<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 333-34835-01
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS AND +
+PROSPECTUS SUPPLEMENT. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN +
+OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY +
+SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR +
+SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED FEBRUARY 19, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 17, 1997)
PRICE DEVELOPMENT COMPANY, [JP LOGO]
LIMITED PARTNERSHIP
$50,000,000 % SENIOR NOTES DUE 200
$50,000,000 % SENIOR NOTES DUE 200
----------
The $50.0 million aggregate principal amount of % Senior Notes due 200
(the "200 Notes") and the $50.0 million aggregate principal amount of %
Senior Notes due 200 (the "200 Notes" and, together with the 200 Notes, the
"Notes") offered hereby (the "Offering") are being issued by Price Development
Company, Limited Partnership, a Maryland limited partnership (the "Operating
Partnership"). The Notes will mature on , 200 and , 200 ,
respectively, and are redeemable at any time at the option of the Operating
Partnership, in whole or in part, at a redemption price equal to the sum of (i)
the principal amount of the Notes being redeemed plus accrued and unpaid
interest to the redemption date and (ii) the Make-Whole Amount (as defined in
"Description of the Notes--Optional Redemption"), if any. The Notes are not
subject to any mandatory sinking fund. Interest on the Notes is payable semi-
annually in arrears on each of and , commencing
, 1998.
The Notes will be senior unsecured obligations of the Operating Partnership
and will rank pari passu with each other and with all other unsecured and
unsubordinated indebtedness of the Operating Partnership from time to time
outstanding. The Notes will be effectively subordinated to mortgages and other
secured indebtedness of the Operating Partnership and to secured and unsecured
indebtedness and other liabilities of the Operating Partnership's Subsidiaries
(as defined in "Description of the Notes--Certain Covenants"). As of December
31, 1997, after giving pro forma effect to the Offering and the application of
the net proceeds therefrom as described in "Use of Proceeds," such secured
indebtedness of the Operating Partnership and indebtedness of Subsidiaries of
the Operating Partnership aggregated approximately $155.8 million and such
unsecured and unsubordinated indebtedness of the Operating Partnership
aggregated approximately $128.8 million. See "Capitalization." Each series of
Notes is a new issue of securities with no established trading market. The
Operating Partnership has not applied for and does not intend to apply for
listing of the Notes on any securities exchange.
JP Realty, Inc., a Maryland corporation and the general partner of the
Operating Partnership (the "Company"), is a fully integrated, self-administered
and self-managed real estate investment trust. As general partner of the
Operating Partnership, the Company controls and is solely responsible for all
aspects of the management of the Operating Partnership.
The 200 Notes and the 200 Notes will each be represented by a single fully
registered global note in book-entry form, without coupons (each a "Global
Note"), registered in the name of the nominee of the Depository Trust Company
("DTC"). Beneficial interests in the Global Notes will be shown on, and
transfers thereof will be effected only through, records maintained by DTC
(with respect to beneficial interests of participants) or by participants or
persons that hold interests through participants (with respect to beneficial
interests of beneficial owners). Owners of beneficial interests in the Global
Notes will be entitled to physical delivery of Notes in definitive form equal
in principal amount to their respective beneficial interest only under the
limited circumstances described under "Description of the Notes--Book-Entry
System." Settlement for the Notes will be made in immediately available funds.
The Notes will trade in DTC's Same-Day Funds Settlement System until maturity
or until the Notes are issued in definitive form and secondary market trading
activity in the Notes will therefore settle in immediately available funds. All
payments of principal and interest with respect to the Notes will be made by
the Operating Partnership in immediately available funds. See "Description of
the Notes--Same-Day Settlement and Payment."
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROCEEDS
PRICE TO UNDERWRITING TO OPERATING
PUBLIC (1) DISCOUNT (2) PARTNERSHIP (1)(3)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 200 Note..... % % %
- ------------------------------------------------------------------------------
Total.......... $ $ $
- ------------------------------------------------------------------------------
Per 200 Note..... % % %
- ------------------------------------------------------------------------------
Total.......... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from , 1998.
(2) The Operating Partnership has agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) Before deducting estimated expenses of $500,000 payable by the Operating
Partnership.
----------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if delivered to and accepted by them, subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Global Notes will be made in New York, New York on or about
February , 1998 against payment therefor in immediately available funds.
----------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
UBS SECURITIES
----------
The date of this Prospectus Supplement is February , 1998.
<PAGE>
"Price Development Company, Limited Partnership Property Locations"
Map of the Western United States with solid circles, squares, triangles and
stars representing regional malls, community centers, business centers and
corporate headquarters, respectively, labeled and placed as follows: one square
in Phoenix/Glendale, one square in Flagstaff, one square in Anaheim, one circle
in Visalla, one square in Colorado Springs, one circle, two squares and one
triangle in Boise, one circle in Coeur d'Alene, one circle and two squares in
Idaho Falls, one circle and one square in Pocatello, one square in Twin Falls,
one square in Las Vegas, one square in Reno/Sparks, one circle in Clovis, one
circle in Farmington, one circle in Salem, one square in Eugene, one square in
Gresham, one square in Portland, one square in Bountiful, one circle in Logan,
one square in Nephi, 3 squares, one circle, one square and one triangle in
Orem/Provo, one circle and one square in St. George, one circle, five squares
and four triangles in Salt Lake City, one circle in Kelso, one circle in
Spokane, one circle in Casper and one circle in Rock Springs.
[JP LOGO]
THE TERRITORY
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP PROPERTY LOCATIONS
(Solid Circle) Regional Malls
(Solid Square) Community Centers
(Solid Triangle) Business Centers
(Solid Star) Corporate Headquarters
ARIZONA
Phoenix/Glendale
- ----------------
(Solid Square) Fry's Shopping Plaza
Flagstaff
(Solid Square) Woodlands Village
CALIFORNIA
Anaheim
- -------
(Solid Square) Anaheim Plaza
Visalia
- -------
(Solid Circle) Visalia Mall
COLORADO
Colorado Springs
- ----------------
(Solid Square) Austin Bluffs Plaza
IDAHO
Boise
- -----
(Solid Circle) Boise Towne Square
(Solid Square) Boise Towne Plaza
(Solid Square) Boise Plaza
(Solid Triangle) First Security Place
IDAHO (cont.)
Coeur d'Alene
- -------------
(Solid Circle) Silver Lake Mall
Idaho Falls
- -----------
(Solid Circle) Grand Teton Mall
(Solid Square) Yellowstone Square
(Solid Square) Baskin-Robbins 17th St.
Pocatello
- ---------
(Solid Circle) Pine Ridge Mall
(Solid Square) Alameda Plaza
Twin Falls
- ----------
(Solid Square) Twin Falls Crossing
NEVADA
Las Vegas
- ---------
(Solid Square) Fremont Plaza
Reno/Sparks
- -----------
(Solid Square) Plaza 800
NEW MEXICO
Clovis
- ------
(Solid Circle) North Plains Mall
Farmington
- ----------
(Solid Circle) Animas Valley Mall
OREGON
Salem
- -----
(Solid Circle) Salem Center
Eugene
- ------
(Solid Square) Bailey Hills Plaza
Gresham
- -------
(Solid Square) Halsey Crossing
Portland
- --------
(Solid Square) Division Crossing
UTAH
Bountiful
- ---------
(Solid Square) Gateway Crossing
Logan
- -----
(Solid Circle) Cache Valley Mall
UTAH (cont.)
Nephi
- -----
(Solid Square) Bank One
Orem/Provo
- ----------
(Solid Square) University Crossing
(Solid Square) Orem Plaza State St.
(Solid Square) Orem Plaza Center St.
(Solid Circle) Provo Towne Centre
(opening October 1998)
(Solid Square) Riverside Plaza
(Solid Triangle) East Bay
St. George
- ----------
(Solid Circle) Red Cliffs Mall
(Solid Square) Red Cliffs Plaza
Salt Lake City
- --------------
(Solid Circle) Cottonwood Mall
(Solid Circle) Cottonwood Square
(Solid Square) Plaza 9400
(Solid Square) River Pointe Plaza
(Solid Square) Fort Union Plaza
UTAH (cont.)
(Solid Square) North Temple Shops
Price Business Centers
(Solid Triangle) Timesquare
(Solid Triangle) Commerce Park
(Solid Triangle) South Main
(Solid Triangle) Pioneer Square
WASHINGTON
Kelso
- -----
(Solid Circle) Three Rivers Mall
Spokane
- -------
(Solid Circle) Spokane Valley Mall
WYOMING
Casper
- ------
(Solid Circle) Eastridge Mall
Rock Springs
- ------------
(Solid Circle) White Mountain Mall
THE UNDERWRITERS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR
OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH TRANSACTIONS MAY INCLUDE
STABILIZING AND THE PURCHASE OF NOTES TO COVER SYNDICATE SHORT POSITIONS. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information appearing elsewhere in this
Prospectus Supplement and the accompanying Prospectus or incorporated herein
and therein by reference. Unless the context indicates otherwise, all
references to the "Company" in this Prospectus Supplement and the accompanying
Prospectus shall be deemed to include JP Realty, Inc., a Maryland corporation
("JP Realty"), and its subsidiaries, including Price Development Company,
Limited Partnership, a Maryland limited partnership (the "Operating
Partnership" or "PDC"), on a consolidated basis and, as the context may
require, its predecessors. All references in this Prospectus to "gross leasable
area" or "GLA" shall refer to the Company-owned leasable area within the
Company's properties and "total gross leasable area" or "Total GLA" shall refer
to the GLA plus any tenant-owned leasable area within the Company's properties.
THE COMPANY AND THE OPERATING PARTNERSHIP
JP Realty, the sole general partner of the Operating Partnership, is a fully
integrated, self-administered and self-managed real estate investment trust (a
"REIT"). The Company was formed on September 8, 1993 to continue and expand the
business, commenced in 1957, of certain companies (the "Predecessor Companies")
affiliated with John Price, Chairman of the Board of Directors and Chief
Executive Officer of the Company. All of the Properties (as hereinafter
defined) and other assets of the Company are held by, and all of the Company's
operations are conducted through, the Operating Partnership. JP Realty owns a
controlling 83% interest in the Operating Partnership and is solely responsible
for all aspects of the management thereof.
The Company is primarily engaged in the business of owning, leasing,
managing, operating, developing, redeveloping and acquiring malls, community
centers and other commercial and retail properties in Utah, Idaho, Colorado,
Arizona, Nevada, New Mexico and Wyoming (the "Intermountain Region") as well as
in Oregon, Washington and California (together with the Intermountain Region,
the "Western States"). As of December 31, 1997, the Company, through the
Operating Partnership, held a portfolio consisting of 48 properties (each a
"Property" and together, the "Properties"), including 15 enclosed regional
malls, 25 community centers and two free-standing retail properties located in
ten states and six mixed-use commercial properties located primarily in the
Salt Lake City, Utah metropolitan area.
Based on Total GLA, the Company owns and operates the largest retail property
portfolio in each of the states of Utah, Idaho and Wyoming, and is the leading
owner and operator of retail shopping center properties throughout the
Intermountain Region. Since 1976, the Company and the Predecessor Companies
have been responsible for developing more retail malls in the Intermountain
Region than any other developer, having constructed, developed or redeveloped
11 malls in the region (as well as three other malls in Oregon and Washington).
The Company's strategy is to extend its dominant market position in the
Intermountain Region, continue to achieve cash flow growth and enhance the
value of its real property portfolio by increasing its rental income and net
operating income (i.e., revenues less property operating expenses, before
interest expenses and depreciation) over time. In order to extend its market
position, the Company expects to continue to concentrate its acquisition and
development activities in the Western States.
As of December 31, 1997, the Company's retail portfolio contained an
aggregate of 10,909,652 square feet of Total GLA and its commercial portfolio
contained an aggregate of 1,417,667 square feet of GLA. Based on Total GLA, the
Company's retail properties were approximately 94% leased as of December 31,
1997 and, based on GLA, its commercial properties were approximately 92% leased
as of that date. For the year ended December 31, 1997, the retail properties
and the commercial properties contributed approximately 90.5% and 9.5%,
respectively, to the Company's consolidated net operating income.
S-3
<PAGE>
As of December 31, 1997, the eight principal executive officers of the
Company beneficially owned approximately 13.32% of the outstanding shares of
common stock, par value $.0001 per share (the "Common Stock") of JP Realty on a
fully diluted basis (including currently exercisable stock options and units of
limited partner interest in the Operating Partnership ("OP Units") exchangeable
for shares of Common Stock). The Common Stock is listed on the New York Stock
Exchange under the symbol "JPR."
The Operating Partnership's and the Company's principal executive office is
located at 35 Century Park-Way, Salt Lake City, Utah 84115, and their telephone
number is (801) 486-3911.
THE INTERMOUNTAIN REGION
The Intermountain Region is expected to outpace national population growth
and economic performance for the balance of the 1990s. The Company believes
that the many attractive attributes of the Intermountain Region, such as its
natural beauty, generally lower living costs and less congested urban areas,
which make transportation and commuting less difficult and less costly, make
this region very attractive for personal and corporate relocations. The Company
expects that these factors, combined with the continued constrained development
of new retail properties in many parts of this region, will continue to have a
positive impact on retail rental rates and values of existing retail
properties. In addition, Salt Lake City, Utah, where the Company's commercial
and industrial portfolio is concentrated, has been selected as the site for the
2002 Olympic Winter Games.
PROPERTIES
Set forth below is certain information regarding the location, size,
occupancy rate and net operating income of the Properties as of December 31,
1997:
<TABLE>
<CAPTION>
TOTAL PERCENTAGE PERCENTAGE OF
NUMBER OF GLA (SQ. OF OCCUPANCY NET OPERATING
STATE PROPERTIES FT.) TOTAL GLA RATE(1) INCOME
- ----- ---------- ---------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
Utah.................. 20 4,167,525 33.81% 92.90% 34.33%
Idaho................. 11 2,994,910 24.29 96.34 31.12
New Mexico............ 2 822,005 6.67 84.92 8.04
Wyoming............... 2 912,123 7.40 85.51 7.74
Washington............ 2 1,203,355 9.76 92.57 6.79
California............ 2 517,149 4.20 98.13 4.91
Arizona............... 2 313,562 2.54 99.23 2.79
Oregon................ 4 1,008,870 8.18 96.74 1.77
Nevada................ 2 270,971 2.20 97.34 1.73
Colorado.............. 1 116,849 0.95 100.00 0.78
--- ---------- ------ ------ ------
Total............... 48 12,327,319 100.00% 93.49% 100.00%
=== ========== ====== ====== ======
</TABLE>
- --------
(1) Occupancy rate is based on the percentage of Total GLA occupied.
S-4
<PAGE>
RECENT DEVELOPMENTS
Acquisitions, Development and Expansion. The following table sets forth
certain information regarding the acquisition, development and expansion
activities of the Operating Partnership since January 1, 1997:
<TABLE>
<CAPTION>
ACTUAL OR EXPECTED
QUARTER OF PROPERTY TOTAL GLA
COMPLETION PROPERTY LOCATION TYPE (1) (SQ. FT.)
- ---------------------- ------------------------------ ----------------- -------- ---------
<S> <C> <C> <C> <C>
ACQUISITIONS
Completed:
2nd Qtr 97 Silver Lake Mall Coeur d'Alene, ID RM 298,711
2nd Qtr 97 Visalia Mall Visalia, CA RM 439,716
4th Qtr 97 Salem Center Salem, OR RM 650,500
---------
1,388,927
---------
DEVELOPMENTS
Completed:
3rd Qtr 97 Spokane Valley Mall Spokane, WA RM 688,982
4th Qtr 97 Animas Valley Mall(2) Farmington, NM OD 5,500
4th Qtr 97 Boise Towne Plaza Boise, ID CC 76,414
---------
770,896
---------
Under Development:
2nd Qtr 98 Boise Towne Plaza Boise, ID CC 29,250
4th Qtr 98 Provo Towne Centre Provo, UT RM 723,548
---------
752,798
---------
EXPANSIONS/RENOVATIONS
Completed:
2nd Qtr 97 Silver Lake Mall(3) Coeur d'Alene, ID RM 36,036
4th Qtr 97 Pine Ridge Mall(4) Pocatello, ID RM 76,411
---------
112,447
---------
Under Development:
3rd Qtr 98 Boise Towne Square Expansion(5) Boise, ID RM 273,000
4th Qtr 98 Red Cliffs Plaza(6) St. George, UT CC 10,696
4th Qtr 98 Red Cliffs Mall(7) St. George, UT RM 70,385
---------
354,081
---------
Total 3,379,149
=========
</TABLE>
- --------
(1) Property type definitions are as follows: Community Center--CC, Regional
Mall--RM, Outparcel Development--OD.
(2) Developed an Applebees restaurant.
(3) Expanded the Sears department store.
(4) Added a new Sears department store.
(5) Adding a Dillard's department store, expanding The Bon Marche department
store space and adding additional shop space.
(6) Adding a Sears automotive center.
(7) Adding a Sears department store.
S-5
<PAGE>
Results of Operations. The Operating Partnership's total revenue for the
quarter ended December 31, 1997 was $24.2 million compared with $19.1 million
for the same period in 1996. Net income for the quarter ended December 31, 1997
was $8.9 million, or $0.42 per OP Unit, compared with $7.7 million, or $0.39
per OP Unit, for the same period in 1996. Funds from operations ("FFO") for the
quarter ended December 31, 1997 increased 19% to $12.3 million, or $0.58 per OP
Unit, compared with FFO of $10.4 million, or $0.53 per OP Unit, for the same
period in 1996.
Revenues for the year ended December 31, 1997 increased 14% to $83.0 million
over revenues of $72.9 million for the same period in 1996. Net income for the
year ended December 31, 1997 increased 15% to $32.8 million, or $1.56 per OP
Unit, compared to net income of $28.5 million, or $1.45 per OP Unit, for the
same period in 1996. FFO for the year ended December 31, 1997 increased 14% to
$44.4 million, or $2.10 per OP Unit, compared to FFO for the year ended
December 31, 1996 of $39.0 million, or $1.98 per OP Unit.
New Credit Facility. On October 16, 1997, the Company entered into a $150.0
million unsecured credit facility (the "Unsecured Credit Facility") with a
syndicate of banks. The Company used borrowings under the Unsecured Credit
Facility to repay $67.1 million outstanding under its two then-existing credit
facilities, a $40.0 million credit facility (the "1996 Credit Facility") and a
$50.0 million credit facility (the "1995 Credit Facility" and, together with
the 1996 Credit Facility, the "Pre-1997 Credit Facilities"). On December 18,
1997, the Company increased the total amount available under the Unsecured
Credit Facility to $200.0 million. The Unsecured Credit Facility bears
interest, at the option of the Operating Partnership, at one, or a combination,
of (i) the higher of the Federal Funds Rate plus 50 basis points or the prime
rate or (ii) LIBOR plus a spread of 70 to 130 basis points based on the credit
rating of the Operating Partnership (which resulted in a spread of 90 basis
points at December 31, 1997) or (iii) LIBOR plus a spread as offered by the
participating banks under a one to three month bid rate auction option. The
Unsecured Credit Facility has a term of three years and provides for monthly
payments of interest only. The weighted average interest rate paid on 1997
borrowings under the Unsecured Credit Facility was 6.75%, and the balance
outstanding at December 31, 1997 was $127.0 million. The Unsecured Credit
Facility is available for general corporate purposes, including development,
working capital, equity investments, repayment of indebtedness and/or
amortization payments.
Equity Offering. On January 28, 1997, JP Realty completed a public offering
of 1,500,000 shares of Common Stock, raising approximately $38.8 million in net
proceeds. The Operating Partnership, which received the net proceeds from JP
Realty in exchange for OP Units, used such proceeds to reduce outstanding
borrowings under the Pre-1997 Credit Facilities.
S-6
<PAGE>
THE OFFERING
Unless otherwise indicated, all capitalized terms used but not otherwise
defined herein shall have the meanings provided in "Description of the Notes."
For a more complete description of the terms of the $50.0 million aggregate
principal amount of % Senior Notes due 200 (the "200 Notes") and the
$50.0 million aggregate principal amount of % Senior Notes due 200 (the
"200 Notes" and, together with the 200 Notes, the "Notes"), see
"Description of the Notes" in this Prospectus Supplement and "Description of
Debt Securities" in the accompanying Prospectus.
SECURITIES OFFERED.......... $50.0 million aggregate principal amount of %
Senior Notes due 200 and $50.0 million aggregate
principal amount of % Senior Notes due 200 .
MATURITY.................... The 200 Notes will mature on , 200
and the 200 Notes will mature on ,
200 .
INTEREST PAYMENT DATES...... Semi-annually in arrears on each and
, commencing , 1998.
RANKING..................... The Notes will be senior unsecured obligations of
the Operating Partnership and will rank pari
passu with each other and with all of the
Operating Partnership's other unsecured and
unsubordinated indebtedness. The Notes will be
effectively subordinated to mortgages and other
secured indebtedness of the Operating Partnership
and to secured and unsecured indebtedness and
other liabilities of the Operating Partnership's
Subsidiaries (as defined in "Description of the
Notes--Certain Covenants"). As of December 31,
1997, after giving pro forma effect to the
Offering and the application of the net proceeds
therefrom as described in "Use of Proceeds,"
mortgages and other secured indebtedness of the
Operating Partnership and total secured and
unsecured indebtedness and other liabilities of
Subsidiaries of the Operating Partnership
aggregated approximately $155.8 million and
unsecured and unsubordinated indebtedness of the
Operating Partnership aggregated approximately
$128.8 million. See "Capitalization" and "Use of
Proceeds."
USE OF PROCEEDS............. The net proceeds to the Operating Partnership
from this offering of the Notes (the "Offering")
will be used to repay indebtedness outstanding
under the Unsecured Credit Facility. See "Use of
Proceeds."
LIMITATIONS ON INCURRENCE Neither the Operating Partnership nor any
OF DEBT..................... Subsidiary shall incur any Debt, other than
Intercompany Debt, if, after giving effect
thereto, the aggregate principal amount of all
outstanding Debt of the Operating Partnership and
its Subsidiaries is greater than 60% of the sum
of (i) Adjusted Total Assets as of the end of the
most recent fiscal quarter and (ii) the increase
in Adjusted Total Assets since the end of such
quarter, including any increase in Adjusted Total
Assets resulting from the incurrence of such
additional Debt (such increase together with the
Operating Partnership's Adjusted Total Assets
S-7
<PAGE>
being referred to as "Currently Adjusted Total
Assets"). On a pro forma basis as of December 31,
1997, the Operating Partnership's Adjusted Total
Assets were $718.1 million. See "Description of
the Notes--Certain Covenants--Limitations on
Incurrence of Debt."
LIMITATIONS ON INCURRENCE
OF SECURED DEBT............
Neither the Operating Partnership nor any
Subsidiary shall incur any Secured Debt if, after
giving effect thereto, the aggregate principal
amount of all outstanding Secured Debt of the
Operating Partnership and its Subsidiaries is
greater than 40% of Currently Adjusted Total
Assets. See "Description of the Notes--Certain
Covenants--Limitations on Incurrence of Secured
Debt."
DEBT SERVICE COVERAGE....... In addition to the foregoing limitation on the
incurrence of Debt, the Operating Partnership and
its Subsidiaries will not incur any Debt, other
than Intercompany Debt, if the ratio of
Consolidated Income Available for Debt Service to
Annual Debt Service Charge, for the four
consecutive fiscal quarters most recently ended
prior to the date of the incurrence of such
additional Debt, is less than 1.5 to 1, on a pro
forma basis after giving effect to the incurrence
of such Debt and to the application of the
proceeds therefrom, as calculated based on
certain assumptions described below under
"Description of the Notes--Certain Covenants--
Debt Service Coverage."
MAINTENANCE OF UNENCUMBERED
CURRENTLY ADJUSTED TOTAL
ASSETS..................... The Operating Partnership shall maintain
Unencumbered Currently Adjusted Total Assets
(defined herein generally to mean Currently
Adjusted Total Assets minus the value of any
properties that are encumbered) of not less than
150% of the aggregate principal amount of all
outstanding Unsecured Debt of the Operating
Partnership and its Subsidiaries. On a pro forma
basis as of December 31, 1997, this percentage
would have been 266.75%. See "Description of the
Notes--Certain Covenants--Maintenance of
Unencumbered Currently Adjusted Total Assets."
The foregoing covenants do not restrict the
Operating Partnership from refinancing existing
Debt, provided that the outstanding principal
amount of such Debt is not increased.
OPTIONAL REDEMPTION......... The Notes are redeemable at any time at the
option of the Operating Partnership, in whole or
in part, at a redemption price (the "Redemption
Price") equal to the sum of (i) the principal
amount of the Notes being redeemed plus accrued
and unpaid interest to the redemption date and
(ii) the Make-Whole Amount, if any. See
"Description of the Notes--Optional Redemption."
MANDATORY REDEMPTION........ There will be no mandatory redemption
requirements with respect to the Notes. The Notes
are not subject to any mandatory sinking fund.
S-8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table sets forth (i) summary historical financial and operating
data on a consolidated basis for the Operating Partnership and its Subsidiaries
for each of the three years in the period ended December 31, 1997 and (ii)
summary unaudited pro forma financial and operating data on a consolidated
basis for the Operating Partnership and its Subsidiaries for the year ended
December 31, 1997. The historical financial information for the three years
ended December 31, 1997 has been derived from the audited historical
consolidated and combined financial statements of the Operating Partnership.
The unaudited summary pro forma operating information, which is presented as if
the Offering, the issuance of new OP Units as a result of the offering of
Common Stock on January 22, 1997 and the acquisitions of Silver Lake Mall,
Visalia Mall and Salem Center had occurred as of January 1, 1997, is not
necessarily indicative of what the actual financial position or results of
operations of the Operating Partnership would have been for, or as of, the year
ended December 31, 1997, nor does it purport to represent or project the
financial position or results of operations for future periods. The following
information should be read in conjunction with, and is qualified in its
entirety by, the Operating Partnership's consolidated financial statements and
notes thereto included and incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
PRO FORMA
1997
1995 1996 1997 (UNAUDITED)
-------- -------- -------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT
DATA)
<S> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Minimum Rents....................... $ 43,640 $ 52,447 $ 59,624 $ 66,146
Percentage and Overage Rents........ 3,465 4,061 3,896 4,168
Recoveries from Tenants............. 12,252 15,557 18,199 21,138
Interest and Other.................. 1,593 884 1,254 1,150
-------- -------- -------- --------
Total Revenues.................... 60,950 72,949 82,973 92,602
Expenses:
Operating Expenses.................. 20,389 24,405 27,434 31,116
Interest............................ 6,623 7,776 9,066 12,813
Depreciation and Amortization....... 11,528 11,979 13,410 14,792
-------- -------- -------- --------
Total Expenses.................... 38,540 44,160 49,910 58,721
Income before Gain on Sales of Real
Estate, Equity in Net Loss of
Partnership Investment,
Extraordinary Item and
Minority Interests................. 22,410 28,789 33,063 33,881
Minority Interests in Income of
Consolidated Partnerships.......... (421) (389) (394) (394)
Equity in Net Loss of Partnership
Investment......................... (184) -- -- --
Gain on Sales of Real Estate........ 918 94 339 339
-------- -------- -------- --------
Income before Extraordinary Item.... 22,723 28,494 33,008 33,826
Extraordinary Item.................. -- -- (162) (162)
-------- -------- -------- --------
Net Income........................... $ 22,723 $ 28,494 $ 32,846 $ 33,664
======== ======== ======== ========
Basic Earnings per OP Unit.......... $ 1.26 $ 1.45 $ 1.56 $ 1.58
Diluted Earnings per OP Unit........ $ 1.26 $ 1.44 $ 1.54 $ 1.57
BALANCE SHEET DATA (AT PERIOD END):
Real Estate, before Accumulated
Depreciation........................ $388,205 $453,241 $619,371 $619,371
Total Assets......................... 327,061 381,360 545,684 546,884
Total Debt........................... 106,406 162,375 283,390 284,590
Total Unsecured Debt.............. 201 4,360 127,627 128,827
Total Secured Debt................ 106,205 158,015 155,763 155,763
Partners' Capital................... 209,742 204,666 241,008 241,008
OTHER DATA:
EBITDA(1)............................ $ 40,874 $ 48,249 $ 55,322 $ 61,269
Funds from operations(2)............. $ 32,038 $ 38,978 $ 44,402 $ 46,480
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
PRO FORMA
1997
1995 1996 1997 (UNAUDITED)
----------- --------- --------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT
DATA)
<S> <C> <C> <C> <C>
OPERATING DATA:
Cash flow provided by (used
in):
Operating activities.......... $ 32,719 $ 43,074 $ 44,373 $ 46,585
Investing activities.......... (67,383) (65,231) (137,184) (137,184)
Financing activities.......... 21,339 22,080 96,664 97,864
Adjusted Total Assets(3)....... 487,305 552,341 718,061 718,061
Ratios:
Debt as a percentage of
Currently Adjusted Total
Assets(3).................... 21.84% 29.40% 39.47% 39.63%
Secured Debt as a percentage
of Currently Adjusted Total
Assets(3).................... 21.79% 28.61% 21.69% 21.69%
Ratio of Consolidated Income
Available for Debt Service to
Annual Debt Service
Charge(3).................... 6.00 4.95 3.49 3.48
Unencumbered Currently
Adjusted Total Assets as a
percentage of Unsecured
Debt(3) 110,729.32% 3,541.70% 269.26% 266.75%
Ratio of earnings to fixed
charges(4)................... 3.47 3.64 3.13 2.71
Ratio of EBITDA to interest
expense...................... 6.17 6.20 6.10 4.79
Distributions to Partners...... $ 29,918 $ 33,977 $ 37,221 $ 37,221
Distributions per OP Unit...... $ 1.64 $ 1.70 $ 1.76 $ 1.76
Basic OP Units outstanding
(weighted average)............ 18,037 19,668 21,119 21,264
Diluted OP Units outstanding
(weighted average)............ 18,103 19,753 21,285 21,430
GLA (sq. ft. at end of period). 9,505 10,062 12,327 12,327
Number of Properties (at end of
period)....................... 43 44 48 48
</TABLE>
- --------
(1) For purposes of this calculation, EBITDA is defined as earnings before
interest expense, taxes, depreciation and amortization. EBITDA is not
intended to represent cash flow for the period nor has it been presented as
an alternative to earnings from operations as an indicator of operating
performance and should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally accepted
accounting principles ("GAAP").
(2) FFO is defined by the National Association of Real Estate Investment
Trusts ("NAREIT") as "net income (computed in accordance with GAAP),
excluding gains (or losses) from debt restructuring and sales of property,
plus depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures." In March 1995, NAREIT
issued the White Paper which discussed NAREIT's views on certain
interpretive issues under the definition of FFO. Effective January 1,
1996, the Operating Partnership modified its calculation of FFO in
accordance with the interpretive positions set forth by NAREIT in the
White Paper. While the Operating Partnership believes that FFO is the most
relevant and widely used measure of its operating performance, it does not
represent cash generated from operating activities in accordance with GAAP
and is not indicative of cash available to fund cash needs. Further, the
Operating Partnership's presentation of FFO may not be comparable to other
similarly titled measures used by other equity REITs.
(3) Pursuant to the Indenture, dated as of February , 1998 (the
"Indenture"), as supplemented by the First Supplemental Indenture, dated
as of February , 1998 (the "First Supplemental Indenture"), each between
the Operating Partnership and The Chase Manhattan Bank, as trustee, (i)
Debt as a percentage of Adjusted Total Assets may not exceed 60% of the
sum of (a) Adjusted Total Assets as of the end of the most recent fiscal
quarter and (b) the increase in the Operating Partnership's Adjusted Total
Assets since the end of such quarter, including any increase in the
Operating Partnership's Adjusted Total Assets resulting from the
incurrence of such additional Debt (such increase together with the
Operating Partnership's Adjusted Total Assets being referred to as
"Currently Adjusted Total Assets"); (ii) neither the Operating Partnership
nor any Subsidiary will incur any Debt secured by any mortgage or other
lien upon any of its properties if, after giving effect thereto, the
aggregate principal amount of all outstanding Debt of the Operating
Partnership and its Subsidiaries on a consolidated basis which is secured
by any mortgage or other lien on properties will be greater than 40% of
Currently Adjusted Total Assets; (iii) neither the Operating Partnership
nor any Subsidiary may incur any Debt, other than Intercompany Debt, if
the Ratio of Consolidated Income Available for Debt Service to Annual Debt
Service Charge for the four consecutive fiscal quarters most recently
ended prior to the date of the incurrence of such additional Debt, is less
than 1.5 to 1, on a pro forma basis after giving effect to the incurrence
of such Debt and to the application of the proceeds therefrom; and (iv)
the Operating Partnership will maintain Unencumbered Currently Adjusted
Total Assets (defined herein generally to mean Currently Adjusted Total
Assets minus the value of any Properties that are encumbered) of not less
than 150% of the aggregate principal amount of all outstanding Unsecured
Debt of the Operating Partnership and its Subsidiaries. Immediately after
the Offering, this percentage will be 266.75%. For a more complete
description of the terms of and definitions used in the foregoing
limitation, see "Description of the Notes--Certain Covenants--Maintenance
of Unencumbered Currently Adjusted Total Assets." Capitalized terms used
in this footnote but not otherwise defined shall have the meanings
ascribed to them in "Description of the Notes."
(4) For purposes of computing these ratios, earnings have been calculated by
adding fixed charges (excluding capitalized interest) to income (loss)
before real estate sales, income taxes and extraordinary items. Fixed
charges consist of interest costs, whether expensed or capitalized, the
interest component of rental expense, and amortization and write-off of
debt discounts and issue costs, whether expensed or capitalized.
S-10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Operating Partnership from the sale of the Notes
offered hereby, after payment of expenses related to the Offering and
underwriting discounts and commissions, are estimated to be approximately
$98.8 million. The Operating Partnership intends to use the net proceeds to
repay indebtedness outstanding under the Unsecured Credit Facility. As of
December 31, 1997, $127.0 million was outstanding under the Unsecured Credit
Facility, which amount was incurred in connection with the repayment of the
Pre-1997 Credit Facilities, the acquisition of the Salem Center and the
funding of development and expansion projects. The Unsecured Credit Facility
bears interest, at the option of the Operating Partnership, at one, or a
combination, of (i) the higher of the Federal Funds Rate plus 50 basis points
or the prime rate or (ii) LIBOR plus a spread of 70 to 130 basis points based
on the credit rating of the Operating Partnership (which resulted in a spread
of 90 basis points at December 31, 1997) or (iii) LIBOR plus a spread as
offered by the participating banks under a one to three month bid rate auction
option. The Unsecured Credit Facility has a term of three years and provides
for monthly payments of interest only. The weighted average interest rate paid
on 1997 borrowings under the Unsecured Credit Facility was 6.75%. Following
the Offering, the Operating Partnership expects that it will borrow additional
amounts under the Unsecured Credit Facility to fund future acquisitions and
developments and for working capital purposes.
CAPITALIZATION
The following table sets forth the capitalization of the Operating
Partnership as of December 31, 1997 and as adjusted to give effect to the
Offering and the application of the net proceeds therefrom as described under
"Use of Proceeds." The information set forth in the table should be read in
conjunction with the summary financial information included in this Prospectus
Supplement and the consolidated financial statements and notes thereto
included in, and incorporated by reference into, the accompanying Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
DEBT
Mortgages and notes payable.............................. $113,381 $113,381
$200.0 million Unsecured Credit Facility................. 127,000 28,200
% Notes due 200 ........................................ -- 50,000
% Notes due 200 ........................................ -- 50,000
$50.0 million Construction Facility...................... 43,009 43,009
-------- --------
Total Debt............................................. $283,390 $284,590
-------- --------
PARTNERS' CAPITAL
General Partner.......................................... $207,582 $207,582
Limited Partners......................................... 33,426 33,426
-------- --------
Total Partners' Capital................................ $241,008 $241,008
-------- --------
Total Capitalization................................... $524,398 $525,598
======== ========
</TABLE>
S-11
<PAGE>
THE COMPANY AND THE OPERATING PARTNERSHIP
GENERAL
JP Realty, the sole general partner of the Operating Partnership, is a fully
integrated, self-administered and self-managed REIT. The Company was formed on
September 8, 1993 to continue and expand the business, commenced in 1957, of
the Predecessor Companies affiliated with John Price, Chairman of the Board of
Directors and Chief Executive Officer of the Company. All of the Properties
and other assets of the Company are held by, and all of the Company's
operations are conducted through, the Operating Partnership. JP Realty owns a
controlling 83% interest in the Operating Partnership and is solely
responsible for all aspects of the management thereof.
The Company is primarily engaged in the business of owning, leasing,
managing, operating, developing, redeveloping and acquiring malls, community
centers and other commercial and retail properties in the Intermountain
Region, as well as in Oregon, Washington and California. As of December 31,
1997, the Company, through the Operating Partnership, held a portfolio
consisting of 48 Properties, including 15 enclosed regional malls, 25
community centers and two free-standing retail properties located in ten
states and six mixed-use commercial properties located primarily in the Salt
Lake City, Utah metropolitan area. Since 1976, the Company and the Predecessor
Companies have been responsible for developing more retail malls in the
Intermountain Region than any other developer, having constructed, developed
or redeveloped 11 malls in the region (as well as three other malls in Oregon
and Washington).
Based on Total GLA, the Company owns and operates the largest retail
property portfolio in each of the states of Utah, Idaho and Wyoming, and is
the leading owner and operator of retail shopping center properties throughout
the Intermountain Region. As of December 31, 1997, the Company's retail
portfolio contained an aggregate of 10,909,652 square feet of Total GLA and
its commercial portfolio contained an aggregate of 1,417,667 square feet of
GLA. Based on Total GLA, the Company's retail properties were approximately
94% leased as of December 31, 1997, and, based on GLA, its commercial
properties were approximately 92% leased as of that date. For the year ended
December 31, 1997, the retail properties and the commercial properties
contributed approximately 90.5% and 9.5%, respectively, to the Company's
consolidated net operating income.
As of December 31, 1997, the eight principal executive officers of the
Company beneficially owned approximately 13.32% of the outstanding shares of
Common Stock on a fully diluted basis (including currently exercisable stock
options and OP Units exchangeable for shares of Common Stock).
The Operating Partnership's and the Company's principal executive office is
located at 35 Century Park-Way, Salt Lake City, Utah 84115, and their
telephone number is (801) 486-3911.
BUSINESS STRATEGY
The Company's strategy is to extend its dominant market position in the
Intermountain Region, and to continue to achieve cash flow growth and enhance
the value of the Properties by increasing their rental income and net
operating income over time. The Company expects to achieve rental income and
net operating income growth through (i) contractual rent increases, which are
included in substantially all existing leases for the Properties, (ii) re-
leasing available space at higher rent levels and (iii) selectively
renovating, expanding and redeveloping the Properties. In order to extend its
market position, the Company expects to concentrate its acquisition and other
development activities in the Western States.
The Company has managed its growth within a conservative capital structure.
In connection with its acquisition and development activities, the Company
intends to incur additional borrowings in the future in a manner consistent
with its policy of maintaining a ratio of debt-to-total market capitalization
of less than 50%. The Company's ratio of debt-to-total market capitalization
(i.e. total debt of the Company as a percentage of the market value of its
outstanding capital stock as well as shares of Common Stock issuable upon
exchange of outstanding OP Units plus total debt) was 33.94% at December 31,
1997 and, after giving effect to the Offering and the application of the net
proceeds therefrom, will be 34.03%.
S-12
<PAGE>
Key elements of the Company's strategies are as follows:
Operation and Management. The Company performs all property management
functions for the Properties. As of December 31, 1997, the Company had 311
full-time employees devoted exclusively to property management. Each of the
malls has on-site management and maintenance personnel as well as a marketing
staff to assist the mall tenants in promoting and advertising their products
and services. Overall supervision of mall operations, headed by the Company's
Director of Enclosed Malls and Director of Marketing, is conducted in a
centralized fashion in order to take advantage of economies of scale and to
deliver a uniform presentation of all management functions. The Company's
internal property management information system enables it to determine
quickly tenant status, tenant gross sales, insurance and other critical
information in order to effectively manage the affairs of its Properties. The
data collected regarding percentage sales allows the Company to predict sales
and retain tenants and enhance mall stability.
The Company's Leasing/Development Department is responsible for maintaining
relationships with tenants that afford the Company opportunities for new
development and expansion. The Company conducts an active program of leasing,
within the common area space of its malls and community centers, kiosks and
other promotional displays on a seasonal basis. In addition to increased
customer traffic, this approach generates additional revenue for the Company
and offers an opportunity for entrepreneurial individuals interested in
opening stores on a more permanent basis within the Company's retail
properties.
The Company's property management efforts will continue to be directed
toward improving the attractiveness and appeal of its retail properties and
providing a pleasant shopping environment in order to increase overall tenant
sales and rents. The Company strives to meet the needs of its tenants in the
areas of promotion, marketing and ongoing property management and seeks to
bring together a sufficient critical mass of complementary upscale and brand-
name tenants. As part of its property management efforts, the Company monitors
tenant mix, store size, sales results and store locations, and works closely
with tenants to improve the overall performance of their stores. The Company
seeks to anticipate trends in the retailing industry and introduce new retail
names and concepts into its retail properties in response to these trends. The
Company maintains its malls and community centers to very high standards and
believes that the aesthetics, ambiance and cleanliness of these Properties
contribute to repeat visits by customers.
Acquisitions. The Company is currently seeking to acquire additional retail
properties, particularly malls and community centers in the Western States
that (i) have leases at rental rates below market, (ii) have potential for
rental and/or occupancy increases and/or (iii) offer cash flow growth or
capital appreciation potential where the Company's financial strength,
relationships with retail companies or expansion or redevelopment capabilities
can enhance value.
Development and Expansion. Since 1976, the Company and the Predecessor
Companies have been responsible for developing more retail malls in the
Intermountain Region than any other developer, having constructed, developed
or redeveloped 11 malls in the region (as well as three other malls in Oregon
and Washington). The Company maintains the in-house capability to bring a
project from concept to completion. The Leasing/Development Department had a
total of 30 full-time employees at December 31, 1997, including directors of
Leasing, Development, Tenant Coordination and Design/Drafting.
The Company has commenced the development of a new enclosed regional mall in
Provo, Utah, is continuing its expansion projects at Red Cliffs Mall, Red
Cliffs Plaza and Boise Towne Square and its development of Boise Towne Plaza.
The Company estimates that upon completion, these projects will add an
aggregate of approximately 1.11 million square feet of Total GLA to the
Company's retail portfolio. In August 1997, the Company completed its
development of the Spokane Valley Mall, a 688,982 square foot enclosed
regional mall located in Spokane, Washington. See "Recent Developments."
In addition to the foregoing projects, the Company may also seek to apply
its substantial expertise and resources to the development of additional
malls, community centers or commercial properties. The Company
S-13
<PAGE>
expects any such future development projects will primarily be in underserved
and/or growing markets in the Western States and undertaken in cooperation
with anchor tenants with which the Company has long-standing established
relationships.
Further, the Properties contain approximately 48 acres of vacant land
suitable for additional retail expansion projects. Likewise, the Properties
include additional improved land ready for development of approximately
263,000 square feet of free standing retail space. The Company will seek to
expand these and other Properties in its retail portfolio, as well as newly
acquired properties, depending on tenant demand and market conditions.
Third-Party Property Management. The Company provides third-party property
management for an office building and a commercial building located in the
greater Salt Lake City, Utah metropolitan area, a commercial building located
in Albuquerque, New Mexico and Silver Lake Plaza, a community center, located
in Coeur d'Alene, Idaho. In addition to these arrangements, the Company plans
to pursue other property management opportunities. Because property management
facilitates an understanding of a property's value and potential for cash flow
growth, the Company believes that, in addition to generating property
management fees, third-party property management arrangements can be a source
of future acquisitions for the Company. For example, the Company was the
property manager for Eastridge Mall and Silver Lake Mall prior to their
acquisitions by the Company.
CAPITAL REQUIREMENTS FOLLOWING THE OFFERING
The Operating Partnership intends to maintain a conservative capital
structure with total debt at less than 50% of total market capitalization of
the Operating Partnership. The Operating Partnership's ratio of debt-to-total
market capitalization was 33.94% at December 31, 1997. After giving pro forma
effect to this Offering and the application of the proceeds therefrom as
described in "Use of Proceeds," the ratio of debt to market capitalization of
the Operating Partnership (based on a closing price on December 31, 1997 of
$25.9375 per share of Common Stock, after full conversion of all OP Units and
including total indebtedness and minority interests in joint ventures) will be
34.03%. The Operating Partnership, however, consistently seeks to optimize its
use of debt and other sources of financing to create a flexible capital
structure that will allow the Operating Partnership to continue its investment
strategy.
The Operating Partnership's sources of debt financing include its Unsecured
Credit Facility, secured notes, mortgages, unsecured notes and a construction
loan. As of December 31, 1997, after giving pro forma effect to this Offering
and the application of the net proceeds therefrom as described in "Use of
Proceeds," the Operating Partnership and its Subsidiaries collectively had
total indebtedness of $284.6 million, which consisted of $155.8 million of
secured indebtedness (of which $14.8 million was secured indebtedness of the
Operating Partnership and $141.0 million was secured indebtedness of its
Subsidiaries) and $128.8 million of unsecured indebtedness (all of which was
unsecured indebtedness of the Operating Partnership).
S-14
<PAGE>
OUTSTANDING DEBT STRUCTURE
The existing indebtedness of the Operating Partnership and its Subsidiaries
as of December 31, 1997, aggregating approximately $283.4 million, is set
forth in the table below:
<TABLE>
<CAPTION>
INTEREST EXPIRATION BALANCE
DESCRIPTION RATE DATE OUTSTANDING
----------------------------------------- -------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Secured Notes............................ 6.370% 2001(1) $ 95,000
Mortgage................................. 9.375 2001 1,927
Mortgage................................. 8.500 2000 12,827
Mortgage................................. 9.999 2095 3,000
Unsecured Note........................... 7.000 2003 494
Unsecured Note........................... 7.800 2000 133
$200.0 million Unsecured Credit Facility. (2) 2000 127,000(3)
Construction Facility.................... (4) (5) 43,009
--------
Total.................................. $283,390
========
</TABLE>
- --------
(1) Interest only is payable quarterly. Principal of $11,875,000 is due on
January 21, 2000 and the remaining balance is due on January 21, 2001. At
the option of the Operating Partnership, the notes can be extended to
January 21, 2003.
(2) Interest based upon one, or a combination, of (i) the higher of the
Federal Funds Rate plus 50 basis points or the prime rate or (ii) LIBOR
plus a spread of 70 to 130 basis points based on the credit rating
obtained by the Operating Partnership (which resulted in a spread of 90
basis points at December 31, 1997) or (iii) LIBOR plus a spread as offered
by the participating banks under a one to three month bid rate auction
option. Provides for monthly payments of interest only. The weighted
average interest rate paid on 1997 borrowings under this line of credit
was 6.75%.
(3) After application of the $98.8 million of net proceeds from this Offering,
an estimated $28.2 million will remain outstanding.
(4) LIBOR plus 150 basis points.
(5) Interest payable monthly through August 1, 1999 at which time the total
principal balance is due. At the option of the Operating Partnership, the
loan can be extended for two years.
S-15
<PAGE>
RECENT DEVELOPMENTS
Acquisitions. In June 1997, the Company acquired Silver Lake Mall, a 298,711
square foot mall located in Coeur d'Alene, Idaho. The Company, which had held
a 30% interest in Silver Lake Mall, Ltd., a limited partnership owning Silver
Lake Mall, prior to its acquisition of the mall, acquired the remaining 70%
interest in such limited partnership in exchange for 72,000 OP Units and the
assumption of approximately $24.8 million in outstanding indebtedness. Silver
Lake Mall is anchored by JCPenney, Sears, Emporium and Lamont's and contains
65 mall shops. As of December 31, 1997, Silver Lake Mall was 99% leased.
In June 1997, the Company also acquired Visalia Mall, a 439,716 square foot
mall located in Visalia, California for approximately $38.0 million. Visalia
Mall is anchored by JCPenney and Gottschalk's and contains 68 mall shops.
Prior to the Company's purchase of Visalia Mall, the mall underwent a major
renovation which included the expansion of anchor tenant space, the addition
of a new food court, the renovation and expansion of additional tenant shop
space and the construction of a new 1,000 stall parking facility. As of
December 31, 1997, Visalia Mall was 98% leased.
In December 1997, the Company acquired the Salem Center, a 650,500 square
foot enclosed mall located in Salem, Oregon. The Company acquired the Salem
Center for approximately $32.5 million, $32.0 million of which the Company
financed by borrowing under the Unsecured Credit Facility and assuming debt
for the remainder. Salem Center is located in Salem's downtown business
district covering over five contiguous city blocks and is anchored by
Nordstrom, Mervyn's, Meier & Frank, JCPenney and a 7-screen, 2,300 seat
theater. As of December 31, 1997, Salem Center was 97% leased.
Development and Expansion. In August 1997, the Company completed the
development of the Spokane Valley Mall, a two-level, 688,982 square foot
regional mall, located on an 85 acre parcel of land overlooking the Spokane
River and the Centennial Trail in Spokane, Washington. The mall is anchored by
JCPenney, Sears and The Bon Marche and contains 101 mall shops. In addition to
the 273,673 square feet of retail mall space, the mall contains a 40,000
square foot 12-screen ACT III theater and seven out-parcel pads for retail and
restaurant development.
In early 1997, the Company began developing Boise Towne Plaza, a 105,664
square foot shopping center located adjacent to Boise Towne Square in Boise,
Idaho. The first phase of construction at Boise Towne Plaza, containing 76,414
square feet of retail space, was completed and opened in November 1997. The
second phase of construction at Boise Towne Plaza, containing 29,250 square
feet of retail space, is expected to be completed in the second quarter of
1998. During 1997, the Company also completed the construction of (i) a 76,411
square foot Sears department store at the Pine Ridge Mall located in
Pocatello, Idaho, (ii) a 36,036 square foot addition to the Sears department
store at the Silver Lake Mall and (iii) a 5,500 square foot Applebees
restaurant at the Animas Valley Mall located in Farmington, New Mexico.
The Company is also developing Provo Towne Centre, a 723,548 square foot
enclosed regional mall, located in Provo, Utah. Provo Towne Center will be
anchored by JCPenney, Sears and Dillard's and will include space for more than
80 mall shops. Additionally, the Company is currently contemplating the
expansion and renovation of several other of its Properties as well as other
developments and acquisitions.
Results of Operations. The Operating Partnership's total revenue for the
quarter ended December 31, 1997 was $24.2 million compared with $19.1 million
for the same period in 1996. Net income for the quarter ended December 31,
1997 was $9.0 million, or $0.42 per OP Unit, compared with $7.7 million, or
$0.39 per OP Unit, for the same period in 1996. FFO for the quarter ending
December 31, 1997 increased 19% to $12.3 million, or $0.58 per OP Unit,
compared with FFO of $10.4 million, or $0.53 per OP Unit, for the same period
in 1996.
Revenues for the year ended December 31, 1997 increased 14% to $83.0 million
over revenues of $72.9 million for the same period in 1996. Net income for the
year ended December 31, 1997 increased 15% to $32.9 million, or $1.56 per OP
Unit, compared to net income of $28.5 million, or $1.45 per OP Unit, for the
same period in 1996. FFO for the year ended December 31, 1997 increased 14% to
$44.4 million, or $2.10 per OP Unit, compared to FFO for the year ended
December 31, 1996 of $39.0 million, or $1.98 per OP Unit.
S-16
<PAGE>
New Credit Facility. On October 16, 1997, the Company entered into the
$150.0 million Unsecured Credit Facility with a syndicate of banks. The
Company used borrowings under the Unsecured Credit Facility to repay $67.1
million outstanding under the Pre-1997 Credit Facilities. On December 18,
1997, the Company increased the total amount available under the Unsecured
Credit Facility to $200.0 million. The Unsecured Credit Facility bears
interest, at the option of the Operating Partnership, at one, or a
combination, of (i) the higher of the Federal Funds Rate plus 50 basis points
or the prime rate or (ii) LIBOR plus a spread of 70 to 130 basis points based
on the credit rating of the Operating Partnership (which resulted in a spread
of 90 basis points at December 31, 1997) or (iii) LIBOR plus a spread as
offered by the participating banks under a one to three month bid rate auction
option. The Unsecured Credit Facility has a term of three years and provides
for monthly payments of interest only. The weighted average interest rate paid
on 1997 borrowings under the Unsecured Credit Facility was 6.75% and the
balance outstanding under this facility at December 31, 1997 was $127.0
million. The Unsecured Credit Facility is available for general corporate
purposes, including development, working capital, equity investments,
repayment of indebtedness and/or amortization payments.
Equity Offering. On January 28, 1997, JP Realty completed a public offering
of 1,500,000 shares of Common Stock, raising approximately $38.8 million in
net proceeds. The Operating Partnership, which received the net proceeds from
JP Realty in exchange for OP Units, used such proceeds to reduce outstanding
borrowings under the Pre-1997 Credit Facilities.
PROPERTIES
GENERAL
As of December 31, 1997, the Company, through the Operating Partnership,
held a portfolio consisting of 48 Properties, including 15 enclosed regional
malls, 25 community centers and two free-standing retail properties located in
ten states and six mixed-use commercial properties located primarily in the
Salt Lake City, Utah metropolitan area.
Each of the Company's regional malls is the premier and dominant mall and,
in some cases, the only mall within its trade area and is generally considered
to be the financial, economic and social center for a given geographic area.
The trade areas surrounding the Company's malls have a drawing radius,
depending on the mall, ranging from five to over 150 miles. The malls have
attracted as anchor tenants some of the leading national and regional retail
companies such as JCPenney, Nordstrom, Wal-Mart, The Bon Marche, Sears,
Dillard's, Mervyn's and ZCMI. The 15 regional malls in the portfolio contain
an aggregate of approximately 7,745,000 square feet of Total GLA and range in
size from approximately 296,000 to 876,000 square feet of Total GLA. The
community center portfolio consists of 25 Properties in seven states
containing over 3,159,000 square feet of Total GLA. The two freestanding
retail properties contain a total of approximately 5,000 square feet of GLA.
The commercial portfolio, which includes 40 commercial buildings containing
approximately 1,418,000 square feet of GLA, is primarily located in the Salt
Lake City, Utah area where the Company's headquarters are located.
PROPERTIES
The following tables set forth certain information, as of December 31, 1997,
relating to the Properties, all of which (except as otherwise indicated) are
100% owned by the Operating Partnership. The Company believes that all such
Properties are adequately covered by insurance.
S-17
<PAGE>
RETAIL PROPERTIES
<TABLE>
<CAPTION>
OCCUPANCY
--------------------
FREE TENANT- BASED
STANDING TENANT TOTAL OWNED ON BASED TENANT
PROPERTY STORES(2) SHOPS(3) ANCHORS GLA (4) GLA (5) (SQ. TOTAL ON SHOP
PROPERTY LOCATION TYPE (1) (SQ.FT) (SQ.FT) (SQ.FT) (SQ.FT) (SQ.FT) FT.) GLA GLA SPACE
---------------- -------------- -------- --------- -------- ------- ------- ------- ------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UTAH
Bank One........ Nephi FR 3,590 -- -- 3,590 3,590 -- 100.0% 100.0% --
Cache Valley
Mall(7)......... Logan RM 30,120 96,839 182,889 309,848 307,348 2,500 95.2% 95.2% 84.7%
Cottonwood
Mall(7)......... Salt Lake City RM 53,300 321,314 379,508 754,122 754,122 -- 93.5% 93.5% 84.7%
Cottonwood
Square.......... Salt Lake City CC -- 35,371 41,612 76,983 76,983 -- 93.3% 93.3% 85.4%
Fort Union
Plaza........... Salt Lake City CC 29,240 -- -- 29,240 29,240 -- 100.0% 100.0% --
Gateway Bountiful CC 35,620 65,932 174,047 275,599 145,639 129,960(9) 100.0% 100.0% 100.0%
Crossing........
North Temple
Shops........... Salt Lake City CC -- 10,085 -- 10,085 10,085 -- (11) 100.0% 100.0% 100.0%
Orem Plaza-
Center St....... Orem CC 15,491 18,814 62,420 96,725 91,125 5,600 100.0% 100.0% 100.0%
Orem Plaza-State
St.............. Orem CC 8,045 19,057 -- 27,102 27,102 -- (12) 89.3% 89.3% 84.8%
Plaza 9400...... Sandy CC 34,510 55,445 136,745 226,700 226,700 -- 100.0% 100.0% 100.0%
Red Cliffs
Mall(7)......... St. George RM 12,500 90,872 203,338 306,710 192,439 114,271(13) 97.4% 95.8% 91.2%
Red Cliffs
Plaza........... St. George CC 9,327 -- 46,626 55,953 46,626 9,327 16.7% -- --
River Pointe
Plaza........... West Jordan CC 18,522 56,120 135,707 210,349 56,120 154,229(15) 98.5% 94.3% 94.3%
Riverside Plaza. Provo CC 10,050 11,363 156,454 177,867 174,867 3,000 65.7% 65.1% 84.8%
University Orem CC 33,401 38,551 128,091 200,043 199,143 900 100.0% 100.0% 100.0%
Crossing........
IDAHO
Alameda Plaza... Pocatello CC 19,049 27,346 143,946 190,341 190,341 -- 100.0% 100.0% 100.0%
Baskin Robbins,
17th Street..... Idaho Falls FR 1,761 -- -- 1,761 1,761 -- 100.0% 100.0% --
Boise Towne Boise RM 84,418 339,050 452,037 875,505 480,368 395,137(19) 98.0% 96.4% 94.9%
Square(7).......
Boise Plaza..... Boise CC -- -- 108,464 108,464 108,464 -- 100.0% 100.0% --
Boise Towne
Plaza........... Boise CC -- -- 76,414 76,414 76,414 -- 100.0% 100.0% --
Grand Teton Idaho Falls RM 29,089 172,056 323,925 525,070 519,450 5,620 94.1% 94.0% 81.9%
Mall............
Pine Ridge Pocatello RM 25,818 148,976 436,528 611,322 499,822 111,500(9) 96.1% 95.2% 84.0%
Mall(7).........
Twin Falls
Crossing........ Twin Falls CC -- -- 37,680 37,680 37,680 -- 100.0% 100.0% --
Silver Lake
Mall(7)......... Coeur d'Alene RM 20,090 97,164 217,493 334,747 327,811 6,936 99.1% 99.1% 96.9%
Yellowstone
Square.......... Idaho Falls CC 16,865 38,950 166,733 222,548 220,748 1,800 87.6% 87.5% 59.5%
WASHINGTON
Spokane Valley
Mall(7) Spokane RM 46,125 273,673 369,184 688,982 447,405 241,577(25) 89.0% 83.1% 72.4%
Three Rivers Kelso RM 199,623 126,674 188,076 514,373 345,566 168,807(26) 97.3% 96.0% 89.1%
Mall(7)
<CAPTION>
OWNERSHIP
PROPERTY TYPE(6) ANCHORS
- ------------------- ---------- ------------------------
<S> <C> <C>
UTAH
Bank One........ Fee None
Cache Valley
Mall(7)......... Fee JCPenney, ZCMI, Lamont's
Cottonwood
Mall(7)......... Fee/GL(8) JCPenney, ZCMI
Cottonwood
Square.......... Fee/GL Albertson's
Fort Union
Plaza........... GL None
Gateway Fee Ernst Home Center(10),
Crossing........ ShopKo, TJ Maxx
North Temple Albertson's, Payless
Shops........... Fee Drug
Orem Plaza-
Center St....... Fee Savers, Showbiz Pizza
Orem Plaza-State
St.............. Fee Payless Drug
Albertson's, Fred Meyer,
Plaza 9400...... GL Pep Boys
Red Cliffs
Mall(7)......... Fee JCPenney, ZCMI, Wal-Mart
Red Cliffs
Plaza........... Fee Ernst Home Center(14)
River Pointe
Plaza........... Fee Albertson's, ShopKo
Riverside Plaza. Fee Best Products(16),
Payless Drug,
McFrugal's, Mini World
University Fee Burlington Coat(17),
Crossing........ Office Max(18), CompUSA
IDAHO
Alameda Plaza... Fee Albertson's, Fred Meyer
Baskin Robbins,
17th Street..... Fee None
Boise Towne Fee/GL(20) JCPenney, Sears, The Bon
Square(7)....... Marche, Mervyn's
Boise Plaza..... PI(21) Burlington Coat(17),
Albertson's
Boise Towne Circuit City, Linens 'n
Plaza........... Fee Things
Grand Teton Fee JCPenney, Sears, ZCMI,
Mall............ The Bon Marche
Pine Ridge Fee/GL(22) JCPenney, ZCMI, The Bon
Mall(7)......... Marche, ShopKo, Sears
Twin Falls
Crossing........ Fee None(23)
Silver Lake JCPenney, Sears,
Mall(7)......... Fee Lamont's, Emporium
Yellowstone
Square.......... PI(24) Albertson's, Fred Meyer
WASHINGTON
Spokane Valley JCPenney, Sears, The Bon
Mall(7) Fee Marche
Three Rivers Fee JCPenney, Sears, The Bon
Mall(7) Marche, Emporium
</TABLE>
S-18
<PAGE>
<TABLE>
<CAPTION>
OCCUPANCY
--------------------
FREE BASED
STANDING TENANT TOTAL TENANT- ON BASED TENANT
PROPERTY STORES(2) SHOPS(3) ANCHORS GLA (4) GLA (5) OWNED TOTAL ON SHOP
PROPERTY LOCATION TYPE (1) (SQ.FT) (SQ.FT) (SQ.FT) (SQ.FT) (SQ.FT) (SQ. FT.) GLA GLA SPACE
------------------- ------------ -------- --------- --------- --------- ---------- --------- --------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OREGON
Bailey Hills
Plaza.............. Eugene CC 12,000 11,895 155,000 178,895 11,895 167,000(27) 100.0% 100.0% 100.0%
Division Crossing.. Portland CC 2,589 24,091 67,960 94,640 92,051 2,589 91.5% 91.3% 66.6%
Halsey Crossing.... Gresham CC 9,000 23,071 52,764 84,835 84,835 -- 95.3% 95.3% 82.8%
Salem Center....... Salem RM 45,000 167,500 438,000 650,500 212,500 438,000 96.8% 90.2% 87.6%
WYOMING
Eastridge Mall..... Casper RM 17,500 264,388 289,796 571,684 495,801 75,883(29) 90.9% 89.5% 80.3%
White Mountain
Mall(7)............ Rock Springs RM 26,025 105,962 208,452 340,439 340,439 -- 76.4% 76.4% 75.4%
NEW MEXICO
Animas Valley Farmington RM 33,000 221,936 271,155 526,091 466,753 59,338(30) 78.5% 75.8% 71.7%
Mall...............
North Plains
Mall(7)............ Clovis RM 19,076 81,407 195,431 295,914 196,937 98,977(13) 96.3% 94.4% 86.6%
NEVADA
Fremont Plaza...... Las Vegas CC 6,542 19,643 77,348 103,533 103,533 -- 100.0% 100.0% 100.0%
Plaza 800.......... Reno/Sparks CC 5,985 21,846 139,607 167,438 167,438 -- 95.7% 95.7% 67.0%
COLORADO
Austin Bluffs Colorado CC 9,447 35,859 71,543 116,849 78,902 37,947(31) 100.0% 100.0% 100.0%
Plaza.............. Springs
ARIZONA
Fry's Shopping
Plaza.............. Glendale CC 8,564 38,781 71,919 119,264 119,264 -- 98.0% 98.0% 93.8%
Woodlands Village.. Flagstaff CC 4,020 43,380 146,898 194,298 91,858 102,440(13) 100.0% 100.0% 100.0%
CALIFORNIA
Anaheim Plaza...... Anaheim CC 10,000 -- 67,433 77,433 77,433 -- 100.0% 100.0% --
Visalia Mall....... Visalia RM 8,510 174,206 257,000 439,716 439,716 -- 97.8% 97.8% 94.5%
------- --------- --------- ---------- --------- --------- ----- ----- -----
Total........... 953,812 3,277,617 6,678,223 10,909,652 8,576,314 2,333,338 93.66% 91.94% 85.68%
======= ========= ========= ========== ========= ========= ===== ===== =====
<CAPTION>
OWNERSHIP
PROPERTY TYPE(6) ANCHORS
- --------------------- ---------- ------------------------
<S> <C> <C>
OREGON
Bailey Hills
Plaza.............. Fee Safeway, ShopKo
United Grocers, Payless
Division Crossing.. Fee Drug
Halsey Crossing.... GL Safeway
Salem Center....... Fee/GL(28) Nordstrom, Mervyn's,
Meier & Frank, JCPenney
WYOMING
Eastridge Mall..... Fee Target, The Bon Marche,
JCPenney, Sears
White Mountain JCPenney, Herbergers,
Mall(7)............ Fee Wal-Mart
NEW MEXICO
Animas Valley Fee JCPenney, Sears,
Mall............... Dillard's, Beall's, Best
Products
North Plains JCPenney, Sears, Wal-
Mall(7)............ Fee Mart, Beall's
NEVADA
Smith's Food & Drug,
Fremont Plaza...... GL Sav-On Drug
Plaza 800.......... GL Albertson's, ShopKo
COLORADO
Austin Bluffs Fee Albertson's, Longs Drug
Plaza..............
ARIZONA
Fry's Shopping
Plaza.............. Fee Fry's
Woodlands Village.. Fee Bashas', Wal-Mart
CALIFORNIA
Anaheim Plaza...... PI(32) (33)
Visalia Mall....... Fee JCPenney, Gottschalk's
Total...........
</TABLE>
- -----
(1) Property type definitions are as follows: Regional Mall--RM, Community
Centers--CC, Freestanding Retail Properties--FR.
(2) Freestanding stores means leasable buildings or other structures located
on a property which are not physically attached to a mall or community
center.
(3) Tenant shops means non-anchor retail stores located in a mall or community
center.
(4) Represents Operating Partnership-owned leasable area and tenant-owned
leasable area within the Properties.
(5) Represents Operating Partnership-owned leasable area within the
Properties.
(6) Ownership type definitions are as follows: Fee, Groundlease--GL and
Partnership Interest--PI.
(7) Secured Property as of December 31, 1997.
S-19
<PAGE>
(8) The Operating Partnership owns a ground lease on one-half acre.
(9) Tenant-owned space at this Property includes Shopko.
(10) Ernst Home Center has filed for protection under the United States
Bankruptcy Code ("Bankruptcy Code") but continues to be responsible for
lease payments and at December 31, 1997 was still paying rent pursuant to
the terms of the lease and the Bankruptcy Code.
(11) Tenant-owned space at this Property includes Albertson's and Payless
Drug.
(12) Tenant-owned space at this Property includes Payless Drug.
(13) Tenant-owned space at this Property includes Wal-Mart.
(14) Ernst Home Center has filed for protection under the Bankruptcy Code. The
trustee in bankruptcy has rejected the terms of the lease and the Company
is currently in the process of re-leasing the space.
(15) Tenant-owned space at this Property includes Albertson's and Shopko.
(16) Best Products has filed for protection under the Bankruptcy Code. The
trustee in bankruptcy has rejected the terms of this lease and the
Company is currently in the process of re-leasing the space.
(17) The Operating Partnership's lease is with Fred Meyer which subleases the
Property space to Burlington Coat.
(18) The Operating Partnership's lease is with Fred Meyer which subleases the
space to Burlington Coat. 33.6% of the space represented by the
Burlington Coat sublease is further subleased to Office Max.
(19) Tenant-owned space at this Property includes JCPenney, Sears and
Mervyn's.
(20) The Operating Partnership owns a ground lease on two acres.
(21) The Operating Partnership's ownership represents a 73.3% partnership
interest in the current fee holder of the Property.
(22) The Operating Partnership owns two ground leases on 7.3 acres and 1.2
acres.
(23) The Operating Partnership's lease subleases the Property to several other
retailers.
(24) The Operating Partnership's ownership represents a 83.5% partnership
interest in the current fee holder of the Property.
(25) Tenant-owned space at this Property includes Sears and The Bon Marche.
(26) Tenant-owned space at this Property includes Target and Top Foods.
(27) Tenant-owned space at this Property includes Safeway and Shopko.
(28) The Operating Partnership owns seven ground leases comprising a total of
1.58 acres and 2.35 acres in fee.
(29) Tenant-owned space at this Property includes Target.
(30) Tenant-owned space at this Property includes property owned by a third
party which leases its space to Best Products.
(31) Tenant-owned space at this Property includes Longs Drugs.
(32) The Operating Partnership's ownership interest represents a 50%
partnership interest in the current ground lease holder of the Property.
(33) Anchor space is vacant as of December 31, 1997.
S-20
<PAGE>
COMMERCIAL PROPERTIES
<TABLE>
<CAPTION>
PROPERTY GLA OCCUPANCY OWNERSHIP
PROPERTY LOCATION TYPE(1) (SQ. FT.) BASED ON GLA TYPE
- ------------------------ ---------------- -------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
UTAH
Price Business Center-
Pioneer Square......... Salt Lake City BP 530,484 97.52% Fee
Price Business Center-
South Main............. Salt Lake City BP 144,554 96.41% Fee
Price Business Center-
Timesquare............. Salt Lake City BP 289,423 84.07% Fee
Sears-Eastbay(2)........ Provo CP 48,880 100.00% Fee
Price Business Center-
Commerce Park.......... West Valley City BP 393,268 89.74% Fee
IDAHO
Boise/FSB Plaza......... Boise CP 11,058 38.55% Fee
--------- ------
Total.................. 1,417,667 92.13%
========= ======
</TABLE>
- --------
(1)Property type definitions are as follows: Business Park -- BP, Commercial
Property -- CP.
(2)Secured Property as of December 31, 1997.
TENANTS
Large stores (over 20,000 square feet per store) occupy 63.5% of the Total
GLA of the Company's regional malls and community centers. The Company's
largest tenants include JCPenney, ZCMI, Wal-Mart, The Bon Marche, Sears, Meier
& Frank, Mervyn's and Gottschalk's. No tenant represented more than 10% of the
Company's total rental revenues (i.e., minimum rents plus percentage rents)
for the year ended December 31, 1997.
Anchors. Regional malls and community centers usually contain one or more
large retail companies known as "anchors." Anchors, which include traditional
department stores, general merchandise stores, large fashion specialty stores,
value oriented specialty stores and discount stores, usually inventory a broad
range of products that appeal to many shoppers. Anchors either own their own
stores (and sufficient parking) or lease their stores from the owner of the
mall or center. Although the rent and other charges paid by anchors are
usually much less (on a per square foot basis) than the rent and other charges
paid by other tenants, their presence typically attracts many shoppers and
enhances the value of a mall or community center.
Anchor tenants in the regional malls are JCPenney, ZCMI, Nordstrom, Wal-
Mart, The Bon Marche, Sears, Gottschalk's, ShopKo, The Emporium, Lamont's,
Mervyn's, Meier & Frank, Target and Dillard's. Anchors in the regional malls
occupy 57.0% of Total GLA of the regional malls. The following table
summarizes the Total GLA owned and leased as of December 31, 1997 by these
anchors:
MALLS
<TABLE>
<CAPTION>
COMPANY-OWNED
ANCHOR ANCHORS AS
NUMBER OF COMPANY-OWNED ANCHOR-OWNED TOTAL GLA PERCENT % OF
ANCHOR ANCHOR STORES SQUARE FEET SQUARE FEET SQUARE FEET TOTAL GLA REVENUE(1)
- ------------------------ ------------- ------------- ------------ ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
JCPenney................ 15 913,188 243,591 1,156,779 9.38% 4.81%
Sears................... 9 471,669 227,780 699,449 5.67% 3.66%
The Bon Marche.......... 6 354,794 120,420 475,215 3.85% 3.26%
ZCMI.................... 5 562,754 -- 562,754 4.57% 2.41%
Wal-Mart................ 3 86,944 210,128 297,072 2.41% *
Meier & Frank........... 1 -- 183,500 183,500 1.49% --
Mervyn's................ 2 -- 159,648 159,648 1.30% --
Gottschalk's............ 1 150,000 -- 150,000 1.22% *
ShopKo Stores........... 1 -- 111,500 111,500 0.90% --
The Emporium............ 2 84,261 -- 84,261 0.68% *
Lamont's................ 2 80,953 -- 80,953 0.66% *
Target Stores........... 1 -- 75,883 75,883 0.62% --
Dillard's............... 1 72,212 -- 72,212 0.59% *
Nordstrom............... 1 -- 72,000 72,000 0.58% --
--- --------- --------- --------- -----
Total.................. 50 2,776,775 1,404,450 4,181,226 33.92%
=== ========= ========= ========= =====
</TABLE>
- --------
*Less than 1%.
(1)Revenue defined as minimum rents plus percentage rents.
S-21
<PAGE>
Anchor tenants occupying the greatest amount of GLA in the Company's
community centers are Shopko, Fred Meyer, Albertson's, Burlington Coat,
Safeway, Wal-Mart and Payless Drug Stores. Anchors in the community centers
occupy approximately 71.2% of Total GLA of the community centers. The
following table summarizes the Total GLA owned and leased as of December 31,
1997 by these anchors:
COMMUNITY CENTERS
<TABLE>
<CAPTION>
COMPANY-OWNED
ANCHOR ANCHORS AS
NUMBER OF COMPANY-OWNED ANCHOR-OWNED TOTAL GLA PERCENT % OF
ANCHOR ANCHOR STORES SQUARE FEET SQUARE FEET SQUARE FEET TOTAL GLA REVENUE(1)
- ------------------------ ------------- ------------- ------------ ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
ShopKo.................. 4 104,000 297,140 401,140 3.25% *
Albertson's............. 8 269,098 41,407 310,505 2.52 1.24%
Fred Meyer.............. 3 309,944 -- 309,944 2.51 1.16%
Burlington Coat(2)...... 2 174,248 -- 174,248 1.41 *
Safeway................. 2 52,764 53,000 105,764 0.86 *
Wal-Mart................ 1 -- 102,440 102,440 0.83 --
Ernst Home Centers(3)... 2 94,783 -- 94,783 0.77 *
Payless Drug............ 2 70,583 -- 70,583 0.57 *
Best Products(4)........ 1 59,350 -- 59,350 0.48 *
--- --------- ------- --------- -----
Total.................. 26 1,134,770 493,987 1,678,757 13.21%
=== ========= ======= ========= =====
</TABLE>
- --------
*Less than 1%.
(1)Revenue defined as minimum rents plus percentage rents.
(2)Subleased from Fred Meyer, Inc.
(3) Ernst Home Center has filed for protection under the Bankruptcy Code but
continues to be responsible for lease payments pursuant to the terms of
the Gateway Crossing lease and the Bankruptcy Code. The Ernst Home Center
lease for space at the Red Cliffs Plaza has been rejected and the Company
is currently in the process of re-leasing the space.
(4) The Best Products lease for space at the Riverside Plaza has been rejected
and the Company is currently in the process of re-leasing the space.
Major Tenants. Nonanchor tenants owned by major national retail chains lease
a considerable amount of space in the Company's retail properties. Such retail
chains include Amcena Corporation (Maurice's), Brown Group (Naturalizer
Shoes), Claire's (Claire's Boutique), Edison Brothers (Bakers Shoes, Jeans
West, J. Riggings, 5-7-9), Waldenbooks Books, Inc., The Limited (Lane Bryant,
Lerner, Limited Express, Victoria's Secret, Bath & Body Works, Structure), May
Department Stores (PayLess ShoeSource), Kay-Bee Toys, Wilson's Suede &
Leather, Musicland Land Group (Musicland, Sam Goody, Suncoast Pictures), Tandy
Corporation (Radio Shack), Woolworth Corporation (Northern Reflections,
Afterthoughts, Athletic X-press, Footlocker, Kinney Shoes, Lady Footlocker,
San Francisco Music Box Company), B. Dalton (B. Dalton Bookseller,
Barnes & Noble), Charming Shoppes, Inc. (Fashion Bug), Deb Shops, Regis
Corporation, Jay Jacobs, County Seat, General Mills (Olive Garden, Red
Lobster), Gap Stores, Inc. (Gap, GapKids), The Buckle, Eddie Bauer, Zales
Corporation, Gymboree, Fred Meyer, Millers Outpost, Pearle Vision and
Pendleton.
LEASES
Most of the Company's leases are long-term leases that contain fixed base
rents and step-ups in rent, typically occurring every three to five years.
These leases generally pass through to the tenant the tenant's share of common
area charges, including insurance costs and real estate taxes. Generally, all
of the regional mall leases and certain of the community center leases include
roof and structure repair costs in common area charges. The Company's leases
also generally provide for additional rents based on a percentage of tenant
sales. For the years ended December 31, 1996 and 1997, such percentage rents
accounted for approximately 7.2% and 6.1%, respectively, of total rental
income from the Properties owned by the Company during such periods.
S-22
<PAGE>
The following table sets forth information relating to the rental revenue
from the Properties for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
PROPERTY TYPE 1994 1995 1996 1997
------------------------------------------ ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Regional Malls............................ $24,860 $29,299 $36,286 $44,005
Community Centers and Freestanding Retail
Properties............................... 10,658 12,173 13,591 13,192
Commercial Properties..................... 4,929 5,633 6,631 6,323
------- ------- ------- -------
Total................................... $40,447 $47,105 $56,508 $63,520
======= ======= ======= =======
</TABLE>
VACANT SPACE
Approximately 803,000 square feet, or 6.51%, of Total GLA was vacant as of
December 31, 1997. Of this vacant space, approximately 523,000 square feet was
in the regional mall portfolio (20% of which is anchor and 80% of which is
mall shop space), 168,171 square feet was in the community center portfolio
and 111,586 square feet was in the commercial portfolio.
The following tables set forth information relating to lease expirations for
retail store and commercial property leases in effect as of December 31, 1997,
over the ten-year period commencing January 1, 1998 and thereafter for large
stores (over 20,000 square feet) and small stores (20,000 square feet or less)
at the retail properties and for all leases at the commercial properties.
Unless otherwise indicated, all information set forth below assumes that none
of the tenants exercise renewal options and excludes leases that had not
commenced as of December 31, 1997.
LEASE EXPIRATIONS FOR
RETAIL STORE LEASES (OVER 20,000 SQUARE FEET)
<TABLE>
<CAPTION>
AVERAGE
ANNUALIZED BASE
LEASE EXPIRATION NUMBER OF ANNUALIZED BASE RENT PER SQUARE
YEAR ENDING LEASES GLA IN RENT UNDER FOOT UNDER
DECEMBER 31, EXPIRING SQUARE FEET EXPIRING LEASES EXPIRING LEASES(1)
------------------------ --------- ----------- --------------- ------------------
<S> <C> <C> <C> <C>
1998.................... 8 370,846 $ 510,121 $1.38
1999.................... 2 201,690 323,647 1.60
2000.................... 3 119,045 365,534 3.07
2001.................... 9 595,718 1,423,260 2.39
2002.................... 4 231,458 711,643 3.07
2003.................... 3 100,249 303,001 3.02
2004.................... 4 255,669 725,957 2.84
2005.................... 1 33,421 111,605 3.34
2006.................... 3 185,240 562,696 3.04
2007 and thereafter..... 40 2,409,564 11,874,088 4.93
--- ---------
Total................. 77 4,502,900
=== =========
</TABLE>
--------
(1)Excludes tenants paying percentage rents in lieu of minimum rents.
S-23
<PAGE>
LEASE EXPIRATIONS FOR
RETAIL STORE LEASES (20,000 SQUARE FEET OR LESS)
<TABLE>
<CAPTION>
AVERAGE
ANNUALIZED BASE
LEASE EXPIRATION NUMBER OF ANNUALIZED BASE RENT PER SQUARE
YEAR ENDING LEASES GLA IN RENT UNDER FOOT UNDER
DECEMBER 31, EXPIRING SQUARE FEET EXPIRING LEASES EXPIRING LEASES(1)
------------------------ --------- ----------- --------------- ------------------
<S> <C> <C> <C> <C>
1998.................... 177 294,545 $3,847,377 $13.06
1999.................... 160 337,915 4,562,648 13.50
2000.................... 177 347,098 5,403,907 15.57
2001.................... 125 282,675 4,008,790 14.18
2002.................... 134 331,438 4,273,324 12.89
2003.................... 70 211,116 3,067,072 14.53
2004.................... 63 181,666 3,094,598 17.03
2005.................... 46 133,587 2,421,583 18.13
2006.................... 51 144,223 2,745,303 19.04
2007 and thereafter..... 150 509,436 9,418,638 18.49
----- ---------
Total............... 1,153 2,773,699
===== =========
</TABLE>
--------
(1)Excludes tenants paying percentage rents in lieu of minimum rents.
LEASE EXPIRATIONS FOR
COMMERCIAL PROPERTIES
<TABLE>
<CAPTION>
AVERAGE
ANNUALIZED BASE
LEASE EXPIRATION NUMBER OF ANNUALIZED BASE RENT PER SQUARE
YEAR ENDING LEASES GLA IN RENT UNDER FOOT UNDER
DECEMBER 31, EXPIRING SQUARE FEET EXPIRING LEASES EXPIRING LEASES(1)
----------------- --------- ----------- --------------- ------------------
<S> <C> <C> <C> <C>
1998............. 15 363,165 $1,616,563 $4.45
1999............. 12 195,205 929,800 4.76
2000............. 12 422,641 2,002,513 4.74
2001............. 3 113,115 922,213 8.15
2002............. 10 170,585 1,174,651 6.89
2003............. 1 20,988 275,572 13.13
2004............. 2 28,621 146,464 5.12
--- ---------
Total.......... 55 1,314,320
=== =========
</TABLE>
--------
(1)Excludes tenants paying percentage rents in lieu of minimum rents.
As leases expire, the Company currently expects to be able to increase
rental revenue by re-leasing the underlying space (either to a new tenant or
to an existing tenant) at rental rates that are at or higher than the existing
rates.
ENVIRONMENTAL REGULATION
Under various federal, state and local laws, ordinances and regulations, an
owner of real estate is liable for the costs of removal or remediation of
certain hazardous or toxic substances on or in such property. Such laws often
impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or toxic substances. The
presence of such substances, or the failure properly to remediate such
substances, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property
S-24
<PAGE>
as collateral. Persons who arrange for the disposal or treatment of hazardous
or toxic substances may also be liable for the costs of removal or remediation
of such substances at a disposal or treatment facility, whether or not such
facility is owned or operated by such person. Certain environmental laws
impose liability for release of asbestos-containing materials ("ACMs") into
the air and third parties may seek recovery from owners or operators of real
properties for personal injury associated with ACMs. In connection with the
ownership (direct or indirect), operation, management and development of real
properties, the Company may be considered an owner or operator of such
properties or as having arranged for the disposal or treatment of hazardous or
toxic substances and, therefore, potentially liable for removal or remediation
costs, as well as certain other related costs, including governmental fines
and injuries to persons and property.
All of the Properties have been subject to Phase I or similar environmental
audits, inspections and regulatory review (completed by licensed and qualified
independent environmental consultants, but not involving soil sampling or
groundwater analysis). The environmental audits do not reveal any significant
environmental liability that would have a material adverse effect on the
Company's financial condition or results of operations. The Company is aware
of one environmental issue concerning the 1990 findings of the Idaho
Department of Health & Welfare, Division of Environmental Quality (the
"Department") relating to a property adjacent to the Boise Towne Square. The
Company has received from the prior owner of the property a broad
indemnification relating to such environmental condition as well as a covenant
to complete the ongoing remediation of such environmental condition.
Remediation is on schedule as monitored by the Department. The Company does
not believe that this will have a material adverse effect on its financial
condition.
THE INTERMOUNTAIN REGION
The Intermountain Region is expected to outpace national population growth
and economic performance for the balance of the 1990s. The improving economic
and demographic trends in the region, combined with continued constrained
development of new retail properties in many parts of the region, is expected
to have a positive impact on rental rates and values of existing retail
properties.
Increasing Demand. The Company believes that there will be an increase in
demand for retail space in the Intermountain Region due to anticipated
continuing growth in population, employment, personal income and retail sales.
According to the 1996 MSA Profile published by Woods & Poole Economics, Inc.
(the "1996 Profile"), the Intermountain Region is projected to experience a
20.1% growth in population over the 1990 to 2000 period. During the 1990 to
1997 period, the Intermountain Region experienced a 15.1% growth in
population. The population growth rate over the 1990 to 2000 period for Boise
City, Idaho and Salt Lake City, Utah is projected to be 31.3% and 24.1%,
respectively, compared to a projected rate for the United States of 10.2%. The
population growth rate during the 1990 to 1997 period for Boise City, Idaho
and Salt Lake City, Utah was 24.0% and 16.8%, respectively, compared to 7.3%
for the United States. The 1996 Profile projects a 26.3% job growth rate over
this period in the Intermountain Region and a 37.7% and 30.9% rate for Boise
City, Idaho and Salt Lake City, Utah, respectively, compared to an 11.3% job
growth rate for the nation as a whole. According to the U.S. Department of
Labor, unemployment rates as of August 1995 for the Intermountain Region,
Idaho and Utah were 4.1%, 3.8% and 3.6%, respectively, compared to a 6.3%
national average.
The 1996 Profile also projects that personal income in the Intermountain
Region, Boise, Idaho and Salt Lake City, Utah will grow 39.8%, 56.8% and
48.1%, respectively, for the balance of the 1990s, while the rate for the
nation as a whole is projected to be 22.7%. Retail sales, according to the
1996 Profile, are projected to grow 35.1%, 50.0% and 37.4%, respectively,
during the same period, while the nation is projected to experience growth in
retail sales of 18.6%.
S-25
<PAGE>
Population Growth (% increase)
- ------------------------------
<TABLE>
<CAPTION>
Estimated Projected
1980-1990 1990-1997 1990-2000
--------- --------- ---------
<S> <C> <C> <C>
Salt Lake City, UT 17.3% 16.8% 24.1%
Boise, ID 15.5% 24.0% 31.3%
Intermountain Region 10.7% 15.1% 20.1%
United States of America 9.8% 7.3% 10.2%
</TABLE>
Source: 1996 MSA Profile published by Woods & Poole Economics, Inc.
<TABLE>
<CAPTION>
Total Employment (% increase)
- -----------------------------
Estimated Projected
1980-1990 1990-1997 1990-2000
--------- --------- ---------
<S> <C> <C> <C>
Salt Lake City, UT 36.2% 23.8% 30.9%
Boise, ID 31.4% 30.7% 37.7%
Intermountain Region 22.5% 21.2% 26.3%
United States of America 22.2% 8.1% 11.3%
</TABLE>
Source: 1996 MSA Profile published by Woods & Poole Economics, Inc.
<TABLE>
<CAPTION>
Personal Income (% increase)
- ----------------------------
Estimated Projected
1980-1990 1990-1997 1990-2000
--------- --------- ---------
<S> <C> <C> <C>
Boise, ID 30.7% 42.3% 56.8%
Salt Lake City, UT 29.7% 33.7% 48.1%
United States of America 28.1% 28.4% 39.8%
Intermountain Region 20.0% 14.7% 22.7%
</TABLE>
Source: 1996 MSA Profile published by Woods & Poole Economics, Inc.
<TABLE>
<CAPTION>
Retail Sales (% Increase)
- -------------------------
Estimated Projected
1980-1990 1990-1997 1990-2000
--------- --------- ---------
<S> <C> <C> <C>
Salt Lake City, UT 24.0% 28.5% 37.4%
Boise, ID 20.5% 40.7% 50.0%
United States of America 16.2% 14.4% 18.6%
Intermountain Region 7.8% 28.3% 35.1%
</TABLE>
Source: 1996 MSA Profile published by Woods & Poole Economics, Inc.
S-26
<PAGE>
Limited New Supply. Based on data compiled by the International Council of
Shopping Centers, new construction of shopping center properties in Utah,
Idaho and Wyoming (where approximately 68.7% of the Total GLA of the
Properties is located) has decreased considerably since 1989. At its peak in
1988, new construction starts of shopping centers in these states totaled 1.0
million square feet of GLA and, during 1996, new construction starts of
shopping centers in Utah, Idaho and Wyoming totalled 554,000 square feet of
GLA.
Other Factors. The Company believes that the many attractive attributes of
the Intermountain Region, such as its natural beauty, generally lower living
costs and less congested urban areas, which make transportation and commuting
less difficult and less costly, make it very attractive for personal and
corporate relocations. The Company expects that these factors, combined with
the continued constrained development of new retail properties in many parts
of the region, will continue to have a positive impact on retail rental rates
and values of existing retail properties. In addition, Salt Lake City, Utah,
where the Company's commercial and industrial portfolio is concentrated, has
been selected as the site for the 2002 Olympic Winter Games.
S-27
<PAGE>
MANAGEMENT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
John Price 64 Chairman of the Board of Directors and
Chief Executive Officer
G. Rex Frazier 54 President, Chief Operating Officer and
Director
Paul K. Mendenhall 50 Vice President--Chief Investment Officer
and Secretary
Martin G. Peterson 51 Vice President--Administration
Thomas L. Mulkey 45 Vice President--Leasing/Development
Greg Curtis 47 Vice President--Management
David R. Sabey 45 Vice President and General Counsel
M. Scott Collins 42 Vice President--Chief Financial Officer
and Treasurer
Warren P. King 60 Director
James A. Anderson 62 Director
Sam W. Souvall 77 Director
Allen P. Martindale 66 Director
Albert Sussman 81 Director
</TABLE>
EXECUTIVE OFFICERS
John Price has served as Chairman of the Board of Directors and Chief
Executive Officer since September 1993. Mr. Price formed Fairfax Realty, Inc.
("Fairfax"), the principal entity through which the business of the
Predecessor Companies was conducted, in 1972, and its predecessor, John Price
Associates, Inc., a construction company, in 1957. Mr. Price has developed and
built substantial retail and commercial real estate properties during his 40
years in the real estate industry and has been involved in all facets of real
estate development, construction, leasing, management and financing. Mr. Price
is a member of the Board of Directors and the Executive Committee of Alta
Industries--Utah, Inc. (a distributor of ferrous and nonferrous metals and a
manufacturer of roofing, siding, and other structural components). Mr. Price
is also a member of the NAREIT Legislative Advisory Council, a trustee of the
University of Utah, a member of the Board of Directors of the Utah State
Fairpark Corporation which operates the Utah State Fairgrounds and a member of
the Advisory Board of the First Security Bank of Utah, N.A. Mr. Price is a
graduate of the University of Utah.
G. Rex Frazier has served as President, Chief Operating Officer and a
Director since September 1993. Mr. Frazier has served as President and Chief
Operating Officer of Fairfax since 1986, prior to which he had served as
Executive Vice President, Vice President--Finance and Director of Finance. Mr.
Frazier has been involved in the real estate industry since 1976. He is a
certified public accountant and, prior to joining Fairfax, worked as an audit
supervisor with Touche Ross & Company. Mr. Frazier is a graduate of the
University of Utah.
Paul K. Mendenhall has served as Vice President--Chief Investment Officer
and Secretary since May 1997, prior to which he served as Vice President--
Finance and Secretary. Mr. Mendenhall has served as Vice President--Finance
and Secretary of Fairfax since 1986, prior to which he served as Director of
Finance and as Financial Analyst. Mr. Mendenhall has been involved in the real
estate industry since 1977. He is a certified public accountant and, prior to
joining Fairfax, worked as a senior auditor for Touche Ross & Company. Mr.
Mendenhall is a former President and Director of the Utah Association of
Certified Public Accountants (UACPA). Mr. Mendenhall is a graduate of the
University of Utah.
Martin G. Peterson has served as Vice President--Administration since
September 1993, prior to which he served as Vice President--
Administration/Accounting and Treasurer and as Assistant Vice President. In
addition, Mr. Peterson has served as Vice President--Administration and
Treasurer of Fairfax since 1978. Mr. Peterson has been involved in the real
estate industry since 1975. He is a certified public accountant and, prior to
joining Fairfax, worked as a senior auditor for Price Waterhouse & Co. Mr.
Peterson is a member of the Advisory Board of the Marriott School of
Management at Brigham Young University. Mr. Peterson is a graduate of Brigham
Young University.
S-28
<PAGE>
Thomas L. Mulkey has served as Vice President--Leasing/Development since
September 1993. In addition, Mr. Mulkey has served as the Vice President--
Leasing/Development of Fairfax since 1987, prior to which he oversaw the
development of many of the Company's properties. Mr. Mulkey has been involved
in the real estate industry since 1974. Prior to joining Fairfax, Mr. Mulkey
was a project manager for the May Stores Centers, Inc. (a retail department
store company). Mr. Mulkey is a graduate of the University of Missouri.
Greg Curtis has served as Vice President--Management since September 1993.
In addition, Mr. Curtis has served as Vice President--Management of Fairfax
since 1982, prior to which he served as Director of Enclosed Malls and as a
Mall Manager. Mr. Curtis has been involved in the real estate industry since
1977. Mr. Curtis is a graduate of Brigham Young University.
David R. Sabey has served as Vice President and General Counsel since
September 1993. In addition, Mr. Sabey has served as Vice President and
General Counsel of Fairfax since 1990. Prior to joining Fairfax, Mr. Sabey
worked as Assistant General Counsel for the Longs Drug Stores Corporation (a
retail drug store company). Mr. Sabey has been in the retail and real estate
industry since 1983. Mr. Sabey is a graduate of McGeorge School of Law and the
University of Utah.
M. Scott Collins has served as Vice President--Chief Financial Officer and
Secretary since May 1997. From November 1992 through May 1997, Mr. Collins
served as Vice President--Finance and Administration, Chief Financial Officer
and Secretary of Park City Group, Inc., (a software development company).
Prior to his employment with Park City Group, Mr. Collins worked as a senior
manager for Price Waterhouse where he was also involved with the real estate
industry. Mr. Collins is a certified public accountant and is a graduate of
Brigham Young University.
BOARD OF DIRECTORS
Warren P. King has been a Director since the formation of the Company and
was appointed Vice Chairman of the Board of Directors in August 1994. Prior to
the formation of the Company, Mr. King served as Vice Chairman of the Board of
Directors and Chairman of the Finance Committee of Fairfax beginning in 1977,
and has been involved in the real estate industry since 1974. He is the
President and Chief Executive Officer and director of Alta Industries--Utah,
Ltd. Mr. King is also a director of A.T.S. Industrial Supply (an industrial
tool and supply distributor). He is a certified public accountant and is a
graduate of Stevens Henager Business College.
James A. Anderson has been a Director since the formation of the Company.
From April 1978 to March 1993, Mr. Anderson was the Chairman of the Board of
Directors of the State of California Mining and Geology Board. He also was the
Executive Vice President of Fulcrum Management, Inc. (a public and private
natural resource venture capital investment company) from 1987 to 1991, and
was a director of Venture Trident Ltd. Partnership (the parent company of
Fulcrum Management, Inc.). He also served as a director of Homestake Mining
Company from 1980 to 1987 and as Executive Vice President from 1979 to 1987.
Mr. Anderson received his bachelor's degree in geological engineering from the
University of Utah, a masters degree in mining geology and a doctorate degree
in economic geology from Harvard University and a degree in business
administration from the Stanford University Executive Program.
Sam W. Souvall has been a Director since the formation of the Company. Since
1979, Mr. Souvall has been Chairman of the Board of Alta Industries--Utah,
Ltd. and, from 1970 to 1978, was President and Chief Executive Officer of that
company. From 1972 to 1984, Mr. Souvall served as a director of Valley Bank &
Trust Company and as Chairman of the Board of Directors from 1984 to 1988. Mr.
Souvall also served as Chairman of the Board of Directors of Utah
Bancorporation from 1980 to 1988, and as President and Chief Executive Officer
of Souvall Bros. Intermountain Wholesalers from 1946 to 1969.
S-29
<PAGE>
Allen P. Martindale has been a Director since the formation of the Company.
Since 1988, Mr. Martindale has served as the President of A.P.M. Associates (a
management consulting firm). Mr. Martindale has served as a director of
Smith's Food and Drug Center, Inc. (a retail food and drug store) since 1970
and served such company in several senior executive capacities since that
date, including Chairman of the Board of Directors and Chief Executive
Officer. He also served as President and Chief Executive Officer of Arden-
Mayfair from 1964 to 1970. Mr. Martindale is a certified public accountant and
a graduate of the University of California at Los Angeles.
Albert Sussman has been a Director since the formation of the Company. Since
January 1985, Mr. Sussman has been the Senior Advisor and a lifetime member of
the Board of Trustees of the International Council of Shopping Centers, an
organization of which he had previously served as executive head for 28 years.
From 1987 to 1988, Mr. Sussman was consultant to LaSalle Partners (a national
firm which specializes in the management and investment of real estate
properties held by major corporations) and he also was a consultant to Kimco
Realty Corporation (a public company owning/managing small and medium-size
shopping centers). Mr. Sussman is a graduate of the City College of New York.
S-30
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The 200 Notes and the 200 Notes offered hereby constitute separate series
of Debt Securities (which are more fully described in the accompanying
Prospectus), each to be issued pursuant to the Indenture, as supplemented by
the First Supplemental Indenture, between the Operating Partnership and The
Chase Manhattan Bank, as trustee (the "Trustee"). The Indenture does not limit
the aggregate principal amount of Debt Securities which may be issued
thereunder. The following description of the particular terms of the Notes
supplements the description of the general terms and provisions of the Debt
Securities set forth in the accompanying Prospectus, to which description
reference is hereby made. The terms of the Notes include those provisions
contained in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
The Notes are subject to all such terms, and holders of Notes are referred to
the Indenture and Trust Indenture Act for a statement thereof.
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Indenture, including the definitions therein of certain
capitalized terms used herein but not otherwise defined. Copies of the
Indenture and the Notes are available for inspection at the office of the
Trustee located at 450 West 33rd Street, New York, New York 10001. As used in
this section, the "Operating Partnership" refers to Price Development Company,
Limited Partnership and the "Company" refers to JP Realty, Inc., in each case,
exclusive of their respective subsidiaries and affiliates.
The Notes will be senior unsecured obligations of the Operating Partnership
and will rank pari passu with each other and with all other unsecured and
unsubordinated indebtedness of the Operating Partnership from time to time
outstanding. The Notes will be effectively subordinated to mortgages and other
secured indebtedness of the Operating Partnership and to secured and unsecured
indebtedness and other liabilities of the Operating Partnership. As of
December 31, 1997, after giving pro forma effect to the Offering and the
application of the net proceeds therefrom as described in "Use of Proceeds,"
such secured indebtedness of the Operating Partnership and indebtedness of
Subsidiaries of the Operating Partnership aggregated approximately $156.4
million and such unsecured and unsubordinated indebtedness of the Operating
Partnership aggregated approximately $128.2 million. See "Capitalization" and
"Use of Proceeds." Subject to certain limitations set forth in the Indenture
and other instruments governing the rights of holders of its outstanding
indebtedness, including the restrictions described under "Certain Covenants"
below, the Indenture will permit the Operating Partnership and its
Subsidiaries to incur additional secured and unsecured indebtedness.
The 200 Notes will mature on , 200 and the 200 Notes will mature on
, 200 (each, a "Maturity Date"). The Notes are not subject to any
mandatory sinking fund provisions. The Notes are subject to redemption at the
Operating Partnership's option prior to their Maturity Date, in whole or in
part, at any time, at the Redemption Price. See "Optional Redemption" below.
The Notes will be issued only in fully registered, book-entry form without
coupons, in denominations of $1,000 and integral multiples thereof, except
under the limited circumstances described below under "--Book-Entry System."
Except as described under "Certain Covenants" below and under "Description
of Debt Securities--Merger, Consolidation or Sale" in the accompanying
Prospectus, the Indenture does not contain any provision that would limit the
ability of the Operating Partnership to incur indebtedness or that would
afford holders of the Notes protection in the event of (i) a highly leveraged
or similar transaction involving the Operating Partnership, the management of
the Operating Partnership or the Company, or any affiliate of them, (ii) a
change of control of the Operating Partnership or the Company or (iii) a
reorganization, restructuring, merger or similar transaction involving the
Operating Partnership or the Company that may adversely affect the holders of
the Notes. In addition, subject to the limitations set forth under
"Description of Debt Securities--Merger, Consolidation or Sale" in the
accompanying Prospectus, the Operating Partnership may, in the future, enter
into certain transactions such as the sale of all or substantially all of its
assets or the merger or consolidation of the Operating Partnership that would
increase the amount of the Operating Partnership's indebtedness or
substantially reduce or eliminate the Operating Partnership's assets, which
may have an adverse effect on the Operating Partnership's
S-31
<PAGE>
ability to service its indebtedness, including the Notes. Neither the
Operating Partnership nor the management of the Operating Partnership or the
Company have any present intention of engaging in a highly leveraged or
similar transaction involving the Operating Partnership. In addition, certain
restrictions on ownership and transfer of the Company's capital stock designed
to preserve its status as a REIT may act to prevent or hinder any such
transaction or change in control.
PRINCIPAL AND INTEREST
The 200 Notes will bear interest at a rate of % per annum and the 200
Notes will bear interest at a rate of % per annum, in each case from the
date of issuance or from the immediately preceding Interest Payment Date (as
defined below) to which interest has been paid, payable semi-annually in
arrears on each and , commencing , 1998 (each an
"Interest Payment Date"), and on the applicable Maturity Date, to the persons
(the "Holders") in whose names the Notes are registered in the security
register applicable to such Notes at the close of business on the date 15
calendar days prior to such Interest Payment Date (each, a "Regular Record
Date") regardless of whether such day is a Business Day (as defined below).
Interest on the Notes will be computed on the basis of a 360-day year of
twelve 30-day months.
If any Interest Payment Date or a Maturity Date falls on a day that is not a
Business Day, the required payment shall be made on the next Business Day as
if it were made on the date such payment was due and no interest shall accrue
on the amount so payable for the period from and after such Interest Payment
Date or such Maturity Date, as the case may be. "Business Day" means any day,
other than a Saturday or Sunday or legal holiday, on which banking
institutions in The City of New York are open for business.
OPTIONAL REDEMPTION
The Notes are subject to redemption at the option of the Operating
Partnership, in whole or in part at any time at a redemption price (the
"Redemption Price"), equal to the sum of (i) the principal amount of the Notes
being redeemed plus accrued and unpaid interest to the redemption date and
(ii) the Make-Whole Amount, if any.
If notice has been given as provided in the Indenture and funds for the
redemption of the Notes called for redemption shall have been made available
on the redemption date referred to in such notice, such Notes will cease to
bear interest on the date fixed for such redemption specified in such notice
and the only right of the Holders from and after the redemption date will be
to receive payment of the Redemption Price upon surrender of such Notes in
accordance with such notice.
Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the security register for the Notes, not less
than 30 nor more than 60 days prior to the date fixed for redemption. The
notice of redemption will specify, among other items, the Redemption Price and
the principal amount of the Notes held by such Holder to be redeemed.
If less than all the Notes of a series are to be redeemed at the option of
the Operating Partnership, the Operating Partnership will notify the Trustee
at least 45 days prior to giving notice of redemption (or such shorter period
as is satisfactory to the Trustee) of the aggregate principal amount of the
Notes to be redeemed and their redemption date. The Trustee shall select, pro
rata, by lot or in such manner as it shall deem fair and appropriate, Notes to
be redeemed in whole or in part. Notes of a series may be redeemed in part in
the authorized denomination of $1,000 or in any integral multiple thereof.
As used herein:
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Notes of such series being so redeemed or
accelerated, the excess, if any, of (i) the aggregate present value as of the
date of such redemption or accelerated payment of each dollar of principal of
such series being redeemed and the amount of any interest (exclusive of
interest accrued to the date of redemption or accelerated payment)
S-32
<PAGE>
that would have been payable in respect of each such dollar if such redemption
or accelerated payment had not been made, determined by discounting, on a
semi-annual basis, such principal and interest at the applicable Reinvestment
Rate (determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the
respective dates on which such principal and interest would have been payable
if such redemption or accelerated payment had not been made, over (ii) the
aggregate principal amount of the particular series of Notes being redeemed or
paid as calculated and certified by the Operating Partnership to the Trustee
in an Officers' Certificate.
"Reinvestment Rate" means 0.25% plus the arithmetic mean of the yield(s) on
treasury securities at a constant maturity for the most recent week under the
heading "Week Ending" published in the most recent Statistical Release under
the caption "Treasury Constant Maturities" for the maturity (rounded to the
nearest month) corresponding to the remaining life to maturity, as of the
payment date of the principal being redeemed or paid. If no maturity exactly
corresponds to such maturity, yields for the two published maturities most
closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month. For the purpose of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States
government securities adjusted to constant maturities, or, if such statistical
release is not published at the time of any determination under the Indenture,
then such other reasonably comparable index which shall be designated by the
Operating Partnership.
CERTAIN COVENANTS
Reference is made to the section entitled "Description of Debt Securities"
in the accompanying Prospectus for a description of certain covenants
applicable to the Notes. In addition to the foregoing, the following covenants
of the Operating Partnership will apply to the Notes for the benefit of the
Holders.
Limitations on Incurrence of Debt. The Operating Partnership will not, and
will not permit any Subsidiary to, incur any Debt, other than Intercompany
Debt, if, immediately after giving effect to the incurrence of such additional
Debt, the aggregate principal amount of all outstanding Debt of the Operating
Partnership and its Subsidiaries on a consolidated basis determined in
accordance with GAAP is greater than 60% of the sum of (without duplication)
(i) the Adjusted Total Assets (as defined below) of the Operating Partnership
and its Subsidiaries as of the end of the fiscal quarter covered in the
Operating Partnership's Annual Report on Form 10-K or Quarterly Report on Form
10-Q, as the case may be, most recently filed with the Securities and Exchange
Commission (the "Commission") (or, if such filing is not required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), with the
Trustee) prior to the incurrence of such additional Debt and (ii) the increase
in Adjusted Total Assets from the end of such quarter, including, without
limitation, any increase in Adjusted Total Assets caused by the incurrence of
such additional Debt (such increase together with the Adjusted Total Assets
shall be referred to as the "Currently Adjusted Total Assets").
Limitations of Incurrence of Secured Debt. In addition to the foregoing
limitation on the incurrence of Debt, the Operating Partnership will not, and
will not permit any Subsidiary to, incur any Secured Debt if, immediately
after giving effect to the incurrence of such additional Secured Debt, the
aggregate principal amount of all outstanding Secured Debt of the Operating
Partnership and its Subsidiaries on a consolidated basis determined in
accordance with GAAP is greater than 40% of the Currently Adjusted Total
Assets.
Debt Service Coverage. In addition to the foregoing limitation on the
incurrence of Debt, the Operating Partnership and its Subsidiaries will
maintain a ratio of Consolidated Income Available for Debt Service to Annual
Debt Service Charge for the four consecutive fiscal quarters most recently
ended prior to the date on which such additional Debt is to be incurred of not
less than 1.5 to 1, on a pro forma basis after giving effect to
S-33
<PAGE>
the incurrence of such Debt and to the application of the proceeds therefrom,
and calculated on the assumption that (i) such Debt and any other Debt
incurred since the first day of such four-quarter period and the application
of the proceeds therefrom, including to refinance other Debt, had occurred at
the beginning of such period, (ii) the repayment or retirement of any other
Debt since the first day of such four-quarter period had occurred at the
beginning of such period (except that, in making such computation under this
subsection (ii) or subsection (i) above, the amount of Debt under any
revolving credit facility shall be computed based upon the average daily
balance of such Debt during such period) and (iii) any increase or decrease in
Adjusted Total Assets, or any other acquisition or disposition by the
Operating Partnership or any Subsidiary of any asset or group of assets, since
the first day of such four-quarter period, including, without limitation, by
merger, stock purchase or sale, or asset purchase or sale, had occurred at the
beginning of such period, in each case with the appropriate adjustments to net
income and Debt levels with respect to such increase, decrease or other
acquisition or disposition being included in such pro forma calculation. For
purposes of the adjustments referred to in clause (iii) of the preceding
sentence, any income earned (or loss incurred) as a result of any such
increase, decrease or other acquisition or disposition referred to in clause
(iii) for a period of less than such four-quarter period shall be annualized
for such four-quarter period.
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Operating
Partnership and its Subsidiaries on a consolidated basis whenever the
Operating Partnership and its Subsidiaries shall create, assume, guarantee or
otherwise become liable in respect thereof.
Maintenance of Unencumbered Currently Adjusted Total Assets. The Operating
Partnership shall maintain at all times Unencumbered Currently Adjusted Total
Assets of not less than 150% of the aggregate principal amount of all
outstanding Unsecured Debt of the Operating Partnership and its Subsidiaries
on a consolidated basis. After giving effect to the Offering and the
application of the net proceeds therefrom, the Operating Partnership's
Unencumbered Currently Adjusted Total Assets will be equal to 266.75% of the
aggregate principal amount of all outstanding Unsecured Debt of the Operating
Partnership and its Subsidiaries.
The foregoing covenants do not restrict the Operating Partnership from
refinancing existing Debt, provided that the outstanding principal amount of
such Debt is not increased.
Insurance. The Operating Partnership will, and will cause each of its
Subsidiaries to, keep all of their respective insurable properties insured
against loss or damage at least equal to their then fully insurable value with
financially sound and reputable insurance companies.
Maintenance of Properties. The Operating Partnership will cause all of its
respective properties used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Operating Partnership may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
the Operating Partnership shall not be prevented from selling or otherwise
disposing of for value its properties in the ordinary course of business.
Payment of Taxes and Other Claims. The Operating Partnership will pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (i) all taxes, assessments and governmental charges levied or
imposed upon the Operating Partnership or upon the income, profits or property
of the Operating Partnership and (ii) all lawful claims for labor, materials
and supplies which, if unpaid, might by law become a lien upon the property of
the Operating Partnership; provided, however, that the Operating Partnership
shall not be required to pay or discharge or cause to be paid or discharged
any such tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings.
Provision of Financial Information. Whether or not the Operating Partnership
is subject to Section 13 or 15(d) of the Exchange Act and for so long as any
Notes are outstanding, the Operating Partnership will, to the extent permitted
under the Exchange Act, file with the Commission the annual reports, quarterly
reports and other
S-34
<PAGE>
documents which the Operating Partnership would have been required to file
with the Commission pursuant to such Section 13 or 15(d) if the Operating
Partnership were so subject, such documents to be filed with the Commission on
or prior to the respective dates (the "Required Filing Dates") by which the
Operating Partnership would have been required so to file such documents if
the Operating Partnership were so subject.
The Operating Partnership will also in any event (i) within 15 days of each
Required Filing Date (a) transmit by mail to all Holders, as their names and
addresses appear in the Security Register, without cost to such Holders,
copies of the annual reports and quarterly reports which the Operating
Partnership would have been required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act if the Operating Partnership were
subject to such Sections and (b) file with the Trustee copies of the annual
reports, quarterly reports and other documents which the Operating Partnership
would have been required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act if the Operating Partnership were subject to such
Sections and (ii) if filing such documents by the Operating Partnership with
the Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective Holder.
As used herein:
"Adjusted Total Assets" as of any date means the sum of (i) $296.1 million,
which represents the amount determined by multiplying the sum of the shares of
Common Stock of the Company and the OP Units of the Operating Partnership not
held by the Company issued in connection with the Company's initial public
offering on January 21, 1994 (the "IPO") by the IPO price ($17.50), (ii)
$106.7 million, which represents the principal amount of outstanding Debt of
the Operating Partnership on the date of the IPO and (iii) the purchase price
or cost of any real estate assets or mortgages receivable acquired (including
the value of any OP Units issued in connection therewith) or developed or
capital improvements incurred after the IPO and the amount of any securities
offering proceeds and other proceeds of Debt received after the IPO (to the
extent such proceeds were not used to acquire real estate assets or mortgages
receivable or used to reduce Debt), adjusted in the case of (i), (ii) and
(iii) for the proceeds of any real estate assets disposed of by the Operating
Partnership. On a pro forma basis after giving effect to the Offering and the
application of the net proceeds therefrom as described in "Use of Proceeds,"
as of December 31, 1997, the Operating Partnership's Adjusted Total Assets
were $718.1 million.
"Annual Debt Service Charge" means the amount which was payable in the four
consecutive fiscal quarters most recently ended for interest on Debt.
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income plus amounts which have been deducted for (i)
Consolidated Interest Expense, (ii) provision for taxes of the Operating
Partnership and its Subsidiaries based on income, (iii) amortization of Debt
discount, (iv) provisions for gains and losses on properties, (v) depreciation
and amortization, (vi) the effect of any non-cash charge resulting from a
change in accounting principles, (vii) charges for early extinguishment of
Debt, less amounts which have been added in determining Consolidated Net
Income during such period, and (viii) amortization of deferred charges.
"Consolidated Interest Expense" means, for any period, and without
duplication, all interest (including the interest component of rentals on
capitalized leases, letter of credit fees, commitment fees and other like
financial charges) and all amortization of Debt discount on all Debt
(including, without limitation, payment-in-kind, zero coupon and other like
securities), but excluding legal fees, title insurance charges, other out-of-
pocket fees and expenses incurred in connection with the issuance of Debt and
the amortization of any such Debt issuance costs that are capitalized, all
determined in accordance with GAAP.
"Consolidated Net Income" for any period means the amount of consolidated
net income (or loss) of the Operating Partnership and its Subsidiaries for
such period determined on a consolidated basis in accordance with GAAP.
"Currently Adjusted Total Assets" means Adjusted Total Assets as of the end
of the fiscal quarter covered in the Operating Partnership's Annual Report on
Form 10-K or Quarterly Report on Form 10-Q, as the case may be, most recently
filed with the Commission (or, if such filing is not required under the
Exchange Act, with the
S-35
<PAGE>
Trustee) prior to the incurrence of such additional Debt and the increase in
Adjusted Total Assets from the end of such quarter, including, without
limitation, any increase in Adjusted Total Assets caused by the incurrence of
such additional Debt.
"Debt" means any indebtedness of the Operating Partnership or any Subsidiary
whether or not contingent, in respect of (i) borrowed money or evidenced by
bonds, notes, debentures or similar interest instruments, (ii) indebtedness
secured by any mortgage, pledge, lien, charge, encumbrance or any security
interest existing on property owned by the Operating Partnership or any
Subsidiary, (iii) the reimbursement obligations, contingent or otherwise, in
connection with any letters of credit actually issued or amounts representing
the balance deferred and unpaid of the purchase price of any property except
any such balance that constitutes an accrued expense or trade payable or (iv)
any lease of property by the Operating Partnership or any of its Subsidiaries
as lessee which is reflected in the Operating Partnership's consolidated
balance sheet as a capitalized lease in accordance with GAAP in the case of
items of indebtedness incurred under (i) through (iii) above to the extent
that any such items (other than letters of credit) would appear as a liability
on the Operating Partnership's Consolidated Balance Sheet in accordance with
GAAP, and also includes, to the extent not otherwise included, any obligation
of the Operating Partnership or any Subsidiary to be liable for, or to pay, as
obligor, guarantor or otherwise (other than for purposes of collection in the
ordinary course of business), indebtedness of another person (other than the
Operating Partnership or any Subsidiary).
"Intercompany Debt" means indebtedness owed by the Company, the Operating
Partnership or any Subsidiary solely to the Company, the Operating Partnership
or any Subsidiary.
"Secured Debt" means Debt secured by any mortgage, lien, charge,
encumbrance, trust deed, deed of trust, deed to secure Debt, security
agreement, pledge, conditional sale or other title retention agreement,
capitalized lease, or other security interest or agreement granting or
conveying security title to or a security interest in real property or other
tangible assets.
"Senior Executive Group" means, collectively, those individuals holding the
offices of Chairman, President, Chief Executive Officer, Chief Operating
Officer or any Vice President of the Company.
"Subsidiary" means (i) any corporation, partnership, joint venture, limited
liability company or other entity the majority of the shares of the non-voting
capital stock or other equivalent ownership interests of which (except
directors' qualifying shares) are at the time directly or indirectly owned by
the Operating Partnership, and the majority of the shares of the voting
capital stock or other equivalent ownership interests of which (except
directors' qualifying shares) are at the time directly or indirectly owned by
the Operating Partnership, the Company, any other Subsidiary and/or more
individuals of the Senior Executive Group (or, in the event of death or
disability of any such individuals, his/her respective legal
representative(s)), or such individual's successors in office as an officer of
the Company and (ii) any other entity (other than the Company) the accounts of
which are consolidated with the accounts of the Operating Partnership.
"Undepreciated Real Estate Assets" as of any date means the amount of real
estate assets of the Operating Partnership and its Subsidiaries on such date,
before depreciation and amortization determined on a consolidated basis in
accordance with GAAP.
"Unencumbered Currently Adjusted Total Assets" means Currently Adjusted
Total Assets minus the value of any properties of the Operating Partnership
and its Subsidiaries that are encumbered by any mortgage, charge, pledge,
lien, security interest or other encumbrance of any kind, including the value
of any capital stock of any Subsidiary that is so encumbered. For purposes of
this definition, the value of each of the 38 Properties owned by the Operating
Partnership at the time of the IPO shall be determined by reference to each
such Property's contribution to net operating income of the Operating
Partnership at the time of the IPO and the value of each Property acquired
since the IPO shall be equal to the purchase price or cost of each such
acquired Property.
"Unsecured Debt" means Debt that is not Secured Debt.
Compliance with the covenants described herein and such additional covenants
with respect to the Notes generally may not be waived by the Board of
Directors of the Company, as general partner of the Operating
S-36
<PAGE>
Partnership, or by the Trustee unless the Holders of at least a majority in
principal amount of such series consent to such waiver; provided, however,
that the defeasance and covenant defeasance provisions of the Indenture
described under "Description of Debt Securities--Discharge, Defeasance and
Covenant Defeasance" in the accompanying Prospectus will apply to the Notes,
including, with respect to the covenants described in this Prospectus
Supplement.
EVENTS OF DEFAULT
In addition to the "Events of Default" described under "Description of Debt
Securities--Events of Default, Notice and Waiver" in the accompanying
Prospectus, the Indenture provides that any default in the payment of recourse
indebtedness of the Operating Partnership or any mortgage, indenture or other
instrument under which such indebtedness is issued or by which such
indebtedness is secured having an aggregate principal amount exceeding $10.0
million, such default having occurred after the expiration of any applicable
grace period and having resulted in the acceleration of the maturity of such
indebtedness, but only if such indebtedness is not discharged or such
acceleration is not rescinded or annulled, will be an Event of Default with
respect to any series of Debt Securities issued thereunder.
BOOK-ENTRY SYSTEM
The following are summaries of certain rules and operating procedures of the
Depository Trust Company ("DTC") that affect the payment of principal and
interest and transfers of interests in the fully registered global notes in
book-entry form, without coupons (the "Global Notes"). Upon issuance, each
series of Notes will only be issued in the form of a Global Note which will be
deposited with, or on behalf of, DTC and registered in the name of Cede & Co.,
as nominee of DTC. Unless and until it is exchanged in whole or in part for
Notes in definitive form under the limited circumstances described below, a
Global Note may not be transferred except as a whole (i) by DTC to a nominee
of DTC, (ii) by a nominee of DTC to DTC or another nominee of DTC or (iii) by
DTC or any such nominee to a successor of DTC or a nominee of such successor.
Ownership of beneficial interests in a Global Note will be limited to
persons that have accounts with DTC for such Global Note ("participants") or
persons that may hold interests through participants. Upon the issuance of a
Global Note, DTC will credit, on its book-entry registration and transfer
system, the participants' accounts with the respective principal amounts of
the Notes represented by such Global Note beneficially owned by such
participants. The accounts to be credited will be designated by the
Underwriters (as defined below). Ownership of beneficial interests in the
Global Notes will be shown on, and the transfer of such ownership interests
will be effected only through, records maintained by DTC (with respect to
interests of participants) and on the records of participants (with respect to
interests of persons holding through participants). The laws of some states
may require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may limit or
impair the ability to own, transfer or pledge beneficial interests in the
Global Notes.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or its nominee, as the case may be, will be considered the sole owner or
Holder represented by such Global Note for all purposes under the Indenture.
Except as set forth below, owners of beneficial interests in a Global Note
will not be entitled to have Notes represented by such Global Note registered
in their names, will not receive or be entitled to receive physical delivery
of such Notes in definitive form and will not be considered the registered
owners or Holders thereof under the Indenture. Accordingly, each person owning
a beneficial interest in a Global Note must rely on the procedures of DTC and,
if such person is not a participant, on the procedures of the participant
through which such person owns its interest to exercise any rights of a Holder
of record under the Indenture. The Operating Partnership understands that
under existing industry practices, if the Operating Partnership requests any
action of Holders or if an owner of a beneficial interest in a Global Note
desires to give or take any action that a Holder is entitled to give or take
under the Indenture, DTC would authorize the participants holding the relevant
beneficial interests to give or take such action, and such participants would
authorize the beneficial owners owning through
S-37
<PAGE>
such participants to give or take such action or would otherwise act upon the
instructions of beneficial owners holding through them.
Payments of principal of, or premium or Make-Whole Amount, if any, and
interest on Notes represented by a Global Note registered in the name of DTC
or its nominee will be made to DTC or its nominee, as the case may be, as the
registered owner of such Global Note. None of the Operating Partnership, the
Trustee or any other agent of the Operating Partnership or the Trustee will
have any responsibility or liability for any aspect of the records relating
to, or payments made on account of, beneficial ownership of interests in the
Global Notes or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests. The Operating Partnership expects that
DTC, upon receipt of any payment of principal or interest in respect of a
Global Note, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in such Global
Note as shown on the records of DTC. The Operating Partnership also expects
that payments by participants to owners of beneficial interests in the Global
Notes held through such participants will be governed by standing customer
instructions and customer practice, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name,"
and will be the responsibility of such participants.
If DTC is at any time unwilling or unable to continue as depositary for the
Notes or ceases to be eligible under applicable law, and the Operating
Partnership fails to appoint a successor depositary registered as a clearing
agency under the Exchange Act within 90 days, the Operating Partnership will
issue the Notes in definitive form in exchange for the respective Global
Notes. In addition, the Operating Partnership may, at any time and in its sole
discretion, determine not to have any of the Notes represented by one or more
Global Notes and, in such event, will issue Notes in definitive form in
exchange for all of the Global Note or Global Notes representing such Notes.
Any Notes issued in definitive form in exchange for the Global Notes will he
registered in such name or names, and will be issued in denominations of
$1,000 and such integral multiples thereof, as DTC shall instruct the Trustee.
DTC is a limited-purpose trust company organized under the Banking Law of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities of its participants and to
facilitate the clearance and settlement of transactions among its participants
in such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations,
some of which (and/or their representatives) own DTC. Access to the DTC book-
entry system is also available to others, such as banks, brokers and dealers
and trust companies that clear through or maintain a custodial relationship
with a participant, either directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest in respect of the
Notes will be made by the Operating Partnership in immediately available
funds.
The Notes will trade in DTC's Same-Day Funds Settlement System until
maturity or until the Notes are issued in certificated form, and secondary
market trading activity in the Notes will therefore be required by DTC to
settle in immediately available funds. No assurance can be given as to the
effect, if any, of settlement in immediately available funds on trading
activity in the Notes.
TRUSTEE
The Chase Manhattan Bank or its affiliates may from time to time perform
other services for the Company and the Operating Partnership in the normal
course of business.
S-38
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the purchase agreement (the
"Purchase Agreement"), the Operating Partnership has agreed to sell to each of
the underwriters named below (collectively, the "Underwriters"), and each of
the Underwriters have severally agreed to purchase from the Operating
Partnership, the respective principal amount of 200 Notes and 200 Notes set
forth opposite its name below. The Purchase Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent,
and that the Underwriters will be obligated to purchase all of the Notes if
any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
UNDERWRITERS 200 NOTES 200 NOTES
------------ ----------- -----------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith $ $
Incorporated......................................
Goldman, Sachs & Co. ..................................
Lehman Brothers Inc. ..................................
Morgan Stanley & Co. Incorporated......................
UBS Securities LLC.....................................
----------- -----------
Total.................................................. $50,000,000 $50,000,000
=========== ===========
</TABLE>
The Underwriters have advised the Operating Partnership that they propose
initially to offer each series of Notes to the public at the public offering
price set forth on the cover page of this Prospectus Supplement, and to
certain dealers at such price less a concession not in excess of % (in the
case of the 200 Notes) and % (in the case of the 200 Notes) of the
principal amount thereof. The Underwriters may allow, and such dealers may re-
allow, a discount not in excess of % of the principal amount thereof on
sales to certain other dealers. After the initial public offering of the
Notes, the public offering price, concession and discount may be changed.
The Operating Partnership and JP Realty have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required
to make in respect thereof.
Each series of Notes is a new issue of securities with no established
trading market. The Operating Partnership has not applied for and does not
intend to apply for listing of the Notes on any securities exchange. The
Operating Partnership has been advised by the Underwriters that the
Underwriters intend to make a market in the Notes as permitted by applicable
laws and regulations. The Underwriters are not obligated, however, to make a
market in any of the Notes and may discontinue market-making at any time
without notice at the sole discretion of the Underwriters. No assurance can be
given as to the liquidity of, or the trading market for, the Notes.
Until the distribution of the Notes is completed, rules of the Commission
may limit the ability of the Underwriters to bid for and purchase the Notes.
As an exception to these rules, the Underwriters will be permitted to engage
in certain transactions that stabilize the price of the Notes. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection with
the Offering (i.e., if they sell more Notes than are set forth on the cover
page of this Prospectus Supplement), the Underwriters may reduce that short
position by purchasing Notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.
Neither the Operating Partnership nor the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the prices of the Notes.
S-39
<PAGE>
In addition, neither the Operating Partnership nor the Underwriters makes any
representation that they will engage in such transactions or that such
transactions, once commenced, will be discontinued without notice.
Certain of the Underwriters and their respective affiliates have provided
from time to time, and expect to provide, investment banking and financial
advisory services for, and/or have normal banking relationships with, the
Company and the Operating Partnership and their affiliates, for which they
receive customary compensation.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Operating Partnership by Rogers & Wells LLP, New York, New York. Certain legal
matters relating to the Offering will be passed upon for the Underwriters by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Rogers & Wells
LLP will rely as to certain matters of Maryland law on the opinion of Piper &
Marbury L.L.P., Baltimore, Maryland.
S-40
<PAGE>
PROSPECTUS
$400,000,000
JP REALTY, INC.
COMMON STOCK, PREFERRED STOCK, COMMON STOCK WARRANTS,
DEPOSITARY SHARES AND GUARANTEES
PRICE DEVELOPMENT COMPANY,
LIMITED PARTNERSHIP
DEBT SECURITIES
JP Realty, Inc., a Maryland corporation (the "Company"), may from time to
time offer in one or more series (i) shares of its common stock, par value
$.0001 per share (the "Common Stock"); (ii) shares or fractional shares of its
preferred stock, par value $.0001 per share (the "Preferred Stock"), which may
be issued in the form of depositary shares (the "Depositary Shares") evidenced
by depositary receipts; or (iii) warrants to purchase Common Stock (the
"Common Stock Warrants"), with an aggregate public offering price of up to
$200,000,000. Price Development Company, Limited Partnership, a Maryland
limited partnership and a majority-owned subsidiary of the Company (the
"Operating Partnership"), may from time to time offer in one or more series
unsecured non-convertible investment grade debt securities or other non-
convertible debt securities which will be fully and unconditionally guaranteed
by the Company (any such debt securities being referred to herein as "Debt
Securities" and any such guarantees being referred to herein as "Guarantees"),
with an aggregate public offering price of up to $200,000,000. The Common
Stock, Preferred Stock, Common Stock Warrants, Depositary Shares, Debt
Securities and Guarantees (collectively, the "Offered Securities") may be
offered separately or together, in separate series, in amounts, at prices and
on terms to be determined at the time of offering and set forth in one or more
supplements to this Prospectus (each, a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Common
Stock, any public offering price; (ii) in the case of Preferred Stock, the
specific title and stated value, any distribution, liquidation, redemption,
conversion, voting and other rights and any initial public offering price;
(iii) in the case of Common Stock Warrants, the duration, offering price,
exercise price and detachability features; (iv) in the case of Depositary
Shares, the fractional share of Preferred Stock represented by each such
Depositary Share; and (v) in the case of Debt Securities, the title, aggregate
principal amount, denominations, maturity, rate, if any (which may be fixed or
variable), or method of calculation thereof, time of payment of any interest,
any terms for redemption at the option of the Operating Partnership or the
holder, any terms for sinking fund payments, rank, any conversion or exchange
rights, any Guarantees, and the initial public offering price and any other
terms in connection with the offering and sale of such Debt Securities. In
addition, such specific terms may include limitations on direct or beneficial
ownership and restrictions on transfer of the Offered Securities, in each case
as may be appropriate to preserve the status of the Company as a real estate
investment trust ("REIT") for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about all material federal income tax considerations relating to,
and any listing on a securities exchange of, the Offered Securities covered by
such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company or the Operating Partnership, or to or
through underwriters or dealers. If any agents or underwriters are involved in
the sale of any of the Offered Securities, their names, and any applicable
purchase price, fee, commission or discount arrangement between or among them,
will be set forth, or will be calculable from the information set forth, in
the applicable Prospectus Supplement. See "Plan of Distribution." No Offered
Securities may be sold without delivery of the applicable Prospectus
Supplement describing the method and terms of the offering of such series of
Offered Securities.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is November 17, 1997
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE OPERATING PARTNERSHIP OR ANY
UNDERWRITERS, AGENTS OR DEALERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY AND ITS SUBSIDIARIES OR THE OPERATING PARTNERSHIP SINCE
THE DATE HEREOF OR THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Following the sale of
any Debt Securities hereunder by the Operating Partnership, the Operating
Partnership may become subject to the informational requirements of the
Exchange Act and, if so subject, will be required to file reports and other
information with the Commission. The Company's and the Operating Partnership's
Registration Statement on Form S-3 (the "Registration Statement"), the
exhibits and schedules forming a part thereof and the reports, proxy
statements and other information filed by the Company or the Operating
Partnership can be inspected and copied, at the prescribed rates, at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at Seven World Trade Center, Suite 1300, New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Electronic
filings of the Company made through the Electronic Data Gathering, Analysis
and Retrieval System are publicly available through the Commission's web site
(http://www.sec.gov). The Company's Common Stock is listed on the New York
Stock Exchange (the "NYSE") and similar information concerning the Company may
be inspected and copied at the offices of the NYSE at 20 Broad Street, New
York, New York 10005.
This Prospectus constitutes a part of the Registration Statement filed by
the Company and the Operating Partnership with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
omits certain of the information contained in the Registration Statement and
the exhibits and schedules thereto, in accordance with the rules and
regulations of the Commission. For further information concerning the Company,
the Operating Partnership and the Offered Securities, reference is hereby made
to the Registration Statement and the exhibits and schedules filed therewith,
which may be inspected without charge at the office of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and copies of which may be obtained
from the Commission at prescribed rates. Any statements contained herein
concerning the provisions of any document are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
FORWARD-LOOKING INFORMATION
Certain information both included and incorporated by reference herein may
contain forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, and as such may involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company or the Operating
Partnership to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. Forward-
looking statements, which are based on certain assumptions and describe future
plans, strategies and expectations of the Company or the Operating
Partnership, are generally identifiable by use of the words "may,"
2
<PAGE>
"will," "should," "expect," "anticipate," "estimate," "believe," "intend" or
"project" or the negative thereof or other variations thereon or comparable
terminology. Factors which could have a material adverse effect on the
operations and future prospects of the Company or the Operating Partnership
include, but are not limited to, changes in: economic conditions generally and
the real estate market specifically, legislative/regulatory changes (including
changes to laws governing the taxation of REITs), availability of capital,
interest rates, competition, supply and demand for properties in current and
proposed market areas of the Company and the Operating Partnership and general
accounting principles, policies and guidelines applicable to REITs. These
risks and uncertainties should be considered in evaluating any forward-looking
statements contained herein.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company (Commission File No. 1-12560) which
have been filed with the Commission are hereby incorporated by reference to
this Prospectus.
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1996, as amended by the Annual Report on Form 10-K/A No. 2 filed
November 14, 1997;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997;
3. The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997;
4. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997;
5. The Company's Current Report on Form 8-K, dated January 22, 1997;
6. The Company's Current Report on Form 8-K, dated June 30, 1997, as
amended by the Current Report on Form 8-K/A filed November 10, 1997;
7. The Company's Current Report on Form 8-K, dated September 11, 1997; and
8. The Company's Registration Statement on Form 8-A, dated November 15,
1993, which contains a description of the Common Stock, including any
amendment or report filed for the purpose of updating such description.
All documents filed by the Company or the Operating Partnership pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering of the Offered
Securities shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the respective dates of filing such documents.
Any statement or information contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
herein or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company and the Operating Partnership hereby undertake to provide
without charge to each person to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the documents
incorporated by reference herein (not including any exhibits to the
information that is incorporated by reference unless such exhibits are
specifically incorporated by reference to the information that this Prospectus
incorporates). Requests should be directed to: JP Realty, Inc., 35 Century
Park-Way, Salt Lake City, Utah 84115, Attn.: M. Scott Collins, Vice
President--Chief Financial Officer and Treasurer, telephone number (801)
486-3911.
3
<PAGE>
THE COMPANY AND THE OPERATING PARTNERSHIP
JP Realty, Inc., a Maryland corporation (the "Company"), is a fully
integrated, self-administered and self-managed real estate investment trust
("REIT") primarily engaged in the ownership, leasing, management, operation,
development, redevelopment and acquisition of retail properties in Utah,
Idaho, Colorado, Arizona, Nevada, New Mexico and Wyoming (the "Intermountain
Region") as well as in Oregon, Washington and California. The Company was
formed on September 8, 1993 to continue and expand the business, commenced in
1957, of certain companies affiliated with John Price, Chairman of the Board
and Chief Executive Officer of the Company. Based on total gross leasable
area, the Company owns and operates the largest retail property portfolio in
the states of Utah, Idaho and Wyoming, and one of the largest in the
Intermountain Region.
As of November 1, 1997, the Company's portfolio was comprised of 46 retail
properties (the "Properties"), including 14 enclosed regional malls, 24
community centers and two free-standing retail properties located in ten
states and six mixed-use commercial properties located primarily in the Salt
Lake City, Utah metropolitan area. As of that date, the Properties contained
an aggregate of approximately 11.6 million square feet of total gross leasable
area, of which approximately 9.7 million square feet was Company owned.
All of the Properties or interests therein are held by, and all of the
Company's business operations are conducted through, Price Development
Company, Limited Partnership, a Maryland limited partnership (the "Operating
Partnership"). As of November 1, 1997, the Company owned an approximate 83%
controlling general partner interest in the Operating Partnership. As general
partner of the Operating Partnership, the Company has unilateral control and
complete responsibility for the management of the Operating Partnership and
over each of the Properties. The Company's Common Stock is listed on the NYSE
under the Symbol "JPR."
The Company's management has an average of 23 years of experience in the
ownership, leasing, management, operation, development, redevelopment and
acquisition of regional malls, community shopping centers and other commercial
properties. As of November 1, 1997, the Company had 448 employees, including a
corporate staff of 77 individuals including senior management, and 371
property management personnel. The Company's and the Operating Partnership's
executive offices are located at 35 Century Park-Way, Salt Lake City, Utah
84115, and their telephone number is (801) 486-3911.
USE OF PROCEEDS
Except as otherwise provided in the applicable Prospectus Supplement,
proceeds to the Company from the sale of the Offered Securities will be added
to the working capital of the Company and will be available for the repayment
of indebtedness, the financing of capital commitments, possible future
acquisitions associated with the continued expansion of the Company's business
and general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for (i) the nine months
ended September 30, 1997 was 3.85x and (ii) the fiscal years ended December
31, 1996 and 1995, the year ended December 31, 1994 (which includes results of
operations of the Company's predecessors, which consisted of a group of
affiliated companies owned and controlled by John Price (the "Predecessor
Companies"), for the period of January 1, 1994 through January 20, 1994) and
the years ended December 31, 1993 and 1992 (which are based on the results of
operations of the Predecessor Companies) was 3.64x, 3.47x, 2.07x, 1.19x and
1.09x, respectively. To date, the Company has not issued any Preferred Stock;
therefore, the ratios of earnings to combined fixed charges and Preferred
Stock distributions are the same as the ratios of earnings to fixed charges.
The ratios of earnings to fixed charges presented above were computed by
dividing the Company's earnings by fixed charges. For this purpose, earnings
have been calculated by adding fixed charges (excluding capitalized
4
<PAGE>
interest) to income before extraordinary item and minority interest of holders
of units of limited partner interests in the Operating Partnership (the "OP
Units"). Fixed charges consist of interest costs, whether expensed or
capitalized, the interest component of rental expense, if any, and
amortization of deferred financing costs (including amounts capitalized).
Prior to the completion of the Company's initial public offering on January
21, 1994 (the "IPO"), the Predecessor Companies operated in a highly leveraged
manner utilizing traditional single-asset mortgage loans and construction
loans as their principal source of outside capital. In connection with
completion of the IPO, the Company reorganized the Predecessor Companies into
a single consolidated entity and substantially deleveraged their asset base,
resulting in a significantly improved ratio of earnings to fixed charges.
DESCRIPTION OF COMMON STOCK
GENERAL
Under the Company's Amended and Restated Articles of Incorporation (the
"Charter"), the Company has authority to issue 200,000,000 shares of capital
stock, par value $.0001 per share, with 124,800,000 of such shares designated
as Common Stock. At November 1, 1997, the Company had outstanding 17,389,827
shares of Common Stock. In addition, the Company has reserved for issuance (i)
3,678,390 shares of Common Stock upon exchange of the OP Units; and (ii)
1,013,793 shares of Common Stock upon exercise of stock options that have
been, or are available to be, granted under the Company's 1993 Stock Option
Plan. Under Maryland law, stockholders generally are not responsible for a
corporation's debts or obligations. The following descriptions do not purport
to be complete and are subject to, and qualified in their entirety by
reference to, the more complete descriptions thereof set forth in the
following documents: (i) the Charter and (ii) the Company's Amended and
Restated By-Laws (the "By-Laws"), which documents are exhibits to this
Registration Statement.
TERMS
Subject to the preferential rights of any other shares or series of capital
stock, including, without limitation, the Company's Price Group Stock, par
value $.0001 per share (the "Price Group Stock"), and to the provisions of the
Charter regarding excess stock, par value $.0001 per share ("Excess Stock"),
holders of shares of Common Stock will be entitled to receive distributions on
shares of Common Stock if, as and when authorized and declared by the Board of
Directors out of assets legally available therefor and to share ratably in the
assets of the Company legally available for distribution to its stockholders
in the event of its liquidation, dissolution or winding up after payment of,
or adequate provision for, all known debts and liabilities of the Company.
Under the Charter, holders of shares of Price Group Stock are entitled to
receive distributions at a rate per share equal to 80% of any distributions
declared by the Board of Directors, out of assets legally available therefor,
in respect of the Common Stock.
Subject to the preferential rights of the Price Group Stock with respect to
the election of directors and to the provisions of the Charter regarding
Excess Stock, each outstanding share of Common Stock entitles the holder to
one vote on all matters submitted to a vote of stockholders. No cumulative
voting rights for the election of directors will attach to shares of Common
Stock or Price Group Stock. For the period that John Price, his spouse and
children, any lineal descendants of any of the foregoing, any estates of any
of the foregoing, any trusts now or hereafter established for the benefit of
any of the foregoing and any other entity now or hereafter controlled by any
of the foregoing (collectively, the "Price Group") continues to hold a
combined 10% or greater direct or indirect economic interest in the Operating
Partnership, the holders of the Price Group Stock will elect two of the seven
members of the Board of Directors and the holders of the Common Stock and
Price Group Stock, voting together as a single class, will elect the remaining
five members of the Board of Directors. After the combined direct or indirect
economic interest held by the Price Group in the Operating Partnership falls
below 10%, the holders of the Price Group Stock will not, as a class, be
entitled to elect any of the members of the Board of Directors, but will vote
together with the Common Stock, as a single class, to elect all seven
5
<PAGE>
members of the Board of Directors. In addition, any change in the size of the
Board of Directors must be approved by a majority of the outstanding shares of
the Price Group Stock.
Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.
The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm.
Pursuant to the Maryland General Corporation Law ("MGCL"), a corporation
generally cannot dissolve, amend its Charter, merge, sell all or substantially
all of its assets, engage in a share exchange or engage in similar
transactions outside the ordinary course of business unless approved by the
affirmative vote of stockholders holding at least two-thirds of the shares
entitled to vote on the matter unless a lesser percentage (but not less than a
majority of all of the votes to be cast on the matter) is set forth in the
corporation's Articles of Incorporation. The Charter provides that such
transactions, with the exception of an amendment of the Charter (i) affecting
certain changes relating to the Board of Directors or the terms of the Price
Group Stock or (ii) to limit stockholder proposals and nominations, can be
affected by a vote of a majority of the shares entitled to vote on such
matters. With respect to the matters set forth in items (i) and (ii) above,
the Charter provides that it may only be amended upon the affirmative vote of
not less than 80% of the aggregate votes entitled to vote thereon.
Provisions of the Charter described below under "Restrictions on Transfers
of Capital Stock," together with other provisions of the Charter and the MGCL,
may discourage a takeover or other transaction in which holders of some, or a
majority, of shares of Common Stock might receive a premium for their shares
over the then-prevailing market price or which such holders might believe to
be otherwise in their best interest.
RESTRICTIONS ON TRANSFER AND OWNERSHIP
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
Common Stock, Preferred Stock or Price Group Stock (collectively, the "Equity
Stock") may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities) during the last half of a
taxable year. To assist the Company in meeting this requirement, the Charter
contains certain provisions restricting certain transfers of shares of Equity
Stock and limiting the beneficial ownership, directly or indirectly, of the
Company's outstanding Equity Stock. See "Restrictions on Transfers of Capital
Stock."
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
6
<PAGE>
DESCRIPTION OF PREFERRED STOCK
GENERAL
Under the Charter, the Company has authority to issue 200 million shares of
capital stock, par value $.0001 per share, of which 124,800,000 shares have
been designated as Common Stock, 200,000 of which have been designated as
Price Group Stock and 75,000,000 of which have been designated as Excess
Stock. As of the date hereof, none of the shares of capital stock has been
designated as Preferred Stock. Under the Charter, shares of Common Stock or
Excess Stock may be redesignated by the Board of Directors as Preferred Stock
and, following such redesignation, may be issued from time to time, in one or
more series of Preferred Stock, as authorized by the Board of Directors. Prior
to issuance of shares of each series, the Board of Directors is required by
the MGCL and the Charter to fix for each series, subject to the provisions of
the Charter regarding Price Group Stock, the terms, preferences, conversion or
other rights, voting powers, restrictions, limitations as to distributions or
other distributions, qualifications and terms or conditions of redemption, as
are permitted by Maryland law. The Preferred Stock will, when issued, be fully
paid and nonassessable and will have no preemptive rights. The Board of
Directors could authorize the issuance of shares of Preferred Stock with terms
and conditions that could have the effect of discouraging a takeover or other
transaction that holders of Common Stock might believe to be in their best
interests or in which holders of some, or a majority, of the shares of Common
Stock might receive a premium for their shares over the then market price of
such shares of Common Stock.
TERMS
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Charter and the By-Laws and any articles
supplementary to the Charter designating terms of a series of Preferred Stock
(the "Articles Supplementary").
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1)the title and stated value of such Preferred Stock;
(2) the number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of such
Preferred Stock;
(3) the distribution rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock;
(4) the date from which distributions on such Preferred Stock shall
accumulate, if applicable;
(5) the provision for a sinking fund, if any, for such Preferred Stock;
(6) the provision for redemption, if applicable, of such Preferred
Stock;
(7) any listing of such Preferred Stock on any securities exchange;
(8) the terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock, including the
conversion price or rate (or manner of calculation thereof);
(9) any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(10) a discussion of federal income tax considerations applicable to such
Preferred Stock;
(11) the relative ranking and preference of such Preferred Stock as to
distribution rights and rights upon liquidation, dissolution or
winding up of the affairs of the Company;
(12) any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series of Preferred Stock as to
distribution rights and rights upon liquidation, dissolution or
winding up of the affairs of the Company; and
(13) any limitations on direct or beneficial ownership and restrictions
on transfer, in each case as may be appropriate to preserve the
status of the Company as a REIT.
7
<PAGE>
RANK
Unless otherwise specified in the applicable Prospectus Supplement, the
Preferred Stock will, with respect to distribution rights and rights upon
liquidation, dissolution or winding up of the Company, rank (i) senior to all
classes or series of Common Stock or Price Group Stock of the Company and to
all equity securities ranking junior to such Preferred Stock with respect to
distribution rights or rights upon liquidation, dissolution or winding up of
the Company; (ii) on a parity with all equity securities issued by the
Company, the terms of which specifically provide that such equity securities
rank on a parity with the Preferred Stock with respect to distribution rights
or rights upon liquidation, dissolution or winding up of the Company; and
(iii) junior to all equity securities issued by the Company, the terms of
which specifically provide that such equity securities rank senior to the
Preferred Stock with respect to distribution rights or rights upon
liquidation, dissolution or winding up of the Company.
DISTRIBUTIONS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors, out of assets of the
Company legally available for payment, cash distributions at such rates and on
such dates as will be set forth in the applicable Prospectus Supplement. Each
such distribution shall be payable to holders of record as they appear on the
share transfer books of the Company on such record dates as shall be fixed by
the Board of Directors.
Distributions on any series of the Preferred Stock may be cumulative or
noncumulative, as provided in the applicable Prospectus Supplement.
Distributions, if cumulative, will be cumulative from and after the date set
forth in the applicable Prospectus Supplement. If the Board of Directors fails
to declare a distribution payable on a distribution payment date on any series
of the Preferred Stock for which distributions are noncumulative, then the
holders of such series of the Preferred Stock will have no right to receive a
distribution in respect of the distribution period ending on such distribution
payment date, and the Company will have no obligation to pay the distribution
accrued for such period, whether or not distributions on such series are
declared payable on any future distribution payment date.
If Preferred Stock of any series is outstanding, no distributions will be
declared or paid or set apart for payment on any capital stock of the Company
of any other series ranking, as to distributions, on a parity with or junior
to the Preferred Stock of such series for any period, unless (i) if such
series of Preferred Stock has a cumulative distribution, full cumulative
distributions have been or contemporaneously are declared and paid, or
declared and a sum sufficient for the payment thereof is set apart for such
payment on the Preferred Stock of such series for all past distribution
periods and the then current distribution period, or (ii) if such series of
Preferred Stock does not have a cumulative distribution, full distributions
for the then current distribution period have been or contemporaneously are
declared and paid, or declared and a sum sufficient for the payment thereof is
set apart for such payment on the Preferred Stock of such series. When
distributions are not paid in full (or a sum sufficient for such full payment
is not so set apart) upon Preferred Stock of any series and the shares of any
other series of Preferred Stock ranking on a parity as to distributions with
the Preferred Stock of such series, all distributions declared upon Preferred
Stock of such series and any other series of Preferred Stock ranking on a
parity as to distributions with such Preferred Stock shall be declared pro
rata so that the amount of distributions declared per share of Preferred Stock
of such series and such other series of Preferred Stock shall in all cases
bear to each other the same ratio that accrued distributions per share on the
Preferred Stock of such series (which shall not include any accumulation in
respect of unpaid distributions for prior distribution periods if such
Preferred Stock does not have a cumulative distribution) and such other series
of Preferred Stock bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any distribution payment or payments
on Preferred Stock of such series that may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative distribution, full cumulative
distributions on the Preferred Stock of such series have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof is set apart
8
<PAGE>
for payment for all past distribution periods and the then current
distribution period, or (ii) if such series of Preferred Stock does not have a
cumulative distribution, full distributions on the Preferred Stock of such
series have been or contemporaneously are declared and paid, or declared and a
sum sufficient for the payment thereof is set apart for payment for the then
current distribution period, no distributions (other than in shares of Common
Stock, Price Group Stock or other shares of capital stock ranking junior to
the Preferred Stock of such series as to distributions and upon liquidation)
shall be declared or paid or set aside for payment nor shall any other
distribution be declared or made upon the Common Stock, Price Group Stock or
any other capital stock of the Company ranking junior to or on a parity with
the Preferred Stock of such series as to distributions or upon liquidation,
nor shall any shares of Common Stock, or any other shares of capital stock of
the Company ranking junior to or on a parity with the Preferred Stock of such
series as to distributions or upon liquidation, be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Company (except by conversion into or exchange for other capital stock of the
Company ranking junior to the Preferred Stock of such series as to
distributions and upon liquidation).
Any distribution payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid distribution due
with respect to shares of such series that remain payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and
at the redemption prices set forth in such Prospectus Supplement.
The applicable Prospectus Supplement relating to a series of Preferred Stock
that is subject to mandatory redemption will specify the number of shares of
such Preferred Stock that shall be redeemed by the Company in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accrued and unpaid
distributions thereon (which shall not, if such Preferred Stock does not have
a cumulative distribution, include any accumulation in respect of unpaid
distributions for prior distribution periods) to the date of redemption. The
redemption price may be payable in cash or other property, as specified in the
applicable Prospectus Supplement. If the redemption price for Preferred Stock
of any series is payable only from the net proceeds of the issuance of shares
of capital stock of the Company, the terms of such Preferred Stock may provide
that if no such shares of capital stock shall have been issued, or to the
extent the net proceeds from any issuance are insufficient to pay in full the
aggregate redemption price then due, such Preferred Stock shall automatically
and mandatorily be converted into the applicable shares of capital stock of
the Company pursuant to conversion provisions specified in the applicable
Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock has
a cumulative distribution, full cumulative distributions on all shares of such
series of Preferred Stock shall have been or contemporaneously are declared
and paid, or declared and a sum sufficient for the payment thereof set apart
for payment for all past distribution periods and the then current
distribution period, or (ii) if a series of Preferred Stock does not have a
cumulative distribution, full distributions on all shares of the Preferred
Stock of such series have been or contemporaneously are declared and paid, or
declared and a sum sufficient for the payment thereof set apart for payment
for the then current distribution period, no shares of such series of
Preferred Stock shall be redeemed unless all outstanding shares of Preferred
Stock of such series are simultaneously redeemed; provided, however, that the
foregoing shall not prevent the purchase or acquisition of Preferred Stock of
such series to preserve the REIT status of the Company or pursuant to a
purchase or exchange offer made on the same terms to holders of all
outstanding shares of Preferred Stock of such series. In addition, unless (i)
if such series of Preferred Stock has a cumulative distribution, full
cumulative distributions on all outstanding shares of such series of Preferred
Stock have been or contemporaneously are declared and paid, or declared and a
sum sufficient for the payment thereof set apart for payment for all past
distribution periods and the then current distribution period, or (ii) if such
series of Preferred Stock does not have a cumulative distribution, full
distributions on the Preferred Stock
9
<PAGE>
of such series have been or contemporaneously are declared and paid, or
declared and a sum sufficient for the payment thereof set apart for payment
for the then current distribution period, the Company shall not purchase or
otherwise acquire directly or indirectly any shares of such series of
Preferred Stock (except by conversion into or exchange for capital shares of
the Company ranking junior to the Preferred Stock of such series as to
distributions and upon liquidation); provided, however, that the foregoing
shall not prevent the purchase or acquisition of shares of Preferred Stock of
such series to preserve the REIT status of the Company or pursuant to a
purchase or exchange offer made on the same terms to holders of all
outstanding shares of Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by
the Company and such shares may be redeemed pro rata from the holders of
record of such shares in proportion to the number of such shares held or for
which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by any other equitable manner determined
by the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such
Preferred Stock are to be surrendered for payment of the redemption price; (v)
that distributions on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the date upon which the holder's conversion rights,
if any, as to such shares shall terminate. If fewer than all the shares of
Preferred Stock of any series are to be redeemed, the notice mailed to each
such holder thereof shall also specify the number of shares of Preferred Stock
to be redeemed from each such holder. If notice of redemption of any Preferred
Stock has been given and if the funds necessary for such redemption have been
set aside by the Company in trust for the benefit of the holders of any
Preferred Stock so called for redemption, then from and after the redemption
date distributions will cease to accrue on such Preferred Stock, and all
rights of the holders of such shares will terminate, except the right to
receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock, Price Group Stock, Excess Stock or
any other class or series of capital stock of the Company ranking junior to
the Preferred Stock in the distribution of assets upon any liquidation,
dissolution or winding up of the Company, the holders of each series of
Preferred Stock shall be entitled to receive out of assets of the Company
legally available for distribution to stockholders liquidating distributions
in the amount of the liquidation preference per share, if any, set forth in
the applicable Prospectus Supplement, plus an amount equal to all
distributions accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid noncumulative distributions for prior
distribution periods). After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Preferred Stock will
have no right or claim to any of the remaining assets of the Company. In the
event that, upon any such voluntary or involuntary liquidation, dissolution or
winding up, the available assets of the Company are insufficient to pay the
amount of the liquidating distributions on all outstanding shares of Preferred
Stock and the corresponding amounts payable on all shares of other classes or
series of capital stock of the Company ranking on a parity with the Preferred
Stock in the distribution of assets, then the holders of the Preferred Stock
and all other such classes or series of capital stock ranking on parity with
the Preferred Stock shall share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed
among the holders of any other classes or series of capital stock ranking
junior to the Preferred Stock upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each case
according to their respective number of shares. For such purposes, the
10
<PAGE>
consolidation or merger of the Company with or into any other corporation,
trust or entity, or the sale, lease or conveyance of all or substantially all
of the property or business of the Company, shall not be deemed to constitute
a liquidation, dissolution or winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will
not, without the affirmative vote or consent of the holders of at least a
majority of the shares of such series of Preferred Stock outstanding at the
time, given in person or by proxy, either in writing or at a meeting (such
series voting separately as a class), (i) authorize or create, or increase the
authorized or issued amount of, any class or series of capital stock ranking
prior to such series of Preferred Stock with respect to payment of
distributions or the distribution of assets upon liquidation, dissolution or
winding up or reclassify any authorized capital stock of the Company into such
shares, or create, authorize or issue any obligation or security convertible
into or evidencing the right to purchase any such shares, or (ii) amend, alter
or repeal the provisions of the Charter or the Articles Supplementary for such
series of Preferred Stock, whether by merger, consolidation or otherwise (an
"Event"), so as to materially and adversely affect any right, preference,
privilege or voting power of such series of Preferred Stock or the holders
thereof; provided, however, with respect to the occurrence of any Event set
forth in (ii) above, so long as the Preferred Stock remains outstanding with
the terms thereof materially unchanged, taking into account that upon the
occurrence of an Event the Company may not be the surviving entity, the
occurrence of any such Event shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting power of holders of
Preferred Stock; and provided further that (a) any increase in the amount of
the authorized Preferred Stock or the creation or issuance of any other series
of Preferred Stock or (b) any increase in the amount of authorized shares of
such series or any other series of Preferred Stock, in each case ranking on a
parity with or junior to the Preferred Stock of such series with respect to
payment of distributions or the distribution of assets upon liquidation,
dissolution or winding up, shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall
have been redeemed or called for redemption and sufficient funds shall have
been deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into Common Stock will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
shares of Common Stock into which the shares of Preferred Stock are
convertible, the conversion price or rate (or manner of calculation thereof),
the conversion period, provisions as to whether conversion will be at the
option of the holders of the Preferred Stock or the Company, the events
requiring an adjustment of the conversion price and the provisions affecting
conversion in the event of the redemption of such series of Preferred Stock.
RESTRICTIONS ON TRANSFER AND OWNERSHIP
The provisions contained in the Company's Charter restricting certain
transfers of shares of Equity Stock and limiting the beneficial ownership,
directly or indirectly, of the Company's outstanding Equity Stock will effect
any shares of Preferred Stock that may from time to time be issued by the
Company. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
11
<PAGE>
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants for the purchase of Common
Stock. Common Stock Warrants may be issued independently or together with any
other Offered Securities offered by any Prospectus Supplement and may be
attached to or separate from such Offered Securities. Each series of Common
Stock Warrants will be issued under a separate warrant agreement (each, a
"Warrant Agreement") to be entered into between the Company and a warrant
agent specified in the applicable Prospectus Supplement (the "Warrant Agent").
The Warrant Agent will act solely as an agent of the Company in connection
with the Common Stock Warrants of such series and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of Common Stock Warrants. The following description of the
Common Stock Warrants sets forth certain general terms and provisions of the
Common Stock Warrants to which any Prospectus Supplement may relate. The
statements below describing the Common Stock Warrants and the applicable
Warrant Agreements are in all respects subject to and qualified in their
entirety by any further terms and provisions that may be set forth in any
applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the Common
Stock Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following:
(1) the title of such Common Stock Warrants;
(2) the aggregate number of such Common Stock Warrants;
(3) the price or prices at which such Common Stock Warrants will be
issued;
(4) the designation, number and terms of the shares of Common Stock
purchasable upon exercise of such Common Stock Warrants;
(5) the designation and terms of the other Offered Securities with which
such Common Stock Warrants are issued and the number of such Common
Stock Warrants issued with each such Offered Security;
(6) the date, if any, on and after which such Common Stock Warrants and
the related Common Stock will be separately transferable;
(7) the price at which each share of Common Stock purchasable upon
exercise of such Common Stock Warrants may be purchased;
(8) the date on which the right to exercise such Common Stock Warrants
shall commence and the date on which such right shall expire;
(9) the minimum or maximum amount of such Common Stock Warrants which
may be exercised at any one time;
(10) information with respect to book-entry procedures, if any;
(11) a discussion of certain federal income tax considerations; and
(12) any other terms of such Common Stock Warrants, including terms,
procedures and limitations relating to the exchange and exercise of
such Common Stock Warrants.
Each Common Stock Warrant will entitle the holder thereof to purchase such
number of shares of Common Stock, as the case may be, at such exercise price
as shall, in each case, be set forth in, or calculable from, the applicable
Prospectus Supplement relating to the offered Common Stock Warrants. Prior to
the exercise of any Common Stock Warrants, holders of such Common Stock
Warrants will not have any rights of holders of Common Stock, including the
right to receive payments of distributions, if any, on such Common Stock, or
to exercise any applicable right to vote. After the close of business on the
expiration date of any series of Common Stock Warrants (or such later date to
which such expiration date may be extended by the Company), unexercised Common
Stock Warrants will become void.
12
<PAGE>
Common Stock Warrants may be exercised by delivering to the Warrant Agent
payment, as provided in the applicable Prospectus Supplement, of the amount
required to purchase the Common Stock purchasable upon such exercise and
otherwise by following the procedures specified in such Prospectus Supplement.
The Warrant Agreements may be amended or supplemented without the consent of
the holders of the Common Stock Warrants issued thereunder to effect changes
that are not inconsistent with the provisions of the Common Stock Warrants and
that do not adversely affect the interests of the holders of the Common Stock
Warrants.
Reference is made to the section captioned "Description of Common Stock" for
a general description of the Common Stock to be acquired upon the exercise of
the Common Stock Warrants, including a description of certain restrictions on
the ownership of Common Stock.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The Company may issue receipts ("Depositary Receipts") for Depositary
Shares, each of which will represent a fractional interest of a share of a
particular series of Preferred Stock, as specified in the applicable
Prospectus Supplement. Shares of Preferred Stock of each series represented by
Depositary Shares will be deposited under a separate deposit agreement (each,
a "Deposit Agreement") among the Company, the depositary named therein (a
"Preferred Stock Depositary") and the holders from time to time of the
Depositary Receipts. Subject to the terms of the applicable Deposit Agreement,
each owner of a Depositary Receipt will be entitled, in proportion to the
fractional interest of a share of a particular series of Preferred Stock
represented by the Depositary Shares evidenced by such Depositary Receipt, to
all the rights and preferences of the Preferred Stock represented by such
Depositary Shares (including distribution, voting, conversion, redemption and
liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the Preferred Stock by the Company to a Preferred
Stock Depositary, the Company will cause such Preferred Stock Depositary to
issue, on behalf of the Company, the Depositary Receipts. Copies of the
applicable form of Deposit Agreement and Depositary Receipt may be obtained
from the Company upon request, and the statements made hereunder relating to
Deposit Agreements and the Depositary Receipts to be issued thereunder are
summaries of certain anticipated provisions thereof and do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
all of the provisions of the applicable Deposit Agreement and related
Depositary Receipts.
DISTRIBUTIONS
A Preferred Stock Depositary will be required to distribute all cash
distributions received in respect of the applicable Preferred Stock to the
record holders of Depositary Receipts evidencing the related Depositary Shares
in proportion to the number of such Depositary Receipts owned by such holders,
subject to certain obligations of holders to file proofs, certificates and
other information and to pay certain charges and expenses to such Preferred
Stock Depositary.
In the event of a distribution other than in cash, a Preferred Stock
Depositary will be required to distribute property received by it to the
record holders of Depositary Receipts entitled thereto, subject to certain
obligations of holders to file proofs, certificates and other information and
to pay certain charges and expenses to such Preferred Stock Depositary, unless
such Preferred Stock Depositary determines that it is not feasible to make
such distribution, in which case such Preferred Stock Depositary may, with the
approval of the Company, sell such property and distribute the net proceeds
from such sale to such holders.
No distribution will be made in respect of any Depositary Share to the
extent that it represents any Preferred Stock which has been converted or
exchanged.
13
<PAGE>
WITHDRAWAL OF STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the applicable Preferred Stock Depositary (unless the related Depositary
Shares have previously been called for redemption or converted), the holders
thereof will be entitled to delivery at such office, to or upon each such
holder's order, of the number of whole or fractional shares of the applicable
Preferred Stock and any money or other property represented by the Depositary
Shares evidenced by such Depositary Receipts. Holders of Depositary Receipts
will be entitled to receive whole or fractional shares of the related
Preferred Stock on the basis of the proportion of Preferred Stock represented
by each Depositary Share as specified in the applicable Prospectus Supplement,
but holders of such shares of Preferred Stock will not thereafter be entitled
to receive Depositary Shares therefor. If the Depositary Receipts delivered by
the holder evidence a number of Depositary Shares in excess of the number of
Depositary Shares representing the number of shares of Preferred Stock to be
withdrawn, the applicable Preferred Stock Depositary will be required to
deliver to such holder at the same time a new Depositary Receipt evidencing
such excess number of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever the Company redeems shares of Preferred Stock held by a Preferred
Stock Depositary, such Preferred Stock Depositary will be required to redeem
as of the same redemption date the number of Depositary Shares representing
shares of the Preferred Stock so redeemed, provided the Company shall have
paid in full to such Preferred Stock Depositary the redemption price of the
Preferred Stock to be redeemed plus an amount equal to any accrued and unpaid
distributions thereon to the date fixed for redemption. The redemption price
per Depositary Share will be equal to the redemption price and any other
amounts per share payable with respect to the Preferred Stock. If fewer than
all the Depositary Shares are to be redeemed, the Depositary Shares to be
redeemed will be selected pro rata (as nearly as may be practicable without
creating fractional Depositary Shares) or by any other equitable method
determined by the Company that preserves the REIT status of the Company.
From and after the date fixed for redemption, all distributions in respect
of the shares of Preferred Stock so called for redemption will cease to
accrue, the Depositary Shares so called for redemption will no longer be
deemed to be outstanding and all rights of the holders of the Depositary
Receipts evidencing the Depositary Shares so called for redemption will cease,
except the right to receive any moneys payable upon such redemption and any
money or other property to which the holders of such Depositary Receipts were
entitled upon such redemption upon surrender thereof to the applicable
Preferred Stock Depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the applicable
Preferred Stock are entitled to vote, a Preferred Stock Depositary will be
required to mail the information contained in such notice of meeting to the
record holders of the Depositary Receipts evidencing the Depositary Shares
which represent such Preferred Stock. Each record holder of Depositary
Receipts evidencing Depositary Shares on the record date (which will be the
same date as the record date for the Preferred Stock) will be entitled to
instruct such Preferred Stock Depositary as to the exercise of the voting
rights pertaining to the amount of Preferred Stock represented by such
holder's Depositary Shares. Such Preferred Stock Depositary will be required
to vote the amount of Preferred Stock represented by such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by such Preferred Stock
Depositary in order to enable such Preferred Stock Depositary to do so. Such
Preferred Stock Depositary will be required to abstain from voting the amount
of Preferred Stock represented by such Depositary Shares to the extent it does
not receive specific instructions from the holders of Depositary Receipts
evidencing such Depositary Shares. A Preferred Stock Depositary will not be
responsible for any failure to carry out any instruction to vote, or for the
manner or effect of any such vote made, as long as such action or non-action
is in good faith and does not result from negligence or willful misconduct of
such Preferred Stock Depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of each Depositary Receipt will
be entitled to the fraction of the liquidation preference accorded each
14
<PAGE>
share of Preferred Stock represented by the Depositary Share evidenced by such
Depositary Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED STOCK
The Depositary Shares, as such, will not be convertible into Common Stock or
any other securities or property of the Company. Nevertheless, if so specified
in the applicable Prospectus Supplement relating to an offering of Depositary
Shares, the Depositary Receipts may be surrendered by holders thereof to the
applicable Preferred Stock Depositary with written instructions to such
Preferred Stock Depositary to instruct the Company to cause conversion of the
Preferred Stock represented by the Depositary Shares evidenced by such
Depositary Receipts into whole shares of Common Stock, other shares of
Preferred Stock of the Company or other shares of stock, and the Company will
agree that upon receipt of such instructions and any amounts payable in
respect thereof, it will cause the conversion thereof utilizing the same
procedures as those provided for delivery of Preferred Stock to effect such
conversion. If the Depositary Shares evidenced by a Depositary Receipt are to
be converted in part only, a new Depositary Receipt or Depositary Receipts
will be issued for any Depositary Shares not to be converted. No fractional
shares of Common Stock will be issued upon conversion, and if such conversion
will result in a fractional share being issued, an amount will be paid in cash
by the Company equal to the value of the fractional interest based upon the
closing price of the Common Stock on the last business day prior to the
conversion.
AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
Any form of Depositary Receipt evidencing Depositary Shares which will
represent Preferred Stock and any provision of a Deposit Agreement will be
permitted at any time to be amended by agreement between the Company and the
applicable Preferred Stock Depositary. However, any amendment that materially
and adversely alters the rights of the holders of Depositary Receipts or that
would be materially and adversely inconsistent with the rights granted to the
holders of the related Preferred Stock will not be effective unless such
amendment has been approved by the existing holders of at least two-thirds of
the applicable Depositary Shares evidenced by the applicable Depositary
Receipts then outstanding. No amendment shall impair the right, subject to
certain anticipated exceptions in the Deposit Agreements, of any holders of
Depositary Receipts to surrender any Depositary Receipt with instructions to
deliver to the holder the related Preferred Stock and all money and other
property, if any, represented thereby, except in order to comply with any
applicable law. Every holder of an outstanding Depositary Receipt at the time
any such amendment becomes effective shall be deemed, by continuing to hold
such Depositary Receipt, to consent and agree to such amendment and to be
bound by the applicable Deposit Agreement as amended thereby.
A Deposit Agreement will be permitted to be terminated by the Company upon
not less than 30 days' prior written notice to the applicable Preferred Stock
Depositary if (i) such termination is necessary to preserve the Company's
status as a REIT or (ii) a majority of each series of Preferred Stock affected
by such termination consents to such termination, whereupon such Preferred
Stock Depositary will be required to deliver or make available to each holder
of Depositary Receipts, upon surrender of the Depositary Receipts held by such
holder, such number of whole or fractional shares of Preferred Stock as are
represented by the Depositary Shares evidenced by such Depositary Receipts
together with any other property held by such Preferred Stock Depositary with
receipts to such Depositary Receipts. The Company will agree that if a Deposit
Agreement is terminated to preserve the Company's status as a REIT, then the
Company will use its best efforts to list the Preferred Stock issued upon
surrender of the related Depositary Shares on a national securities exchange.
In addition, a Deposit Agreement will automatically terminate if (i) all
outstanding Depositary Shares thereunder shall have been redeemed; (ii) there
shall have been a final distribution in respect of the related Preferred Stock
in connection with any liquidation, dissolution or winding up of the Company
and such distribution shall have been distributed to the holders of Depositary
Receipts evidencing the Depositary Shares representing such Preferred Stock;
or (iii) each share of the related Preferred Stock shall have been converted
into stock of the Company not so represented by Depositary Shares.
15
<PAGE>
CHARGES OF A PREFERRED STOCK DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of a Deposit Agreement. In addition, the
Company will pay the fees and expenses of a Preferred Stock Depositary in
connection with the performance of its duties under a Deposit Agreement.
However, holders of Depositary Receipts will pay the fees and expenses of a
Preferred Stock Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the applicable
Deposit Agreement.
RESIGNATION AND REMOVAL OF A PREFERRED STOCK DEPOSITARY
A Preferred Stock Depositary will be permitted to resign at any time by
delivering to the Company notice of its election to do so, and the Company
will be permitted at any time to remove a Preferred Stock Depositary, any such
resignation or removal to take effect upon the appointment of a successor
Preferred Stock Depositary. A successor Preferred Stock Depositary will be
required to be appointed within 60 days after delivery of the notice of
resignation or removal and will be required to be a bank or trust company
having its principal office in the United States and having a combined capital
and surplus of at least $50 million.
MISCELLANEOUS
A Preferred Stock Depositary will be required to forward to holders of
Depositary Receipts any reports and communications from the Company which are
received by such Preferred Stock Depositary with respect to the related
Preferred Stock.
Neither a Preferred Stock Depositary nor the Company will be liable if it is
prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under a Deposit Agreement. The obligations of the
Company and a Preferred Stock Depositary under a Deposit Agreement will be
limited to performing their duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of Preferred
Stock represented by the applicable Depositary Shares), gross negligence or
willful misconduct, and neither the Company nor any applicable Preferred Stock
Depositary will be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Receipts, Depositary Shares or shares of Preferred
Stock represented thereby unless satisfactory indemnity is furnished. The
Company and any Preferred Stock Depositary will be permitted to rely on
written advice of counsel or accountants, or information provided by persons
presenting shares of Preferred Stock represented thereby for deposit, holders
of Depositary Receipts or other persons believed in good faith to be competent
to give such information, and on documents believed in good faith to be
genuine and signed by a proper party.
In the event a Preferred Stock Depositary shall receive conflicting claims,
requests or instructions from any holders of Depositary Receipts, on the one
hand, and the Company, on the other hand, such Preferred Stock Depositary
shall be entitled to act on such claims, requests or instructions received
from the Company.
16
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities may be issued by the Operating Partnership. The Debt
Securities will be either (i) non-convertible investment grade Debt Securities
or (ii) non-convertible Debt Securities that are fully and unconditionally
guaranteed by, and are accompanied by Guarantees of, the Company. The Debt
Securities will be issued pursuant to an indenture (the "Indenture"), between
the Operating Partnership and a trustee (a "Trustee"). The form of Indenture
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part, subject to such amendments or supplements as may be
adopted from time to time and is available for inspection as described above
under "Available Information." The Indenture will be dated as of a date prior
to the issuance of the Debt Securities to which it relates. The Indenture is
subject to, and governed by, the Trust Indenture Act of 1939, as amended. The
statements made hereunder relating to the Indenture and the Debt Securities to
be issued thereunder are summaries of certain provisions thereof, do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all provisions of the Indenture and such Debt Securities.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Operating
Partnership and, unless subordinated (see "--Subordination" below), will rank
pari passu with all other unsecured and unsubordinated indebtedness of the
Operating Partnership. The Debt Securities may be issued without limit as to
aggregate principal amount, in one or more series, in each case as established
from time to time, in or pursuant to authority granted by a resolution of the
Board of Directors of the Company (the "Board of Directors") on behalf of the
Operating Partnership or as established in one or more indentures supplemental
to the Indenture. All Debt Securities of one series need not be issued at the
same time and, unless otherwise provided in the Indenture, a series may be
reopened, without the consent of the holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series.
The Indenture provides that the Operating Partnership may, but need not,
designate more than one Trustee thereunder, each with respect to one or more
series of Debt Securities. Any Trustee under the Indenture may resign or be
removed with respect to one or more series of Debt Securities, and a successor
Trustee may be appointed to act with respect to such series. In the event that
two or more persons are acting as Trustee with respect to different series of
Debt Securities, each such Trustee shall be a trustee of a trust under the
Indenture separate and apart from the trust administered by any other Trustee,
and, except as otherwise indicated herein, any action described herein to be
taken by the Trustee may be taken by each such Trustee with respect to, and
only with respect to, the one or more series of Debt Securities for which it
is Trustee under the Indenture.
The following summaries set forth certain general terms and provisions of
the Indenture and the Debt Securities. The Prospectus Supplement relating to
the series of Debt Securities being offered will contain further terms thereof
and of the Guarantees, if any, relating to such Debt Securities, including,
where applicable, the following:
(1) the title of such Debt Securities, whether such are senior Debt
Securities or subordinated Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt Securities
will be issued and, if other than the principal amount thereof, the
portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof;
(4) the date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(5) the rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
17
<PAGE>
(6) the date or dates, or the method for determining such date or dates,
from which any interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment
dates, or the method by which any such date shall be determined, and
the basis upon which interest shall be calculated if other than that
of a 360-day year of 12 months consisting of 30 days each;
(7) the place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, such Debt
Securities may be surrendered for registration of transfer or
exchange and notices or demands to or upon the Operating Partnership
in respect of such Debt Securities, any applicable Guarantees and
the Indenture may be served;
(8) the period or periods within which, the price or prices at which and
the terms and conditions upon which such Debt Securities may be
redeemed, as a whole or in part, at the option of the Operating
Partnership, if the Operating Partnership is to have such an option;
(9) the obligation, if any, of the Operating Partnership to redeem,
repay or purchase such Debt Securities pursuant to any sinking fund
or analogous provision or at the option of a holder thereof, and the
period or periods within which, the price or prices at which and the
terms and conditions upon which such Debt Securities will be
redeemed, repaid or purchased, as a whole or in part, pursuant to
such obligation;
(10) if other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating
thereto;
(11) whether the amount of payments of principal of (and premium, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula
or method may, but need not be, based on a currency, currencies,
currency unit or units or composite currency or currencies) and the
manner in which such amounts shall be determined;
(12) the events of default or covenants of such Debt Securities, to the
extent different from or in addition to those described herein;
(13) whether such Debt Securities will be issued in certificated and/or
book-entry form;
(14) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than
$1,000 and any integral multiple thereof and, if in bearer form, the
denominations thereof if other than $5,000 and terms and conditions
relating thereto;
(15) the applicability, if any, of the defeasance and covenant defeasance
provisions described herein or any modification thereof;
(16) if such Debt Securities are to be issued upon the exercise of debt
warrants, the time, manner and place for such Debt Securities to be
authenticated and delivered;
(17) the terms and conditions, if any, upon which such Debt Securities
may be subordinated to other indebtedness of the Operating
Partnership;
(18) whether and under what circumstances the Operating Partnership will
pay additional amounts on such Debt Securities in respect of any
tax, assessment or governmental charge and, if so, whether the
Operating Partnership will have the option to redeem such Debt
Securities in lieu of making such payment;
(19) with respect to any Debt Securities that provide for optional
redemption or prepayment upon the occurrence of certain events (such
as a change of control of the Operating Partnership), (i) the
possible effects of such provisions on the market price of the
Operating Partnership's or the Company's securities or in deterring
certain mergers, tender offers or other takeover attempts, and the
intention of the Operating Partnership to comply with the
requirements of Rule 14e-1 under the Exchange Act; (ii) whether the
occurrence of the specified events may give rise to cross-defaults
on other indebtedness such that payment on such Debt Securities may
be effectively
18
<PAGE>
subordinated; and (iii) the existence of any limitation on the
Operating Partnership's financial or legal ability to repurchase such
Debt Securities upon the occurrence of such an event (including, if
true, the lack of assurance that such a repurchase can be effected)
and the impact, if any, under the Indenture of such a failure,
including whether and under what circumstances such a failure may
constitute an Event of Default; and
(20) any other terms of such Debt Securities or of any Guarantees issued
concurrently with such Debt Securities not inconsistent with the
provisions of the Indenture.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). If material or applicable, the federal
income tax, accounting and other considerations applicable to Original Issue
Discount Securities will be described in the applicable Prospectus Supplement.
Except as described under "--Merger, Consolidation or Sale" or as may be set
forth in any Prospectus Supplement, the Indenture does not contain any other
provisions that would limit the ability of the Operating Partnership to incur
indebtedness or that would afford holders of the Debt Securities protection in
the event of (i) a highly leveraged or similar transaction involving the
Operating Partnership, the management of the Operating Partnership or any
affiliate of any such party, (ii) a change of control or (iii) a
reorganization, restructuring, merger or similar transaction involving the
Operating Partnership that may adversely affect the holders of the Debt
Securities. In addition, subject to the limitations set forth under "--Merger,
Consolidation or Sale," the Operating Partnership may, in the future, enter
into certain transactions, such as the sale of all or substantially all of its
assets or the merger or consolidation of the Operating Partnership that would
increase the amount of the Operating Partnership's indebtedness or
substantially reduce or eliminate the Operating Partnership's assets, which
may have an adverse effect on the Operating Partnership's ability to service
its indebtedness, including the Debt Securities. In addition, restrictions on
ownership and transfers of the Company's capital stock are designed to
preserve its status as a REIT and, therefore, may act to prevent or hinder a
change of control. See "Description of Common Stock" and "Description of
Preferred Stock." Reference is made to the applicable Prospectus Supplement
for information with respect to any deletions from, modifications of or
additions to the events of default or covenants that are described below,
including any addition of a covenant or other provisions providing event risk
or similar protection.
Reference is made to "--Certain Covenants" below and to the description of
any additional covenants with respect to a series of Debt Securities in the
applicable Prospectus Supplement. Except as otherwise described in the
applicable Prospectus Supplement, compliance with such covenants generally may
not be waived with respect to a series of Debt Securities by the Board of
Directors on behalf of the Operating Partnership or by the Trustee unless the
holders of at least a majority in principal amount of all outstanding Debt
Securities of such series consent to such waiver, except to the extent that
the defeasance and covenant defeasance provisions of the Indenture described
under "--Discharge, Defeasance and Covenant Defeasance" below apply to such
series of Debt Securities. See "--Modification of the Indenture."
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series which are registered securities, other than
registered securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $1,000 and any integral
multiple thereof and the Debt Securities which are bearer securities, other
than bearer securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $5,000.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest, if any, on any series of Debt
Securities will be payable at the corporate trust office of the Trustee,
initially at the address which will be set forth in the applicable Prospectus
Supplement, provided that, at the option of the Operating Partnership payment
of interest may be made by check mailed to the address of the person entitled
thereto as it appears in the applicable register or by wire transfer of funds
to such person at an account maintained within the United States.
19
<PAGE>
Any interest not punctually paid or duly provided for on any interest
payment date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the holder on the applicable regular record
date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the holder of such Debt Security not
less than 10 days prior to such Special Record Date, or may be paid at any
time in any other lawful manner, all as more completely described in the
Indenture.
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount
and tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the applicable Trustee. In
addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
registration of transfer thereof at the corporate trust office of the
applicable Trustee. Every Debt Security surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer. No service charge will be made for any registration of
transfer or exchange of any Debt Securities, but the Trustee or the Operating
Partnership may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. If the applicable
Prospectus Supplement refers to any transfer agent (in addition to the
Trustee) initially designated by the Operating Partnership with respect to any
series of Debt Securities, the Operating Partnership may at any time rescind
the designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Operating
Partnership will be required to maintain a transfer agent in each place of
payment for such series. The Operating Partnership may at any time designate
additional transfer agents with respect to any series of Debt Securities.
Neither the Operating Partnership nor any Trustee shall be required (i) to
issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days before any
selection of Debt Securities of that series to be redeemed and ending at the
close of business on (a) if such Debt Securities are issuable only as
registered securities, the day of the mailing of the relevant notice of
redemption and (b) if such Debt Securities are issuable as bearer securities,
the day of the first publication of the relevant notice of redemption or, if
such Debt Securities are also issuable as registered securities and there is
no publication, the day of the mailing of the relevant notice of redemption,
(ii) to register the transfer or exchange of any registered security to be
redeemed in whole or in part, except, in the case of any registered security
to be redeemed in part, the portion thereof not to be redeemed, (iii) to
exchange any bearer security so selected for redemption except that such a
bearer security may be exchanged for a registered security of that series and
like tenor, provided that such registered security shall be simultaneously
surrendered for redemption, or (iv) to issue, register the transfer of or
exchange any Debt Security which has been surrendered for repayment at the
option of the holder, except the portion, if any, of such Debt Security not to
be so repaid.
MERGER, CONSOLIDATION OR SALE
The Operating Partnership may consolidate with, or sell, lease or convey all
or substantially all of its assets to, or merge with or into, any other
entity, provided that (i) either the Operating Partnership shall be the
continuing entity or the successor entity (if other than the Operating
Partnership) formed by or resulting from any such consolidation or merger or
which shall have received the transfer of such assets shall expressly assume
payment of the principal of (and premium, if any) and interest, if any, on all
of the Debt Securities and the due and punctual performance and observance of
all of the covenants and conditions contained in the Indenture; (ii)
immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of the Operating Partnership or any
subsidiary as a result thereof as having been incurred by the Operating
Partnership or such subsidiary at the time of such transaction, no Event of
Default under the Indenture, and no event which, after notice or the lapse of
time, or both, would become such an Event of Default, shall have occurred and
be continuing; and (iii) an officer's certificate and legal opinion covering
such conditions shall be delivered to the Trustee.
20
<PAGE>
CERTAIN COVENANTS
Existence. Except as permitted under "--Merger, Consolidation or Sale," the
Operating Partnership will be required to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
and franchises; provided, however, that the Operating Partnership shall not be
required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of its business and
that the loss thereof is not disadvantageous in any material respect to the
holders of the Debt Securities.
Payment of Taxes and Other Claims. The Operating Partnership is required to
pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) all taxes, assessments and governmental charges levied
or imposed upon it or any subsidiary or upon the income, profits or property
of the Operating Partnership or any subsidiary and (ii) all lawful claims for
labor, materials and supplies which, if unpaid, might by law become a lien
upon the property of the Operating Partnership or any subsidiary; provided,
however, that the Operating Partnership shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings.
Additional Covenants. Any additional or different covenants of the Operating
Partnership with respect to any series of Debt Securities will be set forth in
the Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (i) default
for 30 days in the payment of any installment of interest on any Debt Security
of such series; (ii) default in the payment of the principal of (or premium,
if any, on) any Debt Security of such series at its maturity; (iii) default in
making any sinking fund payment as required for any Debt Security of such
series; (iv) default in the performance of any other covenant of the Operating
Partnership contained in the Indenture (other than a covenant added to such
Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series), such default having continued for 60 days
after written notice as provided in such Indenture; (v) default in the payment
of an aggregate principal amount exceeding a specified dollar amount of any
evidence of recourse indebtedness of the Operating Partnership or any
mortgage, indenture or other instrument under which such indebtedness is
issued or by which such indebtedness is secured, such default having occurred
after the expiration of any applicable grace period and having resulted in the
acceleration of the maturity of such indebtedness, but only if such
indebtedness is not discharged or such acceleration is not rescinded or
annulled; (vi) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the Operating
Partnership or any Significant Subsidiary (as hereinafter defined) or any of
their respective property; and (vii) any other Event of Default provided with
respect to a particular series of Debt Securities. The term "Significant
Subsidiary" means each significant subsidiary (as defined in Regulation S-X
promulgated under the Securities Act) of the Operating Partnership.
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% in
principal amount of the outstanding Debt Securities of that series may declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities or indexed securities, such portion of the principal
amount as may be specified in the terms thereof) of all of the Debt Securities
of that series to be due and payable immediately by written notice thereof to
the Operating Partnership (and to the applicable Trustee if given by the
holders). However, at any time after such a declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
outstanding under the Indenture, as the case may be) has been made, but before
a judgment or decree for payment of the money due has been obtained by the
applicable Trustee, the holders of not less than a majority in principal
amount of outstanding Debt Securities of such series (or of all Debt
Securities then outstanding under the Indenture, as the case may be) may
rescind and annul such declaration and its consequences if (i) the Operating
Partnership shall have deposited with the applicable Trustee all required
payments of the principal of (and premium, if any) and interest, if any, on
the Debt Securities of
21
<PAGE>
such series (or of all Debt Securities then outstanding under the Indenture,
as the case may be), plus certain fees, expenses, disbursements and advances
of the applicable Trustee and (ii) all events of default, other than the non-
payment of accelerated principal (or specified portion thereof), or premium
(if any) or interest on the Debt Securities of such series (or of all Debt
Securities then outstanding under the Indenture, as the case may be) have been
cured or waived as provided in the Indenture. The Indenture also provides that
the holders of not less than a majority in principal amount of the outstanding
Debt Securities of any series (or of all Debt Securities then outstanding
under the applicable Indenture, as the case may be) may waive any past default
with respect to such series and its consequences, except a default (i) in the
payment of the principal of (or premium, if any) or interest, if any, on any
Debt Security of such series or (ii) in respect of a covenant or provision
contained in the Indenture that cannot be modified or amended without the
consent of the holder of each outstanding Debt Security affected thereby.
The Trustee will be required to give notice to the holders of Debt
Securities within 90 days of a default under the Indenture unless such default
has been cured or waived; provided, however, that such Trustee may withhold
notice to the holders of any series of Debt Securities of any default with
respect to such series (except a default in the payment of the principal of
(or premium, if any) or interest, if any, on any Debt Security of such series
or in the payment of any sinking fund installment in respect of any Debt
Security of such series) if specified responsible officers of such Trustee
consider such withholding to be in the interest of such holders.
The Indenture provides that no holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the case of failure of the
applicable Trustee, for 60 days, to act after it has received a written
request to institute proceedings in respect of an Event of Default from the
holders of not less than 25% in principal amount of the outstanding Debt
Securities of such series, as well as an offer of indemnity reasonably
satisfactory to it. This provision will not prevent, however, any holder of
Debt Securities from instituting suit for the enforcement of payment of the
principal of (and premium, if any) and interest, if any, on such Debt
Securities at the respective due dates thereof.
Subject to provisions in the Indenture relating to its duties in case of
default, no Trustee will be under any obligation to exercise any of its rights
or powers under the Indenture at the request or direction of any holders of
any series of Debt Securities then outstanding under such Indenture, unless
such holders shall have offered to the Trustee reasonable security or
indemnity. The holders of not less than a majority in principal amount of the
outstanding Debt Securities of any series (or of all Debt Securities then
outstanding under the Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the applicable Trustee, or of exercising any trust or power
conferred upon such Trustee. However, a Trustee may refuse to follow any
direction which is in conflict with any law or the Indenture, which may
involve such Trustee in personal liability or which may be unduly prejudicial
to the holders of Debt Securities of such series not joining therein.
Within 120 days after the close of each fiscal year, the Operating
Partnership will be required to deliver to each Trustee a certificate, signed
by one of several specified officers of the Company, stating whether or not
such officer has knowledge of any default under the Indenture and, if so,
specifying each such default and the nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture will be permitted to be made
only with the consent of the holders of not less than a majority in principal
amount of all outstanding Debt Securities or series of outstanding Debt
Securities which are affected by such modification or amendment; provided,
however, that no such modification or amendment may, without the consent of
the holder of each such Debt Security affected thereby, (i) change the stated
maturity of the principal of, or any installment of interest (or premium, if
any) on, any such Debt Security; (ii) reduce the principal amount of, or the
rate or amount of interest on, or any premium payable on redemption of, any
such Debt Security, or reduce the amount of principal of an Original Issue
Discount Security that would be due and payable upon declaration of
acceleration of the maturity thereof or would be
22
<PAGE>
provable in bankruptcy, or adversely affect any right of repayment of the
holder of any such Debt Security; (iii) change the place of payment, or the
coin or currency, for payment of principal of, premium, if any, or interest on
any such Debt Security; (iv) impair the right to institute suit for the
enforcement of any payment on or with respect to any such Debt Security; (v)
reduce the above-stated percentage of outstanding Debt Securities of any
series necessary to modify or amend the Indenture, to waive compliance with
certain provisions thereof or certain defaults and consequences thereunder or
to reduce the quorum or voting requirements set forth in such Indenture; or
(vi) modify any of the foregoing provisions or any of the provisions relating
to the waiver of certain past defaults or certain covenants, except to
increase the required percentage to effect such action or to provide that
certain other provisions may not be modified or waived without the consent of
the holder of such Debt Security.
The Indenture provides that the holders of not less than a majority in
principal amount of a series of outstanding Debt Securities have the right to
waive compliance by the Operating Partnership with certain covenants relating
to such series of Debt Securities in the Indenture.
Modifications and amendments of the Indenture will be permitted to be made
by the Operating Partnership and the respective Trustee thereunder without the
consent of any holder of Debt Securities for any of the following purposes:
(i) to evidence the succession of another person to the Operating Partnership
as obligor under such Indenture; (ii) to add to the covenants of the Operating
Partnership for the benefit of the holders of all or any series of Debt
Securities or to surrender any right or power conferred upon the Operating
Partnership in such Indenture; (iii) to add events of default for the benefit
of the holders of all or any series of Debt Securities; (iv) to add or change
any provisions of such Indenture to facilitate the issuance of Debt Securities
in uncertificated form, provided that such action shall not adversely affect
the interests of the holders of the Debt Securities in any material respect;
(v) to change or eliminate any provisions of such Indenture, provided that any
such change or elimination shall become effective only when there are no Debt
Securities outstanding of any series created prior thereto which are entitled
to the benefit of such provision; (vi) to secure the Debt Securities; (vii) to
establish the form or terms of Debt Securities of any series; (viii) to
provide for the acceptance of appointment by a successor Trustee or facilitate
the administration of the trusts under such Indenture by more than one
Trustee; (ix) to cure any ambiguity, defect or inconsistency in such
Indenture, provided that such action shall not adversely affect the interests
of holders of Debt Securities of any series in any material respect; or (x) to
supplement any of the provisions of such Indenture to the extent necessary to
permit or facilitate defeasance and discharge of any series of such Debt
Securities or of any applicable Guarantees, provided that such action shall
not adversely affect the interests of the holders of the Debt Securities of
any series in any material respect.
The Indenture provides that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination
upon declaration of acceleration of the maturity thereof, (ii) the principal
amount of a Debt Security denominated in a foreign currency that shall be
deemed outstanding shall be the U.S. dollar equivalent, determined on the
issue date for such Debt Security, of the principal amount (or, in the case of
an Original Issue Discount Security, the U.S. dollar equivalent on the issue
date of such Debt Security of the amount determined as provided in (i) above),
(iii) the principal amount of an indexed security that shall be deemed
outstanding shall be the principal face amount of such indexed security at
original issuance, unless otherwise provided with respect to such indexed
security pursuant to such Indenture, and (iv) Debt Securities owned by the
Operating Partnership or any other obligor upon the Debt Securities or any
affiliate of the Operating Partnership or of such other obligor shall be
disregarded.
The Indenture contains provisions for convening meetings of the holders of
Debt Securities of a series. A meeting will be permitted to be called at any
time by a Trustee, and also, upon request, by the Operating Partnership or the
holders of at least 10% in principal amount of the outstanding Debt Securities
of such series, in any such case, upon notice given as provided in such
Indenture. Except for any consent that must be given by the holder of each
Debt Security affected by certain modifications and amendments of the
Indenture, any
23
<PAGE>
resolution presented at a meeting or adjourned meeting duly reconvened at
which a quorum is present may be adopted by the affirmative vote of the
holders of a majority in principal amount of the outstanding Debt Securities
of that series; provided, however, that, except as referred to above, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by
the holders of a specified percentage, which is less than a majority, in
principal amount of the outstanding Debt Securities of a series may be adopted
at a meeting or adjourned meeting duly reconvened at which a quorum is present
by the affirmative vote of the holders of such specified percentage in
principal amount of the outstanding Debt Securities for that series. Any
resolution passed or decision taken at any meeting of holders of Debt
Securities of any series duly held in accordance with the Indenture will be
binding on all holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may
be given by the holders of not less than a specified percentage in principal
amount of the outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, the Indenture provides that if any
action is to be taken at a meeting of holders of Debt Securities of any series
with respect to any request, demand, authorization, direction, notice,
consent, waiver or other action that such Indenture expressly provides may be
made, given or taken by the holders of such series and one or more additional
series: (i) there shall be no minimum quorum requirement for such meeting and
(ii) the principal amount of the outstanding Debt Securities of such series
that vote in favor of such request, demand, authorization, direction, notice,
consent, waiver or other action shall be taken into account in determining
whether such request, demand, authorization, direction, notice, consent,
waiver or other action has been made, given or taken under such Indenture.
SUBORDINATION
The terms and conditions, if any, upon which the Debt Securities are
subordinated to other indebtedness of the Operating Partnership will be set
forth in the applicable Prospectus Supplement relating thereto. Such terms
will include a description of the indebtedness ranking senior to the Debt
Securities, the restrictions on payments to the holders of such Debt
Securities while default with respect to such senior indebtedness is
continuing, the restrictions, if any, on payments to the holders of such Debt
Securities following an Event of Default, and provisions requiring holders of
such Debt Securities to remit certain payments to holders of senior
indebtedness. If this Prospectus is being delivered in connection with a
series of Debt Securities, which by its terms are subordinated to other
indebtedness of the Operating Partnership, the applicable Prospectus
Supplement or the information incorporated herein by reference will set forth
the approximate amount of such other indebtedness outstanding at the end of
the Operating Partnership's most recent fiscal quarter. If the applicable
Prospectus Supplement relates to Debt Securities that are guaranteed by the
Company, the terms and conditions, if any, upon which such guarantee may be
subordinated to other indebtedness of the Company will also be set forth.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Operating Partnership may discharge certain obligations to holders of
any series of Debt Securities that have not already been delivered to the
applicable Trustee for cancellation and that either have become due and
payable or will become due and payable within one year (or scheduled for
redemption within one year) by irrevocably depositing with such Trustee, in
trust, funds in such currency or currencies, currency unit or units or
composite currency or currencies in which such Debt Securities are payable in
an amount sufficient to pay the entire indebtedness on such Debt Securities in
respect of principal (and premium, if any) and interest to the date of such
deposit (if such Debt Securities have become due and payable) or to the stated
maturity or redemption date, as the case may be.
The Indenture provides that, if certain provisions thereof are made
applicable to the Debt Securities of or within a series pursuant to such
Indenture, the Operating Partnership may elect either (i) to defease and be
24
<PAGE>
discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay additional amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register
the transfer or exchange of such Debt Securities, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or
agency in respect of such Debt Securities and to hold moneys for payment in
trust) ("defeasance") or (ii) to be released from its obligations with respect
to such Debt Securities under certain sections of such Indenture (including
the restrictions described under "--Certain Covenants") and, if provided
pursuant to such Indenture, its obligations with respect to any other
covenant, and any omission to comply with such obligations shall not
constitute a default or an Event of Default with respect to such Debt
Securities ("covenant defeasance"), in either case upon the irrevocable
deposit by the Operating Partnership with the applicable Trustee, in trust, of
an amount, in such currency or currencies, currency unit or units of composite
currency or currencies in which such Debt Securities are payable at stated
maturity, or Government Obligations (as defined below), or both, applicable to
such Debt Securities which through the scheduled payment of principal and
interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any) and interest on such
Debt Securities, and any mandatory sinking fund or analogous payments thereon,
on the scheduled dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Operating Partnership has delivered to the Trustee an opinion of
counsel (as specified in the Indenture) to the effect that the holders of such
Debt Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such opinion of counsel, in the case of
defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service ("IRS") or a change in applicable federal income tax law occurring
after the date of the Indenture.
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations
of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which
issued the foreign currency in which the Debt Securities of a particular
series are payable, the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America or such other
government, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such
Government Obligation or a specific payment of interest on or principal of any
such Government Obligation held by such custodian for the account of the
holder of a depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to
the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligations or the specific payment of
interest on or principal of the Government Obligations evidenced by such
depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Operating Partnership has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance with respect to Debt Securities of
any series, (i) the holder of a Debt Security of such series is entitled to,
and does, elect pursuant to the Indenture or the terms of such Debt Security
to receive payment in a currency, currency unit or composite currency other
than that in which such deposit has been made in respect of such Debt
Security, or (ii) a Conversion Event (as defined below) occurs in respect of
the currency, currency unit or composite currency in which such deposit has
been made, the indebtedness represented by such Debt Security shall be deemed
to have been, and will be, fully discharged and satisfied through the payment
of the principal of (and premium, if any) and interest, if any, on such Debt
Security as they become due out of the proceeds yielded by converting the
amount so deposited in respect of such Debt Security into the currency,
currency unit or composite currency in which such Debt Security becomes
payable as a result of such election or such Conversion Event based on the
applicable market exchange rate. "Conversion Event" means the cessation of use
of (i) a currency, currency
25
<PAGE>
unit or composite currency both by the government of the country which issued
such currency and for the settlement of transactions by a central bank or
other public institutions of or within the international banking community,
(ii) the European Currency Unit (the "ECU") both within the European Monetary
System and for the settlement of transactions by public institutions of or
within the European Communities or, (iii) any currency unit or composite
currency other than the ECU for the purposes for which it was established.
Unless otherwise provided in the applicable Prospectus Supplement, all
payments of principal of (and premium, if any) and interest, if any, on any
Debt Security that is payable in a foreign currency that ceases to be used by
its government of issuance shall be made in U.S. dollars.
In the event the Operating Partnership effects covenant defeasance with
respect to any Debt Securities and such Debt Securities are declared due and
payable because of the occurrence of any Event of Default other than the Event
of Default described in clause (iv) under "--Events of Default, Notice and
Waiver" with respect to certain sections of the Indenture (which sections
would no longer be applicable to such Debt Securities) or described in clause
(vii) under "--Events of Default, Notice and Waiver" with respect to any other
covenant as to which there has been covenant defeasance, the amount in such
currency, currency unit or composite currency in which such Debt Securities
are payable, and Government Obligations on deposit with the applicable
Trustee, will be sufficient to pay amounts due on such Debt Securities at the
time of their stated maturity but may not be sufficient to pay amounts due on
such Debt Securities at the time of the acceleration resulting from such Event
of Default. However, the Operating Partnership would remain liable to make
payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
GUARANTEES
If the Operating Partnership issues any Debt Securities that are rated below
investment grade at the time of issuance, the Company will fully and
unconditionally guarantee, on a senior or subordinated basis, the due and
punctual payment of principal of or premium, if any, and interest on such Debt
Securities, and the due and punctual payment of any sinking fund payments
thereon, when and as the same shall become due and payable, whether at a
maturity date, by declaration of acceleration, call for redemption or
otherwise. See "--Subordination." The applicability and terms of any such
Guarantees relating to a series of Debt Securities will be set forth in the
Prospectus Supplement relating to such Debt Securities.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for individual
certificates evidencing Debt Securities in definitive form represented
thereby, a Global Security may not be transferred except as a whole by a
depositary for such Global Security to a nominee of such depositary or by a
nominee of such depositary to such depositary or another nominee of such
depositary or by such depositary or any such nominee to a successor of such
depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Global Securities, and certain limitations and restrictions relating to a
series of bearer Global Securities, will be described in the applicable
Prospectus Supplement relating to such series.
26
<PAGE>
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
For the Company to qualify as a REIT under the Code, among other things, not
more than 50% in value of its outstanding Equity Stock may be owned, directly
or indirectly, by five or fewer individuals (defined in the Code to include
certain entities) during the last half of a taxable year (other than the first
year), and such Equity Stock must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year of 12 months (other than the first
year) or during a proportionate part of a shorter taxable year.
The Charter provides that, subject to certain exceptions specified in the
Charter, no stockholder may own, or be deemed to own by virtue of the
attribution provisions of the Code (or by virtue of being deemed part of a
"group" within the meaning of Section 13(d)(3) of the Exchange Act), more than
5% of the number or value of the issued and outstanding shares of the Company
(the "Ownership Limit"). The Board of Directors may waive the Ownership Limit
if evidence satisfactory to the Board of Directors is presented that such
Ownership Limit will not jeopardize the Company's status as a REIT. As a
condition to such waiver, the Board of Directors may require opinions of
counsel satisfactory to it and undertakings from the applicant with respect to
preserving the REIT status of the Company. The Ownership Limit will not apply
if the Board of Directors and the stockholders of the Company determine that
it is no longer in the best interests of the Company to attempt to qualify, or
to continue to qualify, as a REIT.
If shares of Equity Stock in excess of the Ownership Limit, or shares which
would cause the Company to be beneficially owned by fewer than 100 persons or
cause the Company to become "closely held" under Section 856(h) of the Code,
are issued or transferred to any person, such issuance or transfer shall be
null and void and the intended transferee will acquire no rights to the Equity
Stock. Shares issued or transferred that would cause any stockholder to own
more than the Ownership Limit or cause the Company to become "closely held"
under Section 856(h) of the Code will be exchanged automatically for shares of
Excess Stock. All Excess Stock will be transferred, without action by the
stockholder, to the Company as trustee of a trust for the exclusive benefit of
the transferee or transferees to whom the Excess Stock is ultimately
transferred. While the Excess Stock is held in trust, it will not be entitled
to vote, it will not be considered for purposes of any stockholder vote or the
determination of a quorum for such vote and it will not be entitled to
participate in any distributions made by the Company, except upon liquidation.
The intended transferee (provided he does not make a profit from the transfer)
may, at any time the Excess Stock is held by the Company in trust, transfer
the Excess Stock to any individual whose ownership of such Excess Stock would
be permitted under the Ownership Limit provision and would not cause the
Company to be beneficially owned by fewer than 100 persons or cause the
Company to become to become "closely held" under Section 856(h) of the Code,
at which time the Excess Stock would automatically be exchanged for Common
Stock. In addition, the Company has the right, for a period of 90 days,
beginning on the later of the date of the transfer that caused the exchange
for Excess Stock and the date the Board has knowledge of the transfer, to
purchase all or any portion of the Excess Stock from the intended transferee
at the lesser of the price paid for the Equity Stock by the intended
transferee and the closing market price for the Equity Stock on the date the
Company exercises its option to purchase.
The Charter provides that these restrictions will not preclude the
settlement of transactions entered into through the facilities of the NYSE.
Each stockholder who owns, directly or by virtue of the attribution
provisions of the Code, more than 5% of the outstanding Equity Stock (or 1% if
there are fewer than 2,000 stockholders) must give written notice to the
Company containing the information specified in the Charter within 30 days
after January 1 of each year. In addition, each stockholder shall, upon
demand, be required to disclose to the Company in writing such information
with respect to the direct, indirect and constructive ownership of beneficial
interests as the Board of Directors deems necessary to comply with the
provisions of the Code applicable to REITs, to comply with the requirements of
any taxing authority or governmental agency or to determine any such
compliance.
27
<PAGE>
The Charter excludes from the Ownership Limit the Price Group, which would
exceed the Ownership Limit as a result of the exchange of its OP Units for
Common Stock. Some members of the Price Group may also acquire additional
shares of Common Stock through the Company's 1993 Stock Option Plan, but in no
event will such persons be entitled to acquire additional shares such that the
five largest beneficial owners of the Company's shares of Equity Stock hold
more than 50% of the total outstanding shares of Equity Stock.
In addition to preserving the Company's status as a REIT, the Ownership
Limit may have the effect of precluding an acquisition of control of the
Company without the approval of the Board of Directors.
PLAN OF DISTRIBUTION
The Company and/or the Operating Partnership, as the case may be, may sell
the Offered Securities through underwriters or dealers, directly to one or
more purchasers (including executive officers of the Company or other persons
that may be deemed affiliates of the Company), through agents or through a
combination of any such methods of sale. Any underwriter involved in the offer
and sale of the Offered Securities will be named in the applicable Prospectus
Supplement.
The distribution of the Common Stock by the Company may be effected from
time to time in one or more transactions (which may involve block
transactions) on the NYSE or otherwise pursuant to and in accordance with the
applicable rules of the NYSE, in the over-the-counter market, in negotiated
transactions, through the writing of Common Stock Warrants or through the
issuance of Preferred Stock convertible into Common Stock (whether such Common
Stock Warrants or Preferred Stock is listed on a securities exchange or
otherwise), or a combination of such methods of distribution, at market prices
prevailing at the time of the sale, at prices related to such prevailing
market prices or at negotiated prices.
In connection with the sale of the Offered Securities, underwriters or
agents may receive compensation from the Company or the Operating Partnership
or from purchasers of the Offered Securities, for whom they may act as agents
in the form of discounts, concessions or commissions. Underwriters may sell
the Offered Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution
of the Offered Securities may be deemed to be underwriters under the
Securities Act, and any discounts or commissions they receive from the Company
or the Operating Partnership and any profit on the resale of the Offered
Securities they realize may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company or the
Operating Partnership will be described, in the applicable Prospectus
Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, each
series of the Offered Securities will be a new issue with no established
trading market, other than the Common Stock which is listed on the NYSE. Any
shares of Common Stock sold pursuant to a Prospectus Supplement will be listed
on the NYSE, subject to official notice of issuance. The Company or the
Operating Partnership, as the case may be, may elect to list any series of
Preferred Stock on an exchange, but is not obligated to do so. It is possible
that one or more underwriters may make a market in a series of the Offered
Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of, or the trading market for, the Offered Securities.
Under agreements into which the Company or the Operating Partnership may
enter, underwriters, dealers and agents who participate in the distribution of
the Offered Securities may be entitled to indemnification by the Company or
the Operating Partnership against certain liabilities, including liabilities
under the Securities Act.
28
<PAGE>
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be tenants of, the Company or the Operating Partnership in
the ordinary course of business.
In order to comply with the securities laws of certain states, if
applicable, the Offered Securities will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states the Offered Securities may not be sold unless they have been registered
or qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Offered Securities may not simultaneously
engage in market making activities with respect to the Offered Securities for
a period of two business days prior to the commencement of such distribution.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF THE OPERATING PARTNERSHIP
OVERVIEW
The following discussion should be read in conjunction with the Consolidated
Financial Statements of the Operating Partnership and the Notes thereto
appearing elsewhere herein.
The Operating Partnership is primarily engaged in the ownership, leasing,
management, operation, development, redevelopment and acquisition of retail
properties in the Intermountain Region, as well as in Oregon, Washington and
California. At September 30, the Operating Partnership's portfolio consists of
46 Properties, including 14 enclosed regional malls, 24 community centers, two
freestanding retail properties and six mixed-use commercial properties. The
Operating Partnership's financial condition and results of operations were
positively impacted by the Operating Partnership's August 13, 1997 opening of
Spokane Valley Mall, June 30, 1997 acquisition of Visalia Mall, June 1, 1997
acquisition of Silver Lake Mall, the 1996 acquisition of the Grand Teton Mall,
the 1995 acquisition of two regional malls, Eastridge Mall and Animas Valley
Mall, and one community center, Cottonwood Square. The Operating Partnership's
acquisition and development activities added a combined 3,220,000 square feet
of Gross Leasable Area ("GLA") to the retail portfolio and 305,000 square feet
of GLA to the commercial portfolio during 1995, 1996 and through September 30,
1997.
The Company is a fully integrated, self-administered and self-managed REIT.
The Company completed an additional public offering in August 1995, raising
approximately $56.4 million in gross proceeds through the sale of 2,750,000
shares of its Common Stock. An additional public offering was completed in
January 1997, raising approximately $40.7 million in gross proceeds through
the sale of 1,500,000 shares of Common Stock. The Company purchased units of
limited partner interest ("OP Units") in the Operating Partnership with the
proceeds from these offerings. The Operating Partnership issued 2,750,000 OP
Units in 1995 and 1,500,000 OP Units in 1997 from these transactions.
During 1995, the Operating Partnership obtained a $50 million credit
facility (the "1995 Credit Facility") to fund working capital and property
acquisition, expansion and development activities. On January 22, 1996, the
Operating Partnership obtained an additional $25 million credit facility (the
"1996 Credit Facility," together with the 1995 Credit Facility, the "Credit
Facilities"). In October 1997, the Operating Partnership replaced the Credit
Facilities with a new $150 million credit facility (the "1997 Credit
Facility").
RESULTS OF OPERATIONS
The financial statement results presented for the period January 21, 1994
through December 31, 1994 reflect a 345 day period and are not indicative of
the Operating Partnership's performance on an annual basis. In order to show
annualized results, the Operating Partnership has combined its 1994 operations
with the 20 day period from January 1, 1994 to January 20, 1994 operations of
its Predecessor Companies to compare it to the full year ended December 31,
1995. The Operating Partnership believes presentation in this manner provides
a more meaningful discussion of year-to-year results.
Comparison of nine months ended September 30, 1997 to nine months ended
September 30, 1996
Total revenues for the nine months ended September 30, 1997 increased
$4,919,000 or 9% to $58,765,000 as compared to $53,846,000 in 1996. This
increase is primarily attributable to a $3,321,000 or 9% increase in minimum
rents to $41,761,000 as compared to $38,440,000 in 1996. Additionally, other
income increased $370,000 due to development and leasing fees relating to the
opening of the Spokane Valley Mall.
The increase in minimum rents was primarily due to the April 1996
acquisition of the Grand Teton Mall, the June 1997 acquisitions of Silver Lake
Mall and Visalia Mall and the August 13, 1997 opening of Spokane Valley Mall
offset somewhat by certain unexpected vacancies in the retail and commercial
properties.
30
<PAGE>
Recoveries from tenants increased $1,385,000 or 12% to $12,911,000 as
compared to $11,526,000 in 1996. Operating and maintenance increased $840,000
or 10% and real estate taxes and insurance increased $81,000. These increases
are mainly due to the 1996 acquisition of Grand Teton Mall property and the
June 1997 acquisitions of Silver Lake Mall and Visalia Mall. Grand Teton Mall,
Silver Lake Mall, Visalia Mall and Spokane Valley Mall had tenant recoveries
of $1,286,000 and operating and maintenance, real estate taxes and insurance
of $1,330,000. Recoveries from tenants as a percentage of property operating
expenses for the nine months ended September 30, 1997 were 84% compared to 80%
in 1996.
General and administrative expenses increased $234,000 or 6% to $4,014,000
as compared to $3,780,000. The main increase is the result of increased
payroll costs from additional personnel added to support the Company's growth.
Depreciation and amortization increased $653,000 or 7% to $9,576,000 as
compared to $8,923,000 in 1996. This increase is primarily due to the
acquisitions of Grand Teton Mall, Silver Lake Mall, Visalia Mall, the opening
of the Spokane Valley Mall and tenant allowances given on existing GLA.
Interest expense increased $204,000 or 4% to $5,899,000 as compared to
$5,695,000 in 1996. This increase was primarily a result of borrowings to
acquire Silver Lake Mall, Visalia Mall and borrowings to construct Spokane
Valley Mall. The increase is offset by interest in 1996 on Grand Teton Mall
purchase. The debt was repaid in February 1997.
Net income increased $2,867,000, or 17%, to $19,942,000 as compared to
$17,075,000 in 1996. The increase is mainly due to the items discussed above
namely the acquisitions of Grand Teton Mall, Silver Lake Mall and Visalia
Mall, and the opening of the Spokane Valley Mall. Additionally, net income was
increased by the gain on sales of real estate (Arctic Circle Granger) at a
gain of $339,000 as compared to gain on sales of real estate in 1996 of
$94,000.
Comparison of year ended December 31, 1996 to year ended December 31, 1995
For the year ended December 31, 1996, net income increased $5,769,000, or
25%, when compared to the year ended December 31, 1995. The improvement in
operations was primarily attributable to the following factors: an increase in
minimum rents of $8,807,000; an increase in percentage and overage rents of
$596,000; and an increase in recoveries from tenants of $3,305,000. These
increases were offset by a decrease in interest and other income of $709,000;
an increase in operating expenses of $3,801,000; an increase in general and
administrative expense of $215,000; and an increase in interest expense of
$1,153,000. These were also offset by an increase in depreciation and
amortization of $451,000.
Total revenues for the year ended December 31, 1996 increased $11,999,000,
or 20%, to $72,949,000 as compared to $60,950,000 in 1995. This increase is
primarily attributable to an $8,807,000, or 20%, increase in minimum rents to
$52,447,000 as compared to $43,640,000 in 1995. Additionally, percentage and
overage rents increased $596,000, or 17%, to $4,061,000 as compared to
$3,465,000 in 1995.
The April 1996 acquisition of the Grand Teton Mall, the June 1995
acquisitions of the Eastridge Mall and the Animas Valley Mall and the December
1995 acquisition of Cottonwood Square contributed a combined $6,915,000 to the
minimum rent increase and $459,000 to the percentage and overage rent increase
in 1996.
Recoveries from tenants increased $3,305,000, or 27%, to $15,557,000 as
compared to $12,252,000 in 1995. Property operating expenses, including
operating and maintenance and real estate taxes and insurance increased
$3,014,000, or 35%, and $787,000, or 11%, respectively. These increases are
mainly due to the 1995 and 1996 property acquisitions. Recoveries from tenants
as a percentage of property operating expenses were 80% in 1996, compared to
79% in 1995.
Interest expense increase $1,153,000, or 17%, to $7,776,000 as compared to
$6,623,000 in 1995. This increase resulted from additional borrowings used to
acquire the Grand Teton Mall in April 1996.
31
<PAGE>
Depreciation increased $620,000, or 6%, to $10,230,000 as compared to
$9,610,000 in 1995. This increase is primarily due to the 1995 and 1996
property acquisitions and the development of additional GLA at the Properties.
Comparison of year ended December 31, 1995 to the combined year ended
December 31, 1994
For the year ended December 31, 1995, income before extraordinary item
increased by $4,288,000, or 23%, when compared to the year ended December 31,
1994. The improvement in operations was primarily attributable to the
following factors: an increase in minimum rents of $5,949,000; an increase in
percentage and overage rents of $709,000; an increase in recoveries from
tenants of $1,854,000; a decrease in interest income of $168,000; an increase
in operating and maintenance expenses of $2,406,000; and a decrease in
interest expense of $76,000. These amounts were offset by an increase in
depreciation and amortization of $2,364,000.
Minimum rents increased in 1995 by $5,949,000, or 16%. The increase was
primarily attributable to leasing of existing vacant spaces, higher minimum
rents on lease renewals and the acquisition of the Woodlands Village Shopping
Center on October 19, 1994, and Eastridge Mall and Animas Valley Mall on June
30, 1995, which acquisitions contributed minimum rents of $3,996,000.
Percentage and overage rents increased in 1995 by $709,000, or 26%. The
increase was primarily attributable to increased sales by tenants paying
percentage rents and additional percentage rents paid by tenants of Eastridge
Mall and Animas Valley Mall.
Recoveries from tenants increased in 1995 by $1,854,000, or 18%, while
operating and maintenance expenses in 1995 increased by $2,406,000, or 13%.
Property operating expenses that are incurred by the Operating Partnership are
generally passed through to the tenants of each Property in the form of common
area charges.
Interest expense decreased in 1995 by $76,000, or 1%. This decrease was
primarily attributable to the retirement of debt during 1995 with proceeds
from the August 1995 additional public offering and other existing cash
balances.
Depreciation and amortization expense increased in 1995 by $2,364,000, or
26%, due primarily to the amortization of capitalized costs associated with
the 1995 Credit Facility, additional depreciation related to the acquisition
of Eastridge Mall and Animas Valley Mall and the write-off of capitalized
tenant allowances for vacating tenants.
LIQUIDITY AND CAPITAL RESOURCES
The Operating Partnership's principal uses of its liquidity and capital
resources have historically been for distributions, property development,
expansion and renovation programs and debt repayment. The Operating
Partnership declared quarterly distributions aggregating $1.695 per OP Unit in
1996 and aggregating $1.305 for the first three quarters of 1997. Future
distributions will be determined based on actual results of operations and
cash available for distribution.
The Operating Partnership's principal source of liquidity is its cash flow
from operations generated from its real estate investments. As of September
30, 1997, the Operating Partnership's cash and restricted cash amounted to
approximately $5.3 million. In addition to its cash and restricted cash,
unused capacity under its $50.0 million and $25.0 million Credit Facilities
totaled $7.5 million as of September 30, 1997. The 1997 Credit Facility
increased the Company's unused capacity to $65.0 million. On January 28, 1997,
the Company completed an additional public offering of 1,500,000 shares of
common stock, raising approximately $40.7 million in gross proceeds. The net
proceeds of approximately $38.8 million were contributed to the Operating
Partnership in exchange for OP Units and used to pay costs of the offering and
to reduce outstanding borrowings under the Credit Facilities by approximately
$38.6 million.
32
<PAGE>
The Operating Partnership's principal long-term capital requirements will be
the repayment of principal on the $95 million mortgage debt, which matures in
2001 and which may require principal payments in an amount necessary to reduce
the debt to $83.1 million as of January 21, 2000, and to retire outstanding
balances under the 1997 Credit Facility which is due in 2000.
On July 30, 1996, Spokane Mall Development Company, a consolidated
partnership, of which the Operating Partnership is the General Partner,
entered into a $50.0 million construction facility to fund the development and
construction of the Spokane Valley Mall. The construction loan has a three-
year term with an optional two-year extension and is secured by the Spokane
Valley Mall and guaranteed by the Operating Partnership. There are various
interest rates used to calculate interest which vary given the amount of
borrowing outstanding. The various interest rates ranged from 6.88 to 8.25
percent during 1996. Borrowings outstanding at September 30, 1997 on this loan
were $36.3 million.
The Operating Partnership is also developing an enclosed regional mall in
Provo, Utah. The Provo project will also represent a future long-term capital
need for the Operating Partnership. The Operating Partnership expects to fund
this project through advances under the 1997 Credit Facility in combination
with construction financing. The availability of financing and the status of
other projects will influence the Operating Partnership's decision to proceed
with, and the pace of, the Provo development.
The Operating Partnership is also contemplating the expansion and renovation
of several of its existing properties, additional development projects and
acquisitions as a means to expand its portfolio. Exclusive of construction and
development, capital expenditures (both revenue and non-revenue enhancing) for
the existing Properties are budgeted in 1997 to be approximately $4,200,000.
The Operating Partnership does not expect to generate sufficient funds from
operations to meet these long-term capital needs and intends to finance these
costs primarily through advances under the 1997 Credit Facility, together with
alternative funding sources, including public and private offerings of equity
and debt.
The Operating Partnership intends to incur additional borrowings in the
future in a manner consistent with its policy of maintaining a ratio of debt-
to-total market capitalization of less than 50%. The Operating Partnership's
ratio of debt to total market capitalization was approximately 28% at
September 30, 1997.
INFLATION
Inflation has remained relatively low during the past three years and has
had minimal impact on the operating performance of the Properties.
Nonetheless, 93% of the retail tenants' leases contain provisions designed to
protect the Operating Partnership from the impact of inflation. Such
provisions include clauses enabling the Operating Partnership to receive
percentage rents based on tenants' gross sales, which generally increase as
prices rise, and/or escalation clauses, which generally increase rents during
the terms of the leases. In addition, many of the leases are for terms less
than ten years, which may enable the Operating Partnership to replace existing
leases with new leases at higher base and/or percentage rentals if rents of
the existing leases are below then-existing market rates. Substantially all of
the leases, other than those for anchors, require the tenants to pay a
proportionate share of operating expenses, including common area maintenance,
real estate taxes and insurance, thereby reducing the Operating Partnership's
exposure to increases in costs and operating expenses resulting from
inflation.
However, inflation may have a negative impact on some of the Operating
Partnership's other operating items. Interest and general and administrative
expenses may be adversely affected by inflation as these specified costs could
increase at a rate higher than rents. Also, for tenant leases with specified
rent increases, inflation may have a negative effect as the specified rent
increases in these leases could be lower than the increase in the inflation
rate at any given time.
33
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following summary of material federal income tax considerations relevant
to the Company is based on current law, and is not intended as tax advice. The
following discussion, which is not exhaustive of all possible tax
considerations, does not include a detailed discussion of any state, local or
foreign tax considerations. Nor does it discuss all of the aspects of federal
income taxation that may be relevant to a prospective holder of Offered
Securities in light of his or her particular circumstances or to certain types
of stockholders (including insurance companies, tax-exempt entities, financial
institutions or broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) who are subject to special
treatment under the federal income tax laws. The tax treatment of a holder of
any Offered Securities will also vary depending upon the terms of the specific
securities acquired by such holder. Additional federal income tax
considerations relevant to holders of the Offered Securities other than Common
Stock may be provided in the applicable Prospectus Supplement relating
thereto.
EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT WITH HIS OR
HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF
THE PURCHASE, OWNERSHIP AND SALE OF COMMON STOCK IN AN ENTITY ELECTING TO BE
TAXED AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION, AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
General. The Company elected to be taxed as a REIT under Sections 856
through 860 of the Code, effective for its taxable year ended December 31,
1994. The Company believes that it was organized and has operated in such a
manner so as to qualify for taxation as a REIT under the Code, and the Company
intends to continue to operate in such a manner. No assurance, however, can be
given that the Company has operated in a manner so as to qualify, or will
continue to operate in a manner so as to qualify, as a REIT. Qualification and
taxation as a REIT depend upon the Company's ability to meet, on a continuing
basis, through actual annual operating results, distribution levels, diversity
of stock ownership, and the various other qualification tests imposed under
the Code on REITs, some of which are summarized below. While the Company
intends to operate so that it will qualify as a REIT, given the highly complex
nature of the rules governing REITs, the ongoing importance of factual
determinations and the possibility of future changes in circumstances of the
Company, no assurance can be given that the Company has qualified or will so
qualify for any particular year. See "--Failure to Qualify."
Prior to the issuance of any of the Offered Securities, Rogers & Wells LLP,
counsel to the Company ("Counsel"), will render an opinion to the effect that
commencing with its taxable year ended December 31, 1994, the Company was
organized in conformity with the requirements for qualification as a REIT
under the Code, and the proposed method of operation of the Company, the
Operating Partnership and its financing subsidiary (the "Financing
Partnership") will enable the Company to continue to so qualify. It must be
emphasized that Counsel's opinion is based on various assumptions and is
conditioned upon certain representations made by the Company, the Operating
Partnership and Financing Partnership as to factual matters. In addition,
Counsel's opinion is based upon factual representations of the Company
concerning its business and properties, and the business and properties of the
Operating Partnership and the Financing Partnership. Unlike a tax ruling, an
opinion of counsel is not binding upon the Internal Revenue Service ("IRS")
and no assurance can be given that the IRS will not challenge the status of
the Company as a REIT. Moreover, such qualification and taxation as a REIT
depend upon the Company's ability to meet, through actual annual operating
results, distribution levels, diversity of stock ownership and various other
qualification tests imposed under the Code discussed below, the results of
which will not be reviewed by Counsel. Accordingly, no assurance can be given
34
<PAGE>
that the actual results of the Company's operation for any one taxable year
will satisfy such requirements. See "--Failure to Qualify."
As a REIT, the Company generally is not subject to federal corporate income
taxes on net income that it distributes currently to stockholders. However,
the Company will be subject to federal income or excise tax as follows: (i)
the Company will be taxed at regular corporate rates on any undistributed REIT
taxable income and undistributed net capital gains; (ii) under certain
circumstances, the Company may be subject to the "alternative minimum tax" on
its items of tax preference, if any; (iii) if the Company has (1) net income
from the sale or other disposition of "foreclosure property" (generally,
property acquired by reason of a foreclosure or otherwise on default of a loan
secured by the property) that is held primarily for sale to customers in the
ordinary course of business or (2) other nonqualifying net income from
foreclosure property, it will be subject to tax at the highest corporate rate
on such income; (iv) if the Company has net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property (other than dispositions of foreclosure property, and, as a result of
the Taxpayer Relief Act of 1997, enacted August 5, 1997 (the "Taxpayer Relief
Act"), effective for the Company's taxable year ending December 31, 1998,
dispositions of property that occur due to involuntary conversion) held
primarily for sale to customers in the ordinary course of business), such
income will be subject to a 100% tax; (v) if the Company should fail to
satisfy the 75% gross income test or the 95% gross income test (as discussed
below), and has nonetheless maintained its qualification as a REIT because
certain other requirements have been met, it will be subject to a 100% tax on
the net income attributable to the greater of the amount by which the Company
fails the 75% or 95% test, multiplied by a fraction intended to reflect the
Company's profitability; (vi) if the Company should fail to distribute with
respect to each calendar year at least the sum of (1) 85% of its REIT ordinary
income for such year, (2) 95% of its REIT capital gain net income for such
year, and (3) any undistributed taxable income from prior years, the Company
would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed; (vii) if the Company
acquires any asset from a C corporation (i.e., generally a corporation subject
to full corporate-level tax) in a transaction in which the basis of the asset
in the Company's hands is determined by reference to the basis of the asset
(or any other property) in the hands of the C corporation and the Company
subsequently recognizes gain on the disposition of such asset during the 10-
year period (the "Recognition Period") beginning on the date on which the
asset was acquired by the Company (or the Company first qualified as a REIT),
then the excess of (1) the fair market value of the asset as of the beginning
of the applicable Recognition Period, over (2) the REIT's adjusted basis in
such asset as of the beginning of such Recognition Period will be subject to
tax at the highest regular corporate rate (pursuant to Treasury Regulations
issued by the IRS which have not yet been promulgated).
The following is a general summary of the Code provisions that govern the
federal income tax treatment of a REIT and its stockholders. These provisions
of the Code are highly technical and complex. This summary is qualified in its
entirety by the applicable Code provisions, Treasury Regulations and
administrative and judicial interpretations thereof.
Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association (1) that is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable common
stock, or by transferable certificates of beneficial interest; (3) that would
be taxable as a domestic corporation but for Sections 856 through 859 of the
Code; (4) that is neither a financial institution nor an insurance company
subject to certain provisions of the Code; (5) that has the calendar year as
its taxable year; (6) the beneficial ownership of which is held by 100 or more
persons; (7) during the last half of each taxable year not more than 50% in
value of the outstanding stock of which is owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain
entities); and (8) that meets certain other tests, described below, regarding
the nature of its income and assets. The Company believes that it currently
satisfies requirements (1) through (7). In addition, the Charter includes
restrictions regarding the transfer of the Company's Common Stock that are
intended to assist the Company in continuing to satisfy the share ownership
requirements described in (6) and (7) above. See "Restrictions on Transfers of
Capital Stock."
35
<PAGE>
In addition, the Company intends to continue to comply with the Treasury
Regulations requiring it to ascertain the actual ownership of its shares. The
Taxpayer Relief Act eliminates the rule that a failure to comply with these
Regulations will result in a loss of REIT status. Instead, a failure to comply
with these regulations will result in a fine. This provision will be effective
for the Company's taxable year ending December 31, 1998.
The Company currently has one "qualified REIT subsidiary." A corporation
that is a "qualified REIT subsidiary" is not treated as a separate corporation
for federal income tax purposes, and all assets, liabilities and items of
income, deduction and credit of a "qualified REIT subsidiary" are treated as
assets, liabilities and items of the REIT. In applying the requirements
described herein, the Company's "qualified REIT subsidiary" will be ignored,
and all assets, liabilities and items of income, deduction and credit of such
subsidiary will be treated as assets, liabilities and items of the Company.
The Company's "qualified REIT subsidiary" will therefore not be subject to
federal corporate income taxation, although it may be subject to state or
local taxation.
In the case of a REIT that is a partner in a partnership, the REIT is deemed
to own its proportionate share of the assets of the partnership and is deemed
to receive the income of the partnership attributable to such share. In
addition, the character of the assets and gross income of the partnership
shall retain the same character in the hands of the REIT. Thus, the Company's
proportionate share of the assets, liabilities and items of income of the
Operating Partnership and the Financing Partnership, are treated as assets,
liabilities and items of income of the Company for purposes of applying the
requirements described herein, provided that the Operating Partnership and the
Financing Partnership are treated as partnerships for federal income tax
purposes. See "--Other Tax Considerations--Effect of Tax Status of the
Operating Partnership and the Financing Partnership on REIT Qualification."
Income Tests. In order to qualify as a REIT, there are three gross income
requirements that must be satisfied annually. First, at least 75% of the
REIT's gross income (excluding gross income from prohibited transactions) for
each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (including "rents from
real property" and, in certain circumstances, interest) or from certain types
of temporary investments. Second, at least 95% of the REIT's gross income
(excluding gross income from prohibited transactions) for each taxable year
must be derived from the same items which qualify under the 75% gross income
test, and from dividends, interest and gain from the sale or disposition of
stock or securities, or from any combination of the foregoing. Third, short-
term gain from the sale or other disposition of stock or securities, gain from
prohibited transactions and gain on the sale or other disposition of real
property held for less than four years (apart from involuntary conversions and
sales of foreclosure property) must represent less than 30% of the REIT's
gross income (including gross income from prohibited transactions) for each
taxable year. The Taxpayer Relief Act repeals the 30% gross income test for
taxable years beginning after its enactment. Thus, the 30% gross income test
will no longer apply after the Company's taxable year ending December 31,
1997.
Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions (related to the identity of the tenant, the computation of
the rent payable and the nature of the property leased) are met. The Company
does not anticipate receiving rents in excess of a de minimis amount of gross
annual revenue that fail to meet these conditions. Finally, for rents received
to qualify as "rents from real property," the Company generally must not
operate or manage the property or furnish or render services to tenants, other
than through an "independent contractor" from whom the Company derives no
revenue. The "independent contractor" requirement, however, does not apply to
the extent the services provided by the Company are "usually or customarily
rendered" in connection with the rental of space for occupancy only and are
not otherwise considered "rendered to the occupant." The Taxpayer Relief Act
provides a de minimis rule for non-customary services which is effective for
taxable years beginning after August 5, 1997. If the value of the non-
customary service income with respect to a property (valued at no less than
150% of the Company's direct cost of performing such services) is 1% or less
of the gross income derived from the property, then all rental income except
the non-customary service income will qualify as "rents from real property."
This provision will be effective for the Company's taxable year ending
December 31, 1998.
36
<PAGE>
The Company provides certain services with respect to the Properties through
the Operating Partnership, which is not an "independent contractor." However,
the Company believes all of the services provided by the Company through the
Operating Partnership are considered "usually or customarily rendered" in
connection with the rental of retail and other space for occupancy. If the
Company contemplates providing services in the future that may be reasonably
expected not to meet the "usual or customary" standard, it will arrange to
have such services provided by an independent contractor from which the
Company and the Operating Partnership will receive no income.
The Company will receive some income that is not qualifying income for
purposes of the 75% and 95% gross income tests. Such income includes
management and leasing fee income from the management by the Operating
Partnership of retail properties not wholly owned by the Operating Partnership
and certain parking income. Such income is not expected to exceed 1% to 2% of
the Operating Partnership's gross income and, therefore, will not cause the
Company to fail to satisfy the 75% or 95% gross income test.
If the Company fails to satisfy one or both of the 75% or the 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code. It
is not possible, however, to state whether in all circumstances the Company
would be entitled to the benefit of these relief provisions. Even if these
relief provisions were to apply, a tax would be imposed on certain excess net
income.
Asset Tests. The Company, at the close of each quarter of its taxable year,
must also satisfy three tests relating to the nature of its assets: (i) at
least 75% of the value of the Company's total assets must be represented by
"real estate assets," cash, cash items and government securities; (ii) not
more than 25% of the Company's total assets may be represented by securities
other than those in the 75% asset class; and (iii) of the investments included
in the 25% asset class, the value of any one issuer's securities (other than
an interest in a partnership or shares of a "qualified REIT subsidiary" or
another REIT) owned by the Company may not exceed 5% of the value of the
Company's total assets, and the Company may not own more than 10% of any one
issuer's outstanding voting securities (other than an interest in a
partnership or securities of a "qualified REIT subsidiary" or another REIT).
After initially meeting the assets tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset
values. If the failure to satisfy the asset tests results from an acquisition
of securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close
of that quarter. The Company maintains adequate records of the value of its
assets to ensure compliance with the asset tests and plans to take such other
action within 30 days after the close of any quarter as may be required to
cure any noncompliance. However, there can be no assurance that such other
action will always be successful.
Annual Distribution Requirements. To qualify as a REIT, the Company
generally must distribute to its stockholders at least 95% of its income each
year. In addition, the Company will be subject to regular capital gains and
ordinary corporate tax rates on undistributed income, and also may be subject
to a 4% excise tax on undistributed income in certain events. The Company
believes that it has made, and intends to continue to make, timely
distributions sufficient to satisfy the annual distribution requirements. It
is possible, however, that the Company, from time to time, may not have
sufficient cash or other liquid assets to meet the distribution requirements.
In that event, the Company may cause the Operating Partnership to arrange for
short-term, or possibly long-term, borrowing to permit the payments of
required dividends.
Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a year by paying a "deficiency dividend"
(plus applicable penalties and interest) within a specified period.
Failure to Qualify. If the Company fails to qualify for taxation as a REIT
in any taxable year and special relief provisions do not apply, the Company
will be subject to tax (including any applicable alternative minimum
37
<PAGE>
tax) on its taxable income at regular corporate rates. Distributions to
stockholders in any year in which the Company fails to qualify as a REIT will
not be deductible, nor will they be required to be made. In such event, to the
extent of current and accumulated earnings and profits, all distributions to
stockholders will be taxable as ordinary income and, subject to certain
limitations in the Code, corporate distributees may be eligible for the
"dividends received deduction." Unless entitled to relief under specific
statutory provisions, the Company also will be disqualified from taxation as a
REIT for the four taxable years following the year during which qualification
was lost. It is not possible to state whether in all circumstances the Company
would be entitled to such statutory relief.
TAXATION OF STOCKHOLDERS
Taxation of Taxable Domestic Stockholders. As long as the Company qualifies
as a REIT, distributions made to the Company's taxable domestic stockholders
out of current or accumulated earnings and profits (and not designated as
capital gain dividends) will be taken into account by them as ordinary income,
and corporate stockholders will not be eligible for the dividends received
deduction as to such amounts. Distributions that are designated as capital
gain dividends will be taxed as long-term capital gains (to the extent they do
not exceed the Company's actual net capital gain for the taxable year) without
regard to the period for which the stockholder has held its stock. However,
corporate stockholders may be required to treat up to 20% of certain capital
gain dividends as ordinary income. The Taxpayer Relief Act provides that,
beginning with the Company's taxable year ending December 31, 1998, if the
Company elects to retain and pay income tax on any net long-term capital gain,
domestic stockholders of the Company would include in their income as long-
term capital gain their proportionate share of such net long-term capital
gain. A domestic stockholder would also receive a refundable tax credit for
such stockholder's proportionate share of the tax paid by the Company on such
retained capital gains and an increase in its basis in the stock of the
Company in an amount equal to the difference between the undistributed long-
term capital gains and the amount of tax paid by the Company. Distributions in
excess of current and accumulated earnings and profits will not be taxable to
a stockholder to the extent that they do not exceed the adjusted basis of the
stockholder's Common Stock, but rather will reduce the adjusted basis of such
Common Stock. To the extent that such distributions exceed the adjusted basis
of a stockholder's Common Stock, they will be included in income as long-term
capital gain (or short-term capital gain if the Common Stock has been held for
one year or less), assuming the Common Stock is a capital asset in the hands
of the stockholder. In addition, any dividend declared by the Company in
October, November or December of any year and payable to a stockholder of
record on a specific date in any such month shall be treated as both paid by
the Company and received by the stockholder on December 31 of such year,
provided that the dividend is actually paid by the Company during January of
the following calendar year. Stockholders may not include in their individual
income tax returns any net operating losses or capital losses of the Company.
In general, a domestic stockholder will realize capital gain or loss on the
disposition of Common Stock equal to the difference between (i) the amount of
cash and the fair market value of any property received on such disposition,
and (ii) the stockholder's adjusted basis of such Common Stock. Such gain or
loss generally will constitute long-term capital gain or loss if the
stockholder has held such shares for more than one year. Under the Taxpayer
Relief Act, an individual, trust or estate that holds shares of Common Stock
for more than 18 months will be subject to a maximum tax of 20% on gains from
the sale or disposition of such shares. See "--Recent Legislation" below. Loss
upon a sale or exchange of Common Stock by a stockholder who has held such
Common Stock for six months or less (after applying certain holding period
rules) will be treated as a long-term capital loss to the extent of
distributions from the Company required to be treated by such stockholder as
long-term capital gain.
Under certain circumstances, domestic stockholders may be subject to backup
withholding at the rate of 31% with respect to dividends paid.
Taxation of Tax-Exempt Stockholders. Distributions by the Company to a
stockholder that is a tax-exempt entity will not constitute "unrelated
business taxable income" ("UBTI"), provided that the tax-exempt entity has not
financed the acquisition of its Common Stock with "acquisition indebtedness"
within the meaning of
38
<PAGE>
the Code and the Common Stock is not otherwise used in an unrelated trade or
business of the tax-exempt entity. In addition, under certain circumstances,
qualified trusts that own more than 10% (by value) of the Company's shares may
be required to treat a certain percentage of dividends as UBTI. This
requirement will only apply if the Company is a "pension-held REIT." The
restrictions on ownership in the Company's Charter should prevent the Company
from being treated as a pension-held REIT.
Taxation of Non-U.S. Stockholders. The rules governing U.S. federal income
taxation of Non-U.S. Stockholders (persons other than (i) citizens or
residents of the United States; (ii) corporations, partnerships or other
entities created or organized in the United States or any political
subdivisions thereof; or (iii) estates or trusts the income of which is
subject to U.S. federal income taxation regardless of its source) are complex,
and no attempt will be made herein to provide more than a very limited summary
of such rules. Prospective Non-U.S. Stockholders should consult with their own
tax advisors to determine the impact of U.S. federal, state and local income
tax laws with regard to an investment in Common Stock, including any reporting
requirements.
Distributions that are not attributable to gain from sales or exchanges by
the Company of U.S. real property interests and not designated by the Company
as capital gain dividends will be treated as dividends and taxed as ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of the Company. Such distributions are, generally, subject to a
withholding tax equal to 30% of the gross amount of the distribution, unless
an applicable tax treaty reduces that tax. Distributions in excess of current
and accumulated earnings and profits of the Company will not be taxable to a
Non-U.S. Stockholder to the extent that they do not exceed the adjusted basis
of the Non-U.S. Stockholder's Common Stock, but rather will reduce the
adjusted basis of such Common Stock. To the extent that such distributions
exceed the adjusted basis of a Non-U.S. Stockholder's Common Stock, they will
give rise to tax liability if the Non-U.S. Stockholder otherwise would be
subject to tax on any gain from the sale or disposition of his Common Stock as
described below (in which case they also may be subject to a 30% branch
profits tax if the stockholder is a foreign corporation). If it cannot be
determined at the time a distribution is made whether or not such distribution
will be in excess of current and accumulated earnings and profits, the
distribution will be subject to withholding tax at the rate applicable to
dividends. However, the Non-U.S. Stockholder may seek a refund of such amounts
from the IRS if it is subsequently determined that such distribution was, in
fact, in excess of current and accumulated earnings and profits of the
Company.
For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of U.S. real
property interests will be taxed to a Non-U.S. Stockholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA") at the normal capital gain rates applicable to U.S. stockholders
(subject to applicable alternative minimum tax and a special alternative
minimum tax in the case of nonresident alien individuals). Also, distributions
subject to FIRPTA may be subject to a 30% branch profits tax in the hands of a
corporate Non-U.S. Stockholder not entitled to treaty relief or exemption. The
Company is required by the Code to withhold 35% of any distribution that could
be designated by the Company as a capital gain dividend. This amount is
creditable against the Non-U.S. Stockholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Stockholder upon a sale of Common Stock will
generally not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which, at all times during a
specified testing period, less than 50% in value of the stock was held
directly or indirectly by foreign persons. The Company believes that it is a
"domestically controlled REIT" and, therefore, the sale of Common Stock will
not be subject to taxation under FIRPTA. If the gain on the sale of Common
Stock were to be subject to tax under FIRPTA, the Non-U.S. Stockholder would
be subject to the same treatment as U.S. stockholders with respect to such
gain (subject to applicable alternative minimum tax, possible withholding tax
and a special alternative minimum tax in the case of nonresident alien
individuals), and the purchaser of the Common Shares would be required to
withhold and remit to the IRS 10% of the purchase price.
39
<PAGE>
OTHER TAX CONSIDERATIONS
Effect of Tax Status of the Operating Partnership and the Financing
Partnership on REIT Qualification. All of the Company's investments are
through the Operating Partnership and the Financing Partnership. The Company
believes that the Operating Partnership and the Financing Partnership are
properly treated as partnerships for tax purposes (and not as associations
taxable as corporations). If, however, the Operating Partnership or the
Financing Partnership were treated as an association taxable as a corporation,
the Company would cease to qualify as a REIT. Furthermore, in such a
situation, any partnership treated as a corporation would be subject to
corporate income taxes. Also, in such a situation, the Company would not be
able to deduct its share of any losses generated by any such partnership in
computing its taxable income.
Tax Allocations with Respect to the Properties. The Operating Partnership
was formed by way of contributions of appreciated property (including certain
of the Properties). When property is contributed to a partnership in exchange
for an interest in the partnership, the partnership generally takes a
carryover basis in that property for tax purposes equal to the adjusted basis
of the contributing partner in the property, rather than a basis equal to the
fair market value of the property at the time of contribution (this difference
is referred to as a "Book-Tax Difference"). The partnership agreement of the
Operating Partnership and the Financing Partnership require allocations of
income, gain, loss and deduction with respect to contributed Property to be
made in a manner consistent with the special rules in Section 704(c) of the
Code, and the regulations thereunder, which tend to eliminate the Book-Tax
Differences with respect to the contributed Properties over the life of the
Operating Partnership. However, because of certain technical limitations, the
special allocation rules of Section 704(c) may not always entirely eliminate
the Book-Tax Difference on an annual basis or with respect to a specific
taxable transaction such as a sale. Thus, the carryover basis of the
contributed Properties in the hands of the Operating Partnership could cause
the Company to be allocated lower amounts of depreciation and other deductions
for tax purposes than would be allocated to the Company if all Properties were
to have a tax basis equal to their fair market value at the time of
acquisition. The foregoing principles also apply in determining the earnings
and profits of the Company for purposes of determining the portion of
distributions taxable as dividend income. The application of these rules over
time may result in a higher portion of distributions being taxed as dividends
than would have occurred had the Company purchased its interests in the
Properties at their agreed value.
State and Local Taxes. The Company and its stockholders may be subject to
state or local taxation in various state or local jurisdictions, including
those in which it or they transact business or reside. The state and local tax
treatment of the Company and its stockholders may not conform to the federal
income tax consequences discussed above. Consequently, prospective
stockholders should consult with their own tax advisors regarding the effect
of state, local and other tax laws of any investment in the Common Stock of
the Company.
RECENT LEGISLATION
In addition to changes to the requirements for qualification and taxation as
a REIT discussed above, the Taxpayer Relief Act also contains significant
changes to the taxation of capital gains of individuals, trusts and estates.
For gains realized after July 28, 1997, and subject to certain exceptions, the
maximum rate of tax on net capital gains of individuals, trusts and estates
from the sale or exchange of capital assets held for more than 18 months has
been reduced to 20%, and the maximum rate is reduced to 18% for assets
acquired after December 31, 2000 and held for more than five years. The
maximum rate for net capital gains attributable to the sale of depreciable
real property held for more than 18 months is 25% to the extent of the
deductions for depreciation with respect to such property. Long term capital
gain allocated to a stockholder by the Company will be subject to the 25% rate
to the extent that the gain does not exceed depreciation on real property sold
by the Company. The maximum rate of capital gains tax for capital assets held
for more than one year but not more than 18 months remains at 28%. The
taxation of capital gains of corporations was not changed by the Taxpayer
Relief Act.
40
<PAGE>
LEGAL MATTERS
The validity of the Offered Securities issued hereunder, as well as certain
legal matters described under "Federal Income Tax Considerations," will be
passed upon for the Company by Rogers & Wells LLP, New York, New York, and
certain legal matters will be passed upon for any underwriters, dealers or
agents by the counsel named in the applicable Prospectus Supplement. Rogers &
Wells LLP will rely as to certain matters of Maryland law on the opinion of
Piper & Marbury L.L.P., Baltimore, Maryland.
EXPERTS
The financial statements of Price Development Company, Limited Partnership
as of December 31, 1996 and 1995 and for each of the two years in the period
ended December 31, 1996 and the period January 21, 1994 to December 31, 1994
included in this Prospectus and the financial statements incorporated in this
Prospectus by reference to JP Realty Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1996 and the audited historical financial statements
included on page F-2 of JP Realty Inc.'s Current Report on Form 8-K, dated
June 30, 1997 have been so incorporated in reliance on the reports of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
41
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND OTHER INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheet as of September 30, 1997, December 31, 1996 and
1995..................................................................... F-3
Consolidated Statement of Operations for the nine-month periods ended
September 30, 1997 and 1996 and for the years ended December 31, 1996,
1995 and for the period January 21, 1994 to December 31, 1994............ F-4
Consolidated Statement of Partners' Capital for the period ended September
30, 1997 and for the years ended December 31, 1996, 1995 and for the
period January 21, 1994 to December 31, 1994............................. F-5
Consolidated Statement of Cash Flows for the nine-month periods ended
September 30, 1997 and 1996 and for the years ended December 31, 1996,
1995, and for the period January 21, 1994 to December 31, 1994........... F-6
Notes to Financial Statements............................................. F-7
Schedule II--Valuation and Qualifying Accounts............................ F-17
Schedule III--Real Estate and Accumulated Depreciation.................... F-18
OTHER INFORMATION
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
nine-month period ended September 30, 1997 and for the year ended
December 31, 1996 ....................................................... F-21
Selected Financial and Other Data......................................... F-24
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Price Development Company, Limited Partnership
In our opinion, the consolidated financial statements of Price Development
Company, Limited Partnership listed in the accompanying index, present fairly,
in all material aspects, the financial position of Price Development Company,
Limited Partnership and affiliated partnerships at December 31, 1996 and 1995
and the results of their operations and their cash flows for the years then
ended and the period January 21, 1994 through December 31, 1994, all in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the management of Price Development
Company, Limited Partnership; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Salt Lake City, Utah
January 29, 1997
F-2
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNAUDITED
-------------
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Real Estate Assets
Land................................. $ 93,820 $ 69,714 $ 63,754
Buildings............................ 441,026 353,500 320,757
-------- -------- --------
534,846 423,214 384,511
Less: Accumulated Depreciation....... (95,251) (87,318) (77,462)
-------- -------- --------
Operating Real Estate Assets......... 439,595 335,896 307,049
Real Estate Under Development........ 28,243 30,027 3,694
-------- -------- --------
Net Real Estate Assets............... 467,838 365,923 310,743
Cash................................... 2,870 1,750 1,827
Restricted Cash........................ 2,442 2,372 2,464
Accounts and Notes Receivable, Net..... 5,907 4,081 3,295
Deferred Charges, Net.................. 6,819 6,512 7,874
Other Assets........................... 1,872 722 858
-------- -------- --------
$487,748 $381,360 $327,061
======== ======== ========
LIABILITIES AND PARTNERS' CAPITAL
Borrowings............................. $216,456 $162,375 $106,406
Accounts Payable and Accrued Expenses.. 16,344 11,611 7,837
Distributions Payable.................. 9,234 -- --
Accumulated Losses in Excess of Equity
Investment............................ -- 1,555 1,555
Other Liabilities...................... 2,263 485 923
-------- -------- --------
244,297 176,026 116,721
-------- -------- --------
Minority Interests..................... 1,776 668 598
-------- -------- --------
Commitment and Contingencies
PARTNERS' CAPITAL
General Partner........................ 208,130 172,286 175,604
Limited Partners....................... 33,545 32,380 34,138
-------- -------- --------
241,675 204,666 209,742
-------- -------- --------
$487,748 $381,360 $327,061
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS--EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE YEAR
ENDED SEPTEMBER 30, ENDED DECEMBER 31, FOR THE PERIOD
------------------------ ------------------------ JANUARY 21, 1994
UNAUDITED TO DECEMBER 31,
1997 1996 1996 1995 1994
----------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
REVENUES
Minimum Rents........... $ 41,761 $ 38,440 $ 52,447 $ 43,640 $ 35,775
Percentage and Overage
Rents.................. 3,087 3,190 4,061 3,465 2,632
Recoveries from Tenants. 12,911 11,526 15,557 12,252 9,903
Interest................ 397 451 549 1,231 1,387
Other................... 609 239 335 362 374
----------- ----------- ----------- ----------- -----------
58,765 53,846 72,949 60,950 50,071
----------- ----------- ----------- ----------- -----------
EXPENSES
Operating and
Maintenance............ 8,892 8,060 11,240 8,288 6,874
Real Estate Taxes and
Insurance.............. 6,134 6,053 7,679 6,892 6,116
Advertising and
Promotions............. 328 320 426 364 299
General and
Administrative......... 4,014 3,780 5,060 4,845 3,801
Depreciation............ 8,381 7,580 10,230 9,610 7,588
Amortization of Deferred
Financing Costs........ 719 821 1,085 1,256 538
Amortization of Deferred
Leasing Costs.......... 476 522 664 662 608
Interest................ 5,899 5,695 7,776 6,623 5,873
----------- ----------- ----------- ----------- -----------
34,843 32,831 44,160 38,540 31,697
----------- ----------- ----------- ----------- -----------
23,922 21,015 28,789 22,410 18,374
Minority Interest in
Income of Consolidated
Partnerships........... (299) (297) (389) (421) (277)
Equity in Net Loss of
Partnership Interest... -- -- -- (184) (82)
Gain on Sales of Real
Estate................. 339 94 94 918 --
----------- ----------- ----------- ----------- -----------
Income Before
Extraordinary Item..... -- --
Extraordinary Item-Loss
on Extinguishment of
Debt................... -- -- -- -- (6,670)
----------- ----------- ----------- ----------- -----------
Net Income.............. $ 23,962 $ 20,812 $ 28,494 $ 22,723 $ 11,345
=========== =========== =========== =========== ===========
Earnings Per Partnership
Unit Income Before
Extraordinary Item..... $ 1.14 $ 1.06 $ 1.45 $ 1.26 $ 1.06
Extraordinary Item...... -- -- -- -- (.39)
----------- ----------- ----------- ----------- -----------
Net Income.............. $ 1.14 $ 1.06 $ 1.45 $ 1.26 $ .67
=========== =========== =========== =========== ===========
Weighted Average Number
of Partnership Units
Outstanding............ 21,068,998 19,664,612 19,667,865 18,037,429 16,922,809
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
-------- -------- --------
<S> <C> <C> <C>
Commencement of Operation on January 21, 1994
Basis Adjustments and acquisitions of Limited
Partners' Interests.............................. $(67,402) $38,679 $(28,723)
Units Issued for Proceeds From Initial Public Of-
fering........................................... 206,198 -- 206,198
Distributions..................................... (20,116) (5,631) (25,747)
Net Income........................................ 8,870 2,475 11,345
-------- ------- --------
Partners' Capital at December 31, 1994............ 127,550 35,523 163,073
Units Issued for Proceeds from Sale of Common
Stock............................................ 52,888 -- 52,888
Units Issued Upon Exercise of Stock Options....... 976 -- 976
Distributions..................................... (23,881) (6,037) (29,918)
Net Income........................................ 18,071 4,652 22,723
-------- ------- --------
Partners' Capital at December 31, 1995............ 175,604 34,138 209,742
Units Issued Upon Exercise of Stock Options....... 407 -- 407
Conversion of Limited Partners' Interests......... 164 (164) --
Distributions..................................... (27,139) (6,838) (33,977)
Net Income........................................ 23,250 5,244 28,494
-------- ------- --------
Partners' Capital at December 31, 1996............ 172,286 32,380 204,666
* Units Issued for Proceeds from Sale of Common
Stock............................................ 38,632 -- 38,632
* Units Issued Upon Exercise of Stock Options..... 220 -- 220
* Conversion of Limited Partners' Interests....... 39 (39) --
* Units Issued for Acquisition.................... -- 1,863 1,863
* Distributions................................... (22,899) (4,769) (27,668)
* Net Income...................................... 19,852 4,110 23,962
-------- ------- --------
* Partners' Capital at September 30, 1997......... $208,130 $33,545 $241,675
======== ======= ========
</TABLE>
*Unaudited
F-5
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR
SEPTEMBER 30, ENDED DECEMBER 31, FOR THE PERIOD
------------------ -------------------- JANUARY 21, 1994
UNAUDITED TO DECEMBER 31,
1997 1996 1996 1995 1994
-------- -------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income.............. $ 23,962 $ 20,812 $ 28,494 $ 22,723 $ 11,345
Adjustments to Reconcile
Net Income to Net Cash
Provided by
Operating Activities:
Depreciation........... 8,381 7,580 10,230 9,610 7,588
Amortization........... 1,195 1,343 1,749 1,918 1,146
Minority Interest in
Income of Consolidated
Partnerships.......... 299 297 389 421 277
Equity in Net Loss of
Partnership Interest.. -- -- -- 184 82
Gain on Sales of Real
Estate................ (339) (94) (94) (918) --
Increase in Accounts
and Notes Receivable.. (1,782) (504) (786) (540) (1,726)
(Increase) Decrease in
Deferred Charges...... (1,070) (315) (387) (1,428) 640
Increase in Accounts
Payable and Accrued
Expenses.............. 6,399 2,778 3,774 887 1,324
Decrease (Increase) in
Other................. 98 (331) (295) (138) 164
-------- -------- --------- --------- ---------
Net Cash Provided by
Operating Activities.. 37,143 31,566 43,074 32,719 20,840
-------- -------- --------- --------- ---------
CASH FLOWS FROM
INVESTING ACTIVITIES
Real Estate Assets,
Developed or Acquired.. (86,486) (51,395) (65,323) (69,300) (16,514)
Proceeds from Sales of
Real Estate............ 410 -- -- 1,281 --
Decrease (Increase) in
Restricted Cash........ (70) (400) 92 636 855
-------- -------- --------- --------- ---------
Net Cash Used in
Investing Activities.. (86,146) (51,795) (65,231) (67,383) (15,659)
-------- -------- --------- --------- ---------
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from
Borrowings............. 85,414 52,890 65,442 47,009 104,021
Repayment of
Borrowings............. (56,087) (9,440) (9,473) (49,344) (203,231)
Deferred Financing
Costs.................. (431) -- -- -- (4,162)
Net Proceeds from Sale
of Partnership Units... 38,852 141 407 53,850 206,198
Distributions to
Partners............... (18,434) (17,155) (33,977) (29,918) (25,747)
Distributions to
Minority Interests..... (191) (262) (319) (258) (175)
Capital Contributions by
Minority Interests..... 1,000 -- -- -- --
Decrease in Due to
Affiliates............. -- -- -- -- (23,005)
Buyout of Joint Venture
Partner................ -- -- -- -- (44,376)
-------- -------- --------- --------- ---------
Net Cash Provided by
Financing Activities.. 50,123 26,174 22,080 21,339 9,523
-------- -------- --------- --------- ---------
Net (Decrease) Increase
in Cash................ 1,120 5,945 (77) (13,325) 14,704
Cash, Beginning of
Period................. 1,750 1,827 1,827 15,152 448
-------- -------- --------- --------- ---------
Cash, End of Period..... $ 2,870 $ 7,772 $ 1,750 $ 1,827 $ 15,152
======== ======== ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AND PER PARTNERSHIP UNIT AMOUNTS)
1. ORGANIZATION AND BASIS PRESENTATION
Price Development Company, Limited Partnership (the "Operating Partnership")
was formed on September 13, 1993 under the Limited Partnership Law of Maryland
and commenced operations on January 21, 1994 when JP Realty, Inc. (the
"Company") completed an initial public offering ("IPO") and issued 13,029,500
Shares of common stock at $17.50 per share. Net proceeds of $206,198 were used
to purchase an approximate 78.18 percent general partnership interest in the
Operating Partnership. The Company is a real estate investment trust (REIT) as
defined by the Internal Revenue Code. Concurrent with the IPO, the partners
and owners of the predecessor companies contributed their properties to the
Operating Partnership, in exchange for limited partnership interests in the
Operating Partnership which became exchangeable after one year from the date
of the IPO, at the option of the holders of such interests, for common stock
in the Company. The predecessor companies are not a single legal entity but
rather a combination of real estate properties of a number of affiliated
partnerships, joint ventures and certain properties carved-out of an S-
Corporation, all having varying ownership interests in common.
Concurrent with the closing of the IPO, a majority owned financing partnership
of the Operating Partnership borrowed $95,000 through a private placement and
the Operating Partnership borrowed $9,000 from a bank. The net proceeds from
the IPO and the borrowings were used primarily to repay indebtedness, acquire
a 75% interest in a mall, pay certain expenses, and held as cash on hand for
operations and future acquisitions. The extraordinary item recognized in the
period January 21, 1994 to December 31, 1994 resulted from mortgage prepayment
penalties ($5,874) and the write-off of deferred financing costs ($796) on the
mortgage debt satisfied with the proceeds from the IPO.
On August 7, 1995, the Company sold 2,750,000 shares of common stock in an
underwritten public offering at $20.50 per share. Net proceeds of $52,887 were
contributed to the Operating Partnership in exchange for additional
partnership units and were principally used to repay indebtedness incurred by
the Operating Partnership to fund acquisition activities.
On January 28, 1997, the Company sold 1,500,000 shares of common stock in an
underwritten public offering at $27.13 per share. Net proceeds of $38,600 were
contributed to the Operating Partnership in exchange for additional
partnership units. The Operating Partnership used the proceeds to repay
borrowings under the $50,000 credit facility.
As a result of the aforementioned stock offerings and contribution of capital
to the Operating Partnership by the Company, it owned approximately 82.70
(unaudited), 81.66 and 81.28 percent general partnership interest of the
Operating Partnership as of September 30, 1997, December 31, 1996 and 1995,
respectively.
The Operating Partnership is primarily engaged in the business of owning,
leasing, managing, operating, developing and redeveloping malls, community
centers and other commercial properties. The tenant base includes primarily
national retail chains and local retail companies. Consequently, the Operating
Partnership's credit risk is concentrated in the retail industry.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Operating Partnership and all partnerships in which the Operating Partnership
has a majority interest. All significant intercompany accounts and
transactions have been eliminated in the consolidation.
F-7
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AND PER PARTNERSHIP UNIT AMOUNTS)
The Operating Partnership's 30 percent limited partnership interest in Silver
Lake Mall is accounted for using the equity method. Commencing in 1996, the
Operating Partnership discontinued recording its proportionate interest in the
loss generated by this partnership as the Operating Partnership is not
required to fund such losses. On June 1, 1997, the Operating Partnership
acquired the remaining 70 percent interest in Silver Lake Mall and it is now
consolidated in the financial statements.
REVENUE RECOGNITION
Certain minimum rents are recognized monthly based upon amounts which are
currently due from tenants, when such amounts are not materially different
than recognizing the fixed cash flow over the initial term of the lease using
the straight-line method. All other minimum rents are recognized using the
straight-line method. Percentage rents are recognized monthly on an accrual
basis based on estimated annual amounts.
REAL ESTATE ASSETS
Real estate assets are stated at cost. At each balance sheet date, the
Operating Partnership reviews for possible impairment to the recorded book
values of real estate assets based upon expectations of future nondiscounted
cash flows (excluding interest) from each property. Depreciation is computed
on a straight-line basis generally over 40 years for buildings and four to ten
years for equipment and fixtures. Tenant improvements are capitalized and
depreciated on a straight-line basis over the life of the related lease.
Expenditures for maintenance and repairs are charged to operations as
incurred. Major replacements and betterments which improve or extend the life
of the asset are capitalized and depreciated over their estimated useful
lives.
INCOME TAXES
Income taxes have not been provided in the accompanying financial statements
as the tax effects of the Operating Partnership's operations accrue directly
to the partners.
RESTRICTED CASH
Restricted cash reflects cash restricted under terms of a loan agreement to be
used for certain capital expenditures and funds held in reserve by a trustee
for interest payments on borrowings.
INTEREST AND REAL ESTATE TAXES
Interest and real estate taxes incurred during the construction period are
capitalized and depreciated over the lives of the constructed assets.
DEFERRED CHARGES
Third party costs incurred in obtaining long-term financing and initial tenant
leases are included in deferred charges in the accompanying consolidated
balance sheet and are amortized on a straight-line basis over the terms of the
related debt and lease agreements, as applicable.
PER UNIT DATA
Earnings per unit for income before extraordinary item, and net income was
computed for each period by dividing the respective amounts by the weighted
average number of units outstanding.
F-8
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AND PER PARTNERSHIP UNIT AMOUNTS)
USE OF ESTIMATES
The preparation of these financial statements in conformity with generally
accepted accounting principles required 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 the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENT
In October 1995, the Financial Accounting Standards Board issued SFAS 123
"Accounting for Stock-based Compensation." The statement allows an entity to
elect either the fair value based method of accounting for employee stock
options or the intrinsic value based method prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." The new pronouncement was adopted
beginning January 1, 1996. The Operating Partnership has elected to continue
valuing stock-based compensation under the intrinsic value based method but has
included proforma disclosure in Note 11 showing the impact on net income and
earnings per partnership unit had the fair value based method prescribed by
SFAS 123 been utilized for financial reporting.
The Operating Partnership is required to adopt the Statement of Accounting
Standard No. 128 ("SFAS 128") as of December 31, 1997; earlier application is
not permitted. SFAS 128 specifies the computation, presentation, and disclosure
requirements for earnings per partnership unit. The Operating Partnership does
not believe that the adoption of SFAS 128 will have a material effect on the
Operating Partnership's method of calculation or display of earnings per
partnership unit.
INTERIM FINANCIAL DATA
The interim financial data for the nine months ended September 30, 1996 and
1997 is unaudited; however, in the opinion of the Operating Partnership, the
interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim
periods.
3. ACQUISITIONS
On June 30, 1995, the Operating Partnership acquired the Eastridge Mall located
in Casper, Wyoming and the Animas Valley Mall located in Farmington, New Mexico
for approximately $51,875. The acquisition was financed utilizing borrowings on
a $50,000 line of credit.
On April 4, 1996, the Operating Partnership acquired the Grand Teton Mall
located in Idaho Falls, Idaho for approximately $34,400. The acquisition was
financed utilizing borrowings on a $50,000 line of credit.
The following unaudited pro forma financial information for the year ended
December 31, 1996, is presented as if the acquisition of the Grand Teton Mall
had occurred on January 1, 1996. The unaudited pro forma financial information
for the year ended December 31, 1995 is presented as if the acquisition of the
Eastridge Mall and Animas Valley Mall, the August 7, 1995 issuance of
partnership units to the Company and the acquisition of the Grand Teton Mall
had occurred on January 1, 1995.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
1996 1995
-------- --------
<S> <C> <C>
Pro forma revenues..................................... $ 74,100 $ 70,746
Pro forma net income................................... 28,534 26,089
Pro forma earnings per partnership unit................ $ 1.45 $ 1.33
</TABLE>
F-9
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AND PER PARTNERSHIP UNIT AMOUNTS)
On June 1, 1997, the Operating Partnership acquired the remaining 70% interest
in Silver Lake Mall located in Coeur D'Alene, Idaho by issuing 72,000
partnership units and assuming $24,755 in debt (unaudited). On June 30, 1997,
the Operating Partnership acquired Visalia Mall located in Visalia, California
for $38,000 paying $1,000 from operations and $37,000 from borrowings
(unaudited).
Reference is made to the unaudited pro forma financial information,
reflecting the 1997 acquisitions, included elsewhere herein.
4. ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable in the consolidated balance sheet are expected
to be collected within one year and are net of estimated unrecoverable amounts
of approximately $489 and $504 at December 31, 1996 and 1995, respectively.
5. DEFERRED CHARGES
Deferred charges consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
1996 1995
-------- --------
<S> <C> <C>
Financing costs....................................... $ 4,695 $ 5,043
Leasing costs......................................... 7,881 8,505
-------- --------
12,576 13,548
Less accumulated amortization......................... (6,064) (5,674)
-------- --------
$ 6,512 $ 7,874
======== ========
</TABLE>
6. BORROWINGS
Borrowings consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------
<S> <C> <C>
1996 1995
-------- --------
Notes, secured by real estate; interest at 6.37 per-
cent; interest only is payable quarterly through Jan-
uary 21, 2001 at which time the principal balance is
due..................................................
$ 95,000 $ 95,000
Credit facility, secured by real estate; interest at
115 basis points over AAA commercial paper........... 44,000 --
Credit facility, unsecured; interest at 175 basis
points over LIBOR.................................... 4,200 --
Mortgage payable, secured by real estate; interest at
9.38 percent; due in 2001............................ 2,072 2,205
Note payable, interest at 7.8 percent; due in 2000.... 160 201
Note payable, secured by real estate; interest at LI-
BOR plus 200 basis points (maximum interest rate of
6.5 percent); due January 21, 1996................... -- 9,000
-------- --------
$162,375 $106,406
======== ========
</TABLE>
On March 8, 1995, the Operating Partnership entered into a $50,000 credit
facility agreement which provides for a two year commitment ending in March
1997 with an option to extend for an additional year (which
F-10
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AND PER PARTNERSHIP UNIT AMOUNTS)
option was exercised on January 22, 1997). Borrowings under this agreement are
collateralized by approximately $79,000 of the Operating Partnership's assets
at net book value. The credit facility bears interest at a floating rate equal
to 115 basis points over the established rate of AAA commercial paper and is
guaranteed by the Company. The facility also provides for commitment fees
equal to .25% on the unused line of credit amount. For the year ended December
31, 1996 and 1995, the Operating Partnership paid commitment fees totaling
$200 and $90, respectively. Borrowings outstanding at September 30, 1997
(unaudited) and December 31, 1996 under this facility were $49,621 and
$44,000, respectively.
On January 22, 1996, the Operating Partnership entered into a $25,000
unsecured credit facility agreement. This credit facility bears interest at a
floating rate equal to 175 basis points over LIBOR, and provides a two-year
credit line with an option to extend for an additional year (which option was
exercised on January 24, 1997). The facility also provides for commitment fees
equal to .375% on the unused credit amount. For the year ended December 31,
1996, the Operating Partnership paid commitment fees totaling $67. Borrowings
outstanding at September 30, 1997 (unaudited) and December 31, 1996 under this
facility were $17,500 and $4,200, respectively.
On July 30, 1996, Spokane Mall Development Company, a consolidated
partnership, of which the Operating Partnership is the General Partner,
entered into a $50,000 construction facility. The construction facility will
be used to fund the development and construction of the Spokane Valley Mall in
Spokane, Washington. The construction loan has a three-year term with an
optional two-year extension and is secured by the Spokane Valley Mall and
guaranteed by the Operating Partnership. There are various interest rates used
to calculate interest which vary given the amount of borrowing outstanding.
The various interest rates ranged from 6.88 to 8.25 percent during 1996.
Borrowings outstanding at September 30, 1997 (unaudited) and December 31, 1996
on this loan were $36,336 and $16,943, respectively.
As part of the June 1, 1997 acquisition (Note 3), the Operating Partnership
assumed a loan which had a balance of $12,902 at September 30, 1997
(unaudited).
The following summarizes the scheduled maturities of borrowings at December
31, 1996 (reflecting the Operating Partnership's exercise of options to extend
both the $50,000 and $25,000 credit facilities in January 1997):
<TABLE>
<CAPTION>
YEAR TOTAL
---- --------
<S> <C>
1997................................ $ 183
1998................................ 44,199
1999................................ 21,345
2000................................ 69
2001................................ 96,579
--------
$162,375
========
</TABLE>
7. RENTAL INCOME
Substantially all real estate held for investment is leased to retail and
commercial tenants under arrangements which generally require the tenants to
pay property taxes, insurance and maintenance charges. These operating leases
generally range from 1 to 25 years and provide for minimum monthly rents and
in certain instances percentage rents based on tenants' sales.
F-11
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AND PER PARTNERSHIP UNIT AMOUNTS)
All non-cancelable leases, assuming no new or renegotiated leases or option
extensions, in effect at December 31, 1996 provide for the following minimum
future rental income:
<TABLE>
<CAPTION>
YEAR TOTAL
---- --------
<S> <C>
1997................................ $ 47,787
1998................................ 42,773
1999................................ 37,030
2000................................ 32,397
2001................................ 26,235
Thereafter.......................... 143,006
--------
$329,228
========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Future minimum rental payments under the terms of all non-cancelable operating
leases under which the Operating Partnership is the lessee, principally for
ground leases, are as follows:
<TABLE>
<CAPTION>
YEAR TOTAL
---- -------
<S> <C>
1997................................. $ 550
1998................................. 544
1999................................. 541
2000................................. 541
2001................................. 538
Thereafter........................... 20,038
-------
$22,752
=======
</TABLE>
The Operating Partnership is a defendant in certain litigation relating to its
business activities. Management does not believe that the resolution of these
matters will have a materially adverse effect upon the Operating Partnership.
9. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the years ended December 31, 1996 and 1995, non-cash investing and
financing transactions included the write-off of capitalized tenant allowances
of $159 and $1,281, respectively. Also, during 1996, the holders of limited
partnership units elected to convert 16,000 units having a recorded value of
$164 into shares of common stock of the Company. At September 30, 1997
distributions accrued but not paid totaled $9,234 (unaudited).
F-12
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AND PER PARTNERSHIP UNIT AMOUNTS)
For the period January 21, 1994 to December 31, 1994, the following non-cash
investing and financing transactions occurred:
<TABLE>
<S> <C>
Step up in Real Estate Assets for Cottonwood Mall Equity Buyout... $16,324
Exchange of Debt due to an affiliated entity for 200,000 Shares of
Price Group
Stock and partnership units...................................... 5,664
Exchange of Borrowings by Various Partners for partnership units.. 1,174
Restricted Cash Used to Pay Off Debt.............................. 1,851
Reclassification of owners'/shareholders' deficit to partners'
capital.......................................................... 7,307
Issuance of Note Payable in connection with Land Purchase......... 2,113
Buildings and Improvements Reclassified to Property, Furniture and
Fixtures......................................................... 181
Distribution of Property for Buyout of Minority Interest Holders.. 202
</TABLE>
Interest paid (net of capitalized amounts of $1,261, $788 and $656 for the
year ended December 31, 1996, 1995 and for the period January 21, 1994 to
December 31, 1994, respectively) aggregated $7,707, $6,597 and $6,566 for the
year ended December 31, 1996 and 1995 and for the period January 21, 1994 to
December 31, 1994, respectively.
10. RELATED PARTY TRANSACTIONS
The Operating Partnership and predecessor companies lease computer services
from Alta Computer Services, Inc. ("Alta"). Alta is majority owned by three
directors of the Company. The Operating Partnership paid $194, $196 and $208
in 1996, 1995 and 1994, respectively, for such services.
The Operating Partnership has entered into a management agreement under which
the Operating Partnership performs certain accounting and management functions
on behalf of a related entity whose majority owner is the Chairman of the
Board of Directors of the Company. Management fees collected by the Operating
Partnership under this agreement aggregated $72, $72 and $68 in 1996, 1995 and
1994, respectively.
11. STOCK OPTION PLAN
On October 26, 1993, the Company adopted a plan (the "1993 Stock Option Plan")
which authorizes the discretionary grant by the Executive Compensation
Committee, of options intended to qualify as "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code, to key employees of
the Company and the discretionary grant of nonqualified stock options to key
employees, directors and consultants. The maximum number of shares of common
stock of the Company subject to option under the 1993 Stock Option Plan is
1,100,000. The proceeds received by the Company upon exercise of options are
contributed to the Operating Partnership in exchange for the issuance of an
equivalent number of partnership units. No stock options may be granted after
ten years from the date of adoption and options must be granted at a price
generally not less than the fair market value of the Company's common stock at
the date of grant. These options vest over a period of one to five years.
F-13
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AND PER PARTNERSHIP UNIT AMOUNTS)
A summary of the 1993 Stock Option Plan activity is set forth below:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE
OF SHARES PER SHARE
--------- ------------
<S> <C> <C>
Outstanding at
December 31, 1993............................... -- --
Granted.......................................... 550,000 $17.50-20.38
Exercised........................................ -- --
Forfeited........................................ -- --
------- ------------
Outstanding at
December 31, 1994............................... 550,000 17.50
Granted.......................................... 7,000 19.13
Exercised........................................ (55,000) 17.50
Forfeited........................................ (8,000) 17.50
------- ------------
Outstanding at
December 31, 1995............................... 494,000 17.50-20.38
Granted.......................................... 107,000 20.00-20.25
Exercised........................................ (22,000) 17.50-19.13
Forfeited........................................ (21,000) 17.50-20.00
------- ------------
Outstanding at December 31, 1996................. 558,000 $17.50-20.38
======= ============
</TABLE>
At December 31, 1996, 178,000 options are fully vested and exercisable.
The fair value of options granted during 1996 and 1995 were determined using
the following assumptions in the valuation method prescribed by SFAS 123. The
weighted average assumptions for 1996 and 1995, respectively: risk-free
interest rate ranged from 5.50% to 6.68% in 1996 and 6.96% in 1995, expected
life of 10 years, dividend yield of 7%, and expected volatility range of 16%
to 17% in 1996 and 20% for 1995. The fair values of options granted during
1996 and 1995 using the above assumptions are $43, and $16, respectively. Had
the Operating Partnership recorded the options at their fair value, net income
and earnings per unit for the years ended December 31, 1996 and 1995 would
have been as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
1996 1995
------------ ------------
<S> <C> <C>
Net Income...................................... $28,451 $22,707
======= =======
Earnings Per Unit............................... $ 1.45 $ 1.26
======= =======
</TABLE>
12. EMPLOYEE BENEFIT PLANS
401(K) PLAN
During 1994, the Company adopted a 401(k) defined contribution plan covering
substantially all of the officers and employees of the Company and
subsidiaries which permits participants to defer up to a maximum of 15% of
their compensation. The Company will match 50% of the employee's contribution
up to a maximum of $1 per year. Employees who have completed at least one year
of service, working full-time, and have attained the age of 21 are eligible to
participate in the plan. The employees' contributions, together with
contributions from the Company are immediately vested. The Company's
contribution to the plan for the years ended December 31, 1996, 1995 and 1994
(which were reimbursed by the Operating Partnership) were $40, $40 and $22,
respectively. The 401(k) plan is fully funded at December 31, 1996.
F-14
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AND PER PARTNERSHIP UNIT AMOUNTS)
RETIREMENT PLAN
During 1995, the Company adopted a retirement plan covering substantially all
of the officers and employees of the Company, wherein the Company contributes
3% of the participant's base compensation. Employees working a minimum of
1,000 hours per year and who have attained the age of 21 are eligible to
participate in the plan. The Company's contribution vests 20% per year. Once
an employee has been with the Company five years, all contributions are fully
vested. Years of service include service with predecessor companies. The
Company's contribution to the plan for the years ended December 31, 1996 and
1995 (which were reimbursed by the Operating Partnership) were $150 and $119,
respectively. The retirement plan is fully funded at December 31, 1996.
13. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by
management using available market information. Considerable judgment is
necessary to interpret market data and develop estimated fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts the Operating Partnership could realize on disposition of the
financial instruments. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts.
Accounts and notes receivable, accounts payable, accrued expenses and due to
affiliates at December 31, 1996 and 1995 are carried at amounts which
reasonably approximate their fair values.
Borrowings with an aggregate carrying value of $162,375 and $106,406 have an
estimated aggregate fair value of $158,287 and $105,362 at December 31, 1996
and 1995, respectively. Estimated fair value is based on interest rates
currently available to the Operating Partnership for issuance of borrowings
with similar terms and remaining maturities.
14. DISTRIBUTIONS PER UNIT
Distributions paid per unit for the year ended December 31, 1996 and 1995, are
summarized as follows:
DISTRIBUTIONS:
<TABLE>
<CAPTION>
1996 DATE PAID TOTAL
---- --------- -----
<S> <C> <C>
1st Quarter 4/23/96 $ .420
2nd Quarter 7/23/96 .420
3rd Quarter 10/22/96 .420
4th Quarter 12/30/96 .435
------
$1.695
======
<CAPTION>
1995 DATE PAID TOTAL
---- --------- -----
<S> <C> <C>
1st Quarter 4/18/95 $ .405
2nd Quarter 7/18/95 .405
3rd Quarter 10/24/95 .405
4th Quarter 12/28/95 .420
------
$1.635
======
</TABLE>
F-15
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AND PER PARTNERSHIP UNIT AMOUNTS)
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Financial information for each of the quarters in the year ended December 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
1996:
Revenues.................................. $16,942 $18,407 $18,497 $19,103
Income Before Minority Interest, Equity in
Net Loss of Partnership Interest and Gain
on Sale
of Real Estate........................... 6,693 7,234 7,088 7,774
Net Income................................ 6,696 7,068 7,059 7,671
Net Income per Partnership Unit........... .34 .36 .36 .39
1995:
Revenues.................................. $13,568 $13,905 $15,620 $17,857
Income Before Minority Interest, Equity in
Net Loss of Partnership Interest and Gain
on Sale
of Real Estate........................... 5,193 5,102 5,765 6,350
Net Income................................ 5,066 4,968 5,636 7,053
Net Income per Partnership Unit........... .30 .30 .30 .36
</TABLE>
F-16
<PAGE>
SCHEDULE II
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
VALUATIONS AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF YEAR EXPENSE DEDUCTIONS END OF YEAR
----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended December 31,
1996
Allowance for uncollecti-
ble accounts............ $504 $340 $355 $489
Year ended December 31,
1995
Allowance for uncollecti-
ble accounts............ 437 258 191 504
Year ended December 31,
1994
Allowance for uncollecti-
ble accounts............ 564 212 339 437
</TABLE>
F-17
<PAGE>
SCHEDULE III
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COSTS CAPITALIZED CARRIED AT CLOSE OF PERIOD
------------------- SUBSEQUENT -----------------------------
RELATED BUILDING & TO BLDG. & ACCUMULATED DATE OF DATE
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROV. TOTAL(1) DEPRECIATION CONSTRUCTION ACQUIRED
----------- ------------ ------ ------------ ----------- -------- --------- ---------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MALLS:
Animas Valley
Mall, Farming-
ton, NM......... $15,098 $3,902 $24,059 $ 20 $ 3,902 $ 24,079 $ 27,981 $ 908 -- 1995
Boise Towne
Square, Boise,
ID.............. 32,475 6,512 -- 37,347 6,512 37,347 43,859 11,316 1987-88 1985-86
Cache Valley
Mall, Logan, UT. 5,781 909 -- 8,382 909 8,382 9,291 4,029 1975-76 1973-75
Cottonwood Mall,
Salt Lake City,
UT.............. 19,857 7,514 20,776 30,544 7,514 51,320 58,834 16,382 1981-87 1980
Eastridge Mall,
Casper, WY...... 13,237 4,300 19,896 315 4,300 20,211 24,511 774 -- 1995
Grand Teton
Mall, Idaho
Falls, ID....... -- 5,802 28,614 -- 5,802 28,614 34,416 531 -- 1996
North Plains
Mall, Clovis,
NM.............. 5,472 1,592 -- 10,784 1,592 10,784 12,376 3,121 1984-85 1979-84
Pine Ridge Mall,
Pocatello, ID... 10,019 1,883 -- 21,468 1,883 21,468 23,351 7,352 1979-81 1979
Red Cliffs Mall,
St. George, UT.. 6,299 903 -- 12,586 903 12,586 13,489 2,493 1989-90 1989
Three Rivers
Mall, Kelso, WA. 10,174 1,977 -- 20,088 1,977 20,088 22,065 4,416 1986-87 1984
White Mountain
Mall, Rock
Springs, WY..... 5,083 1,120 -- 15,640 1,120 15,640 16,760 5,553 1977-78 1977
COMMUNITY CENTERS
&
FREE-STANDING
RETAIL:
Alameda Plaza,
Pocatello, ID... 1,178 500 -- 3,365 500 3,365 3,865 1,752 1973 1973
Anaheim Plaza,
Anaheim, CA..... -- -- -- 54 -- 54 54 27 1980-81 1979
Arctic Circle
Granger, West
Valley City, UT. -- 48 -- 50 48 50 98 30 1973 1971
Austin Bluffs
Plaza, Colorado
Springs, CO..... -- 1,488 -- 1,943 1,488 1,943 3,431 537 1985 1979
Bailey Hills
Plaza, Eugene,
OR.............. -- 157 -- 317 157 317 474 39 1988-89 1988
Bank One, Nephi,
UT.............. -- 17 183 -- 17 183 200 135 -- 1976
Baskin Robbins
17th St., Idaho
Falls, ID....... -- 8 66 8 8 74 82 16 -- 1988
Boise Plaza,
Boise, ID....... -- 322 -- 1,382 322 1,382 1,704 866 1970-71 1970
Cottonwood
Square, Salt
Lake City, UT... -- 1,926 3,535 -- 1,926 3,535 5,461 88 -- 1995
Division Cross-
ing, Portland,
OR.............. 3,468 2,429 -- 4,484 2,429 4,484 6,913 694 1990-91 1990
Twin Falls
Crossing, Twin
Falls, ID....... -- 125 -- 776 125 776 901 387 1976 1975
Fort Union Pla-
za, Salt Lake
City, UT........ -- 21 -- 1,668 21 1,668 1,689 586 1979-84 --
Fremont Plaza,
Las Vegas, NV... -- -- -- 2,254 -- 2,254 2,254 1,075 1976-80 --
Fry's Shopping
Plaza, Glendale,
AZ.............. 1,950 353 -- 4,579 1,253 3,679 4,932 1,437 1980-81 1980
Gateway Cross-
ing, Bountiful,
UT.............. -- 3,644 -- 8,480 3,644 8,480 12,124 827 1990-92 1990
Halsey Crossing,
Gresham, OR..... -- -- -- 2,302 -- 2,302 2,302 416 1989-91 --
North Temple
Shops, Salt Lake
City, UT........ -- 60 -- 177 60 177 237 76 1970 1970
<CAPTION>
DEPRECIABLE
DESCRIPTION LIVES-YEARS
----------- -----------
<S> <C>
MALLS:
Animas Valley
Mall, Farming-
ton, NM......... 40
Boise Towne
Square, Boise,
ID.............. 5-40
Cache Valley
Mall, Logan, UT. 10-40
Cottonwood Mall,
Salt Lake City,
UT.............. 4-40
Eastridge Mall,
Casper, WY...... 40
Grand Teton
Mall, Idaho
Falls, ID....... 40
North Plains
Mall, Clovis,
NM.............. 10-40
Pine Ridge Mall,
Pocatello, ID... 10-40
Red Cliffs Mall,
St. George, UT.. 3-40
Three Rivers
Mall, Kelso, WA. 10-40
White Mountain
Mall, Rock
Springs, WY..... 40
COMMUNITY CENTERS
&
FREE-STANDING
RETAIL:
Alameda Plaza,
Pocatello, ID... 40
Anaheim Plaza,
Anaheim, CA..... 40
Arctic Circle
Granger, West
Valley City, UT. 40
Austin Bluffs
Plaza, Colorado
Springs, CO..... 3-40
Bailey Hills
Plaza, Eugene,
OR.............. 40
Bank One, Nephi,
UT.............. 40
Baskin Robbins
17th St., Idaho
Falls, ID....... 40
Boise Plaza,
Boise, ID....... 40
Cottonwood
Square, Salt
Lake City, UT... 40
Division Cross-
ing, Portland,
OR.............. 20-40
Twin Falls
Crossing, Twin
Falls, ID....... 40
Fort Union Pla-
za, Salt Lake
City, UT........ 40
Fremont Plaza,
Las Vegas, NV... 40
Fry's Shopping
Plaza, Glendale,
AZ.............. 40
Gateway Cross-
ing, Bountiful,
UT.............. 40
Halsey Crossing,
Gresham, OR..... 4-40
North Temple
Shops, Salt Lake
City, UT........ 40
</TABLE>
(continued)
F-18
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF
INITIAL COSTS CAPITAL PERIOD
-------------------- SUBSEQUENT -------------------------
RELATED BUILDING & TO BLDG. & ACCUMULATED DATE OF DATE
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROV. TOTAL(1) DEPRECIATION CONSTRUCTION ACQUIRED
- ----------- ------------ ------- ------------ ----------- ------- -------- -------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Orem Plaza
Center Street,
Orem, UT....... -- 371 330 1,091 344 1,448 1,792 531 1976-87 1973
Orem Plaza State
Street, Orem,
UT............. -- 126 -- 627 126 627 753 326 1975 1973
Plaza 800, Reno,
NV............. -- 33 2,969 8 33 2,977 3,010 1,592 1974 --
Plaza 9400,
Sandy, UT...... 1,517 -- -- 4,555 -- 4,555 4,555 1,835 1976-84 --
Red Cliffs
Plaza, St.
George, UT..... -- -- 2,403 -- -- 2,403 2,403 135 1994-95 1994-95
River Pointe
Plaza, West
Jordan, UT..... 1,762 1,130 -- 2,670 1,130 2,670 3,800 640 1987-88 1986-87
Riverside Plaza,
Provo, UT...... -- 427 1,886 1,206 427 3,092 3,519 1,379 1978-81 1977
University
Crossing, Orem,
UT............. 1,710 230 -- 4,411 230 4,411 4,641 1,575 1971-92 1971
Woodlands
Village,
Flagstaff, AZ.. 4,080 2,068 5,329 228 2,068 5,557 7,625 308 -- 1994
Yellowstone
Square, Idaho
Falls, ID...... -- 355 -- 4,552 355 4,552 4,907 2,422 1972-77 1972
COMMERCIAL:
First Security
Place, Boise,
ID............. -- 301 -- 3,248 300 3,249 3,549 1,388 1978-80 1978
Price Business
Center-Pioneer
Square, Salt
Lake City, UT.. -- 658 -- 10,165 658 10,165 10,823 3,006 1974-92 1973
Price Business
Center-South
Main, Salt Lake
City, UT....... -- 317 -- 2,640 317 2,640 2,957 1,302 1967-82 1966-81
Price Business
Center-
Timesquare,
Salt Lake City,
UT............. -- 581 -- 8,723 581 8,723 9,304 3,275 1974-80 1972-80
Sears-Eastbay,
Provo, UT...... 2,072 275 -- 2,097 275 2,097 2,372 423 1989-90 1989
Price Business
Center,
Commerce Park,
West Valley
City, UT....... -- 415 2,109 8,153 1,147 9,530 10,677 1,109 1980 1973-95
OTHER REAL
ESTATE:
Spokane Valley
Center,
Spokane, WA.... 16,943 6,708 -- 28,054 6,708 28,054 34,762 -- 1990-96(2) 1990
Miscellaneous
Real Estate.... -- 6,601 67 1,470 6,603 1,535 8,138 209 -- 1980-95
-------- ------- -------- -------- ------- -------- -------- -------
TOTAL........... $158,175 $68,108 $112,222 $272,911 $69,714 $383,527 $453,241 $87,318
======== ======= ======== ======== ======= ======== ======== =======
<CAPTION>
DEPRECIABLE
DESCRIPTION LIVES-YEARS
- ----------- -----------
<S> <C>
Orem Plaza
Center Street,
Orem, UT....... 10-40
Orem Plaza State
Street, Orem,
UT............. 29-40
Plaza 800, Reno,
NV............. 40
Plaza 9400,
Sandy, UT...... 10-40
Red Cliffs
Plaza, St.
George, UT..... 40
River Pointe
Plaza, West
Jordan, UT..... 5-40
Riverside Plaza,
Provo, UT...... 40
University
Crossing, Orem,
UT............. 40
Woodlands
Village,
Flagstaff, AZ.. 40
Yellowstone
Square, Idaho
Falls, ID...... 40
COMMERCIAL:
First Security
Place, Boise,
ID............. 10-40
Price Business
Center-Pioneer
Square, Salt
Lake City, UT.. 3-40
Price Business
Center-South
Main, Salt Lake
City, UT....... 3-40
Price Business
Center-
Timesquare,
Salt Lake City,
UT............. 5-40
Sears-Eastbay,
Provo, UT...... 40
Price Business
Center,
Commerce Park,
West Valley
City, UT....... 40
OTHER REAL
ESTATE:
Spokane Valley
Center,
Spokane, WA.... 40
Miscellaneous
Real Estate.... 40
TOTAL...........
</TABLE>
- ------
(1)The aggregate cost for Federal Income Tax purposes was approximately
$459,179 at December 31, 1996.
(2)Construction in progress as of December 31, 1996.
F-19
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
A summary of activity for real estate investments and accumulated
depreciation is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Real Estate Investments:
Balance at Beginning of Year.................... $388,205 $321,242 $286,719
Acquisitions.................................. 37,055 59,081 7,723
Improvements.................................. 28,268 9,903 27,459
Disposition of Property....................... (287) (2,021) (659)
-------- -------- --------
Balance at End of Year.......................... $453,241 $388,205 $321,242
======== ======== ========
Accumulated Depreciation:
Balance at Beginning of Year.................... $ 77,462 $ 69,660 $ 62,105
Depreciation.................................. 10,015 9,386 7,768
Depreciation of Disposed Property............. (159) (1,584) (213)
-------- -------- --------
Balance at End of Year.......................... $ 87,318 $ 77,462 $ 69,660
======== ======== ========
</TABLE>
F-20
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997
AND FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE AMOUNTS)
(Unaudited)
On April 4, 1996, the Operating Partnership acquired the Grand Teton Mall
located in Idaho Falls, Idaho for approximately $34,400. The acquisition was
financed utilizing borrowings on the $50,000 credit facility. On January 28,
1997, the Company sold 1,500,000 shares of common stock in an underwritten
public offering at an offering price of $27.125 per share. Net proceeds of
$38,600 were contributed to the Operating Partnership in exchange for
additional partnership units. The Operating Partnership used the net proceeds
to repay borrowings under the $50,000 Credit Facility. On June 1, 1997, the
Operating Partnership acquired the remaining 70% interest in Silver Lake Mall
by issuing 72,000 partnership units and assuming $24,755 in debt. On June 30,
1997, the Operating Partnership acquired Visalia Mall for $38,000 paying
$1,000 from operations and $37,000 from borrowings.
The following unaudited pro forma condensed consolidated statement of
operations for the nine month period ended September 30, 1997 is presented as
if the offering of common stock purchasing additional partnership units and
the acquisition of the properties purchased on June 1, 1997 and June 30, 1997
had occurred on January 1, 1997. The unaudited pro forma condensed statement
of operations for the year ended December 31, 1996 is presented as if the
public offering of common stock purchasing additional partnership units and
the acquisition of the properties purchased on April 4, 1996, June 1, 1997 and
June 30, 1997 had occurred on January 1, 1996.
Pro forma information is based upon the historical consolidated results of
operations of the Operating Partnership for the nine-month period ended
September 30, 1997 and for the year ended December 31, 1996, giving effect to
the transactions described above. The pro forma condensed consolidated
statement of operations should be read in conjunction with the historical
financial statements and notes thereto of the Operating Partnership included
elsewhere herein.
The unaudited pro forma condensed consolidated statement of operations is not
necessarily indicative of what the actual results of operations of the
Operating Partnership would have been assuming the transactions had been
completed as set forth above, nor does it purport to represent the Operating
Partnership's results of operations for future periods.
F-21
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS--EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
ACQUIRED
OPERATING PROPERTIES AND OPERATING
PARTNERSHIP PARTNERSHIP UNITS PARTNERSHIP
HISTORICAL(A) ISSUED(B) PRO FORMA
------------- ----------------- -----------
<S> <C> <C> <C>
REVENUES
Minimum Rents..................... $ 41,761 $3,222 $ 44,983
Percentage and Overage Rents...... 3,087 64 3,151
Recoveries from Tenants........... 12,911 1,444 14,355
Interest and Other Income......... 1,006 (104)(C) 902
----------- ------ -----------
58,765 4,626 63,391
EXPENSES
Operating Expenses Before
Depreciation and Interest........ 19,368 1,718 21,086
Interest.......................... 5,899 1,659 (D) 7,558
Depreciation and Amortization..... 9,576 660 (E) 10,236
----------- ------ -----------
Net Operating Income............ 23,922 589 24,511
Minority Interests in Income of
Consolidated
Partnerships..................... (299) -- (299)
Gain of Sale of Real Estate....... 339 -- 339
----------- ------ -----------
Net Income........................ $ 23,962 $ 589 $ 24,551
=========== ====== ===========
Net Income Per Partnership Unit... $ 1.14 $ 1.15
=========== ===========
Weighted Average Number of
Partnership Units Outstanding.... 21,068,988 21,262,932
=========== ===========
</TABLE>
- --------
(A)Reflects the Operating Partnership's historical consolidated statement of
operations for the period January 1, 1997 to September 30, 1997.
(B)Reflects revenues and certain expenses of the properties acquired on June
1, 1997 and June 30, 1997 for the five months ended May 31, 1997 and the
nine months ended September 30, 1997, respectively, and the partnership
units issued as a result of the common stock offering on January 28, 1997
of the Company, as if consummated on January 1, 1997.
(C)Reflects a reduction in outside management fees for the Operating
Partnership received for management services of Silver Lake Mall prior to
the acquisition.
(D)Reflects interest expense on borrowings outstanding under the revolving
Credit Facilities, drawn for purposes of the acquisition of the properties,
at a rate equal to the average interest rate incurred under the Credit
Facilities, and interest on assumed debt at 8.5% fixed rate. A change in
the interest rate of 1/8% on the Credit Facility used to finance the
acquisition of the properties would result in $44 interest expense increase
or decrease for the nine-month period ended September 30, 1997.
Interest expense is reduced for the period January 1, 1997 through February
11, 1997 by $289, reflecting the $38,600 in net proceeds from the
partnership units issued as a result of the January 28, 1997 common stock
offering of the Company. The proceeds were used to retire borrowings
outstanding on the Operating Partnership's $50,000 Credit Facility.
(E)Reflects depreciation on the purchase price allocated to buildings over a
40-year useful life.
F-22
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS--EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
ACQUIRED
OPERATING PROPERTIES AND OPERATING
PARTNERSHIP PARTNERSHIP UNITS PARTNERSHIP
HISTORICAL(A) ISSUED(B) PRO FORMA
------------- ----------------- -----------
<S> <C> <C> <C>
REVENUES
Minimum Rents................... $ 52,447 $7,650 $ 60,097
Percentage and Overage Rents.... 4,061 338 4,399
Recoveries from Tenants......... 15,557 3,094 18,651
Interest and Other Income....... 884 (148)(C) 736
----------- ------ -----------
72,949 10,934 83,883
EXPENSES
Operating Expenses Before Depre-
ciation and Interest........... 24,405 3,885 28,290
Interest........................ 7,776 2,667 (D) 10,443
Depreciation and Amortization... 11,979 1,500 (E) 13,479
----------- ------ -----------
Net Operating Income.......... 28,789 2,882 31,671
Minority Interests in Income of
Consolidated Partnerships........ (389) -- (389)
Gain on Sale of Real Estate....... 94 -- 94
----------- ------ -----------
Net Income.................... $ 28,494 $2,882 $ 31,376
=========== ====== ===========
Net Income Per Partnership Unit... $ 1.45 $ 1.50
=========== ===========
Weighted Average Number of Part-
nership Units Outstanding........ 19,667,865 20,962,028
=========== ===========
</TABLE>
(Unaudited)
- --------
(A)Reflects the Operating Partnership's historical consolidated statement of
operations for the period January 1, 1996 to December 31, 1996.
(B)Reflects revenues and expenses of the properties acquired on April 4, 1996,
June 1, 1997 and June 30, 1997, and the partnership units issued as a
result of the common stock offering on January 28, 1997 of the Company, as
if consummated on January 1, 1996.
(C)Adjustment reflects a reduction in outside management fees for the
Operating Partnership received for management services of Silver Lake Mall
prior to the acquisition.
(D)Reflects interest expense on borrowings outstanding under the revolving
Credit Facilities, drawn for purposes of the acquisition of the properties,
at a rate equal to the average interest rate incurred under the Credit
Facilities, and interest on assumed debt at 8.5% fixed rate. A change in
the interest rate of 1/8% on the Credit Facility used to finance the
acquisition of the properties would result in $58 interest expense increase
or decrease.
Interest expense is reduced by using the $38,600 in net proceeds from
issuing units from the January 28, 1997 common stock offering. The proceeds
were used to retire borrowings outstanding on the Operating Partnership's
$50,000 Credit Facility. Prior to April 4, 1996, only $10,000 was
outstanding on this Credit Facility. As a result, the interest expense
reduction is computed based on that amount during the period January 1,
1996 to April 4, 1996.
(E)Reflects depreciation on the purchase price allocated to buildings, over a
40-year useful life.
F-23
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
SELECTED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS--EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
<TABLE>
<CAPTION>
OPERATING PARTNERSHIP HISTORICAL PREDECESSOR COMPANIES
------------------------------------------------------------------------ --------------------------------
HISTORICAL
HISTORICAL YEAR ENDED
JANUARY 1, 1997 JANUARY 1, 1996 JANUARY 21, 1994 JANUARY 1, 1994 DECEMBER 31,
TO SEPTEMBER 30, TO SEPTEMBER 30, YEAR ENDED YEAR ENDED TO DECEMBER 31, TO JANUARY 20, ----------------
1997 1996 1996 1995 1994 1994 1993 1992
---------------- ---------------- ---------- ---------- ---------------- --------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES......... $58,765 $53,846 $72,949 $60,950 $50,071 $2,578 $47,728 $45,610
EXPENSES
Operating
Expenses before
Interest,
Depreciation and
Amortization.... 19,368 18,213 24,405 20,389 17,090 893 17,226 17,012
Interest......... 5,899 5,695 7,776 6,623 5,873 826 18,482 18,852
Depreciation and
Amortization.... 9,576 8,923 11,979 11,528 8,734 430 8,530 7,882
------- ------- ------- ------- ------- ------ ------- -------
Total........... 34,843 32,831 44,160 38,540 31,697 2,149 44,238 43,746
------- ------- ------- ------- ------- ------ ------- -------
23,922 21,015 28,789 22,410 18,374 429 3,490 1,864
Minority
Interests in
Income of
Consolidated
Partnerships.... (299) (297) (389) (421) (277) -- (251) (254)
Equity in Net
Loss of
Partnership
Interest........ -- -- -- (184) (82) 7 (238) (238)
Gain (Loss) of
Sales of Real
Estate.......... 339 94 94 918 -- -- 607 531
------- ------- ------- ------- ------- ------ ------- -------
Income Before
Extraordinary
Item............ 23,962 20,812 28,494 22,723 18,015 436 3,608 1,903
Extraordinary
Item-Loss on
Extinguishment
of Debt......... -- -- -- -- (6,670) -- -- --
------- ------- ------- ------- ------- ------ ------- -------
Net Income...... $23,962 $20,812 $28,494 $22,723 $11,345 $ 436 $ 3,608 $ 1,903
------- ------- ------- ------- ------- ------ ------- -------
Income Before
Extraordinary
Item........... $ 1.14 $ 1.06 $ 1.45 $ 1.26 $ 1.06
Extraordinary
Item............ -- -- -- -- (39)
------- ------- ------- ------- -------
Net Income per
Partnership
Unit (1)....... $ 1.14 $ 1.06 $ 1.45 $ 1.26 $ .67
======= ======= ======= ======= =======
Distribution per
Partnership
Unit........... $ 1.305 $ 1.26 $ 1.695 $ 1.635 $ 1.525
======= ======= ======= ======= =======
</TABLE>
- --------
(1)Based on 20,969,047, 19,667,865, 18,037,429 and 16,922,809 weighted average
number of partnership units outstanding for the period June 30, 1997 and the
years ended December 31, 1996, 1995 and 1994, respectively.
F-24
<PAGE>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
SELECTED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OPERATING PARTNERSHIP HISTORICAL PREDECESSOR COMPANIES
----------------------------------------------------------------------------------
JANUARY HISTORICAL
1, 1997 HISTORICAL YEAR ENDED
TO YEAR JANUARY 21, 1994 JANUARY 1, 1994 DECEMBER 31,
SEPTEMBER ENDED YEAR ENDED TO DECEMBER 31, TO JANUARY 20, ------------------
30, 1997 1996 1995 1994 1994 1993 1992
--------- -------- ---------- ---------------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Real Estate, before
Accumulated
Depreciation........... $563,089 $453,241 $388,205 $321,242 N/A $286,719 $280,911
Total Assets.......... 487,748 381,360 327,061 281,696 N/A 236,482 237,867
Total Debt............ 216,456 162,375 106,406 108,741 N/A 235,799 232,195
Partners' Capital
(Deficit).............. 241,675 204,666 209,742 163,073 N/A (6,951) (1,721)
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF PROPERTIES/TOTAL GLA
------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
------------- -------------------
1997 1996 1995 1994 1993 1992
------------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Number of Properties at
Year End............... 46 44 43 40 38 38
========== ========== ========= ========= ========= =========
Total GLA in square feet
at Year End:
Malls................... 7,026,000 5,553,000 5,020,000 3,898,000 3,855,000 3,849,000
Community Centers and
Free-Standing Retail
Properties............. 3,089,000 3,091,000 3,091,000 2,997,000 2,742,000 2,720,000
Commercial Properties... 1,418,000 1,418,000 1,394,000 1,113,000 1,113,000 1,108,000
---------- ---------- --------- --------- --------- ---------
Total................. 11,533,000 10,062,000 9,505,000 8,008,000 7,710,000 7,677,000
========== ========== ========= ========= ========= =========
</TABLE>
F-25
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE OPERATING PARTNERSHIP OR THE
UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE
AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS OR IN THE AFFAIRS OF THE OPERATING
PARTNERSHIP OR THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Prospectus Supplement Summary............................................. S-3
Use of Proceeds........................................................... S-11
Capitalization............................................................ S-11
The Company and the Operating Partnership................................. S-12
Recent Developments....................................................... S-16
Properties................................................................ S-17
Management................................................................ S-28
Description of the Notes.................................................. S-31
Underwriting.............................................................. S-39
Legal Matters............................................................. S-40
PROSPECTUS
Available Information..................................................... 2
Forward-Looking Information............................................... 2
Incorporation of Certain Documents by Reference........................... 3
The Company and the Operating Partnership................................. 4
Use of Proceeds........................................................... 4
Ratio of Earnings to Fixed Charges........................................ 4
Description of Common Stock............................................... 5
Description of Preferred Stock............................................ 7
Description of Common Stock Warrants...................................... 12
Description of Depositary Shares.......................................... 13
Description of Debt Securities............................................ 17
Restrictions on Transfers of Capital Stock................................ 27
Plan of Distribution...................................................... 28
Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Operating Partnership.................................. 30
Federal Income Tax Considerations......................................... 34
Legal Matters............................................................. 41
Experts................................................................... 41
Consolidated Financial Statements and Other Information................... F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[JP LOGO]
PRICE DEVELOPMENT COMPANY,
LIMITED PARTNERSHIP
$50,000,000
% SENIOR NOTES DUE 200
$50,000,000
% SENIOR NOTES DUE 200
----------------
PROSPECTUS SUPPLEMENT
----------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
UBS SECURITIES
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
