SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: September 30, 1996
Commission File No. 1-11530
Taubman Centers, Inc.
(Exact name of registrant as specified in its charter)
Michigan 38-2033632
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 300, 200 East Long Lake Road, Bloomfield Hills, Michigan 48304
(Address of principal executive offices) (Zip Code)
(810) 258-6800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
As of November 11, 1996, there were outstanding 44,098,113 shares of the
Company's common stock, par value $0.01 per share.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following financial statements of Taubman Centers, Inc. (the Company) are
provided pursuant to the requirements of this item. The financial statements of
The Taubman Realty Group Limited Partnership (TRG) are also provided.
INDEX TO FINANCIAL STATEMENTS
TAUBMAN CENTERS, INC.
Balance Sheet as of December 31, 1995 and September 30, 1996...................2
Statement of Operations for the three months ended September 30, 1995 and 1996.3
Statement of Operations for the nine months ended September 30, 1995 and 1996..4
Statement of Cash Flows for the nine months ended September 30, 1995 and 1996..5
Notes to Financial Statements..................................................6
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
Consolidated Balance Sheet as of December 31, 1995 and September 30, 1996....10
Consolidated Statement of Operations for the three months ended
September 30, 1995 and 1996.................................................11
Consolidated Statement of Operations for the nine months ended
September 30, 1995 and 1996.................................................12
Consolidated Statement of Cash Flows for the nine months ended
September 30, 1995 and 1996.................................................13
Notes to Consolidated Financial Statements....................................14
-1-
<PAGE>
TAUBMAN CENTERS, INC.
BALANCE SHEET
(in thousands, except share data)
December 31 September 30
---------- ------------
1995 1996
Assets:
Investment in TRG (Note 2) $307,190 $291,308
Cash and cash equivalents 7,886 8,494
Other assets 119
-------- --------
$315,076 $299,921
======== ========
Liabilities:
Accounts payable and accrued liabilities $ 348 $ 419
Dividends payable 9,710 9,702
-------- --------
$ 10,058 $ 10,121
Commitments and Contingencies (Note 4)
Shareowners' Equity (Note 3)
Common Stock $ 441 $ 441
$0.01 par value, 250,000,000 shares authorized,
44,134,913 and 44,098,113 issued and outstanding
at December 31, 1995 and September 30, 1996
Additional paid-in capital 386,680 386,332
Dividends in excess of net income (82,103) (96,973)
-------- --------
$305,018 $289,800
-------- --------
$315,076 $299,921
======== ========
See notes to financial statements.
-2-
<PAGE>
TAUBMAN CENTERS, INC.
STATEMENT OF OPERATIONS
(in thousands, except share data)
Three Months Ended September 30
-------------------------------
1995 1996
---- ----
Income:
Equity in TRG's income before
extraordinary item (Note 2) $4,170 $5,161
Interest and other 71 73
------ ------
$4,241 $5,234
------ ------
Operating Expenses:
General and administrative $ 151 $ 136
Management fee 62 62
------ ------
$ 213 $ 198
------ ------
Income before extraordinary item $4,028 $5,036
Equity in TRG's extraordinary item (Note 2) (444)
------ ------
Net Income $4,028 $4,592
====== ======
Earnings per common share:
Income before extraordinary item $ .09 $ .11
Extraordinary item (.01)
------ ------
Net Income $ .09 $ .10
====== ======
Cash dividends declared per common share $ .22 $ .22
====== ======
Weighted average number of common
shares outstanding 44,169,913 44,098,113
========== ==========
See notes to financial statements.
-3-
<PAGE>
TAUBMAN CENTERS, INC.
STATEMENT OF OPERATIONS
(in thousands, except share data)
Nine Months Ended September 30
------------------------------
1995 1996
---- ----
Income:
Equity in TRG's income before
extraordinary items (Note 2) $12,907 $15,158
Interest and other 256 206
------- -------
$13,163 $15,364
------- -------
Operating Expenses:
General and administrative $ 523 $ 499
Management fee 187 187
------- -------
$ 710 $ 686
------- -------
Income before extraordinary items $12,453 $14,678
Equity in TRG's extraordinary items (Note 2) (781) (444)
------- -------
Net Income $11,672 $14,234
======= =======
Earnings per common share:
Income before extraordinary items $ .28 $ .33
Extraordinary items (.02) (.01)
------- -------
Net Income $ .26 $ .32
======= =======
Cash dividends declared per common share $ .66 $ .66
======= =======
Weighted average number of common
shares outstanding 44,281,294 44,102,470
========== ==========
See notes to financial statements.
-4-
<PAGE>
TAUBMAN CENTERS, INC.
STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended September 30
------------------------------
1995 1996
---- ----
Cash Flows From Operating Activities:
Income before extraordinary items $ 12,453 $ 14,678
Adjustments to reconcile income before
extraordinary items to net cash provided
by operating activities:
Increase (decrease) in accounts payable and
other liabilities (95) 71
Increase in other assets (42) (119)
-------- --------
Net Cash Provided By Operating Activities $ 12,316 $ 14,630
-------- --------
Cash Flows Provided by Investing Activities -
Distributions from TRG in excess of income
before extraordinary items $ 17,688 $ 15,438
-------- --------
Cash Flows From Financing Activities:
Cash dividends $(29,285) $(29,113)
Purchases of stock (Note 3) (3,851) (347)
-------- --------
Net Cash Used in Financing Activities $(33,136) $(29,460)
-------- --------
Net Increase (Decrease) In Cash $ (3,132) $ 608
Cash and Cash Equivalents at Beginning of Period 11,000 7,886
-------- --------
Cash and Cash Equivalents at End of Period $ 7,868 $ 8,494
======== ========
See notes to financial statements.
-5-
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
Nine months ended September 30, 1996
Note 1 - Interim Financial Statements
The unaudited interim financial statements should be read in conjunction with
the audited financial statements and related notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995. In the opinion
of management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial statements for the interim
periods have been made. The results for interim periods are not necessarily
indicative of the results for a full year.
Note 2 - Investment in TRG
The Company's investment in TRG at December 31, 1995 and September 30, 1996
consists of a managing general partnership interest. Net income and
distributions are allocable to the general and limited TRG partners in
accordance with their percentage ownership.
In July 1996, TRG completed transactions that resulted in it acquiring the 75%
interest in Fairlane Town Center previously held by a joint venture partner. In
connection with the transactions, TRG issued 3,096 units of partnership interest
to the joint venture partner. The units are exchangeable, after one year, for
approximately 6.1 million shares of TCI common stock. As a result, the Company's
ownership of TRG decreased from 35.10% to 33.47%. The Company expects that the
acquisition will have an immaterial effect on the Company's net income in 1996,
and would have had an immaterial effect in 1995.
The excess of the Company's cost of its investment in TRG over its
proportionate share of TRG's accumulated deficiency in assets at December 31,
1995 and September 30, 1996 was $448.6 million and $413.9 million, respectively.
The Company's proportionate share of TRG's income before extraordinary items for
the three months ended September 30, 1995 and 1996 was $6.3 million and $7.1
million, respectively, reduced by $2.1 million and $1.9 million, respectively,
representing adjustments arising from the Company's additional basis in TRG's
net assets. The Company's proportionate share of TRG's income before
extraordinary items for the nine months ended September 30, 1995 and 1996 was
$19.1 million and $20.9 million, respectively, reduced by $6.2 million and $5.7
million, respectively, representing adjustments arising from the Company's
additional basis in TRG's net assets. In the second quarter of 1995 and the
third quarter of 1996, the Company recognized extraordinary charges to income
related to TRG's prepayment of debt.
-6-
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS-- (Continued)
TRG's summarized balance sheet and results of operations information (in
thousands) are presented below, followed by information about TRG's beneficial
interest in the operations of its unconsolidated joint ventures. Beneficial
interest is calculated based on TRG's ownership interest in each of the joint
ventures.
December 31 September 30
----------- ------------
1995 1996
---- ----
Assets:
Properties $ 926,207 $1,087,142
Accumulated depreciation and amortization 200,440 226,341
---------- ----------
$ 725,767 $ 860,801
Other assets 78,589 79,469
---------- ----------
$ 804,356 $ 940,270
========== ==========
Liabilities:
Unsecured notes payable $ 632,575 $ 786,665
Mortgage notes payable 160,496 160,126
Other notes payable 162,178 94,119
Capital lease obligation 14,418 31,883
Accounts payable and other liabilities 82,603 90,109
Distributions in excess of net income of
unconsolidated joint ventures 154,933 143,773
---------- ----------
$1,207,203 $1,306,675
Accumulated deficiency in assets (402,847) (366,405)
---------- ----------
$ 804,356 $ 940,270
========== ==========
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1995 1996 1995 1996
---- ---- ---- ----
Revenues $58,052 $ 66,077 $167,139 $185,626
Operating costs other than interest
and depreciation and amortization $27,047 $ 30,790 $ 79,304 $ 86,042
Interest expense 16,970 18,533 48,039 52,873
Depreciation and amortization 8,093 9,366 23,852 26,066
------- -------- -------- --------
$52,110 $ 58,689 $151,195 $164,981
------- -------- -------- --------
Equity in income before extraordinary
items of unconsolidated joint ventures 11,867 13,552 38,585 39,663
------- -------- -------- --------
Income before extraordinary items $17,809 $ 20,940 $ 54,529 $ 60,308
Extraordinary items (1,328) (2,225) (1,328)
------- -------- -------- --------
Net Income $17,809 $ 19,612 $ 52,304 $ 58,980
======= ======== ======== ========
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1995 1996 1995 1996
---- ---- ---- ----
TRG's beneficial interest in
unconsolidated joint ventures' operations:
Revenues less recoverable and other
operating expenses $23,433 $ 23,298 $ 71,243 $69,049
Interest expense (8,237) (6,516) (22,796) (20,450)
Depreciation and amortization (3,329) (3,230) (9,862) (8,936)
------- -------- -------- -------
Income before extraordinary items $11,867 $ 13,552 $ 38,585 $39,663
======= ======== ======== =======
-7-
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS-- (Continued)
Note 3 - Purchases of Common Stock
The Company's Board of Directors has authorized the purchase of up to 750
thousand shares of the Company's common stock in the open market. The stock may
be purchased from time to time as market conditions warrant. In the first nine
months of 1996, the Company purchased 36.8 thousand shares for approximately
$0.3 million. As of September 30, 1996, the Company had purchased a cumulative
total of 491.8 thousand shares of its common stock for approximately $4.7
million. Funding for the purchases was provided by excess cash that otherwise
would have been invested in cash equivalents.
Note 4 - Commitments and Contingencies
At the time of the Company's initial public offering (IPO) and acquisition of
its interest in TRG, the Company entered into an agreement with A. Alfred
Taubman and the General Motors Hourly-Rate Employes Pension Trust and the
General Motors Salaried Employes Pension Trust (the GM Trusts), each of whom
indirectly owns an interest in TRG, whereby each has the annual right to tender
to the Company units of partnership interest in TRG (provided that the aggregate
value is at least $50 million) and cause the Company to purchase the tendered
interests at a purchase price based on a market valuation of the Company on the
trading date immediately preceding the date of the tender (the Cash Tender
Agreement). The Company will have the option to pay for these interests from
available cash, borrowed funds or from the proceeds of an offering of the
Company's common stock. Generally, the Company expects to finance these
purchases through the sale of new shares of its stock. The tendering partners
will bear the costs of sale. Any proceeds of the offering in excess of the
purchase price will be for the sole benefit of the Company. At A. Alfred
Taubman's election, his family and Robert C. Larson and his family may
participate in tenders. The GM Trusts will be entitled to receive from TRG an
amount (not to exceed $10.9 million in the aggregate over the term of the
Partnership) equal to 5.5% of the amounts that the Company pays to the GM Trusts
under the Cash Tender Agreement.
Based on a market value at December 31, 1995 and September 30, 1996 of $10.00
and $11.125 per common share, the aggregate value of interests in TRG which may
be tendered under the Cash Tender Agreement was approximately $743 million and
$808 million, respectively. Purchase of these interests would result in the
Company owning an additional 56% interest in TRG.
The Company has made a continuing, irrevocable offer to all present holders
(other than certain excluded holders, including A. Alfred Taubman and the GM
Trusts), assignees of all present holders, those future holders of partnership
interests in TRG as the Company may, in its sole direction, agree to include in
the continuing offer, and all existing and future optionees under TRG's
incentive option plan (described below) to exchange shares of common stock for
partnership interests in TRG (the Continuing Offer). The number of shares of
common stock to be exchanged is based on a market valuation of the Company on
the trading date immediately preceding the date of exchange. The offer is
subject to certain restrictions relating to the minimum value of the interest
exchanged and ownership limitations.
-8-
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS-- (Continued)
The GM Trusts and the AT&T Master Pension Trust are able to sell shares of
common stock that they acquired in connection with the IPO through a registered
offering. Pursuant to a registration rights agreement with the Company, each of
the Trusts has the annual right to cause the Company to register and publicly
sell their shares of common stock (provided that the shares have an aggregate
value of at least $50 million and subject to certain other restrictions). The
annual right is deemed to be exercised if they initiate or participate in a sale
pursuant to the Cash Tender Agreement, as described above. All expenses of such
a registration are to be borne by the Company, other than the underwriting
discounts or selling commissions, which will be borne by the exercising party.
Currently, 4,500 units of partnership interest may be issued under TRG's
incentive option plan for employees of The Taubman Company Limited Partnership
(the Manager). The Manager, which is approximately 99% beneficially owned by
TRG, provides various administrative, management, accounting, shareowner
relations, and other services to the Company and TRG. The exercise price of all
outstanding options is equal to fair market value on the date of grant.
Incentive options generally become exercisable to the extent of one-third of the
units on each of the third, fourth and fifth anniversaries of the date of grant.
Options expire ten years from the date of grant. Under the Continuing Offer, one
unit of partnership interest would be exchangeable for approximately 2,000
shares of the Company's common stock at September 30, 1996. There were
outstanding options for 4,119 units and 4,110 units as of December 31, 1995 and
September 30, 1996, respectively, with exercise prices ranging from $18 thousand
to $27 thousand per unit. Options for nine units were canceled in the second
quarter of 1996. As of December 31, 1995 and September 30, 1996, options for
1,195 and 1,336 units, respectively, were exercisable with an exercise price
range of $22 thousand to $27 thousand per unit.
-9-
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(in thousands)
December 31 September 30
----------- ------------
1995 1996
---- ----
Assets:
Properties $ 926,207 $1,087,142
Accumulated depreciation and amortization 200,440 226,341
---------- ----------
$ 725,767 $ 860,801
Cash and cash equivalents 16,836 11,766
Accounts and notes receivable, less allowance
for doubtful accounts of $381 and $369
in 1995 and 1996 14,192 15,986
Accounts receivable from related parties 5,234 5,535
Deferred charges and other assets 42,327 46,182
---------- ----------
$ 804,356 $ 940,270
========== ==========
Liabilities:
Unsecured notes payable $ 632,575 $ 786,665
Mortgage notes payable 160,496 160,126
Other notes payable 162,178 94,119
Capital lease obligation 14,418 31,883
Accounts payable and other liabilities 82,603 90,109
Distributions in excess of net income of
unconsolidated Joint Ventures (Note 3) 154,933 143,773
---------- ----------
$1,207,203 $1,306,675
Commitments and Contingencies (Notes 6 and 7)
Accumulated deficiency in assets (402,847) (366,405)
---------- ----------
$ 804,356 $ 940,270
========== ==========
Allocation of accumulated deficiency in assets:
General Partners $ (322,346) $ (279,562)
Limited Partners (80,501) (86,843)
---------- ----------
$ (402,847) $ (366,405)
========== ==========
See notes to financial statements.
-10-
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except units data)
Three Months Ended September 30
-------------------------------
1995 1996
---- ----
Revenues:
Minimum rents $ 32,358 $ 38,893
Percentage rents 1,397 1,319
Expense recoveries 19,303 21,243
Other 3,556 2,816
Revenues from management, leasing
and development services 1,438 1,806
-------- --------
$ 58,052 $ 66,077
-------- --------
Operating Costs:
Recoverable expenses $ 16,571 $ 18,504
Other operating 4,947 6,247
Management, leasing and development
services 952 912
General and administrative 4,577 5,127
Interest expense 16,970 18,533
Depreciation and amortization 8,093 9,366
-------- --------
$ 52,110 $ 58,689
-------- --------
Income before equity in income of
unconsolidated Joint Ventures
and before extraordinary items $ 5,942 $ 7,388
Equity in income before extraordinary items
of unconsolidated Joint Ventures (Note 3) 11,867 13,552
-------- --------
Income before extraordinary items $ 17,809 $ 20,940
Extraordinary items (Note 4) (1,328)
-------- --------
Net Income $ 17,809 $ 19,612
======== ========
Allocation of net income:
General Partners $ 14,250 $ 15,098
Limited Partners 3,559 4,514
-------- --------
$ 17,809 $ 19,612
======== ========
Earnings per Unit of Partnership Interest:
Income before extraordinary items $ 280 $ 317
Extraordinary items (20)
-------- --------
Net Income $ 280 $ 297
======== ========
Weighted Average Number of Units of
Partnership Interest Outstanding 63,521 66,045
======== ========
See notes to financial statements.
-11-
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except units data)
Nine Months Ended September 30
------------------------------
1995 1996
---- ----
Revenues:
Minimum rents $ 95,557 $ 108,416
Percentage rents 3,674 3,771
Expense recoveries 55,246 59,503
Other 8,586 8,424
Revenues from management, leasing
and development services 4,076 5,512
--------- ---------
$ 167,139 $ 185,626
--------- ---------
Operating Costs:
Recoverable expenses $ 46,457 $ 49,520
Other operating 15,321 17,841
Management, leasing and development
services 2,598 3,281
General and administrative 14,928 15,400
Interest expense 48,039 52,873
Depreciation and amortization 23,852 26,066
--------- ---------
$ 151,195 $ 164,981
--------- ---------
Income before equity in income of
unconsolidated Joint Ventures and
before extraordinary items $ 15,944 $ 20,645
Equity in income before extraordinary items
of unconsolidated Joint Ventures (Note 3) 38,585 39,663
--------- ---------
Income before extraordinary items $ 54,529 $ 60,308
Extraordinary items (Note 4) (2,225) (1,328)
--------- ---------
Net Income $ 52,304 $ 58,980
========= =========
Allocation of net income:
General Partners $ 41,852 $ 46,599
Limited Partners 10,452 12,381
--------- ---------
$ 52,304 $ 58,980
========= =========
Earnings per Unit of Partnership Interest:
Income before extraordinary items $ 858 $ 937
Extraordinary items (35) (20)
--------- ---------
Net Income $ 823 $ 917
========= =========
Weighted Average Number of Units of
Partnership Interest Outstanding 63,521 64,369
========= =========
See notes to financial statements.
-12-
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended September 30
------------------------------
1995 1996
---- ----
Cash Flows From Operating Activities:
Income before extraordinary items $ 54,529 $ 60,308
Adjustments to reconcile income before
extraordinary items to net cash provided
by operating activities:
Depreciation and amortization 23,852 26,066
Provision for losses on accounts receivable 712 998
Amortization of deferred financing costs 1,719 1,610
Other 2,191 495
Gain on sale of land (261) (315)
Increase (decrease) in cash attributable to
changes in assets and liabilities:
Receivables, deferred charges and other assets (10,291) (5,456)
Accounts payable and other liabilities 10,304 4,451
-------- ---------
Net Cash Provided By Operating Activities $ 82,755 $ 88,157
-------- ---------
Cash Flows From Investing Activities:
Purchase of interests in Fairlane (Note 2) $ (66,375)
Purchase of Paseo Nuevo (Note 2) (37,195)
Additions to properties $(43,296) (14,991)
Proceeds from sale of land 841 686
Contributions to unconsolidated Joint Ventures (8,183)
Distributions from unconsolidated Joint Ventures
in excess of income before extraordinary items 2,082 6,618
-------- ---------
Net Cash Used In Investing Activities $(40,373) $(119,440)
-------- ---------
Cash Flows From Financing Activities:
Debt proceeds $167,708 $ 275,212
Debt payments (13,288) (189,667)
Extinguishment of debt (105,827) (35,964)
Debt issuance costs (1,530) (830)
Issuance of units of partnership interest (Note 2) 65,575
Cash distributions (87,169) (88,113)
-------- ---------
Net Cash Provided By (Used In) Financing Activities $(40,106) $ 26,213
-------- ---------
Net Increase (Decrease) In Cash $ 2,276 $ (5,070)
Cash and Cash Equivalents at Beginning of Period 10,709 16,836
-------- ---------
Cash and Cash Equivalents at End of Period $ 12,985 $ 11,766
======== =========
Interest on mortgage notes and other loans paid during the nine months ended
September 30, 1995 and 1996, net of amounts capitalized of $5,891 and $3,443,
was $36,261 and $41,282, respectively.
See notes to financial statements.
-13-
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended September 30, 1996
Note 1 - Interim Financial Statements
The Taubman Realty Group Limited Partnership (TRG) engages in the ownership,
operation, management, leasing, acquisition, development, redevelopment,
expansion, financing and refinancing of regional retail shopping centers
(Taubman Shopping Centers) and interests therein. Taubman Centers, Inc. (TCI) is
the managing general partner of TRG. GMPTS Limited Partnership, TG Partners
Limited Partnership and Taub-Co Management, Inc. are also general partners.
The unaudited interim financial statements should be read in conjunction with
the audited financial statements and related notes included in TRG's Annual
Report on Form 10-K for the year ended December 31, 1995. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial statements for the interim
periods have been made. The results for interim periods are not necessarily
indicative of the results for a full year.
Note 2 - Acquisitions
In June 1996, TRG acquired the Paseo Nuevo shopping center (Paseo Nuevo)
located in Santa Barbara, California. Paseo Nuevo is a 463,000 square foot open
air center, with 137,000 square feet of mall tenant area. The Center is anchored
by Macy's and Nordstrom. TRG borrowed under its existing lines of credit to fund
the $37 million purchase price. The Center is owned subject to two participating
ground leases with remaining terms of approximately 70 years. The acquisition
was recorded at fair value. The operating results of Paseo Nuevo have been
consolidated in TRG's financial statements from the acquisition date. TRG
expects the acquisition to have an immaterial effect on net income in 1996. The
pro forma effect of the acquisition on 1995 net income is also immaterial.
In July 1996, TRG completed transactions that resulted in it acquiring the 75%
interest in Fairlane Town Center (Fairlane), previously held by a joint venture
partner. In connection with the transactions, TRG issued to the former joint
venture partner 3,096 units of partnership interest, economically equivalent to
approximately 6.1 million shares of TCI common stock, which had a closing price
of $10.75 per share on the day prior to the issuance date. The former joint
venture partner is obligated to hold the partnership units for at least one
year. TRG also assumed mortgage debt of approximately $26 million, representing
the former joint venture partner's beneficial interest in the $34.6 million
mortgage encumbering the property. TRG used unsecured debt to fund the repayment
of the 9.73% mortgage and the prepayment penalty of approximately $1.2 million.
The acquisition, which resulted in TRG owning 100% of Fairlane, was accounted
for at fair value. Prior to the acquisition date, TRG's interest in Fairlane was
accounted for under the equity method.
-14-
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Pro forma results of TRG's operations, assuming the Fairlane acquisition had
occurred on January 1, 1995, are as follows:
Pro Forma
-------------------------------------------
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1995 1996 1995 1996
---- ---- ---- ----
Revenues $65,158 $67,371 $188,148 $200,636
Income before extraordinary items 19,579 21,176 59,858 63,372
Net income 19,579 19,848 57,633 62,044
Earnings per unit of partnership interest:
Income before extraordinary item $294 $318 $899 $951
Net income 294 298 865 931
The pro forma results are not necessarily indicative of what actual results
would have been had the acquisition occurred on January 1, 1995, nor are they
necessarily indicative of future results.
Note 3 - Investments in Joint Ventures
Certain Taubman Shopping Centers are partially owned through joint ventures
(Joint Ventures). TRG is also the managing general partner of these Joint
Ventures. TRG's interest in each Joint Venture is as follows:
TRG's %
Ownership
as of
Joint Venture Taubman Shopping Center September 30, 1996
---------------------------------------------------------------------------
Arizona Mills, L.L.C. Arizona Mills 35%
(under construction)
Fairfax Associates Fair Oaks 50
Lakeside Mall Limited Partnership Lakeside 50
Rich-Taubman Associates Stamford Town Center 50
Taubman-Cherry Creek
Limited Partnership Cherry Creek 50
Taubman MacArthur Associates MacArthur Center
Limited Partnership (under construction) 70
Twelve Oaks Mall Limited
Partnership Twelve Oaks Mall 50
West Farms Associates Westfarms 79
Woodfield Associates Woodfield 50
Woodland Woodland 50
Arizona Mills, L.L.C., a joint venture in which TRG has a 35% interest, is
developing Arizona Mills in Tempe, Arizona, which is expected to open in the
fall of 1997. Taubman MacArthur Associates Limited Partnership, a joint venture
in which TRG has a 70% interest, is developing MacArthur Center in Norfolk,
Virginia. MacArthur Center is expected to open in the spring of 1999.
-15-
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
TRG reduces its investment in Joint Ventures to eliminate intercompany profits
on sales of services that are capitalized by the Joint Ventures. As a result,
the carrying value of TRG's investment in Joint Ventures is less than TRG's
share of the deficiency in assets reported in the combined balance sheet of the
Unconsolidated Joint Ventures by $4.8 million and $7.4 million at December 31,
1995 and at September 30, 1996, respectively. These differences are amortized
over the useful lives of the related assets.
Combined balance sheet and results of operations information are presented
below (in thousands) for all Joint Ventures, followed by TRG's beneficial
interest in the combined information. Beneficial interest is calculated based on
TRG's ownership interest in each of the Joint Ventures.
December 31 September 30
----------- ------------
1995 1996
---- ----
Assets:
Properties, net $ 373,803 $ 407,230
Other assets 109,668 69,248
--------- ---------
$ 483,471 $ 476,478
========= =========
Liabilities and partners' accumulated
deficiency in assets:
Debt $ 741,121 $ 714,458
Other liabilities 50,227 36,791
TRG accumulated deficiency in assets (150,117) (136,362)
Joint Venture Partners' accumulated
deficiency in assets (157,760) (138,409)
--------- ---------
$ 483,471 $ 476,478
========= =========
TRG accumulated deficiency in assets (above) $(150,117) $(136,362)
Elimination of intercompany profit (4,816) (7,411)
--------- ---------
Distributions in excess of net income
of unconsolidated Joint Ventures $(154,933) $(143,773)
========= =========
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1995 1996 1995 1996
---- ---- ---- ----
Revenues $71,137 $63,657 $210,096 $202,369
Recoverable and other operating expenses $28,113 $22,793 $ 80,778 $ 77,722
Interest expense 15,528 12,857 43,582 40,314
Depreciation and amortization 6,577 6,413 19,520 18,312
------- ------- -------- --------
Total operating costs $50,218 $42,063 $143,880 $136,348
------- ------- -------- --------
Income before extraordinary items $20,919 $21,594 $ 66,216 $ 66,021
Extraordinary items (624)
------- ------- -------- --------
Net income $20,919 $21,594 $ 65,592 $ 66,021
======= ======= ======== ========
Net income attributable to TRG $10,716 $12,007 $ 33,744 $ 35,121
Extraordinary items attributable to TRG 493
Realized intercompany profit 1,151 1,545 4,348 4,542
------- ------- -------- --------
Equity in income before extraordinary items
of unconsolidated Joint Ventures $11,867 $13,552 $ 38,585 $ 39,663
======= ======= ======== ========
-16-
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1995 1996 1995 1996
---- ---- ---- ----
TRG's beneficial interest
in unconsolidated Joint Ventures'
operations:
Revenues less recoverable and other
operating expenses $23,433 $23,298 $71,243 $69,049
Interest expense (8,237) (6,516) (22,796) (20,450)
Depreciation and amortization (3,329) (3,230) (9,862) (8,936)
------- ------- ------- -------
Income before extraordinary items $11,867 $13,552 $38,585 $39,663
======= ======= ======= =======
Note 4 - Debt Transactions
In the third quarter of 1996, TRG issued $154 million of unsecured notes under
its medium-term note program. The notes were used to pay down TRG's floating
rate bank lines bearing interest at approximately LIBOR plus 1.5% as well as to
pay off the $34.6 million, 9.73% mortgage on Fairlane Town Center and the
related prepayment penalty of approximately $1.2 million, leaving the wholly
owned property unencumbered. TRG recognized an extraordinary charge to income of
$1.3 million in the third quarter, consisting primarily of the prepayment
penalty. The issuance included $100 million of notes with a five year maturity,
including $70 million of fixed rate notes at 8% and $30 million of floating rate
notes bearing interest at three month LIBOR plus 105 basis points. The remaining
$54 million of notes have maturities of two and three years and bear interest at
three month LIBOR plus 77 to 90 basis points. TRG has issued a total of $287
million medium-term notes since the program's inception in 1995 under TRG's $500
million shelf registration statement.
In the second quarter of 1995, TRG recognized an extraordinary charge to
income of approximately $2.2 million relating to the extinguishment of debt of
TRG and a Joint Venture, consisting primarily of prepayment penalties.
-17-
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 5 - Beneficial Interest in Debt and Interest Expense
TRG's beneficial interest in the debt, capitalized interest, and interest
expense (net of capitalized interest) of TRG, its consolidated subsidiaries and
its unconsolidated Joint Ventures is summarized as follows:
TRG's Share TRG's TRG's
Joint of Joint Consolidated Beneficial
Ventures Ventures Subsidiaries Interest
-----------------------------------------------
Debt as of:
December 31, 1995 $741,121 $390,680 $ 955,249 $1,345,929
September 30, 1996 714,458 389,151 1,040,910 1,430,061
Capitalized interest:
Nine months ended
September 30, 1995 $ 2,315 $ 1,235 $ 5,891 $ 7,126
Nine months ended
September 30, 1996 3,775 2,669 3,443 6,112
Interest expense
(Net of capitalized interest):
Nine months ended
September 30, 1995 $ 43,582 $ 22,796 $ 48,039 $ 70,835
Nine months ended
September 30, 1996 40,314 20,450 52,873 73,323
Note 6 - Incentive Option Plan
TRG has an incentive option plan for employees of the Manager. Currently,
4,500 units of partnership interest may be issued under the plan. The exercise
price of all outstanding options is equal to fair market value on the date of
grant. Incentive options generally become exercisable to the extent of one-third
of the units on each of the third, fourth and fifth anniversaries of the date of
grant. Options expire ten years from the date of grant. There were outstanding
options for 4,119 units and 4,110 units as of December 31, 1995 and September
30, 1996, respectively, with exercise prices ranging from $18 thousand to $27
thousand per unit. Options for nine units were canceled in the second quarter of
1996. As of December 31, 1995 and September 30, 1996, options for 1,195 and
1,336 units, respectively, were exercisable with an exercise price range of $22
thousand to $27 thousand per unit.
Note 7 - Subsequent Events
TRG has entered into an agreement to lease Memorial City shopping center
(Memorial City), a 1.4 million square foot shopping center located in Houston,
Texas. Memorial City is anchored by Sears, Foley's, Montgomery Ward and Mervyn's
and includes 579 thousand square feet of mall GLA. The lease of this
unencumbered property grants TRG the exclusive right to manage, lease and
operate the property beginning in early November 1996. The annual rent is
initially $7 million. TRG has the option to terminate the lease after the third
full lease year by paying $2 million to the lessor. TRG will use this option
period to evaluate the redevelopment opportunities of the center.
-18-
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
If TRG does not exercise its option to terminate the lease at the end of the
third full lease year, the lease continues for another 52 years and provides for
increases in rent every ten years based on 75% of the increase in the Consumer
Price index between 1996 and the then current year. Under the terms of the
lease, TRG has agreed to invest at least $25 million in property expenditures
not recoverable from tenants during the first 10 years of the lease term,
including a minimum investment of $3 million for the first three years.
Memorial City is expected to have an immaterial effect on net income.
TRG has also entered into an agreement to purchase for cash La Cumbre shopping
center, a 477 thousand square foot center located in Santa Barbara, California.
La Cumbre is anchored by Robinsons-May and Sears, and includes 178 thousand
square feet of mall GLA. The purchase agreement contains a provision prohibiting
disclosure of the purchase price until the closing date. The transaction, which
is expected to close in December 1996, is contingent on obtaining necessary
approvals. The acquisition is expected to have an immaterial effect on TRG's
assets and net income.
-19-
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the accompanying
Financial Statements of Taubman Centers, Inc. and the Notes thereto and the
Consolidated Financial Statements of The Taubman Realty Group Limited
Partnership and the Notes thereto.
General Background and Performance Measurement
The Company, through its interest in and as managing general partner of TRG,
participates in TRG's Managed Businesses. TRG's Managed Businesses include: (i)
wholly owned Taubman Shopping Centers, development projects for future regional
shopping centers (Development Projects) and The Taubman Company Limited
Partnership (the Manager), (collectively, the Consolidated Businesses); and (ii)
Taubman Shopping Centers partially owned through joint ventures (Joint
Ventures).
TRG consolidates the wholly owned Taubman Shopping Centers, the Development
Projects, and the Manager. The Joint Ventures are accounted for under the equity
method in TRG's Consolidated Financial Statements.
Certain aspects of the performance of the Managed Businesses are best
understood by measuring their performance as a whole, without regard to TRG's
ownership interest. For example, mall tenant sales and shopping center occupancy
trends fit this category and are so analyzed below. In addition, trends in
certain items of revenue and expense are often best understood in the same
fashion, and the discussions following take this approach when appropriate. When
relevant, these items are also discussed separately with regard to the
Consolidated Businesses and the Joint Ventures.
Seasonality
The regional shopping center industry is seasonal in nature, with mall tenant
sales highest in the fourth quarter due to the Christmas season, and with
lesser, though still significant, sales fluctuations associated with the Easter
holiday and back-to-school events. While minimum rents and recoveries are
generally not subject to seasonal factors, most leases are scheduled to expire
in the first quarter, and the majority of new stores open in the second half of
the year in anticipation of the Christmas selling season. Accordingly, revenues
and occupancy levels are generally highest in the fourth quarter.
The following table summarizes certain quarterly operating data for TRG's
Managed Businesses for 1995 and the first three quarters of 1996 (Bellevue
Center is included in the data below through October 1995):
<TABLE>
1st 2nd 3rd 4th 1st 2nd 3rd
Quarter Quarter Quarter Quarter Total Quarter Quarter Quarter
1995 1995 1995 1995 1995 1996 1996 1996
---------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mall tenant sales $541,627 $587,678 $611,606 $998,482 $2,739,393 $591,677 $617,821 $627,791
Revenues 123,719 124,364 129,187 134,450 511,720 129,764 128,497 129,730
Occupancy
Average Occupancy 87.8% 87.3% 87.7% 89.2% 88.0% 87.8% 87.3% 86.8%
Ending Occupancy 87.0% 87.5% 87.8% 89.4% 89.4% 87.7% 87.3% 86.8%
Leased Space 90.0% 90.3% 90.1% 90.6% 90.6% 89.5% 88.2% 87.6%
</TABLE>
-20-
<PAGE>
Because the seasonality of sales contrasts with the generally fixed nature of
minimum rents and recoveries, mall tenant occupancy costs (the sum of minimum
rents, percentage rents and expense recoveries) relative to sales are
considerably higher in the first three quarters than they are in the fourth
quarter. The following table summarizes occupancy costs, excluding utilities,
for mall tenants as a percentage of sales for 1995 and the first three quarters
of 1996:
<TABLE>
1st 2nd 3rd 4th 1st 2nd 3rd
Quarter Quarter Quarter Quarter Total Quarter Quarter Quarter
1995 1995 1995 1995 1995 1996 1996 1996
-------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Minimum rents 12.8% 11.8% 11.7% 7.5% 10.4% 12.3% 11.7% 11.7%
Percentage rents 0.3 0.3 0.3 0.2 0.3 0.3 0.3 0.3
Expense recoveries 5.3 5.2 4.9 3.1 4.4 5.6 5.0 4.6
---- ---- ---- ---- ---- ---- ---- ----
Mall tenant occupancy costs 18.4% 17.3% 16.9% 10.8% 15.1% 18.2% 17.0% 16.6%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
Rental Rates
As leases have expired in the Taubman Shopping Centers, TRG has generally been
able to rent the available space, either to the existing tenant or a new tenant,
at rental rates that are higher than those of the expired leases. In a period of
increasing sales, rents on new leases will tend to rise as tenants' expectations
of future growth become more optimistic. In periods of slower growth or
declining sales, rents on new leases will grow more slowly or will decline for
the opposite reason. However, Center revenues nevertheless increase as older
leases roll over or are terminated early and replaced with new leases negotiated
at current rental rates that are usually higher than the average rates for
existing leases. The following table contains certain information regarding per
square foot base rent at Taubman Shopping Centers that have been owned and open
for five years:
Store Store Difference
All Closings Openings Between
Mall During During Opening and
Tenants Period Period Closing Rents
------- -------- -------- -------------
Average Average Average Average
Base Annualized Annualized Annualized
Twelve Months Ended Rent Base Rent Base Rent Base Rent
- ------------------- -------- ---------- ---------- ----------
September 30, 1995 (1) $35.70 $34.16 $41.00 $6.84
September 30, 1996 (2) 37.59 32.31 41.13 8.82
(1) Includes 17 centers owned and open prior to January 1, 1990.
(2) Includes 18 centers owned and open prior to January 1, 1991.
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 1996 to the Three
and Nine Months Ended September 30, 1995
Taubman Centers, Inc.
The Company is the managing general partner of TRG and shares in TRG's
financial performance to the extent of its ownership percentage. In July 1996,
the Company's ownership changed from 35.10% to 33.47% as a result of TRG's
acquisition of additional interests in Fairlane Town Center, and the related
issuance of TRG units of partnership interest (see TRG - Acquisitions). As of
September 30, 1996 the Company had 44.1 million shares outstanding, down from
44.2 million at September 30, 1995, as the result of the Company's repurchase of
shares.
-21-
<PAGE>
In the three months ended September 30, 1996, equity in income of TRG
consisted of the Company's $7.1 million proportionate share of TRG's income
before extraordinary items, compared to $6.3 million for the same period in
1995, reduced by $1.9 million and $2.1 million for the three months ended
September 30, 1996 and 1995, respectively, representing adjustments arising from
the Company's additional basis in TRG's net assets. Income before extraordinary
items for the three months ended September 30, 1996 was $5.0 million, or $0.11
per share, compared to $4.0 million, or $0.09 per share, for the same period in
1995. The Company recognized extraordinary charges to income of $0.4 million for
the three months ended September 30, 1996, consisting of its share of TRG's
extraordinary charge to income related to the prepayment of debt. Net income for
the three months ended September 30, 1996 was $4.6 million, or $0.10 per share,
compared to $4.0 million, or $0.09 per share for the comparable period in 1995.
In the nine months ended September 30, 1996, equity in income of TRG consisted
of the Company's $20.9 million proportionate share of TRG's income before
extraordinary items, compared to $19.1 million for the same period in 1995.
These amounts were reduced by $5.7 million and $6.2 million for the nine months
ended September 30, 1996 and 1995, respectively, representing adjustments
arising from the Company's additional basis in TRG's net assets. Income before
extraordinary items for the nine months ended September 30, 1996 was $14.7
million, or $0.33 per share, compared to $12.5 million, or $0.28 per share, for
the same period in 1995. The Company recognized extraordinary charges to income
of $0.4 million and $0.8 million for the nine months ended September 30, 1996
and 1995, respectively, consisting of its share of TRG's extraordinary charges
to income related to the prepayment of debt. Net income for the nine months
ended September 30, 1996 was $14.2 million, or $0.32 per share, compared to
$11.7 million, or $0.26 per share for the same period in 1995.
TRG
Occupancy and Mall Tenant Sales
Average occupancy rates in the Taubman Shopping Centers were 86.8% in the
three months ended September 30, 1996 versus 87.7% for the comparable period in
1995. For the nine months ended September 30, 1996, average occupancy was 87.3%
compared to 87.5% for the same period in 1995. Ending occupancy rates for the
Taubman Shopping Centers at September 30, 1996 were 86.8% versus 87.8% at the
same date in 1995. Leased space at September 30, 1996 was 87.6% compared to
90.1% at the same date in 1995. TRG currently expects that occupancy for the
remainder of 1996 will be somewhat less than the previous year's level. However,
TRG expects that average occupancy for the year will be comfortably within TRG's
historic range of average annual occupancy. TRG also expects that it will not
achieve year over year increases in average occupancy before the second half of
1997.
Total sales for Taubman Shopping Center mall tenants increased in the three
months ended September 30, 1996 by 2.6% to $627.8 million from $611.6 million in
the three months ended September 30, 1995. Tenant sales increased 5.5% to $1.84
billion for the nine months ended September 30, 1996 from $1.74 billion in the
comparable period in 1995. Mall tenant sales per square foot increased 5.4% and
7.3% in the three and nine months ended September 30, 1996, over the comparable
periods in 1995. Excluding Bellevue Center (Bellevue) and Paseo Nuevo (see
Acquisitions), the increase in sales was 3.2% and 7.1% for the three and nine
month periods, respectively, and sales per square foot for mall tenants was up
3.2% and 5.1% for the three and nine months ended September 30, 1996.
-22-
<PAGE>
Acquisitions
In June 1996, TRG acquired the Paseo Nuevo shopping center (Paseo), located in
Santa Barbara, California, for $37 million. TRG borrowed under its existing
lines of credit to fund the acquisition. The acquisition is expected to have an
immaterial effect on net income in 1996. The acquisition is also expected to
produce EBITDA in excess of 10% of the acquisition cost in its first twelve
months (EBITDA is defined and described in Liquidity and Capital Resources -
Distributions). See Note 2 to TRG's consolidated financial statements for
further discussion of the acquisition.
In July 1996, TRG completed transactions that resulted in it acquiring the 75%
interest in Fairlane Town Center (Fairlane) previously held by a joint venture
partner. In connection with the transactions, TRG issued to the former joint
venture partner 3,096 units of partnership interest, economically equivalent to
6.1 million shares of TCI common stock, which had a closing price of $10.75 per
share on the day prior to the issuance date. TRG also assumed mortgage debt of
approximately $26 million, representing the former joint venture partner's
beneficial interest in the $34.6 million mortgage encumbering the property. TRG
used unsecured debt to fund the repayment of the 9.73% mortgage and the
prepayment penalty of approximately $1.2 million. In addition, the acquisition
is expected to incrementally add over $11 million to EBITDA over the twelve
months following the acquisition (EBITDA is defined and discussed in Liquidity
and Capital Resources - Distributions). See Note 2 to TRG's consolidated
financial statements for further discussion of the acquisition.
-23-
<PAGE>
Comparison of the Three Months Ended September 30, 1996 to the Three Months
Ended September 30, 1995
The following table sets forth operating results for TRG's Managed Businesses
for the three months ended September 30, 1995 and September 30, 1996, showing
the results of the Consolidated Businesses and Joint Ventures:
<TABLE>
Three Months Ended September 30, 1995 Three Months Ended September 30, 1996
----------------------------------------- -----------------------------------------
TRG TOTAL: TRG TOTAL:
CONSOLIDATED JOINT MANAGED CONSOLIDATED JOINT MANAGED
BUSINESSES VENTURES(1) BUSINESSES BUSINESSES VENTURES(1) BUSINESSES
------------- ------------- ----------- ------------- ------------- -----------
(in millions of dollars) (in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Minimum rents 32.4 41.8 74.2 38.9 37.4 76.3
Percentage rents 1.4 0.9 2.3 1.3 0.9 2.2
Expense recoveries 19.3 26.2 45.5 21.2 21.6 42.8
Other 5.0 2.2 7.2 4.6 3.7 8.3
----- ----- ----- ----- ----- -----
Total revenues 58.1 71.1 129.2 66.1 63.7 129.7
OPERATING COSTS:
Recoverable expenses 16.6 23.4 39.9 18.5 18.9 37.4
Other operating 4.9 3.0 8.0 6.2 2.3 8.6
Management, leasing
and development 0.9 0.9 0.9 0.9
General and
administrative 4.6 4.6 5.1 5.1
Interest expense 17.0 15.6 32.6 18.5 12.7 31.2
Depreciation and
amortization 8.1 6.4 14.5 9.4 6.2 15.6
----- ----- ----- ----- ----- -----
Total operating costs 52.1 48.4 100.5 58.7 40.2 98.8
----- ----- ----- ----- ----- -----
5.9 22.7 28.6 7.4 23.5 30.9
===== ===== ===== =====
Equity in income before
extraordinary items of
Joint Ventures 11.9 13.5
----- -----
Income before
extraordinary items 17.8 20.9
Extraordinary items (1.3)
----- -----
NET INCOME 17.8 19.6
===== =====
SUPPLEMENTAL
INFORMATION (2)
EBITDA contribution 31.0 23.4 54.4 35.3 23.3 58.6
TRG's Beneficial Interest
Expense (17.0) (8.2) (25.2) (18.5) (6.5) (25.0)
Non-real estate
depreciation (0.5) (0.5) (0.5) (0.5)
----- ----- ----- ----- ----- -----
Distributable Cash Flow
contribution 13.5 15.2 28.7 16.3 16.8 33.1
===== ===== ===== ===== ===== =====
(1) Costs are net of intercompany profits.
(2) EBITDA, TRG's Beneficial Interest Expense and Distributable Cash Flow are
defined and discussed in Liquidity and Capital Resources - Distributions.
(3) Amounts in this table may not add due to rounding.
</TABLE>
-24-
<PAGE>
TRG --Consolidated Businesses
Total revenues for the three months ended September 30, 1996 were $66.1
million, an $8.0 million or 13.8% increase over the comparable period in 1995.
Minimum rents increased $6.5 million, of which $4.1 million was caused by the
Fairlane and Paseo acquisitions. The results of Fairlane have been consolidated
in TRG's results subsequent to the acquisition date (prior to that date Fairlane
was accounted for under the equity method as a Joint Venture). Minimum rent also
increased due to the expansions at Short Hills and Meadowood and tenant
rollovers. The increase in expense recoveries was also primarily due to the
Fairlane and Paseo acquisitions.
Total operating costs increased $6.6 million, or 12.7%, to $58.7 million.
Recoverable expenses and other operating costs increased primarily due to
Fairlane and Paseo, offset by decreases in recoverable expenses, bad debt
expense and professional fees at other Centers. Interest expense increased $1.5
million due primarily to an increase in debt levels, including debt used to
finance the acquisition of Paseo and capital expenditures and the assumption of
debt relating to the Fairlane acquisition, and a decrease in capitalized
interest, partially offset by decreased interest rates. The increase in
depreciation and amortization was due primarily to the acquisitions of Fairlane
and Paseo and the expansions at Short Hills and Meadowood.
Joint Ventures
Total revenues for the three months ended September 30, 1996 were $63.7
million, a $7.4 million or 10.4% decrease from the comparable period of 1995, of
which $9.0 million of the decrease was caused by the change in Fairlane from a
Joint Venture to a Consolidated Business and by the November 1995 disposition of
Bellevue, offset by increases at other Centers. Minimum rent decreases due to
Fairlane and Bellevue were offset by increases due to the expansion at Woodfield
and tenant rollovers. Expense recoveries decreased primarily due to Fairlane and
Bellevue. Other income increased $1.5 million due to an increase in lease
cancellation revenue, offset by a decrease in interest income.
Total operating costs decreased by $8.2 million, or 16.9%, to $40.2 million
for the three months ended September 30, 1996, of which a $7.2 million decrease
was due to Fairlane and Bellevue. Recoverable expenses decreased $4.5 million
primarily due to Fairlane and Bellevue and a decrease in utilities expense.
Interest expense decreased $2.9 million due primarily to a decrease in debt
related to Fairlane and Bellevue and an increase in capitalized interest.
Operating costs as presented in the preceding table differ from the amounts
shown in the combined, summarized financial statements (Note 3 to TRG's
financial statements) of the Unconsolidated Joint Ventures by the amount of
intercompany profit.
As a result of the foregoing, income before extraordinary items of the Joint
Ventures increased by $0.8 million, or 3.5%, to $23.5 million. TRG's equity in
income before extraordinary items of the Joint Ventures increased $1.6 million,
or 13.4%, to $13.5 million for the three months ended September 30, 1996.
Net Income
As a result of the foregoing, TRG's income before extraordinary items
increased by $3.1 million, or 17.4%, to $20.9 million for the three months ended
September 30, 1996. In the third quarter of 1996, TRG recognized a $1.3 million
extraordinary charge related to the prepayment of Fairlane's debt. Net income
for the third quarter of 1996 was $19.6 million, compared to $17.8 million for
the third quarter of 1995.
-25-
<PAGE>
Comparison of the Nine Months Ended September 30, 1996 to the Nine Months Ended
September 30, 1995
The following table sets forth operating results for TRG's Managed Businesses
for the nine months ended September 30, 1995 and September 30, 1996, showing the
results of the Consolidated Businesses and Joint Ventures:
<TABLE>
Nine Months Ended September 30, 1995 Nine Months Ended September 30, 1996
----------------------------------------- -----------------------------------------
TRG TOTAL: TRG TOTAL:
CONSOLIDATED JOINT MANAGED CONSOLIDATED JOINT MANAGED
BUSINESSES VENTURES(1) BUSINESSES BUSINESSES VENTURES(1) BUSINESSES
------------- ------------- ----------- ------------- ------------- -----------
(in millions of dollars) (in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Minimum rents 95.6 123.2 218.8 108.4 119.0 227.4
Percentage rents 3.7 2.5 6.2 3.8 2.5 6.2
Expense recoveries 55.2 75.8 131.0 59.5 73.0 132.5
Other 12.7 8.6 21.3 13.9 7.9 21.9
----- ----- ----- ------ ----- -----
Total revenues 167.1 210.2 377.3 185.6 202.4 388.0
OPERATING COSTS:
Recoverable expenses 46.5 66.3 112.7 49.5 62.9 112.4
Other operating 15.3 9.4 24.7 17.8 10.1 28.0
Management, leasing
and development 2.6 2.6 3.3 3.3
General and
administrative 14.9 14.9 15.4 15.4
Interest expense 48.0 44.0 92.0 52.9 40.2 93.0
Depreciation and
amortization 23.9 19.0 42.8 26.1 17.6 43.7
----- ----- ----- ----- ----- -----
Total operating costs 151.2 138.6 289.8 165.0 130.8 295.8
----- ----- ----- ----- ----- -----
15.9 71.6 87.5 20.6 71.6 92.2
===== ===== ===== =====
Equity in income before
extraordinary items of
Joint Ventures 38.6 39.7
----- -----
Income before
extraordinary items 54.5 60.3
Extraordinary items (2.2) (1.3)
----- -----
NET INCOME 52.3 59.0
===== =====
SUPPLEMENTAL
INFORMATION (2)
EBITDA contribution 87.8 71.2 159.0 99.6 69.0 168.6
TRG's Beneficial Interest
Expense (48.0) (22.8) (70.8) (52.9) (20.5) (73.3)
Non-real estate
depreciation (1.6) (1.6) (1.4) (1.4)
----- ----- ----- ----- ----- -----
Distributable Cash Flow
contribution 38.2 48.4 86.7 45.3 48.6 93.9
===== ===== ===== ===== ===== =====
(1) Costs are net of intercompany profits.
(2) EBITDA, TRG's Beneficial Interest Expense and Distributable Cash Flow are
defined and discussed in Liquidity and Capital Resources - Distributions.
(3) Amounts in this table may not add due to rounding.
</TABLE>
-26-
<PAGE>
TRG --Consolidated Businesses
Total revenues for the nine months ended September 30, 1996 were $185.6
million, an $18.5 million or 11.1% increase over the comparable period in 1995.
Minimum rents increased $12.8 million, of which $4.1 million was caused by the
Fairlane and Paseo acquisitions. The results of Fairlane have been consolidated
in TRG's results subsequent to the acquisition date (prior to that date Fairlane
was accounted for under the equity method as a Joint Venture). Minimum rent also
increased due to the expansions at Short Hills and Meadowood and tenant
rollovers. The increase in expense recoveries was also primarily due to the
Fairlane and Paseo acquisitions. The increase in other revenues of $1.2 million
was primarily due to increases in revenue from management, leasing, and
development services, interest income and rental fees on exterior advertising
signs, offset by a decrease in lease cancellation revenue.
Total operating costs increased $13.8 million, or 9.1%, to $165.0 million. The
increase in recoverable expenses for the nine months ended September 30, 1996
was due to Fairlane and Paseo and to increases in maintenance costs and property
taxes, including those related to the expansions at Short Hills. Other operating
expenses increased due to Fairlane and Paseo, an increase in the charge to
operations for development pre-construction reserves and increases in various
other expenses. General and administrative expense in the first nine months of
1996 increased from the comparable period in 1995 due primarily to increases in
compensation, travel, and professional fees in 1996, offset by a decrease
resulting from a $0.8 million charge in the first quarter of 1995 for severance
and termination benefits. Interest expense increased $4.9 million due primarily
to an increase in debt levels, including debt used to finance the acquisition of
Paseo and capital expenditures and the assumption of debt relating to the
Fairlane acquisition, and a decrease in capitalized interest, partially offset
by decreased interest rates. The increase in depreciation and amortization was
due primarily to the acquisitions of Fairlane and Paseo and the expansions at
Short Hills and Meadowood.
Joint Ventures
Total revenues for the nine months ended September 30, 1996 were $202.4
million, a $7.8 million or 3.7% decrease from the comparable period of 1995,
representing a $15.3 million decrease caused by the change in Fairlane from a
Joint Venture to a Consolidated Business and by the November 1995 disposition of
Bellevue, offset by increases at other Centers. Minimum rent decreases due to
Fairlane and Bellevue were offset by increases due to the expansion at Woodfield
and tenant rollovers. Expense recoveries decreased primarily due to Fairlane and
Bellevue, offset by increases at other Centers. Other income decreased due to a
gain on the sale of peripheral land in 1995 and decreased interest income in
1996, offset by an increase in lease cancellation revenue in 1996.
Total operating costs decreased by $7.8 million, or 5.6%, to $130.8 million
for the nine months ended September 30, 1996, representing a $14.2 million
decrease due to Fairlane and Bellevue, offset by increases at other Centers.
Recoverable expenses decreased $3.4 million due to Fairlane and Bellevue and a
decrease in utilities expense, offset by increases in maintenance costs and
property taxes, including those related to the Woodfield expansion. Other
operating costs increased $0.7 million reflecting increases in bad debt expense,
promotion and advertising costs, and a nonrecurring $0.5 million payment to an
anchor at one of the Centers, offset by decreases due to Bellevue and Fairlane.
Interest expense decreased $3.8 million due to a decrease in debt related to
Fairlane and Bellevue and an increase in capitalized interest, partially offset
by increases due to an increase in debt used to finance capital expenditures and
to higher interest rates on certain debt refinanced in 1995. Operating costs as
presented in the preceding table differ from the amounts shown in the combined,
summarized financial statements (Note 3 to TRG's financial statements) of the
Unconsolidated Joint Ventures by the amount of intercompany profit.
-27-
<PAGE>
As a result of the foregoing, income before extraordinary items of the Joint
Ventures of $71.6 million was unchanged from the comparable period in 1995.
TRG's equity in income before extraordinary items of the Joint Ventures
increased $1.1 million, or 2.8%, to $39.7 million for the nine months ended
September 30, 1996.
Net Income
As a result of the foregoing, TRG's income before extraordinary items
increased by $5.8 million, or 10.6%, to $60.3 million for the nine months ended
September 30, 1996. In the third quarter of 1996, TRG recognized a $1.3 million
extraordinary charge related to the prepayment of Fairlane's debt. In the nine
months ended September 30, 1995, TRG recognized $2.2 million in extraordinary
charges related to the prepayment of debt at TRG and at one of its Joint
Ventures. Net income for the nine months ended September 30, 1996 was $59.0
million, compared to $52.3 million for the comparable period in 1995.
Recent and Anticipated Transactions
TRG has entered into an agreement to lease Memorial City shopping center
(Memorial City), a 1.4 million square foot shopping center located in Houston,
Texas. Memorial City is anchored by Sears, Foley's, Montgomery Ward and Mervyn's
and includes 579 thousand square feet of mall GLA. The lease of this
unencumbered property grants TRG the exclusive right to manage, lease and
operate the property beginning in early November 1996. The annual rent is
initially $7 million. TRG has the option to terminate the lease after the third
full lease year by paying $2 million to the lessor. TRG will use this option
period to evaluate the redevelopment opportunities of the center.
If TRG does not exercise its option to terminate the lease at the end of the
third full lease year, the lease continues for another 52 years and provides for
increases in rent every ten years based on 75% of the increase in the Consumer
Price index between 1996 and the then current year. Under the terms of the
lease, TRG has agreed to invest at least $25 million in property expenditures
not recoverable from tenants during the first 10 years of the lease term,
including a minimum investment of $3 million for the first three years.
Memorial City is expected to have an immaterial effect on EBITDA and net
income for the immediate future.
TRG has also entered into an agreement to purchase for cash La Cumbre shopping
center, a 477 thousand square foot center located in Santa Barbara, California.
La Cumbre is anchored by Robinsons-May and Sears, and includes 178 thousand
square feet of mall GLA. The purchase agreement contains a provision prohibiting
disclosure of the purchase price until the closing date. The transaction, which
is expected to close in December 1996, is contingent on obtaining necessary
approvals. The acquisition is expected to have an immaterial effect on TRG's
assets and net income, and to be moderately accretive to Distributable Cash Flow
in TRG's first twelve months of ownership.
-28-
<PAGE>
Liquidity and Capital Resources
Taubman Centers, Inc.
As of September 30, 1996, the Company had a cash balance of $8.5 million, the
source of which was primarily TRG's distributions, and had incurred no
indebtedness. During the first nine months of 1996 and 1995, the Company
received distributions of $30.6 million from TRG. On September 18, 1996, the
Company declared a quarterly dividend of $0.22 per common share payable October
18, 1996 to shareholders of record October 4, 1996. The dividends declared in
each of the first two quarters of 1996 and in each of the first three quarters
of 1995 were also $0.22 per common share.
The Company pays regular quarterly dividends to its shareowners. The Company's
ability to pay dividends is affected by several factors, most importantly, the
receipt of distributions from TRG (see Distributions below). Dividends by the
Company are at the discretion of the Board of Directors and depend on the cash
available to the Company, its financial condition, capital and other
requirements, and such other factors as the Board of Directors deems relevant.
The tax status of total 1996 dividends declared and to be declared, assuming
continuation of current quarterly dividend amounts, is estimated to be
approximately 45% return of capital, and approximately 55% of ordinary income.
This is a forward-looking statement and certain significant factors could cause
the actual results to differ materially, including: 1) the amount of dividends
declared; 2) changes in the Company's share of the anticipated taxable income of
TRG due to the actual results of TRG; 3) changes in the number of the Company's
outstanding shares; 4) property acquisitions or dispositions; 5) financing
transactions, including refinancings of existing debt; and 6) changes in the
Internal Revenue Code or its application.
The Company's Board of Directors has authorized the purchase of up to 750
thousand shares of the Company's common stock in the open market. The stock may
be purchased from time to time as market conditions warrant. In the first nine
months of 1996, the Company purchased 36.8 thousand shares for approximately
$0.3 million. As of September 30, 1996, the Company had purchased a cumulative
total of 491.8 thousand shares of its common stock for approximately $4.7
million. Funding for the purchases was provided by excess cash that otherwise
would have been invested in cash equivalents.
TRG
As of September 30, 1996, TRG had a cash balance of $11.8 million. TRG has
available for general partnership purposes an unsecured revolving credit
facility of $200 million, which expires in May 1998. Borrowings under this
facility at September 30, 1996 were $7 million. TRG also has available an
unsecured bank line of credit of up to $30 million with borrowings of $13
million at September 30, 1996. This line expires in August 1997. TRG also has
available a secured commercial paper facility, supported by a line of credit
facility, of up to $75 million, all of which had been issued at September 30,
1996. Commercial paper is generally sold with a 30 day maturity. The underlying
credit facility is renewable quarterly for a twelve month period.
Proceeds from short term borrowings of $121.3 million provided funding for the
first nine months of 1996 compared to $48.6 million in 1995. The proceeds were
used primarily for the $37 million acquisition in June 1996 of the Paseo Nuevo
shopping center and for the $66.4 million acquisition in July 1996 of the 75%
interest in Fairlane Town Center previously held by TRG's joint venture partner.
Proceeds from the issuance of units of partnership interest to the former joint
venture partner in Fairlane were used to repay short term borrowings.
-29-
<PAGE>
In the third quarter of 1996, TRG issued $154 million of unsecured notes under
its medium-term note program. The notes were used to pay down TRG's floating
rate bank lines bearing interest at approximately LIBOR plus 1.5% as well as to
pay off the $34.6 million, 9.73% mortgage on Fairlane Town Center and the
related prepayment penalty of approximately $1.2 million, leaving the wholly
owned property unencumbered. The issuance included $100 million of notes with a
five year maturity, including $70 million of fixed rate notes at 8% and $30
million of floating rate notes bearing interest at three month LIBOR plus 105
basis points. The remaining $54 million of notes have maturities of two and
three years and bear interest at three month LIBOR plus 77 to 90 basis points.
TRG has issued a total of $287 million medium-term notes since the program's
inception in 1995 under TRG's $500 million shelf registration statement.
In the second quarter of 1995, the net proceeds of issuances totaling $119.4
million under TRG's medium-term note program was used to pay down floating rate
debt under TRG's revolving credit facilities as well as to pay off the $22.6
million mortgage securing a wholly owned Center.
Scheduled principal payments on installment notes were $497 thousand and $370
thousand in the nine months ended September 30, 1995 and 1996, respectively.
At September 30, 1996, TRG's debt (excluding TRG's capital lease obligation)
and its beneficial interest in the debt of its Joint Ventures totaled $1,430.1
million. As shown in the following table there was no unhedged floating rate
debt at September 30, 1996. Interest rates shown do not include amortization of
debt issuance costs and interest rate hedging costs. These items are reported as
interest expense in TRG's results of operations. In the aggregate, these costs
accounted for 0.31% of the effective rate of interest on TRG's beneficial
interest in debt at September 30, 1996. Included in TRG's beneficial interest in
debt at September 30, 1996 is debt used to fund development and expansion costs.
TRG's beneficial interest in assets on which interest is being capitalized
totaled $126.8 million as of September 30, 1996. TRG's beneficial interest in
capitalized interest was $2.3 million and $6.1 million for the three and nine
months ended September 30, 1996, respectively.
-30-
<PAGE>
Beneficial Interest in Debt
------------------------------------------------
Amount Interest LIBOR Frequency LIBOR
(In millions Rate at Cap of Rate at
of dollars) 9/30/96 Rate Resets 9/30/96
------------------------------------------------
Total beneficial interest in
fixed rate debt 1,113.7(1) 7.55%(2)
Floating rate debt hedged
via interest rate caps:
Through December 1996 25.0(3) 5.95 7.50% Monthly 5.44%
Through January 1997 175.0(4) 6.06 (2) 6.00 Monthly 5.44
Through January 1997 12.1 6.65 (2) 9.60 Monthly 5.44
Through January 1998 65.0(5) 6.17 6.50 Monthly 5.44
Through October 1998 39.3 6.19 6.00 Three Months 5.66
-------
Total beneficial interest
in debt 1,430.1
=======
(1)Includes TRG's $100 million floating rate notes due in 1997, which were
swapped to a fixed rate of 6.15% until maturity. The interest rate on the
refinancing of this debt is hedged via an interest rate cap for the period
November 1997 to December 1998 at a three month LIBOR cap rate of 6.5%.
(2)Denotes weighted average interest rate.
(3)This debt is additionally hedged via an interest rate cap for the period
December 1996 to October 2001 at a one month LIBOR cap rate of 8.55%.
(4)$100 million of this debt is additionally hedged via an interest rate cap for
the period January 1997 to January 1998 at a one month LIBOR cap rate of
6.5%.
(5)This debt is additionally hedged via an interest rate cap for the period
February 1998 through July 1998 at a one month LIBOR rate cap of 8.35%.
TRG's loan agreements and indenture contain various restrictive covenants
including limitations on the amount of secured and unsecured debt and minimum
debt service coverage ratios, the latter being the most restrictive. TRG is in
compliance with all of such covenants.
Distributions
A principal factor considered by TRG in deciding upon distributions to
partners is an amount, which TRG defines as Distributable Cash Flow, equal to
EBITDA less TRG's Beneficial Interest Expense and non-real estate depreciation
and amortization. This measure of performance is influenced not only by
operations but also by capital structure. EBITDA is defined as TRG's beneficial
interest in revenues, less operating costs before interest, depreciation and
amortization, meaning TRG's pro rata share of this result for each of the
Managed Businesses, after recording appropriate intercompany eliminations. TRG's
Beneficial Interest Expense is defined as 100% of the interest expense of TRG's
Consolidated Businesses and TRG's pro rata share of the interest expense on the
debt of the Joint Ventures. Funds from Operations is calculated by adding the
Company's beneficial interest in TRG's Distributable Cash Flow to the Company's
other income, less the Company's operating expenses. EBITDA, Distributable Cash
Flow and Funds from Operations do not represent cash flows from operations, as
defined by generally accepted accounting principles, and should not be
considered to be an alternative to net income as an indicator of operating
performance or to cash flows from operations as a measure of liquidity. However,
the National Association of Real Estate Investment Trusts (NAREIT) suggests that
Funds from Operations is a useful supplemental measure of operating performance
for REITs.
-31-
<PAGE>
The following table summarizes TRG's Distributable Cash Flow and the Company's
Funds from Operations for the three months ended September 30, 1995 and 1996:
<TABLE>
Three months ended Three months ended
September 30, 1995 September 30, 1996
---------------------------------- ----------------------------------
TRG TRG
Consolidated Joint Consolidated Joint
Businesses Ventures(1) Total Businesses Ventures(1) Total
---------------------------------- ----------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
TRG's Net Income(2) 17.8 19.6
Extraordinary Items 1.3
Depreciation and Amortization(3) 11.4 12.7
TRG's Beneficial Interest Expense(4) 25.2 25.0
----- -----
EBITDA 31.0 23.4 54.4 35.3 23.3 58.6
TRG's Beneficial Interest Expense(4) (17.0) (8.2) (25.2) (18.5) (6.5) (25.0)
Non-real estate depreciation (0.5) (0.5) (0.5) (0.5)
----- ----- ----- ----- ----- -----
Distributable Cash Flow 13.5 15.2 28.7 16.3 16.8 33.1
===== ===== ===== ===== ===== =====
TCI's share of Distributable Cash Flow 10.1 11.2
Other income/ expense, net (0.1) (0.1)
----- -----
Funds from Operations 9.9 11.0
===== =====
(1) Amounts represent TRG's beneficial interest in the operations of its Joint
Ventures.
(2) Net income for the third quarter of 1995 includes TRG's share of a gain on
a peripheral land sale of $0.3 million. There were no land sales in the
third quarter of 1996.
(3) Amounts represent TRG's and TRG's beneficial interest in the Joint Ventures'
depreciation and amortization. Includes $0.8 million of amortization of mall
tenant allowances in both of the third quarters of 1995 and 1996,
respectively.
(4) Amounts represent TRG's and TRG's beneficial interest in the Joint Ventures'
interest expense.
(5) Amounts may not add due to rounding.
</TABLE>
<PAGE>
The following table summarizes TRG's Distributable Cash Flow and the
Company's Funds from Operations for the nine months ended September 30, 1995 and
1996:
<TABLE>
Nine months ended Nine months ended
September 30, 1995 September 30, 1996
---------------------------------- ----------------------------------
TRG TRG
Consolidated Joint Consolidated Joint
Businesses Ventures(1) Total Businesses Ventures(1) Total
---------------------------------- ----------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
TRG's Net Income(2) 52.3 59.0
Extraordinary Items 2.2 1.3
Depreciation and Amortization(3) 33.7 35.0
TRG's Beneficial Interest Expense(4) 70.8 73.3
----- -----
EBITDA 87.8 71.2 159.0 99.6 69.0 168.6
TRG's Beneficial Interest Expense(4) (48.0) (22.8) (70.8) (52.9) (20.5) (73.3)
Non-real estate depreciation (1.6) (1.6) (1.4) (1.4)
----- ----- ----- ----- ----- -----
Distributable Cash Flow 38.2 48.4 86.7 45.3 48.6 93.9
===== ===== ===== ===== ===== =====
TCI's share of Distributable Cash Flow 30.4 32.5
Other income/ expense, net (0.5) (0.5)
----- -----
Funds from Operations 30.0 32.0
===== =====
(1) Amounts represent TRG's beneficial interest in the operations of its Joint
Ventures.
(2) Net income includes TRG's share of gains on peripheral land sales of $1.1
million and $0.3 million for the nine months ended September 30, 1995 and
1996, respectively.
(3) Amounts represent TRG's and TRG's beneficial interest in the Joint Ventures'
depreciation and amortization. Includes $2.3 million and $2.4 million of
amortization of mall tenant allowances for the nine months ended September
30, 1995 and 1996, respectively.
(4) Amounts represent TRG's and TRG's beneficial interest in the Joint Ventures'
interest expense.
(5) Amounts may not add due to rounding.
</TABLE>
-32-
<PAGE>
In March 1995, NAREIT issued a clarification of the definition of Funds from
Operations. Beginning in 1996, the Company modified its calculation of Funds
from Operations and TRG's calculation of Distributable Cash Flow to be
consistent with NAREIT's clarified definition. As a result, TRG adjusted the
depreciation and amortization amount added back to net income to include only
depreciation and amortization of assets uniquely significant to the real estate
industry. Distributable Cash Flow and Funds from Operations for the first three
quarters of 1995 have been restated in the tables above to reflect the clarified
definition. The following table presents a restatement of TRG's Distributable
Cash Flow and the Company's Funds from Operations for the year and each quarter
of 1995.
<TABLE>
Three Months Ended Year Ended
------------------------------------------------------ ------------
3/31/95 6/30/95 9/30/95 12/31/95 12/31/95
----------- ----------- ----------- ------------ ------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C>
Distributable Cash Flow as reported 30.8 28.2 29.2 31.6 119.9
Non-real estate depreciation (0.6) (0.5) (0.5) (0.5) (2.0)
---- ---- ---- ---- -----
Distributable Cash Flow as restated 30.2 27.7 28.7 31.2 117.8
==== ==== ==== ==== =====
Funds from Operations as reported 10.7 9.7 10.1 11.0 41.5
Funds from Operations as restated 10.5 9.6 9.9 10.8 40.8
(1) Amounts may not add due to rounding.
</TABLE>
During the third quarter of 1996, EBITDA and Distributable Cash Flow were
$58.6 million and $33.1 million, compared to $54.4 million and $28.7 million, as
restated, for the same period in 1995. TRG distributed $30.0 million and $29.1
million to its partners in the three months ended September 30, 1996 and 1995,
respectively. The Company's Funds from Operations for 1996 was $11.0 million,
compared to $9.9 million, as restated, for the same period in 1995.
During the first nine months of 1996, EBITDA and Distributable Cash Flow were
$168.6 million and $93.9 million, compared to $159.0 million and $86.7 million,
as restated, for the same period in 1995. TRG distributed $88.1 million and
$87.2 million to its partners in the nine months ended September 30, 1996 and
1995, respectively. The Company's Funds from Operations for 1996 was $32.0
million, compared to $30.0 million, as restated, for the same period in 1995.
The Partnership Committee of TRG makes an annual determination of appropriate
distributions for each year. The determination is based on anticipated
Distributable Cash Flow, as well as financing considerations and such other
factors as the Partnership Committee considers appropriate. Further, the
Partnership Committee has decided that the growth in distributions will be less
than the growth in Distributable Cash Flow for the immediate future.
Except under unusual circumstances, TRG's practice is to distribute equal
monthly installments of the determined amount of distributions throughout the
year. Due to seasonality and the fact that cash available to TRG for
distributions may be more or less than net cash provided from operating
activities plus distributions from Joint Ventures during the year, TRG may
borrow from unused credit facilities (described in Liquidity and Capital
Resources -- TRG above) to enable it to distribute the amount decided upon by
the Partnership Committee.
Distributions by each Joint Venture may be made only in accordance with the
terms of its partnership agreement. TRG acts as the managing partner in each
case and, in general, has the right to determine the amount of cash available
for distribution from the Joint Venture. In general, the provisions of these
agreements require the distribution of all available cash (as defined in each
partnership agreement), but most do not allow borrowing to finance distributions
without approval of the Joint Venture Partner.
-33-
<PAGE>
As a result, distribution policies of many Joint Ventures will not parallel
those of TRG. While TRG may not, therefore, receive as much in distributions
from each Joint Venture as it intends to distribute with respect to that Joint
Venture, the Company does not believe this will impede TRG's intended
distribution policy because of TRG's overall access to liquid resources,
including borrowing capacity.
Any inability of TRG or its Joint Ventures to secure financing as required to
fund maturing debts, capital expenditures and changes in working capital,
including development activities and expansions, may require the utilization of
cash to satisfy such obligations, thereby possibly reducing distributions to
partners of TRG and funds available to the Company for the payment of dividends.
In addition, if the GM Trusts exercise their rights under the Cash Tender
Agreement (see below), TRG will be required to pay the GM Trusts $10.9 million
and may borrow to finance such expenditures.
Capital Spending
Capital spending for routine maintenance of the Taubman Shopping Centers is
generally recovered from tenants. Excluding acquisitions, 1996 planned capital
spending by the Managed Businesses not recovered from tenants is summarized in
the following table:
1996
---------------------------------------------
TRG's Share
Consolidated Joint of
Businesses Ventures(1) Joint Ventures(1)
---------------------------------------------
(in millions of dollars)
Development and expansion 14.1(2) 105.9(3) 58.4
Mall tenant allowances 2.5 3.6 1.8
Pre-construction development
and other 9.0(4) 2.3 1.2
---- ----- ----
Total 25.6 111.8 61.4
==== ===== ====
(1) Costs are net of intercompany profits.
(2) Includes costs related to expansion projects at Marley, Meadowood, and
Stoneridge. Also includes costs related to leasehold improvements at The
Mall at Tuttle Crossing; excludes capital lease assets.
(3) Includes costs related to expansion projects at Westfarms and Cherry Creek.
Also includes construction costs for MacArthur Center and Arizona Mills.
(4) Includes costs to explore the possibilities of building an enclosed 1.7
million square foot value super-regional mall in Auburn Hills, Michigan.
New Lord & Taylor stores, formerly Woodward & Lothrop stores, opened in August
1996 at Fair Oaks and Lakeforest. In addition, new Sears stores are scheduled to
open in November 1996 at Marley Station and Stoneridge. An expansion at
Westfarms, which is expected to open in the fall of 1997, will add approximately
135,000 square feet of mall GLA and Nordstrom as an anchor. An expansion at
Cherry Creek will include a newly constructed Lord & Taylor store, which is
expected to open in the fall of 1997, and the addition of 120,000 square feet of
mall GLA, which is expected to open in the fall of 1998.
Additionally, a project is now under construction to utilize for new mall
tenants 30,000 square feet of the space vacated when Saks Fifth Avenue moved to
the I. Magnin site at Biltmore. The new stores are presently expected to open
beginning in the spring of 1997.
-34-
<PAGE>
In 1995, construction began on The Mall at Tuttle Crossing, a 980,000 square
foot Center in northwest Columbus, Ohio, which will be anchored by Marshall
Field's, Lazarus, JCPenney and Sears. TRG has entered into an agreement to lease
the land and mall buildings from Tuttle Holding Co., which owns the land on
which the Center is being built. TRG will make ninety annual minimum lease
payments of $4.4 million beginning when the Center opens in July 1997.
Substantially all of each payment in the first ten years of operation will be
recognized as interest expense. TRG will also pay additional rent based on
achieved levels of net operating income, a measure of operating performance
before rent payments, as specified in the agreement (NOI); 100% of the portion
of NOI which is over $11.6 million but less than or equal to $14.4 million, 30%
of the portion of NOI between $14.4 million and $18.3 million, and 50% of the
portion of NOI over $18.3 million. TRG estimates this additional rent, which
will be recognized as other operating expense, will approximate $2 million to $3
million annually in the three years subsequent to the opening of the Center.
MacArthur Center, a new Center being developed by TRG in Norfolk, Virginia, is
expected to open in the spring of 1999. The Center is expected to total 1.1
million square feet and will initially be anchored by Nordstrom and Dillard's.
This Center will be owned by a joint venture in which TRG has a 70% interest.
TRG has entered into agreements with The Mills Corporation, Simon Property
Group and Grossman Company Properties to develop, own and operate Arizona Mills,
an enclosed value super-regional mall in Tempe, Arizona, which broke ground in
August 1996. TRG has a 35% ownership interest in the venture. The 1.2 million
square foot value-oriented mall is expected to open in the fall of 1997.
TRG's share of costs for development and expansion projects scheduled to be
completed in 1997 through 1999 is anticipated to be as much as $139 million in
1997 and $51 million in 1998.
In April 1996, Federated Department Stores, Inc. closed the Emporium store at
Hilltop. TRG is considering alternatives for the vacant anchor space.
Negotiations are in progress which may result in an amount of TRG capital
spending at Hilltop which cannot be presently determined.
TRG's estimates regarding capital expenditures presented above are
forward-looking statements and certain significant factors could cause the
actual results to differ materially, including but not limited to: 1) actual
results of negotiations with anchors, tenants and contractors; 2) changes in the
scope of projects; 3) cost overruns; 4) timing of expenditures; and 5) actual
time to complete projects.
Capital Resources
TRG believes that its net cash provided by operating activities, together with
distributions from the Joint Ventures, the unutilized portion of its credit
facilities and its ability to generate cash from issuance of medium-term notes
under TRG's shelf registration statement, other securities offerings or mortgage
financings, assure adequate liquidity to conduct its operations in accordance
with its distribution and financing policies.
The financing of TRG is intended to maintain an investment grade credit rating
for TRG and (i) minimize, to the extent practical, secured indebtedness
encumbering TRG's wholly owned properties, (ii) mitigate TRG's exposure to
increases in floating interest rates, (iii) assure that the amount of debt
maturing in any future year will not pose a significant refinancing risk, (iv)
provide for additional capital and liquidity resources, and (v) maintain average
maturities for TRG's debt obligations of between five and ten years. TRG's
intent to continue to minimize secured indebtedness is dependent on actions
taken by credit rating agencies and market conditions.
-35-
<PAGE>
TRG expects to finance its capital requirements, including development,
expansions and working capital, with available cash, borrowings under its lines
of credit and cash from future securities offerings under its medium-term note
program, other securities offerings, or mortgage financings. TRG's acquisition
activities are discretionary in nature, and will only be undertaken by TRG after
procuring adequate financing on terms that are consistent with TRG's financing
policies. TRG's Joint Ventures expect to finance development and expansion
spending with secured debt to the extent it is available.
TRG's borrowings are not and will not be recourse to the Company without its
consent.
Cash Tender Agreement
A. Alfred Taubman and the GM Trusts each have the annual right to tender to
the Company Units of Partnership Interest in TRG (provided that the aggregate
value is at least $50 million) and cause the Company to purchase the tendered
interests at a purchase price based on a market valuation of the Company on the
trading date immediately preceding the date of the tender (the Cash Tender
Agreement). The Company will have the option to pay for these interests from
available cash, borrowed funds, or from the proceeds of an offering of the
Company's common stock. Generally, the Company expects to finance these
purchases through the sale of new shares of its stock. The tendering partners
will bear all market risk if the market price at closing is less than the
purchase price. Any proceeds of the offering in excess of the purchase price
will be for the sole benefit of the Company. At A. Alfred Taubman's election,
his family, and Robert C. Larson and his family may participate in tenders. The
GM Trusts will be entitled to receive from TRG an amount (not to exceed $10.9
million in the aggregate over the term of the Partnership) equal to 5.5% of the
amounts that the Company pays to the GM Trusts under the Cash Tender Agreement.
Based on a market value at December 31, 1995 and September 30, 1996 of $10.00
and $11.125 per common share, the aggregate value of interests in TRG that may
be tendered under the Cash Tender Agreement was approximately $743 million and
$808 million, respectively. Purchase of these interests at September 30, 1996
would have resulted in the Company owning an additional 56% interest in TRG.
Although certain partners in TRG have pledged, and other partners may pledge,
their Units of Partnership Interest, the Company is not aware of any present
intention of any partner to sell its interest in TRG.
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<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
3 -- By-Laws, as amended.
11 -- Statement Re: Computation of Per Share Earnings.
12 -- Statement Re: Computation of Ratio of Earnings to Fixed
Charges.
27 -- Financial Data Schedule.
b) Current Reports on Form 8-K.
The Company filed a current report on Form 8-K dated July 19, 1996,
(the "8-K"), to report the acquisition of interests in Fairlane Town
Center ("Fairlane"), a regional shopping center located in Dearborn,
Michigan. The 8-K included the following financial statements and
pro forma information regarding the acquisition of Fairlane:
Independent Auditors' Report.
Fairlane Town Center, Historical Summaries of Revenues and Direct
Operating Expenses for each of the Three Years in the Period Ended
December 31, 1995.
Taubman Centers, Inc., Pro Forma Condensed Statement of Operations,
Year Ended December 31, 1995, and the Three Months Ended March 31,
1996 (unaudited).
The Taubman Realty Group Limited Partnership, Pro Forma Condensed
Consolidated Balance Sheet, March 31, 1996 (unaudited).
The Taubman Realty Group Limited Partnership, Pro Forma Condensed
Consolidated Statement of Operations, Year Ended December 31, 1995
(unaudited).
The Taubman Realty Group Limited Partnership, Pro Forma Condensed
Consolidated Statement of Operations, Three Months Ended March 31,
1996 (unaudited).
The Taubman Realty Group Limited Partnership, Statement of Estimated
Taxable Operating Results of Fairlane Town Center and Estimated Cash
to be Made Available by Operations of Fairlane Town Center for a
Twelve-Month Period Ended March 31, 1996 (unaudited).
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TAUBMAN CENTERS, INC.
Date: November 14, 1996 By: /s/ Bernard Winograd
--------------------
Bernard Winograd
Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number
3 -- By-Laws, as amended.
11 -- Statement Re: Computation of Per Share Earnings.
12 -- Statement Re: Computation of Ratio of Earnings to Fixed Charges.
27 -- Financial Data Schedule.
BY-LAWS
OF
TAUBMAN CENTERS, INC.
As amended through September 18, 1996
MWK-BH\109360.1-A
<PAGE>
INDEX
TO
BY-LAWS
OF
TAUBMAN CENTERS, INC.
Page
Article I - MEETINGS OF SHAREHOLDERS
Section 1.01 Place of Meetings......................................1
Section 1.02 Annual Meeting.........................................1
Section 1.03 Special Meetings.......................................1
Section 1.04 Notice of Meetings.....................................1
Section 1.05 Waiver of Notice.......................................2
Section 1.06 Inspectors of Election.................................2
Section 1.07 Quorum and Adjournment.................................2
Section 1.08 Vote of Shareholders...................................2
Section 1.09 Proxies................................................3
Section 1.10 Consents...............................................3
Section 1.11 Organization of Shareholders' Meetings.................3
Article II - DETERMINATION OF VOTING, DIVIDEND, AND OTHER RIGHTS.............3
Article III - DIRECTORS
Section 3.01 General Powers.........................................4
Section 3.02 Number, Qualifications, and Term of Office.............4
Section 3.03 Place of Meetings......................................4
Section 3.04 Annual Meeting.........................................4
Section 3.05 Regular and Special Meetings...........................5
Section 3.06 Quorum and Manner of Action............................5
Section 3.07 Compensation...........................................6
Section 3.08 Removal of Directors...................................6
Section 3.09 Resignations...........................................6
Section 3.10 Vacancies..............................................6
Section 3.11 Organization of Board Meeting..........................7
Article IV - COMMITTEES
Section 4.01 Committees.............................................7
Section 4.02 Regular Meetings.......................................7
Section 4.03 Special Meetings.......................................7
Section 4.04 Quorum and Manner of Action............................7
Section 4.05 Records................................................7
Section 4.06 Vacancies..............................................8
Article V - OFFICERS
Section 5.01 Officers...............................................8
Section 5.02 Term of Office and Resignation.........................8
Section 5.03 Removal of Elected Officers............................8
MWK-BH\109360.1-A
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Section 5.04 Vacancies..............................................8
Section 5.05 Compensation...........................................8
Section 5.06 The Chairman of the Board..............................9
Section 5.07 The Vice Chairman of the Board.........................9
Section 5.08 The President..........................................9
Section 5.09 The Chief Financial Officer............................9
Section 5.10 The Vice President.....................................9
Section 5.11 The Secretary..........................................9
Section 5.12 The Treasurer..........................................9
Article VI - INDEMNIFICATION
Section 6.01 Indemnification.......................................10
Section 6.02 Advancement of Expenses...............................10
Section 6.03 Indemnification: Insurance...........................10
Section 6.04 Indemnification: Constituent Corporations............10
Article VII - SHARE CERTIFICATES
Section 7.01 Form; Signature.......................................11
Section 7.02 Transfer Agents and Registrars........................11
Section 7.03 Transfers of Shares...................................11
Section 7.04 Registered Shareholders...............................11
Section 7.05 Lost Certificates.....................................11
Article VIII - MISCELLANEOUS
Section 8.01 Fiscal Year...........................................12
Section 8.02 Signatures on Negotiable Instruments..................12
Section 8.03 Dividends.............................................12
Section 8.04 Reserves..............................................12
Section 8.05 Seal..................................................12
Section 8.06 Corporation Offices...................................12
Article IX - AMENDMENTS
Section 9.01 Power to Amend........................................12
As amended through September 18, 1996
MWK-BH\109360.1-A
(ii)
<PAGE>
BY-LAWS
OF
TAUBMAN CENTERS, INC.
Article I
MEETINGS OF SHAREHOLDERS
Section 1.01. PLACE OF MEETINGS.
Annual and special meetings of the shareholders shall be held at such place
within or outside the State of Michigan as may be fixed from time to time by the
board of directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 1.02. ANNUAL MEETING.
The annual meeting of the shareholders for the election of directors and
for the transaction of such other business as may properly come before the
meeting shall be held on such date as the Chairman of the Board, or the Vice
Chairman of the Board or the President or the board of directors shall
designate, and at such hour as may be named, in the notice of said meeting. If
the election of directors shall not be held on the date so designated for any
annual meeting or at any adjournment of such meeting, the board of directors
shall cause the election to be held at a special meeting as soon thereafter as
it conveniently may be held.
Section 1.03. SPECIAL MEETINGS.
A special meeting of the shareholders may be called at any time and for any
purpose or purposes by the Chairman of the Board, the Vice Chairman of the
Board, the President, a Vice President or any two directors, or by a shareholder
or shareholders holding of record at least twenty-five percent (25%) of the
outstanding capital stock of the corporation entitled to vote at such meeting.
Section 1.04. NOTICE OF MEETINGS.
A written notice of the place, date, hour, and purposes of each meeting,
whether annual or special, and any adjournment thereof, shall be given
personally or by mail to each shareholder entitled to vote thereat at least ten
(l0) but not more than sixty (60) days prior to the meeting unless a shorter
time is provided by the Michigan Business Corporation Act and is fixed by the
board of directors. The notice of any special meeting shall also state by or at
whose direction it is being issued. If, at any meeting, whether annual or
special, action is proposed to be taken which would, if taken, entitle
shareholders fulfilling requirements of law to receive payment for their shares,
the notice of such meeting shall include a statement of that purpose and to that
effect. If any notice, as provided in this Section 1.04 is mailed, it shall be
directed to the shareholder in a postage prepaid envelope at his address as it
appears on the record of shareholders, or, if he shall have filed with the
Secretary a written request that notices to him be mailed to some other address,
then directed to him at such other address.
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<PAGE>
Section 1.05. WAIVER OF NOTICE.
Notice of meeting need not be given to any shareholder who submits a waiver
of notice, signed in person or by proxy, whether before, at or after the
meeting. The attendance of any shareholder at a meeting, in person or by proxy,
shall constitute a waiver of notice by him except when the shareholder attends
such meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
Section 1.06. INSPECTORS OF ELECTION.
The board of directors, or any officer or officers duly authorized by the
board of directors, in advance of any meeting of shareholders, may appoint one
or more inspectors to act at the meeting or any adjournment thereof. If
inspectors are not so appointed, the person presiding at the meeting may, and on
the request of any shareholder entitled to vote thereat shall, appoint one or
more inspectors. In case any person appointed fails to appear or act, the
vacancy may be filled by appointment made by the board of directors in advance
of the meeting or at the meeting by the chairman of the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors shall
determine the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall receive votes, ballots, or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots, or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all shareholders. On request of the person presiding at the meeting or any
shareholder entitled to vote thereat, the inspectors shall make a report in
writing of any facts or matters found or determined by them and execute a
certificate with respect thereto.
Section 1.07. QUORUM AND ADJOURNMENT.
At all meetings of shareholders, except as otherwise provided by statute or
the articles of incorporation, the holders of a majority of the shares entitled
to vote thereat, present in person or by proxy, shall be necessary and
sufficient, to constitute a quorum for the transaction of business. The
shareholders present in person or by proxy at any of such meetings at which a
quorum is initially present may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. By a vote of the majority of shareholders present, in person or by
proxy, whether or not a quorum is present, the meeting may, from time to time,
be adjourned, by resolution to another place and time, for a period not
exceeding thirty (30) days in any one case. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally called.
Section 1.08. VOTE OF SHAREHOLDERS.
Each shareholder having the right to vote shall be entitled at every
meeting of shareholders to one (1) vote for every share having voting power
standing in his name on the record date of shareholders fixed by the board of
directors pursuant to Article II of these by-laws. All elections of directors
shall be by a plurality vote of the shareholders entitled to vote at such
meeting of shareholders. Whenever any corporate action is to be taken by vote,
other than the election of directors, it shall, except as otherwise required by
statute, by the articles of incorporation, or by these by-laws, be authorized by
the affirmative vote of holders of two-thirds (2/3rds) of the outstanding common
stock. Directors shall be elected if approved by a plurality of the votes cast
at an election.
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<PAGE>
Section 1.09. PROXIES.
Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent without a meeting may authorize another person or
persons to act for him by proxy. Every proxy must be in writing and signed by
the shareholder or his attorney-in-fact. No proxy shall be valid after the
expiration of three (3) years from the date thereof unless otherwise provided in
the proxy.
Section 1.10. CONSENTS.
Any action required or permitted by the Michigan Business Corporation Act
to be taken at an annual or special meeting of shareholders may be taken without
a meeting, without prior notice, and without a vote, if consents in writing,
setting forth the action so taken, are signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take the action at a meeting at which all shares entitled to
vote on the action were present and voted. The written consents shall bear the
date of signature of each shareholder who signs the consent. No written consents
shall be effective to take the corporate action referred to unless, within 60
days after the record date for determining shareholders entitled to express
consent to or to dissent from a proposal without a meeting, written consents
signed by shareholders holding a sufficient number of shares to take the action
are delivered to the corporation. Delivery shall be to the corporation's
registered office, its principal place of business, or an officer or agent of
the corporation having custody of the minutes of the proceedings of its
shareholders. Delivery made to the corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to shareholders who have not consented in
writing.
Section 1.11. ORGANIZATION OF SHAREHOLDERS' MEETINGS.
At every meeting of the shareholders, the Chairman of the Board, or in his
absence, the Vice Chairman of the Board, or in his absence, the President, or in
his absence, a Vice President, or in the absence of the Chairman of the Board,
the President and Vice President, a chairman chosen by a majority in interest of
the shareholders of the corporation present in person or by proxy and entitled
to vote, shall act as chairman; and the Secretary, or in his absence any person
appointed by the chairman, shall act as secretary.
Article II
DETERMINATION OF VOTING,
DIVIDEND, AND OTHER RIGHTS
For the purpose of determining the shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or to express
consent to or dissent from any proposal without a meeting, or for the purpose of
determining shareholders entitled to receive payment of any dividend or the
allotment of any rights, or the date when any change or conversion or exchange
of capital stock shall go into effect, or for the purpose of any other action,
the board of directors may fix, in advance, a date as the record date for any
such determination of shareholders. Such date shall not be more than sixty (60)
nor less than ten (10) days before the date of any such meeting, nor more than
thirty (30) days prior to any other action. If a record date is so fixed, such
shareholders and only such shareholders as shall be shareholders of record on
that date so fixed shall be entitled to notice of, and to vote at, such meeting
and any adjournment thereof, or to express such consent or dissent, or to
receive payment of such dividend or such allotment of rights, or otherwise to be
recognized as shareholders for the purpose of any other action, notwithstanding
any transfer of any shares on the books of the corporation after any such record
date so fixed.
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<PAGE>
Article III
DIRECTORS
Section 3.01. GENERAL POWERS.
The business and all the powers of the corporation, and the stock,
property, and affairs of the corporation, except as otherwise provided by the
articles of incorporation, the by-laws, or by statute, shall be managed by the
board of directors.
Section 3.02. NUMBER, QUALIFICATIONS, AND TERM OF OFFICE. [As amended 9/18/96]
Except as otherwise required by the next sentence of this Section 3.02 of
these by-laws, the board shall consist of eleven (11) directors. To the extent
necessary in order to satisfy the requirements of the articles of incorporation
with respect to the number of directors that must be Independent Directors (as
that term is defined in Section 3.06 of these by-laws), the number of directors
may be increased by resolution of the board of directors to that number (and not
more than that number) which shall be equal to the then existing number of
directors plus that number of additional Independent Directors that is then
necessary in order to satisfy the requirements of the articles of incorporation.
Except as otherwise provided by statute, the articles of incorporation, or these
by-laws, the directors, who need not be shareholders, shall be divided into
three (3) classes, initially two (2) of which shall consist of three (3)
directors and one (1) of which shall consist of four (4) directors. If the
number of directors is increased, the three (3) classes of directors shall each
be as nearly equal in number as is possible. The initial term of office of those
directors in the first (1st) class shall expire at the annual meeting of the
shareholders next ending and upon their successor being duly elected and
qualified, or, if earlier, until death, resignation or removal. The initial term
of office of those directors in the second (2nd) class shall expire one year
thereafter. The initial term of office of those directors in the third (3rd)
class shall expire two years thereafter. The classification of the initial
directors and any, except as otherwise required by this Section 3.02 of these
by-laws, director elected by reason of an increase in the size of the board of
directors shall be determined by resolution of the board of directors. At each
annual meeting of shareholders held after such initial classification and
election, directors shall be chosen for a full three (3) year term and until
their successors shall be duly elected and qualified, or, if earlier, until
death, resignation or removal.
Section 3.03. PLACE OF MEETINGS.
Meetings of the board of directors, annual or special, shall be held at any
place within or outside the State of Michigan as may from time to time be
determined by the board of directors.
Section 3.04. ANNUAL MEETING.
The board of directors shall meet as soon as practicable after each annual
election of directors for the purpose of organization, election of officers, and
the transaction of other business, on the same day and at the same place at
which the shareholders' meeting is held. Notice of such meeting need not be
given. Such meeting may be held at such other time and place as shall be
specified in a notice to be given as hereinafter provided for special meetings
of the board of directors, or according to consent and waiver of notice thereof
signed by all directors.
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Section 3.05. REGULAR AND SPECIAL MEETINGS.
Regular (i.e., previously scheduled by action of the board of directors)
meetings of the board of directors may be held with or without notice. Special
meetings of the board of directors shall be held whenever called by any
director. Notice of any special meeting, and any adjournment thereof, stating
the place, date, hour and purpose of the meeting, shall be mailed to each
director, addressed to him at his residence or usual place of business, or shall
be sent to him at such place by mail, telegraph, cable, fax or radio, or be
delivered personally or by telephone, not later than forty-eight (48) hours
prior to the day on which the meeting is to be held. Notice of any meeting of
the board of directors need not be given to any director who submits a signed
waiver of notice before or after the meeting, or who attends the meeting without
protesting, either prior to or at the commencement of such meeting, the lack of
notice to him. Unless limited by statute, the articles of incorporation, these
by-laws, or the terms of the notice thereof, any and all business may be
transacted at any special meeting.
Section 3.06. QUORUM AND MANNER OF ACTION.
A majority of the directors in office at the time of any annual or special
meeting of the board of directors, present in person, shall be necessary and
sufficient to constitute a quorum for the transaction of business. Whether or
not specified in any other Section of these by-laws, the affirmative vote of a
majority of the Independent Directors (as hereinafter defined) and a majority of
the entire board of directors shall be required for the approval of all actions
to be taken by the board of directors, except as otherwise required by statute
or the articles of incorporation and except for adjournment; provided, however,
the corporation may not appoint to the Partnership Committee (as hereinafter
defined) as a corporation appointee an individual that does not satisfy the
definition of Independent Director in one or more respects without the
affirmative vote of all of the Independent Directors then in office. A majority
of the directors present, whether or not a quorum is present, may by resolution,
from time to time, adjourn any meeting to another place and time for a period
not exceeding thirty (30) days in any one case. If all of the directors shall
severally and/or collectively consent in writing to any act taken or to be taken
by the corporation, such action shall be valid corporate action as though it had
been authorized at a meeting of the board of directors. For purposes of this
Section 3.06 of these by-laws, "Independent Directors" shall mean an individual
who is neither one of the following named persons nor an employee, beneficiary,
principal, director, officer or agent of, or a general partner in, or limited
partner (owning in excess of five percent (5%) of the beneficial interest) or
shareholder (owning in excess of five percent (5%) of the beneficial interest)
in, any such named person: (i) for so long as TG Limited Partnership, a Delaware
limited partnership, has the right to appoint one or more Partnership Committee
(as hereinafter defined) members, A. Alfred Taubman and any affiliate of A.
Alfred Taubman or any member of his immediate family, (ii) for so long as
Taub-Co. Management, Inc., a Michigan corporation (formerly The Taubman Company,
Inc. ("T-Co.")) has the right to appoint one or more Partnership Committee
members, T-Co or an affiliate of T-Co, (iii) for so long as a Taubman Transferee
(as hereinafter defined) has the right to appoint one or more Partnership
Committee members, a Taubman Transferee, or an affiliate of such Taubman
Transferee, (iv) for so long as the General Motors Hourly-Rate Employes Pension
Trust or the General Motors Salaried Employes Pension Trust ("GMPTS") has the
right to appoint one or more Partnership Committee members, GMPTS, General
Motors Corporation, or an affiliate of GMPTS or of General Motors Corporation,
and (v) for so long as a GMPTS Transferee (as hereinafter defined) has the right
to appoint one or more Partnership Committee members, a GMPTS Transferee or an
affiliate of such GMPTS Transferee. "Partnership Committee" means the committee
of The Taubman Realty Group Limited Partnership, a Delaware limited Partnership
("TRG"), that has the power to approve all actions, decisions, determinations,
designations, delegations, directions, appointments, consents, approvals,
selections, and the like to be taken, made or given, with respect to TRG, its
business and its properties as well as the management of the affairs of TRG.
"Taubman Transferee" means a single person that acquires, pursuant to Section
8.1(b) or Section 8.3(a) of The Amended and Restated
MWK-BH\109360.1-A
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Agreement of Limited Partnership of the Taubman Realty Group Limited Partnership
(as the same may be amended, the "Partnership Agreement") or upon the
foreclosure or like action in respect of a pledge of a partnership interest in
TRG, the then (i.e., at the time of such acquisition) entire partnership
interest (excluding, in the case of an acquisition pursuant to Section 8.3(a) of
the Partnership Agreement or pursuant to a foreclosure or like action in respect
of a pledge of a partnership interest in TRG, the ability of such person to act
as a substitute partner) of A. Alfred Taubman, and any affiliate of A. Alfred
Taubman or any member of his immediate family, from one or more such persons or
from any Taubman Transferee provided that the percentage interest in TRG being
transferred exceeds seven and 7/10ths percent (7.7%). "GMPTS Transferee" means a
single Person that acquires, pursuant to Section 8.1(b) or Section 8.3(a) of the
Partnership Agreement, or upon the foreclosure or like action in respect of a
pledge of a partnership interest in TRG, the then (i.e., at the time of such
acquisition) entire such partnership interest (excluding, in the case of an
acquisition pursuant to Section 8.3(a) of the Partnership Agreement or pursuant
to a foreclosure or like action in respect of a pledge of partnership interests
in TRG, the ability of such person to act as a substitute partner) of GMPTS or
of any GMPTS Transferee; provided that the percentage interest in TRG being
transferred exceeds seven and 7/10ths percent (7.7%).
Section 3.07. COMPENSATION.
Each Independent Director shall be paid such directors' fees and fixed sums
and expenses for attendance at each annual, regular or special meeting of the
board of directors or committees of the board of directors as the board of
directors by resolution so determines; provided, however, that nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 3.08. REMOVAL OF DIRECTORS.
By a vote of two-thirds of all shares of stock outstanding and entitled to
vote, one or more or all of the directors may be removed from office for or
without cause.
Section 3.09. RESIGNATIONS.
Any director may resign at any time by giving written notice to the board
of directors, the Chairman of the Board, the Vice Chairman, the President, or
the Secretary of the corporation. Such resignation shall take effect at the time
specified therein; and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 3.10. VACANCIES.
Any vacancies occurring on the board of directors by reason of death,
resignation, retirement, disqualification, removal, or an increase in the size
of the board of directors shall be temporarily filled by the board of directors
then in office (including a majority of the Independent Directors), even though
less than a quorum, provided that the membership requirements of Article VI of
the Corporation's Restated and Amended Articles of Incorporation and Section
3.02 of these By-Laws are at all times satisfied. Except as provided in the next
sentence, unless a successor director is elected by a vote of the shareholders,
any director elected by the board of directors to fill a vacancy temporarily
shall hold office for the unexpired portion of the term of his predecessor. If a
director is elected by the directors in order to fill a vacancy created as a
result of an increase in the size of the board of directors, then such director
shall have an initial term equal to the remaining term of the class of directors
that such director is placed in pursuant to the resolution of the board of
directors adopted pursuant to Section 3.02 of these by-laws.
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Section 3.11. ORGANIZATION OF BOARD MEETING.
At each meeting of the board of directors, the Chairman, or in his absence,
the Vice Chairman, or in his absence, the President, if he is a director, or in
his absence, a director chosen by a majority of the directors present, shall act
as chairman of the meeting. The Secretary, or in his absence, any person
appointed by the chairman, shall act as secretary of the meeting.
Article IV
COMMITTEES
Section 4.01. COMMITTEES.
The corporation may have such committees as the board of directors shall by
resolution from time to time determine consisting of two or more directors
(provided that the membership of the Audit Committee shall consist only of
Independent Directors, the membership of the Compensation Committee shall
consist only of those directors who also serve on the Compensation Committee of
TRG and the membership of any other committee shall consist of not less than one
Independent Director) which shall have such powers and authority as designated
by the board of directors.
Section 4.02. REGULAR MEETINGS.
Regular meetings of a committee shall be held without notice at such time
and at such place as shall from time to time be determined by resolution of the
committee. In case the day so determined shall be a legal holiday, such meeting
shall be held on the next succeeding day, not a legal holiday, at the same hour.
Section 4.03. SPECIAL MEETINGS.
Special meetings of a committee shall be held wherever called by the
chairman of the committee. Notice of any special meeting and any adjournment
thereof shall be delivered personally, by telephone or fax or mailed to each
member, addressed to him at his residence or usual place of business, or be sent
to him at such place by telegraph, or be delivered personally, by telephone, or
by fax, not later than the second (2nd) day before the day on which the meeting
is to be held. Notice of any meeting of a committee need not be given to any
member who submits a signed waiver of notice before or after the meeting, or who
attends the meeting without protesting prior thereto or at its commencement the
lack of notice to him. Unless limited by statute, the articles of incorporation,
these by-laws, or the terms of the notice thereof, any and all business may be
transacted at any special meeting of the committee.
Section 4.04. QUORUM AND MANNER OF ACTION.
A majority of the members of a committee in office at the time of any
regular or special meeting of the committee present in person shall constitute a
quorum for the transaction of business. The unanimous vote of the members shall
be the act of the committee. A majority of the members present, whether or not a
quorum is present, may adjourn any meeting to another time and place; and no
notice of an adjourned meeting need be given.
Section 4.05. RECORDS.
A committee shall keep minutes of its proceedings and shall submit the same
from time to time to the board of directors. The Secretary of the corporation,
or in his absence an
MWK-BH\109360.1-A
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<PAGE>
assistant secretary, shall act as secretary to the committee; or the committee
may in its discretion appoint its own secretary.
Section 4.06. VACANCIES.
Any newly created memberships and vacancies occurring in a committee shall
be filled by resolution adopted by a majority of the entire board of directors,
provided that the membership requirements of Section 4.01 are at all times
satisfied.
Article V
OFFICERS
Section 5.01. OFFICERS.
The elected officers of the corporation shall be a Chairman of the Board, a
Vice Chairman of the Board, a President, a Chief Financial Officer, a Secretary,
a Treasurer, and, if the board of directors so determines, one or more Vice
Presidents. The board of directors may also appoint one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers and
agents as may from time to time appear to be necessary or advisable in the
conduct of the affairs of the corporation. Any two or more offices, whether
elective or appointive, may be held by the same person, except that an officer
shall not execute, acknowledge or verify any instrument in more than one
capacity if the instrument is required by law or the articles of incorporation
or the by-laws to be executed, acknowledged or verified by two or more officers.
Section 5.02. TERM OF OFFICE AND RESIGNATION.
So far as practicable, all elected officers shall be elected at the first
meeting of the board of directors following the annual meeting of shareholders
in each year and, except as otherwise hereinafter provided, shall hold office
until the first meeting of the board of directors following the next annual
meeting of shareholders and until their respective successors shall have been
elected or appointed and qualified. All other officers shall hold office during
the pleasure of the board of directors. Any elected or appointed officer may
resign at any time by giving written notice to the board of directors, the
Chairman, the Vice Chairman, the President, the Chief Financial Officer, or the
Secretary of the corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5.03. REMOVAL OF ELECTED OFFICERS.
Any officer may be removed at any time, with or without cause, by vote at
any meeting of the board of directors.
Section 5.04. VACANCIES.
If any vacancy shall occur in any office for any reason, the board of
directors may elect or appoint a successor to fill such vacancy for the
remainder of the term.
Section 5.05. COMPENSATION.
The compensation, if any, of all elected or appointed officers and agents
of the corporation shall be fixed by the board of directors.
MWK-BH\109360.1-A
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<PAGE>
Section 5.06. THE CHAIRMAN OF THE BOARD.
The Chairman of the Board (sometimes herein the "Chairman") shall preside
at all meetings of the shareholders and board of directors and shall appoint all
standing and special committees as are deemed necessary in the conduct of the
business. The Chairman shall exercise any and all powers and perform any and all
duties which are required by the by-laws and which the board of directors may
additionally confer upon him.
Section 5.07. THE VICE CHAIRMAN OF THE BOARD.
The Vice Chairman of the Board (sometimes herein the "Vice Chairman"), in
the absence of the Chairman, shall preside at all meetings of the shareholders
and board of directors. The Vice Chairman shall exercise any and all powers and
perform any and all duties which are required by the by-laws and which the board
of directors may additionally confer upon him.
Section 5.08. THE PRESIDENT.
The President shall be the Chief Executive Officer and, if he is a
director, in the absence of the Chairman and the Vice Chairman, preside at all
meetings of the board of directors; and shall perform such other duties as are
usually ascribed to that office. The President shall exercise any and all powers
and perform any and all duties which are required by the by-laws and which the
board of directors may additionally confer upon him.
Section 5.09. THE CHIEF FINANCIAL OFFICER.
The Chief Financial Officer shall perform all necessary acts and duties in
connection with the administration of the financial affairs of the corporation;
and shall perform such other duties as are usually ascribed to that office. The
Chief Financial Officer shall exercise any and all powers and perform any and
all duties which are required by the by-laws and which the board of directors
may additionally confer upon him.
Section 5.10. THE VICE PRESIDENT.
The Vice President, if any, or if there is more than one Vice President,
each Vice President, shall have such powers and discharge such duties as may be
assigned to him from time to time by the board of directors.
Section 5.11. THE SECRETARY.
The Secretary shall attend all meetings of the board of directors and the
shareholders and shall record all votes and the minutes of all proceedings in a
book to be kept for that purpose and shall, when requested, perform like duties
for all committees of the board of directors. He shall attend to the giving of
notice of all meetings of the shareholders, and special meetings of the board of
directors and committees thereof; he shall have custody of the corporate seal,
if same is provided, and, when authorized by the board of directors, shall have
authority to affix the same to any instrument and, when so affixed, it shall be
attested by his signature or by the signatures of the Treasurer or an Assistant
Secretary or an Assistant Treasurer. He shall keep an account for all books,
documents, papers, and records of the corporation, except those for which some
other officer or agent is properly accountable. He shall have authority to sign
stock certificates, and shall generally perform all the duties appertaining to
the office of secretary of a corporation. In the absence of the Secretary, such
person as shall be designated by the President shall perform his duties.
Section 5.12. THE TREASURER.
The Treasurer shall have the care and custody of all the funds of the
corporation and shall deposit the same in such banks or other depositories as
the board of directors, or any officer
MWK-BH\109360.1-A
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<PAGE>
and agent jointly, duly authorized by the board of directors, shall, from time
to time, direct or approve. He shall keep a full and accurate account of all
monies received and paid on account of the corporation, and shall render a
statement of his accounts whenever the board of directors shall require. In
addition, he shall generally perform all duties usually appertaining to the
office of Treasurer of a corporation. When required by the board of directors,
he shall give bonds for the faithful discharge of his duties in such sums and
with such sureties as the board of directors shall approve. In the absence of
the Treasurer, such person as shall be designated by the Chief Financial Officer
shall perform his duties.
Article VI
INDEMNIFICATION
Section 6.01. INDEMNIFICATION.
Subject to and in accordance with the provisions of the corporation's
articles of incorporation, the corporation has the power to (and, if so provided
in the corporation's articles of incorporation, shall) indemnify any person (and
the heirs, executors, and administrators of any such person) against any loss,
cost, damage, fine, penalty, or expense (including attorneys' fees) suffered,
incurred, assessed, or imposed by reason of the fact that such person is or was
a director, officer, employee, or agent of the corporation or is or was serving,
at the request of the corporation, as a director, officer, employee, agent,
partner, or trustee of another corporation, partnership, joint venture, trust,
or other enterprise, or a member of the Partnership Committee.
Section 6.02. ADVANCEMENT OF EXPENSES.
Subject to and in accordance with the corporation's articles of
incorporation, expenses incurred in defending or settling a civil or criminal
action, suit, or proceeding to which any person described in Section 6.01 is or
was a party, or is or was threatened to be made a party, may (and, if so
provided in the corporation's articles of incorporation, shall) be paid by the
corporation in advance.
Section 6.03. INDEMNIFICATION: INSURANCE.
The corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the corporation or is liable as a director of the corporation, or is or was
serving, at the request of the corporation, as a director, officer, partner,
trustee, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise, or a member of the Partnership Committee against any
liability asserted against him and incurred by him in any such capacity or
arising out of his status as such, regardless of whether the corporation would
have power to indemnify him against such liability under the provisions of this
Article VI.
Section 6.04. INDEMNIFICATION: CONSTITUENT CORPORATIONS.
For the purposes of this Article VI, references to the corporation include
all constituent corporations absorbed in a merger and the resulting or surviving
corporation, so that a person who is or was a director or officer of such
constituent corporation or is or was serving at the request of such constituent
corporation as a director or officer of another corporation, partnership, joint
venture, trust, or other enterprise shall (as shall his heirs, executors, and
administrators) stand in the same position, under the provisions of this
Article, with respect to the resulting or surviving corporation as he would if
he had served the resulting or surviving corporation in the same capacity.
MWK-BH\109360.1-A
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<PAGE>
Article VII
SHARE CERTIFICATES
Section 7.01. FORM; SIGNATURE.
The shares of the corporation shall be represented by certificates in such
form as shall be determined by the board of directors and shall be signed by the
Chairman, Vice Chairman, President or a Vice President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer of the
corporation, and if a seal has been provided for the corporation, may be sealed
with the seal of the corporation or a facsimile thereof. The signatures of the
officers upon a certificate may be facsimiles if the certificate is
countersigned by a Transfer Agent or registered by a Registrar other than the
corporation or its employee. In case any officer who has signed or whose
facsimile has been placed upon a certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer at the date of issue.
Section 7.02. TRANSFER AGENTS AND REGISTRARS.
The board of directors may, in its discretion, appoint one or more banks or
trust companies in the State of Michigan and in such other state or states as
the board of directors may deem advisable, from time to time, to act as Transfer
Agents and Registrars of the shares of the corporation; and upon such
appointments being made, no certificate representing shares shall be valid until
countersigned by one of such Transfer Agents and registered by one of such
Registrars.
Section 7.03. TRANSFERS OF SHARES.
Transfers of shares shall be made on the books of the corporation only upon
written request by the person named in the certificate, or by his attorney
lawfully constituted in writing, and upon surrender and cancellation of a
certificate or certificates for a like number of shares of the same class, with
duly executed assignment and a power of transfer endorsed thereon or attached
thereto, and with such proof of the authenticity of the signatures as the
corporation or its agents may reasonably require.
Section 7.04. REGISTERED SHAREHOLDERS.
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
other distributions, and to vote as such owner, and to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law or contemplated by the
articles of incorporation.
Section 7.05. LOST CERTIFICATES.
In case any certificate representing shares shall be lost, stolen, or
destroyed, the board of directors, or any officer or officers duly authorized by
the board of directors, may authorize the issuance of a substitute certificate
in place of the certificate so lost, stolen, or destroyed, and may cause or
authorize such substitute certificate to be countersigned by the appropriate
Transfer Agent and registered by the appropriate Registrar. In each such case
the applicant for a substitute certificate shall furnish to the corporation and
to such of its Transfer Agents and Registrars as may require the same, evidence
to their satisfaction, in their discretion, of the loss, theft, or destruction
of such certificate and of the ownership thereof, and also such security or
indemnity as may by them be required.
MWK-BH\109360.1-A
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<PAGE>
Article VIII
MISCELLANEOUS
Section 8.01. FISCAL YEAR.
The board of directors from time to time shall determine the fiscal year of
the corporation.
Section 8.02. SIGNATURES ON NEGOTIABLE INSTRUMENTS.
All bills, notes, checks, or other instruments for the payment of money
shall be signed or countersigned by such officers or agents and in such manner
as from time to time may be prescribed by resolution of the board of directors,
or may be prescribed by any officer or officers, or any officer and agent
jointly, duly authorized by the board of directors.
Section 8.03. DIVIDENDS.
Except as otherwise provided in the articles of incorporation, dividends
upon the shares of the corporation may be declared and paid as permitted by law
in such amounts as the board of directors may determine at any annual or special
meeting. Dividends may be paid in cash, in property, or in shares of the capital
stock of the corporation, subject to the articles of incorporation.
Section 8.04. RESERVES.
Before payment of any dividend, there may be set aside out of any funds of
the corporation available for dividends such sum or sums as the board of
directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the board of directors deems conducive to the interest of the
corporation; and in its discretion, the board of directors may decrease or
abolish any such reserve.
Section 8.05. SEAL.
The board of directors may, but need not, provide a corporate seal which
shall consist of two concentric circles between which is the name of the
corporation and in the center of which shall be inscribed "SEAL".
Section 8.06. CORPORATION OFFICES.
The registered office of the corporation shall be as set forth in the
articles of incorporation. The corporation may also have offices in such places
as the board of directors may from time to time appoint or the business of the
corporation require. Such offices may be outside the State of Michigan.
Article IX
AMENDMENTS
Section 9.01. POWER TO AMEND.
These by-laws may be amended, repealed, or adopted by the shareholders or
the board of directors. Any by-law adopted by the board of directors may be
amended or repealed by
MWK-BH\109360.1-A
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<PAGE>
the board of directors or by shareholders entitled to vote thereon as herein
provided; and any by-law adopted by the Incorporators or the shareholders may be
amended or repealed by the board of directors, except as limited by statute and
except when the shareholders have expressly provided otherwise with respect to
any particular by-law or by-laws.
MWK-BH\109360.1-A
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Exhibit 11
TAUBMAN CENTERS, INC.
Computation of Per Share Earnings
(in thousands, except share data)
<TABLE>
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- ------------------------------
1995 1996 1995 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary
- -------
Income before extraordinary items as reported $4,028 $5,036 $12,453 $14,678
Effect of partnership units issuable under The Taubman Realty
Group Limited Partnership's 1992 Incentive Option Plan 0 (8) 0 (18)
------ ------ ------- -------
Income before extraordinary items for purposes of calculating
primary earnings per share $4,028 $5,028 $12,453 $14,660
====== ====== ======= =======
Average number of shares outstanding 44,169,913 44,098,113 44,281,294 44,102,470
========== ========== ========== ==========
Primary earnings per share $.09 $.11 $.28 $.33
==== ==== ==== ====
Fully diluted
- -------------
Income before extraordinary items as reported $4,028 $5,036 $12,453 $14,678
Effect of partnership units issuable under The Taubman Realty
Group Limited Partnership's 1992 Incentive Option Plan (1) (8) (1) (27)
------ ------ ------- -------
Income before extraordinary items for purposes of calculating
fully diluted earnings per share $4,027 $5,028 $12,452 $14,651
====== ====== ======= =======
Average number of shares outstanding 44,169,913 44,098,113 44,281,294 44,102,470
========== ========== ========== ==========
Fully diluted earnings per share $.09 $.11 $.28 $.33
==== ==== ==== ====
</TABLE>
<PAGE>
Exhibit 11
(Continued)
TAUBMAN CENTERS, INC.
Computation of Per Share Earnings
(in thousands, except share data)
<TABLE>
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- ------------------------------
1995 1996 1995 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary
- -------
Net income as reported $4,028 $4,592 $11,672 $14,234
Effect of partnership units issuable under The Taubman Realty
Group Limited Partnership's 1992 Incentive Option Plan 0 (7) 0 (17)
------ ------ ------- -------
Net income for purposes of calculating primary
earnings per share $4,028 $4,585 $11,672 $14,217
====== ====== ======= =======
Average number of shares outstanding 44,169,913 44,098,113 44,281,294 44,102,470
========== ========== ========== ==========
Primary earnings per share $.09 $.10 $.26 $.32
==== ==== ==== ====
Fully diluted
- -------------
Net income as reported $4,028 $4,592 $11,672 $14,234
Effect of partnership units issuable under The Taubman Realty
Group Limited Partnership's 1992 Incentive Option Plan (1) (8) (1) (27)
------ ------ ------- -------
Net income for purposes of calculating fully
diluted earnings per share $4,027 $4,584 $11,671 $14,207
====== ====== ======= =======
Average number of shares outstanding 44,169,913 44,098,113 44,281,294 44,102,470
========== ========== ========== ==========
Fully diluted earnings per share $.09 $.10 $.26 $.32
==== ==== ==== ====
</TABLE>
Exhibit 12
The Taubman Realty Group Limited Partnership
Computation of Ratios of Earnings to Fixed Charges
(in thousands, except ratios)
Nine Months Ended September 30
------------------------------
1995 1996
---- ----
Net Earnings from Continuing Operations $ 54,529 $ 60,308
Add back:
Fixed charges 82,095 84,133
Amortization of previously capitalized
interest (1) 1,598 1,472
Distributions in excess of equity in
net income of 25% owned Joint Venture (286) 122
Deduct:
Capitalized interest (1) (7,126) (6,112)
-------- --------
Earnings Available for Fixed Charges $130,810 $139,923
======== ========
Fixed Charges
Interest expense $ 48,039 $ 52,873
Capitalized interest 5,891 3,443
Interest portion of rent expense 3,477 3,746
Proportionate share of Joint Ventures'
fixed charges 24,688 24,071
-------- --------
Total Fixed Charges $ 82,095 $ 84,133
======== ========
Ratio of earnings to fixed charges 1.6 1.7
(1) Amounts include TRG's pro rata share of capitalized interest and
amortization of previously capitalized interest of the Joint Ventures.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TAUBMAN CENTERS, INC. BALANCE SHEET AS OF SEPTEMBER 30, 1996 (UNAUDITED) AND THE
TAUBMAN CENTERS, INC. STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000890319
<NAME> TAUBMAN CENTERS, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 8,494
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 299,921<F2>
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 441
<OTHER-SE> 289,359
<TOTAL-LIABILITY-AND-EQUITY> 299,921
<SALES> 0
<TOTAL-REVENUES> 15,364<F2>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 187
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,678
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,678
<DISCONTINUED> 0
<EXTRAORDINARY> (444)
<CHANGES> 0
<NET-INCOME> 14,234
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
<FN>
<F1> THE COMPANY HAS AN UNCLASSIFIED BALANCE SHEET.
<F2> THE COMPANY'S PRIMARY ASSET IS AN EQUITY INVESTMENT IN THE TAUBMAN
REALTY GROUP LIMITED PARTNERSHIP.
</FN>
</TABLE>
