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: March 31, 1999
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.)
200 East Long Lake Road, Suite 300, P.O. Box 200, Bloomfield Hills, Michigan
- -----------------------------------------------------------------------------
(Address of principal executive offices) 48303-0200
----------
(Zip Code)
(248) 258-6800
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(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 April 30, 1999, there were outstanding 53,164,453 shares of the
Company's common stock, par value $0.01 per share.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following consolidated financial statements of Taubman Centers, Inc. (the
Company) are provided pursuant to the requirements of this item.
Consolidated Balance Sheet as of March 31, 1999 and December 31, 1998....... 2
Consolidated Statement of Operations for the three
months ended March 31, 1999 and 1998...................................... 3
Consolidated Statement of Cash Flows for the three months
ended March 31, 1999 and 1998............................................ 4
Notes to Consolidated Financial Statements.................................. 5
-1-
<PAGE>
TAUBMAN CENTERS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
March 31 December 31
-------- -----------
1999 1998
---- ----
Assets:
Properties, net $1,367,771 $1,308,642
Investment in Unconsolidated Joint Ventures 101,980 98,350
Cash and cash equivalents 12,527 19,045
Accounts and notes receivable, less allowance
for doubtful accounts of $1,027 and $333 in
1999 and 1998 20,578 20,595
Accounts receivable from related parties 4,279 7,092
Deferred charges and other assets 29,108 27,139
---------- ----------
$1,536,243 $1,480,863
========== ==========
Liabilities:
Unsecured notes payable $ 619,641 $ 531,946
Mortgage notes payable 244,908 243,352
Accounts payable and accrued liabilities 147,199 171,669
Dividends payable 12,737 12,719
---------- ----------
$1,024,485 $ 959,686
Commitments and Contingencies (Note 5)
Minority Interests (Note 1)
Shareowners' Equity:
Series A Cumulative Redeemable Preferred
Stock, $0.01 par value, 50,000,000 shares
authorized, $200 million liquidation
preference, 8,000,000 shares issued and
outstanding at March 31, 1999 and December
31, 1998 $ 80 $ 80
Series B Non-Participating Convertible
Preferred Stock, $0.001 par and liquidation
value, 40,000,000 shares authorized and
31,399,913 shares issued and outstanding at
March 31, 1999 and December 31, 1998 31 28
Common Stock, $0.01 par value, 250,000,000
shares authorized, 53,070,963 and 52,995,904
issued and outstanding at March 31, 1999 and
December 31, 1998 531 530
Additional paid-in capital 698,744 697,965
Dividends in excess of net income (187,628) (177,426)
---------- ----------
$ 511,758 $ 521,177
---------- ----------
$1,536,243 $1,480,863
========== ==========
See notes to consolidated financial statements.
-2-
<PAGE>
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share data)
Three Months Ended March 31
---------------------------
1999 1998
---- ----
Income:
Minimum rents $ 33,014 $ 25,353
Percentage rents 985 955
Expense recoveries 17,585 13,645
Revenues from management, leasing and
development services 5,733 1,777
Other 3,114 3,440
Revenues - transferred centers (Note 1) 42,032
-------- --------
$ 60,431 $ 87,202
-------- --------
Operating Expenses:
Recoverable expenses $ 15,469 $ 12,231
Other operating 8,205 5,971
Management, leasing and development services 4,391 1,033
General and administrative 4,728 6,826
Expenses other than interest, depreciation and
amortization - transferred centers (Note 1) 14,100
Interest expense 10,865 22,637
Depreciation and amortization (including $7.2
million in 1998 relating to the transferred
centers) 12,203 15,047
-------- --------
$ 55,861 $ 77,845
-------- --------
Income before equity in income before extraordinary
item of Unconsolidated Joint Ventures,
extraordinary item, and minority interest $ 4,570 $ 9,357
Equity in income before extraordinary item of
Unconsolidated Joint Ventures 9,623 11,730
-------- --------
Income before extraordinary item and minority interest $ 14,193 $ 21,087
Extraordinary item (Note 2) (957)
Minority interest:
Minority share of income (4,538) (11,230)
Distributions in excess of earnings (2,969)
-------- --------
Net income $ 6,686 $ 8,900
Series A preferred dividends (4,150) (4,150)
-------- --------
Net income available to common shareowners $ 2,536 $ 4,750
======== ========
Basic and diluted earnings per common share:
Income before extraordinary item $ .05 $ .10
======== ========
Net income $ .05 $ .09
======== ========
Cash dividends declared per common share $ .24 $ .235
======== ========
Weighted average number of common shares
outstanding 53,016,661 50,773,099
========== ==========
See notes to consolidated financial statements.
-3-
<PAGE>
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Three Months Ended March 31
---------------------------
1999 1998
---- ----
Cash Flows from Operating Activities:
Income before extraordinary item and
minority interest $ 14,193 $ 21,087
Adjustments to reconcile income before
extraordinary item and minority
interest to net cash provided by operating
activities:
Depreciation and amortization 12,203 15,047
Provision for losses on accounts receivable 623 291
Amortization of deferred financing costs 1,248 710
Other 84 212
Gain on sale of land (475)
Increase (decrease)in cash attributable to
changes in assets and liabilities:
Receivables, deferred charges and other
assets (2,518) 1,920
Accounts payable and other liabilities (9,259) 1,286
-------- --------
Net Cash Provided By Operating Activities $ 16,099 $ 40,553
-------- --------
Cash Flows from Investing Activities:
Additions to properties $(84,853) $(56,367)
Proceeds from sale of land 212
Contributions to Unconsolidated Joint Ventures (7,453) (4,860)
Distributions from Unconsolidated Joint Ventures
in excess of income before extraordinary
item 3,823 47,042
-------- --------
Net Cash Used In Investing Activities $(88,271) $(14,185)
-------- --------
Cash Flows from Financing Activities:
Debt proceeds $ 89,251 $129,941
Debt payments (45,949)
Redemption of partnership units (77,698)
Distributions to minority interest (7,507) (19,469)
Issuance of stock pursuant to Continuing Offer 780 771
Cash dividends to common shareowners (12,720) (11,929)
Cash dividends to Series A preferred shareowners (4,150) (4,150)
------- --------
Net Cash Provided By (Used in) Financing Activities $65,654 $(28,483)
------- --------
Net Decrease In Cash $(6,518) $ (2,115)
Cash and Cash Equivalents at Beginning of Period 19,045 8,965
Effect of consolidating TRG in connection with the
GMPT Exchange (TRG's cash balance at Beginning
of Period) (Note 1) 3,250
-------- --------
Cash and Cash Equivalents at End of Period $ 12,527 $ 10,100
======== ========
Interest on mortgage notes and other loans paid during the three months ended
March 31, 1999 and 1998, net of amounts capitalized of $4,247 and $3,308, was
$10,116 and $9,446, respectively. During the three months ended March 31, 1999,
non-cash additions to properties of $42,186 were recorded, representing accrued
construction costs of new centers and development projects.
See notes to consolidated financial statements.
-4-
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 1999
Note 1 - Interim Financial Statements
Taubman Centers, Inc. (the Company or TCO), a real estate investment trust, or
REIT, is the managing general partner of The Taubman Realty Group Limited
Partnership (the Operating Partnership or TRG). The Operating Partnership is an
operating subsidiary that engages in the ownership, management, leasing,
acquisition, development, and expansion of regional retail shopping centers and
interests therein. The Operating Partnership's portfolio as of March 31, 1999
includes 17 urban and suburban shopping centers in seven states. Three
additional centers are under construction in Florida and Texas.
On September 30, 1998, the Company obtained a majority and controlling
interest in the Operating Partnership as a result of a transaction in which the
Operating Partnership transferred interests in 10 shopping centers, together
with $990 million of its debt, for all of the partnership units owned by the
General Motors Pension Trusts (GMPT), representing approximately 37% of the
Operating Partnership's equity (the GMPT Exchange). As a result of the GMPT
Exchange, the Company's general partnership interest in the Operating
Partnership increased to 62.8%.
The consolidated financial statements of the Company include all accounts of
the Company, the Operating Partnership and its consolidated subsidiaries; all
intercompany balances have been eliminated. Investments in entities not
unilaterally controlled by ownership or contractual obligation (Unconsolidated
Joint Ventures) are accounted for under the equity method.
The Company's ownership in the Operating Partnership at March 31, 1999
consisted of a 62.8% managing general partnership interest (53,070,963 of the
84,470,876 units of partnership interest outstanding), as well as a preferred
equity interest. Net income and distributions are allocable first to the
preferred equity interest, and the remaining amounts to the general and limited
partners of the Operating Partnership in accordance with their percentage
ownership. The Company's average ownership percentage in the Operating
Partnership for the three months ended March 31, 1999 and 1998 was 62.8% and
38.3%, respectively.
Because the net equity of the Operating Partnership is less than zero, the
ownership interest of the Operating Partnership's noncontrolling partners (the
Minority Interest) is presented as a zero balance in the balance sheet as of
March 31, 1999 and December 31, 1998, and subsequent to the GMPT Exchange, the
income allocated to the Minority Interest is equal to the Minority Interest's
share of distributions. The Operating Partnership's net equity is less than zero
due to accumulated distributions in excess of net income and not as a result of
operating losses. Distributions to partners are usually greater than net income
because net income includes non-cash charges for depreciation and amortization.
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, 1998. 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 of interim periods are not necessarily
indicative of the results for a full year.
-5-
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2 - Investments in Unconsolidated Joint Ventures
Following are the Company's investments in various real estate
Unconsolidated Joint Ventures which own regional retail shopping centers. The
Operating Partnership is generally the managing general partner of these
Unconsolidated Joint Ventures. The Operating Partnership's interest in each
Unconsolidated Joint Venture is as follows:
Ownership
as of
Unconsolidated Joint Venture Shopping Center March 31, 1999
---------------------------- --------------- --------------
Arizona Mills, L.L.C. Arizona Mills 37%
Fairfax Company of Virginia L.L.C. Fair Oaks 50
Lakeside Mall Limited Partnership Lakeside 50
Rich-Taubman Associates Stamford Town Center 50
Taubman-Cherry Creek
Limited Partnership Cherry Creek 50
Twelve Oaks Mall Limited Partnership Twelve Oaks Mall 50
West Farms Associates Westfarms 79
Woodland Woodland 50
The Company's carrying value of its Investment in Unconsolidated Joint
Ventures exceeds its share of the deficiency in assets reported in the combined
balance sheet of the Unconsolidated Joint Ventures due to (i) intercompany
profits on sales of services that are capitalized by the Unconsolidated Joint
Ventures and (ii) the Company's cost of its investment in excess of the
historical net book values of the Unconsolidated Joint Ventures. The Company
reduces its investment in Unconsolidated Joint Ventures to eliminate the
intercompany profits and amortizes such amounts over the useful lives of the
related assets. The Company's additional basis allocated to depreciable assets
is recognized on a straight-line basis over 40 years.
During the three months ended March 31, 1998, an unconsolidated joint
venture incurred an extraordinary charge related to the extinguishment of debt,
primarily consisting of a prepayment premium.
Combined balance sheet and results of operations information are presented
below (in thousands) for all Unconsolidated Joint Ventures, followed by the
Operating Partnership's beneficial interest in the combined information.
Beneficial interest is calculated based on the Operating Partnership's ownership
interest in each of the Unconsolidated Joint Ventures. The accounts of Woodfield
Associates, formerly a 50% Unconsolidated Joint Venture transferred to GMPT
(Note 1), are included in these results for the three months ended March 31,
1998.
-6-
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
March 31 December 31
-------- -----------
1999 1998
---- ----
Assets:
Properties, net $ 573,529 $572,149
Other assets 68,885 73,046
--------- --------
$ 642,414 $645,195
========= ========
Liabilities and partners' accumulated
deficiency in assets:
Debt $ 826,124 $ 825,927
Capital lease obligations 4,923 5,187
Other liabilities 35,070 47,622
TRG's accumulated deficiency in assets (98,420) (103,545)
Unconsolidated Joint Venture Partners'
accumulated deficiency in assets (125,283) (129,996)
--------- ---------
$ 642,414 $ 645,195
========= =========
TRG's accumulated deficiency in assets (above) $ (98,420) $(103,545)
Elimination of intercompany profit (5,159) (4,846)
TCO's additional basis 205,559 206,741
--------- ---------
Investment in Unconsolidated Joint Ventures $ 101,980 $ 98,350
========= =========
Three Months Ended March 31
---------------------------
1999 1998
---- ----
Revenues $ 60,296 $ 72,121
--------- ---------
Recoverable and other operating expenses $ 20,939 $ 24,968
Interest expense 15,291 17,133
Depreciation and amortization 7,260 8,445
--------- ---------
Total operating costs $ 43,490 $ 50,546
--------- ---------
Income before extraordinary item $ 16,806 $ 21,575
Extraordinary item (1,913)
--------- ---------
Net income $ 16,806 $ 19,662
========= =========
Net income allocable to TRG $ 9,539 $ 10,173
Extraordinary item allocable to TRG 957
Realized intercompany profit 1,266 1,473
Depreciation of TCO's additional basis (1,182) (873)
--------- ---------
Equity in income before extraordinary item
of Unconsolidated Joint Ventures $ 9,623 $ 11,730
========= =========
Beneficial interest in Unconsolidated
Joint Ventures' operations:
Revenues less recoverable and other
operating expenses $ 22,851 $ 26,052
Interest expense (8,244) (9,205)
Depreciation and amortization (4,984) (5,117)
--------- ---------
Income before extraordinary item $ 9,623 $ 11,730
========= =========
-7-
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3 - Beneficial Interest in Debt and Interest Expense
The Operating Partnership's beneficial interest in the debt, capital lease
obligations, capitalized interest, and interest expense of its consolidated
subsidiaries and its Unconsolidated Joint Ventures is summarized in the
following table. The Operating Partnership's beneficial interest excludes the
30% minority interest in the debt outstanding on the MacArthur Center
construction facility.
<TABLE>
<CAPTION>
Unconsolidated Share
Joint of Unconsolidated Consolidated Beneficial
Ventures Joint Ventures Subsidiaries Interest
------------- ----------------- ------------ ----------
<S> <C> <C> <C> <C>
Debt as of:
March 31, 1999 $ 826,124 $ 439,207 $ 864,549 $ 1,274,912
December 31, 1998 825,927 439,271 775,298 1,186,192
Capital lease obligations:
March 31, 1999 $ 4,923 $ 2,707 -- $ 2,707
December 31, 1998 5,187 2,858 -- 2,858
Capitalized interest:
Three months ended March
31, 1999 $ 317 $ 158 $ 4,247 $ 4,405
Three months ended March
31, 1998 455 224 3,308 3,243
Interest expense (Net of
capitalized interest):
Three months ended March
31, 1999 $ 15,291 $ 8,244 $ 10,865 $ 18,993
Three months ended March
31, 1998 17,133 9,205 22,637 31,842
</TABLE>
Note 4 - Incentive Option Plan
The Operating Partnership has an incentive option plan for employees of the
Manager. Currently, options for 7.9 million units of partnership interest may be
issued under the Operating Partnership's incentive option plan for employees of
The Taubman Company Limited Partnership (the Manager), of which options for 7.7
million units are outstanding. The exercise price of all options outstanding was
equal to market value on the date of the grant. Incentive options generally vest
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. During the three months ended March 31, 1999 and March 31, 1998, options
for 75,059 units and 69,128 units were exercised at weighted average prices of
$10.38 and $11.14 per unit, respectively. There were 1,000,000 units granted at
$12.25 per unit and 61,890 units cancelled at a weighted average exercise price
of $12.58 per unit during the three months ended March 31, 1999. As of March 31,
1999, there were options outstanding for 7.7 million units with a weighted
average exercise price of $11.35 per unit, of which options for 6.3 million
units were vested with a weighted average exercise price of $11.24 per unit.
-8-
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5 - Commitments and Contingencies
At the time of the Company's initial public offering (IPO) and acquisition of
its partnership interest in the Operating Partnership, the Company entered into
an agreement with A. Alfred Taubman, who owns an interest in the Operating
Partnership, whereby he has the annual right to tender to the Company units of
partnership interest in the Operating Partnership (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 partner
will bear all market risk if the market price at closing is less than the
purchase price and 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.
Based on a market value at March 31, 1999 of $12.25 per common share, the
aggregate value of interests in the Operating Partnership which may be tendered
under the Cash Tender Agreement was approximately $295.6 million. The purchase
of these interests at March 31, 1999 would have resulted in the Company owning
an additional 29% interest in the Operating Partnership.
The Company has made a continuing, irrevocable offer to all present holders
(other than certain excluded holders, including A. Alfred Taubman), assignees of
all present holders, those future holders of partnership interests in the
Operating Partnership as the Company may, in its sole discretion, agree to
include in the continuing offer, and all existing and future optionees under the
Operating Partnership's incentive option plan to exchange shares of common stock
for partnership interests in the Operating Partnership (the Continuing Offer).
Under the Continuing Offer agreement, one unit of partnership interest is
exchangeable for one share of the Company's common stock.
Shares of common stock that were acquired by GMPT and the AT&T Master Pension
Trust in connection with the IPO may be sold through a registered offering.
Pursuant to a registration rights agreement with the Company, the owners of each
of these shares have 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). 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.
Note 6 - Earnings Per Share
Basic earnings per common share are calculated by dividing earnings
available to common shareowners by the average number of common shares
outstanding during each period. For diluted earnings per common share, the
Company's ownership interest in the Operating Partnership (and therefore
earnings) are adjusted assuming the exercise of all options for units of
partnership interest under the Operating Partnership's incentive option plan
having exercise prices less than the average market value of the units using the
treasury stock method. For each of the three months ended March 31, 1999 and
1998, options for 0.4 million units of partnership interest with a weighted
average exercise price of $13.58 per unit were excluded from the computation of
diluted earnings per share because the exercise prices were greater than the
average market price for the period calculated.
-9-
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Three Months
Ended March 31
--------------------
1999 1998
---- ----
(in thousands, except share data)
Income before extraordinary item allocable
to common shareowners (Numerator):
Net income available to common
shareowners $ 2,536 $ 4,750
Common shareowners' share of extraordinary
item 366
---------- ----------
Basic income before extraordinary item $ 2,536 $ 5,116
Effect of dilutive options (70) (53)
---------- ----------
Diluted income before extraordinary item $ 2,466 $ 5,063
========== ==========
Shares (Denominator) - basic and diluted 53,016,661 50,733,099
========== ==========
Income before extraordinary item per common
share:
Basic and diluted $ 0.05 $ 0.10
========== =========
Note 7 - Subsequent Events
In April 1999, the following subsequent events occurred.
A secured, ten-year financing of $270 million with an all-in rate of
approximately 6.9% on The Mall at Short Hills was completed. The Company used
the proceeds to partially pay down its $340 million bridge loan, which matures
on June 21, 1999.
A three-year $170 million facility, secured by Great Lakes Crossing, was
finalized. The loan agreement provides for an option to extend the maturity date
one year. The loan bears interest at one month LIBOR plus 1.50%. Proceeds from
the loan were used to repay the balance of the existing construction facility.
Payment of principal and interest are guaranteed by the Operating Partnership.
The loan agreement provides for a reduction of the interest rate and the amount
guaranteed as certain center performance and valuation criteria are met. In
addition, the Company finalized an amendment to the MacArthur Center
construction facility. The total availability under the facility is $120 million
with interest at one month LIBOR plus 1.35%.
The Company made an investment of $5.8 million in an e-commerce company
that markets and sells fashion apparel, footwear, and beauty products over the
Internet. The Company's investment will become 824,084 convertible preferred
shares of Fashionmall.com, Inc., a 9.9 percent interest in the company, upon
completion of Fashionmall.com, Inc.'s anticipated initial public offering which
is currently in registration. The investment was based on a $7.00 per share
purchase price, and is subject to an upward adjustment to the lower of the
initial public offering price and $9.00 per share. In addition, the Company
received an option, exercisable during the 60-day period commencing one year
after the offering, to purchase an additional 924,898 shares of common stock at
the initial public offering price per share.
-10-
<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.
General Background and Performance Measurement
The Company owns a managing general partner's interest in The Taubman Realty
Group Limited Partnership (Operating Partnership), through which the Company
conducts all of its operations. The Operating Partnership owns, develops,
acquires and operates regional shopping centers nationally. The Consolidated
Businesses consist of shopping centers that are controlled by ownership or
contractual agreement, development projects for future regional shopping centers
and The Taubman Company Limited Partnership (the Manager). Shopping centers that
are not controlled and that are owned through joint ventures with third parties
(Unconsolidated Joint Ventures) are accounted for under the equity method.
The operations of the shopping centers are best understood by measuring their
performance as a whole, without regard to the Company's ownership interest.
Consequently, in addition to the discussion of the operations of the
Consolidated Businesses, the operations of the Unconsolidated Joint Ventures are
presented and discussed as a whole.
On September 30, 1998, the Operating Partnership exchanged interests in 10
shopping centers (nine Consolidated Businesses and one Unconsolidated Joint
Venture) and a share of the Operating Partnership's debt for all of the
partnership units owned by two General Motors pension trusts (GMPT) (the GMPT
Exchange - see Results of Operations -- GMPT Exchange and Related Transactions).
Performance statistics presented below exclude these ten centers (transferred
centers). Because the Company's portfolio changed significantly as a result of
the GMPT Exchange, the results of operations of the transferred centers have
been separately classified within the Consolidated Businesses and Unconsolidated
Joint Ventures for purposes of analyzing and understanding the historical
results of the current portfolio.
Since the Company's interest in the Operating Partnership has been its sole
material asset throughout all periods presented, references in the following
discussion to "the Company" include the Operating Partnership, except where
intercompany transactions are discussed or as otherwise noted, even though the
Operating Partnership did not become a consolidated subsidiary until September
30, 1998.
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.
-11-
<PAGE>
The following table summarizes certain quarterly operating data for 1998 and
the first quarter of 1999:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th 1st
Quarter Quarter Quarter Quarter Total Quarter
1998 1998 1998 1998 1998 1999
----------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mall tenant sales $467,698 $505,732 $507,098 $852,198 $2,332,726 $533,730
Revenues 98,960 99,993 106,250 126,424 431,627 117,901
Occupancy:
Average Occupancy 88.7% 89.3% 89.5% 90.0% 89.4% 88.5%
Ending Occupancy 88.6% 89.3% 89.6% 90.2% 90.2% 87.5%
Leased Space 91.7% 92.0% 92.4% 92.3% 92.3% 91.3%
</TABLE>
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 1998 and the first quarter of
1999:
1st 2nd 3rd 4th 1st
Quarter Quarter Quarter Quarter Total Quarter
1998 1998 1998 1998 1998 1999
-----------------------------------------------------
Minimum rents 11.6% 10.9% 11.0% 7.2% 9.7% 11.8%
Percentage rents 0.2 0.2 0.3 0.4 0.3 0.2
Expense recoveries 4.5 4.5 4.7 3.4 4.1 4.7
----- ----- ----- ----- ----- -----
Mall tenant occupancy
costs 16.3% 15.6% 16.0% 11.0% 14.1% 16.7%
===== ===== ===== ===== ===== =====
Rental Rates
Average base rent per square foot for all mall tenants at the 10 centers
owned and open for at least five years was $43.09 for the twelve months ended
March 31, 1999, compared to $41.93 for the twelve months ended March 31, 1998.
As leases have expired in the shopping centers, the Company 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.
-12-
<PAGE>
Results of Operations
The following represent significant debt and equity transactions, new center
openings and expansions which affect the operating results described under
Comparison of Three Months Ended March 31, 1999 to the Three Months Ended March
31, 1998.
GMPT Exchange and Related Transactions
On September 30, 1998, the Operating Partnership exchanged interests in 10
shopping centers (nine wholly owned and one Unconsolidated Joint Venture),
together with $990 million of debt, for all of GMPT's partnership units
(approximately 50 million units with a fair value of $675 million), providing
the Company with a majority and controlling interest in the Operating
Partnership. The Operating Partnership continues to manage the centers exchanged
under management agreements with GMPT that expire December 31, 1999. The
management agreements are cancelable with 90 days notice. Certain costs of
providing services under these agreements, including administrative and certain
other fixed costs, would not necessarily be eliminated if the contracts were to
be canceled or not renewed. The actual reduction of costs would be affected by
whether all or a portion of the contracts were canceled or not renewed, timing
of the cancellation or non-renewal, and actual or anticipated changes in the
Operating Partnership's owned or managed portfolio.
In anticipation of the GMPT Exchange, the Operating Partnership used the $1.2
billion proceeds from two bridge loans bearing interest at one-month LIBOR plus
1.30% to extinguish $1.1 billion of debt, including substantially all of the
Operating Partnership's public unsecured debt, its outstanding commercial paper,
and borrowings on its existing line of credit.
Concurrently with the GMPT Exchange, the Operating Partnership committed to
a restructuring of its operations. The Company expects to reduce its annual
general and administrative expense to approximately $19 million in 1999. This is
a forward looking statement, and certain significant factors could cause the
actual reductions in general and administrative expense to differ materially,
including but not limited to: 1) actual payroll reductions achieved; 2) actual
results of negotiations; 3) use of outside consultants; and 4) changes in the
Company's owned or managed portfolio.
Openings and Expansions
In March 1999, MacArthur Center, a 70% owned enclosed super-regional mall,
opened in Norfolk, Virginia. In November 1998, Great Lakes Crossing, an 80%
owned enclosed value super-regional mall, opened in Auburn Hills, Michigan. Both
Great Lakes Crossing and MacArthur Center are owned by joint ventures in which
the Operating Partnership has a controlling interest, and consequently the
results of these centers are consolidated in the Company's financial statements.
The Company is entitled to a preferred return on its equity contributions to
these centers. The contributed capital was used to fund construction costs. The
income effect of the cumulative preferred return net of the interest on the
Operating Partnership's associated borrowings was approximately $0.5 million in
the first quarter of 1999 and is expected to total approximately $2 million in
1999. The net effect in 2000 of any recurring preference is expected to be
minimal. At Cherry Creek, a 132,000 square foot expansion opened in stages
throughout the fall of 1998.
-13-
<PAGE>
Presentation of Operating Results
In order to facilitate the analysis of the ongoing business for periods prior
to the GMPT Exchange, the following tables contain the combined operating
results of the Company and the Operating Partnership and also present separately
the revenues and expenses, other than interest, depreciation and amortization,
of the transferred centers. The following discussions include analysis of the
Consolidated Businesses and the Unconsolidated Joint Ventures, with the interest
of the noncontrolling partners of the Operating Partnership (the Minority
Interest) deducted to arrive at the results allocable to the Company's
shareowners. Because the Operating Partnership's net equity is less than zero,
for periods subsequent to the GMPT Exchange the income allocated to the Minority
Interest is equal to the Minority Interest's share of distributions. The
Operating Partnership's net equity is less than zero due to accumulated
distributions in excess of net income and not as a result of operating losses.
Distributions to partners are usually greater than net income because net income
includes non-cash charges for depreciation and amortization. The Company's
average ownership percentage of the Operating Partnership was 62.80% for the
1999 period and 38.29% for the 1998 period.
-14-
<PAGE>
Comparison of the Three Months Ended March 31, 1999 to the Three Months
Ended March 31, 1998
The following table sets forth operating results for the three months ended
March 31, 1999 and March 31, 1998, showing the results of the Consolidated
Businesses and Unconsolidated Joint Ventures:
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999 Three Months Ended March 31, 1998
------------------------------------------ -------------------------------------------
UNCONSOLIDATED UNCONSOLIDATED
CONSOLIDATED JOINT CONSOLIDATED JOINT
BUSINESSES(1) VENTURES(2) TOTAL BUSINESSES(1) VENTURES(2) TOTAL
------------------------------------------ -------------------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Minimum rents 31.0 38.5 69.6 23.5 35.6 59.0
Percentage rents 1.0 0.5 1.5 0.9 0.7 1.5
Expense recoveries 16.8 19.5 36.4 13.0 17.7 30.6
Management, leasing and
development 5.7 5.7 1.8 1.8
Other 3.0 1.7 4.7 3.2 2.8 6.0
Revenues - transferred centers 42.0 15.5 57.5
---- ---- ----- ---- ---- ----
Total revenues 57.6 60.3 117.9 84.3 72.1 156.4
OPERATING COSTS:
Recoverable expenses 14.4 16.2 30.7 11.3 14.8 26.1
Other operating 6.1 3.2 9.3 4.0 3.0 7.0
Management, leasing and
development 4.4 4.4 1.0 1.0
Expenses other than
interest, depreciation
and amortization
- transferred centers 14.1 5.8 19.9
General and administrative 4.7 4.7 6.8 6.8
Interest expense 10.9 15.4 26.2 22.6 17.2 39.9
Depreciation and amortization 12.1 7.2 19.3 15.0 8.0 23.0
---- ---- ---- ---- ---- -----
Total operating costs 52.6 42.0 94.6 74.8 48.8 123.6
Net results of Memorial City (1) (0.4) (0.4) (0.2) (0.2)
---- ---- ---- ---- ---- -----
4.6 18.3 22.9 9.4 23.3 32.7
==== ==== ==== =====
Equity in income before
extraordinary item of
Unconsolidated Joint Ventures 9.6 11.7
---- ----
Income before extraordinary
item and minority interest 14.2 21.1
Extraordinary item (1.0)
Minority interest (7.5) (11.2)
---- -----
Net income 6.7 8.9
Series A preferred dividends (4.2) (4.2)
---- -----
Net income available to common
shareowners 2.5 4.8
==== =====
SUPPLEMENTAL INFORMATION (3):
EBITDA contribution 27.5 22.9 50.4 47.2 26.0 73.3
Beneficial Interest Expense (10.8) (8.2) (19.0) (22.6) (9.2) (31.8)
Non-real estate depreciation (0.6) (0.6) (0.5) (0.5)
Series A preferred dividends (4.2) (4.2) (4.2) (4.2)
---- ---- ----- ----- ---- -----
Funds from Operations
contribution 12.0 14.6 26.6 19.9 16.8 36.8
==== ==== ===== ===== ==== =====
(1) The results of operations of Memorial City are presented net in this table.
The Company expects that Memorial City's net operating income will approximate
the ground rent payable under the lease for the immediate future.
(2) With the exception of the Supplemental Information, amounts represent
100% of the Unconsolidated Joint Ventures. Amounts are net of intercompany
profits.
(3) EBITDA represents earnings before interest and depreciation and
amortization. Funds from Operations is defined and discussed in Liquidity and
Capital Resources.
(4) Amounts in the table may not add due to rounding.
(5) Certain 1998 amounts have been reclassified to conform to 1999 classifications.
</TABLE>
-15-
<PAGE>
Consolidated Businesses
- -----------------------
Total revenues for the three months ended March 31, 1999 were $57.6 million, a
$15.3 million, or 36.2%, increase over the comparable period in 1998, excluding
revenues of the transferred centers. Minimum rents increased $7.5 million of
which $5.9 million was caused by the opening of MacArthur Center and Great Lakes
Crossing. Minimum rents also increased due to tenant rollovers. Expense
recoveries increased primarily due to the new centers. Revenues from management,
leasing, and development services increased primarily due to the management
agreements with GMPT. Other revenue decreased primarily due to a decrease in
lease cancellation revenue, offset by an increase in gains on sales of
peripheral land.
Total operating costs were $52.6 million, an $8.1 million, or 13.3%
decrease over the comparable period in 1998, excluding expenses other than
depreciation, amortization and interest of the transferred centers. Recoverable
and depreciation and amortization expenses increased primarily due to Great
Lakes Crossing and MacArthur Center. Costs of management, leasing and
development services increased primarily due to the management agreements with
GMPT. Other operating expense increased due to an increase in the charge to
operations for costs of potentially unsuccessful pre-development activities, bad
debt expense and the new centers. General and administrative expense decreased
$2.1 million primarily due to decreases in payroll, professional fees and
recruiter costs. Interest expense decreased primarily due to the assumption of
debt by GMPT as part of the GMPT Exchange, partially offset by an increase in
debt used to finance Great Lakes Crossing and a decrease in capitalized interest
related to this center.
Unconsolidated Joint Ventures
- -----------------------------
Total revenues for the three months ended March 31, 1999 were $60.3 million, a
$3.7 million, or 6.5%, increase from the comparable period of 1998, excluding
revenues of the transferred center. The increase in minimum rents and expense
recoveries was primarily due to the expansion at Cherry Creek and the opening of
Arizona Mills in November 1997. Minimum rents also increased due to tenant
rollovers. Other revenue decreased by $1.1 million primarily due to a decrease
in gains on sales of peripheral land.
Total operating costs decreased by $6.8 million (of which $5.8 million
represented the expenses other than interest, depreciation, and amortization of
the transferred center), to $42.0 million for the three months ended March 31,
1999. Recoverable expenses increased primarily due to the Cherry Creek expansion
and Arizona Mills. Interest expense decreased due to the assumption of debt by
GMPT as part of the GMPT Exchange.
As a result of the foregoing, income before extraordinary item of the
Unconsolidated Joint Ventures decreased by $5.0 million, or 21.5%, to $18.3
million. The Company's equity in income before extraordinary item of the
Unconsolidated Joint Ventures was $9.6 million, a 17.9% decrease from the
comparable period in 1998.
Net Income
- ----------
As a result of the foregoing, the Company's income before extraordinary item
and minority interest decreased $6.9 million, or 32.7%, to $14.2 million for the
three months ended March 31, 1999. During 1998, an extraordinary charge of $1.0
million was recognized related to the extinguishment of debt. The minority
interest in the Company's results decreased to $7.5 million, from $11.2 million
in 1998, primarily reflecting the Company's increased ownership in the Operating
Partnership due to the GMPT Exchange. After payment of $4.2 million in Series A
preferred dividends, net income available to common shareowners for 1999 was
$2.5 million compared to $4.8 million in 1998.
Investment in Fashionmall.com
- -----------------------------
In April 1999, the Company made an investment of $5.8 million in an
e-commerce company that markets and sells fashion apparel, footwear, and beauty
products over the Internet. The Company's investment will become 824,084
convertible preferred shares of Fashionmall.com, Inc., a 9.9% interest in the
company, upon completion of Fashionmall.com, Inc.'s anticipated initial public
offering which is currently in registration. The investment was based on a $7.00
per share purchase price, and is subject to an upward adjustment to the lower of
the initial public offering price and $9.00 per share. In addition, the Company
received an option, exercisable during the 60-day period commencing one year
after the offering, to purchase an additional 924,898 shares of common stock at
the initial public offering price per share.
-16-
<PAGE>
Liquidity and Capital Resources
On September 30, 1998, the Company obtained a majority and controlling
interest in the Operating Partnership as a result of the GMPT Exchange (See
Results of Operations - GMPT Exchange and Related Transactions above). As of
that date the Company consolidated the accounts of the Operating Partnership in
the Company's financial statements. Prior to that date the Company accounted for
its investment in the Operating Partnership under the equity method. In the
following discussion, references to beneficial interest represent the Operating
Partnership's share of the results of its consolidated and unconsolidated
businesses. The Company does not have and has not had any parent company
indebtness; all debt discussed represents obligations of the Operating
Partnership or its subsidiaries and joint ventures.
The Company believes that its net cash provided by operating activities,
distributions from the Joint Ventures, the unutilized portion of its credit
facilities, and its ability to access the capital markets, assures adequate
liquidity to conduct its operations in accordance with its dividend and
financing policies.
As of March 31, 1999, the Company had a consolidated cash balance of $12.5
million. Additionally, the Company has an unsecured $200 million line of credit.
The line had $90 million of borrowings as of March 31, 1999 and expires in
September 2001. The Company also has available an unsecured bank line of credit
of up to $40 million. The line had $13.1 million of borrowings as of March 31,
1999 and expires in August 1999.
Proceeds from borrowings provided funding of $89.3 million for the first three
months of 1999 compared to $129.9 million in the comparable period of 1998
(including $77.7 million for the redemption of 6.1 million units of partnership
interest in January 1998). Additionally, the proceeds were used to fund capital
expenditures for the Consolidated Businesses and contributions to Unconsolidated
Joint Ventures for construction costs.
At March 31, 1999, the Operating Partnership's debt and its beneficial
interest in the debt of its Consolidated and Unconsolidated Joint Ventures
totaled $1,274.9 million. As shown in the following table, $279.6 million of
this debt was floating rate debt that remained unhedged at March 31, 1999.
Interest rates shown do not include amortization of debt issuance costs and
interest rate hedging costs. These items are reported as interest expense in the
results of operations. In the aggregate, these costs added 0.42% to the
effective rate of interest on beneficial interest in debt at March 31, 1999.
Included in beneficial interest in debt is debt used to fund development and
expansion costs. Beneficial interest in assets on which interest is being
capitalized totaled $177.4 million as of March 31, 1999. Beneficial interest in
capitalized interest was $4.4 million for the three months ended March 31, 1999.
Beneficial Interest in Debt
-----------------------------------------------
Amount Interest LIBOR Frequency LIBOR
(in millions Rate at Cap of Rate at
of dollars) 3/31/99 Rate Resets 3/31/99
----------- ------- ---- ------ -------
Total beneficial interest
in fixed rate debt $408.5 8.01%(1)
Floating rate debt
hedged via interest rate caps:
Through May 1999 200.0 6.09 (1) 6.00% Monthly 4.94%
Through July 1999 65.0 5.71 7.00 Monthly 4.94
Through December 1999 200.0 6.09 (1) 7.00 Monthly 4.94
Through October 2001 25.0 5.39 8.55 Monthly 4.94
Through January 2002 53.4 6.23 (1) 9.50 Monthly 4.94
Through July 2002 43.4 6.10 6.50 Monthly 4.94
Other floating rate debt 279.6 6.09 (1)
-----
Total beneficial interest in debt $1,274.9 6.68 (1)
========
1) Denotes weighted average interest rate.
-17-
<PAGE>
Certain loan agreements contain various restrictive covenants, including
limitations on net worth, minimum debt service and fixed charges coverage
ratios, a maximum payout ratio on distributions, and a minimum debt yield ratio,
the latter being the most restrictive. The Company is in compliance with all of
such covenants.
In April 1999, a secured, ten-year financing of $270 million with an all-in
rate of approximately 6.9% on The Mall at Short Hills was completed. The Company
used the proceeds to partially pay down its $340 million bridge loan which
matures on June 21, 1999. The Company is currently working on securing a
mortgage on Biltmore Fashion Park to refinance the remaining $70 million balance
on the bridge loan.
Also in April 1999, a three-year $170 million facility, secured by Great Lakes
Crossing, was finalized. The loan agreement provides for an option to extend the
maturity date one year. The loan bears interest at one month LIBOR plus 1.50%.
Proceeds from the loan were used to repay the balance of the existing unsecured
construction facility. Payment of principal and interest are guaranteed by the
Operating Partnership. The loan agreement provides for a reduction of the
interest rate and the amount guaranteed as certain center performance and
valuation criteria are met. In addition, the Company finalized an amendment to
the MacArthur Center construction facility. The total availability under the
facility is $120 million with interest at one month LIBOR plus 1.35%.
Sensitivity Analysis
The Company has exposure to interest rate risk on its debt obligations and
interest rate instruments. Based on the Operating Partnership's beneficial
interest in debt and interest rates in effect at March 31, 1999 and considering
the Short Hills financing mentioned above, a one percent increase or decrease in
interest rates would decrease or increase annual earnings and cash flows by
approximately $5.1 million. Based on the Company's consolidated debt and
interest rates in effect at March 31, 1999, as well as the Short Hills
financing, a one percent increase or decrease in interest rates would decrease
or increase the fair value of debt by approximately $25 million.
Funds from Operations
A principal factor that the Company considers in determining dividends to
shareowners is Funds from Operations, which is defined as income before
extraordinary and unusual items, real estate depreciation and amortization, and
the allocation to the minority interest in the Operating Partnership, less
preferred dividends.
Funds from Operations does 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 suggests that Funds
from Operations is a useful supplemental measure of operating performance for
REITs.
-18-
<PAGE>
Reconciliation of Net Income to Funds from Operations
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
------------------ ------------------
(in millions of dollars)
Income before extraordinary item
and minority interest (1) 14.2 21.1
Depreciation and Amortization (2) 12.2 15.1
Share of Unconsolidated Joint Ventures'
depreciation and amortization (3) 5.0 5.1
Other income/expenses, net 0.2
Non-real estate depreciation (0.6) (0.5)
Preferred dividends (4.2) (4.2)
---- ----
Funds from Operations 26.6 36.8
==== ====
Funds from Operations allocable to
the Company 16.7 13.9
==== ====
(1) Includes gains on peripheral land sales of $0.5 million and $0.4 million
for the three months ended March 31, 1999 and March 31, 1998, respectively.
(2) Includes $0.5 million and $0.7 million of mall tenant allowance
amortization for the three months ended March 31, 1999 and March 31,
1998, respectively.
(3) Includes $0.3 million of mall tenant allowance amortization for each of
the three month periods ended March 31, 1999 and March 31, 1998.
Dividends
The Company pays regular quarterly dividends to its common and Series A
preferred shareowners. Dividends to its common shareowners 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. Preferred dividends accrue regardless of
whether earnings, cash availability, or contractual obligations were to prohibit
the current payment of dividends.
On March 4, 1999, the Company declared a quarterly dividend of $0.24 per
common share payable April 20, 1999 to shareowners of record on March 31, 1999.
The Board of Directors also declared a quarterly dividend of $0.51875 per share
on the Company's 8.3% Series A Preferred Stock for the quarterly dividend period
ended March 31, 1999, which was paid on March 31, 1999 to shareowners of record
on March 16, 1999.
The tax status of total 1999 common dividends declared and to be declared,
assuming continuation of a $0.24 per common share quarterly dividend, is
estimated to be approximately 50% return of capital, and approximately 50% of
ordinary income. The tax status of total 1999 dividends to be paid on Series A
Preferred Stock is estimated to be 100% ordinary income. These are
forward-looking statements 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 anticipated taxable income of the
Operating Partnership due to the actual results of the Operating Partnership; 3)
changes in the number of the Company's outstanding shares; 4) property
acquisitions or dispositions; 5) financing transactions, including refinancing
of existing debt; and 6) changes in the Internal Revenue Code or its
application.
The annual determination of the Company's common dividends is based on
anticipated Funds from Operations available after preferred dividends, as well
as financing considerations and other appropriate factors. Further, the Company
has decided that the growth in common dividends will be less than the growth in
Funds from Operations for the immediate future.
Any inability of the Operating Partnership 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 the Operating Partnership and funds available to
the Company for the payment of dividends.
-19-
<PAGE>
Capital Spending
Capital spending for routine maintenance of the shopping centers is generally
recovered from tenants. The following table summarizes planned capital spending,
which is not recovered from tenants and assuming no acquisitions during 1999:
<TABLE>
<CAPTION>
1999
------------------------------------------------------------
Beneficial Interest in
Unconsolidated Consolidated Businesses
Consolidated Joint and Unconsolidated
Businesses Ventures(1) Joint Ventures(1)(2)
------------------------------------------------------------
(in millions of dollars)
<S> <C> <C> <C>
Development, renovation, and
expansion 223.4 (3) 25.4 190.0
Mall tenant allowances 6.1 9.8 11.1
Pre-construction development and
other 21.5 4.0 23.5
----- ----- -----
Total 251.0 39.2 224.6
===== ===== =====
(1) Costs are net of intercompany profits.
(2) Includes the Operating Partnership's share of construction costs for
MacArthur Center (a 70% owned consolidated joint venture), The Mall at
Wellington Green (a 90% owned consolidated joint venture) and International
Plaza (a 50.1% owned consolidated joint venture).
(3) Includes costs related to MacArthur Center, The Shops at Willow Bend, The Mall at
Wellington Green and International Plaza.
</TABLE>
MacArthur Center, a new center in Norfolk, Virginia, opened in March 1999. The
930,000 square foot center is anchored by Nordstrom and Dillard's. This center
is owned by a joint venture in which the Operating Partnership has a 70%
controlling interest and cost approximately $157 million.
International Plaza, a new 1.3 million square foot center under
construction in Tampa, Florida, will be anchored by Nordstrom, Lord & Taylor,
Dillard's and Neiman Marcus. This center will be owned by a joint venture in
which the Operating Partnership will have a controlling 50.1% interest. In 1999,
the Company held ground-breaking ceremonies for The Shops at Willow Bend, a new
1.5 million square foot center in Plano, Texas. Anchors will be Neiman Marcus,
Saks Fifth Avenue, Lord & Taylor, Foley's and Dillard's. The Mall at Wellington
Green, a 1.3 million square foot center under construction in West Palm Beach
County, Florida, will be anchored by Lord & Taylor, Burdine's, Dillard's and
JCPenney. The center will be owned by a joint venture in which the Operating
Partnership has a 90% controlling interest. All three of these centers are
expected to open in 2001 and will have an aggregate cost to the Operating
Partnership of over $500 million. The Operating Partnership is presently
arranging construction loans for these projects and expects to complete the
financings by the end of 1999.
In 1996, the Operating Partnership entered into an agreement to lease Memorial
City Mall, 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. In
November 1999, the Operating Partnership has the option to terminate the lease
by paying $2 million to the lessor. The Operating Partnership is using this
option period to evaluate the redevelopment opportunities of the center. Under
the terms of the lease, the Operating Partnership has agreed to invest a minimum
of $3 million during the three-year option period. If the redevelopment
proceeds, the Operating Partnership is required to invest an additional $22
million in property expenditures not recoverable from tenants during the first
10 years of the lease term.
The Operating Partnership and The Mills Corporation have formed an alliance to
develop value super-regional projects in major metropolitan markets. The
ten-year agreement calls for the two companies to jointly develop and own at
least seven of these centers, each representing approximately $200 million of
capital investment. A number of locations across the nation are targeted for
future initiatives.
-20-
<PAGE>
The Operating Partnership anticipates that its share of costs for development
projects scheduled to be completed in 2001 will be as much as $185 million in
2000. The Operating Partnership's estimates of 1999 and 2000 capital spending
include only projects approved by the Company's Board of Directors and,
consequently, estimates will change as new projects are approved. 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 and number of
projects; 3) cost overruns; 4) timing of expenditures; 5) financing
considerations; and 6) actual time to complete projects.
Year 2000 Matters
The approach of the calendar year 2000 (Year 2000) presents issues for many
financial, information, and operational systems that may not properly recognize
the Year 2000. The Company has developed a high-level plan to address the risks
posed by the Year 2000 issue, covering affected application and infrastructure
systems. Affected systems include both informational (such as accounting and
payroll) and operational (such as elevators, security and lighting). The
Company's plan also addresses the effect of Year 2000 on third parties with
which it conducts business, including tenants, vendors, contractors, creditors,
and others. The Company has completed the assessment, inventory, planning and
testing phases of its plan and has determined that the majority of the Company's
internal systems and all of its mission critical systems are already Year 2000
compliant. The Company has requested information and has obtained commitments
from tenants, vendors, suppliers and business partners and is continuing to
develop contingency plans to minimize the impact on the Company in the event
they do not meet their Year 2000 commitments.
The Company performed a full system test during the first quarter of 1999 and
expects to remediate any remaining issues encountered with application and
infrastructure systems through repair and/or replacement in the second quarter.
The estimated costs of addressing this issue are not expected to be material to
1999 operations. The Company will also continue monitoring the progress of
material third parties' responses to the Year 2000 issue. The Company believes
that its most likely exposure will be the failure of third parties in
comprehensively addressing the issue. For example, failure of utility companies
to meet their commitments might result in temporary business interruption at
centers. The Company is continuing to develop contingency plans in response to
such exposure, as appropriate. Failure of third parties with which the Company
conducts business to successfully respond to the Year 2000 issue may have a
material adverse effect on the Company.
Cash Tender Agreement
A. Alfred Taubman has the annual right to tender to the Company units of
partnership interest in the Operating Partnership (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). At A. Alfred Taubman's election, his family, and Robert C. Larson
and his family may participate in tenders. 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 partner will bear all market risk if the market price at closing
is less than the purchase price and 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.
Based on a market value at March 31, 1999 of $12.25 per common share, the
aggregate value of interests in the Operating Partnership that may be tendered
under the Cash Tender Agreement was approximately $296 million. The purchase of
these interests at March 31, 1999 would have resulted in the Company owning an
additional 29% interest in the Operating Partnership.
-21-
<PAGE>
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
requires companies to record derivatives on the balance sheet as assets and
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivatives and whether it qualifies for hedge accounting. This statement is
not expected to have a material impact on the Company's consolidated financial
statements. This statement is effective for fiscal years beginning after June
15, 1999.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is included in this report at Item 2
under the caption "Liquidity and Capital Resources - Sensitivity Analysis".
-22-
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10 -- The Taubman Company Long-Term Performance Compensation Plan
(as amended and restated effective January 1, 1999).
12 -- Statement Re: Computation of Taubman Centers, Inc. Ratio
of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
27 -- Financial Data Schedule.
b) Current Reports on Form 8-K.
None
-23-
<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: May 4, 1999 By: /s/ Lisa A. Payne
-----------------
Lisa A. Payne
Executive Vice President
and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number
-------
10 -- The Taubman Company Long-Term Performance Compensation Plan
(as amended and restated effective January 1, 1999).
12 -- Statement Re: Computation of Taubman Centers, Inc. Ratio of
Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
27 -- Financial Data Schedule.
THE TAUBMAN COMPANY
LONG-TERM PERFORMANCE
COMPENSATION PLAN
(AS AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 1999)
<PAGE>
THE TAUBMAN COMPANY
LONG-TERM PERFORMANCE
COMPENSATION PLAN
(AS AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 1999)
TABLE OF CONTENTS
Page
ARTICLE 1 BACKGROUND AND PURPOSE OF THE PLAN;
ADOPTION OF THE PLAN; TERM................................. 1
1.1 Background................................................... 1
1.2 Purpose of the Plan.......................................... 1
1.3 Amendment and Restatement and Term........................... 1
ARTICLE 2 DEFINITIONS.................................................. 1
ARTICLE 3 ADMINISTRATION............................................... 6
3.1 Administration............................................... 6
3.2 Binding Effect of Decisions.................................. 6
3.3 Expenses of Administration................................... 6
3.4 Indemnification.............................................. 6
ARTICLE 4 PARTICIPATION; GRANTS; DIVIDEND EQUIVALENTS.................. 7
4.1 Participation................................................ 7
4.2 Power to Grant Notional Share Awards......................... 7
4.3 Dividend Equivalents......................................... 7
4.4 Participant to Have No Rights as a
Shareholder in TCO or a Partner in TRG....................... 7
4.5 Conversion of Notional Units of Partnership
Interests to Notional Shares of Common Stock................. 7
ARTICLE 5 ESTABLISHMENT, MAINTENANCE AND VESTING
OF SUB ACCOUNTS............................................. 7
5.1 Agreements Evidencing Notional Share Awards.................. 7
5.2 Plan Provisions Control Notional Share Award Terms........... 8
5.3 Establishment of Sub Accounts................................ 8
5.4 Vesting of Each Sub Account.................................. 8
5.5 Death, Disability or Retirement During the Vesting Period.... 8
5.6 Acceleration of Vesting...................................... 8
5.7 Forfeiture of Sub Accounts................................... 8
5.8 Statement of Accounts........................................ 9
ARTICLE 6 CALCULATION, PAYMENT AND WITHDRAWAL OF SUB ACCOUNTS.......... 9
6.1 Notional Unit Awards Granted Prior to January 1, 1999........ 9
6.2 Notional Share Awards Granted on or After January 1, 1999.... 9
6.3 Crediting of Interest During Deferral Period................. 9
6.4 Time and Manner of Payment................................... 9
6.5 Deferral of Settlement Date.................................. 10
6.6 Early Termination of Deferral Period......................... 10
6.7 Taxes........................................................ 10
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6.8 Dealings with Beneficiaries or Representatives
of a Participant............................................ 10
ARTICLE 7 AMENDMENT AND TERMINATION OF THE PLAN........................ 11
7.1 Amendment of the Plan........................................ 11
7.2 Termination of the Plan...................................... 11
7.3 Dissolution of TRG........................................... 11
7.4 Termination of Management Contract/
Change of Control Event..................................... 11
ARTICLE 8 BENEFICIARY DESIGNATION...................................... 12
8.1 Beneficiary Designation...................................... 12
8.2 In the Event of No Valid Designation......................... 12
ARTICLE 9 GENERAL PROVISIONS........................................... 12
9.1 Compliance with Applicable Laws and Regulations.............. 12
9.2 Status of Each Participant is that of an Unsecured
General Creditor............................................ 12
9.3 Nonassignability............................................. 13
9.4 No Right to Continued Employment............................. 13
9.5 Inspection of Records........................................ 13
9.6 Word Meanings................................................ 13
9.7 Section Titles............................................... 13
9.8 Severability................................................. 13
9.9 Strict Construction.......................................... 13
9.10 Choice of Law................................................ 13
9.11 Execution.................................................... 14
<PAGE>
THE TAUBMAN COMPANY
LONG-TERM PERFORMANCE
COMPENSATION PLAN
(As Amended and Restated
Effective January 1, 1999)
Article 1
Background and Purpose of the Plan; Adoption of the Plan; Term.
1.1 Background. The Taubman Realty Group Limited Partnership, a Delaware
limited partnership (including any successor thereto, "TRG") was formed for the
purposes of, among other things, owning, operating, maintaining, developing,
holding, improving, redeveloping, expanding, leasing, financing, selling,
exchanging, disposing of, and generally dealing in and with, regional retail
shopping centers and opportunities to develop regional retail shopping centers
(and interests therein). TRG has engaged THE TAUBMAN COMPANY LIMITED
PARTNERSHIP, a Delaware limited partnership (the "Company"), on an exclusive
basis, to provide various services, including management, leasing, development,
acquisition, and administrative services, to TRG and entities in which TRG has a
significant interest.
1.2 Purpose of the Plan. The Taubman Company Long-Term Performance
Compensation Plan, as the same may be amended from time to time (the "Plan"), is
intended to provide deferred compensation to certain key employees of the
Company, to provide incentives to employees of the Company to remain in the
employ of the Company for the benefit of TRG, and to attract new employees with
outstanding qualifications to serve the Company.
1.3 Amendment and Restatement and Term. The Plan is hereby amended and
restated effective as of January 1, 1999. The Plan will remain in effect until
terminated or abandoned by action of the Company and the Compensation Committee.
Article 2
Definitions
In the Plan, whenever the context so indicates, the singular or plural
number, and the masculine, feminine or neuter gender shall each be deemed to
include the other, the terms "he," "his," and "him" shall refer to a
Participant, and the capitalized terms shall have the following meanings:
2.1 "Beneficiary" means (i) an individual, trust, estate, or family trust
who or which, by will or by operation of the laws of descent and distribution,
succeeds to the rights and obligations of a Participant under the Plan upon the
Participant's death; or (ii) an individual who, as a result of designation by a
Participant in a Beneficiary Designation, or as otherwise provided in Article 8,
succeeds to the rights and obligations of such Participant under the Plan upon
such Participant's death.
2.2 "Beneficiary Designation" is defined in Section 8.1 hereof.
2.3 "Board of Directors" means the Board of Directors of TCO, including
any Committee or Committees of the Board established pursuant to the By-Laws of
TCO.
2.4 "Business Day" means any Day on which the New York Stock Exchange is
open for trading.
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2.5 "Change of Control Event" means:
(a) Any removal or election of a member of the Board of
Directors, which removal or election was not approved by a vote of at
least 70% of the directors comprising the Board of Directors on the date
immediately preceding the removal or election, or
(b) The acquisition by any person or group or persons
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") other than A. Alfred
Taubman or any of his immediate family members or lineal descendants, any
heir of the foregoing, any trust for the benefit of any of the foregoing,
any private charitable foundation or any partnership, limited liability
company or corporation owned or controlled by some or all of the
foregoing, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 40% or more of the outstanding
voting capital stock of TCO.
2.6 "Code" means the Internal Revenue Code of 1986, as amended from time
to time (or any corresponding provisions of succeeding law).
2.7 "Common Stock" means the common stock of TCO, par value $.01 per
share.
2.8 "Company" means The Taubman Company Limited Partnership, a Delaware
limited partnership, the present constituency of which is Taub-Co Management,
Inc., a Michigan corporation, and TRG, and any successor interest to the
business of the Company that has, by agreement, adopted the Plan.
2.9 "Compensation Committee" or "Committee" means the Compensation
Committee of the Board of Directors of TCO.
2.10 "Date of Grant" means, with respect to a Notional Share Award,
January 1st of the year in which the Compensation Committee awards such Notional
Share Award pursuant to the Plan, unless the Compensation Committee specifically
provides otherwise.
2.11 "Day" means each calendar day, including Saturdays, Sundays, and
legal holidays; provided, however, that if the Day on which a period of time for
consent or approval or other action ends is not a Business Day, such period
shall end on the next Business Day.
2.12 "Dividend Equivalent" is defined in Section 4.3 hereof.
2.13 "Deemed Dividend Date" means any date on which each Sub Account
established pursuant to this Plan is credited with a Dividend Equivalent with
respect to the aggregate number of Notional Shares then credited to such Sub
Account and shall coincide with the date(s) on which actual dividends are made
with respect to Shares of Common Stock.
2.14 "Deferral Period" means, with respect to a Sub Account, the period
following the Vesting Date of a Sub Account, for which a Participant elects to
defer the Settlement Date.
2.15 "Disability" or "Disabled" means, with respect to an Employee, a
physical or mental condition resulting from any medically determinable physical
or mental impairment that renders such Employee incapable of engaging in any
substantial gainful employmentand that can be expected to result in death or
that has lasted or can be expected to last for a
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continuous period of not less than three hundred sixty-five (365) Days.
Notwithstanding the foregoing, an Employee shall not be deemed to be Disabled as
a result of any condition that:
(a) was contracted, suffered, or incurred while such Employee
was engaged in, or resulted from such Employee having engaged in, a
felonious activity;
(b) resulted from an intentionally self-inflicted injury or an
addiction to drugs, alcohol, or substances which are not administered
under the direction of a licensed physician as part of a medical treatment
plan; or
(c) resulted from service in the Armed Forces of the United
States for which such Employee received or is receiving a disability
benefit or pension from the United States, or from service in the armed
forces of any other country irrespective of any disability benefit or
pension.
The Disability of an Employee and the date upon which an
Employee ceases to be employed by reason of Disability shall be determined by
the Company, in accordance with uniform principles consistently applied, upon
the basis of such evidence as the Compensation Committee and the Company deem
necessary and desirable, and its good faith determination shall be conclusive
for all purposes of this Plan. The Compensation Committee or the Company shall
have the right to require an Employee to submit to an examination by a physician
or physicians and to submit to such reexaminations as the Compensation Committee
or the Company shall require in order to make a determination concerning the
Employee's physical or mental condition; provided, however, that (i) an Employee
may not be required to undergo a medical examination more often than once each
one hundred eighty (180) Days nor at any time after the normal date of the
Employee's Retirement, and (ii) the fees and expenses of any such medical
examination(s) shall be considered expenses of administering the Plan. If any
Employee engages in any occupation or employment (except for rehabilitation as
determined by the Compensation Committee, upon the recommendation from the
Company) for remuneration or profit, which activity would be inconsistent with
the finding of Disability, or if the Compensation Committee, upon the
recommendation from the Company, determines on the basis of a medical
examination that an Employee no longer has a Disability, or if an Employee
refuses to submit to any medical examination properly requested by the
Compensation Committee or the Company, then in any such event, the Employee
shall be deemed to have recovered from such Disability.
2.16 "Effective Date" of the Plan, as amended and restated, means January
1, 1999.
2.17 "Employee" means an individual who is and continues to be employed by
the Company or an affiliate of the Company. An Employee shall cease to be an
Employee upon the voluntary or involuntary termination of his employment with
the Company or an affiliate of the Company for any reason, including death,
Disability, Retirement, or with or without cause. Transfers of employment
between the Company and an affiliate of the Company, or between affiliates of
the Company, shall not affect an individual's status as an Employee for purposes
of the Plan and shall not be treated as a cessation of employment provided that
the cessation of employment with the Company or an affiliate of the Company is
immediately followed by employment with the Company or another affiliate of the
Company. Whether an authorized leave of absence, or an absence due to military
or government service, Disability, or any other reason, constitutes a cessation
of employment shall be determined by the Company.
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<PAGE>
2.18 "Fair Market Value of the Common Stock" means the per share value of
the Common Stock on the applicable date, and is determined as follows:
(a) If the Common Stock is listed or admitted for trading on
any national securities exchange, the Fair Market Value of the Common
Stock is the closing price per share on such exchange on such date (or, if
listed on more than one exchange, the principal said exchange).
(b) If the Common Stock is not traded on any national
securities exchange, but is quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System (NASDAQ System) or any
similar system of automated dissemination of quotations of prices in
common use, the Fair Market Value of the Common Stock is the price per
share equal to the mean between the closing high bid and the closing low
bid on such system on such date.
(c) If neither paragraph (a) nor paragraph (b) of this
definition is applicable, the Fair Market Value of the Common Stock is the
fair market value per share, on the applicable date, as determined by, or
in accordance with a method or formula or process established from time to
time by, the Board of Directors (or by the Compensation Committee if the
Board of Directors so directs), in good faith and in accordance with
uniform principles consistently applied.
2.19 "Notional Share Award" or "Award" means an award of a Notional Share
of Common Stock under this Plan.
2.20 "Notional Share Account" means the total of all Sub Accounts
maintained for each Participant pursuant to this Plan. A separate Notional Share
Account will be maintained for each Participant. Each Participant's Notional
Share Account will be utilized solely as a device for the measurement and
determination of the amount(s) to be paid to or for the benefit of the
Participant pursuant to this Plan and will not under any circumstances
constitute or be treated as a trust fund of any kind.
2.21 "Notional Share of Common Stock" or "Notional Share" means a phantom
share of Common Stock granted under this Plan and shall not represent any
ownership interest in any actual shares of Common Stock.
2.22 "Participant" means an Employee who is designated by the Compensation
Committee to participate in this Plan and who has received a Notional Share
Award pursuant to this Plan.
2.23 "Partnership Agreement" means The Second Amendment and Restatement of
Agreement of Limited Partnership of The Taubman Realty Group Limited
Partnership, as the same may be amended and/or supplemented.
2.24 "Payout Value" means, with respect to a Sub Account, the amount
credited to such Sub Account as of the Settlement Date of such Sub Account in
accordance with the provisions of Article 6. The Payout Value and the Vesting
Date Value for a Sub Account shall be the same if the Participant does not elect
to defer distribution of such Sub Account beyond the Vesting Date for such Sub
Account.
2.25 "Person" or "Persons" means an individual, a partnership (general or
limited), corporation, joint venture, business trust, cooperative, association,
or other form of business organization, whether or not regarded as a legal
entity under applicable law, a trust (inter vivos or testamentary), an estate of
a deceased, insane, or incompetent person, a quasi-governmental entity, a
government or any agency, authority, political subdivision, or other
instrumentality thereof, or any other entity.
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<PAGE>
2.26 "Plan" means The Taubman Company Long Term Performance Compensation
Plan as amended and restated effective January 1, 1999.
2.27 "Prior Plan" means The Taubman Company Long Term Performance
Compensation Plan effective January 1, 1996.
2.28 "Retirement" means the termination of employment by an Employee after
the attainment of the age of sixty-two (62) years or upon such earlier date as
required by local law or as otherwise determined or approved by the President of
the Company.
2.29 "Settlement Date" means, with respect to a Sub Account, the date on
which the Award credited to such Sub Account becomes vested or, in the case of
an Award for which the Participant has elected to defer the Settlement Date, the
date on which the Deferral Period expires or is otherwise terminated under the
provisions of the Plan.
2.30 "Sub Account" means the account established for each Award added to a
Participant's Notional Share Account. Each Sub Account will be utilized solely
as a device for the measurement and determination of the amount(s) to be paid to
or for the benefit of the Participant pursuant to this Plan, and will not under
any circumstances constitute or be treated as a trust fund of any kind. A
separate Sub Account will be established for each Award, which Sub Account will
be credited and maintained and will vest and be paid out, or be terminated or
forfeited in accordance with the terms of the Plan.
2.31 "TCO" means Taubman Centers, Inc., a Michigan corporation.
2.32 "Termination for Cause" means termination of employment by reason of
a Participant's action or repeated acts, including without limitation, the
commission of a felony, fraud, or willful misconduct, which has resulted, or is
likely to result, in damage to the Company, an affiliate of the Company, or TRG,
as the Company may conclusively determine.
2.33 "Vesting Date" means, with respect to a Notional Share Award, the
date that is the third anniversary of the Date of Grant of such Award.
2.34 "Vesting Date Value" means the value of a Sub Account on the Vesting
Date for such Sub Account and is calculated by multiplying (a) the number of
Notional Shares credited to the Sub Account as of the Vesting Date of such Sub
Account, by (b) the average of the Fair Market Value of the Common Stock for the
twenty (20) Business Days preceding the Vesting Date.
2.35 "Vesting Period" means, with respect to a Notional Share Award, the
three-year period following the Date of Grant of such Award.
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<PAGE>
Article 3
Administration.
3.1 Administration. The Plan shall be administered by the Compensation
Committee in accordance with this Article 3. Except as otherwise provided in the
Partnership Agreement or this Plan, the Compensation Committee shall have the
sole discretionary authority (i) to select the Employees who are to be granted
Notional Share Awards under the Plan, (ii) to determine the number of Notional
Shares to be granted to Employees and the manner of making or determining such
grant, (iii) to authorize the granting of Notional Shares, (iv) to interpret the
Plan, (v) to establish and modify administrative rules for the Plan, (vi) to
impose such conditions and restrictions on Notional Share Awards as it
determines appropriate, and (vii) to take any other actions in connection with
the Plan and the Notional Share Awards and to make all determinations under the
Plan as it may deem necessary or advisable.
It is anticipated that the Compensation Committee will act upon a
recommendation from the Company in exercising the discretion granted to the
Compensation Committee under this Plan. Action taken or not taken by the Company
or the Compensation Committee on one or more occasions shall be without
obligation to take or not take such action on any other occasion(s).
The Compensation Committee may delegate to one or more Persons any of its
powers, other than its power to authorize the granting of Notional Share Awards,
hereinbefore or hereinafter, provided or conferred, or designate one or more
Persons to do or perform those matters to be done or performed by the
Compensation Committee, including administration of the Plan. Any Person or
Persons delegated or designated by the Compensation Committee shall be subject
to the same obligations and requirements imposed on the Compensation Committee
and its members under the Plan.
3.2 Binding Effect of Decisions. The decision or action of the Company
(including that of the Compensation Committee) in respect of any question
arising out of or in connection with the administration, interpretation and
application of this Plan and the rules and regulations promulgated hereunder
shall be final and conclusive and binding upon all Persons having any interest
in this Plan.
3.3 Expenses of Administration. The Company shall pay all costs and
expenses of administering the Plan.
3.4 Indemnification. The Board of Directors, the Compensation Committee,
members of the Board of Directors and the Compensation Committee, and each
Person or Persons designated or delegated by the Board of Directors or the
Compensation Committee, and the Company and each affiliate of the Company and
the officers or agents of the Company and each partner of the Company and of TRG
and the officers, directors, committee members and agents of each such partner
shall be entitled to indemnification and reimbursement from the Company and from
TRG for any action or any failure to act in connection with services performed
by or on behalf of the Compensation Committee or the Company to the fullest
extent provided or permitted by the Partnership Agreement, the partnership
agreement of the Company and by any insurance policy or other agreement intended
for the benefit of the Compensation Committee or an indemnified Person
hereunder, or by any applicable law.
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<PAGE>
Article 4
Participation; Grants; Dividend Equivalents
4.1 Participation. All Employees shall be eligible to receive Notional
Share Awards under the Plan. The Participants shall be such Employees as the
Compensation Committee may select (who may include executive officers of the
Company). Participation under the Plan shall be based upon the past and expected
future contribution of such Employee to the Company.
4.2 Power to Grant Notional Share Awards. The Compensation Committee may
determine the pool of Notional Shares to be awarded under the Plan at such time
or times, and in such quantity and subject to such terms and conditions not
inconsistent with the terms of the Plan, as the Compensation Committee shall
determine. The Company shall then allocate Notional Shares in such amount and to
such Employees as the Company shall determine. In allocating Notional Shares to
Participants, the Company shall consider individual performance and such other
criteria as the Company deems relevant. Such allocation shall be confirmed by
the Compensation Committee.
4.3 Dividend Equivalents. Effective January 1, 1999, each Sub Account
(including Sub Accounts established for Awards granted prior to January 1, 1999)
shall be credited, as of each Deemed Dividend Date, with that number of Notional
Shares (a "Dividend Equivalent") having a then fair market value equal to the
product of (a) the dividend amount paid with respect to each actual share of
Common Stock on such Deemed Dividend Date, and (b) the number of Notional Shares
credited to such Sub Account as of the Day immediately preceding such Deemed
Dividend Date. Dividend Equivalents credited to a Sub Account shall vest at the
same time as the Award credited to such Sub Account. Effective for Notional
Share Awards granted on or after January 1, 1999, Dividend Equivalents shall
cease to be credited to a Sub Account as of the Vesting Date of such Sub
Account.
4.4 Participant to Have No Rights as a Shareholder in TCO or a Partner in
TRG. A Participant shall have no rights at any time as a shareholder in TCO or a
partner in TRG with respect to the Notional Shares of Common Stock awarded to
him under this Plan.
4.5 Conversion of Notional Units of Partnership Interests to Notional
Shares of Common Stock. Effective January 1, 1999, all Notional Units of
Partnership Interest granted under the Prior Plan shall be converted into
Notional Shares of Common Stock. With respect to Notional Unit Awards granted as
of January 1, 1998, the amount of the Participant's Notional Unit Award will be
confirmed or adjusted, and finally determined in accordance with the terms of
the Prior Plan.
Article 5
Establishment, Maintenance and Vesting
of Sub Accounts
5.1 Agreements Evidencing Notional Share Awards. The terms of each
Notional Share Award shall be evidenced by a written agreement (an "Award
Agreement"), in such form as the Company may from time to time determine,
executed by the Company and the Participant. Such agreement shall state the
number of Notional Shares granted to the Participant and the vesting schedule of
the Award and/or such other terms as the Company shall determine. Each Award
Agreement shall comply with and be subject to the terms and conditions of the
Plan and such other terms and conditions as the Company may deem appropriate. No
Person shall have any rights under any Notional Share Award granted under the
Plan unless and until the Company and the Participant have executed an Award
Agreement setting forth the grant and the terms and conditions of the Notional
Share Award.
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<PAGE>
5.2 Plan Provisions Control Notional Share Award Terms. The terms of the
Plan shall govern all Notional Share Awards granted under the Plan. In the event
that any provision of a Notional Share Award granted under the Plan or the Award
Agreement shall conflict with any term in the Plan as constituted on the Date of
Grant of such Notional Share Award, the term in the Plan shall control.
5.3 Establishment of Sub Accounts. Each Notional Share Award to a
Participant shall be added to the Participant's Notional Share Account by
establishing a separate Sub Account equal to such addition, which new Sub
Account shall be deemed established as of the Date of Grant. The number of
Notional Shares credited to each Sub Account shall equal the number of Notional
Shares granted pursuant to the Award. Each such Sub Account shall vest as
provided in Section 5.4, shall be credited with Dividend Equivalents on each
Deemed Dividend Date, as provided in Section 4.3, and, subject to the provisions
of the Plan, shall be paid to the Participant as provided in Article 6.
5.4 Vesting of Each Sub Account. Subject to the provisions of Section 5.6
and 5.7, each Sub Account (including those Sub Accounts established under the
Prior Plan) shall vest 100% on the third anniversary of the Date of Grant (i.e.,
the Vesting Date), provided the Participant is still in the employ of the
Company, or upon the earlier death, Retirement or Disability of the Participant
for whom such Sub Account is maintained, dissolution of TRG, occurrence of a
Change of Control Event, or termination (without renewal) of the Master Services
Agreement (as defined in the Partnership Agreement). Any Dividend Equivalents
credited to a Sub Account pursuant to Section 4.3 shall vest at the same time as
the Notional Share Award credited to such Sub Account.
5.5 Death, Disability or Retirement During the Vesting Period. In the
event that a Participant dies, becomes Disabled or terminates employment by
reason of Retirement during a Vesting Period, such Participant's Sub Accounts
(which have become 100% vested pursuant to Section 5.4) shall be calculated as
of the date of the Participant's death, Disability or Retirement by multiplying
the number of Notional Shares credited to the Participant's Sub Accounts by the
average of the Fair Market Value of Common Stock for the twenty (20) Business
Days immediately preceding the date of death, Disability or Retirement. A
Participant's Notional Share Accounts shall be paid in a lump sum cash payment
as soon as administratively practicable following the Participant's death or
Retirement. In the event of a Participant's Disability only, the Company, in its
sole discretion, may elect to distribute such Participant's Notional Share
Accounts either (i) as soon as administratively practicable following the date
of Disability, or (ii) in January of the calendar year following the year in
which the Participant became Disabled.
5.6 Acceleration of Vesting. Notwithstanding anything to the contrary in
the Plan, including Section 5.4 hereof, the Compensation Committee, in its
discretion, upon the recommendation from the Company, may accelerate at any time
the vesting of a Notional Share Award that has not previously become vested.
5.7 Forfeiture of Sub Accounts.
(a) If the employment of a Participant with the Company is
terminated for any reason other than death, Disability, or Retirement, then such
Participant's rights with respect to any Sub Accounts which have not become
vested on or prior to the date of the Participant's termination of employment
will terminate and be forfeited, and neither the Participant nor his heirs,
personal representatives, successors or assigns shall have any rights with
respect to any such Sub Accounts.
(b) Notwithstanding any other provision of the Plan, all rights to
any payments hereunder to a Participant will be discontinued and forfeited, and
the Company will
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<PAGE>
have no further obligation hereunder to such Participant (including with
respect to a vested Sub Account or Accounts), if the Participant is discharged
from employment with the Company and such discharge constitutes a Termination
for Cause.
5.8 Statement of Accounts. The Company shall submit to each Participant,
within 100 days after the end of each calendar year, a statement setting forth
the total number of Notional Shares credited to such Participant's Notional
Share Account, the Fair Market Value of a Notional Share and, for each Sub
Account, the Date of Grant, the Vesting Date of such Award, the Dividend
Equivalents credited to the Sub Account during such calendar year, and the
Deferral Period, if any, in respect of such Sub Account, all as of the close of
business on December 31 of such calendar year, or as of such other date(s) as
the Company shall select. The Company, in its discretion, may also submit
quarterly or semi-annual statements.
Article 6
Calculation, Payment and Withdrawal of Sub Accounts
6.1 Notional Unit Awards Granted Prior to January 1, 1999. Except as
provided in this Section 6.1, Notional Unit Awards granted prior to January 1,
1999 under the Prior Plan will continue to be governed by the terms of the Prior
Plan. Notional Unit Sub Accounts established prior to January 1, 1999 shall be
credited with Dividend Equivalents through the Settlement Date of such Sub
Accounts. The value of such Sub Accounts shall continue to be based on the Fair
Market Value of Common Stock through the Settlement Date of such Sub Accounts;
provided, however, that the Payout Value of those Sub Accounts shall be
calculated by multiplying (a) the number of Notional Shares credited to a Sub
Account(s), by (b) the average of the Fair Market Value of the Common Stock for
the twenty (20) Business Days preceding the Settlement Date.
6.2 Notional Share Awards Granted On or After January 1, 1999. As soon as
administratively practicable following the Vesting Date of any Sub Accounts
established for Notional Share Awards granted on or after January 1, 1999, the
Company shall calculate the Vesting Date Value of such Sub Account by
multiplying the number of Notional Shares credited to such Sub Account on the
Vesting Date by the average of the Fair Market Value of Common Stock for the
twenty (20) Business Days immediately preceding the Vesting Date of such Sub
Account. The Company shall then pay such amount to the Participant in a lump sum
cash payment unless the Participant has elected to defer the payment of his Sub
Account in accordance with the provisions of Section 6.5.
6.3 Crediting of Interest During Deferral Period. Effective for Notional
Share Awards granted on or after January 1, 1999, any Sub Account which a
Participant elects to defer beyond the Vesting Date shall be credited with a
uniform interest rate determined by the President of the Company.
6.4 Time and Manner of Payment. As soon as administratively practicable
following the Settlement Date for a Sub Account of a Participant, the Company
shall pay to the Participant the Payout Value of such Sub Account. Payment to
the Participant of the Payout Value shall be made in cash in a lump sum. Any and
all amounts due under the Plan shall be the sole obligation of the Company, and
neither TRG nor TCO shall have any liability to Participants or Beneficiaries
under this Plan.
-9-
<PAGE>
6.5 Deferral of Settlement Date.
(a) Deferral for One to Five Years. Subject to the provisions of
Section 7.2 of the Plan, each Participant may make, with respect to each
Notional Share Award (i.e., the Sub Account established in respect of such
Award), an election to defer the Settlement Date that would otherwise occur on
the Vesting Date of such Award. Effective for Notional Share Awards granted on
or after January 1, 1999, a Participant can elect to defer until the earlier of
(i) the January 1st which is one to five (1 - 5) years after the Vesting Date of
such Award; and (ii) the date on which the Participant's employment with the
Company terminates for any reason.
(b) Deferral Beyond Five Years. Provided the Company has received
advice of its counsel that such an election would not cause the Plan to become
subject to the nondiscrimination, funding, and fiduciary provisions of the
Employee Retirement Income Security Act of 1974, as amended, any Participant
whose total cash compensation (paid in the previous calendar year) determined as
of the date on which the deferral election is made, exceeds $120,000 (or such
other amount as counsel to the Company may advise from time to time) may, in
lieu of deferring the Settlement Date for the aforementioned one to five year
period, make an election to defer the Settlement Date for an Award until the
earlier of (i) any January 1st selected by the Employee at the time of such
deferral election; and (ii) the date on which the Participant's employment with
the Company terminates for any reason.
(c) Election to Divide Sub Account in Half. A Participant may also
elect to divide a Sub Account in half and receive 50% of his Sub Account
(rounded up to the nearest whole dollar) as soon as administratively practicable
following the Vesting Date of such Sub Account. The remaining 50% of the
Participant's vested Sub Account shall be deferred until the Settlement Date
elected pursuant to a valid deferral election under this Section 6.5
(d) Deadline for Deferral Election. Any election by a Participant to
defer the Settlement Date for a Sub Account pursuant to this Section 6.5 must be
made at least one year prior to the Vesting Date for such Sub Account. An
election to defer the Settlement Date for a Sub Account shall become irrevocable
one year prior to the Vesting Date for such Sub Account.
6.6 Early Termination of Deferral Period. Any Deferral Period elected
pursuant to Section 6.5 hereof shall terminate immediately upon the occurrence
of any of the following events: termination of the employment of the Participant
for any reason, the dissolution of TRG, a Change of Control Event, or
termination (without renewal) of the Master Services Agreement (as defined in
the Partnership Agreement). Any Sub Accounts which a Participant has elected to
defer shall be valued as of the Settlement Date in accordance with Section 6.1
or 6.2, as applicable, and shall be distributed in a lump sum payment as soon as
administratively practicable following the termination of the Deferral Period.
6.7 Taxes. To the extent required by the law in effect at the relevant
time, the Company shall withhold from payments made hereunder or from other
amounts otherwise payable to the Participant by the Company (or secure payment
from a Participant or Beneficiary in lieu of withholding) the amount of any
withholding or other tax required by federal or any state or local law to be
withheld or paid by the Company with respect to such Participant's Notional
Share Account. The amount of any such withholding or other tax shall be
determined by the Company. 6.8 Dealings with Beneficiaries or Representatives of
a Participant. The Company may require such proper proof of death and such
evidence of the right of any Person other than a Participant to receive payment
of the Payout Value of a Sub Account established
-10-
<PAGE>
under the Plan, as the Company deems necessary or advisable. The Company's
determination of death or Disability and of the right of any Person other than a
Participant to receive payment of the Payout Value of a Sub Account established
under the Plan shall be conclusive. The payment of and acceptance of any cash
pursuant to Article 6 hereof shall constitute a complete acquittance and
discharge of full liability of the Company under the Plan, and the Company shall
be entitled to demand a receipt and/or acquittance in full satisfaction of all
claims against the Company.
Article 7
Amendment and Termination of the Plan
7.1 Amendment of the Plan. The Compensation Committee may from time to
time suspend or discontinue the Plan or revise or amend the Plan in any respect
whatsoever; provided, however, that except with the written consent of a
Participant or as otherwise specifically provided herein, no amendment or
suspension of the Plan shall alter or impair any Notional Share Award previously
granted to such Participant under the Plan.
7.2 Termination of the Plan. The Compensation Committee shall have the
right and power to terminate the Plan at any time, and no Notional Share Award
shall be granted under the Plan after such termination. Upon termination of the
Plan by the Compensation Committee, no further deferral elections pursuant to
Section 6.5 shall be permitted unless the Compensation Committee specifically
provides otherwise. In connection with any termination of the Plan pursuant to
this Section 7.2, the Compensation Committee may, in its sole discretion, cause
all existing Deferral Periods for Sub Accounts then outstanding under the Plan
to also terminate, thereby accelerating the Settlement Date for such Sub
Accounts. Subject to the Compensation Committee's authority to terminate all
existing Deferral Periods upon termination of the Plan, any Notional Share
Awards outstanding at the time of termination of the Plan shall vest and become
payable to the same extent and subject to the same terms and conditions, as
provided in Article 5 hereof, that would have applied to such Notional Share
Award if the Plan had not been terminated.
7.3 Dissolution of TRG. The dissolution of TRG (provided that TRG is not
reconstituted as provided in the Partnership Agreement) shall cause the Plan to
terminate immediately without any further action on the part of the Compensation
Committee, and each outstanding Sub Account which is not then vested to vest
immediately and fully. In addition, the dissolution of TRG shall cause all
existing Deferral Periods for Sub Accounts then outstanding under the Plan to
terminate immediately, thereby accelerating the occurrence of the Settlement
Date for each such Sub Account. Upon the dissolution of TRG, each Participant
having an outstanding Notional Share Account shall be paid the aggregate Payout
Value of his or her Sub Accounts, as provided in Article 6 hereof. The grant of
any Notional Share Awards pursuant to the Plan shall not affect in any way the
right or power of the Company or TRG to make changes to its business structure,
or to merge, dissolve, or terminate, or to sell or transfer any or all of its
assets.
7.4 Termination of Management Contract/Change of Control Event. Upon the
termination of the Master Services Agreement (as defined in the Partnership
Agreement) between TRG and the Company, for any reason, without a renewal of
such Master Services Agreement, or upon the occurrence of a Change of Control
Event, the Plan shall terminate immediately, without any further action on the
part of the Compensation Committee, and each outstanding Sub Account which is
not then vested shall vest immediately and fully. In addition, all existing
Deferral Periods for Sub Accounts then outstanding under the Plan shall
terminate immediately, thereby accelerating the Settlement Date for such Sub
Accounts; and each Participant having an outstanding Notional Share Account
shall be paid the aggregate Payout Value of his or her Sub Accounts as provided
in Article 6 of the Plan.
-11-
<PAGE>
Article 8
Beneficiary Designation
8.1 Beneficiary Designation. Each Participant may, at any time, designate
any Person or Persons as such Participant's Beneficiary or Beneficiaries (both
principal as well as contingent) to whom payment under this Plan will be made in
the event of such Participant's death prior to distribution of the benefits due
such Participant under this Plan. Such designation may be changed at any time
prior to the Participant's death, without consent of any previously designated
beneficiary. Any designation must be made in writing ("Beneficiary
Designation"). A Beneficiary Designation shall be effective only if properly
completed and only upon receipt by the Company. Any properly completed
Beneficiary Designation received by the Company prior to the Participant's death
shall automatically revoke any prior Beneficiary Designation. In the event of
divorce, the person from whom such divorce has been obtained shall be deemed to
have predeceased the Participant in determining who shall be entitled to receive
payment pursuant to such Participant's Beneficiary Designation, unless the
Participant completes and submits after the divorce a Beneficiary Designation
which designates the former spouse as the Participant's Beneficiary for purposes
of the Plan.
8.2 In the Event of No Valid Designation. If a Participant fails to
designate a Beneficiary as provided above, or if all designated Beneficiaries
predecease (or are deemed to predecease) such Participant or die prior to
distribution of such Participant's benefits, then such Participant's designated
Beneficiary shall be deemed to be the Person or Persons surviving such
Participant in the first of the following classes in which there is a survivor,
share and share alike:
(a) Such Participants' surviving spouse, but if there is no such surviving
spouse.
(b) Such Participant's children, except that if any of such Participant's
children predecease the Participant but leave issue surviving, then such issue
shall take, by right of representation, the share their parent would have taken
if living; but if there are no such children or issue. The term "children" shall
include natural or adopted children but shall not include a child (or children)
whom the Participant has placed for adoption or foster care.
(c) Such Participant's estate.
Article 9
General Provisions
9.1 Compliance with Applicable Laws and Regulations. The Plan, the grant
of Notional Share Awards under the Plan, and the obligation of the Company to
deliver payment in cash in settlement of Sub Accounts established under the Plan
shall be subject to all applicable federal and state laws, rules, and
regulations and to such approvals by any government or regulatory agency as may
be required.
9.2 Status of Each Participant is that of an Unsecured General Creditor.
Each Participant and his or her Beneficiaries, heirs, successors and assigns
shall have no legal or equitable rights, interest or claims in any specific
property or assets of the Company, TRG or TCO, nor of any entity for which the
Company or any affiliate of the Company provides services. Assets of the Company
or such other entities shall not be held under any trust for the benefit of any
Participant or his or her Beneficiaries, heirs, successors or assigns, or held
in any way as collateral security for the fulfilling of the obligations of the
Company under this Plan. Any and all of the Company's and such other entities'
assets shall be, and remain, the general unrestricted assets of the Company or
such other entities. The Company's sole
-12-
<PAGE>
obligation under this Plan shall be merely that of an unfunded and
unsecured promise of the Company to pay money in the future, subject to the
conditions and provisions hereof.
9.3 Nonassignability. A Participant's rights and interests under the Plan
may not be assigned or transferred other than by will or the laws of descent and
distribution. No part of the amounts payable hereunder shall, prior to actual
payment, be subject to seizure or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant or any other
Person, or be transferable by operation of law in the event of a Participant's
or any other Person's bankruptcy or insolvency.
9.4 No Right to Continued Employment. No Employee or any other Person
shall have any claim or right to be granted an Award under the Plan. Neither the
adoption and maintenance of the Plan nor the granting of Awards pursuant to the
Plan nor the execution of an Award Agreement shall be deemed to constitute a
contract of employment between the Company, an affiliate of the Company or TRG
or TCO and any Employee or to be a condition of the employment of any Person.
The Plan and any Award granted under the Plan shall not confer upon any
Participant any right with respect to continued employment by the Company or an
affiliate of the Company, nor shall they interfere in any way with the right of
the Company or an affiliate of the Company to terminate the employment of any
Participant at any time, and for any reason, with or without cause, it being
acknowledged, unless expressly provided otherwise in writing, that the
employment of any Participant is "at will."
9.5 Inspection of Records. Copies of the Plan, records reflecting each
Participant's Notional Share Account, and any other documents and records that a
Participant is entitled by law to inspect shall be open to inspection by the
Participant and his duly authorized representative(s) at the office of the
Company at any reasonable business hour.
9.6 Word Meanings. The words such as "herein," "hereinafter," "hereof,"
and "hereunder" refer to this Plan as a whole and not merely to a subdivision in
which such words appear unless the context otherwise requires.
9.7 Section Titles. Section titles are for descriptive purposes only and
shall not control or alter the meaning of the Plan as set forth in the text.
9.8 Severability. Whenever possible, each provision in the Plan and every
Notional Share Award at any time granted under the Plan shall be interpreted in
such a manner as to be effective and valid under applicable law, but if any
provision of the Plan or any Notional Share Award at any time granted under the
Plan shall be held to be prohibited or invalid under applicable law, then, (i)
such provision shall be deemed amended to accomplish the objectives of the
provision as originally written to the fullest extent permitted by law, and (ii)
all other provisions of the Plan and every other Notional Share Award at any
time granted under the Plan shall remain in full force and effect.
9.9 Strict Construction. No rule of strict construction shall be implied
against TRG, the Partnership Committee, the Compensation Committee, or any other
Person in the interpretation of any of the terms of the Plan, any Notional Share
Award granted under the Plan or any rule or procedure established by the
Compensation Committee or the Company.
9.10 Choice of Law. All determinations made and actions taken pursuant to
the Plan shall be governed by the internal laws of the State of Michigan and
construed in accordance therewith.
-13-
<PAGE>
9.11 Execution. To record the adoption of the Plan, the Company has caused
the execution hereof this 4th day of March 1999.
THE TAUBMAN COMPANY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: TAUB-CO MANAGEMENT, INC.,
a Michigan corporation,
general partner
By: /s/ Robert S. Taubman
---------------------
Robert S. Taubman
Its: President
-14-
Exhibit 12
TAUBMAN CENTERS, INC.
Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Stock
Dividends
(in thousands, except ratios)
Three Months Ended March 31
---------------------------
1999 1998
---- ----
Net Earnings from Continuing Operations $ 14,193 $ 21,087
Add back:
Fixed charges 24,811 37,391
Amortization of previously capitalized
interest (1) 504 619
Equity in net income in excess of distributions
of less than 50% owned Unconsolidated Joint
Ventures (341) (594)
Deduct:
Capitalized interest (1) (4,405) (3,532)
------- ------
Earnings Available for Fixed Charges
and Preferred Dividends $ 34,762 $ 54,971
======== =========
Fixed Charges
Interest expense $ 10,865 $ 22,637
Capitalized interest 4,247 3,308
Interest portion of rent expense 1,050 1,769
Proportionate share of Unconsolidated Joint
Ventures' fixed charges 8,649 9,677
--------- ---------
Total Fixed Charges $ 24,811 $ 37,391
--------- ---------
Series A Preferred Stock Dividends 4,150 4,150
--------- ---------
Total Fixed Charges and Preferred
Stock Dividends $ 28,961 $ 41,541
========= =========
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends 1.2 1.3
- ----------------
(1) Amounts include TRG's pro rata share of capitalized interest and
amortization of previously capitalized interest.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TAUBMAN CENTERS, INC.(TCO) CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1999 AND
THE TAUBMAN CENTERS, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE
MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000890319
<NAME> TAUBMAN CENTERS, INC.
<MULTIPLIER> 1,000 <F1>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 12,527
<SECURITIES> 0
<RECEIVABLES> 25,884
<ALLOWANCES> 1,027
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 1,543,346
<DEPRECIATION> 175,575
<TOTAL-ASSETS> 1,536,243
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 864,549
0
111
<COMMON> 531
<OTHER-SE> 511,116
<TOTAL-LIABILITY-AND-EQUITY> 1,536,243
<SALES> 0
<TOTAL-REVENUES> 60,431
<CGS> 0
<TOTAL-COSTS> 40,268
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,865
<INCOME-PRETAX> 14,193 <F3>
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,193 <F3>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,686
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
<FN>
<F1> EXCEPT FOR PER SHARE DATA.
<F2> TCO HAS AN UNCLASSIFIED BALANCE SHEET.
<F3> REPRESENTS INCOME BEFORE EXTRAORDINARY ITEM AND MINORITY INTEREST.
THE MINORITY INTEREST'S SHARE OF INCOME WAS $7.507 MILLION.
</FN>
</TABLE>
