SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 1999.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to _________________
Commission File Number 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 48303-0200
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (248) 258-6800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, New York Stock Exchange
$0.01 Par Value
8.3% Series A Cumulative New York Stock Exchange
Redeemable Preferred Stock,
$0.01 Par Value
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such report(s)) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
X Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
As of March 21, 2000, the aggregate market value of the 52,679,418 shares of
Common Stock held by non-affiliates of the registrant was $603 million, based
upon the closing price ($11 7/16) on the New York Stock Exchange composite tape
on such date. (For this computation, the registrant has excluded the market
value of all shares of its Common Stock reported as beneficially owned by
executive officers and directors of the registrant and certain other
shareholders; such exclusion shall not be deemed to constitute an admission that
any such person is an "affiliate" of the registrant.) As of March 21, 2000,
there were outstanding 53,046,243 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual shareholders meeting to be
held in 2000 are incorporated by reference into Part III.
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PART I
Item 1. BUSINESS
The Company
Taubman Centers, Inc. (the "Company" or "TCO") was incorporated in Michigan
in 1973 and had its initial public offering ("IPO") in 1992. Upon completion of
the IPO, the Company became the managing general partner of The Taubman Realty
Group Limited Partnership (the "Operating Partnership" or "TRG"). The Company
has a 63% partnership interest in the Operating Partnership, through which the
Company conducts all its operations. The Company owns, develops, acquires, and
operates regional shopping centers ("Centers") and interests therein. The
Company's portfolio, as of December 31, 1999, includes 17 urban and suburban
Centers located in seven states. Four additional Centers are under construction
and are expected to open in 2001. Fourteen of the Centers are "super-regional"
centers because they have more than 800,000 square feet of gross leasable area.
The Operating Partnership also owns certain regional retail shopping center
development projects and more than 99% of The Taubman Company Limited
Partnership (the "Manager"), which manages the shopping centers, and provides
other services to the Operating Partnership and the Company. See the table on
pages 12 and 13 of this report for information regarding the Centers.
The Company is a real estate investment trust, or REIT, under the Internal
Revenue Code of 1986, as amended (the "Code"). In order to satisfy the
provisions of the Code applicable to REITs, the Company must distribute to its
shareholders at least 95% of its REIT taxable income and meet certain other
requirements. TRG's partnership agreement provides that the Operating
Partnership will distribute, at a minimum, sufficient amounts to its partners
such that the Company's pro rata share will enable the Company to pay
shareholder dividends (including capital gains dividends that may be required
upon the Operating Partnership's sale of an asset) that will satisfy the REIT
provisions of the Code.
Recent Developments
For a discussion of business developments that occurred in 1999, see the
response to Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" (MD&A).
The Shopping Center Business
There are several types of retail shopping centers, varying primarily by
size and marketing strategy. Retail shopping centers range from neighborhood
centers of less than 100,000 square feet of GLA to regional and super-regional
shopping centers. Retail shopping centers in excess of 400,000 square feet of
GLA are generally referred to as "regional" shopping centers, while those
centers having in excess of 800,000 square feet of GLA are generally referred to
as "super-regional" shopping centers. In this annual report on Form 10-K, the
term "regional shopping centers" refers to both regional and super-regional
shopping centers. The term "GLA" refers to gross retail space, including anchors
and mall tenant areas, and the term "Mall GLA" refers to gross retail space,
excluding anchors. The term "anchor" refers to a department store or other large
retail store. The term "mall tenants" refers to stores (other than anchors) that
are typically specialty retailers and lease space in shopping centers.
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Business of the Company
The Company, as managing general partner of the Operating Partnership, is
engaged in the ownership, management, leasing, acquisition, development and
expansion of regional shopping centers.
The Centers:
o are strategically located in major metropolitan areas, many in communities
that are among the most affluent in the country, including New York City,
Los Angeles, Denver, Detroit, Phoenix, and Washington, D.C.;
o range in size between 438,000 and 1.5 million square feet of GLA and
between 133,000 and 594,000 square feet of Mall GLA. The smallest Center
has approximately 50 stores, and the largest has approximately 200 stores.
Of the 17 Centers, 14 are super-regional shopping centers;
o have approximately 2,340 stores operated by its mall tenants under
approximately 990 trade names;
o have 52 anchors, operating under 17 trade names;
o lease approximately 76% of Mall GLA to national chains, including
subsidiaries or divisions of The Limited (The Limited, Limited Express,
Victoria's Secret, and others), The Gap (The Gap, Banana Republic, and
others), and Venator Group, Inc. (Foot Locker, Kinney Shoes, and others);
and
o are among the most productive (measured by mall tenants' average per
square foot sales) in the United States. In 1999, mall tenants had average
per square foot sales of $453, which is substantially greater than the
average for all regional shopping centers owned by public companies.
The most important factor affecting the revenues generated by the Centers
is leasing to mall tenants (primarily specialty retailers), which represents
approximately 90% of revenues. Anchors account for less than 10% of revenues
because many own their stores and, in general, those that lease their stores do
so at rates substantially lower than those in effect for mall tenants.
The Company's portfolio is concentrated in highly productive super-regional
shopping centers. Of the 17 Centers, 14 had annual rent rolls at December 31,
1999 of over $10 million. The Company believes that this level of productivity
is indicative of the Centers' strong competitive position and is, in significant
part, attributable to the Company's business strategy and philosophy. The
Company believes that large shopping centers (including regional and especially
super-regional shopping centers) are the least susceptible to direct competition
because (among other reasons) anchors and large specialty retail stores do not
find it economically attractive to open additional stores in the immediate
vicinity of an existing location for fear of competing with themselves. In
addition to the advantage of size, the Company believes that the Centers'
success can be attributed in part to their other physical characteristics, such
as design, layout, and amenities.
2
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Business Strategy And Philosophy
The Company believes that the regional shopping center business is not
simply a real estate development business, but rather an operating business in
which a retailing approach to the on-going management and leasing of the Centers
is essential. Thus the Company:
o Offers a large, diverse selection of retail stores in each Center to give
customers a broad selection of consumer goods and variety of price ranges.
o Endeavors to increase overall mall tenants' sales, and thereby increase
achievable rents, by leasing space to a constantly changing mix of
tenants.
o Seeks to anticipate trends in the retailing industry and emphasizes ongoing
introductions of new retail concepts into the Centers. Due in part to this
strategy, a number of successful retail trade names have opened their first
mall stores in the Centers. The Company believes that its execution of this
leasing strategy is unique in the industry and is an important element in
building and maintaining customer loyalty and increasing mall productivity.
o Provides innovative initiatives that utilize technology and the Internet
to heighten the shopping experience for customers, build customer loyalty
and increase tenant sales. One such initiative is the Company's ShopTaubman
on-to-one marketing program, which connects shoppers and retailers through
interactive in-center computer kiosks and on-line web-sites.
The Centers compete for retail consumer spending through diverse, in-depth
presentations of predominantly fashion merchandise in an environment intended to
facilitate customer shopping. While some Centers include stores that target
high-end, upscale customers, each Center is individually merchandised in light
of the demographics of its potential customers within convenient driving
distance.
The Company's leasing strategy involves assembling a diverse mix of mall
tenants in each of the Centers in order to attract customers, thereby generating
higher sales by mall tenants. High sales by mall tenants make the Centers
attractive to prospective tenants, thereby increasing the rental rates that
prospective tenants are willing to pay. The Company implements an active leasing
strategy to increase the Centers' productivity and to set minimum rents at
higher levels. Elements of this strategy include terminating leases of
under-performing tenants, renegotiating existing leases, and not leasing space
to prospective tenants that (though viable or attractive in certain ways) would
not enhance a Center's retail mix.
Potential For Growth
The Company's principal objective is to enhance shareholder value. The
Company seeks to maximize the financial results of its assets, while pursuing a
growth strategy that concentrates primarily on an active new center development
program.
Development of New Centers
The Company is pursuing an active program of regional shopping center
development. The Company believes that it has the expertise to develop
economically attractive regional shopping centers through intensive analysis of
local retail opportunities. The Company believes that the development of new
centers is the best use of its capital and an area in which the Company excels.
At any time, the Company has numerous potential development projects in various
stages.
During March 1999, the Company opened MacArthur Center, an enclosed
super-regional mall in Norfolk, Virginia. Additionally, four new centers are
currently under construction: International Plaza, an enclosed 1.3 million
square foot regional mall in Tampa, Florida; The Shops at Willow Bend, a 1.4
million square foot regional shopping center in the metropolitan Dallas area;
The Mall at Wellington Green, a 1.3 million square foot regional shopping center
located in west Palm Beach County, Florida; and Dolphin Mall, a 1.4 million
square foot value regional center in Miami, Florida. All four of these Centers
are expected to open in 2001.
3
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The Company's policies with respect to development activities are designed
to reduce the risks associated with development. For instance, the Company
previously entered into an agreement to lease a center, while the Company
investigated the redevelopment opportunities of the center. Also, the Company
generally does not intend to acquire land early in the development process.
Instead, the Company generally acquires options on land or forms partnerships
with landholders holding potentially attractive development sites. The Company
typically exercises the options only once it is prepared to begin construction.
In addition, the Company does not intend to begin construction until a
sufficient number of anchor stores have agreed to operate in the shopping
center, such that the Company is confident that the projected sales and rents
from Mall GLA are sufficient to earn a return on invested capital in excess of
the Company's cost of capital. Having historically followed these principles,
the Company's experience indicates that less than 10% of the costs of the
development of a regional shopping center will be incurred prior to the
construction period; however, no assurance can be given that the Company will
continue to be able to so limit pre-construction costs.
While the Company will continue to evaluate development projects using
criteria, including financial criteria for rates of return, similar to those
employed in the past, no assurances can be given that the adherence to these
policies will produce comparable results in the future. In addition, the costs
of shopping center development opportunities that are explored but ultimately
abandoned will, to some extent, diminish the overall return on development
projects (see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Capital Spending"
for further discussion of the Company's development activities).
Strategic Acquisitions
The Company's objective is to acquire existing centers only when they are
compatible with the quality of the Company's portfolio (or can be redeveloped to
that level) and that satisfy the Company's strategic plans and pricing
requirements.
The Company believes it will have additional opportunities to acquire
regional shopping centers, or interests therein, and will have certain
advantages in doing so.
o First, the management expertise of the Manager will enhance the leasing
and operation of newly acquired regional shopping centers. If
opportunities exist to expand, remodel, or re-merchandise the center
through new leasing, the Company's expertise will assist in making an
informed and timely evaluation of the economic consequences of such
activities prior to acquisition, as well as facilitate implementation of
such activities.
o Second, a center can be acquired for any combination of cash or equity
interests in the Operating Partnership or (subject to certain limitations)
the Company, possibly creating the opportunity for tax-advantaged
transactions for the seller, thereby reducing the price that might
otherwise have to be paid in an all cash transaction or making an
opportunity available that would not otherwise exist. The Operating
Partnership is able to offer partnership interests in itself in exchange
for shopping center interests, allowing sellers to diversify their
interests, attain liquidity not otherwise available, possibly defer taxes
that might otherwise be due if the interests were instead sold for cash,
maintain an investment in the regional shopping center business, and
resolve concerns sellers otherwise may have regarding future management of
their properties.
In addition, the Company may make other investments to enhance the value of
its business, for example, in April 1999, the Company made a strategic
investment in fashionmall.com, an online landlord. Visitors to the fashionmall
website find many of the same retailers in Taubman centers, including Sephora,
Gap, Esprit and Banana Republic. Understanding this developing shopping venue
will help the Company identify ways to maximize the opportunities of the
internet. Also, in November 1999, the Company acquired the retail leasing firm
Lord Associates, which will provide additional resources for the leasing of the
four new centers scheduled to open in 2001. Lord Associates has extensive
experience with value and entertainment specialty centers and had worked with
the Company on the leasing of Great Lakes Crossing.
4
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Expansions of the Centers
Another potential element of growth is the strategic expansion of existing
properties to update and enhance their market positions, by replacing or adding
new anchor stores or increasing mall tenant space. Most of the Centers have been
designed to accommodate expansions. Expansion projects can be as significant as
new shopping center construction in terms of scope and cost, requiring
governmental and existing anchor store approvals, design and engineering
activities, including rerouting utilities, providing additional parking areas or
decking, acquiring additional land, and relocating anchors and mall tenants (all
of which must take place with a minimum of disruption to existing tenants and
customers). For example, a 21-screen theater will be added at Fairlane, in the
Detroit metropolitan area and is anticipated to open in the spring of 2000. At
Fair Oaks in the Washington, D.C. area, Hecht's expansion will open in the
spring of 2000, and a JCPenney expansion and a newly constructed Macy's store
will open in the fall of 2000.
The following table includes information regarding recent development,
acquisition, and expansion activities.
Developments:
Completion Date Center Location
July 1997 Tuttle Crossing (1) Columbus, Ohio
November 1997 Arizona Mills Tempe, Arizona
November 1998 Great Lakes Crossing Auburn Hills, Michigan
March 1999 MacArthur Center Norfolk, Virginia
Acquisitions:
Completion Date Center Location
September 1997 Regency Square Richmond, Virginia
December 1997 Tuttle Leasehold (1) Columbus, Ohio
December 1997 The Falls (1) (2) Miami, Florida
December 1999 Great Lakes Crossing - Auburn Hills, Michigan
additional interest (3)
Expansions, Renovations and Anchor Conversions:
Completion Date Center Location
March 1997 Beverly Center (4) Los Angeles, California
August 1997 Westfarms (5) West Hartford, Connecticut
November 1997 -
August 1998 Cherry Creek (6) Denver, Colorado
December 1997 Biltmore (7) Phoenix, Arizona
November 1998 Woodland Grand Rapids, Michigan
September 1999 Lakeside (8) Sterling Heights, Michigan
November 1999 Fairlane (8) Dearborn, Michigan
November 1999 Biltmore (9) Phoenix, Arizona
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(1) Centers transferred to GMPT in connection with the GMPT Exchange (see
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations-GMPT Exchange and Related Transactions).
(2) Completely redeveloped and expanded in 1996 before the acquisition of The
Falls.
(3) In December 1999, an additional 5% interest in the center was acquired.
(4) Broadway converted to Bloomingdale's.
(5) 135,000 square foot expansion followed by the opening of a new Nordstrom in
September 1997.
(6) Lord & Taylor opened a new and expanded store in 1997. Additional 132,000
square foot expansion of mall tenant space opened in August of 1998.
(7) 50,000 square foot expansion of mall tenant space completed
(8) New food courts opened.
(9) Macy's expansion completed.
5
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Internal Growth
The Centers are among the most productive in the nation, when measured by
mall tenant's average sales per square foot. Higher sales per square foot enable
mall tenants to remain profitable while paying occupancy costs that are a
greater percentage of total sales. As leases expire at the Centers, the Company
has consistently been able, on a portfolio basis, to lease the available space
to an existing or new tenant at higher rates.
Augmenting this growth, the Company is pursuing a number of new sources of
revenue from the Centers. For example, the Company has entered into a 15 year
lease agreement with JCDecaux, the world's largest street furniture and
outdoor advertising company. The agreement will create an in-mall advertising
program in the Company's portfolio of owned properties, creating new
point-of-sale opportunities for retailers and manufacturers as well as
heightening in-mall experience for shoppers. In addition, the Company expects
increased revenue from its specialty leasing efforts. In recent years a new
industry -- beyond traditional carts and kiosks -- has evolved, with more and
better quality specialty tenants. The Company has put in place a company-wide
program to maximize this opportunity.
Rental Rates
As leases have expired in the 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. The following table contains certain information regarding per
square foot base rent at Centers that have been owned and open for five years.
Year Ended December 31
---------------------------------------------
1999 1998(1) 1997 1996 1995
---- ---- ---- ---- ----
Average base rent per square foot:
All mall tenants $43.58 $41.93 $38.79 $37.90 $36.33
Stores closing during year $41.14 $44.27 $37.62 $33.39 $32.96
Stores opening during year $52.64 $47.92 $41.67 $42.39 $41.27
(1) Excludes centers transferred to GMPT.
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Lease Expirations
The following table shows lease expirations based on information available
as of December 31, 1999 for the next ten years for the Centers in operation at
that date:
Percent of
Annualized Annualized Total Leased
Base Rent Base Rent Square Footage
Lease Number Leased Area Under Expiring Under Expiring Represented
Expiration of Leases in Square Leases Leases by Expiring
Year Expiring Footage (in thousands) Per Square Foot Leases
---- -------- ------- -------------- --------------- ------
2000 (1) 116 237,438 $ 9,918 $ 41.77 2.8%
2001 193 502,237 20,554 40.92 6.0%
2002 243 693,848 24,769 35.70 8.3%
2003 276 878,877 31,645 36.01 10.5%
2004 243 693,340 29,688 42.82 8.3%
2005 255 682,853 31,895 46.71 8.2%
2006 172 469,931 21,248 45.21 5.6%
2007 209 751,694 28,100 37.38 9.0%
2008 205 899,300 30,789 34.24 10.8%
2009 228 911,602 34,618 37.97 10.9%
(1) Excludes leases that expire in 2000 for which renewal leases or leases with
replacement tenants have been executed as of December 31, 1999.
The Company believes that the information in the table is not necessarily
indicative of what will occur in the future because of several factors, but
principally because its leasing policies and practices create a significant
level of early lease terminations at the Centers. For example, the average
remaining term of the leases that were terminated during the period 1994 to 1999
was approximately 1.9 years. The average term of leases signed during 1999 and
1998 was approximately 7.9 years.
In addition, mall tenants at the Centers may seek the protection of the
bankruptcy laws, which could result in the termination of such tenants' leases
and thus cause a reduction in cash flow. In 1999, approximately 3.1% of leases
were so affected compared to 1.2% in 1998, 1.5% in 1997, 2.8% in 1996, and 3.2%
in 1995. Since 1991, the annual provision for losses on accounts receivable has
been less than 2% of annual revenues.
Occupancy
Mall tenant average occupancy, ending occupancy, and leased space rates of
the Centers are as follows:
Year Ended December 31
1999 1998 (1) 1997 1996 1995
----- ---- ---- ---- ----
Average Occupancy 89.0% 89.4% 87.6% 87.4% 88.0%
Ending Occupancy 90.4% 90.2% 90.3% 88.0% 89.4%
Leased Space 92.1% 92.3% 92.3% 89.0% 90.6%
(1) Excludes centers transferred to GMPT.
Major Tenants
No single retail company represents 10% or more of the Company's revenues.
The combined operations of The Limited, Inc. accounted for approximately 8.3% of
leased Mall GLA as of December 31, 1999 and for approximately 7.1% of the 1999
base rent. The largest of these, in terms of square footage and rent, is The
Limited, which accounted for approximately 1.2% of leased Mall GLA and 1.2% of
1999 base rent. No other single retail company accounted for more than 4% of
leased Mall GLA or 1999 base rent.
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General Risks of the Company
Economic Performance and Value of Shopping Centers Dependent on Many Factors
The economic performance and value of the Company's shopping centers are
dependent on various factors. Additionally, these same factors will influence
the Company's decision whether to go forward on the development of new centers
and may affect the ultimate economic performance and value of projects under
construction (see other risks associated with the development of new centers
under "Business of the Company--Development of New Centers"). Such factors
include:
o changes in the national, regional, and/or local economic climates,
o competition from other shopping centers, discount stores, outlet malls,
discount shopping clubs, direct mail and the Internet in attracting
customers and tenants,
o increases in operating costs,
o the public perception of the safety of customers at the shopping centers,
o environmental or legal liabilities,
o availability and cost of financing, and
o uninsured losses, resulting from wars, riots, or civil disturbances or
losses from earthquakes or floods in excess of policy specifications and
insured limits.
In addition, the value of shopping centers may be adversely affected by:
o changes in government regulations, and
o changes in real estate zoning and tax laws.
Adverse changes in the economic performance and value of shopping centers would
adversely affect the Company's income and cash available to pay dividends.
Third Party Interests in the Centers
Some of the shopping centers which the Company develops and leases are
partially owned by other non-affiliated partners through joint venture
arrangements. As a result, the Company may not be able to control all decisions
regarding those shopping centers and may be required to take actions that are in
the interest of the joint venture partners but not the Company's best interests.
Bankruptcy of Mall Tenants or Joint Venture Partners
The Company could be adversely affected by the bankruptcy of third parties.
The bankruptcy of a mall tenant could result in the termination of its lease
which would lower the amount of cash generated by that mall. In addition, if a
department store operating an anchor at one of our shopping centers were to go
into bankruptcy and cease operating, its closing may lead to reduced customer
traffic and lower mall tenant sales which would, in turn, affect the amount of
rent our tenants pay us. The profitability of shopping centers held in a joint
venture could also be adversely affected by the bankruptcy of one of the joint
venture partners if, because of certain provisions of the bankruptcy laws, the
Company was unable to make important decisions in a timely fashion or became
subject to additional liabilities.
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Third Party Contracts
The Company provides property management, leasing, development and other
administrative services to centers transferred to GMPT, other third parties and
to certain Taubman affiliates. The contracts under which these services are
provided may be canceled or not renewed or may be renegotiated on terms less
favorable to the Company. Certain costs of providing services under these
contracts would not necessarily be eliminated if the contracts were to be
canceled or not renewed.
Inability to Maintain Status as a REIT
o The Company may not be able to maintain its status as a real estate
investment trust, or REIT, for Federal income tax purposes with the result
that the income distributed to shareholders will not be deductible in
computing taxable income and instead would be subject to tax at regular
corporate rates. Although the Company believes it is organized and operates
in a manner to maintain its REIT qualification, many of the REIT
requirements of the Internal Revenue Code are very complex and have limited
judicial or administrative interpretations. Changes in tax laws or
regulations or new administrative interpretations and court decisions may
also affect the Company's ability to maintain REIT status in the future. If
the Company fails to qualify as a REIT, its income may also be subject to
the alternative minimum tax. If the Company does not maintain its REIT
status in any year, it may be unable to elect to be treated as a REIT for
the next four taxable years. In addition, if the Company fails to meet the
Internal Revenue Code's requirement that it distribute to shareholders at
least 95% of our otherwise taxable income, it will be subject to a
nondeductible 4% excise tax on a portion of its income.
o Although the Company currently intends to maintain its status as a REIT,
future economic, market, legal, tax or other considerations may cause it to
determine that it would be in the Company's and its shareholders' best
interests to revoke its REIT election. As noted above, if the Company
revokes its REIT election, it will not be able to elect REIT status for the
next four taxable years.
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Environmental Matters
All of the Centers presently owned by the Company (not including option
interests in the Development Projects or any of the real estate managed but not
included in the Company's portfolio) have been subject to environmental
assessments. The Company is not aware of any environmental liability relating to
the Centers or any other property, in which they have or had an interest
(whether as an owner or operator) that the Company believes, would have a
material adverse effect on the Company's business, assets, or results of
operations. No assurances can be given, however, that all environmental
liabilities have been identified or that no prior owner, operator, or current
occupant has created an environmental condition not known to the Company.
Moreover, no assurances can be given that (i) future laws, ordinances, or
regulations will not impose any material environmental liability or that (ii)
the current environmental condition of the Centers will not be affected by
tenants and occupants of the Centers, by the condition of properties in the
vicinity of the Centers (such as the presence of underground storage tanks), or
by third parties unrelated to the Company.
With respect to the matters described below, while there can be no
assurances, the Company believes that such matters will not have a material
adverse effect on the Company's business, assets, or results of operations.
Beverly Center is located over an oil field and several abandoned oil
wells, and is adjacent to an active oil production facility that operates
numerous oil and gas wells. In the Los Angeles basin, where Beverly Center is
located, pockets of methane gas may be found in oil fields; however, elevated
levels of methane have not been detected at Beverly Center.
Cherry Creek is situated on land that was used as a landfill prior to 1950.
Because of the past use of the site as a landfill, the site is listed on the
United States Environmental Protection Agency's Comprehensive Environmental
Response, Compensation and Liability Information System list.
In the summer of 1997, geotechnical drilling activities were undertaken in
the former gasoline station area as part of a parking lot expansion at the
southeastern corner of the Cherry Creek site. The geotechnical soil samples were
observed to have petroleum odors and staining. A subsurface environmental
investigation subsequently revealed a limited zone of hydrocarbon contaminated
soils, with no significant impacts to groundwater. Discussions with the Colorado
Department of Labor and Employment, Oil Inspection Section, held in September
1997, resulted in a "passive retardation" remedial approach that relies on
natural processes to degrade the hydrocarbon contamination. A Corrective Action
Plan was submitted and accepted in 1998 that provided for monitoring the soil
and groundwater. The monitoring procedures required under this plan have been
completed.
Paseo Nuevo is located in an area of known groundwater contamination by
tetrachloroethylene ("PCE"). The groundwater under and around the site was
monitored for six years before, during, and after construction of the center. No
on-site sources of PCE were identified during construction. The Regional Water
Quality Control Board has given approval to discontinue the monitoring program
because the PCE levels remained relatively constant over the six-year period and
do not exceed the state standard for PCE in drinking water.
There are asbestos containing materials ("ACMs") at most of the Centers,
primarily in the form of floor tiles, roof coatings and mastics. The floor
tiles, roof coatings and mastics are generally in good condition. The Manager
has developed and is implementing an operations and maintenance program that
details operating procedures with respect to ACMs prior to any renovation and
that requires periodic inspection for any change in condition of existing ACMs.
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Personnel
The Company has engaged the Manager to provide real estate management,
acquisition, development, and administrative services required by the Company
and its properties.
As of December 31, 1999, the Manager had 447 full-time employees. The
following table provides a breakdown of employees by operational areas as of
December 31, 1999:
Number Of Employees
Property Management............................... 203
Leasing .......................................... 71
Development....................................... 52
Financial Services................................ 70
Other .......................................... 51
--
Total..................................... 447
===
The Manager considers its relations with its employees to be good.
Item 2. PROPERTIES
Ownership
The following table sets forth certain information about each of the
Centers. The table includes only Centers in operation at December 31, 1999.
Excluded from this table are Tampa International, The Shops at Willow Bend,
Dolphin Mall and the Mall at Wellington Green, all of which will open in 2001.
Centers are owned in fee other than Beverly Center, Cherry Creek, La Cumbre
Plaza, MacArthur Center and Paseo Nuevo, which are held under ground leases
expiring between 2028 and 2083.
Certain of the Centers are partially owned through joint ventures.
Generally, the Operating Partnership's joint venture partners have ongoing
rights with regard to the disposition of the Operating Partnership's interest in
the joint ventures, as well as the approval of certain major matters.
11
<PAGE>
<TABLE>
<CAPTION>
Sq. Ft. of GLA/ Year Ownership Percent of Mall
Mall GLA Opened/ Year % as of GLA Occupied 1999 Rent (1)
Owned Centers Anchors as of 12/31/99 Expanded Acquired 12/31/99 as of 12/31/99 (in Thousands)
- ------------- ------- --------------- -------- -------- --------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Beverly Center Bloomingdale's, 902,000/ 1982 70%(2) 95% $ 27,388
Los Angeles, CA Macy's 594,000
Biltmore Fashion Park Macy's, Saks Fifth 620,000/ 1963/1992/ 1994 100% 91% 10,949
Phoenix, AZ Avenue 313,000 1997/1999
Cherry Creek Foley's, Lord & Taylor, 1,035,000/ 1990/1998 50% 94% 22,916
Denver, CO Neiman Marcus, Saks 562,000 (3)
Fifth Avenue
Fair Oaks Hecht's, JCPenney, 1,389,000/ 1980/1987/ 50% 86% 19,590
Fairfax, VA Lord & Taylor, 573,000 1988
(Washington, D.C. Sears (4)
Metropolitan Area)
Fairlane Town Center Hudson's, JCPenney, 1,400,000/(5) 1976/1978/ 100% 72% 13,417
Dearborn, MI Lord & Taylor, Saks 511,000 1980
(Detroit Metropolitan Fifth Avenue, Sears
Area)
La Cumbre Plaza Robinsons-May, Sears 479,000/ 1967/1989 1996 100% 94% 4,343
Santa Barbara, CA 179,000
Lakeside Hudson's, Hudson's Men's 1,478,000/ 1976/1978 50%(6) 88% 18,497
Sterling Heights, MI and Home, 516,000
(Detroit Metropolitan JCPenney, Lord & Taylor,
Area) Sears
MacArthur Center Dillard's, Nordstrom 945,000/ 1999 70% 88% 11,983
Norfolk, VA 531,000
Paseo Nuevo Macy's, Nordstrom 438,000/ 1990 1996 100% 96% 4,833
Santa Barbara, CA 133,000
Regency Square Hecht's (two locations), 826,000/ 1975/1987 1997 100% 97% 9,310
Richmond, VA JCPenney, Sears 239,000
The Mall at Short Hills Bloomingdale's, Macy's, 1,350,000/ 1980/1994/ 100% 97% 33,260
Short Hills, NJ Neiman Marcus, Nordstrom, 528,000 1995
Saks Fifth Avenue
Stamford Town Center Filene's, Macy's, Saks 868,000/ 1982 50% 88% 16,223
Stamford, CT Fifth Avenue 375,000
Twelve Oaks Mall Hudson's, JCPenney, 1,220,000/ 1977/1978 50%(6) 93% 20,601
Novi, MI Lord & Taylor, Sears 482,000
(Detroit Metropolitan
Area)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Sq. Ft. of GLA/ Year Ownership Percent of Mall
Mall GLA Opened/ Year % as of GLA Occupied 1999 Rent (1)
Owned Centers Anchors as of 12/31/99 Expanded Acquired 12/31/99 as of 12/31/99 (in Thousands)
- ------------- ------- --------------- -------- -------- --------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Westfarms Filene's, Filene's 1,295,000/ 1974/1983/ 79% 94% $ 23,503
West Hartford, CT Men's Store/Furniture 525,000 1997
Gallery, JCPenney,
Lord & Taylor,Nordstrom
Woodland Hudson's, JCPenney, 1,095,000/ 1968/1974/ 50% 92% 15,721
Grand Rapids, MI Sears 370,000 1984/1989
Value Centers:
Arizona Mills GameWorks, Harkins 1,193,000/ 1997 37% 94% 22,840
Tempe, AZ Cinemas,JCPenney 533,000
(Phoenix Metropolitan Outlet, Neiman Marcus-
Area) Last Call, Off 5th Saks,
Rainforest Cafe
Great Lakes Crossing Bass Pro, GameWorks, 1,385,000/ 1998 85% 90% 22,556
Auburn Hills, MI JCPenney Outlet, 576,000
(Detroit Metropolitan Neiman Marcus-Last Call, ---------
Area) Off 5th Saks, Rainforest
Cafe, Star Theatres
Total GLA/Total
Mall GLA: 17,918,000/
7,540,000
Average GLA/Average
Mall GLA: 1,054,000/
444,000
- ------------------------
<FN>
(1) Includes minimum and percentage rent for the year ended December 31, 1999.
Excludes rent from certain peripheral properties. For MacArthur Center,
which opened in March, the amounts reflect rents for the period subsequent
to opening date.
(2) The Company has an option to acquire the remaining 30%. The results of
Beverly Center are consolidated in the Company's financial statements.
(3) GLA excludes approximately 166,000 square feet for the renovated buildings
on adjacent peripheral land.
(4) A newly constructed Macy's store will open in the fall of 2000.
(5) A 21-screen theater will be added and is anticipated to open in the spring
of 2000.
(6) Under terms of an agreement expected to be completed in March 2000, the
Operating Partnership will exchange its 50% interest in Lakeside to obtain
a 100% interest in Twelve Oaks Mall.
</FN>
</TABLE>
13
<PAGE>
Anchors
The following table summarizes certain information regarding the anchors at
the operating Centers (excluding the value centers) as of December 31, 1999.
Number of 12/31/99 GLA
Name Anchor Stores (in thousands) % of GLA
--- ------------- -------------- --------
May Company
Lord & Taylor 6 760
Hecht's 3 417
Filene's 2 379
Filene's Men's Store/
Furniture Gallery 1 80
Foley's 1 178
Robinsons-May 1 150
---- ------
Total 14 1,964 12.8%
Sears 7 1,582 10.3%
JCPenney 7 1,327 8.6%
Federated
Macy's 5 (1) 947
Bloomingdale's 2 379
---- -------
Total 7 1,326 8.6%
Dayton Hudson
Hudson's 4 853
Hudson's Men's & Home 1 115
---- -------
Total 5 968 6.3%
Nordstrom 4 677 4.4%
Saks 5 452 2.9%
Neiman Marcus 2 216 1.4%
Dillard's 1 254 1.7%
---- ------- -----
Total 52 8,766 57.1%
== ===== ====
(1) A new Macy's store will open at Fair Oaks in 2000.
14
<PAGE>
Mortgage Debt
The following table sets forth certain information regarding the mortgages
encumbering the Centers as of December 31,1999. All mortgage debt in the table
below is nonrecourse to the Operating Partnership, except for debt encumbering
Arizona Mills, Great Lakes Crossing, Dolphin Mall, MacArthur Center, and
International Plaza. The Operating Partnership has guaranteed the payment of
principal and interest on the mortgage debt of these Centers. The loan
agreements provide for the reduction of the amounts guaranteed as certain center
performance and valuation criteria are met. The Operating Partnership's guaranty
of the Arizona Mills' principal is $13.1 million at December 31, 1999. The
guarantees on the Great Lakes Crossing and MacArthur Center mortgages are
currently for 100% of the outstanding balances. The guarantee on the Dolphin
Mall mortgage is currently for 50% of the outstanding balance and 100% of
accrued unpaid interest. The Operating Partnership has guaranteed the payment of
100% of the principal and interest on the International Plaza construction loan.
An investor in the International Plaza project has indemnified the Operating
Partnership to the extent of 25% of the amounts guaranteed on the International
Plaza loan. Assessment bonds totaling approximately $2.5 million, which are not
included in the table, also encumber Biltmore.
15
<PAGE>
<TABLE>
<CAPTION>
Principal
Balance Annual Debt Balance Due Earliest
Centers Consolidated in Interest as of 12/31/99 Service Maturity on Maturity Prepayment
TCO's Financial Statements Rate (000's) (000's) Date (000's) Date
- -------------------------- -------- -------------- ----------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Beverly Center 8.36% $146,000 Interest Only 07/15/04 $146,000 30 Days' Notice (1)
Biltmore 7.68% 80,000 Interest Only (2) 07/10/09 71,391 09/14/01 (3)
Great Lakes Crossing (85%) Floating (4) 170,000 Interest Only (5) 04/01/02 (6) 167,925 2 Days' Notice (7)
MacArthur Center (70%) Floating (8) 115,212 (9) Interest Only 10/27/00 (6) 115,212 4 Days' Notice (7)
Short Hills 6.70% 270,000 Interest Only (10) 04/01/09 245,301 05/01/04 (11)
Other Consolidated Secured Debt
TRG Credit Facility Floating (12) 63,000 Interest Only 09/21/01 63,000 2 Days' Notice (7)
Other 13.00% (13) 20,000 Interest Only 11/22/09 20,000 11/22/04 (14)
Centers Owned by Unconsolidated
Joint Ventures/TRG's % Ownership
Arizona Mills (37%) Floating (15) 142,214 Interest Only 02/01/02 142,214 5 Days' Notice (7)
Cherry Creek (50%) 7.68% 177,000 Interest Only (16) 08/11/06 171,933 08/02/02 (17)
Dolphin (50%) Floating (18) 22,267 Interest Only 10/06/02 (6) 22,267 3 Days' Notice (7)
Fair Oaks (50%) 6.60% 140,000 Interest Only 04/01/08 140,000 04/01/00 (1)
International Plaza (26%) Floating 0 Interest Only 11/10/02 (6) 0 3 Days' Notice (7)
Lakeside (50%) 6.47% 88,000 Interest Only 12/15/00 88,000 30 Days' Notice (1)
Stamford Town Center (50%) 11.69% (19) 54,053 (20) 7,207 12/01/17 0 30 Days' Notice (20)
Twelve Oaks Mall (50%) Floating (21) 49,971 Interest Only 10/15/01 50,000 30 Days' Notice (7)
Westfarms (79%) 7.85% 100,000 Interest Only 07/01/02 100,000 60 Days' Notice (1)
Westfarms (79%) Floating (22) 55,000 Interest Only 07/01/02 55,000 4 Days' Notice (7)
Woodland (50%) 8.20% 66,000 Interest Only 05/15/04 66,000 30 Days' Notice (1)
- ------------------------
<FN>
(1) Debt may be prepaid with a yield maintenance prepayment penalty. No
prepayment penalty is due if prepaid within six months of maturity date.
(2) Interest only through 7/10/00.Thereafter, principal will be amortized based
on 30 years. Annual debt service will be $6.9 million.
(3) No defeasance deposit required if paid within three months of maturity
date.
(4) The rate is capped at 6.0% until 9/1/00, plus credit spread, based on
one-month LIBOR.
(5) Interest only until 4/1/01.Thereafter principal will be amortized based on
25 years.
(6) The maturity date may be extended one year. The MacArthur loan may be
extended an additional year.
(7) Prepayment can be made without penalty.
(8) The rate on the Operating Partnership's beneficial interest in the loan is
capped at 6.50% until 10/27/00, plus credit spread, based on one-month
LIBOR.
(9) The loan is a construction facility with a current maximum availability of
$120 million.
(10) Interest only until 4/1/02. Thereafter, principal will be amortized based
on 30 years. Annual debt service will be $20.9 million.
(11) Debt may be prepaid with a prepayment penalty equal to greater of yield
maintenance or 1% of principal prepaid. No prepayment penalty is due if
prepaid within three months of maturity date. 30 days notice required.
(12) The facility is a $200 million line of credit and is secured by mortgages
on Fairlane, LaCumbre, Paseo Nuevo, and Regency Square.
(13) Currently payable at 9%. Deferred interest is due at maturity. The loan is
secured by TRG's indirect interests in International Plaza.
(14) Debt may be prepaid with a yield maintenance prepayment penalty. 60 days
notice required.
(15) The rate is capped at 9.5% until maturity, plus credit spread, based on
one-month LIBOR.
(16) Interest only until 7/11/04. Thereafter, principal will be amortized based
on 25 years. Annual debt service will be $15.9 million.
(17) May prepay with a yield maintenance penalty on the earlier of 8/2/02 or 2
years from securitization. No prepayment penalty is due if redeemed within
three months of maturity date. 30-60 day notice required.
(18) The rate is capped at 7.0% until maturity, plus credit spread, based on
one-month LIBOR. The cap has an embedded swap with a rate of 5.15% when
LIBOR is below 6.0%.
(19) The lender was entitled to contingent interest equal to 20% of annual
applicable receipts in excess of $9.0 million.
(20) Debt was prepaid in January 2000. Property is now encumbered by a $76
million mortgage with a floating rate of one-month LIBOR + 0.80%.
(21) The rate is capped at 8.55% until maturity, plus credit spread, based on
one-month LIBOR.
(22) The rate is capped until maturity at 6.5%, plus credit spread, based on
one-month LIBOR.
</FN>
</TABLE>
For additional information regarding the Centers and their operation, see
the responses to Item 1 of this report.
16
<PAGE>
Item 3. LEGAL PROCEEDINGS
Neither the Company, its subsidiaries, nor any of the joint ventures is
presently involved in any material litigation nor, to the Company's knowledge,
is any material litigation threatened against the Company, its subsidiaries or
any of the properties. Except for routine litigation involving present or former
tenants (generally eviction or collection proceedings), substantially all
litigation is covered by liability insurance.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock of Taubman Centers, Inc. is listed and traded on the New
York Stock Exchange (Symbol: TCO). As of March 21, 2000, the 53,046,243
outstanding shares of Common Stock were held by 715 holders of record.
The following table presents the dividends declared and range of share
prices for each quarter of 1999 and 1998.
Market Quotations
--------------------------------------
1999 Quarter Ended High Low Dividends
------------------ ---- --- ---------
March 31 $ 13 7/8 $ 11 5/8 $ 0.24
June 30 14 11 15/16 0.24
September 30 13 11/16 11 3/16 0.24
December 31 11 11/16 10 1/2 0.245
Market Quotations
--------------------------------------
1998 Quarter Ended High Low Dividends
------------------ ---- --- ---------
March 31 $ 13 11/16 $ 12 1/8 $ 0.235
June 30 14 3/8 12 3/4 0.235
September 30 14 3/4 12 1/4 0.235
December 31 14 3/16 12 5/16 0.24
17
<PAGE>
During the fourth quarter of 1998, the Company offered and sold a total of
31,399,913 shares of Series B Non-Participating Convertible Preferred Stock (the
"Series B Stock") to the partners (other than the Company) in TRG, which is the
Company's subsidiary Operating Partnership, in an offering exempt from
registration under the Securities Act of 1933 (the "Securities Act"). Under the
Company's articles of incorporation, as amended on September 30, 1998, the
Company was required to offer each partner in the Operating Partnership (other
than the Company) the right to subscribe for Series B Stock on the basis of one
share of Series B Stock for each Unit of Partnership Interest in the Operating
Partnership owned by the subscribing partner. The aggregate offering price was
$38,400, which was equal to the Series B Stock's per share liquidation
preference of $0.001 multiplied by the number of shares sold. The Company sold
all of the offered shares. The Company offered and sold all shares directly and
did not pay any commissions or discounts.
In connection with its November 1999 acquisition of Lord Associates, the
Company issued 435,153 shares of Series B Stock as part of the consideration
paid to the owner. These shares will be released over a five-year period (5
shares had been released as of December 31 ,1999). The former owner, presently
an officer of the Company, has granted an irrevocable proxy to a subsidiary of
the Operating Partnership for the unreleased shares, and therefore has no voting
or dispositive power for these shares until release.
Each share of Series B Stock is entitled to one vote. The Series B Stock
and the Company's Common Stock vote as a single class on all matters submitted
to a vote of the Company's shareholders. The Series B Stock is not entitled to
dividends or other distributions, except upon liquidation as indicated above.
The Series B Stock is convertible under certain circumstances into Common
Stock at the ratio of one share of Common Stock for each 14,000 shares of Series
B Stock (with any resulting fractional shares of Common Stock being redeemed for
cash). Generally, a partner desiring to sell (by exchange or otherwise) Units in
the Operating Partnership to the Company must surrender for conversion shares of
Series B Stock equal in number to the Units being sold. In addition, if a
transfer of Series B Stock results in the transferee holding more shares of
Series B Stock than is permitted under the Company's articles of incorporation,
then the shares of Series B Stock in excess of the permitted number will
automatically convert into Common Stock (or will be redeemed for cash, as
indicated above).
The offerings of Series B Stock described above were exempt from
registration under the Securities Act pursuant to Section 4(2) of the Securities
Act. Under the Company's articles of incorporation, the Company may issue shares
of Series B Stock only to partners in the Operating Partnership. Offers were
limited to partners in the Operating Partnership, who constitute a limited
number of sophisticated investors (all of whom are "accredited investors," as
defined in Rule 501 under the Securities Act) fully familiar with the business
and operations of the Company, and did not involve any general solicitation or
advertising. Under the Company's articles of incorporation, resales of the
Series B Stock are permitted only if registered (or exempt from registration)
under the Securities Act, and each certificate evidencing Series B Stock carries
a restrictive legend.
In September and November 1999, the Operating Partnership offered and sold
a total of $100 million of 9% Cumulative Redeemable Preferred Partnership Equity
to institutional investors, in an offering exempt from registration pursuant to
Section 4(2) of the Securities Act. In connection with this private placement,
the Operating Partnership paid $2.5 million in total commissions to the
placement agent who facilitated both transactions. After 10 years (an in certain
circumstances, earlier), the holders of such preferred partnership equity have
the right to exchange their interests for shares of the Company's newly
authorized Series C and Series D Cumulative Redeemable Preferred Stock. Each
such series of the Company's preferred stock has substantially similar terms as
the preferred partnership equity being exchanged therefor and does not entitle
its holders to vote. No shares of Series C or Series D Cumulative Redeemable
Preferred Stock are currently outstanding.
18
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Company and
should be read in conjunction with the financial statements and notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations included in this report.
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands of dollars, except as noted)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Income before extraordinary items from investment in TRG (1) 29,349 21,368 19,831
Rents, recoveries and other shopping center revenues (1) 268,692 333,953
Income before extraordinary items, minority
and preferred interests 58,445 70,403 28,662 20,730 19,267
Extraordinary items (2) (468) (50,774) (444) 5,836
Minority interest (1) (30,031) (6,009)
TRG preferred distributions (3) (2,444)
Net income 25,502 13,620 28,662 20,286 25,103
Series A preferred dividends (4) (16,600) (16,600) (4,058)
Net income (loss) available to common shareowners 8,902 (2,980) 24,604 20,286 25,103
Income before extraordinary items per
common share - diluted 0.17 0.32 0.48 0.47 0.44
Net income (loss) per common share - diluted 0.16 (0.06) 0.48 0.46 0.57
Dividends per common share declared 0.965 0.945 0.925 0.89 0.88
Weighted average number of common shares outstanding 53,192,364 52,223,399 50,737,333 44,444,833 44,249,617
Number of common shares outstanding at end of period 53,281,643 52,995,904 50,759,657 50,720,358 44,134,913
Ownership percentage of TRG at end of period (1) 63% 63% 37% 37% 35%
BALANCE SHEET DATA (1) :
Investment in TRG 547,859 369,131 307,190
Real estate before accumulated depreciation 1,572,285 1,473,440
Total assets 1,596,911 1,480,863 556,824 378,527 315,076
Total debt 886,561 775,298
SUPPLEMENTAL INFORMATION (5) :
Funds from Operations allocable to TCO (6) 68,506 61,131 53,137 44,104 40,798
Mall tenant sales (7) 2,695,645 2,332,726 3,086,259 2,827,245 2,739,393
Sales per square foot (7) 453 426 384 377 364
Number of shopping centers at end of period 17 16 25 21 19
Ending Mall GLA in thousands of square feet 7,540 7,038 10,850 9,250 8,996
Average occupancy 89.0% 89.4% 87.6% 87.4% 88.0%
Ending occupancy 90.4% 90.2% 90.3% 88.0% 89.4%
Leased space (8) 92.1% 92.3% 92.3% 89.0% 90.6%
Average base rent per square foot (9) :
All mall tenants $43.58 $41.93 $38.79 $ 37.90 $ 36.33
Stores closing during year $41.14 $44.27 $37.62 $ 33.39 $ 32.96
Stores opening during year $52.64 $47.92 $41.67 $ 42.39 $ 41.27
- --------------------------
<FN>
(1) On September 30, 1998 the Company obtained a majority and controlling
interest in The Taubman Realty Group Limited Partnership (TRG or the
Operating Partnership) as a result of the GMPT Exchange (see Management's
Discussion and Analysis of Financial Condition and Results of Operations
(MD&A) - GMPT Exchange and Related Transactions). As a result of this
transaction, the Company's ownership of the Operating Partnership increased
to a majority and the Company began consolidating the Operating
Partnership. For years prior to 1998, amounts reflect the Company's
interest in the Operating Partnership under the equity method.
(2) Extraordinary items for 1995 through 1999 include charges related to the
extinguishment of debt, primarily consisting of prepayment premiums. Also,
in 1995, the Company recognized its $6.6 million share of an extraordinary
gain related to the disposition of Bellevue Center and the related
extinguishment of debt.
(3) In 1999, the Operating Partnership completed $100 million in private
placements of 9% Cumulative Redeemable Preferred Partnership Equity.
(4) In October 1997, the Company issued 8.3% Series A Preferred Stock.
(5) Operating statistics prior to 1998 include centers transferred to GMPT as
part of the GMPT Exchange.
(6) Funds from Operations is defined and discussed in MD&A - Liquidity and
Capital Resources - Funds from Operations. Funds from Operations does not
represent cash flow from operations, as defined by generally accepted
accounting principles, and should not be considered to be an alternative to
net income as a measure of operating performance or to cash flows as a
measure of liquidity.
(7) Based on reports of sales furnished by mall tenants.
(8) Leased space comprises both occupied space and space that is leased but not
yet occupied.
(9) Amounts include centers owned and open for at least five years.
</FN>
</TABLE>
19
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Selected
Financial Data and the 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 (the Operating Partnership or TRG), 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
below. Performance statistics presented below exclude these 10 centers
(transferred centers).
Mall Tenant Sales and Center Revenues
Over the long term, the level of mall tenant sales is the single most
important determinant of revenues of the shopping centers because mall tenants
provide approximately 90% of these revenues and because mall tenant sales
determine the amount of rent, percentage rent, and recoverable expenses
(together, total occupancy costs) that mall tenants can afford to pay. However,
levels of mall tenant sales can be considerably more volatile in the short run
than total occupancy costs.
The Company believes that the ability of tenants to pay occupancy costs and
earn profits over long periods of time increases as sales per square foot
increase, whether through inflation or real growth in customer spending. Because
most mall tenants have certain fixed expenses, the occupancy costs that they can
afford to pay and still be profitable are a higher percentage of sales at higher
sales per square foot.
20
<PAGE>
The following table summarizes occupancy costs, excluding utilities, for
mall tenants as a percentage of mall tenant sales.
1999 1998 1997
---- ---- ----
Mall tenant sales (in thousands) $2,695,645 $2,332,726 $1,965,905
Sales per square foot 453 426 410
Minimum rents 9.7% 9.7% 10.0%
Percentage rents 0.2 0.3 0.3
Expense recoveries 4.3 4.1 4.2
----- ----- -----
Mall tenant occupancy costs 14.2% 14.1% 14.5%
===== ===== =====
Occupancy
Historically, average annual occupancy has been within a narrow band. In
the last ten years, average annual occupancy has ranged between 86.5% and 89.4%.
Mall tenant average occupancy, ending occupancy and leased space rates are as
follows:
1999 1998 1997
---- ---- ----
Mall Tenant Average Occupancy 89.0% 89.4% 88.0%
Ending Occupancy 90.4 90.2 90.7
Leased Space 92.1 92.3 92.7
Rental Rates
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. The following table contains certain information
regarding per square foot base rent at the shopping centers that have been owned
and open for five years.
1999 1998 1997
---- ---- ----
Average Base Rent per square foot:
All mall tenants $43.58 $41.93 $41.37
Stores closing during the year $41.14 $44.27 $39.07
Stores opening during the year $52.64 $47.92 $41.08
In 1999, average base rent per square foot for stores opening during the
year was somewhat weighted by the leasing of smaller than average spaces at
several of the Company's most productive centers. The Company expects the rent
spread between opening and closing stores in 2000 to be in the Company's
historic range of $5.00 to $10.00 per square foot. However, this statistic is
difficult to predict in part because the Company's leasing policies and
practices may result in early lease terminations with actual average closing
rents per square foot which may vary from the average rent per square foot of
scheduled lease expirations.
21
<PAGE>
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.
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
1999 1999 1999 1999 1999
------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Mall Tenant Sales $533,730 $598,956 $ 610,520 $952,439 $2,695,645
Revenues 117,485 127,669 125,140 139,327 509,621
Occupancy:
Average 88.5% 88.1% 88.9% 90.3% 89.0%
Ending 87.5% 88.0% 89.5% 90.4% 90.4%
Leased Space 91.3% 91.7% 92.8% 92.1% 92.1%
</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.
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
1999 1999 1999 1999 1999
--------------- -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Minimum Rents 11.8% 10.8% 10.7% 7.2% 9.7%
Percentage Rents 0.2 0.1 0.1 0.5 0.2
Expense Recoveries 4.6 4.9 4.5 3.4 4.3
----- ----- ----- ----- -----
Mall Tenant Occupancy Costs 16.6% 15.8% 15.3% 11.1% 14.2%
----- ----- ----- ----- -----
</TABLE>
Results of Operations
The following represent significant debt and equity transactions, new
center openings, expansions, and acquisitions which affect the operating results
described under Comparison of 1999 to 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, based on the
average stock price of the Company's common shares of $13.50 for the two week
period prior to the closing), 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.
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 to extinguish $1.1 billion of debt
in September 1998. The remaining proceeds were used primarily to pay prepayment
premiums and transaction costs. GMPT's share of debt received in the exchange
included the $902 million balance on the first bridge loan, $86 million
representing 50% of the debt on the Joint Venture owned shopping center, and
$1.6 million of assessment bond obligations. The $340 million balance on the
second bridge loan was refinanced during the first half of 1999.
22
<PAGE>
Concurrently with the GMPT Exchange the Operating Partnership, expecting to
reduce its annual general and administrative expense, committed to a
restructuring of its operations and recognized a $10.7 million charge related to
this restructuring. During the fourth quarter of 1998, general and
administrative expense decreased $2.2 million from the comparable period in
1997. During 1999, general and administrative expense decreased $6.5 million
from 1998. Substantially all of the decrease in 1999 expense occurred in the
first three quarters of 1999.
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.
Other Debt and Equity Transactions
In September and November 1999, the Operating Partnership completed private
placements totaling $100 million of 9% Cumulative Redeemable Preferred
Partnership Equity (Series C Preferred Equity and Series D Preferred Equity,
respectively), which were purchased by institutional investors. The net proceeds
were used to pay down lines of credit.
In August 1999, a seven-year secured financing of $177 million with an
all-in rate of 7.8% was completed by the 50% owned Unconsolidated Joint Venture
that owns Cherry Creek. The proceeds were used to repay the existing $130
million mortgage and transaction costs. The remaining net proceeds of
approximately $45.2 million were distributed to the Operating Partnership, which
had contributed all the funding for the 1998 expansion of Cherry Creek. The
Operating Partnership used the distribution to pay down lines of credit.
In June 1999, the Operating Partnership's $200 million line of credit
facility was securitized, with interests in Fairlane, LaCumbre, Paseo Nuevo, and
Regency Square serving as collateral. The rate on the line was decreased to
LIBOR plus 0.90%.
In April 1999, a ten-year financing of $270 million with an all-in rate of
approximately 6.9% secured by The Mall at Short Hills was completed. Also, in
June 1999, a ten-year financing of $80 million with an all-in rate of
approximately 7.8% secured by Biltmore Fashion Park was completed. The net
proceeds of these financings were used to pay off the entire $340 million
balance on the bridge loan.
In April 1999, a three-year $170 million loan secured by Great Lakes
Crossing was finalized, with proceeds used to repay the balance of the existing
construction facility. The loan bears interest at one-month LIBOR plus 1.50%. In
addition, the Company finalized an amendment to the MacArthur Center
construction facility, with total availability under the facility of $120
million at an interest rate of one-month LIBOR plus 1.35%.
In January 1998, the Operating Partnership redeemed a partner's 6.1 million
units of partnership interest for approximately $77.7 million (including costs).
The redemption was funded through the use of an existing revolving credit
facility.
23
<PAGE>
Openings, Expansions, Acquisitions, and Other
In March 1999, MacArthur Center, a 70% owned enclosed super-regional mall,
opened in Norfolk, Virginia. In November 1998, Great Lakes Crossing, an 85% (an
increase from 80%-see below) 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 Operating Partnership 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 $2.0 million for 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.
In November 1999, the Operating Partnership acquired Lord Associates, a
retail leasing firm based in Alexandria, Virginia for $2.5 million in cash and
$5 million in partnership units, which are subject to certain contingencies. In
addition, $1.0 million of the purchase price is contingent upon profits achieved
on acquired leasing contracts. Of the cash purchase price, approximately $1.0
million was paid at closing and $1.5 million will be paid over five years.
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. The lease was subject to certain provisions that enabled the
Operating Partnership to explore significant redevelopment opportunities and
terminate the lease obligations in the event such redevelopment opportunities
were not deemed to be sufficient. In November 1999, the Operating Partnership
exercised its option to terminate the lease. Under the terms of the lease, the
Operating Partnership will continue to manage the center until May 2000.
In December 1999, the Operating Partnership acquired an additional 5%
interest in Great Lakes Crossing for $1.2 million in cash, increasing the
Operating Partnership's interest in the center to 85%.
Subsequent Events
In January 2000, the Company agreed to exchange property interests with its
current joint venture partner in two Unconsolidated Joint Ventures. Under the
terms of the agreement, expected to be completed in first quarter 2000, the
Operating Partnership will assume 100 percent ownership of Twelve Oaks Mall and
the current joint venture partner will become 100 percent owner of Lakeside.
Both properties will remain subject to the existing mortgages ($50 million and
$88 million at Twelve Oaks and Lakeside, respectively.) The Operating
Partnership will also pay the joint venture partner $30 million in cash. The
Operating Partnership will continue to manage Twelve Oaks, while the joint
venture partner will assume management responsibility of Lakeside at closing.
Upon completion of the transaction, the Company expects to recognize a gain on
the exchange, representing the excess of the fair value over the net book basis
of the Company's interest in Lakeside Mall, adjusted for the $30 million paid
and transaction costs. Aside from this book gain, the Company does not expect
the transaction to have a material effect on the Company's results of
operations.
In January 2000, the 50% owned Unconsolidated Joint Venture that owns
Stamford Town Center completed a $76 million secured financing. The new
financing bears interest at a rate of one-month LIBOR plus 0.8% and matures in
2002 with a two-year extension option. The rate is capped at 8.2% plus credit
spread for the term of the loan. The proceeds were used to repay the $54 million
participating mortgage, the $18.3 million prepayment premium, and accrued
interest and transaction costs.
24
<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. Income allocated to the noncontrolling partners and
preferred interests is deducted to arrive at the results allocable to the
Company's common shareowners. Because the net equity of the Operating
Partnership's unitholders is less than zero, for periods subsequent to the GMPT
Exchange, the income allocated to the noncontrolling partners is equal to their
share of distributions. The net equity of these minority partners 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 63% for 1999 and 43% for 1998 (including averages of 39% for the
period through the GMPT Exchange and 63% thereafter.)
25
<PAGE>
Comparison of 1999 to 1998
The following table sets forth operating results for 1999 and 1998, showing
the results of the Consolidated Businesses and Unconsolidated Joint Ventures:
<TABLE>
<CAPTION>
1999 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 133.9 158.1 292.1 99.8 149.3 249.1
Percentage rents 4.6 3.9 8.6 5.2 3.7 8.9
Expense recoveries 78.9 83.6 162.4 57.9 79.2 137.1
Management, leasing and
development 23.9 23.9 12.3 12.3
Other 16.3 6.4 22.7 17.4 6.8 24.2
Revenues - transferred centers 129.7 47.2 177.0
------- ------- ------- ------- ------- -------
Total revenues 257.6 252.0 509.6 322.3 286.3 608.6
OPERATING COSTS:
Recoverable expenses 69.5 69.4 138.9 51.4 66.0 117.4
Other operating 28.9 13.0 41.9 25.7 11.7 37.4
Management, leasing and
development 17.2 17.2 8.0 8.0
Expenses other than interest,
depreciation and amortization
- transferred centers 44.3 17.7 62.0
General and administrative 18.1 18.1 24.6 24.6
Interest expense 51.3 64.4 115.8 75.8 69.7 145.5
Depreciation and amortization(3) 51.9 29.7 81.6 57.0 31.5 88.5
------- ------- ------- ------- ------- -------
Total operating costs 237.0 176.5 413.5 286.8 196.7 483.5
Net results of Memorial City (1) (1.4) (1.4) (0.8) (0.8)
------- ------- ------- ------- ------- -------
19.2 75.6 94.7 34.7 89.7 124.4
======= ======= ======= =======
Equity in income before
extraordinary items of
Unconsolidated Joint Ventures(3) 39.3 46.4
Restructuring loss (10.7)
------- -------
Income before extraordinary items,
minority and preferred interests 58.4 70.4
Extraordinary items (0.5) (50.8)
TRG preferred distributions (2.4)
Minority share of income (17.6) (4.2)
Distributions in excess of minority
share of income (12.4) (1.8)
------- -------
Net income 25.5 13.6
Series A preferred dividends (16.6) (16.6)
------- -------
Net income (loss) available to
common shareowners 8.9 (3.0)
======= =======
SUPPLEMENTAL INFORMATION(4):
EBITDA contribution 118.6 94.1 212.7 168.3 104.3 272.6
Beneficial Interest Expense (47.6) (34.5) (82.1) (75.8) (37.1) (112.9)
Non-real estate depreciation (2.7) (2.7) (2.3) (2.3)
Preferred dividends and distributions (19.0) (19.0) (16.6) (16.6)
------- ------- ------- ------- ------- -------
Funds from Operations contribution 49.3 59.7 108.9 73.7 67.1 140.8
======= ======= ======= ======= ======= =======
<FN>
(1) The results of operations of Memorial City are presented net in this table.
(2) With the exception of the Supplemental Information, amounts represent 100%
of the Unconsolidated Joint Ventures. Amounts are net of intercompany
profits.
(3) Included in 1999 (a) Equity in income before extraordinary item of
Unconsolidated Joint Ventures and (b) Depreciation and amortization are
charges of $4.7 million and $3.8 million, respectively, representing
amortization of the Company's additional basis in the Operating
Partnership.
(4) EBITDA represents earnings before interest and depreciation and
amortization. Funds from Operations is defined and discussed in Liquidity
and Capital Resources.
(5) Amounts in this table may not add due to rounding.
(6) Certain 1998 amounts have been reclassified to conform to 1999
classifications.
</FN>
</TABLE>
26
<PAGE>
Consolidated Businesses
Total revenues for the year ended December 31, 1999 were $257.6 million, a
$65.0 million, or 33.7%, increase over the comparable period in 1998, excluding
revenues of the transferred centers. Minimum rents increased $34.1 million of
which $30.6 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
gains on sales of peripheral land, partially offset by increases in garage and
trash removal services and lease cancellation fees.
Total operating costs were $237.0 million, a $5.5 million, or 2.3% decrease
from the comparable period in 1998, excluding expenses other than depreciation,
amortization and interest of the transferred centers. Recoverable expenses
increased primarily due to Great Lakes Crossing and MacArthur Center. Other
operating expense increased due to an increase in the charge to operations for
costs of unsuccessful and potentially unsuccessful pre-development activities,
the new centers, and bad debt expense. Costs of management, leasing and
development services increased primarily due to the management agreements with
GMPT. General and administrative expense decreased $6.5 million primarily due to
decreases in payroll costs, travel and professional fees. Interest expense
decreased primarily due to the assumption of debt by GMPT as part of the GMPT
Exchange and debt paid down with the proceeds of the Series C and Series D
Preferred Equity offerings, partially offset by an increase in debt used to
finance Great Lakes Crossing and MacArthur Center and a decrease in capitalized
interest related to these centers. Depreciation and amortization expenses
decreased due to the transferred centers, partially offset by an increase due to
the new centers.
During 1998, a $10.7 million loss on the restructuring was recognized,
which primarily represented the cost of certain involuntary terminations of
personnel.
Unconsolidated Joint Ventures
Total revenues for the year ended December 31, 1999 were $252.0 million, a
$12.9 million, or 5.4%, increase from the comparable period of 1998, excluding
revenues of the transferred center. Minimum rents increased due to the expansion
at Cherry Creek and tenant rollovers. Expense recoveries also increased because
of the Cherry Creek expansion and an increase in property taxes recoverable from
tenants at certain centers.
Total operating costs decreased by $20.2 million (of which $17.7 million
represented the expenses other than interest, depreciation, and amortization of
the transferred center) to $176.5 million for the year ended December 31, 1999.
Recoverable expenses increased primarily due to the Cherry Creek expansion and
an increase in property taxes at certain centers. Other operating expense
increased primarily due to increases in bad debt expense. Interest expense
decreased primarily due to the assumption of debt by GMPT as part of the GMPT
Exchange. Depreciation and amortization decreased due to the transferred center,
offset by an increase due to the Cherry Creek expansion.
Income before extraordinary items of the Unconsolidated Joint Ventures
decreased by $14.1 million, or 15.7%, to $75.6 million. The Company's equity in
income before extraordinary items of the Unconsolidated Joint Ventures was $39.3
million, a 15.3% decrease from the comparable period in 1998.
Net Income
As a result of the foregoing, the Company's income before extraordinary
items, minority and preferred interests decreased $12.0 million, or 17.0%, to
$58.4 million for the year ended December 31, 1999. The Company recognized $0.5
million in extraordinary losses related to the extinguishment of debt during
1999, while an extraordinary charge of $50.8 million for the extinguishment of
debt, primarily related to the GMPT Exchange, was recognized in 1998. The income
of the Operating Partnership allocable to minority partners increased to a total
of $30.0 million, from $6.0 million in 1998, primarily due to the minority
partners' $30.7 million share of the extraordinary charges in 1998.
Distributions of $2.4 million to the Operating Partnership's Series C and Series
D Preferred Equity owners were made in 1999. After payment of $16.6 million in
Series A preferred dividends, net income (loss) available to common shareowners
for 1999 was $8.9 million compared to $(3.0) million in 1998.
27
<PAGE>
Comparison of 1998 to 1997
Discussion of significant debt and equity transactions, acquisitions, and
openings occurring in 1998 is included in the Comparison of 1999 to 1998.
Significant 1997 items are described below.
In October 1997, the Company used the $200 million public offering of eight
million shares of 8.3% Series A Cumulative Redeemable Preferred Stock to acquire
a preferred equity interest in the Operating Partnership. The Operating
Partnership used the net proceeds to pay down debt under existing revolving
credit and commercial paper facilities, which were used to fund the acquisition
of Regency Square in September 1997. In September 1997, the Operating
Partnership acquired Regency Square (Regency) shopping center for $123.9 million
in cash. Additionally, in November 1997, the Operating Partnership opened
Arizona Mills, a 37% owned value super-regional shopping center. In December
1997, the Operating Partnership acquired The Falls shopping center for $156
million in cash and the leasehold interest in The Mall at Tuttle Crossing, which
opened in July 1997. These two centers were transferred to GMPT.
A 135,000 square foot expansion opened at Westfarms in August 1997. In
addition, approximately 50,000 square feet of new mall stores opened at Biltmore
in 1997.
The Company's average ownership percentage of the Operating Partnership was
43% for 1998 (including averages of 39% for the period through the GMPT Exchange
and 63% thereafter) and 37% for 1997.
28
<PAGE>
Comparison of 1998 to 1997
The following table sets forth operating results for 1998 and 1997, showing
the results of the Consolidated Businesses and Unconsolidated Joint Ventures:
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------- ----------------------------------------------
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 99.8 149.3 249.1 86.4 121.1 207.5
Percentage rents 5.2 3.7 8.9 5.0 2.6 7.5
Expense recoveries 57.9 79.2 137.1 51.6 64.4 115.9
Management, leasing and
development 12.3 12.3 8.5 8.5
Other 17.4 6.8 24.2 11.4 8.0 19.4
Revenues - transferred centers 129.7 47.2 177.0 138.9 62.7 201.6
------- ------- ------ ------- ------- -------
Total revenues 322.3 286.3 608.6 301.6 258.8 560.4
OPERATING COSTS:
Recoverable expenses 51.4 66.0 117.4 45.6 53.7 99.2
Other operating 25.7 11.7 37.4 16.8 10.7 27.5
Management, leasing
and development 8.0 8.0 4.4 4.4
Expenses other than interest,
depreciation and amortization
- transferred centers 44.3 17.7 62.0 47.7 23.9 71.5
General and administrative 24.6 24.6 26.7 26.7
Interest expense 75.8 69.7 145.5 73.6 54.5 128.2
Depreciation and amortization 57.0 31.5 88.5 49.2 23.7 72.8
------- ------- ------ ------- ------- -------
Total operating costs 286.8 196.7 483.5 264.0 166.4 430.4
Net results of Memorial City (1) (0.8) (0.8) 0.0 0.0
------- ------- ------ ------- ------- -------
34.7 89.7 124.4 37.6 92.4 130.0
======= ====== ======= =======
Equity in income before
extraordinary item of
Unconsolidated Joint Ventures 46.4 48.8
Restructuring loss (10.7)
------- -------
Income before extraordinary items,
minority and preferred interests 70.4 86.4
Extraordinary items (50.8)
Minority share of income (4.2) (57.8)
Distributions in excess of minority
share of income (1.8) -------
-------
Net income 13.6 28.7
Series A preferred dividends (16.6) (4.1)
------- -------
Net income (loss) available to
common shareowners (3.0) 24.6
======== =======
SUPPLEMENTAL INFORMATION (3):
EBITDA contribution 168.3 104.3 272.6 161.4 94.4 255.7
Beneficial Interest Expense (75.8) (37.1) (112.9) (73.6) (29.3) (102.9)
Non-real estate depreciation (2.3) (2.3) (2.1) (2.1)
Preferred dividends and distributions (16.6) (16.6) (4.1) (4.1)
------ ------- ------ ------ ------- ------
Funds from Operations contribution 73.7 67.1 140.8 81.6 65.1 146.7
====== ======= ====== ====== ======= ======
<FN>
(1) The results of operations of Memorial City are presented net in this table.
(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 this table may not add due to rounding.
(5) Certain 1998 and 1997 amounts have been reclassified to conform to 1999
classifications.
</FN>
</TABLE>
29
<PAGE>
Consolidated Businesses
Total revenues for 1998 were $322.3 million, a $20.7 million, or 6.9%,
increase over 1997. Minimum rents increased $13.4 million, of which $8.9 million
was due to the opening of Great Lakes Crossing and the acquisition of Regency.
Minimum rents also increased because of the expansion at Biltmore and tenant
rollovers. Expense recoveries increased primarily due to Great Lakes Crossing
and Regency. Revenues from management, leasing and development services
increased primarily due to the new management agreements with GMPT. Other
revenue increased primarily due to an increase in gains on sales of peripheral
land and lease cancellation revenue.
Total operating costs increased $22.8 million, or 8.6%, to $286.8 million.
Recoverable and other operating expenses increased due to Great Lakes Crossing
and Regency. Other operating expense also increased due to professional fees,
management expense and an increase in the charge to operations for costs of
unsuccessful and potentially unsuccessful pre-development activities. General
and administrative expense decreased $2.1 million between periods due to
decreases in payroll and reduced employee relocation and recruiter costs,
partially offset by increases attributable to the phase-in of the long term
compensation plan.
Interest expense increased due to an increase in debt used to finance
Tuttle Crossing, the acquisition of The Falls and the redemption of a partner's
interest in the Operating Partnership, partially offset by a decrease in debt
paid down with the proceeds of the October 1997 and April 1998 equity offerings
and the assumption of debt by GMPT as part of the GMPT Exchange. Depreciation
and amortization expense increased due to Great Lakes Crossing, Tuttle Crossing,
Regency and The Falls, partially offset by the decrease in expense due to the
transferred centers only being included in 1998 through the date of the GMPT
Exchange.
Revenues and expenses other than interest and depreciation for the
transferred centers for 1998 represent operations through the date of the GMPT
Exchange. The resulting decreases from 1997 were partially offset by increases
in revenues and expenses due to the acquisition of The Falls and the opening of
Tuttle Crossing.
During 1998, a $10.7 million loss on the restructuring was recognized,
which primarily represented the cost of certain involuntary terminations of
personnel.
Unconsolidated Joint Ventures
Total revenues for 1998 were $286.3 million, a $27.5 million, or 10.6%,
increase from 1997. The increase in minimum rents and expense recoveries was
primarily due to Arizona Mills and the expansions at Westfarms and Cherry Creek.
Minimum rents also increased due to tenant rollovers. Other revenue decreased by
$1.2 million primarily due to a decrease in gains on peripheral land sales.
Total operating costs increased by $30.3 million, or 18.2%, to $196.7
million for 1998. Recoverable and depreciation and amortization expenses
increased primarily due to Arizona Mills and the expansions. Other operating
expense increased primarily due to Arizona Mills. Interest expense increased
primarily due to an increase in debt used to finance Arizona Mills and the
Westfarms expansion, and a decrease in capitalized interest related to these two
projects.
Revenues and expenses other than interest and depreciation for the
transferred centers for 1998 represent the operations of Woodfield through the
date of the GMPT Exchange, resulting in decreases from the prior year.
As a result of the foregoing, income before extraordinary item of the
Unconsolidated Joint Ventures decreased by $2.7 million, or 2.9%, to $89.7
million. The Company's equity in income before extraordinary item of the
Unconsolidated Joint Ventures was $46.4 million, a 4.9% decrease from the
comparable period in 1997.
30
<PAGE>
Net Income
As a result of the foregoing, the Company's income before extraordinary
items, minority and preferred interest decreased to $70.4 million for 1998. The
income allocable to minority partners decreased to $6.0 million, from $57.8
million, reflecting the Company's increased ownership in the Operating
Partnership due to the GMPT Exchange and other equity transactions, as well as
the minority partners' $30.7 million share of the 1998 extraordinary items.
Also, the Company recognized its $20.1 million share of $50.8 million in
extraordinary charges related to the extinguishment of debt, including debt
extinguished in anticipation of the GMPT Exchange, primarily consisting of
prepayment premiums. After payment of $16.6 million in Series A preferred
dividends, net income (loss) available to common shareowners for 1998 was $(3.0)
million compared to $24.6 million for 1997.
31
<PAGE>
Liquidity and Capital Resources
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 indebtedness; 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 its 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 December 31, 1999, the Company had a consolidated cash balance of
$20.6 million. Additionally, the Company has a secured $200 million line of
credit. The line had $63.0 million of borrowings as of December 31, 1999 and
expires in September 2001. The Company also has available a second bank line of
credit of up to $40 million. The line had $17.6 million of borrowings as of
December 31, 1999.
Debt and Equity Transactions
Discussion of significant debt and equity transactions occurring in the
three years ended December 31, 1999 is contained in Results of Operations. In
addition to the transactions described therein, the following transactions have
occurred which will affect the Company's liquidity and capital resources in
future periods.
In October 1999, the 50% owned Unconsolidated Joint Venture that is
developing Dolphin Mall closed on a $200 million, three-year construction
facility. The rate on the facility is LIBOR plus 2%, decreasing to LIBOR plus
1.75% when a certain coverage ratio is met. The rate on the loan is capped at 7%
plus credit spread until maturity. Under the interest rate agreement, the rate
is swapped to a fixed rate of 5.15% when LIBOR is less than 6%. The maturity
date may be extended one year. The balance at December 31, 1999 was $22.3
million.
In November 1999, the 26% owned Unconsolidated Joint Venture that is
developing International Plaza closed on a $193.5 million, three-year
construction financing, with a one-year extension option. The rate on the
facility is LIBOR plus 1.90%. There were no borrowings as of December 31, 1999.
In January 2000, the Company finalized an agreement that securitized the
$40 million bank line of credit and extended its maturity to August 2000.
In March 2000, the Company's Board of Directors authorized the purchase of
up to $50 million of the Company's common stock in the open market. The stock
may be purchased from time to time as market conditions warrant.
Summary of Investing Activities
Net cash used in investing activities was $197.4 million in 1999 compared
to $269.9 million in 1998. Cash used in investing activities was impacted by the
timing of capital expenditures, with outflows in 1999 and 1998 for the
construction of MacArthur Center, Great Lakes Crossing, International Plaza, The
Mall at Wellington Green, The Shops at Willow Bend, as well as other development
activities and other capital items (see Capital Spending below). During 1999,
$18.5 million was used in purchasing investments in Fashionmall.com, Inc.,
Swerdlow Real Estate Group, and Lord Associates. Proceeds from sales of
peripheral land decreased in 1999 by $4.9 million, to $1.8 million.
Contributions to Unconsolidated Joint Ventures are impacted primarily by the
timing of construction and expansion activities, which in 1999 and 1998 included
projects at Dolphin Mall, International Plaza, Cherry Creek, Woodland and
Lakeside. Distributions from Unconsolidated Joint Ventures in 1999 and 1998
included distributions from centers comprised of excess mortgage refinancing
proceeds ($45.2 million from Cherry Creek in 1999 and $45.9 million from Fair
Oaks in 1998), while the loss of distributions from Woodfield after the GMPT
Exchange was offset by increases at other centers.
32
<PAGE>
Net cash used in investing activities in 1998 was $269.9 million compared
to $178.3 million in 1997. As the Company's interest in the Operating
Partnership changed significantly as a result of the GMPT Exchange (see Results
of Operations - GMPT Exchange and Related Transactions), investing activities of
periods prior to this transaction are not comparable. In 1997, the Company
acquired its $200 million preferred equity interest in the Operating
Partnership, and received $21.7 million of distributions from its equity
investment in the Operating Partnership in excess of its share of the Operating
Partnership's income.
Summary of Financing Activities
Financing activities contributed cash of $91.3 million, a decrease of $40.0
million from the $131.3 million in 1998. Borrowings net of debt repayments and
issuance costs decreased by $244.5 million to $100.9 million, while net proceeds
from equity offerings increased by $71.3 million to $100.4 million. The net
decrease in the debt and equity sources of $173.2 million was offset by
decreases in cash used in 1999 compared to 1998 in connection with (i) the $77.7
million partner redemption in January 1998, (ii) the greater amount of partner
distributions made in 1998 due the Company's larger pre-GMPT Exchange equity
base, and (iii) transaction costs incurred in connection with the GMPT Exchange.
Net cash provided by financing activities in 1998 was $131.3 million
compared to $149.3 million in 1997. Financing activities for 1998 and 1997 are
not comparable due to the GMPT Exchange. In 1997, the Company issued $200
million of 8.3% preferred stock, for which 1998 reflects a complete year of
dividends.
Beneficial Interest in Debt
At December 31, 1999, the Operating Partnership's debt and its beneficial
interest in the debt of its Consolidated and Unconsolidated Joint Ventures
totaled $1,300.2 million. As shown in the following table, there was no unhedged
floating rate debt at December 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 December 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 $257.1 million as of December 31,
1999. Beneficial interest in capitalized interest was $15.2 million for the year
ended December 31, 1999.
Beneficial Interest in Debt
---------------------------------------------------
Amount Interest LIBOR Frequency LIBOR
(in millions Rate at Cap of Rate at
of dollars) 12/31/99(1) Rate Resets 12/31/99
----------- ---------- ----- ------- --------
Total beneficial interest in
fixed rate debt 862.2 7.65%(2)
Floating rate debt hedged via
interest rate caps:
Through August 2000 144.5 7.32 6.00% Monthly 5.82%
Through October 2000 80.6 7.17 6.50 Monthly 5.82
Through December 2000 81.0 6.74(2) 7.00 Monthly 5.82
Through October 2001 25.0 6.27 8.55 Monthly 5.82
Through January 2002 52.4 7.12 9.50 Monthly 5.82
Through July 2002 43.4 6.95 6.50 Monthly 5.82
Through September 2002 11.1 7.15(3) 7.00 Monthly 5.82
----
Total beneficial interest
in debt 1,300.2 7.45(1)
=======
(1) All floating rates are based on the one-month LIBOR rate on December 31,
1999.
(2) Denotes weighted average interest rate.
(3) This cap has an embedded swap with a rate of 5.15% when LIBOR is below 6%.
33
<PAGE>
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 December 31, 1999, a one
percent increase in interest rates on floating rate debt would decrease cash
flows by approximately $2.9 million and, due to the effect of capitalized
interest, annual earnings by approximately $2.2 million. A one percent decrease
in interest rates on floating rate debt would increase cash flows and annual
earnings by approximately $4.3 million and $3.3 million, respectively. Based on
the Company's consolidated debt and interest rates in effect at December 31,
1999, a one percent increase in interest rates would decrease the fair value of
debt by approximately $13 million, while a one percent decrease in interest
rates would increase the fair value of debt by approximately $32 million.
34
<PAGE>
Covenants and Commitments
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 Operating Partnership is in
compliance with all of such covenants.
Payment of principal and interest on the Great Lakes Crossing, MacArthur
Center, and International Plaza loans is guaranteed by the Operating
Partnership. The total amount outstanding on these loans was $285.2 million at
December 31, 1999. The new investor in the International Plaza venture has
indemnified the Operating Partnership to the extent of approximately 25% of the
amounts guaranteed on the International Plaza loan. In addition, the payment of
principal and interest on the Arizona Mills' debt is guaranteed by each of the
owners of Arizona Mills to the extent of its ownership. The Operating
Partnership's guaranty of principal on the Arizona Mills loan was $13.1 million
at December 31, 1999. The Operating Partnership has also guaranteed the payment
of 50% of principal and interest on the Dolphin Mall loan. The balance on the
Dolphin Mall loan was $22.3 million at December 31, 1999. All of the loan
agreements provide for a reduction of the amount guaranteed as certain center
performance and valuation criteria are met.
Funds from Operations
A principal factor that the Company considers in determining dividends to
shareowners is Funds from Operations (FFO), 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 and distributions.
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.
In October 1999, NAREIT approved certain clarifications of the definition
of FFO, including that non-recurring items that are not defined as
"extraordinary" under generally accepted accounting principles should be
reflected in the calculation of FFO. The clarified definition is effective
January 1, 2000 and restatement of all periods presented is recommended. Under
the clarified definition, the Company would have included in FFO, for the year
ended December 31, 1998, the $10.7 million restructuring charge (Results of
Operations - GMPT Exchange and Related Transactions), resulting in an
approximate $0.09 decrease to the Company's FFO per share reported for that
period. There would have been no change to the amounts reported for 1999.
35
<PAGE>
Reconciliation of Net Income to Funds from Operations
Year Ended Year Ended
December 31, 1999 December 31, 1998
----------------- -----------------
(in millions of dollars)
Income before extraordinary items,
minority and preferred interests (1) 58.4 70.4
Restructuring loss 10.7
Depreciation and amortization (2) 52.5 57.4
Share of Unconsolidated Joint Ventures
depreciation and amortization (3) 20.4 20.7
Other income/expenses, net 0.5
Non-real estate depreciation (2.7) (2.3)
Preferred dividends and distributions (19.0) (16.6)
Minority interest in consolidated joint ventures (0.7)
----- -----
Funds from Operations 108.9 140.8
===== =====
Funds from Operations allocable to the Company 68.5 61.1
===== =====
(1) Includes gains on peripheral land sales of $1.7 million and $6.0 million
for the years ended December 31, 1999 and 1998, respectively.
(2) Includes $2.1 million and $2.7 million of mall tenant allowance
amortization for the years ended December 31, 1999 and 1998, respectively.
(3) Includes $1.2 million and $1.3 million of mall tenant allowance
amortization for the years ended December 31, 1999 and 1998, respectively.
(4) Amounts in the tables may not add due to rounding.
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 December 9, 1999, the Company declared a quarterly dividend of $0.245
per common share payable January 20, 2000 to shareowners of record on December
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, paid December 31, 1999
to shareowners of record on December 21, 1999.
Common dividends declared totaled $0.965 per common share in 1999, of which
$0.4534 represented return of capital and $0.5116 represented ordinary income,
compared to dividends declared in 1998 of $0.945 per common share, of which
$0.854 represented return of capital and $0.091 represented ordinary income. The
tax status of total 2000 common dividends declared and to be declared, assuming
continuation of a $0.245 per common share quarterly dividend, is estimated to be
approximately 40% return of capital, and approximately 60% ordinary income.
Series A preferred dividends declared were $2.075 per preferred share in 1999
and 1998, all of which represented ordinary income. The tax status of total 2000
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.
36
<PAGE>
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.
Capital Spending
Capital spending for routine maintenance of the shopping centers is
generally recovered from tenants. Capital spending not recovered from tenants is
summarized in the following tables:
1999
--------------------------------------------------
Beneficial Interest
in Consolidated
Unconsolidated Businesses and
Consolidated Joint Unconsolidated
Businesses Ventures(1) Joint Ventures(1)(2)
--------------------------------------------------
(in millions of dollars)
Development, renovation,
and expansion:
Existing centers 12.4 24.9 24.8
New centers 124.4 (3) 112.9 (4) 160.5
Pre-construction development
activities, net of charge
to operations 2.0 2.0
Mall tenant allowances 3.8 6.2 7.0
Corporate office improvements
and equipment 3.0 3.0
Other 0.8 2.4 2.2
--- --- ---
Total 146.4 146.4 199.5
===== ===== =====
(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), International
Plaza (a 26% owned unconsolidated joint venture), and Dolphin Mall (a 50%
owned unconsolidated joint venture).
(3) Includes costs related to MacArthur Center, The Shops at Willow Bend and
The Mall at Wellington Green.
(4) Includes costs related to Dolphin Mall and International Plaza.
1998 (1)
--------------------------------------------------
Beneficial Interest
in Consolidated
Unconsolidated Businesses and
Consolidated Joint Unconsolidated
Businesses Ventures(2) Joint Ventures(2)(3)
--------------------------------------------------
(in millions of dollars)
Development, renovation,
and expansion:
Existing centers 27.0 34.5 43.9
New centers 291.6 (4) 4.5 226.9
Pre-construction development
activities, net of charge to
operations 20.8 20.8
Mall tenant allowances 8.2 7.4 12.3
Corporate office improvements
and equipment 3.4 3.4
Other 0.3 2.2 1.3
--- --- ---
Total 351.3 48.6 308.6
===== ==== =====
(1) Includes capital spending on the transferred centers through September 30,
1998.
(2) Costs are net of intercompany profits.
(3) Includes the Operating Partnership's share of construction costs for Great
Lakes Crossing (an 80% owned consolidated joint venture), 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 in 1998).
(4) Includes costs related to Great Lakes Crossing, MacArthur Center, The Shops
at Willow Bend and International Plaza.
The Operating Partnership's share of mall tenant allowances per square foot
leased during the year, excluding expansion space and new developments, was
$12.76 in 1999, and $11.80 in 1998. In addition, the Operating Partnership's
share of capitalized leasing costs in 1999, excluding new developments, was $6.2
million, or $10.82 per square foot leased and $7.0 million or $7.95 per square
foot leased during the year in 1998. The 1998 amounts exclude costs related to
the transferred centers.
37
<PAGE>
The Shops at Willow Bend, a new 1.4 million square foot center under
construction in Plano, Texas, will be anchored by Neiman Marcus, Saks Fifth
Avenue, Lord & Taylor, Foley's and Dillard's. The center is scheduled to open in
August 2001; Saks Fifth Avenue will open in 2004. The Mall at Wellington Green,
a 1.3 million square foot center under construction in west Palm Beach County,
Florida, will be anchored by Nordstrom, Lord & Taylor, Burdine's, Dillard's and
JCPenney. The center, scheduled to open in October 2001, will be owned by a
joint venture in which the Operating Partnership has a 90% controlling interest.
In September 1999, the Company finalized a partnership agreement with Swerdlow
Real Estate Group to jointly develop Dolphin Mall, a 1.4 million square foot
value regional center located in Miami, Florida. The center is scheduled to open
in March 2001.
Additionally, the Company is developing International Plaza, a new 1.3
million square foot center under construction in Tampa, Florida. The center will
be anchored by Nordstrom, Lord & Taylor, Dillard's and Neiman Marcus, and is
scheduled to open in September 2001. The Company originally had a controlling
50.1% interest in the partnership (Tampa Westshore) that owns the project. The
Company was responsible for providing the funding for project costs in excess of
construction financing in exchange for a preferential return. In November 1999,
the Company entered into agreements with a new investor, which provided funding
for the project and thereby reduced the Company's ownership interest to
approximately 26%. It is anticipated that given the preferential return
arrangements, the original 49.9% owner in Tampa Westshore will not initially
receive cash distributions. The Company expects to be initially allocated
approximately 33% of the net operating income of the project, with an additional
7% representing return of capital.
The total cost of these four projects is anticipated to be approximately $1
billion. The Company's beneficial investment in the projects will be
approximately $700 million, as three of these projects are joint ventures. While
the Company intends to finance approximately 75 percent of each new center with
construction debt, the Company has a greater responsibility for the project
equity (approximately $230 million). Approximately $215 million of this amount
has been funded through the Operating Partnership's preferred equity offerings,
contributions from the new joint venture partner in the International Plaza
project, and borrowing under the Company's lines of credit. With respect to the
construction loan financing, the Company has closed on financing for Dolphin
Mall and International Plaza. The financings on the two remaining projects are
expected to be completed in 2000.
Additionally, a 21-screen theater will be added at Fairlane, in the Detroit
metropolitan area and is anticipated to open in the spring of 2000. At Fair Oaks
in the Washington, D.C. area, Hecht's expansion will open in the spring of 2000,
and a JCPenney expansion and a newly constructed Macy's store will open in the
fall of 2000. The Operating Partnership's share of the cost of these projects is
expected to be approximately $9.8 million.
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.
38
<PAGE>
The following table summarizes planned capital spending, which is not
recovered from tenants and assumes no acquisitions during 2000:
2000
--------------------------------------------------
Beneficial Interest
in Consolidated
Unconsolidated Businesses and
Consolidated Joint Unconsolidated
Businesses Ventures(1) Joint Ventures(1)(2)
--------------------------------------------------
(in millions of dollars)
Development, renovation,
and expansion 186.7 (3) 239.5 (4) 279.7
Mall tenant allowances 7.9 4.8 10.1
Pre-construction development
and other 11.9 0.9 12.3
----- ----- -----
Total 206.5 245.2 302.1
===== ===== =====
(1) Costs are net of intercompany profits.
(2) Includes the Operating Partnership's share of construction costs for The
Mall at Wellington Green (a 90% owned consolidated joint venture),
International Plaza (a 26% owned unconsolidated joint venture), and Dolphin
Mall (a 50% owned unconsolidated joint venture).
(3) Includes costs related to The Shops at Willow Bend and The Mall at
Wellington Green.
(4) Includes costs related to Dolphin Mall and International Plaza.
The Operating Partnership anticipates that its share of costs in 2001 for
development projects scheduled to be completed in 2001 will be as much as $220
million. Estimates of future 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
All of the Company's financial, information and operational systems
performed and continue to perform satisfactorily with the onset of calendar year
2000. The Company had developed a detailed plan to address the risks posed by
the year 2000 issue, as such issue was likely to impact both its own systems and
those of third parties with which the Company conducts business. The costs of
addressing year 2000 issues were not material to 1998 or 1999 operations.
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 December 31, 1999 of $10.75 per common share,
the aggregate value of interests in the Operating Partnership that may be
tendered under the Cash Tender Agreement was approximately $259 million. The
purchase of these interests at December 31, 1999 would have resulted in the
Company owning an additional 28% interest in the Operating Partnership.
39
<PAGE>
New Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB
101). SAB 101 requires that a lessor defer recognition of percentage rents in
quarterly periods until the specified target (typically gross sales in excess of
a certain amount) that triggers this type of rental income is achieved. The
Company had previously accrued interim contingent rental income as lessees'
specified sales targets were met or achievement of the sales targets was
probable. The Company adopted the accounting method set forth in SAB 101 during
the fourth quarter of 1999. Although the adoption had no impact on annual net
income, the Company restated the results of the first three quarters of 1999.
The effect of the restatement was to reduce net income by $0.3 million ($0.01
per diluted common share), $1.2 million ($0.02 per diluted common share), and
$1.2 million ($0.02 per diluted common share) for the first, second, and third
quarters of 1999, respectively, and to increase fourth quarter income and per
share amounts by $2.7 million and $0.05 per share, respectively.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
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. The Company is
still evaluating the impact of SFAS 133 on its consolidated financial
statements. SFAS 133 is effective for fiscal years beginning after June 15,
2000.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item is included in this report at Item 7
under the caption "Liquidity and Capital Resources".
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements of Taubman Centers, Inc. and the Independent
Auditors' Report thereon are filed pursuant to this Item 8 and are included in
this report at Item 14.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
40
<PAGE>
PART III*
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is hereby incorporated by reference
to the material appearing in the Company's definitive proxy statement for the
annual meeting of shareholders to be held in 2000 (the "Proxy Statement") under
the captions "Management--Directors, Nominees and Executive Officers" and
"Security Ownership of Certain Beneficial Owners and Management -- Section 16(a)
Beneficial Ownership Reporting Compliance."
Item 11. EXECUTIVE COMPENSATION
The information required by this item is hereby incorporated by reference
to the material appearing in the Proxy Statement under the captions "Executive
Compensation" and "Management -- Compensation of Directors."
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is hereby incorporated by reference
to the table and related footnotes appearing in the Proxy Statement under the
caption "Security Ownership of Certain Beneficial Owners and Management."
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is hereby incorporated by reference
to the material appearing in the Proxy Statement under the caption
"Management--Certain Transactions." and "Executive Compensation-- Certain
Employment Arrangements."
- --------------------------------------------
* The Compensation Committee Report on Executive Compensation and the
Shareholder Return Performance Graph appearing in the Proxy Statement are not
incorporated by reference in this Annual Report on Form 10-K or in any other
report, registration statement, or prospectus of the Registrant.
41
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
14(a)(1) The following financial statements of Taubman Centers, Inc. and the
Independent Auditors' Report thereon are filed with this report:
TAUBMAN CENTERS, INC. Page
Independent Auditors' Report........................................F-2
Balance Sheet as of December 31, 1999 and 1998 .....................F-3
Statement of Operations for the years ended
December 31, 1999, 1998 and 1997..................................F-4
Statement of Shareowners' Equity for the years ended
December 31, 1999, 1998 and 1997..................................F-5
Statement of Cash Flows for the years ended
December 31, 1999, 1998 and 1997..................................F-6
Notes to Financial Statements.......................................F-7
14(a)(2) The following is a list of the financial statement schedules required
by Item 14(d).
TAUBMAN CENTERS, INC.
Schedule II - Valuation and Qualifying Accounts....................F-28
Schedule III - Real Estate and Accumulated Depreciation............F-29
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP LIMITED
PARTNERSHIP (a consolidated subsidiary of Taubman Centers, Inc.)
Independent Auditors' Report.......................................F-31
Combined Balance Sheet as of December 31, 1999 and 1998............F-32
Combined Statement of Operations for the years ended
December 31, 1999, 1998 and 1997.................................F-33
Combined Statement of Accumulated Deficiency in Assets for the three
years ended December 31, 1999, 1998 and 1997.....................F-34
Combined Statement of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.................................F-35
Notes to Combined Financial Statements.............................F-36
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP LIMITED
PARTNERSHIP (a consolidated subsidiary of Taubman Centers, Inc.)
Schedule II - Valuation and Qualifying Accounts....................F-44
Schedule III - Real Estate and Accumulated Depreciation............F-45
42
<PAGE>
14(a)(3)
2 -- Separation and Relative Value Adjustment Agreement between
The Taubman Realty Group Limited Partnership and GMPTS
Limited Partnership (without exhibits or schedules, which
will be supplementally provided to the Securities and
Exchange Commission upon its request) (incorporated herein
by reference to Exhibit 2 filed with the Registrant's
Current Report on Form 8-K dated September 30, 1998).
3(a) -- Restated By-Laws of Taubman Centers, Inc., (incorporated
herein by reference to Exhibit 3 (b) filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998).
3(b) -- Composite copy of Articles of Incorporation of Taubman
Centers, Inc., including all amendments to date.
4(a) -- Indenture dated as of July 22, 1994 among Beverly Finance
Corp., La Cienega Associates, the Borrower, and Morgan
Guaranty Trust Company of New York, as Trustee (incorporated
herein by reference to Exhibit 4(h) filed with the 1994
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994 ("1994 Second Quarter Form 10-Q")).
4(b) -- Deed of Trust, with assignment of Rents, Security Agreement
and Fixture Filing, dated as of July 22, 1994, from La
Cienega Associates, Grantor, to Commonwealth Land Title
Company, Trustee, for the benefit of Morgan Guaranty Trust
Company of New York, as Trustee, Beneficiary (incorporated
herein by reference to Exhibit 4(i) filed with the 1994
Second Quarter Form 10-Q).
4(c) -- Loan Agreement dated as of March 29, 1999 among Taubman
Auburn Hills Associates Limited Partnership, as Borrower,
Fleet National Bank, as a Bank, PNC Bank, National
Association, as a Bank, the other Banks signatory hereto,
each as a Bank, and PNC Bank, National Association, as
Administrative Agent (incorporated herein by reference to
exhibit 4(a) filed with the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999 ("1999 Second
Quarter Form 10- Q")).
4(d) -- Mortgage, Assignment of Leases and Rents and Security
Agreement from Taubman Auburn Hills Associates Limited
Partnership, a Delaware limited partnership ("Mortgagor") to
PNC Bank, National Association, as Administrative Agent for
the Banks, dated as of March 29, 1999 (incorporated herein
by reference to Exhibit 4(b) filed with the 1999 Second
Quarter Form 10-Q).
4(e) -- First Amendment to Construction Loan Agreement dated as of
April 23, 1999 among Taubman MacArthur Associates Limited
Partnership, a Delaware limited partnership, as Borrower,
Bayerische Hypo - Und Vereinsbank AG, a New York Branch
(successor in interest to Bayerische Hypotheken - Und
Weschel - Bank Aktiengesellschaft, New York Branch), the New
York branch of a German banking corporation, as
administrative agent (incorporated herein by reference to
Exhibit 4 (c) filed with the 1999 Second Quarter Form 10-Q).
43
<PAGE>
4(f) -- Mortgage, Security Agreement and Fixture Filing by Short
Hills Associates, as Mortgagor, to Metropolitan Life
Insurance Company, as Mortgagee, dated April 15, 1999
(incorporated herein by reference to Exhibit 4(d) filed with
the 1999 Second Quarter Form 10-Q).
4(g) -- Assignment of Leases, Short Hills, Associates (Assignor) and
Metropolitan Life Insurance Company (Assignee) dated as of
April 15, 1999 (incorporated herein by reference to Exhibit
4(e) filed with the 1999 Second Quarter Form 10-Q).
4(h) -- Secured Revolving Credit Agreement dated as of June 24, 1999
among the Taubman Realty Group Limited Partnership, as
Borrower, The Banks Signatory Hereto, each as a bank and UBS
AG, Stamford Branch, as Administrative Agent (incorporated
herein by reference to Exhibit 4(f) filed with the 1999
Second Quarter Form 10-Q).
* 10(a) -- The Taubman Realty Group Limited Partnership 1992 Incentive
Option Plan, as Amended and Restated Effective as of
September 30, 1997 (incorporated herein by reference to
Exhibit 10(b) filed with the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997).
10(b) -- Registration Rights Agreement among Taubman Centers, Inc.,
General Motors Hourly-Rate Employees Pension Trust, General
Motors Retirement Program for Salaried Employees Trust, and
State Street Bank & Trust Company, as trustee of the AT&T
Master Pension Trust (incorporated herein by reference to
Exhibit 10(e) filed with the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992 ("1992 Form
10-K")).
10(c) -- Master Services Agreement between The Taubman Realty Group
Limited Partnership and the Manager (incorporated herein by
reference to Exhibit 10(f) filed with the 1992 Form 10-K).
10(d) -- Cash Tender Agreement among Taubman Centers, Inc., A. Alfred
Taubman, acting not individually but as Trustee of The A.
Alfred Taubman Restated Revocable Trust, as amended and
restated in its entirety by Instrument dated January 10,
1989 (as the same has been and may hereafter be amended from
time to time), TRA Partners, and GMPTS Limited Partnership
(incorporated herein by reference to Exhibit 10(g) filed
with the 1992 Form 10-K).
* 10(e) -- Supplemental Retirement Savings Plan (incorporated herein by
reference to Exhibit 10(i) filed with the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1994).
* 10(f) -- Employment agreement between The Taubman Company Limited
Partnership and Lisa A. Payne (incorporated herein by
reference to Exhibit 10 filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1997).
* 10(g) -- Amended and Restated Continuing Offer, dated as of September
30, 1997 (incorporated herein by reference to Exhibit 10
filed with the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997).
10(h) -- Consolidated Agreement: Notice of Retirement and Release and
Covenant Not to Compete, between Robert C. Larson and The
Taubman Company Limited Partnership (incorporated herein by
reference to Exhibit 10 filed with the Registrant's 1999
Second Quarter Form 10-Q).
44
<PAGE>
10(i) -- Second Amendment to the Second Amendment and Restatement of
Agreement of Limited Partnership of The Taubman Realty Group
Limited Partnership effective as of September 3, 1999
(incorporated herein by reference to Exhibit 10(a) filed
with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 ("1999 Third Quarter Form
10-Q")).
10(j) -- Private Placement Purchase Agreement dated as of September
3, 1999 among The Taubman Realty Group Limited Partnership,
Taubman Centers, Inc. and Goldman Sachs 1999 Exchange Place
Fund, L.P. (incorporated herein by reference to Exhibit
10(b) filed with the Registrant's 1999 Third Quarter Form
10-Q).
10(k) -- Registration Rights Agreement entered into as of September
3, 1999 by and between Taubman Centers, Inc. and Goldman
Sachs 1999 Exchange Place Fund, L.P. (incorporated herein by
reference to Exhibit 10(c) filed with the Registrant's 1999
Third Quarter Form 10-Q).
10(l) -- Private Placement Purchase Agreement dated as of November
24, 1999 among The Taubman Realty Group Limited Partnership,
Taubman Centers, Inc. and GS-MSD Select Sponsors, L.P.
10(m) -- Registration Rights Agreement entered into as of November
24, 1999 by and between Taubman Centers, Inc and GS-MSD
Select Sponsors, L.P.
* 10(n) -- Employment agreement between The Taubman Company Limited
Partnership and Courtney Lord.
* 10(o) -- The Taubman Company Long-Term Compensation Plan (as amended
and restated effective January 1, 1999) (incorporated herein
by reference to Exhibit 10 filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March
31,1999.)
10(p) -- Annex II to Second Amendment to the Second Amendment and
Restatement of Agreement of Limited Partnership of The
Taubman Realty Group Limited Partnership.
12 -- Statement Re: Computation of Taubman Centers, Inc. Ratio of
Earnings to Combined Fixed Charges and Preferred Dividends
and Distributions.
21 -- Subsidiaries of Taubman Centers, Inc.
23 -- Consent of Deloitte & Touche LLP.
24 -- Powers of Attorney.
27(a) -- Financial Data Schedule.
27(b) -- Restated Financial Data Schedule for three months ended
March 31, 1999.
27(c) -- Restated Financial Data Schedule for six months ended June
30, 1999.
27(d) -- Restated Financial Data Schedule for nine months ended
September 30, 1999.
45
<PAGE>
* A management contract or compensatory plan or arrangement required to be
filed pursuant to Item 14(c) of Form 10-K.
14(b) Current Reports on Form 8-K.
None
14(c) The list of exhibits filed with this report is set forth in response
to Item 14(a)(3). The required exhibit index has been filed with the
exhibits.
14(d) The financial statements and the financial statement schedules of the
Unconsolidated Joint Ventures of The Taubman Realty Group Limited
Partnership listed at Item 14(a)(2) are filed pursuant to this Item
14(d).
46
<PAGE>
TAUBMAN CENTERS, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
AND FOR EACH OF THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareowners
Taubman Centers, Inc.
We have audited the accompanying balance sheets of Taubman Centers, Inc.
(the "Company") as of December 31, 1999 and 1998, and the related statements of
operations, shareowners' equity, and cash flows for each of the three years in
the period ended December 31, 1999. Our audits also included the financial
statement schedules listed in the Index at Item 14. These financial statements
and financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Taubman Centers, Inc. as of December 31,
1999 and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
DELOITTE & TOUCHE LLP
Detroit, Michigan
February 9, 2000
F-2
<PAGE>
TAUBMAN CENTERS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
December 31
------------------------------
1999 1998
---- ----
Assets:
Properties, net (Note 5) $ 1,361,497 $ 1,308,642
Investment in Unconsolidated
Joint Ventures (Note 4) 125,245 98,350
Cash and cash equivalents 20,557 19,045
Accounts and notes receivable,
less allowance for doubtful accounts
of $1,549 and $333 in 1999 and 1998 33,021 20,595
Accounts receivable from related
parties (Note 9) 7,095 7,092
Deferred charges and other
assets (Note 6) 49,496 27,139
------------- ------------
$ 1,596,911 $ 1,480,863
============= ============
Liabilities:
Mortgage notes payable (Note 7) $ 866,742 $ 243,352
Unsecured notes payable (Note 7) 19,819 531,946
Accounts payable and accrued liabilities 118,230 171,669
Dividends payable 13,054 12,719
------------- ------------
$ 1,017,845 $ 959,686
Commitments and Contingencies
(Notes 4, 7 and 12)
Preferred Equity of TRG (Note 11) $ 97,275
Partners' Equity of TRG allocable to minority
partners (Note 1)
Shareowners' Equity (Notes 2 and 11):
Series A Cumulative Redeemable Preferred
Stock, $0.01 par value, 8,000,000 shares
authorized, $200 million liquidation
preference, 8,000,000 shares issued and
outstanding at December 31, 1999 and 1998 $ 80 $ 80
Series B Non-Participating Convertible
Preferred Stock, $0.001 par and liquidation
value, 40,000,000 shares authorized,
31,835,066 and 31,399,913 shares issued and
outstanding at December 31, 1999 and 1998 32 28
Series C Cumulative Redeemable Preferred
Stock, $0.01 par value, 1,000,000 shares
authorized, $75 million liquidation
preference, none issued
Series D Cumulative Redeemable Preferred
Stock, $0.01 par value, 250,000 shares
authorized, $25 million liquidation
preference, none issued
Common Stock, $0.01 par value, 250,000,000
shares authorized, 53,281,643 and
52,995,904 issued and outstanding
at December 31, 1999 and 1998 533 530
Additional paid-in capital 701,045 697,965
Dividends in excess of net income (219,899) (177,426)
------------- ------------
$ 481,791 $ 521,177
------------- ------------
$ 1,596,911 $ 1,480,863
============= ============
See notes to financial statements.
F-3
<PAGE>
TAUBMAN CENTERS, INC.
STATEMENT OF OPERATIONS
(in thousands, except share data)
Year Ended December 31
---------------------------------------
1999 1998 1997
---- ---- ----
(Consolidated) (Consolidated)
Income:
Minimum rents $ 141,885 $ 107,657
Percentage rents 4,881 5,881
Expense recoveries 81,453 60,650
Revenues from management, leasing
and development services 23,909 12,282
Other 16,564 17,769 $ 322
Revenues - transferred centers
(Note 2) 129,714
Income before extraordinary item
from investment in TRG (Note 3) 29,349
----------- ----------- -----------
$ 268,692 $ 333,953 $ 29,671
----------- ----------- -----------
Operating Expenses:
Recoverable expenses $ 73,711 $ 55,351
Other operating 36,685 33,842
Management, leasing and
development services 17,215 8,025
General and administrative 18,129 24,616 $ 1,009
Restructuring (Note 2) 10,698
Expenses other than interest,
depreciation and amortization -
transferred centers (Note 2) 44,260
Interest expense 51,327 75,809
Depreciation and amortization
(including $22.8 million in 1998
relating to the transferred
centers) 52,475 57,376
----------- ----------- -----------
$ 249,542 $ 309,977 $ 1,009
----------- ----------- -----------
Income before equity in income
before extraordinary items
of Unconsolidated Joint Ventures,
extraordinary items, and minority
and preferred interests $ 19,150 $ 23,976 $ 28,662
Equity in income before
extraordinary items
of Unconsolidated Joint
Ventures (Note 4) 39,295 46,427
----------- ----------- -----------
Income before extraordinary
items, minority and
preferred interests $ 58,445 $ 70,403 $ 28,662
Extraordinary items
(Notes 2, 4 and 7) (468) (50,774)
Minority interest:
TRG income allocable to minority
partners (17,600) (4,230)
Distributions in excess of earnings
allocable to minority partners (12,431) (1,779)
TRG Series C and D preferred
distributions (Note 11) (2,444)
----------- ----------- -----------
Net income $ 25,502 $ 13,620 $ 28,662
Series A preferred dividends
(Note 11) (16,600) (16,600) (4,058)
----------- ----------- -----------
Net income (loss) available to
common shareowners $ 8,902 $ (2,980) $ 24,604
=========== =========== ===========
Basic earnings per common share
(Note 13):
Income before extraordinary items $ .17 $ .33 $ .48
=========== =========== ===========
Net income (loss) $ .17 $ (.06) $ .48
=========== =========== ===========
Diluted earnings per common share
(Note 13):
Income before extraordinary items $ .17 $ .32 $ .48
=========== =========== ===========
Net income (loss) $ .16 $ (.06) $ .48
=========== =========== ===========
Cash dividends declared per
common share $ .965 $ .945 $ .925
=========== =========== ===========
Weighted average number of
common shares outstanding 53,192,364 52,223,399 50,737,333
========== ========== ==========
See notes to financial statements.
F-4
<PAGE>
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(in thousands, except share data)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Dividends in
--------------- ------------ Additional excess of
Shares Amount Shares Amount Paid-in Capital Net Income Total
------ ------ ------ ------ --------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 50,720,358 $ 507 $ 468,590 $ (102,587) $ 366,510
Proceeds from preferred stock
offering (Note 11) 8,000,000 $ 80 199,920 200,000
Issuance of stock pursuant
to Continuing Offer (Note 12) 39,299 1 441 442
Cash dividends declared (50,996) (50,996)
Net income 28,662 28,662
---------- ------- ----------- ------- ----------- ----------- -----------
Balance, December 31, 1997 8,000,000 $ 80 50,759,657 $ 508 $ 668,951 $ (124,921) $ 544,618
Proceeds from common stock
offering 2,021,611 20 26,640 26,660
Proceeds from preferred stock
offering (Note 11) 31,399,913 28 28
Issuance of stock pursuant
to Continuing Offer (Note 12) 214,636 2 2,374 2,376
Cash dividends declared (66,125) (66,125)
Net income 13,620 13,620
---------- ------- ----------- ------- ----------- ----------- -----------
Balance, December 31, 1998 39,399,913 $ 108 52,995,904 $ 530 $ 697,965 $ (177,426) $ 521,177
Issuance of stock pursuant to
acquisition (Note 6) 435,153 4 4
Issuance of stock pursuant to
Continuing Offer (Note 12) 285,739 3 3,080 3,083
Cash dividends declared (67,975) (67,975)
Net income 25,502 25,502
---------- ------- ----------- ------- ----------- ----------- -----------
Balance, December 31, 1999 39,835,066 $ 112 53,281,643 $ 533 $ 701,045 $ (219,899) $ 481,791
========== ======= ========== ======= =========== =========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
TAUBMAN CENTERS, INC.
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------
1999 1998 1997
---- ---- ----
(Consolidated) (Consolidated)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Income before extraordinary items, minority and
preferred interests $ 58,445 $ 70,403 $ 28,662
Adjustments to reconcile income before
extraordinary items, minority and preferred interests to net
cash provided by operating activities:
Depreciation and amortization 52,475 57,376
Provision for losses on accounts receivable 2,238 1,207
Amortization of deferred financing costs 4,452 3,318
Other 359 2,264
Gains on sales of land (1,667) (5,637)
Increase (decrease) in cash attributable to changes
in assets and liabilities:
Receivables, deferred charges and other assets (17,183) (14,632)
Accounts payable and other liabilities 8,440 31,121 (66)
------------ ------------ ------------
Net Cash Provided By Operating Activities $ 107,559 $ 145,420 $ 28,596
------------ ------------ ------------
Cash Flows From Investing Activities:
Purchase of additional interests in TRG $ (200,000)
Additions to properties $ (208,142) $ (294,336)
Proceeds from sales of land 1,834 6,750
Purchases of equity securities (Note 6) (18,462)
Contributions to Unconsolidated Joint Ventures (36,799) (33,322)
Distributions from Unconsolidated Joint Ventures
in excess of income before extraordinary items 64,215 50,970 21,714
------------ ------------ ------------
Net Cash Used In Investing Activities $ (197,354) $ (269,938) $ (178,286)
------------ ------------ ------------
Cash Flows From Financing Activities:
Debt proceeds $ 625,797 $ 1,695,235
Debt payments (514,534) (175,599)
Early extinguishment of debt (1,169,769)
Debt issuance costs (10,335) (4,458)
Issuance of stock 3,087 29,037 $ 200,000
Issuance of TRG Preferred Equity (Note 11) 97,275
Distributions to minority and preferred interests (32,474) (65,914)
Cash dividends to common shareowners (51,040) (48,735) (46,675)
Cash dividends to Series A preferred shareowners (16,600) (16,600) (4,058)
Redemption of partnership units (77,698)
GMPT Exchange (9,869) (32,651)
Other (1,500)
------------ ------------ ------------
Net Cash Provided By Financing Activities $ 91,307 $ 131,348 $ 149,267
------------ ------------ ------------
Net Increase (Decrease) In Cash $ 1,512 $ 6,830 $ (423)
Cash and Cash Equivalents at Beginning of Year 19,045 8,965 9,388
Effect of consolidating TRG in connection with the
GMPT Exchange (TRG's cash balance at Beginning
of Year) (Note 2) 3,250
------------ ------------ ------------
Cash and Cash Equivalents at End of Year $ 20,557 $ 19,045 $ 8,965
============ ============ ============
</TABLE>
See notes to financial statements.
F-6
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
Three Years Ended December 31, 1999
Note 1 - Summary of Significant Accounting Policies
Organization and Basis of Presentation
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 December 31, 1999
includes 17 urban and suburban shopping centers in seven states. Four 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 exchanged interests in 10 shopping centers, together with
$990 million of its debt, for all of the partnership units owned by two General
Motors pension trusts (GMPT), representing approximately 37% of the Operating
Partnership's equity (the GMPT Exchange) (Note 2).
The consolidated balance sheet of the Company includes all accounts of the
Company, the Operating Partnership and its consolidated subsidiaries; all
intercompany balances have been eliminated. Investments in joint ventures not
unilaterally controlled by ownership or contractual obligation (Unconsolidated
Joint Ventures) are accounted for under the equity method. The statements of
operations and cash flows for the years ended December 31, 1999 and 1998 include
the Operating Partnership as a consolidated subsidiary for the entire year. The
statements of operations and cash flows for the year ended December 31, 1997
reflect the financial position and results of operations of the Operating
Partnership under the equity method.
Since the Company's interest in the Operating Partnership has been its sole
material asset throughout all periods presented, references in the following
notes 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.
Dollar amounts presented in tables within the notes to the financial
statements are stated in thousands of dollars, except share data or as otherwise
noted.
F-7
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Income Taxes
Federal income taxes are not provided because the Company operates in such
a manner as to qualify as a REIT under the provisions of the Internal Revenue
Code; therefore, applicable taxable income is included in the taxable income of
its shareowners, to the extent distributed by the Company. As a REIT, the
Company must distribute at least 95% of its REIT taxable income to its
shareowners and meet certain other requirements. Additionally, no provision for
income taxes for consolidated partnerships has been made, as such taxes are the
responsibility of the individual partners.
Dividends per common share declared in 1999 were $0.965, of which $0.453
represented return of capital and $0.512 represented ordinary income. Dividends
per common share declared in 1998 were $0.945, of which $0.854 represented
return of capital and $0.091 represented ordinary income. Dividends per common
share declared in 1997 were $0.925, of which $0.324 represented return of
capital and $0.601 represented ordinary income. The tax status of the Company's
common dividends in 1999, 1998 and 1997 may not be indicative of future periods.
Dividends per Series A preferred share declared in both 1999 and 1998 were
$2.075, all of which represented ordinary income. The difference between net
income for financial reporting purposes and taxable income results primarily
from differences in depreciation expense.
Revenue Recognition
Shopping center space is generally leased to specialty retail tenants under
short and intermediate term leases which are accounted for as operating leases.
Minimum rents are recognized on the straight-line method. Percentage rent is
accrued when lessees' specified sales targets have been met (Note 14). Expense
recoveries, which include an administrative fee, are recognized as revenue in
the period applicable costs are chargeable to tenants. Management, leasing and
development revenue is recognized as services are rendered.
Depreciation and Amortization
Buildings, improvements and equipment are depreciated on straight-line or
double-declining balance bases over the estimated useful lives of the assets,
which range from 3 to 50 years. Tenant allowances and deferred leasing costs are
amortized on a straight-line basis over the lives of the related leases.
Capitalization
Costs related to the acquisition, development, construction and improvement
of properties are capitalized. Interest costs are capitalized until construction
is substantially complete. Assets are reviewed for impairment if events or
changes in circumstances indicate that the carrying amounts may not be
recoverable.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with a maturity of 90
days or less at the date of purchase.
Deferred Charges
Direct financing and interest rate hedging costs are deferred and amortized
over the terms of the related agreements as a component of interest expense.
Direct costs related to leasing activities are capitalized and amortized on a
straight-line basis over the lives of the related leases. All other deferred
charges are amortized on a straight-line basis over the terms of the agreements
to which they relate.
F-8
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Stock-Based Compensation Plans
Stock-based compensation plans are accounted for under APB Opinion 25,
"Accounting for Stock Issued to Employees" and related interpretations, as
permitted under FAS 123, "Accounting for Stock-Based Compensation."
Interest Rate Hedging Agreements
Premiums paid for interest rate caps are amortized to interest expense over
the terms of the cap agreements. Amounts received under the cap agreements are
accounted for on an accrual basis, and recognized as a reduction of interest
expense.
Partners' Equity of TRG Allocable to Minority Partners
Because the net equity of the partnership unitholders is less than zero,
the interest of the noncontrolling unitholders is presented as a zero balance in
the balance sheet as of December 31, 1999 and December 31, 1998. Also, for
periods subsequent to the GMPT Exchange, the income allocated to the
noncontrolling unitholders is equal to their share of distributions. The net
equity of the Operating Partnership unitholders is less than zero because of
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.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of financial instruments:
The carrying value of cash and cash equivalents, accounts and notes
receivable, and accounts payable approximates fair value due to the short
maturity of these instruments.
The fair value of debt is estimated based on quoted market prices if
available, or on the current rates available to the Company for debt of
similar terms and maturity and the assumption that debt will be prepaid at
the earliest possible date.
The fair value of interest rate hedging instruments is the amount that the
Company would receive or pay to terminate the agreement at the reporting
date, taking into account current interest rates.
Operating Segment
The Company has one reportable operating segment; it owns, develops and
manages regional shopping centers. The shopping centers are located in major
metropolitan areas, have similar tenants (most of which are national chains),
and share common economic characteristics. No single retail company represents
10% or more of the Company's revenues.
Reclassifications
Certain prior year amounts have been reclassified to conform to 1999
classifications.
F-9
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Note 2 - The GMPT Exchange and Related Transactions
On September 30, 1998, the Company obtained a controlling interest in the
Operating Partnership due to the following transaction. The Operating
Partnership transferred interests in 10 shopping centers (nine wholly owned
(Briarwood, Columbus City Center, The Falls, Hilltop, Lakeforest, Marley
Station, Meadowood Mall, Stoneridge, and The Mall at Tuttle Crossing) and one
Unconsolidated Joint Venture (Woodfield)), together with $990 million of debt,
for all of the partnership units of GMPT (approximately 50 million units with a
fair value of $675 million, based on the average stock price of the Company's
common shares of $13.50 for the two week period prior to the closing) (the GMPT
Exchange). The Operating Partnership continues to manage the transferred centers
under agreements with GMPT (Note 10).
As of the date of the GMPT Exchange, the excess of the Company's cost of
its investment in the Operating Partnership over the Company's share of the
Operating Partnership's accumulated deficit was $390.4 million, of which $176.6
million and $213.8 million were allocated to the Company's bases in the
Operating Partnership's properties and investment in Unconsolidated Joint
Ventures, respectively.
In September 1998, in anticipation of the GMPT Exchange, the Operating
Partnership used the $1.2 billion proceeds from two bridge loans to extinguish
approximately $1.1 billion of debt. The remaining proceeds were used primarily
to pay prepayment premiums and transaction costs. An extraordinary charge of
approximately $49.8 million, consisting primarily of prepayment premiums, was
incurred in connection with the extinguishment of the debt.
The balance on the first bridge loan of $902 million was assumed by GMPT in
connection with the GMPT Exchange. The second loan had a balance of $340 million
as of December 31, 1998 and was refinanced during the first half of 1999 (Note
7).
Concurrently with the GMPT Exchange, the Operating Partnership committed to
a restructuring of its operations. A restructuring charge of approximately $10.7
million was incurred, primarily representing the cost of certain involuntary
terminations of personnel. Pursuant to the restructuring plan, approximately 40
employees were terminated across various administrative functions. During 1998,
termination benefits of $6.1 million were paid. Substantially all remaining
benefits were paid by the end of the first quarter of 1999.
F-10
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Note 3 - Investment in the Operating Partnership
The partnership equity of the Operating Partnership and the Company's
ownership therein are shown below.
TRG Units TRG Units TCO's % Interest TCO's
outstanding at Owned by TCO at in TRG at Average
December 31 December 31 December 31 Interest in TRG
---------------- -------------- ----------- ------------------
1999 85,116,709 53,281,643 63% 63%
1998 84,395,817 52,995,904 63% 43%
1997 138,299,310 50,759,657 37% 37%
Net income and distributions of the Operating Partnership are allocable
first to the preferred equity interests (Note 11), and the remaining amounts to
the general and limited Operating Partnership partners in accordance with their
percentage ownership. Prior to 1998, when the Company obtained a controlling
interest in the Operating Partnership (Note 2), the Company accounted for its
investment in the Operating Partnership under the equity method.
The Company's income from its investment in the Operating Partnership
included $4.1 million for the year ended December 31, 1997 from its Series A
Preferred Equity interest in the Operating Partnership (Note 11). Additionally,
the Company's share of the Operating Partnership's income before extraordinary
items available to partnership unitholders for 1997 was $33.5 million, reduced
by $8.2 million, representing adjustments arising from the Company's additional
basis in the Operating Partnership's net assets.
The Operating Partnership's summarized results of operations information is
presented below for 1997, during which the Company accounted for the Operating
Partnership under the equity method.
Revenues $ 313,426
-----------
Operating costs other than interest and
depreciation and amortization $ 152,044
Interest expense 73,639
Depreciation and amortization 44,719
-----------
$ 270,402
Equity in net income of
Unconsolidated Joint Ventures 52,270
-----------
Net income $ 95,294
Preferred distributions (4,058)
-----------
Net income available to unitholders $ 91,236
===========
Net income allocable to TCO $ 37,532
Depreciation of TCO's additional basis (8,183)
-----------
Income from investment in TRG $ 29,349
===========
F-11
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Note 4 - Investments in Unconsolidated Joint Ventures
Following are the Company's investments in 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 December 31, 1999
- ------------------------------ ---------------- ------------------
Arizona Mills, L.L.C. Arizona Mills 37%
Dolphin Mall Associates Dolphin Mall 50
Limited Partnership (under construction)
Fairfax Company of Virginia L.L.C. Fair Oaks 50
Lakeside Mall Limited Partnership Lakeside 50 (Note 16)
Rich-Taubman Associates Stamford Town Center 50
Taubman-Cherry Creek
Limited Partnership Cherry Creek 50
Tampa Westshore Associates International Plaza 26
Limited Partnership (under construction)
Twelve Oaks Mall Limited Partnership Twelve Oaks Mall 50 (Note 16)
West Farms Associates Westfarms 79
Woodland Woodland 50
The Company is developing International Plaza, a 1.3 million square foot
regional center under construction in Tampa, Florida, which is expected to open
September 2001. The Company originally had a controlling 50.1% interest in the
partnership (Tampa Westshore) that owns the project. The Company was responsible
for providing funding for project costs in excess of the construction financing
in exchange for a preferential return. In November 1999, the Operating
Partnership entered into agreements with a new investor, which provided funding
for the project and thereby reduced the Company's ownership to approximately
26%. Also, in November 1999, Tampa Westshore closed on a $193.5 million,
three-year construction financing, with a one-year extension option. The rate on
the facility is LIBOR plus 1.90%. The Operating Partnership has guaranteed the
payment of 100% of the principal and interest. The new investor in the Tampa
venture has indemnified the Operating Partnership to the extent of 25% of the
amounts guaranteed. The loan agreement provides for reductions of the rate and
the amount guaranteed as certain center performance criteria are met. There was
no balance outstanding at December 31, 1999.
In September 1999, the Company entered into a partnership agreement with
Swerdlow Real Estate Group to jointly develop Dolphin Mall, a 1.4 million square
foot value regional center under construction in Miami, Florida, expected to
open March 2001. In October 1999, the joint venture that is developing Dolphin
Mall closed on a $200 million, three-year construction facility. The rate on the
facility is LIBOR plus 2%, decreasing to LIBOR plus 1.75% when a certain
coverage ratio is met. The Operating Partnership has guaranteed the payment of
50% of any outstanding principal balance and 100% of all accrued and unpaid
interest. The guaranty will be reduced as certain performance conditions are
met. The maturity date on the loan may be extended one year. The balance
outstanding was $22.3 million at December 31, 1999.
During 1999, noncash investing activities included a total of $58.7 million
contributed to the Unconsolidated Joint Ventures developing International Plaza
and Dolphin Mall. This amount primarily consists of project costs expended prior
to the creation of the joint ventures.
F-12
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Arizona Mills, L.L.C. has a construction facility with a maximum
availability of $142 million, all of which was outstanding as of December 31,
1999. The payment of principal and interest is guaranteed by each of the owners
of Arizona Mills to the extent of their ownership, with reduction in amounts
guaranteed being provided as certain center performance and valuation criteria
are met. The Operating Partnership's guaranty of principal was $13.1 million at
December 31, 1999.
During 1999 and 1998, the Unconsolidated Joint Ventures incurred
extraordinary charges related to the extinguishment of debt, primarily
consisting of prepayment premiums.
The Company's carrying value of its Investment in Unconsolidated Joint
Ventures differs from its share of the deficiency in assets reported in the
combined balance sheet of the Unconsolidated Joint Ventures due to (i) the
Company's cost of its investment in excess of the historical net book values of
the Unconsolidated Joint Ventures and (ii) the Operating Partnership's
adjustments to the book basis, including intercompany profits on sales of
services that are capitalized by the Unconsolidated Joint Ventures. The
Company's additional basis allocated to depreciable assets is recognized on a
straight-line basis over 40 years. The Operating Partnership's differences in
bases are amortized over the useful lives of the related assets.
Combined balance sheet and results of operations information are presented
below (in thousands) for all 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 2), are included in these results through September 30, 1998, the date of
the GMPT Exchange.
F-13
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31 December 31
----------- -----------
1999 1998
---- ----
Assets:
Properties, net $ 724,846 $ 572,149
Other assets 91,820 73,046
------------- -------------
$ 816,666 $ 645,195
============= =============
Liabilities and partners'
accumulated deficiency in assets:
Debt $ 895,163 $ 825,927
Capital lease obligations 3,664 5,187
Other liabilities 53,825 47,622
TRG's accumulated deficiency in assets (74,749) (103,545)
Unconsolidated Joint Venture Partners'
accumulated deficiency in assets (61,237) (129,996)
------------- -------------
$ 816,666 $ 645,195
============= =============
TRG's accumulated deficiency in
assets (above) $ (74,749) $ (103,545)
TRG basis adjustments, including
elimination of intercompany profit 2,205 (4,846)
TCO's additional basis 197,789 206,741
------------- -------------
Investment in Unconsolidated
Joint Ventures $ 125,245 $ 98,350
============= =============
Year Ended
-------------
December 31
-------------
1999 1998
---- ----
Revenues $ 252,009 $ 286,287
------------- -------------
Recoverable and other operating expenses $ 87,755 $ 101,277
Interest expense 64,152 69,389
Depreciation and amortization 29,983 32,466
------------- -------------
Total operating costs $ 181,890 $ 203,132
------------- -------------
Income before extraordinary items $ 70,119 $ 83,155
Extraordinary items (333) (1,913)
------------- -------------
Net income $ 69,786 $ 81,242
============= =============
Net income allocable to TRG $ 38,346 $ 42,322
Extraordinary items allocable to TRG 167 957
Realized intercompany profit 5,434 7,205
Depreciation of TCO's additional basis (4,652) (4,057)
------------- -------------
Equity in income before extraordinary items
of Unconsolidated Joint Ventures $ 39,295 $ 46,427
============= =============
Beneficial interest in Unconsolidated
Joint Ventures' operations:
Revenues less recoverable and other
operating expenses $ 94,136 $ 104,257
Interest expense (34,470) (37,118)
Depreciation and amortization (20,371) (20,712)
------------- -------------
Income before extraordinary items $ 39,295 $ 46,427
============= =============
F-14
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Note 5 - Properties
Properties at December 31, 1999 and December 31, 1998 are summarized as
follows:
1999 1998
----- ----
Land $ 106,268 $ 102,901
Buildings, improvements and equipment 1,308,365 1,142,466
Construction in process 127,168 199,561
Development pre-construction costs 30,484 28,512
------------- -------------
$ 1,572,285 $ 1,473,440
Accumulated depreciation and amortization (210,788) (164,798)
-------------- -------------
$ 1,361,497 $ 1,308,642
============= =============
Depreciation expense for 1999 and 1998 was $47.9 million and $50.8 million,
respectively. Construction in process includes costs related to the construction
of new centers, and expansions and other improvements at various existing
centers. The charge to operations in 1999 and 1998 for costs of unsuccessful and
potentially unsuccessful pre-development activities was $10.1 million and $7.3
million, respectively. During 1999 and 1998, non-cash additions to properties of
$13.6 million and $54.9 million, respectively, were recorded, representing
accrued costs of new centers, expansions and development projects.
In December 1999, the Operating Partnership acquired an additional 5%
interest in Great Lakes Crossing for $1.2 million in cash, increasing the
Operating Partnership's interest in the center to 85%. The acquisition was
accounted for as a purchase.
Note 6 - Deferred Charges and Other Assets
Deferred charges and other assets at December 31, 1999 and December 31,
1998 are summarized as follows:
1999 1998
---- ----
Leasing $ 25,223 $ 21,164
Accumulated amortization (14,050) (10,349)
-------------- ------------
$ 11,173 $ 10,815
Deferred financing costs, net 10,061 10,248
Investments 22,878 2,497
Other, net 5,384 3,579
------------- -------------
$ 49,496 $ 27,139
============= =============
In April 1999, the Company invested in an e-commerce company that markets,
promotes, advertises, and sells fashion apparel and related accessories and
products over the Internet. The Company obtained 824,084 convertible preferred
shares of Fashionmall.com, Inc., a 9.9% interest in the company, for $7.4
million. In connection with this investment, the Company received an option,
exercisable during a 60-day period commencing March 2000, to purchase an
additional 924,898 shares of common stock at the initial public offering price
of $13.00 per share. The investment in Fashionmall.com, Inc. is accounted for
under the cost method.
In September 1999, the Company acquired an approximately 5% interest in
Swerdlow Real Estate Group, a privately held real estate investment trust, for
approximately $10 million. The investment in Swerdlow is accounted for under the
cost method.
F-15
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
In November 1999, the Operating Partnership acquired Lord Associates, a
retail leasing firm based in Alexandria, Virginia, for approximately $7.5
million, representing $2.5 million in cash and 435,153 partnership units (and an
equal number of the Company's Series B Non-Participating Convertible Preferred
Stock.) The units and stock will be released over a five-year period. The owner
of the partnership units is not entitled to distributions or income allocations,
and an affiliate of the Operating Partnership will have voting rights to the
stock, until release of the units. Of the cash purchase price, approximately
$1.0 million was paid at closing and $1.5 million will be paid over five years;
$1.0 million of the purchase price is contingent upon profits achieved on
acquired leasing contracts. The final 65,271 partnership units are collateral if
the profit contingency is not met. The acquisition of Lord Associates was
accounted for as a purchase (cost amortized over five years), with the results
of operations of Lord Associates being included in the income statement of the
Company subsequent to the acquisition date.
Note 7 - Debt
Mortgage Notes Payable
Mortgage notes payable at December 31, 1999 and December 31, 1998 consist
of the following:
<TABLE>
<CAPTION>
Interest Balance Due
1999 1998 Rate Maturity Date on Maturity
---- ---- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Beverly Center $ 146,000 $ 146,000 8.36% 07/15/04 $146,000
Biltmore 80,000 7.68% 07/10/09 71,391
Great Lakes Crossing 170,000 LIBOR + 1.50% 04/01/02 167,925
MacArthur Center 115,212 94,589 LIBOR + 1.35% 10/27/00 115,212
The Mall at Short Hills 270,000 6.70% 04/01/09 245,301
Line of Credit 63,000 LIBOR + 0.90% 09/21/01 63,000
Other 22,530 2,763 Various Various 20,000
--------- --------
$ 866,742 $ 243,352
========= =========
</TABLE>
Mortgage debt is collateralized by properties with a net book value of $1.2
billion and $289.5 million as of December 31, 1999 and December 31, 1998,
respectively.
The Great Lakes Crossing and MacArthur Center loan agreements provide for
an option to extend the maturity date one and two years, respectively. Payment
of principal and interest are guaranteed by the Operating Partnership. The loan
agreements provide for a reduction of the amount guaranteed (the Great Lakes
Crossing agreement also provides for a reduction of the interest rate) as
certain center performance and valuation criteria are met. The MacArthur Center
construction facility has total availability of $120 million.
F-16
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
In June 1999, the Operating Partnership's $200 million line of credit
facility was securitized with interests in Fairlane, LaCumbre, Paseo Nuevo, and
Regency Square serving as collateral.
The other mortgage notes payable are due at various dates through 2009, and
have fixed interest rates between 5.4% and 13%.
The following table presents scheduled principal payments on mortgage debt,
as of December 31, 1999.
2000 $ 115,727
2001 65,670
2002 171,292
2003 4,179
2004 150,457
Thereafter 359,417
Unsecured Notes Payable
Unsecured notes payable at December 31, 1999 and December 31, 1998 consist
of the following:
1999 1998
---- ----
Bridge loan, interest at
LIBOR plus 1.30% $ 340,000
Construction facility, interest at
LIBOR plus 0.90% 170,100
Line of credit, maximum borrowing
available of $40 million, interest
based on a variable bank borrowing
rate, 6.75% at December 31, 1999,
maturing August 2000 (Note 16) $ 17,624 15,450
Other 2,195 6,396
---------- -----------
$ 19,819 $ 531,946
========== ===========
Debt Covenants
Certain loan and facility 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 covenants.
Interest Expense
Interest paid in 1999 and 1998, net of amounts capitalized of $14.5 million
and $18.2 million, respectively, approximated $45.8 million and $76.1 million,
respectively.
F-17
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Extraordinary Items
During the year ended December 31, 1999, extraordinary charges to income of
$0.5 million were recognized in connection with the extinguishment of debt.
During 1998, extraordinary charges of $50.8 million were recognized related to
the extinguishment of debt, primarily in connection with the GMPT Exchange.
Interest Rate Hedging Instruments
The Company enters into interest rate agreements to reduce its exposure to
changes in the cost of its floating rate debt. The derivative agreements
generally match the notional amounts, reset dates and rate bases of the hedged
debt to assure the effectiveness of the derivatives in reducing interest rate
risk. As of December 31, 1999, the following interest rate cap agreements were
outstanding:
Frequency
Notional LIBOR of Rate
Amount Cap Rate Resets Term
-------- -------- --------- ------------------------------------
$100,000 7.0% Monthly December 1999 through December 2000
170,000 6.0% Monthly September 1999 through August 2000
84,000 6.5% Monthly September 1999 through October 2000
The Company is exposed to credit risk in the event of nonperformance by the
counterparties to its interest rate cap agreements, but has no off-balance sheet
risk of loss. The Company anticipates that its counterparties will fully perform
their obligations under the agreements.
Fair Value of Financial Instruments Related to Debt
The estimated fair values of financial instruments at December 31, 1999 and
December 31, 1998 are as follows:
1999 1998
--------------------- ---------------------
Carrying Fair Carrying Fair
Value Value Value Value
--------- --------- --------- ---------
Mortgage notes payable $ 866,742 $ 885,741 $ 243,352 $ 254,156
Unsecured notes payable 19,819 19,819 531,946 532,043
Interest rate instruments -
in a receivable position 632 410 319 5
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 debt
and interest relating to the minority interest in Great Lakes Crossing (15% at
December 31, 1999-see Note 5) and the 30% minority interest in MacArthur Center.
F-18
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
<TABLE>
<CAPTION>
Unconsolidated Share
Joint of Unconsolidated Consolidated Beneficial
Ventures Joint Ventures Subsidiaries Interest
-------------- ----------------- ------------- -----------
<S> <C> <C> <C> <C>
Debt as of:
December 31, 1999 $ 895,163 $ 473,726 $ 886,561 $ 1,300,224
December 31, 1998 825,927 439,271 775,298 1,186,192
Capital lease obligations:
December 31, 1999 $ 3,664 $ 2,018 $ 469 $ 2,418
December 31, 1998 5,187 2,858 -- 2,858
Capitalized interest:
Year ended December 31,1999 $ 2,528 $ 1,085 $ 14,489 $ 15,188
Year ended December 31,1998 2,466 1,062 18,192 17,610
Interest expense
(Net of capitalized interest):
Year ended December 31,1999 $ 64,152 $ 34,470 $ 51,327 $ 82,062
Year ended December 31,1998 69,389 37,118 75,809 112,927
</TABLE>
Note 8 - Leases
Operating Leases
Shopping center space is leased to tenants and certain anchors pursuant to
lease agreements. Tenant leases typically provide for guaranteed minimum rent,
percentage rent, and other charges to cover certain operating costs. Future
minimum rent under operating leases in effect at December 31, 1999 for operating
centers, assuming no new or renegotiated leases or option extensions on anchor
agreements, is summarized as follows:
2000 $ 137,065
2001 132,046
2002 125,614
2003 114,567
2004 98,968
Thereafter 349,017
Certain shopping centers, as lessees, have ground leases expiring at
various dates through the year 2065. In addition, the Company leases its office
facilities. Rental payments under ground and office leases were $7.0 million in
1999 and $8.9 million in 1998. Included in this amount are related party office
rental payments of $2.7 million and $2.8 million, respectively.
F-19
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
The following is a schedule of future minimum rental payments required
under operating leases.
2000 $ 6,505
2001 6,324
2002 6,262
2003 6,253
2004 6,251
Thereafter 171,861
The table above includes $2.6 million, $2.7 million, $2.8 million, $2.8
million, $2.8 million and $0.9 million of related party amounts in 2000, 2001,
2002, 2003, 2004, and thereafter.
Memorial City Mall Lease
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. The lease was subject to certain provisions that enabled the
Operating Partnership to explore significant redevelopment opportunities and
terminate the lease obligations in the event such redevelopment opportunities
were not deemed to be sufficient. In November 1999, the Operating Partnership
exercised its option to terminate the lease. Under the terms of the lease, the
Operating Partnership will continue to manage the center until May 2000.
Note 9 - Transactions with Affiliates
The revenue from management, leasing and development services includes $2.5
million and $3.2 million from transactions with affiliates for the years ended
December 31, 1999 and 1998, respectively. Accounts receivable from related
parties includes amounts related to reimbursement of third-party
(non-affiliated) costs.
During 1997, the Operating Partnership acquired an option from a related
party to purchase certain real estate on which the Operating Partnership may
develop a shopping center. The option agreement requires option payments of
$150,000 during each of the first five years, $400,000 in the sixth year, and
$500,000 in the seventh year. If the Operating Partnership exercises the option,
the purchase price for the property will be between $5 million and $10 million,
depending upon the year of purchase. While the optionor will have no interest in
the shopping center itself, the optionor may, under certain circumstances,
participate in the proceeds from the Operating Partnership's future sales, if
any, of the peripheral land contiguous to the shopping center.
Other related party transactions are described in Notes 8 and 10.
Note 10 - The Manager
The Taubman Company Limited Partnership (the Manager), which is 99%
beneficially owned by the Operating Partnership, provides property management,
leasing, development and other administrative services to the Company, the
shopping centers, and Taubman affiliates. In addition, the Manager provides
services to centers transferred to GMPT under management agreements. The
management agreements are cancelable with 90 days notice.
The Manager has a voluntary retirement saving plan established in 1983 and
amended and restated effective January 1, 1994 (the Plan). The Plan is qualified
in accordance with Section 401(k) of the Internal Revenue Code (the Code). The
Manager contributes an amount equal to 2% of the qualified wages of all
qualified employees and matches employee contributions in excess of 2% up to 7%
of qualified wages. In addition, the Manager may make discretionary
contributions within the limits prescribed by the Plan and imposed in the Code.
Costs relating to the Plan were $1.6 million in 1999 and $1.7 million in 1998.
F-20
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
The Operating Partnership has an incentive option plan for employees of the
Manager. Currently, options for 7.7 million Operating Partnership units may be
issued under the plan, including options outstanding for 7.4 million units.
Incentive options generally become exercisable to the extent of one-third of the
units on each of the third, fourth, and fifth anniversaries of the date of
grant. Options expire ten years from the date of grant. The Operating
Partnership's units issued in connection with the incentive option plan are
exchangeable for shares of the Company's common stock under the Continuing Offer
(Note 12).
A summary of the status of the plan as of December 31, 1999 and 1998 and
changes during the years ending on those dates are presented below:
1999 1998
--------------------------- --------------------------
Weighted-Average Weighted-Average
Exercise Price Exercise Price
Options Units Per Unit Units Per Unit
------- ----- ------- ----- --------
Outstanding at
beginning of year 6,805,018 $11.22 7,023,605 $11.22
Exercised (285,739) 10.79 (214,636) 11.07
Granted 1,000,000 12.25
Cancelled (93,494) 12.90 (3,951) 10.52
Forfeited (1,976) 9.69
---------- ----------
Outstanding at
end of year 7,423,809 11.36 6,805,018 11.22
========= ==========
Options vested
at year end 6,601,090 11.32 6,022,730 11.28
========= =========
Options outstanding at December 31, 1999 have a remaining weighted-average
contractual life of 4.2 years and range in exercise price from $9.39 to $13.89.
The weighted average fair value per unit of options granted during 1999 was
$1.24. The Company used a binomial option pricing model to determine the grant
date fair value based on the following assumptions: volatility rate of 20.43%,
risk-free rate of return of approximately 5.26%, and dividend yield of
approximately 7.8%.
The Company applies APB Opinion 25 and related interpretations in
accounting for the plan. The exercise price of all options outstanding granted
under the plan was equal to market value on the date of grant. Accordingly, no
compensation expense has been recognized for the plan. Had compensation cost for
the plan been determined based on the fair value of the options at the grant
dates, consistent with the method of FAS Statement 123, the pro forma effect on
the Company's earnings and earnings per share would have been approximately $0.7
million, or $0.01 per share in 1999, and approximately $0.1 million, or $0.002
per share, in 1998.
Effective January 1, 1996 and amended January 1, 1999, the Manager adopted
The Taubman Company Long-Term Performance Compensation Plan. Annually, eligible
employees will be granted notional shares, the ultimate number of which will be
based on the employee's performance. These awards, which will vest on the third
anniversary of the date of grant, will also accrue dividend equivalents in the
form of additional notional shares. The awards will be paid to the employee in
cash upon vesting, based on the value of the Company's common shares, unless the
employee elects to defer payment as provided in the plan. The cost of this plan
was approximately $3.8 million for 1999 and $6.6 million for 1998.
F-21
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Note 11 - Preferred Stock and Preferred Equity of TRG
In October 1997, the Company used the proceeds from a $200 million public
offering of eight million shares of 8.3% Series A Cumulative Redeemable
Preferred Stock (Series A Preferred Stock) to acquire a Series A Preferred
Equity interest in the Operating Partnership that entitles the Company to income
and distributions (in the form of guaranteed payments) in amounts equal to the
dividends payable on the Company's Series A Preferred Stock.
The Series A Preferred Stock has no stated maturity, sinking fund or
mandatory redemption and is not convertible into any other securities of the
Company. The Series A Preferred Stock has a liquidation preference of $200
million ($25 per share). Dividends are cumulative and accrue at an annual rate
of 8.3% from the date of the original issuance, October 3, 1997, and are payable
in arrears on or before the last day of each calendar quarter. All accrued
dividends have been paid. The Series A Preferred Stock can be redeemed by the
Company beginning in October 2002 at $25 per share plus any accrued dividends.
The redemption price can be paid solely out of the sale of capital stock of the
Company.
In connection with the GMPT Exchange, the Company became obligated to issue
to the minority interest, upon subscription, one share of Series B
Non-Participating Convertible Preferred Stock (Series B Preferred Stock) for
each of the Operating Partnership units held by the minority interest. Each
share of Series B Preferred Stock entitles the holder to one vote on all matters
submitted to the Company's shareholders. The holders of Series B Preferred
Stock, voting as a class, have the right to designate up to four nominees for
election as directors of the Company. On all other matters, including the
election of directors, the holders of Series B Preferred Stock will vote with
the holders of common stock. The holders of Series B Preferred Stock are not
entitled to dividends or earnings. Under certain circumstances, the Series B
Preferred Stock is convertible into common stock at a ratio of 14,000 shares of
Series B Preferred Stock for one share of common stock.
In September 1999 and November 1999, the Operating Partnership completed
private placements of $75 million 9% Cumulative Redeemable Preferred Partnership
Equity (Series C Preferred Equity) and $25 million 9% Cumulative Redeemable
Preferred Partnership Equity (Series D Preferred Equity), respectively. Both the
Series C and Series D Preferred Equity were purchased by institutional
investors, and have a fixed 9% coupon rate, no stated maturity, sinking fund or
mandatory redemption requirements.
The holders of Series C Preferred Equity have the right, beginning in 2009,
to exchange $75 in liquidation value of such equity for one share of Series C
Preferred Stock. The holders of the Series D Preferred Equity have the right,
beginning in 2009, to exchange $100 in liquidation value of such equity for one
share of Series D Preferred Stock. The terms of the Series C Preferred Stock and
Series D Preferred Stock are substantially similar to those of the Series C
Preferred Equity and Series D Preferred Equity. Like the Series A Preferred
Stock, the Series C Preferred Stock and Series D Preferred Stock are non-voting.
In connection with each private placement, the Company covenanted to amend its
Restated Articles of Incorporation to increase the total number of authorized
shares of Preferred Stock and to increase the total number of shares designated
as Series C Preferred Stock and Series D Preferred Stock, to a minimum of
2,000,000 shares and 250,000 shares, respectively. The Company has further
covenanted, once additional shares of Series C Preferred Stock and Series D
Preferred Stock are available for issuance, to in each case lower the applicable
exchange ratio and to issue more shares with each share having a lower
liquidation value. The aggregate amount in liquidation value of each of the
Series C Preferred Stock and Series D Preferred Stock will remain $75 million
and $25 million, respectively.
F-22
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Note 12 - 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 Operating
Partnership units (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 December 31, 1999 of $10.75 per common share,
the aggregate value of interests in the Operating Partnership that may be
tendered under the Cash Tender Agreement was approximately $259 million. The
purchase of these interests at December 31, 1999 would have resulted in the
Company owning an additional 28% 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 (Note 10) to exchange shares of
common stock for partnership interests in the Operating Partnership (the
Continuing Offer). Under the Continuing Offer agreement, one unit of the
Operating 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.
The Company is currently involved in certain litigation arising in the
ordinary course of business. Management believes that this litigation will not
have a material adverse effect on the Company's financial statements.
F-23
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Note 13 - 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 the years ended December 31, 1999, 1998 and 1997,
options for 0.7 million, 0.3 million and 0.4 million units of partnership
interest with average exercise prices of $13.38, $13.81 and $13.58,
respectively, were excluded from the computation of diluted earnings per share
because the options' exercise prices were greater than the average market price
for the period calculated.
Year Ended December 31
----------------------------------------
1999 1998 1997
----------------------------------------
(in thousands, except share data)
Income before extraordinary items
allocable to common shareowners
(Numerator):
Net income (loss) available to
common shareowners $ 8,902 $ (2,980) $ 24,604
Common shareowners' share of
extraordinary items 294 20,066
-------- -------- --------
Basic income before extraordinary
items $ 9,196 $ 17,086 $ 24,604
Effect of dilutive options (270) (256) (241)
-------- -------- --------
Diluted income before extraordinary
items $ 8,926 $ 16,830 $ 24,363
======== ======== ========
Shares (Denominator) - basic
and diluted 53,192,364 52,223,399 50,737,333
========== ========== ==========
Income before extraordinary items
per common share:
Basic $ 0.17 $ 0.33 $ 0.48
======== ======== ========
Diluted $ 0.17 $ 0.32 $ 0.48
======== ======== ========
Extraordinary items per common
share - basic and diluted $ (0.01) $ (0.38)
======== ========
F-24
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Note 14 - New Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB
101). SAB 101 requires that a lessor defer recognition of percentage rents in
quarterly periods until the specified target (typically gross sales in excess of
a certain amount) that triggers this type of rental income is achieved. The
Company had previously accrued interim contingent rental income as lessees'
specified sales targets were met or achievement of the sales targets was
probable. The Company adopted the accounting method set forth in SAB 101 during
the fourth quarter of 1999. Although the adoption had no impact on annual net
income, the Company has restated the results of the first three quarters of 1999
(Note 15). The effect of the restatement was to reduce net income by $0.3
million ($0.01 per diluted common share), $1.2 million ($0.02 per diluted common
share), and $1.2 million ($0.02 per diluted common share) for the first, second,
and third quarters of 1999, respectively, and to increase fourth quarter income
and per share amounts by $2.7 million and $0.05 per share, respectively. Had SAB
101 been in effect during 1998, 11%, 7%, 10%, and 72% of annual percentage rent
would have been recognized in the first, second, third, and fourth quarters of
1998, on a pro forma basis.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
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 uses of
the derivatives and whether they qualify for hedge accounting. The Company is
currently evaluating the impact of SFAS 133 on the Company's consolidated
financial statements. SFAS 133 is effective for fiscal years beginning after
June 15, 2000.
F-25
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Note 15 - Quarterly Financial Data (Unaudited)
The following is a summary of quarterly results of operations for 1999 and
1998. Amounts for the first three quarters of 1999 have been restated for the
change in accounting method for percentage rent (Note 14).
<TABLE>
<CAPTION>
1999
-----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------------------------------------------
(in thousands, except share data)
<S> <C> <C> <C> <C>
Revenues $ 60,163 $ 68,771 $ 65,995 $ 73,763
Equity in income of Unconsolidated Joint Ventures 9,545 9,767 8,887 11,096
Income before extraordinary items, minority and preferred
interests 13,847 12,941 12,623 19,034
Net income 6,340 5,132 4,590 9,440
Net income available to common shareowners 2,190 982 440 5,290
Basic earnings per common share:
Income before extraordinary items $ 0.04 $ 0.02 $ 0.01 $ 0.10
Net income 0.04 0.02 0.01 0.10
Diluted earnings per common share:
Income before extraordinary items $ 0.04 $ 0.02 $ 0.01 $ 0.10
Net income 0.04 0.02 0.01 0.10
</TABLE>
<TABLE>
<CAPTION>
1998
------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------------------------------------------
(in thousands, except share data)
<S> <C> <C> <C> <C>
Revenues $ 87,202 $ 92,103 $ 90,968 $ 63,680
Equity in income of Unconsolidated Joint Ventures 11,730 10,946 12,836 10,915
Income before extraordinary items, minority and preferred
interests 21,087 20,514 11,494 17,308
Net income (loss) 8,900 9,046 (14,126) 9,800
Net income (loss) available to common shareowners 4,750 4,896 (18,276) 5,650
Basic earnings per common share:
Income before extraordinary items $ 0.10 $ 0.09 $ 0.03 $ 0.11
Net income (loss) 0.09 0.09 (0.35) 0.11
Diluted earnings per common share:
Income before extraordinary items $ 0.10 $ 0.09 $ 0.03 $ 0.10
Net income (loss) 0.09 0.09 (0.34) 0.10
</TABLE>
F-26
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Note 16 - Subsequent Events
In January 2000, the Company agreed to exchange property interests with its
current joint venture partner in two Unconsolidated Joint Ventures. Under the
terms of the agreement, expected to be completed in the first quarter 2000, the
Operating Partnership will assume 100 percent ownership of Twelve Oaks Mall and
the current joint venture partner will become 100 percent owner of Lakeside.
Both properties will remain subject to the existing mortgage debt ($50 million
and $88 million at Twelve Oaks and Lakeside, respectively.) The Operating
Partnership will also pay the joint venture partner $30 million in cash. The
transaction will be accounted for as a purchase. The Operating Partnership will
continue to manage Twelve Oaks, while the joint venture partner will assume
management responsibility for Lakeside at closing.
In January 2000, the 50% owned Unconsolidated Joint Venture that owns
Stamford Town Center completed a $76 million secured financing. The new
financing bears interest at a rate of one-month LIBOR plus 0.8% and matures in
2002 with a two-year extension option. The rate is capped at 8.2% plus credit
spread for the term of the loan. The proceeds were used to repay the $54 million
participating mortgage, the $18.3 million prepayment premium, and accrued
interest and transaction costs.
In January 2000, the Company finalized an agreement that securitized the
$40 million bank line of credit and extended its maturity to August 2000.
F-27
<PAGE>
Schedule II
TAUBMAN CENTERS, INC.
Valuation and Qualifying Accounts
For the years ended December 31, 1999 and 1998
(in thousands)
<TABLE>
<CAPTION>
Additions
-------------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
of year expenses accounts Write-offs Transfers, net of year
--------- ---------- ---------- ------------ -------------- --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999:
Allowance for doubtful receivables $333 2,238 (1,022) $ 1,549
==== ===== ======= =======
Year ended December 31, 1998:
Allowance for doubtful receivables $1,207 (1,221) 347(1) $ 333
====== ======= ======= =======
<FN>
(1) On September 30, 1998, the Company obtained a majority and controlling
interest in TRG as a result of the GMPT Exchange. Upon obtaining this
controlling interest, the Company consolidated the financial position of
TRG. The Company previously accounted for its investment in TRG under the
equity method.
</FN>
</TABLE>
F-28
<PAGE>
TAUBMAN CENTERS, INC. Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Initial Cost Gross Amount at Which
to Company Cost Carried at Close of Period
------------------ Capitalized --------------------------- Accumulated Total
Buildings and Subsequent Depreciation Cost Net
Land Improvements to Acquisition Land BI&E Total (A/D) of A/D
---- ------------ -------------- ---- ---- ----- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers:
Beverly Center, Los Angeles, CA $ 0 $ 209,348 $ 23,290 $ 0 $ 232,638 $ 232,638 $ 63,040 $ 169,598
Biltmore Fashion Park, Phoenix, AZ 19,097 103,257 15,988 19,097 119,245 138,342 17,348 120,994
Fairlane Town Center, Dearborn, MI 16,830 104,812 11,053 16,830 115,865 132,695 17,642 115,053
Great Lakes Crossing, Auburn Hills, MI 12,798 196,398 7,542 12,798 203,940 216,738 12,346 204,392
La Cumbre Plaza, Santa Barbara, CA 0 27,762 188 0 27,950 27,950 2,841 25,109
MacArthur Center, Norfolk, VA 4,000 144,480 0 4,000 144,480 148,480 4,913 143,567
Paseo Nuevo, Santa Barbara, CA 0 39,086 1,028 0 40,114 40,114 4,666 35,448
Regency Square, Richmond, VA 18,635 103,062 418 18,635 103,480 122,115 9,344 112,771
The Mall at Short Hills, Short Hills, NJ 25,114 171,443 118,041 25,114 289,484 314,598 55,857 258,741
Other:
Manager's Office Facilities 0 0 30,044 0 30,044 30,044 22,526 7,518
Peripheral Land 9,794 0 5 9,794 5 9,799 0 9,799
Construction in Process and
Development Pre-construction Costs 0 151,879 5,773 0 157,652 157,652 0 157,652
Other 0 1,120 0 0 1,120 1,120 265 855
------- --------- --------- --------- ---------- ---------- --------- ---------
TOTAL $106,268 $1,252,647 $ 213,370 $ 106,268 $1,466,017 $1,572,285 $ 210,788 $1,361,497
======== ========== ========= ========= ========== ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Date of
Completion of
Construction or Depreciable
Encumbrances Acquisition Life
------------ ------------- ----------
<S> <C> <C> <C>
Shopping Centers:
Beverly Center, Los Angeles, CA $ 146,000 1982 40 Years
Biltmore Fashion Park, Phoenix, AZ 80,000 1994 40 Years
Fairlane Town Center, Dearborn, MI Note (1) 1996 40 Years
Great Lakes Crossing, Auburn Hills, MI 170,000 1998 50 Years
La Cumbre Plaza, Santa Barbara, CA Note (1) 1996 40 Years
MacArthur Center, Norfolk, VA 115,212 1999 50 Years
Paseo Nuevo, Santa Barbara, CA Note (1) 1996 40 Years
Regency Square, Richmond, VA Note (1) 1997 40 Years
The Mall at Short Hills, Short Hills, NJ 270,000 1980 40 Years
Other:
Manager's Office Facilities 0
Peripheral Land 0
Construction in Process and
Development Pre-construction Costs 0
Other 22,530
</TABLE>
The changes in total real estate assets and accumulated depreciation for the
years ended December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Total Total
Real Estate Real Estate Accumulated Accumulated
Assets Assets Depreciation Depreciation
------ ------ ------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <S> <C> <C>
Balance, beginning of year $ 1,473,440 $ 0 Balance, beginning of year $ (164,798) $ 0
New development and
improvements 160,746 349,234 Depreciation for year (47,965) (57,376)
Disposals (3,181) (3,527) Disposals 1,975 1,263
Transfers In/(Out) (58,720)(2) 1,127,733 Transfers In 0 (108,685)
---------- --------- ----------- -----------
Balance, end of year $ 1,572,285 $1,473,440 (3) Balance, end of year $ (210,788) $ (164,798) (3)
=========== ========== =========== ===========
<FN>
(1) These centers are collateral for the Company's line of credit, which had a
balance of $63 million at December 31, 1999.
(2) Includes costs transferred relating to International Plaza and Dolphin
Mall, which became Unconsolidated Joint Ventures in 1999.
(3) On September 30, 1998, the Company obtained a majority and controlling
interest in the Operating Partnership as a result of the GMPT Exchange.
Upon obtaining this controlling interest, the Company consolidated the
accounts of the Operating Partnership. The Company previously accounted for
its investment in the Operating Partnership under the equity method.
</FN>
</TABLE>
F-29
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP (a consolidated subsidiary of Taubman Centers, Inc.)
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998 AND
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
F-30
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareowners
Taubman Centers, Inc.
We have audited the accompanying combined balance sheets of Unconsolidated
Joint Ventures of The Taubman Realty Group Limited Partnership (the
"Partnership") (a consolidated subsidiary of Taubman Centers, Inc.) as of
December 31, 1999 and 1998, and the related combined statements of operations,
accumulated deficiency in assets, and cash flows for each of the three years in
the period ended December 31, 1999. Our audits also included the financial
statement schedules listed in the Index at Item 14. These financial statements
and financial statement schedules are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the combined financial position of Unconsolidated Joint
Ventures of The Taubman Realty Group Limited Partnership as of December 31, 1999
and 1998, and the combined results of their operations and their combined cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedules, when considered in relation to the basic
combined financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Detroit, Michigan
February 9, 2000
F-31
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
COMBINED BALANCE SHEET
(in thousands)
December 31
---------------------------
1999 1998
---- ----
Assets:
Properties (Notes 2, 4 and 6) $ 942,248 $ 769,665
Accumulated depreciation and amortization 217,402 197,516
----------- ----------
$ 724,846 $ 572,149
Cash and cash equivalents 36,823 29,828
Accounts and notes receivable, less allowance
for doubtful accounts of $1,588 and $255
in 1999 and 1998 9,916 7,521
Note receivable from Joint Venture Partner (Note 6) 607 964
Deferred charges and other assets (Notes 3 and 6) 44,474 34,733
----------- ----------
$ 816,666 $ 645,195
=========== ==========
Liabilities:
Mortgage notes payable (Note 4) $ 894,505 $ 824,826
Other notes payable (Note 4) 658 1,101
Capital lease obligations (Note 5) 3,664 5,187
Accounts payable to related parties (Note 6) 3,924 2,749
Accounts payable and other liabilities 49,901 44,873
----------- ----------
$ 952,652 $ 878,736
Commitments (Note 5)
Accumulated deficiency in assets:
TRG $ (74,749) $ (103,545)
Joint Venture Partners (61,237) (129,996)
------------ -----------
$ (135,986) $ (233,541)
----------- -----------
$ 816,666 $ 645,195
=========== ===========
See notes to financial statements.
F-32
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
COMBINED STATEMENT OF OPERATIONS
(in thousands)
Year Ended December 31
-----------------------------------------
1999 1998 1997
---- ---- ----
Revenues:
Minimum rents $ 158,126 $ 175,674 $ 155,912
Percentage rents 3,921 4,171 3,057
Expense recoveries 83,557 97,994 89,653
Other 6,405 8,448 10,013
---------- ---------- ----------
$ 252,009 $ 286,287 $ 258,635
----------- ---------- ----------
Operating costs:
Recoverable expenses (Note 6) $ 69,367 $ 82,595 $ 76,493
Other operating (Note 6) 18,388 18,682 17,638
Interest expense (Note 4) 64,152 69,389 54,018
Depreciation and amortization 29,983 32,466 24,180
----------- ----------- ----------
$ 181,890 $ 203,132 $ 172,329
----------- ---------- ----------
Income before extraordinary items $ 70,119 $ 83,155 $ 86,306
Extraordinary items (Note 4) (333) (1,913)
----------- ---------- ----------
Net income $ 69,786 $ 81,242 $ 86,306
=========== ========== ==========
Allocation of net income:
Attributable to TRG $ 38,346 $ 42,322 $ 46,857
Attributable to Joint Venture
Partners 31,440 38,920 39,449
----------- ---------- ----------
$ 69,786 $ 81,242 $ 86,306
=========== ========== ==========
See notes to financial statements.
F-33
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
COMBINED STATEMENT OF ACCUMULATED DEFICIENCY IN ASSETS
(in thousands)
Joint Venture
TRG Partners Total
--- ---------- ------
Balance, January 1, 1997 $ (134,986) $ (124,146) $ (259,132)
Cash contributions 18,822 9,800 28,622
Cash distributions (64,373) (59,711) (124,084)
Net income 46,857 39,449 86,306
---------- ---------- -----------
Balance, December 31, 1997 $ (133,680) $ (134,608) $ (268,288)
Cash contributions 33,322 4,900 38,222
Cash distributions (90,263) (83,934) (174,197)
Transferred center (Note 1) 44,754 44,726 89,480
Net income 42,322 38,920 81,242
---------- ---------- -----------
Balance, December 31, 1998 $ (103,545) $ (129,996) $ (233,541)
Non-cash contributions (Note 1) 52,110 31,247 83,357
Cash contributions 36,799 34,747 71,546
Cash distributions (98,459) (28,675) (127,134)
Net income 38,346 31,440 69,786
---------- ---------- -----------
Balance, December 31, 1999 $ (74,749) $ (61,237) $ (135,986)
=========== =========== ===========
See notes to financial statements.
F-34
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
COMBINED STATEMENT OF CASH FLOWS
(in thousands)
Year Ended December 31
----------------------------------
1999 1998 1997
---- ---- ----
Cash Flows From Operating Activities:
Income before extraordinary items $ 70,119 $ 83,155 $ 86,306
Adjustments to reconcile income before
extraordinary items to net cash provided
by operating activities:
Depreciation and amortization 29,983 32,466 24,180
Provision for losses on accounts receivable 1,822 1,119 697
Gains on sales of land (1,090) (2,748)
Other 3,908 3,806
Increase (decrease) in cash attributable
to changes in assets and liabilities:
Receivables, deferred
charges and other assets (6,413) (7,109) (7,760)
Accounts payable and other liabilities (1,952) (22,042) 43,110
--------- --------- ---------
Net Cash Provided By Operating Activities $ 93,559 $ 90,407 $ 147,591
--------- --------- ---------
Cash Flows From Investing Activities:
Additions to properties $ (79,298) $ (64,455) $(190,188)
Restricted cash for expansion (30) (224)
Proceeds from sales of land 105 1,590 3,452
--------- --------- ---------
Net Cash Used In Investing Activities $ (79,223) $ (63,089) $(186,736)
--------- --------- ---------
Cash Flows From Financing Activities:
Debt proceeds $ 201,152 $ 164,710 $ 158,255
Debt payments (3,439) (4,489) (8,267)
Extinguishment of debt (141,459) (40,741)
Debt issuance costs (8,007) (7,619) (4,420)
Cash contributions from partners 71,546 38,222 28,622
Cash distributions to partners (127,134) (174,197) (124,084)
--------- --------- ---------
Net Cash Provided By (Used In)
Financing Activities $ (7,341) $ (24,114) $ 50,106
--------- --------- ---------
Net increase in cash $ 6,995 $ 3,204 $ 10,961
Cash and Cash Equivalents at Beginning of Year 29,828 36,875 25,914
Effect of transferred center in connection
with the GMPT Exchange (Note 1) (10,251)
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 36,823 $ 29,828 $ 36,875
========= ========= =========
See notes to financial statements.
F-35
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The Taubman Realty Group Limited Partnership (TRG), a consolidated
subsidiary of Taubman Centers, Inc., engages in the ownership, management,
leasing, acquisition, development and expansion of regional retail shopping
centers and interests therein. TRG has engaged the Manager (The Taubman Company
Limited Partnership, which is approximately 99% beneficially owned by TRG) to
provide property management and leasing services for the shopping centers and to
provide corporate, development, and acquisition services. For financial
statement reporting purposes, the accounts of shopping centers that are not
controlled and that are owned through joint ventures with third parties
(Unconsolidated Joint Ventures) have been combined in these financial
statements. Generally, net profits and losses of the Unconsolidated Joint
Ventures are allocated to TRG and the outside partners (Joint Venture Partners)
in accordance with their ownership percentages.
Dollar amounts presented in tables within the notes to the combined
financial statements are stated in thousands.
Investments in Unconsolidated Joint Ventures
TRG's interest in each of the Unconsolidated Joint Ventures at December 31,
1999, is as follows:
TRG's %
Unconsolidated Joint Venture Shopping Center Ownership
Arizona Mills, L.L.C. Arizona Mills 37%
Dolphin Mall Associates Dolphin Mall 50
Limited Partnership (under construction)
Fairfax Company of Virginia L.L.C. Fair Oaks 50
Lakeside Mall Limited Partnership Lakeside 50 (Note 7)
Rich-Taubman Associates Stamford Town Center 50
Taubman-Cherry Creek
Limited Partnership Cherry Creek 50
Taubman Westshore Associates International Plaza 26
Limited Partnership (under construction)
Twelve Oaks Mall
Limited Partnership Twelve Oaks Mall 50 (Note 7)
West Farms Associates Westfarms 79
Woodland Woodland 50
TRG is developing International Plaza, a 1.3 million square foot regional
center under construction in Tampa, Florida, expected to open September 2001.
TRG originally had a controlling 50.1% interest in the partnership (Tampa
Westshore) that owns the project. TRG was responsible for providing funding for
project costs in excess of the construction financing in exchange for a
preferential return. In November 1999, TRG entered into agreements with a new
investor, who contributed funding for the project and thereby reduced TRG's
ownership interest in Tampa Westshore to approximately 26%.
In September 1999, TRG entered into a partnership agreement with Swerdlow
Real Estate Group to jointly develop Dolphin Mall, a 1.4 million square foot
value regional center under construction in Miami, Florida, expected to open
March 2001.
F-36
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
During 1999, noncash investing activities included a total of $83.4 million
contributed to the Unconsolidated Joint Ventures developing International Plaza
and Dolphin Mall. This amount primarily consists of the net book value of
project costs expended prior to the creation of the joint ventures.
On September 30, 1998, TRG completed a transaction that included the
transfer of interests in nine consolidated shopping centers and one
Unconsolidated Joint Venture (the GMPT Exchange). The accounts of Woodfield
Associates (Woodfield), a 50% owned Unconsolidated Joint Venture that was
transferred, are included in these combined financial statements through
September 30, 1998. On the date of the GMPT Exchange, the book values of
Woodfield's assets and liabilities were approximately $107.4 million and $196.9
million, respectively.
Revenue Recognition
Shopping center space is generally leased to specialty retail tenants under
short and intermediate term leases which are accounted for as operating leases.
Minimum rents are recognized on the straight-line method. Percentage rent is
accrued when lessees' specified sales targets have been met. Expense recoveries,
which include an administrative fee, are recognized as revenue in the period
applicable costs are chargeable to tenants.
Depreciation and Amortization
Buildings, improvements and equipment, stated at cost, are depreciated on
straight-line or double-declining balance bases over the estimated useful lives
of the assets that range from 3 to 55 years. Tenant allowances and deferred
leasing costs are amortized on a straight-line basis over the lives of the
related leases.
Capitalization
Costs related to the acquisition, development, construction, and
improvement of properties are capitalized. Interest costs are capitalized until
construction is substantially complete. Properties are reviewed for impairment
if events or changes in circumstances indicate that the carrying amounts of the
properties may not be recoverable.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with a maturity of 90
days or less at the date of purchase.
Deferred Charges
Direct financing and interest rate hedging costs are deferred and amortized
over the terms of the related agreements as a component of interest expense.
Direct costs related to leasing activities are capitalized and amortized on a
straight-line basis over the lives of the related leases. All other deferred
charges are amortized on a straight-line basis over the terms of the agreements
to which they relate.
F-37
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Interest Rate Hedging Agreements
Premiums paid for interest rate cap instruments are amortized to interest
expense over the terms of the agreements. Amounts received under the cap
agreements are accounted for on an accrual basis, and recognized as a reduction
of interest expense. The differential to be paid or received on swap agreements
is accounted for on an accrual basis and recognized as an adjustment to interest
expense.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of financial instruments:
The carrying value of cash and cash equivalents, accounts and notes
receivable, and accounts payable approximates fair value due to the
short maturity of these instruments.
The fair value of mortgage notes and other notes payable is estimated
based on quoted market prices if available, or on the current rates
available to the Unconsolidated Joint Ventures for debt of similar
terms and maturity and the assumption that debt will be prepaid at the
earliest possible date.
The fair value of interest rate hedging instruments is the amount the
Unconsolidated Joint Venture would pay or receive to terminate the
agreement at the reporting date, taking into account current interest
rates.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
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 uses of
the derivatives and whether they qualify for hedge accounting. The impact of
SFAS 133 on the financial statements of the Unconsolidated Joint Ventures is
currently being evaluated. SFAS 133 is effective for fiscal years beginning
after June 15, 2000.
Reclassifications
Certain prior year amounts have been reclassified to conform to 1999
classifications.
F-38
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Note 2 - Properties
Properties at December 31, 1999 and 1998, are summarized as follows:
1999 1998
---- ----
Land $ 42,339 $ 42,444
Buildings, improvements and equipment 725,182 705,529
Construction in process 174,727 21,692
---------- ----------
$ 942,248 $ 769,665
=========== ===========
Depreciation expense for 1999, 1998 and 1997 was $26.0 million, $26.7
million and $18.7 million. Construction in process includes costs related to the
construction of Dolphin Mall and International Plaza, as well as expansions and
other improvements at various centers. Assets under capital lease of $3.7
million and $5.2 million at December 31, 1999 and 1998, respectively, are
included in the table above in buildings, improvements and equipment.
Note 3 - Deferred Charges and Other Assets
Deferred charges and other assets at December 31, 1999 and 1998 are
summarized as follows:
1999 1998
---- ----
Leasing $ 35,579 $ 30,248
Accumulated amortization (14,466) (12,814)
---------- --------
$ 21,113 $ 17,434
Deferred financing, net 21,829 15,734
Other, net 1,532 1,565
---------- ----------
$ 44,474 $ 34,733
========== =========
F-39
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Note 4 - Debt
Mortgage Notes Payable
Mortgage notes payable at December 31, 1999 and 1998 consists of the
following:
<TABLE>
<CAPTION>
Balance Due
Center 1999 1998 Interest Rate Maturity Date on Maturity
- ------ ---- ---- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Arizona Mills $ 142,214 $ 140,984 LIBOR + 1.30% 02/01/02 $ 142,214
Cherry Creek 177,000 0 7.68% 08/11/06 171,933
Cherry Creek 0 130,000 LIBOR + 0.75% 08/01/99 130,000
Dolphin Mall 22,267 0 LIBOR + 2.00% 10/06/02 22,267
Fair Oaks 140,000 140,000 6.60% 04/01/08 140,000
Lakeside 88,000 88,000 6.47% 12/15/00 88,000
Stamford Town Center 54,053 54,887 11.69% 12/01/17 0
Twelve Oaks Mall 49,971 49,955 LIBOR + 0.45% 10/15/01 50,000
Westfarms 100,000 100,000 7.85% 07/01/02 100,000
Westfarms 55,000 55,000 LIBOR + 1.125% 07/01/02 55,000
Woodland 66,000 66,000 8.20% 05/15/04 66,000
----------- -----------
$ 894,505 $ 824,826
=========== ===========
</TABLE>
In October 1999, the Unconsolidated Joint Venture that is developing
Dolphin Mall (Note 1) closed on a $200 million, three-year construction
facility. The rate on the facility is LIBOR plus 2%, decreasing to LIBOR plus
1.75% when a certain coverage ratio is met. The rate on the loan is capped at 7%
until maturity, plus credit spread. Under the interest rate agreement, the rate
is swapped to a fixed rate of 5.15% when LIBOR is less than 6%. TRG has
guaranteed the payment of 50% of any outstanding principal balance and 100% of
all accrued and unpaid interest. The guaranty will be reduced as certain
performance conditions are met. The maturity date may be extended one year.
In November 1999, the joint venture that is developing International Plaza
in Tampa, Florida closed on a $193.5 million, three-year construction financing,
with a one-year extension option. The rate on the facility is LIBOR plus 1.90%.
TRG has guaranteed the payment of 100% of the principal and interest; however,
the new investor in the venture (Note 1) has indemnified TRG to the extent of
25% of the amounts guaranteed. The loan agreement provides for reductions of the
rate and the amount guaranteed as certain center performance criteria are met.
The rate on the Arizona Mills loan is capped at 9.5% until maturity, plus
credit spread. The payment of principal and interest is guaranteed by each of
the owners of Arizona Mills to the extent of their ownership percentage. The
loan agreement provides for the reduction of the amount guaranteed as certain
center performance and valuation criteria are met. TRG's guaranty of the
principal was $13.1 million at December 31, 1999.
The other Unconsolidated Joint Ventures with floating rate debt have
entered into interest rate agreements to reduce their exposure to increases in
interest rates. The rate on the Twelve Oaks loan is capped at 8.55% until
maturity, plus credit spread. The rate on the $55 million Westfarms loan is
capped until maturity at 6.5%, plus credit spread.
F-40
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
The Stamford note required payment of additional interest ($1.5 million,
$1.5 million, and $1.3 million, in 1999, 1998, and 1997) based on operating
results (Note 7).
Scheduled principal payments on mortgage debt are as follows as of December
31, 1999:
2000 $ 88,936
2001 51,052
2002 320,663
2003 1,328
2004 68,485
Thereafter 364,041
--------
Total $894,505
========
Other Notes Payable
Other notes payable at December 31, 1999 and 1998 consists of the
following:
1999 1998
---- ----
Notes payable to banks, line of credit,
interest at prime (8.5% at December 31,
1999), maximum borrowings available up
to $5.5 million to fund tenant loans,
allowances and buyouts and working capital. $ 623 $ 1,058
Other 35 43
--------- ---------
$ 658 $ 1,101
========= =========
Interest Expense
Interest paid on mortgages and other notes payable in 1999, 1998 and 1997,
net of amounts capitalized of $2.5 million, $2.5 million, and $9.4 million,
approximated $59.7 million, $64.0 million, and $48.7 million, respectively.
Extraordinary Items
In 1999 and 1998, joint ventures recognized extraordinary charges related
to the extinguishment of debt, primarily consisting of prepayment premiums.
Interest Rate Hedging Instruments
Certain of the Unconsolidated Joint Ventures have entered into interest
rate agreements to reduce their exposure to changes in the cost of floating rate
debt. The terms of the derivative agreements are generally equivalent to the
notional amounts, reset dates and rate bases of the underlying hedged debt to
assure the effectiveness of the derivatives in reducing interest rate risk.
These Unconsolidated Joint Ventures are exposed to credit risk in the event of
nonperformance by their counterparties to the agreements. These Unconsolidated
Joint Ventures anticipate that their counterparties will be able to fully
perform their obligations under the agreements.
F-41
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Fair Value of Debt Instruments
The estimated fair values of financial instruments at December 31, 1999 and
1998 are as follows:
December 31
--------------------------------------------------
1999 1998
--------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
----------------------- -----------------------
Mortgage notes payable $894,505 $928,205 $824,826 $861,141
Other notes payable 658 658 1,101 1,101
Interest rate instruments:
In a receivable position 4,178 3,134 3,450 288
Note 5 - Leases
Shopping center space is leased to tenants and certain anchors pursuant to
lease agreements. Tenant leases typically provide for guaranteed minimum rent,
percentage rent, and other charges to cover certain operating costs. Future
minimum rent under operating leases in effect at December 31, 1999 for operating
centers, assuming no new or renegotiated leases or option extensions on anchor
agreements, is summarized as follows:
2000 $ 152,174
2001 144,389
2002 132,771
2003 113,940
2004 100,667
Thereafter 319,045
Revenues derived from the combined operations of The Limited provided
approximately 10.1% of total revenues in 1999. Revenues derived from the
combined operations of The Limited were approximately 10.5% of total revenues in
1998 and less than 10% in 1997. Amounts due from The Limited at December 31,
1999 were $100 thousand.
One Unconsolidated Joint Venture, as lessee, has a ground lease expiring in
2083 with its Joint Venture Partner. Rental payments under the lease were $2.0
million, $2.0 million and $1.8 million in 1999, 1998 and 1997. TRG is entitled
to receive preferential distributions equal to 75% of each payment.
Approximately 25% of the ground lease payments over the term of the lease, on a
straight-line basis, are recognized as ground rent expense, with 75% of the
current payment accounted for as a distribution to the Joint Venture Partner.
The Unconsolidated Joint Venture that owns International Plaza is the
lessee under a ground lease agreement that expires in 2080. The lease requires
annual payments of approximately $0.1 million and when the center opens will
require additional rentals, based on the leasable area of the center as defined
in the agreement.
The following is a schedule of future minimum rental payments required
under operating leases:
2000 $ 2,111
2001 2,111
2002 2,185
2003 2,408
2004 2,408
Thereafter 663,610
F-42
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Capital Lease Obligations
Certain Unconsolidated Joint Ventures have entered into lease agreements
for property improvements with three to five year terms. As of December 31,
1999, future minimum lease payments for these capital leases are as follows:
2000 $ 2,014
2001 1,878
2002 98
2003 34
2004 3
---------
Total minimum lease payments $ 4,027
Less amount representing interest (363)
---------
Capital lease obligations $ 3,664
=========
Note 6 - Transactions with Affiliates
Charges from the Manager under various written agreements were as follows
for the years ended December 31:
1999 1998 1997
---- ---- ----
Management and leasing services $16,721 $17,849 $17,352
Security and maintenance services 7,653 9,481 9,468
Development services 5,935 3,941 4,661
----- ------ -----
$30,309 $31,271 $31,481
======= ======= =======
TRG is one-third owner of an entity providing management, leasing, and
development services to Arizona Mills, L.L.C. Charges from this entity were $1.4
million and $2.5 million in 1999 and 1998, respectively. In addition, $2.8
million and $1.8 million were paid in 1999 and 1998, respectively, to one of the
Arizona Mills Joint Venture Partners for leasing and development services.
Westfarms previously loaned $2.4 million to one of its Joint Venture
Partners to purchase a portion of a deceased Joint Venture Partner's interest.
The note bears interest at approximately 7.9% and requires monthly principal
payments of $25 thousand, plus accrued interest, with the final payment due in
2001. The balance at December 31, 1999 and 1998 was $0.6 million and $1.0
million, respectively. Interest income related to the loan was approximately
$0.1 million in 1999, 1998, and 1997.
Other related party transactions are described in Notes 1 and 5.
Note 7 - Subsequent Events
In January 2000, TRG agreed to exchange property interests with its current
joint venture partner in two Unconsolidated Joint Ventures. Under the terms of
the agreement, expected to be completed in the first quarter 2000, TRG will
assume 100 percent ownership of Twelve Oaks Mall and the current joint venture
partner will become 100 percent owner of Lakeside. Both properties will remain
subject to the existing mortgage debt ($50 million and $88 million at Twelve
Oaks and Lakeside, respectively.) TRG will also pay the joint venture partner
$30 million in cash.
In January 2000, the 50% owned Unconsolidated Joint Venture that owns
Stamford Town Center completed a $76 million secured financing. The new
financing bears interest at a rate of one-month LIBOR plus 0.8% and matures in
2002 with a two-year extension option. The rate is capped at 8.2% plus credit
spread for the term of the loan. The proceeds were used to repay the $54 million
participating mortgage, the $18.3 million prepayment premium, and accrued
interest and transaction costs.
F-43
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
Valuation and Qualifying Accounts
For the years ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
Additions
--------------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
of year expenses accounts Write-offs Transfers of year
--------- ---------- ----------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowance for doubtful receivables $ 90 697 0 (473) 0 $ 314
========= ========= ========= ========= ========= =========
Year ended December 31, 1998:
Allowance for doubtful receivables $ 314 1,119 0 (1,148) (30)(1) $ 255
========= ========= ========= ========= ========= =========
Year ended December 31, 1999:
Allowance for doubtful receivables $ 255 1,822 0 (489) 0 $ 1,588
========= ========= ========= ========= ========= =========
<FN>
(1) Subsequent to September 30, 1998, the date of the GMPT Exchange, the
accounts of Woodfield are no longer included in these combined financial
statements.
</FN>
</TABLE>
F-44
<PAGE>
Schedule III
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Gross Amount at Which
Carried at Close of Period
Initial Cost ------------------------------------------
to Company Cost
---------------------------- Capitalized Accumulated Total
Buildings and Subsequent Depreciation Cost Net
Land Improvements to Acquisition Land BI&E Total (A/D) of A/D
---- ------------ -------------- ---- ---- ----- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Taubman Shopping Centers:
Arizona Mills, Tempe, AZ $ 22,017 $163,618 $ 6,242 $ 22,017 $ 169,860 $191,877 $ 15,000 $ 176,877
Cherry Creek, Denver, CO 55 100,414 62,760 55 163,174 163,229 42,186 121,043
Fair Oaks, Fairfax, VA 5,167 36,182 11,224 5,167 47,406 52,573 29,968 22,605
Lakeside, Sterling Heights, MI 2,667 21,182 21,887 2,667 43,069 45,736 23,068 22,668
Stamford Town Center,
Stamford, CT 1,977 43,176 12,534 1,977 55,710 57,687 29,165 28,522
Twelve Oaks Mall, Novi, MI 803 28,640 22,063 803 50,703 51,506 25,262 26,244
Westfarms, Farmington, CT 5,287 38,638 110,354 5,287 148,992 154,279 33,075 121,204
Woodland, Grand Rapids, MI 2,367 19,078 27,190 2,367 46,268 48,635 19,678 28,957
Other Properties:
Peripheral land 1,999 0 0 1,999 0 1,999 0 1,999
Construction in Process 64,342 0 110,385 64,342 110,385 174,727 0 174,727
---------- -------------- --------- -------- -------- -------- --------- ---------
TOTAL $106,681 $450,928 $384,639 $106,681 $835,567 $942,248 $217,402 $724,846
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Date of
Completion of Depreciable
Encumbrances Construction Life
------------ ------------ ----
<S> <C> <C> <C>
Taubman Shopping Centers:
Arizona Mills, Tempe, AZ $142,214 1997 50 Years
Cherry Creek, Denver, CO 177,000 1990 40 Years
Fair Oaks, Fairfax, VA 140,000 1980 55 Years
Lakeside, Sterling Heights, MI 88,000 1976 40 Years
Stamford Town Center,
Stamford, CT 54,053 1982 40 Years
Twelve Oaks Mall, Novi, MI 49,971 1977 50 Years
Westfarms, Farmington, CT 155,000 1974 34 Years
Woodland, Grand Rapids, MI 66,000 1968 33 Years
Other Properties:
Peripheral land 0
Construction in Process 22,267
--------
TOTAL $894,505
========
</TABLE>
The changes in total real estate assets for the three years ended December 31,
1999 are as follows:
1999 1998 1997
---- ---- ----
Balance, beginning of year $769,665 $829,640 $638,960
Improvements 79,298 64,455 192,888
Disposals (6,162) (2,715) (2,208)
Transfers In 99,447 (2)
Transfers Out (121,715) (1)
-------- ---------- --------
Balance, end of year $942,248 $769,665 $829,640
======== ========= ========
The changes in accumulated depreciation and amortization for the three years
ended December 31, 1999 are as follows:
1999 1998 1997
---- ---- ----
Balance, beginning of year $(197,516) $(205,659) $(188,491)
Depreciation for year (25,958) (26,707) (18,669)
Disposals 6,072 1,685 1,501
Transfers Out 33,165(1)
-------- --------- ---------
Balance, end of year $(217,402) $(197,516) $(205,659)
========= ========= =========
(1) Subsequent to September 30, 1998, the date of the GMPT Exchange, the
accounts of Woodfield are no longer included in these combined financial
statements.
(2) Includes costs transferred relating to International Plaza and Dolphin
Mall, which became Unconsolidated Joint Ventures in 1999.
F-45
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
TAUBMAN CENTERS, INC.
Date: March 24, 2000 By:/s/ Robert S. Taubman
------------------------------------------
Robert S. Taubman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
* Chairman of the Board March 24, 2000
- -------------------------- ----------------
A. Alfred Taubman
* Vice Chairman of the Board March 24, 2000
- -------------------------- ----------------
Robert C. Larson
/s/ Robert S. Taubman President, Chief Executive March 24, 2000
- --------------------------- Officer, and Director ----------------
Robert S. Taubman
/s/ Lisa A. Payne Executive Vice President, March 24, 2000
- -------------------------- Chief Financial Officer, and ----------------
Lisa A. Payne Director
/s/ Esther R. Blum Senior Vice President, Controller March 24, 2000
- -------------------------- and Chief Acconting Officer ----------------
Esther R. Blum
* Director March 24, 2000
- -------------------------- ----------------
Graham Allison
* Director March 24, 2000
- -------------------------- ----------------
Allan J. Bloostein
* Director March 24, 2000
- -------------------------- ----------------
Jerome A. Chazen
* Director March 24, 2000
- -------------------------- ----------------
S. Parker Gilbert
/s/ Lisa A. Payne
*By: ---------------------------------------
Lisa A. Payne, as
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- -------
2 -- Separation and Relative Value Adjustment Agreement between
The Taubman Realty Group Limited Partnership and GMPTS
Limited Partnership (without exhibits or schedules, which
will be supplementally provided to the Securities and
Exchange Commission upon its request) (incorporated herein
by reference to Exhibit 2 filed with the Registrant's
Current Report on Form 8-K dated September 30, 1998).
3(a) -- Restated By-Laws of Taubman Centers, Inc., (incorporated
herein by reference to Exhibit 3 (b) filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998).
3(b) -- Composite copy of Articles of Incorporation of Taubman
Centers, Inc., including all amendments to date.
4(a) -- Indenture dated as of July 22, 1994 among Beverly Finance
Corp., La Cienega Associates, the Borrower, and Morgan
Guaranty Trust Company of New York, as Trustee (incorporated
herein by reference to Exhibit 4(h) filed with the 1994
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994 ("1994 Second Quarter Form 10-Q")).
4(b) -- Deed of Trust, with assignment of Rents, Security Agreement
and Fixture Filing, dated as of July 22, 1994, from La
Cienega Associates, Grantor, to Commonwealth Land Title
Company, Trustee, for the benefit of Morgan Guaranty Trust
Company of New York, as Trustee, Beneficiary (incorporated
herein by reference to Exhibit 4(i) filed with the 1994
Second Quarter Form 10-Q).
4(c) -- Loan Agreement dated as of March 29, 1999 among Taubman
Auburn Hills Associates Limited Partnership, as Borrower,
Fleet National Bank, as a Bank, PNC Bank, National
Association, as a Bank, the other Banks signatory hereto,
each as a Bank, and PNC Bank, National Association, as
Administrative Agent (incorporated herein by reference to
exhibit 4(a) filed with the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999 ("1999 Second
Quarter Form 10- Q")).
4(d) -- Mortgage, Assignment of Leases and Rents and Security
Agreement from Taubman Auburn Hills Associates Limited
Partnership, a Delaware limited partnership ("Mortgagor") to
PNC Bank, National Association, as Administrative Agent for
the Banks, dated as of March 29, 1999 (incorporated herein
by reference to Exhibit 4(b) filed with the 1999 Second
Quarter Form 10-Q).
4(e) -- First Amendment to Construction Loan Agreement dated as of
April 23, 1999 among Taubman MacArthur Associates Limited
Partnership, a Delaware limited partnership, as Borrower,
Bayerische Hypo - Und Vereinsbank AG, a New York Branch
(successor in interest to Bayerische Hypotheken - Und
Weschel - Bank Aktiengesellschaft, New York Branch), the New
York branch of a German banking corporation, as
administrative agent (incorporated herein by reference to
Exhibit 4 (c) filed with the 1999 Second Quarter Form 10-Q).
<PAGE>
4(f) -- Mortgage, Security Agreement and Fixture Filing by Short
Hills Associates, as Mortgagor, to Metropolitan Life
Insurance Company, as Mortgagee, dated April 15, 1999
(incorporated herein by reference to Exhibit 4(d) filed with
the 1999 Second Quarter Form 10-Q).
4(g) -- Assignment of Leases, Short Hills, Associates (Assignor) and
Metropolitan Life Insurance Company (Assignee) dated as of
April 15, 1999 (incorporated herein by reference to Exhibit
4(e) filed with the 1999 Second Quarter Form 10-Q).
4(h) -- Secured Revolving Credit Agreement dated as of June 24, 1999
among the Taubman Realty Group Limited Partnership, as
Borrower, The Banks Signatory Hereto, each as a bank and UBS
AG, Stamford Branch, as Administrative Agent (incorporated
herein by reference to Exhibit 4(f) filed with the 1999
Second Quarter Form 10-Q).
* 10(a) -- The Taubman Realty Group Limited Partnership 1992 Incentive
Option Plan, as Amended and Restated Effective as of
September 30, 1997 (incorporated herein by reference to
Exhibit 10(b) filed with the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997).
10(b) -- Registration Rights Agreement among Taubman Centers, Inc.,
General Motors Hourly-Rate Employees Pension Trust, General
Motors Retirement Program for Salaried Employees Trust, and
State Street Bank & Trust Company, as trustee of the AT&T
Master Pension Trust (incorporated herein by reference to
Exhibit 10(e) filed with the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992 ("1992 Form
10-K")).
10(c) -- Master Services Agreement between The Taubman Realty Group
Limited Partnership and the Manager (incorporated herein by
reference to Exhibit 10(f) filed with the 1992 Form 10-K).
10(d) -- Cash Tender Agreement among Taubman Centers, Inc., A. Alfred
Taubman, acting not individually but as Trustee of The A.
Alfred Taubman Restated Revocable Trust, as amended and
restated in its entirety by Instrument dated January 10,
1989 (as the same has been and may hereafter be amended from
time to time), TRA Partners, and GMPTS Limited Partnership
(incorporated herein by reference to Exhibit 10(g) filed
with the 1992 Form 10-K).
* 10(e) -- Supplemental Retirement Savings Plan (incorporated herein by
reference to Exhibit 10(i) filed with the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1994).
* 10(f) -- Employment agreement between The Taubman Company Limited
Partnership and Lisa A. Payne (incorporated herein by
reference to Exhibit 10 filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1997).
* 10(g) -- Amended and Restated Continuing Offer, dated as of September
30, 1997 (incorporated herein by reference to Exhibit 10
filed with the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997).
10(h) -- Consolidated Agreement: Notice of Retirement and Release and
Covenant Not to Compete, between Robert C. Larson and The
Taubman Company Limited Partnership (incorporated herein by
reference to Exhibit 10 filed with the Registrant's 1999
Second Quarter Form 10-Q).
<PAGE>
10(i) -- Second Amendment to the Second Amendment and Restatement of
Agreement of Limited Partnership of The Taubman Realty Group
Limited Partnership effective as of September 3, 1999
(incorporated herein by reference to Exhibit 10(a) filed
with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 ("1999 Third Quarter Form
10-Q")).
10(j) -- Private Placement Purchase Agreement dated as of September
3, 1999 among The Taubman Realty Group Limited Partnership,
Taubman Centers, Inc. and Goldman Sachs 1999 Exchange Place
Fund, L.P. (incorporated herein by reference to Exhibit
10(b) filed with the Registrant's 1999 Third Quarter Form
10-Q).
10(k) -- Registration Rights Agreement entered into as of September
3, 1999 by and between Taubman Centers, Inc. and Goldman
Sachs 1999 Exchange Place Fund, L.P. (incorporated herein by
reference to Exhibit 10(c) filed with the Registrant's 1999
Third Quarter Form 10-Q).
10(l) -- Private Placement Purchase Agreement dated as of November
24, 1999 among The Taubman Realty Group Limited Partnership,
Taubman Centers, Inc. and GS-MSD Select Sponsors, L.P.
10(m) -- Registration Rights Agreement entered into as of November
24, 1999 by and between Taubman Centers, Inc and GS-MSD
Select Sponsors, L.P.
* 10(n) -- Employment agreement between The Taubman Company Limited
Partnership and Courtney Lord.
* 10(o) -- The Taubman Company Long-Term Compensation Plan (as amended
and restated effective January 1, 1999) (incorporated herein
by reference to Exhibit 10 filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March
31,1999.)
10(p) -- Annex II to Second Amendment to the Second Amendment and
Restatement of Agreement of Limited Partnership of The
Taubman Realty Group Limited Partnership.
12 -- Statement Re: Computation of Taubman Centers, Inc. Ratio of
Earnings to Combined Fixed Charges and Preferred Dividends
and Distributions.
21 -- Subsidiaries of Taubman Centers, Inc.
23 -- Consent of Deloitte & Touche LLP.
24 -- Powers of Attorney.
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27(a) -- Financial Data Schedule.
27(b) -- Restated Financial Data Schedule for three months ended
March 31, 1999.
27(c) -- Restated Financial Data Schedule for six months ended June
30, 1999.
27(d) -- Restated Financial Data Schedule for nine months ended
September 30, 1999
* A management contract or compensatory plan or arrangement required to be
filed pursuant to Item 14(c) of Form 10-K.
<PAGE>
Composite Copy
RESTATED ARTICLES OF INCORPORATION
OF
TAUBMAN CENTERS, INC.
1. These Restated Articles of Incorporation are executed on behalf of Taubman
Centers, Inc. (the "Corporation") pursuant to the provisions of Section 643
of the Michigan Business Corporation Act (the "Act").
2. The present name of the Corporation is: Taubman Centers, Inc.
3. The corporation identification number (CID) assigned by the Bureau is:
011-602.
4. Except for the Corporation's present name, the Corporation has not used any
name other than Taubman Realty, Inc.
5. The date of filing the original articles of incorporation was November 21,
1973.
6. These Restated Articles of Incorporation were duly adopted by the Board of
Directors of the Corporation in accordance with the provisions of Section
641(4) of the Act.
7. The following Restated Articles of Incorporation only restate and integrate
(and do not further amend) the Corporation's Second Amended and Restated
Articles of Incorporation, as previously amended. There is no material
discrepancy between the provisions of the Corporation's Second Amended and
Restated Articles of Incorporation, as amended, and the following Restated
Articles of Incorporation (referred to below as "these Amended and Restated
Articles of Incorporation").
ARTICLE I
Name
The name of the Corporation is: Taubman Centers, Inc.
ARTICLE II
Purpose
The purpose for which the Corporation is organized is to:
1. own, hold, develop and dispose of and invest in any type of retail real
property or mixed use real property having a retail component of
significant value in relation to the value of the entire mixed use real
property, including any entity whose material assets include such real
properties including, but not limited to, partnership interests in The
Taubman Realty Group Limited Partnership, a Delaware limited partnership,
and any successor thereto ("TRG");
2. act as managing general partner of TRG;
3. at such time, if ever, as TRG distributes its assets to its partners, own,
hold, manage, develop and dispose of said assets and in all other respects,
carry on the business of TRG;
4. qualify as a REIT (as hereinafter defined); and
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5. engage in any other lawful act or activity for which corporations may be
organized under the Michigan Business Corporation Act in addition to any of
the foregoing purposes, that is consistent with the Corporation's
qualification as a REIT.
ARTICLE III
Capital
1. Classes and Number of Shares.
The total number of shares of all classes of stock that the Corporation
shall have authority to issue is 300,000,000 shares. The classes and the
aggregate number of shares of stock of each class are as follows:
250,000,000 shares of Common Stock, par value $0.01 per share (the
"Common Stock"), which shall have the rights and limitations set forth
below.
50,000,000 shares of preferred stock (the "Preferred Stock"), which
may be issued in one or more series having such relative rights,
preferences, priorities, privileges, restrictions, and limitations as the
Board of Directors may determine from time to time.
2. Certain Powers, Rights, and Limitations of Capital Stock.
(a) Common Stock. Subject to the rights, preferences, and limitations that
the Board of Directors designates with respect to any series of Preferred Stock,
a statement of certain powers, rights, and limitations of the shares of the
Common Stock is as follows:
(i) Dividend Rights. The holders of shares of the Common Stock shall
be entitled to receive such dividends as may be declared by the Board of
Directors of the Corporation with respect to the Common Stock, subject to
the preferential rights of any series of Preferred Stock designated by the
Corporation's Board of Directors.
(ii) Rights Upon Liquidation. Subject to the provisions of Subsection
(e) of this Section 2 of this Article III, in the event of any voluntary or
involuntary liquidation, dissolution or winding up of, or any distribution
of the assets of, the Corporation, each holder of shares of the Common
Stock shall be entitled to receive, ratably with each other holder of
shares of the Common Stock, that portion of the assets of the Corporation
available for distribution to its holders of shares of Common Stock as the
number of shares of the Common Stock held by such holder bears to the total
number of shares of Common Stock (including shares of Common Stock that
have become Excess Stock) then outstanding.
(b) Voting Rights. Subject to the provisions of Subsection (e) of this
Section 2 of this Article III, the holders of shares of the Common Stock shall
be entitled to vote on all matters (for which a common shareholder shall be
entitled to vote thereon) at all meetings of the shareholders of the
Corporation, and shall be entitled to one vote for each share of the Common
Stock entitled to vote at such meeting. Any action to be taken by the
shareholders, other than the election of directors or adjourning a meeting,
including, but not limited to, the approval of an amendment to these Amended and
Restated Articles of Incorporation (other than an amendment by the Board of
Directors to establish the relative rights, preferences, priorities, privileges,
restrictions, and limitations of Preferred Stock as provided in Subsection (c)
of this Section 2 of this Article III, which amendment by the Board of Directors
shall require no action to be taken by the shareholders), shall be authorized if
approved by the affirmative vote of two-thirds of the shares of Capital Stock
entitled to vote thereon. Directors shall be elected if approved by a plurality
of the votes cast at an election.
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(c) Preferred Stock. The Preferred Stock shall have such relative rights,
preferences, priorities, privileges, restrictions, and limitations as the Board
of Directors may determine from time to time by one or more amendments to these
Amended and Restated Articles of Incorporation.
(i) Series A Preferred Stock. Subject in all cases to the other
provisions of this Section 2 of this Article III, including, without
limitation, those provisions restricting the Beneficial Ownership and
Constructive Ownership of shares of Capital Stock and those provisions with
respect to Excess Stock, the following sets forth the designation,
preferences, limitations as to dividends, voting and other rights, and the
terms and conditions of redemption of the Series A Preferred Stock (defined
below) of the Corporation.
(a) There is hereby established a series of Preferred Stock
designated "8.30% Series A Cumulative Redeemable Preferred Stock, par
value $0.01 per share" (the "Series A Preferred Stock"),which shall
consist of 8,000,000 authorized shares.
(b) All shares of Series A Preferred Stock redeemed, purchased,
exchanged, or otherwise acquired by the Corporation shall be restored
to the status of authorized but unissued shares of Preferred Stock.
(c) The Series A Preferred Stock shall, with respect to dividend
rights, rights upon liquidation, winding up or dissolution, and
redemption rights, rank (i) junior to any other series of Preferred
Stock hereafter duly established by the Board of Directors of the
Corporation, the terms of which specifically provide that such series
shall rank prior to the Series A Preferred Stock as to the payment of
dividends and distribution of assets upon liquidation (the "Senior
Preferred Stock"), (ii) pari passu with any other series of Preferred
Stock hereafter duly established by the Board of Directors of the
Corporation, the terms of which specifically provide that such series
shall rank pari passu with the Series A Preferred Stock as to the
payment of dividends and distribution of assets upon liquidation (the
"Parity Preferred Stock"), and (iii) prior to any other class or
series of Capital Stock, including, without limitation, the Common
Stock of the Corporation, whether now existing or hereafter created
(collectively, the "Junior Stock").
(d) (1) Subject to the rights of any Senior Preferred Stock, the
holders of the then outstanding shares of Series A Preferred Stock
shall be entitled to receive, as and when declared by the Board of
Directors, out of funds legally available for the payment of
dividends, cumulative preferential cash dividends at the annual rate
of 8.30% of the $25.00 per share liquidation preference (i.e., $2.075
per annum per share). Such dividends shall accrue and be cumulative
from the date of original issue and shall be payable in equal
quarterly amounts in arrears on or before the last day of each March,
June, September, and December or, if such day is not a business day,
the next succeeding business day (each, a "Dividend Payment Date")
(for the purposes of this Subparagraph (1) of this Paragraph (d), a
"business day" is any day, other than a Saturday, Sunday, or legal
holiday, on which banks in Detroit, Michigan, are open for business).
The first dividend, which shall be paid on December 31, 1997, will be
for less than a full quarter. All dividends on the Series A Preferred
Stock, including any dividend for any partial dividend period, shall
be computed on the basis of a 360-day year consisting of twelve 30-day
months. Dividends will be payable to holders of record as they appear
in the stock records of the Corporation at the close of business on
the applicable record date, which shall be the 15th day of the
calendar month in which the applicable Dividend Payment Date falls or
on such other date designed by the Board of Directors of the
Corporation for the payment of dividends that is not more than 30 nor
less than ten days prior to such Dividend Payment Date (each, a
"Dividend Record Date").
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(2) No dividends on the Series A Preferred Stock shall
be declared by the Board of Directors or paid or set apart for payment
by the Corporation at such time as any agreement of the Corporation,
including any agreement relating to its indebtedness, prohibits such
declaration, payment, or setting apart for payment or provides that
such declaration, payment, or setting apart for payment would
constitute a breach of, or a default under, such agreement or if such
declaration, payment, or setting aside shall be restricted or
prohibited by law.
(3) Dividends on the Series A Preferred Stock shall accrue and be
cumulative regardless of whether the Corporation has earnings,
regardless of whether there are funds legally available for the
payment of such dividends, and regardless of whether such dividends
are declared. Accrued but unpaid dividends on the Series A Preferred
Stock will accumulate as of the Dividend Payment Date on which they
first become payable. Except as set forth below in this Subparagraph
(3), no dividends shall be declared or paid or set apart for payment
on any Common Stock or any other series of Preferred Stock ranking, as
to dividends, on a parity with or junior to the Series A Preferred
Stock (other than a dividend in shares of Junior Stock) for any period
unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment
thereof is set apart for such payment on the Series A Preferred Stock
for all past dividend periods and the then current dividend period.
When dividends are not paid in full (and a sum sufficient for such
full payment is not so set apart) upon the Series A Preferred Stock
and the shares of any other series of Preferred Stock ranking on a
parity as to dividends with the Series A Preferred Stock, all
dividends declared upon the Series A Preferred Stock and any other
series of Preferred Stock ranking on a parity as to dividends with the
Series A Preferred Stock shall be declared pro rata, so that the
amount of dividends declared per share of Series A Preferred Stock and
such other series of Preferred Stock shall in all cases bear to each
other the same ratio that accrued dividends per share on the Series A
Preferred Stock and such other series of Preferred Stock (which shall
not include any accrual in respect of unpaid dividends for prior
dividend periods if such Preferred Stock does not have a cumulative
dividend) bear to each other. No interest shall be payable in respect
of any dividend payment on the Series A Preferred Stock that may be in
arrears. Holders of shares of the Series A Preferred Stock shall not
be entitled to any dividend, whether payable in cash, property, or
stock, in excess of full cumulative dividends on the Series A
Preferred Stock as provided above. Any dividend payment made on shares
of the Series A Preferred Stock shall first be credited against the
earliest accumulated but unpaid dividend due with respect to such
shares that remains payable.
(4) Except as provided in Subparagraph (3) of this Paragraph (d)
of this Item (i) of this Subsection (c) of this Section 2 of this
Article III, unless full cumulative dividends on the Series A
Preferred Stock have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof is set apart
for payment for all past dividend periods and the then current
dividend period: (i) no dividends (other than in shares of Junior
Stock) shall be declared or paid or set aside for payment nor shall
any other distribution be declared or made upon the Common Stock (or
any other Preferred Stock ranking junior to or on a parity with the
Series A Preferred Stock as to dividends or upon liquidation); and
(ii) no shares of Common Stock (or any other Preferred Stock of the
Corporation ranking junior to or on a parity with the Series A
Preferred Stock as to dividends or upon liquidation) shall be
redeemed, purchased, or otherwise acquired for any consideration (nor
shall any moneys be paid to or made available for a sinking fund for
the redemption of any such shares) by the Corporation (except by
conversion into or exchange for Junior Stock).
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(5) If for any taxable year the Corporation elects to
designate as "capital gains dividends" (as defined in Section 857 of
the Code) any portion (the "Capital Gains Amount") of the dividends
paid or made available for the year to holders of all classes of
Capital Stock (the "Total Dividends"), then the portion of the Capital
Gains Amount that shall be allocable to the holders of Series A
Preferred Stock shall be the amount that the total dividends paid or
made available to the holders of the Series A Preferred Stock for the
year bears to the Total Dividends.
(e) Subject to the rights of any Senior Stock, upon any voluntary
or involuntary liquidation, dissolution, or winding up of the affairs
of the Corporation, and before any distribution of assets shall be
made in respect of any Junior Stock, the holders of the Series A
Preferred Stock shall be entitled to be paid out of the assets of the
Corporation legally available for distribution to its shareholders a
liquidation preference of $25.00 per share in cash (or property having
a fair market value as determined by the Board of Directors valued at
$25.00 per share), plus an amount equal to any accrued but unpaid
dividends to the date of payment. After payment of the full amount of
the liquidating distributions to which they are entitled, the holders
of Series A Preferred Stock shall have no right or claims to any of
the remaining assets of the Corporation. Neither the consolidation or
merger of the Corporation with or into any other corporation, trust,
or entity (or of any other corporation with or into the Corporation)
nor the sale, lease, or conveyance of all or substantially all of the
property or business of the Corporation shall be deemed to constitute
a liquidation, dissolution or winding up of the Corporation for the
purpose of this Paragraph (e) of this Item (i).
(f) (1) The Series A Preferred Stock is not redeemable prior to
October 3, 2002. On and after October 3, 2002, the Corporation, at its
option upon not less than 30 nor more than 60 days' written notice,
may redeem shares of the Series A Preferred Stock, in whole or in
part, at any time and from time to time, for a cash redemption price
of $25.00 per share, plus all accrued and unpaid dividends to the date
fixed for redemption (except as provided below).
(2) The redemption price of the Series A Preferred Stock
(other than the portion thereof consisting of accrued but unpaid
dividends) shall be payable solely out of the sale proceeds of other
"capital stock" of the Corporation. For purposes of the preceding
sentence, the term "capital stock" means any equity securities of the
Corporation (including Common Stock and Preferred Stock), shares,
interest, participation, or other ownership interests (however
designated) and any rights (other than debt securities convertible
into or exchangeable for equity securities) or options to purchase any
of the foregoing. Holders of Series A Preferred Stock to be redeemed
shall surrender such shares at the place designated in the notice of
redemption and shall be entitled to the redemption price and any
accrued and unpaid dividends payable upon such redemption following
such surrender. If notice of redemption has been given and if the
Corporation has set aside in trust the funds necessary for the
redemption, then from and after the redemption date: (i) dividends
shall cease to accrue on such shares of Series A Preferred Stock; (ii)
such shares of Series A Preferred Stock shall no longer be deemed
outstanding; and (iii) all rights of the holders of such shares shall
terminate, except the right to receive the redemption price. If less
than all of the outstanding Series A Preferred Stock is to be
redeemed, the Series A Preferred Stock to be redeemed shall be
selected pro rata (as nearly as may be practicable without creating
fractional shares) or by any other equitable method determined by the
Corporation.
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(3) Unless full cumulative dividends on all shares of Series
A Preferred Stock shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set
apart for payment, no shares of Series A Preferred Stock shall be
redeemed unless all outstanding shares of Series A Preferred Stock are
simultaneously redeemed, and the Corporation shall not purchase or
otherwise acquire directly or indirectly any shares of Series A
Preferred Stock (except by exchange for Junior Stock); however, the
foregoing shall not prevent the purchase or acquisition of shares of
Series A Preferred Stock pursuant to a purchase or exchange offer made
on the same terms to holders of all outstanding shares of Series A
Preferred Stock.
(4) Notice of redemption shall be given by publication in a
newspaper of general circulation in The City of New York, such
publication to be made once a week for two successive weeks commencing
not less than 30 nor more than 60 days prior to the redemption date. A
similar notice shall be mailed by the Corporation, postage prepaid,
not less than 30 nor more than 60 days prior to the redemption date,
addressed to the respective holders of record of the Series A
Preferred Stock to be redeemed at their respective addresses as they
appear on the stock transfer records of the Corporation. No failure to
give or defect in such notice shall affect the validity of the
proceedings for the redemption of any shares of Series A Preferred
Stock except as to the holder to whom notice was defective or not
given. Each notice shall state: (i) the redemption date; (ii) the
redemption price; (iii) the number of shares of Series A Preferred
Stock to be redeemed; (iv) the place or places where the Series A
Preferred Stock is to be surrendered for payment of the redemption
price; and (v) that dividends on the shares to be redeemed will cease
to accrue on such redemption date. If fewer than all shares of the
Series A Preferred Stock held by any holder are to be redeemed, the
notice mailed to such holder shall also specify the number of shares
of Series A Preferred Stock to be redeemed from such holder.
(5) The holders of Series A Preferred Stock at the close of
business on a Dividend Record Date shall be entitled to receive the
dividend payable with respect to such Series A Preferred Stock on the
corresponding Dividend Payment Date notwithstanding the redemption
thereof between such Dividend Record Date and the corresponding
Dividend Payment Date or the Corporation's default in the payment of
the dividend due. Except as provided above, the Corporation will make
no payment or allowance for unpaid dividends, regardless of whether in
arrears, on called Series A Preferred Stock.
(6) The Series A Preferred Stock has no stated maturity and
shall not be subject to any sinking fund or mandatory redemption. The
Series A Preferred Stock is not convertible into any other securities
of the Corporation, but is subject to the Excess Stock (and all other)
provisions of this Article III.
(g) (1) Except as may be required by law or as otherwise
expressly provided in this Item (i) of this Subsection (c) of this
Section 2 of this Article III, the holders of Series A Preferred Stock
shall not be entitled to vote. On all matters with respect to which
the Series A Preferred Stock is entitled to vote, each share of Series
A Preferred Stock shall be entitled to one vote.
(2) Whenever dividends on the Series A Preferred Stock are
in arrears for six or more quarterly periods, the number of directors
then constituting the Board of Directors shall be increased by two,
and the holders of Series A Preferred Stock (voting separately as a
class with all other series of Preferred Stock upon which like voting
rights have been conferred and are exercisable) ("Voting Parity
Preferred") shall have the right to elect two directors of the
Corporation at a special meeting called by the holders of record of
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at least 10% of the Series A Preferred Stock or at least 10% of any
other Voting Parity Preferred so in arrears (unless such request is
received less than 90 days before the date fixed for the next annual
or special meeting of the shareholders) or at the next annual meeting
of shareholders, and at each subsequent annual meeting, until all
dividends accumulated on the Series A Preferred Stock for the past
dividend periods and the then current dividend period have been fully
paid or declared and a sum sufficient for the payment of such
dividends has been set aside for payment. If and when all accumulated
dividends and the dividend for the then current dividend period on the
Series A Preferred Stock shall have been paid in full or set aside for
payment in full, the holders of the Series A Preferred Stock shall be
divested of the foregoing voting rights, and if all accumulated
dividends and the dividend for the then current period have been paid
in full or set aside for payment in full on all series of Voting
Parity Preferred, the term of office of each director so elected by
the holders of the Series A Preferred Stock and the Voting Parity
Preferred shall terminate.
(3) As long as any shares of Series A Preferred Stock remain
outstanding, the Corporation shall not, without the affirmative vote
or consent of the holders of at least two-thirds of the outstanding
shares of Series A Preferred Stock (voting as a separate class): (i)
authorize or create, or increase the authorized or issued amount of,
any Capital Stock ranking senior to the Series A Preferred Stock with
respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution, or winding up or reclassify any authorized
Capital Stock of the Corporation into such shares, or create,
authorize, or issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (ii) amend,
alter, or repeal the provisions of these Amended and Restated Articles
of Incorporation, whether by merger, consolidation, or otherwise (an
"Event"), so as to materially and adversely affect any right,
preference, privilege, or voting power of the Series A Preferred Stock
or the holders thereof; however, as long as the Series A Preferred
Stock remains outstanding with its terms materially unchanged, taking
into account that upon the occurrence of an Event, the Corporation may
not be the surviving entity, the occurrence of an Event described in
clause (ii) above of this Subparagraph (3) shall not be deemed to
materially and adversely affect such rights, preferences, privileges,
or voting power of the holders of Series A Preferred Stock, and (x)
any increase in the amount of the authorized Preferred Stock or the
creation or issuance of any other series of Preferred Stock, or (y)
any increase in the amount of authorized shares of the Series A
Preferred Stock or any other series of Preferred Stock, in each case
ranking on a parity with or junior to the Series A Preferred Stock
with respect to payment of dividends or the distribution of assets
upon liquidation, dissolution, or winding up, shall not be deemed to
materially and adversely affect such rights, preferences, privileges,
or voting powers.
(4) Notwithstanding the foregoing, the Series A Preferred
Stock shall not be entitled to vote, and the foregoing voting
provisions shall not apply, if at or prior to the time when the act
with respect to which such vote would otherwise be required is
effected, all outstanding shares of the Series A Preferred Stock have
been redeemed or called for redemption, and sufficient funds have been
deposited in trust for the benefit of the holders of the Series A
Preferred Stock to effect such redemption.
(ii) Series B Preferred Stock. Subject in all cases to the other
provisions of this Section 2 of this Article III, including, without
limitation, those provisions restricting the Beneficial Ownership and
Constructive Ownership of shares of Capital Stock and those provisions with
respect to Excess Stock, the following sets forth the designation,
preference, limitation as to dividends, voting, and other rights of the
Series B Preferred Stock (defined below) of the Corporation. Terms that are
used and not otherwise defined in this Item (ii) have the meanings ascribed
to them elsewhere
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in these Amended and Restated Articles of Incorporation or, if not so
defined, their conventional meanings.
(a) There is hereby established a series of Preferred Stock
designated "Series B Non-Participating Convertible Preferred Stock,"
(the "Series B Preferred Stock"), which shall initially consist of
40,000,000 authorized shares, subject to one or more increases in the
authorized shares of the series by a further amendment(s) to these
Amended and Restated Articles of Incorporation to permit the issuance
of additional shares upon the issuance of additional Units (defined
below) to Registered Unitholders (defined below) and to accommodate
stock dividends or stock splits as provided below.
(b) All shares of Series B Preferred Stock purchased, exchanged,
or otherwise acquired by the Corporation or that are converted into
Common Stock shall be restored to the status of authorized but
unissued shares of Preferred Stock.
(c) Except upon the dissolution, liquidation, or winding up of
the Corporation, the Series B Preferred Stock shall have no right to
any assets of the Corporation, and (except as expressly set forth in
this Item (ii)) shall have no right to cash dividends or distributions
(from whatever source), but shall have the preference rights upon
dissolution, liquidation, and winding up that are set forth in this
Item (ii) of this Section 2. The Series B Preferred Stock ranks (i)
junior to the Series A Preferred Stock and junior to any Parity
Preferred Stock or Senior Preferred Stock (the Series A Preferred
Stock, the Parity Preferred Stock, and the Senior Preferred Stock are
collectively referred to as the "Series B Senior Preferred Stock"),
(ii) pari passu with any other series of Preferred Stock hereafter
duly established by the Board of Directors of the Corporation, the
terms of which specifically provide that such series shall rank pari
passu with the Series B Preferred Stock as to the distribution of
assets upon liquidation (the "Series B Parity Preferred Stock"), and
(iii) prior to any other class or series of Capital Stock, including,
without limitation, the Common Stock of the Corporation, whether now
existing or hereafter created (collectively, the "Series B Junior
Stock"). If shares of Common Stock or other securities are distributed
on the Common Stock or other voting Capital Stock (as a stock dividend
or otherwise) (a "Voting Stock Dividend"), then each share of Series B
Preferred Stock shall receive a distribution of the number of shares
(or warrants or rights to acquire shares, as the case may be) of
Series B Preferred Stock that would then be necessary to preserve the
relative voting power of the Series B Preferred Stock (i.e., in
relation to the voting power of all outstanding shares of voting
Capital Stock) that existed prior to the Voting Stock Dividend.
(d) Subject to the rights of the Series B Senior Preferred Stock,
upon any voluntary or involuntary dissolution, liquidation, or winding
up of the affairs of the Corporation, and before any distribution of
assets shall be made in respect of any Series B Junior Stock, the
holders of the Series B Preferred Stock shall be entitled to be paid
out of the assets of the Corporation legally available for
distribution to its shareholders a liquidation preference of $0.001
per share in cash (or property having a fair market value as
determined by the Board of Directors valued at $0.001 per share).
After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Series B Preferred Stock shall
have no right or claims to any of the remaining assets of the
Corporation.
(e) The Series B Preferred Stock has no stated maturity and shall
not be subject to redemption; however, the foregoing shall not be a
restriction on the Corporation=s otherwise lawful redemption of shares
of Series B Preferred Stock on a consensual basis with each holder of
the shares to be redeemed.
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(f) (1) The Series B Preferred Stock is convertible, and will be
automatically converted under the circumstances described below, into
Common Stock at a conversion ratio of 14,000:1; i.e., each 14,000
shares of Series B Preferred Stock may be converted into one share of
Common Stock. In lieu of issuing less than a full share (a "fractional
share") of Common Stock upon the conversion of fewer than 14,000
shares (or an integral multiple of 14,000 shares) of Series B
Preferred Stock, the Corporation shall redeem the shares of Series B
Preferred Stock that would otherwise be convertible into a fractional
share of Common Stock (the "Scrip Shares"), and from and after the
date of the conversion, the Scrip Shares shall cease to be outstanding
shares of Series B Preferred Stock, shall not constitute any other
class of Capital Stock, and shall entitle the holder only to receive
the cash redemption price, as provided below.
(2) The Corporation will initially issue the Series B
Preferred Stock to each Person who, on the initial date of issuance,
is a Registered Unitholder at the rate of one share for each Unit held
by such Registered Unitholder, if such Registered Unitholder
subscribes for the shares and pays to the Corporation an amount equal
to the product of $0.001 multiplied by the number of shares of Series
B Preferred Stock to be issued to him. Shares of Series B Preferred
Stock may be issued only in certificated, fully registered form and
may be issued only to Registered Unitholders. The Corporation may
issue fractional shares of Series B Preferred Stock. Following the
initial issuance of the Series B Preferred Stock, each Registered
Unitholder acquiring one or more newly issued Units shall be entitled
to receive from the Corporation shares of Series B Preferred Stock
equal in number to the number of newly issued Units acquired by such
Registered Unitholder, provided that the Registered Unitholder
subscribes for the shares and pays to the Corporation an amount equal
to the product of $0.001 multiplied by the number of shares of Series
B Preferred Stock to be issued to him. Except as provided below, a
holder of shares of Series B Preferred Stock may freely effect a
transfer of the shares to any Person (subject to the Transfer being in
compliance with, or (to the satisfaction of the Corporation) exempt
from, applicable securities laws and regulations). Upon a Registered
Unitholder's Transfer of one or more Units to another Registered
Unitholder, then (to the extent of the transferring Registered
Unitholder's then ownership of Series B Preferred Stock) the
transferring Registered Unitholder shall be deemed to have transferred
to the transferee of the Units (i) shares of Series B Preferred Stock
equal in number to the number of transferred Units or if, after giving
effect to the Unit Transfer, the transferring Registered Unitholder
will cease to own any Units, (ii) all of the transferring Registered
Unitholder's shares of Series B Preferred Stock. Notwithstanding the
foregoing, a Registered Unitholder shall have the right (which shall
be exercised by delivering written notice at the time of the Unit
Transfer to the Corporation and the transferee of the Units) to negate
the deemed simultaneous Transfer of Series B Preferred Stock. A
Registered Unitholder desiring to sell (by exchange or otherwise)
Units to the Corporation shall be required to surrender to the
Corporation for conversion shares of Series B Preferred Stock equal in
number to the number of Units being sold (by exchange or otherwise),
but only if and to the extent that, after giving effect to the
Corporation's proposed purchase of Units, the number of outstanding
shares of Series B Preferred Stock will exceed the aggregate number of
Units held by all Registered Unitholders. Shares of Series B Preferred
Stock surrendered for conversion as provided in the immediately
preceding sentence shall be converted into Common Stock, as provided
in subparagraph (1) of this Paragraph (f), upon the Corporation's
purchase of the Units of the surrendering Registered Unitholder, and
the Corporation shall promptly redeem any resulting Scrip Shares for
cash, as provided below. Except as provided above in this subparagraph
(f)(2), a holder of Series B Preferred Stock shall have no voluntary
conversion rights with respect to the Series B Preferred Stock, but
shares of Series B Preferred Stock shall
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automatically convert into Common Stock as provided in subparagraph
(3) of this Paragraph (f).
(3) After giving effec to a Transfer of shares of Series B
Preferred Stock to a Registered Unitholder, the transferee Registered
Unitholder is permitted to own shares of Series B Preferred Stock up
to (i) the number of Units then owned by such transferee Registered
Unitholder or (ii) 5% of the outstanding shares of Series B Preferred
Stock, whichever is greater (any shares in excess of a transferee
Registered Unitholder's permitted ownership of Series B Preferred
Stock are referred to as the "Disproportionate Shares"). After giving
effect to a Transfer of shares of Series B Preferred Stock to any
Person who is not a Registered Unitholder, the transferee is permitted
to own up to 5% of the outstanding shares of Series B Preferred Stock
(any shares held by a transferee of Series B Preferred Stock who is
not a Registered Unitholder in excess of such 5% limit are referred to
as the "Greater than 5% Shares"). Upon a Transfer of Series B
Preferred Stock resulting in the transferee holding Disproportionate
Shares or Greater than 5% Shares, as applicable, the Disproportionate
Shares or Greater than 5% Shares, as applicable, shall automatically
convert into Common Stock as provided in subparagraph (1) of this
Paragraph (f) without action on the part of anyone, and the
Corporation shall promptly redeem any resulting Scrip Shares for cash,
as provided below. Upon any such automatic conversion, each
certificate evidencing converted shares of Series B Preferred Stock
shall instead represent the whole number of shares of Common Stock
into which such shares of Series B Preferred Stock were converted and
the right to receive the cash redemption payment for any Scrip Shares
evidenced by such certificate until such certificate is surrendered to
the Corporation for cancellation in exchange for a Common Stock
certificate and the redemption price of the Scrip Shares (if any).
(4) Upon conversion of any shares of Series B Preferred
Stock, no payment or adjustment shall be made on account of dividends
declared and payable to holders of Common Stock of record on a date
prior to the date of conversion.
(5) As soon as practicable on or after the date of conversion
of shares of Series B Preferred Stock and the surrender to the
Corporation of the certificate(s) evidencing the converted shares, the
Corporation will issue and deliver to or at the direction of the
converting shareholder a certificate(s) for the whole number of shares
of Common Stock issuable upon such conversion. The Corporation shall
redeem Scrip Shares resulting from a voluntary or automatic conversion
of Series B Preferred Stock for a cash payment equal to the fair value
of the fractional share of Common Stock into which the Scrip Shares
would otherwise be convertible (the fair value shall be the product of
the relevant fraction multiplied by the closing price of the Common
Stock on the trading date next preceding the date of conversion on the
principal national securities exchange on which the Common Stock is
listed (or the average of the high and low prices of the Common Stock
on such date on the principal national market system on which the
Common Stock is traded) or (if the Common Stock is not so listed or
traded) the fair value of the Common Stock on such date as determined
by the Corporation's Board of Directors). The Corporation shall be
responsible for any stamp or other issuance taxes payable upon the
issuance of Common Stock in exchange for surrendered or automatically
converted shares of Series B Preferred Stock.
(g) (1) On all matters with respect to which shareholders of the
Corporation vote, each share of Series B Preferred Stock shall be
entitled to one vote. On all matters with respect to which the Series
B Preferred Stock is entitled to vote as a separate class, including
the nomination of directors pursuant to subparagraph (2) of this
Paragraph (g), the action shall be determined by the vote (which may
be by non-unanimous written consent) of a
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majority of the outstanding shares of Series B Preferred Stock
entitled to vote. On all other matters, including the election of
directors, the Series B Preferred Stock will vote as a single class
with all other Capital Stock entitled to vote.
(2) With respect to each annual meeting of the Corporation's
shareholders, commencing with the annual meeting of the Corporation's
shareholders to be held in 1999 (the "1999 Annual Meeting"), the
holders of shares of Series B Preferred Stock shall have the right,
voting as a separate class, to designate nominees for election as
directors of the Corporation and to have such nominees included as
such in the Corporation's proxy statement and ballots (or, if none, in
a specially prepared proxy statement and ballots) submitted to the
shareholders of the Corporation entitled to vote in a timely manner
prior to the annual meeting. The Corporation shall use all reasonable
efforts, consistent with the Board of Directors' exercise of its
fiduciary duties, to cause the election of the nominees designated by
the holders of Series B Preferred Stock. With respect to the 1999
Annual Meeting, the holders of Series B Preferred Stock shall have the
right to designate four nominees. With respect to each succeeding
annual meeting of shareholders, the number of nominees to be
designated by the holders of Series B Preferred Stock (the "Base
Number of Series B Nominees") shall be equal to the difference between
(i) four and (ii) the number of directors whose terms commenced prior
to and will continue after such meeting and who were nominated to
serve such terms by the holders of Series B Preferred Stock, voting as
a separate class. The Base Number of Series B Nominees calculated as
set forth in the immediately preceding sentence shall be reduced (i)
by one, if as of the record date for determining the shareholders
entitled to vote for the election of directors at the relevant annual
meeting (the "Record Date"), the Registered Unitholders collectively
own less than 25% (but at least 15%) of the Fully Diluted Common Stock
of the Corporation, (ii) by two, if as of the Record Date, the
Registered Unitholders collectively own less than 15% (but at least
10%) of the Fully Diluted Common Stock of the Corporation, (iii) by
three, if as of the Record Date, the Registered Unitholders
collectively own less than 10% (but at least 5%) of the Fully Diluted
Common Stock of the Corporation, and (iv) to zero, if as of the Record
Date, the Registered Unitholders collectively own less than 5% of the
Fully Diluted Common Stock of the Corporation. For purposes of the
immediately preceding sentence, (i) "Fully Diluted Common Stock of the
Corporation" means all shares of Common Stock issued and outstanding
on the relevant Record Date, plus all shares of Common Stock issuable
upon the exercise of vested employee stock options to acquire Common
Stock and issuable upon the exchange of Units owned by the Registered
Unitholders (assuming a 1:1 exchange ratio and calculated without
regard to limitations imposed on the ability or rights of certain
Registered Unitholders to exchange Units for Common Stock), and (ii)
the Registered Unitholders shall be deemed to "collectively own" all
shares of Common Stock that they own in fact, that they have the right
to acquire upon the exercise of vested employee stock options, and
that would be issued upon the exchange (without regard to limitations
imposed on the ability or rights of certain Registered Unitholders to
exchange Units for Common Stock) of all outstanding Units (and Units
issuable upon the exercise of options to acquire Units) held by the
Registered Unitholders.
(h) At all times when the holders of Series B Preferred Stock,
voting as a separate class, are entitled to designate nominees for
election as directors of the Corporation, (i) the Board of Directors
shall consist of nine directors (other than during any vacancy caused
by the death, resignation, or removal of a director), plus the number
of directors that any series of Preferred Stock, voting separately as
a class, has the right to elect because of the Corporation's default
in the payment of preferential dividends due on such series, and (ii)
a majority of the directors shall be "independent" (for these
purposes, an individual shall be deemed "independent" if such
individual is neither an officer nor an employee of the
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Corporation or any of its direct or indirect subsidiaries). At such
time as the holders of Series B Preferred Stock no longer have the
right to designate any nominees for election as directors of the
Corporation, the size of the Board of Directors shall be as determined
in accordance with the provisions of the By-Laws of the Corporation.
(i) For purposes of this Item (ii) of this Subsection (c) of this
Section 2 of this Article III, the following terms have the indicated
meanings:
(1) "Registered Unitholder" means a Person, other than the
Corporation, (i) who at the relevant time is reflected in the records
of The Taubman Realty Group Limited Partnership as a partner in such
partnership (or who as the result of a Transfer of Units is being
admitted as a partner in such partnership) or (ii) who is (or upon
completion of the relevant Transfer (including, for these purposes,
the exercise of an option to acquire a Unit) will become) a beneficial
owner of Units.
(2) "Units" means Units of Partnership Interest in The
Taubman Realty Group Limited Partnership (and its successors), and any
securities into which such Units of Partnership Interest (as a class)
are converted or for which such Units (as a class) are exchanged,
whether by merger, reclassification, or otherwise. All references in
this Item (ii) of this Subsection (c) of this Section 2 of this
Article III to numbers of Units shall be adjusted to reflect any
splits, reverse splits, or reclassifications of Units of Partnership
Interest.
(j) As long as shares of Series B Preferred Stock remain
outstanding, the Corporation shall not, without the affirmative vote
or consent of the holders of a majority of the outstanding shares of
Series B Preferred Stock (voting as a separate class):
(1) create, authorize, or issue any securities or any
obligation or security convertible into or evidencing the right to
purchase any such securities, the issuance of which could adversely
and (relative to the other outstanding Capital Stock) disparately
affect the voting power or voting rights of the Series B Preferred
Stock or the holders of Series B Preferred Stock (including the rights
under Paragraph (g) of this Item (ii) of this Subsection (c) of this
Section 2 of this Article III, and disregarding, for these purposes,
the right of any series of Preferred Stock, voting as a separate
class, to elect directors of the Corporation as the result of the
Corporation=s default in the payment of a preferential dividend to
which the holders of such series of Preferred Stock are entitled);
(2) amend, alter, or repeal the provisions of these Amended
and Restated Articles of Incorporation, whether by merger,
consolidation, or otherwise, in a manner that could adversely affect
the voting power or voting rights of the Series B Preferred Stock or
the holders of Series B Preferred Stock (including the rights under
Paragraph (g) of this Item (ii) of this Subsection (c) of this Section
2 of this Article III, and disregarding, for these purposes, the right
of any series of Preferred Stock, voting as a separate class, to elect
directors of the Corporation as the result of the Corporation=s
default in the payment of a preferential dividend to which the holders
of such series of Preferred Stock are entitled);
(3) be a party to a material transaction (including, without
limitation, a merger, consolidation, or share exchange) (a "Series B
Transaction") if the Series B Transaction could adversely and
(relative to the other outstanding Capital Stock) disparately affect
the voting power or voting rights of the Series B Preferred Stock or
the holders of Series B Preferred Stock (including the rights under
Paragraph (g) of this Item (ii) of this
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Subsection (c) of this Section 2 of this Article III, and
disregarding, for these purposes, the right of any series of Preferred
Stock, voting as a separate class, to elect directors of the
Corporation as the result of the Corporation=s default in the payment
of a preferential dividend to which the holders of such series of
Preferred Stock are entitled). The provisions of this subparagraph (3)
shall apply to successive Series B Transactions; or
(4) issue any shares of Series B Preferred Stock to anyone
other than a Registered Unitholder as provided in Paragraph (c) or
subparagraph (f)(2) of this Item (ii).
(iii) Series C Preferred Stock. Subject in all cases to the other
provisions of this Section 2 of this Article III, including, without
limitation, those provisions restricting the Beneficial Ownership and
Constructive Ownership of shares of Capital Stock and those provisions with
respect to Excess Stock, the following sets forth the designation,
preferences, limitations as to dividends, voting and other rights, and the
terms and conditions of redemption of the Series C Preferred Stock (defined
below) of the Corporation.
(a) There is hereby established a series of Preferred Stock
designated "9% Series C Cumulative Redeemable Preferred Stock, par
value $0.01 per share" (the "Series C Preferred Stock"), which shall
consist of 1,000,000 authorized shares.
(b) All shares of Series C Preferred Stock redeemed, purchased,
exchanged, or otherwise acquired by the Corporation shall be restored
to the status of authorized but unissued shares of Preferred Stock.
(c) The Series C Preferred Stock shall, with respect to dividend
rights, rights upon liquidation, winding up or dissolution, and
redemption rights, rank (i) junior to any other series of Preferred
Stock hereafter duly established by the Board of Directors of the
Corporation, the terms of which specifically provide that such series
shall rank prior to the Series C Preferred Stock as to the payment of
dividends and distribution of assets upon liquidation (the "Senior
Preferred Stock"), (ii) pari passu with the Series A and Series B
Preferred Stock and any other series of Preferred Stock hereafter duly
established by the Board of Directors of the Corporation, the terms of
which specifically provide that such series shall rank pari passu with
the Series C Preferred Stock as to the payment of dividends and
distribution of assets upon liquidation (the "Parity Preferred
Stock"), and (iii) prior to any other class or series of Capital
Stock, including, without limitation, the Common Stock of the
Corporation, whether now existing or hereafter created (collectively,
the "Junior Stock").
(d) (1) Subject to the rights of any Senior Preferred Stock, the
holders of the then outstanding shares of Series C Preferred Stock
shall be entitled to receive, as and when declared by the Board of
Directors, out of funds legally available for the payment of
dividends, cumulative preferential cash dividends at the annual rate
of 9% of the $75 per share liquidation preference (i.e., $6.75 per
annum per share). Such dividends shall accrue and be cumulative from
the date of original issue and shall be payable in equal quarterly
amounts in arrears on or before the last day of each March, June,
September, and December or, if such day is not a business day, the
next succeeding business day except that, if such business day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding business day, in each case with the same force
and effect as if made on such date (each, a "Dividend Payment Date")
(for the purposes of this Subparagraph (1) of this Paragraph (d), a
"business day" is any day, other than a Saturday, Sunday, or legal
holiday, on which banks in Detroit, Michigan, are open for business).
The first dividend may be for less than a full quarter. All dividends
on the Series C Preferred Stock, including
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any dividend for any partial dividend period, shall be computed on the
basis of a 360-day year consisting of twelve 30-day months. Dividends
will be payable to holders of record as they appear in the stock
records of the Corporation at the close of business on the applicable
record date, which shall be the 15th day of the calendar month in
which the applicable Dividend Payment Date falls or on such other date
designed by the Board of Directors of the Corporation for the payment
of dividends that is not more than 30 nor less than ten days prior to
such Dividend Payment Date (each, a "Dividend Record Date").
(2) No dividends on the Series C Preferred Stock shall be
declared by the Board of Directors or paid or set apart for payment by
the Corporation at such time as any agreement of the Corporation,
including any agreement relating to its indebtedness, prohibits such
declaration, payment, or setting apart for payment or provides that
such declaration, payment, or setting apart for payment would
constitute a breach of, or a default under, such agreement or if such
declaration, payment, or setting aside shall be restricted or
prohibited by law.
(3) Dividends on the Series C Preferred Stock shall accrue
and be cumulative regardless of whether the Corporation has earnings,
regardless of whether there are funds legally available for the
payment of such dividends, and regardless of whether such dividends
are declared. Accrued but unpaid dividends on the Series C Preferred
Stock will accumulate as of the Dividend Payment Date on which they
first become payable. Except as set forth below in this Subparagraph
(3), no dividends shall be declared or paid or set apart for payment
on any Common Stock or any other series of Preferred Stock ranking, as
to dividends, on a parity with or junior to the Series C Preferred
Stock (other than a dividend in shares of Junior Stock) for any period
unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment
thereof is set apart for such payment on the Series C Preferred Stock
for all past dividend periods and the then current dividend period.
When dividends are not paid in full (and a sum sufficient for such
full payment is not so set apart) upon the Series C Preferred Stock
and the shares of any other series of Preferred Stock ranking on a
parity as to dividends with the Series C Preferred Stock, all
dividends declared upon the Series C Preferred Stock and any other
series of Preferred Stock ranking on a parity as to dividends with the
Series C Preferred Stock shall be declared pro rata, so that the
amount of dividends declared per share of Series C Preferred Stock and
such other series of Preferred Stock shall in all cases bear to each
other the same ratio that accrued dividends per share on the Series C
Preferred Stock and such other series of Preferred Stock (which shall
not include any accrual in respect of unpaid dividends for prior
dividend periods if such Preferred Stock does not have a cumulative
dividend) bear to each other. No interest shall be payable in respect
of any dividend payment on the Series C Preferred Stock that may be in
arrears. Holders of shares of the Series C Preferred Stock shall not
be entitled to any dividend, whether payable in cash, property, or
stock, in excess of full cumulative dividends on the Series C
Preferred Stock as provided above. Any dividend payment made on shares
of the Series C Preferred Stock shall first be credited against the
earliest accumulated but unpaid dividend due with respect to such
shares that remains payable.
(4) Except as provided in Subparagraph (3) of this Paragraph
(d) of this Item (iii) of this Subsection (c) of this Section 2 of
this Article III, unless full cumulative dividends on the Series C
Preferred Stock have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof is set apart
for payment for all past dividend periods and the then current
dividend period: (i) no dividends (other than in shares of Junior
Stock) shall be declared or paid or set aside for payment nor shall
any other distribution be declared or made upon the Common Stock or
the Series B Preferred Stock
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(or any other Preferred Stock ranking junior to or on a parity with
the Series C Preferred Stock as to dividends or upon liquidation); and
(ii) no shares of Common Stock or the Series B Preferred Stock (or any
other Preferred Stock of the Corporation ranking junior to or on a
parity with the Series C Preferred Stock as to dividends or upon
liquidation) shall be redeemed, purchased, or otherwise acquired for
any consideration (nor shall any moneys be paid to or made available
for a sinking fund for the redemption of any such shares) by the
Corporation (except by conversion into or exchange for Junior Stock).
(5) If for any taxable year the Corporation elects to
designate as "capital gains dividends" (as defined in Section 857 of
the Code) any portion (the "Capital Gains Amount") of the dividends
paid or made available for the year to holders of all classes of
Capital Stock (the "Total Dividends"), then the portion of the Capital
Gains Amount that shall be allocable to the holders of Series C
Preferred Stock shall be the amount that the total dividends paid or
made available to the holders of the Series C Preferred Stock for the
year bears to the Total Dividends.
(6) Notwithstanding anything to the contrary set forth
herein, the Corporation may declare and pay a dividend on the Common
Stock, without preserving the priority of distributions described in
Subparagraphs 3 and 4 of this Paragraph (d) of this Item (iii) of this
Subsection (c) of this Section 2 of this Article III, but only to the
extent such dividends are required to preserve the Real Estate
Investment Trust status of the Corporation and to avoid the imposition
of an excise tax on the Corporation.
(e) Subject to the rights of any Senior Stock, upon any voluntary
or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, and before any distribution of assets shall be
made in respect of any Junior Stock, the holders of the Series C
Preferred Stock shall be entitled to be paid out of the assets of the
Corporation legally available for distribution to its shareholders a
liquidation preference of $75 per share in cash (or property having a
fair market value as determined by the Board of Directors valued at
$75 per share), plus an amount equal to any accrued but unpaid
dividends to the date of payment. After payment of the full amount of
the liquidating distributions to which they are entitled, the holders
of Series C Preferred Stock shall have no right or claims to any of
the remaining assets of the Corporation. Neither the consolidation or
merger of the Corporation with or into any other corporation, trust,
or entity (or of any other corporation with or into the Corporation)
nor the sale, lease, or conveyance of all or substantially all of the
property or business of the Corporation shall be deemed to constitute
a liquidation, dissolution or winding up of the Corporation for the
purpose of this Paragraph (e) of this Item (iii).
(f) (1) The Series C Preferred Stock is not redeemable prior to
September 3, 2004. On and after September 3, 2004, the Corporation, at
its option upon not less than 30 nor more than 60 days' written
notice, may redeem shares of the Series C Preferred Stock, in whole or
in part, at any time and from time to time, for a cash redemption
price of $75 per share, plus all accrued and unpaid dividends to the
date fixed for redemption (except as provided below).
(2) The redemption price of the Series C Preferred Stock
(other than the portion thereof consisting of accrued but unpaid
dividends) shall be payable solely out of the sale proceeds of other
"capital stock" of the Corporation. For purposes of the preceding
sentence, the term "capital stock" means any equity securities of the
Corporation (including Common Stock and Preferred Stock), shares,
interest, participation, or other ownership interests (however
designated) and any rights (other than debt securities convertible
into or exchangeable for equity securities) or options to purchase any
of the foregoing. Holders of
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Series C Preferred Stock to be redeemed shall surrender such shares at
the place designated in the notice of redemption and shall be entitled
to the redemption price and any accrued and unpaid dividends payable
upon such redemption following such surrender. If notice of redemption
has been given and if the Corporation has set aside in trust the funds
necessary for the redemption, then from and after the redemption date:
(i) dividends shall cease to accrue on such shares of Series C
Preferred Stock; (ii) such shares of Series C Preferred Stock shall no
longer be deemed outstanding; and (iii) all rights of the holders of
such shares shall terminate, except the right to receive the
redemption price. If less than all of the outstanding Series C
Preferred Stock is to be redeemed, the Series C Preferred Stock to be
redeemed shall be selected pro rata (as nearly as may be practicable
without creating fractional shares) or by any other equitable method
determined by the Corporation.
(3) Unless full cumulative dividends on all shares of Series
C Preferred Stock shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set
apart for payment, no shares of Series C Preferred Stock shall be
redeemed unless all outstanding shares of Series C Preferred Stock are
simultaneously redeemed, and the Corporation shall not purchase or
otherwise acquire directly or indirectly any shares of Series C
Preferred Stock (except by exchange for Junior Stock); however, the
foregoing shall not prevent the purchase or acquisition of shares of
Series C Preferred Stock pursuant to a purchase or exchange offer made
on the same terms to holders of all outstanding shares of Series C
Preferred Stock.
(4) Notice of redemption shall be given by publication in a
newspaper of general circulation in The City of New York, such
publication to be made once a week for two successive weeks commencing
not less than 30 nor more than 60 days prior to the redemption date. A
similar notice shall be mailed by the Corporation, postage prepaid,
not less than 30 nor more than 60 days prior to the redemption date,
addressed to the respective holders of record of the Series C
Preferred Stock to be redeemed at their respective addresses as they
appear on the stock transfer records of the Corporation. No failure to
give or defect in such notice shall affect the validity of the
proceedings for the redemption of any shares of Series C Preferred
Stock except as to the holder to whom notice was defective or not
given. Each notice shall state: (i) the redemption date; (ii) the
redemption price; (iii) the number of shares of Series C Preferred
Stock to be redeemed; (iv) the place or places where the Series C
Preferred Stock is to be surrendered for payment of the redemption
price; and (v) that dividends on the shares to be redeemed will cease
to accrue on such redemption date. If fewer than all shares of the
Series C Preferred Stock held by any holder are to be redeemed, the
notice mailed to such holder shall also specify the number of shares
of Series C Preferred Stock to be redeemed from such holder.
(5) The holders of Series C Preferred Stock at the close of
business on a Dividend Record Date shall be entitled to receive the
dividend payable with respect to such Series C Preferred Stock on the
corresponding Dividend Payment Date notwithstanding the redemption
thereof between such Dividend Record Date and the corresponding
Dividend Payment Date or the Corporation's default in the payment of
the dividend due. Except as provided above, the Corporation will make
no payment or allowance for unpaid dividends, regardless of whether in
arrears, on called Series C Preferred Stock.
(6) The Series C Preferred Stock has no stated maturity and
no sinking fund shall be required and shall not be subject to
mandatory redemption. The Series C Preferred Stock is not convertible
into any other securities of the Corporation, but is subject to the
Excess Stock (and all other) provisions of this Article III.
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(g) (1) Except as may be required by law or as otherwise
expressly provided in this Item (iii) of this Subsection (c) of this
Section 2 of this Article III, the holders of Series C Preferred Stock
shall not be entitled to vote. On all matters with respect to which
the Series C Preferred Stock is entitled to vote, each share of Series
C Preferred Stock shall be entitled to one vote.
(2) Whenever dividends on the Series C Preferred Stock are
in arrears (which shall, with respect to any quarterly dividend, mean
that any such divided has not been paid in full whether or not earned
or declared) for six or more quarterly periods (whether consecutive or
not), the number of directors then constituting the Board of Directors
shall be increased by two, and the holders of Series C Preferred Stock
(voting separately as a class with all other series of Voting Parity
Preferred) shall have the right to elect two directors of the
Corporation at a special meeting called by the holders of record of at
least 10% of the Series C Preferred Stock or at least 10% of any other
Voting Parity Preferred so in arrears (unless such request is received
less than 90 days before the date fixed for the next annual or special
meeting of the shareholders) or at the next annual meeting of
shareholders, and at each subsequent annual meeting, until all
dividends accumulated on the Series C Preferred Stock for the past
dividend periods and the then current dividend period have been fully
paid or declared and a sum sufficient for the payment of such
dividends has been set aside for payment. If and when all accumulated
dividends and the dividend for the then current dividend period on the
Series C Preferred Stock shall have been paid in full or set aside for
payment in full, the holders of the Series C Preferred Stock shall be
divested of the foregoing voting rights (but subject always to the
same provision for the vesting of such voting rights in the case of
any similar future arrearages in six quarterly dividends), and if all
accumulated dividends and the dividend for the then current period
have been paid in full or set aside for payment in full on all series
of Voting Parity Preferred, the term of office of each director so
elected by the holders of the Series C Preferred Stock and the Voting
Parity Preferred shall terminate.
(3) As long as any shares of Series C Preferred Stock remain
outstanding, the Corporation shall not, without the affirmative vote
or consent of the holders of at least two-thirds of the outstanding
shares of Series C Preferred Stock (voting as a separate class); (i)
authorize or create, or increase the authorized or issued amount of,
any Capital Stock ranking senior to the Series C Preferred Stock with
respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution, or winding up or reclassify any authorized
Capital Stock of the Corporation into or exchangeable for such shares,
or create, authorize, or issue any obligation or security convertible
into or evidencing the right to purchase any such shares; or (ii)
amend, alter, or repeal the provisions of these Amended and Restated
Articles of Incorporation, whether by merger, consolidation or
otherwise (an "Event"), so as to materially and adversely affect any
right, preference, privilege, or voting power of the Series C
Preferred Stock or the holders thereof; however, as long as the Series
C Preferred Stock remains outstanding with its terms materially
unchanged, taking into account that upon the occurrence of an Event,
the Corporation may not be the surviving entity, the occurrence of an
Event described in clause (ii) above of this Subparagraph (3) shall
not be deemed to materially and adversely affect such rights,
preferences, privileges, or voting power of the holders of Series C
Preferred Stock, and (x) any increase in the amount of the authorized
Preferred Stock or the creation or issuance of any other series of
Preferred Stock, or (y) any increase in the amount of authorized
shares of the Series C Preferred Stock or any other series of
Preferred Stock, in the case of either (x) or (y) ranking on a parity
with or junior to the Series C Preferred Stock with respect to payment
of dividends or the distribution of assets upon liquidation,
dissolution, or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges, or voting
powers.
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(4) Notwithstanding the foregoing, the Series C Preferred
Stock shall not be entitled to vote, and the foregoing voting
provisions shall not apply, if at or prior to the time when the act
with respect to which such vote would otherwise be required is
effected, all outstanding shares of the Series C Preferred Stock have
been redeemed or called for redemption, and sufficient funds have been
deposited in trust for the benefit of the holders of the Series C
Preferred Stock to effect such redemption.
(iv) Series D Preferred Stock. Subject in all cases to the other
provisions of this Section 2 of this Article III, including, without
limitation, those provisions restricting the Beneficial Ownership and
Constructive Ownership of shares of Capital Stock and those provisions with
respect to Excess Stock, the following sets forth the designation,
preferences, limitations as to dividends, voting and other rights, and the
terms and conditions of redemption of the Series D Preferred Stock (defined
below) of the Corporation.
(a) There is hereby established a series of Preferred Stock
designated "9% Series D Cumulative Redeemable Preferred Stock, par
value $0.01 per share" (the "Series D Preferred Stock"), which shall
consist of 250,000 authorized shares.
(b) All shares of Series D Preferred Stock redeemed, purchased,
exchanged, or otherwise acquired by the Corporation shall be restored
to the status of authorized but unissued shares of Preferred Stock.
(c) The Series D Preferred Stock shall, with respect to dividend
rights, rights upon liquidation, winding up or dissolution, and
redemption rights, rank (i) junior to any other series of Preferred
Stock hereafter duly established by the Board of Directors of the
Corporation, the terms of which specifically provide that such series
shall rank prior to the Series D Preferred Stock as to the payment of
dividends and distribution of assets upon liquidation (the "Senior
Preferred Stock"), (ii) pari passu with the Series A, Series B and
Series C Preferred Stock and any other series of Preferred Stock
hereafter duly established by the Board of Directors of the
Corporation, the terms of which specifically provide that such series
shall rank pari passu with the Series D Preferred Stock as to the
payment of dividends and distribution of assets upon liquidation (the
"Parity Preferred Stock"), and (iii) prior to any other class or
series of Capital Stock, including, without limitation, the Common
Stock of the Corporation, whether now existing or hereafter created
(collectively, the "Junior Stock").
(d) (1) Subject to the rights of any Senior Preferred Stock, the
holders of the then outstanding shares of Series D Preferred Stock
shall be entitled to receive, as and when declared by the Board of
Directors, out of funds legally available for the payment of
dividends, cumulative preferential cash dividends at the annual rate
of 9% of the $100 per share liquidation preference (i.e., $9.00 per
annum per share). Such dividends shall accrue and be cumulative from
the date of original issue and shall be payable in equal quarterly
amounts in arrears on or before the last day of each March, June,
September, and December or, if such day is not a business day, the
next succeeding business day except that, if such business day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding business day, in each case with the same force
and effect as if made on such date (each, a "Dividend Payment Date")
(for the purposes of this Subparagraph (1) of this Paragraph (d), a
"business day" is any day, other than a Saturday, Sunday, or legal
holiday, on which banks in Detroit, Michigan, are open for business).
The first dividend may be for less than a full quarter. All dividends
on the Series D Preferred Stock, including any dividend for any
partial dividend period, shall be computed on the basis of a 360-day
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year consisting of twelve 30-day months. Dividends will be payable to
holders of record as they appear in the stock records of the
Corporation at the close of business on the applicable record date,
which shall be the 15th day of the calendar month in which the
applicable Dividend Payment Date falls or on such other date designed
by the Board of Directors of the Corporation for the payment of
dividends that is not more than 30 nor less than ten days prior to
such Dividend Payment Date (each, a "Dividend Record Date").
(2) No dividends on the Series D Preferred Stock shall be
declared by the Board of Directors or paid or set apart for payment by
the Corporation at such time as any agreement of the Corporation,
including any agreement relating to its indebtedness, prohibits such
declaration, payment, or setting apart for payment or provides that
such declaration, payment, or setting apart for payment would
constitute a breach of, or a default under, such agreement or if such
declaration, payment, or setting aside shall be restricted or
prohibited by law.
(3) Dividends on the Series D Preferred Stock shall accrue
and be cumulative regardless of whether the Corporation has earnings,
regardless of whether there are funds legally available for the
payment of such dividends, and regardless of whether such dividends
are declared. Accrued but unpaid dividends on the Series D Preferred
Stock will accumulate as of the Dividend Payment Date on which they
first become payable. Except as set forth below in this Subparagraph
(3), no dividends shall be declared or paid or set apart for payment
on any Common Stock or any other series of Preferred Stock ranking, as
to dividends, on a parity with or junior to the Series D Preferred
Stock (other than a dividend in shares of Junior Stock) for any period
unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment
thereof is set apart for such payment on the Series D Preferred Stock
for all past dividend periods and the then current dividend period.
When dividends are not paid in full (and a sum sufficient for such
full payment is not so set apart) upon the Series D Preferred Stock
and the shares of any other series of Preferred Stock ranking on a
parity as to dividends with the Series D Preferred Stock, all
dividends declared upon the Series D Preferred Stock and any other
series of Preferred Stock ranking on a parity as to dividends with the
Series D Preferred Stock shall be declared pro rata, so that the
amount of dividends declared per share of Series D Preferred Stock and
such other series of Preferred Stock shall in all cases bear to each
other the same ratio that accrued dividends per share on the Series D
Preferred Stock and such other series of Preferred Stock (which shall
not include any accrual in respect of unpaid dividends for prior
dividend periods if such Preferred Stock does not have a cumulative
dividend) bear to each other. No interest shall be payable in respect
of any dividend payment on the Series D Preferred Stock that may be in
arrears. Holders of shares of the Series D Preferred Stock shall not
be entitled to any dividend, whether payable in cash, property, or
stock, in excess of full cumulative dividends on the Series D
Preferred Stock as provided above. Any dividend payment made on shares
of the Series D Preferred Stock shall first be credited against the
earliest accumulated but unpaid dividend due with respect to such
shares that remains payable.
(4) Except as provided in Subparagraph (3) of this Paragraph
(d) of this Item (iv) of this Subsection (c) of this Section 2 of this
Article III, unless full cumulative dividends on the Series D
Preferred Stock have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof is set apart
for payment for all past dividend periods and the then current
dividend period: (i) no dividends (other than in shares of Junior
Stock) shall be declared or paid or set aside for payment nor shall
any other distribution be declared or made upon the Common Stock, or
the Series B Preferred Stock (or any other Preferred Stock ranking
junior to or on a parity with the Series D Preferred
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<PAGE>
Stock as to dividends or upon liquidation); and (ii) no shares of
Common Stock or the Series B Preferred Stock (or any other Preferred
Stock of the Corporation ranking junior to or on a parity with the
Series D Preferred Stock as to dividends or upon liquidation) shall be
redeemed, purchased, or otherwise acquired for any consideration (nor
shall any moneys be paid to or made available for a sinking fund for
the redemption of any such shares) by the Corporation (except by
conversion into or exchange for Junior Stock).
(5) If for any taxable year the Corporation elects to
designate as "capital gains dividends" (as defined in Section 857 of
the Code) any portion (the "Capital Gains Amount") of the dividends
paid or made available for the year to holders of all classes of
Capital Stock (the "Total Dividends"), then the portion of the Capital
Gains Amount that shall be allocable to the holders of Series D
Preferred Stock shall be the amount that the total dividends paid or
made available to the holders of the Series D Preferred Stock for the
year bears to the Total Dividends.
(6) Notwithstanding anything to the contrary set forth
herein, the Corporation may declare and pay a dividend on the Common
Stock, without preserving the priority of distributions described in
Subparagraphs 3 and 4 of this Paragraph (d) of this Item (iii) of this
Subsection (c) of this Section 2 of this Article III, but only to the
extent such dividends are required to preserve the Real Estate
Investment Trust status of the Corporation and to avoid the imposition
of an excise tax on the Corporation.
(e) Subject to the rights of any Senior Stock, upon any voluntary
or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, and before any distribution of assets shall be
made in respect of any Junior Stock, the holders of the Series D
Preferred Stock shall be entitled to be paid out of the assets of the
Corporation legally available for distribution to its shareholders a
liquidation preference of $100 per share in cash (or property having a
fair market value as determined by the Board of Directors valued at
$100 per share), plus an amount equal to any accrued but unpaid
dividends to the date of payment. After payment of the full amount of
the liquidating distributions to which they are entitled, the holders
of Series D Preferred Stock shall have no right or claims to any of
the remaining assets of the Corporation. Neither the consolidation or
merger of the Corporation with or into any other corporation, trust,
or entity (or of any other corporation with or into the Corporation)
nor the sale, lease, or conveyance of all or substantially all of the
property or business of the Corporation shall be deemed to constitute
a liquidation, dissolution or winding up of the Corporation for the
purpose of this Paragraph (e) of this Item (iv).
(f) (1) The Series D Preferred Stock is not redeemable prior to
November 24, 2004. On and after November 24, 2004, the Corporation, at
its option upon not less than 30 nor more than 60 days' written
notice, may redeem shares of the Series D Preferred Stock, in whole or
in part, at any time and from time to time, for a cash redemption
price of $100 per share, plus all accrued and unpaid dividends to the
date fixed for redemption (except as provided below).
(2) The redemption price of the Series D Preferred Stock
(other than the portion thereof consisting of accrued but unpaid
dividends) shall be payable solely out of the sale proceeds of other
"capital stock" of the Corporation. For purposes of the preceding
sentence, the term "capital stock" means any equity securities of the
Corporation (including Common Stock and Preferred Stock), shares,
interest, participation, or other ownership interests (however
designated) and any rights (other than debt securities convertible
into or exchangeable for equity securities) or options to purchase any
of the foregoing. Holders of Series D Preferred Stock to be redeemed
shall surrender such shares
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<PAGE>
at the place designated in the notice of redemption and shall be
entitled to the redemption price and any accrued and unpaid dividends
payable upon such redemption following such surrender. If notice of
redemption has been given and if the Corporation has set aside in
trust the funds necessary for the redemption, then from and after the
redemption date: (i) dividends shall cease to accrue on such shares of
Series D Preferred Stock; (ii) such shares of Series D Preferred Stock
shall no longer be deemed outstanding; and (iii) all rights of the
holders of such shares shall terminate, except the right to receive
the redemption price. If less than all of the outstanding Series D
Preferred Stock is to be redeemed, the Series D Preferred Stock to be
redeemed shall be selected pro rata (as nearly as may be practicable
without creating fractional shares) or by any other equitable method
determined by the Corporation.
(3) Unless full cumulative dividends on all shares of Series
D Preferred Stock shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set
apart for payment, no shares of Series D Preferred Stock shall be
redeemed unless all outstanding shares of Series D Preferred Stock are
simultaneously redeemed, and the Corporation shall not purchase or
otherwise acquire directly or indirectly any shares of Series D
Preferred Stock (except by exchange for Junior Stock); however, the
foregoing shall not prevent the purchase or acquisition of shares of
Series D Preferred Stock pursuant to a purchase or exchange offer made
on the same terms to holders of all outstanding shares of Series D
Preferred Stock.
(4) Notice of redemption shall be given by publication in a
newspaper of general circulation in The City of New York, such
publication to be made once a week for two successive weeks commencing
not less than 30 nor more than 60 days prior to the redemption date. A
similar notice shall be mailed by the Corporation, postage prepaid,
not less than 30 nor more than 60 days prior to the redemption date,
addressed to the respective holders of record of the Series D
Preferred Stock to be redeemed at their respective addresses as they
appear on the stock transfer records of the Corporation. No failure to
give or defect in such notice shall affect the validity of the
proceedings for the redemption of any shares of Series D Preferred
Stock except as to the holder to whom notice was defective or not
given. Each notice shall state: (i) the redemption date; (ii) the
redemption price; (iii) the number of shares of Series D Preferred
Stock to be redeemed; (iv) the place or places where the Series D
Preferred Stock is to be surrendered for payment of the redemption
price; and (v) that dividends on the shares to be redeemed will cease
to accrue on such redemption date. If fewer than all shares of the
Series D Preferred Stock held by any holder are to be redeemed, the
notice mailed to such holder shall also specify the number of shares
of Series D Preferred Stock to be redeemed from such holder.
(5) The holders of Series D Preferred Stock at the close of
business on a Dividend Record Date shall be entitled to receive the
dividend payable with respect to such Series D Preferred Stock on the
corresponding Dividend Payment Date notwithstanding the redemption
thereof between such Dividend Record Date and the corresponding
Dividend Payment Date or the Corporation's default in the payment of
the dividend due. Except as provided above, the Corporation will make
no payment or allowance for unpaid dividends, regardless of whether in
arrears, on called Series D Preferred Stock.
(6) The Series D Preferred Stock has no stated maturity and
no sinking fund shall be required and shall not be subject to
mandatory redemption. The Series D Preferred Stock is not convertible
into any other securities of the Corporation, but is subject to the
Excess Stock (and all other) provisions of this Article III.
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(g) (1) Except as may be required by law or as otherwise
expressly provided in this Item (iv) of this Subsection (c) of this
Section 2 of this Article III, the holders of Series D Preferred Stock
shall not be entitled to vote. On all matters with respect to which
the Series D Preferred Stock is entitled to vote, each share of Series
D Preferred Stock shall be entitled to one vote.
(2) Whenever dividends on the Series D Preferred Stock are
in arrears (which shall, with respect to any quarterly dividend, mean
that any such divided has not been paid in full whether or not earned
or declared) for six or more quarterly periods (whether consecutive or
not), the number of directors then constituting the Board of Directors
shall be increased by two, and the holders of Series D Preferred Stock
(voting separately as a class with all other series of Voting Parity
Preferred) shall have the right to elect two directors of the
Corporation at a special meeting called by the holders of record of at
least 10% of the Series D Preferred Stock or at least 10% of any other
Voting Parity Preferred so in arrears (unless such request is received
less than 90 days before the date fixed for the next annual or special
meeting of the shareholders) or at the next annual meeting of
shareholders, and at each subsequent annual meeting, until all
dividends accumulated on the Series D Preferred Stock for the past
dividend periods and the then current dividend period have been fully
paid or declared and a sum sufficient for the payment of such
dividends has been set aside for payment. If and when all accumulated
dividends and the dividend for the then current dividend period on the
Series D Preferred Stock shall have been paid in full or set aside for
payment in full, the holders of the Series D Preferred Stock shall be
divested of the foregoing voting rights (but subject always to the
same provision for the vesting of such voting rights in the case of
any similar future arrearages in six quarterly dividends), and if all
accumulated dividends and the dividend for the then current period
have been paid in full or set aside for payment in full on all series
of Voting Parity Preferred, the term of office of each director so
elected by the holders of the Series D Preferred Stock and the Voting
Parity Preferred shall terminate.
(3) As long as any shares of Series D Preferred Stock remain
outstanding, the Corporation shall not, without the affirmative vote
or consent of the holders of at least two-thirds of the outstanding
shares of Series D Preferred Stock (voting as a separate class); (i)
authorize or create, or increase the authorized or issued amount of,
any Capital Stock ranking senior to the Series D Preferred Stock with
respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution, or winding up or reclassify any authorized
Capital Stock of the Corporation into or exchangeable for such shares,
or create, authorize, or issue any obligation or security convertible
into or evidencing the right to purchase any such shares; or (ii)
amend, alter, or repeal the provisions of these Amended and Restated
Articles of Incorporation, whether by merger, consolidation or
otherwise (an "Event"), so as to materially and adversely affect any
right, preference, privilege, or voting power of the Series D
Preferred Stock or the holders thereof; however, as long as the Series
D Preferred Stock remains outstanding with its terms materially
unchanged, taking into account that upon the occurrence of an Event,
the Corporation may not be the surviving entity, the occurrence of an
Event described in clause (ii) above of this Subparagraph (3) shall
not be deemed to materially and adversely affect such rights,
preferences, privileges, or voting power of the holders of Series D
Preferred Stock, and (x) any increase in the amount of the authorized
Preferred Stock or the creation or issuance of any other series
of Preferred Stock, or (y) any increase in the amount of authorized
shares of the Series D Preferred Stock or any other series of
Preferred Stock, in the case of either (x) or (y) ranking on a parity
with or junior to the Series D Preferred Stock with respect to payment
of dividends or the distribution of assets upon liquidation,
dissolution, or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges, or voting
powers.
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(4) Notwithstanding the foregoing, the Series D Preferred
Stock shall not be entitled to vote, and the foregoing voting
provisions shall not apply, if at or prior to the time when the act
with respect to which such vote would otherwise be required is
effected, all outstanding shares of the Series D Preferred Stock have
been redeemed or called for redemption, and sufficient funds have been
deposited in trust for the benefit of the holders of the Series D
Preferred Stock to effect such redemption.
(d) Restrictions on Transfer.
(i) Definitions. The following terms shall have the following meanings
for purposes of these Amended and Restated Articles of Incorporation:
"Affiliate" and "Affiliates" mean, (i) with respect to any individual,
any member of such individual's Immediate Family, a Family Trust with
respect to such individual, and any Person (other than an individual) in
which such individual and/or his Affiliate(s) owns, directly or indirectly,
more than 50% of any class of Equity Security or of the aggregate
Beneficial Interest of all beneficial owners, or in which such individual
or his Affiliate is the sole general partner, or is the sole managing
general partner, or which is controlled by such individual and/or his
Affiliates; and (ii) with respect to any Person (other than an individual),
any Person (other than an individual) which controls, is controlled by, or
is under common control with, such Person, and any individual who is the
sole general partner or the sole managing general partner in, or who
controls, such Person. The terms "Affiliated" and "Affiliated with" shall
have the correlative meanings.
"Beneficial Interest" means an interest, whether as partner, joint
venturer, cestui que trust, or otherwise, a contract right, or a legal or
equitable position under or by which the possessor participates in the
economic or other results of the Person (other than an individual) to which
such interest, contract right, or position relates.
"Beneficial Ownership" means ownership of shares of Capital Stock
(including Capital Stock that may be acquired upon conversion of
Debentures) (i) by a Person who owns such shares of Capital Stock in his
own name or is treated as an owner of such shares of Capital Stock
constructively through the application of Section 544 of the Code, as
modified by Sections 856(h)(1)(B) and 856(h)(3)(A) of the Code; or (ii) by
a person who falls within the definition of "Beneficial Owner" under
Section 776(4) of the Act. The terms "Beneficial Owner", "Beneficially
Owns" and "Beneficially Owned" shall have the correlative meanings.
"Capital Stock" means the Common Stock and the Preferred Stock,
including shares of Common Stock and Preferred Stock that have become
Excess Stock.
"Charitable Proceeds" means the amounts due from time to time to the
Designated Charity, consisting of (i) dividends or other distributions,
including capital gain distributions (but not including liquidating
distributions not otherwise within the definition of Excess Liquidation
Proceeds), paid with respect to Excess Stock, (ii) in the case of a sale of
Excess Stock, the excess, if any, of the Net Sales Proceeds over the amount
due to the Purported Transferee as determined under Item (iii)(b) of
Subsection (e) of this Section 2 of this Article III, and (iii) in the case
of any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, the Excess Liquidation Proceeds.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Constructive Ownership" means ownership of shares of Capital Stock
(including
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Capital Stock that may be acquired upon conversion of Debentures) by a
Person who owns such shares of Capital Stock in his own name or would be
treated as an owner of such shares of Capital Stock constructively through
the application of Section 318 of the Code, as modified by Section 856
(d)(5) of the Code. The terms "Constructive Owner", "Constructively Owns"
and "Constructively Owned" shall have the correlative meanings.
"Control(s)" (and its correlative terms "Controlled By" and "Under
Common Control With") means, with respect to any Person (other than an
individual), possession by the applicable Person or Persons of the power,
acting alone (or solely among such applicable Person or Persons, acting
together), to designate and direct or cause the designation and direction
of the management and policies thereof, whether through the ownership of
voting securities, by contract, or otherwise.
"Debentures" means any convertible debentures or other convertible
debt securities issued by the Corporation from time to time.
"Demand" means the written notice to the Purported Transferee
demanding delivery to the Designated Agent of (i) all certificates or other
evidence of ownership of shares of Excess Stock and (ii) Excess Share
Distributions. Any reference to "the date of the Demand" means the date
upon which the Demand is mailed or otherwise transmitted by the
Corporation.
"Designated Agent" means the agent designated by the Board of
Directors, from time to time, to act as attorney-in-fact for the Designated
Charity and to take delivery of certificates or other evidence of ownership
of shares of Excess Stock and Excess Share Distributions from a Purported
Transferee.
"Designated Charity" means any one or more organizations described in
Sections 501(c)(3) and 170(c) of the Code, as may be designated by the
Board of Directors from time to time to receive any Charitable Proceeds.
"Equity Security" has the meaning ascribed to it in the Securities
Exchange Act of 1934, as amended from time to time, and the rules and
regulations thereunder (and any successor laws, rules and regulations of
similar import).
"Excess Liquidation Proceeds" means, with respect to shares of Excess
Stock, the excess, if any, of (i) the amount which would have been due to
the Purported Transferee pursuant to Subsection (a)(ii) of this Section 2
of this Article III with respect to such stock in the case of any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation if
the Transfer had been valid under Item (ii) of this Subsection (d) of this
Section 2 of this Article III, over (ii) the amount due to the Purported
Transferee as determined under Item (iii)(b)(2) of Subsection (e) of this
Section 2 of this Article III.
"Excess Share Distributions" means dividends or other distributions,
including, without limitation, capital gain distributions and liquidating
distributions, paid with respect to shares of Excess Stock.
"Excess Stock" means shares of Common Stock and shares of Preferred
Stock that have been automatically converted to Excess Stock pursuant to
the provisions of Item (iii) of this Subsection (d) of this Section 2 of
this Article III, and which are subject to the provisions of Subsection (e)
of this Section 2 of this Article III.
"Existing Holder" means (i) the General Motors Hourly-Rate Employes
Pension
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Trust, (ii) the General Motors Salaried Employes Pension Trust (such trusts
referred to in (i) or (ii) are hereinafter referred to as "GMPTS"), (iii)
the AT&T Master Pension Trust, (iv) any nominee of the foregoing, and (v)
any Person to whom an Existing Holder transfers Beneficial Interest of
Regular Capital Stock if (x) the result of such transfer would be to cause
the transferee to Beneficially Own shares of Regular Capital Stock in
excess of the greater of the Ownership Limit or any pre-existing Existing
Holder Limit with respect to such transferee (such excess being herein
referred to as the "Excess Amount") and (y) the transferor Existing Holder,
by notice to the Corporation in connection with such transfer, designates
such transferee as a successor Existing Holder (it being understood that,
upon any such transfer, the Existing Holder Limit for the transferor
Existing Holder shall be reduced by the Excess Amount and the then
applicable Ownership Limit or Existing Holder Limit for the transferee
Existing Holder shall be increased by such Excess Amount).
"Existing Holder Limit" (i) for any Existing Holder who is an Existing
Holder by virtue of Clauses (i) and (ii) of the definition thereof means
the greater of (x) 9.9% of the outstanding Capital Stock, reduced (but not
below the Ownership Limit) by any Excess Amount transferred in accordance
with clause (v) of the definition of Existing Holder and (y) 4,365,713
shares of Regular Capital Stock (as adjusted to reflect any increase in the
number of outstanding shares as the result of a stock dividend or any
increase or decrease in the number of outstanding shares resulting from a
stock split or reverse stock split), reduced (but not below the Ownership
Limit) by any Excess Amount transferred in accordance with clause (v) of
the definition of Existing Holder, (ii) for any Existing Holder who is an
Existing Holder by virtue of Clause (iii) of the definition thereof means
the greater of (x) 13.74% of the outstanding Capital Stock, reduced (but
not below the Ownership Limit) by any Excess Amount transferred in
accordance with clause (v) of the definition of Existing Holder and (y)
6,059,080 shares of Regular Capital Stock (as adjusted to reflect any
increase in the number of outstanding shares as the result of a stock
dividend or any increase or decrease in the number of outstanding shares
resulting from a stock split or reverse stock split), reduced (but not
below the Ownership Limit) by any Excess Amount transferred in accordance
with Clause (v) of the definition of Existing Holder, (iii) for any
Existing Holder who is an Existing Holder by virtue of Clause (iv) of the
definition thereof means the percentage of the outstanding Capital Stock or
the number of shares of the outstanding Regular Capital Stock that the
Beneficial Owner for whom the Existing Holder is acting as nominee is
permitted to own under this definition, and (iv) for any Existing Holder
who is an Existing Holder by virtue of Clause (v) of the definition thereof
means the greater of (x) a percentage of the outstanding Capital Stock
equal to the Ownership Limit or pre-existing Existing Holder Limit
applicable to such Person plus the Excess Amount transferred to such Person
pursuant to clause (v) of the definition of Existing Holder and (y) the
number of shares of outstanding Regular Capital Stock equal to the
Ownership Limit or pre-existing Existing Holder Limit applicable to such
Person plus the Excess Amount transferred to such Person pursuant to clause
(v) of the definition of Existing Holder.
"Family Trust" means, with respect to an individual, a trust for the
benefit of such individual or for the benefit of any member or members of
such individual's Immediate Family or for the benefit of such individual
and any member or members of such individual's Immediate Family (for the
purpose of determining whether or not a trust is a Family Trust, the fact
that one or more of the beneficiaries (but not the sole beneficiary) of the
trust includes a Person or Persons, other than a member of such
individual's Immediate Family, entitled to a distribution after the death
of the settlor if he, she, it, or they shall have survived the settlor of
such trust and/or includes an organization or organizations exempt from
federal income taxes pursuant to the provisions of Section 501(a) of the
Code and described in Section 501(c)(3) of the Code, shall be disregarded);
provided, however, that in respect of transfers by way of testamentary or
inter vivos trust, the trustee or trustees shall be solely such individual,
a member or members of such individual's Immediate Family, a responsible
financial institution and/or an attorney that is a member of the bar of any
state in the United States.
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"Immediate Family" means, with respect to a Person, (i) such Person's
spouse (former or then current), (ii) such Person's parents and
grandparents, and (iii) ascendants and descendants (natural or adoptive, of
the whole or half blood) of such Person's parents or of the parents of such
Person's spouse (former or then current).
"Look Through Entity" means any Person that (i) is not an individual
or an organization described in Sections 401(a), 501(c)(17), or 509(a) of
the Code or a portion of a trust permanently set aside or to be used
exclusively for the purposes described in Section 642(c) of the Code or a
corresponding provision of a prior income tax law, and (ii) provides the
Corporation with (a) a written affirmation and undertaking, subject only to
such exceptions as are acceptable to the Corporation in its sole
discretion, that (x) it is not an organization described in Sections
401(a), 501(c)(17) or 509(a) of the Code or a portion of a trust
permanently set aside or to be used exclusively for the purposes described
in Section 642(c) of the Code or a corresponding provision of a prior
income tax law, (y) after the application of the rules for determining
stock ownership, as set forth in Section 544(a) of the Code, as modified by
Sections 856(h)(1)(B) and 856(h)(3)(A) of the Code, no "individual" would
own, Beneficially or Constructively, more than the then-applicable
Ownership Limit, taking into account solely for the purpose of determining
such "individual's" ownership for the purposes of this clause (y) (but not
for determining whether such "individual" is in compliance with the
Ownership Limit for any other purpose) only such "individual's" Beneficial
and Constructive Ownership derived solely from such Person and (z) it does
not Constructively Own 10% or more of the equity of any tenant with respect
to real property from which the Corporation or TRG receives or accrues any
rent from real property, and (b) such other information regarding the
Person that is relevant to the Corporation's qualifications to be taxed as
a REIT as the Corporation may reasonably request.
"Market Price" means, with respect to any class or series of shares of
Regular Capital Stock, the last reported sales price of such class or
series of shares reported on the New York Stock Exchange on the trading day
immediately preceding the relevant date, or if such class or series of
shares of Regular Capital Stock is not then traded on the New York Stock
Exchange, the last reported sales price of such class or series of shares
on the trading day immediately preceding the relevant date as reported on
any exchange or quotation system over which such class or series of shares
may be traded, or if such class or series of shares of Regular Capital
Stock is not then traded over any exchange or quotation system, then the
market price of such class or series of shares on the relevant date as
determined in good faith by the Board of Directors of the Corporation.
"Net Sales Proceeds" means the gross proceeds received by the
Designated Agent upon a sale of Regular Capital Stock that has become
Excess Stock, reduced by (i) all expenses (including, without limitation,
any legal expenses or fees) incurred by the Designated Agent in obtaining
possession of (x) the certificates or other evidence of ownership of the
Regular Capital Stock that had become Excess Stock and (y) any Excess Share
Distributions, and (ii) any expenses incurred in selling or transferring
such shares (including, without limitation, any brokerage fees,
commissions, stock transfer taxes or other transfer fees or expenses).
"Ownership Limit" means 8.23% of the value of the outstanding Capital
Stock of the Corporation.
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"Person" means (a) an individual, corporation, partnership, estate,
trust (including a trust qualified under Section 401(a) or 501(c)(17) of
the Code), a portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity and (b) also includes a group as
that term is used for purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended from time to time, and the rules and
regulations thereunder (and any successor laws, rules and regulations of
similar import).
"Purported Transferee" means, with respect to any purported Transfer
which results in Excess Stock, the purported beneficial transferee for whom
the shares of Regular Capital Stock would have been acquired if such
Transfer had been valid under Item (ii) of this Subsection (d) of this
Section 2 of this Article III.
"Regular Capital Stock" means shares of Common Stock and Preferred
Stock that are not Excess Stock.
"REIT" means a Real Estate Investment Trust defined in Section 856 of
the Code.
"Transfer" means any sale, transfer, gift, assignment, devise or other
disposition of Capital Stock, (including (i) the granting of any option or
entering into any agreement for the sale, transfer or other disposition of
Capital Stock or (ii) the sale, transfer, assignment or other disposition
of any securities or rights convertible into or for Capital Stock), whether
voluntary or involuntary, whether of record or beneficial ownership, and
whether by operation of law or otherwise.
(ii) Restriction on Transfers.
(a) Except as provided in Item (viii) of this Subsection (d) of
this Section 2 of this Article III, no Person (other than an Existing
Holder) shall Beneficially Own or Constructively Own shares of Capital
Stock having an aggregate value in excess of the Ownership Limit, and
No Existing Holder shall Beneficially Own or Constructively Own shares
of Capital Stock in excess of the Existing Holder Limit for such
Existing Holder.
(b) Except as provided in Item (viii) of this Subsection (d) of
this Section 2 of this Article III, any Transfer that, if effective,
would result in any Person (other than an Existing Holder)
Beneficially Owning or Constructively Owning shares of Regular Capital
Stock having an aggregate value in excess of the Ownership Limit shall
be void ab initio as to the Transfer of such shares which would be
otherwise Beneficially Owned or Constructively Owned by such Person in
excess of the Ownership Limit, and the intended transferee shall
acquire no rights in such shares.
(c) Except as provided in Item (viii) of this Subsection (d) of
this Section 2 of this Article III, any Transfer that, if effective,
would result in any Existing Holder Beneficially Owning or
Constructively Owning shares of Regular Capital Stock in excess of the
applicable Existing Holder Limit shall be void ab initio as to the
Transfer of such shares which would be otherwise Beneficially Owned or
Constructively Owned by such Existing Holder in excess of the
applicable Existing Holder Limit, and such Existing Holder shall
acquire no rights in such shares.
(d) Except as provided in Item (viii) of this Subsection (d) of
this Section 2 of this Article III, any Transfer that, if effective,
would result in the Capital Stock being beneficially owned by fewer
than 100 Persons (determined without reference to any rules of
attribution) shall be void ab initio as to the Transfer of such shares
which would be
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otherwise beneficially owned by the transferee, and the intended
transferee shall acquire no rights in such shares.
(e) Any Transfer that, if effective, would result in the
Corporation being "closely held" within the meaning of Section 856(h)
of the Code shall be void ab initio as to the Transfer of the shares
of Regular Capital Stock which would cause the Corporation to be
"closely held" within the meaning of Section 856(h) of the Code, and
the intended transferee shall acquire no rights in such shares.
(f) In determining the shares which any Person Beneficially Owns
(or would Beneficially Own following a purported Transfer) or
Constructively Owns (or would Constructively Own following a purported
Transfer) for purposes of applying the limitations contained in
Paragraphs (a), (b), (c), (d) and (e) of this Item (ii) of this
Subsection (d) of this Article III:
(1) shares of Capital Stock that may be acquired upon
conversion of Debentures Beneficially Owned or Constructively Owned by
such Person, but not shares of Capital Stock issuable upon conversion
of Debentures held by others, are deemed to be outstanding.
(2) a pension trust shall be treated as owning all shares of
Capital Stock (including Capital Stock that may be acquired upon
conversion of Debentures) as are (x) owned in its own name or with
respect to which it is treated as an owner constructively through the
application of Section 544 of the Code as modified by Section
856(h)(1)(B) of the Code but not by Section 856(h)(3)(A) of the Code
and (y) owned by, or treated as owned by, constructively through the
application of Section 544 of the Code as modified by Section
856(h)(1)(B) of the Code but not by Section 856(h)(3)(A) of the Code,
all pension trusts sponsored by the same employer as such pension
trust or sponsored by any of such employer's Affiliates.
Notwithstanding the foregoing, (y) above shall not apply in the case
of either Motors Insurance Corporation and its subsidiaries
(collectively, "MIC") or any pension trusts sponsored by the General
Motors Corporation, a Delaware corporation ("GMC"), or the American
Telephone and Telegraph Company, a New York corporation ("AT&T"), or
by any of their respective Affiliates, provided that with respect to
MIC and each such pension trust sponsored by GMC, AT&T or any of their
respective Affiliates, other than the Existing Holders described in
(i) through (iii) in the definition thereof, all of the following
conditions are met: (i) each such pension trust is administered, and
will continue to be administered, by persons who do not serve in an
administrative or other capacity to any other such pension trust
sponsored by GMC or any Affiliate of GMC or AT&T or any Affiliate of
AT&T, as applicable, including the Existing Holders described in (i)
through (iv) in the definition thereof, (it being understood that the
fact that any two such pension trusts may have in common one or more,
but less than a majority, of the persons having ultimate investment
authority for such pension trusts shall not cause such trusts to be
treated as one Person, provided that they are otherwise separately
administered as hereinbefore described), (ii) day to day investment
decisions with respect to MIC are made by a person or persons
different than the person or persons who make such decisions for the
pension trusts sponsored by GMC or its affiliates, including the
Existing Holders described in (i), (ii) and, in respect of (i) and
(ii), item (iv) in the definition thereof, (although MIC and the
pension trusts sponsored by GMC may have in common the person or
persons with ultimate investment authority for such entities), and the
investment of MIC in the Corporation does not exceed 2% of the value
of the outstanding Capital Stock of the Corporation, (iii) neither MIC
nor any such pension trust acts or will act, in concert with MIC, any
other pension trust sponsored by GMC or any Affiliate of GMC or AT&T
or any
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Affiliate of AT&T, as applicable, including the Existing Holders
described in (i) through (iv) in the definition thereof, with respect
to its investment in the Corporation, and (iv) as from time to time
requested by the Corporation, MIC and each pension trust shall provide
the Corporation with a representation and undertaking in writing to
the foregoing effect.
(3) If there are two or more classes of stock then
outstanding, the total value of the outstanding Capital Stock shall be
allocated among the different classes and series according to the
relative value of each class or series, as determined by reference to
the Market Price per share of each such class or series, using the
date on which the Transfer occurs as the relevant date, or the
effective date of the change in capital structure as the relevant
date, as appropriate.
(g) If any shares are transferred resulting in a violation of the
Ownership Limit or Paragraphs (b), (c), (d) or (e) of this Item (ii)
of this Subsection (d) of this Section 2 of this Article III, such
Transfer shall be valid only with respect to such amount of shares
transferred as does not result in a violation of such limitations, and
such Transfer otherwise shall be null and void ab initio.
(iii) Conversion to Excess Stock.
(a) If, notwithstanding the other provisions contained in this
Article III, at any time there is a purported Transfer or other change
in the capital structure of the Corporation such that any Person
(other than an Existing Holder) would Beneficially Own or any Person
(other than an Existing Holder) would Constructively Own shares of
Regular Capital Stock in excess of the Ownership Limit, or that any
Person who is an Existing Holder would Beneficially Own or any Person
who is an Existing Holder would Constructively Own shares of Regular
Capital Stock in excess of the Existing Holder Limit, then, except as
otherwise provided in Item (viii) of this Subsection (d) of this
Section 2 of this Article III, such shares of Common Stock or
Preferred Stock, or both, in excess of the Ownership Limit or Existing
Holder Limit, as the case may be, (rounded up to the nearest whole
share) shall automatically become Excess Stock. Such conversion shall
be effective as of the close of business on the business day prior to
the date of the Transfer or change in capital structure.
(b) If, notwithstanding the other provisions contained in this
Article III, at any time, there is a purported Transfer or other
change in the capital structure of the Corporation which, if
effective, would cause the Corporation to become "closely held" within
the meaning of Section 856(h) of the Code then the shares of Common
Stock or Preferred Stock, or both, being Transferred which would cause
the Corporation to be "closely held" within the meaning of Section
856(h) of the Code or held by a Person in excess of that Person's
Ownership Limit or Existing Holder Limit, as applicable (rounded up to
the nearest whole share) shall automatically become Excess Stock. Such
conversion shall be effective as of the close of business on the
business day prior to the date of the Transfer or change in capital
structure.
(c) Shares of Excess Stock shall be issued and outstanding stock
of the Corporation. The Purported Transferee shall have no rights in
such shares of Excess Stock except as provided in Subsection (e) of
this Section 2 of this Article III.
(iv) Notice of Restricted Transfer. Any Person who acquires or
attempts to acquire shares in violation of Item (ii) of this Subsection (d)
of this Section 2 of this Article III, or any Person who is a transferee
such that Excess Stock results under Item (iii) of this Subsection (d) of
this Section 2 of this Article III, shall immediately give written notice
to the Corporation of such event
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and shall provide to the Corporation such other information as the
Corporation may request regarding such Person's ownership of Capital Stock.
(v) Owners Required to Provide Information.
(a) Every Beneficial Owner of more than 5% (or such other
percentage, as provided in the applicable regulations adopted under
Sections 856 through 859 of the Code) of the outstanding shares of the
Capital Stock of the Corporation shall, within 30 days after January 1
of each year, give written notice to the Corporation stating the name
and address of such Beneficial Owner, the number of shares
Beneficially Owned and Constructively Owned, and a full description of
how such shares are held. Every Beneficial Owner shall, upon demand by
the Corporation, disclose to the Corporation in writing such
additional information with respect to the Beneficial Ownership and
Constructive Ownership of the Capital Stock as the Board of Directors
deems appropriate or necessary (i) to comply with the provisions of
the Code, regarding the qualification of the Corporation as a REIT
under the Code, and (ii) to ensure compliance with the Ownership Limit
or the Existing Holder Limit.
(b) Any Person who is a Beneficial Owner or Constructive Owner of
shares of Capital Stock and any Person (including the shareholder of
record) who is holding Capital Stock for a Beneficial Owner or
Constructive Owner, and any proposed transferee of shares, upon the
determination by the Board of Directors to be reasonably necessary to
protect the status of the Corporation as a REIT under the Code, shall
provide a statement or affidavit to the Corporation, setting forth the
number of shares of Capital Stock already Beneficially Owned or
Constructively Owned by such shareholder or proposed transferee and
any related person specified, which statement or affidavit shall be in
the form prescribed by the Corporation for that purpose.
(vi) Remedies Not Limited. Subject to Subsection (h) of this Section 2
of this Article III, nothing contained in this Article III shall limit the
authority of the Board of Directors to take such other action as it deems
necessary or advisable (i) to protect the Corporation and the interests of
its shareholders in the preservation of the Corporation's status as a REIT,
and (ii) to insure compliance with the Ownership Limit and the Existing
Holder Limit.
(vii) Determination. Any question regarding the application of any of
the provisions of this Subsection (d) of this Section 2 of this Article
III, including any definition contained in Item (i) of this Subsection (d)
of this Section 2 of this Article III, shall be determined or resolved by
the Board of Directors and any such determination or resolution shall be
final and binding on the Corporation, its shareholders, and all parties in
interest.
(viii) Exceptions. The Board of Directors, upon advice from, or an
opinion from, Counsel, may exempt a Person from the Ownership Limit if such
Person is a Look Through Entity, provided, however, in no event may any
such exception cause such Person's ownership, direct or indirect (without
taking into account such Person's ownership of interests in TRG), to exceed
9.9% of the value of the outstanding Capital Stock.
For a period of 90 days following the purchase of Regular Capital
Stock by an underwriter that (i) is a Look Through Entity and (ii)
participates in a public offering of the Regular Capital Stock, such
underwriter shall not be subject to the Ownership Limit with respect to the
Regular Capital Stock purchased by it as a part of such public offering.
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(e) Excess Stock.
(i) Surrender of Excess Stock to Designated Agent. Within thirty
business days of the date upon which the Corporation determines that shares
have become Excess Stock, the Corporation, by written notice to the
Purported Transferee, shall demand that any certificate or other evidence
of ownership of the shares of Excess Stock be immediately surrendered to
the Designated Agent (the "Demand").
(ii) Excess Share Distributions. The Designated Agent shall be
entitled to receive all Excess Share Distributions. The Purported
Transferee of Regular Capital Stock that has become Excess Stock shall not
be entitled to any dividends or other distributions, including, without
limitation, capital gain distributions, with respect to the Excess Stock.
Any Excess Share Distributions paid to a Purported Transferee shall be
remitted to the Designated Agent within thirty business days after the date
of the Demand.
(iii) Restrictions on Transfer; Sale of Excess Stock.
(a) Excess Stock shall be transferable by the Designated Agent as
attorney-in-fact for the Designated Charity. Excess Stock shall not be
transferable by the Purported Transferee.
(b) Upon delivery of the certificates or other evidence of
ownership of the shares of Excess Stock to the Designated Agent, the
Designated Agent shall immediately sell such shares in an arms-length
transaction (over the New York Stock Exchange or such other exchange
over which the shares of the applicable class or series of Regular
Capital Stock may then be traded, if practicable), and the Purported
Transferee shall receive from the Net Sales Proceeds, the lesser of:
(1) the Net Sales Proceeds; or
(2) the price per share that such Purported Transferee paid
for the Regular Capital Stock in the purported Transfer that resulted
in the Excess Stock, or if the Purported Transferee did not give value
for such shares (because the Transfer was, for example, through a
gift, devise or other transaction), a price per share equal to the
Market Price determined using the date of the purported Transfer that
resulted in the Excess Stock as the relevant date.
(c) If some or all of the shares of Excess Stock have been sold
prior to receiving the Demand, such sale shall be deemed to been made
for the benefit of and as the agent for the Designated Charity. The
Purported Transferee shall pay to the Designated Agent, within thirty
business days of the date of the Demand, the entire gross proceeds
realized upon such sale. Notwithstanding the preceding sentence, the
Designated Agent may grant written permission to the Purported
Transferee to retain an amount from the gross proceeds equal to the
amount the Purported Transferee would have been entitled to receive
had the Designated Agent sold the shares as provided in Item (iii)(b)
of this Subsection (e) of this Section 2 of this Article III.
(d) The Designated Agent shall promptly pay to the Designated
Charity any Excess Share Distributions recovered by the Designated
Agent and the excess, if any, of the Net Sales Proceeds over the
amount due to the Purported Transferee as provided in Item (iii)(b) of
this Subsection (e) of this Section 2 of this Article III.
(iv) Voting Rights. The Designated Agent shall have the exclusive
right to vote all
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shares of Excess Stock as the attorney-in-fact for the Designated Charity.
The Purported Transferee shall not be entitled to vote such shares (except
as required by applicable law). Notwithstanding the foregoing, votes
erroneously cast by a Prohibited Transferee shall not be invalidated in the
event that the Corporation has already taken irreversible corporate action
to effect a reorganization, merger, sale or dissolution of the Corporation.
(v) Rights Upon Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of, or any distribution
of the assets of the Corporation, a Purported Transferee shall be entitled
to receive the lesser of (i) that amount which would have been due to such
Purported Transferee had the Designated Agent sold the shares of Excess
Stock as provided in Item (iii)(b) of this Subsection (e) of this Section 2
of this Article III and (ii) that amount which would have been due to the
Purported Transferee if the Transfer had been valid under Item (ii) of
Subsection (d) of this Section 2 of this Article III, determined (A) in the
case of Common Stock, pursuant to Subsection (a)(ii) of this Section 2 of
this Article III, and (B) in the case of Preferred Stock, pursuant to the
provisions of these Amended and Restated Articles of Incorporation, amended
as authorized by Section 1 of this Article III, which sets forth the
liquidation rights of such class or series of Preferred Stock. With respect
to shares of Excess Stock, a Purported Transferee shall not have any rights
to share in the assets of the Corporation upon the liquidation, dissolution
or winding up of the Corporation other than the right to receive the amount
determined in the preceding sentence and shall not be entitled to any
preference or priority (as a creditor of the Corporation) over the holders
of the shares of Regular Capital Stock. Any Excess Liquidation Proceeds
shall be paid to the Designated Charity.
(vi) Action by Corporation to Enforce Transfer Restrictions. If the
Purported Transferee fails to deliver the certificates or other evidence of
ownership and all Excess Share Distributions to the Designated Agent within
thirty business days of the date of Demand, the Corporation shall take such
legal action to enforce the provisions of this Article III as may be
permitted under applicable law.
(f) Legend. Each certificate for Capital Stock shall bear the following
legend:
"The Amended and Restated Articles of Incorporation, as the same may
be amended (the "Articles"), impose certain restrictions on the
transfer and ownership of the shares represented by this Certificate
based upon the percentage of the outstanding shares owned by the
shareholder. At no charge, any shareholder may receive a written
statement of the restrictions on transfer and ownership that are
imposed by the Articles."
(g) Severability. If any provision of this Article III or any application
of any such provision is determined to be invalid by any Federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall be affected
only to the extent necessary to comply with the determination of such court.
(h) New York Stock Exchange Settlement. Nothing contained in these Amended
and Restated Articles of Incorporation shall preclude the settlement of any
transaction entered into through the facilities of the New York Stock Exchange
or of any other stock exchange on which shares of the Common Stock or class or
series of Preferred Stock may be listed, or of the Nasdaq National Market (if
the shares are quoted on such Market) and which has conditioned such listing or
quotation on the inclusion in the Corporation's Amended and Restated Articles of
Incorporation of a provision such as this Subsection (h). The fact that the
settlement of any transaction is permitted shall not negate the effect of any
other provision of this Article III and any transferee in such a transaction
shall be subject to all of the provisions and limitations set forth in this
Article III.
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ARTICLE IV
Registered Office and Registered Agent
1. Registered Office.
The address and mailing address of the registered office of the Corporation
is 500 North
Woodward Avenue, Suite 100, Bloomfield Hills, Michigan 48304.
2. Resident Agent.
The resident agent for service of process on the Corporation at the
registered office is Jeffrey H. Miro.
ARTICLE V
Plan of Compromise or Reorganization
When a compromise or arrangement or a plan of reorganization of the
Corporation is proposed between the Corporation and its creditors or any class
of them or between the Corporation and its shareholders or any class of them, a
court of equity jurisdiction within the State of Michigan, on application of the
Corporation or of a creditor or shareholder thereof, or on application of a
receiver appointed for the Corporation, may order a meeting of the creditors or
class of creditors or of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or reorganization, to be
summoned in such manner as the court directs. If a majority in number
representing 75% in value of the creditors or class of creditors, or of the
shareholders or class of shareholders to be affected by the proposed compromise
or arrangement or a reorganization, agree to a compromise or arrangement or a
reorganization of the Corporation as a consequence of the compromise or
arrangement, the compromise or arrangement and the reorganization, if sanctioned
by the court to which the application has been made, shall be binding on all the
creditors or class of creditors, or on all the shareholders or class of
shareholders and also on the Corporation.
ARTICLE VI
Directors
For so long as the Corporation has the right to designate, pursuant to The
Amended and Restated Agreement of Limited Partnership of TRG (as the same may be
amended, the Partnership Agreement"), members of the committee of TRG that have
the power to approve or propose all actions, decisions, determinations,
designations, delegations, directions, appointments, consents, approvals,
selections, and the like to be taken, made or given, with respect to TRG, its
business and its properties as well as the management of all affairs of TRG (the
"Partnership Committee"), the Board of Directors shall consist of, except during
the period of any vacancy between annual meetings of the shareholders, that
number of members as are set forth in the By-Laws of the Corporation of which,
except during the period of any vacancy between annual meetings of the
shareholders, not less than 40% (rounded up to the next whole number) of the
members shall be Independent Directors (as hereinafter defined), and,
thereafter, the Board of Directors shall consist of, except during the period of
any vacancy between annual meetings of the shareholders, that number of members
as are set forth in the By-Laws of the Corporation. For purposes of this Article
VI, "Independent Director" shall mean an individual who is neither one of the
following named persons nor an employee, beneficiary, principal, director,
officer or agent of, or a general partner in, or limited partner (owning in
excess of 5% of the Beneficial Interest) or shareholder (owning in excess of 5%
of the Beneficial Interest) in, any such named Person: (i) for so long as TG
Partners Limited Partnership, a Delaware limited partnership, has the right to
appoint one or more Partnership Committee members, A. Alfred Taubman and any
Affiliate of A. Alfred Taubman or any member of his Immediate Family, (ii) for
so long as Taub-Co Management, Inc., a Michigan corporation (formerly The
Taubman Company, Inc. ("T-Co")) has the right
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to appoint one or more Partnership Committee members, T-Co or an Affiliate of
T-Co, (iii) for so long as a Taubman Transferee (as hereinafter defined) has the
right to appoint one or more Partnership Committee members, a Taubman
Transferee, or an Affiliate of such Taubman Transferee, (iv) for so long as
GMPTS has the right to appoint one or more Partnership Committee members, GMPTS,
General Motors Corporation, or an Affiliate of GMPTS or of General Motors
Corporation, and (v) for so long as a GMPTS Transferee (as hereinafter defined)
has the right to appoint one or more Partnership Committee members, a GMPTS
Transferee or an Affiliate of such GMPTS Transferee. "Taubman Transferee" means
a single Person that acquires, pursuant to Section 8.1(b) or Section 8.3(a) of
The Partnership Agreement, or upon the foreclosure or like action in respect of
a pledge of a partnership interest in TRG, the then (i.e., at the time of such
acquisition) entire partnership interest in TRG (excluding, in the case of an
acquisition pursuant to Section 8.3(a) of the Partnership Agreement or pursuant
to a foreclosure or like action in respect of a pledge of a partnership interest
in TRG, the ability of such Person to act as a substitute partner) of A. Alfred
Taubman, and any Affiliate of A. Alfred Taubman or any member of his Immediate
Family, from one or more such persons or from any Taubman Transferee; provided
that the percentage interest in TRG being transferred exceeds 7.7%. "GMPTS
Transferee" means a single Person that acquires, pursuant to Section 8.1(b) or
Section 8.3(a) of the Partnership Agreement, or upon the foreclosure or like
action in respect of a pledge of a partnership interest in TRG, the then (i.e.,
at the time of such acquisition) entire such partnership interest in TRG
(excluding, in the case of an acquisition pursuant to Section 8.3(a) of the
Partnership Agreement or pursuant to a foreclosure or like action in respect of
a pledge of partnership interests in TRG, the ability of such Person to act as a
substitute partner) of GMPTS or of any GMPTS Transferee; provided that the
percentage interest in TRG being transferred exceeds 7.7%.
For so long as the Corporation has the right to designate, pursuant to the
Partnership Agreement, any members of the Partnership Committee, the affirmative
vote of both a majority of the Independent Directors who do not have a
beneficial financial interest in the action before the Board of Directors and a
majority of all members of the Board of Directors who do not have a beneficial
financial interest in the action before the Board of Directors is required for
the approval of all actions to be taken by the Board of Directors; provided,
however, the Corporation may not appoint to the Partnership Committee as a
Corporation appointee an individual who does not satisfy the definition of
Independent Director in one or more respects without the affirmative vote of all
of the Independent Directors then in office. Thereafter, the affirmative vote of
a majority of all members of the Board of Directors who do not have a beneficial
financial interest in the action before the Board of Directors is required for
the approval of all actions to be taken by the Board of Directors. The
establishment of reasonable compensation of Directors for services to the
Corporation as Directors or officers shall not constitute action in which any
Director has a beneficial financial interest.
Subject to the foregoing, a Director shall be deemed and considered in all
respects and for all purposes to be a Director of the Corporation, including,
without limitation, having the authority to vote or act on all matters,
including, without limitation, matters submitted to a vote at any meeting of the
Board of Directors or at any meeting of a committee of the Board of Directors,
and the application to such Director of Articles VII and VIII of these Amended
and Restated Articles of Incorporation, notwithstanding a Purported Transferee's
unauthorized exercise of voting rights with respect to such Director's election.
ARTICLE VII
Limited Liability of Directors
No director of the Corporation shall be liable to the Corporation or its
shareholders for monetary damages for a breach of the director's fiduciary duty;
provided, however, the foregoing provision shall not be deemed to limit a
director's liability to the Corporation or its shareholders resulting from:
(i) a breach of the director's duty of loyalty to the Corporation or
its shareholders;
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(ii) acts or omissions of the director not in good faith or which
involve intentional misconduct or knowing violation of law;
(iii)a violation of Section 551(1) of the Act or;
(iv) a transaction from which the director derived an improper
personal benefit.
ARTICLE VIII
Indemnification of Officers, Directors, Etc.
1. Indemnification of Directors.
The Corporation shall and does hereby indemnify a person (including the
heirs, executors, and administrators of such person) who is or was a party to,
or who is threatened to be made a party to, a threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal, including, without limitation, an
action by or in the right of the Corporation, by reason of the fact that he or
she is or was a director of the Corporation, or is or was serving at the request
of the Corporation as a director (or in a similar capacity, including serving as
a member of the Partnership Committee and of any other committee of TRG) or in
any other representative capacity of another foreign or domestic corporation or
of or with respect to any other entity (including TRG), whether for profit or
not, against expenses, attorneys' fees, judgments, penalties, fines, and amounts
paid in settlement actually and reasonably incurred by him or her in connection
with the action, suit, or proceeding. This Section 1 of this Article VIII is
intended to grant the persons herein described with the fullest protection not
prohibited by existing law in effect as of the date of filing this Amended and
Restated Articles of Incorporation or such greater protection as may be
permitted or not prohibited under succeeding provisions of law.
2. Indemnification of Officers, Etc.
The Corporation has the power to indemnify a person (including the heirs,
executors, and administrators of such person) who is or was a party to, or who
is threatened to be made a party to, a threatened, pending, or contemplated
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal, including an action by or in the
right of the Corporation, by reason of the fact that he or she is or was an
officer, employee, or agent of the Corporation or is or was serving at the
request of the Corporation as an officer, partner, trustee, employee, or agent
of another foreign or domestic corporation, partnership (including TRG), joint
venture, trust or other enterprise, whether for profit or not, against expenses,
including attorneys' fees, judgments, penalties, fines, and amounts paid in
settlement actually and reasonably incurred by him or her in connection with the
action, suit, or proceeding, if the person acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Corporation or its shareholders, and with respect to a criminal action or
proceeding, if the person had no reasonable cause to believe his or her conduct
was unlawful. Unless ordered by a court, an indemnification under this Section 2
of this Article VIII shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the officer,
employee, or agent is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in this Section 2 of this Article VIII.
3. Advancement of Expenses.
The Corporation shall pay the expenses incurred by a person described
in Section 1 of this Article VIII in defending a civil or criminal action, suit,
or proceeding described in such Section 1 in advance of the final disposition of
the action, suit, or proceeding. The Corporation shall pay the expenses incurred
by a person described in Section 2 of this Article VIII in defending a civil or
criminal action, suit, or proceeding described in such Section 2 in advance of
the final disposition of the action, suit, or proceeding upon receipt
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of an undertaking by or on behalf of such person to repay the expenses if it is
ultimately determined that the person is not entitled to be indemnified by the
Corporation. Such undertaking shall be by unlimited general obligation of the
person on whose behalf advances are made but need not be secured.
Signed and certified as a true and complete composite as of the 24th day of
March, 2000.
/s/ ROBERT S. TAUBMAN
-----------------------
Robert S. Taubman
President and Chief Executive Officer
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PRIVATE PLACEMENT PURCHASE AGREEMENT
GS-MSD Select Sponsors, L.P.
c/o Goldman, Sachs & Co.
One New York Plaza
New York, New York 10004
Attention:
Ladies and Gentlemen:
1. Certain Representations; Opinions of Counsel
(a) The Taubman Realty Group Limited Partnership (the "Company") and
Taubman Centers, Inc., the managing general partner of the Company
("TCO"), represent and warrant to the undersigned ("Subscriber") as
follows:
(i) TCO has made with the Securities Exchange Commission ("SEC") all
filings required to be made by it (the "SEC Reports"). Since
September 30, 1998, the Company has not been, and is not,
required to file any reports with the SEC. The SEC Reports were
prepared and filed in compliance with the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or the Securities Act
of 1933, as amended (the "Securities Act"), as applicable, and
the rules and regulations promulgated by the SEC thereunder, and
did not, as of their respective dates, contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not
misleading. The financial statements and the interim financial
statements of TCO included in the SEC Reports were prepared in
accordance with generally accepted accounting principles (except
as may be indicated in the notes thereto) and fairly presented
the financial condition and results of operations of TCO and its
subsidiaries as at the dates thereof and for the periods then
ended, subject, in the case of the interim financial statements,
to normal year-end adjustments and any other adjustments
described therein;
(ii) there has been no material adverse change in or affecting the
business, assets or financial condition of the Company since the
most recent such filing;
(iii)the Company and TCO have all requisite corporate and limited
partnership authority and power to execute and deliver this
Private Placement Purchase Agreement, the Registration Agreement
(as hereinafter defined), the Certificate with Respect to Tax
Matters of even date herewith executed
<PAGE>
and delivered by the Company, and the Designation, Distribution,
Redemption, Exchange, and Consent Provisions with Respect to the
9% Series D Cumulative Redeemable Preferred Equity of the Company
(collectively, the "Transaction Documents") and to consummate the
transactions contemplated thereby. The execution and delivery of
the Transaction Documents and the consummation of the
transactions contemplated thereby have been duly and validly
authorized by all requisite corporate or limited partnership
action on the part of the Company and TCO, and no other
proceedings on the part of the Company or TCO are necessary to
authorize the Transaction Documents or to consummate the
transactions contemplated hereby. The Transaction Documents have
been duly and validly executed and delivered by the Company and
TCO. The Transaction Documents constitute valid and binding
obligations of the Company and TCO, enforceable in accordance
with their terms;
(iv) neither the execution, delivery nor performance of the
Transaction Documents by the Company or TCO will conflict with,
result in a default, right to accelerate or loss of rights under,
or result in the creation of any lien, charge or encumbrance
pursuant to, any provision of the Company's or TCO's
organizational documents or any franchise, mortgage, deed of
trust, lease, license, agreement, understanding, law, rule or
regulation or any order, judgement or decree to which the Company
or TCO is a party or by which the Company or TCO may be bound or
affected;
(v) the 1998 financial statements of the Company and TCO, including
the notes thereto, and supporting schedules have been prepared in
conformity with GAAP applied on a consistent basis (except as
otherwise noted therein) and present fairly the financial
position of the Company and TCO as of the dates indicated and the
results of its operations for the periods shown;
(vi) there is no action, suit, proceeding or investigation pending or,
to the Company's or TCO's knowledge, currently threatened against
the Company or TCO that questions the validity of any of the
Transaction Documents or the issuance of Parity Preferred Equity
(as defined below), or the right of the Company or TCO to enter
into any of the Transaction Documents or to consummate the
transactions contemplated thereby or that could reasonably be
expected to interfere with the ability of the Company or TCO to
perform their obligations thereunder;
(vii)the Equity (as defined below) when issued, sold and delivered by
the Company, shall be duly and validly issued and outstanding,
fully paid, and non-assessable and will be free of any liens,
claims, security interests, encumbrances, restrictions or rights
of third parties of any kind
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(collectively, "Encumbrances"). The Shares (as defined below)
when issued in redemption of the Equity, shall be duly and valued
issued and outstanding, fully paid, and non-assessable and will
be free of any Encumbrances;
(viii) a true and complete copy of the Company's Partnership Agreement
is set forth as Exhibit A hereto. There are no interests in the
Company authorized, issued or outstanding that rank senior to, or
on a parity with, the Equity with respect to liquidation, winding
up, dividends or distributions other than the Series A Preferred
Equity and Series C Preferred Equity. There are no equity
interests in TCO authorized, issued or outstanding that rank
senior to, or on a parity with, the Shares with respect to
liquidation, winding up, dividends or distributions other than
the Series A Preferred Stock of TCO, the Series B Preferred Stock
of TCO and the Series C Preferred Stock of TCO, and TCO will not
authorize, create or issue any such senior equity interests
without the prior written consent of Subscriber; and
(ix) the foregoing representations and warranties will continue to be
true and correct on the Closing Date (as defined below).
(b) The Company will make the tax and securities representations set forth
on Exhibit B on the Closing Date.
(c) Counsel to the Company and TCO is concurrently herewith rendering an
opinion to Subscriber attached hereto as Exhibit C.
2. Sale of Equity
(a) The Company hereby agrees to sell to Subscriber, and Subscriber hereby
agrees to purchase from the Company, $25,000,000 of Series D Preferred
Equity of the Company (the "Equity"). The purchase price of the Equity
is $25,000,000, and is payable in cash at the Closing (as defined
below).
(b) The sale and purchase of the Equity (the "Closing") shall take place
at the offices of Subscriber on November 24, 1999 (the "Closing
Date").
(c) On the Closing Date, Subscriber shall, if the condition set forth in
Section 2(d) below is satisfied on the Closing Date, pay to the
Company by wire transfer of immediately available funds the purchase
price of the Equity purchased by such Subscriber, against delivery to
the Subscriber of each of the documents set forth on Schedule A
attached hereto.
(d) It shall be a condition to the Closing that the Company's and TCO's
representations and warranties hereunder then continue to be true and
correct.
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3. Registration
(a) TCO will file a registration statement with respect to the Series D
Preferred Stock to be issued to the Company upon exchange of the
Equity (the "Shares"), into such shares, in accordance with the
Registration Rights Agreement attached hereto as Exhibit D (the
"Registration Agreement") which is being executed and delivered
simultaneously herewith.
4. Covenants of the Company and TCO
(a) No later than June 30, 2000, TCO shall amend its Restated Articles of
Incorporation so that TCO will have the authority to issue additional
shares of preferred stock. Simultaneously therewith, TCO shall amend
its series designation creating the Series D Preferred Stock to
increase the number of shares of Series D Preferred Stock constituting
the series to an amount not less than 250,000 shares. Thereafter,
subject to the Second Amendment and Restatement of Agreement of
Limited Partnership of the Company, as amended, including the
Designation, Redemption, Exchange, and Voting Provisions with Respect
to the Series D Preferred Equity (the "Partnership Agreement"), the
holders of the Equity will be able to convert $100 in liquidation
value of the Equity for one share of Series D Preferred Stock, it
being understood that the aggregate amount in liquidation value of the
equity shall remain $25,000,000.
5. Subscriber's Representations.
(a) Subscriber represents and warrants that it is purchasing the Equity
solely for investment solely for its own account and not with a view
to or for the resale or distribution thereof except as permitted under
the Registration Agreement or as otherwise permitted under applicable
law, including the Securities Act of 1933, as amended (the "Securities
Act").
(b) Subscriber understands that it may sell or otherwise transfer the
Equity or the shares issuable on conversion of the Equity only if such
transaction is duly registered under the Securities Act, or if
Subscriber shall have received the favorable opinion of counsel to
Subscriber, which opinion shall be reasonably satisfactory to counsel
to the Company, to the effect that such sale or other transfer may be
made in the absence of registration under the Securities Act, and
registration or qualification in every applicable state. Subscriber
realizes that the Equity is not a liquid investment. Subscriber has
the knowledge and experience to evaluate the Company and the risks and
merits relating thereto.
(c) Subscriber represents and warrants that Subscriber is an "accredited
investor" as such term is defined in Rule 501 of the Regulation D
promulgated pursuant to the Securities Act, and shall be such on the
date any Equity is issued to Subscriber;
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Subscriber acknowledges that Subscriber is able to bear the economic
risk of losing Subscriber's entire investment in the Equity and
understands that an investment in the Company involves substantial
risks; Subscriber has the power and authority to enter into this
Agreement, and the execution and delivery of, and performance under
this Agreement, shall not conflict with any rule, regulation,
judgement or agreement applicable to Subscriber. Subscriber has had
the opportunity to discuss the Company's affairs with the Company's
officers.
(d) Subscriber represents and warrants that it was not formed with a
principal purpose of permitting the Company to satisfy the 100 partner
limitation of Treas. Reg. ss. 1.7704.1(h)(1)(ii).
6. Execution of Partnership Agreement
By executing this Private Placement Purchase Agreement, Subscriber agrees
to be bound by and subject to the terms of the Partnership Agreement as if
a signatory thereto.
7. Miscellaneous
This Agreement may not be changed or terminated except by written agreement
of both parties. It shall be binding on the parties and on their permitted
assigns. It sets forth all agreements of the parties, and may be signed in
counterparts.
This Agreement shall be governed by, and construed in accordance with, the
laws of New York without regard to conflicts of law principles thereof. The
federal and state courts sitting in New York, New York shall have exclusive
jurisdiction over all matters relating to this Agreement.
All notices, requests, service of process, consents, and other
communications under this Agreement shall be in writing and shall be deemed
to have been delivered (i) on the date personally delivered or (ii) one day
after properly sent by recognized overnight courier, addressed to the
respective parties at their address set forth in this Agreement or (iii) on
the day transmitted by facsimile so long as a confirmation copy is
simultaneously forwarded by recognized overnight courier, in each case
addressed to the respective parties at their address set forth in this
Agreement. Either party hereto may designate a different address by
providing written notice of such new address to the other party hereto as
provided above.
Dated: November 24, 1999
5
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THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
By: /s/ Robert S. Taubman
Name: Robert S. Taubman
Title: Authorized Signatory
TAUBMAN CENTERS, INC.
By: /s/ Robert S. Taubman
Name: Robert S. Taubman
Title: President and
SUBSCRIBER Chief Executive Officer
GS-MSD Select Sponsors, L.P.
By: GS-MSD 1999 exchange Advisors, l.L.C.
By: /s/ Elizabeth Groves
-------------------------
Elizabeth Groves
Authorized Person
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of November 24, 1999 by and between Taubman Centers, Inc., a
Michigan corporation (the "Company"), and GS-MSD Select Sponsors, L.P., a
Delaware limited partnership ("Holder").
WHEREAS, Holder is receiving on the date hereof Series D Preferred
Equity (the "Equity") in The Taubman Realty Group Limited Partnership, a
Delaware limited partnership (the "Partnership");
WHEREAS, in connection therewith, the Company has agreed to grant to
Holder the Registration Rights (as defined in Section 1 hereof);
NOW, THEREFORE, the parties hereto, in consideration of the foregoing
and the mutual covenants and agreements hereinafter set forth, hereby agree as
follows:
SECTION 1. REGISTRATION RIGHTS
If Holder receives 9% Series D Cumulative Redeemable Preferred Stock of
the Company (the "Preferred Stock") upon exchange of the Equity (the "Exchange
Shares") pursuant to the terms of the Amended and Restated Agreement of Limited
Partnership of the Partnership, as the same has been and may be amended from
time to time (the "Partnership Agreement"), then unless such Exchange Shares are
issued to Holder pursuant to an Issuer Registration Statement as provided in
Section 2 below, Holder shall be entitled to offer for sale pursuant to a shelf
registration statement, the Exchange Shares, subject to the terms and conditions
set forth in Section 3 hereof (the "Registration Rights").
SECTION 2. ISSUER REGISTRATION STATEMENT
Anything contained herein to the contrary notwithstanding, in the event
that the Exchange Shares are issued by the Company to Holder pursuant to an
effective registration statement (an "Issuer Registration Statement") filed with
the Securities and Exchange Commission (the "Commission"), the Company shall be
deemed to have satisfied all of its registration obligations under this
Agreement.
SECTION 3. DEMAND REGISTRATION RIGHTS
3.1 (a) Registration Procedure. Unless such Exchange Shares are issued
pursuant to an Issuer Registration Statement as provided in Section 2 hereof,
then subject to Sections 3.1(c) and 3.2 hereof, if Holder desires to exercise
its Registration Rights with respect to the Exchange Shares, Holder shall
deliver to the Company a written notice (a "Registration Notice") informing the
Company of such exercise and specifying the number of shares to be offered by
such Holder (such shares to be offered being referred to herein as the
"Registrable Securities"). Such notice may be given at any time on or after the
date a notice of exchange is delivered by Holder to the Partnership pursuant to
the Partnership Agreement, but must be given at least fifteen (15) Business Days
prior to the anticipated consummation of the sale of Registrable Securities,
which consummation shall in any event
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be subject to an effective Shelf Registration Statement (as hereinafter defined)
or an effective New Registration Statement (as hereinafter defined). As used in
this Agreement, a "Business Day" is any Monday, Tuesday, Wednesday, Thursday or
Friday other than a day on which banks and other financial institutions are
authorized or required to be closed for business in the State of New York or
Michigan. Upon receipt of the Registration Notice, the Company, if it has not
already caused the Registrable Securities to be included as part of an existing
shelf registration statement (prior to the filing of which the Company shall
have given ten (10) Business Days notice to Holder) and related prospectus that
the Company than has on file with the Commission (the "Shelf Registration
Statement") (in which event the Company shall be deemed to have satisfied its
registration obligation under this Section 3), will cause to be filed with the
Commission as soon as reasonably practicable after receiving the Registration
Notice a new registration statement and related prospectus (a "New Registration
Statement") that complies as to form in all material respects with applicable
Commission rules providing for the sale by Holder of the Registrable Securities,
and agrees (subject to Section 3.2 hereof) to use its best efforts to cause such
New Registration Statement to be declared effective by the Commission as soon as
practicable. (As used herein, "Registration Statement" and "Prospectus" refer to
the Shelf Registration Statement and related prospectus (including any
preliminary prospectus) or the New Registration Statement and related prospectus
(including any preliminary prospectus), whichever is utilized by the Company to
satisfy Holder's Registration Rights pursuant to this Section 3, including in
each case any documents incorporated therein by reference.) Holder agrees to
provide in a timely manner information regarding the proposed distribution by
Holder of the Registrable Securities and such other information reasonably
requested by the Company in connection with the preparation of and for inclusion
in the Registration Statement. The Company agrees (subject to Section 3.2
hereof) to use its best efforts to keep the Registration Statement effective
(including the preparation and filing of any amendments and supplements
necessary for that purpose) until the earlier of (i) the date on which Holder
consummates the sale of all of the Registrable Securities registered under the
Registration Statement, or (ii) the date on which all of the Registrable
Securities are eligible for sale pursuant to Rule 144(k) (or any successor
provision) or in a single transaction pursuant to Rule 144(e) (or any successor
provision) under the Securities Act of 1933, as amended (the "Act"), provided,
that except with respect to any Shelf Registration, such period need to extend
beyond nine months after the effective date of the Registration Statement; and
provided further, that with respect to any Shelf Registration, such period need
not extend beyond the time period provided in this Section 3.1(a), and which
periods, in any event, shall terminate when all the Exchange Shares covered by
such Registration Statement have been sold (but not before the expiration of the
time period provided in Section 4(3) of the Act and Rule 174 thereunder, if
applicable). The Company agrees to provide to Holder a reasonable number of
copies of the final Prospectus and any amendments or supplements thereto.
Notwithstanding the foregoing, the Company may at any time, in its sole
discretion and prior to receiving any Registration Notice from Holder, include
all of Holder's Exchange Shares or any portion thereof in any Shelf Registration
Statement. In connection with any Registration Statement utilized by the Company
to satisfy Holder Registration Rights pursuant to this Section 3, Holder agrees
that it will respond within ten (10) Business Days to any request by the Company
to provide or verify information regarding Holder or Holder's Registrable
Securities as may be required to be included in such Registration Statement
pursuant to the rules and regulations of the Commission.
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<PAGE>
(b) Offers and Sales. All offers and sales by Holder under the
Registration Statement referred to in this Section 3 shall be completed within
the period during which the Registration Statement is required to remain
effective pursuant to Section 3.1(a) of this Section 3, and upon expiration of
such period Holder will not offer or sell any Registrable Securities under the
Registration Statement. If directed by the Company, Holder will return all
undistributed copies of the Prospectus in its possession upon the expiration of
such period.
(c) Limitations on Registration Rights. Each exercise of a Registration
Right shall be with respect to a minimum of the lesser of (i) one hundred twenty
five thousand (125,000) shares of Preferred Stock or (ii) the total number of
Exchange Shares held by Holder at such time plus the number of Exchange Shares
that may be issued upon exchange of the Equity by Holder. The right of Holder to
deliver a Registration Notice commences upon the first date Holder is permitted
to exchange the Equity pursuant to the Partnership Agreement and Holder's
acceptance of Partnership Agreement pursuant to that certain Private Placement
Purchase Agreement of even date herewith between Holder and the Partnership. The
right of Holder to deliver a Registration Notice shall expire on the date on
which all of the Exchange Shares held by Holder or issuable upon exchange of the
Equity held by Holder are eligible for sale pursuant to Rule 144(k) (or any
successor provision) under the Act. The Registration Rights granted pursuant to
this Section 3.1 may be exercised in connection with an underwritten public
offering provided that the Company shall have the right to select the
Underwriter or Underwriters in connection with such public offering, which shall
be subject to the reasonable approval of Holder.
3.2 Suspension of Offering. Upon any notice by the Company, either
before or after Holder has delivered a Registration Notice, that a negotiation
or consummation of a transaction by the Company or any of its subsidiaries is
pending or an event has occurred, which negotiation, consummation or event would
require additional disclosure by the Company in a Registration Statement of
material information which the Company has a bona fide business purpose for
keeping confidential and the nondisclosure of which in the Registration
Statement might cause the Registration Statement to fail to comply with
applicable disclosure requirements (a "Materiality Notice"), Holder agrees that
it will immediately discontinue offers and sales of the Registrable Securities
under the Registration Statement until Holder receives copies of a supplemental
or amended Prospectus that corrects the misstatement(s) or omission(s) referred
to above and receives notice that any post-effective amendment has become
effective; provided, that the Company may delay, suspend or withdraw the
Registration Statement for such reason for no more than sixty (60) days after
delivery of the Materiality Notice at any one time but may not do so more than
two times in any twelve month period. If so directed by the Company, Holder will
deliver to the Company all copies of the Prospectus covering the Registrable
Securities current at the time of receipt of any Materiality Notice.
3.3 Qualification. The Company agrees to use its best efforts to
register or qualify the Registrable Securities by the time the applicable
Registration Statement is declared effective by the Commission under all
applicable state securities or "blue sky" laws of such jurisdictions as Holder
shall reasonably request in writing, to keep each such registration or
qualification effective during the period such Registration Statement is
required to be kept effective or during the period offers or sales are being
made by Holder after delivery of a Registration Notice to the Company, whichever
is shorter, and to do any
3
<PAGE>
and all other acts and things which may be reasonably necessary or advisable to
enable Holder to consummate the disposition in each such jurisdiction of the
Registrable Securities owned by Holder; provided, however, that the Company
shall not be required to (x) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in such jurisdiction where it
would not otherwise be required to qualify but for this Section 3.3, (y) subject
itself to taxation in any such jurisdiction, or (z) submit to the general
service of process in any such jurisdiction.
3. 4 Whenever the Company is required to effect the registration of
Exchange Shares under the Securities Act pursuant to Section 3.1 of this
Agreement, subject to Section 3.2 hereof, the Company shall:
(a) prepare and file with the Commission (as soon as reasonably
practical after receiving the Registration Notice, and in any event within 60
days after receipt of such Registration Notice) the requisite Registration
Statement to effect such registration, which Registration Statement shall comply
as to form in all material respects with the requirements of the applicable form
and include all financial statements required by the Commission to be filed
therewith, and the Company shall use its reasonable best efforts to cause such
Registration Statement to become effective; provided, however, that before
filing a Registration Statement or Prospectus or any amendments or supplements
thereto, or comparable statements under securities or blue sky laws of any
jurisdiction, the Company shall (i) provide Holder with an adequate and
appropriate opportunity to participate in the preparation of such Registration
Statement and each Prospectus included therein (and each amendment or supplement
thereto or comparable statement) to be filed with the Commission and (ii) not
file any such Registration Statement or Prospectus (or amendment or supplement
thereto or comparable statement) with the Commission to which Holder's counsel
or any underwriter designated by the Holder and approved by the Company, which
approval shall not be unreasonably withheld (the "Underwriter"), shall have
reasonably objected on the grounds that such filing does not comply in all
material respects with the requirements of the Act or of the rules or
regulations thereunder;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the Prospectus used in connection
therewith as may be necessary (i) to keep such Registration Statement effective
and (ii) to comply with the provisions of the Act with respect to the
disposition of the Redemption Shares covered by such Registration Statement, in
each case until such time as all of such Redemption Shares have been disposed of
in accordance with the intended methods of disposition by the seller(s) thereof
set forth in such Registration Statement; provided, that except with respect to
any Shelf Registration, such period need not extend beyond nine months after the
effective date of the Registration Statement; and provided further, that with
respect to any Shelf Registration, such period need not extend beyond the time
period provided in Section 3.1(a), and which periods, in any event, shall
terminate when all the Redemption Shares covered by such Registration Statement
have been sold (but not before the expiration of the time period referred to in
Section 4(3) of the Act and Rule 174 thereunder, if applicable);
(c) furnish, without charge, to the Holder and each Underwriter, if
any, of the securities covered by such Registration Statement, such number of
copies of such Registration Statement, each amendment and supplement thereto (in
each case including
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all exhibits), and the Prospectus included in such Registration Statement
(including each preliminary Prospectus) in conformity with the requirements of
the Act, and other documents, as the Holder and such Underwriter may reasonably
request in order to facilitate the public sale or other disposition of the
Redemption Shares owned by the Holder;
(d) prior to any public offering of Redemption Shares, use its
reasonable best efforts to register or qualify the Redemption Shares covered by
such Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Holder or the sole or lead managing Underwriter, if any,
may reasonably request to enable the Holder to consummate the disposition in
such jurisdictions of the Redemption Shares owned by the Holder and to continue
such registration or qualification in effect in each such jurisdiction for as
long as such Registration Statement remains in effect (including through new
filings or amendments or renewals), and do any and all other acts and things
which may be necessary or advisable to enable the Holder to consummate the
disposition in such jurisdictions of the Redemption Shares owned by it,
provided, however, that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section, (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(e) promptly notify Holder and the sole or lead managing Underwriter,
if any: (i) when the Registration Statement, any pre-effective amendment, the
Prospectus or any prospectus supplement related thereto or post-effective
amendment to the Registration Statement has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the Commission or any state securities or blue
sky authority for amendments or supplements to the Registration Statement or the
Prospectus related thereto or for additional information, (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration or the initiation or threat of any proceedings for that purpose,
(iv) of the receipt by the Company of any notification with respect to the
suspension of qualification of any Exchange Shares for sale under the securities
or blue sky laws of any jurisdiction or the initiation of any proceeding for
such purpose, (v) of the existence of any fact of which the Company becomes
aware or the happening of any event which results in (A) the Registration
Statement containing an untrue statement of a material fact or omitting to state
a material fact required to be stated therein or necessary to make any
statements therein not misleading, or (B) the Prospectus included in such
Registration Statement containing an untrue statement of a material fact or
omitting to state a material fact required to be stated therein or necessary to
make any statements therein, in the light of the circumstances under which they
were made, not misleading, and (vi) of the Company's reasonable determination
that a post-effective amendment to a Registration Statement would be appropriate
or that there exists circumstances not yet disclosed to the public which make
further sales under such Registration Statement inadvisable pending such
disclosure and post-effective amendment; and, if the notification relates to an
event described in any of the clauses (v) or (vi) of this Section, subject to
Section 3.2, the Company shall promptly prepare a supplement or post-effective
amendment to such Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document, so that
(1) such Registration Statement shall not contain any untrue statement of a
material fact or omit to state a material fact required
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<PAGE>
to be stated therein or necessary to make the statements therein not misleading,
and (2) as thereafter delivered to the purchasers of the Exchange Shares being
sold thereunder, such Prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein in the light of the circumstances under
which they were made not misleading (and shall furnish to Holder and each
Underwriter, if any, a reasonable number of copies of such Prospectus so
supplemented or amended); and if the notification relates to an event described
in clauses (ii) through (iv) of this Section, the Company shall use its
reasonable best efforts to remedy such matters;
(f) make reasonably available for inspection by Holder, any sole or
lead managing Underwriter participating in any disposition pursuant to such
Registration Statement, Holder's counsel and any attorney, accountant or other
agent retained by any such seller or any Underwriter material financial and
other relevant information concerning the business and operations of the Company
and the properties of the Company and any subsidiaries thereof as may be in
existence at such time as shall be necessary, in the reasonable opinion of such
Holder's and such Underwriters' respective counsel, to enable them to conduct a
reasonable investigation within the meaning of the Securities Act, and cause the
Company's and any subsidiaries' officers, directors and employees, and the
independent public accountants of the Company, to supply such information as may
be reasonably requested by any such parties in connection with such Registration
Statement;
(g) obtain an opinion from the Company's counsel and a "cold comfort"
letter from the Company's independent public accountants who have certified the
Company's financial statements included or incorporated by reference in such
Registration Statement in customary form and covering such matters as are
customarily covered by such opinions and "cold comfort" letters delivered to
Underwriters in underwritten public offerings, which opinion and letter shall be
reasonably satisfactory to the sole or lead managing Underwriter, if any, and to
Holder, and furnish to Holder participating in the offering and to each
Underwriter, if any, a copy of such opinion and letter addressed to Holder (in
the case of the opinion) and Underwriter (in the case of the opinion and the
"cold comfort" letter);
(h) in the case of an underwritten offering, make generally available
to its security-holders as soon as practicable, but in any event not later than
eighteen months after the effective date of the Registration Statement (as
defined in Rule 158(c)), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a) of the Act
and the rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(i) use its reasonable best efforts to cause all such Exchange Shares
to be listed (i) on the national securities exchange on which the Company's
common shares are then listed or (ii) if common shares of the Company are not at
the time listed on any national securities exchange (or if the listing of
Exchange Shares is not permitted under the rules of such national securities
exchange on which the Company's common shares are then listed), on another
national securities exchange;
(j) furnish to Holder and the sole or lead managing Underwriter, if
any, without charge, at least one manually signed copy of the Registration
Statement and any post-effective amendments thereto, including financial
statements and schedules, all documents
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incorporated therein by reference and all exhibits (including those deemed to be
incorporated by reference);
(k) if requested by the sole or lead managing Underwriter or Holder of
Exchange Shares, incorporate in a prospectus supplement or post-effective
amendment such information concerning Holder, the Underwriters or the intended
method of distribution as the sole or lead managing Underwriter or Holder
reasonably requests to be included therein and as is appropriate in the
reasonable judgment of the Company, including, without limitation, information
with respect to the number of Exchange Shares being sold to the Underwriters,
the purchase price being paid therefor by such Underwriters and with respect to
any other terms of the underwritten offering of the Exchange Shares to be sold
in such offering; and
(l) use its reasonable best efforts to take all other steps necessary
to expedite or facilitate the registration and disposition of the Exchange
Shares contemplated hereby, including obtaining necessary governmental approvals
and effecting required filings; entering into customary agreements (including
customary underwriting agreements, if the public offering is underwritten);
cooperating with Holder and any Underwriters in connection with any filings
required by the NASD; providing appropriate certificates not bearing restrictive
legends representing the Exchange Shares; and providing a CUSIP number and
maintaining a transfer agent and registrar for the Exchange Shares.
3.5 Indemnification by the Company. The Company agrees to indemnify and
hold harmless Holder and each person, if any, who controls Holder within the
meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment thereto)
pursuant to which the Registrable Securities were registered under the
Act, including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus
(or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating,
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preparing or defending against any litigation, or investigation or
proceeding by any governmental agency or body, commenced or
threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) above;
provided, however, that the indemnity provided pursuant to this Section 3.4 does
not apply with respect to any loss, liability, claim, damage or expense to the
extent arising out of (A) any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with written
information furnished to the Company by Holder expressly for use in the
Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto), or (B) Holder's failure to deliver an amended
or supplemental Prospectus provided to the Holder by the Company if such loss,
liability, claim, damage or expense would not have arisen had such delivery
occurred.
3.6 Indemnification by Holder. Holder (and each permitted assignee of
Holder, on a several basis) agrees to indemnify and hold harmless the Company,
and each of its directors and officers (including each director and officer of
the Company who signed a Registration Statement), and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment thereto)
pursuant to which the Registrable Securities were registered under the
act, including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus
(or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of Holder; and
(iii) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency
or body, commenced or threatened, in each case whether or not a party,
or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) or (ii)
above;
8
<PAGE>
provided, however, that the indemnity provided pursuant to this Section 3.5
shall only apply with respect to any loss, liability, claim, damage or expense
to the extent arising out of (A) any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
written information furnished to the Company by Holder expressly for use in
the Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto), or (B) Holder's failure to deliver an
amended or supplemental Prospectus provided to Holder by the Company if such
loss, liability, claim, damage or expense would not have arisen had such
delivery occurred. Notwithstanding the provisions of this Section 3.6, Holder
and any permitted assignee shall not be required to indemnify the Company, its
officers, directors or control persons with respect to any amount in excess of
the amount of the total proceeds to Holder or such permitted assignee, as the
case may be, from sales of the Registrable Securities of Holder under the
Registration Statement.
3.7 Conduct of Indemnification Proceedings. An indemnified party
hereunder shall give reasonably prompt notice to the indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify the indemnifying party (i) shall not
relieve it from any liability which it may have under the indemnity agreement
provided in Section 3.5 or 3.6 above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the indemnified party
results in the forfeiture by the indemnifying party of substantial rights and
defenses, and (ii) shall not, in any event, relieve the indemnifying party from
any obligations to the indemnified party other than the indemnification
obligation provided under Section 3.5 or 3.6 above. If the indemnifying party so
elects within a reasonable time after receipt of such notice, the indemnifying
party may assume the defense of such action or proceeding at such indemnifying
party's own expense with counsel chosen by the indemnifying party and approved
by the indemnified party, which approval shall not be unreasonably withheld;
provided, however, that the indemnifying party will not settle any such action
or proceeding without the written consent of the indemnified party unless, as a
condition to such settlement, the indemnifying party secures the unconditional
release of the indemnified party; and provided further, that if the indemnified
party reasonably determines that a conflict of interest exists where it is
advisable for the indemnified party to be represented by separate counsel or
that, upon advice of counsel, there may be legal defenses available to it which
are different from or in addition to those available to the indemnifying party,
then the indemnifying party shall not be entitled to assume such defense and the
indemnified party shall be entitled to separate counsel at the indemnifying
party's expense. If the indemnifying party is not entitled to assume the defense
of such action or proceeding as a result of the second proviso to the preceding
sentence, the indemnifying party's counsel shall be entitled to conduct the
indemnifying party's defense and counsel for the indemnified party shall be
entitled to conduct the defense of the indemnified party, it being understood
that both such counsel will cooperate with each other to conduct the defense of
such action or proceeding as efficiently as possible. If the indemnifying party
is not so entitled to assume the defense of such action or does not assume such
defense, after having received the notice referred to in the first sentence of
this paragraph, the indemnifying party will pay the reasonable fees and expenses
of counsel for the indemnified party. In such event, however, the indemnifying
party will not be liable for any settlement effected without the written consent
of the indemnifying party. If an indemnifying party is entitled to assume, and
assumes, the defense of such action or proceeding in accordance with this
paragraph, the indemnifying party shall not be liable for
9
<PAGE>
any fees and expenses of counsel for the indemnified party incurred thereafter
in connection with such action or proceeding.
3.8 Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Sections 3.5 and 3.6 above is for any reason held to be unenforceable by the
indemnified party although applicable in accordance with its terms, the Company
and Holder shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company and Holder, (i) in such proportion as is appropriate to
reflect the relative fault of the Company on the one hand and Holder on the
other, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative fault of but also
the relative benefits to the Company on the one hand and Holder on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits to the indemnifying party and
indemnified party shall be determined by reference to, among other things, the
total proceeds received by the indemnifying party and indemnified party in
connection with the offering to which such losses, claims, damages, liabilities
or expenses relate. The relative fault of the indemnifying party and indemnified
party shall be determined by reference to, among other things, whether the
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, the indemnifying party or the
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 3.8 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 3.8, Holder shall not be required
to contribute any amount in excess of the amount of the total proceeds to Holder
from sales of the Registrable Securities of Holder under the Registration
Statement.
Notwithstanding the foregoing, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 3.8, each person, if any, who
controls Holder within the meaning of Section 15 of the Act shall have the same
rights to contribution as Holder, and each director of the Company, each officer
of the Company who signed a Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act shall have the
same rights to contribution as the Company.
SECTION 4. EXPENSES
The Company shall pay all expenses incident to the performance by the
Company of
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the Company's registration obligations under Sections 2 and 3, including (i) all
stock exchange, Commission and state securities registration, listing and filing
fees, (ii) all expenses incurred in connection with the preparation, printing
and distributing of any Issuer Registration Statement or Registration Statement
and Prospectus, and (iii) fees and disbursements of counsel for the Company and
of the independent public accountants of the Company. Holder shall be
responsible for the payment of any brokerage and sales commissions, fees and
disbursements of Holder's counsel, accountants and other advisors, and any
transfer taxes relating to the sale or disposition of the Registrable Securities
by Holder pursuant to Section 3 or otherwise.
SECTION 5. RULE 144 COMPLIANCE
The Company covenants that it will use its best efforts to timely file
the reports required to be filed by the Company under the Act and the Exchange
Act so as to enable Holder to sell Registrable Securities pursuant to Rule 144
under the Act. In connection with any sale, transfer or other disposition by
Holder of any Registrable Securities pursuant to Rule 144 under the Act, the
Company shall cooperate with Holder to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any Act legend, and enable certificates for such Registrable Securities
to be for such number of shares and registered in such names as Holder may
reasonably request at least ten (10) Business Days prior to any sale of
Registrable Securities hereunder.
SECTION 6. MISCELLANEOUS
6.1 Integration; Amendment. This Agreement constitutes the entire
agreement between the parties hereto with respect to the matters set forth
herein and supersedes and renders of no force and effect all prior oral or
written agreements, commitments and understandings among the parties with
respect to the matters set forth herein. Except as otherwise expressly provided
in this Agreement, no amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by the
Company and Holder.
6.2 Waivers. No waiver by a party hereto shall be effective unless made
in a written instrument duly executed by the party against whom such waiver is
sought to be enforced, and only to the extent set forth in such instrument.
Neither the waiver by any of the parties hereto of a breach or a default under
any of the provisions of this Agreement, nor the failure of any of the parties,
on one or more occasions, to enforce any of the provisions of this Agreement or
to exercise any right or privilege hereunder shall thereafter be construed as a
waiver of any subsequent breach or default of a similar nature, or as a waiver
of any such provisions, rights or privileges hereunder.
6.3 Assignment; Successors and Assigns. This Agreement and the rights
granted hereunder may not be assigned by Holder without the written consent of
the Company, provided, however, that Holder may assign its rights and
obligations hereunder, following at least ten (10) days' prior written notice to
the Company, to the direct equity owners (e.g., partners or members) or
beneficiaries, if, such persons agree in writing to be bound by all of the
provisions hereof. This Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of all of the parties hereto.
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6.4 Notices. All notices called for under this Agreement shall be in
writing and shall be deemed given upon receipt if delivered personally or by
facsimile transmission and followed promptly by mail, or mailed by registered or
certified mail (return receipt requested), postage prepaid, to the parties at
the addresses set forth below their names in the signature page hereto, or to
any other address or addressee as any party entitled to receive notice under
this Agreement shall designate, from time to time, to others in the manner
provided in this Section 6.4 for the service of notices; provided, however, that
notice of a change of address shall be effective only upon receipt thereof. Any
notice delivered to the party hereto to whom it is addressed shall be deemed to
have been given and received on the day it was received; provided, however, that
if such day is not a Business Day then the notice shall be deemed to have been
given and received on the Business Day next following such day and if any party
rejects delivery of any notice attempted to be given hereunder, delivery shall
be deemed given on the date of such rejection. Any notice sent by facsimile
transmission shall be deemed to have been given and received on the Business Day
next following the transmission.
6.5 Specific Performance. The Parties hereto acknowledge that the
obligations undertaken by them hereunder are unique and that there would be no
adequate remedy at law if either party fails to perform any of its obligations
hereunder, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to (i)
compel specific performance of the obligations, covenants and agreements of the
other party under this Agreement in accordance with the terms and conditions of
this Agreement and (ii) obtain preliminary injunctive relief to secure specific
performance and to prevent a breach or contemplated breach of this Agreement in
any court of the United States or any State thereof having jurisdiction.
6.6 Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of Michigan, but not
including the choice of law rules thereof.
6.7 Headings. Section and subsection headings contained in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
6.8 Pronouns. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the person or entity may require.
6.9 Execution in Counterparts. To facilitate execution, this Agreement
may be executed in as many counterparts as may be required. It shall not be
necessary that the signature of or on behalf of each party appears on each
counterpart, but it shall be sufficient that the signature of or on behalf of
each party appears on one or more of the counterparts. All counterparts shall
collectively constitute a single agreement. It shall not be necessary in any
proof of this Agreement to produce or account for more than a number of
counterparts containing the respective signatures of or on behalf of both of the
parties.
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6.10 Severability. If fulfillment of any provision of this Agreement,
at the time such fulfillment shall be due, shall transcend the limit of validity
prescribed by law, then the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision contained in this
Agreement operates or would operate to invalidate this Agreement, in whole or in
part, then such clause or provision only shall be held ineffective, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first herein above
set forth.
TAUBMAN CENTERS, INC.
By:/s/ Robert S. Taubman
------------------------
Name: Robert S. Taubman
Title: President and
Chief Executive Officer
Address: 200 East Long Lake Road
Suite 300
Bloomfield Hills, MI 48304
GS-MSD Select Sponsors,L.P.
By: GS-MSD 1999 Exchange Advisors, L.L.C.
By:/s/ Elizabeth Groves
-----------------------
Elizabeth Groves
Authorized Person
Address: c/o Goldman Sachs & Co.
One New York Plaza
New York, New York 10004
Attn:
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of November 4,
1999 by and between The Taubman Company Limited Partnership, a Delaware limited
partnership (the "Company"), and Courtney Lord ("Lord").
RECITALS
WHEREAS, the Company wishes to employ Lord as Senior Vice President,
and Lord desires to work for the Company in such capacity upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the parties agree as follows:
1. Employment.
The Company shall employ Lord on a full-time basis as a Senior
Vice President. Effective January 1, 2000, Lord's employment title shall change
to Senior Vice President-Managing Director of Leasing. Lord shall also perform
such other leasing management and/or administrative duties consistent with the
office of Senior Vice President as from time to time may be assigned to him by
the President of the Company. Lord shall devote his full time and attention to,
and exert his best efforts in, the performance of his duties hereunder, so as to
promote the business of the Company.
2. Term of Employment.
Lord's term of employment shall commence as of a date mutually
acceptable to the Company and Lord, which shall not be later than November 5,
1999, and continue through January 1, 2005, unless terminated earlier pursuant
to paragraph 5 below (the "Term of Employment").
3. Compensation.
(a) Base Salary. The Company shall pay or cause to be paid to
Lord during the Term of Employment a base salary of not less than $270,000 per
annum, payable in accordance with the Company's payroll practices. The base
salary shall be reviewed each year and subject to normal increases (2% - 3%)
commencing with the March 2001 salary review.
(b) SSTI Bonus. Lord shall participate in the Company's Senior
Short-Term Incentive Plan ("SSTI") and shall have a guaranteed bonus equal to
$195,000 for the years beginning January 1, 2000 and January 1, 2001. Other than
the bonus amount specified in the preceding statement, the SSTI payment shall be
determined in accordance with the terms and conditions of the SSTI.
(c) Long-Term Incentive Compensation. Effective January 1,
2000, Lord shall receive a Participation Grant equal to 10,000 Notional Shares
under The Taubman
<PAGE>
Company Long-Term Performance Compensation Plan (the "LTPC") and a Performance
Grant under the LTPC in an amount, which amount may be zero, determined by the
Company in its discretion. Grants are subject to all of the terms and conditions
(including the vesting schedule) of the LTPC.
(d) Other Benefits. During the Term of Employment, Lord shall
be entitled to participate in any retirement plan or other benefit program of
the Company now existing or established hereafter by the Company, to the extent
that he is eligible under the general provisions thereof. Lord shall also be
entitled to participate in any group insurance, hospitalization, medical, health
and accident, disability, or similar plan or program of the Company now existing
or established hereafter to the extent that he is eligible under the general
provisions thereof.
4. Relocation Expenses.
Lord and the Company agree that Lord shall relocate his
primary family residence to the Detroit metropolitan area no later than
September 1, 2000. The Company shall pay the following expenses in connection
with Lord's relocation:
(a) $50,000 lump sum payment within 30 days of Lord's
employment commencement date.
(b) Monthly rental of $2,550 for Lord's rental apartment
from November 1, 1999 through March 31, 2000.
(c) Roundtrip airfare between Detroit and Aspen for Lord for
three weekends per month from November 1, 1999, until Lord's family relocates to
Detroit, but no later than July 1, 2000.
(d) Roundtrip airfare between Detroit and Aspen for Lord's
family for four separate visits between Lord's employment commencement date and
July 1, 2000.
(e) Cost of moving van to move Lord's household goods from
Aspen to Detroit.
All eligible relocation expenses shall either be paid directly by the
Company, or the Company shall reimburse Lord upon Lord's furnishing the Company
with receipts or such other documentation as the Company requests.
5. Termination of Employment.
(a) Voluntary Termination of Employment by Lord. In the event
Lord terminates his employment with the Company for reasons other than his
death, Disability or a Termination with Good Reason (as such terms are defined
below), such termination shall be deemed a Voluntary Termination. In the event
of a Voluntary Termination by Lord prior to January 1, 2005, the Company shall
have no further obligation to Lord other than the Company's obligation to pay
any amounts that have accrued through the employment termination date. Upon a
Voluntary Termination, the Company shall have the right to
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purchase any Additional Units (as defined below) and an equal number of Series B
Preferred Stock (as defined below) issued to Lord and the capital account
allocated to the Additional Units for a cash lump sum payment of $50,000. The
Taubman Realty Group Limited Partnership ("TRG") acknowledges that the Company
has the right to purchase the Additional Units and the capital account allocated
to the Additional Units. Additional Units means Units of Partnership Interest in
TRG which have no right to receive distributions (except upon liquidation of
TRG) or allocation of partnership income or loss (or items thereto). The number
of Additional Units which the Company has the right to purchase pursuant to
paragraph 5(a), (c), or (e) corresponds to the number of Additional Units on
Lord's employment termination date as listed on the schedule attached hereto as
Exhibit A. Series B Preferred Stock means the Series B Non-Participating
Convertible Preferred Stock of Taubman Centers, Inc.
For purposes of this Agreement, a Termination with Good Reason
shall mean a termination of employment by Lord because of any of the following:
(i) a material reduction in base salary and SSTI bonus
(other than for Cause), or
(ii) a substantial diminution of duties or
responsibilities.
(b) Death or Disability of Lord. In the event Lord's
employment is terminated by reason of his death or disability (as that term is
defined in the LTPC), he shall receive accrued but unpaid base salary through
the employment termination date. Lord shall also receive any benefits otherwise
provided under the Company's plans or programs in accordance with the terms of
such plans or such programs.
(c) Termination by the Company Without Cause on or Prior to
January 31, 2001. If Lord's employment is terminated by the Company without
Cause (as defined below) on or prior to January 31, 2001, Lord shall be entitled
to receive, and the Company shall be obligated to pay 50% of the amounts that
would have been payable to Lord as Base Salary and SSTI Bonus had Lord remained
employed for the duration of the Term of Employment. The Company also shall have
the right to purchase 50% of Lord's Additional Units, an equal number of Series
B Preferred Stock and the capital account allocated to the Additional Units for
a cash lump sum payment of $50,000. TRG acknowledges that the Company has the
right to purchase the Additional Units and the capital account allocated to the
Additional Units. The Base Salary and SSTI Bonus amounts shall be payable as
follows: The Company shall pay Lord 100% of his Base Salary and SSTI Bonus in
accordance with the Company's normal payroll practice during the first twelve
months after Lord's employment termination date. Thereafter, the balance due
(i.e. 50% of Base Salary and SSTI Bonus from employment termination date through
January 1, 2005 minus Base Salary and SSTI already paid pursuant to preceding
sentence) will be payable in a lump sum payment within 30 days after the first
anniversary of Lord's employment termination date.
(d) Termination by the Company Without Cause After January 31,
2001. If Lord's employment is terminated by the Company for any reason other
than cause after January 31, 2001 but prior to January 1, 2005, Lord shall be
entitled to receive and the
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Company shall be obligated to pay the balance of the amounts that would have
been payable to Lord as Base Salary and SSTI Bonus had Lord remained employed
for the duration of the Term of Employment.
(e) Termination by the Company for Cause. The Company may
terminate Lord's employment and this Agreement effective immediately for Cause
(as defined below). If the Company terminates Lord's employment for Cause prior
to January 1, 2005, the Company shall have no further obligation to Lord other
than its obligation to pay any amounts that have accrued through the employment
termination date. In the event Lord's employment is terminated for Cause, the
Company shall have the right to purchase Lord's Additional Units, an equal
number of Series B Preferred Stock and the capital account allocated to the
Additional Units for a cash lump sum payment of $50,000. TRG acknowledges that
the Company has the right to purchase the Additional Units and the capital
account allocated to the Additional Units.
(f) Definitions. For purposes of this Agreement, "Cause" means
the willful and continual failure to perform Lord's duties with the Company and
to perform such duties on a full-time basis or Lord's engagement in conduct
(including but not limited to fraud or theft) which has a material adverse
effect on the business affairs of the Company, monetarily or otherwise;
provided, that cause shall have occurred only if it shall have been preceded by
a notice specifying the facts and circumstances claimed to provide a basis for
Cause and Lord shall have been given 30 days from the date of such notice to
cure. For purposes of this Agreement, no act or failure to act on Lord's part
shall be considered "willful" unless done, or omitted to be done, by Lord not in
good faith and without reasonable belief that his action or omission was in the
best interests of the Company.
6. Covenant Not to Compete.
Lord agrees that during the Employment Term he will apply all
of his skill and experience to the business and affairs of the Company. Lord
further agrees that during the Employment Term and for a period of (a) one (1)
year after his employment termination date if he is terminated by the Company
without Cause on or prior to January 31, 2001; (b) two (2) years after his
employment termination date if he is terminated for any reason after January 31,
2001, but prior to January 1, 2005 (provided, however, if the employment
termination date is after January 1, 2004, but before January 1, 2005, Lord's
agreement not to compete will expire on January 31, 2005); and (c) one (1) year
after his employment termination date if his employment is terminated for any
reason on or after January 1, 2005, he shall not, without the prior written
approval of the Company, directly or indirectly hold or acquire an ownership
interest in, or perform any services as a shareholder, director, partner,
member, employee, agent, adviser or consultant or otherwise for any person or
entity, or any affiliate or subsidiary thereof, wherever located, that is
engaged in the business of consulting, brokering or in any manner leasing or
negotiating occupancy, whether by sale, lease or otherwise, in connection with
any traditional regional mall or value regional mall. Such restriction includes,
but is not limited to, employment by a developer and/or owner acting
independently. Lord further agrees that during the Employment Term and for a
period of two (2) years after the later of (a) the date his employment with the
Company terminates for any reason, or (b) the last date
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Lord receives any payment under this Agreement, he shall not, without the prior
written consent of the Company, directly or indirectly contact or solicit
employees of the Company other than on behalf of the Company.
7. Confidentiality Covenant.
During the Term of Employment and at all times thereafter,
Lord shall keep secret and retain in strictest confidence, and shall not use for
his own benefit or the benefit of others except in connection with the business
and affairs of the Company, all Confidential Information and all other
confidential matter relating to the business of the Company learned by him, and
shall not disclose such Confidential Information and other confidential matter
to anyone outside of the Company, either during or after employment, nor may
Lord exploit for his own benefit or the benefit of others any personal
relationships with tenants, employees or contacts of the Company formed
heretofore or hereafter.
For purposes of this Agreement "Confidential Information"
shall mean all information that would normally be deemed to be proprietary
including trade secrets and all information relating to the Company's (or its
affiliate's) research, development, accounting, tenants and tenant lists,
business connections, consultants, advisors and employees, programming and
formatting information, operational methods, marketing plans or strategies,
business acquisition plans, new personnel acquisition plans, designs and design
projects, and all other information of any kind or nature whatsoever, which may
pertain to or be derived from the business operations and affairs of the
Company, now or hereafter existing. Notwithstanding anything herein to the
contrary, the obligations under this paragraph do not apply to any portion of
the Confidential Information which (1) is or becomes public knowledge through no
fault of Lord, (2) is in lawful possession of Lord prior to engagement by
Company, or (3) is disclosed pursuant to the lawful requirement or formal
request of a government agency.
8. Company's Remedies Upon Breach.
In the event Lord breaches the non-compete or confidentiality
covenants, Lord acknowledges that he shall forfeit all rights to any amounts
payable under this Agreement, and that the Company shall have the right to
purchase his Additional Units and capital account allocated to the Additional
Units for $50,000. Lord further acknowledges that the Company shall be entitled
to injunctive relief in addition to any other remedy it may have. Lord further
acknowledges that the Company's remedies upon breach by him of the provisions of
paragraph 6 and 7 hereof will be inadequate. Accordingly, in the event of the
breach or threatened breach by Lord of paragraphs 6 or 7 hereof, the Company
shall be entitled to injunctive relief in addition to any other remedy it may
have.
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9. Notices.
All notices required or contemplated under this Agreement
shall be delivered (a) personally, (b) by next day courier service, or (c) by
certified or registered mail, return receipt requested, addressed as follows (or
to such other address as any party may provide in writing to the other):
If to the Company:
The Taubman Company Limited Partnership
200 East Long Lake Road
Suite 200
Bloomfield Hills, Michigan 48304
Attention: Mr. Robert S. Taubman
with a copy to:
Miro Weiner & Kramer, P.C.
500 North Woodward Avenue
Suite 100
Bloomfield Hills, Michigan 48304
Attention: Ernest J. Weiner, Esq.
If to Lord:
Courtney Lord
517 West North Street
Aspen, Colorado 81611
with a copy to:
Shulman, Rogers, Gandal,
Pordy & Ecker, P.A.
11921 Rockville Pike, Suite 300
Rockville, Maryland 20852-2743
Attention: Lawrence A. Shulman, Esq.
All notices under this Agreement shall be deemed received when
personally delivered, on the first business day after depositing with a next day
courier service, or on the third day after mailing, as the case may be.
10. Prior Agreements.
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This Agreement supersedes and replaces all prior agreements
between the parties and may not be modified orally.
11. Waiver.
The waiver by the Company of a breach by Lord of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by Lord. The waiver by Lord of a breach by the Company of any
provisions of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by the Company.
12. Assigns and Successors.
The rights and obligations of the Company under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of the Company.
13. Construction and Governing Law.
This Agreement shall be construed under the laws of the State
of Michigan (excluding the choice of law rules thereof). Paragraph headings are
for convenience only and shall not be considered a part of the terms and
provisions of the Agreement.
14. Severability.
If any provision of this Agreement as applied to either party
or to any circumstance shall be adjudged by a court of competent jurisdiction to
be void or unenforceable, the same shall in no way affect any other provision of
this Agreement or the validity or enforceability of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and Lord has hereunto set his hand, all
as of the day and year first above written.
WITNESS: THE TAUBMAN COMPANY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: /s/ Robert Taubman
-------------------
/s/ Christopher C. Maeso
- ------------------------
Its: Authorized Signatory
/s/ Ernest J. Weiner
- ---------------------
/s/ Christopher C. Maeso /s/ Courtney Lord
- ------------------------ --------------------
Courtney Lord
/s/ Ernest J. Weiner
- -----------------------
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<PAGE>
With respect to paragraphs 5(a), (c) and (e) only:
WITNESS: THE TAUBMAN COMPANY REALTY GROUP
LIMITED PARTNERSHIP,
a Delaware limited partnership
By: /s/ Robert Taubman
/s/ Christopher C. Maeso --------------------
- ------------------------ Its: Authorized Signatory
/s/ Ernest J. Weiner
- -----------------------
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EXHIBIT A
ADDITIONAL UNITS SCHEDULE
ADDITIONAL
EMPLOYMENT TERMINATION DATE OUTSTANDING UNITS
Prior to January 1, 2000 435,148
After January 1, 2000 but prior to January 1, 2001 348,118
After January 1, 2001 but prior to January 1, 2002 261,088
After January 1, 2002 but prior to January 1, 2003 174,058
After January 1, 2003 but prior to January 1, 2004 87,028
After January 1, 2004 but prior to January 1, 2005 43,514
After January 1, 2005 -0-
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ANNEX II TO SECOND AMENDMENT TO THE SECOND
AMENDMENT AND RESTATEMENT OF AGREEMENT OF
LIMITED PARTNERSHIP OF THE TAUBMAN
REALTY GROUP LIMITED PARTNERSHIP
Designation, Distribution, Redemption, Exchange, and Consent Provisions
with Respect to the 9% Series D Cumulative Redeemable Preferred Equity
THIS ANNEX II (this "Annex II") TO THE SECOND AMENDMENT (the "Second
Amendment") TO THE SECOND AMENDMENT AND RESTATEMENT OF AGREEMENT OF LIMITED
PARTNERSHIP OF THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP (as amended through
the date hereof, the "Partnership Agreement"), entered into effective November
24, 1999, serves as a further amendment to the Partnership Agreement entered
into pursuant to Section 4.1(c) of the Partnership Agreement, and is made by,
between, and among TAUBMAN CENTERS, INC., a Michigan corporation ("TCO"), TG
PARTNERS LIMITED PARTNERSHIP, a Delaware limited partnership ("TG"), and TAUB-CO
MANAGEMENT, INC., a Michigan corporation ("Taub-Co"), who, as the Appointing
Persons, pursuant to Section 13.11 of the Partnership Agreement, have the full
power and authority to amend the Partnership Agreement on behalf of all of the
Partners of The Taubman Realty Group Limited Partnership, a Delaware limited
partnership (the "Partnership"), with respect to the matters herein provided.
(Capitalized terms used herein that are not herein defined, shall have the
meanings ascribed to them in the Partnership Agreement.)
<PAGE>
A. On September 3, 1999, TCO, TG, and Taub-Co entered into the Second
Amendment to provide for the contribution of preferred capital to the
Partnership in exchange for a preferred equity interest, and for certain other
purposes.
B. On September 3, 1999, TCO, TG, and Taub-Co also entered into the Annex
to the Partnership Agreement entitled "Designation, Distribution, Redemption,
Exchange, and Consent Provisions with Respect to the 9% Series C Cumulative
Redeemable Preferred Equity."
C. Pursuant to Section 4.1(c) of the Partnership Agreement and as
authorized by Section 13.11 of the Partnership Agreement, the parties hereto
wish to enter into this Annex II to provide for the designation, distribution,
redemption, exchange, and consent provisions with respect to that certain series
of Parity Preferred Equity herein designated as "9% Series D Cumulative
Redeemable Preferred Equity."
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows: (i) Designation: There is hereby established a series of Parity
Preferred Equity designated "9% Series D Cumulative Redeemable Preferred Equity"
(the "Series D Preferred Equity"). The Parity Preferred Rate with respect to the
Series D Preferred Equity is hereby designated as nine percent (9%) per annum.
The Parity Preferred Return in respect of the Series D Preferred Equity is
hereinafter referred to as the "Series D Return." The holder of the Series D
Preferred Equity is hereinafter referred to as the "Series D Preferred Partner."
The Parity Preferred Equity Balance of the Series D Preferred Partner is
hereinafter referred to as the "Series D Preferred Equity Balance." The Unpaid
Parity Preferred Return of the Series D Preferred Partner is hereinafter
referred to as the "Unpaid Series D Preferred Return."
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(ii) Payment of Distributions/Allocations: The Series D Preferred Partner shall
be entitled to receive cumulative cash distributions equal to the Series D
Preferred Return. Such distributions shall accrue from the date of the
contribution to the Partnership of the Series D Preferred Equity, and shall be
payable when, as and if determined by the Managing General Partner, on or before
the last Day of each March, June, September, and December of each Partnership
Fiscal Year (a "Distribution Date") and on a priority basis as against all
distributions other than those required to be made under the Partnership
Agreement and other than distributions required by any series of Preferred
Equity existing as of the date hereof or any other series of Parity Preferred
Equity. The amount of the distribution payable for any period shall be computed
on the basis of a 360-Day year of twelve 30-Day months and for any period
shorter than a full quarterly period for which distributions are computed, the
amount of the distribution payable shall be computed on the basis of the actual
number of days elapsed in such a 30-Day month. If any date on which
distributions are to be made on the Series D Preferred Equity is not a Business
Day, then payment of the distribution to be made on such date shall be made on
the next succeeding Day that is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such Business Day is
in the next succeeding Partnership Fiscal Year, such payment shall be made on
the immediately preceding Business Day, in each case with the same force and
effect as if made on such date. Notwithstanding the foregoing, no distribution
shall be made to the Series D Preferred Partner which would reduce its Adjusted
Capital Account Balance below zero. Distributions on the Series D Preferred
Equity shall be made to the Series D Preferred Partner of record on the
fifteenth (15th) Day of the calendar month in which the applicable Distribution
Date falls or such other date established by the Managing General Partner for
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<PAGE>
determining the holders of record of the Series D Preferred Equity for such
distribution (the "Distribution Record Date"), which date shall not be more than
thirty (30) Days nor less than ten (10) Days prior to such Distribution Date. In
the event of the issuance of Series D Preferred Stock (as defined below), the
Distribution Record Date for the Series D Preferred Equity shall be the Dividend
Record Date (as defined in the Restated Articles of Incorporation of TCO, as
amended) for the Series D Preferred Stock. Unpaid Series D Preferred Return will
not compound. The Series D Preferred Equity Balance distributed to the Series D
Preferred Partner pursuant to Section 11.1(a)(5) of the Partnership Agreement
shall be computed after giving effect to a "book-up" of all Partnership assets
to their respective fair market values and allocations under the Partnership
Agreement of Profits and Losses resulting therefrom.
In no event shall Profits for any Partnership Fiscal Year allocated to the
Series D Preferred Partner exceed nineteen and 95/100ths percent (19.95%) of the
Profits of the Partnership for such Partnership Fiscal Year (the "19.95% Profits
Allocation Limit"), provided however, that the 19.95% Profits Allocation Limit
will not apply to TCO. Further, in applying Section 704(c) of the Code with
respect to the Series D Preferred Partner, the Partnership shall, consistent
with the requirements of the applicable Regulations, utilize a reasonable method
of allocation, provided that such method shall not have the effect of allocating
to the Series D Preferred Partner a greater amount of taxable income for any
Partnership Fiscal Year than the amount of Profits allocated to the Series D
Preferred Partner for such Partnership Fiscal Year.
(iii) Optional Redemption:
(A) Partnership's Redemption Right: The Series D Preferred Equity is not
redeemable prior to November 24, 2004. On or after November 24, 2004, the
Partnership, at its option, upon not less than thirty (30) nor more than sixty
(60) Days'
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<PAGE>
written notice, may redeem the Series D Preferred Equity, in whole or in part,
at any time and from time to time, at a redemption price (the "Redemption
Price"), payable in cash equal in amount to the amount of contributed capital
plus Unpaid Series D Preferred Return, in each case, with respect to that
portion of the Series D Preferred Equity Balance being redeemed. Immediately
prior to such redemption, the Capital Accounts of the Partnership shall be
adjusted to give effect to a "book-up" of all Partnership assets to their
respective fair market values and allocations under the Partnership Agreement of
Profits and Losses resulting therefrom. If less than all of the Series D
Preferred Equity is redeemed, the Capital Account of the holder of the Series D
Preferred Equity shall, as a result of the redemption, be reduced by only the
portion of such Capital Account attributable to the interest redeemed.
(B) Limitations on Redemption: Unless the accrued Series D Return has been
distributed in full for all quarterly distribution periods terminating on or
prior to the date of redemption, the Partnership may not redeem less than the
entire outstanding amount of the Series D Preferred Equity. Further, the
Redemption Price (other than the portion thereof consisting of Unpaid Series D
Preferred Return) shall be payable solely out of the sale proceeds of other
"partnership interests" of the Partnership, or "capital stock" of TCO. For
purposes of the preceding sentence, the terms "partnership interests" and
"capital stock" mean any equity securities of the Partnership and/or TCO,
respectively (including "Units of Partnership Interests," "preferred equity
interests," "common stock" and "preferred stock"), shares, interest,
participation, or other ownership interests (however designated), and any rights
(other than debt securities convertible into or exchangeable for equity
securities) or options to purchase any of the foregoing.
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<PAGE>
(C) Procedure for Redemption: Notice of redemption shall be (i) faxed and
(ii) mailed by the Partnership, by certified mail, postage prepaid, not less
than thirty (30) nor more than sixty (60) Days prior to the Redemption Date (as
defined below), addressed to the Series D Preferred Partner at its address as it
appears on the records of the Partnership. In addition to any information
required by law, each such notice shall state: (a) the redemption date (the
"Redemption Date"), (b) the Redemption Price, (c) the percentage of the Series D
Preferred Equity to be redeemed, and (d) the place where a Certificate of
Withdrawal in the form of Exhibit 1 hereto, is to be delivered in exchange for
payment of the Redemption Price.
If the Partnership gives a notice of redemption in respect of the Series D
Preferred Equity or any portion thereof (which notice shall be irrevocable)
then, by 12:00 noon, New York City time, on the Redemption Date, the Partnership
shall deposit irrevocably in trust for the benefit of the Series D Preferred
Partner funds sufficient to pay the Redemption Price and shall give irrevocable
instructions and authority to pay such Redemption Price to the Series D
Preferred Partner upon delivery of a Certificate of Withdrawal at the place
designated in the notice of redemption. If any date fixed for redemption of the
Series D Preferred Equity is not a Business Day, then payment of the Redemption
Price shall be made on the next succeeding Business Day (without any interest or
any payment in respect of any such delay) except that if such Business Day falls
in the next calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the Redemption Date. If payment of the Redemption Price is improperly
withheld or refused and not paid by the Partnership, the Series D Return on the
portion of the Series D Preferred Equity to be redeemed shall continue to accrue
from the Redemption Date to the date of payment, in which case the
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<PAGE>
actual payment date will be considered the date fixed for redemption in the
redemption notice for purposes of calculating the applicable Redemption Price.
(iv) Exchange Rights:
(A) Right to Exchange:
(1) The Series D Preferred Equity shall be exchangeable in whole but
not in part unless expressly otherwise provided herein at any time on or after
November 24, 2009 for Series D Preferred Stock of TCO (the "Series D Preferred
Stock") at an exchange rate (the "Exchange Rate") of One Hundred Dollars ($100)
of Series D Preferred Equity Balance (as computed after giving effect to a
"book-up" of all Partnership assets to their respective fair market values and
allocations under the Partnership Agreement of Profits and Losses resulting
therefrom but in no event shall such Series D Preferred Equity Balance (as so
computed) exceed an amount equal to the capital contribution plus any Unpaid
Series D Preferred Return) for one (1) share of Series D Preferred Stock to be
delivered by TCO, subject to adjustment as described below. In the event of an
exchange, the Unallocated Series D Preferred Return shall be reduced to zero. At
such time as TCO receives approval to amend its Restated Articles of
Incorporation, as amended, to increase the number of authorized shares of
Preferred Stock (as defined therein), and further amends such Restated Articles
of Incorporation, as amended, by increasing the number of shares of Series D
Preferred Stock, which amendments TCO has undertaken to use its commercially
reasonable efforts to cause to be made, the Exchange Rate will be reduced
proportionately. The terms of the Series D Preferred Stock shall be as set forth
on Schedule A attached hereto. Notwithstanding the foregoing, the Series D
Preferred Equity shall become exchangeable at any time, in whole but not in part
unless expressly provided otherwise herein, for Series D Preferred Stock if (x)
at any time the accrued Series D
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<PAGE>
Return shall not have been distributed in full to the Series D Preferred Partner
with respect to six (6) prior quarterly distribution periods, whether or not
consecutive, provided, however, a distribution of the Series D Return shall be
considered timely if made within two (2) Business Days after the Distribution
Date for the Series D Return if at the time of such late payment there shall not
be any prior quarterly distribution periods in respect of which the full amount
of the accrued Series D Return was not timely made or (y) upon receipt by the
Series D Preferred Partner of (a) notice from the Managing General Partner that
the Partnership has taken the position that the Partnership is, or upon the
consummation of an identified event in the immediate future will be taxable as a
corporation and (b) an opinion rendered by independent counsel familiar with
such matters addressed to the Series D Preferred Partner that the Partnership is
or likely is, or upon the occurrence of an identified event in the immediate
future will be or likely will be, taxable as a corporation. The Series D
Preferred Equity may be exchanged, in whole but not in part, for Series D
Preferred Stock if the Series D Preferred Partner concludes at any time that
there exists in the reasonable judgment of the Series D Preferred Partner (as
confirmed by its independent accountants) an imminent and substantial risk that
the Series D Preferred Partner's interest in the Partnership represents or will
represent more than nineteen and 95/100ths percent (19.95%) of the capital or
profits of the Partnership determined in accordance with Regulations Section
1.731-2(e)(4). In addition, if the Partnership sells in one (1) or more taxable
transactions two (2) or more of (x) the properties on Schedule E to the
Partnership Agreement or (y) the properties, if any, exchanged for any of the
properties on Schedule E in a transaction pursuant to Section 1031 of the Code
or pursuant to any other Code section providing for non-recognition treatment,
and after giving effect to such sales (and related tax distributions by the
Partnership) it is reasonably expected that the
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<PAGE>
net income of the Partnership as computed on the basis of tax depreciation and
not book depreciation will be below Eleven Million Two Hundred Fifty Thousand
Dollars ($11,250,000) for the taxable year of the sale or the next succeeding
taxable year, then the Series D Preferred Equity shall be exchangeable, in
whole, but not in part, at the exchange rate set forth above. Further, the
Series D Preferred Equity shall be exchangeable, in whole but not in part at the
exchange rate set forth above, if the Series D Preferred Partner, in its
reasonable judgment (as confirmed by its independent accountants), determines
that less than ninety percent (90%) of the gross income of the Partnership for
the taxable year of the exchange will or will likely constitute "qualifying
income" within the meaning of Section 7704(d) of the Code.
(2) Notwithstanding anything to the contrary set forth in Paragraph
(iv)(A)(1) above, if an Exchange Notice (as defined below) has been delivered to
TCO, then TCO may, at its option, within thirty (30) Business Days after receipt
of the Exchange Notice, purchase directly or elect to cause the Partnership to
redeem, all or a portion of the outstanding Series D Preferred Equity by
redeeming or, as applicable, purchasing, the corresponding portion of the Series
D Preferred Equity Balance (in each case, as computed after giving effect to a
"book-up" of all Partnership assets to their respective fair market values and
allocations under the Partnership Agreement of Profits and Losses resulting
therefrom) for cash in an amount equal to the Series D Preferred Equity Balance
or portion thereof being redeemed.
(3) In the event an exchange of the Series D Preferred Equity would
violate the provisions on ownership limitation of TCO as set forth in the
Restated Articles of Incorporation of TCO, as amended, the Series D Preferred
Partner shall be entitled to exchange, pursuant to the provisions of Paragraph
(iv)(A)(1) hereof, a percentage of the
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<PAGE>
Series D Preferred Equity Balance that would comply with the provisions on
ownership limitation of TCO and any portion of the Series D Preferred Equity
Balance not so exchanged (the "Excess Preferred Equity") shall be redeemed by
the Partnership for cash in an amount equal to the Series D Preferred Equity
Balance allocable to the Excess Preferred Equity, subject to any restriction
thereon contained in any debt instrument or agreement of the Partnership and
provided that such redemption would not adversely impact the rating of any
outstanding debt of the Partnership.
(B) Procedure for Exchange and/or Redemption of Series D Preferred Equity:
(1) Any exchange shall be exercised pursuant to a notice of exchange
(the "Exchange Notice") delivered to TCO by the Series D Preferred Partner by
(a) fax and (b) by certified mail, postage prepaid. TCO may effect any exchange
of the Series D Preferred Equity or exercise its option to cause the Partnership
to redeem any portion of the Series D Preferred Equity for cash pursuant to
Paragraph (iv)(A)(2) above or redeem Excess Preferred Equity pursuant to
Paragraph (iv)(A)(3) above by delivering to the Preferred Equity Partner, within
thirty (30) Business Days after receipt of the Exchange Notice, (a) if TCO
elects to acquire any of the Series D Preferred Equity then outstanding, (1) a
written notice stating (A) the date of the exchange, which may be the date of
such written notice or any other date which is not later than sixty (60) Days
after the receipt of the Exchange Notice, and (B) the place where the
Certificate of Withdrawal is to be delivered and (2) certificates representing
the Series D Preferred Stock being issued in exchange for the Series D Preferred
Equity and corresponding Series D Preferred Equity Balance being exchanged, or
(b) if TCO elects to cause the Partnership to redeem all of the Series D
Preferred Equity then outstanding in exchange for cash or elects to cause the
Partnership to redeem any Excess Preferred Equity for cash, a written notice
stating (1) the
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redemption date, which may be the date of such written notice or any other date
which is not later than sixty (60) Days after the receipt of the Exchange
Notice, (2) the redemption price, and (3) the place where the Certificate of
Withdrawal is to be delivered. The Series D Preferred Equity shall be deemed
canceled simultaneously with the delivery of the Certificate of Withdrawal (with
respect to the Series D Preferred Equity Balance exchanged) or simultaneously
with the redemption date (with respect to Series D Preferred Equity Balance
redeemed). Notwithstanding anything to the contrary contained herein, any and
all Series D Preferred Equity to be exchanged for Series D Preferred Stock
pursuant to this Paragraph (iv) shall be so exchanged in a single transaction at
one (1) time. As a condition to exchange, TCO may require the Series D Preferred
Partner to make such representations and warranties including, without
limitation, warranties as to ownership and absence of restrictions, liens, and
encumbrances and representations as may be reasonably necessary for TCO to
establish that the issuance of Series D Preferred Stock pursuant to the exchange
shall not be required to be registered under the Securities Act of 1933, as
amended (the "Securities Act"), or any state securities laws. Any Series D
Preferred Stock issued pursuant to this Paragraph (iv) shall be delivered as
shares which are duly authorized, validly issued, fully paid, and nonassessable,
free of any pledge, lien, encumbrance or restriction other than those provided
in the Restated Articles of Incorporation, as amended, the Restated By-Laws of
TCO, the Securities Act, and relevant state securities or blue sky laws. The
certificates representing the Series D Preferred Stock issued upon exchange of
the Series D Preferred Equity shall contain the following legend:
THE AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS THE SAME MAY BE
AMENDED (THE "ARTICLES"), IMPOSE CERTAIN RESTRICTIONS ON THE
11
<PAGE>
TRANSFER AND OWNERSHIP OF THE SHARES REPRESENTED BY THIS CERTIFICATE BASED UPON
THE PERCENTAGE OF THE OUTSTANDING SHARES OWNED BY THE SHAREHOLDER. AT NO CHARGE,
ANY SHAREHOLDER MAY RECEIVE A WRITTEN STATEMENT OF THE RESTRICTIONS ON TRANSFER
AND OWNERSHIP THAT ARE IMPOSED BY THE ARTICLES.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF EXCEPT (A) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT), OR (B) IF THE CORPORATION HAS BEEN FURNISHED WITH A SATISFACTORY
OPINION OF COUNSEL FOR THE HOLDER OF THE SHARES REPRESENTED HEREBY, OR OTHER
EVIDENCE SATISFACTORY TO THE CORPORATION, THAT SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION, OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF
SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS THEREUNDER.
(2) In the event of an exchange of the Series D Preferred Equity for
Series D Preferred Stock, fractional Series D Preferred Stock of TCO is not to
be issued upon the exchange but, in lieu thereof, TCO shall pay a cash
adjustment based on the fair market value of the Series D Preferred Stock on the
Day prior to the exchange date as determined in good faith by the Board of
Directors of TCO.
(3) Adjustment of Exchange Price. In the event that TCO shall be a
party to any transaction (including, without limitation, a merger,
consolidation, statutory share exchange, tender offer for all or substantially
all of TCO's capital stock, or sale of all or substantially all of TCO's
assets), in each case as a result of which the Series D Preferred Stock will be
converted into the right to receive shares of capital stock, other securities or
12
<PAGE>
other property (including cash or any combination thereof), the Series D
Preferred Equity Balance will thereafter be exchangeable into the kind and
amount of shares of capital stock and other securities and property receivable
(including cash or any combination thereof) upon the consummation of such
transaction by a holder of that number of Series D Preferred Stock of TCO or
fraction thereof into which the Series D Preferred Equity Balance was
exchangeable immediately prior to such transaction. TCO may not become a party
to any such transaction unless the terms thereof are consistent with the
foregoing.
(v) No Other Conversion Rights. Subject to TCO's right to convert the Series D
Preferred Equity Balance to an Additional Interest pursuant to Section 8.1(c) of
the Partnership Agreement, the Series D Preferred Partner shall not have any
right to convert the Series D Preferred Equity Balance or any portion thereof
into any other securities of, or interest in, the Partnership.
(vi) No Sinking Fund: No sinking fund shall be required for the retirement or
redemption of the Series D Preferred Equity Balance.
(vii) Certain Voting Rights: The Series D Preferred Partner shall not have any
voting rights or rights to consent to any Partnership matter requiring the
consent or approval of Partners, except as set forth below.
So long as any Series D Preferred Equity Balance remains outstanding, the
Partnership shall not, without the affirmative vote of Series D Preferred
Partners holding at least two-thirds (2/3rds) of the Series D Preferred Equity
Balance at the time, (x) authorize or create, or increase the authorized or
issued amount of, any class or series of Partnership Interests ranking senior to
the Series D Preferred Equity with respect to payment of distributions or rights
upon liquidation, dissolution, or winding up (including, without limitation, any
future issuances of Preferred Equity), or reclassify any Partnership Interests
13
<PAGE>
of the Partnership into any such Partnership Interest, or create, authorize or
issue any obligations or security convertible into or exchangeable for or
evidencing the right to purchase any such Partnership Interests, (y)
consolidate, merge into or with, or convey, transfer or lease its assets
substantially as an entirety to, any corporation or other entity, or amend or
alter Sections 1.2, 1.3, 1.4, 5.1, 5.2(a)(i), 5.5, 5.7(a), 6.10, 8.1(a), 8.1(c),
or 11.1(a)(5) of the Partnership Agreement or any other sections of the
Partnership Agreement which would affect such sections, or the rights or
obligations of the Series D Preferred Partner under the Partnership Agreement,
or this Annex, whether by merger, consolidation, amendment or otherwise, in each
such case in a manner that would materially and adversely affect the rights of
the Series D Preferred Equity or the Series D Preferred Partner; provided,
however, that with respect to the occurrence of any event set forth in clause
(y) above, so long as (1) the Partnership is the surviving entity and the Series
D Preferred Equity remains outstanding with the terms thereof unchanged, or (2)
the resulting, surviving or transferee entity is a partnership, limited
liability company, or other pass-through entity organized under the laws of any
state and substitutes for the Series D Preferred Equity other interests in such
entity having substantially the same terms and rights as the Series D Preferred
Equity, including with respect to distributions, redemptions, transfers, voting
rights, and rights upon liquidation, then the occurrence of any such event shall
not be deemed to materially and adversely affect such rights of the Series D
Preferred Partner; and provided further, that any increase or issuance in the
amount of Partnership Interests or the creation or issuance of any other class
or series of Partnership Interests, in each case ranking (a) junior to the
Series D Preferred Equity with respect to payment of distributions or the
distribution of assets upon liquidation, or (b) on a parity to the Series D
14
<PAGE>
Preferred Equity with respect to payment of distributions or the distribution of
assets upon liquidation shall not be deemed to materially and adversely affect
such rights.
Notwithstanding anything to the contrary contained herein or in the
Partnership Agreement, in determining what is a class or series ranking senior,
or on parity to the Series D Preferred Equity, the 19.95% Profits Allocation
Limit shall be disregarded.
IN WITNESS WHEREOF, the undersigned Appointing Persons, in accordance with
Section 13.11 of the Partnership Agreement, on behalf of all of the Partners
have entered into this Annex as of the date first above written.
TAUBMAN CENTERS, INC., a Michigan
corporation
By: /s/ Robert S. Taubman
---------------------
Robert S. Taubman
Its: President and Chief Executive Officer
-------------------------------------
TG PARTNERS LIMITED PARTNERSHIP, a
Delaware limited partnership
By: TG Michigan, Inc., a Michigan
Corporation, Managing General
Partner
By: /s/ Robert S. Taubman
---------------------
Robert S. Taubman
Its: President and
-------------
Chief Executive Officer
-----------------------
TAUB-CO MANAGEMENT, INC.,
a Michigan corporation
By: /s/ Robert S. Taubman
---------------------
Robert S. Taubman
Its: President and Chief Executive Officer
-------------------------------------
15
<PAGE>
SCHEDULE A
Attachment to the Certificate of Amendment to the
Articles of Incorporation of Taubman Centers, Inc.
16
<PAGE>
EXHIBIT 1
Certificate of Withdrawal
The undersigned hereby confirms that effective on the date hereof, the
undersigned has withdrawn from The Taubman Realty Group Limited Partnership (the
"Partnership"), a Delaware limited partnership, and effective as of the date
hereof the undersigned is no longer a partner in the Partnership and has no
right or interest in or to the Partnership, its property, and business and has
no authority to represent or bind the Partnership.
---------------------------------------
By: ________________________________
Dated: _________________, _________ Its: ________________________________
17
<PAGE>
Exhibit 12
Taubman Centers, Inc.
Computation of Ratios of Earnings to Combined Fixed Charges and Preferred
Dividends and Distributions
(in thousands, except ratios)
Year Ended December 31
-----------------------------
1999 1998
---- ----
Net Earnings from Continuing Operations $ 58,445 $ 70,403
Add back:
Fixed charges 105,741 139,556
Amortization of previously capitalized
interest (1) 2,167 2,335
Deduct:
Capitalized interest (1) (15,574) (19,254)
------------- ------------
Earnings Available for Fixed Charges and
Preferred Dividends and Distributions $ 150,779 $ 193,040
============= ============
Fixed Charges
Interest expense $ 51,327 $ 75,809
Capitalized interest 14,489 18,192
Interest portion of rent expense 4,122 6,383
Proportionate share of Unconsolidated Joint
Ventures' fixed charges 35,803 39,172
------------ ------------
Total Fixed Charges $ 105,741 $ 139,556
------------ ------------
Preferred Dividends and Distributions 19,044 16,600
------------ ------------
Total Fixed Charges and Preferred
Dividends and Distributions $ 124,785 $ 156,156
============= ============
Ratio of Earnings to Fixed Charges and
Preferred Dividends and Distributions 1.2 1.2
(1) Amounts include TRG's pro rata share of capitalized interest and
amortization of previously capitalized interest of the Unconsolidated Joint
Ventures.
Exhibit 21
TAUBMAN CENTERS, INC.
LIST OF SUBSIDIARIES
JURISDICTION
NAME OF FORMATION DOING BUSINESS AS
- ---- ------------ -----------------
Biltmore Shopping Centers Partners Arizona Biltmore Fashion Park
Fairlane Town Center Michigan Fairlane Town Center
Katy-Gessner Associates Limited Delaware Memorial City Mall
Partnership (leased)
La Cienega Associates California Beverly Center
La Cumbre Shopping Center Associates California La Cumbre Plaza
Paseo Nuevo Associates California Paseo Nuevo
Short Hills Associates New Jersey The Mall at Short Hills
Taubman Auburn Hills Associates Delaware Great Lakes Crossing
Limited Partnership
Taubman MacArthur Associates Delaware MacArthur Center
Limited Partnership
The Taubman Company Delaware The Taubman Company
Limited Partnership
The Taubman Realty Group Delaware N/A
Limited Partnership
TJ Palm Beach Associates Delaware The Mall at Wellington
Green
(under construction)
TRG - Regency Square Associates Virginia Regency Square
Willow Bend Associates Limited Delaware The Shops at Willow Bend
Partnership (under construction)
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 1 to Form S-11 on
Form S-8 Registration Statement No. 33-65934 of Taubman Centers, Inc., in
Amendment No. 2 to Form S-3 Registration Statement No. 33-73038 of Taubman
Centers, Inc., in Amendment No. 1 to Form S-3 Registration Statement No.
33-99636 of Taubman Centers, Inc., in Amendment No. 3 to Form S-3 Registration
Statement No. 333-19503 of Taubman Centers, Inc., in Form S-3 Registration
Statement No. 333-16781 of Taubman Centers, Inc., and in Amendment No. 1 to Form
S-3 Registration Statement No. 333-35433 of Taubman Centers, Inc., of our
reports dated February 9, 2000 on the financial statements and the financial
statement schedules of Taubman Centers, Inc., and the combined financial
statements and the financial statement schedules of Unconsolidated Joint
Ventures of The Taubman Realty Group Limited Partnership appearing in this
Annual Report on Form 10-K of Taubman Centers, Inc. for the year ended December
31, 1999.
Deloitte & Touche LLP
Detroit, Michigan
March 23, 2000
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, the Company's Annual Report and Form 10-K for the
year ended December 31, 1999, and any and all amendments thereto, to be filed
with the Securities and Exchange Act of 1934, as amended (the "Act"), and any
and all instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 24th day of March, 2000.
/S/ A. ALFRED TAUBMAN
---------------------
A. Alfred Taubman
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, the Company's Annual Report and Form 10-K for the
year ended December 31, 1999, and any and all amendments thereto, to be filed
with the Securities and Exchange Act of 1934, as amended (the "Act"), and any
and all instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 24th day of March, 2000.
/S/ GRAHAM ALLISON
------------------
Graham Allison
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, the Company's Annual Report and Form 10-K for the
year ended December 31, 1999, and any and all amendments thereto, to be filed
with the Securities and Exchange Act of 1934, as amended (the "Act"), and any
and all instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 24th day of March, 2000.
/S/ S. PARKER GILBERT
---------------------
S. Parker Gilbert
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, the Company's Annual Report and Form 10-K for the
year ended December 31, 1999, and any and all amendments thereto, to be filed
with the Securities and Exchange Act of 1934, as amended (the "Act"), and any
and all instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 24th day of March, 2000.
/S/ JEROME A. CHAZEN
--------------------
Jerome A. Chazen
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, the Company's Annual Report and Form 10-K for the
year ended December 31, 1999, and any and all amendments thereto, to be filed
with the Securities and Exchange Act of 1934, as amended (the "Act"), and any
and all instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 24th day of March, 2000.
/S/ ALLAN J. BLOOSTEIN
----------------------
Allan J. Bloostein
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, the Company's Annual Report and Form 10-K for the
year ended December 31, 1999, and any and all amendments thereto, to be filed
with the Securities and Exchange Act of 1934, as amended (the "Act"), and any
and all instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 24th day of March, 2000.
/S/ ROBERT C. LARSON
--------------------
Robert C. Larson
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TAUBMAN CENTERS, INC. (TCO) CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999
AND THE TAUBMAN CENTERS, INC. STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 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> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 20,557
<SECURITIES> 0
<RECEIVABLES> 41,665
<ALLOWANCES> 1,549
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 1,572,285
<DEPRECIATION> 210,788
<TOTAL-ASSETS> 1,596,911
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 886,561
0
112
<COMMON> 533
<OTHER-SE> 481,146
<TOTAL-LIABILITY-AND-EQUITY> 1,596,911
<SALES> 0
<TOTAL-REVENUES> 268,692
<CGS> 0
<TOTAL-COSTS> 180,086
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,327
<INCOME-PRETAX> 58,445 <F3>
<INCOME-TAX> 0
<INCOME-CONTINUING> 58,445 <F3>
<DISCONTINUED> 0
<EXTRAORDINARY> (468)
<CHANGES> 0
<NET-INCOME> 25,502
<EPS-BASIC> .17
<EPS-DILUTED> .16
<FN>
<F1> EXCEPT FOR PER SHARE DATA
<F2> TCO HAS AN UNCLASSIFIED BALANCE SHEET
<F3> REPRESENTS INCOME BEFORE EXTRAORDINARY ITEM AND MINORITY AND PREFERRED
INTERESTS. THE DEDUCTION FOR MINORITY AND PREFERRED INTERESTS WAS $32.475
MILLION.
</FN>
</TABLE>
<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. STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS. THIS SCHEDULE HAS BEEN RESTATED FROM A PREVIOUSLY FILED VERSION TO
REFLECT A CHANGE IN ACCOUNTING POLICY FOR PERCENTAGE RENT, AS DESCRIBED IN THE
FINANCIAL STATEMENTS INCLUDED IN THE FILING ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1999.
</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> 1,543,349
<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> 60,163
<CGS> 0
<TOTAL-COSTS> 40,268
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,865
<INCOME-PRETAX> 13,847 <F3>
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,847 <F3>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,340
<EPS-BASIC> .04
<EPS-DILUTED> .04
<FN>
<F1> EXCEPT FOR PER SHARE DATA
<F2> TCO HAS AN UNCLASSIFIED BALANCE SHEET
<F3> REPRESENTS INCOME BEFORE EXTRAORDINARY ITEMS AND MINORITY INTEREST. THE
MINORITY INTEREST'S SHARE OF INCOME WAS $7.507 MILLION.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TAUBMAN CENTERS, INC. (TCO) CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1999 AND
THE TAUBMAN CENTERS, INC. STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS. THIS SCHEDULE HAS BEEN RESTATED FROM A PREVIOUSLY FILED VERSION TO
REFLECT A CHANGE IN ACCOUNTING POLICY FOR PERCENTAGE RENT, AS DESCRIBED IN THE
FINANCIAL STATEMENTS INCLUDED IN THE FILING ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1999.
</LEGEND>
<CIK> 0000890319
<NAME> TAUBMAN CENTERS, INC.
<MULTIPLIER> 1,000 <F1>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 15,706
<SECURITIES> 0
<RECEIVABLES> 32,681
<ALLOWANCES> 1,192
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 1,552,081
<DEPRECIATION> 186,685
<TOTAL-ASSETS> 1,554,531
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 932,352
0
111
<COMMON> 533
<OTHER-SE> 502,752
<TOTAL-LIABILITY-AND-EQUITY> 1,554,531
<SALES> 0
<TOTAL-REVENUES> 128,934
<CGS> 0
<TOTAL-COSTS> 87,621
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,688
<INCOME-PRETAX> 26,788 <F3>
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,788 <F3>
<DISCONTINUED> 0
<EXTRAORDINARY> (301)
<CHANGES> 0
<NET-INCOME> 11,472
<EPS-BASIC> .06
<EPS-DILUTED> .06
<FN>
<F1> EXCEPT FOR PER SHARE DATA
<F2> TCO HAS AN UNCLASSIFIED BALANCE SHEET
<F3> REPRESENTS INCOME BEFORE EXTRAORDINARY ITEMS AND MINORITY INTEREST.
THE MINORITY INTEREST'S SHARE OF INCOME WAS $15.015 MILLION.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TAUBMAN CENTERS, INC. (TCO) CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999
AND THE TAUBMAN CENTERS, INC. STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS. THIS SCHEDULE HAS BEEN RESTATED FROM A PREVIOUSLY FILED
VERSION TO REFLECT A CHANGE IN ACCOUNTING POLICY FOR PERCENTAGE RENT, AS
DESCRIBED IN THE FINANCIAL STATEMENTS INCLUDED IN THE FILING ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1999.
</LEGEND>
<CIK> 0000890319
<NAME> TAUBMAN CENTERS, INC.
<MULTIPLIER> 1,000 <F1>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 14,795
<SECURITIES> 0
<RECEIVABLES> 31,665
<ALLOWANCES> 1,557
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 1,571,917
<DEPRECIATION> 198,557
<TOTAL-ASSETS> 1,554,412
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 868,120
0
111
<COMMON> 533
<OTHER-SE> 491,603
<TOTAL-LIABILITY-AND-EQUITY> 1,554,412
<SALES> 0
<TOTAL-REVENUES> 194,929
<CGS> 0
<TOTAL-COSTS> 131,926
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,231
<INCOME-PRETAX> 39,411 <F3>
<INCOME-TAX> 0
<INCOME-CONTINUING> 39,411 <F3>
<DISCONTINUED> 0
<EXTRAORDINARY> (301)
<CHANGES> 0
<NET-INCOME> 16,062
<EPS-BASIC> .07
<EPS-DILUTED> .07
<FN>
<F1> EXCEPT FOR PER SHARE DATA
<F2> TCO HAS AN UNCLASSIFIED BALANCE SHEET
<F3> REPRESENTS INCOME BEFORE EXTRAORDINARY ITEMS AND MINORITY AND PREFERRED
INTERESTS. THE DEDUCTION FOR MINORITY ABD PREFERRED INTERESTS WAS $23.048
MILLION.
</FN>
</TABLE>
