<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
(Mark One)
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 1-11690
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
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(Exact name of registrant as specified in its charter)
Ohio 34-1723097
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
34555 Chagrin Boulevard Moreland Hills, Ohio 44022
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(Address of principal executive offices - zip code)
(216) 247-4700
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Shares, Without Par Value New York Stock Exchange
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Depositary Shares Representing
Class A Cumulative Redeemable Preferred Shares New York Stock Exchange
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Depositary Shares Representing
Class B Cumulative Redeemable Preferred Shares New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant at March 14, 1997 was $836,860,868.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
25,049,005 common shares outstanding as of March 14, 1997
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DOCUMENTS INCORPORATED BY REFERENCE.
The registrant incorporates by reference in Part III hereof portions of
its definitive Proxy Statement for its 1997 Annual Meeting of Shareholders.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Item No. Report Page
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PART I
<S> <C> <C> <C>
1. Business ..................................................... 4
2. Properties.................................................... 9
3. Legal Proceedings............................................. 18
4. Submission of Matters to a Vote of Security Holders........... 18
PART II
5. Market for the Registrant's Common Equity and
Related Shareholder Matters .................................. 19
6. Selected Financial Data........................................ 20
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 22
8. Financial Statements and Supplementary Data.................... 30
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure........................ 30
PART III
10. Directors and Executive Officers of the Registrant............ 31
11. Executive Compensation........................................ 34
12. Security Ownership of Certain Beneficial Owners
and Management ............................................. 34
13. Certain Relationships and Related Transactions................ 34
PART IV
14. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K......................................... 35
</TABLE>
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PART I
Item 1. BUSINESS
General Development of Business
Developers Diversified Realty Corporation (the "Company"), a
self-administered and self-managed real estate investment trust (a "REIT"), was
formed in November 1992 by the principals of the affiliates comprising the
Developers Diversified Group ("DDG") to continue the business of DDG by
acquiring, developing, redeveloping, owning, leasing and managing shopping
centers and business centers. The Company completed the initial public offering
of its common shares in February 1993 (the "IPO"). Unless otherwise provided,
references herein to the Company include Developers Diversified Realty
Corporation, its wholly owned subsidiaries and its joint ventures.
Since the IPO, the Company has acquired 60 shopping center properties,
including those owned through joint ventures four of which were acquired in
1997, five of which were acquired in 1996, 20 of which were acquired in 1995, 14
of which were acquired in 1994 and 17 of which were acquired in 1993.
The Company's executive offices are located at 34555 Chagrin Boulevard,
Moreland Hills, Ohio 44022, and its telephone number is (216) 247-4700.
Financial Information about Industry Segments
The Company is in the business of managing, operating, leasing,
acquiring, developing and investing in shopping centers and business centers.
See the consolidated financial statements and notes thereto included in Item 8
of this Annual Report on Form 10-K for certain information required by Item 1.
Narrative Description of Business
Since 1965, the Company and DDG, its predecessor, have owned and
managed approximately 230 shopping centers. The Company's portfolio as of March
14, 1997 consisted of 116 shopping centers (including 17 properties which are
owned through joint ventures, 14 of which the Company owns a 50% interest, two
of which the Company owns a majority interest and one of which the Company owns
a 35% interest), seven business centers and 76 undeveloped parcels (14 of which
are owned through joint ventures) aggregating approximately 211 acres (the
"Portfolio Properties"). Since the IPO the Company has acquired 60 shopping
centers containing an aggregate of 12.0 million square feet of GLA owned by the
Company for an aggregate purchase price of approximately $976.3 million. The
Company acquired from DDG the Company's initial portfolio of properties and
DDG's property management business prior to, or concurrently with the
consummation of, the IPO. During 1994, 1995 and 1996, the Company completed
expansions at one of its business centers and 24 of its shopping centers. As of
March 14, 1997, the Company was expanding seven of its shopping centers and
expects to commence expansions at additional shopping centers in 1997. The
Company has also completed the development of four additional shopping centers,
since the IPO, at an aggregate cost of $73 million aggregating approximately
850,000 square feet. As of March 14, 1997, the Company had shopping centers
under development at four sites.
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The Company's shopping centers were approximately 94.8% leased as of
December 31, 1996, and the business centers were 78.3% leased as of that date.
At December 31, 1996, the Company had entered into additional leases with anchor
tenants aggregating in excess of 240,000 square feet of vacant space, scheduled
to commence in 1997, which brings the current occupancy rate at the shopping
centers to 96.0%. On December 31, 1996, the average annualized base rent per
square foot of Company-owned GLA of the shopping centers, including those owned
through joint ventures, was $7.85 and the business centers was $3.76.
The Company is self-administered and self-managed and, therefore, does
not engage or pay for a REIT advisor. The Company manages all of the Portfolio
Properties, including those owned through joint ventures. At December 31, 1996,
the Company owned and/or managed approximately 30.7 million total square feet of
GLA, which included all of the Portfolio Properties and 27 properties owned by
third parties.
Strategy and Philosophy
The Company's investment objective is to increase cash flow and the
value of its portfolio of properties and to seek continued growth through the
selective acquisition, development, redevelopment, renovation and expansion of
income-producing real estate properties, primarily shopping centers. In pursuing
its investment objective, the Company will continue to seek to acquire and
develop high quality, well-located shopping centers with attractive initial
yields and strong prospects for future cash flow growth and capital appreciation
where the Company's financial strength and management and leasing capabilities
can enhance value.
Management believes that opportunities to acquire existing shopping
centers have been and will continue to be available to buyers with access to
capital markets, such as the Company. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
The Company's real estate strategy and philosophy is to grow its
business through a combination of leasing, expansion, acquisition and
development. The Company seeks to:
- increase cash flows and property values through strategic
leasing, re-tenanting, renovation and expansion of the Company's
portfolio;
- continue to selectively acquire well-located, quality shopping
centers (individually or in portfolio transactions) which have
leases at rental rates below market rates or other cash flow
growth or capital appreciation potential where the Company's
financial strength, relationships with retailers and management
capabilities can enhance value;
- increase cash flows and property values by continuing to take
advantage of attractive financing and refinancing opportunities
(see "Recent Developments - Financings");
- selectively develop the Company's undeveloped parcels or new
sites in areas with attractive demographics;
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- hold properties for long-term investment and place a strong
emphasis on regular maintenance, periodic renovation and capital
improvements; and
- continue to manage and develop the properties of others to
generate fee income, subject to restrictions imposed by federal
income tax laws, and create opportunities for acquisitions.
As part of its ongoing business the Company may periodically engage in
discussions with public and private real estate entities regarding possible
portfolio or asset acquisitions or business combinations.
In addition, the Company intends to maintain a conservative debt
capitalization with a ratio of debt to total market capitalization (the sum of
the aggregate market value of the Company's common shares, the liquidation value
of preferred shares and the Company's total indebtedness) of less than .50 to 1.
At December 31, 1996, the Company's debt to total market capitalization ratio,
excluding the Company's proportionate share of indebtedness of its
unconsolidated joint ventures, was approximately 0.33 to 1; and at March 14,
1997 this ratio was approximately 0.28 to 1. At December 31, 1996, the Company's
capitalization consisted of $478.4 million of debt (excluding the Company's
proportionate share of joint venture mortgage debt aggregating $180.1 million),
$149.8 million of preferred stock and $805.0 million of market equity. At
December 31, 1996, the Company's total debt consisted of $379.8 million of
fixed-rate debt and $98.6 million of variable rate debt. Fluctuations in the
market price of the common shares may cause this ratio to vary from time to
time. The Company has elected to establish its financing policies based on the
total market capitalization of the Company and not on the value of the Company's
assets.
The strategy, philosophy, investment and financing policies of the
Company, and its policies with respect to certain other activities, including
its growth, debt capitalization, distributions, status as a REIT and operating
policies, are determined by the Board of Directors. Although it has no present
intention to do so, the Board of Directors may amend or revise these policies
from time to time without a vote of the shareholders of the Company.
Recent Developments
Financings
In June 1996, the Company extended its $150 million unsecured revolving
credit facility for an additional year, through May 1999, and reduced the
current interest rate payable on such facility by 25 basis points to LIBOR plus
1.25%. In September 1996, the Company restructured its $25 million secured
revolving credit facility. This restructuring resulted in an $18.6 million ten
year non-recourse mortgage loan, which was transferred into the joint venture
with The Ohio State Teachers Retirement System ("OSTRS"), and a $10 million
unsecured revolving credit facility which matures in November 1999. This
restructuring resulted in the mortgage release of two of the three shopping
centers which served as collateral for the $25 million secured revolving credit
facility.
In January 1996, in conjunction with an overallotment option granted to
underwriters in connection with a December offering , an additional 175,000
Class B Depositary preferred shares were issued by the Company, which resulted
in additional net proceeds of approximately $4.2 million. In March 1996, the
Company issued 2.6 million common shares and received net proceeds of
approximately $75.4 million which was used to retire debt.
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In November 1995, the Company commenced a medium-term note program (the
"Medium Term Note Program"). The Medium Term Note Program enables the Company
(i) to issue on an ongoing basis discrete amounts of unsecured debt that will
closely match, both as to timing and amount, the Company's specific liquidity
requirements, including property acquisition, development and redevelopment
costs, and (ii) to better manage the Company's debt maturities, including its
mortgage debt maturities. As of December 31, 1996, the Company had issued Medium
Term Notes in the aggregate amount of $115.7 million. The net proceeds from each
issuance were used to repay line of credit borrowings and mortgage debt. The
Medium Term Note Program remains available for the Company to issue additional
Medium Term Notes pursuant thereto when the Company considers market conditions
advantageous.
On January 14, 1997, the Company issued 3.4 million common shares and
received net proceeds of approximately $116 million which were used to repay
revolving credit debt and for general corporate purposes.
Equity Investments in Joint Venture
On November 17, 1995, the Company, in conjunction with certain joint
venture partners described below, acquired the Homart Community Center Division
of Sears from an affiliate of General Growth Properties, Inc. General Growth
Properties, Inc. had contracted to purchase the Homart Community Center Division
as part of its acquisition of Homart Development Co., a subsidiary of Sears. The
Homart Community Center Division includes ten power centers which, when
completed, will aggregate in excess of four million square feet of GLA located
in major metropolitan areas throughout the United States and several outlots and
pad sites adjacent to the ten power centers and certain other power centers
previously sold by Sears (the "Community Center Properties"). At the date of the
acquisition, construction of seven of the ten power centers was complete or
substantially complete and three of the power centers were under construction.
Construction of the three centers was substantially completed during 1996.
The Community Center Properties are owned by four joint ventures
(collectively, the "Community Center Joint Ventures"). The Company or a wholly
owned subsidiary of the Company and its joint venture partners each purchased a
50% interest in each Community Center Joint Venture. The Company's joint venture
partners are a consortium of third party investors, including a private REIT,
owned by institutional investors advised by DRA Advisors, Inc. ("DRA"), three
limited partnerships whose respective limited partners are pension funds and
whose general partners are affiliates of DRA and one corporation whose owners
are affiliates of DRA. In addition to owning a 50% interest in each Community
Center Joint Venture, the Company manages the Community Center Properties and
related developments pursuant to management and development agreements with each
of the Community Center Joint Ventures.
The total purchase price of the Community Center Properties aggregated
approximately $449.2 million and was funded through $300.1 million of secured
indebtedness at the joint venture level, $3.1 million of assumed net liabilities
and $146.0 million of cash of which one-half was provided by each of the Company
and its joint venture partners. In addition, the Company paid cash of
approximately $1.3 million relating to the purchase of certain rights to several
development sites.
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In October 1996, the Company formed a joint venture with DD Merriam,
L.P., which is advised by DRA relating to the development of a shopping center
in Merriam, Kansas, which was one of the development sites acquired in
conjunction with the acquisition of the Homart Community Center Division. The
joint venture is 50% owned by the Company and 50% owned by DD Merriam, L.P. The
Company will manage the shopping center and related development pursuant to
management and development agreements. At December 31, 1996, the Company
advanced $1.1 million to pay for certain construction related costs. The
advances accrue interest at 8% per annum and are to be repaid from the proceeds
of construction financing which will be entered into in 1997.
The joint venture agreements provide, after November 17, 1999 or if
either party is in default of the joint venture agreements, each partner has the
right to trigger a purchase or sale of its interest in the joint venture
(Reciprocal Purchase Rights) or to initiate a purchase and sale of the
properties (Property Purchase Rights).
In addition, at any time after November 17, 1999, the Company's joint
venture partners may convert all or a portion of their respective interests in
such joint ventures into common shares of the Company in accordance with the
terms set forth in the governing documents of such joint ventures. However, if
the joint venture partners elect to convert their respective interests into
common shares, the Company will have the sole option to pay cash instead of
issuing common shares. If the Company agrees to the issuance of common shares,
the agreement provides that the converting joint venture partner will execute an
agreement restricting the transfer of such shares acceptable to the Company.
In September 1996, the Company entered into a joint venture with OSTRS.
In conjunction with the formation of the joint venture, the Company transferred
two shopping centers with a net book value of $41.6 million and non-recourse
mortgage debt aggregating $36.4 million in exchange for a 50% interest in the
joint venture. OSTRS funded an initial cash contribution of $11.6 million which
was used to repay a portion of the non-recourse mortgage debt. The Company
continues to manage the two properties pursuant to a management agreement.
Property Acquisitions, Developments and Expansions
During 1996, the Company acquired five shopping centers, aggregating
1.1 million square feet of Company-owned GLA, at an aggregate purchase price of
approximately $113.9 million.
During 1996, the Company also completed six developments, including
those acquired from the Homart Community Center Division of Sears, and seven
expansions with approximately 1.2 million square feet of GLA at an aggregate
cost of approximately $135.6 million.
Retail Environment
During 1996, certain national and regional retailers experienced
financial difficulties and several have filed for protection under bankruptcy
laws. No significant bankruptcies have occurred during the period January 1
through March 14, 1997 with regard to the Company's portfolio of tenants.
See Management's Discussion and Analysis of Financial Condition and
Results of Operations included in Item 7 and the Consolidated Financial
Statements and Notes thereto included in Item 8 of this annual report on Form
10-K for further information on certain of the recent developments described
above.
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Competition
As one of the nation's largest owners and developers of neighborhood
and community shopping centers, the Company has established close relationships
with a large number of major national and regional retailers. Management is
associated with and/or actively participates in many shopping center and REIT
industry organizations.
Notwithstanding these relationships, there are numerous developers and
real estate companies that compete with the Company in seeking properties for
acquisition and tenants who will lease space in these properties.
Employees
As of March 14, 1997, the Company employed 173 full-time individuals,
including executive, administrative and field personnel. The Company considers
its relations with its personnel to be good.
Qualification as a Real Estate Investment Trust
The Company presently meets the qualification requirements of a REIT
under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the
"Code"). As a result, the Company generally will not be subject to federal
income tax to the extent it meets certain requirements of the Code.
Item 2. PROPERTIES
At December 31, 1996 the Portfolio Properties included 112 shopping
centers (13 of which are owned through joint ventures in which the Company and a
party otherwise unaffiliated with the Company owns a 50% interest), consisting
of 96 community shopping centers and power centers, 12 enclosed mini-malls, and
four neighborhood shopping centers. The Portfolio Properties also include seven
business centers containing office and light industrial, warehouse and research
space and 76 undeveloped parcels (aggregating approximately 211 acres) primarily
located adjacent to certain of the shopping centers. The shopping centers and
business centers aggregate approximately 21.1 million square feet of
Company-owned GLA (approximately 27.5 million square feet of total GLA) and are
located in 28 states, principally in the East and Midwest, with significant
concentrations in Florida, Ohio, South Carolina, North Carolina, Michigan and
Minnesota.
Neighborhood and community shopping centers and power centers make up
the largest portion of the Company's portfolio, comprising 17,701,995 (83.8%)
square feet of Company-owned GLA. Enclosed mini-malls account for 2,855,256
(13.5%) square feet of Company-owned GLA, and business center space consists of
576,742 (2.7%) square feet of Company-owned GLA. On December 31, 1996, the
average annualized base rent per square foot of Company-owned GLA of the
shopping centers, including those owned through joint ventures, was $7.85 and of
the business centers was $3.76.
The Company's shopping centers are designed to attract local area
customers and are typically anchored by one or more discount department stores
and often include a supermarket, drug store, junior department store and/or
other major "category-killer" discount retailer as additional anchors.
Substantially all of the shopping centers are anchored by a Wal-Mart or Kmart,
and the power centers are anchored by two or more national
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or regional tenants. The tenants of the shopping centers typically offer
day-to-day necessities rather than high-priced luxury items. As one of the
nation's largest owners and operators of shopping centers, the Company has
established close relationships with a large number of major national and
regional retailers, many of which occupy space in the shopping centers.
The following table sets forth, as of December 31, 1996, information as
to anchor and/or national retail tenants which individually accounted for at
least 1.0% of total annualized base rent of the properties, including those
owned though joint ventures:
<TABLE>
<CAPTION>
% of Shopping Center % of Company-owned
Base Rental Revenues Shopping Center GLA
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<S> <C> <C>
Wal-Mart 8.7% 13.3%
Kmart 6.2 11.0
T. J. Maxx/Marshall's 3.1 2.6
Kohl's Dept. Store 3.1 3.2
Barnes & Noble/B. Dalton 2.5 1.1
Lowes Home Centers 2.1 2.6
Office Max 1.6 1.0
JC Penny 1.6 3.1
Publix Supermarkets 1.4 1.5
Kroger 1.3 1.4
Fashion Bug 1.3 1.5
General Cinema 1.2 0.4
Winn-Dixie Supermarkets 1.2 1.4
Circuit City 1.1 0.8
Ahold Supermarkets 1.0 0.9
</TABLE>
In addition, as of December 31, 1996 unless otherwise indicated, with respect to
the 112 shopping centers:
- 49 of these properties were developed by DDG and four were
developed by the Company;
- 76 of these properties are anchored by Kmart or Wal-Mart store;
- these properties range in size from just under 100,000 square
feet to approximately 780,000 square feet of GLA (with 23
properties exceeding 325,000 square feet of GLA);
- approximately 58.2% of the Company-owned GLA of these properties
is leased to national chains, including subsidiaries, with
approximately 31.2% of the Company-owned GLA leased to regional
chains and approximately 6.6% of the Company-owned GLA leased to
local tenants;
- approximately 94.8% of the aggregate Company-owned GLA of these
properties was leased as of December 31, 1996. The Company has
entered into additional leases with anchor tenants aggregating in
excess of 240,000 square feet of vacant space, scheduled to
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- commence in 1997, which brings the existing occupancy rate to
96.0% (and, with respect to the properties owned by the Company
at December 31, of each of the five years beginning with 1992,
between 94.8% and 97.1% of aggregate Company-owned GLA of these
properties was leased);
- seven of these properties are currently being expanded by the
Company, and the Company is pursuing the expansion of additional
properties.
TENANT LEASE EXPIRATIONS AND RENEWALS
The following table shows tenant lease expirations for the next ten
years at the Company's shopping centers and business centers, assuming that none
of the tenants exercise any of their renewal options:
<TABLE>
<CAPTION>
Percentage of Percentage of
Total leased Total Base
Annualized Average Base Sq.Footage Rental Revenues
No. of Approximate Base Rent Rent Per Sq. Foot Represented Represented
Expiration Leases Lease Area in Under Expiring Under Expiring by Expiring by Expiring
Year Expiring Square Feet Leases (1) Leases(1) Leases Leases(1)
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<C> <C> <C> <C> <C> <C> <C>
1997 . . . . . . 365 1,153,813 $ 8,818,795 $ 7.64 5.5% 5.6%
1998 . . . . . . 279 1,256,945 $ 8,692,504 $ 6.92 6.0% 5.6%
1999 . . . . . . 326 1,219,203 $10,466,847 $ 8.58 5.8% 6.7%
2000 . . . . . . 250 1,012,243 $ 9,651,379 $ 9.53 4.8% 6.2%
2001 . . . . . . 230 1,143,804 $ 9,405,516 $ 8.22 5.4% 6.0%
2002 . . . . . . 70 816,129 $ 4,637,157 $ 5.68 3.9% 3.0%
2003 . . . . . . 61 933,097 $ 4,785,642 $ 5.13 4.4% 3.1%
2004 . . . . . . 59 658,769 $ 5,200,633 $ 7.89 3.1% 3.3%
2005 . . . . . . 71 993,213 $ 7,032,101 $ 7.08 4.7% 4.5%
2006 . . . . . . 45 494,320 $ 5,874,111 $11.88 2.3% 3.8%
----- --------- ----------- ------ ----- -----
1,756 9,681,536 $74,564,685 $ 7.70 45.9% 47.8%
</TABLE>
The seven business centers are located in Ohio and range in size from
approximately 36,000 to 236,000 square feet of Company-owned GLA. During 1994,
the Company expanded, by approximately 100,000 square feet of Company-owned GLA,
its business center located in Aurora, Ohio. The business centers contain office
and light industrial, warehouse and research space. As of December 31, 1996, the
business centers were 78.3% leased. Five of the seven business centers are
triple net leased, four are leased to single tenants, and one is leased to
multiple users. Pursuant to the triple net leases, the tenants are obligated to
pay all maintenance and insurance expenses and real estate taxes, and all or
substantially all operating expenses, relating to the applicable business
centers. The leases for the business centers have terms which are scheduled to
expire between October 1998 and November 2003. These leases generally have fixed
or cost-of-living rental increases in their option, but not in their base terms.
Accordingly, the rental payments under these leases will remain constant until
the expiration of their base terms, regardless of inflationary increases. There
can be no assurance that any of these leases will be renewed or that any new
tenants for the Company's business centers can be obtained if not renewed.
The Company's 76 undeveloped parcels primarily consist of outlots,
retail pads and expansion pads which are primarily located adjacent to certain
of the shopping centers. The Company is pursuing an active marketing program to
lease or develop its undeveloped parcels.
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST AS OF DECEMBER 31, 1996
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<TABLE>
<CAPTION>
Ownership
Interest
(ground
lease Company
termination/ Gross Mortgage
Type of option Date Land Leasable Obligation as
Property termination Developed or Area Area (sq. ft. of December
Center / Property Location (1) ) Acquired (2) (Acres) ) 31, 1996
- ----------------- -------- --------- ------------ ------------ ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALABAMA
- -------
Birmingham, AL 5291 Highway 280 South PC Fee 12/01/94 64.46 431,561
12/29/94 (a)
Birmingham, AL 7001 Crestwood Blvd. PC Fee 03/01/89 45.49 284,475
11/15/95 (a)
Huntsville, AL 6140-A University Drive PC Fee 12/28/95 5.29 41,000
12/28/95 (a)
ARIZONA
- -------
Phoenix, AZ 7553 West Bell Road PC Fee 10/01/95 24.12 340,094
07/02/96 (a)
ARKANSAS
- --------
North Little Rock, AR 4124 East McCain Blvd PC Fee 07/01/91 27.76 294,357
03/21/94 (a)
Russellville, AR 3093 East Main Street PC Fee 02/01/92 31.20 272,245
04/18/94 (a)
CALIFORNIA
- ----------
San Diego, CA 11610 Carmel Mntn. Rd. PC Fee(7) 04/01/93 50.00 446,484
11/17/95 (a)
COLORADO
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Alamosa, CO 145 Craft Avenue PC Fee 01/01/86 13.10 20,164
Denver, CO 505 South Broadway PC Fee(7) 11/01/93 38.59 369,386
11/17/95 (a)
Trinidad, CO Hwy 239 @ 125 Frontage PC Fee 05/01/86 17.88 63,836
CONNETICUT
- ----------
Waterbury, CT 899 Wolcott Street PC GL1 11/01/73 15.60 124,310
FLORIDA
- -------
Bayonet Point, FL U.S. 19 & S.R. 52 PC Fee 09/01/85 58.67 203,760 5,327,208
Brandon, FL 1602 Brandon Blvd PC GL2 06/01/72 17.33 139,522
Cape Coral, FL 1420 Del Prado Blvd NC Fee 09/01/85 9.61 98,413
Crystal River, FL 420 Sun Coast Hwy PC Fee 10/01/86 21.18 146,954
Fern Park, FL 6735 U.S. #17-92 PC Fee 10/01/70 3.04 16,000
Jacksonville, FL 3000 Dunn Avenue PC Fee 12/01/88 30.82 219,073 8,117,177
03/31/95 (a)
Marianna, FL 2820 Highway 71 PC Fee 08/01/90 17.34 63,894
Melbourne, FL 750-850 Apollo Blvd. PC GL3 11/01/78 15.52 121,913
Naples, FL 5010 Airport Road North PC Fee(7) 03/01/94 30.60 266,438
11/17/95 (a)
Ocala, FL 3711 Silver Sprgs, NE PC Fee 06/01/74 2.23 19,280
Orlando, FL 5250 W.Colonial Dr PC Fee 08/01/89 30.57 177,215
Ormond Beach, FL 1458 West Granada Blvd PC Fee 07/01/93 32.09 231,445
05/02/94 (a)
Palm Harbor, FL 300 East Lake Road PC Fee 05/01/90 5.80 52,395
05/12/95(a)
Pensacola, FL 8934 Pensacola Blvd PC Fee 12/01/88 21.00 75.736
<CAPTION>
Average
Total Base Annual Percentage
Annualized Rent per Percentage Leased
Base Rent (3) sq. ft. (4) Rent (5) (6) Anchor Tenants (Lease Expiration/Option Expiration)
------------- ----------- ---------- ---------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALABAMA
- -------
Birmingham, AL $3,397,447 7.87 100.0% Wal-Mart (2004/2024), Winn-Dixie (2014/2044),
Goody's (2004/2019), Stein Mart (2011/2021).
Birmingham, AL 1,843,069 7.38 115,165 87.8% Home Depot (not owned) Western Supermarkets (not
owned), Office Depot (1999/2014), Goody's (2004/
2019), Stein Mart (2003/2018), Cobb Theaters (2006/
2016)
Huntsville, AL 458,350 11.18 100.0% Wal-Mart (not owned)
ARIZONA
- -------
Phoenix, AZ 3,616,799 10.63 100.0% Lil' Things (2009/2024), Barnes & Noble(2011/2026),
TJMaxx (2005/2020), Circuit City (2016/2036),
Oshman's (2017/2037), Linens 'N Things (2011/2026).
ARKANSAS
- --------
North Little Rock, AR 1,790,068 6.60 92.1% Kmart (2016/2066), Wards (2014/2034), TJMaxx
(2001/2011), Cinemark (2011/2031)
Russellville, AR 1,638,184 6.09 28,336 98.8% Wal-Mart (2011/2041), JCPenney (2012/2032), Beall-
Ladymon (2007/2022).
CALIFORNIA
- ----------
San Diego, CA 5,988,064 13.41 100.0% Mervyn's (not owned), Kmart (2018/2048), Pacific
Theaters (2013/2023), Sportmart (2008/2023), Circuit
City (2009/2024), Marshall's (2009/2029), Ross Dress
For Less (2004/2019), Michael's (2004/2014), Barnes
& Noble (2003/2013), Blockbuster Music (1999/2014)
COLORADO
- --------
Alamosa, CO 155,086 7.80 13,587 98.6% Wal-Mart (not owned)
Denver, CO 3,553,362 9.62 100.0% Kmart (2019/2069), Albertson's (2019/2049), Sam's
(2018/2058), Office Max (2010/2035), Pep Boys (2014/
2035)
Trinidad, CO 292,581 4.83 343 95.0% Wal-Mart (not owned), Super Save (1998)
CONNETICUT
- ----------
Waterbury, CT 408,208 3.28 100.0% Kmart (1998/2048), Grand Union (1999/2024)
FLORIDA
- -------
Bayonet Point, FL 1,126,374 5.76 96.0% Publix (2005/2025), Beall's (2002/2017), TJMaxx
(2010/2030)*, Eckerd (2005/2025)
Brandon, FL 508,991 3.72 98.1% Kmart (1997/2047)
Cape Coral, FL 397,006 5.80 39,922 69.5% TJMaxx (2007/2017), Office Max (2012/2027)
Crystal River, FL 402,381 3.14 89,547 87.3% Beall's (2001/2016), Scotty's (2008/2038)
Fern Park, FL 97,700 6.43 95.0% Kmart (not owned)
Jacksonville, FL 1,385,737 6.41 45,115 98.7% Wal-Mart (not owned), J.C.Penney (2002/2022), Winn
Dixie (2009/2034), Walgreen's (2029/2029)
Marianna, FL 425,930 6.92 5,422 96.3% Wal-Mart (not owned), Beall's (2005/2020) , Eckerd
(2010/2030)
Melbourne, FL 364,464 3.12 31,376 95.7% Kmart (2003/2048), Beall's (1997/2007)
Naples, FL 2,674,090 10.47 95.8% Winn Dixie (2014/2038), TJMaxx (2009/2024), Service
Merchandise (2015/2035), Ross Dress For Less
(2005/2025), Circuit City (2015/2035), OfficeMax
(2010/2025)
Ocala, FL 72,060 4.72 10,811 79.3% Kmart (not owned), Eckerd (1998/2018)
Orlando, FL 1,016,984 8.83 25,349 65.0% Wal-Mart (not owned), Publix (2009/2019) , Walgreens
(2029/2029)
Ormond Beach, FL 1,719,873 7.96 93.4% Kmart (2018/2064), Publix (2013/2033), Bealls (2004/
2024)
Palm Harbor, FL 652,477 13.06 1,746 95.3% Target (not owned), Albertson's (not owned), Eckerd
(2010/2025)
Pensacola, FL 325,624 8.03 26,891 53.5% Wal-Mart (not owned), City Drug (1998/2003)
</TABLE>
-12-
<PAGE> 13
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST AS OF DECEMBER 31, 1996
- -------------------------------------
<TABLE>
<CAPTION>
Ownership
Interest
(ground
lease Company
termination/ Gross Mortgage
Type of option Date Land Leasable Obligation as
Property termination Developed or Area Area (sq. ft. of December
Center / Property Location (1) ) Acquired (2) (Acres) ) 31, 1996
- ----------------- -------- --------- ------------ ------------ ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Spring Hill, FL 13050 Cortez Blvd PC Fee 09/01/88 21.60 103,112 6,212,636
Tampa, FL 15233 No.Dale Mabry PC Fee 12/01/90 23.70 104,473
Tampa, FL 7039 West Waters Ave PC Fee 07/01/90 30.61 134,166
Tarpon Springs, FL 41232 U.S. 19, North PC Fee 11/01/74 23.30 190,680
West Pasco, FL 7201 County Rd 54 PC Fee 09/01/86 24.40 135,421 4,783,894
GEORGIA
- -------
Atlanta, GA 1155 Mt. Vernon Highway PC Fee(7) 11/01/95 30.67 202,191
11/17/95 (a)
Duluth, GA 1630 Pleasant Hill Road PC Fee 04/01/90 8.70 99,025
02/24/94 (a)
Marietta, GA 2609 Bells Ferry Road PC Fee(7) 08/01/95 48.28 270,440
11/17/95 (a)
Stone Mountain, GA 5615 Memorial Drive PC Fee 11/01/73 16.60 143,860
ILLINOIS
- --------
Harrisburg, IL 701 North Commercial PC Fee 01/01/91 24.46 168,507
02/17/94 (a)
Mount Vernon, IL 42nd and Broadway MM Fee 08/01/74 39.25 266,601
08/13/93 (a)
Schaumburg, IL 1430 East Golf Road PC Fee 11/01/93 62.80 501,092
11/17/95 (a)
INDIANA
- -------
Bedford, IN 1320 James Avenue PC Fee 07/01/93 20.56 187,135
10/21/93 (a)
Connersville, IN 2100 Park Road PC Fee 01/01/91 21.99 139,087
12/10/93 (a)
Highland, IN Highway 41 & Main Street PC Fee 11/01/95 16.08 239,845
07/02/96 (a)
IOWA
- ----
Ottumwa, IA 1110 Quincy Avenue MM Fee 04/01/90 34.00 161,659
KENTUCKY
- --------
Hazard, KY Kentucky Highway 80 PC Fee 08/01/78 11.74 111,492
Murray, KY U.S. Highway 641 & PC Fee 10/01/77 15.18 149,028
Arcadia 02/18/94 (a)
MASSACHUSETS
- ------------
Framingham, MA 1 Worcester Road PC Fee(7) 08/01/94 177.00 716,393
11/17/95 (a)
MICHIGAN
- --------
Bad Axe, MI 850 No.Van Dyke Rd PC Fee 01/01/91 18.58 63,415
08/12/93 (a)
Cheboygan, MI 1109 East State PC Fee 01/01/88 16.75 95,094
12/14/93 (a)
Gaylord, MI 1401 West Main Street PC Fee 02/01/91 19.49 190,482
08/12/93 (a)
Houghton, MI Highway M26 MM Fee 12/01/81 21.48 234,338 3,098,376
Howell, MI 3599 East Grand River PC Fee 11/01/91 26.52 213,737 7,734,904
09/23/93 (a)
<CAPTION> Average
Total Base Annual Percentage
Annualized Rent per Percentage Leased
Base Rent (3) sq. ft. (4) Rent (5) (6) Anchor Tenants (Lease Expiration/Option Expiration)
------------- ----------- ---------- ---------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALABAMA
- -------
Spring Hill, FL 855,918 8.50 97.7% Wal-Mart (not owned), Publix (2008/2028), Walgreens
(2028/2028), Beall's (2006/2046)
Tampa, FL 944,152 9.64 5,825 93.8% Wal-Mart (not owned), Publix (2010/2030)
Tampa, FL 984,591 8.24 89.1% Wal-Mart (not owned), Beall's (2005/2029), Kash N
Karry (2010/2040)
Tarpon Springs, FL 677,344 5.15 69.0% Kmart (1999/2049)
West Pasco, FL 969,156 7.21 4,077 99.3% Wal-Mart (not owned), Publix (2006/2026), Beall's
(2001/2016), Walgreens (2026/2026)
GEORGIA
- -------
Atlanta, GA 2,567,985 12.70 100.0% SteinMart (2010/2025), HomePlace (2011/2026),
United Artists (2015/2035)
Duluth, GA 1,154,648 12.34 94.5% Wal-Mart (not owned), Office Depot (2000/2020),
Ethan Allen (2000/2010)
Marietta, GA 3,162,581 11.69 100.0% Publix (2015/2035), HomePlace (2011/2026),
PetsMart (2011/2021), Barnes & Noble (2011/2026)
Stone Mountain, GA 459,183 3.24 98.4% Kmart (1998/2048)
ILLINOIS
- --------
Harrisburg, IL 865,997 5.46 94.1% Wal-Mart (2011/2041), Roundy's Grocery (2011/2031)
Mount Vernon, IL 1,134,153 4.71 198,177 90.3% Wal-Mart (2008/2028), J.C.Penney (1997/2022),
Martin's(1999/2014), Stage (1999/2014)
Schaumburg, IL 7,179,165 14.33 100.0% Builder's Square (2019/2049), Service Merchandise
(2014/2049), OfficeMax (2010/2020), Sports Authority
(2013/2033), Marshall's (2009/2024), Nordstrom Rack
(2009/2024), Border's Books (2009/2029), Circuit City
(2010/2025), Off 5th Saks Fifth Avenue (2011/2026)
INDIANA
- -------
Bedford, IN 996,376 5.45 6,761 97.7% Kmart (2018/2068), J.C.Penney (2008/2028), Goody's
(2003/2018), Buehler's (2010/2025)
Connersville, IN 771,499 5.61 1,992 98.9% Wal-Mart (2011/2041), Cox Supermarket (2011/2026)
Highland, IN 2,086,989 8.70 100.0% Marshall's (2011/2021), Circuit City (2016/2036),
Kohl's (2016/2036), OfficeMax (2012/2032), Jewel
(not owned), Target (not owned)
IOWA
- ----
Ottumwa, IA 1,023,466 6.75 32,297 93.8% Wal-Mart (not owned), J.C. Penney (2005/2035),
Herberger (2004/2019)
KENTUCKY
- --------
Hazard, KY 404,189 3.96 12,647 91.7% Kmart (2003/2053)*, A&P (1998/2038)
Murray, KY 452,522 3.23 137,965 94.1% Wal-Mart (2010/2030), Kroger (1997/2022)
MASSACHUSETS
- ------------
Framingham, MA 11,129,737 15.54 100.0% General Cinema (2014/2034), TJMaxx (2010/2020),
Sears Homelife (2004/2024), Marshall's (2011/2026),
Bob's (2011/2026), Linens 'N Things (2011/2026)
Sports Authority (2015/2035), Barnes & Noble (2011/
2026), OfficeMax (2011/2026), Toys R Us (2020/2070),
Kids R Us (2020/2070), Bradlee's (2005/2020)
MICHIGAN
- --------
Bad Axe, MI 515,770 8.13 100.0% Wal-Mart (not owned), Farmer Jack's (2012/2037)
Cheboygan, MI 397,950 4.60 365 91.1% Kmart (2005/2055), Carters Food Center (1999/2024)
Gaylord, MI 1,070,620 5.71 2,340 98.4% Wal-Mart (2010/2040), Buy-Low (2011/2031)
Houghton, MI 963,196 4.39 67,537 93.5% Kmart (2005/2055), J.C. Penney (2000/2020)
Howell, MI 1,289,526 6.03 9,851 100.0% Wal-Mart (2011/2041), Kroger (2012/2042)
</TABLE>
-13-
<PAGE> 14
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST AS OF DECEMBER 31, 1996
- -------------------------------------
<TABLE>
<CAPTION>
Ownership
Interest
(ground
lease Company
termination/ Gross Mortgage
Type of option Date Land Leasable Obligation as
Property termination Developed or Area Area (sq. ft. of December
Center / Property Location (1) ) Acquired (2) (Acres) ) 31, 1996
- ----------------- -------- --------- ------------ ------------ ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mt Pleasant, MI 4208 E.Blue Grass Rd PC Fee 07/01/90 51.13 248,963
09/24/93 (a)
Sault Ste Marie, MI 4516 I-75 Business Spur PC Fee 08/01/93 40.08 262,267 8,027,584
09/02/94 (a)
Walker, MI 3390-B Alpine Ave. N.W. PC Fee 09/01/89 16.40 133,981
12/29/95 (a)
MINNESOTA
- ---------
Bemidji, MN 1201 Paul Bunyan Dr MM Fee 11/01/77 31.55 285,166
Brainerd, MN 1200 Hwy 210 West MM Fee 08/01/85 17.19 230,129 1,020,000
Hutchinson, MN 1060 S.R. 15 MM Fee 12/01/81 36.88 121,273 5,242,849
Maple Grove, MN Weaver Lake Road & I-94 PC Fee 10/01/95 250,269
07/02/96 (a)
Worthington, MN 1635 Oxford Street MM Fee 11/01/77 38.02 185,348
MISSISSIPPI
- -----------
Starkville, MS 882 Highway 12 West PC Fee 08/01/90 28.81 234,652 2,438,320
11/16/94 (a)
Tupelo, MS 3850 North Gloster PC Fee 08/01/92 41.91 348,236 11,920,655
12/15/94 (a)
MISSOURI
- --------
Fenton, MO Gravois Rd-Hwy 141 NC Fee 07/01/70 11.07 100,548
Independence, MO 900 East 39th Street PC Fee(7) 09/01/95 46.95 365,062
11/17/95 (a)
NEW MEXICO
- ----------
Los Alamos, NM 800 Trinity Drive NC Fee 07/01/78 8.72 98,050
NORTH CAROLINA
- --------------
Ahoskie, NC 1400 East Memorial Drive PC Fee 12/01/92 26.95 187,257
02/25/94 (a)
Durham, NC 3500 Oxford Road PC Fee 12/01/90 41.70 206,827
Durham, NC 5428-B New Hope PC Fee(7) 07/01/95 39.53 408,292
Commons 11/17/95 (a)
Jacksonville, NC US Hwy 17-Western Avenue PC Fee 08/01/89 27.51 79,200 2,664,141
New Bern, NC 3003 Claredon Blvd PC Fee 05/01/89 28.18 238,388 5,392,642
Washington, NC 536 Pamlico Plaza NC Fee 11/01/90 22.17 85,000
Waynesville, NC 201 Paragon Parkway PC Fee 06/01/90 28.40 181,894
04/28/93 (a)
Wilmington, NC S. College-New Centre Dr PC Fee 09/01/89 57.78 442,583 10,075,323
NORTH DAKOTA
- ------------
Dickinson, ND 1681 Third Avenue MM Fee 05/01/78 27.10 267,676
OHIO
- ----
Ashland, OH U.S. Route 42 PC Fee 11/01/77 6.26 110,656
Aurora, OH 70-130 Barrington Town PC 04/01/96 37,876
Square Drive
Aurora, OH 180 Lena Drive BC Fee 09/01/88 20.00 236,225
<CAPTION> Average
Total Base Annual Percentage
Annualized Rent per Percentage Leased
Base Rent (3) sq. ft. (4) Rent (5) (6) Anchor Tenants (Lease Expiration/Option Expiration)
------------- ----------- ---------- ---------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mt Pleasant, MI 1,467,586 5.92 7,865 99.5% Wal-Mart (2009/2039), Kroger (2011/2041), Odd Lots
(1998/2008)
Sault Ste Marie, 1,575,229 6.37 94.3% Wal-Mart (2012/2042), J.C. Penney (2008/2033),
Glen's Supermarket (2013/2033)
Walker, MI 1,283,825 9.67 99.1% Circuit City (not owned), Target (not owned), Toys R
Us (not owned), TJMaxx (2005/2020), Office Depot
MINNESOTA
- ---------
Bemidji, MN 1,210,199 4.81 63,116 88.2% Kmart (2002/2052), J.C. Penney (1998/2018),
Herberger's (2005/2030)
Brainerd, MN 1,248,673 6.13 57,666 88.5% Kmart (2004/2054), Herberger's (2008/2023)
Hutchinson, MN 754,194 6.86 26,964 90.6% Kmart (not owned), J.C. Penney (2001/2021)
Maple Grove, MN 2,428,247 9.70 100.0% Kohl's (2016/2036), Barnes & Noble (2011/2026),
Holiday Sports (2011/2027), HomePlace (2016/2036),
Cub Foods (not owned)
Worthington, MN 980,469 5.45 15,708 97.1% Kmart (2001/2051), J.C. Penney (2007/2032), Sterling
(2001/2021), Hy-Vee (2011/2031)
MISSISSIPPI
- -----------
Starkville, MS 1,190,521 5.22 14,283 97.2% Wal-Mart (2015/2045), J.C. Penney (2010/2040),
Kroger (2012/2042)
Tupelo, MS 1,835,150 5.37 98.2% Wal-Mart (2012/2042), Sam's (2012/2042), Goody's
(2002/2017)
MISSOURI
- -------
Fenton, MO 725,846 8.07 694 89.4%
Independence, MO 3,521,749 9.74 99.0% Kohl's (2016/2036), Bed Bath & Beyond (2012/2027),
Marshall's (2012/2027), Rhodes Furniture (2016/2026),
Barnes & Noble (2011/2026), American Multi-Cinema
(2015/2034)
NEW MEXICO
- ----------
Los Alamos, NM 504,764 5.15 54,461 100.0% Furrs(1997/1997), Furrs Pharmacy (1998/2013),
TG&Y (2018/2033)
NORTH CAROLINA
- --------------
Ahoskie, NC 939,468 5.02 15,903 100.0% Wal-Mart (2013/2043), Belk (2008/2033), Food Lion
(2012/2032)
Durham, NC 1,319,776 6.52 109,873 97.8% Wal-Mart (not owned), Food Lion (2010/2030),
Lowes (2011/2031)
Durham, NC 4,422,876 10.83 100.0% Wal-Mart (2015/2035), Upton's (not owned), Michael's
(2005/2020), Marshall's (2011/2026), Linens 'N Things
(2011/2026), Best Buy (2011/2026), OfficeMax (2010/
(2025) Barnes & Noble (2010/2025)
Jacksonville, NC 546,189 6.90 6,384 100.0% Wal-Mart (not owned), Wilson's (2009/2024)
New Bern, NC 1,204,321 5.78 7,538 87.4% Wal-Mart (2009/2034)
Washington, NC 396,519 4.66 2,962 100.0% Wal-Mart (2009/2034)
Waynesville, NC 1,068,340 5.93 1,455 99.1% Wal-Mart (2011/2041), Food Lion (2011/2031)
Wilmington, NC 2,995,331 6.77 33,348 100.0% Wal-Mart (2009/2034), Sam's (not owned), Lowes
(2009/2029), Hamrick's (2002/2007), Goody's (2005/
2015)
NORTH DAKOTA
- ------------
Dickinson, ND 966,217 3.96 68,209 91.1% Kmart (2003/2053), J.C. Penney (1998/2018),
Herberger (2000/2020), Thrifty Drug (2001/2001)
OHIO
- ----
Ashland, OH 267,098 2.41 100.0% Kmart (2002/2052), N.J. Supermarkets (1997/2022)
Aurora, OH 341,387 10.72 84.1% Heinens (not owned)
Aurora, OH 744,109 3.15 100.0% Hardline Services (2003/2013)
</TABLE>
-14-
<PAGE> 15
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST AS OF DECEMBER 31, 1996
- -------------------------------------
<TABLE>
<CAPTION>
Ownership
Interest
(ground
lease Company
termination/ Gross Mortgage
Type of option Date Land Leasable Obligation as
Property termination Developed or Area Area (sq. ft. of December
Center / Property Location (1) ) Acquired (2) (Acres) ) 31, 1996
- ----------------- -------- --------- ------------ ------------ ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Canton, OH 5496 Dressler Road PC Fee(7) 10/01/95 20.00 229,809
Chillicothe, OH 867 North Bridge Street PC Fee 09/01/74 16.70 191,982
Cincinnati, OH 5100 Glencrossing Way PC Fee 11/01/90 24.47 231,224
05/26/93 (a)
Clev.W.65th, OH 3250 West 65th Street PC Fee 10/01/77 4.18 49,420
Eastlake, OH 33752 Vine Street PC Fee 09/01/71 0.99 4,000
Elyria, OH 825 Cleveland PC Fee 09/01/77 16.30 150,200 3,808,568
Highland Hts., OH 6235 Wilson Mills Rd PC Fee 11/01/95 11.63 247,146
Hillsboro, OH 1100 North High St PC Fee 03/01/79 11.02 58,583
Huber Hts., OH 8280 Old Troy Pike PC Fee 06/01/90 17.39 163,741
08/12/93 (a)
Lebanon, OH 1879 Deerfield Road PC Fee 01/01/90 14.40 26,500
08/12/93 (a)
Macedonia, OH 8210 Macedonia Commons PC Fee(7) 05/01/94 19.94 234,789
07/05/94 (a)
Mayfield Hts, OH 624 Alpha Drive BC Fee 11/01/86 7.00 35,705
Mayfield Hts, OH 625 Alpha Drive BC Fee 07/01/84 5.90 77,110
Mentor, OH Pine Needle BC Fee 11/01/87 3.10 40,200
Solon, OH 6211 S.O.M. Center Rd PC Fee 05/01/78 0.64 2,560
Stow, OH 4332 Kent Road PC Fee 07/01/69 20.14 116,806
Streetsboro, OH 3000 Crane Drive BC Fee 03/01/89 5.00 66,200
Tiffin, OH 870 West Market St MM Fee 09/01/80 27.62 230,278
Toledo, OH 5245 Airport Highway PC Fee 10/01/93 22.87 187,674
02/24/95 (a)
Twinsburg, OH 9177 Dutton Drive BC Fee 11/01/89 3.90 35,502
Twinsburg, OH 9300 Dutton Drive BC Fee 11/01/89 6.80 85,800
Westlake, OH 30100 Detroit Road PC Fee 10/01/74 12.71 162,420
Wilmington, OH 1025 S. South Street PC Fee 11/01/77 7.38 55,130
Xenia, OH 1700 West Park Square PC Fee 11/01/94 7.38 104,873
Zanesville, OH 3431 North Maple Ave PC Fee 04/01/90 3.28 13,283
Oregon
- ------
Portland, OR NW Evergreen Pkwy. & PC Fee 11/01/95 140,626
NW Ring Road 08/22/96 (a)
Pennsylvania
- ------------
Erie, PA 2301 West 38th Street PC GL8 08/01/73 13.27 95,000
Erie, PA 1902 Keystone Drive PC Fee 07/31/95 65.69 483,305
East Norriton, PA 2700 DeKalb Pike PC Fee 11/01/75 24.22 157,309
South Carolina
- --------------
Anderson, SC 406 Highway 28 By-pass PC Fee 06/01/90 20.90 163,809
03/08/94 (a)
Anderson, SC 3812 Liberty Highway PC Fee 10/01/93 2.13 14,250
03/22/95 (a)
<CAPTION>
Average
Total Base Annual Percentage
Annualized Rent per Percentage Leased
Center / Property Base Rent (3) sq. ft. (4) Rent (5) (6) Anchor Tenants (Lease Expiration/Option Expiration)
- ----------------- ------------- ----------- ---------- ---------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Canton, OH 2,241,879 10.41 93.7% Kohl's (2016/2046), Target (not owned), Media Play
(2011/2026), Dick's Clothing & Sporting Goods (2010/
2025)
Chillicothe, OH 1,257,085 6.66 9,630 98.3% Lowes, (2015/2035), Kroger (2001/2031), Super X
(2001/2031)
Cincinnati, OH 2,131,845 9.23 99.9% Thriftway (2009/2029), Service Merchandise (2006/
2031)
Clev.W.65th, OH 229,630 4.91 94.6% Kmart (not owned), A&P (1997/2027), Revco(1997/2007)
Eastlake, OH 68,400 17.10 100.0% Kmart (not owned)
Elyria, OH 761,970 5.07 7,281 100.0% Hill's (2003/2028), Finast (2010/2045)
Highland Hts., OH 2,563,263 10.37 100.0% Builders Square (2020/2070), Kohl's (2007/2047),
Dick's Clothing and Sporting Goods (2016/2036)
Hillsboro, OH 232,315 4.18 192 94.9% Kmart (2004/2054)*, Rite Aid (1999/2004), Bob &
Carls (not owned)
Huber Hts., OH 1,613,718 10.05 549 98.1% Wal-Mart (not owned), Cub Foods (2011/2031), Sears
(2002/2012)
Lebanon, OH 229,240 8.65 100.0% Wal-Mart (not owned), PK Lumber (not owned)
Macedonia, OH 2,221,812 9.46 100.0% Wal-Mart (not owned), Finast (2018/2049), Kohl's
(2016/2041)
Mayfield Hts, OH 0 0.0%
Mayfield Hts, OH 0 0.0%
Mentor, OH 217,080 5.40 100.0% Steris Corp (1999/2004)
Solon, OH 62,300 24.34 100.0% Kmart (not owned)
Stow, OH 189,344 1.62 39,772 100.0% Kmart (1996/2006)
Streetsboro, OH 211,840 3.20 100.0% Alumax Alum (1997/2006)
Tiffin, OH 744,908 3.57 57,287 90.5% Kmart (2005/2055), J.C. Penney (2000/2010), Heileg-
Myers (2004/2014)
Toledo, OH 1,428,882 7.61 15,244 100.0% Best Buy (2009/2024),Office Depot (2009/2024),
Michaels (2004/2014) Sears (2002/2012)
Twinsburg, OH 162,330 7.09 64.5%
Twinsburg, OH 359,460 4.19 100.0% VSA (1998)
Westlake, OH 932,683 6.01 40,086 95.5% Kmart (1999/2049), Marc's (2004/2019)
Wilmington, OH 179,454 3.94 17,817 82.6% Kmart (not owned), Super Valu (1998/2018)
Xenia, OH 814,659 7.77 2,971 100.0% Wal-Mart (not owned), Kroger (2019/2049)
Zanesville, OH 84,400 10.05 2,598 63.2% Kmart (not owned)
OREGON
- ------
Portland, OR 2,026,705 14.41 100.0% Office Depot (2010/2025), Haggan Supermarket (2021/
2046), Mervyn's (not owned), Target (not owned)
PENNSYLVANIA
- ------------
Erie, PA 209,415 2.36 36,736 93.3% Hill's (1998/2023),
Erie, PA 3,790,658 7.89 99.4% Wal-Mart (2015/2045), Lowe's (2015/2045), Media
Play (2010/2025), Kohl's (2016/2046)
East Norriton, PA 884,535 5.68 2,144 99.0% Kmart (2000/2050), Acme (2002/2027), Thrift Drug
(2002/2022)
SOUTH CAROLINA
- --------------
Anderson, SC 847,512 5.56 93.0% Wal-Mart (2010/2040), Ingles (2011/2066)
Anderson, SC 143,316 10.06 3,610 100.0% Wal-Mart (not owned), Sam's (not owned)
</TABLE>
-15-
<PAGE> 16
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST AS OF DECEMBER 31, 1996
- -----------------------------------------
<TABLE>
<CAPTION>
Ownership
Interest
(ground
lease Company
termination/ Gross Mortgage
Type of option Date Land Leasable Obligation as
Property termination Developed or Area Area (sq. ft. of December
Center / Property Location (1) ) Acquired (2) (Acres) ) 31, 1996
- ----------------- -------- --------- ------------ ------------ ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Camden, SC 1671 Springdale Drive PC Fee 03/01/90 22.97 166,197
06/24/93 (a)
Columbia, SC 5420 Forest Drive PC Fee 08/01/95 7.04 46,700
11/13/95 (a)
Mt.Pleasant, SC 1500 Highway 17 North PC Fee 03/01/92 22.70 187,496 7,043,274
03/30/95 (a)
No Charleston, SC 7400 Rivers Avenue PC Fee 08/01/89 28.10 211,288
11/07/93 (a)
Orangeburg, SC 2795 North Road PC Fee 07/01/94 2.65 22,200
03/22/95 (a)
Simpsonville, SC 621 Fairview Road PC Fee 10/01/90 17.23 142,133
01/03/94 (a)
Union, SC Highway 176 By-Pass #1 PC Fee 06/01/90 45.65 184,331
06/24/93 (a)
South Dakota
- ------------
Watertown, SD 1300 9th Avenue, S.E. MM Fee 11/01/77 29.30 286,165
Texas
- -----
Ft. Worth, TX SWC Eastchase Pkwy. PC Fee 12/01/95 17.00 117,109
and I-30 07/02/96 (a)
Vermont
- -------
Berlin, VT Route 4 MM Fee 09/01/86 50.25 174,646 4,940,000
Virginia
- ---------
Fairfax, VA 12210 Fairfax Town PC Fee(7) 10/01/94 22.79 253,941
Center 11/17/95 (a)
Martinsville, VA 240 Commonwealth Blvd. MM Fee(7) 07/01/89 43.73 411,977
Pulaski, VA 1000 Memorial Dr PC Fee 09/01/90 21.93 143,299
04/28/93 (a)
Winchester, VA 2190 So Pleasant Valley PC Fee 01/01/90 26.42 214,081 9,591,984
12/10/93 (a)
---------- ------------
21,103,838 $107,439,535
<CAPTION> Average
Total Base Annual Percentage
Annualized Rent per Percentage Leased
Base Rent (3) sq. ft. (4) Rent (5) (6) Anchor Tenants (Lease Expiration/Option Expiration)
------------- ----------- ---------- ---------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Camden, SC 933,717 5.81 96.7% Wal-Mart (2009/2039), Winn-Dixie (2011/2036),
Goody's (2001/2016)
Columbia, SC 484,450 10.37 691 100.0% Wal-Mart (not owned)
Mt.Pleasant, SC 1,449,547 7.73 49,962 100.0% Wal-Mart (not owned), Lowe's (2012/2032), Piggly
Wiggly (2012/2022), TJMaxx (2002/2012)
No Charleston, SC 1,381,282 6.73 97.2% Wal-Mart (2009/2039), Office Warehouse (2002/2012),
Service Merchandise (not owned)
Orangeburg, SC 227,175 10.23 100.0% Wal-Mart (not owned)
Simpsonville, SC 795,669 5.71 98.0% Kmart (2015/2065), Ingles (2011/2065)
Union, SC 974,987 5.35 2,135 98.9% Wal-Mart (2009/2039), Belk's (2010/2030), Win-Dixie
(2010/2035)
South Dakota
- ------------
Watertown, SD 1,357,576 4.88 100,864 97.2% Kmart (2002/2052), J.C. Penney (1998/2018),
Herberger's (1999/2019), Osco (1998/2003)
Texas
- -----
Ft. Worth, TX 1,143,171 9.76 100.0% PetsMart (2011/2036), MJ Designs (2011/2031), Ross
Dress For Less (2006/2026), Toys R Us (not owned),
Vermont Target (not owned)
- ---------
Berlin, VT 1,172,187 6.84 44,744 98.2% Rich's (2012/2032), J.C. Penney (2009/2034)
Virginia
- --------
Fairfax, VA 3,999,815 15.75 100.0% United Artists (2014/2034), Safeway (2019/2054)
TJMaxx (2009/2024), Bed, Bath and Beyond (2010/2020)
Tower Records (2009/2019)
Martinsville, VA 2,766,593 7.18 93.5% J.C. Penney (2009/2034), Leggett (2009/2024), Sears
(2009/2029), Kroger (2017/2062), Goody's (2006/
Pulaski, VA 859,649 6.15 27,962 97.6% Wal-Mart (2011/2041), Food Lion (2011/2031)
Winchester, VA 1,871,147 9.13 95.7% Office Max (2012/2027), Kohl's (2018/2048), Giant
Foods (2010/2040), Books-A-Million (2007/2017)
------------ ----- ---------- ------
$156,563,307 $7.76 $1,862,144 95.5%
<FN>
- -----------------------
(1) "PC" indicates a power center or a community shopping center, "NC" indicates a neighborhood shopping center, "MM"
indicates an enclosed mini-mall and "BC" indicates a business center.
(2) Indicates the date developed or acquired by the Company or DDG, unless denoted with (a), which indicates the date on
which the property was acquired by the company following completion of the IPO.
(3) Total annualized base rentals as of December 31, 1996
(4) Calculated as total annualized base rentals divided by Company-owned GLA actually leased as of December 31, 1996
(5) Percentage and overage rentals paid for the twelve-month period ended December 31, 1996.
(6) Includes space leased as of December 31, 1996,for which rent was being paid but which was not then occupied; also
includes anchor tennant leases signed as of said date relating to approximately 240,000 square feet which have not yet
been fully occupied
(7) One of thirteen properties owned through joint ventures which serve as collateral for joint venture mortgage debt
aggregating approximately $360.1 million (of which the Company's proportionate share is $180.1 million) which is not
reflected in the consolidated indebtedness.
* This anchore tenant has closed and sublet the space.
** This tenant-owned anchor store has closed.
*** This tenant-owned anchor store has closed and the space has been sublet.
**** This anchor tenant continues to pay rent to the Company but does not occupy or sublet the space.
</TABLE>
-16-
<PAGE> 17
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST AS OF DECEMBER 31, 1996
- -------------------------------------
<TABLE>
<CAPTION>
Ownership
Interest
(ground
lease Company
termination/ Gross Mortgage
Type of option Date Leasable Obligation as
Property termination Developed or Area (sq. ft. of December
Center / Property Location (1) ) Acquired (2) ) 31, 1996
- ----------------- -------- --------- ------------ ------------ ------------- -------------
1997 ACQUISITIONS
- -----------------
For the period January 1, 1997 through March 14, 1997 the Company acquired four (4) additional shopping centers at an aggregate
cost fo approximately $102.5 million summarized as follows:
<S> <C> <C> <C> <C> <C>
ARIZONA
- -------
Ahwatukee, AZ 4711 East Ray Road PC Fee 07/10/96 245,400
02/21/97 (a)
OHIO
- ----
N.Olmsted, OH 25877 Great Northern Blvd. PC Fee 06/01/58 459,858
02/21/97 (a)
N.Olmsted, OH 5140 Great Northern Blvd. PC Fee 06/01/87 145,080
02/21/97 (a)
TEXAS
- -----
San Antonio, TX 125 NE Loop 410 PC Fee (8) 12/30/96 286,388(8)
02/21/97 (a)
<CAPTION> Average
Total Base Annual Percentage
Annualized Rent per Percentage Leased
Base Rent (3) sq. ft. (4) Rent (5) (6) Anchor Tenants (Lease Expiration/Option Expiration)
------------- ----------- ---------- ---------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
ARIZONA
- -------
Ahwatukee, AZ 2,783,602 11.34 100.0% HomePlace (2012/2027), Smith's (2021/2046), Stein
Mart (2011/2026)
OHIO
- ----
N.Olmsted, OH 4,685,531 10.69 95.3% Regal Cinemas (2001/2001), Marc's (2002/2007)
CompUSA (2008/2023), Finast (not owned)
N.Olmsted, OH 1,297,077 9.33 95.9% Best Buy (2010/2025), Marshall's (2000/2005),
Kronheim's (1999/2004)
TEXAS
- -----
San Antonio, TX 3,516,406 13.97 87.9% Ross Dress For Less (2007/2027), DSW Warehouse
(2007/2027), Best Buy (2011/2026), Oshman's (2017/
2037), HomePlace (2012/2027)
</TABLE>
(8) Owned through joint venture which serves as collateral for joint venture
mortgage debt aggregating approximately $26.7 million (of which the
Company's proportionate share is $9.3 million) which is not reflected in
the consolidated indebtedness.
-17-
<PAGE> 18
Item 3. LEGAL PROCEEDINGS
Other than routine litigation and administrative proceedings arising in
the ordinary course of business, the Company is not presently involved in any
litigation nor, to its knowledge, is any litigation threatened against the
Company or its properties, which is reasonably likely to have a material
adverse effect on the liquidity or results of operations of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
-18-
<PAGE> 19
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The following table shows the high and low sales price of the Company's
common shares on the New York Stock Exchange (the "NYSE") for each quarter in
1996 and 1995 and the dividends paid per common share with respect to each such
quarter:
<TABLE>
<CAPTION>
Dividends
Paid per
1996 High Low Common Share
----------- -------- ------- --------------
<S> <C> <C> <C> <C>
1st quarter $ 31-3/4 $28-1/8 $ .60
2nd quarter 32 28-1/8 .60
3rd quarter 33-1/8 30-1/2 .60
4th quarter 37-1/4 32-1/8 .60
-------
$ 2.40
Dividends
Paid per
1995 High Low Common Share
----------- -------- ------- --------------
1st quarter $ 31 $27-5/8 $ .54
2nd quarter 30-3/8 26-1/8 .54
3rd quarter 32 27-3/4 .54
4th quarter 32-1/8 27-1/4 .54
------
$ 2.16
</TABLE>
The approximate number of record holders of the Company's common
shares, (the only class of common equity) at March 14, 1997 was 400, and the
approximate number of beneficial owners of such shares was 17,000.
In January 1997, the Company declared its 1997 first quarter dividend
to shareholders of record on February 12, 1997 of $.63 per share, a 5.0%
increase over the quarterly dividend rate of $.60 per share in 1996.
The Company intends to continue to declare quarterly dividends on its
common shares. However, no assurances can be made as to the amounts of future
dividends, since such dividends are subject to the Company's cash flow from
operations, earnings, financial condition, capital requirements and such other
factors as the Board of Directors considers relevant. The Company is required by
the Internal Revenue Code of 1986, as amended, to distribute at least 95% of its
REIT taxable income. The amount of cash available for dividends is impacted by
capital expenditures and debt service requirements to the extent that the
Company were to fund such items out of cash flow from operations.
In June 1995, the Company implemented a dividend reinvestment plan
under which shareholders may elect to reinvest their dividends automatically in
common shares. Under the plan, the Company may, from time to time, elect to
purchase common shares in the open market on behalf of participating
shareholders or may issue new common shares to such shareholders.
-19-
<PAGE> 20
Item 6. SELECTED FINANCIAL DATA
The financial data included in the following table has been selected by
the Company and has been derived from the financial statements for the last five
years and include the information required by Item 301 of Regulation S-K.
COMPARATIVE SUMMARY OF SELECTED FINANCIAL DATA
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------
OPERATING DATA: DDG Predecessor
----------------------
Pro forma Pro forma
1996(1) 1995(1) 1994(1) 1993(2) 1993(1) 1992(2) 1992
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues (primary real estate rentals) $ 130,906 $ 107,805 $ 81,974 $ 54,606 $ 54,531 $ 46,890 $ 46,180
--------- --------- --------- --------- --------- --------- ---------
Expenses:
Rental operation 35,124 28,069 22,802 16,963 16,863 15,530 14,980
Depreciation & amortization 25,062 21,865 16,211 10,393 10,393 9,115 9,256
Interest 29,888 29,595 21,423 13,407 15,060 11,936 25,509
--------- --------- --------- --------- --------- --------- ---------
90,074 79,529 60,436 40,763 42,316 36,581 49,745
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before equity in
net income (loss) from joint ventures,
gains on sales of land, non-recurring
charges and extraordinary items 40,832 28,276 21,538 13,843 12,215 10,309 (3,565)
Equity in net income (loss) of joint ventures 8,710 486 (186) (347) (347) (326) (526)
Gain on sales of land -- 300 -- 122 122 806 806
Non-recurring charges (3) -- -- -- -- (2,641) -- --
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary item 49,542 29,062 21,352 13,618 9,349 10,789 (3,285)
Extraordinary item(3) -- (3,557) (216) -- (731) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) $ 49,542 $ 25,505 $ 21,136 $ 13,618 $ 8,618 $ 10,789 $ (3,285)
========= ========= ========= ========= ========= ========= =========
Net income (loss) applicable to
applicable to common shareholders $ 35,342 $ 24,250 $ 21,136 $ 13,618 $ 8,618 $ 10,789 $ (3,285)
========= ========= ========= ========= ========= ========= =========
Per share data:
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary item $1.67 $1.48 $1.35 $ 1.10 $0.82 $0.93
Net income $1.67 $1.29 $1.34 $ 1.10 $0.76 $0.93
Cash dividends $2.40 $2.16 $1.92 $ 1.60(4) $1.42 --
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------------------
DDG
Predecessor
1996 1995 1994 1993 1992
--------- --------- --------- --------- -----------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Real estate (at cost) $ 991,647 $ 848,373 $ 686,890 $ 459,049 $ 307,745
Real estate, net of accumulated depreciation 849,608 728,333 586,839 375,183 232,519
Advances to and investments in joint ventures 106,796 83,190 8,710 9,078 (630)
Total assets 975,126 830,060 611,116 395,942 238,414
Total debt 478,432 405,726 394,435 184,534 299,789
Shareholders' equity (deficit) 469,336 404,161 203,508 197,118 (72,739)
</TABLE>
-20-
<PAGE> 21
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------
DDG Predecessor
----------------
Pro forma Proforma
1996(1) 1995(1) 1994(1) 1993(2) 1993(1) 1992(2) 1992
-------- ------- ------- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Cash flow provided from (used in):
Operating activities $ 75,820 $ 49,039 $ 39,112 (5) $ 19,151 (5) $ 5,090
Investing activities (199,671) (217,198) (191,810) (5) (137,232) (5) (2,418)
Financing activities 123,851 167,252 150,373 (5) 120,417 (5) (3,324)
Funds from operations (6):
Net income (loss) applicable to
common shareholders $ 35,342 $ 24,250 $ 21,136 $ 13,618 $ 8,618 $ 10,789 $ (3,285)
Depreciation and amortization 24,832 21,706 16,211 10,393 10,393 9,115 9,256
Equity in net (income) loss of joint
ventures (8,710) (486) 186 347 347 326 526
Joint venture funds from operations 13,172 1,364 217 105 105 70 (130)
Gain on sales of land -- (300) -- (122) (122) (806) (806)
Non-recurring and extraordinary items (3) -- 3,557 216 -- 3,372 -- --
--------- --------- --------- --------- --------- --------- ---------
$ 64,636 $ 50,091 $ 37,966 $ 24,341 $ 22,713 $ 19,494 $ 5,561
========= ========= ========= ========= ========= ========= =========
Weighted average number of common
shares outstanding 21,142 18,780 15,806 12,391 11,383 11,618
<FN>
(1) As described in the consolidated financial statements, the Company acquired
5 properties, 20 properties (10 of which are owned through joint ventures),
14 properties and 17 properties in 1996, 1995, 1994 and 1993, respectively.
(2) Pro forma adjustments reflect only those adjustments associated with the
Company's IPO and do not include the pro forma adjustments associated with
the secondary offerings and acquisitions in 1994 and 1993.
(3) The non-recurring charges in 1993 relate to costs incurred in connection
with the transfer of the initial properties (primarily transfer taxes and
title insurance costs) and the 1993 extraordinary item relates to debt
prepayment fees and write-off of deferred finance costs. In 1995 and 1994,
the extraordinary charges relate primarily to the write-off of deferred
finance costs.
(4) Represents annualized dividend rate as declared by the Board of Directors.
(5) Pro forma information has not been presented.
(6) Industry analysts generally consider funds from operations (`FFO") to be an
appropriate measure of the performance of an equity REIT. FFO does not
represent cash generated from operating activities in accordance with
generally accepted accounting principles and is not necessarily indicative
of cash available to fund cash needs and should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or as an alternative to cash flow as a measure of liquidity.
FFO is defined generally as net income applicable to common shareholder
excluding gains (losses) on sale of property, non-recurring charges and
extraordinary items, adjusting for certain noncash items, principally real
property depreciation and equity income (loss) from its joint ventures and
adding the Company's proportionate share of FFO of its unconsolidated joint
ventures, determined on a consistent basis. The Company calculates FFO in
accordance with the foregoing definition, which is currently used by
NAREIT. Certain other real estate companies may calculate FFO in a
different manner.
</TABLE>
-21-
<PAGE> 22
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements, the notes thereto and the comparative summary of selected
financial data appearing elsewhere in this report. Historical results and
percentage relationships set forth in the consolidated financial statements,
including trends which might appear, should not be taken as indicative of future
operations.
- --------------------------------------------------------------------------------
COMPARISON OF 1996 TO 1995 RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
REVENUES FROM OPERATIONS
Total revenues increased $23.1 million, or 21.4%, to $130.9 million for the year
ended December 31, 1996 as compared to $107.8 million for the year ended
December 31, 1995. Base and percentage rents for 1996 increased $13.8 million or
16.4% to $98.2 million as compared to $84.4 million in 1995. Approximately $2.5
million of the increase in base and percentage rental income is the result of
new leasing, re-tenanting and expansion of the Core Portfolio Properties
(shopping center properties owned as of January 1, 1995), an increase of 3.3%
over 1995 revenues from Core Portfolio Properties. The 15 shopping centers
acquired by the Company in 1996 and 1995 contributed $10.5 million of additional
revenue and the three new shopping center developments contributed $2.3 million.
The above increases were offset by the transfer of two properties to a joint
venture which reduced revenue by $0.8 million and a decrease in business center
base rents of $0.7 million. Included in the rental revenues is approximately
$0.7 million of revenue resulting from the recognition of straight line rents
primarily associated with recent acquisitions and developments. At December 31,
1996, the occupancy rate of the Company's shopping centers was at 94.8% as
compared to 96.3% at December 31, 1995. Contributing to the decrease in
occupancy was the Company's decision to terminate the leases of two Wal-Mart
stores in Winchester and Martinsville, Virginia at the end of June 1996. The
former Wal-Mart space in each center has been leased to a variety of tenants at
higher rents commencing in the fourth quarter of 1996 and first half of 1997.
The Company has entered into additional leases with anchor tenants aggregating
in excess of 240,000 square feet of vacant space including the above mentioned
Wal-Mart space which effectively adjusts the existing occupancy rate to 96.0%.
The average annualized base rent per leased square foot, including those
properties owned through joint ventures, was $7.85 at December 31, 1996 as
compared to $7.61 at December 31, 1995. During 1996, aggregate same store sales,
for tenants reporting sales, increased 3.9% to $225.18 per square foot as
compared to $216.70 per square foot in 1995.
The increase in recoveries from tenants of $4.9 million is directly related to
the increase in operating and maintenance expenses and real estate taxes
primarily associated with the 1996 and 1995 shopping center acquisitions and
developments. Recoveries were approximately 90.4% of operating expenses and real
estate taxes as compared to 88.8% in 1995.
Management fee income and other income increased by approximately $4.5 million
which generally relates to an increase in management fee income of approximately
$2.1 million, associated with the formation of the Community Center Joint
Ventures and the OSTRS Joint Venture and an increase in lease termination income
of approximately $2.4 million.
EXPENSES FROM OPERATIONS
Rental operating and maintenance expenses for the year ended December 31, 1996
increased $3.0 million, or 33.0% to $12.1 million as compared to $9.1 million
for the year ended December 31, 1995. An increase of $2.3 million is
attributable to the 18 shopping centers acquired and developed in 1996 and 1995
and an increase of $0.7 million in the Core Portfolio Properties, primarily
attributed to higher repair and maintenance costs and snow removal costs in 1996
as compared to 1995.
Real estate taxes increased $2.0 million, or 16.0%, to $14.5 million for the
year ended December 31, 1996 as compared to $12.5 million in 1995. This increase
is related to the 18 shopping centers acquired and developed in 1996 and 1995.
General and administrative expenses increased $2.0 million, or 32.3% to $8.4
million for the year ended December 31, 1996 as compared to $6.4 million in
1995. The increase is attributable to the growth of the Company primarily
related to the 1996 and 1995 acquisitions, joint ventures, expansions and
developments. During the fourth quarter of 1995, the Company expanded its
leasing staff and added three regional vice presidents of leasing and through-
22
<PAGE> 23
out 1996 opened seven new regional leasing and operations offices in various
cities throughout the country. The Company continues to maintain a conservative
policy with regard to the expensing of all internal leasing salaries, legal
salaries and related expenses associated with the leasing and re-leasing of
existing space.
Depreciation and amortization expense increased $3.2 million, or 14.6%, to $25.1
million for the year ended December 31, 1996 as compared to $21.9 million in
1995. The increase is primarily attributable to the growth related to the 18
shopping centers acquired and developed in 1996 and 1995 which contributed $2.9
million of the increase. The remaining $0.3 million relates to the expansions
and improvements associated with the Core Portfolio Properties.
Interest expense increased $0.3 million, or 1.0%, to $29.9 million for the year
ended December 31, 1996 as compared to $29.6 million for the year ended December
31, 1995. The overall increase in interest expense is primarily related to the
acquisition and development of shopping centers during 1996. The weighted
average debt outstanding during 1996 and related weighted average interest rate
was $426.5 million and 7.8% respectively, compared to $394.8 million and 8.1%
respectively, during 1995. Interest capitalized in conjunction with development
and expansion projects, was $3.3 million for the year ended December 31, 1996,
as compared to $2.5 million in 1995.
Equity in net income of joint ventures increased $8.2 million to $8.7 million in
1996 as compared to $0.5 million in 1995. The increase is attributable to the
formation of the Community Center Joint Ventures during the fourth quarter of
1995 and a joint venture with Ohio State Teachers Retirement Systems ("OSTRS")
in the third quarter of 1996 which contributed $8.1 million and $0.3 million of
equity in net income of joint ventures, respectively. This increase was offset
by $0.2 million increase in the equity in net loss from the Martinsville,
Virginia joint venture. This temporary decrease was the result of the joint
venture's election to terminate its Wal-Mart lease. The former Wal-Mart space
has been released to two major tenants at higher rents commencing during the
fourth quarter of 1996 and the first half of 1997.
The extraordinary item which aggregated $3.6 million for the year ended December
31, 1995, is primarily related to the write-off of unamortized deferred finance
costs.
NET INCOME
Net income increased $24.0 million to $49.5 million for the year ended December
31, 1996 as compared to net income of $25.5 million for the year ended December
31, 1995. The increase in net income is attributable to increased net operating
revenues (total revenues less operating and maintenance, real estate taxes, rent
and general and administrative expense) aggregating $16.0 million, resulting
from new leasing, re-tenanting and expansion of Core Portfolio Properties, and
the 18 shopping centers acquired and developed in 1995 and 1996. An additional
increase of $8.2 million relates to the formation of the Community Center Joint
Ventures and the OSTRS Joint Venture and an increase of $3.6 million relates to
a decrease in extraordinary charges. The increase in net operating revenues and
equity income from joint ventures and reduction in extraordinary charges was
offset by increases in depreciation and interest expense of $3.2 million and
$0.3 million, respectively, and a decrease in gain on sales of land of $0.3
million.
- --------------------------------------------------------------------------------
COMPARISON OF 1995 TO 1994 RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
REVENUES FROM OPERATIONS
Total revenues increased $25.8 million, or 31.5%, to $107.8 million for the year
ended December 31, 1995 as compared to $82.0 million for the year ended December
31, 1994. Base and percentage rental revenues increased $20.0 million.
Approximately $2.3 million of the increase in base and percentage rental income
is the result of new leasing, re-tenanting and expansion of the Core Portfolio
Properties (properties owned as of January 1, 1994) and $0.7 million is
attributable to additional recoveries from tenants, primarily resulting from
increased real estate taxes. The 14 shopping centers acquired by the Company in
1994 contributed $12.5 million of additional revenue and the 10 shopping centers
acquired by the Company in 1995 and the three new shopping center developments
contributed $9.0 million.
The increase in management fee income of $0.1 million is primarily attributable
to the formation of the Community Center Joint Ventures. Other income increased
by approximately $1.4 million which primarily relates to an increase in lease
termination income of $0.5 million and other fee related income of $0.7 million,
primarily development fees, and $0.2 million is primarily related to increases
in interest income.
23
<PAGE> 24
EXPENSES FROM OPERATIONS
Rental operating and maintenance expenses for the year ended December 31, 1995
increased $1.6 million, or 20.5% to $9.1 million as compared to $7.5 million for
the year ended December 31, 1994. An increase of $1.7 million is attributable to
the 27 shopping centers acquired and developed in 1995 and 1994 which was offset
by a reduction of $0.1 million in the Core Portfolio Properties, primarily
attributed to lower repair and maintenance costs and snow removal costs in 1995
as compared to 1994.
Real estate taxes increased $3.0 million, or 30.9%, to $12.5 million for the
year ended December 31, 1995 as compared to $9.5 million for the year ended
December 31, 1994. An increase of $2.1 million is related to the 27 shopping
centers acquired and developed in 1995 and 1994 and an increase of $0.9
million is related to the Core Portfolio Properties.
General and administrative expenses increased $0.8 million, or 13.8% to $6.4
million for the year ended December 31, 1995 as compared to $5.6 million in
1994. The increase is attributable to the growth of the Company primarily
related to the 1995 and 1994 acquisitions, expansions and developments.
Depreciation and amortization expense increased $5.7 million, or 34.9%, to $21.9
million for the year ended December 31, 1995 as compared to $16.2 million in
1994. The increase is primarily attributable to the growth related to the 27
shopping centers acquired and developed in 1994 and 1995 which contributed $4.4
million of the increase. The remaining $1.3 million relates to the expansions
and improvements associated with the Core Portfolio Properties and also includes
a charge in the first quarter of 1995 of $0.6 million resulting from the
demolition of an existing Kmart store, with a net book value of $0.6 million.
The Kmart store was replaced with a new Lowe's Home Improvement ("Lowe's") store
in the fourth quarter of 1995.
Interest expense increased $8.2 million, or 38.1%, to $29.6 million for the year
ended December 31, 1995 as compared to $21.4 million for the year ended December
31, 1994. An increase in interest expense of $2.6 million for the year ended
December 31, 1995 is attributable to the debt assumed in conjunction with the
Company's acquisitions in 1995 and 1994. An increase of $2.8 million, $7.1
million and $4.9 million is related to the Company's Debentures, Floating Rate
Senior Notes and Fixed Rate Senior Notes, respectively. The aforementioned
increases were offset by a decrease of $4.3 million in interest expense on the
revolving credit facilities, an increase in the capitalization of interest costs
aggregating $1.4 million relating to development projects and a decrease of $3.5
million which relates to principal amortization and retirement of mortgage debt
relating to the Core Portfolio Properties.
Equity in net income of joint ventures increased $0.7 million to $0.5 million in
1995 as compared to a net loss of $0.2 million in 1994. The increase is
attributable to the formation of Community Center Joint Ventures during the
fourth quarter of 1995 which contributed $0.7 million of equity in net income of
joint ventures.
The extraordinary item which aggregated $3.6 million for the year ended December
31, 1995, is primarily related to the write-off of unamortized deferred finance
costs. During 1995 the Company entered into a $150 million unsecured credit
facility and terminated its $150 million secured credit facility with Nomura
Asset Capital Corporation. The termination of the secured facility resulted in
the write-off of unamortized deferred finance costs aggregating $3.3 million. In
addition, the Company terminated a $25 million secured revolving credit facility
in January 1995, in conjunction with a 2,875,000 common share offering. The
termination of this facility also resulted in an extraordinary charge of $0.3
million primarily related to the write-off of unamortized deferred finance
costs.
NET INCOME
Net income increased $4.4 million to $25.5 million for the year ended December
31, 1995 as compared to net income of $21.1 million for the year ended December
31, 1994. The increase in net income is primarily attributable to increased net
operating revenues (total revenues less operating and maintenance, real estate
taxes and general and administrative expense) aggregating $20.6 million,
resulting from new leasing, re-tenanting and expansion of Core Portfolio
Properties, and the 27 shopping centers acquired and developed in 1995 and 1994.
In addition, the formation of the Community Center Joint Ventures resulted in an
increase of approximately $0.7 million and gains on sale of land aggregated $0.3
million. The aforementioned increases were offset by increases in depreciation,
interest expense and extraordinary charges aggregating $5.7 million, $8.2
million, and $3.3 million, respectively.
24
<PAGE> 25
- --------------------------------------------------------------------------------
FUNDS FROM OPERATIONS
- --------------------------------------------------------------------------------
Management believes that funds from operations ("FFO") provides an additional
indicator of the financial performance of a Real Estate Investment Trust. FFO is
defined generally as net income applicable to common shareholders excluding
gains (losses) on sale of property, non-recurring charges and extraordinary
items, adjusting for certain non-cash items, principally real property
depreciation and equity income (loss) from its joint ventures and adding the
Company's proportionate share of FFO of its unconsolidated joint ventures,
determined on a consistent basis. The Company calculates FFO in accordance with
the foregoing definition, which is substantially the same as the definition
currently used by the National Association Of Real Estate Investment Trusts
("NAREIT"). Certain other real estate companies may calculate funds from
operations in a different manner. In 1996, FFO increased $14.5 million, or 28.9%
to $64.6 million as compared to $50.1 million in 1995 and $38.0 million in 1994.
The increases in each year are attributable to the continuing increases in
revenues from Core Portfolio Properties, acquisitions and developments. The
Company's calculation of FFO is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income applicable to
common shareholders(1) $ 35,342 $ 24,250 $ 21,136
Depreciation of real property 24,832 21,706 16,211
Equity in net (income) loss of
joint ventures (8,710) (486) 186
Joint Ventures FFO(2) 13,172 1,364 217
Gain on sales of land -- (300) --
Extraordinary item -- 3,557 216
---------------------------------------
$ 64,636 $ 50,091 $ 37,966
=======================================
<FN>
(1) Includes straight line rental revenues of approximately $0.7 million in 1996
and $0.1 million in 1995 and none in 1994, primarily related to recent
acquisitions and new developments.
(2) Joint Venture Funds From Operations are summarized
as follows:
</TABLE>
<TABLE>
<S> <C> <C> <C>
Net income (loss)(3) $ 17,419 $ 972 $ (372)
Depreciation of real property 8,924 1,756 805
---------------------------------------
26,343 2,728 433
Ownership interest 50% 50% 50%
---------------------------------------
$ 13,172 $ 1,364 $ 217
=======================================
<FN>
(3) Includes straight line rental revenue of approximately $2.3 million in 1996
and $0.4 million in 1995 and none in 1994. The Company's proportionate share of
straight line rental revenues was $1.1 million in 1996 and $0.2 million in 1995.
</TABLE>
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
The Company anticipates that cash flow from operating activities will continue
to provide adequate capital for all principal payments, recurring tenant
improvements, as well as dividend payments in accordance with REIT requirements
and that cash on hand, borrowings under its existing revolving credit
facilities, as well as other debt and equity alternatives will provide the
necessary capital to achieve continued growth. Cash flow from operating
activities for 1996 increased to $75.8 million as compared to $49.0 million in
1995. The increase is attributable to the 28 acquisitions and developments
completed in 1996 and 1995, new leasing, expansion and re-tenanting of the core
portfolio properties and the equity offerings completed in 1996 and 1995.
The Company satisfied its REIT requirement of distributing at least 95% of
ordinary taxable income with declared common and preferred share dividends of
$66.0 million in 1996 as compared to $41.8 million in 1995 and $30.4 million in
1994. Accordingly, federal income taxes were not incurred at the corporate
level. The Company's common share dividend payout ratio for the year
approximated 80.3% of the actual 1996 FFO as compared to 81.5% and 80.0% in 1995
and 1994, respectively.
An increase in the 1997 quarterly dividend per common share to $.63 from $.60
was approved in December 1996 by the Company's Board of Directors. It is
anticipated that the new dividend level will result in a more conservative
payout ratio as compared to prior years. A lower payout ratio will enable the
Company to retain more capital which will be utilized toward attractive
investment opportunities in the development, acquisition and expansion of
portfolio properties.
25
<PAGE> 26
- --------------------------------------------------------------------------------
ACQUISITIONS, DEVELOPMENTS AND EXPANSIONS
- --------------------------------------------------------------------------------
During the three year period ended December 31, 1996, the Company and its joint
ventures expended $1,077.6 million, net, to acquire, develop, expand, improve
and re-tenant its properties as follows (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------------
COMPANY:
<S> <C> <C> <C>
Acquisitions $113.9 $ 81.6 $179.7
Completed Expansions 24.6 25.8 10.9
Developments and
Construction in Progress 48.2 58.6 34.7
Tenant Improvements and
Building Renovations 1.1 1.1 2.5
----------------------------------
187.8 167.1 227.8
Less Land Sales and Property
Transferred to Joint Ventures (44.5) (5.6) --
----------------------------------
Company Total 143.3 161.5 227.8
----------------------------------
JOINT VENTURES:
Acquisitions/Transfers 42.8 450.5 --
Developments and
Construction in Progress 47.1 4.5 --
Tenant Improvements and
Building Renovations -- -- .1
----------------------------------
Joint Venture Total 89.9 455.0 .1
----------------------------------
$233.2 $616.5 $227.9
===================================
</TABLE>
During 1996, the Company acquired five shopping centers currently aggregating
1.1 million square feet of Company owned GLA (Gross Leasable Area) at an
aggregate purchase price of approximately $113.9 million.
In September 1996, the Company entered into a joint venture with OSTRS. In
conjunction with the formation of the joint venture, the Company transferred to
the joint venture two recently developed shopping centers with a net book value
of $41.6 million and non-recourse mortgage debt aggregating $36.4 million. OSTRS
funded initial cash contributions of $11.6 million, which was used to repay a
portion of the non-recourse mortgage debt. In addition to owning a 50% interest
in the joint venture, the Company continues to manage the two properties
pursuant to a management agreement.
During 1996, the Company completed the first phase of a 520,000 square foot
shopping center development in Canton, Ohio at an aggregate cost of $21.2
million. This property was transferred into the joint venture with OSTRS
discussed above. The Company also completed the development of the initial phase
of a shopping center in Aurora, Ohio aggregating approximately 90,000 square
feet at a total cost of $4.9 million. In addition, the Company completed the
development of the Independence, Missouri shopping center which is one of the
three Community Center Joint Venture properties acquired while under
development, in 1995, through the Homart transactions as described below. The
remaining two shopping centers under development, located in Framingham,
Massachusetts and Atlanta, Georgia, are in the final stages of construction. As
of December 31, 1996 the majority of tenants had opened at each of these
centers.
Construction has also commenced on the development of four additional shopping
centers aggregating approximately 1.7 million square feet with an aggregate
projected cost of approximately $117 million and include: (1) a 235,000 square
foot Phase II development of the Canton, Ohio center, (2) a 500,000 square foot
shopping center in Boardman, Ohio, (3) a 475,000 square foot shopping center in
Stow, Ohio and (4) a 443,000 square foot shopping center in Merriam, Kansas. The
Merriam, Kansas shopping center is being developed through a joint venture,
formed in October 1996, which is 50% owned by the Company. All of the above
shopping centers are scheduled for completion during the second half of 1997
with certain anchor tenants opening as early as the fourth quarter of 1996 and
the first half of 1997. The Company continues to pursue additional development
opportunities.
During 1996, the Company completed expansions aggregating approximately 375,000
square feet at an aggregate cost of approximately $24.6 million at the Company's
shopping centers located in Highland Heights, Ohio; Erie, Pennsylvania;
Birmingham, Alabama; North Charleston, South Carolina; Wilmington, North
Carolina; Brainerd, Minnesota and Watertown, South Dakota. The Company is
currently expanding seven shopping centers and will continue to pursue
additional expansion opportunities. The Company and its joint ventures currently
have approximately 211 acres of undeveloped land consisting of 76 parcels,
primarily adjacent to its existing shopping centers, available for development,
expansion or sale.
26
<PAGE> 27
During 1995, the Company acquired ten shopping centers aggregating 1.2 million
square feet of Company-owned GLA at an aggregate purchase price of approximately
$81.6 million.
On November 17, 1995, the Company, in conjunction with certain venture partners
described below, acquired the Homart Community Center Division of Sears, Roebuck
and Co. ("Sears") from an affiliate of General Growth Properties, Inc. The
Homart Community Center Division includes ten power centers which will aggregate
in excess of four million square feet of GLA located in major metropolitan areas
throughout the United States and several outlots and pad sites adjacent to the
ten power centers and certain other power centers previously sold by Sears (the
"Community Center Properties"). Construction of seven of the ten power centers
was complete or substantially complete at the time of acquisition and three of
the power centers were under construction.
The Company, or a wholly owned subsidiary of the Company, and its joint venture
partners each purchased a 50% interest in each Community Center Joint Venture.
The total purchase price for the Community Center Properties aggregated $449.2
million and was funded through $300.1 million of secured indebtedness at the
joint venture level, $3.1 million of assumed net liabilities and $146.0 million
of cash of which one-half each was provided by the Company and its joint venture
partners. In addition, the Company paid cash of approximately $1.3 million
relating to the purchase of certain rights to various development sites.
During 1995, the Company completed the first phase of a 480,000 square foot
shopping center development in Erie, Pennsylvania; and the first phase of a
245,000 square foot redevelopment in Highland Heights, Ohio. The Company also
completed the development of a 195,000 square foot shopping center in Xenia,
Ohio.
During 1995, the Company completed over 400,000 square feet of expansions at 12
shopping centers for a total cost of approximately $25.8 million.
During 1994, the Company acquired 14 shopping centers aggregating of 3.1 million
square feet of Company-owned GLA at an aggregate purchase price of approximately
$179.7 million.
During 1994, the Company completed expansions at seven shopping centers
aggregating approximately 258,000 square feet of GLA at an aggregate cost of
approximately $10.9 million.
- --------------------------------------------------------------------------------
FINANCING ACTIVITIES
- --------------------------------------------------------------------------------
The above acquisitions, developments and expansions were financed through cash
provided from operating activities, revolving credit facilities, mortgages
assumed, construction loans and debt and equity offerings. Total debt
outstanding at December 31, 1996 was $478.4 million compared to $405.7 million
at December 31, 1995 and $394.4 million at December 31, 1994. In 1996, the
Company increased total debt by $72.7 million primarily to fund acquisitions,
developments and expansions.
During 1996, the Company issued $111.7 million of senior unsecured fixed rate
notes through its Medium Term Note ("MTN") program with maturities ranging from
five to seven years and interest rates ranging from 6.58% to 7.42%. The Company
also repaid approximately $30 million of mortgage debt with a weighted average
interest rate of 8.8% which also unencumbered three shopping center properties.
In June 1996, the Company extended its $150 million unsecured revolving credit
facility for an additional year, through May 1999, and reduced the current
interest rate 25 basis points to LIBOR plus 1.25%. In September 1996, the
Company restructured its $25 million secured revolving credit facility. This
restructuring resulted in an $18.6 million ten year non-recourse mortgage loan,
which was transferred into the joint venture with OSTRS, and a $10 million
unsecured revolving credit facility which matures in November 1999. This
restructuring resulted in the mortgage release of two of the three shopping
centers which served as collateral for the $25 million secured revolving credit
facility.
In January 1996, an additional 175,000 Class B Depositary preferred shares were
issued, in conjunction with the underwriters over allotment option, which
resulted in additional net proceeds of approximately $4.2 million. In March
1996, the Company issued 2.6 million common shares and received net proceeds of
approximately $75.4 million which were used to retire debt.
27
<PAGE> 28
A summary of the aggregate gross proceeds raised of $698.1 million through the
issuance of common shares, preferred shares, senior unsecured notes and
subordinated convertible debentures during the three year period ended December
31, 1996 is as follows (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY:
Common Shares $ 75.6 $ 81.2 $ 15.8
Class A Preferred Shares -- 105.4 --
Class B Preferred Shares 4.4 40.0 --
----------------------------------------
Total Equity 80.0 226.6 15.8
----------------------------------------
DEBT:
Senior Fixed Rate Notes 111.7 104.0 --
Senior Variable Rate Notes -- -- 100.0
Subordinated Convertible Debentures -- -- 60.0
----------------------------------------
Total Debt 111.7 104.0 160.0
----------------------------------------
$191.7 $330.6 $175.8
========================================
</TABLE>
In addition to the above financings, the Community Center Joint Ventures entered
into mortgage loans for up to $330 million during 1995. At December 31, 1996 and
1995 outstanding borrowings associated with the Community Center Joint Ventures
aggregated $319.5 and $303.3, respectively.
At December 31, 1996, the Company's capitalization consisted of $478.4 million
of debt (excluding the Company's proportionate share of joint venture mortgage
debt aggregating $180.1 million), $149.8 of preferred stock and $805.0 million
of market equity (market equity is defined as common shares outstanding
multiplied by the closing price of the common shares on the New York Stock
Exchange at December 31, 1996 of $37-1/8) resulting in a debt to total market
capitalization ratio of .33 to 1.0 compared to the ratios of .36 to 1.0 and .44
to 1.0 at December 31, 1995 and 1994, respectively. At December 31, 1996, the
Company's total debt consisted of $379.8 million of fixed rate debt, and $98.6
million of variable rate debt.
It is management's intention that the Company have access to the capital
resources necessary to expand and develop its business. Accordingly, the Company
may seek to obtain funds through additional equity offerings or debt financing
in a manner consistent with its intention to operate with a conservative debt
capitalization policy and maintain its investment grade ratings with Moody's
Investor Services and Standard and Poor's. In June 1996, the Company filed a
shelf registration statement with the Securities and Exchange Commission under
which $400 million of debt securities, preferred shares or common shares may be
issued. As of December 31, 1996, the Company had $341.3 million available under
its shelf registration statement. In addition as of December 31, 1996 the
Company had $64.5 million available under its $160 million of unsecured
revolving credit facilities. On December 31, 1996, the Company also had 90
operating properties with $97.7 million or 70.3% of the total revenue for the
year ended December 31, 1996 which were unencumbered thereby providing a
potential collateral base for future borrowings.
On January 14, 1997, the Company completed the sale of 3.4 million common shares
at an offering price of $36-5/8 which resulted in net proceeds of approximately
$116 million which were used to repay the $95.5 million of outstanding revolving
credit borrowings and for general corporate purposes. On January 14, 1997, the
Company's capitalization consisted of $382.8 million of debt (excluding the
Company's proportionate share of joint venture mortgage debt aggregating $180.1
million), $149.8 of preferred stock and $916.9 million of market equity (based
on the offering price of $36-5/8) resulting in a debt to total market
capitalization ratio of .26 to 1.0. As of January 14, 1997, the Company had
$218.6 million available under its shelf registration statement.
- --------------------------------------------------------------------------------
INFLATION
- --------------------------------------------------------------------------------
Substantially all of the Company's long-term leases contain provisions designed
to mitigate the adverse impact of inflation. Such provisions include clauses
enabling the Company to receive percentage rentals based on tenants' gross
sales, which generally increase as prices rise, and/or escalation clauses, which
generally increase rental rates during the terms of the leases. Such escalation
clauses are often related to increases in the consumer price index or similar
inflation indices. In addition, many of the Company's leases are for terms of
less than ten years, which permits the Company to seek to increase rents upon
re-rental at market rates. Most of the Company's leases require the tenants to
pay their share of operating expenses, including common area maintenance,
28
<PAGE> 29
real estate taxes, insurance and utilities, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
At December 31, 1996, approximately 79.4% of the Company's debt (excluding joint
venture debt) bore interest at fixed rates with a weighted average maturity of
approximately 4.8 years and a weighted average interest rate of approximately
7.8%. The remainder of the Company's debt bears interest at variable rates, with
a weighted average maturity of approximately 2.6 years and a weighted average
interest rate of approximately 6.9%. As of December 31, 1996, the Company's
Community Center Joint Ventures had variable rate debt aggregating approximately
$319.5 million in the form of bridge loans which are expected to be converted to
long-term fixed rate debt through securitizations during the second quarter of
1997. The Company's OSTRS Joint Venture had variable rate debt aggregating $24.8
million. The Company intends to utilize variable rate indebtedness available
under its revolving credit facilities in order to initially fund future
acquisitions of shopping centers. Thus, to the extent that the Company incurs
additional variable rate indebtedness, its exposure to increases in interest
rates in an inflationary period would increase. The Company believes, however,
that in no event would increases in interest expense as a result of inflation
significantly impact the Company's distributable cash flow.
The Community Center Joint Ventures have entered into swap agreements with major
financial institutions as a hedge against increasing interest rates associated
with the joint ventures' proposed upcoming securitization. The Company intends
to continuously monitor and actively manage interest costs on its variable rate
debt portfolio and may enter into swap positions based on market fluctuations.
In addition, the Company believes that it has the ability to obtain funds
through additional equity and/or debt offerings, including the issuance of
medium term notes. Accordingly, the cost of obtaining such protection agreements
in relation to the Company's access to capital markets will continue to be
evaluated.
- --------------------------------------------------------------------------------
ECONOMIC CONDITIONS
- --------------------------------------------------------------------------------
Many regions of the United States, including regions in which the Company owns
property, have experienced varying degrees of economic recession. A continuation
of the economic recession, or further adverse changes in general or local
economic conditions, could result in the inability of some existing tenants of
the Company to meet their lease obligations and could otherwise adversely affect
the Company's ability to attract or retain tenants. The shopping centers are
typically anchored by discount department stores (usually Wal-Mart, Kmart or
JCPenney), supermarkets and drug stores which usually offer day-to-day
necessities, rather than high-priced luxury items. Since these merchants
typically perform better in an economic recession than those who market high
priced luxury items, the percentage rents received by the Company have remained
relatively stable. In addition, the Company seeks to reduce its operating and
leasing risks through ownership of a portfolio of properties with a diverse
geographic and tenant base.
During 1996 and 1995, certain national and regional retailers have experienced
financial difficulties and several have filed for protection under bankruptcy
laws. Although the Company has experienced an increase in the number of tenants
filing for protection under bankruptcy laws, no significant bankruptcies have
occurred through February 21, 1997 with regard to the Company's portfolio of
tenants.
29
<PAGE> 30
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is included in a separate section at the end
of this report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-30-
<PAGE> 31
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Board of Directors of the Company consists of seven members. As
required by the Company's amended and restated Articles of Incorporation, four
of the Company's directors are "Independent', as defined therein. All directors
of the Company serve terms of one year or until the election of their respective
successors. Officers of the Company serve at the pleasure of the Board.
The Board of Directors has control of the management of the Company and
its property and the disposition thereof and is responsible for the general
policies of the Company and the general supervision of the Company's activities
conducted by its officers, agents, employees, advisors, managers or independent
contractors as may be necessary in the course of the Company's business.
The following table sets forth certain information with respect to the
directors, nominees for director and executive officers of the Company as of
March 14, 1997:
<TABLE>
<CAPTION>
Name Age Position and Office with the Company
---- --- ------------------------------------
<S> <C> <C>
Scott A. Wolstein 44 Chairman of the Board of Directors and Chief
Executive Officer and a Director
James A. Schoff 51 Executive Vice President, Chief Operating Officer
and a Director
John R. McGill 42 Vice President and Director of Development
Joan U. Allgood 44 Vice President and General Counsel
Loren F. Henry 49 Vice President and Director of Management
William H. Schafer 39 Vice President and Chief Financial Officer
Walter H. Teninga 69 Director
William N. Hulett III 53 Director
Alan Bobman 36 Regional Vice President of Leasing
Steven M. Dorsky 39 Regional Vice President of Leasing
Robin R. Walker 40 Regional Vice President of Leasing
Ethan Penner 35 Director
Albert T. Adams 46 Director
Dean S. Adler 40 Nominee for Director
</TABLE>
Messrs. Wolstein and Schoff have served as directors of the Company
since November of 1992, and Messrs. Teninga, and Hulett have served as directors
of the Company since the IPO in February 1993. Messrs. Penner and Adams have
served as directors of the Company since 1996. Mr. Adler is a nominee for
election as a director at the Company's 1997 annual meeting of shareholders
currently scheduled to be held on May 12, 1997.
-31-
<PAGE> 32
Scott A. Wolstein has been the President, Chief Executive Officer and a
Director of the Company since its organization and assumed the responsibilities
of Chairman of the Board of Directors in February 1997. Prior to the
organization of the Company, Mr. Wolstein was a principal and executive officer
of its predecessor entities since before 1992. Mr. Wolstein is a graduate of the
Wharton School at the University of Pennsylvania and of the University of
Michigan Law School. Following his graduation from the University of Michigan
Law School, Mr. Wolstein was associated with the Cleveland law firm of Thompson,
Hine & Flory. He has served as President of the Board of Trustees of the United
Cerebral Palsy Association of Greater Cleveland and as a member of the Board of
The Great Lakes Theater Festival, Neighborhood Progress, Inc., The Park
Synagogue, Cleveland's Convention and Visitors Bureau of Greater Cleveland and
Bellefaire. He is currently a member of the Board of Trustees of the National
Association of Real Estate Investment Trusts and the International Council of
Shopping Centers and serves as the General Co-Chairman of the Cleveland Campaign
for the State of Israel Bonds. He is also a member of the Young Presidents
Organization, the Urban Land Institute, the National Realty Committee, and the
Wharton Real Estate Center.
James A. Schoff has been Executive Vice President, Chief Operating
Officer and a Director of the Company since its organization. After graduating
from Hamilton College and Cornell University Law School, Mr. Schoff practiced
law with the firm of Thompson, Hine and Flory where he specialized in the
acquisition and syndication of real estate properties. Mr. Schoff serves as a
member of the Board of Trustees of the Western Reserve Historical Society, the
Children's Aid Society and the Cleveland Ballet.
John R. McGill has been affiliated with the Company and its predecessor
entities since 1969. During his tenure with the Company he has been involved
with the coordination and development of in excess of 65 of their properties,
including land acquisition, major tenant leases, and the overall development
program. Mr. McGill has been a Vice President and Director of Development of the
Company since April 1993.
Joan U. Allgood has been a Vice President and General Counsel of the
Company since its organization as a public company and General Counsel of its
predecessor entities since 1987. Mrs. Allgood practiced law with the firm of
Thompson, Hine and Flory from 1983 to 1987, and is a graduate of Denison
University and Case Western Reserve University School of Law.
Loren F. Henry has been a Vice President, Director of Management of the
Company since its organization as a public Company and served as President of
one of its predecessor entities since 1984. Mr. Henry earned a Bachelor of Arts
degree in Business Administration and Mathematics from Winona State College.
William H. Schafer has been a Vice President and Chief Financial
Officer of the Company since its organization as a public company and the Chief
Financial Officer of its predecessor entities since April 1992. Mr. Schafer
joined the Cleveland, Ohio office of the Price Waterhouse LLP accounting firm in
1983 and served there as a Senior Manager from July 1990 until he joined the
organization in 1992. Mr. Schafer graduated from the University of Michigan with
a Bachelor of Arts degree in Business Administration.
-32-
<PAGE> 33
Alan Bobman joined the Company in October 1995 as Regional Vice
President of Leasing. Mr. Bobman was previously Divisional Director of Real
Estate at Charming Shoppes, Inc. which operates the Fashion Bug and Fashion Bug
Plus stores nationwide. He was employed at Charming Shoppes since 1985, and is
an Insurance and Real Estate graduate of Penn State University.
Steven M. Dorsky has been a Regional Vice President of Leasing since
November 1995. Prior to joining the Company, he was an Assistant Vice President
and Senior Leasing Associate for the Cleveland based retail brokerage and
management firm, The Hausman Companies. Mr. Dorsky earned a Bachelor of Arts
degree in business from Macalester College and a Masters degree in Social
Administration from Case Western Reserve University - School of Applied Social
Science.
Robin R. Walker joined the Company in April 1995 and was appointed
Regional Vice President of leasing in November 1995. Prior to joining the
Company, Ms. Walker was president of Aroco, Inc., a retail brokerage and tenant
representation firm based in Alabama. Ms. Walker attended the University of
Alabama where she earned her degree in elementary education.
Walter H. Teninga was the President and Chief Executive Officer of
American Club Stores, Inc., from January 1992 to September 1993. Mr. Teninga
founded the Warehouse Club, a wholesale cash-and-carry membership warehouse
business, the stock of which became publicly-traded during Mr. Teninga's 10-year
tenure as Chairman and Chief Executive Officer. Prior to forming the Warehouse
Club, Mr. Teninga served as Vice Chairman and Chief Financial and Development
Officer of Kmart Corporation, where he was employed from 1956 to 1979. He is a
past president and former director of the Boys and Girls Clubs of Southeastern
Michigan.
William N. Hulett III is the Co-Chairman and Chief Executive Officer of
the Rock & Roll Hall of Fame & Museum in Cleveland. From 1981 to 1993, Mr.
Hulett was the President of Stouffer Hotel Company, the owner of a national
hotel chain. Prior to that time, Mr. Hulett served as Vice President of
Operations for Westin Hotels, based in Seattle, Washington. In December 1991, he
completed a third consecutive term as chairman of the Convention and Visitors
Bureau of Greater Cleveland. He is a member of the Board of Trustees of the New
Cleveland Campaign, a director of the Greater Cleveland Growth Association, a
director of the Boykin Lodging Company and a member of the 1992 U.S. Savings
Bonds Volunteer Committee appointed by the Secretary of the U.S. Treasury. Mr.
Hulett was named Business Executive of the year for 1995 by the Sales and
Marketing Executives Association.
Ethan Penner has been the President of Nomura Asset Capital Corporation
(Nomura's real estate finance arm), as well as a member of Nomura's Operating
Committee since 1994. Mr. Penner has also been the Executive Managing Director
of Nomura Securities International, Inc. since 1994. From 1992 to 1994, Mr.
Penner was President of Magellan Financial Services, an investment banking firm
which he founded in 1992. Prior to founding Magellan Financial Services, Mr.
Penner was a Principal at Morgan Stanley & Co., Inc. from 1987 to 1992. Mr.
Penner serves as a member of the Executive Committee and Board of Directors of
the National Realty Committee, a director of Nomura Asset Securities Corp., a
director of Asset Securitization Corp. a member of the Urban Land Institute, a
member of the Board of Trustees of the Simon Wiesenthal Center, and is a member
of the Advisory Board for the Elton John Aids Foundation.
-33-
<PAGE> 34
Albert T. Adams has been a partner with the law firm of Baker &
Hostetler LLP in Cleveland, Ohio, since 1984, and has been affiliated with the
firm since 1977. Mr. Adams is a graduate of Harvard College, Harvard Business
School and Harvard Law School. He serves as a member of the Board of Trustees of
the Western Reserve Historical Society and is a Vice President of the Harvard
Business School Club of Northeastern Ohio. Mr. Adams also serves as a director
of Associated Estates Realty Corporation and the Boykin Lodging Company.
Dean S. Adler is currently a partner with Lubert-Adler Partners, L.P.
From 1987 through 1996 Mr. Adler was a principal and co-head of the private
equity group of CMS Companies, specializing in acquiring operating businesses
and real estate within the private equity market. He serves as a member of the
Board of Directors of The Lane Company and Trans World Entertainment
Corporation. Mr. Adler has served on such community boards as the UJA National
Young Leadership Cabinet and he is currently a member of the Alexis de
Tocqueville Society.
To the Company's knowledge, based solely on review of the copies of
reports required by Section 16(a) of the Securities Exchange Act of 1934
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 1996, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than 10% beneficial owners were complied with, except that the following reports
were filed after the respective dates on which the reports were due to be filed:
(i) a report of change in ownership relating to the award of stock options to
Messrs. Adams, Henry, Hulett, McGill, Penner, Schafer, Schoff, Teninga, B.
Wolstein, S. Wolstein and Ms. Allgood, (ii) a report of change in ownership
relating to the acquisition of Common Shares by Mr. S. Wolstein and (iii) a
report of change in ownership relating to the exercise of stock options by Mr.
S. Dorsky and (iv) a report of change in ownership relating to the transfer of
Common Shares by Mr. B. Wolstein and (v) initial reports of beneficial ownership
following the election to the Board of Directors by Messrs. Adams and Penner.
Item 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the "Executive Compensation"
section of the Company's definitive proxy statement filed with respect to its
annual meeting of shareholders to be held on May 12, 1997.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the "Security Ownership of Certain
Beneficial Owners and Management" section of the Company's definitive proxy
statement filed with respect to its annual meeting of shareholders to be held on
May 12, 1997.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the "Certain Transactions" section
of the Company's definitive proxy statement filed with respect to its annual
meeting of shareholders to be held on May 12, 1997.
-34-
<PAGE> 35
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENTS SCHEDULES AND
REPORTS ON FORM 8-K
a) Financial Statements
The following documents are filed as part of this report:
Report of Independent Accountants - Developers Diversified Realty
Corporation
Consolidated Balance Sheets as of December 31, 1996 and 1995.
Consolidated Statements of Operations for the three years ended
December 31, 1996, 1995 and 1994.
Consolidated Statements of Shareholders Equity for the years
ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Notes to Financial Statements
b) Reports on Form 8-K were filed on May 31, 1996 and July 2, 1996 in
which information regarding Items 2, 5 and 7 of Form 8-K was reported.
c) Exhibits
The following exhibits are filed as part of, or incorporated by
reference into, this Report:
-35-
<PAGE> 36
<TABLE>
<CAPTION>
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
<S> <C> <C> <C> <C>
2 2.1 Agreement of Current Report on
Purchase and Sale, Form 8-K (Filed with
dated July 2, 1996, the SEC on January 14,
between the Company 1997)
and Opus Corporation
for Maple Grove
Crossing Shopping
Center
2 2.2 Agreement of Current Report on
Purchase and Sale, Form 8-K (Filed with
dated July 2, 1996, the SEC on January 14,
between the Company 1997)
and Opus North
Corporation for
Highland Grove
Shopping Center
2 2.3 Agreement of Current Report on
Purchase and Sale, Form 8-K (Filed with
dated July 2, 1996, the SEC on January 14,
between the Company 1997)
and Opus South
Corporation for
Eastchase Market
Shopping Center
2 2.4 Agreement of Current Report on
Purchase and Sale, Form 8-K (Filed with
dated July 2, 1996, the SEC on January 14,
between the Company 1997)
and Opus Northwest,
L.L.C. for
Tanasbourne Town
Center Phase I
Shopping Center
</TABLE>
-36-
<PAGE> 37
<TABLE>
<CAPTION>
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
<S> <C> <C> <C> <C>
2 2.5 Agreement of Current Report on
Purchase and Sale, Form 8-K (Filed with
dated July 2, 1996, the SEC on January 14,
between the Company 1997)
and Opus Southwest
Corporation for
Arrowhead Crossing
Shopping Center
3 3.1 Amended and Restated Form S-11 Registration
Articles of No. 33-54930 (Filed
Incorporation of the with SEC on November
Company 23, 1992; see Exhibit
3.1 therein)
3 3.2 Amendments to Annual Report on Form
Amended and Restated 10-K (Filed with the
Articles of SEC on March 30,
Incorporation of the 1996)
Company
3 3.3 Amendment to Current Report on
Amended and Restated Form 8-K (Filed with
Articles of the SEC on January 14,
Incorporation 1997)
3 3.4 Code of Regulations of Form S-11 Registration
the Company No. 33-54930 (Filed
with the SEC on
November 23, 1992;
see Exhibit 3.2 therein)
3 3.5 Amendment to Code Annual Report on Form
of Regulations of the 10-K (Filed with the
Company SEC on March 30,
1996)
3 3.6 Amendment to Code Current Report on
of Regulations of the Form 8-K (Filed with
Company the SEC on January 14,
1997)
</TABLE>
-37-
<PAGE> 38
<TABLE>
<CAPTION>
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
<S> <C> <C> <C> <C>
4 4.1 Specimen Certificate Form S-11 Registration
for Common Shares No. 33-54930 (Filed
with the SEC on
November 23, 1992;
see Exhibit 4.1 therein)
4 4.2 Specimen Certificate Annual Report on Form
for Depositary Shares 10-K (Filed with the
Relating to 9.5% Class SEC on March 30,
A Cumulative 1996)
Redeemable Preferred
Shares
4 4.3 Specimen Certificate Annual Report on Form
for 9.5% Class A 10-K (Filed with the
Cumulative SEC on March 30,
Redeemable Preferred 1996)
Shares
4 4.4 Specimen Certificate Annual Report on Form
for Depositary Shares 10-K (Filed with the
Relating to 9.44% SEC on March 30,
Class B Cumulative 1996)
Redeemable Preferred
Shares
4 4.5 Specimen Certificate Annual Report on Form
for 9.44% Class B 10-K (Filed with the
Cumulative SEC on March 30,
Redeemable Preferred 1996)
Shares
4 4.6 Credit Agreement Form 10-QA (Filed
dated as of May 1, with the SEC on May
1995 among the 16, 1995; See Exhibit
Company, the First 4.2 therein)
National Bank of
Chicago and the First
National Bank of
Boston.
</TABLE>
-38-
<PAGE> 39
<TABLE>
<CAPTION>
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
<S> <C> <C> <C> <C>
4 4.7 Form of Form S-11 Registration
Indemnification No. 33-54930 (Filed
Agreement with the SEC on
November 23, 1992;
see Exhibit 4.2 therein)
4 4.8 Indenture dated as of Current Report on
May 1, 1994 by and Form 8-K (Filed with
between the Company the SEC on May 27,
and Chemical Bank, as 1994)
Trustee
4 4.9 Indenture dated as of Current Report on
May 1, 1994 by and Form 8-K (Filed with
between the Company the SEC on December
and National City 5, 1994)
Bank, as Trustee (the
"NCB Indenture")
4 4.10 First Supplement to Annual Report on Form
NCB Indenture 10-K (Filed with the
SEC on March 30,
1996)
4 4.11 Specimen 7% Annual Report on Form
Convertible 10-K (Filed with the
Subordinated SEC on April 1, 1995)
Debentures due 1999
4 4.12 Specimen Senior Note Annual Report on Form
due 2000 10-K (Filed with the
SEC on March 30,
1996)
4 4.13 Building and Loan Annual Report on Form
Agreement dated as of 10-K (Filed with the
November 17, 1995 SEC on March 30,
among Community 1996)
Center Two L.L.C.
and certain other
parties named therein
</TABLE>
-39-
<PAGE> 40
<TABLE>
<CAPTION>
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
<S> <C> <C> <C> <C>
4 4.14 Loan Agreement dated Annual Report on Form
as of November 17, 10-K (Filed with the
1995 among SEC on March 30,
Community Center 1996)
One L.L.C. and
certain other parties
named therein
4 4.15 Amendment dated Current Report on
June 18, 1996, to the Form 8-K (Filed with
Credit Agreement, the SEC on January 14,
dated as of May 1, 1997)
1995, among the
Company, the First
National Bank of
Chicago and the First
National Bank of
Boston
4 4.16 Revolving Credit Exhibit 4.16 filed herewith
Facility, dated as of
November 13, 1996,
among the Company
and National City
Bank
10 10.1 Registration Rights Form S-11 Registration
Agreement No. 33-54930 (Filed
with the SEC on
November 23, 1992;
see Exhibit 10.1
therein)
10 10.2 Stock Option Plan Form S-8 Registration
No. 33-74562 (Filed
with the SEC on
January 28, 1994; see
Exhibit 4(a) therein)
</TABLE>
-40-
<PAGE> 41
<TABLE>
<CAPTION>
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
<S> <C> <C> <C> <C>
10 10.3 Employment Form S-11 Registration
Agreement between No. 33-54930 (Filed
the Company and Scott with the SEC on
A. Wolstein November 23, 1992;
see Exhibit 10.3
therein)
10 10.4 Employment Form S-11 Registration
Agreement between No. 33-54930 (Filed
the Company and with the SEC on
James A. Schoff November 23, 1992;
see Exhibit 10.4
therein)
10 10.5 Limited Partnership Annual Report on Form
Agreement dated as of 10-K (Filed with the
November 16, 1995 SEC on March 30,
among DD 1996)
Community Centers
Three, Inc. and certain
other parties named
therein
10 10.6 Amended and Restated Annual Report on Form
Limited Liability 10-K (Filed with the
Company Agreement SEC on March 30,
dated as of November 1996)
17, 1995 among DD
Community Centers
One, Inc. and certain
other parties named
therein
10 10.7 Amended and Restated Annual Report on Form
Limited Liability 10-K (Filed with the
Company Agreement SEC on March 30,
dated as of November 1996)
17, 1995 among DD
Community Centers
Two, Inc. and certain
other parties named
therein
</TABLE>
-41-
<PAGE> 42
<TABLE>
<CAPTION>
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
<S> <C> <C> <C> <C>
10 10.8 Limited Liability Annual Report on Form
Company Agreement 10-K (Filed with the
dated as of November SEC on March 30,
17, 1995 among the 1996)
Company and certain
other parties named
therein
10 10.9 Purchase and Sale Annual Report on Form
Agreement dated as of 10-K (Filed with the
October 16, 1995 SEC on March 30,
among the Company 1996)
and certain other
parties named therein
10 10.10 Directors' Deferred Annual Report on Form
Compensation Plan 10-K (Filed with the
SEC on April 1, 1995)
10 10.11 Elective Deferred Annual Report on Form
Compensation Plan 10-K (Filed with the
SEC on April 1, 1995)
10 10.12 Developers Diversified Current Report on
Realty Corporation Form 8-K (Filed with
Equity-Based Award the SEC on January 14,
Plan 1997)
12 12.1 Computation of Ratio Form S-3 Registration
of Earnings to Fixed No. 33-94182 (Filed
Charges with the SEC on June
30, 1995; see Exhibit
12 therein)
</TABLE>
-42-
<PAGE> 43
<TABLE>
<CAPTION>
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
<S> <C> <C> <C> <C>
21 21.1 List of subsidiaries Exhibit 21.1 filed herewith
23 23.1 Consent of Price Exhibit 23.1 filed herewith
Waterhouse
</TABLE>
-43-
<PAGE> 44
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DEVELOPERS DIVERSIFIED REALTY CORPORATION
By: /s/ Scott A. Wolstein
-------------------------------------------------
Scott A. Wolstein, Chairman, President and Chief Executive Officer
Date: March 28, 1997
---------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities indicated on the 28th day of March, 1996.
<TABLE>
<S> <C>
/s/ Scott A. Wolstein Chairman, President, Chief Executive Officer and Director
- --------------------------------- (principal executive officer)
Scott A. Wolstein
/s/ James A. Schoff Executive Vice President, Chief Operating
- --------------------------------- Officer and Director
James A. Schoff
/s/ William H. Schafer Vice President and Chief Financial Officer
- --------------------------------- (principal financial and accounting officer)
William H. Schafer
/s/ William N. Hulett III Director
- ---------------------------------
William N. Hulett III
/s/ Walter H. Teninga Director
- ---------------------------------
Walter H. Teninga
/s/ Albert T. Adams Director
- ---------------------------------
Albert T. Adams
/s/ Ethan Penner Director
- ---------------------------------
Ethan Penner
</TABLE>
-44-
<PAGE> 45
INDEX TO FINANCIAL STATEMENTS
DEVELOPERS DIVERSIFIED REALTY CORPORATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Statements:
Report of Independent Accountants ............................................. F-2
Balance Sheets at December 31, 1996 and 1995 .................................. F-3
Statements of Operations for the three years ended
December 31, 1996 .......................................................... F-4
Statement of Changes in Shareholders' Equity for the three
years ended December 31, 1996 ............................................... F-5
Statements of Cash Flows for the three years ended
December 31, 1996 .......................................................... F-6
Notes to Financial Statements ................................................. F-7
Financial Statement Schedules:
II - Valuation and Qualifying Accounts for the three
years ended December 31, 1996 .................................... F-23
III - Real Estate and Accumulated Depreciation at
December 31, 1996 ................................................ F-24
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
F-1
<PAGE> 46
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Developers Diversified Realty Corporation
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Developers Diversified Realty Corporation ("Company") and its subsidiaries at
Decembers 31, 1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Cleveland, Ohio
February 21, 1997
F-2
<PAGE> 47
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 1995
- -------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Real estate rental property:
Land $ 122,696,277 $ 109,325,006
Land under development 27,304,847 18,440,812
Buildings 798,476,568 688,122,876
Fixtures and tenant improvements 14,805,101 13,677,643
Construction in progress 28,364,167 18,806,999
- --------------------------------------------------------------------------------------------------------------
991,646,960 848,373,336
Less accumulated depreciation (142,039,284) (120,040,503)
- --------------------------------------------------------------------------------------------------------------
Real estate, net 849,607,676 728,332,833
Cash and cash equivalents 12,600 12,100
Accounts receivable, net 11,438,806 6,961,058
Advances to and investments in joint ventures 106,795,688 83,190,388
Deferred charges, net 4,296,042 4,950,470
Other assets 2,975,128 6,612,680
- --------------------------------------------------------------------------------------------------------------
$ 975,125,940 $ 830,059,529
LIABILITIES AND SHAREHOLDERS' EQUITY ============= =============
- --------------------------------------------------------------------------------------------------------------
Unsecured indebtedness:
Fixed rate senior notes $ 215,492,754 $ 103,731,362
Revolving credit facilities 95,500,000 65,000,000
Subordinated convertible debentures 60,000,000 60,000,000
- --------------------------------------------------------------------------------------------------------------
370,992,754 228,731,362
- --------------------------------------------------------------------------------------------------------------
Mortgage indebtedness:
Banks and other financial institutions 107,439,535 139,643,352
Revolving credit facilities -- 22,500,000
Construction loans -- 14,851,074
- --------------------------------------------------------------------------------------------------------------
107,439,535 176,994,426
- --------------------------------------------------------------------------------------------------------------
Total indebtedness 478,432,289 405,725,788
Accounts payable and accrued expenses 20,920,765 17,530,130
Other liabilities 6,436,667 2,642,148
- --------------------------------------------------------------------------------------------------------------
505,789,721 425,898,066
- --------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity:
Class A 9.5% cumulative redeemable preferred
shares, without par value, $250 liquidation value;
1,500,000 shares authorized; 421,500 shares
issued and outstanding at December 31, 1996 and 1995 105,375,000 105,375,000
Class B 9.44% cumulative redeemable preferred shares,
without par value, $250 liquidation value; 1,500,000
shares authorized; 177,500 and 160,000 shares issued
and outstanding at December 31, 1996 and 1995, respectively 44,375,000 40,000,000
Common shares, without par value, $.10 stated value; 50,000,000
shares authorized; 21,682,917 and 18,968,943 shares issued and
outstanding at December 31, 1996 and 1995, respectively 2,168,292 1,896,894
Paid-in-capital 369,417,186 291,843,152
Accumulated dividends in excess of net income (51,384,259) (34,953,583)
- --------------------------------------------------------------------------------------------------------------
469,951,219 404,161,463
Less: Unearned compensation - restricted stock (615,000) --
- --------------------------------------------------------------------------------------------------------------
469,336,219 404,161,463
------------- -------------
$ 975,125,940 $ 830,059,529
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 48
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
Revenues from operations:
<S> <C> <C> <C>
Minimum rents $ 95,835,619 $ 82,721,794 $ 62,745,077
Percentage and overage rents 1,862,144 1,662,698 1,593,872
Recoveries from tenants 24,577,941 19,255,301 14,941,032
Management fee income 2,631,745 555,881 478,701
Other 5,998,349 3,609,588 2,214,955
- --------------------------------------------------------------------------------------------------------------
130,905,798 107,805,262 81,973,637
- --------------------------------------------------------------------------------------------------------------
Rental operation expenses:
Operating and maintenance 12,098,219 9,097,557 7,548,947
Real estate taxes 14,589,394 12,592,989 9,647,631
General and administrative 8,435,616 6,378,482 5,604,985
Interest 29,888,287 29,595,157 21,423,027
Depreciation and amortization 25,061,772 21,865,122 16,210,728
- --------------------------------------------------------------------------------------------------------------
90,073,288 79,529,307 60,435,318
- --------------------------------------------------------------------------------------------------------------
Income before equity in net income (loss)
of joint ventures, gain on sales of land and
extraordinary item 40,832,510 28,275,955 21,538,319
Equity in net income (loss) of joint ventures 8,709,725 486,098 (186,017)
Gain on sales of land -- 299,666 --
- --------------------------------------------------------------------------------------------------------------
Income before extraordinary item 49,542,235 29,061,719 21,352,302
- --------------------------------------------------------------------------------------------------------------
Extraordinary item - extinguishment of debt -
deferred finance costs written off -- (3,556,875) (216,244)
- --------------------------------------------------------------------------------------------------------------
Net income $ 49,542,235 $ 25,504,844 $ 21,136,058
==============================================================================================================
Net income applicable to common shareholders $ 35,342,610 $ 24,249,405 $ 21,136,058
=====================================================
Per share data:
Earnings per common share - primary
Income before extraordinary item $ 1.67 $ 1.48 $ 1.35
Extraordinary item -- (0.19) (0.01)
- --------------------------------------------------------------------------------------------------------------
Net income $ 1.67 $ 1.29 $ 1.34
==============================================================================================================
Earnings per common share - fully diluted
Income before extraordinary item $ 1.66 $ 1.47 $ 1.34
Extraordinary item -- (0.19) (0.01)
- --------------------------------------------------------------------------------------------------------------
Net income $ 1.66 $ 1.28 $ 1.33
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 49
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON CLASS A CLASS B ACCUMULATED
SHARES PREFERRED PREFERRED DIVIDENDS IN
($.10 STATED SHARES ($250 SHARES ($250 PAID-IN EXCESS OF
VALUE STATED VALUE STATED VALUE) CAPITAL NET INCOME
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $1,556,806 $ -- $ -- $ 205,020,925 $ (9,460,113)
Issuance of 9,233 common shares
for cash - exercise of stock options 922 -- -- 201,984 --
Issuance of 808 common shares
related to employee 401(k) plan 81 -- -- 22,935 --
Issuance of 500,000 common shares
for cash - underwritten offering 50,000 -- -- 15,362,500 --
Net income -- -- -- -- 21,136,058
Dividends declared -- -- -- -- (30,383,729)
- ------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 1,607,809 -- -- 220,608,344 (18,707,784)
Issuance of 11,398 common shares for
cash - exercise of stock options 1,140 -- -- 249,617 --
Issuance of 1,744 common shares
related to employee 401(k) plan 174 -- -- 49,799 --
Issuance of 2,708 common shares
related to dividend reinvestment plan 271 -- -- 67,426 --
Issuance of 2,875,000 common shares
for cash - underwritten offering 287,500 -- -- 76,218,750 --
Issuance of 421,500 class A preferred shares
for cash - underwritten offering -- 105,375,000 -- (3,883,639) --
Issuance of 160,000 class B preferred shares
for cash - underwritten offering -- -- 40,000,000 (1,467,145) --
Net income -- -- -- -- 25,504,844
Dividends declared - common shares -- -- -- -- (40,959,043)
Dividends declared - preferred shares -- -- -- -- (791,600)
- ------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 1,896,894 105,375,000 40,000,000 291,843,152 (34,953,583)
Issuance of 71,378 common shares
for cash - exercise of stock options 7,138 -- -- 1,683,127 --
Issuance of 1,671 common shares
related to employee 401(k) plan 167 -- -- 52,151 --
Issuance of 4,425 common shares
related to dividend reinvestment plan 443 -- -- 137,299 --
Issuance of 25,000 common shares
related to restricted stock plan 2,500 -- -- 766,250 --
Issuance of 2,611,500 common shares
for cash - underwritten offering 261,150 -- -- 75,128,157 --
Issuance of 17,500 class B preferred
shares for cash - underwritten offering -- -- 4,375,000 (192,950) --
Net income -- -- -- -- 49,542,235
Dividends declared - common shares -- -- -- -- (51,889,724)
Dividends declared - preferred shares -- -- -- -- (14,083,187)
-------------------------------------------------------------------------
Balance, December 31, 1996 $2,168,292 $105,375,000 $ 44,375,000 $ 369,417,186 $(51,384,259)
=========================================================================
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RESTRICTED
STOCK TOTAL
- -----------------------------------------------------------------------------
<S> <C> <C>
Balance, December 31, 1993 $ -- $ 197,117,618
Issuance of 9,233 common shares
for cash - exercise of stock options -- 202,906
Issuance of 808 common shares
related to employee 401(k) plan -- 23,016
Issuance of 500,000 common shares
for cash - underwritten offering -- 15,412,500
Net income -- 21,136,058
Dividends declared -- (30,383,729)
- -----------------------------------------------------------------------------
Balance, December 31, 1994 -- 203,508,369
Issuance of 11,398 common shares for
cash - exercise of stock options -- 250,757
Issuance of 1,744 common shares
related to employee 401(k) plan -- 49,973
Issuance of 2,708 common shares
related to dividend reinvestment plan -- 67,697
Issuance of 2,875,000 common shares
for cash - underwritten offering -- 76,506,250
Issuance of 421,500 class A preferred shares
for cash - underwritten offering -- 101,491,361
Issuance of 160,000 class B preferred shares
for cash - underwritten offering -- 38,532,855
Net income -- 25,504,844
Dividends declared - common shares -- (40,959,043)
Dividends declared - preferred shares -- (791,600)
- -----------------------------------------------------------------------------
Balance, December 31, 1995 -- 404,161,463
Issuance of 71,378 common shares
for cash - exercise of stock options -- 1,690,265
Issuance of 1,671 common shares
related to employee 401(k) plan -- 52,318
Issuance of 4,425 common shares
related to dividend reinvestment plan -- 137,742
Issuance of 25,000 common shares
related to restricted stock plan (615,000) 153,750
Issuance of 2,611,500 common shares
for cash - underwritten offering -- 75,389,307
Issuance of 17,500 class B preferred
shares for cash - underwritten offering -- 4,182,050
Net income -- 49,542,235
Dividends declared - common shares -- (51,889,724)
Dividends declared - preferred shares -- (14,083,187)
------------------------------
Balance, December 31, 1996 $ (615,000) $ 469,336,219
==============================
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 50
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income $ 49,542,235 $ 25,504,844 $ 21,136,058
Adjustments to reconcile net income to net cash flow
provided by operating activities:
Depreciation and amortization 25,061,772 21,865,122 16,210,728
Amortization of deferred finance costs 1,685,657 1,749,155 1,202,928
Write-off of deferred finance costs -- 3,512,773 202,556
Equity in net (income) loss of joint ventures (8,709,725) (486,098) 186,017
Cash distributions from joint ventures 8,645,772 -- --
Gain on sales of land -- (299,666) --
Net change in accounts receivable (4,477,748) (2,835,037) (1,373,815)
Net change in accounts payable and accrued expenses 1,060,896 2,698,798 1,833,269
Net change in other operating assets and liabilities 3,011,331 (2,670,639) (285,852)
- ----------------------------------------------------------------------------------------------------------------------------------
Total adjustments 26,277,955 23,534,408 17,975,831
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash flow provided by operating activities 75,820,190 49,039,252 39,111,889
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flow from investing activities:
Real estate developed or acquired (185,667,846) (149,095,594) (190,221,498)
Equity contributions to joint ventures (14,869,948) (74,277,446) --
Repayments from (advances to) joint ventures, net (854,912) 283,248 181,563
Issuance of note receivable -- -- (1,770,000)
Proceeds from sale of land 1,721,843 5,891,541 --
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash flow used for investing activities (199,670,863) (217,198,251) (191,809,935)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flow from financing activities:
Proceeds from (repayment of) revolving credit facilities, net 26,600,000 (2,138,586) 62,387,160
Repayment of Floating Rate Senior Notes -- (100,000,000) --
Repayment of construction loans -- (14,682,049) --
Principal payments on rental property debt (32,203,817) (9,291,192) (59,214,615)
Proceeds from construction loans 2,923,926 17,938,197 11,594,926
Proceeds from issuance of Medium Term Notes, net of underwriting commissions
and offering expenses paid of $800,000 and $30,000
in 1996 and 1995, respectively 110,898,543 3,967,750 --
Proceeds from issuance of Fixed Rate Senior Notes, net of underwriting
commissions and discounts and $400,000 of offering expenses paid -- 98,543,000 --
Proceeds from issuance of Floating Rate Senior Notes, net of
underwriting commissions and $150,000 of offering expenses paid -- -- 99,600,000
Proceeds from issuance of Debentures, net of underwriting
commissions and $500,000 of offering expenses paid -- -- 57,700,000
Payment of deferred finance costs (bank borrowings) -- (2,233,311) (722,038)
Proceeds from issuance of common shares, net of underwriting
commissions and $300,000, $400,000 and $100,000 of offering
expenses paid in 1996, 1995 and 1994, respectively 75,389,307 76,506,250 15,412,500
Proceeds from issuance of Class A preferred shares, net of
underwriting commissions and $500,000 of offering expenses paid -- 101,491,361 --
Proceeds from issuance of Class B preferred shares, net of underwriting
commissions and $200,000 of offering expenses paid in 1996 and 1995 4,182,050 38,532,855 --
Proceeds from issuance of common shares in conjunction with exercise of stock
options, 401(k) plan, dividend investment plan and restricted stock plan 2,034,075 368,427 225,922
Dividends paid (65,972,911) (41,750,643) (36,610,954)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 123,851,173 167,252,059 150,372,901
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 500 (906,940) (2,325,145)
Cash and cash equivalents, beginning of year 12,100 919,040 3,244,185
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 12,600 $ 12,100 $ 919,040
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
NATURE OF BUSINESS
Developers Diversified Realty Corporation and related real estate joint ventures
(the "Company" or "DDR") are engaged in the business of acquiring, expanding,
owning, developing, managing and operating neighborhood and community shopping
centers, enclosed malls and business centers. The Company's centers, located in
28 states, are typically anchored by discount department stores (usually
Wal-Mart, Kmart or JCPenney), supermarkets and drug stores which usually offer
day-to-day necessities. The tenant base includes primarily national and regional
retail chains and local retailers; consequently, the Company's credit risk is
concentrated in the retail industry.
Revenues derived from the Company's two largest tenants, Wal-Mart and Kmart,
aggregated 15.6%, 19.7% and 19.3% of total revenues, including joint venture
revenues, for the years ended December 31, 1996, 1995 and 1994, respectively as
follows:
<TABLE>
<CAPTION>
YEAR WAL-MART KMART
- --------------------------------------------------------------------------------
<S> <C> <C>
1996 9.3% 6.3%
1995 12.3% 7.4%
1994 10.1% 9.2%
</TABLE>
The total percentage of Company owned gross leasable area attributed to Wal-Mart
and Kmart was 13.3% and 11.0%, respectively, at December 31, 1996. The Company's
ten largest tenants comprised 32.2%, 34.0% and 33.3% of total revenues for the
years ended December 31, 1996, 1995 and 1994, respectively. Management believes
the Company's portfolio is diversified in terms of location of its shopping
centers and its tenant profile. Adverse changes in general or local economic
conditions could result in the inability of some existing tenants to meet their
lease obligations and could otherwise adversely affect the Company's ability to
attract or retain tenants. During 1996 and 1995, certain national and regional
retailers experienced financial difficulties and several filed for protection
under bankruptcy laws. Although the Company has experienced an increase in the
number of tenants filing for protection under bankruptcy laws, no significant
bankruptcies have occurred affecting the Company's portfolio of tenants.
PRINCIPLES OF CONSOLIDATION
All subsidiaries are included in the consolidated financial statements and all
significant intercompany balances and transactions have been eliminated in
consolidation. At December 31, 1996, the Company owned a 50% interest in 13
shopping centers through various joint ventures and limited liability
corporations (11 in 1995 and one in 1994). These investments are presented
using the equity method of accounting and are discussed in Note 2.
STATEMENT OF CASH FLOWS AND SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND
FINANCING INFORMATION
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
The following transactions did not provide or use cash and, accordingly, they
are not reflected in the statements of cash flows.
During the year ended December 31, 1996, the Company assumed other liabilities
of approximately $1.1 million in conjunction with the acquisitions of certain
shopping centers. At December 31, 1996, accounts payable aggregating
approximately $5.3 million was related to construction in progress. In addition,
in conjunction with the formation of two joint ventures, the Company transferred
land and buildings with a net book value of $41.6 million and related mortgage
debt of $36.4 million into joint ventures accounted for under the equity method.
During the year ended December 31, 1995, the Company assumed mortgages payable
aggregating $15.7 million, and other liabilities aggregating approximately $0.8
million in conjunction with the acquisition of certain shopping centers. At
December 31, 1995 accounts payable aggregating approximately $2.8 million was
related to construction in progress. During 1995 the Company exchanged a note
receivable and related accrued interest aggregating $1.9 million for partial
consideration for the acquisition of a certain property in Birmingham, Alabama.
F-7
<PAGE> 52
For the year ended December 31, 1994, the Company assumed mortgages payable
aggregating $35.1 million, and other liabilities aggregating approximately $1.8
million in conjunction with the acquisition of certain shopping centers. At
December 31, 1994 accounts payable aggregating approximately $0.3 million was
related to construction in progress.
REAL ESTATE
Real estate assets are stated at cost less accumulated depreciation,
which, in the opinion of management, is not in excess of the individual
property's estimated undiscounted future cash flows, including estimated
proceeds from disposition.
Depreciation and amortization are provided on a straight-line basis over the
estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Buildings 18 to 31 years
- --------------------------------------------------------------------------------
<S> <C>
Furniture/Fixtures and Useful lives, which approximate
Tenant Improvements lease terms, where applicable
- --------------------------------------------------------------------------------
</TABLE>
Depreciation expense was $25.1 million, $21.9 million and $16.2 million for the
years ended December 31, 1996, 1995 and 1994, respectively. Expenditures for
maintenance and repairs are charged to operations as incurred. Renovations which
improve or extend the life of the asset are capitalized.
Included in land is undeveloped real estate, generally outlots or expansion pads
adjacent to the shopping centers and enclosed malls owned by the Company. Land
under development at December 31, 1996 included approximately 208 acres at 11
sites.
Construction in progress includes shopping center developments and significant
expansions and re-developments. The Company capitalizes interest on funds used
for the construction or expansion of shopping centers. Capitalization of
interest ceases when construction activities are completed and the property is
available for occupancy by tenants. For the years ended December 31, 1996, 1995
and 1994, the Company capitalized interest of $3.3 million, $2.5 million and
$1.1 million, respectively. In addition, the Company capitalized certain
construction administration costs of $1.1 million, $0.6 million, and $0.2
million in 1996, 1995 and 1994, respectively.
DEFERRED FINANCING COSTS
Costs incurred in obtaining long-term financing are included in deferred charges
in the accompanying balance sheets and are amortized over the terms of the
related debt agreements; such amortization is reflected as interest expense in
the consolidated statements of operations.
REVENUE RECOGNITION
Minimum rents from tenants are recognized monthly using the straight-line
method. Percentage and overage rents are recognized after the tenants reported
sales have exceeded the applicable sales breakpoint. Revenues associated with
tenant reimbursements are recognized in the period in which the expenses are
incurred based upon the provision of tenant leases. Lease termination fees are
included in other income and recognized upon termination of a tenant's lease,
which generally coincides with the receipt of cash.
ACCOUNTS RECEIVABLE
Accounts receivable, other than straight line rents receivable, are expected to
be collected within one year and are net of estimated unrecoverable amounts of
approximately $1.8 million and $1.0 million at December 31, 1996 and 1995,
respectively. At December 31, 1996 and 1995, net straight line rent receivables
aggregated $0.8 million and $0.1 million, respectively.
GAIN ON SALES OF REAL ESTATE
Gain on sales of real estate generally relates to the sale of outlots and land
adjacent to existing shopping centers and is recognized at closing when the
earnings process is deemed to be complete.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses include internal leasing salaries, legal
salaries and related expenses associated with the leasing of space, which are
charged to operations as incurred.
INTEREST AND REAL ESTATE TAXES
Interest and real estate taxes incurred during the construction period are
capitalized and depreciated over the building life. Interest paid during the
years ended December 31, 1996, 1995 and 1994 aggregated $31.2 million, $29.6
million and $18.5 million, respectively, and is reflected net of capitalized
interest.
F-8
<PAGE> 53
FEDERAL INCOME TAXES
The Company has elected to be taxed as a qualified Real Estate Investment Trust
("REIT") under the Internal Revenue Code of 1986, as amended. As a REIT, the
Company is entitled to a tax deduction for the amount of dividends paid its
shareholders, thereby effectively subjecting the distributed net income of the
Company to taxation at the shareholder level only, provided it distributes at
least 95% of its taxable income and meets certain other REIT qualification
requirements. As the Company distributed sufficient taxable income for the years
ended December 31, 1996, 1995 and 1994, no U.S. Federal income or excise taxes
were incurred.
The tax basis of assets and liabilities exceeds the amounts reported in the
accompanying financial statements by approximately $108 million, $104 million
and $101 million at December 31, 1996, 1995 and 1994, respectively.
Use of Estimates in Preparation of
Financial Statements.
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 and the reported amounts
of revenues and expenses during the year. Actual results could differ from those
estimates.
- --------------------------------------------------------------------------------
2. EQUITY INVESTMENTS IN JOINT VENTURES
- --------------------------------------------------------------------------------
The Company's equity investments in joint ventures at December 31, 1996, as
described below, was comprised of: (i) a 50% joint venture interest in four
Community Center Joint Ventures, formed in November 1995 in conjunction with the
acquisition of the Homart Community Center Division of Sears, Roebuck and Co.
("Sears"), (ii) a 50% joint venture interest, formed in September 1996, with the
Ohio State Teachers Retirement System (OSTRS), (iii) a 50% joint venture
interest, formed in October 1996, in conjunction with the development of a
443,000 square foot shopping center in Merriam, Kansas, and (iv) a 50% joint
venture interest in a limited partnership that owns a 411,977 square foot
shopping center located in Martinsville, Virginia.
Combined condensed financial information of the Company's joint venture
investments is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Combined Balance Sheets
Real estate, net $ 561,624,478 $ 473,913,981
Other assets 16,012,336 18,606,231
-------------------------------------
$ 577,636,814 $ 492,520,212
=====================================
Mortgage debt $ 360,113,705 $ 317,142,199
Amounts payable to DDR 10,747,149 9,173,195
Other liabilities 7,782,117 16,927,381
-------------------------------------
378,642,971 343,242,775
Accumulated equity 198,993,843 149,277,437
-------------------------------------
$ 577,636,814 $ 492,520,212
=====================================
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Combined Statements of Operations
Revenues from operations $ 63,681,840 $ 9,356,560 $ 3,314,210
-------------------------------------------------------------
Rental operation expenses 16,192,552 2,377,110 755,935
Depreciation and amortization expense 8,923,764 1,755,502 804,888
Interest expense 21,146,073 4,251,751 2,125,422
-------------------------------------------------------------
46,262,389 8,384,363 3,686,245
-------------------------------------------------------------
Net income (loss) $ 17,419,451 $ 972,197 $ (372,035)
=============================================================
</TABLE>
F-9
<PAGE> 54
The Company has guaranteed $25 million of joint venture indebtedness and related
interest associated with certain mortgage debt.
Advances to and investments in joint ventures include acquisition costs related
to the Community Center Joint Ventures and the Merriam Joint Venture of
approximately $2.7 million and $0.7 million respectively, and a deferred gain of
approximately $5.9 million related to the contribution of the real estate
property and mortgage debt to the OSTRS Joint Venture.
The Company provides property management services to the joint ventures.
Included in management fee income is $2.1 million, $0.2 million and $0.1 million
for the years ended December 31, 1996, 1995 and 1994, respectively, related to
these services. Other income includes development fee income from the Community
Center Joint Ventures of $0.7 million in 1996 and $0.5 million in 1995 (none in
1994). Cash distributions are made from the joint venture to the extent the
joint venture generates "net cash flows," as defined in the joint venture
agreements. During 1996 and 1995 the joint ventures distributed an aggregate of
$8.6 million and $0.2 million, respectively, to its joint venture partners.
On February 10, 1993, the Company advanced $9.0 million to the Martinsville,
Virginia Joint Venture which utilized these funds to repay a portion of its
first mortgage debt. The Company's advance is evidenced by a note receivable
requiring monthly payments of principal and interest at the rate of 9.25% per
annum. In addition, in 1996, the Company advanced $1.1 million to the joint
venture to pay for the construction and re-tenanting of vacant space. The
Company's advances are evidenced by notes receivable with interest calculated at
prime rate plus 1%. In accordance with the joint venture agreement, construction
or operating advances must be repaid before any capital distributions can be
made. The Company recorded interest income of $0.8 million for each of the years
ended December 31, 1996, 1995 and 1994, relating to these advances.
On November 17, 1995, the Company, in conjunction with certain joint venture
partners described below, acquired the Homart Community Center Division of Sears
from an affiliate of General Growth Properties, Inc. General Growth Properties,
Inc. had contracted to purchase the Homart Community Center Division as part of
its acquisition of Homart Development Co., a subsidiary of Sears. The Homart
Community Center Division included ten power centers, aggregating in excess of
four million square feet of Gross Leasable Area ("GLA"), located in major
metropolitan areas throughout the United States and several outlots and pad
sites adjacent to the ten power centers and certain other power centers
previously sold by Sears (the "Community Center Properties"). At the date of
acquisition, construction of seven of the ten power centers was complete or
substantially complete and three of the power centers were under construction.
Construction of the three centers was substantially completed during 1996. The
ten shopping center properties are summarized as follows:
<TABLE>
<CAPTION>
ACQUISITION YEAR COMPANY
CENTER LOCATION BUILT GLA
- --------------------------------------------------------------
<S> <C> <C> <C>
Carmel Mountain Plaza San Diego, CA 1993 446,484
Broadway Market Place Denver, CO 1993 369,386
Carillon Place Naples, FL 1994 266,438
Town Center, Prado Marietta, GA 1995 270,440
Woodfield Village Green Schaumburg, IL 1993 501,092
New Hope Commons Durham, NC 1995 408,292
Fairfax Town Center Fairfax, VA 1994 253,941
Perimeter Pointe Atlanta, GA 1995 202,191
Shoppers World Framingham, MA 1994 716,393
Independence Commons Independence, MO 1995 365,062
</TABLE>
The Community Center Properties are owned by four joint ventures (collectively,
the "Community Center Joint Ventures"). The Company, or a wholly owned
subsidiary of the Company and its joint venture partners each purchased a 50%
interest in each Community Center Joint Venture. The Company's joint venture
partners are a consortium of third party investors, including a private REIT,
owned by institutional investors advised by DRA Advisors, Inc. ("DRA"), three
limited partnerships whose respective limited partners are pension funds and
whose general partners are affiliates of DRA and one corporation whose owners
are affiliates of DRA. In addition to owning a 50% interest in each Community
Center Joint Venture, the Company manages the Community Center Properties and
related developments pursuant to management and development agreements with each
of the Community Center Joint Ventures.
The total purchase price for the Community Center Properties aggregated $449.2
million and was funded through $300.1 million of secured indebtedness at the
joint venture level, $3.1 million of assumed net liabilities and $146.0 million
of cash of which one-half each was provided by the Company and its joint venture
partners. In addition, the Company paid cash of approximately $1.3 million
relating to the
F-10
<PAGE> 55
purchase of certain rights to potential future development sites. The Company's
initial cash contribution was made available through proceeds from the issuance
of the 9.5% Class A depositary shares (Note 11). The purchase price for the
Community Center Properties was adjusted in 1996 to reflect development costs
incurred through the date of closing, as well as the finalization of certain
purchase price issues.
In October 1996, the Company formed a joint venture with DD Merriam, L.P., which
is advised by DRA, relating to the development of a shopping center in Merriam,
Kansas, which was one of the development sites acquired in conjunction with the
acquisition of the Homart Community Center Division. The joint venture is 50%
owned by the Company and 50% owned by DD Merriam, L.P. The Company will manage
the shopping center and related development pursuant to management and
development agreements. At December 31, 1996 the Company advanced $1.1 million
to pay for certain construction related costs. The advances accrue interest at
8% per annum and are to be repaid from the proceeds of construction financing
which will be entered into in 1997.
The joint venture agreements with DRA provide, after November 17, 1999 or if
either party is in default of the joint venture agreements, each partner has the
right to trigger a purchase or sale of its interest in the joint ventures
(Reciprocal Purchase Rights) or to initiate a purchase and sale of the
properties (Property Purchase Rights).
In addition, at any time after November 17, 1999, the Company's joint venture
partners may convert all or a portion of their respective interests in such
joint ventures into common shares of the Company in accordance with the terms
set forth in the governing documents of such joint ventures. However, if the
joint venture partners elect to convert their respective interest into common
shares, the Company will have the sole option to pay cash instead of issuing
common shares. If the Company agrees to the issuance of common shares, the
agreement provides that the converting joint venture partner will execute a
lock-up arrangement acceptable to the Company.
In September 1996, the Company entered into a joint venture with OSTRS. In
conjunction with the formation of the joint venture, the Company transferred two
shopping centers with a net book value of $41.6 million and non-recourse
mortgage debt aggregating $36.4 million in exchange for a 50% interest in the
joint venture. OSTRS funded an initial cash contribution of $11.6 million which
was used to repay a portion of the non-recourse mortgage debt. The Company
continues to manage the two properties pursuant to a management agreement. The
two shopping center properties are summarized as follows:
<TABLE>
<CAPTION>
YEAR
CENTER LOCATION BUILT GLA
- ----------------------------------------------------------
<S> <C> <C> <C>
Macedonia Commons Macedonia, OH 1994 234,789
Belden Parke Crossings Canton, OH 1995 229,809
</TABLE>
F-11
<PAGE> 56
- --------------------------------------------------------------------------------
3. ACQUISITIONS AND PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
During the years ended December 31, 1996, 1995 and 1994, the Company completed
the acquisition of 29 shopping centers, excluding those acquired through joint
ventures as discussed in Note 2, (5 in 1996, 10 in 1995 and 14 in 1994) with an
aggregate of 5.4 million Company owned gross leasable square feet (GLA) at a
total purchase price of $375.2 million. These acquisitions were accounted for
using the purchase method of accounting. These properties are summarized as
follows:
<TABLE>
<CAPTION>
CENTER ACQUISITION LOCATION DATE ACQUIRED YEAR BUILT COMPANY GLA
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 ACQUISITIONS:
Arrowhead Crossing Phoenix (Peoria), AZ July, 1996 1995 340,094
Maple Grove Crossing Minneapolis (Maple Grove), MN July, 1996 1995 250,269
Highland Grove Highland, IN July, 1996 1995 239,845
Eastchase Market Fort Worth, TX July, 1996 1995 117,109
Tanasbourne Town Center Portland, OR August, 1996 1995 140,626
---------
Total 1996 Acquisitions 1,087,943
=========
- -----------------------------------------------------------------------------------------------------------------------------
1995 Acquisitions:
Airport Square Shopping Center Toledo, OH February, 1995 1993 187,674
North Road Plaza Orangeburg, SC March, 1995 1994 22,200
Northtowne Shopping Center Anderson, SC March, 1995 1993 14,250
Wando Crossing Shopping Center Mt. Pleasant, SC March, 1995 1992 187,496
Jacksonville Regional Shopping Center Jacksonville, FL March, 1995 1988 219,073
The Shoppes of Boot Ranch Palm Harbor, FL May, 1995 1990 52,395
East Forest Plaza Columbia, SC November, 1995 1995 46,700
Eastwood Festival Centre Birmingham, AL November, 1995 1989 284,500
Enterprise Plaza Huntsville, AL December, 1995 1995 41,000
Green Ridge Square Shopping Center Grand Rapids, MI December, 1995 1989 134,057
---------
Total 1995 Acquisitions 1,189,345
=========
- -----------------------------------------------------------------------------------------------------------------------------
1994 Acquisitions:
Fairview Station Simpsonville, SC January, 1994 1990 142,133
Arrowhead Point Harrisburg, IL February, 1994 1991 168,507
Central Shopping Center Murray, KY February, 1994 1977 149,028
Pleasant Hills Plaza Duluth, GA February, 1994 1990 99,025
Ahoskie Commons Ahoskie, NC February, 1994 1992 188,457
Crossroads Plaza Anderson, SC March, 1994 1990 163,809
McCain Plaza N. Little Rock, AR March, 1994 1991 294,357
Valley Park Centre Russellville, AR April, 1994 1992 272,245
Ormond Town Square Ormond Beach, FL May, 1994 1993 231,445
Macedonia Commons Macedonia, OH July, 1994 1994 158,205
Cascade Crossings Sault Ste. Marie, MI September, 1994 1993 262,267
Starkville Crossing Starkville, MS November, 1994 1990 221,152
Big Oak Crossing Tupelo, MS December, 1994 1992 348,236
Brook Highland Plaza Birmingham, AL December, 1994 1994 388,604
---------
Total 1994 Acquisitions 3,087,470
---------
Total Acquisitions 5,364,758
=========
</TABLE>
The operating results of the acquired shopping centers are included in the
results of operations of the Company from the date of purchase including the
acquisition of the Community Center Properties, discussed in Note 2, which are
included in equity in net income of joint ventures in the statements of
operations for 1996 and 1995.
F-12
<PAGE> 57
The following unaudited supplemental proforma information is presented to
reflect the effects of the common share offerings, preferred share offerings,
debt offerings and, pursuant to APB Opinion No. 16, the property acquisitions
consummated through December 31, 1995, including the Community Center
acquisition (Note 2), as if all such transactions had occurred on January 1,
1994. Pro forma information is not presented for 1996 because the acquired
properties were either under development or in the lease-up phase and,
accordingly, the related operating information for such centers either does not
exist or would not be meaningful. The pro forma financial information is
presented for information purposes only and may not be indicative of what actual
results of operations would have been had the acquisitions occurred on January
1, 1994 nor does it purport to represent the results of the operations for
future periods (in thousands, except per share data):
<TABLE>
<CAPTION>
UNAUDITED
DECEMBER 31, 1995(a) 1994(b)
- --------------------------------------------------------------------------------
<S> <C> <C>
Pro forma revenues $114,016 $99,053
=========================
Pro forma income before
extraordinary item $ 47,106 $34,254
=========================
Pro forma net income applicable
to common shareholders $ 29,349 $20,467
=========================
Pro forma net income applicable
to common shareholders per
common share $ 1.37 $ 1.08
=========================
<FN>
(a) Reflects revenues and expenses of the properties acquired in 1995 for the
period January 1, 1995 through the dates of acquisition. Operating results for
the Company's 1995 acquired properties located in Orangeburg, South Carolina;
Anderson, South Carolina; Columbia, South Carolina; and Huntsville, Alabama and
with regard to the acquisition of the Community Center Properties the shopping
centers located in Durham, North Carolina; Marietta, Georgia; Independence,
Missouri; Atlanta, Georgia; and Phase II of Framingham, Massachusetts are not
reflected in the 1995 pro forma information prior to their respective
acquisition dates because these shopping centers were either under development
or in the lease-up phase and, accordingly, the related operating information for
such centers either does not exist or would not be meaningful.
(b) Reflects revenues and expenses of the properties acquired in 1995 and 1994
for the period January 1, 1994 through the dates of acquisition or December 31,
1994. Operating results for the Company's 1995 acquired properties located in
Orangeburg, South Carolina; Anderson, South Carolina; Columbia, South Carolina;
and Huntsville, Alabama and with regard to the acquisition of the Community
Center Properties the shopping centers located in Durham, North Carolina;
Marietta, Georgia; Independence, Missouri; Atlanta, Georgia; and Phase II of
Framingham, Massachusetts and 1994 acquired properties located in Macedonia,
Ohio and Birmingham, Alabama are not reflected in the 1994 pro forma information
prior to their respective acquisition dates because these shopping centers were
either under development or in the lease-up phase and, accordingly, the related
operating information for such centers either does not exist or would not be
meaningful.
</TABLE>
- --------------------------------------------------------------------------------
4. DEFERRED CHARGES
- --------------------------------------------------------------------------------
Deferred charges consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred financing costs $ 7,300,756 $ 6,809,895
Organization costs 144,191 134,635
----------- -----------
7,444,947 6,944,530
Less - accumulated amortization (3,148,905) (1,994,060)
----------- -----------
$ 4,296,042 $ 4,950,470
=========== ===========
</TABLE>
The Company incurred deferred finance costs aggregating $1.0 and $3.4 million,
in 1996 and 1995 primarily relating to the Company's issuance of Senior Notes
(Note 6) and unsecured revolving credit agreements (Note 5). Amortization of
deferred charges was $1.5 million, $1.7 million and $1.2 million for the years
ended December 1996, 1995 and 1994, respectively. During 1995 and 1994 the
Company wrote off $3.6 million and $0.2 million, respectively, (none in 1996) of
unamortized deferred finance costs in conjunction with the repayment of certain
secured indebtedness.
- --------------------------------------------------------------------------------
5. REVOLVING CREDIT FACILITIES
- --------------------------------------------------------------------------------
In May 1995, the Company obtained a three year $150 million unsecured revolving
credit facility from a syndicate of financial institutions for which the First
National Bank of Chicago and the First National Bank of Boston serve as agents
(the "Unsecured Credit Facility"). In June 1996, the Company renegotiated the
terms of this facility to extend the agreement one year, to May 1999, reduce the
specified spread over LIBOR and reduce the unused commitment fees. Borrowings
under this facility bear interest at variable rates based on LIBOR plus a
specified spread, currently at 1.25%, depending on the Company's long term
senior unsecured debt rating from Standard and Poor's and
F-13
<PAGE> 58
Moody's Investors Service. The Company is required to comply with certain
covenants relating to total outstanding indebtedness, secured indebtedness, net
worth, maintenance of unencumbered real estate assets and debt service coverage.
The facility also provides for commitment fees of 0.25% on the unused credit
amounts. The Unsecured Credit Facility is used to initially finance the
acquisition of shopping centers, to provide working capital and for general
corporate purposes. At December 31, 1996 total borrowings under the unsecured
credit facility aggregated $88.5 million with a weighted average interest rate
of 6.9%.
In July 1995, the Company entered into a three year $25 million secured
revolving credit facility with National City Bank. In September 1996, the
Company restructured this facility. This restructuring resulted in an $18.6
million ten year non-recourse mortgage loan, which was transferred into the
OSTRS Joint Venture as discussed in Note 2, and a $10 million unsecured
revolving credit facility which matures in November 1999 and bears interest at
variable rates based on the prime rate, or LIBOR plus a specified spread,
currently at 1.25%, depending on the Company's long term senior unsecured debt
rating from Standard and Poors and Moody's Investors Service. The restructuring
resulted in the mortgage release of two of the three shopping centers which
served as collateral for the $25 million secured revolving credit facility. The
Company is required to comply with certain covenants relating to total
outstanding indebtedness, secured indebtedness, net worth, maintenance of
unencumbered real estate assets and debt service coverage. The facility also
provides for commitment fees of 0.25% on the unused credit amount. At December
31, 1996 total borrowings under this facility aggregated $7.0 million with a
weighted average interest rate of 6.8%.
In January 1995, the Company terminated a $25 million secured revolving credit
facility in conjunction with the successful completion of a 2,875,000 common
share offering and recognized an extraordinary charge of $0.3 million in the
first quarter of 1995 primarily relating to the write-off of unamortized
deferred finance costs. In the second quarter of 1995, the Company terminated a
$150 million secured revolving credit facility with Nomura Asset Capital
Corporation. As a result, the Company recognized a non-cash extraordinary charge
of $3.3 million relating to the write-off of unamortized deferred finance costs.
Total commitment fees paid by the Company on its revolving credit facilities in
1996, 1995 and 1994 aggregated approximately $0.3 million, $0.4 million, and
$0.1 million, respectively.
- --------------------------------------------------------------------------------
6. FIXED RATE SENIOR NOTES
- --------------------------------------------------------------------------------
In May 1995, the Company issued, through an underwritten offering, $100 million
of unsecured Fixed Rate Senior Notes at a discount to 99.693% which mature on
May 15, 2000. The Fixed Rate Senior Notes bear a coupon interest rate of 7-5/8%
per annum. Interest is paid semi-annually in arrears on May 15 and November 15.
In November and December 1995, through its Medium Term Note (MTN) program, the
Company issued $4 million of unsecured Fixed Rate Senior Notes at interest rates
of 7.15% and 7.28% and maturities of seven and ten years, respectively. In 1996,
the Company issued $111.7 million of MTN's at interest rates ranging from 6.58%
to 7.42% and maturities of five to seven years. The above Fixed Rate Senior
Notes may not be redeemed by the Company prior to maturity and will not be
subject to any sinking fund requirements. The Fixed Rate Senior Notes were
issued pursuant to an indenture dated as of May 1, 1994 which contains certain
covenants including limitation on incurrence of debt, maintenance of
unencumbered real estate assets and debt service coverage.
- --------------------------------------------------------------------------------
7. SUBORDINATED CONVERTIBLE DEBENTURES
- --------------------------------------------------------------------------------
In August 1994, the Company issued, through an underwritten offering, $60
million of unsecured subordinated convertible debentures ("Debentures") which
mature on August 15, 1999. The Debentures bear interest at 7% per annum.
Interest is paid semi-annually in arrears on February 15 and August 15. The
Debentures were issued pursuant to an indenture dated May 1, 1994 and are
non-callable and convertible at anytime prior to maturity into common shares at
a conversion price of $33-3/8 per share, subject to adjustment under certain
conditions. The Debentures are unsecured and subordinate to present and future
senior indebtedness, as defined in the indenture.
F-14
<PAGE> 59
- --------------------------------------------------------------------------------
8. CONSTRUCTION LOANS
- --------------------------------------------------------------------------------
During 1995, the Company entered into a construction loan with a financial
institution relating to the Company's shopping center development in Canton,
Ohio. The Canton, Ohio construction loan provided for borrowings up to $17.8
million and was due June 1997. The construction loan bore interest at LIBOR plus
1.5% per annum. During 1996, the construction loan was restructured into a five
year mortgage loan and transferred to the OSTRS Joint Venture as discussed in
Note 2.
- --------------------------------------------------------------------------------
9. MORTGAGES PAYABLE AND SCHEDULED PRINCIPAL REPAYMENTS
- --------------------------------------------------------------------------------
At December 31, 1996, mortgages payable, collateralized by real estate with a
net book value of approximately $161.5 million and related tenants leases, are
generally due in monthly installments of principal and/or interest and mature at
various dates through 2023. Interest rates ranged from approximately 6.0% to
10.9% (averaging 8.6% and 8.7% at December 31, 1996 and 1995, respectively).
Variable rate debt obligations, reflected in mortgages payable at December 31,
1996 and 1995, totaled approximately $3.1 million and $3.4 million,
respectively. Interest rates on the variable rate debt averaged 6.1% at December
31, 1996 and 1995, respectively.
As of December 31, 1996, the scheduled principal payments of mortgages payable,
senior notes and debentures for the next five years and thereafter are as
follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- --------------------------------------------------------------------------------
<S> <C>
1997 $ 5,972,473
1998 13,976,590
1999 94,806,929
2000 101,709,247
2001 88,756,307
Thereafter 77,710,745
-------------
$ 382,932,291
=============
</TABLE>
The revolving credit facility balances aggregating $95.5 million are not
reflected in the above amounts as these balances were repaid using the proceeds
from a 3,350,000 common share offering completed in January, 1997.
- --------------------------------------------------------------------------------
10. FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
The following methods and assumptions were used by the Company in estimating
fair value disclosures of financial instruments:
Cash and cash equivalents, accounts receivable, accounts payable, accruals and
other liabilities:
The carrying amounts reported in the balance sheet for these financial
instruments approximated fair value because of the short maturities.
Notes receivable and advance to affiliates:
Fair value is estimated by discounting the current rates at which similar loans
would be made. At December 31, 1996 and 1995, the carrying amounts reported in
the balance sheet approximates fair value.
Debt:
The carrying amounts of the Company's borrowings under its revolving credit
facilities and construction loans approximate fair value because such borrowings
are at variable rates. The fair value of Fixed Rate Senior Notes is based on the
Company's estimated interest rate spread over the applicable treasury rate with
a similar remaining maturity. Fair value of the mortgage debt is estimated using
a discounted cash flow analysis, based on the Company's incremental borrowing
rates for similar types of borrowing arrangements with the same remaining
maturities. Fair value of the Debentures is determined based on the closing
price as of December 31, 1996 and 1995, as reported by the New York Stock
Exchange.
Considerable judgement is necessary to develop estimated fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts the Company could realize on disposition of the financial
instruments.
F-15
<PAGE> 60
Financial instruments at December 31, 1996 and 1995, with carrying values that
are different than estimated fair values are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---------------------------------- ----------------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debentures $ 60,000 $ 63,000 $ 60,000 $ 59,550
Fixed Rate Senior Notes 215,493 218,828 103,731 107,859
Mortgage debt 107,440 112,085 139,643 144,756
- ----------------------------------------------------------------------------------------------------
$ 382,933 $ 393,913 $ 303,374 $ 312,165
==========================================================================
</TABLE>
The Company may, from time to time, enter into interest rate hedge agreements to
manage interest costs and risks associated with changing interest rates. The
Company intends to monitor continuously and actively manage interest costs on
its variable rate debt portfolio and may increase or decrease its swap position
based on market fluctuations. In addition, the Company believes that it has the
ability to obtain funds through additional equity and/or debt offerings and the
cost of obtaining such protection agreements in relation to the Company's access
to capital markets will continue to be evaluated.
- --------------------------------------------------------------------------------
11. PREFERRED AND COMMON SHARES
- --------------------------------------------------------------------------------
PREFERRED SHARES:
In November and December 1995, the Company sold 4,215,000 depositary
shares of 9.5% Class A Cumulative Redeemable Preferred Stock at $25 per
depositary share. In December 1995, the Company sold 1,600,000 depositary shares
of 9.44% Class B Cumulative Redeemable Preferred Stock at $25 per share. An
additional 175,000 of Class B depositary shares were sold in January 1996, in
conjunction with the underwriters' over allotment option. Both the Class A and B
depositary shares represent 1/10 of a share of their respective preferred class.
The Class A and Class B depositary shares are not redeemable by the Company,
except in certain circumstances relating to the preservation of the Company's
status as a REIT, prior to November 15, 2000 and December 26, 2000,
respectively. The aggregate net proceeds of approximately $144 million were used
in part to fund the Company's equity investment relating to the acquisition of
the Community Center Properties (Note 2) and to retire variable rate
indebtedness, primarily Floating Rate Senior Notes.
On April 29, 1996, the Company's shareholders authorized (i) 1,500,000 Class C
Cumulative Preferred Shares, without par value, (ii) 1,500,000 Class D
Cumulative Preferred Shares, without par value; (iii) 1,500,000 Class E
Cumulative Preferred Shares, without par value and (iv) the reduction of the
number of authorized Class A Cumulative Preferred Shares, without par value,
Class B Cumulative Preferred Shares without par value, and Noncumulative
Preferred shares, without par value from 3,000,000 to 1,500,000 each. At
December 31, 1996 the Company's unissued preferred shares consisted of the
following:
Class C - Cumulative redeemable preferred shares, without par value;
1,500,000 shares authorized;
Class D - Cumulative redeemable preferred shares, without par value;
1,500,000 shares authorized;
Class E - Cumulative redeemable preferred shares, without part value;
1,500,000 shares authorized;
Noncumulative redeemable preferred shares, without par value; 1,500,000
shares authorized.
COMMON SHARES
In July 1994 the Company sold 500,000 shares of common stock, in an underwritten
offering, to a group of Institutional Investors at an offering price of $31-5/8
per share. In January 1995 the Company sold 2,875,000 shares of common stock, in
an underwritten offering at an offering price of $28.25 per share. In March
1996, the Company sold 2,611,500 shares of common stock in an underwritten
offering at an offering price of $28.95 per share. The aggregate net proceeds of
approximately $167.3 million from the above three offerings were primarily used
to retire variable rate debt. In January, 1997, as discussed in Note 17, the
Company sold 3,350,000 shares of common stock in an underwritten offering at an
offering price of $36-5/8. The proceeds were used to reduce outstanding
borrowings under the lines of credit and for general corporate purposes.
F-16
<PAGE> 61
- --------------------------------------------------------------------------------
12. TRANSACTIONS WITH RELATED PARTIES
- --------------------------------------------------------------------------------
In July 1994, the Company acquired from a partnership owned by the chairman of
the board of directors and an officer of the Company, the first phase of a newly
constructed shopping center in Macedonia, Ohio. At the date of acquisition, the
shopping center contained an aggregate of approximately 276,000 total square
feet of GLA (158,205 of which is owned by the Company) and was acquired at a
cost of approximately $14.0 million (of which $10.8 million was comprised of
liabilities assumed and $3.2 million was paid in cash). In April 1995, the
Company acquired two outparcels and approximately eight acres of land adjacent
to the shopping center at a purchase price of approximately $3 million. The two
outparcels were pre-leased and an 81,000 square foot Kohl's Department Store was
constructed on the eight acres of land. During 1996 this shopping center was
transferred into a joint venture with OSTRS (Note 2) at a fair market value of
approximately $24.6 million. At the date of transfer, the net asset value of the
transferred property was $20.3 million.
In August 1994, the Company acquired, from a partnership owned by the chairman
of the board of directors and an officer of the Company, approximately 12 acres
of land adjacent to an existing Wal-Mart store in Xenia, Ohio for a purchase
price of $0.9 million. The Company completed the construction of a 100,000
square foot shopping center on the site, with a Kroger supermarket as an anchor
tenant.
In September 1994, the Company acquired, from a partnership owned by the
chairman of the board and three officers of the Company, approximately 9.75
acres of land in Aurora, Ohio for a purchase price of $1.2 million. The Company
recently completed the initial phase (approximately 90,000 square feet) of a
shopping center development with a Heinen's supermarket as an anchor tenant.
The Company has agreed to acquire, from the affiliates previously referred to,
additional land parcels and expansion areas which are located adjacent to the
properties previously acquired. The Company's purchase price has not yet been
determined since it is subject to the leasing and/or construction of vacant
space and resolution of various other contingencies.
The Company entered into a lease for office space owned by one of its principal
partners/shareholders. General and administrative rental expense associated with
this office space, for the years ended December 31, 1996, 1995 and 1994
aggregated $0.5 million, $0.3 million, and $0.2 million, respectively. The
increase in rental payments is primarily related to the leasing of additional
space to accomodate the Company's growth.
The Company also entered into a management agreement in 1993 with a partnership,
owned in part by a related party, in which management fee and leasing fee income
of $0.1 million was earned in 1996, 1995 and 1994.
The Company performs certain administrative functions on behalf of entities in
which the chairman of the board has an ownership interest and recorded
management fee income of $22,500 for the three years ended 1996, 1995, and 1994.
- --------------------------------------------------------------------------------
13. Commitments
- --------------------------------------------------------------------------------
The Company is engaged in the operation of shopping centers/malls and business
centers which are either owned or, with respect to six shopping centers,
operated under long-term ground leases which expire at various dates after 2048.
Space in the shopping centers is leased to tenants pursuant to agreements which
provide for terms ranging generally from one to 30 years and, in some cases, for
annual rentals which are subject to upward adjustments based on operating
expense levels, sales volume, or contractual increases as defined in the lease
agreements.
The scheduled future minimum revenues from rental property under the terms of
all noncancelable tenant leases, assuming no new or renegotiated leases or
option extensions for such premises, for the subsequent five years ending
December 31, were as follows:
<TABLE>
<S> <C>
1997 $ 98,139,684
1998 92,014,275
1999 84,060,542
2000 76,345,221
2001 69,187,656
Thereafter 574,542,908
------------
$994,290,286
============
</TABLE>
F-17
<PAGE> 62
Scheduled minimum rental payments under the terms of all non-cancelable
operating leases in which the Company is the lessee, principally for office
space and ground leases, for the subsequent five years ending December 31 and
thereafter are as follows:
<TABLE>
<S> <C>
1997 $ 892,640
1998 953,651
1999 1,013,465
2000 1,043,465
2001 1,043,465
Thereafter 16,290,321
--------------
$ 21,237,007
==============
</TABLE>
In conjunction with the development and expansion of various shopping centers,
the Company has entered into agreements for the construction of the shopping
centers and acquisition of land aggregating approximately $17.3 million.
- --------------------------------------------------------------------------------
14. OTHER INCOME
- --------------------------------------------------------------------------------
Other income is comprised of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Interest $1,212,567 $1,227,541 $ 910,514
Temporary tenant
rentals (kiosks) 689,398 636,569 570,440
Lease termination fees 3,007,457 623,642 147,374
Development fees 671,622 803,842 93,054
Other 417,305 317,994 493,573
------------------------------------------
$5,998,349 $3,609,588 $2,214,955
==========================================
</TABLE>
- --------------------------------------------------------------------------------
15. BENEFIT PLANS
- --------------------------------------------------------------------------------
STOCK OPTION PLANS
Effective January 31, 1993, the Company established an incentive and
non-qualified stock option plan under which 1,556,903 of the Company's Common
Shares at December 31, 1996 are reserved for issuance to eligible employees.
Options may be granted at per share prices not less than fair market value at
the date of grant, and in the case of incentive options, must be exercisable
within ten years thereof (or, with respect to options granted to certain
shareholders, within five years thereof). Options granted under the plan
generally become exercisable on the year after the date of grant as to one third
of the optioned shares, with the remaining options being exercisable over the
following two-year period.
As of December 31, 1996, 1995 and 1994, 555,057, 381,193 and 141,272 options,
respectively, were exercisable. Option prices range from $22 to $34 per share.
In addition to the stock option plan described above, the Company granted
options for a total of 445,000 shares to its directors and certain officers who
are not employees of the Company. Such options were granted at the fair market
value on the date of grant. Options with respect to 45,000 shares are
exercisable one year from the date of grant, and options with respect to the
remaining 400,000 shares become exercisable one year after the date of grant as
to one third of the 400,000 shares with the remaining options being exercisable
over the following two-year period. As of December 31, 1996, 1995 and 1994,
options aggregating 253,333, 158,334 and 58,333, respectively, were exercisable,
of which 5,000 were exercised during 1996. Option prices range from $22 to
$30.75 per share.
The following table reflects the stock option activity described above:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
EMPLOYEES DIRECTORS
- --------------------------------------------------------------------------------
<S> <C> <C>
Balance December 31, 1993 423,815 125,000
Granted 295,950 200,000
Exercised (9,223) --
Canceled (10,036) --
---------------------------
Balance December 31, 1994 700,506 325,000
Granted 179,282 --
Exercised (11,398) --
Canceled (41,467) --
---------------------------
Balance December 31, 1995 826,923 325,000
Granted 533,619 120,000
Exercised (66,378) (5,000)
Canceled (29,530) --
---------------------------
Balance December 31, 1996 1,264,634 440,000
</TABLE> ===========================
The options exercised during 1996, 1995 and 1994 ranged from $22.00 to $30.75
per share.
The Company does not recognize compensation cost for stock options when the
option exercise price equals or exceeds the market value on the date of the
grant. Had compensation cost for the Company's stock-based compensation plans
been determined based on the fair values of the options
F-18
<PAGE> 63
granted at the grant dates, the Company's net income (in thousands) and earnings
per share would have been as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C>
NET INCOME AS REPORTED 35,343 24,250
PRO FORMA 34,025 22,640
PRIMARY EARNINGS AS REPORTED 1.67 1.29
PER SHARE PRO FORMA 1.61 1.21
FULLY DILUTED AS REPORTED 1.66 1.28
EARNINGS PER SHARE PRO FORMA 1.60 1.20
</TABLE>
The fair value of the options at the date of grant was estimated using the
Black-Scholes model. The following assumptions were used for the grants in 1996
and 1995; risk-free interest rates ranging from 5.6% to 6.8%; expected
volatility ranging from 15.4% to 24.4%; expected life ranging from 8.3 years to
ten years; and dividend yield of 7.8%.
In April 1996, the shareholders approved an equity-based award Plan which
provides for the grant, to key employees of the Company, of options to purchase
common shares of the Company, rights to receive the appreciation in value of
common shares, awards of common shares subject to restrictions on transfer,
awards of common shares issuable in the future upon satisfaction of certain
conditions, rights to purchase common shares and other awards based on common
shares. Under the terms of the Award Plan, awards may be granted with respect to
an aggregate of not more than 600,000 common shares.
In 1996, the Board of Directors approved a grant of 25,000 restricted shares of
common stock and 15,000 Participation Units to the Company's Chief Executive
Officer. The 25,000 shares of restricted stock will vest in equal annual amounts
of 5,000 shares per year through the year 2000. The 15,000 Participation Units
will be converted into common shares, ranging from 15,000 common shares to
100,000 common shares, at the end of five years. The actual number of shares
issued will be based upon the average annual total shareholder return during the
five year period. During 1996, approximately $450,000 was charged to expense
relating to these awards.
ELECTIVE DEFERRED COMPENSATION PLAN
Effective October 15, 1994, the Company adopted a non-qualified elective
deferred compensation plan for certain key executives which permits eligible
employees to defer up to 25% of their compensation.
The Company will match 25% of the employees' contributions up to a maximum of 6%
of an employee's annual compensation, after deducting contributions, if any,
made in conjunction with the Company's 401(k) plan. Both the deferred and
matching contributions are made in Company performance units, with the gains and
losses being related to the Company's quoted share price. Deferred compensation
related to employee contributions is fully vested and the Company's matching
contribution vests 20% per year, including service prior to the plan's effective
date. Once an employee has been with the Company five years, all matching
contributions are fully vested. The Company's contribution, including plan
earnings for the years ended December 31, 1996, 1995 and 1994, was $53,354,
$22,053 and $2,700, respectively. At December 31, 1996, 1995 and 1994 deferred
compensation under this plan aggregated $183,921, $91,112 and $13,554,
respectively. The plan is not funded.
- --------------------------------------------------------------------------------
16. EARNINGS AND DIVIDENDS PER SHARE
- --------------------------------------------------------------------------------
Primary earnings per share for income before extraordinary item and net income
available to common shareholders were computed by dividing dividends paid or
declared for the period by the weighted average number of common shares
outstanding, plus the undistributed income before extraordinary item available
to common shareholders or undistributed net income (loss) available to common
shareholders, as appropriate, divided by the weighted average number of common
shares and common share equivalents outstanding. For all periods reported,
applicable dividends declared exceeded the amount of net income and,
accordingly, common share equivalents were excluded from the calculation of
primary earnings per share as they were antidilutive. The weighted average
number of shares outstanding utilized in the calculations was 21,141,653,
18,780,047 and 15,806,474 for the years ended December 31, 1996, 1995 and 1994,
respectively.
F-19
<PAGE> 64
Fully diluted earnings per common share were calculated by dividing income
(loss) before extraordinary item available to common shareholders and net income
(loss) available to common shareholders by the weighted average number of common
shares and common share equivalents outstanding during the period. Common share
equivalents included stock options outstanding. The assumed conversion of the
Debentures would have been antidilutive on per share amounts, and was therefore
excluded from the calculation. The weighted average number of shares utilized in
the fully diluted calculation was 21,261,632 and 18,937,413 and 15,942,836 for
the years ended December 31, 1996, 1995 and 1994, respectively.
The extraordinary item recognized in 1995 had the effect of reducing both
primary and fully diluted earnings per share by $0.19, based on the weighted
average number of shares outstanding 18,780,047 and 18,937,413. The
extraordinary item recognized in 1994 had the effect of reducing both primary
and fully diluted earnings per share by $.01, based on the weighted average
number of shares outstanding of 15,806,474 and 15,942,836. Dividends declared
per share for the years ended December 31, 1996, 1995 and 1994 are summarized as
follows:
<TABLE>
<CAPTION>
GROSS ORDINARY NON-TAXABLE CAPITAL GAIN TOTAL
1996 DIVIDENDS DATE PAID INCOME RETURN OF CAPITAL DISTRIBUTIONS DIVIDENDS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st QUARTER 04/01/96 $ .475 $ .12 $ .005 $ .60
2nd QUARTER 07/01/96 .475 .12 .005 .60
3rd QUARTER 09/30/96 .475 .12 .005 .60
4th QUARTER 12/30/96 .475 .12 .005 .60
-----------------------------------------------------------------
$ 1.90 $ .48 $ .02 $ 2.40
=================================================================
<CAPTION>
GROSS ORDINARY NON-TAXABLE CAPITAL GAIN TOTAL
1995 DIVIDENDS DATE PAID INCOME RETURN OF CAPITAL DISTRIBUTIONS DIVIDENDS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st quarter 03/31/95 $ .43 $ .11 $ - $ .54
2nd quarter 06/30/95 .43 .11 - .54
3rd quarter 09/29/95 .43 .11 - .54
4th quarter 12/29/95 .43 .11 - .54
-----------------------------------------------------------------
$ 1.72 $ .44 $ - $ 2.16
=================================================================
<CAPTION>
GROSS ORDINARY NON-TAXABLE CAPITAL GAIN TOTAL
1994 DIVIDENDS DATE PAID INCOME RETURN OF CAPITAL DISTRIBUTIONS DIVIDENDS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st quarter 04/15/94 $ .35 $ .13 $ - $ .48
2nd quarter 07/15/94 .35 .13 - .48
3rd quarter 09/30/94 .35 .13 - .48
4th quarter 12/30/94 .35 .13 - .48
-----------------------------------------------------------------
$ 1.40 $ .52 $ - $ 1.92
=================================================================
</TABLE>
F-20
<PAGE> 65
- --------------------------------------------------------------------------------
17. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
On January 14, 1997, the Company sold 3,350,000 common shares at $36-5/8 per
share through an underwritten offering. The net proceeds of approximately $116
million were primarily used to repay revolving credit debt and for general
corporate purposes. Pro forma income before extraordinary item applicable to
common shareholders for the year ended December 31, 1996, would have been
approximately $39.4 million or $1.71 per share reflecting: i) the common share
offering completed in March, 1996 and if it had been consumated on January 1,
1996 (Note 11); and ii) this offering as if it had been completed on July 1,
1996, at which time the Company borrowed $105 million against its revolving
credit facilities for the properties acquired in 1996. The weighted average
shares used in this calculation were 23.1 million.
In January 1997, the Company acquired a 296,000 square foot shopping center in
San Antonio, Texas. The shopping center is owned through a joint venture in
which the Company owns a 35% interest. The remaining 65% interest is owned by
institutional investors advised by DRA Advisors. The Company will manage the
shopping center and will receive management fee income from the joint venture.
The purchase price for the shopping center approximated $38.3 million. The joint
venture obtained a bridge loan for approximately $26.7 million from a financial
institution.
In February 1997, the Company acquired a shopping center located in Phoenix,
Arizona aggregating 245,409 square feet of Company GLA. The purchase price for
this center approximated $ 26.5 million.
In February 1997, the Company made an initial capital contribution of
approximately $37.7 million to a joint venture relating to the ownership and
management of two adjacent shopping centers in Cleveland (North Olmsted), Ohio
aggregating approximately 600,000 square feet. The Company owns a majority
interest and is entitled to approximately 95% of the economic benefit.
In conjunction with the above acquisitions and investments, the Company borrowed
$50 million under its revolving credit facilities.
- --------------------------------------------------------------------------------
18. PRICE RANGE OF COMMON SHARES (UNAUDITED)
- --------------------------------------------------------------------------------
The high and low sale prices per share of the Company's common shares, as
reported on the New York Stock Exchange Composite tape, and declared dividends
per share for the periods indicated were as follows:
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1996:
FIRST $ 31-3/4 $ 28-1/8 $ .60
SECOND 32 28-1/8 .60
THIRD 33-1/8 30-1/2 .60
FOURTH 37-1/4 32-1/8 .60
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995:
First $ 31 $ 27-5/8 $ .54
Second 30-3/8 26-1/8 .54
Third 32 27-3/4 .54
Fourth 32-1/8 27-1/4 .54
</TABLE>
F-21
<PAGE> 66
- --------------------------------------------------------------------------------
19. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
The following table sets forth the quarterly results of operations for the years
ended December 31, 1996 and 1995.
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996:
REVENUES $30,635 $31,904 $34,535 $33,832 $130,906
INCOME BEFORE EQUITY IN NET INCOME (LOSS)
OF JOINT VENTURES, GAIN ON SALES OF LAND,
AND EXTRAORDINARY ITEM 9,204 11,242 10,788 9,599 40,833
INCOME BEFORE EXTRAORDINARY CHARGE 11,216 13,104 12,926 12,296 49,542
NET INCOME 11,216 13,104 12,926 12,296 49,542
NET INCOME APPLICABLE TO COMMON SHAREHOLDERS 7,666 9,554 9,377 8,746 35,343
- ------------------------------------------------------------------------------------------------
INCOME PER COMMON SHARE:
INCOME BEFORE EXTRAORDINARY CHARGE $ .39 $ .44 $ .43 $ .40 $ 1.67
NET INCOME $ .39 $ .44 $ .43 $ .40 $ 1.67
- ------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 19,705 21,591 21,619 21,642 21,142
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995:
Revenues $25,265 $26,313 $27,239 $28,988 $107,805
Income before equity in net income (loss)
of joint ventures, gain on sales of land,
and extraordinary item 6,376 6,971 7,222 7,707 28,276
Income before extraordinary charge 6,432 7,117 7,126 8,387 29,062
Net income 6,181 3,811 7,126 8,387 25,505
Net income applicable to common shareholders 6,181 3,811 7,126 7,132 24,250
- ------------------------------------------------------------------------------------------------
Income per common share:
Income before extraordinary charge $ .35 $ .38 $ .38 $ .37 $ 1.48
Net income $ .34 $ .20 $ .38 $ .37 $ 1.29
- ------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 18,253 18,960 18,964 18,965 18,780
</TABLE>
F-22
<PAGE> 67
SCHEDULE II
DEVELOPERS DIVERSIFIED REALTY CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Balance at Balance at
beginning of Charged end of
year to expense Deductions year
------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for uncollectible accounts . . . . . $990,000 $1,292,000 $ 512,000 $1,770,000
========= ========== ========== ===========
Year ended December 31, 1995
Allowance for uncollectible accounts . . . . . $310,000 $ 721,000 $ 41,000 $ 990,000
========= ========== ========== ===========
Year ended December 31, 1994
Allowance for uncollectible accounts . . . . . $130,000 $ 217,000 $ 37,000 $ 310,000
========= ========== ========== ===========
</TABLE>
F-23
<PAGE> 68
<TABLE>
<CAPTION>
SCHEDULE III
Continued
DEVELOPERS DIVERSIFIED REALTY CORPORATION
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 1996
Initial Cost Total Cost (A)
---------------------------- --------------------------------------------
Buildings & Buildings &
Land Improvements Improvements Land Improvements Total
---------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BRANDON, FL ................ $0 $4,111,281 $0 $0 $4,111,281 $4,111,281
STOW, OH ................... 433,358 1,566,859 0 390,022 7,461,398 7,851,420
FERN PARK, FL(ORLANDO) ..... 445,852 302,755 97,300 445,852 400,055 845,907
EASTLAKE, OH ............... 40,000 141,000 0 40,000 141,000 181,000
HIGHLAND HTS., OH .......... 383,417 1,711,463 0 383,417 13,320,903 13,704,320
HIGHLAND HTS., OH (DEV) .... 3,603,635 6,184,528 0 3,603,635 0 3,603,635
WESTLAKE, OH ............... 424,225 3,802,863 203,235 424,225 4,046,349 4,470,574
WATERBURY, CT .............. 0 3,048,300 0 0 3,048,300 3,048,300
ZANESVILLE, OH ............. 0 619,023 0 0 619,023 619,023
E. NORRITON, PA ............ 80,408 4,697,718 233,380 80,408 4,941,098 5,021,506
PALM HARBOR, FL ............ 1,136,915 4,089,138 0 1,136,915 4,124,312 5,261,227
TARPON SPRINGS, FL ......... 248,067 7,381,640 80,859 248,067 7,462,499 7,710,566
BAYONET PT., FL ............ 2,112,566 8,180,960 127,530 2,124,621 8,308,490 10,433,111
STARKVILLE, MS ............. 819,323 5,253,897 0 819,323 6,606,664 7,425,987
STARKVILLE (KROGER) ........ 451,758 2,955,317 0 451,758 2,955,317 3,407,075
TUPELO, MS ................. 2,282,000 14,978,722 0 2,282,000 15,575,757 17,857,757
JACKSONVILLE, FL ........... 3,005,420 9,425,063 0 3,005,420 9,425,063 12,430,483
STONE MOUNTAIN, GA ......... 460,471 3,018,074 21,890 460,471 3,039,964 3,500,435
ATLANTA, GA ................ 475,360 9,373,552 0 475,360 9,435,586 9,910,946
ERIE, PA ................... 7,030,162 19,200,609 0 6,830,163 32,466,100 39,296,263
ERIE, PA ................... 3,850,317 0 0 3,850,317 0 3,850,317
ERIE, PA ................... 1 2,563,770 12,990 1 2,576,760 2,576,761
CHILLICOTHE, OH ............ 42,857 2,549,287 2,200 1,266,066 6,916,992 8,183,058
OCALA, FL .................. 26,800 351,065 25,028 26,800 376,093 402,893
TAMPA, FL (WATERS). ........ 4,105,230 6,640,240 324,071 3,905,230 7,003,417 10,908,647
WINCHESTER, VA ............. 618,075 13,903,078 0 618,075 13,905,278 14,523,353
HUBER HEIGHTS, OH .......... 757,422 14,468,512 1,000 757,422 14,470,362 15,227,784
LEBANON, OH ................ 651,025 911,178 30,993 651,025 1,026,666 1,677,691
WILMINGTON, OH ............. 156,975 1,615,646 50,575 156,975 1,676,221 1,833,196
HILLSBORO, OH .............. 79,579 1,984,831 0 79,579 1,984,831 2,064,410
CANTON, OH PHASE II ........ 5,523,122 0 0 6,233,482 0 6,233,482
XENIA, OH .................. 948,202 3,938,138 0 948,202 5,494,621 6,442,823
BOARDMAN, OH ............... 9,025,281 0 0 9,025,281 0 9,025,281
CINCINNATI, OH ............. 2,399,250 11,238,105 172,198 2,399,250 12,058,431 14,457,681
BEDFORD, IN ................ 706,282 8,424,532 5,750 706,282 8,455,285 9,161,567
WATERTOWN, SD .............. 62,712 6,442,712 441,927 62,712 7,997,434 8,060,146
CONNERSVILLE, IN ........... 539,720 6,457,710 0 539,720 6,457,710 6,997,430
ASHLAND, OH ................ 209,500 2,272,624 0 209,500 2,325,424 2,534,924
PENSACOLA, FL .............. 1,804,641 4,010,290 273,372 1,804,641 4,333,262 6,137,903
<CAPTION> Total Cost,
Net of Depreciable Date of
Accumulated Accumulated Lives Construction (C)
Depreciation Depreciation Encumbrances (Years)(1) Acquisition (A)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BRANDON, FL .............. $3,358,135 $753,146 $0 S/L 30 1972 (C)
STOW, OH ................. 1,487,243 6,364,177 0 S/L 30 1969 (C)
FERN PARK, FL(ORLANDO) ... 248,596 597,310 0 S/L 30 1970 (C)
EASTLAKE, OH ............. 109,685 71,315 0 S/L 30 1971 (C)
HIGHLAND HTS., OH ........ 333,899 13,370,421 0 S/L 30 1971 (C)
HIGHLAND HTS., OH (DEV)... 38,587 3,565,048 0 S/L 31.5 1995 (C)
WESTLAKE, OH ............. 2,867,557 1,603,017 0 S/L 30 1974 (C)
WATERBURY, CT ............ 2,395,873 652,427 0 S/L 30 1973 (C)
ZANESVILLE, OH ........... 127,742 491,280 0 S/L 31.5 1990 (C)
E. NORRITON, PA .......... 3,263,031 1,758,475 0 S/L 30 1975 (C)
PALM HARBOR, FL .......... 218,427 5,042,800 0 S/L 31.5 1995 (A)
TARPON SPRINGS, FL ....... 5,396,798 2,313,768 0 S/L 30 1974 (C)
BAYONET PT., FL .......... 3,184,962 7,248,148 5,327,208 S/L 30 1985 (C)
STARKVILLE, MS ........... 397,922 7,028,065 0 S/L 31.5 1994 (A)
STARKVILLE (KROGER) ...... 195,457 3,211,618 2,438,320 S/L 31.5 1994 (A)
TUPELO, MS ............... 983,767 16,873,990 11,920,655 S/L 31.5 1994 (A)
JACKSONVILLE, FL ......... 521,736 11,908,747 8,117,177 S/L 31.5 1995 (A)
STONE MOUNTAIN, GA ....... 2,408,271 1,092,164 0 S/L 30 1973 (C)
ATLANTA, GA .............. 857,890 9,053,056 0 S/L 31.5 1994 (A)
ERIE, PA ................. 1,225,796 38,070,467 0 S/L 31.5 1995 (C)
ERIE, PA ................. 0 3,850,317 0 S/L 31.5 1995 (C)
ERIE, PA ................. 1,950,816 625,945 0 S/L 30 1973 (C)
CHILLICOTHE, OH .......... 1,470,911 6,712,147 0 S/L 30 1974 (C)
OCALA, FL ................ 286,557 116,336 0 S/L 30 1974 (C)
TAMPA, FL (WATERS) ....... 1,437,300 9,471,346 0 S/L 31.5 1990 (C)
WINCHESTER, VA ........... 1,358,724 13,164,629 9,591,984 S/L 31.5 1993 (A)
HUBER HEIGHTS, OH ........ 1,569,565 13,658,219 0 S/L 31.5 1993 (A)
LEBANON, OH .............. 138,547 1,539,144 0 S/L 31.5 1993 (A)
WILMINGTON, OH ........... 1,054,458 778,738 0 S/L 30 1977 (C)
HILLSBORO, OH ............ 1,157,765 906,644 0 S/L 30 1979 (C)
CANTON, OH PHASE II ...... 0 6,233,482 0 S/L 31.5 1995 (A)
XENIA, OH ................ 343,936 6,098,887 0 S/L 31.5 1994 (A)
BOARDMAN, OH ............. 0 9,025,281 0 S/L 31.5 1997 (C)
CINCINNATI, OH ........... 1,391,695 13,065,986 0 S/L 31.5 1993 (A)
BEDFORD, IN .............. 839,529 8,322,038 0 S/L 31.5 1993 (A)
WATERTOWN, SD ............ 4,167,278 3,892,868 0 S/L 30 1977 (C)
CONNERSVILLE, IN ......... 631,577 6,365,853 0 S/L 31.5 1993 (A)
ASHLAND, OH .............. 1,483,137 1,051,787 0 S/L 30 1977 (C)
PENSACOLA, FL ............ 1,122,792 5,015,110 0 S/L 30 1988 (C)
</TABLE>
F-24
<PAGE> 69
<TABLE>
<CAPTION>
SCHEDULE III
Continued
DEVELOPERS DIVERSIFIED REALTY CORPORATION
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 1996
Initial Cost Total Cost (A)
---------------------------- --------------------------------------------
Buildings & Buildings &
Land Improvements Improvements Land Improvements Total
---------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
W.65TH CLEVELAND, OH ....... 90,120 1,463,076 15,000 90,120 1,478,076 1,568,196
LOS ALAMOS, NM ............. 725,000 3,499,950 30,336 725,000 3,530,286 4,255,286
TAMPA, FL (DALE) ........... 4,268,673 5,368,147 204,666 4,268,672 6,064,385 10,333,057
WAYNESVILLE, NC ............ 431,910 8,088,668 131,096 431,910 8,232,657 8,664,567
AHOSKIE, NC ................ 269,530 7,775,856 3,168 269,530 7,804,724 8,074,254
PULASKI, VA ................ 528,075 6,395,809 2,000 528,075 6,402,247 6,930,322
TWINSBURG, OH (VSA) ........ 341,025 2,108,098 0 341,025 1,872,503 2,213,528
AURORA, OH ................. 832,436 0 0 832,436 5,305,367 6,137,803
WORTHINGTON, MN ............ 373,943 6,404,291 440,740 373,943 6,890,476 7,264,419
HARRISBURG, IL ............. 550,100 7,619,281 0 550,100 7,619,281 8,169,381
MT. VERNON, IL ............. 1,789,009 9,398,696 111,000 1,789,009 9,746,717 11,535,726
FENTON, MO ................. 413,993 4,243,854 475,714 413,993 5,047,909 5,461,902
MELBOURNE, FL .............. 1 3,084,819 116,638 1 3,201,457 3,201,458
SIMPSONVILLE, SC ........... 430,800 6,563,154 0 430,800 6,563,154 6,993,954
CAMDEN, SC ................. 627,100 7,519,161 6,500 627,100 7,831,400 8,458,500
UNION, SC .................. 684,750 7,629,275 500 684,750 7,648,975 8,333,725
N. CHARLESTON, SC .......... 910,840 11,346,348 1,000 1,081,461 14,908,724 15,990,185
S. ANDERSON, SC ............ 1,365,600 6,117,482 13,170 1,365,600 6,130,652 7,496,252
ANDERSON, SC ............... 204,094 939,733 0 204,094 939,733 1,143,827
ORANGEBURG, SC ............. 317,934 1,692,836 0 317,934 1,692,836 2,010,770
MT. PLEASANT, SC ........... 2,583,887 10,469,891 0 2,583,887 10,469,891 13,053,778
COLUMBIA, SC ............... 600,000 3,262,624 0 600,000 3,262,624 3,862,624
SAULT STE. MARIE, MI ....... 1,826,454 13,709,705 0 1,826,454 13,735,020 15,561,474
CHEBOYGAN, MI .............. 126,670 3,612,242 0 126,670 3,612,242 3,738,912
GRAND RAPIDS, MI ........... 1,926,389 8,039,411 0 1,926,389 8,048,942 9,975,331
HOUGHTON, MI ............... 439,589 7,300,952 1,820,772 439,589 9,222,349 9,661,938
BAD AXE, MI ................ 183,850 3,647,330 0 183,850 4,038,246 4,222,096
GAYLORD, MI ................ 269,900 8,727,812 2,250 269,900 9,060,182 9,330,082
HOWELL, MI ................. 331,500 11,938,263 750 331,500 11,949,361 12,280,861
MT. PLEASANT, MI ........... 766,950 7,768,538 20,340 766,950 11,483,267 12,250,217
ELYRIA, OH ................. 352,295 5,692,642 0 352,295 5,692,642 6,044,937
BEMIDJI, MN ................ 442,031 8,228,731 500,161 442,031 8,808,171 9,250,202
CAPE CORAL, FL ............. 1,286,628 2,548,149 149,507 1,286,628 2,697,656 3,984,284
TRINDAD, CO ................ 411,329 2,578,930 197,546 411,329 2,787,426 3,198,755
HAZARD, KY ................. 402,563 3,271,343 296,745 402,563 3,568,089 3,970,652
BIRMINGHAM, AL ............. 3,726,122 13,973,590 0 3,726,122 14,010,222 17,736,344
BIRMINGHAM, AL ............. 10,572,916 26,002,258 0 11,434,040 30,163,042 41,597,082
HUNTSVILLE, AL ............. 600,000 3,058,100 0 600,000 3,059,600 3,659,600
MURRAY, KY ................. 303,660 4,739,709 0 303,660 4,762,756 5,066,416
JACKSONVILLE, NC ........... 521,111 3,998,798 172,993 521,111 4,171,791 4,692,902
ORMOND BEACH, FL ........... 1,048,380 15,812,069 3,875 1,048,380 15,823,606 16,871,986
ALAMOSA, CO ................ 161,479 1,034,465 210,958 161,479 1,247,424 1,408,903
WILMINGTON, NC ............. 4,785,052 16,851,571 1,182,775 4,185,802 23,718,647 27,904,449
BERLIN, VT ................. 858,667 10,948,064 23,935 866,217 10,983,359 11,849,576
BRAINERD, MN ............... 703,410 9,104,117 271,802 1,182,018 9,470,585 10,652,603
SPRING HILL, FL ............ 1,083,851 4,816,166 265,762 2,121,843 5,081,998 7,203,841
TIFFIN, OH ................. 432,292 5,907,856 434,761 432,292 6,496,188 6,928,480
TOLEDO, OH ................. 2,490,543 10,582,588 0 2,490,543 10,583,789 13,074,332
<CAPTION> Total Cost,
Net of Depreciable Date of
Accumulated Accumulated Lives Construction (C)
Depreciation Depreciation Encumbrances (Years)(1) Acquisition (A)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
W.65TH CLEVELAND, OH ....... 967,627 600,569 0 S/L 30 1977 (C)
LOS ALAMOS, NM ............. 1,138,593 3,116,693 0 S/L 30 1978 (C)
TAMPA, FL (DALE) ........... 1,102,327 9,230,730 0 S/L 31.5 1990 (C)
WAYNESVILLE, NC ............ 1,028,793 7,635,774 0 S/L 31.5 1993 (A)
AHOSKIE, NC ................ 704,625 7,369,629 0 S/L 31.5 1994 (A)
PULASKI, VA ................ 747,757 6,182,565 0 S/L 31.5 1993 (A)
TWINSBURG, OH (VSA) ........ 423,576 1,789,952 0 S/L 31.5 1989 (C)
AURORA, OH ................. 48,937 6,088,866 0 S/L 31.5 1995 (C)
WORTHINGTON, MN ............ 3,766,231 3,498,187 0 S/L 30 1977 (C)
HARRISBURG, IL ............. 685,332 7,484,049 0 S/L 31.5 1994 (A)
MT. VERNON, IL ............. 1,082,770 10,452,956 0 S/L 31.5 1993 (A)
FENTON, MO ................. 2,056,946 3,404,956 0 S/L 30 1983 (A)
MELBOURNE, FL .............. 1,887,999 1,313,459 0 S/L 30 1978 (C)
SIMPSONVILLE, SC ........... 625,064 6,368,890 0 S/L 31.5 1994 (A)
CAMDEN, SC ................. 858,336 7,600,164 0 S/L 31.5 1993 (A)
UNION, SC .................. 853,038 7,480,687 0 S/L 31.5 1993 (A)
N. CHARLESTON, SC .......... 1,140,912 14,849,273 0 S/L 31.5 1993 (A)
S. ANDERSON, SC ............ 560,859 6,935,393 0 S/L 31.5 1994 (A)
ANDERSON, SC ............... 52,208 1,091,619 0 S/L 31.5 1995 (A)
ORANGEBURG, SC ............. 94,046 1,916,723 0 S/L 31.5 1995 (A)
MT. PLEASANT, SC ........... 581,506 12,472,271 7,043,274 S/L 31.5 1995 (A)
COLUMBIA, SC ............... 120,838 3,741,786 0 S/L 31.5 1995 (A)
SAULT STE. MARIE, MI ....... 1,017,019 14,544,455 8,027,584 S/L 31.5 1994 (A)
CHEBOYGAN, MI .............. 352,750 3,386,161 0 S/L 31.5 1993 (A)
GRAND RAPIDS, MI ........... 255,463 9,719,868 0 S/L 31.5 1995 (A)
HOUGHTON, MI ............... 5,517,093 4,144,845 3,098,376 S/L 30 1980 (C)
BAD AXE, MI ................ 416,951 3,805,145 0 S/L 31.5 1993 (A)
GAYLORD, MI ................ 964,748 8,365,334 0 S/L 31.5 1993 (A)
HOWELL, MI ................. 1,204,180 11,076,681 7,734,904 S/L 31.5 1993 (A)
MT. PLEASANT, MI ........... 959,956 11,290,261 0 S/L 31.5 1993 (A)
ELYRIA, OH ................. 2,044,569 4,000,368 3,808,568 S/L 30 1977 (C)
BEMIDJI, MN ................ 4,057,033 5,193,168 0 S/L 30 1977 (C)
CAPE CORAL, FL ............. 1,064,340 2,919,944 0 S/L 30 1985 (C)
TRINDAD, CO ................ 980,751 2,218,004 0 S/L 30 1986 (C)
HAZARD, KY ................. 1,993,301 1,977,350 0 S/L 30 1978 (C)
BIRMINGHAM, AL ............. 519,844 17,216,500 0 S/L 31.5 1994 (A)
BIRMINGHAM, AL ............. 1,639,576 39,957,506 0 S/L 31.5 1995 (A)
HUNTSVILLE, AL ............. 97,118 3,562,482 0 S/L 31.5 1995 (A)
MURRAY, KY ................. 428,064 4,638,352 0 S/L 31.5 1994 (A)
JACKSONVILLE, NC ........... 989,608 3,703,294 2,664,141 S/L 31.5 1989 (C)
ORMOND BEACH, FL ........... 1,340,499 15,531,487 0 S/L 31.5 1994 (A)
ALAMOSA, CO ................ 534,299 874,604 0 S/L 30 1986 (C)
WILMINGTON, NC ............. 3,670,202 24,234,247 10,075,323 S/L 31.5 1989 (C)
BERLIN, VT ................. 3,488,331 8,361,245 4,940,000 S/L 30 1986 (C)
BRAINERD, MN ............... 1,399,624 9,252,979 1,020,000 S/L 31.5 1991 (A)
SPRING HILL, FL ............ 1,360,594 5,843,247 6,212,636 S/L 30 1988 (C)
TIFFIN, OH ................. 3,390,420 3,538,060 0 S/L 30 1980 (C)
TOLEDO, OH ................. 615,934 12,458,398 0 S/L 31.5 1995 (A)
</TABLE>
F-25
<PAGE> 70
<TABLE>
<CAPTION>
SCHEDULE III
Continued
DEVELOPERS DIVERSIFIED REALTY CORPORATION
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 1996
Initial Cost Total Cost (A)
---------------------------- --------------------------------------------
Buildings & Buildings &
Land Improvements Improvements Land Improvements Total
---------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DICKINSON, ND .............. 57,470 6,864,237 354,820 51,148 7,259,157 7,310,305
WEST PASCO, FL ............. 1,422,383 6,552,470 8,500 1,422,383 6,560,969 7,983,352
MARIANNA, FL ............... 1,496,347 3,499,835 129,855 1,496,347 3,630,489 5,126,836
HUTCHINSON, MN ............. 401,502 5,510,326 656,937 426,502 6,225,385 6,651,887
NEW BERN, NC ............... 780,029 8,204,036 71,587 780,029 11,266,277 12,046,306
MAYFIELD HTS., OH (624) .... 168,000 1,418,886 0 168,000 1,418,886 1,586,886
MAYFIELD HTS., OH (625) .... 235,000 1,701,843 0 235,000 1,701,843 1,936,843
MENTOR, OH ................. 184,420 1,148,523 0 184,420 1,148,523 1,332,943
STREETSBORO, OH ............ 50,000 1,298,398 0 50,000 1,298,398 1,348,398
AURORA, OH ................. 100,000 2,909,005 0 100,000 2,937,911 3,037,911
HIGHLAND, IN ............... 4,003,400 20,101,245 0 4,003,400 20,101,245 24,104,645
PHOENIX, AR ................ 1,733,400 6,979,713 0 1,733,400 6,979,713 8,713,113
PHOENIX, AR ................ 4,686,600 21,569,807 0 4,686,600 21,569,807 26,256,408
MAPLE GROVE, MN ............ 4,564,278 18,379,324 0 4,564,278 18,379,324 22,943,602
TANASBOURNE TWN CTR ........ 3,780,000 15,991,872 0 3,780,000 15,991,872 19,771,872
FORT WORTH, TX ............. 2,325,000 10,275,719 0 2,325,000 10,275,719 12,600,719
RUSSELLVILLE, AR ........... 624,100 13,391,122 0 624,100 13,397,796 14,021,896
N. LITTLE ROCK, AR ......... 907,083 17,159,794 0 907,083 17,187,763 18,094,846
OTTUMWA, IA ................ 338,126 8,564,281 102,680 321,628 8,680,148 9,001,776
WASHINGTON, NC ............. 990,780 3,118,121 33,690 990,780 3,182,676 4,173,456
ORLANDO, FL ................ 4,792,146 11,673,702 84,343 4,792,146 11,758,045 16,550,191
DURHAM, NC ................. 2,210,222 11,671,268 277,631 2,210,222 11,961,399 14,171,621
CRYSTAL RIVER, FL .......... 1,216,709 5,795,643 364,531 1,219,142 6,160,174 7,379,316
TWINSBURG, OH (HBC) ........ 138,204 833,311 692,706 138,204 1,505,884 1,644,088
Portfolio Balance (DDR) .... 0 18,807,001 749,489 0 29,597,812 29,597,813
---------------------------------------- ---------------------------------------------
$146,537,577 $756,118,408 $12,737,527 $150,001,124 $841,645,836 $991,646,960
============ ============ =========== ============ ============ ============
<CAPTION> Total Cost,
Net of Depreciable Date of
Accumulated Accumulated Lives Construction (C)
Depreciation Depreciation Encumbrances (Years)(1) Acquisition (A)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DICKINSON, ND .............. 4,545,373 2,764,932 0 S/L 30 1978 (C)
WEST PASCO, FL ............. 2,333,283 5,650,069 4,783,894 S/L 30 1986 (C)
MARIANNA, FL ............... 736,296 4,390,540 0 S/L 31.5 1990 (C)
HUTCHINSON, MN ............. 3,241,458 3,410,429 5,242,849 S/L 30 1981 (C)
NEW BERN, NC ............... 2,166,189 9,880,117 5,392,642 S/L 31.5 1989 (C)
MAYFIELD HTS., OH (624) .... 698,580 888,306 0 S/L 19 1986 (C)
MAYFIELD HTS., OH (625) .... 1,184,004 752,838 0 S/L 18 1984 (C)
MENTOR, OH ................. 449,687 883,256 0 S/L 31.5 1987 (C)
STREETSBORO, OH ............ 415,488 932,910 0 S/L 25 1989 (C)
AURORA, OH ................. 398,140 2,639,771 0 S/L 31.5 1988 (C)
HIGHLAND, IN ............... 171,711 23,932,934 0 S/L 31.5 1996 (A)
PHOENIX, AR ................ 110,703 8,602,410 0 S/L 31.5 1996 (A)
PHOENIX, AR ................ 320,645 25,935,763 0 S/L 31.5 1996 (A)
MAPLE GROVE, MN ............ 291,735 22,651,867 0 S/L 31.5 1996 (A)
TANASBOURNE TWN CTR ........ 161,290 19,610,583 0 S/L 31.5 1996 (A)
FORT WORTH, TX ............. 148,649 12,452,070 0 S/L 31.5 1996 (A)
RUSSELLVILLE, AR ........... 1,134,346 12,887,550 0 S/L 31.5 1994 (A)
N. LITTLE ROCK, AR ......... 1,491,059 16,603,787 0 S/L 31.5 1994 (A)
OTTUMWA, IA ................ 2,105,807 6,895,969 0 S/L 31.5 1990 (C)
WASHINGTON, NC ............. 755,449 3,418,007 0 S/L 31.5 1990 (C)
ORLANDO, FL ................ 2,948,699 13,601,492 0 S/L 31.5 1989 (C)
DURHAM, NC ................. 2,317,890 11,853,731 0 S/L 31.5 1990 (C)
CRYSTAL RIVER, FL .......... 2,225,352 5,153,965 0 S/L 30 1986 (C)
TWINSBURG, OH (HBC) ........ 361,333 1,282,755 0 S/L 31.5 1989 (C)
Portfolio Balance (DDR) .... 469,560 29,128,253 0
----------------------------------------
$142,039,284 $849,607,676 $107,439,535
============ ============ ============
</TABLE>
- ------------------------------
(1) S/L refers to straight-line depreciation.
F-26
<PAGE> 71
(A) The Aggregate Cost for Federal Income Tax purposes was approximately
$990.0 million at December 31, 1996.
The changes in Total Real Estate Assets for the three years ended
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------
<S> <C> <C> <C>
BALANCE, BEGINNING OF YEAR $848,373,336 $686,890,098 $459,048,887
ACQUISITIONS INCLUDING CLOSING COSTS 114,390,359 81,634,342 179,684,535
IMPROVEMENTS AND EXPANSIONS 64,199,411 84,884,431 16,505,191
LAND UNDER DEVELOPMENT AND
CONSTRUCTION IN PROGRESS 9,557,168 2,405,064 31,651,485
SALES, TRANSFERS AND RETIREMENTS (44,873,314) (7,440,599) -
------------------------------------------
BALANCE, END OF YEAR $991,646,960 $848,373,336 $686,890,098
==========================================
</TABLE>
The changes in Accumulated Depreciation and Amortization for the three
years ended December 31, 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------
<S> <C> <C> <C>
BALANCE, BEGINNING OF YEAR $120,040,503 $100,051,018 $83,866,081
DEPRECIATION FOR YEAR 24,872,181 21,838,209 16,184,937
RETIREMENTS AND TRANSFERS (2,873,400) (1,848,724) -
------------------------------------------
BALANCE, END OF YEAR $142,039,284 $120,040,503 $100,051,018
==========================================
</TABLE>
F-27
<PAGE> 1
Exhibit 4.16
REVOLVING CREDIT FACILITY
BY AND BETWEEN
DEVELOPERS DIVERSIFIED REALTY CORPORATION,
AND
NATIONAL CITY BANK
Dated as of November 13, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 1 Interpretation....................................................................... 1
Section 1.1 General............................................................. 1
Section 1.2 Definitions......................................................... 1
ABR Applicable Margin................................................................ 1
Accountants.......................................................................... 1
Acquisition.......................................................................... 1
Adjusted Prime Rate.................................................................. 2
Affiliate............................................................................ 2
Applicable Margin.................................................................... 2
Assets Under Development............................................................. 2
Business Day......................................................................... 2
Capital Stock........................................................................ 2
Cash Equivalents..................................................................... 2
Closing Date......................................................................... 3
Code................................................................................. 4
Consolidated Capitalization Value.................................................... 4
Consolidated Cash Flow............................................................... 4
Consolidated Debt Service............................................................ 4
Consolidated Interest Expense........................................................ 4
Consolidated Market Value............................................................ 4
Consolidated Net Income.............................................................. 4
Consolidated Net Worth............................................................... 4
Consolidated Outstanding Indebtedness................................................ 5
Consolidated Secured Indebtedness.................................................... 5
Consolidated Senior Unsecured Indebtedness........................................... 5
Consolidated Subsidiaries............................................................ 5
Contingent Obligation................................................................ 5
Default.............................................................................. 6
Default Interest Rate................................................................ 6
Distribution......................................................................... 6
Draw Date............................................................................ 6
Environmental Laws................................................................... 6
ERISA................................................................................ 6
Event of Default..................................................................... 7
Financial Undertaking................................................................ 7
Funds From Operations................................................................ 7
Generally Accepted Accounting Principles or GAAP..................................... 7
Governmental Authority............................................................... 7
Hazardous Substances................................................................. 7
Head Office.......................................................................... 8
Indebtedness......................................................................... 8
Indebtedness for Borrowed Money...................................................... 9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Interest Period...................................................................... 10
Late Charge.......................................................................... 10
Legal Requirements................................................................... 10
LIBOR................................................................................ 10
LIBOR Applicable Margin.............................................................. 11
LIBOR Break Funding Costs............................................................ 11
LIBOR Break Funding Event............................................................ 11
LIBOR Rate........................................................................... 11
LIBOR Rate Loan...................................................................... 11
Licenses and Permits................................................................. 11
Lien................................................................................. 11
Loan Documents....................................................................... 11
Loans................................................................................ 11
Material Adverse Effect.............................................................. 12
Maturity Date........................................................................ 12
Net Operating Income................................................................. 12
Notes................................................................................ 12
Obligations.......................................................................... 12
Payment Authorization................................................................ 13
Permitted Acquisitions............................................................... 13
Permitted Liens...................................................................... 13
Person............................................................................... 13
Prime Rate........................................................................... 13
Prim................................................................................. 13
Project.............................................................................. 13
Property............................................................................. 13
Rate Option.......................................................................... 13
REIT................................................................................. 13
Request For Advance.................................................................. 13
Securities........................................................................... 13
Subordinated Indebtedness............................................................ 14
Subsidiary........................................................................... 14
Substantial Portion.................................................................. 14
Type................................................................................. 14
Unencumbered Asset................................................................... 14
Unfunded Liabilities................................................................. 15
Unmatured Default.................................................................... 15
Unrestricted Cash and Cash Equivalents............................................... 15
Value of Unencumbered Assets......................................................... 15
Article 2 The Loans............................................................................ 16
Section 2.1 The Loans........................................................... 16
Section 2.2 The Notes........................................................... 16
Section 2.3 Interest Payable on the Loans....................................... 16
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
Section 2.4 Repayments and Prepayments of Principal............................. 19
Section 2.5 Payments and Computations....................................................... 20
Section 2.6 Payments to be Free of Deductions................................... 22
Section 2.7 Use of Proceeds..................................................... 22
Section 2.8 LIBOR Break Funding Cost........................................................ 22
Section 2.9 Additional Costs.................................................... 23
Section 2.10 Indemnification for Losses.......................................... 25
Section 2.11 Statements by National City......................................... 25
Section 2.12 Requests for Advances............................................... 26
Article 3 Conditions Precedent To Disbursements................................................ 26
Section 3.1 Conditions Precedent to Disbursements........................................... 26
Article 4 Affirmative Covenants of Borrower.................................................... 28
Section 4.1 Reports and Other Information....................................... 28
Section 4.2 Maintenance of Property; Insurance.................................. 30
Section 4.3 Consolidated Net Worth.............................................. 30
Section 4.4 Indebtedness and Cash Flow Covenants................................ 30
Section 4.5 Corporate Existence................................................. 31
Section 4.6 Compliance with Laws................................................ 31
Section 4.7 Notice of Litigation: Judgments..................................... 31
Section 4.8 Notice of Other Events.............................................. 32
Section 4.9 Inspections......................................................... 32
Section 4.10 Payment of Taxes and Other Claims................................... 32
Section 4.11 Payment of Indebtedness............................................. 33
Section 4.12 Performance of Obligations Under the Loan........................... 33
Section 4.13 Governmental Consents and Approvals................................. 33
Section 4.14 Notice as to Certain Documents...................................... 34
Section 4.15 Notice of Termination of Certain Documents.......................... 34
Section 4.16 Environmental Matters............................................... 35
Section 4.17 Further Assurances.................................................. 36
Section 4.18 Borrower's Depository Accounts...................................... 36
Section 4.19 Use of Proceeds..................................................... 36
Article 5 Negative Covenants Of Borrower....................................................... 36
Section 5.1 Limitation on Nature of Business.................................... 36
Section 5.2 Limitation on Consolidation and Merger.............................. 36
Section 5.3 Limitation on Distributions, Dividends, Acquisitions and
Investments......................................................... 37
Section 5.4 Acquisition of Margin Securities.................................... 38
Section 5.5 Sale and Leaseback.................................................. 38
Section 5.6 Liens............................................................... 38
Section 5.7 Affiliates.......................................................... 39
Section 5.8 Financial Undertakings.............................................. 39
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
Section 5.9 Variable Interest Indebtedness...................................... 39
Article 6 Events Of Default; Remedies.......................................................... 39
Section 6.1 Events of Default................................................... 39
Section 6.2 Acceleration of Obligations......................................... 41
Section 6.3 No Implied Waiver; Rights Cumulative................................ 42
Article 7 Provisions Of General Application.................................................... 42
Section 7.1 Duration............................................................ 42
Section 7.2 Notices............................................................. 42
Section 7.3 Survival of Representations......................................... 44
Section 7.4 Amendments.......................................................... 44
Section 7.5 Costs, Expenses, Taxes and Indemnification.......................... 44
Section 7.6 Set-Off............................................................. 45
Section 7.7 Binding Effect...................................................... 45
Section 7.8 Governing Law; Jurisdiction and Venue............................... 46
Section 7.9 Waiver Jury......................................................... 46
Section 7.10 Waivers............................................................. 46
Section 7.11 Integration of Schedules and Exhibits............................... 46
Section 7.12 Headings............................................................ 46
Section 7.13 Counterparts........................................................ 47
Section 7.14 Severability........................................................ 47
Section 7.15 One General Obligation.............................................. 47
Section 7.16 Confidentiality..................................................... 47
</TABLE>
-iv-
<PAGE> 6
Exhibit 99
REVOLVING CREDIT FACILITY
THIS REVOLVING CREDIT FACILITY (this "AGREEMENT") dated as of November 13, 1996,
is by and between DEVELOPERS DIVERSIFIED REALTY CORPORATION, an Ohio corporation
("BORROWER") and NATIONAL CITY BANK, a national banking association ("NATIONAL
CITY"). For good and valuable consideration, the receipt and sufficiency of
which is acknowledged, the parties agree as follows:
ARTICLE 1
INTERPRETATION
SECTION 1.1 GENERAL. For the purposes of this Agreement the following general
rules of interpretation shall apply to the extent they are not clearly
inconsistent with the context or the subject matter of specific provisions
hereof.
(a) The expression "THIS AGREEMENT" shall mean this Credit
Facility (including all of the Schedules and Exhibits annexed
hereto) as originally executed, or, if supplemented, amended
or restated from time to time, as so supplemented, amended or
restated.
(b) Singular nouns shall include the plural and vice versa, and
all references to dollars shall mean United States Dollars.
(c) Accounting terms not otherwise defined herein shall have the
meanings assigned to them in accordance with Generally
Accepted Accounting Principles (as hereinafter defined).
(d) All Schedules and Exhibits to this Agreement shall be deemed
to be incorporated herein by reference.
SECTION 1.2 DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, the terms set forth below shall have the following meanings for the
purpose of this Agreement:
"ABR APPLICABLE MARGIN" means, as of any date, the Applicable Margin in
effect on such date with respect to Prime Rate Loans.
"ACCOUNTANTS" means Price, Waterhouse & Co., or such other nationally
recognized firm of certified public accountants as may from time to
time be selected by Borrower and acceptable to National City.
"ACQUISITION" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by
which Borrower or any of its Subsidiaries (i) acquires any going
business or all or substantially all of the assets of any firm,
corporation
<PAGE> 7
or division thereof, whether through purchase of assets, merger or
otherwise or (ii) directly or indirectly acquires (in one transaction
or as the most recent transaction in a series of transactions) at least
a majority (in number of votes) of the securities of a corporation
which have ordinary voting power for the election of directors (other
than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the
outstanding partnership interests of a partnership.
"ADJUSTED PRIME RATE" means, at any time, the sum of the Prime Rate
plus the ABR Applicable Margin in effect at such time.
"AFFILIATE" means, in relation to any Person (in this definition called
"AFFILIATED PERSON"), any Person (other than a Subsidiary) which
(directly or indirectly) controls or is controlled by or is under
common control with such Affiliated Person. For the purposes of this
definition, the term "control" shall mean the possession (directly or
indirectly) of the power to direct or to cause the direction of the
management or the policies of a Person, whether through the ownership
of shares of any class in the capital or any other voting securities of
such Person, by contract or otherwise.
"APPLICABLE MARGIN" means the applicable margin set forth in the table
in Section 2.3 used in calculating the interest rate applicable to the
various Types of Loans, which shall vary from time to time in
accordance with Borrower's long term unsecured debt ratings.
"ASSETS UNDER DEVELOPMENT" means, as of any date of determination, any
Project, or expansion area of an existing Project, owned by Borrower or
any of its Subsidiaries which is then treated as an asset under
development under GAAP and which has been designated by Borrower as an
"Asset Under Development" for purposes of this Agreement, both such
land and improvements under construction to be valued for purposes of
this Agreement at then-current book value, as determined in accordance
with GAAP; provided, however, in no event shall Assets Under
Development include any Project or any expansion area of an existing
Project for more than 270 days.
"BUSINESS DAY" means any day other than a Saturday or Sunday on which
commercial banking institutions are open for business in Cleveland,
Ohio.
"CAPITAL STOCK" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
which is not a corporation and any and all warrants or options to
purchase any of the foregoing.
"CASH EQUIVALENTS" means, as of any date:
(a) securities issued or directly and fully guaranteed or insured
by the United States Government or any agency or
instrumentality thereof having maturities of not more than one
year from such date;
-2-
<PAGE> 8
(b) mutual funds organized under the United States Investment
Company Act rated AAm or AAm-G by S&P, P-1 by Moody's and A by
Fitch;
(c) certificates of deposit or other interest-bearing obligations
of a bank or trust company which is a member in good standing
of the Federal Reserve System having a short term unsecured
debt rating of not less than A-1 by S&P, not less than P-1 by
Moody's and F-1 by Fitch (or in each case. if no bank or trust
company is so rated, the highest comparable rating then given
to any bank or trust company, but in such case only for funds
invested overnight or over a weekend) provided that such
investments shall mature or be redeemable upon the option of
the holders thereof on or prior to a date one month from the
date of their purchase;
(d) certificates of deposit or other interest-bearing obligations
of a bank or trust company which is a member in good standing
of the Federal Reserve System having a short term unsecured
debt rating of not less than A-1+ by S&P, and not less than
P-1 by Moody's and which has a long term unsecured debt rating
of not less than A1 by Moody's (or in each case, if no bank or
trust company is so rated, the highest comparable rating then
given to any bank or trust company, but in such case only for
funds invested overnight or over a weekend) provided that such
investments shall mature or be redeemable upon the option of
the holders thereof on or prior to a date three months from
the date of their purchase;
(e) bonds or other obligations having a short term unsecured debt
rating of not less than A-1+ by S&P and P-1+ by Moody's and
having a long term debt rating of not less than A-1 by Moody's
issued by or by authority of any state of the United States,
any territory or possession of the United States, including
the Commonwealth of Puerto Rico and agencies thereof, or any
political subdivision of any of the foregoing;
(f) repurchase agreements issued by an entity rated not less than
A-1+ by S&P, and not less than P-1 by Moody's which are
secured by U.S. Government securities of the type described in
clause (i) of this definition maturing on or prior to a date
one month from the date the repurchase agreement is entered
into;
(g) short term promissory notes rated not less than A-1+ by S&P,
and not less than P-1 by Moody's maturing or to be redeemable
upon the option of the holders thereof on or prior to a date
one month from the date of their purchase; and
(h) commercial paper (having original maturities of not more than
365 days) rated as least A-1+ by S&P and P-1 by Moody's and
issued by a foreign or domestic issuer who, at the time of the
investment, has outstanding long-term unsecured debt
obligations rated at least A-1 by Moody's.
"CLOSING DATE" means the date of this Agreement.
-3-
<PAGE> 9
"CODE" means the United States Internal Revenue Code of 1986, as
amended from time to time, or any successor federal tax code; any
reference to any statutory provision shall be deemed to be a reference
to any successor provision or provisions.
"CONSOLIDATED CAPITALIZATION VALUE" means, as of any date, an amount
equal to the sum of (i) Consolidated Cash Flow for the most recent
period of two consecutive fiscal quarters for which the Borrower has
reported results to National City (excluding any portion of
Consolidated Cash Flow attributable to Assets Under Development and
Projects acquired by Borrower or its Subsidiaries during such period)
MULTIPLIED BY 2, and DIVIDED BY 0.10 PLUS (ii) with respect to each
Project so acquired by Borrower or its Subsidiaries during such period,
Borrower's estimated annual Net Operating Income for such Project based
on leases in existence at the date of such acquisition DIVIDED BY 0.10.
"CONSOLIDATED CASH FLOW" means, for any period, an amount equal to (a)
Funds From Operations for such Period PLUS (b) Consolidated Interest
Expense for such period.
"CONSOLIDATED DEBT SERVICE" means, for any period, (a) Consolidated
Interest Expense for such period PLUS (b) the aggregate amount of
scheduled principal payments of Indebtedness (excluding optional
prepayments and scheduled principal payments in respect of any
Indebtedness which is not amortized through equal periodic installments
of principal and interest over the term of such Indebtedness) required
to be made during the period by Borrower or any of its Consolidated
Subsidiaries.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the amount of
interest expense of Borrower and its Subsidiaries for such period on
the aggregate principal amount of their Indebtedness, determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED MARKET VALUE" means, as of any date, an amount equal to
the sum of (a) the Consolidated Capitalization Value as of such date,
PLUS (b) 100% of the value of Unrestricted Cash and Cash Equivalents,
PLUS (c) the lesser of (i) the value of Assets Under Development, or
(ii) ten percent (10%) of the Consolidated Capitalization Value.
"CONSOLIDATED NET INCOME" means, for any period, consolidated net
income (or loss) of Borrower and its Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP; PROVIDED
that there shall be excluded (a) the income (or deficit) of any other
Person accrued prior to the date it becomes a Subsidiary of Borrower or
is merged into or consolidated with Borrower or any of its Subsidiaries
and (b) the undistributed earnings of any Subsidiary which has not
furnished a Subsidiary Guaranty to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary is not
at the time permitted by the terms of any contractual obligation or
requirement of law applicable to such Subsidiary.
-4-
<PAGE> 10
"CONSOLIDATED NET WORTH" means, as of any date of determination, an
amount equal to (a) Consolidated Market Value MINUS (b) Consolidated
Outstanding Indebtedness as of such date.
"CONSOLIDATED OUTSTANDING INDEBTEDNESS" means, as of any date of
determination, all Indebtedness for Borrowed Money of Subsidiaries
outstanding at such date, determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED SECURED INDEBTEDNESS" means, as of any date of
determination, the sum of (a) the aggregate principal amount of all
Indebtedness of Borrower and its Subsidiaries outstanding at such date
secured by any Lien on the Property of Borrower or its Subsidiaries,
without regard to recourse, plus (b) the excess, if any, of the
aggregate principal amount of all Senior Unsecured Indebtedness of the
Subsidiaries of Borrower which have not furnished Subsidiary Guaranties
over $5,000,000, determined on a consolidated basis in accordance with
GAAP.
"CONSOLIDATED SENIOR UNSECURED INDEBTEDNESS" means, as of any date of
determination, the aggregate principal amount of all Senior Unsecured
Indebtedness of Borrower and its Subsidiaries outstanding at such date,
including without limitation all the outstanding Indebtedness under
this Agreement as of such date, determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED SUBSIDIARIES" means all of Borrower's direct,
wholly-owned subsidiaries with which Borrower reports financial results
on a consolidated basis in accordance with GAAP.
"CONTINGENT OBLIGATION" means any direct or indirect liability,
contingent or otherwise, with respect to any Indebtedness, lease,
dividend, letter of credit, banker's acceptance or other obligation of
another Person incurred to provide assurance to the obligee of such
obligation that such obligation will be paid or discharged, that any
agreements relating thereto will be complied with, or that the holders
of such obligation will be protected (in whole or in part) against loss
in respect thereof. Contingent Obligations shall include, without
limitation,
(a) the direct or indirect guaranty, endorsement (otherwise than
for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by
any Person of the obligation of another Person; and
(b) any liability for the obligations of another Person through
any agreement (contingent or otherwise)
(i) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation
-5-
<PAGE> 11
(whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or
(ii) to maintain the solvency of any balance sheet item,
level of income or financial condition of another,
if in the case of any agreement described under subclauses
(i), (ii) or (iii) of this sentence the purpose or intent
thereof is to provide the assurance described above. The
amount of any Contingent Obligation shall be equal to the
amount of the obligation so guaranteed or otherwise supported.
"DEFAULT" means any event or occurrence which, with the giving of
notice or the passage of time, or both, would constitute an Event of
Default.
"DEFAULT INTEREST RATE" means an annual rate of interest equal to the
lesser of
(a) one percent (1.0%) above the Prime Rate; or
(b) the maximum rate of interest which may lawfully be charged in
respect of the Obligations.
"DISTRIBUTION" means:
(a) The declaration or payment of any dividends or other
distributions on or in respect of capital stock (except
distributions in such common stock); or
(b) The redemption, acquisition or other retirement of Securities,
except such redemptions, acquisitions or other retirements
made as a part of the same transaction from the net proceeds
of the sale of such Securities.
"DRAW DATE" means, in relation to any Loan, the day on which such Loan
is made or to be made to Borrower pursuant to this Agreement.
"ENVIRONMENTAL LAWS" means all present and future laws, statutes,
ordinances, rules, regulations, orders, and determinations of any
Federal, state or local governmental authority pertaining to health,
protection of the environment, natural resources, conservation,
wildlife, waste management, regulation of activities involving
Hazardous Substances, and pollution, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act
("SUPERFUND" or "CERCLA"), 42 U.S.C. Section 9601 et seq., the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42
U.S.C. Section 9601(20)(D), the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. Section 6901 et seq., the Federal Water Pollution
Control Act, as amended by the Clean Water Act (the "CLEAN WATER ACT"),
33 U.S.C. Section 1251 et seq., the Clean Air Act ("CAA"), 42 U.S.C.
Section 7401 et seq., and the Toxic Substances Control Act ("TCSA"), 15
U.S.C. Section 2601 et seq., together with any and
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all applicable licenses, permits or governmental approvals
pertaining to, or establishing standards with respect to, any of the
foregoing matters, as any of the foregoing may be amended or
supplemented.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
the rules and regulations issued thereunder, as the same may be amended
from time to time.
"EVENT OF DEFAULT" means any event or condition described in Section
6.1 of this Agreement.
"FINANCIAL UNDERTAKING" of a Person means
(a) any transaction which is the functional equivalent of or takes
the place of borrowing but which does not constitute a
liability on the consolidated balance sheet of such Person, or
(b) any agreements, devices or arrangements designed to protect at
least one of the parties thereto from the fluctuations of
interest rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange transactions,
including, but not limited to, interest rate exchange agreements,
forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate options.
"FUNDS FROM OPERATIONS" means, for any period, Consolidated Net Income
for such period, excluding gains (losses) on sales of property,
non-recurring charges and extraordinary items, adjusted for non-cash
charges (including, without limitation, depreciation and amortization,
and equity gains (losses) from each unconsolidated joint venture
included therein, but excluding any amortization of deferred finance
costs), plus the proportionate share of funds from operations of each
unconsolidated joint venture that is due to Borrower or any Subsidiary
for such period, all determined on a consistent basis.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means generally
accepted accounting principles in effect from time to time in the
United States, consistently applied.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political jurisdiction thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"HAZARDOUS SUBSTANCES" means
(a) any hazardous wastes and/or toxic chemicals, materials,
substances or wastes as defined by or for the purposes of any
of the Environmental Laws;
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<PAGE> 13
(b) any "OIL", as defined by the Clean Water Act, as amended from
time to time, and regulations promulgated thereunder
(including crude oil or any fraction thereof and any petroleum
products or derivatives thereof);
(c) any substance, the presence of which is prohibited, regulated
or controlled by any other applicable federal or state or
local laws, regulations, statutes or ordinances now in force
or hereafter enacted relating to waste disposal or
environmental protection with respect to the exposure to, or
manufacture, possession, presence, use, generation, storage,
transportation, treatment, release, emission, discharge,
disposal, abatement, cleanup, removal, remediation or handling
of any such substances;
(d) any asbestos or asbestos-containing materials, polychlorinated
biphenyls ("PCBS") in the form of electrical equipment,
fluorescent light fixtures with ballasts, cooling oils or any
other form, urea formaldehyde or atmospheric radon at levels
which violate the applicable standards therefor set by
applicable Environmental Laws;
(e) any solid, liquid, gaseous or thermal irritant or contaminant,
such as smoke, vapor, soot, fumes, alkalis, acids, chemicals,
pesticides, herbicides, sewage, industrial sludge or other
similar wastes;
(f) industrial, nuclear or medical by-products; and
(g) any underground storage tanks.
"HEAD OFFICE" means the head office of National City, located at 1900
East Ninth Street, Cleveland, Ohio 44101-0756, or such other office as
may be designated as such by written notice to Borrower by National
City.
"INDEBTEDNESS" means, in relation to any Person, at any time, all of
the obligations of such Person which, in accordance with GAAP, would be
classified as indebtedness upon a balance sheet (including any footnote
thereto) of such Person prepared at such time, and in any event shall
include, without limitation:
(a) all indebtedness of such Person arising or incurred under or
in respect of
(i) any guaranties (whether direct or indirect) by such
Person of the indebtedness, obligations or
liabilities of any other Person, or
(ii) any endorsement by such Person of any of the
indebtedness, obligations or liabilities of any other
Person (otherwise than as an endorser of negotiable
instruments received in the ordinary course of
business and presented to commercial banks for
collection of deposit), or
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<PAGE> 14
(iii) the discount by such Person, with recourse to such
Person, of any of the indebtedness, obligations or
liabilities of any other Person;
(b) all indebtedness of such Person arising or incurred under or
in respect of any agreement, contingent or otherwise made by
such Person
(i) to purchase any indebtedness of any other Person or
to advance or supply funds for the payment or
purchase of any indebtedness of any other Person or
(ii) to purchase, sell or lease (as lessee or lessor) any
property, products, materials or supplies or to
purchase or sell transportation or services,
primarily for the purpose of enabling any other
Person to make payment of any indebtedness of such
other Person or to assure the owner or holder of such
other Person's indebtedness against loss, regardless
of the delivery or non-delivery of the property,
products, materials or supplies or the furnishing or
non-furnishing of the transportation or services, or
(iii) to make any loan, advance, capital contribution or
other investment in any other Person for the purpose
of assuring a minimum equity, asset base, working
capital or other balance sheet condition for or as at
any date, or to provide funds for the payment of any
liability, dividend or stock liquidation payment, or
otherwise to supply funds to or in any manner invest
in any other Person;
(c) all indebtedness, obligations and liabilities secured by or
arising under or in respect of any Lien, upon or in Property
owned by such Person, even though such Person has not assumed
or become liable for the payment of such indebtedness,
obligations and liabilities;
(d) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to Property
acquired by such Person, even though the rights and remedies
of the seller or lender (or lessor) under such agreement in
the event of default are limited to repossession or sale of
such Property; and
(e) all indebtedness arising or incurred under or in respect of
any Contingent Obligation.
"INDEBTEDNESS FOR BORROWED MONEY" means at any time, all Indebtedness
required by GAAP to be reflected as such on Borrower's balance sheet,
including, as appropriate, all Indebtedness
(a) in respect of any money borrowed (including pursuant to this
Agreement);
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<PAGE> 15
(b) under or in respect of any Contingent Obligation (whether
direct or indirect) of any money borrowed;
(c) evidenced by any loan or credit agreement, promissory note,
debenture, bond, guaranty or other similar written obligation
to pay money; or
(d) arising under leases which, in accordance with GAAP, should be
reflected as indebtedness on a balance sheet.
"INTEREST PERIOD" means:
(a) For each LIBOR Rate Loan, the period commencing on the Draw
Date and ending one, two, three, four, five or six months
thereafter, provided that:
(i) any Interest Period which would otherwise end on a
day which is not a Business Day shall be extended to
the next Business Day unless such Business Day falls
in another calendar month, in which case such
Interest Period shall end on the Business Day
immediately preceding such day;
(ii) any Interest Period which begins on the last Business
Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end
on the last Business Day of a calendar month; and
(iii) any Interest Period shall end on or before the
Maturity Date.
(b) For each Prime Rate Loan, the period commencing on the Draw
Date for such Loan and ending on the earliest of
(i) the date on which such Prime Rate Loan is repaid by
Borrower;
(ii) the date on which such Prime Rate Loan is converted
to a LIBOR Rate Loan pursuant to Section 2.3 hereof,
or
(iii) the Maturity Date.
"LATE CHARGE" means with respect to any delinquent payment of principal
or interest hereunder, a fee that is equal to the greater of One
Hundred Dollars ($100.00) or one percent (1.0%) of the delinquent
payment, charged to Borrower or added to the unpaid balance of the
Notes whenever any payment of principal or interest is not paid when
due.
"LEGAL REQUIREMENTS" means all applicable laws, rules, regulations,
ordinances, judgments, orders, decrees, injunctions, arbitral awards,
permits, licenses, authorizations, directions and requirements of all
governments, departments, commissions, boards, courts, authorities,
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<PAGE> 16
agencies, and officials and officers thereof, that are in effect now or
at any time in the future.
"LIBOR" means the rate (rounded upward to the next highest 1/100 of 1%)
obtained by dividing (a) the rate of interest per annum determined by
National City equal to the offered rates for deposits in U.S. Dollars
of one, two, three, four, five or six-month periods (as the case may
be) commencing of the first date of the applicable Interest Period for
which such rate is determined, as such rate appears on the Telerate
system as of 11:00 a.m. (London, England time) on the date which is two
(2) Business Days preceding the first day of such Interest Period, for
a period comparable to the duration of such Interest Period and in an
amount comparable to the amount of the LIBOR Rate Loan to be
outstanding during such Interest Period, by (b) a percentage equal to
100% minus the stated maximum rate of all reserves required to be
maintained against "LIBOR Rate liabilities" as specified in Regulation
D (or against any other category of liabilities which includes deposits
by reference to which the LIBOR Rate is determined or any category of
extensions of credit or other assets which includes loans by a
non-United States office of a bank to United States residents) on such
date to any member bank of the Federal Reserve System.
"LIBOR APPLICABLE MARGIN" means, as of any date, the Applicable Margin
in effect on such date with respect to LIBOR Rate Loans.
"LIBOR BREAK FUNDING COSTS" means an amount sufficient to reimburse
National City for any and all loss, cost or expense actually incurred
by National City as the result of the occurrence of any LIBOR Break
Funding Event, determined by multiplying the amount of the principal
prepayment hereunder by the difference, if any, between (a) LIBOR for a
term then available closest to the remaining duration of the Interest
Period for the principal sum being prepaid, and for an amount
comparable to such principal sum, and (b) the LIBOR Rate in effect for
the principal sum being so prepaid, immediately prior to the prepayment
of such sum, all as determined as of the date of the occurrence of the
LIBOR Break Funding Event.
"LIBOR BREAK FUNDING EVENT" means any of the events or occurrences set
forth in Sections 2.8(a) or 2.8(b).
"LIBOR RATE" means for each Interest Period applicable to each LIBOR
Rate Loan, the sum of LIBOR PLUS the LIBOR Applicable Margin in effect
as of the Draw Date for such Loan.
"LIBOR RATE LOAN" means a Loan which bears interest at the LIBOR Rate.
"LICENSES AND PERMITS" means all licenses, permits, registrations and
recordings thereof now owned or hereafter acquired by Borrower and
necessary for the business operations of Borrower, together with all
applications for the foregoing.
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<PAGE> 17
"LIEN" means any lien, mortgage, pledge, security interest, charge or
other encumbrance of any kind, including any conditional sale or other
title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest.
"LOAN DOCUMENTS" means this Agreement, the Notes and any other
agreement, instrument, certificate or document now or hereafter
executed in connection with or pursuant to this Agreement, together
with any and all modifications, amendments and supplements thereof
(each, singly, a "LOAN DOCUMENT").
"LOANS" means the loans (each, singly, a "LOAN") made or to be made to
Borrower pursuant to this Agreement.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, Property or condition (financial or otherwise)
of Borrower and its Subsidiaries taken as a whole,
(b) the ability of Borrower to perform its obligations under the
Loan Documents, or
(c) the validity or enforceability of any of the Loan Documents.
"MATURITY DATE" means the earlier of (a) September 1, 1999, subject to
extension in accordance with Section 2.1 of this Agreement, or (b) the
date on which the entire outstanding balance of the Notes shall become
due and payable (whether as a result of acceleration or otherwise).
"NET OPERATING INCOME" means, with respect to any Project for any
period, "property rental and other income" (as determined by GAAP)
attributable to such Project accruing for such period MINUS the amount
of all expenses (as determined in accordance with GAAP) incurred in
connection with and directly attributable to the ownership and
operation of such Project for such period, including, without
limitation, Management Fees and amounts accrued for the payment of real
estate taxes and insurance premiums, but excluding interest expense or
other debt service charges and any non-cash charges such as
depreciation or amortization of financing costs. As used herein
"MANAGEMENT FEES", means, with respect to each Project for any period,
an amount equal to (i) three percent (3%) of the aggregate base rent
and percentage rent due and payable under leases with anchor tenants at
such Project, PLUS (ii) five percent (5%) of the aggregate base rent
and percentage rent due and payable under leases with tenants other
than anchor tenants at such Project.
"NOTES" means, collectively, the promissory notes of Borrower in the
form of EXHIBIT A. "Note" shall mean any one of the Notes.
"OBLIGATIONS" means, collectively, all of the indebtedness, obligations
and liabilities existing on the date hereof or arising from time to
time hereafter, whether direct, indirect,
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absolute, contingent, joint or several, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract,
operation of law or otherwise, of Borrower to National City
(a) in respect of the Loans made; or
(b) under or in respect of any one or more of the Loan Documents.
Obligations shall also include, without limitation, all interest,
charges and other fees payable hereunder (or under any of the Loan
Documents) by Borrower, or due hereunder (or under any of the Loan
Documents) from Borrower to National City from time to time, together
with all costs and expenses referred to in Section 7.5 herein.
"PAYMENT AUTHORIZATION" means the form substantially in the form of
attached EXHIBIT B, to be executed by Borrower and delivered to
National City notifying National City of any payment hereunder or under
the Notes, and if appropriate, authorizing National City to debit a
designated Borrower's accounts or account for such payment amount.
"PERMITTED ACQUISITIONS" are defined in Section 5.3.
"PERMITTED LIENS" are defined in Section 5.6.
"PERSON" means any individual, company, corporation, association,
partnership, joint venture, unincorporated trade or business
enterprise, trust, estate, or any other legal entity, or a government
(Federal, state or local), court, arbitrator or any agency,
instrumentality or official of the foregoing.
"PRIME RATE" means the fluctuating rate of interest which is publicly
announced from time to time by National City at its Head Office as
being its "prime rate" or "base rate" thereafter in effect, with each
change in the Prime Rate automatically, immediately and without notice
being reflected in the fluctuating interest rate thereafter applicable
hereunder, it being specifically acknowledged that the Prime Rate is
not necessarily the lowest rate of interest then available from
National City on fluctuating-rate loans.
"PRIME RATE LOAN" means a Loan which bears interest at the Adjusted
Prime Rate.
"PROJECT" means any real estate owned by Borrower or any of its
Subsidiaries and operated or intended to be operated as a shopping
center or business center.
"PROPERTY" means any type of real, personal, tangible, intangible or
mixed property.
"RATE OPTION" means the Prime Rate or the LIBOR Rate.
"REIT" means a qualified real estate investment trust, as defined in
the Code.
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<PAGE> 19
"REQUEST FOR ADVANCE" means the form, substantially in the form of
attached EXHIBIT C, executed by Borrower and delivered to National
City, requesting an advance of Loan proceeds hereunder, and among other
items, notifying National City of the intended use of such Loan
proceeds.
"SECURITIES" means any stock, shares, voting trust certificates, bonds,
debentures, notes, or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of
interest, shares or participation in temporary or interim certificates
for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"SUBORDINATED INDEBTEDNESS" means Indebtedness which is contractually
subordinated to the Obligations on terms reasonably acceptable to
National City.
"SUBSIDIARY" means any corporation in which Borrower (or a Subsidiary
of Borrower) owns at least a majority of the securities having voting
power for the election of directors.
"SUBSTANTIAL PORTION" means, with respect to the Property of Borrower
and its Subsidiaries, Property which
(a) represents more than 10% of the consolidated assets of
Borrower and its Subsidiaries as would be shown in the
consolidated financial statements of Borrower and its
Subsidiaries as at the beginning of the twelve-month period
ending with the month in which such determination is made, or
(b) is responsible for more than 10% of the consolidated net sales
or of the consolidated net income of Borrower and its
Subsidiaries as reflected in the financial statements referred
to in clause (i) above.
"TYPE" means, with respect to any Loan, its nature as a Prime Rate Loan
or a LIBOR Rate Loan.
"UNENCUMBERED ASSET" means, with respect to any Project, at any date of
determination, the circumstance that such asset on such date
(a) is not subject to any Liens or claims (including restrictions
on transferability or assignability) of any kind (including
any such Lien, claim or restriction imposed by the
organizational documents of any Subsidiary, but excluding
Permitted Liens,
(b) is not subject to any agreement (including
(i) any agreement governing Indebtedness incurred in
order to finance or refinance the acquisition of such
asset, and
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<PAGE> 20
(ii) of applicable, the organizational documents of any
Subsidiary)
which prohibits or limits the ability of Borrower or any of
its Subsidiaries to create, incur, assume or suffer to exist
any Lien upon any assets or Capital Stock of Borrower or any
of its Subsidiaries, including, without limitation, any
negative pledge or similar covenant or restriction,
(c) is not subject to any agreement (including any agreement
governing Indebtedness incurred in order to finance or
refinance the acquisition of such asset) which entitles any
Person to the benefit of any Lien (other than Permitted Liens)
on any assets or Capital Stock of Borrower or any of its
Subsidiaries, or would entitle any Person to the benefit of
any Lien (other than Permitted Liens) on such assets or
Capital Stock upon the occurrence of any contingency
(including, without limitation, pursuant to an "equal and
ratable" clause), and
(d) has been improved with an income-producing building or
buildings which are substantially completed and occupied.
For the purposes of this Agreement, any Project of a Subsidiary shall
not be deemed to be unencumbered unless both
(a) such Project and
(b) all Capital Stock of such Subsidiary held by Borrowers is
unencumbered.
"UNFUNDED LIABILITIES" means the amount (if any) by which the present
value of all vested nonforfeitable benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable
to such benefits, all determined as of the then most recent valuation
date for such Plans.
"UNMATURED DEFAULT" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"UNRESTRICTED CASH AND CASH EQUIVALENTS" means, as of any date of
determination, the sum of
(a) the aggregate amount of Unrestricted cash then held by
Borrower or any of their Consolidated Subsidiaries and
(b) the aggregate amount of Unrestricted Cash Equivalents (valued
at the lower of cost and fair market value) then held by
Borrower or any of their Consolidated Subsidiaries.
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As used in this definition, "UNRESTRICTED" means the specified asset is
not subject to any Liens in favor of any Person.
"VALUE OF UNENCUMBERED ASSETS" means, for any period of two consecutive
fiscal quarters, an amount equal to the sum of
(a) Net Operating Income attributable to Unencumbered Assets for
the most recent period of two consecutive fiscal quarters for
which Borrower has reported results to National City
(excluding any portion of Net Operating Income attributable to
Unencumbered Assets acquired by Borrower or its Subsidiaries
during or after such period) MULTIPLIED BY 2, and DIVIDED BY
0.10, PLUS
(b) with respect to those Unencumbered Assets so acquired by
Borrower or its Subsidiaries during such period of two
consecutive fiscal quarters, Borrower's estimated annual Net
Operating Income for such Unencumbered Assets based on leases
in existence at the date of such acquisition DIVIDED BY 0.10.
ARTICLE 2
THE LOANS
SECTION 2.1 THE LOANS. National City will, subject to the terms and conditions
of this Agreement, make Loans to Borrower in an aggregate amount not to exceed
$10,000,000.00. Subject to the terms of this Agreement, Borrower may borrow,
repay and reborrow hereunder at any time prior to the Maturity Date. Borrower
may extend the Maturity Date for successive and consecutive periods of one (1)
year each, provided, as to each instance (a) that Borrower shall provide
National City with written notice of its election to so extend not later than
ninety days prior to the anniversary of the Closing Date for any year in which
this Agreement is in effect; (b) that there is not then a default hereunder or
under any other Loan Document, nor any circumstance which would, with the
passing of time or the delivery of notice (or both) constitute such a default;
and (c) that National City elects in its sole and absolute discretion to consent
to such an extension.
SECTION 2.2 THE NOTES. The absolute and unconditional obligation of Borrower to
repay to National City the principal of each Loan and the interest thereon, as
and when required as hereinafter provided, shall be evidenced by a separate Note
in the amount of the principal of such Loan, and substantially in the form of
EXHIBIT A hereto. All payments under the Notes shall be made to National City at
its Head Office.
SECTION 2.3 INTEREST PAYABLE ON THE LOANS.
(a) APPLICABLE MARGINS. Each of the ABR Applicable Margin, and the
LIBOR Applicable Margin to be used in calculating the interest
rate applicable to different
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Types of Loans shall vary from time to time in accordance with
the lower of Borrower's then applicable
(x) Moody's debt rating, and
(y) S&P's debt rating,
as the case may be (e.g., if Borrower's Moody's debt rating is
Baal and its S&P debt rating is BBB then the Applicable
Margins shall be computed based on the S&P rating), and the
Applicable Margins shall be adjusted effective on the next
Business Day following any change in Borrower's Moody's debt
rating and/or S&P's debt rating, as the case may be. The
applicable debt ratings and the Applicable Margins are set
forth in the following table:
<TABLE>
<CAPTION>
LIBOR ABR
Applicable Applicable
S&P Rating Moody's Rating Margin Margin
- ---------- -------------- ------------- ----------
<S> <C> <C> <C>
A- or higher A3 or higher 0.95% 0.00%
BBB+ Baal 1.10% 0.00%
BBB- to BBB Baa3 to Baa2 1.25% 0.00%
Less than BBB- Less than Baa3 1.85% 0.60%
</TABLE>
In the event that either S&P or Moody's shall discontinue
their ratings of the REIT industry or Borrower, Borrower shall
seek a debt rating from Fitch or Duff & Phelps or, if Borrower
so desires, another substitute rating agency reasonably
satisfactory to National City and Borrower. For the period
from the date of such discontinuance until the first to occur
of
(i) the date Borrower receives a debt rating from such
new rating agency or
(ii) a date 180 days after such discontinuance,
the single rating from S&P or Moody's, as the case may be,
shall be used to determine the Applicable Margin. If the debt
rating of Borrower from such new rating agency is not received
within such 180 day period, or if both S&P and Moody's shall
discontinue their ratings of the REIT industry or Borrower,
the Applicable Margin to be used for the calculation of
interest on Loans hereunder shall be the highest Applicable
Margin for each Type.
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<PAGE> 23
(b) METHOD OF SELECTING RATE OPTIONS PERIODS. Borrower shall
select the Rate Option for each Loan and shall select the
Interest Period applicable to each LIBOR Rate Loan from time
to time. Borrower shall give National City an irrevocable
Request For Advance not later than 11:00 a.m. Cleveland time
not more than ten (10) Business Days nor less than one (1)
Business Day before the Draw Date of each Prime Rate Loan and
not more than ten (10) Business Days nor less than two (2)
Business Days before the Draw Date for each LIBOR Rate Loan,
specifying:
(i) the Draw Date (which shall be a Business Day) for
such Loan;
(ii) the amount of such Loan;
(iii) the Rate Option selected for such Loan; and
(iv) in the case of each LIBOR Rate Loan, the Interest
Period therefor.
Each LIBOR Rate Loan shall bear interest from and including
the first day of the Interest Period applicable thereto until
(but not including) the last day of such Interest Period at
the interest rate determined as applicable to such LIBOR Rate
Loan. Borrower shall select Interest Periods with respect to
LIBOR Rate Loans so that it is not necessary to pay a LIBOR
Rate Loan prior to the last day of the applicable Interest
Period in order to repay the Loans on the Maturity Date.
Provided that no Default or Event of Default shall have
occurred and be continuing, Borrower may elect to continue a
Loan as a LIBOR Rate Loan by giving irrevocable written,
telephonic or telegraphic notice thereof to National City not
more than ten (10) nor less than two (2) Business Days prior
to the last day of the then-current Interest Period for such
LIBOR Rate Loan, specifying the duration of the succeeding
Interest Period therefor. If National City does not receive
timely notice of such election, Borrower shall be deemed to
have elected to convert such LIBOR Rate Loan to a Prime Rate
Loan at the end of the then-current Interest Period. Provided
that no Default or Event of Default shall have occurred and be
continuing, Borrower may, on any Business Day, convert any
outstanding Prime Rate Loan, or portion thereof, into a LIBOR
Rate Loan in the same aggregate principal amount. If Borrower
desires so to convert a Prime Rate Loan, it shall give
National City prior written or telephonic notice not more than
ten (10) nor less than two (2) Business Days prior to the
requested conversion date, which notice shall specify the
duration of the Interest Period applicable thereto.
(c) MONTHLY INSTALLMENTS.
(i) Borrower shall pay to National City, monthly in
arrears on the last Business Day of each month,
interest on the outstanding principal amount of the
Adjusted Prime Rate Loans at the annual rate equal to
the Adjusted Prime Rate; PROVIDED, HOWEVER, that if
Borrower elects, pursuant to the final
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<PAGE> 24
paragraph of Section 2.3(b), to convert a Prime Rate
Loan, or any portion thereof, to a LIBOR Rate Loan,
Borrower shall pay to National City, all accrued but
unpaid interest on such Prime Rate Loan, or that
portion thereof which is being so converted, for the
period commencing on the date of the last payment
date under this paragraph 2.3(c)(i) and concluding on
the day immediately preceding the first day of the
Interest Period for the LIBOR Rate Loan into which
such Prime Rate Loan is converted.
(ii) Borrower shall pay to National City, in arrears,
interest on the outstanding principal amount of the
LIBOR Rate Loans at the annual rate equal to the
LIBOR Rate. Such interest shall be due and payable on
the last Business Day of the applicable Interest
Period for each LIBOR Rate Loan having an Interest
Period of ninety (90) days or less; for all other
LIBOR Rate Loans, interest shall be payable, in
arrears as aforesaid, on (A) that Business Day which
is ninety (90) days after the beginning of the
Interest Period for such LIBOR Rate Loans; and (B) on
the final day of the Interest Period therefor.
(d) INTEREST ON OVERDUE PAYMENTS; DEFAULT INTEREST RATE. If any
payment of principal or interest is not paid when due, or
prior to the expiration of the applicable period of grace (if
any) therefor, National City may charge and collect from
Borrower, or may add to the unpaid balance of the Notes, a
Late Charge. National City may charge interest on the Late
Charge at the Default Interest Rate until such time as the
required payment of principal and interest (together with the
Late Charge) is paid hereunder. No failure by National City to
charge or collect any Late Charge in respect of any delinquent
payment shall be considered to be a waiver by National City of
any rights they may have hereunder, including without
limitation the right subsequently to impose a Late Charge for
such delinquent payment or to take such other actions as may
then be available to them hereunder or at law or in equity,
including but not limited to the right to accelerate the
Obligations pursuant to the terms of Section 6.2 hereof. If
the Notes have been accelerated pursuant to Section 6.2 or if
an Event of Default hereunder or under any other Loan Document
shall have occurred and be continuing, the outstanding
principal balance of the indebtedness advanced under this
Agreement, together with all accrued interest thereon and any
and all other Obligations, shall bear interest from the date
on which such amount shall have first become due and payable
to the date on which such amount shall be paid (whether before
or after judgment) at the Default Interest Rate. Interest at
the Default Interest Rate will continue to accrue and will (to
the extent permitted by applicable law) be compounded daily
until the Obligations in respect of such payment are
discharged (whether before or after judgment).
SECTION 2.4 REPAYMENTS AND PREPAYMENTS OF PRINCIPAL.
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(a) OPTIONAL PREPAYMENTS. Borrower may prepay the principal of the
Loans in full or in part at any time and from time to time
upon payment to National City of all accrued interest to the
date of payment; provided, however, that
(i) all partial payments of principal shall be in an
amount equal to or greater than $100,000.00; and
(ii) all Loans may be prepaid without penalty or premium,
subject to the following provision.
If Borrower shall prepay any Loan which is a LIBOR Rate Loan
on a day other than the final day of the applicable Interest
Period therefor, such prepayment must include an amount equal
to all of National City's LIBOR Break Funding Costs applicable
to or resulting from such prepayment.
(b) APPLICATION OF PREPAYMENTS. Any prepayment of the Obligations
shall be applied by National City as set forth in Section 2.5
hereof. To the extent that such payment, repayment or
prepayment shall be applied to a LIBOR Rate Loan, National
City shall retain such amount until the expiration of the
Interest Period applicable to such LIBOR Rate Loan, and shall
apply such payment at such time so as to minimize the LIBOR
Break Funding Costs applicable to such payment, repayment or
prepayment, unless otherwise instructed by Borrower to pay,
repay or prepay such LIBOR Rate Loan and nonetheless incur the
applicable LIBOR Break Funding Cost.
(c) MATURITY. All of the indebtedness evidenced by each Note
shall, if not sooner paid, be in any event absolutely and
unconditionally due and payable in full by Borrower, on the
Maturity Date.
(d) NOTICE OF PREPAYMENTS OF PRINCIPAL. Borrower will provide
National City written notice of its intention to make any
voluntary prepayment of principal not later than 11:00 a.m.
Cleveland time on such prepayment day. Such notice shall be
irrevocable and shall specify the date of prepayment and the
aggregate amount to be paid.
SECTION 2.5 PAYMENTS AND COMPUTATIONS.
(a) TIME AND PLACE OF PAYMENTS. Each payment to be made by
Borrower under this Agreement or any other Loan Document shall
be made directly to National City at its Head Office, not
later than 2:00 p.m. Cleveland Time, on the due date of each
such payment, in immediately available and freely transferable
funds. Any payment received after such time will be deemed to
have been received on the next Business Day. All payments of
interest, principal and all other amounts owing hereunder or
under the Notes or any other Loan Document shall be documented
by Borrower's
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transmitting to National City, via telecopy, a Payment
Authorization; the funds representing such payment shall be
transferred to National City in accordance with such Payment
Authorization.
(b) APPLICATION OF FUNDS. Notwithstanding anything herein to the
contrary, and notwithstanding anything set forth in the
Payment Authorization, the funds received by National City
with respect to the Obligations shall be applied as follows:
(i) NO DEFAULT. Provided that the Notes have not been
accelerated pursuant to Section 6.2, below, and
provided further that no Event of Default hereunder
or under any Loan Document shall have occurred and be
continuing at the time that National City receives
such funds, in the following manner:
(A) FIRST, to the payment of all fees, charges,
and other sums (other than principal and
interest) then due and payable to National
City under the Notes, this Agreement or the
other Loan Documents (including, without
limitation, any LIBOR Break Funding Costs
which may then be payable);
(B) SECOND, to the payment of all accrued but
unpaid interest at the time of such payment;
and
(C) THIRD, to the payment of principal of the
Notes.
(ii) DEFAULT. If the Notes have been accelerated pursuant
to Section 6.2, or if an Event of Default hereunder
shall have occurred and be continuing hereunder or
under the Notes or any of the other Loan Documents at
the time National City receives such funds, in the
following manner:
(A) FIRST to the payment or reimbursement of
National City for all costs, expenses,
disbursements and losses which shall have
been incurred or sustained by the National
City in or incidental to the collection of
the Obligations owed by Borrower hereunder
or the exercise, protection, or enforcement
by National City of all or any of the
rights, remedies, powers and privileges
National City under this Agreement, the
Notes, or any of the other Loan Documents
and in and towards the provision of adequate
indemnity National City against all taxes or
Liens which by law shall or may have
priority over the rights of National City in
and to such funds; and
(B) SECOND to the payment of all of the
Obligations in accordance with Section
2.5(b)(i) above.
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(c) PAYMENTS ON BUSINESS DAYS. If any sum would (but for the
provisions of this Section 2.5(c)) become due and payable on
any day which is not a Business Day, then such sum shall
become due and payable on the next succeeding Business Day,
and interest payable on such sum shall continue to accrue and
shall be adjusted by National City accordingly.
(d) COMPUTATION OF INTEREST. All computations of interest payable
under this Agreement, the Notes, or any of the other Loan
Documents shall be computed by National City on the basis of
the actual principal amount outstanding on each day during the
payment period, and shall be calculated with reference to the
actual number of days elapsed during such period on the basis
of a year consisting of 360 days. The daily interest charge
shall be 1/360th of the annual interest amount. Each
determination of any interest rate by National City shall be
conclusive and binding on Borrower in the absence of manifest
error. Absent manifest error, a certificate or statement
signed by an authorized officer of National City shall be
conclusive evidence of the amount of the Obligations due and
unpaid as of the date of such certificate or statement.
SECTION 2.6 PAYMENTS TO BE FREE OF DEDUCTIONS. Each payment to be made by
Borrower under this Agreement, any Note, or any of the other Loan Documents
shall be made in accordance with Section 2.5 hereof, without set-off, deduction
or counterclaim whatsoever, and free and clear of taxes, levies, imposts,
duties, charges, fees, deductions, withholdings, compulsory loans, restrictions
or conditions of any nature now or hereafter imposed or levied by any
governmental or taxing authority, unless Borrower is compelled by law to make
any such deduction or withholding. In the event that any such obligation to
deduct or withhold is imposed upon Borrower with respect to any such payment:
(a) Borrower shall be permitted to make the deduction or
withholding required by law in respect of such payment, and
(b) there shall become and be absolutely due and payable by
Borrower to National City on the date on which such payment
shall become due and payable,
and Borrower hereby promises to pay to National City on such date, such
additional amount as shall be necessary to enable National City to receive the
same net amount which National City would have received on such due date had no
such obligation been imposed by law. Notwithstanding any provision of this
Section 2.6 to the contrary, the foregoing provisions of this Section 2.6 shall
not apply in the case of any deductions or withholdings made in respect of taxes
charged upon or by reference to the overall net income, profits or gains of
National City.
SECTION 2.7 USE OF PROCEEDS.
(a) PERMITTED USES OF LOAN PROCEEDS. Borrower represents, warrants
and covenants to National City that all proceeds of the Loans
shall be for general corporate
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purposes, working capital, property acquisitions and
construction and expansion of retail facilities
(b) PROHIBITED USES. Borrower represents, warrants and covenants
to the National City that the proceeds of all Loans shall be
used only for the permitted uses described in the foregoing
paragraph, and that no part of the proceeds of any Loan will
be used (directly or indirectly) so as to result in a
violation of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System or for any other
purpose violative of any rule or regulation of such Board.
SECTION 2.8 LIBOR BREAK FUNDING COST. Borrower shall pay to National City, the
LIBOR Break Funding Costs that National City determines are attributable to:
(a) any payment (including, without limitation, any payment
resulting from the acceleration of the Loans pursuant to this
Agreement or any Loan Document), repayment, mandatory or
optional prepayment, or conversion of a LIBOR Rate Loan for
any reason on a date other than the last day of the Interest
Period for such LIBOR Rate Loan; or
(b) any failure by Borrower for any reason to borrow a LIBOR Rate
Loan on the date for such borrowing specified in the relevant
notice of borrowing or Request for Advance given pursuant to
this Agreement.
SECTION 2.9 ADDITIONAL COSTS.
(a) Notwithstanding any conflicting provision of this Agreement to
the contrary, if any applicable law or regulation not in
effect as of the date hereof shall
(i) subject National City to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature
with respect to any Loan, this Agreement, any Note,
or any of the other Loan Documents or the payment by
Borrower of any amounts payable to National City
hereunder or thereunder; or
(ii) materially change, in the reasonable opinion of the
party so affected, the basis of taxation of payments
to National City of the principal of or the interest
on any Note or any other amounts payable to National
City under this Agreement, or any of the other Loan
Documents; or
(iii) impose or increase or render applicable any special
or supplementary special deposit or reserve or
similar requirements (whether or not having the force
of law) against assets held by, or deposits in or for
the account of, or any eligible liabilities of, or
loans by any office or branch of, National City; or
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(iv) impose National City any other condition or
requirement with respect to this Agreement, any Note,
or any of the other Loan Documents, and if the result
of any of the foregoing is
(A) to increase the cost to National City of
making, funding or maintaining all or any
part of the principal of the Loans, or
(B) to reduce the amount of principal, interest
or any other sum payable by Borrower to
National City under this Agreement, any
Note, or any of the other Loan Documents, or
(C) to require National City to make any payment
or to forego any interest or other sum
payable by Borrower to National City under
this Agreement, any Note, or any of the
other Loan Documents, the amount of which
payment or foregone interest or other sum is
measured by or calculated by reference to
the gross amount of any sum receivable or
deemed received by National City from
Borrower under this Agreement, any Note, or
any of the other Loan Documents,
then, and in each such case, Borrower will pay to
National City, within sixty (60) days of written
notice by National City, such additional amounts as
will (in the reasonable opinion of National City) be
sufficient to compensate National City for such
additional cost, reduction, payment or foregone
interest or other sum.
Anything in this paragraph to the contrary notwithstanding,
the foregoing provisions of this paragraph shall not apply in
the case of any additional cost, reduction, payment or
foregone interest or other sum resulting solely from or
arising solely as a consequence of any taxes charged upon or
by reference to the overall net income, profits or gains of
National City.
(b) If any present or future applicable law shall make it unlawful
for Borrower to perform any one or more of their agreements or
Obligations under this Agreement, any Note, or any of the
other Loan Documents, then the obligations of National City
hereunder shall terminate immediately. If any present or
future applicable law shall make it unlawful for Borrower to
perform any one or more of its agreements or obligations under
this Agreement, any Note, or any of the other Loan Documents,
National City shall at any time determine (which reasonable
determination shall be conclusive and binding on Borrower)
(i) that, as a consequence of the effect or operation
(whether direct or indirect) of any such applicable
law, any one or more of the rights, remedies, powers
or privileges of National City under or in respect of
this Agreement, any
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Note, or any of the other Loan Documents shall be or
become invalid, unenforceable, or materially
restricted; and
(ii) that all or any one or more of the rights, remedies,
powers and privileges so affected are of material
importance to National City,
then National City shall, by giving notice to Borrower,
declare all of the Obligations, including, without limitation,
the entire unpaid principal of the Notes, all of the unpaid
interest accrued thereon and any and all other sums due and
payable by Borrower to National City under this Agreement, any
Note, and any of the other Loan Documents, to be immediately
due and payable, and, thereupon, such Obligations shall (if
not already due and payable) forthwith become and be due and
payable without further notice or other formalities of any
kind, all of which are hereby expressly waived.
(c) If National City shall reasonably determine that any law, rule
or regulation not in effect as of the date hereof regarding
capital adequacy, or in the event of any change in any
existing such law, rule or regulation or in the interpretation
or administration thereof by any governmental authority,
central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by
National City with any request or directive regarding capital
adequacy (whether or not having the force of law) from any
such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on
National City's capital, as a consequence of its obligations
hereunder, to a level below that which National City could
have achieved but for such adoption, change or compliance
(taking into consideration National City's policies with
respect to capital adequacy) by any amount deemed by National
City to be material, then Borrower shall pay to National City
upon demand such amount or amounts, in addition to the amounts
payable under the other provisions of this Agreement or any
other Loan Document, as will compensate National City for such
reduction. Determinations by National City of the additional
amount or amounts required to compensate National City in
respect of the foregoing shall be conclusive in the absence of
manifest error. In determining such amount or amounts,
National City may use any reasonable averaging and attribution
methods of general application.
SECTION 2.10 INDEMNIFICATION FOR LOSSES. Without derogating from any of the
other provisions of this Agreement or any of the other Loan Documents, Borrower
hereby absolutely and unconditionally agrees to indemnify National City, upon
demand at any time and as often as the occasion therefor may require, against
any and all claims, demands, suits, actions, damages, losses, costs, expenses
and all other liabilities whatsoever which National City or any of its directors
or officers may sustain or incur as a consequence of, on account of, in relation
to or in any way in connection with
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(a) any failure by Borrower to pay, punctually on the due date
thereof, any amount payable under this Agreement, any Note, or
any of the other Loan Documents beyond the expiration of the
period of grace (if any) applicable thereto, or
(b) the acceleration, in accordance with SECTION 6.2 hereof, of
the maturity of any of the Obligations, or
(c) any failure by Borrower to perform or comply with any of the
terms and provisions of this Agreement, any Note or any of the
other Loan Documents.
Such claims, demands, suits, actions, damages, losses, costs or expenses shall
include, without limitation
(i) any costs incurred by National City in carrying funds to cover
any overdue principal, overdue interest or any other overdue
sums payable by Borrower under this Agreement, any Note, or
any of the other Loan Documents;
(ii) any losses (but excluding losses of anticipated profit)
incurred or sustained by National City in liquidating or
re-employing funds acquired from third parties to make, fund
or maintain all or any part of the Loans.
SECTION 2.11 STATEMENTS BY NATIONAL CITY. A statement signed by an officer of
National City setting forth any additional amount required to be paid by
Borrower to National City, under Sections 2.9 and 2. 1 0 hereof shall be
submitted by National City to Borrower in connection with each demand made at
any time by National City under either of such Sections. A claim by National
City for all or any part of any additional amounts required to be paid by
Borrower under Sections 2.9 and 2.10 hereof may be made before or after any
payment to which such claim relates. Each such statement shall, in the absence
of manifest error, constitute conclusive evidence of the additional amount
required to be paid to National City.
SECTION 2.12 REQUESTS FOR ADVANCES. From and after the date of this Agreement,
Borrower may make additional requests for advances of Loan proceeds, which
advances shall not exceed the difference between
(x) the outstanding principal balance of the Loans on the date of
this Agreement, and
(y) $10,000,000.00.
(a) All requests for draws, advances, or disbursements of Loan
proceeds shall be made by and on behalf of Borrower in writing
on a Request for Advance in the form of Exhibit C hereto. Such
Requests for Advance may be transmitted to National City at
its Head Office via fax or telecopy, provided that Borrower
immediately notify National City by telephone of such
transmission. Each Request for Advance for LIBOR Rate Loans
shall be transmitted to and received by National City not
later
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than 11:00 a.m., Cleveland Time, on a Business Day which is
not less than two (2) Business Days prior to the Draw Date
specified on such Request for Advance. Each Request for
Advance for Prime Rate Loans shall be transmitted to and
received by National City not later than 11:00 a.m., Cleveland
Time, on a Business Day which is not less than one (1)
Business day prior to the Draw Date specified in such Request
for Advance. All Requests for Advance shall be accompanied by
such documents, reports and other materials as may be
necessary to enable National City) to confirm that the
conditions precedent to the disbursement of such requested
Loan have been satisfied.
(b) National City shall disburse the proceeds of each Loan to
Borrower, in immediately available funds not later than Noon,
Cleveland time, on the Draw Date described therefor, provided
that:
(i) Borrower shall have provided National City with a
Request for Advance for such Loan as and when
provided above; and
(ii) all of the conditions precedent applicable to such
Loan under Article 3, below, shall be satisfied as at
the Draw Date as may be applicable to such Loan.
ARTICLE 3
CONDITIONS PRECEDENT TO DISBURSEMENTS
SECTION 3.1 CONDITIONS PRECEDENT TO DISBURSEMENTS. The obligation of National
City to make or disburse the proceeds of any Loan hereunder shall be subject in
each case to the satisfaction, prior thereto or concurrently therewith, of each
of the following conditions precedent:
(a) LEGALITY OF TRANSACTIONS. It shall not be unlawful
(i) for National City to perform any of its agreements or
obligations under any of the Loan Documents to which
such Person is a party on the Draw Date of such Loan,
or
(ii) for Borrower to perform any of its agreements or
obligations under any of the Loan Documents.
(b) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties made by or on behalf of Borrower to National
City in this Agreement (including any form of this Agreement
prior to amendment on the date hereof) or any other Loan
Document
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(i) shall be true and correct when made and
(ii) shall, for all purposes of this Agreement, be deemed
to be repeated on and as of the date of the
Borrower's Request for Advance for such Loan and
shall be true and correct in all material respects as
of such date.
(c) PERFORMANCE, ETC. Borrower shall have duly and properly
performed, complied with and observed, in all material
respects, its covenants, agreements and obligations contained
in this Agreement (including any form of this Agreement prior
to amendment on the date hereof) or in all of the other Loan
Documents to which it is a party.
(d) NO DEFAULT. No event shall have occurred on or prior to the
Draw Date for each such Loan and be continuing on such date,
and no condition shall exist on such date which constitutes a
Default or Event of Default, and the making of such Loan shall
not result in a Default or an Event of Default.
(e) PROCEEDINGS AND DOCUMENTS. All corporate, governmental and
other proceedings in connection with the transactions
contemplated hereby and by the other Loan Documents, and all
instruments and documents incidental thereto, shall be
completed and in place (and, to the extent required by
National City, duly recorded) in form and substance
satisfactory to National City, and National City shall have
received all such counterpart originals or certified or other
copies of all such instruments and documents as National City
shall have reasonably requested.
(f) CERTIFICATES. Prior to or on the date hereof, a Certificate,
dated as of the date hereof, of the secretary of Borrower
certifying
(i) that Borrower's Articles of Incorporation and By-laws
or Code of Regulations have not been amended since
April 29, 1996 (or certifying that true, correct and
complete copies of any amendments are attached),
(ii) that copies of resolutions of the Board of Directors
of Borrower are attached with respect to the approval
of this Agreement and of the matters contemplated
hereby and authorizing the execution, delivery and
performance by Borrower of this Agreement and each
other document to be delivered pursuant hereto and
(iii) as to the incumbency and signatures of the officers
of Borrower signing this Agreement and each other
document to be delivered pursuant hereto, shall have
been delivered to National City (in form and
substance acceptable to National City).
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(g) OTHER APPROVALS. National City shall have received such other
approvals, opinions, certificates, instruments and documents
as it may reasonably request.
ARTICLE 4
AFFIRMATIVE COVENANTS OF BORROWER
Borrower covenants with and warrants to National City that, from and after the
date hereof and until all of the Obligations are paid and satisfied in full, it
shall comply with, observe, perform or fulfill all of the covenants set forth in
this Article 4 applicable to it.
SECTION 4.1 REPORTS AND OTHER INFORMATION.
(a) Borrower shall provide to National City as soon as available,
and in any event within 45 days after the end of each of the
first three quarters of each fiscal year of Borrower, balance
sheets of Borrower and its Consolidated Subsidiaries as of the
end of such quarter, and statements of income and cash flow of
Borrower and its Consolidated Subsidiaries for the period
commencing at the end of the previous fiscal year and ending
with the end of such quarter, certified by the chief financial
officer, principal accounting officer or chief executive
officer of Borrower, together with a certificate of such
officer stating that of the date of such certificate and to
the best of his knowledge after reasonable inquiry no event
has occurred which constitutes a Default or Event or, if a
Default or Event of Default has occurred and is continuing, a
statement as to the nature thereof and the action which
Borrower has taken or proposes to take with respect thereto,
and further setting out in such detail as may reasonably be
required by National City
(i) Borrower's compliance with the requirements of
Article 5 hereof, and
(ii) such other information as may reasonably be requested
the by National City with respect to Borrower or
Borrower's business or Property.
(b) Borrower shall provide to National City as soon as available
and in any event within 90) days after the end of each fiscal
year of Borrower a copy of the annual financial statements of
Borrower and its Consolidated Subsidiaries for such year,
including therein a copy of the balance sheets of Borrower and
its Consolidated Subsidiaries as of the end of such fiscal
year and statements of income and statements of cash flow and
statements of Shareholders' Equity of Borrower and its
Consolidated Subsidiaries, certified by Borrower's
Accountants, together with a certificate of the chief
financial officer, principal accounting officer or chief
executive officer of Borrower stating that, as of the date of
such certificate, to the best of his knowledge and after
reasonable inquiry, no event has occurred which constitutes a
Default or Event of Default, or, if any Default or Event of
Default and is continuing, a
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statement as to the nature thereof and the action which
Borrower has taken or proposes to take with respect thereto
and further setting out in such detail as may reasonably be
required by National City
(i) Borrower's compliance with the requirements of
Article 5 hereof, and
(ii) such other information as may be reasonably requested
by National City with respect to Borrower's business
or Property.
(c) Borrower shall provide to National City, promptly after the
sending or filing thereof, copies of all reports which
Borrower sends to its shareholders, and copies of all reports
and registration statements which Borrower files with the
Securities and Exchange Commission.
(d) Borrower shall provide to National City as soon as possible,
and in any event within five (5) days after the occurrence
thereof, any information as to the occurrence of a Default or
an Event of Default continuing on the date of such statement,
together with a statement of the chief financial officer or
treasurer of Borrower setting forth the details of such
Default or Event of Default and the action which Borrower
proposes to take with respect thereto.
(e) Borrower shall provide on an annual basis to National City, as
soon as possible, the certificate of Borrower's chief
executive officer, chief financial officer or principal
accounting officer stating that Borrower qualified as a REIT
under Sections 856-860 of the Code (or any successor
provisions thereto) for such fiscal year and that it is in a
position to qualify as such REIT for its current fiscal year,
and covering such other matters relative to Borrower's
performance of its obligations hereunder as National City may
reasonably request.
(f) Borrower shall also provide National City with such other
information relating to Borrower (including, without
limitation, any business plan of Borrower) as National City
may from time to time reasonably request.
SECTION 4.2 MAINTENANCE OF PROPERTY; INSURANCE.
(a) Borrower covenants and agrees to keep and maintain all of its
Property in good repair, working order and condition,
reasonable wear and tear excepted, and from time to time to
make, all proper repairs, renewals or replacements,
betterments and improvements thereto so that the business
carried on in connection therewith may be properly and
advantageously conducted at all times;
(b) Borrower covenants and agrees to keep all of its Properties
insured against loss or damage by theft, fire, smoke,
sprinklers, riot and explosion, such insurance (the
"INSURANCE") to be in such form, in such amounts and against
such other risks and
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hazards as are customarily maintained by other Persons
operating similar businesses and having similar properties in
the same general areas, including but not limited to liability
coverage, with an insurer which is financially sound and
reputable and which has been accorded a rating by A.M. Best
Company, Inc. (or any successor rating agency) of A-/X (or any
replacement rating of equivalent stature) or better (a
"QUALIFIED INSURER"). In the event that an insurer ceases to
be a Qualified Insurer during the term of any Insurance
policy, Borrower shall replace such coverage, at the end of
the then-current policy term, by a policy issued by a
Qualified Insurer. Borrower shall, in addition, require that
the insurer with respect to each such Insurance policy provide
for at least thirty (30) days' advance written notice of any
cancellation or termination of, or other change of any nature
whatsoever in, the coverage provided under any such policy.
SECTION 4.3 CONSOLIDATED NET WORTH. Borrower shall maintain a Consolidated Net
Worth of not less than the sum of
(a) $300,000,000.00, plus
(b) 90% of the aggregate proceeds received by Borrower (net of
customary related fees and expenses) in connection with any
offering of stock in Borrower after the Closing Date and on or
prior to the date such determination of Consolidated Net Worth
is made.
SECTION 4.4 INDEBTEDNESS AND CASH FLOW COVENANTS. Borrower on a consolidated
basis with its Subsidiaries shall not, as of the last day of any fiscal quarter,
permit:
(a) Consolidated Outstanding Indebtedness to exceed 55% of
Consolidated Market Value;
(b) Consolidated Secured Indebtedness to exceed 35% of
Consolidated Market Value;
(c) the Value of Unencumbered Assets to be less than 2.0 times the
Consolidated Senior Unsecured Indebtedness; and
(d) Consolidated Cash Flow to be less than 2.0 times the
Consolidated Debt Service, based on the most recent two (2)
fiscal quarter results, for which Borrower has reported
results to National City annualized.
SECTION 4.5 CORPORATE EXISTENCE.
(a) Borrower shall make all filings under the Code necessary to
preserve and maintain
(i) its qualifications as a REIT under the Code, and
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(ii) the applicability to Borrower and its shareholders of
the method of taxation provided for in Section 857(b)
of the Code (and any successor provision thereto).
(b) Borrower shall each preserve and maintain its existence and
all of its rights, franchises and privileges as an Ohio
corporation and maintain all requisite authority to conduct
their businesses in substantially the same manner as they are
presently conducted where the failure to do so could
reasonably be expected to have a Material Adverse Effect and,
specifically, Borrower may not undertake any business other
than the acquisition, development, ownership, management,
operation and leasing of shopping centers and business centers
and ancillary businesses specifically related to such type of
properties.
(c) Borrower shall at all times
(i) remain a corporation listed and in good standing on
the New York Stock Exchange, and
(ii) preserve and maintain its status as a
self-administered REIT.
SECTION 4.6 COMPLIANCE WITH LAWS. Borrower will promptly notify National City in
the event that Borrower receives any notice, claim or demand from any
governmental agency which alleges that Borrower is in violation of any of the
terms of, or has failed to comply with any applicable order issued pursuant to,
any Federal, state or local statute regulating its operation and business.
SECTION 4.7 NOTICE OF LITIGATION: JUDGMENTS. Borrower shall furnish or cause to
be furnished to National City, promptly (and, in any event, within five (5)
Business Days) after Borrower shall have first become aware of the same, a
written notice setting forth full particulars of and what action Borrower is
taking or proposes to take with respect to
(a) any final judgment in an amount exceeding $10,000,000.00
rendered against Borrower or any Affiliate of Borrower;
(b) the commencement or institution of any legal or administrative
action, suit, proceeding or investigation by or against
Borrower in or before any court, governmental or regulatory
body, agency, commission or official, board of arbitration or
arbitrator, the outcome of which could materially and
adversely affect Borrower's current or future financial
position, assets, business, operations or prospects, or could
prevent or impede the implementation or completion, observance
or performance of any of the arrangements or transactions
contemplated by any of the Loan Documents; or
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(c) the occurrence of any adverse development not previously
disclosed by Borrower to National City in writing, in any such
action, suit, proceeding or investigation.
SECTION 4.8 NOTICE OF OTHER EVENTS.
(a) If (and on each occasion that) any event shall occur or any
condition shall develop which constitutes a Default or an
Event of Default, then, promptly (and, in any event, within
five (5) Business Days) after Borrower shall have first become
aware of the same, Borrower will furnish or cause to be
furnished to National City a written notice specifying the
nature and the date of the occurrence of such event or (as the
case may be), the nature and the period of existence of such
condition and what action Borrower is taking or propose to
take with respect thereto.
(b) Immediately upon Borrower's first becoming aware of any of the
following occurrences, Borrower will furnish or cause to be
furnished to National City written notice with full
particulars of
(i) the business failure, insolvency or bankruptcy of
Borrower;
(ii) any material labor dispute, any attempt by any labor
union or organization representatives to organize or
represent employees of Borrower, or any unfair labor
practices or proceedings of the National Labor
Relations Board with respect to Borrower; or any
defaults or events of default under any material
agreement of Borrower or any material violations of
any laws, regulations, rules or ordinances of any
governmental or regulatory body by Borrower or with
respect to any of Borrower's Property.
SECTION 4.9 INSPECTIONS. Borrower shall permit any officer, employee, consultant
or other representative or agent of National City to visit and inspect, from
time to time and at any reasonable time, after prior notice to Borrower, any of
the assets or Property owned or held under lease by Borrower and, to examine the
books of account, records, reports and the papers (and to make copies thereof
and to take extracts therefrom) of Borrower and to discuss the affairs, finances
and accounts of Borrower with the directors and executive officers, as the case
may be, of Borrower.
SECTION 4.10 PAYMENT OF TAXES AND OTHER CLAIMS. Borrower shall pay and discharge
promptly all taxes, assessments and other governmental charges or levies at any
time imposed upon it or upon its income, revenues or Property, as well as all
claims of any kind (including claims for labor, material or supplies) which, if
unpaid, might by law become a Lien or charge upon all or any part of its income,
revenues or Property. Notwithstanding the foregoing to the contrary, Borrower
may, provided that there is not then an Event of Default hereunder, contest the
propriety or amount of any such taxes, assessments or governmental charges, or
of any such claims, if
(a) such contest is instituted in good faith and prosecuted with
reasonable diligence;
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(b) such contest shall preclude the sale or forfeiture of the
affected Property (or Borrower shall provide National City
with such reasonable security or other assurances as may be
requested by National City in connection with such contest);
and
(c) Borrower shall indemnify National City of and from any and all
liability, loss, cost or expense incurred by or asserted
against any such party in connection with, or in consequence
of, any such contest.
SECTION 4.11 PAYMENT OF INDEBTEDNESS. Borrower will duly and punctually pay or
cause to be paid the principal and interest on the Loans and all fees and other
amounts payable hereunder or under the Loan Documents as and when required by
this Agreement and/or the other Loan Documents. Borrower shall pay all other
Indebtedness (whether existing on the date hereof or arising at any time
thereafter) as and when the same is due and payable and prior to the expiration
of any period of notice or grace applicable thereto.
SECTION 4.12 PERFORMANCE OF OBLIGATIONS UNDER THE LOAN. Borrower will duly and
properly perform, observe and comply with all of its agreements, covenants and
obligations under this Agreement and each of the other Loan Documents to which
it is a party.
SECTION 4.13 GOVERNMENTAL CONSENTS AND APPROVALS.
(a) Borrower will obtain or cause to be obtained all such
approvals, consents, orders, authorizations and licenses from,
give all such notices promptly to, register, enroll or file
all such agreements, instruments or documents promptly with,
and promptly take all such other action with respect to, any
governmental or regulatory authority, agency or official, or
any central bank or other fiscal or monetary authority, agency
or official, as may be required from time to time under any
provision of any applicable law:
(i) for the performance by Borrower of any of its
agreements or obligations under the Notes, this
Agreement or any of the other Loan Documents to which
it is a party or for the payment by Borrower to
National City at its Head Office of any sums which
shall become due and payable by Borrower to National
City thereunder;
(ii) to ensure the continuing legality, validity, binding
effect or enforceability of the Notes or any of the
other Loan Documents or of any of the agreements or
obligations thereunder of Borrower, or either of
them; or
(iii) to continue the proper operation of the business and
operations of Borrower.
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(b) Borrower shall duly perform and comply with the terms and
conditions of all such approvals, consents, orders,
authorizations and Licenses and Permits from time to time
granted to or made upon Borrower.
SECTION 4.14 NOTICE AS TO CERTAIN DOCUMENTS. If (and on each occasion that) any
of the following events shall occur:
(a) the charter or other organizational documents of Borrower
shall at any time be modified or amended in any respect
whatever; or
(b) the by-laws or code of regulations of Borrower shall at any
time be modified or amended in any respect whatever;
then promptly (and, in any event, within one (1) Business Day) after the
occurrence of any such event, Borrower shall furnish National City with a true
and complete copy of each such modification, amendment or supplement.
SECTION 4.15 NOTICE OF TERMINATION OF CERTAIN DOCUMENTS.
(a) If (and on each occasion that) any of the following events
shall occur:
(i) any Loan Document shall at any time be terminated,
canceled or rescinded for any reason whatever; or
(ii) any action at law, suit in equity or other legal
proceeding shall at any time be commenced or
threatened in writing by any person
(A) to terminate, cancel or rescind any Loan
Document, or
(B) to enforce any other Person's performance or
observance of or compliance with any
covenants, agreements or obligations under
any Loan Document; or
(iii) any Person which is a party to or otherwise bound by
any Loan Document shall fail or refuse to perform,
comply with or observe or shall otherwise breach any
one or more of its covenants, agreements or
obligations under such Loan Document;
then Borrower will promptly (and, in any event, within one (1)
Business Day) after Borrower shall have first become aware of
the occurrence of any such event, furnish to National City
written notice setting forth the particulars thereof.
(b) Borrower will take or cause to be taken, promptly and without
any expense to National City, all such action as may be
required to prevent, and will refrain from
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taking any action that might cause, the termination,
cancellation, amendment or rescission of this Agreement or any
of the other Loan Documents.
SECTION 4.16 ENVIRONMENTAL MATTERS. Borrower and its Subsidiaries shall
(a) Comply with, and use all reasonable efforts to ensure
compliance by all tenants and subtenants, if any, with, all
applicable Environmental Laws and obtain and comply with and
maintain, and use all reasonable efforts to ensure that all
tenants and subtenants obtain and comply with and maintain,
any and all licenses, approvals, notifications, registrations
and permits required by applicable Environmental Laws, except
to the extent that failure to do so could not be reasonably
expected to have a Material Adverse Effect; provided that in
no event shall Borrower or its Subsidiaries be required to
modify the terms of leases, or renewals thereof, with existing
tenants
(i) at Projects owned by Borrower or its Subsidiaries as
of the date hereof, or
(ii) at Projects hereafter acquired by Borrower or its
Subsidiaries as of the date of such acquisition,
to add provisions to such effect.
(b) Conduct and complete all investigations, studies, sampling and
testing and all remedial, removal and other actions required
under Environmental Laws and promptly comply in all material
respects with all lawful orders and directives of all
Governmental Authorizes regarding Environmental Laws, except
to the extent that
(i) the same are being contested in good faith by
appropriate proceedings and the pendency of such
proceedings could not be reasonably expected to have
a Material Adverse Effect or
(ii) Borrower have determined in good faith that
contesting the same is not in the best interests of
Borrower and its Subsidiaries and the failure to
contest the same could not be reasonably expected to
have a Material Adverse Effect.
(c) Defend, indemnify and hold harmless National City and its
officers, and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way
relating to the violation of, noncompliance with or liability
under any Environmental Laws applicable to the operations of
Borrower, its Subsidiaries or the Projects, or any orders,
requirements or demands of Governmental Authorities related
thereto, including, without limitation, attorney's and
consultant's fees, investigation and laboratory fees, response
costs, court costs and litigation expense, except to the
extent that any of the
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foregoing arise our of the gross negligence or willful
misconduct of the party seeking indemnification thereof. This
indemnity shall continue in full force and effect regardless
of the termination of this Agreement
(d) Prior to the acquisition of a new Project after the Closing
Date, perform or cause to be performed an environmental
investigation which investigation shall at a minimum comply
with ACSM standards. In connection with any such
investigation, Borrower shall cause to be prepared a report of
such investigation, to be made available to National City upon
reasonable request, for informational purposes and to assure
compliance with the specifications and procedures.
SECTION 4.17 FURTHER ASSURANCES. Borrower will execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, any and all such further
assurances and other agreements or instruments, and take or cause to be taken
all such other action, as shall be reasonably requested by National City from
time to time in order to give full effect to any of the Loan Documents.
SECTION 4.18 BORROWER'S DEPOSITORY ACCOUNTS. Borrower shall maintain a
depository relationship with National City, including without limitation demand
deposit, time deposit, concentration, cash management and zero balance accounts
to the extent consistent with Borrower's lending relationships with other
commercial banks.
SECTION 4.19 USE OF PROCEEDS. Borrower shall use all Loan proceeds only for
purposes permitted by Section 2.7 of this Agreement.
ARTICLE 5
---------
NEGATIVE COVENANTS OF BORROWER
------------------------------
Borrower covenants with and represents and warrants to National City that from
and after the date hereof and until all of the Obligations are paid and
satisfied in full:
SECTION 5.1 LIMITATION ON NATURE OF BUSINESS. Borrower will not materially alter
the nature or character of its business as a self-administered and self-managed
Real Estate Investment Trust operating as a fully integrated real estate company
which acquires, develops, owns, leases and manages shopping centers and business
centers, generally as carried on at the date hereof
SECTION 5.2 LIMITATION ON CONSOLIDATION AND MERGER. Borrower shall not at any
time consolidate with or merge into or with any Person or Persons or enter into
or undertake any plan or agreement of consolidation or merger with any Person,
provided, however, that this Section 5.2 shall not prohibit Borrower from
(a) merging any one or more of Borrower's Consolidated
Subsidiaries with or into Borrower; or
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(b) from entering into or consummating any merger or consolidation
transaction in which Borrower is the surviving entity,
provided that upon the completion of any transaction described
in this Section 5.2(b) Borrower shall remain in compliance
with all of its obligations and agreements under this
Agreement.
SECTION 5.3 LIMITATION ON DISTRIBUTIONS, DIVIDENDS, ACQUISITIONS AND
INVESTMENTS.
(a) Except with respect to Distributions made by Borrower in the
ordinary course of its business, including but not limited to
such Distributions as may be necessary to preserve Borrower's
status as a REIT, Borrower shall not declare or pay any
Distribution or cash dividends of any kind on any shares of
any class in its capital
(i) if dividends paid on account of any fiscal quarter,
in the aggregate, would exceed 95% of Funds From
Operations for such fiscal quarter;
(ii) if dividends paid on account of any fiscal year, in
the aggregate, would exceed 90% of Funds From
Operations for such fiscal year; or
(iii) if, at the time of such payment or Distribution,
there shall have occurred and be continuing any Event
of Default hereunder or under any Loan Document.
(b) Borrower shall not at any time make or suffer to exist any
Investments (including, without limitation, loans and advances
to, and other Investments in, Subsidiaries), or commitments
therefor, or become or remain a partner in any partnership or
joint venture, or to make any Acquisition of any Person,
except:
(i) Cash Equivalents;
(ii) Investments in existing Subsidiaries, Investments in
Subsidiaries formed for the purpose of acquiring
Properties, Investments in joint ventures and
partnerships engaged solely in the business of
purchasing, developing, owning, operating, leasing
and managing shopping centers and business centers
and Investments in existence on the date hereof and
described in SCHEDULE 5.3 hereto;
(iii) transactions permitted pursuant to Section 5.2; and
(iv) Acquisitions of Persons whose primary operations
consist of the ownership, development, operation and
management of shopping centers and business centers
provided that, after giving effect to such
Acquisitions and Investments, Borrower continues to
comply with all of its covenants herein. Acquisitions
permitted pursuant to this Section 5.3(b) shall be
deemed to be "PERMITTED ACQUISITIONS".
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SECTION 5.4 ACQUISITION OF MARGIN SECURITIES. Borrower shall not own, purchase
or acquire (or enter into any Contract to purchase or acquire) any "margin
security" as defined by any regulation of the Federal Reserve Board as now in
effect or as the same may hereafter be in effect unless, prior to any such
purchase or acquisition or entering into any such contract, National City shall
have received an opinion of counsel satisfactory to National City to the effect
that such purchase or acquisition will not cause this Agreement or the Notes to
be in violation of Regulation G, T, U, X or any other regulation of the Federal
Reserve Board then in effect.
SECTION 5.5 SALE AND LEASEBACK. Borrower shall not sell or transfer a
Substantial Portion of its Property in order to concurrently or subsequently
lease such Property as lessee.
SECTION 5.6 LIENS. Borrower shall not create, incur or suffer to exist any Lien
in, of or on the Property of Borrower, except:
(a) Liens for taxes, assessments or governmental charges or levies
on its Property if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are
being contested in good faith and by appropriate proceedings
and for which adequate reserves shall have been set aside on
its books;
(b) Liens imposed by law, such as carriers, warehousemen's and
mechanic's liens and other similar liens arising in the
ordinary course of business which secure payment of
obligations not more than 60-days past due or which are being
contested in good faith by appropriate proceedings and for
which adequate reserves shall have been set aside on its
books;
(c) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions,
or other social security or retirement benefits, or similar
legislation;
(d) easements, restrictions and such other encumbrances or charges
against real property as are of a nature generally existing
with respect to properties of a similar character and which do
not in any material way affect the marketability of the same
or interfere with the use thereof in the business of Borrower;
(e) Liens on Projects existing on the date hereof which secure
Indebtedness as described in SCHEDULE 5.6 hereto: and
(f) Liens other than Liens described in subsections (a) through
(e) above arising in connection with any Indebtedness
permitted hereunder to the extent such Liens will not result
in a Default in any of Borrower's covenants herein.
Liens permitted pursuant to this Section 5.6 shall be deemed to be "PERMITTED
LIENS".
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SECTION 5.7 AFFILIATES. Borrower shall not enter into any transactions
(including, without limitation, the purchase or sale of any Property or service)
with, or make any payment or transfer to, any Affiliate except in the ordinary
course of business and pursuant to the reasonable requirements of Borrower's
business and upon fair and reasonable terms no less favorable to Borrower than
Borrower would obtain in a comparable arms-length transaction.
SECTION 5.8 FINANCIAL UNDERTAKINGS. Borrower shall not enter into or remain
liable upon any Financial Undertaking, except to the extent required to protect
Borrower against increases in interest payable to it under variable interest
Indebtedness.
SECTION 5.9 VARIABLE INTEREST INDEBTEDNESS. Borrower shall not at any time
permit the outstanding principal balance of Indebtedness which bears interest at
an interest rate that is not fixed through the maturity date of such
Indebtedness to exceed $175,000,000.00, unless all of such Indebtedness in
excess of $175,000,000.00 is subject to a swap, rate cap or other interest rate
management program approved by National City that effectively converts the
interest rate on such excess to a fixed rate.
ARTICLE 6
---------
EVENTS OF DEFAULT; REMEDIES
---------------------------
SECTION 6.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(a) PRINCIPAL AND INTEREST. Any principal, interest or any other
sum payable under this Agreement or the Notes shall not be
paid within five (5) days of when due;
(b) REPRESENTATION AND WARRANTIES. Any representation or warranty
at any time made by or on behalf of Borrower in this
Agreement, any Loan Document or in any certificate, written
report or statement furnished to National City in connection
therewith shall prove to have been untrue, incorrect or
breached in any material respect on or as of the date on which
the same was made or was deemed to have been made or repeated;
(c) CERTAIN COVENANTS. Borrower shall fail to comply with the
covenants set forth in Sections 4.2(b), 4.5(a),or Article 5;
(d) OTHER COVENANTS. Borrower shall fail to perform, comply with
or observe any other covenant or agreement contained in this
Agreement and such failure or breach shall continue for more
than twenty (20) days after the earlier of the date on which
Borrower shall have first become aware of such failure or
breach or National City shall have first notified Borrower of
such failure or breach (provided, however, that solely with
respect to defaults of the nature described in this Section
6.1(d) which
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cannot be cured by the payment of money and cannot
using appropriate diligence be cured within such 20-day
period, Borrower shall not be deemed to have defaulted
hereunder provided that Borrower, shall commence reasonable
curative action with respect to such matter within such 20-day
period and shall thereafter diligently and continuously
prosecute the same to a timely completion);
(e) LOAN DOCUMENTS. Borrower shall fail to observe or perform in
any material fashion any of its obligations or undertakings
under any Loan Document other than this Agreement, and such
failure shall continue beyond the applicable period of grace
(if any) provided therein, or any Loan Document shall cease to
be legal, valid, binding or enforceable in accordance with its
terms;
(f) LITIGATION. Any action at law, suit in equity or other legal
or administrative proceeding to amend, cancel, revoke or
rescind any Loan Document shall be commenced by or on behalf
of Borrower, or by any court or any other governmental
authority or any court or any other governmental authority
shall make a determination, or issue a judgment, order, decree
or ruling to the effect that, any one or more of the
covenants, agreements or obligations of Borrower hereunder or
under any one or more of the other Loan Documents are illegal,
invalid or unenforceable in accordance with the terms thereof,
(g) INSOLVENCY-VOLUNTARY. If Borrower shall:
(i) take any action for the termination, winding up,
liquidation or dissolution of its operations;
(ii) make a general assignment for the benefit of
creditors, become insolvent or be unable to pay its
debts as they mature;
(iii) file a petition in voluntary liquidation or
bankruptcy;
(iv) file a petition or answer or consent seeking the
reorganization of its business, or the readjustment
of any Indebtedness;
(v) commence any case or proceeding under applicable
insolvency or bankruptcy laws now or hereafter
existing;
(vi) consent to the appointment of any receiver,
administrator, custodian, liquidator or trustee of
all or any part of its assets or property;
(vii) take any corporate action for the purpose of
effecting any of the foregoing; or
(viii) be adjudicated as bankrupt or insolvent;
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(h) INSOLVENCY-INVOLUNTARY. If any petition for any proceedings in
bankruptcy or liquidation or for the reorganization or
readjustment of Indebtedness of Borrower shall be filed, or
any case or proceeding shall be commenced, under any
applicable bankruptcy or insolvency laws now or hereafter
existing, against Borrower, or any receiver, administrator,
custodian, liquidator or trustee shall be appointed for
Borrower or for all or any part of Borrower's assets or
Property, or any order for relief shall be entered in a
proceeding with respect to Borrower under the provisions of
the United States Bankruptcy Code, as amended, and such
proceeding or such appointment shall not be dismissed or
discharged, as the case may be, within forty-five (45) days
after the filing or appointment thereof;
(i) JUDGMENT. Any final and non-appealable judgment, order or
decree for the payment of money in excess of Ten Million
Dollars ($10,000,000) shall be rendered against Borrower, and
shall not be discharged within thirty (30) days after the date
of the entry thereof;
(j) ERISA. Any Termination Event shall occur and, as of the date
thereof or any subsequent date, the sum of the various
liabilities of Borrower and its ERISA Affiliates including,
without limitation, any liability to the Pension Benefit
Guaranty Corporation or its successor or to any other party
under Sections 4062, 4063, or 4064 of ERISA or any other
provision of law resulting from or otherwise associated with
such event exceeds One Million Dollars ($1,000,000); or
Borrower or any of its ERISA Affiliates as an employer under
any Multiemployer Plan shall have made a complete or partial
withdrawal from such Multiemployer Plans and the plan sponsors
of such Multiemployer Plans shall have notified such
withdrawing employer that such employer has incurred a
withdrawal liability requiring a payment in an amount
exceeding One Million Dollars ($1,000,000); or
(k) LOSS OF LICENSE OR PERMITS. Any of the Licenses and Permits
now held or hereafter acquired by Borrower shall be revoked or
terminated and not renewed and the absence of any such
Licenses and Permits would have a material adverse impact on
the business, Property, prospects, profits or condition
(financial or otherwise) of Borrower.
SECTION 6.2 ACCELERATION OF OBLIGATIONS. If any one or more of the Events of
Default shall at any time occur and be continuing:
(a) National City shall, by giving notice to Borrower (a "NOTICE
OF ACCELERATION"), declare all of the Obligations, including
the entire unpaid principal of the Notes, all of the unpaid
interest accrued thereon, and any and all other sums payable
by Borrower under this Agreement, the Notes, or any of the
other Loan Documents, to be immediately due and payable;
except that if there shall be an Event of Default under
Section 6.1(h) or (g), all of the Obligations, including the
entire unpaid
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balance of all of the Notes, all of the unpaid interest
accrued thereon and all (if any) other sums payable by
Borrower under this Agreement, the Notes or any of the other
Loan Documents shall automatically and immediately be due and
payable without notice to Borrower; and except further that if
there shall be an Event of Default under Section 6.1(g) or
(h), and if National City, in accordance with the terms of
this Agreement, shall give a Notice of Acceleration to
Borrower, Borrower shall not be required to pay any prepayment
penalties in connection with the acceleration of any of the
Obligations of Borrower. Thereupon, all of such Obligations
which are not already due and payable shall forthwith become
absolutely and unconditionally due and payable, without
presentment, demand, protest or any further notice or any
other formalities of any kind, all of which are hereby
expressly and irrevocably waived.
(b) National City may proceed to protect and enforce all or any of
its rights, remedies, powers and privileges under this
Agreement, the Notes or any of the other Loan Documents by
action at law, suit in equity or other appropriate
proceedings, whether for specific performance of any covenant
contained in this Agreement, any Note or any of the other Loan
Documents, or in aid of the exercise of any power granted to
National City herein or therein.
SECTION 6.3 NO IMPLIED WAIVER; RIGHTS CUMULATIVE. No delay on the part National
City in exercising any right, remedy, power or privilege hereunder, under any of
the other Loan Documents or provided by statute, at law in equity or otherwise
shall impair, prejudice or constitute a waiver of any such right, remedy, power
or privilege or be construed as a waiver of any Default or Event of Default or
as an acquiescence therein. No right, remedy, power or privilege conferred on or
reserved to National City under any of the Loan Documents or otherwise is
intended to be exclusive of any other right, remedy, power or privilege. Each
and every right, remedy, power and privilege conferred on or reserved to
National City under any of the Loan Documents or otherwise shall be cumulative
and in addition to each and every other right, remedy, power or privilege so
conferred on or reserved to National City, and may be exercised at such time or
times and in such order and manner as National City shall (in its sole and
complete discretion) deem expedient.
ARTICLE 7
---------
PROVISIONS OF GENERAL APPLICATION
---------------------------------
SECTION 7.1 DURATION. This Agreement shall continue in full force and effect and
the duties, covenants, and liabilities of Borrower hereunder and all the terms,
conditions, and provisions hereof relating thereto shall continue to be fully
operative until all Obligations to National City have been satisfied in full,
PROVIDED, HOWEVER that notwithstanding the provisions of this Section 7.1 all
Obligations shall be due and payable on the Maturity Date.
SECTION 7.2 NOTICES.
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(a) All notices and other communications pursuant to this
Agreements shall be in writing, either delivered in hand or
sent by recognized overnight delivery service or by
first-class mail, postage prepaid, addressed as follows:
(i) If to Borrower, to:
Developers Diversified Realty Corporation
34555 Chagrin Boulevard
Moreland Hills, Ohio 44022
Attn: William H. Schafer, Vice President and Chief
Financial Officer
with a copy to:
Developers Diversified Realty Corporation
34555 Chagrin Boulevard
Moreland Hills, Ohio 44022
Attn: Joan U. Allgood, Esq.,
General Counsel
(ii) If to National City, to:
National City Bank
1900 East Ninth Street
Cleveland, Ohio 44101
Attn: Real Estate Industries Division,
Gary L. Wimer, Vice President
with a copy to:
National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114
Attn: Law Department
or to such other addresses or by way of such telex and other numbers as
any party hereto shall have designated in a written notice to the other
parties hereto.
(b) Except as otherwise expressly provided herein, any notice or
other communication given under this Agreement or any other
Loan Document shall be deemed to have been duly given or made
and to have become effective when delivered in hand to the
party to which it is directed, or, if sent by overnight
delivery service or by first-class mail, postage prepaid, and
properly addressed in accordance with Section 7.2(a),
-44-
<PAGE> 50
(i) when received by the addressee; or
(ii) if sent by first-class mail, postage prepaid, on the
third (3rd) Business Day following the day of the
dispatch thereof, whichever shall be the earlier.
SECTION 7.3 SURVIVAL OF REPRESENTATIONS. All representations and warranties made
by or on behalf of Borrower in this Agreement or any of the other Loan Documents
shall be deemed to have been relied upon by National City notwithstanding any
investigation made by National City. All such representations and warranties
shall survive the making of each of the Loans until all of the Obligations shall
have been paid in full.
SECTION 7.4 AMENDMENTS. Each of the Loan, amended Documents may be modified or
supplemented in any respect whatever, only by a written instrument signed by
Borrower and National City.
SECTION 7.5 COSTS, EXPENSES, TAXES AND INDEMNIFICATION.
(a) Borrower absolutely and unconditionally agrees to pay to
National City, and to reimburse National City for, all
reasonable out-of-pocket costs and expenses (including
reasonable legal fees and expenses) which shall at any time be
incurred or sustained by National City or any of its directors
or officers as a consequence of or any way in connection with:
(i) the preparation, negotiation, execution and delivery
of the Loan Documents;
(ii) the continuation of the rights of National City in
connection with respect to any Loan;
(iii) preparation, negotiation, execution, or delivery of
any amendment or modification of any of the Loan
Documents; or
(iv) in the granting by National City of any consents,
approvals or waivers under any of the Loan Documents.
(b) Borrower absolutely and unconditionally agrees to pay to
National City and upon demand by National City at any time and
as often as the occasion therefor may require, all reasonable
out-of-pocket costs and expenses which shall be incurred or
sustained National City or its directors or officers as a
consequence of, on account of, in relation to or any way in
connection with the exercise, protection or enforcement any of
its rights, remedies, powers or privileges hereunder or under
any of the Loan Documents or in connection with any
litigation, proceeding or dispute arising from or related to
any of the Loan Documents (including, but not limited to, all
of the reasonable fees and disbursements of consultants, legal
advisers,
-45-
<PAGE> 51
accountants, experts and agents for National City, the
reasonable travel and living expenses away from home of
employees, consultants, experts or agents of National City,
and the reasonable fees of agents, consultants and experts of
National City for services rendered on its behalf).
(c) Borrower shall absolutely and unconditionally indemnify and
hold harmless National City against any and all claims,
demands, suits, actions, causes of action, damages, losses,
settlement payments, obligations, costs, expenses and all
other liabilities whatsoever which shall at any time or times
be incurred or sustained by National City or by any of their
respective shareholders, directors, officers, subsidiaries or
Affiliates on account of, or in relation to, or in any way in
connection with, any of the arrangements or transactions
contemplated by, associated with or ancillary to this
Agreement or any of the other Loan Documents, without regard
to whether all or any of the transactions contemplated by,
associated with or ancillary to this Agreement, or any of such
Loan Documents shall ultimately be consummated.
(d) Borrower hereby covenants and agrees that any sums expended
National City for which National City is entitled to
reimbursement under this Section 7.5 shall be due and payable
within thirty (30) days after Borrower's receipt of written
notice thereof from National City, and shall bear interest at
the Default Interest Rate from the thirtieth (30th) day after
the date on which Borrower receive such notice until the date
such payment is made in full.
(e) Borrower's indemnity obligations under this Section 7.5 shall
not extend to any losses, costs, expenses or damages
proximately caused by the gross negligence or willful
misconduct of any party which, absent this Section 7.5(e),
would be entitled to indemnification hereunder.
SECTION 7.6 SET-OFF. Borrower hereby confirms to National City the continuing
and immediate rights of set-off of National City with respect to all deposits,
balances and other sums credited by or due from National City or any of its
offices or branches to Borrower, which rights are in addition to any other
rights which National City may have under applicable law. If any principal,
interest or other sum payable by Borrower to National City under the Notes or
any of the Loan Documents is not paid punctually as and when the same shall
first become due and payable, or if any Event of Default shall at any time occur
and be continuing, any deposits, balances or other sums credited by or due from
National City or any of their respective offices or branches to Borrower, may,
without any prior notice of any kind to Borrower, and without any other
conditions precedent now or hereafter imposed by statute, rule or law or
otherwise (all of which are hereby expressly and irrevocably waived by
Borrower), be immediately set off, appropriated and applied by National City
toward the payment and satisfaction of the Obligations in such order and manner
as National City (in its sole and complete discretion) may determine.
-46-
<PAGE> 52
SECTION 7.7 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns; provided, however, that
(a) Borrower may not assign or delegate any of its rights or
obligations hereunder without the express prior written
consent of National City; and
(b) National City may assign or delegate its rights or obligations
hereunder.
SECTION 7.8 GOVERNING LAW; JURISDICTION AND VENUE.
(a) This instrument and the rights and obligations of all parties
hereunder shall be governed by and construed under the
substantive laws of the State of Ohio, without reference to
the conflict of laws principles of such state.
(b) National City and Borrower hereby designate all state and
federal courts of record sitting in Cleveland, Ohio as forums
where any action, suit or proceeding in respect of or arising
out of this Agreement, the Notes, Loan Documents, or the
transactions contemplated by this Agreement may be prosecuted
as to all parties, their successors and assigns, and each
hereby consents to the jurisdiction and venue of such courts.
Borrower waives any and all personal rights under the laws of
any other state to object to jurisdiction within the State of
Ohio for the purposes of litigation to enforce the
Obligations. In the event any such litigation shall be
commenced, Borrower agrees that service of process may be
made, and personal jurisdiction over Borrower obtained, by
service of a copy of the summons, complaint and other
pleadings required to commence such litigation upon Borrower's
appointed Agent for Service of Process in the State of Ohio,
which the undersigned hereof designates to be: Joan U.
Allgood, Esquire, 34555 Chagrin Boulevard, Moreland Hills,
Ohio 44022. Borrower recognizes and agrees that such
designation of agency has been created for Borrower's
convenience and benefit, and shall not be revoked, withdrawn,
or modified without the prior written consent of National
City.
SECTION 7.9 WAIVER JURY. AS A MATERIAL INDUCEMENT FOR NATIONAL CITY TO EXTEND
CREDIT AS PROVIDED HEREIN, AND AFTER HAVING THE OPPORTUNITY TO CONSULT COUNSEL,
BORROWER HEREBY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR
ARISING IN ANY WAY FROM THE OBLIGATIONS.
SECTION 7.10 WAIVERS. Borrower waives notice of nonpayment, demand, notice of
demand, presentment, protest and notice of protest with respect to the
Obligations, or notice of acceptance hereof, notice of the Loans made, credit
extended, or any other action taken in reliance hereon, and all other demands
and notices of any description, except for those notices which are expressly
provided for herein. Borrower acknowledges and agrees that, as of the date
hereof, all of
-47-
<PAGE> 53
Borrower's outstanding loan obligations to National City are owed without any
offset, defense, claim or counterclaim of any nature whatsoever.
SECTION 7.11 INTEGRATION OF SCHEDULES AND EXHIBITS. The Exhibits and Schedules
annexed to this Agreement are part of this Agreement and are incorporated herein
by reference.
SECTION 7.12 HEADINGS. The table of contents, headings of the Articles, Sections
and paragraphs of this Agreement have been inserted for convenience of reference
only and shall not be deemed to alter, limit or affect the scope, meaning or
interpretation of any provision of this Agreement.
SECTION 7.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and signature pages from any counterpart may be appended to any
other counterpart. All such counterparts shall together constitute a single,
unified, agreement. In making proof of this Agreement, it shall not be necessary
to produce or account for more than one counterpart hereof signed by each of the
parties hereto.
SECTION 7.14 SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the balance of this Agreement and the application of all provisions of
this Agreement to all other persons and circumstances shall not be affected
thereby. Each provision of this Agreement shall remain valid and enforceable to
the fullest extent permitted by law.
SECTION 7.15 ONE GENERAL OBLIGATION. All Loans under this Agreement constitute
one loan, and all Obligations of Borrower under this Agreement and all of the
other Loan Documents constitute one general obligation. All of the rights of
National City contained in this Agreement shall likewise apply insofar as
applicable to any modification of or supplement to this Agreement. No officers,
directors, shareholders or employees of Borrower shall have any personal
liability for any obligations under this Agreement or as a result of any
documents or certificates delivered pursuant to this Agreement, except in cases
of actual fraud or willful misconduct; provided, however, that nothing in this
sentence shall be deemed in any way to limit the absolute and unconditional
liability of Borrower for the full and timely payment, observance and
performance of all of its obligations hereunder.
SECTION 7.16 CONFIDENTIALITY.
(a) Borrower acknowledges that from time to time financial
advisory, investment banking and other services may be offered
or provided to Borrower or one or more of its Affiliates by
National City, or by their Affiliates, and Borrower hereby
authorizes National City to share any information delivered to
it by Borrower or its Affiliates pursuant to this Agreement,
or in connection with their respective decisions to enter into
this Agreement, with any such Affiliate, it being understood
that any such Affiliate receiving such information shall be
bound by the provisions of clause (b) below as if it were a
bank hereunder.
-48-
<PAGE> 54
(b) National City agrees to keep confidential, in accordance with
its customary procedures for handling confidential
information, any non-public information supplied to it by
Borrower pursuant to this Agreement which is identified by
Borrower as being confidential at the time the same is
delivered to National City. Notwithstanding the foregoing to
the contrary National City may disclose any such information:
(i) to the extent required by statute, rule, regulation
or judicial process,
(ii) to its counsel,
(iii) to regulatory personnel. auditors or accountants,
(iv) in connection with any litigation to National City is
a party,
(v) to an Affiliate of National City as provided in
clause (a) above, or
(vi) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or
participant (or prospective assignee or participant)
agrees to be bound by the provisions hereof.
DEVELOPERS DIVERSIFIED REAL
CORPORATION
By: ________________________________
Name: William H. Schafer
Title: Vice President and Chief
Financial Officer
NATIONAL CITY BANK
By: ________________________________
Gary L. Wimer
Vice President
-49-
<PAGE> 55
PROMISSORY NOTE
---------------
$10,000,000.00 Cleveland, Ohio
November 13, 1996
FOR VALUE RECEIVED, the undersigned, DEVELOPERS DIVERSIFIED REALTY CORPORATION,
an Ohio corporation ("BORROWER"), promises to pay to the order of NATIONAL CITY
BANK ("NATIONAL CITY"), at the main office of National City in Cleveland, Ohio,
the principal sum of
TEN MILLION DOLLARS
(or, if less, the aggregate unpaid principal balance from time to time shown on
the reverse side hereof or as may be entered in a loan account on National
City's books and records, or both), together with interest computed in the
manner provided in the Credit Agreement referred to below, which principal and
interest is payable in accordance with provisions in the Credit Agreement.
This Note is issued pursuant to a Revolving Credit Agreement dated as of
November 13, 1996, as amended from time to time (as amended, the "CREDIT
AGREEMENT") by and between Borrower and National City.
Reference is made to the Credit Agreement for the definitions of certain terms,
for provisions governing the making of subject loans, the acceleration of the
maturity thereof, rights of prepayment, and for other provisions to which this
note is subject. Any endorsement by the payee on the reverse side of this note
(or any allonge thereto) shall be presumptive evidence of the data so endorsed.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION
By: ________________________________
Name: William H. Schafer
Title: Vice President and Chief Officer
<PAGE> 56
EXHIBIT A
---------
PAYMENT AUTHORIZATION
---------------------
DEVELOPERS DIVERSIFIED REALTY CORPORATION ("BORROWER") under the Revolving
Credit Facility dated as of November 13, 1996 ("CREDIT AGREEMENT") between
Borrower and NATIONAL CITY BANK ("NATIONAL CITY"), hereby notifies National City
that it is making a payment of $_________ in accordance with and pursuant to the
terms of the Credit Agreement.
The payment of $_______________ represents:
<TABLE>
<S> <C>
Principal $_____________________
Interest from _________ $_____________________
to __________
Fees $_____________________
Others (including LIBOR $_____________________
Breakage Costs)*
</TABLE>
This payment of $____________ shall be transmitted to National City on
___________________ in the following manner:
Borrower hereby authorizes National City to transfer, withdraw, and/or deposit
the funds in accordance with the instructions above.
BORROWER:
DEVELOPERS DIVERSIFIED REALTY
CORPORATION
Dated: ________________ By:_______________________________________
Name: ________________________________
Title:________________________________
* LIBOR Breakage Costs may not be payable at the time of such payment.
Borrower agrees to pay such breakage costs in accordance with the terms
of the Credit Agreement.
<PAGE> 57
EXHIBIT B
---------
REQUEST FOR ADVANCE
-------------------
DEVELOPERS DIVERSIFIED REALTY CORPORATION ("BORROWER") hereby requests an
advance in the amount of $________________ pursuant to and in accordance with
the terms and conditions of the Revolving Credit Facility dated as of November
13, 1996 ("CREDIT AGREEMENT"), between NATIONAL CITY BANK ("NATIONAL CITY"), and
Borrower and Developers Diversified Finance Corporation.
Such advance in the amount of $ ___________________ shall be deposited to the
account of Borrower on the date hereof.
Please notify ___________________ at Borrower to confirm the transmittal of
funds.
To induce National City to make such advance, Borrower hereby represents to
National City as follows:
1. The Outstanding Amount (as such term is defined in the Credit
Agreement) shall not, giving effect to the advance hereby requested,
exceed the Maximum Commitment.
2. All of the representations and warranties made by the Borrower in the
Credit Agreement are true and correct on the date hereof, except for
any representation or warranty limited by its terms to a specific date.
3. No Default or Event of Default exists under the Credit Agreement.
4. The approval of this Request for Advance shall not be deemed to be a
waiver by National City of any Default or Event of Default by the
Borrower under the Credit Agreement.
BORROWER:
DEVELOPERS DIVERSIFIED REALTY
CORPORATION
Dated: ______________ By:________________________________
Name:______________________________
Title:_____________________________
<PAGE> 58
EXHIBIT C
---------
COMMERCIAL LOANS
LOAN DISBURSEMENT AUTHORIZATION
You are hereby authorized and directed to disburse the proceeds of the loan
which you are making to the undersigned in the following manner.
<TABLE>
<S> <C>
ISSUE CASHIER'S CHECK PAYABLE TO THE ORDER OF:
_____________________________________________________________ $____________
_____________________________________________________________ $____________
CREDIT ACCOUNT SHOWN BELOW:
NAME ACCT. #
DEVELOPERS DIVERSIFIED REALTY CORPORATION 2856056 $ PERIODIC ADVANCES
PAY EXISTING OBLIGATIONS(S) SHOWN BELOW:
_____________________________________________________________ $____________
_____________________________________________________________ $____________
OTHER (WIRE TRANSFER, INTER-DEPARTMENT TRANSFER):
_____________________________________________________________ $____________
_____________________________________________________________ $____________
_____________________________________________________________ $____________
</TABLE>
ADDITIONAL ADVANCES, TO BE DISTRIBUTED UPON REQUEST, NOT TO EXCEED
TOTAL APPROVAL/NOTE.
DEVELOPERS DIVERSIFIED Total Disbursed $______________
REALTY CORPORATION
(an Ohio corporation) Total Approval/
Note $ 10,000,000.00
BY: _____________________________
TITLE: __________________________ DATE: 11/13/96
-------------------
<PAGE> 59
Developers
Diversified
Realty Corporation
VIA MESSENGER
November 15, 1996
Mr. Gary Wimer
Real Estate Industries
National City Bank
1900 E. Ninth Street
Cleveland, Ohio 44114
RE: $10,000,000.00 Unsecured Revolving Credit Facility
Dear Gary:
Enclosed are the following original documents:
1 Revolving Credit Facility dated as of November 13, 1996, executed by
DDR;
2. Promissory Note in the principal amount of $10,000,000.00, executed by
DDR;
3. Secretary's Certificate, executed by Joan Allgood; and
4. Certificate of Incumbency.
The Secretary's Certificate has been revised. Per Joan Allgood's
discussion with Bill Smith, it was agreed that the resolutions adopted by the
Board of Directors regarding a borrowing of up to $50,000,000.00 were acceptable
for this transaction. I also enclose our standard incumbency certificate as all
officers of DDR have the authority to execute and deliver documents on behalf of
the corporation.
Thank you for your continued cooperation. Should you have any
questions, please call me of Bill Schafer.
Very truly yours,
Elizabeth A. Berry
Legal Assistant
Enclosures
cc: Joan Allgood, Esq.
William H. Schafer (w/enc.)
<PAGE> 60
PROMISSORY NOTE
$10,000,000.00 Cleveland, Ohio
November 13, 1996
FOR VALUE RECEIVED, the undersigned, DEVELOPERS DIVERSIFIED REALTY CORPORATION,
an Ohio corporation ("BORROWER"), promises to pay to the order of NATIONAL CITY
BANK ("NATIONAL CITY"), at the main office of National City in Cleveland, Ohio,
the principal sum of
TEN MILLION DOLLARS
(or, if less, the aggregate unpaid principal balance from time to time shown on
the reverse side hereof or as may be entered in a loan account on National
City's books and records, or both), together with interest computed in the
manner provided in the Credit Agreement referred to below, which principal and
interest is payable in accordance with provisions in the Credit Agreement.
This Note is issued pursuant to a Revolving Credit Agreement dated as of
November 13, 1996, as amended from time to time (as amended, the "CREDIT
AGREEMENT") by and between Borrower and National City.
Reference is made to the Credit Agreement for the definitions of certain terms,
for provisions governing the making of subject loans, the acceleration of the
maturity thereof, rights of prepayment, and for other provisions to which this
note is subject. Any endorsement by the payee on the reverse side of this note
(or any allonge thereto) shall be presumptive evidence of the data so endorsed.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION
By: ____________________________________
Name: William H. Schafer
Title: Vice President and Chief
Financial Officer
<PAGE> 61
SECRETARY'S CERTIFICATE
The undersigned, being the duly elected, qualified and acting Secretary
of DEVELOPERS DIVERSIFIED REALTY CORPORATION, an Ohio corporation ("BORROWER"),
on this 15th day of November, 1996, certifies to NATIONAL CITY BANK ("NATIONAL
CITY"), as follows:
1. The Articles of Incorporation and Code of Regulations of Borrower
have not been amended or modified in any manner since April 25, 1995 and they
continue to remain in full force and effect.
2. On March 23, 1995, the Directors of the Borrower adopted the
resolutions set forth on Exhibit A attached hereto, and said resolutions have
not been amended, modified or rescinded and are in full force and effect on the
date hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed her name as
of the day and year first above written.
________________________________
Joan Allgood, Secretary
<PAGE> 62
EXHIBIT A
RESOLVED, that the corporation borrow from time to time up to an
aggregate principal amount not to exceed Fifty Million Dollars ($50,000,000) at
any one time outstanding from a syndicate for which National City Bank will act
as agent (the "Lenders") to fund acquisitions of properties, the construction of
new facilities and for working capital and other corporate purposes for itself
and affiliated entities.
FURTHER RESOLVED, that any executive officer of the Corporation be, and
each of them acting alone hereby is, authorized for and on behalf of the
Corporation to execute and deliver a loan agreement, a security agreement, one
or more mortgages, one or more promissory notes and other related documents and
instruments (collectively, the "Loan Documents") , providing, among other
things, for an interest rate equal to (a) the prime rate announced from time to
time plus not in excess of 25 basis points or (b) LIBOR announced from time to
time plus not in excess of 200 basis points; an increased default interest rate
on overdue principal and interest payments; a maturity date of three years from
the date of the definitive agreement; representations, warranties and covenants
of the Corporation; events of default and the acceleration of indebtedness upon
the occurrence of an event of default; and reimbursement and indemnification of
the Lenders for expenses and losses incurred in connection with such borrowing,
including attorneys' fees; and such other and different terms and conditions as
the executive officer or officers executing the same may deem advisable and all
as negotiated and agreed upon by the officers or officer executing the same, the
execution of the Loan Documents to be conclusive evidence of such approval and
such authority.
<PAGE> 63
CERTIFICATE OF INCUMBENCY
The undersigned, Joan Allgood, hereby certifies that:
1. She is the duly elected and acting Secretary of Developers
Diversified Realty Corporation, an Ohio corporation (the "Company"); and
2. Each of the officers of the Company whose name and signature appear
below is a duly elected, qualified and acting officer of the Company, holding
the office or offices of the Company set forth opposite his or her name, and the
signature set forth opposite his or her name is his or her own genuine
signature:
<TABLE>
<CAPTION>
NAME TITLE SIGNATURE
<S> <C> <C>
Scott A. Wolstein President & Chief __________________________________________________
Executive Officer
James A. Schoff Executive Vice President __________________________________________________
& Chief Operating Officer
Joan Allgood Vice President, Secretary __________________________________________________
& General Counsel
Loren F. Henry Vice President & __________________________________________________
Director of Management
John R. McGill Vice President & __________________________________________________
Director of Development
William H. Schafer Vice President, Treasurer __________________________________________________
& Chief Financial Officer
</TABLE>
IN WITNESS WHEREOF, the undersigned has executed and delivered this
certificate in the name and on behalf of the Company as of NOVEMBER 15, 1996.
______________________________
Joan Allgood, Secretary
<PAGE> 64
The undersigned, Scott A. Wolstein, hereby certifies that he is the
duly elected and acting President of the Company and that Joan Allgood is the
duly elected and acting Secretary of the Company, that he is authorized on the
Company's behalf to deliver the foregoing certificate and that the matters set
forth in the foregoing certificate are true and correct.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
certificate in the name and on behalf of the Company as of NOVEMBER 15, 1996.
___________________________________
Scott A. Wolstein, President
<PAGE> 1
Exhibit 21.1
LIST OF SUBSIDIARIES
--------------------
OF
--
DEVELOPERS DIVERSIFIED REALTY CORPORATION
-----------------------------------------
State of
Subsidiary Incorporation
---------- -------------
1. Developers Diversified Finance Corporation Ohio
2. Developers Diversified of Alabama, Inc. Alabama
3. Community Centers One, L.L.C. Delaware
4. Community Centers Two, L.L.C. Delaware
5. Community Centers Three, L.L.C. Delaware
6. Shoppers World Community Center, L.P. Delaware
7. DD Community Centers One, Inc. Ohio
8. DD Community Centers Two, Inc. Ohio
9. DD Community Centers Three, Inc. Ohio
10. Arizona Crossing Limited Liability Company
(fka Arrowhead Crossing Company LTD.) Ohio
11. Eastchase Market Inc. dba Eastchase Market I, Inc. in Texas Ohio
12. Eastchase Market L.P. Texas
13. Eastchase Market LTD. Ohio
14. Highland Grove Limited Liability Company Ohio
15. Maple Grove Crossing Limited Liability Company Ohio
16. Tanasbourne Town Center Limited Liability Company Ohio
17. Merriam Town Center LTD. Ohio
18. Macedonia Commons LTD. Ohio
19. DOTRS Limited Liability Company Ohio
20. Liberty Fair Mall Associates Virginia
<PAGE> 2
21. Developers Diversified of Pennsylvania, Inc. Ohio
22. Pedro Community Centers, Inc. Ohio
23. DDRA Community Centers Four, L.P. Texas
24. Foothills Towne Center II, Inc. Ohio
25. Foothills Towne Center III, INC. Ohio
26. DDRC Great Northern Limited Partnership Ohio
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference (i) in the
Prospectuses constituting part of the Registration Statements on Form S-3 (Nos.
33-94182 and 333-05565) and (ii) in the Registration Statements on Form S-8
(Nos. 33-84606 and 33-74562) of Developers Diversified Realty Corporation of our
report dated February 21, 1997 appearing on page F-2 of this Form 10-K.
PRICE WATERHOUSE LLP
Cleveland, Ohio
March 31, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000894315
<NAME> DEVELOPERS DIVERSIFIED
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 12,600
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 991,646,960
<DEPRECIATION> (142,039,284)
<TOTAL-ASSETS> 975,125,940
<CURRENT-LIABILITIES> 0
<BONDS> 478,432,289
<COMMON> 2,168,292
0
149,750,000
<OTHER-SE> 317,417,927
<TOTAL-LIABILITY-AND-EQUITY> 975,125,940
<SALES> 0
<TOTAL-REVENUES> 130,905,798
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 60,185,001
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,888,287
<INCOME-PRETAX> 49,542,235
<INCOME-TAX> 0
<INCOME-CONTINUING> 49,542,235
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,542,235
<EPS-PRIMARY> 1.67
<EPS-DILUTED> 1.66
</TABLE>
