<PAGE>
U.S. Securities and Exchange Commission
Operations Center, Stop 0-7
6432 General Green Way
Alexandria, Virginia 22312
Re: Urban Shopping Centers, Inc.
Commission File No. 1-12278
Form 10-Q
Gentlemen:
Transmitted, for the above-captioned registrant is the electronically filed
executed copy of registrant's current report on Form 10-Q for the quarter
ended June 30, 1997.
Thank you.
Very truly yours,
URBAN SHOPPING CENTERS, INC.
By: ADAM S. METZ
Executive Vice President, Chief Financial
Officer, Director of Acquisitions and
Chief Accounting Officer
ASM/go
Enclosures
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter
ended June 30, 1997 Commission file number 1-12278
URBAN SHOPPING CENTERS, INC.
(Exact name of registrant as specified in its charter)
Maryland 36-3886885
(State of incorporation) (I.R.S. Employer
Identification No.)
900 North Michigan Avenue, Suite 1500, Chicago, Illinois 60611
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 915-2000
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
----- -----
The number of shares of Common Stock and Unit Voting Common Stock, $.01 par
value, outstanding on August 8, 1997 were 17,026,101 and 340,511, respectively.
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 21
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 32
Item 6. Exhibits and Reports on Form 8-K 33
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
($000's omitted, except share amounts)
ASSETS
------
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
Investment properties:
Land, including peripheral land parcels $ 105,657 $ 102,559
Buildings and improvements 855,149 766,847
Equipment, furniture and fixtures 3,086 2,560
Construction in progress 4,310 62,216
-------------- --------------
968,202 934,182
Accumulated depreciation (110,825) (97,558)
-------------- --------------
Investment properties, net of accumulated
depreciation 857,377 836,624
Investments in unconsolidated partnerships 51,484 15,233
Investment in the Management Company 15,107 15,557
Cash, cash equivalents and short-term
investments 3,101 5,276
Interest, rents and other receivables 17,576 19,926
Deferred expenses and other assets 11,745 11,460
-------------- --------------
$ 956,390 $ 904,076
============== ==============
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
JUNE 30, DECEMBER 31,
1997 1996
-------------- --------------
Liabilities:
Mortgage notes payable $ 482,000 $ 439,886
Land sale-leaseback proceeds 75,000 75,000
Deferred lease accrual 17,422 16,252
Accounts payable and other liabilities 43,033 30,512
Investments in unconsolidated partnerships 38,140 36,030
Commitments and contingencies
-------------- --------------
Total liabilities 655,595 597,680
Minority interest 108,709 111,733
Stockholders' equity:
Common stock, $.01 par value, authorized
140,000,000 shares, issued and outstanding
17,021,801 shares in 1997 and 16,737,279
shares in 1996 170 167
Unit voting stock, $.01 par value,
authorized 5,000,000 shares, issued and
outstanding 340,511 shares in 1997 and
344,057 shares in 1996 4 4
Additional paid-in capital 331,233 326,495
Retained earnings (deficit) (139,321) (132,003)
-------------- --------------
Total stockholders' equity 192,086 194,663
-------------- --------------
$ 956,390 $ 904,076
============== ==============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
($000's omitted, except share amounts)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Shopping center
revenues:
Minimum rents $ 23,294 $ 14,875 $ 44,768 $ 29,871
Percentage rents 1,252 881 2,220 1,611
Recoveries from tenants 11,331 6,152 21,643 12,942
Other 1,102 550 1,680 795
----------- ----------- ----------- -----------
36,979 22,458 70,311 45,219
Interest income 377 441 763 863
----------- ----------- ----------- -----------
37,356 22,899 71,074 46,082
----------- ----------- ----------- -----------
Expenses:
Shopping center
expenses 12,465 6,999 24,370 15,227
Mortgage and other
interest 8,053 3,504 15,050 6,956
Ground rent 1,181 1,104 2,397 2,210
Depreciation and
amortization 7,897 5,290 15,056 10,459
General and
administrative 751 572 1,709 1,482
Write-off of assets 1 87 22 125
----------- ----------- ----------- -----------
30,348 17,556 58,604 36,459
----------- ----------- ----------- -----------
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
Operating income 7,008 5,343 12,470 9,623
Income from
unconsolidated
partnerships 1,256 649 2,166 937
Income (loss) from the
Management Company (223) 199 (373) 497
----------- ----------- ----------- -----------
Income before other
gains, minority
interest and
extraordinary items 8,041 6,191 14,263 11,057
Other gains 1,821 720 1,821 720
Minority interest (3,140) (2,443) (5,540) (4,182)
----------- ----------- ----------- -----------
Income before
extraordinary items 6,722 4,468 10,544 7,595
Extraordinary items from
consolidated and
unconsolidated
partnerships (net of
minority interest) (207) -- (295) --
----------- ----------- ----------- -----------
Net income $ 6,515 $ 4,468 $ 10,249 $ 7,595
=========== =========== =========== ===========
Income per common
and unit voting
common share:
Before
extraordinary
items $ .39 $ .33 $ .61 $ .55
Extraordinary
items (.01) -- (.02) --
----------- ----------- ----------- -----------
Net income $ .38 $ .33 $ .59 $ .55
=========== =========== =========== ===========
Weighted average
common and unit
voting common
stock outstanding 17,332,715 13,742,259 17,276,063 13,742,259
=========== =========== =========== ===========
Dividends declared
and paid $ .5075 $ .4950 $ 1.0150 $ .9900
=========== =========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
($000's omitted, except share amounts)
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,249 $ 7,595
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 15,056 10,459
Write-off of assets 22 125
Provision for losses on accounts receivable 512 (116)
Income from unconsolidated partnerships (2,166) (937)
Loss from the Management Company 373 --
Minority interest 5,540 4,182
Deferred lease accrual 1,170 1,171
Extraordinary items 295 --
Other gains (1,821) (720)
Other, net (676) (248)
Other changes in assets and liabilities:
Interest, rents and other receivables (407) 1,815
Deferred expenses and other assets (334) 335
Accounts payable and other liabilities 9,408 2,324
-------------- --------------
Net cash provided by operating activities 37,221 25,985
-------------- --------------
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996
-------------- --------------
Cash flows from investing activities:
Additions to investment properties, net of
change in related payables (25,929) (22,636)
Acquisition of partnership interest (31,400) (9,431)
Acquisition of land parcel (3,388)
Proceeds from the sale of development parcels,
net of selling costs 2,296 1,044
Cash contributions to unconsolidated
partnerships and the Management
Company (4,544) (685)
Cash distributions from unconsolidated
partnerships and the Management
Company 3,743 4,907
Other, net (497) (289)
-------------- --------------
Net cash used in investing activities (59,719) (27,090)
-------------- --------------
Cash flows from financing activities:
Proceeds from issuance of debt, net of
issuance costs 152,026 28,156
Proceeds from issuance of Common Stock under
option plan 4,478 --
Repayment of debt (110,230) (7,000)
Cash distributions to common unitholders (7,406) (7,300)
Cash distributions to preferred unitholders (980) --
Dividends paid (17,567) (13,604)
-------------- --------------
Net cash provided by financing activities 20,321 252
-------------- --------------
Net decrease in cash and cash equivalents (2,177) (853)
Cash and cash equivalents at beginning of
period 5,151 7,866
-------------- --------------
Cash and cash equivalents at end of period $ 2,974 $ 7,013
============== ==============
Supplemental disclosure of cash flow
information:
Cash paid for mortgage and other interest,
net of amounts capitalized $ 14,480 $ 6,658
============== ==============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(UNAUDITED)
($000's omitted, except share amounts)
Readers of this quarterly report should refer to the Company's audited
financial statements for the year ended December 31, 1996, which are
incorporated by reference in the Company's 1996 annual report on Form 10-K,
as certain disclosures which would substantially duplicate those contained in
such audited financial statements have been omitted from this report.
(1) BASIS OF PRESENTATION
In the opinion of management, all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation of the
consolidated financial statements have been included. The results for the
interim periods ended June 30, 1997 and 1996 are not necessarily indicative of
the results to be obtained for the full fiscal year.
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
The accompanying consolidated financial statements include the accounts
of Urban Shopping Centers, Inc. ("Urban"), Urban Shopping Centers, L.P. (the
"Operating Partnership") and all controlled affiliates. As of June 30, 1997,
the Company which is the sole general partner of the Operating Partnership,
owns an approximate 70.4% interest; JMB Realty Corporation ("JMB Realty"),
certain of its affiliates and certain other parties hold limited partnership
interests in the Operating Partnership and own an approximate 29.6% minority
interest. The effect of all significant intercompany balances and
transactions have been eliminated in the consolidated presentation.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Company's interest in
Water Tower Joint Venture ("Water Tower Place"), Coral-CS/LTD Associates
("Coral Square Mall"), West Dade County Associates ("Miami International
Mall"), Valencia Town Center Associates, L.P. ("Valencia Town Center"),
Citrus Park Venture, Urban Retail Properties Co. (the "Management Company")
and San Francisco Shopping Centre ("San Francisco Centre").
Certain amounts in the 1996 financial statements have been reclassified
to conform with the 1997 presentation.
Development costs, including interest and real estate taxes incurred in
connection with construction or expansion of certain investment properties,
are capitalized as a cost of the investment property and depreciated over the
estimated useful life of the related asset. During the six months ended
June 30, 1997 and 1996, the Company incurred interest of $16,141 and $8,193,
respectively, and capitalized interest of $1,091 and $1,237, respectively.
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(1) BASIS OF PRESENTATION (CONTINUED)
Cash and cash equivalents (which aggregated $2,974 and $5,151 at June 30,
1997 and December 31, 1996, respectively) include a treasury money market fund
which invests principally in U.S. Treasury notes and bills ($1,983 and $2,928
at June 30, 1997 and December 31, 1996, respectively). Other short-term
investments (generally with original maturities of one year or less) are
generally held to maturity and aggregated $127 and $125 at June 30, 1997 and
December 31, 1996, respectively. Cash equivalents and other short-term
investments are held at cost which approximates market.
ACCOUNTING FOR DERIVATIVES
The Company uses interest rate swap agreements as part of its interest
rate risk management strategy. These off-balance sheet derivatives are
classified as sythetic alterations. The criteria that must be satisfied by
synthetic alteration accounting are as follows: (i) the liability to be
converted has exposure to interest rate risk and (ii) the derivative is
designated and effective as a synthetic alteration of the liability.
Accrual accounting is applied for these derivatives treated as synthetic
alterations, and income and expense are recorded as adjustments of interest
expense. Fees, if any, related to these off-balance sheet investment products
are amortized on the interest method over the life of the derivative. If the
balance of the liability falls below that of the derivative, the excess
portion of the derivative is marked to market and the resulting gain or loss
included in income, as applicable. If a derivative is terminated independent
of the underlying debt, the gain or loss is deferred and amortized over the
remaining life of the derivative.
Derivatives that do not satisfy the criteria above would be carried at
market value with changes in market value to be recognized in non-interest
income.
(2) ACQUISITIONS
(a) San Francisco Shopping Centre
On June 17, 1997, the Company made an investment in a partnership for
approximately $31,400 in cash resulting in a preferred 50% interest in San
Francisco Shopping Centre ("San Francisco Centre"). The transaction is
structured so that the Company has the option, after approximately eight
years, to make an additional investment in the partnership resulting in the
Company owning substantially all of the interests in San Francisco Centre.
Concurrent with the investment, a new first mortgage loan of $73,600 was
placed on the property, of which $61,350 was funded at closing with the
balance of $12,250 to be funded in January 2000. The loan bears interest
at LIBOR + .62% and matures on July 1, 2002; however, it may be extended
for three one-year periods. Subsequent to the end of the quarter, the Company
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(2) ACQUISITIONS (CONTINUED)
entered into an eight year interest rate swap agreement thereby fixing the
interest rate at an all-in rate of 6.9%. The Management Company assumed
leasing and management responsibilities at the property at closing. San
Francisco Centre, completed in 1989, is a vertical shopping center located in
downtown San Francisco containing approximately 500,000 square feet of retail
space and is anchored by a 312,000 square foot Nordstrom department store.
The center also contains more than 180,000 square feet of mall GLA occupied by
approximately 80 specialty retailers and restaurants.
(b) Roseville, California
On June 24, 1997, the Company acquired approximately 95 acres of land in
Roseville, California for $3,388 in cash. This land is intended to be the site
of the Company's next planned regional mall development, tentatively scheduled
for completion in the year 2000.
(c) Copley Place
On August 1, 1997, the Company acquired a one-third equity interest in
Copley Place from JMB Realty in a transaction valued at $42,333 paid through
the issuance of 1,282,828 units of partnership interest in the Operating
Partnership. In connection with the transaction, JMB Realty also purchased
53,451 shares of Unit Voting Stock from the Company for $1,764 in cash. The
remaining interest is owned by an unaffiliated third party. The Management
Company will continue to provide management and leasing services to the
property. Concurrent with this transaction, the Company also secured
partnership financing in the amount of $195,000 which bears interest at a
fixed rate of 7.44% and matures on August 1, 2007. Copley Place, completed in
1984, is a mixed use property containing 369,000 square feet of retail space
in a two-level mall, four office towers aggregating 842,000 square feet of
office space on seven levels rising above the mall, a three-level, 980-space,
below grade parking garage and a two-level, 695-space parking garage located
adjacent to the property. The property is located in the Back Bay section of
Boston, Massachusetts. The retail area includes a 108,000 square foot
Neiman Marcus store, approximately 110 specialty retailers and an eleven-
screen movie theatre.
(d) Citrus Park Venture
The Company and the Management Company had each owned a 50% economic
interest in Citrus Park Venture, which owns a 163 acre land parcel which is
the site of the Company's next planned regional mall development project,
Citrus Park Town Center, in Tampa, Florida. Construction is proceeding on
schedule on the regional mall for a scheduled opening in March 1999.
Effective August 1, 1997, the Company acquired rights to the remaining 50%
economic interest in Citrus Park Venture from an affiliate of JMB Realty in
exchange for 243,513 units of limited partnership interest in the Operating
Partnership and 10,146 shares of Unit Voting Stock, valued at $8,212 in the
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(2) ACQUISITIONS (CONTINUED)
aggregate. Also effective August 1, 1997, the Company exercised its option
and purchased 68 acres of land adjacent to the site for the regional mall
from an affiliate of JMB Realty in exchange for 177,316 shares of Common Stock
valued at $5,741. This land was transferred, through sale and contribution,
to Citrus Park Venture. This land will be used for the development of a
community center, Citrus Park Plaza, scheduled to open in the fall of 1998,
and for other commercial uses.
(3) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS
The accompanying consolidated financial statements include investments in
certain partnerships in which the Company does not own a controlling interest.
These investments are reported using the equity method. To the extent the
Company's investment basis differs from its share of the capital of an
unconsolidated partnership, such difference is amortized over the depreciable
lives of the unconsolidated partnership's investment assets. Investments in
unconsolidated partnerships consist of the following:
Name Property Company's Ownership
- -------------------------- ------------------------- -------------------
Water Tower Joint Venture Water Tower Place, 55% (a)
Chicago, IL
Coral-CS/LTD Associates Coral Square Mall, 50%
Coral Springs, FL
West Dade County Miami International Mall, 40% (b)
Associates Miami, FL
Valencia Town Center Valencia Town Center, 25% (c)
Associates, L.P. Valencia, CA
Citrus Park Venture Tampa, FL 50% (d)
San Francisco Shopping San Francisco Centre,
Centre San Francisco, CA 50% (e)
(a) The Company owns a 55% interest in a retail property (Water Tower Place)
through its investment in Water Tower Joint Venture ("WTJV"). All major
decisions concerning the retail property require the approval of both partners
of WTJV and thus the Company does not control the partnership. On February 10,
1997, the Company refinanced $170,000 of indebtedness on Water Tower Place.
The new loan matures on February 1, 1999; however, it may be extended for two
one-year periods. Of the total $170,000, $160,000 bears interest at LIBOR
+1.125% and $10,000 bears interest at LIBOR +1.500%.
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(3) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS (CONTINUED)
(b) Effective April 1, 1996, JMB/Miami International Associates (an
unconsolidated partnership) distributed its interest in West Dade County
Associates ("West Dade") to its partners (the Operating Partnership and two
affiliates of JMB Realty). Effective April 1, 1996, the Operating Partnership
purchased an approximate 18% interest in West Dade from one of the JMB Realty
affiliates for $9,431 in cash and the assumption of the seller's pro rata share
of all liabilities of West Dade. The remaining interests owned by the JMB
Realty affiliates were sold to the outside partner in West Dade for $5,375 in
cash and the assumption of the sellers' pro rata share of all liabilities of
West Dade. Subsequent to these transactions, the Operating Partnership owns
a 40% interest in West Dade and the outside partner owns the remaining 60%
interest.
(c) The outside partner has a right to all cash distributions until it has
received a return on and of its contributions to the partnership (as set forth
in the partnership agreement).
(d) On June 23, 1995, the Company acquired a 50% interest in Citrus Park
Venture (a development parcel). The Management Company owns the remaining
50% interest in Citrus Park Venture which is subject to a purchase option
in favor of the Company. Subsequent to the end of the quarter, the Company
acquired rights to the remaining 50% economic interest in Citrus Park Venture.
In addition, a bond offering of $26,700 to fund the roadwork surrounding the
property was completed by the Citrus Park Community Development District (the
"CDD") during the fourth quarter of 1996. The Operating Partnership assisted
the CDD in obtaining the financing for the roadwork by guaranteeing the
irrevocable letter of credit (aggregating approximately $27,050) which
supports the bonds.
(e) On June 17, 1997, the Company made an investment in a partnership
resulting in a preferred 50% interest in San Francisco Shopping Centre.
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(3) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS (CONTINUED)
Summarized financial information for the unconsolidated partnerships is
presented below.
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
Assets:
Investment properties, net $ 381,270 $ 292,829
Other assets 33,193 29,190
-------------- --------------
Less liabilities:
Mortgage notes payable 371,869 310,800
Other liabilities 21,972 16,484
-------------- --------------
Total capital (deficit) 20,622 (5,265)
Less: Outside partners' capital (7,278) 15,532
-------------- --------------
Total investments in unconsolidated
partnerships $ 13,344 $ (20,797)
============== ==============
Total investments in unconsolidated
partnerships are presented in the
accompanying consolidated balance sheets as
follows:
Assets - Investments in unconsolidated
partnerships $ 51,484 $ 15,233
Liabilities - Investments in unconsolidated
partnerships 38,140 36,030
-------------- --------------
$ 13,344 $ (20,797)
============== ==============
</TABLE>
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(3) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS (CONTINUED)
Summarized financial information for the unconsolidated partnerships -
continued
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Revenues:
Shopping centers $ 41,027 $ 38,644
Interest income 230 189
Expenses:
Shopping centers (18,414) (17,709)
Mortgage and other interest and ground rent (11,937) (12,633)
Depreciation and amortization (5,751) (5,674)
-------------- --------------
Income before extraordinary item 5,155 2,817
Extraordinary item (228) --
-------------- --------------
Net income $ 4,927 $ 2,817
============== ==============
Company's share of:
Mortgage and other interest and ground rent $ (5,099) $ (5,311)
Depreciation and amortization (2,415) (2,259)
Income before extraordinary item 2,166 937
============== ==============
</TABLE>
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(4) INVESTMENT IN THE MANAGEMENT COMPANY
The Company's consolidated financial statements present its investment in
the Management Company under the equity method of accounting.
Summarized financial information for the Management Company is presented
below.
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
Assets:
Investments in land parcels (a) $ 36,264 $ 38,391
Cash, cash equivalents and short-term
investments 2,248 5,443
Receivables and deferred expenses 12,684 11,346
-------------- --------------
$ 51,196 $ 55,180
============== ==============
Liabilities:
Notes payable (b) $ 70,000 $ 70,000
Accounts payable and other liabilities 3,492 5,095
-------------- --------------
73,492 75,095
Owners' deficit (22,296) (19,915)
-------------- --------------
$ 51,196 $ 55,180
============== ==============
</TABLE>
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(4) INVESTMENT IN THE MANAGEMENT COMPANY (CONTINUED)
Summarized financial information for the Management Company - continued
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Revenues $ 17,889 $ 19,200
-------------- --------------
Expenses:
Management, leasing and development services 15,329 15,279
Mortgage and other interest 2,854 2,597
Land parcels 106 255
Depreciation and amortization 219 209
-------------- --------------
18,508 18,340
-------------- --------------
Operating income (loss) (619) 860
Income tax benefit (provision) 137 (438)
-------------- --------------
Net income (loss) $ (482) $ 422
============== ==============
</TABLE>
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(4) INVESTMENT IN THE MANAGEMENT COMPANY (CONTINUED)
(a) Includes 50% of the outstanding mortgage loan of an affiliated
joint venture. The mortgage loan, with a 50% face value of $25,750, was
acquired for $19,312 resulting in a discount of $6,438. The loan bears
interest at a variable rate based on market interest rates (as defined) and
is secured by the affiliated joint venture's interest in a land parcel located
in Chicago, IL. Interest is recorded for financial reporting purposes when
received. Accordingly, accretion of the discount has also not been recorded.
(b) Includes $51,000 of indebtedness secured by the Management Company's
interest in certain management contracts and a guarantee by Penn Square Mall
Limited Partnership (a consolidated venture) which is secured by Penn Square
Mall. The $51,000 bears interest at 7.54% per annum and matures on August 1,
2001. Also includes $9,000 of indebtedness owed to affiliates of JMB Realty
which bore no interest through the original maturity of May 20, 1996, at which
time it was extended to September 1, 2001, at an interest rate of 7.0%. The
effective interest rate on the aggregate $60,000 of indebtedness is 7.46%
through September 1, 2001. The Management Company also is indebted under a
$10,000 note payable to the Company. Such note bears interest at 12% per annum
and matures on September 1, 2001.
The Management Company provides management, leasing and development
services to certain of the Company's consolidated and unconsolidated
investment properties, to affiliated entities and to third parties. During
1995, management contracts for six of the Company's consolidated investment
properties were terminated and new management contracts were entered into with
the Operating Partnership. In connection therewith, the Operating Partnership
entered into a service agreement with the Management Company to provide
supervisory services by Management Company personnel at 105% of the Management
Company's cost thereof. In the six months ended June 30 1997 and 1996, the
Management Company received such reimbursements from the Operating Partnership
of approximately $368 and $309, respectively. In the six months ended June 30,
1997 and 1996, management, leasing and development revenues of approximately
$3,920 and $4,746, respectively, resulted from services provided to affiliated
entities. In addition, the Management Company received reimbursements (at
cost) of payroll and other operating expenses from affiliated entities for
activities performed on such affiliated entities' behalf. Such reimbursements
were approximately $8,113 and $7,987 during the six months ended June 30, 1997
and 1996, respectively. Additionally, rent expense, including building
expenses, paid by the Management Company to affiliates of JMB Realty during
the six months ended June 30, 1997 and 1996 were $395 and $459, respectively.
The Company has options to purchase certain development parcels from the
Management Company at the lower of fair market value or 110% of allocable cost
(all terms as defined) until October 2000. In addition, the sale or
development of any development parcels by the Management Company is subject to
a right of first offer in favor of the Company on the same conditions as
described above.
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(5) MORTGAGE NOTES PAYABLE
On June 30, 1997, the Company signed an agreement with a lender for
$80,000 of indebtedness secured by Wolfchase Galleria. The loan bears
interest at 7.80% and matures on June 30, 2007. In connection with the funding
of the new loan, the Company repaid the $41,824 then outstanding balance on the
construction loan at Wolfchase Galleria.
(6) SALE OF INVESTMENT PROPERTY
On May 27, 1997, the Company completed an outparcel land sale at
Wolfchase Galleria for total proceeds, net of selling expenses, of
approximately $2,296 and recognized a gain of $1,821 for financial reporting
purposes.
On June 25, 1996, the Company sold an outparcel of land at Wolfchase
Galleria for total proceeds, net of selling expenses, of $1,044 and recognized
a gain of $720 for financial reporting purposes.
(7) TRANSACTIONS WITH AFFILIATES (not disclosed elsewhere)
Costs and expenses for services provided by the Management Company to the
Company's investment properties, including the Company's share of
unconsolidated investment properties, were as follows:
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1997 1996
------------ ------------
Property management and leasing
services (a) $ 690 $ 712
Development services 620 554
------------ ------------
$ 1,310 $ 1,266
============ ============
(a) Management services of $1,027 and $706 for the six months ended June
30, 1997 and 1996, respectively, provided by the Operating Partnership to
certain consolidated investment properties have been eliminated in
consolidation.
The Company has purchase options, until October 2000, with respect to
interests in certain improved retail properties in which JMB Partners have an
interest. In addition, these interests may not be sold by JMB Partners without
first offering such interests to the Company at the lower of the option price
or the then fair market value of such property. The Company also has options
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(UNAUDITED)
($000's omitted, except share amounts)
(7) TRANSACTIONS WITH AFFILIATES (not disclosed elsewhere) (CONTINUED)
to purchase certain retail development land parcels from JMB Partners at the
lower of fair market value or 110% of allocable cost (all terms as defined)
until October 2000. In addition, the sale or development of any development
parcels by JMB Partners is subject to a right of first offer in favor of the
Company on the same conditions as described above.
(8) EMPLOYEE BENEFIT PLAN
On May 6, 1997, the shareholders approved the Company's 1996 Incentive
Unit Program (the "Program") which provides for the award of up to 525,000
Incentive Units to officers and key employees of the Company and the
Management Company. Incentive Units may be earned 25% in each of calendar
years 1996 through 1999 subject to the Company achieving annual and cumulative
performance targets in its funds available for distribution for each year.
The determination of whether the performance target for any year has been
achieved is to be made not later than March 31 of the following year (the
"Determination Date"). Awards are subject to vesting over a three-year period
following the Determination Date. The Company recognizes deferred
compensation expense for earned awards as of each year's Determination Date.
Such amounts are amortized to expense over the related vesting periods.
Awards for 525,000 Incentive Units were granted in 1996 and 131,250
Incentive Units were earned for calendar year 1996 concurrent with the
shareholder approval of the Program. The Operating Partnership and the
Management Company have accrued deferred compensation expense related to the
1996 awards and are amortizing the deferred amounts over the three-year
vesting period.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL CONDITION. Net cash flows from operating activities increased
$11.2 million in the six months ended June 30, 1997 from the six months ended
June 30, 1996. This increase was primarily attributable to (i) an increase in
rental operations as discussed below,(ii) receipt of prepaid rents primarily
at Old Orchard and Wolfchase Galleria and (iii) collection of presale rents at
Old Orchard (prepaid and presale rents are included in accounts payable and
other liabilities in the accompanying consolidated balance sheets).
Net cash flows used in investing activities increased $32.6 million in
the six months ended June 30, 1997 from the six months ended June 30, 1996.
This increase was primarily attributable to (i) the purchase of a preferred
50% interest in San Francisco Centre on June 17, 1997, (ii) the purchase of
land in Roseville, California on June 24, 1997, (iii) an increase in additions
to investment properties due to an increase in construction activity at
Wolfchase Galleria and (iv) an increase in cash contributions to Citrus Park
Venture. These increases were partially offset by (i) the purchase of an
approximate 18% interest in Miami International Mall in April 1996 and (ii) an
increase in proceeds from the sale of development parcels at Wolfchase Galleria
in 1997 as compared to 1996.
Net cash flows from financing activities increased $20.1 million in the
six months ended June 30, 1997 from the six months ended June 30, 1996. This
increase was primarily attributable to (i) additional net fundings in 1997
from the Company's line of credit and the loans at Wolfchase Galleria and
(ii) the issuance of Common Stock related to the exercise of employee stock
options. These increases were partially offset by an increase in dividends
paid as a result of the additional shares of Common Stock issued in connection
with the Company's public offering completed in December of 1996 and the
increase in the dividend per share beginning with the fourth quarter 1996
dividend paid in the 1st quarter of 1997.
At June 30, 1997, the Company had cash, cash equivalents and short-term
investments of approximately $3.1 million. Such funds are available for
working capital requirements, recurring capital expenditures, dividends and
distributions to shareholders and limited partners of the Operating
Partnership, respectively, and future acquisitions, expansions, renovations
and developments.
On June 4, 1997, Urban paid $8.8 million to shareholders as a dividend
of $.5075 per share representing its first quarter 1997 dividend. On June 4,
1997, the Operating Partnership paid $3.7 million to its limited partners as
a distribution of $.5075 per Unit representing its first quarter 1997
distribution.
CAPITALIZATION. At June 30, 1997, the Company's debt (including the
Company's share of debt of unconsolidated partnerships and the Management
Company) totaled $708.7 million of which $641.7 million is fixed rate debt
(including debt fixed through interest rate swap agreements) and $67.0 million
is floating rate debt. On June 17, 1997, the Company made an investment in a
partnership resulting in a preferred 50% interest in San Francisco Centre.
Concurrent with the investment, a new first mortgage loan of $73.6 million was
placed on the property, of which $61.4 million is outstanding. The
<PAGE>
loan bears interest at LIBOR + .62% and matures on July 1, 2002; however, it
may be extended for three one-year periods. Subsequent to the end of the
quarter, the Company entered into an eight year interest rate swap agreement
thereby fixing the interest rate at an all-in rate of 6.9%. On December 18,
1996, the Company acquired Old Orchard subject to $159.8 million in property
debt. On November 6, 1996, the Company entered into an agreement with a
lender for a one year $5.0 million unsecured revolving line of credit. As of
June 30, 1997, $1.5 million was outstanding on this line of credit. On June
30, 1997, the Company signed an agreement with a lender for $80.0 million of
indebtedness secured by Wolfchase Galleria. The loan bears interest at 7.8%
and matures on June 30, 2007. In connection with the funding on the new loan,
the Company repaid the $41.8 million then outstanding balance on the
construction loan at Wolfchase Galleria. On July 26, 1995, the Company signed
an agreement with a group of lenders for the establishment of a $90.0 million
secured, revolving line of credit ("Line"). As of June 30 ,1997, $21.3
million was outstanding. On February 10, 1997, the Company refinanced the
Water Tower Place $170.0 million of indebtedness. The new loan matures on
February 1, 1999; however, it may be extended for two one-year periods. Of
the total $170.0 million, $160.0 million bears interest at LIBOR +1.125% and
$10.0 million bears interest at LIBOR + 1.500%. As of the date of this report,
the Company entered into six separate unsecured interest rate swap agreements
for an aggregate amount of $63.5 million in order to hedge exposure on a portion
of its floating rate indebtedness. Subsequent to the end of the quarter,
concurrent with the Company's acquisition of a one-third interest in Copley
Place, the Company secured partnership financing for $195.0 million which
bears interest at a fixed rate of 7.44% and matures on August 1, 2007.
Although there can be no assurances, the Company believes that operating
cash flows will be sufficient to service all Company debt and anticipates
repayment or refinancing when such amounts are due in the ordinary course of
its business. At June 30, 1997, the Company's ratio of Company debt to total
market capitalization (which includes the market value of issued and
outstanding shares of capital stock of the Company and of partnership interests
in the Operating Partnership not held by the Company, plus Company debt) was
approximately 47%, as illustrated by the table at the end of liquidity and
capital resources. The debt to total market capitalization ratio is based
upon the market value of the Common Stock and indebtedness of the Company and,
accordingly, will fluctuate with changes in the value of the Common Stock (and
the issuance of additional shares of Common Stock, or other forms of capital,
if any, and the amount of outstanding indebtedness).
On November 25, 1996, the Company completed an offering of 3,000,000
shares of Common Stock under a shelf registration declared effective by the
Securities and Exchange Commission on April 22, 1996 (for up to $200.0
million). On December 12, 1996, an overallotment option was exercised for an
additional 225,000 shares of Common Stock. Net proceeds from the sale of these
shares, after underwriter's discount, was $80.6 million. The net proceeds
after deducting transaction costs were used to fund a portion of the December
18, 1996 acquisition of Old Orchard and to reduce outstanding borrowings under
the Company's Line. The remaining balance outstanding on the shelf
registration is $119.4 million.
The Company believes that its cash generated from property operations
will provide the necessary funds on a short-term and long-term basis for its
operating expenses, interest expenses on outstanding indebtedness and recurring
capital expenditures and all dividends to the shareholders necessary to satisfy
the REIT requirements. Sources of capital for future acquisitions, development
and non-recurring capital expenditures, such as major building renovations and
expansions, as well as for scheduled principal payments, including balloon
<PAGE>
payments, on the outstanding indebtedness are expected to be obtained from the
following: (i) excess funds available for distribution, (ii) working capital
reserves, (iii) additional Company or property financing, (iv) proceeds from
the sale of assets, including outparcels and (v) additional equity raised in
the public or private markets (including the issuance of additional Units
and/or Unit Voting Stock). Accordingly, the Company expects that it may
incur additional indebtedness. In light of current economic conditions,
relative costs of debt and equity capital, market values of properties, growth
and acquisition opportunities and other factors, the Company may consider an
increase or decrease in its ratio of Company debt to total market
capitalization accordingly.
CAPITAL INVESTMENTS. On August 1, 1997, the Company acquired a one-third
equity interest in Copley Place from JMB Realty in a transaction valued at
$42.3 million paid through the issuance of 1,282,828 units of partnership
interest in the Operating Partnership. In connection with the transaction,
JMB Realty also purchased 53,451 shares of Unit Voting Stock from the Company
for $1.8 million in cash. The remaining interest is owned by an unaffiliated
third party. The Management Company will continue to provide management and
leasing services to the property. Concurrent with this transaction, the
Company also secured partnership financing in the amount of $195.0 million
which bears interest at a fixed rate of 7.44% and matures on August 1, 1997.
Copley Place, completed in 1984, is a mixed use property containing 369,000
square feet of retail space in a two-level mall, four office towers
aggregating 842,000 square feet of office space on seven levels rising above
the mall, a three-level, 980-space, below grade parking garage and a two-level,
695-space parking garage located adjacent to the property. The property is
located in the Back Bay section of Boston, Massachusetts. The retail area
includes a 108,000 square foot Neiman Marcus store, approximately 110
specialty retailers and an eleven-screen movie theatre.
On June 17, 1997, the Company made an investment in a partnership
resulting in a preferred 50% interest in San Francisco Centre for $31.4
million in cash. Concurrent with the investment, a new first mortgage loan of
$73.6 million was placed on the property, of which $61.4 million is
outstanding. San Francisco Centre is a vertical shopping center located in
downtown San Francisco. San Francisco Centre contains approximately 500,000
square feet of retail space and is anchored by a 312,000 square foot Nordstrom
department store. The center also contains more than 180,000 square feet of
mall GLA occupied by approximately 80 specialty retailers and restaurants.
On December 18, 1996, the Company acquired Old Orchard for $78.6 million
in cash prior to prorations and the issuance of $28.0 million in preferred
units in the Operating Partnership, subject to $159.8 million of existing
indebtedness. In connection with the issuance of the preferred units, the
Company issued $1.1 million in Unit Voting Stock. Old Orchard is an open air
regional shopping center located in Skokie, Illinois. Old Orchard contains
1.7 million square feet of retail space and is anchored by Bloomingdale's,
Lord & Taylor, Marshall Field's, Nordstrom and Saks Fifth Avenue. In addition,
Old Orchard contains approximately 120 other stores, theaters and restaurants.
Old Orchard includes approximately 675,000 square feet of mall GLA and
contains parking for over 7,500 vehicles and approximately 60,000 square feet
of office space.
The Company's newest super-regional mall development, Wolfchase Galleria,
in Memphis, opened on February 26, 1997. The anchor tenants are Dillard's,
Goldsmiths's (a division of Federated Department Stores, Inc.), JCPenney and
Sears. Wolfchase Galleria also contains approximately 120 retailers,
restaurants, a food court, a major entertainment complex and approximately
<PAGE>
5,450 parking spaces. Wolfchase Galleria was approximately 94% leased at
opening. The Company has also sold five outparcels at Wolfchase Galleria to
users that the Company believes add to the mall's overall appeal to shoppers
in the Memphis retail market. As of June 30, 1997, net proceeds from the sale
of these outparcels totaled $7.0 million. The Company also signed an agreement
with Bed Bath and Beyond to lease a building that the Company constructed
under a build to suit lease on an outparcel and which opened on September 3,
1996. There are approximately 25 acres of outparcel land remaining at
Wolfchase Galleria for future sale or development. Costs of $94.2 million
have been incurred as of June 30, 1997, for the acquisition and subsequent
development of the Wolfchase project, of which $8.9 million is included in
land, $84.0 million is included in buildings and improvements and equipment,
furniture and fixtures and the remainder is included in construction in
progress in the accompanying consolidated balance sheet.
The Company's next planned development project after Wolfchase Galleria
is the 1.2 million square foot Citrus Park Town Center ("Citrus Park") in
Tampa, Florida. Burdines, Dillard's, JCPenney and Sears have agreed to be
anchor stores for the project. Ground has been broken for Citrus Park and
construction is proceeding on schedule for a scheduled opening in March of
1999. In addition, a 450,000 square foot community center opposite the
regional mall, Citrus Park Plaza, is tentatively scheduled to open in the fall
of 1998. The Company and the Management Company each own a 50% economic
interest in Citrus Park Venture, which owns a 163 acre land parcel which is
the site for the regional mall. Effective August 1, 1997, the Company acquired
rights to the remaining 50% economic interest in Citrus Park Venture from an
affiliate of JMB Realty in exchange for 243,513 units of limited partnership
interest in the Operating Partnership and 10,146 shares of Unit Voting Stock,
valued at $8.2 million in the aggregate. Also effective August 1, 1997, the
Company exercised its option and purchased 68 acres of land adjacent to the
site for the regional mall from an affiliate of JMB Realty in exchange for
177,316 shares of Common Stock valued at $5.7 million. This land was
transferred, through sale and contribution, to Citrus Park Venture. This land
will be used for development of a community center, Citrus Park Plaza,
scheduled to open in the fall of 1998, and for other commercial uses. In
addition, a bond offering of $26.7 million to fund the roadwork surrounding
the property was completed by the Citrus Park Community Development District
(the "CDD") during the fourth quarter of 1996. The Operating Partnership
assisted the CDD in obtaining the financing for the roadwork by guaranteeing
the irrevocable letter of credit (aggregating $27.1 million) which supports
the bonds.
Certain statements set forth herein contain forward-looking statements,
including, without limitation, statements relating to the timing and
anticipated capital expenditures of the Company's development progress and
acquisitions. Although the Company believes that the expectations reflected
in such forward-looking statements are based on reasonable assumptions, the
actual results may differ materially from that set forth in the
forward-looking statements. Certain factors that might cause such differences
include general economic conditions, local real estate conditions, construction
delays due to the unavailability of construction materials, weather conditions
or other delays beyond the control of the Company. Consequently, such forward-
looking statements should be regarded solely as reflections of the Company's
current operating and development and acquisition plans and estimates. These
plans and estimates are subject to revision from time to time as additional
information becomes available, and actual results may differ from those
indicated in the referenced statements.
<PAGE>
<TABLE>
<CAPTION>
100% PRO RATA
BALANCE OF SHARE OF
($000's omitted, ANNUAL MORTGAGE MORTGAGE
except share MATURITY INTEREST NOTES OWNERSHIP NOTES
amounts) DATE RATE PAYABLE INTEREST PAYABLE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated
Entities:
Old Orchard Sept. 2000 8.5269%(1) $ 159,200 100.0% $ 159,200
Oakbrook Center Oct. 2000 6.0751%(2) 140,000 100.0% 140,000
MainPlace Oct. 1998 5.4066% 80,000 100.0% 80,000
Operating
Partnership (3) (3) 22,800 100.0% 22,800
Wolfchase
Galleria June 2007 7.8000% 80,000 100.0% 80,000
- -------------------------------------------------------------------------------
482,000 482,000
Unconsolidated
Entities: (4)
Water Tower
Place April 1997 (5) 170,000 55.0% 93,500
Coral Square
Mall Dec. 2000 7.4000% 53,300 50.0% 26,650
Miami
International
Mall Dec. 2003 6.9100% 47,219 40.0% 18,888
San Francisco
Centre July 2002(6) 6.9045% 61,350 50.0% 30,675
Management
Company Aug. 2001 7.5400% 51,000 95.0% 48,450
Management
Company Sept. 2001 7.0000% 9,000 95.0% 8,550
- -------------------------------------------------------------------------------
226,713
- -------------------------------------------------------------------------------
Company debt $ 708,713
- -------------------------------------------------------------------------------
Convertible
preferred units $ 28,000
- -------------------------------------------------------------------------------
Market value of
equity interests
as of June 30, 1997,
based upon 24,650,809
shares/Units at
$31.875 per share $ 785,745
- -------------------------------------------------------------------------------
Total market
capitalization $ 1,552,458
- -------------------------------------------------------------------------------
Company debt to total
market capitalization 47%
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) Mortgage consists of two notes, one with a balance of $104.5 million
which bears interest at 9.09% and a second with a balance of $54.7 million
which bears interest at 7.45%. Interest rate shown is a weighted average.
(2) Of the $140.0 million of total debt, $58.0 million is subject to a
fixed rate of 5.856% and $82.0 million is subject to a fixed rate of 6.23%.
Interest rate shown is a weighted average.
(3) Includes $21.3 million outstanding under the Company's $90.0 million
secured revolving line of credit. The line of credit, subject to lenders'
approval, may be extended for an additional one or two year period and is
subject to a floating rate of .85% over LIBOR which was reduced from 1.42%
over LIBOR during the second quarter of 1997. In addition, the original
maturity date was extended from July 31, 1998 to April 30, 2000. Also,
includes $1.5 million outstanding under the Company's one-year $5.0 million
unsecured revolving line of credit bearing interest at a floating rate
(6.5% as of June 30 ,1997).
(4) Excludes Valencia Town Center as the Company is currently not entitled
to any cash distributions until the outside partner has received a return on
and of its contributions to the partnership.
(5) On February 10, 1997, the Water Tower Place indebtedness was refinanced.
The new loan matures on February 1, 1999; however, it may be extended for two
one-year periods. Of the total $170.0 million, $160.0 million bears interest
at LIBOR +1.125% and $10.0 million bears interest at LIBOR + 1.500%.
(6) Loan matures on July 1, 2002; however, it may be extended for three
one-year periods.
<PAGE>
<TABLE>
REVIEW OF OPERATIONS
FUNDS FROM OPERATIONS. Funds from the operations should not be considered as
an alternative to net income or any other GAAP measurement of performance as
an indicator of operating performance or as an alternative to cash flows from
operating, investing or financing activities as a measure of liquidity. The
chart below shows the calculation of funds from operations, based upon the
National Association of Real Estate Investment Trusts ("NAREIT") definition:
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income before minority
interest and
extraordinary items $ 9,862 $ 6,911 $ 16,084 $ 11,777
Plus depreciation and
amortization 7,169 4,789 13,739 9,461
Plus the Company's share
of depreciation and
amortization from
unconsolidated
partnerships and the
Management Company 1,167 1,060 2,247 2,062
Less preferred unit
distribution (490) -- (980) --
----------- ----------- ----------- -----------
Total funds from
operations $ 17,708 $ 12,760 $ 31,090 $ 23,300
=========== =========== =========== ===========
Company's share of funds
from operations (a) $ 12,465 $ 8,305 $ 21,844 $ 15,164
=========== =========== =========== ===========
<FN>
(a) Based upon a weighted average of 24,623,409 and 24,588,295 common
shares and units outstanding for the three and six months ended June 30, 1997,
respectively and 21,115,860 for the three and six months ended June 30, 1996.
Total common shares and units outstanding at June 30, 1997 and 1996, were
24,650,809 and 21,115,860, respectively.
</TABLE>
<PAGE>
<TABLE>
FUNDS AVAILABLE FOR DISTRIBUTION. The chart below shows the calculation of
funds available for distribution:
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1997 1996 1996 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total funds from
operations $ 17,708 $ 12,760 $ 31,090 $ 23,300
Plus non-cash effect of
Oakbrook Center
straight-lined ground
rent and related
interest 829 790 1,651 1,572
Plus (less) adjustment
to reflect actual cash
received from the
Management Company 197 (23) 322 (96)
Plus write-off of
assets (a) 1 87 22 125
Less straight-line rent
adjustments (a) (433) (157) (746) (335)
----------- ----------- ----------- -----------
Total funds available
for distribution
including other gains 18,302 13,457 32,339 24,566
Less other gains (1,821) (720) (1,821) (720)
----------- ----------- ----------- -----------
Total funds available
for distribution
excluding other gains $ 16,481 $ 12,737 $ 30,518 $ 23,846
=========== =========== =========== ===========
Company's share of funds
available for
distribution including
other gains (b) $ 12,883 $ 8,758 $ 22,721 $ 15,988
=========== =========== =========== ===========
Company's share of funds
available for
distribution excluding
other gains (b) $ 11,601 $ 8,289 $ 21,442 $ 15,519
=========== =========== =========== ===========
<FN>
(a) Includes the Company's share of unconsolidated partnerships.
(b) Based upon a weighted average of 24,623,409 and 24,588,295 common shares
and units outstanding for the three and six months ended June 30, 1997,
respectively and 21,115,860 for the three and six months ended June 30, 1996.
Total common shares and units outstanding at June 30, 1997 and 1996, were
24,650,809 and 21,115,860, respectively.
</TABLE>
<PAGE>
SALES. Aggregate sales volume at the Company's regional malls for those
mall shops and anchors that report sales, excluding San Francisco Centre, have
increased 27.3% to $377 million in the three months ended June 30, 1997 from
$296 million in the three months ended June 30, 1996. Excluding San Francisco
Centre, Old Orchard and Wolfchase Galleria, aggregate sales volume increased
2.6% in the second quarter of 1997 as compared to the second quarter of 1996.
Mall tenant sales (excluding anchors and movie theaters), excluding San
Francisco Centre, have increased 31.0% to $281 million in the three months
ended June 30, 1997 from $214 million in the same period for 1996. Excluding
San Francisco Centre, Old Orchard and Wolfchase Galleria, mall tenant sales
increased 2.6% in the second quarter of 1997 as compared to the second quarter
of 1996. Comparable reported mall tenant sales increased .6% in the six months
ended June 30, 1997 compared to the same period for 1996. Sales per square
foot (excluding San Francisco Centre, Old Orchard and Wolfchase Galleria) for
the rolling twelve months ended June 30, 1997 were $351 compared to $350 for
the twelve months ended March 31, 1997 and $344 for the twelve months ended
June 30, 1996. Sales per square foot were calculated in accordance with the
International Council of Shopping Centers definition.
OCCUPANCY. Excluding San Francisco Centre, the mall GLA was 91.5%
occupied at June 30, 1997 as compared to 90.8% at March 31, 1997 and 89.3% at
June 30, 1996. Excluding San Francisco Centre, the mall GLA was 94.6% leased
at June 30, 1997.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE SIX MONTHS ENDED
JUNE 30, 1996
Shopping center revenues increased $25.1 million to $70.3 million in the
six months ended June 30, 1997 from $45.2 million in the six months ended June
30, 1996. This increase was primarily attributable to the increase in shopping
center revenues at Old Orchard, Wolfchase Galleria, Penn Square Mall and
Oakbrook Center. Minimum Rents and recoveries from tenants increased as a
result of the Company's acquisition of Old Orchard on December 18, 1996.
Minimum rents and recoveries from tenants increased at Wolfchase Galleria as a
result of its opening on February 26, 1997. Minimum rents increased at Penn
Square Mall and Oakbrook Center as a result of an increase in average
occupancy and rents in 1997.
Shopping center expenses, including depreciation and amortization,
increased $13.7 million to $39.4 million in the six months ended June 30, 1997
from $25.7 million in the same period for 1996. This increase was primarily
attributable to an increase in shopping center expenses, including depreciation
and amortization, as a result of the Company's acquisition of Old Orchard on
December 18, 1996 and at Wolfchase Galleria as a result of its opening on
February 26, 1997.
Mortgage and other interest increased $8.1 million to $15.1 million in
the six months ended June 30, 1997 from $7.0 million in the same period for
1996. This increase was primarily attributable to an increase in interest
expense as a result of the Company's acquisition of Old Orchard on December
18, 1996 and at Wolfchase Galleria as a result of its opening on February 26,
1997.
General and administrative expenses increased $.2 million to $1.7 million
in the six months ended June 30, 1997 from $1.5 million in the same period for
1996 as a result of additional compensation related to the Company's Incentive
Unit Program.
<PAGE>
Income from unconsolidated partnerships increased $1.3 million to $2.2
million in the six months ended June 30, 1997 from $.9 million in the same
period for 1996. This increase was primarily attributable to (i) a decrease
in interest expense at Water Tower Place as a result of the February 10, 1997
refinancing and (ii) the purchase of an additional approximate 18% interest
in Miami International Mall on April 1, 1996.
Income from the Management Company decreased $.9 million to a $.4 million
loss in the six months ended June 30, 1997 from $.5 million in income in the
same period for 1996. This decrease was primarily attributable to a decrease
in management fees resulting from the net decrease in management contracts,
including Old Orchard, which subsequent to the Company's acquisition on
December 18, 1996, is being managed by the Operating Partnership, and an
increase in interest expense as a result of the $9.0 million of indebtedness
accruing interest at 7.0% commencing in late May 1996; partially offset by a
decrease in income taxes as a result of the decrease in operating income.
Other gains of $1.8 million and $.7 million for the six months ended June
30, 1997 and 1996, respectively, represent the gains on the sale of outparcels
of land at Wolfchase Galleria.
The extraordinary items (net of minority interest) of $.3 million in 1997
resulted from the write-off of deferred expenses and loan fees related to
(i) repayment of debt at Water Tower Place and (ii) repayment of the
construction loan at Wolfchase Galleria.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1996
Shopping center revenues increased $14.5 million to $37.0 million in the
three months ended June 30, 1997 from $22.5 million in the three months ended
June 30, 1996. This increase was primarily attributable to the increase in
shopping center revenues at Old Orchard, Wolfchase Galleria, Penn Square Mall
and Oakbrook Center. Minimum rents and recoveries from tenants increased as a
result of the Company's acquisition of Old Orchard on December 18, 1996.
Minimum rents and recoveries from tenants increased at Wolfchase Galleria as a
result of its opening on February 26, 1997. Minimum rents increased at Penn
Square Mall and Oakbrook Center as a result of an increase in average
occupancy and rents in 1997.
Shopping center expenses, including depreciation and amortization,
increased $8.1 million to $20.4 million in the three months ended June 30,
1997 from $12.3 million in the same period for 1996. This increase was
primarily attributable to an increase in shopping center expenses, including
depreciation and amortization, as a result of the Company's acquisition of Old
Orchard on December 18, 1996 and at Wolfchase Galleria as a result of its
opening on February 26, 1997.
Mortgage and other interest increased $4.6 million to $8.1 million in the
three months ended June 30, 1997 from $3.5 million in the same period for 1996.
This increase was primarily attributable to an increase in interest expense as
a result of the Company's acquisition of Old Orchard on December 18, 1996 and
at Wolfchase Galleria as a result of its opening on February 26, 1997.
General and administrative expenses increased $.2 million to $.8 million
in the three months ended June 30, 1997 from $.6 million in the same period for
1996 as a result of additional compensation related to the Company's Incentive
Unit Program.
<PAGE>
Income from unconsolidated partnerships increased $.6 million to $1.3
million in the three months ended June 30, 1997 from $.7 million in the same
period for 1996. This increase was primarily attributable to a decrease in
interest expense at Water Tower Place as a result of the February 10, 1997
refinancing.
Income from the Management Company decreased $.4 million to a $.2 million
loss in the three months ended June 30, 1997 from $.2 million in income in the
same period for 1996. This decrease was primarily attributable to a decrease
in management fees resulting from the net decrease in management contracts,
including Old Orchard, which subsequent to the Company's acquisition on
December 18, 1996, is being managed by the Operating Partnership, and an
increase in interest expense as a result of the $9.0 million of indebtedness
accruing interest at 7.0% commencing in late May 1996; partially offset by a
decrease in income taxes as a result of the decrease in operating income.
Other gains of $1.8 million and $.7 million for the three months ended
June 30, 1997 and 1996, respectively, represent the gains on the sale of
outparcels of land at Wolfchase Galleria.
The extraordinary item (net of minority interest) of $.2 million in 1997
resulted from the write-off of deferred expenses and loan fees related to the
repayment of the construction loan at Wolfchase Galleria.
ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
During the first half of 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, "Earning Per
Share." The statement requires the presentation of basic and diluted earnings
per share for companies with other than simple capital structures. The
statement is effective for financial statements for both interim and annual
periods ending after December 31, 1997 and early application is not permitted.
For the three and six months ended June 30, 1997 basic and diluted income per
share would have approximated income per common and unit voting common share
(as presented in the accompanying statements of operations).
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 6, 1997, at the Company's annual meeting of shareholders, actions
were taken on (i) the election of directors, (ii) the approval of the
Company's 1996 Incentive Unit Program and (iii) the ratification of independent
auditors. The results of these actions are presented below.
Election of Directors:
For Withheld
---------- -----------
Neil G. Bluhm 22,715,915 52,650
James B. Digney 22,685,251 83,314
Matthew S. Dominski 22,715,722 52,843
Susan Getzendanner 22,685,427 83,138
Judd D. Malkin 22,714,821 53,744
John E. Neal 22,686,113 82,452
Phillip B. Rooney 22,685,237 83,328
John G. Schreiber 22,715,121 53,444
Henry T. Segerstrom 22,683,571 84,994
Messrs. Bluhm, Malkin and Dominski have been directors since inception.
Messrs. Digney, Rooney, Segerstrom and Ms. Getzendanner have held such
positions since October 18, 1993. Messrs. Neal and Schreiber have been
directors since February 13, 1995.
Each of the above directors will serve until the Company's next annual
meeting of shareholders and until their respective successors have been
elected and qualified, or until their resignation, death, termination or
removal.
Approval of the Company's 1996 Incentive Unit Program:
For Against Abstain
- ------------ ------------ ------------
22,022,586 670,249 75,730
Ratification of Appointment of KPMG Peat Marwick LLP as independent
auditors for 1997:
For Against Abstain
- ------------ ------------ ------------
22,720,641 11,824 36,100
No other matters were submitted to a vote of security holders during the
meeting or during the period covered by this report.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Stock Certificate is hereby incorporated by reference to Exhibit
4.1 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993
4.2 Indenture by and between USC Oakbrook, Inc. and Bankers Trust
Company is hereby incorporated by reference to Exhibit 4.2 to the
Registrant's Form 10-K (File No. 1-12278) filed on March 25, 1994
4.3 Mortgage Note by and between Oakbrook Urban Venture, L.P. and USC
Oakbrook, Inc. is hereby incorporated by reference to Exhibit 4.3
to the Registrant's Form 10-K (File No. 1-12278) filed on March
25, 1994
4.4 Indenture by and between Water Tower Finance, Inc., Water Tower
Joint Venture and First National Bank of Chicago is hereby
incorporated by reference to Exhibit 4.7 to the Registrant's Form
10-K (File No. 1-12278) filed on March 25, 1994
4.5 Credit Agreement among Urban Shopping Centers, L.P., Union Bank of
Switzerland (New York Branch), Morgan Guaranty Trust Company of
New York and the several Lenders is hereby incorporated by
reference to Exhibit 4.11 to the Registrant's Form 10-Q (File No.
1-12278) filed on November 9, 1995
4.6 First Amendment to Indenture by and between USC Oakbrook, Inc. and
Bankers Trust Company is hereby incorporated by reference to
Exhibit 4.11 to the Registrant's Form 10-K (File No. 1-12278) filed
on March 25, 1996
4.7 Fourth Amendment to Loan Agreement by and among ZML-Old Orchard
Limited Partnership, American National Bank and Trust Company of
Chicago, The Prudential Insurance Company of America and Mellon
Bank, N.A. is hereby incorporated by reference to Exhibit 4.7 to
the Registrant's Form 10-K (File No. 1-12278) filed on March 31,
1997
4.8 Mortgage, Security Agreement, Assignment of Leases and Rents and
Fixture Filing dated as of February 10, 1997 made by LaSalle
National Trust, N.A. and Water Tower Joint Venture to and with
Lehman Brothers Holdings Inc. is hereby incorporated by reference
to Exhibit 4.8 to the Registrant's Form 10-Q (File No. 1-12278)
filed on May 12, 1997
4.9 Promissory Note A dated as of February 10, 1997 by and between
Water Tower Joint Venture and Lehman Brothers Holdings Inc. is
hereby incorporated by reference to Exhibit 4.9 to the
Registrant's Form 10-Q (File No. 1-12278) filed on May 12, 1997
4.10 Promissory Note B is dated as of February 10, 1997 by and between
Water Tower Joint Venture and Lehman Brothers Holdings Inc. is
hereby incorporated by reference to Exhibit 4.10 to the
Registrant's Form 10-Q (File No. 1-12278) filed on May 12, 1997
<PAGE>
10.1 Second Amended and Restated Agreement of Limited Partnership of
Urban Shopping Centers, L.P. is hereby incorporated by reference
to Exhibit 10.1 to the Registrant's Form 10-Q (File No. 1-12278)
filed on November 19, 1993
10.2 Corporate Services Agreement among the Registrant, Urban Shopping
Centers, L.P. and JMB Retail Properties Co. (now Urban Retail
Properties Co.) is hereby incorporated by reference to Exhibit
10.3 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993
10.3 JMB Realty Corporation Employee Savings Plan is hereby
incorporated by reference to Exhibit 10.4 to the Registrant's
Registration Statement on Form S-11 (No. 33-64488)
10.4 Retirement Plan for Employees of Amfac, Inc. and Subsidiaries is
hereby incorporated by reference to Exhibit 10.5 to the
Registrant's Registration Statement on Form S-11 (No. 33-64488)
10.5 Urban Shopping Centers 1993 Option Plan is hereby incorporated by
reference to Exhibit 10.6 to the Registrant's Form 10-Q (File No.
1-12278) filed on November 19, 1993
10.6 Non-Competition Agreement between JMB Realty Corporation and the
Registrant is hereby incorporated by reference to Exhibit 10.7 to
the Registrant's Form 10-Q (File No. 1-12278) filed on November
19, 1993
10.7 Non-Competition Agreement between JMB Institutional Realty
Corporation and the Registrant is hereby incorporated by
reference to Exhibit 10.8 to the Registrant's Form 10-Q (File No.
1-12278) filed on November 19, 1993
10.8 Non-Competition Agreement between Neil G. Bluhm and the Registrant
is hereby incorporated by reference to Exhibit 10.9 to the
Registrant's Form 10-Q (File No. 1-12278) filed on November 19,
1993
10.9 Non-Competition Agreement between Judd D. Malkin and the
Registrant is hereby incorporated by reference to Exhibit
10.10 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993
10.10 Omnibus Agreement among Urban Shopping Centers, L.P., JMB
Properties Company, JMB Retail Properties Co. (now Urban Retail
Properties Co.) and the Registrant is hereby incorporated by
reference to Exhibit 10.12 to the Registrant's Form 10-Q (File No.
1-12278) filed on November 19, 1993
10.11 Indemnification Agreement between the Registrant and its Directors
and Officers is hereby incorporated by reference to Exhibit 10.13
to the Registrant's Form 10-Q (File No. 1-12278) filed on November
19, 1993
10.12 Registration Rights and Lock-Up Agreement between the Registrant
and certain Investors is hereby incorporated by reference to
Exhibit 10.14 to the Registrant's Form 10-Q (File No. 1-12278)
filed on November 19, 1993
<PAGE>
10.13 Stockholders Agreement between Center Partners, Ltd., Urban
Investment & Development Co., Urban-Water Tower Associates,
JMB/Miami Investors, L.P., Island Holidays, Ltd., Celtic Funding
Corporation and the Registrant is hereby incorporated by reference
to Exhibit 10.15 to the Registrant's Form 10-Q (File No. 1-12278)
filed on November 19, 1993
10.14 Lease Agreement, dated December 31, 1990, by and between Teachers'
Retirement System of the State of Illinois and LaSalle National
Trust, N.A., as Trustee for Oakbrook Urban Venture, as amended by
the First Amendment to Lease Agreement and to Restated and Amended
Memorandum of Lease is hereby incorporated by reference to Exhibit
10.16 to the Registrant's Registration Statement on Form S-11 (No.
33-64488)
10.15 Second Amendment to Lease Agreement by and between Teachers'
Retirement System of the State of Illinois and LaSalle National
Trust, N.A., as Trustee for Oakbrook Urban Venture, L.P. is hereby
incorporated by reference to Exhibit 10.17 to the Registrant's Form
10-Q (File No. 1-12278) filed on November 19, 1993
10.16 Net Ground Rental Lease Agreement with respect to Penn Square Mall,
as amended by Amendment of Net Ground Rental Lease and as further
amended by Second Amendment of Net Ground Rental Lease is hereby
incorporated by reference to Exhibit 10.18 to the Registrant's
Registration Statement on Form S-11 (No. 33-64488)
10.17 Ground Lease by and between The Newhall Land and Farming Company
and Valencia Town Center Associates is hereby incorporated by
reference to Exhibit 10.19 to the Registrant's Registration
Statement on Form S-11 (No. 33-64488)
10.18 Restated Employment Agreement between Matthew S. Dominski and the
Registrant is hereby incorporated by reference to Exhibit 10.19 to
the Registrant's Form 10-K (File No. 1-12278) filed on March 25,
1994
10.19 Third Amendment to Lease Agreement by and between Teachers'
Retirement System of the State of Illinois and LaSalle National
Trust, N.A., as Trustee for Oakbrook Urban Venture, L.P. is hereby
incorporated by reference to Exhibit 10.20 to the Registrant's Form
10-K (File No. 1-12278) filed on March 25, 1994
10.20 First Amendment to Second Amended and Restated Agreement of Limited
Partnership of Urban Shopping Centers, L.P. is hereby incorporated
by reference to Exhibit 10.21 to the Registrant's Form 10-Q (File
No. 1-12278) filed on August 9, 1995
10.21 First and Second Amendments to Urban Shopping Centers 1993 Option
Plan are hereby incorporated by reference to Exhibit 10.22 to the
Registrant's Form 10-Q (File No. 1-12278) filed on August 9, 1995
10.22 Urban Shopping Centers 1996 Incentive Unit Program is hereby
incorporated by reference to Exhibit 10.1 to the Registrant's
Form 8-K filed on November 25, 1996
<PAGE>
10.23 Second Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban Shopping Centers, L.P. is hereby
incorporated by reference to Exhibit 10.23 to the Registrant's Form
10-K (File No. 1-12278) filed on March 31, 1997
10.24 Agreement for Purchase and Sale of Partnership Interest by and
between ZML-00 Associates Limited Partnership, Urban Shopping
Centers, L.P., USC Old Orchard, Inc., and H. Rigel Barber, Gary
A. Nickele and Jeffery A. Gluskin, as owner trustees of the Old
Orchard Trust, is hereby incorporated by reference to Exhibit
10.24 to the Registrant's Form 10-K (File No. 1-12278) filed on
March 31, 1997
10.25 Amended and Restated Agreement of Limited Partnership of Old
Orchard Urban Limited Partnership by and between USC Old Orchard,
Inc. and Urban Shopping Centers, L.P. is hereby incorporate by
reference to Exhibit 10.25 to the Registrant's Form 10-K (File
No. 1-12278) filed on March 31, 1997
10.26 Third Amendment to Urban Shopping Centers 1993 Option Plan is
hereby incorporated by reference to Exhibit 10.26 to the
Registrant's Form 10-Q (File No. 1-12278) filed on May 12, 1997
27.1 Financial Data Schedule
Although certain additional long-term debt instruments of the
Registrant have been excluded from Exhibit 4 above, pursuant to Rule
601(b)(4)(iii), the Registrant commits to provide copies of such
agreements to the Securities and Exchange Commission upon request.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
URBAN SHOPPING CENTERS, INC.
By: ADAM S. METZ
Executive Vice President, Chief
Financial Officer, Treasurer,
Director of Acquisitions and Chief
Accounting Officer
Date: August 12, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person in the capacity and on
the date indicated.
ADAM S. METZ
Executive Vice President, Chief
Financial Officer, Treasurer,
Director of Acquisitions and Chief
Accounting Officer
Date: August 12, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FINANCIAL STATEMENTS INCLUDED IN ITS REPORT ON FORM 10-Q FOR THE
THREE MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH REPORT.
</LEGEND>
<CIK> 0000907077
<NAME> URBAN SHOPPING CENTERS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUNE-30-1997
<CASH> 3,101
<SECURITIES> 0
<RECEIVABLES> 17,576
<ALLOWANCES> 0
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<CURRENT-ASSETS> 20,677
<PP&E> 968,202
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<TOTAL-ASSETS> 956,390
<CURRENT-LIABILITIES> 43,033
<BONDS> 482,000
0
0
<COMMON> 170
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<TOTAL-LIABILITY-AND-EQUITY> 956,390
<SALES> 70,311
<TOTAL-REVENUES> 71,074
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