SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter
ended March 31, 1999 Commission file 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 May 7, 1999 were 17,492,684 and 407,935,
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 . . . . 15
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 23
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk . . . . . . . . . . . . . . . . . . . . . 27
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(Unaudited)
($000's omitted, except share amounts)
ASSETS
------
MARCH 31, DECEMBER 31,
1999 1998
------------- -----------
Investment properties:
Land, including peripheral
land parcels . . . . . . . . . . . . $ 154,627 $ 157,045
Buildings and improvements . . . . . . 1,189,115 1,095,431
Equipment, furniture and fixtures. . . 4,843 4,065
Construction in progress . . . . . . . 28,763 101,188
------------ -----------
1,377,348 1,357,729
Accumulated depreciation . . . . . . . (170,719) (163,845)
------------ -----------
Investment properties, net of
accumulated depreciation . . . . . 1,206,629 1,193,884
Investment property held for sale. . . . 12,568 --
Investments in unconsolidated
partnerships . . . . . . . . . . . . . 133,330 135,052
Investment in the Management Company . . 51,467 48,552
Cash, cash equivalents and
short-term investments . . . . . . . . 2,189 422
Interest, rents and other receivables. . 17,855 18,978
Deferred expenses and other assets . . . 16,081 14,522
------------ -----------
$ 1,440,119 $ 1,411,410
============ ===========
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
MARCH 31, DECEMBER 31,
1999 1998
------------- -----------
Liabilities:
Mortgage notes payable . . . . . . . . $ 783,986 $ 765,501
Land sale-leaseback proceeds . . . . . 75,000 75,000
Deferred lease accrual . . . . . . . . 21,269 20,733
Accounts payable and other
liabilities. . . . . . . . . . . . . 67,352 51,270
Investments in unconsolidated
partnerships . . . . . . . . . . . . 43,693 42,893
Commitments and contingencies
----------- -----------
Total liabilities. . . . . . . 991,300 955,397
Minority interest. . . . . . . . . . . . 127,038 129,739
Stockholders' equity:
Preferred stock, $.01 par value,
authorized 5,000,000 shares,
issued and outstanding 3,772,915
shares in 1999 and 1998 (liquida-
tion preference of $125,000) . . . . 38 38
Common stock, $.01 par value,
authorized 140,000,000 shares,
issued and outstanding 17,487,684
shares in 1999 and 17,380,193
shares in 1998 . . . . . . . . . . . 175 174
Unit voting stock, $.01 par value,
authorized 5,000,000 shares,
issued and outstanding 407,935
shares in 1999 and 1998. . . . . . . 4 4
Additional paid-in capital . . . . . . 492,131 489,880
Retained earnings (deficit). . . . . . (170,567) (163,822)
------------ -----------
Total stockholders' equity . . 321,781 326,274
------------ -----------
$ 1,440,119 $ 1,411,410
============ ===========
See accompanying notes to consolidated financial statements.
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
($000's omitted, except share amounts)
1999 1998
---------- ----------
Revenues:
Shopping center revenues:
Minimum rents. . . . . . . . . . . . . . . $ 31,252 $ 29,406
Percentage rents . . . . . . . . . . . . . 645 1,193
Recoveries from tenants. . . . . . . . . . 16,327 14,894
Other. . . . . . . . . . . . . . . . . . . 1,487 1,026
---------- ----------
49,711 46,519
Interest income. . . . . . . . . . . . . . . 181 389
---------- ----------
49,892 46,908
---------- ----------
Expenses:
Shopping center expenses . . . . . . . . . . 18,311 17,634
Mortgage and other interest. . . . . . . . . 11,976 10,834
Ground rent. . . . . . . . . . . . . . . . . 1,087 1,188
Depreciation and amortization. . . . . . . . 10,845 10,314
General and administrative . . . . . . . . . 1,504 1,335
Write-off of assets. . . . . . . . . . . . . -- 81
---------- ----------
43,723 41,386
---------- ----------
Operating income . . . . . . . . . . 6,169 5,522
Income from unconsolidated partnerships. . . . 2,501 1,850
Income (loss) from the Management Company. . . 32 (835)
----------- -----------
Income before minority interest
and extraordinary items. . . . . . 8,702 6,537
Minority interest. . . . . . . . . . . . . . . (2,603) (1,997)
----------- -----------
Income before extraordinary
items. . . . . . . . . . . . . . . 6,099 4,540
Extraordinary items from the Management
Company (net of taxes and minority
interest). . . . . . . . . . . . . . . . . . (1,132) --
----------- -----------
Net income . . . . . . . . . . . . . 4,967 4,540
Dividends on preferred stock . . . . . . . . . (2,113) (1,621)
----------- -----------
Income applicable to common and
unit voting common stock . . . . . $ 2,854 $ 2,919
=========== ===========
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1999 1998
---------- ----------
Basic income per common and unit
voting common share:
Before extraordinary items . . . . . . . . . $ .22 $ .16
Extraordinary items. . . . . . . . . . . . . (.06) --
----------- -----------
Net income . . . . . . . . . . . . . $ .16 $ .16
=========== ===========
Diluted income per common and unit
voting common share:
Before extraordinary items . . . . . . . . . $ .22 $ .16
Extraordinary items. . . . . . . . . . . . . (.06) --
----------- -----------
Net income . . . . . . . . . . . . . $ .16 $ .16
=========== ===========
Weighted-average common and
unit voting common stock outstanding . . . . 17,885,675 17,719,039
=========== ===========
Dividends declared and paid per common
and unit voting common share. . . . . . . . . $ .5600 $ .5250
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
($000's omitted, except share amounts)
1999 1998
---------- ----------
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . $ 4,967 $ 4,540
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization. . . . . . . 10,845 10,314
Write-off of assets. . . . . . . . . . . . -- 81
Provision for losses on accounts
receivable . . . . . . . . . . . . . . . 167 525
Income from unconsolidated
partnerships . . . . . . . . . . . . . . (2,501) (1,850)
Loss (income) from the Management
Company. . . . . . . . . . . . . . . . . (32) 835
Minority interest. . . . . . . . . . . . . 2,603 1,997
Deferred lease accrual . . . . . . . . . . 536 535
Extraordinary items. . . . . . . . . . . . 1,132 --
Other, net . . . . . . . . . . . . . . . . (366) (457)
Other changes in assets and liabilities:
Interest, rents and other receivables. . . 1,313 435
Deferred expenses and other assets . . . . (96) 1,005
Accounts payable and other liabilities . . 1,962 6,161
----------- -----------
Net cash provided by
operating activities . . . . . . . 20,530 24,121
----------- -----------
Cash flows from investing activities:
Additions to investment properties,
net of change in related payables. . . . . (22,894) (3,393)
Cash contributions to unconsolidated
partnerships and the Management
Company. . . . . . . . . . . . . . . . . . (5,176) (6,109)
Cash distributions from unconsolidated
partnerships and the Management
Company. . . . . . . . . . . . . . . . . . 5,617 3,170
Other, net . . . . . . . . . . . . . . . . . 190 (52)
----------- -----------
Net cash used in
investing activities . . . . . . . (22,263) (6,384)
----------- -----------
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1999 1998
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of debt,
net of issuance costs. . . . . . . . . . . 101,853 31,629
Proceeds from issuance of common stock
under option plan and incentive unit
plan . . . . . . . . . . . . . . . . . . . 2,730 1,867
Repayment of debt. . . . . . . . . . . . . . (83,836) (34,591)
Cash distributions to common unitholders . . (5,006) (4,610)
Cash distributions to preferred
unitholders. . . . . . . . . . . . . . . . (490) (490)
Dividends paid . . . . . . . . . . . . . . . (11,712) (10,165)
Other, net . . . . . . . . . . . . . . . . . (39) 58
----------- -----------
Net cash provided by (used in)
financing activities . . . . . . . 3,500 (16,302)
----------- -----------
Net increase in cash and cash equivalents. . . 1,767 1,435
Cash and cash equivalents at
beginning of period. . . . . . . . . . . . . 294 1,143
----------- -----------
Cash and cash equivalents at
end of period. . . . . . . . . . . . . . . . $ 2,061 $ 2,578
=========== ===========
Supplemental disclosure of cash flow
information:
Cash paid for mortgage and other
interest, net of amounts capitalized . . . $ 10,931 $ 10,587
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
(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, 1998, which are
incorporated by reference in the Company's 1998 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 March 31, 1999 and 1998 are not necessarily
indicative of the results to be obtained for the full fiscal year.
The accompanying consolidated financial statements include the
accounts of the Company, Urban Shopping Centers, L.P. (the "Operating
Partnership") and all controlled affiliates. 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"), S. F. Shopping Centre Associates, L.P. ("San Francisco Shopping
Centre"), Copley Place Associates, LLC ("Copley Place"), Valencia Town
Center Associates, L.P. ("Valencia Town Center"), Woodland Hills Mall, LLC
("Woodland Hills Mall") and Urban Retail Properties Co. (the "Management
Company").
For the three months ended March 31, 1999 and 1998, the common units,
convertible preferred units, convertible preferred stock, stock options and
incentive units are either antidilutive or do not have a significant effect
on the computation of earnings per share.
Certain amounts in the 1998 financial statements have been
reclassified to conform with the 1999 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 three months ended March 31, 1999 and 1998, the Company incurred
interest of $13,559 and $11,405, respectively, and capitalized interest of
$1,583 and $571, respectively.
Cash and cash equivalents (which aggregated $2,061 and $294 at
March 31, 1999 and December 31, 1998, respectively) include a treasury
money market fund which invests principally in U.S. Treasury notes and
bills ($76 and none at March 31, 1999 and December 31, 1998, respectively).
Other short-term investments (generally with original maturities of one
year or less) are generally held to maturity and aggregated $128 at
March 31, 1999 and December 31, 1998. Cash equivalents and other short-
term investments are held at cost which approximates market.
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
($000's omitted, except share amounts)
(1) BASIS OF PRESENTATION (Continued)
On May 21, 1998, the Emerging Issues Task Force of the Financial
Accounting Standards Board reached a consensus on Issue 98-9 "Accounting
for Contingent Rent in Interim Financial Periods." The Task Force
determined that a lessor should defer recognition of contingent rental
income (i.e., percentage/excess rent) in interim periods until the
specified target (i.e., breakpoint) that triggers the contingent rental
income is achieved. The Company implemented the consensus as of May 21,
1998. This consensus affects timing of revenue recognition for interim
financial periods and it is not expected to have any significant effect on
the Company's net income for the full calendar year 1999.
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 synthetic 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 as current
income or expense.
(2) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS
Summarized financial information for the unconsolidated partnerships
is presented below:
March 31, December 31,
1999 1998
------------- -------------
Assets:
Investment properties, net . . . . . $ 855,947 $ 860,634
Other assets . . . . . . . . . . . . 45,556 46,934
---------- -----------
901,503 907,568
Less liabilities:
Mortgage notes payable . . . . . . . 645,085 645,904
Other liabilities. . . . . . . . . . 31,241 30,045
----------- -----------
Total capital . . . . . . . . . . 225,177 231,619
Less: Outside partners' capital. . . . 135,540 139,460
----------- -----------
Total investments in
unconsolidated partnerships . . $ 89,637 $ 92,159
=========== ===========
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
($000's omitted, except share amounts)
(2) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS (Continued)
March 31, December 31,
1999 1998
------------- -------------
Total investments in unconsolidated
partnerships are presented in the
accompanying consolidated balance
sheets as follows:
Assets - Investments in
unconsolidated partnerships. . . $ 133,330 $ 135,052
Liabilities - Investments in
unconsolidated partnerships. . . 43,693 42,893
----------- -----------
$ 89,637 $ 92,159
=========== ===========
Three Months Ended
March 31,
---------------------------
1999 1998
----------- -----------
Revenues:
Shopping centers . . . . . . . . . . $ 44,493 $ 39,371
Interest income. . . . . . . . . . . 244 261
Expenses:
Shopping centers . . . . . . . . . . 20,430 18,299
Mortgage and other interest and
ground rent. . . . . . . . . . . . 11,538 10,691
Depreciation and amortization. . . . 6,873 5,704
----------- -----------
Net income . . . . . . . . . . $ 5,896 $ 4,938
=========== ===========
Company's share of:
Mortgage and other interest and
ground rent. . . . . . . . . . . . $ 5,430 $ 4,746
Depreciation and amortization. . . . 2,880 2,443
Net income . . . . . . . . . . . . . 2,501 1,850
=========== ===========
(3) 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.
March 31, December 31,
1999 1998
------------- -------------
Assets:
Investments in land parcels. . . . . $ 15,171 $ 15,171
Cash, cash equivalents and
short-term investments . . . . . . 3,858 4,324
Receivables and deferred expenses. . 18,851 17,332
----------- -----------
$ 37,880 $ 36,827
=========== ===========
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
($000's omitted, except share amounts)
(3) INVESTMENT IN THE MANAGEMENT COMPANY (Continued)
March 31, December 31,
1999 1998
------------- -------------
Liabilities:
Notes payable. . . . . . . . . . . . $ 20,000 $ 20,000
Accounts payable and
other liabilities. . . . . . . . . 3,444 4,777
----------- -----------
23,444 24,777
Owners' equity . . . . . . . . . . . . 14,436 12,050
----------- -----------
$ 37,880 $ 36,827
=========== ===========
Three Months Ended
March 31,
---------------------------
1999 1998
----------- -----------
Revenues . . . . . . . . . . . . . . . $ 10,775 $ 9,864
Expenses:
Management, leasing and
development services . . . . . . . 9,978 8,892
Mortgage and other interest. . . . . 378 1,421
Land parcels . . . . . . . . . . . . 40 --
Depreciation and amortization. . . . 375 335
----------- -----------
10,771 10,648
----------- -----------
Operating income (loss). . . 4 (784)
Income tax benefit (expense) . . . . . (8) 207
----------- -----------
Income (loss) before
extraordinary items. . . . (4) (577)
Extraordinary items (net of taxes) . . (1,788) --
----------- -----------
Net loss . . . . . . . . . . $ (1,792) $ (577)
=========== ===========
(4) SUBSEQUENT EVENT
At March 31, 1999, the Company recognized Service Merchandise Plaza as
an investment property held for sale. Service Merchandise Plaza in
Columbus, Ohio, is an approximate 193,000 square foot community center
anchored by Service Merchandise, Circuit City and Office Depot. The
Company is selling Service Merchandise Plaza at this time because it is a
non-core asset which is not integral to the Company's strategy of owning
and operating dominant high quality regional malls and adjacent retail.
Revenues of $737 and $525, expenses of $403 and $305, and net income of
$334 and $220, for the three months ended March 31, 1999 and 1998,
respectively, related to Service Merchandise Plaza are included in the
accompanying consolidated statements of operations.
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
On April 26, 1999, the Company signed a letter of intent to sell
Service Merchandise Plaza. Assuming the completion of customary due
diligence review and other customary closing conditions, the transaction is
expected to close during the second quarter of 1999.
(5) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
During 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company defines
each of its regional malls and community centers as an individual operating
segment and has determined that all of the regional malls and community
centers exhibit substantially identical economic characteristics and meet
the other criteria specified by SFAS No. 131 which permits the malls to be
aggregated into one reportable segment. The Management Company is viewed
by management as a separate segment and does not meet the quantitative
measures required for separate disclosure.
The Company separately assesses and measures the operating results of
its regional malls based on net operating income ("NOI"). NOI is
calculated as shopping center revenues less shopping center expenses
adjusted for straight-line rent and non-real estate depreciation. NOI for
the Company's unconsolidated partnerships is measured at the Company's
ownership share.
The following table summarizes the revenues, NOI and assets for the
Company's reportable segment.
Three Months Ended
March 31,
-------------------------
1999 1998
---------- ----------
REVENUES:
Shopping center revenues . . . . . . . $ 69,582 $ 63,417
Company's share of unconsolidated
partnerships . . . . . . . . . . . (19,871) (16,898)
Interest income. . . . . . . . . . . 181 389
---------- ----------
Consolidated revenue . . . . . $ 49,892 $ 46,908
========== ==========
NOI:
Shopping Center NOI. . . . . . . . . . $ 41,646 $ 37,242
Unconsolidated shopping center
NOI. . . . . . . . . . . . . . . . (10,744) (8,910)
Interest income. . . . . . . . . . 181 389
Straight-line rent adjustments . . 366 457
Real estate depreciation and
amortization . . . . . . . . . . (10,392) (9,769)
Non-shopping center expenses . . . (14,888) (13,887)
Income from unconsolidated
partnerships and the
Management Company . . . . . . . 2,533 1,015
---------- ----------
Consolidated income before
minority interest and
extraordinary items. . . . . $ 8,702 $ 6,537
========== ==========
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Concluded
March 31, December 31,
1999 1998
---------- ------------
ASSETS:
Total shopping center assets . . . . . $1,386,463 $1,362,436
Investment in the Management
Company. . . . . . . . . . . . . . 51,467 48,552
Cash, cash equivalents and
short-term investments . . . . . . 2,189 422
---------- ----------
Consolidated assets. . . . . . $1,440,119 $1,411,410
========== ==========
Information relative to the Company's expenditures for additions to
long-lived assets has been included in the investing activities reported in
the consolidated statements of cash flows.
<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
decreased $3.6 million in the three months ended March 31, 1999 from the
three months ended March 31, 1998. This decrease was primarily
attributable to a decrease in accounts payable and other liabilities.
Net cash flows used in investing activities increased $15.9 million in
the three months ended March 31, 1999 from the three months ended March 31,
1998. This increase was primarily attributable to an increase in additions
to investment properties at Citrus Park Town Center as a result of the
consolidation of this entity in 1999.
Net cash flows from financing activities increased $19.8 million in
the three months ended March 31, 1999 from the three months ended March 31,
1998. This increase was primarily attributable to the fundings from the
Citrus Park Town Center construction loan in 1999.
At March 31, 1999, the Company had cash, cash equivalents and short-
term investments of approximately $2.2 million.
On March 5, 1999, the Company paid $11.7 million to common and
preferred shareholders as a dividend of $.56 per share representing its
fourth quarter 1998 dividend. On March 4, 1999, the Operating Partnership
paid $5.0 million to its limited partners as a distribution of $.56 per
unit representing its fourth quarter 1998 distribution.
CAPITALIZATION. At March 31, 1999, the Company's debt (including the
Company's share of debt of unconsolidated partnerships and the Management
Company) totaled $1,077.4 million of which $987.5 million is fixed rate
debt and $89.9 million is floating rate debt. On February 25, 1999, the
Company secured $75.0 million in financing for Penn Square Mall. This loan
bears interest at a fixed rate of 7.025% and matures on March 1, 2009.
Also on February 25, 1999, the Management Company obtained a $20.0 million
bank loan. This loan bears interest at LIBOR + 1.20% (6.26% at March 31,
1999) and matures on February 25, 2004. On March 1, 1999, Penn Square Mall
and the Management Company prepaid their indebtedness of $31.0 million and
$20.0 million, respectively. The indebtedness had a scheduled maturity
date of August 1, 2001. The Management Company incurred a penalty of
approximately $2.0 million due to this prepayment of debt. On February 25,
1999, the interest rate on the Citrus Park Town Center construction loan
was reduced to LIBOR + 1.05% (6.10% at March 31, 1999) based upon achieving
certain specified performance hurdles. 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, which on January 30, 1998, was amended
to increase the line to $7.5 million and extend the maturity to January 29,
1999. On January 29, 1999, this line was further amended to increase the
line to $10.0 million, extend the maturity to January 28, 2000 and change
the interest rate to the Reference Rate - 1.5625% (6.19% at March 31,
1999). As of March 31, 1999, $7.2 million was outstanding on this line of
credit. As of March 31, 1999, $10.8 million was outstanding on the
Company's $107.5 million secured, revolving line of credit. On January 11,
1999, Water Tower Joint Venture completed a one year extension of its
$170.0 million of indebtedness. This indebtedness is now scheduled to
mature on February 1, 2000. In addition, it may be further extended for
one additional year. On January 14, 1999, S.F. Shopping Centre Associates,
L.P. extended the loan maturity on its $53.5 million of indebtedness to
July 1, 2003. In addition, it may be further extended for two one-year
periods.
<PAGE>
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 March 31, 1999, 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 54%, as illustrated by the
table at the end of the liquidity and capital resources section. 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).
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 payments, on the outstanding
indebtedness are expected to be obtained from the following sources: (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 common 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. The Company's newest super-regional mall, Citrus
Park Town Center in Tampa, Florida, opened 100% leased on March 3, 1999.
The anchor tenants are Burdines, Dillard's, JCPenney and Sears. Citrus
Park Town Center also contains more than 120 specialty shops and
restaurants and an approximate 90,000 square foot state-of-the-art movie
theatre in a total retailing package designed to make Citrus Park Town
Center a destination mall. In addition, an approximate 350,000 square foot
community center opposite the regional mall, The Plaza at Citrus Park Town
Center, is scheduled to open in phases beginning in the fall of 1999.
The Company's latest development project is the 1.1 million square
foot Galleria at Roseville near Sacramento, California. Galleria at
Roseville already has four committed anchor tenants with JCPenney, Macy's,
Nordstrom and Sears. The development schedule calls for Galleria at
Roseville to open in August of 2000.
As of the date of this report, there are approximately twenty-three,
nine and twenty-five acres of outparcel land, respectively, at Brandon
TownCenter, Citrus Park Town Center and Wolfchase Galleria available for
future sale or development.
<PAGE>
<TABLE>
<CAPTION>
100% Pro Rata
Balance of Share of
($000's omitted, Annual Mortgage Mortgage
except share and Maturity Interest Notes Ownership Notes
per share amounts) Date Rate Payable Interest Payable
- ----------------------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Consolidated Entities:
Old Orchard Center Dec. 2009 6.98% $165,840 100.0% $ 165,840
Oakbrook Center Oct. 2004 6.14% 140,000 100.0% 140,000
MainPlace Sept. 1999 6.25% 80,000 100.0% 80,000
Wolfchase Galleria June 2007 7.80% 78,810 100.0% 78,810
Fox Valley Center Nov. 2006 6.75% 85,528 100.0% 85,528
Hawthorn Center Nov. 2008 6.75% 77,864 100.0% 77,864
Penn Square Mall Mar. 2009 7.03% 75,000 100.0% 75,000
Citrus Park Town Center Aug. 2000(1) (1) 62,994 100.0% 62,994
Operating Partnership Apr. 2000(2) (2) 10,800 100.0% 10,800
Operating Partnership Jan. 2000 (3) 7,150 100.0% 7,150
- -------------------------------------------------------------------------------------------------------------
783,986 783,986
Unconsolidated Entities: (4)
Water Tower Place Feb. 2000(5) (5) 170,000 55.0% 93,500
Coral Square Mall Dec. 2000 7.40% 53,300 50.0% 26,650
Miami International Mall Dec. 2003 6.91% 46,392 40.0% 18,557
San Francisco Shopping Centre July 2003(6) 6.90% 53,531 50.0% 26,766
Copley Place Aug. 2007 7.44% 192,057 33.3% 64,019
Woodland Hills Mall Jan. 2009 7.00% 89,852 50.0% 44,926
Management Company Feb. 2004 (7) 20,000 95.0% 19,000
- -------------------------------------------------------------------------------------------------------------
625,132 293,418
- -------------------------------------------------------------------------------------------------------------
Company debt $1,077,404
- -------------------------------------------------------------------------------------------------------------
Convertible preferred units
(convertible into 1,018,182
common units) $ 28,000
Convertible preferred stock
(convertible into 3,772,915
shares of common stock) $ 125,000
- -------------------------------------------------------------------------------------------------------------
<PAGE>
100% Pro Rata
Balance of Share of
($000's omitted, Annual Mortgage Mortgage
except share and Maturity Interest Notes Ownership Notes
per share amounts) Date Rate Payable Interest Payable
- ----------------------- ---------- ---------- ---------- ---------- -----------
Market value of equity interests
as of March 31, 1999, based upon
26,834,691 common shares, unit
voting common shares and common
units at $28.6875 per share/unit $ 769,820
- -------------------------------------------------------------------------------------------------------------
Total market capitalization $2,000,224
- -------------------------------------------------------------------------------------------------------------
Company debt to total market
capitalization 54%
- -------------------------------------------------------------------------------------------------------------
<FN>
(1) This construction loan matures on August 7, 2000; however, it may be extended for three one-year
periods. The loan currently bears interest at LIBOR + 1.05% (6.10% at March 31, 1999).
(2) This line of credit, subject to lenders' approval, may be extended for an additional one or two-year
period and is currently subject to a floating rate of LIBOR + 0.85% (6.58% at March 31, 1999).
(3) This line of credit bears at the Reference Rate - 1.5625% (6.19% at March 31, 1999).
(4) Excludes Valencia Town Center as the Company is a limited partner and 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) During the first quarter of 1999, the Company extended this loan maturity to February 1, 2000. It may
be further extended for one additional year. Of this total $170.0 million, $160.0 million bears interest at LIBOR
+ 1.125% and $10.0 million bears interest at LIBOR + 1.500% (6.09% and 6.46%, respectively, at March 31, 1999).
(6) On January 14, 1999, the Company extended this loan maturity to July 1, 2003; however, it may be further
extended for two one-year periods.
(7) This loan currently bears interest at a floating rate of LIBOR + 1.20% (6.26% at March 31, 1999).
</TABLE>
<PAGE>
REVIEW OF OPERATIONS
FUNDS FROM OPERATIONS. Funds from 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 diluted
funds from operations:
Three Months Ended
March 31,
---------------------------
1999 1998
----------- -----------
Income before minority interest
and extraordinary items. . . . . . . $ 8,702 $ 6,537
Plus depreciation and amortization . . 10,392 9,769
Plus Company's share of depreciation
and amortization from unconsolidated
partnerships and the Management
Company . . . . . . . . . . . . . . . 2,891 2,294
Plus incentive unit dividends. . . . . 139 109
---------- ----------
Diluted funds from operations. . . . . $ 22,124 $ 18,709
========== ==========
FUNDS AVAILABLE FOR DISTRIBUTION. The chart below shows the
calculation of diluted funds available for distribution:
Three Months Ended
March 31,
---------------------------
1999 1998
----------- -----------
Diluted funds from operations. . . . . $ 22,124 $ 18,709
Plus non-cash effect of Oakbrook
Center straight-lined ground rent
and related interest . . . . . . . . 854 813
Plus (less) adjustment to reflect
actual cash received from the
Management Company . . . . . . . . . (43) 809
Plus write-off of assets (a) . . . . . -- 81
Less straight-line rent adjustments
(a). . . . . . . . . . . . . . . . . (572) (551)
---------- ----------
Diluted funds available for
distribution . . . . . . . . . . . . $ 22,363 $ 19,861
========== ==========
(a) Includes the Company's share of unconsolidated partnerships.
Weighted-average diluted shares and units outstanding for the three
months ended March 31, 1999 and 1998 were 31,980,768 and 30,885,331,
respectively.
SALES. Aggregate sales volume at the Company's regional malls for
those mall shops and anchors that report sales (excluding Citrus Park Town
Center and including the December 1998 acquisition of Woodland Hills Mall
as if it had been in the portfolio for the entire period) increased 4.6% to
$548.3 million in the three months ended March 31, 1999 from $524.3 million
in the three months ended March 31, 1998. Mall tenant sales (excluding
anchors and movie theaters) (excluding Citrus Park Town Center and
including the December 1998 acquisition of Woodland Hills Mall as if it had
been in the portfolio for the entire period) increased 6.2% to $407.3
million in the three months ended March 31, 1999 from $383.4 million in the
<PAGE>
same period for 1998. Comparable reported mall tenant sales increased 4.4%
in the three months ended March 31, 1999 compared to the same period for
1998. Sales per square foot for the rolling twelve months ended March 31,
1999 were $376 compared to $361 for the twelve months ended March 31, 1998.
The 1998 sales per square foot figure excludes Woodland Hills Mall, which
was acquired in December 1998. All sales per square foot figures exclude
Citrus Park Town Center which opened in March 1999.
OCCUPANCY. The mall GLA was 91.6% occupied at March 31, 1999 as
compared to 93.3% at December 31, 1998 and 90.4% at March 31, 1998. The
mall GLA was 93.7% leased at March 31, 1999.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1998
Shopping center revenues increased $3.2 million to $49.7 million in
the three months ended March 31, 1999 from $46.5 million in the three
months ended March 31, 1998. This increase was primarily a result of the
opening of Citrus Park Town Center on March 3, 1999 and increases in
shopping center revenues at Brandon TownCenter, Service Merchandise Plaza,
Old Orchard Center and Wolfchase Galleria.
Shopping center expenses, including depreciation and amortization,
increased $1.2 million to $29.1 million in the three months ended March 31,
1999 from $27.9 million in the same period for 1998. This increase was
primarily a result of the opening of Citrus Park Town Center on March 3,
1999.
Mortgage and other interest increased $1.1 million to $11.9 million in
the three months ended March 31, 1999 from $10.8 million in the same period
for 1998. This increase was primarily the result of fundings on the
construction loan at Citrus Park Town Center.
Income from unconsolidated partnerships increased $.6 million to $2.5
million in the three months ended March 31, 1999 from $1.9 million in the
same period for 1998. This increase was primarily attributable to the
Company's acquisition of a 50% equity interest in Woodland Hills Mall on
December 21, 1998 and increases from Water Tower Place and San Francisco
Shopping Centre. The increase at Water Tower Place was primarily due to a
decrease in mortgage interest as a result of a decrease in the floating
interest rate. The increase at San Francisco Shopping Centre was due to
increased minimum rents as a result of the re-merchandising of tenants.
Income from the Management Company increased $.8 million from a $.8
million loss in the three months ended March 31, 1998. This increase was
primarily attributable to a decrease in mortgage interest as a result of
the restructuring of debt at the Management Company.
The extraordinary items (net of taxes and minority interest) of $1.1
million in 1999 resulted from the prepayment penalty and the write-off of
deferred expenses related to the repayment of debt at the Management
Company.
<PAGE>
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("Statement 133"), was
issued by the FASB in June 1998. The effective date of this statement for
the Company is January 1, 2000. Statement 133 standardizes the accounting
for derivative instruments, including certain derivative instruments
embedded in other contracts. Under the standard, entities will be required
to carry all derivative instruments in the balance sheet at fair value.
The accounting for changes in the fair value (i.e., gains or losses) of a
derivative instrument depends on whether it has been designated and
qualifies as part of a hedging relationship and, if so, on the reason for
holding it. The Company uses interest rate swap agreements and treasury
locks as part of its interest rate risk management strategy. These
derivatives are used to hedge cash flow exposure and under Statement 133
the effective portion of the gain or loss on the derivative instrument will
be reported initially as a component of other comprehensive income (outside
earnings) and subsequently reclassified into earnings when the hedged
transaction affects earnings. Any amounts excluded from the assessment of
hedge effectiveness as well as the ineffective portion of the gain or loss
will be reported in earnings immediately.
The Company does not anticipate early adoption of Statement 133;
however, it is estimated that adoption of Statement 133 will result in the
Company recording a derivative instrument liability of $6.1 million and a
transition adjustment loss of $6.1 million in other comprehensive income at
January 1, 2000.
The Company expects that the adoption of Statement 133 will increase
the volatility of reported earnings and other comprehensive income. In
general, the amount of volatility will vary with the level of derivative
activities during any period.
YEAR 2000
The Company uses a significant number of information technology ("IT")
and non-IT computer systems in its operations. The IT systems include the
Company's corporate operating and accounting systems, central lease entry
and property management systems, desktop and communications systems and
other corporate systems. The non-IT systems include embedded
microprocessors that control building systems, such as lighting, security,
fire, elevators, heating, ventilating and air conditioning systems.
In 1997, the Company began to address the year 2000 problem (that is,
the fact that some systems may fail or produce inaccurate results using
dates in or around the year 2000). The Company has replaced all of its
mission-critical IT systems, including its central lease entry and property
management software, key communications and desktop software and the
related computer hardware. The Company believes, based on statements by
vendors and on its own testing, that all of the replacements for mission-
critical IT systems are year 2000 ready. The Company also is continuing to
replace other IT systems which are not mission critical with year 2000
ready systems to the extent that it is cost-effective to do so.
The Company's property management staff has conducted an inventory and
assessment of the non-IT systems at its properties and is seeking
confirmation from the relevant vendors that these non-IT systems are year
2000 ready. The Company has begun, and is continuing, to replace critical
non-IT systems that the Company believes may not be year 2000 ready, and
the Company expects that its properties will be year 2000 ready by July
1999. However, the Company does not have the technical capacity to test
all of the non-IT systems at its properties.
<PAGE>
The Company relies on a variety of outside suppliers to provide
critical services to its properties. Of particular concern are the local
utility providers. Electric utilities, for example, use numerous embedded
systems in producing, measuring, controlling, and dispensing electricity.
Without electricity, almost none of the systems at any property will
function and the property may be unable to operate. The Company does not
control these outside suppliers and for some suppliers, such as the
utilities, there may be no feasible alternative supplier available. The
failure of a utility or other supplier could have a material adverse effect
on the operations of the affected property, and a widespread failure of
utilities or other suppliers could have a material adverse effect on the
Company.
The Company has developed and will continue to refine contingency
plans to address the risk created by the year 2000 problem. These plans
generally include having property management personnel on-site at the
properties during the year change to handle year 2000 problems as they
arise by using the methods that the Company's property management staff
customarily uses to address failures of systems and suppliers. The
contingency plans also include procuring alternative suppliers, when
available, where the Company is able to conclude, on the basis of its
inventory and assessment, that an existing supplier will not be year 2000
ready.
The Company's historical costs for remediation have not been material
and the Company does not anticipate that its future remediation will be
material. Although the cost of replacing the Company's IT mission-critical
systems was substantial, those replacements were made to improve
operational efficiency and were not accelerated due to the year 2000
problem. The Company has not delayed any material projects as a result of
the year 2000 problem.
The foregoing discussion is equally applicable to the Management
Company, except that at third party-owned properties managed by the
Management Company both the historical and any necessary future remediation
costs are the obligation of the property owner and the replacement of any
non-IT systems located upon such properties are at the discretion of the
property owner.
FORWARD LOOKING STATEMENTS
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
programs 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>
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 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
4.3 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 13, 1997
4.4 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 13, 1997
4.5 Promissory Note B 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 13, 1997
4.6 Mortgage, Security Agreement and Assignment of Rents dated as
of November 3, 1997 made by LaSalle National Bank and Oak Brook Urban
Venture, L.P. to and with USC Oakbrook, Inc., Goldman Sachs Mitsui Marine
Derivative Products, L.P. and Teachers' Retirement System of the State of
Illinois is hereby incorporated by reference to Exhibit 4.6 to the
Registrant's Form 10-K (File no. 1-12278) filed on March 31, 1998
4.7 Fifth Amendment to Loan Agreement dated December 11, 1997 by
and among The Prudential Insurance Company of America, Old Orchard Urban
Limited Partnership and American National Bank and Trust Company 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 31, 1998
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)
<PAGE>
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
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
<PAGE>
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
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 incorporated 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 13, 1997
<PAGE>
10.27 Hawthorn, L.P. Agreement of Purchase and Sale of Partnership
Interest dated November 14, 1997 is hereby incorporated by reference to
Exhibit 10.1 to the Registrant's Form 8-K/A filed on December 22, 1997
10.28 Fox Valley Mall LLC Agreement of Purchase and Sale of
Membership Interest dated November 14, 1997 is hereby incorporated by
reference to Exhibit 10.2 to the Registrant's Form 8-K/A filed on December
22, 1997
10.29 Third Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban Shopping Centers, L.P. is hereby incorporated
by reference to Exhibit 10.7 to the Registrant's Form 8-K/A filed on
December 22, 1997
10.30 Urban Shopping Centers Deferred Cash Compensation Plan dated
August 1, 1998 is hereby incorporated by reference to Exhibit 10.30 to the
Registrant's Form 10-K (File No. 1-12278) filed on March 29, 1999
10.31 Fourth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban Shopping Centers, L.P. is hereby incorporated
by reference to Exhibit 10.31 to the Registrant's Form 10-K (File No. 1-
12278) filed on March 29, 1999
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.
(b) No reports on Form 8-K were filed during the first quarter of
1999.
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate changes primarily as a result
of its indebtedness. The Company's interest rate risk management objective
is to limit the impact of interest rate changes on earnings and cash flows
and to lower its overall borrowing costs. To achieve its objective, the
Company may enter into derivative financial instruments such as interest
rate swaps, caps and treasury locks in order to mitigate its interest rate
risk on a related financial instrument. Because of the Company's
objectives discussed above, the Company limits its exposure to increases in
interest rates; however, the Company also does not benefit fully from
decreases in interest rates. Furthermore, as interest rates increase and
decrease, the implicit value of the derivative instrument rises and falls,
respectively. This rise and fall in the implicit value of an interest rate
swap agreement does not impact the fixed payment agreed to under the swap
agreement. The Company does not enter into derivative or interest rate
transactions for speculative purposes.
The Company manages its exposure to changes in floating interest rates
by limiting exposure to floating rate changes in any one year. The Company
manages liquidity risk by staggering the maturities of its indebtedness.
The Company increases its financial flexibility through the use of variable
rate debt and derivatives versus fixed rate debt. The Company manages its
exposure to counterparties by diversifying its exposure to counterparties
and entering into swap agreements and treasury locks only with certain
parties which have a specified credit rating.
The Company's interest rate risk is monitored using a variety of
techniques. Fixed rate debt matures and bears average interest rates as
follows: 2000 - $26,650 at 7.40%; 2003 - $18,557 at 6.91%; and thereafter
- - $591,987 at 7.08%. Variable rate debt matures and bears average interest
rates (based on the March 31, 1999 LIBOR rate) as follows: 1999 - $80,000
at 5.49%; 2000 - $174,444 at 6.08%; 2003 - $26,766 at 5.56%; and thereafter
- - $159,000 at 5.29%.
The Company utilizes principally variable-to-fixed interest rate swaps
to mitigate its interest rate risk on the above variable rate debt.
Notional amounts of outstanding interest rate swaps have the following
maturities and provide for the following average fixed payment rates to
hedge the indicated underlying variable rates: 2000 - $20,000 at 6.07% and
6.81%; 2002 - $63,500 at 6.10% and 7.37%; 2003 - $10,000 at 6.07% and
7.41%; and thereafter - $256,766 at 5.32% and 6.26%.
The above average balances include the Company's share of
unconsolidated partnership's debt and swaps. The fair value of fixed and
variable rate debt approximates its carrying value at March 31, 1999. The
fair value of interest rate swap agreements was ($5,081) at March 31, 1999.
As the above information incorporates only those exposures that exist
as of March 31, 1999, it does not consider those exposure or positions,
which could arise after that date. Moreover, because firm commitments are
not presented, the information represented therein has limited predictive
value. As a result, the Company's ultimate realized gain or loss with
respect to interest rate fluctuations will depend on the exposures that
arise during the period, the Company's hedging strategies at the time and
interest rates.
<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: May 13, 1999
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: May 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,189
<SECURITIES> 0
<RECEIVABLES> 17,855
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,044
<PP&E> 1,377,348
<DEPRECIATION> (170,719)
<TOTAL-ASSETS> 1,440,119
<CURRENT-LIABILITIES> 67,352
<BONDS> 783,986
<COMMON> 175
0
38
<OTHER-SE> 321,568
<TOTAL-LIABILITY-AND-EQUITY> 1,440,119
<SALES> 49,711
<TOTAL-REVENUES> 49,892
<CGS> 0
<TOTAL-COSTS> 18,311
<OTHER-EXPENSES> 13,436
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,976
<INCOME-PRETAX> 3,986
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,986
<DISCONTINUED> 0
<EXTRAORDINARY> (1,132)
<CHANGES> 0
<NET-INCOME> 2,854
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
