SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]For the Fiscal
Year Ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]For the
transition period from _________ to __________
Commission File No. 1-12494
CBL & ASSOCIATES PROPERTIES, INC.
________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 62-1545718
_______________________________ _____________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Park Place
6148 Lee Highway
Chattanooga, Tennessee 37421
_______________________________ _____________________
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(423) 855-0001
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of Each Class on which Registered
_______________________________ _____________________
Common Stock, $.01 par New York Stock Exchange
value per share
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed
all Reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter 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
______ ______
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $596,361,906
based on the closing price on the New York Stock Exchange for
such stock on March 24, 1997.
As of March 24, 1997, there were 23,974,348 shares of the
Registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part II incorporates certain information by reference from the
Registrant's 1996 Annual Report to Shareholders (the "Annual
Report"). With the exception of the sections of the Annual
Report specifically incorporated by reference herein, the Annual
Report is not deemed to be filed as part of this Form 10-K.
Part III incorporates certain information by reference to the
Registrant's definitive proxy statement filed on March 25, 1997
in respect to the Annual Meeting of Stockholders to be held on
May 1, 1997.<PAGE>
FORM 10-K
TABLE OF CONTENTS
Item No. Page
________ _____
PART I
Item 1 Business . . . . . . . . . . . . . . . . . . . . . . 3
Item 2 Properties . . . . . . . . . . . . . . . . . . . . . 13
Item 3 Legal Proceedings. . . . . . . . . . . . . . . . . 32
Item 4 Submission of Matters to a Vote of Security Holders 32
PART II
Item 5 Market for Registrant's Common Equity and Related
Shareholder Matters. . . . . . . . . . . . . . . . 32
Item 6 Selected Financial Data. . . . . . . . . . . . . . 33
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . 33
Item 8 Financial Statements and Supplementary Data. . . . 34
Item 9 Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure. . . . . . . . 34
PART III
Item 10 Directors and Executive Officers of the Registrant 34
Item 11 Executive Compensation. . . . . . . . . . . . . . 34
Item 12 Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . 34
Item 13 Certain Relationships and Related Transactions. . 34
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . 35
<PAGE>
PART I
ITEM 1. BUSINESS.
FORMATION OF THE REIT
CBL & Associates Properties, Inc. (the "Company") was
incorporated on July 13, 1993 under the laws of the State of
Delaware to acquire an interest in substantially all of the real
estate properties owned by CBL & Associates, Inc. and its
affiliates ("CBL") and to provide a public vehicle for the
expansion of CBL's shopping center business. The Company is a
self-managed, self-administered, fully-integrated real estate
company which is engaged in the ownership, operation, marketing,
management, leasing, expansion, development, redevelopment,
acquisition and financing of regional malls and community and
neighborhood centers.
The Company conducts all of its business through CBL &
Associates Limited Partnership, a Delaware limited partnership
(the "Operating Partnership"). To comply with certain technical
requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), the Operating Partnership carries out the Company's
property management and development activities through CBL &
Associates Management, Inc. (the "Management Company").
On November 3, 1993, the Company completed initial public
offerings, inside and outside the United States (the
"Offerings"), of 15,400,000 shares of its common stock, par value
$.01 per share (the "Common Stock"). Simultaneously with the
completion of the Offerings, CBL transferred to the Operating
Partnership substantially all of CBL's interests in its real
estate properties and its management and development operations
in exchange for an aggregate 35.4% limited partner interest in
the Operating Partnership. CBL also acquired an additional 4.9%
limited partner interest in the Operating Partnership for a cash
payment of $24.4 million. Each of the partnership interests in
the Operating Partnership may, at the election of its respective
holder, be exchanged for shares of Common Stock of the Company,
subject to certain limitations imposed by the Code. Following
the Offerings, the Company owned a 59.7% general partner interest
in the Operating Partnership.
The Offerings and the application of proceeds therefrom,
including the Operating Partnership's acquisition of certain
property interests, and the contribution by CBL of property
interests to the Operating Partnership, are referred to herein as
the "Formation."
In December, 1993, CBL exercised its right under the
Operating Partnership's partnership agreement to exchange a 4.7%
limited partner interest in the Operating Partnership for
1,221,744 shares of Common Stock. In October 1994, the Operating
Partnership exercised its option to acquire from CBL the former
Phar-Mor space at Valley Crossing in Hickory, North Carolina for
a value of $3,575,400. The Operating Partnership issued a .5377%
limited partnership interest (190,688 share equivalents) to CBL
in return for the former Phar-Mor space.
In September, 1995, the Company completed a follow-on
offering of 4,163,500 shares of its Common Stock at $20.625 per
share. CBL purchased 150,000 of these shares. The net proceeds
of $80.7 million were used to repay floating rate indebtedness on
the Company's revolving lines of credit.
In August, 1996, the Company exercised its option to acquire
from CBL a parcel of land for the recently constructed Just for
Feet on the periphery of Hamilton Place Mall in Chattanooga,
Tennessee for a value of $780,053. The Operating Partnership
issued a .0798% limited partner interest (34,246 share
equivalents) to CBL in return for the parcel.
After giving effect to the above transactions and at
December 31, 1996, CBL held a 30.97% limited partner interest in
the Operating Partnership, and the Company held a 69.03% general
partner interest in the Operating Partnership. In addition, CBL
held approximately 1.5 million of the outstanding shares of
Common Stock for a total ownership share of 36.01%.
Subsequent to the end of the 1996 year, in January, 1997,
the Company completed a spot offering of 3,000,000 shares of its
Common Stock at $26.125 per share. CBL purchased 55,000 of those
shares as part of the offering. The net proceeds of $74.3
million, were used to repay variable rate indebtedness incurred
in the Company's development and acquisition program.
After giving effect to the above transactions, CBL holds a
28.18% limited partner interest in the Operating Partnership, and
the Company holds a 71.82% general partner interest in the
Operating Partnership. In addition, CBL holds approximately 1.6
million of the outstanding shares of Common Stock for a total
ownership share of 32.95%.
GENERAL
The Company owns interests in a portfolio of properties,
consisting of 18 enclosed regional malls (the "Malls"), of which
three are joint venture investments, eight associated centers
(the "Associated Centers"), each of which is part of a regional
shopping mall complex, and 75 independent community shopping
centers (the "Community Centers").
Additionally, the Company owns one mall, two associated
centers, two power centers, and four community shopping centers
currently under construction (the "Construction Properties").
The Company also owns options to acquire certain shopping center
development sites (the "Development Properties").
The Company also holds mortgages (the "Mortgages") on six
community and neighborhood shopping centers owned by non-CBL
affiliates. The Mortgages were granted in connection with sales
by CBL of certain properties previously developed by CBL. The
Company also owns an interest in a three-story office building in
Chattanooga, Tennessee, a portion of which serves as the
Company's headquarters (the "Office Building"). The Malls,
Associated Centers, Community Centers, Construction Properties,
Development Properties, Mortgages and Office Building are
collectively referred to herein as the "Properties" and
individually as a "Property."
The Company and the Operating Partnership generally own a
100% interest in the Properties. In all but one of the
Properties where the Company and the Operating Partnership own
less than a 100% interest the Operating Partnership is the sole
general partner or managing general partner of the property
partnership which owns such Properties. In one Mall, an
affiliate of the Operating Partnership is a non-managing general
partner.
For a full description of the Properties, see Item 2
"Properties."
The Company's executive offices are located at One Park
Place, 6148 Lee Highway, Chattanooga, Tennessee 37421. The
telephone number at this address is (423) 855-0001.
MANAGEMENT AND OPERATION OF PROPERTIES
MANAGEMENT COMPANY
The Company is self-managed and self-administered. To
comply with certain technical requirements of the Code, the
Operating Partnership carries out the Company's property
management and development activities through the Management
Company.
The Operating Partnership holds 100% of the preferred stock
and 5% of the common stock of the Management Company. The
remaining 95% of the common stock is held by Charles Lebovitz,
his family and his associates. Substantially all of CBL's asset
management, property management and leasing and development
operations, including CBL's executive, property, financial, legal
and administrative personnel, were transferred to the Management
Company as part of the Formation. The Management Company manages
all of the Properties (except for Governor's Square see below)
pursuant to a management agreement that may be terminated at any
time by the Operating Partnership upon 30 days written notice.
In addition, the Management Company manages certain properties
owned by CBL that were not transferred to the Company in the
Formation as well as certain shopping centers owned by non-CBL
affiliates. Through its ownership of the Management Company's
preferred stock, the Operating Partnership enjoys substantially
all of the economic benefits of the Management Company's
business. Pursuant to requirements set forth in the Management
Company's Amended and Restated Certificate of Incorporation, a
majority of the Management Company's board of directors are
required to be independent of CBL. From November 1993 to the
current date, the board of directors of the Management Company
consist of the same individuals as the Company's board of
directors including the four independent directors.
ON-SITE MANAGEMENT
The on-site property management functions at the Malls
include leasing, management, data processing, rent collection,
project bookkeeping, marketing, and promotion. Each Mall, for
itself and its Associated Centers, has an on-site property
manager who oversees the on-site staff and an on-site marketing
director who oversees the marketing program for that mall.
District managers, most of whom are located at the Company's
headquarters, oversee the leasing and operations at a majority of
the Community Centers. The on-site Mall managers are experienced
managers with training in mall management.
Virtually all operating activities are supported by a
computer software system which is designed to provide management
with operating data necessary to make informed business decisions
on a timely basis. During 1994, the Company implemented a new
management information system which included hardware and
software. The system was developed to more efficiently assist
management in efforts to maintain management quality and tenant
relations while minimizing operating expenses. Retail sales
analysis, leasing information, budget controls, accounts
receivable/payable, operating expense variance reports and income
analysis are continually available to management. Management
also has available an information system that facilitates the
development and monitoring of budgets and other relevant
information.
An affiliate of the Management Company also leases certain
equipment, such as furniture, computers and vehicles, to
partnerships that own title to the Properties (the "Property
Partnerships") for use at the Malls. During 1996, security,
maintenance and cleaning services at most of the Malls were
provided by a company (ERMC, L.P.) in which certain executive
officers of the Company had an interest at year end. In
February, 1997, substantially all of the assets of ERMC, L.P.
were sold to a third party not affiliated with CBL or any of the
Company's executive officers.
Management pursues periodic preventative maintenance
programs, which encompass paving, roofing, HVAC and general
improvements to the Properties' common areas. The on-site
property managers oversee all such work in accordance with
approved budgets.
GOVERNOR'S SQUARE
Governor's Square is the only Property in the Company's
portfolio in which the Company is not the sole general partner or
managing general partner. Governor's Square is owned by a
Property Partnership, the managing general partner of which is a
non-CBL affiliate which owns a 47.5% interest in the Mall.
Although the managing general partner of this partnership
controls the timing of distributions of cash flow, the Company's
approval is required for certain major decisions, including
permanent financing, refinancing and sale of all or substantially
all of the partnership's assets. Property management services,
including accounting, auditing, maintenance, promotional
programs, leasing, collection and insurance, are performed by a
property manager affiliated with the non-CBL managing general
partner for which such property manager receives a fee.
EMPLOYEES
The Company, through the Management Company, currently
employs approximately 266 full time and 160 part time persons.
None of these employees is currently represented by any union.
Prior to the Formation, substantially all of the employees were
employed by CBL. The Company does not have any employees other
than its statutory officers.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws and regulations,
a current or previous owner or operator of real estate may be
liable for the costs of removal or remediation of certain
hazardous or toxic substances on such real estate. Such laws
typically impose such liability without regard to whether the
owner or operator knew of, or was responsible for, the presence
of such hazardous or toxic substances. The costs of remediation
or removal of such substances may be substantial, and the
presence of such substances, or the failure to promptly remediate
such substances, may adversely affect the owner's or operator's
ability to sell such real estate or to borrow using such real
estate as collateral. Persons who arrange for the disposal or
treatment of hazardous or toxic substances may also be liable for
the costs of removal or remediation of such substances at the
disposal or treatment facility, regardless of whether such
facility is owned or operated by such person. Certain laws
require abatement or removal of friable and certain non-friable
asbestos-containing materials ("ACMs") in the event of demolition
or certain renovations or remodeling. Certain laws regarding
ACMs require building owners and lessees, among other things, to
notify and train certain employees working in areas known or
presumed to contain ACMs. Certain laws also impose liability for
release of ACMs into the air and third parties may seek recovery
from owners or operators of real properties for personal injury
or property damage associated with ACMs. In connection with its
ownership and operations of the Properties, the Company, the
Operating Partnership or the relevant Property Partnership, as
the case may be, may be potentially liable for such costs or
claims.
All of the Properties, except for Development Property land
options, have been subject to Phase I environmental assessments
or updates of existing Phase I environmental assessments within
approximately the last four years. Such assessments were
intended to evaluate the environmental condition of, and
potential environmental liabilities associated with, the
Properties. The Phase I assessments generally consisted of an
investigation of environmental conditions at the Properties,
including a preliminary investigation of the sites and
identification of publicly known conditions concerning properties
in the vicinity of the sites, limited screening and sampling for
the presence of ACMs, an investigation as to the presence of
polychlorinated biphenyls ("PCBs") and above ground and
underground storage tanks presently or formerly at the sites and
the preparation and issuance of written reports. Where believed
to be warranted, soil samplings or other subsurface
investigations were undertaken. Some of the Properties contain,
or at one time contained, underground storage tanks ("UST's")
used to store heating oil for on-site consumption or petroleum
products or wastes typically related to the auto service or other
operations conducted at such Properties. Certain Properties
contain, or at one time contained dry cleaning establishments
utilizing solvents. Certain adjacent Properties also contain or
contained USTs. The Company, as a result of the Phase I surveys,
has no reason to believe that these conditions have had a
material adverse impact on the Properties. Nevertheless, there
can be no assurance that the Properties have not been adversely
affected by such USTs or dry cleaning establishments or that the
Company would not be responsible for remediating contamination
associated with those conditions. The Phase I assessments
included a limited survey for friable ACMs which revealed the
presence of friable ACMs at a limited number of the Properties,
primarily in the form of pipe insulation and ceiling tiles.
Earlier inspections revealed non-friable ACMs at certain of the
Properties, primarily in the form of mastic adhesive bonding in
floor tiles. At certain Properties, where warranted by the
conditions, the Company has developed and implemented an
operations and maintenance program that establishes operating
procedures with respect to ACMs. The costs associated with the
development and implementation for such programs was not
material. The Company intends to obtain or review environmental
site assessments prior to exercising any Development Property
land options.
None of the environmental assessments conducted to date has
revealed any environmental condition which management believes
would have a significant material adverse effect on the Company's
business, assets or results of operations, nor is management
otherwise aware of any such condition. Nevertheless, it is
possible that these assessments do not reveal all potential
environmental liabilities, that adverse environmental conditions
have arisen subsequent to the performance of the environmental
assessments, or that there are material environmental liabilities
of which management is unaware. Moreover, no assurances can be
given that (i) future laws, ordinances or regulations will not
impose any material environmental liability or (ii) the current
environmental condition of the Properties has not been or will
not be affected by tenants and occupants of the Properties, by
the condition of properties in the vicinity of the Properties or
by third parties unrelated to the Company, the Operating
Partnership or the relevant Property Partnership.
The Company believes that the Properties are in compliance
in all material respects with federal, state and local
ordinances and regulations regarding the handling, discharge and
emission of hazardous or toxic substances. Neither the Company
nor the Operating Partnership has been notified by any
governmental authority, or is otherwise aware, of any material
noncompliance, liability or claim relating to hazardous or toxic
substances in connection with any of its present or former
properties.
The Company has not recorded in its financial statements any
material liability in connection with environmental matters.
INSURANCE
The Operating Partnership carries comprehensive liability,
fire, extended coverage and rental loss insurance covering all
the Properties, with policy specifications and insured limits
customarily carried for similar properties. Management believes
that the Properties are adequately insured in accordance with
industry standards.
THE COMPANY'S STRATEGY FOR GROWTH
Management believes that per share growth in the Company's
Funds from Operations is one of the key factors in enhancing
shareholder value. It is the objective of the Company's
management to achieve growth in Funds from Operations through the
aggressive management of the Company's existing Properties, the
expansion and renovation of existing Properties, the development
of new properties, and select acquisitions. Funds from
Operations can also be affected by external factors, such as
inflation, fluctuations in interest rates or changes in general
economic conditions, which are beyond the control of the
Company's management.
"Funds from Operations" is defined by the Company as net
income (loss) before property depreciation, other non-cash items
(consisting of the effect of straightlining of rents), gains or
losses on sales of real estate and gains or losses on investments
in marketable securities. Funds from Operations also includes
the Company's share of Funds from Operations from unconsolidated
affiliates but minority investors' interests are excluded from
Funds from Operations. The Company complies with the National
Association of Real Estate Investment Trust's ("NAREIT") revised
definition of Funds from Operations by not adding back to income
from operations depreciation and amortization of finance costs
and non-real estate assets. The Company continues to exclude
outparcel sales and the effect of straight-line rents from its
Funds from Operations calculation, even though the revised
definition allows their inclusion. Funds from Operations does
not represent cash flow from operations as defined by generally
accepted accounting principles ("GAAP") and is not necessarily
indicative of cash available to fund all cash flow needs and
should not be considered an alternative to net income (loss) for
purposes of evaluating the Company's operating performance or to
cash flow as a measure of liquidity.
Specifically, the Company has implemented its objective of
growing its Funds from Operations and will continue to do so by:
| Maximizing the cash flow from its existing portfolio of
regional malls, community centers, and other retail
complexes through aggressive leasing, management, and
marketing, including:
an active leasing strategy which seeks to increase
occupancy. At December 31, 1996, the occupancy at
the Stabilized Malls, New Malls, Associated
Centers, and Community Centers was 89.0%, 87.7%,
99.6%, and 97.2%, respectively, as compared to
occupancies of 89.8%, 81.1%, 99.0%, and 96.8%,
respectively, at December 31, 1995;
expanded merchandising, marketing and promotional
activities, with the goal of enhancing tenant
sales and thereby increasing percentage rents.
Mall shop sales per square foot for the year ended
December 31, 1996 were 1.5% higher at the
Stabilized Malls than for the year ended December
31, 1995;
increased base rents as tenant leases expire,
renegotiation of leases and negotiation of
terminations of leases of under performing
retailers. At December 31, 1996 average base
rents per square foot at the Malls, Associated
Centers, and Community Centers was $19.64, $8.59,
and $6.94, respectively, as compared to average
base rents per square foot of $18.72, $8.37, and
$6.66, respectively, at December 31, 1995;
control of operating costs. Occupancy costs as a
percentage of sales at the Malls decreased to
11.5% for the year ended December 31, 1996 as
compared to 12.3% for the year ended December 31,
1995.
| Expanding and renovating existing properties to
maintain their competitive position.
Most of the Malls were designed to allow for expansion
and growth through the addition of new department
stores or other large retail stores as anchors
("Anchors"). Fourteen of the 18 Malls have undergone
expansion or renovation since their opening, and all of
the Malls have been either built or renovated in the
last 10 years or are in the process of being renovated.
Four of the Malls had available Anchor pads at December
31, 1996, two of which are now Dillard stores which
opened in March, 1997. Eighteen existing Anchors at 10
Malls have expansion potential at their existing
stores. During 1996, the Company completed the
renovation of Pemberton Square Mall in Vicksburg,
Mississippi and Twin Peaks Mall in Longmont, Colorado.
The Company plans to renovate and expand Foothills Mall
in Maryville, Tennessee in 1997 and Hamilton Place in
Chattanooga, Tennessee in 1998.
In the community center portfolio, the Company expanded
four Food Lion stores totaling approximately 24,800
square feet in 1996, and one other community center was
renovated. Renovations and expansions are planned for
seven community centers in 1997 as well as a 24,000
square foot expansion for Barnes & Noble.
| Developing new retail properties with profitable
returns on capital, leading to growth for the future.
<PAGE>
In 1996, the Company opened one Mall redevelopment and
expansion, two free standing buildings on the periphery
of two Malls and four community centers. Summary
information concerning these properties is set forth
below.
SUMMARY INFORMATION CONCERNING PROPERTIES
OPENED DURING THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
Anchor Non-
Name of Center/ Total GLA Anchor Percentage
Location GLA(1) (2) GLA Leased(3) Anchors
<S> <C> <C> <C> <C> <C>
MALLS
Westgate Mall 1,100,059 833,643 266,416 85% Belk, Dillards,
Spartanburg, SC(5) J.B. White, JCPenney,
Regal Cinemas, Sears,
Uptons
Just for Feet 15,000 15,000 0 100% Just for Feet
Chattanooga, TN
Barnes & Noble 25,920 25,920 0 100% Barnes & Noble
High Point, NC --------- --------- ---------
Total Malls................. 1,140,979 874,563 0
--------- --------- ---------
COMMUNITY CENTERS
Lowe's Plaza 101,287 101,287 0 100% Lowe's
Adrian, MI(4)
Devonshire Place 104,517 104,517 0 100% Hannaford Bros.
Cary, NC Borders, Kinetix
Kingston Overlook 116,926 116,926 0 100% HomePlace
Knoxville, TN Baby Superstore
Michael's(6)
LaGrange Commons 59,799 44,799 15,000 85% A & P
LaGrange, NY
Chester Square 54,664 54,664 0 100% Hannaford Bros.
Chester, VA(4) --------- --------- ---------
Total Community Centers..... 437,193 422,193 15,000
--------- --------- ---------
TOTAL PROPERTIES GLA........ 1,578,172 1,296,756 281,000
--------- --------- ---------
LESS EXISTING GLA(5)........ 676,030 493,675 182,355
--------- --------- ---------
TOTAL PROPERTIES OPENINGS... 902,142 803,081 99,061
========= ========= =========
</TABLE>
(1) Includes total square footage of Anchors
(whether owned or leased by the Anchor) and
mall stores or shops.
(2) Includes total square footage of Anchors
(whether owned or leased by the Anchor).
(3) Percentage leased for Westgate Mall does not
include Anchor GLA. For the community
centers, percentage leased includes leased
Anchor and GLA.
(4) Center sold during 1996.
(5) At Westgate Mall there was existing GLA of
676,030, consisting of Anchor GLA of
493,675 and mall store GLA of 182,355.
(6) Michael's is leased and will open in July, 1997.
<PAGE>
The Company currently has one mall, two associated centers, two
power centers, and four community centers under construction.
These properties will add approximately 3,128,000 square feet to
the Company's portfolio and are all scheduled to open during 1997
or early 1998.
SUMMARY INFORMATION CONCERNING CONSTRUCTION PROPERTIES
AS OF MARCH 15, 1997
<TABLE>
Ownership
by Company
Anchor Non- Annualized and Percentage
Name of Center/ Total GLA Anchor Base Operating Pre- Projected
Location GLA (1) (2) GLA Rent (3) Partnership Leased(4) Opening Anchors
- ------------------- ---------- --------- ------- ----------- ----------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MALLS
Bonita Lakes Mall 633,140 449,427 183,713 $ 1,822,000 100% 48% October 1997 Dillards(5),
Meridian, MS McRae's(5),
---------- --------- ------- ------------ JCPenney,
Sears(5),
Goody's
POWER CENTERS
Springhurst Town 808,159 594,159 214,000 $ 2,608,636 100% 80% July 1997/ Meijer(5),
Center June 1998 Target(5),
Louisville, KY Kohls',
Party Source,
Cinemark, Gap
Old Navy, TJ Maxx
Cortlandt Town 769,163 576,816 231,343 6,304,830 100% 83% October 1997/ Home Depot(5),
Center June 1998 HomePlace,
Cortland, NY Wal*Mart,
---------- --------- ------- ------------ Barnes & Noble,
The Wiz, A & P,
United Artist
Total Power
Centers........... 1,577,322 1,170,975 445,343 $ 8,913,466
---------- --------- ------- ------------
ASSOCIATED CENTER
Bonita Lakes 74,000 50,000 24,000 $ 168,200 100% 29% October 1997 Books A Million
Crossing
Meridian, MS
The Terrace 157,923 157,923 0 1,596,875 100% 100% March 1997/ Circuit City(5)(6),
Chattanooga, TN April 1997 HomePlace(6),
Barnes & Noble,
Gap Old Navy,
Staples
---------- --------- ------- ------------
Total Associated
Centers............ 231,923 207,923 24,000 $ 1,765,075
COMMUNITY CENTERS
Massard Crossing 290,717 260,057 30,660 $ 757,748 100% 100% March 1997 Wal*Mart(5),
Fort Smith, AR Goody's,
TJ-Maxx
Salem Crossing 289,305 251,892 37,413 569,168 100% 98% April 1997/ Hannaford Bros.,
Virginia Beach, VA May 1997 Wal*Mart(5)
Northpark Center 62,500 62,500 0 337,500 100% 100% March 1997 Hannaford Bros.
Richmond, VA
Strawbridge Market 43,570 43,570 0 533,732 100% 100% August 1997 Regal Cinema
Place
Virginia Beach, VA
---------- --------- ------- ------------
Total Community
Centers ........... 686,092 618,019 68,073 $ 2,198,148
---------- --------- ------- ------------
Total Construction
Properties......... 3,128,477 2,446,344 721,129 $14,698,689
========== ========= ======= ============
</TABLE>
_________________________
( 1) Includes total square footage of Anchors (whether owned or
leased by the Anchor) and mall stores or shops.
( 2) Includes total square footage of Anchors (whether owned or
leased by the Anchor)
( 3) Represents initial base rents from leases executed prior to
March 5, 1997.
( 4) Percentage leased for malls does not include Anchor GLA.
For the community, associated, and power centers percentage leased
includes non-Anchor GLA and leased Anchor GLA.
( 5) Owned by Tenant.
( 6) Circuit City and Home Place were open prior to March 15, 1997
In addition to the Construction Properties, the Company
is pursuing the development of a number of sites which
the Company believes are viable for future development
as malls and community and neighborhood shopping
centers. Regional mall development sites are being
pursued in Alabama, Georgia, and Kansas and community
shopping center sites are being pursued in Alabama,
Florida, Georgia, New York, North Carolina, Tennessee
and Virginia.
In general, the Company seeks out development
opportunities in middle-market trade areas that it
believes are under-serviced by existing retail
facilities, have demonstrated improving demographic
trends or otherwise afford an opportunity for effective
market penetration and competitive presence.
| Acquiring existing retail properties where cash flow
can be enhanced by improved management, leasing,
redevelopment and expansion.
Management believes that an opportunity for growth
exists through the acquisition of shopping centers that
meet the Company's investment criteria and targeted
returns. In general, the Company seeks to acquire
well-located shopping centers in middle-market
geographic areas consistent with management's
experience where management believes significant value
can be created through its development, leasing and
management expertise.
In November, 1996 the Company purchased St. Clair
Square located in Fairview Heights, Illinois, an
approximate 1,044,000 square foot super regional mall
for $86.4 million. St. Clair Square is anchored by
Dillard's, Famous-Barr, JCPenney and Sears and is
currently 97.7% leased. The acquisition was funded by a
$66.0 million acquisition loan with the balance funded
from the Company's credit lines.
In December, 1996, the Company completed the
acquisition of a controlling interest in Foothills
Mall, an approximate 472,000 square foot regional mall
located in Maryville, Tennessee. The Company received a
95% partnership interest in the center in exchange for
extending the term of the mortgage for an additional
five years. The Company had already owned the space
occupied by JCPenney prior to the acquisition.
In January, 1997 the Company purchased Sutton Plaza, a
community center located in Mount Olive, New Jersey
for $5.7 million. The approximate 122,000 square foot
community center is 100% leased and is anchored by A&P
and Ames.
<PAGE>
| Strengthening our balance sheet through selective
dispositions of five of our community centers. Summary
information concerning these dispositions is set forth
below.
SUMMARY INFORMATION CONCERNING DISPOSITIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
Name of Total Gross Sales
Center/Location GLA Price Cost Gain on Sale Anchors
- ------------------- --------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Lowe's Plaza 125,357 $ 8,000 $ 5,877 $ 2,123(1) Lowe's
Benton Harbor, MI
Lowe's Plaza 101,287 7,519 6,328 1,191 Lowe's
Adrian, MI
Hannaford Bros. 63,113 5,624 4,283 1,341 Hannaford Bros.
West Broad, VA
Chester Plaza 54,664 2,792 2,303 489 Hannaford Bros.
Chester, VA
Lakeshore Crossing 123,948 7,435 5,009 2,426 Lowe's
Gainesville, GA --------- ----------- ---------- ------------
468,369 $ 31,370 $ 23,800 $ 7,570
========= =========== ========== ============
</TABLE>
(1) Disposition was structured as a like-kind exchange pursuant to Section
1031 of the code.
COMPETITION
There are numerous shopping facilities that compete with the
Properties in attracting retailers to lease space. In addition,
retailers at the Properties face continued competition from
discount shopping centers, outlet malls, wholesale clubs, direct
mail, telemarketing, television shopping networks and shopping
via the Internet. Competition could adversely affect the Company's
revenues and funds available for distribution to shareholders.
QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST
The Company has elected to be taxed as real estate
investment trust under the Code, commencing with its taxable year
ended December 31, 1993, and will seek to maintain such status.
As a qualified real estate investment trust, the Company
generally will not be subject to Federal income tax to the extent
it distributes at least 95% of its real estate investment trust
taxable income to its shareholders. If the Company fails to
qualify as a real estate investment trust in any taxable year,
the Company will be subject to Federal income tax (including any
applicable alternative minimum tax) on its taxable income at
regular corporate rates.
<PAGE>
ITEM 2. PROPERTIES.
MALLS
Each of the Malls is an enclosed regional shopping complex.
Each Mall generally has at least three Anchors which own or lease
their stores and numerous Mall Stores, most of which are national
or regional retailers, located along enclosed malls connecting
the Anchors. At most of the Malls, additional freestanding
restaurants and retail stores are located on the periphery of the
Mall complex. These freestanding stores are, in most cases,
owned by their occupants. Seven of the Mall complexes include
one or more Associated Centers.
The total GLA of the 18 Malls is approximately 12.5 million
square feet or an average GLA of approximately 693,000 square
feet per Mall. The Company classifies its regional malls into
two categories - Stabilized Malls which have completed their
initial lease-up and New Malls which are in the initial lease-up
phase. Currently, Oak Hollow Mall in High Point, North Carolina,
Turtle Creek Mall in Hattiesburg, Mississippi, and Westgate Mall
in Spartanburg, South Carolina are characterized as New Malls.
The Stabilized Mall occupancy was 89.0% at December 31, 1996 (94%
including leased Anchor GLA). The Company wholly owns all but
five of its Malls and manages all but one of them.
In the years ended December 31, 1994, 1995 and 1996, Mall
revenues represented approximately 72.0%, 72.5% and 72.8%,
respectively, of total revenues from the Company's Properties.
Stabilized Mall Store occupancy decreased from 89.8% at
December 31, 1995, to 89.0% at December 31, 1996. St. Clair
Square and Foothills Mall, which were acquired during 1996, were
included in the Stabilized Mall category at December 31, 1996. If
such malls had not been included, occupancy would have been 89.7%
in the Stabilized Mall category.
In the years ended December 31, 1994, 1995 and 1996, average
Stabilized Mall Store sales per square foot were approximately
$226, $237 and $240, respectively (computed using a monthly
weighted average). Average Stabilized Mall Store sales per
square foot increased by 1.5% for the year ended December 31,
1996 as compared to the year ended December 31, 1995.
Average base rent per square foot at the Mall Stores
increased from $18.72 at December 31, 1995 to $19.64 at December
31, 1996.
Occupancy costs as a percentage of sales for tenants in the
Stabilized Malls (excluding St. Clair Square and Foothills Mall
which the Company did not own for the entire 1996 year) were
12.2%, 12.3% and 11.7% for the years 1994, 1995, and 1996,
respectively.
The Malls are generally located in middle-markets.
Management believes that the Malls have strong competitive
positions because they generally are the only or largest enclosed
malls within their respective trade areas. Trade areas have been
identified by management based upon a number of sources of
information, including the location of other malls, publicly
available population information, customer surveys, surveys of
customer automobile license plates as well as ZIP codes and
third-party market studies.
The two largest revenue-producing Malls are Hamilton Place
and CoolSprings Galleria. Hamilton Place is located on a
187-acre site in Chattanooga, Tennessee and represented, as of
December 31, 1996, 5.67% of the Properties' total GLA, 6.38% of
total Mall Store GLA and 9.8% of total revenues from the
Company's Properties. CoolSprings Galleria is located on a
148-acre site in metropolitan Nashville, Tennessee and
represented, as of December 31, 1996, 5.6% of the Properties'
total GLA, 6.51% of total Mall Store GLA and 8.92% of total
revenues from the Company's Properties.
Fourteen of the eighteen Malls have undergone an expansion
or remodeling since their opening, and all of the Malls have
either been built or renovated in the last 10 years or are in the
process of being renovated with the exception of Hamilton Place
which is scheduled for renovation in 1998. Four of the Malls
have available Anchor pads providing expansion potential totaling
approximately 358,000 buildable square feet at December 31, 1996.
The Company constructed a Dillard's on two of the available
anchor pads at Twin Peaks Mall and Frontier Mall which opened in
March, 1997 leaving approximately 205,700 buildable square feet.
Eighteen existing Anchors at ten Malls have aggregate expansion
potential at their existing stores of approximately 473,000
buildable square feet.
With the exception of Westgate Mall and St. Clair Square
which were acquired by the Company in March 1995 and November,
1996 respectively, each of the Malls was developed by the
Company. The land underlying the Malls is owned in fee in all
cases, except for Walnut Square, Westgate Mall, and St. Clair
Square, which are each subject to long-term ground leases for all
or a portion of the land underlying these malls.
The table on the following page sets forth certain
information for each of the Malls as of December 31, 1996.
<PAGE>
<TABLE>
Ownership Mall
by Store Percentage
Year of Company Total Sales Mall
Opening/ and Mall Per Store Fee or
Name of Mall/ Recent Operating Total Store Square GLA Anchor Ground
Location Expansion Partnership GLA(1) GLA(2) Foot(3) Leased(4) Anchors Vacancies Lease
- ------------------ ---------- ----------- --------- --------- ------- --------- ------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NEW MALLS
Oak Hollow Mall 1995/N/A 75% 829,194 252,366 $209 86% Goody's, None Fee
High Point, NC JCPenney, Belk-
Beck, Sears,
Dillard's
Turtle Creek Mall 1994/1995 100% 844,668 221,574 243 93% JCPenney, Sears, None Fee
Hattiesburg, MS Dillard's,
Gayfers, Goody's
McRae's
Westgate Mall 1975/1996 100% 1,100,57 276,461 309 85% Belk-Hudson, None Fee/
Spartanburg, SC --------- ------- --- JCPenney, Ground
Dillard's, Sears, Lease(5)
Upton's, JB White
Total New Malls 2,774,437 750,401 87%
========= ======= ===
STABILIZED MALLS
College Square 1988/1993 100% 460,463 157,594 $206 82% JCPenney, Sears, None Fee
Morristown, TN Wal*Mart, Goody's,
Proffitt's
CoolSprings Galleria 1991/1994 100% 1,130,597 375,582 264 90% Castner-Knott, None Fee
Cheyenne, WY Dillard's, Sears,
JCPenney, Parisian
Foothills Mall 1983(6)/N/A 95% 472,220 175,524 180 69% Sears, None Fee
Maryville, TN JCPenney(7),
Proffitt's,
Proffitt's II
Frontier Mall 1981/1983 100% 438,004 202,417 189 86% Fashion Bar(8), None(8) Fee
Cheyenne, WY JCPenney,
Joslins, Sears
Georgia Square 1981/N/A 100% 680,135 258,581 217 92% Belk, JCPenney, None Fee
Athens, GA Macy's, Sears
Governor's Square 1986/1994 48% 692,320 271,319 222 94% JCPenney, Parks- None Fee
Clarksville, TN Belk, Sears
Dillard's, Goody's
Hamilton Place 1987/1992 90% 1,159,636 367,988 331 97% Belk, Parisian, None Fee
Chattanooga, TN Proffitt's I,
Proffitt's II,
Sears, JCPenney
Lakeshore Mall 1992/N/A 100% 408,534 153,053 193 81% Kmart, Belk- None Fee
Sebring, FL Lindsey, JCPenney,
Beall's (9)
Madison Square 1984/1985 50% 933,845 300,025 283 96% Castner Knott, None Fee
Huntsville, AL JCPenney, McRae's,
Parisian, Sears
Pemberton Square 1985/1990 100% 353,300 135,065 185 82% JCPenney, None Fee
Vicksburg, MS McRae's,
Wal*Mart, Goody's
Plaza Del Sol 1979/1990 51% 245,685 89,504 152 99% Beall Bros.(9), None Fee
Del Rio, TX JCPenney, Kmart
Post Oak Mall 1982/1985 100% 776,823 318,642 228 84% Beall Bros.(9), None Fee
College Station, TX Dillard's,
Foley's, Service
Merchandise,
Sears, JCPenney
St. Clair Square 1974(10)/N/A 100% 1,044,599 315,656 341 94% Famous Barr, None Fee/
Fairview Heights, IL Sears, JCPenney, Ground
Dillard's Lease(11)
Twin Peaks Mall 1985/1987 100% 448,685 202,197 170 81% JCPenney(12), None(12) Fee
Longmont, CO Joslins, Sears
Walnut Square 1980/1992 100% 450,385 171,192 181 96% Belk, JCPenney, None Ground
Dalton, GA --------- --------- ---- ---- Proffitt's, Sears, Lease(13)
Goody's
TOTAL STABILIZED MALLS 9,695,231 3,494,348 $240 89%
========= ========= ==== ====
</TABLE>
<PAGE>
(1) Includes the total square footage of the Anchors (whether
owned or leased by the Anchor) and Mall Stores. Does not
include future expansion areas.
(2) Does not include Anchors.
(3) Totals represent weighted averages.
(4) Includes tenants paying rent for executed leases as of
December 31, 1996.
(5) The Company is the lessee under several ground leases
for approximately 53% of the underlying land. The leases
extend through October 31, 2084, including six ten-year
renewal options. Rental amount is $130,000 per year.
In addition to base rent, the landlord receives 20% of
the percentage rents collected. The Company has a right
of first refusal to purchase the fee.
(6) Originally opened in 1983 and controlling interest acquired
by the Company in December 1996.
(7) A lease with Goody's was executed and they opened in March, 1997.
(8) Fashion Bar's lease expired January 31, 1997 and is
currently vacant. A new anchor Dillard's opened in March,
1997.
(9) Beall Bros. operating in Texas is unrelated to Beall's
operating in Florida.
(10) Originally opened in 1974, last renovation completed in
1994, and acquired by the Company in November, 1996.
(11) The Company is the lessee under a ground lease for 20 acres
which extends through January 31, 2073, including 14
five-year renewal options and one four-year renewal option.
Rental amount is $40,000 per year. In addition to base
rent, the landlord receives .25% of Dillard's sales in
excess of $16,200,000.
(12) An additional anchor Dillard's opened in March, 1997.
(13) The Company is the lessee under several ground leases which
extend through March 14, 2078, including six ten-year
renewal options and one eight-year renewal option. Rental
amount is $149,450 per year. In addition to base rent, the
landlord receives 20% of the percentage rents collected.
The Company has a right of first refusal to purchase the
fee.
ANCHORS. Anchors are a critical factor in a Mall's
success because of the public's identification with a property
typically focuses on its Anchors. Mall Anchors generally are
department stores whose merchandise appeals to a broad range of
shoppers. Although the Malls derive a smaller percentage of
their operating income from Anchor stores than from Mall Stores,
strong Anchors play an important part in generating customer
traffic and making the Malls desirable locations for Mall Store
tenants.
Anchors either own their stores together with the land
under them and sometimes with adjacent parking areas, or enter
into long-term leases with respect to their stores at rental
rates that are significantly lower than the rents charged to
tenants of Mall Stores. Anchors which lease their stores account
for approximately 12.0% of the total revenues from the Company's
Properties. Each Anchor which owns its own store has entered
into a reciprocal easement agreement with the Company covering,
among other things, operating covenants, reciprocal easements,
property operations, initial construction and future expansions.
The Malls have a total of 84 Anchors. No Anchor
Stores at any of the Malls were vacant as of December 31, 1996.
The Fashion Bar lease at Cheyenne, Wyoming, expired January 31,
1997 and is currently vacant . The following table indicates all
Mall Anchors and sets forth the aggregate number of square feet
owned or leased by Anchors in the Malls as of December 31, 1996.<PAGE>
Mall Anchor Summary Information
<TABLE>
GLA GLA Total
Number Owned Leased Occupied
of Anchor by by by
Name Stores Anchor Anchor Anchor(1)
- ----------------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
JCPenney............... 18 424,471 1,080,335 1,504,806
Sears.................. 15 987,843 651,466 1,639,309
Proffitt's
Proffitt's...... 6 492,654 0 492,654
McRae's........ 3 283,559 0 283,559
Parisian....... 3 207,520 133,000 340,520
--------- ---------- ---------- ----------
Subtotal..... 12 983,733 133,000 1,116,733
Dillard's.............. 7 846,350 169,504 1,015,854
Belk
Belk........... 4 0 457,888 457,888
Belk-Lindsey... 1 0 61,029 61,029
Belk-Hudson.... 1 0 152,890 152,890
Parks-Belk..... 1 0 122,367 122,367
-------- ---------- ---------- ----------
Subtotal..... 7 0 794,174 794,174
Mercantile Stores
Castner Knott.. 2 326,004 30,000 356,004
J.B. White..... 1 150,000 0 150,000
Gayfers........ 1 127,800 0 127,800
Joslins........ 2 152,914 2,500 155,414
-------- ---------- ---------- ----------
Subtotal..... 6 756,718 32,500 789,218
The May Company
Foley's........ 1 103,888 0 103,888
Famous Barr.... 1 0 236,489 236,489
-------- ---------- ---------- ----------
Subtotal..... 2 103,888 236,489 340,377
Wal*Mart............... 2 0 214,653 214,653
Goody's................ 6 0 190,795 190,795
Kmart.................. 2 0 173,940 173,940
Macy's................. 1 115,623 0 115,623
Uptons................. 1 0 69,993 69,993
Beall Bros. (Texas).... 2 0 61,916 61,916
Beall's (Florida)...... 1 0 45,844 45,844
Fashion Bar, Inc....... 1 0 24,750 24,750
Service Merchandise.... 1 0 40,804 40,804
-------- ----------- --------- ----------
TOTAL.......... 84 4,218,626 3,920,163 8,138,789
======== =========== ========= ==========
</TABLE>
(1) Includes all square footage owned by or leased to such
Anchor including TBA (tire, battery and automotive)
facilities and storage square footage.
(2) Proffitt's occupies two Anchor spaces at Foothills Mall and
three at Hamilton Place Mall.
MALL STORES. The Malls have approximately 1,492 Mall
Stores. National or regional chains (excluding individually
franchised stores) lease approximately 81.52% of the occupied
Mall Store GLA. Although Mall Stores occupy only 34.1% of total
Mall GLA, for the year ended December 31, 1996, the Malls derived
approximately 88.0% of their revenue from Mall Stores.
Among the companies with the largest representation
among Mall Stores are: The Limited Stores, Inc./Intimate Brands
(The Limited, Limited Too, Express, Lerner New York, Lane Bryant,
Structure, Victoria Secret, and Bath and Body Works) and
Woolworth Corporation (Footlocker, Lady Footlocker, Kinney Shoes,
Champs Sports Stores, Afterthoughts Boutique and San Francisco
Music Box). As of December 31, 1996, The Limited Stores,
Inc.'s/Intimate Brands 65 stores accounted for 10.9% of total
leased GLA and 8.37% of total revenues from the Company's
Properties. No single Mall Store retailer accounted for more
than 11.0% of total leased GLA and no single Mall Store retailer
accounted for more than 8.37% of total revenues from the
Company's Properties.
<PAGE>
The following table sets forth certain information for
executed renewal leases with current tenants or leases of
previously at the Malls during the year ended December 31, 1996.
<TABLE>
Prior Lease New Lease Increase Increase
Total Base and Initial Year Per New Lease Per
Number Square Percentage Rent Base Rent Square Average Square
of leases Feet per Square Foot per Square Foot Foot Base Rent Foot
- ----------- -------- ----------------- ----------------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
178 372,328 $16.20 $17.92 $1.71 $18.32 $2.12
</TABLE>
The following table sets forth the total Mall Store
GLA, the total square footage of leased Mall Store GLA, the
percentage of Mall Store GLA leased, the average base rent per
square foot of Mall Store GLA and average Mall Store sales per
square foot as of the end of each of the past five years.
STABILIZED MALL STORE SUMMARY INFORMATION
<TABLE>
Total Percentage Average Average Mall
Total Mall Store of Mall Store Base Rent Store Sales
At Mall Store Leased GLA per Square per Square
December 31, GLA GLA Leased (1) Foot (2) Foot (3)
- -------------------- ------------- ------------ --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1992................ 2,563,308 2,172,979 84.8% $15.67 $205
1993................ 2,576,047 2,268,790 88.1 16.12 217
1994................ 2,576,047 2,284,987 88.7 16.55 226
1995................ 3,003,334 2,697,969 89.8 18.28 237
1996................ 3,452,997 3,073,190 89.0 19.03 240
</TABLE>
(1) Mall Store occupancy includes tenants with executed leases
who are paying rent.
(2) Average base rent per square foot is based on Mall Store GLA
occupied as of the last day of the indicated period for the
preceding twelve-month period.
(3) Calculated for the preceding twelve-month period.
LEASE EXPIRATIONS. The following table shows the
scheduled lease expirations for the Malls (assuming that none of
the tenants exercise renewal options) for the year ending
December 31, 1997 and for the next nine years for the Mall
Stores.
MALL LEASE EXPIRATION
<TABLE>
Percentage of Total
Approximate Represented by
Annualized Mall Store Expiring Leases
Number of Base Rent GLA of ------------------------------
Year Ending Leases of Expiring Expiring Annualized Leased Mall
December 31, Expiring Leases* Leases Base Rent Store GLA
- -------------------- ------------- ------------ --------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1997................ 252 $7,027,648 351,970 10.21% 9.63%
1998................ 156 4,982,897 269,193 7.24 7.36
1999................ 155 5,024,921 255,451 7.30 6.99
2000................ 146 5,084,560 319,525 7.39 8.74
2001................ 146 6,052,840 306,069 8.79 8.37
2002................ 126 5,713,431 268,391 8.30 7.34
2003................ 109 4,992,322 248,069 7.25 6.79
2004................ 126 5,572,033 248,351 8.09 6.79
2005................ 145 7,591,693 355,712 11.03 9.73
2006................ 66 5,471,840 272,766 7.95 7.46
</TABLE>
* Total annualized base rent for all leases executed as of
December 31, 1996 includes rent for space that is leased but
not yet occupied but excludes (i) percentage rents, (ii)
additional payments by tenants for common area maintenance,
real estate taxes and other expense reimbursements and (iii)
contractual rent escalations and cost of living increases
due after December 31, 1996.
COST OF OCCUPANCY. Management believes that in order to
maximize the Company's Funds from Operations, tenants in Mall
Stores must be able to operate profitably. A major factor
contributing to tenant profitability is the tenant's cost of
occupancy.
The following table summarizes for Stabilized Mall Store
tenants the occupancy costs under their leases as a percentage of
total Mall Store sales for the last three years.
<TABLE>
For the Year Ended
December 31, (1)
---------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Mall Store sales (in thousands)(2)....... $422,499 $526,107 $515,121
Minimum rents............................ 8.7% 8.6% 7.9%
Percentage rents......................... 0.4 0.5 0.3
Expense recoveries....................... 3.1 3.2 3.3
--------- --------- ---------
Mall tenant occupancy costs.............. 12.2% 12.3% 11.5%
- --------------------
</TABLE>
(1) Excludes Malls not open for full reporting period.
(2) Consistent with industry practice, sales are based on
reports by retailers (excluding theaters) leasing Mall Store
GLA and occupying space for the reporting period.
Represents 100% of sales for these Malls. In certain cases,
the Company and the Operating Partnership will own less than
100% interest in these Malls.
(3) Represents real estate tax and common area maintenance
charges.
At December 31, 1996 the Company had investments in three
malls in joint ventures with third parties, all of which are
reflected using the equity method of accounting. The Company's
investment in Brownwood Associates (Heartland Mall in Brownwood,
Texas) was transferred to the lender in April, 1995. The
effect of this transfer on the financial statements was not
material. Condensed combined results of operations for the
unconsolidated affiliates are presented in the following table.
<TABLE>
Total for the Year Company's Share for the Year
Ended Ended
December 31, December 31,
--------------------------- ---------------------------
(dollars in thousands) 1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues......................... $ 21,014 $ 20,729 $ 10,318 $ 10,186
Depreciation & Amortization...... 2,592 2,583 1,268 1,264
Interest Expense................. 8,278 8,709 4,061 4,273
Other Operating Expenses......... 6,389 6,462 3,159 3,199
------------ ------------ ------------ ------------
Net Income Before
Extraordinary Item............. 3,755 2,975 1,830 1,450
Extraordinary Item............... 1,727 0 820 0
------------ ------------ ------------ ------------
Income After Extraordinary Item.. $ 2,028 $ 2,975 $ 1,010 $ 1,450
------------ ------------ ------------ ------------
</TABLE>
<PAGE>
ASSOCIATED CENTERS
The eight Associated Centers are each part of a Mall complex
and generally have one or two Anchor tenants and various smaller
tenants. Anchor tenants in these centers include such retailers
as Service Merchandise, Target, Toys "R" Us, and TJ Maxx, which
are category dominant retailers that benefit from the regional
draw of the Malls. The Associated Centers also increase the draw
to the total Mall complex.
Total leasable GLA of the eight Associated Centers is
approximately 0.5 million square feet, including Anchors, or an
average of approximately 62,000 square feet per center. As of
December 31, 1996, 99.6% of total leasable GLA at the Associated
Centers was occupied.
In the years ended December 31, 1994, 1995, and 1996,
revenues from the Associated Centers represented approximately
3.9%, 3.5% and 3.3%, respectively, of total revenues from the
Company's Properties.
In the years ended December 31, 1994, 1995 and 1996, average
tenant sales per square foot at the Associated Centers were
approximately $214, $215 and $207, respectively.
Average base rent per square foot at the Associated Centers
increased from $8.37 at December 31, 1995 to $8.59 at December
31, 1996.
Each of the Associated Centers was developed by the Company.
All of the land underlying the Associated Centers is owned in
fee.
LEASE EXPIRATIONS. The following table shows for the
Associated Centers (assuming that none of the tenants exercise
renewal options) the scheduled lease expirations for the year
ending December 31, 1997 and for the next nine years.
ASSOCIATED CENTER LEASE EXPIRATION
<TABLE>
Percentage of Total
Approximate Represented by
Annualized Mall Store Expiring Leases
Number of Base Rent GLA of ------------------------------
Year Ending Leases of Expiring Expiring Annualized Leased Mall
December 31, Expiring Leases* Leases Base Rent Store GLA
- -------------------- ------------- ------------ --------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1997................ 14 $ 315,782 32,085 8.07% 4.35%
1998................ 10 239,759 24,448 6.13 3.32
1999................ 24 581,939 45,582 14.87 6.19
2000................ 9 451,720 57,898 11.55 7.86
2001................ 5 92,553 5,050 2.37 0.69
2002................ 2 186,000 28,757 4.75 3.90
2003................ 2 279,810 33,903 7.15 4.60
2004................ 3 68,296 121,139 1.75 16.44
2005................ 5 422,879 50,404 10.81 6.84
2006................ 3 518,864 91,660 13.26 12.44
</TABLE>
* Total annualized base rent for all leases executed as of
December 31, 1996 includes 12 months of rent for space that
is newly leased but not yet occupied but excludes (i)
percentage rents, (ii) additional payments by tenants for
common area maintenance, real estate taxes and other
expenses reimbursements and (iii) contractual rent
escalations and cost of living increases due after December
31, 1996.
<PAGE>
The following table sets forth certain information for
executed renewal leases with current tenants or leases
of previously occupied space with new tenants at the
Associated Centers during the year ending December 31, 1996.
<TABLE>
Prior Lease New Lease Increase Increase
Total Base and Initial Year Per New Lease Per
Number Square Percentage Rent Base Rent Square Average Square
of leases Feet per Square Foot per Square Foot Foot Base Rent Foot
- ----------- -------- ----------------- ----------------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
13 43,223 $10.91 $11.46 $0.56 $12.05 $1.14
</TABLE>
The following table sets forth certain information for each of the
Associated Centers as of December 31, 1996:
<TABLE>
Ownership
by
Year of Company
Opening/ and Total Percentage
Name of Mall/ Recent Operating Total Leasable GLA
Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors
- --------------------- ----------- ------------ ---------- ----------- ----------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
CoolSprings Crossing.. 1992 100% 340,596 40,513 100% Target,
Nashville, TN Service Merchandise,
Toys "R" Us, Uptons,
Carmike Cinemas
Foothills Plaza....... 1983/1988 100% 204,400(4) 94,400(4) 97.9%(4) Goody's(5), Food Lion,
Maryville, TN Eckerd(6), Carmike
Cinemas
Frontier Square....... 1985 100% 161,615 16,615 100% Dan's County Market,
Cheyenne, WY Target
Georgia Square Plaza.. 1984 100% 15,393 15,393 100% General Cinema
Athens, GA
Hamilton Corner 1990 90% 88,298 88,298 100% Michael's, Goody's,
Chattanooga, TN Fresh Market
Hamilton Crossing..... 1987/1994 92% 171,370 78,257 100% Service Merchandise,
Chattanooga, TN Toys "R" Us, TJ Maxx
Madison Plaza......... 1984(7) 75% 153,085 98,690 100% Food World, TJ Maxx,
Huntsville, AL Service Merchandise
Pemberton Plaza....... 1986 100% 65,918 14,972 100% Kroger
Vicksburg, MS
---------- ----------- -----------
TOTAL ASSOCIATED
CENTERS........... 1,200,675 447,138 99%
========== =========== ===========
</TABLE>
(1) Includes the total square footage of the Anchors (whether
owned or leased by the Anchor) and shops. Does not include
future expansion areas.
(2) Includes leasable Anchors.
(3) Includes tenants paying rent on executed leases on
December 31, 1996. Calculation includes leased
Anchors.
(4) Total GLA includes and Total Leasable GLA and
Percentage GLA Leased exclude a vacant former Hills
Department Store (80,000 square feet of GLA), which is
owned by senior management of the Company. The Company
has a ten-year option (with approximately seven years
remaining) to acquire this property for a fixed
acquisition price of $3,800,000. Carmike Cinemas is
subject to a ground lease (30,000 square feet of GLA).
(5) Goody's lease was terminated in March 1997 to allow them to
move into Foothills Mall.
(6) Eckerd has closed its store but is continuing to meet its
financial obligations under its lease.
(7) Center was renovated during 1995.
<PAGE>
COMMUNITY CENTERS
In addition to Mall development, the Company's development
activities focus on Community Center projects. Community Centers
pose fewer development risks than Malls because they have shorter
development timetables and lower up-front costs. Community
Centers also afford the Company the opportunity to meet the needs
of retailers for whom a "convenience" type of location is more
appropriate and the needs of customers whose trade areas cannot
support a regional mall.
The Company's Community Center developments in the 1980's
were generally anchored by supermarkets, and, in certain cases,
by drug stores. Management's current focus has expanded to
include the development of larger centers, anchored by mass
merchandisers and department stores, while continuing the
development of smaller centers anchored by supermarkets and drug
stores. Recently completed Community Centers include centers in
Adrian, Michigan; Cary, North Carolina; LaGrange, New York;
Knoxville, Tennessee; and Chester, Virginia. Anchors at these
new centers include, Lowe's Home Improvement, Hannaford Brothers,
A&P, and HomePlace. The Community Centers in Adrian, Michigan
and Chester, Virginia were sold by the Company in 1996. See
"Summary Information Concerning Dispositions for the Year ended
December 31, 1996".
Community Centers range in size from 25,000 square feet to
in excess of 286,000 square feet. Anchors in Community Centers
generally lease their store space and occupy 60-85% of a center's
GLA. The number of stores in a Community Center ranges up to
sixteen with an average of seven stores per center.
Total GLA of the 75 Community Centers is approximately 6.2
million square feet, or an average of approximately 84,000 square
feet per center. As of December 31, 1996, 97.2% of total
leasable GLA at the Community Centers was leased.
In the years ended December 31, 1994, 1995 and 1996,
revenues from the Community Centers represented approximately
21.0%, 21.2% and 21.4%, respectively, of total revenues from the
Company's Properties.
Occupancy at the Community Centers increased from 96.8% at
December 31, 1995 to 97.2% at December 31, 1996.
Average base rent per square foot at the Community Centers
increased from $6.66 at December 31, 1995, to $6.94 at December
31, 1996.
As of December 31, 1996, Food Lion, a major regional
supermarket operator with headquarters in North Carolina
served as an anchor tenant in 37 of the Company's Community
Centers and in one Associated Center. For the year ended
December 31, 1996, Food Lion accounted for approximately 5.01% of
the revenues generated by the Company's Properties.
With the exception of Suburban Plaza and Sutton Plaza, which
were acquired by the Company in March, 1995 and January, 1997
respectively, each of the Community Centers was developed by the
Company.
<PAGE>
The following table summarizes the percentage of total
leasable GLA leased, average base rent per square foot (excluding
percentage rent) and tenant sales per square foot at the
Community Centers for each of the last five years.
COMMUNITY CENTER SUMMARY INFORMATION
<TABLE>
Average
Percentage Base Rent Tenant
Year Ended GLA Per Square Sales Per
December 31, Leased (1) Foot (2) Square Foot (3)
- --------------------------- ----------- ---------- ---------------
<S> <C> <C> <C>
1992...................... 94.1% $ 6.10 $ 206
1993...................... 95.0 6.44 205
1994...................... 96.5 6.64 200
1995...................... 96.8 6.66 202
1996...................... 97.2 6.94 210
</TABLE>
______________________
(1) Percentage leased includes tenants who have executed
leases and are paying rent as of the specified date.
(2) Average base rent per square foot is based on GLA occupied
as of the last day of the indicated period.
(3) Consistent with industry practice, sales are based on
reports by retailers (excluding theaters) leasing GLA and
occupying space for the 12 months ending on the last day
of the indicated period.
LEASE EXPIRATIONS. The following table shows the scheduled
lease expirations for the Community Centers (assuming that none of
the tenants exercise renewal options) for the year ending December
31, 1997, and for the next nine years.
COMMUNITY CENTER LEASE EXPIRATION
<TABLE>
Percentage of Total
Represented by
Annualized Approximate Expiring Leases
Number of Base Rent GLA of ------------------------------
Year Ending Leases of Expiring Expiring Annualized Leased Mall
December 31, Expiring Leases* Leases Base Rent Store GLA
- -------------------- ------------- ------------ --------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1997................ 95 $1,446,159 238,768 5.82% 6.16%
1998................ 108 1,648,039 286,200 6.63 7.38
1999................ 73 1,488,103 257,656 5.99 6.64
2000................ 34 1,041,314 176,745 4.19 4.56
2001................ 51 1,332,043 155,961 5.36 4.02
2002................ 18 568,140 77,320 2.29 1.99
2003................ 6 326,844 43,296 1.32 1.12
2004................ 12 541,875 87,032 2.18 2.24
2005................ 12 1,095,879 250,172 4.41 6.45
2006................ 12 913,905 138,831 3.68 3.58
</TABLE>
_______________________
* Total annualized base rent for all leases executed as of
December 31, 1996 includes 12 months of rent for space that
is newly leased but not yet occupied but excludes (i)
percentage rents, (ii) additional payments by tenants for
common area maintenance, real estate taxes and other
expenses reimbursements and (iii) contractual rent
escalations and cost of living increases for periods after
December 31, 1996.
The following table sets forth certain information for
executed renewal leases of previously occupied space with new
tenants at the Community Centers during the year ending
December 31, 1996.
<TABLE>
Prior Lease New Lease Increase Increase
Total Base and Initial Year Per New Lease Per
Number Square Percentage Rent Base Rent Square Average Square
of leases Feet per Square Foot per Square Foot Foot Base Rent Foot
- ----------- -------- ----------------- ----------------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
158 403,489 $6.80 $6.69 $(0.11) $6.79 $(0.01)
</TABLE>
The following table sets forth certain information regarding
the Community Centers as of December 31, 1996 except for Sutton Plaza
which was acquired in January, 1997.
<TABLE>
Year of Ownership
Opening/ By Company Sq Ft
Name Of Most And Total Percentage of Fee or Number
Community Center Resent Operating Total Leasable GLA Anchor Ground of
/Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors Vacancies Lease Stores
- ----------------- --------- ----------- ------- --------- ----------- ------------------ ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Anderson Plaza 1983/1994 100% 46,258 46,258 100% Food Lion, Eckerd None Fee 4
Greenwood, SC
Bartow Village 1990 100% 40,520 40,520 98% Food Lion, Family Dollar None Fee 4
Bartow, FL
Beach Crossing 1984 100% 45,790 45,790 96% Food Lion(4), Revco Drug 21,000 Fee 6
Myrtle Beach, SC
Bennington Place 1994 100% 42,712 42,712 97% Food Lion None Fee 3
Roanoke, VA
BJ's Plaza 1991 100% 104,233 104,233 100% BJ's Wholesale Club None Ground 1
Portland, ME Lease(5)
Briarcliff Square 1989 100% 41,778 41,778 100% Food Lion None Fee 9
Oak Ridge, TN
Buena Vista Plaza 1989/1994 100% 143,820 10,000 100% Wal*Mart, Winn Dixie None Fee 4
Columbus, GA
Bulloch Plaza 1986 100% 34,400 34,400 100% Food Lion, Rite Aid None Fee 4
Statesboro, GA
Capital Crossing 1995 100% 83,700 83,700 100% Hannaford Bros., Staples None Fee 2
Raleigh, NC
Cedar Bluff Crossing 1986/1994 100% 53,050 53,050 94% Food Lion None Fee 11
Knoxville, TN
Cedar Plaza 1988 100% 95,000 50,000 100% Quality Stores, None None Fee 5
Cedar Springs, MI Great Day Foods
Centerview Plaza 1986/1994 100% 43,720 43,720 100% Food Lion, Eckerd None Fee 6
China Grove, NC
Chestnut Hills 1982 100% 68,364 68,364 95% JCPenney None Fee 9
Murray, KY
Clark's Pond 1995 100% 134,920 134,920 100% Home Quarters None Fee 1
Portland, ME Warehouse
Colleton Square 1986 100% 31,000 31,000 100% Food Lion None Fee 5
Walterboro, SC
Collins Park Common 1989 100% 37,400 37,400 87% Food Lion None Ground 4
Plant City, FL Lease(6)
Conway Plaza 1985 100% 33,000 33,000 96% Food Lion(7) 21,000 Ground 6
Conway, SC Lease(8)
Cosby Station 1984/1991 100% 77,811 77,811 100% Publix None Fee 9
Douglasville, GA
County Park Plaza 1982 100% 47,325 47,325 71% Bi-Lo 28,875(9) Fee 2
Scottsboro, AL
Devonshire Place 1996 100% 104,517 104,517 100% Hannaford Bros., Kinetix, None Ground 4
Cary, NC Borders Books Lease(10)
Dorchester Crossing 1985 100% 40,007 40,007 96% Food Lion None Fee 6
Charleston, SC
East Ridge Crossing 1988 100% 54,000 54,000 98% Food Lion, Revco None Fee 11
Chattanooga, TN
East Towne Crossing 1989/1990 100% 158,751 70,011 100% Home Depot, Regal None Fee 8
Knoxville, TN Cinemas, Food Lion
58 Crossing 1988 100% 49,984 49,984 100% Food Lion, Revco None Fee 9
Chattanooga, TN
Garden City Plaza 1984/1991 100% 188,446 76,246 95% Wal*Mart, JCPenney None Fee 14
Garden City, KS
Genesis Square 1990/1996 100% 35,000 35,000 100% Food Lion None Fee 4
Crossville, TN
Girvin Plaza 1990 100% 56,297 20,375 100% Winn Dixie None Fee 8
Jacksonville, FL
Greenport Towne Cen 1994 100% 191,622 75,525 100% Wal*Mart, Price-Chopper None Fee 2
Hudson, NY
Hampton Plaza 1990 100% 44,624 44,624 92% Food Lion None Fee 6
Tampa, FL
Henderson Square 1995 100% 268,327 164,329 100% JCPenney, Legget's, None Fee 13
Henderson, NC Goody's, Wal*Mart
Hollins Plantation Plaza
Roanoke, VA 1985 100% 40,640 40,640 100% Food Lion, Revco Drug None Fee 5
Jasper Square 1986/1990 100% 95,950 50,550 100% Lowe's, Goody's None Fee 7
Jasper, AL
Jean Ribaut 1977/1993 100% 223,497 223,497 100% Belk, Kmart, Bi-Lo None Fee 17
Beaufort, SC
Karns Corner 1987/1996 100% 35,000 35,000 100% Food Lion None Fee 4
Knoxville, TN
Keystone Crossing 1989 100% 40,400 40,400 96% Food Lion None Fee 4
Tampa, FL
Kingston Overlook 1996 100% 96,885 96,885 100% Baby Superstore, None Fee/ 1
Knoxville, TN(20) Home Place, Ground
Michael's(20) Lease(11)
Lady's Island 1983/1993 100% 60,687 60,687 100% Winn Dixie, Eckerd None Fee 9
Beaufort, SC
LaGrange Commons 1996 100% 59,799 59799 A & P Food Store None Fee 3
LaGrange, NY
Lakeshore Crossing 1994 100% 8,000 8,000 100% None Fee 5
Gainesville, GA
Longview Crossing 1988 100% 29,800 29,800 96% Food Lion None Ground 3
Hickory, NC Lease(12)
Lowe's Plaza 1993 100% 125,351 125,351 100% Lowe's None Fee 1
Joplin, MO
Lunenburg Crossing 1994 100% 198,115 25,515 100% Wal*Mart, Shop'n Save None Fee 8
Lunenburg, MA
North Creek Plaza 1983 100% 28,500 28,500 100% Food Lion None Fee 2
Greenwood, SC
North Haven Crossin 1993 100% 104,612 104,612 100% Sports Authority, Office None Fee 6
North Haven, CT Max, Barnes & Noble
Northridge Plaza 1984/1988 100% 129,570 79,570 99% Winn Dixie, Eckerd None Fee 17
Hilton Head, SC
Northwoods Plaza 1983/1992 100% 32,705 32,705 100% Food Lion None Fee 2
Albemarle, NC
Oaks Crossing 1990/1993 100% 144,978 27,280 92% Wal*Mart, Rite Aid, None Fee 10
Otsego, MI Food City
Orange Plaza 1983 100% 46,875 46,875 76% Food World (13) 24,900 Fee 8
Roanoke, VA
Park Village 1990 100% 48,570 48,570 83% Food Lion, Family Dollar None Fee 6
Lakeland, FL
Perimeter Place 1985/1988 100% 156,945 54,525 10% Home Depot, Drugs For Less None Fee 17
Chattanooga, TN
Rawlinson Place 1987 100% 35,750 35,750 85% Food Lion None Fee 5
Rock Hill, SC
Rhett at Remount 1983/1994 100% 42,628 42,628 100% Food Lion, Eckerd None Fee 3
Charleston, SC
Sattler Square 1989 100% 132,746 94,760 96% Quality Stores, Perry None Fee 13
Big Rapids, MI Drugs, Denny's Value
Land Supermarket
Seacoast Shopping 1991 100% 208,690 91,690 89% Wal*Mart None Fee 12
Seabrook, NH Shaw's supermarket
Shenandoah Crossing 1988 100% 28,600 28,600 100% Food Lion None Fee 2
Roanoke, VA
Signal Hills Villag 1987/1989 100% 24,100 24,100 58% (14) None Ground 5
Statesville, NC Lease(15)
Southgate Crossing 1985 100% 40,100 40,100 85% Food Lion(4) 25,000 Ground 2
Bristol, TN Lease(16)
Sparta Crossing 1989 100% 29,800 29,800 92% Food Lion None Fee 2
Sparta, TN
Springs Crossing 1987/1996 100% 42,920 42,920 100% Food Lion, Rite Aid None Ground 4
Hickory, NC Lease (17)
Statesboro Square 1986 100% 41,000 41,000 100% Food Lion(7) 25,000 Fee 6
Statesboro, GA
Stone East Plaza 1983 100% 45,259 45,259 91% Food Lion(16) None Fee 9
Kingsport, TN
Suburban Plaza 1995 100% 124,109 124,109 100% Toys "R" Us None Fee 23
Knoxville, TN
Surry Square 1985 100% 32,900 32,900 96% Food Lion(4), 21,000 Fee 3
Elkin, NC Revco Drug
Sutton Plaza 1972(19) 100% 122,027 122,027 100% A & P, Ames None Fee 14
Mt. Olive, NJ
34th St. Crossing 1989 100% 51,120 51,120 97%Food Lion, Family Dollar None Fee 11
St. Petersburg, FL
Townshire Shopping 1988 100% 72,440 72,440 100% Blinn College None Space 4
Bryan, TX Lease(18)
Tyler Square 1987 100% 48,370 48,370 100% Food Lion, Revco Drug None Fee 8
Radford, VA
University Crossing 1986 100% 101,964 20,053 81% Wal*Mart None Fee 7
Pueblo, CO
Uvalde Plaza 1987/1992 75% 111,160 34,000 100% Wal*Mart, C.R. Anthony None Fee 7
Uvalde, TX
Valley Commons 1988/1994 100% 45,580 45,580 100% Food Lion None Fee 11
Salem, VA
Valley Crossing 1988/1991 100% 186,077 186,077 100% Goody's, TJ Maxx, None Fee 20
Hickory, NC Office Depot, Circuit City,
Belk Outlet Store
The Village at
Wexford 1990 100% 102,450 72,450 98% Quality Stores(21), None Fee 8
Cadillac, MI Glen's Supermarket,
Village Square 1990/1993 100% 163,294 27,050 96% Wal*Mart, None Fee 10
Houghton Lake, MI Glen's Supermarket,
Perry Drug Store
Wildwood Plaza 1985/1994 100% 39,580 39,580 100% Food Lion None Fee 4
Salem, VA
Willow Springs
Plaza 1991/1994 100% 224,344 121,956 100% Home Depot, Office Max, None Fee 10
Nashua, NH JCPenney Home Store
---------- ----------- ------
TOTAL COMMUNITY CENTERS 6,200,263 4,493,679 97%
========== =========== ======
</TABLE>
<PAGE>
(1) Includes the total square footage of the Anchors (whether
owned by others or leased by the Anchor) and shops. Does
not include future expansion areas.
(2) Includes leasable Anchors.
(3) Includes tenants paying rent on executed leases on
December 31, 1996. Calculation includes leased Anchors.
(4) Tenant has closed its store but is continuing to meet its
financial obligation and is sub-leasing the space.
(5) Ground Lease term extends to 2051 including four 10-year
extensions. Lessee has an option to purchase and a right
of first refusal to purchase the fee.
(6) Ground Lease term extends to 2049 including three 10-year
extensions. Lessor receives a share of percentage rents
during initial term and extensions. Lessee has an option
to purchase and a right of first refusal to purchase the fee.
(7) Represents a Food Lion which has closed its store but is
continuing to meet its financial obligations under its lease.
(8) Ground Lease term extends to 2055 including two 20-year
extensions. During extension periods, lessor receives a
share of percentage rents. Lessee has a right of first
refusal to purchase the fee. Lessor receives a share of
sale proceeds upon sale of the center to a third party.
(9) Bi-Lo is closed but continues to meet its financial
obligations under its lease.
(10) Ground lease extends to 2097 including 12 five year
options. Lessor receives no additional rent.
(11) Grounds lease for a portion of the land extends to 2046
including 4 ten year options. Lessor receives 20% of
percentage rentals.
(12) Ground Lease term extends to 2049 including three 10-year
extensions. Lessor receives a share of percentage rents
during initial term and extensions. Lessee has a right of
first refusal to purchase the fee.
(13) Represents a Food World which has closed its store but is
continuing to meet its financial obligations under its
lease and is sub-leasing the space.
(14) Signal Hills Village is part of Signal Hills Crossing, a
Property on which the Company holds a Mortgage.
(15) Ground Lease term extends to 2084. Rent for entire term
has been prepaid. Lessee has an option to purchase the fee
under certain circumstances.
(16) Ground Lease term extends to 2055 including one 20-year
extension. Commencing in 2005, rental will be the greater
of base rent or a share of the revenue from the center.
Lessee has a right of first refusal to purchase the fee.
(17) Ground Lease term extends to 2048 including three 10-year
extensions. Lessor receives a share of percentage rents
during initial term and extensions. Lessee has a right of
first refusal to purchase the fee.
(18) Represents a space lease for this center. Lease term
expires in 1999 with one 10-year extension option available.
(19) Sutton Place opened in 1972 and was acquired by the Company
in January, 1997.
(20) The remaining 23,000 square feet are still under
development the tenant Michael's, will open in July 1997
occupying 100% of this space.
(21) Quality Stores has an option to purchase its 56,850 square
foot store commencing in 1996 for a price based upon
capitalizing minimum annual rent being paid at the time of
exercise at a rate of 8.33%.
MORTGAGES
The Company owns certain Mortgages which were granted prior to
the IPO in connection with sales by the Company's predecessor of
properties which it had previously developed.
The Company also holds fee mortgages on six community
centers, which mortgages had, as of December 31, 1996, an
aggregate outstanding principal of $12.3 million. Such mortgages
entitle the Company to receive substantially all of such
properties' current cash flow in the form of periodic debt
service payments. The encumbered properties all opened between
1981 and 1984 and have no Anchor vacancies.
In the years ended December 31, 1994, 1995, and 1996,
revenues from the Mortgages represented approximately 2.4%, 2.2%,
and 2.0%, respectively, of total revenues from the Company's
Properties.
<PAGE>
The following table sets forth certain additional information
regarding the Mortgages as of December 31, 1996.
<TABLE>
Mortgage Information Center Information
------------------------------------------ ---------------------------------------
Annual Principal Annual Total Percentage Number
Name of Center/ Interest Balance as Debt Maturity Total Leasable GLA of
Location Rate of 12/31/96 Service Date GLA(1) GLA Leased(2) Anchors Stores
- -------------------- --------- ----------- ------- ---------- -------- -------- ---------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MALL COMMUNITY
CENTERS
BI-LO South......... 9.50 $ 1,608 $ 175 Dec-1996(3) 48,075 48,075 100% BI-LO, 7
Cleveland, TN Rite-Aid
Gaston Square....... 11.00 1,637 179 Oct-97 33,640 33,640 100 Food Lion, 4
Gastonia, NC Eckerd
Inlet Crossing...... 11.00 1,942 327 Oct-97 55,248 55,248 100 Food Lion, 13
Myrtle Beach, SC Revco
Drug
Olde Brainerd
Centre............ 9.50 2,792 245 Dec-2006 57,293 57,293 100 BI-LO, 7
Chattanooga, TN Revco
Drug
Signal Hills
Crossing.......... 11.00 2,306 244 Oct-1997 44,220 44,220 100 Food Lion, 6
Statesville, NC Revco
Drug
Soddy Daisy Plaza... 9.50 1,982 163 Dec-2006 100,095 47,325 100 Wal*Mart, 5
Soddy Daisy, TN BI-LO,
Revco
Drug
----------- ------- -------- -------- ---------- ------
TOTAL COMMUNITY... $12,267 $1,333 338,571 285,801 100% 42
=========== ======= ======== ======== ========== ======
Centers Subject to
Mortgages
_________________________
(1) Includes Anchors.
(2) Includes all leases executed on or before December 31, 1996. Leased GLA includes non-Anchor GLA and leased
Anchor GLA.
(3) The mortgage is on a month-to-month extension pending execution of extension agreements.
</TABLE>
OFFICE BUILDING
The Company owns a 95% interest in a 49,082 square foot
office building in Chattanooga, Tennessee in which the Company's
headquarters are located. The Company occupies 26,613 square
feet or 54% of the total square footage of the Office Building.
The Office Building is 100% occupied.<PAGE>
TOP 25 TENANTS
The following table sets forth the Company's top 25 tenants
based upon a percentage of total revenues from the Company's
Properties in 1996.
<TABLE>
% OF NUMBER OF SQUARE
RANK TENANT REVENUES STORES FEET
- ---- --------------------------------- ---------- --------- ----------
<S> <C> <C> <C> <C>
1 The Limited, Inc................. 7.12% 50 400,694
2 Food Lion........................ 5.43% 38 1,037,807
3 Woolworth Corp................... 2.44% 44 106,257
4 IC Penney Co., Inc............... 2.33% 17 1,156,946
5 Belk Atlanta Group Office........ 1.97% 9 774,018
6 Goody's Family Clothing, Inc..... 1.95% 11 371,823
7 Intimate Brands.................. 1.25% 15 62,197
8 The Shoe Show.................... 1.25% 15 69,928
9 Carmike Cinema................... 1.23% 8 157,119
10 The Regis Corporation............ 1.18% 39 42,475
11 The Gap, Inc..................... 1.16% 8 49,297
12 Regal Cinemas, Inc............... 1.11% 4 105,871
13 Walden Books..................... 1.09% 15 49,449
14 Camelot Music, Inc............... 1.03% 11 44,834
15 County Seat...................... 1.02% 13 51,390
16 Lowe's Companies, Inc............ 0.91% 2 246,499
17 Footstar......................... 0.89% 11 41,552
18 The May Department Stores........ 0.89% 18 290,165
19 Parisian, Inc.................... 0.88% 1 133,000
20 Sears, Roebuck and Co............ 0.86% 6 568,411
21 U.S. Shoe Corporation............ 0.85% 13 41,735
22 Tandy Corporation................ 0.78% 20 49,678
23 Ruby Tuesday, Inc................ 0.72% 7 34,341
24 Consolidated Stores Corporation.. 0.67% 12 41,553
25 American Eagle Outfitters........ 0.64% 7 27,906
---------- --------- ----------
</TABLE>
MORTGAGE DEBT AND RATIO TO TOTAL MARKET CAPITALIZATION
As of December 31, 1996, the Operating Partnership's
proportionate share of indebtedness of all Properties (whether or
not consolidated for financial statement reporting purposes
including the Construction Properties) was approximately $612.5
million. The Company's total market capitalization (the
aggregate market value of the Company's outstanding shares of
Common Stock, assuming the full exchange of the limited
partnership interests in the Operating Partnership for Common
Stock, plus the $612.5 million total debt of the Operating
Partnership) as of December 31, 1996 was $1.4 billion.
Accordingly, the Company's debt to total market capitalization
ratio as of December 31, 1996 was 43.8%. The debt to total market
capitalization ratio, which is based upon the Company's
proportionate share of consolidated and unconsolidated
indebtedness and market values of equity, differs from
debt-to-book capitalization ratios, which are based upon
consolidated indebtedness and book values.
<PAGE>
The following table sets forth certain information regarding
the mortgages and secured lines of credit encumbering the
Properties.
MORTGAGE DEBT
(Dollars in thousands; numbers may not add due to rounding)
MORTGAGE LOANS OUTSTANDING IN
WHOLE OR IN PART AT DECEMBER 31, 1996
<TABLE>
Ownership Earliest
Share of Estimated Date at
Company Principal Balloon Which
and Annual Balance Annual Annual Payment Loans
Center Pledged Operating Interest as of Interest Debt Maturity Due on Can Be
as Collateral Partnership Rate 12/31/96(1) Payment (2) Service Date Maturity Prepaid(3)
- ------------------------ ----------- -------- ----------- ----------- ------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MALLS:
College Square.......... 100% 10.000% $ 13,824 $ 1,382 $ 1,548 Jan-2003 $ 13,393 --(4)
Coolsprings Galleria.... 100% 8.290% 68,987 5,719 6,636 Sep-2010 -- Oct-2000(5)
Frontier Mall........... 100% 10.000% 8,611 861 2,220 Dec-2001 -- --(6)
Governor's Square....... 48% 8.230% 36,685 3,020 3,476 Sep-2016 14,454 Sep-2001(7)
Hamilton Place......(15) 90% 9.250% 60,359 5,583 6,526 Dec-1997 59,461 Jan-1995(8)
Madison Square.......... 50% 9.250% 49,412 4,571 4,936 Mar-2002 46,482 Feb-1997(10)
Oak Hollow Mall......... 75% 7.310% 53,336 3,899 4,709 Feb-2008 39,567 Feb-2002(12)
Plaza del Sol.......(13) 51% 9.500%(14) 2,572 244 244 Nov-1997 1,729 --
St. Clair Square....(41) 100% 7.180% 66,000 4,739 4,739 Nov-1999 66,000 --
Turtle Creek Mall....... 100% 7.400% 34,712 2,569 2,966 Mar-2006 26,992 Mar-1999(16)
Walnut Square.......(17) 100% 10.125% 957 97 140 Feb-2008 -- --(18)
Walnut Square........... 100% 10.000%(9) 389 29 39 Mar-1996 389 --(9)
Westgate Mall.......(11) 100% 7.210%(52) 38,502 2,776 2,776 Jul-1997 38,502 --
---------
Malls Subtotal: 434,346
ASSOCIATED CENTERS:
Georgia Square Plaza.... 100% 9.000% 479 43 141 Jan-2001 -- Feb-1997(8)
Hamilton Corner......... 90% 10.125% 3,589 363 471 Aug-2011 -- --(20)
Hamilton Crossing....... 92% 9.250% 5,228 484 565 Dec- 1997 5,190 Jan-1995(21)
Madison Plaza........... 75% 10.125% 2,850 289 537 Feb-2004 -- --(22)
---------
Associated Centers Subtotal: 12,146
COMMUNITY CENTERS:
Bartow Village.......... 100% 9.750% 1,715 $167 $ 228 Aug-2000 $1,458 Sept-1997(23)
Bennington Place........ 100% 10.250% 611 63 83 Aug-2010 -- Jul-2000(24)
BJ's Plaza.............. 100% 10.400% 3,609 375 476 Dec-2011 -- (19)
Briarcliff Square....... 100% 10.375% 1,765 183 226 Feb-2013(25) -- Feb-1998(26)
Bulloch Plaza........... 100% 10.000% 1,027 103 162 Jan-2007 -- Dec-1996(24)
Cedar Bluff Crossing.... 100% 10.625% 1,492 158 230 Jan-2008 -- Jan-2008(27)
Centerview Plaza........ 100% 10.000% 1,418 142 191 Jan-2010(28) -- Jan-1999(24)
Colleton Square......... 100% 9.375% 1,102 103 143 Aug-2010(29) -- Aug-1998(24)
Collins Park Commons.... 100% 10.250% 1,491 153 202 Oct-2010 -- Sept-2000(24)
Cosby Station........... 100% 8.500% 4,477 381 490 Sep-2014 -- Sep-2001(30)
East Ridge Crossing..... 100% 10.125% 1,523 154 324 May-2003 -- Jan-9001(31)
Fifty-Eight Crossing.... 100% 10.125% 1,468 149 312 May-2003 -- Jan-2001(31)
Genesis Square.......... 100% 10.250% 1,133 116 147 Aug-2010 -- Jul-2000(32)
Greenport Towne Center.. 100% 9.000% 4,681 421 529 Sep-2014 -- --(33)
Hampton Plaza........... 100% 10.000% 2,170 217 256 Nov-2000 1,992 Nov-1997(34)
Henderson Square....(35) 100% 7.500%(35) 7,267 545 750 Apr-2014 -- May-2005(35)
Hollins Plantation
Plaza................. 100% 10.000% 1,272 127 211
(36) Jun-2007 -- Jun-1997(37)
Jean Ribaut............. 100% 8.750% 4,206 368 477 Oct-1998 4,019 --(38)
Karns Corner............ 100% 10.250% 1,051 108 146 Jan-2010 (39) Feb-1999(24)
Keystone Crossing....... 100% 9.625% 2,402 231 278 Aug-2000 2,207 Sept-1997(40)
Longview Crossing....... 100% 10.250% 485 50 66 Aug-2010 -- Aug-2000(24)
Lowe's Plaza............ 100% 9.125% 5,363 489 625 Oct-2013 -- Oct-2003(43)
North Haven Crossing.... 100% 9.550% 8,667 828 1,225 Oct-2008 -- Oct-1998(44)
Northwoods Plaza........ 100% 9.750% 1,362 133 171 Jun-2012 -- --(45)
Perimeter Place......... 100% 10.625% 1,805 192 278 Jan-2008 -- Jan-2008(27)
Seacoast Shopping
Center................ 100% 9.750% 6,079 593 721 Sep-2002 5,110 Oct-1997(46)
Shenandoah Crossing..... 100% 10.250% 610 63 83 Aug-2010 -- Aug-2000(24)
Sparta Crossing......... 100% 10.250% 932 96 127 Aug-2010 -- Jul-2000(47)
Suburban Plaza.......... 100% 8.500% 5,325 453 615 May-1999 5,325 --
(48)
34th St. Crossing...(49) 100% 10.625% 1,703 181 234 Dec-201 0 -- Dec-2000(50)
Tyler Square............ 100% 9.750% 2,021 197 251 Oct-2012(51) -- Nov-1994(26)
Uvalde Plaza............ 75% 10.625% 867 92 133 Feb-2008 -- Feb-2008(27)
Valley Commons.......... 100% 10.250% 1,049 108 142 Oct-2010 -- Oct-2000(24)
Willow Springs Plaza.... 100% 9.750% 6,182 603 934 Aug-2007 601 Aug-1997(47)
---------
Community Centers Subtotal: 88,330
CONSTRUCTION PROPERTIES:
The Terrace........... 100% 7.100% 6,898 490 490 May-1998 6,898 --
Springhurst Towne
Center................ 100% 7.140% 2,856 204 204 Nov-1998 2,856 --
Bonita Lakes Mall....... 100% 7.230% 3,852 279 279 Oct-1998 3,852 --
Cortland Towne Center... 100% 7.250% 12,787 2,776 2,776 Nov-1998 12,787 --
---------
Construction Properties Subtotal: 26,393
OTHER:
Park Place.............. 95% 10.000% 2,147 215 459 Apr-2003 -- --(8)
Credit Lines............ 100% 6.81%(54) 115,595(54) 7,867 7,867 Various 115,595 --
---------
Total: $ 678,959
</TABLE>
Operating Partnership's Share of Total: $612,550(55)
(1) The amount listed includes 100% of the loan amount even
though the Company and the Operating Partnership may own
less than 100% of the property.
(2) Interest has been computed by multiplying the annual
interest rate by the outstanding principal balance as of
December 31, 1996.
(3) Unless otherwise noted, loans are prepayable at any time.
(4) Prepayment premium is greater of 1% or yield maintenance for
any prepayment prior to January, 1998; thereafter, the
prepayment premium is 5%, decreasing by .5% per year to a
minimum of 3%; there is no prepayment premium after July 15,
2002.
(5) Prepayment premium is the greater of 1% or yield maintenance
after October 1, 2000.
(6) Prepayment premium is based on yield maintenance (not less
than 1%) for any prepayment prior to January, 1997;
thereafter, the prepayment premium is 5%, decreasing by 1%
per year to a minimum of 1%; there is no prepayment premium
during the last 120 days of the loan term.
(7) Prepayment premium is based on the greater of yield
maintenance or 2%.
(8) Prepayment premium is the greater of 1% or yield
maintenance.
(9) Interest is floating at 1 1/2% over prime priced at December
31, 1996. The maturity date is 90 days after notice.
(10) Prepayment premium is based on yield maintenance; there is
no prepayment premium after October 1, 2001.
(11) Permanent loan of $52,000,000 at a rate of 6.95% closed in
March, 1997.
(12) Prepayment premium is the greater of 1% or yield
maintenance.
(13) The loan can be extended for 3 one year periods, the
extension fee is 1/4 point for each extension.
(14) Interest is floating at 1% over prime priced at December 31,
1996.
(15) Permanent loan of $75,000,000 at a rate of 7% closed in
March, 1997.
(16) Prepayment premium is the greater of 1% or yield
maintenance.
(17) The loan is secured by a first mortgage lien on the land and
improvements comprising the Goody's anchor store and no
other property.
(18) Prepayment premium is the greater of 1% or yield
maintenance; there is no prepayment premium after
November 1, 2007.
(19) Prepayment premium is based on yield maintenance.
(20) Prepayment premium is the greater of 1% or yield
maintenance; there is no prepayment premium during the last
120 days of the loan term.
(21) Prepayment premium is the greater of 1% or yield
maintenance; there is no prepayment premium after June 1,
1997.
(22) Prepayment premium is the greater of 1% or yield
maintenance; there is no prepayment premium after November
1, 2003.
(23) Prepayment premium is 5%, decreasing to 3% after September,
1998 and to 1% after September, 1999; there is no prepayment
premium during the last 90 days of the loan term.
(24) Prepayment premium is 5%, decreasing by 1% per year to a
minimum of 2% there is no prepayment premium during the last
120 days of the loan term.
(25) Lender has option to accelerate loan between March 1, 2001
and February 28, 2002; March 1, 2006 and February 28, 2007;
and March 1, 2011 and February 28, 2012.
(26) Prepayment premium is 7%, decreasing by 1% per year to a
minimum of 3%.
(27) Loan may not be prepaid.
(28) Lender may accelerate the loan after September, 2006 upon
expiration of the primary term of the lease of either Food
Lion or Eckerds, unless both leases have been extended
beyond January 1, 2010.
(29) Lender may accelerate loan on July 1, 2007 unless Food Lion
exercises an extension option.
(30) Prepayment premium of 7% decreasing by 1% per year to a
minimum of 2%; there is no prepayment premium during the
last six months of the loan term.
(31) Prepayment premium is 5%, decreasing 1% per year to a
minimum of 1%; there is no prepayment premium during the
last two years of the loan term.
(32) Prepayment premium is 5% from July 1, 2000 to June 30, 2001;
thereafter decreasing by 1% per year to a minimum of 2%;
there is no prepayment premium after May 1, 2010.
(33) Prepayment premium is the greater of 10% or 1/12 of the
annual yield difference before Oct-2014. Thereafter the
prepayment premium is 1%.
(34) The interest rate is floating at 190 basis points over
LIBOR. Priced at December 3, 1996. The maximum Loan is
$7,000,000, with no extensions.
(35) Loan may be prepaid after the 9 years. The prepayment
premium is the greater of 1% or yield maintenance.
(36) Annual debt service is reduced to $152,004 (payable monthly)
after June 1, 2004.
(37) Prepayment premium is 5%, decreasing by 1% per year to a
minimum of 1%; there is no prepayment premium during the
last year of the loan term.
(38) Prepayment premium is the greater of 1% or yield
maintenance.
(39) Lender may accelerate loan after January 1, 2008 unless Food
Lion exercises an extension option beyond January 1, 2008.
(40) Prepayment premium is 5%, which is reduced to 3% after
September, 1998 and to 1% after September, 1999; there is no
loan prepayment premium during the last 90 days of the loan
term.
(41) The interest rate is floating at 150 Basis points over
LIBOR. Loan may be extended for 2 years with 90 days written
notice prior to maturity date. Extension fee equal to 1/4%
of the outstanding balance.
(42) The interest rate is floating at 50 Basis points over LIBOR.
Priced at December 31, 1996. The maximum loan amount is
$25,000,000.
(43) Prepayment premium is 5%, decreasing by .5% per year to a
minimum of 1%; there is no loan prepayment premium during
the last 180 days of the loan term.
(44) Prepayment premium is the greater of 2% or yield maintenance
before October, 1998, afterwards it is the greater of 1% or
yield maintenance.
(45) Prepayment premium is based on yield maintenance; there is
no loan prepayment premium during the last 120 days of the
loan term.
(46) Prepayment premium is the greater of 1% or yield
maintenance; there is no loan prepayment premium during the
last three months of the loan term.
(47) Prepayment premium is 5% from August 1, 2000 to July 30,
2001; thereafter decreasing to 1% per year to a minimum of
2%; there is no prepayment premium after May 1, 2010.
(48) Interest only through May, 1997. Annual debt service of
$728,976 on the maximum loan amount of $7,000,000 begins
June, 1997.
(49) The note is secured by rent payable by the Food Lion Anchor
store.
(50) Prepayment premium is 5%, decreasing by 1% per year to a
minimum of 2%. There is no loan prepayment premium during
the last 90 days of the loan term.
(51) Lender has option to accelerate loan between October 1, 1996
and September 30, 1997; October 1, 2001 and September 30,
2002; October 1, 2006 and September 30, 2007; and October 1,
2011 and September 30, 2012.
(52) The interest rate is floating at 175 basis points over
LIBOR. Priced at December 31, 1996. The maximum loan amount
is $42,000,000.
(53) The loan can be extended for 3 one year periods with a fee
of 1/4 point. Principal payments during the second extension
are $100,000 each quarter and $150,000 per quarter during the
third extension.
(54) Interest rates on the credit lines are at various spreads over
LIBOR whose weighted average interest rate is 6.81% with various
maturities through 1999.
(55) Represents non-recourse indebtedness on Properties and
reflects the less than 100% ownership of the Company and the
Operating Partnership with respect to certain Properties
subject to such indebtedness.
ITEM 3. LEGAL PROCEEDINGS.
The Company and the Operating Partnership are not currently
involved in any material litigation nor, to management's
knowledge, is any material litigation currently threatened
against the Company, the Operating Partnership, the Property
Partnerships or the Properties, other than litigation arising in
the ordinary course of business, most of which is expected to be
covered by liability insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS.
(a) MARKET INFORMATION
The principal United States market in which the Common Stock
is traded is the New York Stock Exchange.
<PAGE>
The following table sets forth the high and low sales prices
for the Common Stock for each quarter of the Company's two most
recent fiscal years.
<TABLE>
1995 Quarter Ended High Low
----------------------- ------- -------
<C> <S> <S>
March 31............... $21.125 $18.875
June 30................ 20.250 19.125
September 30........... 22.000 19.875
December 31............ 22.000 20.125
1996 Quarter Ended High Low
----------------------- ------- -------
March 31............... $22.000 $20.375
June 30................ 22.875 19.750
September 30........... 23.500 21.500
December 31............ 25.875 22.750
</TABLE>
(b) HOLDERS
The approximate number of shareholders of record of the
Common Stock was 322 as of March 24, 1997.
(c) DIVIDENDS
The following table sets forth the frequency and amounts
of dividends declared and paid for each quarter of the
Company's two most recent fiscal years.
<TABLE>
Quarter Ended 1995 1996
----------------------- ------- -------
<S> <C> <C>
March 31............... $0.3975 $0.4200
June 30................ 0.3975 0.4200
September 30........... 0.3975 0.4200
December 31............ 0.3975 0.4200
</TABLE>
Future dividend distributions are subject to the Company's
actual results of operations, economic conditions and such other
factors as the Board of Directors of the Company deems relevant.
The Company's actual results of operations will be affected by a
number of factors, including the revenues received from the
Properties, the operating expenses of the Company, the Operating
Partnership and the Property Partnerships, interest expense, the
ability of the anchors and tenants at the Properties to meet
their obligations and unanticipated capital expenditures.
ITEM 6. SELECTED FINANCIAL DATA.
Information set forth under the caption "Selected Financial
Data" on page 1 of the Company's 1996 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" on page 14 of the Company's 1996 Annual Report to
Shareholders is incorporated herein by reference.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Consolidated Financial Statements of the Company and Report
of Independent Public Accountants on page 22 and 35, respectively,
of the Company's 1996 Annual Report to Shareholders is incorporated
herein by reference. Reference is made to Item 14(a) of this report
for the schedules to the Company's Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated herein by reference from the Company's
definitive proxy statement filed on March 25, 1997 with the
Securities and Exchange Commission (the "Commission") with
respect to its Annual Meeting of Stockholders to be held on May
1, 1997.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated herein by reference from the Company's
definitive proxy statement filed on March 25, 1997 with the
Commission with respect to its Annual Meeting of Stockholders to
be held on May 1, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Incorporated herein by reference from the Company's
definitive proxy statement filed on March 25, 1997 with the
Commission with respect to its Annual Meeting of Stockholders to
be held on May 1, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by reference from the Company's
definitive proxy statement filed on March 25, 1997 with the
Commission with respect to its Annual Meeting of Stockholders to
be held on May 1, 1997.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(1) Financial Statements
Incorporated herein by reference from page 22 of the Company's 1996
Annual Report to Shareholders.
(2) Financial Statement Schedules
Report of Independent Public Accountants
Schedule III Real Estate and Accumulated Depreciation
Schedule IV Mortgage Loans on Real Estate
Financial Statement Schedules not listed herein are either
not required or the information required to be included therein
is included in the Company's Consolidated Financial Statements
which are incorporated herein by reference from page 22 of the
Company's 1996 Annual Report to Shareholders.
(3) Exhibits
Exhibit
Number Description
- -------- -------------------------------------------------
3.1 Amended and Restated Certificate of Incorporation
of the Company(a)
3.2 Amended and Restated Bylaws of the Company(a)
4 See Amended and Restated Certificate of
Incorporation of the Company,
relating to the Common Stock(a)
10.1 Partnership Agreement of the Operating
Partnership(a)
10.2 Property Management Agreement between the
Operating Partnership and the Management
Company(a)
10.3 Property Management Agreement relating to Retained
Properties(a)
10.4.1 CBL & Associates Properties, Inc. 1993 Stock
Incentive Plan(a)
<PAGE>
10.4.2 Non-Qualified Stock Option Agreement, dated May
10, 1994, for Charles B. Lebovitz
10.4.3 Non-Qualified Stock Option Agreement, dated May
10, 1994, for James L. Wolford
10.4.4 Non-Qualified Stock Option Agreement, dated May
10, 1994, for John N. Foy
10.4.5 Non-Qualified Stock Option Agreement, dated May
10, 1994, for Jay Wiston
10.4.6 Non-Qualified Stock Option Agreement, dated May
10, 1994, for Ben S. Landress
10.4.7 Non-Qualified Stock Option Agreement, dated May
10, 1994, for Stephen D. Lebovitz
10.4.8 Stock Restriction Agreement, dated December 28,
1994, for Charles B. Lebovitz
10.4.9 Stock Restriction Agreement, dated December 2,
1994, for John N. Foy
10.4.10 Stock Restriction Agreement, dated December 2,
1994, for Jay Wiston
10.4.11 Stock Restriction Agreement, dated December 2,
1994, for Ben S. Landress
10.4.12 Stock Restriction Agreement, dated December 2,
1994, for Stephen D. Lebovitz
10.5 Purchase Agreement relating to Frontier Mall(b)
10.6.1 Purchase Agreement relating to Georgia Square
(JMB)(b)
10.6.2 Purchase Agreement Relating to Georgia Square
(JCPenney)(b)
10.7 Purchase Agreement relating to Post Oak Mall(b)
10.8 Indemnification Agreements between the Company and
the Management Company and their officers and
directors(a)
10.9.1 Employment Agreement for Charles B. Lebovitz(a)
10.9.2 Employment Agreement for James L. Wolford(a)
10.9.3 Employment Agreement for John N. Foy(a)
10.9.4 Employment Agreement for Jay Wiston(a)
10.9.5 Employment Agreement for Ben S. Landress(a)
10.9.6 Employment Agreement for Stephen D. Lebovitz(a)
10.10 Subscription Agreement relating to purchase of the
Common Stock and Preferred Stock of the Management
Company(a)
10.11 Option Agreement relating to certain Retained
Properties(a)
10.12 Option Agreement relating to Outparcels(a)
10.13.1 Property Partnership Agreement relating to
Hamilton Place(a)
10.13.2 Property Partnership Agreement relating to
CoolSprings Galleria(a)
10.14.1 Acquisition Option Agreement relating to Hamilton
Place(a)
10.14.2 Acquisition Option Agreement relating to the
Hamilton Place Centers(a)
10.14.3 Acquisition Option Agreement relating to the
Office Building(a)
10.15 Revolving Credit Agreement between the Operating
Partnership and First Tennessee Bank, National
Association, dated as of March 2, 1994(c)
10.16 Revolving Credit Agreement, dated July 28, 1994,
between the Operating Partnership and Wells Fargo
Advisors Funding, Inc., NationsBank of Georgia,
N.A. and First Bank National Association(d)
10.17 Revolving Credit Agreement, dated October 14,
1994, between the Operating Partnership and
American National Bank and Trust Company of
Chattanooga(e)
10.18 Revolving Credit Agreement, dated November 2,
1994, between the Operating Partnership and First
Tennessee Bank National Association(e)
10.19 Promissory Note Agreement between the Operating
Partnership and Union Bank of Switzerland dated
May 5, 1995(f)
10.20 Amended and Restated Loan Agreement between the
Operating Partnership and First Tennessee Bank
National Association dated July 12, 1995(g)
10.21 Second Amendment to Credit Agreement between the
Operating Partnership and Wells Fargo Realty
Advisors Funding, Inc. dated July 5, 1995(g)
10.22 Consolidation, Amendment, Renewal, and Restatement
of Notes between the Galleria Associates, L.P. and
The Northwestern Mutual Life Insurance Company(h)
10.23 Promissory Note Agreement between High Point
Development Limited Partnership and The
Northwestern Mutual Life Insurance Company
dated January 26, 1996(i)
<PAGE>
10.24 Promissory Note Agreement between Turtle Creek
Limited Partnership and Connecticut General Life
Insurance Company dated February 14, 1996(i)
10.25 Amended and Restated Credit Agreement between the
Operating Partnership and Wells Fargo Bank N.A.
etal dated September 26, 1996. (j)
10.26 Promissory Note Agreement between the Operating
Partnership and Compass Bank dated September 17,
1996. (j)
10.27 Promissory Note Agreement between St Clair Square
Limited Partnership and Wells Fargo National
Bank dated, December 11, 1996.
10.28 Promissory Note Agreement between Lebcon
Associates and Principal Mutual Life Insurance
Company dated, March 18, 1997.
10.29 Promissory Note Agreement between Westgate Mall
Limited Partnership and Principal Mutual Life
Insurance Company dated, February 16, 1997.
10.30 Amended and Restated Credit Agreement between the
Operating Partnership and First Tennessee Bank
etal dated February 24, 1997.
13 Company's 1996 Annual Report to Shareholders
21 Subsidiaries of the Company
23 Consent of Arthur Andersen LLP
24 Powers of Attorney
(a) Incorporated by reference to Post-Effective
Amendment No. 1 to the Company's Registration
Statement on Form S-11 (No. 33-67372), as filed
with the Commission on January 27, 1994.
(b) Incorporated by reference to Amendment No. 2 to
the Company's Registration Statement on Form S-11
(No. 33-67372), as filed with the Commission on
October 26, 1993.
(c) Incorporated herein by reference to the Company's
Annual Report in Form 10-K for the fiscal year
ended December 31, 1993.
<PAGE>
(d) Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994.
(e) Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994.
(f) Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995.
(g) Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995.
(h) Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.
(i) Incorporated by reference to the Company's Annual
Report in Form 10-K for the fiscal year ended
December 31, 1995.
(j) Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996.
A management contract or compensatory plan or
arrangement required to be filed pursuant to Item
14(c) of this report.
(4) Reports on Form 8-K
The outline from the Company's February 5, 1997
conference call with analysts regarding earnings
(Item 5) was filed on February 5, 1997.
Information on the acquisition of St. Clair Square
in Fairview Heights, IL was filed on December 9, 1996.
Information on the retirement of James. L Wolford Executive
Vice President was filed on January 15, 1997.
Information on the acqusition of St Clair Square in
Fairview Heights, IL was filed as an 8-KA on
January 15, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CBL & ASSOCIATES PROPERTIES, INC.
(Registrant)
BY:
Charles B. Lebovitz
Chairman of the Board,
President and Chief
Executive Officer
Dated: March 27, 1997
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signature Title Date
_________________ Chairman of the Board, March 28, 1997
Charles B. Lebovitz Board, President
and Chief Executive
Officer(Principal
Executive Officer)
____________________
John N. Foy Director, Executive March 28, 1997
Vice President, Chief
Financial Officer
and Secretary
(Principal Financial
Officer and Principal
Accounting Officer)
____________________
Stephen D. Lebovitz Director, Senior March 28, 1997
Vice President and
Treasurer
____________________
Claude M. Ballard Director March 28, 1997
____________________
Leo Fields Director March 28, 1997
____________________
William J. Poorvu Director March 28, 1997
<PAGE>
____________________
Winston W. Walker Director March 28, 1997
____________________
*By:
Charles B. Lebovitz Attorney-in-Fact March 28, 1997<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants. . . . . . . . 42
Schedule III-Real Estate and
Accumulated Depreciation . . . . . . . . . . . . . . . 43
Schedule IV- Mortgage Loans on Real Estate. . . . . . . 50
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of CBL
& Associates Properties, Inc.:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in CBL
& Associates Properties, Inc. annual report to shareholders
incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 4, 1997. Our audit was made for
the purpose of forming an opinion on those consolidated
statements taken as a whole. The schedules listed in the
accompanying index are the responsibility of the management of
CBL & Associates Properties, Inc. and are presented for purposes
of complying with the Securities and Exchange Commission's rules
and are not part of the basic consolidated financial statements.
These schedules have been subjected to the auditing procedures
applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as
a whole.
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee,
February 4, 1997
<PAGE>
H
CBL & ASSOCIATES PROPERTIES, INC.
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
(Dollars in Thousands) Gross Amounts at
To The Company Costs Close Of Period
-------------------- Capitalized Disposals ---------------------------
Buildings Subsequent of Buildings Accumulated Date of
Encumbrances And to Land And And Depreciation Construction
Description (B) Land Improvements Acquisition Buildings Land Improvements Total(C) (D) /
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Purchase
Malls
College Square $13,824 $2,954 $17,787 $3,073 $27 $2,927 $20,860 $23,787 $4,601
1987-1988
Morristown, TN
Coolsprings Galleria 68,987 13,527 86,755 18,863 ---- 13,527 105,618 119,145 10,053
1989-1991
Nashville, TN
Foothills Mall ---- 4,537 15,226 ---- ---- 4,537 15,226 19,763 ---- 1996
Maryville, TN
Foothills Mall JCP ---- ---- 2,650 ---- ---- ---- 2,650 2,650 817 1983
Maryville, TN
Frontier Mall 8,611 2,681 15,858 3,251 ---- 2,681 19,109 21,790 2,694 1984-1985
Cheyenne, WY
Georgia Square (E ---- 2,982 31,071 3,262 ---- 2,983 34,332 37,315 4,689 1982
Athens, GA
Hamilton Place 60,359 2,880 42,211 9,510 729 2,932 50,940 53,872 11,074
1986-1987
Chattanooga, TN
Lakeshore Mall ---- 1,443 28,819 739 ---- 1,443 29,558 31,001 3,797 1991-1992
Sebring, FL
Oak Hollow Mall 53,336 4,344 52,904 3,661 ---- 4,344 56,565 60,909 2,424
1994-1995
High Point, NC
Pemberton Square ---- 1,191 14,305 3,279 186 581 18,008 18,589 4,222 1986
Vicksburg, MS
Post Oak Mall (E) ---- 3,936 48,948 928 ---- 3,936 49,876 53,812 11,604 1984-1985
College Station, TX
St. Clair Square 66,000 11,028 75,581 ---- ---- 11,028 75,581 86,609 204 1996
Fairview Heights, IL
Turtle Creek Mall 34,713 2,345 26,418 6,677 ---- 3,535 31,905 35,440 2,638 1993-1995
Hattiesburg, MS
Twin Peaks Mall ---- 1,873 22,022 10,248 65 1,768 32,310 34,078 7,669 1984
Longmont, CO
Walnut Square (E) 1,347 50 15,138 4,442 ---- 50 19,580 19,630 7,013 1984-1985
Dalton, GA
Westgate Mall 38,503 2,150 23,257 32,280 ---- 2,150 55,537 57,687 1,193 1995
Spartanburg, SC
Associated Centers
Coolsprings Xing (E) ---- 2,803 14,985 34 ---- 2,804 15,018 17,822 1,483 1991-1993
Nashville, TN
Foothills Plaza (E) ---- 132 2,123 225 ---- 141 2,339 2,480 782 1984-1988
Maryville, TN
Foothills Plaza Exp ---- 137 1,960 178 ---- 148 2,127 2,275 428 1984-1988
Maryville, TN
Frontier Square ---- 346 684 63 86 260 747 1,007 195 1985
Cheyenne, WY
Georgia Square Plaza 479 100 1,082 14 ---- 100 1,096 1,196 466 1984
Athens, GA
Hamilton Corner 3,589 960 3,670 624 226 734 4,294 5,028 701 1986-1987
Chattanooga, TN
Hamilton Crossing 5,228 3,318 4,387 421 1,370 1,948 4,808 6,756 1,185 1987
Chattanooga, TN
Madison Plaza 2,850 473 2,888 115 ---- 473 3,003 3,476 255 1984
Huntsville, AL
Pemberton Plaza ---- ---- 662 116 ---- ---- 778 778 186 1986
Vicksburg, MS
Community Centers
34th St Crossing 1,703 1,102 2,743 39 ---- 1,023 2,861 3,884 532 1989
St. Petersburg, FL
58 Crossing 1,468 839 2,360 5 96 743 2,365 3,108 493 1988
Chattanooga, TN
Anderson Plaza ---- 198 1,316 1,562 ---- 198 2,878 3,076 325 1983
Greenwood, SC
Bartow Village 1,716 224 2,010 221 ---- 224 2,231 2,455 338 1989
Bartow, FL
Beach Crossing ---- 725 1,749 122 107 623 1,866 2,489 402 1984
Myrtle Beach, SC
Bennington Place 611 256 1,754 618 ---- 175 2,453 2,628 528 1988
Roanoke, VA
BJ'S Plaza 3,609 170 4,735 ---- ---- 170 4,735 4,905 631 1991
Portland, ME
Briarcliff Square 1,765 299 1,936 65 32 267 2,001 2,268 372 1989
Oak Ridge, TN
Buena Vista Plaza ---- 830 1,476 (805) 20 604 877 1,481 186 1988-1989
Columbus, GA
Bullock Plaza 1,027 98 1,493 ---- ---- 98 1,493 1,591 394 1986
Statesboro, GA
Capital Crossing ---- 1,908 756 2,242 ---- 2,544 2,362 4,906 51 1995
Raleigh, NC
Cedar Bluff Crossin 1,492 412 2,128 796 ---- 412 2,924 3,336 564 1987
Knoxville, TN
Cedar Plaza ---- 206 1,845 89 ---- 206 1,934 2,140 384 1988
Cedar Springs, MI
Centerview Plaza 1,418 246 1,584 691 ---- 197 2,324 2,521 485 1986
China Grove, NC
Chestnut Hills (E) ---- 600 1,775 105 ---- 600 1,880 2,480 246 1992
Murray, KY
Colleton Square 1,102 190 1,349 20 34 156 1,369 1,525 349 1986
Walterboro, SC
Collins Park Common 1,491 25 1,858 3 ---- 25 1,861 1,886 345 1989
Plant City, FL
Conway Plaza ---- 110 1,071 897 110 ---- 1,968 1,968 501 1984
Conway, SC
Cosby Station 4,477 999 4,516 474 ---- 999 4,990 5,989 303 1993-1994
Douglasville, GA
County Park Plaza ---- 196 1,500 93 56 140 1,593 1,733 276 1980
Scottsboro, AL
Devonshire Place ---- 520 5,738 ---- ---- 520 5,738 6,258 29 1995-1996
Cary, NC
Dorchester Crossing ---- 493 1,483 236 50 443 1,719 2,162 485 1985
Charleston, SC
East Ridge Crossing 1,523 832 2,494 74 101 731 2,568 3,299 528 1988
Chattanooga, TN
East Towne Xing (E) ---- 867 2,765 584 71 786 3,359 4,145 583 1989
Knoxville, TN
Garden City Plaza (E) ---- 1,056 2,569 139 29 580 3,155 3,735 940 1984
Garden City, KS
Genesis Square 1,134 227 1,435 939 ---- 223 2,378 2,601 213 1990
Crossville, TN
Girvin Plaza ---- 898 1,998 99 142 756 2,097 2,853 325 1989-1990
Jacksonville, FL
Greenport Towne Ctr 4,681 659 6,161 132 ---- 659 6,293 6,952 428 1993-1994
Hudson, NY
Hampton Plaza 2,170 973 2,689 14 ---- 965 2,711 3,676 426 1989-1990
Tampa, FL
Henderson Square 7,267 428 8,074 68 ---- 432 8,138 8,570 384 1994-1995
Henderson, NC
Hollins Plantation 1,272 229 1,845 232 ---- 198 2,108 2,306 581 1985
Roanoke, VA
Home Quarters Warehouse ---- 2,739 ---- 59 ---- 2,738 60 2,798 6 1994
South Portland, ME
Jasper Square (E) ---- 235 1,423 592 ---- 235 2,015 2,250 494 1986
Jasper, AL
Jean Ribaut Square 4,206 505 4,007 1,311 ---- 505 5,318 5,823 1,281 1983-1984
Beaufort, SC
Jean Ribaut K-Mart ---- 317 2,065 654 ---- 340 2,696 3,036 324 1983-1984
Beaufort, SC
Karns Corner 1,051 206 1,360 772 ---- 206 2,132 2,338 366 1987
Knoxville, TN
Keystone Crossing 2,402 938 2,216 44 113 825 2,260 3,085 526 1989
Tampa, FL
Kingston Overlook ---- 1,693 5,664 ---- ---- 1,693 5,664 7,357 ---- 1996
Knoxville, TN
Lady's Island (E) ---- 300 2,323 237 ---- 300 2,560 2,860 284 1992
Beaufort, SC
Lagrange Commons ---- 835 5,765 ---- ---- 835 5,765 6,600 17 1995-1996
Lagrange, NY
Lakeshore Station ---- 200 401 10 ---- 200 411 611 29 1993-1994
Gainesville, GA
Longview Crossing 485 ---- 1,308 ---- ---- ---- 1,308 1,308 269 1988
Hickory, NC
Lowe's Plaza 5,363 1,427 4,440 (28) ---- 1,427 4,412 5,839 359 1992-1993
Joplin, MO
Lunenburg Crossing ---- 1,020 2,308 (26) ---- 1,019 2,283 3,302 133 1993-1994
Lunenburg, MA
North Creek Plaza ---- 98 1,201 38 ---- 97 1,240 1,337 146 1983
Greenwood, SC
North Haven Crossin 8,667 3,229 8,061 1 ---- 3,229 8,062 11,291 722 1992-1993
North Haven, CT
Northridge Plaza (E ---- 1,087 2,970 1,996 ---- 1,244 4,809 6,053 1,303 1984
Hilton Head, SC
Northwoods Plaza 1,362 496 1,403 86 ---- 496 1,489 1,985 174 1995-1996
Albemarle, NC
Oaks Crossing ---- 571 2,885 (1,146) 253 655 1,402 2,057 510 1988
Otsego, MI
Orange Plaza ---- 395 2,111 4 ---- 395 2,115 2,510 255 1992
Roanoke, VA
Park Village ---- 586 2,874 46 ---- 520 2,986 3,506 379 1990
Lakeland, FL
Perimeter Place 1,805 764 2,049 290 ---- 770 2,333 3,103 628 1985
Chattanooga, TN
Rawlinson Place ---- 279 1,573 46 ---- 292 1,606 1,898 372 1987
Rock Hill, SC
Rhett At Remount ---- 67 1,877 848 ---- 67 2,725 2,792 420 1992
Charleston, SC
Sattler Square (E) ---- 792 4,155 128 ---- 705 4,370 5,075 818 1988-1989
Big Rapids, MI
Seacoast Shopping 6,079 1,374 4,164 2,558 179 1,195 6,722 7,917 862 1991
Seabrook, NH
Shenandoah Crossing 610 122 1,382 7 ---- 115 1,396 1,511 295 1988
Roanoke, FL
Signal Village ---- ---- 579 425 ---- ---- 1,004 1,004 210 1983-1984
Statesville, NC
Southgate Crossing ---- ---- 1,002 ---- ---- ---- 1,002 1,002 257 1984-1985
Bristol, TN
Sparta Crossing 932 180 1,463 29 ---- 145 1,527 1,672 275 1989
Sparta, TN
Springs Crossing ---- ---- 1,422 908 ---- ---- 2,330 2,330 324 1987
Hickory, NC
Statesboro Square (E) ---- 237 1,643 135 ---- 227 1,788 2,015 476 1986
Statesboro, GA
Stone East Plaza (E ---- 266 1,635 51 49 217 1,686 1,903 557 1987
Kingsport, TN
Suburban Center 5,325 3,223 3,796 1,228 ---- 3,223 5,024 8,247 185 1995
Knoxville, TN
Surry Square ---- ---- 1,402 ---- ---- ---- 1,402 1,402 377 1985
Elkin, NC
Tyler Square 2,021 196 2,021 (57) ---- 103 2,057 2,160 508 1986
Radford, VA
Wal*Mart Plaza North ---- 545 1,216 (38) ---- 377 1,346 1,723 380 1985
Pueblo, CO
Uvalde Plaza 867 574 1,506 (167) ---- 319 1,594 1,913 430 1987
Uvalde, TX
Valley Commons 1,049 342 1,819 576 ---- 342 2,395 2,737 447 1988
Salem, FL
Valley Crossing (E) ---- 2,390 6,471 3,843 37 3,034 9,633 12,667 1,382 1988
Hickory, NC
Village At Wexford ---- 555 3,009 3 ---- 501 3,066 3,567 527 1989-1990
Cadillac, MI
Village Square ---- 750 3,591 (340) 608 142 3,251 3,393 587 1989-1990
Houghton Lake, MI
Wildwood Plaza ---- 429 1,082 1,103 72 357 2,185 2,542 495 1985
Salem, VA
Willow Springs Plaza 6,182 2,917 6,107 4,985 ---- 2,917 11,092 14,009 1,142 1991
Nashua, NH
Office Buildings
Park Place 2,147 ---- 3,590 709 ---- 231 4,068 4,299 1,209 1984
Chattanooga, TN
Disposals
Chester Plaza ---- 774 1,524 ---- 2,298 ---- ---- ---- ---- 1995-1996
Iron Bridge, VA (F)
Lakeshore Crossing ---- 1,723 3,446 (26) 5,143 ---- ---- ---- ---- 1993-1994
Gainesville, GA (F)
Lowe's' Plaza ---- 1,154 4,690 13 5,857 ---- ---- ---- ---- 1993-1994
Benton Harbor, M (F)
W Broad St Hannaford ---- 2,407 1,867 37 4,311 ---- ---- ---- ---- 1995
Richmond, VA (F)
Lowe's Plaza --- 1,192 5,136 --- 6,328 --- --- --- --- 1991-1992
Adrian, MI (F)
Other
CBL & Associates, LP ---- ---- ---- ---- ---- ---- ---- ---- 775 ----
Westchester Mall ---- 7,000 10,000 ---- ---- 7,000 10,000 17,000 21 1996
Cortlandt, NY
Developments in Progress,
Consisting of Construction and
Development Property 141,990 2,840 ---- 97,401 2,093 ---- 98,148 98,148 ---- ----
TOTALS $590,295 $132,974 $768,598 $231,102 $30,878 $119,965 $981,831 $1101796 $114,536
Schedule III
(A) Initial cost represents the total cost capitalized including carrying cost at the end of the first
fiscal year in which the property opened or was acquired.
(B) Encumbrances represent the mortgage notes payable balances at December 31, 1996.
(C) The aggregate cost of land and buildings and improvements for federal income tax purposes is
approximately $935 million at December 31, 1996.
(D) Depreciation for all properties is computed over the useful life which is generally forty years.
(E) Property is pledged as collateral on the secured lines of credit used for development properties.
(F) Lowes - Benton Harbor, Michigan, Lowes - Adrian, Michigan, West Broad St. Sam's - Richmond, Virginia,
Chester Plaza - Iron Bridge, Virginia, Lakeshore Crossing - Gainesville, Georgia were sold during 1996.
</TABLE>
CBL & ASSOCIATES PROPERTIES, INC.
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
The changes in real estate assets and accumulated depreciation
for the years ending December 31, 1996, December 31, 1995, and
December 31, 1994 (dollars in thousands):
<TABLE>
1996 1995 1994
------------ ------------ ------------
REAL ESTATE ASSETS:
<S> <C> <C> <C>
Balance at beginning of period $ 848,756 $ 747,228 $ 628,954
Additions during the period:
Additions and improvements 165,035 75,533 115,872
Acquisitions of property 123,372 32,301 3,638
(Deductions) during the period:
Cost of sales (34,720) (5,701) (1,236)
Write-off of development projects (646) (605)
Outparcel land transferred to CBL -- -- --
------------ ------------ ------------
Balance at end of period $1,101,797 $ 848,756 $ 747,228
============ ============ ============
ACCUMULATED DEPRECIATION:
Balance at beginning of period $ 89,818 $ 67,503 $ 50,635
Accumulated Depreciation on
properties sold (423) -- --
Depreciation Expense 25,141 22,315 16,868
------------ ------------ ------------
Balance at end of period $ 114,536 $ 89,818 $ 67,503
============ ============ ============
</TABLE>
<PAGE>
Schedule IV
CBL & ASSOCIATES PROPERTIES, INC.
MORTGAGE LOANS ON REAL ESTATE
AT DECEMBER 31, 1996
(dollars in thousands)
<TABLE>
Carrying Mortgages
Monthly Balloon Face Amount Subject to
Final Payment Payment Amount of Delinquent
Interest Maturity Amount at Prior of Mortgage Principal
Name of Center/Location Rate Date (1) Maturity Leins Mortgage (2) or Interest
- ----------------------- -------- -------- ------- --------- ------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMUNITY CENTERS
Bi-Lo South 9.50% 12/96(3) $ 15 $ 1,598 None $ 1,608(3) $ 1,608 $ 0
Cleveland, TN
Gaston Square 11.00% 10/97 15 1,621 None 1,637 1,637 0
Gastonia, NC
Inlet Crossing 11.00% 10/97 27 1,942 None 1,942 1,942 0
Myrtle Beach, SC
Olde Brainerd Centre 9.50% 12/06 20 2,746 None 2,792(3) 2,792 0
Chattanooga, TN
Signal Hills Plaza 11.00% 10/97 20 2,267 None 2,306 2,306 0
Statesville, NC
Soddy Daisy Plaza 9.50% 12/06 14 1,859 None 1,982(3) 1,982 0
Soddy Daisy, TN
Other 10.00% 07/98- 2,591 2,591 0
09/03 ------- --------- ------ --------- --------- -----------
$111 $12,033 $14,858 $14,858 $ 0
======= ========= ====== ========= ========= ============
(1) Equal monthly installments comprised of principal and interest unless otherwise noted.
(2) The aggregate carrying value for federal income tax purposes is approximately $14,858 at December 31, 1996.
(3) Mortgage has been extended on a month to month basis at the same terms while renegotiating mortgage
extension.
</TABLE>
CBL & ASSOCIATES PROPERTIES, INC,
<TABLE>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Beginning Balance $ 34,262 $ 32,651 $ 29,471
Additions 3,697 2,006 3,344
Other Reductions 19,908 0 0
Payments (3,193) 395 164
------------ ------------ ------------
Ending Balance $ 14,858 $ 34,262 $ 32,651
============ ============ ============
</TABLE>
<PAGE>
Exhibit
Number Description
- -------- -------------------------------------------------
3.1 Amended and Restated Certificate of Incorporation
of the Company(a)
3.2 Amended and Restated Bylaws of the Company(a)
4 See Amended and Restated Certificate of
Incorporation of the Company,
relating to the Common Stock(a)
10.1 Partnership Agreement of the Operating
Partnership(a)
10.2 Property Management Agreement between the
Operating Partnership and the Management
Company(a)
10.3 Property Management Agreement relating to Retained
Properties(a)
10.4.1 CBL & Associates Properties, Inc. 1993 Stock
Incentive Plan(a)
<PAGE>
10.4.2 Non-Qualified Stock Option Agreement, dated May
10, 1994, for Charles B. Lebovitz
10.4.3 Non-Qualified Stock Option Agreement, dated May
10, 1994, for James L. Wolford
10.4.4 Non-Qualified Stock Option Agreement, dated May
10, 1994, for John N. Foy
10.4.5 Non-Qualified Stock Option Agreement, dated May
10, 1994, for Jay Wiston
10.4.6 Non-Qualified Stock Option Agreement, dated May
10, 1994, for Ben S. Landress
10.4.7 Non-Qualified Stock Option Agreement, dated May
10, 1994, for Stephen D. Lebovitz
10.4.8 Stock Restriction Agreement, dated December 28,
1994, for Charles B. Lebovitz
10.4.9 Stock Restriction Agreement, dated December 2,
1994, for John N. Foy
10.4.10 Stock Restriction Agreement, dated December 2,
1994, for Jay Wiston
10.4.11 Stock Restriction Agreement, dated December 2,
1994, for Ben S. Landress
10.4.12 Stock Restriction Agreement, dated December 2,
1994, for Stephen D. Lebovitz
10.5 Purchase Agreement relating to Frontier Mall(b)
10.6.1 Purchase Agreement relating to Georgia Square
(JMB)(b)
10.6.2 Purchase Agreement Relating to Georgia Square
(JCPenney)(b)
10.7 Purchase Agreement relating to Post Oak Mall(b)
10.8 Indemnification Agreements between the Company and
the Management Company and their officers and
directors(a)
10.9.1 Employment Agreement for Charles B. Lebovitz(a)
10.9.2 Employment Agreement for James L. Wolford(a)
10.9.3 Employment Agreement for John N. Foy(a)
10.9.4 Employment Agreement for Jay Wiston(a)
10.9.5 Employment Agreement for Ben S. Landress(a)
10.9.6 Employment Agreement for Stephen D. Lebovitz(a)
10.10 Subscription Agreement relating to purchase of the
Common Stock and Preferred Stock of the Management
Company(a)
10.11 Option Agreement relating to certain Retained
Properties(a)
10.12 Option Agreement relating to Outparcels(a)
10.13.1 Property Partnership Agreement relating to
Hamilton Place(a)
10.13.2 Property Partnership Agreement relating to
CoolSprings Galleria(a)
10.14.1 Acquisition Option Agreement relating to Hamilton
Place(a)
10.14.2 Acquisition Option Agreement relating to the
Hamilton Place Centers(a)
10.14.3 Acquisition Option Agreement relating to the
Office Building(a)
10.15 Revolving Credit Agreement between the Operating
Partnership and First Tennessee Bank, National
Association, dated as of March 2, 1994(c)
10.16 Revolving Credit Agreement, dated July 28, 1994,
between the Operating Partnership and Wells Fargo
Advisors Funding, Inc., NationsBank of Georgia,
N.A. and First Bank National Association(d)
10.17 Revolving Credit Agreement, dated October 14,
1994, between the Operating Partnership and
American National Bank and Trust Company of
Chattanooga(e)
10.18 Revolving Credit Agreement, dated November 2,
1994, between the Operating Partnership and First
Tennessee Bank National Association(e)
10.19 Promissory Note Agreement between the Operating
Partnership and Union Bank of Switzerland dated
May 5, 1995(f)
10.20 Amended and Restated Loan Agreement between the
Operating Partnership and First Tennessee Bank
National Association dated July 12, 1995(g)
10.21 Second Amendment to Credit Agreement between the
Operating Partnership and Wells Fargo Realty
Advisors Funding, Inc. dated July 5, 1995(g)
10.22 Consolidation, Amendment, Renewal, and Restatement
of Notes between the Galleria Associates, L.P. and
The Northwestern Mutual Life Insurance Company(h)
10.23 Promissory Note Agreement between High Point
Development Limited Partnership and The
Northwestern Mutual Life Insurance Company
dated January 26, 1996(i)
<PAGE>
10.24 Promissory Note Agreement between Turtle Creek
Limited Partnership and Connecticut General Life
Insurance Company dated February 14, 1996(i)
10.25 Amended and Restated Credit Agreement between the
Operating Partnership and Wells Fargo Bank N.A.
etal dated September 26, 1996. (j)
10.26 Promissory Note Agreement between the Operating
Partnership and Compass Bank dated September 17,
1996. (j)
10.27 Promissory Note Agreement between St Clair Square
Limited Partnership and Wells Fargo National
Bank dated, December 11, 1996.
10.28 Promissory Note Agreement between Lebcon
Associates and Principal Mutual Life Insurance
Company dated, March 18, 1997.
10.29 Promissory Note Agreement between Westgate Mall
Limited Partnership and Principal Mutual Life
Insurance Company dated, February 16, 1997.
10.30 Amended and Restated Credit Agreement between the
Operating Partnership and First Tennessee Bank
etal dated February 24, 1997.
13 Company's 1996 Annual Report to Shareholders
21 Subsidiaries of the Company
23 Consent of Arthur Andersen LLP
24 Powers of Attorney
27 Financial Data Schedule
(a) Incorporated by reference to Post-Effective
Amendment No. 1 to the Company's Registration
Statement on Form S-11 (No. 33-67372), as filed
with the Commission on January 27, 1994.
(b) Incorporated by reference to Amendment No. 2 to
the Company's Registration Statement on Form S-11
(No. 33-67372), as filed with the Commission on
October 26, 1993.
(c) Incorporated herein by reference to the Company's
Annual Report in Form 10-K for the fiscal year
ended December 31, 1993.
(d) Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994.
(e) Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994.
(f) Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995.
(g) Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995.
(h) Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.
(i) Incorporated by reference to the Company's Annual
Report in Form 10-K for the fiscal year ended
December 31, 1995.
(j) Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996.
A management contract or compensatory plan or
arrangement required to be filed pursuant to Item
14(c) of this report.
PROMISSORY NOTE
$66,000,000.00 December __, 1996
FOR VALUE RECEIVED, the undersigned, ST. CLAIR SQUARE
LIMITED PARTNERSHIP, an Illinois limited partnership, whose sole
general partner is St. Clair Square GP, Inc., an Illinois
corporation (hereinafter called "Maker"), promises to pay to the
order of WELLS FARGO BANK, NATIONAL ASSOCIATION, a national
banking association, (hereinafter, together with all subsequent
holders of this Note, called "Payee") on or before the ____ day
of December, 1999 (the "Maturity Date"), as hereinafter provided,
the principal sum of SIXTY-SIX MILLION AND NO/100 DOLLARS
($66,000,000.00), or so much thereof as may actually be advanced
from time to time, together with interest on the unpaid principal
balance from time to time outstanding at the rate per annum equal
to the "Base Rate" of interest as it fluctuates; provided,
however, subject to the limitations stated herein, the Maker may
elect in accordance with the procedures set forth below to have
interest accrue and be paid on all or a portion of the
outstanding principal balance hereof at a rate per annum equal to
the "Fixed Increment Rate" (as defined below).
DEFINED TERMS:
"AGENT": Payee in its capacity as Agent for the Banks (as
defined below) pursuant to an Intercreditor Agreement entered
into pursuant to the Loan Agreement (as defined below) and in its
capacity as agent for the Banks under the Security Documents (as
defined below), and shall be deemed to refer to Payee in its
individual capacity as a Bank where the context so requires.
"BANKS": As that term is defined in the Loan Agreement.
"BASE RATE": An interest rate per annum, fluctuating daily,
equal to the higher of (a) the rate announced by Payee from time
to time at its principal office in San Francisco, California as
its prime rate in effect on such day, or (b) the Federal Funds
Rate (as defined below) in effect on such day plus one-half
percent (0.5%)(i.e. 50 base points) per annum. Neither the Base
Rate nor the prime rate of Payee is necessarily intended to be
the lowest rate of interest charged by Payee in connection with
extensions of credit. Each change in the prime rate or the
Federal Funds Rate shall result in a corresponding change in the
Base Rate and such change shall be effective on the effective
date of such change in the prime rate or Federal Funds Rate.
"FEDERAL FUNDS RATE": On any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%)
equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the "Business Day" (as
defined below) next succeeding such day, provided that (a) if
such day is not a Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day,
and (ii) if no such rate is published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the
average rate quoted to Payee on such day of such transactions as
determined by Payee.
"FIXED INCREMENT RATE": The "Fixed LIBO Rate" (as defined
below), plus one and one-half percent (1.50%) (i.e. 150 basis
points) per annum.
"FIXED LIBO RATE": With respect to any "Fixed Period" (as
defined below), the rate per annum which is equal to the quotient
of the average rate per annum (determined solely by Agent and
rounded upwards, if necessary, to the next higher 1/16 of 1%) at
which deposits in United States Dollars are offered to Payee by
brokers in the London interbank market as of 11:00 a.m. (London
time) two (2) Business Days prior to the first day of such Fixed
Period, in an amount equal to the "Fixed Increment" (as defined
below) so requested and for a period equal to such Fixed Period.
Each determination of the Fixed LIBO Rate by Agent shall, in
absence of manifest error, be conclusive and binding.
"RESERVE REQUIREMENT": The daily average during the Fixed
Period of the maximum aggregate reserve requirement (including
all basic, supplemental, marginal and other reserves and taking
into account any transitional adjustments or other schedule
changes in reserve requirements during the Fixed Period) which is
imposed under "Regulation D" (as defined below) against
"Eurocurrency liabilities" as defined in Regulation D. Each
determination by Agent of the Reserve Requirement shall, in the
absence of manifest error, be conclusive and binding.
"REGULATION D": Regulation D of the Board of Governors of
the Federal Reserve System from time to time in effect and shall
include any successor or other regulation relating to reserve
requirements applicable to member banks of the Federal Reserve
System.
"REGULATION K": Regulation K of the Board of Governors of
the Federal Reserve System from time to time in effect and shall
include any successor or other regulation relating to the
international and foreign activities of United States banking
organizations applicable to member banks of the Federal Reserve
System.
"LOAN": The loan advanced under this Note and evidenced
hereby and by the other Security Documents.
"EVENT OF DEFAULT": As that term is defined in the
"Mortgage" (as defined below).
"SECURITY DOCUMENTS": As that term is defined in the
Mortgage.
"FIXED INCREMENT": The portion of the outstanding principal
balance hereof specified by Maker to Agent effective as of the
applicable "Fixed Period Commencement Date" (as defined below);
provided, however, in no event shall any such Fixed Increment be
less than One Million and No/100 Dollars ($1,000,000.00).
"FIXED PERIOD": A period as designated by Maker which is
thirty (30), sixty (60), ninety (90), one hundred twenty (120),
one hundred eighty (180) or three hundred sixty (360) days,
commencing on the Fixed Period Commencement Date. Notwithstanding
the foregoing, in no event shall any Fixed Period extend beyond
the Maturity Date.
"FIXED PERIOD COMMENCEMENT DATE": The proposed commencement
of the applicable Fixed Period.
"BUSINESS DAY": (a) With respect to any advance, payment or
rate determination for a Fixed Increment, a day, other than a
Saturday or Sunday, on which Agent is open for business in San
Francisco and on which dealings in United States Dollars are
carried on in the London interbank market; and (b) for all other
purposes, any day of the week (but not a Saturday, Sunday or
holiday) on which the offices of Agent are open to the public for
carrying on substantially all of Agent's business functions.
Unless specifically referenced in this Note as a Business Day,
all references to "days" shall be to calendar days.
SELECTION OF FIXED INCREMENT RATE
If the Maker elects to have the Fixed Increment Rate apply,
it shall advise the Agent in writing of its election and the
Fixed Period and Fixed Increment for which the Maker desires said
rate to apply not later than 11:00 a.m., Pacific Standard Time or
Pacific Daylight Time (as applicable), three (3) Business Days
prior to the Fixed Period Commencement Date. Any such election
may be made only (i) once during any thirty (30) day period and
(ii) while no Event of Default is in existence and no event has
occurred which with notice and/or lapse of time would constitute
an Event of Default. After Maker has designated a Fixed Increment
to which the Fixed Increment Rate shall apply, such rate shall
apply to the Fixed Increment for the duration of the Fixed
Period. At any one time during the term hereof, no more than
three (3) Fixed Increments may be outstanding. If the Maker
elects the Fixed Increment Rate, but the applicable Fixed Period
will commence on a date which is not a Business Day, such Fixed
Period shall be deemed to commence on the next Business Day after
it would otherwise commence, and any interest which accrues
hereunder in the interim shall accrue at the Base Rate.
Notwithstanding anything contained herein to the contrary,
if the Maker elects the Fixed Increment Rate to apply but the
Payee is unable for any reason to obtain funds from Payee in the
amount of the Fixed Increment elected for the Fixed Period
elected, interest on such Fixed Increment shall accrue at the
Base Rate unless and until a new election of the Fixed Increment
Rate is made by Maker and the Payee is then able to obtain such
funds.
In the absence of an effective election by Maker of the
Fixed Increment Rate in accordance with the above procedures
prior to the expiration of the then current Fixed Period with
respect to any Fixed Increment, Payee shall be deemed to have
elected that such Fixed Increment thereafter bear interest at the
Fixed Increment Rate for a Fixed Period of thirty (30) days.
SPECIAL PROVISIONS APPLICABLE TO LIBO RATE PROVISIONS.
Notwithstanding any other provisions hereof:
A. CHANGE IN LAW: If, after the date hereof, the adoption
of any applicable law, rule or regulation, or any change therein,
or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by Payee with any request or directive (whether or not
having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for Payee
to make, maintain or fund advances at the Fixed Increment Rate,
Payee shall forthwith give notice thereof to Agent and Maker.
Before giving any notice Payee shall designate a different LIBO
lending office if such designation will avoid the need for giving
such notice and will not be otherwise disadvantageous to Payee
(as determined in good faith by Payee). Upon receipt of such
notice, Maker shall either (i) repay in full the then outstanding
principal amount of any Fixed Increment, together with accrued
interest thereon, or (ii) convert such Fixed Increments to the
Base Rate, either (a) on the last day of the then-current Fixed
Period applicable to such Fixed Increment if Payee may lawfully
continue to maintain and fund advances at the Fixed Increment
Rate to such day or (b) immediately if Payee may not lawfully
continue to fund and maintain advances at the Fixed Increment
Rate to such day.
B. INCREASED COSTS. If, after the date hereof, any
governmental authority, central bank or other comparable
authority, shall at any time impose, modify or deem applicable
any reserve (including, without limitation, the Reserve
Requirement and any other reserve imposed by the Board of
Governors of the Federal Reserve System), special deposit or
similar requirement against assets of, deposits with or for the
account of, or credit extended by, Payee, or shall impose on
Payee (or its eurodollar lending office) or the interbank
eurodollar market any other condition affecting Fixed Increments,
this Note, or Payee's obligation to permit Maker to elect to have
the Fixed Increment Rate apply to a Fixed Increment; and the
result of any of the foregoing is to increase the cost to Payee
of making or maintaining advances at the Fixed Increment Rate, or
to reduce the amount of any sum received or receivable by Payee
hereunder, by an amount deemed by Payee to be material, then,
within five (5) days after demand by Payee, Maker shall pay to
Agent, on behalf of Payee, such additional amount or amounts as
will compensate Payee for such increased cost or reduction.
Payee will use good faith and reasonable efforts to designate a
different LIBO lending office if such designation will avoid the
need for, or reduce the amount of, such compensation and will
not, in the sole opinion of Payee, be disadvantageous to Payee.
A certificate of Payee claiming compensation under this Paragraph
B and setting forth in reasonable detail the calculation of the
additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. If Payee demands
compensation under this Paragraph B, then Maker may at any time,
upon at least five (5) Business Days' prior notice to Agent and
Payee either (i) repay in full all then outstanding Fixed
Increments, together with accrued interest thereon on the date of
prepayment or (ii) convert such Fixed Increments to the Base
Rate; provided, however, that Maker shall be liable for any
"Consequential Loss" (as defined below) arising pursuant to such
actions, unless the requirement or condition giving rise to the
incurred costs is not generally applicable to lenders similar to
Payee, but rather is applicable solely to Payee.
C. PAYMENTS NOT AT END OF INTEREST PERIOD. If Maker makes
any payment of principal with respect to any Fixed Increment on
any day other than the last day of a Fixed Period applicable to
such Fixed Increment (other than any such payment required by
Paragraph A(ii)(b) above), then Maker shall reimburse Agent, on
behalf of Payee, on demand the Consequential Loss incurred by
Payee as a result of the timing of such payment. A certificate
of Payee setting forth in reasonable detail the basis for the
determination of the amount of Consequential Loss shall be
delivered to Agent and Maker by Payee and shall, in the absence
of manifest error, be conclusive and binding. Any conversion of
a Fixed Increment to the Base Rate on any day other than the last
day of the Fixed Period for such Fixed Increment shall be deemed
a payment for purposes of this Paragraph C.
D. EFFECT ON FIXED INCREMENTS. If notice has been given
pursuant to Paragraph A above requiring a Fixed Increment to be
repaid or converted, then unless and until Payee notifies Agent
and Maker that the circumstances giving rise to such repayment or
conversion no longer apply, Maker shall not have the right to
elect to have the Fixed Increment Rate apply. If Payee notifies
Agent and Maker that the circumstances giving rise to such
repayment or conversion no longer apply, Maker may thereafter
elect to have the Fixed Increment Rate apply in accordance with
the terms of this Note.
E. NOTICE. Payee shall notify Agent and Maker of any
event occurring after the date hereof entitling Payee to
compensation under Paragraph B above within 45 days after Payee
obtains actual knowledge thereof; provided that if Payee fails to
give such notice to Maker within 45 days after it obtains actual
knowledge of such an event, Payee shall, with respect to
compensation payable pursuant to such Paragraph B in respect of
any costs resulting from such event, only be entitled to payment
under Paragraph B for costs incurred from and after the date 45
days prior to the date that Payee gives such notice.
F. CONSEQUENTIAL LOSS. The term "Consequential Loss" shall
mean any loss, cost or expense incurred by Payee (or by Agent on
behalf of Payee) as a result of the payment or conversion of any
Fixed Increment on a day other than the last day of the Fixed
Period applicable thereto or in the redepositing, redeploying or
reinvesting the principal amount so paid or affected by the
timing of such conversion including the sum of (i) the interest
which, but for the payment or conversion Payee would have earned
in respect of such principal amount, reduced, if Payee is able to
redeposit, redeploy, or reinvest such principal amount by the
interest earned by Payee as a result of so redepositing,
redeploying or reinvesting such principal amount, plus (ii) any
expense or penalty incurred by Payee on redepositing, redeploying
or reinvesting such principal amount.
GENERAL PROVISIONS:
The Maturity Date for full repayment of the Loan may be
extended by Maker for one period of two (2) years, upon the
written request of Maker given not less than ninety (90) days and
not more than one-hundred twenty (120) days prior to the Maturity
Date, such extension being subject to satisfaction of the
following:
(a) Payment at the Maturity Date by Maker of an
extension fee equal to one-fourth percent (1/4%) of the sum of
(i) the then-outstanding principal amount of this Note as of the
date of the extension, plus (ii) any additional portion of the
principal amount of this Note which Maker is entitled to request
or Payee is obligated to advance;
(b) Payment at the Maturity Date by Maker of any tax,
together with penalties and interest thereon (if any), due to
either St. Clair County or the State of Illinois in connection
with the Loan or any extension thereof;
(c) The delivery by Maker to Agent of an extension
agreement and such other documentation as Agent may reasonably
require in connection therewith, all of which shall be in form
and substance acceptable to Agent, but none of which shall impose
terms materially different than those set forth herein and in the
Security Documents;
(d) The delivery by Maker to Agent of written consent
to such extension from all guarantors of this Note and from the
owner of the Mortgaged Property (as defined in the Mortgage) if
such owner is a party other than Maker;
(e) At the time of such notice and extension, there
shall exist no uncured Event of Default hereunder or under any
other Security Documents;
(f) Maker shall deliver to Agent an opinion of counsel
in form and substance acceptable to Agent, stating that, inter
alia, the Security Documents create valid and binding obligations
of the Maker and all guarantors, and the transactions evidenced
thereby violate no provisions of applicable law;
(g) Maker shall deliver to Agent an endorsement to or
reissuance of the existing title insurance policy held by Payee
in connection with the Loan, stating that the coverage afforded
thereby, or the agreements thereunder, shall not be affected
because of such extension;
(h) On the date that any written request for extension
is given by Maker to Agent, and on the date that such extension
is to commence, the delivery by Maker to Agent of evidence
satisfactory to Agent that the following minimum leasing
requirements exist:
(i) the four anchor tenants (i.e. Sears, Roebuck
& Co., Dillard Department Stores, Inc., Famous Barr and J.
C. Penney) are in possession of their space pursuant to
leases which are in full force and effect and are paying
rent; and
(ii) bona fide third party leases of eighty-five
percent (85%) of the rentable square footage of the
Improvements leased to mall shop tenants are in full force
and effect with tenants under said leases in possession of
their space and paying rent.
(i) An MAI appraisal of the Mortgaged Property and
Improvements (each as defined in the Mortgage) prepared by Agent
or any other party contracted by or acceptable to Agent within
sixty (60) days prior to the Maturity Date indicating a "Value"
(as that term is defined in the fourth sentence of Paragraph 6.5
of the Loan Agreement) of not less than the Value of the
Mortgaged Property and Improvements as determined by Agent and/or
Payee in approving the Loan, and indicating a then current loan
to value ratio of seventy-five percent (75%) or less;
(j) The delivery by Maker to Agent of all financial
information reasonably requested by Agent as provided for in the
Mortgage;
(k) Maker shall pay, at its sole cost and expense, all
costs incurred by Agent and/or Payee in connection with such
extension, including appraisal fees, and such other professional
services which Agent and/or Payee in good faith determines at the
time such extension is requested are necessary to satisfy any
Legal Requirement (as defined in the Mortgage) or to protect the
value of the Mortgaged Property and Improvements (including,
without limitation, inspection fees, survey and survey
recertification fees, reasonable legal fees and fees for
environmental studies and reports). Agent and/or Payee shall, at
Maker's request, give Maker a good faith estimate of the types of
professional services which will be required by Agent and/or
Payee, and the approximate costs thereof, in connection with a
contemplated extension request. The payment by Maker of these
costs and expenses shall not be credited, in any way or to any
extent, against any portion of the outstanding balance of this
Note; and
(l) The delivery of Maker to Agent of current
financial statements from all guarantors of this Note, in form
and substance reasonably acceptable to Payee.
Maker hereby agrees that neither Agent nor Payee shall have
any commitment or obligation to extend the Maturity Date beyond
December __, 1999 unless Maker satisfies all of the conditions
for extension set forth in paragraphs (a) through (k) above.
Interest based on a 360-day year will be accrued on the
number of days funds are actually outstanding. Interest shall be
calculated on a daily basis and shall be payable monthly on the
first day of each and every month following the date hereof until
the Maturity Date, at which time all accrued and unpaid interest
and the unpaid principal balance hereof shall be due and payable
in full.
All payments on this Note shall, at the option of Agent, be
applied first to the payment of accrued but unpaid interest, and
any remainder shall be applied to reduction of the principal
balance hereof. All payments hereunder shall be made to Agent at
c/o Wells Fargo Bank, National Association, 111 Sutter Street,
8th Floor, San Francisco, California 94104, or at such other
address as Payee and Agent may from time to time designate in
writing to Maker.
Except as otherwise specifically provided in the Security
Documents, Maker and any endorsers or guarantors hereof jointly
and severally waive presentment and demand for payment, notice
of intent to accelerate maturity, notice of acceleration of
maturity, protest or notice of protest and nonpayment, bringing
of suit and diligence in taking any action to collect any sums
owing hereunder or in proceeding against any of the rights and
properties securing payment hereof. Maker and any endorsers or
guarantors hereof agree that the time for any payments hereunder
may be extended from time to time without notice and consent to
the acceptance of further security or the release of any existing
security for this Note, all without in any manner affecting their
liability under or with respect to this Note. No extension of
time for the payment of this Note or any installment hereof shall
affect the liability of Maker under this Note even though Maker
is not a party to such agreement.
If a default is made in the payment, in whole or in part, of
any sum provided for herein when due and such default is not
cured within fifteen (15) days after written notice thereof from
Agent to Maker, or if an Event of Default shall occur under any
of the Security Documents, then Agent may, at its option, without
further notice or demand, except as otherwise specifically
provided in the Security Documents, on behalf of Payee declare
the unpaid principal balance and accrued interest on this Note at
once due and payable, foreclose all deeds of trust, mortgages and
liens securing payment hereof, pursue any and all other rights,
remedies, and recourses available to Agent and/or Payee, or
pursue any combination of the foregoing, all remedies hereunder
and under the Security Documents being cumulative.
Failure to exercise any of the foregoing options shall not
constitute a waiver of the right to exercise the same or any
other option at any subsequent time in respect to any other
event. The acceptance by Agent or Payee of any payment hereunder
that is less than payment in full of all amounts due and payable
at the time of such payment shall not constitute a waiver of the
right to exercise any of the foregoing options at that time or at
any subsequent time or nullify any prior exercise of any such
option without the express written consent of Agent.
If any payment required under this Note is not paid within
fifteen (15) days after written notice has been given to Maker
that the same has become due and payable, Agent may require a
late charge for late payment to compensate for the Payee's loss
of use of funds and for the expenses of handling the delinquent
payment, in an amount not to exceed four percent (4%) of such
delinquent payment. Said late charge shall be paid in any event
not later than the due date of the next subsequent installment of
principal and/or interest. In the event the maturity of the
indebtedness hereunder is accelerated by the Agent on behalf of
Payee, this paragraph shall apply only to payments overdue prior
to the time of such acceleration. This paragraph shall not be
deemed to be a waiver of Agent's right on behalf of Payee to
accelerate payment of this Note under the terms hereof.
Maker shall have the right prior to the Maturity Date, upon
ten (10) days' prior written notice, to prepay all or any portion
(except any portion constituting a Fixed Increment during its
applicable Fixed Period) of the principal balance owing hereunder
from time to time without the payment of any premium or penalty;
provided, however, that (a) if such prepayment is only a partial
payment of the then outstanding principal balance hereof, such
prepayment shall be accompanied by the payment of all accrued but
unpaid interest on the portion of the outstanding principal
balance of the Note being so paid through the date the prepayment
is made, and (b) for same day credit all monies shall be received
at Agent's office at c/o Wells Fargo Bank, National Association,
111 Sutter Street, 8th Floor, San Francisco, California 94104 on
or before 11:00 a.m., Pacific Standard Time or Pacific Daylight
Time (as applicable). All monies received after this time shall
be deemed received on the following Business Day and shall
continue to accrue interest at the Base Rate to the date funds
are deemed received.
Maker shall have the right to prepay any Fixed Increment
during its applicable Fixed Period only upon payment to Agent, on
behalf of Payee, at the time of such prepayment, of an amount
(the "Fixed Increment Liquidation Amount") equal to the excess of
(i) the interest that would have been payable by Maker for such
Fixed Increment for the remainder of the applicable Fixed Period
at the applicable Fixed Increment Rate had such prepayment not
been made by Maker, over (ii) the interest to be earned on sums
equal to the amount of such Fixed Increment for the remainder of
the applicable Fixed Period as invested by Payee in an interest
bearing obligation of Payee's selection, in its sole and absolute
discretion.
In addition, in any such event, the provisions of the
immediately preceding paragraph hereto (relating to the
obligation of Maker to pay to Agent on behalf of Payee certain
amounts in the event of the prepayment of a Fixed Increment prior
to the last day of the applicable Fixed Period) shall apply with
respect to any Fixed Increment prepaid by Maker prior to the last
day of the applicable Fixed Period as a result of the
acceleration by Agent on behalf of Payee of the outstanding
principal balance hereof.
Upon the occurrence of an Event of Default, at the option of
the Agent, on behalf of Payee, all amounts payable hereunder or
under the Security Documents shall bear interest for the period
beginning with the date of occurrence of such Event of Default at
a rate of interest per annum (the "Default Rate"), payable on the
first day of each and every month, equal to three percent (3%)
above the Base Rate, as it fluctuates, or three percent (3%)
above the Fixed Increment Rate, whichever is applicable.
Notwithstanding any other provision of this Note to the
contrary, from and after the Maturity Date of this Note, or such
earlier date as the unpaid principal owing on this Note becomes
due and payable upon acceleration or otherwise pursuant to the
terms hereof, the whole of the unpaid principal and, to the
fullest extent permitted by law, interest owing on this Note,
shall thereafter bear interest until paid in full at the Default
Rate.
All amounts payable hereunder are payable in lawful money of
the United States of America. Maker agrees to pay all costs of
collection hereof when incurred, including reasonable attorneys'
fees, whether or not any legal action shall be instituted to
enforce this Note.
This Note is issued pursuant to the Loan Agreement of even
date herewith executed by Maker, Agent and the Banks party
thereto (the "Loan Agreement") and is secured, inter alia, by
that certain Mortgage, Security Agreement and Assignment of
Leases and Rents of even date herewith from Maker to Agent, for
the benefit of Agent on behalf of the Banks (the "Mortgage"),
covering certain real and personal property situated in St. Clair
County, Illinois, as more particularly described therein. All of
the agreements, conditions, covenants, warranties,
representations, provisions and stipulations made by or imposed
upon Maker under the Security Documents are hereby made a part of
this Note to the same extent and with the same force and effect
as if they were fully inserted herein, and Maker covenants and
agrees to keep and perform the same, or cause them to be kept and
performed, strictly in accordance with their terms. This Note is
given for business purposes and none of the proceeds of the Loan
or this Note will be used for personal, family or household
purposes.
If this Note is executed by more than one party, each such
party shall be jointly and severally liable for the obligations
of Maker under this Note. If the Maker is a partnership, each
general partner of Maker shall be jointly and severally liable
hereunder, and each such general partner hereby waives any
requirement of law that, upon an occurrence of an Event of
Default hereunder or under any of the Security Documents, Agent
or Payee exhaust any assets of Maker before proceeding against
such general partner's assets.
MAKER AGREES THAT TIME IS OF THE ESSENCE IN THE PERFORMANCE
OF ALL OBLIGATIONS HEREUNDER.
This Note shall be governed by and construed according to
the laws of the State of Georgia.
It is expressly stipulated and agreed to be the intent of
Maker, Agent and Payee at all times to comply with the applicable
law now or hereafter governing the interest payable on this Note
or the Loan (or applicable United States federal law to the
extent that it permits the Payee to contract for, charge, take,
reserve, or receive a greater amount of interest than under
Georgia law). If the applicable law is ever revised, repealed,
or judicially interpreted so as to render usurious any amount
called for under this Note, or under any of the Security
Documents, or contracted for, charged, taken, reserved or
received with respect to the Loan, or if Agent's or Payee's
exercise of the option herein contained to accelerate the
maturity of this Note, or if any prepayment by Maker results in
Maker's having paid any interest in excess of that permitted by
applicable law, then it is Maker's, Agent's and Payee's express
intent that all excess amounts theretofore collected by Agent or
Payee be credited on the principal balance of this Note (or, if
the Note has been paid in full, refunded to Maker), and the
provisions of this Note and the Security Documents immediately be
deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of
any new document, so as to comply with the then applicable law,
but so as to permit the recovery of the fullest amount otherwise
called for hereunder and thereunder.
All sums paid or agreed to be paid to Agent on behalf of
Payee for the use, forbearance or detention of the indebtedness
evidenced hereby and by the other Security Documents shall, to
the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of
interest on account of such indebtedness does not exceed the
usury ceiling from time to time in effect and applicable to the
Loan for so long as debt is outstanding under the Loan.
The term "Maker" as used in this Note shall mean and have
reference to, collectively, all parties and each of them directly
or indirectly obligated for the indebtedness evidenced by this
Note, whether as principal maker, endorser, guarantor, or
otherwise, together with all parties who have acquired the
property conveyed by the Mortgage or any portion or portions
thereof, together with the respective heirs, administrators,
executors, legal representatives, successors and assigns of each
of the foregoing.
All notices hereunder shall be given at the following
addresses: If to Maker, c/o St. Clair Square GP, Inc., One Park
Place, 6148 Lee Highway, Chattanooga, Tennessee 37421,
Attention: President. If to Agent or Payee, Suite 1805, 2859
Paces Ferry Road, Atlanta, Georgia 30339, with a copy of all
notices to Chief Credit Officer - Real Estate Group, Wells Fargo
Bank, National Association, 420 Montgomery Street, 6th Floor, San
Francisco, California 94163. Either party may change their
address for notice purposes upon giving thirty (30) days' prior
notice thereof to the other party in accordance with this
paragraph. All notices given hereunder shall be in writing and
shall be considered properly given if mailed by first-class
United States mail, postage prepaid, registered or certified with
return receipt requested, if sent by national overnight courier
providing documentation of receipt, if delivered in person, or if
sent by prepaid telegram, telex or telecopy, with a copy of any
communication so sent by telegram, telex or telecopy being sent
by mail, overnight courier or personal delivery as aforesaid.
Any notice mailed as above provided shall be effective three (3)
business days after its deposit in the custody of the United
States Postal Service; all other notices shall be effective upon
receipt.
Whenever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note shall be
prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provisions of this Note.
IN WITNESS WHEREOF, this Note has been duly executed under
seal in Chattanooga, Tennessee on the date first above written.
"MAKER"
ST. CLAIR SQUARE LIMITED
PARTNERSHIP, an Illinois limited
partnership
By: St. Clair Square GP, Inc., an
Illinois corporation, as sole
general partner of St. Clair
Square Limited Partnership
By:________________________
John N. Foy
Its Executive Vice President
Attest:____________________
Joan C. Perry
Its: Assisitant Secretary
(CORPORATE SEAL)
This signature page is attached to and is a part of that
certain Promissory Note in the original principal amount of
Sixty-Six Million and No/100 Dollars ($66,000,000.00) from St.
Clair Square Limited Partnership, as "Maker," to Wells Fargo
Bank, National Association, as "Payee."
SECURED PROMISSORY NOTE
D- 751389
$75,000,000.00 March 24, 1997
FOR VALUE RECEIVED, the undersigned, LEBCON ASSOCIATES, a
Tennessee limited partnership, hereby promises to pay to the
order of PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an Iowa
corporation, herein sometimes referred to as "Noteholder", which
term shall also include any future holder of this Note, with its
Home Office at 711 High Street, Des Moines, Iowa 50392, by wire
transfer to Principal Mutual Life Insurance Company's Account
Number 014752 at Norwest Bank Iowa, N.A., ABA #073000228, 7th and
Walnut Streets, Des Moines, Iowa, identifying funds as to the
undersigned and loan number D-751389 with instructions to notify
the Noteholder's Commercial Real Estate Servicing Department or
at such other place as the holder of this Note may designate, the
principal sum of Seventy-Five Million and 00\100 Dollars
($75,000,000.00)(the "Loan") or so much thereof as shall from
time to time have been advanced, together with interest on the
unpaid balance of said sum from the date hereof at the rate of
seven percent (7%) per annum, computed on the basis of a 360 day
year composed of twelve 30-day months, in installments as
follows:
Beginning on the fifteenth day of the first month
following the date hereof, principal and interest
shall be due and payable in installments of Five
Hundred Thirty Thousand Eighty-Four and 39/100
Dollars ($530,084.39), with an installment in a
like amount due and payable on the same day of
each month thereafter until said principal and
interest are fully paid, except that all remaining
principal and interest shall be due and payable on
the fifteenth day of March, 2007 ("Maturity
Date"). Each installment shall be credited first
upon interest then accrued and the remainder upon
principal, and interest shall cease to accrue upon
principal so credited. If on the date of the
first installment, interest is accrued for more or
less than one installment period, the amount of
said installment shall be increased or decreased
by the amount that the interest accrued exceeds or
is less than the interest for one installment
period based on the actual number of days elapsed
to the date of said installment. All principal
and interest shall be paid in lawful money of the
United States of America.
No privilege is reserved by the undersigned to prepay any
principal of this Note prior to the Maturity Date.
Notwithstanding the foregoing, the privilege is reserved by the
undersigned, after giving thirty (30) days' prior written notice
to the holder of this Note, to prepay in full, but not in part,
all principal and interest to the date of payment, along with all
sums, amounts, advances, or charges due under any instrument or
agreement by which this Note is secured, on any date prior to the
Maturity Date provided such prepayment shall be accompanied by
the payment of a "Make Whole Premium", as that term is hereafter
defined. The Make Whole Premium shall be the greater of one
percent (1%) of the principal amount to be prepaid or a premium
calculated as provided in subparagraphs (a) through (c) below:
(a) Determine the "Reinvestment Yield." The Reinvestment
Yield will be equal to the yield on the 6 1/4 U.S.
Treasury Issue maturing February 2007n ("primary issue")*
published one week prior to the date of prepayment and
converted to an equivalent monthly compounded nominal
yield plus fifty (50) basis points (provided that in the
event of prepayment resulting from default by the
undersigned as hereafter provided, said fifty (50) basis
point addition shall not be made).
*In the event there is no market activity involving the
primary issue at the time of prepayment, the holder of this
Note shall choose a comparable Treasury Bond, Note or Bill
("secondary issue") which the holder of this Note deems to be
similar to the primary issue's characteristics (i.e., rate,
remaining time to maturity, yield).
(b) Calculate the "Present Value of the Mortgage." The
Present Value of the Mortgage is the present value of the
payments to be made in accordance with this Note (all
installment payments and any remaining payment due on the
Maturity Date) discounted at the Reinvestment Yield for
the number of months remaining from the date of
prepayment to the Maturity Date.
(c) Subtract the amount of the prepaid proceeds from the
Present Value of the Mortgage as of the date of
prepayment. Any resulting positive differential shall be
the premium.
The undersigned agrees that if the holder of this Note
accelerates the whole or any part of the principal sum evidenced
hereby, or applies any proceeds in either case as a result of a
default, pursuant to the provisions of the Trust Deed, Security
Agreement and Assignment of Rents of even date herewith between
the undersigned and Principal Mutual Life Insurance Company
("Mortgage") or if Noteholder applies proceeds pursuant to any
letter of credit requirement or escrow requirement as additional
security for the Loan as a result of a default by the undersigned
under any agreement executed by and between the undersigned and
Noteholder in connection with such letter of credit or escrow
requirement or under the Loan Documents,(as hereinafter defined)
in connection therewith, the undersigned waives any right to
prepay said principal sum in whole or in part without premium and
agrees to pay, as yield maintenance protection and not as a
penalty, the "Make Whole Premium" defined herein.
If any payment of principal, interest or premium is not made
when due, damages will be incurred by the holder of this Note,
including additional expense in handling overdue payments, the
amount of which is difficult and impractical to ascertain. The
undersigned therefore agrees to pay, upon demand, the sum of two
cents ($.02) for each one dollar ($1.00) of each said payment
which becomes overdue as a reasonable estimate of the amount of
said damages, subject, however, to the limitations contained in
the second succeeding paragraph.
If any payment of principal, interest or premium is not made
for a period exceeding ten (10) days after due, subject to the
provisions of paragraph 10(a) of the Mortgage, including without
limitation any notice or cure periods provided therein, or if any
Event of Default has occurred or is continuing under any
instrument by which this Note is, or may hereafter be, secured,
the entire principal balance, interest accrued as of the date of
the Event of Default, and premium, whether or not otherwise then
due, shall at the option of the holder of this Note, become
immediately due and payable without demand or notice, and whether
or not the holder of this Note has exercised said option,
interest shall accrue on the entire principal balance, interest
accrued as of the date of the Event of Default, and any premium
then due, at a rate equal to the lesser of (i) two percent (2%)
per annum above the then applicable rate of interest payable
under this Note or (ii) the maximum rate allowed by applicable
law until fully paid or if the holder of this Note has not
exercised said option, for the duration of such Event of Default.
Notwithstanding anything herein or in any of the Loan
Documents, as that term is hereinafter defined, to the contrary,
no provision contained herein or therein which purports to
obligate the undersigned to pay any amount of interest or any
fees, costs or expenses which are in excess of the maximum
permitted by applicable law, shall be effective to the extent it
calls for the payment of any interest or other amount in excess
of such maximum. Any such excess shall, at the option of the
holder of this Note, either be paid to the undersigned or be
credited to principal. All agreements between the undersigned
and the holder hereof, whether now existing or hereafter arising
and whether written or oral, are hereby limited so that in no
contingency, whether by reason of demand for payment or
acceleration of the maturity hereof or otherwise, shall the
interest contracted for, charged or received by the holder hereof
exceed the maximum amount permissible under applicable law. If,
from any circumstance whatsoever, interest would otherwise be
payable to the holder hereof in excess of the maximum lawful
amount, the interest payable to the holder hereof shall be
reduced to the maximum amount permitted under applicable law; and
if from any circumstance the holder hereof shall ever receive
anything of value deemed interest by applicable law in excess of
the maximum lawful amount, an amount equal to any excessive
interest shall, at the option of the holder hereof, be applied to
the reduction of the principal hereof and not to the payment of
interest, or if such excessive interest exceeds the unpaid
balance of principal hereof such excess shall be refunded to the
undersigned. This paragraph shall control all agreements between
the undersigned and the holder hereof.
The undersigned and any endorsers or guarantors waive
presentment, protest and demand, notice of protest, demand and
dishonor and nonpayment, and agree the due date of this Note or
any installment may be extended without affecting any liability
hereunder, and further promise to pay all reasonable costs and
expenses, including attorney's fees, incurred by the holder
hereof in connection with any default or in any proceeding to
interpret and/or enforce any provision of this Note or any
instrument by which it is secured. No release of the undersigned
from liability hereunder shall release any other maker, endorser
or guarantor hereof.
This Note is secured by instruments and agreements of even
date herewith executed and delivered by the undersigned to
Principal Mutual Life Insurance Company creating among other
things legal and valid encumbrances on and an assignment of all
of the undersigned's interest in any leases of certain Premises
located in the County of Hamilton, City of Chattanooga, State of
Tennessee. Terms used herein which are defined in such
instruments or agreements and not otherwise defined herein have
the same definition as in such instruments and agreements. In no
event shall such documents be construed inconsistently with the
terms of this Note, and in the event of any discrepancy between
any such documents and this Note, the terms hereof shall govern.
The proceeds of this Note are to be used for business,
commercial, investment or other similar purposes, and no portion
thereof will be used for any personal, family or household use.
This Note shall be governed by and construed in accordance with
the laws of the State where the Premises is located.
Notwithstanding any provision to the contrary in this Note,
the Mortgage of even date herewith, or any other instrument or
agreement entered into in connection with the closing of the Loan
or by which this Note is evidenced or secured (collectively
referred to herein as the "Loan Documents"), and except as
otherwise provided in this paragraph, the liability of the
undersigned under the Loan Documents shall be limited to (i) the
interest of the undersigned in the Premises and the rents,
issues, proceeds and profits thereof in accordance with the lien
or security interest created pursuant to the Loan Documents and
(ii) any escrow amount or letter of credit provided to or for the
benefit of Noteholder to the extent and in accordance with the
terms and conditions of the Loan Documents. In the event of
foreclosure of the liens evidenced by the Loan Documents, no
judgment for any deficiency upon the indebtedness evidenced by
the Loan Documents shall be sought or obtained by the holder of
this Note against the undersigned or any of its partners or any
of its partners shareholders, directors, officers, agents,
trustees or employees. Nothing contained in this paragraph
shall:
(a) prevent the failure of the undersigned to make any
payment or to perform any obligation under any of the
Loan Documents within the time periods provided therein
from being an Event of Default thereunder;
(b) be construed as limiting the obligations of the
undersigned to any tenant under any lease of the Premises
(provided, however, the undersigned's personal liability
to Noteholder with respect to the foregoing shall be
subject to the provisions of subparagraph (e) below);
(c) in any way limit or impair the lien or enforcement of
the Loan Documents pursuant to the terms thereof; or
(d) limit the obligations of any indemnitor or guarantor,
if any, of obligations of the undersigned under the Loan
Documents.
Notwithstanding the foregoing paragraph, the undersigned (but
no general or limited partner of the undersigned or any of their
partner's, shareholders, directors, officers, agents, trustees or
employees)shall be personally liable to the holder of this Note
for any loss or damage incurred by Noteholder as a result of or
arising out of any of the following:
(a) failure of the undersigned to comply with paragraphs
2 (taxes and assessments) and 3 (insurance) of the
Mortgage;
(b) any event or circumstance for which the undersigned
indemnifies the holder of this Note under paragraph 1(m)
(environmental indemnity) of the Mortgage or under that
certain Environmental Indemnity Agreement from the
undersigned for the benefit of Noteholder dated of even
date herewith;
(c) failure of the undersigned to pay utilities on or
before the date such payments are due;
(d) operation and maintenance of the Premises;
(e) any sums expended by the holder of this Note in
fulfilling the obligations of the undersigned as lessor
under any lease of the Premises prior to a sale of the
Premises pursuant to foreclosure or power of sale, a bona
fide sale (permitted by the terms of paragraph 1(l) of
the Mortgage or consented to in writing by the holder of
this Note) to an unrelated third party or upon conveyance
to the holder of this Note of the Premises by a deed
acceptable to the holder of this Note in form and content
(each of which shall be referred to as a "Sale" for
purposes of this paragraph) or expended by the holder of
this Note after a Sale of the Premises for obligations of
the undersigned which arose prior to a Sale of the
Premises;
(f) any rents or other income regardless of type or
source of payment (including, but not limited to, CAM
charges, lease termination payments, refunds of any type,
prepayment of rents, settlements of litigation, or
settlements of past due rents) from the Premises which
the undersigned has received in cash or in any form
representating value to the undersigned or any of its
affiliates, as that term is defined in the Mortgage,
after an Event of Default under the Loan Documents or an
event which with the passage of time, the giving of
notice or both would constitute an Event of Default,
either or both of which has occurred and is continuing,
and which are not applied to (A) expenses of operation
and maintenance of the Premises and the taxes,
assessments, utility charges and insurance of the
Premises, taking into account sufficient reserves for the
same and for replacements and recurring items, and (B)
payment of principal, interest and other charges when due
under the Loan Documents; provided that any payments to
parties related to the undersigned shall be considered
expenses of operation only if they are at market rates or
fees consistent with market rates or fees for the same or
similar services;
(g) any security deposits of tenants actually received by
the undersigned or its predecessor-in-title not turned
over to the holder of this Note upon conveyance of the
Premises to the holder of this Note pursuant to
foreclosure or power of sale or by a deed acceptable to
the holder of this Note in form and content;
(h) misapplication or misappropriation of tax reserve
accounts, tenant improvement reserve accounts, security
deposits, prepaid rents or other similar sums paid to or
held by the undersigned or any other entity or person in
connection with the operation of the Premises;
(i) any negligent or intentional acts or omissions
committed or allowed by the undersigned constituting
waste with respect to the Premises; and
(j) any insurance or condemnation proceeds or other
similar funds or payments received by the undersigned and
applied by the undersigned in a manner other than as
expressly provided in the Loan Documents.
Notwithstanding the foregoing, the undersigned's personal
liability with respect to subparagraphs (a), (c), (d) and
(e) above shall be limited to the extent that rents,
issues, proceeds and profits from the Premises are
actually received by the undersigned (A) during the
twelve (12) month period prior to an Event of Default
and\or (B) after an Event of Default under the Loan
Documents has occurred, and such rent, issues, proceeds
and profits are not first applied to (y) expenses for the
operation or maintenance of the Premises and the taxes,
assessments, utility charges and insurance of the
Premises, taking into account sufficient reserves for the
same and for replacements and recurring items, and (z)
payment of principal, interest and other charges when due
under the Loan Documents and further provided that any
payments to parties related to the undersigned shall be
considered expenses of operation only if they are at
market rates or fees consistent with market rates or fees
for the same or similar services .
Notwithstanding anything to the contrary in the Loan
Documents, the limitation on liability contained in the
preceding paragraphs SHALL BECOME NULL AND VOID and shall
be of no further force and effect (and provided that
liability shall in no event and under no circumstance
extend to any general or limited partner of the
undersigned or any their partner's shareholders,
directors, officers, agents, trustees or employees) in
the event:
(a) of any breach or violation of paragraph 1(l) (due on
sale or encumbrance) of the Mortgage which constitutes an
Event of Default under the Loan Documents, other than the
filing of a nonmaterial mechanic's lien affecting the
Premises, the granting of any utility or other
nonmaterial easement or servitude burdening the Premises,
or any other transfer or encumbrance not in the nature of
a transfer, reduction or impairment of any material
economic interest in the Premises; or
(b) of any fraud or willful misrepresentation by the
undersigned regarding the Premises, the making or
delivery of any of the Loan Documents or in any materials
or information provided by the undersigned in connection
with the Loan.
If more than one, all obligations and agreements of the
undersigned are joint and several.
This Note may not be changed or terminated orally, but only
by an agreement in writing and signed by the party against whom
enforcement of any waiver, change, modification or discharge is
sought. All of the rights, privileges and obligations hereunder
shall inure to the benefit of the heirs, successors and assigns
of the holder hereof and shall bind the heirs, successors and
assigns of the undersigned.
If any provision of this Note shall, for any reason, be held
to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but
this Note shall be construed as if such invalid or unenforceable
provision had never been contained herein.
[Signatures commence on the following page]
LEBCON ASSOCIATES, a Tennessee
limited partnership
By: CBL & Associates Limited
Partnership, a Delaware
limited partnership,
general partner
By: CBL & Associates
Properties, Inc., a
Delaware corporation
By: _________________
Name: John N. Foy
Title: Executive Vice President
Principal Mutual Life Insurance Company joins in the execution of
this Secured Promissory Note as Noteholder solely to evidence its
consent to the limitations on personal liability of Lebcon
Associates, CBL & Associates Limited Partnership, CBL &
Associates Properties, Inc., and their shareholders, directors,
officers, agents, trustees or employees as more particularly
described above and Principal Mutual Life Insurance Company's
execution of this Note shall not be deemed to bring Principal
Mutual Life Insurance Company within the meaning of the term
"undersigned" set forth above.
PRINCIPAL MUTUAL LIFE
INSURANCE COMPANY, an Iowa
corporation
By ______________________
JoEllen J. Watts
Its ___Counsel________
By ______________________
Dennis D. Ballard
Its ___Counsel________
SECURED PROMISSORY NOTE
D- 751346
$52,000,000.00 February 18, 1997
FOR VALUE RECEIVED, the undersigned, WESTGATE MALL LIMITED
PARTNERSHIP, a South Carolina limited partnership, hereby
promises to pay to the order of PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY, an Iowa corporation, herein sometimes referred to as
"Noteholder", which term shall also include any future holder of
this Note, with its Home Office at 711 High Street, Des Moines,
Iowa 50392, by wire transfer to Principal Mutual Life Insurance
Company's Account Number 014752 at Norwest Bank Iowa, N.A., ABA
#073000228, 7th and Walnut Streets, Des Moines, Iowa, identifying
funds as to the undersigned and loan number D-751346 with
instructions to notify the Noteholder's Commercial Real Estate
Servicing Department or at such other place as the holder of this
Note may designate, the principal sum of Fifty-Two Million and
00\100 Dollars ($52,000,000.00)(the "Loan") or so much thereof as
shall from time to time have been advanced, together with
interest on the unpaid balance of said sum from the date hereof
computed on the basis of a 360 day year composed of twelve 30-day
months, until paid at the rate or rates of interest and in the
manner specified as follows:
(a) INITIAL RATE OF INTEREST\PAYMENT. Commencing on the
fifteenth day of the first month following the date hereof and
continuing on the fifteenth day of each and every month
thereafter to and including the fifteenth day of February, 2002,
except as hereinafter provided, the undersigned shall pay monthly
installments of principal and interest, in the amount of Four
Hundred One Thousand Five Hundred Ninety-Six and 27\100 Dollars
($401,596.27) with interest computed at the rate of six and
ninety-five one hundredths percent (6.95%) per annum (the
"Initial Rate of Interest") on the outstanding principal balance
from the date hereof until the earlier to occur of (i) the date,
if ever, on which the First Adjusted Interest Rate, as that term
is hereinafter defined, becomes effective pursuant to the terms
hereof or (ii) payment in full of this Note. If on the date of
the first installment, interest is accrued for more or less than
one installment period, the amount of said installment shall be
increased or decreased by the amount that the interest accrued
exceeds or is less than the interest for one installment period
based on the actual number of days elapsed to the date of said
installment.
(b) NOTICE OF FIRST TREASURY ISSUE AND POINT SPREAD.
(i) On or before August 15, 2001, Noteholder shall
notify the undersigned in writing, in accordance with the notice
provisions contained in the mortgage securing this Note (the
"Mortgage"), of (i) the applicable 5-year U.S. Treasury Issue as
then shown on the Telerate Financial Information Network System
selected by Noteholder with a maturity closest to the date on
which the Second Adjusted Interest Rate, as that term is
hereinafter defined, becomes effective, or if the Telerate
Financial Information Network System is no longer in operation,
as shown in an equivalent report service selected by Noteholder
(the "First Treasury Issue") and (ii) the basis point (a basis
point shall be equal to 1/100 of 1%) spread established by
Noteholder based upon its evaluation of the then current
financial performance and projected risk of the security for the
Loan, (the "First Point Spread") which Noteholder would use to
establish the First Adjusted Interest Rate, whether such First
Adjusted Interest Rate is less than, equal to or greater than the
Initial Rate of Interest under this Note. Noteholder's review of
the financial performance and projected risk of the security for
the Loan shall encompass various factors, including but not
limited to the term and amount of the Loan, contract debt service
coverage, loan-to-value ratio, economic debt service coverage,
tenant occupancy, frequency of tenant rollover, and financial
strength and stability of tenants.
(ii) (A) In the event the undersigned shall elect to
accept the First Point Spread, the undersigned shall so notify
Noteholder in writing of said election ("Maker's Notice of
Acceptance of the First Point Spread"), in accordance with the
notice provisions contained in the Mortgage, by not later than
the fifteenth day of November, 2001.
(ii) (B) In the event the undersigned shall elect to
reject the First Point Spread, by written notice to Noteholder,
or in the event Noteholder has not received Maker's Notice of
Acceptance of the First Point Spread prior to November 16, 2001,
then in either of such events, notwithstanding anything herein
contained to the contrary, the entire principal balance of this
Note, together with all accrued and unpaid interest hereon
computed at the Initial Rate of Interest and any other payments
due hereunder, except the Make Whole Premium hereinafter
described, shall become due and payable without offset and
without notice on March 15, 2002.
(c) NOTICE OF FIRST SELECTION DATE. In the event the
undersigned has notified the Noteholder of Maker's Notice of
Acceptance of the First Point Spread pursuant to subparagraph (b)
(ii) (A) above, the undersigned shall notify Noteholder in
writing ("Maker's Notice of First Selection Date"), in accordance
with the notice provisions contained in the Mortgage, of the
undersigned's proposed date on which to establish the First
Adjusted Interest Rate (any such date proposed by the undersigned
or Noteholder, the "First Selection Date"). Such First Selection
Date shall be mutually acceptable to the undersigned and
Noteholder and shall not be (x) prior to November 15, 2001; (y)
earlier than Maker's Notice of First Selection Date, or (z) later
than January 20, 2002 and, to the extent mutually agreed upon by
the undersigned and Noteholder, shall be deemed the "Approved
First Selection Date". Notwithstanding the above, for purposes
of this subparagraph (c), Noteholder will accept a facsimile of
Maker's Notice of First Selection Date provided a hard copy of
the same is received by Noteholder the following day via a
reputable overnight delivery service. If Noteholder has not
received Maker's Notice of First Selection Date on or before
January 20, 2002 and/or Noteholder and the undersigned have not
mutually agreed upon the First Selection Date, Noteholder shall
establish the First Adjusted Interest Rate on January 20, 2002
using the then current yield in effect at 11:00 A.M. Central
Standard Time on January 20, 2002 on the First Treasury Issue and
the First Adjusted Interest Rate shall be equal to the sum of (i)
such current yield on the First Treasury Issue and (ii) the First
Point Spread, rounded up to the nearest 1/1000 of 1%
(hereinbefore and hereinafter the "First Adjusted Interest Rate")
and Noteholder shall notify the undersigned in writing, in
accordance with the notice provision contained in the Mortgage,
of the First Adjusted Interest Rate, but in any event the rate
shall become effective on February 15, 2002.
(d) FIRST ADJUSTED INTEREST RATE/FIRST ADJUSTED INTEREST
RATE PERIOD/PAYMENT.
(i) If Noteholder has received Maker's Notice of First
Selection Date and the Approved First Selection Date has been
established pursuant to subparagraph (c) above, Noteholder shall
establish the First Adjusted Interest Rate on the Approved First
Selection Date using the then current yield in effect at the
close of business on the Approved First Selection Date on the
First Treasury Issue and the First Adjusted Interest Rate shall
be equal to the sum of (i) such current yield on the First
Treasury Issue and (ii) the First Point Spread, rounded up to the
nearest 1/1000 of 1% (hereinbefore and hereinafter the "First
Adjusted Interest Rate") or, if Noteholder has established the
First Adjusted Interest Rate on January 20, 2002 as aforesaid, in
either such event, except as otherwise provided herein, the
outstanding principal balance hereof shall bear interest at the
First Adjusted Interest Rate commencing February 15, 2002 until
the earlier to occur of (i) the date, if ever, on which the
Second Adjusted Interest Rate, as that term is hereinafter
defined, becomes effective pursuant to the terms hereof or (ii)
payment in full of this Note, and shall be payable as set forth
in paragraph (d) (ii) below.
(ii) Commencing on the fifteenth day of March, 2002
and continuing on the fifteenth day of each and every month
thereafter, to and including the fifteenth day of February, 2007,
the undersigned shall pay equal monthly installments of principal
and interest, in an amount necessary to amortize fully the
outstanding principal balance of this Note as of February 15,
2002, over a fifteen (15) year period commencing February 15,
2002, with interest at the First Adjusted Interest Rate.
(e) FIRST EXTENSION PERIOD. Notwithstanding the provisions
of subparagraph (b) (ii) (B) to the contrary and the March 15,
2002 due date, subject to (i) Noteholder's non-receipt of Maker's
Notice of Acceptance of the First Point Spread prior to November
16, 2001 and (ii) Noteholder's receipt, prior to January 15, 2002
of the undersigned's written request (the "Maker's First
Extension Request"), delivered in accordance with the notice
provisions contained in the Mortgage, to extend the date within
which to pay the amounts set forth in subparagraph (b) (ii) (B)
above, provided no Event of Default, as that term is defined in
the Mortgage, has occurred and is continuing, Noteholder shall
agree to grant an additional period for payment of the aforesaid
amounts until August 15, 2002 (the period from February 15, 2002
to and including August 15, 2002 being hereinafter sometimes
referred to as the "First Extension Period"); provided, however,
in the event the undersigned delivers Maker's First Extension
Request, notwithstanding anything herein contained to the
contrary, (1) interest shall accrue on the then outstanding
principal balance of this Note from February 15, 2002 until paid,
at a rate equal to the greater of (A) the Initial Rate of
Interest, (B) the First Adjusted Interest Rate that would have
been established by Noteholder pursuant to subparagraphs (c) and
(d)(i) above, or (C) two hundred (200) basis points in excess of
the then current yield on a six month Treasury Bill selected by
Noteholder being closest in maturity to August 15, 2002 (the
"First Extension Interest Rate"); and (2) commencing on March 15,
2002 and on the fifteenth day of each month thereafter until
paid, the undersigned shall pay equal monthly installments of
principal and interest, in an amount necessary to amortize fully
the then outstanding principal balance of this Note over a period
of fifteen (15) years with interest at the First Extension
Interest Rate; provided further, however, the entire principal
balance of this Note, together with all accrued and unpaid
interest thereon computed at the First Extension Interest Rate,
and any other payments due hereunder, except the Make Whole
Premium hereinafter described, shall become due and payable
without offset and without notice on August 15, 2002.
(f) NOTICE OF SECOND TREASURY ISSUE AND POINT SPREAD.
(i) On or before August 15, 2006, Noteholder shall
notify the undersigned in writing, in accordance with the notice
provisions contained in the Mortgage, of (i) the applicable 5-year
U.S. Treasury Issue as then shown on the Telerate Financial
Information Network System selected by Noteholder with a maturity
closest to date on which the Third Adjusted Interest Rate, as
that term is hereinafter defined, becomes effective, or if the
Telerate Financial Information Network System is no longer in
operation, as shown in an equivalent report service selected by
Noteholder (the "Second Treasury Issue") and (ii) the basis point
(a basis point shall be equal to 1/100 of 1%) spread established
by Noteholder based upon its evaluation of the then current
financial performance and projected risk of the security for the
Loan (the "Second Point Spread") which Noteholder would use to
establish the Second Adjusted Interest Rate, whether such Second
Adjusted Interest Rate is less than, equal to or greater than the
First Adjusted Interest Rate under this Note. Noteholder's review
of the financial performance and projected risk of the security
for the Loan shall encompass various factors, including but not
limited to the term and amount of the Loan, contract debt service
coverage, loan-to-value ratio, economic debt service coverage,
tenant occupancy, frequency of tenant rollover, and financial
strength and stability of tenants.
(ii) (A) In the event the undersigned shall elect to
accept the Second Point Spread, the undersigned shall so notify
Noteholder in writing of said election ("Maker's Notice of
Acceptance of the Second Point Spread"), in accordance with the
notice provisions contained in the Mortgage, by not later than
the fifteenth day of November, 2006.
(ii) (B) In the event the undersigned shall elect to
reject the Second Point Spread, by written notice to Noteholder,
or in the event Noteholder has not received Maker's Notice of
Acceptance of the Second Point Spread prior to November 16, 2006,
then in either of such events, notwithstanding anything herein
contained to the contrary, the entire principal balance of this
Note, together with all accrued and unpaid interest hereon
computed at the First Adjusted Interest Rate and any other
payments due hereunder, except the Make Whole Premium hereinafter
described, shall become due and payable without offset and
without notice on March 15, 2007.
(g) NOTICE OF SECOND SELECTION DATE. In the event the
undersigned has notified the Noteholder of Maker's Notice of
Acceptance of the Second Point Spread pursuant to subparagraph
(f) (ii) (A) above, the undersigned shall notify Noteholder in
writing ("Maker's Notice of Second Selection Date"), in
accordance with the notice provisions contained in the Mortgage,
of the undersigned's proposed date on which to establish the
Second Adjusted Interest Rate (any such date proposed by the
undersigned or Noteholder, the "Second Selection Date"). Such
Second Selection Date shall be mutually acceptable to the
undersigned and Noteholder and shall not be (x) prior to November
15, 2006; (y) earlier than Maker's Notice of Second Selection
Date, or (z) later than January 20, 2007 and, to the extent
mutually agreed upon by the undersigned and Noteholder, shall be
deemed the "Approved Second Selection Date". Notwithstanding the
above, for purposes of this subparagraph (g), Noteholder will
accept a facsimile of Maker's Notice of Second Selection Date
provided a hard copy of the same is received by Noteholder the
following day via a reputable overnight delivery service. If
Noteholder has not received Maker's Notice of Second Selection
Date on or before January 20, 2007 and/or Noteholder and the
undersigned have not mutually agreed upon the Second Selection
Date, Noteholder shall establish the Second Adjusted Interest
Rate on January 20, 2007 using the then current yield in effect
at 11:00 A.M. Central Standard Time on January 20, 2007 on the
Second Treasury Issue and the Second Adjusted Interest Rate shall
be equal to the sum of (i) such current yield on the Second
Treasury Issue and (ii) the Second Point Spread, rounded up to
the nearest 1/1000 of 1% (hereinbefore and hereinafter the
"Second Adjusted Interest Rate") and Noteholder shall notify the
undersigned in writing, in accordance with the notice provision
contained in the Mortgage, of the Second Adjusted Interest Rate,
but in any event the rate shall become effective on February 15,
2007.
(h) SECOND ADJUSTED INTEREST RATE/SECOND ADJUSTED INTEREST
RATE PERIOD/PAYMENT.
(i) If Noteholder has received Maker's Notice of
Second Selection Date and the Approved Second Selection Date has
been established pursuant to subparagraph (g) above, Noteholder
shall establish the Second Adjusted Interest Rate on the Approved
Second Selection Date using the then current yield in effect at
the close of business on the Approved Second Selection Date on
the Second Treasury Issue and the Second Adjusted Interest Rate
shall be equal to the sum of (i) such current yield on the Second
Treasury Issue and (ii) the Second Point Spread, rounded up to
the nearest 1/1000 of 1% (hereinbefore and hereinafter the
"Second Adjusted Interest Rate") or, if Noteholder has
established the Second Adjusted Interest Rate on January 20, 2007
as aforesaid, in either such event, except as otherwise provided
herein, the outstanding principal balance hereof shall bear
interest at the Second Adjusted Interest Rate commencing February
15, 2007 until the earlier to occur of (i) the date, if ever, on
which the Third Adjusted Interest Rate, as that term is
hereinafter defined, becomes effective pursuant to the terms
hereof or (ii) payment in full of the Note, and shall be payable
as set forth in paragraph (h) (ii) below.
(ii) Commencing on the fifteenth day of March, 2007
and continuing on the fifteenth day of each and every month
thereafter, to and including the fifteenth day of February, 2012,
the undersigned shall pay equal monthly installments of principal
and interest, in an amount necessary to amortize fully the
outstanding principal balance of this Note as of February 15,
2007, over a ten (10) year period commencing February 15, 2007,
with interest at the Second Adjusted Interest Rate.
(i) SECOND EXTENSION PERIOD. Notwithstanding the
provisions of subparagraph (f) (ii) (B) to the contrary and the
March 15, 2007 due date, subject to (i) Noteholder's non-receipt
of Maker's Notice of Acceptance of the Second Point Spread prior
to November 16, 2006 and (ii) Noteholder's receipt, prior to
January 15, 2007 of the undersigned's written request (the
"Maker's Second Extension Request"), delivered in accordance with
the notice provisions contained in the Mortgage, to extend the
date within which to pay the amounts set forth in subparagraph
(f) (ii) (B) above, provided no Event of Default, as that term is
defined in the Mortgage, has occurred and is continuing,
Noteholder shall agree to grant an additional period for payment
of the aforesaid amounts until August 15, 2007 (the period from
February 15, 2007 to and including August 15, 2007 being
hereinafter sometimes referred to as the "Second Extension
Period"); provided, however, in the event the undersigned
delivers Maker's Second Extension Request, notwithstanding
anything herein contained to the contrary, (1) interest shall
accrue on the then outstanding principal balance of this Note
from February 15, 2007 until paid, at a rate equal to the greater
of (A) the First Adjusted Interest Rate, (B) the Second Adjusted
Interest Rate that would have been established by Noteholder
pursuant to subparagraphs (g) and (h)(i) above, or (C) two
hundred (200) basis points in excess of the then current yield on
a six month Treasury Bill selected by Noteholder being closest in
maturity to August 15, 2007 (the "Second Extension Interest
Rate"); and (2) commencing on March 15, 2007 and on the fifteenth
day of each month thereafter until paid, the undersigned shall
pay equal monthly installments of principal and interest, in an
amount necessary to amortize fully the then outstanding principal
balance of this Note over a period of ten (10) years with
interest at the Second Extension Interest Rate; provided further,
however, the entire principal balance of this Note, together with
all accrued and unpaid interest thereon computed at the Second
Extension Interest Rate, and any other payments due hereunder,
except the Make Whole Premium hereinafter described, shall become
due and payable without offset and without notice on August 15,
2007.
(j) NOTICE OF THIRD TREASURY ISSUE AND POINT SPREAD.
(i) On or before August 15, 2011, Noteholder shall
notify the undersigned in writing, in accordance with the notice
provisions contained in the Mortgage, of (i) the applicable 5-year
U.S. Treasury Issue as then shown on the Telerate Financial
Information Network System selected by Noteholder with a maturity
closest to the Maturity Date, as that term is hereinafter
defined, or if the Telerate Financial Information Network System
is no longer in operation, as shown in an equivalent report
service selected by Noteholder (the "Third Treasury Issue") and
(ii) the basis point (a basis point shall be equal to 1/100 of
1%) spread established by Noteholder based upon its evaluation of
the then current financial performance and projected risk of the
security for the Loan (the "Third Point Spread") which Noteholder
would use to establish the Third Adjusted Interest Rate, whether
such Third Adjusted Interest Rate is less than, equal to or
greater than the Second Adjusted Interest Rate under this Note.
Noteholder's review of the financial performance and projected
risk of the security for the Loan shall encompass various
factors, including but not limited to the term and amount of the
Loan, contract debt service coverage, loan-to-value ratio,
economic debt service coverage, tenant occupancy, frequency of
tenant rollover, and financial strength and stability of tenants.
(ii) (A) In the event the undersigned shall elect to
accept the Third Point Spread, the undersigned shall so notify
Noteholder in writing of said election ("Maker's Notice of
Acceptance of the Third Point Spread"), in accordance with the
notice provisions contained in the Mortgage, by not later than
the fifteenth day of November, 2011.
(ii) (B) In the event the undersigned shall elect to
reject the Third Point Spread, by written notice to Noteholder,
or in the event Noteholder has not received Maker's Notice of
Acceptance of the Third Point Spread prior to November 16, 2011,
then in either of such events, notwithstanding anything herein
contained to the contrary, the entire principal balance of this
Note, together with all accrued and unpaid interest hereon
computed at the Second Adjusted Interest Rate and any other
payments due hereunder, except the Make Whole Premium hereinafter
described, shall become due and payable without offset and
without notice on March 15, 2012.
(k) NOTICE OF THIRD SELECTION DATE. In the event the
undersigned has notified the Noteholder of Maker's Notice of
Acceptance of the Third Point Spread pursuant to subparagraph (j)
(ii) (A) above, the undersigned shall notify Noteholder in
writing ("Maker's Notice of Third Selection Date"), in accordance
with the notice provisions contained in the Mortgage, of the
undersigned's proposed date on which to establish the Third
Adjusted Interest Rate (any such date proposed by the undersigned
or Noteholder, the "Third Selection Date"). Such Third Selection
Date shall be mutually acceptable to the undersigned and
Noteholder and shall not be (x) prior to November 15, 2011; (y)
earlier than Maker's Notice of Third Selection Date, or (z) later
than January 20, 2012 and, to the extent mutually agreed upon by
the undersigned and Noteholder, shall be deemed the "Approved
Third Selection Date". Notwithstanding the above, for purposes
of this subparagraph (k), Noteholder will accept a facsimile of
Maker's Notice of Third Selection Date provided a hard copy of
the same is received by Noteholder the following day via a
reputable overnight delivery service. If Noteholder has not
received Maker's Notice of Third Selection Date on or before
January 20, 2012 and/or Noteholder and the undersigned have not
mutually agreed upon the Third Selection Date, Noteholder shall
establish the Third Adjusted Interest Rate on January 20, 2012
using the then current yield in effect at 11:00 A.M. Central
Standard Time on January 20, 2012 on the Third Treasury Issue and
the Third Adjusted Interest Rate shall be equal to the sum of (i)
such current yield on the Third Treasury Issue and (ii) the Third
Point Spread, rounded up to the nearest 1/1000 of 1%
(hereinbefore and hereinafter the "Third Adjusted Interest Rate")
and Noteholder shall notify the undersigned in writing, in
accordance with the notice provision contained in the Mortgage,
of the Third Adjusted Interest Rate, but in any event the rate
shall become effective on February 15, 2012.
(l) THIRD ADJUSTED INTEREST RATE/THIRD ADJUSTED INTEREST
RATE PERIOD/PAYMENT.
(i) If Noteholder has received Maker's Notice of Third
Selection Date and the Approved Third Selection Date has been
established pursuant to subparagraph (k) above, Noteholder shall
establish the Third Adjusted Interest Rate on the Approved Third
Selection Date using the then current yield in effect at the
close of business on the Approved Third Selection Date on the
Third Treasury Issue and the Third Adjusted Interest Rate shall
be equal to the sum of (i) such current yield on the Third
Treasury Issue and (ii) the Third Point Spread, rounded up to the
nearest 1/1000 of 1% (hereinbefore and hereinafter the "Third
Adjusted Interest Rate") or, if Noteholder has established the
Third Adjusted Interest Rate on January 20, 2012 as aforesaid, in
either such event, except as otherwise provided herein, the
outstanding principal balance hereof shall bear interest at the
Third Adjusted Interest Rate commencing February 15, 2012 until
payment in full of this Note, and shall be payable as set forth
in paragraph (l) (ii) below.
(ii) Commencing on the fifteenth day of March, 2012
and continuing on the fifteenth day of each and every month
thereafter, to and including the fifteenth day of February, 2017,
the undersigned shall pay equal monthly installments of principal
and interest, in an amount necessary to amortize fully the
outstanding principal balance of this Note as of February 15,
2012, over a five (5) year period commencing February 15, 2012,
with interest at the Third Adjusted Interest Rate.
(m) THIRD EXTENSION PERIOD. Notwithstanding the provisions
of subparagraph (j) (ii) (B) to the contrary and the March 15,
2012 due date, subject to (i) Noteholder's non-receipt of Maker's
Notice of Acceptance of the Third Point Spread prior to November
16, 2011 and (ii) Noteholder's receipt, prior to January 15, 2012
of the undersigned's written request (the "Maker's Third
Extension Request"), delivered in accordance with the notice
provisions contained in the Mortgage, to extend the date within
which to pay the amounts set forth in subparagraphs (j) (ii) (B)
above, provided no Event of Default, as that term is defined in
the Mortgage, has occurred and is continuing, Noteholder shall
agree to grant an additional period for payment of the aforesaid
amounts until August 15, 2012 (the period from February 15, 2012
to and including August 14, 2012 being hereinafter sometimes
referred to as the "Third Extension Period"); provided, however,
in the event the undersigned delivers Maker's Third Extension
Request, notwithstanding anything herein contained to the
contrary, (1) interest shall accrue on the then outstanding
principal balance of this Note from February 15, 2012 until
paid, at a rate equal to the greater of (A) the Second Adjusted
Interest Rate, (B) the Third Adjusted Interest Rate that would
have been established by Noteholder pursuant to subparagraphs (k)
and (l)(ii) above, or (C) two hundred (200) basis points in
excess of the then current yield on a six month Treasury Bill
selected by Noteholder being closest in maturity to August 15,
2012 (the "Third Extension Interest Rate"); and (2) commencing on
March 15, 2012 and on the fifteenth day of each month thereafter
until paid, the undersigned shall pay equal monthly installments
of principal and interest, in an amount necessary to amortize
fully the then outstanding principal balance of this Note over a
period of five (5) years with interest at the Third Extension
Interest Rate; provided further, however, the entire principal
balance of this Note, together with all accrued and unpaid
interest thereon computed at the Third Extension Interest Rate,
and any other payments due hereunder, except the Make Whole
Premium hereinafter described, shall become due and payable
without offset and without notice on August 15, 2012.
The effective date of the First Adjusted Interest Rate, the
Second Adjusted Interest Rate and the Third Adjusted Interest
Rate (i.e. February 15, 2002, February 15, 2007 and February 15,
2012) shall sometimes hereinafter be collectively referred to as
the "Adjustment Date"). Each installment shall be credited first
upon interest then accrued and the remainder upon principal, and
interest shall cease to accrue upon principal so credited. All
principal and interest shall be paid in lawful money of the
United States of America.
Notwithstanding anything herein to the contrary, except as
otherwise provided in paragraphs (b)(ii)(B) and (e); (f)(ii) (B)
and (i) and (j)(ii)(B) and (m) above, the entire principal
balance hereof together with all accrued and unpaid interest
thereon computed as aforesaid and any other payments due
hereunder, shall be due and payable in all events without offset
on February 15, 2017 (the "Maturity Date").
The undersigned shall provide to Noteholder, as soon as
practicable after any Adjustment Date, at the undersigned's
expense, an updated endorsement to Noteholder's mortgagee title
insurance policy (hereinafter the "Endorsement to Title Policy")
or, if such updated endorsement cannot be obtained in form and
substance reasonably satisfactory to Noteholder, a new standard
mortgagee title insurance policy (the "Title Policy"), in form
and substance and by an issuer satisfactory to Noteholder which
shall be effective as of the Adjustment Date. The Title Policy
or Endorsement to Title Policy (i) shall insure that the Mortgage
as of the Adjustment Date, shall continue to be a valid first
lien on the property described in the Title Policy (the
"Premises") in the full amount of the Loan subject only to those
exceptions which had been previously submitted to and approved by
Noteholder and (ii) shall contain no exceptions from coverage as
to mechanics liens. Noteholder also shall have received an
opinion of legal counsel acceptable to Noteholder at the expense
of the undersigned that the Loan is not usurious.
Except as specifically set forth above, no privilege is
reserved by the undersigned to prepay any principal of this Note
prior to the Maturity Date. Notwithstanding the foregoing, the
privilege is reserved by the undersigned, after giving thirty
(30) days' prior written notice to the holder of this Note, to
prepay in full, but not in part, all principal and interest to
the date of payment, along with all sums, amounts, advances, or
charges due under any instrument or agreement by which this Note
is secured, (1) on March 15, 2002, March 15, 2007 or March 15,
2012 in the event Noteholder has not received the undersigned's
written acceptance of the applicable Treasury Issue and Point
Spread as provided in paragraphs (b)(ii) B, (f)(ii) (B) or
(j)(ii) (B) above or at any time upon thirty (30) days prior
written notice to Noteholder during the First, Second or Third
Extension Period provided the undersigned was entitled to make
and has made the appropriate Maker's Extension Request, without
payment of the Make Whole Premium or any other premium or
penalty, or (2) on any date (except as set forth in clause (1)
above) prior to the Maturity Date provided such prepayment shall
be accompanied by the payment of a "Make Whole Premium", as that
term is hereafter defined. The Make Whole Premium shall be the
greater of one percent (1%) of the principal amount to be prepaid
or a premium calculated as provided in subparagraphs (a) through
(c) below:
(a) Determine the "Reinvestment Yield." The Reinvestment
Yield will be equal to the yield on the respective U.S.
Treasury Issue ("primary issue")* for the appropriate
prepayment period as indicated in the table below,
published two weeks prior to the date of prepayment and
converted to an equivalent monthly compounded nominal
yield plus fifty (50) basis points (provided that in the
event of prepayment resulting from default by the
undersigned as hereafter provided, said fifty (50) basis
point addition shall not be made).
*In the event there is no market activity involving the
primary issue at the time of prepayment, the holder of this
Note shall choose a comparable Treasury Bond, Note or Bill
("secondary issue") which the holder of this Note deems to be
similar to the primary issue's characteristics (i.e., rate,
remaining time to the end of the respective prepayment period
as indicated in the table below, yield).
(b) Calculate the "Present Value of the Mortgage." The
Present Value of the Mortgage is the present value of the
payments to be made in accordance with this Note (all
installment payments and any remaining payment due on the
earlier of (i) the end of the respective prepayment
period as indicated in the table below; or (ii) the
Maturity Date) discounted at the Reinvestment Yield for
the number of months remaining from the date of
prepayment to the end of the respective prepayment period
as indicated in the table below.
(c) Subtract the amount of the prepaid proceeds from the
Present Value of the Mortgage as of the date of
prepayment. Any resulting positive differential shall be
the premium.
APPLICABLE U.S.
TREASURY ISSUE PREPAYMENT PERIOD
141/4% Treasury Issue the date hereof to February
maturing February, 2002 15, 2002
_** % Treasury Issue February 15, 2002 to
maturing ____,_____ February 15, 2007
_** % Treasury Issue February 15, 2007 to
maturing ____,_____ February 15, 2012
_** % Treasury Issue February 15, 2012 to
maturing ____,_____ February 15, 2017
**At this time there is not a U.S. Treasury Issue for
this prepayment period. At the time of prepayment
Noteholder shall select in its sole and absolute
discretion a U.S. Treasury Issue with similar remaining
time to maturity as the appropriate prepayment period as
indicated in the table above.
The undersigned agrees that if the holder of this Note
accelerates the whole or any part of the principal sum evidenced
hereby, or applies any proceeds in either case as a result of a
default, pursuant to the provisions of the Mortgage and Security
Agreement of even date herewith between the undersigned and
Principal Mutual Life Insurance Company or if Noteholder applies
proceeds pursuant to any letter of credit requirement or escrow
requirement as additional security for the Loan as a result of a
default by the undersigned under any agreement executed by and
between the undersigned and Noteholder in connection with such
letter of credit or escrow requirement or under the Loan
Documents in connection therewith, the undersigned waives any
right to prepay said principal sum in whole or in part without
premium and agrees to pay, as yield maintenance protection and
not as a penalty, the "Make Whole Premium" defined herein.
If any payment of principal, interest or premium is not made
when due, damages will be incurred by the holder of this Note,
including additional expense in handling overdue payments, the
amount of which is difficult and impractical to ascertain. The
undersigned therefore agrees to pay, upon demand, the sum of two
cents ($.02) for each one dollar ($1.00) of each said payment
which becomes overdue as a reasonable estimate of the amount of
said damages, subject, however, to the limitations contained in
the second succeeding paragraph.
If any payment of principal, interest or premium is not made
for a period exceeding ten (10) days after due, subject to the
provisions of paragraph 10(a) of the Mortgage, including without
limitation any notice or cure periods provided therein, or if any
Event of Default has occurred or is continuing under any
instrument by which this Note is, or may hereafter be, secured,
the entire principal balance, interest accrued as of the date of
the Event of Default, and premium, whether or not otherwise then
due, shall at the option of the holder of this Note, become
immediately due and payable without demand or notice, and whether
or not the holder of this Note has exercised said option,
interest shall accrue on the entire principal balance, interest
accrued as of the date of the Event of Default, and any premium
then due, at a rate equal to the lesser of (i) two percent (2%)
per annum above the then applicable rate of interest payable
under this Note or (ii) the maximum rate allowed by applicable
law until fully paid or if the holder of this Note has not
exercised said option, for the duration of such Event of Default.
Notwithstanding anything herein or in any of the Loan
Documents, as that term is hereinafter defined, to the contrary,
no provision contained herein or therein which purports to
obligate the undersigned to pay any amount of interest or any
fees, costs or expenses which are in excess of the maximum
permitted by applicable law, shall be effective to the extent it
calls for the payment of any interest or other amount in excess
of such maximum. Any such excess shall, at the option of the
holder of this Note, either be paid to the undersigned or be
credited to principal. All agreements between the undersigned
and the holder hereof, whether now existing or hereafter arising
and whether written or oral, are hereby limited so that in no
contingency, whether by reason of demand for payment or
acceleration of the maturity hereof or otherwise, shall the
interest contracted for, charged or received by the holder hereof
exceed the maximum amount permissible under applicable law. If,
from any circumstance whatsoever, interest would otherwise be
payable to the holder hereof in excess of the maximum lawful
amount, the interest payable to the holder hereof shall be
reduced to the maximum amount permitted under applicable law; and
if from any circumstance the holder hereof shall ever receive
anything of value deemed interest by applicable law in excess of
the maximum lawful amount, an amount equal to any excessive
interest shall, at the option of the holder hereof, be applied to
the reduction of the principal hereof and not to the payment of
interest, or if such excessive interest exceeds the unpaid
balance of principal hereof such excess shall be refunded to the
undersigned. This paragraph shall control all agreements between
the undersigned and the holder hereof.
The undersigned and any endorsers or guarantors waive
presentment, protest and demand, notice of protest, demand and
dishonor and nonpayment, and agree the due date of this Note or
any installment may be extended without affecting any liability
hereunder, and further promise to pay all reasonable costs and
expenses, including attorney's fees, incurred by the holder
hereof in connection with any default or in any proceeding to
interpret and/or enforce any provision of this Note or any
instrument by which it is secured. No release of the undersigned
from liability hereunder shall release any other maker, endorser
or guarantor hereof.
This Note is secured by instruments and agreements of even
date herewith executed and delivered by the undersigned to
Principal Mutual Life Insurance Company creating among other
things legal and valid encumbrances on and an assignment of all
of the undersigned's interest in any leases of certain Premises
located in the County of Spartanburg, State of South Carolina.
Terms used herein which are defined in such instruments or
agreements and not otherwise defined herein have the same
definition as in such instruments and agreements. In no event
shall such documents be construed inconsistently with the terms
of this Note, and in the event of any discrepancy between any
such documents and this Note, the terms hereof shall govern. The
proceeds of this Note are to be used for business, commercial,
investment or other similar purposes, and no portion thereof will
be used for any personal, family or household use. This Note
shall be governed by and construed in accordance with the laws of
the State where the Premises is located.
Notwithstanding any provision to the contrary in this Note,
the Mortgage of even date herewith, or any other instrument or
agreement entered into in connection with the closing of the Loan
or by which this Note is evidenced or secured (collectively
referred to herein as the "Loan Documents"), and except as
otherwise provided in this paragraph, the liability of the
undersigned under the Loan Documents shall be limited to (i) the
interest of the undersigned in the Premises and the rents,
issues, proceeds and profits thereof in accordance with the lien
or security interest created pursuant to the Loan Documents and
(ii) any escrow amount or letter of credit provided to or for the
benefit of Noteholder to the extent and in accordance with the
terms and conditions of the Loan Documents. In the event of
foreclosure of the liens evidenced by the Loan Documents, no
judgment for any deficiency upon the indebtedness evidenced by
the Loan Documents shall be sought or obtained by the holder of
this Note against the undersigned or any of its partners or any
of its partners shareholders, directors, officers, agents,
trustees or employees. Nothing contained in this paragraph
shall:
(a) prevent the failure of the undersigned to make any
payment or to perform any obligation under any of the
Loan Documents within the time periods provided therein
from being an Event of Default thereunder;
(b) be construed as limiting the obligations of the
undersigned to any tenant under any lease of the Premises
(provided, however, the undersigned's personal liability
to Noteholder with respect to the foregoing shall be
subject to the provisions of subparagraph (e) below);
(c) in any way limit or impair the lien or enforcement of
the Loan Documents pursuant to the terms thereof; or
(d) limit the obligations of any indemnitor or guarantor,
if any, of obligations of the undersigned under the Loan
Documents.
Notwithstanding the foregoing paragraph, the undersigned and
any general partner of the undersigned shall be personally liable
to the holder of this Note for any loss or damage incurred by
Noteholder as a result of or arising out of any of the following:
(a) failure of the undersigned to comply with paragraphs
2 (taxes and assessments) and 3 (insurance) of the
Mortgage;
(b) any event or circumstance for which the undersigned
indemnifies the holder of this Note under paragraph 1(m)
(environmental indemnity) of the Mortgage or under that
certain Environmental Indemnity Agreement from the
undersigned for the benefit of Noteholder dated of even
date herewith;
(c) failure of the undersigned to pay utilities on or
before the date such payments are due;
(d) operation and maintenance of the Premises;
(e) any sums expended by the holder of this Note in
fulfilling the obligations of the undersigned as lessor
under any lease of the Premises prior to a sale of the
Premises pursuant to foreclosure or power of sale, a bona
fide sale (permitted by the terms of paragraph 1(l) of
the Mortgage or consented to in writing by the holder of
this Note) to an unrelated third party or upon conveyance
to the holder of this Note of the Premises by a deed
acceptable to the holder of this Note in form and content
(each of which shall be referred to as a "Sale" for
purposes of this paragraph) or expended by the holder of
this Note after a Sale of the Premises for obligations of
the undersigned which arose prior to a Sale of the
Premises;
(f) any rents or other income regardless of type or
source of payment (including, but not limited to, CAM
charges, lease termination payments, refunds of any type,
prepayment of rents, settlements of litigation, or
settlements of past due rents) from the Premises which
the undersigned has received in cash or in any form
representating value to the undersigned or any of its
affiliates, as that term is defined in the Mortgage,
after an Event of Default under the Loan Documents or an
event which with the passage of time, the giving of
notice or both would constitute an Event of Default,
either or both of which has occurred and is continuing,
and which are not applied to (A) expenses of operation
and maintenance of the Premises and the taxes,
assessments, utility charges and insurance of the
Premises, taking into account sufficient reserves for the
same and for replacements and recurring items, and (B)
payment of principal, interest and other charges when due
under the Loan Documents; provided that any payments to
parties related to the undersigned shall be considered
expenses of operation only if they are at market rates or
fees consistent with market rates or fees for the same or
similar services;
(g) any security deposits of tenants actually received by
the undersigned or its predecessor-in-title not turned
over to the holder of this Note upon conveyance of the
Premises to the holder of this Note pursuant to
foreclosure or power of sale or by a deed acceptable to
the holder of this Note in form and content;
(h) misapplication or misappropriation of tax reserve
accounts, tenant improvement reserve accounts, security
deposits, prepaid rents or other similar sums paid to or
held by the undersigned or any other entity or person in
connection with the operation of the Premises;
(i) any negligent or intentional acts or omissions
committed or allowed by the undersigned constituting
waste with respect to the Premises; and
(j) any insurance or condemnation proceeds or other
similar funds or payments received by the undersigned and
applied by the undersigned in a manner other than as
expressly provided in the Loan Documents.
Notwithstanding the foregoing, the undersigned's and its
general partner's personal liability with respect to
subparagraphs (a), (c), (d) and (e) above shall be
limited to the extent that rents, issues, proceeds and
profits from the Premises are actually received by the
undersigned (A) during the twelve (12) month period prior
to an Event of Default and\or (B) after an Event of
Default under the Loan Documents has occurred, and such
rent, issues, proceeds and profits are not first applied
to (y) expenses for the operation or maintenance of the
Premises and the taxes, assessments, utility charges and
insurance of the Premises, taking into account sufficient
reserves for the same and for replacements and recurring
items, and (z) payment of principal, interest and other
charges when due under the Loan Documents and further
provided that any payments to parties related to the
undersigned shall be considered expenses of operation
only if they are at market rates or fees consistent with
market rates or fees for the same or similar services .
Notwithstanding anything to the contrary in the Loan
Documents, the limitation on liability contained in the
preceding paragraphs SHALL BECOME NULL AND VOID and shall
be of no further force and effect in the event:
(a) of any breach or violation of paragraph 1(l) (due on
sale or encumbrance) of the Mortgage which constitutes an
Event of Default under the Loan Documents, other than the
filing of a nonmaterial mechanic's lien affecting the
Premises, the granting of any utility or other
nonmaterial easement or servitude burdening the Premises,
or any other transfer or encumbrance not in the nature of
a transfer, reduction or impairment of any material
economic interest in the Premises; or
(b) of any fraud or willful misrepresentation by the
undersigned regarding the Premises, the making or
delivery of any of the Loan Documents or in any materials
or information provided by the undersigned in connection
with the Loan.
If more than one, all obligations and agreements of the
undersigned are joint and several.
This Note may not be changed or terminated orally, but only
by an agreement in writing and signed by the party against whom
enforcement of any waiver, change, modification or discharge is
sought. All of the rights, privileges and obligations hereunder
shall inure to the benefit of the heirs, successors and assigns
of the holder hereof and shall bind the heirs, successors and
assigns of the undersigned.
If any provision of this Note shall, for any reason, be held
to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but
this Note shall be construed as if such invalid or unenforceable
provision had never been contained herein.
WESTGATE MALL LIMITED
PARTNERSHIP, a South Carolina
limited partnership
By: CBL/GP II, Inc., a Wyoming
corporation, general partner
By John Foy
Name: John N. Foy
Title: Executive Vice
President
Exhibit 10.30
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Loan Agreement")
amends and restates in its entirety that certain Loan Agreement
dated to be effective August 19, 1996 between the parties hereto
and is made to be effective as of the ____ day of February, 1997,
by and between CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware
limited partnership, whose address is One Park Place, 6148 Lee
Highway, Chattanooga, Tennessee 37421-2931 (the "Borrower"), and
LAKESHORE/SEBRING LIMITED PARTNERSHIP, a Florida limited
partnership, whose address is the same as the Borrower's
described above ("Lakeshore"), and FIRST TENNESSEE BANK NATIONAL
ASSOCIATION, a national banking association organized and
existing under the statutes of the United States of America, with
offices at 701 Market Street, Chattanooga, Tennessee 37402
(hereinafter referred to as the "Bank").
RECITALS OF FACT
Borrower has requested that the Bank commit to make loans
and advances to it, and to Lakeshore, for the benefit of
Borrower, on a revolving credit basis in an amount not to exceed
at any one time outstanding the aggregate principal sum of Eighty
Million Dollars ($80,000,000.00) for the purpose of providing
working capital for pre-development expenses, development costs,
equity investments, repayment of existing indebtedness, certain
distributions to limited partners (as allowed herein), letters of
credit and construction and for general corporate purposes. The
Bank has agreed to make certain portions of such loans and
advances on the terms and conditions herein set forth. KeyBank
National Association, formerly Society National Bank, PNC Bank,
Kentucky, Inc. and AmSouth Bank, all as participants in the Loan
have also agreed to make certain portions of such loan and
advances on the terms and conditions herein set forth.
This Loan Agreement is currently being amended to
increase the revolving credit loan and to modify certain
covenants.
NOW, THEREFORE, incorporating the Recitals of Fact set forth
above and in consideration of the mutual agreements herein
contained, the parties agree as follows:
AGREEMENTS
SECTION 1. : DEFINITIONS AND ACCOUNTING TERMS
a. CERTAIN DEFINED TERMS. For the purposes of this
Loan Agreement, the following terms shall have the
following meanings (such meanings to be applicable
equally to both the singular and plural forms of
such terms) unless the context otherwise requires:
"Adjusted Loan Amount" means the combined Net Operating
Income from the properties described in the CBL Mortgage as of
each July 1, January 1, April 1 and October 1, as the case may
be, based upon the then immediately preceding twelve (12) month
period, divided by 1.25 with the resulting figure being further
divided by the applicable mortgage constant of .1159.
"Affiliate" means as to any Person, any other Person which,
directly or indirectly, owns or controls, on an aggregate basis
including all beneficial ownership and ownership or control as a
trustee, guardian or other fiduciary, at least ten percent (10%)
of the outstanding shares of Capital Stock or other ownership
interest having ordinary voting power to elect a majority of the
board of directors or other governing body (irrespective of
whether, at the time, stock of any other class or classes of such
corporation shall have contingency) of such Person or at least
ten percent (10%) of the partnership or other ownership interest
of such Person; or which controls, is controlled by or is under
common control with such Person. For the purposes of this
definition, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of
management and policies, whether through the ownership of voting
securities, by contract or otherwise. Notwithstanding the
foregoing, a pension fund, university or other endowment funds,
mutual fund investment company or similar fund having a passive
investment intent owning such a ten percent (10%) or greater
interest in a Person shall not be deemed an Affiliate of such
Person unless such pension, mutual, endowment or similar fund
either (i) owns fifty percent (50%) or more of the Capital Stock
or other ownership interest in such Person, or (ii) has the right
or power to select one or more members of such Person's board of
directors or other governing body.
"Agent" means Wells Fargo Realty Advisors Funding,
Incorporated, a Colorado corporation as agent pursuant to the
Credit Agreement dated July 28, 1994 between Borrower and Agent.
"Applicable Law" means, in respect of any Person, all
provisions of statutes, rules, regulations and orders of any
governmental authority applicable to such Person, and all orders
and decrees of all courts and arbitrators in proceedings or
actions in which the person in question is a party.
"Bank's Proportionate Share" means the Bank's undivided
participating interest in the Loan which shall be equal to Twenty
Two Million Five Hundred Thousand and NO/100 Dollars
($22,500,000.00).
"Base Rate" means the base commercial rate of interest
established from time to time by Bank. The currently existing
Base Rate is eight and one quarter percent (8.25%) per annum.
"Borrowing Base" is the limitation on the aggregate
Revolving Credit Loan indebtedness which may be outstanding at
any time during the term of this Agreement. The Borrowing Base
will be calculated each July 1, January 1, April 1 and October 1.
The Borrowing Base will be an amount not to exceed the Borrower's
Adjusted Loan Amount.
"Business Day" means a banking business day of the Bank.
"Capital Stock" shall mean, as to any Person, any and all
shares, interests, warrants, participations or other equivalents
(however designated) of corporate stock of such Person.
"Capitalized Value" shall mean an amount, calculated as of
any date, equal to the quotient of (a) the sum of (i) Borrower's
Funds From Operations during the most recent quarter end,
annualized plus (ii) the Interest Expense used in calculating
Borrower's Funds From Operations pursuant to clause (i) above,
and (b) nine percent (.09).
"CBL Management, Inc." means CBL & Associates Management,
Inc., a Delaware corporation.
"CBL Mortgage" means the mortgages and/or deeds of trust
with security agreements and assignments of rents and leases and
related amendments executed by Borrower, Coolsprings Crossing
Limited Partnership, East Towne Crossing Limited Partnership,
Valley Crossing Associates Limited Partnership, Walnut Square
Associates Limited Partnership, Lakeshore/Sebring Limited
Partnership [Including the Lakeshore Mortgage (New) and the
Lakeshore Mortgage (Old)] and/or Vicksburg Mall Associates, Ltd.
and/or any other entity related to or owned by Borrower and/or
CBL & Associates Properties, Inc. in favor of Bank covering their
interest in the properties described in EXHIBIT "A," attached
hereto and made a part hereof, referred to in Section 4.1(e)
hereof.
"CBL Properties, Inc." means CBL & Associates Properties,
Inc., a Delaware corporation and a qualified public REIT and sole
general partner of Borrower.
"Closing Date" means the date set out in the first paragraph
of this Loan Agreement.
"Combined" means, as to any calculation hereunder, that such
calculation shall be made on a combined basis for Borrower, CBL
Properties, Inc. and CBL Management, Inc., with each such
calculation being made, (a) in respect of Borrower, on a
consolidated basis for Borrower and its Subsidiaries, (b) in
respect of CBL Properties, Inc., on a consolidated basis for CBL
Properties, Inc. and its Subsidiaries, and (c) in respect of CBL
Management, Inc., on a consolidated basis for CBL Management,
Inc. and its Subsidiaries.
"Contingent Obligations" means, for any Person, any material
commitment, undertaking, Guarantee or material obligation
constituting a continuing liability under GAAP, but only to the
extent the same are required to be reflected on such Persons'
audited financial statements.
"Credit Agreement" means the Credit Agreement dated as of
July 28, 1994 and as amended by amendments dated as of May 5,
1995, July 5, 1995 and subsequent amendments between the
Borrower, Wells Fargo Realty Advisors Funding, Incorporated and
others.
"Debt Coverage Ratio" shall mean, as of any date the same is
calculated, the ratio of (a) EBITDA for the fiscal quarter ending
on or most recently ended prior to such date to (b) Debt Service
during such fiscal quarter, in each case calculated on a Combined
basis in accordance with GAAP.
"Debt Service" means, with respect to Borrower, CBL
Properties, Inc., and their respective Subsidiaries for any
period, the sum of (a) Interest Expense of Borrower, CBL
Properties, Inc. and their respective Subsidiaries for such
period, plus (b) regularly scheduled principal payments on
Indebtedness of Borrower, CBL Properties, Inc. and their
respective Subsidiaries during such period other than (x) in
respect of any period following the Termination Date, the
scheduled principal payments of the Term Out Amount made after
the Termination Date, the scheduled principal payments of the
Term Out Amount made after the Termination Date and (y) any
regularly scheduled principal payment payable on any Indebtedness
which prepays such Indebtedness in full, to the extent the amount
of such final scheduled principal payment is greater than the
scheduled principal payment immediately preceding such final
scheduled principal payment, determined in each case on a
Combined basis in accordance with GAAP. For purposes of this
definition, a voluntary prepayment of Indebtedness shall not
constitute a regularly scheduled principal payment even if, under
the terms of the agreement governing such Indebtedness, the
notice of prepayment has the effect of causing the amount of the
prepayment to become due and payable on the date set for such
notice of such prepayment.
"EBITDA" means, for any period, the sum of (i) Net Income of
Borrower, CBL Properties, Inc. and their respective Subsidiaries
for such period (excluding equity in net earnings (or loss) of
their Unconsolidated Affiliates), plus (ii) depreciation and
amortization expense and other non-cash charges of Borrower, CBL
Properties, Inc. and their respective Subsidiaries for such
period, plus (iii) interest expense of Borrower, CBL Properties,
Inc. and their respective Subsidiaries for such period, plus (iv)
income tax expense in respect of such period, plus (v) cash
dividends and distributions actually received by Borrower, CBL
Properties, Inc. and their respective Subsidiaries during such
period from Unconsolidated Affiliates, plus (vi) extraordinary
losses (and any unusual losses arising in or outside the ordinary
course of business of Borrower, CBL Properties, Inc. and their
respective Subsidiaries not included in extraordinary losses
determined in accordance with GAAP that have been reflected in
the determination of Net Income) for such period, minus (vii)
extraordinary gains of Borrower, CBL Properties, Inc. and their
respective Subsidiaries (and any unusual gains arising in or
outside the ordinary course of business of Borrower, CBL
Properties, Inc. or such respective Subsidiaries not included in
extraordinary gains determined in accordance with GAAP that have
been reflected in the determination of Net Income) for such
period, determined in each case on a Combined basis in accordance
with GAAP.
"Effective Date," which definition is used and only applies
within Section 7.9 hereof, means the date the Credit Agreement
between the Borrower and Wells Fargo Realty Advisors Funding
Incorporated became effective in accordance with Section 4.1
thereof.
"Environmental Laws" means all applicable local, state or
federal laws, rules or regulations pertaining to environmental
regulation, contamination or cleanup, including, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation
and Recovery Act of 1976 or any state lien or superlien or
environmental cleanup statutes.
"Event of Default" has the meaning assigned to that phrase
in Section 8.
"Funds from Operations" means, as to any period, an amount
equal to (a) income (loss) from operations of Borrower, CBL
Properties, Inc. and their respective Subsidiaries for such
period, plus (b) depreciation and amortization, plus (minus) (c)
to the extent not included in clause (a) above, gain (loss) on
the sales of outparcels made in the ordinary course of business,
and after adjustments for Unconsolidated Affiliates, determined
in each case on a Combined basis in accordance with GAAP.
Adjustments for Unconsolidated Affiliates will be calculated to
reflect funds from operations on the same basis.
"GAAP" shall mean generally accepted accounting principles
applied on a basis consistent with those which are to be used in
making the calculations for purposes of determining compliance
with this Agreement. All calculations made for the purposes of
determining compliance with this Agreement shall (except as may
be otherwise expressly provided herein) be made by application of
generally accepted accounting principles applied on a basis
consistent with those used in preparation of the annual and
quarterly financial statements of CBL Properties, Inc. furnished
to the Securities and Exchange Commission.
"Guarantee" by any Person means any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing
any Indebtedness or other obligation of any other Person and,
without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation (whether
arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or
otherwise), or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee
against losses in respect thereof (in whole or in part), provided
that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" shall mean and include all hazardous
and toxic substances, wastes or materials, any pollutants or
contaminants (including, without limitation, asbestos and raw
materials which include hazardous constituents), or any other
similar substances or materials which are included under or
regulated by any applicable Environmental Laws.
"Indebtedness" shall mean, as applied to any Person at any
time, without duplication (a) all indebtedness, obligations or
other liabilities of such Person (i) for borrowed money or
evidenced by debt securities, debentures, acceptances, notes or
other similar instruments, and any accrued interest, fees and
charges relating thereto; (ii) with respect to letters of credit
issued for such Person's account; (iii) under agreements for the
prospective purchase or repurchase assets other than obligations
arising under unexercised option agreements; (iv) to make future
investments in any Person; (v) to pay the deferred purchase price
of property or services previously purchased or rendered, except
unsecured trade accounts payable and accrued expenses required to
be capitalized in accordance with GAAP; (b) all indebtedness,
obligations or other liabilities of such Person or others secured
by a Lien on any asset of such Person, whether or not such Person
is otherwise obligated on such indebtedness, obligations or
liabilities are assumed by such Person, all as of such time; (c)
all indebtedness, obligations or other liabilities of such Person
in respect of any foreign exchange contract or any interest rate
swap, cap or collar agreement or similar arrangement, net of
liabilities owed to such Person by the counterparties thereon;
(d) all shares of Capital Stock or equivalent ownership interest
subject (upon the occurrence of any contingency or otherwise) to
mandatory redemption prior to the date the Loan is scheduled to
be repaid in full; (e) obligations of others to the extent
Guaranteed by such Person or to the extent such Person is
otherwise liable on a recourse basis; and (f) such Person's pro
rata share of non-recourse Indebtedness of a partnership in which
such Person is a partner (it being understood that the remaining
portion of such non-recourse partnership Indebtedness shall not
constitute Indebtedness of such Person).
"Interest Coverage Ratio" means, as of any date the same is
calculated, the ratio of (a) EBITDA for the fiscal quarter ending
on or most recently ended prior to such date to (b) Interest
Expense for such fiscal quarter, determined in each case on a
Combined basis in accordance with GAAP.
"Interest Expense" means, for any Person for any period,
total interest expense on Indebtedness of such Person, whether
paid or accrued, but without duplication (including the interest
component of capital leases), including, without limitation, (a)
all commissions, discounts and other fees and charges owed with
respect to letters of credit, and (b) one hundred percent (100%)
of any interest expense, whether paid or accrued, or any other
Person for which such Person is wholly or partially liable
(whether by Guarantee, pursuant to Applicable Law or otherwise)
but excluding (i) interest on Reserved Construction Loan and (ii)
swap or other interest hedging breakage costs, all as determined
in conformity with GAAP.
"Investment" in any Person shall mean any investment,
whether by means of share purchase, loan, advance, extension of
credit, capital contribution or otherwise, in or to such Person,
the Guarantee of any Indebtedness of such Person, or the
subordination of any claim against such Person to other
Indebtedness of such Person.
"Lakeshore Note" means the promissory note from Lakeshore in
the original principal sum of $ 34,600,000.00 payable to the
order of Agent, later assigned by Agent to Shopping Center
Finance Corp., and later assigned by Shopping Center Finance
Corp. to the Bank, such Promissory Note being now for the
principal sum of $20,400,000.00, as amended, renewed, or replaced
from time to time, but it does not include the Renewal of
Promissory Note dated December 6, 1994 to be effective April 1,
1994.
"Lakeshore Mortgage" means the Florida Mortgage from
Lakeshore/Sebring Limited Partnership in favor of Agent later
assigned by Agent to Shopping Center Finance Corp. and
subsequently assigned of even date herewith to the Bank, as
amended from time to time.
"LIBOR Rate" means the London Interbank Offered Rates as
established from time to time and published in The Wall Street
Journal, Money Rates Section which, unless otherwise specified
herein or in the Note, is a one (1) month LIBOR Rate.
"Lien" means any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the
Property, whether such interest is based on the common law,
statute or contract, and including but not limited to the
security interest or lien arising from a deed of trust, mortgage,
encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes, and
including but not limited to reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances
affecting Property.
"Loan" means the Revolving Credit Loan from the Bank to the
Borrower, including the Lakeshore Note which was purchased by the
Bank.
"Loan Agreement" means this Loan Agreement between the
Borrower, Lakeshore and the Bank, and any modifications,
amendments, or replacements thereof, in whole or in part.
"Maximum Rate" means the maximum variable contract rate of
interest which the Bank may lawfully charge under applicable
statutes and laws from time to time in effect.
"Mortgages" or "Mortgage" means a mortgage, deed of trust,
deed to secure debt or similar security instrument made or to be
made by a Person owning real estate or an interest in real estate
granting a Lien on such real estate or interest in real estate as
security for the payment of indebtedness.
"Net Income" means, with respect to Borrower, CBL
Properties, Inc., and their respective Subsidiaries for any
period, net earnings (or loss) after deducting therefrom all
operating expenses, income taxes and reserves and net earnings
(or loss) attributable to minority interests in Subsidiaries for
the period in question, determined in each case on a Combined
basis in accordance with GAAP. Without limiting the generality
of the foregoing, earnings (or losses) from the sale of
outparcels in the ordinary course of business shall be included
in determining Net Income.
"Net Operating Income" means, for any Property for the
period in question (a) any cash rentals, expense or cost
reimbursements, or other income or gain earned by Borrower with
respect to such Property, less (b) all cash expenses (excluding
items capitalized under GAAP) incurred by Borrower during such
period in connection with the operation or leasing of such
Property.
"Net Worth" means, with respect to Borrower, CBL Properties,
Inc. and their Subsidiaries as of any date, the sum of (a) the
total shareholders' equity of CBL Properties, Inc., plus (b) the
value of all minority interests in Borrower, plus (c)
depreciation and amortization since December 31, 1993, minus (d)
all intangible assets, determined on a Combined basis in
accordance with GAAP.
"Note" means the Revolving Credit Note or Notes executed by
the Borrower to the Bank in the original principal sums of Ten
Million Six Hundred Thousand Dollars ($10,600,000.00) (the
"$10,600,000.00 Note") and Forty Nine Million Dollars
($49,000,000.00), dated of even date herewith, and the Lakeshore
Note, as such note or notes may be modified, renewed or extended
from time to time; and any other note or notes executed at any
time to evidence the indebtedness under this Loan Agreement, in
whole or in part, and any renewals, modifications and extensions
thereof, in whole or in part.
"Participant" means KeyBank National Association, PNC Bank,
Kentucky, AmSouth Bank, their successors and assigns, and any
other participants in the Loan.
"Participant's Proportionate Share (AmSouth)" means AmSouth
Bank's (or any successor to such bank's interest in the Loan)
undivided participating interest in the Loan which shall be equal
to Twenty Two Million Five Hundred Thousand and NO/100 Dollars
($22,500,000.00).
"Participant's Proportionate Share (KeyBank)" means
KeyBank's (or any successor to such bank's interest in the Loan)
undivided participating interest in the Loan which shall be equal
to Twenty Two Million Five Hundred Thousand and NO/100 Dollars
($22,500,000.00).
"Participant's Proportionate Share (PNC)" means PNC Bank,
Kentucky, Inc.'s (or any successor to such bank's interest in the
Loan) undivided participating interest in the Loan which shall be
equal to Twelve Million Five Hundred Thousand Dollars
($12,500,000.00).
"Participants' Proportionate Share" means Participant's
Proportionate Share (KeyBank), Participant's Proportionate Share
(PNC), and Participant's Proportionate Share (AmSouth).
"Participation Agreement" means that certain Participation
Agreement entered into of even date herewith among Bank,
KeyBank National Association, PNC Bank, Kentucky, Inc., AmSouth
Bank and/or any other participants in the Loan, as amended from
time to time.
"Permitted Encumbrances" shall mean and include:
i. liens for taxes, assessments or similar
governmental charges not in default or being
contested in good faith by appropriate
proceedings;
ii. workmen's, vendors', mechanics' and
materialmen's liens and other liens imposed by law
incurred in the ordinary course of business, and
easements and encumbrances which are not
substantial in character or amount and do not
materially detract from the value or interfere
with the intended use of the properties subject
thereto and affected thereby;
iii. liens in respect of pledges or deposits under
social security laws, worker's compensation laws,
unemployment insurance or similar legislation and
in respect of pledges or deposits to secure bids,
tenders, contracts (other than contracts for the
payment of money), leases or statutory
obligations;
iv. any liens and security interests specifically
listed and described in EXHIBIT "B" hereto
attached or in any exhibit describing permitted
exceptions and attached to any CBL Mortgage;
v. such other liens and encumbrances to which Bank
shall consent in writing; and
vi. leases, licenses, rental agreements or other
agreements for use and occupancy of the subject
property.
"Person" means an individual, partnership, corporation,
trust, unincorporated organization, association, joint venture or
a government or agency or political subdivision thereof.
"Project" or "Projects," which definition is used and only
applies within Section 7.9 hereof, means the real estate projects
owned by Borrower, a Wholly Owned Subsidiary of Borrower, a
Subpartnership or, to the extent approved by the Supermajority
Lenders, any other Person and "Project" shall mean any one of the
Projects. The capitalized terms used in this definition shall
have the same meaning as provided in the Credit Agreement.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, tangible or intangible.
"Reserved Construction Loan" shall mean a construction loan
extended to Borrower or a Subsidiary of Borrower for the
construction of a project in respect of which: (a) neither any
monetary or material non-monetary default nor any event of
default exists; (b) interest on such loan has been budgeted to
accrue at a rate of not less than the Base Rate plus two percent
(2%) at the time the interest reserve account is established; (c)
the amount of such budgeted interest has been (i) included in the
principal amount of such loan and (ii) segregated into an
interest reserve account (which shall include any arrangement
whereby loan proceeds equal to such budgeted interest are
reserved and only disbursed to make interest payments in respect
of such loan); (d) absent an event of default or a monetary or
material non-monetary default, such interest can be paid out of
such interest reserve account only for the purpose of making
interest payments on such loan; (e) the amount held in such
interest reserve account in respect of such loan, together with
the net income if any, from such project projected by the Agent
in its reasonable judgment, will be sufficient, as reasonably
determined by the Agent from time to time, to pay all Interest
Expense on such loan until the date that the EBITDA of the
project being financed by such loan is anticipated to be
sufficient to pay all Interest Expense on such loan; and (f)
Borrower has delivered all certificates required by Section 6
hereof.
"Revolving Credit Advances" means advances of principal on
the Revolving Credit Loan by the Bank under the terms of this
Loan Agreement to the Borrower during the term of the Revolving
Credit Loan pursuant to Section 3.1.
"Revolving Credit Loan" means the aggregate of the
Borrower's and Lakeshore's indebtedness to the Bank pursuant to
Section 2 of this Loan Agreement.
"Revolving Credit Note" means the Notes as described in
Section 2.3 hereof and the Lakeshore Note.
"Subsidiary" shall mean, as to any Person, any other Person,
more than fifty percent (50%) of the outstanding shares of
Capital Stock, partnership interest or other ownership interest,
having ordinary voting power to elect a majority of the board of
directors or similar governing body of such other Person
(irrespective of whether or not at the time stock or other
ownership interests of any other class or classes of such other
Person shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or by one or more
"Subsidiaries" of such Person, and whose financial reports are
prepared on a consolidated basis with such Person. "Wholly Owned
Subsidiary" shall mean any such Person of which all of the shares
of Capital Stock or ownership interests (other than, in the case
of a corporation, directors' qualifying shares) are so owned or
controlled. For purposes of this Agreement CBL Management, Inc.
shall be deemed to be a Subsidiary of Borrower.
"Termination Date of Revolving Credit Loan" shall mean the
earlier of (a) June 1, 1998, or in the event that the Bank and
Borrower shall hereafter mutually agree in writing that the
Revolving Credit Loan and the Bank's commitment hereunder shall
be extended to another date, such other date mutually agreed upon
between Bank and Borrower to which the Bank's commitment shall
have been extended, or (b) the date as of which Borrower shall
have terminated the Bank's commitment under the provisions of
Section 2.5 hereof.
"Term Out Amount" means the then outstanding principal
balance of the Loan due and owing the Bank under the Note, if the
Bank elects not to extend the existing Maturity Date and the
Borrower elects to cap the line of credit as provided in the
Note.
"Total Obligations" means, as of any date, the sum (without
duplication) of (a) the Indebtedness of Borrower, CBL Properties,
Inc. and their respective Subsidiaries (other than Indebtedness
described in clauses (a)(iii) and (a)(iv) of the definition
thereof); plus (b) the aggregate amount of Contingent Obligations
of Borrower, CBL Properties, Inc. and their respective
Subsidiaries in respect of Indebtedness (other than Indebtedness
described in clauses (a)(iii) and (a)(iv) of the definition
thereof); plus (c) Borrower's, CBL Properties, Inc's or their
respective Subsidiaries' proportionate share of Indebtedness
(other than Indebtedness described in clauses (a)(iii) and
(a)(iv) of the definition thereof) of any Unconsolidated
Affiliate, whether or not Borrower, CBL Properties, Inc. or such
Subsidiary is obligated on such Indebtedness; plus (d) all other
amounts which would be classified as a liability on the
consolidated balance sheets of Borrower or CBL Properties, Inc.,
determined in each case on a Combined basis in accordance with
GAAP.
"Unconsolidated Affiliate" shall mean, in respect of any
Person, any other Person in whom such Person holds an Investment,
which Investment is accounted for in the financial statements of
such Person on an equity basis of accounting.
b. ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in
accordance with generally accepted accounting
principles consistent with those applied in the
preparation of the financial statements required
to be delivered from time to time pursuant to
Section 6.5 hereof.
SECTION 2. : COMMITMENT; FUNDING AND TERMS OF REVOLVING
CREDIT LOAN
a. THE COMMITMENT. Subject to the terms and
conditions herein set out, Bank agrees and commits
to make loan advances and letter of credit
advances to the Borrower from time to time, from
the Closing Date until the Termination Date of
Revolving Credit Loan, in an aggregate principal
amount not to exceed, at any one time outstanding,
the lesser of (a) Eighty Million Dollars
($80,000,000.00) minus the sum, if any, applicable
under the provisions of Section 2.8 hereof; or
(b) the Borrower's Borrowing Base, as defined in
Section 1.
b. FUNDING THE LOAN. Each loan advance hereunder
shall be made upon the written request of the
Borrower to the Bank, specifying the date and
amount and intended use thereof. All advances
hereunder, whether under the Note or the Lakeshore
Note, shall be made by depositing the same to the
checking account of Borrower at the Bank or other
methods acceptable to Borrower and Bank.
LAKESHORE ACKNOWLEDGES AND AGREES THAT NO ADVANCES
SHALL BE MADE DIRECTLY TO LAKESHORE EXCEPT UPON
THE EXPRESS WRITTEN CONSENT OF THE BORROWER
RECEIVED BY THE BANK PRIOR TO THE ADVANCE BEING
MADE.
c. THE NOTE AND INTEREST. The Revolving Credit
Loan shall be evidenced by two (2) promissory
notes of the Borrower and one (1) promissory note
of Lakeshore, each payable to the order of the
Bank in the aggregate principal amount of Eighty
Million Dollars ($80,000,000.00), in form
substantially the same as the copy of the
Revolving Credit Note and the Lakeshore Note
attached hereto as EXHIBIT "C." The entire
principal amount of the Loan shall be due and
payable on the Termination Date of Revolving
Credit Loan. The unpaid principal balances of the
Revolving Credit Loan shall bear interest from the
Closing Date on disbursed and unpaid principal
balances (calculated on the basis of a year of 365
or 366 days as is appropriate) at a rate per annum
as specified in the Note. Said interest shall be
payable monthly on the first day of each month
after the Closing Date, commencing March 1, 1997
provided the Bank has in each instance mailed to
the Borrower a billing notice at least ten (10)
days prior thereto setting forth the payment
amount next due, with the final installment of
interest, together with the entire outstanding
principal balance of the Revolving Credit Loan,
being due and payable on the Termination Date of
Revolving Credit Loan. The first selection of the
one (1) month, three (3) months, six (6) months or
one (1) year LIBOR Rate shall be made by the
Borrower and Lakeshore (but the rate selected by
Lakeshore must always be the same as the rate
selected by the Borrower) on or prior to the date
of the Note and each selection thereafter shall be
made at least twenty-four (24) hours prior to the
end of the then applicable interest rate period.
Neither the Borrower nor Lakeshore may ever select
a rate period which exceeds the Termination Date
of the Revolving Credit Loan.
d. COMMITMENT FEE/SERVICING FEE. On the Closing
Date, the Borrower agrees to pay to the Bank in
addition to the commitment fee it paid in March of
1994 in the amount of Seventy-Five Thousand
Dollars ($75,000.00), and the commitment fee it
paid in November of 1994 in the amount of Fifty
Thousand Dollars ($50,000.00), and the commitment
fee it paid in July of 1995 in the amount of No
Dollars ($-0-), and the commitment fee it paid in
March of 1996 in the amount of Eighty Five
Thousand and NO/100 Dollars ($85,000.00), and the
commitment fee in the amount of NO/100 Dollars
($-0-), a commitment fee in the amount of One Hundred
Ninety Thousand and no/100 Dollars ($190,000.00),
in consideration of the Bank's agreement to make
additional funds available to Borrower under the
terms and provisions hereof from the Closing Date
until the initial Termination Date of Revolving
Credit Loan specified in Section 1 hereof. In
addition to the commitment fee, on each November 2
hereafter, the Borrower shall pay to the Bank a
servicing fee in the amount of Twenty Four
Thousand and NO/100 Dollars ($24,000.00) for the
Bank's services in connection with administering
the Loan participation with Participant. The
servicing fee shall belong solely to the Bank and
the Participant shall have no interest therein.
Borrower agrees that the commitment fees and
servicing fee are fair and reasonable considering
the condition of the money market, the
creditworthiness of Borrower, the interest rate to
be paid, and the nature of the security for the
Loan. In the event that Borrower and Bank shall
hereafter mutually agree to extend the term of the
Bank's commitment hereunder, they may also agree
at that time as to an additional commitment fee,
if any, to be paid for such further commitment by
the Bank, but not to exceed the maximum permitted
by applicable law.
e. BORROWINGS UNDER, PREPAYMENTS OR TERMINATION OF
THE REVOLVING CREDIT LOAN. The Borrower may, at
its option, from time to time, subject to the
terms and conditions hereof including Section 2.8
hereof, without penalty, borrow, repay and
reborrow amounts under the Revolving Credit Note
and the Lakeshore Note, first from the Ten Million
Six Hundred Thousand Dollars ($10,600,000.00)
Note, then from the Forty Nine Million Dollars
($49,000,000.00) Note, then from the Lakeshore
Note and principal payments received shall be
applied by the Bank to the Revolving Credit Note
and the Lakeshore Note in such order and amounts
as the Bank deems appropriate in its sole
discretion. Neither the Borrower nor Lakeshore
shall be permitted to borrow, repay and reborrow
up to the principal amounts of the Lakeshore Note
unless documentary stamps tax and intangibles tax,
required by law to be paid, has been paid on the
amounts readvanced and unless the Bank has a first
in priority mortgage on the Florida property owned
by Lakeshore securing the Lakeshore Note.
By notice to the Bank in writing, Borrower shall be
entitled to terminate the Bank's commitment to make further
advances on the Revolving Credit Loan; and provided that the
Revolving Credit Loan and all interest and all other obligations
of Borrower to Bank arising hereunder shall have been paid in
full, Bank shall thereupon at Borrower's request release its
security interest in all of Borrower's Property securing the
Revolving Credit Loan.
f. SUBSTITUTION OF COLLATERAL. Upon the Bank's
prior written approval, the Borrower may
substitute collateral originally provided for the
Revolving Credit Loan for collateral of equal
value but such substituted collateral must be
acceptable to the Bank and the acceptance thereof
is solely within the discretion of the Bank.
g. SECONDARY FINANCING BY CBL PROPERTIES, INC.
CBL Properties, Inc. is the general partner of the
Borrower. It is also a real estate investment
trust. In the event CBL Properties, Inc. does any
secondary offering of its securities, it will
apply no less than 75% net of expenses of the
monies received from such offering for the benefit
of the Borrower and will not use that percentage
of funds so received to capitalize or otherwise
fund any other new partnerships or entities.
h. CAP ON LOAN. Notwithstanding anything contained
in this Loan Agreement to the contrary, if at any
time the Bank does not have a first-in-priority
lien on the Florida property (Lakeshore Mall)
pursuant to the Lakeshore Mortgage up to the sum
of Thirty One Million Dollars ($31,000,000.00) the
Loan shall be capped at Forty Nine Million Dollars
($49,000,000.00).
SECTION 3. : REQUIRED PAYMENTS, PLACE OF PAYMENT, ETC.
a. REQUIRED REPAYMENTS. In the event that the
outstanding aggregate principal balance of the
Revolving Credit Loan shall at any time exceed the
Borrowing Base, upon discovery of the existence of
such excess borrowings, the Borrower shall, within
one hundred twenty (120) days from the date of
such discovery, make a principal payment which
will reduce the outstanding principal balance of
the Revolving Credit Loan to an amount which does
not exceed the Borrowing Base and/or at Borrower's
option provide the Bank with additional collateral
for the Revolving Credit Loan of a value and type
reasonably satisfactory to the Bank which
additional collateral shall be at a minimum
sufficient to secure the then outstanding balance
of the Loan (after credit for any principal
reduction payment received from Borrower, if any),
and if Borrower intends to request additional
advances under the Loan, the additional collateral
shall include collateral, deemed sufficient in the
Bank's discretion, to secure the Eighty Million
Dollars ($80,000,000.00) credit line limitation,
thereafter permitting Borrower to obtain
additional advances in the manner and to the
extent provided under the terms of this Loan
Agreement.
In addition and during such one hundred twenty (120)
day period or until the principal payment or satisfactory
collateral is received, whichever is less, the Borrower will not
make any additional requests for advances under the Revolving
Credit Loan. Once calculated, the Borrowing Base shall remain
effective until the next Borrowing Base calculation date as
provided in Section 1 of this Agreement.
b. PLACE OF PAYMENTS. All payments of principal
and interest on the Revolving Credit Loan and all
payments of fees required hereunder shall be made
to the Bank, at its address listed in Section 9.2
of this Agreement in immediately available funds.
c. PAYMENT ON NON-BUSINESS DAYS. Whenever any
payment of principal, interest or fees to be made
on the indebtednesses evidenced by the Note shall
fall due on a Saturday, Sunday or public holiday
under the laws of the State of Tennessee, such
payment shall be made on the next succeeding
business day.
SECTION 4. : CONDITIONS OF LENDING
a. CONDITIONS PRECEDENT TO CLOSING AND FUNDING
INITIAL ADVANCE. The obligation of the Bank to
fund the initial Revolving Credit Loan Advance
hereunder is subject to the condition precedent
that the Bank shall have received, on or before
the Closing Date, all of the following in form and
substance satisfactory to the Bank:
i. This Loan Agreement.
ii. The Note.
(c) The Lakeshore Note.
(d) The CBL Mortgage, the Lakeshore Mortgage together with
a title commitment from a title insurance company acceptable to
the Bank, providing for the issuance of a mortgagee's loan policy
insuring the lien of the CBL Mortgage in form, substance and
amount satisfactory to the Bank, containing no exceptions which
are unacceptable to the Bank, and containing such endorsements as
the Bank may require; provided, however, with respect to the
Florida (Lakeshore Mall) and Mississippi (Pemberton Mall)
properties being added as collateral for the Loan, the Bank, in
its sole discretion may require only a title report and may not
require the issuance of a mortgagee's loan policy.
(e) Current draft financial statements of the Borrower in
form satisfactory to the Bank to be held by the Bank in strict
confidence.
(f) Certified copy of Borrower's limited partnership
agreement and certificate of limited partnership, and all
amendments thereto and a certificate of existence for the
Borrower.
(g) Certified corporate resolutions of Borrower's general
partner, and certificate(s) of existence for Borrower's general
partner from the state of its incorporation and such other states
as Bank shall require, together with a copy of the charter and
bylaws of the Borrower's general partner.
(h) The opinion of counsel for Borrower and the Borrower's
general partner, that the transactions herein contemplated have
been duly authorized by all requisite corporate and partnership
authority, that this Loan Agreement and the other instruments and
documents herein referred to have been duly authorized, validly
executed and are in full force and effect, and pertaining to such
other matters as the Bank may require.
(i) A certificate from an insurance company, satisfactory
to Bank, setting forth the information concerning insurance which
is required by Section 6.3 of this Loan Agreement; or, if the
Bank shall so require, certified copies of the original insurance
policies evidencing such insurance.
(j) Environmental audits of the properties described in
the CBL Mortgage.
(k) Current surveys of the property subject to the CBL
Mortgage, indicating the location of all building lines,
easements (visible, reflected in the public records or otherwise)
and any existing improvements or encroachments, which survey
shall contain no set of facts objectionable to the Bank and shall
be accompanied by the Bank's usual survey certificate.
(l) Copies of the appraisals of the real estate described
in EXHIBIT "A" attached hereto.
(m) The Guaranty Agreements of the Borrower guarantying the
Lakeshore Note and of CBL Properties, Inc. guarantying the Loan.
(n) All the items and information shown on the Checklist
for Closing, a copy of which is attached hereto and marked
EXHIBIT "D".
b. CONDITIONS PRECEDENT TO ALL REVOLVING CREDIT
LOAN ADVANCES. The obligation of the Bank to make
Revolving Credit Advances pursuant hereto
(including the initial advance at the Closing
Date) shall be subject to the following additional
conditions precedent:
i. The Borrower shall have furnished to the Bank
a written request stating the amount of Revolving
Credit Advance requested together with the
intended use of the advance.
ii. The Borrower and Lakeshore shall not be in
default of any of the terms and provisions hereof
or of any instrument or document now or at any
time hereafter evidencing or securing all or any
part of the Revolving Credit Loan indebtednesses.
Each of the Warranties and Representations of the
Borrower and Lakeshore, as set out in Section 5
hereof shall remain true and correct in all
material respects as of the date of such Loan
advance.
iii. Within forty-five (45) days after each July 1,
January 1, April 1 and October 1, Borrower shall
furnish to the Bank a Non-Default Certificate
executed by a duly authorized officer of Borrower,
in the form of EXHIBIT "E" attached hereto.
iv. The Borrower shall have furnished to the Bank an
updated and current title report with respect to
the property or properties covered by any CBL
Mortgage held by the Bank. If any lien shall have
been placed on the property subsequent to the date
of this Agreement or the applicable CBL Mortgage,
other than liens in favor of the Bank, no
additional advances shall be made.
SECTION 5. : REPRESENTATIONS AND WARRANTIES
Borrower and Lakeshore represent and warrant that:
a. PARTNERSHIP STATUS. The Borrower is a limited
partnership duly organized, validly existing and
in good standing under the laws of the State of
Delaware; it has the power and authority to own
its properties and assets and is duly qualified to
carry on its business in every jurisdiction
wherein such qualification is necessary.
Lakeshore is a limited partnership duly organized,
validly existing and in good standing under the
laws of the State of Florida; it has the authority
to own its properties and assets and is duly
qualified to carry on its business in every
jurisdiction wherein such qualification is
necessary. Lakeshore is a wholly owned subsidiary
of the Borrower.
b. POWER AND AUTHORITY. The execution, delivery
and performance of the Loan Agreement, the Note,
the CBL Mortgage and the other loan and collateral
documents executed pursuant thereto by the
Borrower and/or Lakeshore have been duly
authorized by all requisite action and, to the
best of Borrower's and Lakeshore's knowledge, will
not violate any provision of law, any order of any
court or other agency of government, the limited
partnership agreement of the Borrower or
Lakeshore, any provision of any indenture,
agreement or other instrument to which Borrower
and/or Lakeshore is a party, or by which
Borrower's and/or Lakeshore's respective
properties or assets are bound, or be in conflict
with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default
under any such indenture, agreement or other
instrument, or result in the creation or
imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the properties
or assets of Borrower and/or Lakeshore, except for
liens and other encumbrances provided for and
securing the indebtedness covered by this Loan
Agreement.
c. FINANCIAL CONDITION. The audited balance
sheet of Borrower and Lakeshore for the fiscal
year ended as of December 31, 1995, and the
related statement of income and changes in
financial conditions for the year then ended, and
(ii) the unaudited interim balance sheet of
Borrower and Lakeshore for September 30, 1996 and
the related statement of income and changes in
financial conditions for the period then ended, a
copy of each of which has been furnished to the
Bank, together with any explanatory notes therein
referred to and attached thereto, are correct and
complete and fairly present the financial
condition of Borrower and Lakeshore as at the date
of said balance sheets and the results of its
operations for said periods and as of the date of
closing of this Loan Agreement and related
transactions, respectively. All such financial
statements have been prepared in accordance with
Generally Accepted Accounting Principles applied
on a consistent basis maintained through the
period involved.
i. There has been no substantial adverse change in
the business, properties or condition, financial
or otherwise, of Borrower and/or Lakeshore since
September 30, 1996.
ii. The audited balance sheet of CBL Properties,
Inc. for the fiscal year ended as December 31,
1995, the unaudited balance sheet of CBL
Properties, Inc. for the period ended September
30, 1996, and the related statement of income and
changes in financial conditions for the year ended
1995 and the period ended September 30, 1996, a
copy of which has been furnished to the Bank,
together with any explanatory notes therein
referred to and attached thereto, are correct and
complete and fairly present the financial
condition of CBL Properties, Inc. as at the date
of said balance sheets and the results of its
operations for said periods and as of the date of
closing of this Loan Agreement and related
transactions, respectively. All such financial
statements have been prepared in accordance with
Generally Accepted Accounting Principles applied
on a consistent basis maintained through the
period involved.
iii. There has been no substantial adverse change in
the business, properties or condition, financial
or otherwise, of CBL Properties, Inc. since
September 30, 1996.
iv. The warranties and representations made in this
Section 5.3 are and were made as of the date of
this Loan Agreement and any violation thereof
shall be determined as of that date.
d. TITLE TO ASSETS. Borrower and Lakeshore have
good and marketable title to all its properties
and assets reflected on the most recent balance
sheet furnished to Bank subject to the Permitted
Encumbrances with respect to the properties
described in the CBL Mortgages and subject to all
encumbrances, whether of record or not, with
respect to all other properties.
e. LITIGATION. There is no action, suit or
proceeding at law or in equity or by or before any
governmental instrumentality or other agency now
pending, or, to the knowledge of the Borrower and
Lakeshore threatened against or affecting Borrower
and/or Lakeshore, or any properties or rights of
Borrower and/or Lakeshore, which, if adversely
determined, would materially adversely affect the
financial or any other condition of Borrower
and/or Lakeshore except as set forth in EXHIBIT
"F" attached hereto.
f. TAXES. Borrower and Lakeshore have filed or
caused to be filed all federal, state or local tax
returns which are required to be filed, and has
paid all taxes as shown on said returns or on any
assessment received by it, to the extent that such
taxes have become due, except as otherwise
permitted by the provisions hereof.
g. CONTRACTS OR RESTRICTIONS. In Borrower's and
Lakeshore's opinions, Borrower and Lakeshore are
not a party to any agreement or instrument or
subject to any partnership agreement restrictions
adversely affecting its business, properties or
assets, operations or condition (financial or
otherwise) other than this agreement, other bank
loan or property partnership agreements that
contain certain restrictive covenants or other
agreements entered into in the ordinary course of
business.
h. NO DEFAULT. No Event of Default (as defined
herein) has occurred and not been waived under any
agreement or instrument to which it is a party
beyond the expiration of any applicable notice and
cure period, which default if not cured would
materially and substantially affect the financial
condition, property or operations of the Borrower
and/or Lakeshore. For the purposes of this
Paragraph 5.8, monetary defaults specifically
excepted under the provisions of Paragraph 8.2
(which excludes non-recourse debt) below shall not
be deemed material defaults.
i. PATENTS AND TRADEMARKS. Borrower and Lakeshore
possess all necessary patents, trademarks, trade
names, copyrights, and licenses necessary to the
conduct of its businesses.
j. ERISA. To the best of Borrower's and
Lakeshore's knowledge and belief, Borrower is in
compliance with all applicable provisions of the
Employees Retirement Income Security Act of 1974
("ERISA") and all other laws, state or federal,
applicable to any employees' retirement plan
maintained or established by it.
k. HAZARDOUS SUBSTANCES. No Hazardous Substances
are unlawfully located on or have been unlawfully
stored, processed or disposed of on or unlawfully
released or discharged (including ground water
contamination) from any property owned by Borrower
and/or Lakeshore which is encumbered by the CBL
Mortgage and no above or underground storage tanks
exist unlawfully on such property. No private or
governmental lien or judicial or administrative
notice or action related to Hazardous Substances
or other environmental matters has been filed
against any property which, if adversely
determined, would materially adversely affect the
business, operations or the financial condition of
Borrower and/or Lakeshore except as set forth in
EXHIBIT "F" attached hereto.
l. OWNERSHIP OF BORROWER. As of the date
hereof, CBL Properties, Inc. owns an approximate
60% general partnership interest in the Borrower.
As of the date hereof, CBL & Associates, Inc. and
its affiliates, officers and key employees owns an
approximate 40% limited partnership interest in
the Borrower. As of the date hereof, CBL
Management, Inc. owns an approximate ____%
_________________ partnership interest in the
Borrower. The Borrower has no other general
partners. As of the date hereof the Borrower owns
100% of the partnership interests in Lakeshore.
5.13 OUTSTANDING BALANCE ON LAKESHORE NOTE. As of the date
hereof, the outstanding unpaid principal balance of the Lakeshore
Note is $18,000,000.00 and the undisbursed amount of the
Lakeshore Note is $2,400,000.00 and no defenses or offsets exist
against the holder of the Lakeshore Note or otherwise.
SECTION 6. : AFFIRMATIVE COVENANTS OF BORROWER AND LAKESHORE
Borrower and Lakeshore covenant and agree that from the date
hereof and until payment in full of the principal of and interest
on indebtednesses evidenced by the Note and the Lakeshore Note,
unless the Bank shall otherwise consent in writing, such consent
to be at the discretion of the Bank, Borrower and Lakeshore will:
a. BUSINESS AND EXISTENCE. Perform all things
necessary to preserve and keep in full force and
effect its existence, rights and franchises,
comply with all laws applicable to it and continue
to conduct and operate its business in a sound and
prudent manner.
b. MAINTAIN PROPERTY. Maintain, preserve, and
protect all leases, franchises, and trade names
and preserve all of its properties used or useful
in the conduct of its business in a sound and
prudent manner, keep the same in good repair,
working order and condition, ordinary wear and
tear excepted, and from time to time make, or
cause to be made, all needed and proper repairs,
renewals, replacements, betterments and
improvements thereto so that the business carried
on in connection therewith may be properly
conducted at all times.
c. INSURANCE. With respect to all of the
Property which serves as collateral for the Loan,
at all times maintain in some company or companies
(having a Best's rating of A:XI or better)
approved by Bank:
(1) Comprehensive public liability insurance
covering claims for bodily injury, death, and
property damage, with minimum limits
satisfactory to the Bank, but in any event
not less than those amounts customarily
maintained by companies in the same or
substantially similar business;
(2) Business interruption insurance and/or loss
of rents insurance in a minimum amount
specified by Bank, with loss payable clause
in favor of Bank;
(3) Hazard insurance insuring Borrower's and
Lakeshore's property and assets against loss
by fire (with extended coverage) and against
such other hazards and perils (including but
not limited to loss by windstorm, hail,
explosion, riot, aircraft, smoke, vandalism,
malicious mischief and vehicle damage) as
Bank, in its sole discretion, shall from time
to time require, all such insurance to be
issued in such form, with such deductible
provision, and for such amount as shall be
satisfactory to Bank, with loss payable
clause in favor of Bank. The Bank is hereby
authorized and empowered, at its option, to
adjust or compromise any loss under any such
insurance policies and to collect and receive
the proceeds from any such policy or policies
as provided in the CBL Mortgage; and
(4) Such other insurance as the Bank may, from
time to time, reasonably require by notice in
writing to the Borrower and/or to Lakeshore.
i. All required insurance policies shall provide
for not less than thirty (30) days' prior written
notice to the Bank of any cancellation,
termination, or material amendment thereto; and in
all such liability insurance policies, Bank shall
be named as an additional insured. Each such
policy shall, in addition, provide that there
shall be no recourse against the Bank for payment
of premiums or other amounts with respect thereto.
Hazard insurance policies shall contain the
agreement of the insurer that any loss thereunder
shall be payable to the Bank notwithstanding any
action, inaction or breach of representation or
warranty by the Borrower and/or Lakeshore. The
Borrower and Lakeshore will deliver to Bank
original or duplicate policies of such insurance,
or satisfactory certificates of insurance, and, as
often as Bank may reasonably request, a report of
a reputable insurance broker with respect to such
insurance. Any insurance proceeds received by
Bank shall be applied upon the indebtednesses,
liabilities, and obligations of the Borrower to
the Bank (whether matured or unmatured) or, at
Bank's option, released to the Borrower or
Lakeshore, as the case might be.
d. OBLIGATIONS, TAXES AND LIENS. Pay all of its
indebtednesses and obligations in accordance with
normal terms and practices of its business and pay
and discharge or cause to be paid and discharged
all taxes, assessments, and governmental charges
or levies imposed upon it or upon any of its
income and profits, or upon any of its properties,
real, personal or mixed, or upon any part thereof,
before the same shall become in default, as well
as all lawful claims for labor, materials, and
supplies which otherwise, if unpaid, might become
a lien or charge upon such properties or any part
thereof; provided, however, that the Borrower
shall not be required to pay and discharge or to
cause to be paid and discharged any such
indebtedness, obligation, tax, assessment, trade
payable, charge, levy or claim so long as the
validity thereof shall be contested in good faith
by appropriate proceedings satisfactory to Bank,
and Bank shall be furnished, if Bank shall so
request, bond or other security protecting it
against loss in the event that such contest should
be adversely determined. In addition, Borrower
and Lakeshore shall immediately pay, upon the
request of the Bank, all mortgage and/or
intangible taxes and/or penalties payable to
government officials with respect to any CBL
Mortgage and/or the Note or, if Bank has elected
to pay same, Borrower shall immediately reimburse
Bank therefor upon the request of the Bank;
provided, however Borrower shall not be required
to pay or reimburse so long as Borrower is
contesting the tax and/or penalties in good faith
and through continuous and appropriate
proceedings.
e. FINANCIAL REPORTS AND OTHER DATA. Furnish to
the Bank as soon as available and in any event
within ninety (90) days after the end of each
fiscal year of Borrower and Lakeshore,
respectively, an unqualified audit as of the close
of such fiscal year of Borrower and Lakeshore,
including a balance sheet and statement of income
and surplus of Borrower and Lakeshore together
with the unqualified audit report and opinion of
Arthur Andersen Company, Certified Public
Accountant, or other independent Certified Public
Accountant which is widely recognized and of good
national repute or which is otherwise acceptable
to the Bank, showing the financial condition of
Borrower at the close of such year and the results
of operations during such year; and, within forty-
five (45) days after the end of each fiscal
quarter, (i) financial statements similar to those
described above for Borrower and for CBL
Properties, Inc., not audited but certified by the
Chief Financial Officer or Controller of Borrower
and CBL Properties, Inc., as the case may be, such
balance sheets to be as of the end of such quarter
and such statements of income and surplus to be
for the period from the beginning of said year to
the end of such quarter, in each case subject only
to audit and year-end adjustment and the
preparation of required footnotes; and (ii) a
Non-Default Certificate in the form prescribed on
EXHIBIT "E" Attached hereto and made a part
hereof; and, within thirty (30) days after the end
of each fiscal quarter, rent rolls and operating
statements related to the properties described in
the CBL Mortgage.
f. ADDITIONAL INFORMATION. Furnish such other
information regarding the operations, business
affairs and financial condition of the Borrower
and/or Lakeshore as Bank may reasonably request,
including but not limited to written confirmation
of requests for loan advances, true and exact
copies of its books of account and tax returns,
and all information furnished to the owners of its
partnership interests, or any governmental
authority, and permit the copying of the same and
Bank agrees that all such information shall be
maintained in strict confidence. Provided,
however, the Borrower and Lakeshore shall not be
required to divulge the terms of other financing
arrangements with other lending institutions if
and to the extent Borrower and/or Lakeshore is
prohibited by contractual agreement with such
lending institutions from disclosing such
information with the exception that Borrower and
Lakeshore shall promptly notify Bank in writing of
all defaults, if any, which exist beyond any
applicable cure periods and the nature thereof,
which occur in connection with such financing
arrangements and which defaults would constitute
an Event of Default hereunder. Borrower and
Lakeshore shall not enter into any such
contractual arrangement whereby the Borrower or
Lakeshore is prohibited from disclosing such
financial arrangements, without providing Bank
with written notice of the nature of such
prohibitions. In addition, Borrower and Lakeshore
shall not enter into any such arrangement while
any Event of Default hereunder exists beyond any
applicable cure periods.
g. RIGHT OF INSPECTION. Permit any person
designated by the Bank, at the Bank's expense, to
visit and inspect any of the properties, books and
financial reports of the Borrower and Lakeshore
and to discuss its affairs, finances and accounts
with its principal officers, at all such
reasonable times and as often as a Bank may
reasonably request provided that such inspection
shall not unreasonably interfere with the
operation and conduct of Borrower's and/or
Lakeshore's properties and business affairs and
provided further that such person shall disclose
such information only to the Bank, the Bank's
appraisers and examiners as required by banking
laws, rules and regulations.
h. ENVIRONMENTAL LAWS. Maintain at all times all
of Borrower's and Lakeshore's property described
in the CBL Mortgage in compliance with all
applicable Environmental Laws, and immediately
notify the Bank of any notice, action, lien or
other similar action alleging either the location
of any Hazardous Substances or the violation of
any Environmental Laws with respect to any of such
properties.
i. NOTICE OF ADVERSE CHANGE IN ASSETS. At the time
of Borrower's and/or Lakeshore's first knowledge
or notice, immediately notify the Bank of any
information that may adversely affect in any
material manner the properties of the Borrower
and/pr Lakeshore which are subject to the CBL
Mortgage.
j. MINIMUM NET WORTH. Borrower shall not permit
Net Worth at any time to be less than an amount
equal to $410,000,000.00 plus ninety percent (90%)
of the net proceeds or value (whether cash,
property or otherwise) received by CBL Properties,
Inc. or Borrower from any issuance after the
effective date of this Loan Agreement of any
shares of Capital Stock of CBL Properties, Inc.,
any operating partnership units of Borrower or any
shares of Capital Stock or other equity interest
in any Subsidiary of Borrower.
k. TOTAL OBLIGATIONS TO CAPITALIZED VALUE.
Maintain at all times beginning on the Closing
Date, a ratio of Total Obligations to Capitalized
Value of not more than .60 to 1.00.
l. APPRAISALS. Deliver to the Bank upon the Bank's
request but, for each property, no more frequently
than once per every eighteen (18) month period,
reappraisals of the property or properties
described in the CBL Mortgage.
6.13 INTEREST COVERAGE RATIO. Borrower shall not permit,
as of the last day of any fiscal quarter, the Interest Coverage
Ratio to be less than 2.00 to 1.00.
6.14 DEBT COVERAGE RATIO. Borrower shall not permit, as of
the last day of any fiscal quarter of Borrower, the Debt Coverage
Ratio to be less than 1.75 to 1.00.
6.15 AGREEMENTS REGARDING LAKESHORE NOTE AND LAKESHORE
MORTGAGE. So long as no Event of Default then exists or with
notice or lapse of time would exist, upon the request of the
Borrower, but in the Bank's discretion, the Bank shall sell to
the Borrower and/or the Borrower's designated subsidiary, the
Lakeshore Note and/or the Lakeshore Mortgage for the balance due
under the Lakeshore Note (the "Lakeshore Principal Balance") plus
accrued interest.
SECTION 7. : NEGATIVE COVENANTS OF BORROWER AND LAKESHORE
Borrower and Lakeshore covenant and agree that at all times
from and after the Closing Date, unless the Bank shall otherwise
consent in writing, such consent to be at the discretion of the
Bank, Borrower and Lakeshore will not, either directly or
indirectly:
a. INDEBTEDNESS. Incur, create, assume or permit
to exist any indebtedness or liability, secured by
any of the properties described in the CBL
Mortgage, (except with respect to the Borrower
only) for indebtedness, which is subordinate in
all respects to the indebtedness evidenced by the
Note, which indebtedness does not exceed Two
Hundred Fifty Thousand Dollars ($250,000.00) in
the aggregate per property and is used for
renovation of the property or properties described
in the CBL Mortgage.
b. MORTGAGES, LIENS, ETC. Create, assume or suffer
to exist any mortgage, pledge, lien, charge or
other encumbrance of any nature whatsoever on any
of the properties subject to the CBL Mortgage
except:
i. Liens in favor of the Bank securing payment of
the Note and/or the Lakeshore Note;
ii. Existing liens securing indebtednesses permitted
under Section 7.1 above;
iii. Permitted Encumbrances (as defined at
Section 1); and
iv. Liens securing indebtedness permitted under
Section 7.1 above.
c. SALE OF ASSETS. Sell, lease, convert, transfer
or dispose (other than in the normal course of
business) of all or a substantial part of its
assets for less than book value or fair market
consideration without the Bank's prior written
consent; provided, however, while the Revolving
Credit Loan is outstanding, the Borrower and
Lakeshore may not sell in a single transaction or
related series of transactions properties whose
GAAP base value exceeds twenty percent (20%) of
the GAAP book value of the Borrower's assets,
without the Bank's approval or review. All
transfers, whether or not the Bank's approval
shall be required as set forth above, shall be
reported to the Bank.
d. CONSOLIDATION OR MERGER; ACQUISITION OF ASSETS.
Enter into any transaction of merger or
consolidation, acquire any other business or
corporation, or acquire all or substantially all
of the property or assets of any other Person
unless the Borrower and/or its general partner
shall be the surviving entities.
e. PARTNERSHIP DISTRIBUTIONS AND OTHER PAYMENTS.
Except as hereinafter provided, declare or pay, or
set apart any funds for the payment of, any
distributions on any partnership interest in
Borrower and/or Lakeshore, or apply any of its
funds, properties, or assets to or set apart any
funds, properties or assets for, the purchase or
other retirement of or make any other distribution
(whether by reduction of partnership capital or
otherwise) in respect of, any partnership interest
in Borrower and/or Lakeshore; or without the
consent of Bank, pay any fee or other compensation
of any nature to or for the benefit of CBL &
Associates, Inc. and/or CBL Properties, Inc.
and/or their affiliates, officers or key employees
(the "Distributees"). Notwithstanding anything
stated in the foregoing to the contrary, (a)
Borrower may pay to such Distributees and its
other partners quarterly distributions so long as
such distributions do not exceed in the aggregate
95% of Funds from Operations and (b) Borrower may
pay any fee or other reasonable compensation of
any nature to or for the benefit of (i) CBL
Management, Inc., or (ii) any other Distributee,
which payment has been made in the ordinary course
of business and approved by the independent
directors of CBL Properties, Inc. Borrower may
make a distribution from Loan proceeds but only
once during any rolling twelve (12) month period
and provided Borrower is not in default hereunder
and such distribution will not create a default
hereunder.
f. LOANS TO OFFICERS AND EMPLOYEES. Permit or
allow loans to officers and employees of Borrower
or holders of partnership interests in Borrower to
exceed $500,000.00 in any one instance or
$2,000,000.00 in the aggregate, provided that
nothing in the foregoing shall be deemed to limit
loans made in the ordinary course of business to
CBL Properties Management, Inc.
g. LIMITATIONS ON FLOATING RATE INDEBTEDNESS.
Incur, assume or suffer to exist any outstanding
indebtedness bearing interest at a variable rate
that fluctuates during the scheduled life of such
indebtedness (other than indebtedness under
Reserved Construction Loans, as that term is
defined hereinafter) in an aggregate principal
amount in excess of $175,000,000.00 at any one
time outstanding unless Borrower has obtained an
interest rate swap, cap or collar agreement or
similar arrangement with a recognized investment
grade financial institution which prevents the
all-in effective interest rate payable by Borrower
with respect to the principal amount of such
indebtedness in excess of $175,000,000.00
(including base rate, applicable margin and
reserve and similar costs) from increasing above
the rate set forth below with respect to such
indebtedness:
PRINCIPAL AMOUNT IN
EXCESS OF $175,000,000.00 INTEREST RATE
-------------------------- --------------
Less than or equal
to $50,000,000.00 8.5%
Greater than
$50,000,000.00 and
less than or equal
to $100,000,000.00 8.0%
Greater than
$100,000,000.00 and
less than or equal
to $150,000,000.00 7.5%
Greater than
$150,000,000.00 7.0%
For purposes of this Loan Agreement, "Reserved
Construction Loan" shall mean a construction loan extended to
Borrower or Lakeshore or to a subsidiary of Borrower for the
construction of a project in respect to which (a) neither any
monetary or material non-monetary default nor any event of
default exists; (b) interest on such loan has been budgeted to
accrue at a rate of not less than the Base Rate plus two percent
(2%) at the time the interest reserve account is established; (c)
the amount of such budgeted interest has been (i) included in the
principal amount of such loan and (ii) segregated into an
interest reserve account (which shall include any arrangement
whereby loan proceeds equal to such budgeted interest are
reserved and only disbursed to make interest payments with
respect to such loan); (d) absent an event of default or a
monetary or material non-monetary default, such interest can be
paid out of such interest reserve account only for the purpose of
making interest payments on such loan; (e) the amount held in
such interest reserve account with respect to such loan, together
with the net income, if any, from such project projected by the
Bank in its reasonable judgment, will be sufficient, as
reasonably determined by the Bank from time to time, to pay all
interest expense on such loan until the date that the earnings
before income, taxes, depreciation and amortization of the
project being financed by such loan is anticipated to be
sufficient to pay all interest expense on such loan; and (f)
Borrower has delivered all certificates required by this Loan
Agreement.
h. LIMITATIONS ON ACTIONS AGAINST BANK AND
PARTICIPANTS. Take any action against:
(a) Bank, if any Participant fails or refuses to fund for
the account of Borrower and/or Lakeshore or to Bank for the
benefit of Borrower and/or Lakeshore, such Participant's
respective Proportionate Share and such failure or refusal has
not been caused by Bank's breach of this Loan Agreement; or
(b) any Participant, if Bank fails or refuses to fund for
the account of Borrower and/or Lakeshore any Participant's
Proportionate Share, to the extent such Participant's
Proportionate Share has been received by Bank; or
(c) any Participant, if Bank fails or refuses to fund for
the account of Borrower and/or Lakeshore Bank's Proportionate
Share and such failure has not been caused by such Participant's
breach of this Loan Agreement or the Participation Agreement.
Borrower's and Lakeshore's cause of action under this Loan
Agreement, if any, for failure to fund being directly against the
lender which fails or refuses to fund, and then only if such
failure or refusal to fund would constitute a breach of this Loan
Agreement.
i. INVESTMENT CONCENTRATION. (a) Borrower shall
not make, and shall not permit any of its
Subsidiaries to make, any Investment in the
following items which would cause the value of
such holdings of Borrower and/or to exceed the
following percentages of Borrower's Net Worth:
(1) raw land, such that the aggregate book
value of all such raw land (other than: (A)
raw land subject to a ground lease under
which Borrower is the landlord and a Person
not an Affiliate of Borrower is the tenant;
(B) land on which the development of a
Project has commenced; (C) land subject to a
binding contract of sale under which Borrower
one of its Subsidiaries is the seller, the
buyer is not an Affiliate of Borrower and (D)
out-parcels held for lease or sale) exceeds
ten percent (10%) of Net Worth;
(2) developed real estate used primarily for
non-retail purposes, such that the aggregate
book value of such real estate (other than
the real estate located at 6148 Lee Highway,
Chattanooga, Tennessee) exceeds ten percent
(10%) of Net Worth;
(3) Capital Stock of any Person, such that the
aggregate value of such Capital Stock in
Unconsolidated Affiliates other than CBL
Management, Inc., calculated on the basis of
the lower of cost or market, exceeds ten
percent (10%) of Net Worth;
(4) Mortgages, such that the aggregate
principal amount secured by Mortgages
acquired by Borrower after the Effective Date
exceeds ten percent (10%) of Net Worth;
(5) Investments made after the date hereof
in partnerships, joint ventures and other
non-corporate Persons accounted for an equity
basis (determined in accordance with GAAP),
such that the aggregate outstanding amount of
such Investments (other than Investments in
partnerships in which (A) Borrower is the
sole general partner and the only limited
partners are either (I) the Person from whom
the real estate owned by such partnership was
purchased, and such Person's successors and
assigns or (II) a Person operating stores
which anchor the development constructed or
to be constructed by such partnership or (B)
Borrower owns not less than ninety percent
(90%) of the partnership interests and has
the unilateral right to make all operational
and strategic decisions) exceeds ten percent
(10%) of Net Worth.
(b) Neither Borrower nor any of its Subsidiaries shall
acquire the business of all or substantially all of the assets or
stock of any Person, or any division of any Person, whether
through Investment, purchase of assets, merger or otherwise;
provided that Borrower or its Subsidiaries may make such an
acquisition so long as Borrower has delivered to Agent, not less
than thirty (30) days prior to the date such acquisition is
consummated, (i) all information related to such acquisition as
is reasonably requested by the Agent and (ii) a certificate,
signed by the chief financial officer of Borrower, certifying
that, giving effect to such acquisition, there shall not exist
any Default or Event of Default hereunder and setting forth in
reasonable detail the calculations setting forth, on a pro forma
basis giving effect such acquisition, Borrower's compliance with
Sections 6.8, 6.11, 6.12, 6.13, 6.14, 6.15, 6.17 or 6.18 of the
loan documents which exist between Borrower and Agent.
SECTION 8. : EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following
shall occur:
a. PAYMENT OF PRINCIPAL, INTEREST TO BANK. The
Borrower and/or Lakeshore defaults in the payment
as and when due of principal or interest on any
Note or the Lakeshore Note or any fees due under
this Loan Agreement which default shall continue
for more than ten (10) days following mailing of
notice from Bank to Borrower and/or Lakeshore
thereof; or the Borrower and/or Lakeshore defaults
in the payment when due of any other recourse
indebtednesses, liabilities, or obligations to the
Bank beyond the expiration of any applicable
notice and cure period, whether now existing or
hereafter created or arising; direct or indirect,
absolute or contingent; or
b. PAYMENT OF OBLIGATIONS TO OTHERS. The Borrower
and/or Lakeshore defaults in the payment as and
when due of any other indebtedness or obligation
but only if: (a) such indebtedness or obligation
is with recourse to the Borrower and/or Lakeshore;
and (b) the effect of such default is to
accelerate the maturity of such indebtedness or
obligation, or the effect of such default is to
permit the holder thereof to cause such
indebtedness or obligation to become due prior to
its stated maturity; and (c) the default is not
cured within the applicable cure period, if any,
or subsequently waived by the lender to whom
payment is owed. Provided, however, even if such
indebtedness or obligation is with recourse to the
Borrower and/or Lakeshore, the Borrower and
Lakeshore will not be considered in default
hereunder if the default is either: (a) a
monetary default which does not exceed One Million
Dollars ($1,000,000.00) and is not a failure to
pay a normal monthly, quarterly or other periodic
principal or interest installment due; or, (b) is
being contested by the Borrower and/or Lakeshore
in good faith through appropriate proceedings
acceptable to Bank; or
c. PERFORMANCE OF OBLIGATIONS TO BANK. The
Borrower and/or Lakeshore defaults with respect to
the performance of any non-monetary obligation
incurred in connection with the Loan other than
its obligations under Section 7.8 hereof and such
default continues for more thirty (30) days
following mailing of notice thereof from Bank to
Borrower and/or Lakeshore, or, if such default is
incapable of cure within such thirty (30) day
period, Borrower and/or Lakeshore fails to
diligently, continuously and in good faith pursue
such cure to completion; or the Borrower and/or
Lakeshore defaults with respect to the performance
of any other non-monetary obligation incurred in
connection with any recourse indebtedness for
borrowed money owed to the Bank an such default
continues for more thirty (30) days following
mailing of notice thereof from Bank to Borrower
and/or Lakeshore, as the case may be, or, if such
default is incapable of cure within such thirty
(30) day period, Borrower and/or Lakeshore fails
to diligently, continuously and in good faith
pursue such cure to completion; or
d. PERFORMANCE OF OBLIGATIONS TO OTHERS. An
event of default occurs with respect to the
performance of non-monetary obligations incurred
in connection with any recourse indebtedness for
borrowed money owed to a lender other than Bank,
if the default even if subsequently waived by the
Lender is considered a material default by the
Bank and if the default is not cured within the
applicable cure period provided by the lender to
whom such performance is owed; provided, however,
if the indebtedness is in an amount less that
$1,000,000.00, or if the lender's declaration of
default is being continuously and diligently
contested by the Borrower and/or Lakeshore in good
faith through appropriate proceedings, such
default shall not constitute a default hereunder;
or
e. REPRESENTATION OR WARRANTY. Any representation
or warranty made by the Borrower and/or Lakeshore
herein, or in any report, certificate, financial
statement or other writing furnished in connection
with or pursuant to this Loan Agreement shall
prove to be false, misleading or incomplete in any
substantial material respect on the date as of
which made; or
f. BANKRUPTCY, ETC. The Borrower or Lakeshore or
CBL Properties, Inc. shall make a general
assignment of assets for the benefit of creditors,
file a petition in bankruptcy, petition or apply
to any tribunal for the appointment of a
custodian, receiver or any trustee for it or a
substantial part of its assets, or shall commence
on its or their behalf any proceeding under any
bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or
hereafter in effect; or if there shall have been
filed any such petition or application, or any
such proceeding shall have been commenced against
Borrower or Lakeshore or CBL Properties, Inc., in
which an order for relief is entered against
Borrower or CBL Properties, Inc. or which remains
undismissed for a period of ninety (90) days or
more; or Borrower or Lakeshore or CBL Properties,
Inc. by any act or omission shall indicate its
consent to, approval of or acquiescence in any
such petition, application or proceeding or order
for relief or the appointment of a custodian,
receiver or any trustee for it or any substantial
part of any of its properties, or shall suffer any
such custodianship, receivership or trusteeship to
continue undischarged for a period of ninety (90)
days or more; or Borrower or Lakeshore or CBL
Properties, Inc. shall generally not pay its debts
as such debts become due; or
g. CONCEALMENT OF PROPERTY, ETC. The Borrower or
Lakeshore or CBL Properties, Inc. shall have
concealed, removed, or permitted to be concealed
or removed, any part of its property, with intent
to hinder, delay or defraud its or his creditors
or any of them, or made or suffered a transfer of
any of its property which shall constitute a
fraudulent act under any bankruptcy, fraudulent
conveyance or similar law; or shall have made any
transfer of its property to or for the benefit of
a creditor at a time when other creditors
similarly situated have not been paid; or shall
have suffered or permitted, while insolvent, any
creditor to obtain a lien upon any of its property
through legal proceedings or distraint which is
not vacated within thirty (30) days from the date
thereof; or
h. MANAGEMENT CHANGE. Management of the Borrower
shall, for a period of one hundred eighty (180)
consecutive days, cease to be in at least one of
the following persons: (a) Charles B. Lebovitz,
(b) John N. Foy, (c) Jay Wiston, or (d) Stephen D.
Lebovitz, who shall be in an executive management
position with Borrower or who shall be a senior
vice president, executive vice president, senior
executive vice president or president with
Borrower's general partner; or
i. CHANGE IN OWNERSHIP. CBL & Associates, Inc.,
its affiliates, officers and key employees shall
have, through sale or transfer, reduced their
aggregate partnership interest in Borrower (which,
for this purpose, shall include a proportionate
share of CBL Properties, Inc.'s partnership
interest in Borrower equal to their proportionate
shareholding in CBL Properties, Inc.) to less than
50% of such partnership interests owned by them on
November 7, 1993. Provided, however, if the
change in ownership occurs as a result of actions
taken by Borrower in compliance with Section 2.7
of this Loan Agreement, no such change of
ownership shall result in an Event of Default
hereunder; or
j. LOAN DOCUMENTS TERMINATED OR VOID. This Loan
Agreement, the Note, or any instrument securing
the Note shall, at any time after their respective
execution and delivery and for any reason, cease
to be in full force and effect or shall be
declared to be null and void; or the Borrower
and/or Lakeshore shall deny it has any or further
liability under this Loan Agreement or the Note,
respectively; or
k. COVENANTS. The Borrower or Lakeshore or any
grantor under any CBL Mortgage defaults in the
performance or observance of any covenant,
agreement or undertaking on its part to be
performed or observed, contained herein, in the
Security Agreement, CBL Mortgage or in any other
instrument or document which now or hereafter
evidences or secures all or any part of the loan
indebtedness which default shall continue for more
than thirty (30) days following the mailing of
notice from Bank to Borrower and/or Lakeshore
and/or such grantor under any CBL Mortgage
thereof; or
l. BREACH OF SECTION 7.8 OF THIS LOAN AGREEMENT.
The Borrower and/or Lakeshore shall fail to
observe or perform its obligations to the Bank,
and/or any Participant under Section 7.8 of this
Loan Agreement;
m. PLACEMENT OF LIENS ON PROPERTY. The Borrower or
any other grantor of a CBL Mortgage shall, without
the prior written consent of the Bank, create,
place or permit to be created or placed, or
through any act or failure to act, acquiesce in
the placing of, or allow to remain, any mortgage,
deed of trust, pledge, lien (statutory,
constitutional or contractual), or security
interest, encumbrance or charge on, or conditional
sale or other title retention agreement,
regardless of whether same are expressly
subordinate to the liens of the CBL Mortgage, with
respect to the property described in the Lakeshore
Mortgage or any other CBL Mortgage.
8.14 REMEDY. Upon the occurrence of any Event of Default,
as specified herein, the Bank shall, at its option, be relieved
of any obligation to make further Revolving Credit Advances under
this Agreement; and the Bank may at its option record the
Lakeshore Mortgage (New); and the Bank may, at its option,
thereupon declare the entire unpaid principal balances of the
Note of Borrower and the Lakeshore Note, all interest accrued and
unpaid thereon and all other amounts payable under this Loan
Agreement to be immediately due and payable for all purposes, and
may exercise all rights and remedies available to it under the
CBL Mortgage, any other instrument or document which secures the
Note and/or the Lakeshore Note, or available at law or in equity.
All such rights and remedies are cumulative and nonexclusive, and
may be exercised by the Bank concurrently or sequentially, in
such order as the Bank may choose.
SECTION 9. : MISCELLANEOUS
a. AMENDMENTS. The provisions of this Loan
Agreement, the Note or the Lakeshore Note or any
instrument or document executed pursuant hereto or
securing the indebtednesses may be amended or
modified only by an instrument in writing signed
by the parties hereto.
b. NOTICES. All notices and other communications
provided for hereunder shall be in writing and
shall be mailed, certified mail, return receipt
requested, or delivered, if to the Borrower and/or
Lakeshore, to it at c/o CBL Properties, Inc., One
Park Place, 6148 Lee Highway, Chattanooga,
Tennessee 37421, Attention: President; if to the
Bank, to it at 701 Market Street, Chattanooga,
Tennessee 37402, Attention: Gregory L. Cullum; or
as to any such person at such other address as
shall be designated by such person in a written
notice to the other parties hereto complying as to
delivery with the terms of this Section 9.2. All
such notices and other communications shall be
effective (i) if mailed, when received or three
business days after mailing, whichever is earlier;
or (ii) if delivered, upon delivery and receipt of
an executed acknowledgment of receipt by the party
to whom delivery is made.
c. NO WAIVER, CUMULATIVE REMEDIES. No failure to
exercise and no delay in exercising, on the part
of the Bank, any right, power or privilege
hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any
other right, power or privilege. Waiver of any
right, power, or privilege hereunder or under any
instrument or document now or hereafter securing
the indebtedness evidenced hereby or under any
guaranty at any time given with respect thereto is
a waiver only as to the specified item. The
rights and remedies herein provided are cumulative
and not exclusive of any rights or remedies
provided by law.
d. INDEMNIFICATION. Borrower and Lakeshore agree
to indemnify Bank from and against any and all
claims, losses and liabilities, including, without
limitation, reasonable attorneys' fees, growing
out of or resulting from this Agreement
(including, without limitation, enforcement of
this Agreement), except claims, losses or
liabilities resulting solely and directly from
Bank's gross negligence or willful misconduct or
from Bank's violation of applicable banking rules
and regulations. The indemnification provided for
in this Section shall survive the payment in full
of the loan.
e. SURVIVAL OF AGREEMENTS. All agreements,
representations and warranties made herein shall
survive the delivery of the Note. This Loan
Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their
respective successors and assigns, except that the
Borrower shall not have the right to assign its
rights hereunder or any interest therein.
f. GOVERNING LAW. This Loan Agreement shall be
governed and construed in accordance with the laws
of the State of Tennessee; except (a) that the
provisions hereof which relate to the payment of
interest shall be governed by (i) the laws of the
United States or, (ii) the laws of the State of
Tennessee, whichever permits the Bank to charge
the higher rate, as more particularly set out in
the Note, and (b) to the extent that the Liens in
favor of the Bank, the perfection thereof, and the
rights and remedies of the Bank with respect
thereto, shall, under mandatory provisions of law,
be governed by the laws of a state other than
Tennessee.
g. EXECUTION IN COUNTERPARTS. This Loan Agreement
may be executed in any number of counterparts,
each of which when so executed shall be deemed to
be an original and all of which taken together
shall constitute but one and the same instrument.
h. TERMINOLOGY; SECTION HEADINGS. All personal
pronouns used in this Loan Agreement whether used
in the masculine, feminine, or neuter gender,
shall include all other genders; the singular
shall include the plural, and vice versa. Section
headings are for convenience only and neither
limit nor amplify the provisions of this Loan
Agreement.
i. ENFORCEABILITY OF AGREEMENT. Should any one or
more of the provisions of this Loan Agreement be
determined to be illegal or unenforceable, all
other provisions, nevertheless, shall remain
effective and binding on the parties hereto.
j. INTEREST LIMITATIONS. The loan and the Note
evidencing the loan, including any renewals or
extensions thereof, may provide for the payment of
any interest rate (i) permissible at the time the
contract to make the loan is executed,
(ii) permissible at the time the loan is made or
any advance thereunder is made, or
(iii) permissible at the time of any renewal or
extension of the loan or the Note.
i. It is the intention of the Bank and the Borrower
to comply strictly with applicable usury laws;
and, accordingly, in no event and upon no
contingency shall the Bank ever be entitled to
receive, collect, or apply as interest any
interest, fees, charges or other payments
equivalent to interest, in excess of the maximum
rate which the Bank may lawfully charge under
applicable statutes and laws from time to time in
effect; and in the event that the holder of the
Note ever receives, collects, or applies as
interest any such excess, such amount which, but
for this provision, would be excessive interest,
shall be applied to the reduction of the principal
amount of the indebtedness thereby evidenced; and
if the principal amount of the indebtedness
evidenced thereby, and all lawful interest
thereon, is paid in full, any remaining excess
shall forthwith be paid to the Borrower, or other
party lawfully entitled thereto. In determining
whether or not the interest paid or payable, under
any specific contingency, exceeds the highest rate
which Bank may lawfully charge under applicable
law from time to time in effect, the Borrower
and/or Lakeshore and the Bank shall, to the
maximum extent permitted under applicable law,
characterize any non-principal payment as a
reasonable loan charge, rather than as interest.
Any provision hereof, or of any other agreement
between the Bank and the Borrower and/or
Lakeshore, that operates to bind, obligate, or
compel the Borrower to pay interest in excess of
such maximum rate shall be construed to require
the payment of the maximum rate only. The
provisions of this paragraph shall be given
precedence over any other provision contained
herein or in any other agreement between the Bank
and the Borrower and/or Lakeshore that is in
conflict with the provisions of this paragraph.
The Note and the Lakeshore Note shall be governed and
construed according to the statutes and laws of the State of
Tennessee from time to time in effect, except to the extent that
Section 85 of Title 12 of the United States Code (or other
applicable federal statue) may permit the charging of a higher
rate of interest than applicable state law, in which event such
applicable federal statute, as amended and supplemented from time
to time shall govern and control the maximum rate of interest
permitted to be charged hereunder; it being intended that, as to
the maximum rate of interest which may be charged, received, and
collected hereunder, those applicable statutes and laws, whether
state or federal, from time to time in effect, which permit the
charging of a higher rate of interest, shall govern and control;
provided, always, however, that in no event and under no
circumstances shall the Borrower and/or Lakeshore be liable for
the payment of interest in excess of the maximum rate permitted
by such applicable law, from time to time in effect.
k. NON-CONTROL. In no event shall the Bank's
rights hereunder be deemed to indicate that the
Bank is in control of the business, management or
properties of the Borrower and/or Lakeshore or has
power over the daily management functions and
operating decisions made by the Borrower and/or
Lakeshore.
l. LOAN REVIEW; EXTENSIONS OF TERMINATION DATE;
CONTINUING SECURITY. The specific Termination
Date of Revolving Credit Loan mentioned in Article
One may be extended for additional periods of one
(1) year. On each June 1 hereafter, so long as
the Loan remains unpaid, Bank shall review the
performance of the Loan. If the Bank deems
performance of the Loan acceptable, it will renew
the Loan for one (1) year from the then existing
Termination Date of Revolving Credit Loan. If
Bank deems performance of the Loan not acceptable,
Bank shall not be obligated to extend the
Termination Date of Revolving Credit Loan;
however, the Borrower shall then have the right to
repay the Loan pursuant to the repayment
provisions contained in the Note. Assessment of
performance and the decision whether to extend the
Termination Date of Revolving Credit Loan shall be
solely within Bank's discretion. The Bank will not
deem the performance of the Loan acceptable unless
and until the Borrower provides to the Bank, among
other things, updated title commitments with
respect to all properties covered by any CBL
Mortgage, which title commitments must be in form
and substance acceptable to the Bank and must
contain no exceptions unacceptable to the Bank.
Bank shall notify Borrower of the results of its
review of the Loan no later than eleven (11)
months prior to the then effective Termination
Date of the Revolving Credit Loan. If Bank elects
not to renew the Loan, Bank shall not perform or
cause to be performed, except at Bank's expense,
any inspections, appraisals, surveys or similar
items between: (a) the date notice thereof is
given Borrower or the Termination Date, whichever
first occurs, and (b) the date the Note is repaid
as provided herein.
i. Upon the specific Termination Date of Revolving
Credit Loan so fixed in Article One, or in the
event of the extension of this Agreement to a
subsequent Termination Date (when no effective
extension is in force), the Revolving Credit Loan
and all other extensions of credit (unless sooner
declared to be due and payable by the Bank
pursuant to the provisions hereof), and subject to
Borrower's election as set forth in subparagraph
(a) above, shall become due and payable for all
purposes. Until all such indebtednesses,
liabilities and obligations secured by the CBL
Mortgage are satisfied in full, such termination
shall not affect the security interest granted to
Bank pursuant to the CBL Mortgage, nor the duties,
covenants, and obligations of the Borrower therein
and in this Agreement; and all of such duties,
covenants and obligations shall remain in full
force and effect until the Revolving Credit Loan
and all obligations under this Loan Agreement have
been fully paid and satisfied in all respects.
m. FEES AND EXPENSES. The Borrower agrees to pay,
or reimburse the Bank for, the reasonable actual
third party out-of-pocket expenses, including
counsel fees and fees of any accountants,
inspectors or other similar experts, as deemed
necessary by the Bank, incurred by the Bank in
connection with the development, preparation,
execution, amendment, recording, (excluding the
salary and expenses of Bank's employees and Bank's
normal and usual overhead expenses) or enforcement
of, or the preservation of any rights under this
Loan Agreement, the Notes, and any instrument or
document now or hereafter securing the and
Revolving Credit Loan indebtednesses.
n. TIME OF ESSENCE. Time is of the essence of this
Loan Agreement, the Note, and the other
instruments and documents executed and delivered
in connection herewith.
o. COMPROMISES, RELEASES, ETC. Bank is hereby
authorized from time to time, without notice to
anyone, to make any sales, pledges, surrenders,
compromises, settlements, releases, indulgences,
alterations, substitutions, exchanges, changes in,
modifications, or other dispositions including,
without limitation, cancellations, of all or any
part of the Loan indebtedness, or of any contract
or instrument evidencing any thereof, or of any
security or collateral therefor, and/or to take
any security for or guaranties upon any of said
indebtedness; and the liability of any guarantor,
if any, shall not be in any manner affected,
diminished, or impaired thereby, or by any lack of
diligence, failure, neglect, or omission on the
part of Bank to make any demand or protest, or
give any notice of dishonor or default, or to
realize upon or protect any of said indebtedness
or any collateral or security therefor. Bank
shall have the right to apply such payments and
credits first to the payment of all its expenses,
including costs and reasonable attorneys' fees,
then to interest due under the Note and then to
principal due under the Note. Bank shall be under
no obligation, at any time, to first resort to,
make demand on, file a claim against, or exhaust
its remedies against the Borrower and/or
Lakeshore, or its property or estate, or to resort
to or exhaust its remedies against any collateral,
security, property, liens, or other rights
whatsoever. Upon the occurrence of an Event of
Default, it is expressly agreed that Bank may at
any time make demand for payment on, or bring suit
against, the Borrower and/or Lakeshore and any
guarantor, jointly or severally and may compromise
with any of them for such sums or on such terms as
it may see fit, and without notice or consent, the
same being hereby expressly waived.
p. JOINDER OF CBL PROPERTIES, INC. CBL Properties,
Inc. joins herein for the purpose of acknowledging
and consenting to the terms and provisions of
Section 2.7 hereof.
q. BANK'S CONSENT. Except as otherwise expressly
provided herein, in any instance hereunder where
Bank's approval or consent is required or the
exercise of its judgment is required, the granting
or denial of such approval or consent and the
exercise of such judgment shall be within the sole
discretion of Bank, and Bank shall not, for any
reason or to any extent, be required to grant such
approval or consent or exercise such judgment
provided that the Bank shall proceed at all times
in good faith and in a commercially reasonable
manner. Bank may consult with counsel, and the
written advice or opinion of such counsel shall be
full and complete authorization and protection in
respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance
thereon.
r. VENUE OF ACTIONS. As an integral part of the
consideration for the making of the loan, it is
expressly understood and agreed that no suit or
action shall be commenced by the Borrower,
Lakeshore, CBL Properties, Inc., by any guarantor,
or by any successor, personal representative or
assignee of any of them, with respect to the loan
contemplated hereby, or with respect to this Loan
Agreement or any other document or instrument
which now or hereafter evidences or secures all or
any part of the loan indebtedness, other than in a
state court of competent jurisdiction in and for
the County of the State in which the principal
place of business of the Bank is situated, or in
the United States District Court for the District
in which the principal place of business of the
Bank is situated, and not elsewhere. Nothing in
this paragraph contained shall prohibit Bank from
instituting suit in any court of competent
jurisdiction for the enforcement of its rights
hereunder or in any other document or instrument
which evidences or secures the loan indebtedness.
s. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO
THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR
(b) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR
THE TRANSACTIONS RELATED HERETO OR THERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING; AND EACH PARTY HEREBY AGREES AND CONSENTS
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
t. CONFLICT. In the event of any conflict between
the provisions hereof and any other loan document
during the continuance of this Agreement
(including but not limited to the Construction
Loan Agreement and any other documents received by
the Bank via assignment in connection with the
Lakeshore Mall), the provisions of this Agreement
shall control.
u. PARTICIPATION AGREEMENT. The Borrower and
Lakeshore acknowledge that the Participation
Agreement exists and that the Bank is obligated,
subject to the terms and conditions hereof, to
fund Eighty Million Dollars ($80,000,000.00) to
the Borrower but that of that amount KeyBank
National Association, formerly Society National
Bank and AmSouth Bank are obligated, subject to
the terms and conditions of the Participation
Agreement, to fund Twenty Two Million Five Hundred
Thousand Dollars ($22,500,000.00) each to the Bank
and PNC Bank, Kentucky, Inc. is obligated, subject
to the terms and conditions of the Participation
Agreement, to fund Twelve Million Five Hundred
Thousand and NO/100 Dollars ($12,500,000.00) to
the Bank.
<PAGE>
IN WITNESS WHEREOF, the Borrower, Lakeshore, the Bank and
CBL Properties, Inc. have caused this Agreement to be executed by
their duly authorized officers and/or partner, all as of the day
and year first above written.
CBL & ASSOCIATES LIMITED
PARTNERSHIP
BY: CBL & ASSOCIATES PROPERTIES,
INC., Its Sole General Partner
By:________________________________
John N. Foy
Title:___Executive Vice President_______
BORROWER
LAKESHORE/SEBRING LIMITED
PARTNERSHIP
BY: CBL & ASSOCIATES LIMITED
PARTNERSHIP, its sole General
Partner
BY: CBL & ASSOCIATES PROPERTIES,
INC., its sole General Partner
By:__________________________
John N. Foy
Title:____Executive Vice President_____
LAKESHORE
CBL & ASSOCIATES PROPERTIES,
INC.
By:________________________________
John N. Foy
Title:__Executive Vice President________
GUARANTOR
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION
By:________________________________
Gregory L. Cullum, Senior Vice
President
1996 ANNUAL REPORT
DELIVERING CONSISTENT PERFORMANCE
CBL & ASSOCIATES PROPERTIES, INC.
<PAGE>
COMPANY PROFILE
CBL & Associates Properties, Inc. is a self-managed and self-administered
Real Estate Investment Trust with a fully integrated team of professionals
focused on increasing shareholder value through:
- - Developing new retail properties with profitable returns on capital
and growth potential for the future.
- - Maximizing the cash flow from our existing portfolio of regional
malls, community shopping centers, single anchor tenant buildings
and other retail complexes through aggressive leasing, management
and marketing.
- - Expanding and renovating our existing properties to maintain their
competitive position.
- - Acquiring existing retail properties where cash flow can be enhanced
by improved management, improved leasing, redevelopment and
expansion.
- - Providing management services for retail properties for third
parties.
CBL & Associates Properties, Inc. has a portfolio of 117 owned and managed
properties totaling 22.8 million square feet. The properties are located
primarily in the growing Southeast and select markets in the northeastern
United States.
Cover: Westgate Mall, Spartanburg, South Carolina
CBL & ASSOCIATES PROPERTIES, INC.
Headquarters/Regional Offices - Malls - Associated Centers - Community Centers
MAP
<PAGE>
FINANCIAL HIGHLIGHTS
(In thousands, except per share data and number of properties)
<TABLE>
Years Ended December 31,
------------------------
1996 1995
FOR THE YEAR
<S> <C> <C>
Revenues $ 146,805 $ 131,727
Funds from Operations $ 61,997 $ 51,686
Net income before extraordinary item $ 35,243 $ 20,349
Dividends declared $ 35,136 $ 29,799
PER SHARE
Funds from Operations $ 2.05 $ 1.90
Net income excluding extraordinary item $ 1.69 $ 1.14
Dividends declared $ 1.68 $ 1.59
AT YEAR END
Total assets $1,025,925 $ 814,168
Mortgage notes payable $ 590,295 $ 392,754
Minority interest $ 114,425 $ 113,692
Shareholders' equity $ 272,804 $ 270,892
Common shares - as if Operating
Partnership Units fully converted 30,374 30,211
Shopping center square footage 20,258 18,835
Number of properties 108 105
</TABLE>
GRAPH GROWTH IN PORTFOLIO GLA (Square feet in millions)
Under Construction
<PAGE>
LETTER TO THE SHAREHOLDERS
Our challenge for 1996 was to profitably navigate the ever changing retail
trends and increased competition in the shopping center business. We were
able to meet this challenge through enhancements to our existing portfolio,
a strong development program, a record amount of acquisitions and the
strengthening of our balance sheet. Our efforts resulted in the following
highlights for 1996:
- Funds from operations increased 19.9% to $61,997,000
- Funds from operations per share increased 7.9% to $2.05
- Revenues increased 11.4% to $146,805,000
- Income before extraordinary items rose 73.2% to $35,243,000
During 1996, we were able to enhance our portfolio through renovations
and expansions of existing centers as well as the selective dispositions
of five of our community centers. Some of our major activities were:
- Redevelopment, expansion and renovation of Westgate Mall in
Spartanburg, South Carolina.
- Renovation of Twin Peaks Mall (Longmont, Colorado) and
Pemberton Square (Vicksburg, Mississippi).
- Expansion of Cinemark Theater at Plaza del Sol (Del Rio,
Texas).
- Remodeling of five community centers.
We will make further enhancements to our existing centers in 1997 by
adding a new Dillard's to Twin Peaks Mall (Longmont, Colorado) and to
Frontier Mall (Cheyenne, Wyoming), renovating and adding Goody's to
Foothills Mall (Maryville, Tennessee), which was converted to an owned
property from a mortgage property in 1996, and remodeling seven community
centers.
In addition to Westgate Mall, we opened five new community centers
during 1996, totaling over 866,000 square feet:
- Lowe's Home Improvement Center in Adrian, Michigan
- Devonshire Place in Raleigh (Cary), North Carolina
- Chester Square in Richmond, Virginia
- Kingston Overlook in Knoxville, Tennessee
- LaGrange Commons in LaGrange, New York
As active as our development program was in 1996, we expect 1997 will be
even stronger. In the thirty-five years I have been in the shopping center
business, we have never had a development program as impressive as the 3.1
million square feet of centers under construction today. We have one mall,
two power centers, two associated centers and four community centers opening
in 1997.
Acquisitions kept pace with our new developments in 1996. First, we
acquired St. Clair Square, a super regional mall in Fairview Heights,
Illinois, a suburb of St. Louis, Missouri. Next, we purchased an existing
mall plus adjoining acreage that we are redeveloping into Cortlandt Town
Center, a power center located in Cortlandt (Westchester County), New York.
Subsequent to year end, we acquired Sutton Plaza, a community center in
Mount Olive, New Jersey. In total, we invested $119 million in these three
acquisitions.
Our capital structure remains solid after reflecting the increased
development, acquisition and expansion activity. At year-end, total debt
was $612.5 million, or 43.8% of total market capitalization. In addition
to $55.5 million of interest rate swaps in place, we have secured fixed-rate
loan commitments totaling $127 million and completed an offering of three
million shares in January 1997, netting $74.5 million that will
substantially reduce the $248 million of variable rate debt outstanding
at year-end. These transactions have provided us the balance sheet
flexibility to continue to pursue an active development program and
additional acquisitions.
During 1996, we paid dividends totaling $1.68 per share. Based upon our
performance in 1996 and the optimistic outlook for 1997, we have recommended
to the Board of Directors that we increase the annual dividend by 5.4% to
$1.77 per share. This increase, if approved, would be effective with the
first quarter of 1997. We continue to increase our dividend while lowering
our payout ratio.
In January 1997, we announced the retirement of our longtime friend and
associate, Bucky Wolford, senior executive vice president of the Company.
We appreciate his contributions to the Company and wish him the best in his
retirement. Taking over Bucky's responsibilities and expanding upon their
existing roles are Stephen Lebovitz, Ron Fullam, Ron Gimple and Michael
Lebovitz, who have been promoted to our senior executive level.
Competition and the retail environment will remain our greatest
challenges in 1997. With the investments we have made in our existing
portfolio, along with developments and acquisitions, we are well-positioned
to continue to grow.
Sincerely,
Charles B. Lebovitz
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC.
We are frequently asked why CBL & Associates Properties owns and manages
regional malls, community centers and freestanding stores in middle markets.
The answer is quite simple - we believe this is the best way to deliver
consistent performance to our core constituencies: shareholders, retailers
and customers.
A broad, diverse range of retailers have chosen us for many years to
consistently deliver their stores on schedule and within budget. We are
proud of the fact that we have never missed an opening date for one of our
centers once we have set the date. Our proven track record, dependability
and financial resources mean that retailers can rely upon us to provide the
stores necessary for the profitable growth of their businesses.
The relationships we have built have translated into new development
and acquisition opportunities. In fact, most of our new developments start
as assignments from retailers. In the past, there have been many developers
with short-term mentalities who have come and gone. Based upon our
long-term commitment and ability to consistently deliver new projects during
both good and bad economic cycles, we have earned the respect and trust of
retailers, which is vital in the shopping center business.
One of the best examples of long-term relationships creating an
opportunity for us is Westgate Mall in Spartanburg, South Carolina. Based
upon a recommendation from two of the existing department stores in the mall,
we investigated the possibility of acquiring this asset. By the time we
acquired Westgate in the first quarter of 1995, we had commitments from two
additional department stores and had drawn plans for expanding the mall with
an additional 100,000 square feet of small shop space. We opened the new
Westgate Mall in October 1996 as the only mall in the Carolinas with six
department stores.
With the new Westgate Mall, the residents of Spartanburg are better
served now that they have the best retailers in their area. The fact that
Westgate's sales have increased from $263 per square foot in 1994 to $310
per square foot in 1996 confirms how well these residents are served as well
as the ability of our team of professionals to aggressively lease and manage
Westgate Mall. We believe the same can be said of the residents in all our
markets. Our commitment to these customers is to meet their needs by
providing the most up-to-date concepts in safe, convenient, well-maintained
shopping centers.
Our centers are predominantly located in middle markets. These markets
have been overlooked by competitors in favor of the much larger metropolitan
cities. For the most part, the residents of middle markets are left with
obsolete centers that should have been updated or redeveloped years ago.
Their only choice is to drive hours away to a larger market to meet their
needs.
CBL & Associates Properties' new mall developments come at the expense
of out of date centers and replace rather than add to the total useable,
productive retail space available in a market. Turtle Creek Mall in
Hattiesburg, Mississippi, which opened in October 1994, Oak Hollow Mall in
High Point, North Carolina, which opened in August 1995, and Bonita Lakes
Mall in Meridian, Mississippi, which will open in October 1997, have secured
anchor department stores from existing centers and added new department
stores leading to a revitalization of the retail industry for that trade
area. In each case, the existing retail space was obsolete, a market was
not fully served and the existing owners had not anticipated future growth
and changes in the industry. CBL & Associates Properties has been successful
for over thirty years in bringing customers back to their home markets by
offering the best place to shop.
We want to be known not only for having the best retailers but also for
having a safe, entertaining and pleasing environment in which to shop each
time a customer visits. Consistent service is important. One bad experience
could prevent a shopper from returning. Therefore, we direct our local
managers and marketing directors to be attentive to local conditions so that
we can best address the needs of each individual market. We have found this
is the best way to deliver consistent service to our customers. The
performance we deliver to retailers and our customers must also benefit
our shareholders. After all, they have entrusted their investment with us
and expect us to produce secure, consistent, profitable return on that
investment. Our strategy of focusing on developing, acquiring, renovating
and aggressively leasing, managing and marketing shopping centers is the
best way we know to increase shareholder value. The successful execution
of this strategy depends on a seasoned and flexible management team. With
an average of twenty years experience in the shopping center business among
senior management, CBL & Associates Properties is fully committed to
delivering consistent performance to our shareholders, retailers, and
customers.
<PAGE>
<TABLE>
PROPERTY LIST
NAME OF CENTER LOCATION TOTAL GLA
- -----------------------------------------------------------------------------
<S> <C> <C>
MALLS
College Square Morristown, Tennessee 460,463
Coolsprings Galleria Nashville, Tennessee 1,130,597
Foothills Mall Maryville, Tennessee 472,220
Frontier Mall Cheyenne, Wyoming 438,004
Georgia Square Athens, Georgia 680,135
Governors Square Clarksville, Tennessee 692,320
Hamilton Place Chattanooga, Tennessee 1,159,636
Lakeshore Mall Sebring, Florida 408,534
Madison Square Huntsville, Alabama 933,845
Oak Hollow Mall High Point, North Carolina 829,194
Pemberton Square Vicksburg, Mississippi 353,300
Plaza Del Sol Del Rio, Texas 245,685
Post Oak Mall College Station, Texas 776,823
St. Clair Square Fairview Heights, Illinois 1,044,599
Turtle Creek Mall Hattiesburg, Mississippi 844,668
Twin Peaks Mall Longmont, Colorado 448,685
Walnut Square Dalton, Georgia 450,885
Westgate Mall Spartanburg, South Carolina 1,100,575
TOTAL MALLS 12,469,668
ASSOCIATED CENTERS
Coolsprings Crossing Nashville, Tennessee 340,596
Foothills Plaza Maryville, Tennessee 204,400
Frontier Square Cheyenne, Wyoming 161,615
Georgia Square Plaza Athens, Georgia 15,393
Hamilton Corner Chattanooga, Tennessee 88,298
Hamilton Crossing Chattanooga, Tennessee 171,370
Madison Plaza Huntsville, Alabama 153,085
Pemberton Plaza Vicksburg, Mississippi 65,918
TOTAL ASSOCIATED CENTERS 1,200,675
<PAGE>
COMMUNITY CENTERS
34th St Crossing St. Petersburg, Florida 51,120
58 Crossing Chattanooga, Tennessee 49,984
Anderson Plaza Greenwood, South Carolina 46,258
Bartow Village Bartow, Florida 40,520
Beach Crossing Myrtle Beach, South Carolina 45,790
Bennington Place Roanoke, Virginia 42,712
Bj's Plaza Portland, Maine 104,233
Briarcliff Square Oak Ridge, Tennessee 41,778
Buena Vista Plaza Columbus, Georgia 143,820
Bullock Plaza Statesboro, Georgia 34,400
Capital Crossing Raleigh, North Carolina 83,700
Cedar Bluff Crossing Knoxville, Tennessee 53,050
Cedar Plaza Cedar Springs, Michigan 95,000
Centerview Plaza China Grove, North Carolina 43,720
Chestnut Hills Murray, Kentucky 68,364
Colleton Square Walterboro, South Carolina 31,000
Collins Park Commons Plant City, Florida 37,400
Conway Plaza Conway, South Carolina 33,000
Cosby Station Douglasville, Georgia 77,811
County Park Plaza Scottsboro, Alabama 47,325
Devonshire Place Cary, North Carolina 104,517
Dorchester Crossing Charleston, South Carolina 40,007
East Ridge Crossing Chattanooga, Tennessee 54,000
East Towne Crossing Knoxville, Tennessee 158,751
Garden City Plaza Garden City, Kansas 188,446
Genesis Square Crossville, Tennessee 35,000
Girvin Plaza Jacksonville, Florida 56,297
Greenport Towne Centre Hudson, New York 191,622
Hampton Plaza Tampa, Florida 44,624
Henderson Square Henderson, North Carolina 268,327
Hollins Plantation Plaza Roanoke, Virginia 40,640
Home Quarters Warehouse South Portland, Maine 134,920
Jasper Square Jasper, Alabama 95,950
Jean Ribaut Square Beaufort, South Carolina 223,497
Karns Corner Knoxville, Tennessee 35,000
Keystone Crossing Tampa, Florida 40,400
Kingston Overlook Knoxville, Tennessee 96,885
Lady's Island Beaufort, South Carolina 60,687
Lagrange Commons Lagrange, New York 9,799
Lakeshore Station Gainesville, Georgia 8,000
Longview Crossing Hickory, North Carolina 29,800
Lowe's Plaza Joplin, Missouri 125,351
Lunenburg Crossing Lunenburg, Massachusetts 198,115
North Creek Plaza Greenwood, South Carolina 28,500
North Haven Crossing North Haven, Connecticut 104,612
Northridge Plaza Hilton Head, South Carolina 129,570
Northwoods Plaza Albemarle, North Carolina 32,705
Oaks Crossing Otsego, Michigan 144,978
Orange Plaza Roanoke, Virginia 46,875
<PAGE>
Park Village Lakeland, Florida 48,570
Perimeter Place Chattanooga, Tennessee 156,945
Rawlinson Place Rock Hill, South Carolina 35,750
Rhett at Remount Charleston, South Carolina 42,628
Sattler Square Big Rapids, Michigan 132,746
Seacoast Shopping Center Seabrook, New Hampshire 208,690
Shenandoah Crossing Roanoke, Virginia 28,600
Signal Village Statesville, North Carolina 24,100
Southgate Crossing Bristol, Tennessee 40,100
Sparta Crossing Sparta, Tennessee 29,800
Springs Crossing Hickory, North Carolina 42,920
Statesboro Square Statesboro, Georgia 41,000
Stone East Plaza Kingsport, Tennessee 45,259
Suburban Center Knoxville, Tennessee 124,109
Surry Square Elkin, North Carolina 32,900
Sutton Plaza Mount Olive, New Jersey 122,027
Townshire Shopping Center Bryan, Texas 72,440
Tyler Square Radford, Virginia 48,370
Uvalde Plaza Uvalde, Texas 111,160
Valley Commons Salem, Virginia 45,580
Valley Crossing Hickory, North Carolina 186,077
Village at Wexford Cadillac, Michigan 102,450
Village Square Houghton Lake, Michigan 163,294
Wal*mart Plaza North Pueblo, Colorado 101,964
Wildwood Plaza Salem, Virginia 39,580
Willow Springs Plaza Nashua, New Hampshire 224,344
TOTAL COMMUNITY CENTERS 6,200,263
MORTGAGES
Bi-lo Plaza South Cleveland, Tennessee 48,075
Gaston Square Gastonia, North Carolina 33,640
Inlet Crossing Myrtle Beach, South Carolina 55,248
Olde Brainerd Center Chattanooga, Tennessee 57,293
Signal Hills Crossing Statesville, North Carolina 44,220
Soddy-daisy Plaza Chattanooga, Tennessee 100,095
TOTAL MORTGAGES 338,571
OFFICE BUILDING
Park Place Chattanooga, Tennessee 49,082
TOTAL EXISTING PORTFOLIO 20,258,259
PROPERTIES MANAGED FOR THIRD PARTIES
The Avenues Jacksonville, Florida 1,172,147
Bradley Commons Cleveland, Tennessee 130,062
Germantown Road Chattanooga, Tennessee 29,280
Mill Square Alexander City, Alabama 87,202
Northgate Plaza Chattanooga, Tennessee 97,665
Odgen City Mall Ogden, Utah 800,331
Southside Plaza Johnson City, Tennessee 54,295
Walnut Crossing Dalton, Georgia 128,465
Whiteway Shopping Center Athens, Tennessee 79,330
TOTAL PROPERTIES MANAGED FOR THIRD PARTIES 2,578,777
TOTAL PROPERTIES OWNED AND MANAGED 22,837,036
</TABLE>
<PAGE>
FINANCIAL TABLE OF CONTENTS:
Selected Financial Data..........................................13
Management's Discussion and Analysis of
Financial Condition and Results of Operations.................14
Consolidated Balance Sheets......................................22
Consolidated Statements of Operations............................23
Consolidated Statements of Shareholders' Equity..................24
Consolidated Statement of Cash Flows.............................25
Notes to Consolidated Financial Statements.......................26
Report of Independent Public Accountants.........................35
CBL & Associates Properties, Inc.
SELECTED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
CBL & Associates Properties, Inc. CBL Properties (1)
--------------------------------------------- ----------------------------
Period from Period From
Year Year Year November 3, January 1, Year
Ended Ended Ended 1993 to 1993 to Ended
December 31, December 31, December 31, December 31, November 2, December 31,
1996 1995 1994 1993 1993 1992
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Rentals
Minimum $ 93,217 $ 82,319 $ 67,591 $ 10,723 $ 35,438 $ 39,144
Percentage 2,724 2,811 1,641 281 894 484
Other 1,758 1,507 1,137 502 204 1,077
Tenant reimbursements 42,447 38,370 31,609 5,190 14,534 15,830
Management and leasing fees 2,377 2,235 2,085 183 2,459 2,706
Development fees 7 271 150 -- 215 --
Interest and other 4,275 4,214 3,881 741 5,348 5,527
----------- ------------ ------------ ------------ ------------ ------------
Total revenues 146,805 131,727 180,094 17,620 59,092 64,768
----------- ------------ ------------ ------------ ------------ ------------
EXPENSES
Property operating 24,232 21,611 18,062 2,537 8,526 8,631
Depreciation and amortization 25,439 22,834 19,418 2,851 7,925 9,090
Real estate taxes 11,587 10,087 8,738 1,427 5,170 5,058
Maintenance and repairs 8,957 8,991 6,708 1,448 3,591 4,186
General and administrative 8,467 8,049 8,327 1,126 5,800 8,010
Interest 31,684 31,951 22,674 3,417 26,126 30,921
Other 646 605 164 -- -- --
----------- ------------ ------------ ------------ ------------ ------------
Total expenses 111,012 104,128 84,091 12,806 57,138 65,896
----------- ------------ ------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 35,793 27,599 24,003 4,814 1,954 (1,128)
GAIN ON SALES OF REAL
ESTATE ASSETS 13,614 2,213 2,135 -- 2,072 1,753
EQUITY IN EARNINGS (LOSSES)
OF UNCONSOLIDATED AFFILIATES 1,831 1,450 1,469 490 (117) (479)
MINORITY INVESTORS' INTEREST
IN (EARNINGS) LOSSES:
Operating partnership (15,468) (10,527) (9,836) (598) -- --
Shopping center properties (527) (386) (312) (35) (199) 215
----------- ------------ ------------ ------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 35,243 20,349 17,459 4,671 3,710 361
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBIT (820) (326) -- (3,820) -- --
----------- ------------ ------------ ------------ ------------ ------------
NET INCOME $ 34,423 $ 20,023 $ 17,459 $ 851 $ 3,710 $ 361
=========== ============ ============ ============ ============ ============
EARNINGS PER COMMON SHARE:
Income before extraordinary
item $ 1.69 $ 1.14 $ 1.05 $ 0.31
Extraordinary loss on early
extinguishment of debt (0.04) (0.02) -- (0.25)
----------- ------------ ------------ ------------
Net income $ 1.65 $ 1.12 $ 1.05 $ 0.06
=========== ============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 20,890 17,827 16,625 16,625
=========== ============ ============ ============
</TABLE>
<TABLE>
Year Ended December 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992(1)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net investment in real
estate assets $987,260 $758,939 $679,725 $578,319 $331,958
Total assets 1,025,925 814,168 728,209 629,545 387,067
Total debt 590,295 392,754 373,300 276,928 344,067
Minority interest 114,425 113,692 108,036 109,796 431
Shareholders' equity 272,804 270,892 209,338 216,808 30,556
(1) Represents the historical combined operations and combined financial position of CBL Properties, The
predecessor entity. On November 3, 1993, CBL & Associates Properties, Inc. (the "REIT") completed
an initial public offering.<PAGE>
</TABLE>
CBL & ASSOCIATES PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with CBL & Associates
Properties, Inc. Consolidated Financial Statements and Notes thereto.
GENERAL BACKGROUND
On November 3, 1993, CBL & Associates Properties, Inc. (the "REIT")
completed an initial public offering of 15,400,000 shares of common stock
priced at $19.50 per share (the "Offerings"). In connection with the
Offerings, CBL & Associates, Inc. and its affiliates contributed their
interests in properties to CBL & Associates Limited Partnership (the
"Operating Partnership"), of which the REIT is the sole general partner and
majority owner. As a result, the CBL & Associates Properties, Inc.
Consolidated Financial Statements and Notes thereto reflect the consolidated
financial results of the Operating Partnership which includes at
December 31, 1996, the operations of a portfolio of properties consisting of
fifteen regional malls, eight associated centers, seventy-five community
centers, an office building, joint venture investments in three regional
malls, and income from six mortgages, (the"Properties"). The Operating
Partnership currently has under construction one mall, two power centers,
two associated centers, and four community centers, and owns options to
acquire certain shopping center development sites. The consolidated
financial statements also include the results of CBL & Associates
Management, Inc. (the "Management Company").
The REIT classifies its regional malls into two categories-stabilized
malls which have completed their initial lease-up and new malls which are in
their initial lease-up phase. The New Mall category is presently comprised
of Westgate Mall in Spartanburg, South Carolina which was renovated and
expanded and reopened in October 1996, Turtle Creek Mall in Hattiesburg,
Mississippi which opened partially in October 1994 and the remainder in
March 1995, and Oak Hollow Mall in High Point, North Carolina which opened
in August 1995.
In November 1996, the REIT acquired St. Clair Square a 1,044,599 square
foot regional mall located in Fairview Heights, Illinois . The mall was
purchased for $86.4 million and was funded by a $66 million loan with the
balance funded from the REIT's credit lines.
<PAGE>
In December 1996 the REIT completed the acquisition of Foothills Mall a
472,220 square foot mall located in Maryville, Tennessee. The REIT received
a 95% partnership interest in the center in exchange for extending the term
of the mortgage for an additional five years.
Subsequent to the end of the year on January 15, 1997, the REIT
completed a spot offering of 3,000.000 shares at $26.125. Management of the
REIT purchased 55,000 of those shares. The net proceeds, of $74.3 million
after underwriters' discount, were used to repay variable rate indebtedness
incurred in the development and acquisition program.
RESULTS OF OPERATIONS
Operational highlights for 1996 as compared to 1995 are as follows:
SALES
Mall shop sales, for those tenants who have reported, in the
fifteen stabilized malls in the REIT's portfolio, (including
St. Clair Square and Foothills Mall in 1995 and 1996 sales,
which the REIT now owns) increased by 1.5% on a comparable per
square foot basis as shown below:
<TABLE>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Sales per square foot $240.45 $236.95
</TABLE>
Total sales volume in the mall portfolio, including new malls,
increased 7.8% to $682.8 million in 1996 from $633.3 million in
1995.
Occupancy costs as a percentage of sales for the years ended
December 31, 1996, 1995, and 1994 for the stabilized malls
(excluding St. Clair Square and Foothills Mall from all years)
were 11.5%, 12.3% and 12.2% respectively. The decrease in
occupancy costs as a percentage of sales from 1995 to 1996 was
due primarily to the REIT's policy of cost containment and
increasing sales.
<PAGE>
OCCUPANCY
Occupancy remained stable for the REIT's overall portfolio with
a breakdown by asset category as follows:
<TABLE>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Stabilized malls* 89.0% 89.8%
New malls 87.7 81.1
Associated centers 99.6 99.0
Community centers 97.2 96.8
---------- ----------
Total Portfolio 93.3% 93.2%
</TABLE>
========== ==========
* - St. Clair Square and Foothills Mall, which were purchased
during 1996, were included in the Stabilized Mall category
at December 31, 1996. If such malls were not included,
occupancy would be 89.7% in the Stabilized Mall category.
AVERAGE BASE RENTS
Average base rents for the REIT's three portfolio categories:
<TABLE>
At December 31,
------------------------------------
Percentage
1996 1995 Increase
-------- --------- ----------
<S> <C> <C> <C>
Malls $19.65 $18.72 4.9%
Associated Centers 8.59 8.37 2.6
Community Centers 6.94 6.66 4.2
</TABLE>
<PAGE>
LEASE ROLLOVERS
On spaces previously occupied, the REIT achieved the following
results from rollover leasing for the year ended December 31, 1996
over and above the base and percentage rent being paid by the
previous tenant:
<TABLE>
Per Square Per Square
Foot Rent Foot Rent Percentage
Prior New Lease Increase
Lease(1) (2) (Decrease)
---------- ---------- ----------
<S> <C> <C> <C>
Malls $16.20 $18.32 13.1%
Associated Centers 10.91 12.05 10.4
Community Centers 6.80 6.79 (0.1)
</TABLE>
(1) - Rental achieved for spaces previously occupied at the
end of the lease including percentage rent.
(2) - Average base rent over the term of the lease.
In 1996 and 1995, respectively, revenues from the malls represented
72.8% and 72.5% of total revenues from the properties; revenues from
associated centers represented 3.3% and 3.5%; revenues from community
centers represented 21.4% and 21.2%; and revenues from mortgages and the
office building represented 2.5% and 2.8%. Accordingly, revenues and results
of operations are disproportionately impacted by the malls' achievements.
The shopping center business is somewhat seasonal in nature with tenant
sales achieving the highest levels during the fourth quarter because of the
holiday season. The malls earn most of their "temporary" rents (rents from
short-term tenants) during the holiday period. Thus, occupancy levels and
revenue production are generally the highest in the fourth quarter of each
year. Results of operations realized in any one quarter may not be
indicative of the results likely to be experienced over the course of the
entire year.
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS FOR 1996 TO THE RESULTS OF
OPERATIONS FOR 1995
Total revenues in 1996 increased by $15.1 million, or 11.4% to $146.8
million as compared to $131.7 million in 1995. Of this increase, minimum
rents increased by $10.9 million, or 13.2%, to $93.2 million as compared to
$82.3 million in 1995, percentage rents decreased by $0.1 million, or 3.1%,
to $2.7 million as compared to $2.8 million in 1995, other rents increased
by $0.3 million, or 16.6%, to $1.8 million as compared to $1.5 million in
1995, tenant reimbursements increased by $4.1 million, or 10.6%, to $42.4
million as compared to $38.4 million in 1995.
Approximately $8.2 million of the increase in revenues resulted from a
full year of operations at the five new centers opened during 1995 and a
full year of operations for Phase II of Turtle Creek Mall in Hattiesburg,
Mississippi. The two Centers the REIT acquired on March 31, 1995 contributed
approximately $2.0 million of new revenues in 1996. The five new centers
opened during 1996 described in Development, Expansions and Acquisitions
contributed approximately $0.7 million of new revenues during 1996 and
St. Clair Square in Fairview Heights, Illinois, the regional mall acquired
on November 25, 1996, contributed $1.3 million. Improved occupancies and
operations and increased rents in the REIT's operating portfolio generated
approximately $2.9 million of the new revenues with stabilized malls
contributing approximately $1.8 million and the associated and community
center portfolio contributing $1.1 million in increased revenues.
Management, leasing and development fees decreased $0.1 million to
$2.4 million in 1996 from $2.5 million in 1995. This decrease was primarily
due to development fees earned in 1995 from Hannaford Bros. offset by a
management contract for Ogden City Mall in Ogden, Utah and increased
management and leasing fees from Madison Square Mall in Huntsville, Alabama,
which the REIT owns in a joint venture. Interest and other income increased
by $0.1 million to $4.3 million in 1996 from $4.2 million in 1995. This
increase was primarily due to increased notes receivable balances and other
miscellaneous income.
Property operating expenses, including real estate taxes and maintenance
and repairs, increased in 1996 by $4.1 million or 10.0%, to $44.8 million as
compared to $40.7 million in 1995. This increase is primarily the result of
the opening of the ten new centers over the past twenty four months, the
acquisition of the three properties, and increases in maintenance and
security in the REIT'S operating portfolio. The REIT's cost recovery ratio
increased slightly to approximately 94.7% in 1996 as compared to 94.3% in
1995.
<PAGE>
Depreciation and amortization increased in 1996 by $2.6 million or
11.4% to $25.4 million as compared to $22.8 million in 1995. This increase
resulted primarily from depreciation and amortization on the ten new centers
opened and the acquisition of three properties over the past twenty four
months.
Interest expense decreased in 1996 by $0.3 million or 0.8% to $31.7
million as compared to $32.0 million in 1995. This decrease is primarily due
to the conversion of variable rate debt to permanent rate debt, the reduction
of variable rate debt with proceeds from the follow-on offering in September
1995, and lower interest rates on variable rate debt offset by increased
interest expense on the ten new centers opened and the acquisition of three
properties over the past twenty four months.
General and administrative expense was $8.5 million in 1996 as compared
to $8.0 million in 1995. This increase was primarily due to increases in
reserves for state tax expense and for payroll in management and leasing.
Other expense was $.6 million in 1996 and 1995. These amounts represent
the write-off of development projects which the REIT has elected not to
pursue.
Gain on sales of real estate assets was $13.6 million in 1996 as
compared to $2.2 million in 1995. The majority of these gains were from
sales or exchanges of five completed centers for $7.6 million. These centers
consist of: (I) Lowe's Plaza in Adrian, Michigan; (II) Lowe's in Benton
Harbor, Michigan; (III) Hannaford Bros in West Broad, Virginia; (IV) Chester
Plaza in Chester, Virginia; and (V) Lakeshore Crossing in Gainesville,
Georgia. The majority of the $6.0 million of outparcel sales in 1996 was
in connection with the development of Springhurst Towne Center in
Louisville, Kentucky and Massard Crossing in Ft. Smith, Arkansas.
The extraordinary loss in 1996 of $0.8 million resulted from the REIT's
share of the early extinguishment of debt from its joint-venture in
Governor's Square in Clarksville, Tennessee. The interest savings from the
refinanced debt is 140 basis points.
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS FOR 1995 TO THE RESULTS OF
OPERATIONS FOR 1994
Total revenues in 1995 increased by $23.6 million, or 21.9% to $131.7
million as compared to $108.1 million in 1994. Of this increase, minimum
rents increased by $14.7 million, or 21.8%, to $82.3 million as compared to
$67.6 million in 1994, percentage rents increased by $1.2 million, or 71.3%,
to $2.8 million as compared to $1.6 million in 1994, other rents increased
by $0.4 million, or 32.5%, to $1.5 million as compared to $1.1 million in
1994, tenant reimbursements increased by $6.8 million, or 21.4%, to $38.4
million as compared to $31.6 million in 1994.
Approximately $7.3 million of the increase in revenues resulted from a
full year of operations at the six new centers opened during 1994. The five
new centers opened during 1995 contributed approximately $4.7 million of
new revenues during 1995. These centers consist of: (I) Oak Hollow Mall
in High Point, North Carolina, which opened in August 1995; (II) Henderson
Square in Henderson, North Carolina, which opened in March 1995; (III)
Capital Crossing in Raleigh, North Carolina, which opened in December 1995;
(IV) Home Quarter's Warehouse in Portland, Maine, which opened in May 1995;
and (V) Hannaford Bros. in Richmond, Virginia, which opened in December
1995. The two centers the REIT acquired on March 31, 1995, Westgate
Mall in Spartanburg, South Carolina and Suburban Plaza in Knoxville,
Tennessee, contributed approximately $5.0 million of new revenues in
1995.
Improved occupancies and operations and increased rents in the REIT's
operating portfolio generated approximately $6.1 million of new revenues.
Stabilized malls contributed approximately $5.2 million of increased
revenues, of which the majority were generated at Hamilton Place Mall in
Chattanooga, Tennessee, CoolSprings Galleria in Nashville, Tennessee,
Frontier Mall in Cheyenne, Wyoming, and College Square Mall in Morristown,
Tennessee. The associated and community center portfolio added approximately
$0.9 million in increased revenues.
<PAGE>
Management, leasing and development fees increased $0.3 million to
$2.5 million in 1995 from $2.2 million in 1994. This increase was primarily
due to development fees earned from Hannaford Bros., and increased management
and leasing fees from Madison Square Mall in Huntsville, Alabama, which the
REIT owns in a joint venture. Interest and other income increased by $0.3
million to $4.2 million in 1995 from $3.9 million in 1994. This increase
was primarily due to increased notes receivable balances and other
miscellaneous income.
Property operating expenses, including real estate taxes and
maintenance and repairs, increased in 1995 by $7.2 million or 21.4%, to
$40.7 million as compared to $33.5 million in 1994. This increase is
primarily the result of the opening of the eleven new centers over the
past twenty four months, the acquisition of the two properties, and
increases in maintenance and security in the REIT's operating portfolio.
The REIT's cost recovery ratio remained the same at 94.3% in 1995 and 1994.
Depreciation and amortization increased in 1995 by $3.4 million or
17.6% to $22.8 million as compared to $19.4 million in 1994. This increase
resulted primarily from depreciation on the eleven new centers opened over
the past twenty four months and the acquisition of two properties on
March 31, 1995.
Interest expense increased in 1995 by $9.3 million or 40.9% to $32.0
million as compared to $22.7 million in 1994. This increase is primarily
due to additional interest expense attributable to the eleven new centers,
the two acquisition centers and expansions completed during 1995 and 1994,
and higher interest on variable rate debt.
General and administrative expense was $8.0 million in 1995 as compared
to $8.3 million in 1994. This decrease was primarily due to decreases in
legal and professional fees partially offset by increased state income taxes.
Other expense was $0.6 million in 1995 as compared to $0.2 million in
1994. These amounts represent the write-off of development projects which
the REIT has elected not to pursue.
<PAGE>
Gain on sales of real estate assets was $2.2 million in 1995 as
compared to $2.1 million in 1994. The majority of outparcel sales in 1995
and 1994 were at the REIT's new mall in High Point, North Carolina.
The extraordinary loss in 1995 of $0.3 million resulted from the
early extinguishment of debt at CoolSprings Galleria in Nashville, Tennessee
and Westgate Mall in Spartanburg, South Carolina.
LIQUIDITY AND CAPITAL RESOURCES
The principal uses of the REIT's liquidity and capital resources have
historically been for property development, expansion and renovation
programs, and debt repayment. To maintain its qualification as a real
estate investment trust under the Internal Revenue Code, the REIT is
required to distribute to its shareholders at least 95% of its "Real Estate
Investment Trust Taxable Income" as defined in the Internal Revenue Code of
1986, as amended (the "Code"). As of January 31, 1997, the REIT had $96.4
million available in unfunded construction loans to be used for completion
of the construction projects and replenishment of working capital previously
used for construction. Additionally, as of January 31, 1997, the REIT had
obtained revolving credit lines totaling $137.0 million of which $94.6
million was available. Also, as a publicly traded company, the REIT has
access to capital through both the public equity and debt markets. The REIT
has filed a Shelf Registration authorizing shares of the REIT's preferred
stock and common stock and warrants to purchase shares of the REIT's common
stock with an aggregate public offering price of up to $200.0 million,
with $35.8 million remaining after the REIT's follow-on and spot offerings
of common stock on September 25, 1995 and on January 15, 1997. The REIT
anticipates that the combination of these sources will, for the foreseeable
future, provide adequate liquidity to enable it to continue its capital
programs substantially as in the past and make distributions to its
shareholders in accordance with the Code's requirements applicable to real
estate investment trusts.
Management expects to refinance the majority of the mortgage notes
payable maturing over the next five years with replacement loans.
<PAGE>
The REIT's policy is to maintain a conservative debt to total market
capitalization ratio in order to enhance its access to the broadest range
of capital markets, both public and private. The REIT's current capital
structure includes property specific mortgages, which are generally non-
recourse, revolving lines of credit, common stock and a minority interest
in the Operating Partnership. The minority interest in the Operating
Partnership represents the 31.0% ownership interest in the Operating
Partnership held by the REIT's executive and senior officers which may be
exchanged for approximately 9.4 million shares of common stock.
Additionally, REIT executive officers and directors own approximately
1.5 million shares of the outstanding common stock of the REIT, for a
combined total interest in the Operating Partnership of approximately 36.0%.
Assuming the exchange of all limited partnership interests in the Operating
Partnership for common stock, there would be outstanding approximately 30.4
million shares of common stock with a market value of approximately $785.9
million at December 31, 1996 (based on the closing price of $25.875 per
share on December 31, 1996). REIT executive and senior officers' ownership
interests had a market value of approximately $283.0 million at
December 31, 1996.
Mortgage debt consists of debt on certain consolidated properties as
well as on three properties in which the REIT owns a non-controlling
interest accounted for under the equity method of accounting. At
December 31, 1996, the REIT's share of funded mortgage debt on its
consolidated properties adjusted for minority investors' interests in
seven properties was $563.9 million and its pro rata share of mortgage
debt on unconsolidated properties (accounted for under the equity method)
was $43.4 million for total debt obligations of $612.5 million with a
weighted average interest rate of 8.0%. Variable rate debt accounted for
$248.0 million with a weighted average interest rate of 7.0%. Variable
rate debt accounted for approximately 40.5% of the REIT's total debt and
17.7% of its total capitalization. Of this variable rate debt, $108.0
million is related to construction projects. Periodically, the REIT enters
into interest rate cap and swap agreements to reduce interest rate risks on
variable rate debt. The REIT has entered into swap agreements for $55.5
million of the variable rate debt associated with operating properties at
an average interest rate of 7.4% through the second quarter of 1998. The
REIT's exposure to interest rate fluctuations which could impact funds from
operations after taking into account swap agreements is $84.5 million.
<PAGE>
In April 1995, the REIT executed a three year interest rate swap
agreement on $5.5 million of debt on its shopping center in Benton Charter
Township, Michigan with First Union National Bank. The effective date was
March 16, 1995. This swap agreement effectively fixes the interest rate on
the $5.5 million of debt at 8.5%. In June 1995, the REIT executed a $50.0
million interest rate swap agreement with NationsBank N.A. for a three
year period at a rate of 5.52%. This agreement effectively fixes $50.0
million of the REIT's variable rate debt at a rate no greater than 7.15%.
There were no fees charged to the REIT related to these transactions.
In March 1996, the Company added $17 million and one additional bank
to its credit facility led by First Tennessee Bank N.A. bringing the total
to $42.0 million with $8.6 million unfunded at January 31, 1997. In
August, 1996, the pricing on this credit facility was reduced from 165
basis points to an average menu pricing of approximately 137 basis points
over LIBOR. In March 1997, the Company added $38 million and one
additional bank to this facility.
In April 1996, the Company reduced the pricing on the $10.0 million
credit facility led by SunTrust N.A. from 165 basis points to 125 basis
points over LIBOR.
In May 1996, the Company's major line bank, Wells Fargo, reduced the
pricing on its $85.0 million facility from 175 basis points to 150 basis
points over LIBOR. The Company's total revolving lines of credit were
$137.0 million at December 31, 1996.
In September 1996, the Company closed a loan with Compass Bank in
the amount of $25.0 million at an interest rate of 50 basis points over
LIBOR. The maturity of this facility has been extended to May 15, 1997.
This loan was used to repay higher variable rate debt.
<PAGE>
During March 1996, the Company closed on three permanent loans; (I) a
twelve-year loan on Oak Hollow Mall in High Point, North Carolina, owned 75%
by the Company, in the amount of $54.0 million at an interest rate of 7.31%;
(II) a ten-year loan on Turtle Creek Mall in Hattiesburg, Mississippi, in
the amount of $35.0 million at an interest rate of 7.4%; and (III) an
eighteen-year loan on Henderson Square in Henderson, North Carolina, in
the amount of $7.4 million at an interest rate of 7.5%. The proceeds from
these loans were used to repay variable rate debt.
The company has a permanent loan commitment for a $52.0 million loan
on Westgate Mall in Spartanburg, South Carolina, to pay off the existing
$39.7 million construction loan and a $75 million loan commitment on
Hamilton Place in Chattanooga, Tennessee, owned 90% by the Company, to
refinance the existing debt at a savings of 225 basis points.
Based on the debt (including construction projects) and the market
value of equity described above, the REIT's debt to total market
capitalization (debt plus market value equity) ratio was 43.8% at
December 31, 1996, as compared to 38.8% at December 31, 1995.
Subsequent to the end of the year on January 15, 1997, the REIT
completed a spot offering of 3,000,000 shares at $26.125. Management of
the REIT purchased 55,000 of those shares. After the offering the REIT
executive officers and directors owned a combined total interest in the
operating partnership of approximately 32.9 % which includes approximately
1.6 million shares of common stock. The net proceeds, of $74.3 million after
underwriters' discount, was used to repay variable rate indebtedness
incurred in the development and acquisition program. This transaction
provided the REIT with a stronger capital structure to pursue its new
developments and acquisitions.
<PAGE>
DEVELOPMENT, EXPANSIONS AND ACQUISITIONS
During 1996, the REIT opened approximately 866,000 square feet of new
retail properties consisting of : (I) an approximate 101,287 square foot
free-standing Lowe's in Adrian, Michigan, which opened in June 1996; (II)
an approximate 108,076 square foot community center Devonshire Place in
Cary, North Carolina, which opened in September 1996 with 3 anchors -
Hannaford Bros., Borders and Kinetix; (III) an approximate 59,799 square
foot community center LaGrange Commons in LaGrange, New York which opened
in November 1996 ; (IV) an approximate 118,891 square foot community center
Kingston Overlook in Knoxville, Tennessee which opened with Baby Superstore
and HomePlace in November 1996. The remaining anchor Michael's is scheduled
to open in July 1997; (V) the approximate 54,000 square foot free-standing
Hannaford in Chester, Virginia which opened in September 1996 and was sold
to Hannaford Bros. in December 1996; (VI) the redevelopment and expansion
of the approximate 1.1 million square foot Westgate Mall in Spartanburg,
South Carolina which opened in October 1996. Westgate Mall is anchored
by Belk, Dillard's, JB White, JCPenney, Sears and Uptons making it the
only six-anchor regional mall in the Carolinas. Westgate Mall opened
with 82% of the small shops occupied and 87% leased and committed; (VII)
an approximate 15,000 square foot free-standing Just for Feet on the
periphery of Hamilton Place Mall in Chattanooga, Tennessee, which opened
in July 1996; (VIII) an approximate 20,000 square foot Staples at Capital
Crossing in Raleigh, North Carolina, which opened in February 1996; and
(IX) an approximate 26,000 square foot free-standing Barnes & Noble on the
periphery of Oak Hollow Mall in High Point, North Carolina, which opened
in October 1996.
<PAGE>
The REIT currently has approximately 3,118,000 square feet under
construction consisting of: (I) an approximate 158,000 square foot
associated center The Terrace in Chattanooga, Tennessee, adjacent to the
Hamilton Place Mall scheduled to open in March 1997; (II) an approximate
291,000 square foot community center Massard Crossing in Fort Smith,
Arkansas, anchored by scheduled to open in March 1997; (III) an approximate
289,000 square foot community center Salem Crossing in Virginia Beach,
Virginia scheduled to open in April 1997; (IV) an approximate 63,000 square
foot free-standing Hannaford Bros. in Richmond, Virginia, scheduled to
open in February 1997; (V) an approximate 808,000 square foot power center
Springhurst Towne Center in Louisville, Kentucky scheduled to open beginning
in August 1997; (VI) an approximate 769,211 square foot power center
Cortlandt Town Center in Cortlandt, New York scheduled to open beginning
in September 1997; (VII) an approximate 632,000 square foot mall Bonita
Lakes Mall in Meridian, Mississippi scheduled to open in October 1997;
(VIII) an approximate 64,000 square foot associated center Bonita Lakes
Crossing in Meridian, Mississippi, scheduled to open in October 1997; and
(IX) an approximate 43,570 square foot free-standing Regal Cinema
Strawbridge Marketplace in Virginia Beach, Virginia, scheduled to open in
August 1997.
In the fourth quarter of 1996, the REIT acquired two regional malls
and subsequent to the year end in January 1997 one community center.
St. Clair Square located in Fairview Heights, Illinois, an approximate
1,044,599 square foot super regional mall was purchased for $86.4 million.
Anchored by Dillard's, Famous-Barr, JCPenney and Sears. St. Clair Square
is currently 97.7% leased. The acquisition was funded by a $66.0 million
acquisition loan with the balance funded from the REIT's credit lines.
In December 1996, the REIT completed the acquisition of Foothills Mall
an approximate 472,220 square foot mall located in Maryville, Tennessee,
anchored by JCPenney, Sears, Proffitt's for Women, and Proffitt's for
Men/Kids/Home The REIT received a 95% partnership interest in the center
in exchange for extending the term of the mortgage for an additional five
years. The REIT had already owned the JCPenney store prior to the purchase.
<PAGE>
Sutton Plaza in Mount Olive, New Jersey, was purchased in January 1997
for $5.7 million. The 122,027 square foot community center is anchored by
A&P and Ames and is currently 100% leased.
The REIT has also entered into a number of option agreements for the
development of future regional malls and community centers. Except for
these projects and as further described below, the REIT currently has no
other capital commitments.
It is management's expectation that the REIT will continue to have
access to the capital resources necessary to expand and grow its business.
Future development and acquisition activities will be undertaken by the REIT
as suitable opportunities arise. Such activities are not expected to be
undertaken unless adequate sources of financing are available and a
satisfactory budget with targeted returns on investment has been internally
approved.
The REIT will fund its major development, expansion and acquisition
activity with its traditional sources of construction and permanent debt
financing as well as from other debt and equity financings, including
public financings, and its credit facilities in a manner consistent with
its intention to operate with a conservative debt to total market
capitalization ratio.
<PAGE>
OTHER CAPITAL EXPENDITURES
Management prepares an annual capital expenditure budget for each
property which is intended to provide for all necessary recurring capital
improvements. Management believes that its annual operating reserve for
maintenance and recurring capital improvements and reimbursements from
tenants will provide the necessary funding for such requirements. The
REIT intends to distribute approximately 70% - 90% of its funds from
operations with the remaining 10% - 30% to be held as a reserve for
capital expenditures and continued growth opportunities. The REIT believes
that this reserve will be sufficient to cover tenant finish costs associated
with the renewal or replacement of current tenant leases as their leases
expire as well as capital expenditures which will not be reimbursed by
tenants.
Major tenant finish costs for currently vacant space are expected to
be funded with working capital, operating reserves, or revolving lines of
credit, and a return on the funds invested is expected to be earned.
For the year ended December 31, 1996, revenue generating capital
expenditures or tenant allowances for improvements were $3.0 million.
These capital expenditures generate a return by increased rents from these
tenants over the term of their leases. Revenue enhancing capital
expenditures, or remodeling and renovation costs, were $5.6 million.
Revenue neutral capital expenditures, such as parking lot and roof repairs,
which are recovered from the tenants were $1.1 million for this period.
The REIT believes that the Properties are in compliance in all material
respects with all federal, state and local ordinances and regulations
regarding the handling, discharge and emission of hazardous or toxic
substances. The REIT has not been notified by any governmental authority,
or is not otherwise aware, of any material noncompliance, liability or claim
relating to hazardous or toxic substances in connection with any of its
present or former properties.
The REIT has not recorded in its financial statements any material
liability in connection with environmental matters.
<PAGE>
FUNDS FROM OPERATIONS
Management believes that funds from operations ("FFO") provides an
additional indicator of the financial performance of the Properties. FFO
is defined by the REIT as net income (loss) before property depreciation,
other non-cash items (consisting of the effect of straight-lining of rents
and the write-off of development projects not being pursued), gains or
losses on sales of real estate assets and gains or losses on investments
in marketable securities. The cost of interest rate caps and finance costs
on the REIT's lines of credit are being amortized in interest expense and
therefore reduce FFO. The REIT's calculation of FFO is reduced by the
difference in average rents and actual rents received (straight-lining).
FFO also includes the REIT's share of FFO in unconsolidated properties and
excludes minority interests' share of FFO in consolidated properties.
The use of FFO as an indicator of financial performance is influenced
not only by the operations of the Properties, but also by the capital
structure of the Operating Partnership and the REIT. Accordingly,
management expects that FFO will be one of the significant factors
considered by the Board of Directors in determining the amount of cash
distributions the Operating Partnership will make to its partners (including
the REIT). FFO does not represent cash flow from operations as defined by
generally accepted accounting principles and is not necessarily indicative
of cash available to fund all cash flow needs and should not be considered
as an alternative to net income for purposes of evaluating the REIT's
operating performance or to cash flow as a measure of liquidity.
In 1996, FFO increased by $10.3 million, or 19.9%, to $62.0 million as
compared to $51.7 million in 1995. The increase in FFO was primarily
attributable to the continuing increase in revenues and income from
operations and new developments.
Beginning with the first quarter of 1996 the REIT complied with
NAREIT's revised definition of FFO by not adding back depreciation and
amortization of finance costs and non-real estate assets to income from
operations. The REIT will continue to exclude outparcel sales and the
effect of straight-line rents from its FFO calculation, even though the
revised definition allows their inclusion.
Depreciation and amortization from consolidated properties includes
amortization of finance costs and depreciation of non-real estate assets
of approximately $0.3 million and approximately $0.6 million of non-real
estate depreciation in property operating in 1996.
The REIT does not include outparcel sales (which would have added $6.0
million in 1996) or the effect of straight-line rents (which would have
added $1.0 million in 1996) in its calculation of funds from operations.
<PAGE>
The REIT's calculation of FFO is as follows: (dollars in thousands)
<TABLE>
Three Months Ended Years Ended
December 31, December 31,
------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
Income from operations............. $ 9,622 $ 8,501 $35,793 $27,500
ADD:
Depreciation & amortization
from consolidated properties..... 6,856(1) 6,221(2) 25,439(3) 23,407(4)
Income from operations of
unconsolidated................... 302 324 1,831 1,428
Depreciation & amortization from
unconsolidated affiliates........ 306 310 1,203 1,264
Write-off of development costs
charged to net income............ 196 140 646 605
SUBTRACT:
Minority investors' share of
income from operations in
seven properties................. (142) (47) (527) (366)
Minority investor's share of
depreciation and amortization
in seven properties.............. (173) (163) (659) (345)
Preference return paid to
mortgagees....................... (64) (195) (395) (930)
Adjustment for the
straight-lining of rents:
Consolidated properties...... (311) (234) (1,039) (998)
Unconsolidated affiliates.... 5 8 9 22
Minority investors share
of seven properties........ (28) -- (17) --
Depreciation and amortization
of non-real estate assets
and finance costs................ (93) -- (287) --
----------- ----------- ----------- ----------
TOTAL FUNDS FROM OPERATIONS........ $16,476 $14,865 $61,997 $51,686
=========== =========== =========== ==========
(1) Old basis would have included $176 of non-real estate depreciation, which now is classified as property
operating expense on the consolidated statements of operations, and excluded finance costs.
(2) Includes $159 of non-real estate depreciation, which now is classified as property operating
expense on the consolidated statements of operations.
(3) Old basis would have included $693 of non-real estate depreciation, which now is classified as
property operating expense on the consolidated statements of operations, and excluded finance cost.
(4) Includes $573 of non-real estate depreciation, which now is classified as property operating expense
on the consolidated statement of operation.
</TABLE>
<PAGE>
IMPACT OF INFLATION
In the last three years, inflation has not had a significant impact on
the REIT because of the relatively low inflation rate. Substantially all
tenant leases do, however, contain provisions designed to protect the REIT
from the impact of inflation. Such provisions include clauses enabling the
REIT to receive percentage rentals based on tenant's gross sales, which
generally increase as prices rise, and/or escalation clauses, which generally
increase rental rates during the terms of the leases. In addition, many of
the leases are for terms of less than ten years which may enable the REIT to
replace existing leases with new leases at higher base and/or percentage
rentals if rents of the existing leases are below the then-existing market
rate. Most of the leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and insurance,
thereby reducing the REIT's exposure to increases in costs and operating
expenses resulting from inflation.
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, excepts per share data)
<TABLE>
DECEMBER 31,
-----------------------
1996 1995
<S> <C> <C>
ASSETS
REAL ESTATE ASSETS:
Land $ 119,965 $ 98,305
Building and improvements 883,683 722,178
---------- ---------
1,003,648 820,483
Less: Accumulated depreciation (114,536) (89,818)
---------- ---------
889,112 730,665
Developments in progress 98,148 28,273
---------- ---------
987,260 758,938
Net investment in real estate assets 4,298 3,029
CASH AND CASH EQUIVALENTS
RECEIVABLES:
Tenant, net of allowance for doubtful
accounts of $450 in 1996 and 1995 11,417 10,479
Other 1,087 974
MORTGAGE NOTES RECEIVABLE 14,858 34,262
OTHER ASSETS 7,005 6,486
---------- ---------
$1,025,925 $ 814,168
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
MORTGAGE AND OTHER NOTES PAYABLE $ 590,295 $ 392,754
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 39,785 28,035
---------- ---------
Total liabilities 630,080 420,789
---------- ---------
COMMITMENTS AND CONTINGENCIES
(NOTES 4 AND 13)
DISTRIBUTIONS AND LOSSES IN EXCESS
OF INVESTMENT IN UNCONSOLIDATED AFFILIATES 8,616 8,795
---------- ---------
MINORITY INTEREST 114,425 113,692
---------- ---------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000
shares authorized, non issued -- --
Common stock, $.01 par value, 95,000,000
shares authorized, 20,965,790 and
20,837,099 shares issued and outstanding
in 1996 and 1995, respectively 210 208
Excess stock, $.01 par value, 100,000,000
shares authorized, none issued -- --
Additional paid-in capital 293,824 291,182
Accumulated deficit (20,855) (20,142)
Deferred compensation (375) (356)
---------- ---------
Total shareholders' equity 272,804 270,892
---------- ---------
$1,025,925 $ 814,168
========== =========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Rentals:
Minimum $ 93,217 $ 82,319 $ 67,591
Percentage 2,724 2,811 1,641
Others 1,758 1,507 1,137
Tenant reimbursements 42,447 38,370 31,609
Management and leasing fees 2,377 2,235 2,085
Development fees 7 271 150
Interest and other 4,275 4,214 3,881
------------ ------------- ------------
Total revenues 146,805 131,727 108,094
------------ ------------- ------------
EXPENSES:
Property operating 24,232 21,611 18,062
Depreciation and amortization 25,439 22,834 19,418
Real estate taxes 11,587 10,087 8,738
Maintenance and repair 8,957 8,991 6,708
General and administrative 8,467 8,049 8,327
Interest 31,684 31,951 22,674
Other 646 605 164
------------ -------------- -------------
Total expenses 111,012 104,128 84,091
------------ -------------- -------------
INCOME FROM OPERATIONS 35,793 27,599 24,003
GAIN ON SALES OF REAL ESTATE ASSETS 13,614 2,213 2,135
EQUITY IN EARNINGS OF
UNCONSOLIDATED AFFILIATES 1,831 1,450 1,469
MINORITY INTEREST IN EARNINGS:
Operating partnership (15,468) (10,527) (9,836)
Shopping center properties (527) (386) (312)
------------ -------------- -------------
INCOME BEFORE EXTRAORDINARY ITEM 35,243 20,349 17,459
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT (820) (326) (312)
------------ -------------- -------------
NET INCOME $ 34,423 $ 20,023 $ 17,459
============ ============== =============
EARNINGS PER COMMON SHARE:
Income before extraordinary item $ 1.69 $ 1.14 $ 1.05
Extraordinary loss on early
extinguishment of debt (0.04) (0.02) --
------------ -------------- -------------
Net income $ 1.65 $ 1.12 $ 1.05
============ ============== =============
WEIGHTED AVERAGE SHARES OUTSTANDING 20,890 17,827 16,625
============ ============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands, except per share data)
<TABLE>
Additional
Common Paid-in Accumulated Deferred
Stock Capital Deficit Compensation Total
---------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 $ 166 $219,526 $ (2,884) $ -- $216,808
Net income -- -- 17,459 -- 17,459
Dividends, $1.50 per share -- -- (24,941) -- (24,941)
Issuance of 12,752 shares of
common stock -- 250 -- (250) --
Amortization of deferred compensation -- 12 12
----------- ---------- ----------- ------------- -----------
BALANCE, December 31, 1994 166 219,776 (10,366) (238) 209,338
Net income -- -- 20,023 -- 20,023
Dividends, $1.59 per share -- -- (29,799) -- (29,799)
Issuance of 29,624 shares of common
stock -- 602 -- (282) 320
Issuance of 4,163,500 shares
through a public offering 42 80,618 -- -- 80,660
Minority interest in Operating
Partnership -- (9,924) -- -- (9,924)
Exercise of stock options -- 110 -- -- 110
Amortization of deferred compensation -- -- -- 164 164
----------- ----------- ------------ ------------- ------------
BALANCE, December 31, 1995 208 291,182 (20,143) (356) 270,892
Net income -- -- 34,423 -- 34,423
Dividends, $1.68 per share -- -- (35,136) -- (35,136)
Issuance of 34,891 shares of common
stock 1 804 -- (347) 458
Exercise of stock options 1 1,838 -- -- 1,839
Amortization of deferred compensation -- -- -- 328 328
----------- ----------- ------------ ------------- ------------
BALANCE, December 31, 1996 $210 $293,824 $ (20,855) $ (375) $272,804
=========== =========== ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,423 $ 20,023 $ 17,459
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority investors' interest in earnings 15,995 10,913 10,148
Depreciation 24,036 22,190 19,014
Amortization 2,677 1,217 404
Extraordinary loss on early
extinguishment of debt 820 326 --
Gain on sales of real estate assets (13,614) (2,213) (2,135)
Equity in earnings of unconsolidated
affiliates (1,831) (1,450) (1,469)
Issuance of stock under incentive plan 146 80 --
Amortization of deferred compensation 328 94 --
Write-off of development projects 646 605 --
Distributions from unconsolidated
affiliates 3,398 3,186 2,084
Distributions to minority investors (15,874) (15,182) (12,083)
Changes in assets and liabilities:
Tenant and other receivables (1,051) (2,837) (2,906)
Other assets (487) (75) 1,003
Accounts payable and accrued liabilities 5,177 (7,900) (2,087)
------------ ------------ -----------
Net cash provided by operating activities 54,789 28,977 29,432
------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate assets (141,842) (57,654) (98,109)
Acquisitions of real estate assets (103,464) (32,301) --
Capitalized interest (6,978) (4,290) (2,784)
Revenue enhancing capital expenditures (5,625) (5,238) (3,198)
Other capital expenditures (3,913) (3,075) (2,843)
Proceeds from sales of real estate assets 47,968 7,185 3,284
Additions to mortgage notes receivable (3,697) (2,006) (3,344)
Payments received on mortgage notes receivable 3,193 396 164
Additional investments in and advances to
unconsolidated affiliates (2,566) (859) (4,362)
Additions to other assets (1,092) (1,848) (1,416)
------------ ------------ -----------
Net cash used in investing activities (218,016) (99,690) (112,608)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage and other notes payable 309,494 149,831 124,131
Principal payments on mortgage and other
notes payable (111,953) (130,377) (27,755)
Additions to deferred finance costs (1,173) (708) (1,071)
Refunds of finance costs 721 -- --
Proceeds from issuance of common stock 178 80,681 --
Proceeds from exercise of stock options 1,839 110 --
Prepayment penalties on early
extinguishment of debt -- (95) --
Dividends paid (34,610) (27,753) (22,442)
------------ ------------ -----------
Net cash provided by financing activities 164,496 71,689 72,863
------------ ------------ -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,269 976 (10,313)
CASH AND CASH EQUIVALENTS, beginning of period 3,029 2,053 12,366
------------ ------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 4,298 $ 3,029 $ 2,053
============ ============ ===========
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest,
net of amounts capitalized $ 30,587 $ 31,923 $ 20,981
============ ============ ===========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
N 0 T E S T 0 C 0 N S 0 L I D A T E D
F I N A N C I A L S T A T E M E N T S
1. ORGANIZATION
CBL & Associates Properties, Inc. (the "REIT'), a Delaware corporation,
is engaged in the development and operation of regional shopping malls and
community centers, primarily in the southeast and northeast regions of the
United States. The REIT owns an interest in and conducts its business
activities through CBL &Associates Properties Limited Partnership (the
"Operating Partnership"), which at December 31, 1996, owns controlling
interests in a portfolio of properties consisting of fifteen regional malls,
eight associated centers, each of which is part of a regional shopping mall
complex, seventy-five community centers, and one office building.
Additionally, the Operating Partnership owns noncontrolling interests in
three regional malls. The Operating Partnership has two malls, two
associated centers, four community centers, and two power centers currently
under construction, and owns options to acquire certain properties owned
by third parties. At December 3 1, 1996, the REIT owns a 69.03% general
partnership interest in the Operating Partnership.
The minority interest in the Operating Partnership is held primarily
by CBL & Associates, Inc. and its affiliates (collectively "CBL") who
contributed their interests in certain real estate properties and joint
ventures to the Operating Partnership in exchange for a limited partnership
interest in connection with the formation of the Operating Partnership in
November 1993. At December 31, 1996, CBL owns a 30.97% limited partnership
interest in the Operating Partnership (Note 9).
In September 1995, the REIT completed a follow-on offering of 4,163,500
shares of its common stock at $20.625 per share. The net proceeds of $80.7
million were used to repay variable rate indebtedness on the REIT's revolving
lines of credit.
In January 1997, the REIT completed a spot offering of 3,000,000 shares
of its common stock at $26.125 per share. The net proceeds of $74.3 million
were used to repay variable rate indebtedness incurred in the REIT's
development and acquisition program.
<PAGE>
To comply with certain technical requirements of the Internal Revenue
Code of 1986, as amended (the "Code"), the' Operating Partnership carries
out the REIT's property management and development activities through CBL
& Associates Management, Inc. (the "Management Company"). The Operating
Partnership holds 100% of the preferred stock and 5% of the common stock of
the Management Company, with CBL holding the remaining 95% of the common
stock. Through the ownership of the preferred stock, the Operating
Partnership receives substantially all of the cash flow, and therefore
enjoys substantially all of the economic benefits of the Management
Company's operations. Due to the REIT's ability, as sole general partner,
to control the Operating Partnership and Operating Partnership's rights to
substantially all of the economic benefits of the Management Company, the
accounts of each entity are included in the accompanying consolidated
financial statements. The REIT, the Operating Partnership and the
Management Company are referred to collectively as the "Company".
All significant intercompany balances and transactions have been
eliminated in the consolidated presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Real Estate Assets
- ------------------
Costs directly related to the acquisition and development of real estate
assets, including overhead costs directly attributable to property
development, are capitalized. Interest costs incurred during the
development and construction period are capitalized.
Ordinary repairs and maintenance are expensed as incurred. Major
replacements and betterments are capitalized and depreciated over their
estimated useful lives. Depreciation is computed on a straight-line basis
generally over forty years for buildings and improvements and seven to ten
years for equipment and fixtures. Tenant improvements are capitalized and
depreciated on a straight-line basis over the life of the related lease.
<PAGE>
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 121 on accounting for the
impairment of long-lived assets, certain identifiable intangibles and
goodwill related to assets to be held and used. SFAS No. 121 also
establishes accounting standards for long-lived assets and certain
identifiable intangibles to be disposed of. The Company adopted SFAS No. 121
effective January 1, 1996. The adoption of SFAS No. 121 did not have a
significant impact on the Company's consolidated financial position and
results of operations.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include all cash and cash equivalent
investments with original maturities of three months or less,
primarily consisting of demand deposits in banks.
Deferred Financing Costs
- ------------------------
Deferred financing costs are included in other assets in the accompanying
consolidated balance sheets and include fees and costs incurred to obtain
long-term financing and are being amortized over the terms of the respective
mortgage notes payable. Unamortized deferred financing costs are written
off when mortgage notes payable are retired before the maturity date.
Deferred financing costs of $231,000 were written off during 1995, due
to the early repayment of mortgage notes payable. Such write-off is
presented as a component of the extraordinary loss on early extinguishment
of debt in the accompanying consolidated statement of operations.
<PAGE>
Revenue Recognition
- -------------------
Rental revenue attributable to operating leases is recognized on a straight-
line basis over the initial term of the related leases. Certain tenants are
required to pay additional rent if sales volume exceeds specified amounts.
The Company recognizes this additional rent as revenue when such amounts
become determinable. A substantial portion of the Company's rental income
is derived from various national and regional retail companies.
Tenant Reimbursements
- ---------------------
The Company receives reimbursements from tenants for certain costs as
provided in the lease agreements. These costs consist of real estate taxes,
common area maintenance and other recoverable costs. Tenant reimbursements
are recognized as revenue in the period the costs are incurred.
Management and Leasing Fees
- ---------------------------
Management fees are charged as a percentage of rentals and are recognized
as revenue as they are earned. Leasing fees are charged for newly executed
leases. These fees are recognized as revenues as they are earned.
Development Fees
- ----------------
Development fees are recognized as revenue on a pro rata basis over the
development period.
Gain on Sales of Real Estate Assets
- -----------------------------------
Gain on sales of real estate assets are recognized at the time title to the
asset is transferred to the buyer, subject to the adequacy of the buyer's
initial and continuing investment and the assumption by the buyer of all
future ownership risks of operations of the property.
<PAGE>
Income Taxes
- ------------
The REIT is qualified as a real estate investment trust under Section 856
through 860 of the Code and applicable treasury regulations. In order to
maintain qualification as a real estate investment trust, the REIT is
required to distribute at least 95% of its taxable income to shareholders
and meet certain other asset and income tests as well as other requirements.
As a real estate investment trust, the REIT will generally not be liable
for federal corporate income taxes. Thus, no provision for federal income
taxes has been included in the accompanying consolidated financial
statements. If the REIT fails to qualify as a real estate investment trust
in any taxable year, the REIT will be subject to federal income tax on its
taxable income at regular corporate tax rates. Even if the REIT maintains
its qualification for taxation as a real estate investment trust, the REIT
may be subject to certain state and local taxes on its income and property
and to federal income and excise taxes on its undistributed income. State
income taxes were not significant in 1996, 1995, and 1994.
Derivative Financial Instruments
- --------------------------------
Interest rate swap agreements, which are principally used by the Company in
the management of interest rate exposure, are accounted for on an accrual basis.
Amounts to be paid or received under interest rate swap agreements
are recorded in interest expense in the period in which they accrue.
Concentration of Credit Risk
- ----------------------------
The Company's tenants consist of national, regional and local retailers.
Financial instruments which subject the Company to concentrations of credit
risk consist primarily of tenant receivables. The Company does not obtain
collateral or other security to support financial instruments subject to
credit risk but monitors the credit standing of tenants.
<PAGE>
Earnings Per Common Share
- -------------------------
The computation of earnings per common share is based on net income and the
weighted average number of shares outstanding during 1996, 1995, and 1994,
after giving effect to stock options considered to be common stock
equivalents. The fight to convert CBL's minority interest in the Operating
Partnership into shares of common stock is not dilutive (Note 9).
Stock-Based Compensation
- ------------------------
The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB No. 25). Effective in 1996, the Company adopted the disclosure option
of SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123
requires companies that do not choose to account for stock-based compensation
as prescribed by the statement to disclose the pro forma effects on net
income and earnings per share as if SFAS No. 123 had been adopted.
Additionally, certain other disclosures are required with respect to stock-
based compensation and the assumptions used to determine the pro forma
effects of SFAS No. 123.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
<PAGE>
3. UNCONSOLIDATED AFFILIATES
The Company has investments in three partnerships and joint ventures all of
which are reflected on the equity method of accounting in the accompanying
consolidated financial statements and consist of the following at
December 31, 1996:
<TABLE>
Property Company's
Partnership Name Interest
<S> <C> <C>
Governor's Square Company Governor's Square 47.5%
Madison Square Associates, Ltd. Madison Square 50.0%
Mall Shopping Center Company Plaza Del Sol 50.6%
</TABLE>
Condensed combined financial statement information of the partnerships and
joint ventures are presented as follows (in thousands):
<TABLE>
December 31,
----------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS:
Net investment in real estate assets $62,779 $ 62,346
Other assets 3,132 2,876
________ ________
Total assets 65,911 65,222
======== ========
LIABILITIES:
Mortgage notes payable 88,667 88,302
Other liabilities 1,253 1,149
________ ________
Total liabilities 89,920 89,451
________ ________
OWNERS' DEFICIT:
Company (8,616) (8,795)
Other investors (15,393) (15,434)
________ ________
Total owners' deficit (24,009) (24,229)
________ ________
Total liabilities and owners' deficit $ 65,911 $ 65,222
</TABLE>
======== ========
<PAGE>
<TABLE>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1995 1994
___________ ___________ ___________
<S> <C> <C> <C>
Revenues $21,014 $20,729 $21,019
___________ ___________ ___________
Depreciation expense 2,592 2,583 2,452
Other operating expenses 14,668 15,171 15,546
___________ ___________ ___________
Operating income 3,754 2,975 3,021
Gain on sales of real
estate assets 1 - -
___________ ___________ ___________
Income before extraordinary
item 3,755 2,975 3,021
Extraordinary loss on early
extinguishment of debt (1,727) - -
___________ ___________ ____________
Net income 2,028 2,975 3,021
=========== =========== ============
Company's share of:
Income before extraordinary
item 1,831 1,450 1,469
Extraordinary loss on early
extinguishment of debt (820) - -
___________ ___________ ____________
Net income $1,011 $1,450 $1,469
=========== =========== ============
</TABLE>
During 1996, the mortgage note payable on Governor's Square was refinanced
with lower fixed rate debt. A prepayment penalty of approximately
$1,727,000 was incurred in connection with the refinancing. The Company's
share of this prepayment penalty has been reflected as extraordinary loss
on early extinguishment of debt in the accompanying consolidated statement
of operations.
In general, contributions and distributions of capital or cash flows and
allocations of income and expense are made on a pro rata basis in proportion
to the equity interest held by each general or limited partner.
<PAGE>
4. MORTGAGE AND OTHER NOTES PAYABLE
Mortgage and other notes payable consist of the following at
December 31, 1996 and 1995 (in thousands):
<TABLE>
1996 1995
<S> <C> <C>
Permanent loans $473,305 $359,355
Construction loans 26,395 18,299
Lines of credit 90,595 15,100
________ ________
$590,295 $392,754
======== ========
</TABLE>
Permanent Loans
- ---------------
Permanent loans consist of loans secured by properties held by the Company
at December 31, 1996 with a carrying amount of $638,942,000. At
December 31, 1996, permanent loans totaling $343,802,000 bear interest at
fixed rates ranging from 7.31 % to 10.625%. Permanent loans totaling
$129,503,000 bear interest at variable interest rates indexed to the prime
lending rate or LIBOR rate (5.875% to 8.500% at December 31, 1996).
Permanent loans mature at various dates from 1997 through 2014.
At December 31, 1995, permanent loans totaling $262,055,000 bear
interest at fixed rates ranging from 7.250% to 10.625%. Permanent loans
totaling $97,300,000 bear interest at variable interest rates indexed to
the prime lending rate or LIBOR rate (7.42% to 7.94% at December 31, 1995).
Construction Loans
- ------------------
At December 31, 1996, the Company had construction loans on four properties
trader construction. The total commitment under the construction loans is
$133,775,000, of which $26,395,000 is outstanding at December 31, 1996.
The construction loans mature in 1998 and bear interest at variable interest
rates indexed to the prime lending rate or LIBOR rate (7. 10% to 7.25% at
December 31 at 1996).
<PAGE>
Lines of Credit
- ---------------
The Company maintains line of credit agreements with banks for construction
and working capital purposes. At December 31, 1996, the Company has
$137,000,000 available under its line of credit agreements of which
$90,595,000 is outstanding. The lines expire at various dates through
1999 and bear interest at variable rates indexed to the prime lending rate
or LIBOR rate (6.700% to 7.180% at December 31, 1996). At December 31,
1996, outstanding letters of credit issued under the line of credit
agreements, not reflected in the accompanying consolidated balance sheets,
total approximately $5,088,000. The line of credit agreements contain among
other restrictions certain restrictive covenants including the maintenance
of certain coverage ratios, minimum net worth and limitations on
distributions.
Debt Maturities
- ---------------
As of December 31, 1996, the scheduled principal payments on all mortgage
and other notes payable are as follows (in thousands):
<TABLE>
<S> <C>
1997 $137,158
1998 111,840
1999 93,796
2000 15,719
2001 10,602
Thereafter 221,180
___________
$590,295
===========
5. MORTGAGE NOTES RECEIVABLE
Substantially all mortgage notes receivable are collateralized by wrap-
around mortgages which are first mortgages on the underlying real estate
and related improvements. Interest rates on these notes range from 9.25%
to 11.0% at December 31, 1996.
<PAGE>
6. MINIMUM RENTS
The Company leases space in its shopping center properties to tenants. The
leases are usually for five to twenty year periods and generally provide for
renewals and annual rentals which are subject to upward adjustments based on
tenant sales volume. Future minimum rents are scheduled to be received
under noncancellable tenant leases at December 31, 1996, as follows (in
thousands):
1997 $113,762
1998 104,028
1999 97,269
2000 89,178
2001 82,609
Thereafter 458,955
No single tenant collectively accounts for more than 10% of the Company's
total revenue.
7. DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to
manage well defined interest rate risks.
Under interest rate swap agreements, the Company agrees with other
parties to exchange, at specified intervals, the difference between fixed-
rate and variable-rate interest amounts calculated by reference to an
agreed-upon notional amount. At December 31, 1996 and 1995, the Company
had two interest rate swap agreements outstanding with financial
institutions, each expiring in 1998. One interest rate swap agreement
fixes the LIBOR component on $50 million of the Company's LIBOR based
variable rate debt at 5.52%. The Company will receive interest payments
from the financial institution for the amount LIBOR exceeds 5.52% for each
monthly settlement period. The second interest rate swap agreement has a
notional amount of $5.5 million. On this agreement, the Company will
receive interest payments at a rate equal to LIBOR plus 140 basis points
(7.18% at December 31, 1996) and will pay interest at a fixed rate of 8.5%.
<PAGE>
The Company is exposed to credit losses in the event of nonperformance
by the counterparties to its interest rate swap agreements and nonderivate
financial assets but has no off-balance sheet credit risk of accounting
loss. The Company anticipates, however, that counterparties will be able
to fully satisfy their obligations under the contracts. The Company does
not obtain collateral or other security to support financial instruments
subject to credit risk but monitors the credit standing of counterparties.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, receivables, accounts
payable and accrued liabilities are reasonable estimates of their fair
values because of the short maturity of these financial instruments.
Based on the interest rates for similar financial instruments, the
carrying value of mortgage notes receivable is a reasonable estimation of
fair value. The carrying value of mortgage and other notes payable, based
on borrowing rates currently available to the Company, is a reasonable
estimation of fair value at December 31, 1996. The fair value of mortgage
and other notes payable was $414,028,000 at December 31, 1995. The fair
value of the interest rate swap agreements, which represent the cash
requirement if the existing agreements had been settled at year end, was
not significant at December 31, 1996 and 1995.
9. CBL RIGHTS
Pursuant to the Operating Partnership agreement, the limited partners were
granted rights (the "CBL Rights") to convert their limited partnership
interests in the Operating Partnership into shares of common stock, subject
to certain Emits, and to sell to the REIT after November 3, 1996 part or
all of their limited partnership interest in the Operating Partnership in
exchange for shares of common stock or their cash equivalent at the REIT's
election, as defined.
<PAGE>
CBL sold properties to the Operating Partnership in exchange for 34,246
and 190,688 limited partnership units in the Operating Partnership during
1996 and 1994, respectively.
At December 31, 1996 and 1995, there remained outstanding CBL Rights to
convert CBL's minority interest in the Operating Partnership to 9,408,006
and 9,373,760 shares of common stock, respectively.
10. 401(K) PROFIT SHARING PLAN
The Management Company maintains a 401(k) profit sharing plan (the "Plan),
which is qualified under Section 401(a) and Section 401(k) of the Code to
cover employees of the Management Company. All employees who have attained
the age of 21 and have completed at least one year of service are eligible
to participate in the Plan. The Plan provides for employer matching
contributions on behalf of each participant equal to 50% of the portion of
such participant's contribution which does not exceed 2.5% of such
participant's compensation for the plan year. Additionally, the Management
Company has the discretion to make additional profit-sharing-type
contributions not related to participant elective contributions. Total
contributions by the Management Company were not significant for 1996, 1995,
and 1994.
11. STOCK INCENTIVE PLAN
The Company maintains the 1993 Stock Incentive Plan (the "Plan") which
permits the issuance of stock options and common stock to selected officers,
employees and directors of the Company, up to 2,800,000 shares of common
stock. The Plan is administered by the Compensation Committee of the
Board of Directors (the "Committee").
<PAGE>
Stock options issued under the Plan allow for the purchase of common
stock at the fair market value of the stock at the date of grant. Stock
options granted to officers and employees under the Plan vest and become
exercisable in installments on each of the first five anniversaries of the
date of grant and expire ten years after the date of grant. Stock options
granted to directors are fully vested upon grant, but may not be sold,
pledged or otherwise transferred in any manner during the director's term
or for one year thereafter.
The Company accounts for its stock-based compensation plans under APB
No. 25, under which no compensation expense has been recognized for stock
options granted as all employee options have been granted with an exercise
price equal to the fair value of the Company's common stock on the date of
grant. The Company adopted SFAS No. 123 for disclosure purposes only in
1996. For SFAS No. 123 purposes, the fair value of each employee option
grant has been estimated as of the date of grant using the Black-Sholes
option pricing model and the following weighted average assumptions for 1996
and 1995, respectively: risk-free interest rate of 6.53% and 6.58%, expected
life of 6.5 and 6.7 years, dividend yield of 7.64% and 7.75%, and expected
volatility of 16% for 1996 and 1995. Using these assumptions, the fair
value of the employee stock options granted in 1996 and 1995 is $860,000
and $965,000, respectively, which would be amortized as compensation expense
over the vesting period of the options. Had compensation cost for the plan
been determined in accordance with SFAS No. 123, utilizing the assumptions
detailed above, the Company's pro forma net income would have been
$34,117,000 and $19,910,000 for the years ended December 31, 1996 and
1995, respectively. Pro forma net income per share would have been $1.63
and $1.12 for the years ended December 31, 1996 and 1995, respectively.
The pro forma effect on net income in this pro forma disclosure is not
representative of the pro forma effect on net income in future years because
it does not take into consideration pro forma compensation expense related
to grants made prior to 1995.
<PAGE>
A summary of the Company's stock option activity for 1996, 1995, and
1994 is as follows.
</TABLE>
<TABLE>
Weighted-
Average
Exercise
Shares Option Price Price
<S> <C> <C> <C> <C>
Outstanding at December 31, 1993 - - - -
Granted 384,000 $19.5625 -$20.3125 $19.57
Exercised - - -
__________
Outstanding at December 31, 1994 384,000 $19-5625 -$20.3125 19.57
Granted 532,000 $19.6250 -$21.6250 19.63
Exercised (5,600) $19.5625 19.56
__________
Outstanding at December 31, 1995 910,400 $19.5625 -$21.6250 19.61
Granted 582,000 $20.5000 -$25.6250 20.52
Exercised (93,800) $19.5625 -$21.6250 19.60
__________
Outstanding at December 31, 1996 1,398,600) $19.5625 -$25.6250 $19.99
==========
</TABLE>
The weighted-average fair value of options granted during 1996 and 1995 was
$1.66 and $1.62, respectively.
Shares subject to options outstanding at December 31, 1996 have a
weighted-average remaining contractual life of 8.6 years. Of the options
outstanding at December 31, 1996, 165,400 are currently exercisable with a
weighted-average exercise price of $19.68 per share.
Under the Plan, common stock may be awarded either alone, in addition
to, or in tandem with other stock awards granted under the Plan. The
Committee has the authority to determine eligible persons to whom common
stock will be awarded, the number of shares to be awarded and the duration
of the vesting period, as defined.
During 1996, the Company issued 26,780 shares of common stock under the
Plan with a weighted-average grant-date fair value of $23.35 per share, of
which 12,391 shares of common stock were immediately vested. The remaining
14,389 shares of common stock vest at various dates from 1997 to 1999.
During 1995, the Company issued 28,606 shares of common stock under the
Plan with a weighted-average grant-date fair value of $20.43 per share, of
which 14,910 shares of common stock were immediately vested. The remaining
13,696 shares of common stock vest at various dates in 1997.
<PAGE>
During 1994, the Company issued 14,631 shares of common stock under the
Plan with a weighted-average grant-date fair value of $18.625 per share, of
which 1,879 shares of common stock were immediately vested and 671 shares
vested in 1996. The remaining 12,081 shares of common stock vest in 1997.
Deferred compensation related to the common stock is reflected in the
accompanying consolidated statements of shareholders' equity based on the
market value of the common stock at the date of grant and is amortized
ratably over the period the awards vest.
12. RELATED PARTY TRANSACTIONS
CBL and certain officers of the Company have a significant minority interest
in the construction company that has been engaged by the Company in the
building of substantially all of the properties.
The Management Company provides management and leasing services to
affiliated partnerships and joint ventures not controlled by the Company.
Revenue recognized for these services amounted to $1,537,000 in 1996,
$1,419,000 in 1995, and $1,292,000 in 1994.
A company that provides security, maintenance, cleaning services and
background music for certain of the real estate properties is majority owned
by officers of the Company. Expenses related to these services were not
significant in 1996, 1995, and 1994.
In 1995 and 1994, officers of the Company had an ownership interest in
a company engaged in the title insurance business that had written title
insurance on certain of the real estate properties. Expenses related to
these services were not significant in 1995 and 1994.
An insurance agency that has served as agent with respect to the placing
of insurance on certain of the real estate properties is majority owned by
certain employees of the Management Company. Total insurance premiums paid
by the Company to the related insurance agency were $2,229,000 in 1996,
$1,750,000 in 1995, and $1,527,000 in 1994.
<PAGE>
13. CONTINGENCIES
The Company is currently involved in certain litigation arising in the
ordinary course of business. In the opinion of management, the pending
litigation will not materially affect the financial statements of the
Company. Additionally, based on environmental studies completed to date on
the real estate properties, management believes exposure related to
environmental cleanup will be immaterial to the consolidated financial
position and consolidated results of operations of the Company.
14. OPERATING PARTNERSHIP
Condensed financial statement information for the Operating Partnership is
presented as follows (in thousands):
<TABLE>
December 31,
_____________________________
1996 1995
<S> <C> <C>
ASSETS:
Net investment in real estate assets $ 987,260 $758,938
Other assets 38,665 55,230
__________ ________
Total assets $1,025,925 $814,168
========== ========
LIABILITIES:
Mortgage and other notes payable $ 590,295 $392,754
Other liabilities 27,027 16,026
__________ ________
Total liabilities 617,322 408,780
Distributions and losses in excess of
investment in unconsolidated affiliates 8,616 8,795
Minority interest 729 466
OWNERS' EQUITY 399,258 396,127
__________ ________
Total liabilities and owners' equity $1,025,925 $814,168
========== ========
</TABLE>
<PAGE>
<TABLE>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1995 1994
<S> <C> <C> <C>
Revenues $146,805 $131,727 $108,094
___________ __________ __________
Depreciation expense 25,439 22,834 19,418
Other operating expenses 85,573 81,294 64,673
___________ __________ __________
Operating income 35,793 27,599 24,003
Gain on sales of real estate
assets 13,614 2,213 2,135
Equity in earnings of
unconsolidated affiliates 1,831 1,450 1,469
Minority investors' interest (527) (386) (312)
___________ __________ __________
Income before extraordinary item 50,711 30,876 27,295
Extraordinary loss on early
extinguishment of debt (820) (326) -
___________ __________ __________
Net income $ 49,891 $ 30,550 $ 27,295
=========== ========== ==========
</TABLE>
15. RECLASSIFICATIONS
Certain reclassifications have been made to prior years' financial
information to conform with the 1996 presentation.
<PAGE>
16. QUARTERLY INFORMATION (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
Income Earnings
From Net Per Common
1996 Revenues Operations Income Share (1)
<S> <C> <C> <C> <C>
Quarter ended:
March 31 $ 35,380 $ 8,621 $ 6,737 $ .32
June 30 35,969 8,614 10,897 .52
September 30 35,491 8,935 6,779 .32
December 31 39,965 9,623 10,010 .47
-------- ------- ------- -----
Total $146,805 $35,793 $34,423 $1.65
======== ======= ======= =====
Income Earnings
From Net Per Common
1995 Revenues Operations Income Share (1)
Quarter ended:
March 31 $ 30,718 $ 6,472 $ 4,500 $ .27
June 30 31,502 6,141 4,965 .30
September 30 33,128 6,485 4,536 .28
December 31 36,379 8,501 6,022 .29
-------- ------- ------- -----
Total $131,727 $27,599 $20,023 $1.12
======== ======= ======= =====
</TABLE>
(1) The sum of quarterly earnings per share amounts may differ from annual
earnings per share.
<PAGE>
To the Board of Directors of CBL & Associates Properties, Inc.:
We have audited the accompanying consolidated balance sheets of CBL &
ASSOCIATES PROPERTIES, INC. (a Delaware corporation) and subsidiary as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CBL & Associates
Properties, Inc. and subsidiary as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee
February 4, 1997
<PAGE>
S H A R E H O L D E R I N F O R M A T I O N
CORPORATE OFFICES
CBL & Associates Properties, Inc.
One Park Place
6148 Lee Highway
Chattanooga, Tennessee 37421-2931
(423) 855-0001
REGIONAL OFFICES
CBL & Associates Properties, Inc.
Watermill Center
800 South Street, Suite 395
Waltham, Massachusetts 02154-1439
(617) 647-3330
TRANSFER AGENT AND REGISTRAR
The First National Bank of Boston
c/o Boston EquiServe
Post Office Box 644
Boston, Massachusetts 02102-0644
(617) 575-3400
DIVIDEND REINVESTMENT PLAN
Shareholders may automatically reinvest their dividends in
additional Common Stock of the Company through the Dividend
Reinvestment Plan which also provides for purchase by voluntary
cash contributions. For additional information, please contact
Bank of Boston or John R. Martin, Jr. at CBL & Associates
Properties, Inc.
ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of shareholders will be held at 11:00 a.m.
(EDT) at the Chattanooga Marriott at the Convention Center,
2 Carter Plaza, Chattanooga, Tennessee, on Thursday, May 1, 1997.
INDEPENDENT AUDITORS
Arthur Andersen LLP
Chattanooga, Tennessee
<PAGE>
COUNSEL
Shumacker & Thompson, P.C.
Chattanooga, Tennessee
Willkie Farr & Gallagher
New York, New York
STOCK EXCHANGE LISTING
New York Stock Exchange
Symbol: CBL
FORM 10-K
Copies of the CBL & Associates Properties, Inc. Annual Report
and Form 10-K are available, without charge, upon written request
to John R. Martin, Jr., Vice President Corporate Relations and
Marketing, CBL & Associates Properties, Inc., One Park Place,
6148 Lee Highway, Chattanooga, Tennessee 37421-2931.
QUARTERLY STOCK PRICE AND DIVIDEND INFORMATION
The following table presents the dividends declared and the high
and low closing sale price of the common stock as listed on the
New York Stock Exchange for each quarter of 1995 and 1996.
<TABLE>
Market Quotations
--------------------------------------
High Low Dividends
<S> <C> <C> <C>
1996 QUARTER ENDED
March 31 $22.000 $20.375 $0.4200
June 30 $22.875 $19.750 $0.4200
September 30 $23.500 $21.500 $0.4200
December 31 $25.875 $22.750 $0.4200
1995 QUARTER ENDED
March 31 $21.125 $18.875 $0.3975
June 30 $20.250 $19.125 $0.3975
September 30 $20.000 $19.875 $0.3975
December 31 $20.000 $20.125 $0.3975
</TABLE>
Member of National Association
of Real Estate Investment Trusts, Inc.
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
CHARLES B. LEBOVITZ(3)
Chairman of the Board of Directors,
President and Chief Executive Officer
CLAUDE M. BALLARD(1)(2)
Director, Limited Partner,
Goldman Sachs & Co.
LEO FIELDS(1)(2)
Director, President, Weisberg & Fields, Inc.
Retired Vice Chairman,
Zale Corporation
JOHN N. FOY(3)
Director, Executive Vice President-Finance
Chief Financial Officer and Secretary
BEN S. LANDRESS(4)
Executive Vice President-Management
STEPHEN D. LEBOVITZ
Director, Executive Vice President-
Development and Treasurer
WILLIAM J. POORVU(1)(2)
Director, Adjunct Professor
Harvard Business School
WINSTON W. WALKER(2)(3)
Director, President, Walker & Associates
Retired President & CEO
Provident Life & Accident
Insurance Company
JAY WISTON(4)
Executive Vice President-Leasing
<PAGE>
SENIOR MANAGEMENT:
RONALD L. FULLAM
Senior Vice President-Development
RONALD S. GIMPLE
Senior Vice President and
General Counsel
MICHAEL I. LEBOVITZ
Senior Vice President-Mall Projects
ERIC P. SNYDER
Senior Vice President and Director
of Corporate Leasing
AUGUSTUS N. STEPHAS
Senior Vice President-
Accounting and Controller
KENNY F. BURNETTE
Vice President-
Redevelopment/Expansion
JIM DUNN
Vice President and Director
of Leasing-Community Centers
<PAGE>
MARK D. MANCUSO
Vice President-Development
JOHN R. MARTIN, JR.
Vice President-Corporate
Relations and Marketing
VERNON E. PIRTLE
Vice President and Director
of Operations-Community Centers
JERRY L. SINK
Vice President-Mall Management
R. STEPHEN TINGLE
Vice President-Development
CHARLES W.A. WILLETT, JR.
Vice President-Real Estate Finance
EXHIBIT 21
SUBSIDIARIES OF THE REIT
STATE OF INCORPORATION OF FORMATION
Albemarle Partners Limited Partnership North Carolina
Arbor Place GP, Inc. Georgia
Arbor Place Limited Partnership Georgia
BJ/Portland Limited Partnership Maine
Bonita Lakes Mall Limited Partnership Mississippi
Brownwood Associates, L.P. Texas
Cadillac Associates Limited Partnership Tennessee
Capital Crossing Limited Partnership North Carolina
Cary Limited Partnership North Carolina
CBL & Associates Limited Partnership Delaware
CBL & Associates Management, Inc. Delaware
CBL/34th Street St. Petersburg Limited
Partnership Florida
CBL/Bartow Limited Partnership Florida
CBL/Brushy Creek Limited Partnership Florida
CBL/Buena Vista Limited Partnership Georgia
CBL/Cedar Bluff Crossing Limited Partnership Tennessee
CBL/Foothills Plaza, L.P. Tennessee
CBL/GP, Inc. Wyoming
CBL/GP I, Inc. Tennessee
CBL/GP II, Inc. Wyoming
CBL/GP III, Inc. Mississippi
CBL/GP IV, Inc. Connecticut
CBL/GP V, Inc. Tennessee
CBL/GP VI, Inc. Tennessee
CBL/GP Cary, Inc. North Carolina
CBL/GP Langley, Inc. Virginia
CBL/Karns Corner Limited Partnership Tennessee
CBL/Low Limited Partnership Wyoming
CBL Morristown, LTD. Tennessee
CBL/Nashua Limited Partnership New Hampshire
CBL/North Haven, Inc. Connecticut
CBL/Perimeter Place Limited Partnership Tennessee
CBL/Plant City Limited Partnership Florida
CBL/Plantation Plaza, L.P. Virginia
CBL/Rawlinson Place Limited Partnership Tennessee
CBL/Springs Crossing Limited Partnership Tennessee
CBL/Suburban, Inc. Tennessee
CBL/Tampa Keystone Limited Partnership Florida
CBL Terrace Limited Partnership Tennessee
CBL/Uvalde, Ltd. Texas
Chester Square Limited Partnership Virginia
College Station Partners, Ltd. Texas
CoolSprings Crossing Limited Partnership Tennessee
Cortlandt Town Center, Inc. New York
Cortlandt Town Center Limited Partnership New York
Cosby Station Limited Partnership Georgia
Crossville Associates Limited Partnership Tennessee
Development Options, Inc. Wyoming
East Ridge Partners, L.P. Tennessee
East Towne Crossing Limited Partnership Tennessee
Elkin Partners, Ltd. Tennessee
Fifty-Eight Partners, L.P. Tennessee
Foothills Mall, Inc. Tennessee
Frontier Mall Associates Limited Partnership Wyoming
Georgia Square Associates, Ltd. Georgia
Georgia Square Partnership Georgia
Governor's Square Company Ohio
Green Cove Mall Limited Partnership Alabama
Greenville Plaza GP, Inc. North Carolina
Greenville Plaza Limited Partnership North Carolina
Henderson Square Limited Partnership North Carolina
High Point Development Limited Partnership North Carolina
High Point Development Limited Partnership II North Carolina
Hudson Plaza Limited Partnership New York
Joplin-Low Limited Partnership Missouri
Kiln Creek Limited Partnership Virginia
Kingston Overlook Limited Partnership Tennessee
LaGrange Commons Limited Partnership New York
Lakeshore Gainesville Limited Partnership Georgia
Lakeshore/Sebring Limited Partnership Florida
Langley Square Limited Partnership Virginia
Leaseco, Inc. New York
Lebcon Associates Tennessee
Lebcon I, Ltd. Tennessee
Lee Partners Tennessee
Longview Associates Limited Partnership North Carolina
Lunenburg Crossing Limited Partnership Massachusetts
Madison Plaza Associates, Ltd. Alabama
Madison Square Associates, Ltd. Alabama
Mall Shopping Center Company, L.P. Texas
Maryville Department Stores, Ltd. Tennessee
Maryville Partners, L.P. Tennessee
Montgomery Partners, L.P. Tennessee
Massard Crossing Limited Partnership Arkansas
Naugatuck Limited Partnership Connecticut
NewLease Corp. Tennessee
North Haven Crossing Limited Partnership Connecticut
Oak Ridge Associates Limited Partnership Tennessee
Park Village Limited Partnership Florida
Parham Limited Partnership Virginia
Portland/HQ Limited Partnership Maine
Post Oak Mall Associates Limited Partnership Texas
RC Strawbridge Limited Partnership Virginia
Salem Crossing Limited Partnership Virginia
Scottsboro Associates, Ltd. Alabama
Seacoast Shopping Center Limited Partnership New Hampshire
Shared Appreciation I, LTD. Tennessee
Shopping Center Finance Corp. Wyoming
Springhurst Limited Partnership Kentucky
St. Clair Square GP, Inc. Illinois
St. Clair Square Limited Partnership Illinois
Stone East Partners, Ltd. Tennessee
Suburban Plaza Limited Partnership Tennessee
Sutton Plaza GP, Inc. New Jersey
Sutton Plaza Limited Partnership New Jersey
The Galleria Associates, L.P. Tennessee
Turtle Creek Limited Partnership Mississippi
Twin Peaks Mall Associates, Ltd. Colorado
Valley Crossing Associates Limited Partnership North Carolina
Vicksburg Mall Associates, Ltd. Mississippi
Walnut Square Associates Limited Partnership Wyoming
West Broad Street Limited Partnership Virginia
Westgate Mall Limited Partnership South Carolina
<PAGE>
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in and incorporated by reference in
this Form 10-K, into the Company's previously filed Registration
Statement on Form S-8 (File No. 33-73376).
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee
March 26, 1997
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Charles B.
Lebovitz, John N. Foy and Stephen D. Lebovitz and each of them,
with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report of CBL & Associates
Properties, Inc. on Form 10-K for the fiscal year ended December
31, 1995, including one or more amendments to such Form 10-K,
which amendments may make such changes as such person deems
appropriate, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary
fully to all intents and purposes as he might or could do in
person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his
substitutes or substitute, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this
Power-of-Attorney on the date set opposite his respective name.
Signature Title Date
____________________ Chairman of the Board, March 28, 1997
Charles B. Lebovitz Board, President
and Chief Executive
Officer(Principal
Executive Officer)
____________________
John N. Foy Director, Executive March 28, 1997
Vice President, Chief
Financial Officer
and Secretary
(Principal Financial
Officer and Principal
Accounting Officer)
____________________
Stephen D. Lebovitz Director, Senior March 28, 1997
Vice President and
Treasurer
____________________
Claude M. Ballard Director March 28, 1997
____________________
Leo Fields Director March 28, 1997
____________________
William J. Poorvu Director March 28, 1997
____________________
Winston W. Walker Director March 28, 1997
____________________
*By:
Charles B. Lebovitz Attorney-in-Fact March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the
Consoldiated Balance Sheet at December 31, 1996 and the Consolidated
Statement of Operations for the year ended December 31, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,298
<SECURITIES> 0
<RECEIVABLES> 12,504
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 114,536
<TOTAL-ASSETS> 1,025,925
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 210
<OTHER-SE> 272,594
<TOTAL-LIABILITY-AND-EQUITY> 1,025,925
<SALES> 0
<TOTAL-REVENUES> 146,805
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 79,328
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,495
<INCOME-PRETAX> 35,243
<INCOME-TAX> 0
<INCOME-CONTINUING> 35,243
<DISCONTINUED> 0
<EXTRAORDINARY> (820)
<CHANGES> 0
<NET-INCOME> 34,423
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 1.65
</TABLE>
