<PAGE> 1
Filed pursuant to Rule 424(b)(1) and (2)
Registration No. 333-11431
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 20, 1996)
8,000,000 SHARES
SIMON DEBARTOLO GROUP, INC.
8 3/4% SERIES B CUMULATIVE REDEEMABLE PREFERRED STOCK
(LIQUIDATION PREFERENCE $25.00 PER SHARE)
------------------------
Distributions on shares of the 8 3/4% Series B Cumulative Redeemable
Preferred Stock, $.0001 par value per share (the "Series B Preferred Shares"),
of Simon DeBartolo Group, Inc. (formerly known as Simon Property Group, Inc.), a
Maryland corporation (the "Company"), will be cumulative from the date of
original issue and will be payable quarterly in arrears on or about the last day
of March, June, September and December of each year, commencing on December 31,
1996, at the rate of 8 3/4% of the initial liquidation preference per annum. See
"Description of Series B Preferred Shares -- Distributions."
The Series B Preferred Shares are not redeemable prior to September 29,
2006. On and after September 29, 2006, the Series B Preferred Shares may be
redeemed at the option of the Company in whole or in part, at a redemption price
of $25.00 per share, plus accrued and unpaid distributions, if any, thereon. The
redemption price of the Series B Preferred Shares (other than any portion
thereof consisting of accrued and unpaid distributions) may only be paid from
the sale proceeds of other capital shares of the Company, which may include
other classes or series of preferred shares, and from no other source. The
Series B Preferred Shares have no stated maturity and will not be subject to any
sinking fund or mandatory redemption provisions and will not be convertible into
any other securities of the Company. In order to maintain its qualification as a
real estate investment trust for federal income tax purposes, the Company's
Amended and Restated Articles of Incorporation provide that no person or persons
acting as a group may beneficially own more than 6.0% of the value of the
outstanding capital stock of the Company, including the Series B Preferred
Shares, with limited exceptions. See "Description of Series B Preferred
Shares -- Restrictions on Ownership."
Approval has been obtained from the New York Stock Exchange ("NYSE") to list
the Series B Preferred Shares on the NYSE under the symbol "SPGPrB," subject to
official notice of issuance. Trading of the Series B Preferred Shares on the
NYSE is expected to commence within a 30-day period after the date of initial
delivery of the Series B Preferred Shares. While the Representatives (as defined
below) have advised the Company that they intend to make a market in the Series
B Preferred Shares prior to commencement of trading on the NYSE, they are under
no obligation to do so and no assurance can be given that a market for the
Series B Preferred Shares will exist prior to commencement of trading. See
"Underwriting."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Per share............................................. $25.00 $.7875 $24.2125
- ---------------------------------------------------------------------------------------------------------------
Total(4).............................................. $200,000,000 $6,300,000 $193,700,000
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued distributions, if any, from the date of original issue.
(2) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $700,000.
(4) The Company has granted to the several Underwriters an option for 30 days to
purchase up to an additional 1,200,000 Series B Preferred Shares solely to
cover over-allotments, if any. If all of such shares are purchased, the
total Price to Public, Underwriting Discount and Proceeds to Company will be
$230,000,000, $7,245,000 and $222,755,000, respectively. See "Underwriting."
------------------------
The Series B Preferred Shares are offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, subject to approval of certain legal matters by counsel for the
Underwriters and to certain other conditions. The Underwriters reserve the right
to withdraw, cancel or modify such offer and to reject orders in whole or in
part. It is expected that delivery of the certificates evidencing the Series B
Preferred Shares will be made in New York, New York on or about September 27,
1996.
------------------------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
------------------------
The date of this Prospectus Supplement is September 24, 1996.
LOGO
<PAGE> 2
A graphical presentation of the location of the Company's regional malls on a
map of the United States and a graphical presentation of the location of the
Company's community centers on a map of the United States. On each map, owned,
managed and in development malls or centers, as the case may be, are each
represented by a different symbol
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY EFFECT TRANSACTIONS WHICH
STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES B PREFERRED SHARES AT
LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
S-2
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
The following Summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information appearing elsewhere in this
Prospectus Supplement and the accompanying Prospectus or incorporated herein and
therein by reference. Unless indicated otherwise, the information contained in
this Prospectus Supplement is presented as of June 30, 1996 and assumes that the
Underwriters' over-allotment option is not exercised. All references to the
"Company" in this Prospectus Supplement and the accompanying Prospectus include
the Company, those entities owned or controlled by the Company and predecessors
of the Company, unless the context indicates otherwise. Except as otherwise
noted, statistical property information contained in this Prospectus Supplement
and in the accompanying Prospectus is based upon the business and properties of
the Partnerships (as defined below) on a combined basis, adjusted to give effect
to the Merger and related transactions thereto (as defined below) as though it
had occurred prior to the date or period of time to which such information
relates. Historical financial information, unless expressly designated as pro
forma financial information, has not been adjusted to give effect to the Merger
and related transactions thereto.
THE COMPANY
The Company, a self-administered and self-managed real estate investment
trust ("REIT"), through its subsidiary partnerships, Simon-DeBartolo Group, L.P.
(the "Operating Partnership") and Simon Property Group, L.P. ("SPG, LP" and,
together with the Operating Partnership, the "Partnerships"), is engaged
primarily in the ownership, development, management, leasing, acquisition and
expansion of income producing properties, primarily regional malls and community
shopping centers. On August 9, 1996, the Company acquired the national shopping
center business of DeBartolo Realty Corporation ("DRC"), The Edward J. DeBartolo
Corporation ("EJDC") and their affiliates as the result of the merger (the
"Merger") of DRC with a subsidiary of the Company. As a result of the Merger,
the Company expanded its portfolio by 61 properties and combined the management
resources of the merged entities to create one of the most experienced
management teams in the shopping center business. Management believes that as a
result of the Merger, the Company's portfolio, as measured in gross leasable
area ("GLA"), is the largest and most geographically diverse portfolio of any
publicly traded REIT in North America. Management also believes that the Company
is the largest, as measured by market capitalization, of any publicly traded
real estate company in North America. Management further believes that the
Company's relationships with tenants, access to capital markets and
opportunities for economies of scale and operating efficiencies will be enhanced
as a result of the Company's substantially increased portfolio size and market
capitalization. In conjunction with the Merger, DRC was renamed SD Property
Group, Inc. (the "Subsidiary") and is the managing general partner of the
Operating Partnership. The Company is a general partner of the Operating
Partnership and sole general partner of SPG, LP. As of September 17, 1996, 61.4%
of the equity interest in the Operating Partnership was owned by the Company and
38.6% was owned by certain limited partners of the Operating Partnership,
including the Simons (as defined below), certain members of the DeBartolo
family, including certain affiliates and trusts and estates established for
their benefit (collectively, the "DeBartolos"), and other limited partners.
In addition, SPG, LP holds substantially all of the economic interest in,
and Melvin Simon, Herbert Simon, David Simon and certain of their affiliates,
including certain other Simon family members and estates, trusts and other
entities established for their benefit (collectively, the "Simons") or their
affiliates hold the voting stock of, M.S. Management Associates, Inc. (the "SPG
Management Company"), which manages regional malls and community shopping
centers not wholly owned by the Partnerships and certain other properties and
also engages in certain property development activities. The Operating
Partnership holds substantially all of the economic interest in, and the SPG
Management Company holds substantially all of the voting stock of, DeBartolo
Properties Management, Inc. (the "DRC Management Company"), which provides
architectural, design, construction and other services to substantially all of
the Portfolio Properties (as defined below) owned by the Operating Partnership,
as well as certain other regional malls and community shopping centers owned by
third parties.
S-3
<PAGE> 4
The Company owns or holds interests in a diversified portfolio of 183
income producing properties (the "Portfolio Properties"), including 111
super-regional and regional malls, 66 community shopping centers, two specialty
retail centers and four mixed-use properties located in 32 states. The Portfolio
Properties contain an aggregate of approximately 110 million square feet of GLA,
of which approximately 65 million square feet is GLA owned by the Company
("Owned GLA"). More than 3,600 different retailers occupy approximately 12,000
stores in the Portfolio Properties. Total estimated retail sales at the
Portfolio Properties approached $16 billion in fiscal 1995. In addition, the
Company has interests in eight properties under construction in the United
States aggregating an additional seven million square feet of GLA, and owns land
held for future development. The Operating Partnership, together with the SPG
Management Company and its affiliated management companies, manage over 127
million square feet of GLA of retail and mixed-use properties.
SUMMARY OF PORTFOLIO PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)
The following table summarizes on a combined basis, as of June 30, 1996,
certain information with respect to the Portfolio Properties, in total and by
type of shopping center and retailer:
<TABLE>
<CAPTION>
TOTAL
OWNED % OF OWNED
GLA GLA % OF OWNED GLA WHICH IS
TYPE OF PROPERTY(1) (SQ. FT.) (SQ. FT.) GLA(2) LEASED(3)
- ----------------------------------------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Regional Malls(4)
Mall Store............................. 32,255,514 32,255,514 49.4 83.2
Freestanding........................... 1,251,647 599,826 0.9 93.6
----------- ---------- ----- -----
Subtotal............................ 33,507,161 32,855,340 50.3 83.4
----------- ---------- ----- -----
Anchor................................. 59,280,749 20,025,108 30.6 96.9
----------- ---------- ----- -----
Total.......................... 92,787,910 52,880,448 80.9 88.5
Community Shopping Centers
Mall Store............................. 3,882,220 3,801,130 5.9 90.3
Freestanding........................... 768,648 284,809 0.4 100.0
Anchor................................. 10,462,344 6,420,675 9.8 92.3
----------- ---------- ----- -----
Total.......................... 15,113,212 10,506,614 16.1 91.8
Office Portion of Mixed-Use Properties... 1,943,676 1,943,676 3.0 93.4
----------- ---------- ----- -----
Total.......................... 109,844,798 65,330,738 100.0 89.2
=========== ========== ===== =====
</TABLE>
- ---------------
(1) Here and elsewhere in this Prospectus Supplement, all of the GLA, Owned GLA,
and base rent is reported for each Portfolio Property, even if the Company
has less than a 100% ownership interest in the Portfolio Property.
(2) Indicates the percentage of total Owned GLA represented by each category of
space.
(3) Includes, here and elsewhere in this Prospectus Supplement, space for which,
a lease has been executed, whether or not the space was then occupied. The
table under "Additional Information" in this Prospectus Supplement indicates
vacant anchor space as of June 30, 1996.
(4) Includes two specialty retail centers and retail space at four mixed-use
properties.
S-4
<PAGE> 5
THE OFFERING
Securities Offered......... 8,000,000 Series B Preferred Shares (9,200,000
Series B Preferred Shares if the Underwriters'
over-allotment option is exercised in full).
Approval has been obtained from the NYSE to list
the Series B Preferred Shares on the NYSE, subject
to official notice of issuance, with trading
expected to commence within a 30-day period after
the initial delivery of the Series B Preferred
Shares.
Use of Proceeds............ The net proceeds to the Company from the Offering,
approximately $193 million (approximately $222
million if the Underwriters' overallotment option
is exercised in full) will be used to repay $142.8
million of outstanding mortgage indebtedness and
$50.2 million under its current revolving credit
facilities.
Ranking.................... With respect to the payment of distributions and
amounts upon liquidation, the Series B Preferred
Shares offered hereby will rank pari passu with any
other preferred shares which are not by their terms
subordinated to the Series B Preferred Shares,
including the Company's Series A preferred stock,
par value $.0001 per share (the "Series A Preferred
Shares") and will rank senior to the Common Stock
and any other equity securities of the Company
which by their terms rank junior to the Series B
Preferred Shares. See "Description of Series B
Preferred Shares."
Distributions.............. Distributions on the Series B Preferred Shares
offered hereby are cumulative from the date of
issue and are payable quarterly on or about the
last day of March, June, September and December of
each year, commencing on December 31, 1996, at the
rate of 8 3/4% of the liquidation preference per
annum. Distributions on the Series B Preferred
Shares will accrue whether or not the Company has
earnings, whether or not there are funds legally
available for the payment of such distributions and
whether or not such distributions are declared.
Liquidation Rights......... The Series B Preferred Shares will have a
liquidation preference of $25.00 per Series B
Preferred Share, plus an amount equal to accrued
and unpaid distributions. See "Description of
Series B Preferred Shares -- Liquidation Rights."
Redemption................. The Series B Preferred Shares are not redeemable
prior to September 29, 2006. On and after September
29, 2006, the Series B Preferred Shares will be
redeemable for cash at the option of the Company,
in whole or in part, at $25.00 per share, plus
distributions accrued and unpaid to the redemption
date. The redemption price (other than the portion
thereof consisting to accrued and unpaid
distributions) is payable solely out of the sale
proceeds of other capital shares of the Company
which may include other series of preferred shares,
and from no other source. See "Description of
Series B Preferred Shares -- Redemption."
Voting Rights.............. If distributions on the Series B Preferred Shares
are in arrears for six or more quarterly periods,
whether or not such quarterly periods are
consecutive, holders of Series B Preferred Shares
(voting separately as a class with all other series
of preferred shares upon which like voting rights
have been conferred and are exercisable) will be
entitled to vote for the election of two additional
Directors to serve on the Board of Directors of the
Company until all distribution arrearages have been
paid. See "Description of Series B Preferred
Shares -- Voting Rights."
Conversion................. The Series B Preferred Shares are not convertible
or exchangeable for any other property or
securities of the Company.
S-5
<PAGE> 6
THE COMPANY
The Company, a self-administered and self-managed REIT, through the
Partnerships, is engaged primarily in the ownership, development, management,
leasing, acquisition and expansion of income producing properties, primarily
regional malls and community shopping centers. On August 9, 1996, the Company
acquired the national shopping center business of DRC, EJDC and their affiliates
as the result of the merger of DRC with a subsidiary of the Company. As a result
of the Merger, the Company expanded its portfolio by 61 properties and combined
the management resources of the merged entities to create one of the most
experienced management teams in the shopping center business. Management
believes that as a result of the Merger, the Company's portfolio, as measured in
GLA, is the largest and most geographically diverse portfolio of any publicly
traded REIT in North America. Management also believes that the Company is the
largest, as measured by market capitalization, of any publicly traded real
estate company in North America. Management further believes that the Company's
relationships with tenants, access to capital markets and opportunities for
economies of scale and operating efficiencies will be enhanced as a result of
the Company's substantially increased portfolio size and market capitalization.
In conjunction with the Merger, DRC was renamed SD Property Group, Inc. and is
the managing general partner of the Operating Partnership. The Company is a
general partner of the Operating Partnership and sole general partner of SPG,
LP. As of September 17, 1996, 61.4% of the equity interest in the Operating
Partnership was owned by the Company and 38.6% was owned by certain limited
partners of the Operating Partnership, including the Simons, the DeBartolos and
other limited partners.
In addition, SPG, LP holds substantially all of the economic interest in,
and the Simons or their affiliates hold the voting stock of, the SPG Management
Company, which manages regional malls and community shopping centers not wholly
owned by the Partnerships and certain other properties and also engages in
certain property development activities. The Operating Partnership holds
substantially all of the economic interest in, and the SPG Management Company
holds substantially all of the voting stock of, the DRC Management Company,
which provides architectural, design, construction and other services to
substantially all of the Portfolio Properties owned by the Operating
Partnership, as well as certain other regional malls and community shopping
centers owned by third parties.
S-6
<PAGE> 7
The following chart depicts the organizational and ownership structure of
the Company and certain affiliates:
STRUCTURE OF THE SIMON DEBARTOLO GROUP, INC.
The information provided in these notes gives effect to the Merger and
related transactions thereto as if they occurred on March 31, 1996.
(1) The Simons will own less than 1% of the outstanding shares of common
stock of the Company and all of the Class B common stock of the
Company.
(2) The DeBartolos will own less than 1% of the outstanding common stock of
the Company and all of the Class C common stock of the Company.
(3) The Company will own over 99.9% of the common stock of SD Property
Group, Inc. and, both directly and indirectly through its ownership of
the SD Property Group, Inc., will own a 61.4% interest in the Operating
Partnership and, as general partner, will own 1% of the units of
limited partnership in SPG, LP (the "SPG Units") and a 49.5% interest
in the capital of SPG, LP.
(4) The former limited partners of the Partnerships as a group (including
the Simons and the DeBartolos) will own a 38.6% beneficial interest in
the Operating Partnership and the SPG, LP, of which the Simons will own
21.7% and the DeBartolos will own 14.2%.
(5) The Operating Partnership will own a 49.5% special limited partnership
interest in, and an additional 49.5% interest in the profits of, SPG,
LP.
(6) Properties owned by the Operating Partnership will be held as they were
held in the pre-Merger structure. Later acquired properties will be
held by, and future operations will be conducted through, the Operating
Partnership. Until transferred to the Operating Partnership (assuming
all necessary consents can be obtained), properties owned by SPG, LP
will continue to be owned by SPG, LP.
S-7
<PAGE> 8
DIVERSIFIED PORTFOLIO
Management believes that the Portfolio Properties are the largest, as
measured in GLA, of any publicly traded REIT, with more regional malls than any
other publicly traded REIT. Management believes that the geographic
diversification of the Portfolio Properties should mitigate the effects of
regional economic conditions and local factors, and that the diversified types
of properties should reduce the impact of economic factors that may affect the
retailers in any particular type of property. In addition, management believes
that the large size of the portfolio should mitigate the effects of any other
factors that may affect a limited group of shopping centers.
The Company owns or holds interests in a diversified portfolio of 183
income producing Portfolio Properties, including 111 super-regional and regional
malls, 66 community shopping centers, two specialty retail centers and owns four
mixed-use properties located in 32 states. The Portfolio Properties contain an
aggregate of approximately 110 million square feet of GLA, of which
approximately 66 million square feet is GLA owned by the Company. In addition,
the Company has interests in eight properties under construction in the United
States, and owns land held for future development. The Operating Partnership,
together with the SPG Management Company and its affiliated management
companies, manage over 127 million square feet of GLA of retail and mixed-use
properties. As of June 30, 1996, no single Portfolio Property accounted for more
than 1.4% of GLA or 3.5% of the Company's pro forma gross revenues for the six
months ended June 30, 1996.
The diversity of property type and market also provides the Company with a
broad spectrum of tenant relationships, ranging from in-line specialty shops to
full service department stores; and from value retailers to high end fashion
merchants. More than 3,600 retailers occupy approximately 12,000 stores in the
Portfolio Properties. Total estimated retail sales at the Portfolio Properties
approached $16 billion in fiscal 1995. Furthermore, no single retailer leases
more than 10.9% of the Owned GLA in the income-producing properties or
represents more than 7.7% of the annualized base rent from these properties.
The Portfolio Properties include properties owned 100% by the Company (the
"Wholly-Owned Properties"), and properties held as joint ventures (the "Joint
Venture Properties"). Of the 183 Portfolio Properties, 139 are Wholly-Owned
Properties, and 44 are Joint Venture Properties. The Operating Partnership
manages the Wholly-Owned Properties and its affiliate, the SPG Management
Company, manages all but two of the Joint Venture Properties.
COMPETITIVE POSITION
The Company believes that it has a competitive advantage in the retail real
estate business as a result of (i) its use of innovative retailing concepts,
(ii) the strength of its management and operational expertise, (iii) its
extensive experience and relationship with retailers and lenders and (iv) the
size and diversity of its portfolio of properties.
The Company has employed many creative retailing concepts in the Portfolio
Properties, such as the power center, which transformed the community shopping
center through its high concentration of anchor stores; the specialty retail
center, with many unique merchandising and entertainment attractions located in
a distinctive marketplace or location; the selective addition to regional malls
of value-oriented tenants; and the combination of traditional retail stores with
entertainment and restaurant facilities.
The Company's senior executives have been recognized leaders in the
shopping center industry over the past three decades. The Company was among the
first owners of shopping centers to integrate the full spectrum of services
needed to manage, develop and acquire shopping centers, including leasing,
development, management, marketing, research, budgeting, accounting, real estate
tax management, collection, technical, architectural, construction, engineering,
tenant coordination, legal and financial services. The depth and tenure of the
Company's management has enabled it to develop a results-driven team that is
encouraged to adopt innovative strategies and solutions to the operation of the
Company's business.
Management believes its experience and relationships with retailers of
almost every type make the Company one of the few shopping center companies
that, on a national scale, can develop, acquire, lease and
S-8
<PAGE> 9
manage virtually every kind of shopping center in both urban and suburban
locations, from the community center to the super-regional mall, and from the
high-fashion center to the value-oriented center. Management believes that such
a wide spectrum of retail formats provides the Company with a competitive
advantage which enables it to respond quickly and effectively to the changing
requirements of the market.
Management also believes that the size and diversity of its portfolio and
operations enable the Company to realize significant economies of scale,
provides operating and leasing leverage, and enable the Company to stay at the
forefront of emerging retail trends.
OPERATING STRATEGY
The Company's primary business objectives are to increase per share cash
generated from operations and the value of the Company's properties and
operations. The Company plans to achieve these objectives through a variety of
methods discussed below, although no assurance can be made that such objectives
will be achieved.
Leasing. The Company pursues an active leasing strategy, which includes
aggressively marketing available space; increasing occupancy; renewing leases at
higher base rents per square foot; retenanting space occupied by underperforming
tenants; and continuing to sign leases that provide for percentage rents and/or
regular or periodic fixed contractual increases in base rents. Management
believes that the Company's extensive relationship with national retail tenants
provides an advantage in leasing space at the Portfolio Properties.
Management. Drawing upon the expertise gained through management of over
127 million square feet of retail and mixed-use properties, the Company seeks to
maximize cash flow through a combination of an active merchandising program to
maintain its shopping centers as inviting shopping destinations, continuation of
its successful efforts to minimize overhead and operating costs, coordinated
marketing and promotional activities and systematic planning and monitoring of
results.
Renovation and Expansion. The Company has a number of renovation or
expansion projects under construction or in the final stages of pre-construction
development, including several existing Portfolio Properties which have
significant expansion opportunities. The contemplated expansions would typically
involve the addition of one or more anchor stores and/or additional mall store
space. At each site where additional anchor space is contemplated, one or more
retailers have expressed interest in occupying an anchor store in the expansion
space. The Company's current and recently completed renovation and expansion
projects are described under "Recent Developments."
Development. The Company believes there will continue to be opportunities
to develop regional malls and power centers in selected growing metropolitan
markets. The Company intends to undertake such development on a selected basis,
and believes that it will have a competitive advantage in doing so as a result
of its extensive development expertise, the breadth and depth of its
relationships with retailers and its access to capital. Since the 1960's, the
Company has been among the most active developers, managers and redevelopers of
shopping centers in the U.S. The Company's current development activities are
described under "Recent Developments."
Acquisitions. The Company intends selectively to acquire individual
properties and portfolios of properties that meet its investment criteria as
opportunities arise. The Company's management believes that consolidation is
occurring within the shopping center industry, creating opportunities for the
Company to acquire portfolios of shopping centers. The Company's management also
believes that its extensive experience in the shopping center business, access
to capital markets, familiarity with real estate markets and advanced management
systems will allow it to evaluate, execute and integrate acquisitions
competitively. Furthermore, management believes that the Company will be able to
manage and operate acquired properties on a cost effective basis as a result of
(i) the scope of the Company's existing portfolio and (ii) the economies of
scale of the regional mall business. Additionally, the Company may be able to
acquire properties on a tax-advantaged basis for the transferors through the
issuance of units of limited partnership in the Operating Partnership ("Units").
The Company may also be able to acquire properties through public or private
debt or
S-9
<PAGE> 10
equity financings or through the issuance of Common Stock to transferors. The
consent of the lenders under certain of the Company's long term debt agreements
may be required in connection with substantial property acquisitions. See
"Recent Developments."
FINANCING STRATEGY
The Company seeks to maintain a well-balanced, conservative and flexible
capital structure by: (i) targeting a ratio of debt to total market
capitalization of approximately 50% or lower; (ii) managing and sequencing the
maturity dates of its debt; (iii) borrowing primarily at fixed rates, and
hedging floating rate indebtedness where appropriate; (iv) decreasing the
proportion of borrowings done on a secured basis and increasing the amount of
unencumbered cash flow and properties; (v) maintaining conservative debt service
and fixed charge coverage ratios; (vi) pursuing liquidity and financial
flexibility by maintaining cash reserves and substantial availability under its
revolving credit facility; and (vii) as the Company's Funds From Operations
("FFO") grows, gradually reducing the payout ratio and retaining more FFO for
capital needs. Management believes that these strategies have enabled and should
continue to enable the Company to access the debt and equity capital markets for
their long-term requirements such as debt refinancings and financing for
development and acquisitions of additional properties and portfolios of
properties. It is the Company's policy that Simon DeBartolo Group, Inc. shall
not incur indebtedness other than short-term trade, employee compensation,
distributions payable or similar indebtedness that will be paid in the ordinary
course of business, and that indebtedness shall instead by incurred by the
Operating Partnership to the extent necessary to fund the business activities
conducted by the Operating Partnership, its subsidiaries and affiliates.
RECENT DEVELOPMENTS
THE MERGER
On August 9, 1996, the Company acquired the national shopping center
business of DRC as a result of the merger of DRC with a subsidiary of the
Company. Pursuant to the Merger, outstanding shares of common stock of DRC, par
value $0.01 per share were converted into the right to receive 0.68 share of
common stock of the Company, and cash for any fractional shares. As a result,
shareholders of DRC received approximately 37.9 million shares of common stock
of the Company pursuant to the Merger. Management believes that as a result of
the Merger, the Company's portfolio, as measured in GLA, is the largest and most
geographically diverse of any publicly traded REIT in North America. Management
also believes that the Company is the largest, as measured by market
capitalization, of any publicly traded real estate company in North America.
ACQUISITIONS, DEVELOPMENT AND EXPANSION
Since December 1994, the Company has continued to acquire, develop, expand
and renovate its portfolio. Such projects have historically been, and the
Company expects that in the future they will continue to be, financed
principally with existing corporate credit facilities, equity financings and
cash flow from operations.
S-10
<PAGE> 11
Completed Acquisitions:
The Company selectively acquires individual properties and portfolios of
properties that meet its investment criteria as opportunities arise. Since
December 1994 the Company and DRC have completed 14 acquisitions resulting in an
addition of approximately 4.5 million square feet of GLA to the Portfolio
Properties from such acquisitions in properties in which the Company or DRC had
previously owned no interests. The table below gives certain information
regarding recently completed acquisitions.
<TABLE>
<CAPTION>
COMPANY'S PERCENT
% INTEREST LEASED(1)
AS OF AS OF
DATE OF % INTEREST JUNE 30, TOTAL GLA JUNE 30,
NAME LOCATION COMPLETION ACQUIRED 1996 (SQ. FT.) 1996
- ------------------ ----------------- ----------------- ---------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Independence Independence, MO December, 1994 100% 100% 1,033,566 77.3%
Center
Orange Park Mall Jacksonville, FL December, 1994 100% 100% 850,963 90.1%
University Mall Pensacola, FL December, 1994 100% 100% 712,013 82.0%
Broadway Square Tyler, TX December, 1994 100% 100% 573,142 93.7%
White Oaks Mall Springfield, IL February, 1995 50% 77% 903,839 94.4%
Miami Miami, FL July, 1995, 23% 60% 972,281 95.7%
International March, 1996
Mall
University Center South Bend, IN July, 1995 10% 60% 150,533 97.8%
University Park South Bend, IN July, 1995 10% 60% 870,002 95.6%
Mall
Crossroads Mall Omaha, NE August, 1995 50% 100% 884,356 91.8%
East Towne Mall Knoxville, TN September, 1995 50% 100% 977,042 79.7%
Smith Haven Mall Lake Grove, NY December, 1995 25% 25% 1,348,232 84.9%
Biltmore Square Asheville, NC January, 1996 33% 67% 495,419 77.3%
Chesapeake Square Chesapeake, VA January, 1996 25% 75% 704,785 79.9%
Ross Park Mall Pittsburgh, PA April, 1996 39% 89%(2) 1,273,446 93.1%
</TABLE>
- ---------------
(1) Represents the percentage of Owned GLA leased.
(2) The Company receives 100% of the economic ownership interest in the property
and has exercised its option to acquire the remaining 11% of the ownership
effective January 1997.
S-11
<PAGE> 12
Completed Developments and New Developments under Construction:
The Company continues to develop regional malls, power centers and
specialty centers in selected growing metropolitan markets. The Company
undertakes such development on a selected basis and believes that it has a
competitive advantage in doing so as a result of its development expertise, the
breadth and depth of its relationships with retailers and its access to capital.
The table below gives certain information regarding recently completed
developments and new developments under construction.
<TABLE>
<CAPTION>
PERCENT
LEASED(1)
AS OF
ACTUAL OR EXPECTED COMPANY'S TOTAL GLA JUNE 30,
DATE OF COMPLETION NAME LOCATION % INTEREST (SQ. FT.) 1996
- ------------------------- --------------------- ----------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C>
Completed Developments:
September, 1995.. Circle Centre Indianapolis, IN 15% 790,476 94.3%
September, 1995.. Seminole Towne Center Sanford, FL 45% 1,137,374 85.2%
October, 1995............ Lakeline Mall North Austin, TX 50% 1,109,324 88.9%
July, 1996............... Cottonwood Mall Albuquerque, NM 100% 1,035,000 87.4%(2)
---------
Total 4,072,174
New Developments Under Construction:
4th Qtr. 1996 Ontario Mills Ontario, CA 25% 1,400,000 N/A
4th Qtr. 1996 Indian River Mall Vero Beach, FL 50% 754,000 N/A
4th Qtr. 1996 Tower Shops at Las Vegas, NV 50% 80,000 N/A
Stratosphere
1st Qtr. 1997 Indian River Commons Vero Beach, FL 50% 265,000 N/A
3rd Qtr. 1997 The Source Long Island, NY 50% 730,000 N/A
4th Qtr. 1997 Arizona Mills Tempe, AZ 25% 1,225,000 N/A
4th Qtr. 1997 Grapevine Mills Grapevine, TX 37% 1,450,000 N/A
---------
Total 5,904,000
</TABLE>
- ---------------
(1) Represents the percentage of Owned GLA leased.
(2) Percent leased as of opening on July 31, 1996.
S-12
<PAGE> 13
Expansions and Renovations
The Company has recently completed several expansions or renovations of
Portfolio Properties and has a number of projects under construction or in the
final stages of pre-construction development, including several existing
Portfolio Properties which have significant expansion opportunities. Such
projects typically involve the addition of one of more anchor stores and/or
additional mall space. The table below gives certain information regarding
recently completed expansions or renovations and expansions or renovations
projects currently under construction.
<TABLE>
<CAPTION>
PERCENT LEASED(1)
ACTUAL OR EXPECTED AS OF JUNE 30,
DATE OF COMPLETION NAME LOCATION 1996
- --------------------------- -------------------------------- ----------------- ------------------
<S> <C> <C> <C>
Completed Expansions and Renovations:
August, 1995 Biltmore Square Asheville, NC 77.3%
November, 1995 Tippecanoe Mall Lafayette, IN 80.7%
November, 1995 Ingram Park Mall San Antonio, TX 89.2%
November, 1995 Barton Creek Square Austin, TX 87.2%
November, 1995 Cheltenham Square Philadelphia, PA 94.4%
November, 1995 Bay Park Square Green Bay, WI 87.3%
November, 1995 Coral Square Coral Springs, FL 86.2%
November, 1995 Lima Mall Lima, OH 93.6%
November, 1995 Glen Burnie Mall Glen Burnie, MD 89.9%
</TABLE>
Expansions and Renovations Currently Under Construction:
<TABLE>
<S> <C> <C> <C>
October, 1996 University Park Mall South Bend, IN 95.6%
November, 1996 Summit Mall Akron, OH 80.7%
November, 1996 College Mall Bloomington, IN 86.3%
November, 1996 Greenwood Plus Greenwood, IN 100.0%
November, 1996 Lafayette Square Indianapolis, IN 85.3%
March, 1997 Chautauqua Mall Lakewood, NY 65.8%
May, 1997 Tippecanoe Plaza Lafayette, IN 100.0%
September, 1997 Muncie Mall Muncie, IN 89.1%
September, 1997 Forum Shops at Las Vegas, NV 95.9%
Caesars
September, 1997 Aventura Mall Miami, FL 96.6%
Fall, 1998 Florida Mall Orlando, FL 98.4%
</TABLE>
- ---------------
(1) Represents the percentage of Owned GLA leased.
Pre-construction development continues on a number of project expansions,
renovations and anchor additions at over 50 properties, including significant
activity properties such as Irving Mall in Irving, Texas; La Plaza in McAllen,
Texas; North East Mall in Hurst, Texas; Prien Lake Mall in Lake Charles,
Louisiana; Southern Park Mall in Youngstown, Ohio; University Mall in Pensacola,
Florida; Mission Viejo Mall in Mission Viejo, California; and Northgate Mall in
Seattle, Washington. The Company expects to commence construction on many of
these projects in the next 12 to 24 months.
FINANCINGS AND INDEBTEDNESS
On April 19, 1995, the Company completed an offering of 6,000,000 shares of
common stock, and on May 10, 1995 the underwriters exercised a portion of the
over-allotment option granted them in connection with that offering aggregating
241,845 shares generating net proceeds of $142 million. These proceeds were used
to repay a term loan and pay down amounts outstanding on an unsecured revolving
credit facility.
S-13
<PAGE> 14
On October 27, 1995, the Company completed a $100 million private equity
placement of 4,000,000 shares of Series A convertible preferred stock (the
"Series A Preferred Shares") with Algemeen Burgerlijk Pensioenfonds ("ABP"). The
holder of the Series A Preferred Shares votes with the holders of the Company's
common stock on all matters. The Company contributed the proceeds of this
private equity placement to SPG, LP, in exchange for preferred units in SPG, LP
which are entitled to preferential distributions equal to the dividends paid on
the Series A Preferred Shares held by ABP.
On September 6, 1996, the Operating Partnership filed a shelf registration
statement with the Securities and Exchange Commission to provide for the
offering, from time to time, of up to $750 million aggregate principal amount of
unsecured debt securities of the Operating Partnership. Upon effectiveness of
this shelf registration statement the Company intends to cause SPG, LP to
withdraw its current shelf registration statement, which provides for the
offering, from time to time, by SPG, LP of unsecured debt securities.
On September 10, 1996, the Company retired the DRC secured line of credit,
which bore interest at LIBOR plus 175 basis points, with proceeds from the
Company's unsecured credit facilities, which bear interest at LIBOR plus 132.5
basis points.
As of September 17, 1996, the Company, through SPG, LP, had two outstanding
unsecured credit facilities, with outstanding borrowings of $423 million. The
Company has a commitment to consolidate such credit facilities into one single,
$750 million, unsecured, three-year credit facility of the Operating
Partnership, which will initially bear interest at LIBOR plus 90 basis points.
This consolidation is expected to close by the end of September, 1996.
S-14
<PAGE> 15
As of June 30, 1996, the Company had consolidated debt on a pro forma basis
of $3,469.6 million (including $140.2 million applicable to minority interests)
and the Company's allocable share of unconsolidated debt of the Joint Venture
Properties was $370.8 million. Scheduled maturities of this debt for periods
reflected are as follows:
<TABLE>
<CAPTION>
ALLOCABLE SHARE
CONSOLIDATED OF JOINT VENTURE
YEAR OF MATURITY DEBT(1) DEBT TOTAL DEBT
------------------------------------- -------------------- ---------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
1996 (7/1 to 12/31).................. $ 135,182(2) $ 3,041 $ 138,223
1997................................. 30,000 3,669 33,669
1998................................. 611,179(3) 70,833 682,012
1999................................. 268,672 40,615 309,287
2000................................. 326,249 55,490 381,739
2001................................. 659,328 -- 659,328
2002................................. 462,542 26,282 488,824
2003................................. 348,519 71,488 420,007
2004................................. 188,489 -- 188,489
2005................................. 95,250 61,635 156,885
2006................................. 0 37,750 37,750
Thereafter........................... 339,644 -- 339,644
---------- -------- ----------
Subtotal........................ 3,465,054 370,803 3,835,857
Other(4)............................. 4,593 -- 4,593
---------- -------- ----------
Total........................... 3,469,647 370,803 3,840,450
</TABLE>
- ---------------
(1) This table reflects that the proceeds of the Series B Preferred Shares
offered hereby are expected to retire $65,600 maturing in 1996, $77,200
maturing in 1997 and $50,200 maturing in 1998.
(2) $72,103 has already been extended for up to three years and $63,079 has
received a commitment to be extended for up to three years.
(3) Includes $322,800 outstanding on the credit facilities.
(4) Amount reflects the adjustment of DRC's indebtedness to fair market value.
See "Pro Forma Combined Condensed Financial Information."
S-15
<PAGE> 16
USE OF PROCEEDS
The net proceeds from the sale of the Series B Preferred Shares offered
hereby, after deducting total expenses of $7 million, are estimated to be
approximately $193 million (approximately $222 million if the Underwriters'
over-allotment option is exercised in full). The Company intends to contribute
or otherwise transfer the net proceeds of the sale of the Series B Preferred
Shares to the Operating Partnership in exchange for 8 3/4% Series B Preferred
Units in the Operating Partnership, the economic terms of which will be
substantially identical to the Series B Preferred Shares. The Operating
Partnership will be required to make all required distributions on the Series B
Preferred Units (which will mirror the payments of distributions, including
accrued and unpaid distributions upon redemption, and of the liquidation
preference amount on the Series B Preferred Shares) prior to any distribution of
cash or assets to the holders of Units or to the holders of any other interests
in the Operating Partnership, except for any other series or preference units
ranking on a parity with the Series B Preferred Units as to distributions and/or
liquidation rights and except for distributions required to enable the Company
to maintain its qualification as a REIT. The Operating Partnership intends to
use substantially all of the proceeds of the Offering to repay existing mortgage
indebtedness of approximately $142.8 million, and to contribute the remainder to
SPG, LP to reduce the amount outstanding under SPG, LP's credit facilities by
approximately $50.2 million. Proceeds from the exercise of the Underwriters'
over-allotment option, if any, will be used to reduce outstanding indebtedness
under the Company's credit facilities. Pending such use, the net proceeds may be
invested in short-term income producing investments such as commercial paper,
government securities or money market funds that invest in government
securities. On June 30, 1996, the weighted average interest rate on the interim
indebtedness expected to be repaid with the aggregate net proceeds of the
Offering and the weighted average maturity of such indebtedness on a pro forma
basis, were 7.15% and 1.22 years, respectively.
S-16
<PAGE> 17
CAPITALIZATION
The following table sets forth the historical capitalization of the Company
and DRC and their subsidiaries as of June 30, 1996, and the capitalization of
the Company and its subsidiaries, as adjusted to give effect to the Merger and
related transactions thereto, and as further adjusted to give effect to the
Merger and related transactions thereto and the issuance of the Series B
Preferred Shares and the anticipated use of the proceeds thereof as described
under "Use of Proceeds" (the "Offering"):
<TABLE>
<CAPTION>
HISTORICAL
----------------- AS FURTHER
SPG DRC AS ADJUSTED ADJUSTED
------ ------ ----------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Debt
Mortgage Debt.................................... $1,868 $1,418 $ 3,290 $3,147
Credit Facilities................................ 311 62 373 323
------ ------ ------ ------
Total Debt............................... 2,179 1,480 3,663 3,470
------ ------ ------ ------
Limited Partners' Interest in the Partnerships..... 69 (2) 643 643
Shareholders' Equity
Series A Preferred Shares, 4,000,000 shares
authorized, issued and outstanding(1)......... 100 -- 100 100
Series B Preferred Shares, 9,200,000 shares
authorized, 8,000,000 shares issued and
outstanding on an As Further Adjusted basis... -- -- -- 193
Common Stock, Class B Common Stock and Class C
Common Stock, each $.0001 par value(2)........ -- 1 -- --
Capital in excess of par value of Common Stock... 269 -- 1,185 1,185
Accumulated deficit.............................. (162) (4) (162) (162)
Unamortized Restricted Stock Award............... (6) -- (6) (6)
------ ------ ------ ------
Total Shareholders' Equity............... 201 (3) 1,117 1,310
------ ------ ------ ------
Total Capitalization.......................... $2,449 $1,475 $ 5,423 $5,423
------ ------ ------ ------
</TABLE>
- ---------------
(1) The Company is entitled to preferred distributions from SPG, LP equal to the
dividends paid by the Company on the Series A Preferred Shares.
(2) Shares authorized and issued and outstanding on a SPG Historical, As
Adjusted and As Further Adjusted basis, respectively, are as follows:
<TABLE>
<CAPTION>
AUTHORIZED ISSUED AND OUTSTANDING
--------------------------------------- ------------------------------------
AS AS
SPG AS FURTHER SPG AS FURTHER
HISTORICAL ADJUSTED ADJUSTED HISTORICAL ADJUSTED ADJUSTED
----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Common Stock................. 246,000,000 383,996,000 374,796,000 55,360,225 96,444,745 96,444,745
Class B Common Stock......... 12,000,000 12,000,000 12,000,000 3,200,000 3,200,000 3,200,000
Class C Common Stock......... -- 4,000 4,000 -- 4,000 4,000
</TABLE>
S-17
<PAGE> 18
SELECTED FINANCIAL AND OPERATING DATA
The following tables set forth certain selected financial and operating
data on a historical basis for the Company and for Simon Property Group (the
"Predecessor") and pro forma historical financial data of the Company, for the
respective periods presented. The historical financial information should be
read in conjunction with the financial statements and notes thereto included in
or incorporated by reference into the accompanying Prospectus. The pro forma
combined balance sheet data as of June 30, 1996 is presented as if the Offering
and the Merger and related transactions thereto had occurred on June 30, 1996.
The unaudited pro forma combined operating data for the six month period ended
June 30, 1996 and the year ended December 31, 1995 are presented as if the
Offering and the Merger and related transactions thereto had occurred as of
January 1, 1995 and were carried forward through June 30, 1996. The pro forma
financial information does not purport to represent what the actual financial
position or results of operation would have been as of the period or for the
periods indicated, nor does it purport to represent any future financial
position or results of operations for any future period. The pro forma financial
information should be read in conjunction with the financial statements and
notes thereto included in or incorporated by reference into the accompanying
Prospectus.
<TABLE>
<CAPTION>
THE COMPANY
---------------------------------------------------------------------------------------------------
FOR THE
PERIOD FROM
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, DECEMBER 20 TO
------------------------------------- ------------------------------------------ DECEMBER 31,
PRO FORMA PRO FORMA --------------
1996 1996 1995 1995 1995 1994 1993
---------- ---------- ---------- ---------- -------------- ------------ --------------
(IN THOUSANDS EXCEPT PER SHARE DATA, PORTFOLIO PROPERTY DATA AND RATIOS.)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenue.................. $ 461,536 $ 283,204 $ 260,255 $ 889,714 $ 553,657 $ 473,676 $ 18,424
Expenses:
Operating Expenses.......... 169,257 107,773 100,078 318,280 209,782 183,433 4,095
Depreciation and
Amortization.............. 89,244 51,307 43,197 162,353 92,739 75,945 2,051
Interest Expense(1)......... 127,544 79,134 75,657 241,288 150,224 150,164 3,548
Income (Loss) before
Extraordinary Items......... 86,212 47,800 45,735 183,740 101,505 60,308 8,707
Net Income (Loss)............. $ 57,928 $ 30,628 $ 26,594 $ 118,927 $ 59,271 $ 23,377 $ (11,366)
Preferred Dividends............ 12,937 4,062 -- 19,240 1,490 -- --
Net Income (Loss) available to
common shareholders........... 44,991 26,566 26,594 99,687 57,781 23,377 (11,366)
Net Income per share before
extraordinary items......... $ 0.47 $ 0.45 $ 0.51 $ 1.07 $ 1.08 $ 0.71 $ 0.11
Net Income per share(2)....... $ 0.47 $ 0.45 $ 0.51 $ 1.07 $ 1.04 $ 0.50 $ (0.28)
Distributions per common
share....................... $ 0.99 $ 0.99 $ 0.95 $ 1.97 $ 1.97 $ 1.90 --
Weighted average shares
outstanding................. 96,356 58,471 52,536 93,197 55,312 47,012 40,950
BALANCE SHEET DATA:
Investment in Real Estate,
net......................... $5,211,194(3) $2,154,506 $1,872,165 N/A $2,009,344 $1,829,111 $1,350,360
Cash and cash equivalents..... 77,094 65,556 79,827 N/A 62,721 105,139 110,625
Total Assets.................. 5,714,664 2,679,076 2,286,907 N/A 2,556,436 2,316,860 1,793,654
Total Debt(4)................. 3,469,647 2,178,539 1,825,453 N/A 1,980,759 1,938,091 1,455,884
Shareholders' Equity and
Owner's (Deficit)........... $1,309,769 $ 201,160 $ 149,368 N/A $ 232,946 $ 57,307 $ 29,521
OTHER DATA:
Cash flow provided by
(used in):
Operating activities........ $ 168,830 $ 90,634 $ 80,830 $ 303,236 $ 194,336 $ 128,023 N/A
Investing activities........ (128,243) (70,010) (28,495) (306,421) (222,679) (266,772) N/A
Financing activities........ (65,517) (17,789) (77,647) (88,481) (14,075) 133,263 N/A
Restated Funds from Operations
(FFO) of Partnerships(5).... 169,954 99,212 87,795 338,992 197,909 167,761 N/A
Restated FFO allocable to the
Company(5).................. $ 104,352 $ 60,619 $ 51,357 $ 205,429 $ 119,339 $ 92,604 N/A
---------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
PREDECESSOR
--------------------------------------
FOR THE
PERIOD FROM
JANUARY 1 TO YEAR ENDED
DECEMBER 19, DECEMBER 31,
------------ -----------------------
1993 1992 1991
------------ ---------- ----------
<S> <C> <C> <C>
OPERATING DATA:
Total Revenue.................. $405,869 $ 400,852 $ 378,029
Expenses:
Operating Expenses.......... 175,801 176,682 173,923
Depreciation and
Amortization.............. 60,243 58,104 56,033
Interest Expense(1)......... 156,909 178,075 159,798
Income (Loss) before
Extraordinary Items......... 6,912 (11,692) (15,865)
Net Income (Loss)............. $ 33,101 $ (11,692) $ (15,865)
Preferred Dividends............ -- -- --
Net Income (Loss) available to
common shareholders........... 33,101 (11,692) (15,865)
Net Income per share before
extraordinary items......... N/A N/A N/A
Net Income per share(2)....... N/A N/A N/A
Distributions per common
share....................... N/A N/A N/A
Weighted average shares
outstanding................. N/A N/A N/A
BALANCE SHEET DATA:
Investment in Real Estate,
net......................... N/A $1,156,009 $1,143,050
Cash and cash equivalents..... N/A 42,682 31,840
Total Assets.................. N/A 1,494,289 1,432,028
Total Debt(4)................. N/A 1,711,778 1,548,292
Shareholders' Equity and
Owner's (Deficit)........... N/A $ (565,566) $ (418,697)
OTHER DATA:
Cash flow provided by
(used in):
Operating activities........ N/A N/A N/A
Investing activities........ N/A N/A N/A
Financing activities........ N/A N/A N/A
Restated Funds from Operations
(FFO) of Partnerships(5).... N/A N/A N/A
Restated FFO allocable to the
Company(5).................. N/A N/A N/A
----------
Ratio of EBITDA after minority
interest to interest
expense(6)(9)................. 2.47x 2.35x 2.23x 2.49x 2.39x 2.36x N/A
Ratio of EBITDA after minority
interest to Fixed Charges and
Preferred Stock
Dividends(7)(9)............... 2.11x 2.03x 2.04x 2.15x 2.18x 2.18x N/A
Ratio of Earnings to Fixed
Charges and Preferred Stock
Dividends or Coverage
Deficit(8)(9)................. 1.47x 1.47x 1.59x 1.66x 1.66x 1.43x 3.36x
<CAPTION>
Ratio of EBITDA after minority
expense(6)(9)................. N/A N/A N/A
Ratio of EBITDA after minority
interest to Fixed Charges and
Preferred Stock
Dividends(7)(9)............... N/A N/A N/A
Ratio of Earnings to Fixed
Charges and Preferred Stock
Dividends or Coverage
Deficit(8)(9)................. 1.11x $ (12,821) $ (18,719)
<CAPTION>
interest to interest
</TABLE>
S-18
<PAGE> 19
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------------------- -----------------------------------------------------------
PRO FORMA PRO FORMA
1996 1996 1995 1995 1995 1994 1993
---------- ---------- ---------- ---------- -------------- ------------ --------------
(IN THOUSANDS EXCEPT NUMBER OF PROPERTIES AND GLA)
<S> <C> <C> <C> <C> <C> <C> <C>
PORTFOLIO DATA:
Total EBITDA(9)............... $ 389,145 $ 231,981 $ 208,027 $ 760,880 $ 437,548 $ 386,835 $ 346,679
EBITDA after minority
interest(9)................. 331,692 184,936 169,363 650,307 357,158 307,372 256,169
Number of Properties at End of
Period...................... 183 122 119 184 122 119 114
Total GLA at End of Period
(thousands of square
feet)....................... 109,845 62,304 58,097 109,300 62,232 58,200 54,042
<CAPTION>
1992 1991
------------ ----------
<S> <C> <C> <C>
PORTFOLIO DATA:
Total EBITDA(9)............... $316,535 $ 282,326
EBITDA after minority
interest(9)................. 227,931 210,634
Number of Properties at End of
Period...................... 110 108
Total GLA at End of Period
(thousands of square
feet)....................... 52,404 51,375
</TABLE>
- ---------------
(1) Interest expense for the year ended December 31, 1994 includes $27.2 million
of additional non-recurring contingent interest paid in connection with the
refinancing of a Portfolio Property. The property lender was entitled to
participate in the appreciated market value of the Portfolio Property upon
refinancing. None of the other mortgages or debt instruments affecting the
Portfolio Properties contain similar provisions and management does not
presently expect to enter into financing arrangements with similar
participation features in the future. Accordingly, management considers the
payment made to the lender unusual in nature. As explained in footnote (5)
below, unusual or extraordinary items are excluded for purposes of computing
FFO. Accordingly, this item has been excluded from FFO in this table and
elsewhere in this Prospectus Supplement.
(2) Per share data are reflected only for the periods from December 31, 1994
through June 30, 1996. Per share data are not relevant for the historical
combined financial statements of the Predecessor since such financial
statements are a combined presentation of partnerships and corporations.
(3) For pro forma purposes, the Company has combined investment in properties,
partnerships and joint ventures. The Company has not completed the
allocation of the purchase price between these categories.
(4) Historical debt of June 30, 1996 and 1995 and December 31, 1995 includes
$1,867.5 million, $1,694.7 million and $1,784.8 million, respectively, of
mortgage indebtedness and $311.0 million, $130.8 million and $196.0 million,
respectively, outstanding under the Company's credit facilities,
respectively.
(5) Funds from Operations ("FFO"), as defined by the National Association of
Real Estate Investment Trusts ("NAREIT"), means the consolidated net income
of the Partnerships without giving effect to depreciation and amortization,
gains or losses from extraordinary items, gains or losses on sales of real
estate, gains or losses on investments in marketable securities and any
provision/benefit for income taxes for such period, plus the allocable
portion, based on the Partnerships', ownership interest, of FFO of
unconsolidated joint ventures, all determined on a consistent basis in
accordance with generally accepted accounting principles. FFO for the pro
forma periods presented is based on the pro forma combined net income of the
Partnerships and for the historical periods presented is based on the net
income of SPG, LP. Management believes that FFO is an important and widely
used measure of the operating performance of REITs which provides a relevant
basis for comparison among REITs. FFO is presented to assist investors in
analyzing the performance of the Company. The Company's method of
calculating FFO may be different from the methods used by other REITs. FFO
(i) does not represent cash flows from operations as defined by generally
accepted accounting principles, (ii) should not be considered as an
alternative to net income as a measure of operating performance or to cash
flows from operating, investing and financing activities and (iii) is not an
alternative to cash flows as a measure of liquidity. In March 1995, NAREIT
modified its definition of FFO. The modified definition provides that
amortization of deferred financing costs and depreciation of non-rental real
estate assets are no longer to be added back to net income in arriving at
FFO. The modified definition was adopted by the Company beginning in 1996.
Additionally the FFO prior to 1996 was restated to reflect the new
definition in order to make the amounts comparative.
S-19
<PAGE> 20
The following table reconciles pro forma combined net income of the Partnerships
to pro forma FFO for the six months ended June 30, 1996 and for the year ended
December 31, 1995:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
JUNE 30, ENDED
1996 DECEMBER 31, 1995
------------ -----------------
(IN THOUSANDS)
<S> <C> <C>
Pro forma combined net income of the Partnerships before
extraordinary items..................................... $ 86,212 $ 183,740
Plus:
Depreciation and amortization less minority interests
for consolidated properties plus the Partnerships'
share from unconsolidated affiliates............... 96,679 176,238
Less:
Partnerships' share of gains on sales of assets...... -- (1,746)
Preferred distributions.............................. (12,937) (19,240)
------- --------
Pro forma FFO of the Partnerships......................... $169,954 $ 338,992
======= ========
Pro forma FFO allocable to the Company.................... $104,352 $ 205,429
======= ========
</TABLE>
(6) For purposes of computing the ratio of EBITDA after minority interest to
interest expense, EBITDA after minority interest represents earnings before
interest, taxes, depreciation and amortization for all properties after
distribution to the third-party joint venture partners. Interest expense
includes the Company's pro rata share of joint venture interest expense and
is reduced by amortization of debt issuance costs.
(7) For purposes of computing the ratio of EBITDA after minority interest to
fixed charges and preferred stock dividends, EBITDA after minority interest
represents earnings before interest, taxes, depreciation and amortization
for all properties after distribution to the third-party joint venture
partners. Fixed charges and preferred stock dividends consist of interest
costs, whether expensed or capitalized and including the Company's pro rata
share of joint venture interest expense, the interest component of rental
expense and amortization of debt issuance costs, plus any dividends on
outstanding preferred stock.
(8) For purposes of computing the ratio of earnings to fixed charges and
preferred stock dividends, earnings have been calculated by adding fixed
charges, excluding capitalized interest, to income (loss) from continuing
operations including income from minority interests which have fixed
charges, and including distributed operating income from unconsolidated
joint ventures instead of income from unconsolidated joint ventures. Fixed
charges and preferred stock dividends consist of interest costs, whether
expensed or capitalized, the interest component of rental expense and
amortization of debt issuance costs, plus any dividends on outstanding
preferred stock.
(9) Total EBITDA represents earnings before interest, taxes, depreciation and
amortization for all Portfolio Properties. EBITDA after minority interest
represents earnings before interest, taxes, depreciation and amortization
for all Portfolio Properties after distribution to the third-party joint
venture partners. EBITDA (i) does not represent cash flow from operations as
defined by generally accepted accounting principles, (ii) should not be
considered as an alternative to net income as a measure of operating
performance or to cash flows from operating, investing and financing
activities; and (iii) is not an alternative to cash flows as a measure of
liquidity. The Company's management believes that in addition to cash flows
and net income, EBITDA is a useful financial performance measurement for
assessing the operating performance of an equity REIT because, together with
net income and cash flows, EBITDA provides investors with an additional
basis to evaluate the ability of a REIT to incur and service debt and to
fund acquisitions and other capital expenditures. To evaluate EBITDA and the
trends it depicts, the components of EBITDA, such as revenues and operating
expenses, should be considered. The Company's method of calculating EBITDA
may be different from the methods used by other REITs. The Company's
weighted average share of the operating results for the six months ended
June 30, 1996 and 1995 was 61.1% and 58.5%, respectively, and was 60.3%,
55.2% and 52.2% in 1995, 1994 and 1993, respectively. The Company's share of
SPG, LP was 61.1% and 60.5% at June 30, 1996 and 1995, respectively, and was
61.0% and 56.4% at December 31, 1995 and 1994, respectively.
S-20
<PAGE> 21
BUSINESS AND PROPERTIES
THE PORTFOLIO PROPERTIES
Management believes that the Company's portfolio of properties is the
largest (measured by GLA) and most geographically diverse of any publicly traded
REIT and that the Company has interests in more regional malls than any other
publicly traded REIT. Management also expects that geographic diversification
should mitigate the effects of regional economic conditions and local factors,
and that diversified types of Portfolio Properties will reduce the impact of
economic factors that may affect the retailers in any particular type of
Portfolio Property. In addition, management believes that the large size of the
portfolio should mitigate the effects of any other factors that may affect a
limited group of shopping centers.
No single income-producing Portfolio Property accounted for more than 1.4%
of GLA as of June 30, 1996 or for more than 3.5% of the Company's pro forma
gross revenues for the six months ended June 30, 1996. No single retailer leased
more than 10.9% of Owned GLA in the Portfolio Properties or represented more
than 7.7% of the annualized base rent from these properties.
The following table summarizes on a combined basis, as of June 30, 1996,
certain information with respect to the Portfolio Properties, in total and by
type of shopping center and retailer:
<TABLE>
<CAPTION>
TOTAL
OWNED % OF OWNED
GLA GLA % OF OWNED GLA WHICH IS
TYPE OF PROPERTY(1) (SQ. FT.) (SQ. FT.) GLA(2) LEASED(3)
- ----------------------------------------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Regional Malls(4)
Mall Store............................. 32,255,514 32,255,514 49.4 83.2
Freestanding........................... 1,251,647 599,826 0.9 93.6
----------- ---------- ----- -----
Subtotal............................ 33,507,161 32,855,340 50.3 83.4
----------- ---------- ----- -----
Anchor................................. 59,280,749 20,025,108 30.6 96.9
----------- ---------- ----- -----
Total.......................... 92,787,910 52,880,448 80.9 88.5
Community Shopping Centers
Mall Store............................. 3,882,220 3,801,130 5.9 90.3
Freestanding........................... 768,648 284,809 0.4 100.0
Anchor................................. 10,462,344 6,420,675 9.8 92.3
----------- ---------- ----- -----
Total.......................... 15,113,212 10,506,614 16.1 91.8
Office Portion of Mixed-Use Properties... 1,943,676 1,943,676 3.0 93.4
----------- ---------- ----- -----
Total.......................... 109,844,798 65,330,738 100.0 89.2
=========== ========== ===== =====
</TABLE>
- ---------------
(1) Here and elsewhere in this Prospectus Supplement, all of the GLA, Owned GLA,
and base rent is reported for each Portfolio Property, even if the Company
has less than a 100% ownership interest in the Portfolio Property.
(2) Indicates the percentage of total Owned GLA represented by each category of
space.
(3) Includes, here and elsewhere in this Prospectus Supplement, space for which,
a lease has been executed, whether or not the space was then occupied. The
table under "Additional Information" in this Prospectus Supplement indicates
vacant anchor space as of June 30, 1996.
(4) Includes two specialty retail centers and retail space at four mixed-use
properties.
Regional Malls
Regional malls, specialty retail centers and the retail space at the
mixed-use properties represented 84% of the Portfolio Properties' GLA, 81% of
total Owned GLA and 85% of their total annualized base rent as of
S-21
<PAGE> 22
June 30, 1996. They range in size from 208,000 to 1.5 million square feet of
GLA, with 107 having more than 400,000 square feet. Overall, the malls contain
over 10,300 tenants, including approximately 450 anchors. As of June 30, 1996,
83.4% of the total Owned GLA at the regional malls was leased, at an average
annualized base rent of $20.18 per square foot. (Data for specialty retail
centers and the retail space at mixed-use properties are also included, without
further reference, in all data in this section concerning regional malls. This
additional retail space represents approximately 2% of the GLA in the regional
malls.)
The following table sets forth selected data for the mall and freestanding
stores at regional malls:
<TABLE>
<CAPTION>
TOTAL PERCENT
MALL AND OF AVERAGE BASE RENT
NUMBER OF FREESTANDING OWNED GLA PER LEASED
DATE PROPERTIES (SQ. FT.)(1) LEASED(2) SQUARE FOOT(3)
- ---------------------------------------- --------- ------------ --------- -----------------
<S> <C> <C> <C> <C>
June 30, 1996........................... 117 32,855 83.4% $ 20.18
June 30, 1995........................... 115 31,503 84.3 18.80
December 31, 1995....................... 118 33,208 85.5 19.18
December 31, 1994....................... 115 31,570 85.6 18.37
December 31, 1993....................... 110 29,905 85.9 17.70
December 31, 1992....................... 109 29,642 85.9 16.85
</TABLE>
- ---------------
(1) In thousands.
(2) Occupancies for regional malls are generally lower in the initial part of
the calendar year and higher in the latter part of the calendar year.
(3) Base rent does not include the effects of percentage rent or common area
maintenance charges reimbursed by the tenants, nor does it consider the
costs required to obtain new tenants.
Lease Expirations
The following table sets forth scheduled expirations during each of the
next eleven years of leases for mall stores and freestanding stores at the
Company's regional malls, assuming that none of the tenants exercises available
renewal options:
<TABLE>
<CAPTION>
APPROX. LEASED AVG. BASE RENT PER % OF TOTAL LEASED GLA
NO. OF LEASES AREA IN SQ. SQ. FT. UNDER REPRESENTED BY
YEAR ENDING DECEMBER 31 EXPIRING FT. EXPIRING LEASES(1) EXPIRING LEASES(2)
- ----------------------------- ------------- -------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
1996 (7/1-12/31)............. 210 370,588 $21.70 1.4%
1997......................... 1,138 2,474,960 19.11 9.0
1998......................... 1,122 2,115,621 21.88 7.7
1999......................... 1,027 2,243,284 21.85 8.2
2000......................... 1,022 2,346,792 22.24 8.6
2001......................... 922 2,329,297 20.41 8.5
2002......................... 633 1,888,266 20.90 6.9
2003......................... 698 1,941,386 22.42 7.1
2004......................... 659 2,155,919 20.90 7.9
2005......................... 639 2,209,795 20.15 8.1
2006......................... 723 2,311,220 21.87 8.4
----- ---------- ------ ----
Total.............. 8,793 22,387,128 $21.15 81.7%
</TABLE>
- ---------------
(1) Represents the average base rent in effect on June 30, 1996 for those leases
expiring for tenants paying base rent.
(2) Percentage of total leased Owned GLA of mall and freestanding stores in the
regional malls as of June 30, 1996.
S-22
<PAGE> 23
Sales
The following table sets forth for each of the last four years at regional
malls, the total retail sales (in millions) during the given year or period for
those tenants who are required to report sales:
<TABLE>
<CAPTION>
ANNUAL PERCENTAGE
YEAR TOTAL TENANT SALES INCREASE
---------------------------------------------------- ------------------ -----------------
<S> <C> <C>
1/1/96 to 6/30/96................................... $2,801 7.8%
1/1/95 to 6/30/95................................... 2,598 N/A
1995................................................ 6,098 0.7%
1994................................................ 6,053 3.9
1993................................................ 5,827 N/A
</TABLE>
Anchors
As of June 30, 1996, almost all of the approximately 450 anchors in the
Company's regional malls are department stores and most are national retailers.
Anchors space represents 64% of the GLA in the Company's regional malls, and a
majority own their stores, either in fee or subject to ground leases with the
Company. All but seven anchor stores in the regional malls were occupied as of
June 30, 1996.
The following table sets forth, as of June 30, 1996, certain information
with respect to the anchors whose stores in the aggregate have over 600,000
square feet of GLA in the regional malls:
<TABLE>
<CAPTION>
ANCHOR-OWNED TOTAL GLA
NUMBER OF ANCHOR-LEASED OR LAND- OCCUPIED BY
ANCHOR STORES GLA LEASED GLA ANCHOR
--------------------------------- --------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
JC Penney Co., Inc. ............. 86 7,094,185 5,254,480 12,348,665
Sears, Roebuck & Co. ............ 80 2,531,655 9,178,545 11,710,200
Dillard Department Stores
Inc. .......................... 57 545,124 7,490,297 8,035,421
Federated Department Stores
Inc. .......................... 40 2,657,585 4,072,995 6,730,580
The May Department Stores Co. ... 34 1,045,065 3,924,161 4,969,226
Montgomery Ward & Co., Inc. ..... 33 1,131,838 3,426,491 4,558,329
Dayton Hudson Corp. ............. 17 348,226 1,313,628 1,661,854
Nordstrom Inc. .................. 4 459,820 219,415 679,235
Belk Stores Group................ 8 392,403 283,701 676,104
</TABLE>
Mall Stores and Freestanding Stores
There are nearly 10,000 mall and freestanding stores in the regional malls.
Substantially all of these stores lease space from the Company. Mall and
freestanding stores represent approximately 32.9 million of the almost 52.9
million square feet of total Owned GLA of these properties, with no single mall
or freestanding store or chain occupying more than 4.9% of the total Owned GLA
in all Portfolio Properties or accounting for more than 9.9% of the total
annualized base rent from these properties.
S-23
<PAGE> 24
The following table sets forth, as of June 30, 1996, certain information
with respect to the ten mall and freestanding store tenants occupying the
largest amounts of GLA paying the most annualized base rent in the regional
malls:
<TABLE>
<CAPTION>
% OF TOTAL
OWNED GLA
NUMBER OF TOTAL GLA LEASED BY
TENANT STORES LEASED (SQUARE FEET) TENANT
------------------------------------------ ------------- ------------- ----------------
<S> <C> <C> <C>
The Limited, Inc. ........................ 474 3,223,147 4.9%
F.W. Woolworth Co. ....................... 424 1,418,147 2.2
Melville Corp. ........................... 229 751,154 1.1
United States Shoe Corp................... 155 576,022 0.9
Petrie Stores Corp.(1).................... 86 457,795 0.7
The Gap................................... 70 423,219 0.6
Edison Brothers Stores, Inc.(1)........... 197 419,070 0.6
United Artists Theatre Circuit, Inc. ..... 16 403,407 0.6
County Seat Stores, Inc. ................. 96 389,439 0.6
The Musicland Group, Inc. ................ 110 380,675 0.6
----- --------- -----
Total........................... 1,857 8,442,075 12.9%
</TABLE>
- ---------------
(1) Tenant is currently operating under protection of Chapter 11 of the
Bankruptcy Code.
Community Shopping Centers
The Company has interests in 66 income-producing community shopping
centers, with an aggregate of over 15 million square feet of GLA. Community
shopping centers represented 14% of the Portfolio Properties' GLA, 16% of the
total Owned GLA and 10% of the total annualized base rent as of June 30, 1996.
With the exception of four centers, the community shopping centers range in size
from 88,000 to 650,000 square feet of GLA. Overall, they contain over 1,100
tenants, including over 190 anchors. As of June 30, 1996, 91.8% of the total
Owned GLA in community shopping centers was leased at an average annualized base
rent of $7.44 per square foot.
The following table sets forth selected data for the community shopping
centers.
<TABLE>
<CAPTION>
TOTAL OWNED PERCENT OF AVERAGE BASE
NUMBER OF GLA(1) OWNED GLA RENT PER LEASED
DATE PROPERTIES (SQUARE FEET) LEASED SQUARE FOOT(2)
---------------------------- --------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C>
June 30, 1996............... 66 10,507 91.8% $7.44
June 30, 1995............... 66 10,511 93.7 7.22
December 31, 1995........... 66 10,525 93.1 7.28
December 31, 1994........... 66 10,530 93.7 7.12
</TABLE>
- ---------------
(1) In thousands.
(2) Base rent does not include the effects of percentage rent or common area
maintenance charges reimbursed by tenants, nor does it consider the costs
required to obtain new tenants.
S-24
<PAGE> 25
Lease Expirations
The following table sets forth scheduled expirations during each of the
next eleven years of leases for all types of tenants at the Company's community
shopping centers, assuming that none of the tenants exercises available renewal
options:
<TABLE>
<CAPTION>
AVG. BASE RENT
APPROX. LEASED PER SQ. FT. UNDER % OF TOTAL LEASED
NO. OF LEASES AREA IN SQ. EXPIRING GLA REPRESENTED BY
YEAR ENDING DECEMBER 31 EXPIRING FT. LEASES(1) EXPIRING LEASES(2)
- ------------------------------- ------------- -------------- ----------------- ------------------
<S> <C> <C> <C> <C>
1996 (7/1-12/31)............... 15 101,073 $6.79 1.0%
1997........................... 163 766,761 8.31 7.9
1998........................... 166 557,281 9.75 5.8
1999........................... 157 842,570 8.00 8.7
2000........................... 140 790,426 7.99 8.2
2001........................... 107 794,727 6.51 8.2
2002........................... 40 378,710 7.84 3.9
2003........................... 34 443,138 7.85 4.6
2004........................... 29 300,671 8.20 3.1
2005........................... 39 819,662 6.51 8.5
2006........................... 24 702,294 6.37 7.3
--- --------- ----- -----
Total................ 914 6,497,313 $7.61 67.4%
</TABLE>
- ---------------
(1) Represents the average base rent in effect on June 30, 1996 for those leases
expiring for the tenants paying base rent.
(2) Percentage of total leased Owned GLA at community shopping centers as of
June 30, 1996.
Sales
The following table sets forth, for each of the last four years, at
community shopping centers, the total retail sales (in millions) during the
given year or period for those tenants who are required to report such sales.
<TABLE>
<CAPTION>
ANNUAL PERCENTAGE
YEAR TOTAL PROPERTY SALES INCREASE
-------------------------------------------------- -------------------- -----------------
<S> <C> <C>
1/1/96 to 6/30/96................................. $ 600 6.3%
1/1/95 to 6/30/95................................. 640 N/A
1995.............................................. 1,419 0.0
1994.............................................. 1,419 7.5
1993.............................................. 1,319 N/A
</TABLE>
Tenants
There are over 190 anchors in the community shopping centers, most of which
occupy at least 15,000 square feet of space. Anchor space represents 69% of the
GLA in these properties, and unlike in regional malls, most anchors lease their
space from the Company. All but twelve of the anchor spaces in the community
shopping centers are occupied as of June 30, 1996. No single anchor leases
stores that in the aggregate constitute more than 12.4% of the total Owned GLA
in the community shopping center portfolio and no anchor accounts for more than
7.6% of the total annualized base rent from these properties.
There are nearly 1,000 mall and freestanding tenants in the community
shopping centers. Substantially all of these stores lease space from the
Company. Mall and freestanding store space represents approximately 4.1 million
of the 10.5 million square feet of Owned GLA of these properties. No single mall
and freestanding store or chain occupies more than 0.15% of the total Owned GLA
of all Portfolio Properties or accounts for more than 1.1% of the total
annualized base rent from the community shopping centers.
S-25
<PAGE> 26
The following table sets forth, as of June 30, 1996, certain information
relating to the ten tenants whose stores in the aggregate occupy the most square
feet of GLA in the community shopping centers:
<TABLE>
<CAPTION>
TENANT TOTAL GLA
NUMBER OF LEASED OCCUPIED
TENANT STORES GLA BY TENANT
---------------------------------------------------- --------- ---------- -----------
<S> <C> <C> <C>
Kmart Corporation................................... 19 1,047,425 1,305,464
Wal-Mart Stores, Inc................................ 12 82,398 1,280,837
Service Merchandise Company......................... 21 345,541 1,066,828
Dayton Hudson Corp. (Target)........................ 6 178,819 574,549
TJX Companies....................................... 9 444,418 444,418
Dominick's Finer Foods, Inc......................... 5 239,407 443,909
Montgomery Ward & Co., Inc.......................... 7 379,646 379,646
Kohl's Department Stores, Inc....................... 5 378,747 378,747
Burlington.......................................... 5 273,516 273,516
Tru Properties, Inc................................. 7 46,000 264,202
</TABLE>
Specialty Retail Centers and Mixed-Use Properties
The income-producing Portfolio Properties include two specialty retail
centers and four mixed-use properties. The two specialty retail centers, The
Forum Shops at Caesars in Las Vegas, Nevada and Trolley Square in Salt Lake
City, Utah, contain an aggregate of approximately 500,000 square feet of GLA. As
of June 30, 1996, The Forum Shops' average base rent per leased square foot of
mall store GLA was $60, while the rate at Trolley Square was $17 per leased
square foot. Mall store sales for the 12 months ended June 30, 1996 and 1995 at
The Forum Shops were $1,194, and at Trolley Square were $275, respectively. As
of June 30, 1996, 95.9% of Owned GLA at The Forum Shops and 76.3% of Owned GLA
at Trolley Square was leased or committed for lease.
The mixed-use properties consist of Fashion Center at Pentagon City in
Arlington, Virginia, at which the Company have an interest only in the retail
and office portions of the complex; New Orleans Centre and CNG Tower in New
Orleans, Louisiana; and two properties with almost exclusively office space,
O'Hare International Center and Riverway in Rosemont, Illinois. These four
properties contain an aggregate of approximately 2.0 million square feet of
office space and approximately 1.4 million square feet of retail space. The mall
store space at Fashion Center was 98.6% leased as of June 30, 1996, and mall
store sales were $626 per leased square foot. The average base rent per leased
square foot at Fashion Center was $41.98 at June 30, 1996. The mall store space
at New Orleans Centre was 62.4% leased as of June 30, 1996, and mall store sales
were $230 per leased square foot. The average base rent per leased square foot
at New Orleans Centre was $22.63 at June 30, 1996. The office space at the
mixed-use properties, including Riverway and O'Hare International Center, was
93.4% leased as of June 30, 1996 and had an average rent of $19.05 per leased
square foot.
S-26
<PAGE> 27
ADDITIONAL INFORMATION
The following table sets forth certain information, as of June 30, 1996,
regarding the Portfolio Properties:
<TABLE>
<CAPTION>
OWNERSHIP
INTEREST
(EXPIRATION PARTNERSHIPS' PERCENT OF MALL
IF GROUND PERCENTAGE YEAR BUILT OR TOTAL AND FREESTANDING
NAME/LOCATION LEASE)(1) INTEREST(2) ACQUIRED GLA GLA LEASED(3)
- -------------------------------------------- ---------------- ------------- ------------- --------- ----------------
<C> <S> <C> <C> <C> <C> <C>
REGIONAL MALLS
1. Alton Square, Alton, IL Fee 100.0% Acquired 1993 545,656 58.9%
2. Amigoland Mall, Brownsville, TX Fee 100.0 Built 1974 560,352 76.4
3. Anderson Mall, Anderson, SC Fee 100.0 Built 1972 636,505 82.5
4. Aventura Mall(4), Miami, FL Fee 33.3 Built 1983 976,574 96.6
5. Avenues, The, Jacksonville, FL Fee 25.0 Built 1990 1,113,036 88.3
6. Barton Creek Square, Austin, TX Fee 100.0 Built 1981 1,380,814 87.2
7. Battlefield Mall, Springfield, MO Fee and Ground 100.0 Built 1970 1,127,051 87.7
Lease (2056)
8. Bay Park Square, Green Bay, Wisconsin Fee 100.0 Built 1980 602,780 87.3
9. Bergen Mall, Paramus, NJ Fee and Ground 100.0 Acquired 1987 953,498 85.1
Lease(6)(2061)
10. Biltmore Square, Asheville, NC Fee 66.7(7) Built 1989 494,283 77.3
11. Boynton Beach Mall, Boynton Beach, FL Fee 100.0 Built 1985 1,065,746 91.3
12. Broadway Square, Tyler, TX Fee 100.0 Acquired 1994 571,704 93.7
13. Brunswick Square, East Brunswick, NJ Fee 100.0 Built 1973 735,171 90.9
14. Castleton Square, Indianapolis, IN Fee 100.0 Built 1972 1,351,716 95.3
15. Century III Mall, Pittsburgh, PA Fee 50.0 Built 1979 1,289,750 86.8
16. Century Consumer Mall, Merrillville, Fee 100.0 Acquired 1982 398,665 65.5
IN
17. Charles Towne Square, Charleston, SC Fee 100.0 Built 1976 463,303 39.9
18. Chautauqua Mall, Lakewood, NY Fee 100.0 Built 1971 425,644 65.8
19. Cheltenham Square, Philadelphia, PA Fee 100.0 Built 1981 638,507 94.4
20. Chesapeake Square, Chesapeake, VA Fee and Ground 75.0(7) Built 1989 704,983 79.9
Lease (2062)
21. Cielo Vista Mall, El Paso, TX Fee and Ground 100.0 Built 1974 1,194,474 90.3
Lease(9)(2027)
22. Circle Centre, Indianapolis, IN Property Lease 14.7 Built 1995 797,846 94.3
(2097)
<CAPTION>
ANCHORS
- ----- --------------------------------------
<C> <<C>
REGIO
1. Famous Barr, JC Penney
2. Dillard's, JC Penney, Montgomery Ward
3. Gallant Belk, JC Penney, Sears, Uptons
4. Lord & Taylor, Macy's, JC Penney,
Sears
5. Dillard's, Gayfers, Sears, Parisian,
JC Penney
6. Dillard's(5), Foley's, JC Penney,
Montgomery Ward, Sears
7. Dillard's, JC Penney, Famous Barr,
Sears, Montgomery Ward
8. Kohl's, Montgomery Ward, Shopko,
Elder-Beerman
9. Steinbach's, Stern's
10. Belk's, Dillard's, Profitt's
11. Burdines, Macy's, Mervyn's, JC Penney,
Sears
12. Dillard's, JC Penney, Sears
13. Macy's, JC Penney
14. LS Ayres, Kohl's, Lazarus, Montgomery
Ward, JC Penney, Sears
15. Lazarus, Kaufman's, JC Penney, Sears
16. Burlington Coat Factory(5), Montgomery
Ward
17. Montgomery Ward, Service Merchandise (8)
18. Sears (8)
19. Clover, Home Depot (8)
20. Profitt's, Leggett, JC Penney, Sears,
Montgomery Ward
21. Dillard's(5), JC Penney, Montgomery
Ward, Sears
22. Nordstrom, Parisian
</TABLE>
S-27
<PAGE> 28
<TABLE>
<CAPTION>
OWNERSHIP
INTEREST
(EXPIRATION PARTNERSHIPS' PERCENT OF MALL
IF GROUND PERCENTAGE YEAR BUILT OR TOTAL AND FREESTANDING
NAME/LOCATION LEASE)(1) INTEREST(2) ACQUIRED GLA GLA LEASED(3)
- -------------------------------------------- ---------------- ------------- ------------- --------- ----------------
<C> <S> <C> <C> <C> <C> <C>
<CAPTION>
ANCHORS
- ----- --------------------------------------
<C> <<C>
23. College Mall, Bloomington, IN Fee and Ground 100.0 Built 1965 697,179 86.3
Lease(10)(2048)
24. Columbia Center, Kennewick, WA Fee 100.0 Acquired 1987 690,503 90.4
25. Coral Square, Coral Springs, FL Fee 50.0 Built 1984 939,414 86.2
26. Crossroads Mall, Omaha, NE Fee 100.0 Acquired 1994 872,859 91.8
27. Crystal River Mall, Crystal River, FL Fee 100.0 Built 1990 425,091 75.8
28. Desoto Square, Bradenton, FL Fee 100.0 Built 1973 701,611 83.3
29. East Towne Mall, Knoxville, TN Fee 100.0 Built 1984 977,227 79.7
30. Eastern Hills Mall, Buffalo, NY Fee 100.0 Built 1971 990,851 88.6
31. Eastgate Consumer Mall, Indianapolis, Fee 100.0 Acquired 1981 462,968 84.2
IN
32. Eastland Mall, Tulsa, OK Fee 100.0 Built 1986 703,942 79.4
33. Florida Mall, The, Orlando, FL Fee 50.0 Built 1986 1,119,884 98.4
34. Forest Mall, Fond Du Lac, WI Fee 100.0 Built 1973 486,224 87.6
35. Forest Village Park Mall, Forestville, Fee 100.0 Built 1980 417,206 84.0
MD
36. Fremont Mall, Fremont, NE Fee 100.0 Built 1966 208,367 95.4
37. Glen Burnie Mall, Glen Burnie, MD Fee 100.0 Built 1963 450,178 89.9
38. Golden Ring Mall, Baltimore, MD Fee 100.0 Built 1974 719,437 87.1
39. Great Lakes Mall, Cleveland, OH Fee 100.0 Built 1961 1,293,096 98.8
40. Greenwood Park Mall, Greenwood, IN Fee 100.0 Acquired 1979 1,274,150 93.0
41. Gulf View Square, Port Richey, FL Fee 100.0 Built 1980 811,426 87.6
42. Heritage Park Mall, Midwest City, OK Fee 100.0 Built 1978 636,889 74.0
43. Hutchinson Mall, Hutchinson, KS Fee 100.0 Built 1985 525,942 71.4
44. Independence Center, Independence, MO Fee 100.0 Acquired 1994 1,033,566 77.3
45. Ingram Park Mall, San Antonio, TX Fee 100.0 Built 1979 1,134,426 89.2
46. Irving Mall, Irving, TX Fee 100.0 Built 1971 1,127,213 83.9
47. Jefferson Valley Mall, Yorktown Fee 100.0 Built 1983 589,600 95.2
Heights, NY
<CAPTION>
23. JC Penney, Lazarus, L.S. Ayres, Sears,
Target
24. The Bon Marche, Lamonts, JC Penney,
Sears
25. Burdines(5), Mervyn's, JC Penney,
Sears
26. Dillard's, Sears, Younkers
27. Belk Lindsey, Kmart, JC Penney, Sears
28. Burdines, JC Penney, Sears, Dillard's
29. Dillard's, JC Penney, Proffitt's,
Sears, Service Merchandise
30. Sears, Bon Ton, JC Penney, Kaufman's
31. Burlington Coat Factory (8)
32. Dillard's, JC Penney, Mervyn's,
Service Merchandise
33. Saks Fifth Avenue, Dillard's(5),
Gayfers, JC Penney, Sears
34. JC Penney, Kohl's, Younkers, Prange
Way
35. JC Penney, Kmart
36. 1/2 Price Store, JC Penney
37. Montgomery Ward
38. Caldor, Montgomery Ward, The Hecht
Company
39. Dillard's(5), Kaufman's, JC Penney,
Sears
40. JC Penney, Lazarus, L.S. Ayres,
Montgomery Ward, Sears, Service
Merchandise
41. Burdines, Dillard's, Montgomery Ward,
JC Penney, Sears
42. Dillard's, Montgomery Ward, Sears
43. Dillard's, JC Penney, Sears, Service
Merchandise, Wal-Mart
44. Dillard's, The Jones Store Co., Sears
45. Dillard's(5), Foley's, JC Penney,
Sears
46. Dillard's, Foley's, JC Penney,
Mervyn's, Sears
47. Macy's, Sears, Service Merchandise
</TABLE>
S-28
<PAGE> 29
<TABLE>
<CAPTION>
OWNERSHIP
INTEREST
(EXPIRATION PARTNERSHIPS' PERCENT OF MALL
IF GROUND PERCENTAGE YEAR BUILT OR TOTAL AND FREESTANDING
NAME/LOCATION LEASE)(1) INTEREST(2) ACQUIRED GLA GLA LEASED(3)
- -------------------------------------------- ---------------- ------------- ------------- --------- ----------------
<C> <S> <C> <C> <C> <C> <C>
<CAPTION>
ANCHORS
- ----- --------------------------------------
<C> <<C>
48. La Plaza, McAllen, TX Fee and Ground 100.0 Built 1976 841,573 95.8
Lease(6)(2040)
49. Lafayette Square, Indianapolis, IN Fee 100.0 Built 1968 1,244,957 85.3
50. Lakeland Square, Lakeland, FL Fee 49.9 Built 1988 901,818 85.9
51. Lakeline Mall, N. Austin, TX Fee 50.0 Built 1995 1,102,946 88.9
52. Lima Mall, Lima, OH Fee 100.0 Built 1965 753,314 93.6
53. Lincolnwood Town Center, Lincolnwood, Fee 100.0 Built 1990 441,169 94.9
IL
54. Longview Mall, Longview, TX Fee 100.0 Built 1978 617,002 87.2
55. Machesney Park Mall, Rockford, IL Fee 100.0 Built 1979 555,882 74.9
56. Mall of the Mainland, Galveston, TX Fee 65.0(7) Built 1991 779,014 56.2
57. Markland Mall, Kokomo, IN Ground Lease 100.0 Built 1968 391,231 86.7
(2041)
58. McCain Mall, N. Little Rock, AR Ground Lease 100.0 Built 1973 775,378 97.4
(11)(2032)
59. Melbourne Square, Melbourne, FL Fee 100.0 Built 1982 733,842 83.2
60. Memorial Mall, Sheboygan, WI Fee 100.0 Built 1969 416,273 91.0
61. Miami International Mall, Miami, FL Fee 60.0 Built 1982 972,281 95.7
62. Midland Park Mall, Midland, TX Fee 100.0 Built 1980 619,396 81.0
63. Miller Hill Mall, Duluth, MN Fee 100.0 Built 1973 806,667 88.1
64. Mission Viejo Mall, Mission Viejo, CA Fee 100.0 Built 1979 815,466 70.2
65. Mounds Mall, Anderson, IN Ground Lease 100.0 Built 1965 409,437 75.6
(2033)
66. Muncie Mall, Muncie, IN Fee 100.0 Built 1970 499,683 89.1
67. North East Mall, Hurst, TX Fee 50.0(12) Built 1971 1,140,403 87.7
68. North Towne Square, Toledo, OH Fee 100.0 Built 1980 750,886 72.9
69. Northfield Square, Bradley, IL Fee 31.6(7) Built 1990 533,002 72.1
70. Northgate Mall, Seattle, WA Fee 100.0 Acquired 1987 1,049,978 92.0
71. Northwoods Mall, Peoria, IL Fee 100.0 Acquired 1983 666,778 92.9
72. Orange Park Mall, Jacksonville, FL Fee 100.0 Acquired 1994 848,549 90.1
<CAPTION>
48. Dillard's, JC Penney, Jones & Jones,
Sears, Service Merchandise
49. JC Penney, LS Ayres, Lazarus, Sears,
Montgomery Ward
50. Belk Lindsey, Burdines, Dillard's,
Mervyn's, JC Penney, Sears
51. Dillard's, Foley's, JC Penney,
Mervyn's, Sears
52. Elder-Beerman, Lazarus, JC Penney,
Sears
53. Carson Pirie Scott, JC Penney
54. Dillard's(5), JC Penney, Sears,
Wilson's
55. Kohl's, JC Penney, Younkers (8)
56. Dillard's, JC Penney, Sears, Foley's
57. Lazarus, Sears, Target
58. Dillard's, JC Penney, M.M. Cohn, Sears
59. Belk Lindsey, Burdines, Dillard's,
Mervyn's, JC Penney
60. JC Penney, Kohl's, Sears
61. Burdines(5), Sears, Mervyn's, JC
Penney
62. Dillard's(5), JC Penney, Sears
63. Glass Block, JC Penney, Montgomery
Ward, Sears
64. Bullock's, Montgomery Ward, Robinsons-
May(5)
65. Elder-Beerman, JC Penney, Sears
66. JC Penney, L.S. Ayres, Sears
67. Dillard's(5), JC Penney, Montgomery
Ward, Sears
68. Elder-Beerman, Lion, Montgomery Ward
69. Sears, Carson Pirie Scott, JC Penney,
Venture
70. The Bon Marche, Lamonts, Nordstrom, JC
Penney
71. Famous Barr, JC Penney, Montgomery
Ward
72. Dillard's, Gayfer's, JC Penney, Sears
</TABLE>
S-29
<PAGE> 30
<TABLE>
<CAPTION>
OWNERSHIP
INTEREST
(EXPIRATION PARTNERSHIPS' PERCENT OF MALL
IF GROUND PERCENTAGE YEAR BUILT OR TOTAL AND FREESTANDING
NAME/LOCATION LEASE)(1) INTEREST(2) ACQUIRED GLA GLA LEASED(3)
- -------------------------------------------- ---------------- ------------- ------------- --------- ----------------
<C> <S> <C> <C> <C> <C> <C>
<CAPTION>
ANCHORS
- ----- --------------------------------------
<C> <<C>
73. Paddock Mall, Ocala, FL Fee 100.0 Built 1980 568,082 91.0
74. Palm Beach Mall, West Palm Beach, FL Fee 50.0 Built 1967 1,200,636 85.6
75. Port Charlotte Town Center, Port Fee 80.0(7) Built 1989 720,988 73.2
Charlotte, FL
76. Prien Lake Mall, Lake Charles, LA Fee and Ground 100.0 Built 1972 467,520 96.2
Lease(6)(2025)
77. Raleigh Springs Mall, Memphis, TN Fee and Ground 100.0 Built 1971 885,741 83.3
Lease (6)(2018)
78. Randall Park Mall, Cleveland, OH Fee 100.0 Built 1976 1,531,484 68.0
79. Richardson Square, Dallas, TX Fee 100.0 Built 1977 864,404 57.8
80. Richmond Mall, Cleveland, OH Fee 100.0 Built 1966 873,227 71.9
81. Richmond Square, Richmond, IN Fee 100.0 Built 1966 310,975 58.0
82. Rolling Oaks Mall, North San Antonio, Fee 49.9 Built 1988 758,834 67.4
TX
83. Ross Park Mall, Pittsburgh, PA Fee 89.0(7) Built 1986 1,273,446 93.1
84. Seminole Towne Center, Sanford, FL Fee 45.0 Built 1995 1,132,378 85.2
85. Smith Haven Mall, Lake Grove, NY Fee 25.0 Acquired 1995 1,354,631 84.9
86. South Park Mall, Shreveport, LA Fee 100.0 Built 1975 856,685 77.5
87. Southern Park Mall, Youngstown, OH Fee 100.0 Built 1970 1,168,972 92.7
88. Southgate Mall, Yuma, AZ Fee 100.0 Acquired 1988 321,177 78.0
89. Southtown Mall, Ft. Wayne, IN Fee 100.0 Built 1969 858,196 34.7
90. St. Charles Towne Center, Waldorf, MD Fee 100.0 Built 1990 962,060 83.8
91. Summit Mall, Akron, OH Fee 100.0 Built 1965 724,578 80.7
92. Sunland Park Mall, El Paso, TX Fee 100.0 Built 1988 921,357 79.5
93. Tacoma Mall, Tacoma, WA Fee 100.0 Acquired 1987 1,255,278 91.0
94. Tippecanoe Mall, Lafayette, IN Fee 100.0 Built 1973 867,892 80.7
95. Towne East Square, Wichita, KS Fee 100.0 Built 1975 1,151,920 75.4
96. Towne West Square, Wichita, KS Fee 100.0 Built 1980 942,158 83.7
97. Treasure Coast Square, Stuart, FL Fee 100.0 Built 1987 884,630 84.3
<CAPTION>
73. Belk Lindsey, Burdines, JC Penney,
74. JC Penney, Lord & Taylor, Mervyn's,
Burdines, Sears
75. Burdines, Dillard's, Montgomery Ward,
JC Penney, Sears
76. JC Penney, Montgomery Ward, The White
House
77. Dillard's, Goldsmith's, JC Penney,
Sears
78. Dillard's, Kaufman's, JC Penney,
Sears, Burlington Coat Factory
79. Dillard's(5), Sears, Montgomery Ward
80. JC Penney, Sears
81. JC Penney, Sears
82. Dillard's, Foley's, Sears
83. Lazarus, JC Penney, Kaufmann's, Sears,
Service Merchandise
84. Burdines, Dillard's, JC Penney,
Parisian, Sears
85. Sterns, Macy's, Sears, Steinbach
86. Burlington Coat Factory, Dillard's, JC
Penney, Montgomery Ward, Stage
87. Dillard's, Kaufman's, JC Penney, Sears
88. Albertson's, Dillard's, JC Penney,
Sears
89. Kohl's, JC Penney, L.S. Ayres, Sears,
Service Merchandise
90. Hoecht's, JC Penney, Montgomery Ward,
Sears
91. Kaufmann's, Dillard's (8)
92. Dillard's, JC Penney, Mervyn's,
Montgomery Ward, The Popular
93. The Bon Marche, Mervyn's, Nordstrom,
JC Penney, Sears
94. JC Penney, Kohl's, L.S. Ayres,
Lazarus, Sears
95. Dillard's, JC Penney, Sears
96. Dillard's, JC Penney, Montgomery Ward,
Office Depot, Sears, Service
Merchandise
97. Burdines, Dillard's, Mervyn's, JC
Penney, Sears
</TABLE>
S-30
<PAGE> 31
<TABLE>
<CAPTION>
OWNERSHIP
INTEREST
(EXPIRATION PARTNERSHIPS' PERCENT OF MALL
IF GROUND PERCENTAGE YEAR BUILT OR TOTAL AND FREESTANDING
NAME/LOCATION LEASE)(1) INTEREST(2) ACQUIRED GLA GLA LEASED(3)
- -------------------------------------------- ---------------- ------------- ------------- --------- ----------------
<C> <S> <C> <C> <C> <C> <C>
98. Tyrone Square, St. Petersburg, FL Fee 100.0 Built 1972 1,092,449 97.5
99. University Mall, Little Rock, AR Ground Lease 100.0 Built 1967 565,876 84.6
(13)(2026)
100. University Mall, Pensacola, FL Fee 100.0 Acquired 1994 711,992 82.0
101. University Park Mall, South Bend, IN Fee 60.0 Built 1979 872,234 95.6
102. Upper Valley Mall, Springfield, OH Fee 100.0 Built 1971 750,665 91.6
103. Valle Vista Mall, Harlingen, TX Fee 100.0 Built 1983 647,117 85.3
104. Virginia Center Commons(4), Richmond, Fee 70.0(7) Built 1991 788,892 76.5
VA
105. Washington Square, Indianapolis, IN Fee 100.0 Built 1974 1,178,409 65.9
106. West Ridge Mall, Topeka, KS(14) Fee 100.0 Built 1988 1,041,611 75.1
107. West Town Mall, Knoxville, TN Ground Lease 2.0 Acquired 1991 1,261,902 86.0
(6)(2042)
108. White Oaks Mall, Springfield, IL Fee 77.0 Built 1977 903,578 94.4
109. Wichita Mall, Wichita, KS Ground Lease 100.0 Built 1969 379,461 47.9
(2022)
110. Windsor Park Mall, San Antonio, TX Fee 100.0 Built 1976 1,089,537 70.8
111. Woodville Mall, Toledo, OH Fee 100.0 Built 1969 795,027 59.9
SPECIALTY RETAIL CENTERS
1. The Forum Shops at Caesars, Las Vegas, Ground Lease 60.0 Built 1992 242,031 95.9
NV (2067)
2. Trolley Square, Salt Lake City, UT Fee and Ground 90.0 Acquired 1986 225,612(16) 76.4
Lease(15)
MIXED-USE PROPERTIES
1. Fashion Centre at Pentagon City, The, Fee 21.0 Built 1989 987,942(17) 99.1(18)
Arlington, VA
2. New Orleans Centre/CNG Tower, New Fee and Ground 100.0 Built 1988 1,025,634(19) 62.4(18)
Orleans, LA Lease (2084)
3. O'Hare International Center, Rosemont, Fee 100.0 Built 1988 502,012(20) 87.9(18)
IL
4. Riverway, Rosemont, IL Fee 100.0 Acquired 1991 821,332(21) 93.9(18)
<CAPTION>
NAME/LOCATION ANCHORS
- -------------------------------------------- -------------------------------------
<C> <S> <C>
98. Tyrone Square, St. Petersburg, FL Burdines, Dillard's, JC Penney, Sears
99. University Mall, Little Rock, AR JC Penney, Montgomery Ward, M.M. Cohn
100. University Mall, Pensacola, FL McRae's, JC Penney, Sears
101. University Park Mall, South Bend, IN LS Ayres, Hudson's, JC Penney, Sears
102. Upper Valley Mall, Springfield, OH Lazarus, JC Penney, Sears,
Elder-Beerman
103. Valle Vista Mall, Harlingen, TX Dillard's, JC Penney, Marshalls,
Mervyn's, Sears
104. Virginia Center Commons(4), Richmond, Profitt's, Hoecht's, Leggett, JC
VA Penney, Sears
105. Washington Square, Indianapolis, IN L.S. Ayres, Lazarus, Montgomery Ward,
JC Penney, Sears
106. West Ridge Mall, Topeka, KS(14) Dillard's, JC Penney, Jones,
Montgomery Ward, Sears
107. West Town Mall, Knoxville, TN JC Penney, Sears, Profitt's,
Dillard's, Parisian
108. White Oaks Mall, Springfield, IL Bergner's, Famous Barr, Montgomery
Ward, Sears
109. Wichita Mall, Wichita, KS Office Max, Montgomery Ward
110. Windsor Park Mall, San Antonio, TX Dillard's(5), JC Penney, Mervyn's,
Montgomery Ward
111. Woodville Mall, Toledo, OH Andersons, Elder-Beerman, Sears (8)
SPECIALTY RETAIL CENTERS
1. The Forum Shops at Caesars, Las Vegas, --
NV
2. Trolley Square, Salt Lake City, UT --
1. Fashion Centre at Pentagon City, The, Macy's, Nordstrom
Arlington, VA
2. New Orleans Centre/CNG Tower, New Macy's, Lord & Taylor
Orleans, LA
3. O'Hare International Center, Rosemont, --
IL
4. Riverway, Rosemont, IL --
</TABLE>
S-31
<PAGE> 32
<TABLE>
<CAPTION>
OWNERSHIP
INTEREST
(EXPIRATION PARTNERSHIPS' PERCENT OF
IF GROUND PERCENTAGE YEAR BUILT OR TOTAL GLA
NAME/LOCATION LEASE)(1) INTEREST(2) ACQUIRED GLA LEASED(3)
- -------------------------------------------- ---------------- ------------- ------------- --------- ----------------
<C> <S> <C> <C> <C> <C> <C>
COMMUNITY SHOPPING CENTERS
1. Arvada Plaza, Arvada, CO Ground Lease 100.0 Built 1966 98,215 100.0
(2058)
2. Aurora Plaza, Aurora, CO Ground Lease 100.0 Built 1965 148,666 96.6
(2058)
3. Bloomingdale Court, Bloomingdale, IL Fee 100.0 Built 1987 598,570 85.7
4. Boardman Plaza, Youngstown, OH Fee 100.0 Built 1951 649,817 91.2
5. Bridgeview Court, Bridgeview, IL Fee 100.0 Built 1988 280,299 62.9
6. Brightwood Plaza, Indianapolis, IN Fee 100.0 Built 1965 41,893 100.0
7. Bristol Plaza, Bristol, VA Ground Lease 100.0 Built 1965 116,754 38.9
(2029)
8. Buffalo Grove Towne Center, Buffalo Fee 92.5 Built 1988 134,131 82.3
Grove, IL
9. Celina Plaza, El Paso, TX Fee and Ground 100.0 Built 1978 32,622 100.0
Lease(22)(2027)
10. Chesapeake Center, Chesapeake, VA Fee 100.0 Built 1989 299,604 99.2
11. Cobblestone Court, Victor, NY Fee and Ground 35.0 Built 1993 261,211 97.3
Lease(10)(2038)
12. Cohoes Commons, Rochester, NY Fee and Ground 100.0 Built 1984 262,964 93.6
Lease(6)(2032)
13. Cook's Discount, Ardmore, OK(23) Fee 100.0 Built 1969 60,396 0.0
14. Countryside Plaza, Countryside, IL Fee and Ground 100.0 Built 1977 435,441 82.6
Lease(10)(2058)
15. Crystal Court, Crystal Lake, IL Fee 35.0 Built 1989 284,741 57.8
16. East Towne Commons, Knoxville, TN Fee 100.0 Built 1987 180,355 100.0
17. Eastland Plaza, Tulsa, OK Fee 100.0 Built 1986 190,261 75.6
18. Fairfax Court, Fairfax, VA Ground Lease 26.3 Built 1992 249,285 96.5
(2052)
19. Forest Plaza, Rockford, IL Fee 100.0 Built 1985 421,516 99.3
20. Fox River Plaza, Elgin, IL Fee 100.0 Built 1985 324,786 81.3
21. Gaitway Plaza, Ocala, FL Fee 23.3 Built 1989 230,052 98.3
22. Great Lakes Plaza, Cleveland, OH Fee 100.0 Built 1977 162,873 77.8
<CAPTION>
ANCHORS
- ----- ---------------------------------------------
<C> <<C>
1. King Soopers
2. King Soopers, MacFrugel's Bargains, Super
Saver Cinema
3. Builders Square, Cineplex Odeon, Frank's
Nursery, Marshalls, Office Max, Service
Merchandise, T.J. Maxx, Wal-Mart (8)
4. Burlington Coat Factory, Giant Eagle, Hills,
Reyers Outlet (8)
5. Omni, Venture
6. --
7. (8)
8. Buffalo Grove Theatres
9. --
10. Kmart, Phar Mor, Service Merchandise,
Cinemark Theatres
11. Dick's Sporting Goods, Kmart, Office Max,
Fashion Bug
12. Bryant & Stratton Business Institute,
Lechmere's, Xerox
13. (8)
14. Best Buy, Builders Square, Old Country
Buffet, Venture (8)
15. Cub, Service Merchandise, Wal-Mart (8)
16. Electric Avenue & More
17. Marshalls, Target, Toys 'R' Us
18. Circuit City, Superstore, Montgomery Ward,
Today's Man
19. Builders Square, Kohl's, Marshalls, Michaels,
Office Max, T.J. Maxx
20. Builders Square, Michaels, Service
Merchandise, Venture (8)
21. Books-A-Million, Montgomery Ward, Office
Depot, T.J. Maxx
22. Handy Andy, Michaels
</TABLE>
S-32
<PAGE> 33
<TABLE>
<CAPTION>
OWNERSHIP
INTEREST
(EXPIRATION PARTNERSHIPS' PERCENT OF
IF GROUND PERCENTAGE YEAR BUILT OR TOTAL GLA
NAME/LOCATION LEASE)(1) INTEREST(2) ACQUIRED GLA LEASED(3)
- ---------------------------------------------- ---------------- ------------- ------------- --------- ----------------
<C> <S> <C> <C> <C> <C> <C>
23. Great Northeast Plaza, Philadelphia, PA Fee 50.0 Acquired 1989 298,242 97.4
24. Greenwood Plus, Greenwood, IN Fee 100.0 Built 1979 145,116 100.0
25. Griffith Park Plaza, Griffith, IN Ground Lease 100.0 Built 1979 274,230 97.8
(2060)
26. Grove at Lakeland Square, The, Lakeland, Fee 100.0 Built 1988 215,463 96.5
FL
27. Hammond Square, Sandy Springs, GA Space Lease 100.0 Built 1974 87,705 100.0
(2011)
28. Highland Lakes Center, Orlando, FL Fee 100.0 Built 1991 477,452 83.9
29. Ingram Plaza, San Antonio, TX Fee 100.0 Built 1980 111,518 100.0
30. Lake Plaza, Waukegan, IL Fee 100.0 Built 1986 218,208 100.0
31. Lake View Plaza, Orland Park, IL Fee 100.0 Built 1986 388,126 96.9
32. Lima Center, Lima, OH Fee 100.0 Built 1976 201,154 91.0
33. Lincoln Crossing, O'Fallon, IL Fee 100.0 Built 1990 161,337 100.0
34. Mainland Crossing, Galveston, TX Fee 80.0(7) Built 1991 390,986 39.5
35. Maplewood Square, Omaha, NE Fee 100.0 Built 1970 129,190 96.3
36. Markland Plaza, Kokomo, IN Fee 100.0 Built 1974 108,296 98.1
37. Martinsville Plaza, Martinsville, VA Space Lease 100.0 Built 1967 102,162 97.1
(2036)
38. Marwood Plaza, Indianapolis, IN Fee 100.0 Built 1962 105,066 100.0
39. Matteson Plaza, Matteson, IL Fee 100.0 Built 1988 275,455 87.2
40. Memorial Plaza, Sheboygan, WI Fee 100.0 Built 1966 129,202 24.0
41. Mounds Mall Cinema, Anderson, IN Fee 100.0 Built 1974 7,500 100.0
42. New Castle Plaza, New Castle, IN Fee 100.0 Built 1966 91,648 100.0
43. North Ridge Plaza, Joliet, IL Fee 100.0 Built 1985 323,672 100.0
44. North Riverside Park Plaza, North Fee 100.0 Built 1977 119,608 96.5
Riverside, IL
45. Northland Plaza, Columbus, OH Fee and Ground 100.0 Built 1988 205,635 94.5
Lease(6)(2085)
46. Northwood Plaza, Fort Wayne, IN Fee 100.0 Built 1974 211,840 100.0
47. Park Plaza, Hopkinsville, KY Fee and Ground 100.0 Built 1968 114,042 100.0
Lease(6)(2039)
<CAPTION>
NAME/LOCATION ANCHORS
- -------------------------------------------------- ----------------------------------------
<S> <C> <C>
23. Great Northeast Plaza, Philadelphia, PA Sears, Phar Mor
24. Greenwood Plus, Greenwood, IN Best Buy, Kohl's
25. Griffith Park Plaza, Griffith, IN General Cinema, Venture
26. Grove at Lakeland Square, The, Lakeland, FL Cobb Theatres, Sports Authority, Wal-Mart
27. Hammond Square, Sandy Springs, GA --
28. Highland Lakes Center, Orlando, FL Goodings, Dress for Less, Marshalls,
Cinemark Theatres, Office Max, Service
Merchandise, Target (8)
29. Ingram Plaza, San Antonio, TX --
30. Lake Plaza, Waukegan, IL Builders Square, Venture
31. Lake View Plaza, Orland Park, IL Best Buy(24), L. Fish Furniture,
Linens-N-Things(24), Marshalls,
Michaels, Omni, Pet Care Plus(24),
Service Merchandise, Ultra 3 (24)
32. Lima Center, Lima, OH Hills, Service Merchandise
33. Lincoln Crossing, O'Fallon, IL PetsMart, Wal-Mart
34. Mainland Crossing, Galveston, TX Sam's Club, Wal-Mart (8)
35. Maplewood Square, Omaha, NE Target
36. Markland Plaza, Kokomo, IN Service Merchandise
37. Martinsville Plaza, Martinsville, VA Rose's
38. Marwood Plaza, Indianapolis, IN Kroger
39. Matteson Plaza, Matteson, IL Dominick's, Kmart, Michael's (8)
40. Memorial Plaza, Sheboygan, WI Marcus Theatre(8)
41. Mounds Mall Cinema, Anderson, IN Cinema I & II
42. New Castle Plaza, New Castle, IN Goody's
43. North Ridge Plaza, Joliet, IL Builders Square, Office Max, Service Merchandise
44. North Riverside Park Plaza, North --
Riverside, IL
45. Northland Plaza, Columbus, OH Marshalls, Phar-Mor, Service Merchandise
46. Northwood Plaza, Fort Wayne, IN Regal Cinema, Target
47. Park Plaza, Hopkinsville, KY Wal-Mart
</TABLE>
S-33
<PAGE> 34
<TABLE>
<CAPTION>
OWNERSHIP
INTEREST
(EXPIRATION PARTNERSHIPS' PERCENT OF
IF GROUND PERCENTAGE YEAR BUILT OR TOTAL GLA
NAME/LOCATION LEASE)(1) INTEREST(2) ACQUIRED GLA LEASED(3)
------------- ---------------- ------------- ------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
48. Plaza at Buckland Hills, The, East Fee 26.3 Built 1993 336,534 78.7
Hartford, CT
49. Regency Plaza, St. Charles, MO Fee 100.0 Built 1988 277,521 96.3
50. Ridgewood Court, Jackson, MS Fee 35.0 Built 1993 240,843 100.0
51. Royal Eagle Plaza, Coral Springs, FL Fee 35.0 Built 1989 203,140 96.5
52. St. Charles Towne Plaza, Waldorf, MD Fee 100.0 Built 1987 435,162 98.4
53. Teal Plaza, Lafayette, IN Fee and Ground 100.0 Built 1962 110,751 100.0
Lease(2007)(6)
54. Terrace at The Florida Mall, Orlando, FL Fee 100.0 Built 1989 332,980 96.7
55. Tippecanoe Plaza, Lafayette, IN Fee 100.0 Built 1974 94,125 100.0
56. University Center, South Bend, IN Fee 60.0 Built 1980 150,533 97.8
57. Village Park Plaza, Westfield, IN Fee 35.0 Built 1990 503,002 97.5
58. Wabash Village, West Lafayette, IN Ground Lease 100.0 Built 1970 124,688 95.4
(2063)
59. Washington Plaza, Indianapolis, IN Fee 85.0(7) Built 1978 50,302 97.7
60. West Ridge Plaza, Topeka, KS Fee 100.0 Built 1988 232,675 96.3
61. West Town Corners, Altamonte Springs, FL Fee 23.3 Built 1989 384,812 99.2
62. Westland Park Plaza, Orange Park, FL Fee 23.3 Built 1989 163,154 95.3
63. White Oaks Plaza, Springfield, IL Fee 100.0 Built 1986 389,063 98.9
64. Willow Knolls Court, Peoria, IL Fee 35.0 Built 1990 364,735 93.5
65. Wood Plaza, Fort Dodge, IA Ground Lease 100.0 Built 1968 88,595 98.9
(2045)
66. Yards Plaza, The, Chicago, IL Fee 35.0 Built 1990 273,292 95.6
PROPERTIES UNDER CONSTRUCTION
1. Arizona Mills, Tempe, AZ (25) 25.0 (26) 1,225,000 N/A
2. Cottonwood Mall, Albuquerque, NM Fee 100.0 1996 (27) 1,035,000 N/A
<CAPTION>
ANCHORS
-------
<S> <C>
48. Plaza at Buckland Hills, The, East Toys 'R' Us, Kids 'R' Us, Service
Hartford, CT Merchandise, Lechmere, Linens-N-Things,
Filene's Basement (8)
49. Regency Plaza, St. Charles, MO Sam's Wholesale, Wal-Mart
50. Ridgewood Court, Jackson, MS Campo Electronics, Home Quarters,
Service Merchandise, T.J. Maxx
51. Royal Eagle Plaza, Coral Springs, FL Kmart, Luxury Linens
52. St. Charles Towne Plaza, Waldorf, MD Ames, Hechinger, Jo Ann Fabrics,
People's, Service Merchandise, Shoppers
Food Warehouse, T.J. Maxx
53. Teal Plaza, Lafayette, IN Kmart
54. Terrace at The Florida Mall, Orlando, F Target, J. Byrons, Waccamaw, Service
Merchandise, Marshalls
55. Tippecanoe Plaza, Lafayette, IN Barnes & Noble Bookseller, Service
Merchandise
56. University Center, South Bend, IN Best Buy, Michaels, Service Merchandise
57. Village Park Plaza, Westfield, IN Frank's Nursery, Gaylans, Jo-Ann
Fabrics, Kohl's, Marsh, Regal Cinemas,
Wal-Mart
58. Wabash Village, West Lafayette, IN Kmart
59. Washington Plaza, Indianapolis, IN Kids 'R' Us
60. West Ridge Plaza, Topeka, KS Magic Forest, Target, TJ Maxx, Toys 'R' Us
61. West Town Corners, Altamonte Springs, FL PetsMart, Service Merchandise, Sports
Authority, WalMart, Xtra
62. Westland Park Plaza, Orange Park, FL Burlington Coat Factory, PetsMart,
Sports Authority
63. White Oaks Plaza, Springfield, IL Cub Foods, Kids 'R' Us, Kohl's, Office
Max, T.J. Maxx, Toys 'R' Us
64. Willow Knolls Court, Peoria, IL Kohl's, Phar-Mor, Sam's Wholesale Club,
Willow Knolls, Theaters 14
65. Wood Plaza, Fort Dodge, IA Country General
66. Yards Plaza, The, Chicago, IL Burlington Coat Factory, Omni
Superstore, Montgomery Ward
PROPERTIES UNDER CONSTRUCTION
1. Arizona Mills, Tempe, AZ Burlington Coat Factory, Ross Dress for
Less, Oshman's Supersport, Off 5th-Saks
Fifth Avenue Outlet
2. Cottonwood Mall, Albuquerque, NM Dillard's, Foley's, JC Penney, Mervyn's,
Montgomery Ward, United Artist
Entertainment Complex
</TABLE>
S-34
<PAGE> 35
<TABLE>
<CAPTION>
OWNERSHIP
INTEREST
(EXPIRATION PARTNERSHIPS' PERCENT OF
IF GROUND PERCENTAGE YEAR BUILT OR TOTAL GLA
NAME/LOCATION LEASE)(1) INTEREST(2) ACQUIRED GLA LEASED(3)
- ---------------------------------------------- ---------------- ------------- ------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
3. Grapevine Mills, Dallas/Ft. Worth, TX Fee 37 (26) 1,450,000 N/A
4. Indian River Commons, Vero Beach, FL Fee 50.0 (26) 265,000 N/A
5. Indian River Mall, Vero Beach, FL Fee 50.0 (28) 754,000 N/A
6. Ontario Mills, Ontario, CA Fee 25.0 (28) 1,421,470 N/A
7. The Source, Long Island, NY Fee 50.0 (26) 730,000 N/A
8. Tower Shops at Stratosphere, Las Vegas, Space Lease 50.0 (28) 80,000 N/A
NV (2051)
<CAPTION>
ANCHORS
- ----- ----------------------------------------
<S> <C>
3. Books-A-Million, Burlington Coat
4. HomePlace, Lowe's, Office Max, Service
Merchandise
5. AMC Theatres, Burdines, Dillard's, JC
Penney, Sears
6. AMC Theatres, American Wilderness
Experience, Bed, Bath & Beyond,
Bernini -- Off Rodeo, Burlington Coat
Factory, Dave & Busters, Group USA,
IWERKS, JC Penney, Marshall's, Mikasa,
Off 5th-Saks Fifth Avenue Outlet, Sports
Authority, TJ Maxx, Totally for Kids,
Virgin Records
7. Fortunoff, Nordstrom Rack, Off 5th-Saks
Fifth Avenue Outlet, Cheesecake Factory,
Rainforest Cafe, Just For Feet,
Bertolini's
8. Rainforest Cafe
</TABLE>
S-35
<PAGE> 36
- ---------------
(1) The date listed is the expiration date of the last renewal option available
to the Company under the ground lease. In a majority of the ground leases,
the lessee has either a right of first refusal or the right to purchase the
lessor's interest. Unless otherwise indicated, each ground lease listed in
this column covers at least 50% of its respective property.
(2) The Company's interests in some Joint Venture Properties are subject to
preferences on distributions in favor of other partners.
(3) Represents the percentage of Owned GLA leased by tenants.
(4) This property is managed by a third party.
(5) This retailer operates two stores at this property.
(6) Indicates ground lease covers less than 15% of the acreage of this
property.
(7) The Company receives substantially all of the economic benefit of these
properties.
(8) Includes an anchor space currently vacant.
(9) Indicates two ground leases which taken together, cover less than 50% of
the acreage of the property.
(10) Indicates ground lease covers less than 50% of the acreage of the property.
(11) Indicates ground lease covers all of the property except for parcels owned
in fee by anchors.
(12) The Operating Partnership has received an assignment of distributions in
respect of the Simons' 50% general partnership interest in this property.
In addition, the Simons have granted the Operating Partnership an option to
purchase the Simons' general partnership interest for one dollar, and to
purchase the Simons' 30% limited partnership interest if consents to such
transfers can be obtained. The purchase price is fair market value. The
general and limited partners have the right to put their interests to the
Operating Partnership at the same price as provided under the option.
Certain limited partners have filed an action challenging the Operating
Partnership's right to receive these interests in the partnership. The
Simons have agreed to indemnify the Operating Partnership against any and
all damages and costs relating to such action. Settlement discussions are
under way which, if successful, could result in the Operating Partnership
owning 100% of the property.
(13) Indicates one ground lease covers substantially all of the property and a
second ground lease covers the remainder.
(14) Includes outlots in which the Operating Partnership has an 85% interest and
which represents less than 3% of the GLA and total annualized base rent for
the property.
(15) Indicates a ground lease covers a pedestrian walkway and steps at this
property. The Operating Partnership, as ground lessee, has the right to
successive five-year renewal options, except if the lessor, a public
agency, determines that public right-of-way needs necessitate the
locality's use of the ground lease property.
(16) Primarily retail space with approximately 1,500 square feet of office
space.
(17) Primarily retail space with approximately 167,000 square feet of office
space.
(18) Indicates combined occupancy of office and retail space.
(19) Primarily retail space with approximately 488,760 square feet of office
space.
(20) Primarily office space with approximately 12,800 square feet of retail
space.
(21) Primarily office space with approximately 24,300 square feet of retail
space.
(22) Indicates ground lease covers outparcel.
(23) This property was sold on August 1, 1996.
(24) Subleased from TJX Companies.
(25) The joint venture is currently negotiating the purchase of the land at this
property and expects to close before the end of 1996.
(26) Scheduled to open during 1997.
(27) This property opened on July 31, 1996.
(28) Scheduled to open during November of 1996.
S-36
<PAGE> 37
MANAGEMENT
BOARD OF DIRECTORS OF SIMON DEBARTOLO GROUP, INC.
The following table sets forth the composition of the Board of Directors of
the Company.
<TABLE>
<CAPTION>
YEAR OF
EXPIRATION
NAME AGE OF TERM
-------------------------------------------------------------------- --- ----------
<S> <C> <C>
Melvin Simon........................................................ 69 1997
Herbert Simon....................................................... 61 1997
David Simon......................................................... 35 1997
Richard S. Sokolov.................................................. 46 1997
Edward J. DeBartolo, Jr. ........................................... 49 1997
M. Denise DeBartolo York............................................ 45 1997
Birch Bayh.......................................................... 68 1997
William T. Dillard, II.............................................. 51 1998
G. William Miller................................................... 71 1998
Frederick W. Petri.................................................. 49 1999
Terry S. Prindiville................................................ 60 1998
J. Albert Smith, Jr................................................. 55 1999
Philip J. Ward...................................................... 47 1999
</TABLE>
Set forth below is a summary of the business experience of the directors of
the Company.
Melvin Simon is the Co-Chairman of the Board of Directors. In addition, he
is the Chairman of the Board of Directors of Melvin Simon & Associates, Inc.
("MSA, Inc."), a company he founded in 1960 with his brother, Herbert Simon.
Herbert Simon is the Co-Chairman of the Board of Directors. Mr. Simon
served as Chief Executive Officer from the Company's incorporation through
January 2, 1995, when he was appointed Co-Chairman of the Board. In addition,
Mr. Simon is the Chief Executive Officer and President of MSA, Inc., positions
he has held since its founding. Mr. Simon is also a director of Kohl's
Corporation, a specialty retailer.
David Simon is the Chief Executive Officer of the Company. Mr. Simon served
as President from the Company's incorporation until the Merger and was appointed
Chief Executive Officer on January 3, 1995. In addition, he has been Executive
Vice President, Chief Operating Officer and Chief Financial Officer of MSA, Inc.
since 1990. From 1988 to 1990, Mr. Simon was Vice President of Wasserstein
Perella & Company, a firm specializing in mergers and acquisitions. He is the
son of Melvin Simon, the nephew of Herbert Simon and a director of Healthcare
Compare Corp. Mr. Simon served as President from the Company's incorporation
until the Merger.
Richard S. Sokolov has been the President, Chief Operating Officer and a
director of the Company since the Merger. He was the President, Chief Executive
Officer and a director of the DRC from its incorporation until the Merger. Prior
to that he had served as Senior Vice President, Development of EJDC since 1986
and as Vice President and General Counsel since 1982. In addition, Mr. Sokolov
is a trustee and a member of the Executive Committee of the International
Council of Shopping Centers.
Edward J. DeBartolo, Jr. was the Chairman of the DRC Board of Directors
from its incorporation until the Merger. Mr. DeBartolo has been President and
Chief Executive Officer of EJDC since 1994 and a director of EJDC since 1973. He
previously served as President and Chief Administrative Officer of EJDC since
1979. He has been associated with EJDC in an executive capacity since 1973. Mr.
DeBartolo is Chairman of the San Francisco 49ers professional football team and
is also Chairman and Chief Executive Officer of DeBartolo Entertainment, Inc.
EJDC owns a majority of the interests in the San Francisco 49ers. Mr. DeBartolo,
Jr. is the son of the late Edward J. DeBartolo and the brother of M. Denise
DeBartolo York.
S-37
<PAGE> 38
M. Denise DeBartolo York was a director of DRC from February 1995 until the
Merger. She serves as Chairman of the Board of EJDC and DeBartolo, Inc. Ms. York
previously served EJDC as Executive Vice President of Personnel/Communications
and has been associated with EJDC in an executive capacity since 1975. She is
the daughter of the late Edward J. DeBartolo and the sister of Edward J.
DeBartolo, Jr.
Birch Bayh, a director of the Company since the Company's initial public
offering (the "IPO"), is the senior partner in the Washington, D.C. law firm of
Bayh, Connaughton & Malone, P.C. He served as a United States Senator from
Indiana from 1963 to 1981. Mr. Bayh also serves as a director of ICN
Pharmaceuticals and Acordia, Inc.
William T. Dillard, II, a director of the Company since the IPO, is
President and Chief Operating Officer of Dillard Department Stores Inc., a
retailing chain, a position he has held since 1977. Mr. Dillard also serves as a
director of Dillard Department Stores Inc., Frederick Atkins, Inc., Texas
Commerce Bancshares, Inc., Acxiom Corporation and Barnes & Noble, Inc.
G. William Miller was a director of DRC from DRC's initial public offering
(the "DRC IPO") until the Merger. He has been Chairman of the Board and Chief
Executive Officer of G. William Miller & Co. Inc., a merchant banking firm,
since 1983. He is a former Secretary of the U.S. Treasury and a former Chairman
of the Federal Reserve Board. From January 1990 until February 1992, he was
Chairman and Chief Executive Officer of Federated Stores, Inc., the parent
company of predecessors to Federated Department Stores, Inc. Mr. Miller is
Chairman of the Board and a director of Waccamaw Corporation. He is also a
director of GS Industries, Inc., Kleinwort Benson Australian Income Fund, Inc.
and Repligen Corporation.
Fredrick W. Petri was a director of DRC from the DRC IPO until the Merger.
He is a partner of Petrone, Petri & Company, a real estate investment firm he
founded in 1993, and an officer of Housing Capital Company since its formation
in 1994. Prior thereto, he was an Executive Vice President of Wells Fargo Bank,
where for over 18 years he held various real estate positions. Mr. Petri is
currently a trustee of the Urban Land Institute and a director of Storage Trust
Realty. He previously was a member of the Board of Governors and a Vice
President of the National Association of Real Estate Investment Trusts and a
director of the National Association of Industrial and Office Park Development.
He is a director of the University of Wisconsin's Real Estate Center.
Terry S. Prindiville, a director of the Company since the IPO, served as
Executive Vice President and Director of Support Services of J.C. Penney
Company, Inc. a retailing chain from 1988 until 1995. He is also the Chairman of
the Board of Directors of JCP Realty, Inc., a wholly-owned subsidiary of J.C.
Penney Company, Inc.
J. Albert Smith, Jr., a director of the Company since the IPO, is the
President of Bank One, Indianapolis, NA, a commercial bank, a position he has
held since September 30, 1994. Prior to his current position, he was the
President of Bank One Mortgage Corporation, a mortgage banking firm, a position
he held since 1975.
Philip J. Ward was a director of DRC from the DRC IPO until the Merger. He
is Senior Managing Director, Head of Real Estate Investments, for CIGNA
Investments, Inc., a wholly-owned subsidiary of CIGNA Corporation. He is a
member of the International Council of Shopping Centers, the Urban Land
Institute, the National Association of Industrial and Office Parks and the
Society of Industrial and Office Realtors. He is a director of the Connecticut
Housing Investment Fund.
S-38
<PAGE> 39
SENIOR MANAGEMENT OF THE SIMON DEBARTOLO GROUP
The following table sets forth certain information with respect to the
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
-------------------------------- --- ----------------------------------------------
<S> <C> <C>
Melvin Simon(1)................. 69 Co-Chairman
Herbert Simon(1)................ 61 Co-Chairman
David Simon(1).................. 35 Chief Executive Officer
Richard S. Sokolov.............. 46 President and Chief Operating Officer
Executive Vice President--Corporate
Randolph L. Foxworthy........... 51 Development
William J. Garvey............... 57 Executive Vice President--Property Development
James A. Napoli................. 50 Executive Vice President--Leasing
Executive Vice President -- Property
John R. Neutzling............... 44 Management
James M. Barkley................ 44 General Counsel; Secretary
Stephen E. Sterrett............. 41 Treasurer
</TABLE>
- ---------------
(1) Melvin Simon is the brother of Herbert Simon and the father of David Simon.
Set forth below is a summary of the business experience of the executive
officers of the Company whose business experience is not summarized above.
Mr. Foxworthy is the Executive Vice President -- Corporate Development. He
served as a Director of the Company from the IPO until the Merger. Mr. Foxworthy
joined MSA, Inc. in 1980 and has been an Executive Vice President of MSA, Inc.
since 1986 in charge of Corporate Development and has held the same position
with the Company since the IPO. Prior to assuming the position of Executive Vice
President, Mr. Foxworthy served as General Counsel, in which capacity he
supervised all legal operations of MSA, Inc.
Mr. Garvey is the Executive Vice President -- Property Development. Mr.
Garvey, who was Executive Vice President and Director of Development at MSA,
Inc., joined MSA, Inc. in 1979 and has held various positions with MSA, Inc.
since that date and has held his current position with the Company since the
IPO.
Mr. Napoli is the Executive Vice President -- Leasing of the Company. Mr.
Napoli also served as Executive Vice President and Director of Leasing of MSA,
Inc. and has held his current position with the Company since the IPO. Mr.
Napoli was Executive Vice President and Director of Leasing for May Centers,
Inc. before he joined MSA, Inc. in 1989.
Mr. Neutzling is the Executive Vice President -- Property Management, and
as such oversees all property and asset management functions of the Company. He
has held his current position with the Company since the IPO. Mr. Neutzling
joined MSA, Inc. in 1974 and has held various positions with MSA, Inc. since
that date.
Mr. Barkley serves as General Counsel and Secretary. Mr. Barkley holds the
same position for MSA, Inc. and has held his current position with the Company
since the IPO. He joined MSA, Inc. in 1978 as Assistant General Counsel for
Development Activity.
Mr. Sterrett serves as Treasurer and has held his current position with the
Company since the IPO. He joined MSA, Inc. in 1989 and has held various
positions with MSA, Inc. since that date. Prior to that, he was a Senior Manager
at Price Waterhouse.
S-39
<PAGE> 40
DESCRIPTION OF SERIES B PREFERRED SHARES
The description of the particular terms of the Series B Preferred Shares
offered hereby supplements, and to the extent inconsistent therewith replaces,
the description of the general terms and provisions of the Series B Preferred
Shares set forth in the accompanying Prospectus, to which description reference
is hereby made.
GENERAL
The Board of Directors of the Company is authorized to establish one or
more classes and series of capital stock, including series of preferred stock,
from time to time and to establish the number of shares in each class or series
and to fix the preferences, conversion and other rights of such series,
including but not limited to, the fixing of distribution rights, distribution
rates, voting powers, restrictions, limitations as to distributions,
qualifications and terms and conditions of redemption (including sinking fund
provisions) of such class or series, and the liquidation preference, without any
further vote or actions by the stockholders (except in limited circumstances by
holders of Series A Preferred Shares), unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which the Company's securities may be listed.
On September 17, 1996, the Board of Directors of the Company adopted the
relevant resolutions with respect to the designation and issuance of the Series
B Preferred Shares. The following summary of the terms and provisions of the
Series B Preferred Shares does not purport to be complete and is qualified in
its entirety by reference to the pertinent sections of the Company's Amended and
Restated Articles of Incorporation (the "Charter") and the Articles
Supplementary designating the Series B Preferred Shares (the "Designating
Amendment"), each of which is available from the Company.
The registrar, transfer agent and distributions disbursing agent for the
Series B Preferred Shares will be First Chicago Trust Company of New York.
Application has been made to list the Series B Preferred Shares on the
NYSE, subject to official notice of issuance. If so approved, trading of the
Series B Preferred Shares on the NYSE is expected to commence within a 30-day
period after the date of initial delivery of the Series B Preferred Shares. See
"Underwriting."
DISTRIBUTIONS
Holders of the Series B Preferred Shares shall be entitled to receive, when
and as authorized by the Board of Directors, out of funds legally available for
the payment of distributions, cumulative cash distributions at the rate of
8 3/4% of the liquidation preference per annum. Distributions on the Series B
Preferred Shares offered hereby shall accrue and be cumulative from the date of
original issue and shall be payable quarterly in arrears on or about the last
day of each March, June, September and December or, if not a business day, the
succeeding business day (each, a Distribution Payment Date"). The first
distribution on the Series B Preferred Shares offered hereby will be paid on
December 31, 1996. Any distributions payable on the Series B Preferred Shares
for any partial period will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Distributions will be payable to holders of
record as they appear in the share records of the Company at the close of
business on the applicable record date, which shall be the first day of the
calendar month in which the applicable Distribution Payment Date falls or such
other date designated by the Board of Directors of the Company for the payment
of distributions that is not more than 30 nor less than 10 days prior to such
Distribution Payment Date (each, a "Distribution Record Date").
No distributions on the Series B Preferred Shares shall be authorized by
the Board of Directors of the Company or be paid or set apart for payment by the
Company at such time as the terms and provisions of any agreement of the
Company, including any agreement relating to its indebtedness, prohibits such
authorization, payment or setting apart for payment or provides that such
authorization, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such authorization or payment shall be
restricted or prohibited by law.
S-40
<PAGE> 41
Notwithstanding the foregoing, distributions on the Series B Preferred
Shares will accrue whether or not the Company has earnings, whether or not there
are funds legally available for the payment of such distributions and whether or
not such distributions are authorized. Accrued but unpaid distributions on the
Series B Preferred Shares will not bear interest and holders of the Series B
Preferred Shares will not be entitled to any distributions in excess of full
cumulative distributions as described above.
The Company intends to contribute or otherwise transfer the net proceeds of
the sale of the Series B Preferred Shares to the Operating Partnership in
exchange for 8 3/4% Series B Preferred Units in the Operating Partnership, the
economic terms of which will be substantially identical to the Series B
Preferred Shares. The Operating Partnership will be required to make all
required distributions on the Series B Preferred Units (which will mirror the
payments of distributions, including accrued and unpaid distributions upon
redemption, and of the liquidation preference amount on the Series B Preferred
Shares) prior to any distribution of cash or assets to the holders of the Units
or to the holders of any other interests in the Operating Partnership, except
for any other series or preference units ranking on a parity with the Series B
Preferred Units as to distributions and/or liquidation rights and except for
distributions required to enable the Company to maintain its qualification as a
REIT.
Any distribution payment made on the Series B Preferred Shares shall first
be credited against the earliest accrued but unpaid distribution due with
respect to such shares which remains payable.
If, for any taxable year, the Company elects to designate as "capital gain
distributions" (as defined in Section 857 of the Code), any portion (the
"Capital Gains Amount") of the distributions paid or made available for the year
to holders of all classes of shares (the "Total Distributions"), then the
portion of the Capital Gains Amount that shall be allocable to the holders of
Series B Preferred Shares shall be the amount that the total distributions paid
or made available to the holders of the Series B Preferred Shares for the year
bears to the Total Distributions.
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of the affairs
of the Company, the holders of the Series B Preferred Shares are entitled to be
paid out of the assets of the Company legally available for distribution to its
shareholders liquidating distributions in cash or property at its fair market
value as determined by the Company's Board of Directors in the amount of a
liquidation preference of $25.00 per share, plus an amount equal to any accrued
and unpaid distributions to the date of such liquidation, dissolution or winding
up, before any distribution of assets is made to holders of Common Stock or any
other capital shares that rank junior to the Series B Preferred Shares as to
liquidation rights. After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Series B Preferred
Shares will have no right or claim to any of the remaining assets of the
Company. The consolidation or merger of the Company with or into any other
entity or the sale, lease, transfer or conveyance of all or substantially all of
the property or business of the Company shall not be deemed to constitute a
liquidation, dissolution or winding up of the Company. For further information
regarding the rights of the holders of the Series B Preferred Shares upon the
liquidation, dissolution or winding up of the Company, see "Description of
Securities -- Preferred Stock -- Liquidation Preference" in the accompanying
Prospectus.
REDEMPTION
The Series B Preferred Shares are not redeemable prior to September 29,
2006. On and after September 29, 2006 the Company, at its option upon not less
than 30 nor more than 60 days' written notice, may redeem the Series B Preferred
Shares, in whole or in part, at any time or from time to time, at a redemption
price of $25.00 per share, plus all accrued and unpaid distributions thereon to
the date fixed for redemption (except as provided below), without interest, to
the extent the Company will have funds legally available therefor. The
redemption price of the Series B Preferred Shares (other than any portion
thereof consisting of accrued and unpaid distributions) may be paid solely from
the sale proceeds of other capital stock of the Company and not from any other
source. For purposes of the preceding sentence, "capital stock" means any common
stock, preferred stock, depositary shares, interests, participation, or other
ownership
S-41
<PAGE> 42
interests (however designated) and any rights (other than debt securities
convertible into or exchangeable for equity securities) or options to purchase
any of the foregoing. Holders of Series B Preferred Shares to be redeemed shall
surrender such Series B Preferred Shares at the place designated in such notice
and shall be entitled to the redemption price and any accrued and unpaid
distributions payable upon such redemption following such surrender. If notice
of redemption of any Series B Preferred Shares has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Series B Preferred Shares so called for
redemption, then from and after the redemption date distributions will cease to
accrue on such Series B Preferred Shares, such Series B Preferred Shares shall
no longer be deemed outstanding and all rights of the holders of such shares
will terminate, except the right to receive the redemption price. If fewer than
all of the outstanding Series B Preferred Shares are to be redeemed, the Series
B Preferred Shares to be redeemed shall be selected pro rata (as nearly as may
be practicable without creating fractional Series B Preferred Shares) or by any
other equitable method determined by the Company. See "Description of
Securities -- Preferred Stock -- Redemption" in the accompanying Prospectus.
Notice of redemption will be given by publication in a newspaper of general
circulation in the City of New York, such publication to be made once a week for
two successive weeks commencing not less than 30 nor more than 60 days prior to
the redemption date. A similar notice will be mailed by the Company, postage
prepaid, not less than 30 nor more than 60 days prior to the redemption date,
addressed to the respective holders of record of the Series B Preferred Shares
to be redeemed at their respective addresses as they appear on the share
transfer records of the Company. No failure to give such notice or any defect
thereto or in the mailing thereof shall affect the validity of the proceedings
for the redemption of any Series B Preferred Shares except as to the holder to
whom notice was defective or not given. Each notice shall state: (i) the
redemption date; (ii) the redemption price; (iii) the number of Series B
Preferred Shares to be redeemed; (iv) the place or places where the certificates
evidencing the Series B Preferred Shares are to be surrendered for payment of
the redemption price; and (v) that distributions on the shares to be redeemed
will cease to accrue on such redemption date. If fewer than all the Series B
Preferred Shares held by any holder are to be redeemed, the notice mailed to
such holder shall also specify the number of Series B Preferred Shares to be
redeemed from such holder.
The holders of Series B Preferred Shares at the close of business on a
Distribution Record Date will be entitled to receive the dividend payable with
respect to such Series B Preferred Shares on the corresponding Distribution
Payment Date notwithstanding the redemption thereof between such Distribution
Record Date and the corresponding Distribution Payment Date or the Company's
default in the payment of the distribution due. Except as provided above, the
Company will make no payment or allowance for unpaid distributions, whether or
not in arrears, on Series B Preferred Shares to be redeemed.
The Series B Preferred Shares have no stated maturity and will not be
subject to any sinking fund or mandatory redemption provisions (except as
provided under "-- Restrictions on Ownership" below).
VOTING RIGHTS
In any matter in which the Series B Preferred Shares are entitled to vote
(as expressly provided herein, as may be required by law or as required by the
rules of the New York Stock Exchange), including any action by written consent,
each Series B Preferred Share shall be entitled to one vote.
If distributions on the Series B Preferred Shares are in arrears for six or
more quarterly periods, whether or not such quarterly periods are consecutive,
holders of Series B Preferred Shares (voting separately as a class with all
other series of preferred shares upon which like voting rights have been
conferred and are exercisable) will be entitled to vote for the election of two
additional directors to serve on the Board of Directors of the Company until all
distribution arrearages have been paid.
CONVERSION
The Series B Preferred Shares are not convertible into or exchangeable for
any other property or securities of the Company.
S-42
<PAGE> 43
RESTRICTIONS ON OWNERSHIP
In order to maintain its qualification as a REIT, the Company's Charter
imposes limitations on the number of shares of capital stock, including Series B
Preferred Shares, that may be owned by any single person or affiliated group.
For information regarding such restrictions on ownership of Series B Preferred
Shares, see "Restrictions on Transfer" in the accompanying Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
SALE OR EXCHANGE OF SERIES B PREFERRED SHARES. Upon the sale or exchange
of Series B Preferred Shares to or with a person other than the Company, a
shareholder will generally recognize gain or loss equal to the difference
between (i) the amount of cash and the fair market value of any property
received (less any portion thereof attributable to accumulated and declared but
unpaid dividends, which will be taxable as a dividend to the extent of the
Company's current and accumulated earnings and profits) and (ii) the
shareholder's adjusted tax basis in such shares. Such gain or loss will be a
capital gain or loss if the Series B Preferred Shares have been held as a
capital asset, and will be long-term gain or loss if such shares have been held
for more than one year. Any loss upon a sale or exchange of Series B Preferred
Shares by a shareholder who held such Series B Preferred Shares for six months
or less (after applying certain holding period rules) will generally be treated
as a long-term capital loss to the extent such shareholder previously received
capital gain distributions with respect to such Series B Preferred Shares.
REDEMPTION OF SERIES B PREFERRED SHARES. A redemption of Series B
Preferred Shares will be treated under Section 302 of the Code as a distribution
taxable as a dividend (to the extent of the Company's current and accumulated
earnings and profits) at ordinary income rates unless the redemption satisfies
one of the tests set forth in Section 302(b) of the Code and is therefore
treated as a sale or exchange of the redeemed shares. The redemption will be
treated as a sale or exchange if it (i) is "substantially disproportionate" with
respect to the shareholder, (ii) results in a "complete termination" of the
shareholder's share interest in the Company, or (iii) is "not essentially
equivalent to a dividend" with respect to the shareholder, all within the
meaning of Section 302(b) of the Code. In determining whether any of these tests
have been met, Series B Preferred Shares considered to be owned by a shareholder
by reason of certain constructive ownership rules set forth in the Code, as well
as Series B Preferred Shares actually owned by such shareholder, must generally
be taken into account. If a particular shareholder of Series B Preferred Shares
owns (actually or constructively) no shares of Common Stock of the Company, or
an insubstantial percentage of the outstanding shares of Common Stock of the
Company, a redemption of Series B Preferred Shares of such shareholder is likely
to qualify for sale or exchange treatment because the redemption would not be
"essentially equivalent to a dividend." However, because the determination as to
whether any of the alternative tests of Section 302(b) of the Code will be
satisfied with respect to any particular shareholder of Series B Preferred
Shares depends upon the facts and circumstances at the time that the
determination must be made, prospective shareholders of Series B Preferred
Shares are encouraged to consult their own tax advisors to determine such tax
treatment.
If a redemption of Series B Preferred Shares in not treated as a
distribution taxable as a dividend to a particular shareholder, it will be
treated as to that shareholder as a taxable sale or exchange. (See "Sale or
Exchange of the Series B Preferred Shares" above.)
If a redemption of Series B Preferred Shares is treated as a distribution
taxable as a dividend, the amount of the distribution will be measured by the
amount of cash and the fair market value of any property received by such
shareholder. The shareholder's adjusted basis in the redeemed Series B Preferred
Shares for tax purposes will be transferred to such shareholder's remaining
shares of the Company. If the shareholder owns no other shares of the Company,
such basis may, under certain circumstances, be transferred to a related person
or it may be lost entirely.
S-43
<PAGE> 44
UNDERWRITING
Subject to the terms and conditions contained in the terms agreement and
related underwriting agreement (collectively, the "Underwriting Agreement"), the
Company has agreed to sell to each of the Underwriters named below, and each of
the Underwriters for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), Dean Witter Reynolds Inc., PaineWebber Incorporated,
Prudential Securities Incorporated and Smith Barney Inc. are acting as
representatives (the "Representatives") has severally agreed to purchase from
the Company, the number of Series B Preferred Shares set forth after its name
below. The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters will be obligated to purchase all of the Series B Preferred Shares
if any are purchased.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF
----------------------- SERIES B PREFERRED SHARES
-------------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................... 1,460,000
Dean Witter Reynolds Inc. ...................................... 1,460,000
PaineWebber Incorporated........................................ 1,460,000
Prudential Securities Incorporated.............................. 1,460,000
Smith Barney Inc. .............................................. 1,460,000
Alex. Brown & Sons Incorporated................................. 100,000
Donaldson, Lufkin & Jenrette Securities Corporation............. 100,000
A.G. Edwards & Sons, Inc. ...................................... 100,000
EVEREN Securities, Inc. ........................................ 100,000
Legg Mason Wood Walker, Incorporated............................ 100,000
McDonald & Company Securities, Inc. ............................ 100,000
Piper Jaffray Inc. ............................................. 100,000
------------
Total.............................................. 8,000,000
==================
</TABLE>
The Representatives have advised the Company that they propose initially to
offer the Series B Preferred Shares to the public at the public offering price
set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of $.50 per share. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $.35 to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
The Company had granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus Supplement, to purchase up
to 1,200,000 additional Series B Preferred Shares at the price to the public set
forth on the cover page of this Prospectus Supplement, less the underwriting
discount. If the Underwriters exercise this option, each of the Underwriters
will have a firm commitment, subject to certain conditions, to purchase
approximately the same percentage thereof which the number of Series B Preferred
Shares to be purchased by it shown in the foregoing table bears to the 8,000,000
Series B Preferred Shares offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriters may be required to make in respect
thereof.
Approval has been obtained from the NYSE to list the Series B Preferred
Shares on the NYSE under the symbol "SPGPrB," subject to official notice of
issuance. Trading of the Series B Preferred Shares on the NYSE is expected to
commence within a 30-day period after the initial delivery of the Series B
Preferred Shares. The Representatives have advised the Company that they intend
to make a market in the Series B Preferred Shares prior to the commencement of
trading on the NYSE. The Representatives will have no obligation to make a
market in the Series B Preferred Shares, however, and may cease market making
activities if commenced at any time.
Merrill Lynch from time to time provides investment banking and financial
advisory services to the Company. Merrill Lynch has also acted as representative
of various underwriters in connection with public offerings of the Company's
Common Stock. The Company has agreed to pay Merrill Lynch a fee of approximately
$4 million for financial advisory services provided by Merrill Lynch to the
Company in connection with the Merger.
S-44
<PAGE> 45
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The accompanying financial statements present the unaudited pro forma
combined condensed balance sheet of the Company as of June 30, 1996 and the
unaudited pro forma combined condensed statements of operations of the Company
for the six-month period ended June 30, 1996 and for the year ended December 31,
1995.
The unaudited pro forma combined condensed balance sheet as of June 30,
1996 is presented as if the issuance of $200 million of Series B Cumulative
Redeemable Preferred Stock (the "Offering") and the Merger and related
transactions thereto had occurred on June 30, 1996. The unaudited pro forma
combined condensed statements of operations for the six-month period ended June
30, 1996 and for the year ended December 31, 1995 are presented as if the
Offering and the Merger and related transactions thereto had occurred as of
January 1, 1995 and carried forward through June 30, 1996.
Preparation of the pro forma financial information was based on assumptions
deemed appropriate by the management of the Company. The assumptions give effect
to the Offering and the Merger and related transactions thereto under the
purchase and affiliates method of accounting in accordance with generally
accepted accounting principles and the combined entity qualifying as a REIT,
distributing all of its taxable income and, therefore, incurring no federal
income tax expense during the periods presented. The pro forma financial
information is unaudited and is not necessarily indicative of the results which
actually would have occurred if the transactions had been consummated at the
beginning of the periods presented, nor does it purport to represent the future
financial position and results of operations for future periods. The pro forma
information should be read in conjunction with the historical financial
statements of the Company included in or incorporated by reference in the
accompanying Prospectus and the historical financial statements and DRC.
The pro forma adjustments included in the unaudited pro forma combined
financial statements are based upon currently available information and upon
certain assumptions that management of the Company believes are reasonable.
There can be no assurance that the actual adjustments will not differ
significantly from the pro forma adjustments reflected in the pro forma
financial information.
F-1
<PAGE> 46
SIMON DEBARTOLO GROUP, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MERGER AND
RELATED PRO
TRANSACTIONS FORMA OFFERING
SPG DRC PRO FORMA COMBINED PRO FORMA TOTAL
(HISTORICAL)(A) (HISTORICAL)(A) ADJUSTMENTS CONDENSED ADJUSTMENT PRO FORMA
--------------- --------------- --------------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment in properties,
partnerships and joint
ventures, net........... $ 2,243,674 $ 1,349,147 $ 1,618,373(B) $ 5,211,194 $ -- 5,211,194
Cash, cash equivalents and
short-term
investments............. 65,556 45,938 (34,400)(C) 77,094 -- 77,094
Receivables............... 141,520 40,754 (26,934)(D) 155,340 -- 155,340
Note receivable from the
SPG, LP Management
Company................. 91,478 -- -- 91,478 -- 91,478
Other assets.............. 120,734 118,136 (59,312)(E) 179,558 -- 179,558
---------- ---------- ---------- ----------- ---------- ----------
Total assets....... $ 2,662,962 $ 1,553,975 $ 1,497,727 $ 5,714,664 $ -- $5,714,664
========== ========== ========== =========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Mortgages and other notes
payable................. $ 2,178,539 $ 1,479,515 $ 4,593(F) $ 3,662,647 $ (193,000 )(I) $3,469,647
Accounts payable, accrued
expenses and other
liabilities............. 194,998 80,035 (2,801)(G) 272,232 -- 272,232
Investment in the SPG, LP
Management Company...... 19,740 -- -- 19,740 -- 19,740
---------- ---------- ---------- ----------- ---------- ----------
Total liabilities....... 2,393,277 1,559,550 1,792 3,954,619 $ (193,000 ) 3,761,619
---------- ---------- ---------- ----------- ---------- ----------
LIMITED PARTNERS' INTEREST
IN THE PARTNERSHIPS....... 68,525 (2,126) 576,877(H) 643,276 -- 643,276
STOCKHOLDERS' EQUITY:
Series A Preferred
Stock................... 99,923 -- -- 99,923 -- 99,923
Series B Preferred
Stock................... -- -- -- -- 193,000 (J) 193,000
Common stock.............. 7 553 (549)(H) 11 -- 11
Capital in excess of par
value of Common Stock... 269,757 (4,002) 919,607(H) 1,185,362 -- 1,185,362
Accumulated deficit....... (162,131) -- -- (162,131) -- (162,131)
Unamortized restricted
stock award............. (6,396) -- -- (6,396) -- (6,396)
---------- ---------- ---------- ----------- ---------- ----------
Total stockholders'
equity........... 201,160 (3,449) 919,058 1,116,769 193,000 1,309,769
---------- ---------- ---------- ----------- ---------- ----------
Total liabilities
and stockholders'
equity........... $ 2,662,962 $ 1,553,975 $ 1,497,727 $ 5,714,664 $ -- $5,714,664
========== ========== ========== =========== ========== ==========
</TABLE>
The accompanying notes and management's assumptions are an integral part of
these statements.
F-2
<PAGE> 47
SIMON DEBARTOLO GROUP, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX-MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
MERGER AND
RELATED
TRANSACTIONS PRO FORMA OFFERING
SPG DRC PRO FORMA COMBINED PRO FORMA TOTAL
(HISTORICAL) (HISTORICAL) ADJUSTMENTS CONDENSED ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Minimum rent..................... $159,076 $114,086 $ 1,700(A) $ 274,862 $ -- $ 274,862
Overage rent..................... 10,751 5,635 -- 16,386 -- 16,386
Tenant reimbursements............ 93,696 45,456 -- 139,152 -- 139,152
Other income..................... 19,681 11,455 -- 31,136 -- 31,136
---------- ------- -------- ---------- ------- ----------
Total revenue............. 283,204 176,632 1,700 461,536 -- 461,536
---------- ------- -------- ---------- ------- ----------
EXPENSES
Property and other operating
expenses....................... 107,773 66,484 (5,000)(B) 169,257 -- 169,257
Depreciation and amortization.... 51,307 32,432 5,505(C) 89,244 -- 89,244
Merger and Other Transaction
expenses....................... -- 10,200 (10,200)(D) -- -- --
---------- ------- -------- ---------- ------- ----------
Total expenses............ 159,080 109,116 (9,695) 258,501 -- 258,501
---------- ------- -------- ---------- ------- ----------
OPERATING INCOME................... 124,124 67,516 11,395 203,035 -- 203,035
INTEREST EXPENSE................... 79,134 60,759 (5,445)(E) 134,448 (6,904)(H) 127,544
---------- ------- -------- ---------- ------- ----------
INCOME BEFORE MINORITY
INTEREST......................... 44,990 6,757 16,840 68,587 6,904 75,491
MINORITY PARTNERS' INTEREST........ (1,175) (325) -- (1,500) -- (1,500)
---------- ------- -------- ---------- ------- ----------
INCOME BEFORE UNCONSOLIDATED
ENTITIES......................... 43,815 6,432 16,840 67,087 6,904 73,991
INCOME FROM UNCONSOLIDATED
ENTITIES......................... 3,985 8,236 -- 12,221 -- 12,221
---------- ------- -------- ---------- ------- ----------
INCOME OF THE PARTNERSHIPS'........ 47,800 14,668 16,840 79,308 6904 86,212
LESS LIMITED PARTNERS' INTEREST
IN THE PARTNERSHIPS.............. 16,883 5,593 6,569(F) 29,045 (761)(I) 28,284
---------- ------- -------- ---------- ------- ----------
NET INCOME FROM CONTINUING
OPERATIONS....................... 30,917 9,075 10,271 50,263 7,665 57,928
PREFERRED DIVIDENDS................ 4,062 -- -- 4,062 8,875(J) 12,937
---------- ------- -------- ---------- ------- ----------
NET INCOME FROM CONTINUING
OPERATIONS AVAILABLE TO
COMMON STOCKHOLDERS BEFORE
EXTRAORDINARY ITEMS.............. $ 26,855 $ 9,075 $ 10,271 $ 46,201 $(1,210) $ 44,991
========== ======= ======== ========== ======= ==========
NET INCOME BEFORE EXTRAORDINARY
ITEMS PER SHARE OF COMMON
STOCK............................ $0.46 $0.47
====== ======
WEIGHTED AVERAGE SHARES
OUTSTANDING...................... 58,471,201 96,355,721(G)
========== ==========
</TABLE>
The accompanying notes and management's assumptions are an integral part of
these statements.
F-3
<PAGE> 48
SIMON DEBARTOLO GROUP, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
MERGER AND
RELATED
TRANSACTIONS PRO FORMA OFFERING
SPG DRC PRO FORMA COMBINED PRO FORMA TOTAL
(HISTORICAL) (HISTORICAL) ADJUSTMENTS CONDENSED ADJUSTMENTS PRO FORMA
------------ ------------ ------------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Minimum rent................. $307,849 $205,056 $ 3,400(A) $516,305 -- $ 516,305
Overage rent................. 23,278 12,924 -- 36,202 -- 36,202
Tenant reimbursements........ 191,535 82,147 -- 273,682 -- 273,682
Other income................. 30,995 32,530 -- 63,525 -- 63,525
------------ ------------ ------------- ---------- --------------- ----------
Total revenue........ 553,657 332,657 3,400 889,714 -- 889,714
------------ ------------ ------------- ---------- --------------- ----------
EXPENSES
Property and other operating
expenses.................. 209,782 118,498 (10,000)(B) 318,280 -- 318,280
Depreciation and
amortization.............. 92,739 58,603 11,011(C) 162,353 -- 162,353
------------ ------------ ------------- ---------- --------------- ----------
Total expenses....... 302,521 177,101 1,011 480,633 -- 480,633
------------ ------------ ------------- ---------- --------------- ----------
OPERATING INCOME............... 251,136 155,556 2,389 409,081 -- 409,081
INTEREST EXPENSE............... 150,224 124,567 (19,695)(E) 255,096 (13,808)(H) 241,288
------------ ------------ ------------- ---------- --------------- ----------
INCOME BEFORE MINORITY
INTEREST..................... 100,912 30,989 22,084 153,985 13,808 167,793
MINORITY PARTNERS' INTEREST.... (2,681) 1,029 -- (1,652) -- (1,652)
GAIN ON SALE OF ASSET.......... 1,871 5,460 -- 7,331 -- 7,331
------------ ------------ ------------- ---------- --------------- ----------
INCOME BEFORE UNCONSOLIDATED
ENTITIES..................... 100,102 37,478 22,084 159,664 13,808 173,472
INCOME FROM UNCONSOLIDATED
ENTITIES..................... 1,403 8,865 -- 10,268 -- 10,268
------------ ------------ ------------- ---------- --------------- ----------
INCOME OF THE PARTNERSHIPS..... 101,505 46,343 22,084 169,932 13,808 183,740
LESS LIMITED PARTNERS' INTEREST
IN THE PARTNERSHIPS.......... 40,297 18,715 7,354(F) 66,366 (1,553)(I) 64,813
------------ ------------ ------------- ---------- --------------- ----------
NET INCOME FROM CONTINUING
OPERATIONS................... 61,208 27,628 14,730 103,566 15,361 118,927
PREFERRED DIVIDENDS............ 1,490 -- -- 1,490 17,750(J) 19,240
------------ ------------ ------------- ---------- --------------- ----------
NET INCOME FROM CONTINUING
OPERATIONS AVAILABLE TO
COMMON STOCKHOLDERS BEFORE
EXTRAORDINARY ITEMS.......... $ 59,718 $ 27,628 $ 14,730 $ 102,076 $(2,389) $ 99,687
========= ========= ========== ========= =========== =========
NET INCOME BEFORE EXTRAORDINARY
ITEMS PER SHARE OF COMMON
STOCK... $1.08 $1.07
===== =====
WEIGHTED AVERAGE SHARES
OUTSTANDING.................. 55,312,078 93,196,598(G)
========= =========
</TABLE>
The accompanying notes and management's assumptions are an integral part of
these statements.
F-4
<PAGE> 49
SIMON DEBARTOLO GROUP, INC.
NOTES AND MANAGEMENT ASSUMPTIONS TO
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. ACCOUNTING TREATMENT
The exchange of DRC Common Stock for Company Common Stock, the merger, and
transfer by the Company and the limited partners of SPG, L.P. (the "SPG, L.P.
Limited Partners") of their interests in SPG, L.P. to the Operating Partnership
under the contribution agreement technically result in a reverse merger for
financial reporting purposes. In substance, the interests of DRC and the limited
partners of the Operating Partnership (the "DRC Limited Partners") in the
Operating Partnership are being acquired and accordingly have been adjusted to
fair value in connection with the application of purchase accounting. The
interests transferred by the Company and SPG, L.P. Limited Partners to Operating
Partnership have been appropriately reflected at historical cost.
2. ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED BALANCE SHEET
<TABLE>
<S> <C> <C>
(A) Certain reclassifications have been made to the Company and DRC
historical balance sheets to conform to the desired pro forma combined
condensed balance sheet presentation.
(B) Represents adjustments to record the Merger and the related transactions
in accordance with the purchase method of accounting, based upon an
assumed purchase price of $1,512,960 assuming a market value of Company
Common Stock of $24.375 (which was the closing price of the Company's
Common Stock on August 9, 1996), and the exchange ratio of 0.68 (the
"Exchange Ratio") as follows:
Value of DRC Common Stock (55,712,529 shares outstanding immediately
prior
to the Merger) and 34,203,623 DRC Operating Partnership interests
multiplied by
the exchange ratio and the market value of the Company's Common Stock.... $1,490,360
Merger and related transactions costs (see below)........................ 22,600
----------
$1,512,960
=========
Estimated fees and expenses related to the Merger and the related
transactions, as follows:
Advisory fees............................................................ $ 11,000
Legal and accounting..................................................... 6,200
Severance and relocation costs........................................... 19,000
----------
36,200
Less DRC expenses........................................................ (13,600)
----------
Company transaction costs................................................ $ 22,600
=========
Adjustment to reflect investment in properties, partnerships and joint
ventures, net at fair value:
Purchase price (see above)............................................... $1,512,960
Historical book value of DRC (equity) deficit acquired:
Historical book value of the Operating Partnership at June 30, 1996...... 5,575
To adjust equity for the stay bonus and to reflect accelerated vesting of
accrued compensation in accordance with the terms of the Merger and
related transactions..................................................... 5,599
To reflect DRC's expenses associated with the Merger and related
transactions of $13,600 less $10,200 recognized as expense in the
six-month
period ended June 30, 1996 ($1,800 was paid with the balance of $8,400
accrued)................................................................. 3,400
Adjustments to reflect certain assets and liabilities of DRC at estimated
fair value:
Receivables (see Note (D))............................................... 26,934
Other assets (see Note (E)).............................................. 59,312
Mortgages and other notes payable (see Note (F))......................... 4,593
----------
Adjustment required to reflect investment in properties, partnerships and
joint
ventures, net at fair value.............................................. $1,618,373
=========
</TABLE>
F-5
<PAGE> 50
SIMON DEBARTOLO GROUP, INC.
NOTES AND MANAGEMENT ASSUMPTIONS TO
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION -- (CONTINUED)
<TABLE>
<S> <C> <C>
(C) To reflect the decrease in cash and cash equivalents due to the estimated
Merger
and related transactions costs, including expenses of DRC, of $36,200
less cash
payments made of $1,800.................................................. $ (34,400)
=========
(D) To reflect the adjustment to eliminate DRC's deferred asset related to
the
straight-lining of rent related to leases................................ $ (26,934)
=========
(E) To reflect the following adjustments to other assets:
To eliminate deferred financing, interest rate buy-downs and similar
costs related
to mortgages and other notes payable and organization costs.............. $ (53,536)
To adjust DRC's historical basis in the DRC Management Company to
estimated
fair market value of $15,000............................................. 13,428
To eliminate deferred leasing costs...................................... (19,204)
----------
$ (59,312)
=========
(F) To record a premium required to adjust mortgages and other notes payable
to estimated fair value based on current analysis completed on an
instrument by instrument basis........................................... $ 4,593
=========
(G) To reflect the following adjustments to accounts payable, accrued
liabilities and
other liabilities:
1. To record accrued compensation expense related to the stay bonus
($8,467) less the portion which vests immediately for which DRC Common
Stock was issued ($1,325) and to reflect the accelerated vesting of
accrued compensation settled with DRC Common Stock ($1,543)........... $ 5,599
2. To eliminate accrued DRC Merger and related transactions costs paid in
(C) above................................................................ (8,400)
----------
$ (2,801)
=========
(H) To adjust DRC's shareholders' equity and the DRC Limited Partners'
interests to reflect the issuance of 37,884,520 shares of Company Common
Stock and the conversion of the DRC Limited Partners' interests in the
Operating Partnership into Units at the Exchange Ratio (assuming that
there were 55,712,529 shares of DRC Common Stock and 34,203,623 DRC
Limited Partners' Units outstanding immediately prior to the Merger and
related transactions) with an assumed value of $24.375 per share and per
unit (which was the closing price of the Company's Common Stock on August
9, 1996), in exchange for substantially all of the outstanding DRC Common
Stock and Units, as follows:
</TABLE>
<TABLE>
<CAPTION>
TOTAL EQUITY
OF THE
TOTAL PARTNERSHIPS'
COMMON LIMITED BEFORE
STOCKHOLDERS' PARTNERS' PREFERRED
CAPITAL IN EQUITY BEFORE INTEREST IN UNITS AND
COMMON EXCESS OF ACCUMULATED UNRESTRICTED THE UNRESTRICTED
STOCK PAR VALUE DEFICIT STOCK AWARD PARTNERSHIPS STOCK AWARDS
------ ---------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Value of Shares and Interests
Acquired...................... $ 4 $ 923,431 $ -- $ 923,435 $566,925 $ 1,490,360
Historical Value of the
Company....................... 7 269,757 (162,131) 107,633 68,525 176,158
------ ---------- ----------- ------------- ------------ ---------------
Combined Equity................. 11 1,193,188 (162,131) 1,031,068 635,450 1,666,518
======== ========== =========== ============ =========== ==============
Pro Forma Ownership............. 61.4% 38.6% 100.0%
============ =========== ==============
Pro Forma Equity................ 11 1,185,362 (162,131) 1,023,242 643,276 1,666,518
Less Historical Value of the
Company....................... 7 269,757 (162,131) 107,633 68,525 176,158
Less Historical Value of DRC.... 553 (4,002) -- (3,449) (2,126) (5,575)
------ ---------- ----------- ------------- ------------ ---------------
Pro Forma Adjustments........... $(549 ) $ 919,607 $ -- $ 919,058 $576,877 $ 1,495,935
======== ========== =========== ============ =========== ==============
</TABLE>
F-6
<PAGE> 51
SIMON DEBARTOLO GROUP, INC.
NOTES AND MANAGEMENT ASSUMPTIONS TO
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION -- (CONTINUED)
<TABLE>
<S> <C> <C>
(I) To reflect the use of $193,000 in net proceeds from the Offering to repay
existing mortgage indebtedness of $142,800 with an average interest rate
of 7.28% and to reduce the amount outstanding under one of the Company's
credit facilities of $50,200 with an interest rate of 6.81%. $ (193,000)
=========
(J) To reflect the Offering which results in the issuance of an estimated
8,000,000 shares of Series B Preferred Stock at $25 per share at an
estimated dividend rate of 8.875% with estimated issuance costs of
$7,000. $ 193,000
=========
</TABLE>
3. ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
Immediately prior to the Merger and related transactions, DRC will expense
$8,467 in connection with the Stay Bonus which has not been included in the Pro
Forma Combined Condensed Statements of Operations. DRC will also incur $13,600
of expenses in connection with the Merger and related transactions, of which
$10,200 was accrued as of June 30, 1996, which have not been included in the Pro
Forma Combined Condensed Statements of Operations.
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE YEAR
ENDED ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
<S> <C> <C> <C>
(A) To recognize revenue from straight-lining rent related to
leases which will be reset in connection with the Merger
and related transactions................................... $ 1,700 $ 3,400
=========== ===========
(B) To reflect cost savings to eliminate duplicative public
company costs and other identified redundancies which have
been estimated based upon historical costs for those items
as a result of the Merger and related transactions......... $ (5,000) $ (10,000)
=========== ===========
(C) To reflect the increase in depreciation as a result of
recording the investment properties of DRC at acquisition
value versus historical cost and utilizing an estimated
useful life of 35 years offset by the decrease in
amortization expense as a result of the elimination of
deferred leasing costs..................................... $ 5,505 $ 11,011
=========== ===========
(D) To reflect the elimination of Merger and related
transactions related costs expensed during the six-month
period ended June 30, 1996................................. $ (10,200) $ --
=========== ===========
(E) To reflect the following adjustments to interest expense:
(1) To reflect the elimination of amortization of deferred
mortgage
costs, related to DRC, written-off in connection with the
Merger and related transactions............................ $ (5,062) $ (18,929)
(2) To reflect the amortization of the premium required to
adjust
mortgages and other notes payable to fair value............ (383) (766)
----------- -----------
$ (5,445) $ (19,695)
=========== ===========
(F) To adjust the allocation of the Limited Partners' interest
after giving effect to the Merger and related transactions
in the net income of the Partnerships, after consideration
of the preferred unit distribution. The Limited Partners'
pro forma weighted average ownership interest for the six
months ended June 30, 1996 and for the year ended December
31, 1995 was 38.6% and 39.4% , respectively................ $ 6,569 $ 7,354
=========== ===========
</TABLE>
F-7
<PAGE> 52
SIMON DEBARTOLO GROUP, INC.
NOTES AND MANAGEMENT ASSUMPTIONS TO
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE YEAR
ENDED ENDED
JUNE 30, 1996 DECEMBER 31, 1995
----------- -----------
<S> <C> <C> <C>
(G) The pro forma weighted average common shares outstanding is
computed as follows:
SPG Historical Weighted Average Shares Outstanding......... 58,471,201 55,312,078
Issuance of shares of SPG Common Stock in connection with
the Merger and related transactions (assuming that there
are 55,712,529 shares of DRC Common Stock outstanding
immediately prior to the Effective Time)................. 37,884,520 37,884,520
----------- -----------
96,355,721 93,196,598
=========== ===========
(H) To reflect the reduction in interest expense as a result of
the use of the net proceeds of $193,000 from the
Offering................................................... $ (6,904) $ (13,808)
=========== ===========
(I) To adjust the allocation of the Limited Partners' interest
after giving effect to Offering and the Merger and related
transactions in the net income of the Partnerships after
consideration of the preferred unit distribution related to
the Series B Preferred Stock. The Limited Partners' pro
forma weighted average ownership interest for the six
months ended June 30, 1996 and for the year ended December
31, 1995 was 38.6% and 39.4%, respectively................. $ (761) $ (1,553)
=========== ===========
(J) To reflect dividends related to the Offering............... $ 8,875 $ 17,750
=========== ===========
</TABLE>
F-8
<PAGE> 53
PROSPECTUS
$750,000,000
SIMON DEBARTOLO GROUP, INC.
COMMON STOCK, PREFERRED STOCK, DEPOSITARY SHARES AND WARRANTS
------------------------
Simon DeBartolo Group, Inc. (the "Company") may from time to time offer (i)
shares of its common stock, par value $0.0001 per share ("Common Stock"), (ii)
in one or more series, shares of its preferred stock, par value $0.0001 per
share ("Preferred Stock"), (iii) in one or more series, its Preferred Stock
represented by depositary shares ("Depositary Shares") and (iv) warrants to
purchase Common Stock or Preferred Stock ("Warrants"), with an aggregate public
offering price of up to $750,000,000 (or its equivalent based on the exchange
rate at the time of sale) in amounts, at prices and on terms to be determined at
the time of offering. The Common Stock, Preferred Stock, Depositary Shares and
Warrants (collectively, the "Securities") may be offered, separately or
together, in amounts, at prices and on terms to be described in one or more
supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Common Stock, any initial
public offering price; (ii) in the case of Preferred Stock, the specific title
and stated value, any distribution, liquidation, redemption, conversion, voting
and other rights, and any initial public offering price; (iii) in the case of
Depositary Shares, the fractional Preferred Stock represented by each Depositary
Share; and (iv) in the case of Warrants, the duration, offering price, exercise
price and detachability. In addition, such specific terms may include
limitations on direct or beneficial ownership and restrictions on transfer of
the Securities, in each case as may be appropriate to assist in maintaining the
status of the Company as a real estate investment trust ("REIT") for federal
income tax purposes.
The applicable Prospectus Supplement also will contain information, where
applicable, about the material U.S. federal income tax considerations relating
to, and any listing on a securities exchange of, the Securities covered by such
Prospectus Supplement, not contained in this Prospectus.
The Securities may be offered directly or through agents designated from
time to time by the Company or to or through underwriters or dealers. If any
agents or underwriters are involved in the sale of any of the Securities, their
names, and any applicable purchase price, fee, commission or discount
arrangement between or among them, will be set forth, or will be calculable from
the information set forth, in an accompanying Prospectus Supplement. No
Securities may be sold by the Company through agents, underwriters or dealers
without delivery of a Prospectus Supplement describing the method and terms of
the offering of such Securities. Shares of Common Stock may also be issued
pursuant to this Prospectus to holders of units in the Simon-DeBartolo Group,
L.P. ("Units") in exchange for their Units, which Units may be exchanged for
shares of Common Stock on a one-for-one basis or cash, as selected by the
Company, pursuant to the partnership agreement of such partnership. See "Plan of
Distribution."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 20, 1996.
<PAGE> 54
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied, at the prescribed rates, at the public reference facilities of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at 7 World Trade Center, Suite 1300, New York,
New York 10048, and Northwestern Atrium Center, 500 W. Madison Street, Chicago,
Illinois 60661. The Company's Common Stock is traded on the New York Stock
Exchange ("NYSE"). Reports and other information concerning the Company may be
inspected at the principal office of the NYSE at 20 Broad Street, New York, New
York 10005.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
omits certain of the information contained in the Registration Statement and the
exhibits and schedules thereto, in accordance with the rules and regulations of
the Commission. For further information concerning the Company and the
Securities offered hereby, reference is hereby made to the Registration
Statement and the exhibits and schedules filed therewith, which may be inspected
without charge at the office of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and copies of which may be obtained from the Commission
at prescribed rates. The Commission maintains a World Wide Web Site
(http://www.sec.gov) that contains such material regarding issuers that file
electronically with the Commission. This Registration Statement has been so
filed and may be obtained at such site. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company which have been filed with the
Commission are hereby incorporated by reference in this Prospectus.
1. The Company's Registration Statement on Form S-4 (Registration No.
333-06933), which contains, among other things, a description of the Common
Stock, including any amendment or report filed for the purpose of updating such
description;
2. The Company's Proxy Statement dated June 28, 1996, relating to the
annual and special meetings of stockholders held on August 7, 1996;
3. The Company's Annual Report on Form 10-K for the year ended December 31,
1995, as amended by Form 10-K/A-1;
4. The Company's Quarterly Reports on Form 10-Q for the calendar quarters
ended March 31, 1996, as amended by Form 10-Q/A-1, and June 30, 1996; and
5. The Company's Current Reports on Form 8-K dated March 26, August 9,
August 26, and September 18, 1996.
The Company's Exchange Act filing number is 1-12618.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14, or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the respective dates of filing such documents. Any statement or information
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed modified or superseded for the purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated herein
by reference modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom a Prospectus
is delivered, on written or oral request of such person, a copy of any or all of
the documents incorporated herein by reference (other than exhibits and
schedules to such documents). Requests should be directed to: James M. Barkley,
General Counsel, at National City Center, 115 West Washington Street, Suite 15
East, Indianapolis, IN 46204, Telephone (317) 636-1600.
2
<PAGE> 55
THE COMPANY
The Company,a self-administered and self-managed real estate investment
trust ("REIT"), through its subsidiary partnerships, Simon-DeBartolo Group, L.P.
(the "Operating Partnership") and Simon Property Group, L.P. ("SPG, LP" and,
together with the Operating Partnership, the "Partnerships"), is engaged
primarily in the ownership, development, management, leasing, acquisition and
expansion of income producing properties, primarily regional malls and community
shopping centers. In August 1996, the Company acquired the national shopping
center business of DeBartolo Realty Corporation ("DRC"), The Edward J. DeBartolo
Corporation ("EJDC") and their affiliates as the result of the merger (the
"Merger") of DRC with a subsidiary of the Company. As a result of the Merger,
the Company expanded its portfolio by 61 properties and combined the management
resources of the merged entities to create one of the most experienced
management teams in the shopping center business. Management believes that as a
result of the Merger, the Company's portfolio, as measured in gross leasable
area ("GLA"), is the largest and most geographically diverse portfolio of any
publicly traded REIT in North America. Management also believes that the Company
is the largest, as measured by market capitalization of any publicly traded real
estate company in North America. Management further believes that the Company's
relationships with tenants, access to capital markets and opportunities for
economies of scale and operating efficiencies will be enhanced as a result of
the Company's substantially increased portfolio size and market capitalization.
In conjunction with the Merger, DRC was renamed SD Property Group, Inc. (the
"Subsidiary") and is the managing general partner of the Operating Partnership.
The Company is a general partner of the Operating Partnership and the sole
general partner of SPG, LP. As of September 17, 1996, 61.4% of the equity
interest in the Operating Partnership was owned by the Company and 38.6% was
owned by certain limited partners of the Operating Partnership, including the
Simons (defined below), certain members of the DeBartolo family, including
certain affiliates and trusts and estates established for their benefit
(collectively, the "DeBartolos"), and other limited partners.
In addition, SPG, LP holds substantially all of the economic interest in,
and Melvin Simon, Herbert Simon, David Simon and certain of their affiliates,
including certain other Simon family members and estates, trusts and other
entities established for their benefit (collectively, the "Simons") or their
affiliates hold the voting stock of, M.S. Management Associates, Inc. (the "SPG
Management Company"), which manages regional malls and community shopping
centers not wholly owned by the Partnerships and certain other properties and
also engages in certain property development activities. The Operating
Partnership holds substantially all of the economic interest in, and the SPG
Management Company holds substantially all of the voting stock of, DeBartolo
Properties Management, Inc. (the "DRC Management Company"), which provides
architectural, design, construction and other services to substantially all of
the Portfolio Properties (as defined below) owned by the Operating Partnership,
as well as certain other regional malls and community shopping centers owned by
third parties.
As of June 30, 1996, on a combined basis, adjusted to give effect to the
Merger and related transactions thereto as though they had occurred prior to
such date: the Company owns or holds interests in a diversified portfolio of 183
income producing properties (the "Portfolio Properties"), including 111
super-regional and regional malls, 66 community shopping centers, two specialty
retail centers and four mixed-use properties located in 32 states; the Portfolio
Properties contain an aggregate of approximately 110 million square feet of GLA,
of which approximately 65 million square feet is GLA owned by the Company
("Owned GLA"); more than 3,600 different retailers occupy approximately 12,000
stores in the Portfolio Properties; total estimated retail sales at the
Portfolio Properties approached $16 billion in fiscal 1995; the Company has
interests in eight properties under construction in the United States
aggregating an additional seven million square feet of GLA, and owns land held
for future development; and the Operating Partnership, together with the SPG
Management Company and its affiliated management companies, manage over 127
million square feet of GLA of retail and mixed-use properties.
Each of the Company and the Subsidiary has elected to be taxed as a real
estate investment trust (a "REIT") under sections 856 through 860 of the
Internal Revenue Code, as amended (the "Code"), and applicable Treasury
Regulations relating to REIT qualification. The Company provides management,
leasing, accounting, design and construction expertise through its own personnel
or, where appropriate, through outside professionals.
3
<PAGE> 56
USE OF PROCEEDS
Except as otherwise provided in the applicable Prospectus Supplement,
proceeds to the Company from any sale of the Securities offered hereby will be
added to the working capital of the Company and will be available for general
corporate purposes, which may include the repayment of indebtedness, the
financing of capital commitments and possible future acquisitions associated
with the continued expansion of the Partnerships' business.
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The Company's ratio of earnings to fixed charges and preferred stock
dividends for the six months ended June 30, 1996 and 1995 was 1.47x and 1.59x,
respectively, and for the fiscal years ended December 31, 1995 and 1994 was
1.66x and 1.43x, respectively. From the commencement of its operations on
December 20, 1993 through December 31, 1993, the ratio of earnings to fixed
charges and preferred stock dividends for the Company was 3.36x. The pro forma
ratio of earnings to fixed charges and preferred stock dividends for the six
months ended June 30, 1996 and for the fiscal year ended December 31, 1995 of
the Company, assuming the Merger and related transactions had occurred as of
January 1, 1995 and carried forward through June 30, 1996, was 1.50x and 1.71x,
respectively.
For purposes of computing the ratio of earnings to fixed charges and
preferred stock dividends, earnings have been calculated by adding fixed
charges, excluding capitalized interest, to income (loss) from continuing
operations including income from minority interests which have fixed charges,
and including distributed operating income from unconsolidated joint ventures
instead of income from unconsolidated joint ventures. Fixed charges and
preferred stock dividends consist of interest costs, whether expensed or
capitalized, the interest component of rental expense and amortization of debt
issuance costs, plus any dividends on outstanding preferred stock.
Prior to the commencement of business by the Company in December, 1993, the
predecessor of the Company maintained a different ownership and equity
structure. The predecessor's operating properties have historically generated
positive net cash flow. The financial statements of the predecessor show net
income for the period January 1, 1993 through December 19, 1993, and net losses
for the fiscal years ended December 31, 1992 and 1991. The ratio of earnings to
fixed charges and preferred stock dividends for the period January 1, 1993
through December 19, 1993 was 1.11x. As a consequence of the net losses for the
fiscal years ended December 31, 1992 and 1991, the computation of the ratio of
earnings to fixed charges and preferred stock dividends for these fiscal years
indicates that earnings were inadequate to cover fixed charges by approximately
$12.8 million and $18.7 million, respectively.
The new capitalization of the Company effected in December 1993 in
connection with its initial public offering permitted the Company to deleverage
significantly resulting in an improved ratio of earnings to fixed charges and
preferred stock dividends subsequent to its commencement of operations.
DESCRIPTION OF THE SECURITIES
The following summary is a description of certain provisions of the Amended
and Restated Articles of Incorporation (the "Charter") and the Amended and
Restated By-laws (the "By-laws") of the Company, each as in effect on the date
hereof. This summary does not purport to be complete and is qualified by
reference to the Charter and By-laws, which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
Under the Charter, the total number of shares of all classes of capital
stock that the Company has authority to issue is 650,000,000 shares, par value
$0.0001 per share, currently consisting of 383,996,000 shares of Common Stock,
12,000,000 shares of Class B common stock, par value $0.0001 per share (the
"Class B Common Stock"), 4,000 shares of Class C common stock, par value $0.0001
per share (the "Class C Common Stock"), 4,000,000 shares of Series A preferred
stock, par value $0.0001 per share (the "Series A Preferred Stock"), and
250,000,000 shares of Excess Stock.
COMMON STOCK
Common Stock, Class B Common Stock and Class C Common Stock
Immediately following the consummation of the Merger, the Company had
93,245,854 shares of its Common Stock outstanding, 3,200,000 shares of its Class
B Common Stock outstanding and 4,000 shares of
4
<PAGE> 57
its Class C Common Stock outstanding. All outstanding shares of Common Stock,
Class B Common Stock and Class C Common Stock are duly authorized, fully paid
and nonassessable. Holders of Common Stock, Class B Common Stock and Class C
Common Stock are entitled to one vote for each share held of record on all
matters submitted to a vote of the stockholders, other than the election of
directors elected exclusively by the holders of Class B Common Stock and the
election of directors elected exclusively by the holders of Class C Common
Stock. Holders of Common Stock, Class B Common Stock and Class C Common Stock
have no right to cumulative voting for the election of directors. Subject to
preferential rights with respect to the Series A Preferred Stock, the holders of
Common Stock, Class B Common Stock and Class C Common Stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors of
the Company (the "Board of Directors") out of funds legally available therefor.
If the Company is liquidated, subject to the right of the holders of Series A
Preferred Stock (including any Excess Stock into which such Series A Preferred
Stock has been converted) to receive preferential distributions, each
outstanding share of Common Stock, Class B Common Stock and Class C Common
Stock, including shares of Excess Stock (other than those issued upon the
conversion of Series A Preferred Stock), if any, will be entitled to participate
pro rata in the assets remaining after payment of, or adequate provision for,
all known debts and liabilities of the Company.
The holders of Class B Common Stock are entitled to elect four of the 13
directors of the Company, unless their portion of the aggregate equity interest
of the Company (including Common Stock, Class B Common Stock and units in the
Operating Partnership ("Units") considered on an as-converted basis) decreases
to less than 50% of the amount that they owned as of the consummation of the
Merger, in which case they will be entitled to elect only two directors of the
Company.
Shares of Class B Common Stock may be converted at the holder's option into
an equal number of shares of Common Stock. If the Simons' aggregate equity
interest in the Company on a fully diluted basis has been reduced to less than
5%, the outstanding shares of Class B Common Stock convert automatically into an
equal number of shares of Common Stock. Shares of Class B Common Stock also
convert automatically into an equal number of shares of Common Stock upon the
sale or transfer thereof to a person not affiliated with the Simons. Holders of
shares of Common Stock and Class B Common Stock have no sinking fund rights,
redemption rights or preemptive rights to subscribe for any securities of the
Company.
Four thousand shares of Class C Common Stock were authorized and issued to
EJDC in connection with the Merger to enable the estate of Edward J. DeBartolo,
Edward J. DeBartolo, Jr., M. Denise DeBartolo York, EJDC and certain of their
affiliates, including certain other DeBartolo family members and estates and
trusts established for their benefit (collectively, the "DeBartolos"), to elect
two members of the Board of Directors under the Charter. Except with respect to
the right to elect directors, as summarized below, each share of Class C Common
Stock has the same rights and restrictions as a share of Class B Common Stock.
The holders of Class C Common Stock are entitled to elect two of the 13
directors of the Company, unless their portion of the aggregate equity interest
of the Company (including Common Stock, Class C Common Stock and Units
considered on an as-converted basis) decreases to less than 50% of the amount
that they owned as of the closing of the Merger, in which case they will be
entitled to elect only one director of the Company.
Shares of Class C Common Stock may be converted at the holder's option into
an equal number of shares of Common Stock. If the DeBartolos' aggregate equity
interest in the Company on a fully diluted basis has been reduced to less than
5%, the outstanding shares of Class C Common Stock convert automatically into an
equal number of shares of Common Stock. Shares of Class C Common Stock will also
convert automatically into an equal number of shares of Common Stock upon the
sale or transfer thereof to a person not affiliated with the DeBartolos. Holders
of shares of Class C Common Stock have no sinking fund rights, redemption rights
or preemptive rights to subscribe for any securities of the Company.
Certain Provisions of the Partnership Agreements of the Partnerships, the
Charter and By-Laws and of Maryland Law
The partnership agreements of the Partnerships provide that the Company may
not merge, consolidate or engage in any combination with another person or sell
all or substantially all of its assets unless such transaction includes the
merger of the Partnerships, which merger requires the approval of the holders of
a majority of the Units and the holders of a majority of the units of SPG, LP.
These voting requirements might limit the possibility for acquisition or change
in control of the Company, even if some of the Company's stockholders deem such
a change to be in the Company's and their best interest.
5
<PAGE> 58
The Charter and By-laws and certain Maryland statutes contain provisions
that may be deemed to have an anti-takeover effect and that may delay, defer or
prevent a tender offer or takeover attempt that a stockholder might consider in
its best interest, including an attempt that might result in a premium over the
market price for the shares held by stockholders. These provisions are expected
to discourage certain types of coercive takeover practices and inadequate
takeover bids and to encourage persons seeking to acquire control of the Company
to negotiate first with its Board of Directors. The Company's management
believes that the benefits of these provisions outweigh the potential
disadvantages of discouraging such proposals because, among other things,
negotiation of such proposals might result in an improvement of their terms.
Pursuant to the Maryland General Corporation Law (the "MGCL"), a
corporation generally cannot dissolve, merge, consolidate, sell all or
substantially all of its assets, engage in a share exchange or engage in similar
transactions outside the ordinary course of business unless approved by the
Board of Directors and by the affirmative vote of at least two-thirds of the
votes entitled to be cast on the matter.
Number of Directors; Filling Vacancies; Removal
The Charter currently fixes the number of directors of the Board of
Directors at 13. It provides that, subject to any separate rights of holders of
preferred stock, any vacancy created by the resignation, death or removal of a
director elected by the holders of Class B Common Stock will be filled by the
holders of the Class B Common Stock, and that any vacancy created by the
resignation, death or removal of a director elected by the holders of Common
Stock may be filled by a majority of the remaining directors or by the
stockholders at a special meeting. If such a vacancy has not been filled within
30 days after it occurs, a special meeting of the holders of Common Stock and
Class B Common Stock must be called to fill the vacancy. Accordingly, the Board
of Directors could temporarily prevent a stockholder from filling new
directorships with such stockholder's own nominees. Two directors will be
elected by the holders of Class C Common Stock voting as a separate class, and
there are separate provisions with respect to the filling of vacancies of a
director elected by the holders of Class C Common Stock.
The Charter provides that, subject to the right of holders of any class
separately entitled to elect one or more directors, if any such right has been
granted, directors may be removed only for cause and only upon the affirmative
vote of holders of at least a majority of the voting power of all the then
outstanding shares entitled to vote generally in the election of directors,
voting together as a single class.
Advance Notice Provisions for Stockholder Nominations and Stockholder
Proposals
The By-laws establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors or bring other business
before an annual meeting of stockholders of the Company. This procedure provides
that (i) only persons who are nominated by, or at the direction of, the Board of
Directors, or by a stockholder who has given timely written notice containing
specified information to the Secretary of the Company prior to the meeting at
which directors are to be elected, will be eligible for election as directors of
the Company, and (ii) at an annual meeting only such business may be conducted
as has been brought before the meeting by, or at the direction of, the Chairman
of the Board of Directors or by a stockholder who has given timely written
notice to the Secretary of the Company of such stockholder's intention to bring
such business before such meeting. In general, for notice of stockholder
nominations or business to be made at an annual meeting to be timely, such
notice must be received by the Company not less than 60 days nor more than 90
days prior to the first anniversary of the previous year's annual meeting. Such
notice must contain information concerning the person or persons to be nominated
or the matters to be brought before the meeting and concerning the stockholder
submitting the proposal.
The purpose of requiring stockholders to give the Company advance notice of
nominations and other business is to afford the Board of Directors a meaningful
opportunity to consider the qualifications of the proposed nominees or the
advisability of the other proposed business and, to the extent deemed necessary
or desirable by the Board of Directors, to inform stockholders and make
recommendations about such qualifications or business, as well as to provide a
more orderly procedure for conducting meetings of stockholders. Although the
By-laws do not give the Board of Directors any power to disapprove stockholder
nominations for the election of directors or proposals for action, they may have
the effect of precluding a contest for the election of directors or the
consideration of stockholder proposals if the proper procedures are not
followed, and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to the Company and its stockholders.
6
<PAGE> 59
Director Action
The Charter, By-laws and MGCL generally require that a majority of a quorum
is necessary to approve any matter to come before the Board of Directors;
however, certain matters including sales of property, transactions with the
Simons or the DeBartolos and certain affiliates and certain other matters will
also require approval of a majority of independent directors on the Board of
Directors. The By-laws require that at least six of such independent directors
approve the sale of any property owned by any partnership in which the Company
acts as general partner, and the Charter requires that a majority of such
independent directors approve any transaction between the Simon DeBartolo Group
on the one hand and the Simons and/or the DeBartolos on the other hand.
PREFERRED STOCK
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate.
The Board of Directors is authorized to establish one or more classes and
series of capital stock, including series of preferred stock, from time to time
and to establish the number of shares in each class or series and to fix the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to distributions, qualifications and terms and conditions of
redemption of such class or series, without any further vote or actions by the
stockholders (except in limited circumstances by holders of Series A Preferred
Stock), unless such action is required by applicable law or the rules of any
stock exchange or automated quotation system on which the Company's securities
may be listed.
The Board of Directors is empowered by the Charter to designate and issue
from time to time one or more series of Preferred Stock without stockholder
approval. The Board of Directors may determine the relative rights, preferences
and privileges of each series of Preferred Stock so issued. Because the Board of
Directors has the power to establish the preferences and rights of each series
of Preferred Stock, it may afford the holder of any series of Preferred Stock
preferences, powers and rights, voting or otherwise, senior to the rights of
holders of Common Stock. The Preferred Stock will, when issued, be fully paid
and nonassessable.
The Company currently has outstanding 4,000,000 shares of Series A
Preferred Stock. Series A Preferred Stock ranks, with respect to dividends,
voting, preferences, qualifications, limitations, restrictions and the
distribution of assets upon liquidation, senior to Common Stock, Class B Common
Stock and Class C Common Stock. Classification of authorized but unissued
capital stock into additional shares of Preferred Stock and issuance thereof,
unless ranking junior to or on a parity with Series A Preferred Stock, must be
approved by an 80% vote of the holders of Series A Preferred Stock. The Series A
Preferred Stock has no preemptive rights and is not subject to any sinking fund
or other obligation of the Company to purchase or redeem it.
Holders of Series A Preferred Stock are entitled to receive cumulative cash
dividends of the greater of either (i) $0.5078125 per share per calendar
quarter, or (ii) the aggregate amount of dividends paid since the end of the
previous calendar quarter on the number of shares of Common Stock into which
each share of Series A Preferred Stock is convertible, in either case payable in
arrears when and as declared by the Board of Directors, out of funds legally
available therefor, on the last business day of each quarter. Dividends are
cumulative from the payment date of any such declaration and accrue whether or
not there are funds of the Company legally available for the payment of such
dividends.
The Company may not declare or pay any dividend on the Common Stock, Class
B Common Stock or Class C Common Stock or on any other class of stock ranking
junior to Series A Preferred Stock as to dividends and upon liquidation,
distribution or winding up of the Company (the Common Stock, Class B Common
Stock, Class C Common Stock, and any other such junior class being referred to
as the "Junior Stock"), other than in shares of Junior Stock or rights to
purchase or acquire Junior Stock, and the Company may not redeem or make any
payment on account of, or set apart money for, a sinking or other analogous fund
for the purchase, redemption or other retirement of any Junior Stock or make any
distribution in respect thereof, in each case, either directly or indirectly and
whether in cash or property or in obligations or shares of the Company, unless
and until such time as all accrued and unpaid dividends with respect to Series A
Preferred Stock have been paid (or declared and a sum sufficient for the payment
thereof is set apart for such payment) and sufficient funds have been set apart
for the payment of the dividend for the current dividend period with respect to
Series A Preferred Stock.
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In the event of any liquidation, dissolution or winding up of the affairs
of the Company (any or all of such events, a "liquidation"), whether voluntary
or involuntary, the holders of Series A Preferred Stock then outstanding shall
be entitled to be paid out of the assets of the Company, before any payment
shall be made to the holders of the Junior Stock, an amount equal to $25 per
share, plus an amount equal to any unpaid cumulative dividends on Series A
Preferred Stock accrued to the date when such payment shall be made available to
the holders thereof. Neither a consolidation or merger of the Company with or
into any other corporation or corporations, nor a sale or transfer by the
Company of all or substantially all of its assets, nor a statutory share
exchange in which stockholders of the Company may participate shall be deemed to
be a liquidation of the Company.
If dividends on Series A Preferred Stock are in arrears and are unpaid for
any four consecutive calendar quarters, then the holders of Series A Preferred
Stock (voting as a separate class) have an additional right to vote on any
acquisition of the Company by any other entity, including by merger,
consolidation or reorganization, as well as on the sale of all or substantially
all of the Company's assets. This separate voting right does not arise, however,
if (i) the Company's stockholders will have at least 50% of the aggregate voting
power of the surviving entity following the merger, consolidation,
reorganization or other acquisition, or (ii) the terms of the acquisition or
sale provide for the contemporaneous full payment of all accrued and unpaid
dividends on the Series A Preferred Stock.
The Prospectus Supplement relating to any Preferred Stock offered thereby
will contain the specific terms thereof, including without limitation:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of such Preferred
Stock;
(3) The distribution rate(s), period(s) or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock;
(4) The date from which distributions on such Preferred Stock shall
accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred
Stock;
(7) The provision for redemption, if applicable, of such Preferred
Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock of the Company, including the
conversion price (or manner of calculation thereof);
(10) Whether interests in such Preferred Stock will be represented by
Depositary Shares;
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(12) A discussion of all material federal income tax considerations,
if any, applicable to such Preferred Stock that are not discussed in this
Prospectus;
(13) The relative ranking and preferences of such Preferred Stock as
to distribution rights and rights upon liquidation, dissolution or winding
up of the affairs of the Company;
(14) Any limitations on issuance of any series of Preferred Stock
ranking senior to or on a parity with such series of Preferred Stock as to
distribution rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company; and
(15) Any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to preserve
the status of the Company as a REIT.
Rank. Unless otherwise specified in the Prospectus Supplement, the
Preferred Stock will, with respect to distribution rights and rights upon
liquidation, dissolution or winding up of the Company, rank (i) senior to all
classes or series of Common Stock of the Company, and to all equity securities
ranking junior to such Preferred Stock; (ii) on a parity with all equity
securities issued by the Company the terms of which specifically provide that
such equity securities rank on a parity with the Preferred Stock; and (iii)
junior to all
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equity securities issued by the Company the terms of which specifically provide
that such equity securities rank senior to the Preferred Stock. The term "equity
securities" does not include convertible debt securities.
Distributions. Holders of the Preferred Stock of each series will be
entitled to receive, when, as and if declared by the Board of Directors, out of
assets of the Company legally available for payment, cash distributions (or
distributions in kind or in other property if expressly permitted and described
in the applicable Prospectus Supplement) at such rates and on such dates as will
be set forth in the applicable Prospectus Supplement. Each such distribution
shall be payable to holders of record as they appear on the share transfer books
of the Company on such record dates as shall be fixed by the Board of Directors.
Redemption. If so provided in the applicable Prospectus Supplement, the
Preferred Stock will be subject to mandatory redemption or redemption at the
option of the Company, in whole or in part, in each case upon the terms, at the
times and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid distributions thereon
(which shall not, if such Preferred Stock does not have a cumulative
distribution, include any accumulation in respect of unpaid distributions for
prior distribution periods) to the date of redemption. The redemption price may
be payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for Preferred Stock of any series is payable
only from the net proceeds of the issuance of shares of capital stock of the
Company, the terms of such Preferred Stock may provide that, if no such shares
of capital stock shall have been issued or to the extent the net proceeds from
any issuance are insufficient to pay in full the aggregate redemption price then
due, such Preferred Stock shall automatically and mandatorily be converted into
the applicable shares of capital stock of the Company pursuant to conversion
provisions to be specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Stock
has a cumulative distribution, full cumulative distributions on all shares of
any series of Preferred Stock shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past distribution periods and the then current distribution
period, and (ii) if such series of Preferred Stock does not have a cumulative
distribution, full distributions of the Preferred Stock of any series have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current distribution
period, no shares of any series of Preferred Stock shall be redeemed unless all
outstanding Preferred Stock of such series is simultaneously redeemed; provided,
however, that the foregoing shall not prevent the purchase or acquisition of
Preferred Stock of such series to preserve the REIT status of the Company or
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding Preferred Stock of such series. In addition, unless (i) if such
series of Preferred Stock has a cumulative distribution, full cumulative
distributions on all outstanding shares of any series of Preferred Stock have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for all past distribution periods
and the then current distribution period, and (ii) if such series of Preferred
Stock does not have a cumulative distribution, full distributions on the
Preferred Stock of any series have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for the then current distribution period, the Company shall not purchase
or otherwise acquire directly or indirectly any shares of Preferred Stock of
such series (except by conversion into or exchange for shares of capital stock
of the Company ranking junior to the Preferred Stock of such series as to
distributions and upon liquidation); provided, however, that the foregoing shall
not prevent the purchase or acquisition of Preferred Stock of such series to
preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Preferred Stock of
such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
or for which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by lot in a manner determined by the
Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the
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share transfer books of the Company. Each notice shall state: (i) the redemption
date; (ii) the number of shares and series of the Preferred Stock to be
redeemed; (iii) the redemption price; (iv) the place or places where
certificates for such Preferred Stock are to be surrendered for payment of the
redemption price; (v) that distributions on the shares to be redeemed will cease
to accrue on such redemption date; and (vi) the date upon which the holder's
conversion rights, if any, as to such shares shall terminate. If fewer than all
the shares of Preferred Stock of any series are to be redeemed, the notice
mailed to each such holder thereof shall also specify the number of shares of
Preferred Stock to be redeemed from each such holder. If notice of redemption of
any Preferred Stock has been given and if the funds necessary for such
redemption have been set aside by the Company in trust for the benefit of the
holders of any Preferred Stock so called for redemption, then from and after the
redemption date distributions will cease to accrue on such Preferred Stock, and
all rights of the holders of such shares will terminate, except the right to
receive the redemption price.
Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, then, before any
distribution or payment shall be made to the holders of any Common Stock or any
other class or series of shares of capital stock of the Company ranking junior
to the Preferred Stock in the distribution of assets upon any liquidation,
dissolution or winding up of the Company, the holders of each series of
Preferred Stock shall be entitled to receive out of assets of the Company
legally available for distribution to stockholders liquidating distributions in
the amount of the liquidation preference per share of Preferred Stock (set forth
in the applicable Prospectus Supplement), plus an amount equal to all
distributions accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid distributions for prior distribution periods
if such Preferred Stock do not have a cumulative distribution). After payment of
the full amount of the liquidating distributions to which they are entitled, the
holders of Preferred Stock will have no right or claim to any of the remaining
assets of the Company. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the Company are
insufficient to pay the amount of the liquidating distributions on all
outstanding Preferred Stock and the corresponding amounts payable on all shares
of other classes or series of shares of capital stock of the Company ranking on
parity with the Preferred Stock in the distribution of assets, then the holders
of the Preferred Stock and all other such classes or series of shares of capital
stock shall share ratably in any such distribution of assets in proportion to
the full liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of shares of capital stock ranking
junior to the Preferred Stock upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each case according
to their respective number of shares. For such purposes, the consolidation or
merger of the Company with or into any other corporation, trust or entity, or
the sale, lease or conveyance of all or substantially all of the property or
business of the Company, shall not be deemed to constitute a liquidation,
dissolution or winding up of the Company.
Voting Rights. Holders of Preferred Stock will not have any voting rights,
except as set forth below or as otherwise from time to time required by law or
as indicated in the applicable Prospectus Supplement.
Unless otherwise indicated in the applicable Prospectus Supplement,
whenever distributions on any shares of Preferred Stock shall be in arrears for
six or more quarterly periods, the holders of such shares of Preferred Stock
(voting separately as a class with all other series of preferred stock upon
which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of two additional directors of the Company at
a special meeting called by the holders of record of at least 10% of any series
of Preferred Stock so in arrears (unless such request is received less than 90
days before the date fixed for the next annual or special meeting of the
stockholders) or at the next annual meeting of stockholders, and at each
subsequent annual meeting until (i) if such series of Preferred Stock has a
cumulative distribution, all distributions accumulated on such shares of
Preferred Stock for the past distribution periods and the then current
distribution period shall have been fully paid or declared and a sum sufficient
for the payment thereof set aside for payment or (ii) if such series of
Preferred Stock does not have a cumulative distribution, four consecutive
quarterly distributions shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment. In such case, the
entire Board of Directors will be increased by two directors.
Unless otherwise provided for any series of Preferred Stock, so long as any
shares of Preferred Stock remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of at least two-thirds of the shares
of each series of Preferred Stock outstanding at the time, given in person or by
proxy,
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either in writing or at a meeting (such series voting separately as a class),
(i) authorize or create, or increase the authorized or issued amount of, any
class or series of capital stock ranking prior to such series of Preferred Stock
with respect to payment of distributions or the distribution of assets upon
liquidation, dissolution or winding up or reclassify any authorized capital
stock of the Company into such shares, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase any
such shares; or (ii) amend, alter or repeal the provisions of the Company's
Charter or the articles supplementary for such series of Preferred Stock,
whether by merger, consolidation or otherwise (an "Event"), so as to materially
and adversely affect any right, preference, privilege or voting power of such
series of Preferred Stock or the holders thereof; provided, however, with
respect to the occurrence of any of the Events set forth in (ii) above, so long
as the Preferred Stock remains outstanding with the terms thereof materially
unchanged, taking into account that upon the occurrence of an Event, the Company
may not be the surviving entity, the occurrence of any such Event shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting power of holders of Preferred Stock and provided further that (x) any
increase in the amount of the authorized Preferred Stock or the creation or
issuance of any other series of Preferred Stock, or (y) any increase in the
amount of authorized shares of such series or any other series of Preferred
Stock, in each case ranking on a parity with or junior to the Preferred Stock of
such series with respect to payment of distributions or the distribution of
assets upon liquidation, dissolution or winding up, shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
Conversion Rights. The terms and conditions, if any, upon which any series
of Preferred Stock is convertible into Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of shares of Common Stock into which the Preferred Stock is convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
Registrar and Transfer Agent. The registrar and transfer agent for the
Preferred Stock will be set forth in the applicable Prospectus Supplement.
DEPOSITARY SHARES
General
The Company may issue receipts ("Depositary Receipts") for Depositary
Shares, each of which will represent a fractional interest of a share of a
particular series of Preferred Stock, as specified in the applicable Prospectus
Supplement. Shares of Preferred Stock of each series represented by Depositary
Shares will be deposited under a separate Deposit Agreement (each, a "Deposit
Agreement") among the Company, the depositary named therein (the "Preferred
Stock Depositary") and the holders from time to time of the Depositary Receipts.
Subject to the terms of the Deposit Agreement, each owner of a Depositary
Receipt will be entitled, in proportion to the fractional interest of a share of
a particular series of Preferred Stock represented by the Depositary Shares
evidenced by such Depositary Receipt, to all the rights and preferences of the
Preferred Stock represented by such Depositary Shares (including distribution,
voting, conversion, redemption and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Stock by the Company to the Preferred Stock
Depositary, the Company will cause the Preferred Stock Depositary to issue, on
behalf of the Company, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from the Company upon
request, and the following summary of the form thereof filed as an exhibit to
the Registration Statement of which this Prospectus is a part is qualified in
its entirety by reference thereto.
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Distributions
The Preferred Stock Depositary will distribute all cash distributions
received in respect of the Preferred Stock to the record holders of Depositary
Receipts evidencing the related Depositary Shares in proportion to the number of
such Depositary Receipts owned by such holders, subject to certain obligations
of holders to file proofs, certificates and other information and to pay certain
charges and expenses to the Preferred Stock Depositary.
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to the Preferred Stock Depositary, unless the Preferred Stock
Depositary determines that it is not feasible to make such distribution, in
which case the Preferred Stock Depositary may, with the approval of the Company,
sell such property and distribute the net proceeds from such sale to such
holders.
No distribution will be made in respect of any Depositary Share to the
extent that it represents any Preferred Stock converted into Excess Stock.
Withdrawal of Preferred Stock
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Stock Depositary (unless the related Depositary Shares have
previously been called for redemption or converted into Excess Stock), the
holders thereof will be entitled to delivery at such office, to or upon such
holder's order, of the number of whole or fractional shares of Preferred Stock
and any money or other property represented by the Depositary Shares evidenced
by Depositary Receipts. Holders of Depositary Receipts will be entitled to
receive whole or fractional shares of the related Preferred Stock on the basis
of the proportion of the Preferred Stock represented by each Depositary Share as
specified in the applicable Prospectus Supplement, but holders of such Preferred
Stock will not thereafter be entitled to receive Depositary Shares therefor. If
the Depositary Receipts delivered by the holder evidence a number of Depositary
Shares in excess of the number of Depositary Shares representing the number of
shares of Preferred Stock to be withdrawn, the Preferred Stock Depositary will
deliver to such holder at the same time a new Depositary Receipt evidencing such
excess number of Depositary Shares.
Redemption of Depositary Shares
Whenever the Company redeems shares of Preferred Stock held by the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of the
same redemption date the number of Depositary Shares representing shares of
Preferred Stock so redeemed, provided the Company shall have paid in full to the
Preferred Stock Depositary the redemption price of the Preferred Stock to be
redeemed plus an amount equal to any accrued and unpaid distributions thereon to
the date fixed for redemption. The redemption price per Depositary Share will be
equal to the redemption price and any other amounts per share payable with
respect to the Preferred Stock. If fewer than all the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fractional Depositary Shares) or
by any other equitable method determined by the Company that will not result in
the issuance of any Excess Stock.
From and after the date fixed for redemption, all distributions in respect
of the shares of Preferred Stock so called for redemption will cease to accrue,
the Depositary Shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the Depositary Receipts evidencing
the Depositary Shares so called for redemption will cease, except the right to
receive any monies payable upon such redemption and any money or other property
to which the holders of such Depositary Receipts were entitled upon such
redemption upon surrender thereof to the Preferred Stock Depositary.
Voting of the Preferred Stock
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Preferred Stock Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Receipts evidencing the Depositary Shares which represent such
Preferred Stock. Each record holder of Depositary Receipts evidencing Depositary
Shares on the record date (which will be the same date as the record date for
the Preferred Stock) will be entitled to instruct the Preferred Stock Depositary
as
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to the exercise of the voting rights pertaining to the amount of Preferred Stock
represented by such holder's Depositary Shares. The Preferred Stock Depositary
will vote the amount of Preferred Stock represented by such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will abstain from voting the amount of Preferred
Stock represented by such Depositary Shares to the extent it does not receive
specific instructions from the holders of Depositary Receipts evidencing such
Depositary Shares. The Preferred Stock Depositary shall not be responsible for
any failure to carry out any instruction to vote, or for the manner or effect of
any such vote made, as long as any such action or non-action is in good faith
and does not result from negligence or willful misconduct of the Preferred Stock
Depositary.
Liquidation Preference
In the event of the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of each Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depositary Share evidenced by such Depositary
Receipt, as set forth in the applicable Prospectus Supplement.
Conversion of Preferred Stock
The Depositary Shares, as such, are not convertible into Common Stock or
any other securities or property of the Company, except in connection with
certain conversions in connection with the preservation of the Company's status
as a REIT. Nevertheless, if so specified in the applicable Prospectus Supplement
relating to an offering of Depositary Shares, the Depositary Receipts may be
surrendered by holders thereof to the Preferred Stock Depositary with written
instructions to the Preferred Stock Depositary to instruct the Company to cause
conversion of the Preferred Stock represented by the Depositary Shares evidenced
by such Depositary Receipts into whole shares of Common Stock, other shares of
Preferred Stock (including Excess Stock) of the Company or other shares of
capital stock, and the Company has agreed that upon receipt of such instructions
and any amounts payable in respect thereof, it will cause the conversion thereof
utilizing the same procedures as those provided for delivery of Preferred Stock
to effect such conversion. If the Depositary Shares evidenced by a Depositary
Receipt are to be converted in part only, a new Depositary Receipt or Receipts
will be issued for any Depositary Shares not to be converted. No fractional
shares of Common Stock will be issued upon conversion, and if such conversion
will result in a fractional share being issued, an amount will be paid in cash
by the Company equal to the value of the fractional interest based upon the
closing price of the Common Stock on the last business day prior to the
conversion.
Amendment and Termination of a Deposit Agreement
Any form of Depositary Receipt evidencing Depositary Shares which will
represent Preferred Stock and any provision of a Deposit Agreement will be
permitted at any time to be amended by agreement between the Company and the
applicable Preferred Stock Depositary. However, any amendment that materially
and adversely alters the rights of the holders of Depositary Receipts or that
would be materially and adversely inconsistent with the rights granted to the
holders of the related Preferred Stock will not be effective unless such
amendment has been approved by the existing holders of at least two-thirds of
the applicable Depositary Shares evidenced by the applicable Depositary Receipts
then outstanding. No amendment shall impair the right, subject to certain
anticipated exceptions in the Deposit Agreements, of any holder of Depositary
Receipts to surrender any Depositary Receipt with instructions to deliver to the
holder the related Preferred Stock and all money and other property, if any,
represented thereby, except in order to comply with law. Every holder of an
outstanding Depositary Receipt at the time any such amendment becomes effective
shall be deemed, by continuing to hold such Depositary Receipt, to consent and
agree to such amendment and to be bound by the applicable Deposit Agreement as
amended thereby.
A Deposit Agreement will be permitted to be terminated by the Company upon
not less than 30 days prior written notice to the applicable Preferred Stock
Depositary if (i) such termination is necessary to preserve the Company's status
as a REIT or (ii) a majority of each series of Preferred Stock affected by such
termination consents to such termination, whereupon such Preferred Stock
Depositary will be required to deliver or make available to each holder of
Depositary Receipts, upon surrender of the Depositary Receipts held by such
holder, such number of whole or fractional shares of Preferred Stock as are
represented by the Depositary Shares evidenced by such Depositary Receipts
together with any other property held by such
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Preferred Stock Depositary with respect to such Depositary Receipts. The Company
will agree that if a Deposit Agreement is terminated to preserve the Company's
status as a REIT, then the Company will use its best efforts to list the
Preferred Stock issued upon surrender of the related Depositary Shares on a
national securities exchange. In addition, a Deposit Agreement will
automatically terminate if (i) all outstanding Depositary Shares thereunder
shall have been redeemed, (ii) there shall have been a final distribution in
respect of the related Preferred Stock in connection with any liquidation,
dissolution or winding up of the Company and such distribution shall have been
distributed to the holders of Depositary Receipts evidencing the Depositary
Shares representing such Preferred Stock or (iii) each share of the related
Preferred Stock shall have been converted into stock of the Company not so
represented by Depositary Shares.
Charges of a Preferred Stock Depositary
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of a Deposit Agreement. In addition, the
Company will pay the fees and expenses of a Preferred Stock Depositary in
connection with the performance of its duties under a Deposit Agreement.
However, holders of Depositary Receipts will pay the fees and expenses of a
Preferred Stock Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the applicable
Deposit Agreement.
Resignation and Removal of Depositary
A Preferred Stock Depositary will be permitted to resign at any time by
delivering to the Company notice of its election to do so, and the Company will
be permitted at any time to remove a Preferred Stock Depositary, any such
resignation or removal to take effect upon the appointment of a successor
Preferred Stock Depositary. A successor Preferred Stock Depositary will be
required to be appointed within 60 days after delivery of the notice of
resignation or removal and will be required to be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
Miscellaneous
The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Stock Depositary with respect to the related Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under the Deposit Agreement. The obligations of the
Company and the Preferred Stock Depositary under the Deposit Agreement will be
limited to performing their duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of Preferred
Stock represented by the Depositary Shares), gross negligence or willful
misconduct, and the Company and the Preferred Stock Depositary will not be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Receipts, Depositary Shares or shares of Preferred Stock represented
thereby unless satisfactory indemnity is furnished. The Company and the
Preferred Stock Depositary may rely on written advice of counsel or accountants,
or information provided by persons presenting shares of Preferred Stock
represented thereby for deposit, holders of Depositary Receipts or other persons
believed in good faith to be competent to give such information, and on
documents believed in good faith to be genuine and signed by a proper party.
In the event the Preferred Stock Depositary shall receive conflicting
claims, requests or instructions from any holders of Depositary Receipts, on the
one hand, and the Company, on the other hand, the Preferred Stock Depositary
shall be entitled to act on such claims, requests or instructions received from
the Company.
WARRANTS
The Company has no Warrants outstanding (other than options issued under
the Company's employee stock option plan). The Company may issue Warrants for
the purchase of shares of Preferred Stock or Common Stock. Warrants may be
issued independently or together with any other Securities offered by any
Prospectus Supplement and may be attached to or separate from such Securities.
Each series of Warrants will be issued under a separate warrant agreement (each,
a "Warrant Agreement") to be entered into between the Company and a warrant
agent specified in the applicable Prospectus Supplement (the "Warrant Agent").
The Warrant Agent will act solely as an agent of the Company in connection with
the Warrants of such series and
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will not assume any obligation or relationship of agency or trust for or with
holders or beneficial owners of Warrants. The following sets forth certain
general terms and any provisions of the Warrants offered hereby. Further terms
of the Warrants and the applicable Warrant Agreements will be set forth in the
applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the
Warrants in respect of which this Prospectus is being delivered, including,
where applicable, the following:
(1) the title of such Warrants;
(2) the aggregate number of such Warrants;
(3) the price or prices at which such Warrants will be issued;
(4) the designation, terms and number of shares of Common Stock or
Preferred Stock purchasable upon exercise of such Warrants;
(5) the designation and terms of the Securities, if any, with which
such Warrants are issued and the number of such Warrants issued with each
such Security;
(6) the date, if any, on and after which such Warrants and the related
shares of Common Stock or Preferred Stock will be separately transferable;
(7) the price at which each share of Common Stock or Preferred Stock
purchasable upon exercise of such Warrants may be purchased;
(8) the date on which the right to exercise such Warrants shall
commence and the date on which such right shall expire;
(9) the minimum or maximum amount of such Warrants which may be
exercised at any one time;
(10) information with respect to book-entry procedures, if any;
(11) a discussion of certain federal income tax considerations; and
(12) any other terms of such Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Warrants.
RESTRICTIONS ON TRANSFER
The Charter contains certain restrictions on the number of shares of
capital stock of the Company (including the Common Stock, Class B Common Stock,
Class C Common Stock and Series A Preferred Stock and any other series of
preferred stock) that individual stockholders may own. For the Company to
qualify as a REIT under the Code, in addition to other requirements discussed in
"Federal Income Tax Considerations" not more than 50% in value of the
outstanding capital stock of the Company may be owned, directly or indirectly,
by five or fewer individuals (as defined in the Code to include certain
entities) during the last half of a taxable year (other than the first year) and
the capital stock also must be beneficially owned by 100 or more persons during
at least 335 days of a taxable year of 12 months or during a proportionate part
of a shorter taxable year. Because the management of the Company currently
believes it is essential for the Company to maintain its status as a REIT, the
provisions of the Charter with respect to Excess Stock contain restrictions on
the acquisition of its capital stock intended to ensure compliance with these
requirements.
The Charter provides that, subject to certain specified exceptions, no
stockholder may own, or be deemed to own by virtue of the attribution provisions
of the Code, more than the ownership limit (the "Ownership Limit"), which is
equal to 6% (24% in the case of the Simons) of any class of capital stock of the
Company (calculated based on the lower of outstanding shares, voting power or
value). In the event of a purported transfer or other event that would, if
effective, result in the ownership of shares of stock in violation of the
Ownership Limit, such transfer or other event with respect to that number of
shares that would be owned by the transferee in excess of the Ownership Limit
would be deemed void ab initio and the intended transferee would acquire no
rights in such shares of stock. Such shares of stock would automatically be
converted into shares of Excess Stock, according to rules set forth in the
Charter, to the extent necessary to ensure that the purported transfer or other
event does not result in ownership of shares of stock in violation of the
Ownership Limit. The Board of Directors may exempt a person from the Ownership
Limit if they receive a ruling from the IRS or an opinion of tax counsel that
such ownership will not jeopardize the Company's status as a REIT.
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Upon a purported transfer or other event that results in Excess Stock, the
Excess Stock will be deemed to have been transferred to a trustee to be held in
trust for the exclusive benefit of a qualifying charitable organization
designated by the Company. Such Excess Stock will be issued and outstanding
stock of the Company, and it will be entitled to dividends equal to any
dividends which are declared and paid. Any dividend or distribution paid prior
to the discovery by the Company that stock has been converted into Excess Stock
is to be repaid upon demand. The recipient of such dividend will be personally
liable to the trust. Any dividend or distribution declared but unpaid will be
rescinded as void ab initio with respect to such shares of stock and will
automatically be deemed to have been declared and paid with respect to the
shares of Excess Stock into which such shares were converted. Such Excess Stock
will also be entitled to such voting rights as are ascribed to the stock from
which such shares of Excess Stock were converted. Any voting rights exercised
prior to discovery by the Company that shares of stock were converted to Excess
Stock will be rescinded and recast as determined by the trustee.
While Excess Stock is held in trust, an interest in that trust may be
transferred by the purported transferee, or other purported holder with respect
to such Excess Stock only to a person whose ownership of the shares of stock
would not violate the Ownership Limit, at which time the Excess Stock will be
automatically exchanged for the same number of shares of stock of the same type
and class as the shares of stock for which the Excess Stock was originally
exchanged.
The Charter contains provisions that are designed to ensure that the
purported transferee or other purported holder of the Excess Stock may not
receive in return for such a transfer an amount that reflects any appreciation
in the shares of stock for which such Excess Stock was exchanged during the
period that such Excess Stock was outstanding. Any amount received by a
purported transferee or other purported holder in excess of the amount permitted
to be received must be paid over to the trust. If the foregoing restrictions are
determined to be void or invalid by virtue of any legal decision, statute, rule
or regulation, then the intended transferee or holder of any Excess Stock may be
deemed, at the option of the Company, to have acted as an agent on behalf of the
trust in acquiring or holding such Excess Stock and to hold such Excess Stock on
behalf of the trust.
The Charter further provides that the Company may purchase, for a period of
90 days during the time the Excess Stock is held by the trustee in trust, all or
any portion of the Excess Stock from the original transferee-stockholder at the
lesser of the price paid for the stock by the purported transferee (or if no
notice of such purchase price is given, at a price to be determined by the Board
of Directors, in its sole discretion, but no lower than the lowest market price
of such stock at any time prior to the date the Company exercises its purchase
option) and the closing market price for the stock on the date the Company
exercises its option to purchase. The 90-day period begins on the date of the
violative transfer or other event if the original transferee-stockholder gives
notice to the Company of the transfer or (if no notice is given) the date the
Board of Directors determines that a violative transfer or other event has been
made.
The Charter further provides that in the event of a purported issuance or
transfer that would, if effective, result in the Company being beneficially
owned by fewer than 100 persons, such issuance or transfer would be deemed null
and void ab initio, and the intended transferee would acquire no rights to the
stock.
All certificates representing shares of any class of stock of the Company
bear a legend referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution provisions of
the Code, more than 5% (or such other percentage as may be required by the Code
or regulations promulgated thereunder) of the outstanding stock must file an
affidavit with the Company containing the information specified in the Charter
before January 30 of each year. In addition, each stockholder shall, upon
demand, be required to disclose to the Company in writing such information with
respect to the direct, indirect and constructive ownership of shares as the
Board of Directors deems necessary to comply with the provisions of the Charter
or the Code applicable to a REIT or to comply with the requirements of any
taxing authority or governmental agency.
The Excess Stock provision will not be removed automatically even if the
REIT provisions of the Code are changed so as to no longer contain any ownership
concentration limitation or if the ownership concentration limitation is
increased. In addition to preserving the Company's status as a REIT, the
Ownership Limit may have the effect of precluding an acquisition of control of
the Company without the approval of the Board of Directors.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material federal income tax considerations
that may be relevant to a prospective purchase. The following is based upon
current law, and is not tax advice. This discussion does not address all aspects
of taxation that may be relevant to particular stockholders in light of their
personal investment or tax circumstances, or to certain types of stockholders
(including insurance companies, tax exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) subject to special treatment under
the federal income tax laws, nor does it give a detailed discussion of any
state, local or foreign tax considerations.
EACH PROSPECTIVE PURCHASER IS ENCOURAGED TO CONSULT ITS OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE PURCHASE,
OWNERSHIP AND SALE OF THE SECURITIES AND OF THE COMPANY'S ELECTION TO BE
TAXED AS A REAL ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP,
SALE AND ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
GENERAL
Both the Company and the Subsidiary have made elections to be taxed as
REITs under the Code, and applicable Treasury Regulations relating to REIT
qualification (the "REIT Requirements"). Management of both companies believe
that both companies have been organized and operate in such a manner as to
qualify for taxation as REITs under the Code. Both companies intend to continue
to operate in such a manner, but no assurance can be given that they have
operated in a manner so as to qualify or will operate in a manner so as to
remain qualified.
The REIT Requirements, relating to the federal income tax treatment of
REITs and their stockholders, are highly technical and complex. The following
discussion sets forth only the material aspects of those requirements. This
summary is qualified in its entirety by the applicable Code provisions, rules
and regulations promulgated thereunder, and administrative and judicial
interpretations thereof.
OPINION OF COUNSEL
In the opinion of Paul, Weiss, Rifkind, Wharton & Garrison ("Counsel"),
commencing with the taxable year ended December 31, 1994 and ending on the
Merger Date, the Company (as Simon Property Group, Inc.) was organized and has
operated in a manner so as to qualify for taxation as a REIT under the Code and
commencing on the Merger Date, the Company's and the Subsidiary's proposed
methods of operation will enable them to continue to meet the requirements for
qualification and taxation as REITs under the Code. In the opinion of Willkie
Farr & Gallagher, prior counsel to DRC ("WF&G"), commencing with the taxable
year ending December 31, 1994 and ending on the Merger Date, DRC was organized
and has operated in a manner so as to qualify for taxation as a REIT. It must be
emphasized that Counsel's opinion is based on the opinion of WF&G referred to
above, and Counsel's and WF&G's opinions are based on various assumptions and
discussions set forth in the Company's Prospectus/Joint Proxy Statement dated
June 28, 1996, with respect to the Merger and are conditioned upon certain
representations made by the Company and DRC as to factual matters. Such factual
assumptions and representations are set forth below in this discussion of
"Federal Income Tax Considerations." In addition, Counsel's and WF&G's opinions
are based upon the factual representations of the Company concerning its
business and properties, and the business and properties of the Subsidiary and
the Operating Partnership, as set forth in this Prospectus. Moreover, such
qualification and taxation as a REIT depend upon each of the Company's and the
Subsidiary's ability to meet, through actual annual operating results,
distribution levels, diversity of stock ownership, and the various other
qualification tests imposed under the Code discussed below, the results of which
will not be reviewed by Counsel or WF&G. Accordingly, no assurance can be given
that the actual results of either company's operation for any one taxable year
will satisfy such requirements. See "-- Failure to Qualify."
TAXATION OF THE COMPANY
A REIT generally is not subject to federal corporate income taxes on that
portion of its ordinary income or capital gain that is distributed currently to
stockholders because the REIT provisions of the Code generally allow a REIT to
deduct dividends paid to its stockholders. This deduction for dividends paid to
stockholders
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substantially eliminates the federal "double taxation" on earnings (once at the
corporate level and once again at the stockholder level) that generally results
from investment in a corporation.
However, REITs are taxed at regular corporate rates on their ordinary
income and capital gain not distributed to its stockholders and may be subject
to federal income or excise tax in certain other circumstances, some of which
are as follows. First, a REIT may be subject to the "alternative minimum tax" on
its items of tax preference, if any. Second, if the REIT has net income from a
"prohibited transaction" (generally, a sale or other disposition of property
held primarily for sale to customers in the ordinary course of business, other
than foreclosure property), such income will be subject to a 100% tax. Third, if
the REIT should fail to satisfy the 75% gross income test or the 95% gross
income test (as discussed below), and has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on the net income attributable to the greater of
the amount by which the REIT fails the 75% or 95% test, multiplied by a fraction
intended to reflect the REIT's profitability. Fourth, if the REIT should fail to
distribute with respect to each calendar year at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income
for such year, and (iii) any undistributed taxable income from prior periods,
the REIT will be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed.
REQUIREMENTS FOR QUALIFICATION
To qualify as a REIT, a corporation must elect to be so treated and must
meet the requirements discussed below, relating to its organization, sources of
income, nature of assets, and distributions of income to stockholders.
Organizational Requirements
The Code defines a REIT as a corporation, trust or association: (i) that is
managed by one or more trustees or directors; (ii) the beneficial ownership of
which is evidenced by transferable shares or by transferable certificates of
beneficial interest; (iii) that would be taxable as a domestic corporation but
for the REIT Requirements; (iv) that is neither a financial institution nor an
insurance company subject to certain provisions of the Code; (v) that has the
calendar year as its taxable year; (vi) the beneficial ownership of which is
held by 100 or more persons; and (vii) during the last half of each taxable year
not more than 50% in value of the outstanding capital stock of which is owned,
directly or indirectly through the application of certain attribution rules, by
five or fewer individuals (as defined in the Code to include certain entities).
In addition, certain other tests, described below, regarding the nature of a
REIT's income and assets must also be satisfied. The Code provides that
conditions (i) through (v), inclusive, must be met during the entire taxable
year and that condition (vi) must be met during at least 335 days of a taxable
year of 12 months, or during a proportionate part of a taxable year of less than
12 months. Conditions (vi) and (vii) do not apply until after the first taxable
year for which an election is made to be taxed as a REIT.
The Company satisfies the requirements set forth in (i) through (vi) above
and believes that it satisfies the requirement set forth in (vii) above. In
addition, the Charter includes certain restrictions regarding transfer of the
Common Stock that are intended to assist the Company in continuing to satisfy
the share ownership requirements described in (vi) and (vii) above.
The Subsidiary satisfies the requirements set forth in (i) through (vi)
above, and requirement (vii) is satisfied by virtue of the Company's owning
99.99% of the Subsidiary's outstanding stock.
The Company currently has several "qualified REIT subsidiaries." Code
section 856(i) provides that a corporation that is a "qualified REIT subsidiary"
will not be treated as a separate corporation, and all assets, liabilities and
items of income, deduction, and credit of a "qualified REIT subsidiary" will be
treated as assets, liabilities, and such items (as the case may be) of the REIT.
In applying the requirements described herein, the Company's "qualified REIT
subsidiaries" will be ignored, and all assets, liabilities, and items of income,
deduction, and credit of such subsidiaries will be treated as assets,
liabilities and items of the Company.
In the case of a REIT which is a partner in a partnership, the REIT is
deemed to own its proportionate share of the assets of the partnership and is
deemed to receive the income of the partnership attributable to such share. In
addition, the character of the assets and gross income of the partnership shall
retain the same character in the hands of the REIT for purposes of the RElT
Requirements, including satisfying the income tests and asset tests. Thus, the
Company's and the Subsidiary's proportionate share of the assets, liabilities
and
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items of income of the Operating Partnership and the partnerships in which the
Operating Partnership has an interest are treated as assets, liabilities and
items of income of the Company and the Subsidiary for purposes of applying the
requirements described herein, provided that the Operating Partnership and the
other partnerships in which the Company or the Subsidiary holds a direct or
indirect interest are treated as partnerships for federal income tax purposes.
See "Effect of Tax Status of Operating Partnership and Other Partnerships on
REIT Qualification."
Income Tests
To maintain qualification as a REIT, there are three gross income
requirements that must be satisfied annually by each of the Company and the
Subsidiary. First, at least 75% of each company's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived
directly or indirectly from investments relating to real property or mortgages
on real property (including "rents from real property", "dividends from
qualified REITS" and, in certain circumstances, interest) or from "qualified
temporary investment income" (described below). Second, at least 95% of each
company's gross income (excluding gross income from prohibited transactions) for
each taxable year must be derived from such real property investments and from
dividends, interest, and gain from the sale or disposition of stock or
securities or from any combination of the foregoing. Third, short-term gain from
the sale or other disposition of stock or securities, gain from prohibited
transactions, and gain on the sale or other disposition of real property held
for less than four years (apart from involuntary conversions and sales of
foreclosure property) must represent less than 30% of each company's gross
income (including gross income from prohibited transactions) for each taxable
year. In applying these tests, the Company and the Subsidiary will each be
treated as realizing its share of the income and bearing its share of the loss
of the Operating Partnership, and the character of such income or loss, as well
as other partnership items, will be determined at the partnership level.
Rents received by each company will qualify as "rents from real property"
only if several conditions are met. First, the amount of rent must not be based
in whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Code provides that rents received
from a tenant will not qualify as "rents from real property" if the REIT, or a
direct or indirect owner of 10% or more of the REIT, directly or constructively
owns 10% or more of such tenant (a "Related Party Tenant"). Third, if rent
attributable to personal property, leased in connection with a lease of real
property, is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property." Finally, for rents received to qualify as "rents
from real property," the REIT generally must not operate or manage the property
or furnish or render services to the tenants of such property, other than
through an "independent contractor" who is adequately compensated and from whom
the REIT does not derive any income; provided, however, that the REIT may
directly perform certain customary services (e.g., furnishing water, heat, light
and air conditioning, and cleaning windows, public entrances and lobbies) other
than services which are considered rendered to the occupant of the property.
Interpretations of the law concerning the types of services that may be rendered
by a REIT to its tenants is constantly evolving and the consequences of
rendering impermissible services are somewhat uncertain.
It is expected that both companies' real estate investments will give rise
to income that will enable both companies to satisfy all of the income tests
described above. Substantially all of the Company's and the Subsidiary's income
is and will continue to be derived from their interests in the Operating
Partnership, which income will, for the most part, qualify as "rents from real
property" for purposes of the 75% and 95% gross income tests. If, however, the
Subsidiary fails to qualify as a REIT, then the Company will not receive
qualifying income for purposes of the 75% gross income tests.
Neither company charges, nor anticipates charging, more than a de minimis
amount of rent that is based in whole or in part on the income or profits of any
person (except by reason of being based on a percentage of receipts or sales, as
described above). Although neither company can be absolutely certain whether all
Related Party Tenants have been or will be identified because of complex
attribution rules, neither company anticipates receiving rents in excess of a de
minimis amount from Related Party Tenants. Neither company anticipates holding a
lease on any property in which rents attributable to personal property
constitute greater than 15% of the total rents received under the lease. Both
companies, through the Operating Partnership, will perform all development,
construction and leasing services for, and does and will operate and manage the
properties wholly-owned by the Company directly without using an "independent
contractor." Management
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and Counsel believe that the services currently provided to lessees of these
properties are those usually or customarily rendered in connection with the
rental of space for occupancy only. As noted above, this area of the law is
somewhat uncertain and no absolute assurance can be given that the IRS or a
court will concur with Counsel's analysis with respect to such services.
The Operating Partnership indirectly owns 5% of the voting common stock,
substantially all of the nonvoting common stock and all of the preferred stock
of the SPG Management Company, a corporation that is taxable as a regular
corporation. The SPG Management Company performs management, development,
construction and leasing services for properties and other real estate owned in
whole or in part by third parties. The income is earned by and taxed to the SPG
Management Company and is received by the Operating Partnership only indirectly
as dividends and interest that qualify under the 95% test. The Operating
Partnership also owns 5% of the voting common stock and all of the preferred
stock of the DRC Management Company, a corporation that is also taxable as a
regular corporation. The SPG Management Company owns 95% of the voting common
stock of the DRC Management Company. The SPG Management Company and the DRC
Management Company (together, the "Management Companies") will perform
management, development, construction and leasing services for (i) any
income-producing property less than wholly-owned, directly or indirectly, by the
Operating Partnership, (ii) the properties in which the Simons own an interest
that were not transferred to the Company or the SPG Management Company in
connection with the initial public offering of the Common Stock consummated in
December, 1993 and (iii) other real estate owned in whole or in part by third
parties. The income will be earned by and taxed to the Management Companies and
will be received by the Operating Partnership only indirectly as dividends and
interest that qualify under the 95% test.
If either the Company or the Subsidiary fails to satisfy one or both of the
75% or 95% gross income tests for any taxable year, it may nevertheless qualify
as a REIT for such year if it is entitled to relief under certain provisions of
the Code. These relief provisions will be generally available if (i) the failure
to meet such tests was due to reasonable cause and not due to willful neglect,
(ii) the failing company attaches a schedule of the sources of its income to its
return, and (iii) any incorrect information on the schedule was not due to fraud
with intent to evade tax. It is not possible however, to state whether in all
circumstances either company would be entitled to the benefit of these relief
provisions. Even if these relief provisions apply, a tax would be imposed with
respect to the excess net income. No similar mitigation provision applies to
provide relief if the 30% income test is failed, and in such case, the Company
or the Subsidiary would cease to qualify as a REIT. See "-- Failure to Qualify."
Asset Tests
In order for each of the Company and the Subsidiary to maintain its
qualification as a REIT, at the close of each quarter of its taxable year it
must also satisfy three tests relating to the nature of its assets. First, at
least 75% of the value of each company's total assets must be represented by
real estate assets (which for this purpose include (i) its allocable share of
real estate assets held by partnerships in which such company or a "qualified
REIT subsidiary" of such company owns an interest and (ii) stock or debt
instruments purchased with the proceeds of a stock offering or a long-term (at
least five years) debt offering of such company and held for not more than one
year from the date such company receives such proceeds), cash, cash items, and
government securities. Second, not more than 25% of each company's total assets
may be represented by securities other than those in the 75% asset class. Third,
of the investments included in the 25% asset class, the value of any one
issuer's securities owned by such company may not exceed 5% of the value of such
company's total assets, and such company may not own more than 10% of any one
issuer's outstanding voting securities (excluding securities of a qualified REIT
subsidiary or another REIT).
It is anticipated that the Company and the Subsidiary will be able to
comply with these asset tests. The Company and the Subsidiary are deemed to hold
directly their proportionate shares of all real estate and other assets of the
Operating Partnership. As a result, each company plans to hold more than 75% of
its assets as real estate assets. In addition, neither the Company nor the
Subsidiary plan to hold any securities representing more than 10% of any one
issuer's voting securities, other than any qualified REIT subsidiary or another
REIT, nor securities of any one issuer exceeding 5% of the value of either the
Company's or the Subsidiary's gross assets, respectively (determined in
accordance with generally accepted accounting principles). Securities of the
Subsidiary held by the Company will not violate the asset test so long as the
Subsidiary qualifies as a REIT. If, however, the Subsidiary fails to qualify as
a REIT, then the Company would fail this asset test because the Company would
then hold more than 10% of the securities of an issuer which is not a REIT.
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The Operating Partnership indirectly owns 5% of the voting common stock,
substantially all of the nonvoting common stock and all of the participating
preferred stock of the SPG Management Company, which, in the aggregate, does not
exceed 10% of the voting securities of the SPG Management Company. The Operating
Partnership also owns 5% of the voting common stock and all of the nonvoting
preferred stock of the DRC Management Company, which, in the aggregate, does not
exceed 10% of the voting securities of the DRC Management Company. Management
believes that (a) neither the value of the securities of SPG Management Company
nor the value of the securities of DRC Management Company held by the Company
will exceed 5% of the value of the total assets of the Company and (b) neither
the value of the securities of SPG Management Company nor the value of DRC
Management Company held by the Subsidiary will exceed 5% of the value of the
total assets of the Subsidiary.
After initially meeting the asset tests at the close of any quarter,
neither the Company nor the Subsidiary will lose its status as a REIT for
failure to satisfy the asset tests at the end of a later quarter solely by
reason of changes in asset values. If the failure to satisfy the asset tests
results from an acquisition of securities or other property during a quarter,
the failure can be cured by disposition of sufficient nonqualifying assets
within 30 days after the close of that quarter. Both companies maintain adequate
records of the value of its assets to ensure compliance with the asset tests,
and to take such other action within 30 days after the close of any quarter as
may be required to cure any noncompliance. However, there can be no assurance
that such other action will always be successful.
Annual Distribution Requirements
In order to be treated as a REIT, each of the Company and the Subsidiary is
required to distribute dividends (other than capital gain dividends) to its
stockholders in an amount at least equal to (i) the sum of (a) 95% of its "REIT
taxable income" (computed without regard to the dividends paid deduction and the
Company's net capital gain) and (b) 95% of its net income, if any, from
foreclosure property in excess of the special tax on income from foreclosure
property, minus (ii) the sum of certain items of noncash income.
To the extent that either company does not distribute all of its net
capital gain or distributes at least 95% (but less than 100%) of its REIT
taxable income, as adjusted, it will be subject to tax on the undistributed
portion, at regular ordinary and capital gains corporate tax rates. Furthermore,
if either company fails to distribute during each calendar year at least the sum
of (a) 85% of its REIT ordinary income for such year, (b) 95% of its REIT
capital gain net income for such year, and (c) any undistributed taxable income
from prior periods, such company will be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed. Each
of the Company and the Subsidiary intends to make timely distributions
sufficient to satisfy this annual distribution requirement.
It is expected that each of the Company's and the Subsidiary's taxable
income will be less than its cash flow, due to the allowance of depreciation and
other noncash charges in computing its taxable income. Accordingly, each of the
Company and the Subsidiary anticipates that it will generally have sufficient
cash or liquid assets to enable it to satisfy the 95% distribution requirement.
It is possible that, from time to time, neither the Company nor the
Subsidiary may have sufficient cash or other liquid assets to meet the 95%
distribution requirement due to timing differences between the actual receipt of
income and actual payment of deductible expenses and the inclusion of such
income and deduction of such expenses in arriving at taxable income of either
company or if the amount of nondeductible expenses such as principal
amortization or capital expenditures exceed the amount of noncash deductions. In
the event that such situation occurs, in order to meet the 95% distribution
requirement, either company may find it necessary to arrange for short-term, or
possibly long-term, borrowings or to pay dividends in the form of taxable share
dividends. If the amount of nondeductible expenses exceeds noncash deductions,
either company may refinance its indebtedness to reduce principal payments and
borrow funds for capital expenditures.
Under certain circumstances, either the Company or the Subsidiary may be
able to rectify a failure to meet the distribution requirement for a year by
paying "deficiency dividends" to stockholders in a later year, which may be
included in such company's deduction for dividends paid for the earlier year.
Thus, either company may be able to avoid being taxed on amounts distributed as
deficiency dividends; however, such company will be required to pay interest
based upon the amount of any deduction taken for deficiency dividends.
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FAILURE TO QUALIFY
If either the Company or the Subsidiary fails to qualify for taxation as a
REIT in any taxable year, and the relief provisions do not apply, the Company
will be subject to tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. The failure of the Company or the
Subsidiary to qualify as a REIT will subject the Company to such tax.
Distributions to stockholders in any year in which the Company fails to qualify
will not be deductible by the Company nor will they be required to be made. In
such event, to the extent of current or accumulated earnings and profits, all
distributions to stockholders will be taxable as ordinary income, and subject to
certain limitations of the Code, corporate distributees may be eligible for the
dividends-received deduction. Unless entitled to relief under specific statutory
provisions, the Company and the Subsidiary (if it fails to qualify as a REIT)
will also be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether in all circumstances the Company or the Subsidiary would be
entitled to such statutory relief.
TAXATION OF U.S. STOCKHOLDERS
As used herein, the term "U.S. Stockholder" means a holder of shares of
Common Stock that (for United States federal income tax purposes) (i) is a
citizen or resident of the United States, (ii) is a corporation, partnership, or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) is an estate or trust the income
of which is subject to United States federal income taxation regardless of its
source. For any taxable year for which the Company qualifies for taxation as a
REIT, amounts distributed to taxable U.S. Stockholders will be taxed as follows.
Distributions Generally
Distributions to U.S. Stockholders, other than capital gain dividends
discussed below, will be taxable as ordinary income to such holders up to the
amount of the Company's current or accumulated earnings and profits. Such
distributions are not eligible for the dividends-received deduction for
corporations. To the extent that the Company makes distributions in excess of
its current or accumulated earnings and profits, such distributions will first
be treated as a tax-free return of capital, reducing the tax basis in the U.S.
Stockholders' shares of Common Stock, and distributions in excess of the U.S.
Stockholders' tax basis in their respective shares of Common Stock are taxable
as gain realized from the sale of such shares. Dividends declared by the Company
in October, November, or December of any year payable to a stockholder of record
on a specified date in any such month will be treated as both paid by the
Company and received by the stockholder on December 31 of such year, provided
that the dividend is actually paid by the Company during January of the
following calendar year. Stockholders may not include on their own income tax
returns any tax losses of the Company.
The Company will be treated as having sufficient earnings and profits to
treat as a dividend any distribution by the Company up to the greater of its
current or accumulated earnings and profits. As a result, stockholders may be
required to treat certain distributions that would otherwise result in a tax
free return of capital as taxable dividends. Moreover, any "deficiency dividend"
will be treated as a "dividend" (an ordinary dividend or a capital gain
dividend, as the case may be), regardless of the Company's earnings and profits.
Capital Gain Dividends
Dividends to U.S. Stockholders that are properly designated by the Company
as capital gain dividends will be treated as long-term capital gain (to the
extent they do not exceed the Company's actual net capital gain) for the taxable
year without regard to the period for which the stockholder has held his stock.
Corporate stockholders, however, may be required to treat up to 20% of certain
capital gain dividends as ordinary income. Capital gain dividends are not
eligible for the dividends-received deduction for corporations.
Dispositions of Shares of Common Stock
A U.S. Stockholder will recognize gain or loss on the sale or exchange of
shares of Common Stock to the extent of the difference between the amount
realized on such sale or exchange and the holder's tax basis in such shares.
Such gain or loss generally will constitute long-term capital gain or loss if
the holder has held such shares for more than one year. Losses incurred on the
sale or exchange of shares of Common Stock held for six months or less (after
applying certain holding period rules), however, will generally be deemed long-
term capital loss to the extent of any long-term capital gain dividends received
by the U.S. Stockholder with respect to such shares.
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<PAGE> 75
Treatment of Tax-Exempt U.S. Stockholders
The IRS has ruled that amounts distributed by a REIT to a tax-exempt
pension trust did not constitute unrelated business taxable income ("UBTI").
Although rulings are merely interpretations of law by the IRS and may be revoked
or modified, based on this analysis, indebtedness incurred by the Company in
connection with the acquisition of an investment should not cause any income
derived from the investment to be treated as UBTI to a tax exempt entity. A
tax-exempt entity that incurs indebtedness to finance its purchase of shares,
however, will be subject to UBTI by virtue of the acquisition indebtedness
rules.
In addition, qualified trusts that hold more than 10% (by value) of the
interests in a REIT may be required to treat a percentage of REIT dividends as
UBTI. The requirement applies if (i) the qualification of the REIT depends upon
the application of a "look-through" exception to the restriction on REIT
stockholdings by five or fewer individuals, including qualified trusts, and (ii)
the REIT is "predominantly held" by qualified trusts. Qualification of the
Company as a REIT does not depend upon application of the "look-through"
exception and the Company is not "predominantly held" by qualified trusts. Thus,
the Company does not expect this rule to apply to it.
Additional Tax Consequences for Holders of Preferred Stock, Depositary Shares
and Warrants
If the Company offers one or more series of Preferred Stock, Depositary
Shares or Warrants, then there may be additional tax consequences for the
holders of such Preferred Stock, Depositary Shares or Warrants. For a discussion
of any such additional consequences, see the applicable Prospectus Supplement.
SPECIAL TAX CONSIDERATIONS FOR FOREIGN STOCKHOLDERS
The rules governing United States federal income taxation of non-resident
alien individuals, foreign corporations, foreign partnerships, and foreign
trusts and estates (collectively, "Non-U.S. Stockholders") are complex, and the
following discussion is intended only as a summary of such rules. Prospective
Non-U.S. Stockholders should consult with their own tax advisors to determine
the impact of federal, state, and local income tax laws on an investment in the
REIT, including any reporting requirements, as well as the tax treatment of such
an investment under tax treaties and their home country laws.
In general, Non-U.S. Stockholders will be subject to regular United States
federal income tax with respect to their investment in the Company if such
investment is "effectively connected" with the Non-U.S. Stockholder's conduct of
a trade or business in the United States. A corporate Non-U.S. Stockholder that
receives income that is (or is treated as) effectively connected with a United
States trade or business may also be subject to the branch profits tax under
section 884 of the Code, which is payable in addition to regular United States
corporate income tax. The Company expects to withhold United States income tax,
as described below, on the gross amount of any distributions paid to a Non-U.S.
Stockholder unless (i) a lower treaty rate applies and the required form
evidencing eligibility for that reduced rate is filed with the Company, or (ii)
the Non-U.S. Stockholder files an IRS Form 4224 with the Company, claiming that
the distribution is "effectively connected" income.
A distribution by the Company that is not attributable to gain from the
sale or exchange by the Company of a United States real property interest and
that is not designated by the Company as a capital gain dividend will be treated
as an ordinary income dividend to the extent made out of current or accumulated
earnings and profits. Generally, an ordinary income dividend received by a
Non-U.S. Stockholder that is not "effectively connected" with such Non-U.S.
Stockholder's trade or business in the United States will be subject to a United
States withholding tax equal to 30% of the gross amount of the distribution
unless such tax is reduced or eliminated by an applicable tax treaty. A
distribution of cash in excess of the Company's earnings and profits will be
treated first as a return of capital that will reduce a Non-U.S. Stockholder's
basis in its shares of Common Stock (but not below zero) and then as gain from
the disposition of such shares, the tax treatment of which is described under
the rules discussed below with respect to dispositions of shares.
Distributions by the Company that are attributable to gain from the sale or
exchange of a United States real property interest will be taxed to a Non-U.S.
Stockholder under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S. Stockholder
as if such distributions were gains "effectively connected" with a United States
trade or business. Accordingly, a Non-U.S. Stockholder will be taxed at the
capital gain rates applicable to a U.S. Stockholder (subject to any applicable
alternative minimum tax and a special alternative minimum tax in the case of
non-resident alien individuals). Distributions subject to FIRPTA may also be
subject to a 30% branch profits tax in the hands of a foreign corporate
stockholder that is not entitled to treaty exemption. The Company will be
required to
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withhold from distributions to Non-U.S. Stockholders, and remit to the IRS, (i)
35% of designated capital gain dividends (or, if greater, 35% of the amount of
any distributions that could be designated as capital gain dividends) and (ii)
30% of ordinary dividends paid out of earnings and profits.
A sale of shares of Common Stock by a Non-U.S. Stockholder generally will
not be subject to United States taxation unless such shares constitute a "United
States real property interest" within the meaning of FIRPTA or are effectively
connected with a U.S. trade or business. The shares of Common Stock of the
Company will not constitute a United States real property interest if the
Company is a "domestically controlled REIT." A domestically controlled REIT is a
REIT in which at all times during a specified testing period less than 50% in
value of its shares is held directly or indirectly by Non-U.S. Stockholders.
Currently, the Company is a domestically controlled REIT, and therefore the sale
of shares in the Company are not subject to taxation under FIRPTA. However,
because the shares of Common Stock are publicly traded, no assurance can be
given that the Company will continue to be a domestically controlled REIT. If
the Company, in the future, does not constitute a domestically controlled REIT,
whether a Non-U.S. Stockholder's sale of shares of Common Stock would be subject
to tax under FIRPTA as a sale of a United States real property interest would
depend on whether the shares were "regularly traded" (as defined by applicable
Treasury Regulations) on an established securities market (e.g., the New York
Stock Exchange, on which the shares of Common Stock will be listed) and on the
size of the selling stockholder's interest in the Company.
If the gain on the sale of the Company's shares were subject to taxation
under FIRPTA, the Non-U.S. Stockholder would be subject to the same treatment as
a U.S. Stockholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals) and the purchaser of such shares may be required to withhold
10% of the purchase price and remit such amount to the IRS. Notwithstanding the
foregoing, capital gain not subject to FIRPTA will be taxable to a Non-U.S.
Stockholder if the Non-U.S. Stockholder is a nonresident alien individual who is
present in the United States for 183 days or more during the taxable year and
certain other conditions apply, in which case the nonresident alien individual
will be subject to a 30% tax on such individual's capital gains.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
The Company will report to its U.S. Stockholders and the IRS the amount of
distributions paid during each calendar year and the amount of tax withheld, if
any. U.S. Stockholders, other than certain exempt recipients, such as
corporations and tax-exempt organizations, may be subject to backup withholding
at a rate of 31% with respect to distributions paid unless such stockholder
complies with applicable requirements of backup withholding rules. U.S.
Stockholders should consult their own tax advisors regarding their qualification
for exemption from backup withholding and the procedure for obtaining such an
exemption. Any amount of backup withholding with respect to a payment to a U.S.
Stockholder will be allowed as a credit against such U.S. Stockholder's United
States federal income tax liability and may entitle such U.S. Stockholder to a
refund, provided that the required information is furnished to the IRS.
Additional issues may arise pertaining to information reporting and backup
withholding with respect to Non-U.S. Stockholders. For example, the Company may
be required to withhold a portion of capital gain distributions to any
stockholders who fail to certify their non-foreign status to the Company.
Non-U.S. Stockholders should consult their tax advisors with respect to any such
information reporting and backup withholding requirements.
OTHER TAX CONSIDERATIONS
Effect of Tax Status of Operating Partnership and Other Partnerships on REIT
Qualification.
All of the Company's and the Subsidiary's investments are through the
Operating Partnership, which in turn holds interests in other partnerships. The
Company believes that the Operating Partnership, and each other partnership in
which it holds an interest, is properly treated as a partnership for tax
purposes (and not as an association taxable as a corporation). If, however, the
Operating Partnership were treated as an association taxable as a corporation,
both the Company and the Subsidiary would cease to qualify as a REIT. If any of
the other partnerships were treated as an association taxable as a corporation
and the Operating Partnership's interest in such partnership exceeded 10% of the
partnership's voting interests or the value of such interest exceeded 5% of the
value of the Company's or the Subsidiary's assets, the Company or the Subsidiary
would cease to qualify as a REIT. Furthermore, in such a situation, any
partnerships treated as a corporation would be subject to corporate income
taxes, and distributions from any such partnership to the Company or the
Subsidiary, as the case may be, would be treated as dividends, which are not
taken into account in satisfying
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<PAGE> 77
the 75% gross income test described above and which therefore could make it more
difficult for the Company or the Subsidiary to meet the 75% asset test described
above. Finally, in such a situation, the Company or the Subsidiary would not be
able to deduct its share of any losses generated by any such partnership in
computing its taxable income.
Sale of Partnership Property
Generally, any gain realized by a partnership on the sale of property held
by the partnership for more than one year will be long-term capital gain, except
for any portion of such gain that is treated as depreciation or cost recovery
recapture. However, under the REIT Requirements, both the Company's and the
Subsidiary's share as partners of any gain realized by the Operating Partnership
on the sale of any property held as inventory or other property held primarily
for sale to customers in the ordinary course of a trade or business will be
treated as income from a prohibited transaction that is subject to a 100%
penalty tax. See "Taxation of the Company." Such prohibited transaction income
will also have an adverse effect upon both the Company's and the Subsidiary's
ability to satisfy the income tests for REIT status. See "-- Requirements for
Qualification -- Income Tests." Under existing law, whether property is held as
inventory or primarily for sale to customers in the ordinary course of a trade
or business is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. A safe harbor to avoid
classification as a prohibited transaction exists as to real estate assets held
for the production of rental income by a REIT for at least four years where in
any taxable year the REIT has made no more than seven sales of property or, in
the alternative, the aggregate of the adjusted bases of all properties sold does
not exceed 10% of the adjusted bases of all of the REIT's properties during the
year and the expenditures includible in a property's basis made during the four-
year period prior to disposition must not exceed 30% of the property's net sales
price. The Operating Partnership holds the properties for investment with a view
to long-term appreciation, to engage in the business of acquiring, developing,
owning, and operating and leasing the properties and to make such occasional
sales of the properties, including peripheral land, as are consistent with the
Company's and the Operating Partnership's investment objectives. No assurance
can be given, however, that every property sale by the Operating Partnership
will constitute a sale of property held for investment.
There are additional consequences with respect to a sale or other taxable
disposition of any of the Operating Partnership's properties (a "Covered Sale")
listed in Exhibit C to the Fifth Amended and Restated Limited Partnership
Agreement of the Operating Partnership (the "Amended Operating Partnership
Agreement"). During the five-year period beginning with the Merger Date, a
limited partner of the Operating Partnership (a "Limited Partner") who is
allocated pre-contribution gain under Section 704(c) of the Code on a Covered
Sale is entitled to a distribution, pro rata in accordance with the Units, of
sufficient cash to pay any tax liability incurred by reason of such allocation
and distribution. In addition, during the sixth through the eighth years after
the Merger Date, a Limited Partner that is a DeBartolo family member or an
affiliate of the DeBartolo family (including certain estates and trusts) who is
allocated gain on a Covered Sale can require the Operating Partnership to
exchange such Limited Partner's Units pursuant to the exchange rights under the
Amended Operating Partnership Agreement for cash to the extent of the tax due on
such allocation and exchange.
STATE AND LOCAL TAXES
The Company and the Subsidiary are, and their stockholders may be, subject
to state, local or other taxation in various state, local or other
jurisdictions, including those in which they transact business or reside. The
tax treatment in such jurisdictions may differ from the federal income tax
consequences discussed above. Consequently, prospective stockholders should
consult their own tax advisors regarding the effect of state and local tax laws
on their investment in the Company.
POSSIBLE FEDERAL TAX DEVELOPMENTS
The rules dealing with federal income taxation are constantly under review
by the IRS, the Treasury Department and Congress. New federal tax legislation or
other provisions may be enacted into law or new interpretations, rulings or
Treasury Regulations could be adopted, all of which could affect the taxation of
the Company or of its stockholders. No prediction can be made as to the
likelihood of passage of any new tax legislation or other provisions either
directly or indirectly affecting the Company or its stockholders. Consequently,
the tax treatment described herein may be modified prospectively or
retroactively by legislative, judicial or administrative action. Any material
changes or developments will be described in a Prospectus Supplement.
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PLAN OF DISTRIBUTION
The Company may sell the Securities to or through underwriters, and also
may sell the Securities directly to one or more other purchasers or through
agents. The distribution of the Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Shares of Common Stock may
also be issued pursuant to this Prospectus to holders of Units in exchange for
their Units, which Units may be exchanged for shares of Common Stock on a
one-for-one basis or cash, as selected by the Company, pursuant to the
partnership agreement of the Operating Partnership.
The Prospectus Supplement will set forth terms of the offering of the
Securities, including where applicable, (i) the name or names of any
underwriters or agents with whom the Company has entered into arrangements with
respect to the sale or issuance of Securities, (ii) in the case of the Common
Stock, the initial public offering price, where applicable, (iii) in the case of
the Preferred Stock, the specific title and stated value, any distribution,
liquidation, redesignation, conversion, voting and other rights, and any initial
public offering price; (iv) in the case of Depositary Shares, the fractional
shares of Preferred Stock represented by each Depositary Share; (v) in the case
of Warrants, the duration, offering price, exercise price and detachability;
(vi) any underwriting discounts, commissions and other items constituting
underwriters compensation from the Company and any other discounts, concessions
or commissions allowed or reallowed or paid by any underwriters to other
dealers, (vii) any commissions paid to any agents and (viii) the net proceeds to
the Company. In connection with the sale of Securities, underwriters may receive
compensation from the Company or from purchasers of Securities, for whom they
may act as agents, in the form of discounts, concessions, or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions, or commissions from
the underwriters or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers, and agents that participate in the distribution
of Securities may be deemed to be underwriters, and any discounts or commissions
they receive from the Company, and any profit on the resale of Securities they
realize, may be deemed to be underwriting discounts and commissions under the
Securities Act.
Under agreements the Company may enter into, underwriters, dealers and
agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, the Company in the ordinary course of
business.
Unless otherwise set forth in the Prospectus Supplement relating to the
issuance of Securities, the obligations of the underwriters to purchase such
Securities will be subject to certain conditions precedent and each of the
underwriters with respect to such Securities will be obligated to purchase all
of the Securities allocated to it if any such Securities are purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
LEGAL MATTERS
The validity of the issuance of the Securities offered pursuant to this
Prospectus will be passed upon by Piper & Marbury L.L.P., Baltimore, Maryland on
behalf of the Company. Certain tax matters will be passed upon by Paul, Weiss,
Rifkind, Wharton & Garrison, New York, New York, and certain legal matters will
be passed upon for any underwriters, dealers or agents by Rogers & Wells, New
York, New York.
EXPERTS
The audited financial statements and schedule of the Company incorporated
by reference in the Registration Statement of which this Prospectus is a part,
to the extent and for the periods indicated in their reports, have been audited
by Arthur Andersen LLP, independent public accountants, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
The audited financial statements and schedules of DRC incorporated by
reference in the Registration Statement of which this Prospectus is a part, to
the extent and for the periods indicated in their report, have been audited by
Ernst & Young LLP, independent public accountants, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said report.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary......... S-3
The Company........................... S-6
Recent Developments................... S-10
Use of Proceeds....................... S-16
Capitalization........................ S-17
Selected Financial and Operating
Data................................ S-18
Business and Properties............... S-21
Management............................ S-37
Description of Series B Preferred
Shares.............................. S-40
Certain Federal Income Tax
Consequences........................ S-43
Underwriting.......................... S-44
Pro Forma Combined Condensed
Financial Information............... F-1
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Use of Proceeds....................... 4
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends........... 4
Description of the Securities......... 4
Restrictions on Transfer.............. 15
Federal Income Tax Considerations..... 17
Plan of Distribution.................. 26
Legal Matters......................... 26
Experts............................... 26
</TABLE>
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- ------------------------------------------------------
- ------------------------------------------------------
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8,000,000 SHARES
LOGO
8 3/4% SERIES B
CUMULATIVE REDEEMABLE
PREFERRED STOCK
(PAR VALUE $0.0001
PER SHARE)
(LIQUIDATION PREFERENCE
$25.00 PER SHARE)
------------------------
PROSPECTUS SUPPLEMENT
------------------------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
SEPTEMBER 24, 1996
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