As filed with the Securities and Exchange Commission on September 5, 1996
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
___________________
SIMON DeBARTOLO GROUP, INC.
(Exact name of registrant as specified in its charter)
Maryland 35-1901999
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
_____________________
National City Center
115 West Washington Street
Suite 15 East
Indianapolis, IN 46204
(317) 636-1600
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
DAVID SIMON
Chief Executive Officer
Simon DeBartolo Group, Inc.
National City Center
115 West Washington Street
Suite 15 East
Indianapolis, IN 46204
(317) 636-1600
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
_________________
Copies to:
Edwin S. Maynard, Esq. James M. Asher, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison Robert E. King, Jr., Esq.
1285 Avenue of the Americas Rogers & Wells
New York, New York 10019-6064 200 Park Avenue
(212) 373-3000 New York, New York 10166
(212) 878-8000
_________________
Approximate date of commencement of proposed sale to the public:
From time to time or at one time after the effective date of the
Registration Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box.[ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the
following box.[x]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box.[ ]
_____________________
<PAGE>
CALCULATION OF REGISTRATION FEE
=========================================================================
Title of each class of Proposed maximum Amount of
securities to be registered aggregate offering price(1) Registration
fee (2)
Common Stock, par value $0.0001
per share
Preferred Stock, par value $750,000,000 $187,837
$0.0001 per share
Depositary Shares
Warrants
=========================================================================
(1) Estimated solely for purposes of calculating the registration fee. No
separate consideration will be received for Common Stock or Preferred
Stock issued upon conversion of Depositary Shares or Preferred Stock or
upon exercise of Warrants registered hereunder, as the case may be. The
aggregate maximum offering price of all Securities issued pursuant to
this Registration Statement will not exceed $750,000,000.
(2) 8,758,146 shares of Common Stock registered by the Registrant (formerly
known as Simon Property Group, Inc.) under Registration Statement No.
33-89012 and not previously sold are consolidated in this Registration
Statement pursuant to Rule 429 under the Securities Act of 1933. The
registration fees in connection with such unsold amount of Common
Stock, in the pro rated amount of $70,783, have been previously paid by
the Registrant under the foregoing Registration Statement. Accordingly,
the total amount of registration fee under this Registration Statement as
so consolidated as of the date of this filing is $187,837, which is
obtained by deducting such $70,783 from $258,620, the amount of
registration fee otherwise payable with respect to the amount of
Securities registered under this Registration Statement pursuant to
Rule 457(o).
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to
said Section 8(a), may determine.
The Prospectus in this Registration Statement also relates to
Registration Statement No. 33-89012 pursuant to Rule 429 under the
Securities Act of 1933.
<PAGE>
PROSPECTUS Subject to Completion, Dated September 5, 1996
$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 ______ __, 1996.
<PAGE>
2
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, and August 26, 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
<PAGE>
3
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.
THE COMPANY
Simon DeBartolo Group, Inc., formerly known as Simon
Property Group, Inc. (the "Company"), is a Maryland corporation that,
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. As a result
of the merger (the "Merger") of DeBartolo Realty Corporation ("DRC")
with a subsidiary of the Company, consummated on August 9, 1996
(the "Merger Date"), the Company continues and expands the national
shopping center and real estate businesses previously owned by 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"),
and the national shopping center business of DRC, The Edward J.
DeBartolo Corporation ("EJDC") and their affiliates. In conjunction
with the Merger, DRC was renamed SD Property Group, Inc. (the
"Subsidiary") and is the managing general partner of the Operating
Partnership.
In addition, SPG, LP holds substantially all of the economic
interest in, and 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 SPG, LP 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.
The Partnerships own or hold interests in a diversified
portfolio of 183 income producing properties (the "Portfolio
Properties"), including 112 super-regional and regional malls, 65
community shopping centers, two specialty retail centers and four
mixed-use properties located in 33 states. The Portfolio Properties
contain an aggregate of approximately 110 million square feet of
gross leasable area ("GLA"), of which approximately 65 million
square feet is GLA owned by the Partnerships ("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 Partnerships have interests in eight properties under
construction in the United States, and 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.
<PAGE>
4
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 is a self-administered and self-managed REIT. The
Company provides management, leasing, accounting, design and
construction expertise through its own personnel or, where
appropriate, through outside professionals.
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 1.47 X and 1.59 X , respectively, and for the fiscal years
ended December 31, 1995 and 1994 was 1.66 X and 1.43 X ,
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 3.36 X . 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 1.50 X and 1.71 X , 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 1.11 X.
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 commencements of operations.
<PAGE>
5
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 $.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 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
<PAGE>
6
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.
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
<PAGE>
7
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.
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.
<PAGE>
8
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.
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
<PAGE>
9
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;
<PAGE>
10
(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 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
<PAGE>
11
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 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
<PAGE>
12
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 consecutive 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 or 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, 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
<PAGE>
13
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.
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,
<PAGE>
14
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 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
<PAGE>
15
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 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.
<PAGE>
16
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 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.
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17
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) that individual stockholders may own. For the
Company to qualify as a REIT under the Code, in addition to other
requirement 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 contains 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
<PAGE>
18
"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.
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.
<PAGE>
19
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.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material federal income tax
considerations that may be relevant to a prospective purchaser, 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.
<PAGE>
20
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
ended 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, in part, 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 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
<PAGE>
21
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 REIT Requirements, including
satisfying the income tests and asset tests. Thus, the Company's and the
Subsidiary's proportionate share of the assets, liabilities and 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.
<PAGE>
22
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 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
<PAGE>
23
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.
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.
<PAGE>
24
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.
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
<PAGE>
25
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
<PAGE>
26
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.
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
<PAGE>
27
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 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.
<PAGE>
28
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
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
<PAGE>
29
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.
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's 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
<PAGE>
30
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.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses (not including underwriting commissions and
fees) of issuance and distribution of the securities are estimated to be:
Securities and Exchange Commission
Registration Fee. . . . . . . . . . . . . . .$187,387
NASD Filing Fees. . . . . . . . . . . . . . . .$ 30,500
Accounting Fees and Expenses . . . . . . . . .$ 25,000 (1)
Attorneys' Fees and Expenses . . . . . . . . .$ (1)*
Blue Sky Fees and Expenses . . . . . . . . . .$ 60,000 (1)*
Miscellaneous Expenses. . . . . . . . . . . . .$ (1)*
========
Total . . . . . . . . . . . . . . . . . .$ (1)*
(1) Estimated
* To be filed by amendment
Item 15. Indemnification of Directors and Officers.
The Company's officers and directors are indemnified under
Maryland law, the Company's Charter and the partnership
agreements of the Operating Partnership and SPG, LP against certain
liabilities. The Company's Charter requires the Company to
indemnify its directors and officers to the fullest extent permitted
from time to time by the laws of Maryland. The Company's By-Laws
contain provisions which implement the indemnification provisions of
the Company's Charter.
The Maryland General Corporation Law (the "MGCL") permits
a corporation to indemnify its directors and officers, among others,
against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by them in connection with any
proceeding to which they may be made a party by reason of their
service in those or other capacities unless it is established that the act
or omission of the director or officer was material to the matter
giving rise to the proceeding and was committed in bad faith or was
the result of active and deliberate dishonesty, or the director or
officer actually received an improper personal benefit in money,
property or services, or in the case of any criminal proceeding, the
director or officer had reasonable cause to believe that the act or
omission was unlawful. No amendment of the Company's Charter
shall limit or eliminate the right to indemnification provided with
respect to acts or omissions occurring prior to such amendment or
repeal. Maryland law permits the Company to provide
indemnification to an officer to the same extent as a director,
although additional indemnification may be provided if such officer is
not also a director.
The MGCL permits the charter of a Maryland corporation to
include a provision limiting the liability of its directors and officers
to the corporation and its stockholders for money damages, subject to
specified restrictions. The MGCL does not, however, permit the
liability of directors and officers to the corporation or its stockholders
to be limited to the extent that (1) it is proved that the person
II-1
<PAGE>
actually
received an improper benefit or profit in money, property or services
(to the extent such benefit or profit was received) or (2) a judgment
or other final adjudication adverse to such person is entered in a
proceeding based on a finding that the person's action, or failure to
act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. The
Company's Charter contains a provision consistent with the MGCL.
No amendment of the Company's Charter shall limit or eliminate the
limitation of liability with respect to acts or omissions occurring prior
to such amendment or repeal.
The partnership agreements of the Operating Partnership and
SPG, LP also provides for indemnification of the Company and its
officers and directors to the same extent indemnification is provided
to officers and directors of the Company in its Charter, and limits the
liability of the Company and its officers and directors to the
Operating Partnership and its partners to the same extent liability of
officers and directors of the Company to the Company and its
stockholders is limited under the Company's Charter.
The Company has entered into indemnification agreements with
each of the Company's directors and officers. The indemnification
agreements require, among other things, that the Company indemnify
its directors and officers to the fullest extent permitted by law, and
advance to the directors and officers all related expenses, subject to
reimbursement if it is subsequently determined that indemnification is
not permitted. The Company also must indemnify and advance all
expenses incurred by directors and officers seeking to enforce their
rights under the indemnification agreements, and cover each director
and officer if the Company obtains directors' and officers' liability
insurance.
II-2
<PAGE>
Item 16. Exhibits.
EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Description Page
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation,
incorporated by reference to Exhibit 3.1 to
Post-Effective Amendment No. 1 on Form
S-8 to the Company's Registration Statement
on Form S-4 (Registration No. 333-06933)
3.2 Amended and Restated By-laws, incorporated by
reference to Exhibit 3.2 to Post-Effective
Amendment No. 1 on Form S-8 to
the Company's Registration
Statement on Form S-4 (Registration
No. 333-06933)
4.1 Form of Common Stock Certificate
4.2* Form of Common Stock Warrant Agreement
4.4* Form of Preferred Stock Certificate
4.5* Form of Deposit Agreement
4.6* Form of Preferred Stock Warrant Agreement
5.1 Opinion of Piper & Marbury L.L.P.
8.1 Opinion of Paul, Weiss, Rifkind, Wharton &
Garrison
12.1 Computation of Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of Piper & Marbury L.L.P.
is contained in its opinion
filed as Exhibit 5.1
23.4 Consent of Paul, Weiss, Rifkind, Wharton &
Garrison is contained in its
opinion filed as Exhibit 8.1
23.5 Consent of Willkie Farr & Gallagher
24.1 Power of Attorney (included in
the signature page to the
Registration Statement)
___________________
* To be filed by amendment.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement:
II-3
<PAGE>
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in price of
securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in
the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the registration statement is on Form S-3 or Form S-8
and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the Offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to
supplement the prospectus, after the expiration of the subscription
period, to set forth the results of the subscription offer, the
transactions by the underwriters during the subscription period, the
amount of unsubscribed securities to be purchased by the
underwriters, and the terms of any subsequent reoffering thereof. If
any public offering by the underwriters is to be made on terms
differing from those set forth on the cover page of the prospectus, a
post-effective amendment will be filed to set forth the terms of such
offering.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities
Act
II-4
<PAGE>
of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication
of such issue.
(e) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under
the Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and
has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Indianapolis, State of Indiana, on September 4, 1996.
SIMON DeBARTOLO GROUP, INC.
By: /s/ David Simon
David Simon
(Chief Executive Officer)
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each
person whose signature appears below constitutes and appoints
David Simon, Melvin Simon and Herbert Simon, and each of
them (with full power to each of them to act alone) his true and
lawful attorney-in-fact and agent, with full powers of substitution
and resubstitution, for him and in his name, place and stead, in
any and all capacities, to (i) act on, sign and file with the
Securities and Exchange Commission any and all amendments
(including post-effective amendments) to this registration
statement together with all schedules and exhibits thereto and any
subsequent registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended, together with all
schedules and exhibits thereto, (ii) act on, sign and file such
certificates, instruments, agreements and other documents as
may be necessary or appropriate in connection therewith, (iii) act
on and file any supplement to any prospectus included in this
registration statement or any such amendment or any subsequent
registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and (iv) take any and all
actions which may be necessary or appropriate in connection
therewith, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and
about the premises as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
II-6
<PAGE>
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the date indicated.
Name Title Date
/s/ Melvin Simon Co-Chairman of the Board of September 4, 1996
MELVIN SIMON Directors
/s/ Herbert Simon Co-Chairman of the Board of September 4, 1996
HERBERT SIMON Directors
/s/ David Simon Chief Executive September 4, 1996
DAVID SIMON Officer and Director (Principal
Executive Officer, Financial
Officer and
Accounting Officer)
/s/ Richard S. Sokolov President, Chief Operating September 4, 1996
RICHARD S. SOKOLOV Officer and Director
/s/ Birch Bayh Director September 4, 1996
BIRCH BAYH
/s/ Edward J. DeBartolo, Jr. Director September 4, 1996
EDWARD J. DeBARTOLO, JR.
/s/ William T. Dillard, II Director September 4, 1996
WILLIAM T. DILLARD, II
/s/ G. William Miller Director September 4, 1996
G. WILLIAM MILLER
/s/ Fredrick W. Petri Director September 4, 1996
FREDRICK W. PETRI
/s/ Terry S. Prindiville Director September 4, 1996
TERRY S. PRINDIVILLE
/s/ J. Albert Smith, Jr. Director September 4, 1996
J. ALBERT SMITH, JR.
II-7
<PAGE>
/s/ Phillip J. Ward Director September 4, 1996
PHILIP J. WARD
/s/ M. Denise DeBartolo York Director September 4, 1996
M. DENISE DeBARTOLO YORK
II-8
EXHIBIT 4.1
CERTIFICATE OF STOCK
S_________________ __________________
NUMBER SHARES
COMMON STOCK COMMON STOCK
$.0001 PAR VALUE $.0001 PAR VALUE
{CENTRAL LOGO}
SIMON PROPERTY GROUP, INC.*/
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
THIS CERTIFICATE IS TRANSFERABLE CUSIP 828805 10 1
IN INDIANAPOLIS, IN OR NEW YORK, NY SEE REVERSE FOR
CERTAIN DEFINITIONS
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
Simon Property Group, Inc. (hereinafter called the "Corporation"),
transferable on the books of the Corporation by the registered holder
hereof in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid until
countersigned and registered by the Transfer Agent and Registrar.
In Witness Whereof, the Corporation has caused the facsimile signatures
of its duly authorized officers and its facsimile seal to be affixed hereto.
Dated:
{CORPORATE SEAL}
/s/ James M. Barkley /s/ David Simon
- -------------------- -------------------
Secretary President
Countersigned and Registered:
BANK ONE, INDIANAPOLIS, N.A.
(Indianapolis, Indiana)
By______________________________
Transfer Agent and Registrar
Authorized Signature
________________________________
*/ Name changed to SIMON DeBARTOLO GROUP, INC.
<PAGE>
2
SIMON PROPERTY GROUP, INC.
The shares of Common Stock represented by this certificate are
subject to restrictions on transfer for the purpose of the Corporation's
maintenance of its status as a real estate investment trust under the
Internal Revenue Code of 1986, as amended (the "Code"). Except as
otherwise provided pursuant to the Charter of the Corporation, no
Person may (1) Beneficially Own or Constructively Own shares of
Equity Stock in excess of 4.9% of the value of the outstanding Equity
Stock of the Corporation (other than members of the Simon Family
Group, who may not Beneficially Own or Constructively Own shares of
Equity Stock in excess of 30% of the value of the outstanding Equity
Stock of the Corporation); or (2) Beneficially Own Equity Stock that
would result in the Corporation's being "closely held" under section
856(h) of the Code. Any Person who attempts to Beneficially Own or
Constructively Own shares of Equity Stock in excess of the above
limitations must immediately notify the Corporation in writing at least 15
days prior to such proposed or attempted transfer. All capitalized terms
in this legend have the meanings defined in the Corporation's Charter, as
the same may be further amended from time to time, a copy of which,
including the restrictions on transfer, will be sent without charge to each
stockholder who so requests. If the restrictions on transfer are violated,
the shares of Equity Stock represented hereby will be automatically
converted into shares of Excess Stock which will be held in trust by the
Corporation.
The Corporation will furnish to any stockholder on request and
without charge a full statement of the designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption of the
stock of each class which the Corporation is authorized to issue, of the
differences in the relative rights and preferences between the shares of
each series of a preferred or special class in series which the
Corporation is authorized to issue, to the extent they have been set, and
of the authority of the Board of Directors to set the relative rights and
preferences of subsequent series of a preferred or special class of stock.
Such request may be made to the secretary of the Corporation or to its
transfer agent.
Keep this certificate in a safe place. If it is lost, stolen, or
destroyed, the Corporation will require a bond of indemnity as a
condition to the issuance of a replacement certificate.
The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were written
out in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT -___________________Custodian____________________
(Cust) (Minor)
under Uniform Gifts to Minors Act___________________
(State)
Additional abbreviations may also be used though not in the above list.
<PAGE>
3
For value received, ________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_____________________________
| |
| ___________________________|__________________________________________
________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
________________________________________________________________________
_________________________________________________________________________
___________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_________________________________________________________________Attorney
to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated:______________
Signature(s)______________________________
NOTICE: The signature(s) to
this assignment must correspond
with the name as written upon
the face of the Certificate, in
every particular, without
alteration or enlargement or any
change whatever.
Signature Guaranteed By:
_________________________________
PIPER & MARBURY
L.L.P.
CHARLES CENTER SOUTH
36 SOUTH CHARLES STREET
Baltimore, Maryland 21201-3018
410-539-2530
FAX: 410-539-0489
WASHINGTON
NEW YORK
PHILADELPHIA
EASTON
September 5, 1996
Simon DeBartolo Group, Inc.
115 West Washington Street
Indianapolis, Indiana 46204
Ladies and Gentlemen:
We have acted as Maryland counsel to Simon DeBartolo Group, Inc., a
Maryland corporation (the "Company"), in connection with the registration
under the Securities Act of 1933, as amended (the "Act"), pursuant to a
Registration Statement on Form S-3 of the Company expected to be filed with
the Securities and Exchange Commission (the "Commission") on September 5,
1996, (the "Registration Statement"), including the prospectus included
therein at the time the Registration Statement is declared effective (the
"Prospectus"), for offering by the Company from time to time of up to
$750,000,000 aggregate initial offering price of: (i) shares of
common stock, par value $0.0001 per share (the "Common Stock"); (ii) shares of
preferred stock, par value $0.0001 per share (the "Preferred Stock"); (iii)
Preferred Stock represented by depositary shares (the "Depositary Shares");
and (iv) warrants to purchase Common Stock or Preferred Stock (the
"Warrants"). The Common Stock, the Preferred Stock, the Depositary Shares and
the Warrants are collectively referred to herein as the "Securities." The
Registration Statement provides that the Securities may be offered separately
or together, in separate series, in amounts, at prices, and on
terms to be set forth in one or more supplements to the Prospectus (each a
"Prospectus Supplement"). This opinion is being provided at your request in
connection with the filing of the Registration Statement.
In our capacity as Maryland counsel, we have reviewed the following:
(a) The Registration Statement;
(b) The Amended and Restated Articles of Incorporation of
the Company (the "Charter"), certified by the Department of
Assessments and Taxation of the State of Maryland (the
"Department");
(c) A copy of the By-Laws of the Company as in effect on
the date hereof (the "By-Laws");
(d) The Preliminary Prospectus (the "Preliminary Prospectus")
relating to the issuance of the Securities, which forms part of the
Registration Statement;
-1-
<PAGE>
Simon Property Group Piper & Marbury L.L.P
September 4, 1996
(e) Certified resolutions of the Board of Directors of the
Company relating to the Company's organization and to the Board's
authorization of the filing of the Registration Statement;
(f) A good standing certificate for the Company, dated
August 9, 1996, issued by the Department;
(g) A Secretary's Certificate of the Company, dated the date
hereof (the "Secretary's Certificate"), as to certain factual matters;
and
(h) Such other documents as we have considered necessary to
the rendering of the opinions expressed below.
In our examination of the aforesaid documents, we have assumed, without
independent investigation, the genuineness of all signatures, the legal
capacity of all individuals who have executed any of the aforesaid
documents, the authenticity of all documents submitted to us as originals,
and the conformity with originals of all documents submitted to us as copies
(and the authenticity of the originals of such copies), and that all public
records reviewed are accurate and complete. In making our examination of
documents executed by parties other than the Company, we have assumed that
such parties had the power, corporate or other, to enter into and perform
all obligations thereunder, and we have also assumed the due authorization
by all requisite action, corporate or other, and the valid
execution and delivery by such parties of such documents and the validity,
binding effect and enforceability thereof with respect to such parties. As
to any facts material to this opinion which we did not independently
establish or verify, we have relied solely upon the Secretary's Certificate.
We assume that prior to the issuance of any shares of Preferred Stock or
Common Stock or of Warrants or Depositary Shares, there will exist, under the
Charter of the Company, the requisite number of authorized but unissued
shares of Preferred Stock or Common Stock, as the case may be, and that all
actions necessary to the creation of any such Preferred Stock, whether by
Charter amendment or by classification or reclassification of existing
capital stock and the filing of Articles Supplementary, will have been
taken. We further assume that appropriate certificates representing shares
of Preferred Stock or Common Stock will be executed and delivered upon
issuance and sale of any shares of Preferred Stock or Common Stock, as the
case may be, and will comply with all applicable requirements of Maryland
law. We further assume that any Depositary Shares will be issued under one
or more valid and legally binding deposit agreements (each, a
"Deposit Agreement") between the Company and a financial institution
identified therein as depositary (the "Depositary"); that any Common Stock
Warrants will be issued under a valid and legally binding warrant agreement
(a "Common Stock Warrant Agreement") that conforms to the description
thereof set forth in the Registration Statement; and that any Preferred
Stock Warrants will be issued under a valid and legally binding warrant
agreement (a "Preferred Stock Warrant Agreement") that conforms to the
description thereof set forth in the Registration Statement. Finally, we
assume that the underwriting agreements for offerings of the Common Stock,
the Preferred Stock, the Depositary Shares, the Common Stock
-2-
<PAGE>
Simon Property Group Piper & Marbury L.L.P
September 4, 1996
Warrants and the Preferred Stock Warrants (each, an "Underwriting
Agreement, " and collectively the "Underwriting Agreements") will be valid
and legally binding agreements that conform to the description thereof set
forth in the applicable Prospectus Supplement.
We assume that the issuance, sale, amount and terms of the Securities to
be offered from time to time will be authorized and determined by proper
action of the Board of Directors of the Company in accordance with the
parameters described in the Registration Statement (each, a "Board Action")
and in accordance with the Company's Charter and By-Laws and with the
applicable Maryland law.
To the extent that the obligations of the Company under any Common
Stock Warrant Agreement or Preferred Stock Warrant Agreement (each, a
"Warrant Agreement") may be dependent upon such matters, we assume for
purposes of this opinion that the financial institution to be identified in
such Warrant Agreement as warrant agent (the "Warrant Agent") will be duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization; that the Warrant Agent will be duly qualified
to engage in the activities contemplated by such Warrant Agreement; that
such Warrant Agreement will have been duly authorized, executed and delivered
by the Warrant Agent and will constitute the legally valid and binding
obligation of the Warrant Agent enforceable against the Warrant Agent in
accordance with its terms; that the Warrant Agent will be in compliance,
generally, with respect to acting as Warrant Agent under such Warrant
Agreement, with all applicable laws and regulations; and that the Warrant
Agent will have the requisite organization and legal power and authority to
perform its obligations under such Warrant Agreement.
To the extent that the obligations of the Company under the Deposit
Agreement may be dependent upon such matters, we assume for purposes of this
opinion that the Depositary will be duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization; that the
Depositary will be duly qualified to engage in the activities contemplated
by the Deposit Agreement; that the Deposit Agreement will have been duly
authorized, executed and delivered by the Depositary and will constitute
the legally valid and binding obligation of the Depositary enforceable
against the Depositary in accordance with its terms; that the Depositary
will be in compliance, generally, with respect to acting as Depositary
under the Deposit Agreement, with all applicable laws and regulations; and
that the Depositary will have the requisite organization and legal
power and authority to perform its obligations under the Deposit Agreement.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof:
1. Upon due authorization by Board Action of an issuance of
Common Stock, and upon issuance and delivery of certificates for
shares of such Common Stock against payment therefor in
accordance with the terms and provisions of such Board Action, the
Registration Statement (as declared effective under the Act), the
Prospectus or the applicable Prospectus Supplement and, if
applicable, an Underwriting Agreement, or upon issuance and
delivery of certificates for shares of such Common Stock pursuant to
the exercise of one or more Common Stock Warrants, the shares of
Common
-3-
<PAGE>
Simon Property Group Piper & Marbury L.L.P
September 4, 1996
Stock represented by such certificates will be duly
authorized, validly issued, fully paid and non-assessable.
2. When a series of the Preferred Stock has been duly
authorized and established in accordance with the applicable Board
Action, the terms of the Company's Charter and applicable Maryland
law, and, upon issuance and delivery of certificates for shares of
such series of Preferred Stock against payment therefor in
accordance with the terms and provisions of such Board Action, the
Registration Statement (as declared effective under the Act), the
Prospectus or the applicable Prospectus Supplement and, if
applicable, an Underwriting Agreement, or upon issuance and
delivery of certificates for shares of such series of Preferred Stock
pursuant to the exercise of one or more Preferred Stock Warrants,
the shares of Preferred Stock represented by such certificates will be
duly authorized, validly issued, fully paid and non-assessable.
3. When the Common Stock Warrants have been duly
established by the related Common Stock Warrant Agreement, duly
authenticated by the Warrant Agent and duly authorized and
established by the applicable Board Action, and when warrant
certificates representing the Common Stock Warrants have been duly
executed and delivered on behalf of the Company against payment
therefor in accordance with the terms and provisions of such Board
Action, the Common Stock Warrant Agreement, the Registration
Statement (as declared effective under the Act), the Prospectus or the
applicable Prospectus Supplement and, if applicable, an
Underwriting Agreement, the Common Stock Warrants will be duly
authorized and will constitute valid obligations of the Company.
4. When a series of the Preferred Stock has been duly
authorized and established in accordance with the applicable Board
Action, the terms of the Company's Charter and applicable Maryland
law, when the Preferred Stock Warrants for such series of Preferred
Stock have been duly established by the related Preferred Stock
Warrant Agreement, duly authenticated by the Warrant Agent and
duly authorized and established by the applicable Board Action, and
when warrant certificates representing the Preferred Stock Warrants
have been duly executed and delivered on behalf of the Company
against payment therefor in accordance with the terms and
provisions of such Board Action, the Preferred Stock Warrant
Agreement, the Registration Statement (as declared effective under
the Act), the Prospectus or the applicable Prospectus Supplement
and, if applicable, an Underwriting Agreement, the Preferred Stock
Warrants will be duly authorized and will constitute valid
obligations of the Company.
5. When a series of the Preferred Stock has been duly
authorized and established in accordance with the applicable Board
Action, the terms of the Company's Charter and applicable Maryland
law, when Depositary Shares for such series of Preferred Stock have
been duly authorized and established in
-4-
<PAGE>
Simon Property Group Piper & Marbury L.L.P
September 4, 1996
accordance with the
applicable Board Action, the terms of the Company's Charter and
applicable Maryland law, and when Depositary Receipts
representing such Depositary Shares have been duly executed and
delivered by the Depositary against payment therefor in the manner
contemplated by such Board Action, the Depositary Agreement, the
Registration Statement (as declared effective under the Act), the
Prospectus or the applicable Prospectus Supplement and, if
applicable, an Underwriting Agreement, such Depositary Shares will
be validly issued and will entitle the holders thereof to the rights
specified in the Depositary Receipts and such Deposit Agreement.
The opinions stated herein relating to the validity and binding nature
of obligations of the Company are subject to (i) the effect of any applicable
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
creditors' rights generally and (ii) the effect of general principals of
equity (regardless of whether considered in a proceeding in equity or at
law).
The opinions expressed above are limited to the laws of the State of
Maryland, exclusive of the securities or "blue sky" laws of the State of
Maryland. All of the foregoing opinions are rendered as of the date hereof.
We assume no obligation to update such opinions to reflect any facts or
circumstances which may hereafter come to our attention or changes in the
law which may hereafter occur. To the extent that any documents referred
to herein are governed by the law of a jurisdiction other than Maryland,
we have assumed that the laws of such jurisdiction are the same as the law
of Maryland.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 to the Registration Statement and to the reference to our firm
under the heading "Legal Matters" in the Registration Statement. We
further consent to the reliance on this opinion by Paul, Weiss, Rifkind,
Wharton & Garrison in rendering their opinion to the Company in connection
with the Registration Statement. The opinions expressed in this letter are
limited to the matters set forth in this letter, and no other opinion
should be inferred beyond the matters expressly stated.
Very truly yours,
/s/ PIPER & MARBURY L.L.P
-5-
Exhibit 8.1
September 5, 1996
Simon DeBartolo Group, Inc.
National City Center
115 West Washington Street
Suite 15 East
Indianapolis, Indiana 45204
Ladies and Gentlemen:
You have requested our opinion concerning the federal
income tax matters pertaining to Simon DeBartolo Group, Inc. (the
"Company") and the purchasers of shares of beneficial ownership of
the Company in connection with the Registration Statement on Form
S-3, filed with the Securities and Exchange Commission on
September 5, 1996 (the "Registration Statement"). All capitalized
terms used herein have their respective meanings set forth in the
Registration Statement unless otherwise stated.
In rendering the opinions expressed herein, we have
examined and, with your consent, relied upon the following: (i) the
Registration Statement and all amendments to date; (ii) the
Company's Registration Statement on Form S-4 (Registration No.
333-06933); (iii) the Fifth Amended and Restated Agreement of
Limited Partnership of Simon-DeBartolo Group, L.P. (the "Operating
Partnership"); (iv) the partnership agreements of the partnerships
which the Company, the Subsidiary or the Operating Partnership,
directly or indirectly, own in whole or in part (the "Subsidiary
Partnerships"); (v) the opinions of Willkie Farr & Gallagher, dated as
of August 9, 1996, addressed to Simon Property Group, Inc., the
former name of the Company; and (vi) such other documents, records
and instruments as we have deemed necessary in order to enable us to
render the opinions expressed herein.
<PAGE>
In our examination of documents, we have assumed,
with your consent, (i) that all documents submitted to us are authentic
originals, or if submitted as photocopies, that they faithfully
reproduce the originals thereof; (ii) that all such documents have been
or will be duly executed to the extent required; (iii) that all
representations and statements set forth in such documents are true
and correct; (iv) that any representation or statement made as a belief
or made "to the knowledge of," or similarly qualified is correct and
accurate without such qualification; (v) that all obligations imposed by
any such documents on the parties thereto have been or will be
performed or satisfied in accordance with their terms; and (vi) that the
Company, the Subsidiary, the Operating Partnership, the Management
Companies and the Subsidiary Partnerships at all times will be
organized and operated in accordance with the terms of such
documents. We have further assumed that, except for any exceptions
set forth in the representation letter described in the following
paragraph, the statements and descriptions of the Company's, the
Subsidiary's, the Operating Partnership's, the Management
Companies' and the Subsidiary Partnerships' businesses, properties,
and intended activities as described in the Registration Statement and
the documents incorporated therein by reference are accurate and
complete and that all actions contemplated therein with respect to the
organization of each of the Company and the Subsidiary as a REIT
have been or will be completed in a timely fashion.
For purposes of rendering the opinions expressed
herein, we also have assumed, with your consent, the accuracy of the
representations contained in the letter from the Company to us dated
September 5, 1996. These representations relate to the classification
and operation of each of the Company and the Subsidiary as a REIT
and the organization and operation of the Operating Partnership and
the Management Companies.
Based upon and subject to the foregoing, we are of the
following opinions:
1. 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.
2. Commencing with the Merger Date, the proposed
methods of operation of the Company, the Subsidiary, the Operating
Partnership, the Subsidiary Partnerships and the Management
Companies as described in the Registration Statement and as
represented by the Company and the Subsidiary will enable the
Company and the Subsidiary to continue to so qualify.
3. The discussion contained in that portion of the
Registration Statement under the captions "Federal Income Tax
Considerations" fairly summarizes the
<PAGE>
federal income tax considerations that are likely to be material to a
holder of stock of the Company.
This opinion is given as of the date hereof and is based
on various statutory provisions, regulations promulgated thereunder
and interpretations thereof by the Internal Revenue Service and the
courts having jurisdiction over such matters, all of which are subject
to change either prospectively or retroactively. Further, any variation
or difference in the facts from those set forth in the Registration
Statement may affect the conclusions stated herein. Moreover, each
of the Company's and the Subsidiary's qualification and taxation as a
REIT depends upon its ability to meet -- through actual annual
operating results -- requirements under the Code regarding income,
distributions and diversity of stock ownership. Because each of the
Company's and the Subsidiary's satisfaction of these requirements
will depend upon future events, no assurance can be given that the
actual results of its operations for any one taxable year will satisfy the
tests necessary to qualify as or be taxed as a REIT under the Code.
This opinion is furnished to you solely for use in
connection with the Registration Statement. We hereby consent to the
filing of this opinion as Exhibit 8.1 to the Registration Statement and
to the use of our name under the caption "Federal Income Tax
Considerations" in the Registration Statement. In giving this consent
we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder.
We express no opinion as to any federal income tax
issue or other matter except those set forth or confirmed above.
Very truly yours,
/s/ Paul, Weiss, Rifkind, Wharton & Garrison
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
(in thousands of dollars)
<TABLE>
<CAPTION>
SIMON DEBARTOLO
GROUP, L.P. SIMON PROPERTY GROUP, L.P.
________________________ ____________________________________________________________________
Pro
Forma for For the For the
Pro Forma for the Year For the Six For the Six Year Year
the Six Month Ended Month Period Month Period Ended Ended For the period
Period Ended December Ended Ended December December December 20 to
June 30, 1996 31, 1995 June 30, 1996 June 30, 1995 31, 1995 31, 1994 December 31, 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) of the Operating
Partnership
before extraordinary items...... $80,478 $173,285 $47,800 $45,735 $10,1505 $60,308 $ 8,707
Add:
Minority interest in income of
majority owned subsidiaries.... 1,384 4,005 1,175 1,335 2,681 3,759 58
Distributed operating income
from unconsilidated
joint ventures................ 8,992 25,593 2,662 3,089 6,214 5,795 -
Fixed charges.................... 138,869 257,466 83,500 78,216 154,159 154,580 3,690
Less:
Income from unconsolidated
joint ventures................ (10,372) (14,005) (3,132) (2,409) (5,140) (1,034) (43)
Interest capitalized............. (4,246) (3,129) (3,176) (1,343) (1,515) (1,586) -
________ ________ _______ ________ ________ _______ ________
Earnings........................... $215,105 $443,215 $128,829 $124,623 $257,904 $221,822 $12,412
========= ======== ======== ======= ======== ======== =======
Fixed Charges:
Portion of rents representative
of the interest factor........... 1,661 3,224 1,190 1,216 2,420 2,087 37
Interest on indebtedness (including
amortization of debt expense)...... 132,962 251,113 79,134 75,657 150,224 150,907 3,653
Interest capitalized................ 4,246 3,129 3,176 1,343 1,515 1,586 -
________ ________ _______ ________ ________ _______ _______
Fixed Charges......................... 138,869 257,466 83,500 78,216 154,159 154,580 3,690
Preferred Stock Dividends 4,062 1,490 4,062 - 1,490 - -
________ ________ _______ ________ ________ _______ _______
Fixed Charges and Preferred Stock
Dividends.......................... $142,931 $258,956 $87,562 $78,216 $155,649 $154,580 $3,690
========= ======== ======== ======= ======== ======== =======
Ratio of Earnings to Fixed
Charges and Preferred Stock
Dividends...................... 1.50 1.71 1.47 1.59 1.66 1.43 3.36
========= ======= ======= ======= ====== ======= ======
Coverage Deficit
</TABLE>
SIMON PROPERTY GROUP
(The Predecessor)
________________________________________
For the period For the Year For the Year
January 1 to Ended Ended
December 19, December 31, December 31,
1993 1992 1992
[S] [C] [C] [C]
Earnings:
Income (loss)of the Operating
Partnership
before extraordinary items...... 6,912 (11,692) (15,865)
Add:
Minority interest in income of
majority owned subsidiaries.... 3,558 177 (684)
Distributed operating income
from unconsilidated
joint ventures................ 6,076 - -
Fixed charges.................... 161,856 183,961 163,504
Less:
Income from unconsolidated
joint ventures................. (1,091) - -
Interest capitalized............. (86) (1,306) (2,170)
________ ________ _______
Earnings........................... $179,407 $171,140 $44,785
========= ======== ========
Fixed Charges:
Portion of rents representative
of the interest factor........... 1,491 1,693 1,536
Interest on indebtedness (including
amortization of debt expense)...... 160,279 180,962 159,798
Interest capitalized................ 86 1,306 2,170
________ ________ _______
Fixed Charges......................... 161,856 183,961 163,504
Preferred Stock Dividends - - -
________ ________ _______
Fixed Charges and Preferred Stock
Dividends........................... 161,856 183,961 163,504
======== ======== =======
Ratio of Earnings to Fixed
Charges and Preferred Stock
Dividends...................... 1.11
=========
Coverage Deficit $(12,821) $(18,719)
========= =========
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated February
14, 1996 included in Simon Property Group, Inc.'s Form 10-K for the year
ended December 31, 1995, as amended on April 29, 1996, and to all
references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Indianapolis, Indiana
August 29, 1996
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption 'Experts' in the
Registration Statement (Form S-3) of Simon DeBartolo Group, Inc. and to the
incorporation by reference therein of our report dated February 14, 1996,
except for Note 16, first paragraph, as to which the date is March 1, 1996,
with respect to the consolidated financial statements and schedules of
DeBartolo Realty Corporation included in its Annual Report (Form 10-K) for
the year ended December 31, 1995 which is incorporated by reference in the
Prospectus/Joint Proxy Statement dated June 28, 1996 forming a part of the
Simon DeBartolo Group, Inc.'s Registration Statement on Form S-4
(No. 333-06933) filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
New York, New York
August 30, 1996
EXHIBIT 23.5
[LETTERHEAD OF WILLKIE FARR & GALLAGHER]
September 5, 1996
Simon DeBartolo Group, Inc.
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Ladies and Gentlemen:
We consent to the reference to our firm and to the summarization
of our opinion under the caption "Federal Income Tax Considerations -
Opinion of Counsel" in the Registration Statement on Form S-3 (the
"Form S-3") of Simon DeBartolo Group, Inc. (the "Company") relating
to the offer from time to time by the Company of common stock,
preferred stock, preferred stock represented by depository shares and
warrants to purchase common stock or preferred stock, with an
aggregate offering price of up to $750,000,000 and to the incorporation
by reference into the Form S-3 of (i) the summarization's of our
opinions set forth in the Registration Statement on Form S-4 (the Form
"S-4") (Registration No. 333-06933) of the Company under the headings
"The Merger - Federal Income Tax Consequences to Holders of DRC
Common Stock" and "The Merger - Opinion of SPG's Counsel" in the
Form S-4 and (ii) of our opinion included as an Exhibit to the Form S-4.
In giving this consent we do not admit that we come within the category
of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities
and Exchange Commission thereunder.
/s/ Willkie Farr & Gallagher
