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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 4, 1997
REGISTRATION NO. 333-33627
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SIMON DEBARTOLO GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MARYLAND 35-1901999
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
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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)
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COPIES TO:
DAVID C. WORRELL, ESQ.
BAKER & DANIELS
300 NORTH MERIDIAN STREET
SUITE 2700
INDIANAPOLIS, INDIANA 46204
(317) 237-1110
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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 to be 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. [ ]
THIS REGISTRATION STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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PROSPECTUS
LOGO
658,707 SHARES
SIMON DEBARTOLO GROUP, INC.
COMMON STOCK
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All of the shares of common stock ("Common Stock"), par value $.0001 per
share, of Simon DeBartolo Group, Inc. (the "Company") offered hereby (the
"Shares") may be sold from time to time by the stockholder described herein (the
"Selling Stockholder") in transactions on the New York Stock Exchange ("NYSE")
or otherwise at prices and on terms prevailing at the time of sale, at prices
related to the then-current market price or in negotiated transactions, other
than underwritten public offerings. The aggregate proceeds to the Selling
Stockholder from the sale of the Shares will be the purchase price thereof, less
the aggregate dealer's, broker's or agent's discount. The Company will not
receive any of the proceeds from the sale of the Shares.
All of the Shares have been "restricted securities" under the Securities
Act of 1933, as amended (the "Act"), prior to their registration under the
registration statement of which this Prospectus is a part. On August 8, 1997,
the Company issued 658,707 shares of Common Stock to the Selling Stockholder in
a private transaction, all of which shares are being registered. The
registration of the shares of Common Stock being registered hereby does not
necessarily mean that any of such shares will be offered or sold by the Selling
Stockholder. In connection with any sales, the Selling Stockholder and any
brokers participating in such sales may be deemed to be "underwriters" within
the meaning of the Act. See "Selling Stockholder" and "Plan of Distribution."
All expenses incurred in connection with this offering are being borne by
the Company, other than any discounts paid or allowed by the Selling Stockholder
to dealers, brokers or agents.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is September 5, 1997.
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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 8-A, dated November
24, 1993, which contains 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 May 14, 1997, relating to the
annual meeting of stockholders held on May 14, 1997;
3. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
4. The Company's Quarterly Reports on Form 10-Q for the calendar
quarters ended March 31, 1997 and June 30, 1997; and
5. The Company's Current Reports on Form 8-K filed on March 27, May
22, July 9, July 23, August 1, and August 15, 1997.
The Company's Exchange Act filing number is 1-12618.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14, or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the respective dates of filing such documents. Any statement or information
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed modified or superseded for the purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated herein
by reference modifies or supersedes such statement. Any such
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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.
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THE COMPANY
The Company is a self-administered and self-managed real estate investment
trust ("REIT"). Through its subsidiary partnerships, Simon-DeBartolo Group, L.P.
(the "Operating Partnership") and Simon Property Group, L.P. ("SPG, LP" and,
together with the Operating Partnership, the "Partnerships"), the Company is
engaged primarily in the ownership, development, management, leasing,
acquisition and expansion of income producing properties, primarily regional
malls and community shopping centers. On August 9, 1996 (the "Merger Date"), the
Company acquired the national shopping center business of DeBartolo Realty
Corporation ("DRC"), The Edward J. DeBartolo Corporation ("EJDC") and their
affiliates as the result of the merger (the "Merger") of DRC with a subsidiary
of the Company. As a result of the Merger, the Company expanded its portfolio by
61 properties and combined the management resources of the merged entities to
create one of the most experienced management teams in the shopping center
business. Management believes that the Company's portfolio, as measured in gross
leasable area ("GLA"), is the largest and most geographically diverse portfolio
of any publicly traded REIT in North America and that the Company's market
capitalization is the largest of any publicly traded real estate company in
North America.
In addition, the Company owns, through the Partnerships, substantially all
of the economic interest in affiliated companies (the "Management Companies")
which manage regional malls and community shopping centers not wholly owned by
the Partnerships and certain other properties, engage in certain property
development activities and provide architectural, design, construction and other
services to substantially all of the Properties (as defined below) owned by the
Partnerships, 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 186
income producing properties (the "Properties"), including 114 regional malls, 65
community shopping centers, three specialty retail centers and four mixed-use
properties located in 33 states. The Properties contain an aggregate of
approximately 114 million square feet of GLA, of which approximately 68 million
square feet is GLA owned by the Company ("Owned GLA"). Approximately 3,100
different retailers occupy approximately 12,000 stores in the Properties. Total
estimated retail sales at the Properties exceeded $16 billion in 1996. The
Partnerships have interests in five properties under construction aggregating an
additional four million square feet of GLA, and own six parcels of land held for
future development. The Partnerships, together with the Management Companies,
manage approximately 130 million square feet of GLA of retail and mixed-use
properties.
As of June 30, 1997, the Company, the Partnerships and their affiliated
Management Companies had an aggregate of approximately 5,700 employees.
Unless indicated otherwise, the information in this Prospectus is presented
as of June 30, 1997.
The Company's executive offices are located at National City Center, 115
West Washington Street, Indianapolis, Indiana 46204, and its telephone number is
(317) 636-1600.
RECENT DEVELOPMENTS
On August 8, 1997, an affiliate of the Operating Partnership acquired a
fifty percent (50%) interest in a Florida land trust that owns Dadeland Mall, a
super regional mall in Miami, Florida, with 1.4 million square feet of GLA. The
Selling Stockholder owns the remaining 50% interest in the land trust. Dadeland
Mall is a dominant mall in its trade area with small shop sales of $649 per
square foot and an occupancy level of 94% for the year ended December 31, 1996.
A portion of the purchase price was paid in the form of 658,707 shares of the
Company's Common Stock, which are the Shares being offered pursuant to this
Prospectus.
On August 13, 1997, the Operating Partnership and SPG, LP filed a
registration statement with the Commission relating to the issuance and sale,
from time to time, of up to $1 billion aggregate public offering price of
unsecured debt securities to be issued by the Operating Partnership and
guaranteed by SPG, LP. The net proceeds of such offerings may be used to fund
property acquisition or development activity, retire existing debt or for any
other purpose deemed appropriate by the Operating Partnership.
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On September 4, 1997, the Operating Partnership filed a Current Report on
Form 8-K with the Commission relating to an offer made by the Operating
Partnership on August 28, 1997, to purchase all outstanding beneficial interests
(the "Shares") of The Retail Property Trust ("RPT"), at a net price of $17.50
per Share. RPT has approximately 38.3 million Shares outstanding of which the
Operating Partnership owns approximately 2.3 million Shares. The offer to
purchase, which contains the terms and conditions of the offer, is included as
an exhibit to the Form 8-K.
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USE OF PROCEEDS
The Company will not receive any of the proceeds from the shares sold by
the Selling Stockholder, nor will any such proceeds be available for use by the
Company or otherwise for the Company's benefit.
RESTRICTIONS ON TRANSFER
The Company's Charter contains certain restrictions on the number of shares
of capital stock of the Company (including the Common Stock, Class B Common
Stock, Class C Common Stock and Series A Preferred Stock and any other series of
preferred stock) that individual stockholders may own. For the Company to
qualify as a REIT under the Internal Revenue Code of 1986, as amended (the
"Code"), in addition to other requirements discussed in "Federal Income Tax
Considerations" not more than 50% in value of the outstanding capital stock of
the Company may be owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of a
taxable year (other than the first year) and the capital stock also must be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year of 12 months or during a proportionate part of a shorter taxable year.
Because the management of the Company currently believes it is essential for the
Company to maintain its status as a REIT, the provisions of the Charter with
respect to the Company's shares of Excess Stock as described below contain
restrictions on the acquisition of its capital stock intended to ensure
compliance with these requirements.
The Charter provides that, subject to certain specified exceptions, no
stockholder may own, or be deemed to own by virtue of the attribution provisions
of the Code, more than the ownership limit (the "Ownership Limit"), which is
equal to 6% (24% in the case of certain stockholders) 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 the Board receives 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.
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The Charter contains provisions that are designed to ensure that the
purported transferee or other purported holder of the Excess Stock may not
receive in return for such a transfer an amount that reflects any appreciation
in the shares of stock for which such Excess Stock was exchanged during the
period that such Excess Stock was outstanding. Any amount received by a
purported transferee or other purported holder in excess of the amount permitted
to be received must be paid over to the trust. If the foregoing restrictions are
determined to be void or invalid by virtue of any legal decision, statute, rule
or regulation, then the intended transferee or holder of any Excess Stock may be
deemed, at the option of the Company, to have acted as an agent on behalf of the
trust in acquiring or holding such Excess Stock and to hold such Excess Stock on
behalf of the trust.
The Charter further provides that the Company may purchase, for a period of
90 days during the time the Excess Stock is held by the trustee in trust, all or
any portion of the Excess Stock from the original transferee-stockholder at the
lesser of the price paid for the stock by the purported transferee (or if no
notice of such purchase price is given, at a price to be determined by the Board
of Directors, in its sole discretion, but no lower than the lowest market price
of such stock at any time prior to the date the Company exercises its purchase
option) and the closing market price for the stock on the date the Company
exercises its option to purchase. The 90-day period begins on the date of the
violative transfer or other event if the original transferee-stockholder gives
notice to the Company of the transfer or (if no notice is given) the date the
Board of Directors determines that a violative transfer or other event has been
made.
The Charter further provides that in the event of a purported issuance or
transfer that would, if effective, result in the Company being beneficially
owned by fewer than 100 persons, such issuance or transfer would be deemed null
and void ab initio, and the intended transferee would acquire no rights to the
stock.
All certificates representing shares of any class of stock of the Company
bear a legend referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution provisions of
the Code, more than 5% (or such other percentage as may be required by the Code
or regulations promulgated thereunder) of the outstanding stock must file an
affidavit with the Company containing the information specified in the Charter
before January 30 of each year. In addition, each stockholder shall, upon
demand, be required to disclose to the Company in writing such information with
respect to the direct, indirect and constructive ownership of shares as the
Board of Directors deems necessary to comply with the provisions of the Code
applicable to a REIT and the Charter or to comply with the requirements of any
taxing authority or governmental agency.
The Excess Stock provision will not be removed automatically even if the
REIT provisions of the Code are changed so as to no longer contain any ownership
concentration limitation or if the ownership concentration limitation is
increased. In addition to preserving the Company's status as a REIT, the
Ownership Limit may have the effect of precluding an acquisition of control of
the Company without the approval of the Board of Directors.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material federal income tax considerations
that may be relevant to a prospective purchase. The following is based upon
current law, and is not tax advice. This discussion does not address all aspects
of taxation that may be relevant to particular stockholders in light of their
personal investment or tax circumstances, or to certain types of stockholders
(including insurance companies, tax exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) subject to special treatment under
the federal income tax laws, nor does it give a detailed discussion of any
state, local or foreign tax considerations.
EACH PROSPECTIVE PURCHASER IS ENCOURAGED TO CONSULT ITS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE PURCHASE, OWNERSHIP AND
SALE OF THE SECURITIES AND OF THE COMPANY'S ELECTION TO BE TAXED AS A REAL
ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER
TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
Prospective purchasers should be aware that the recently enacted Taxpayer
Relief Act of 1997 (the "1997 Act") made numerous changes to the Code, including
reducing the maximum tax imposed on net capital gains from the sale of assets
held for more than 18 months by individuals, trust and estates. The 1997 Act
also makes certain changes to the requirements to qualify as a REIT and to the
taxation of REITs and their stockholders. See "-- Recent Legislation."
GENERAL
Both the Company and its subsidiary, SD Property Group, Inc. (the
"Subsidiary") have made elections to be taxed as REITs under the Code, and
applicable Treasury Regulations relating to REIT qualification (the "REIT
Requirements"). Management of both companies believe that both companies have
been organized and operate in such a manner as to qualify for taxation as REITs
under the Code. Both companies intend to continue to operate in such a manner,
but no assurance can be given that they have operated in a manner so as to
qualify or will operate in a manner so as to remain qualified.
The REIT Requirements, relating to the federal income tax treatment of
REITs and their stockholders, are highly technical and complex. The following
discussion sets forth only the material aspects of those requirements. This
summary is qualified in its entirety by the applicable Code provisions, rules
and regulations promulgated thereunder, and administrative and judicial
interpretations thereof.
OPINION OF COUNSEL
In the opinion of Baker & Daniels ("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 (as Simon DeBartolo Group, Inc.) and the Subsidiary have been
organized and have operated in a manner so as to qualify for taxation as a REIT
and their methods of operation will enable them to continue to meet the
requirements for qualification and taxation as REITs under the Code. It must be
emphasized that Counsel's opinion is based on 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
and is also based upon certain other factual representations made by the
Company. 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. 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."
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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 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,
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the Company's "qualified REIT subsidiaries" will be ignored, and all assets,
liabilities, and items of income, deduction, and credit of such subsidiaries
will be treated as assets, liabilities and items of the Company.
In the case of a REIT which is a partner in a partnership, the REIT is
deemed to own its proportionate share of the assets of the partnership and is
deemed to receive the income of the partnership attributable to such share. In
addition, the character of the assets and gross income of the partnership shall
retain the same character in the hands of the REIT for purposes of the RElT
Requirements, including satisfying the income tests and asset tests. Thus, the
Company's and the Subsidiary's proportionate share of the assets, liabilities
and 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; however, the 30% test has been repealed effective for the Company's
taxable years commencing after August 5, 1997. In applying these tests, the
Company and the Subsidiary will each be treated as realizing its share of the
income and bearing its share of the loss of the Operating Partnership, and the
character of such income or loss, as well as other partnership items, will be
determined at the partnership level.
Rents received by each company will qualify as "rents from real property"
only if several conditions are met. First, the amount of rent must not be based
in whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Code provides that rents received
from a tenant will not qualify as "rents from real property" if the REIT, or a
direct or indirect owner of 10% or more of the REIT, directly or constructively
owns 10% or more of such tenant (a "Related Party Tenant"). Third, if rent
attributable to personal property, leased in connection with a lease of real
property, is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property." Finally, for rents received to qualify as "rents
from real property," the REIT generally must not operate or manage the property
or furnish or render services to the tenants of such property, other than
through an "independent contractor" who is adequately compensated and from whom
the REIT does not derive any income; provided, however, that the REIT may
directly perform certain customary services (e.g., furnishing water, heat, light
and air conditioning, and cleaning windows, public entrances and lobbies) other
than services which are considered rendered to the occupant of the property.
Interpretations of the law concerning the types of services that may be rendered
by a REIT to its tenants is constantly evolving and the consequences of
rendering impermissible services are somewhat uncertain.
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
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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, have operated and managed and will
continue to operate and manage the properties wholly-owned by the Operating
Partnership directly without using an "independent contractor" and to perform
all permitted development, construction and leasing services for such
properties. Based upon information provided by the Company regarding services
provided by the Operating Partnership as well as services provided by landlords
of comparable properties in the same geographic areas as the Properties, Counsel
believes that the services currently provided to substantially all of the
lessees of these properties are those usually or customarily rendered in
connection with the rental of space for occupancy only. Management intends to
continue to limit services to tenants to such customary services. 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 M.S. Management Associates, Inc. (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 DeBartolo Properties Management, Inc.
(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 with their respective subsidiaries, the "Management
Companies") perform management, development, construction and leasing services
for (i) all but one of the income-producing properties that are less than
wholly-owned, directly or indirectly, by the Operating Partnership and that are
not managed by the Operating Partnership or one of the subsidiary partnerships,
(ii) the properties 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 in which members of the families of Melvin
Simon or Herbert Simon or their affiliates own an interest and (iii) other real
estate owned in whole or in part by third parties. The income that is earned by
and taxed to the Management Companies is received by the Operating Partnership
only indirectly as dividends and interest that qualify under the 95% test.
Income received by the Operating Partnership from the management of properties
that are not wholly-owned, directly or indirectly, by the Operating Partnership
qualifies for the 75% and 95% income tests to the extent of the Operating
Partnership's ownership of such properties. Based on the foregoing, it is
expected that 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 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."
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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).
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.
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
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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, such company
will be subject to tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. The failure of the Subsidiary to
qualify as a REIT will also cause the Company to fail to qualify as a REIT and
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 (other than a trust) created or organized in or under the laws of
the United States or of any political subdivision thereof, (iii) is an estate
the income of which is subject to United States federal income taxation
regardless of its source, or (iv) is a trust over which a court in the United
States is able to exercise primary supervision and over which one or more United
States fiduciaries have authority to control all substantive decisions. 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.
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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. Beginning in
1998, the Company may elect to allocate some or all of its undistributed net
capital gains to its stockholders. In that event the stockholders would be
entitled to a tax credit or refund in the amount of the tax paid by the Company
on the undistributed gain allocated to the stockholders and the stockholders
would be entitled to increase their tax basis by the amount of undistributed
capital gains allocated to such stockholders reduced by the amount of the
credit. See "-- Recent Legislation."
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. A U.S. Stockholder that
is an individual, trust or estate and that holds shares of Common Stock for more
than 18 months will be subject to a maximum tax of 20% on gains from the sale or
disposition of such shares. See "-- Recent Legislation." Losses incurred on the
sale or exchange of shares of Common Stock held for six months or less (after
applying certain holding period rules), however, will generally be deemed
long-term capital loss to the extent of any long-term capital gain dividends
received by the U.S. Stockholder and undistributed capital gains allocated to
such U.S. Stockholder with respect to such shares.
Treatment of Tax-Exempt U.S. Stockholders
Most tax-exempt entities are not subject to federal income tax except to
the extent of their receipt of "unrelated business taxable income" as defined in
Section 512(a) of the Code ("UBTI"). Distributions by the Company to a
tax-exempt entity, generally, should not constitute UBTI, provided that the
tax-exempt entity has not financed its acquisition of Common Stock with
"acquisition indebtedness" within the meaning of the Code and the Common Stock
is not otherwise used in an unrelated trade or business of the tax-exempt
entity. In addition, certain pension trusts that own more than 10% of a
"pension-held REIT" must report a
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portion of the dividends that they received from such a REIT as UBTI. The
Company has not been and does not expect to be treated as a pension-held REIT
for purposes of this rule.
SPECIAL TAX CONSIDERATIONS FOR FOREIGN STOCKHOLDERS
The rules governing United States federal income taxation of non-resident
alien individuals, foreign corporations, foreign partnerships, and other
entities that do not qualify as U.S. Stockholders (collectively, "Non-U.S.
Stockholders") are complex, and the following discussion is intended only as a
summary of such rules. Prospective Non-U.S. Stockholders should consult with
their own tax advisors to determine the impact of federal, state, and local
income tax laws on an investment in the REIT, including any reporting
requirements, as well as the tax treatment of such an investment under tax
treaties and their home country laws.
In general, Non-U.S. Stockholders will be subject to regular United States
federal income tax with respect to their investment in the Company if such
investment is "effectively connected" with the Non-U.S. Stockholder's conduct of
a trade or business in the United States. A corporate Non-U.S. Stockholder that
receives income that is (or is treated as) effectively connected with a United
States trade or business may also be subject to the branch profits tax under
section 884 of the Code, which is payable in addition to regular United States
corporate income tax. The Company expects to withhold United States income tax,
as described below, on the gross amount of any distributions paid to a Non-U.S.
Stockholder unless (i) a lower treaty rate applies and the required form
evidencing eligibility for that reduced rate is filed with the Company, or (ii)
the Non-U.S. Stockholder files an IRS Form 4224 with the Company, claiming that
the distribution is "effectively connected" income.
A distribution by the Company that is not attributable to gain from the
sale or exchange by the Company of a United States real property interest and
that is not designated by the Company as a capital gain dividend will be treated
as an ordinary income dividend to the extent made out of current or accumulated
earnings and profits. Generally, an ordinary income dividend received by a
Non-U.S. Stockholder that is not "effectively connected" with such Non-U.S.
Stockholder's trade or business in the United States will be subject to a United
States withholding tax equal to 30% of the gross amount of the distribution
unless such tax is reduced or eliminated by an applicable tax treaty. A
distribution of cash in excess of the Company's earnings and profits will be
treated first as a return of capital that will reduce a Non-U.S. Stockholder's
basis in its shares of Common Stock (but not below zero) and then as gain from
the disposition of such shares, the tax treatment of which is described under
the rules discussed below with respect to dispositions of shares.
Distributions by the Company that are attributable to gain from the sale or
exchange of a United States real property interest will be taxed to a Non-U.S.
Stockholder under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S. Stockholder
as if such distributions were gains "effectively connected" with a United States
trade or business. Accordingly, a Non-U.S. Stockholder will be taxed at the
capital gain rates applicable to a U.S. Stockholder (subject to any applicable
alternative minimum tax and a special alternative minimum tax in the case of
non-resident alien individuals). Distributions subject to FIRPTA may also be
subject to a 30% branch profits tax in the hands of a foreign corporate
stockholder that is not entitled to treaty exemption. The Company will be
required to 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.
The amount withheld is creditable against the Non-U.S. Stockholder's actual U.S.
tax liability.
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
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subject to taxation under FIRPTA. However, because the shares of Common Stock
are publicly traded, no assurance can be given that the Company will continue to
be a domestically controlled REIT. If the Company, in the future, does not
constitute a domestically controlled REIT, whether a Non-U.S. Stockholder's sale
of shares of Common Stock would be subject to tax under FIRPTA as a sale of a
United States real property interest would depend on whether the shares were
"regularly traded" (as defined by applicable Treasury Regulations) on an
established securities market (e.g., the New York Stock Exchange, on which the
shares of Common Stock will be listed) and on the size of the selling
stockholder's interest in the Company.
If the gain on the sale of the Company's shares were subject to taxation
under FIRPTA, the Non-U.S. Stockholder would be subject to the same treatment as
a U.S. Stockholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals) and the purchaser of such shares may be required to withhold
10% of the purchase price and remit such amount to the IRS. Notwithstanding the
foregoing, capital gain not subject to FIRPTA will be taxable to a Non-U.S.
Stockholder if the Non-U.S. Stockholder is a nonresident alien individual who is
present in the United States for 183 days or more during the taxable year and
certain other conditions apply, in which case the nonresident alien individual
will be subject to a 30% tax on such individual's capital gains.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
The Company will report to its U.S. Stockholders and the IRS the amount of
distributions paid during each calendar year and the amount of tax withheld, if
any. U.S. Stockholders, other than certain exempt recipients, such as
corporations and tax-exempt organizations, may be subject to backup withholding
at a rate of 31% with respect to distributions paid unless such stockholder
complies with applicable requirements of backup withholding rules. U.S.
Stockholders should consult their own tax advisors regarding their qualification
for exemption from backup withholding and the procedure for obtaining such an
exemption. Any amount of backup withholding with respect to a payment to a U.S.
Stockholder will be allowed as a credit against such U.S. Stockholder's United
States federal income tax liability and may entitle such U.S. Stockholder to a
refund, provided that the required information is furnished to the IRS.
Additional issues may arise pertaining to information reporting and backup
withholding with respect to Non-U.S. Stockholders. For example, the Company may
be required to withhold a portion of capital gain distributions to any
stockholders who fail to certify their non-foreign status to the Company.
Non-U.S. Stockholders should consult their tax advisors with respect to any such
information reporting and backup withholding requirements.
OTHER TAX CONSIDERATIONS
Effect of Tax Status of Operating Partnership and Other Partnerships on REIT
Qualification.
All of the Company's and the Subsidiary's investments are through the
Operating Partnership and other partnerships in which the Company and the
Subsidiary hold a direct or indirect interest. 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.
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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 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 Properties (a "Covered Sale") listed in Exhibit C to
the Fifth Amended and Restated Limited Partnership Agreement of the Operating
Partnership (the "Amended Operating Partnership Agreement"). During the
five-year period beginning with the Merger Date, a limited partner of the
Operating Partnership (a "Limited Partner") who is allocated pre-contribution
gain under Section 704(c) of the Code on a Covered Sale is entitled to a
distribution, pro rata in accordance with the Units, of sufficient cash to pay
any tax liability incurred by reason of such allocation and distribution. In
addition, during the sixth through the eighth years after the Merger Date, a
Limited Partner that is a DeBartolo family member or an affiliate of the
DeBartolo family (including certain estates and trusts) who is allocated gain on
a Covered Sale can require the Operating Partnership to exchange such Limited
Partner's Units pursuant to the exchange rights under the Amended Operating
Partnership Agreement for cash to the extent of the tax due on such allocation
and exchange.
RECENT LEGISLATION
The 1997 Act contains significant changes to the taxation of capital gains
of individuals, trusts and estates and certain changes to the requirements for
qualification and the taxation of REITs. For gains realized after July 28, 1997,
and subject to certain exceptions, the maximum rate of tax on net capital gains
of individuals, trusts and estates from the sale or exchange of assets held for
more than 18 months has been reduced to 20%, and the maximum rate is reduced to
18% for assets acquired after December 31, 2000 and held for more than five
years. For taxpayers who would be subject to a maximum tax rate of 15%, the rate
on net capital gains is reduced to 10%, and effective for taxable years
commencing after December 31, 2000, the rate is reduced to 8% for assets held
for more than five years. The maximum rate for net capital gains attributable to
the sale of depreciable real property held for more than 18 months is 25% to the
extent of the deductions for depreciation with respect to such property.
Long-term capital gain allocated to a stockholder by the Company will be subject
to the 25% rate to the extent that the gain does not exceed depreciation on real
property sold by the Company. The maximum rate of capital gains tax for capital
assets held more than one year but not more than 18 months remains at 28%. The
taxation of capital gains of corporations was not changed by the 1997 Act.
The 1997 Act also includes several provisions that are intended to simplify
the taxation of REITs. These provisions are effective for the Company's taxable
years commencing after August 5, 1997. First, in determining whether a REIT
satisfies the income tests, a REIT's rental income from a property will not
cease
17
<PAGE> 19
to qualify as "rents from real property" merely because the REIT performs
services for a tenant other than permitted customary services if the amount that
the REIT is deemed to have received as a result of performing impermissible
services does not exceed one percent of all amounts received, directly or
indirectly, by the REIT with respect to such property. The amount that a REIT
will be deemed to have received for performing impermissible services is at
least 150% of the direct cost to the REIT of providing those services. Second,
certain non-cash income, including income from cancellation of indebtedness and
original issue discount in excess of actual payments received will be excluded
from income in determining the amount of dividends that a REIT is required to
distribute. Third, a REIT may elect to require its stockholders to include the
REIT's undistributed net capital gains in their income. If a REIT makes such an
election, the REIT's stockholders would receive a tax credit attributable to
their share of capital gains tax paid by a REIT on the undistributed net capital
gains that was included in the stockholders' income, and such stockholders will
receive an increase in the basis of their shares in the amount of undistributed
net capital gain included in their income reduced by the amount of the credit.
Fourth, the 1997 Act repeals the requirement that a REIT receive less than 30%
of its gross income from the sale or disposition of stock or securities held for
less than one year, gain from prohibited transactions, and gain from certain
sales of real property held less than four years. Finally, the 1997 Act contains
a number of technical provisions that reduce the risk that a REIT will
inadvertently cease to qualify as a REIT.
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 ADDITIONAL DEVELOPMENTS
In addition to the 1997 Act, the rules dealing with federal income taxation
are constantly under review by the IRS, the Treasury Department and Congress.
Additional new federal tax legislation 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.
SELLING STOCKHOLDER
The Company has agreed with The Equitable Life Assurance Society of the
United States (the "Selling Stockholder") to file a registration statement with
respect to the resale of the Shares and to use its best efforts to keep such
registration effective until the earlier of: the sale or transfer of all the
Shares; the date on which all of the remaining Shares may be sold within a three
month period without continued registration; or three years from the effective
date of the registration statement of which this Prospectus is a part. The
following table sets forth certain information regarding beneficial ownership of
the Selling Stockholder.
<TABLE>
<CAPTION>
PERCENT OF TOTAL
BENEFICIALLY OWNED OUTSTANDING SHARES NUMBER OF SHARES
NAME NUMBER OF SHARES OF COMMON STOCK BEING REGISTERED
- ------------------------------------------- ------------------ ------------------ ----------------
<S> <C> <C> <C>
The Equitable Life Assurance Society of the
United States............................ 658,707 0.007%* 658,707
</TABLE>
- ---------------
* Based on shares of Common Stock, Class B Common Stock and Class C Common Stock
outstanding as of June 30, 1997, as adjusted to reflect issuance of the
Shares.
18
<PAGE> 20
PLAN OF DISTRIBUTION
Any or all of the Common Stock to be sold by the Selling Stockholder may be
sold to purchasers directly by or on behalf of the Selling Stockholder from time
to time on the NYSE, in privately negotiated transactions or otherwise at prices
prevailing in such market or as may be negotiated at the time of sale. The
Common Stock to be sold by the Selling Stockholder may not be sold pursuant to
an underwritten public offering. In effecting sales, brokers and dealers engaged
by the Selling Stockholder may arrange for other brokers or dealers to
participate. Brokers or dealers will receive usual and customary commissions or
discounts from the Selling Stockholder in amounts to be negotiated (and, if any
such broker-dealer acts as agent for the purchaser of such shares, from such
purchaser). Brokers or dealers may agree with the Selling Stockholder to sell a
specified number of shares of Common Stock at a stipulated price per share, and,
to the extent such broker or dealer is unable to do acting as agent for the
Selling Stockholder, to purchase as principal any unsold shares of Common Stock
at the prices required to fulfill the broker-dealer commitment to the Selling
Stockholder. Brokers or dealers who acquire Common Stock as principal may
thereafter resell such Common Stock from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other brokers or dealers, including transactions of the nature described
above) on the NYSE, in negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at negotiated prices, and in connection with
such resales may pay to or receive from the purchasers of Common Stock
commissions as described above.
The Company is bearing all of the costs relating to the registration of the
Common Stock. Any commission, discounts or other fees payable to a broker,
dealer or market maker in connection with the sale of any Common Stock will be
borne by the Selling Stockholder.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered pursuant to this
Prospectus has been passed upon by Piper & Marbury L.L.P., Baltimore, Maryland
on behalf of the Company. Certain tax matters as set forth under "Federal Income
Tax Considerations" have been passed upon by Baker & Daniels, Indianapolis,
Indiana.
EXPERTS
The audited financial statements and schedule incorporated by reference in
the Registration Statement of which this Prospectus is a part, have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
19
<PAGE> 21
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:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee........................ $ 6,244
Accounting Fees and Expenses............................................... $ 7,000(1)*
Attorneys' Fees and Expenses............................................... $15,000(1)*
Miscellaneous Expenses..................................................... $ 4,256(1)
------
Total............................................................ $32,500
======
</TABLE>
- ---------------
(1) Estimated.
* To be supplied 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 Agreement of each 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 as directors or officers or in 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 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 limiting liability 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,
provide for indemnification of the officers and directors of each general
partner of the Partnerships to the same extent indemnification is provided to
officers and directors of the Company in its Charter, and limits the liability
of such general partners and their officers and directors to the Partnerships
and their 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.
II-1
<PAGE> 22
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.
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
4 Agreement dated as of August 8, 1997, between The Equitable Life Assurance
Society of the United States and Simon DeBartolo Group, Inc.
5 Opinion of Piper & Marbury L.L.P.
8 Opinion of Baker & Daniels
23.1* Consent of Arthur Andersen LLP
23.2 Consent of Piper & Marbury L.L.P. is contained in their opinion filed as
Exhibit 5
23.3 Consent of Baker & Daniels is contained in their opinion filed as Exhibit 8.
24* Power of Attorney (included in the signature page)
</TABLE>
- ---------------
* Previously filed.
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:
(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 volume 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 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the 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 information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission 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.
II-2
<PAGE> 23
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of such
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 the time shall be deemed to be the initial bona fide offering thereof.
(c) 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 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.
II-3
<PAGE> 24
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 amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Indianapolis, State of Indiana, on September 3, 1997.
SIMON DeBARTOLO GROUP, INC.
By: /s/ DAVID SIMON
------------------------------------
David Simon, Chief Executive Officer
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.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ ------------------------------ -------------------
<C> <S> <C>
/s/ MELVIN SIMON* Co-Chairman of the Board of September 3, 1997
- ------------------------------------------ Directors
Melvin Simon
/s/ HERBERT SIMON* Co-Chairman of the Board of September 3, 1997
- ------------------------------------------ Directors
Herbert Simon
/s/ DAVID SIMON Chief Executive Officer and September 3, 1997
- ------------------------------------------ Director (Principal
David Simon Executive Officer)
/s/ RICHARD S. SOKOLOV* President, Chief Operating September 3, 1997
- ------------------------------------------ Officer and Director
Richard S. Sokolov
/s/ BIRCH BAYH* Director September 3, 1997
- ------------------------------------------
Birch Bayh
/s/ EDWARD J. DEBARTOLO, JR.* Director September 3, 1997
- ------------------------------------------
Edward J. DeBartolo, Jr.
/s/ M. DENISE DEBARTOLO YORK* Director September 3, 1997
- ------------------------------------------
M. Denise DeBartolo York
/s/ WILLIAM T. DILLARD, II* Director September 3, 1997
- ------------------------------------------
William T. Dillard, II
/s/ G. WILLIAM MILLER* Director September 3, 1997
- ------------------------------------------
G. William Miller
/s/ FREDRICK W. PETRI* Director September 3, 1997
- ------------------------------------------
Fredrick W. Petri
/s/ TERRY S. PRINDIVILLE* Director September 3, 1997
- ------------------------------------------
Terry S. Prindiville
/s/ J. ALBERT SMITH, JR.* Director September 3, 1997
- ------------------------------------------
J. Albert Smith, Jr.
</TABLE>
II-4
<PAGE> 25
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ ------------------------------ -------------------
<C> <S> <C>
/s/ PHILIP J. WARD* Director September 3, 1997
- ------------------------------------------
Philip J. Ward
/s/ STEPHEN E. STERRETT Senior Vice President and September 3, 1997
- ------------------------------------------ Treasurer (Principal
Stephen E. Sterrett Financial Officer)
/s/ JOHN DAHL Senior Vice President and September 3, 1997
- ------------------------------------------ Chief Accounting Officer
John Dahl (Principal Accounting
Officer)
*By /s/ DAVID SIMON
- ------------------------------------------
David Simon, Attorney-in-fact
</TABLE>
II-5
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<S> <C>
4 Agreement dated as of August 8, 1997, between The Equitable Life Assurance Society of
the United States and Simon DeBartolo Group, Inc.
5 Opinion of Piper & Marbury L.L.P.
8 Opinion of Baker & Daniels
23.1* Consent of Arthur Andersen LLP
23.2 Consent of Piper & Marbury L.L.P. is contained in their opinion filed as Exhibit 5
23.3 Consent of Baker & Daniels is contained in their opinion filed as Exhibit 8.
24* Power of Attorney (included in the signature page)
</TABLE>
- ---------------
* Previously filed.
II-6
<PAGE> 1
EXHIBIT 4
THIS AGREEMENT is made as of August 8, 1997 by and between THE EQUITABLE
LIFE ASSURANCE SOCIETY OF THE UNITED STATES, a New York corporation having an
office at 1290 Avenue of the Americas, New York, New York 10104 ("Seller"), and
SIMON DEBARTOLO GROUP, INC., a Maryland corporation having an office at National
City Center, 115 West Washington Street, Indianapolis, Indiana 46204 ("SDG").
WITNESSETH:
Seller is this day selling and assigning to SD Dadeland Limited
Partnership (the "Partnership"), a Delaware limited partnership whose general
partner is a wholly-owned subsidiary of SDG and in whose limited partner SDG is
a general partner, an undivided 50% beneficial interest in a Florida Land Trust
which holds title to Dadeland Mall, a regional shopping center located in Dade
County, Florida.
Pursuant to the Purchase and Sale Agreement between Seller and the
Purchaser (the "Purchase and Sale Agreement"), a portion of the purchase price
for such undivided 50% interest consists of 658,707 shares of the common stock
of SDG being issued to Seller by SDG (the "Shares").
In connection with the issuance of the Shares by SDG to Seller, the
Purchaser agreed to cause SDG to enter into this Agreement with Seller.
NOW, THEREFORE, in consideration of the premises and of Ten Dollars
($10) and other good and valuable consideration by each party hereto to the
other paid, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Within five (5) days after the date hereof SDG shall file a
registration statement on an appropriate registration form under the Securities
Act of 1933, as amended, and the regulations promulgated thereunder (the "1933
Act"), with the Securities and Exchange Commission ("SEC") covering the resale
of the Shares (the "Registration Statement") and shall use its reasonable best
efforts to cause the Registration Statement to become effective under the 1933
Act within ninety (90) days following the date hereof (the "Outside Date"). Time
is of the essence with respect to such time period. SDG has heretofore furnished
to Seller a copy of a draft Registration Statement in the form proposed to be
filed with the SEC and Seller has approved such form. If the Registration
Statement becomes effective, until the earliest to occur of (i) the sale or
transfer by Seller of all the Shares, (ii) the date on which the Shares become
eligible for sale pursuant to Rule 144(k) under the 1933 Act, and (iii) the
third anniversary of the effective date of the Registration Statement, SDG shall
keep the Registration Statement current, effective and available for the resale
by Seller of the Shares. SDG agrees that it shall deliver to Seller copies of
the Registration Statement as filed with the SEC and any amendments and
supplements thereto (other than post-effective amendments) prior to the filing
thereof. SDG shall bear all expenses relating to filing the Registration
Statement and keeping the Registration Statement current, effective and
available during the period specified above; provided, however, that SDG shall
not be responsible for any brokerage fees or underwriting commissions, if any,
incurred by Seller in connection with the resale by Seller of the Shares or the
fees and expenses of any counsel retained by Seller in connection with its sale
of the Shares.
2. During the time period that the Registration Statement is required
to be current, effective and available under Section 1 above, SDG shall also at
its expense:
2.1 prepare and file with the SEC such amendments and supplements
to the Registration Statement and the prospectus constituting a part
thereof, as amended or supplemented (the "Prospectus"), as may be
necessary to keep the Registration Statement effective and to comply
with the provisions of the 1933 Act with respect to the sale of the
Shares whenever Seller shall desire to sell or otherwise dispose of the
same, or any portion thereof, but in no event beyond the period during
which the Registration Statement is required to be kept in effect under
Section 1 above;
<PAGE> 2
2.2 furnish to Seller, without charge, such number of authorized
copies of the Prospectus, and any amendments or supplements to the
Prospectus, in conformity with the requirements of the 1933 Act and the
Securities Exchange Act of 1934, as amended, and the regulations
promulgated thereunder (the "1934 Act"), and such other documents as
Seller may reasonably request in order to facilitate the public sale or
other disposition of the Shares owned by Seller;
2.3 register or qualify the Shares under state securities or blue
sky laws of such jurisdictions as are reasonably required to effect a
sale thereof and do any and all other acts and things which may be
necessary or appropriate under such state securities or blue sky laws
to enable Seller to consummate the public sale or other disposition in
such jurisdictions of the Shares to be sold or otherwise disposed of by
Seller from time to time;
2.4 before filing with the SEC any amendments or supplements to
the Registration Statement or the Prospectus, furnish copies of all
such documents proposed to be filed to Seller, which shall have five
(5) business days to review and comment thereon (and absent comment
within such five (5) business day period such documents shall be deemed
approved by Seller); provided, however, that all such documents shall
be subject to the approval of Seller insofar as they relate to
information concerning Seller (including, without limitation, the
proposed method of distribution of the Shares);
2.5 notify Seller promptly (a) when the Registration Statement has
become effective and when any post-effective amendments and supplements
thereto become effective, (b) of any request by the SEC or any state
securities authority for amendments or supplements to the Registration
Statement and the Prospectus or for additional information, (c) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, (d) of the receipt by
SDG of any notification with respect to the suspension of the
qualification of the Shares or the initiation of any proceeding for
such purpose, and (e) of the happening of any event during the period
the Registration Statement is effective which in the judgment of SDG
makes any statement made in the Registration Statement or the
Prospectus untrue in any material respect or which requires the making
of any changes in the Registration Statement or the Prospectus in order
to make the statements therein not misleading;
2.6 use its reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement at
the earliest practicable time;
2.7 cooperate with Seller to facilitate the timely preparation and
delivery of certificates representing Shares being sold, which
certificates shall not bear any restrictive legends provided the Shares
evidenced thereby have been sold in a manner permitted by the
Prospectus; and
2.8 upon the occurrence of any event contemplated by subsection
2.5(e), promptly prepare and file a supplement or post-effective
amendment to the Registration Statement or the Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to purchasers of the Shares,
the Prospectus will not contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the obligation to prepare and file
any such supplement or post-effective amendment shall be suspended if
SDG, relying upon advice of counsel, determines that disclosure of any
information required to be included therein would be adverse to its
interests, but such suspension shall not extend beyond thirty (30) days
with respect to any such specified event or for more than an aggregate
of sixty (60) days in any calendar year.
3. SDG hereby agrees to indemnify and hold harmless Seller and
each person or entity, if any, which controls Seller (within the meaning of
either Section 15 of the 1933 Act or Section 20 of the 1934 Act), and its and
their respective officers, directors, agents and employees, from and against any
and all losses, claims, damages, costs and expenses (including reasonable
attorneys' fees) to which Seller or each such Person may become subject under
the 1933 Act or otherwise by reason of any untrue statement or alleged untrue
statement of a material fact
<PAGE> 3
contained in the Registration Statement or the Prospectus, or by reason of any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse Seller for any legal or other expenses reasonably incurred by
Seller in connection with investigating or defending any such loss, claim or
damages as such expenses are incurred; provided, however, that SDG shall not be
liable insofar as any such losses, claims, damages, costs and expenses
(including reasonable attorneys fees) are caused or incurred by reason of any
such untrue statement or omission or alleged untrue statement or omission based
upon information furnished in writing to SDG by Seller expressly for use
therein. In addition, upon request of Seller, SDG shall enter into one or more
indemnification agreements with any broker or brokers engaged by Seller to sell
all or any portion of the Shares, each such agreement to indemnify the broker in
question against the same losses, claims, damages, costs and expenses as Seller
is indemnified against by SDG under this paragraph 3 in the event that such
broker is deemed to be an underwriter in respect of the Shares.
4. Seller hereby (i) represents and warrants that the Shares are
being acquired by Seller for investment and not with a view to the distribution
thereof (except as contemplated by and in accordance with this Agreement, the
Registration Statement or otherwise in accordance with the requirements of the
1933 Act and the 1934 Act and all applicable state securities laws), (ii) agrees
that, upon receipt of any notice from SDG of the happening of any event of the
kind described in subsection 2.5(e), Seller will forthwith discontinue
disposition of the Shares pursuant to the Registration Statement until Seller's
receipt of the copies of the supplemented or amended Prospectus contemplated by
subsection 2.8 and (iii) agrees that the certificate or certificates
representing the Shares which are initially issued to Seller shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933 AND IN
COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT
THERETO, OR IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
5. SDG covenants and agrees that upon the issuance of the Shares
by SDG to Seller pursuant to the Purchase and Sale Agreement, Seller shall have
good and absolute title to the Shares free and clear of all liens, encumbrances
and security interests except for restrictions under the 1933 Act and the 1934
Act, restrictions on transfer contemplated by Section 4 above and any liens,
encumbrances and security interests arising out of Seller's own acts.
6. Anything contained in this Agreement to the contrary
notwithstanding, in the event SDG for any reason fails or is unable to register
the Shares under the 1933 Act on or before the close of business on the Outside
Date, and subsequent to the Outside Date but prior to the earlier to occur of
the effectuation of such registration and the date on which the Shares become
eligible for sale pursuant to Rule 144(k) under the 1933 Act, Seller desires to
sell all or any portion of the Shares, Seller shall give notice to SDG of the
fact that it desires to make such sale. If Seller gives any such notice to SDG
and thereafter (i) Seller exerts its reasonable good faith efforts to effectuate
such sale at the highest price then reasonably obtainable through a private
placement that is exempt from registration under the 1933 Act, or (ii) if the
Registration Statement becomes effective before such sale is effectuated and
promptly thereafter Seller sells the Shares in question pursuant to the
Registration Statement, and if in either such event the gross sales price
received by Seller per Share upon such sale is less than the closing price of a
share of SDG's common stock on the New York Stock Exchange on the date of
Seller's notice to SDG (the "Closing Price"), then and in such event within 30
days after receipt of notice from Seller of the effectuation of such sale, the
date thereof, the gross purchase price per Share received and the number of
Shares sold, SDG shall pay to Seller an amount equal to the product of (a) the
number of Shares sold and (b) the amount by which the Closing Price exceeds the
gross purchase price per Share received by Seller.
7. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. Notices which
either party hereto may desire or be required to give to the other shall be
given in the manner provided in Article 15 of the Purchase and Sale Agreement.
The provisions of the
<PAGE> 4
Agreement shall be construed in accordance with the laws of the State of New
York applicable to agreements made and to be performed within said state.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By /s/ Allen H. Sullivan
----------------------------------------
Name: Allen H. Sullivan
Title: Investment Officer
SIMON DEBARTOLO GROUP, INC.
By /s/ Randolph L. Foxworthy
----------------------------------------
Name: Randolph L. Foxworthy
Title: Executive Vice President
<PAGE> 1
PIPER & MARBURY L.L.P.
Simon DeBartolo Group, Inc.
September 3, 1997
Page 2
matters set forth herein, and no other opinion should be inferred beyond the
matters expressly stated.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the Prospectus included in the Registration Statement. In giving
our consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission thereunder.
Very truly yours,
<PAGE> 1
Exhibit 8
BAKER & DANIELS
300 NORTH MERIDIAN STREET, SUITE 2700 . INDIANAPOLIS, INDIANA 46204-1782
(317) 237-0300 FAX: (317) 237-0300
September 3, 1997
Simon DeBartolo Group, Inc.
National City Center
Suite 15 East
115 West Washington Street
Indianapolis, IN 46204
Ladies and Gentlemen:
You have asked our opinion concerning the federal income tax matters
pertaining to Simon DeBartolo Group, Inc. (the "Company") in connection with the
Registration Statement on Form S-3, filed with the Securities and Exchange
Commission on August 14, 1997, File No. 333-33627 (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 Fifth Amended and Restated Agreement of Limited
Partnership of Simon DeBartolo Group, L.P. (the "Operating Partnership"); (iii)
the Third Amended and Restated Agreement of limited partnership of Simon
Property Group, L.P.; (iv) 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 (v) such other documents, records and instruments as we have deemed
necessary in order to enable us to render the opinions expressed herein.
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
<PAGE> 2
Simon DeBartolo Group, Inc. -2- September 3, 1997
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 3, 1997. 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.) has been
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 (as Simon DeBartolo Group, Inc.) and the Subsidiary have been
organized and have operated in a manner as described in the Registration
Statement and as represented by the Company so as to enable the Company and the
Subsidiary so as to remain qualified.
3. The discussion contained in that portion of the Registration
Statement under the captions "Federal Income Tax Considerations" fairly
summarizes the federal income tax considerations that are likely to be material
to a holder of common 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.
<PAGE> 3
Simon DeBartolo Group, Inc. -3- September 3, 1997
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 Prospectus which is a part of
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/ BAKER & DANIELS
