SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 24, 1998
SPG PROPERTIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 1-12618 35-1901999
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(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
115 WEST WASHINGTON STREET
INDIANAPOLIS, INDIANA 46204
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: 317.636.1600
<PAGE> 01
This Amendment No. 1 to the Registrant's Report on Form 8-K dated October
9, 1998 regarding the Registrant's combination with Corporate Property
Investors, Inc. (predecessor to Simon Property Group, Inc.) and its
paired-share affiliate is being filed to amend Item 7(b) to provide certain
required pro forma financial information which was impracticable to provide
at the time the original Form 8-K was filed. Capitalized terms used, but not
defined herein, shall have the meanings ascribed to them in the original
Form 8-K.
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information.
The required pro forma condensed financial information of
SPG Properties, Inc. follows beginning at page F-1.
<PAGE> 02
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
SPG PROPERTIES, INC.
/s/ John Dahl
---------------------
John Dahl,
Senior Vice President and Chief
Accounting Officer
(Principal Accounting Officer)
Date: December 8, 1998
<PAGE> 03
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The accompanying financial statements prepared by the management of
SPG Properties, Inc. ("SPG Properties") present the pro forma
consolidated condensed Statements of Operations of SPG Properties and
subsidiary for the nine months ended September 30, 1998, and for the
year ended December 31, 1997. SPG Properties, formerly Simon DeBartolo
Group, Inc. ("SDG"), is a substantially wholly owned subsidiary of Simon
Property Group, Inc. ("SPG"). No pro forma balance sheet is required
because the merger and related transactions and the Other Property
Transactions described below were reflected in SPG Properties' unaudited
interim balance sheet included in SPG Properties' quarterly report on
Form 10-Q for the period ended September 30, 1998. SPG Properties and
subsidiary's operating results are derived from its partnership
interests in Simon Property Group, L.P. (the "Operating Partnership").
SPG Properties' noncontrolling interest in the Operating Partnership is
accounted for using the equity method. Also attached are pro forma
consolidated condensed Statements of Operations for the nine months
ended September 30, 1998 and the year ended December 31, 1997, of the
Operating Partnership, SPG Properties' equity method investee.
The pro forma consolidated condensed Statements of Operations for
the nine months ended September 30, 1998 and for the year ended December
31, 1997, are presented as if (i) the Corporate Property Investors,
Inc.("CPI") Merger and related transactions which were consummated for
financial reporting purposes as of the close of business on September
24, 1998, (ii) the September and November 1997 transactions by SDG to
acquire ten portfolio properties and a 50% ownership interest in an
eleventh property of The Retail Property Trust, ("RPT"), (iii) the
December 1997 acquisition by SDG of the Fashion Mall at Keystone at the
Crossing, (iv) the January 1998 acquisition by CPI of Phipps Plaza,
(v) the January 1998 sale by CPI of Burnsville Mall, (vi) the January
1998 acquisition by SDG of Cordova Mall, (vii) the February 1998
acquisition by SDG of a 50% interest in a portfolio of twelve regional
malls and (viii) the sale by CPI of the General Motors Building had
occurred as of January 1, 1997, (items (ii) through (vii) collectively,
the "Other Property Transactions").
Preparation of the pro forma financial information was based on
assumptions deemed appropriate by management. These assumptions give
effect to the CPI Merger being accounted for as a reverse purchase in
accordance with generally accepted accounting principles, resulting in
the assets and liabilities transferred to the Operating Partnership
being reflected at fair value. The cash contributed by the Operating
Partnership on behalf of its partners to Corporate Realty Consultants,
Inc. ("CRC") and the newly formed CRC operating partnership was
accounted for as a distribution. The pro forma financial information has
been updated to reflect revised assumptions based upon the completion of
the CPI Merger and related transactions in September 1998. The pro
forma financial information is not necessarily indicative of the results
which actually would have occurred if the transactions had been
consummated at the beginning of the periods presented, nor does it
purport to represent the results of operations for future periods. The
pro forma information should be read in conjunction with the historical
financial statements of SPG Properties, SDG, the Operating Partnership,
and CPI.
<TABLE>
SPG PROPERTIES, INC.
Pro Forma Consolidated Condensed Statement of Operations
For the Nine Months Ended September 30, 1998
(unaudited, in thousands)
<CAPTION>
Pro Forma
SPG Properties
SPG Restated
Properties to Equity Pro Forma
(Historical) Method Adjustments Total
<S> <C> <C> <C> <C>
REVENUE/INCOME
Equity in Earnings of the
Operating Partnership* $ -- $ 97,037 $ (17,494)(L) $ 79,543
Minimum rent 565,294 -- -- --
Overage rent 22,766 -- -- --
Tenant reimbursements 283,805 -- -- --
Other income 60,754 -- -- --
Total revenue/income 932,619 97,037 (17,494) 79,543
EXPENSES
Property & other
expenses 328,690 -- -- --
Depreciation and
amortization 177,710 -- -- --
Total expenses 506,400 -- -- --
INCOME BEFORE ITEMS
BELOW 426,219 97,037 (17,494) 79,543
INTEREST EXPENSE 281,748 -- -- --
INCOME BEFORE MINORITY
INTEREST 144,471 97,037 (17,494) 79,543
MINORITY PARTNERS'
INTEREST (4,704) -- -- --
(LOSS) GAIN ON SALES OF
ASSETS (7,283) -- -- --
INCOME BEFORE
UNCONSOLIDATED ENTITIES 132,484 97,037 (17,494) 79,543
INCOME FROM UNCONSOLIDATED
ENTITIES 8,789 -- -- --
INCOME OF THE OPERATING
PARTNERSHIP 141,273 97,037 (17,494) 79,543
LESS:
LIMITED PARTNERS' INTEREST
IN THE OPERATING
PARTNERSHIP 42,867 -- -- --
MANAGING GENERAL PARTNERS'
INTEREST IN THE
OPERATING PARTNERHIIP 1,369 -- -- --
PREFERRED DIVIDEND
REQUIREMENT 22,002 22,002 -- 22,002
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $75,035 $ 75,035 $ (17,494) $ 57,541
The accompanying notes and management's assumptions are an integral part of this
statement.
* See detailed adjustments relating to the Operating Partnership's pro forma
results in the accompanying pro forma Statement of Operations and notes thereto.
</TABLE>
<TABLE>
SIMON PROPERTY GROUP, L.P.
Pro Forma Consolidated Condensed Statement of Operations
For the Nine Months Ended September 30, 1998
(unaudited, in thousands except unit and per unit amounts)
<CAPTION>
Pro Forma
CPI Merger and
CPI (1/1 to 9/24) Sale of GM Related Other
SPG, LP (1/1 to 9/24) (Historical) Building Transactions Property
(Historical) (A) (Historical) Not Transferred (B) (Historical)(C) Adjustments Transactions(I) Total
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Minimum rent $ 565,294 $ 237,413 $ (8,264) $ (46,067) $ 2,250(D) $ (248) $ 750,378
Overage rent 22,766 3,303 (82) -- 33 26,020
Tenant
reimbursements 283,805 110,071 (3,417) (7,217) (616) 382,626
Other income 60,754 15,384 (207) (6,140) (600)(E) (71) 69,120
Total revenue 932,619 366,171 (11,970) (59,424) 1,650 (902) 1,228,144
EXPENSES
Property & other
expenses 328,690 146,215 (3,752) (23,552) -- (613) 446,988
Merger related costs -- 83,019 -- -- (83,019)(K) -- --
Depreciation and
amortization 177,710 61,149 (1,342) (3,493) 28,300(F) 216 262,540
Total expenses 506,400 290,383 (5,094) (27,045) (54,719) (397) 709,528
INCOME BEFORE ITEMS
BELOW 426,219 75,788 (6,876) (32,379) 56,369 (505) 518,616
INTEREST EXPENSE 281,748 48,058 (53) (307) 75,030(G) 2,827 407,303
INCOME BEFORE
MINORITY INTEREST 144,471 27,730 (6,823) (32,072) (18,661) (3,332) 111,313
MINORITY PARTNERS'
INTEREST (4,704) -- -- -- -- -- (4,704)
(LOSS) GAIN ON SALES
OF ASSETS (7,283) 244,147 -- (198,891) -- -- 37,973
INCOME BEFORE
UNCONSOLIDATED
ENTITIES 132,484 271,877 (6,823) (230,963) (18,661) (3,332) 144,582
INCOME FROM
UNCONSOLIDATED
ENTITIES 8,789 15,756 -- -- -- 1,879 26,424
INCOME OF THE
OPERATING
PARTNERSHIPS BEFORE
EXTRAORDINARY
ITEMS 141,273 287,633 (6,823) (230,963) (18,661) (1,453) 171,006
PREFERRED UNIT
REQUIREMENT 22,742 10,061 -- -- 23,098(H) -- 55,901
NET INCOME AVAILABLE
TO UNIT HOLDERS $ 118,531 $ 277,572 $ (6,823) $ (230,963) $ (41,759) $ (1,453) $ 115,105
NET INCOME AVAILABLE
TO UNIT HOLDERS
ATTRIBUTABLE TO:
MANAGING GENERAL
PARTNER (SPG) 629 $ 24,598
GENERAL PARTNER
(SPG Properties) 75,035 57,541
LIMITED PARTNERS 42,867 32,966
$118,531 $115,105
NET INCOME PER
UNIT
HOLDERS-
BASIC AND DILUTED $ 0.67 $0.51
WEIGHTED AVERAGE
OUTSTANDING
OR EQUIVALENT
UNITS 176,752,302 223,630,555(J)
The accompanying notes and management's assumptions are an integral part of this
statement.
</TABLE>
SPG PROPERTIES, INC.
Pro Forma Consolidated Condensed Statement of Operations
For the Year Ended December 31, 1997
(unaudited, in thousands )
Pro Forma
SPG Properties
SPG Restated
Properties to Equity Pro Forma
(Historical) Method Adjustments Total
REVENUE/INCOME
Equity in Earnings of the
Opera ing Partnership* $ -- $137,179 $(2,903)(L) $134,276
Minimum rent 641,352 -- -- --
Overage rent 38,810 -- -- --
Tenant reimbursements 322,416 -- -- --
Other income 51,589 -- -- --
Total revenue/income 1,054,167 137,179 (2,903) 134,276
EXPENSES
Property & other expenses 376,237 -- -- --
Depreciation and amortization 200,900 -- -- --
Total expenses 577,137 -- -- --
INCOME BEFORE ITEMS BELOW 477,030 137,179 (2,903) 134,276
INTEREST EXPENSE 287,823 -- -- --
INCOME BEFORE MINORITY INTEREST 189,207 137,179 (2,903) 134,276
MINORITY PARTNERS' INTEREST (5,270) -- -- --
GAIN ON SALE OF ASSETS 20 -- -- --
INCOME BEFORE UNCONSOLIDATED
ENTITIES 183,957 137,179 (2,903) 134,276
INCOME FROM UNCONSOLIDATED
ENTITIES 19,176 -- -- --
INCOME OF THE OPERATING
PARTNERSHIPS BEFORE
EXTRAORDINARY ITEMS 203,133 137,179 (2,903) 134,276
LESS: LIMITED PARTNERS' INTEREST
IN THE OPERATING PARTNERSHIP 65,954 -- -- --
PREFERRED DIVIDEND REQUIREMENT 29,248 29,248 -- 29,248
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $107,931 $107,931 $(2,903) $105,028
The accompanying notes and management's assumptions are an integral part of this
statement.
* See detailed adjustments relating to the Operating Partnership's pro forma
results in the accompanying pro forma Statement of Operations and notes thereto.
<TABLE>
SIMON PROPERTY GROUP, L.P.
Pro Forma Consolidated Condensed Statement of Operations
For the Year Ended December 31, 1997
(in thousands except unit and per unit amounts)
<CAPTION>
Pro Forma
Merger and
CPI Sale of GM Related Other
SDG, LP CPI (Historical) Building Transactions Property
(Historical) (A) (Historical) Not Transferred (B) (Historical)(C) Adjustments Transactions(I) Total
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Minimum rent $ 641,352 $ 319,862 $(10,085) $(77,707) $ 3,000(D) $ 88,305 $ 964,727
Overage rent 38,810 10,489 (167) (536) -- 5,119 53,715
Tenant reimbursements 322,416 138,579 (3,934) (12,297) -- 49,251 494,015
Other income 51,589 24,858 (546) (962) (800)(E) 4,463 78,602
Total revenue 1,054,167 493,788 (14,732) (91,502) 2,200 147,138 1,591,059
EXPENSES
Property & other
expenses 376,237 199,503 (4,368) (40,420) -- 53,779 584,731
Depreciation and
amortization 200,900 91,312 (1,784) (17,764) 34,100(F) 28,866 335,630
Total expenses 577,137 290,815 (6,152) (58,184) 34,100 82,645 920,361
INCOME BEFORE ITEMS
BELOW 477,030 202,973 (8,580) (33,318) (31,900) 64,493 670,698
INTEREST EXPENSE 287,823 69,562 -- (716) 102,790(G) 82,870 542,329
INCOME BEFORE
MINORITY
INTEREST 189,207 133,411 (8,580) (32,602) (134,690) (18,377) 128,369
MINORITY PARTNERS'
INTEREST (5,270) -- -- -- -- -- (5,270)
GAIN ON SALE OF ASSETS 20 122,410 -- -- -- -- 122,430
INCOME BEFORE
UNCONSOLIDATED
ENTITIES 183,957 255,821 (8,580) (32,602) (134,690) (18,377) 245,529
INCOME FROM
UNCONSOLIDATED
ENTITIES 19,176 21,390 -- -- -- 8,770 49,336
INCOME OF THE
OPERATING
PARTNERSHIPS BEFORE
EXTRAORDINARY ITEMS 203,133 277,211 (8,580) (32,602) (134,690) (9,607) 294,865
PREFERRED UNIT
REQUIREMENT 29,248 13,712 -- -- 31,488(H) -- 74,448
NET INCOME AVALIABLE
TO UNIT
HOLDER $ 173,885 $ 263,499 $ (8,580) $(32,602) $(166,178) $(9,607) $ 220,417
NET INCOME AVAILABLE
TO UNIT
HOLDERS ATTRIBUTABLE
TO:
MANAGING GENERAL
PARTNER (SPG) $ -- $ 49,528
GENERAL PARTNER
(SPG Properties) 107,931 105,028
LIMITED PARTNERS 65,954 65,861
$ 173,885 $ 220,417
NET INCOME PER UNIT--
BASIC $ 1.08 $ 1.04
DILUTED $ 1.08 $ 1.03
WEIGHTED AVERAGE
OUTSTANDING
OR EQUIVALENT
UNITS
BASIC 161,022,887 212,690,398(J)
DILUTED 161,406,951 213,074,462(J)
The accompanying notes and management's assumptions are an integral part of this
statement.
</TABLE>
SPG Properties, Inc. and Simon Property Group, L.P. - Notes and
Management's Assumptions to Unaudited Pro Forma Consolidated Condensed
Statements of Operations (dollars in thousands)
1. Basis of Presentation
Prior to the CPI Merger described below, Simon DeBartolo Group,
Inc. ("SDG"), now SPG Properties, Inc.("SPG Properties"), held a
controlling partnership interest in Simon DeBartolo Group, L.P. (the
"Operating Partnership"), now Simon Property Group, L.P. SDG also held
preferred interest and therefore is entitled to preferred distributions
from, the Operating Partnership of 8.75% and 7.89%, respectively, on the
8,000,000 $25 par value Series B preferred units and 3,000,000 $50 par
value Series C preferred units. The Operating Partnership is engaged
primarily in the ownership, development, management, leasing,
acquisition and expansion of income-producing properties, primarily
regional malls and community shopping centers.
In February 1998, SDG, CPI and CRC entered into the Merger
Agreement, which provided for the merger of a substantially wholly-owned
subsidiary of CPI with and into SDG. CPI is a self-administered and
self-managed privately held REIT which invests in income-producing
properties. As of the CPI Merger date, CPI owned or held interests in 26
properties, 23 shopping centers, one community center and two office
buildings. CRC was engaged in the ownership, operation, acquisition and
development of income producing properties directly or through interests
in joint ventures and other non-REIT qualifying activities.
Pursuant to the Agreement and Plan of Merger dated February 18,
1998, among Simon DeBartolo Group, Inc. ("SDG"), Corporate Property
Investors, Inc. ("CPI"), and Corporate Realty Consultants, Inc. ("CRC"),
the CPI Merger and related transactions were consummated for financial
reporting purposes, as of the close of business on September 24, 1998.
SPG Merger Sub, Inc., a substantially wholly-owned subsidiary of CPI,
merged with and into SDG with SDG continuing as the surviving company.
Legally, SDG became a majority-owned subsidiary of CPI. The outstanding
shares of common stock of SDG were exchanged for a like number of shares
of CPI. The Operating Partnership contributed $22 million in cash to CRC
and the newly formed SRC Operating Partnership on behalf of the SDG
stockholders and the limited partners of SDG, LP for beneficial
interests in CRC in order to pair the common stock of CPI with 1/100th
of a share of common stock of CRC and to obtain units in the SRC
Operating Partnership in order that the limited partners of the
Operating Partnership will hold the same proportionate interest in the
SRC Operating Partnership as they hold in the Operating Partnership.
Immediately prior to the consummation of the CPI Merger, the
holders of CPI common stock were paid a merger dividend consisting of
(i) $90 in cash, (ii) 1.0818 additional shares of CPI common stock and
(iii) 0.19 shares of 6.50% Series B convertible preferred stock of CPI.
Each share of the 6.5% $100 par value Series B convertible preferred
stock is convertible into 2.586 shares of SPG common stock. Immediately
prior to the CPI Merger, there were 25,496,476 shares of CPI common
stock outstanding. The aggregate value associated with the completion
of the CPI Merger is approximately $5.9 billion including transaction
costs and liabilities assumed. The purchase price includes 209,249
shares of 6.5% $1,000 par value of Series A convertible preferred stock
previously issued by CPI which remained outstanding following the CPI
Merger. Each share of Series A convertible preferred stock is
convertible into 37.995 shares of SPG common stock.
To finance the cash portion of the CPI Merger consideration, $1.4
billion was borrowed under a new senior unsecured medium term bridge
loan (the "CPI Merger Facility"), which bears interest at a base rate of
LIBOR plus 65 basis points and matures in three mandatory amortization
payments (on June 22, 1999, March 24, 2000 and September 24, 2000). An
additional $236,100 was also borrowed under the Operating Partnership's
existing $1.25 billion credit facility. In connection with the CPI
Merger, CPI was renamed `Simon Property Group, Inc.' CPI's paired share
affiliate, Corporate Realty Consultants, Inc., was renamed `SPG Realty
Consultants, Inc.' ("SRC"). In addition SDG and SDG, LP were renamed
`SPG Properties, Inc.', and `Simon Property Group, L.P.', respectively.
Upon completion of the CPI Merger, SPG transferred substantially
all of the CPI assets acquired, which consisted primarily of 23 regional
malls, one community center, two office buildings and one regional mall
under construction (other than one regional mall, Ocean County Mall, and
certain net leased properties valued at approximately $153.1 million)
net of liabilities assumed (SPG remains a co-obligor with respect to the
CPI Merger Facility) of approximately $2.3 billion to the Operating
Partnership or one or more subsidiaries of the Operating Partnership in
exchange for 47,790,550 limited partnership interests and 5,053,580
preferred partnership interests in the Operating Partnership. The
preferred partnership interests carry the same rights and equal the
number of preferred shares issued and outstanding as a direct result of
the CPI Merger. Likewise, the assets of SRC were transferred to the SRC
Operating Partnership in exchange for partnership interests.
As a result of the CPI Merger and related transactions, the common
stockholders of SPG own a share of common stock of SPG and a beneficial
interest in SRC. The beneficial interest in SRC are stapled to a share
of SPG. Accordingly, a share of SPG cannot be transferred without a
corresponding transfer of the beneficial interest in SRC. SPG and SRC
operate as a paired-share REIT structure for income tax purposes.
SPG and SRC (together, the "Company") own directly and indirectly a
managing general partnership interest of 71.6% in the operating
partnerships as of September 30, 1998. As of September 30, 1998, the
Company owned or held a consolidated interest in 241 income-producing
properties, which consisted of 153 regional malls, 76 community shopping
centers, three specialty retail centers, six office and mixed-use
properties and three value-oriented regional malls in 35 states.
SPG Properties held a noncontrolling 50.4% general partnership
interest in the Operating Partnership as of September 30, 1998. SPG
Properties' ownership interest is included in the percentage interest
held by the Company described above.
The Company accounted for the merger between SDG and the CPI merger
subsidiary as a reverse purchase in accordance with Accounting
Principles Board Opinion No. 16. Although paired shares of the former
CPI and CRC were issued to SDG common stock holders and SDG became a
substantially wholly owned subsidiary of CPI following the CPI Merger,
CPI is considered the business acquired for accounting purposes. SDG is
the acquiring company because the SDG common stockholders hold a
majority of the common stock of the Company post-merger. The value of
the consideration paid by SDG has been allocated on a preliminary basis
to the estimated fair value of the CPI assets acquired and liabilities
assumed which resulted in goodwill of $62,227. Goodwill will be
amortized over the estimated life of the properties of 35 years. The
allocation of the purchase will be finalized when the Operating
Partnership completes its evaluation of the assets acquired and
liabilities assumed and finalizes its operating plan.
The Operating Partnership contributed cash to CRC and the SRC
Operating Partnership on behalf of the SDG common stockholders and the
limited partners of SDG, LP to obtain the beneficial interests in CRC,
which were paired with the shares of common stock issued by the Company,
and to obtain units of ownership interest ("Units") in the SRC Operating
Partnership so that the limited partners of the Operating Partnership
would hold the same proportionate interest in the SRC Operating
Partnership that they hold in the Operating Partnership. The cash
contributed on behalf of its partners was accounted for as a
distribution by the Operating Partnership. The cash contributed to CRC
and the SRC Operating Partnership in exchange for an ownership interest
therein have been appropriately accounted for as capital infusion or
equity transactions. The assets and liabilities of CRC have been
reflected at historical cost. Adjusting said assets and liabilities to
fair value would only have been appropriate if the SDG stockholders'
beneficial interests in CRC exceeded 80%.
As a result of the CPI Merger, SPG Properties became a
noncontrolling general partner in the Operating Partnership and,
accordingly, as of the merger date, began accounting for its
noncontrolling interest in the Operating Partnership using the equity
method. Prior to the CPI Merger, SDG, now SPG Properties, accounted for
its then controlling interest in the Operating Partnership using the
consolidated method of accounting.
In addition to the CPI Merger Dividends and the Merger, the
following transactions (the "Other Property Transactions") have been
reflected in the accompanying unaudited pro forma Statements of
Operations using the purchase method of accounting. Investments in
non-controlled joint ventures are reflected using the equity method.
Controlled properties have been consolidated.
* On September 29, 1997, SDG completed its cash tender offer for
all of the outstanding shares of beneficial interests of The Retail
Property Trust ("RPT"). In connection therewith, RPT became a
subsidiary of the Operating Partnership. RPT owned 98.8% of
Shopping Center Associates ("SCA"), which owned or had interests in
twelve regional malls and one community shopping center. Following
the completion of the tender offer, the SCA portfolio was
restructured. SDG exchanged its 50% interest in two SCA properties
with a third party for similar interests in two other SCA properties,
in which SDG had 50% interests, with the result that SCA now owns
interest in a total of eleven properties. Effective November 30, 1997,
SDG also acquired the remaining interest in another of the SCA
properties. In addition, SDG acquired the remaining 1.2% interest
in SCA. At the completion of these transactions, SDG held
a 100% interest in ten of the eleven properties, and a noncontrolling
50% ownership interest in the remaining property. The total cost for
the acquisition of RPT and related transactions was approximately
$1,300,000, which includes SDG common stock issued valued at
approximately $50,000, units of the Operating Partnership valued at
approximately $25,300, and the assumption of consolidated debt and
SDG's pro rata share of joint venture indebtedness of approximately
$475,300. The balance of the transaction costs was borrowed under the
Operating Partnership's credit facility.
* On December 29, 1997, the Operating Partnership completed the
acquisition of the Fashion Mall at Keystone at the Crossing, a
regional mall located in Indianapolis, Indiana, for $124,500. The
purchase price was financed by additional borrowings under the
Operating Partnership's credit facility of approximately $59,700 and
the assumption of approximately $64,800 in mortgage debt. The
mortgage debt bears interest at 7.85%.
* In January 1998, CPI acquired Phipps Plaza, a super
regional mall located in Atlanta, Georgia, for approximately
$198,800. The transaction was financed with cash of $158,800
and debt of $40,000.
* In January 1998, CPI sold one of its shopping centers
(Burnsville Mall) for $80,672 cash. The selling price exceeded
Burnsville Mall's historical net assets of $37,581 at
December 31, 1997, by $43,091. A portion ($40,000) of the
proceeds received in the Burnsville transaction was used to
repay the amount borrowed in connection with the acquisition
of Phipps Plaza.
* In January 1998, SDG acquired Cordova Mall, a regional
mall in Pensacola, Florida, for $94,000. This acquisition was
financed by issuing units of the Operating Partnership valued
at $55,523, the assumption of mortgage debt of $28,935 and
other liabilities of $6,842 and cash of $2,700. The mortgage
debt, which bore interest at 12.125%, has been refinanced
through the Operating Partnership's credit facility.
* In February 1998, SDG, through a joint venture with
another REIT, acquired an interest in a portfolio of twelve
regional malls comprising approximately 10.7 million square
feet of GLA. SDG's non-controlling 50% share of the total
purchase price of $487,250 was financed with a $242,000
unsecured loan which bears interest at 6.4% per annum, accrued
payables of $2,750 and the assumption of $242,500 of mortgage
debt. The weighted average interest rate on the mortgage debt
assumed was 6.94%.
* In July 1998, CPI sold the General Motors Building for $800,000.
The net proceeds of $798,000 were used to pay off the building's
mortgage balance ($10,706) with the remainder available to partially
finance a portion of the CPI Merger Dividends. CPI paid a commission
to SDG totaling $2.5 million for services rendered by SDG in
connection with the sale of the General Motors Building. This
commission has not been reflected in the accompanying pro forma
financial information.
The accompanying pro forma consolidated condensed Statements of
Operations are presented as if the CPI Merger Dividends, the CPI Merger
and related transactions and the Other Property Transactions previously
described had occurred on January 1, 1997.
These pro forma financial statements should be read in conjunction
with the historical financial statements and notes thereto of SDG, LP.
In the opinion of management, all adjustments necessary to reflect the
effects of the CPI Merger and related transactions and the Other
Property Transactions previously described have been made. Certain
adjustments have been estimated based on information currently
available. Final adjustments are not expected to materially impact the
pro forma results reported.
The pro forma financial statements are not necessarily indicative
of the actual results of operations for the period ended September 30,
1998, or December 31, 1997, or what the actual results of operations
would have been assuming the Merger and the Other Property Transactions
had been completed as of January 1, 1997, nor are they indicative of the
results of operations for future periods.
2. Pro forma Adjustments to Unaudited Pro Forma Consolidated
Condensed Statements of Operations
In connection with the CPI Merger, CPI incurred $83,019
of merger-related expenses which have been excluded from the Pro Forma
Consolidated Condensed Statements of Operations. Further, the gain of
$198,891 related to the sale of the General
Motors Building has been excluded from the unaudited Pro Forma
Consolidated Condensed Statements of Operations.
For the
Nine For the
Months year
Ended Ended
September December
30, 1998 31, 1997
(A) The historical results of SPG, LP include
the historical results of SDG, LP and the post-
merger results of CPI for the period from
September 25, 1998 to September 30, 1998.
(B) Reflects the historical operating results
of CPI assets not transferred to the
Operating Partnership, primarily Ocean County
Mall.
(C) Adjustment to reflect the reversal of the
historical operating results of the General
Motors Building which was sold in July 1998.
(D) To recognize revenue from straight-lining
rent related to leases which will be reset in
connection with the CPI Merger $ 2,250 $ 3,000
(E) To reflect a reduction in interest income
due to forgiveness of Notes Receivable from CPI
employees ($13,200 multiplied by 6%) $ (600) $ (800)
(F) To reflect the increase in depreciation and
amortization as a result of recording the
investment properties at acquisition value,
allocating 20% of the premium to land, versus
historical cost, allocating $62,227 to goodwill
and utilizing an estimated useful life of
35 years for investment properties and goodwill $28,300 $34,100
(G) To reflect the following adjustments to
interest expense:
(1) To reflect the elimination of amortization
of deferred financing costs related to CPI
written off in connection with the CPI Merger $(651) $(868)
(2) To reflect the amortization of the costs
incurred of $9,500 to finance the cash
portion of the CPI Merger consideration 4,633 6,334
(3) To reflect the amortization of $19,165
premium required to adjust mortgages and other
notes payable to fair value (5,888) (7,850)
(4) To reflect interest expense for debt
borrowed to finance the CPI Merger and related
transactions:
CPI Merger Facility $1,400,000 at LIBOR
plus 80 basis points (includes an annual
facility fee of 15 basis points)--6.45% 66,055 90,300
Revolving credit facility $236,100 at LIBOR
plus 65 basis points--6.3% 10,881 14,874
76,936 105,174
$75,030 $102,790
(A 1/8% change in the LIBOR rate would
change the annual pro forma adjustment to interest
expense by $2,045.)
(H) To reflect annual dividends on 6.5%
Series B Preferred Units issued to SPG in
connection with the CPI Merger $23,098 $31,488
(I) Other Property Transactions represent the historical operating
results of the properties
for the appropriate period to reflect a full year of activities
in the unaudited pro forma
statements of operations. The pro forma adjustments give effect
when applicable to:
(1) An increase in depreciation expense as a result of recording
the properties at
estimated fair value
(2) An increase in interest expense primarily resulting from
debt incurred to finance
the transactions
(3) The elimination of expenses included in the historical
results incurred by the seller
directly related to the transaction
(4) The elimination of the historical results to reflect the sale
of Burnsville Mall
The Other Property Transactions include:
(1) The acquisition of Phipps Plaza in January 1998
(2) The sale of Burnsville Mall in January 1998
(3) The acquisition of Cordova Mall in January 1998
(4) The acquisition of a 50% interest in a portfolio of
twelve regional malls in February 1998
(5) The September and November 1997 transactions by SDG to
acquire ten portfolio properties and a 50% ownership interest
in an eleventh property of The Retail Property Trust,
("RPT")
(6) The December 1997 acquisition by SDG of the Fashion Mall at
Keystone at the Crossing
For the Nine For the year
Months Ended Ended
September December
30, 1998 31, 1997
(J) The pro forma weighted average
equivalent units is computed as follows:
Historical Weighted Average units outstanding 176,752,302 161,022,887
Pro forma adjustments:
Units issued related to the acquisition of
Cordova Mall 138,045 1,713,016
Units issued related to RPT transaction -- 2,163,945
Units issued related to the CPI Merger 46,740,208 47,790,550
Pro forma weighted average equivalent units 223,630,555 212,690,398
The diluted pro forma weighted average
equivalent units for the nine month period
ended September 30, 1998 and for the year
ended December 31, 1997 were 223,999,001
and 213,074,462, respectively. Each series
of preferred units issued and outstanding
during the periods either were not
convertible or their conversion would not
have had a dilutive effect on earnings per
unit. The increase in pro forma weighted
average equivalent units under the diluted
method is due entirely to the effect of
outstanding stock options.
(K) To eliminate expenses incurred by CPI during
the period related to the CPI Merger and related
transactions including severance, legal,
accounting and investment banking fees and the
write off of notes receivable from CPI employees
related to the CPI stock purchase plan $(83,019) N/A
(L) The pro forma adjustment required to reflect SPG Properties'
equity interest in the Operating Partnership as a result of the CPI
Merger and Other Property Transactions:
For the nine months ended
September 30, 1998:
Managing
General General Limited
Total Partner Partner Partners
Net income of the Operating
Partnership $171,006
Preferred unit requirement 55,901 33,899 22,002
-------- -------- --------
Pro forma net income
available to unitholders 115,105
========
Weighted average ownership
interest:
Managing general partner 21.37% 24,598
General partner 49.99% 57,541
Limited partners 28.64% 32,966
-------- ------- -------
Allocation of pro forma net
income available to
unitholders 115,105 24,598 57,541 32,966
========= --------- ========
SPG Properties pro forma
equity interest in the
Operating Partnership 79,543
Less: Historical net income
available to unitholders 97,037
--------
Pro forma adjustment $(17,494)
For the year ended December 31,
1997:
Managing
General General Limited
Total Partner Partner Partners
Net income of the Operating
Partnership $294,865
Preferred unit requirement 74,448 45,200 29,248
-------- ------- --------
Pro forma net income
available to unitholders 220,417
========
Weighted average ownership
interest:
Managing general partner 22.47% 49,528
General partner 47.65% 105,028
Limited partners 29.88% 65,861
-------- ------- -------
Allocation of pro forma net
income available to
unitholders 220,417 49,528 105,028 65,861
======== ------- ========
SPG Properties pro forma
equity interest in the
Operating Partnership 134,276
Less: Historical net income
available to unitholders 137,179
--------
Pro forma adjustment $(2,903)
