UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(AMENDMENT NO.1)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission file number 1-12618
SPG PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 34-1901999
(State or other
jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
115 West Washington Street
Indianapolis, Indiana 46204
(Address of principal
executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 636-1600
SIMON DeBARTOLO GROUP, INC.
(Former name of registrant)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [x] NO [ ]
<Page 01>
SPG Properties, Inc. hereby amends its Quarterly Report on Form 10-Q for
the period ended September 30, 1998, to correct disclosures in the notes to the
unaudited consolidated condensed financial statements to reflect an adjustment
required with regard to the allocation of the purchase price in connection with
the CPI Merger (see Note 3).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPG PROPERTIES, INC.
/s/ James M. Barkley
---------------------
James M. Barkley,
Secretary/General Counsel
Date: March 29, 1999
<Page 02>
SPG PROPERTIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited and dollars in thousands, except per share amounts)
September 30, December 31,
1998 1997
ASSETS:
Investment in the Operating Partnership $2,071,724 $--
Investment properties, at cost - 6,867,354
-
Less - accumulated depreciation - 461,792
-
----------- -----------
- 6,405,562
-
Cash and cash equivalents - 109,699
-
Restricted cash - 8,553
-
Tenant receivables and accrued revenue, net - 188,359
-
Notes and advances receivable from Management
Company and affiliates -- 93,809
Investment in partnerships and joint ventures,
at equity -- 612,140
Investment in Management Company and
affiliates -- 3,192
Other investment - 53,785
-
Deferred costs and other assets - 164,413
-
Minority interest - 23,155
-
------------ ------------
Total assets $ 2,071,724 $ 7,662,667
LIABILITIES:
Mortgages and other indebtedness $ - $ 5,077,990
-
Accounts payable and accrued expenses - 245,121
-
Cash distributions and losses in partnerships
and joint ventures, at equity -- 20,563
Other liabilities - 67,694
-
----------- -----------
Total liabilities - 5,411,368
-
COMMITMENTS AND CONTINGENCIES (Note 11)
LIMITED PARTNERS' INTEREST IN THE
OPERATING PARTNERSHIP -- 694,437
SHAREHOLDERS' EQUITY:
Series B and C cumulative redeemable preferred
stock, 12,200,000 shares authorized,
11,000,000 issued and outstanding,
respectively 339,262 339,061
Common stock, $.0001 par value, 400,000,000
shares authorized,
and 110,495,527 and 106,439,001 issued and
outstanding, respectively 11 10
Class B common stock, $.0001 par value,
12,000,000 shares authorized, 3,200,000
issued and outstanding 1 1
Class C common stock, $.0001 par value, 4,000
shares authorized, issued and
outstanding - --
-
Capital in excess of par value 2,176,242 1,491,908
Accumulated deficit (263,308)
(420,894)
Unrealized gain on long-term investment 2,420
(887)
Unamortized restricted stock award (13,230)
(22,011)
------------ ------------
Total shareholders' equity 2,071,724 1,556,862
Total liabilities, limited partners' interest
and shareholders' equity $2,071,724 $7,662,667
The accompanying notes are an integral part of these statements.
<Page 03>
SPG PROPERTIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited and dollars in thousands)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
REVENUE:
Minimum rent $194,360 $152,320 $565,294 $449,693
Overage rent 2,283 8,650 22,766 26,214
Tenant reimbursements 101,834 81,413 283,805 231,444
Other income 23,510 17,400 60,754 39,901
------- ------- ------ -------
Total revenue 321,987 259,783 932,619 747,252
EXPENSES:
Property operating 55,564 46,203 155,822 130,228
Depreciation and amortization 61,092 48,185 177,710 135,668
Real estate taxes 31,382 23,816 90,341 73,166
Repairs and maintenance 12,403 11,107 35,953 28,653
Advertising and promotion 11,270 8,396 27,992 20,296
Provision for (recovery of)
credit losses (1,856) (135) 1,599 2,690
Other 4,806 4,639 16,983 12,818
------- -------- ------- -------
Total operating expenses 174,661 142,211 506,400 403,519
OPERATING INCOME 147,326 117,572 426,219 343,733
INTEREST EXPENSE 97,328 68,940 281,748 203,934
------- -------- ------- -------
INCOME BEFORE MINORITY INTEREST 49,998 48,632 144,471 139,799
MINORITY INTEREST (1,108) (1,423) (4,704) (3,648)
GAIN (LOSS) ON SALES OF ASSETS (64) -- (7,283) 20
------- ------- ------- -------
INCOME BEFORE UNCONSOLIDATED
ENTITIES 48,826 47,209 132,484 136,171
INCOME FROM UNCONSOLIDATED
ENTITIES 3,809 7,077 8,789 9,590
INCOME BEFORE EXTRAORDINARY
ITEMS 52,635 54,286 141,273 145,761
EXTRAORDINARY ITEMS (22) 27,215 7,002 2,501
-------- -------- ------- --------
INCOME OF THE OPERATING
PARTNERSHIP 52,613 81,501 148,275 148,262
LESS:
LIMITED PARTNERS' INTEREST IN
THE OPERATING PARTNERSHIP 15,795 27,758 45,374 48,522
MANAGING GENERAL PARTNERS'
DIRECT INTEREST
IN THE OPERATING PARTNERSHIP
NET INCOME 35,449 53,743 101,532 99,740
PREFERRED DIVIDENDS (7,334) (9,101) (22,002) (21,914)
------- -------- ------- ------
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $28,115 $44,642 $79,530 $77,826
The accompanying notes are an integral part of these statements.
<Page 04>
SPG PROPERTIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited and dollars in thousands)
For the Nine Months
Ended September 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $101,532 $99,740
Adjustments to reconcile net income to net cash
provided
by operating activities-
Depreciation and amortization 185,798 140,927
Extraordinary items (7,002) (2,501)
(Gain) loss on sales of assets, net 7,283 (20)
Limited Partners' Interest in the Operating
Partnership 45,374 48,522
Managing General Partners' Interest in the Operating
Partnership 1,369 --
Straight-line rent (5,892) (6,378)
Minority interest 4,704 3,648
Equity in income of unconsolidated entities (8,789) (9,590)
Changes in assets and liabilities-
Tenant receivables and accrued revenue (5,280) (1,341)
Deferred costs and other assets (10,516) (18,906)
Accounts payable, accrued expenses and other
liabilities 41,648 8,151
--------- --------
Net cash provided by operating activities 350,229 262,252
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (1,881,183) (736,600)
Capital expenditures (233,200) (219,672)
Change in restricted cash 6,868 (8,829)
Cash from acquisitions 17,213 --
Cash held by deconsolidated investee (78,971) --
Net proceeds from sales of assets 46,087 599
Investments in unconsolidated entities (28,726) (63,656)
Distributions from unconsolidated entities 164,914 22,199
Investments in and advances to Management Company (19,915) --
Other investing activity -- (55,400)
--------- ---------
Net cash used in investing activities (2,006,913) (1,061,359)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common and convertible
preferred stock, net 92,629 327,101
Minority interest distributions, net (10,991) (2,825)
Distributions to shareholders (206,179) (168,263)
Distributions to limited partners (104,139) (91,632)
Mortgage and other note proceeds, net of
transaction costs 3,305,199 1,595,202
Mortgage and other note principal payments (1,529,534) (852,906)
Other refinancing transaction -- (21,000)
--------- ---------
Net cash provided by financing activities 1,546,985 785,677
DECREASE IN CASH AND CASH EQUIVALENTS (109,699) (13,430)
CASH AND CASH EQUIVALENTS, beginning of period 109,699 64,309
--------- ----------
CASH AND CASH EQUIVALENTS, end of period $ -- $ 50,879
========= ==========
The accompanying notes are an integral part of these statements.
<Page 05>
SPG PROPERTIES, INC.
Notes to Unaudited Consolidated Condensed Financial Statements
(Dollars in thousands)
Note 1 - Organization
SPG Properties, Inc. ("SPG Properties"), formerly Simon DeBartolo
Group, Inc., is a wholly owned subsidiary of Simon Property Group, Inc.
("SPG"). SPG Properties and its substantially wholly owned subsidiary
SD Properties, Inc. as general partners hold a noncontrolling
partnership interest in Simon Property Group, L.P. ("SPG, LP" or the
"Operating Partnership") as of September 30, 1998. SPG is the managing
general partner. The Operating Partnership is engaged in the ownership,
operation, management, leasing, acquisition, expansion and development
of real estate properties, primarily regional malls and community
shopping centers. SPG and its paired-share affiliate, SPG Realty
Consultants, Inc., together "the Company," is a self-administered and self-
managed real estate investment trust ("REIT") under the Internal Revenue
Code of 1986, as amended. As of September 30, 1998, the Operating
Partnership owned or held an interest in 239 income-producing
properties, which consisted of 152 regional malls, 76 community shopping
centers, three specialty retail centers, five office and mixed-use
properties and three value-oriented super-regional malls in 35 states
(the "Properties"). The Operating Partnership also owned interests in
one regional mall, one specialty retail center and one value-oriented
super-regional mall under construction, an additional two community
centers in the final stages of pre-development and eight parcels of land
held for future development. In addition, the Operating Partnership
holds substantially all of the economic interest in M.S. Management
Associates, Inc. (the "Management Company" - See Note 7). The Operating
Partnership also holds substantially all of the economic interest in,
and the Management Company holds substantially all of the voting stock
of, DeBartolo Properties Management, Inc. ("DPMI"), which provides
architectural, design, construction and other services to substantially
all of the Properties, as well as certain other regional malls
and community shopping centers owned by third parties. The Company and its
subsidiaries owned 71.6% of the Operating Partnership at September 30, 1998,
which includes SPG Properties and subsidiary noncontrolling 50.4% partnership
interest in the Operating Partnership. Simon DeBartolo Group, Inc. and
subsidiary owned 63.9% of the Operating Partnership at December 31, 1997.
Note 2 - Basis of Presentation
The accompanying consolidated condensed financial statements are
unaudited; however, they have been prepared in accordance with generally
accepted accounting principles for interim financial information and in
conjunction with the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the
disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting solely of normal recurring matters) necessary
for a fair presentation of the consolidated condensed financial
statements for these interim periods have been included. The results for
the interim period ended September 30, 1998 are not necessarily
indicative of the results to be obtained for the full fiscal year. These
unaudited consolidated condensed financial statements should be read in
conjunction with the December 31, 1997 audited financial statements and
notes thereto included in the Simon DeBartolo Group, Inc. Annual Report,
as amended, on Form 10-K/A.
Prior to the change in control described below, the accompanying
consolidated condensed financial statements of SPG Properties
include all accounts of all entities owned or controlled by
the Operating Partnership. All significant intercompany amounts have
been eliminated. In connection with the CPI Merger (see below), SPG
became the managing general partner of the Operating Partnership. Since
SPG Properties no longer controls the Operating Partnership, the
accompanying unaudited interim balance sheet as of September 30, 1998
reflects SPG Properties' interest in the Operating Partnership utilizing
the equity method of accounting. Because of the proximity of the change
in control (as of the close of business on September 24, 1998) to the
period ended September 30, 1998, for purposes of the statements of
operations and cash flows, the equity method will commence effective
October 1, 1998. The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles, which requires management to make estimates and assumptions
that affect the reported amounts of the SPG Properties assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and revenues and expenses during
the reported periods. Actual results could differ from these estimates.
<Page 06>
Net operating results of the Operating Partnership are allocated to
its partners based first on their preferred unit preference and then on
their remaining ownership interest in the Operating Partnership during
the period. SPG Properties' remaining weighted average ownership interest
in the Operating Partnership for the nine-month periods ended September 30,
1998 and 1997 was 63.4% and 61.6%, respectively. SPG Properties'
remaining weighted average ownership interest in the Operating
Partnership for the three-month periods ended September 30, 1998 and
1997 was 63.1% and 61.8%, respectively.
Note 3 - CPI Merger
For financial reporting purposes, as of the close of business on
September 24, 1998, pursuant to the Agreement and Plan of Merger dated
February 18, 1998, SPG Merger Sub, Inc., a substantially wholly-owned
subsidiary of Corporate Property Investors ("CPI"), merged with and into
Simon DeBartolo Group, Inc. ("SDG") with SDG continuing as the surviving
company (the "CPI Merger"). Pursuant to the terms of the CPI Merger,
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. Additionally, beneficial interests in Corporate Realty
Consultants, Inc. ("CRC"), CPI's paired share affiliate, were acquired
for $22,000 in order to pair the common stock of CPI with 1/100th of a
share of common stock of CRC.
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.
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.
To finance the cash portion of the CPI Merger consideration, $1.4
billion was borrowed under a new unsecured medium term bridge loan,
which bears interest at a base rate of LIBOR plus 65 basis points and
matures in mandatory amortization payments (on June 22, 1999, March 24,
2000 and September 24, 2000). An additional $237,000 was also borrowed
under the Company's existing $1.25 billion credit facility. In
connection with the CPI Merger, CPI was renamed `Simon Property Group,
Inc.'. Its paired share affiliate, Corporate Realty Consultants, Inc.,
was renamed `SPG Realty Consultants, Inc.'("SRC"). In addition SDG and
Simon DeBartolo Group, LP were renamed `SPG Properties, Inc.', and
`Simon Property Group, L.P.', respectively.
Upon completion of the CPI Merger, the Company 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
$153,100) and liabilities assumed (except that the Company remains a co-
obligor with respect to the 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 SPG Realty Consultants, L.P. (the "SRC Operating
Partnership") in exchange for partnership interests.
As a result of the CPI Merger, the Company, including its subsidiaries,
owns a 71.6% interest in the Operating Partnership as of September 30, 1998.
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 $58,134. 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.
<Page 07>
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%.
Note 4 - Reclassifications
Certain reclassifications of prior period amounts have been made in
the financial statements to conform to the 1998 presentation. These
reclassifications have no impact on the net operating results previously
reported.
Note 5 - Cash Flow Information
Cash paid for interest, net of amounts capitalized, during the nine
months ended September 30, 1998 was $256,611, as compared to $199,285
for the same period in 1997. Unpaid Operating Partnership distributions
as of September 30, 1998 totaled $84,496 and included $83,978 to
holders of partnership units in the Operating Partnership("Units") and
$518 to the holders of the Series B Convertible Preferred Units issued in
connection with the CPI Merger. All accrued distributions were paid as of
December 31, 1997. See Notes 3, 6, 7 and 9 for information about non-cash
transactions during the nine months ended September 30, 1998.
Note 6 - Other Acquisitions, Dispositions and Developments
On January 26, 1998, the Operating Partnership acquired Cordova
Mall in Pensacola, Florida for approximately $87,300, which included the
assumption of a $28,935 mortgage, which was later retired, and the
issuance of 1,713,016 Units, valued at approximately $55,500. This
874,000 square-foot regional mall is wholly-owned by the Operating
Partnership.
In March of 1998, the Operating Partnership opened the
approximately $13,300 Muncie Plaza in Muncie, Indiana. The Operating
Partnership owns 100% of this 196,000 square-foot community center. In
addition, phase I of the approximately $34,000 Lakeline Plaza opened in
April 1998 in Austin, Texas. Phase II of this 360,000 square-foot
community center is scheduled to open in 1999. Each of these new
community centers is adjacent to an existing regional mall in the
Operating Partnership's portfolio.
On April 15, 1998, the Operating Partnership purchased the
remaining 7.5% ownership interest in Buffalo Grove Towne Center for
$255. This 134,000 square-foot community center is in Buffalo Grove,
Illinois.
Effective May 5, 1998, in a series of transactions, the Operating
Partnership acquired the remaining 50.1% interest in Rolling Oaks Mall
for 519,889 shares of SPG Properties' common stock, valued at approximately
$17,176. The Operating Partnership issued 519,889 Units to SPG Properties in
exchange for the shares of common stock.
Effective June 30, 1998, the Operating Partnership sold Southtown
Mall for $3,250 and recorded a $7,219 loss on the transaction.
On September 29, 1997, the Operating Partnership completed its cash
tender offer for all of the outstanding shares of beneficial interests
of The Retail Property Trust ("RPT"), a private REIT. RPT owned 98.8% of
Shopping Center Associates ("SCA"), which owned or had interests in
twelve regional malls and one community center, comprising approximately
twelve million square feet of GLA in eight states (the "SCA
Properties"). Following the completion of the tender offer, the SCA
portfolio was restructured. The Operating Partnership exchanged its 50%
interests in two SCA Properties to a third party for similar interests
in two other SCA Properties, in which it had 50% interests, with the
result that SCA then owned interests in a total of eleven Properties.
Effective November 30, 1997, the Operating Partnership also acquired the
remaining 50% ownership interest in another of the SCA Properties. In
addition, an affiliate of the Operating Partnership acquired the
remaining 1.2% interest in SCA. During 1998, the Operating Partnership
sold the community center and The Promenade for $9,550 and $33,500,
respectively. These Property sales were accounted for as an adjustment
to the allocation of the purchase price. At the completion of these
transactions, the Operating Partnership owns 100% of eight of the nine
SCA Properties, and a noncontrolling 50% ownership interest in the
remaining Property.
<Page 08>
Pro Forma
The following unaudited pro forma summary financial information
excludes any extraordinary items and includes the consolidated results
of operations of the Operating Partnership as if the CPI Merger and the
RPT acquisition had occurred as of January 1, 1997, and were carried
forward through September 30, 1998. Preparation of the pro forma summary
information was based upon assumptions deemed appropriate by
management. The pro forma summary information is not necessarily
indicative of the results which actually would have occurred if the CPI
Merger and the RPT acquisition had been consummated at January 1, 1997,
nor does it purport to represent the results of operations for future
periods. Pro forma net income includes net gains on sales of assets of
$37,973 and $114,799 during the nine months ended September 30, 1998 and
1997, respectively.
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
Revenue $ 1,227,234 $1,140,084
============ ============
Income of the Operating Partnership $ 120,731 $ 173,305
Note 7 - Investment in Unconsolidated Entities
Partnerships and Joint Ventures
On February 27, 1998, the Operating Partnership, in a joint venture
partnership with The Macerich Company ("Macerich"), acquired a portfolio
of twelve regional malls and two community centers (the "IBM
Properties") comprising approximately 10.7 million square feet of GLA at
a purchase price of $974,500, including the assumption of $485,000 of
indebtedness. The Operating Partnership and Macerich, as noncontrolling
50/50 partners in the joint venture, were each responsible for one half
of the purchase price, including indebtedness assumed and each assumed
leasing and management responsibilities for six of the regional malls
and one community center. The Operating Partnership funded its share of
the cash portion of the purchase price using borrowings from a new
$300,000 unsecured revolving credit facility. (See Note 8)
In March 1998, the Operating Partnership transferred its 50%
ownership interest in The Source, an approximately 730,000 square-foot
regional mall, to a newly formed limited partnership in which it has a
50% ownership interest, with the result that the Operating Partnership
now owns an indirect noncontrolling 25% ownership interest in The
Source. In connection with this transaction, the Operating Partnership's
partner in the newly formed limited partnership is entitled to a
preferred return of 8% on its initial capital contribution, a portion of
which was distributed to the Operating Partnership. The Operating
Partnership applied the distribution against its investment in The
Source.
On June 4, 1998, the Operating Partnership, Harvard Private Capital
Group ("Harvard") and Argo II, an investment fund established by J.P.
Morgan and The O'Connor Group, announced that they have collectively
committed to acquire a 44 percent ownership position in Groupe BEG, S.A.
("BEG"). BEG is a fully integrated retail real estate developer, lessor
and manager headquartered in Paris, France. The Operating Partnership
and its affiliated Management Company have contributed $15,000 of equity
capital for a noncontrolling 22% ownership interest and are committed to
an additional investment of $37,500 over the next 9 to 15 months,
subject to certain financial and other conditions. The agreement with
BEG is structured to allow the Operating Partnership, Argo II and
Harvard to collectively acquire a controlling interest in BEG over time.
In August 1998, the Operating Partnership sold one-half of its 75%
ownership in The Shops at Sunset Place construction project. The
Operating Partnership now holds a 37.5% noncontrolling interest in this
project, which is scheduled to open in December 1998. The Operating
Partnership applied the distribution against its investment in the
project.
Through September 30, 1998, in a series of transactions, the
Operating Partnership has acquired additional 30% ownership interests in
Lakeline Mall and Lakeline Plaza for 319,390 Units valued at
approximately $10,500 and $2,100 in cash. These transactions increased
the Operating Partnership's ownership interest in these Properties to a
noncontrolling 80%. On October 28, 1998, the Operating Partnership
acquired an additional 5% noncontrolling ownership interest in Lakeline
Mall and Lakeline Plaza for $2,100.
Summary unaudited financial information of the Operating
Partnership and the Operating Partnership's investment in partnerships
and joint ventures accounted for using the equity method of accounting
and a summary of the Operating Partnership's investment in and share of
income from such partnerships and joint ventures follows:
<Page 09>
INVESTMENT IN THE OPERATING PARTNERSHIP
September 30,
BALANCE SHEETS 1998
Assets:
Investment properties at cost, net $ 10,859,016
Goodwill 58,134
Cash and cash equivalents 78,971
Tenant receivables 215,468
Due from SRC 4,093
Investment in and advances to Management
Company and affiliates 133,290
Investments in partnerships and joint
ventures, at equity 1,203,118
Other assets 308,125
-------------
Total assets $ 12,860,215
Liabilities and Shareholders' Equity:
Mortgages and other indebtedness $ 7,744,926
Accounts payable, accrued expenses and
other liabilities 571,989
Cash distributions and losses in
partnerships and joint ventures, at equity 25,836
--------------
Total liabilities 8,342,751
Shareholders' equity 4,517,464
-------------
Total liabilities and shareholders' equity $ 12,860,215
SPG Properties' Share of:
Total assets $ 6,285,939
Shareholders' equity $ 2,071,724
OPERATING PARTNERSHIP'S INVESTMENT IN PARTNERSHIPS AND JOINT
VENTURES
September 30, December 31,
BALANCE SHEETS 1998 1997
Assets:
Investment properties at cost, net $ 4,131,774 $ 2,880,094
Cash and cash equivalents 144,919 101,582
Tenant receivables 141,360 87,008
Other assets 129,983 71,548
------------ ------------
Total assets $ 4,548,036 $ 3,140,232
Liabilities and Partners' Equity:
Mortgages and other indebtedness $ 2,819,094 $ 1,888,512
Accounts payable, accrued expenses and
other liabilities 227,631 212,543
------------ -----------
Total liabilities 3,046,725 2,101,055
Partners' equity 1,501,311 1,039,177
Total liabilities and partners' equity $ 4,548,036 $ 3,140,232
The Operating Partnership's Share of:
Total assets $ 1,803,056 $ 1,082,232
============= ===========
Partners' equity $ 523,518 $ 297,866
Add: Excess Investment (See below) 653,764 293,711
------------ ------------
The Operating Partnership's Net
Investment in Joint Ventures $ 1,177,282 $ 591,577
<Page 10>
For the three months For the nine months
ended ended
September 30, September 30,
STATEMENTS OF OPERATIONS 1998 1997 1998 1997
Revenue:
Minimum rent $108,924 $ 62,613 $ 306,486 $ 168,817
Overage rent 426 2,319 8,236 5,633
Tenant reimbursements 51,775 27,913 138,433 77,491
Other income 5,985 5,384 17,205 12,747
------- --------- -------- --------
Total revenue 167,110 98,229 470,360 264,688
Operating Expenses:
Operating expenses and other 59,044 33,660 166,547 94,575
Depreciation and amortization 33,324 18,518 94,949 53,579
Total operating expenses 92,368 52,178 261,496 148,154
Operating Income 74,742 46,051 208,864 116,534
Interest Expense 45,569 21,577 130,747 63,155
Extraordinary Losses 2,060 -- 2,102 1,182
------- -------- -------- --------
Net Income 27,113 24,474 76,015 52,197
Third Party Investors' Share of
Net Income 21,820 17,970 55,849 38,347
------- --------- -------- --------
The Operating Partnership's
Share of Net Income $ 5,293 $ 6,504 $ 20,166 $ 13,850
Amortization of Excess
Investment (See below) (3,636) (2,823) (9,038) (8,792)
======= ========= ======== ========
Income from Unconsolidated
Entities $ 1,657 $ 3,681 $ 11,128 $ 5,058
As of September 30, 1998 and December 31, 1997, the unamortized
excess of the Operating Partnership's investment over its share of the
equity in the underlying net assets of the partnerships and joint
ventures ("Excess Investment") was $653,764 and $293,711, respectively.
This Excess Investment, which resulted primarily from the CPI Merger and
the August 9, 1996 acquisition, through merger (the "DRC Merger"), of
the national shopping center business of DeBartolo Realty Corporation
("DRC"), is being amortized generally over the life of the related
Properties. Amortization included in income from unconsolidated entities
for the three-month periods ended September 30, 1998 and September 30,
1997 was $3,636 and $2,823, respectively. Amortization included in
income from unconsolidated entities for the nine-month periods ended
September 30, 1998 and September 30, 1997 was $9,038 and $8,792,
respectively.
The net income or net loss for each partnership and joint venture
is allocated in accordance with the provisions of the applicable
partnership or joint venture agreement. The allocation provisions in
these agreements are not always consistent with the ownership interest
held by each general or limited partner or joint venturer, primarily due
to partner preferences.
The Management Company
The Management Company, including its consolidated subsidiaries,
provides management, leasing, development, accounting, legal, marketing
and management information systems services to one wholly-owned
Property, 41 non-wholly owned Properties, Melvin Simon & Associates,
Inc., and certain other nonowned properties. Certain subsidiaries of the
Management Company provide architectural, design, construction,
insurance and other services primarily to certain of the Properties. The
Management Company also invests in other businesses to provide other
synergistic services to the Properties. The Operating Partnership's
share of consolidated net income (loss) of the Management Company, after
intercompany profit eliminations, was $2,151 and $3,396 for the three-
month periods ended September 30, 1998 and 1997, respectively, and was
($2,339) and $4,532 for the nine-month periods ended September 30, 1998
and 1997, respectively.
Note 8 - Debt
On February 28, 1998, the Operating Partnership obtained an
unsecured revolving credit facility in the amount of $300,000, to
finance the acquisition of the IBM Properties (See Note 7). The new
facility bore interest at LIBOR plus 0.65% and had a maturity of August
27, 1998. The Operating Partnership drew $242,000 on this facility
during 1998 and subsequently retired and canceled the facility using
borrowing's from the Credit Facility (See below).
<Page 11>
On June 18, 1998, the Operating Partnership refinanced a $33,878
mortgage on a regional mall Property and recorded a $7,024 extraordinary
gain on the transaction, including debt forgiveness of $5,162 and the
write-off of a premium of $1,862. The new mortgage, which totals
$35,000, bears interest of 7.33% and matures on June 18, 2008. The
retired mortgage bore interest at 9.25% with a maturity of January 1,
2011.
On June 22, 1998, the Operating Partnership completed the sale of
$1,075,000 of senior unsecured debt securities. The issuance included
three tranches of senior unsecured notes as follows (1) $375,000 bearing
interest at 6.625% and maturing on June 15, 2003 (2) $300,000 bearing
interest at 6.75% and maturing on June 15, 2005 and (3) $200,000 bearing
interest at 7.375% and maturing on June 15, 2018. This offering also
included a fourth tranche of $200,000 of 7.00% Mandatory Par Put
Remarketed Securities ("MOPPRS") due June 15, 2028, which are subject to
redemption on June 16, 2008. The premium received relating to the MOPPRS
of approximately $5,302 is being amortized over the life of the debt
securities. The net proceeds of approximately $1,062,000 were combined
with approximately $40,000 of working capital and used to retire and
terminate the $300,000 unsecured revolving credit facility (See Above)
and to reduce the outstanding balance of the Operating Partnership's
$1,250,000 unsecured revolving credit facility (the "Credit Facility").
The Credit Facility has an initial maturity of September 1999 with an
optional one-year extension. The debt retired had a weighted average
interest rate of 6.29%.
In conjunction with the CPI Merger, the Operating Partnership and
SPG, as co-borrowers, closed a $1,400,000 medium term unsecured bridge
loan (the "Merger Facility"). The Merger Facility bears interest at a
base rate of LIBOR plus 65 basis points and will mature at the following
intervals (i) $450,000 on the nine-month anniversary of the closing (ii)
$450,000 on the eighteen-month anniversary of the closing and (iii)
$500,000 on the two-year anniversary of the closing. The Merger Facility
is subject to covenants and conditions substantially identical to those
of the Credit Facility. The Operating Partnership drew the entire
$1,400,000 available on the Merger Facility along with $237,000 on the
Credit Facility to pay for the cash portion of the dividend declared in
conjunction with the CPI Merger, as well as certain other costs
associated with the CPI Merger. Financing costs of $9,456, which were
incurred to obtain the Merger Facility, are being amortized over the
Merger Facility's average life of 18-months.
In connection with the CPI Merger, RPT, a REIT, and the 99.999%
owned subsidiary of the Operating Partnership, took title for
substantially all of the CPI assets and assumed $825,000 of unsecured
notes (the "CPI Notes"), as described in Note 3. As a result, the CPI
Notes are structurally senior in right of payment to holders of other
unsecured notes of the Operating Partnership to the extent of the assets
and related cash flow of RPT only, with over 99.999% of the excess cash
flow plus any capital event transactions available for the other
Operating Partnership unsecured notes. The CPI Notes pay interest
semiannually, and bear interest rates ranging from 7.05% to 9.00%
(weighted average of 8.03%), and have various due dates through 2016
(average maturity of 9.6 years). The CPI Notes contain leverage ratios,
annual real property appraisal requirements, debt service coverage
ratios and minimum Net Worth ratios. Additionally, consolidated
mortgages totaling $2,093, and a pro-rata share of $194,952 of
nonconsolidated joint venture indebtedness were assumed in the CPI
Merger, and as a result of acquiring the remaining interest in Palm
Beach Mall in connection with the CPI Merger, the Operating Partnership
began accounting for that Property using the consolidated method of
accounting, adding $50,700 to consolidated indebtedness. A net premium
of $19,165 was recorded in accordance with the purchase method of
accounting to adjust the CPI Notes and mortgage indebtedness assumed in
the CPI Merger to fair value, which is being amortized over the
remaining lives of the related indebtedness.
At September 30, 1998, the Operating Partnership had consolidated
debt of $7,744,926, of which $5,361,294 was fixed-rate debt and
$2,383,632 was variable-rate debt. The Operating Partnership's pro rata
share of indebtedness of the unconsolidated joint venture Properties as
of September 30, 1998 and December 31, 1997 was $1,307,974 and $770,776,
respectively. As of September 30, 1998 and December 31, 1997, the
Operating Partnership had interest-rate protection agreements related to
$1,224,493 and $415,254 of its pro rata share of indebtedness,
respectively. The agreements are generally in effect until the related
variable-rate debt matures. As a result of the various interest rate
protection agreements, consolidated interest savings were $122 and $285
for the three months ended September 30, 1998 and 1997, respectively,
and were $301 and $1,371 for the nine months ended September 30, 1998
and 1997, respectively.
<Page 12>
Note 9 - Shareholders' Equity
<TABLE>
The following table summarizes the change in the shareholders'
equity of SPG Properties since December 31, 1997.
Unrealized Capital in Unamortized Total
Preferred Common Gain on Excess of Accumulated Restricted Shareholders'
Stock Stock Investment Par Value Deficit Stock Award Equity
(1)
Balance at
<C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997 $ 339,061 $ 11 $ 2,420 $1,491,908 $ (263,308) $ (13,230) $ 1,556,862
Common stock issued
to the public
(2,957,335 shares) 1 91,398 91,399
Common stock issued
in connection with
acquisitions
(519,889 shares) 17,176 17,176
Amortization of
stock incentive 7,299 7,299
Other common stock
issued (579,302
shares) 18,332 (16,080) 2,252
Adjustment to
limited partners'
interest in the
Operating
Partnership 557,428 557,428
Distributions (259,118) (259,118)
Other 201 201
--------- ------ ---------- ---------- ----------- ---------- -------------
Subtotal 339,262 12 2,420 2,176,242 (522,426) (22,011) 1,973,499
Comprehensive
Income:
Net income 101,532 101,532
Unrealized loss on
investment (1) (3,307) (3,307)
--------- ------ ---------- ---------- ----------- ---------- -------------
Total Comprehensive
Income (3,307) 101,532 98,225
--------- ------ ---------- ---------- ----------- ---------- -------------
Balance at September
30, 1998 $ 339,262 $ 12 $ (887) $2,176,242 $ (420,894) $ (22,011) $ 2,071,724
========= ====== ========== ========== =========== ========== =============
</TABLE>
(1) Amounts consist of the Operating Partnership's pro rata share of
the unrealized gain resulting from the change in market value of
1,408,450 shares of common stock of Chelsea GCA Realty, Inc.
("Chelsea"), a publicly traded REIT, which the Operating Partnership
purchased on June 16, 1997. The investment in Chelsea is being
reflected in the accompanying consolidated condensed balance sheets of
the Operating Partnership in other assets.
<Page 13>
Stock Incentive Programs
In March 1995, an aggregate of 1,000,000 shares of restricted stock
was granted to 50 executives, subject to the performance standards,
vesting requirements and other terms of the Stock Incentive Program.
Prior to the DRC Merger, 2,108,000 shares of DRC common stock were
deemed available for grant to certain designated employees of DRC, also
subject to certain performance standards, vesting requirements and other
terms of DRC's stock incentive program (the "DRC Plan"). In April 1998,
492,478 shares were awarded to executives relating to 1997 performance,
and another 24,163 awarded in August 1998. Through September 30, 1998,
1,290,285 shares of common stock of the Company, net of forfeitures,
were deemed earned and awarded under the Stock Incentive Program and the
DRC Plan. Approximately $2,852 and $1,086 relating to these programs
were amortized in the three-month periods ended September 30, 1998 and
1997, respectively and approximately $7,299 and $4,110 relating to these
programs were amortized in the nine-month periods ended September 30,
1998 and 1997, respectively. The cost of restricted stock grants, based
upon the stock's fair market value at the time such stock is earned,
awarded and issued, is charged to shareholders' equity and subsequently
amortized against earnings of the Operating Partnership over the vesting
period.
On September 24, 1998, in conjunction with the CPI Merger, a new
stock incentive plan, `The Simon Property Group 1998 Stock Incentive
Plan' ("The 1998 Plan"), was approved by a vote of SPG's shareholders.
The 1998 Plan replaced the existing Stock Incentive Program, the DRC
Plan and the existing employee and director stock option plans. The 1998
Plan provides for the grant of equity-based awards during the ten-year
period following its adoption, in the form of options to purchase common
stock of the Company, stock appreciation rights, restricted stock awards
and performance unit awards. A total of 6,300,000 shares of common stock
of the Company have been approved for issuance under The 1998 Plan,
including approximately 2,230,875 shares reserved for the exercise of
options granted and award of restricted stock allocated under the
previously existing Stock Incentive Program and DRC Plan.
Common Stock Issuances
During 1998, SPG Properties issued 2,957,335 shares of its common
stock in private offerings generating combined net proceeds of approximately
$91,399. The net proceeds were contributed to the Operating Partnership
in exchange for a like number of Units. The Operating Partnership used
the net proceeds for general working capital purposes.
Preferred Units
As a result of the CPI Merger, the Company has issued and
outstanding 209,249 shares of 6.50% Series A Convertible Preferred
Stock. Each share of Series A Convertible Preferred Stock is convertible
into 37.995 shares of common stock of the Company, subject to adjustment
under certain circumstances including (i) a subdivision or combination
of shares of common stock of the Company, (ii) a declaration of a
distribution of additional shares of common stock of the Company,
issuances of rights or warrants by the Company and (iii) any
consolidation or merger, which the Company is a part of or a sale or
conveyance of all or substantially all of the assets of the Company to
another person or any statutory exchange of securities with another
person. The Series A Convertible Preferred Stock is not redeemable,
except as needed to maintain or bring the direct or indirect ownership
of the capital stock of the Company into conformity with REIT
requirements. The Operating Partnership has issued and outstanding a
like number of preferred units with terms identical to those of the
Company's Series A Preferred Stock, with the Company as the holder.
In addition, 4,844,331 shares of 6.50% Series B Convertible
Preferred Stock were issued in connection with the CPI Merger. Each
share of Series B Convertible Preferred Stock is convertible into 2.586
shares of common stock of the Company, subject to adjustment under
circumstances identical to those of the Series A Preferred Stock
described above. The Company may redeem the Series B Preferred Stock on
or after September 24, 2003 at a price beginning at 105% of the
liquidation preference plus accrued dividends and declining to 100% of
the liquidation preference plus accrued dividends any time on or after
September 24, 2008. The Operating Partnership has issued and outstanding
a like number of preferred units with terms identical to those of the
Company's Series B Preferred Stock, with the Company as the holder.
Note 10 - Related Party Transactions
In preparation for the CPI Merger, on July 31, 1998, CPI, with
assistance from the Operating Partnership, completed the sale of the
General Motors Building in New York, New York for approximately
$800,000. The Operating Partnership and certain third parties each
received a $2,500 brokerage fee from CPI in connection with the sale.
The amount due from SRC to the Operating Partnership of $4,093 at September
30, 1998 represents expenses paid by CPI in 1998, including legal, accounting,
investment advisory and other costs, on behalf of SRC in connection with the CPI
Merger.
<Page 14>
Note 11 - Commitments and Contingencies
Litigation
Richard E. Jacobs, et al. v. Simon DeBartolo Group, L.P. On
September 3, 1998, a complaint was filed in the Court of Common Pleas in
Cuyahoga County, Ohio, captioned Richard E. Jacobs, et al. v. Simon
DeBartolo Group, L.P. The plaintiffs are all principals or affiliates
of The Richard E. Jacobs Group, Inc. ("Jacobs"). The plaintiffs allege
in their complaint that Simon DeBartolo Group, L.P. (now Simon Property
Group, L.P. or the Operating Partnership) engaged in malicious
prosecution, abuse of process, defamation, libel, injurious
falsehood/unlawful disparagement, deceptive trade practices under Ohio
law, tortious interference and unfair competition in connection with the
Operating Partnership's acquisition by tender offer of shares in RPT, a
Massachusetts business trust, and certain litigation instituted in
September, 1997, by the Operating Partnership against Jacobs in federal
district court in New York, wherein the Operating Partnership alleged
that Jacobs and other parties had engaged, or were engaging in activity
which violated Section 10(b) of the Securities Exchange Act of 1934, as
well as certain rules promulgated thereunder. Plaintiffs in the Ohio
action are seeking compensatory damages in excess of $200,000, punitive
damages and reimbursement for fees and expenses. It is difficult to
predict the ultimate outcome of this action and there can be no
assurance that the Operating Partnership will receive a favorable
verdict. Based upon the information known at this time, in the opinion
of management, it is not expected that this action will have a material
adverse effect on the Operating Partnership or SPG Properties.
Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. On
October 16, 1996, a complaint was filed in the Court of Common Pleas of
Mahoning County, Ohio, captioned Carlo Angostinelli et al. v. DeBartolo
Realty Corp. et al. The named defendants are SD Property Group, Inc., a
99%-owned subsidiary of SPG Properties, and DPMI, and the plaintiffs
are 27 former employees of the defendants. In the complaint, the plaintiffs
alleged that they were recipients of deferred stock grants under the
DRC Plan and that these grants immediately vested under the DRC Plan's
"change in control" provision as a result of the DRC Merger. Plaintiffs
asserted that the defendants' refusal to issue them approximately 661,000
shares of DRC common stock, which is equivalent to approximately 450,000
shares of common stock of the Company computed at the 0.68 exchange ratio
used in the DRC Merger, constituted a breach of contract and a breach of
the implied covenant of good faith and fair dealing under Ohio law.
Plaintiffs sought damages equal to such number of shares of DRC common
stock, or cash in lieu thereof, equal to all deferred stock ever granted
to them under the DRC Plan, dividends on such stock from the time of the
grants, compensatory damages for breach of the implied covenant of good
faith and fair dealing, and punitive damages. The complaint was served on
the defendants on October 28, 1996. The plaintiffs and the Operating
Partnership each filed motions for summary judgment. On October 31, 1997,
the Court entered a judgment in favor of the Operating Partnership granting
the Operating Partnership's motion for summary judgment. The plaintiffs have
appealed this judgment and the matter is pending. While it is difficult to
predict the ultimate outcome of this action, based on the information known
to date, it is not expected that this action will have a material adverse
effect on the Operating Partnership or SPG Properties.
Roel Vento et al v. Tom Taylor et al. An affiliate of the Operating
Partnership is a defendant in litigation entitled Roel Vento et al v.
Tom Taylor et al, in the District Court of Cameron County, Texas, in
which a judgment in the amount of $7,800 has been entered against all
defendants. This judgment includes approximately $6,500 of punitive
damages and is based upon a jury's findings on four separate theories of
liability including fraud, intentional infliction of emotional distress,
tortuous interference with contract and civil conspiracy arising out of
the sale of a business operating under a temporary license agreement at
Valle Vista Mall in Harlingen, Texas. The Operating Partnership is
seeking to overturn the award and has appealed the verdict. The appeal
is pending. Although management is optimistic that the Operating
Partnership may be able to reverse or reduce the verdict, there can be
no assurance thereof. Management, based upon the advice of counsel,
believes that the ultimate outcome of this action will not have a
material adverse effect on the Operating Partnership or SPG Properties.
The Operating Partnership currently is not subject to any other
material litigation other than routine litigation and administrative
proceedings arising in the ordinary course of business. On the basis of
consultation with counsel, management believes that these items will not
have a material adverse impact on the Operating Partnership's financial
position or results of operations.
Note 12 - New Accounting Pronouncements
During the second quarter of 1998, the Financial Accounting
Standards Board ("FASB") released EITF 98-9, which clarified its
position relating to the timing of recognizing contingent rent. The
Operating Partnership adopted this pronouncement prospectively,
beginning May 22, 1998, which has reduced overage rent by approximately
$5,600 through September 30, 1998.
<Page 15>
On June 15, 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities. The Statement establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that
receive hedge accounting.
Statement 133 will be effective for the Operating Partnership
beginning with the 1999 fiscal year and may not be applied
retroactively. Management does not expect the impact of Statement 133 to
be material to the financial statements. However, the Statement could
increase volatility in earnings and other comprehensive income.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, Disclosure about Segments of an Enterprise and
Related Information. The Statement establishes standards for the way
public companies report information about operating segments in annual
financial statements and also requires those enterprises to report
selected information about operating segments in interim financial
reports issued to shareholders. This statement is effective for
financial statements for fiscal years beginning after December 15, 1997.
Management is currently evaluating the impact, if any, the Statement
will have on the Operating Partnership's 1998 annual financial
statements.
<Page 16>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,071,724
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
339,262
<COMMON> 12
<OTHER-SE> 1,732,450
<TOTAL-LIABILITY-AND-EQUITY> 2,071,724
<SALES> 0
<TOTAL-REVENUES> 932,619
<CGS> 0
<TOTAL-COSTS> 504,801
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,599
<INTEREST-EXPENSE> 281,748
<INCOME-PRETAX> 141,273
<INCOME-TAX> 141,273
<INCOME-CONTINUING> 141,273
<DISCONTINUED> 0
<EXTRAORDINARY> 7,002
<CHANGES> 0
<NET-INCOME> 101,532
<EPS-PRIMARY> 0.00<F1>
<EPS-DILUTED> 0.00<F1>
<FN>
<F1>The Registrant is substantially wholly-owned by Simon Property Group, Inc.
and therefore does not report earnings per share.
</FN>
</TABLE>
