<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999 OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ____________________
Commission File Number 1-12994
THE MILLS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 52-1802283
(State or other jurisdiction of (I.R.S. Employer
incorporate or organization) Identification No.)
1300 WILSON BOULEVARD, SUITE 400
ARLINGTON, VA 22209
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (703) 526-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
COMMON STOCK, $0.01 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
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 periods that the registrant was
required to file such report(s)) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No__ .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
As of March 21, 2000, the aggregate market value of the 22,974,898 shares of
common stock held by non-affiliates of the registrant was $422,163,751 based
upon the closing price ($18.375) on the New York Stock Exchange composite tape
on such date. (For this computation, the registrant has excluded the market
value of all shares of its common stock reported as beneficially owned by
executive officers and directors of the registrant; such exclusion shall not be
deemed to constitute an admission that any such person is an "affiliate" of the
registrant.) As of March 21, 2000, there were 23,971,307 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement for the annual shareholders meeting
to be held in 2000 are incorporated by reference into Part III.
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THE MILLS CORPORATION
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I ........................................................................................................... 3
Item 1. Business................................................................................................. 3
Item 2. Properties .............................................................................................. 17
Item 3. Legal Proceedings ....................................................................................... 49
Item 4. Submission of Matters to a Vote of Security Holders ..................................................... 49
PART II ......................................................................................................... 50
Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters ............................... 50
Item 6. Selected Financial Data ................................................................................. 51
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ................... 54
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .............................................. 54
Item 8. Financial Statements and Supplementary Data ............................................................. 63
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .................... 63
PART III ........................................................................................................ 64
Item 10. Directors and Executive Officers of the Registrant...................................................... 64
Item 11. Executive Compensation.................................................................................. 64
Item 12. Security Ownership of Certain Beneficial Owners and Management.......................................... 64
Item 13. Certain Relationships and Related Transactions......................................................... 64
PART IV ......................................................................................................... 65
Item 14. Exhibits, Financial Statements, Schedules and Reports and Form 8-K...................................... 65
SIGNATURES........................................................................................................ 68
</TABLE>
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PART I
ITEM 1. BUSINESS
CAUTIONARY STATEMENT
Certain matters discussed in this Form 10-K and the information
incorporated by reference herein contain "forward-looking statements" for
purposes of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") relating to, without limitation, future economic
performance, plans and objectives of management for future operations and
projections of revenue and other financial items, demographic projections and
federal income tax considerations, which can be identified by the use of
forward-looking terminology such as "may," "will," "except," "anticipate,"
"estimate," or "continue" or the negative thereof or other variations thereon or
comparable terminology. Such forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those described in such forward-looking statements. Risks and other factors
that might cause differences, some of which could be material include, but are
not limited to: general industry and economic conditions; failure to consummate
financing and joint venture arrangements; development risks, including the lack
of satisfactory financing, construction delays and cost overruns; the level of
volatility of interest rates; and the financial stability of tenants within the
retail industry.
THE COMPANY
Except as otherwise required by the context, references in this Form
10-K to "we," "us," "our" and the "Company" refer to The Mills Corporation and
its direct and indirect subsidiaries, including The Mills Limited Partnership,
and references in this Form 10-K to the "Operating Partnership" refer to The
Mills Limited Partnership, of which The Mills Corporation is the sole general
partner.
We own interests in, develop, redevelop, lease and manage a portfolio
currently consisting of nine super-regional, value and entertainment oriented
malls (the "Mills"), 11 community shopping centers (the "Community Centers"),
one urban entertainment/retail project (the "Block") and other related
commercial development. We are a fully-integrated, self-managed real estate
investment trust (a "REIT") with approximately 1,600 employees as of December
31, 1999 and provide all development, redevelopment, leasing, financing,
management and marketing services with respect to all properties currently in
operation. The Mills comprise the primary focus of our operations, with
approximately 13.8 million square feet of gross leasable area in eight states,
of which approximately 1.0 million square feet is owned by certain anchor
tenants.
We were originally incorporated in the Commonwealth of Virginia on
January 2, 1991 and reincorporated in the State of Delaware in 1994. We became
publicly traded on April 21, 1994. We have authorized 150,000,000 shares of
common stock, $0.01 par value per share, comprised of 100,000,000 shares of
voting common stock and 50,000,000 shares of nonvoting common stock and
20,000,000 shares of preferred stock, par value $0.01 per share. As of December
31, 1999, there were 23,955,132 shares of common stock (including 763,091 shares
of common stock issued to the Operating Partnership and held in escrow to secure
specific obligations pursuant to a settlement agreement entered into with
Chelsea GCA Realty and Simon Property Realty Group, L.P. (together with its
affiliates "Simon Property") in October 1998 and no shares of preferred stock
outstanding. We are the sole general partner of the Operating Partnership and
currently own 59.43% of the Operating Partnership's outstanding partnership
units (before giving effect to the common stock held in escrow and the
corresponding partnership units associated with those shares). The Operating
Partnership's partnership units (other than those owned by us) are exchangeable
under certain circumstances for the cash equivalent of a share of our common
stock or, at our option, a share of our common stock. As the sole general
partner of the Operating Partnership, we have the exclusive power to manage and
conduct the business of the Operating Partnership, subject to certain limited
exceptions. The Operating Partnership either holds title to our properties or
directly or indirectly holds 100% of the general and limited partnership
interests in the partnerships that own Potomac Mills, Franklin Mills,
Sawgrass Mills (Phases I & II) and Gurnee Mills. For the joint ventures that own
Ontario Mills, Grapevine Mills, Arizona Mills, The Block at Orange, The Oasis at
Sawgrass, Concord Mills, and Katy Mills, the Operating Partnership holds 50.0%,
37.5%, 36.8%, 50.0%, 50.0%, 37.5% and 62.5% interest, respectively. The
Operating Partnership has also formed joint ventures to develop additional
properties.
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We conduct all of our business through the Operating Partnership and
the Operating Partnership's various subsidiaries, which include: (i) Management
Associates Limited Partnership, which provides leasing and management services
for our properties, and (ii) MillsServices Corp. ("MSC"), which provides
management services to properties in which we do not own an interest and
provides development services for our properties and new properties acquired by
us. The Operating Partnership owns 100% of the interests in the Management
Associates Limited Partnership, and 99% of the non-voting preferred stock
(representing a 99% economic interest) and 5% of the voting common stock of MSC.
In addition, two of our key employees each own .5% of the non-voting preferred
stock (representing, in the aggregate, a 1% economic interest) and 47.5% of the
voting common stock of MillsServices Corp. MSC also owns 100% of Mills
Enterprises, Inc., an entity that owns Foodbrand (the Company's food and
beverage entity that was created in 1999 to master lease and operate food courts
at the Company's malls with existing operations of Katy Mills and Franklin
Mills, and future projects under development) and which holds investments in
other retail ventures.
We maintain our executive offices at 1300 Wilson Boulevard, Suite 400,
Arlington, Virginia 22209. Our telephone number is (703) 526-5000. We also
maintain a web site at www.millscorp.com.
OUR PORTFOLIO
The following table sets forth a summary of our operating properties as
of December 31, 1999:
<TABLE>
<CAPTION>
APPROX.
GROSS PERCENT
METROPOLITAN YEAR LEASABLE AREA LEASED
NAME/LOCATION AREA SERVICED OPENED (SQ. FT.)(1) (2)
- --------------- ----------------- ------ -------------- -----------
<S> <C> <C> <C> <C>
MILLS
Washington,
Potomac Mills ........................ D.C./Baltimore 1985 1,637,122 97%
Philadelphia/
Franklin Mills ....................... Wilmington 1989 1,741,141 92
Fort Lauderdale/
Sawgrass Mills ....................... Miami/Palm Beach 1990 1,845,342 96
Gurnee Mills ......................... Chicago/Milwaukee 1991 1,699,673 96
Ontario Mills ........................ Los Angeles 1996 1,471,096(4) 98
Grapevine Mills ...................... Dallas/Ft. Worth 1997 1,500,470 98
Arizona Mills ........................ Phoenix 1997 1,233,884 98
The Oasis at Sawgrass................. Ft. Lauderdale/Miami
/Palm Beach 1999 290,063 94
Concord Mills ........................ Charlotte 1999 1,235,838 89
Katy Mills ........................... Houston 1999 1,159,821 91
----------
MILLS TOTALS/WEIGHTED AVERAGES ..... 13,814,450 95%
==========
BLOCKS
Los Angeles/
The Block at Orange .................. Orange County 1998 644,652(8) 94%
==========
COMMUNITY CENTERS (11 SHOPPING
CENTERS) ........................... Various 2,220,320 89%
========== ====
</TABLE>
<TABLE>
<CAPTION>
NO. OF 1999
ANCHOR SPECIALTY
STORES STORE SALES COMPANY
NAME/LOCATION (3) PER SQ. FT. OWNERSHIP
- --------------- ---------- ----------- ----------
<S> <C> <C> <C>
MILLS
Potomac Mills ........................ 17 $ 329 100%
Franklin Mills ....................... 16 316 100%
Sawgrass Mills ....................... 19 436 100%
Gurnee Mills ......................... 17 290 100%
Ontario Mills ........................ 23 361 50%(5)
Grapevine Mills ...................... 17 297 37.5%(6)
Arizona Mills ........................ 16 307 36.8%(7)
The Oasis at .........................
Sawgrass ............................. 3 N/A 50.0%(9)
Concord Mills ........................ 15 N/A 37.5%(6)
Katy Mills ........................... 13 N/A 62.5%(10)
----
MILLS TOTALS/WEIGHTED AVERAGES ..... 156 $ 337
====
BLOCKS
The Block at Orange .................. 9 $ 338 50%(9)
====
COMMUNITY CENTERS (11 SHOPPING
CENTERS) ........................... 27 $ 245 100%
====
</TABLE>
- -----------------
(1) Includes 963,173 square feet of gross leasable area owned by tenants as
follows: Potomac Mills-80,000 square feet; Franklin Mills-209,612 square
feet; Sawgrass Mills-281,774 square feet; Gurnee Mills-250,806 square
feet; Ontario Mills-125,000 square feet; and Community Centers-15,981
square feet. A ground lease at Franklin Mills of 152,370 square feet and
a ground lease at Grapevine Mills of 177,063 square feet are also
included.
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(2) Percent leased is defined as all space leased and for which rent is being
paid as of December 31, 1999, excluding tenants with leases having a term
of less than one year, plus gross leasable area owned by store tenants.
(3) Anchor stores include all stores occupying more than 20,000 square feet.
(4) Ontario Mills will contain approximately 1.7 million square feet of gross
leasable area, including gross leasable area owned by tenants, upon full
build out.
(5) Our other joint venture partners are affiliates of Kan Am U.S., Inc.
("Kan Am," which owns approximately 34.0% of the outstanding partnership
units in the Operating Partnership), with a 25% interest, and Simon
Property, with a 25% interest. We and our other partners each are
entitled to a priority return during operations equal to 9% per annum
on unreturned capital contributions.
(6) Our other joint venture partners are Kan Am, with a 25% interest, and
Simon Property, with a 37.5% interest. We and our other partners each are
entitled to a priority return during operations equal to 9% per annum on
unreturned capital contributions.
(7) Our other joint venture partners are Taubman Realty L.P. ("Taubman
Realty"), with a 36.8% interest, and Simon Property, with a 26.4%
interest.
(8) The Block at Orange will contain approximately 0.8 million square feet of
gross leasable area, including gross leasable area owned by tenants, upon
full build out.
(9) Our other joint venture partner is Kan Am, with a 50% interest. Each
partner is entitled to a cumulative construction period preference and a
priority return during operations equal to 9% per annum on its unreturned
capital contributions.
(10) Our other joint venture partner is Kan Am, with a 37.5% interest. Each
partner is entitled to a cumulative construction period preference and a
priority return during operations equal to 9% per annum on its unreturned
capital contributions.
A brief description of the three types of real estate projects in our
portfolio is set forth below:
MILLS. The Mills are the primary focus of our operations. A typical
Mills contains 175 to 200 specialty tenants and 15 to 20 anchor tenants, and
averages approximately 1.5 million square feet of gross leasable area. Mills are
essentially a hybrid of various retail formats with a diverse tenant base
consisting of department stores, specialty stores, manufacturers outlets,
off-price retailers, catalog retailers, "category killers," (which offer a
selection of products in one defined merchandise category), and entertainment
venues. A list of representative tenants is set forth below:
DEPARTMENT STORES SPECIALTY STORES MANUFACTURERS OUTLETS
Off 5th-Saks Fifth Avenue Bose Ralph Lauren/Polo
Last Call from Neiman Marcus Golf America Nautica
Nordstrom Rack Sharper Image Tommy Hilfiger
OFF-PRICE RETAILERS CATALOG RETAILERS
Old Navy J. Crew
Banana Republic Harry and David
Casual Corner J.C. Penney Outlet
CATEGORY KILLERS ENTERTAINMENT VENUES
Bed, Bath & Beyond AMC Theatres
Homeplace Jillian's
Bass Pro Shops Outdoor Sega Gameworks
World
Mills are located in large, metropolitan areas with a minimum of one
million people within a 20 mile radius, a projected annual population growth of
at least 6%, a minimum median annual household income of $50,000 and a market
with steady tourist appeal. Prototypical physical layout is a "race track"
format of stores on one level with ample non-decked parking. We believe shoppers
of the Mills can generally be characterized as follows:
- shoppers within a 10-15 mile radius of the property that use the
Mills as their local regional mall equivalent;
- shoppers within a 15-40 mile radius that travel beyond other
retail offerings to access the breadth and uniqueness of the
Mills tenant mix; and
- shoppers and tourists traveling from various distances as part
of a planned shopping experience.
OTHER RETAIL FORMATS. We are continuing to explore the feasibility of
alternative retail formats that will serve the unique needs of target markets
such as major university towns, dense suburban areas and large city centers.
With the opening of The Block at Orange in November, 1998, we created a new
retail format consisting of an open-air urban mainstreet atmosphere combining
both entertainment (with themed restaurants, theatres and other interactive
uses) with distinctive retail concepts such as Vans, a clothing/shoe store and
skateboarding park. In 1999, we further modified this concept with our
addition of The Oasis at Sawgrass. We are continuing to explore the optimum
retail concepts to be incorporated into our projects at the Meadowlands and
Midtown Atlanta. We believe that our success with the Mills concept will carry
over to these other retail concepts, as evidenced by the current 94% occupancy
rate at The Block at Orange and the favorable market reaction to this
distinctive development.
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COMMUNITY CENTERS. The eleven Community Centers contain a total of
approximately 2.2 million square feet of gross leasable area and are located in
Florida, Georgia, Illinois, Maryland, New Jersey, Ohio, Pennsylvania, South
Carolina and Virginia. The Community Centers are open-air shopping centers
containing traditional shopping center tenants such as grocery, drug, video and
greeting card stores, as well as a strong concentration of national value
retailers. Anchor tenants of the Community Centers include Giant Food, Krogers,
Marshall's, Safeway, T.J. Maxx, Wal-Mart, Bed, Bath & Beyond, Sears and
Walgreens.
The Company is exploring the possible sale of its community center
portfolio. In addition to providing the Company with a source of development
capital, this disposition will allow management to focus on its main retail
products.
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COMPETITIVE ADVANTAGES
All of the Mills are located in areas which have other shopping
centers and retail facilities. The amount of rentable retail space in the
vicinity of the Mills could have an effect on the amount of rent we charge and
on our ability to rent vacant space and/or renew leases of such Mills. In
addition, the Mills compete with numerous shopping alternatives as retailers
themselves face increasing competition from discount shopping centers, outlet
malls, discount shopping clubs, direct mail, internet sales and telemarketing.
However, we believe that the Mills have a number of inherent competitive
advantages over other retail formats in operation today, and that these
advantages are responsible for the strong operating performance of our portfolio
of properties, as more fully described below.
CONSUMER DRAW. We believe that the critical mass achieved by
aggregating an average of approximately 190 stores and 1.5 million square feet
of gross leasable area under one roof, coupled with the distinctive physical
characteristics of our Mills, are the primary reasons that our properties
attract so many people and create extended shopping trips. We believe people are
attracted to our distinctive mix of tenants, including department stores,
specialty stores, manufacturer's outlets, off-price retailers, catalog
retailers, "category killers" (which offer a selection of products in one
defined merchandise category), and entertainment venues. We believe we have
created a shopping environment that is festive and social, with interior designs
resembling a "Mainstreet" atmosphere which incorporates staggered store fronts
and roof lines, natural lighting and colorful graphic accents. Shopping avenues
in our Mills are interspersed with a variety of food establishments and video
and entertainment courts, further enhancing the entertainment nature of the
shopping trip.
We believe our Mills have a primary trade area of an estimated 40
miles. The Mills that operated throughout 1999 are among the top tourist
destinations in their respective states. The Mills average 18 million visitors
each per year, and are visited by an excess of 2,000 tour buses annually.
BRAND AWARENESS. The Mills brand is synonymous with a one of a kind
value, entertainment and variety retail offering. We believe that the Mills is
the only retail shopping experience that is differentiated by its product type
with the market, consumers and tourist shoppers and their identification with
the Mills brand.
ATTRACTIVENESS TO TENANTS. We believe tenants are attracted to our
Mills as a result of the heavy foot traffic generated at the Mills and the
length and productivity of consumer visits, which translate into high sales
levels. In addition, we believe tenant occupancy costs are low as a result of
lower common area maintenance costs at a Mills versus many other retail formats.
The lower common maintenance costs are a result of several factors, including:
- Anchor contributions: due to 15 to 20 anchor stores
contributing significantly to common area maintenance pools;
- Low maintenance costs: due to one-story construction, smaller
concourses and lack of deck parking; and
- Larger tenant base: due to each Mills' significant specialty
store shop tenant square footage, resulting in a lower per
square foot common area maintenance costs.
FLEXIBILITY OF PRODUCT. The single-story, simple construction of our
Mills allows us to easily reconfigure them in response to changing retail
formats. Furthermore, our anchor leases give us more flexibility to establish
our preferred merchandise mix and to undertake any desired remodeling projects
than is afforded by traditional regional mall anchor leases. This makes it
easier for us to make room for new, exciting retailers, which keep the product
fresh and enhance consumer draw, and to replace underperforming stores.
BARRIERS TO ENTRY. We believe that our status as the innovator of the
Mills and Block product types and our success with our existing portfolio have
made us the leading developer of large-scale value/entertainment oriented retail
projects. The strong relationships we have developed with our tenants give us a
number of competitive advantages in the development process, including the
ability to validate project feasibility in the predevelopment stage with tenant
commitments and the ability to fulfill significant pre-leasing requirements
imposed by construction lenders. In addition, the complexity and financial
commitment associated with developing a project the size and nature of a Mills
precludes many potential competitors from entering our business. Furthermore,
through our contractual alliances with Simon Property and Taubman Realty, we
believe we are already aligned with two of the strongest developers of retail
projects in the country. See "Strategic Relationships." Finally, we believe we
are the only company currently building Mills-type projects that has fully
integrated development capabilities reflecting lessons learned from successful
past development projects.
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DEVELOPMENT PIPELINE
PROJECTS UNDER CONSTRUCTION. We have three Mills under construction,
comprising approximately 3.7 million square feet of new gross leasable area.
Estimated total development cost for these projects is approximately $683
million. After construction financing proceeds and joint venture partner equity
contributions, our equity requirement associated with these projects is
approximately $69.5 million, $57.0 million of which had been funded as of
December 31, 1999. The following table sets forth certain information with
regard to these projects.
<TABLE>
<CAPTION>
MILLS UNDER CONSTRUCTION
APPROXIMATE
METROPOLITAN ANTICIPATED GROSS
NAME/ AREA OPENING LEASABLE COMPANY
LOCATION SERVED DATE (1) AREA (1),(2) OWNERSHIP
-------- ------ -------- ------------- ---------
<S> <C> <C> <C> <C>
Spring
Opry Mills ......................................... Nashville 2000 1,200,000 66.7%(4,5)
Baltimore/ Fall
Arundel Mills ...................................... Washington, DC 2000 1,300,000 37.5%(6)
Spring
Sugarloaf Mills .................................... Atlanta 2001 1,200,000 50.0%(7)
----------
(to be renaned Discover Mills)
3,700,000
==========
</TABLE>
<TABLE>
<CAPTION>
MILLS UNDER CONSTRUCTION
ESTIMATED ANCHOR
TOTAL REQUIRED STORE
NAME/ PROJECT EQUITY FROM TENANT
LOCATION COST (3) COMPANY (4) COMMITMENTS
-------- ------------ ----------- ------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C>
Opry Mills ......................................... $ 222 $ 52.00 13
Arundel Mills ...................................... 230 17.50 8
Sugarloaf Mills .................................... 231 -- N/A
----------- ---------
(to be renamed Discover Mills)
$ 683 $ 69.50
=========== ==========
</TABLE>
(1) Anticipated opening dates and approximate gross leasable area may be
subject to adjustment as a result of factors inherent in the
development process, some of which may not be under our direct control.
(2) Approximate gross leasable area includes space that will be owned by
anchor tenants.
(3) Our best estimate of aggregate project cost as of December 31, 1999,
net of reimbursements for tax increment financings, sales of land to
anchor tenants and other construction-related recoveries. Many of the
underlying components of development cost may not be under our direct
control.
(4) Consists of equity requirement of the Company after construction loans
and joint venture equity partner contributions. Of the $69.5 million
required for all three projects, $57.0 million, or 82.0%, had been
funded by the Company as of December 31, 1999. We have a letter of
intent with Kan Am to fund 100% of our equity requirement for Opry
Mills in exchange for 33.33% interest in the Opry Mills Limited
Partnership.
(5) Our other joint venture partner is a corporate affiliate of Gaylord
Entertainment Company, with a 33.3% interest. We are entitled to a
cumulative construction period preference and each partner is entitled
to a priority return during operations equal to 9% per annum on its
unreturned capital contributions.
(6) Our other joint venture partners are Kan Am, with a 25% interest, and
Simon Property, with a 37.5% interest. Each partner is entitled to a
cumulative construction period preference and a priority return during
operations equal to 9% per annum on its unreturned capital
contributions.
(7) Our other joint venture partner is Kan Am, with a 50.0% interest. Each
partner is entitled to a cumulative construction period preference and
a priority return during operations equal to 9% per annum on its
unreturned capital contributions.
The following is a brief description of the Mills projects currently
under construction:
Opry Mills - Nashville, Tennessee. Opry Mills will be constructed on a
67-acre site located adjacent to the Grand Ole Opry and the Opryland Hotel
Convention Center. Opry Mills will have approximately 1.2 million square feet of
retail and entertainment space and will feature an entertainment corridor
connecting the enhanced Opry Plaza and Cumberland Landing areas. We have
obtained anchor lease commitments from Regal Cinemas, Bass Pro Shops, Alabama
Grill, Rainforest Cafe, Barnes & Noble, Jillian's, Bed, Bath & Beyond, Off
5th-Saks Fifth Avenue, Applebarn, Sun & Ski, Tower Records, Gibson Guitar, and
BlackLion. Construction began in October 1998. We expect to open this project in
May of 2000. Development costs through December 31, 1999 were approximately
$129.4 million.
The project is being developed and is owned by a limited partnership
between us, with a 66.7% interest, and a corporate affiliate of Gaylord
Entertainment Company, with a 33.3% interest. We have committed to contribute up
to $52 million to fund the project's equity capital requirements, while the
affiliate of Gaylord Entertainment Company has contributed the land for the
project, valued at $25 million. As of December 31, 1999, we have fully funded
our capital equity requirement. The remainder of the project costs is being
financed with a construction loan. We have a letter of intent with Kan Am to
fund 100% of our equity requirement for Opry Mills in exchange for our transfer
to Kan Am of a 33.33% interest in the Opry Mills joint venture. We and Kan Am
will receive a 9% preferred return on our unreturned equity contributions. We
will guarantee Kan Am's receipt of this preferred return until such time as
permanent financing is secured. After permanent financing is secured, we and Kan
Am will receive a new 9% preferred return on our equity. After this preference,
the affiliate of Gaylord Entertainment Company will receive a 9% preferred
return on its $25 million land contribution. After this preference is paid to
the affiliate of Gaylord
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Entertainment Company, the remaining cash flow will be distributed pro rata in
accordance with the percentage ownership interests, except that until the
project has achieved an 11% yield, up to $3.5 million out of certain net
sponsorship revenues will be distributed to us. We have the right to provide
development, leasing and management services for the project, subject to the
approval of such affiliate of Gaylord Entertainment Company for specified major
decisions, including a sale or refinancing of the project and approval of annual
budgets.
At specified times, following the tenth anniversary of the project's
opening or at any time after the opening if the partners are unable to agree on
specified major decisions, either we or the affiliate of Gaylord Entertainment
Company can exercise a buy-sell provision. Pursuant to the buy-sell provision,
either party, as the offeror, may require the other party, as the offeree, to
elect to either sell to the offeror the offeree's interest in the partnership or
purchase from the offeror the offeror's interest in the partnership.
Arundel Mills- Anne Arundel County, Maryland. The Arundel Mills project
will be situated on an approximately 107-acre site located near the intersection
of the Baltimore-Washington Parkway and State Route 100 in Anne Arundel County,
Maryland. The Arundel Mills joint venture has the option to purchase
approximately 300 additional acres to be developed as part of our master-plan
approach. The approximately 1.3 million square foot project planned for this
site will consist of a combination of specialty retailers, cinemas, and
restaurants. We have obtained anchor lease commitments from Jillian's, FYE (For
Young Entertainment), Off 5th-Saks Fifth Avenue, Muvico, Iguana Ameramex, Sun &
Ski, Bed, Bath & Beyond and Books-A-Million. Construction began in July 1999. We
expect to open this project in the fall of 2000. Development costs through
December 31, 1999 were approximately $42.1 million.
The project is being developed and is owned by a limited partnership
among us, with a 37.5% interest, Simon Property, with a 37.5% interest, and Kan
Am, with a 25% interest. We and Simon Property have committed to contribute
$17.5 million each and Kan Am has committed to contribute up to $35 million to
fund the project's equity capital requirements. The remainder of the estimated
project costs will be financed with a construction loan. As of December 31,
1999, we have funded $5.0 million of our commitment. We, Simon Property and Kan
Am will receive a 9% preferred return on our equity. We and Simon Property have
guaranteed Kan Am's receipt of this preferred return until permanent financing
is secured for the project. After permanent financing is secured, we, Simon
Property and Kan Am each will receive a 9% preferred return on our equity, and
the remaining cash flow will be distributed pro rata in accordance with the
percentage ownership interests. We and Simon Property have the right to provide
development, management and leasing services for the project. Development fees
are allocated to us and Simon Property on a 60% and 40% basis, respectively.
Leasing fees will be allocated to us and Simon Property an a 75% and 25% basis,
respectively. We will be entitled to a management fee equal to 4% of revenues
collected and Simon Property will be entitled to an asset management fee equal
to 2% of revenues collected. Specified major decisions are subject to Simon
Property's and Kan Am's approval, which include the sale or refinancing of the
project and approval of annual budgets.
At specified times following the tenth anniversary of the project's
opening, either we and Simon Property together or Kan Am can exercise a buy-sell
provision. Pursuant to the buy-sell provision, we and Simon Property can require
Kan Am to sell us, for cash or limited partnership units of the Operating
Partnership and limited partnership units of Simon Property at Kan Am's
election, Kan Am's entire interest in the partnership. Also, pursuant to the
buy-sell provision, Kan Am can require us and Simon Property to acquire, for
cash or limited partnership units of the Operating Partnership and limited
partnership units of Simon Property at our and Simon Property's election, Kan
Am's entire interest in the partnership.
Discover Mills- Gwinette County, Georgia. The Discover Mills project
will be constructed on a 225-acre site located just off Interstate 85 and
Sugarloaf Parkway in Gwinette County, Georgia. The approximately 1.2 million
square foot project planned for this site will consist of a combination of
specialty retailers, cinemas, and themed restaurants. We recently have begun
leasing efforts for this project and have obtained various letters of interest
for this project. We expect to open this project in the spring of 2001.
Development costs through December 31, 1999 were approximately $34.8 million.
The project is being developed and is owned by a limited partnership
between us, with a 50% interest, and Kan Am, with a 50% interest. Kan Am has
agreed to fund 100% of the project's initial required equity. We have no equity
contribution requirement. Kan Am will receive a 9% preferred return on it's
equity. We have guaranteed Kan Am's receipt of this preferred return until
permanent financing is secured for the project. After permanent financing is
secured, Kan Am will receive a 9% preferred return on its equity, and the
remaining cash flow will be distributed pro rata in accordance with the
percentage ownership interests. We have the right to provide all development,
management and leasing services for the project, subject to the approval of Kan
Am for specified major decisions, including a sale or refinancing of the project
and the
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<PAGE> 10
approval of the development and annual budgets. We have guaranteed completion of
the project within parameters of the approved development budget.
At specified times following the tenth anniversary of the project's
opening, either we or Kan Am can exercise a buy-sell provision. Pursuant to the
buy-sell provision, we can require Kan Am to sell to us, for cash or limited
partnership units of the Operating Partnership at Kan Am's election, Kan Am's
entire interest in the partnership. Also, pursuant to the buy-sell provision,
Kan Am can require us to acquire, for cash or limited partnership units of the
Operating Partnership at our election, Kan Am's entire interest in the
partnership.
PROJECTS UNDER DEVELOPMENT. In addition to the projects currently under
construction, we are also actively pursuing other prospective projects. These
projects are in various levels of the due diligence stage where we are in the
process of determining site/demographic viability, negotiating tenant
commitments or working through third-party approval processes. Consistent with
past practice, we will not begin construction on these projects until we have
completed our investment due diligence process and obtained significant
pre-leasing commitments. While we currently believe that these projects will
ultimately be completed, we cannot assure you that they will actually be
constructed or that they will have any particular level of operational success
or ultimate value. The following is a brief description of these prospective
projects. As of December 31, 1999, we had invested $45.7 million in the pursuit
of these prospective projects.
Vaughan Mills - Toronto, Ontario. We and Cambridge Shopping Centres
Limited have secured a site for the proposed development of a Mills project.
The 180-acre site is located in the City of Vaughan at the southeast corner of
Highway 400 and Rutherford Road, approximately 20 miles north of downtown
Toronto, Ontario. Upon completion, this project would be the first Mills outside
of the United States. Subject to the receipt of necessary government approvals,
construction is anticipated to begin by the fall of 2000. As of December 31,
1999, we had invested approximately $18.0 million in this project.
We anticipate that the project will be jointly developed and owned by
one of our affiliates and Cambridge Shopping Centres Limited as tenants in
common. Our ownership interest will be 50%.
Meadowlands Mills- Carlstadt, New Jersey. We have acquired a mortgage
interest in a 592-acre site located on the New Jersey turnpike (I-95) adjacent
to Meadowlands Sports Complex and approximately five miles from New York City
and have signed preliminary agreements with Empire Ltd., the current owner of
the site, concerning the development of Meadowlands Mills. Commencement of
construction is contingent upon the completion of ongoing Environmental Impact
Statement and the federal/state permitting process. A Special Area Management
Plan (SAMP) for the Meadowlands area was published in the Federal Register on
April 22, 1999. The guidelines proposal in the SAMP would upon their anticipated
adoption in the second quarter of 2000, permit development of approximately 1.5
million square feet of gross leaseable area (GLA) for Meadowlands Mills. The
project would be developed on an entitled site on 90.5 acres plus roads and
retention facilities. As of December 31, 1999, costs to date for this project
were $48.2 million, of which we have funded $27.7 million.
Upon procurement of all necessary entitlements, it is anticipated that
the project will be developed by a joint venture between us, Kan Am, Empire
Ltd., and Bennett S. Lazare, an individual affiliated with the Empire Ltd. The
partners' respective ownership interests will be Mills 53.3%, Kan Am 26.7%,
Empire Ltd 14% and Bennett S. Lazare 6%. The project's equity requirements
have not yet been determined. Kan Am has committed to contribute approximately
$70 million to the project in addition to its existing investment of $24
million, if it proceeds as planned. We and Kan Am will both receive a 9%
preferred return on each of our equity contributions. We will guarantee payment
of Kan Am's preference until permanent financing is secured for the project.
After payment of preferences, the remaining cash flow will be split in
accordance with the percentage ownership interests.
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Colorado Mills - Denver, Colorado. We have identified a site in the
Denver, Colorado area and are in process of forming a joint venture to
develop the site. The 131-acre is located at the intersection of I-70, Colfax
Avenue and Indiana Avenue in the City of Lakewood approximately 10 miles west
of downtown Denver. We anticipate that construction could commence during 2000
and that the project could open as early as 2001.
PROJECTS UNDER REVIEW. In addition to the projects discussed above, we
are also conducting due diligence on several other proposed developments,
including sites in Atlanta, Georgia; Cleveland, Ohio; North Aurora, Illinois
(Chicago); San Francisco, California; South Weymouth, Massachusetts (Boston);
and Tampa, Florida. We are also continuing to evaluate various prospective
international sites, including a site identified in Spain, with a concentrated
focus on Western Europe, as well as other domestic sites for Mills-type and
other retail oriented projects.
NEW BUSINESS OPPORTUNITIES
The following is a brief description of new revenue generating
opportunities that are related to, or are extensions of, our core business of
developing, redeveloping, leasing, financing and managing retail projects. We
expect to grow this aspect of our business significantly during the next few
years, subject to tax law limitations applicable to REITs.
Advertising/Non-Traditional Programs. In 1999, we continued selling
corporate advertising space in Mills malls to both tenants and non-tenants
through a sponsorship program. We believe that the consumer traffic generated at
our properties make them valuable environments for corporate advertisers seeking
to market their products in non-traditional ways. At The Block at Orange, for
example, we erected over 19 billboards to enhance the urban mainstreet
experience while adding architectural features to the mall. We contracted with a
third-party billboard company to sell advertising on these billboards to both
tenants in the mall and non-tenants.
Other non-traditional programs conducted in 1999 include participating
in revenues from ATM machines and payphone operations located at our properties,
as well as leasing telephone lines to phone providers.
Investing in Retail and Entertainment Concepts. Historically, many new
retail and entertainment concepts have been developed and expanded at the Mills.
Examples include:
- Foodbrand, an entity that is owned by Mills Enterprises, Inc.,
was created in 1999 to master lease and operate food courts at
our malls with existing operations at Katy Mills and Franklin
Mills, and future projects under development.
- retail companies that have used Mills projects to launch
extensions of their brands, including Neiman Marcus and Saks
Fifth Avenue, which opened its first Off 5th - Saks Fifth Avenue
store at Franklin Mills in February 1990;
- urban retailers, including Virgin Megastore and Wolfgang Puck,
which have used Mills projects to expand into non-urban markets;
and
- participatory retailers like Van's Skate Park and Bass Pro
Shops Outdoor World that are using Mills and Block projects to
launch new retail entertainment concepts and for additional
promotion of their products.
New concepts frequently require significant capital, which in a typical
landlord/tenant relationship is provided by both the tenant and landlord in the
form of tenant allowances and buildout. The landlord receives rental income for
its investment and, if the concept performs well, can increase its returns
through percentage rents as well. Mills Enterprises, Inc., a separate
corporation wholly owned by MSC, is able to acquire interests of up to 50% in
retail, food and beverage and entertainment enterprises in the early stage of
their growth cycles. Initial investments by Mills Enterprises, Inc. include
partnership interests in two Wolfgang Puck restaurants and two Ron Jon Surf
Shops. We have initially limited our investment in Mills Enterprises, Inc.
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<PAGE> 12
to $25 million. While we believe that this initiative presents significant
opportunities, we have limited the amount of such investments in order to comply
with the tax laws applicable to REITs.
CAPITAL STRATEGIES
To fund our capital needs, we have generally utilized project specific
secured financing, joint venture equity contributions, cash flow from operations
and our line of credit. New development is financed with construction loans, tax
increment municipal financing and joint venture partner equity contributions.
After project openings, the properties are refinanced with permanent debt in the
form of non-recourse, fixed rate mortgage debt. A description of our capital
cycle and the various funding sources utilized follows.
Development Financing. A typical Mills project will cost approximately
$200 to $250 million to build. Approximately 65% to 75% of this cost is funded
with a construction loan, provided by a bank group led by an agent bank. This
financing is obtained after a substantial portion of the equity contributions to
a project have been made and is based upon the achievement of certain levels of
pre-leasing. We have relationships with multiple lenders in the construction
loan market. Our construction loans generally have terms of three years, some
with extension options for an additional two years. Interest rates range from
120 to 275 basis points over LIBOR. The construction loans are typically
guaranteed by us and our joint venture partners other than Kan Am, and are
generally obtained on a several and not joint basis. When Kan Am is a partner in
a project, we and our other joint venture partners, on a pro rata basis,
guarantee Kan Am's portion of the construction debt in addition to our own
portions. See "Strategic Relationships." Guarantees are generally reduced
incrementally after completion of a project based upon the achievement of
interest coverage ratios (ranging from 1.0 to 1.5).
In addition to construction debt, we have historically been able to
obtain tax increment financing to fund infrastructure costs (including roads,
traffic signals and interstate on and off ramps). This financing generally takes
the form of bonds that are issued by the local municipality in which our project
is located, and the capital is advanced as the infrastructure improvements are
constructed. This financing is advantageous to us because debt service is
typically paid from special tax assessments levied against the project which are
passed on to the tenants as part of their contractual leases, or from sales tax
revenues generated by the project and paid by shoppers. We have been successful
in obtaining this form of financial assistance because our projects typically
create new jobs and generate large sales revenues, much of which comes from
outside the municipality and is therefore beneficial to the municipality.
The remainder of the cost of a development project is funded with
equity contributed by us and our joint venture partners. See "-- Strategic
Relationships." These equity contributions fund the initial development costs
prior to the funding of the construction loan. Our share of required equity is
funded with cash from operations, including proceeds from land sales, our $100
million line of credit and proceeds from any corporate debt or equity offerings.
Permanent Financing. After a new project opens and stabilizes
(generally within 24 months of opening), we generally refinance the
construction loan with permanent, fixed rate, non-recourse mortgage debt. This
debt usually has a seven to ten-year term and is amortized over 30 years. We
have found that the credit of our tenants and the stable nature of the property
cash flows make our projects attractive collateral for a number of real estate
lenders, including commercial banks, life insurance companies and investment
banks (in the form of commercial mortgage backed securitizations). When
refinancing a construction loan, we have historically achieved investment grade
ratings on the entire refinanced balance. The refinancings of Ontario Mills
and Grapevine Mills are examples of projects that are encumbered by permanent
investment grade securitized mortgage loans. As of December 31, 1999, our
indebtedness had a weighted average maturity of 3.9 years and a weighted
average interest rate of 7.32%. We intend to permanently finance our future
projects in a similar manner.
STRATEGIC RELATIONSHIPS
We have formed strategic relationships with certain developers and
equity partners. These relationships serve as a source of equity for new
development projects, mitigate development risk and competition and provide
assistance in the identification of new development opportunities and the
development and expansion of tenant and lender relationships. The following is a
brief description of our contractual strategic partnerships.
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<PAGE> 13
Simon Property. In November 1995, we entered into an agreement with
Simon Property pursuant to which we agreed to examine with Simon Property the
feasibility of developing Mills projects in eight specified markets. Since
entering into this agreement, we have jointly, with Simon Property, developed
Ontario Mills in Ontario, California, Grapevine Mills in Grapevine, Texas,
Arizona Mills in Phoenix, Arizona, and Concord Mills in Charlotte, North
Carolina. We are in the process of developing Arundel Mills in Anne Arundel
County, Maryland. The agreement generally provides that when Simon Property
jointly develops a Mills project with us, each party will hold equal interests
and will be required to contribute needed equity on a pro rata basis. The
agreement restricts Simon Property from developing any Mills project unless it
first offers to us the right to participate equally in such development. In
exchange, the agreement also restricts us from developing a Mills project in 25
specified metropolitan areas in which Simon Property has major mall investments
without first offering to Simon Property the right to participate equally in
such development. These restrictions extend through December 2003. The agreement
also prohibits Simon Property from acquiring more than 800,000 shares of our
common stock or from hiring specified members of our senior management without
our prior written approval.
Taubman Realty. In May 1998, we entered into an agreement with Taubman
Realty (a member of our joint venture that developed Arizona Mills) to jointly
develop four Mills projects during a five-year period and a total of seven Mills
projects in a ten-year period. The agreement establishes ownership percentages
for each project, and contemplates that the partners will contribute their pro
rata share of the equity required for such projects. The agreement requires that
each partner approve major decisions on the venture, and requires the partners
to share responsibility for developing, leasing and managing the projects.
Pursuant to this agreement, we and Taubman Realty have identified a site in the
Denver, Colorado metropolitan area for the development of a Mills project.
Currently, we are negotiating a joint venture agreement for the project.
Kan Am. We have a long-standing relationship with Kan Am, a German
syndicator of closed U.S. real estate funds which currently manages about $650
million in equity for approximately 5,000 German investors. Over the last three
years, Kan Am has invested approximately $250 million in equity in various
projects with us. To date, Kan Am has never failed to raise the agreed upon
level of capital.
In addition to its existing investments at the property level, Kan Am
owns approximately 34.0% of the partnership units of the Operating Partnership,
which are freely exchangeable on a one-to-one basis for our common stock.
Directors and executive officers of Kan Am hold three seats on our Board of
Directors.
On February 4, 1999, we received from Kan Am a commitment that Kan
Am would use its best efforts to invest up to a total of $750,000,000 in joint
ventures with the Company over a five-year period. Pursuant to this
commitment, in 1999 Kan Am: agreed to contribute an additional $26,250,000 to
Katy Mills Limited Partnership in exchange for an additional 12.5% interest in
such partnership; agreed to contribute $25,000,000 to Concord Mills Limited
Partnership in exchange for a 25% interest in such partnership; agreed to
contribute $35,000,000 to Arundel Mills Limited Partnership in exchange for a
25% interest in such partnership; agreed to contribute $70,000,000 to
Sugarloaf Mills Limited Partnership in exchange for a 50% partnership interest
in such partnership; and agreed in principle to contribute up to $50,000,000
to Opry Mills Limited Partnership in exchange for a 33.3% interest in such
partnership.
We expect that the terms of our future arrangements with Kan Am will
be similar to Kan Am's historical capital contributions in our projects.
Kan Am will agree to use its best efforts to provide up to one-half the
required equity for a project in return for an ownership interest equal to
half of the percentage of total project equity it has funded. Each of us,
other partners and Kan Am will be entitled to receive a 9% preferred return
on our qualifying equity. We and other partners will guarantee Kan Am's
preference until such time as permanent financing is secured for the project.
After permanent financing is secured, each partner will get a 9% preference
on their qualifying equity, and the remaining cash flow will be split pro
rata per the respective ownership interests. We, along with any other joint
venture partners on a specific project, guarantee Kan Am's portion of
construction debt.
As of December 31, 1999, Kan Am has property level investments in six
existing projects, Ontario Mills, Grapevine Mills, The Block at Orange, The
Oasis at Sawgrass, Concord Mills and Katy Mills, and is currently a partner in
two of our projects under construction, Arundel Mills and Discover Mills. In
addition, Kan Am is participating with us in our efforts to develop the
Meadowlands Mills site near Carlstadt, New Jersey.
Cambridge Shopping Centres Limited. In October 1999, we entered into a
Master Agreement with Cambridge Shopping Centres Limited ("Cambridge") pursuant
to which we agreed to examine with Cambridge the feasibility of jointly
acquiring, owning, developing, constructing and operation one or more Mills
projects in the Provinces of Ontario, Quebec, Alberta and or British Columbia
or Block projects in any Province in Canada. Pursuant to the agreement, we and
Cambridge have jointly acquired the site in Vaughan, Ontario and are examining
the feasibility of several other locations. The agreement generally provides
that when Cambridge jointly develops a site with us, the parties will hold
their interests as tenants-in-common having equal interests. The agreement
restricts Cambridge from developing a Mills project in the four specified
Provinces or from developing a Block project anywhere without first offering to
the other party the right to participate equally in such development. The
agreement also prohibits either party from developing a Mills Project within a
fifty mile radius of any other project developed by the parties, and from
developing any other project within a ten mile radius of any such project
unless such project shall have been approved by the other party. The term of
this agreement extends through December 31, 2005 unless otherwise agreed by the
parties.
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ASSET MANAGEMENT STRATEGIES
We believe that the property operating income provided by our existing
assets is a stable, predictable source of cash flow from which to fund our
corporate endeavors, including the development of new projects and the payment
of distributions to shareholders. All of our Mills have experienced stable,
moderate growth in standard measures of real estate operating performance. We
believe these results are attributable to our ability to optimize our tenant
mix, actively manage and promote our assets to tenants and consumers, and
maintain the high standards of our physical assets while maintaining low tenant
occupancy costs.
Optimization of Tenant Mix. Our management actively manages and leases
the properties with the goal of maintaining a fresh and exciting tenant mix that
continues to appeal to consumers over time. Below are examples of our
management's recent efforts in this regard.
- At Potomac Mills, we remerchandised approximately 71,000
square feet of specialty space over the last three years,
adding tenants such as Brooks Brothers, Hush Puppies, Jones
New York, Oshkosh B'Gosh, Pacific Sunwear, Polo Ralph Lauren
Factory Store, Samsonite, Bath & Body Works, Bebe, Aeropostale
and Tommy Hilfiger. Average specialty store sales at Potomac
Mills rose approximately 14% from 1996 to 1999, to $329 per
square foot.
- At Franklin Mills, we upgraded our tenant mix by adding
approximately 135,000 square feet of fashionable new tenants
including Aeropostale, BCBG, DKNY, Kenneth Cole, L'eggs Hanes
Bali, Old Navy, Perry Ellis, Polo Ralph Lauren Factory Store,
Reebok-Rockport and Greg Norman, The Gap Outlet and
Track-n-Trail. Additionally, we updated the food court and
created an entertainment zone with a large-scale general
cinema and themed restaurants like Elephant & Castle Pub and
Rainforest Cafe. Average specialty store sales at Franklin
Mills rose approximately 24% from 1996 to 1999, to $316 per
square foot.
- At Gurnee Mills, we have re-tenanted 30,000 square feet with
upscale fashion tenants such as The Gap Outlet, Abercrombie &
Fitch and Nautica and added a 125,000 square foot Bass Pro
Shops Outdoor World. Average specialty store sales at Gurnee
Mills rose approximately 15% from 1996 to 1999, to $290 per
square foot.
Active Management and Promotion of Properties to Tenants and Consumers.
As a result of the performance of our properties and our strong relationships
with retailers, the Mills have had a high degree of tenant retention. During
1999, for example, 66% of the expiring specialty store gross leasable area was
renewed by the existing tenants.
We generally obtain favorable lease terms as evidenced by the long
duration of our leases, their fixed rent steps and their percentage rent
provisions.
Anchor leases, which generally represent approximately 61% of the gross
leasable area of any individual project, generally have a ten-year term with a
series of five-year options exercisable at the tenant's discretion. Specialty
store leases generally range from three to seven years in term. As of December
31, 1999, the weighted average lease maturity for our existing portfolio of
leases was 6.4 years.
Our leases generally provide for the payment of a fixed base rent as
well as an additional rent based upon sales levels achieved by the tenant. The
lease agreements also typically provide for base rental increases either in the
form of fixed rate step ups or consumer price index increases.
We promote our Mills to consumers by spending $1.0 million to $2.5
million annually per Mills on advertising aimed at consumers. Our success in
this program is evidenced by the following:
- 18 million visitors per Mills operating throughout 1999,
ranking each Mills in the top tourist attractions in its
respective state
- Average length of visit is significantly higher than the peer
group average; and
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- Primary trade area is extended to 40 miles with tourist draw
from 50 states and 49 countries.
Maintenance of High Standards of Physical Assets and Low Tenant
Occupancy Costs. We believe our properties are well maintained physically. To
ensure a high quality shopping experience for our customers, in addition to our
regular recurring maintenance program, we invested an additional $102.5 million
in renovation and expansion projects in our assets from 1996 to 1999.
While continuing the high appearance standard and maintenance level of
our properties, we have maintained an affordable cost of occupancy for our
tenants. During 1999, specialty store cost of occupancy for the seven Mills
opened for a full year or more totaled 11.7%. (The industry average for
specialty store cost of occupancy for 1997 was 12.9%, according to Urban Land
Institute Dollars & Cents Shopping Centers: 1998).
DEVELOPMENT STRATEGY
Proven Track Record. Since our initial public offering in April 1994,
we have developed and opened five new Mills projects and one new Block project,
adding a total of approximately 6.8 million square feet of new gross leasable
area to our portfolio at a total cost of approximately $1.1 billion. Each of
these projects was completed on time and under budget, with strong occupancy
levels as outlined below:
<TABLE>
<CAPTION>
OCCUPANCY AT OCCUPANCY AT
PROJECT DATE OPENED OPENING (1) DECEMBER 31, 1999 (1)
- ------------------- ------------- ---------------- ---------------------
<S> <C> <C> <C>
Ontario Mills November 1996 91.3% 98.0%
Grapevine Mills October 1997 91.8 97.6
Arizona Mills November 1997 92.6 97.7
The Block at Orange November 1998 88.5 94.2
Concord Mills September 1999 88.4 88.8
Katy Mills October 1999 91.2 91.2
</TABLE>
(1) Occupancy is percentage of gross leasable area subject to fully executed
leases.
Disciplined Approach. We intend to complete two to three new
development projects per year, depending on market conditions and capital
availability. We employ what we consider to be a highly disciplined approach to
the development process. Our in-house development team consists of several
senior officers who are responsible for all aspects of development, including
market research, site selection, predevelopment, construction and tenant
coordination. We maintain strict asset management control through the entire
development process, including frequent internal reviews of costs and leasing
status.
To mitigate development risk, we have adopted a number of procedures,
including the following:
- Site Selection: Mills projects are developed in the top standard
metropolitan statistical areas that are populous, growing and
reasonably affluent. We select sites within our target markets
that have at least one million people within a 20-mile radius.
The sites must be well situated and near major transportation
arteries. We perform predevelopment work when land is under
option to minimize capital exposure.
- Pre-leasing: We obtain tenant validation prior to land
acquisition and significant pre-leasing commitments prior to
construction commencement and financing. We traditionally obtain
letters of intent and approvals from at least five to ten key
anchor tenants indicating their desire to join us in the
project. Typically, a project will be 40-50% pre-leased before
construction financing is obtained.
- Financing: We maintain a network of relationship banks to
facilitate construction financing and utilize strategic and
financial equity partners to share in the risks and costs,
including loan guarantees.
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ADDITIONAL FACTORS
Seasonality. The regional shopping center industry is seasonal in
nature, with mall tenant sales peaking in the fourth quarter due to the holiday
season. As a result, a substantial portion of the percentage rent is not paid
until the fourth quarter. Furthermore, most new lease-up occurs towards the
later part of the year in anticipation of the holiday season and most vacancies
occur toward the beginning of the year. In addition, the majority of the
temporary tenants take occupancy in the fourth quarter. Accordingly, cash flow
and occupancy levels are generally lowest in the first quarter and highest in
the fourth quarter. This seasonality also impacts the quarter-by-quarter results
of net operating income and funds from operations. However, minimum rent, which
is the largest source of income, is not affected by seasonality.
Environmental Matters. We believe that our properties are in compliance
in all material respects with all federal, state and local ordinances and
regulations regarding hazardous or toxic substances. We are not aware of any
environmental condition which we believe would have a material adverse effect on
our financial condition or results of operations (before consideration of any
potential insurance coverage). Nevertheless, it is possible that there are
material environmental liabilities of which we are unaware. Moreover, no
assurances can be given that (i) future laws, ordinances or regulations will not
impose any material environmental liability or (ii) the current environmental
condition of our properties have not been or will not be affected by tenants and
occupants of our properties, by the condition of properties in the vicinity of
our properties or by third parties unrelated to us.
Limited quantities of asbestos containing materials are present in
certain of our properties. The asbestos containing materials found are generally
non-friable (meaning that the asbestos containing materials are not easily
crumbled and thus are less likely to release asbestos fibers into the air), in
good condition and are unlikely to be disturbed. With certain exceptions, these
asbestos containing materials will be removed by us in the ordinary course of
renovation or reconstruction. Prior to removal, these asbestos containing
materials will be monitored and maintained by us in accordance with procedures
established by the Environmental Protection Agency, the Occupational Safety and
Health Administration and other applicable governmental authorities.
Insurance. Our management believes that all of our properties are
adequately covered by insurance.
TAX STATUS
We conduct our operations in a way intended to qualify us as a REIT
under the Internal Revenue Code of 1986 (the "Code"). As a REIT, we generally
will not be subject to federal and state income taxes on our net taxable income
that we currently distribute to stockholders. Qualification and taxation as a
REIT depends on our ability to meet certain dividend distribution tests, share
ownership requirements and various qualification tests prescribed in the Code.
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ITEM 2. PROPERTIES
The following tables set forth certain information relating to our
properties as of December 31, 1999. We either hold title to the properties or
directly or indirectly hold 100% of the general and limited partnership
interests in the partnerships that own Potomac Mills, Franklin Mills, Sawgrass
Mills (Phases I & II) and Gurnee Mills. For the joint ventures that own
Ontario Mills, Grapevine Mills, Arizona Mills, The Block at Orange, The Oasis at
Sawgrass, Concord Mills and Katy Mills, the Operating Partnership holds
50%, 37.5%, 36.8%, 50%, 50.0%, 37.5%, and 62.5% interests, respectively. The
Operating Partnership has also formed joint ventures to develop additional
properties.
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SUMMARY OF PROPERTIES
The following table sets forth certain information with respect to the
Mills, the Block and the Community Centers as of December 31, 1999:
<TABLE>
<CAPTION>
APPROX.
GROSS ANNUALIZED
METROPOLITAN YEAR LEASABLE AREA PERCENT BASE
NAME/LOCATION AREA SERVICED OPENED (SQ. FT.)(1) LEASED (2) RENT (3)
------------- ------------------ ------ -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
MILLS
Potomac Mills........ Washington 1985 1,637,122 97% $21,699,801
D.C./Baltimore
Franklin Mills....... Philadelphia/Wilmington 1989 1,741,141 92% 17,448,588
Sawgrass Mills....... Fort Lauderdale, FL/ 1990 1,845,342 96% 24,766,417
Miami/Palm Beach
Gurnee Mills......... Chicago/Milwaukee 1991 1,699,673 96% 17,784,832
Ontario Mills........ Los Angeles 1996 1,471,096(5) 98% 19,867,357
Grapevine Mills...... Dallas/Fort Worth 1997 1,500,470 98% 21,177,189
Arizona Mills........ Phoenix 1997 1,233,884 98% 19,538,164
The Oasis at Sawgrass Ft. Lauderdale/Miami/ 1999 290,063 94% 5,947,047
Palm Beach
Concord Mills........ Charlotte 1999 1,235,838(7) 89% 18,442,290
</TABLE>
<TABLE>
<CAPTION>
1999 1999
NO. OF SPECIALTY ANCHOR
ANCHOR STORE SALES STORE SALES
NAME/LOCATION STORES (4) ANCHOR STORE TENANTS PER SQ. FT. PER SQ. FT.
------------- ---------- -------------------- ------------ -----------
<S> <C> <C> <C> <C>
MILLS
Potomac Mills........ 17 AMC Theatres, Books-A-Million, Burlington Coat $ 329 $ 224
Factory, Daffy's, Everything Rubbermaid, IKEA,
J.C. Penney, Linens 'N Things, Marshalls,
Nordstrom Rack, Off 5th - Saks Fifth Avenue,
Spiegel, Sports Authority, Syms, T.J. Maxx,
Homeplace, Group USA, Old Navy
Franklin Mills....... 16 Bed, Bath & Beyond, Boscov's, Burlington Coat 316 168
Factory, General Cinema, Group USA, J.C.
Penney, Last Call-Neiman Marcus, Marshalls,
Modells, Nordstrom Factory, OfficeMax, Pharmor,
Off 5th - Saks Fifth Avenue, Sam's Wholesale,
Syms, Rainforest Cafe, Jillian's
Sawgrass Mills....... 19 Beall's Outlet, Bed, Bath & Beyond, 436 300
Books-A-Million, Brandsmart, Burlington Coat
Factory, J.C. Penney, Last Call-Neiman Marcus,
Marshalls, Outlet Marketplace, Rainforest Cafe,
Off 5th - Saks Fifth Avenue, Service
Merchandise, Spec's Outlet, Spiegel, Sports
Authority, T.J. Maxx, Target, Homeplace
Gurnee Mills......... 17 Bass Pro Shops, Bed, Bath & Beyond, Burlington 290 168
Coat Factory, Computer City, J.C. Penney, Marcus
Cinema, Marshalls, Off 5th - Saks Fifth Avenue,
Rainforest Cafe, Spiegel, Sports Authority,
Syms, T.J. Maxx, Value City, Homeplace, Rinkside
Sports
Ontario Mills........ 18 AMC Theatres, American Wilderness, Bed, Bath & 361 167
Beyond, Burlington Coat Factory, Dave & Busters,
Foozles, Group USA, J.C. Penney, Marshalls,
Mikasa, Off Rodeo Drive, Off 5th - Saks Fifth
Avenue, Sega Gameworks, Sports Authority, T.J.
Maxx, Totally for Kids, Virgin Megastores,
Rainforest Cafe
Grapevine Mills...... 17 Bed, Bath & Beyond, Books-A-Million, Burlington 297 215
Coat Factory, Group USA, J.C. Penney, Marshalls,
Off Rodeo Drive, Old Navy, Rainforest Cafe, Off
5th - Saks Fifth Avenue, Sega Gameworks, Sports
Authority, Virgin Megastores, Western
Warehouse, AMC Theatres, American Wilderness,
Bass Pro Shops
Arizona Mills........ 16 Burlington Coat Factory, Sega Gameworks, Group 307 175
USA, Harkins Great Mall Cinemas, Hi-Health
World of Nutrition, J.C. Penney, Linens' N
Things, Marshalls, Off 5th - Saks Fifth Avenue,
Off Rodeo Drive, Oshman's Supersports,
Rainforest Cafe, Ross Dress for Less, Virgin
Megastores, American Wilderness, Last Call -
Neiman Marcus
The Oasis at Sawgrass 3 Regal Theatres, Ron Jon Surf Shop, Sega Gameworks N/A (8) N/A (8)
Concord Mills........ 15 Sun & Ski Sports, Jillian's, Alabama Grill, N/A (8) N/A (8)
Jeepers, Books-A-Million, Off 5th - Saks Fifth
Avenue, Blacklion, Bed, Bath & Beyond, T.J.
Maxx, Bass Pro Shops, Burlington Coat Factory,
Group USA, AMC Theatres, F.Y.E. (For Your
Entertainment), Old Navy
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
APPROX.
GROSS ANNUALIZED
METROPOLITAN YEAR LEASABLE AREA PERCENT BASE
NAME/LOCATION AREA SERVICED OPENED (SQ. FT.)(1) LEASED (2) RENT (3)
------------- ------------------ ------ -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Katy Mills........... Houston 1999 1,159,821 91% 18,651,953
MILLS TOTALS/WEIGHTED AVERAGES 13,814,450 95% $185,324,338
========== ============
The Block at Orange Los Angeles/Orange 1998 644,652 (6) 94% 14,399,399
County ========== ==========
COMMUNITY CENTERS (11 CENTERS) 2,220,320 89% $18,051,821
========== ===========
</TABLE>
<TABLE>
<CAPTION>
1999 1999
NO. OF SPECIALTY ANCHOR
ANCHOR STORE SALES STORE SALES
NAME/LOCATION STORES (4) ANCHOR STORE TENANTS PER SQ. FT. PER SQ. FT.
------------- ---------- -------------------- ------------ -----------
<S> <C> <C> <C> <C>
Katy Mills........... 13 F.Y.E. (For Your Entertainment), Boot Town, N/A (8) N/A (8)
Books-A-Million, Off 5th - Saks Fifth Avenue,
Rainforest Cafe, Bass Pro Shops, Sun & Ski
Sports, Burlington Coat Factory, Old Navy, Bed,
Bath & Beyond, Jillians, AMC Theatres, Benneton
Sportsystems
MILLS TOTALS/WEIGHTED
AVERAGES 156 $ 337 $ 207
===
The Block at Orange 9 Borders Books and Music, Vans, Virgin 338 177
=== Megastores, Off 5th - Saks Fifth Avenue, Ron Jon
Surf Shop, Sega Gameworks, AMC Theatres, Dave &
Busters, Hilo Hattie
COMMUNITY CENTERS (11 CENTERS 27
===
</TABLE>
(1) Includes 963,173 square feet of gross leasable area owned by tenants as
follows: Potomac Mills-80,000 square feet; Franklin Mills-209,612 square
feet; Sawgrass Mills-281,774 square feet; Gurnee Mills-250,806 square
feet; Ontario Mills-125,000 square feet; and Community Centers- 15,981
square feet. Ground leases at Franklin Mills of 152,370 square feet and at
Ontario Mills of 16,595 square feet are also included.
(2) Percent leased is defined as all space leased and for which rent is being
paid as of December 31, 1999, excluding tenants with leases having a term
of less than one year plus gross leasable area owned by store tenants
described in footnote (1).
(3) Annualized base rent is defined as the contractual minimum rent of tenants
comprising gross leasable area at December 31, 1999 multiplied by 12.
(4) Anchor stores include all stores occupying more than 20,000 square feet.
(5) Ontario Mills will contain approximately 1.7 million square feet of gross
leasable area, including gross leasable area owned by certain store
tenants, upon full build out.
(6) The Block at Orange will contain approximately 0.8 million square feet of
gross leasable area, including gross leasable area owned by certain store
tenants, upon full build out.
(7) Concord Mills will contain approximately 1.3 million square feet of gross
leasable area, including gross leasable area owned by certain store
tenants, upon full buildout.
(8) 1999 sales per square foot information is not available for The Oasis at
Sawgrass, Concord Mills and Katy Mills, which opened in April 1999,
September 1999, and October 1999, respectively.
19
<PAGE> 20
PROPERTY OPERATING INCOME (IN THOUSANDS, UNAUDITED)
The following table sets forth the property operating income for each of the
Mills, the Block, Mainstreet (our push cart program) and the Community Centers.
The purpose of this table is to provide details about selected line items within
our consolidated financial statements for the year ended December 31, 1999 and
is not intended to be a representation of net income according to accounting
principles generally accepted in the United States.
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
WHOLLY OWNED PROPERTIES
<TABLE>
<CAPTION>
COMMUNITY
POTOMAC FRANKLIN SAWGRASS GURNEE MAINSTREET CENTERS TOTAL
-------- -------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
RENTAL REVENUES:
Minimum rent ............ $ 21,698 $ 18,437 $ 25,680 $ 18,109 $ 2,423 $ 18,060 $104,407
Percentage rent ......... 486 452 1,868 544 236 91 3,677
Recoveries from tenants . 9,510 11,942 14,771 9,724 62 5,671 51,680
Other revenue ........... 1,077 1,146 3,717 1,771 599 468 8,778
-------- -------- -------- -------- -------- -------- --------
Total rental revenues . 32,771 31,977 46,036 30,148 3,320 24,290 168,542
PROPERTY OPERATING COSTS:
Recoverable from tenants 8,023 9,095 13,101 8,446 7 5,792 44,464
Other operating (1)...... 735 966 703 1,150 1,838 792 6,184
-------- -------- -------- -------- -------- -------- --------
Total property operating
costs .................. 8,758 10,061 13,804 9,596 1,845 6,584 50,648
-------- -------- -------- -------- -------- -------- --------
PROPERTY OPERATING INCOME .. $ 24,013 $ 21,916 $ 32,232 $ 20,552 $ 1,475 $ 17,706 $117,894
======== ======== ======== ======== ======== ======== ========
</TABLE>
UNCONSOLIDATED JOINT VENTURES
<TABLE>
<CAPTION>
ONTARIO GRAPEVINE ARIZONA THE BLOCK THE OASIS CONCORD KATY
-------- --------- -------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
RENTAL REVENUES:
Minimum rent ............ $ 19,507 $ 22,391 $ 20,986 $ 16,139 $ 4,221 $ 5,763 $ 3,416
Percentage rent ......... 447 233 542 143 -- 38 3
Recoveries from tenants . 9,513 10,079 8,381 3,363 1,336 1,394 1,091
Other revenue (2) ....... 2,905 2,373 1,902 1,335 103 831 488
-------- -------- -------- -------- -------- -------- --------
Total rental revenues .. 32,372 35,076 31,811 20,980 5,660 8,026 4,998
PROPERTY OPERATING COSTS:
Recoverable from tenants 8,296 8,808 8,048 4,761 1,240 1,622 1,334
Other operating (1) ..... 760 916 1,151 465 377 279 79
-------- -------- -------- -------- -------- -------- --------
Total property operating
costs................... 9,056 9,724 9,199 5,226 1,617 1,901 1,413
-------- -------- -------- -------- -------- -------- --------
PROPERTY OPERATING INCOME .. $ 23,316 $ 25,352 $ 22,612 $ 15,754 $ 4,043 $ 6,125 $ 3,585
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
OTHER TOTAL
-------- --------
<S> <C> <C>
RENTAL REVENUES:
Minimum rent ............ $ 85 $ 92,508
Percentage rent ......... -- 1,406
Recoveries from tenants . 6 35,163
Other revenue (2) ....... -- 9,937
-------- --------
Total rental revenues .. 91 139,014
PROPERTY OPERATING COSTS:
Recoverable from tenants 8 34,117
Other operating (1) ..... 341 4,368
-------- --------
Total property operating
costs................... 349 38,485
-------- --------
PROPERTY OPERATING INCOME .. $ (258) $100,529
======== ========
</TABLE>
(1) Total property operating costs excludes management fees as follows:
Potomac Mills - $935, Franklin Mills - $791, Sawgrass Mills - $1,218,
Gurnee Mills - $867, Community Centers - $795, Ontario Mills - $849,
Grapevine Mills - $1,232, Arizona Mills - $1,357, The Block at Orange -
$660, The Oasis at Sawgrass - $151, Concord Mills - $365, and Katy Mills
$150.
(2) Other revenue for The Block excludes $1,298 of income related to tax
increment financing for the project, which the Company considers to be
recurring operating income.
20
<PAGE> 21
OCCUPANCY ANALYSIS
The following table sets forth occupancy analysis for our Mills, Community
Centers and the Block as of December 31, 1999.
<TABLE>
<CAPTION>
GROSS LEASED & OCCUPIED AREA (SQ. FT.) (1)
TOTAL GROSS LEASABLE AREA OCCUPIED
GROSS (3)
PROJECT LEASABLE AREA AT DECEMBER 31, 1999 %
- ------------------ ------------- ---------------------------- -------
<S> <C> <C> <C>
MILLS:
Potomac Mills 1,637,122 1,594,827 97.42%
Franklin Mills 1,741,141 1,597,093 91.73%
Sawgrass Mills 1,845,342 1,765,903 95.70%
Gurnee Mills 1,699,673 1,639,317 96.45%
--------- --------- ------
Total Mills 6,923,278 6,597,140 95.29%
COMMUNITY CENTERS:
Butterfield 114,610 114,610 100.00%
Coopers Crossing 173,509 115,115 66.35%
Crosswinds 144,273 141,600 98.15%
Fashion Place 147,950 119,418 80.72%
Germantown 177,097 173,097 97.74%
Gwinnett 194,503 183,513 94.35%
Liberty Plaza 315,067 248,856 78.99%
Montgomery Village 117,391 94,601 80.59%
Mt. Prospect 298,600 290,037 97.13%
West Falls Church 87,824 86,488 98.48%
Western Hills 449,496 404,281 89.94%
--------- --------- ------
2,220,320 1,971,616 88.80%
--------- --------- ------
Total Wholly Owned 9,143,598 8,568,756 93.71%
========= ========= ======
JOINT VENTURES:
Ontario Mills 1,471,096 1,441,011 97.95%
Grapevine Mills 1,500,470 1,464,845 97.63%
Arizona Mills 1,233,884 1,205,890 97.73%
Concord Mills 1,235,838 1,096,988 88.76%
Katy Mills 1,159,821 1,058,211 91.24%
The Block at Orange 644,652 607,432 94.23%
The Oasis at
Sawgrass 290,063 273,739 94.37%
--------- --------- -----
Total Joint Ventures 7,535,824 7,148,116 94.86%
========= ========= ======
Total Mills 13,814,450 13,137,824 95.10%
========== ========== ======
Total Wholly Owned
and Joint Ventures 16,679,422 15,716,872 94.23%
========== ========== ======
</TABLE>
<TABLE>
<CAPTION>
GROSS LEASED & OCCUPIED AREA, NET OF ANCHORS (SQ. FT.) (2)
TOTAL
GROSS GROSS LEASABLE AREA OCCUPIED (3)
PROJECT LEASABLE AREA AT DECEMBER 31, 1999 %
- ------------------ ------------- -------------------------------- --------
<S> <C> <C> <C>
MILLS:
Potomac Mills 636,565 594,270 93.36%
Franklin Mills 598,306 521,813 87.22%
Sawgrass Mills 676,617 642,497 94.96%
Gurnee Mills 623,027 562,671 90.31%
--------- --------- ------
Total Mills 2,534,515 2,321,251 91.59%
COMMUNITY CENTERS:
Butterfield 72,677 72,677 100.00%
Coopers Crossing 14,953 14,953 100.00%
Crosswinds 23,298 20,625 88.53%
Fashion Place 74,692 46,160 61.80%
Germantown 130,341 126,341 96.93%
Gwinnett 96,956 85,966 88.66%
Liberty Plaza 52,320 39,458 75.42%
Montgomery Village 80,986 58,196 71.86%
Mt. Prospect 126,005 117,442 93.20%
West Falls Church 49,983 48,647 97.33%
Western Hills 134,980 89,765 66.50%
--------- --------- ------
857,191 720,230 84.02%
--------- --------- ------
Total Wholly Owned 3,391,706 3,041,481 89.67%
========= ========= ======
JOINT VENTURES:
Ontario Mills 509,569 479,484 94.10%
Grapevine Mills 543,397 507,772 93.44%
Arizona Mills 533,153 505,159 94.75%
Concord Mills 565,400 426,550 75.44%
Katy Mills 563,828 462,218 81.98%
The Block at Orange 284,951 247,731 86.94%
The Oasis at
Sawgrass 155,203 138,879 89.48%
--------- --------- ------
Total Joint Ventures 3,155,501 2,767,793 87.71%
========= ========= ======
Total Mills 5,405,065 4,841,313 89.57%
========= ========= ======
Total Wholly Owned
and Joint Ventures 6,547,207 5,809,274 88.73%
========= ========= ======
</TABLE>
<TABLE>
<CAPTION>
TOTAL VACANT (SQ.FT.)
SPECIALTY
PROJECT ANCHOR STORE TOTAL
- ------------------ ------- --------- -------
<S> <C> <C> <C>
MILLS:
Potomac Mills 0 42,295 42,295
Franklin Mills 67,555 76,493 144,048
Sawgrass Mills 45,319 34,120 79,439
Gurnee Mills 0 60,356 60,356
------- ------- ------
Total Mills 112,874 213,264 326,138
COMMUNITY CENTERS:
Butterfield 0 0 0
Coopers Crossing 58,394 0 58,394
Crosswinds 0 2,673 2,673
Fashion Place 0 28,532 28,532
Germantown 0 4,000 4,000
Gwinnett 0 10,990 10,990
Liberty Plaza 53,349 12,862 66,211
Montgomery Village 0 22,790 22,790
Mt. Prospect 0 8,563 8,563
West Falls Church 0 1,336 1,336
Western Hills 0 45,215 45,215
------- ------- ------
111,743 136,961 248,704
------- ------- ------
Total Wholly Owned 224,617 350,225 574,842
======= ======= =======
JOINT VENTURES:
Ontario Mills 0 30,085 30,085
Grapevine Mills 0 35,625 35,625
Arizona Mills 0 27,994 27,994
Concord Mills 0 138,850 138,850
Katy Mills 0 101,610 101,610
The Block at Orange 0 37,220 37,220
The Oasis at
Sawgrass 0 16,324 16,324
------- -------- -------
Total Joint Ventures 0 387,708 387,708
======= ======== =======
Total Mills 112,874 563,752 676,626
======= ======== =======
Total Wholly Owned
and Joint Ventures 224,617 737,933 962,550
======= ======== =======
</TABLE>
(1) Includes 963,173 square feet of gross leasable area owned by tenants as
follows: Potomac Mills-80,000 square feet; Franklin Mills-209,612 square
feet; Sawgrass Mills-281,774 square feet; Gurnee Mills-250,806 square feet;
Liberty Plaza - 13,741 square feet; West Falls Church - 2,240 square feet;
and Ontario Mills-125,000 square feet. A ground lease at Franklin Mills of
152,370 square feet and at Grapevine Mills of 177,063 square feet are also
included.
(2) Anchor stores include all stores occupying more than 20,000 square feet.
(3) Gross leasable area occupied is defined as follows: (i) all space leased
and for which rent is being paid as of December 31, 1999, excluding tenants
with leases that have a term of less than one year, plus (ii) gross
leasable area owned by certain store tenants.
21
<PAGE> 22
LEASE EXPIRATION SCHEDULE(1)
The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1999 multiplied by 12.
<TABLE>
<CAPTION>
NO. OF 2000 NO. OF
LEASES ANNUALIZED PER SQ. LEASES
EXPIRING SQ. FT MIN. RENT FT. EXPIRING SQ. FT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Potomac Mills:
Anchors (2) -- -- $ -- $ -- -- --
Majors (2) 2 83,533 626,498 7.50 2 67,052
Specialty 26 66,678 1,706,556 25.59 27 69,344
Food Court 5 3,898 240,855 61.79 3 2,484
----------- ----------- ----------- ----------- ----------- -----------
33 154,109 $ 2,573,909 $ 16.70 32 138,880
Franklin Mills:
Anchors (2) -- -- $ -- $ -- 1 70,701
Majors (2) -- -- -- -- 1 25,127
Specialty 24 87,924 1,827,158 20.78 37 107,409
Food Court 3 2,870 118,310 41.22 2 1,000
----------- ----------- ----------- ----------- ----------- -----------
27 90,794 $ 1,945,468 $ 21.43 41 204,237
Sawgrass Mills:
Anchors (2,3) 1 78,619 $ 255,512 $ 3.25 2 147,915
Majors (2) 1 20,189 240,000 11.89 -- --
Specialty 49 159,647 3,786,418 23.72 47 164,740
Food Court 22 18,536 1,036,516 55.92 4 3,124
----------- ----------- ----------- ----------- ----------- -----------
73 276,991 $ 5,318,446 $ 19.20 53 315,779
Gurnee Mills:
Anchors (2) -- -- $ -- $ -- 3 231,271
Majors (2) -- -- -- -- 1 40,752
Specialty 21 66,071 1,211,857 18.34 53 174,782
Food Court 1 657 24,309 37.00 14 10,061
----------- ----------- ----------- ----------- ----------- -----------
22 66,728 $ 1,236,166 $ 18.53 71 456,866
Total Mills without Joint
Ventures:
Anchors (2) 1 78,619 $ 255,512 $ 3.25 6 449,887
Majors (2) 3 103,722 866,498 8.35 4 132,931
Specialty 120 380,320 8,531,989 22.43 164 516,275
Food Court 31 25,961 1,419,990 54.70 23 16,669
----------- ----------- ----------- ----------- ----------- -----------
155 588,622 $11,073,989 $ 18.81 197 1,115,762
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
2001 NO. OF 2002
ANNUALIZED PER SQ. LEASES ANNUALIZED PER SQ.
MIN. RENT FT. EXPIRING SQ. FT MIN. RENT FT.
----------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Potomac Mills:
Anchors (2) $ -- $ -- -- -- $ -- $ --
Majors (2) 602,846 8.99 -- -- -- --
Specialty 1,850,960 26.69 32 121,924 2,592,939 21.27
Food Court 153,506 61.80 3 1,859 127,485 68.58
----------- ----------- ----------- ----------- ----------- ---------
$ 2,607,312 $ 18.77 35 123,783 $ 2,720,424 $ 21.98
Franklin Mills:
Anchors (2) $ 484,302 $ 6.85 -- -- $ -- $ --
Majors (2) 178,402 7.10 1 30,237 257,015 8.50
Specialty 2,335,638 21.75 26 83,912 1,808,558 21.55
Food Court 40,990 40.99 3 2,512 74,660 29.72
----------- ----------- ----------- ----------- ----------- ---------
$ 3,039,332 $ 14.88 30 116,661 $ 2,140,233 $ 18.35
Sawgrass Mills:
Anchors (2,3) $ 1,101,435 $ 7.45 -- -- $ -- $ --
Majors (2) -- -- 2 42,657 365,491 8.57
Specialty 3,941,804 23.93 28 72,411 2,193,327 30.29
Food Court 176,752 56.58 2 1,852 87,602 47.30
----------- ----------- ----------- ----------- ----------- ---------
$ 5,219,991 $ 16.53 32 116,920 $ 2,646,420 $ 22.63
Gurnee Mills:
Anchors (2) $ 1,381,540 $ 5.97 1 61,265 $ 495,000 $ 8.08
Majors (2) 289,339 7.10 1 33,627 252,202 7.50
Specialty 3,569,870 20.42 24 73,363 1,553,646 21.18
Food Court 572,738 56.93 5 3,611 228,158 63.18
----------- ----------- ----------- ----------- ----------- ---------
$ 5,813,487 $ 12.72 31 171,866 $ 2,529,006 $ 14.71
Total Mills without Joint
Ventures:
Anchors (2) $ 2,967,277 $ 6.60 1 61,265 $ 495,000 $ 8.08
Majors (2) 1,070,587 8.05 4 106,521 874,408 8.21
Specialty 11,698,272 22.66 110 351,610 8,148,470 23.17
Food Court 943,986 56.63 13 9,834 517,905 52.66
----------- ----------- ----------- ----------- ----------- ---------
$16,680,122 $ 14.95 128 529,230 $10,036,083 $ 18.96
=========== =========== =========== =========== =========== =========
</TABLE>
<TABLE>
<CAPTION>
NO. OF 2003
LEASES ANNUALIZED PER SQ.
EXPIRING SQ. FT MIN. RENT FT.
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Potomac Mills:
Anchors (2) -- -- $ -- $ --
Majors (2) 3 75,384 654,146 8.68
Specialty 48 132,888 3,802,223 28.61
Food Court -- -- -- --
----------- ----------- ----------- ---------
51 208,272 $ 4,456,369 $ 21.40
Franklin Mills:
Anchors (2) 1 128,950 $ 567,000 $ 4.40
Majors (2) -- -- -- --
Specialty 20 92,026 1,692,582 18.39
Food Court 2 1,238 54,400 43.94
----------- ----------- ----------- ---------
23 222,214 $ 2,313,982 $ 10.41
Sawgrass Mills:
Anchors (2,3) 1 111,324 $ 640,113 $ 5.75
Majors (2) -- -- -- --
Specialty 20 72,676 2,050,395 28.21
Food Court -- -- -- --
----------- ----------- ----------- ---------
21 184,000 $ 2,690,508 $ 14.62
Gurnee Mills:
Anchors (2) -- -- $ -- $ --
Majors (2) 3 115,506 977,120 8.46
Specialty 24 85,015 1,775,190 20.88
Food Court -- -- -- --
----------- ----------- ----------- ---------
27 200,521 $ 2,752,310 $ 13.73
Total Mills without Joint
Ventures:
Anchors (2) 2 240,274 $ 1,207,113 $ 5.02
Majors (2) 6 190,890 1,631,266 8.55
Specialty 112 382,605 9,320,390 24.36
Food Court 2 1,238 54,400 43.94
----------- ----------- ----------- ---------
122 815,007 $12,213,169 $ 14.99
=========== =========== =========== =========
</TABLE>
(1) Excludes 963,173 square feet of gross leasable area owned by tenants as
follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
square feet; Ontario Mills - 125,000 square feet; and Community Centers -
15,981 square feet. Ground leases at Franklin Mills of 152,370 square feet
and at Grapevine Mills of 177,063 square feet are also excluded.
(2) Anchor tenants are defined as any tenant who gross leasable area equals or
exceeds 50,000 square feet and major tenants are defined as any tenant
whose gross leasable area equals or exceeds 20,000 square feet but is less
than 50,000 square feet.
(3) For lease expiration purposes, Sawgrass Mills includes 59,480 square feet
of gross leasable area that is owned in fee by Sawgrass Mills Phase III
(The Oasis), but is lease back to Sawgrass Mills and is sublet to Regal
Theatres.
22
<PAGE> 23
LEASE EXPIRATION SCHEDULE(1)
The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1999 multiplied by 12.
<TABLE>
<CAPTION>
NO. OF 2000 NO. OF
LEASES ANNUALIZED PER SQ. LEASES
EXPIRING SQ. FT MIN. RENT FT. EXPIRING SQ. FT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ontario Mills:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- -- --
Specialty 6 9,872 306,440 31.04 47 199,801
Food Court -- -- -- -- -- --
---------- ----------- ----------- ----------- ----------- -----------
6 9,872 $ 306,440 $ 31.04 47 199,801
Grapevine Mills:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- -- --
Specialty 8 16,419 382,112 23.27 11 26,709
Food Court -- -- -- -- -- --
---------- ---------- ----------- ----------- ----------- -----------
8 16,419 $ 382,112 $ 23.27 11 26,709
Arizona Mills:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- -- --
Specialty 6 18,768 505,145 26.92 8 17,212
Food Court -- -- -- -- -- --
---------- ---------- ----------- ----------- ----------- -----------
6 18,768 $ 505,145 $ 26.92 8 17,212
The Oasis at Sawgrass:
Anchors(2,3) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- -- --
Specialty -- -- -- -- -- --
Food Court -- -- -- -- -- --
---------- ---------- ----------- ----------- ----------- -----------
-- -- $ -- $ -- -- --
Concord Mills:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- -- --
Specialty 2 12,107 352,710 29.13 1 2,658
Food Court -- -- -- -- -- --
---------- ---------- ----------- ----------- ----------- -----------
2 12,107 $ 352,710 $ 29.13 1 2,658
</TABLE>
<TABLE>
<CAPTION>
2001 NO. OF 2002
ANNUALIZED PER SQ. LEASES ANNUALIZED PER SQ.
MIN. RENT FT. EXPIRING SQ. FT MIN. RENT FT.
----------- ----------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ontario Mills:
Anchors(2) $ -- $ -- -- -- $ -- $ --
Majors (2) -- -- -- -- -- --
Specialty 3,895,178 19.50 24 70,772 1,716,121 24.25
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
$3,895,178 $ 19.50 24 70,772 $1,716,121 $ 24.25
Grapevine Mills:
Anchors (2) $ -- $ -- -- -- $ -- $ --
Majors (2) -- -- 1 23,329 279,948 12.00
Specialty 627,739 23.50 55 182,280 4,007,068 21.98
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
$ 627,739 $ 23.50 56 205,609 $4,287,016 $ 20.85
Arizona Mills:
Anchors(2) $ -- $ -- -- -- $ -- $ --
Majors (2) -- -- -- -- -- --
Specialty 444,141 25.80 58 198,373 4,221,874 21.28
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
$ 444,141 $ 25.80 58 198,373 $4,221,874 $ 21.28
The Oasis at Sawgrass:
Anchors(2,3) $ -- $ -- -- -- $ -- $ --
Majors (2) -- -- -- -- -- --
Specialty -- -- 2 3,132 179,705 57.38
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
$ -- $ -- 2 3,132 $ 179,705 $ 57.38
Concord Mills:
Anchors(2) $ -- $ -- -- -- $ -- $ --
Majors(2) -- -- -- -- -- --
Specialty 58,476 22.00 2 2,946 92,894 31.53
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
$ 58,476 $ 22.00 2 2,946 $ 92,894 $ 31.53
</TABLE>
<TABLE>
<CAPTION>
NO. OF 2003
LEASES ANNUALIZED PER SQ.
EXPIRING SQ. FT MIN. RENT FT.
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Ontario Mills:
Anchors (2) -- -- $ -- $ --
Majors (2) -- -- -- --
Specialty 14 42,440 1,112,563 26.21
Food Court -- -- -- --
---------- ------------- ------------- -----------
14 42,440 $ 1,112,563 $ 26.21
Grapevine Mills:
Anchors -- -- $ -- $ --
Majors -- -- -- --
Specialty 22 71,420 1,636,636 22.92
Food Court -- -- -- --
------------ ------------- ------------- -----------
22 71,420 $ 1,636,636 $ 22.92
Arizona Mills:
Anchors(2) -- -- $ -- $ --
Majors -- -- -- --
Specialty 23 87,967 1,906,924 21.68
Food Court -- -- -- --
------------ ------------- ------------- -----------
23 87,967 $ 1,906,924 $ 21.68
The Oasis at Sawgrass:
Anchors(2,3) -- -- $ -- $ --
Majors -- -- -- --
Specialty 2 11,539 368,940 31.97
Food Court -- -- -- --
------------ ------------- ------------- -----------
2 11,539 $ 368,940 $ 31.97
Concord Mills:
Anchors(2) -- -- $ -- $ --
Majors(2) 1 21,543 258,516 12.00
Specialty 2 22,071 298,780 13.54
Food Court -- -- -- --
------------ -------------- ------------- ------------
3 43,614 $ 557,296 $ 12.78
</TABLE>
- -----------------
(1) Excludes 963,173 square feet of gross leasable area owned by tenants as
follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
square feet; Ontario Mills - 125,000 square feet; and Community Centers -
15,981 square feet. Ground leases at Franklin Mills of 152,370 square feet
and at Grapevine Mills of 177,063 square feet are also excluded.
(2) Anchor tenants are defined as any tenant who gross leasable area equals or
exceeds 50,000 square feet and major tenants are defined as any tenant
whose gross leasable area equals or exceeds 20,000 square feet but is less
than 50,000 square feet.
(3) For lease expiration purposes, Sawgrass Mills includes 59,480 square feet
of gross leasable area that is owned in fee by Sawgrass Mills Phase III
(The Oasis), but lease back to Sawgrass Mills and is sublet to Regal
Theatres.
23
<PAGE> 24
LEASE EXPIRATION SCHEDULE(1)
The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1999 multiplied by 12.
<TABLE>
<CAPTION>
NO. OF 2000 NO. OF
LEASES ANNUALIZED PER SQ. LEASES
EXPIRING SQ. FT MIN. RENT FT. EXPIRING SQ. FT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Katy Mills:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- -- --
Specialty 1 1,582 36,386 23.00 1 3,327
Food Court -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
1 1,582 $ 36,386 $ 23.00 1 3,327
Total Mills with
Joint Ventures:
Anchors(2) 1 78,619 $ 255,512 $ 3.25 6 449,887
Majors(2) 3 103,722 866,498 8.35 4 132,931
Specialty 143 439,068 10,114,782 23.04 232 765,982
Food Court 31 25,961 1,419,990 54.70 23 16,669
----------- ----------- ----------- ----------- ----------- -----------
178 647,370 $12,656,782 $ 19.55 265 1,365,469
=========== =========== =========== =========== =========== ===========
The Block at Orange:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- -- --
Specialty 2 826 72,210 87.42 6 5,946
Food Court -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
2 826 $ 72,210 $ 87.42 6 5,946
=========== =========== =========== =========== =========== ===========
Community Centers:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) 1 21,007 283,595 13.50 1 24,300
Specialty 28 118,258 1,292,259 10.93 47 169,173
Food Court -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
29 139,265 $ 1,575,854 $ 11.32 48 193,473
=========== =========== =========== =========== =========== ===========
Totals:
Anchors(2) 1 78,619 $ 255,512 $ 3.25 6 449,887
Majors(2) 4 124,729 1,150,093 9.22 5 157,231
Specialty 173 558,152 11,479,251 20.57 285 941,101
Food Court 31 25,961 1,419,990 54.70 23 16,669
----------- ----------- ----------- ----------- ----------- -----------
209 787,461 $14,304,846 $ 18.17 319 1,564,888
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
2001 NO. OF 2002
ANNUALIZED PER SQ. LEASES ANNUALIZED PER SQ.
MIN. RENT FT. EXPIRING SQ. FT MIN. RENT FT.
----------- ----------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Katy Mills:
Anchors(2) $ -- $ -- -- -- $ -- $ --
Majors(2) -- -- -- -- -- --
Specialty 66,540 20.00 5 7,017 265,154 37.79
Food Court -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
$ 66,540 $ 20.00 5 7,017 $ 265,154 $ 37.79
Total Mills with
Joint Ventures:
Anchors(2) $ 2,967,277 $ 6.60 1 61,265 $ 495,000 $ 8.08
Majors(2) 1,070,587 8.05 5 129,850 1,154,656 8.89
Specialty 16,790,346 21.92 256 816,130 18,631,286 22.83
Food Court 943,986 56.63 13 9,834 517,905 52.66
----------- ----------- ----------- ----------- ----------- -----------
$21,772,196 $ 15.94 275 1,017,079 $20,798,847 $ 20.45
=========== =========== =========== =========== =========== ===========
The Block at Orange:
Anchors(2) $ -- $ -- -- -- $ -- $ --
Majors(2) -- -- -- -- -- --
Specialty 227,569 38.27 5 7,495 224,909 30.01
Food Court -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
$ 227,569 $ 38.27 5 7,495 $ 224,909 $ 30.01
=========== =========== =========== =========== =========== ===========
Community Centers:
Anchors(2) $ -- $ -- -- -- $ -- $ --
Majors(2) 133,650 5.50 2 59,300 245,450 4.14
Specialty 2,261,380 13.37 46 132,654 1,923,505 14.50
Food Court -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
$ 2,395,030 $ 12.38 48 191,954 $ 2,168,955 $ 11.30
=========== =========== =========== =========== =========== ===========
Totals:
Anchors(2) $ 2,967,277 $ 6.60 1 61,265 $ 495,000 $ 8.08
Majors(2) 1,204,237 7.66 7 189,150 1,400,106 7.40
Specialty 19,279,295 20.49 307 956,279 20,779,700 21.73
Food Court 943,986 56.63 13 9,834 517,905 52.66
----------- ----------- ----------- ----------- ----------- -----------
$24,394,795 $ 15.59 328 1,216,528 $23,192,711 $ 19.06
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
NO. OF 2003
LEASES ANNUALIZED PER SQ.
EXPIRING SQ. FT MIN. RENT FT.
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Katy Mills:
Anchors(2) -- -- $ -- $ --
Majors(2) 1 22,715 272,580 12.00
Specialty 3 16,535 258,233 15.62
Food Court -- -- -- --
----------- ----------- ----------- ----------
4 39,250 $ 530,813 $ 13.52
Total Mills with
Joint Ventures:
Anchors(2) 2 240,274 $ 1,207,113 $ 5.02
Majors(2) 8 235,148 2,162,362 9.20
Specialty 178 634,577 14,902,466 23.48
Food Court 2 1,238 54,400 43.94
----------- ----------- ----------- ----------
190 1,111,237 $18,326,341 $ 16.49
=========== =========== =========== ==========
The Block at Orange:
Anchors(2) -- -- $ -- $ --
Majors(2) -- -- -- --
Specialty 19 42,461 1,358,944 32.00
Food Court 1 946 70,004 74.00
----------- ----------- ----------- ----------
20 43,407 $ 1,428,948 $ 32.92
=========== =========== =========== ==========
Community Centers:
Anchors(2) 1 56,949 $ 194,300 $ 3.41
Majors(2) 4 117,557 910,369 7.74
Specialty 26 81,287 1,173,614 14.44
Food Court -- -- -- --
----------- ----------- ----------- ----------
31 255,793 $ 2,278,283 $ 8.91
=========== =========== =========== ==========
Totals:
Anchors(2) 3 297,223 $ 1,401,413 $ 4.72
Majors(2) 12 352,705 3,072,731 8.71
Specialty 223 758,325 17,435,024 22.99
Food Court 3 2,184 124,404 56.96
----------- ----------- ----------- ----------
241 1,410,437 $22,033,572 $ 15.62
=========== =========== =========== ==========
</TABLE>
(1) Excludes 963,173 square feet of gross leasable area owned by tenants as
follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
square feet; Ontario Mills - 125,000 square feet; and Community Centers -
15,981 square feet. Ground leases at Franklin Mills of 152,370 square feet
and at Grapevine Mills of 177,063 square feet are also excluded.
(2) Anchor tenants are defined as any tenant who gross leasable area equals or
exceeds 50,000 square feet and major tenants are defined as any tenant
whose gross leasable area equals or exceeds 20,000 square feet but is less
than 50,000 square feet.
(3) For lease expiration purposes, Sawgrass Mills includes 59,480 square feet
of gross leasable area that is owned in fee by Sawgrass Mills Phase III
(The Oasis), but lease back to Sawgrass Mills and is sublet to Regal
Theatres.
24
<PAGE> 25
LEASE EXPIRATION SCHEDULE(1)
The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1999 multiplied by 12.
<TABLE>
<CAPTION>
NO. OF 2004 NO. OF 2005
LEASES ANNUALIZED PER SQ. LEASES ANNUALIZED
EXPIRING SQ. FT MIN. RENT FT. EXPIRING SQ. FT MIN. RENT
----------- ----------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Potomac Mills:
Anchors(2) 1 61,763 $ 509,546 $ 8.25 1 153,036 $ 525,000
Majors(2) 2 64,934 677,066 10.43 1 33,743 326,779
Specialty 22 78,810 1,902,562 24.14 11 45,597 1,148,703
Food Court 1 590 37,635 63.79 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
26 206,097 $3,126,809 $ 15.17 13 232,376 $2,000,482
Franklin Mills:
Anchors(2) 1 100,200 $ 597,975 $ 5.97 -- -- $ --
Majors(2) 2 82,473 644,700 7.82 -- -- --
Specialty 16 37,651 943,055 25.05 6 39,325 728,747
Food Court -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
19 220,324 $2,185,730 $ 9.92 6 39,325 $ 728,747
Sawgrass Mills:
Anchors(2,3) -- -- $ -- $ -- -- -- --
Majors(2) 2 83,581 864,393 10.34 2 72,772 881,436
Specialty 14 33,510 1,126,458 33.62 15 68,484 1,652,766
Food Court -- -- -- -- 1 2,960 37,148
---------- ---------- ---------- ---------- ---------- ---------- ----------
16 117,091 $1,990,851 $ 17.00 18 144,216 $2,571,350
Gurnee Mills:
Anchors(2) -- -- $ -- $ -- -- -- $ --
Majors(2) -- -- -- -- -- -- --
Specialty 14 56,644 1,131,252 19.97 7 46,012 948,275
Food Court 2 1,357 54,280 40.00 1 542 24,390
---------- ---------- ---------- ---------- ---------- ---------- ----------
16 58,001 $1,185,532 $ 20.44 8 46,554 $ 972,665
Total Mills
without Joint Ventures:
Anchors(2) 2 161,963 $1,107,521 $ 6.84 1 153,036 $ 525,000
Majors(2) 6 230,988 2,186,159 9.46 3 106,515 1,208,215
Specialty 66 206,615 5,103,327 24.70 39 199,418 4,478,491
Food Court 3 1,947 91,915 47.21 2 3,502 61,538
---------- ---------- ---------- ---------- ---------- ---------- ----------
77 601,513 $8,488,922 $ 14.11 45 462,471 $6,273,244
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
NO. OF 2006 NO. OF
PER SQ. LEASES ANNUALIZED PER SQ. LEASES
FT. EXPIRING SQ. FT MIN. RENT FT. EXPIRING SQ. FT
---------- ---------- ---------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Potomac Mills:
Anchors(2) $ 3.43 2 208,813 $1,394,772 $ 6.68 -- --
Majors(2) 9.68 -- -- -- -- 1 38,210
Specialty 25.19 3 35,029 744,083 21.24 1 1,088
Food Court -- 2 1,354 81,820 60.43 -- --
---------- ---------- ---------- ---------- --------- ---------- ----------
$ 8.61 7 245,196 $2,220,675 $ 9.06 2 39,298
Franklin Mills:
Anchors(2) $ -- -- -- $ -- $ -- -- --
Majors(2) -- 1 46,406 483,087 10.41 3 80,762
Specialty 18.53 2 2,561 71,198 27.80 -- --
Food Court -- 1 476 24,276 51.00 -- --
---------- ---------- ---------- ---------- --------- ---------- ----------
$ 18.53 4 49,443 $ 578,561 $ 11.70 3 80,762
Sawgrass Mills:
Anchors(2,3) $ -- -- -- $ -- $ -- -- --
Majors(2) 12.11 1 20,300 527,800 26.00 -- --
Specialty 24.13 4 17,593 502,605 28.57 6 12,816
Food Court 12.55 -- -- -- -- -- --
---------- ---------- ---------- ---------- --------- ---------- ----------
$ 17.83 5 37,893 $1,030,405 $ 27.19 6 12,816
Gurnee Mills:
Anchors(2) -- -- -- $ -- $ -- -- --
Majors(2) -- 1 20,000 600,000 30.00 -- --
Specialty 20.61 2 14,273 213,036 14.93 4 4,912
Food Court 45.00 1 533 42,500 79.74 1 831
---------- ---------- ---------- ---------- --------- ---------- ----------
$ 20.89 4 34,806 $ 855,536 $ 24.58 5 5,743
Total Mills
without Joint Ventures:
Anchors(2) $ 3.43 2 208,813 $1,394,772 $ 6.68 -- --
Majors(2) 11.34 3 86,706 1,610,887 18.58 4 118,972
Specialty 22.46 11 69,456 1,530,922 22.04 11 18,816
Food Court 17.57 4 2,363 148,596 62.88 1 831
---------- ---------- ---------- ---------- --------- ---------- ----------
$ 13.56 20 367,338 $4,685,177 $ 12.75 16 138,619
========== ========== ========== ========== ========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
2007
ANNUALIZED PER SQ.
MIN. RENT FT.
----------- ---------
<S> <C> <C>
Potomac Mills:
Anchors(2) $ -- $ --
Majors(2) 337,394 8.83
Specialty 67,405 61.95
Food Court -- --
---------- ---------
$ 404,799 $ 10.30
Franklin Mills:
Anchors(2) $ -- $ --
Majors(2) 993,250 12.30
Specialty -- --
Food Court -- --
---------- ---------
$ 993,250 $ 12.30
Sawgrass Mills:
Anchors(2,3) $ -- $ --
Majors(2) -- --
Specialty 493,249 38.49
Food Court -- --
---------- ---------
$ 493,249 $ 38.49
Gurnee Mills:
Anchors(2) $ -- $ --
Majors(2) -- --
Specialty 163,889 33.37
Food Court 29,085 35.00
---------- ---------
$ 192,974 $ 33.60
Total Mills
without Joint Ventures:
Anchors(2) $ -- $ --
Majors(2) 1,330,644 11.18
Specialty 724,543 38.51
Food Court 29,085 35.00
---------- ---------
$2,084,272 $ 15.04
========== =========
</TABLE>
(1) Excludes 963,173 square feet of gross leasable area owned by tenants as
follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
square feet; Ontario Mills - 125,000 square feet; and Community Centers -
15,981 square feet. Ground leases at Franklin Mills of 152,370 square feet
and at Grapevine Mills of 177,063 square feet are also excluded.
(2) Anchor tenants are defined as any tenant who gross leasable area equals or
exceeds 50,000 square feet and major tenants are defined as any tenant
whose gross leasable area equals or exceeds 20,000
square feet but is less than 50,000 square feet.
(3) For lease expiration purposes, Sawgrass Mills includes 59,480 square feet
of gross leasable area that is owned in fee Sawgrass Mills Phase III
(The Oasis), but lease back to Sawgrass Mills and is sublet to Regal
Theatres.
25
<PAGE> 26
LEASE EXPIRATION SCHEDULE(1)
The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1999 multiplied by 12.
<TABLE>
<CAPTION>
NO. OF 2004 NO. OF
LEASES ANNUALIZED PER SQ. LEASES
EXPIRING SQ. FT MIN. RENT FT. EXPIRING SQ. FT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ontario Mills:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- --
Specialty 4 17,215 378,235 21.97 2 7,872
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
4 17,215 $ 378,235 $ 21.97 2 7,872
Grapevine Mills:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- -- --
Specialty 7 15,408 423,097 27.46 8 31,750
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
7 15,408 $ 423,097 $ 27.46 8 31,750
Arizona Mills:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- -- --
Specialty 13 37,357 945,602 25.31 2 2,938
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
13 37,357 $ 945,602 $ 25.31 2 2,938
The Oasis at Sawgrass:
Anchors(2,3) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- -- --
Specialty 17 46,133 1,608,600 34.87 1 1,226
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
17 46,133 $1,608,600 $ 34.87 1 1,226
Concord Mills:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) 1 21,964 285,532 13.00 -- --
Specialty 42 166,476 3,734,092 22.43 8 29,941
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
43 188,440 $4,019,624 $ 21.33 8 29,941
</TABLE>
<TABLE>
<CAPTION>
2005 NO. OF 2006
ANNUALIZED PER SQ. LEASES ANNUALIZED PER SQ.
MIN. RENT FT. EXPIRING SQ. FT MIN. RENT FT.
----------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ontario Mills:
Anchors(2) $ -- $ -- -- -- $ -- $ --
Majors(2) -- -- 4 102,308 1,380,041 13.49
Specialty 224,391 28.50 26 71,568 1,887,758 26.38
Food Court -- -- 1 400 40,000 100.00
---------- ---------- ---------- ---------- ---------- ----------
$ 224,391 $ 28.50 31 174,276 $3,307,799 $ 18.98
Grapevine Mills:
Anchors(2) $ -- $ -- -- -- $ -- $ --
Majors(2) -- -- -- -- -- --
Specialty 701,731 22.10 2 8,974 168,618 18.79
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
$ 701,731 $ 22.10 2 8,974 $ 168,618 $ 18.79
Arizona Mills:
Anchors(2) $ -- $ -- -- -- $ -- $ --
Majors(2) -- -- 1 22,774 120,000 5.27
Specialty 112,770 38.38 3 10,192 218,140 21.40
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
$ 112,770 $ 38.38 4 32,966 $ 338,140 $ 10.26
The Oasis at Sawgrass:
Anchors(2,3) $ -- $ -- -- -- $ -- $ --
Majors(2) -- -- -- -- -- . --
Specialty 58,848 48.00 1 19,971 500,000 25.04
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
$ 58,848 $ 48.00 1 19,971 $ 500,000 $ 25.04
Concord Mills:
Anchors(2) $ -- $ -- -- -- $ -- $ --
Majors(2) -- -- -- -- -- --
Specialty 680,782 22.74 7 24,677 616,669 24.99
Food Court -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
$ 680,782 $ 22.74 7 24,677 $ 616,669 $ 24.99
</TABLE>
<TABLE>
<CAPTION>
NO. OF 2007
LEASES ANNUALIZED PER SQ.
EXPIRING SQ. FT MIN. RENT FT.
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Ontario Mills:
Anchors(2) -- -- $ -- $ --
Majors(2) 3 78,457 1,141,946 14.56
Specialty 11 25,095 765,622 30.51
Food Court -- -- -- --
---------- ---------- ---------- ----------
14 103,552 $1,907,568 $ 18.42
Grapevine Mills:
Anchors(2) -- -- $ -- $ --
Majors(2) 6 151,812 2,343,211 15.43
Specialty 22 77,193 1,901,386 24.63
Food Court -- -- -- --
---------- ---------- ---------- ----------
28 229,005 $4,244,597 $ 18.53
Arizona Mills:
Anchors(2) -- -- $ -- $ --
Majors(2) 4 111,578 1,920,786 17.21
Specialty 11 67,779 1,333,956 19.68
Food Court -- -- -- --
---------- ---------- ---------- ----------
15 179,357 $3,254,742 $ 18.15
The Oasis at Sawgrass:
Anchors(2,3) -- -- $ -- $ --
Majors(2) -- -- -- --
Specialty -- -- -- --
Food Court -- -- -- --
---------- ---------- ---------- ----------
-- -- -- $ --
Concord Mills:
Anchors(2) -- -- $ -- $ --
Majors(2) -- -- -- --
Specialty 6 18,963 507,907 26.78
Food Court -- -- -- --
---------- ---------- ---------- ----------
6 18,963 $ 507,907 $ 26.78
</TABLE>
(1) Excludes 963,173 square feet of gross leasable area owned by tenants as
follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
square feet; Ontario Mills - 125,000 square feet; and Community Centers -
15,981 square feet. Ground leases at Franklin Mills of 152,370 square feet
and at Grapevine Mills of 177,063 square feet are also excluded.
(2) Anchor tenants are defined as any tenant who gross leasable area equals or
exceeds 50,000 square feet and major tenants are defined as any tenant
whose gross leasable area equals or exceeds 20,000 square feet but is less
than 50,000 square feet.
(3) For lease expiration purposes, Sawgrass Mills includes 59,480 square feet
of gross leasable area that is owned in fee by Sawgrass Mills Phase III
(The Oasis), but lease back to Sawgrass Mills and is sublet to Regal
Theatres.
26
<PAGE> 27
LEASE EXPIRATION SCHEDULE(1)
The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1999 multiplied by 12.
<TABLE>
<CAPTION>
NO. OF 2004 NO. OF
LEASES ANNUALIZED PER SQ. LEASES
EXPIRING SQ. FT MIN. RENT FT. EXPIRING SQ. FT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Katy Mills:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- -- --
Specialt2 47 171,533 3,856,739 22.48 13 50,917
Food Court -- -- -- -- -- --
----------- ----------- ----------- -------------- ----------- -----------
47 171,533 $ 3,856,739 $ 22.48 13 50,917
Total Mills with
Joint Ventures:
Anchors(2) 2 161,963 $ 1,107,521 $ 6.84 1 153,036
Majors(2) 7 252,952 2,471,691 9.77 3 106,515
Specialty 196 660,737 16,049,692 24.29 73 324,062
Food Court 3 1,947 91,915 47.21 2 3,502
----------- ----------- ----------- -------------- ----------- -----------
208 1,077,599 $19,720,819 $ 18.30 79 587,115
=========== =========== =========== ============== =========== ===========
The Block at Orange:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- -- --
Specialty 9 40,484 844,298 20.86 3 12,548
Food Court -- -- -- -- -- --
----------- ----------- ----------- -------------- ----------- -----------
9 40,484 $ 844,298 $ 20.86 3 12,548
=========== =========== =========== ============== =========== ===========
Community Centers:
Anchors(2) -- -- $ -- $ -- 1 72,897
Majors(2) -- -- -- -- 5 157,086
Specialty 23 86,557 1,256,739 14.52 6 32,960
Food Court -- -- -- -- -- --
----------- ----------- ----------- -------------- ----------- -----------
23 86,557 $ 1,256,739 $ 14.52 12 262,943
=========== =========== =========== ============== =========== ===========
Totals:
Anchors(2) 2 161,963 $ 1,107,521 $ 6.84 2 225,933
Majors(2) 7 252,952 2,471,691 9.77 8 263,601
Specialty 228 787,778 18,150,729 23.04 82 369,570
Food Court 3 1,947 91,915 47.21 2 3,502
----------- ----------- ----------- -------------- ----------- -----------
240 1,204,640 $21,821,856 $ 18.11 94 862,606
=========== =========== =========== ============== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
2005 NO. OF 2006
ANNUALIZED PER SQ. LEASES ANNUALIZED PER SQ.
MIN. RENT FT. EXPIRING SQ. FT MIN. RENT FT.
----------- -------------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Katy Mills:
Anchors(2) $ -- $ -- -- -- $ -- $ --
Majors(2) -- -- -- -- -- --
Specialt2 1,216,779 23.90 8 23,989 620,011 25.85
Food Court -- -- -- -- -- --
----------- -------------- ----------- ----------- ----------- --------------
$ 1,216,779 $ 23.90 8 23,898 $ 620,011 $ 25.85
Total Mills with
Joint Ventures:
Anchors(2) $ 525,000 $ 3.43 2 208,813 $ 1,394,772 $ 6.68
Majors(2) 1,208,215 11.34 8 211,788 3,100,928 14.69
Specialty 7,473,792 23.06 58 228,827 5,542,118 24.22
Food Court 61,538 17.57 5 2,763 188,596 68.26
----------- -------------- ----------- ----------- ----------- --------------
$ 9,268,545 $ 15.79 73 652,191 $10,226,414 $ 15.70
=========== ============== =========== =========== =========== ==============
The Block at Orange:
Anchors(2) $ -- $ -- -- -- $ -- $ --
Majors(2) -- -- -- -- -- --
Specialty 299,800 23.89 -- -- -- --
Food Court -- -- -- -- -- --
----------- -------------- ----------- ----------- ----------- --------------
$ 299,800 $ 23.89 -- -- $ -- $ --
=========== ============== =========== =========== =========== ==============
Community Centers:
Anchors(2) $ 394,337 $ 5.41 -- -- $ -- $ --
Majors(2) 908,568 5.78 -- -- -- --
Specialty 464,947 14.11 7 32,730 516,882 15.79
Food Court -- -- -- -- -- --
----------- -------------- ----------- ----------- ----------- --------------
$ 1,767,852 $ 6.72 7 32,730 $ 516,882 $ 15.79
=========== ============== =========== =========== =========== ==============
Totals:
Anchors(2) $ 919,337 $ 4.07 2 208,813 $ 1,394,772 $ 6.68
Majors(2) 2,116,783 8.03 8 211,788 3,110,928 14.69
Specialty 8,238,539 22.29 65 261,557 6,059,000 23.17
Food Court 61,538 17.57 5 2,763 188,596 68.26
----------- -------------- ----------- ----------- ----------- --------------
$11,336,197 $ 13.14 80 684,921 $10,753,296 $ 15.70
=========== ============== =========== =========== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
NO. OF 2007
LEASES ANNUALIZED PER SQ.
EXPIRING SQ. FT MIN. RENT FT.
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Katy Mills:
Anchors(2) -- -- $ -- $ --
Majors(2) -- -- -- --
Specialt2 7 26,346 648,852 24.63
Food Court -- -- -- --
----------- ----------- ----------- --------------
7 26,346 $ 648,852 $ 24.63
Total Mills with
Joint Ventures:
Anchors(2) -- -- $ -- --
Majors(2) 17 460,819 6,736,587 14.62
Specialty 68 234,192 5,882,266 25.12
Food Court 1 831 29,085 35.00
----------- ----------- ----------- --------------
86 695,842 $12,647,938 $ 18.18
=========== =========== =========== ==============
The Block at Orange:
Anchors(2) -- -- $ -- $ --
Majors(2) -- -- -- --
Specialty 1 6,221 124,420 20.00
Food Court -- -- -- --
----------- ----------- ----------- --------------
1 6,221 $ 124,420 $ 20.00
=========== =========== =========== ==============
Community Centers:
Anchors(2) -- -- $ -- $ --
Majors(2) -- -- -- --
Specialty 4 31,972 380,397 11.90
Food Court -- -- -- --
----------- ----------- ----------- --------------
4 31,972 $ 380,397 $ 11.90
=========== =========== =========== ==============
Totals:
Anchors(2) -- -- $ -- $ --
Majors(2) 17 460,819 6,736,587 14.62
Specialty 73 272,385 6,387,083 23.45
Food Court 1 831 29,085 35.00
----------- ----------- ----------- --------------
91 734,035 $13,152,755 $ 17.92
=========== =========== =========== ==============
</TABLE>
(1) Excludes 963,173 square feet of gross leasable area owned by tenants as
follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
square feet; Ontario Mills - 125,000 square feet; and Community Centers -
15,981 square feet. Ground leases at Franklin Mills of 152,370 square feet
and at Grapevine Mills of 177,063 square feet are also excluded.
(2) Anchor tenants are defined as any tenant who gross leasable area equals or
exceeds 50,000 square feet and major tenants are defined as any tenant
whose gross leasable area equals or exceeds 20,000 square feet but is less
than 50,000 square feet.
(3) For lease expiration purposes, Sawgrass Mills includes 59,480 square feet
of gross leasable area that is owned in fee by Sawgrass Mills Phase III
(The Oasis), but lease back to Sawgrass Mills and is sublet to Regal
Theatres.
27
<PAGE> 28
LEASE EXPIRATION SCHEDULE(1)
The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1999 multiplied by 12.
<TABLE>
<CAPTION>
NO. OF 2008 NO. OF 2009
LEASES ANNUALIZED PER SQ. LEASES ANNUALIZED
EXPIRING SQ. FT MIN. RENT FT. EXPIRING SQ. FT MIN. RENT
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Potomac Mills:
Anchors(2) 1 107,021 $ 611,520 $ 5.71 -- -- $ --
Majors(2) 1 27,068 216,000 7.98 -- -- --
Specialty 4 16,089 364,538 22.66 3 13,581 314,425
Food Court -- -- -- -- -- -- --
----------- ----------- ----------- ------ ----------- ----------- -----------
6 150,178 $ 1,192,058 $ 7.94 3 13,581 $ 314,425
Franklin Mills:
Anchors(2) 1 60,268 $ 919,087 $15.25 -- -- $ --
Majors(2) 1 20,000 317,880 15.89 -- -- --
Specialty 2 15,736 333,160 21.17 4 11,750 293,015
Food Court -- -- -- -- -- -- --
----------- ----------- ----------- ------ ----------- ----------- -----------
4 96,004 $ 1,570,127 $16.35 4 11,750 $ 293,015
Sawgrass Mills:
Anchors(2,3) -- -- $ -- $ -- 2 183,915 $ 1,134,545
Majors(2) -- -- -- -- -- -- --
Specialty 1 1,605 62,595 39.00 4 14,176 422,020
Food Court -- -- -- -- -- -- --
----------- ----------- ----------- ------ ----------- ----------- -----------
1 1,605 $ 62,595 $39.00 6 198,091 $ 1,556,565
Gurnee Mills:
Anchors(2) -- -- $ -- $ -- 1 105,248 $ 568,339
Majors(2) -- -- -- -- -- -- --
Specialty 5 9,155 243,273 26.57 3 14,356 279,402
Food Court -- -- -- -- -- -- --
----------- ----------- ----------- ------ ----------- ----------- -----------
5 9,155 $ 243,273 $26.57 4 119,604 $ 847,741
Total Mills without
Joint Ventures:
Anchors(2) 2 167,289 $ 1,530,607 $ 9.15 3 289,163 $ 1,702,884
Majors(2) 2 47,068 533,880 11.34 -- -- --
Specialty 12 42,585 1,003,566 23.57 14 53,863 1,308,862
Food Court -- -- -- -- -- -- --
----------- ----------- ----------- ------ ----------- ----------- -----------
16 256,942 $ 3,068,053 $11.94 17 343,026 $ 3,011,746
=========== =========== =========== ====== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
NO. OF AFTER 2009 NO. OF
PER SQ. LEASES ANNUALIZED PER SQ. LEASES
FT. EXPIRING SQ. FT MIN. RENT FT. EXPIRING SQ. FT.
------ ----------- ----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Potomac Mills:
Anchors(2) $ -- -- -- $ -- $ -- 5 530,633
Majors(2) -- -- -- -- -- 12 389,924
Specialty 23.15 1 3,057 82,539 27.00 178 584,085
Food Court -- -- -- -- -- 14 10,185
------ ----------- ----------- ----------- ------ ----------- -----------
$23.15 1 3,057 $ 82,539 $27.00 209 1,514,827
Franklin Mills:
Anchors(2) $ -- 1 68,174 $ 1,005,567 $14.75 5 428,293
Majors(2) -- -- -- -- -- 9 285,005
Specialty 24.94 5 35,423 654,576 18.48 142 513,717
Food Court -- -- -- -- -- 11 8,096
------ ----------- ----------- ----------- ------ ----------- -----------
$24.94 6 103,597 $ 1,660,143 $16.03 167 1,235,111
Sawgrass Mills:
Anchors(2,3) $ 6.17 2 137,007 $ 1,114,037 $ 8.13 8 658,780
Majors(2) -- -- -- -- -- 8 239,499
Specialty 29.77 1 1,200 72,000 60.00 189 618,858
Food Court -- -- -- -- -- 29 26,472
------ ----------- ----------- ----------- ------ ----------- -----------
$ 7.86 3 138,207 $ 1,186,037 $ 8.58 234 1,543,609
Gurnee Mills:
Anchors(2) $ 5.40 2 193,171 $ 881,342 $ 4.56 7 590,955
Majors(2) -- 1 25,000 250,000 10.00 7 234,885
Specialty 19.46 -- -- -- -- 157 544,583
Food Court -- 1 496 24,800 50.00 26 18,088
------ ----------- ----------- ----------- ------ ----------- -----------
$ 7.09 4 218,667 $ 1,156,142 $ 5.29 197 1,388,511
Total Mills without
Joint Ventures:
Anchors(2) $ 5.89 5 398,352 $ 3,000,946 $ 7.53 25 2,208,661
Majors(2) -- 1 25,000 250,000 10.00 36 1,149,313
Specialty 24.30 7 39,680 809,115 20.39 666 2,261,243
Food Court -- 1 496 24,800 50.00 80 62,841
------ ----------- ----------- ----------- ------ ----------- -----------
$ 8.78 14 463,528 $ 4,084,861 $ 8.81 807 5,682,058
====== =========== =========== =========== ====== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
TOTAL
ANNUALIZED PER SQ.
MIN. RENT FT.
----------- -------
<S> <C> <C>
Potomac Mills:
Anchors(2) $ 3,040,838 $ 5.73
Majors(2) 3,440,729 8.82
Specialty 14,576,933 24.96
Food Court 641,301 62.97
----------- ------
$21,699,801 $14.32
Franklin Mills:
Anchors(2) $ 3,573,931 $ 8.34
Majors(2) 2,874,334 10.09
Specialty 10,687,687 20.80
Food Court 312,636 38.62
----------- ------
$17,448,588 $14.13
Sawgrass Mills:
Anchors(2,3) $ 4,245,642 $ 6.44
Majors(2) 2,879,120 12.02
Specialty 16,303,637 26.34
Food Court 1,338,018 50.54
----------- ------
$24,766,417 $16.04
Gurnee Mills:
Anchors(2) $ 3,326,221 $ 5.63
Majors(2) 2,368,661 10.08
Specialty 11,089,690 20.36
Food Court 1,000,260 55.30
----------- ------
$17,784,832 $12.81
Total Mills without
Joint Ventures:
Anchors(2) $14,186,632 $ 6.42
Majors(2) 11,562,844 10.06
Specialty 52,657,947 23.29
Food Court 3,292,215 52.39
----------- ------
$81,699,638 $14.38
=========== ======
</TABLE>
(1) Excludes 963,173 square feet of gross leasable area owned by tenants as
follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
square feet; Ontario Mills - 125,000 square feet; and Community Centers -
15,981 square feet. Ground leases at Franklin Mills of 152,370 square feet
and at Grapevine Mills of 177,063 square feet are also excluded.
(2) Anchor tenants are defined as any tenant who gross leasable area equals or
exceeds 50,000 square feet and major tenants are defined as any tenant
whose gross leasable area equals or exceeds 20,000 square feet but is less
than 50,000 square feet.
(3) For lease expiration purposes, Sawgrass Mills includes 59,480 square feet
of gross leasable area that owned in fee by Sawgrass Mills Phase III
(The Oasis), but lease back to Sawgrass Mills and is sublet to Regal
Theatres.
28
<PAGE> 29
LEASE EXPIRATION SCHEDULE(1)
The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1999 multiplied by 12.
<TABLE>
<CAPTION>
NO. OF 2008 NO. OF
LEASES ANNUALIZED PER SQ. LEASES
EXPIRING SQ. FT MIN. RENT FT. EXPIRING SQ. FT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ontario Mills:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) 1 21,711 500,000 23.03 3 93,608
Specialty 5 11,257 260,105 23.11 3 11,864
Food Court 2 11,328 554,165 48.92 -- --
----------- ----------- ----------- ------ ----------- -----------
8 44,296 $ 1,314,270 $29.67 6 105,472
Grapevine Mills:
Anchors(2) -- -- $ -- $ -- 1 82,000
Majors(2) 2 72,730 881,588 12.12 1 27,490
Specialty 9 44,028 923,066 20.97 6 14,824
Food Court -- -- -- -- 1 9,800
----------- ----------- ----------- ------ ----------- -----------
11 116,758 $ 1,804,654 $15.46 9 134,114
Arizona Mills:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) 1 29,845 297,340 9.96 2 55,816
Specialty 8 15,380 543,657 35.35 2 5,565
Food Court -- -- -- -- -- --
----------- ----------- ----------- ------ ----------- -----------
9 45,225 $ 840,997 $18.60 4 61,381
The Oasis at Sawgrass:
Anchors(2,3) -- -- $ -- $ -- 1 32,802
Majors(2) 1 22,539 462,050 20.50 1 20,039
Specialty -- -- -- -- 5 28,360
Food Court -- -- -- -- -- --
----------- ----------- ----------- ------ ----------- -----------
1 22,539 $ 462,050 $20.50 7 81,201
Concord Mills:
Anchors(2) -- -- $ -- $ -- 2 105,014
Majors(2) -- -- -- -- 6 137,619
Specialty 2 9,420 205,172 21.78 28 69,329
Food Court -- -- -- -- -- --
----------- ----------- ----------- ------ ----------- -----------
2 9,420 $ 205,172 $21.78 36 311,962
</TABLE>
<TABLE>
<CAPTION>
2009 NO. OF AFTER 2009 NO. OF
ANNUALIZED PER SQ. LEASES ANNUALIZED PER SQ. LEASES
MIN. RENT FT. EXPIRING SQ. FT MIN. RENT FT. EXPIRING
----------- ------ ----------- ----------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ontario Mills:
Anchors(2) $ -- $ -- 4 286,023 $ 1,883,132 $ 6.58 4
Majors(2) 1,113,592 11.90 7 254,420 2,458,590 9.66 18
Specialty 249,478 21.03 -- -- -- -- 142
Food Court -- -- -- -- -- -- 3
----------- ------ ----------- ----------- ----------- ------ -----------
$ 1,363,070 $12.92 11 540,443 $ 4,341,722 $ 8.03 167
Grapevine Mills:
Anchors(2) $ 720,000 $ 8.78 3 315,042 $ 3,638,510 $11.55 4
Majors(2) 453,585 16.50 3 107,607 1,079,964 10.04 13
Specialty 308,842 20.83 1 8,967 112,088 12.50 151
Food Court 588,000 60.00 -- -- -- -- 1
----------- ------ ----------- ----------- ----------- ------ -----------
$ 2,070,427 $15.44 7 431,616 $ 4,830,562 $11.19 169
Arizona Mills:
Anchors(2) $ -- $ -- 5 382,513 $ 3,163,114 $ 8.27 5
Majors(2) 945,958 16.95 3 98,205 1,100,983 11.21 11
Specialty 177,936 31.97 3 29,704 747,336 25.16 137
Food Court -- -- 1 13,924 832,502 59.79 1
----------- ------ ----------- ----------- ----------- ------ -----------
$ 1,123,894 $18.31 12 524,346 $ 5,843,935 $11.15 154
The Oasis at Sawgrass:
Anchors(2,3) $ 615,322 $18.76 -- -- $ -- $ -- 1
Majors(2) 420,819 21.00 -- -- -- -- 2
Specialty 944,797 33.31 4 28,518 787,966 27.63 32
Food Court -- -- -- -- -- -- --
----------- ------ ----------- ----------- ----------- ------ -----------
$ 1,980,938 $24.40 4 28,518 $ 787,966 $27.63 35
Concord Mills:
Anchors(2) $ 1,229,000 $11.70 3 328,264 $ 3,485,862 $10.62 5
Majors(2) 1,909,265 13.87 2 56,034 584,838 10.44 10
Specialty 2,143,982 30.92 14 57,132 1,410,513 24.69 114
Food Court -- -- 1 10,830 588,000 54.29 1
----------- ------ ----------- ----------- ----------- ------ -----------
$ 5,282,247 $16.93 20 452,260 $ 6,069,213 $13.42 130
</TABLE>
<TABLE>
<CAPTION>
TOTAL
ANNUALIZED PER SQ.
SQ. FT. MIN. RENT FT.
----------- ----------- ------
<S> <C> <C> <C>
Ontario Mills:
Anchors(2) 286,023 $ 1,883,132 $ 6.58
Majors(2) 550,504 6,594,169 11.98
Specialty 467,756 10,795,891 23.08
Food Court 11,728 594,165 50.66
----------- ----------- ------
1,316,011 $19,867,357 $15.10
Grapevine Mills:
Anchors(2) 397,042 $ 4,358,510 $10.98
Majors(2) 382,968 5,038,296 13.16
Specialty 497,972 11,192,383 22.48
Food Court 9,800 588,000 60.00
----------- ----------- ------
1,287,782 $21,177,189 $16.44
Arizona Mills:
Anchors(2) 382,513 $ 3,163,114 $ 8.27
Majors(2) 318,218 4,385,067 13.78
Specialty 491,235 11,157,481 22.71
Food Court 13,924 832,502 59.79
----------- ----------- ------
1,205,890 $19,538,164 $16.20
The Oasis at Sawgrass:
Anchors(2,3) 32,802 $ 615,322 $18.76
Majors(2) 42,578 882,869 20.74
Specialty 138,879 4,448,856 32.03
Food Court -- -- --
----------- ----------- ------
214,259 $ 5,947,047 $27.76
Concord Mills:
Anchors(2) 433,278 $ 4,714,862 $10.88
Majors(2) 237,160 3,038,151 12.81
Specialty 415,720 10,101,977 24.30
Food Court 10,830 588,000 54.29
----------- ----------- ------
1,096,988 $18,442,990 $16.81
</TABLE>
(1) Excludes 963,173 square feet of gross leasable area owned by tenants as
follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
square feet; Ontario Mills - 125,000 square feet; and Community Centers -
15,981 square feet. Ground leases at Franklin Mills of 152,370 square feet
and at Grapevine Mills of 177,063 square feet are also excluded.
(2) Anchor tenants are defined as any tenant who gross leasable area equals or
exceeds 50,000 square feet and major tenants are defined as any tenant
whose gross leasable area equals or exceeds 20,000 square feet but is less
than 50,000 square feet.
(3) For lease expiration purposes, Sawgrass Mills includes 59,480 square feet
of gross leasable area that is owned in fee by Sawgrass Mills Phase III
(The Oasis), but lease back to Sawgrass Mills and is sublet to Regal
Theatres.
29
<PAGE> 30
LEASE EXPIRATION SCHEDULE(1)
The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1999 multiplied by 12.
<TABLE>
<CAPTION>
NO. OF 2008 NO. OF
LEASES ANNUALIZED PER SQ. LEASES
EXPIRING SQ. FT MIN. RENT FT. EXPIRING SQ. FT
------------ ------------- ------------ -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Katy Mills:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) -- -- -- -- 7 195,171
Specialty 1 6,911 124,398 18.00 30 98,619
Food Court -- -- -- -- -- --
------------ ------------ ------------ ------ ------------ ----------
1 6,911 $ 124,398 $18.00 37 293,790
Total Mills with Joint Ventures:
Anchors(2) 2 167,289 $ 1,530,607 $ 9.15 7 508,979
Majors(2) 7 193,893 2,674,858 13.80 20 529,743
Specialty 37 129,581 3,059,964 23.61 88 282,424
Food Court 2 11,328 554,165 48.92 1 9,800
------------ ------------ ------------ ------ ------------ ----------
48 502,091 $ 7,819,594 $15.57 116 1,330,946
============ ============ ============ ====== ============ ==========
The Block at Orange:
Anchors(2) -- -- $ -- $ -- -- --
Majors(2) 3 82,264 1,330,420 15.07 1 22,196
Specialty 19 72,368 2,550,726 35.25 9 38,558
Food Court 8 10,931 813,847 74.45 1 1,061
------------ ------------ ------------ ------ ------------ ----------
30 171,563 $ 4,694,993 $27.37 11 61,815
============ ============ ============ ====== ============ ==========
Community Centers:
Anchors(2) 1 131,812 $ 790,872 $ 6.00 -- --
Majors(2) 1 46,193 397,260 8.60 2 66,531
Specialty 3 18,586 296,801 5.97 2 5,208
Food Court -- -- -- -- -- --
------------ ------------ ------------ ------ ------------ ----------
5 195,591 $ 1,484,933 $ 7.55 4 71,739
============ ============ ============ ====== ============ ==========
Totals:
Anchors(2) 3 299,101 $ 2,321,479 $ 7.76 7 508,979
Majors(2) 11 328,350 4,402,538 13.41 23 618,470
Specialty 59 220,535 5,907,491 26.79 99 326,190
Food Court 10 22,259 1,368,012 61.46 2 10,861
------------ ------------ ------------ ------ ------------ ----------
83 870,245 $ 13,999,520 $16.09 131 1,464,500
============ ============ ============ ====== ============ ==========
</TABLE>
<TABLE>
<CAPTION>
2009 NO. OF AFTER 2009
ANNUALIZED PER SQ. LEASES ANNUALIZED PER SQ.
MIN. RENT FT. EXPIRING SQ. FT MIN. RENT FT.
----------- ------ ----------- ----------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Katy Mills:
Anchors(2) $ -- $ -- 3 322,444 $ 2,893,633 $ 8.97
Majors(2) 3,492,766 17.90 2 55,663 581,293 10.44
Specialty 2,519,060 25.54 13 45,359 1,144,134 25.22
Food Court -- -- 1 10,083 655,395 65.00
------------ ------ ------------ ------------ ------------ ------
$ 6,011,826 $20.46 19 433,549 $ 5,274,455 $12.17
Total Mills with Joint Ventures:
Anchors(2) $ 4,267,206 $ 8.38 23 2,032,638 $ 18,065,197 $ 8.89
Majors(2) 8,335,985 15.74 18 596,929 6,055,668 10.17
Specialty 7,652,957 27.10 42 209,360 5,011,152 23.94
Food Court 588,000 60.00 4 35,333 2,100,697 59.45
------------ ------ ------------ ------------ ------------ ------
$ 20,844,148 $15.66 87 2,874,260 $ 31,232,714 $10.87
============ ====== ============ ============ ============ ======
The Block at Orange:
Anchors(2) $ -- $ -- 2 172,785 $ 3,473,326 $20.10
Majors(2) 339,599 15.30 3 76,456 1,169,812 15.30
Specialty 1,137,633 29.50 2 7,886 287,612 36.47
Food Court 74,270 70.00 -- -- -- --
------------ ------ ------------ ------------ ------------ ------
$ 1,551,502 $25.10 7 257,127 $ 4,930,750 $19.18
============ ====== ============ ============ ============ ======
Community Centers:
Anchors(2) $ -- $ -- 4 334,359 $ 2,373,107 $ 7.10
Majors(2) 533,413 8.02 4 140,759 1,145,710 8.14
Specialty 70,416 13.52 2 17,500 104,250 5.96
Food Court -- -- -- -- -- --
------------ ------ ------------ ------------ ------------ ------
$ 603,829 $ 8.42 10 492,618 $ 3,623,067 $ 7.35
============ ====== ============ ============ ============ ======
Totals:
Anchors(2) $ 4,267,206 $ 8.38 29 2,539,782 $ 23,911,630 $ 9.41
Majors(2) 9,208,997 14.89 25 814,144 8,371,190 10.28
Specialty 8,861,006 27.17 46 234,746 5,403,014 23.02
Food Court 662,270 60.98 4 35,333 2,100,697 59.45
------------ ------ ------------ ------------ ------------ ------
$ 22,999,479 $15.70 104 3,624,005 $ 39,786,531 $10.98
============ ====== ============ ============ ============ ======
</TABLE>
<TABLE>
<CAPTION>
NO. OF TOTAL
LEASES ANNUALIZED PER SQ.
EXPIRING SQ. FT. MIN. RENT FT.
------------ ------------- ------------ ------
<S> <C> <C> <C> <C>
Katy Mills:
Anchors(2) 3 322,444 $ 2,893,633 $ 8.97
Majors(2) 10 273,549 4,346,639 15.89
Specialty 129 452,135 10,756,286 23.79
Food Court 1 10,083 655,395 65.00
------------ ------------ ------------ ------
143 1,058,211 $ 18,651,953 $17.63
Total Mills with Joint Ventures:
Anchors(2) 47 4,062,763 $ 31,815,205 $ 7.83
Majors(2) 100 2,954,290 35,848,035 12.13
Specialty 1,371 4,724,940 111,110,821 23.52
Food Court 87 119,206 6,550,277 54.95
------------ ------------ ------------ ------
1,605 11,861,199 $185,324,338 $15.62
============ ============ ============ ======
The Block at Orange:
Anchors(2) 2 172,785 $ 3,473,326 $20.10
Majors(2) 7 186,916 2,839,831 15.19
Specialty 75 234,793 7,128,121 30.36
Food Court 10 12,938 958,121 74.05
------------ ------------ ------------ ------
94 607,432 $ 14,399,399 $23.71
============ ============ ============ ======
Community Centers:
Anchors(2) 7 596,017 $ 3,752,616 $ 6.30
Majors(2) 20 632,733 4,558,015 7.20
Specialty 194 726,885 9,741,190 13.40
Food Court -- -- -- --
------------ ------------ ------------ ------
221 1,955,635 $ 18,051,821 $ 9.23
============ ============ ============ ======
Totals:
Anchors(2) 56 4,831,565 $ 39,041,147 $ 8.08
Majors(2) 127 3,773,939 43,245,881 11.46
Specialty 1,640 5,686,618 127,980,132 22.51
Food Court 97 132,144 7,508,398 56.82
------------ ------------ ------------ ------
1,920 14,424,266 $217,775,558 $15.10
============ ============ ============ ======
</TABLE>
(1) Excludes 963,173 square feet of gross leasable area owned by tenants as
follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
square feet; Ontario Mills - 125,000 square feet; and Community Centers -
15,981 square feet. Ground leases at Franklin Mills of 152,370 square feet
and at Grapevine Mills of 177,063 square feet are also excluded.
(2) Anchor tenants are defined as any tenant whose gross leasable area equals
or exceeds 50,000 square feet and major tenants are defined as any tenant
whose gross leasable area equals or exceeds 20,000 square feet but is less
than 50,000 square feet.
(3) For lease expiration purposes, Sawgrass Mills includes 59,480 square feet
of gross leasable area that is owned in fee by Sawgrass Mills Phase III
(The Oasis), but lease back to Sawgrass Mills and is sublet to Regal
Theatres.
30
<PAGE> 31
EXISTING OPERATING TRENDS
The following table sets forth, for each of the last five years, certain
information regarding operating trends with respect to the existing Mills and
The Block at Orange.
<TABLE>
<CAPTION>
MINIMUM RENT PLUS PERCENTAGE RENT
---------------------------------------------------------------------------------
AVERAGE TOTAL STORES ANCHOR STORES SPECIALTY STORES
PERCENT ------------------------------ --------------------------------- ------------------------
LEASED (1) TOTAL PER SQ. FT. TOTAL PER SQ. FT. TOTAL PER SQ. FT.
---------- -------------- -------------- ----------------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
POTOMAC MILLS
1999 96% $ 22,184,170 $ 14.78 $ 6,228,103 $ 6.93 $15,956,067 $ 26.31
1998 95 21,443,619 14.43 6,001,966 6.75 15,441,653 25.91
1997 96 20,980,272 14.04 6,284,111 6.86 14,696,161 25.44
1996 96 20,865,975 14.00 6,142,999 6.76 14,722,976 23.32
1995 96 19,905,334 13.30 5,839,132 6.57 14,066,202 23.14
FRANKLIN MILLS
1999 95% 18,889,430 13.05 6,799,317 7.44 12,090,113 22.67
1998 94 17,689,143 12.38 6,050,348 6.61 11,638,795 22.64
1997 92 16,549,052 11.47 5,700,661 6.05 10,848,391 21.68
1996 92 16,318,689 11.40 5,291,698 5.67 11,026,991 22.16
1995 95 16,837,997 11.33 5,401,107 5.69 11,436,890 21.29
SAWGRASS MILLS
1999 (2) 97% 27,047,670 17.21 7,428,095 8.10 19,619,575 30.00
1998 (2) 98 26,969,276 17.29 7,265,079 8.13 19,704,197 29.57
1997 (2) 97 26,448,955 17.08 7,384,896 8.28 19,064,059 29.04
1996 98 25,787,924 16.55 7,150,346 8.03 18,637,578 27.90
1995 95 22,738,214 15.66 6,670,486 7.68 16,067,728 27.58
GURNEE MILLS
1999 96% 18,652,338 13.60 5,350,186 6.71 13,302,152 23.20
1998 96 17,525,250 13.06 5,022,342 6.52 12,502,908 21.85
1997 91 15,900,406 13.80 4,418,036 7.42 11,482,370 20.63
1996 90 15,340,496 13.62 3,823,991 6.78 11,516,505 20.50
1995 91 15,089,531 12.89 3,898,381 6.36 11,191,150 20.08
ONTARIO MILLS
1999 98% 19,953,687 16.35 7,716,126 10.69 12,237,561 24.55
1998 98 19,516,934 16.50 7,300,086 10.61 12,216,848 24.68
1997 95 18,708,479 17.11 6,358,058 10.11 12,350,421 26.59
GRAPEVINE MILLS
1999(3) 97% 21,608,407 17.78 8,986,655 12.75 12,621,752 24.72
1998 95 21,108,019 18.03 8,797,950 12.74 12,310,069 25.63
ARIZONA MILLS
1999 97% 21,527,568 17.97 8,158,743 11.71 13,368,825 26.69
1998 95 19,165,290 16.82 7,262,540 10.83 11,902,750 25.41
TOTAL - MILLS
1999 97% $ 149,863,270 $ 15.73 $50,667,225 $ 8.97 $99,196,045 $ 25.61
1998 96 143,417,531 15.41 47,700,311 8.65 95,717,220 25.24
1997 94 98,587,164 14.65 30,145,762 7.58 68,441,402 24.84
1996 94 78,313,084 13.97 22,409,034 6.80 55,904,050 24.21
1995 95 74,571,076 13.31 21,809,106 6.57 52,761,970 23.09
THE BLOCK AT ORANGE
1999 93% 16,282,327 27.10 6,715,008 18.67 9,567,319 39.67
TOTAL (INCL THE BLOCK)
1999 96% $ 166,145,597 $ 16.41 $57,382,233 $ 9.55 $108,763,364 $ 26.43
</TABLE>
(1) Average percent leased is defined as total average space leased and for
which rent was being paid excluding tenants with leases having a term of
less than one year.
(2) Annual rent excludes $500,000 of ground lease rent for 1999 and $800,000
of ground lease rent for 1998 and 1997.
(3) Annual rent excludes $1,014,839 of rent for 1999 related to a tenant
that occupies space that is outside the service road which encompasses
the mall.
Note: The above amounts do not include Mainstreet retail income of $2,423,346
for 1999, $2,205,661 for 1998, $2,066,991 for 1997, and $2,088,000 for
1996. The Oasis at Sawgrass, Concord Mills and Katy Mills are excluded,
since the projects opened in the second quarter, third quarter and
fourth quarter of 1999, respectively.
31
<PAGE> 32
RENTAL RATES (1)
The following table sets forth the average base rent per leased square foot of
store openings and closings for each property for the twelve months ended
December 31, 1999, 1998, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
ANCHOR STORES
-------------------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD (2)
---------------------- --------------------------- -----------------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
---------- --------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
POTOMAC MILLS 1999 $ 12.00 24,077 $ -- -- $ N/A N/A
1998 11.52 65,028 9.46 70,490 2.06 21.75%
1997 7.71 73,432 6.30 97,820 1.41 22.33%
1996 11.43 33,406 11.55 15,178 (0.12) (1.04%)
1995 8.74 20,048 8.61 78,572 0.13 1.51%
FRANKLIN MILLS 1999 $ -- -- $ 7.24 67,555 $ N/A N/A
1998 13.33 100,127 6.49 85,242 6.85 105.60%
1997 11.27 85,072 7.53 85,072 3.74 49.74%
1996 10.41 18,247 10.25 20,000 0.16 1.56%
1995 -- -- -- -- -- --
GURNEE MILLS 1999 $ 8.60 55,970(3) $ -- -- $ N/A N/A
1998 7.10 40,752 6.45 40,752 0.65 10.08%
1997 4.92 184,259(3) -- -- N/A N/A
1996 30.00 20,000 -- -- N/A N/A
1995 -- -- 8.08 74,218 N/A N/A
SAWGRASS MILLS 1999 $ -- -- $ 15.00 28,152 $ N/A N/A
1998 15.00 28,152 15.00 28,152 -- --
1997 8.91 50,579 8.93 50,579 (0.02) (0.21%)
1996 26.39 20,000 14.86 39,275 11.53 77.59%
1995 12.80 25,110 -- -- N/A N/A
ONTARIO MILLS 1999 $11.82 135,707(4) $ 6.33 16,595 $ 5.49 86.73%
1998 -- -- -- -- -- --
GRAPEVINE MILLS 1999 $ 8.78 82,000(5) $ -- -- $ N/A N/A
ARIZONA MILLS 1999 $ -- -- $ -- -- $ -- --
TOTAL MILLS 1999 $ 10.39 297,754 $ 9.05 112,302 $ 1.34 14.81%
1998 11.94 234,059 8.48 224,636 3.46 40.86%
1997 7.33 393,342 7.32 233,471 0.01 0.15%
1996 18.54 91,653 12.95 74,453 5.59 43.17%
1995 11.00 45,158 8.36 152,790 2.64 31.58%
</TABLE>
<TABLE>
<CAPTION>
SPECIALTY STORES
------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD (2)
------------------------------------------------------------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
----------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
POTOMAC MILLS 1999 $ 26.70 73,060 $ 23.42 76,881 $ 3.29 14.03%
1998 27.68 70,769 27.91 62,034 (0.23) (0.79%)
1997 22.78 128,964 21.77 127,191 1.00 4.61%
1996 23.64 83.594 21.80 66,607 1.84 8.44%
1995 24.91 49,135 18.89 82,912 6.02 31.87%
FRANKLIN MILLS 1999 $ 21.83 86,646 $ 23.34 113,810 $ (1.50) (6.44%)
1998 19.18 150,869 17.65 113,961 1.53 8.65%
1997 20.16 112,670 19.34 106,202 0.83 4.29%
1996 20.08 73,880 18.61 115,416 1.47 7.90%
1995 19.49 46,453 21.90 77,713 (2.41) (11.00%)
GURNEE MILLS 1999 $ 22.74 65,922 $ 19.92 95,997 $ 2.82 14.16%
1998 21.07 99,886 18.59 88,220 2.48 13.35%
1997 20.75 101,771 19.24 104,086 1.51 7.87%
1996 19.01 74,447 18.63 71,457 0.38 2.04%
1995 16.95 48,988 17.79 55,864 (0.84) (4.72%)
SAWGRASS MILLS 1999 $ 39.16 31,982 $ 31.15 55,470 $ 8.01 25.71%
1998 32.52 48,268 26.32 49,373 6.20 23.54%
1997 30.00 72,188 24.57 64,626 5.42 22.08%
1996 29.63 58,904 22.24 57,770 7.39 33.23%
1995 24.58 173,744 23.11 55,108 1.47 6.36%
ONTARIO MILLS 1999 $ 29.65 30,580 $ 27.97 39,224 $ 1.67 5.97%
1998 27.34 35,616 27.64 26,400 (0.30) (1.08%)
GRAPEVINE MILLS 1999 $ 26.81 9,195 $ 27.27 30,776 $ (0.46) (1.70%)
ARIZONA MILLS 1999 $ 26.83 16,566 $ 27.49 22,020 $ (0.66) (2.40%)
TOTAL MILLS 1999 $ 26.09 318,864 $ 24.50 454,633 $ 1.59 6.49%
1998 23.43 405,408 21.80 339,988 1.63 7.49%
1997 22.83 415,593 20.92 402,105 1.90 9.10%
1996 22.76 290,825 19.97 311,250 2.79 13.97%
1995 22.71 318,320 20.38 271,597 2.33 11.43%
</TABLE>
(1) Katy Mills, Concord Mills, The Oasis at Sawgrass, and The Block at Orange
are excluded from this analysis, due to still being in their initial
lease-up phase. For the same reason, Ontario Mills for 1997, Grapevine
Mills for 1998 and Arizona Mills for 1998 are excluded.
(2) The releasing spread is calculated as the difference between per square
foot openings and per square foot closings for the twelve months ended
December 31, 1999, 1998, 1997, 1996 and 1995. Openings and closings
include renewals but exclude exercised options.
(3) For 1997, primarily consists of expansion space related to two anchor
stores, Bass Pro and Computer City comprising 125,000 sq. ft. and 25,000
sq. ft., respectively. The Bass Pro lease is expected to provide
substantial percentage rent in addition to the base rent stated above.
For 1999, consists of expansion space related to an anchor store,
Rinkside Sports comprising 55,970 sq. ft.
(4) Consists of expansion space related to several anchor stores, Sam Ash
Music, Iguana Ameramex, Hollytron, Cost Plus, and Vans Skate Park
comprising 23,086 sq. ft., 23,194 sq. ft., 21,978 sq. ft., 20,121 sq.
ft., and 47,328 sq. ft., respectively.
(5) Consist of expansion space related to Polar Ice.
Note: Totals may not sum due to rounding
32
<PAGE> 33
GROSS REPORTED TENANT SALES (1)(2)
The following table sets forth certain gross reported tenant sales information
for the years ended December 31, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------- ---------------------------------------------------
SQ. FT. SALES PER SQ. FT. SQ. FT. SALES PER SQ. FT.
----------- ----------------- -------------- ----------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Potomac Mills:
Anchor/Majors 908,839 $ 203,605,964 $ 224 951,043 $ 191,678,102 $ 202
Specialty 589,380 194,162,316 329 580,658 185,618,081 320
Temporary/Kiosk -- 4,402,397 -- -- 5,155,021 --
----------- ----------------- -------------- ----------- ---------------- --------------
1,498,219 $ 402,170,677 $ 268 1,531,701 $ 382,451,204 $ 250
Franklin Mills:
Anchor/Majors 958,557 $ 161,484,240 $ 168 971,940 $ 155,395,973 $ 160
Specialty 522,365 164,958,255 316 527,403 155,109,858 294
Temporary/Kiosk -- 6,502,230 -- -- 3,496,367 --
----------- ----------------- -------------- ----------- ---------------- --------------
1,480,922 $ 332,944,725 $ 225 1,499,343 $ 314,002,198 $ 209
Sawgrass Mills:
Anchor/Majors 1,140,813 $ 342,642,918 $ 300 1,174,642 $ 353,258,477 $ 301
Specialty 648,498 282,866,635 436 664,466 297,963,690 448
Temporary/Kiosk -- 9,002,205 -- -- 10,588,716 --
----------- ----------------- -------------- ----------- ---------------- --------------
1,789,311 $ 634,511,758 $ 355 1,839,108 $ 661,810,883 $ 360
Gurnee Mills:
Anchor/Majors 832,290 $ 139,416,739 $ 168 831,201 $ 141,156,686 $ 170
Specialty 567,505 164,669,598 290 565,887 159,651,566 282
Temporary/Kiosk -- 7,067,600 -- -- 6,515,341 --
----------- ----------------- -------------- ----------- ---------------- --------------
1,399,795 $ 311,153,937 $ 222 1,397,088 $ 307,323,593 $ 220
Ontario Mills:
Anchor/Majors 871,267 $ 145,908,434 $ 167 823,815 $ 136,055,601 $ 165
Specialty 479,270 173,224,557 361 482,653 166,299,546 345
Temporary/Kiosk -- 7,306,868 -- -- 8,188,974 --
----------- ----------------- -------------- ----------- ---------------- --------------
1,350,537 $ 326,439,859 $ 242 1,306,468 $ 310,544,121 $ 238
Grapevine Mills:
Anchor/Majors 803,425 $ 172,500,779 $ 215 657,994 $ 117,597,419 $ 179
Specialty 506,035 150,259,271 297 481,255 144,338,088 300
Temporary/Kiosk -- 9,030,995 -- -- 9,710,374 --
----------- ----------------- -------------- ----------- ---------------- --------------
1,309,460 $ 331,791,045 $ 253 1,139,249 $ 271,645,881 $ 238
Arizona Mills:
Anchor/Majors 674,963 $ 118,027,825 $ 175 669,035 $ 113,812,451 $ 170
Specialty 489,120 150,345,621 307 455,674 137,253,170 301
Temporary/Kiosk -- 7,321,984 -- -- 8,300,350 --
----------- ----------------- -------------- ----------- ---------------- --------------
1,164,083 $ 275,695,430 $ 237 1,124,709 $ 259,365,971 $ 231
Total Mills:
Anchor/Majors 6,190,154 $1,283,586,899 $ 207 6,079,670 $1,208,954,709 $ 199
Specialty 3,802,173 1,280,486,253 337 3,757,996 1,246,233,999 332
Temporary/Kiosk -- 50,634,279 -- -- 51,955,143 --
----------- ----------------- -------------- ----------- ---------------- --------------
9,992,327 $2,614,707,431 $ 262 9,837,666 $2,507,143,851 $ 255
=========== ================= ============== =========== ================ ==============
</TABLE>
(1) The Block at Orange, The Oasis at Sawgrass, Concord Mills and Katy Mills
are excluded from this analysis since they did not open until November
1998, April 1999, September 1999, and October 1999, respectively, and do
not have twenty-four months of sales data for comparison. The Block at
Orange is the only additional project with at least twelve months of
sales data. The Block at Orange sales of the year ended December 31,
1999, were $63,274,627 on 357,956 sq. ft. of anchor/major space ($177
per sq. ft.), $80,930,385 on 239,765 of specialty store space ($338 per
sq. ft.), and $7,208,445 of Temp/Kiosk sales.
(2) Anchor/major sales have been adjusted to include sales from tenants that
own their parcels.
33
<PAGE> 34
Diversified Tenant Base
Because our projects represent a collection of various retail formats
under one roof, we believe that our tenant base represents one of the more
diversified mixes of retailers in the industry today. This is evidenced by the
fact that no tenant represents more than 3.6% of 1999 base rent. We further
believe that the overall credit of our tenant base is strong given the diversity
of our retailers and the large number of manufacturer outlet tenants. Our
universe of tenants continues to expand.
The following table, which includes our joint venture projects (Ontario
Mills, Grapevine Mills, Arizona Mills, The Block at Orange, The Oasis at
Sawgrass, Concord Mills, and Katy Mills), sets forth certain information with
respect to our ten largest tenants (as measured by 1999 base rent) as of
December 31, 1999:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF NUMBER
1999 TOTAL LEASED OF
TENANT BASE RENT GROSS LEASABLE AREA STORES
<S> <C> <C> <C>
AMC Theatres 3.6% 3.6% 6
T.J. Maxx Group (1) 3.1% 5.0% 19
J.C. Penney (2) 2.1% 4.7% 8
Rainforest Cafe 1.7% 0.9% 7
Burlington Coat Factory
Group (3) 1.6% 5.8% 10
Bed, Bath & Beyond 1.5% 2.4% 8
Off 5th - Saks Fifth Avenue 1.4% 2.2% 10
The Sports Authority 1.3% 1.5% 5
Just For Feet 1.2% 0.5% 6
GAP (4) 1.2% 1.7% 18
---- ---- --
Total 18.7% 28.3% 97
==== ==== ==
</TABLE>
- ---------------
(1) Includes T.J. Maxx and Marshalls.
(2) Includes J.C. Penney and Rite Aid.
(3) Includes Burlington Coat Factory and Totally 4 Kids.
(4) Includes Gap Outlet and Old Navy.
Description of Existing Properties
Set forth below are descriptions of each of our existing Mills and
Block properties.
Potomac Mills - Woodbridge, Virginia. Potomac Mills contains
approximately 1.6 million square feet of gross leasable area, of which one
anchor store tenant owns approximately 80,000 square feet. Potomac Mills opened
in 1985 with a total of approximately 630,000 square feet of gross leasable
area. As a result of customer demand, Potomac Mills was expanded to
approximately 1.2 million square feet of gross leasable area in 1986. The Phase
III expansion of Potomac Mills opened on September 30, 1993 and increased total
gross leasable area by approximately 355,000 square feet. We started
construction of a 62,000 square foot Vans Skate Park in 1999 with an opening in
the spring of 2000. Potomac Mills has 17 anchors, including: IKEA, J.C. Penney
Outlet, Homeplace, Marshalls, Spiegel Outlet, AMC Theatres, The Sports
Authority, Off 5th - Saks Fifth Avenue, T.J. Maxx, Syms, Group USA and Nordstrom
Rack. Potomac Mills is situated on approximately 161 acres located approximately
20 miles southwest of Washington, D.C. Potomac Mills is adjacent to Interstate
95, which serves as one of the transportation backbones of the Washington
metropolitan area. This location strategically positions Potomac Mills between
the Washington/Baltimore metropolitan market to the north and Richmond,
approximately 90 miles to the south. We own 100% of Potomac Mills.
Franklin Mills - Philadelphia, Pennsylvania. Franklin Mills opened in
1989 and contains approximately 1.7 million square feet of gross leasable area,
of which two anchor store tenants own approximately 209,000 square feet. We
began remerchandising Franklin Mills in 1996 by upgrading its tenant mix and
began construction on an entertainment zone, including themed restaurants and
interactive entertainment venues, in the first half of 1997, which was completed
by November 19, 1998 with the openings of Rainforest Cafe and Elephant Castle.
Franklin Mills has 16 anchors, including: Bed, Bath & Beyond, Last Call from
Neiman Marcus, Marshalls, Nordstrom Rack, Office Max, Off 5th-Saks Fifth Avenue,
Jillian's
34
<PAGE> 35
and Syms. Franklin Mills features what we believe is the largest concentration
of outlet retailing in the Delaware Valley. With access from U.S. Highway 1 and
the Pennsylvania Turnpike, Franklin Mills is strategically positioned
approximately 15 miles northeast of Philadelphia's Center City and just west of
Interstate 95, a major thoroughfare serving the greater Philadelphia/Wilmington
metropolitan market. We own 100% of Franklin Mills.
Sawgrass Mills - Sunrise, Florida. Sawgrass Mills, which opened in
1990, contains approximately 1.8 million square feet of gross leasable area, of
which three anchor store tenants own approximately 282,000 square feet. As a
result of customer demand, Sawgrass Mills was expanded by approximately 136,000
square feet of gross leasable area in 1995. We opened The Oasis at Sawgrass in
April 1999 which consisted of an approximately 290,000 square foot entertainment
zone anchored by a 24-screen Regal Theater. Other tenants include Sega
Gameworks, Cheesecake Factory and Legal Seafoods. Sawgrass Mills has 19 anchors,
including: Beall's Outlet Store, Burlington Coat Factory, Last Call from Neiman
Marcus, Loehmanns, Rainforest Cafe, Spiegel Outlet, The Sports Authority and
Homeplace. Sawgrass Mills is located in Florida's "Gold Coast" market
approximately 11 miles west of Fort Lauderdale. The site lies adjacent to both
the Sawgrass Expressway and Flamingo Road, between Sunrise and Oakland Park
Boulevards. The entire South Florida region is linked by the road network of the
Sawgrass Expressway, Interstate 75 and Interstate 595, which intersect at an
interchange located less than two miles southwest of Sawgrass Mills. We own 100%
of Sawgrass Mills, excluding The Oasis at Sawgrass.
Gurnee Mills - Gurnee, Illinois. Gurnee Mills opened in 1991 and
contains approximately 1.7 million square feet of gross leasable area, of which
three anchor store tenants own approximately 251,000 square feet. We have
completed construction of an expansion of over 195,000 square feet of gross
leasable area, which added an ice skating rink to the existing mall. Gurnee
Mills has been remerchandised resulting in the upgrade of the project's tenant
mix. Gurnee Mills has 17 anchors, including: Bass Pro Shops, Rinkside Sports,
J.C. Penney Outlet, Homeplace, Marshalls, Spiegel Outlet, Bed, Bath & Beyond,
The Sports Authority, Off 5th-Saks Fifth Avenue, T.J. Maxx and Syms. The project
is located adjacent to Interstate 94, the major north/south thoroughfare linking
Chicago and Milwaukee. Gurnee Mills is clearly visible from Interstate 94 and is
situated directly across from Six Flags Great America, one of the largest
amusement parks in the Midwest. We own 100% of Gurnee Mills.
Ontario Mills - Ontario, California. Ontario Mills opened in 1996 and
contains approximately 1.5 million square feet of gross leasable area comprised
of approximately 1,000,000 square feet of anchor space and approximately 500,000
square feet of specialty store space. In 1999, we completed a 136,000 square
foot expansion which included tenants such as Van Skate Park, Sam Ash Music,
Cost Plus and Iguana Ameramex. In addition, we have plans to expand the project
to a total of 1.7 million square feet upon full build out. Ontario Mills
currently has 23 anchors, including: Off 5th-Saks Fifth Avenue, Dave & Busters,
J.C. Penney Outlet, Burlington Coat Factory, The Sports Authority, Marshalls,
Bed, Bath & Beyond, Mikasa, Off Rodeo Drive, T.J. Maxx, AMC Theatres, Virgin
Megastore, Group USA, Foozles, Totally 4 Kids, American Wilderness Experience,
Sega Gameworks and Rainforest Cafe. Ontario Mills is located at the intersection
of Interstate 10 and Interstate 15 in the heart of the Riverside/San Bernardino
area known as the "Inland Empire." Ontario Mills serves the Los Angeles/Orange
County metropolitan market. Net construction costs at completion are estimated
at $174 million.
Ontario Mills is owned by a limited partnership among us, with a 50%
interest, Kan Am, with a 25% interest, and Simon Property, with a 25% interest.
Kan Am has agreed to contribute 50% of the initial required equity capital. We
and Simon Property are responsible for the balance of the initial required
equity capital on a pro rata basis. We, Simon Property and Kan Am each will
receive a 9% preferred return on our equity, and the remaining cash flow will be
distributed pro rata in accordance with the percentage ownership interests. We
have the right to manage the development, property management and leasing of the
Ontario Mills project, subject to the other joint venture partners' approval of
specified major decisions, including sale or refinancing of the project and
approval of an annual budget.
At specified times following the fifth anniversary of the project's
opening, either we and Simon Property together or Kan Am can exercise a buy-sell
provision. Pursuant to the buy-sell provision, we and Simon Property can require
Kan Am to sell to us, for cash or limited partnership units of the Operating
Partnership and limited partnership units of Simon Property at Kan Am's
election, Kan Am's entire interest in the partnership. Also pursuant to the
buy-sell provision, Kan Am can require us and Simon Property to acquire, for
cash or limited partnership units of the Operation Partnership and limited
partnership units of Simon Property at our and Simon Property's election, Kan
Am's entire interest in the partnership.
35
<PAGE> 36
Grapevine Mills - Grapevine, Texas. Grapevine Mills opened in 1997 and
contains approximately 1.5 million square feet of gross leasable area comprised
of approximately 950,000 square feet of anchor space and approximately 550,000
square feet of specialty store space. Grapevine Mills currently has 17 anchors,
including: AMC Theatres, Polar Ice, Old Navy, Bass Pro Shops, Off 5th-Saks Fifth
Avenue, Burlington Coat Factory, Bed, Bath & Beyond, Group USA, Rainforest Cafe,
Books-A-Million, Sega Gameworks and Virgin Megastore. Grapevine Mills is located
on a 175-acre site located at the interchange of Highway 121 and International
Parkway, two miles north of the Dallas/Fort Worth Airport in Grapevine, Texas.
Grapevine Mills is approximately 19 miles northeast of downtown Fort Worth and
serves the Dallas/Fort Worth metropolitan area.
Grapevine Mills is owned by a limited partnership among us, with a
37.5% interest, Simon Property, with a 37.5% interest, and Kan Am, with a 25%
interest. Kan Am has agreed to contribute 50% of the initial required equity
capital. We and Simon Property are responsible for the balance of the initial
required equity capital on a pro rata basis. We, Simon Property and Kan Am each
will receive a 9% preferred return on our equity, and the remaining cash flow
will be distributed pro rata in accordance with the percentage ownership
interests. We have the right to manage the development, property management and
leasing of the Grapevine Mills project, subject to the joint venture partners'
approval of specified major decisions, such as changes to the plan of
development, the annual operating budget for the project and any proposed sale
or refinancing.
At specified times following the tenth anniversary of the project's
opening, either we and Simon Property together or Kan Am can exercise a buy-sell
provision. Pursuant to the buy-sell provision, we and Simon Property can require
Kan Am to sell to us, for cash or limited partnership units of the Operating
Partnership and limited partnership units of Simon Property at Kan Am's
election, Kan Am's entire interest in the partnership. Also pursuant to the
buy-sell provision, Kan Am can require us and Simon Property to acquire, for
cash or limited partnership units of the Operating Partnership and limited
partnership units of Simon Property at our and Simon Property's election, Kan
Am's entire interest in the partnership.
Arizona Mills - Tempe, Arizona. Arizona Mills opened in November 1997
and contains approximately 1.2 million square feet of gross leasable area
comprised of approximately 700,000 square feet of anchor space and approximately
530,000 square feet of specialty store space. Arizona Mills currently has 16
anchors, including: Burlington Coat Factory, Off 5th-Saks Fifth Avenue, Last
Call-Neiman Marcus, Oshman's, Harkins Cinema, J.C. Penney, Rainforest Cafe,
Group USA, Hi-Health, Virgin Megastore and Sega Gameworks. The project is
located on a 115-acre site located 20 minutes from downtown Phoenix, at the
intersection of Interstate 10 and Superstition Freeway (Highway 60).
Arizona Mills is owned by a limited liability company owned by us, with
a 36.8% interest, Taubman Realty, with a 36.8% interest, and Simon Property,
with a 26.4% interest. All joint venture partners are obligated to contribute
required equity capital on a pro rata basis. We have the right to manage the
development, property management and leasing services of the Arizona Mills
project, subject to the other joint venture partners' approval of specified
major decisions, including sale or refinancing of the project and approval of an
annual budget.
At specified times following the fifth anniversary of the project's
opening or, if later, the date that 90% of the project has been leased, if the
joint venture partners are unable to agree upon specified major decisions, any
joint venture partner can cause the project to be sold pursuant to specified
procedures.
The Block at Orange - Orange, California. The Block at Orange opened in
November 1998, with approximately 0.6 million square feet of gross leasable area
comprised of approximately 360,000 square feet of anchor space and approximately
280,000 square feet of specialty store space. We have plans to expand the
project to a total of 0.8 million square feet upon full build out. The Block at
Orange currently has nine anchors, including: Borders Books and Music, Vans,
Virgin Megastore, Off 5th-Saks Fifth Avenue, Ron Jon Surf Shop, Gameworks, AMC
Theatres, Dave & Busters and Hilo Hattie, and has two additional anchor store
commitments. The Block at Orange is located on an 85-acre site located at the
intersection of the Santa Ana Freeway (I-10), the Garden Grove Freeway and
Orange Freeway (Highway 57) in the City of Orange, California, three miles from
Disneyland.
The Block at Orange project is owned by a limited partnership between
us, with a 50% interest, and Kan Am, with a 50% interest. Kan Am has committed
to fund up to $60 million (which represents 100% of the estimated equity
requirements for this project). Kan Am will receive a 9% preferred return on its
equity. We have guaranteed Kan Am's receipt of this preferred return until such
time as permanent financing is secured for the project. After permanent
financing is secured, we and Kan Am each will receive a 9% preferred return on
our equity, and the remaining cash flow will be distributed pro rata in
accordance with the percentage ownership interests. We have the right to manage
the development, property management and
36
<PAGE> 37
leasing services for the project, subject to the approval of Kan Am for
specified major decisions, including the sale or refinancing of the project and
approval of an annual budget.
At specified times following the tenth anniversary of the project's
opening, either we or Kan Am can exercise a buy-sell provision. Pursuant to the
buy-sell provision, we can require Kan Am to sell to us, for cash or limited
partnership units of the Operating Partnership at Kan Am's election, Kan Am's
entire interest in the partnership. Also pursuant to the buy-sell provision, Kan
Am can require us to acquire, for cash or limited partnership units of the
Operating Partnership at our election, Kan Am's entire interest in the
partnership.
The Oasis at Sawgrass - Sunrise, Florida. The Oasis at Sawgrass opened
in April 1999 and contains approximately 290,000 square feet of gross leasable
area comprised of approximately 135,000 square feet of anchor space and
approximately 155,000 square feet in 2000 for a new tenant, Jillian's. The Oasis
at Sawgrass currently has 3 anchors including: Regal Theatre, Sega Gameworks,
and Ron Jon Surf Shop. The Oasis at Sawgrass is an expansion of the existing
Sawgrass Mills Project.
The Oasis at Sawgrass is owned by a limited partnership among us, with
a 50% interest, and Kan Am, with a 50% interest. The land on which the Oasis
is situated is owned in fee by Sawgrass Mills Phase II Limited Partnership and
is ground leased to the joint venture that owns the Oasis. The Oasis joint
venture, in turn, master leases improvements containing 96,907 square feet of
space to the entity that owns Phase I of Sawgrass Mills. A transaction is
pending by which Sawgrass Mills Phase II Limited Partnership will convey its
fee title interest in the Phase III land to the Oasis joint venture and will
terminate the Phase III ground lease. A deed dated December 30, 1999
conveying such interest has been delivered in escrow, subject to receipt of
requisite lender approvals and an amendment to the master lease of
improvements referenced above extending the term of such lease to 60 years,
granting the lessee thereunder three options to extend the lease for
additional ten-year terms, and extending customary protections to the Phase
I lender.
Kan Am has committed to fund up to $24 million (which represents
100% of the estimated equity requirements for this project.) Kan Am will
receive a 9% preferred return on it's equity. We have guaranteed Kan Am's
receipt of this preferred return until such time as permanent financing is
secured for this project. After permanent financing is secured, we and Kan Am
will receive a 9% preferred return on our equity, and the remaining cash flow
will be distributed pro rata in accordance with the percentage ownership
interests. We have the right to provide all the development, property
management and leasing services for this project, subject to the approval of
Kan Am for special major decisions, including the sale of refinancing of the
project and approval of an annual budget.
At specified times following the tenth anniversary of the project's
opening, either we or Kan Am can exercise a buy-sell provision. Pursuant to the
buy-sell provision, we can require Kan Am to sell us, for cash or limited
partnership units of the Operating Partnership at Kan Am's election, Kan Am's
entire interest in the partnership. Also, pursuant to the buy-sell provision,
Kan Am can require us to acquire, for cash or limited partnership units of the
Operating at our election, Kan Am's entire interest in the partnership.
Concord Mills - Concord, North Carolina. Concord Mills opened in
September 1999 and contains approximately 1.2 million square feet of gross
leasable comprised of approximately 670,000 square feet of anchor space and
approximately 565,000 square feet of specialty store space. We have plans to
expand the project to a total of 1.3 million square feet upon full build out.
Concord Mills currently has 15 anchors including: Bass Pro Shops, AMC theatres,
Jillian's Sun & Ski Sports, Alabama Grill, Off 5th-Saks Fifth Avenue, Burlington
Coat Factory, T.J. Maxx, F.Y.E. (For Your Entertainment), and Old Navy. Concord
Mills is located on an 165-acre site at the intersection of interstate 85 and
Concord Mills Boulevard in the city of concord which is approximately ten miles
north of downtown Charlotte.
Concord Mills is owned by a limited partnership among us, with a 37.5%
interest, Simon Property, with a 37.5% interest, and Kan Am, with a 25%
interest. Kan Am has agreed to contribute 50% of the initial equity capital. We
and Simon Property are responsible for the balance of this initial required
equity capital on a pro rata basis. We and Simon Property have guaranteed Kan
Am's receipt of this preferred return until permanent financing is secured for
the project. After permanent financing is secured, we, Simon Property, and Kan
Am will receive a 9% preferred return on our equity, and the remaining cash flow
will be distributed pro rata in accordance with the percentage ownership
interests. We have the right to manage the development, property management and
leasing of the Concord Mills project, subject to the joint venture partner's
approval of specified major decisions, such as changes to the plan of
development, the annual operating budget and any proposed sale or refinancing.
At specified times following the tenth anniversary of the project's
opening, either we and Simon Property together or Kan Am can exercise a buy-sell
provision. Pursuant to the buy-sell provision, we and Simon Property can require
Kan Am to sell us, for cash or limited partnership units of the Operating
Partnership and limited partnership units of Simon Property, at Kan Am's
election, Kan Am's entire interest in the partnership. Also, pursuant to the
buy-sell provision, Kan Am can require us and Simon property to acquire, for
cash or limited partnership units of the Operating Partnership and limited
partnership units of Simon property at our and Simon Property's election, Kan
Am's entire interest in the partnership.
37
<PAGE> 38
Katy Mills - Katy, Texas. Katy Mills opened in October 1999 and
contains approximately 1.2 million square feet of gross leasable area comprised
of approximately 600,000 square feet of anchor space and approximately 560,000
square feet of specialty store space. Katy Mills currently has 13 anchors
including: Bass Pro Shops, Burlington Coat Factory, AMC Theatres, F.Y.E. (For
Your Entertainment), Off 5th-Saks Fifth Avenue, Rainforest Cafe, Sun & Ski
Sports, Old Navy, Jillian's, and Benetton Sportssystems. Katy Mills is located
on a 500-acre site at the intersection of Interstate 10 and Katy-Fort Bend Road
in Fort Bend and Harris Counties which is approximately twenty miles west of
Houston.
Katy Mills is owned by a limited partnership between us, with a 62.5%
interest, and Kan Am, with a 37.5% interest. Kan Am has committed to fund up to
$78.75 million (which represents 75% of the estimated equity requirements for
the project). We and Kan Am will receive a 9% preferred return on our equity. We
have guaranteed Kan Am's receipt of this preferred return until permanent
financing is secured for the project. After permanent financing is secured, we
and Kan Am each will receive a 9% preferred return on ownership interests. We
have the right to provide all development, property management and leasing
services for the project, subject to the approval of Kan Am for specified major
decisions, including a sale or refinancing of the project and approval of annual
budgets.
At specified times following the tenth anniversary of the project's
opening, either we or Kan Am can exercise a buy-sell provision. Pursuant to the
buy-sell provision , we can require Kan Am to sell us, for cash or limited
partnership units of the Operating Partnership, at Kan Am's election, Kan Am's
entire interest in the partnership. Also, pursuant to the buy-sell provision,
Kan Am can require us to acquire, for cash or limited partnership units of the
Operating Partnership at our election, Kan Am's entire interest in the
partnership.
38
<PAGE> 39
The Community Centers
The eleven Community Centers contain a total of approximately 2.2
million square feet of gross leasable area and are located in Florida, Georgia,
Illinois, Maryland, New Jersey, Ohio, Pennsylvania, South Carolina and Virginia.
The Community Centers are open-air shopping centers containing traditional
shopping center tenants, such as grocery, drug, video and greeting card stores,
as well as a strong concentration of national value retailers. Anchor tenants of
the Community Centers include Giant Food, Krogers, Marshalls, Safeway, T.J.
Maxx, Walgreens, Wal-Mart, Bed, Bath & Beyond and Sears Roebuck & Co.
COMMUNITY CENTERS
The following table sets forth certain information with respect to the
Community Centers as of December 31, 1999:
<TABLE>
<CAPTION>
GROSS LEASABLE AREA
(SQ. FT.)
TOTAL
YEAR LAND GROSS
COMPLETED/ AREA ANCHOR SPECIALTY LEASABLE
PROPERTY EXPANDED (ACRES) STORES (1) STORES AREA
- -------- -------- ------- ---------- ------ ----
<S> <C> <C> <C> <C> <C>
West Falls Church Outlet 1982 7 37,841 49,983 87,824
Center
Butterfield 1983 9 41,933 72,677 114,610
Plaza
Montgomery 1983 11 36,405 80,986 117,391
Village
Western Hills 1983 36 314,516 134,980 449,496
Plaza
Crosswinds 1984 11 120,975 23,298 144,273
Center
Germantown 1986 20 46,756 130,341 177,097
Commons
Fashion Place 1987 13 73,258 74,692 147,950
Gwinnett 1987 18 97,547 96,956 194,503
Marketfair
Mount 1987 34 172,595 126,005 298,600
Prospect Plaza
Cooper's Plaza 1994 20 158,556 14,953 173,509
Liberty Plaza 1994 36 262,747 52,320 315,067
-- ------- ------- -------
Totals/Weighted
Averages 215 1,363,129 857,191 2,220,320
=== ========= ======= =========
</TABLE>
<TABLE>
<CAPTION>
PERCENT LEASED (2)
TOTAL ANNUALIZED NUMBER
ANCHOR SPECIALTY PERCENT BASE OF
PROPERTY STORES STORES LEASED RENT (3) STORES
- -------- ------ ------ ------ -------- ------
<S> <C> <C> <C> <C> <C>
West Falls Church Outlet 100% 97% 98% $ 849,301 17
Center
Butterfield 100% 100% 100% 1,504,664 18
Plaza
Montgomery 100% 72% 81% 1,252,610 19
Village
Western Hills 100% 67% 90% 3,016,554 33
Plaza
Crosswinds 100% 89% 98% 1,034,740 12
Center
Germantown 100% 97% 98% 2,210,875 36
Commons
Fashion Place 100% 62% 81% 879,468 16
Gwinnett 100% 89% 94% 2,011,570 29
Marketfair
Mount 100% 93% 97% 2,147,375 29
Prospect Plaza
Cooper's Plaza 63% 100% 66% 1,157,036 3
Liberty Plaza 80% 75% 79% 1,987,628 9
---------- ---
Totals/Weighted
Averages 92% 84% 89% $18,051,821 221
========== ===
</TABLE>
<TABLE>
<CAPTION>
1999
SALES PER SQ. FT.
ANCHOR SPECIALTY
PROPERTY ANCHOR STORE TENANTS STORES STORES
- -------- -------------------- ------ ------
<S> <C> <C> <C>
West Falls Church Outlet Safeway Marketplace $ 435 $ 153
Center
Butterfield Arvey Paper & Office, Kids R Us 114 213
Plaza
Montgomery Safeway Marketplace 423 176
Village
Western Hills Krogers, Staples, Sears Robuck & 289 179
Plaza Co., and Media Play
Crosswinds Bed, Bath & Beyond, Marshalls and 199 239
Center Scotty's
Germantown Giant Food 458 157
Commons
Fashion Place Staples, Superpetz and TJ Maxx 156 134
Gwinnett A&P, Marshalls and TJ Maxx 217 222
Marketfair
Mount Dominicks, Marshalls, TJ Maxx and 212 152
Prospect Plaza Walgreens
Cooper's Plaza Marshalls and Pathmark 131 100
Liberty Plaza Dick's Sporting Goods and 199 148
Wal-Mart
Totals/Weighted
Averages $ 245 $ 173
</TABLE>
- -------------------
(1) Anchor stores includes all stores occupying more than 20,000 square feet.
(2) Percent leased is defined as all space leased and for which rent was being
paid as of December 31, 1999, excluding tenants with leases having a term of
less than one year.
(3) Annualized base rent is the base rent payable in December 1999 multiplied by
12.
39
<PAGE> 40
OPERATING TRENDS
The following table sets forth, for the last five years, certain information
regarding operating trends with respect to the Community Centers as of December
31, 1999:
<TABLE>
<CAPTION>
MINIMUM RENT PLUS PERCENTAGE RENT
------------------------------------------------------------------------------------------
AVERAGE TOTAL STORES ANCHOR STORES SPECIALTY STORES
PERCENT ----------------------------- ---------------------------- ---------------------------
LEASED (1) TOTAL PER SQ. FT. TOTAL PER SQ. FT. TOTAL ER SQ. FT.
-------------- ------------- ------------ ----------- ------------ ------------- -----------
COMMUNITY CENTERS
<S> <C> <C> <C> <C> <C> <C> <C>
1999 85% $ 18,151,315 $ 9.65 $ 8,191,146 $ 7.05 $ 9,960,169 $ 13.85
1998 91 18,396,101 9.19 8,473,402 6.66 9,922,699 13.60
1997 87 17,853,568 9.33 8,223,866 6.76 9,629,702 13.84
1996 93 18,492,347 9.08 8,956,215 6.74 9,536,132 13.49
1995 90 17,933,643 9.03 8,692,927 6.78 9,240,716 13.13
</TABLE>
(1) Average percent leased is defined as total average space leased and for
which rent was paid excluding tenants with leases having a term of less than
one year.
40
<PAGE> 41
CAPITAL EXPENDITURES
The following tables set forth certain information regarding capital
expenditures for the Mills and the Community Centers combined for each of the
last three years and a 3-year average, the existing Mills (Potomac Mills,
Franklin Mills, Sawgrass Mills, Gurnee Mills, Ontario Mills, Grapevine Mills and
Arizona Mills) for each of the last three years and a 3-year average, and the
Community Centers for each of the last three years and a 3-year average. Only
1999 and 1998 data is available for Ontario Mills, Grapevine Mills and Arizona
Mills.
CAPITAL EXPENDITURES - EXISTING MILLS AND EXISTING COMMUNITY CENTERS COMBINED
(9)
The following table sets forth certain information regarding capital
expenditures for the existing Mills and the Community Centers combined:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------- 3 - YEAR
1999 1998 1997 AVERAGE
---------------------------------------------------------- ----------------
<S> <C> <C> <C> <C>
RECURRING NON-TENANT CAPITAL
EXPENDITURES (1)
Costs $ 313,462 $ 1,453,123 $ 435,742 $ 734,109
Per Square Foot (2) 0.03 0.12 0.05 0.07
RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)
Costs $ 4,594,831 $ 5,467,329 $ 5,143,206 $ 5,068,455
Per Square Foot Improved (4) 8.52 7.85 11.90 9.42
Per Square Foot (2) 0.38 0.46 0.62 0.50
TOTAL RECURRING COSTS
Costs $ 4,908,293 $ 6,920,452 $ 5,578,948 $ 5,802,564
Per Square Foot (2) 0.41 0.58 0.67
0.55
NON-RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)
Costs $ 22,881,626(7) $ 18,911,845(7) $ 41,571,485(7) $ 27,788,319
Per Square Foot Improved (5) 51.85 71.68 73.69 65.74
Per Square Foot (2) 1.91 1.58 5.03 2.84
WORK IN PROCESS (6)
Costs $ 2,676,259 $ 8,447,326 $ 4,703,992 $ 5,275,859
Per Square Foot Improved (8) 18.81 25.99 14.59 19.80
</TABLE>
(1) Recurring non-tenant capital expenditures include expenditures that are not
tenant related nor recoverable from tenants.
(2) Includes annual costs divided by total gross leasable area (excluding space
owned by certain store tenants) of our properties.
(3) Tenant Improvements/Leasing costs include tenant specific costs including
tenant improvements, tenant allowances and capitalized internal leasing
costs.
(4) Calculated as recurring tenant improvements/leasing costs divided by gross
leasable area of all recurring store openings (including spaces requiring no
expenditures).
(5) Calculated as non-recurring tenant improvements/leasing costs divided by
gross leasable area of all non-recurring store openings.
(6) Work in process will be shown as recurring or non-recurring in the year that
the work is completed.
(7) Includes expansion costs at Franklin Mills and Gurnee Mills and
non-recurring remerchandising costs. Excludes costs relating to the Sawgrass
Phase III expansion.
(8) Calculated as work in process divided by gross leasable area of all space
with work in process.
(9) Excludes projects with less than 12 months of operations.
41
<PAGE> 42
CAPITAL EXPENDITURES - EXISTING MILLS (9)
The following table sets forth certain information regarding capital
expenditures for the existing Mills (Potomac Mills, Franklin Mills, Sawgrass
Mills, Gurnee Mills, Ontario Mills, Grapevine Mills and Arizona Mills). Only
1999 and 1998 data is available for Ontario Mills, Grapevine Mills and Arizona
Mills.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------ 3 - YEAR
1999 1998 1997 AVERAGE
------------------------------------------------------------ --------------
<S> <C> <C> <C> <C>
RECURRING NON-TENANT CAPITAL
EXPENDITURES (1)
Costs $ 140,913 $ 949,095 $ 388,003 $ 492,670
Per Square Foot (2) 0.01 0.10 0.06 0.06
RECURRING TENANT
IMPROVEMENTS/LEASING COSTS (3)
Costs $ 4,307,703 $ 4,274,398 $ 4,518,073 $ 4,366,725
Per Square Foot Improved (4) 9.28 8.53 13.35 10.39
Per Square Foot (2) 0.44 0.44 0.75 0.54
TOTAL RECURRING COSTS
Costs $ 4,448,616 $ 5,223,493 $ 4,906,076 $ 4,859,395
Per Square Foot (2) 0.45 0.54 0.81 0.60
NON-RECURRING TENANT
IMPROVEMENTS/LEASING COSTS (3)
Costs $ 16,911,884(7) $ 18,175,677(7) $ 41,010,815(7) $ 25,366,125
Per Square Foot Improved (5) 64.28 96.48 78.37 79.71
Per Square Foot (2) 1.73 1.86 6.77 3.45
WORK IN PROCESS (6)
Costs $ 1,955,746 $ 6,779,660 $ 3,989,739 $ 4,241,715
Per Square Foot Improved (8) 38.97 38.45 31.27 36.23
</TABLE>
(1) Recurring non-tenant capital expenditures include expenditures that are not
tenant related nor recoverable from tenants.
(2) Includes annual costs divided by total gross leasable area (excluding space
owned by certain store tenants) of our properties.
(3) Tenant improvements/leasing costs include tenant specific costs including
tenant improvements, tenant allowances and capitalized internal leasing
costs.
(4) Calculated as recurring tenant improvements/leasing costs divided by gross
leasable area of all recurring store openings (including spaces requiring no
expenditures).
(5) Calculated as non-recurring tenant improvements/leasing costs divided by
gross leasable area of all non-recurring store openings.
(6) Work in process will be shown as recurring or non-recurring in the year that
the work is completed.
(7) Includes expansion costs at Franklin Mills and Gurnee Mills. Excludes cost
relating to Sawgrass Phase III expansion.
(8) Calculated as work in process divided by gross leasable area of all space
with work in process.
(9) Excludes projects with less than 12 months of operations.
42
<PAGE> 43
CAPITAL EXPENDITURES - COMMUNITY CENTERS
The following table sets forth certain information regarding capital
expenditures for the Community Centers:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------- 3 - YEAR
1999 1998 1997 AVERAGE
------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
RECURRING NON-TENANT CAPITAL
EXPENDITURES (1)
Costs $ 172,549 $ 504,028 $ 47,739 $ 241,439
Per Square Foot (2) 0.08 0.23 0.02 0.11
RECURRING TENANT
IMPROVEMENTS/LEASING COSTS (3)
Costs $ 287,128 $ 1,192,931 $ 625,133 $ 701,731
Per Square Foot Improved (4) 3.83 6.10 6.68 5.54
Per Square Foot (2) 0.13 0.54 0.28 0.32
TOTAL RECURRING COSTS
Costs $ 459,677 $ 1,696,959 $ 672,872 $ 943,169
Per Square Foot (2) 0.21 0.77 0.31 0.43
NON-RECURRING TENANT
IMPROVEMENTS/LEASING COSTS (3)
Costs $5,969,742 $ 736,168 $ 560,670 $2,422,193
Per Square Foot Improved (5) 33.49 9.76 13.73 18.99
Per Square Foot (2) 2.71 0.33 0.25 1.10
WORK IN PROCESS (6)
Costs $ 720,513 $ 1,667,666 $ 714,253 $1,034,144
Per Square Foot Improved (7) 7.83 11.22 3.66 7.57
</TABLE>
(1) Recurring non-tenant capital expenditures include expenditures that are not
tenant related nor recoverable from tenants.
(2) Includes annual costs divided by total gross leasable area (excluding space
owned by certain store tenants) of the Community Centers.
(3) Tenant improvements/leasing costs include tenant specific costs including
tenant improvements, tenant allowances and capitalized internal leasing
costs.
(4) Calculated as recurring tenant improvements/leasing costs divided by gross
leasable area of all recurring store openings (including spaces requiring no
expenditures).
(5) Calculated as non-recurring tenant improvements/leasing costs divided by
gross leasable area of all non-recurring store openings.
(6) Work in process will be shown as recurring or non-recurring in the year that
the work is completed.
(7) Calculated as work in process divided by gross leasable area of all space
with work in process.
43
<PAGE> 44
THE MILLS CORPORATION
SUMMARY OF OUTSTANDING CONSOLIDATED INDEBTEDNESS
(DOLLARS IN THOUSANDS)
AS OF DECEMBER 31, 1999
As of December 31, 1999, the Company had outstanding consolidated indebtedness
in an aggregate amount of approximately $877.3 million (excluding its pro rata
share of unconsolidated joint venture debt) as set forth below.
<TABLE>
<CAPTION>
PRINCIPAL INTEREST ANNUAL MATURITY
MORTGAGE/LOAN BALANCE RATE TYPE INTEREST RATE DATE
- ------------- ------- --------- ------------- ----
(000's) (000's)
<S> <C> <C> <C> <C>
Potomac Mills/Gurnee Mills:
Tranche A $202,704 Fixed 6.905% 12/17/26 (1)
Tranche B 27,000 Fixed 7.021% 12/17/26 (1)
Tranche C 15,000 Fixed 7.235% 12/17/26 (1)
Tranche D 30,000 Fixed 7.701% 12/17/26 (1)
Franklin Mills and Liberty Plaza
Tranche A 107,502 Fixed 7.882% 6/1/27 (3)
Mortgage Loan 19,560 Fixed 7.440% 6/1/27 (3)
Mortgage Loan 12,805 Fixed 6.220% 6/1/27 (3)
Sawgrass Mills:
Tranche A 115,000 Fixed 6.450% 1/18/01
Tranche B 10,000 Variable with cap 85 bp over LIBOR(6) 1/18/01
Tranche C 20,000 Variable with cap 230 bp over LIBOR(6) 1/18/01
Sawgrass Mills - Phase II: 18,000 Fixed 6.970% 1/18/01
TenCommunity Centers: 111,662 Fixed 7.300% 2/1/29
Concord Mills Residual III: 8,956 Variable 200 bp over LIBOR 12/31/00
--------
Total Property Mortgages 698,189
--------
Other Loans
Sawgrass Mills Mezzanine Loan: 57,000 Variable 475 bp over LIBOR 10/1/00
Corporate Miscellaneous: 354 Fixed 8.250% 10/31/00
Corporate Miscellaneous: 2,400 Fixed 6.200% 7/15/00
Corporate Line of Credit: 100,000 Variable 150 bp over LIBOR 4/1/00
Corporate Miscellaneous: 15,000 Variable 125 bp over LIBOR 1/18/01
Sawgrass Residual: 4,330 Variable 165 bp over LIBOR 1/18/01
--------
Total $877,273
==========
</TABLE>
<TABLE>
<CAPTION>
EARLIEST DAY RECOURSE TO
ANNUAL AT WHICH DEBT COMPANY OR
MORTGAGE/LOAN INTEREST CAN BE REPAID OP. PTNRSHP
- ------------- -------- ------------- -----------
(000's)
<S> <C> <C> <C>
Potomac Mills/Gurnee Mills:
Tranche A $13,996 (2) 0%
Tranche B 1,896 (2) 0%
Tranche C 1,085 (2) 0%
Tranche D 2,310 (2) 0%
Franklin Mills and Liberty Plaza
Tranche A 8,473 (4) 0%
Mortgage Loan 1,455 (4) 0%
Mortgage Loan 796 (4)
Sawgrass Mills:
Tranche A 7,418 (5) 0%
Tranche B 667(7) (5) 0%
Tranche C 1,625(7) (5) 0%
Sawgrass Mills - Phase II: 1,255 (5) 0%(13)
TenCommunity Centers: 8,151 (14) 0%
Concord Mills Residual III: 701 (15) 100%
-------
Total Property Mortgages 49,829
-------
Other Loans
Sawgrass Mills Mezzanine Loan: 6,026(7) (5) 0%
Corporate Miscellaneous: 29 (10) 0%
Corporate Miscellaneous: 149 (10) 0%
Corporate Line of Credit: 7,323(7) (8),(9) 100%
Corporate Miscellaneous: 1,061(7) (12) 100%
Sawgrass Residual: 331(7) (11) 0%
--------
Total $ 64,749
========
</TABLE>
- -------------------
(1) This indebtedness is a 30 year amortizing loan with an anticipated balloon
repayment on December 18, 2003. In the event the mortgage loan is not
repaid by the anticipated balloon repayment date, the annual interest rate
for each tranche will be increased by 2% per annum in excess of the stated
interest rate. In addition, excess cash flow available after payment of the
increased interest rate and scheduled amortization will be used to reduce
the principal balance of the loan. Principal repayments are based on the
scheduled amortization, assuming a 7% mortgage interest rate, over a 30
year period, with the monthly amortization payments being applied
sequentially, beginning with Tranche A to reduce the principal balance.
(2) Optional payments of principal are not permitted prior to December 17,
1999. After such date, prepayments, in whole or in part, are permitted upon
at least 15 days notice. In addition, the Company is required to pay a
prepayment penalty equal to the greater of (i) 1% of the remaining
principal balance or (ii) a yield preservation payment. Generally, yield
preservation payments are intended to compensate the lender for the total
amount of interest it would have earned on the indebtedness but for the
repayment, less the amount of interest that the lender could earn if it
invested the repayment amount in United States Treasury obligations or
other similar securities from the date of the repayment through the
maturity date of the indebtedness.
44
<PAGE> 45
(3) This indebtedness is a 30 year amortizing loan with an anticipated balloon
repayment on May 5, 2007. In the event the mortgage loan is not repaid by
the anticipated balloon repayment date, the annual interest rate will be
increased by 5% per annum in excess of the stated interest rate. In
addition, excess cash flow available after payment of the increased
interest rate and scheduled amortization will be used to reduce the
principal balance of the loan.
(4) This indebtedness may be prepaid, without a prepayment penalty, beginning
180 days prior to May 5, 2007. Prior to that date, there is no right to
prepay the indebtedness, except that $12.5 million of the principal
balance, which has been allocated to the Liberty Plaza shopping center, may
be defeased through the establishment of defeasance collateral (which may
include government or agency securities that have the full faith and credit
of the United States government).
(5) On January 31, 2000, the loan was repaid with proceeds of a new $285,000
permanent loan. The new indebtedness is a non-amortizing loan with an
anticipated balloon payment date of June 18, 2001. The loan bears interest
at a variable rate of 275 bp over LIBOR.
(6) The loan agreement provides for a cap on LIBOR at 14% for the life of the
loan.
(7) Calculated using 30-day LIBOR at 5.8225%, which was the rate at December
31, 1999.
(8) Prepayable, in whole or in part, at any time without prepayment penalty.
(9) The total commitment under the Line of Credit is $100,000. Funds are
available subject to certain performance measures and restrictive
covenants. This loan bears interest at a variable rate ranging from 100 bp
to 165 bp over LIBOR subject to certain leverage tests (LIBOR + 150 bp at
12/31/99). The line of credit matures April 1, 2000 with a one-year option
to extend.
(10) Primarily corporate debt with maturities under one year. Prepayable, in
whole or in part, at any time without prepayment penalty.
(11) Prepayable, in whole or in part, at any time, upon 3 days prior notice to
lender without prepayment penalty.
(12) Prepayable, in whole or in part, at any time, upon 5 days prior notice to
lender without prepayment penalty.
(13) Principal is guaranteed by the Company if the Phase II project fails to
achieve a DSC ratio of 1.35 and a debt yield of 12.5%. As of December 31,
1999, the guaranteed amount was 0%.
(14) The indebtedness is a 30 year amortizing loan with an anticipated balloon
repayment date of February 1, 2009. Interest is payable at a fixed rate of
7.30%. The principal is guaranteed by the Company. In the event the
mortgage is not repaid by the anticipated balloon repayment date, the
interest rate will be the greater of (i) the loan interest rate plus 2% or
(ii) the yield calculated by linear interpolation of the yields of
noncallable United States Treasury obligations with terms (one longer and
one shorter) most nearly approximating the period from such date of
determination to the anticipated repayment date.
(15) The total commitment under this loan is $9,000. Funds are available subject
to certain performance measures and restrictive covenants. Interest accrues
at 200 bp over LIBOR. The indebtedness matures on December 31, 2000.
45
<PAGE> 46
THE MILLS CORPORATION
SUMMARY OF OUTSTANDING UNCONSOLIDATED JOINT VENTURE INDEBTEDNESS
(DOLLARS IN THOUSANDS)
AS OF DECEMBER 31, 1999
As of December 31, 1999, the unconsolidated joint ventures had outstanding
indebtedness in an aggregate amount of approximately $948.0 million as set forth
below.
<TABLE>
<CAPTION>
Principal Total Interest Annual
Mortgage/Loan Balance Commitment Rate Type Interest Rate
------------- ------- ---------- --------- -------------
(000's) (000's)
<S> <C> <C> <C> <C>
Arizona Mills $ 142,214 $ 142,214 Variable 130 bp over LIBOR (5)
Grapevine Mills 155,000 155,000 Fixed 6.465%
Ontario Mills 143,594 145,000 Fixed 6.750%
The Block at Orange 127,495 136,000 Variable 135 bp over LIBOR(6)
Sawgrass Phase III 44,000 44,000 Variable 165 bp over LIBOR(7)
Sawgrass Phase III 1,958 6,500 Variable 275 bp over LIBOR
Concord Mills 164,442 199,000 Variable 120 bp over LIBOR(13)
Katy Mills 131,286 168,000 Variable 200 bp over LIBOR
Opry Mills 21,866 168,000 Variable 200 bp over LIBOR
Arundel Mills 10,000 10,000 Variable 165 bp over LIBOR
Sugarloaf Mills 6,120 12,000 Variable 350 bp over LIBOR
---------- ----------
Total $ 947,975 $1,185,714
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Earliest day Recourse to
Maturity Annual at which debt Company or
Mortgage/Loan Date Interest can be repaid Op. Ptnrshp
------------- ---- -------- ------------- -----------
(000's)
<S> <C> <C> <C> <C>
Arizona Mills 2/1/02 $ 10,129 (4) (1) 9.2%(10)
Grapevine Mills 9/1/32(8) 10,021 (2) 0.0%
0.0%
Ontario Mills 12/1/28(9) 9,693 (3)
The Block at Orange 1/22/02 9,145(4) (3) 26.7%(11)
Sawgrass Phase III 1/18/01 3,288(4) (15) 0.0%(12)
Sawgrass Phase III 1/18/01 54(4) (15) 0.0%(12)
Concord Mills 12/2/01 11,795(4) (2) 25.0%(13)
Katy Mills 3/31/02 10,270(4) (15) 100.0%(14)
Opry Mills 10/1/02 1,710(4) (16) 100.0%(17)
Arundel Mills 12/9/00 747 (18) 50.0%(19)
Sugarloaf Mills 12/20/00 571 (18) 100.0%(20)
--------
Total $ 67,422
========
</TABLE>
- -------------------
(1) This indebtedness may be prepaid, in whole or in part, upon 5 business days
notice to the Administrative Agent, in a principal amount of not less than
$1 million and an integral multiple of $100,000 thereof, and each
prepayment under this shall include all interest accrued on the amount of
principal prepaid (and all late charges and other sums that may be payable)
through the date of prepayment.
(2) This indebtedness may be prepaid, in whole or in part, upon 3 business days
notice to the Administrative Agent.
(3) The Company shall have the right to make prepayments of the loan, without
penalty, and a late charge, as the case may be, following the occurrence of
an Event of Default under any of the Loan Documents, in whole or in part,
upon not less than 5 business days prior written notice to lender. No
prepayment of all or part of the loan, including any mandatory prepayment
of the loan made as a result of an acceleration of the loan or pursuant to
the immediately preceding sentence, shall be permitted unless same is made
together with the payment of all interest accrued on the loan though the
date of prepayment and an amount equal to all Breakage Costs and
reasonable, out-of-pocket attorneys' fees and disbursements incurred by
Lender and any participants in good faith as a result of the prepayment.
(4) Calculated using 30-day LIBOR at 5.8225%, which was the rate at December
31, 1999.
(5) The loan is a construction facility with a maximum availability of $142.
The rate is capped at 9.5% until maturity, plus credit spread, based on one
month LIBOR.
46
<PAGE> 47
(6) Interest Rate shall be LIBOR plus (a) 165 basis points until the following
conditions have been satisfied: (i) the Construction Phase Completion Date
has occurred, (ii) the Grand Opening Date has occurred, (iii) 33% of the
Specialty Space has been and continues to be leased to Specialty Tenants
and 55% of the Anchor Space has been and continues to be leased to Anchors,
(iv) the DSC Ratio for any Calculation Period is equal to or greater than
1.00 and (v) no Event of Default is continuing. Once these conditions have
been satisfied the Interest Rate shall be LIBOR plus 150 bp. A further
reduction to LIBOR plus 135 bp shall occur once the DSC Ratio for any
period is equal to or greater than 1.25. Interest Rate will reduce to LIBOR
plus 125 bp when the DSC Ratio for any period is equal to or greater than
1.40. Interest Rate will reduce to LIBOR plus 115 bp when the DSC Ratio for
any period is equal to or greater than 1.50.
Interest Rate will reduce to LIBOR plus 115 bp when the DSC Ratio for any
period is equal to or greater than 1.50.
(7) Interest Rate shall be LIBOR plus (a) 165 basis points until the following
conditions have been satisfied: (i) the Construction Phase Completion Date
has occurred and the project has achieved a DSC ratio of 1.00, the interest
rate shall be LIBOR plus 150 bp; (ii) the project has achieved a DSC ratio
of 1.30 and a debt yield of 12.0% for a minimum of three months, the
interest rate shall be LIBOR plus 125 bp; (iii) the project has achieved a
DSC ratio of 1.35 and a debt yield of 12.5% for a subsequent three months,
the interest rate will be LIBOR plus 110 bp.
(8) This indebtedness is a 30 year amortizing loan with an anticipated
repayment date on October 1, 2008. The loan has an interest only period
through September 1, 2002. In the event the mortgage loan is not repaid by
the anticipated balloon repayment date, the annual interest rate will be
the greater of (i) the loan interest rate plus 2% or (ii) the yield
calculated by linear interpolation of the yields of noncallable United
States Treasury obligations with terms (one longer and one shorter) most
nearly approximating the period from such date of determination to the
anticipated repayment date.
(9) This indebtedness is a 30 year amortizing loan with an anticipated
repayment date on December 1, 2008. In the event the mortgage loan is not
repaid by the anticipated balloon repayment date, the annual interest rate
will be the greater of (i) the loan interest rate plus 5% or (ii) the
Treasury Rate plus 5%.
(10) Principal is guaranteed on a several basis by each partner (the Company's
share is 36.8%) reduced as follows: (i) as of closing, the "Guaranteed
Amount" was 100% of Loan Amount; (ii) upon completion of construction,
opening and achieving $16,000 of "In-Place Minimum Rent," the Guaranteed
Amount will reduce to 50%; (iii) upon achieving a 13.5% "Debt Yield,"
("Debt Yield" is defined as EBITDA to total loan commitment) the Guaranteed
Amount will reduce to 25% of the Loan Amount; (iv) upon achieving a 15%
"Debt Yield," the Guaranteed Amount will reduce to 15% of the Loan Amount;
and (v) upon achieving a 17% Debt Yield and an appraised value indicating a
loan to value ratio of no greater than 55%, the Guaranteed Amount will
reduce to $0. As of December 31, 1999, the Company's share of the
Guaranteed Amount was reduced from 36.8% to 9.2% according to the above
formula.
(11) Principal is guaranteed by the Company, reduced as follows: (i) as of
closing, the "Guaranteed Amount" was 100% of Loan Amount; (ii) upon
construction completion, grand opening and a Debt Service Coverage ration
of 1.00 the Guaranteed Amount will reduce to $68,000; (iii) upon achieving
DSC ratio of 1.25 the Guaranteed Amount will reduce to $34,000; (iv) upon
achieving a DSC Ratio of 1.40 the Guaranteed Amount will reduce to 10%; and
(v) upon achieving a DSC Ratio of 1.50 the Guaranteed Amount will reduce to
0%. As of December 31, 1999, the guaranteed amount was $34,000.
(12) Principal is guaranteed by the Company, reduced as follows: (i) as of
closing, the "Guaranteed Amount" was 100% of Loan Amount; (ii) upon
achieving a DSC Ratio of 1.35 and a debt yield of 12.5% the Guaranteed
Amount will reduce to 0%. As of December 31, 1999, the guaranteed amount
was 0%.
(13) The loan commitment has a term of three years with two one-year extension
options. The interest rate will be LIBOR plus 135 basis points until
completion and occupancy requirements are met. Once achieved, the interest
rate will be LIBOR plus 120 basis points. The interest rate can be further
reduced to LIBOR plus 110 basis points when the project achieves a debt
service coverage for three months of 1.35. The new loan is guaranteed
severally by the Company (50%) and Simon Property Group, L.P. (50%) and can
be reduced as follows: (i) as of closing, the "Guaranteed Amount" was 100%
of loan amount; (ii) 50% upon achieving completion and occupancy
requirements; (iii) 35% upon achieving a DSC ratio of 1.20 for three
consecutive months; (iv) 20% upon achieving a DSC ratio of 1.35 for three
consecutive months subsequent to the prior condition. As of December 31,
1999, the guarantee amount was 25%.
(14) The loan commitment has a term of three years with a one-year extension
option. The principal is guaranteed by the Company and can be reduced as
follows: (i) as of closing, the "Guaranteed Amount" was 100% of loan
amount; (ii) upon completion of construction, grand opening and Debt
Service Coverage ratio of 1.00 the Guaranteed Amount will reduce to 50%;
(iii) upon achieving a DSC ratio of 1.25 the Guaranteed Amount will reduce
to 25%. As of December 31, 1999, the guaranteed amount was 100%.
(15) This indebtedness may be prepaid, in whole or in part, upon 5 business days
notice to the Administrative Agent.
(16) The indebtedness may be prepaid, in whole or in part, upon 3 business days
notice to the Administrative Agent, provided that each prepayment under
this loan shall include all interest accrued on the amount of principal
prepaid (and all late charges and other sums that may be payable) through
the date of prepayment.
(17) The loan commitment has a term of three years with a one-year extension
option. The principal is guaranteed by the Company and can be reduced as
follows: (i) as of closing, the "Guaranteed Amount" was 100% of loan
amount; (ii) upon completion of construction, fulfilling certain occupancy
requirements as defined per construction loan agreement and a debt service
coverage ration of 1.10 the Guaranteed Amount will reduce to 50%.
(18) Prepayable, in whole or in part, at any time upon 5 days prior notice to
lender without prepayment penalty. Any partial prepayments shall be in
$100,000 increments.
(19) Principal is guaranteed severally by the Company and Simon Property.
(20) Principal is guaranteed by the Company.
47
<PAGE> 48
Income Producing Property - Federal Income Tax Basis (in thousands)
The following table sets forth certain information regarding federal
income tax basis and depreciation of income producing property for the Mills
(including Ontario Mills, Grapevine Mills, Arizona Mills, The Oasis at Sawgrass,
Concord Mills and Katy Mills, which are unconsolidated joint ventures) and The
Block at Orange, which is an unconsolidated joint venture, as of December 31,
1999:
<TABLE>
<CAPTION>
LAND LAND IMPROVEMENTS
---- -----------------
FEDERAL TAX FEDERAL TAX DEPRECIATION
BASIS BASIS METHOD LIFE (YRS)
----- ----- ---------------------
<S> <C> <C> <C> <C>
Franklin Mills $ 28,313 $ 6,441 MACRS 15
Gurnee Mills 18,456 16,719 MACRS 15
MACRS 15
Potomac Mills 15,913 27,199 ACRS 15,18
Sawgrass Mills 15,541 8,869 MACRS 15
Ontario Mills 7,266 10,648 MACRS 15
Grapevine Mills 18,249 5,781 MACRS 15
Arizona Mills 22,018 539 MACRS 15
The Block at
Orange 23,181 10,212 MACRS 15
The Oasis at
Sawgrass - 3,861 MACRS 15
Concord Mills 24,529 20,224 MACRS 15
Katy Mills 8,847 20,452 MACRS 15
</TABLE>
<TABLE>
<CAPTION>
BUILDING FURNITURE, FIXTURE AND EQUIPMENT
-------- --------------------------------
FEDERAL TAX DEPRECIATION FEDERAL TAX DEPRECIATION
BASIS METHOD LIFE (YRS) BASIS METHOD LIFE (YRS)
------------ ----------------------- ----------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Franklin Mills $ 161,938 MACRS 39 $ 4,245 MACRS 5,7
Gurnee Mills 166,385 MACRS 31.5,39 4,078 MACRS 3,5,7
MACRS 31.5,39
Potomac Mills 117,760 ACRS 15,18 2,535 MACRS 5,7
Sawgrass Mills 162,496 MACRS 39 5,297 MACRS 3,5,7
Ontario Mills 125,868 MACRS 39 4,006 MACRS 5,7
Grapevine Mills 151,268 MACRS 39 4,203 MACRS 5,7
Arizona Mills 166,022 MACRS 39 2,924 MACRS 5,7
The Block at
Orange 82,581 MACRS 39 8,647 MACRS 5,7
The Oasis at
Sawgrass 47,447 MACRS 39 1,795 MACRS 7
Concord Mills 151,939 MACRS 39 4,751 MACRS 5,7
Katy Mills 156,458 MACRS 39 4,467 MACRS 5,7
</TABLE>
48
<PAGE> 49
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Secretary Holders
None.
49
<PAGE> 50
PART II
Item 5. Market for the Registrant's Common Stock and related Shareholder Matters
Market Information
Our common stock trades on the New York Stock Exchange ("NYSE") under
the symbol "MLS". The following table sets forth the high and low closing sale
prices per share of common stock for the periods indicated as reported on the
NYSE and the distributions per share paid by us with respect to the periods
noted.
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTIONS
---- --- -------------
1999
<S> <C> <C> <C>
First Quarter $ 20 7/16 $ 17 5/16 $.4875
Second Quarter 22 3/8 16 3/16 .5025
Third Quarter 21 11/16 17 3/4 .5025
Fourth Quarter 18 1/4 15 3/8 .5025
1998
First Quarter $ 27 1/4 $ 23 11/16 $.4825
Second Quarter 26 9/16 23 3/16 .4875
Third Quarter 27 3/16 19 3/8 .4875
Fourth Quarter 22 1/2 18 5/8 .4875
</TABLE>
The last reported closing sale price on the NYSE on March 21, 2000 was
$18.375 per share. As of March 21, 2000, there were 23,971,307 shares of our
common stock outstanding, held by 923 holders of record (including 639,507
shares issued to the Operating Partnership and held in escrow to secure specific
obligations pursuant to a settlement agreement with Chelsea GCA Realty and Simon
Property.
Distributions
We have made consecutive quarterly distributions since our initial
public offering. The indicated annual distribution rate was $2.01 per share of
common stock based on the fourth quarter 1999 distribution. A portion of our
distribution may represent a non-taxable return of capital and/or a capital gain
dividend. Approximately 50% of 1999 distributions of $1.99 per share of common
stock were a non-taxable return of capital. Approximately 1% of 1999
distributions were capital gain dividends. In 2000, we increased our annual
distribution rate to $2.07 per share of common stock commencing with our
dividend for the first quarter of 2000 which is payable in April 2000. Our
ability to make distributions depends on a number of factors, including net cash
provided by operating activities, financial condition, capital commitments, debt
repayment schedules and such other factors, as the Board of Directors deems
relevant.
Holders of common stock are entitled to receive distributions when, as
and if declared by the Board of Directors out of any funds legally available for
that purpose. As a REIT, we are required to distribute annually to our
shareholders at least 95% of its "real estate investment trust taxable income,"
which, as defined by the relevant tax statutes and regulations, is generally
equivalent to net taxable ordinary income.
50
<PAGE> 51
Item 6. Selected Financial Data
The following table sets forth selected consolidated financial data for
the Company, the Operating Partnership and their subsidiaries. The historical
financial data should be read in conjunction with the financial statements and
notes thereto included and the discussion set forth in "Management's Discussion
and Analysis of Financial Condition and Results of Operations," each included
elsewhere in this Form 10-K
51
<PAGE> 52
SELECTED CONSOLIDATED FINANCIAL DATA
THE MILLS CORPORATION
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands, except per share data) 1999 1998 1997 1996 1995
- ------------------------------------- ---- ---- ---- ---- ----
STATEMENTS OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
REVENUES:
Minimum rent $104,407 $101,503 $ 96,370 $94,678 $89,839
Percentage rent 3,677 3,832 4,413 4,216 4,460
Recoveries from tenants 51,680 50,943 47,350 45,761 44,267
Other property revenue 8,778 7,653 8,150 7,616 6,537
Management fee income 4,891 2,193 1,485 - -
Other fee income 8,647 7,908 5,647 3,639 3,975
Interest income 2,605 3,238 2,561 2,850 2,431
------- ------- ------- ------- -------
184,685 177,270 165,976 158,760 151,509
EXPENSES:
Recoverable from tenants 44,464 44,361 42,025 41,308 39,299
Other operating 6,184 5,872 5,720 6,170 5,231
General and administrative 12,416 9,994 9,506 8,725 7,808
Interest expense 46,808 44,044 41,006 45,885 43,947
Depreciation and amortization 36,669 36,925 35,487 39,020 40,815
------- ------- ------- ------- -------
146,541 141,196 133,744 141,108 137,100
Other income/(expense) (1,828) (979) 567 1,073 859
Equity in earnings of unconsolidated
joint ventures before extraordinary items 12,287 8,097 4,372 2,661 -
------- ------- ------- ------- -------
Income before extraordinary items and
minority interests 48,603 43,192 37,171 21,386 15,268
Extraordinary losses on debt extinguishments (2,762) (422) (8,060) (5,301) (419)
Equity in extraordinary losses on debt
extinguishments of unconsolidated joint
ventures - (3,518) (397) - -
------- ------- ------- ------- -------
Income before minority interests 45,841 39,252 28,714 16,085 14,849
Minority interests (18,618) (16,000) (12,303) (7,904) (7,231)
------- ------- ------- ------- -------
Net income $27,223 $23,252 $16,411 $8,181 $7,618
======= ======= ======= ======= =======
PER SHARE INFORMATION:
Net income per common share - basic:
Income before extraordinary items $1.25 $1.11 $0.99 $0.64 $0.46
Extraordinary losses on debt extinguishments (0.07) (0.10) (0.23) (0.16) (0.01)
------- ------- ------- ------- -------
Net income $1.18 $1.01 $0.76 $0.48 $0.45
======= ======= ======= ======= =======
Net income per share - diluted:
Income before extraordinary items $1.24 $1.10 $0.98 $0.64 $0.46
Extraordinary losses on debt extinguishments (0.07) (0.10) (0.23) (0.16) (0.01)
------- ------- ------- ------- -------
Net income $1.17 $1.00 $0.75 $0.48 $0.45
======= ======= ======= ======= =======
Dividends declared $1.99 $1.94 $1.89 $1.89 $1.89
======= ======= ======= ======= =======
Tax treatment of dividends (unaudited):
Ordinary income $0.97 $1.14 $0.76 $0.66 $0.60
======= ======= ======= ======= =======
Capital gains $0.02 $0.02 $ -- $ -- $0.06
======= ======= ======= ======= =======
Return of capital $1.00 $0.78 $1.13 $1.23 $1.23
======= ======= ======= ======= =======
</TABLE>
52
<PAGE> 53
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands, except per share data) 1999 1998 1997 1996 1995
- --------------------------------------------- -------- -------- ------ ------ --------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Cash flow provided by (used in):
Operating activities $77,069 $78,948 $80,273 $63,262 $61,823
Investing activities (95,775) (98,407) (74,837) (67,468) (58,474)
Financing activities 11,231 4,706 13,500 (4,017) (8,856)
Funds From Operations (1) 95,076 85,047 74,055 56,250 50,030
Distributions paid per share 1.99 1.94 1.89 1.89 1.89
Weighted average shares outstanding
- Diluted 23,293 23,361 21,931 16,998 16,906
Weighted average shares and Units
Outstanding - Diluted 39,137 39,230 38,063 33,329 32,964
PORTFOLIO DATA:
Total owned GLA at end of period (2) 16,679 12,604 11,719 9,233 8,172
Number of properties at end of period 22 19 18 16 15
</TABLE>
<TABLE>
<CAPTION>
December 31,
(In thousands) 1999 1998 1997 1996 1995
- ------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investment in real estate assets
(before accumulated depreciation) $1,177,726 $1,086,822 $1,018,067 $947,621 $894,265
Total assets 1,039,467 970,362 926,621 862,624 853,057
Total mortgages, notes and loans payable 877,273 782,182 703,713 730,113 676,435
Minority interests 40,978 54,052 68,955 43,975 66,839
Total stockholders' equity 60,027 78,918 99,024 45,525 70,408
</TABLE>
- -----------------
(1) The Company generally considers Funds From Operations ("FFO") to be a
widely used and appropriate measure of performance for an equity REIT which
provides a relevant basis for comparison among REITs. FFO as defined by
NAREIT means income (loss) before minority interest (determined in
accordance with generally accepted accounting principles, referred to
herein as "GAAP"), excluding gains (losses) from debt restructuring and
sales of depreciated property, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and
joint ventures. FFO is presented to assist investors in analyzing the
performance of the Company. The Company's method of calculating FFO may be
different from methods used by other REITs and, accordingly, may not be
comparable to such other REITs. FFO (i) does not represent cash flows from
operations as defined by GAAP, (ii) is not indicative of cash available to
fund all cash flow needs and liquidity, including its ability to make
distributions and (iii) should not be considered as an alternative to net
income (as determined in accordance with GAAP) for purposes of evaluating
the Company's operating performance. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations---Funds From
Operations."
(2) Includes Ontario Mills, Grapevine Mills, Arizona Mills, The Block at
Orange, The Oasis at Sawgrass, Concord Mills and Katy Mills at 1.5 million
square feet, 1.5 million square feet, 1.2 million square feet, 0.6 million
square feet, 0.3 million square feet, 1.2 million square feet and 1.2
million square feet, respectively. Upon completion Ontario Mills, Grapevine
Mills, Arizona Mills, The Block at Orange, The Oasis at Sawgrass, Concord
Mills and Katy Mills will contain approximately 1.7 million square feet of
GLA, 1.5 million square feet of GLA, 1.2 million square feet of GLA, 0.8
million square feet of GLA, 0.3 million square feet of GLA, 1.3 million
square feet of GLA and 1.2 million square feet of GLA, respectively.
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Item 7. and 7A. Management's Discussion and Analysis of Financial Condition and
Results of Operations and Quantitative and Qualitative Disclosures about Market
Risk
THE MILLS CORPORATION
The following discussion and analysis of the consolidated financial condition
and results of operations should be read in conjunction with the Consolidated
Financial Statements and Notes thereto for the years ended December 31, 1999,
1998 and 1997.
COMPARISON OF YEAR ENDED DECEMBER 31, 1999 TO YEAR ENDED DECEMBER 31, 1998
Income before minority interest for the year ended December 31, 1999, increased
by approximately $6.6 million (16.8%), to $45.8 million as compared to the year
ended December 31, 1998. The increase was the result of an increase in revenues
of approximately $7.4 million (4.2%), an increase in equity in earnings of
unconsolidated joint ventures before extraordinary items of approximately $4.2
million (51.7%), offset by an increase in expenses of approximately $5.3 million
(3.8%) and a decrease in other income/(expense) of approximately $0.8 million.
Revenues
Minimum rent for the year ended December 31, 1999, increased
approximately $2.9 million (2.9%) compared with the year ended December 31,
1998. The increase was primarily due to additional rents obtained in connection
with the Company's expansion and remerchandising efforts at Franklin Mills and
Gurnee Mills as well as higher lease rates across the properties.
Recoveries from tenants for the year ended December 31, 1999, increased
$0.7 million (1.4%) compared to the year ended December 31, 1998. The increase
was due to increases in recoverable operating costs for various projects, an
increase in the recoveries from Franklin Mills due to increasing the
management-imposed ceiling on operating cost pass-throughs, and improved
recapture of operating costs in the new leases executed by the Company.
Other property revenue for the year ended December 31, 1999, increased
$1.1 million (14.7%) compared to the year ended December 31, 1998. The increase
was primarily due to an increase in income related to the Company's pushcart
program and increases in lease buyout income at various properties in the
portfolio.
Management fee income for the year ended December 31, 1999, increased
$2.7 million (123.0%) to $4.9 million compared to the year ended December 31,
1998. The increase was due to the opening of The Block at Orange in the fourth
quarter 1998, the opening of The Oasis at Sawgrass in the second quarter of
1999, the opening of Concord Mills in the third quarter of 1999 and the opening
of Katy Mills in the fourth quarter of 1999.
Other fee income for the year ended December 31, 1999, increased $0.7
million (9.3%) compared with the year ended December 31, 1998. The increase was
due to development, leasing and finance fees earned from seven projects in 1999
(Ontario Mills, Grapevine Mills, The Block at Orange, Katy Mills, Concord Mills,
Opry Mills and The Oasis at Sawgrass) versus six projects in 1998 (Ontario
Mills, Grapevine Mills, The Block at Orange, The Oasis at Sawgrass, Katy Mills
and Concord Mills).
Interest income for the year ended December 31, 1999, decreased $0.6
million (19.5%) compared with the year ended December 31, 1998. The decrease was
due to interest received in 1998 as part of a payment for a legal settlement.
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<PAGE> 55
Expenses
Other operating expenses for the year ended December 31, 1999 increased
$0.3 million (5.3%) compared with the year ended December 31, 1998. The increase
was primarily due to an increase in operating costs associated with the
Company's pushcart program.
General and administrative expenses for the year ended December 31,
1999, increased $2.4 million (24.2%) compared with the year ended December 31,
1998. The increase was primarily due to the increase in costs associated with
FoodBrand (the Company's food and beverage entity that was created in 1999 to
master lease and operate food courts at the Company's malls with existing
operations at Katy Mills and Franklin Mills, and future projects under
development) and other retail operations as well as expanded operations (i.e.
the opening of the Block at Orange, the Oasis at Sawgrass, Concord Mills and
Katy Mills).
Interest expense for the year ended December 31, 1999, increased $2.8
million (6.3%) compared with the year ended December 31, 1998. The increase was
primarily due to the additional debt related to the ten community centers
refinancing in 1999 and the additional debt related to Sawgrass Mills that was
obtained in June 1999 (see Liquidity and Capital Resources discussion).
Other income/(expense) for the year ended December 31, 1999, decreased
$0.8 million (86.7%) compared with the year ended December 31, 1998. The
decrease was primarily due to $1.9 million of start-up costs associated with the
introduction of the Company's FoodBrand and other retail operations and an
increase in abandoned project costs of $0.9 million, offset by $1.9 million in
land sale gains.
Equity in earnings of unconsolidated joint ventures before
extraordinary items for the year ended December 31, 1999, increased $4.2 million
(51.7%) compared with the year ended December 31, 1998. The increase was due to
an increase in the Company's share of gains on joint venture land sales of $0.9
million and income earned at The Block at Orange, The Oasis at Sawgrass, Concord
Mills and Katy Mills which commenced operations in the fourth quarter of 1998,
second quarter of 1999, third quarter of 1999 and fourth quarter of 1999,
respectively. Also, the Company received $2.7 million of interest income related
to tax increment financing on the Katy Mills joint venture. These increases were
partially offset by losses earned from investments held by Mills Enterprises,
Inc, a wholly owned subsidiary of the Company, in partnerships that own certain
retail operations.
Extraordinary losses on debt extinguishments for the year ended
December 31, 1999, increased $2.3 million compared with the year ended December
31, 1998. The increase was due to a prepayment penalty of $2.4 million that was
paid in connection with the refinancing of the community centers in the first
quarter of 1999 plus the write-off of the related unamortized loan costs. The
1998 extraordinary losses on debt extinguishments related to the write-offs of
unamortized loan costs associated the Sawgrass Mills Phase II refinancing and
the refinancing of the Company's line of credit.
There were no extraordinary losses on debt extinguishments of
unconsolidated joint ventures in 1999. In 1998, the Company's share of the
write-offs of unamortized loan costs related to the refinancing of Grapevine
Mills and Ontario Mills and the Company's share of a prepayment penalty that was
incurred with the refinancing of Ontario Mills was $3.5 million.
55
<PAGE> 56
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997
Income before minority interests for the year ended December 31, 1998, increased
by $10.5 million (36.7%) to $39.3 million as compared to the year ended December
31, 1997. The net increase was the result of an increase in revenues of
approximately $11.3 million (6.8%), an increase in expenses of approximately
$7.5 million (5.6%), a decrease in other income of $1.5 million (272.7%), an
increase in equity in earnings of unconsolidated joint ventures before
extraordinary items of $3.7 million (85.2%), a decrease in the extraordinary
losses on debt extinguishments of $7.6 million (94.8%) and an increase in equity
in extraordinary losses on debt extinguishments of unconsolidated joint ventures
of $3.1 million (786.1%).
Revenues
Minimum rent for the year ended December 31, 1998, increased $5.1
million (5.3%) compared with the year ended December 31, 1997. The increase was
primarily due to additional rents obtained in connection with the Company's
expansion and remerchandising efforts coupled with higher occupancy levels and
lease rates across the properties.
Percentage rent for the year ended December 31, 1998, decreased
approximately $0.6 million (13.2%) compared with the year ended December 31,
1997. The decrease was primarily due to lower than anticipated sales at Sawgrass
Mills as a result of unusually harsh weather conditions (Hurricane George in
September and Hurricane Mitch in October). Also, a decrease in tourism at
Sawgrass Mills as a result of the economic crisis in South America contributed
to lower sales.
Recoveries from tenants for the year ended December 31, 1998, increased
approximately $3.6 million (7.6%) compared with the year ended December 31,
1997. The increase was primarily due to increases in occupancy and recoverable
operating costs for various projects as well as an increase in the recoveries
from Franklin Mills due to increasing the management-imposed ceiling on
operating cost pass-throughs.
Other property revenue for the year ended December 31, 1998, decreased
approximately $0.5 million (6.1%) compared with the year ended December 31,
1997. The decrease was primarily due to decreases in lease buyout income at
various properties in the portfolio.
Management fee income for the year ended December 31, 1998, increased
approximately $0.7 million (47.7%) compared with the year ended December 31,
1997. The increase was primarily due to the opening of two additional Mills
projects in the fourth quarter 1997 (Grapevine Mills and Arizona Mills) and one
Block project in the fourth quarter 1998 (The Block at Orange) from which the
Company earns management fees.
Other fee income for the year ended December 31, 1998, increased
approximately $2.3 million (40.0%) compared with the year ended December 31,
1997. The increase was due to development, leasing and finance fees earned from
six projects in 1998 (Ontario Mills, Grapevine Mills, The Block at Orange, Katy
Mills, Concord Mills and The Oasis at Sawgrass) versus four projects in 1997
(The Block at Orange, Arizona Mills, Grapevine Mills and Ontario Mills).
Interest income for the year ended December 31, 1998, increased
approximately $0.7 million (26.4%) compared with the year ended December 31,
1997. The increase is primarily due to interest received as part of a payment
that was received in March 1998 for a legal settlement.
Expenses
Recoverable expenses for the year ended December 31, 1998, increased
$2.3 million (5.6%) compared with the year ended December 31, 1997. The increase
was primarily due to an increase in real estate taxes of $1.1 million at
Sawgrass Mills, $0.5 million at Potomac Mills and $0.3 million at Gurnee Mills.
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<PAGE> 57
General and administrative expenses for the year ended December 31,
1998, increased $0.5 million (5.1%) compared with the year ended December 31,
1997. The increase was due to additional personnel required for increased
domestic and international development activities as well as the opening of
additional projects.
Interest expense for the year ended December 31, 1998, increased $3.0
million (7.4%) compared with the year ended December 31, 1997. The increase was
due to a larger average debt balance for the year ended December 31, 1998
compared with the year ended December 31, 1997 as a result of continued growth
in the Company's business, offset partially by lower interest rates resulting
from refinancings.
Depreciation and amortization expense for the year ended December 31,
1998 increased approximately $1.4 million (4.1%) compared with the year ended
December 31, 1997. The increase was primarily due to a $2.1 million increase in
expense relating to assets placed in service during the second half of 1997 and
during 1998 associated with the remerchandising of Franklin Mills, Potomac Mills
and Gurnee Mills which was partially offset by a $1.3 million decrease in
expense relating to assets reaching the end of their depreciable or amortizable
lives in 1997 at Sawgrass Mills. Also, the increase was partially due to a $0.4
million increase in expense relating to the write-off of software costs.
Other income/(expense) for the year ended December 31, 1998, decreased
$1.5 million (272.7%) compared with the year ended December 31, 1997. The
decrease was primarily due to the Company expensing costs associated with
abandoned projects in 1998 of $0.7 million and recognizing a gain on the sale of
land in 1997 of $0.5 million.
Equity in earnings of unconsolidated joint ventures before
extraordinary items for the year ended December 31, 1998, increased $3.7 million
(85.2%) compared with the year ended December 31, 1997. The increase was due to
the recognition of a full year of income associated with two new Mills
(Grapevine Mills and Arizona Mills) that opened during the fourth quarter of
1997. Also, the Company recognized its share of gain on land sales at Concord
Mills in 1998.
Extraordinary losses on debt extinguishments for the year ended
December 31, 1998, decreased $7.6 million compared with the year ended December
31, 1997. The decrease was primarily due to a non-cash write off of $8.1 million
($4.6 million net of minority interest) in deferred loan costs resulting from
the refinancing of Franklin Mills during the second quarter of 1997.
Equity in extraordinary losses on debt extinguishments of
unconsolidated joint ventures for the year ended December 31, 1998, increased by
$3.1 million compared with the year ended December 31, 1997. The increase was
due to non-cash write-offs of deferred loan costs resulting from the refinancing
of Ontario Mills and Grapevine Mills and a prepayment penalty that was incurred
with regard to the Ontario Mills refinancing.
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<PAGE> 58
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, the Company had cash and cash equivalents of
$3.0 million, excluding its proportionate share of cash held in unconsolidated
entities. The Company has a line of credit. The terms of this facility are as
follows:
<TABLE>
<CAPTION>
Amount
Maturity/ Outstanding at
Nature of Facility Extension Interest Rate Terms Total Facility December 31, 1999
<S> <C> <C> <C> <C> <C> <C>
Line of Credit 4/1/2000 LIBOR+1.50% Interest Only $ 100,000 $ 100,000
4/1/2001
</TABLE>
Pursuant to the line of credit, the Company is subject to certain
performance measurements and restrictive covenants. The Company was in
compliance with the applicable covenants at December 31, 1999. The Company is
currently in negotiations to increase the line of credit to $125 million.
Furthermore, in January 2000, the Company refinanced Sawgrass Mills with a new
nonrecourse mortgage loan of $285 million. The proceeds were used to repay prior
loans totaling $235 million, with the remaining $50 million to be used to pay
down the line of credit and fund the Company's development equity requirements.
Financing Activities. During 1999, the Company completed several
financing and refinancing activities. The weighted average remaining term of the
Company's indebtedness was 3.9 years at December 31, 1999 (including funded
construction and operating debt of the unconsolidated joint ventures), with
investment-grade interest rates (7.32% weighted average interest rate for the
Company's indebtedness and funded construction and operating debt of the
unconsolidated joint ventures at December 31, 1999).
On December 20, 1999, the Sugarloaf Mills (to be renamed Discover
Mills) joint venture entered into a loan agreement in the amount of $12 million,
of which $6 million is outstanding as of December 31, 1999. The loan commitment
matures on December 20, 2000. The interest rate is LIBOR plus 3.50%. The Company
has guaranteed 100% of the outstanding loan balance.
On December 9, 1999, the Arundel Mills joint venture entered into a
loan agreement in the amount of $10 million, which is fully funded as of
December 31, 1999. The loan commitment matures on December 9, 2000. The interest
rate is LIBOR plus 1.65%. The loan is guaranteed severally by the Company and
its joint venture partner, Simon Property Group, L.P.
On September 29, 1999, the Opry Mills joint venture entered into a
construction loan agreement in the amount of $168 million, of which $22 million
is outstanding as of December 31, 1999. The loan commitment matures on October
1, 2002 with a one year extension option. The interest rate is payable at a
variable rate with a variable margin, which was LIBOR plus 2.00% at December 31,
1999. The Company has guaranteed 100% of the outstanding loan balance until
specified debt service requirements are met.
On June 11, 1999 the Company entered into a non-recourse mezzanine loan
agreement in the amount of $57 million which was secured by it's equity interest
in Sawgrass Mills. The proceeds were used to pay down the Company's line of
credit by $40 million and fund development activities. The loan was a
non-amortizing loan with a repayment date of October 1, 2000. The interest is
LIBOR plus 4.75%. The loan was repaid in January 2000 with the refinancing of
Sawgrass Mills.
On March 31, 1999, the Katy Mills joint venture entered into a
construction loan agreement in the amount of $168 million, of which $131 million
is outstanding as of December 31, 1999. The loan matures on March 31, 2002 with
a one year extension option. The interest rate is payable at a variable rate
with a variable margin, which was LIBOR plus 2.00% at December 31, 1999. The
Company has guaranteed 100% of the outstanding loan balance until specified debt
service requirements are met.
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<PAGE> 59
On February 4, 1999, the Company received a five year, $750 million
capital commitment from Kan Am, a significant unit holder of the operating
Partnership and joint venture partner, to fund future development projects.
Subject to terms and conditions, Kan Am will continue to fund certain project
level capital as they have on several of the Company's prior projects.
Approximately $150 million is to be funded in specifically identified
development projects over the next year including Arundel Mills, Discover Mills
and Opry Mills. In addition, Kan Am has agreed to work with the Company to
identify such other projects, and to use best efforts to provide funding for
such projects, in the approximate amount of $150 million in each of 2001, 2002
and 2003. Consistent with prior partnerships, Kan Am will fund 50% to 100% of a
specific project's equity requirement and receive a percentage of ownership
interest equal to half of the percentage of equity that they have funded,
subject to further adjustment for the interest of other partners in such
partnerships.
On January 27, 1999, the Company refinanced the community centers
mortgage loan with a $112.5 million loan. The proceeds were used to repay a
prior mortgage loan of $81.8 million and to fund the Company's development
equity requirements. This indebtedness is a 30-year amortizing loan with an
anticipated balloon repayment date of February 1, 2009. The loan bears a fixed
interest rate of 7.30%.
Effective October 28, 1996, the Company filed a universal shelf
registration statement on Form S-3 to offer a maximum of $250.0 million of
common stock, preferred stock and common stock warrants. Pursuant to this shelf
registration, the Company sold a total of 5,325,000 shares of common stock in
1997 generating net proceeds of $121.8 million. A balance of $128.2 million of
common stock, preferred stock and common stock warrants remains available to the
Company for issuance pursuant to this shelf registration.
At December 31, 1999, the Company had consolidated debt of
approximately $877.3 million and gross unconsolidated joint venture debt of
approximately $948 million. The Company's pro rata share of gross unconsolidated
joint venture debt was $331.7 million (net of tax increment financing) at
December 31, 1999. Of this amount, the Company has guaranteed $161.5 million
(additionally, the Company has guaranteed $126.9 million of its joint venture
partners' share of debt). The Company's consolidated debt plus its pro rata
share of gross unconsolidated joint venture debt totaled approximately $1.2
billion. Of this amount, $777.2 million was fixed rate debt and $431.8 million
was variable rate debt. Scheduled principal repayments of the Company's
consolidated indebtedness and its pro rata share of gross unconsolidated joint
venture debt through 2004 are $861.4 million with $347.6 million due thereafter.
The Company and its partners expect to refinance or repay these obligations with
cash generated from operations, external borrowings (including refinancing of
existing loans) or equity issuances.
The Company's EBITDA (earnings before interest, taxes, depreciation,
amortization and extraordinary items) to interest expense coverage ratio
(including the Company's proportionate share of EBITDA and interest expense of
unconsolidated joint ventures) was 2.68 and 2.59 at December 31, 1999 and
December 31, 1998, respectively.
Development, Remerchandising and Expansion. The Company is involved in
the following development, remerchandising and expansion efforts:
The Company's most significant development efforts currently are
focused on the development of five projects: Opry Mills, Arundel Mills, Discover
Mills, Vaughan Mills, and Meadowlands Mills.
Opry Mills is scheduled to open in May 2000. The project is being
financed principally with external borrowings and equity contributions from
joint venture partners and the Operating Partnership. The Company anticipates
that the Operating Partnership's equity requirements for Opry Mills may total as
much as $52 million, all of which has been funded as of December 31, 1999. The
Company has a Letter of Intent with Kan Am to fund 100% of the Operating
Partnership's equity requirement for Opry Mills. Opryland Attractions, Inc.
contributed an interest in land to the Opry Mills joint venture and received
capital account credit of $25 million. The remaining costs are being financed
through a $168 million construction loan.
Arundel Mills broke ground on July 15, 1999 and is scheduled to open in
the fourth quarter of 2000. The project will be financed principally with
external borrowings and equity contributions from joint venture partners and the
Operating Partnership. The Company anticipates that the Operating Partnership's
equity requirements for Arundel
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<PAGE> 60
Mills may total as much as $18 million, of which $5 million has been funded as
of December 31, 1999. The Company expects to close on $191 million construction
loan in the second quarter of 2000.
Jointly with Kan Am, the Company entered into several purchase
agreements to acquire an approximate 225-acre site located near Atlanta, Georgia
for the Discover Mills project. As of December 31, 1999, the Discover Mills
joint venture has acquired the majority of the land assemblage for the project.
The Company anticipates closing on the remainder of the site in March 2000, with
construction commencing in 2000. Discover Mills is targeted to open in 2001. Kan
Am will fund all of the required equity for this project, and the remaining
project costs are expected to be financed through a construction loan.
In February 1998, the Company announced that it had secured a site in
Vaughan, Ontario for the development of Vaughan Mills, the first Mills project
to be developed outside of the United States. The project will be developed
through a joint venture with Cambridge Shopping Centres Limited of Toronto. The
Company anticipates that the Operating Partnership's equity requirements for
Vaughan Mills may total as much as $30 million, of which $18 million has been
funded as of December 31, 1999. The Company has begun the land assemblage and is
targeting a 2000 groundbreaking.
The Company has acquired a mortgage interest in a 592-acre site located
on the New Jersey Turnpike (I-95) adjacent to the Meadowlands Sports Complex and
approximately five miles from New York City. Commencement of construction is
contingent upon the completion of ongoing Environmental Impact Statement and the
federal/state permitting process. A Special Area Management Plan (SAMP) for the
Meadowlands area was published in the Federal Register on April 22, 1999. The
guidelines proposal in the SAMP would, upon their anticipated adoption in the
second quarter of 2000, permit development of approximately 1.5 million square
feet of gross leasable area (GLA) for Meadowlands Mills. The project would be
developed on an entitled site of 90.5 acres plus roads and retention facilities.
Upon procurement of all necessary entitlements, it is anticipated that the
project will be developed by a joint venture formed among the Operating
Partnership, Kan Am, Empire Ltd., and Bennett S. Lazare, an individual
affiliated with the Empire Ltd. The Operating Partnership's equity requirements
have not yet been determined. The Company has targeted Meadowlands Mills for a
2000 groundbreaking.
The Company has identified a site in Denver, Colorado and is in process
of forming a joint venture to develop the site. The Company is targeting a 2001
opening.
In addition to the above, the Company is also conducting due diligence
on several other proposed sites, including sites in Atlanta, Georgia; Cleveland,
Ohio; North Aurora, Illinois (Chicago); San Francisco, California; South
Weymouth, Massachusetts (Boston); and Tampa, Florida. The Company is also
continuing to evaluate various prospective international sites, including a site
identified in Spain, with a concentrated focus on Western Europe as well as
other domestic sites for other Mills-type and other retail-oriented projects.
The Company is in the process of expanding and/or remerchandising
Potomac Mills, Sawgrass Mills, Franklin Mills, Gurnee Mills and Ontario Mills.
The costs of these expansion and remerchandising programs is estimated at $170
million. At December 31, 1999, approximately $142 million had been spent on
these projects and it is anticipated that an additional $28 million will be
spent during 2000. Of the estimated costs of $170 million, $80 million will be
financed with external sources and $90 million will be funded by the Operating
Partnership. At December 31, 1999, the Operating Partnership had funded $77
million of the required equity to finance those programs.
Capital Resources. The Company anticipates that its operating expenses,
interest expense on outstanding indebtedness, recurring capital expenditures and
distributions to stockholders in accordance with REIT requirements will be
provided by cash generated from operations, potential ancillary land sales and
borrowings under its Line of Credit.
The Company believes that it will have the capital and access to
additional capital resources sufficient to expand and develop its business in
accordance with its operating, development and financing strategies. In the
event such capital cannot be obtained, the Company's development plans could be
curtailed.
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<PAGE> 61
As a potential source of capital, the Company is exploring the possible
sale of its community center portfolio. In addition to providing the Company
with a source of development capital, the disposition will allow management to
focus on its main retail products.
Dividends. The Company has paid and intends to continue to pay regular
quarterly distributions to its stockholders. Dividends are payable at the
discretion of the Board of Directors and depend on a number of factors,
including net cash provided by operating activities, its financial condition,
capital commitments, debt repayment schedules and such other factors as the
Board of Directors deems as relevant.
CASH FLOWS
Comparison of Year Ended December 31, 1999 to Year Ended December 31,
1998. Net cash provided by operating activities decreased by $1.8 million, or
2.3%, to $77.1 million for the year ended December 31, 1999, as compared to
$78.9 million for the year ended December 31, 1998, primarily as a result of
increase in inventory related to the Company's retail operations. Net cash used
in investing activities decreased $2.6 million, or 2.7%, to $95.8 million for
the year ended December 31, 1999, as compared to $98.4 million for the year
ended December 31, 1998, primarily as a result of decreased expenditures for
real estate and development assets. Net cash provided by financing activities
increased by $6.5 million, or 138.7%, to $11.2 million for the year ended
December 31, 1999, as compared $4.7 million for the year ended December 31,
1998, primarily as a result of the refinancing of ten community centers and the
mezzanine loan related to Sawgrass Mills offset by decreased debt repayments in
1999.
Comparison of Year Ended December 31, 1998 to Year Ended December 31,
1997. Net cash provided by operating activities decreased by $1.4 million, or
1.7%, to $78.9 million for the year ended December 31, 1998, as compared to
$80.3 million for the year ended December 31, 1997. Net cash used in investing
activities increased $23.6 million, or 31.5%, to $98.4 million for the year
ended December 31, 1998, as compared to $74.8 million for the year ended
December 31, 1997, primarily as a result of increased expenditures for real
estate and development assets. Net cash provided by financing activities
decreased by $8.8 million, or 65.1%, to $4.7 million for the year ended December
31, 1998, as compared $13.5 million for the year ended December 31, 1997,
primarily as a result of common stock offering proceeds received in 1997 offset
by decreased debt repayments in 1998.
FUNDS FROM OPERATIONS
The Company generally considers Funds From Operations ("FFO") to be a
widely used and appropriate measure of performance for an equity REIT that
provides a relevant basis for comparison among REITs. FFO as defined by NAREIT
means income (loss) before minority interest (determined in accordance with
GAAP), excluding gains (losses) from debt restructuring and sales of depreciated
property, plus real estate related depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures. FFO is presented
to assist investors in analyzing the performance of the Company. The Company's
method of calculating FFO may be different from methods used by other REITs and,
accordingly, may not be comparable to such other REITs. FFO (i) does not
represent cash flows from operations as defined by GAAP, (ii) is not indicative
of cash available to fund all cash flow needs and liquidity, including its
ability to make distributions and (iii) should not be considered as an
alternative to net income (determined in accordance with GAAP) for purposes of
evaluating the Company's operating performance.
61
<PAGE> 62
FFO for the year ended December 31, 1999, increased to $95.1 million
compared to $85.0 million for the comparable period in 1998. FFO amounts were
calculated in accordance with NAREIT's definition of FFO as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in Thousands) 1999 1998 1997
---------------------- ---- ---- ----
<S> <C> <C> <C>
Funds From Operations Calculation:
Income before extraordinary item and minority interest $ 48,603 $43,192 $37,171
Adjustments:
Add: Depreciation and amortization of real estate assets 32,333 32,694 32,361
Add: Adjustment for real estate depreciation and amortization
of unconsolidated affiliates 14,140 9,161 4,523
-------- ------- -------
Funds From Operations $ 95,076 $85,047 $74,055
======== ======= =======
</TABLE>
SEASONALITY
The regional shopping center industry is seasonal in nature, with mall
tenant sales peaking in the fourth quarter due to the holiday season. As a
result, a substantial portion of the percentage rent is not paid until the
fourth quarter. Furthermore, most new lease-up occurs towards the later part of
the year in anticipation of the holiday season and most vacancies occur toward
the beginning of the year. In addition, the majority of the temporary tenants
take occupancy in the fourth quarter. Accordingly, cash flow and occupancy
levels are generally lowest in the first quarter and highest in the fourth
quarter. This seasonality also impacts the quarter-by-quarter results of net
operating income and FFO. However, minimum rent, which is the largest source of
income, is not affected by seasonality.
ECONOMIC TRENDS
Because inflation has remained relatively low during the last three
years, it has had little impact on the operation of the Company during that
period. Even in periods of higher inflation, however, tenant leases provide, in
part, a mechanism to help protect the Company. As operating costs increase,
leases permit a pass-through of the common area maintenance and other operating
costs, including real estate taxes and insurance, to the tenants. Furthermore,
most of the leases contain base rent steps and percentage rent clauses that
provide additional rent after a certain minimum sales level is achieved. These
provisions provide some protection to the Company during highly inflationary
periods.
IMPACT OF YEAR 2000
In 1998, the Company developed a Year 2000 Compliance Assessment and
Remediation Project Plan for the purpose of identifying, understanding and
addressing the issues associated with Year 2000 compliance. In late 1999, the
Company completed its remediation and testing of all computer hardware,
operating systems software, applications software, telephone and voice mail
systems, and embedded/3rd party systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
any computer operating systems, applications software, telecommunications
systems, and embedded/3rd party systems (with particular attention paid to life
safety and building automation systems at the various properties in our
portfolio) and believes those systems successfully responded to the Year 2000
change. In addition, the Company had sought assurances for Year 2000 compliance
from its vendors, contractors, lenders, and tenants through questionnaires and
to date, no material issues were noted in the responses received and no
disruptions have been noted. The Company will continue to monitor its computer
applications and those of its vendors, contractors, lenders, and tenants
throughout the year 2000 to ensure that Year 2000 issues that may arise are
addressed promptly. The Company incurred approximately $500,000 of costs related
to the Year 2000 issue.
62
<PAGE> 63
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
63
<PAGE> 64
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company and their positions
and offices as of February 29, 2000 are set forth in the following table:
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES HELD
---- --- -------------------------
<S> <C> <C>
Laurence C. Siegel ...................... 47 Chairman of the Board, Chief Executive Officer and Director
Peter B. McMillan ....................... 52 President, Chief Operating Officer and Director
James F. Dausch ......................... 57 Senior Executive Vice President - Development and Director
Judith S. Berson ........................ 57 Executive Vice President - Leasing
Kent S. Digby ........................... 47 Executive Vice President - Management/Marketing
Kenneth R. Parent ....................... 39 Executive Vice President and Chief Financial Officer
Thomas E. Frost ......................... 47 Executive Vice President, General Counsel and Secretary
Thomas M. Hindert ....................... 46 Executive Vice President - Real Estate
Steven J. Jacobsen ...................... 44 Executive Vice President - Development
Mark J. Rivers .......................... 34 Executive Vice President - Chief Strategic Officer
James P. Whitcome ....................... 53 Executive Vice President - Capital Services
Dietrich von Boetticher ................. 58 Vice Chairman and Director
John M. Ingram .......................... 64 Vice Chairman and Director
Charles R. Black, Jr .................... 52 Director
James C. Braithwaite .................... 59 Director
The Hon. Joseph B. Gildenhorn ........... 70 Director
Harry H. Nick ........................... 58 Director
Franz von Perfall ....................... 58 Director
Robert P. Pincus ........................ 53 Director
Cristina L. Rose ........................ 53 Director
</TABLE>
Biographical summaries of the remaining directors and executive
officers of the Company are included under the caption "Election of Directors
(Proposal 1) - Board of Directors" and "Executive Officers of the Company,"
respectively, in our proxy statement for the 2000 Annual Meeting of Shareholders
and are incorporated herein by reference. Information required by Item 405 of
Regulation S-K is included under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in our proxy statement for the 2000 Annual Meeting of
Shareholders and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is incorporated
herein by reference to the information under the captions "Compensation of
Directors" and "Executive Compensation" in our proxy statement for the 2000
Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial
owners and management of the Company is incorporated herein by reference to the
information under the caption "Voting Securities and Principal Holders Thereof"
in our proxy statement for the 2000 Annual Meeting of Shareholders.
ITEM 13. CERTAIN TRANSACTIONS WITH RELATED PARTIES
Information with respect to certain relationships and transactions is
incorporated herein by reference to the information under the caption "Certain
Relationships and Transactions" in our proxy statement for the 2000 Annual
Meeting of Shareholders.
64
<PAGE> 65
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS AND FORM 8-K
14(a) LIST OF DOCUMENTS FILED AS PART OF FORM 10-K
(1) FINANCIAL STATEMENTS PAGE
Report of Independent Auditors F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Stockholders' Equity F-4
Consolidated Statements of Cash Flow F-5
Notes to Consolidated Financial Statements F-6
(2) FINANCIAL STATEMENTS SCHEDULES PAGE
Schedule III - Consolidated Real Estate and
Accumulated Depreciation F-19
Notes to Schedule III F-20
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, are included in the consolidated financial
statements or are inapplicable and therefore have been omitted.
65
<PAGE> 66
(3) EXHIBITS
NUMBER EXHIBIT
+3.1 Amended and Restated Certificate of Incorporation of
the Company.
+3.2 Amended and Restated Bylaws of the Company
**3.3 Limited Partnership Agreement of the Operating
Partnership (filed as part of Exhibit 10.3)
*4.1 Specimen Common Stock Certificate of Company
*4.2 Agreement dated March 15, 1994, among Richard L.
Kramer, the A.J. 1989 Trust, the Irrevocable
Intervivos Trust for the Benefit of the Kramer
Children, the N Street Investment Trust, Equity
Resources Associates, Herbert S. Miller, The Mills
Corporation and The Mills Limited Partnership (filed
as Exhibit 10.19)
**4.3 Non-Affiliate Registration Rights and Lock-Up
Agreement
**4.4 Affiliate Registration Rights and Lock-Up Agreement
*10.1 Form of Employee Non-Compete/Employment Agreements
++10.2 1994 Executive Equity Incentive Plan
**10.3 Limited Partnership Agreement of Operating
Partnership
*10.4 Form of Noncompetition Agreement between the Company,
the Operating Partnership and each of Kan Am and the
Kan Am Partnerships
*10.5 Form of Noncompetition Agreement with Kan Am
Directors
*10.6 Trust and Servicing Agreement, dated as of December
1, 1993, among Sawgrass Finance L.L.C., as depositor,
The First National Bank of Chicago, as servicer, and
State Street Bank and Trust Company, as Trustee
*10.7 Amended and Restated Mortgage, Security Agreement,
Assignment of Lessee and Rents and Fixture filing,
dated as of December 1, 1993, by Sunrise Mills
Limited Partnership, as mortgagor, in favor of
Sawgrass Finance L.L.C., as mortgagee
*10.8 Assignment of Leases and Rents, dated as of December
1, 1993, between Sunrise Mills Limited Partnership
and Sawgrass Finance L.L.C.
*10.9 Assignment of Note, Mortgage, and Assignment of Rents
dated as of December 21, 1993, by Sawgrass Finance
L.L.C. in favor of State Street Bank & Trust Co.
*10.10 Agreement dated March 15, 1994 among Richard L.
Kramer, the A.J. 1989 Trust, the Irrevocable
Intervivos Trust for the Benefit of the Kramer
Children, the N Street Investment Trust, Equity
Resources Associates, Herbert S. Miller, The Mills
Corporation and The Mills Limited Partnership
*10.11 Form of Indemnification Agreement between the Company
and each of its Directors and Executive Officers
***10.12 First Amendment to Trust and Servicing Agreement
(Exhibit 10.7) dated as of June 1, 1995, among
Sawgrass Finance L.L.C., as depositor, The First
National Bank of Chicago, as servicer, and State
Street Bank and Trust Company, as trustee.
***10.13 Prepayment Premium Agreement dated as of June 1,
1995, between The Mills Limited Partnership
and State Street Bank and Trust Company, as trustee.
****10.14 Second Amendment and Restated Deed of Trust,
Security Agreement, Assignment of Rents and Fixture
Filing by Potomac Mills-Phase III (MLP) Limited
Partnership and Washington Outlet Mall (MLP) Limited
Partnership, collectively, as Grantor to R. Eric
Taylor, a resident of Fairfax County, Virginia as
Deed Trustee for the benefit of CS First Boston
Mortgage Capital Corp., as Beneficiary dated as of
December 17, 1996.
****10.15 Form of Assignment of Leases and Rents and Security
Deposits dated as of December 17, 1996 by Potomac
Mills-Phase III (MLP) Limited Partnership and
Washington Outlet Mall (MLP) Limited Partnership to
CS First Boston Mortgage Capital Corp (see Exhibit
10.53).
****10.16 Mortgage Security Agreement, Assignment of Rents and
Fixture Filing by Gurnee Mills (MLP) Limited
Partnership to CS First Boston Mortgage Capital
Corp., as Mortgagee dated as of December 17, 1996
66
<PAGE> 67
****10.17 Form of Assignment of Leases and Rents and Security
Deposits dated as of December 17, 1996 by Gurnee
Mills (MLP)Limited Partnership to CS First Boston
Mortgage Capital Corp.
****10.18 Trust and Servicing Agreement dated as of December
17, 1996 among Potomac Gurnee Finance Corp., as
Depositor, AMRESCO Management, Inc., as Servicer, ABN
AMRO Bank NY, as Fiscal Agent and LaSalle National
Bank as Trustee.
NUMBER EXHIBIT
# 21.1 List of Subsidiaries of the Registrant
# 23 Consent of Ernst & Young LLP, Independent Auditors
# 27.1 Financial Data Schedule
* Incorporated by reference to the Registrant's Registration Statement on
Form S-11, Registration No. 33-71524, which was declared effective by
Securities and Exchange Commission on April 14, 1994.
** Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the first quarter ended March 31, 1994.
*** Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the second quarter ended June 30, 1995.
**** Incorporated by reference to the Registrant's Quarterly Annual Report on
Form 10-Q for the third quarter ended September 30, 1996
+ Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the second quarter ended June 30, 1997.
++ Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the third quarter ended September 30, 1997.
+++ Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998
# Filed herewith.
14(b) REPORTS ON FORM 8-K
The Company filed one report on Form 8-K during the last quarter of the
year ended December 31, 1999.
The Company's Current Report on Form 8-K dated September 30, 1999, and
filed on November 17, 1999, made available supplemental financial information
concerning the Company, and the properties owned or managed by it as of
September 30, 1999, in the form of a Supplemental Information Package.
14(c) EXHIBITS
The list of exhibits filed with this report is set forth in response to
item 14(a)(3). The required exhibit index has been filed with the exhibits.
14(d) FINANCIAL STATEMENTS SCHEDULES
Schedule III - Real Estate and Accumulated Depreciation
67
<PAGE> 68
Notes to Schedule III.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 31, 1999.
THE MILLS CORPORATION,
a Delaware corporation
By: /s/ LAURENCE C. SIEGEL
---------------------------------
Laurence C. Siegel
Chairman of the Board of
Directors, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
below on March 31, 1999:
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ LAURENCE C. SIEGEL Chairman of the Board, Chief Executive
------------------------
Laurence C. Siegel Officer and Director (principal executive officer)
/s/ PETER B. MCMILLAN President, Chief Operating Officer and Director
------------------------
Peter B. McMillan
/s/ JAMES F. DAUSCH Senior Executive Vice-President - Development and Director
------------------------
James F. Dausch
/s/ KENNETH R. PARENT Executive Vice President - Finance and Chief Financial
------------------------
Kenneth R. Parent Officer (principal financial officer and principal
accounting officer)
/s/ DIETRICH VON BOETTICHER
---------------------------
Dietrich von Boetticher Vice Chairman and Director
/s/ JOHN M. INGRAM Vice Chairman and Director
------------------------
John M. Ingram
/s/ CHARLES R. BLACK, Jr. Director
------------------------
Charles R. Black, Jr.
/s/ JAMES C. BRAITHWAITE Director
------------------------
James C. Braithwaite
/s/ JOSEPH B. GILDENHORN Director
------------------------
Joseph B. Gildenhorn
Director
------------------------
Harry H. Nick
/s/ FRANZ VON PERFALL Director
------------------------
Franz von Perfall
</TABLE>
68
<PAGE> 69
/s/ ROBERT P. PINCUS Director
------------------------
Robert P. Pincus
/s/ CRISTINA L. ROSE Director
------------------------
Cristina L. Rose
69
<PAGE> 70
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS
THE MILLS CORPORATION
We have audited the accompanying consolidated balance sheets of The
Mills Corporation as of December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity and cash flow for each of the
three years in the period ended December 31, 1999. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the management of The Mills
Corporation. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Mills Corporation as of December 31, 1999 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ ERNST & YOUNG LLP
McLean, Virgina
February 22, 2000
F-1
<PAGE> 71
CONSOLIDATED BALANCE SHEETS
THE MILLS CORPORATION
<TABLE>
<CAPTION>
DECEMBER 31,
(DOLLARS IN THOUSANDS) 1999 1998
- ----------------------------------------------------------- --------------- ---------------
<S> <C> <C>
ASSETS
Real estate and development assets:
Income producing property
Land and land improvements $ 171,024 $ 167,607
Building and improvements 725,530 705,638
Furniture, fixtures and equipment 36,958 28,004
Less: accumulated depreciation and amortization (239,484) (214,766)
--------- ---------
Total income producing property 694,028 686,483
Land held for investment and/or sale 9,924 10,606
Construction in progress 33,138 28,987
Investment in unconsolidated joint ventures 201,152 145,980
--------- ---------
Total real estate and development assets 938,242 872,056
Cash and cash equivalents 3,035 10,510
Restricted cash 13,771 13,422
Accounts receivable 25,389 23,017
Notes receivable 8,351 6,291
Deferred costs, net 47,942 44,000
Other assets 2,737 1,066
--------- ---------
TOTAL ASSETS $1,039,467 $ 970,362
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages, notes, and loans payable $ 877,273 $ 782,182
Accounts payable and other liabilities 61,189 55,210
--------- ---------
Total liabilities 938,462 837,392
Minority interests 40,978 54,052
Stockholders' equity:
Common stock $.01 par value, authorized 100,000,000
shares, issued and outstanding 23,192,041 and 23,131,697
shares in 1999 and 1998, respectively 232 231
Additional paid-in capital 440,924 439,448
Accumulated deficit (379,306) (359,404)
Deferred compensation (1,823) (1,357)
--------- ---------
Total stockholders' equity 60,027 78,918
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,039,467 $ 970,362
========== =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F - 2
<PAGE> 72
CONSOLIDATED STATEMENTS OF OPERATIONS
THE MILLS CORPORATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997
- ---------------------------------------------------- ---------------- ---------------- ---------------
<S> <C> <C> <C>
REVENUES:
Minimum rent $ 104,407 $ 101,503 $ 96,370
Percentage rent 3,677 3,832 4,413
Recoveries from tenants 51,680 50,943 47,350
Other property revenue 8,778 7,653 8,150
Management fee income 4,891 2,193 1,485
Other fee income 8,647 7,908 5,647
Interest income 2,605 3,238 2,561
--------- --------- ---------
184,685 177,270 165,976
EXPENSES:
Recoverable from tenants 44,464 44,361 42,025
Other operating 6,184 5,872 5,720
General and administrative 12,416 9,994 9,506
Interest expense 46,808 44,044 41,006
Depreciation and amortization 36,669 36,925 35,487
--------- --------- ---------
146,541 141,196 133,744
Other income/(expense) (1,828) (979) 567
Equity in earnings of unconsolidated joint ventures
before extraordinary items 12,287 8,097 4,372
--------- --------- ---------
Income before extraordinary items and minority 48,603 43,192 37,171
interests
Extraordinary losses on debt extinguishments (2,762) (422) (8,060)
Equity in extraordinary losses on debt
extinguishments of unconsolidated joint ventures -- (3,518) (397)
--------- --------- ---------
Income before minority interests 45,841 39,252 28,714
Minority interests (18,618) (16,000) (12,303)
--------- --------- ---------
Net income $ 27,223 $ 23,252 $ 16,411
========= ========= =========
PER SHARE INFORMATION:
Net income per common share - basic:
Income before extraordinary items $ 1.25 $ 1.11 $ 0.99
Extraordinary losses on debt extinguishments (0.07) (0.10) (0.23)
--------- --------- ---------
Net income $ 1.18 $ 1.01 $ 0.76
========= ========= =========
Net income per share - diluted:
Income before extraordinary items $ 1.24 $ 1.10 $ 0.98
Extraordinary losses on debt extinguishments (0.07) (0.10) (0.23)
--------- --------- ---------
Net income $ 1.17 $ 1.00 $ 0.75
========= ========= =========
Dividends declared $ 1.99 $ 1.94 $ 1.89
========= ========= =========
Tax treatment of dividends (unaudited):
Ordinary income $ 0.97 $ 1.14 $ 0.76
========= ========= =========
Capital gains $ 0.02 $ 0.02 $ --
========= ========= =========
Return of capital $ 1.00 $ 0.78 $ 1.13
========= ========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F - 3
<PAGE> 73
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THE MILLS CORPORATION
<TABLE>
<CAPTION>
COMMON ADDITIONAL
STOCK PAR PAID-IN ACCUMULATED DEFERRED
(IN THOUSANDS) (SHARES) VALUE CAPITAL DEFICIT COMPENSATION TOTAL
- ------------------------------- -------- --------- ------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 16,907 $ 169 $ 309,813 $(264,457) $ -- $ 45,525
Net proceeds from additional
equity offering 5,325 53 121,757 -- -- 121,810
Restricted stock incentive program 60 1 1,066 -- (1,067) --
Amortization of stock incentive program -- -- -- -- 365 365
Units exchanged for common stock 572 6 2,981 (2,987) -- --
Dividends declared -- -- -- (42,924) -- (42,924)
Net income -- -- -- 16,411 -- 16,411
Exercise of stock options and other 48 -- 1,022 -- -- 1,022
Adjustment to minority interests -- -- -- (43,185) -- (43,185)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1997 22,912 229 436,639 (337,142) (702) 99,024
Restricted stock incentive program 55 -- 1,340 -- (1,340) --
Amortization of stock incentive program -- -- -- -- 685 685
Units exchanged for common stock 110 1 444 (445) -- --
Dividends declared -- -- -- (45,069) -- (45,069)
Net income -- -- -- 23,252 -- 23,252
Exercise of stock options 55 1 1,025 -- -- 1,026
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1998 23,132 231 439,448 (359,404) (1,357) 78,918
Restricted stock incentive program 60 1 1,476 -- (1,477) --
Amortization of stock incentive program -- -- -- -- 1,011 1,011
Dividends declared -- -- -- (47,125) -- (47,125)
Net income -- -- -- 27,223 -- 27,223
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1999 23,192 $ 232 $ 440,924 $(379,306) $ (1,823) $ 60,027
========= ========= ========= ========= ========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F - 4
<PAGE> 74
CONSOLIDATED STATEMENTS OF CASH FLOW
THE MILLS CORPORATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN THOUSANDS) 1999 1998 1997
- ------------------------------------------------------- --------- -------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Income before minority interests $ 45,841 $ 39,252 $ 28,714
Adjustments to reconcile income before minority
interests to net cash provided by operating activities:
Net accretion of note receivable (532) (700) (700)
Depreciation and amortization 36,669 36,925 36,752
Write-off of abandoned projects 1,675 796 --
Provision for losses on accounts receivable 723 1,046 591
Equity in earnings of unconsolidated joint
ventures, net of extraordinary losses on debt
extinguishments (12,287) (4,579) (3,975)
Net gain on sales of property (1,895) -- (992)
Extraordinary loss on debt extinguishment 2,762 422 8,060
Amortization of incentive stock programs 1,011 685 225
Other changes in assets and liabilities:
Increase in accounts receivable (3,095) (2,917) (2,212)
(Increase)/decrease in notes receivable (83) 1,142 1,134
(Increase)/decrease in other assets (1,671) 1,426 380
Increase in accounts payable and other liabilities 7,951 5,450 12,296
--------- --------- ---------
Net cash provided by operating activities 77,069 78,948 80,273
INVESTING ACTIVITIES:
Investment in real estate and development assets (107,789) (121,355) (94,416)
Distributions received from unconsolidated joint ventures 23,683 32,434 29,278
Proceeds from sale of property 3,450 -- 4,316
Notes receivable (1,445) -- --
Deferred costs (13,674) (9,486) (14,015)
--------- --------- ---------
Net cash used in investing activities (95,775) (98,407) (74,837)
FINANCING ACTIVITIES:
Proceeds from mortgages, notes and loans payable 262,728 208,306 196,482
Repayments of mortgages, notes and loans payable (167,637) (129,837) (227,582)
Refinancing costs (4,690) (1,018) (2,054)
Restricted cash (349) 2,201 (2,408)
Net proceeds from common stock offering -- -- 121,810
Dividends (47,125) (45,069) (42,924)
Distributions (31,696) (30,903) (30,506)
Proceeds from exercise of stock options -- 1,026 682
--------- --------- ---------
Net cash provided by financing activities 11,231 4,706 13,500
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents (7,475) (14,753) 18,936
Cash and cash equivalents at beginning of year 10,510 25,263 6,327
--------- --------- ---------
Cash and cash equivalents at end of year $ 3,035 $ 10,510 $ 25,263
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 59,002 $ 52,208 $ 47,953
========= ========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F - 5
<PAGE> 75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE MILLS CORPORATION
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
The Mills Corporation (the "Company") is a fully-integrated, self-managed real
estate investment trust ("REIT").
The Company conducts all of its business through The Mills Limited
Partnership ("the Operating Partnership"), in which it owns, as of December 31,
1999, a 1% interest as the sole general partner and a 58.43% interest as a
limited partner. The Company, through the Operating Partnership, is engaged in
the ownership, development, redevelopment, leasing, acquisition, expansion, and
management of super-regional, retail and entertainment-oriented centers (the
"Mills" and "Block" projects) and community shopping centers (the "Community
Centers"). As of December 31, 1999, the Operating Partnership owns or holds an
interest in the following operating properties:
<TABLE>
<CAPTION>
MILLS LOCATION
--------------------------------------- -------------------------------------------
<S> <C>
Franklin Mills Philadelphia, PA
Gurnee Mills Gurnee, IL (Chicago)
Potomac Mills Woodbridge, VA (Washington, DC)
Sawgrass Mills Sunrise, FL (Ft. Lauderdale)
Ontario Mills Ontario, CA (Los Angeles)
Grapevine Mills Grapevine, TX (Dallas/Fort Worth)
Arizona Mills Tempe, AZ (Phoenix)
The Oasis at Sawgrass Sunrise, FL (Ft. Lauderdale)
Concord Mills Concord, NC (Charlotte)
Katy Mills Katy, TX (Houston)
BLOCK
--------------------------------------- -------------------------------------------
The Block at Orange Orange, CA (Los Angeles)
COMMUNITY CENTERS
--------------------------------------- -------------------------------------------
Butterfield Plaza Downers Grove, IL
Cooper's Plaza Voorhees, NJ
Crosswinds Center St. Petersburg, FL
Fashion Place Columbia, SC
Germantown Commons Germantown, MD
Gwinnett Marketfair Duluth, GA
Liberty Plaza Philadelphia, PA
Montgomery Village Gaithersburg, MD
Mount Prospect Plaza Mount Prospect, IL
West Falls Church Outlet Center Falls Church, VA
Western Hills Plaza Cincinnati, OH
</TABLE>
In addition to the operating properties, the Company is actively involved in the
development of new Mills-type and other retail-oriented projects.
F - 6
<PAGE> 76
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries, including its majority owned subsidiary,
the Operating Partnership. The accounts of the Operating Partnership include the
accounts of all Properties which are wholly-owned or controlled by the Operating
Partnership, as well as its wholly-owned subsidiaries Mills Management LLC
("Mills Management") and Management Associates Limited Partnership ("MALP"). In
addition, the Operating Partnership owns 5% of the voting common stock and 99%
of the preferred stock of the Mills Services Corporation ("MSC"), an entity
formed in connection with the Company's initial public offering to provide
development, management, leasing and financing services to the Company and other
entities owned by affiliates of the Company. As a result of the Operating
Partnership's ownership of 99% of the economic interests, MSC is consolidated
with the Operating Partnership. The Company's ownership in certain Mills and
Block operating properties, as well as certain properties under development are
through investments in the partnerships that own Ontario Mills, Ontario Mills
Residual, Grapevine Mills, Grapevine Mills Residual, Arizona Mills, The Oasis at
Sawgrass, The Block at Orange, Concord Mills, Concord Mills Residual, Katy
Mills, Katy Mills Residual, Opry Mills, Arundel Mills, Sugarloaf Mills (to be
renamed Discover Mills), Vaughan Mills and Meadowlands Mills. MSC also owns 100%
of Mills Enterprises, Inc. ("MEI"), an entity that owns FoodBrand (the Company's
food and beverage entity that was created in 1999 to master lease and operate
food courts at the Company's malls with existing operations at Katy Mills and
Franklin Mills, and future projects under development) and which holds
investments in other retail joint ventures. Such investments are accounted for
using the equity method of accounting (see Note 4).
All significant intercompany transactions and balances have been
eliminated in consolidation. Minority interests represent the ownership
interests in the Operating Partnership not held by the Company.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME PRODUCING PROPERTY
Income producing property is stated at the lower of cost or fair value
and includes all costs related to acquisition, development, leasing and
construction, including tenant improvements, interest incurred during
construction and certain direct and indirect costs of development. Land held for
sale is carried at the lower of cost or fair value less costs to sell.
Maintenance and repairs are charged to expense as incurred. Depreciation expense
is computed using the straight-line method over the estimated useful lives of
the assets, as follows:
Buildings and improvements 40 years
Land improvements 20 years
Furniture, fixtures and equipment 7 years
Total depreciation expense was $25,130, $26,504 and $26,800 for the
years ended December 31, 1999, 1998 and 1997 respectively.
Total interest expense capitalized to real estate and development
assets, including investment in unconsolidated joint ventures under development,
was $13,065, $8,761 and $8,890 for the years ended December 31, 1999, 1998 and
1997, respectively.
F - 7
<PAGE> 77
INCOME RECOGNITION
The Company, as lessor, has retained substantially all the risks and
benefits of ownership and accounts for its leases as operating leases. Minimum
rent from income producing properties is recognized on a straight-line basis
over the terms of the respective leases. Commencing in the second quarter of
1999, percentage rent is recognized when tenants' sales have reached breakpoints
stipulated in the respective leases. For periods prior to the second quarter of
1999, such rents were recognized on an accrual basis. Recoveries from tenants
for real estate taxes and other operating expenses are recognized as revenue in
the period the applicable costs are incurred.
Management, leasing and development fees relating to entities not
wholly owned by the Company are recognized as revenue as they are earned.
OTHER INCOME/(EXPENSE)
Other income/(expense) consist of land sales gains, abandoned project
costs, loan servicing fees, and start up costs associated with the Company's
Foodbrand and other retail operations and are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Foodbrand and other retail operations $(1,863) $ -- $ --
Abandoned projects (1,675) (796) --
Land sale gains 1,895 -- 990
Loan servicing fees and other (185) (183) (423)
------- ------- -------
Total other income/(expense) $(1,828) $ (979) $ 567
======= ======= =======
</TABLE>
DEFERRED COSTS
Deferred costs consist of loan fees and related expenses which are
amortized on a straight-line basis that approximates the interest method over
the terms of the related notes. In addition, deferred costs include leasing
charges, including tenant construction allowances and direct salaries and other
costs incurred by the Company to originate a lease, which are amortized on a
straight-line basis over the terms of the related leases. Total amortization
expense was $11,539, $10,421 and $8,687 for the years ended December 31, 1999,
1998 and 1997, respectively. Total accumulated amortization of deferred costs
was $69,123 and $60,352 at December 31, 1999 and 1998, respectively.
In connection with the refinancing of certain debt during 1999, the
Company wrote off $337 of unamortized loan costs and paid a prepayment penalty
of $2,425. Such amounts are reflected as extraordinary losses on debt
extinguishments. In connection with refinancing of certain debt during 1998, the
Company wrote off $422 of unamortized loan costs. Such amounts are reflected as
extraordinary losses on debt extinguishments. In connection with the refinancing
of certain debt during 1997, the Company wrote off $6,006 of unamortized loan
costs and paid a prepayment penalty of $2,054. Such amounts are reflected as an
extraordinary loss on debt extinguishment.
CASH AND CASH EQUIVALENTS
All highly liquid investments with an original maturity of three months
or less are considered to be cash equivalents.
F - 8
<PAGE> 78
RESTRICTED CASH
Restricted cash primarily consists of funds invested in cash collateral
accounts. The purpose of the cash collateral accounts is to hold proceeds from
certain transactions and to fund maintenance reserves, interest, taxes and
payments on debt. The cash collateral accounts are controlled by the lenders.
INCOME TAXES
Federal income taxes are not provided for because the Company believes
it qualifies as a REIT under the provisions of the Internal Revenue Code ("IRC")
and will distribute in excess of its taxable income to its shareholders. As a
REIT, the Company is required to distribute at least 95% of its taxable income
to shareholders and to meet certain other requirements. The differences between
net income available to common shareholders for financial reporting purposes and
taxable income before dividend deductions relate primarily to temporary
differences, principally real estate depreciation.
MSC, the Company's consolidated IRC subchapter C corporate subsidiary,
is subject to federal income taxes at the prevailing tax rates. MSC has a
federal net operating loss carryforward of $23.1 million at December 31, 1998
and the Company estimates that the federal net operating loss carryforward will
be approximately $25.1 million at December 31, 1999. A valuation allowance has
been established for deferred tax assets principally relating to the loss
carryforward as there can be no assurance that MSC will generate taxable income
in future years.
SEGMENT REPORTING
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). SFAS 131 defines an operating segment as a
component of an enterprise that engages in business activities that generate
revenues and incur expenses, whose operating results are reviewed by the chief
operating decision maker in the determination of resource allocation and
performance, and for which discrete financial information is available. The
Company operates in one reportable segment, the development, ownership and
operation of retail properties. These properties consist of "Mills"
superregional value and entertainment oriented malls, "Block" retail and
entertainment properties, community center retail shopping centers, food court
operations and other retail operations. Substantially all the Company's assets,
revenues and income are derived from this segment. The Company currently has no
operations in foreign countries.
REPORTING ON THE COSTS OF START-UP ACTIVITIES
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting on Costs of Start-Up Activities" (SOP
98-5), which is effective for fiscal years beginning after December 15, 1998.
SOP 98-5 requires costs of start-up activities and organization costs to be
expensed as incurred. It is the Company's policy to capitalize certain costs
incurred to develop and rent its projects in accordance with SFAS No. 67,
"Accounting for Costs and Initial Rental Operations of Real Estate Projects" and
SFAS No. 91, "Accounting for Non-Refundable Fees and Costs Associated with
Originating and or Acquiring Loans and Initial Direct Costs of Leases." All
costs of the Company's development and leasing activities which are not
considered to be within the scope of SFAS No. 67 or SFAS No. 91 are expensed as
incurred. SOP 98-5 states that the guidance provided by SFAS No. 67 and SFAS No.
91 is not affected by the provisions of SOP 98-5. Therefore, the adoption of SOP
98-5 did not have a material effect on results of operations or the financial
position of the Company related to its real estate projects. However, as a
result of the adoption of SOP 98-5, the Company expensed approximately $1.9
million of start-up costs related to FoodBrand and other retail operations.
F - 9
<PAGE> 79
EARNINGS PER SHARE
The Company accounts for earnings per share pursuant to SFAS 128. Basic
EPS is calculated by dividing income available to common shareholders by the
weighted number of common shares outstanding during the period. Diluted EPS is
calculated by adjusting net income for the period for the effects on minority
interests resulting from issuance of stock pursuant to restricted stock or
option grants and dividing the resulting adjusted net income by the weighted
average shares outstanding during the period, adjusted for the dilutive effect
of options and stock grants.
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ------
<S> <C> <C> <C>
Numerator for basic earnings per share $ 27,206 $ 23,232 $ 16,411
======== ======== ========
Numerator for diluted earnings per share $ 27,283 $ 23,374 $ 16,411
======== ======== ========
Denominator:
Denominator for basic earnings per share -
weighted average shares 23,167 23,062 21,517
Unvested Restricted Stock Awards -
weighted average shares (36) (51) (17)
-------- -------- --------
Denominator for basic earnings per share
adjusted weighted average shares 23,131 23,011 21,500
Effect of dilutive securities:
Employee stock options and restricted stock
awards 162 350 431
-------- -------- --------
Denominator for diluted earnings per
share-adjusted weighted-average shares 23,293 23,361 21,931
======== ======== ========
Basic earnings per share $ 1.18 $ 1.01 $ 0.76
Diluted earnings per share $ 1.17 $ 1.00 $ 0.75
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
MINORITY INTERESTS
Minority interests represent the interests of the unitholders in the
Operating Partnership. The minority interest is adjusted at each period end to
reflect the ownership percentage at that particular time. The minority interest
was 40.57%, 40.65% and 41.05% at December 31, 1999, 1998 and 1997, respectively.
RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform
with the current year presentation.
F - 10
<PAGE> 80
NOTE 3. NOTES RECEIVABLE
Notes receivable include $5,243 and $5,980 at December 31, 1999 and
1998, respectively, relating to a reimbursement and annexation agreement with
the Village of Gurnee ("Village") to reimburse the owner of Gurnee Mills for the
cost of certain public improvements. The Village has executed a non-interest
bearing note for $15,000 to be paid from taxes collected from tenants of Gurnee
Mills during a ten-year period beginning one year after Gurnee Mills opened in
August 1991. In 1996, the note was amended and the note amount increased to
$17,500 to be paid over a thirteen year period. The note was recorded in 1991 at
its net present value, based on the estimated taxes to be collected by the
Village using a discount rate of 10%. Interest income accreted was $532 for the
year ended December 31, 1999 and $700 for each of the years ended December 31,
1998 and 1997, respectively. For the years ended December 31, 1999, 1998 and
1997, collections from the Village totaled $1,210, $1,359 and $988,
respectively.
Notes receivable include $1,445 at December 31, 1999, relating to loans
made to certain members of management to fund purchases of the Company's common
stock on the open market. The notes are full recourse, mature on September 29,
2002 and bear interest, payable monthly, at 8.0%.
NOTE 4. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
Certain operating properties and properties under development are
partially owned through joint ventures ("Joint Ventures") in which the Company
is also a co-general and co-managing partner. The Company's interest in each
Joint Venture is as follows:
<TABLE>
<CAPTION>
JOINT VENTURE OWNERSHIP % AS OF 12/31/99
------------------------------ --------------------------------
<S> <C>
Ontario Mills 50.0%
Grapevine Mills 37.5%
Arizona Mills 36.8%
The Block at Orange 50.0%
The Oasis at Sawgrass 50.0%
Concord Mills 37.5%
Katy Mills 62.5%
Opry Mills 66.7%
Arundel Mills 37.5%
Discover Mills 50.0%
Meadowlands Mills 66.7%
</TABLE>
In addition to the above joint ventures, MEI holds investments in
certain retail joint ventures.
As major business decisions require the approval of at least one other
general partner, the Company does not control these Joint Ventures pursuant to
Statement of Position No. 78-9. As a result, the investments are accounted for
under the equity method, where the investments are recorded at cost and
subsequently adjusted for net equity in income (loss) and cash contributions and
distributions. The Company eliminates intercompany profits on sales of services
that are capitalized by the Joint Ventures.
In connection with the Joint Venture agreements, the Company is
committed to providing certain levels of equity in addition to the amounts
invested to date. The Company has guaranteed repayment of $288.4 million of the
Joint Venture debt until certain debt service coverage tests are met. In
addition, the Company is contingently liable for property taxes and assessments
levied against Ontario Mills Limited Partnership by the City of Ontario Special
Assessment District. The remaining aggregate amount of the special tax
assessment is approximately $17.9 million and will be collected over a 25 year
period through 2020 to fund debt service on bonds issued by the City to fund
infrastructure improvements.
F - 11
<PAGE> 81
The Company's real estate joint venture agreements contain buy-sell
provisions whereby certain partners can require the purchase or sale of
ownership interests among certain partners.
Condensed combined balance sheets as of December 31, 1999 and 1998 and
condensed combined results of operations for each of the three years in the
period ended December 31, 1999 are presented below for all Joint Ventures.
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
---------- ----------
<S> <C> <C>
ASSETS:
Income producing assets $ 871,608 $ 522,174
Construction in progress 304,168 299,221
Other 448,715 242,017
---------- ----------
$1,624,491 $1,063,412
========== ==========
LIABILITIES AND PARTNERS' EQUITY:
Debt $ 947,975 $ 583,296
Other liabilities 162,282 118,176
Operating Partnership's accumulated equity 165,801 106,875
Joint Venture partners' accumulated equity 348,433 255,065
---------- ----------
$1,624,491 $1,063,412
========== ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Revenues $ 149,751 $ 98,342 $ 40,367
Recoverable and other property expenses (43,349) (30,010) (17,020)
Interest expense (43,265) (28,456) (10,537)
Depreciation and amortization (43,156) (25,695) (10,693)
Other 6,459 7,253 6,711
Extraordinary losses on debt extinguishments -- (8,878) (961)
--------- --------- ---------
Net income $ 26,440 $ 12,556 $ 7,867
========= ========= =========
Equity in earnings of unconsolidated joint ventures
before extraordinary losses $ 12,287 $ 8,097 $ 4,372
========= ========= =========
Equity in extraordinary losses on debt extinguishments
of unconsolidated joint ventures $ -- $ (3,518) $ (397)
========= ========= =========
</TABLE>
The primary difference between the carrying value of the Company's
investment in unconsolidated joint ventures and the Operating Partnership's
accumulated equity noted above is due to capitalized interest on the investment
balance, capitalized development and leasing costs which are recovered by the
Operating Partnership through fees during construction, and loans and advances
to the Joint Ventures included in other liabilities above.
In connection with the refinancings of debt in 1998, the Grapevine
Mills and Ontario Mills joint ventures recognized extraordinary losses on debt
extinguishments totaling $8.9 million due to the write-off of unamortized
deferred loan costs of $3.4 million and the payment of a prepayment penalty of
$5.5 million. The Company's share of the losses was $3.5 million.
F-12
<PAGE> 82
In October 1998, the Company and the Katy Mills joint venture entered
into a settlement agreement with Chelsea GCA Realty, Inc., Simon Property Group,
L.P., and certain of their affiliates by which the parties settled litigation
concerning efforts by Chelsea and Simon to develop a shopping center in the
Houston, Texas area within close proximity to the Katy Mills project. In order
to protect the investment in the Katy Mills project, the Company and the Katy
Mills joint venture purchased Chelsea's interest in the proposed project by
reimbursing Chelsea for its share of land costs, development costs and fees
related to the project and agreed to make $21.4 million of additional payments
to Chelsea over a four-year period. Of this amount, the Katy Mills joint venture
paid $3.0 million in October 1998, $4.6 million in January 1999 and 2000,
respectively. The Company and its joint venture partners anticipate that the
construction loan and equity contributions for Katy Mills would be sufficient to
cover the joint venture's obligations to make the deferred payments. Katy Mills'
future payment obligations under the settlement agreements are secured by a
pledge of 1,007,620 shares of the Company's common stock. The number of shares
will be reduced pro rata as payments are made. The obligation was reduced to
$9.2 million and the number of shares pledged was reduced to 639,507, after the
January 2000 payment.
NOTE 5. BORROWINGS
Mortgages, notes, and loans payable, which are secured by all of the
Company's income producing properties, consist of the following at December 31,
1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Potomac Mills/Gurnee Mills securitized bonds - principal and interest
payments based on 30 year amortization with an anticipated balloon
payment in December 2003 and required maturity in 2026;
weighted average fixed interest rate of 7.02% $274,704 $278,022
Sawgrass Mills securitized bonds - interest only payments through
maturity in January 2001; fixed interest rate of 6.45% on $115,000; variable
interest rates on remaining amounts from LIBOR + .85% to LIBOR + 2.30%
(LIBOR was 5.82% at December 31, 1999) (see Note 12) 145,000 145,000
Sawgrass Mills Phase II mortgage loan - interest only payments
through maturity in January 2001; fixed interest rate of 6.97% (see Note 12) 18,000 18,000
Franklin Mills and Liberty Plaza mortgage loan - principal and interest
payments based on 30 year amortization with an anticipated balloon payment in
May 2007 and required maturity in 2027; fixed interest rate at 7.88% per
annum on $110 million, 7.44% on $20 million, and 6.22% on $13 million 139,867 141,298
Western Hills mortgage loan - interest only payments through maturity in
January 1999; fixed interest rates at blended rate of 7.675% -- 14,949
Community Centers' mortgage loan - principal and interest payments
through maturity in January 2001; fixed interest rate of 7.16% -- 66,833
Sawgrass Mills mezzanine loan - interest only payments through maturity
in October 2000; variable interest rate at LIBOR plus 4.75% (see Note 12) 57,000 --
Ten Community Centers' mortgage loan - principal and interest payments
through maturity in February 2009; fixed interest rate of 7.30% 111,662 --
The Mills Limited Partnership $100 million revolving line of credit -
interest only payments through maturity in April 2000 (with a one year
extension option); variable interest rate at LIBOR plus 1.50% subject to
certain leverage tests 100,000 89,000
The Mills Limited Partnership $15 million promissory note
interest only payments; through maturity in January 2000
(with a one year extension option); variable interest rate
at LIBOR plus 1.25% (see Note 12) 15,000 15,000
Other notes and loans payable 16,040 14,080
-------- --------
$877,273 $782,182
======== ========
</TABLE>
F - 13
<PAGE> 83
The weighted average interest rate at December 31, 1999 and 1998, was
7.38% and 6.98%, respectively. Of the Company's approximately $877.3 million of
consolidated debt, $662.0 million was fixed rate at December 31, 1999.
In January 1992, in conjunction with improvements to one of the Mills,
a Mills entity obtained from a bank a 10 year letter of credit in the amount of
$30,249 which serves as a credit enhancement for bonds sold by a municipality to
the public. Proceeds from the bonds were used to reimburse the Mills entity for
the costs of public works, which amounted to approximately $21,000. This
reimbursement was recorded as a reduction of the costs previously capitalized to
the income producing property. The bonds are payable from ad valorem taxes
levied by the municipality against the assessed value of the real property owned
by the Partnership and real property owned by outside parties. Funds can be
drawn on the letter of credit for the purpose of repaying principal and interest
on the bonds.
The aggregate maturities of the Company's borrowings (excluding joint ventures)
at December 31, 1999 is as follows:
<TABLE>
<S> <C>
2000 $ 189,777
2001 173,911
2002 7,072
2003 7,601
2004 262,679
Thereafter 236,233
---------
$ 877,273
=========
</TABLE>
NOTE 6. LEASING ACTIVITIES
The Company has noncancellable leases with tenants with remaining terms
ranging from one to 25 years and requiring monthly payments of specified minimum
rent. A majority of the leases require reimbursement by the tenant of
substantially all operating expenses of the properties. In addition, many of the
leases provide for additional rental payments based on gross revenues of the
tenant in excess of specified amounts. Future minimum rental commitments to be
received under noncancellable leases for the Mills (excluding joint ventures)
and the Community Centers are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
-----------------------
<S> <C>
2000 $ 95,127
2001 79,109
2002 63,764
2003 51,521
2004 37,690
Thereafter 123,116
----------
$ 450,327
==========
</TABLE>
F - 14
<PAGE> 84
The Company has a noncancellable operating lease for its corporate
headquarters in Arlington, Virginia. The lease commenced April 1, 1996 for a
term of ten years. Minimum rental payments under this lease subsequent to
December 31, 1999, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
-----------------------
<S> <C>
1999 $ 2,331
2000 2,471
2001 2,596
2002 2,661
2003 2,728
Thereafter 4,093
-------
$16,880
=======
</TABLE>
NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by
management, using available market information and appropriate valuation
methodologies. Considerable judgment is necessary to interpret market data and
develop estimated fair value. Accordingly, the estimates presented herein are
not necessarily indicative of the amounts the Company could realize on
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies could have a material effect on the
estimated fair value amounts.
Cash equivalents, accounts receivable, accounts payable and accrued
expenses and other liabilities are carried at amounts which reasonably
approximate their fair values.
Fixed rate debt with an aggregate carrying value of approximately
$662.0 million and $637.3 million has an estimated aggregate fair value of
$658.3 million and $643.6 million at December 31, 1999 and 1998, respectively.
Estimated fair value of fixed rate debt is based on interest rates currently
available to the Company for issuance of debt with similar terms, credit risk
and remaining maturities. The estimated fair value of the Company's variable
rate debt is estimated to be approximately equal to its carrying value of $215.3
million and $144.9 million at December 31, 1999 and 1998, respectively.
Disclosure about fair value of financial instruments is based on
pertinent information available to management at December 31, 1999 and 1998.
Although management is not aware of any factors that would significantly affect
the reasonable fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since December 31, 1999, and
current estimates of fair value may differ significantly from the amounts
presented herein.
NOTE 8. EMPLOYEE BENEFIT PLANS
The Company has a 401(k) defined contribution benefit plan that covers
all employees who are age 21 or older and have at least one year of service.
Contributions made by employees electing to participate in the plan under salary
reduction agreements are recorded when paid into the plan, or alternatively,
accrued if unpaid. Employer contributions are accrued and paid into the plan
periodically. Employer contributions were $1,165, $790 and $372 in 1999, 1998
and 1997, respectively.
F - 15
<PAGE> 85
NOTE 9. STOCK OPTION PLAN
The Company has an Executive Equity Incentive Plan ("Plan") for the
purpose of attracting and retaining directors, executive officers and other key
personnel for the Company, the Operating Partnership and their subsidiaries.
Pursuant to the Plan, 4,500,000 shares of common stock have been reserved for
issuance of stock options at a price not less than 100% of fair market value at
the date of grant and restricted stock. The options expire 10 years from the
date of grant and will contain such other terms and conditions (including,
without limitation, conditions to vesting) as may be determined by the Company's
Executive Compensation Committee.
In 1999, pursuant to the plan, the Company adopted its 1999 Long-Term
Incentive Plan which granted restricted stock and certain options to the
Company's executive officers and provided that such restricted stock and stock
options would vest in 20% increments over a five-year period. Generally, other
options granted under the Plan vest 50% and 100% on the third and fourth
anniversaries, respectively, of the date of grant.
In 1999, the Company adopted a broad-based 1999 Stock Option Plan for
the purpose of advancing the interests of the Company, the Operating Partnership
and their subsidiaries. Pursuant to the plan, 2,000,000 shares of common stock
have been reserved for issuance of stock options at a price not less than 100%
of fair market value at the date of grant. The options expire 10 years from the
date of grant and will contain such other terms and conditions (including,
without limitation, conditions to vesting) as may be determined by the Company's
Compensation Committee.
A summary of the Company's stock option activity, and related
information for the years ended December 31 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
OPTIONS AVERAGE OPTIONS AVERAGE OPTIONS AVERAGE
(000) EXERCISE PRICE (000) EXERCISE PRICE (000) EXERCISE PRICE
----------- -------------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -
Beginning of year 4,061 $ 23.62 1,892 $ 21.53 1,461 $ 19.57
Granted 1,322 17.44 2,362 25.19 653 25.38
Exercised -- -- (55) 18.56 (34) 20.66
Forfeited (107) 24.32 (138) 22.91 (188) 19.78
----- ------- ----- ------- ----- -------
Outstanding - end of year 5,276 21.63 4,061 23.62 1,892 21.53
===== ======= ===== ======= ===== =======
Exercisable at end of year 1,400 21.96 834 21.71 403 21.28
Weighted-average fair
Value of options granted
During the year $ 1.06 $ 1.90 $ 2.78
</TABLE>
The range of exercise prices of options outstanding at December 31,
1999 was $17.27 to $26.31. The weighted average remaining contractual life of
options outstanding at December 31, 1999 was 7.70 years.
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation," (SFAS 123)
requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, when the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.
F - 16
<PAGE> 86
Pro forma information regarding net income and earnings per share is
required by SFAS 123 which also requires that the information be determined as
if the Company has accounted for its employee stock options granted subsequent
to December 31, 1994 under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1999,
1998 and 1997, respectively: risk-free interest of 6.50%, 5.25% and 6.71%;
expected life of the option of 5.0 years, 4.50 and 4.96 years; a dividend yield
of 10.0%, 9.0% and 7.0%; and volatility factors of the expected market price of
the Company's common stock of .215, .210 and .210.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands except for earnings per share
information):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- ------
<S> <C> <C> <C>
Pro forma income before minority interest $ 44,430 $ 37,899 $ 28,445
Pro forma net income per share - diluted $ 1.14 $ .97 $ .75
</TABLE>
NOTE 10. LEGAL MATTERS
The Company is involved in litigation incident to the operations of its
income producing properties, the outcome of which is not expected to have a
material effect on the consolidated financial position or results of operations
of the Company.
NOTE 11. TRANSACTIONS WITH AFFILIATES
MSC provides management, leasing, commissioned land sales, and related
services to entities owned by partners of the Operating Partnership. Fees earned
for the years ended December 31, 1999, 1998 and 1997, were $285, $867 and
$1,214, respectively.
In addition, MSC provides development and leasing, financing and
management services for Joint Ventures. Fees earned during 1999, 1998 and 1997,
net of amounts eliminated, were $13,253, $9,234 and $5,918, respectively.
The Company is the lessor of a ground lease with the Sawgrass Mills
Phase III Joint Venture. The lease commenced January 1, 1997 and expires on
December 31, 2046. Annual rent was $500 for 1999 and $800 for 1998 and 1997,
respectively.
NOTE 12. SUBSEQUENT EVENTS
On January 31, 2000, the Company entered into a nonrecourse mortgage
loan of $285.0 million for Sawgrass Mills. The loan matures on June 18, 2001.
The interest rate is LIBOR plus 2.75%. The proceeds were used to repay prior
loans totaling $235.0 million and the remaining proceeds will be used to pay
down the line of credit and fund the Company's development equity requirements.
F - 17
<PAGE> 87
NOTE 13. UNAUDITED QUARTERLY RESULTS OF OPERATIONS
The following is a summary of results of operations for each of the
fiscal quarters during 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Total revenues $ 45,592 $ 44,359 $ 45,866 $ 48,868
Income before extraordinary items and
minority interests 10,842 11,398 12,596 13,767
Income before minority interests 8,080 11,398 12,596 13,767
Net income 4,795 6,770 7,481 8,177
EARNINGS PER SHARE - BASIC:
Income per share before extraordinary items 0.28 0.29 0.32 0 .35
Extraordinary loss on debt extinguishment (0.07) -- -- --
-------------- ----------- ----------- -----------
Net income per share $ 0.21 $ 0.29 $ 0.32 $ 0.35
============== =========== =========== ===========
EARNINGS PER SHARE - DILUTED:
Income per share before extraordinary items 0.28 0.29 0.32 0.35
Extraordinary loss on debt extinguishment (0.07) -- -- --
-------------- ----------- ----------- -----------
Net income per share $ 0.21 $ 0.29 $ 0.32 $ 0.35
============== =========== =========== ===========
Basic Shares 23,111,554 23,106,833 23,086,527 23,143,791
Diluted Shares 23,224,560 23,640,113 23,541,420 23,143,791
</TABLE>
The following is a summary of results of operations for each of the
fiscal quarters during 1998:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Total revenues $ 41,745 $ 42,910 $ 43,683 $ 48,932
Income before extraordinary items and
minority interests 8,678 9,920 9,579 15,015
Income before minority interests 8,678 9,498 8,906 12,170
Net income 5,120 5,628 5,285 7,219
EARNINGS PER SHARE - BASIC:
Income per share before extraordinary items 0.22 0.26 0.24 0 .39
Extraordinary loss on debt extinguishment -- (0.01) (0.01) (0.08)
------------ -------------- -------------- ------------
Net income per share $ 0.22 $ 0.25 $ 0.23 $ 0.31
============ ============== ============== ============
EARNINGS PER SHARE - DILUTED:
Income per share before extraordinary items 0.22 0.25 0.24 0 .39
Extraordinary loss on debt extinguishment -- (0.01) (0.01) (0.08)
------------ -------------- -------------- ------------
Net income per share $ 0.22 $ 0.24 $ 0.23 $ 0.31
============ ============== ============== ============
Basic Shares 22,909,523 22,986,131 23,039,036 23,081,737
Diluted Shares 23,338,880 23,589,291 23,385,907 23,313,807
</TABLE>
F - 18
<PAGE> 88
THE MILLS CORPORATION SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COST
INITIAL COST CAPITALIZED
TO PARTNERSHIP(3) SUBSEQUENT TO
--------------------------- ACQUISITION
BUILDING, BUILDING,
EQUIPMENT EQUIPMENT
AND AND LAND
DESCRIPTION(1) ENCUMBRANCES (2) LAND IMPROVEMENTS IMPROVEMENTS
-------------- ------------- ------------- ------------ ------------
MILLS
<S> <C> <C> <C> <C>
Potomac Mills $ 156,697 $ 8,486 $ -- $ 158,221
Sawgrass Mills 145,000 11,194 -- 144,791
Sawgrass Mills Phase II 18,000 2,556 -- 25,632
Franklin Mills 130,094 15,333 -- 174,005
Franklin Mills Residual -- 4,779 -- (4,079)
Gurnee Mills 118,007 20,449 -- 186,809
Hunt Club -- 3,321 -- (3,152)
Community Centers
Montgomery Village 10,324 -- -- 13,958
Germantown Commons 15,869 451 -- 13,463
Mount Prospect Plaza 14,394 4,560 3,740 11,249
Butterfield Plaza 9,381 1,604 -- 9,729
Western Hills 23,824 2,299 3,785 17,285
Crosswinds 5,460 1,346 4,449 1,433
Gwinnett Marketfair 14,394 6,827 2,789 7,624
Fashion Place 6,700 1,853 -- 8,870
West Falls Church 5,360 839 -- 6,835
Liberty Plaza 9,773 9,335 14,456 3,961
Cooper's Plaza 5,956 769 7,888 805
Construction in progress
and development
pre-construction costs -- -- -- 33,138
Corporate 188,040 6,276 2,769 24,678
Mainstreet Retail -- -- 484 149
--------- --------- --------- ---------
Totals $ 877,273 $ 102,277 $ 40,360 $ 833,936
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
-----------------------------------------------
BUILDING
LAND AND EQUIPMENT AND ACCUMULATED DATE USEFUL
DESCRIPTION(1) IMPROVEMENTS IMPROVEMENTS(7) TOTAL(4)(5) EPRECIATION(6) ACQUIRED LIFE (8)
-------------- ------------ --------------- ------------ -------------- -------- -------------
MILLS
<S> <C> <C> <C> <C> <C>
Potomac Mills $ 41,576 $ 125,131 $ 166,707 $ 47,243 1983
Sawgrass Mills 13,344 142,641 155,985 39,299 1986
Sawgrass Mills Phase II 4,765 23,423 28,188 2,740 1993
Franklin Mills 31,017 158,321 189,338 47,245 1986
Franklin Mills Residual 700 -- 700 -- 1986
Gurnee Mills 39,956 167,302 207,258 54,000 1988
Hunt Club 169 -- 169 -- 1988
Community Centers
Montgomery Village 5,620 8,338 13,958 3,454 1980
Germantown Commons 2,074 11,840 13,914 5,257 1980
Mount Prospect Plaza 4,221 15,328 19,549 5,924 1985
Butterfield Plaza 2,419 8,914 11,333 3,695 1982
Western Hills 3,668 19,701 23,369 7,014 1981
Crosswinds 1,633 5,595 7,228 2,814 1981
Gwinnett Marketfair 8,030 9,210 17,240 3,815 1986
Fashion Place 2,088 8,635 10,723 4,470 1985
West Falls Church 1,803 5,871 7,674 3,433 1982
Liberty Plaza 8,972 18,780 27,752 2,368 1994
Cooper's Plaza 769 8,693 9,462 1,345 1994
Construction in progress
and development
pre-construction costs -- 33,138 33,138 various
Corporate 8,124 24,131 32,255 5,167
Mainstreet Retail -- 633 633 201 1995
--------- --------- --------- ---------
Totals $ 180,948 $ 795,625 $ 976,573 $ 239,484
========= ========= ========= =========
</TABLE>
F - 19
<PAGE> 89
THE MILLS CORPORATION
NOTES TO SCHEDULE III
DECEMBER 31, 1999
(1) The Company owns super-regional, value and entertainment oriented malls
("Mills") and community shopping centers ("Community Centers"). The
geographic location of the Mills and Community Centers are as follows:
<TABLE>
<CAPTION>
PROPERTY NAME LOCATION
------------- --------
<S> <C>
MILLS:
Franklin Mills ................ Philadelphia, PA
Franklin Mills - Residual ..... Philadelphia, PA
Gurnee Mills .................. Gurnee, IL
Hunt Club ..................... Gurnee, IL
Potomac Mills ................. Woodbridge, VA
Sawgrass Mills ................ Sunrise, FL
Sawgrass Mills - Phase II ..... Sunrise, FL
COMMUNITY CENTERS:
Butterfield Plaza ............. Downers Grove, IL
Cooper's Plaza ................ Voorhees, NJ
Crosswinds Center ............. St. Petersburg, FL
Fashion Place ................. Columbia, SC
Germantown Commons ............ Germantown, MD
Gwinnett Marketfair ........... Duluth, GA
Liberty Plaza ................. Philadelphia, PA
Montgomery Village ............ Gaithersburg, MD
Mount Prospect Plaza .......... Mount Prospect, IL
West Falls Church Outlet Center Falls Church, VA
Western Hills Plaza ........... Cincinnati, OH
</TABLE>
(2) See description of mortgage, notes and loans payable in Note 5 of the
Notes to the Consolidated Financial Statements.
(3) Initial cost of properties is cost at the end of the calendar year for
the year of acquisition.
(4) The aggregate cost of land, land held for sale, buildings,
improvements, equipment and tenant improvement for federal income tax
basis is $943,849 at December 31, 1999.
(5) Reconciliation of real estate and development assets, excluding
investment in unconsolidated joint ventures
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 . $ 940,842 $ 922,768 $ 880,933
Acquisitions ......... 50,226 49,303 69,535
Retirements .......... (2,435) (18,121) (760)
Other ................ (12,060) (13,108) (26,940)
--------- --------- ---------
Balance at December 31 $ 976,573 $ 940,842 $ 922,768
========= ========= =========
</TABLE>
F - 20
<PAGE> 90
(6) Reconciliation of accumulated depreciation
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 .................. $ 214,766 $ 206,357 $ 179,658
Additions charged to costs and expenses 25,130 26,504 26,799
Removal of accumulated depreciation ... (412) (18,095) (100)
--------- --------- ---------
Balance at December 31 ................ $ 239,484 $ 214,766 $ 206,357
========= ========= =========
</TABLE>
(7) In 1991, the city of Sunrise, Florida issued municipal bonds in the
amount of $24,730 and reimbursed a partnership for costs of public
works which amounted to approximately $21,000. Costs previously
capitalized to income producing property were reduced upon
reimbursement.
In 1991, a note receivable of $5,925 was recorded pursuant to
reimbursement and annexation agreements with the Village of Gurnee to
reimburse the Company that owns Gurnee Mills for the cost of certain
public improvements. The Village of Gurnee has executed a noninterest
bearing note for $15,000, amended to $17,500 in 1996, to be paid from
taxes collected from the tenants of the shopping mall during a ten-year
period, amended to a thirteen year period in 1996, beginning one year
after the mall opened. The note was recorded in 1991, based on the
estimated taxes to be collected by the Village of Gurnee from the
tenants using a discount rate of 10%.
(8) Depreciation is computed based upon the following estimated lives:
<TABLE>
<S> <C>
Building and improvements.............. 40 years
Land improvements...................... 20 years
Equipment.............................. 7 years
Tenant improvements.................... Lesser of life of asset or life of lease
</TABLE>
F - 21
<PAGE> 1
EXHIBIT 21.1
THE MILLS CORPORATION
ENTITY STRUCTURE
(AS OF 12/31/99)
THE MILLS CORPORATION (REIT) SUBSIDIARIES
Coopers Crossing Corp.
Crosswinds Corp.
Fashion Center Corp.
Fashion Place Corp.
Franklin Mills GP, Inc.
Germantown Corp.
Gwinnett Corp.
Liberty Plaza GP, Inc.
Montgomery Village Corp.
Montgomery Village Ground Corp.
Mount Prospect Plaza Corp.
Ontario Mills Finance Corp.
Potomac Gurnee Finance Corp.
Sawgrass Finance L.L.C.
Sunrise Mills/MLP Corp.
Vaughan Mills Advisory Services, Inc.
Washington Potomac Partners Corp.
West Falls Church Corp.
Western Hills Plaza Corp.
OPERATING PARTNERSHIP
THE MILLS LIMITED PARTNERSHIP
The Mills Corporation holds 1% as the sole general partner and an
additional 58.43% as a limited partner
SUBSIDIARIES OF THE MILLS LIMITED PARTNERSHIP
Arizona Mills L.L.C.
Arundel Mills, L.L.C.
Arundel Mills Limited Partnership
Arundel Mills Residual, L.L.C.
Arundel Mills Residual Limited Partnership
Candlestick Mills, L.L.C.
Candlestick Mills Limited Partnership
Concord Mills Limited Partnership
Concord Mills, L.L.C.
Concord Mills Residual, L.L.C.
Concord Mills Residual Limited Partnership
Concord Mills Residual III, L.L.C.
Concord Mills Residual III Limited Partnership
Coopers Crossing L.L.C.
Coopers Crossing Associates (MLP) Limited Partnership
Crosswinds Center Associates of St. Petersburg (MLP) Limited
Partnership
Crosswinds L.L.C.
Echo Hills Center Associates (MLP) Limited Partnership
Fashion Center Associates of Illinois No. 1 (MLP) Limited Partnership
Fashion Center L.L.C.
Fashion Place Associates Limited Partnership
Fashion Place Associates L.L.C.
Franklin Mills Associates Limited Partnership
<PAGE> 2
Franklin Mills, L.L.C.
Franklin Mills Residual Limited Partnership
Germantown Development Associates (MLP) Limited Partnership
Germantown Development Associates L.L.C.
Grapevine Mills Development Company, L.L.C.
Grapevine Mills II Limited Partnership
Grapevine Mills Operating Company II, L.L.C.
Grapevine Mills Limited Partnership
Grapevine Mills Operating Company, L.L.C.
Gurnee Mills L.L.C.
Gurnee Mills II L.L.C.
Gurnee Mills (MLP) Limited Partnership
Gwinnett L.L.C.
Gwinnett Marketfair Associates Limited Partnership
Houston Development I L.P.
Hunt Club Road Properties Associates Limited Partnership
Katy Mills, L.L.C.
Katy Mills Limited Partnership
Katy Mills Residual Limited Partnership
Katy Mills Residual, L.L.C.
Katy Mills Residual II Limited Partnership
Liberty Plaza, L.L.C.
Liberty Plaza Limited Partnership
Mainstreet Retail Limited Partnership
Management Associates Limited Partnership
Meadowlands Mills L.L.C.
Meadowlands Mills Limited Partnership
Mills Global, L.L.C.
Mills International Acquisitions (Luxembourg) S.a r.l.
Mills-Kan Am Sawgrass Phase 3 Limited Partnership
Mills Management L.L.C.
Mills Ontario Acquisitions, L.L.C.
MillsServices Corp.
MillsServices II Corp.
Mills Texas Acquisitions Limited Partnership
Mills Texas Acquisitions, L.L.C.
Montgomery Village Associates L.L.C.
Montgomery Village Associates (MLP) Limited Partnership
Montgomery Village Ground L.L.C.
Montgomery Village Ground (MLP) Limited Partnership
Mount Prospect Plaza L.L.C.
Mount Prospect Plaza (MLP) Limited Partnership
MTS Services of Tempe, L.L.C.
Ontario Mills Finance, L.L.C.
Ontario Mills L.L.C.
Ontario Mills Limited Partnership
Ontario Mills II, L.L.C.
Ontario Mills II Limited Partnership
Ontario Mills Residual, L.L.C.
Ontario Mills Residual Limited Partnership
Opry Mills, L.L.C.
Opry Mills Limited Partnership
Orange City Mills, L.L.C.
Orange City Mills Limited Partnership
Potomac Mills L.L.C.
Potomac Mills Limited Partnership
<PAGE> 3
Sawgrass Mills Phase II, L.L.C.
Sawgrass Mills Phase II Limited Partnership
Sugarloaf Mills, L.L.C.
Sugarloaf Mills Limited Partnership
Sugarloaf Mills Residual, L.L.C.
Sugarloaf Mills Residual Limited Partnership
Sunrise Mills L.L.C.
Sunrise Mills/MLP, L.L.C.
Sunrise Mills (MLP) Limited Partnership
West Falls Church L.L.C.
Western Hills Plaza L.L.C.
WSM South Florida Corp.
SUBSIDIARIES OF MILLSSERVICES CORP.
Commonwealth Investors, Inc.
Franklin Mills Residual Corp.
Grapevine Mills Finance Corp.
Grapevine Mills Residual Limited Partnership
Grapevine Mills Residual Operating Company, L.L.C.
Mainstreet Retail, Inc.
Mainstreet Ventures, Inc.
Manufacturers @ The Mills Corp.
Mills Enterprises, Inc.
MillsServices Canada Corp.
MillsServices of Grapevine, Inc.
Premises Providers, Inc.
SUBSIDIARIES OF MILLSSERVICES II CORP.
1199420 Ontario Inc.
Arundel Mills Residual Corp.
MillsServices Canada II Corp.
Sugarloaf Mills Residual Corp.
SUBSIDIARIES OF MILLS ENTERPRISES, INC.
FoodBrand, L.L.C.
FoodBrand Services, Inc.
MEI/Kan Am I, L.L.C.
MEI/Kan Am II, L.L.C.
Moe's Beverage, Inc.
WPFC/Mills Development Company, L.L.C.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3, No. 333-13363, Form S-3, No. 333-03205, Form S-8, No. 333-81863, and
Form S-8, No. 333-81865) of The Mills Corporation and in the related
Prospectuses of our report dated February 22, 2000, with respect to the
consolidated financial statements and schedule of The Mills Corporation included
in the Annual Report (Form 10-K) for the year ended December 31, 1999.
/S/ ERNST & YOUNG LLP
McLean, Virginia
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,035
<SECURITIES> 0
<RECEIVABLES> 33,740
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 933,512
<DEPRECIATION> (239,484)
<TOTAL-ASSETS> 1,039,467
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 232
<OTHER-SE> 101,005
<TOTAL-LIABILITY-AND-EQUITY> 1,039,467
<SALES> 0
<TOTAL-REVENUES> 196,972
<CGS> 0
<TOTAL-COSTS> 146,541
<OTHER-EXPENSES> 1,828
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,808
<INCOME-PRETAX> 45,841
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (2,762)
<CHANGES> 0
<NET-INCOME> 45,841
<EPS-BASIC> 1.18
<EPS-DILUTED> 1.17
</TABLE>
