SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: September 30, 1997
Commission File No. 33-73988
The Taubman Realty Group Limited Partnership
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-3097317
---------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 East Long Lake Road, Suite 300, P.O. Box 200, Bloomfield Hills, Michigan
----------------------------------------------------------------------------
(Address of principal executive offices) 48303-0200
------------
(Zip Code)
(248) 258-6800
---------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
------- -------
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following financial statements of The Taubman Realty Group Limited
Partnership (TRG) are provided pursuant to the requirements of this item.
INDEX TO FINANCIAL STATEMENTS
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
- --------------------------------------------
Consolidated Balance Sheet as of December 31, 1996 and September 30, 1997 2
Consolidated Statement of Operations for the three months ended
September 30, 1996 and 1997...................................................3
Consolidated Statement of Operations for the nine months ended
September 30, 1996 and 1997...................................................4
Consolidated Statement of Cash Flows for the nine months ended
September 30, 1996 and 1997...................................................5
Notes to Consolidated Financial Statements.....................................6
- 1 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(in thousands)
December 31 September 30
----------- ------------
1996 1997
---- ----
Assets:
Properties $1,136,416 $1,379,546
Accumulated depreciation and amortization 234,030 257,893
---------- ----------
$ 902,386 $1,121,653
Cash and cash equivalents 7,912 1,178
Accounts and notes receivable, less allowance
for doubtful accounts of $393 and $464
in 1996 and 1997 20,162 16,091
Accounts receivable from related parties 6,293 7,861
Deferred charges and other assets 41,509 42,229
---------- ----------
$ 978,262 $1,189,012
========== ==========
Liabilities:
Unsecured notes payable $ 786,705 $ 841,339
Mortgage notes payable 159,703 159,319
Other notes payable 54,997 190,325
Capital lease obligation 39,849 55,320
Accounts payable and other liabilities 86,779 117,132
Distributions in excess of net income of
unconsolidated Joint Ventures (Note 4) 142,367 144,571
---------- ----------
$1,270,400 $1,508,006
Commitments and Contingencies (Notes 8 and 9)
Accumulated deficiency in assets (292,138) (318,994)
---------- ----------
$ 978,262 $1,189,012
========== ==========
Allocation of accumulated deficiency in assets:
General Partners $ (226,242) $ (247,064)
Limited Partners (65,896) (71,930)
---------- ----------
$ (292,138) $ (318,994)
========== ==========
See notes to financial statements.
- 2 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except unit data)
Three Months Ended September 30
-------------------------------
1996 1997
---- ----
Revenues:
Minimum rents $38,893 $45,140
Percentage rents 1,319 1,867
Expense recoveries 21,243 24,476
Other 2,816 4,379
Revenues from management, leasing
and development services 2,046 2,175
------- -------
$66,317 $78,037
------- -------
Operating Costs:
Recoverable expenses $18,504 $20,932
Other operating 6,247 7,980
Management, leasing and development
services 1,032 1,264
General and administrative 5,127 6,587
Interest expense 18,448 19,388
Depreciation and amortization 9,367 11,050
------- -------
$58,725 $67,201
------- -------
Income before equity in net income of
unconsolidated Joint Ventures and
extraordinary item $ 7,592 $10,836
Equity in net income of unconsolidated
Joint Ventures (Note 4) 13,348 12,205
------- -------
Income before extraordinary item $20,940 $23,041
------- -------
Extraordinary item (Note 5) (1,328)
------- -------
Net income $19,612 $23,041
======= =======
Allocation of Net Income:
General Partners $15,098 $17,845
Limited Partners 4,514 5,196
------- -------
$19,612 $23,041
======= =======
Earnings per Unit of Partnership Interest (Note 7):
Income before extraordinary item $ .16 $ .17
Extraordinary item (.01)
------- -------
Net Income $ .15 $ .17
======= =======
Weighted Average Number of Units of
Partnership Interest Outstanding (Note 7) 130,377,743 138,277,110
=========== ===========
See notes to financial statements.
- 3 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except unit data)
Nine Months Ended September 30
------------------------------
1996 1997
---- ----
Revenues:
Minimum rents $108,416 $130,406
Percentage rents 3,771 5,030
Expense recoveries 59,503 70,661
Other 8,424 11,384
Revenues from management, leasing
and development services 6,191 6,480
-------- --------
$186,305 $223,961
-------- --------
Operating Costs:
Recoverable expenses $ 49,520 $ 60,223
Other operating 17,841 26,218
Management, leasing and development
services 3,631 3,553
General and administrative 15,400 18,657
Interest expense 52,714 54,002
Depreciation and amortization 26,069 31,386
-------- --------
$165,175 $194,039
-------- --------
Income before equity in net income
of unconsolidated Joint Ventures and
extraordinary item $ 21,130 $ 29,922
Equity in net income of unconsolidated
Joint Ventures (Note 4) 39,178 38,873
-------- --------
Income before extraordinary item $ 60,308 $ 68,795
-------- --------
Extraordinary item (Note 5) (1,328)
-------- --------
Net Income $ 58,980 $ 68,795
======== ========
Allocation of Net Income:
General Partners $ 46,599 $ 53,278
Limited Partners 12,381 15,517
-------- --------
$ 58,980 $ 68,795
======== ========
Earnings per Unit of Partnership Interest (Note 7):
Income before extraordinary item $ .47 $ .50
Extraordinary item (.01)
-------- --------
Net Income $ .46 $ .50
======== ========
Weighted Average Number of Units of
Partnership Interest Outstanding (Note 7) 127,576,781 138,261,847
=========== ===========
See notes to financial statements.
- 4 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended September 30
------------------------------
1996 1997
---- ----
Cash Flows From Operating Activities:
Income before extraordinary item $ 60,308 $ 68,795
Adjustments to reconcile income before
extraordinary item to net cash provided
by operating activities:
Depreciation and amortization 26,069 31,386
Provision for losses on accounts receivable 998 828
Amortization of deferred financing costs 1,610 1,740
Other 495 468
Gain on sale of land (315) (880)
Increase (decrease) in cash attributable to
changes in assets and liabilities:
Receivables, deferred charges and other assets (5,936) (6,129)
Accounts payable and other liabilities 3,505 30,375
--------- ---------
Net Cash Provided By Operating Activities $ 86,734 $ 126,583
--------- ---------
Cash Flows From Investing Activities:
Purchase of interests in Centers $(103,570) $(124,783)
Additions to properties (20,678) (105,947)
Proceeds from sale of land 686 1,795
Contributions to Joint Ventures (3,398) (12,573)
Distributions from Joint Ventures
in excess of net income 8,943 14,777
--------- ---------
Net Cash Used In Investing Activities $(118,017) $(226,731)
--------- ---------
Cash Flows From Financing Activities:
Debt proceeds $ 275,212 $ 243,991
Debt payments (189,667) (54,544)
Extinguishment of debt (Note 5) (35,964)
Debt issuance costs (830) (382)
Issuance of units of partnership interest (Note 8) 65,575 414
Cash distributions (88,113) (96,065)
--------- ---------
Net Cash Provided By Financing Activities $ 26,213 $ 93,414
--------- ---------
Net Decrease In Cash $ (5,070) $ (6,734)
Cash and Cash Equivalents at Beginning of Period 16,836 7,912
--------- ---------
Cash and Cash Equivalents at End of Period $ 11,766 $ 1,178
========= =========
Interest on mortgage notes and other loans paid during the nine months ended
September 30, 1996 and 1997, net of amounts capitalized of $3,602 and $6,798,
was $41,123 and $39,149, respectively.
See notes to financial statements.
- 5 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended September 30, 1997
Note 1 - Interim Financial Statements
The Taubman Realty Group Limited Partnership (TRG) engages in the ownership,
operation, management, leasing, acquisition, development, redevelopment,
expansion, financing and refinancing of regional retail shopping centers
(Taubman Shopping Centers) and interests therein. Taubman Centers, Inc. is the
managing general partner of TRG. GMPTS Limited Partnership, TG Partners Limited
Partnership and Taub-Co Management, Inc. are also general partners.
The unaudited interim financial statements should be read in conjunction with
the audited financial statements and related notes included in TRG's Annual
Report on Form 10-K for the year ended December 31, 1996. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial statements for the interim
periods have been made. The results for interim periods are not necessarily
indicative of the results for a full year.
Certain 1996 amounts have been reclassified to conform to 1997
classifications.
Note 2 - Acquisition
In September 1997, TRG acquired the Regency Square shopping center, located in
Richmond, Virginia, for $123.9 million. TRG borrowed under its existing
commercial paper facility and an existing revolving credit facility to fund the
purchase price (Note 9). The acquisition is expected to have an immaterial
effect on net income in 1997. The pro forma effect of the acquisition on 1996
net income is also immaterial.
Note 3 - Consolidated Ventures
In the second quarter of 1997, TRG entered into a partnership agreement to
develop, own and operate Great Lakes Crossing, a value super-regional mall
presently under construction in Auburn Hills, Michigan. The accounts of the
partnership are consolidated in these financial statements since TRG, the
managing and sole general partner, has a controlling 80% interest in the
venture. The Center is expected to open in the fall of 1998.
Taubman MacArthur Associates Limited Partnership is developing MacArthur
Center in Norfolk, Virginia. MacArthur Center is expected to open in the spring
of 1999. The accounts of the partnership are consolidated in these financial
statements since TRG, the managing general partner, has a controlling 70%
interest in the venture (Note 9).
- 6 -
<PAGE>
TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (Continued)
Note 4 - Investments in Joint Ventures
Certain Taubman Shopping Centers are partially owned through joint ventures
that are not controlled by TRG (Joint Ventures). TRG is generally the managing
general partner of these Joint Ventures. TRG's interest in each Joint Venture is
as follows:
TRG's %
Ownership
as of
Joint Venture Taubman Shopping Center September 30, 1997
-----------------------------------------------------------------------------
Arizona Mills, L.L.C. Arizona Mills
(under construction) 37%
Fairfax Associates Fair Oaks 50
Lakeside Mall Limited
Partnership Lakeside 50
Rich-Taubman Associates Stamford Town Center 50
Taubman-Cherry Creek
Limited Partnership Cherry Creek 50
Twelve Oaks Mall Limited
Partnership Twelve Oaks Mall 50
West Farms Associates Westfarms 79
Woodfield Associates Woodfield 50
Woodland Woodland 50
TRG reduces its investment in Joint Ventures to eliminate intercompany profits
on sales of services that are capitalized by the Joint Ventures. As a result,
the carrying value of TRG's investment in Joint Ventures is less than TRG's
share of the deficiency in assets reported in the combined balance sheet of the
Joint Ventures by $7.3 million and $7.4 million at December 31, 1996 and at
September 30, 1997, respectively. These differences are amortized over the
useful lives of the related assets.
Combined balance sheet and results of operations information are presented
below (in thousands) for the Joint Ventures, followed by TRG's beneficial
interest in the combined information. Beneficial interest is calculated based on
TRG's ownership interest in each of the Joint Ventures.
December 31 September 30
----------- ------------
1996 1997
---- ----
Assets:
Properties, net $ 450,469 $ 542,387
Other assets 71,252 55,957
--------- ---------
$ 521,721 $ 598,344
========= =========
Liabilities and partners'
accumulated deficiency in assets:
Debt $ 724,162 $ 821,879
Capital lease obligations 5,000 6,396
Other liabilities 51,686 44,872
TRG accumulated deficiency in assets (135,070) (137,185)
Joint Venture Partners' accumulated
deficiency in assets (124,057) (137,618)
--------- ---------
$ 521,721 $ 598,344
========= =========
TRG accumulated deficiency in assets (above) $(135,070) $(137,185)
Elimination of intercompany profit (7,297) (7,386)
--------- ---------
Distributions in excess of net income
of unconsolidated Joint Ventures $(142,367) $(144,571)
========= =========
- 7 -
<PAGE>
TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (Continued)
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1996 1997 1996 1997
---- ---- ---- ----
Revenues $63,657 $62,541 $202,369 $187,574
------- ------- -------- --------
Recoverable and other
operating expenses $22,793 $22,827 $ 77,722 $ 68,417
Interest expense 12,857 13,588 40,314 38,459
Depreciation and amortization 6,412 6,112 18,308 16,728
------- ------- -------- --------
Total operating costs $42,062 $42,527 $136,344 $123,604
------- ------- -------- --------
Net Income $21,595 $20,014 $ 66,025 $ 63,970
======= ======= ======== ========
Net income attributable to TRG $11,923 $11,234 $ 34,965 $ 35,035
Realized intercompany profit 1,425 971 4,213 3,838
------- ------- -------- ---------
Equity in net income
of unconsolidated Joint Ventures $13,348 $12,205 $ 39,178 $ 38,873
======= ======= ======== =========
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1996 1997 1996 1997
---- ---- ---- ----
TRG's beneficial interest
in unconsolidated Joint
Ventures' operations:
Revenues less recoverable and
other operating expenses $23,178 $23,187 $ 68,720 $ 68,503
Interest expense (6,601) (7,491) (20,609) (20,720)
Depreciation and amortization (3,229) (3,491) (8,933) (8,910)
------- ------- -------- ---------
Net Income $13,348 $12,205 $ 39,178 $ 38,873
======= ======= ======== =========
Note 5 - Debt
In July 1997, TRG issued $55 million of unsecured 10-year notes under its
medium-term note program at a coupon rate of 7%. The net proceeds were used to
pay down floating rate debt under TRG's revolving credit facilities.
In the third quarter of 1996, TRG recognized a $1.3 million extraordinary
charge to income, related to the extinguishment of the Fairlane Town Center
mortgage, consisting primarily of a prepayment penalty.
- 8 -
<PAGE>
TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (Continued)
Note 6 - Beneficial Interest in Debt and Interest Expense
TRG's beneficial interest in the debt (excluding capital lease obligations),
capitalized interest, and interest expense (net of capitalized interest) of TRG,
its consolidated subsidiaries and its unconsolidated Joint Ventures is
summarized as follows:
TRG's Share TRG's TRG's
Joint of Joint Consolidated Beneficial
Ventures Ventures Subsidiaries Interest
----------------------------------------------
Debt as of:
December 31, 1996 $724,162 $396,962 $1,001,405 $1,398,367
September 30, 1997 821,879 442,353 1,190,983 1,633,336
Capitalized interest:
Nine months ended
September 30, 1996 $ 3,616 $ 2,510 $ 3,602 $ 6,112
Nine months ended
September 30, 1997 6,683 3,851 6,798 10,649
Interest expense
(Net of capitalized interest):
Nine months ended
September 30, 1996 $ 40,314 $ 20,609 $ 52,714 $ 73,323
Nine months ended
September 30, 1997 38,459 20,720 54,002 74,722
Note 7 - Units of Partnership Interest
Effective September 30, 1997, TRG amended its partnership agreement to split
existing units of partnership interest at a ratio of 1975.08 to one. There were
138,297,334 units of partnership interest outstanding as of September 30, 1997.
The split did not alter the ownership percentage of any of TRG's partners. All
per unit amounts have been adjusted to reflect the unit split on a retroactive
basis.
Note 8 - Incentive Option Plan
TRG has an incentive option plan for employees of the Manager. Currently, 8.9
million units of partnership interest, as restated for the unit split (described
in Note 7), may be issued under the plan, including 7.0 million units of
outstanding options. The exercise price of all outstanding options is equal to
market value on the date of grant. Incentive options generally become vested to
the extent of one-third of the units on each of the third, fourth and fifth
anniversaries of the date of grant. Options expire ten years from the date of
grant.
During the first nine months of 1997, options for 101 thousand units were
issued at an exercise price of $13.14 per unit, options for 37 thousand units
were exercised with a weighted average exercise price of $11.19 per unit, and
options for 22 thousand units were canceled with a weighted average exercise
price of $10.86 per unit. As of September 30, 1997 there were outstanding
options for 7.0 million units with a weighted average exercise price of $11.22.
As of September 30, 1997, options for 4.1 million units were vested with a
weighted average exercise price of $11.35.
- 9 -
<PAGE>
TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (Continued)
Note 9 - Subsequent Event
In October 1997, TRG's managing general partner, Taubman Centers, Inc. (TCO)
used the $200 million proceeds of its offering of 8.30% Series A Cumulative,
Redeemable Preferred Stock (Series A Preferred Stock) to acquire a Series A
Preferred Equity interest in TRG that will entitle TCO to distributions (in the
form of guaranteed payments) in amounts equal to the dividends payable on TCO's
Series A Preferred Stock. TRG bore all expenses of the offering, which will be
accounted for as a reduction of the proceeds from the Series A Preferred Equity.
TRG used the net proceeds to pay down floating rate debt under TRG's existing
revolving credit and commercial paper facilities, which were used to fund the
acquisition of Regency Square in September 1997 (Note 2).
Also in October 1997, TRG closed on a three year $150 million construction
facility for MacArthur Center, which is owned by a consolidated 70% owned
venture. The loan bears interest at one month LIBOR plus 1.2%. The payment of
the principal and interest is guaranteed by TRG. The loan agreement provides for
the reduction of the amount guaranteed as certain center performance and
valuation criteria are met.
- 10 -
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
The following discussion should be read in conjunction with the accompanying
Financial Statements of Taubman Centers, Inc. and the Notes thereto and the
Consolidated Financial Statements of The Taubman Realty Group Limited
Partnership and the Notes thereto.
General Background and Performance Measurement
The Company, through its interest in and as managing general partner of TRG,
participates in TRG's Managed Businesses. TRG's Managed Businesses include: (i)
Taubman Shopping Centers that TRG controls by ownership or contractual
agreement, development projects for future regional shopping centers
(Development Projects) and The Taubman Company Limited Partnership (the
Manager), (collectively, the Consolidated Businesses); and (ii) Taubman Shopping
Centers partially owned through joint ventures that are not controlled (Joint
Ventures). The Joint Ventures are accounted for under the equity method in TRG's
Consolidated Financial Statements.
Certain aspects of the performance of the Managed Businesses are best
understood by measuring their performance as a whole, without regard to TRG's
ownership interest. For example, mall tenant sales and shopping center occupancy
trends fit this category and are so analyzed below. In addition, trends in
certain items of revenue and expense are often best understood in the same
fashion and the discussions following take this approach when appropriate. When
relevant, these items are also discussed separately with regard to the
Consolidated Businesses and the Joint Ventures.
Seasonality
The regional shopping center industry is seasonal in nature, with mall tenant
sales highest in the fourth quarter due to the Christmas season, and with
lesser, though still significant, sales fluctuations associated with the Easter
holiday and back-to-school events. While minimum rents and recoveries are
generally not subject to seasonal factors, most leases are scheduled to expire
in the first quarter, and the majority of new stores open in the second half of
the year in anticipation of the Christmas selling season. Accordingly, revenues
and occupancy levels are generally highest in the fourth quarter.
The following table summarizes certain quarterly operating data for TRG's
Managed Businesses for 1996 and the first three quarters of 1997:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th 1st 2nd 3rd
Quarter Quarter Quarter Quarter Total Quarter Quarter Quarter
1996 1996 1996 1996 1996 1997 1997 1997
---------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mall tenant sales $591,677 $617,821 $627,791 $989,956 $2,827,245 $600,709 $629,906 $692,487
Revenues 129,947 128,753 129,970 138,538 527,208 130,677 134,756 137,728
Occupancy
Average Occupancy 87.8% 87.3% 86.8% 87.6% 87.4% 86.5% 86.8% 87.0%
Ending Occupancy 87.7% 87.3% 86.8% 88.0% 88.0% 86.4% 87.1% 87.2%
Leased Space 89.5% 88.2% 87.6% 89.0% 89.0% 88.7% 89.5% 90.8%
</TABLE>
- 11 -
<PAGE>
Because the seasonality of sales contrasts with the generally fixed nature of
minimum rents and recoveries, mall tenant occupancy costs (the sum of minimum
rents, percentage rents and expense recoveries) relative to sales are
considerably higher in the first three quarters than they are in the fourth
quarter. The following table summarizes occupancy costs, excluding utilities,
for mall tenants as a percentage of sales for 1996 and the first three quarters
of 1997:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th 1st 2nd 3rd
Quarter Quarter Quarter Quarter Total Quarter Quarter Quarter
1996 1996 1996 1996 1996 1997 1997 1997
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Minimum rents 12.3% 11.7% 11.7% 7.6% 10.4% 12.6% 11.8% 11.3%
Percentage rents 0.3 0.3 0.3 0.3 0.3 0.2 0.3 0.3
Expense recoveries 5.6 5.0 4.6 3.5 4.5 5.2 5.1 4.7
---- ---- ---- ---- ---- ---- ---- ----
Mall tenant occupancy
costs 18.2% 17.0% 16.6% 11.4% 15.2% 18.0% 17.2% 16.3%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
Rental Rates
Average base rent per square foot for all mall tenants at the 18 Centers owned
and open for at least five years was $38.62 for the twelve months ended
September 30, 1997, compared to $37.59 for the twelve months ended September 30,
1996.
As leases have expired in the Taubman Shopping Centers, TRG has generally been
able to rent the available space, either to the existing tenant or a new tenant,
at rental rates that are higher than those of the expired leases. In a period of
increasing sales, rents on new leases will tend to rise as tenants' expectations
of future growth become more optimistic. In periods of slower growth or
declining sales, rents on new leases will grow more slowly or will decline for
the opposite reason. However, Center revenues nevertheless increase as older
leases roll over or are terminated early and replaced with new leases negotiated
at current rental rates that are usually higher than the average rates for
existing leases.
The annual spread between average annualized base rent of stores opening and
closing, excluding renewals, has ranged between six and eleven dollars per
square foot during the past five years. TRG anticipates that the spread between
opening and closing rents for the 1997 fiscal year will narrow significantly
from the nine dollars per square foot achieved in 1996. Average closing rents in
1997 are expected to be higher than in 1996, and the opening of a certain large
store in the fourth quarter will have a negative effect on average opening
rents.
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 1997 to the Three
and Nine Months Ended September 30, 1996
1997 Transactions
In July 1997, The Mall at Tuttle Crossing (Tuttle Crossing) opened in
Columbus, Ohio. TRG is leasing the land and mall buildings from Tuttle Holding
Co., which owns the land on which the Center is located. Beginning with the
Center's opening, TRG will make annual minimum lease payments of $4.4 million
for ninety years. Substantially all of each payment in the first ten years of
operation will be recognized as interest expense. TRG will also pay additional
rent based on achieved levels of net operating income, a measure of operating
performance before rent payments, as defined in the agreement (NOI); 100% of the
portion of NOI which is over $11.6 million but less than or equal to $14.4
million, 30% of the portion of NOI between $14.4 million and $18.3 million, and
50% of the portion of NOI over $18.3 million. TRG estimates this additional
rent, which will be recognized as other operating expense, will approximate $2
million to $3 million annually beginning in 1999. Tuttle Crossing cost
approximately $115 million, including capital lease assets of $55 million.
- 12 -
<PAGE>
In September 1997, TRG acquired the Regency Square shopping center, located in
Richmond Virginia, for $123.9 million. TRG borrowed under its existing
commercial paper facility and an existing revolving credit facility to fund the
purchase price. The acquisition is expected to be moderately accretive to
Distributable Cash Flow and Funds from Operations and immaterial to net income
in 1997 (see Liquidity and Capital Resources - Distributions for definitions of
Distributable Cash Flow and Funds from Operations).
In October 1997, TRG's managing general partner, Taubman Centers, Inc. (TCO)
used the $200 million proceeds of its offering of 8.30% Series A Cumulative
Redeemable Preferred Stock (Series A Preferred Stock) to acquire a Series A
Preferred Equity interest in TRG that will entitle TCO to distributions (in the
form of guaranteed payments) in amounts equal to the dividends payable on TCO's
Series A Preferred Stock. TRG bore all expenses of the offering, which will be
accounted for as a reduction of the proceeds from the Series A Preferred Equity.
TRG used the net proceeds to pay down floating rate debt under TRG's existing
revolving credit and commercial paper facilities, which were used to fund the
acquisition of Regency Square in September 1997.
See also Liquidity and Capital Resources - Capital Spending for discussions of
expansions at Westfarms and Biltmore.
1996 Transactions
During 1996, TRG completed the following acquisitions: Paseo Nuevo in June;
the remaining 75% interest in Fairlane Town Center (Fairlane) previously held by
a Joint Venture Partner in July; and La Cumbre Plaza (La Cumbre) in December.
Also during 1996, TRG issued new units of partnership interest to the former
Joint Venture Partner of Fairlane in connection with TRG's acquisition of
Fairlane, and to TCO in connection with an offering of TCO's common stock and
the exercise of incentive options. The net proceeds from the issuances were used
to repay short term borrowings and to acquire La Cumbre.
In November 1996, TRG entered into an agreement to lease Memorial City Mall
(Memorial City) while TRG investigates the redevelopment opportunities of the
center (See Liquidity and Capital Resources -- Capital Spending). As a
development project, Memorial City has been excluded from all operating
statistics in this report, and Memorial City's results of operations have been
presented as a net line item in the following tabular presentations of TRG's
results of operations for the third quarter and first nine months of 1997
compared to 1996.
Occupancy and Mall Tenant Sales
The average occupancy rate in the Taubman Shopping Centers was 87.0% for the
three months ended September 30, 1997 compared to 86.8% for the comparable
period in 1996. For the nine months ended September 30, 1997 average occupancy
was 86.8% compared to 87.3% for the same period in 1996. The ending occupancy
rate for the Taubman Shopping Centers at September 30, 1997 was 87.2% versus
86.8% at the same date in 1996. Leased space at September 30, 1997 was 90.8%
compared to 87.6% at the same date in 1996.
- 13 -
<PAGE>
Total sales for Taubman Shopping Center mall tenants in the three months ended
September 30, 1997 were $692.5 million, a 10.3% increase from $627.8 million in
the third quarter of 1996. Tenant sales increased 4.7% to $1.92 billion for the
nine months ended September 30, 1997 from $1.84 billion for the comparable
period in 1996. Mall tenant sales per square foot increased 3.1% and 1.3%,
respectively, in the three and nine months ended September 30, 1997 over the
compared periods in 1996. Mall tenant sales for Centers owned and open for all
of the first nine months of 1997 and 1996 (which excludes Paseo Nuevo, La
Cumbre, Regency Square and Tuttle Crossing) were $635.3 million and $1.8 billion
in the third quarter and the first nine months of 1997, a 2.8% increase and a
0.5% decrease, respectively, from the comparable periods of 1996. Sales
statistics for the first nine months of 1997 were negatively affected by new
competition near certain centers.
- 14 -
<PAGE>
Comparison of the Three Months Ended September 30, 1997 to the Three Months
Ended September 30, 1996
The following table sets forth operating results for TRG's Managed Businesses
for the three months ended September 30, 1996 and September 30, 1997, showing
the results of the Consolidated Businesses and Joint Ventures:
<TABLE>
<CAPTION>
Three Months Ended September 30, 1996 Three Months Ended September 30, 1997
----------------------------------------- ------------------------------------------
TRG TOTAL: TRG TOTAL:
CONSOLIDATED JOINT MANAGED CONSOLIDATED JOINT MANAGED
BUSINESSES VENTURES(1) BUSINESSES BUSINESSES(2) VENTURES(1) BUSINESSES
----------------------------------------- ------------------------------------------
(in millions of dollars) (in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Minimum rents 38.9 37.4 76.3 43.2 38.2 81.4
Percentage rents 1.3 0.9 2.2 1.8 0.9 2.6
Expense recoveries 21.2 21.6 42.8 23.8 21.8 45.6
Other 4.9 3.7 8.6 6.5 1.7 8.2
----- ----- ----- ----- ----- -----
Total revenues 66.3 63.7 130.0 75.2 62.5 137.7
OPERATING COSTS:
Recoverable expenses 18.5 18.9 37.4 20.1 18.8 38.9
Other operating 6.2 2.3 8.6 6.0 2.4 8.5
Management, leasing and
development 1.0 1.0 1.3 1.3
General and administrative 5.1 5.1 6.6 6.6
Interest expense 18.4 12.8 31.2 19.4 13.7 33.1
Depreciation and amortization 9.4 6.2 15.6 11.0 6.0 17.0
----- ----- ----- ----- ----- -----
Total operating costs 58.7 40.2 99.0 64.3 41.0 105.3
Net results of Memorial City (2) (0.1) (0.1)
----- ----- ----- ----- ----- -----
7.6 23.4 31.0 10.8 21.5 32.4
===== ===== ===== =====
Equity in net income of Joint Ventures 13.4 12.2
----- -----
Income before extraordinary item 20.9 23.0
Extraordinary item (1.3)
----- -----
NET INCOME 19.6 23.0
===== =====
SUPPLEMENTAL INFORMATION (3)
EBITDA contribution 35.4 23.2 58.6 41.3 23.2 64.5
TRG's Beneficial Interest Expense (18.4) (6.6) (25.0) (19.4) (7.5) (26.9)
Non-real estate depreciation (0.5) (0.5) (0.5) (0.5)
----- ----- ----- ----- ----- -----
Distributable Cash Flow contribution 16.5 16.6 33.1 21.4 15.7 37.1
===== ===== ===== ===== ====== =====
(1) With the exception of the Supplemental Information, amounts represent 100%
of Joint Ventures. Amounts are net of intercompany profits.
(2) The results of operations of Memorial City are presented net in this table.
TRG expects that Memorial City's net operating income will approximate the
ground rent payable under the lease for the immediate future.
(3) EBITDA, TRG's Beneficial Interest Expense and Distributable Cash Flow are
defined and discussed in Liquidity and Capital Resources - Distributions.
(4) Amounts in the table may not add due to rounding.
(5) Certain 1996 amounts have been reclassified to conform to 1997
classifications.
</TABLE>
- 15 -
<PAGE>
TRG --Consolidated Businesses
- -----------------------------
Total revenues for the three months ended September 30, 1997 were $75.2
million, an $8.9 million, or 13.4%, increase over the comparable period in 1996.
Minimum rents increased $4.3 million, of which $3.8 million was caused by Tuttle
Crossing and the Regency Square and La Cumbre acquisitions. Minimum rents also
increased due to tenant rollovers. Expense recoveries increased primarily due to
Tuttle Crossing and the acquired Centers. Other revenue increased primarily due
to an increase in lease cancellation revenue and a gain on the sale of
peripheral property.
Total operating costs increased $5.6 million, or 9.5%, to $64.3 million.
Recoverable and depreciation and amortization expenses increased primarily due
to Tuttle Crossing, Regency Square and La Cumbre. General and administrative
expense increased by $1.5 million primarily due to increases in professional
fees, compensation (including the continuing phase-in of the long-term
compensation plan), and relocation charges. Interest expense increased due to an
increase in debt used to finance Tuttle Crossing, the acquisitions of Regency
Square and La Cumbre, and capital expenditures at other Consolidated Businesses,
partially offset by a decrease in debt paid down with the proceeds from the
December 1996 equity issuance (see - 1996 Transactions) and an increase in
capitalized interest.
Revenues and expenses as presented in the preceding table differ from the
amounts shown in TRG's consolidated statement of operations by the amounts
representing Memorial City's revenues and expenses, which are presented in the
preceding table as a net amount.
Joint Ventures
- --------------
Total revenues for the three months ended September 30, 1997 were $62.5
million, a $1.2 million, or 1.9%, decrease from the comparable period of 1996,
of which $1.3 million was caused by the change of Fairlane from a Joint Venture
to a Consolidated Business offset by increases at other Centers. The increase in
minimum rents was primarily due to the expansion at Westfarms, offset by the
decrease due to Fairlane. Other revenue decreased by $2.0 million primarily due
to a decrease in lease cancellation revenue.
Total operating costs increased by $0.8 million, or 2.0%, to $41.0 million for
the three months ended September 30, 1997. Interest expense increased $0.9
million primarily due to an increase in debt used to finance capital
expenditures, including the Westfarms expansion, partially offset by an increase
in capitalized interest. Operating costs as presented in the preceding table
differ from the amounts shown in the combined, summarized financial statements
of the unconsolidated Joint Ventures (Note 4 to TRG's financial statements) by
the amount of intercompany profit.
As a result of the foregoing, net income of the Joint Ventures decreased by
$1.9 million, or 8.1%, to $21.5 million. TRG's equity in net income of the Joint
Ventures was $12.2 million, a 9.0% decrease from the comparable period in 1996.
Net Income
- ----------
As a result of the foregoing, TRG's income before extraordinary item increased
$2.1 million, or 10.0%, to $23.0 million for the three months ended September
30, 1997. In the third quarter of 1996, TRG recognized a $1.3 million
extraordinary charge related to the prepayment of Fairlane's debt. Net income
for the third quarter of 1997 was $23.0 million, a 17.3% increase from the
comparable period in 1996.
- 16 -
<PAGE>
Comparison of the Nine Months Ended September 30, 1997 to the Nine Months Ended
September 30, 1996
The following table sets forth operating results for TRG's Managed Businesses
for the nine months ended September 30, 1996 and September 30, 1997, showing the
results of the Consolidated Businesses and Joint Ventures:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996 Nine Months Ended September 30, 1997
----------------------------------------- ------------------------------------------
TRG TOTAL: TRG TOTAL:
CONSOLIDATED JOINT MANAGED CONSOLIDATED JOINT MANAGED
BUSINESSES VENTURES(1) BUSINESSES BUSINESSES(2) VENTURES(1) BUSINESSES
----------------------------------------- ------------------------------------------
(in millions of dollars) (in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Minimum rents 108.4 119.0 227.4 124.5 112.9 237.3
Percentage rents 3.8 2.5 6.2 4.7 2.0 6.7
Expense recoveries 59.5 73.0 132.5 68.5 64.6 133.0
Other 14.6 7.9 22.5 17.7 8.3 26.1
----- ----- ----- ----- ----- -----
Total revenues 186.3 202.4 388.7 215.3 187.8 403.2
OPERATING COSTS:
Recoverable expenses 49.5 62.9 112.4 57.4 55.3 112.7
Other operating 17.8 10.1 28.0 20.3 8.5 28.8
Management, leasing and
development 3.6 3.6 3.6 3.6
General and administrative 15.4 15.4 18.7 18.7
Interest expense 52.7 40.3 93.0 54.0 38.9 92.9
Depreciation and amortization 26.1 17.6 43.7 31.2 16.3 47.5
----- ----- ----- ----- ----- -----
Total operating costs 165.2 130.9 296.1 185.1 118.9 304.1
Net results of Memorial City (2) (0.3) (0.3)
----- ----- ----- ----- ----- -----
21.1 71.4 92.6 29.9 68.9 98.8
===== ===== ===== =====
Equity in net income of Joint Ventures 39.2 38.9
----- -----
Income before extraordinary item 60.3 68.8
Extraordinary item (1.3)
----- -----
NET INCOME 59.0 68.8
===== =====
SUPPLEMENTAL INFORMATION (3)
EBITDA contribution 99.9 68.7 168.6 115.3 68.5 183.8
TRG's Beneficial Interest Expense (52.7) (20.6) (73.3) (54.0) (20.7) (74.7)
Non-real estate depreciation (1.4) (1.4) (1.6) (1.6)
----- ----- ----- ----- ----- -----
Distributable Cash Flow contribution 45.8 48.1 93.9 59.7 47.8 107.5
===== ===== ===== ===== ===== =====
(1) With the exception of the Supplemental Information, amounts represent 100%
of Joint Ventures. Amounts are net of intercompany profits.
(2) The results of operations of Memorial City are presented net in this table.
TRG expects that Memorial City's net operating income will approximate the
ground rent payable under the lease for the immediate future.
(3) EBITDA, TRG's Beneficial Interest Expense and Distributable Cash Flow
are defined and discussed in Liquidity and Capital Resources - Distributions.
(4) Amounts in the table may not add due to rounding.
(5) Certain 1996 amounts have been reclassified to conform to 1997
classifications.
</TABLE>
- 17 -
<PAGE>
TRG --Consolidated Businesses
- -----------------------------
Total revenues for the nine months ended September 30, 1997 were $215.3
million, a $29.0 million or 15.6% increase over the comparable period in 1996.
Minimum rents increased $16.1 million, of which $14.5 million was caused by the
Fairlane, Paseo Nuevo, La Cumbre and Regency Square acquisitions and Tuttle
Crossing. The results of Fairlane have been consolidated in TRG's results
subsequent to the acquisition date in July 1996 (prior to that date Fairlane was
accounted for under the equity method as a Joint Venture). Minimum rents also
increased due to tenant rollovers. The increase in expense recoveries was
primarily due to the acquired Centers and Tuttle Crossing, offset by decreases
at certain other Centers. Other revenue increased $3.1 million primarily due to
an insurance recovery and a litigation settlement and an increase in gains on
sales of peripheral properties.
Total operating costs increased $19.9 million, or 12.0%, to $185.1 million.
Recoverable, other operating, and depreciation and amortization expenses
increased primarily due to the Fairlane, Paseo Nuevo, and La Cumbre acquisitions
and Tuttle Crossing. General and administrative expense increased by $3.3
million primarily due to increases in compensation (including the continuing
phase-in of the long-term compensation plan), recruiter fees and relocation
charges, travel, and training. Interest expense increased due to an increase in
debt used to finance Tuttle Crossing, the acquisitions of Regency Square and La
Cumbre, and capital expenditures at other Consolidated Businesses, partially
offset by a decrease in debt paid down with the proceeds from the December 1996
equity issuance (see - 1996 Transactions), and an increase in capitalized
interest.
Revenues and expenses as presented in the preceding table differ from the
amounts shown in TRG's consolidated statement of operations by the amounts
representing Memorial City's revenues and expenses, which are presented in the
preceding table as a net amount.
Joint Ventures
- --------------
Total revenues for the nine months ended September 30, 1997 were $187.8
million, a $14.6 million, or 7.2%, decrease from the comparable period of 1996,
representing a $15.0 million decrease caused by the change of Fairlane from a
Joint Venture to a Consolidated Business, offset by increases at other Centers.
The decrease in minimum rents was primarily due to Fairlane, offset by increases
at other Centers. The decrease in expense recoveries was due to Fairlane and a
decrease in recoverable expenses. Other revenue increased by $0.4 million
primarily due to gains on peripheral land sales, offset by a decrease in
interest income and lease cancellation revenue.
Total operating costs decreased by $12.0 million, or 9.2%, to $118.9 million
for the nine months ended September 30, 1997 including a $10.1 million decrease
due to Fairlane. Recoverable expenses decreased $7.6 million primarily due to
Fairlane and decreases in utilities. Other operating costs decreased primarily
due to Fairlane and a decrease in bad debt expense. Interest expense decreased
$1.4 million primarily due to a decrease in debt related to Fairlane and an
increase in capitalized interest, partially offset by an increase in debt used
to finance capital expenditures. Operating costs as presented in the preceding
table differ from the amounts shown in the combined, summarized financial
statements of the unconsolidated Joint Ventures (Note 4 to TRG's financial
statements) by the amount of intercompany profit.
As a result of the foregoing, net income of the Joint Ventures decreased by
$2.5 million, or 3.5%, to $68.9 million. TRG's equity in net income of the Joint
Ventures was $38.9 million, a 0.8% decrease from the comparable period in 1996.
- 18 -
<PAGE>
Net Income
- ----------
As a result of the foregoing, income before extraordinary item increased by
$8.5 million, or 14.1%, to $68.8 million for the nine months ended September 30,
1997. In the third quarter of 1996, TRG recognized a $1.3 million extraordinary
charge related to the prepayment of Fairlane's debt. Net income for the nine
months ended September 30, 1997 was $68.8 million, a 16.6% increase from the
comparable period in 1996.
- 19 -
<PAGE>
Liquidity and Capital Resources
As of September 30, 1997, TRG had a cash balance of $1.2 million. In March
1997, TRG completed the renegotiation of the terms of its unsecured revolving
credit facility available for general partnership purposes. The new terms
increased the facility to $300 million from $200 million, reduced the current
contractual interest rate by 60 basis points to LIBOR plus 90 basis points and
extended the maturity until March 2000. Included in the credit facility is a
competitive bid option program, which allows TRG to hold auctions among the
banks participating in the facility for short term borrowings of up to $150
million. Borrowings under this facility at September 30, 1997 were $110 million.
TRG also has available an unsecured bank line of credit of up to $30 million
with borrowings of $5.3 million at September 30, 1997. This line expires in
August 1998. TRG also has available a secured commercial paper facility of up to
$75 million, all of which had been issued at September 30, 1997. Commercial
paper is generally sold with a 30 day maturity. This facility is supported by a
line of credit facility, which is renewable quarterly for a 12 month period.
Proceeds from short term borrowings provided $189.5 million of funding for the
first nine months of 1997 (including $123.9 million for the acquisition of
Regency Square in September 1997) compared to $121.3 million in 1996 (including
$103.6 million for the acquisitions of Paseo Nuevo in June 1996 and of interests
in Fairlane Town Center in July 1996). Proceeds in both 1997 and 1996 were also
used to fund capital expenditures for the Consolidated Businesses and
contributions to Joint Ventures for construction costs.
TRG has a medium-term note program under TRG's $500 million shelf registration
statement. During July 1997, TRG issued $55 million of unsecured 10-year notes
at a coupon rate of 7%. The net proceeds were used to pay down floating rate
debt under TRG's revolving credit facilities. TRG issued $154 million of notes
in the first nine months of 1996. Including the issuance in July 1997, TRG has
issued a total of $342 million of notes since the program's inception in 1995.
In January 1997, Arizona Mills, L.L.C. closed on a secured $145 million
construction facility maturing in 2002. The loan bears interest at one month
LIBOR plus 1.3%. The loan is hedged until maturity at a one month LIBOR cap rate
of 9.5%. The payment of the principal and interest is guaranteed by each of the
owners of Arizona Mills, L.L.C. to the extent of its respective ownership
percentage. The loan agreement provides for the reduction of the amount
guaranteed as certain center performance and valuation criteria are met.
Borrowings on the facility at September 30, 1997 were $76.5 million. TRG owns a
37% interest in Arizona Mills, L.L.C.
At September 30, 1997, TRG's debt and its beneficial interest in the debt of
its Joint Ventures (excluding $58.9 million of capital lease obligations)
totaled $1,633.3 million. As shown in the following table, $75.3 million of this
debt was floating rate debt that remained unhedged at September 30, 1997. This
debt was paid down in October with the net proceeds of the $200 million
preferred equity issuance (Results of Operations -- 1997 Transactions). Interest
rates shown do not include amortization of debt issuance costs and interest rate
hedging costs. These items are reported as interest expense in TRG's results of
operations. In the aggregate, these costs accounted for 0.37% of the effective
rate of interest on TRG's beneficial interest in debt at September 30, 1997.
Included in TRG's beneficial interest in debt at September 30, 1997 is debt used
to fund development and expansion costs. TRG's beneficial interest in assets on
which interest is being capitalized totaled $170.1 million as of September 30,
1997. TRG's beneficial interest in capitalized interest was $3.5 million and
$10.6 million for the three and nine months ended September 30, 1997,
respectively.
- 20 -
<PAGE>
Beneficial Interest in Debt
------------------------------------------------
Amount Interest LIBOR Frequency LIBOR
(In millions Rate at Cap of Rate at
of dollars) 9/30/97 Rate Resets 9/30/97
---------- -------- ---- ------ --------
Total beneficial interest
in fixed rate debt 1,166.9(1) 7.53%(2)
Floating rate debt hedged
via interest rate caps:
Through January 1998 100.0 6.26(2) 6.50 Monthly 5.66%
Through January 1998 65.0(3) 6.41 6.50 Monthly 5.66
Through July 1998 65.0 6.26(2) 8.35 Monthly 5.66
Through October 1998 39.3 6.25 6.00 Three Months 5.78
Through October 2001 25.0 6.11 8.55 Monthly 5.66
Through January 2002 53.4 6.63(2) 9.50 Monthly 5.66
Through July 2002 43.4 6.72(2) 6.50 Monthly 5.66
Other floating rate debt 75.3 6.26(2)
-------
Total beneficial interest
in debt 1,633.3 7.20(2)
=======
(1) Includes TRG's $100 million floating rate notes due in November 1997, which
were swapped to a fixed rate of 6.15% until maturity. The interest rate on
the refinancing of this debt is hedged via an interest rate cap for the
period November 1997 to December 1998 at a three month LIBOR cap rate of
6.5%. The notes were repaid in November 1997 with short term credit
facilities.
(2) Denotes weighted average interest rate.
(3) This debt is additionally hedged via an interest rate cap for the period
February 1998 through July 1999 at a one month LIBOR cap rate of 7%.
In October 1997, TCO used the $200 million proceeds of its offering of Series
A Preferred Stock to acquire a Series A Preferred Equity interest in TRG that
will entitle TCO to distributions (in the form of guaranteed payments) in
amounts equal to the dividends payable on TCO's Series A Preferred Stock. TRG
bore all expenses of the offering, which will be accounted for as a reduction of
the proceeds from the Series A Preferred Equity. TRG used the net proceeds to
pay down floating rate debt under TRG's existing revolving credit and commercial
paper facilities, which were used to fund the acquisition of Regency Square in
September 1997.
Also in October 1997, TRG closed on a three year $150 million construction
facility for MacArthur Center, which is owned by a consolidated 70% owned
venture. The loan bears interest at one month LIBOR plus 1.2%. The payment of
the principal and interest is guaranteed by TRG. The loan agreement provides for
the reduction of the amount guaranteed as certain center performance and
valuation criteria are met.
TRG's loan agreements and indenture contain various restrictive covenants,
including limitations on the amount of secured and unsecured debt and minimum
debt service coverage ratios, the latter being the most restrictive. TRG is in
compliance with all of such covenants.
- 21 -
<PAGE>
Distributions
A principal factor considered by TRG in deciding upon distributions to
partners is an amount, which TRG defines as Distributable Cash Flow, equal to
EBITDA less TRG's Beneficial Interest Expense and non-real estate depreciation
and amortization. This measure of performance is influenced not only by
operations but also by capital structure. EBITDA is defined as TRG's beneficial
interest in revenues, less operating costs before interest, depreciation and
amortization, meaning TRG's pro rata share of this result for each of the
Managed Businesses, after recording appropriate intercompany eliminations. TRG's
Beneficial Interest Expense is defined as TRG's pro rata share of the interest
expense on the debt of the Managed Businesses. EBITDA and Distributable Cash
Flow do not represent cash flows from operations, as defined by generally
accepted accounting principles, and should not be considered to be an
alternative to net income as an indicator of operating performance or to cash
flows from operations as a measure of liquidity.
The following table summarizes TRG's Distributable Cash Flow three months
ended September 30, 1996 and 1997:
<TABLE>
<CAPTION>
Three Months Ended September 30, 1996 Three Months Ended September 30, 1997
----------------------------------------- -----------------------------------------
TRG TRG
CONSOLIDATED JOINT CONSOLIDATED JOINT
BUSINESSES VENTURES(1) TOTAL: BUSINESSES VENTURES(1) TOTAL:
----------------------------------------- -----------------------------------------
(in millions of dollars) (in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
TRG's Net Income(2) 19.6 23.0
Extraordinary Item 1.3
Depreciation and Amortization(3)(4) 12.6 14.5
TRG's Beneficial Interest Expense(3) 25.0 26.9
----- -----
EBITDA 35.4 23.2 58.6 41.3 23.2 64.5
TRG's Beneficial Interest Expense(3) (18.4) (6.6) (25.0) (19.4) (7.5) (26.9)
Non-real estate depreciation (0.5) (0.5) (0.5) (0.5)
----- ----- ----- ----- ----- -----
Distributable Cash Flow 16.5 16.6 33.1 21.4 15.7 37.1
===== ===== ===== ===== ===== =====
(1) Amounts represent TRG's beneficial interest in the operations of its Joint
Ventures.
(2) Includes TRG's share of a gain on a peripheral land sale of $0.6 million for
the three months ended September 30, 1997. There were no land sales in the
three months ended September 30, 1996.
(3) Amounts represent TRG's beneficial interest in depreciation and amortization
and interest expense.
(4) Includes $0.8 million and $1.0 million of mall tenant allowance amortization
in the third quarter of 1996 and 1997, respectively.
(5) Amounts may not add due to rounding.
</TABLE>
- 22 -
<PAGE>
The following table summarizes TRG's Distributable Cash Flow for the nine
months ended September 30, 1996 and 1997:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996 Nine Months Ended September 30, 1997
----------------------------------------- -----------------------------------------
TRG TRG
CONSOLIDATED JOINT CONSOLIDATED JOINT
BUSINESSES VENTURES(1) TOTAL: BUSINESSES VENTURES(1) TOTAL:
----------------------------------------- -----------------------------------------
(in millions of dollars) (in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
TRG's Net Income(2) 59.0 68.8
Extraordinary Item 1.3
Depreciation and Amortization(3)(4) 35.0 40.3
TRG's Beneficial Interest Expense(3) 73.3 74.7
----- -----
EBITDA 99.9 68.7 168.6 115.3 68.5 183.8
TRG's Beneficial Interest Expense(3) (52.7) (20.6) (73.3) (54.0) (20.7) (74.7)
Non-real estate depreciation (1.4) (1.4) (1.6) (1.6)
----- ----- ----- ----- ----- -----
Distributable Cash Flow 45.8 48.1 93.9 59.7 47.8 107.5
===== ===== ===== ===== ===== =====
(1) Amounts represent TRG's beneficial interest in the operations of its Joint
Ventures.
(2) Includes TRG's share of gains on peripheral land sales of $0.3 million and
$2.5 million for the nine months ended September 30, 1996 and 1997,
respectively.
(3) Amounts represent TRG's beneficial interest in depreciation and amortization
and interest expense.
(4) Includes $2.4 million and $2.8 million of mall tenant allowance amortization
for the nine months ended September 30, 1996 and 1997, respectively.
(5) Amounts may not add due to rounding.
</TABLE>
During the third quarter of 1997, EBITDA and Distributable Cash Flow were
$64.5 million and $37.1 million, compared to $58.6 million and $33.1 million for
the same period in 1996. TRG distributed $32.1 million to its partners in the
third quarter of 1997, compared to $30.0 million in the same period of 1996.
During the first nine months of 1997, EBITDA and Distributable Cash Flow were
$183.8 million and $107.5 million, compared to $168.6 million and $93.9 million
for the same period in 1996. TRG distributed $96.1 million and $88.1 million to
its partners in the nine month periods ended September 30, 1997 and 1996,
respectively.
The Partnership Committee of TRG makes an annual determination of appropriate
distributions for each year. The determination is based on anticipated
Distributable Cash Flow available after guaranteed payments to TCO on TRG's
Series A Preferred Equity, as well as financing considerations and such other
factors as the Partnership Committee considers appropriate. Further, the
Partnership Committee has decided that the growth in distributions will be less
than the growth in Distributable Cash Flow for the immediate future.
Except under unusual circumstances, TRG's practice is to distribute equal
monthly installments of the determined amount of distributions throughout the
year. Due to seasonality and the fact that cash available to TRG for
distributions may be more or less than net cash provided from operating
activities plus distributions from Joint Ventures during the year, TRG may
borrow from unused credit facilities (described above) to enable it to
distribute the amount decided upon by TRG's Partnership Committee.
Distributions by each Joint Venture may be made only in accordance with the
terms of its partnership agreement. TRG acts as the managing partner in each
case and, in general, has the right to determine the amount of cash available
for distribution from the Joint Venture. In general, the provisions of these
agreements require the distribution of all available cash (as defined in each
partnership agreement), but most do not allow borrowing to finance distributions
without approval of the Joint Venture Partner.
As a result, distribution policies of many Joint Ventures will not parallel
those of TRG. While TRG may not, therefore, receive as much in distributions
from each Joint Venture as it intends to distribute with respect to that Joint
Venture, TRG does not believe this will impede its intended distribution policy
because of TRG's overall access to liquid resources, including borrowing
capacity.
- 23 -
<PAGE>
Any inability of TRG or its Joint Ventures to secure financing as required to
fund maturing debts, capital expenditures and changes in working capital,
including development activities and expansions, may require the utilization of
cash to satisfy such obligations, thereby possibly reducing distributions to
partners of TRG.
In addition, if the GM Trusts exercise their rights under the Cash Tender
Agreement (see Liquidity and Capital Resources -- Cash Tender Agreement below),
TRG will be required to pay the GM Trusts $10.9 million and may borrow to
finance such expenditures.
Capital Spending
Capital spending for routine maintenance of the Taubman Shopping Centers is
generally recovered from tenants. Excluding acquisitions, planned capital
spending by the Managed Businesses not recovered from tenants for 1997 is
summarized in the following table:
1997
-----------------------------------------------------
TRG's Share of
Consolidated Joint Consolidated Businesses
Businesses Ventures(1) and Joint Ventures(1)(2)
-----------------------------------------------------
(in millions of dollars)
Development, renovation,
and expansion 137.8(3) 168.8(4) 193.5
Mall tenant allowances 6.5 4.3 8.8
Pre-construction development
and other 12.4(5) 1.0 13.0
----- ----- -----
Total 156.7 174.1 215.3
===== ===== =====
(1) Costs are net of intercompany profits.
(2) Includes TRG's share of construction costs for Great Lakes Crossing (an 80%
owned consolidated joint venture) and MacArthur Center (a 70% owned
consolidated joint venture).
(3) Includes costs related to leasehold improvements at The Mall at Tuttle
Crossing; excludes capital lease assets. Also includes construction costs
for Great Lakes Crossing and MacArthur Center.
(4) Includes costs related to expansion projects at Westfarms and Cherry Creek.
Also includes construction costs for Arizona Mills.
(5) Includes the costs to evaluate the redevelopment of Memorial City and
required property expenditures under the terms of the lease.
An expansion at Westfarms includes approximately 135 thousand square feet of
mall GLA, which opened approximately 85% leased in August 1997, and Nordstrom as
an anchor which opened in September 1997. The expansion cost approximately $100
million. An expansion at Cherry Creek includes a newly constructed Lord & Taylor
store, which opened in November 1997, and the addition of 132 thousand square
feet of mall GLA, which will open in the fall of 1998. The expansion is expected
to cost approximately $50 million. TRG has a 79% and 50% ownership interest in
Westfarms and Cherry Creek, respectively.
At Biltmore, approximately 48 thousand square feet of new mall tenant space
located in the building vacated when Saks Fifth Avenue moved to the I. Magnin
site is completely leased and will be fully open in the fall of 1997. The
project is expected to cost approximately $6 million.
The Mall at Tuttle Crossing, a 980 thousand square foot Center in Columbus,
Ohio, opened substantially leased in July 1997. The Center is anchored by
Marshall Field's, Lazarus, JCPenney and Sears and cost approximately $115
million, including capital lease assets of $55 million.
Arizona Mills, an enclosed value super-regional mall in Tempe, Arizona, will
open in November 1997. The 1.2 million square foot value-oriented mall is
expected to open approximately 90% leased and to cost approximately $190
million. TRG has a 37% ownership interest in Arizona Mills.
In May 1997, TRG began construction on Great Lakes Crossing, an enclosed value
super-regional mall in Auburn Hills, Michigan, owned by a partnership in which
TRG has an 80% controlling interest. The 1.7 million square foot Center is
expected to have approximately 1.4 million square feet of GLA and is scheduled
to open in the fall of 1998. The cost of building this Center will approximate
$210 million.
- 24 -
<PAGE>
MacArthur Center, a new Center being developed by TRG in Norfolk, Virginia, is
expected to open in the spring of 1999. The Center is expected to open with 930
thousand square feet and will initially be anchored by Nordstrom and Dillard's.
This Center is owned by a joint venture in which TRG has a 70% controlling
interest and is projected to cost approximately $150 million.
In 1996, TRG entered into an agreement to lease Memorial City Mall, a 1.4
million square foot shopping center located in Houston, Texas. TRG has the
option to terminate the lease after the third full year by paying $2 million to
the lessor. TRG is using this option period to evaluate the redevelopment
opportunities of the Center. Under the terms of the lease, TRG has agreed to
invest a minimum of $3 million during the three year option period. If the
redevelopment proceeds, TRG is required to invest an additional $22 million in
property expenditures not recoverable from tenants during the first 10 years of
the lease term.
TRG's share of costs for development and expansion projects currently under
construction and scheduled to be completed in 1998 and 1999 is anticipated to be
as much as $190 million in 1998 and $45 million in 1999. TRG generally does not
provide estimates of capital expenditures on individual projects until the total
project cost has been approved and construction is underway or imminent.
TRG's estimates regarding capital expenditures presented above are
forward-looking statements and certain significant factors could cause the
actual results to differ materially, including but not limited to: 1) actual
results of negotiations with anchors, tenants and contractors; 2) changes in the
scope of projects; 3) cost overruns; 4) timing of expenditures; and 5) actual
time to complete projects.
Capital Resources
TRG believes that its net cash provided by operating activities, together with
distributions from the Joint Ventures, the unutilized portion of its credit
facilities and its ability to generate cash from the issuance of medium-term
notes under TRG's shelf registration statement, other securities offerings or
mortgage financings, assure adequate liquidity to conduct its operations in
accordance with its distribution and financing policies.
The financing of TRG is intended to maintain an investment grade credit rating
for TRG and (i) minimize, to the extent practical, secured indebtedness
encumbering TRG's wholly owned properties, (ii) mitigate TRG's exposure to
increases in floating interest rates, (iii) assure that the amount of debt
maturing in any future year will not pose a significant refinancing risk, (iv)
provide for additional capital and liquidity resources, and (v) maintain average
maturities for TRG's debt obligations of between five and ten years. TRG's
intent to continue to minimize secured indebtedness is dependent on actions
taken by credit rating agencies and market conditions.
TRG expects to finance its capital requirements, including development,
expansions and working capital, with available cash, borrowings under its lines
of credit and cash from future securities offerings under its medium-term note
program, other securities offerings, or mortgage financings. TRG's acquisition
activities are discretionary in nature, and will only be undertaken by TRG after
arranging adequate financing on terms that are consistent with TRG's financing
policies. TRG's Joint Ventures expect to finance development and expansion
spending with secured debt to the extent it is available.
- 25 -
<PAGE>
Cash Tender Agreement
A. Alfred Taubman and the GM Trusts each have the annual right to tender to
TCO units of partnership interest in TRG (provided that the aggregate value is
at least $50 million) and cause TCO to purchase the tendered interests at a
purchase price based on a market valuation of TCO on the trading date
immediately preceding the date of the tender (the Cash Tender Agreement). At A.
Alfred Taubman's election, his family, and Robert C. Larson and his family may
participate in tenders. The GM Trusts will be entitled to receive from TRG an
amount (not to exceed $10.9 million in the aggregate over the term of the
Partnership) equal to 5.5% of the amounts that TCO pays to the GM Trusts under
the Cash Tender Agreement.
TRG is not aware of any present intention of any partner to sell its interest
in TRG under the Cash Tender Agreement.
- 26 -
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
4 -- Form of The Amended and Restated Agreement of Limited
Partnership of The Taubman Realty Group Limited
Partnership, as amended through September 30, 1997
(incorporated by reference to Exhibit 4 (c) to the
Registrant's Post Effective Amendment No. 1 to Form S-3
Registration Statement No. 333-35433).
10 -- Amended and Restated Continuing Offer, dated as of
September 30, 1997.
12 -- Statement Re: Computation of Ratios of Earnings to Fixed
Charges.
27 -- Financial Data Schedule.
b) Current Reports on Form 8-K.
TRG filed a current report on Form 8-K dated July 17, 1997 to report
that TRG had reached an agreement to acquire for cash Regency Square
shopping center, which is located in Richmond Virginia.
TRG filed a current report on Form 8-K dated September 4, 1997 (the
"8-K"), to report the completion of TRG's acquisition of Regency
Center. The 8-K included the following financial statements and pro
forma information regarding the acquisition:
Independent Auditors' Report.
Regency Square, Historical Summary of Revenues and Direct Operating
Expenses for the Year Ended December 31, 1996.
The Taubman Realty Group Limited Partnership, Pro Forma Condensed
Consolidated Balance Sheet, June 30, 1997 (unaudited).
The Taubman Realty Group Limited Partnership, Pro Forma Condensed
Consolidated Statement of Operations, Year Ended December 31, 1996
(unaudited).
The Taubman Realty Group Limited Partnership, Pro Forma Condensed
Consolidated Statement of Operations, Six Months Ended June 30, 1997
(unaudited).
The Taubman Realty Group Limited Partnership, Statement of Estimated
Taxable Operating Results of Regency Square and Estimated Cash to be
Made Available by Operations of Regency Square for a Twelve Month
Period Ended June 30, 1997 (unaudited).
On July 10, 1997, TRG filed a current report on Form 8-K/A, dated
July 19, 1996 relating to the acquisition of interests in Fairlane
Town Center, for the sole purpose of filing exhibits.
- 27 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
Date: November 13, 1997 By: /s/ Lisa A. Payne
----------------------------
Lisa A. Payne
Executive Vice President and
Chief Financial Officer
- 28 -
<PAGE>
EXHIBIT INDEX
Exhibit
Number
4 -- Form of The Amended and Restated Agreement of Limited Partnership of
The Taubman Realty Group Limited Partnership, as amended through
September 30, 1997 (incorporated by reference to Exhibit 4 (c) to TCO's
Post - Effective Amendment No. 1 to Form S-3 Registration Statement No.
333-35433).
10 -- Amended and Restated Continuing Offer, dated as of September 30, 1997.
12 -- Statement Re: Computation of Ratios of Earnings to Fixed Charges.
27 -- Financial Data Schedule.
AMENDED AND RESTATED CONTINUING OFFER
For valuable consideration, the receipt and sufficiency of which Taubman
Centers, Inc., a Michigan corporation (the "Company"), acknowledges, effective
as of September 30, 1997, the Company hereby amends and restates in its entirety
the Company's offer (as amended and restated, this "Continuing Offer") to each
Initial Offeree (as defined below) and each Designated Offeree (as defined
below) to exchange any or all Partnership Interests (as defined below) or Rights
(as defined below) owned by each such person in exchange for shares of Common
Stock (as defined below) upon the terms and conditions set forth below. This
Continuing Offer supersedes a similar offer originally made November 30, 1992,
the Company having determined that this modification of the prior offer is not
adverse to the offerees of such prior offer.
1. Definitions.
In this Continuing Offer, whenever the context so indicates, the singular
or plural number, and the masculine, feminine, or neuter gender shall each be
deemed to include the other, the terms "he", "his," and "him" shall refer to an
Initial Offeree or a Designated Offeree, and the following terms shall have the
indicated meanings:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission under such Act, all as the same shall be in effect
at the relevant time.
"Actually" means, with respect to holding or owning Units of Partnership
Interest, those Units of Partnership Interest with respect to which the
referenced Person is (i) set forth on the books and records of TRG as the owner
thereof (the "Record Partner") or (ii) a designee of a Record Partner as
provided in Section 5.2(c) of the Partnership Agreement, in either case without
regard to Beneficial Ownership or Constructive Ownership.
"Beneficial Ownership" means ownership of shares of Capital Stock (or, for
purposes of the definitions of "Actually" and "Eligible Holder," Partnership
Interests) (i) by a Person who owns such shares of Capital Stock (or Partnership
Interests) in his own name or is treated as an owner of such shares of Capital
Stock (or Partnership Interests) constructively through the application of
Section 544 of the Code, as modified by Sections 856(h)(1)(B) and 856(h)(3)(A)
of the Code; or (ii) by a person who falls within the definition of "Beneficial
owner" under Section 776(4) of the Michigan Business Corporation Act. The terms
"Beneficial Owner", "Beneficially Owns" and "Beneficially Owned" shall have the
correlative meanings.
"Board of Directors" means the Board of Directors of the Company and any
Committee of the Board of Directors established pursuant to the Bylaws of the
Company with specific authority in respect of this Continuing Offer given to
such Committee.
"Business Day" means any Day on which the New York Stock Exchange is open
for trading.
"Capital Stock" means the Common Stock and the Preferred Stock, including
shares of Common Stock and Preferred Stock that have become Excess Stock.
1
<PAGE>
"Cash Tender Agreement" means the Amended and Restated Cash Tender
Agreement, dated as of September 30, 1997, among the Company and certain holders
of Partnership Interests.
"Code" means the Internal Revenue Code of 1986, as the same shall be in
effect at the relevant time.
"Common Stock" means the Common Stock of the Company, par value $.01 per
share.
"Company" means Taubman Centers, Inc., a Michigan corporation.
"Constructive Ownership" means ownership of shares of Capital Stock (or,
for purposes of the definitions of "Actually" and "Eligible Holder," Partnership
Interests) by a Person who owns such shares of Capital Stock (or Partnership
Interests) in his own name or would be treated as an owner of such shares of
Capital Stock (or Partnership Interests) constructively through the application
of Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The
terms "Constructive Owner", "Constructively Owns", and "Constructively Owned"
shall have the correlative meanings.
"Day" means each calendar day, including Saturdays, Sundays, and legal
holidays; however, if the Day on which a period of time for consent or approval
or other action ends is not a Business Day, such period shall end on the next
Business Day.
"Designated Offeree" means (i) each Person (other than an Initial Offeree)
who Actually holds Units of Partnership Interest, provided that the Company,
upon the request of said Person, designates said Person in writing as a
Designated Offeree and provided that said Person would be an Eligible Holder at
the time such person is so designated assuming this Continuing Offer were to
extend to such Units of Partnership Interest Actually held by said Person, or
(ii) each assignee of a Person described in (i) above in this definition of
Designated Offeree, but only if such assignee would be an Eligible Holder at the
time of such assignment assuming this Continuing Offer were to extend to the
Units of Partnership Interest acquired through such assignment.
"Determination" shall be as defined in Section 2 hereof.
"Eligible Assignee Units" means those Units of Partnership Interest
acquired and Actually held from time to time by Initial Offerees or Designated
Offerees provided that such Initial Offerees or Designated Offerees would be
Eligible Holders as of the time of such acquisition assuming this Continuing
Offer were to extend to the Units of Partnership Interest so acquired and
Actually held.
"Eligible Holder" means at the relevant time the holder (or if the holder
is not the owner for Federal income tax purposes, such owner) of Units of
Partnership Interest who if he were to exchange for shares of Common Stock
pursuant to this Continuing Offer each Unit of Partnership Interest that is both
(i) Beneficially Owned or Constructively Owned by him (including each Unit of
Partnership Interest that is subject to an Incentive Option or Rights Actually
held by him) and (ii) subject to this Continuing Offer, would not then
Beneficially Own
2
<PAGE>
or Constructively Own, or by reason of its Actually owning Units of Partnership
Interest would cause another Person to Beneficially Own or Constructively Own,
shares of Capital Stock in excess of the Ownership Limit, provided, however, if
such holder is a Look Through Entity, such Look Through Entity's Beneficial
Ownership or Constructive Ownership may exceed the Ownership Limit but in no
event may such Look Through Entity directly or indirectly (without taking into
account the ownership of Units of Partnership Interest) own in excess of 9.9% in
value of the outstanding shares of Capital Stock, provided further, however, the
Partnership Committee shall exempt a Look Through Entity from the requirements
of clause (ii) of this definition of Eligible Holder if (a) such Look Through
Entity is a bank chartered under the laws of the United States or any state of
the United States or is a United States branch of a foreign bank, and (b) TRG
has no reasonable reason to believe after the receipt of the written affirmation
and undertaking required to be provided by the definition of Look Through Entity
that such Look Through Entity would not be an Eligible Holder. In measuring the
Beneficial Ownership or Constructive Ownership for this purpose, the Excess
Stock Provisions shall be disregarded.
"Excess Stock" means shares of Common Stock and shares of Preferred Stock
that have been automatically converted to Excess Stock pursuant to the
provisions of Item (iii) of Subsection (d) of Section 2 of Article III of the
Company's Amended and Restated Articles of Incorporation, as amended.
"Excess Stock Provisions" means the provisions of Article III of the
Amended and Restated Articles of Incorporation of the Company, as amended,
relating to Excess Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the relevant time.
"HSR" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
"Incentive Option" means an option granted pursuant to the TRG Limited
Partnership 1992 Incentive Option Plan to acquire a Partnership Interest,
general and/or limited, or any future plan providing for the granting to
employees of options in respect of Partnership Interests.
"Initial Offeree" means (i) each Person who Actually holds Units of
Partnership Interest as of the date of this Continuing Offer, but only with
respect to (x) Units of Partnership Interest held Actually by such Person as of
the date of this Continuing Offer, provided such Person would be an Eligible
Holder on the date of this Continuing Offer with respect to such Units of
Partnership Interest Actually held by such Person assuming this Continuing Offer
were to extend to such Units of Partnership Interest, and (y) Eligible Assignee
Units, in either case provided that such Person is identified on Schedule A
hereto, (ii) each assignee of an Initial Offeree, but only if such assignee
would be an Eligible Holder at the time of such assignment assuming this
Continuing Offer were to extend to such Units of Partnership Interest so
assigned, provided, however, the Initial Offeree assigning such Units of
Partnership Interest shall have the right to provide in such assignment that
such assignee shall not be an Initial Offeree, (and, therefore, the Units of
Partnership Interest so assigned, while held by such assignee, shall not be
subject to this Continuing Offer), (iii) each Person who is, or hereafter
3
<PAGE>
becomes, a holder of an Incentive Option or Rights, but only if such person
would be an Eligible Holder at the time of becoming a holder of such Incentive
Option or Rights assuming this Continuing Offer were to extend to the Incentive
Option or Rights so acquired, (iv) each Person who hereafter becomes a holder of
Units of Partnership Interest pursuant to the exercise by such Person of an
Incentive Option, but only if such Person would be an Eligible Holder at the
time of such exercise assuming this Continuing Offer were to extend to the Units
of Partnership Interest acquired through such exercise, or (v) each assignee of
a holder of Units of Partnership Interest as of the date hereof, but only if
such assignee would be an Eligible Holder at the time of such assignment
assuming this Continuing Offer were to extend to the Units of Partnership
Interest acquired through such assignment.
"Letter of Transmittal" means the form of letter attached to this
Continuing Offer pursuant to which an Initial Offeree or a Designated Offeree
may tender his Partnership Interests or Rights in exchange for shares of Common
Stock.
"Look Through Entity" shall mean any Person that (i) is not an individual
or an organization described in Sections 401(a), 501(c)(17), or 509(a) of the
Code or a portion of a trust permanently set aside or to be used exclusively for
the purposes described in Section 642(c) of the Code or a corresponding
provision of a prior income tax law, and (ii) provides TRG, not less than ten
days prior to becoming a holder of Units of Partnership Interest, with (a) a
written affirmation and undertaking, subject only to such exceptions as are
acceptable to TRG in its sole discretion, that (w) it is not an organization
described in Sections 401(a), 501(c)(17) or 509(a) of the Code or a portion of a
trust permanently set aside or to be used exclusively for the purposes described
in Section 642(c) of the Code or a corresponding provision of a prior income tax
law, (x) assuming that this Continuing Offer were to extend to Units of
Partnership Interest held by such Person, after the application of the rules for
determining stock ownership, as set forth in Section 544(a) of the Code, as
modified by Sections 856(h)(1)(B) and 856(h)(3)(A) of the Code, no "individual"
would own, Beneficially or Constructively, more than the then-applicable
Ownership Limit, such ownership, solely for the purpose of this clause (x) (but
not for determining whether such "individual" is in compliance with the
Ownership Limit for any other purpose), to be determined by taking into account
only such "individual's" Beneficial and Constructive Ownership derived solely
from such Person, (y) based on such Person's actual knowledge, no such
"individual" would not qualify as an Eligible Holder, and (z) it does not
Constructively Own 10% or more of the equity of any tenant with respect to real
property from which the Company or TRG receives or accrues any rent from real
property, and (b) such other information regarding the Person that is relevant
to the Company's qualification to be taxed as a real estate investment trust as
defined in Section 856 of the Code as TRG may reasonably request.
"Offeree" means an Initial Offeree or a Designated Offeree.
"Ownership Limit" means the Ownership Limit as set forth in the Amended
and Restated Articles of Incorporation of the Company at the relevant time.
"Partnership Agreement" means The Amended and Restated Agreement of
Limited Partnership of The Taubman Realty Group Limited Partnership, dated
November 30, 1992, as amended by a First Amendment to The Amended and Restated
Agreement of Limited Partnership of The Taubman Realty Group Limited
Partnership, dated as of September 30,
4
<PAGE>
1997, as further amended from time to time.
"Partnership Committee" means the Partnership Committee and the Executive
Committee established for TRG pursuant to the Partnership Agreement.
"Partnership Interest" means an interest, as a Partner, in TRG, as such
terms are defined in the Partnership Agreement.
"Partnership Interest Certificate" means a certificate of TRG representing
one or more Units of Partnership Interest.
"Person" or "Persons" means an individual, a partnership (general or
limited), corporation, joint venture, business trust, cooperative, association,
or other form of business organization, whether or not regarded as a legal
entity under applicable law, a trust (inter vivos or testamentary), an estate of
a deceased, insane, or incompetent person, a quasi-governmental entity, a
government or any agency, authority, political subdivision, or other
instrumentality thereof, or any other entity.
"Preferred Stock" means the up to 50 million shares of preferred stock
that the Company may issue in one or more series having such rights,
preferences, and priorities as the Company's Board of Directors may determine
from time to time.
"Record Partner" is defined in the definition of Actually.
"Restricted Offeree" is defined in Section 3 of this Continuing Offer.
"Rights" means Incentive Options that have been exercised, provided that
all payments with respect to the exercise have been fully paid to TRG.
"Settlement Date" is defined in Section 3 of this Continuing Offer.
"Transfer Determination" has the same meaning as set forth in the
Partnership Agreement.
"TRG" means The Taubman Realty Group Limited Partnership, a Delaware
limited partnership.
"Units of Partnership Interest" means the units into which Partnership
Interests are divided.
2. Terms of this Continuing Offer.
Upon the terms and subject to the conditions of this Continuing Offer, the
Company will exchange shares of Common Stock for outstanding Partnership
Interests or Rights owned by an Initial Offeree or a Designated Offeree that are
properly tendered. This Continuing Offer may not be withdrawn, changed, or
modified by the Company, without the prior written consent of each Initial
Offeree and Designated Offeree, except that a change or modification that is for
the benefit of, or not adverse to the rights of, the Initial Offerees and
Designated
5
<PAGE>
Offerees may be made unilaterally by the Company. Notwithstanding the foregoing,
a change or modification that is only adverse to the rights of certain Initial
Offerees or Designated Offerees requires the prior written consent only of the
adversely affected Initial Offerees or Designated Offerees.
No tendering Initial Offeree or Designated Offeree will have any rights as
a shareholder of the Company until such time as that person becomes a holder of
record of shares of Common Stock.
3. Acceptance for Payment and Payment for Partnership Interests or Rights.
Upon the terms and subject to the conditions of this Continuing Offer, the
Company will purchase and pay for Partnership Interests or Rights properly
tendered at the rate of one share of Common Stock for each tendered Unit of
Partnership Interest (including each Unit of Partnership Interest in respect of
a properly tendered Right). Each Offeree tendering outstanding Partnership
Interests (but not Rights) shall pay to the Company on the Settlement Date
(defined below), in cash, an amount equal to the sum of (a) minus (b), where (a)
equals the number of tendered Units of Partnership Interest (excluding Units of
Partnership Interest in respect of tendered Rights) multiplied by the Company's
then-current per share quarterly dividend, and (b) equals the amount of
distributions (as determined by the Company) that the Company can reasonably
expect to receive from TRG under Section 5.2(a) of the Partnership Agreement
with respect to the tendered Units of Partnership Interest between the
Settlement Date and the next record date for the Company's quarterly dividend on
the Common Stock. The Company will purchase and pay for properly tendered
Partnership Interests or Rights on the date (the "Settlement Date") that is the
later of: (i) the expiration of three Business Days from the date that the
Company receives the tender of the Partnership Interests or Rights in proper
form and meeting all of the requirements of this Continuing Offer (or such
shorter period that is the then prevailing settlement period for trades on the
New York Stock Exchange), and (ii) the expiration or termination of the waiting
period applicable to each tender, if any, under the HSR. The Company agrees to
use its best efforts to obtain an early termination of the waiting period
applicable to each tender, if any, under HSR. Furthermore, each tender and the
issuance of Common Stock with respect thereto will be subject to any change in
securities or other applicable law imposing limits or conditions on such tender
or the issuance of Common Stock with respect to such tender. In all cases,
payment for the Partnership Interests or Rights tendered pursuant to this
Continuing Offer will be made only after timely receipt by the Company of the
Partnership Interest Certificate or a copy of the agreement evidencing the grant
of the Rights, together with evidence of exercise and payment with respect to
the exercise, a properly completed and duly executed Letter of Transmittal, and
any other documents required by the Letter of Transmittal.
Notwithstanding the foregoing, the maximum number of Units of Partnership
Interest that a person listed on Schedule B to this Continuing Offer (each, a
"Restricted Offeree") may tender under this Continuing Offer during any 90 day
period with respect to outstanding Partnership Interests Actually held or
Constructively or Beneficially Owned by such Offeree (but excluding from this
restriction all Units of Partnership Interest in respect of Incentive Options or
Rights Actually held by such Offeree) shall not exceed the number of shares of
Common Stock that such Offeree would be entitled to sell under Rule 144(e)(1)
under the Act, assuming that at the time of each sale during such 90 day period
such Restricted Offeree is
6
<PAGE>
an "affiliate" (as defined in Rule 144(a)(1)) of the Company.
Under no circumstances will interest be paid by the Company by reason of
any delay in making such issuance of shares of Common Stock as a result of the
conditions set forth in the preceding or following paragraph.
Except as provided below, the Company will use its best efforts to have
and maintain an effective registration statement under the Act so that the
Company's issuance of the shares of Common Stock under this Continuing Offer or
the resale of such shares by an Offeree who is not an "affiliate" (as defined in
Rule 144(a)(1) under the Securities Act) of the Company will be registered under
the Act; however, the Company shall not be required to maintain such an
effective registration statement for the use of the persons identified on
Schedule B to this Continuing Offer. Anything in this Continuing Offer to the
contrary notwithstanding, the Company shall not be required to accept any tender
or issue any Common Stock at any time if to do so would cause any violation of
the Act or the Exchange Act or any applicable blue sky or other state securities
or real estate syndication laws.
4. Procedure for Tendering Partnership Interests or Rights.
Subject to the conditions set forth in this Continuing Offer, each
tendering Initial Offeree or Designated Offeree may tender any or all
Partnership Interests or Rights owned by such Initial Offeree or Designated
Offeree by delivering to the Company, at 200 East Long Lake Road, Suite 300,
Bloomfield Hills, Michigan 48304 (or such other address as the Company shall
provide in writing to each Initial Offeree and Designated Offeree), a completed
and duly executed Letter of Transmittal and any other documents required by the
Letter of Transmittal. Each tendering Initial Offeree or Designated Offeree
shall simultaneously deliver to TRG, at 200 East Long Lake Road, Suite 300,
Bloomfield Hills, Michigan 48304 (or such other address as TRG shall provide in
writing to each Initial Offeree or Designated Offeree), a copy of such duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal.
If a Transfer Determination shall not have already been obtained or deemed
obtained by the tendering Initial Offeree or Designated Offeree at the time of
the tender (i.e., at the time of receipt by the Company of a Letter of
Transmittal), then TRG (within three Business Days of receipt by TRG of a copy
of a Letter of Transmittal from an Initial Offeree or Designated Offeree) shall
provide, if it is able to then provide pursuant to the Partnership Agreement,
each such Person and the Company with a Transfer Determination. A Transfer
Determination will be deemed to have been provided if not refused by a writing
delivered to the Company and each applicable Initial Offeree or Designated
Offeree within such three Business Day period. If an Initial Offeree or
Designated Offeree (i) is refused a Transfer Determination, such Person shall be
deemed to have withdrawn the tender in its entirety or (ii) receives a limited
Transfer Determination, such Person shall be deemed to have withdrawn such
amount of Partnership Interests or Rights as is necessary in order to satisfy
the limited Transfer Determination.
Unless an exception applies under applicable law and regulations, the
Company will be required to withhold, and will withhold, 31% (or such other
amount as subsequent law may require) of the gross proceeds (including dollar
equivalent of shares of Common Stock) paid to a tendering Initial Offeree or
Designated Offeree pursuant to this Continuing Offer unless
7
<PAGE>
the Initial Offeree or Designated Offeree provides his tax identification number
(employer identification number or Social Security Number) and certifies that
such number is correct. Unless such an exception exists and is proved in a
manner satisfactory to the Company, each tendering Initial Offeree or Designated
Offeree should, therefore, complete and sign the main signature form on the
Letter of Transmittal and sign the Substitute Form W-9 included as part of the
Letter of Transmittal, so as to provide the information and certification
necessary to avoid backup withholding.
The tender of Partnership Interests or Rights pursuant to the foregoing
will constitute a binding agreement between the tendering Initial Offeree or
Designated Offeree and the Company upon the terms and subject to the conditions
of this Continuing Offer and will not be subject to withdrawal or change except
as provided in Section 2 or this Section 4 of this Continuing Offer.
All questions as to the validity and form of any tender of Partnership
Interests or Rights will be determined in the sole discretion of the Company,
which determination shall be final and binding.
5. Rights as a Partner.
Until the Settlement Date, each tendering Initial Offeree and Designated
Offeree shall continue to own his respective tendered Partnership Interests or
Rights, and will continue to be treated as the holder of such tendered
Partnership Interests or Rights for all purposes of the Partnership Agreement,
including, without limitation, for purposes of voting, consent, allocations and
distributions (subject only to reasonable accounting conventions adopted by TRG
for purposes of determining the partners' varying percentage interests in TRG
during the taxable year). Tendered Partnership Interests will be transferred to
the Company only upon receipt by the tendering Initial Offeree or Designated
Offeree of shares of Common Stock in payment in full therefor.
6. Covenants of TRG.
In addition to its obligations contained in Section 4 of this Continuing
Offer, TRG agrees to promptly notify the Company in writing of the name of each
holder of an Incentive Option who becomes a holder of Rights.
7. Miscellaneous.
(a) This Continuing Offer shall be governed in all respects by the
laws of the State of Michigan.
(b) This Continuing Offer and the Letter of Transmittal constitute
the full and entire understanding and agreement with regard to the subjects of
this Continuing Offer and the Letter of Transmittal.
(c) Each notice, demand, request, request for approval, consent,
approval, disapproval, designation or other communication (each of the foregoing
being referred to herein as a "notice") required or desired to be given or made
under this Continuing Offer shall be in
8
<PAGE>
writing (except as otherwise provided in this Continuing Offer), and shall be
effective and deemed to have been received (i) when delivered in person, (ii)
when sent by facsimile transmission with receipt acknowledged, (iii) three days
after having been mailed by certified or registered United States mail, postage
prepaid, return receipt requested, or (iv) the next business day after having
been sent by a nationally recognized overnight mail or courier service, receipt
requested (a) if to an Initial Offeree, at such Initial Offeree's address set
forth in Exhibit A or as shall have been furnished by such Initial Offeree to
the Company in writing, or at such other address or to the telefax number as
such Initial Offeree shall have furnished to the Company in writing, (b) if to
any Designated Offeree, at such address or to the telefax number as such
Designated Offeree shall have furnished the Company in writing, or (c) if to the
Company, at the address of its principal executive offices and addressed to the
attention of the Treasurer, or at such other address or to the telefax number as
the Company shall have furnished to each Initial Offeree or Designated Offeree.
(d) In the event that any provision of this Continuing Offer becomes
or is declared by a court of competent jurisdiction to be illegal,
unenforceable, or void, this Continuing Offer shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Continuing Offer
to any Person.
(e) The words "herein", "hereinafter", "hereof", and "hereunder"
refer to this Continuing Offer as a whole and not merely to a subdivision in
which such words appear unless the context otherwise requires.
(f) Whenever in this Agreement the term "assignee" is used, it shall
include each assignee, transferee, distributee (whether or not in liquidation of
the distributing Person), assignee of an assignee through one or more
predecessor assignments and, by way of illustration and not limitation, each
Person who becomes an assignee as a result of a secured creditor exercising its
rights under a security agreement and/or applicable law, in each case, whether
the assignment creating the assignee was effected with or without consideration,
by gift or bequest, by operation of law, or otherwise. The terms "assign",
"assigned", and "assignment" shall be similarly construed.
(g) Section titles are for descriptive purposes only and shall not
control or alter the meaning of this Continuing Offer as set forth in the text.
TAUBMAN CENTERS, INC.
By: /s/ Robert S. Taubman
----------------------------------------
Its: President and Chief Executive Officer
---------------------------------------
9
<PAGE>
The undersigned executes this Continuing Offer for
the sole purpose of agreeing to be bound by the provisions of the second
paragraph of Section 4, Section 5, and Section 6 of this Continuing Offer.
The Taubman Realty Group Limited Partnership
By: Taubman Centers, Inc.
Its: Managing General Partner
By: /s/ Robert S. Taubman
---------------------------------------
Its: President and Chief Executive Officer
---------------------------------------
10
<PAGE>
SCHEDULE A
Robert S. Taubman
The Taubman Company
200 E. Long Lake Road
Suite 300
Bloomfield Hills, MI 48304
William S. Taubman
The Taubman Company
200 E. Long Lake Road
Suite 300
Bloomfield Hills, MI 48304
Gayle T. Kalisman
117 E. 72nd Street
Apt. 10
New York, NY 10021
Burkhardt Family Trust
c/o Joseph E. Burkhardt
5025 S. McCarron Boulevard
Suite 356
Reno, NV 89502
Leonard Dobbs
117 East 57th Street
Apt. 38B
New York, NY 10022
Gloria Dobbs
c/o Robert Ganer, CPA
Ganer & Ganer P.C.
1995 Broadway
New York, NY 10023
Max M. Fisher, acting not individually but as Trustee, or the successor(s) in
trust, of The Max M. Fisher Revocable Trust, as amended and restated in its
entirety by Instrument dated May 11, 1992 (as the same may be amended from time
to time)
2700 Fisher Building
27th Floor
Detroit, Michigan 48202
Richard P. Kughn
Kughn Enterprises
22842 Orchard Lake Road
Farmington, Michigan 48336-3223
<PAGE>
The Kughn Real Properties Co.
22842 Orchard Lake Road
Farmington, Michigan 48336-3223
Robert C. Larson
The Taubman Company
200 E. Long Lake Road
Suite 300
Bloomfield Hills, MI 48304
Marvin G. Leech
691 Christina Drive
Incline Village, NV 89450
Margaret Putnam
1361 Cedar Bend Drive
Bloomfield Hills, MI 48302
Avner and Gloria Frank Naggar Living Trust
c/o Avner Naggar
3205 Ralston Avenue
Hillsborough, CA 94010
Michaela Naggar Bourne
10 Pilgrim Road
Short Hills, NJ 07078
Auri Neal Naggar
336 Valdez
Half Moon Bay, CA 94019
Ron Naggar
140 East Terrace
Fresno, CA 93704
David Naggar
3205 Ralston Avenue
Hillsborough, CA 94010
Tamara Naggar
15444 Wyandotte
Van Nuys, CA 91406
Sidney R. Unobskey
2770 Green Street
San Francisco, CA 94123
<PAGE>
Charles Carlise
87 Biltmore Estates
Phoenix, Arizona 85016
El Camino Associates
Attn: Charles Carlise
87 Biltmore Estates
Phoenix, Arizona 85016
Grossman/Southwest Associates Limited Partnership
c/o Grossman Company Properties
Attn: Samuel M. Grossman
3101 North Central Avenue, Suite 1390
Phoenix, Arizona 85012
Southwest Associates
c/o Paul Holste
Grossman Company Properties
3101 North Central Avenue, Suite 1390
Phoenix, Arizona 85012
Pacific Telesis Group Master Pension Trust
Attn: Barbara McDowell
Corporate Manager - Alternative Investments
175 E. Houston, Room 7 C 8
San Antonio, Texas 78205
<PAGE>
SCHEDULE B
Robert S. Taubman
William S. Taubman
Gayle T. Kalisman
<PAGE>
LETTER OF TRANSMITTAL
To Tender Partnership Interests or Rights
Pursuant to the Amended and Restated Continuing Offer
Dated September 30, 1997
of
Taubman Centers, Inc.
To: Taubman Centers, Inc.
c/o The Taubman Company Limited Partnership
200 East Long Lake Road, Suite 300
Bloomfield Hills, Michigan 48304
- --------------------------------------------------------------------------------
Name and Address of Partner or Incentive Option Holder:
Name
----------------------------------------------------------------------
Address
-------------------------------------------------------------------
City State Zip Code
---------------------------------- ------- -------------
Incentive Options Being Tendered
- --------------------------------
Number of TRG Units
Number of TRG Subject to Options
Date of Option Units Covered by Being Exercised
Agreement(s) Option Agreement and Tendered
-------------- ---------------- -------------------
-------------- ---------------- -------------------
-------------- ---------------- -------------------
Partnership Interests Being Tendered
- ------------------------------------
Partnership Interest Number of Units
Certificate Numbers Being Tendered
-------------------- ---------------
-------------------- ---------------
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
The undersigned hereby tenders to Taubman Centers, Inc., a Michigan
corporation ("TCI"), the above-described Incentive Options ("Rights") or
Partnership Interests pursuant to TCI's Amended and Restated Continuing Offer
dated September 30, 1997 (the "Continuing Offer") in accordance with the terms
and conditions of the Continuing Offer and this Letter of Transmittal (which
together constitute the "Offer"), receipt of which is hereby acknowledged. All
terms used herein but not defined herein are used as defined in the Continuing
Offer.
Subject to, and effective upon, payment (i.e. issuance of shares of Common
Stock) for any Rights or Partnership Interests tendered herewith, the
undersigned hereby assigns and transfers to TCI all right, title and interest in
and to all of the Rights or Partnership Interests that are being tendered hereby
and irrevocably constitutes and appoints The Taubman Company Limited Partnership
(the "Agent), with full power of substitution (such power of attorney being
deemed an irrevocable power coupled with an interest), to (a) present such
Rights or Partnership Interests for transfer on TRG's books and (b) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Rights or Partnership Interests, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to exercise and tender any tendered Rights and to
tender the tendered Partnership Interests and that, upon payment by TCI in
accordance with the Continuing Offer, TCI will acquire good, marketable, and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances, but subject, in any event, to all of the terms and conditions
of the Partnership Agreement. The undersigned will, upon request, execute any
additional documents deemed by the Agent or TCI to be necessary or desirable to
complete the exercise and tender of the tendered Rights or the transfer of the
tendered Partnership Interests.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the successors, assigns, heirs, executors, administrators, and
legal representatives of the undersigned. Except as stated in the Continuing
Offer, this tender is irrevocable.
The undersigned understands that a tender of Rights or Partnership
Interests pursuant to the Continuing Offer constitutes a binding agreement
between the undersigned and TCI upon the terms and subject to the conditions of
the Offer.
Unless otherwise indicated under "Special Delivery Instructions," please
mail the shares of Common Stock for the purchase price (and accompanying
documents, as appropriate) to the address of the registered holder appearing
under "Description of Rights Tendered." In the event that the Special Delivery
Instructions are completed, please issue the shares of Common Stock for the
purchase price in the name of the registered holder and transmit the same to the
person or persons so indicated.
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4 and 5)
Complete this section unless you intend to hold the shares of Common Stock
in certificated form, delivered to you at the address shown on page 1.
Certificate(s) for shares of Common Stock should be registered in the name
shown below and mailed to the following address:
Name as it is to appear on Stock Certificate
------------------------------------
(please print)
Address
-------------------------------------------------------------------------
City State Zip Code
---------------------------------- ------ ---------------------
Tax Identification or Social Security Number
------------------------------------
SIGNATURE
- --------------------------------------------------------------------------------
Signature of Rights Holder
Dated
---------------------------------------------------------------------------
Name
----------------------------------------------------------------------------
(please print)
This Letter of Transmittal must be signed by the current holder as the holder's
name appears on the Incentive Option Agreement(s) evidencing the Rights or on
the Partnership Interest Certificate representing the tendered Partnership
Interest. If signature is by a trustee, executor, guardian, or others acting in
a fiduciary or representative capacity, please set forth your full title below
and see Instruction 3.
Capacity (Full Title)
-----------------------------------------------------------
Street Address
------------------------------------------------------------------
City State Zip Code
---------------------------------- ------ ---------------------
Area Code and Tel. No.
----------------------------------------------------------
Tax Identification or Social Security No.
---------------------------------------
Guarantee of Signature(s)
(See Instruction 5)
Authorized
Signature
-----------------------------------------------------------------------
Name of
Firm
----------------------------------------------------------------------------
Dated
---------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Continuing Offer
1. Delivery of Letter of Transmittal and Agreement Evidencing Rights. This
Letter of Transmittal is to be completed by the holder of Rights (i.e.,
Incentive Options) or Partnership Interests being tendered. Agreements
evidencing Rights (i.e., Incentive Option Agreements) together with evidence of
exercise and payment with respect to the Rights, the Partnership Interest
Certificates with respect to any tendered Partnership Interests, as well as a
properly completed and duly executed Letter of Transmittal, and any other
documents required by this Letter of Transmittal, must be received by the Agent.
No alternative, conditional, or contingent tenders will be accepted.
2. Partial Tenders. All Rights represented by an Option Agreement, or
Partnership Interests represented by a Partnership Certificate, delivered to the
Agent will be deemed to have been tendered unless otherwise indicated.
3. Signatures on Letter of Transmittal. The signature must correspond with
the name as written on the face of the Incentive Option Agreement evidencing
Rights or on the face of the Partnership Interest Certificate without any change
whatsoever. If any tendered Rights or Partnership Interests are registered in
different names, it will be necessary to complete, sign, and submit as many
separate Letters of Transmittal as there are different registrations of Rights
or Partnership Interests.
If this Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations, or
others acting in a fiduciary or representative capacity, each person should so
indicate when signing, and proper evidence satisfactory to the Agent of their
authority so to act must be submitted.
4. Special Delivery Instructions. If a certificate for shares of Common
Stock is to be sent to someone other than the signer of this Letter of
Transmittal or to an address other than that shown above, the appropriate
sections of this Letter of Transmittal should be completed.
5. Guarantee of Signature. A signature guarantee on this Letter of
Transmittal is required only if the registered holder of the Rights or
Partnership Interests has completed the section entitled "Special Delivery
Instructions." In such case, all signatures on this Letter of Transmittal must
be guaranteed by a member firm of any registered national securities exchange in
the United States or of the National Association of Securities Dealers, Inc. or
by a bank, credit union, or savings association having an office, branch, or
agency in the United States.
6. Waiver of Conditions. TCI reserves the absolute right to waive any of
the specified conditions of the Offer in the case of the Rights or Partnership
Interests tendered.
7. Requests for Assistance or Additional Copies. Questions and requests
for assistance or additional copies of the Continuing Offer and the Letter of
Transmittal may be directed to the Agent at the address set forth above.
Exhibit 12
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
Computation of Ratios of Earnings to Fixed Charges
(in thousands, except ratios)
Nine Months Ended September 30
------------------------------
1996 1997
---- ----
Net Earnings from Continuing Operations $ 60,308 $ 68,795
Add back:
Fixed charges 84,133 91,710
Amortization of previously capitalized
interest (1) 1,472 1,487
Distributions in excess of equity in net
income of 25% owned Joint Venture 122
Deduct:
Capitalized interest (1) (6,112) (10,649)
-------- --------
Earnings Available for Fixed Charges $139,923 $151,343
======== ========
Fixed Charges
Mortgage notes and other $ 52,714 $ 54,002
Capitalized interest 3,602 6,798
Interest portion of rent expense 3,746 5,595
Proportionate share of Joint Ventures'
fixed charges 24,071 25,315
-------- --------
Total Fixed Charges $ 84,133 $ 91,710
======== ========
Ratio of earnings to fixed charges 1.7 1.7
- -----------------
(1) Amounts include TRG's pro rata share of capitalized interest and
amortization of previously capitalized interest of the Joint Ventures.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TAUBMAN REALTY GROUP LIMITED PARTNERSHIP (TRG) CONSOLIDATED BALANCE SHEET AS OF
SEPTEMBER 30, 1997 (UNAUDITED) AND TRG'S CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000917473
<NAME> THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
<MULTIPLIER> 1,000 <F1>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,178
<SECURITIES> 0
<RECEIVABLES> 24,416
<ALLOWANCES> 464
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 1,379,546
<DEPRECIATION> 257,893
<TOTAL-ASSETS> 1,189,012
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 1,246,303
0
0
<COMMON> 0
<OTHER-SE> (318,994)
<TOTAL-LIABILITY-AND-EQUITY> 1,189,012
<SALES> 0
<TOTAL-REVENUES> 223,961
<CGS> 0
<TOTAL-COSTS> 121,380
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,002
<INCOME-PRETAX> 68,795
<INCOME-TAX> 0
<INCOME-CONTINUING> 68,795
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,795
<EPS-PRIMARY> .50 <F3>
<EPS-DILUTED> 0 <F3>
<FN>
<F1> EXCEPT FOR UNIT DATA.
<F2> TRG HAS AN UNCLASSIFIED BALANCE SHEET.
<F3> REPRESENTS EARNINGS DIVIDED BY WEIGHTED AVERAGE NUMBER OF UNITS OF
PARTNERSHIP INTEREST OUTSTANDING DURING THE PERIOD. EPS - DILUTED IS
NOT DISCLOSED AS THE DIFFERENCE FROM EPS - PRIMARY IS LESS THAN 3%.
EFFECTIVE SEPTEMBER 30, 1997, TRG AMENDED ITS PARTNERSHIP AGREEMENT TO
SPLIT EXISTING UNITS OF PARTNERSHIP INTEREST AT A RATIO OF 1975.08 T0
ONE. NO PRIOR FINANCIAL DATA SCHEDULES HAVE BEEN RESTATED.
</FN>
</TABLE>
