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: March 31, 1998
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 March 31, 1998 and December 31, 1997 ....2
Consolidated Statement of Operations for the three months ended
March 31, 1998 and 1997......................................................3
Consolidated Statement of Cash Flows for the three months ended
March 31, 1998 and 1997......................................................4
Notes to Consolidated Financial Statements.....................................5
- 1 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(in thousands)
March 31 December 31
-------- -----------
1998 1997
---- ----
Assets:
Properties $1,649,352 $1,593,350
Accumulated depreciation and amortization 280,358 268,658
---------- ----------
$1,368,994 $1,324,692
Cash and cash equivalents 1,013 3,250
Accounts and notes receivable, less
allowance for doubtful accounts of
$357 and $414 in 1998 and 1997 13,776 17,803
Accounts receivable from related parties 5,807 7,400
Deferred charges and other assets 44,400 43,681
---------- ----------
$1,433,990 $1,396,826
========== ==========
Liabilities:
Unsecured notes payable $1,074,553 $1,008,459
Mortgage notes payable 290,806 275,868
Accounts payable and other liabilities 110,610 106,404
Distributions in excess of net income of
Unconsolidated Joint Ventures (Note 3) 184,081 141,815
---------- ----------
$1,660,050 $1,532,546
Commitments and Contingencies (Note 5)
Accumulated Deficiency in Assets:
Series A Preferred Equity 192,840 192,840
Partners' Accumulated Deficit (418,900) (328,560)
---------- ----------
(226,060) (135,720)
---------- ----------
$1,433,990 $1,396,826
========== ==========
Allocation of Partners' Accumulated Deficit:
General Partners $ (339,491) $ (254,474)
Limited Partners (79,409) (74,086)
---------- ----------
$ (418,900) $ (328,560)
========== ==========
See notes to financial statements.
- 2 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except units data)
Three Months Ended March 31
---------------------------
1998 1997
---- ----
Revenues:
Minimum rents $51,805 $42,850
Percentage rents 1,331 1,454
Expense recoveries 26,937 22,705
Other 5,257 3,924
Revenue from management, leasing and
development services 1,839 1,964
------- -------
$87,169 $72,897
------- -------
Operating Costs:
Recoverable expenses $22,998 $18,998
Other operating 9,304 8,492
Management, leasing and development
services 1,095 1,108
General and administrative 6,560 5,656
Interest expense 22,637 17,284
Depreciation and amortization 13,873 10,103
------- -------
$76,467 $61,641
------- -------
Income before equity in income of
Unconsolidated Joint Ventures and
before extraordinary item $10,702 $11,256
Equity in income before extraordinary item
of Unconsolidated Joint Ventures (Note 3) 12,603 12,328
------- -------
Income before extraordinary item $23,305 $23,584
Extraordinary item (Note 3) (957)
------- -------
Net Income $22,348 $23,584
Preferred distributions to TCO (4,150)
------- -------
Net income available to unitholders $18,198 $23,584
======= =======
Allocation of net income available
to unitholders:
General Partners $14,748 $18,264
Limited Partners 3,450 5,320
------- -------
$18,198 $23,584
======= =======
Basic and diluted earnings per Unit of
Partnership Interest (Note 6):
Income before extraordinary item $ .14 $ .17
======= =======
Net income $ .14 $ .17
======= =======
Weighted Average Number of Units of
Partnership Interest Outstanding 132,609,399 138,251,907
=========== ===========
See notes to financial statements.
- 3 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Three Months Ended March 31
---------------------------
1998 1997
---- ----
Cash Flows From Operating Activities:
Income before extraordinary item $ 23,305 $ 23,584
Adjustments to reconcile income before
extraordinary item to net cash provided
by operating activities:
Depreciation and amortization 13,873 10,103
Provision for losses on accounts receivable 291 225
Amortization of deferred financing costs 710 591
Gain on sale of land (65)
Other 212 149
Increase in cash attributable to changes
in assets and liabilities:
Receivables, deferred charges and
other assets 1,920 1,305
Accounts payable and other liabilities 1,206 7,907
-------- --------
Net Cash Provided By Operating Activities $ 41,517 $ 43,799
-------- --------
Cash Flows From Investing Activities:
Additions to properties $(56,367) $(21,866)
Proceeds from sale of land 289
Distributions from Unconsolidated Joint
Ventures in excess of income before
extraordinary item 46,169 4,025
Contributions to Unconsolidated Joint Ventures (4,860) (1,974)
-------- --------
Net Cash Used In Investing Activities $(15,058) $(19,526)
-------- --------
Cash Flows From Financing Activities:
Debt proceeds $129,941 $ 2,044
Debt payments (45,949)
Redemption of partnership units (77,698)
Issuance of units of partnership interest 771
Cash distributions to partnership unitholders (31,611) (32,019)
Cash distributions to TCO for Series A
Preferred Equity interest (4,150)
-------- --------
Net Cash Used In Financing Activities $(28,696) $(29,975)
-------- --------
Net Decrease In Cash $ (2,237) $ (5,702)
Cash and Cash Equivalents at Beginning of Period 3,250 7,912
-------- --------
Cash and Cash Equivalents at End of Period $ 1,013 $ 2,210
======== ========
Interest on mortgage notes and other loans paid during the three months ended
March 31, 1998 and 1997, net of amounts capitalized of $3,308 and $1,994, was
$9,446 and $5,003, respectively.
See notes to financial statements.
- 4 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 1998
Note 1 - Interim Financial Statements
The Taubman Realty Group Limited Partnership (TRG) engages in the ownership,
management, leasing, acquisition, development, and expansion of regional retail
shopping centers (Taubman Shopping Centers) and interests therein. Taubman
Centers, Inc. (TCO) 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, 1997. 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.
Effective September 30, 1997, TRG amended its partnership agreement to split
existing units of partnership interest at a ratio of 1,975.08 to one. The split
did not alter the ownership percentage of any of TRG's partners. All unit and
per unit amounts have been adjusted to reflect the unit split on a retroactive
basis.
Certain prior year amounts have been reclassified to conform to 1998
classifications.
Note 2 - Redemption
In January 1998, TRG redeemed a partner's 6.1 million units of partnership
interest for approximately $77.7 million (including costs). The redemption was
funded through the use of an existing revolving credit facility.
Note 3 - Investments in Unconsolidated Joint Ventures
Following are TRG's investments in various real estate Unconsolidated Joint
Ventures which own regional retail shopping centers. TRG is generally the
managing general partner of these Unconsolidated Joint Ventures. TRG's interest
in each Unconsolidated Joint Venture is as follows:
TRG's %
Ownership
as of
Unconsolidated Joint Venture Taubman Shopping Center March 31, 1998
---------------------------- ----------------------- --------------
Arizona Mills, L.L.C. Arizona Mills 37%
Fairfax Company of Virginia L.L.C. 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
- 5 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In March 1998, Fairfax Company of Virginia L.L.C. (a 50% owned Unconsolidated
Joint Venture) completed a $140 million, 6.60%, secured financing maturing in
2008. The net proceeds were used to extinguish an existing mortgage on Fair Oaks
of approximately $39 million and pay a prepayment penalty of approximately $1.8
million. In addition, proceeds of $5.6 million were used to close out a treasury
lock agreement entered into in 1997, which resulted in an effective rate on the
financing of approximately 7%. The remaining proceeds were distributed to the
owners. TRG used its 50% share of the distributions to pay down its revolving
credit facilities. TRG recognized an extraordinary charge of approximately $1.0
million on the extinguishment of the Fair Oaks mortgage.
TRG reduces its investment in Unconsolidated Joint Ventures to eliminate
intercompany profits on sales of services that are capitalized by the
Unconsolidated Joint Ventures. As a result, the carrying value of TRG's
investment in Unconsolidated Joint Ventures is less than TRG's share of the
deficiency in assets reported in the combined balance sheet of the
Unconsolidated Joint Ventures by $8.0 million and $8.1 million at March 31, 1998
and December 31, 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 all Unconsolidated 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 Unconsolidated Joint
Ventures.
March 31 December 31
-------- -----------
1998 1997
---- ----
Assets:
Properties, net $ 626,858 $ 623,981
Other assets 74,942 84,397
--------- ---------
$ 701,800 $ 708,378
========= =========
Liabilities and partners' accumulated
deficiency in assets:
Debt $ 988,724 $ 875,356
Capital lease obligations 6,146 6,509
Other liabilities 63,296 94,801
TRG accumulated deficiency in assets (176,066) (133,680)
Unconsolidated Joint Venture Partners'
accumulated deficiency in assets (180,300) (134,608)
--------- ---------
$ 701,800 $ 708,378
========= =========
TRG accumulated deficiency in assets (above) $(176,066) $(133,680)
Elimination of intercompany profit (8,015) (8,135)
--------- ---------
Distributions in excess of net income
of Unconsolidated Joint Ventures $(184,081) $(141,815)
========= =========
- 6 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Three Months Ended March 31
---------------------------
1998 1997
---- ----
Revenues $72,121 $60,681
------- -------
Recoverable and other operating expenses $24,968 $22,357
Interest expense 17,133 12,367
Depreciation and amortization 8,445 5,283
------- -------
Total operating costs $50,546 $40,007
------- -------
Income before extraordinary item 21,575 20,674
Extraordinary item (1,913)
------- -------
Net income $19,662 $20,674
======= =======
Net income attributable to TRG $10,173 $11,406
Extraordinary item attributable to TRG 957
Realized intercompany profit 1,473 922
------- -------
Equity in income before extraordinary item
of Unconsolidated Joint Ventures $12,603 $12,328
======= =======
Three Months Ended March 31
---------------------------
1998 1997
---- ----
TRG's beneficial interest
in Unconsolidated Joint Ventures' operations:
Revenues less recoverable and other
operating expenses $26,052 $21,629
Interest expense (9,205) (6,589)
Depreciation and amortization (4,244) (2,712)
------- -------
Income before extraordinary item $12,603 $12,328
======= =======
Note 4 - 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 in the following table. TRG's beneficial interest for 1998 and 1997
excludes the 30% minority interest in the debt outstanding on the MacArthur
Center construction facility.
Unconsolidated TRG's Share of TRG's TRG's
Joint Unconsolidated Consolidated Beneficial
Ventures Joint Ventures Subsidiaries Interest
-------- -------------- ------------ --------
Debt as of:
March 31, 1998 $988,724 $521,275 $1,365,359 $1,869,510
December 31, 1997 875,356 465,556 1,284,327 1,737,211
Capitalized interest:
Three months ended
March 31, 1998 $ 455 $ 224 $3,308 $3,243
Three months ended
March 31, 1997 1,980 1,267 1,994 3,261
Interest expense
(Net of capitalized
interest):
Three months ended
March 31, 1998 $17,133 $ 9,205 $22,637 $31,842
Three months ended
March 31, 1997 12,367 6,589 17,284 23,873
- 7 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 5 - Incentive Option Plan
TRG has an incentive option plan for employees of the Manager. Currently,
options for 8.1 million units of partnership interest may be issued under the
plan, including options outstanding for 7.0 million units. The exercise price of
all options outstanding was 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 quarter of
1998, options for 69,128 units were exercised at $11.14 per unit. There were no
grants or cancellations during the first quarter of 1998. As of March 31, 1998,
there were options outstanding for 7.0 million units with a weighted average
exercise price of $11.22 per unit, of which options for 6.1 million units were
vested with a weighted average exercise price of $11.28 per unit.
Note 6 - Earnings Per Unit of Partnership Interest
Basic earnings per unit of partnership interest are based on the average
number of units of partnership interest outstanding during each period. Diluted
earnings per unit of partnership interest are based on the average number of
units of partnership interest outstanding during each period, assuming exercise
of all options for units of partnership interest having exercise prices less
than the average market value of the units using the treasury stock method. For
the three months ended March 31, 1998 and 1997, options for 0.4 million and 0.2
million units of partnership interest with average exercise prices of $13.58 and
$13.89 per unit, respectively, were excluded from the computation of diluted
earnings per unit because the exercise prices were greater than the average
market price for the period calculated.
Three Months Ended March 31
---------------------------
1998 1997
---- ----
(in thousands, except unit data)
Income before extraordinary item
allocable to unitholders (Numerator) $ 19,155 $ 23,584
======== ========
Partnership units (Denominator):
Basic 132,609,399 138,251,907
Effect of dilutive options 959,556 1,197,550
----------- -----------
Diluted 133,568,955 139,449,457
=========== ===========
Per unit - basic and diluted $ 0.14 $ 0.17
======= ======
Note 7 - Subsequent Event
In April 1998, TCO sold approximately 2.0 million shares of its common stock
at $13.1875 per share, before deducting the underwriting commission and expenses
of the offering, under TCO's shelf registration statement. TCO used the proceeds
to acquire an additional equity interest in TRG, resulting in TCO holding a
39.36% interest in TRG. TRG paid all costs of the offering. Net proceeds of
approximately $25 million were used by TRG for general partnership purposes.
- 8 -
<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 The Taubman Realty Group Limited Partnership and the
Notes thereto.
General Background and Performance Measurement
The Taubman Realty Group Limited Partnership (TRG) is an operating partnership
that engages in the full range of activities of the regional shopping center
business. These activities include the ownership management, leasing, expansion,
acquisition and development of regional shopping centers (Taubman Shopping
Centers or Centers). 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 with third parties that are not controlled
(Unconsolidated Joint Ventures). The Unconsolidated 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 Unconsolidated 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 1997 and the first quarter of 1998:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th 1st
Quarter Quarter Quarter Quarter Total Quarter
1997 1997 1997 1997 1997 1998
--------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mall tenant sales $600,709 $629,906 $692,487 $1,163,157 $3,086,259 $740,104
Revenues 130,677 134,756 137,728 157,192 560,353 156,415
Occupancy:
Average Occupancy 86.5% 86.8% 87.0% 89.5% 87.6% 88.5%
Ending Occupancy 86.4% 87.1% 87.2% 90.3% 90.3% 88.2%
Leased Space 88.7% 89.5% 90.8% 92.3% 92.3% 91.3%
</TABLE>
- 9 -
<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 1997 and the first quarter of
1998:
1st 2nd 3rd 4th 1st
Quarter Quarter Quarter Quarter Total Quarter
1997 1997 1997 1997 1997 1998
--------------------------------------------------
Minimum rents 12.6% 11.8% 11.3% 7.3% 10.1% 12.0%
Percentage rents 0.2 0.3 0.3 0.2 0.3 0.2
Expense recoveries 5.2 5.1 4.7 3.5 4.4 4.8
---- ---- ---- ---- ---- ----
Mall tenant occupancy costs 18.0% 17.2% 16.3% 11.0% 14.8% 17.0%
==== ==== ==== ==== ==== ====
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 $38.88 for the twelve months ended March
31, 1998, compared to $38.25 for the twelve months ended March 31, 1997.
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 four and eleven dollars per
square foot during the past five years. TRG anticipates that the spread between
opening and closing rents for the 1998 fiscal year will be somewhat higher than
the approximately four dollars per square foot achieved in 1997. This statistic
is difficult to predict in part because TRG's leasing policies and practices may
result in early lease terminations with actual average closing rents which may
vary from the average rent per square foot of scheduled lease expirations. In
addition, the opening or closing of large tenant spaces, which generally pay a
lower rent per square foot, can significantly change the spread in a given year.
Results of Operations
Comparison of the Three Months Ended March 31, 1998 to the Three Months Ended
March 31, 1997
1998 Transactions
In January 1998, TRG redeemed a partner's 6.1 million units of partnership
interest for approximately $77.7 million (including costs). The redemption was
funded through the use of an existing revolving credit facility.
In March 1998, Fairfax Company of Virginia L.L.C. (a 50% owned Unconsolidated
Joint Venture) completed a $140 million, 6.60%, secured financing maturing in
2008. The net proceeds were used to extinguish an existing mortgage on Fair Oaks
of approximately $39 million and pay a prepayment penalty of approximately $1.8
million. In addition, proceeds of $5.6 million were used to close out a treasury
lock agreement entered into in 1997, which resulted in an effective rate on the
financing of approximately 7%. The remaining proceeds were distributed to the
owners. TRG used its share of the distribution to pay down its revolving credit
facilities.
- 10 -
<PAGE>
In April 1998, TRG's managing general partner, Taubman Centers, Inc. (TCO)
sold approximately 2.0 million shares of its common stock at $13.1875 per share,
before deducting the underwriting commission and expenses of the offering, under
TCO's shelf registration statement. TCO used the proceeds to acquire an
additional equity interest in TRG. TRG paid all costs of the offering. Net
proceeds of approximately $25 million were used by TRG for general partnership
purposes.
1997 Transactions
During 1997, TRG completed the following acquisitions: Regency Square in
September, The Falls in December, and the leasehold interest in The Mall at
Tuttle Crossing (Tuttle Crossing), also in December. In addition, TRG opened the
following new centers and expansions: Tuttle Crossing in July, Arizona Mills in
November, Westfarms' expansion in August, and Biltmore's expansion throughout
the last half of the year.
Occupancy and Mall Tenant Sales
The average occupancy rate in the Taubman Shopping Centers was 88.5% for the
three months ended March 31, 1998 compared to 86.5% for the comparable period in
1997. The increase in average occupancy was primarily due to increases in the
occupancy at Centers owned and open prior to 1997. The ending occupancy rate for
the Taubman Shopping Centers at March 31, 1998 was 88.2% versus 86.4% at the
same date in 1997. Leased space at March 31, 1998 was 91.3% compared to 88.7% at
the same date in 1997.
Total sales for Taubman Shopping Center mall tenants in the three months ended
March 31, 1998 were $740.1 million, a 23.2% increase from $600.7 million in the
first quarter of 1997. Mall tenant sales per square foot increased 2.2% over the
first quarter of 1997. Mall tenant sales for Centers owned and open for all of
the first quarters of 1998 and 1997 were $636.2 million in the first quarter of
1998, a 5.9% increase from the first quarter of 1997.
- 11 -
<PAGE>
Comparison of the Three Months Ended March 31, 1998 to the Three Months Ended
March 31, 1997
The following table sets forth operating results for TRG's Managed Businesses
for the three months ended March 31, 1998 and 1997, showing the results of the
Consolidated Businesses and Unconsolidated Joint Ventures:
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998 Three Months Ended March 31, 1997
------------------------------------------- -------------------------------------------
TRG UNCONSOLIDATED TOTAL TRG UNCONSOLIDATED TOTAL
CONSOLIDATED JOINT MANAGED CONSOLIDATED JOINT MANAGED
BUSINESSES(1) VENTURES(2) BUSINESSES BUSINESSES(1) VENTURES(2) BUSINESSES
------------------------------------------- -------------------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Minimum rents 49.9 44.2 94.1 40.8 37.6 78.5
Percentage rents 1.2 0.7 2.0 1.4 0.3 1.7
Expense recoveries 26.3 23.9 50.1 21.9 21.5 43.5
Management, leasing and
development 1.8 1.8 2.0 2.0
Other 5.1 3.3 8.4 3.9 1.2 5.1
----- ----- ----- ----- ----- -----
Total revenues 84.3 72.1 156.4 70.0 60.7 130.7
OPERATING COSTS:
Recoverable expenses 22.1 20.3 42.4 18.0 18.3 36.3
Other operating 7.3 3.3 10.6 6.5 2.7 9.2
Management, leasing and
development 1.1 1.1 1.1 1.1
General and administrative 6.6 6.6 5.7 5.7
Interest expense 22.6 17.2 39.9 17.3 12.5 29.8
Depreciation and amortization 13.8 8.0 21.8 10.0 5.1 15.2
----- ----- ----- ----- ----- -----
Total operating costs 73.5 48.8 122.3 58.7 38.6 97.2
Net results of Memorial City(1) (0.1) (0.1) (0.1) (0.1)
----- ----- ----- ----- ----- -----
10.7 23.3 34.0 11.3 22.1 33.4
===== ===== ===== =====
Equity in income before
extraordinary item of
Unconsolidated Joint Ventures 12.6 12.3
----- -----
Income before extraordinary item 23.3 23.6
Extraordinary item (1.0)
----- -----
Net income 22.3 23.6
Preferred distributions to TCO (4.2)
----- -----
Net income available to unitholders 18.2 23.6
===== =====
SUPPLEMENTAL INFORMATION(3):
EBITDA contribution 47.2 26.0 73.3 38.6 21.6 60.3
TRG's Beneficial Interest Expense (22.6) (9.2) (31.8) (17.3) (6.6) (23.9)
Non-real estate depreciation (0.5) (0.5) (0.5) (0.5)
Preferred distributions to TCO (4.2) (4.2)
----- ----- ----- ----- ----- -----
Distributable Cash Flow contribution 19.9 16.8 36.8 20.8 15.0 35.9
===== ===== ===== ===== ===== =====
(1) 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.
(2) With the exception of the Supplemental Information, amounts represent 100%
of the Unconsolidated Joint Ventures. Amounts are net of intercompany
profits. The Unconsolidated Joint Ventures are accounted for under the
equity method in TRG's Consolidated Financial Statements.
(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 1997 amounts have been reclassified to conform to 1998
classifications.
</TABLE>
- 12 -
<PAGE>
TRG --Consolidated Businesses
- -----------------------------
Total revenues for the three months ended March 31, 1998 were $84.3 million, a
$14.3 million, or 20.4%, increase over the comparable period in 1997. Minimum
rents increased $9.1 million, of which $8.2 million was caused by Tuttle
Crossing and the 1997 acquisitions. Minimum rents also increased due to the
expansion at Biltmore and 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.
Total operating costs increased $14.8 million, or 25.2%, to $73.5 million.
Recoverable, other operating, and depreciation and amortization expenses
increased primarily due to Tuttle Crossing and the acquisitions. The increase in
other operating expense was partially offset by a decrease in the charge to
operations for development pre-construction reserves. General and administrative
expense increased primarily due to increases in compensation (including the
continuing phase-in of the long-term compensation plan), and recruiter fees.
Interest expense increased due to an increase in debt used to finance Tuttle
Crossing, the acquisition of The Falls and the redemption of a partner's
interest in TRG, partially offset by a decrease in debt paid down with the
proceeds of the October 1997 preferred equity offering. In addition, interest
expense increased due to an increase in debt used to fund capital expenditures,
offset by the related 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.
Unconsolidated Joint Ventures
- -----------------------------
Total revenues for the three months ended March 31, 1998 were $72.1 million,
an $11.4 million, or 18.8%, increase from the comparable period of 1997. The
increase in minimum rents and expense recoveries was primarily due to Arizona
Mills and the expansion at Westfarms. Minimum rents also increased due to tenant
rollovers. Other revenue increased by $2.1 million primarily due to an increase
in lease cancellation revenue and a gain on a peripheral land sale.
Total operating costs increased by $10.2 million, or 26.4%, to $48.8 million
for the three months ended March 31, 1998. Recoverable, other operating, and
depreciation and amortization expenses increased primarily due to Arizona Mills
and Westfarms. Interest expense increased primarily due to an increase in debt
used to finance Arizona Mills and the Westfarms expansion, and a decrease in
capitalized interest related to these two projects. 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 3 to TRG's
financial statements) by the amount of intercompany profit.
As a result of the foregoing, income before extraordinary item of the
Unconsolidated Joint Ventures increased by $1.2 million, or 5.4%, to $23.3
million. TRG's equity in income before extraordinary item of the Unconsolidated
Joint Ventures was $12.6 million, a 2.4% increase from the comparable period in
1997.
Net Income
- ----------
As a result of the foregoing, TRG's income before extraordinary item decreased
$0.3 million, or 1.3%, to $23.3 million for the three months ended March 31,
1998. In the first quarter of 1998, TRG recognized a $1.0 million extraordinary
charge related to the prepayment of Fair Oaks' debt. After payment of $4.2
million in preferred distributions to TCO, net income available to partnership
unitholders for the first quarter of 1998 was $18.2 million compared to $23.6
million in 1997.
- 13 -
<PAGE>
Liquidity and Capital Resources
As of March 31, 1998, TRG had a cash balance of $1.0 million. TRG has
available for general partnership purposes an unsecured revolving credit
facility of $300 million, which expires in March 2000. Borrowings under this
facility at March 31, 1998 were $251.2 million. TRG also has available an
unsecured bank line of credit of up to $30 million with borrowings of $9.2
million at March 31, 1998. This line expires in August 1998. TRG also has
available a secured commercial paper facility of up to $75 million, with
borrowings of $75 million at March 31, 1998. 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 twelve month period.
Proceeds from short term borrowings of $129.9 million provided funding for the
first three months of 1998 (including $77.7 million for the redemption of 6.1
million units of partnership interest in January 1998) compared to $2.0 million
in the comparable period of 1997. Additionally, the proceeds were used to fund
capital expenditures for the Consolidated Businesses and contributions to
Unconsolidated Joint Ventures for construction costs.
TRG has issued a total of $342 million of notes since the inception of TRG's
medium-term note program in 1995 under TRG's $500 million shelf registration
statement. There were no medium-term note issuances in the first quarters of
1998 and 1997.
In March 1998, Fairfax Company of Virginia L.L.C. (a 50% owned Unconsolidated
Joint Venture) completed a $140 million, 6.60% secured financing maturing in
2008. The net proceeds were used to extinguish an existing mortgage on Fair Oaks
of approximately $39 million and pay a prepayment penalty of approximately $1.8
million. In addition, proceeds of $5.6 million were used to close out a treasury
lock agreement entered into in 1997, which resulted in a effective rate on the
financing of approximately 7%. The remaining proceeds were distributed to the
owners. TRG used its 50% share of the distribution to pay down its revolving
credit facilities.
At March 31, 1998, TRG's debt and its beneficial interest in the debt of its
Consolidated and Unconsolidated Joint Ventures totaled $1,869.5 million. As
shown in the following table, $225.8 million of this debt was floating rate debt
that remained unhedged at March 31, 1998. 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 added 0.36% to the effective rate of interest on TRG's
beneficial interest in debt at March 31, 1998. Included in TRG's beneficial
interest in debt is debt used to fund development and expansion costs. TRG's
beneficial interest in assets on which interest is being capitalized totaled
$201.0 million as of March 31, 1998. TRG's beneficial interest in capitalized
interest was $3.2 million for the three months ended March 31, 1998.
- 14 -
<PAGE>
Beneficial Interest in Debt
----------------------------------------------------
Amount Interest LIBOR Frequency LIBOR
(In millions Rate at Cap of Rate at
of dollars) 3/31/98 Rate Resets 3/31/98
---------- ------- ---- ------ -------
Total beneficial interest
in fixed rate debt 1,117.6 7.59%(1)
Floating rate debt hedged
via interest rate caps:
Through October 1998 39.3 6.16 6.00% Three Months 5.71%
Through December 1998 100.0 6.44(1) 6.50 Three Months 5.71
Through July 1999 65.0 6.42 7.00 Monthly 5.69
Through December 1999 200.0 6.44(1) 9.50(2) Monthly 5.69
Through October 2001 25.0 6.14 8.55 Monthly 5.69
Through January 2002 53.4 6.94(1) 9.50 Monthly 5.69
Through July 2002 43.4 6.99(1) 6.50 Monthly 5.69
Other floating rate debt 225.8 6.44(1)
-------
Total beneficial interest
in debt 1,869.5 7.14(1)
=======
(1) Denotes weighted average interest rate.
(2) Rate reduces to 7.0% in December 1998.
TRG's loan and facility 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.
In April 1998, TCO sold approximately 2.0 million shares of its common stock
at $13.1875 per share, before deducting the underwriting commission and expenses
of the offering, under TCO's shelf registration statement. TCO used the proceeds
to acquire an additional equity interest in TRG, resulting in TCO holding a
39.36% interest in TRG. TRG paid all costs of the offering. Net proceeds of
approximately $25 million were used by TRG for general partnership purposes.
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, non-real estate depreciation and
amortization, and preferred distributions. 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 of each 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.
- 15 -
<PAGE>
The following table summarizes TRG's Distributable Cash Flow for the three
months ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1998 March 31, 1997
----------------------------------------- ----------------------------------------
TRG Unconsolidated TRG Unconsolidated
Consolidated Joint Consolidated Joint
Businesses Ventures(1) Total Businesses Ventures(1) Total
----------------------------------------- ----------------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
TRG's Net Income (2) 22.3 23.6
Extraordinary item (3) 1.0
Depreciation and amortization (4) 18.1 12.8
TRG's Beneficial Interest Expense 31.8 23.9
----- -----
EBITDA 47.2 26.0 73.3 38.6 21.6 60.3
TRG's Beneficial Interest Expense (22.6) (9.2) (31.8) (17.3) (6.6) (23.9)
Non-real estate depreciation (0.5) (0.5) (0.5) (0.5)
Preferred distributions to TCO (4.2) (4.2)
----- ----- ----- ----- ----- -----
Distributable Cash Flow 19.9 16.8 36.8 20.8 15.0 35.9
===== ===== ===== ===== ===== =====
(1) Amounts represent TRG's beneficial interest in the operations of its
Unconsolidated Joint Ventures.
(2) Includes TRG's share of gains on peripheral land sales of $400 thousand and
$65 thousand in the first quarter of 1998 and 1997, respectively.
(3) Extraordinary charge related to the extinguishment of debt, primarily
consisting of a prepayment penalty.
(4) Includes $1.1 million and $0.9 million of amortization of mall tenant
allowances in the first quarter of 1998 and 1997, respectively.
(5) Amounts may not add due to rounding.
</TABLE>
For the first quarter of 1998, EBITDA and Distributable Cash Flow were $73.3
million and $36.8 million, compared to $60.3 million and $35.9 million for the
same period in 1997. In addition to $4.2 million representing preferred
distributions to TCO on TRG's Series A Preferred Equity, TRG distributed $31.6
million to its partners in the first quarter of 1998, compared to $32.0 million
in the same period of 1997.
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 preferred distributions 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, in general, acts as the managing
partner and 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.
- 16 -
<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. Assuming no acquisitions, planned capital
spending by the Managed Businesses not recovered from tenants for 1998 is
summarized in the following table:
<TABLE>
<CAPTION>
1998
------------------------------------------------------------
TRG's Share of
Unconsolidated Consolidated Businesses
Consolidated Joint and Unconsolidated
Businesses Ventures(1) Joint Ventures(1)(2)
------------------------------------------------------------
(in millions of dollars)
<S> <C> <C> <C>
Development, renovation,
and expansion 240.9(3) 39.0(4) 208.4
Mall tenant allowances 4.6 9.0 9.6
Pre-construction development
and other 22.1 1.4 22.8
----- ----- -----
Total 267.6 49.4 240.8
===== ===== =====
(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 MacArthur Center and Great Lakes Crossing.
(4) Includes costs related to the expansion project at Cherry Creek.
</TABLE>
At Cherry Creek, an ongoing expansion 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 stages throughout the fall of 1998.
The expansion is expected to cost approximately $50 million. TRG has a 50%
ownership interest in Cherry Creek.
Great Lakes Crossing, an enclosed value super-regional mall being developed by
TRG in Auburn Hills, Michigan, will open in November 1998. The Center will be
1.4 million square feet and its 17 anchors will include Bass Pro Shops Outdoor
World, Neiman Marcus Last Call Clearance Center, Off 5th-Saks Fifth Avenue
Outlet, JCPenney Outlet Store, Oshman's Supersports USA, Rainforest Cafe, and a
25-screen 100,000 square foot Star Theatre megaplex. This Center will be owned
by a joint venture in which TRG has a controlling 80% interest and is projected
to cost approximately $210 million.
MacArthur Center, a new Center under construction in Norfolk, Virginia, is
expected to open in March 1999. The Center is expected to open with 930 thousand
square feet and will initially be anchored by Nordstrom and Dillard's. This
Center will be 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. Memorial City is
anchored by Sears, Foley's, Montgomery Ward and Mervyn's. 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.
- 17 -
<PAGE>
TRG's share of costs for development projects scheduled to be completed in
1999 is anticipated to be as much as $58 million in 1999. TRG's estimates of
1998 and 1999 capital spending include only projects approved by TRG's
Partnership Committee and, consequently, TRG's estimates will change as new
projects are approved. Currently, TRG expects to open on average one $175
million to $200 million shopping center each year. 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 and number of projects; 3) cost
overruns; 4) timing of expenditures; and 5) actual time to complete projects.
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.
Capital Resources
TRG believes that its net cash provided by operating activities, distributions
from the Joint Ventures, the unutilized portion of its credit facilities, and
its ability to access the credit markets, assure adequate liquidity to conduct
its operations in accordance with its distribution and financing policies.
- 18 -
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10 -- First Amendment to The Taubman Company Long-Term
Compensation Plan.
12 -- Statement Re: Computation of Ratios of Earnings to Fixed
Charges and Preferred Distributions.
27 -- Financial Data Schedule.
b) Current Reports on Form 8-K.
None
- 19 -
<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: May 12, 1998 By: /s/ Lisa A. Payne
----------------------------
Lisa A. Payne
Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number
------
10 -- First Amendment to The Taubman Company Long-Term Compensation
Plan.
12 -- Statement Re: Computation of Ratios of Earnings to Fixed
Charges and Preferred Distributions.
27 -- Financial Data Schedule.
FIRST AMENDMENT TO THE TAUBMAN COMPANY
LONG-TERM PERFORMANCE COMPENSATION PLAN
WHEREAS, The Taubman Company Limited Partnership (the "Company") maintains
The Taubman Company Long-Term Performance Compensation Plan (the "Plan");
WHEREAS, pursuant to Section 7.1 of the Plan, the Company has the
authority to amend the Plan;
WHEREAS, the Company desires to amend the Plan to provide the new
definition of a Unit of Partnership Interest in connection with the division of
the Units of Partnership Interest in The Taubman Realty Group Limited
Partnership, to convert existing Sub Accounts under the Plan, and to make such
other changes as the Company deems advisable.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. The following sections in Article 2 "Definitions" are hereby deleted
because such references are no longer relevant in defining the fair
market value of a Unit of Partnership Interest. These sections shall
be left intentionally blank and all remaining sections shall not be
renumbered as a result of their deletion.
2.1 Adjusted Market Valuation of TCI
2.26 Market Capitalization of TCI
2.39 Portfolio
2.40 Portfolio Based Value of TRG
2.41 Portfolio Value
2.50 Value of TRG
2. Section 2.21 of the Plan is hereby amended in its entirety to read
as follows:
"Fair Market Value of a Notional Unit of Partnership Interest"
means, with respect to a Notional Unit Award, the value of a
Notional Unit of Partnership Interest that is the subject of
such Award. Effective as of September 30, 1997, the Fair
Market Value of a Notional Unit of Partnership Interest is
equal to the Fair Market Value of the Common Stock as of the
Valuation Date.
<PAGE>
3. Section 2.22 of the Plan is hereby amended in its entirety to read
as follows:
"Grant Value" means, with respect to a Notional Unit granted
after September 30, 1997, the Fair Market Value of such
Notional Unit, determined in accordance with Section 2.21 as
of the Date of Grant of such Notional Unit. For Notional Units
awarded prior to September 30, 1997, Grant Value means the
Fair Market Value of such Notional Unit, determined in
accordance with Section 2.21, prior to the First Amendment to
the Plan.
4. A new Section 4.6 is added to the Plan to provide for the conversion
of Participant Sub Accounts as a result of the division of Units:
4.6 Conversion of Participant Sub Accounts Effective September 30,
1997. In connection with the division of Units of Partnership Interest effective
September 30, 1997, all Notional Unit Accounts under the Plan on September 30,
1997 shall be adjusted by multiplying each Participant's Sub Accounts by the
following conversion factor:
Units in Participant Sub Account on September 30, 1997 x 1975.08.
5. Section 6.2 of the Plan is amended in its entirety by substituting
the following:
6.2 Deferral of Settlement Date. Subject to the provisions of
Section 7.2 of the Plan, each Participant may make, with respect to
each Notional Unit Award (i.e., the Sub Account established in
respect of such Award) granted to him, an election to defer the
Settlement Date that would otherwise occur on the Normal Vesting
Date of such Sub Account until the earlier of (a) the date that is
five (5) years after the Normal Vesting Date of such Award, and (b)
the date on which the Participant's employment with the Company
terminates for any reason. Provided the Company has received advice
of its counsel that such an election would not cause the Plan to
become subject to the nondiscrimination, funding, and fiduciary
provisions of the Employee Retirement Income Security Act of 1974,
as amended, any Participant whose target total cash compensation
(i.e., base salary plus target compensation under the SSTI),
determined as of the date on which the deferral election is made,
exceeds $120,000 (or such other amount as counsel to the Company may
advise from time to time) may, in lieu of deferring the Settlement
Date for the aforementioned five-year period, make an election to
defer the Settlement Date for such Sub Account until the earlier of
(a) termination of the Participant's employment with the Company for
any reason other than Retirement, and (b) a date, as selected by the
Employee at the time of such deferral election, which shall be
either (i) the date of such Participant's Retirement, or (ii) the
date on which such Participant attains sixty-two (62) years of age.
Any election by a Participant to defer the Settlement Date for a Sub
Account pursuant to this Section 6.2 must be made at least one year
prior to the date on which such Sub Account becomes vested. An
election to defer the Settlement Date for a Sub Account shall become
irrevocable one year prior to the date on which such Sub Account
becomes vested.
2
<PAGE>
6. This Amendment shall be effective as of September 30, 1997.
IN WITNESS WHEREOF, the Amendment is hereby executed.
THE TAUBMAN COMPANY LIMITED PARTNERSHIP
By:/s/ Esther R. Blum
------------------------------------
Its: Vice President, Controller and
Chief Accounting Officer
-----------------------------------
3
Exhibit 12
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
Computation of Ratios of Earnings to Fixed Charges and Preferred Distributions
(in thousands, except ratios)
Three Months Ended March 31
---------------------------
1998 1997
---- ----
Net Earnings from Continuing Operations $23,305 $23,584
Add back:
Fixed charges 37,391 29,262
Amortization of previously
capitalized interest (1) 619 476
Equity in net income in excess of
distributions of less than 50% owned
Unconsolidated Joint Ventures (594) 0
Deduct:
Capitalized interest (1) (3,532) (3,261)
------- -------
Earnings Available for Fixed Charges
and Preferred Distributions $57,189 $50,061
======= =======
Fixed Charges
Interest expense $22,637 $17,284
Capitalized interest 3,308 1,994
Interest portion of rent expense 1,769 1,880
Proportionate share of Unconsolidated
Joint Ventures' fixed charges 9,677 8,104
------- -------
Total Fixed Charges $37,391 $29,262
------- -------
Preferred Distributions 4,150
------- -------
Total Fixed Charges and
Preferred Distributions $41,541 $29,262
======= =======
Ratio of Earnings to Fixed Charges
and Preferred Distributions 1.4 1.7
- -----------------
(1) Amounts include TRG's pro rata share of capitalized interest and
amortization of previously capitalized interest of the Unconsolidated 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
MARCH 31, 1998 AND TRG'S CONSOLIDATED STATEMENT OF OPERATIONS FOR THE QUARTER
ENDED MARCH 31, 1998 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,013
<SECURITIES> 0
<RECEIVABLES> 19,940
<ALLOWANCES> 357
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 1,649,352
<DEPRECIATION> 280,358
<TOTAL-ASSETS> 1,433,990
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 1,365,359
0
192,840
<COMMON> 0
<OTHER-SE> (418,900)
<TOTAL-LIABILITY-AND-EQUITY> 1,433,990
<SALES> 0
<TOTAL-REVENUES> 87,169
<CGS> 0
<TOTAL-COSTS> 47,270
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,637
<INCOME-PRETAX> 23,305
<INCOME-TAX> 0
<INCOME-CONTINUING> 23,305
<DISCONTINUED> 0
<EXTRAORDINARY> (957)
<CHANGES> 0
<NET-INCOME> 22,348
<EPS-PRIMARY> .14 <F3>
<EPS-DILUTED> .14
<FN>
<F1> EXCEPT FOR UNIT DATA.
<F2> TRG HAS AN UNCLASSIFIED BALANCE SHEET.
<F3> EFFECTIVE SEPTEMBER 30, 1997, TRG AMENDED ITS PARTNERSHIP AGREEMENT TO
SPLIT EXISTING UNITS OF PARTNERSHIP INTEREST AS A RATIO OF 1975.08 T0
ONE.
</FN>
</TABLE>
