As filed with the Securities and Exchange Commission on October 21, 1996
Registration No. 333-11491
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
___________________
SIMON-DEBARTOLO GROUP, L.P.
(Exact name of each registrant as specified in its charter)
DELAWARE 34-1755769
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
NATIONAL CITY CENTER
115 WEST WASHINGTON STREET
SUITE 15 EAST
INDIANAPOLIS, IN 46204
(317) 636-1600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
DAVID SIMON
CHIEF EXECUTIVE OFFICER
SIMON DEBARTOLO GROUP, INC.
NATIONAL CITY CENTER
115 WEST WASHINGTON STREET
SUITE 15 EAST
INDIANAPOLIS, IN 46204
(317) 636-1600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
_________________
COPIES TO:
EDWIN S. MAYNARD, ESQ. James M. Asher, Esq.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON Robert E. King, Jr., Esq.
1285 AVENUE OF THE AMERICAS Rogers & Wells
NEW YORK, NEW YORK 10019-6064 200 Park Avenue
(212) 373-3000 New York, New York 10166
(212) 878-8000
Approximate date of commencement of proposed sale to the public:
From time to time or at one time after the effective date of the Registration
Statement.
If the only securities being registered on this Form are to be offered pursuant
to dividend or interest reinvestment plans, please check the following box.
[ ].
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ x ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
_____________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
_________________
EXPLANATORY NOTE
This Registration Statement relates to securities which may be offered from
time to time by Simon-DeBartolo Group, L.P. (the "Operating Partnership").
This Registration Statement contains a form of Base Prospectus which will be
used in connection with an offering of securities by the Operating Partnership.
The specific terms of the securities to be offered will be set forth in a
Prospectus Supplement relating to such securities. Pages S-1 through F-11
herein set forth a Preliminary Prospectus Supplement, which is not a part of
the Base Prospectus, relating to the proposed offering by the Operating
Partnership of certain notes of the Operating Partnership.
SUBJECT TO COMPLETION, DATED OCTOBER 21, 1996 **
P R E L I M I N A R Y P R O S P E C T U S S U P P L E M E N T
(To Prospectus dated October ___, 1996)
[LOGO]
SIMON-DeBARTOLO GROUP, L.P.
$ ,000,000 % Notes due , 200
$ ,000,000 % Notes due , 200
$ ,000,000 % Notes due , 20
_________
The % Notes due , 200 (the "200 Notes"), the %
Notes due , 200 (the "200 Notes"), and the % Notes
due , 20 (the "20 Notes," and together with the 200 Notes
and the 200 Notes, the "Notes") offered hereby (the "Offering") are being
issued by Simon-DeBartolo Group, L.P., a Delaware limited partnership (the
"Operating Partnership"), in an aggregate principal amount of $300 million. The
200 Notes will mature on , 200 . The 200 Notes will mature
on , 200 . The 20 Notes will mature on , 20 .
The holder of each 20 Note may elect to have such Note, or any portion of
the principal amount thereof that is a multiple of $1,000, repaid on , 20
at 100% of the principal amount thereof, together with accrued interest to
, 20 . Such election, which is irrevocable when made, must be made within the
period commencing on , 20 and ending on the close of business on
, 20 . The Notes are redeemable at any time at the option of the Operating
Partnership, in whole or in part, at a redemption price equal to the sum of
(i) the principal amount of the Notes being redeemed plus accrued interest to
the redemption date and (ii) the Make-Whole Amount (as defined in "Description
of the Notes - Optional Redemption"), if any. Interest on the Notes is payable
semi-annually in arrears on each and , commencing
, 1996. The Notes are unsecured obligations of the Operating Partnership and
will rank pari passu, with each other and all unsecured unsubordinated
indebtedness of the Operating Partnership. On October ___, 1996, the Operating
Partnership had combined unsecured unsubordinated indebtedness aggregating $
million. See "Description of the Notes."
The 200 Notes, the 200 Notes and the 20 Notes constitute separate series of
debt securities, each of which will be represented by a single fully-registered
global note in book-entry form, without coupons (each a "Global Note"),
registered in the name of the nominee of The Depository Trust Company ("DTC").
Beneficial interests in the Global Notes will be shown on, and transfers
thereof will be effected only through, records maintained by DTC (with respect
to beneficial interests of participants) or by participants or persons that
hold interests through participants (with respect to beneficial interests of
beneficial owners). Owners of beneficial interests in the Global Notes will be
entitled to physical delivery of Notes in definitive form equal in principal
amount to their respective beneficial interest only under the limited
circumstances described under "Description of the Notes - Book Entry System."
Settlement for the Notes will be made in immediately available funds. The Notes
will trade in DTC's Same-Day Funds Settlement System until maturity or until
the Notes are issued in definitive form, and secondary market trading activity
in the Notes will therefore settle in immediately available funds. All payments
of principal and interest in respect of the Notes will be made by the Operating
Partnership in immediately available funds. See "Description of the Notes -
Same Day Settlement and Payment." The Operating Partnership does not intend to
apply for listing of the Notes on a national securities exchange.
_________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_________
**Information contained herin is subject to completion or amendment. A
registration relating to these securities has been filed with the Securities and
Exchange Commission. These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes effective. This
prospectus supplement and the accompanying prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities laws of any such State.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
_________
PRICE TO PUBLIC (1) UNDERWRITING PROCEEDS TO THE
DISCOUNT (2) OPERATING
PARTNERSHIP (3)
Per 200 Note % % %
Total $ $ $
Per 200 Note % % %
Total $ $ $
Per 20 Note % % %
Total(3) $ $ $
@@
(1) Plus accrued interest, if any, from , 1996.
(2) The Operating Partnership has agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See Underwriting.
(3) Before deducting expenses payable by the Operating Partnership estimated
at $ .
_________
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if delivered to and accepted by them, subject to approval of
certain legal matters by counsel for the Underwriters. The Underwriters reserve
the right to withdraw, cancel or modify such offer and to reject orders in
whole or in part. It is expected that delivery of the Notes will be made in New
York, New York on or about October __, 1996.
_________
MERRILL LYNCH & CO.
_________
The date of this Prospectus Supplement is October__, 1996.
A graphical presentation of the location of the Company's regional malls on a
map of the United States and a graphical presentation of the location of the
Company's community centers on a map of the United States. On each map, owned,
managed and in development malls or centers, as the case may be, are each
represented by a different symbol.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT LEVELS ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR INCORPORATED HEREIN
AND THEREIN BY REFERENCE. UNLESS INDICATED OTHERWISE, THE INFORMATION CONTAINED
IN THIS PROSPECTUS SUPPLEMENT IS PRESENTED AS OF JUNE 30, 1996. ALL REFERENCES
TO THE "OPERATING PARTNERSHIP" OR THE "COMPANY" (AS DEFINED BELOW) IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS INCLUDE THE OPERATING
PARTNERSHIP OR THE COMPANY, AS THE CASE MAY BE, THOSE ENTITIES OWNED OR
CONTROLLED BY IT (INCLUDING, IN THE CASE OF THE OPERATING PARTNERSHIP, SPG, LP,
AS DEFINED BELOW) AND ITS PREDECESSORS, UNLESS THE CONTEXT INDICATES OTHERWISE.
EXCEPT AS OTHERWISE NOTED, STATISTICAL PROPERTY INFORMATION CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS IS BASED UPON THE
BUSINESS AND PROPERTIES OF THE OPERATING PARTNERSHIP ON A COMBINED BASIS,
ADJUSTED TO GIVE EFFECT TO THE MERGER (AS DEFINED BELOW) AND RELATED
TRANSACTIONS THERETO AS THOUGH THEY HAD OCCURRED PRIOR TO THE DATE OR PERIOD OF
TIME TO WHICH SUCH INFORMATION RELATES. HISTORICAL FINANCIAL INFORMATION,
UNLESS EXPRESSLY DESIGNATED AS PRO FORMA FINANCIAL INFORMATION, HAS NOT BEEN
ADJUSTED TO GIVE EFFECT TO THE MERGER AND RELATED TRANSACTIONS THERETO.
THE OPERATING PARTNERSHIP
Simon-DeBartolo Group, L.P. (the "Operating Partnership") is a subsidiary
partnership of Simon DeBartolo Group, Inc. (the "Company"). The Company is a
self-administered and self-managed real estate investment trust ("REIT").
Simon Property Group, L.P. ("SPG, LP") is a subsidiary partnership of the
Operating Partnership and is also a subsidiary partnership of the Company. The
Operating Partnership is engaged primarily in the ownership, development,
management, leasing, acquisition and expansion of income producing properties,
primarily regional malls and community shopping centers. On August 9, 1996, the
Company acquired the national shopping center business of DeBartolo Realty
Corporation ("DRC"), The Edward J. DeBartolo Corporation ("EJDC") and their
affiliates as the result of the merger of DRC with a subsidiary of the Company
(the "Merger"). As a result of the Merger, the number of properties in the
portfolio increased by 61 and the management resources of the merged entities
were combined to create one of the most experienced management teams in the
shopping center business. Management believes that as a result of the Merger,
the Portfolio Properties (as defined below), as measured in gross leasable area
("GLA"), are the largest and most geographically diverse portfolio of any
publicly traded REIT in North America. Management also believes that the
Company is the largest, as measured by market capitalization, of any publicly
traded real estate company in North America. Management further believes that
the Operating Partnership's relationships with tenants, access to capital
markets and opportunities for economies of scale and operating efficiencies
will be enhanced as a result of the Operating Partnership's substantially
increased portfolio size and market capitalization. In conjunction with the
Merger, DRC was renamed SD Property Group, Inc. (the "Managing General
Partner") and is the managing general partner of the Operating Partnership. The
Company is a general partner of the Operating Partnership and sole general
partner of SPG, LP (the Company and the Managing General Partner are sometimes
referred to collectively as the "General Partners"). As of September 30, 1996,
61.5% of the equity interest in the Operating Partnership was owned by the
Company and 38.5% was owned by certain limited partners of the Operating
Partnership, including the Simons (as defined below), certain members of the
DeBartolo family, including certain affiliates and trusts and estates
established for their benefit (collectively, the "DeBartolos"), and other
limited partners.
In addition, SPG, LP holds substantially all of the economic interest in
M.S. Management Associates, Inc. (the "SPG Management Company"). Melvin Simon,
Herbert Simon, David Simon and certain of their affiliates, including certain
other Simon family members and estates, trusts and other entities established
for their benefit (collectively, the "Simons") or their affiliates hold the
voting stock of the SPG Management Company. SPG Management Company manages
certain regional malls and community shopping centers not wholly owned by the
Operating Partnership and certain other properties and also engages in certain
property development activities. The Operating Partnership holds substantially
all of the economic interest in, and the SPG Management Company holds
substantially all of the voting stock of, DeBartolo Properties Management, Inc.
(the "DRC Management Company"),
S-4
which provides architectural, design,
construction and other services to substantially all of the Portfolio
Properties (as defined below) owned by the Operating Partnership, as well as
certain other regional malls and community shopping centers owned by third
parties.
The Operating Partnership owns or holds interests in a diversified portfolio
of 183 income producing properties (the "Portfolio Properties"), including 111
super-regional and regional malls, 66 community shopping centers, two specialty
retail centers and four mixed-use properties located in 32 states. The
Portfolio Properties contain an aggregate of approximately 110 million square
feet of GLA, of which approximately 66 million square feet is GLA owned by the
Operating Partnership ("Owned GLA"). More than 3,600 different retailers occupy
approximately 12,000 stores in the Portfolio Properties. Total estimated retail
sales at the Portfolio Properties approached $16 billion in fiscal year 1995.
In addition, the Operating Partnership has interests in eight properties under
construction in the United States aggregating an additional seven million
square feet of GLA, and owns land held for future development. The Operating
Partnership, together with the SPG Management Company and its affiliated
management companies, manage over 127 million square feet of GLA of retail and
mixed-use properties.
SUMMARY OF PORTFOLIO PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)
The following table summarizes on a combined basis, as of June 30, 1996,
certain information with respect to the Portfolio Properties, in total and by
type of shopping center and retailer:@@
TYPE OF PROPERTY(1) GLA TOTAL OWNED GLA (SQ. % OF OWNED % OF OWNED
(SQ. FT.) FT.) GLA(2) GLA WHICH IS
LEASED(3)
Regional Malls (4)
Mall Store 32,255,514 32,255,514 49.4 83.2
Freestanding 1,251,647 599,826 0.9 93.6
__________ __________ ____ _____
Subtotal 33,507,161 32,855,340 50.3 83.4
__________ __________ ____ _____
Anchor 59,280,749 20,025,108 30.6 96.9
__________ __________ ____ _____
Total 92,787,910 52,880,448 80.9 88.5
Community Shopping Centers
Mall Store 3,882,220 3,801,130 5.9 90.3
Freestanding 768,648 284,809 0.4 100.0
Anchor 10,462,344 6,420,675 9.8 92.3
__________ __________ ____ _____
Total 15,113,212 10,506,614 16.1 91.8
Office Portion of Mixed-Use Properties 1,943,676 1,943,676 3.0 93.4
___________ __________ ____ _____
Total 109,844,798 65,330,738 100.0 89.2
=========== ========== ===== =====
_________
(1) Here and elsewhere in this Prospectus Supplement, all GLA, Owned GLA, and
base rent is reported for each Portfolio Property, even if the Operating
Partnership has less than a 100% ownership interest in the Portfolio
Property.
(2) Indicates the percentage of total Owned GLA represented by each category of
space.
S-5
(3) Includes, here and elsewhere in this Prospectus Supplement, space for
which, a lease has been executed, whether or not the space was then occupied.
The table under "Additional Information" in this Prospectus Supplement
indicates vacant anchor space as of June 30, 1996.
(4) Includes two specialty retail centers and retail space at four mixed-use
properties.
THE OFFERING
All capitalized terms used herein and not defined herein have meanings
provided in "Description of the Notes." For a more complete description of the
terms of the Notes specified in the following summary, see "Description of the
Notes."
Securities Offered $ ,000,000 aggregate principal amount of % Notes due , 200
(the "200 Notes"), $ ,000,000 aggregate principal amount of % Notes
due , 200 (the "200 Notes") and $ ,000,000 aggregate principal
amount of % Notes due , 20 (the "20 Notes", and together with the 200
Notes and the 200 Notes, the "Notes"). An aggregate of $300 million principal
amount of Notes is being offered.
Maturity The 200 Notes will mature on , 200 , the 200 Notes will mature on
, 200 , and the 20 Notes will mature on , 20 .
Interest Payment Dates Interest on the Notes is payable semi-annually on each and ,
commencing , 1996, and at maturity.
Ranking The Notes will rank pari passu with each other and with all other unsecured and
unsubordinated indebtedness of the Operating Partnership except that the Notes
will be effectively subordinated to (i) the prior claims of each secured
mortgage lender to any specific Portfolio Property which secures such lender's
mortgage and (ii) any claims of creditors of entities wholly or partly owned,
directly or indirectly, by the Operating Partnership.
Use of Proceeds The net proceeds to the Operating Partnership from the Offering (approximately $
million) will be used to repay outstanding mortgage indebtedness of
approximately $ million and to reduce the amount outstanding under the
Operating Partnership's Credit Facility (as defined herein) by approximately $
million.
Limitations on Incurrence of Debt The Notes contain various covenants, including the following:
(1) The Operating Partnership will not incur any Debt if, after giving effect
thereto, the aggregate principal amount of all outstanding Debt is greater
than 60% of the sum of (i) the Operating Partnership's Adjusted Total Assets
as of the end of the most recent fiscal quarter and (ii) any increase in
Adjusted Total Assets from the end of such quarter, including any pro forma
increase resulting from the application of proceeds of such additional Debt.
S-6
(2) The Operating Partnership will not incur any Secured Debt if, after
giving effect thereto, the aggregate principal amount of all outstanding
Secured Debt is greater than 55% of the sum of (i) the Operating
Partnership's Adjusted Total Assets as of the end of the fiscal quarter
prior to the incurrence of such additional Secured Debt and (ii) any
increase in Adjusted Total Assets from the end of such quarter, including
any pro forma increase resulting from the application of proceeds of such
additional Secured Debt.
(3) The Operating Partnership will not incur any Debt if the ratio of EBITDA
After Minority Interest to Interest Expense for the four consecutive fiscal
quarters most recently ended prior to the incurrence of such Debt, on a pro
forma basis, is less than 1.75 to 1.
(4) The Operating Partnership is required to maintain Unencumbered Assets of not
less than 150% of the aggregate outstanding principal amount of Unsecured
Debt.
For definitions of the capitalized terms used in the foregoing covenants, see
"Descriptions of the Notes - Certain Covenants."
Repayment of the 20 Notes at
Option of Holders The registered holder of each 20 Note may elect to have such 20 Note, or any
portion of the principal amount thereof that is a multiple of $1,000, repaid on
, 20 at 100% of the principal amount thereof, together with accrued interest
to , 20 . Such election, which is irrevocable when made, must be made
within the period commencing on , 20 and ending at the close of
business on 20 . See "Description of the Notes - Repayment of the 20
Notes at the Option of Holders."
Optional Redemption The Notes are redeemable at any time at the option of the Operating Partnership,
in whole or in part, at a redemption price equal to the sum of (i) the principal
amount of the Notes being redeemed plus accrued interest to the redemption date
and (ii) the Make-Whole Amount, if any. See "Description of the Notes - Optional
Redemption."
@@
S-7
THE OPERATING PARTNERSHIP
The Operating Partnership is engaged primarily in the ownership, development,
management, leasing, acquisition and expansion of income producing properties,
primarily regional malls and community shopping centers. On August 9, 1996, the
Company acquired the national shopping center business of DRC, EJDC and their
affiliates as the result of the merger of DRC with a subsidiary of the Company.
As a result of the Merger, the number of properties in the portfolio increased
by 61 and the management resources of the merged entities were combined to
create one of the most experienced management teams in the shopping center
business. Management believes that as a result of the Merger, the Portfolio
Properties, as measured in GLA, are the largest and most geographically diverse
portfolio of any publicly traded REIT in North America. Management also
believes that the Company is the largest, as measured by market capitalization,
of any publicly traded real estate company in North America. Management further
believes that the Operating Partnership's relationships with tenants, access to
capital markets and opportunities for economies of scale and operating
efficiencies will be enhanced as a result of the Operating Partnership's
substantially increased portfolio size and the Company's increased market
capitalization. In conjunction with the Merger, DRC was renamed SD Property
Group, Inc. and is the managing general partner of the Operating Partnership.
The Company is a general partner of the Operating Partnership and sole general
partner of SPG, LP. As of September 30, 1996, 61.5% of the equity interest in
the Operating Partnership was owned by the Company and 38.5% was owned by
certain limited partners of the Operating Partnership, including the Simons,
the DeBartolos and other limited partners.
In addition, SPG, LP holds substantially all of the economic interest in, and
the Simons or their affiliates hold the voting stock of, the SPG Management
Company, which manages regional malls and community shopping centers not wholly
owned by the Operating Partnership and certain other properties and also
engages in certain property development activities. The Operating Partnership
holds substantially all of the economic interest in, and the SPG Management
Company holds substantially all of the voting stock of, the DRC Management
Company, which provides architectural, design, construction and other services
to substantially all of the Portfolio Properties owned by the Operating
Partnership, as well as certain other regional malls and community shopping
centers owned by third parties.
S-8
The following chart depicts the organizational and ownership structure of the
Operating Partnership and certain affiliates:
STRUCTURE OF THE SIMON DEBARTOLO GROUP, INC.
[ORGANIZATIONAL CHART]
The information provided in these notes gives effect to the Merger and
related transactions thereto.
(1) The Simons own less than 1% of the outstanding shares of common stock of
the Company and all of the Class B common stock of the Company.
(2) The DeBartolos own less than 1% of the outstanding common stock of the
Company and all of the Class C common stock of the Company.
(3) The Company owns over 99.9% of the common stock of SD Property Group,
Inc. and, both directly and indirectly through its ownership of the SD
Property Group, Inc., owns a 61.5% interest in the Operating Partnership
and, as general partner, owns 1% of the partnership units in SPG, LP (the
"SPG Units") and a 49.5% interest in the capital of SPG, LP.
(4) The former limited partners of the Partnerships as a group (including the
Simons and the DeBartolos) own a 38.5% beneficial interest in the
Operating Partnership and SPG, LP, of which the Simons own 21.7% and the
DeBartolos own 14.2%.
(5) The Operating Partnership owns a 49.5% special limited partnership
interest in, and an additional 49.5% interest in the profits of, SPG, LP.
(6) Properties owned by SPG, LP will be held as they were held in the pre-
merger structure. Later acquired properties will be held by, and future
operations will be conducted through, the Operating Partnership. Until
transferred to the Operating Partnership (assuming all necessary consents
can be obtained), properties owned by SPG, LP will continue to be owned
by SPG, LP.
S-9
DIVERSIFIED PORTFOLIO
Management believes that the Portfolio Properties are the largest, as
measured in GLA, of any publicly traded REIT, with more regional malls than any
other publicly traded REIT. Management believes that the geographic
diversification of the Portfolio Properties should mitigate the effects of
regional economic conditions and local factors, and that the diversified types
of properties should reduce the impact of economic factors that may affect the
retailers in any particular type of property. In addition, management believes
that the large size of the portfolio should mitigate the effects of any other
factors that may affect a limited group of shopping centers.
The Operating Partnership owns or holds interests in a diversified portfolio
of 183 income producing Portfolio Properties, including 111 super-regional and
regional malls, 66 community shopping centers, two specialty retail centers and
owns four mixed-use properties located in 32 states. The Portfolio Properties
contain an aggregate of approximately 110 million square feet of GLA, of which
approximately 66 million square feet is GLA owned by the Operating Partnership.
In addition, the Operating Partnership has interests in eight properties under
construction in the United States, and owns land held for future development.
The Operating Partnership, together with the SPG Management Company and its
affiliated management companies, manage over 127 million square feet of GLA of
retail and mixed-use properties. As of June 30, 1996, no single Portfolio
Property accounted for more than 1.4% of GLA or 3.5% of the Operating
Partnership's pro forma gross revenues for the six months ended June 30, 1996.
The diversity of property type and market also provides the Operating
Partnership with a broad spectrum of tenant relationships, ranging from in-line
specialty shops to full service department stores; and from value retailers to
high-end fashion merchants. More than 3,600 retailers occupy approximately
12,000 stores in the Portfolio Properties. Total estimated retail sales at the
Portfolio Properties approached $16 billion in fiscal year 1995. Furthermore,
no single retailer leases more than 10.9% of the Owned GLA in the income-
producing properties or represents more than 7.7% of the annualized base rent
from these properties.
The Portfolio Properties include properties owned 100% by the Operating
Partnership (the "Wholly-Owned Properties"), and properties held as joint
ventures (the "Joint Venture Properties"). Of the 183 Portfolio Properties, 139
are Wholly-Owned Properties, and 44 are Joint Venture Properties. The Operating
Partnership manages the Wholly-Owned Properties and its affiliate, the SPG
Management Company, manages all but two of the Joint Venture Properties.
COMPETITIVE POSITION
The Operating Partnership believes that it has a competitive advantage in the
retail real estate business as a result of (i) its use of innovative retailing
concepts, (ii) the strength of its management and operational expertise, (iii)
its extensive experience and relationship with retailers and lenders and (iv)
the size and diversity of its portfolio of properties.
The Operating Partnership has employed many creative retailing concepts in
the Portfolio Properties, such as the power center, which transformed the
community shopping center through its high concentration of anchor stores; the
specialty retail center, with many unique merchandising and entertainment
attractions located in a distinctive marketplace or location; the selective
addition to regional malls of value-oriented tenants; and the combination of
traditional retail stores with entertainment and restaurant facilities.
The senior executives of the General Partners have been recognized leaders in
the shopping center industry over the past three decades. The Operating
Partnership was among the first owners of shopping centers to integrate the
full spectrum of services needed to manage, develop and acquire shopping
centers, including leasing, development, management, marketing, research,
budgeting, accounting, real estate tax management, collection, technical,
architectural, construction, engineering, tenant coordination, legal and
financial services. The depth and tenure of the management of the General
Partners has enabled it to develop a results-driven team that is encouraged to
adopt innovative strategies and solutions to the operation of the Operating
Partnership's business.
S-10
Management believes its experience and relationships with retailers of almost
every type make the Operating Partnership one of the few shopping center
companies that, on a national scale, can develop, acquire, lease and manage
virtually every kind of shopping center in both urban and suburban locations,
from the community center to the super-regional mall, and from the high-fashion
center to the value-oriented center. Management believes that such a wide
spectrum of retail formats provides the Operating Partnership with a
competitive advantage which enables it to respond quickly and effectively to
the changing requirements of the market.
Management also believes that the size and diversity of its portfolio and
operations enable the Operating Partnership to realize significant economies of
scale, provides operating and leasing leverage, and enable the Operating
Partnership to stay at the forefront of emerging retail trends.
OPERATING STRATEGY
The Operating Partnership's primary business objectives are to increase cash
generated from operations and the value of the Operating Partnership's
properties and operations. The Operating Partnership plans to achieve these
objectives through a variety of methods discussed below, although no assurance
can be made that such objectives will be achieved.
LEASING. The Operating Partnership pursues an active leasing strategy, which
includes aggressively marketing available space; increasing occupancy; renewing
leases at higher base rents per square foot; retenanting space occupied by
underperforming tenants; and continuing to sign leases that provide for
percentage rents and/or regular or periodic fixed contractual increases in base
rents. Management believes that the Operating Partnership's extensive
relationship with national retail tenants provides an advantage in leasing
space at the Portfolio Properties.
MANAGEMENT. Drawing upon the expertise gained through management of over 127
million square feet of retail and mixed-use properties, the Operating
Partnership seeks to maximize cash flow through a combination of an active
merchandising program to maintain its shopping centers as inviting shopping
destinations, continuation of its successful efforts to minimize overhead and
operating costs, coordinated marketing and promotional activities and
systematic planning and monitoring of results.
RENOVATION AND EXPANSION. The Operating Partnership has a number of
renovation or expansion projects under construction or in the final stages of
pre-construction development, including several existing Portfolio Properties
which have significant expansion opportunities. The contemplated expansions
would typically involve the addition of one or more anchor stores and/or
additional mall store space. At each site where additional anchor space is
contemplated, one or more retailers have expressed interest in occupying an
anchor store in the expansion space. The Operating Partnership's current and
recently completed renovation and expansion projects are described under
"Recent Developments."
DEVELOPMENT. The Operating Partnership believes there will continue to be
opportunities to develop regional malls and power centers in selected growing
metropolitan markets. The Operating Partnership intends to undertake such
development on a selected basis, and believes that it will have a competitive
advantage in doing so as a result of its extensive development expertise, the
breadth and depth of its relationships with retailers and its access to
capital. Since the 1960's, the Operating Partnership or its predecessor has
been among the most active developers, managers and redevelopers of shopping
centers in the U.S. The Operating Partnership's current development activities
are described under "Recent Developments."
ACQUISITIONS. The Operating Partnership intends selectively to acquire
individual properties and portfolios of properties that meet its investment
criteria as opportunities arise. Management believes that consolidation is
occurring within the shopping center industry, creating opportunities for the
Operating Partnership to acquire selected individual properties and portfolios
of shopping centers. Management also believes that its extensive experience in
the shopping center business, access to capital markets, familiarity with real
estate markets and advanced management systems will allow it to evaluate,
execute and integrate acquisitions competitively. Furthermore, management
believes that the Operating Partnership will be able to manage and operate
acquired properties on a cost effective basis as a result of (i) the scope of
the Operating Partnership's existing portfolio and
S-11
(ii) the economies of scale of the regional mall business. Additionally, the
Operating Partnership may be able to acquire properties on a tax-advantaged
basis for the transferors through the issuance of its units of limited
partnership ("OP Units"). The Operating Partnership may also be able to acquire
properties through public or private debt financings or through equity
financings of the Company. The consent of the lenders under certain of the
Operating Partnership's long term debt agreements may be required in connection
with substantial property acquisitions. See "Recent Developments."
FINANCING STRATEGY
Management seeks to maintain a well-balanced, conservative and flexible
capital structure by: (i) targeting a ratio of debt to total market
capitalization of approximately 50% or lower; (ii) managing and sequencing the
maturity dates of its debt; (iii) borrowing primarily at fixed rates, and
hedging floating rate indebtedness where appropriate; (iv) decreasing the
proportion of borrowings done on a secured basis and increasing the amount of
unencumbered cash flow and properties; (v) maintaining conservative debt
service and fixed charge coverage ratios; (vi) pursuing liquidity and financial
flexibility by maintaining cash reserves and substantial availability under its
revolving credit facility; and (vii) as the Operating Partnership's Funds From
Operations ("FFO") grows, gradually reducing the payout ratio and retaining
more FFO for capital needs. Management believes that these strategies have
enabled and should continue to enable the Operating Partnership to access the
debt and equity capital markets for their long-term requirements such as debt
refinancings and financing for development and acquisitions of additional
properties and portfolios of properties. It is the Company's policy that Simon
DeBartolo Group, Inc. shall not incur indebtedness other than short-term trade,
employee compensation, distributions payable or similar indebtedness that will
be paid in the ordinary course of business, and that indebtedness shall instead
by incurred by the Operating Partnership to the extent necessary to fund the
business activities conducted by the Operating Partnership, its subsidiaries
and affiliates.
RECENT DEVELOPMENTS
THE MERGER
On August 9, 1996, pursuant to an Agreement and Plan of Merger, dated as of
March 26, 1996, as amended, among the Company, Day Acquisition Corp., an Ohio
corporation and a subsidiary of the Company ("Sub"), and DRC, Sub was merged
with and into DRC (the "Merger"). The Merger and certain other related matters
were approved by stockholders of the Company and shareholders of DRC at their
special meetings held on August 7, 1996 and August 6, 1996, respectively.
In connection with the Merger, outstanding shares of common stock of DRC, par
value $.01 per share, were converted into the right to receive 0.68 shares of
common stock of the Company, plus cash in lieu of any fractional shares. As a
result, shareholders of DRC received approximately 37.9 million shares of
common stock of the Company. In addition, all of the limited partners of SPG,
LP and the Company, as general partner of SPG, LP, contributed an aggregate
49.5% interest of the outstanding partnership units of SPG, LP and an
additional 49.5% interest in the profits of SPG, LP to the Operating
Partnership, in exchange for a majority of the partnership interests in the
Operating Partnership.
For financial reporting purposes, the completion of the Merger and related
transactions resulted in a reverse acquisition, directly or indirectly, of 100%
of the net assets of DeBartolo Realty Partnership, L.P. ("DRP, LP"). See
"Accounting Treatment of the Merger and the Other Related Transactions."
ACQUISITIONS, DEVELOPMENT AND EXPANSION
Since December 1994, the Operating Partnership has continued to acquire,
develop, expand and renovate its portfolio. Such projects have historically
been, and the Operating Partnership expects that in the future they will
continue to be, financed principally with existing credit facilities, equity
financings by the Company and cash flow
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from operations.
COMPLETED ACQUISITIONS
The Operating Partnership selectively acquires individual properties and
portfolios of properties that meet its investment criteria as opportunities
arise. Since December 1994 the Company and DRC have completed 14 acquisitions
resulting in an addition of approximately 4.5 million square feet of GLA to the
Portfolio Properties from such acquisitions in properties in which the Company
or DRC had previously owned no interests. The table below gives certain
information regarding recently completed acquisitions.
@@
Name Location Date of % Interest Operating Percent
Completion Acquired Partnership's % Leased(1) as
Interest as of Total GLA. of
June 30, 1996 (Sq. Ft.) June 30, 1996
Independence Center Independence, MO December, 1994 100% 100% 1,033,566 77.3%
Orange Park Mall Jacksonville, FL December, 1994 100% 100% 850,963 90.1%
University Mall Pensacola, FL December, 1994 100% 100% 712,013 82.0%
Broadway Square Tyler, TX December, 1994 100% 100% 573,142 93.7%
White Oaks Mall Springfield, IL February, 1995 50% 77% 903,839 94.4%
Miami International Mall Miami, FL July, 1995, 23% 60% 972,281 95.7%
March, 1996
University Center South Bend, IN July, 1995 10% 60% 150,533 97.8%
University Park Mall South Bend, IN July, 1995 10% 60% 870,002 95.6%
Crossroads Mall Omaha, NE August, 1995 50% 100% 884,356 91.8%
East Towne Mall Knoxville, TN September, 1995 50% 100% 977,042 79.7%
Smith Haven Mall Lake Grove, NY December, 1995 25% 25% 1,348,232 84.9%
Biltmore Square Asheville, NC January, 1996 33% 67% 495,419 77.3%
Chesapeake Square Chesapeake, VA January, 1996 25% 75% 704,785 79.9%
Ross Park Mall Pittsburgh, PA April, 1996 39% 89%(2) 1,273,446 93.1%
North East Mall Hurst, TX October, 1996 50% 50%(3) 1,140,403 87.7%
__________
(1)Represents the percentage of Owned GLA leased.
(2)The Operating Partnership receives 100% of the economic ownership interest
in the property and has exercised its option to acquire the remaining 11% of
the ownership effective January 1997.
(3)In connection with the settlement of certain outstanding litigation, the
Operating Partnership acquired on October 4, 1996, for cash, an additional
20% limited partnership interest in Hurst Mall Company. At the same time,
the Operating Partnership exercised its option to acquire the remaining 30%
limited partnership interest in Hurst Mall Company owned by the Simons in
exchange for units ("OP Units") in the Operating Partnership, as well as the
Simon's 50% general partnership interest which the Operating Partnership
acquired for nominal consideration. The Simons had previously contributed
to the Operating Partnership in exchange for OP Units, the right to receive
distributions relating to its 50% general partnership interest.
S-13
COMPLETED DEVELOPMENTS AND NEW DEVELOPMENTS UNDER CONSTRUCTION
The Operating Partnership continues to develop regional malls, power centers
and specialty centers in selected growing metropolitan markets. The Operating
Partnership undertakes such development on a selected basis and believes that
it has a competitive advantage in doing so as a result of its development
expertise, the breadth and depth of its relationships with retailers and its
access to capital. The table below gives certain information regarding recently
completed developments and new developments under construction.
@@
ACTUAL OR EXPECTED NAME LOCATION OPERATING TOTAL GLA PERCENT
DATE OF COMPLETION PARTNERSHIP'S (SQ. FT.) LEASED(1) AS
% INTEREST OF
JUNE 30, 1996
Completed Developments:
September, 1995 Circle Centre Indianapolis, IN 15% 790,476 94.3%
September, 1995 Seminole Towne Center Sanford, FL 45% 1,137,374 85.2%
October, 1995 Lakeline Mall North Austin, TX 50% 1,109,324 88.9%
July, 1996 Cottonwood Mall Albuquerque, NM 100% 1,035,000 87.4%(2)
__________
Total 4,072,174
New Developments Under Construction:
4th Qtr. 1996 Ontario Mills Ontario, CA 25% 1,400,000 N/A
4th Qtr. 1996 Indian River Mall Vero Beach, FL 50% 754,000 N/A
4th Qtr. 1996 Tower Shops at Las Vegas, NV 50% 80,000 N/A
Stratosphere
1st Qtr. 1997 Indian River Commons Vero Beach, FL 50% 265,000 N/A
3rd Qtr. 1997 The Source Long Island, NY 50% 730,000 N/A
4th Qtr. 1997 Arizona Mills Tempe, AZ 25% 1,225,000 N/A
4th Qtr. 1997 Grapevine Mills Grapevine, TX 37% 1,450,000 N/A
__________
Total 5,904,000
__________
(1)Represents the percentage of Owned GLA leased.
(2)Percent leased as of opening on July 31, 1996.
EXPANSIONS AND RENOVATIONS
The Operating Partnership has recently completed several expansions or
renovations of Portfolio Properties and has a number of projects under
construction or in the final stages of pre-construction development, including
several existing Portfolio Properties which have significant expansion
opportunities. Such projects typically involve the addition of one of more
anchor stores and/or additional mall space. The table below gives certain
information regarding recently completed expansions or renovations and
expansion or renovation projects currently under construction.
S-14
ACTUAL OR EXPECTED NAME LOCATION PERCENT LEASED(1)
DATE OF COMPLETION AS OF JUNE 30,
1996
Completed Expansions and Renovations:
August, 1995 Biltmore Square Asheville, NC 77.3%
November, 1995 Tippecanoe Mall Lafayette, IN 80.7%
November, 1995 Ingram Park Mall San Antonio, TX 89.2%
November, 1995 Barton Creek Square Austin, TX 87.2%
November, 1995 Cheltenham Square Philadelphia, PA 94.4%
November, 1995 Bay Park Square Green Bay, WI 87.3%
November, 1995 Coral Square Coral Springs, FL 86.2%
November, 1995 Lima Mall Lima, OH 93.6%
November, 1995 Glen Burnie Mall Glen Burnie, MD 89.9%
Expansions and Renovations Currently Under
Construction:
October, 1996 University Park Mall South Bend, IN 95.6%
November, 1996 Summit Mall Akron, OH 80.7%
November, 1996 College Mall Bloomington, IN 86.3%
November, 1996 Greenwood Plus Greenwood, IN 100.0%
November, 1996 Lafayette Square Indianapolis, IN 85.3%
March, 1997 Chautauqua Mall Lakewood, NY 65.8%
May, 1997 Tippecanoe Plaza Lafayette, IN 100.0%
September, 1997 Muncie Mall Muncie, IN 89.1%
September, 1997 Forum Shops at Las Vegas, NV 95.9%
Caesars
September, 1997 Aventura Mall Miami, FL 96.6%
Fall, 1998 Florida Mall Orlando, FL 98.4%
__________
(1) Represents the percentage of Owned GLA leased.
Pre-construction development continues on a number of project expansions,
renovations and anchor additions at over 50 properties, including significant
activity at properties such as Irving Mall in Irving, Texas; La Plaza in
McAllen, Texas; North East Mall in Hurst, Texas; Prien Lake Mall in Lake
Charles, Louisiana; Southern Park Mall in Youngstown, Ohio; University Mall in
Pensacola, Florida; Mission Viejo Mall in Mission Viejo, California; and
Northgate Mall in Seattle, Washington. The Operating Partnership expects to
commence construction on many of these projects in the next 12 to 24 months.
FINANCINGS AND INDEBTEDNESS
On April 19, 1995, the Company completed an offering of 6,000,000 shares of
common stock, and on May 10, 1995 the underwriters exercised a portion of the
over-allotment option granted them in connection with that offering aggregating
241,845 shares generating net proceeds of $142 million. These proceeds were
contributed to SPG, LP in exchange for partnership units and subsequently used
to repay a term loan and pay down amounts outstanding on an unsecured revolving
credit facility.
On October 27, 1995, the Company completed a $100 million private equity
placement of 4,000,000 shares of Series A convertible preferred stock (the
"Series A Preferred Shares") with Algemeen Burgerlijk Pensioenfonds ("ABP").
The holder of the Series A Preferred Shares votes with the holders of the
Company's common stock on all matters. The Company contributed the proceeds of
this private equity placement to SPG, LP, in exchange for
S-15
preferred units in
SPG, LP which are entitled to preferential distributions equal to the dividends
paid on the Series A Preferred Shares held by ABP.
On September 6, 1996, the Operating Partnership filed a shelf registration
statement (pursuant to which this Prospectus Supplement and the accompanying
Prospectus are issued) with the Securities and Exchange Commission to provide
for the offering, from time to time, of up to $750 million aggregate principal
amount of unsecured debt securities of the Operating Partnership. Upon
effectiveness of this shelf registration statement the Company intends to cause
SPG, LP to withdraw its current shelf registration statement, which provides
for the offering, from time to time, by SPG, LP of unsecured debt securities,
or otherwise terminate its reporting obligations under the Securities Exchange
Act of 1934, as amended.
On September 10, 1996, the Operating Partnership retired the DRC secured line
of credit, which bore interest at LIBOR plus 175 basis points, with proceeds
from SPG, LP's two unsecured credit facilities, which bore interest at LIBOR
plus 132.5 basis points.
On September 20, 1996, the Securities and Exchange Commission declared
effective a shelf registration statement filed by the Company to provide for
the offering, from time to time, of up to $750 million aggregate public
offering price of common stock, preferred stock, depositary shares and warrants
of the Company. On September 27, 1996, pursuant to such shelf registration
statement, the Company completed a $200 million public offering (the "Preferred
Offering") of 8,000,000 shares of 8 3/4 % Series B Cumulative Redeemable
Preferred Stock (the "Series B Preferred Shares"), generating net proceeds of
approximately $193 million. The Company contributed the proceeds of such
offering to the Operating Partnership in exchange for preferred units in the
Operating Partnership, the terms of which are substantially identical to those
applicable to the Series B Preferred Shares. The Operating Partnership used
the net proceeds to repay $142.8 million of outstanding mortgage indebtedness
and $50.2 million under SPG, LP's two unsecured credit facilities.
On September 27, 1996, the Operating Partnership obtained a $750 million,
unsecured, three-year credit facility (the "Credit Facility"), which will
initially bear interest at LIBOR plus 90 basis points, and retired the
outstanding borrowing of SPG, LP in the aggregate principal amount of $323
million under SPG, LP's two unsecured credit facilities, which bore interest at
LIBOR plus 132.5 basis points. The Credit Facility increases the Operating
Partnership's available capital by $150 million.
As of June 30, 1996, the Operating Partnership had consolidated debt on a pro
forma basis (presenting information as if the Offering (as herein defined), the
Preferred Offering and the Merger had been completed as of June 30, 1996) of
$3,488.4 million (including $140.2 million applicable to minority interests)
and the Operating Partnership's allocable share of unconsolidated debt of the
Joint Venture Properties on a pro forma basis as of June 30, 1996 giving effect
to the Merger was $370.8 million. Scheduled maturities of this debt for periods
reflected are as follows:
S-16
YEAR OF MATURITY CONSOLIDATED ALLOCABLE SHARE TOTAL DEBT
DEBT(1) OF JOINT VENTURE
DEBT
(in thousands)
1996 (7/1 to 12/31) $ 63,079(2) $ 3,041 $ 66,120
1997 30,000 3,669 33,669
1998 440,480(3) 70,833 511,313
1999 230,274 40,615 270,889
2000 326,249 55,490 381,739
2001 659,328 0 659,328
2002 462,542 26,282 488,824
2003 348,519 71,488 420,007
2004 188,489 0 188,489
2005 95,250 61,635 156,885
2006 300,000 37,750 337,750
2007 212,977 0 212,977
Thereafter 126,667 0 126,667
_________ _______ _________
Subtotal 3,483,354 370,803 3,854,657
Other (4) 4,593 -- 4,593
_________ _______ _________
Total 3,488,447 $370,803 $3,859,250
========= ======== ==========
__________
(1) This table reflects that the proceeds of the Series B Preferred Shares were
used to retire $65,600 maturing in 1996, $77,200 maturing in 1997 and $34,400
maturing in 1998. Additionally reflected are the net proceeds of the
Offering which are expected to retire $72,103 maturing in 1996, $186,499
maturing in 1998 and $38,398 maturing in 1999. See "Use of Proceeds."
(2) $63,079 has received a commitment to be extended for up to three years.
(3) Includes $152,101 then outstanding on the credit facilities.
(4) Amount reflects the adjustment of DRC's indebtedness to fair market value.
See "Pro Forma Combined Condensed Financial Information."
S-17
USE OF PROCEEDS
The net proceeds to the Operating Partnership from the sale of the Notes
offered hereby, after deducting total expenses estimated to be approximately $3
million, are estimated to be approximately $297 million. The Operating
Partnership intends to use substantially all of the proceeds of the Offering to
repay existing mortgage indebtedness of approximately $110.5 million, and to
reduce the amount outstanding under the Credit Facility by approximately $186.5
million. Pending such use, the net proceeds may be invested in short-term
income producing investments such as commercial paper, government securities or
money market funds that invest in government securities. On
, 1996, the weighted average interest rate on the interim indebtedness expected
to be repaid with the aggregate net proceeds of the Offering and the weighted
average maturity of such indebtedness, were 7.16% and 2.52 years, respectively.
ACCOUNTING TREATMENT OF THE MERGER AND THE OTHER RELATED TRANSACTIONS
For financial reporting purposes, the completion of the Merger and related
transactions resulted in a reverse acquisition, directly or indirectly, of 100%
of the net assets of DeBartolo Realty Partnership, L.P. ("DRP, LP"). Although
SPG was the accounting acquirer, DRP, LP (now the Operating Partnership) will
be the primary operating partnership through which the future business of the
Company will be conducted. However, SPG was the accounting acquirer upon
completion of the Merger and related transactions and has majority control of
DRP, LP. SPG's initial operating partnership, SPG, LP, is the predecessor to
DRP, LP for financial statement purposes. Accordingly, the financial
statements and ratios disclosed by the Operating Partnership for the post-
merger periods will reflect the reverse acquisition of DRP, LP by SPG using the
purchase method of accounting and for all pre-merger comparative periods, the
financial statements and ratios disclosed by the Operating Partnership will
reflect the financial statements of SPG, LP, as the predecessor to the
Operating Partnership for financial statrement purposes.
S-18
CAPITALIZATION
The following table sets forth the historical capitalization of SPG, LP and
DRP, LP as of June 30, 1996, and the capitalization of Simon-DeBartolo Group,
L.P. ("SDG, LP"), as adjusted to give effect to the Merger and related
transactions thereto, as further adjusted to give effect to the Merger and
related transactions thereto and the Preferred Offering, and as further
adjusted to give effect to the Merger and related transactions thereto, the
Preferred Offering and the issuance of the Notes and the anticipated use of the
proceeds thereof as described under "Use of Proceeds" (the "Offering"):
@@
SDG, LP
_________________________________
As Adjusted
Historical As for the
_____________________ Adjusted for Merger, the
SPG, LP As the Merger Preferred
(THE Adjusted and the Offering
PREDECESSOR for the Preferred and the
to SDG, LP) DRP, LP Merger Offering Offering
Mortgage Debt $1,868 $1,418 $3,290 $3,147 $3,336
Credit Facilities(1) 311 62 373 339 152
Total Debt 2179 1480 3663 3486 3488
Partners' Equity
Series A Preferred Units,
4,000,000 units authorized,
issued and outstanding(2) 100 -- 100 100 100
Series B Preferred Units,
9,200,000 units authorized,
8,000,000 units issued and o -- -- -- 193 193
General Partners(3) 107 -3 1023 1023 1023
Limited Partners(3) 69 -2 643 643 643
Unamortized Restricted Stock Award -6 -- -6 -6 -6
Total Partners' Equity 270 -5 1760 1953 1953
Total Capitalization $2,449 $1,475 $5,423 $5,439 5441
___________________@@
(1) On September 27, 1996, SDG, LP obtained a $750 million, unsecured, three-
year credit facility (the "Credit Facility"), which will initially bear
interest at LIBOR plus 90 basis points, and retired the outstanding
borrowing of SPG, LP in the aggregate principal amount of $323 million under
SPG, LP's two unsecured credit facilities, which bore interest at LIBOR plus
132.5 basis points. The Credit Facility increases the Operating
Partnership's available capital by $150 million.
(2) The Company is entitled to preferred distributions from SPG, LP and the
Operating Partnership equal to the dividends paid by the Company on the
Series A Preferred Shares and the Series B Preferred Shares, respectively.
(3) Units issued and outstanding of SPG, LP Historical (the Predecessor to SDG,
LP), SDG, LP As Adjusted for the Merger, SDG, LP As Adjusted for the Merger
and the Preferred Offering and SDG, LP As Adjusted for the Merger, the
Preferred Offering and the Offering, respectively, are as follows:
S-19
ISSUED AND OUTSTANDING AS OF JUNE 30, 1996
SDG, LP
SPG, LP AS AS AS ADJUSTED FOR THE MERGER,
HISTORICAL ADJUSTED FOR THE ADJUSTED FOR THE MERGER THE PREFERRED OFFERING AND
(THE PREDECESSOR) MERGER AND THE PREFERRED THE OFFERING
OFFERING
General Partners 58,560,225 96,448,745 96,448,745 96,448,745
Limited Partners 37,282,628 60,541,092 60,541,092 60,541,092
SELECTED FINANCIAL AND OPERATING DATA
The following tables set forth certain selected financial and operating data
on a historical basis for SPG, LP, the Predecessor of SDG, LP, and pro forma
historical financial data of SDG, LP for the respective periods presented. The
financial statements of SDG, LP for the post-merger periods will reflect the
reverse acquisition of DRP, LP by SPG using the purchase method of accounting
and for all pre-merger comparative periods the financial statements disclosed
by SDG, LP will reflect the financial statements of its Predecessor, SPG, LP.
See "Accounting Treatment of the Merger and the Other Related Transactions."
The historical financial information should be read in conjunction with the
financial statements and notes thereto incorporated by reference into the
accompanying Prospectus. The pro forma combined balance sheet data as of June
30, 1996 is presented as if the Offering, the Preferred Offering and the Merger
and related transactions thereto had occurred on June 30, 1996. The unaudited
pro forma combined operating data for the six month period ended June 30, 1996
and the year ended December 31, 1995 are presented as if the Offering, the
Preferred Offering and the Merger and related transactions had occurred as of
January 1, 1995 and were carried forward through June 30, 1996. SPG, LP was the
acquirer in the merger transaction for accounting purposes. The pro forma
financial information does not purport to represent what the actual financial
position or results of operation would have been as of the period or for the
periods indicated, nor does it purport to represent any future financial
position or results of operations for any future period. The pro forma
financial information should be read in conjunction with the financial
statements and notes thereto incorporated by reference into the accompanying
Prospectus.
SIMON-DEBARTOLO SIMON PROPERTY GROUP, L.P. SIMON PROPERTY GROUP
GROUP, L.P. (SDG, LP) (SPG, LP, THE PREDECESSOR OF SDG, LP) (THE PREDECESSOR OF SPG, LP)
_____________________ ______________________________________________________ ______________________________
PRO FORMA PRO FORMA FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
FOR THE SIX FOR THE SIX MONTHS SIX MONTHS YEAR ENDED YEAR ENDED PERIOD FROM PERIOD YEAR YEAR
MONTHS ENDED YEAR ENDED ENDED DECEMBER DECEMBER DECEMBER 20 FROM ENDED ENDED
JUNE 30, ENDED JUNE 30, JUNE 30, 31, 1995 31, 1994 TO JANUARY 1 DECEMBER DECEMBER
1996 DECEMBER 1996 1995 DECEMBER 31, TO 31, 1992 31,
31, 1993 DECEMBER 19, 1991
1995 1993
(IN THOUSANDS EXCEPT PER UNIT DATA, PORTFOLIO PROPERTY DATA AND RATIOS)
OPERATING DATA:
Total Revenue $461,536 $889,714 $283,204 $260,255 $553,657 $473,676 $18,424 $405,869 $400,852 $378,029
Expenses:
Operating
Expenses 169,257 318,280 107,773 100,078 209,782 183,433 4,095 175,801 176,682 173,923
Depreciation and
Amortization 89,244 162,353 51,307 43,197 92,739 75,945 2,051 60,243 58,104 56,033
Interest
Expense(1) 130,542 245,886 79,134 75,657 150,224 150,164 3,548 156,909 178,075 159,798
Income (Loss)
before
Extraordinary
Items 83,214 179,142 47,800 45,735 101,505 60,308 8,707 6,912 (11,692) (15,865)
Net Income (Loss) $83,214 $179,142 $47,535 $45,487 $98,220 $42,328 $(21,774) $33,101 (11,692) (15,865)
PreferredDividends 12,812 18,990 4,062 - 1,490 - - - - -
Net Income (Loss)
available to
unit holders 70,402 160,152 43,473 45,487 96,730 42,328 (21,774) 33,101 (11,692) (15,865)
Net Income per $0.45 $1.04 $0.45 $0.51 $1.08 $0.71 $0.11 N/A N/A N/A
unit before
extraordinary
items
Net Income per $0.45 $1.04 $0.45 $0.51 $1.04 $0.50 $(0.28) N/A N/A N/A
unit(2)
Distributions $0.99 $1.97 $0.99 $0.95 $1.97 $1.90 - N/A N/A N/A
per unit
SIMON-DEBARTOLO SIMON PROPERTY GROUP, L.P. SIMON PROPERTY GROUP
GROUP, L.P. (SDG, LP) (SPG, LP, THE PREDECESSOR OF SDG, LP) (THE PREDECESSOR OF SPG, LP)
_____________________ ______________________________________________________ ______________________________
PRO FORMA PRO FORMA FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
FOR THE SIX FOR THE SIX MONTHS SIX MONTHS YEAR ENDED YEAR ENDED PERIOD FROM PERIOD YEAR YEAR
MONTHS ENDED YEAR ENDED ENDED DECEMBER DECEMBER DECEMBER 20 FROM ENDED ENDED
JUNE 30, ENDED JUNE 30, JUNE 30, 31, 1995 31, 1994 TO JANUARY 1 DECEMBER DECEMBER
1996 DECEMBER 1996 1995 DECEMBER 31, TO 31, 1992 31,
31, 1993 DECEMBER 19, 1991
1995 1993
(IN THOUSANDS EXCEPT PER UNIT DATA, PORTFOLIO PROPERTY DATA AND RATIOS)
2 Weighted
average
units
outstanding 156,896,812 153,809,452 95,754 89,868 92,666 84,510 78,447 N/A N/A N/A
BALANCE SHEET
DATA:
Investment in
Real Estate,
net $5,211,194(3) N/A $2,154,506 $1,872,165 $2,009,344 $1,829,111 $ 1,350,360 N/A $1,156,009 $1,143,050
Cash and cash
equivalents 92,894 N/A 65,556 79,827 62,721 105,139 110,625 N/A 42,682 31,840
Total Assets 5,733,464 N/A 2,679,076 2,286,907 2,556,436 2,316,860 1,793,654 N/A 1,494,289 1,432,028
Total Debt(4) 3,488,447 N/A 2,178,539 1,825,453 1,980,759 1,938,091 1,455,884 N/A 1,711,778 1,548,292
Owner's Equity
(Deficit) $1,953,045 N/A $ 269,685 $249,191 $ 319,638 $ 101,693 $ 56,553 N/A $(565,566) $(418,697)
OTHER DATA:
Cash flow
provided by
(used in):
Operating
activities $168,830 $303,236 $90,634 $80,830 $194,336 $128,023 N/A N/A N/A N/A
Investing
activities (128,243) (306,421) (70,010) (28,495) (222,679) (266,772) N/A N/A N/A N/A
Financing
activities (65,517) (88,481) (17,789) (77,647) (14,075) 133,263 N/A N/A N/A N/A
Restated Funds
from Operations $170,081 $334,644 $ 99,212 $87,795 $197,909 $167,761 N/A N/A N/A N/A
(FFO) (5)
RATIO OF EARNINGS
TO FIXED CHARGES
OR COVERAGE
DEFICIT(6) 1.58x 1.76x 1.54x 1.59x 1.67x 1.43x 3.36x 1.11x $(12,821) $(18,719)
OTHER RATIOS:
Ratio of EBITDA
after minority
interest to
Fixed Charges
and Preferred
Stock
Dividends(7)(8) 2.03x 2.07x 2.03x 2.07x 2.19x 2.15x N/A N/A N/A N/A
Ratio of Debt to
Adjusted Total
Assets(9) 47.52% 46.00% 48.07% 47.13% 46.67% 50.76% N/A N/A N/A N/A
Ratio of Secured
Debt to
Adjusted Total
Assets(10) 41.74% 41.64% 41.52% 46.38% 42.32% 45.85% N/A N/A N/A N/A
Ratio of
Unencumbered
Assets to
Unsecured
Debt(11) 3.51x 5.02x 3.43x 33.04x 5.47x 3.83x N/A N/A N/A N/A
Ratio of EBITDA
after minority
interest to
interest expense
(6)(12) 2.41x 2.44x 2.35x 2.23x 2.39x 2.36x N/A N/A N/A N/A
PORTFOLIO DATA:
Total EBITDA(6) $389,145 $760,880 $231,981 $ 208,027 $437,548 $386,835 $346,679(13) N/A $282,326
$316,535
EBITDA after
minority
interest(6) 331,692 650,307 184,936 169,363 357,158 307,372 256,169(13) N/A 227,931 210,634
Number of
Portfolio
Properties at
End of Period 183 184 122 119 122 119 114 N/A 110 108
Total GLA at End
of Period
(thousands of
square feet) 109,845 109,300 62,304 58,097 62,232 58,200 54,042 N/A 52,404 51,375
__________
(1) Interest expense for the year ended December 31, 1994 includes $27.2 million
of additional non-recurring contingent interest paid in connection with the
refinancing of a Portfolio Property. The property lender was
S-21
entitled to
participate in the appreciated market value of the Portfolio Property upon
refinancing. Management does not presently expect to enter into financing
arrangements with similar participation features in the future. Accordingly,
management considers the payment made to the lender unusual in nature. As
explained in footnote (5) below, unusual or extraordinary items are excluded
for purposes of computing FFO. Accordingly, this item has been excluded from
FFO in this table and elsewhere in this Prospectus Supplement.
(2) Per unit data are reflected only for the periods from December 20, 1993
through June 30, 1996. Per unit data are not relevant for the historical
combined financial statements of the Predecessor since such financial
statements are a combined presentation of partnerships and corporations.
(3) For pro forma purposes, the Operating Partnership has combined investments
in properties, partnerships and joint ventures. The Operating Partnership has
not completed the allocation of the purchase price between these categories.
The pro forma adjustments included in the unaudited pro forma combined
financial statements are based upon currently available information and upon
certain assumptions that management of the General Partners believes are
reasonable. There can be no assurance that the actual adjustments will not
differ significantly from the pro forma adjustments reflected in the pro
forma financial information.
(4) Pro forma debt of the Operating Partnership as of June 30, 1996 includes
$3,336.3 and $152.1 of mortgage indebtedness and outstanding indebtedness
under the credit facilities, respectively. Historical debt of SPG, LP as of
June 30, 1996 and 1995 and December 31, 1995 includes $1,867.5 million,
$1,694.7 million and $1,784.8 million, respectively, of mortgage indebtedness
and $311.0 million, $130.8 million and $196.0 million, respectively, of
outstanding indebtedness under the credit facilities, respectively.
(5) Funds from Operations ("FFO"), as defined by the National Association of
Real Estate Investment Trusts ("NAREIT"), means net income without giving
effect to depreciation and amortization, gains or losses from extraordinary
items, gains or losses on sales of real estate, gains or losses on
investments in marketable securities and any provision/benefit for income
taxes for such period, plus the allocable portion, based on ownership
interest, of FFO of unconsolidated joint ventures, all determined on a
consistent basis in accordance with generally accepted accounting principles.
Management believes that FFO is an important and widely used measure of the
operating performance of REITs which provides a relevant basis for comparison
among REITs. FFO is presented to assist investors in analyzing the
performance of the Operating Partnership. The Operating Partnership's method
of calculating FFO may be different from the methods used by other REITs. FFO
(i) does not represent cash flows from operations as defined by generally
accepted accounting principles, (ii) should not be considered as an
alternative to net income as a measure of operating performance or to cash
flows from operating, investing and financing activities and (iii) is not an
alternative to cash flows as a measure of liquidity. In March 1995, NAREIT
modified its definition of FFO. The modified definition provides that
amortization of deferred financing costs and depreciation of non-rental real
estate assets are no longer to be added back to net income in arriving at
FFO. The modified definition was adopted beginning in 1996. Additionally the
FFO for prior periods have been restated to reflect the new definition in
order to make the amounts comparative.
S-22
The following table reconciles pro forma combined net income of the Operating
Partnership to pro forma FFO for the six months ended June 30, 1996 and for
the year ended December 31, 1995:
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1996 DECEMBER 31, 1995
(IN THOUSANDS)
Pro forma combined net income of the Operating
Partnership $ 83,214 $179,142
Plus:
Depreciation and amortization less minority
interests for consolidated properties
plus the Operating Partnership's share
from unconsolidated affiliates 99,679 176,238
Less:
Operating Partnership's share of gains on
sales of assets - (1,746)
Preferred distributions (12,812) (18,990)
_________ ________
Pro forma FFO of the Operating Partnership $170,081 $334,644
======== ========
Pro forma FFO allocable to the General
Partners $104,430 $202,794
======== ========
Pro forma allocable to the Limited Partners $ 65,651 $131,850
======== ========
(6)For purposes of computing the ratio of earnings to fixed charges, earnings
have been calculated by adding fixed charges, excluding capitalized interest,
to income (loss) from continuing operations including income from minority
interests which have fixed charges, and including distributed operating
income from unconsolidated joint ventures instead of income from
unconsolidated joint ventures. Fixed charges consist of interest costs,
whether expensed or capitalized, the interest component of rental expense and
amortization of principal.
(7)Total EBITDA represents earnings before interest, taxes, depreciation and
amortization for all Portfolio Properties. EBITDA after minority interest
represents earnings before interest, taxes, depreciation and amortization for
all Portfolio Properties after distribution to the third-party joint venture
partners. EBITDA (i) does not represent cash flow from operations as defined
by generally accepted accounting principles, (ii) should not be considered as
an alternative to net income as a measure of operating performance or to cash
flows from operating, investing and financing activities; and (iii) is not an
alternative to cash flows as a measure of liquidity. Management believes
that in addition to cash flows and net income, EBITDA is a useful financial
performance measurement for assessing the operating performance of an equity
REIT because, together with net income and cash flows, EBITDA provides
investors with an additional basis to evaluate the ability of a REIT to incur
and service debt and to fund acquisitions and other capital expenditures. To
evaluate EBITDA and the trends it depicts, the components of EBITDA, such as
revenues and operating expenses, should be considered. The Operating
Partnership's method of calculating EBITDA may be different from the methods
used by other REITs. The Company's weighted average ownership interest in the
operating results for the six months ended June 30, 1996 and 1995 was 61.1%
and 58.5%, respectively, and was 60.3%, 55.2% and 52.2% in 1995, 1994 and
1993, respectively. The Company's ownership interest in SPG, LP was 61.1% and
60.5% at June 30, 1996 and 1995, respectively, and was 61.0% and 56.4% at
December 31, 1995 and 1994, respectively.
(8)For purposes of computing the ratio of EBITDA after minority interest to
fixed charges and preferred stock dividends, fixed charges and preferred
stock dividends consist of interest costs, whether expensed or capitalized
and including the Operating Partnership's pro rata share of joint venture
interest expense, the
S-23
interest component of rental expense and amortization
of principal, plus any dividends on outstanding preferred stock.
(9)As specified in the Indenture, Debt consists of indebtedness of the
Operating Partnership and its consolidated subsidiaries, less any portion
attributable to minority interests, plus the Operating Partnership's
allocable portion of indebtedness of unconsolidated joint ventures from
borrowed money, secured indebtedness, reimbursement obligations in connection
with letters of credit and capitalized leases. Adjusted Total Assets consist
of the sum of: the result of multiplying the sum of the shares of the
Company's Common Stock issued in the IPO and units of the Operating
Partnership not held by the Company by the IPO Price of $22.25; the principal
amount of consolidated debt of the Operating Partnership on the date of the
IPO less any portion applicable to minority interests; the Operating
Partnership's allocable portion of debt of unconsolidated joint ventures on
the date of the IPO; the purchase price or cost of real estate assets
acquired or developed after the date of the IPO; the value of the Merger,
compiled as the sum of the purchase price including all related closing costs
and the value of all outstanding indebtedness less any portion attributable
to minority interests, including the Operating Partnership's allocable share,
based on its ownership interest of outstanding indebtedness of unconsolidated
joint ventures at the Merger date; and working capital. See "Description of
the Notes - Certain Covenants."
(10)As specified in the Indenture, Secured Debt consists of Debt secured by a
mortgage or other encumbrance on any property of the Operating Partnership or
any Subsidiary. See "Description of the Notes - Certain Covenants."
(11)As specified in the Indenture, Unencumbered Assets is equal to Adjusted
Total Assets multiplied by a fraction, the numerator of which is Unencumbered
Annualized EBITDA and the denominator of which is Annualized EBITDA.
Unencumbered Annualized EBITDA means Annualized EBITDA less any portion
attributable to assets serving as collateral for Secured Debt. As specified
in the Indenture, Annualized EBITDA means Net Income for a period of four
consecutive fiscal quarters, plus amounts deducted for interest, taxes,
depreciation and amortization and provisions for losses or realized losses on
properties, less gains on properties and with such other adjustments as are
necessary to exclude the effect of extraordinary items, and as adjusted to
reflect the assumption that income earned as a result of any assets having
been placed in service since the end of such period had been earned, on an
annualized basis, during such period. Unsecured Debt means Debt not secured
by a mortgage or other encumbrance on any property of the Operating
Partnership or any subsidiary. See "Description of the Notes - Certain
Covenants."
(12)For purposes of computing the ratio of EBITDA After Minority Interest to
Interest Expense, EBITDA After Minority Interest represents earnings before
interest, taxes, depreciation and amortization for all properties after
distribution to the third-party joint venture partners. Interest expense
includes the Company's pro rata share of joint venture interest expense and
is reduced by amortization of debt issuance costs.
(13)Represents the combined EBITDA and EBITDA After Minority Interest of the
Portfolio Properties for the full year ended December 31, 1993.
BUSINESS AND PROPERTIES
THE PORTFOLIO PROPERTIES
Management believes that the Portfolio Properties comprise the largest
(measured by GLA) and most geographically diverse portfolio of any publicly
traded REIT and that the Company has interests in more regional malls than any
other publicly traded REIT. Management also expects that geographic
diversification should mitigate the effects of regional economic conditions and
local factors, and that diversified types of Portfolio Properties will reduce
the impact of economic factors that may affect the retailers in any particular
type of Portfolio Property. In addition, management believes that the large
size of the portfolio should mitigate the effects of any other factors that may
affect a limited group of shopping centers.
S-24
No single income-producing Portfolio Property accounted for more than 1.4%
of GLA as of June 30, 1996 or for more than 3.5% of the Operating Partnership's
pro forma gross revenues for the six months ended June 30, 1996. No single
retailer leased more than 10.9% of Owned GLA in the Portfolio Properties or
represented more than 7.7% of the annualized base rent from these properties.
The following table summarizes on a combined basis, as of June 30, 1996,
certain information with respect to the Portfolio Properties, in total and by
type of shopping center and retailer:
TYPE OF PROPERTY(1) GLA TOTAL % OF OWNED % OF OWNED
(SQ. FT.) OWNED GLA(2) GLA WHICH IS
GLA LEASED
(SQ. FT.)
Regional Malls(4)
Mall Store 32,255,514 32,255,514 49.4 83.2
Freestanding 1,251,647 599,826 0.9 93.6
Subtotal 33,507,161 32,855,340 50.3 83.4
Anchor 59,280,749 20,025,108 30.6 96.9
Total 92,787,910 52,880,448 80.9 88.5
Community Shopping Centers
Mall Store 3,882,220 3,801,130 5.9 90.3
Freestanding 768,648 284,809 0.4 100.0
Anchor 10,462,344 6,420,675 9.8 92.3
Total 15,113,212 10,506,614 16.1 91.8
Office Portion of Mixed-Use
Properties 1,943,676 1,943,676 3.0 93.4
Total 109,844,798 65,330,738 100.0 89.2
__________
(1) Here and elsewhere in this Prospectus Supplement, all of the GLA, Owned
GLA, and base rent is reported for each Portfolio Property, even if the
Operating Partnership has less than a 100% ownership interest in the
Portfolio Property.
(2) Indicates the percentage of total Owned GLA represented by each category of
space.
(3) Includes, here and elsewhere in this Prospectus Supplement, space for
which, a lease has been executed, whether or not the space was then
occupied. The table under "Additional Information" in this Prospectus
Supplement indicates vacant anchor space as of June 30, 1996.
(4) Includes two specialty retail centers and retail space at four mixed-use
properties.
REGIONAL MALLS
Regional malls, specialty retail centers and the retail space at the mixed-
use properties represented 84% of the Portfolio Properties' GLA, 81% of total
Owned GLA and 85% of their total annualized base rent as of June 30, 1996. They
range in size from 208,000 to 1.5 million square feet of GLA, with 107 having
more than 400,000 square feet. Overall, the malls contain over 10,300 tenants,
including approximately 450 anchors. As of June 30, 1996, 83.4% of the total
Owned GLA at the regional malls was leased, at an average annualized base rent
of $20.18 per square foot. (Data for specialty retail centers and the retail
space at mixed-use properties are also included, without further reference, in
all data in this section concerning regional malls. This additional retail
space represents approximately 2% of the GLA in the regional malls.)
S-25
The following table sets forth selected data for the mall and freestanding
stores at regional malls:
DATE NUMBER OF TOTAL MALL AND PERCENT OF OWNED AVERAGE BASE RENT
PROPERTIES FREESTANDING (SQ. GLA LEASED(2) PER LEASED
FT.)(1) SQUARE FOOT(3)
June 30, 1996 117 32,855 83.4% $20.18
June 30, 1995 115 31,503 84.3 18.80
December 31, 1995 118 33,208 85.5 19.18
December 31, 1994 115 31,570 85.6 18.37
December 31, 1993 110 29,905 85.9 17.70
December 31, 1992 109 29,642 85.9 16.85
__________
(1) In thousands.
(2) Occupancies for regional malls are generally lower in the initial part of
the calendar year and higher in the latter part of the calendar year.
(3) Base rent does not include the effects of percentage rent or common area
maintenance charges reimbursed by the tenants, nor does it consider the
costs required to obtain new tenants.
LEASE EXPIRATIONS
The following table sets forth scheduled expirations during each of the next
eleven years of leases for mall stores and freestanding stores at the Operating
Partnership's regional malls, assuming that none of the tenants exercises
available renewal options:
APPROX. LEASED AVG. BASE RENT PER % OF TOTAL LEASED GLA
NO. OF LEASES AREA IN SQ. SQ. FT. UNDER REPRESENTED BY
Year Ending December 31, Expiring Ft. Expiring Leases(1) Expiring Leases(2)
1996 (7/1-12/31) 210 370,588 21.70 1.4%
1997 1,138 2,474,960 19.11 9.0
1998 1,122 2,115,621 21.88 7.7
1999 1,027 2,243,284 21.85 8.2
2000 1,022 2,346,792 22.24 8.6
2001 922 2,329,297 20.41 8.5
2002 633 1,888,266 20.90 6.9
2003 698 1,941,386 22.42 7.1
2004 659 2,155,919 20.90 7.9
2005 639 2,209,795 20.15 8.1
2006 723 2,311,220 21.87 8.4
_______ __________ ______ _____
Total 8,793 22,387,128 $21.15 81.7%
__________
(1)Represents the average base rent in effect on June 30, 1996 for those leases
expiring for tenants paying base rent.
(2)Percentage of total leased Owned GLA of mall and freestanding stores in the
regional malls as of June 30, 1996.
SALES
The following table sets forth for each of the last four years at regional
malls, the total retail sales (in millions) during the given year or period for
those tenants who are required to report sales:
S-26
Total Tenant Annual Percentage
YEAR SALES INCREASE
1/1/96 to 6/30/96 $2,801 7.8%
1/1/95 to 6/30/95 2,598 N/A
1995 6,098 0.7%
1994 6,053 3.9
1993 5,827 N/A
ANCHORS
As of June 30, 1996, almost all of the approximately 450 anchors in the
Operating Partnership's regional malls are department stores and most are
national retailers. Anchors space represents 64% of the GLA in the Operating
Partnership's regional malls, and a majority own their stores, either in fee or
subject to ground leases with the Operating Partnership. All but seven anchor
stores in the regional malls were occupied as of June 30, 1996.
The following table sets forth, as of June 30, 1996, certain information
with respect to the anchors whose stores in the aggregate have over 600,000
square feet of GLA in the regional malls:
ANCHOR-OWNED TOTAL GLA
NUMBER OF ANCHOR-LEASED OR LAND- Occupied by
ANCHOR Stores GLA Leased GLA ANCHOR
JC Penney Co., Inc. 86 7,094,185 5,254,480 12,348,665
Sears, Roebuck & Co. 80 2,531,655 9,178,545 11,710,200
Dillard Department Stores
Inc. 57 545,124 7,490,297 8,035,421
Federated Department Stores
Inc. 40 2,657,585 4,072,995 6,730,580
The May Department Stores Co. 34 1,045,065 3,924,161 4,969,226
Montgomery Ward & Co., Inc. 33 1,131,838 3,426,491 4,558,329
Dayton Hudson Corp. 17 348,226 1,313,628 1,661,854
Nordstrom Inc. 4 459,820 219,415 679,235
Belk Stores Group 8 392,403 283,701 676,104
MALL STORES AND FREESTANDING STORES
There are nearly 10,000 mall and freestanding stores in the regional malls.
Substantially all of these stores lease space from the Operating Partnership.
Mall and freestanding stores represent approximately 32.9 million of the almost
52.9 million square feet of total Owned GLA of these properties, with no single
mall or freestanding store or chain occupying more than 4.9% of the total Owned
GLA in all Portfolio Properties or accounting for more than 9.9% of the total
annualized base rent from these properties.
The following table sets forth, as of June 30, 1996, certain information
with respect to the ten mall and freestanding store tenants occupying the
largest amounts of GLA paying the most annualized base rent in the regional
malls:
S-27
% OF TOTAL
OWNED GLA
NUMBER OF TOTAL GLA LEASED BY
TENANT Stores Leased (square feet) Tenant
The Limited, Inc. 474 3,223,147 4.9%
F.W. Woolworth Co. 424 1,418,147 2.2
Melville Corp. 229 751,154 1.1
United States Shoe Corp. 155 576,022 0.9
Petrie Stores Corp.(1) 86 457,795 0.7
The Gap 70 423,219 0.6
Edison Brothers Stores, Inc.(1) 197 419,070 0.6
United Artists Theatre Circuit, 16 403,407 0.6
Inc.
County Seat Stores, Inc. 96 389,439 0.6
The Musicland Group, Inc. 110 380,675 0.6
_________ _________ _______
Total 1,857 8,442,075 12.9%
__________
(1) Tenant is currently operating under protection of Chapter 11 of the
Bankruptcy Code.
COMMUNITY SHOPPING CENTERS
The Operating Partnership has interests in 66 income-producing community
shopping centers, with an aggregate of over 15 million square feet of GLA.
Community shopping centers represented 14% of the Portfolio Properties' GLA,
16% of the total Owned GLA and 10% of the total annualized base rent as of June
30, 1996. With the exception of four centers, the community shopping centers
range in size from 88,000 to 650,000 square feet of GLA. Overall, they contain
over 1,100 tenants, including over 190 anchors. As of June 30, 1996, 91.8% of
the total Owned GLA in community shopping centers was leased at an average
annualized base rent of $7.44 per square foot.
The following table sets forth selected data for the community shopping
centers.
Total Owned Percent of Average Base
Number of GLA(1) Owned GLA Rent per Leased
DATE PROPERTIES (SQUARE FEET LEASED SQUARE FOOT(2)
June 30, 1996 66 10,507 91.8% $7.44
June 30, 1995 66 10,511 93.7 7.22
December 31, 1995 66 10,525 93.1 7.28
December 31, 1994 66 10,530 93.7 7.12
__________
(1)In thousands.
(2)Base rent does not include the effects of percentage rent or common area
maintenance charges reimbursed by tenants, nor does it consider the costs
required to obtain new tenants.
S-28
LEASE EXPIRATIONS
The following table sets forth scheduled expirations during each of the next
eleven years of leases for all types of tenants at the Operating Partnership's
community shopping centers, assuming that none of the tenants exercises
available renewal options:
Avg. Base Rent
Approx. Leased per Sq. Ft. under % of Total Leased
No. of Leases Area in Sq. Expiring GLA Represented by
YEAR ENDING DECEMBER 31 EXPIRING FT. LEASES(1) EXPIRING LEASES(2)
1996 (7/1-12/31) 15 101,073 $6.79 1.0%
1997 163 766,761 8.31 7.9
1998 166 557,281 9.75 5.8
1999 157 842,570 8.00 8.7
2000 140 790,426 7.99 8.2
2001 107 794,727 6.51 8.2
2002 40 378,710 7.84 3.9
2003 34 443,138 7.85 4.6
2004 29 300,671 8.20 3.1
2005 39 819,662 6.51 8.5
2006 24 702,294 6.37 7.3
TOTAL 914 6,497,313 $7.61 67.4%
__________
(1)Represents the average base rent in effect on June 30, 1996 for those
leases expiring for the tenants paying base rent.
(2)Percentage of total leased Owned GLA at community shopping centers as
of June 30, 1996.
SALES
The following table sets forth, for each of the last four years, at
community shopping centers, the total retail sales (in millions) during
the given year or period for those tenants who are required to report
such sales.
Annual Percentage
YEAR TOTAL PROPERTY SALES INCREASE
1/1/96 to 6/30/96 $600 6.3%
1/1/95 to 6/30/95 640 N/A
1995 1,419 0.0
1994 1,419 7.5
1993 1,319 N/A
TENANTS
There are over 190 anchors in the community shopping centers, most of
which occupy at least 15,000 square feet of space. Anchor space
represents 69% of the GLA in these properties, and unlike in regional
malls, most anchors lease their space from the Operating Partnership.
All but twelve of the anchor spaces in the community shopping centers
are occupied as of June 30, 1996. No single anchor leases stores that in
the aggregate constitute more than 12.4% of the total Owned GLA in the
community shopping center portfolio and no anchor accounts for more than
7.6% of the total annualized base rent from these properties.
S-29
There are nearly 1,000 mall and freestanding tenants in the community
shopping centers. Substantially all of these stores lease space from the
Operating Partnership. Mall and freestanding store space represents
approximately 4.1 million of the 10.5 million square feet of Owned GLA
of these properties. No single mall and freestanding store or chain
occupies more than 0.15% of the total Owned GLA of all Portfolio
Properties or accounts for more than 1.1% of the total annualized base
rent from the community shopping centers.
The following table sets forth, as of June 30, 1996, certain
information relating to the ten tenants whose stores in the aggregate
occupy the most square feet of GLA in the community shopping centers:
Tenant Total GLA
Number of Leased Occupied
TENANT STORES GLA BY TENANT
Kmart Corporation 19 1,047,425 1,305,464
Wal-Mart Stores, Inc 12 82,398 1,280,837
Service Merchandise 21 345,541 1,066,828
Company
Dayton Hudson Corp. 6 178,819 574,549
(Target)
TJX Companies 9 444,418 444,418
Dominick's Finer Foods, 5 239,407 443,909
Inc.
Montgomery Ward & Co., 7 379,646 379,646
Inc.
Kohl's Department Stores, 5 378,747 378,747
Inc.
Burlington 5 273,516 273,516
Tru Properties, Inc 7 46,000 264,202
SPECIALTY RETAIL CENTERS AND MIXED-USE PROPERTIES
The income-producing Portfolio Properties include two specialty retail
centers and four mixed-use properties. The two specialty retail centers,
The Forum Shops at Caesars in Las Vegas, Nevada and Trolley Square in
Salt Lake City, Utah, contain an aggregate of approximately 500,000 square
feet of GLA. As of June 30, 1996, The Forum Shops' average base rent per
leased square foot of mall store GLA was $60, while the rate at Trolley
Square was $17 per leased square foot. Mall store sales for the 12 months
ended June 30, 1996 and 1995 at The Forum Shops were $1,194, and at
Trolley Square were $275, respectively. As of June 30, 1996, 95.9% of
Owned GLA at The Forum Shops and 76.3% of Owned GLA at Trolley Square was
leased or committed for lease.
The mixed-use properties consist of Fashion Center at Pentagon City in
Arlington, Virginia, at which the Operating Partnership has an interest
only in the retail and office portions of the complex; New Orleans Centre and
CNG Tower in New Orleans, Louisiana; and two properties with almost
exclusively office space, O'Hare International Center and Riverway in
Rosemont, Illinois. These four properties contain an aggregate of
approximately 2.0 million square feet of office space and approximately 1.4
million square feet of retail space. The mall store space at Fashion Center
was 98.6% leased as of June 30, 1996, and mall store sales were $626 per
leased square foot. The average base rent per leased square foot at Fashion
Center was $41.98 at June 30, 1996. The mall store space at New Orleans
Centre was 62.4% leased as of June 30, 1996, and mall store sales were $230
per leased square foot. The average base rent per leased square foot at New
Orleans Centre was $22.63 at June 30, 1996. The office space at the
mixed-use properties, including Riverway and O'Hare International Center,
was 93.4% leased as of June 30, 1996 and had an average rent of $19.05 per
leased square foot.
S-30
ADDITIONAL INFORMATION
The following table sets forth certain information, as of June 30, 1996,
regarding the Portfolio Properties:
Ownership
Interest Partnership's Percent of Mall
(Expiration if Ground Percentage Year Buildt Total and Free-standing
NAME/LOCATION LEASE)(1) INTEREST (2) OR ACQUIRED GLA GLA LEASE (3) ANCHORS
REGIONAL MALLS
1. Alton Square, Alton, IL Fee 100.0% Acquired 1993 545,656 58.9% Famous Barr, JC Penney
2. Amigoland Mall, Brownsville, TX Fee 100 Built 1974 560,352 76.4 Dillard's, JC Penney,
Montgomery Ward
3. Anderson Mall, Anderson, SC Fee 100 Built 1972 636,505 82.5 Gallant Belk, JC
Penney, Sears, Uptons
4. Aventura Mall(4), Miami, FL Fee 33.3 Built 1983 976,574 96.6 Lord & Taylor, Macy's,
JC Penney, Sears
5. Avenues, The, Jacksonville, FL Fee 25 Built 1990 1,113,036 88.3 Dillard's, Gayfers,
Sears, Parisian, JC Penney
6. Barton Creek Square, Austin, TX Fee 100 Built 1981 1,380,814 87.2 Dillard's(5), Foley's,
JC Penney, Montgomery
Ward, Sears
7. Battlefield Mall, Springfield, MO Fee and Ground 100 Built 1970 1,127,051 87.7 Dillard's, JC Penney,
Lease (2056) Famous Barr, Sears,
Montgomery Ward
8. Bay Park Square, Green Bay, Wisconsin Fee 100 Built 1980 602,780 87.3 Kohl's, Montgomery
Ward, Shopko, Elder-Beerman
9. Bergen Mall, Paramus, NJ Fee and Ground 100 Acquired 1987 953,498 85.1 Steinbach's, Stern's
Lease(6)(2061)
10. Biltmore Square, Asheville, NC Fee 66.7 Built 1989 494,283 77.3 Belk's, Dillard's,
Profitt's
11. Boynton Beach Mall, Boynton Beach, FL Fee 100 Built 1985 1,065,746 91.3 Burdines, Macy's,
Mervyn's, JC Penney,
12. Broadway Square, Tyler, TX Fee 100 Acquired 1994 571,704 93.7 Dillard's, JC Penney,
Sears
13. Brunswick Square, East Brunswick, NJ Fee 100 Built 1973 735,171 90.9 Macy's, JC Penney
14. Castleton Square, Indianapolis, IN Fee 100 Built 1972 1,351,716 95.3 LS Ayres, Kohl's,
Lazarus, Montgomery Ward,
JC Penney, Sears
15. Century III Mall, Pittsburgh, PA Fee 50 Built 1979 1,289,750 86.8 Lazarus, Kaufman's,
JC Penney, Sears
16. Century Consumer Mall, Merrillville, IN Fee 100 Acquired 1982 398,665 65.5 Burlington Coat
Factory(5), Montgomery
17. Charles Towne Square, Charleston, SC Fee 100 Built 1976 463,303 39.9 Montgomery Ward,
Service Merchandise, (8)
18. Chautauqua Mall, Lakewood, NY Fee 100 Built 1971 425,644 65.8 Sears, (8)
19. Cheltenham Square, Philadelphia, PA Fee 100 Built 1981 638,507 94.4 Clover, Home Depot,(8)
20. Chesapeake Square, Chesapeake, VA Fee and Ground 75. Built 1989 704,983 79.9 Profitt's, Leggett, JC
Lease (2062) Penney, Sears, Montgomery
Ward
21. Cielo Vista Mall, El Paso, TX Fee and Ground 100 Built 1974 1,194,474 90.3 Dillard's(5), JC
Lease(9)(2027) Penney, Montgomery Ward,
Sears
S-31
22. Circle Centre, Indianapolis, IN Property Lease 14.7 Built 1995 797,846 94.3 Nordstrom, Parisian
(2097)
23. College Mall, Bloomington, IN Fee and Ground 100 Built 1965 697,179 86.3 JC Penney, Lazarus,
Lease(10)(2048) L.S. Ayres, Sears, Target
24. Columbia Center, Kennewick, WA Fee 100 Acquired 1987 690,503 90.4 The Bon Marche,
Lamonts, JC Penney, Sears
25. Coral Square, Coral Springs, FL Fee 50 Built 1984 939,414 86.2 Burdines(5), Mervyn's,
JC Penney, Sears
26. Crossroads Mall, Omaha, NE Fee 100 Acquired 1994 872,859 91.8 Dillard's, Sears,
Younkers
27. Crystal River Mall, Crystal River, FL Fee 100 Built 1990 425,091 75.8 Belk Lindsey, Kmart,
JC Penney, Sears
28. Desoto Square, Bradenton, FL Fee 100 Built 1973 701,611 83.3 Burdines, JC Penney,
Sears, Dillard's
29. East Towne Mall, Knoxville, TN Fee 100 Built 1984 977,227 79.7 Dillard's, JC Penney,
Proffitt's, Sears, Service
Merchandise
30. Eastern Hills Mall, Buffalo, NY Fee 100 Built 1971 990,851 88.6 Sears, Bon Ton, JC
Penney, Kaufman's
31. Eastgate Consumer Mall, Indianapolis, IN Fee 100 Acquired 1981 462,968 84.2 Burlington Coat
Factory, (8)
32. Eastland Mall, Tulsa, OK Fee 100 Built 1986 703,942 79.4 Dillard's, JC Penney,
Mervyn's, Service
Merchandise
33. Florida Mall, The, Orlando, FL Fee 50 Built 1986 1,119,884 98.4 Saks Fifth Avenue,
Dillard's(5), Gayfers, JC
Penney, Sears
34. Forest Mall, Fond Du Lac, WI Fee 100 Built 1973 486,224 87.6 JC Penney, Kohl's,
Younkers, Prange Way
35. Forest Village Park Mall, Forestville, MDFee 100 Built 1980 417,206 84 JC Penney, Kmart
36. Fremont Mall, Fremont, NE Fee 100 Built 1966 208,367 95.4 Price Store, JC
Penney
37. Glen Burnie Mall, Glen Burnie, MD Fee 100 Built 1963 450,178 89.9 Montgomery Ward
38. Golden Ring Mall, Baltimore, MD Fee 100 Built 1974 719,437 87.1 Caldor, Montgomery
Ward, The Hecht Company
39. Great Lakes Mall, Cleveland, OH Fee 100 Built 1961 1,293,096 98.8 Dillard's(5),
Kaufman's, JC Penney,
40. Greenwood Park Mall, Greenwood, IN Fee 100 Acquired 1979 1,274,150 93 JC Penney, Lazarus,
L.S. Ayres, Montgomery
Ward, Sears, Servi
41. Gulf View Square, Port Richey, FL Fee 100 Built 1980 811,426 87.6 Burdines, Dillard's,
Montgomery Ward, JC
Penney, Sears
42. Heritage Park Mall, Midwest City, OK Fee 100 Built 1978 636,889 74 Dillard's, Montgomery
Ward, Sears
43. Hutchinson Mall, Hutchinson, KS Fee 100 Built 1985 525,942 71.4 Dillard's, JC Penney,
Sears, Service Merchandise,
Wal-Mart
44. Independence Center, Independence, MO Fee 100 Acquired 1994 1,033,566 77.3 Dillard's, The Jones
Store Co., Sears
45. Ingram Park Mall, San Antonio, TX Fee 100 Built 1979 1,134,426 89.2 Dillard's(5), Foley's,
JC Penney, Sears
46. Irving Mall, Irving, TX Fee 100 Built 1971 1,127,213 83.9 Dillard's, Foley's, JC
Penney, Mervyn's, Sears
47. Jefferson Valley Mall, Yorktown Heights, Fee 100 Built 1983 589,600 95.2 Macy's, Sears, Service
Merchandise
48. La Plaza, McAllen, TX Fee and Ground 100 Built 1976 841,573 95.8 Dillard's, JC Penney,
Lease(6)(2040) Jones & Jones, Sears,
Service Merchandi
49. Lafayette Square, Indianapolis, IN Fee 100 Built 1968 1,244,957 85.3 JC Penney, LS Ayres,
Lazarus, Sears, Montgomery
Ward
50. Lakeland Square, Lakeland, FL Fee 49.9 Built 1988 901,818 85.9 Belk Lindsey,
Burdines, Dillard's,
Mervyn's, JC Penney, Sears
S-32
51. Lakeline Mall, N. Austin, TX Fee 50 Built 1995 1,102,946 88.9 Dillard's, Foley's, JC
Penney, Mervyn's, Sears
52. Lima Mall, Lima, OH Fee 100 Built 1965 753,314 93.6 Elder-Beerman,
Lazarus, JC Penney,
53. Lincolnwood Town Center, Lincolnwood, IL Fee 100 Built 1990 441,169 94.9 Carson Pirie Scott,
JC Penney
54. Longview Mall, Longview, TX Fee 100 Built 1978 617,002 87.2 Dillard's(5), JC
Penney, Sears, Wilson's
55. Machesney Park Mall, Rockford, IL Fee 100 Built 1979 555,882 74.9 Kohl's, JC Penney,
Younkers, (8)
56. Mall of the Mainland, Galveston, TX Fee 65.0 Built 1991 779,014 56.2 Dillard's, JC Penney,
Sears, Foley's
57. Markland Mall, Kokomo, IN Ground Lease 100 Built 1968 391,231 86.7 Lazarus, Sears, Target
(2041)
58. McCain Mall, N. Little Rock, AR Ground Lease 100 Built 1973 775,378 97.4 Dillard's, JC Penney,
(11)(2032) M.M. Cohn, Sears
59. Melbourne Square, Melbourne, FL Fee 100 Built 1982 733,842 83.2 Belk Lindsey,
Burdines, Dillard's,
Mervyn's, JC Penney
60. Memorial Mall, Sheboygan, WI Fee 100 Built 1969 416,273 91 JC Penney, Kohl's,
Sears
61. Miami International Mall, Miami, FL Fee 60 Built 1982 972,281 95.7 Burdines(5), Sears,
Mervyn's, JC Penney
62. Midland Park Mall, Midland, TX Fee 100 Built 1980 619,396 81 Dillard's(5), JC
Penney, Sears
63. Miller Hill Mall, Duluth, MN Fee 100 Built 1973 806,667 88.1 Glass Block, JC
Penney, Montgomery Ward,
Sears
64. Mission Viejo Mall, Mission Viejo, CA Fee 100 Built 1979 815,466 70.2 Mullock's, Montgomery
Ward, Robinsons-May(5)
65. Mounds Mall, Anderson, IN Ground Lease 100 Built 1965 409,437 75.6 Elder-Beerman, JC
(2033) Penney, Sears
66. Muncie Mall, Muncie, IN Fee 100 Built 1970 499,683 89.1 JC Penney, L.S. Ayres,
Sears
67. North East Mall, Hurst, TX Fee 50 Built 1971 1,140,403 87.7 Dillard's(5), JC
Penney, Montgomery Ward,
Sears
68. North Towne Square, Toledo, OH Fee 100 Built 1980 750,886 72.9 Elder-Beerman, Lion,
Montgomery Ward
69. Northfield Square, Bradley, IL Fee 31.6 Built 1990 533,002 72.1 Sears, Carson Pirie
Scott, JC Penney, Venture
70. Northgate Mall, Seattle, WA Fee 100 Acquired 1987 1,049,978 92 The Bon Marche,
Lamonts, Nordstrom, JC
Penney
71. Northwoods Mall, Peoria, IL Fee 100 Acquired 1983 666,778 92.9 Famous Barr, JC
Penney, Montgomery Ward
72. Orange Park Mall, Jacksonville, FL Fee 100 Acquired 1994 848,549 90.1 Dillard's, Gayfer's,
JC Penney, Sears
73. Paddock Mall, Ocala, FL Fee 100 Built 1980 568,082 91 Belk Lindsey,
Burdines, JC Penney, Sears
74. Palm Beach Mall, West Palm Beach, FL Fee 50 Built 1967 1,200,636 85.6 JC Penney, Lord &
Taylor, Mervyn's, Burdines,
Sears
75. Port Charlotte Town Center, Port Fee 80.0 Built 1989 720,988 73.2 Burdines, Dillard's,
Montgomery Ward,
76. Prien Lake Mall, Lake Charles, LA Fee and Ground 100 Built 1972 467,520 96.2 JC Penney, Montgomery
Lease(6)(2025) Ward, The White House
77. Raleigh Springs Mall, Memphis, TN Fee and Ground 100 Built 1971 885,741 83.3 Dillard's,
Lease(6)(2018) Goldsmith's, JC Penney,
Sears
78. Randall Park Mall, Cleveland, OH Fee 100 Built 1976 1,531,484 68 Dillard's, Kaufman's,
JC Penney, Sears,
Burlington Coat Factor
79. Richardson Square, Dallas, TX Fee 100 Built 1977 864,404 57.8 Dillard's(5), Sears,
Montgomery Ward
80. Richmond Mall, Cleveland, OH Fee 100 Built 1966 873,227 71.9 JC Penney, Sears
S-33
81. Richmond Square, Richmond, IN Fee 100 Built 1966 310,975 58 JC Penney, Sears
82. Rolling Oaks Mall, North San Antonio, TX Fee 49.9 Built 1988 758,834 67.4 Dillard's, Foley's,
Sears
83. Ross Park Mall, Pittsburgh, PA Fee 89. Built 1986 1,273,446 93.1 Lazarus, JC Penney,
Kaufmann's, Sears, Service
Merchandise
84. Seminole Towne Center, Sanford, FL Fee 45 Built 1995 1,132,378 85.2 Burdines, Dillard's,
JC Penney, Parisian, Sears
85. Smith Haven Mall, Lake Grove, NY Fee 25 Acquired 1995 1,354,631 84.9 Sterns, Macy's, Sears,
Steinbach
86. South Park Mall, Shreveport, LA Fee 100 Built 1975 856,685 77.5 Burlington Coat
Factory, Dillard's, JC
Penney, Montgomery War
87. Southern Park Mall, Youngstown, OH Fee 100 Built 1970 1,168,972 92.7 Dillard's, Kaufman's,
JC Penney, Sears
88. Southgate Mall, Yuma, AZ Fee 100 Acquired 1988 321,177 78 Albertson's,
Dillard's, JC Penney, Sears
89. Southtown Mall, Ft. Wayne, IN Fee 100 Built 1969 858,196 34.7 Kohl's, JC Penney,
L.S. Ayres, Sears, Service
Merchandise
90. St. Charles Towne Center, Waldorf, MD Fee 100 Built 1990 962,060 83.8 Hoecht's, JC Penney,
Montgomery Ward, Sears
91. Summit Mall, Akron, OH Fee 100 Built 1965 724,578 80.7 Kaufmann's, Dillard's,
(8)
92. Sunland Park Mall, El Paso, TX Fee 100 Built 1988 921,357 79.5 Dillard's, JC Penney,
Mervyn's, Montgomery Ward,
The Popular
93. Tacoma Mall, Tacoma, WA Fee 100 Acquired 1987 1,255,278 91 The Bon Marche,
Mervyn's, Nordstrom, JC
Penney, Sears
94. Tippecanoe Mall, Lafayette, IN Fee 100 Built 1973 867,892 80.7 JC Penney, Kohl's,
L.S. Ayres, Lazarus, Sears
95. Towne East Square, Wichita, KS Fee 100 Built 1975 1,151,920 75.4 Dillard's, JC Penney,
Sears
96. Towne West Square, Wichita, KS Fee 100 Built 1980 942,158 83.7 Dillard's, JC Penney,
Montgomery Ward, Office
Depot, Sears, S
97. Treasure Coast Square, Stuart, FL Fee 100 Built 1987 884,630 84.3 Burdines, Dillard's,
Mervyn's, JC Penney, Sears
98. Tyrone Square, St. Petersburg, FL Fee 100 Built 1972 1,092,449 97.5 Burdines, Dillard's,
JC Penney, Sears
99. University Mall, Little Rock, AR Ground Lease 100 Built 1967 565,876 84.6 JC Penney, Montgomery
(13)(2026) Ward, M.M. Cohn
100. University Mall, Pensacola, FL Fee 100 Acquired 1994 711,992 82 McRae's, JC Penney,
Sears
101. University Park Mall, South Bend, IN Fee 60 Built 1979 872,234 95.6 LS Ayres, Hudson's, JC
Penney, Sears
102. Upper Valley Mall, Springfield, OH Fee 100 Built 1971 750,665 91.6 Lazarus, JC Penney,
Sears, Elder-Beerman
103. Valle Vista Mall, Harlingen, TX Fee 100 Built 1983 647,117 85.3 Dillard's, JC Penney,
Marshalls, Mervyn's, Sears
104. Virginia Center Commons(4), Richmond, VAFee 70.0 Built 1991 788,892 76.5 Profitt's, Hoecht's,
Leggett, JC Penney, Sears
105. Washington Square, Indianapolis, IN Fee 100 Built 1974 1,178,409 65.9 L.S. Ayres, Lazarus,
Montgomery Ward, JC
Penney, Sears
106. West Ridge Mall, Topeka, KS(14) Fee 100 Built 1988 1,041,611 75.1 Dillard's, JC Penney,
Jones, Montgomery Ward,
Sears
107. West Town Mall, Knoxville, TN Ground Lease 2 Acquired 1991 1,261,902 86 JC Penney, Sears,
(6)(2042) Profitt's, Dillard's,
Parisian
108. White Oaks Mall, Springfield, IL Fee 77 Built 1977 903,578 94.4 Bergner's, Famous
Barr, Montgomery Ward,
Sears
109. Wichita Mall, Wichita, KS Ground Lease 100 Built 1969 379,461 47.9 Office Max, Montgomery
Ward
(2022)
S-34
110. Windsor Park Mall, San Antonio, TX Fee 100 Built 1976 1,089,537 70.8 Dillard's(5), JC
Penney, Mervyn's,
Montgomery Ward
111. Woodville Mall, Toledo, OH Fee 100 Built 1969 795,027 59.9 Andersons,
Elder-Beerman, Sears, (8)
SPECIALTY RETAIL CENTERS
1. The Forum Shops at Caesars, Las Vegas, NV Ground Lease 60 Built 1992 242,031 95.9 --
(2067)
2. Trolley Square, Salt Lake City, UT Fee and Ground 90 Acquired 1986 225,612(16) 76.4 --
Lease(15)
MIXED-USE PROPERTIES
1. Fashion Centre at Pentagon City, The, ArliFee 21 Built 1989 987,942(17) 99.1 (Macy's, Nordstrom
2. New Orleans Centre/CNG Tower, New Orleans,Fee and Ground 100 Built 1988 1,025,634(19) 62.4 (Macy's, Lord & Taylor
Lease (2084)
3. O'Hare International Center, Rosemont, IL Fee 100 Built 1988 502,012(20) 87.9 --
4. Riverway, Rosemont, IL Fee 100 Acquired 1991 821,332(21) 93.9 --
S-35
Ownership
Interest Partner-
Expiration ships' Percent
if Ground Percentage Year Built Total of GLA
NAME/LOCATION LEASE)(1) INTEREST(2) OR ACQUIRED GLA LEASED(3) ANCHORS
COMMUNITY SHOPPING CENTERS
1. Arvada Plaza, Arvada, CO Ground Lease(2058) 100.0 Built 1966 98,215 100.0 King Soopers
2. Aurora Plaza, Aurora, CO Ground Lease(2058) 100.0 Built 1965 148,666 96.6 King Soopers, MacFrugel's
Bargains, Super Saver Cinema
3. Bloomingdale Court, Bloomingdale, IL Fee 100.0 Built 1987 598,570 85.7 Builders Square, Cineplex
Odeon, Frank's Nursery,
Marshalls, Office Max, Service
Merchandise, T.J. Maxx, Wal-
Mart, (8)
4. Boardman Plaza, Youngstown, OH Fee 100.0 Built 1951 649,817 91.2 Burlington Coat Factory, Giant
Eagle, Hills, Reyers Outlet,
(8)
5. Bridgeview Court, Bridgeview, IL Fee 100.0 Built 1988 280,299 62.9 Omni, Venture
6. Brightwood Plaza, Indianapolis, IN Fee 100.0 Built 1965 41,893 100.0 --
7. Bristol Plaza, Bristol, VA Ground Lease(2029) 100.0 Built 1965 116,754 38.9 (8)
8. Buffalo Grove Towne Center, Buffalo Fee 92.5 Built 1988 134,131 82.3 Buffalo Grove Theatres
Grove, IL
9. Celina Plaza, El Paso, TX Fee and Ground 100.0 Built 1978 32,622 100.0 --
Lease(22)(2027)
10. Chesapeake Center, Chesapeake, VA Fee 100.0 Built 1989 299,604 99.2 Kmart, Phar Mor, Service
Merchandise, Cinemark Theatre
11. Cobblestone Court, Victor, NY Fee and Ground 35.0 Built 1993 261,211 97.3 Dick's Sporting Goods, Kmart,
Lease(10)(2038) Office Max, Fashion Bug
12. Cohoes Commons, Rochester, NY Fee and Ground 100.0 Built 1984 262,964 93.6 Bryant & Stratton Business
Lease(6)(2032) Institute, Lechmere's, Xerox
13. Cook's Discount, Ardmore, OK(23) Fee 100.0 Built 1969 60,396 0.0 (8)
14. Countryside Plaza, Countryside, IL Fee and Ground 100.0 Built 1977 435,441 82.6 Best Buy, Builders Square, Old
Lease(10)(2058) Country Buffet, Venture, (8)
15. Crystal Court, Crystal Lake, IL Fee 35.0 Built 1989 284,741 57.8 Cub, Service Merchandise, Wal-
Mart, (8)
16. East Towne Commons, Knoxville, TN Fee 100.0 Built 1987 180,355 100.0 Electric Avenue & More
17. Eastland Plaza, Tulsa, OK Fee 100.0 Built 1986 190,261 75.6 Marshalls, Target, Toys 'R' Us
18. Fairfax Court, Fairfax, VA Ground Lease(2052) 26.3 Built 1992 249,285 96.5 Circuit City, Superstore,
Montgomery Ward, Today's Man
19. Forest Plaza, Rockford, IL Fee 100.0 Built 1985 421,516 99.3 Builders Square, Kohl's,
Marshalls, Michaels, Office
Max, T.J. Maxx
S-36
20. Fox River Plaza, Elgin, IL Fee 100.0 Built 1985 324,786 81.3 Builders Square, Michaels,
Service Merchandise, Venture,
(8)
21. Gaitway Plaza, Ocala, FL Fee 23.3 Built 1989 230,052 98.3 Books-A-Million, Montgomery
Ward, Office Depot, T.J. Maxx
22. Great Lakes Plaza, Cleveland, OH Fee 100.0 Built 1977 162,873 77.8 Handy Andy, Michaels
23. Great Northeast Plaza, Philadelphia, Fee 50.0 Acquired 298,242 97.4 Sears, Phar Mor
PA 1989
24. Greenwood Plus, Greenwood, IN Fee 100.0 Built 1979 145,116 100.0 Best Buy, Kohl's
25. Griffith Park Plaza, Griffith, IN Ground Lease 100.0 Built 1979 274,230 97.8 General Cinema, Venture
(2060)
26. Grove at Lakeland Square, The, Fee 100.0 Built 1988 215,463 96.5 Cobb Theatres, Sports
Lakeland, FL Authority, Wal-Mart
27. Hammond Square, Sandy Springs, GA Space Lease (2011) 100.0 Built 1974 87,705 100.0 --
28. Highland Lakes Center, Orlando, FL Fee 100.0 Built 1991 477,452 83.9 Goodings, Dress for Less,
Marshalls, Cinemark Theaters,
Office Max, Service
Merchandise, Target, (8)
29. Ingram Plaza, San Antonio, TX Fee 100.0 Built 1980 111,518 100.0 --
30. Lake Plaza, Waukegan, IL Fee 100.0 Built 1986 218,208 100.0 Builders Square, Venture
31. Lake View Plaza, Orland Park, IL Fee 100.0 Built 1986 388,126 96.9 Best Buy(24), L. Fish
Furniture, Linens-N-Things(24),
Marshalls, Michaels, Omni, Pet
Care Plus(24), Service
Merchandise, Ultra 3(24)
32. Lima Center, Lima, OH Fee 100.0 Built 1976 201,154 91.0 Hills, Service Merchandise
33. Lincoln Crossing, O'Fallon, IL Fee 100.0 Built 1990 161,337 100.0 PetsMart, Wal-Mart
34. Mainland Crossing, Galveston, TX Fee Built 1991 390,986 39.5 Sam's Club, Wal-Mart, (8)
80.0(7)
35. Maplewood Square, Omaha, NE Fee 100.0 Built 1970 129,190 96.3 Target
36. Markland Plaza, Kokomo, IN Fee 100.0 Built 1974 108,296 98.1 Service Merchandise
37. Martinsville Plaza, Martinsville, VA Space Lease (2036) 100.0 Built 1967 102,162 97.1 Rose's
38. Marwood Plaza, Indianapolis, IN Fee 100.0 Built 1962 105,066 100.0 Kroger
39. Matteson Plaza, Matteson, IL Fee 100.0 Built 1988 275,455 87.2 Dominick's, Kmart, Michael's,
(8)
40. Memorial Plaza, Sheboygan, WI Fee 100.0 Built 1966 129,202 24.0 Marcus Theatre, (8)
41. Mounds Mall Cinema, Anderson, IN Fee 100.0 Built 1974 7,500 100.0 Cinema I & II
42. New Castle Plaza, New Castle, IN Fee 100.0 Built 1966 91,648 100.0 Goody's
43. North Ridge Plaza, Joliet, IL Fee 100.0 Built 1985 323,672 100.0 Builders Square, Office Max,
Service Merchandise
44. North Riverside Park Plaza, North Fee 100.0 Built 1977 119,608 96.5 --
Riverside, IL
45. Northland Plaza, Columbus, OH Fee and Ground 100.0 Built 1988 205,635 94.5 Marshalls, Phar-Mor, Service
Lease(6)(2085) Merchandise
46. Northwood Plaza, Fort Wayne, IN Fee 100.0 Built 1974 211,840 100.0 Regal Cinema, Target
47. Park Plaza, Hopkinsville, KY Fee and Ground 100.0 Built 1968 114,042 100.0 Wal-Mart
Lease(6)(2039)
48. Plaza at Buckland Hills, The, East Fee 26.3 Built 1993 336,534 78.7 Toys 'R' Us, Kids 'R' Us,
Hartford, CT Service Merchandise, Lechmere,
Linens-N-Things, Filene's
Basement, (8)
S-37
49. Regency Plaza, St. Charles, MO Fee 100.0 Built 1988 277,521 96.3 Sam's Wholesale, Wal-Mart
50. Ridgewood Court, Jackson, MS Fee 35.0 Built 1993 240,843 100.0 Campo Electronics, Home
Quarters, Service Merchandise,
T.J. Maxx
51. Royal Eagle Plaza, Coral Springs, FL Fee 35.0 Built 1989 203,140 96.5 Kmart, Luxury Linens
52. St. Charles Towne Plaza, Waldorf, MD Fee 100.0 Built 1987 435,162 98.4 Ames, Hechinger, Jo Ann
Fabrics, People's, Service
Merchandise, Shoppers Food
Warehouse, T.J. Maxx
53. Teal Plaza, Lafayette, IN Fee and Ground 100.0 Built 1962 110,751 100.0 Kmart
Lease(2007)(6)
54. Terrace at The Florida Mall, Orlando, Fee 100.0 Built 1989 332,980 96.7 Target, J. Byrons, Waccamaw,
FL Service Merchandise, Marshalls
55. Tippecanoe Plaza, Lafayette, IN Fee 100.0 Built 1974 94,125 100.0 Barnes & Noble Bookseller,
Service
56. University Center, South Bend, IN Fee 60.0 Built 1980 150,533 97.8 Best Buy, Michaels, Service
Merchandise
57. Village Park Plaza, Westfield, IN Fee 35.0 Built 1990 503,002 97.5 Frank's Nursery, Gaylans, Jo-
Ann Fabrics, Kohl's Marsh,
Regal Cinemas, Wal-Mart
58. Wabash Village, West Lafayette, IN Ground Lease(2063) 100.0 Built 1970 124,688 95.4 Kmart
59. Washington Plaza, Indianapolis, IN Fee Built 1978 50,302 97.7 Kids 'R' Us
85.0(7)
60. West Ridge Plaza, Topeka, KS Fee 100.0 Built 1988 232,675 96.3 Magic Forest, Target, TJ Maxx,
Toys 'R' Us
61. West Town Corners, Altamonte Springs, Fee 23.3 Built 1989 384,812 99.2 PetsMart, Service Merchandise,
FL Sports Authority, Wal-Mart,
Xtra
62. Westland Park Plaza, Orange Park, FL Fee 23.3 Built 1989 163,154 95.3 Burlington Coat Factory,
PetsMart, Sports Authority
63. White Oaks Plaza, Springfield, IL Fee 100.0 Built 1986 389,063 98.9 Cub Foods, Kids 'R' Us, Kohl's,
Office Max, T.J. Maxx, Toys 'R'
Us
64. Willow Knolls Court, Peoria, IL Fee 35.0 Built 1990 364,735 93.5 Kohl's, Phar-Mor, Sam's
Wholesale Club, Willow Knolls,
Theaters 14
65. Wood Plaza, Fort Dodge, IA Ground Lease(2045) 100.0 Built 1968 88,595 98.9 Country General
66. Yards Plaza, The, Chicago, IL Fee 35.0 Built 1990 273,292 95.6 Burlington Coat Factory, Omni
Superstore, Montgomery Ward
PROPERTIES UNDER CONSTRUCTION
1. Arizona Mills, Tempe, AZ (25) 25.0 (26) 1,225,000N/A Burlington Coat Factory, Ross
Dress for Less, Oshman's
Supersport, Off 5th-Saks Fifth
Avenue Outlet
2. Cottonwood Mall, Albuquerque, NM Fee 100.0 1996 (27) 1,035,000N/A Dillard's, Foley's, JC Penney,
Mervyn's, Montgomery Ward,
United Artist Entertainment
Complex
3. Grapevine Mills, Dallas/Ft. Worth, TX Fee 37 (26) 1,450,000N/A Books-A-Million, Burlington
Coat Factory, Group USA, Off
5th-Saks Fifth Avenue Outlet,
Rainforest Cafe
4. Indian River Commons, Vero Beach, FL Fee 50.0 (26) 265,000 N/A HomePlace, Lowe's, Office Max,
Service Merchandise
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5. Indian River Mall, Vero Beach, FL Fee 50.0 (28) 754,000 N/A AMC Theatres, Burdines,
Dillard's, JC Penney, Sears
6. Ontario Mills, Ontario, CA Fee 25.0 (28) 1,421,470N/A AMC Theatres, American
Wilderness Experience, Bed,
Bath & Beyond, Bernini -- Off
Rodeo, Burlington Coat Factory,
Dave & Busters, Group USA,
IWERKS, JC Penney, Marshall's,
Mikasa, Off 5th-Saks Fifth
Avenue Outlet, Sports
Authority, TJ Maxx, Totally for
Kids, Virgin Records
7. The Source, Long Island, NY Fee 50.0 (26) 730,000 N/A Fortunoff, Nordstrom Rack, Off
5th-Saks Fifth Avenue Outlet,
Cheesecake Factory, Rainforest
Cafe, Just For Feet,
Bertolini's
8. Tower Shops at Stratosphere, Las Space Lease (2051) 50.0 (28) 80,000 N/A Rainforest Cafe
Vegas, NV
__________
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(1) The date listed is the expiration date of the last renewal option available
to the Operating Partnership under the ground lease. In a majority of the
ground leases, the lessee has either a right of first refusal or the right
to purchase the lessor's interest. Unless otherwise indicated, each ground
lease listed in this column covers at least 50% of its respective property.
(2) The Operating Partnership's interests in some Joint Venture Properties are
subject to preferences on distributions in favor of other partners.
(3) Represents the percentage of Owned GLA leased by tenants.
(4) This property is managed by a third party.
(5) This retailer operates two stores at this property.
(6) Indicates ground lease covers less than 15% of the acreage of this
property.
(7) The Operating Partnership receives substantially all of the economic
benefit of these properties.
(8) Includes an anchor space currently vacant.
(9) Indicates two ground leases which taken together, cover less than 50% of
the acreage of the property.
(10)Indicates ground lease covers less than 50% of the acreage of the property.
(11)Indicates ground lease covers all of the property except for parcels owned
in fee by anchors.
(12)In connection with the settlement of certain outstanding litigation, the
Operating Partnership acquired on October 4, 1996 for cash an additional
20% limited partnership interest in Hurst Mall Company. At the same time,
the Operating Partnership exercised its option to acquire the remaining 30%
limited partnership interest in Hurst Mall Company owned by the Simons in
exchange for OP Units in the Operating Partnership, as well as the Simon's
50% general partnership interest which the Operating Partnership acquired
for nominal consideration. The Simons had previously contributed to the
Operating Partnership in exchange for OP Units, the right to receive
distributions relating to its 50% general partnership interest.
(13)Indicates one ground lease covers substantially all of the property and a
second ground lease covers the remainder.
(14)Includes outlets in which the Operating Partnership has an 85% interest and
which represents less than 3% of the GLA and total annualized base rent for
the property.
(15)Indicates a ground lease covers a pedestrian walkway and steps at this
property. The Operating Partnership, as ground lessee, has the right to
successive five-year renewal options, except if the lessor, a public
agency, determines that public right-of-way needs necessitate the
locality's use of the ground lease property.
(16)Primarily retail space with approximately 1,500 square feet of office
space.
(17)Primarily retail space with approximately 167,000 square feet of office
space.
(18)Indicates combined occupancy of office and retail space.
(19)Primarily retail space with approximately 488,760 square feet of office
space.
(20)Primarily office space with approximately 12,800 square feet of retail
space.
(21)Primarily office space with approximately 24,300 square feet of retail
space.
(22)Indicates ground lease covers outparcel.
(23)This property was sold on August 1, 1996.
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(24)Subleased from TJX Companies.
(25)The joint venture is currently negotiating the purchase of the land at this
property and expects to close before the end of 1996.
(26)Scheduled to open during 1997.
(27)This property opened on July 31, 1996.
(28)Scheduled to open during November of 1996.
DESCRIPTION OF THE NOTES
GENERAL
The following description of the specific terms of the Notes supplements the
description of the general terms and provisions of Debt Securities set forth in
the Prospectus under the caption "Description of Debt Securities."
The 200 Notes, the 200 Notes and the 20 Notes constitute separate series
of debt securities (which are more fully described in the accompanying
Prospectus) each to be issued pursuant to an indenture dated as of October__,
1996, between the Operating Partnership and Chemical Bank, as trustee (the
"Trustee"), as supplemented by a First Supplemental Indenture, dated October__,
1996 between the Operating Partnership and the Trustee (together, the
"Indenture") and will be limited to an aggregate principal amount of $300
million. The terms of the Notes include those provisions contained in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Notes are
subject to all such terms, and holders of Notes are referred to the Indenture
and the Trust Indenture Act for a statement thereof. The following summary of
certain provisions of the Indenture does not purport to be complete and is
subject to and qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below.
The Notes will be direct, unsecured obligations of the Operating Partnership
and will rank pari passu with each other and with all other unsecured and
unsubordinated indebtedness of the Operating Partnership from time to time
outstanding. The Notes will be effectively subordinated to (i) the prior claims
of each secured mortgage lender to any specific Portfolio Property which
secures such lender's mortgage and (ii) any claims of creditors of entities
wholly or partly owned, directly or indirectly, by the Operating Partnership.
Subject to certain limitations set forth in the Indenture, and as described
under "- Certain Covenants - Limitations on Incurrence of Debt" below, the
Indenture will permit the Operating Partnership to incur additional secured and
unsecured indebtedness. At October ___, 1996, the Operating Partnership had
unsecured unsubordinated indebtedness aggregating $ million.
The 200 Notes will mature on , 200 , the 200 Notes will mature
on , 200 and the 20 Notes will mature on , 20
(each a "Maturity Date"). The Notes are not subject to any sinking fund
provisions. The Notes will be issued only in fully registered, book-entry form
without coupons, in denominations of $1,000 and integral multiples, thereof,
except under the limited circumstances described below under "Book-Entry
System."
Except as described under "- Certain Covenants - Limitations on Incurrence
of Debt" below and under "Description of Debt Securities - Merger,
Consolidation or Sale" in the accompanying Prospectus, the Indenture does not
contain any provisions that would limit the ability of the Operating
Partnership to incur indebtedness or that would afford holders of the Notes
protection in the event of (i) a highly leveraged or similar transaction
involving the Operating Partnership, the Company or the General Partners of the
Operating Partnership, or any affiliate of any such party, (ii) a change of
control, or (iii) a reorganization, restructuring, merger or similar
transaction involving the Operating Partnership that may adversely affect the
holders of the Notes. In addition, subject to the limitations set forth under
"Description of Debt Securities - Merger, Consolidation or Sale" in the
accompanying Prospectus, the Operating Partnership may, in the future, enter
into certain transactions such as the sale of all or substantially all of its
assets or the merger or consolidation of the Operating Partnership that would
increase the amount of the Operating Partnership's indebtedness or
substantially reduce or eliminate the Operating Partnership's assets, which may
have an adverse effect on the Operating Partnership's ability to service its
indebtedness, including the Notes. The Operating Partnership and its management
have no present intention of engaging in a highly leveraged or similar
transaction involving the Operating Partnership except that, subject to the
receipt of required consents, it is contemplated that subsequent to the first
anniversary of the date of the Merger,
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reorganizational transactions will be
effected so that ultimately the Operating Partnership will directly own all of
the property and partnership interests now owned by SPG, LP.
PRINCIPAL AND INTEREST
The 200 Notes will bear interest at % per annum, the 200 Notes will bear
interest at % per annum and the 20 Notes will bear interest at % per
annum, in each case from , 1996 or from the immediately preceding
Interest Payment Date (as defined below) to which interest has been paid,
payable semi-annually in arrears on each and , commencing
, 1996 (each, an "Interest Payment Date"), and on the Maturity Date, to the
persons (the "Holders") in whose names the applicable Notes are registered in
the security register applicable to the Notes at the close of business 15
calendar days prior to such payment date regardless of whether such day is a
Business Day, as defined below (each, a "Regular Record Date"). Interest on the
Notes will be computed on the basis of a 360-day year of twelve 30-day months.
The principal of each Note payable on the Maturity Date will be paid against
presentation and surrender of such Note at the corporate trust office of the
Trustee, located initially at 450 West 33rd Street, New York, New York, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
If any Interest Payment Date or the Maturity Date falls on a day that is not
a Business Day, the required payment shall be made on the next Business Day as
if it were made on the date such payment was due and no interest shall accrue
on the amount so payable for the period from and after such Interest Payment
Date or the Maturity Date, as the case may be. "Business Day" means any day,
other than a Saturday or Sunday, that is neither a legal holiday nor a day on
which banking institutions in the City of New York are authorized or required
by law, regulation or executive order to close.
CERTAIN COVENANTS
LIMITATIONS ON INCURRENCE OF DEBT. The Operating Partnership will not, and
will not permit any Subsidiary (as defined below) to, incur any Debt (as
defined below), other than intercompany debt (representing Debt to which the
only parties are the Company, the Operating Partnership and any of their
Subsidiaries (but only so long as such Debt is held solely by any of the
Company, the Operating Partnership and any Subsidiary) that is subordinate in
right of payment to the Notes), if, immediately after giving effect to the
incurrence of such additional Debt, the aggregate principal amount of all
outstanding Debt would be greater than 60% of the sum of (i) the Operating
Partnership's Adjusted Total Assets (as defined below) as of the end of the
fiscal quarter prior to the incurrence of such additional Debt and (ii) any
increase in Adjusted Total Assets from the end of such quarter including,
without limitation, any pro forma increase from the application of the proceeds
of such additional Debt.
In addition to the foregoing limitation on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur
any Debt secured by any mortgage, lien, pledge, encumbrance or security
interest of any kind upon any of the property of the Operating Partnership or
any Subsidiary ("Secured Debt"), whether owned at the date of the Indenture or
thereafter acquired, if, immediately after giving effect to the incurrence of
such additional Secured Debt, the aggregate principal amount of all outstanding
Secured Debt is greater than 55% of the sum of (i) the Operating Partnership's
Adjusted Total Assets as of the end of the fiscal quarter prior to the
incurrence of such additional Secured Debt and (ii) any increase in Adjusted
Total Assets from the end of such quarter including, without limitation, any
pro forma increase from the application of the proceeds of such additional
Secured Debt.
In addition to the foregoing limitations on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur
any Debt if the ratio of Annualized EBITDA After Minority Interest to Interest
Expense (in each case as defined below) for the period consisting of the four
consecutive fiscal quarters most recently ended prior to the date on which such
additional Debt is to be incurred shall have been less than 1.75 to 1 on a pro
forma basis after giving effect to the incurrence of such Debt and to the
application of the proceeds therefrom, and calculated on the assumption that
(i) such Debt and any other Debt incurred since the first day of such
four-quarter period had been incurred, and the proceeds therefrom had been
applied (to whatever purposes such proceeds had been applied as of the date of
calculation of such ratio), at the beginning of such period, (ii) any other
Debt that has been repaid or retired since the first day of such four-quarter
period had been repaid or retired at the beginning of such period (except that,
in making such computation, the amount of Debt under any revolving credit
facility shall be computed based upon the average daily balance of such Debt
during such period), (iii) any income earned as a result of any assets having
been placed in service since the end of such four-quarter period had been
earned, on an annualized basis, during such period, and (iv) in the case of any
acquisition or disposition by the Operating Partnership, any Subsidiary or any
unconsolidated joint venture in which the Operating Partnership or
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any
Subsidiary owns an interest, of any assets since the first day of such
four-quarter period, including, without limitation, by merger, stock purchase
or sale, or asset purchase or sale, such acquisition or disposition and any
related repayment of Debt had occurred as of the first day of such period with
the appropriate adjustments with respect to such acquisition or disposition
being included in such pro forma calculation.
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Operating
Partnership, its Subsidiaries and by any unconsolidated joint venture, whenever
the Operating Partnership, any Subsidiary, or any unconsolidated joint venture,
as the case may be, shall create, assume, guarantee or otherwise become liable
in respect thereof.
MAINTENANCE OF UNENCUMBERED ASSETS. The Operating Partnership is required to
maintain Unencumbered Assets (as defined below) of not less than 150% of the
aggregate outstanding principal amount of the Unsecured Debt (as defined below)
of the Operating Partnership.
As used herein:
"ADJUSTED TOTAL ASSETS" as of any date means the sum of (i) the defined
amount determined by multiplying the sum of the shares of common stock of the
Company issued in the initial public offering of the Company ("IPO") and the
units of the Operating Partnership not held by the Company outstanding on the
date of the IPO, by $22.25 (the "IPO Price"), (ii) the principal amount of the
outstanding consolidated debt of the Company on the date of the IPO, less any
portion applicable to minority interests, (iii) the Operating Partnership's
allocable portion, based on its ownership interest, of outstanding indebtedness
of unconsolidated joint ventures on the date of the IPO, (iv) the purchase
price or cost of any real estate assets acquired (including the value, at the
time of such acquisition, of any units of the Operating Partnership or shares
of Common Stock of the Company issued in connection therewith) or developed
after the IPO by the Operating Partnership or any Subsidiary, less any portion
attributable to minority interests, plus the Operating Partnership's allocable
portion, based on its ownership interest, of the purchase price or cost of any
real estate assets acquired or developed after the IPO by any unconsolidated
joint venture, (v) the value of the Merger compiled as the sum of (a) the
purchase price including all related closing costs and (b) the value of all
outstanding indebtedness less any portion attributable to minority interests,
including the Operating Partnership's allocable share, based on its ownership
interest, of outstanding indebtedness of unconsolidated joint ventures at the
Merger date, and (vi) working capital of the Operating Partnership; subject,
however, to reduction by the amount of the proceeds of any real estate assets
disposed of after the IPO by the Operating Partnership or any Subsidiary, less
any portion applicable to minority interests, and by the Operating
Partnership's allocable portion, based on its ownership interest, of the
proceeds of any real estate assets disposed of after the IPO by unconsolidated
joint ventures. On a pro forma basis as of June 30, 1996, the Operating
Partnership's Adjusted Total Assets were $7.81 billion.
"ANNUALIZED EBITDA AFTER MINORITY INTEREST" means earnings before interest,
taxes, depreciation and amortization with other adjustments as are necessary to
exclude the effect of items classified as extraordinary items in accordance
with generally accepted accounting principles for all properties after
distribution to the third party joint ventures ("EBITDA After Minority
Interest"), adjusted to reflect the assumption that (i) any income earned as a
result of any assets having been placed in service since the end of such period
had been earned, on an annualized basis, during such period, and (ii) in the
case of any acquisition or disposition by the Operating Partnership, any
Subsidiary or any unconsolidated joint venture in which the Operating
Partnership or any Subsidiary owns an interest, of any assets since the first
day of such period, including, without limitation, by merger, stock purchase or
sale, or asset purchase or sale, such acquisition or disposition and any
related repayment of Debt had occurred as of the first day of such period with
the appropriate adjustments with respect to such acquisition or disposition
being included in the calculation of Annualized EBITDA, all determined on a
consistent basis in accordance with generally accepted accounting principles.
"DEBT" means any indebtedness of the Operating Partnership and its
Subsidiaries on a consolidated basis, less any portion applicable to minority
interests, plus the Operating Partnership's allocable portion, based on its
ownership interest, of indebtedness of unconsolidated joint ventures, in
respect of (i) borrowed money evidenced by bonds, notes, debentures or similar
instruments, as determined in accordance with generally accepted accounting
principles, (ii) indebtedness secured by any mortgage, pledge, lien, charge,
encumbrance or any security interest existing on property owned by the
Operating Partnership or any Subsidiary directly, or indirectly through
unconsolidated joint ventures, as determined in accordance with generally
accepted accounting principles, (iii) reimbursement obligations, contingent or
otherwise, in connection with any letters of credit actually issued or amounts
representing the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or trade
payable, and (iv) any lease of property by the Operating Partnership or any
Subsidiary as lessee which is reflected in the Operating Partnership's
consolidated balance sheet as a capitalized lease or any lease of property by
an unconsolidated joint venture as lessee which is reflected in such joint
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venture's balance sheet as a capitalized lease, in each case, in accordance
with generally accepted accounting principles; provided, that Debt also
includes, to the extent not otherwise included, any obligation by the Operating
Partnership or any Subsidiary to be liable for, or to pay, as obligor,
guarantor or otherwise, items of indebtedness of another person (other than the
Operating Partnership or any Subsidiary) described in clauses (i) through
(iv) above (or, in the case of any such obligation made jointly with another
person, the Operating Partnership's or Subsidiary's allocable portion of such
obligation based on its ownership interest in the related real estate assets).
"FIXED CHARGES AND PREFERRED STOCK DIVIDENDS" consist of interest costs,
whether expensed or capitalized, the interest component of rental expense and
amortization of debt principal, including the Operating Partnerhsip's pro rata
share based on its ownership interest of joint venture interest costs, whether
expensed or capitalized and the interest component of rental expense and
amortization of debt principal, plus any dividends on outstanding preferred
stock.
"INTEREST EXPENSE" includes the Operating Partnerships pro rata share of
joint venture interest expense and is reduced by amortization of debt issuance
costs.
"SUBSIDIARY" means a corporation, partnership, joint venture, limited
liability company or other entity, a majority of the outstanding voting stock,
partnership interests or membership interests, as the case may be, of which is
owned or controlled, directly or indirectly, by the Operating Partnership or by
one or more other Subsidiaries of the Operating Partnership and, for purposes
of this definition, shall include SPG, LP. For the purposes of this
definition, "voting stock" means stock having voting power for the election of
directors, or trustees, as the case may be, whether at all times or only so
long as no senior class of stock has such voting power by reason of any
contingency.
"UNENCUMBERED EBITDA AFTER MINORITY INTEREST" means EBITDA after minority
interest less any portion thereof attributable to assets serving as collateral
for Secured Debt.
"UNENCUMBERED ASSETS" as of any date shall be equal to Adjusted Total Assets
as of such date multiplied by a fraction, the numerator of which is
Unencumbered Annualized EBITDA and the denominator of which is Annualized
EBITDA After Minority Interest. On a pro forma basis as of June 30, 1996, the
Operating Partnership's Unencumbered Assets were $_____ million.
"UNSECURED DEBT" means Debt which is not secured by any mortgage, lien,
pledge, encumbrance or security interest of any kind.
Reference is made to the section entitled "Description of Debt Securities -
Certain Covenants" in the accompanying Prospectus for a description of
additional covenants applicable to the Notes. Compliance with the covenants
described herein and such additional covenants with respect to the Notes
generally may not be waived by the Board of Directors of the Company or the
General Partners, as general partners of the Operating Partnership, or by the
Trustee unless the Holders of at least a majority in principal amount of all
outstanding Notes consent to such waiver; PROVIDED, HOWEVER, that the
defeasance and covenant defeasance provisions of the Indenture described under
"Description of Debt Securities-Discharge" and "-Defeasance and Covenant
Defeasance" in the accompanying Prospectus will apply to the Notes, including
with respect to the covenants described in this Prospectus Supplement.
REPAYMENT OF THE 20 NOTES AT THE OPTION OF HOLDERS
The 20 Notes may be repaid on , 20 (the "Option
Payment Date"), at the option of the registered Holders at 100% of their
principal amount together with accrued interest to the Option Payment Date.
In order for a Holder to exercise this option, the Operating Partnership must
receive at its office or agency in New York, New York, during the
period beginning on , 20 , and ending at 5:00 p.m. (New York City
time) on , 20 (or, if not a Business Day, the next succeeding
Business Day), the 20 Note with the form entitled "Option to Elect
Repayment on the Option Payment Date" on the 20 Note duly completed. Any
such notice received by the Operating Partnership during the period
beginning on , 20 , and ending at 5:00 p.m. (New York
City time) on , 20 , shall be irrevocable. The repayment
option may be exercised for less than the entire principal amount of the 20
Notes held by each such Holder, so long as the principal amount that is
to be repaid is equal to $1,000 or an integral multiple of $1,000. All
questions as to the validity, form, eligibility (including time of receipt) and
acceptance of any 20 Note for repayment will be determined by the Operating
Partnership, whose determination will be final and binding.
Failure by the Operating Partnership to repay the 20 Notes when required
as described in the preceding paragraph will result in an Event of Default
under the Indenture.
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As described below under "- Book Entry System," the 20 Notes will be
registered in the name of DTC or its nominee, which will be the Holder thereof
entitled to exercise the repayment option. In order to ensure that DTC or
its nominee will exercise such option in a timely manner with respect to a
particular 20 Note, the beneficial owner of an interest in such Note must
instruct the broker or other participant (as defined below) through which it
holds an interest in such 20 Note to notify DTC or its nominee of its desire
to exercise such option. Different participants may have different cut-off
times for accepting instructions from their customers and, accordingly, each
such beneficial owner should consult the participant through which it holds
an interest in the 20 Notes to ascertain the cut-off time by which such an
instruction must be given for timely notice to be delivered to DTC or its
nominee.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time after ____________ at the option of
the Operating Partnership, in whole or from time to time in part, at a
redemption price equal to the sum of (i) the principal amount of the Notes
being redeemed plus accrued interest thereon to the redemption date and
(ii) the Make-Whole Amount (as defined below), if any, with respect to such
Notes (the "Redemption Price").
If notice of redemption has been given as provided in the Indenture and
funds for the redemption of any Notes called for redemption shall have been
made available on the redemption date referred to in such notice, such Notes
will cease to bear interest on the date fixed for such redemption specified in
such notice and the only right of the Holders of the Notes from and after the
redemption date will be to receive payment of the Redemption Price upon
surrender of such Notes in accordance with such notice.
Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the security register for the Notes, not more than
60 nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption price and the
principal amount of the Notes held by such Holder to be redeemed.
If less than all the Notes are to be redeemed at the option of the Operating
Partnership, the Operating Partnership will notify the Trustee at least 45 days
prior to giving notice of redemption (or such shorter period as may be
satisfactory to the Trustee) of the aggregate principal amount of Notes to be
redeemed and their redemption date. The Trustee shall select, in such manner as
it shall deem fair and appropriate, Notes to be redeemed in whole or in part.
As used herein:
"MAKE-WHOLE AMOUNT" means, in connection with any optional redemption or
accelerated payment of any Notes, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
(exclusive of interest accrued to the date of redemption or accelerated
payment) that would have been payable in respect of each such dollar if such
redemption or accelerated payment had not been made, determined by discounting,
on a semi-annual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date notice of such
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, to the date of redemption
or accelerated payment, over (ii) the aggregate principal amount of the Notes
being redeemed or accelerated.
"REINVESTMENT RATE" means the yield on treasury securities at a constant
maturity corresponding to the remaining life (as of the date of redemption, and
rounded to the nearest month) to Stated Maturity of the principal being
redeemed (the "Treasury Yield"), plus .25%. For purposes hereof, the Treasury
Yield shall be equal to the arithmetic mean of the yields published in the
Statistical Release under the heading "Week Ending" for "U.S. Government
Securities - Treasury Constant Maturities" with a maturity equal to such
remaining life; provided, that if no published maturity exactly corresponds to
such remaining life, then the Treasury Yield shall be interpolated or
extrapolated on a straight-line basis from the arithmetic means of the yields
for the next shortest and next longest published maturities. For purposes of
calculating the Reinvestment Rate, the most recent Statistical Release
published prior to the date of determination of the Make-Whole amount shall be
used. If the format or content of the Statistical Release changes in a manner
that precludes determination of the Treasury Yield in the above manner, then
the Treasury Yield shall be determined in the manner that most closely
approximates the above manner, as reasonably determined by the Operating
Partnership.
"STATISTICAL RELEASE" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which reports yields on actively traded United States
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government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Operating
Partnership.
BOOK-ENTRY SYSTEM
The following are summaries of certain rules and operating procedures of DTC
that affect the payment of principal and interest and transfers in the Global
Notes. Upon issuance, each series of Notes will only be issued in the form of a
Global Note which will be deposited with, or on behalf of, DTC and registered
in the name of Cede & Co., as nominee of DTC. Unless and until it is exchanged
in whole or in part for Notes in definitive form under the limited
circumstances described below, a Global Note may not be transferred except as a
whole (i) by DTC to a nominee of DTC, (ii) by a nominee of DTC to DTC or
another nominee of DTC or (iii) by DTC or any such nominee to a successor of
DTC or a nominee of such successor.
Ownership of beneficial interests in a Global Note will be limited to
persons that have accounts with DTC for such Global Note ("participants") or
persons that may hold interests through participants. Upon the issuance of a
Global Note, DTC will credit, on its book-entry registration and transfer
system, the participants' accounts with the respective principal amounts of the
Notes represented by such Global Note beneficially owned by such participants.
Ownership of beneficial interests in such Global Notes will be shown on, and
the transfer of such ownership interests will be effected only through, records
maintained by DTC (with respect to interests of participants) and on the
records of participants (with respect to interests of persons holding through
participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may limit or impair the ability to own, transfer or pledge beneficial
interests in the Global Notes.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or its nominee, as the case may be, will be considered the sole owner or Holder
of the Notes represented by such Global Note for all purposes under the
Indenture. Except as set forth below, owners of beneficial interests in a
Global Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of such Notes in certificated form and will not be considered the
registered owners or Holders thereof under the Indenture. Accordingly, each
person owning a beneficial interest in a Global Note must rely on the
procedures of DTC and, if such person is not a participant, on the procedures
of the participant through which such person owns its interest, to exercise any
rights of a Holder under the Indenture. The Operating Partnership understands
that under existing industry practices, if the Operating Partnership requests
any action of Holders or if an owner of a beneficial interest in a Global Note
desires to give or take any action that a Holder is entitled to give or take
under the Indenture, DTC would authorize the participants holding the relevant
beneficial interests to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
holding through them.
Principal and interest payments on interests represented by a Global Note
will be made to DTC or its nominee, as the case may be, as the registered owner
of such Global Note. None of the Operating Partnership, the Trustee or any
agent of the Operating Partnership or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payment made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Operating Partnership expects that DTC, upon receipt of any payment of
principal or interest in respect of a Global Note, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in such Global Note as shown on the records of
DTC. The Operating Partnership also expects that payments by participants to
owners of beneficial interests in the Global Notes held through such
participants will be governed by standing customer instructions and customary
practice, as is now the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the responsibility
of such participants.
If DTC is at any time unwilling or unable to continue as depository for the
Notes and the Operating Partnership fails to appoint a successor depository
registered as a clearing agency under the Exchange Act within 90 days, the
Operating Partnership will issue the Notes in definitive form in exchange for
the Global Notes. Any Notes issued in definitive form in exchange for the
Global Notes will be registered in such name or names, and will be issued in
denominations of $1,000 and such integral multiples thereof, as DTC shall
instruct the Trustee. It is expected that such instructions will be based upon
directions received by DTC from participants with respect to ownership of
beneficial interests in the Global Notes.
DTC has advised the Operating Partnership of the following information
regarding DTC. DTC is a limited-purpose trust company organized under the
Banking Law of the State of New York, a member of the Federal
S-46
Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities of its
participants and to facilitate the clearance and settlement of transactions
among its participants in such securities through electronic book-entry changes
in accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. DTC's participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations, some of which (or their representatives) own DTC. Access
to the DTC book-entry system is also available to others, such as banks,
brokers and dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters (as defined
herein) in immediately available funds. All payments of principal and interest
in respect of the Notes will be made by the Operating Partnership in
immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, the Notes
will trade in DTC's Same-Day Funds Settlement System until maturity or until
the Notes are issued in certificated form, and secondary market trading
activity in the Notes will therefore be required by DTC to settle in
immediately available funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on trading activity in the
Notes.
S-47
MANAGEMENT
BOARD OF DIRECTORS OF THE GENERAL PARTNERS
The following table sets forth the composition of the Board of Directors of
the Managing General Partner, which is identical to that of the Company.
AGE
NAME
Melvin Simon 69 (will be 70 on 10/21)
Herbert Simon 61 (will be 62 on 10/23)
David Simon 35
Richard S. Sokolov 46
Edward J. DeBartolo, Jr 49
M. Denise DeBartolo York 45
Birch Bayh 68
William T. Dillard, II 51
G. William Miller 71
Frederick W. Petri 49
Terry S. Prindiville 60
J. Albert Smith, Jr 55
Philip J. Ward 48
Set forth below is a summary of the business experience of the directors of
the General Partners.
Melvin Simon is the Co-Chairman of the Board of Directors. In addition, he
is the Chairman of the Board of Directors of Melvin Simon & Associates, Inc.
("MSA, Inc."), a company he founded in 1960 with his brother, Herbert Simon.
Herbert Simon is the Co-Chairman of the Board of Directors. Mr. Simon served
as Chief Executive Officer from the Company's incorporation through January 2,
1995, when he was appointed Co-Chairman of the Board. In addition, Mr. Simon is
the Chief Executive Officer and President of MSA, Inc., positions he has held
since its founding. Mr. Simon is also a director of Kohl's Corporation, a
specialty retailer.
David Simon is the Chief Executive Officer of the Company. Mr. Simon served
as President from the Company's incorporation until the Merger and was
appointed Chief Executive Officer on January 3, 1995. In addition, he has been
Executive Vice President, Chief Operating Officer and Chief Financial Officer
of MSA, Inc. since 1990. From 1988 to 1990, Mr. Simon was Vice President of
Wasserstein Perella & Company, a firm specializing in mergers and acquisitions.
He is the son of Melvin Simon, the nephew of Herbert Simon and a director of
Healthcare Compare Corp. Mr. Simon served as President from the Company's
incorporation until the Merger.
Richard S. Sokolov has been the President, Chief Operating Officer and a
director of the Company since the Merger. He was the President, Chief Executive
Officer and a director of the DRC from its incorporation until the Merger.
Prior to that he had served as Senior Vice President, Development of EJDC since
1986 and as Vice President and General Counsel since 1982. In addition, Mr.
Sokolov is a trustee and a member of the Executive Committee of the
International Council of Shopping Centers.
Edward J. DeBartolo, Jr. was the Chairman of the DRC Board of Directors from
its incorporation until the Merger. Mr. DeBartolo has been President and Chief
Executive Officer of EJDC since 1994 and a director of EJDC since 1973. He
previously served as President and Chief Administrative Officer of EJDC since
1979. He has been associated with EJDC in an executive capacity since 1973. Mr.
DeBartolo is Chairman of the San Francisco 49ers professional football team and
is also Chairman and Chief Executive Officer of DeBartolo Entertainment, Inc.
EJDC owns a majority of the interests in the San Francisco 49ers. Mr.
DeBartolo, Jr. is the son of the late Edward J. DeBartolo and the brother of M.
Denise DeBartolo York.
S-48
M. Denise DeBartolo York was a director of DRC from February 1995 until the
Merger. She serves as Chairman of the Board of EJDC and DeBartolo, Inc. Ms.
York previously served EJDC as Executive Vice President of
Personnel/Communications and has been associated with EJDC in an executive
capacity since 1975. She is the daughter of the late Edward J. DeBartolo and
the sister of Edward J. DeBartolo, Jr.
Birch Bayh, a director of the Company since the Company's initial public
offering (the "IPO"), is the senior partner in the Washington, D.C. law firm of
Bayh, Connaughton & Malone, P.C. He served as a United States Senator from
Indiana from 1963 to 1981. Mr. Bayh also serves as a director of ICN
Pharmaceuticals and Acordia, Inc.
William T. Dillard, II, a director of the Company since the IPO, is
President and Chief Operating Officer of Dillard Department Stores Inc., a
retailing chain, a position he has held since 1977. Mr. Dillard also serves as
a director of Dillard Department Stores Inc., Frederick Atkins, Inc., Texas
Commerce Bancshares, Inc., Acxiom Corporation and Barnes & Noble, Inc.
G. William Miller was a director of DRC from DRC's initial public offering
(the "DRC IPO") until the Merger. He has been Chairman of the Board and Chief
Executive Officer of G. William Miller & Co. Inc., a merchant banking firm,
since 1983. He is a former Secretary of the U.S. Treasury and a former Chairman
of the Federal Reserve Board. From January 1990 until February 1992, he was
Chairman and Chief Executive Officer of Federated Stores, Inc., the parent
company of predecessors to Federated Department Stores, Inc. Mr. Miller is
Chairman of the Board and a director of Waccamaw Corporation. He is also a
director of GS Industries, Inc., Kleinwort Benson Australian Income Fund, Inc.
and Repligen Corporation.
Frederick W. Petri was a director of DRC from the DRC IPO until the Merger.
He is a partner of Petrone, Petri & Company, a real estate investment firm he
founded in 1993, and an officer of Housing Capital Company since its formation
in 1994. Prior thereto, he was an Executive Vice President of Wells Fargo Bank,
where for over 18 years he held various real estate positions. Mr. Petri is
currently a trustee of the Urban Land Institute and a director of Storage Trust
Realty. He previously was a member of the Board of Governors and a Vice
President of the National Association of Real Estate Investment Trusts and a
director of the National Association of Industrial and Office Park Development.
He is a director of the University of Wisconsin's Real Estate Center.
Terry S. Prindiville, a director of the Company since the IPO, served as
Executive Vice President and Director of Support Services of J.C. Penney
Company, Inc. a retailing chain from 1988 until 1995. He is also the Chairman
of the Board of Directors of JCP Realty, Inc., a wholly-owned subsidiary of
J.C. Penney Company, Inc.
J. Albert Smith, Jr., a director of the Company since the IPO, is the
President of Bank One, Indianapolis, NA, a commercial bank, a position he has
held since September 30, 1994. Prior to his current position, he was the
President of Bank One Mortgage Corporation, a mortgage banking firm, a position
he held since 1975.
Philip J. Ward was a director of DRC from the DRC IPO until the Merger. He
is Senior Managing Director, Head of Real Estate Investments, for CIGNA
Investments, Inc., a wholly-owned subsidiary of CIGNA Corporation. He is a
member of the International Council of Shopping Centers, the Urban Land
Institute, the National Association of Industrial and Office Parks and the
Society of Industrial and Office Realtors. He is a director of the Connecticut
Housing Investment Fund.
SENIOR MANAGEMENT OF THE GENERAL PARTNERS
The following table sets forth certain information with respect to the
executive officers of the Managing General Partner, which officers also hold
the same positions in the Company.
S-49
NAME AGE POSITION
Melvin Simon(1) 69 Co-Chairman
Herbert Simon(1) 61 Co-Chairman
David Simon(1) 35 Chief Executive Officer
Richard S. Sokolov 46 President and Chief Operating Officer
Randolph L. Foxworthy 52 Executive Vice President--Corporate
Development
William J. Garvey 57 Executive Vice President--Property Development
James A. Napoli 50 Executive Vice President--Leasing
John R. Neutzling 44 Executive Vice President -- Property
Management
James M. Barkley 44 General Counsel; Secretary
Stephen E. Sterrett 41 Treasurer
__________
(1) Melvin Simon is the brother of Herbert Simon and the father of David Simon.
Set forth below is a summary of the business experience of the executive
officers whose business experience is not summarized above.
Mr. Foxworthy is the Executive Vice President -- Corporate Development. He
served as a Director of the Company from the IPO until the Merger. Mr.
Foxworthy joined MSA, Inc. in 1980 and has been an Executive Vice President of
MSA, Inc. since 1986 in charge of Corporate Development and has held the same
position with the Company since the IPO. Prior to assuming the position of
Executive Vice President, Mr. Foxworthy served as General Counsel, in which
capacity he supervised all legal operations of MSA, Inc.
Mr. Garvey is the Executive Vice President -- Property Development. Mr.
Garvey, who was Executive Vice President and Director of Development at MSA,
Inc., joined MSA, Inc. in 1979 and has held various positions with MSA, Inc.
since that date and has held his current position with the Company since the
IPO.
Mr. Napoli is the Executive Vice President -- Leasing of the Company. Mr.
Napoli also served as Executive Vice President and Director of Leasing of MSA,
Inc. and has held his current position with the Company since the IPO. Mr.
Napoli was Executive Vice President and Director of Leasing for May Centers,
Inc. before he joined MSA, Inc. in 1989.
Mr. Neutzling is the Executive Vice President -- Property Management, and as
such oversees all property and asset management functions of the Company. He
has held his current position with the Company since the IPO. Mr. Neutzling
joined MSA, Inc. in 1974 and has held various positions with MSA, Inc. since
that date.
Mr. Barkley serves as General Counsel and Secretary. Mr. Barkley holds the
same position for MSA, Inc. and has held his current position with the Company
since the IPO. He joined MSA, Inc. in 1978 as Assistant General Counsel for
Development Activity.
Mr. Sterrett serves as Treasurer and has held his current position with the
Company since the IPO. He joined MSA, Inc. in 1989 and has held various
positions with MSA, Inc. since that date. Prior to that, he was a Senior
Manager at Price Waterhouse.
S-50
UNDERWRITING
Subject to the terms and conditions contained in the underwriting agreement
(the "Underwriting Agreement"), the Operating Partnership has agreed to sell to
each of the Underwriters named below (the "Underwriters"), and each of the
Underwriters for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), ___________, ________________ and ___________ are acting as
representatives (the "Representatives") has severally agreed to purchase, the
respective principal amounts of the Notes set forth below opposite their
respective names. The Underwriting Agreement provides that the obligations of
the Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the Notes if any are
purchased.
Underwriter Principal Principal Principal
Amount of Amount of Amount of
200 NOTES 200 NOTES 20 NOTES
Merrill Lynch, Pierce, Fenner & Smith $ $ $
Incorporated
Total $ $ $
The Underwriters have advised the Operating Partnership that they propose
initially to offer each series of Notes to the public at the public offering
price set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of % (in the case of
200 Notes), % (in the case of 200 Notes) and % (in the case of 20
Notes) of the principal amount thereof. The Underwriters may allow, and such
dealers may reallow, a discount not in excess of __% (in the case of 200_
Notes), __% (in the case of 200_ Notes) and __% (in the case of 20__ Notes) of
the principal amount thereof to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
Each series of Notes is a new issue of securities with no established
trading market. The Operating Partnership does not intend to apply for listing
of the Notes on a national securities exchange. The Operating Partnership has
been advised by the Underwriters that the Underwriters intend to make a market
in the Notes as permitted by applicable laws and regulations, but the
Underwriters are not obligated to do so and may discontinue market-making at
any time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
The Operating Partnership and the Company have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the
Underwriters may be required to make in respect thereof.
Merrill Lynch from time to time provides investment banking and financial
advisory services to the Company. Merrill Lynch has also acted as
representative of various underwriters in connection with public offerings of
the Company's Common Stock and the Series B Preferred Shares. The Company has
agreed to pay Merrill Lynch a fee of approximately $4 million for financial
advisory services provided by Merrill Lynch to the Company in connection with
the Merger.
S-51
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The accompanying financial statements present the unaudited pro forma
combined condensed balance sheet of the Operating Partnership as of June 30,
1996 and the unaudited pro forma combined condensed statements of operations of
the Operating Partnership for the six-month period ended June 30, 1996 and for
the year ended December 31, 1995.
The unaudited pro forma combined condensed balance sheet as of June 30, 1996
is presented as if the issuance of $300 million of Notes (the "Offering"), the
issuance of $200 million of Series B Cumulative Redeemable Preferred Stock (the
"Preferred Offering") and the Merger and related transactions (the "Merger")
had occurred on June 30, 1996. The unaudited pro forma combined condensed
statements of operations for the six-month period ended June 30, 1996 and for
the year ended December 31, 1995 are presented as if the Offering, the
Preferred Offering and the Merger had occurred as of January 1, 1995 and
carried forward through June 30, 1996.
Preparation of the pro forma financial information was based on assumptions
deemed appropriate by the management of the General Partners. The assumptions
give effect to the Offering, the Preferred Offering and the Merger under the
purchase method of accounting in accordance with generally accepted accounting
principles. The pro forma financial information is unaudited and is not
necessarily indicative of the results which actually would have occurred if the
transactions had been consummated at the beginning of the periods presented,
nor does it purport to represent the future financial position and results of
operations for future periods. The pro forma information should be read in
conjunction with the historical financial statements of SPG, LP incorporated by
reference in the accompanying Prospectus and the historical financial
statements of DeBartolo Realty Partnership, L.P. ("DRP, LP") incorporated by
reference in the accompanying Prospectus.
The pro forma adjustments included in the unaudited pro forma combined
financial statements are based upon currently available information and upon
certain assumptions that management of the General Partners believes are
reasonable. There can be no assurance that the actual adjustments will not
differ significantly from the pro forma adjustments reflected in the pro forma
financial information.
F-1
SIMON-DEBARTOLO GROUP, L.P.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1996
(IN THOUSANDS)
(UNAUDITED)
@@
SDG, LP (NOTE 1)
OFFERING AND
SPG, LP Pro Preferred
(HISTORICAL)(A) MERGER FORMA OFFERING
(THE PREDECESSOR DRP, LP Pro Forma Combined Pro Forma Total
TO SDG, LP) (HISTORICAL)(A) ADJUSTMENTS CONDENSED ADJUSTMENTS PRO FORMA
ASSETS:
Investment in properties,
partnerships and joint
ventures, net $2,243,674 $1,349,147 $1,618,373(B) $5,211,194 -- $ 5,211,194
Cash, cash equivalents and
short-term
investments 65,556 45,938 (34,400)(C) 77,094 15,800(I) 92,894
Receivables 141,520 40,754 (26,934)(D) 155,340 -- 155,340
Note receivable from the
SPG Management
Company 91,478 -- -- 91,478 -- 91,478
Other assets 120,734 118,136 (59,312)(E) 179,558 3,000 (J) 182,558
__________ __________ __________ __________ ________ __________
Total assets $2,662,962 $1,553,975 $1,497,727 $5,714,664 $ 18,800 $5,733,464
========== ========== ========== ========== ======== ==========
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES:
Mortgages and other notes payable $2,178,539 $1,479,515 $4,593(F) $3,662,647 $(174,200)(K) $3,488,447
Accounts payable, accrued
expenses and other liabilities 194,998 80,035 (2,801)(G) 272,232 -- 272,232
Investment in the SPG
Management Company 19,740 -- -- 19,740 -- 19,740
__________ __________ __________ __________ ________ __________
Total liabilities 2,393,277 1,559,550 1,792 3,954,619 (190,000) 3,780,419
__________ __________ __________ __________ ________ __________
PARTNERS' EQUITY:
Series A Preferred Units 99,923 -- -- 99,923 -- 99,923
Series B Preferred Units -- -- -- -- 193,000 (L) 193,000
General Partners 107,633 (3,449) 919,058(H) 1,023,242 -- 1,023,242
Limited Partners 68,525 (2,126) 576,877 (H) 643,276 -- 643,276
Unamortized restricted stock award (6,396) -- (6,396) -- (6,396)
__________ __________ __________ __________ ________ __________
Total partners' equity 269,685 (5,575) 1,495,931 1,760,045 193,000 1,953,045
__________ __________ __________ __________ ________ __________
Total liabilities and
partners' equity $2,662,962 $1,553,975 $1,497,727 $5,714,664 $ 18,800 $5,733,464
========== ========== ========== ========== ======== ==========
The accompanying notes and management's assumptions are an integral part of
these statements.
F-2
SIMON-DEBARTOLO GROUP, L.P.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX-MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT AMOUNTS)
(UNAUDITED)
@@
SDG, LP (NOTE 1)
OFFERING AND
SPG, LP Pro Preferred
(HISTORICAL)(A) MERGER FORMA OFFERING
(THE PREDECESSOR DRP, LP Pro Forma Combined Pro Forma Total
TO SDG, LP) (HISTORICAL)(A) ADJUSTMENTS CONDENSE ADJUSTMENTS PRO FORMA
REVENUE
Minimum rent $159,076 $114,086 $1,700(A) $274,862 $-- $274,862
Overage rent 10,751 5,635 -- 16,386 -- 16,386
Tenant reimbursements 93,696 45,456 -- 139,152 -- 139,152
Other income 19,681 11,455 -- 31,136 -- 31,136
__________ __________ __________ __________ ________ __________
Total revenue 283,204 176,632 1,700 461,536 -- 461,536
__________ __________ __________ __________ ________ __________
EXPENSES
Property and other operating expenses 107,773 66,484 (5,000)(B) 169,257 -- 169,257
Depreciation and amortization 51,307 32,432 5,505(C) 89,244 -- 89,244
Merger and Other Transaction expenses -- 10,200 (10,200)(D) -- --
__________ __________ __________ __________ ________ __________
Total expenses 159,080 109,116 (9,695) 258,501 -- 258,501
__________ __________ __________ __________ ________ __________
OPERATING INCOME 124,124 67,516 11,395 203,035 -- 203,035
INTEREST EXPENSE 79,134 60,759 (5,445)(E) 134,448 (3,906)(H) 130,542
__________ __________ __________ __________ ________ __________
INCOME BEFORE MINORITY INTEREST 44,990 6,757 16,840 68,587 3,906 72,493
MINORITY PARTNERS' INTEREST (1,175) (325) -- (1,500) -- (1,500)
__________ __________ __________ __________ ________ __________
INCOME BEFORE UNCONSOLIDATED
ENTITIES 43,815 6,432 16,840 67,087 3,906 70,993
INCOME FROM UNCONSOLIDATED
ENTITIES 3,985 8,236 -- 12,221 -- 12,221
__________ __________ __________ __________ ________ __________
NET INCOME FROM CONTINUING
OPERATIONS 47,800 14,668 16,840 79,308 3,906 83,214
GENERAL PARTNERS PREFERRED
UNIT REQUIREMENT 4,062 -- -- 4,062 8,750 (J) 12,812
__________ __________ __________ __________ ________ __________
NET INCOME FROM CONTINUING
OPERATIONS AVAILABLE TO
UNITHOLDERS $43,738 $14,668 $16,840 $75,246 $(4,844) $70,402
========== ========== ========== ========== ======== =========
NET INCOME AVAILABLE TO
UNITHOLDERS ATTRIBUTED TO:
GENERAL PARTNERS $26,855 9,075 $10,271 $46,201 $(2,974) $43,227
LIMITED PARTNERS 16,883 5,593 6,569 (F) 29,045 (1,870)(I) 27,175
__________ __________ __________ __________ ________ __________
$43,738 $14,668 $16,840 $75,246 (4,844) 70,402
========== ========== ========== ========== ======== =========
NET INCOME PER UNIT $0.46 $0.45
WEIGHTED AVERAGE UNITS
OUTSTANDING 95,753,829 156,896,812(G)
The accompanying notes and management's assumptions are an integral part of
these statements.
F-3
SIMON-DEBARTOLO GROUP, L.P.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT AMOUNTS)
(UNAUDITED)
@@
SDG, LP (NOTE 1)
OFFERING
AND
SPG, LP PRO PREFERRED
(HISTORICAL)(A) Merger Forma Offering
(the Predecessor DRP, LP PRO FORMA COMBINED PRO FORMA TOTAL
TO SDG, LP) (Historical)(A) Adjustments Condensed Adjustment Pro Forma
REVENUE
Minimum rent $307,849 $205,056 $3,400(A) $516,305 $ $516,305
Overage rent 23,278 12,924 -- 36,202 -- 36,202
Tenant reimbursements 191,535 82,147 -- 273,682 -- 273,682
Other income 30,995 32,530 -- 63,525 -- 63,525
--
Total revenue 553,657 332,657 3,400 889,714 -- 889,714
EXPENSES
Property and other operating expenses 209,782 118,498 (10,000)(B) 318,280 -- 318,280
Depreciation and amortization 92,739 58,603 11,011(C) 162,353 -- 162,353
Total expenses 302,521 177,101 1,011 480,633 -- 480,633
--
OPERATING INCOME 251,136 155,556 2,389 409,081 -- 409,081
INTEREST EXPENSE 150,224 124,567 (19,695)(E) 255,096 (9,210)(H) 245,886
INCOME BEFORE MINORITY INTEREST 100,912 30,989 22,084 153,985 9,210 163,195
MINORITY PARTNERS' INTEREST (2,681) 1,029 -- (1,652) -- (1,652)
GAIN ON SALE OF ASSETS 1,871 5,460 -- 7,331 -- 7,331
INCOME BEFORE UNCONSOLIDATED
ENTITIES 100,102 37,478 22,084 159,664 9,210 168,874
INCOME FROM UNCONSOLIDATED
ENTITIES 1,403 8,865 -- 10,268 -- 10,268
NET INCOME FROM CONTINUING
OPERATIONS 101,505 46,343 22,084 169,932 9,210 179,142
GENERAL PARTNERS PREFERRED
UNIT REQUIREMENT 1,490 -- -- 1,490 17,500(I) 18,990
NET INCOME FROM CONTINUING
OPERATIONS AVAILABLE TO
UNITHOLDERS $100,015 $46,343 $22,084 $168,442 $(8,290) $160,152
NET INCOME AVAILABLE TO
UNITHOLDERS ATTRIBUTABLE TO:
GENERAL PARTNERS $59,718 $27,628 $14,730 $102,076 $(5,024) $ 97,052
LIMITED PARTNERS 40,297 18,715 7,354(F) 66,366 (3,266)(I) 63,100
$100,015 $46,343 $22,084 $168,442 $(8,290) $160,152
NET INCOME PER UNIT $1.08 $1.04
WEIGHTED AVERAGE UNITS
OUTSTANDING 92,666,469 153,809,452(G)
The accompanying notes and management's assumptions are an integral part of
these statements.
F-4
SIMON-DEBARTOLO GROUP, L.P.
NOTES AND MANAGEMENT ASSUMPTIONS TO PRO FORMA FINANCIAL INFORMATION
(UNAUDITED, IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT AMOUNTS)
1. Basis of Presentation
Simon Property Group, LP ("SPG, LP") was formed as a Delaware limited
partnership in 1993 in connection with Simon Property Group, Inc.'s ("SPG")
initial public offering. SPG, as the sole general partner of SPG, LP, has
full, exclusive and complete responsibility and discretion in the management
and control of SPG, LP. As of June 30, 1996, SPG owned 61.1% of SPG, LP. SPG,
LP is engaged primarily in the ownership, operation, management, leasing,
acquisition, expansion and development of real estate properties, primarily
regional malls and community shopping centers. As of June 30, 1996, SPG, LP
owned or held an interest in 122 income-producing properties, which consist of
62 regional malls, 55 community shopping centers, two specialty retail centers
and three mixed-use properties. SPG, LP also owned interests in two regional
malls and one specialty retail center under construction and seven parcels of
land held for future development.
On August 9, 1996, the merger and other related transactions, pursuant to
the agreement and plan of merger between SPG, an acquisition subsidiary of SPG
and DeBartolo Realty Corporation ("DRC"), was consummated (the "Merger").
Pursuant to the Merger, SPG acquired all the outstanding common stock of DRC
(55,712,529 shares), through the acquisition subsidiary, at an exchange ratio
of 0.68 share of SPG common stock for each share of DRC common stock (the
"Exchange Ratio"). DRC and the acquisition subsidiary merged with DRC as the
surviving entity. The closing price of SPG's common stock was $24.375 per
share on August 9, 1996. This portion of the transaction was valued at
approximately $923.4 million and resulted in SPG obtaining an indirect 61.9%
general partnership interest in DRC's operating partnership, DeBartolo Realty
Partnership, LP ("DRP, LP"). The value of the acquisition of DRC was based
upon the number of shares (55,712,529), the Exchange Ratio and the closing
price of SPG's common stock per share on August 9, 1996 ($24.375).
DRP, LP, like SPG, LP, is engaged primarily in the ownership, operation,
management, leasing, acquisition, expansion and development of real estate
properties, primarily regional malls and community shopping centers. As of
June 30, 1996, DRP, LP owned or held an interest in 50 regional malls, 11
community shopping centers and land held for future development.
In connection with the Merger, SPG changed its name to Simon DeBartolo
Group, Inc. ("SDG" or the "Company"). In addition, simultaneous with the
Merger, the general and limited partners of SPG, LP agreed to contribute 99% of
their interests (49.5% partnership interest and an additional 49.5% interest in
the profits of SPG, LP) to DRP, LP in exchange for units of DRP, LP, whose name
was changed to Simon-DeBartolo Group, LP ("SDG, LP"). The limited partners of
DRP, LP approved the contribution made by the partners of SPG, LP and also
agreed to exchange their 38.1% partnership interest in DRP, LP, adjusted for
the Exchange Ratio, for a smaller partnership interest in SDG, LP. The
exchange of the limited partners' interest in DRP, LP for units of SDG, LP has
been accounted for as an acquisition of minority interest and is valued based
on the estimated fair value of the consideration issued (approximately $566.9
million). The units of SDG, LP are convertible into stock of SDG on a one-for-
one basis. Therefore, the value of the acquisition of the limited partners'
interest acquired was based upon the number of units (34,203,623), the Exchange
Ratio and the closing price of SPG's common stock per share on August 9, 1996
($24.375). The limited partners of SPG, LP received a 23.8% interest in SDG,
LP for contributing their 38.9% interest in SPG, LP to SDG, LP. The interests
transferred by the partners of SPG, LP to DRP, LP have been appropriately
reflected at historical costs. Upon completion of the Merger, SDG directly and
indirectly owned a controlling 61.4% interest in SDG, LP.
For financial reporting purposes, the completion of the Merger resulted in a
reverse acquisition of directly or indirectly 100% of the net assets of DRP, LP
for $1,512,960, including related transaction costs. Although SPG was the
accounting acquirer, SDG, LP, formerly the DRC operating partnership (DRP, LP),
will be the primary operating partnership through which the future business of
SDG will be conducted. As a result of the Merger, SPG, LP became a subsidiary
of SDG, LP. However, SPG was the accounting acquirer and upon completion of
the Merger has the majority control of SDG, LP. SPG's initial operating
partnership (SPG, LP) is the predecessor to SDG, LP for financial statement
purposes. Accordingly the financial statements disclosed by SDG, LP for the
post-merger periods will reflect the reverse acquisition of DRP, LP by SPG
using the purchase method of accounting and for all pre-merger comparative
periods, the financial statements disclosed by the SDG, LP will reflect the
financial statements of SPG, LP.
F-5
SIMON-DEBARTOLO GROUP, L.P.
NOTES AND MANAGEMENT ASSUMPTIONS TO PRO FORMA FINANCIAL INFORMATION
(UNAUDITED, IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT AMOUNTS)
The accompanying financial statements present the unaudited pro forma
combined condensed balance sheet of the Operating Partnership as of June 30,
1996 and the unaudited pro forma combined condensed statements of operations of
the Operating Partnership for the six-month period ended June 30, 1996 and for
the year ended December 31, 1995.
The unaudited pro forma combined condensed balance sheet as of June 30, 1996
is presented as if the issuance of $300 million of Notes by the Operating
Partnership (the "Offering"), the issuance of $200 million of Series B
Cumulative Redeemable Preferred Stock by the Company (the "Preferred Offering")
and the Merger, which resulted in a revserse acquisition at the operating
partnership level, had occurred on June 30, 1996. The unaudited pro forma
combined condensed statements of operations for the six-month period ended
June 30, 1996 and for the year ended December 31, 1995 are presented as if the
Offering, the Preferred Offering and the Merger, which resulted in a reverse
acquisition at the operating partnership level, had occurred as of January 1,
1995 and carried forward through June 30, 1996.
Preparation of the pro forma financial information was based on assumptions
deemed appropriate by the management of the General Partners. The assumptions
give effect to the Offering, the Preferred Offering and the Merger, which
resulted in a reverse acquisition at the operating partnership level, under the
purchase method of accounting in accordance with generally accepted accounting
principles. The pro forma financial information is unaudited and is not
necessarily indicative of the results which actually would have occurred if the
transactions had been consummated at the beginning of the periods presented,
nor does it purport to represent the future financial position and results of
operations for future periods. The pro forma information should be read in
conjunction with the historical financial statements of SPG, LP incorporated by
reference in the accompanying Prospectus and the historical financial
statements of DRP, LP incorporated by reference in the accompanying Prospectus.
The pro forma adjustments included in the unaudited pro forma combined
financial statements are based upon currently available information and upon
certain assumptions that management of the General Partners believes are
reasonable. There can be no assurance that the actual adjustments will not
differ significantly from the pro forma adjustments reflected in the pro forma
financial information.
2. ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED BALANCE SHEET
(A) Certain reclassifications have been made to the SPG,
LP and DRP, LP historical balance sheets to conform to
the desired pro forma combined condensed balance sheet
presentation.
(B) Represents adjustments to record the reverse
acquisition in accordance with the purchase method of
accounting, based upon an assumed purchase price of
$1,512,960 assuming a market value of Company common
stock of $24.375 (which was the closing price of the
Company's Common Stock on August 9, 1996), and the
exchange ratio of 0.68 (the "Exchange Ratio"). The
units of DRP, LP, which were adjusted to reflect the
Exchange Ratio, can be exchanged for common stock of
SDG on a one-for-one basis.
Value of 89,916,152 DRP, LP interests multiplied by
the Exchange Ratio and the market value of the
Company's common stock $1,490,360
Merger costs (see below) 22,600
__________
$1,512,960
==========
Estimated fees and expenses related to the Merger, as
follows:
Advisory fees $11,000
Legal and accounting 6,200
Severance and relocation costs 19,000
__________
36,200
F-6
SIMON-DEBARTOLO GROUP, L.P.
NOTES AND MANAGEMENT ASSUMPTIONS TO PRO FORMA FINANCIAL INFORMATION
(UNAUDITED, IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT AMOUNTS)
Less DRP, LP expenses (13,600)
__________
SPG, LP transaction costs $22,600
==========
Adjustment to reflect investment in properties,
partnerships and joint ventures, net at fair value:
Purchase price (see above) $1,512,960
Historical book value of DRP, LP (equity) deficit
acquired:
Historical book value of DRP, LP at June 30, 1996 5,575
To adjust equity for the stay bonus and to reflect
accelerated vesting of accrued compensation in
accordance with the terms of the Merger
5,599
To reflect DRP, LP's expenses associated with the
Merger of $13,600 less $10,200 recognized as expense
in the six-month period ended June 30, 1996 ($1,800
was paid with the balance of $8,400 accrued) 3,400
Adjustments to reflect certain assets and liabilities
of DRP, LP at estimated fair value:
Receivables (see Note (D)) 26,934
Other assets (see Note (E)) 59,312
Mortgages and other notes payable (see Note (F)) 4,593
__________
Adjustment required to reflect investment in
properties, partnerships and joint ventures, net at
fair value $1,618,373
==========
(C) To reflect the decrease in cash and cash equivalents
due to the estimated Merger costs, including expenses
of DRP, LP, of $36,200 less cash payments made of $1,800 $(34,400)
==========
(D) To reflect the adjustment to eliminate DRP, LP's
deferred assets related to the straight-lining of rent)
related to leases $(26,934)
==========
(E) To reflect the following adjustments to other assets:
1. To eliminate deferred financing, interest rate buy-
downs and similar costs related to mortgages and
other notes payable and organization costs $(53,536)
2. To adjust DRP, LP's historical basis in the
DeBartolo Realty Corporation Management Company to
estimated fair market value of $15,000 13,428
3. To eliminate deferred leasing costs (19,204)
__________
$(59,312)
==========
(F) To record a premium required to adjust mortgages and
other notes payable to estimated fair value based on
current analysis completed on an instrument by
instrument basis $ 4,593
==========
(G) To reflect the following adjustments to accounts
payable, accrued liabilities and other liabilities
1. To record accrued compensation expenses related to
the stay bonus ($8,467) less the portion which vests
immediately for which DeBartolo Realty Corporation
("DRC") common stock was issued ($1,325) and to
reflect the accelerated vesting of accrued
compensation settled with DRC common stock ($1,543) $5,599
2. To eliminate accrued DRP, LP Merger costs paid in
(C) above (8,400)
__________
F-7
SIMON-DEBARTOLO GROUP, L.P.
NOTES AND MANAGEMENT ASSUMPTIONS TO PRO FORMA FINANCIAL INFORMATION
(UNAUDITED, IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT AMOUNTS)
$ (2,801)
(H) To adjust partners' equity, excluding the general
partners' preferred units and unrestricted stock award
related to SPG, LP, to reflect the reverse acquisition
of DRP, LP for accounting purposes, general partners'
interest (55,712,529) and DRP, LP's limited partners'
interest (34,203,623), at the Exchange Ratio based on
the closing price of the Company's common stock of
$24.375 on August 9, 1996, as follows:
Partners'
Equity before
preferred units
General Limited and unrestricted
Partners' Equity Partners' Equity stock awards
Value of Units Acquired $923,435 $566,925 $1,490,360
Historical Value of SPG LP 107,633 68,525 176,158
_________ ________ _________
Combined Equity 1,031,068 635,450 1,666,518
========= ======== =========
Pro Forma Ownership 61.4% 38.6% 100.0%
========= ======== =========
Pro Forma Equity 1,023,242 643,276 1,666,518
Less Historical Value of SPG LP 107,633 68,525 176,158
Less Historical Value of DRP, L (3,449) (2,126) (5,575)
_________ ________ _________
Pro Forma Adjustments $919,058 $576,877 $1,495,935
========= ======== =========
(I) To record cash of $15,800 from the Preferred Offering
which represents net proceeds of $193,000 less
$177,200 used to reduce mortgages and other notes
payable (see Note K) $15,800
(J) To record deferred debt issuance costs related to the
Offering $3,000
(K) To reflect the following adjustments to mortgages and
other notes payable:
1. To reflect the use of $177,200 from the $193,000
in net proceeds from the Preferred Offering to
repay existing mortgage indebtedness of $142,800
with an average interest rate of 7.28% and to
reduce the amount outstanding under one of the
SPG, LP's credit facilities of $34,400 with an
interest rate of 6.81% $(177,200)
2. To reflect the issuance of $300,000 in Notes
from the Offering ($3,000 used to pay debt
issuance costs) with an average interest rate of
7.68% and to reflect the use of $297,000 in net
proceeds from the Offering to repay existing
mortgage indebtedness of $110,501 with an
average interest rate of 8.00% and to reduce the
amount outstanding under the SPG, LP's credit
facilities of $186,499 with an interest rate of
6.81%. 3,000
___________
F-8
SIMON-DEBARTOLO GROUP, L.P.
NOTES AND MANAGEMENT ASSUMPTIONS TO PRO FORMA FINANCIAL INFORMATION
(UNAUDITED, IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT AMOUNTS)
$ 174,200
==========
(L) To reflect the Preferred Offering which resulted in
the issuance of 8,000,000 shares of Series B Preferred
Stock at $25 per share at a dividend rate of 8.75%
with estimated issuance costs of $7,000 $ 193,000
===========
3. ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
Immediately prior to the Merger, DRP, LP will expense $8,467 in connection
with the stay bonus which has not been included in the Pro Forma Combined
Condensed Statements of Operations. DRP, LP will also incur $13,600 of expenses
in connection with the Merger, of which $10,200 was accrued as of June 30,
1996, which have not been included in the Pro Forma Combined Condensed
Statements of Operations.
FOR THE FOR THE YEAR
SIX MONTHS ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
(A) To recognize revenue from straight-lining
rent related to leases which will be reset in
connection with the Merger $ 1,700 $ 3,400
========== ==========
(B) To reflect cost savings to eliminate
duplicative public company costs and other
identified redundancies which have been
estimated based upon historical costs for
those items as a result of the Merger $ (5,000) $ (10,000)
========== ==========
(C) To reflect the increase in depreciation as a
result of recording the investment properties
of DRP, LP at acquisition value versus
historical cost and utilizing an estimated
useful life of 35 years offset by the
decrease in amortization expense as a result
of the elimination of deferred leasing costs $5,505 $ 11,011
========== ==========
(D) To reflect the elimination of Merger related
costs expensed during the six-month period
ended June 30, 1996 $(10,200) $ --
========== ==========
(E) To reflect the following adjustments to
interest expense as a result of the Merger:
(1)To reflect the elimination of amortization
of deferred mortgage costs, related to
DRP, LP, written-off in connection with
the Merger $(5,062) $(18,929)
========== ==========
(2)To reflect the amortization of the premium
required to adjust mortgages and other
notes payable to fair value (383) (766)
___________ ________
$(5,445) $(19,695)
========== ==========
F-9
SIMON-DEBARTOLO GROUP, L.P.
NOTES AND MANAGEMENT ASSUMPTIONS TO PRO FORMA FINANCIAL INFORMATION
(UNAUDITED, IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT AMOUNTS)
FOR THE FOR THE YEAR
SIX MONTHS ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
(F) To adjust the allocation of the Limited
Partners' interest after giving effect to the
Merger in the net income of the Partnerships,
taking into consideration of the preferred
unit distribution. The Limited Partners' pro
forma weighted average ownership interest for
the six months ended June 30, 1996 and for
the year ended December 31, 1995 was 38.6%
and 39.4%, respectively $ 6,569 $ 7,354
========== ==========
(G) The pro forma weighted average units
outstanding is computed as follows:
SPG, LP Historical Weighted Average Units
Outstanding 95,753,829 92,666,469
F-10
FOR THE FOR THE YEAR
SIX MONTHS ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
Issuance of units in connection with the
Merger (assuming that there are 89,916,152
units of DRP, LP outstanding immediately
prior to the Effective Time) 61,142,983 61,142,983
156,896,812 153,809,452
(H) To reflect the following adjustments to
interest expense:
1. To record the reduction in interest
expense as a result of the use $177,200 of
the net proceeds of $193,000 from the
Preferred Offering to reduce mortgages and
other notes payable $ (6,366) $ (12,731)
2. To record the net increase in interest
expense and deferred debt issuance cost
amortization as a result of the Offering 2,460 3,521
$ (3,906) $ (9,210)
(I) To adjust the allocation of the Limited
Partners' interest after giving effect to the
Offering, the Preferred Offering and the
Merger in the net income of the Partnerships
after consideration of the preferred unit
distribution related to the Series B
Preferred Stock. The Limited Partners' pro
forma weighted average ownership interest for
the six months ended June 30, 1996 and for
the year ended December 31, 1995 was 38.6% $ (1,870) $ (3,266)
and 39.4%, respectively
(J) To reflect dividends related to the Preferred
Offering $ 8,750 $ 17,500
F-11
SUBJECT TO COMPLETION, DATED OCTOBER 21, 1996 **
PROSPECTUS
$750,000,000
SIMON-DEBARTOLO GROUP, L.P.
DEBT SECURITIES
____________________
Simon-DeBartolo Group, L.P. (the "Operating Partnership") may from time to
time offer in one or more series unsecured non-convertible investment grade
debt securities ("Debt Securities") with an aggregate public offering price of
up to $750,000,000 (or its equivalent in another currency based on the exchange
rate at the time of sale) in amounts, at prices and on terms to be set forth in
one or more supplements to this Prospectus (each a "Prospectus Supplement").
The Operating Partnership is a subsidiary of Simon DeBartolo Group, Inc. (the
"Company") and is the Company's primary operating partnership following the
consummation on August 9, 1996 of the merger of DeBartolo Realty Corporation
with a subsidiary of the Company.
The specific terms of the Debt Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include a specific title, aggregate principal amount,
currency, form (which may be registered or bearer, or certificated or global),
authorized denominations, maturity, rate (or manner of calculation thereof)
and time of payment of interest, terms for redemption at the option of the
Operating Partnership or repayment at the option of the holder, terms for
sinking fund payments, covenants and any initial public offering price.
The applicable Prospectus Supplement will also contain information, where
applicable, concerning material United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Debt Securities
covered by such Prospectus Supplement.
The Debt Securities may be offered directly, through agents designated
from time to time by the Operating Partnership, or to and through underwriters
or dealers. If any agents, dealers or underwriters are involved in the sale of
any of the Debt Securities, their names, and any applicable purchase price,
fee, commission or discount arrangement between or among them, will be set
forth, or will be calculable from the information set forth, in an accompanying
Prospectus Supplement. See "Plan of Distribution." No Debt Securities may be
sold without delivery of a Prospectus Supplement describing the method and
terms of the offering of such series of Debt Securities.
The Debt Securities will be direct, unsecured obligations of the Operating
Partnership and will rank equally with all other unsecured and unsubordinated
indebtedness of the Operating Partnership. On June 30, 1996, on a pro forma
basis after giving effect to the Merger (as defined below), the total
outstanding debt of the Operating Partnership including its pro rata share of
joint venture debt was $3,889 million, 92.0% of which was secured debt. The
Indenture pursuant to which the Debt Securities are issued does not limit the
amount of other indebtedness of the Operating Partnership that may rank equally
with the Debt Securities.
________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
________________________
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON
OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
________________________
**Information contained herin is subject to completion or amendment. A
registration relating to these securities has been filed with the Securities and
Exchange Commission. These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes effective. This
prospectus shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
THE DATE OF THIS PROSPECTUS IS OCTOBER __, 1996.
2
AVAILABLE INFORMATION
Simon DeBartolo Group, Inc. (the "Company") is the holder of approximately
a 99.99% interest in SD Property Group, Inc., which is the managing general
partner of the Operating Partnership. Simon Property Group, L.P. ("SPG, LP")
is a subsidiary partnership of the Operating Partnership. The Company and SPG,
LP are and, following the effectiveness of the registration statement of which
this Prospectus is a part, the Operating Partnership will be, subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, the Company and SPG, LP
file and the Operating Partnership may be required to file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information filed
by the Company and SPG, LP can be inspected and copied, at the prescribed
rates, at the public reference facilities of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and
Northwestern Atrium Center, 500 W. Madison Street, Chicago, Illinois 60661. The
Company's Common Stock is traded on the New York Stock Exchange ("NYSE").
Reports and other information concerning the Company may be inspected at the
principal office of the NYSE at 20 Broad Street, New York, New York 10005.
The Company, SPG, LP and the Operating Partnership will provide without
charge to each person to whom a copy of this Prospectus is delivered, upon
written or oral request, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents). Written requests
for such copies should be addressed to National City Center, 115 West
Washington Street, Suite 15 East, Indianapolis, Indiana 46204, Attn: Investor
Relations, telephone number (317) 685-7330.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Operating Partnership with the
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Debt Securities offered hereby. This Prospectus omits
certain of the information contained in the Registration Statement and the
exhibits and schedules thereto, in accordance with the rules and regulations of
the Commission. For further information concerning the Operating Partnership
and the Debt Securities offered hereby, reference is hereby made to the
Registration Statement and the exhibits and schedules filed therewith, which
may be inspected without charge at the office of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and copies of which may be obtained from
the Commission at prescribed rates. The Commission maintains a World Wide Web
Site (http://www.sec.gov) that contains such material regarding issuers that
file electronically with the Commission. This Registration Statement has been
so filed and may be obtained at such site. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
Certain information, including, but not limited to, information relating
to the Operating Partnership's properties, principal security holders,
management, executive compensation, certain relationships and related
transactions and legal proceedings that would be required to be disclosed in a
prospectus included in a registration statement on Form S-11, has been omitted
from this Prospectus because such information is not materially different from
the information contained in the Company's and SPG, LP's periodic reports,
proxy statements and other information filed by the Company and SPG, LP with
the Commission.
3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company and SPG, LP which have been filed
with the Commission are hereby incorporated by reference in this Prospectus.
1. The Company's Registration Statement on Form S-4 (Registration No.
333-06933);
2. The Company's Proxy Statement dated June 28, 1996, relating to the
annual and special meeting of stockholders held on August 7, 1996;
3. The Company's Annual Report on Form 10-K for the year ended
December 31, 1995, as amended by Form 10-K/A-1;
4. The Company's Quarterly Reports on Form 10-Q for the calendar quarters
ended March 31, 1996, as amended by Form 10-Q/A-1, and June 30, 1996;
5. The Company's Current Reports on Form 8-K dated March 20, March 26,
May 17, August 9, August 12, August 26, September 18, and September 27, 1996;
6. SPG, LP's Annual Report on Form 10-K for the year ended December 31,
1995, as amended by Form 10-K/A-1;
7. SPG, LP's Quarterly Reports on Form 10-Q for the calendar quarters
ended March 31 and June 30, 1996; and
8. SPG, LP's Current Report on Form 8-K dated August 26, 1996, as amended
on August 28, 1996, and on October 21, 1996.
9. The document "Certain Information with respect to Simon DeBartolo
Group, L.P.", filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
The Exchange Act filing numbers of the Company and SPG, LP are 1-12618 and
33-98364, respectively.
Each document filed by the Company, SPG, LP or the Operating Partnership
subsequent to the date of this Prospectus pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act and prior to termination of the offering of all
Debt Securities to which this Prospectus relates shall be deemed to be
incorporated by reference in this Prospectus and shall be part hereof from the
date of filing of such document. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in this Prospectus (in the case of a
statement in a previously-filed document incorporated or deemed to be
incorporated by reference herein), in any accompanying Prospectus Supplement
relating to a specific offering of Debt Securities or in any other subsequently
filed document that is also incorporated or deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus or any accompanying
Prospectus Supplement. Subject to the foregoing, all information appearing in
this Prospectus and each accompanying Prospectus Supplement is qualified in its
entirety by the information appearing in the documents incorporated by
reference.
Although the Operating Partnership is the Registrant under the
Registration Statement, the foregoing documents of the Company and SPG, LP
filed under the Exchange Act have been incorporated by reference herein because
they contain information concerning business, properties, operations and
management of the Operating Partnership through which the Company conducts its
operations.
4
THE OPERATING PARTNERSHIP
Simon-DeBartolo Group, L.P. (the "Operating Partnership") is a subsidiary
partnership of Simon DeBartolo Group, Inc. (the "Company") (formerly known as
Simon Property Group, Inc. ("SPG")), and is the primary operating partnership
of the Company as a result of the merger (the "Merger") of DeBartolo Realty
Corporation ("DRC") with a subsidiary of the Company. The Merger was
consummated on August 9, 1996 (the "Merger Date"), at which time DRC became an
approximately 99.99% owned subsidiary of the Company and was renamed SD
Property Group, Inc. (the "Managing General Partner"). The Managing General
Partner and the Company are both general partners of the Operating Partnership,
but the Managing General Partner is the sole managing general partner of the
Operating Partnership. As part of the Merger, the Company, as general partner
of Simon Property Group, L.P. ("SPG, LP" and, together with the Operating
Partnership, the "Partnerships"), and the limited partners of SPG, LP acquired
a majority of the partnership interests in the Operating Partnership, and in
exchange the Operating Partnership acquired a 49.5% limited partnership
interest in, and an additional 49.5% interest in the profits of, SPG, LP.
The Company is the parent of the Managing General Partner and owned
effectively as of the Merger Date a controlling 61.5% equity interest in, the
Operating Partnership. As of the Merger Date, Melvin Simon, Herbert Simon,
David Simon and certain of their affiliates, including certain other Simon
family members and estates, trusts and other entities established for their
benefit (collectively, the "Simons"), effectively owned a 21.7% equity interest
in the Operating Partnership, and the estate of Edward J. DeBartolo, Edward J.
DeBartolo, Jr., M. Denise DeBartolo York, The Edward J. DeBartolo Corporation,
an Ohio corporation ("EJDC"), and certain of their affiliates, including
certain other DeBartolo family members and estates and trusts established for
their benefit (collectively, the "DeBartolos"), effectively owned a 14.2%
equity interest in the Operating Partnership.
As of June 30, 1996, on a combined basis, adjusted to give effect to the
Merger and related transactions thereto as though they had occurred prior to
such date: the Operating Partnership owns or holds interests in a diversified
portfolio of 183 income producing properties (the "Portfolio Properties"),
including 111 super-regional and regional malls, 66 community shopping centers,
two specialty retail centers and four mixed-use properties located in 32
states; the Portfolio Properties contain an aggregate of approximately 110
million square feet of gross leasable area ("GLA"), of which approximately
65 million square feet is GLA owned by the Partnerships ("Owned GLA"); more
than 3,600 different retailers occupy approximately 12,000 stores in the
Portfolio Properties; total estimated retail sales at the Portfolio Properties
approached $16 billion in fiscal 1995 aggregating an additional seven million
square feet of GLA; the Operating Partnership has interests in eight properties
under construction in the United States, and owns land held for future
development; the Operating Partnership, together with its affiliated management
companies (collectively, the "Management Companies"), manage over 127 million
square feet of GLA of retail and mixed-use properties.
As of the Merger Date, the Operating Partnership and the Management
Companies had approximately 8,000 employees. The Operating Partnership's
executive offices are located at National City Center, 115 West Washington
Street, Suite 15 East, Indianapolis, Indiana 46204, and its telephone number is
(317) 636-1600.
USE OF PROCEEDS
Except as otherwise provided in the applicable Prospectus Supplement,
proceeds to the Operating Partnership from the sale of the Debt Securities
offered hereby will be added to the working capital of the Operating
Partnership and will be available for general purposes, which may include the
repayment of indebtedness, the financing of capital commitments and possible
future acquisitions associated with the continued expansion of the
Partnerships' business.
5
RATIO OF EARNINGS TO FIXED CHARGES
SPG, LP's ratio of earnings to fixed charges for the six months ended June
30, 1996 and 1995 was 1.54x and 1.59x, respectively, and for the fiscal years
ended December 31, 1995 and 1994 was 1.67x and 1.43x, respectively. From the
commencement of its operations on December 20, 1993 through December 31, 1993,
the ratio of earnings to fixed charges for SPG, LP was 3.36x. The pro forma
ratio of earnings to fixed charges for the six months ended June 30, 1996 and
for the fiscal year ended December 31, 1995 of SDG, LP, assuming the Merger and
related transactions had occurred as of January 1, 1995 and carried forward
through June 30, 1996, was 1.53x and 1.70x, respectively. SPG, LP is for
financial reporting purposes the predecessor to the Operating Partnership.
For purposes of computing the ratio of earnings to fixed charges, earnings
have been calculated by adding fixed charges, excluding capitalized interest,
to income (loss) from continuing operations including income from minority
interests which have fixed charges, and including distributed income from
unconsolidated joint ventures instead of income from unconsolidated joint
ventures. Fixed charges consist of interest costs, whether expensed or
capitalized, the interest component of rental expense and amortization of debt
issuance costs.
Prior to the commencement of business by SPG, LP in December 1993, the
predecessor of SPG, LP maintained a different ownership and equity structure.
The predecessor's operating properties have historically generated positive net
cash flow. The financial statements of the predecessor show net income for the
period January 1, 1993 through December 19, 1993, and net losses for the fiscal
years ended December 31, 1992 and 1991. The ratio of earnings to fixed charges
for the period January 1, 1993 through December 19, 1993 was 1.11x. As a
consequence of the net losses for the fiscal years ended December 31, 1992 and
1991, the computation of the ratio of earnings to fixed charges for these
fiscal years indicates that earnings were inadequate to cover fixed charges by
approximately $12.8 million and $18.7 million, respectively.
The new capitalization of the Company effected in December 1993 in
connection with its initial public offering permitted the Company to deleverage
significantly, resulting in an improved ratio of earnings to fixed charges
subsequent to its commencement of operations.
ACCOUNTING TREATMENT OF THE
MERGER AND THE OTHER RELATED TRANSACTIONS
For financial reporting purposes, the completion of the Merger and related
transactions resulted in a reverse acquisition, directly or indirectly, of 100%
of the net assets of DeBartolo Realty Partnership, L.P. ("DRP, LP"). Although
SPG was the accounting acquirer, DRP, LP (now the Operating Partnership) will
be the primary operating partnership through which the future business of the
Company will be conducted. However, SPG was the accounting acquirer upon
completion of the Merger and related transactions and has majority control of
DRP, LP. SPG's initial operating partnership, SPG, LP, is the predecessor to
DRP, LP for financial statement purposes. Accordingly, the financial
statements and ratios disclosed by the Operating Partnership for the post-
merger periods will reflect the reverse acquisition of DRP, LP by SPG using the
purchase method of accounting and for all pre-merger comparative periods, the
financial statements and ratios disclosed by the Operating Partnership will
reflect the financial statements of SPG, LP, as the predecessor to the
Operating Partnership for financial statement purposes.
6
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture (the "Indenture"),
between the Operating Partnership and Chemical Bank, as trustee. The Indenture
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part and is available for inspection at the corporate trust
office of the trustee at 450 West 33rd Street, New York, New York 10001, or as
described above under "Available Information." The Indenture is subject to,
and governed by, the Trust Indenture Act of 1939, as amended (the "TIA"). The
statements made hereunder or in any Prospectus Supplement relating to the
Indenture and the Debt Securities to be issued thereunder are summaries of
certain provisions thereof and do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all provisions of the
Indenture and such Debt Securities. All section references appearing herein
are to sections of the Indenture, and capitalized terms used but not defined
herein shall have the respective meanings set forth in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Operating
Partnership and will rank equally with all other unsecured and unsubordinated
indebtedness of the Operating Partnership. At June 30, 1996, on a pro forma
basis after giving effect to the Merger, the total outstanding debt of the
Operating Partnership including its pro rata share of joint venture debt was
$3,889 million, 92.0% of which was secured debt. The Indenture does not limit
the amount of other indebtedness of the Operating Partnership that may rank
equally with the Debt Securities. The Debt Securities may be issued without
limit as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Directors of the Managing General Partner, as the
managing general partner of the Operating Partnership or as established in one
or more indentures supplemental to the Indenture. All Debt Securities of one
series need not be issued at the same time and, unless otherwise provided, a
series may be reopened, without the consent of the holders of the Debt
Securities of such series, for issuances of additional Debt Securities of such
series (Section 301).
The Indenture provides that there may be more than one trustee (the
"Trustee") thereunder, each with respect to one or more series of Debt
Securities. Any Trustee under the Indenture may resign or be removed with
respect to one or more series of Debt Securities, and a successor Trustee may
be appointed to act with respect to such series (Section 608). In the event
that two or more persons are acting as Trustee with respect to different series
of Debt Securities, each such Trustee shall be a trustee of a trust under the
Indenture separate and apart from the trust administered by any other Trustee
(Section 609), and, except as otherwise indicated herein, any action described
herein to be taken by a Trustee may be taken by each such Trustee with respect
to, and only with respect to, the one or more series of Debt Securities for
which it is Trustee under the Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt Securities
will be issued and, if other than the principal amount thereof, the portion of
the principal amount thereof payable upon acceleration of the maturity thereof;
(4) the date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
7
(5) the rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt Securities
will bear interest, if any;
(6) the date or dates, or the method for determining such date or dates,
from which any interest will accrue, the dates on which any such interest will
be payable, the record dates for such interest payment dates, or the method by
which any such record date shall be determined, the person to whom such
interest shall be payable, and the basis upon which interest shall be
calculated if other than that of a 360-day year of twelve 30-day months;
(7) the place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, such Debt Securities
may be surrendered for registration of transfer or exchange and notices or
demands to or upon the Operating Partnership in respect of such Debt Securities
and the Indenture may be served;
(8) the period or periods within which, the price or prices at which and
the terms and conditions upon which such Debt Securities may be redeemed, as a
whole or in part, at the option of the Operating Partnership, if the Operating
Partnership is to have such an option;
(9) the obligation, if any, of the Operating Partnership to redeem,
repay or purchase such Debt Securities pursuant to any sinking fund or
analogous provision or at the option of a holder thereof, and the period or
periods within which, the price or prices at which and the terms and conditions
upon which such Debt Securities will be redeemed, repaid or purchased, as a
whole or in part, pursuant to such obligation;
(10) if other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign currency or
units of two or more foreign currencies or a composite currency or currencies,
and the terms and conditions relating thereto;
(11) whether the amount of payments of principal of (and premium, if any)
or interest, if any, on such Debt Securities may be determined with reference
to an index, formula or other method (which index, formula or method may, but
need not be, based on a currency, currencies, currency unit or units or
composite currency or currencies) and the manner in which such amounts shall be
determined;
(12) the events of default or covenants of such Debt Securities, to the
extent different from or in addition to those described herein;
(13) whether such Debt Securities will be issued in certificated or book-
entry form;
(14) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000 and
any integral multiple thereof and, if in bearer form, the denominations thereof
if other than $5,000, and any integral multiple thereof and the terms and
conditions relating thereto;
(15) the applicability, if any, of the defeasance and covenant defeasance
provisions described herein, or any modification thereof;
(16) if such Debt Securities are to be issued upon the exercise of debt
warrants, the time, manner and place of such Debt Securities to be
authenticated and delivered;
(17) whether and under what circumstances the Operating Partnership will
pay additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether the Operating Partnership
will have the option to redeem such Debt Securities in lieu of making such
payment;
8
(18) with respect to any Debt Securities that provide for optional
redemption or prepayment upon the occurrence of certain events (such as a
change of control of the Operating Partnership), (i) the possible effects of
such provisions on the market price of the Operating Partnership's securities
or in deterring certain mergers, tender offers or other takeover attempts, and
the intention of the Operating Partnership to comply with the requirements of
Rule 14e-1 under the Exchange Act and any other applicable securities laws in
connection with such provisions; (ii) whether the occurrence of the specified
events may give rise to cross-defaults on other indebtedness such that payment
on such Debt Securities may be effectively subordinated; and (iii) the
existence of any limitation on the Operating Partnership's financial or legal
ability to repurchase such Debt Securities upon the occurrence of such an event
(including, if true, the lack of assurance that such a repurchase can be
effected) and the impact, if any, under the Indenture of such a failure,
including whether and under what circumstances such a failure may constitute an
Event of Default; and
(19) any other terms of such Debt Securities.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon acceleration of the maturity thereof ("Original
Issue Discount Securities"). If material or applicable, special U.S. federal
income tax, accounting and other considerations applicable to Original Issue
Discount Securities will be described in the applicable Prospectus Supplement.
Except as described under "-Merger, Consolidation or Sale" below or as may
be set forth in any Prospectus Supplement, the Indenture does not contain any
other provisions that would limit the ability of the Operating Partnership to
incur indebtedness or that would afford holders of the Debt Securities
protection in the event of (i) a highly leveraged or similar transaction
involving the Operating Partnership, the Company or the management of the
Company, or any affiliate of any such party, (ii) a change of control, or
(iii) a reorganization, restructuring, merger or similar transaction involving
the Operating Partnership that may adversely affect the holders of the Debt
Securities. In addition, subject to the limitations set forth under "-Merger,
Consolidation or Sale," the Operating Partnership may, in the future, enter
into certain transactions, such as the sale of all or substantially all of its
assets or the merger or consolidation of the Operating Partnership, that would
increase the amount of the Operating Partnership's indebtedness or
substantially reduce or eliminate the Operating Partnership's assets, which may
have an adverse effect on the Operating Partnership's ability to service its
indebtedness, including the Debt Securities. Reference is made to the
applicable Prospectus Supplement for information with respect to any deletions
from, modifications of or additions to the events of default or covenants that
are described below, including any addition of a covenant or other provision
providing event risk or similar protection.
Reference is made to "-Certain Covenants" below and to the description of
any additional covenants with respect to a series of Debt Securities in the
applicable Prospectus Supplement. Except as otherwise described in the
applicable Prospectus Supplement, compliance with such covenants generally may
not be waived with respect to a series of Debt Securities unless the Holders of
at least a majority in principal amount of all outstanding Debt Securities of
such series consent to such waiver, except to the extent that the defeasance
and covenant defeasance provisions of the Indenture described under
"-Discharge" and "-Defeasance and Covenant Defeasance" below apply to such
series of Debt Securities. See "-Modification of the Indenture."
9
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series which are registered securities, other than
registered securities issued in global form (which may be of any denomination),
shall be issuable in denominations of $1,000 and any integral multiple thereof
and the Debt Securities which are bearer securities, other than bearer
securities issued in global form (which may be of any denomination), shall be
issuable in denominations of $5,000 and any integral multiple thereof (Section
302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt
Securities in registered form will be payable at the corporate trust office of
the Trustee, initially located at 450 West 33rd Street, New York, New York
10001, provided that, at the option of the Operating Partnership, payment of
interest may be made by check mailed to the address of the Person entitled
thereto as it appears in the applicable Security Register or by wire transfer
of funds to such Person at an account maintained within the United States
(Sections 301, 307 and 1002).
Unless otherwise specified in the applicable Prospectus Supplement, any
interest not punctually paid or duly provided for on any Interest Payment Date
with respect to a Debt Security in registered form ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the Person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of such Debt Security not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the Indenture
(Section 307).
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the Trustee referred to above.
In addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
registration of transfer thereof at the corporate trust office of the Trustee
referred to above. Every Debt Security surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer. No service charge will be made for any registration of
transfer or exchange of any Debt Securities, but the Trustee or the Operating
Partnership may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith (Section 305). If the
applicable Prospectus Supplement refers to any transfer agent (in addition to
the Trustee) initially designated by the Operating Partnership with respect to
any series of Debt Securities, the Operating Partnership may at any time
rescind the designation of any such transfer agent or approve a change in the
location through which any such transfer agent acts, except that the Operating
Partnership will be required to maintain a transfer agent in each place of
payment for such series. The Operating Partnership may at any time designate
additional transfer agents with respect to any series of Debt Securities
(Section 1002).
Neither the Operating Partnership nor the Trustee shall be required (i) to
issue, register the transfer of or exchange any Debt Security if such Debt
Security may be among those selected for redemption during a period beginning
at the opening of business 15 days before selection of the Debt Securities to
be redeemed and ending at the close of business on (A) if such Debt Securities
are issuable only as Registered Securities, the day of the mailing of the
relevant notice of redemption and (B) if such Debt Securities are issuable as
Bearer Securities, the day of the first publication of the relevant notice of
redemption or, if such Debt Securities are also issuable as Registered
Securities and there is no publication, the mailing of the relevant notice of
redemption, or (ii) to register the transfer of or exchange any Registered
Security so selected for redemption in whole or in part, except, in the case of
any Registered Security to be redeemed in part, the portion thereof not to be
redeemed, or (iii) to exchange
10
any Bearer Security so selected for redemption
except that, to the extent provided with respect to such Bearer Security, such
Bearer Security may be exchanged for a Registered Security of that series and
of like tenor, PROVIDED that such Registered Security shall be simultaneously
surrendered for redemption, or (iv) to issue, register the transfer of or
exchange any Debt Security which has been surrendered for repayment at the
option of the Holder, except the portion, if any, of such Debt Security not to
be so repaid (Section 305).
MERGER, CONSOLIDATION OR SALE
The Operating Partnership may consolidate with, or sell, lease or convey
all or substantially all of its assets to, or merge with or into, any other
entity, provided that (a) the Operating Partnership shall be the continuing
entity, or the successor entity (if other than the Operating Partnership)
formed by or resulting from any such consolidation or merger or which shall
have received the transfer of such assets shall expressly assume payment of the
principal of (and premium, if any) and interest on all the Debt Securities and
the due and punctual performance and observance of all of the covenants and
conditions contained in the Indenture; (b) immediately after giving effect to
such transaction and treating any indebtedness which becomes an obligation of
the Operating Partnership or any Subsidiary as a result thereof as having been
incurred by the Operating Partnership or such Subsidiary at the time of such
transaction, no Event of Default under the Indenture, and no event which, after
notice or the lapse of time, or both, would become such an Event of Default,
shall have occurred and be continuing; and (c) an officer's certificate and
legal opinion covering such conditions shall be delivered to the Trustee
(Sections 801 and 803).
CERTAIN COVENANTS
EXISTENCE. Except as permitted under "-Merger, Consolidation or Sale"
above, the Operating Partnership is required to do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (statutory and charter) and franchises; PROVIDED, HOWEVER, that the
Operating Partnership shall not be required to preserve any such right or
franchise if it determines that the loss thereof is not disadvantageous in any
material respect to the Holders of the Debt Securities (Section 1006).
MAINTENANCE OF PROPERTIES. The Operating Partnership is required to cause
all of its material properties used or useful in the conduct of its business or
the business of any Subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and to cause
to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Operating Partnership may
be necessary so that the business carried on in connection therewith may be
properly conducted at all times; PROVIDED, HOWEVER, that the Operating
Partnership and its subsidiaries shall not be prevented from selling or
otherwise disposing for value their respective properties in the ordinary
course of business (Section 1007).
INSURANCE. The Operating Partnership is required to, and is required to
cause each of its Subsidiaries to, keep all of its insurable properties insured
against loss or damage at least equal to their then full insurable value
(subject to reasonable deductibles determined from time to time by the
Operating Partnership) with financially sound and reputable insurance companies
(Section 1008).
PAYMENT OF TAXES AND OTHER CLAIMS. The Operating Partnership is required
to pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) all taxes, assessments and governmental charges levied
or imposed upon it or any Subsidiary or upon its income, profits or property or
that of any Subsidiary, and (ii) all lawful claims for labor, materials and
suppliers which, if unpaid, might by law become a lien upon the property of the
Operating Partnership or any Subsidiary; PROVIDED, HOWEVER, that the Operating
Partnership shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings (Section 1009).
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PROVISION OF FINANCIAL INFORMATION. The Holders of Debt Securities will
be provided with copies of the annual reports and quarterly reports of the
Operating Partnership. Whether or not the Operating Partnership is subject to
Section 13 or 15(d) of the Exchange Act and for so long as any Debt Securities
are outstanding, the Operating Partnership will, to the extent permitted under
the Exchange Act, be required to file with the Commission the annual reports,
quarterly reports and other documents which the Operating Partnership would
have been required to file with the Commission pursuant to such Section 13 or
15(d) (the "Financial Statements") if the Operating Partnership were so
subject, such documents to be filed with the Commission on or prior to the
respective dates (the "Required Filing Dates") by which the Operating
Partnership would have been required so to file such documents if the Operating
Partnership were so subject. The Operating Partnership will also in any event
(x) within 15 days of each Required Filing Date (i) transmit by mail to all
Holders of Debt Securities, as their names and addresses appear in the Security
Register, without cost to such Holders, copies of the annual reports and
quarterly reports which the Operating Partnership would have been required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act if
the Operating Partnership were subject to such Sections and (ii) file with the
Trustee copies of the annual reports, quarterly reports and other documents
which the Operating Partnership would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Operating
Partnership were subject to such Sections and (y) if filing such documents by
the Operating Partnership with the Commission is not permitted under the
Exchange Act, promptly upon written request and payment of the reasonable cost
of duplication and delivery, supply copies of such documents to any prospective
Holder (Section 1010).
ADDITIONAL COVENANTS. Any additional or different covenants of the
Operating Partnership with respect to any series of Debt Securities will be set
forth in the Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default
for 30 days in the payment of any installment of interest on any Debt Security
of such series; (b) default in the payment of the principal of (or premium, if
any, on) any Debt Security of such series at its Maturity; (c) default in
making any sinking fund payment as required for any Debt Security of such
series; (d) default in the performance of any other covenant of the Operating
Partnership contained in the Indenture (other than a covenant added to the
Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series), such default having continued for 60 days
after written notice as provided in the Indenture; (e) default in the payment
of an aggregate principal amount exceeding $30,000,000 of any recourse
indebtedness of the Operating Partnership, however evidenced, such default
having occurred after the expiration of any applicable grace period and having
resulted in the acceleration of the maturity of such indebtedness, but only if
such indebtedness is not discharged or such acceleration is not rescinded or
annulled within 10 days after written notice as provided in the Indenture; (f)
certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of the Operating Partnership
or any Significant Subsidiary or any of their respective property; and (g) any
other Event of Default provided with respect to a particular series of Debt
Securities (Section 501).
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time Outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% in principal amount
of the Outstanding Debt Securities of that series may declare the principal
amount (or, if the Debt Securities of that series of the Original Issue
Discount Securities or Indexed Securities, such portion of the principal amount
as may be specified in the terms thereof) of all of the Debt Securities of that
series to be due and payable immediately by written notice thereof to the
Operating Partnership (and to the Trustee if given by the Holders); provided,
that in the case of an Event of Default described under paragraph (f) of the
preceding paragraph, acceleration is automatic. However, at any time after
such acceleration with respect to Debt Securities of such series has been made,
but before a judgment or decree for payment of the money due has been obtained
by the Trustee, the Holders of not less than a majority in principal amount of
Outstanding Debt Securities of such series may rescind and
12
annul such
acceleration and its consequences if (a) the Operating Partnership shall have
deposited with the Trustee all amounts due otherwise than on account of such
declaration, plus certain fees, expenses, disbursements and advances of the
Trustee and (b) all Events of Default, other than the non-payment of
accelerated principal of the Debt Securities of such series, have been cured or
waived as provided in the Indenture (Section 502). The Indenture also provides
that the Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may waive any past default with
respect to such series and its consequences, except a default (x) in the
payment of the principal of (or premium, if any) or interest on any Debt
Security of such series or (y) in respect of a covenant or provision contained
in the Indenture that cannot be modified or amended without the consent of the
Holder of each Outstanding Debt Security affected thereby (Section 513).
The Trustee will be prepared to give notice to the Holders of Debt
Securities within 90 days of a default under the Indenture unless such default
has been cured or waived; PROVIDED, HOWEVER, that the Trustee may withhold
notice to the Holders of any series of Debt Securities of any default with
respect to such series (except a default in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of such
series) if a trust committee of Responsible Officers of the Trustee consider
such withholding to be in the interest of such Holders (Section 601).
The Indenture provides that no Holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to the
Indenture or for any remedy thereunder, except in the case of failure of the
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of not
less than 25% in principal amount of the Outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it (Section
507). This provision will not prevent, however, any Holder of Debt Securities
from instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof (Section 508).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request of any Holders of any series of Debt
Securities then Outstanding under the Indenture, unless such Holders shall have
offered to the Trustee thereunder reasonable security or indemnity
(Section 602). The Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of any series shall have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or of exercising any trust or power conferred upon
the Trustee with respect to the Debt Securities of such series. However, the
Trustee may refuse to follow any direction which is in conflict with any law or
the Indenture, which may involve the Trustee in personal liability or which may
be unduly prejudicial to the Holders of Debt Securities of such series not
joining therein (Section 512).
Within 120 days after the close of each fiscal year, the Operating
Partnership must deliver to the Trustee a certificate, signed by one of several
specified officers of the Operating Partnership, stating whether or not such
officer has knowledge of any default under the Indenture and, if so, specifying
each such default and the nature and status thereof (Section 1011).
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture will be permitted to be made
only with the consent of the Holders of not less than a majority in principal
amount of all Outstanding Debt Securities which are affected by such
modification or amendment (voting as one class); PROVIDED, HOWEVER, that no
such modification or amendment may, without the consent of the Holder of each
such Debt Security affected thereby: (a) change the Stated Maturity of the
principal of, or premium (if any) or any installment of interest on, any such
Debt Security; (b) reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of, any such Debt Security,
or reduce the amount of principal of an Original Issue Discount Security that
would be due and payable upon
13
acceleration of the maturity thereof or that
would be provable in bankruptcy, or adversely affect any right of repayment at
the option of the holder of any such Debt Security; (c) change the Place of
Payment, or the coin or currency, for payment of principal of, premium, if any,
or interest on any such Debt Security; (d) impair the right to institute suit
for the enforcement of any payment on or with respect to any such Debt
Security; (e) reduce the above-stated percentage in principal amount of
Outstanding Debt Securities necessary to modify or amend the Indenture, reduce
the percentage of Outstanding Debt Securities of any series necessary to waive
compliance with certain provisions thereof or certain defaults and consequences
thereunder, or to reduce the quorum or voting requirements set forth in the
Indenture; or (f) modify any of the foregoing provisions or any of the
provisions relating to the waiver of certain past defaults or certain
covenants, except to increase the percentage required to effect such action or
to provide that certain other provisions may not be modified or waived without
the consent of the Holder of each Outstanding Debt Security affected thereby
(Section 902).
The Indenture provides that the Holders of not less than a majority in
principal amount of a series of Outstanding Debt Securities have the right to
waive compliance by the Operating Partnership with certain covenants relating
to such series of Debt Securities in the Indenture (Section 1013).
Modifications and amendments of the Indenture will be permitted to be made
by the Operating Partnership and the Trustee without the consent of any Holder
of Debt Securities for any of the following purposes: (i) to evidence the
succession of another Person to the Operating Partnership as obligor under the
Indenture; (ii) to add to the covenants of the Operating Partnership for the
benefit of the Holders of all or any series of Debt Securities or to surrender
any right or power conferred upon the Operating Partnership in the Indenture;
(iii) to add Events of Default for the benefit of the Holders of all or any
series of Debt Securities; (iv) to add or change any provisions of the
Indenture to facilitate the issuance of, or to liberalize certain terms of,
Debt Securities in bearer form, to change or eliminate any restrictions on
payment of the principal of or premium or interest on Debt Securities, to
modify the provisions relating to global Debt Securities, or to permit or
facilitate the issuance of Debt Securities in uncertificated form, PROVIDED
that such action shall not adversely affect the interests of the Holders of the
Debt Securities of any series in any material respect; (v) to change or
eliminate any provisions of the Indenture, PROVIDED that any such change or
elimination shall become effective only when there are no Debt Securities
Outstanding of any series created prior thereto which are entitled to the
benefit of such provision or such amendment shall not apply to any then
Outstanding Debt Security; (vi) to secure the Debt Securities; (vii) to
establish the form or terms of Debt Securities of any series; (viii) to provide
for the acceptance of appointment by a successor Trustee or facilitate the
administration of the trusts under the Indenture by more than one Trustee;
(ix) to cure any ambiguity, defect or inconsistency in the Indenture, PROVIDED
that such action shall not adversely affect the interests of Holders of Debt
Securities of any series in any material respect; or (x) to supplement any of
the provisions of the Indenture to the extent necessary to permit or facilitate
defeasance and discharge of any series of such Debt Securities, PROVIDED that
such action shall not adversely affect the interests of the Holders of the Debt
Securities of any series in any material respect (Section 901).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be Outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination upon
acceleration of the maturity thereof, (ii) the principal amount of a Debt
Security denominated in a foreign currency that shall be deemed Outstanding
shall be the U.S. dollar equivalent, determined on the issue date for such Debt
Security, of the principal amount (or, in the case of an Original Issue
Discount Security, the U.S. dollar equivalent on the issue date of such Debt
Security of the amount determined as provided in (i) above) of such Debt
Security, (iii) the principal amount of an Indexed Security that shall be
deemed Outstanding shall be the principal face amount of such Indexed Security
at original issuance, unless otherwise provided with respect to such Indexed
Security pursuant to the Indenture, and (iv) Debt Securities owned by the
Operating Partnership or any other obligor upon
14
the Debt Securities or any
affiliate of the Operating Partnership or of such other obligor shall be
disregarded (Section 101).
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series issuable, in whole or in part, as Bearer Securities
(Section 1501). A meeting will be permitted to be called at any time by the
Trustee, and also, upon request, by the Operating Partnership or the Holders of
at least 10% in principal amount of the Outstanding Debt Securities of such
series, in any such case upon notice given as provided in the Indenture
(Section 1502). Except for any consent that must be given by the Holder of
each Debt Security affected by certain modifications and amendments of the
Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present will be permitted to be adopted by the
affirmative vote of the Holders of a majority in principal amount of the
Outstanding Debt Securities of that series; PROVIDED, HOWEVER, that, except as
referred to above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the Holders of a specified percentage in principal
amount of the Outstanding Debt Securities of a series may be adopted at a
meeting at which a quorum is present by the affirmative vote of the Holders of
such specified percentage in principal amount of the Outstanding Debt
Securities of that series. Any resolution passed or decision taken at any
meeting of Holders of Debt Securities of any series duly held in accordance
with the Indenture will be binding on all Holders of Debt Securities of that
series. The quorum at any meeting called to adopt a resolution, and at any
reconvened meeting, will be Persons holding or representing a majority in
principal amount of the Outstanding Debt Securities of a series; PROVIDED,
HOWEVER, that if any action is to be taken at such meeting with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action which may be made, given or taken by the Holders of not less than a
specified percentage in principal amount of the Outstanding Debt Securities of
a series, then with respect to such action (and only such action) the Persons
holding or representing such specified percentage in principal amount of the
Outstanding Debt Securities of such series will constitute a quorum
(Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at
a meeting of Holders of Debt Securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that the Indenture expressly provides may be made, given or taken by the
Holders of a specified percentage in principal amount of all Outstanding Debt
Securities affected thereby, or of the Holders of such series and one or more
additional series: (i) there shall be no minimum quorum requirement for such
meeting and (ii) the principal amount of the Outstanding Debt Securities of
such series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into account
in determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture (Section 1504).
DISCHARGE
The Operating Partnership may discharge certain obligations to Holders of
any series of Debt Securities that have not already been delivered to the
Trustee for cancellation and that either have become due and payable or will
become due and payable within one year (or scheduled for redemption within one
year) by irrevocably depositing with the Trustee, in trust, funds in an amount
sufficient to pay the entire indebtedness on such Debt Securities in respect of
principal (and premium, if any) and interest to the date of such deposit (if
such Debt Securities have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be (Section 401).
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that, if the provisions of Article Fourteen are
made applicable to the Debt Securities of or within any series pursuant to
Section 301 of the Indenture, the Operating Partnership may elect either (a) to
defease and be discharged from any and all obligations with respect to such
Debt Securities (except for the obligation to pay Additional Amounts, if any,
upon the occurrence of certain
15
events of tax, assessment or governmental charge
with respect to payments on such Debt Securities and the obligations to
register the transfer or exchange of such Debt Securities, to replace temporary
or mutilated, destroyed, lost or stolen Debt Securities, to maintain an office
or agency in respect of such Debt Securities and to hold moneys for payment in
trust) ("defeasance") (Section 1402) or (b) to be released from its obligations
with respect to such Debt Securities under Sections 1004 to 1010, inclusive, of
the Indenture (including the restrictions described under "-Certain Covenants"
above) and its obligations with respect to any other covenant, and any omission
to comply with such obligations shall not constitute a default or an Event of
Default with respect to such Debt Securities ("covenant defeasance")
(Section 1403), in either case upon the irrevocable deposit by the Operating
Partnership with the Trustee, in trust, of an amount, in such currency or
currencies, currency unit or units or composite currency or currencies in which
such Debt Securities are payable at Stated Maturity, or Government Obligations
(as defined below), or both, applicable to such Debt Securities which through
the scheduled payment of principal and interest in accordance with their terms
will provide money in an amount sufficient to pay the principal of (and
premium, if any) and interest on such Debt Securities, and any mandatory
sinking fund or analogous payments thereon, on the scheduled due dates therefor
(Section 1404).
Such a trust will only be permitted to be established if, among other
things, the Operating Partnership has delivered to the Trustee an Opinion of
Counsel (as specified in the Indenture) to the effect that the Holders of such
Debt Securities will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such Opinion of Counsel, in the case of
defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable United States federal income tax law
occurring after the date of the Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations
of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the foreign currency in which the Debt Securities of such series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other government, which, in
either case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such Government Obligations or a
specific payment of interest on or principal of any such Government Obligations
held by such custodian for the account of the holder of a depository receipt,
PROVIDED that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the
Government Obligation evidenced by such depository receipt (Section 101).
Unless otherwise provided in the applicable Prospectus Supplement, if
after the Operating Partnership has deposited funds or Government Obligations
to effect defeasance or covenant defeasance with respect to Debt Securities of
any series, (a) the Holder of a Debt Security of such series is entitled to,
and does, elect pursuant to the Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been,
and will be, fully discharged and satisfied through the payment of the
principal of (and premium, if any) and interest on such Debt Security as they
become due out of the proceeds yielded by converting the amount so deposited in
respect of such Debt Security into a currency, currency unit or composite
currency in which such Debt Security becomes payable as a result of such
election or such Conversion Event based on the applicable market exchange
16
rate (Section 1405). "Conversion Event" means the cessation of use of (i) a
currency, currency unit or composite currency both by the government of the
country which issued such currency and for the settlement of transactions by a
central bank or other public institutions of or within the international
banking community, (ii) the ECU both within the European Monetary System and
for the settlement of transactions by public institutions of or within the
European Community or (iii) any currency unit (or composite currency) other
than the ECU for the purposes for which it was established (Section 101).
Unless otherwise provided in the applicable Prospectus Supplement, all payments
of principal of (and premium, if any) and interest on any Debt Security that is
payable in a foreign currency that ceases to be used by its government of
issuance shall be made in U.S. dollars.
In the event the Operating Partnership effects covenant defeasance with
respect to any Debt Securities and such Debt Securities are declared due and
payable because of the occurrence of any Event of Default other than the Event
of Default described in clause (d) under "-Events of Default, Notice and
Waiver" with respect to Sections 1004 to 1010, inclusive, of the Indenture
(which sections would no longer be applicable to such Debt Securities) or
described in clause (g) under "-Events of Default, Notice and Waiver" with
respect to any other covenant as to which there has been covenant defeasance,
the amount in such currency, currency unit or composite currency in which such
Debt Securities are payable, and Government Obligations on deposit with the
Trustee, will be sufficient to pay amounts due on such Debt Securities at the
time of their Stated Maturity but may not be sufficient to pay amounts due on
such Debt Securities at the time of the acceleration resulting from such Event
of Default. However, the Operating Partnership would remain liable to make
payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above with respect to the Debt
Securities of or within a particular series.
MISCELLANEOUS
NO CONVERSION RIGHTS. The Debt Securities will not be convertible into or
exchangeable for any capital stock of the Company or equity interest in the
Operating Partnership.
LIMITED LIABILITY. The Indenture provides that no holder of any Debt
Securities under the Indenture will have any recourse against any partner
(whether limited or general, including the Managing General Partner and the
Company) of the Operating Partnership, or the assets of such partner, with
respect to any sum payable under or with respect to such Debt Securities, or
the performance of any obligation under the Indenture, and that the sole remedy
of such holder for such sum or obligation will be against the assets of the
Operating Partnership.
GLOBAL SECURITIES. The Debt Securities of a series may be issued in whole
or in part in the form of one or more global securities (the "Global
Securities") that will be deposited with, or on behalf of, a depositary (the
"Depositary") identified in the applicable Prospectus Supplement relating to
such series. Global Securities may be issued in either registered or bearer
form and in either temporary or permanent form. The specific terms of the
depositary arrangement with respect to a series of Debt Securities will be
described in the applicable Prospectus Supplement relating to such series.
PLAN OF DISTRIBUTION
The Operating Partnership may sell the Debt Securities to or through
underwriters, and also may sell the Debt Securities directly to one or more
other purchasers or through agents. The distribution of the Debt Securities may
be effected from time to time in one or more transactions at a fixed price or
prices, which may be changed, or at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices.
17
The Prospectus Supplement will set forth terms of the offering of the Debt
Securities, including (i) the name of any underwriters or agents with whom the
Company has entered into arrangements with respect to the sale or issuance of
Debt Securities, (ii) the initial public offering or purchase price of the Debt
Securities, (iii) any underwriting discounts, commissions and other items
constituting underwriter's compensation from the Operating Partnership and any
other discounts, concessions or commissions allowed or reallowed or paid by any
underwriters to other dealers, (iv) any commissions paid to any agents and (v)
the net proceeds to the Operating Partnership. In connection with the sale of
Debt Securities, underwriters may receive compensation from the Operating
Partnership or from purchasers of Debt Securities, for whom they may act as
agents, in the form of discounts, concessions or commissions. Underwriters may
sell Debt Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution
of Debt Securities may be deemed to be underwriters, and any discounts or
commissions they receive from the Operating Partnership, and any profit on the
resale of Debt Securities they realize, may be deemed to be underwriting
discounts and commissions under the Securities Act.
Under agreements the Operating Partnership may enter into, underwriters,
dealers and agents who participate in the distribution of Debt Securities may
be entitled to indemnification by the Operating Partnership against certain
liabilities, including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, the Operating Partnership in the
ordinary course of business.
Unless otherwise set forth in the Prospectus Supplement relating to the
issuance of Debt Securities, the obligations of the underwriters to purchase
such Debt Securities will be subject to certain conditions precedent and each
of the underwriters with respect to such Debt Securities will be obligated to
purchase all of the Debt Securities allocated to it if any such Debt Securities
are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If so indicated in the applicable Prospectus Supplement, the Operating
Partnership will authorize underwriters or other persons acting as the
Operating Partnership's agents to solicit offers by certain institutions to
purchase Debt Securities from the Operating Partnership pursuant to contracts
providing for payment and delivery on a future date. Institutions with which
such contracts may be made include commercial and savings banks, insurance
companies, pensions funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved by
the Operating Partnership. The obligations of any purchaser under any such
contract will be subject only to the condition that the purchase of the Debt
Securities shall not at any time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject. The underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
LEGAL MATTERS
The validity of each issue of the Debt Securities will be passed upon for
the Operating Partnership by Paul, Weiss, Rifkind, Wharton & Garrison, New
York, New York. Paul, Weiss, Rifkind, Wharton & Garrison will also pass upon
certain tax matters. Rogers & Wells, New York, New York, will act as counsel
to any underwriters, dealers or agents.
EXPERTS
The audited financial statements and
schedules of SPG and SPG, LP
incorporated by reference in the Registration Statement of which this
Prospectus is a part, to the extent and for the periods indicated
18
in their
reports, have been audited by Arthur Andersen LLP, independent public
accountants, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said reports.
The audited financial statements and schedules of DRC and the Operating
Partnership (formerly DeBartolo Realty Partnership, L.P.) incorporated by
reference in the Registration Statement of which this Prospectus is a part, to
the extent and for the periods indicated in their reports, have been audited by
Ernst & Young LLP, independent public accountants, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said report.
______________________________________
______________________________________
NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE OPERATING PARTNERSHIP OR THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCE, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS
SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS OR IN THE AFFAIRS
OF THE OPERATING PARTNERSHIP SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
_________
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PROSPECTUS SUPPLEMENT SUMMARY
THE OPERATING PARTNERSHIP
RECENT DEVELOPMENTS
USE OF PROCEEDS
ACCOUNTING TREATMENT OF THE MERGER AND THE OTHER RELATED TRANSACTIONS
CAPITALIZATION
SELECTED FINANCIAL AND OPERATING DATA
BUSINESS AND PROPERTIES
DESCRIPTION OF THE NOTES
MANAGEMENT
UNDERWRITING
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION ................F-1
PROSPECTUS
ADDITIONAL INFORMATION
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THE OPERATING PARTNERSHIP
USE OF PROCEEDS
RATIONS OF EARNINGS TO FIXED CHARGES
ACCOUNTING TREATMENT OF THE MERGER AND THE OTHER RELATED TRANSACTIONS
DESCRIPTION OF DEBT SECURITIES
PLAN OF DISTRIBUTION
LEGAL MATTERS
EXPERTS
_________
F-12
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS
SUPPLEMENT), ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
[LOGO]
$ ,000,000
% Notes Due , 200
$ ,000,000
% Notes Due , 200
$ ,000,000
% Notes Due , 20
__________
P R O S P E C T U S S U P P L E M E N T
__________
MERRILL LYNCH & CO.
____________, 1996
____________________________________________________________________________
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses (not including underwriting commissions and fees) of issuance
and distribution of the securities are estimated to be:@@
Securities and Exchange Commission
Registration Fee $ 258,620
Printing Costs $ 150,000 (1)
NASD Filing Fees $ 30,500
Fees of Rating Agencies $ 555,000 (1)
Accounting Fees and Expenses $ 100,000 (1)
Attorneys' Fees and Expenses $ 150,000 (1)
Blue Sky Fees and Expenses $ 90,000
Miscellaneous Expenses $ 165,880 (1)
___________
$1,500,000 (1)
______________
(1) Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Partnership Agreement of the Operating Partnership contains provisions
indemnifying the Company's officers and directors against certain liabilities.
The Partnership Agreements provide for indemnification of the Company and its
officers and directors to the same extent indemnification is provided to
officers and directors of the Company in its Charter, and limits the liability
of the Company and its officers and directors to the Operating Partnership and
its partners to the same extent liability of officers and directors of the
Company to the Company and its stockholders is limited under the Company's
Charter. In addition, the Company's officers and directors are indemnified
under Maryland law and the Company's Charter. The Company's Charter requires
the Company to indemnify its directors and officers to the fullest extent
permitted from time to time by the laws of Maryland. The Company's By-Laws
contain provisions which implement the indemnification provisions of the
Company's Charter.
The Maryland General Corporation Law (the "MGCL") permits a corporation to
indemnify its directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason
of their service in those or other capacities unless it is established that the
act or omission of the director or officer was material to the matter giving
rise to the proceeding and was committed in bad faith or was the result of
active and deliberate dishonesty, or the director or officer actually received
an improper personal benefit in money, property or services, or in the case of
any criminal proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful. No amendment
II-1
of the Company's Charter shall limit or eliminate the right to
indemnification provided with respect to acts or omissions occurring prior to
such amendment or repeal. Maryland law permits the Company to provide
indemnification to an officer to the same extent as a director, although
additional indemnification may be provided if such officer is not also a
director.
The MGCL permits the charter of a Maryland corporation to include a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages, subject to specified
restrictions. The MGCL does not, however, permit the liability of directors and
officers to the corporation or its stockholders to be limited to the extent
that (1) it is proved that the person actually received an improper benefit or
profit in money, property or services (to the extent such benefit or profit was
received) or (2) a judgment or other final adjudication adverse to such person
is entered in a proceeding based on a finding that the person's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. The Company's
Charter contains a provision consistent with the MGCL. No amendment of the
Company's Charter shall limit or eliminate the limitation of liability with
respect to acts or omissions occurring prior to such amendment or repeal.
The Company has entered into indemnification agreements with each of the
Company's directors and officers. The indemnification agreements require, among
other things, that the Company indemnify its directors and officers to the
fullest extent permitted by law, and advance to the directors and officers all
related expenses, subject to reimbursement if it is subsequently determined
that indemnification is not permitted. The Company also must indemnify and
advance all expenses incurred by directors and officers seeking to enforce
their rights under the indemnification agreements, and cover each director and
officer if the Company obtains directors' and officers' liability insurance.
ITEM 16. EXHIBITS.
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION Sequentially
Numbered
PAGE
1.1* Form of Underwriting Agreement
4.1 Form of Indenture
5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
12.1 Calculation of Ratio of Earnings to Fixed Charges
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of Paul, Weiss, Rifkind, Wharton & Garrison
(contained in Exhibit 5.1)
23.4** Consent of Willkie Farr & Gallagher
24.1 Power of Attorney (included in the signature page to
the Registration Statement filed on September 6, 1996)
25.1* Statement of Eligibility of Trustee on Form T-1
99.1 Certain Information with respect to Simon-DeBartolo
Group, L.P.
{___________________}
II-2
*To be filed by amendment or incorporated by reference herein by a Current
Report on Form 8-K.
**Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the Offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
II-3
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(e) The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the Trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-4
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO THE
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF INDIANAPOLIS, STATE OF INDIANA, ON OCTOBER 21,
1996.
SIMON-DeBARTOLO GROUP, L.P.
By: SD PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
David Simon
(Chief Executive Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
NAME TITLE DATE
* Co-Chairman of the Board of Directors October 21, 1996
MELVIN SIMON
* Co-Chairman of the Board of October 21, 1996
HERBERT SIMON Directors
/S/ DAVID SIMON Chief Executive Officer and Director October 21, 1996
DAVID SIMON (Principal Executive
Officer, Financial Officer and
Accounting Officer)
* President, Chief Operating Officer and October 21, 1996
RICHARD S. SOKOLOV Director
* Director October 21, 1996
BIRCH BAYH
* Director October 21, 1996
EDWARD J. DeBARTOLO, JR.
* Director October 21, 1996
WILLIAM T. DILLARD, II
II-5
* Director October 21, 1996
G. WILLIAM MILLER
* Director October 21, 1996
FREDRICK W. PETRI
* Director October 21, 1996
TERRY S. PRINDIVILLE
* Director October 21, 1996
J. ALBERT SMITH, JR.
* Director October 21, 1996
PHILIP J. WARD
* Director October 21, 1996
M. DENISE DeBARTOLO YORK
*by /S/ DAVID SIMON
David Simon
Attorney-in-fact
II-6
Rogers & Wells Draft
September 25, 1996
SIMON-DEBARTOLO GROUP, L.P.
Issuer
TO
[CHEMICAL BANK]
Trustee
Indenture
Dated as of September [ ], 1996
Debt Securities
INDENTURE, dated as of September [ ], 1996, between Simon-DeBartolo
Group, L.P., a Delaware limited partnership (the "Issuer"), having its
principal offices at National City Center, 115 West Washington Street,
Suite 15 East, Indianapolis, Indiana 46204, and [Chemical Bank, a New
York banking corporation, as Trustee hereunder (the "Trustee"), having
its Corporate Trust Office at 450 West 33rd Street, New York, New
York 10001].
RECITALS OF THE ISSUER
The Issuer deems it necessary to issue from time to time for its lawful
purposes debt securities (hereinafter called the "Securities") evidencing
its unsecured and unsubordinated indebtedness, and has duly authorized
the execution and delivery of this Indenture to provide for the issuance
from time to time of the Securities, unlimited as to principal amount, to
bear interest at the rates or formulas, to mature at such times and to
have such other provisions as shall be fixed as hereinafter provided.
This Indenture is subject to the provisions of the Trust Indenture Act
of 1939, as amended, that are deemed to be incorporated into this
Indenture and shall, to the extent applicable, be governed by such
provisions.
All things necessary to make this Indenture a valid agreement of the
Issuer, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders of the Securities,
as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS. For all purposes of this Indenture, except
as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the TIA,
either directly or by reference therein, have the meanings assigned to
them therein, and the terms "cash
1
transaction" and "self-liquidating paper," as used in TIA Section 311,
shall have the meanings assigned to them in the rules of the Commission
adopted under the TIA;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(4) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Act," when used with respect to any Holder, has the meaning specified
in Section 104.
"Additional Amounts" means any additional amounts which are required by
a Security or by or pursuant to a Board Resolution, under circumstances
specified therein, to be paid by the Issuer pursuant to Section 1012 in
respect of certain taxes, duties, assessments or other governmental
charges imposed on certain Holders and which are owing to such Holders.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authenticating Agent" means any authenticating agent appointed by the
Trustee pursuant to Section 611.
"Authorized Newspaper" means a newspaper, printed in the English
language or in an official language of the country of publication,
customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays, and of general circulation in each place
in connection with which the term is used or in the financial community
of each such place. Whenever successive publications are required to be
made in Authorized Newspapers, the successive publications may be made in
the same or in different Authorized Newspapers in the same city meeting
the foregoing requirements and in each case on any Business Day.
"Bankruptcy Law" has the meaning specified in Section 501.
2
"Bearer Security" means any Security established pursuant to
Section 201 which is payable to bearer.
"Board of Directors" means the board of directors of the General
Partner or any committee of that board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the General Partner to have been
duly adopted by the Board of Directors and to be in full force and effect
on the date of such certification, and delivered to the Trustee.
"Business Day," when used with respect to any Place of Payment or any
other particular location referred to in this Indenture or in the
Securities, means, unless otherwise specified with respect to any
Securities pursuant to Section 301, any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking
institutions in that Place of Payment or particular location are
authorized or required by law, regulation or executive order to close.
"CEDEL" means Centrale de Livraison de Valeurs Mobilieres, S.A., or its
successor.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time
after execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body
performing such duties on such date.
"Common Depositary" has the meaning specified in Section 304(b).
"Conversion Event" means the cessation of use of (i) a Foreign Currency
both by the government of the country which issued such currency and for
the settlement of transactions by a central bank or other public
institutions of or within the international banking community, (ii) the
ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities
or (iii) any currency unit (or composite currency) other than the ECU for
the purposes for which it was established.
"Corporate Trust Office" means the office of the Trustee at which, at
any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at [450 West
33rd Street, New York, New York 10001].
3
"corporation" includes corporations, associations, partnerships,
companies and business trusts.
"coupon" means any interest coupon appertaining to a Bearer Security.
"Custodian" has the meaning specified in Section 501.
"Defaulted Interest" has the meaning specified in Section 307.
"Dollar" or "$" means a dollar or other equivalent unit in such coin or
currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts.
"DTC" has the meaning specified in Section 304(b).
"ECU" means the European Currency Unit as defined and revised from time
to time by the Council of the European Communities.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
Office, or its successor as operator of the Euroclear System.
"European Communities" means the European Economic Community, the
European Coal and Steel Community and the European Atomic Energy
Community.
"European Monetary System" means the European Monetary System
established by the Resolution of December 5, 1978 of the Council of the
European Communities.
"Event of Default" has the meaning specified in Article Five.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Date" has the meaning specified in Section 304(b).
"Foreign Currency" means any currency, currency unit or composite
currency, including, without limitation, the ECU, issued by the
government of one or more countries other than the United States of
America or by any recognized confederation or association of such
governments.
"GAAP" means generally accepted accounting principles, as in effect
from time to time, as used in the United States applied on a consistent
basis.
4
"General Partner" means the managing general partner of the Issuer,
which on the date of execution of this Indenture is SD Property
Group, Inc., an Ohio corporation.
"Government Obligations" means securities which are (i) direct
obligations of the United States of America or the government which
issued the Foreign Currency in which the Securities of a particular
series are payable, for the payment of which its full faith and credit is
pledged or (ii) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America or
such government which issued the Foreign Currency in which the Securities
of such series are payable, the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America or such other government, which, in either case, are not callable
or redeemable at the option of the issuer thereof, and shall also include
a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of
interest on or principal of any such Government Obligation held by such
custodian for the account of the holder of a depository receipt, PROVIDED
that (except as required by law) such custodian is not authorized to make
any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the
Government Obligation or the specific payment of interest on or principal
of the Government Obligation evidenced by such depository receipt.
"Holder" means, in the case of a Registered Security, the Person in
whose name a Security is registered in the Security Register and, in the
case of a Bearer Security, the bearer thereof and, when used with respect
to any coupon, shall mean the bearer thereof.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions
hereof, and shall include the terms of particular series of Securities
established as contemplated by Section 301; PROVIDED, HOWEVER, that, if
at any time more than one Person is acting as Trustee under this
instrument, "Indenture" shall mean, with respect to any one or more
series of Securities for which such Person is Trustee, this instrument as
originally executed or as it may from time to time be supplemented or
amended by one or more indentures supplemental hereto entered into
pursuant to the applicable provisions hereof and shall include the terms
of the or those particular series of Securities for which such Person is
Trustee established as contemplated by Section 301, exclusive,
5
however, of any provisions or terms which relate solely to other series of
Securities for which such Person is not Trustee, regardless of when such
terms or provisions were adopted, and exclusive of any provisions or
terms adopted by means of one or more indentures supplemental hereto
executed and delivered after such Person had become such Trustee but to
which such Person, as such Trustee, was not a party.
"Indexed Security" means a Security the terms of which provide that the
principal amount thereof payable at Stated Maturity may be more or less
than the principal face amount thereof at original issuance.
"interest," when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, shall
mean interest payable after Maturity, and, when used with respect to a
Security which provides for the payment of Additional Amounts pursuant to
Section 1012, includes such Additional Amounts.
"Interest Payment Date," when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Issuer" means the Person named as the "Issuer" in the first paragraph
of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Issuer"
shall mean such successor.
"Issuer Request" and "Issuer Order" mean, respectively, a written
request or order signed in the name of the Issuer by the General Partner
by its Chairman of the Board, the President or a Vice President, and by
its Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the General Partner, and delivered to the Trustee.
"Make-Whole Amount" means the amount, if any, in addition to principal,
which is required by a Security, under the terms and conditions specified
therein or as otherwise specified as contemplated by Section 301, to be
paid by the Issuer to the Holder thereof in connection with any optional
redemption and/or accelerated payment of such Security. In any case in
which a Make- Whole Amount is provided for with respect to a Security,
such amount shall be treated as premium for all purposes of this
Indenture.
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the
Stated Maturity or by
6
acceleration, notice of redemption, notice of option to elect repayment
or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board of Directors, the President or a Vice President and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the General Partner, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Issuer or who may be an employee of or other counsel for
the Issuer and who shall be satisfactory to the Trustee.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and
payable upon acceleration of the Maturity thereof pursuant to
Section 502.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption or repayment at the option of the Holder money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Issuer) in trust or set aside and segregated
in trust by the Issuer (if the Issuer shall act as its own Paying Agent)
for the Holders of such Securities and any coupons appertaining thereto,
provided that, if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(iii) Securities, except to the extent provided in
Sections 1402 and 1403, with respect to which the Issuer has effected
defeasance and/or covenant defeasance as provided in Article Fourteen;
and
(iv) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by a
bona fide purchaser in whose hands such Securities are valid obligations
of the Issuer;
7
PROVIDED, HOWEVER, that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder or are present at a meeting of Holders for quorum purposes, and
for the purpose of making the calculations required by TIA Section 313,
(i) the principal amount of an Original Issue Discount Security that may
be counted in making such determination or calculation and that shall be
deemed to be Outstanding for such purpose shall be equal to the amount of
principal thereof that would be (or shall have been declared to be) due
and payable, at the time of such determination, upon acceleration of the
maturity thereof pursuant to Section 502, (ii) the principal amount of
any Security denominated in a Foreign Currency that may be counted in
making such determination or calculation and that shall be deemed
Outstanding for such purpose shall be equal to the Dollar equivalent,
determined pursuant to Section 301 as of the date such Security is
originally issued by the Issuer, of the principal amount (or, in the case
of an Original Issue Discount Security, the Dollar equivalent as of such
date of original issuance of the amount determined as provided in
clause (i) above) of such Security, (iii) the principal amount of any
Indexed Security that may be counted in making such determination or
calculation and that shall be deemed outstanding for such purpose shall
be equal to the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such
Security pursuant to Section 301, and (iv) Securities owned by the Issuer
or any other obligor upon the Securities or any Affiliate of the Issuer
or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be
protected in making such calculation or in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only
Securities which a Responsible Officer of the Trustee knows to be so
owned shall be so disregarded. Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Securities and that the pledgee is not the
Issuer or any other obligor upon the Securities or any Affiliate of the
Issuer or of such other obligor.
"Paying Agent" means any Person authorized by the Issuer to pay the
principal of (and premium, if any) or interest on any Securities or
coupons on behalf of the Issuer.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
8
"Place of Payment," when used with respect to the Securities of or
within any series, means the place or places where the principal of (and
premium, if any) and interest on such Securities are payable as specified
as contemplated by Sections 301 and 1002.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen
Security or a Security to which a mutilated, destroyed, lost or stolen
coupon appertains shall be deemed to evidence the same debt as the
mutilated, destroyed, lost or stolen Security or the Security to which
the mutilated, destroyed, lost or stolen coupon appertains.
"premium," when used with respect to a Security which provides for
the payment of a Make-Whole Amount pursuant to Section 1004, includes
such Make-Whole Amount.
"Redemption Date," when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption
by or pursuant to this Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registered Security" shall mean any Security which is registered in
the Security Register.
"Regular Record Date" for the interest payable on any Interest
Payment Date on the Registered Securities of or within any series means
the date specified for that purpose as contemplated by Section 301,
whether or not a Business Day.
"Repayment Date" means, when used with respect to any Security to be
repaid at the option of the Holder, the date fixed for such repayment by
or pursuant to this Indenture.
"Repayment Price" means, when used with respect to any Security to
be repaid at the option of the Holder, the price at which it is to be
repaid by or pursuant to this Indenture.
"Responsible Officer," when used with respect to the Trustee, means
any officer of the Trustee with direct responsibility for the
administration of this Indenture and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter
is referred because of such officer's knowledge and familiarity with the
particular subject.
9
"Security" has the meaning stated in the first recital of this
Indenture and, more particularly, means any Security or Securities
authenticated and delivered under this Indenture; PROVIDED, HOWEVER,
that, if at any time there is more than one Person acting as Trustee
under this Indenture, "Securities" with respect to the Indenture as to
which such Person is Trustee shall have the meaning stated in the first
recital of this Indenture and shall more particularly mean Securities
authenticated and delivered under this Indenture, exclusive, however, of
Securities of any series as to which such Person is not Trustee.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Significant Subsidiary" means any Subsidiary which is a
"significant subsidiary" (as defined in Article I, Rule 1-02 of
Regulation S-X promulgated under the Securities Act of 1933, as amended)
of the Issuer.
"Special Record Date" shall have the meaning specified in
Section 307.
"Stated Maturity," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date
specified in such Security or a coupon representing such installment of
interest as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" means a corporation, partnership, joint venture,
limited liability company or other entity, a majority of the outstanding
voting stock, partnership interests or membership interests, as the case
may be, of which is owned or controlled, directly or indirectly, by the
Issuer or by one or more other Subsidiaries of the Issuer and, for
purposes of this definition, shall include Simon Property Group, L.P.
For the purposes of this definition, "voting stock" means stock having
voting power for the election of directors, trustees or managers, as the
case may be, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of
1939, as amended and as in force at the date as of which this Indenture
was executed, except as provided in Section 905; PROVIDED; HOWEVER, that,
in the event the TIA is amended after such date, "Trust Indenture Act" or
"TIA" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
10
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean or include each Person who is then a
Trustee hereunder; PROVIDED, HOWEVER, that if at any time there is more
than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean only the Trustee with respect to Securities of that
series.
"United States" means, unless otherwise specified with respect to
any Securities pursuant to Section 301, the United States of America
(including the States thereof and the District of Columbia), its
territories, its possessions and other areas subject to its jurisdiction.
"United States Person" means, unless otherwise specified with
respect to any Securities pursuant to Section 301, an individual who is a
citizen or resident of the United States, a corporation, partnership or
other entity created or organized in or under the laws of the United
States or an estate or trust the income of which is subject to United
States federal income taxation regardless of its source.
"Yield to Maturity," when used with respect to any Security, means
the yield to maturity of such Security, computed at the time of issuance
of such Security (or, if applicable, at the most recent redetermination
of interest on such Security) and as set forth in such Security in
accordance with generally accepted United States bond yield computation
principles.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any
application or request by the Issuer to the Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent,
if any, provided for in this Indenture relating to the proposed action
have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request
as to which the furnishing of such documents is specifically required by
any provision of this Indenture relating to such particular application
or request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (including
certificates delivered pursuant to Section 1011) shall include:
11
(1) a statement that each individual signing such certificate
or opinion has read such condition or covenant and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
such individual has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether
or not such condition or covenant has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case
where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but
one such Person may certify or give an opinion as to some matters and one
or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several
documents.
Any certificate or opinion of an officer of the General Partner may
be based, insofar as it relates to legal matters, upon an Opinion of
Counsel, or a certificate or representations by counsel, unless such
officer knows, or in the exercise of reasonable care should know, that
the opinion, certificate or representations with respect to the matters
upon which his certificate or opinion is based are erroneous. Any such
Opinion of Counsel or certificate or representations may be based,
insofar as it relates to factual matters, upon a certificate or opinion
of, or representations by, an officer or officers of the General Partner
stating that the information as to such factual matters is in the
possession of the Issuer, unless such counsel knows that the certificate
or opinion or representations as to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
12
SECTION 104. ACTS OF HOLDERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Holders of the
Outstanding Securities of all series or one or more series, as the case
may be, may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents
duly appointed in writing. If Securities of a series are issuable as
Bearer Securities in whole or in part, any request, demand,
authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Holders of Securities
of such series may, alternatively, be embodied in and evidenced by the
record of Holders of Securities of such series voting in favor thereof,
either in person or by proxies duly appointed in writing, at any meeting
of Holders of Securities of such series duly called and held in
accordance with the provisions of Article Fifteen, or a combination of
such instruments and any such record. Except as herein otherwise
expressly provided, such action shall become effective when such
instrument or instruments or record or both are delivered to the Trustee
and, where it is hereby expressly required, to the Issuer. Such
instrument or instruments and any such record (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders signing such instrument or instruments or so voting
at any such meeting. Proof of execution of any such instrument or of a
writing appointing any such agent, or of the holding by any Person of a
Security, shall be sufficient for any purpose of this Indenture and
conclusive in favor of the Trustee and the Issuer and any agent of the
Trustee or the Issuer, if made in the manner provided in this Section.
The record of any meeting of Holders of Securities shall be proved in the
manner provided in Section 1506.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of his authority. The
fact and date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any
other reasonable manner which the Trustee deems sufficient.
(c) The ownership, principal amount and serial numbers of
Registered Securities held by any Person, and the date of holding the
same, shall be proved by the Security Register.
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(d) The ownership, principal amount and serial numbers of Bearer
Securities held by any Person, and the date of holding the same, may be
proved by the production of such Bearer Securities or by a certificate
executed, as depositary, by any trust company, bank, banker or other
depositary, wherever situated, if such certificate shall be deemed by the
Trustee to be satisfactory, showing that at the date therein mentioned
such Person had on deposit with such depositary, or exhibited to it, the
Bearer Securities therein described; or such facts may be proved by the
certificate or affidavit of the Person holding such Bearer Securities, if
such certificate or affidavit is deemed by the Trustee to be
satisfactory. The Trustee and the Issuer may assume that such ownership
of any Bearer Security continues until (1) another certificate or
affidavit bearing a later date issued in respect of the same Bearer
Security is produced, or (2) such Bearer Security is produced to the
Trustee by some other Person, or (3) such Bearer Security is surrendered
in exchange for a Registered Security, or (4) such Bearer Security is no
longer Outstanding. The ownership of Bearer Securities may also be
proved in any other manner which the Trustee deems sufficient.
(e) If the Issuer shall solicit from the Holders of Registered
Securities any request, demand, authorization, direction, notice,
consent, waiver or other Act, the Issuer may, at its option, in or
pursuant to a Board Resolution, fix in advance a record date for the
determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the
Issuer shall have no obligation to do so. Notwithstanding TIA
Section 316(c), such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not earlier than
the date 30 days prior to the first solicitation of Holders generally in
connection therewith and not later than the date such solicitation is
completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be
given before or after such record date, but only the Holders of record at
the close of business on such record date shall be deemed to be Holders
for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or
consented to such request, demand, authorization, direction, notice,
consent, waiver or other Act, and for that purpose the Outstanding
Securities shall be computed as of such record date; PROVIDED that no
such authorization, agreement or consent by the Holders on such record
date shall be deemed effective unless it shall become effective pursuant
to the provisions of this Indenture not later than eleven months after
the record date.
(f) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any
14
Security shall bind every future Holder of the same Security and the Holder
of every Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustee, any Security Registrar, any Paying Agent,
any Authenticating Agent or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Security.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND ISSUER. Any request,
demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust
Office, or
(2) the Issuer by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first class postage
prepaid, to the Issuer addressed to it at the address of its
principal office specified in the first paragraph of this Indenture
or at any other address previously furnished in writing to the
Trustee by the Issuer.
SECTION 106. NOTICE TO HOLDERS; WAIVER. Where this Indenture
provides for notice of any event to Holders of Registered Securities by
the Issuer or the Trustee, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each such Holder affected by such event,
at his address as it appears in the Security Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Holders of Registered
Securities is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect
the sufficiency of such notice with respect to other Holders of
Registered Securities or the sufficiency of any notice to Holders of
Bearer Securities given as provided herein. Any notice mailed to a
Holder in the manner herein prescribed shall be conclusively deemed to
have been received by such Holder, whether or not such Holder actually
receives such notice.
If by reason of the suspension of or irregularities in regular mail
service or by reason of any other cause it shall be impracticable to give
such notice by mail, then such notification to Holders of Registered
Securities as shall
15
be made with the approval of the Trustee shall constitute a sufficient
notification to such Holders for every purpose hereunder.
Except as otherwise expressly provided herein or otherwise specified
with respect to any Securities pursuant to Section 301, where this
Indenture provides for notice to Holders of Bearer Securities of any
event, such notice shall be sufficiently given if published in an
Authorized Newspaper in New York City and in such other city or cities as
may be specified in such Securities on a Business Day, such publication
to be not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. Any such notice shall be
deemed to have been given on the date of such publication or, if
published more than once, on the date of the first such publication.
If by reason of the suspension of publication of any Authorized
Newspaper or Authorized Newspapers or by reason of any other cause it
shall be impracticable to publish any notice to Holders of Bearer
Securities as provided above, then such notification to Holders of Bearer
Securities as shall be given with the approval of the Trustee shall
constitute sufficient notice to such Holders for every purpose hereunder.
Neither the failure to give notice by publication to any particular
Holder of Bearer Securities as provided above, nor any defect in any
notice so published, shall affect the sufficiency of such notice with
respect to other Holders of Bearer Securities or the sufficiency of any
notice to Holders of Registered Securities given as provided herein.
Any request, demand, authorization, direction, notice, consent or
waiver required or permitted under this Indenture shall be in the English
language, except that any published notice may be in an official language
of the country of publication.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent
of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article
and Section headings herein and the Table of Contents are for convenience
only and shall not affect the construction hereof.
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SECTION 108. SUCCESSORS AND ASSIGNS. All covenants and agreements
in this Indenture by the Issuer shall bind its successors and assigns,
whether so expressed or not.
SECTION 109. SEPARABILITY CLAUSE. In case any provision in this
Indenture or in any Security or coupon shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 110. BENEFITS OF INDENTURE. Nothing in this Indenture or
in the Securities or coupons, express or implied, shall give to any
Person, other than the parties hereto, any Security Registrar, any Paying
Agent, any Authenticating Agent and their successors hereunder and the
Holders any benefit or any legal or equitable right, remedy or claim
under this Indenture.
SECTION 111. GOVERNING LAW. This Indenture and the Securities and
coupons shall be governed by and construed in accordance with the laws of
the State of New York. This Indenture is subject to the provisions of
the TIA that are required to be part of this Indenture and shall, to the
extent applicable, be governed by such provisions.
SECTION 112. LEGAL HOLIDAYS. In any case where any Interest
Payment Date, Redemption Date, Repayment Date, sinking fund payment date,
Stated Maturity or Maturity of any Security shall not be a Business Day
at any Place of Payment, then (notwithstanding any other provision of
this Indenture or any Security or coupon other than a provision in the
Securities of any series which specifically states that such provision
shall apply in lieu hereof), payment of interest or any Additional
Amounts or principal (and premium, if any) need not be made at such Place
of Payment on such date, but may be made on the next succeeding Business
Day at such Place of Payment with the same force and effect as if made on
the Interest Payment Date, Redemption Date, Repayment Date or sinking
fund payment date, or at the Stated Maturity or Maturity, PROVIDED that
no interest shall accrue on the amount so payable for the period from and
after such Interest Payment Date, Redemption Date, Repayment Date,
sinking fund payment date, Stated Maturity or Maturity, as the case may
be, to such next succeeding Business Day.
ARTICLE TWO
SECURITIES FORMS
SECTION 201. FORMS OF SECURITIES. The Registered Securities, if
any, of each series and the Bearer Securities,
17
if any, of each series and related coupons shall be in substantially the forms
as shall be established in one or more indentures supplemental hereto or
approved from time to time by or pursuant to a Board Resolution in accordance
with Section 301, shall have such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture or any indenture supplemental hereto, and may have such
letters, numbers or other marks of identification or designation and such
legends or endorsements placed thereon as the Issuer may deem appropriate
and as are not inconsistent with the provisions of this Indenture, or as
may be required to comply with any law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any stock
exchange on which the Securities may be listed, or to conform to usage.
Any form of Security approved by or pursuant to a Board Resolution must
be acceptable as to form to the Trustee, such acceptance to be evidenced
by the Trustee's authentication of Securities in that form or a
certificate signed by a Responsible Officer of the Trustee and delivered
to the Issuer.
Unless otherwise specified as contemplated by Section 301, Bearer
Securities shall have interest coupons attached.
The definitive Securities and coupons shall be typewritten, printed,
lithographed or engraved or produced by any combination of these methods
or may be produced in any other manner, all as determined by the officers
executing such Securities or coupons, as evidenced by their execution of
such Securities or coupons.
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
Subject to Section 611, the Trustee's certificate of authentication shall
be in substantially the following form:
This is one of the Securities of the series designated
herein referred to in the within-mentioned Indenture.
[CHEMICAL BANK]
as Trustee
By
Authorized Officer
SECTION 203. SECURITIES ISSUABLE IN GLOBAL FORM. If Securities of
or within a series are issuable in global form, as specified as
contemplated by Section 301, then, notwithstanding clause (9) of
Section 301 and the provisions of Section 302, any such Security shall
represent such of the
18
Outstanding Securities of such series as shall be
specified therein and may provide that it shall represent the aggregate
amount of Outstanding Securities of such series from time to time
endorsed thereon and that the aggregate amount of Outstanding Securities
of such series represented thereby may from time to time be increased or
decreased to reflect exchanges. Any endorsement of a Security in global
form to reflect the amount, or any increase or decrease in the amount, of
Outstanding Securities represented thereby shall be made by the Trustee
in such manner and upon instructions given by such Person or Persons as
shall be specified therein or in the Issuer Order to be delivered to the
Trustee pursuant to Section 303 or 304. Subject to the provisions of
Section 303 and, if applicable, Section 304, the Trustee shall deliver
and redeliver any Security in permanent global form in the manner and
upon instructions given by the Person or Persons specified therein or in
the applicable Issuer Order. If an Issuer Order pursuant to Section 303
or 304 has been, or simultaneously is, delivered, any instructions by the
Issuer with respect to endorsement or delivery or redelivery of a
Security in global form shall be in writing but need not comply with
Section 102 and need not be accompanied by an Opinion of Counsel.
The provisions of the last sentence of Section 303 shall apply to
any Security represented by a Security in global form if such Security
was never issued and sold by the Issuer and the Issuer delivers to the
Trustee the Security in global form together with written instructions
(which need not comply with Section 102 and need not be accompanied by an
Opinion of Counsel) with regard to the reduction in the principal amount
of Securities represented thereby, together with the written statement
contemplated by the last sentence of Section 303.
Notwithstanding the provisions of Section 307, unless otherwise
specified as contemplated by Section 301, payment of principal of and any
premium and interest on any Security in permanent global form shall be
made to the Person or Persons specified therein.
Notwithstanding the provisions of Section 308 and except as provided
in the preceding paragraph, the Issuer, the Trustee and any agent of the
Issuer and the Trustee shall treat as the Holder of such principal amount
of Outstanding Securities represented by a permanent global Security
(i) in the case of a permanent global Security in registered form, the
Holder of such permanent global Security in registered form, or (ii) in
the case of a permanent global Security in bearer form, Euroclear or
CEDEL.
ARTICLE THREE
19
THE SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES. The aggregate
principal amount of Securities which may be authenticated and delivered
under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in one or more Board Resolutions or pursuant to authority
granted by one or more Board Resolutions and, subject to Section 303, set
forth, or determined in the manner provided, in an Officers' Certificate,
or established in one or more indentures supplemental hereto, prior to
the issuance of Securities of any series, any or all of the following, as
applicable, each of which, if so provided, may be determined from time to
time by the Issuer with respect to unissued Securities of the series when
issued from time to time:
(1) the title of the Securities of the series (which shall
distinguish the Securities of such series from all other series of
Securities);
(2) any limit upon the aggregate principal amount of the
Securities of the series that may be authenticated and delivered
under this Indenture (except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or
in lieu of, other Securities of the series pursuant to Section 304,
305, 306, 906, 1107 or 1305);
(3) the percentage of the principal amount at which the
Securities of the series will be issued and, if other than the
principal amount thereof, the portion of the principal amount
thereof payable upon acceleration of maturity thereof;
(4) the date or dates, or the method by which such date or
dates will be determined, on which the principal of the Securities
of the series shall be payable;
(5) the rate or rates at which the Securities of the series
shall bear interest, if any, or the method by which such rate or
rates shall be determined, the date or dates from which such
interest shall accrue or the method by which such date or dates
shall be determined, the Interest Payment Dates on which such
interest will be payable and the Regular Record Date, if any, for
the interest payable on any Registered Security on any Interest
Payment Date, or the method by which such date shall be determined,
and the basis upon which interest shall be calculated if other than
that of a 360-day year of twelve 30-day months;
20
(6) the place or places, if any, other than or in addition to
the Borough of Manhattan, New York City, where the principal of (and
premium, if any), interest, if any, on, and Additional Amounts, if
any, payable in respect of, Securities of the series shall be
payable, any Registered Securities of the series may be surrendered
for registration of transfer, exchange or conversion and notices or
demands to or upon the Issuer in respect of the Securities of the
series and this Indenture may be served;
(7) the period or periods within which, the price or prices at
which, the currency or currencies, currency unit or units or
composite currency or currencies in which, and other terms and
conditions upon which Securities of the series may be redeemed, in
whole or in part, at the option of the Issuer, if the Issuer is to
have the option;
(8) the obligation, if any, of the Issuer to redeem, repay or
purchase Securities of the series pursuant to any sinking fund or
analogous provision or at the option of a Holder thereof, and the
period or periods within which or the date or dates on which, the
price or prices at which, the currency or currencies, currency unit
or units or composite currency or currencies in which, and other
terms and conditions upon which Securities of the series shall be
redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation;
(9) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which any Registered
Securities of the series shall be issuable and, if other than
denominations of $5,000 and any integral multiple thereof, the
denomination or denominations in which any Bearer Securities of the
series shall be issuable;
(10) if other than the Trustee, the identity of each Security
Registrar and/or Paying Agent;
(11) if other than the principal amount thereof, the portion of
the principal amount of Securities of the series that shall be
payable upon acceleration of the Maturity thereof pursuant to
Section 502 or the method by which such portion shall be determined;
(12) if other than Dollars, the Foreign Currency or Currencies
in which payment of the principal of (and premium, if any) or
interest or Additional Amounts, if any, on the Securities of the
series shall be payable or in which the Securities of the series
shall be denominated;
21
(13) whether the amount of payments of principal of (and
premium, if any) or interest, if any, on the Securities of the
series may be determined with reference to an index, formula or
other method (which index, formula or method may be based, without
limitation, on one or more currencies, currency units, composite
currencies, commodities, equity indices or other indices), and the
manner in which such amounts shall be determined;
(14) whether the principal of (and premium, if any) or interest
or Additional Amounts, if any, on the Securities of the series are
to be payable, at the election of the Issuer or a Holder thereof, in
a currency or currencies, currency unit or units or composite
currency or currencies other than that in which such Securities are
denominated or stated to be payable, the period or periods within
which, and the terms and conditions upon which, such election may be
made, and the time and manner of, and identity of the exchange rate
agent with responsibility for, determining the exchange rate between
the currency or currencies, currency unit or units or composite
currency or currencies in which such Securities are denominated or
stated to be payable and the currency or currencies, currency unit
or units or composite currency or currencies in which such
Securities are to be so payable;
(15) provisions, if any, granting special rights to the Holders
of Securities of the series upon the occurrence of such events as
may be specified;
(16) any deletions from, modifications of or additions to the
Events of Default or covenants of the Issuer with respect to
Securities of the series, whether or not such Events of Default or
covenants are consistent with the Events of Default or covenants set
forth herein;
(17) whether Securities of the series are to be issuable as
Registered Securities, Bearer Securities (with or without coupons)
or both, any restrictions applicable to the offer, sale or delivery
of Bearer Securities and the terms upon which Bearer Securities of
the series may be exchanged for Registered Securities of the series
and vice versa (if permitted by applicable laws and regulations),
whether any Securities of the series are to be issuable initially in
temporary global form and whether any Securities of the series are
to be issuable in permanent global form with or without coupons and,
if so, whether beneficial owners of interests in any such permanent
global Security may exchange such interests for Securities of such
series and of like tenor of any authorized form and denomination and
the circumstances
22
under which any such exchanges may occur, if other
than in the manner provided in Section 305, and, if Registered
Securities of the series are to be issuable as a global Security,
the identity of the depositary for such series;
(18) the date as of which any Bearer Securities of the series
and any temporary global Security representing Outstanding
Securities of the series shall be dated if other than the date of
original issuance of the first Security of the series to be issued;
(19) the Person to whom any interest on any Registered Security
of the series shall be payable, if other than the Person in whose
name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for
such interest, the manner in which, or the Person to whom, any
interest on any Bearer Security of the series shall be payable, if
otherwise than upon presentation and surrender of the coupons
appertaining thereto as they severally mature, and the extent to
which, or the manner in which, any interest payable on a temporary
global Security on an Interest Payment Date will be paid if other
than in the manner provided in Section 304;
(20) the applicability, if any, of Sections 1402 and/or 1403 to
the Securities of the series and any provisions in modification of,
in addition to or in lieu of any of the provisions of Article
Fourteen;
(21) if the Securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions,
then the form and/or terms of such certificates, documents or
conditions;
(22) if the Securities of the series are to be issued upon the
exercise of warrants, the time, manner and place for such Securities
to be authenticated and delivered;
(23) whether and under what circumstances the Issuer will pay
Additional Amounts as contemplated by Section 1012 on the Securities
of the series to any Holder who is not a United States Person
(including any modification to the definition of such term) in
respect of any tax, assessment or governmental charge and, if so,
whether the Issuer will have the option to redeem such Securities
rather than pay such Additional Amounts (and the terms of any such
option);
23
(24) whether the Issuer will pay a Make-Whole Amount, in
addition to principal, in connection with any optional redemption
and/or accelerated payment with respect to the Securities of the
series and, if so, the manner of calculation and other terms with
respect to the payment of such Make-Whole Amount;
(25) with respect to any Securities that provide for optional
redemption or prepayment upon the occurrence of certain events (such
as a change of control of the Issuer), (i) the possible effects of
such provisions on the market price of the Issuer's or Simon
DeBartolo Group, Inc.'s securities or in deterring certain mergers,
tender offers or other takeover attempts, and the intention of the
Issuer to comply with the requirements of Rule 14e-1 under the
Exchange Act and any other applicable securities laws in connection
with such provisions; (ii) whether the occurrence of the specified
events may give rise to cross-defaults on other indebtedness such
that payment on such Securities may be effectively subordinated; and
(iii) the existence of any limitation on the Issuer's financial or
legal ability to repurchase such Securities upon the occurrence of
such an event (or, if true, the lack of assurance that such a
repurchase can be effected) and the impact, if any, under the
Indenture of such a failure, including whether and under what
circumstances such a failure may constitute an Event of Default; and
(26) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any one series and the coupons appertaining to any
Bearer Securities of such series shall be substantially identical except,
in the case of Registered Securities, as to denomination and except as
may otherwise be provided in or pursuant to such Board Resolution
(subject to Section 303) and set forth in such Officers' Certificate or
in any such indenture supplemental hereto. All Securities of any one
series need not be issued at the same time and, unless otherwise
provided, a series may be reopened, without the consent of the Holders,
for issuances of additional Securities of such series.
If any of the terms of the Securities of any series are established
by action taken pursuant to one or more Board Resolutions, a copy of an
appropriate record of such action(s) shall be certified by the Secretary
or an Assistant Secretary of the General Partner and delivered to the
Trustee at or prior to the delivery of the Officers' Certificate setting
forth the terms of the Securities of such series.
24
SECTION 302. DENOMINATIONS. The Securities of each series shall be
issuable in such denominations as shall be specified as contemplated by
Section 301. With respect to Securities of any series denominated in
Dollars, in the absence of any such provisions with respect to the
Securities of any series, the Registered Securities of such series, other
than Registered Securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $1,000 and any
integral multiple thereof and the Bearer Securities of such series, other
than Bearer Securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $5,000 and any
integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The
Securities and any coupons appertaining thereto shall be executed on
behalf of the Issuer by the General Partner by its Chairman of the Board,
its President or one of its Vice Presidents, under its corporate seal
reproduced thereon, and attested by the General Partner's Secretary or
one of its Assistant Secretaries. The signature of any of these officers
on the Securities and coupons may be manual or facsimile signatures of
the present or any future such authorized officer and may be imprinted or
otherwise reproduced on the Securities.
Securities or coupons bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the General
Partner shall bind the Issuer, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication
and delivery of such Securities or did not hold such offices at the date
of such Securities or coupons.
At any time and from time to time after the execution and delivery
of this Indenture, the Issuer may deliver to the Trustee for
authentication Securities of any series, together with any coupon
appertaining thereto, executed on behalf of the Issuer as set forth
above, together with an Issuer Order for the authentication and delivery
of such Securities, and the Trustee in accordance with the Issuer Order
shall authenticate and deliver such Securities; PROVIDED, HOWEVER, that,
in connection with its original issuance, no Bearer Security shall be
mailed or otherwise delivered to any location in the United States; and
PROVIDED FURTHER that, unless otherwise specified with respect to any
series of Securities pursuant to Section 301, a Bearer Security may be
delivered in connection with its original issuance only if the Person
entitled to receive such Bearer Security shall have furnished a
certificate to Euroclear or CEDEL, as the case may be, in the form set
forth in Exhibit A-1 to this Indenture or such other certificate as may
be specified with respect to any series of Securities pursuant to
Section 301, dated no earlier than
25
15 days prior to the earlier of the
date on which such Bearer Security is delivered and the date on which any
temporary Security first becomes exchangeable for such Bearer Security in
accordance with the terms of such temporary Security and this Indenture.
If any Security shall be represented by a permanent global Bearer
Security, then, for purposes of this Section and Section 304, the
notation of a beneficial owner's interest therein upon original issuance
of such Security or upon exchange of a portion of a temporary global
Security shall be deemed to be delivery in connection with its original
issuance of such beneficial owner's interest in such permanent global
Security. Except as permitted by Section 306, the Trustee shall not
authenticate and deliver any Bearer Security unless all appurtenant
coupons for interest then matured have been detached and cancelled.
If all the Securities of any series are not to be issued at one time
and if the Board Resolution or supplemental indenture establishing such
series shall so permit, such Issuer Order may set forth procedures
acceptable to the Trustee for the issuance of such Securities and
determining the terms of particular Securities of such series, such as
interest rate or formula, maturity date, date of issuance and date from
which interest shall accrue. In authenticating such Securities, and
accepting the additional responsibilities under this Indenture in
relation to such Securities, the Trustee shall be entitled to receive,
and (subject to TIA Section 315(a) through 315(d)) shall be fully
protected in relying upon, in addition to the documents required by
Section 102,
(a) an Opinion of Counsel stating substantially to the effect
that
(i) the form or forms of such Securities and any coupons have
been established in conformity with the provisions of this
Indenture;
(ii) the terms of such Securities and any coupons, or the
manner of determining such terms, have been established in
conformity with the provisions of this Indenture; and
(iii)such Securities, together with any coupons appertaining
thereto, when completed by appropriate insertions and executed and
delivered by the Issuer to the Trustee for authentication in
accordance with this Indenture, authenticated and delivered by the
Trustee in accordance with this Indenture and issued by the Issuer
in the manner and subject to any conditions specified in such
Opinion of Counsel, will constitute legal, valid and binding
obligations of the Issuer, enforceable in accordance
26
with their terms, subject to applicable bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating
to or affecting the enforcement of creditors' rights generally and to
general equitable principles, and except further as enforcement
thereof may be limited by (1) requirements that a claim (or a
Foreign Currency judgment in respect of such claim) be converted
into Dollars at a rate of exchange prevailing on a date determined
pursuant to applicable law or (2) governmental authority to limit,
delay or prohibit the making of payments in a Foreign Currency or
payments outside the United States (and with such other exceptions
as to enforceability as such counsel shall state are not materially
adverse to the Holders); and
(iv) if the authentication and delivery relates to a new series
of Securities created by an indenture supplemental hereto, all laws
and requirements with respect to the form and execution by the
Issuer of the supplemental indenture with respect to that series of
Securities have been complied with, the Issuer has power to execute
and deliver any such supplemental indenture and has taken all
necessary action for those purposes and any such supplemental
indenture has been executed and delivered and constitutes the legal,
valid and binding obligation of the Issuer, enforceable in
accordance with its terms (subject, as to enforcement of remedies,
to applicable bankruptcy, reorganization, insolvency, moratorium or
other laws and legal principles affecting creditors' rights
generally from time to time in effect and to general equitable
principles, whether applied in an action at law or in equity); and
(b) an Officers' Certificate stating that all conditions
precedent provided for in this Indenture relating to the issuance of the
Securities have been complied with and that, to the best of the knowledge
of the signers of such certificate, no Event of Default with respect to
any of the Securities shall have occurred and be continuing.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties,
obligations or immunities under the Securities and this Indenture or
otherwise in a manner which is not reasonably acceptable to the Trustee.
27
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all the Securities of any series are not to be issued at
one time, it shall not be necessary to deliver an Officers' Certificate
otherwise required pursuant to Section 301 or an Issuer Order, or an
Opinion of Counsel or an Officers' Certificate otherwise required
pursuant to the preceding paragraph or Section 102 at the time of
issuance of each Security of such series, but such order, opinion and
certificates, with appropriate modifications to cover such future
issuances, shall be delivered at or before the time of issuance of the
first Security of such series.
Each Registered Security shall be dated the date of its
authentication and each Bearer Security shall be dated as of the date
specified as contemplated by Section 301.
No Security or coupon shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears
on such Security or Security to which such coupon appertains a
certificate of authentication substantially in the form provided for
herein duly executed by the Trustee by manual signature of an authorized
officer, and such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder and is entitled to the benefits of
this Indenture. Notwithstanding the foregoing, if any Security shall
have been authenticated and delivered hereunder but never issued and sold
by the Issuer, and the Issuer shall deliver such Security to the Trustee
for cancellation as provided in Section 309 together with a written
statement (which need not comply with Section 102 and need not be
accompanied by an Opinion of Counsel) stating that such Security has
never been issued and sold by the Issuer, for all purposes of this
Indenture such Security shall be deemed never to have been authenticated
and delivered hereunder and shall never be entitled to the benefits of
this Indenture.
SECTION 304. TEMPORARY SECURITIES. (a) Pending the preparation of
definitive Securities of any series, the Issuer may execute, and upon
Issuer Order the Trustee shall authenticate and deliver, temporary
Securities which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued, in
registered form, or, if authorized, in bearer form with one or more
coupons or without coupons, and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing
such Securities may determine, as conclusively evidenced by their
execution of such Securities. In the case of Securities of any series,
such temporary Securities may be in global form.
28
Except in the case of temporary Securities in global form (which
shall be exchanged in accordance with Section 304(b) or as otherwise
provided in or pursuant to a Board Resolution), if temporary Securities
of any series are issued, the Issuer will cause definitive Securities of
that series to be prepared without unreasonable delay. After the
preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities
of such series upon surrender of the temporary Securities of such series
at the office or agency of the Issuer in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Securities of any series (accompanied by any
unmatured coupons appertaining thereto), the Issuer shall execute and the
Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of the same series of
authorized denominations; PROVIDED, HOWEVER, that no definitive Bearer
Security shall be delivered in exchange for a temporary Registered
Security; and PROVIDED FURTHER that a definitive Bearer Security shall be
delivered in exchange for a temporary Bearer Security only in compliance
with the conditions set forth in Section 303. Until so exchanged, the
temporary Securities of any series shall in all respects be entitled to
the same benefits under this Indenture as definitive Securities of such
series.
(b) Unless otherwise provided in or pursuant to a Board Resolution,
this Section 304(b) shall govern the exchange of temporary Securities
issued in global form other than through the facilities of The Depository
Trust Company ("DTC"). If any such temporary Security is issued in
global form, then such temporary global Security shall, unless otherwise
provided therein, be delivered to the London office of a depositary or
common depositary (the "Common Depositary"), for the benefit of Euroclear
and CEDEL, for credit to the respective accounts of the beneficial owners
of such Securities (or to such other accounts as they may direct).
Without unnecessary delay, but in any event not later than the date
specified in, or determined pursuant to the terms of, any such temporary
global Security (the "Exchange Date"), the Issuer shall deliver to the
Trustee definitive Securities, in aggregate principal amount equal to the
principal amount of such temporary global Security, executed by the
Issuer. On or after the Exchange Date, such temporary global Security
shall be surrendered by the Common Depositary to the Trustee, as the
Issuer's agent for such purpose, to be exchanged, in whole or from time
to time in part, for definitive Securities without charge, and the
Trustee shall authenticate and deliver, in exchange for each portion of
such temporary global Security, an equal aggregate principal amount of
definitive Securities of the same series of authorized denominations and
of like tenor
29
as the portion of such temporary global Security to be
exchanged. The definitive Securities to be delivered in exchange for any
such temporary global Security shall be in bearer form, registered form,
permanent global bearer form or permanent global registered form, or any
combination thereof, as specified as contemplated by Section 301, and, if
any combination thereof is so specified, as requested by the beneficial
owner thereof; PROVIDED, HOWEVER, that, unless otherwise specified in
such temporary global Security, upon such presentation by the Common
Depositary, such temporary global Security is accompanied by a
certificate dated the Exchange Date or a subsequent date and signed by
Euroclear as to the portion of such temporary global Security held for
its account then to be exchanged and a certificate dated the Exchange
Date or a subsequent date and signed by CEDEL as to the portion of such
temporary global Security held for its account then to be exchanged, each
in the form set forth in Exhibit A-2 to this Indenture or in such other
form as may be established pursuant to Section 301; and PROVIDED FURTHER
that definitive Bearer Securities shall be delivered in exchange for a
portion of a temporary global Security only in compliance with the
requirements of Section 303.
Unless otherwise specified in such temporary global Security, the
interest of a beneficial owner of Securities of a series in a temporary
global Security shall be exchanged for definitive Securities of the same
series and of like tenor following the Exchange Date when the account
holder instructs Euroclear or CEDEL, as the case may be, to request such
exchange on his behalf and delivers to Euroclear or CEDEL, as the case
may be, a certificate in the form set forth in Exhibit A-1 to this
Indenture (or in such other form as may be established pursuant to
Section 301), dated no earlier than 15 days prior to the Exchange Date,
copies of which certificate shall be available from the offices of
Euroclear and CEDEL, the Trustee, any Authenticating Agent appointed for
such series of Securities and each Paying Agent. Unless otherwise
specified in such temporary global Security, any such exchange shall be
made free of charge to the beneficial owners of such temporary global
Security, except that a Person receiving definitive Securities must bear
the cost of insurance, postage, transportation and the like unless such
Person takes delivery of such definitive Securities in person at the
offices of Euroclear or CEDEL. Definitive Securities in bearer form to
be delivered in exchange for any portion of a temporary global Security
shall be delivered only outside the United States.
Until exchanged in full as hereinabove provided, the temporary
Securities of any series shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities of the same series
and of like tenor authenticated and delivered hereunder, except that,
unless
30
otherwise specified as contemplated by Section 301, interest
payable on a temporary global Security on an Interest Payment Date for
Securities of such series occurring prior to the applicable Exchange Date
shall be payable to Euroclear and CEDEL on such Interest Payment Date
upon delivery by Euroclear and CEDEL to the Trustee of a certificate or
certificates in the form set forth in Exhibit A-2 to this Indenture (or
in such other forms as may be established pursuant to Section 301), for
credit without further interest on or after such Interest Payment Date to
the respective accounts of Persons who are the beneficial owners of such
temporary global Security on such Interest Payment Date and who have each
delivered to Euroclear or CEDEL, as the case may be, a certificate dated
no earlier than 15 days prior to the Interest Payment Date occurring
prior to such Exchange Date in the form set forth as Exhibit A-1 to this
Indenture (or in such other forms as may be established pursuant to
Section 301). Notwithstanding anything to the contrary herein contained,
the certifications made pursuant to this paragraph shall satisfy the
certification requirements of the preceding two paragraphs of this
Section 304(b) and of the third paragraph of Section 303 of this
Indenture and the interests of the Persons who are the beneficial owners
of the temporary global Security with respect to which such certification
was made will be exchanged for definitive Securities of the same series
and of like tenor on the Exchange Date or the date of certification if
such date occurs after the Exchange Date, without further act or deed by
such beneficial owners. Except as otherwise provided in this paragraph,
no payments of principal or interest owing with respect to a beneficial
interest in a temporary global Security will be made unless and until
such interest in such temporary global Security shall have been exchanged
for an interest in a definitive Security. Any interest so received by
Euroclear and CEDEL and not paid as herein provided shall be returned to
the Trustee prior to the expiration of two years after such Interest
Payment Date in order to be repaid to the Issuer.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Issuer shall cause to be kept at the Corporate Trust Office of the
Trustee or in any office or agency of the Issuer in a Place of Payment a
register for each series of Securities (the registers maintained in such
office or in any such office or agency of the Issuer in a Place of
Payment being herein sometimes referred to collectively as the "Security
Register") in which, subject to such reasonable regulations as it may
prescribe, the Issuer shall provide for the registration of Registered
Securities and of transfers of Registered Securities. The Security
Register shall be in written form or any other form capable of being
converted into written form within a reasonable time. Unless otherwise
provided with respect to a series of Registered Securities as
contemplated by Section 301, the Trustee is hereby appointed "Security
31
Registrar" for each series of Registered Securities until a successor has
been appointed by a Board Resolution or an instrument executed on behalf
of the General Partner by its Chairman of the Board, President or one of
its Vice Presidents and delivered to the Trustee. In the event that the
Trustee shall cease to be Security Registrar, it shall have the right to
examine the Security Register at all reasonable times.
Subject to the provisions of this Section 305, upon surrender for
registration of transfer of any Registered Security of any series at any
office or agency of the Issuer in a Place of Payment for that series, the
Issuer shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new
Registered Securities of the same series, of any authorized denominations
and of a like aggregate principal amount, bearing a number not
contemporaneously outstanding, and containing identical terms and
provisions.
Subject to the provisions of this Section 305, at the option of the
Holder, Registered Securities of any series may be exchanged for other
Registered Securities of the same series, of any authorized denomination
or denominations and of a like aggregate principal amount, containing
identical terms and provisions, upon surrender of the Registered
Securities to be exchanged at any such office or agency. Whenever any
such Registered Securities are so surrendered for exchange, the Issuer
shall execute, and the Trustee shall authenticate and deliver, the
Registered Securities which the Holder making the exchange is entitled to
receive. Unless otherwise specified with respect to any series of
Securities as contemplated by Section 301, Bearer Securities may not be
issued in exchange for Registered Securities.
If (but only if) permitted by the applicable Board Resolution and
(subject to Section 303) set forth in the applicable Officers'
Certificate, or in any indenture supplemental hereto, delivered as
contemplated by Section 301, at the option of the Holder, Bearer
Securities of any series may be exchanged for Registered Securities of
the same series of any authorized denominations and of a like aggregate
principal amount and tenor, upon surrender of the Bearer Securities to be
exchanged at any such office or agency, with all unmatured coupons and
all matured coupons in default thereto appertaining. If the Holder of a
Bearer Security is unable to produce any such unmatured coupon or coupons
or matured coupon or coupons in default, any such permitted exchange may
be effected if the Bearer Securities are accompanied by payment in funds
acceptable to the Issuer in an amount equal to the face amount of such
missing coupon or coupons, or the surrender of such missing coupon or
coupons may be waived by the Issuer and the Trustee if there is furnished
32
to them such security or indemnity as they may require to save each of
them and any Paying Agent harmless. If thereafter the Holder of such
Security shall surrender to any Paying Agent any such missing coupon in
respect of which such a payment shall have been made, such Holder shall
be entitled to receive the amount of such payment; PROVIDED, HOWEVER,
that, except as otherwise provided in Section 1002, interest represented
by coupons shall be payable only upon presentation and surrender of those
coupons at an office or agency located outside the United States.
Notwithstanding the foregoing, in case a Bearer Security of any series is
surrendered at any such office or agency in a permitted exchange for a
Registered Security of the same series and like tenor after the close of
business at such office or agency on (i) any Regular Record Date and
before the opening of business at such office or agency on the relevant
Interest Payment Date, or (ii) any Special Record Date and before the
opening of business at such office or agency on the related proposed date
for payment of Defaulted Interest, such Bearer Security shall be
surrendered without the coupon relating to such Interest Payment Date or
proposed date for payment, as the case may be, and interest or Defaulted
Interest, as the case may be, will not be payable on such Interest
Payment Date or proposed date for payment, as the case may be, in respect
of the Registered Security issued in exchange for such Bearer Security,
but will be payable only to the Holder of such coupon when due in
accordance with the provisions of this Indenture. Whenever any
Securities are so surrendered for exchange, the Issuer shall execute, and
the Trustee shall authenticate and deliver, the Securities which the
Holder making the exchange is entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 301, any permanent global Security shall be
exchangeable only as provided in this paragraph. If the depositary for
any permanent global Security is DTC, then, unless the terms of such
global Security expressly permit such global Security to be exchanged in
whole or in part for definitive Securities, a global Security may be
transferred, in whole but not in part, only to a nominee of DTC, or by a
nominee of DTC to DTC, or to a successor to DTC for such global Security
selected or approved by the Issuer or to a nominee of such successor to
DTC. If at any time DTC notifies the Issuer that it is unwilling or
unable to continue as depositary for the applicable global Security or
Securities or if at any time DTC ceases to be a clearing agency
registered under the Exchange Act, if so required by applicable law or
regulation, the Issuer shall appoint a successor depositary with respect
to such global Security or Securities. If (x) a successor depositary for
such global Security or Securities is not appointed by the Issuer within
90 days after the Issuer receives such notice or becomes aware of such
unwillingness, inability or ineligibility, (y) an Event of Default has
33
occurred and is continuing and the beneficial owners representing a
majority in principal amount of the applicable series of Securities
represented by such global Security or Securities advise DTC to cease
acting as depositary for such global Security or Securities or (z) the
Issuer, in its sole discretion, determines at any time that all
Outstanding Securities (but not less than all) of any series issued or
issuable in the form of one or more global Securities shall no longer be
represented by such global Security or Securities, then the Issuer shall
execute, and the Trustee shall authenticate and deliver definitive
Securities of like series, rank, tenor and terms in definitive form in an
aggregate principal amount equal to the principal amount of such global
Security or Securities. If any beneficial owner of an interest in a
permanent global Security is otherwise entitled to exchange such interest
for Securities of such series and of like tenor and principal amount of
another authorized form and denomination, as specified as contemplated by
Section 301 and provided that any applicable notice provided in the
permanent global Security shall have been given, then without unnecessary
delay but in any event not later than the earliest date on which such
interest may be so exchanged, the Issuer shall execute, and the Trustee
shall authenticate and deliver definitive Securities in aggregate
principal amount equal to the principal amount of such beneficial owner's
interest in such permanent global Security. On or after the earliest
date on which such interests may be so exchanged, such permanent global
Security shall be surrendered for exchange by DTC or such other
depositary as shall be specified in the Issuer Order with respect thereto
to the Trustee, as the Issuer's agent for such purpose; PROVIDED,
HOWEVER, that no such exchanges may occur during a period beginning at
the opening of business 15 days before any selection of Securities to be
redeemed and ending on the relevant Redemption Date if the Security for
which exchange is requested may be among those selected for redemption;
and PROVIDED FURTHER that no Bearer Security delivered in exchange for a
portion of a permanent global Security shall be mailed or otherwise
delivered to any location in the United States. If a Registered Security
is issued in exchange for any portion of a permanent global Security
after the close of business at the office or agency where such exchange
occurs on (i) any Regular Record Date and before the opening of business
at such office or agency on the relevant Interest Payment Date, or
(ii) any Special Record Date and the opening of business at such office
or agency on the related proposed date for payment of Defaulted Interest,
interest or Defaulted Interest, as the case may be, will not be payable
on such Interest Payment Date or proposed date for payment, as the case
may be, in respect of such Registered Security, but will be payable on
such Interest Payment Date or proposed date for payment, as the case may
be, only to the Person to whom interest in respect of such portion of
such permanent global
34
Security is payable in accordance with the provisions of this Indenture.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Issuer, evidencing
the same debt, and entitled to the same benefits under this Indenture, as
the Securities surrendered upon such registration of transfer or
exchange.
Every Registered Security presented or surrendered for registration
of transfer or for exchange or redemption shall (if so required by the
Issuer or the Security Registrar) be duly endorsed, or be accompanied by
a written instrument of transfer in form satisfactory to the Issuer and
the Security Registrar duly executed, by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 304, 906, 1107
or 1305 not involving any transfer.
The Issuer or the Trustee, as applicable, shall not be required
(i) to issue, register the transfer of or exchange any Security if such
Security may be among those selected for redemption during a period
beginning at the opening of business 15 days before selection of the
Securities to be redeemed under Section 1103 and ending at the close of
business on (A) if such Securities are issuable only as Registered
Securities, the day of the mailing of the relevant notice of redemption
and (B) if such Securities are issuable as Bearer Securities, the day of
the first publication of the relevant notice of redemption or, if such
Securities are also issuable as Registered Securities and there is no
publication, the mailing of the relevant notice of redemption, or (ii) to
register the transfer of or exchange any Registered Security so selected
for redemption in whole or in part, except, in the case of any Registered
Security to be redeemed in part, the portion thereof not to be redeemed,
or (iii) to exchange any Bearer Security so selected for redemption
except that, to the extent provided with respect to such Bearer Security,
such Bearer Security may be exchanged for a Registered Security of that
series and of like tenor, PROVIDED that such Registered Security shall be
simultaneously surrendered for redemption, or (iv) to issue, register the
transfer of or exchange any Security which has been surrendered for
repayment at the option of the Holder, except the portion, if any, of
such Security not to be so repaid.
35
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES. If
any mutilated Security or a Security with a mutilated coupon appertaining
to it is surrendered to the Trustee or the Issuer, together with, in
proper cases, such security or indemnity as may be required by the Issuer
or the Trustee to save each of them or any agent of either of them
harmless, the Issuer shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security of the same series and
principal amount, containing identical terms and provisions and bearing a
number not contemporaneously outstanding, with coupons corresponding to
the coupons, if any, appertaining to the surrendered Security.
If there shall be delivered to the Issuer and to the Trustee
(i) evidence to their satisfaction of the destruction, loss or theft of
any Security or coupon, and (ii) such security or indemnity as may be
required by them to save each of them and any agent of either of them
harmless, then, in the absence of notice to the Issuer or the Trustee
that such Security or coupon has been acquired by a bona fide purchaser,
the Issuer shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security or in exchange for the Security to which a destroyed, lost or
stolen coupon appertains (with all appurtenant coupons not destroyed,
lost or stolen), a new Security of the same series and principal amount,
containing identical terms and provisions and bearing a number not
contemporaneously outstanding, with coupons corresponding to the coupons,
if any, appertaining to such destroyed, lost or stolen Security or to the
Security to which such destroyed, lost or stolen coupon appertains.
Notwithstanding the provisions of the previous two paragraphs, in
case any such mutilated, destroyed, lost or stolen Security or coupon has
become or is about to become due and payable, the Issuer in its
discretion may, instead of issuing a new Security, with coupons
corresponding to the coupons, if any, appertaining to such destroyed,
lost or stolen Security or to the Security to which such destroyed, lost
or stolen coupon appertains, pay such Security or coupon; PROVIDED,
HOWEVER, that payment of principal of (and premium, if any), any interest
on and any Additional Amounts with respect to, Bearer Securities shall,
except as otherwise provided in Section 1002, be payable only at an
office or agency located outside the United States and, unless otherwise
specified as contemplated by Section 301, any interest on Bearer
Securities shall be payable only upon presentation and surrender of the
coupons appertaining thereto.
Upon the issuance of any new Security under this Section, the Issuer
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in
36
relation thereto and any other expenses (including the fees and expenses
of the Trustee) connected therewith.
Every new Security of any series with its coupons, if any, issued
pursuant to this Section in lieu of any destroyed, lost or stolen
Security, or in exchange for a Security to which a destroyed, lost or
stolen coupon appertains, shall constitute an original additional
contractual obligation of the Issuer, whether or not the destroyed, lost
or stolen Security and its coupons, if any, or the destroyed, lost or
stolen coupon shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of that series and
their coupons, if any, duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities
or coupons.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Except
as otherwise specified with respect to a series of Securities in
accordance with the provisions of Section 301, interest on any Registered
Security that is payable, and is punctually paid or duly provided for, on
any Interest Payment Date shall be paid to the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest at the
office or agency of the Issuer maintained for such purpose pursuant to
Section 1002; PROVIDED, HOWEVER, that each installment of interest on any
Registered Security may at the Issuer's option be paid by (i) mailing a
check for such interest, payable to or upon the written order of the
Person entitled thereto pursuant to Section 308, to the address of such
Person as it appears on the Security Register or (ii) wire transfer to an
account maintained by the payee located inside the United States.
Unless otherwise provided as contemplated by Section 301 with
respect to the Securities of any series, payment of interest may be made,
in the case of a Bearer Security, by wire transfer to an account
maintained by the payee with a bank located outside the United States.
Unless otherwise provided as contemplated by Section 301, every
permanent global Security will provide that interest, if any, payable on
any Interest Payment Date will be paid to DTC, Euroclear and/or CEDEL, as
the case may be, with respect to that portion of such permanent global
Security held for its account by Cede & Co. or the Common Depositary, as
the case may be, for the purpose of permitting such party to credit the
37
interest received by it in respect of such permanent global Security to
the accounts of the beneficial owners thereof.
In case a Bearer Security of any series is surrendered in exchange
for a Registered Security of such series after the close of business (at
an office or agency in a Place of Payment for such series) on any Regular
Record Date and before the opening of business (at such office or agency)
on the next succeeding Interest Payment Date, such Bearer Security shall
be surrendered without the coupon relating to such Interest Payment Date
and interest will not be payable on such Interest Payment Date in respect
of the Registered Security issued in exchange for such Bearer Security,
but will be payable only to the Holder of such coupon when due in
accordance with the provisions of this Indenture.
Except as otherwise specified with respect to a series of Securities
in accordance with the provisions of Section 301, any interest on any
Registered Security of any series that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the
registered Holder thereof on the relevant Regular Record Date by virtue
of having been such Holder, and such Defaulted Interest may be paid by
the Issuer, at its election in each case, as provided in clause (1)
or (2) below:
(1) The Issuer may elect to make payment of any Defaulted
Interest to the Persons in whose names the Registered Securities of
such series (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest, which shall be fixed in the
following manner. The Issuer shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each
Registered Security of such series and the date of the proposed
payment (which shall not be less than 20 days after such notice is
received by the Trustee), and at the same time the Issuer shall
deposit with the Trustee an amount of money in the currency or
currencies, currency unit or units or composite currency or
currencies in which the Securities of such series are payable
(except as otherwise specified pursuant to Section 301 for the
Securities of such series) equal to the aggregate amount proposed to
be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit on or
prior to the date of the proposed payment, such money when deposited
to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as provided in this clause. Thereupon the
Trustee shall fix a record date (a "Special Record Date") for the
payment of such Defaulted Interest which shall be
38
not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly
notify the Issuer of such Special Record Date and, in the name and
at the expense of the Issuer, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder
of Registered Securities of such series at his address as it appears
in the Security Register not less than 10 days prior to such Special
Record Date. The Trustee may, in its discretion, in the name and at
the expense of the Issuer, cause a similar notice to be published at
least once in an Authorized Newspaper in each place of payment, but
such publications shall not be a condition precedent to the
establishment of such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest
shall be paid to the Persons in whose names the Registered
Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following
clause (2). In case a Bearer Security of any series is surrendered
at the office or agency in a Place of Payment for such series in
exchange for a Registered Security of such series after the close of
business at such office or agency on any Special Record Date and
before the opening of business at such office or agency on the
related proposed date for payment of Defaulted Interest, such Bearer
Security shall be surrendered without the coupon relating to such
proposed date of payment and Defaulted Interest will not be payable
on such proposed date of payment in respect of the Registered
Security issued in exchange for such Bearer Security, but will be
payable only to the Holder of such coupon when due in accordance
with the provisions of this Indenture.
(2) The Issuer may make payment of any Defaulted Interest on
the Registered Securities of any series in any other lawful manner
not inconsistent with the requirements of any securities exchange on
which such Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Issuer to
the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 305,
each Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of
39
any other Security shall carry the rights to interest accrued and unpaid, and
to accrue, which were carried by such other Security.
SECTION 308. PERSONS DEEMED OWNERS. Prior to due presentment of a
Registered Security for registration of transfer, the Issuer, the Trustee
and any agent of the Issuer or the Trustee may treat the Person in whose
name such Registered Security is registered as the owner of such Security
for the purpose of receiving payment of principal of (and premium, if
any), and (subject to Sections 305 and 307) interest on, such Registered
Security and for all other purposes whatsoever, whether or not such
Registered Security be overdue, and neither the Issuer, the Trustee nor
any agent of the Issuer or the Trustee shall be affected by notice to the
contrary.
Title to any Bearer Security and any coupons appertaining thereto
shall pass by delivery. The Issuer, the Trustee and any agent of the
Issuer or the Trustee may treat the Holder of any Bearer Security and the
Holder of any coupon as the absolute owner of such Security or coupon for
the purpose of receiving payment thereof or on account thereof and for
all other purposes whatsoever, whether or not such Security or coupon be
overdue, and neither the Issuer, the Trustee nor any agent of the Issuer
or the Trustee shall be affected by notice to the contrary.
No owner of any beneficial interest in any global Security held on
its behalf by a depositary shall have any rights under this Indenture
with respect to such global Security, and such depositary may be treated
by the Issuer, the Trustee, and any agent of the Issuer or the Trustee as
the owner and Holder of such global Security for all purposes whatsoever.
None of the Issuer, the Trustee, any Paying Agent or the Security
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Security in global form or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Notwithstanding the foregoing, with respect to any global Security,
nothing herein shall prevent the Issuer, the Trustee, or any agent of the
Issuer or the Trustee, from giving effect to any written certification,
proxy or other authorization furnished by any depositary, as a Holder,
with respect to such global Security or impair, as between such
depositary and owners of beneficial interests in such global Security,
the operation of customary practices governing the exercise of the rights
of such depositary (or its nominee) as Holder of such global Security.
40
SECTION 309. CANCELLATION. All Securities and coupons surrendered
for payment, redemption, repayment at the option of the Holder,
registration of transfer or exchange or for credit against any sinking
fund payment shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee, and any such Securities and coupons and
Securities and coupons surrendered directly to the Trustee for any such
purpose shall be promptly cancelled by it; provided, however, where the
Place of Payment is located outside of the United States, the Paying
Agent at such Place of Payment may cancel the Securities surrendered to
it for such purposes prior to delivering the Securities to the Trustee.
The Issuer may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the
Issuer may have acquired in any manner whatsoever, and may deliver to the
Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the
Issuer has not issued and sold, and all Securities so delivered shall be
promptly cancelled by the Trustee. If the Issuer shall so acquire any of
the Securities, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such
Securities unless and until the same are surrendered to the Trustee for
cancellation. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section, except
as expressly permitted by this Indenture. Cancelled Securities and
coupons held by the Trustee shall be destroyed by the Trustee and the
Trustee shall deliver a certificate of such destruction to the Issuer,
unless by an Issuer Order the Issuer directs their return to it.
SECTION 310. COMPUTATION OF INTEREST. Except as otherwise
specified as contemplated by Section 301 with respect to Securities of
any series, interest on the Securities of each series shall be computed
on the basis of a 360-day year consisting of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE. This
Indenture shall upon Issuer Request cease to be of further effect with
respect to any series of Securities specified in such Issuer Request
(except as to any surviving rights of registration of transfer or
exchange of Securities of such series herein expressly provided for and
any right to receive Additional Amounts, as provided in Section 1012),
and the Trustee, upon receipt of an Issuer Order, and at the expense of
the Issuer, shall execute proper instruments acknowledging
41
satisfaction and discharge of this Indenture as to such series when
2. either
(1) all Securities of such series theretofore
authenticated and delivered and all coupons, if any,
appertaining thereto (other than (i) coupons appertaining to
Bearer Securities surrendered for exchange for Registered
Securities and maturing after such exchange, whose surrender is
not required or has been waived as provided in Section 305,
(ii) Securities and coupons of such series which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 306, (iii) coupons appertaining to
Securities called for redemption and maturing after the
relevant Redemption Date, whose surrender has been waived as
provided in Section 1106, and (iv) Securities and coupons of
such series for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from
such trust, as provided in Section 1003) have been delivered to
the Trustee for cancellation; or
(2) all Securities of such series and, in the case of (i)
or (ii) below, any coupons appertaining thereto not theretofore
delivered to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) if redeemable at the option of the Issuer, are to be
called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption by the Trustee in the
name, and at the expense, of the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has irrevocably
(except as provided in the second proviso to Section 403) deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount in the currency or currencies, currency unit or units
or composite currency or currencies in which the Securities of such
series are payable, sufficient to pay and
42
discharge the entire
indebtedness on such Securities and such coupons not theretofore
delivered to the Trustee for cancellation, for principal (and premium, if
any) and interest, and any Additional Amounts with respect thereto, to
the date of such deposit (in the case of Securities which have become due
and payable) or to the Stated Maturity or Redemption Date, as the case
may be;
3. the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer; and
4. the Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture as to such series have
been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Issuer to the Trustee and any predecessor Trustee
under Section 606, the obligations of the Issuer to any Authenticating
Agent under Section 611 and, if money shall have been deposited with and
held by the Trustee pursuant to subclause (B) of clause (1) of this
Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
Notwithstanding the reference to premium under subclause (B) of
clause (1) of this Section, the Issuer shall not be required to deposit
pursuant thereto any premium that would be payable on the Securities of
such series only upon acceleration of the Maturity thereof pursuant to
Section 502.
SECTION 402. APPLICATION OF TRUST FUNDS. Subject to the
provisions of the last paragraph of Section 1003, all money deposited
with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities, the
coupons and this Indenture, to the payment, either directly or through
any Paying Agent (including the Issuer acting as its own Paying Agent) as
the Trustee may determine, to the Persons entitled thereto, of the
principal (and premium, if any), and any interest and Additional Amounts
for whose payment such money has been deposited with or received by the
Trustee, but such money need not be segregated from other funds except to
the extent required by law.
SECTION 403. REINSTATEMENT. If the Trustee or Paying Agent is
unable to apply any money in accordance with Section 402 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting
such
43
application, the Issuer's obligations under this Indenture and the
Securities of such series shall be revived and reinstated as though no
deposit had occurred pursuant to Section 401 until such time as the
Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 402; PROVIDED that, if the Issuer has made any
payment of principal of or interest on any Securities because of the
reinstatement of its obligations, the Issuer shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the
money held by the Trustee or Paying Agent; provided further that, if the
Issuer's obligations are revived and reinstated as herein provided, the
Trustee or Paying Agent shall, upon Issuer Request, discharge from trust
and pay to the Issuer all funds (together with the earnings thereon, if
any) previously deposited therewith pursuant to Section 402 and thereupon
the Issuer, the Trustee, any Paying Agent and the Holders of the
Securities of such series shall be restored severally and respectively to
their former positions hereunder as if no satisfaction and discharge had
been effected.
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT. "Event of Default," wherever used
herein with respect to any particular series of Securities, means any one
of the following events (whatever the reason for such Event of Default
and whether or not it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or
governmental body):
(1) default in the payment of any interest upon or any
Additional Amounts payable in respect of any Security of that series
or of any coupon appertaining thereto, when such interest,
Additional Amounts or coupon becomes due and payable, and
continuance of such default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if
any, on) any Security of that series when it becomes due and payable
at its Maturity; or
(3) default in the deposit of any sinking fund payment, when
and as due by the terms of any Security of that series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Issuer in this Indenture with respect to any
Security of that series (other than a
44
covenant or warranty a default
in whose performance or whose breach is elsewhere in this
Section specifically dealt with), and continuance of such default or
breach for a period of 60 days after there has been given, by
registered or certified mail, to the Issuer by the Trustee or to the
Issuer and the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Securities of that series a written notice
specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder; or
(5) a default under any evidence of recourse indebtedness of
the Issuer, or under any mortgage, indenture or other instrument of
the Issuer (including a default with respect to Securities of any
series other than that series) under which there may be issued or by
which there may be secured any recourse indebtedness of the Issuer
(or of any Subsidiary, the repayment of which the Issuer has
guaranteed or for which the Issuer is directly responsible or liable
as obligor or guarantor), whether such indebtedness now exists or
shall hereafter be created, which default shall constitute a failure
to pay an aggregate principal amount exceeding $30,000,000 of such
indebtedness when due and payable after the expiration of any
applicable grace period with respect thereto and shall have resulted
in such indebtedness in an aggregate principal amount exceeding
$30,000,000 becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable,
without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled, within a period of
10 days after there shall have been given, by registered or
certified mail, to the Issuer by the Trustee or to the Issuer and
the Trustee by the Holders of at least 10% in principal amount of
the Outstanding Securities of that series a written notice
specifying such default and requiring the Issuer to cause such
indebtedness to be discharged or cause such acceleration to be
rescinded or annulled and stating that such notice is a "Notice of
Default" hereunder; or
(6) the Issuer or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against
it in an involuntary case,
45
(C) consents to the appointment of a Custodian of it or
for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors; or
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Issuer or any Significant
Subsidiary in an involuntary case,
(B) appoints a Custodian of the Issuer or any Significant
Subsidiary or for all or substantially all of the property of
the Issuer or any Significant Subsidiary, or
(C) orders the liquidation of the Issuer or any
Significant Subsidiary,
and the order or decree remains unstayed and in effect for 90 days;
or
(8) any other Event of Default provided with respect to
Securities of that series.
As used in this Section 501, the term "Bankruptcy Law" means title 11,
U.S. Code or any similar Federal or State law for the relief of debtors
and the term "Custodian" means any receiver, trustee, assignee,
liquidator or other similar official under any Bankruptcy Law.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default with respect to Securities of any series at the
time Outstanding occurs and is continuing (other than an Event of Default
specified in Section 501(6) or (7)), then, and in every such case, the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the principal amount
(or, if any Securities of that series are Original Issue Discount
Securities or Indexed Securities, such portion of the principal amount as
may be specified in the terms thereof) of, and the Make-Whole Amount, if
any, on, all of the Securities of that series to be due and payable
immediately, by a notice in writing to the Issuer (and to the Trustee if
given by the Holders), and upon any such declaration such principal or
specified portion thereof and Make-Whole Amount, if any, shall become
immediately due and payable. If an Event of Default specified in Section
501(6) or (7) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then, and in every such case, the
principal amount (or, if any
46
Securities of that series are Original
Discount Securities or Indexed Securities, such portion of the principal
amount as may be specified in the terms thereof) of, and the Make-Whole
Amount, if any, on, all of the Securities of that series shall become and
be immediately due and payable without any declaration or other action on
the part of the Trustee or any Holder.
At any time after such acceleration with respect to Securities of
any series has occurred and before a judgment or decree for payment of
the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Issuer
and the Trustee, may rescind and annul such acceleration and its
consequences if:
(1) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay in the currency or currency unit or composite
currency in which the Securities of such series are payable (except
as otherwise specified pursuant to Section 301 for the Securities of
such series):
(A) all overdue installments of interest on and any
Additional Amounts payable in respect of all Outstanding
Securities of that series and any related coupons,
(B) the principal of (and premium, if any, on) any
Outstanding Securities of that series which have become due
otherwise than by such acceleration, together with interest
thereon at the rate or rates borne by or provided for in such
Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue installments of interest and any
Additional Amounts at the rate or rates borne by or provided
for in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any
amounts due the Trustee and any predecessor Trustee under
Section 606; and
(2) all Events of Default with respect to Securities of that
series, other than the nonpayment of the principal of, and the Make-
Whole Amount, if any, on, Securities of that series which have
become due solely by reason of such
47
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE. The Issuer covenants that if:
(1) default is made in the payment of any installment of
interest or Additional Amounts, if any, on any Security of any
series and any related coupon when such interest or Additional
Amount becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security of any series at its Maturity,
then the Issuer will, upon demand of the Trustee, pay to the Trustee, for
the benefit of the Holders of such Securities of such series and coupons,
the whole amount then due and payable on such Securities and coupons for
principal (and premium, if any) and interest and Additional Amounts, with
interest upon any overdue principal (and premium, if any) and, to the
extent that payment of such interest shall be legally enforceable, upon
any overdue installments of interest or Additional Amounts, if any, at
the rate or rates borne by or provided for in such Securities, and, in
addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel and all other amounts due the Trustee and any predecessor Trustee
under Section 606.
If the Issuer fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, and may prosecute such proceeding to judgment or final decree,
and may enforce the same against the Issuer or any other obligor upon
such Securities of such series and collect the moneys adjudged or decreed
to be payable in the manner provided by law out of the property of the
Issuer or any other obligor upon such Securities of such series, wherever
situated.
If an Event of Default with respect to Securities of any series
occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of
Securities of such series and any related coupons by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect
and enforce any
48
such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Issuer or any other obligor upon the
Securities or the property of the Issuer or of such other obligor or
their creditors, the Trustee (irrespective of whether the principal of
the Securities of any series shall then be due and payable as therein
expressed or by acceleration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Issuer for the payment of
overdue principal, premium, if any, or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount, or such
lesser amount as may be provided for in the Securities of such
series, of principal (and premium, if any) and interest and
Additional Amounts, if any, owing and unpaid in respect of the
Securities and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel
and all other amounts due the Trustee and any predecessor Trustee
under Section 606) and of the Holders allowed in such judicial
proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the
same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator
(or other similar official) in any such judicial proceeding is hereby
authorized by each Holder of Securities of such series and coupons to
make such payments to the Trustee, and in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee and any predecessor
Trustee, their agents and counsel, and any other amounts due the Trustee
or any predecessor Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a
Security or coupon any plan of reorganization, arrangement, adjustment or
composition
49
affecting the Securities or coupons or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the
claim of any Holder of a Security or coupon in any such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES OR COUPONS. All rights of action and claims under this
Indenture or any of the Securities or coupons may be prosecuted and
enforced by the Trustee without the possession of any of the Securities
or coupons or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its
own name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel and any other amounts due the Trustee and any predecessor Trustee
under Section 606, be for the ratable benefit of the Holders of the
Securities and coupons in respect of which such judgment has been
recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED. Any money collected
by the Trustee pursuant to this Article shall be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal (or premium, if any)
or interest and any Additional Amounts, upon presentation of the
Securities or coupons, or both, as the case may be, and the notation
thereon of the payment if only partially paid and upon surrender thereof
if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 606;
SECOND: To the payment of the amounts then due and unpaid upon
the Securities and coupons for principal (and premium, if any) and
interest and any Additional Amounts payable, in respect of which or
for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the
aggregate amounts due and payable on such Securities and coupons for
principal (and premium, if any), interest and Additional Amounts,
respectively; and
THIRD: To the payment of the remainder, if any, to the Issuer.
SECTION 507. LIMITATION ON SUITS. Subject to Section 508, no
Holder of any Security of any series or any related coupon shall have any
right to institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for
any other remedy hereunder, unless:
50
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the
Securities of that series;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
indemnity reasonably satisfactory to the Trustee against the costs,
expenses and liabilities to be incurred in compliance with such
request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders
of a majority in principal amount of the Outstanding Securities of
that series;
it being understood and intended that no one or more of such Holders
shall have any right in any manner whatever by virtue of, or by availing
of, any provision of this Indenture to affect, disturb or prejudice the
rights of any other Holders of Securities of such series, or to obtain or
to seek to obtain priority or preference over any other of such Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all such Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM, IF ANY, INTEREST AND ADDITIONAL AMOUNTS. Notwithstanding any
other provision in this Indenture, the Holder of any Security or coupon
shall have the right which is absolute and unconditional to receive
payment of the principal of (and premium, if any) and (subject to
Sections 305 and 307) interest on, and any Additional Amounts in respect
of, such Security or payment of such coupon on the respective due dates
expressed in such Security or coupon (or, in the case of redemption, on
the Redemption Date) and to institute suit for the enforcement of any
such payment, and such rights shall not be impaired without the consent
of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or
any Holder of a Security or coupon has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has
been discontinued or abandoned for any reason, or has been determined
adversely to
51
the Trustee or to such Holder, then and in every such case,
the Issuer, the Trustee and the Holders of Securities and coupons shall,
subject to any determination in such proceeding, be restored severally
and respectively to their former positions hereunder and thereafter all
rights and remedies of the Trustee and the Holders shall continue as
though no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities or coupons in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders of Securities or coupons is intended to be
exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of any right
or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER. No delay or omission of
the Trustee or of any Holder of any Security or coupon to exercise any
right or remedy accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by
law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders
of Securities or coupons, as the case may be.
SECTION 512. CONTROL BY HOLDERS OF SECURITIES. The Holders of not
less than a majority in principal amount of the Outstanding Securities of
any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to
the Securities of such series, PROVIDED that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve
it in personal liability or be unduly prejudicial to the Holders of
Securities not joining therein.
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SECTION 513. WAIVER OF PAST DEFAULTS. The Holders of not less than
a majority in principal amount of the Outstanding Securities of any
series may on behalf of the Holders of all the Securities of such series
and any related coupons waive any past default hereunder with respect to
such series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on or Additional Amounts payable in respect of any Security
of such series or any related coupons, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of
the Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon.
SECTION 514. WAIVER OF USURY, STAY OR EXTENSION LAWS. The Issuer
covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Issuer (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay
or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no
such law had been enacted.
SECTION 515. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Security by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in
any suit for the enforcement of any right or remedy under this Indenture,
or in any suit against the Trustee for any action taken or omitted by it
as Trustee, the filing by any party litigant in such suit of any
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section shall not apply to any suit instituted by
the Issuer or the Trustee, to any suit instituted by any Holder or group
of Holders holding in the aggregate more
53
than 10% in principal amount of
the Outstanding Securities of any series, or to any suit instituted by
any Holder for the enforcement of the payment of the principal of (or
premium, if any) or interest on any Security on or after the respective
Stated Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
ARTICLE SIX
THE TRUSTEE
SECTION 601. NOTICE OF DEFAULTS. Within 90 days after the
occurrence of any default hereunder with respect to the Securities of any
series, the Trustee shall transmit in the manner and to the extent
provided in TIA Section 313(c), notice of such default hereunder known to
the Trustee, unless such default shall have been cured or waived;
PROVIDED, HOWEVER, that, except in the case of a default in the payment
of the principal of (or premium, if any) or interest on or any Additional
Amounts with respect to any Security of such series, or in the payment of
any sinking fund installment with respect to the Securities of such
series, the Trustee shall be protected in withholding such notice if and
so long as a trust committee of Responsible Officers of the Trustee in
good faith determine that the withholding of such notice is in the
interests of the Holders of the Securities and coupons of such series;
and PROVIDED FURTHER that in the case of any default or breach of the
character specified in Section 501(4) with respect to the Securities and
coupons of such series, no such notice to Holders shall be given until at
least 60 days after the occurrence thereof. For the purpose of this
Section, the term "default" means any event which is, or after notice or
lapse of time or both would become, an Event of Default with respect to
the Securities of such series.
SECTION 602. CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions
of TIA Section 315(a) through 315(d):
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, coupon or other paper or document
believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(2) any request or direction of the Issuer mentioned herein
shall be sufficiently evidenced by an Issuer Request or Issuer Order
(other than delivery of any Security, together with any coupons
appertaining thereto, to the Trustee for authentication and delivery
pursuant to
54
Section 303 which shall be sufficiently evidenced as
provided therein) and any resolution of the Board of Directors may
be sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate;
(4) the Trustee may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders of Securities of any
series or any related coupons pursuant to this Indenture, unless
such Holders shall have offered to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the costs, expenses
and liabilities which might be incurred by it in compliance with
such request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, coupon or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Issuer, personally or by agent or
attorney following reasonable notice to the Issuer;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and reasonably believed by
it to be authorized or within the
55
discretion or rights or powers conferred upon it by this Indenture;
and
(9) the Trustee shall not be charged with knowledge of any
default (as defined in Section 601) or Event of Default with respect
to the Securities of any series for which it is acting as Trustee
unless either (a) a Responsible Officer shall have actual knowledge
of such default or Event of Default or (b) written notice of such
default or Event of Default shall have been given to the Trustee by
the Company or any other obligor on such Securities or by any Holder
of such Securities.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if
it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
Except during the continuance of an Event of Default, the Trustee
undertakes to perform only such duties as are specifically set forth in
this Indenture, and no implied covenants or obligations shall be read
into this Indenture against the Trustee.
SECTION 603. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES. The recitals contained herein and in the Securities, except
the Trustee's certificate of authentication, and in any coupons shall be
taken as the statements of the Issuer, and neither the Trustee nor any
Authenticating Agent assumes any responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of
this Indenture or of the Securities or coupons, except that the Trustee
represents that it is duly authorized to execute and deliver this
Indenture, authenticate the Securities and perform its obligations
hereunder and that the statements made by it in the Statement of
Eligibility on Form T-1 supplied to the Issuer are true and accurate,
subject to the qualifications set forth therein. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application
by the Issuer of Securities or the proceeds thereof.
SECTION 604. MAY HOLD SECURITIES. The Trustee, any Paying Agent,
the Security Registrar, any Authenticating Agent or any other agent of
the Issuer or the Trustee, in its individual or any other capacity, may
become the owner or pledgee of Securities and coupons and, subject to TIA
Sections 310(b) and 311, may otherwise deal with the Issuer with the same
rights it would have if it were not Trustee,
56
Paying Agent, Security Registrar, Authenticating Agent or such other agent.
SECTION 605. MONEY HELD IN TRUST. Money held by the Trustee in
trust hereunder need not be segregated from other funds except to the
extent required by law. The Trustee shall be under no liability for
interest on any money received by it hereunder except as otherwise agreed
in writing with the Issuer.
SECTION 606. COMPENSATION AND REIMBURSEMENT. The Issuer agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse each of the Trustee and any predecessor Trustee upon its
request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify each of the Trustee and any predecessor
Trustee for, and to hold it harmless against, any loss, liability or
expense incurred without negligence or bad faith on its own part,
arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
As security for the performance of the obligations of the Issuer
under this Section, the Trustee shall have a lien prior to the Securities
upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the payment of principal of (or premium,
if any) or interest on particular Securities or any coupons.
The provisions of this Section shall survive the resignation or
removal of any Trustee, the discharge of the Issuer's obligations
pursuant to Article Four hereof, and the termination of this Indenture.
57
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(6) or (7), the expenses
and the compensation for the services are intended to constitute expenses
of administration under any Bankruptcy Law.
SECTION 607. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY; CONFLICTING
INTERESTS. There shall at all times be a Trustee hereunder which shall
be eligible to act as Trustee under TIA Section 310(a)(1) and shall have
a combined capital and surplus of at least $50,000,000. If such
corporation publishes reports of condition at least annually, pursuant to
law or the requirements of Federal, State, Territorial or District of
Columbia supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such corporation shall
be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until
the acceptance of appointment by the successor Trustee in accordance with
the applicable requirements of Section 609.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Issuer. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court
of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series delivered to the
Trustee and to the Issuer.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
TIA Section 310(b) after written request therefor by the Issuer or
by any Holder of a Security who has been a bona fide Holder of a
Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 607
and shall fail to resign after written request
58
therefor by the Issuer or by any Holder of a Security who has been a bona
fide Holder of a Security for at least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Issuer by or pursuant to a Board
Resolution may remove the Trustee and appoint a successor Trustee with
respect to all Securities, or (ii) subject to TIA Section 315(e), any
Holder of a Security who has been a bona fide Holder of a Security for at
least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of
the Trustee with respect to all Securities and the appointment of a
successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any
cause with respect to the Securities of one or more series, the Issuer,
by or pursuant to a Board Resolution, shall promptly appoint a successor
Trustee or Trustees with respect to the Securities of that or those
series (it being understood that any such successor Trustee may be
appointed with respect to the Securities of one or more or all of such
series and that at any time there shall be only one Trustee with respect
to the Securities of any particular series). If, within one year after
such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee with respect to the Securities of any series
shall be appointed by Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series delivered to the
Issuer and the retiring Trustee, the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become the
successor Trustee with respect to the Securities of such series and to
that extent supersede the successor Trustee appointed by the Issuer. If
no successor Trustee with respect to the Securities of any series shall
have been so appointed by the Issuer or the Holders of Securities and
accepted appointment in the manner hereinafter provided, any Holder of a
Security who has been a bona fide Holder of a Security of such series for
at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to Securities of such
series.
(f) The Issuer shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of
59
any series and
each appointment of a successor Trustee with respect to the Securities of
any series in the manner provided for notices to the Holders of
Securities in Section 106. Each notice shall include the name of the
successor Trustee with respect to the Securities of such series and the
address of its Corporate Trust Office.
SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. (a) In case
of the appointment hereunder of a successor Trustee with respect to all
Securities, every such successor Trustee shall execute, acknowledge and
deliver to the Issuer and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all
the rights, powers, trusts and duties of the retiring Trustee; but, on
request of the Issuer or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts
of the retiring Trustee, and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring
Trustee hereunder, subject nevertheless to its claim, if any, provided
for in Section 606.
(b) In case of the appointment hereunder of a successor Trustee
with respect to the Securities of one or more (but not all) series, the
Issuer, the retiring Trustee and each successor Trustee with respect to
the Securities of one or more series shall execute and deliver an
indenture supplemental hereto, pursuant to Article Nine hereof, wherein
each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, each successor Trustee all the rights,
powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such
successor Trustee relates, (2) if the retiring Trustee is not retiring
with respect to all Securities, shall contain such provisions as shall be
deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities
of that or those series as to which the retiring Trustee is not retiring
shall continue to be vested in the retiring Trustee, and (3) shall add to
or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder
by more than one Trustee, it being understood that nothing herein or in
such supplemental indenture shall constitute such Trustee's co-trustees
of the same trust and that each such Trustee shall be trustee of a trust
or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution
60
and delivery of such supplemental indenture the resignation or removal of the
retiring Trustee shall become effective to the extent provided therein
and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates;
but, on request of the Issuer or any successor Trustee, such retiring
Trustee shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the
appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Issuer shall
execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers and
trusts referred to in paragraph (a) or (b) of this Section, as the case
may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS. Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, PROVIDED such corporation
shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of
the parties hereto. In case any Securities or coupons shall have been
authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Securities or
coupons so authenticated with the same effect as if such successor
Trustee had itself authenticated such Securities or coupons. In case any
Securities or coupons shall not have been authenticated by such
predecessor Trustee, any such successor Trustee may authenticate and
deliver such Securities or coupons, in either its own name or that of its
predecessor Trustee, with the full force and effect which this Indenture
provides for the certificate of authentication of the Trustee.
SECTION 611. APPOINTMENT OF AUTHENTICATING AGENT. At any time when
any of the Securities remain Outstanding, the Trustee may appoint an
Authenticating Agent or Agents with respect to
61
one or more series of
Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon exchange, registration
of transfer or partial redemption or repayment thereof, and Securities so
authenticated shall be entitled to the benefits of this Indenture and
shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Any such appointment shall be evidenced by an
instrument in writing signed by a Responsible Officer of the Trustee, a
copy of which instrument shall be promptly furnished to the Issuer.
Wherever reference is made in this Indenture to the authentication and
delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication
and delivery on behalf of the Trustee by an Authenticating Agent and a
certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to
the Issuer and shall at all times be a bank or trust company or
corporation organized and doing business and in good standing under the
laws of the United States of America or of any State or the District of
Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authorities.
If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or the requirements of the aforesaid
supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. In case at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any corporation succeeding to
the corporate agency or corporate trust business of an Authenticating
Agent, shall continue to be an Authenticating Agent, PROVIDED such
corporation shall be otherwise eligible under this Section, without the
execution or filing of any paper or further act on the part of the
Trustee or the Authenticating Agent.
An Authenticating Agent for any series of Securities may at any time
resign by giving written notice of resignation to the Trustee for such
series and to the Issuer. The Trustee for any series of Securities may
at any time terminate the agency of an Authenticating Agent by giving
written notice of
62
termination to such Authenticating Agent and to the
Issuer. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time such Authenticating Agent shall cease
to be eligible in accordance with the provisions of this Section, the
Trustee for such series may appoint a successor Authenticating Agent
which shall be acceptable to the Issuer and shall give notice of such
appointment to all Holders of Securities of the series with respect to
which such Authenticating Agent will serve in the manner set forth in
Section 106. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally
named as an Authenticating Agent herein. No successor Authenticating
Agent shall be appointed unless eligible under the provisions of this
Section.
The Issuer agrees to pay to each Authenticating Agent from time to
time reasonable compensation including reimbursement of its reasonable
expenses for its services under this Section.
If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of such series may have endorsed
thereon, in addition to or in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication substantially
in the following form:
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This is one of the Securities of the series designated
herein referred to in the within-mentioned Indenture.
[CHEMICAL BANK]
as Trustee
By:
as Authenticating Agent
By:
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUER
SECTION 701. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS.Every
Holder of Securities or coupons, by receiving and holding the same,
agrees with the Issuer and the Trustee that neither the Issuer nor the
Trustee nor any Authenticating Agent nor any Paying Agent nor any
Security Registrar shall be held accountable by reason of the disclosure
of any information as to the names and addresses of the Holders of
Securities in accordance with TIA Section 312, regardless of the source
from which such information was derived, and that the Trustee shall not
be held accountable by reason of mailing any material pursuant to a
request made under TIA Section 312(b).
SECTION 702. REPORTS BY TRUSTEE. Within 60 days after May 15 of
each year commencing with the first May 15 after the first issuance of
Securities pursuant to this Indenture, the Trustee shall transmit by mail
to all Holders of Securities as provided in TIA Section 313(c) a brief
report dated as of such May 15 if required by TIA Section 313(a).
SECTION 703. REPORTS BY ISSUER. The Issuer will:
(1) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with
respect to compliance by the Issuer with the conditions and
covenants of this Indenture as may be required from time to time by
such rules and regulations; and
(2) transmit by mail to the Holders of Securities, within
30 days after the filing thereof with the Trustee,
64
in the manner and
to the extent provided in TIA Section 313(c), such summaries of any
information, documents and reports required to be filed by the
Issuer pursuant to Section 1010 and paragraph (1) of this Section as
may be required by rules and regulations prescribed from time to
time by the Commission.
SECTION 704. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
HOLDERS. The Issuer will furnish or cause to be furnished to the
Trustee:
(a) semiannually, not later than 15 days after the Regular Record
Date for interest for each series of Securities, a list, in such form as
the Trustee may reasonably require, of the names and addresses of the
Holders of Registered Securities of such series as of such Regular Record
Date, or if there is no Regular Record Date for interest for such series
of Securities, semiannually, upon such dates as are set forth in the
Board Resolution or indenture supplemental hereto authorizing such
series, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Issuer of any such request, a
list of similar form and content as of a date not more than 15 days prior
to the time such list is furnished,
PROVIDED, HOWEVER, that, so long as the Trustee is the Security
Registrar, no such list shall be required to be furnished.
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION 801. CONSOLIDATIONS AND MERGERS OF ISSUER AND SALES, LEASES
AND CONVEYANCES PERMITTED SUBJECT TO CERTAIN CONDITIONS. The Issuer may
consolidate with, or sell, lease or convey all or substantially all of
its assets to, or merge with or into any other corporation, PROVIDED that
in any such case, (1) either the Issuer shall be the continuing
corporation, or the successor corporation shall be a corporation
organized and existing under the laws of the United States or a State
thereof and such successor corporation shall expressly assume the due and
punctual payment of the principal of (and premium, if any) and any
interest (including all Additional Amounts, if any, payable pursuant to
Section 1012) on all of the Securities, according to their tenor, and the
due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed by the Issuer by
supplemental indenture, complying with Article Nine hereof, satisfactory
to the Trustee, executed and delivered to the Trustee by such corporation
and (2) immediately after giving effect to
65
such transaction and treating any indebtedness which becomes an obligation
of the Issuer or any Subsidiary as a result thereof as having been
incurred by the Issuer or such Subsidiary at the time of such transaction, no
Event of Default, and no event which, after notice or the lapse of time,
or both, would become an Event of Default, shall have occurred and be
continuing.
SECTION 802. RIGHTS AND DUTIES OF SUCCESSOR CORPORATION. In case
of any such consolidation, merger, sale, lease or conveyance and upon any
such assumption by the successor corporation, such successor corporation
shall succeed to and be substituted for the Issuer, with the same effect
as if it had been named herein as the party of the first part, and the
predecessor corporation, except in the event of a lease, shall be
relieved of any further obligation under this Indenture and the
Securities. Such successor corporation thereupon may cause to be signed,
and may issue either in its own name or in the name of the Issuer, any or
all of the Securities issuable hereunder which theretofore shall not have
been signed by the Issuer and delivered to the Trustee; and, upon the
order of such successor corporation, instead of the Issuer, and subject
to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered by the
officers of the Issuer to the Trustee for authentication, and any
Securities which such successor corporation thereafter shall cause to be
signed and delivered to the Trustee for that purpose. All the Securities
so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Securities theretofore or thereafter issued
in accordance with the terms of this Indenture as though all of such
Securities had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, lease or
conveyance, such changes in phraseology and form (but not in substance)
may be made in the Securities thereafter to be issued as may be
appropriate.
SECTION 803. OFFICERS' CERTIFICATE AND OPINION OF COUNSEL. Any
consolidation, merger, sale, lease or conveyance permitted under
Section 801 is also subject to the condition that the Trustee receive an
Officers' Certificate and an Opinion of Counsel to the effect that any
such consolidation, merger, sale, lease or conveyance, and the assumption
by any successor corporation, complies with the provisions of this
Article and that all conditions precedent herein provided for relating to
such transaction have been complied with.
ARTICLE NINE
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SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders of Securities or coupons, the Issuer,
when authorized by or pursuant to a Board Resolution, and the Trustee, at
any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:
(1) to evidence the succession of another Person to the Issuer
and the assumption by any such successor of the covenants of the
Issuer herein and in the Securities contained; or
(2) to add to the covenants of the Issuer for the benefit of
the Holders of all or any series of Securities (and if such
covenants are to be for the benefit of less than all series of
Securities, stating that such covenants are expressly being included
solely for the benefit of such series) or to surrender any right or
power herein conferred upon the Issuer; or
(3) to add any additional Events of Default for the benefit of
the Holders of all or any series of Securities (and if such Events
of Default are to be for the benefit of less than all series of
Securities, stating that such Events of Default are expressly being
included solely for the benefit of such series); PROVIDED, HOWEVER,
that in respect of any such additional Events of Default such
supplemental indenture may provide for a particular period of grace
after default (which period may be shorter or longer than that
allowed in the case of other defaults) or may provide for an
immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default or may limit the right of
the Holders of a majority in aggregate principal amount of that or
those series of Securities to which such additional Events of
Default apply to waive such default; or
(4) to add to or change any of the provisions of this
Indenture to provide that Bearer Securities may be registrable as to
principal, to change or eliminate any restrictions on the payment of
principal of or any premium or interest on or Additional Amounts
with respect to Registered Securities or Bearer Securities, to
permit Bearer Securities to be issued in exchange for Registered
Securities, to permit Bearer Securities to be issued in exchange for
Bearer Securities of other authorized denominations, to modify the
provisions relating to global Securities or to permit or facilitate
the issuance of Securities in uncertificated form, PROVIDED that any
such
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action shall not adversely affect the interests of the Holders
of Securities of any series or any related coupons in any material
respect; or
(5) to add to, change or eliminate any of the provisions of
this Indenture in respect of one or more series of Securities,
PROVIDED that any such addition, change or elimination not otherwise
permitted under this Section 901 shall either (i) become effective
only when there is no Security Outstanding of any series created
prior to the execution of such supplemental indenture which is
entitled to the benefit of such provision or (ii) not apply to any
Security then Outstanding; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series
and any related coupons as permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of
one or more series and to add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee;
or
(9) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions with respect
to matters or questions arising under this Indenture which shall not
be inconsistent with the provisions of this Indenture, PROVIDED such
provisions shall not adversely affect the interests of the Holders
of Securities of any series or any related coupons in any material
respect; or
(10) to supplement any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the
defeasance and discharge of any series of Securities pursuant to
Sections 401, 1402 and 1403; PROVIDED that any such action shall not
adversely affect the interests of the Holders of Securities of such
series and any related coupons or any other series of Securities in
any material respect.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With
the consent of the Holders of not less than a majority in principal
amount of all Outstanding Securities affected by such supplemental
indenture, by Act of said Holders (voting as one class) delivered to the
Issuer and the Trustee, the Issuer, when authorized by or pursuant to a
Board
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Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Holders of
Securities and any related coupons under this Indenture; PROVIDED,
HOWEVER, that no such supplemental indenture shall, without the consent
of the Holder of each Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of (or
premium, if any, on) or any installment of principal of or interest
on, any Security, or reduce the principal amount thereof or the rate
or amount of interest thereon or any Additional Amounts payable in
respect thereof, or any premium payable upon the redemption or
acceleration thereof, or change any obligation of the Issuer to pay
Additional Amounts pursuant to Section 1012 (except as contemplated
by Section 801(1) and permitted by Section 901(1) and (4)), or
reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon acceleration of the
Maturity thereof pursuant to Section 502 or the amount thereof
provable in bankruptcy pursuant to Section 504, or adversely affect
any right of repayment at the option of the Holder of any Security,
or change any Place of Payment where, or the currency or currencies,
currency unit or units or composite currency or currencies in which,
the principal of any Security or any premium or the interest thereon
or any Additional Amounts with respect thereto is payable, or impair
the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of
redemption or repayment at the option of the Holder, on or after the
Redemption Date or the Repayment Date, as the case may be), or
(2) reduce the percentage in principal amount of the
Outstanding Securities the consent of whose Holders is required for
any such supplemental indenture, or reduce the percentage in
principal amount of the Outstanding Securities of any series the
consent of whose Holders is required for any waiver with respect to
such series (of compliance with certain provisions of this Indenture
or certain defaults hereunder and their consequences) provided for
in this Indenture, or reduce the requirements of Section 1504 for
quorum or voting, or
(3) modify any of the provisions of this Section, Section 513
or Section 1013, except to increase the required percentage to
effect such action or to provide that certain other provisions of
this Indenture cannot
69
be modified or waived without the consent of
the Holder of each Outstanding Security affected thereby.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance
thereof.
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included
solely for the benefit of one or more particular series of Securities, or
which modifies the rights of the Holders of Securities of such series
with respect to such covenant or other provision, shall be deemed not to
affect the rights under this Indenture of the Holders of Securities of
any other series.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing,
or accepting the additional trusts created by, any supplemental indenture
permitted by this Article or the modification thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and
shall be fully protected in relying upon, in addition to the documents
required by Section 102, an Opinion of Counsel stating that the execution
of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into
any such supplemental indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution
of any supplemental indenture under this Article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall
form a part of this Indenture for all purposes; and every Holder of
Securities theretofore or thereafter authenticated and delivered
hereunder and of any coupon appertaining thereto shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT. Every
supplemental indenture executed pursuant to this Article shall conform to
the requirements of the Trust Indenture Act as then in effect.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities of any series authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article may, and shall, if
required by the Trustee, bear a notation in form approved by the Trustee
as to any matter provided for in such supplemental indenture. If the
Issuer shall so determine, new Securities of any series so modified as to
conform, in the opinion of the Trustee and the
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Issuer, to any such supplemental indenture may be prepared and executed by
the Issuer and authenticated and delivered by the Trustee in exchange for
Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, INTEREST AND
ADDITIONAL AMOUNTS. The Issuer covenants and agrees for the benefit of
the Holders of each series of Securities that it will duly and punctually
pay the principal of (and premium, if any) and interest on and any
Additional Amounts payable in respect of the Securities of that series in
accordance with the terms of such series of Securities, any coupons
appertaining thereto and this Indenture. Unless otherwise specified as
contemplated by Section 301 with respect to any series of Securities, any
interest due on and any Additional Amounts payable in respect of Bearer
Securities on or before Maturity, other than Additional Amounts, if any,
payable as provided in Section 1012 in respect of principal of (or
premium, if any, on) such a Security, shall be payable only upon
presentation and surrender of the several coupons for such interest
installments as are evidenced thereby as they severally mature. Unless
otherwise specified with respect to Securities of any series pursuant to
Section 301, at the option of the Issuer, all payments of principal may
be paid by check to the registered Holder of the Registered Security or
other Person entitled thereto against surrender of such Security.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY. If Securities of a
series are issuable only as Registered Securities, the Issuer shall
maintain in each Place of Payment for that series of Securities an office
or agency where Securities of that series may be presented or surrendered
for payment or conversion, where Securities of that series may be
surrendered for registration of transfer or exchange and where notices
and demands to or upon the Issuer in respect of the Securities of that
series and this Indenture may be served. If Securities of a series are
issuable as Bearer Securities, the Issuer will maintain: (A) in the
Borough of Manhattan, New York City, an office or agency where any
Registered Securities of that series may be presented or surrendered for
payment or conversion, where any Registered Securities of that series may
be surrendered for registration of transfer, where Securities of that
series may be surrendered for exchange, where notices and demands to or
upon the Issuer in respect of the Securities of that series and this
Indenture may be served and where Bearer Securities of that series and
related coupons may be presented or surrendered for payment or conversion
in the circumstances described in the following paragraph (and not
71
otherwise); (B) subject to any laws or regulations applicable thereto, in
a Place of Payment for that series which is located outside the United
States, an office or agency where Securities of that series and related
coupons may be presented and surrendered for payment (including payment
of any Additional Amounts payable on Securities of that series pursuant
to Section 1012) or conversion; PROVIDED, HOWEVER, that if the Securities
of that series are listed on the Luxembourg Stock Exchange or any other
stock exchange located outside the United States and such stock exchange
shall so require, the Issuer will maintain a Paying Agent for the
Securities of that series in Luxembourg or any other required city
located outside the United States, as the case may be, so long as the
Securities of that series are listed on such exchange; and (C) subject to
any laws or regulations applicable thereto, in a Place of Payment for
that series located outside the United States, an office or agency where
any Registered Securities of that series may be surrendered for
registration of transfer, where Securities of that series may be
surrendered for exchange and where notices and demands to or upon the
Issuer in respect of the Securities of that series and this Indenture may
be served. The Issuer will give prompt written notice to the Trustee of
the location, and any change in the location, of each such office or
agency. If at any time the Issuer shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may
be made or served at the Corporate Trust Office of the Trustee, except
that Bearer Securities of that series and the related coupons may be
presented and surrendered for payment (including payment of any
Additional Amounts payable on Bearer Securities of that series pursuant
to Section 1012) or conversion at the offices specified in the Security,
in London, England.
Unless otherwise specified with respect to any Securities pursuant
to Section 301, no payment of principal, premium or interest on or
Additional Amounts in respect of Bearer Securities shall be made at any
office or agency of the Issuer in the United States or by check mailed to
any address in the United States or by transfer to an account maintained
with a bank located in the United States; PROVIDED, HOWEVER, that, if the
Securities of a series are payable in Dollars, payment of principal of
and any premium and interest on any Bearer Security (including any
Additional Amounts payable on Securities of such series pursuant to
Section 1012) shall be made at the office of the designated agent of the
Issuer's Paying Agent in the Borough of Manhattan, New York City, if (but
only if) payment in Dollars of the full amount of such principal,
premium, interest or Additional Amounts, as the case may be, at all
offices or agencies outside the United States maintained for the purpose
by the Issuer in accordance with this
72
Indenture, is illegal or effectively precluded by exchange controls or
other similar restrictions.
The Issuer may from time to time designate one or more other offices
or agencies where the Securities of one or more series may be presented
or surrendered for any or all of such purposes, and may from time to time
rescind such designations; PROVIDED, HOWEVER, that no such designation or
rescission shall in any manner relieve the Issuer of its obligation to
maintain an office or agency in accordance with the requirements set
forth above for Securities of any series for such purposes. The Issuer
will give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency. Unless otherwise specified pursuant to Section 301 with respect
to a series of Securities, the Issuer hereby designates as a Place of
Payment for each series of Securities the Borough of Manhattan, New York
City, and initially appoints the Trustee at its Corporate Trust Office as
Paying Agent in such city and as its agent to receive all such
presentations, surrenders, notices and demands.
Unless otherwise specified with respect to any Securities pursuant
to Section 301, if and so long as the Securities of any series (i) are
denominated in a Foreign Currency or (ii) may be payable in a Foreign
Currency, or so long as it is required under any other provision of the
Indenture, then the Issuer will maintain with respect to each such series
of Securities, or as so required, at least one exchange rate agent.
SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.
If the Issuer shall at any time act as its own Paying Agent with respect
to any series of Securities and any related coupons, it will, on or
before each due date of the principal of (and premium, if any), or
interest on or Additional Amounts in respect of, any of the Securities of
that series, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum in the currency or currencies, currency unit or
units or composite currency or currencies in which the Securities of such
series are payable (except as otherwise specified pursuant to Section 301
for the Securities of such series) sufficient to pay the principal (and
premium, if any) or interest or Additional Amounts so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as
herein provided, and will promptly notify the Trustee of its action or
failure so to act.
Whenever the Issuer shall have one or more Paying Agents for any
series of Securities and any related coupons, it will, before each due
date of the principal of (and premium, if any), or interest on or
Additional Amounts in respect of, any
73
Securities of that series, deposit
with a Paying Agent a sum (in the currency or currencies, currency unit
or units or composite currency or currencies described in the preceding
paragraph) sufficient to pay the principal (and premium, if any) or
interest or Additional Amounts, so becoming due, such sum to be held in
trust for the benefit of the Persons entitled to such principal, premium
or interest or Additional Amounts and (unless such Paying Agent is the
Trustee) the Issuer will promptly notify the Trustee of its action or
failure so to act.
The Issuer will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will
(1) hold all sums held by it for the payment of principal of
(and premium, if any) or interest on Securities or Additional
Amounts in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed
of as herein provided;
(2) give the Trustee notice of any default by the Issuer (or
any other obligor upon the Securities) in the making of any such
payment of principal (and premium, if any) or interest or Additional
Amounts; and
(3) at any time during the continuance of any such default
upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Issuer may at any time, for the purpose of obtaining the
satisfaction, discharge or defeasance of this Indenture or for any other
purpose, pay, or by Issuer Order direct any Paying Agent to pay, to the
Trustee all sums held in trust by the Issuer or such Paying Agent, such
sums to be held by the Trustee upon the same trusts as those upon which
such sums were held by the Issuer or such Paying Agent; and, upon such
payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such sums.
Except as otherwise provided in the Securities of any series, any
money deposited with the Trustee or any Paying Agent, or then held by the
Issuer, in trust for the payment of the principal of (and premium, if
any) or interest on, or any Additional Amounts in respect of, any
Security of any series and remaining unclaimed for two years after such
principal (and premium, if any), interest or Additional Amounts has
become due and payable shall be paid to the Issuer upon Issuer Request
along with the interest, if any, that has been accumulated thereon or (if
then held by the Issuer) shall be discharged
74
from such trust; and the
Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Issuer for payment of such principal of (and
premium, if any) or interest on, or any Additional Amounts in respect of,
any Security, without interest thereon, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability
of the Issuer as trustee thereof, shall thereupon cease; PROVIDED,
HOWEVER, that the Trustee or such Paying Agent, before being required to
make any such repayment, may at the expense of the Issuer cause to be
published once, in an Authorized Newspaper, notice that such money
remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer.
SECTION 1004. MAKE-WHOLE AMOUNT. If any Securities of a series
provide for the payment of a Make-Whole Amount, the Issuer will pay to
the Holder of any Security of such series the Make- Whole Amount
specified with respect thereto under the terms, conditions and
circumstances as contemplated by or pursuant to Section 301. Whenever in
this Indenture there is mentioned, in any context, the payment of premium
on or in respect of any Security of any series, such mention shall be
deemed to include mention of the payment of the Make-Whole Amount
provided by the terms of such series established pursuant to Section 301
to the extent that, in such context, the Make-Whole Amount is or would be
payable in respect thereof pursuant to such terms; and express mention of
the payment of the Make-Whole Amount (if applicable) in any provisions
hereof shall not be construed as excluding the Make-Whole Amount in those
provisions hereof where such express mention is not made.
SECTION 1005. [This Section Intentionally Omitted].
SECTION 1006. EXISTENCE. Subject to Article Eight, the Issuer will
do or cause to be done all things necessary to preserve and keep in full
force and effect its existence, rights (charter and statutory) and
franchises; PROVIDED, HOWEVER, that the Issuer shall not be required to
preserve any such right or franchise if the Board of Directors shall
determine that the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 1007. MAINTENANCE OF PROPERTIES. The Issuer will cause all
of its material properties used or useful in the conduct of its business
or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the
judgment of the Issuer may be necessary so that the business carried on
in connection
75
therewith may be properly and advantageously conducted at
all times; PROVIDED, HOWEVER, that nothing in this Section shall prevent
the Issuer or any Subsidiary from selling or otherwise disposing for
value its properties in the ordinary course of its business.
SECTION 1008. INSURANCE. The Issuer will, and will cause each of
its Subsidiaries to, keep all of its insurable properties insured against
loss or damage at least equal to their then full insurable value (subject
to reasonable deductibles determined from time to time by the Issuer)
with insurers of recognized responsibility and having a rating of at
least A:VIII in Best's Key Rating Guide.
SECTION 1009. PAYMENT OF TAXES AND OTHER CLAIMS. The Issuer will
pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (1) all taxes, assessments and governmental charges
levied or imposed upon it or any Subsidiary or upon the income, profits
or property of the Issuer or any Subsidiary, and (2) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a
lien upon the property of the Issuer or any Subsidiary; PROVIDED,
HOWEVER, that the Issuer shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith
by appropriate proceedings.
SECTION 1010. PROVISION OF FINANCIAL INFORMATION. Whether or not
the Issuer is subject to Section 13 or 15(d) of the Exchange Act and for
so long as any Securities are Outstanding, the Issuer will, to the extent
permitted under the Exchange Act, file with the Commission the annual
reports, quarterly reports and other documents which the Issuer would
have been required to file with the Commission pursuant to such
Section 13 or 15(d) (the "Financial Statements") if the Issuer were so
subject, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Issuer
would have been required so to file such documents if the Issuer were so
subject.
The Issuer will also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders, as their names
and addresses appear in the Security Register, without cost to such
Holders, copies of the annual reports and quarterly reports which the
Issuer would have been required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act if the Issuer were subject to
such Sections, and (ii) file with the Trustee copies of the annual
reports, quarterly reports and other documents which the Issuer would
have been required to file with the Commission pursuant to Section 13
or 15(d) of the Exchange Act if the Issuer were
76
subject to such Sections
and (y) if filing such documents by the Issuer with the Commission is not
permitted under the Exchange Act, promptly upon written request and
payment of the reasonable cost of duplication and delivery, supply copies
of such documents to any prospective Holder.
SECTION 1011. STATEMENT AS TO COMPLIANCE. The Issuer will deliver
to the Trustee, within 120 days after the end of each fiscal year, a
brief certificate from the principal executive officer, principal
financial officer or principal accounting officer of the General Partner
as to his or her knowledge of the Issuer's compliance with all conditions
and covenants under this Indenture and, in the event of any
noncompliance, specifying such noncompliance and the nature and status
thereof. For purposes of this Section 1011, such compliance shall be
determined without regard to any period of grace or requirement of notice
under this Indenture.
SECTION 1012. ADDITIONAL AMOUNTS. If any Securities of a series
provide for the payment of Additional Amounts, the Issuer will pay to the
Holder of any Security of such series or any coupon appertaining thereto
Additional Amounts as may be specified as contemplated by Section 301.
Whenever in this Indenture there is mentioned, in any context, the
payment of the principal of or any premium or interest on, or in respect
of, any Security of any series or payment of any related coupon or the
net proceeds received on the sale or exchange of any Security of any
series, such mention shall be deemed to include mention of the payment of
Additional Amounts provided by the terms of such series established
pursuant to Section 301 to the extent that, in such context, Additional
Amounts are, were or would be payable in respect thereof pursuant to such
terms; and express mention of the payment of Additional Amounts (if
applicable) in any provisions hereof shall not be construed as excluding
Additional Amounts in those provisions hereof where such express mention
is not made.
Except as otherwise specified as contemplated by Section 301, if the
Securities of a series provide for the payment of Additional Amounts, at
least 10 days prior to the first Interest Payment Date with respect to
that series of Securities (or if the Securities of that series will not
bear interest prior to Maturity, the first day on which a payment of
principal and any premium is made), and at least 10 days prior to each
date of payment of principal and any premium or interest if there has
been any change with respect to the matters set forth in the below-
mentioned Officers' Certificate, the Issuer will furnish the Trustee and
the Issuer's principal Paying Agent or Paying Agents, if other than the
Trustee, with an Officers' Certificate instructing the Trustee and such
Paying Agent or Paying Agents whether such payment of principal of and
any premium or interest on the Securities of that series
77
shall be made to
Holders of Securities of that series or any related coupons who are not
United States Persons without withholding for or on account of any tax,
assessment or other governmental charge described in the Securities of
the series. If any such withholding shall be required, then such
Officers' Certificate shall specify by country the amount, if any,
required to be withheld on such payments to such Holders of Securities of
that series or related coupons and the Issuer will pay to the Trustee or
such Paying Agent the Additional Amounts required by the terms of such
Securities. If the Trustee or any Paying Agent, as the case may be,
shall not so receive the above-mentioned certificate, then the Trustee or
such Paying Agent shall be entitled (i) to assume that no such
withholding or deduction is required with respect to any payment of
principal or interest with respect to any Securities of a series or
related coupons until it shall have received a certificate advising
otherwise and (ii) to make all payments of principal and interest with
respect to the Securities of a series or related coupons without
withholding or deductions until otherwise advised. The Issuer covenants
to indemnify the Trustee and any Paying Agent for, and to hold them
harmless against, any loss, liability or expense reasonably incurred
without negligence or bad faith on their part arising out of or in
connection with actions taken or omitted by any of them or in reliance on
any Officers' Certificate furnished pursuant to this Section or in
reliance on the Issuer's not furnishing such an Officers' Certificate.
SECTION 1013. WAIVER OF CERTAIN COVENANTS. The Issuer may omit in
any particular instance to comply with any term, provision or condition
set forth in Sections 1006 to 1010, inclusive, and any covenant not
currently included in this Indenture but specified as applicable to a
series of Securities as contemplated by Section 301, with respect to the
Securities of any series if before or after the time for such compliance
the Holders of at least a majority in principal amount of all Outstanding
Securities of such series, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect any
such covenant or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Issuer
and the duties of the Trustee in respect of any such term, provision or
condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. APPLICABILITY OF ARTICLE. Securities of any series
which are redeemable before their Stated Maturity
78
shall be redeemable in
accordance with their terms and (except as otherwise specified as
contemplated by Section 301 for Securities of any series) in accordance
with this Article.
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election
of the Issuer to redeem any Securities shall be evidenced by or pursuant
to a Board Resolution. In case of any redemption at the election of the
Issuer of less than all of the Securities of any series, the Issuer
shall, at least 45 days prior to the giving of the notice of redemption
in Section 1104 (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date and of the principal
amount of Securities of such series to be redeemed. In the case of any
redemption of Securities prior to the expiration of any restriction on
such redemption provided in the terms of such Securities or elsewhere in
this Indenture, the Issuer shall furnish the Trustee with an Officers'
Certificate evidencing compliance with such restriction.
SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities of any series issued on the same day with
the same terms are to be redeemed, the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption
Date by the Trustee, from the Outstanding Securities of such series
issued on such date with the same terms not previously called for
redemption, by such method as the Trustee shall deem fair and appropriate
and which may provide for the selection for redemption of portions (equal
to the minimum authorized denomination for Securities of that series or
any integral multiple thereof) of the principal amount of Securities of
such series of a denomination larger than the minimum authorized
denomination for Securities of that series.
The Trustee shall promptly notify the Issuer and the Security
Registrar (if other than itself) in writing of the Securities selected
for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall
relate, in the case of any Security redeemed or to be redeemed only in
part, to the portion of the principal amount of such Security which has
been or is to be redeemed.
SECTION 1104. NOTICE OF REDEMPTION. Notice of redemption shall be
given in the manner provided in Section 106, not less than 30 days nor
more than 60 days prior to the Redemption Date, unless a shorter period
is specified by the terms of such
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series established pursuant to
Section 301, to each Holder of Securities to be redeemed, but failure to
give such notice in the manner herein provided to the Holder of any
Security designated for redemption as a whole or in part, or any defect
in the notice to any such Holder, shall not affect the validity of the
proceedings for the redemption of any other such Security or portion
thereof.
Any notice that is mailed to the Holders of Registered Securities in
the manner herein provided shall be conclusively presumed to have been
duly given, whether or not the Holder receives the notice.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price, accrued interest to the Redemption
Date payable as provided in Section 1106, if any, and Additional
Amounts, if any,
(3) if less than all Outstanding Securities of any series are
to be redeemed, the identification (and, in the case of partial
redemption, the principal amount) of the particular Security or
Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the
notice which relates to such Security shall state that on and after
the Redemption Date, upon surrender of such Security, the holder
will receive, without a charge, a new Security or Securities of
authorized denominations for the principal amount thereof remaining
unredeemed,
(5) that on the Redemption Date the Redemption Price and
accrued interest to the Redemption Date payable as provided in
Section 1106, if any, will become due and payable upon each such
Security, or the portion thereof, to be redeemed and, if applicable,
that interest thereon shall cease to accrue on and after said date,
(6) the Place or Places of Payment where such Securities,
together in the case of Bearer Securities with all coupons
appertaining thereto, if any, maturing after the Redemption Date,
are to be surrendered for payment of the Redemption Price and
accrued interest, if any, or for conversion,
(7) that the redemption is for a sinking fund, if such is the
case,
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(8) that, unless otherwise specified in such notice, Bearer
Securities of any series, if any, surrendered for redemption must be
accompanied by all coupons maturing subsequent to the date fixed for
redemption or the amount of any such missing coupon or coupons will
be deducted from the Redemption Price, unless security or indemnity
satisfactory to the Issuer, the Trustee for such series and any
Paying Agent is furnished,
(9) if Bearer Securities of any series are to be redeemed and
any Registered Securities of such series are not to be redeemed, and
if such Bearer Securities may be exchanged for Registered Securities
not subject to redemption on this Redemption Date pursuant to
Section 305 or otherwise, the last date, as determined by the
Issuer, on which such exchanges may be made,
(10) the CUSIP number or the Euroclear or the CEDEL reference
numbers (or any other numbers used by a depositary to identify such
Securities), if any, of the Securities to be redeemed, and
(11) if applicable, that a Holder of Securities who desires to
convert Securities for redemption must satisfy the requirements for
conversion contained in such Securities, the then existing
conversion price or rate, and the date and time when the option to
convert shall expire.
Notice of redemption of Securities to be redeemed shall be given by
the Issuer or, at the Issuer's request, by the Trustee in the name and at
the expense of the Issuer.
SECTION 1105. DEPOSIT OF REDEMPTION PRICE. At least one Business
Day prior to any Redemption Date, the Issuer shall deposit with the
Trustee or with a Paying Agent (or, if the Issuer is acting as its own
Paying Agent, which it may not do in the case of a sinking fund payment
under Article Twelve, segregate and hold in trust as provided in
Section 1003) an amount of money in the currency or currencies, currency
unit or units or composite currency or currencies in which the Securities
of such series are payable (except as otherwise specified pursuant to
Section 301 for the Securities of such series) sufficient to pay on the
Redemption Date the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the
Securities or portions thereof which are to be redeemed on that date.
SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE. Notice of
redemption having been given as aforesaid, the Securities so to be
redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein
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specified in the currency or currencies,
currency unit or units or composite currency or currencies in which the
Securities of such series are payable (except as otherwise specified
pursuant to Section 301 for the Securities of such series) (together with
accrued interest, if any, to the Redemption Date), and from and after
such date (unless the Issuer shall default in the payment of the
Redemption Price and accrued interest) such Securities shall, if the same
were interest- bearing, cease to bear interest and the coupons for such
interest appertaining to any Bearer Securities so to be redeemed, except
to the extent provided below, shall be void. Upon surrender of any such
Security for redemption in accordance with said notice, together with all
coupons, if any, appertaining thereto maturing after the Redemption Date,
such Security shall be paid by the Issuer at the Redemption Price,
together with accrued interest, if any, to the Redemption Date; PROVIDED,
HOWEVER, that installments of interest on Bearer Securities whose Stated
Maturity is on or prior to the Redemption Date shall be payable only at
an office or agency located outside the United States (except as
otherwise provided in Section 1002) and, unless otherwise specified as
contemplated by Section 301, only upon presentation and surrender of
coupons for such interest; and PROVIDED FURTHER that installments of
interest on Registered Securities whose Stated Maturity is on or prior to
the Redemption Date shall be payable to the Holders of such Securities,
or one or more Predecessor Securities, registered as such at the close of
business on the relevant Record Dates according to their terms and the
provisions of Section 307.
If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant coupons maturing after the Redemption
Date, such Security may be paid after deducting from the Redemption Price
an amount equal to the face amount of all such missing coupons, or the
surrender of such missing coupon or coupons may be waived by the Issuer
and the Trustee if there be furnished to them such security or indemnity
as they may require to save each of them and any Paying Agent harmless.
If thereafter the Holder of such Security shall surrender to the Trustee
or any Paying Agent any such missing coupon in respect of which a
deduction shall have been made from the Redemption Price, such Holder
shall be entitled to receive the amount so deducted; PROVIDED, HOWEVER,
that interest represented by coupons shall be payable only at an office
or agency located outside the United States (except as otherwise provided
in Section 1002) and, unless otherwise specified as contemplated by
Section 301, only upon presentation and surrender of those coupons.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate
borne by the Security.
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SECTION 1107. SECURITIES REDEEMED IN PART. Any Registered Security
which is to be redeemed only in part (pursuant to the provisions of this
Article or of Article Twelve) shall be surrendered at a Place of Payment
therefor (with, if the Issuer or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the
Issuer and the Trustee duly executed by, the Holder thereof or his
attorney duly authorized in writing) and the Issuer shall execute and the
Trustee shall authenticate and deliver to the Holder of such Security
without service charge a new Security or Securities of the same series,
of any authorized denomination as requested by such Holder in aggregate
principal amount equal to and in exchange for the unredeemed portion of
the principal of the Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. APPLICABILITY OF ARTICLE. The provisions of this
Article shall be applicable to any sinking fund for the retirement of
Securities of a series except as otherwise specified as contemplated by
Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory
sinking fund payment," and any payment in excess of such minimum amount
provided for by the terms of such Securities of any series is herein
referred to as an "optional sinking fund payment." If provided for by the
terms of any Securities of any series, the cash amount of any mandatory
sinking fund payment may be subject to reduction as provided in
Section 1202. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series.
SECTION 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH
SECURITIES. The Issuer may, in satisfaction of all or any part of any
mandatory sinking fund payment with respect to the Securities of a
series, (1) deliver Outstanding Securities of such series (other than any
previously called for redemption) together in the case of any Bearer
Securities of such series with all unmatured coupons appertaining thereto
and (2) apply as a credit Securities of such series which have been
redeemed either at the election of the Issuer pursuant to the terms of
such Securities or through the application of permitted optional sinking
fund payments pursuant to the terms of such Securities, as provided for
by the terms of such Securities, or which have otherwise been acquired by
the Issuer; PROVIDED that
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such Securities so delivered or applied as a
credit have not been previously so credited. Such Securities shall be
received and credited for such purpose by the Trustee at the applicable
Redemption Price specified in such Securities for redemption through
operation of the sinking fund and the amount of such mandatory sinking
fund payment shall be reduced accordingly.
SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND. Not less
than 60 days prior to each sinking fund payment date for Securities of
any series, the Issuer will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing mandatory sinking
fund payment for that series pursuant to the terms of that series, the
portion thereof, if any, which is to be satisfied by payment of cash in
the currency or currencies, currency unit or units or composite currency
or currencies in which the Securities of such series are payable (except
as otherwise specified pursuant to Section 301 for the Securities of such
series) and the portion thereof, if any, which is to be satisfied by
delivering and crediting Securities of that series pursuant to
Section 1202, and the optional amount, if any, to be added in cash to the
next ensuing mandatory sinking fund payment, and will also deliver to the
Trustee any Securities to be so delivered and credited. If such
Officers' Certificate shall specify an optional amount to be added in
cash to the next ensuing mandatory sinking fund payment, the Issuer shall
thereupon be obligated to pay the amount therein specified. Not less
than 30 days before each such sinking fund payment date the Trustee shall
select the Securities to be redeemed upon such sinking fund payment date
in the manner specified in Section 1103 and cause notice of the
redemption thereof to be given in the name of and at the expense of the
Issuer in the manner provided in Section 1104. Such notice having been
duly given, the redemption of such Securities shall be made upon the
terms and in the manner stated in Sections 1106 and 1107.
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ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. APPLICABILITY OF ARTICLE. Repayment of Securities of
any series before their Stated Maturity at the option of Holders thereof
shall be made in accordance with the terms of such Securities, if any,
and (except as otherwise specified by the terms of such series
established pursuant to Section 301) in accordance with this Article.
SECTION 1302. REPAYMENT OF SECURITIES. Securities of any series
subject to repayment in whole or in part at the option of the Holders
thereof will, unless otherwise provided in the terms of such Securities,
be repaid at a price equal to the principal amount thereof, together with
interest, if any, thereon accrued to the Repayment Date specified in or
pursuant to the terms of such Securities. The Issuer covenants that at
least one Business Day prior to the Repayment Date it will deposit with
the Trustee or with a Paying Agent (or, if the Issuer is acting as its
own Paying Agent, segregate and hold in trust as provided in
Section 1003) an amount of money in the currency or currencies, currency
unit or units or composite currency or currencies in which the Securities
of such series are payable (except as otherwise specified pursuant to
Section 301 for the Securities of such series) sufficient to pay the
principal (or, if so provided by the terms of the Securities of any
series, a percentage of the principal) of, and (except if the Repayment
Date shall be an Interest Payment Date) accrued interest on, all the
Securities or portions thereof, as the case may be, to be repaid on such
date.
SECTION 1303. EXERCISE OF OPTION. Securities of any series subject
to repayment at the option of the Holders thereof will contain an "Option
to Elect Repayment" form on the reverse of such Securities. In order for
any Security to be repaid at the option of the Holder, the Trustee must
receive at the Place of Payment therefor specified in the terms of such
Security (or at such other place or places of which the Issuer shall from
time to time notify the Holders of such Securities) not earlier than
60 days nor later than 30 days prior to the Repayment Date (1) the
Security so providing for such repayment together with the "Option to
Elect Repayment" form on the reverse thereof duly completed by the Holder
(or by the Holder's attorney duly authorized in writing) or (2) a
telegram, telex, facsimile transmission or a letter from a member of a
national securities exchange, or the National Association of Securities
Dealers, Inc., or a commercial bank or trust company in the United States
setting forth the name of the Holder of the Security, the principal
amount of the Security, the principal amount of the Security to be
repaid, the CUSIP number or the Euroclear or the CEDEL reference number
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(or any other number used by a depositary to identify the Security) of
the Security, if any, or a description of the tenor and terms of the
Security, a statement that the option to elect repayment is being
exercised thereby and a guarantee that the Security to be repaid,
together with the duly completed form entitled "Option to Elect
Repayment" on the reverse of the Security, will be received by the
Trustee not later than the fifth Business Day after the date of such
telegram, telex, facsimile transmission or letter; PROVIDED, HOWEVER,
that such telegram, telex, facsimile transmission or letter shall only be
effective if such Security and form duly completed are received by the
Trustee by such fifth Business Day. If less than the entire principal
amount of such Security is to be repaid in accordance with the terms of
such Security, the principal amount of such Security to be repaid, in
increments of the minimum denomination for Securities of such series, and
the denomination or denominations of the Security or Securities to be
issued to the Holder for the portion of the principal amount of such
Security surrendered that is not to be repaid, must be specified. The
principal amount of any Security providing for repayment at the option of
the Holder thereof may not be repaid in part if, following such
repayment, the unpaid principal amount of such Security would be less
than the minimum authorized denomination of Securities of the series of
which such Security to be repaid is a part. Except as otherwise may be
provided by the terms of any Security providing for repayment at the
option of the Holder thereof, exercise of the repayment option by the
Holder shall be irrevocable unless waived by the Issuer and all questions
as to the validity, form, eligibility (including time of receipt) and
acceptance of any Security for repayment will be determined by the
Issuer, whose determination will be final and binding.
SECTION 1304. WHEN SECURITIES PRESENTED FOR REPAYMENT BECOME DUE
AND PAYABLE. If Securities of any series providing for repayment at the
option of the Holders thereof shall have been surrendered as provided in
this Article and as provided by or pursuant to the terms of such
Securities, such Securities or the portions thereof, as the case may be,
to be repaid shall become due and payable and shall be paid by the Issuer
on the Repayment Date therein specified, and on and after such Repayment
Date (unless the Issuer shall default in the payment of such Securities
on such Repayment Date) such Securities shall, if the same were interest-
bearing, cease to bear interest and the coupons for such interest
appertaining to any Bearer Securities so to be repaid, except to the
extent provided below, shall be void. Upon surrender of any such
Security for repayment in accordance with such provisions, together with
all coupons, if any, appertaining thereto maturing after the Repayment
Date, the principal amount of such Security so to be repaid shall be paid
by the Issuer, together with accrued interest, if any, to the Repayment
Date; PROVIDED,
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HOWEVER, that coupons whose Stated Maturity is on or
prior to the Repayment Date shall be payable only at an office or agency
located outside the United States (except as otherwise provided in
Section 1002) and, unless otherwise specified pursuant to Section 301,
only upon presentation and surrender of such coupons; and PROVIDED
FURTHER that, in the case of Registered Securities, installments of
interest, if any, whose Stated Maturity is on or prior to the Repayment
Date shall be payable (but without interest thereon, unless the Issuer
shall default in the payment thereof) to the Holders of such Securities,
or one or more Predecessor Securities, registered as such at the close of
business on the relevant Record Dates according to their terms and the
provisions of Section 307.
If any Bearer Security surrendered for repayment shall not be
accompanied by all appurtenant coupons maturing after the Repayment Date,
such Security may be paid after deducting from the amount payable
therefor as provided in Section 1302 an amount equal to the face amount
of all such missing coupons, or the surrender of such missing coupon or
coupons may be waived by the Issuer and the Trustee if there be furnished
to them such security or indemnity as they may require to save each of
them and any Paying Agent harmless. If thereafter the Holder of such
Security shall surrender to the Trustee or any Paying Agent any such
missing coupon in respect of which a deduction shall have been made as
provided in the preceding sentence, such Holder shall be entitled to
receive the amount so deducted; provided, however, that interest
represented by coupons shall be payable only at an office or agency
located outside the United States (except as otherwise provided in
Section 1002) and, unless otherwise specified as contemplated by
Section 301, only upon presentation and surrender of those coupons.
If the principal amount of any Security surrendered for repayment
shall not be so repaid upon surrender thereof, such principal amount
(together with interest, if any, thereon accrued to such Repayment Date)
shall, until paid, bear interest from the Repayment Date at the rate of
interest or Yield to Maturity (in the case of Original Issue Discount
Securities) set forth in such Security.
SECTION 1305. SECURITIES REPAID IN PART. Upon surrender of any
Registered Security which is to be repaid in part only, the Issuer shall
execute and the Trustee shall authenticate and deliver to the Holder of
such Security, without service charge and at the expense of the Issuer, a
new Registered Security or Securities of the same series, of any
authorized denomination specified by the Holder, in an aggregate
principal amount equal to and in exchange for the portion of the
principal of such Security so surrendered which is not to be repaid.
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ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. APPLICABILITY OF ARTICLE; ISSUER'S OPTION TO EFFECT
DEFEASANCE OR COVENANT DEFEASANCE. If, pursuant to Section 301,
provision is made for either or both of (a) defeasance of the Securities
of or within a series under Section 1402 or (b) covenant defeasance of
the Securities of or within a series under Section 1403, then the
provisions of such Section or Sections, as the case may be, together with
the other provisions of this Article (with such modifications thereto as
may be specified pursuant to Section 301 with respect to any Securities),
shall be applicable to such Securities and any coupons appertaining
thereto, and the Issuer may at its option by Board Resolution, at any
time, with respect to such Securities and any coupons appertaining
thereto, elect to have Section 1402 (if applicable) or Section 1403 (if
applicable) be applied to such Outstanding Securities and any coupons
appertaining thereto upon compliance with the conditions set forth below
in this Article.
SECTION 1402. DEFEASANCE AND DISCHARGE. Upon the Issuer's exercise
of the above option applicable to this Section with respect to any
Securities of or within a series, the Issuer shall be deemed to have been
discharged from its obligations with respect to such Outstanding
Securities and any coupons appertaining thereto on the date the
conditions set forth in Section 1404 are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Issuer
shall be deemed to have paid and discharged the entire indebtedness
represented by such Outstanding Securities and any coupons appertaining
thereto, which shall thereafter be deemed to be "Outstanding" only for
the purposes of Section 1405 and the other Sections of this Indenture
referred to in clauses (A) and (B) below, and to have satisfied all of
its other obligations under such Securities and any coupons appertaining
thereto and this Indenture insofar as such Securities and any coupons
appertaining thereto are concerned (and the Trustee, at the expense of
the Issuer, shall execute proper instruments acknowledging the same),
except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of Holders of such Outstanding
Securities and any coupons appertaining thereto to receive, solely from
the trust fund described in Section 1404 and as more fully set forth in
such Section, payments in respect of the principal of (and premium, if
any) and interest, if any, on such Securities and any coupons
appertaining thereto when such payments are due, (B) the Issuer's
obligations with respect to such Securities under Sections 305, 306, 1002
and 1003 and with respect to the payment of Additional Amounts, if any,
on such Securities as contemplated by Section 1012,
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(C) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and (D)
this Article. Subject to compliance with this Article Fourteen, the
Issuer may exercise its option under this Section notwithstanding the
prior exercise of its option under Section 1403 with respect to such
Securities and any coupons appertaining thereto.
SECTION 1403. COVENANT DEFEASANCE. Upon the Issuer's exercise of
the above option applicable to this Section with respect to any
Securities of or within a series, the Issuer shall be released from its
obligations under Sections 1006 to 1010, inclusive, and, if specified
pursuant to Section 301, its obligations under any other covenant, with
respect to such Outstanding Securities and any coupons appertaining
thereto on and after the date the conditions set forth in Section 1404
are satisfied (hereinafter, "covenant defeasance"), and such Securities
and any coupons appertaining thereto shall thereafter be deemed to be not
"Outstanding" for the purposes of any direction, waiver, consent or
declaration or Act of Holders (and the consequences of any thereof) in
connection with Sections 1006 to 1010, inclusive, or such other covenant,
but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with
respect to such Outstanding Securities and any coupons appertaining
thereto, the Issuer may omit to comply with and shall have no liability
in respect of any term, condition or limitation set forth in any such
Section or such other covenant, whether directly or indirectly, by reason
of any reference elsewhere herein to any such Section or such other
covenant or by reason of reference in any such Section or such other
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a default or an Event of Default
under Section 501(4) or 501(8) or otherwise, as the case may be, but,
except as specified above, the remainder of this Indenture and such
Securities and any coupons appertaining thereto shall be unaffected
thereby.
SECTION 1404. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The
following shall be the conditions to application of Section 1402 or
Section 1403 to any Outstanding Securities of or within a series and any
coupons appertaining thereto:
(a) The Issuer shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the provisions
of this Article Fourteen applicable to it) as trust funds in trust for
the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of such
Securities and any coupons appertaining thereto, (1) an amount in such
currency, currencies or currency unit in which such Securities
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and any
coupons appertaining thereto are then specified as payable at Stated
Maturity, or (2) Government Obligations applicable to such Securities and
coupons appertaining thereto (determined on the basis of the currency,
currencies or currency unit in which such Securities and coupons
appertaining thereto are then specified as payable at Stated Maturity)
which through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one
day before the due date of any payment of principal of (and premium, if
any) and interest, if any, on such Securities and any coupons
appertaining thereto, money in an amount, or (3) a combination thereof,
in any case, in an amount, sufficient, without consideration of any
reinvestment of such principal and interest, in the opinion of a
nationally recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or other qualifying
trustee) to pay and discharge, (i) the principal of (and premium, if any)
and interest, if any, on such Outstanding Securities and any coupons
appertaining thereto on the Stated Maturity of such principal or
installment of principal or interest and (ii) any mandatory sinking fund
payments or analogous payments applicable to such Outstanding Securities
and any coupons appertaining thereto on the day on which such payments
are due and payable in accordance with the terms of this Indenture and of
such Securities and any coupons appertaining thereto. Notwithstanding
the references in this Section 1404(a) to "premium", the Issuer shall not
be required to deposit an amount sufficient to pay any premium that would
be due and payable only upon acceleration of the Maturity of such
Securities pursuant to Section 502.
(b) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which the Issuer is a party
or by which it is bound.
(c) No Event of Default or event which with notice or lapse of time
or both would become an Event of Default with respect to such Securities
and any coupons appertaining thereto shall have occurred and be
continuing on the date of such deposit or, insofar as Sections 501(6)
and 501(7) are concerned, at any time during the period ending on the
91st day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period).
(d) In the case of an election under Section 1402, the Issuer shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Issuer has received from, or there has been published by, the Internal
Revenue Service a ruling,
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or (ii) since the date of execution of this
Indenture, there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion
shall confirm that, the Holders of such Outstanding Securities and any
coupons appertaining thereto will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance had not
occurred.
(e) In the case of an election under Section 1403, the Issuer shall
have delivered to the Trustee an Opinion of Counsel to the effect that
the Holders of such Outstanding Securities and any coupons appertaining
thereto will not recognize income, gain or loss for Federal income tax
purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had
not occurred.
(f) The Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance under Section 1402 or the covenant defeasance
under Section 1403 (as the case may be) have been complied with and an
Opinion of Counsel to the effect that either (i) as a result of a deposit
pursuant to subsection (a) above and the related exercise of the Issuer's
option under Section 1402 or Section 1403 (as the case may be),
registration is not required under the Investment Company Act of 1940, as
amended, by the Issuer, with respect to the trust funds representing such
deposit or by the Trustee for such trust funds or (ii) all necessary
registrations under said Act have been effected.
(g) Notwithstanding any other provisions of this Section, such
defeasance or covenant defeasance shall be effected in compliance with
any additional or substitute terms, conditions or limitations which may
be imposed on the Issuer in connection therewith pursuant to Section 301.
SECTION 1405. DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of
the last paragraph of Section 1003, all money and Government Obligations
(or other property as may be provided pursuant to Section 301) (including
the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 1405, the "Trustee")
pursuant to Section 1404 in respect of any Outstanding Securities of any
series and any coupons appertaining thereto shall be held in trust and
applied by the Trustee, in accordance with the provisions of such
Securities and any coupons appertaining thereto and this Indenture, to
the
91
payment, either directly or through any Paying Agent (including the
Issuer acting as its own Paying Agent) as the Trustee may determine, to
the Holders of such Securities and any coupons appertaining thereto of
all sums due and to become due thereon in respect of principal (and
premium, if any) and interest and Additional Amounts, if any, but such
money need not be segregated from other funds except to the extent
required by law.
Unless otherwise specified with respect to any Security pursuant to
Section 301, if, after a deposit referred to in Section 1404(a) has been
made, (a) the Holder of a Security in respect of which such deposit was
made is entitled to, and does, elect pursuant to Section 301 or the terms
of such Security to receive payment in a currency or currency unit other
than that in which the deposit pursuant to Section 1404(a) has been made
in respect of such Security, or (b) a Conversion Event occurs in respect
of the currency or currency unit in which the deposit pursuant to
Section 1404(a) has been made, the indebtedness represented by such
Security and any coupons appertaining thereto shall be deemed to have
been, and will be, fully discharged and satisfied through the payment of
the principal of (and premium, if any), and interest, if any, on such
Security as the same becomes due out of the proceeds yielded by
converting (from time to time as specified below in the case of any such
election) the amount or other property deposited in respect of such
Security into the currency or currency unit in which such Security
becomes payable as a result of such election or Conversion Event based on
the applicable market exchange rate for such currency or currency unit in
effect on the second Business Day prior to each payment date, except,
with respect to a Conversion Event, for such currency or currency unit in
effect (as nearly as feasible) at the time of the Conversion Event.
The Issuer shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the Government Obligations
deposited pursuant to Section 1404 or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by
law is for the account of the Holders of such Outstanding Securities and
any coupons appertaining thereto.
Anything in this Article to the contrary notwithstanding, subject to
Section 606, the Trustee shall deliver or pay to the Issuer from time to
time upon Issuer Request any money or Government Obligations (or other
property and any proceeds therefrom) held by it as provided in
Section 1404 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof
which would then be required to be deposited to effect a
92
defeasance or covenant defeasance, as applicable, in accordance with this
Article.
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. PURPOSES FOR WHICH MEETINGS MAY BE CALLED. If
Securities of a series are issuable, in whole or in part, as Bearer
Securities, a meeting of Holders of Securities of such series may be
called at any time and from time to time pursuant to this Article to
make, give or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be made,
given or taken by Holders of Securities of such series.
SECTION 1502. CALL, NOTICE AND PLACE OF MEETINGS. (a) The Trustee
may at any time call a meeting of Holders of Securities of any series for
any purpose specified in Section 1501, to be held at such time and at
such place in the Borough of Manhattan, New York City, or in London as
the Trustee shall determine. Notice of every meeting of Holders of
Securities of any series, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such
meeting, shall be given, in the manner provided in Section 106, not less
than 21 nor more than 180 days prior to the date fixed for the meeting.
(b) In case at any time the Issuer, pursuant to a Board Resolution,
or the Holders of at least 10% in principal amount of the Outstanding
Securities of any series shall have requested the Trustee to call a
meeting of the Holders of Securities of such series for any purpose
specified in Section 1501, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee
shall not have made the first publication of the notice of such meeting
within 21 days after receipt of such request or shall not thereafter
proceed to cause the meeting to be held as provided herein, then the
Issuer or the Holders of Securities of such series in the amount above
specified, as the case may be, may determine the time and the place in
the Borough of Manhattan, New York City, or in London for such meeting
and may call such meeting for such purposes by giving notice thereof as
provided in subsection (a) of this Section.
SECTION 1503. PERSONS ENTITLED TO VOTE AT MEETINGS. To be entitled
to vote at any meeting of Holders of Securities of any series, a Person
shall be (1) a Holder of one or more Outstanding Securities of such
series, or (2) a Person appointed by an instrument in writing as proxy
for a Holder or
93
Holders of one or more Outstanding Securities of such
series by such Holder or Holders. The only Persons who shall be entitled
to be present or to speak at any meeting of Holders of Securities of any
series shall be the Persons entitled to vote at such meeting and their
counsel, any representatives of the Trustee and its counsel and any
representatives of the Issuer and its counsel.
SECTION 1504. QUORUM; ACTION. The Persons entitled to vote a
majority in principal amount of the Outstanding Securities of a series
shall constitute a quorum for a meeting of Holders of Securities of such
series; PROVIDED, HOWEVER, that if any action is to be taken at such
meeting with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action which this Indenture expressly
provides may be made, given or taken by the Holders of not less than a
specified percentage in principal amount of the Outstanding Securities of
a series, then with respect to such action (and only such action) the
Persons entitled to vote such specified percentage in principal amount of
the Outstanding Securities of such series shall constitute a quorum. In
the absence of a quorum within 30 minutes after the time appointed for
any such meeting, the meeting shall, if convened at the request of
Holders of Securities of such series, be dissolved. In any other case
the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of
such meeting. In the absence of a quorum at the reconvening of any such
adjourned meeting, such adjourned meeting may be further adjourned for a
period of not less than 10 days as determined by the chairman of the
meeting prior to the adjournment of such adjourned meeting. Notice of
the reconvening of any adjourned meeting shall be given as provided in
Section 1502(a), except that such notice need be given only once not less
than five days prior to the date on which the meeting is scheduled to be
reconvened. Notice of the reconvening of any adjourned meeting shall
state expressly the percentage, as provided above, of the principal
amount of the Outstanding Securities of such series which shall
constitute a quorum.
Except as limited by the proviso to Section 902, any resolution
presented to a meeting duly convened or an adjourned meeting duly
reconvened at which a quorum is present as aforesaid may be adopted only
by the affirmative vote of the Persons entitled to vote a majority in
aggregate principal amount of the Outstanding Securities of that series;
PROVIDED, HOWEVER, that, except as limited by the proviso to Section 902,
any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action which this Indenture
expressly provides may be made, given or taken by the Holders of a
specified percentage in principal amount of the Outstanding Securities of
a series may
94
be adopted at a meeting duly convened or an adjourned
meeting duly reconvened and at which a quorum is present as aforesaid by
the affirmative vote of the Holders of such specified percentage in
principal amount of the Outstanding Securities of that series.
Any resolution passed or decision taken at any meeting of Holders of
Securities of any series duly held in accordance with this Section shall
be binding on all the Holders of Securities of such series and the
related coupons, whether or not present or represented at the meeting.
Notwithstanding the foregoing provisions of this Section 1504, if
any action is to be taken at a meeting of Holders of Securities of any
series with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that this Indenture expressly
provides may be made, given or taken by the Holders of a specified
percentage in principal amount of all Outstanding Securities affected
thereby, or of the Holders of such series and one or more additional
series:
(a) there shall be no minimum quorum requirement for such
meeting; and
(b) the principal amount of the Outstanding Securities of such
series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into
account in determining whether such request, demand, authorization,
direction, notice, consent, waiver or other action has been made, given
or taken under this Indenture.
SECTION 1505. DETERMINATION OF VOTING RIGHTS; CONDUCT AND
ADJOURNMENT OF MEETINGS. (a) Notwithstanding any provisions of this
Indenture, the Trustee may make such reasonable regulations as it may
deem advisable for any meeting of Holders of Securities of a series in
regard to proof of the holding of Securities of such series and of the
appointment of proxies and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall deem
appropriate. Except as otherwise permitted or required by any such
regulations, the holding of Securities shall be proved in the manner
specified in Section 104 and the appointment of any proxy shall be proved
in the manner specified in Section 104 or by having the signature of the
Person executing the proxy witnessed or guaranteed by any trust company,
bank or banker authorized by Section 104 to certify to the holding of
Bearer Securities. Such regulations may provide that written
95
instruments appointing proxies, regular on their face, may be presumed
valid and genuine without the proof specified in Section 104 or other proof.
(b) The Trustee shall, by an instrument in writing appoint a
temporary chairman of the meeting, unless the meeting shall have been
called by the Issuer or by Holders of Securities as provided in
Section 1502(b), in which case the Issuer or the Holders of Securities of
the series calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the Persons entitled
to vote a majority in principal amount of the Outstanding Securities of
such series represented at the meeting.
(c) At any meeting each Holder of a Security of such series or
proxy shall be entitled to one vote for each $1,000 principal amount of
the Outstanding Securities of such series held or represented by him;
PROVIDED, HOWEVER, that no vote shall be cast or counted at any meeting
in respect of any Security challenged as not Outstanding and ruled by the
chairman of the meeting to be not Outstanding. The chairman of the
meeting shall have no right to vote, except as a Holder of a Security of
such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 1502 at which a quorum is present may be adjourned
from time to time by Persons entitled to vote a majority in principal
amount of the Outstanding Securities of such series represented at the
meeting, and the meeting may be held as so adjourned without further
notice.
SECTION 1506. COUNTING VOTES AND RECORDING ACTION OF MEETINGS. The
vote upon any resolution submitted to any meeting of Holders of
Securities of any series shall be by written ballots on which shall be
subscribed the signatures of the Holders of Securities of such series or
of their representatives by proxy and the principal amounts and serial
numbers of the Outstanding Securities of such series held or represented
by them. The permanent chairman of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting for or
against any resolution and who shall make and file with the secretary of
the meeting their verified written reports in duplicate of all votes cast
at the meeting. A record, at least in duplicate, of the proceedings of
each meeting of Holders of Securities of any Series shall be prepared by
the secretary of the meeting and there shall be attached to said record
the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of
the fact, setting forth
96
a copy of the notice of the meeting and showing
that said notice was given as provided in Section 1502 and, if
applicable, Section 1504. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one
such copy shall be delivered to the Issuer and another to the Trustee
to be preserved by the Trustee, the latter to have attached thereto the
ballots voted at the meeting. Any record so signed and verified
shall be conclusive evidence of the matters therein stated.
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 1601. SECURITIES IN FOREIGN CURRENCIES. Except as
otherwise provided in the definition of "Outstanding" in Section 101,
whenever this Indenture provides for any distribution to Holders of
Securities, in the absence of any provision to the contrary in the form
of Security of any particular series, any amount in respect of any
Security denominated in a currency or currencies other than Dollars shall
be treated for any such distribution as that amount of Dollars that could
be obtained for such amount on such reasonable basis of exchange and as
of the record date with respect to Registered Securities of such series
(if any) for such distribution (or, if there shall be no applicable
record date, such other date reasonably proximate to the date of such
distribution) as the Company may specify in a written notice to the
Trustee or, in the absence of such written notice, as the Trustee may
determine.
SECTION 1602. NON-RECOURSE. Notwithstanding any other provision of
this Indenture to the contrary, no recourse shall be had, whether by levy
or execution or otherwise, for the payment of any sums due under any
Security, including, without limitation, the principal of, premium, if
any, or interest payable under any Security, or for the payment or
performance of any obligation under, or for any claim based on, this
Indenture or otherwise in respect hereof, against the General Partner or
its assets or against any principal, shareholder, officer, director,
trustee or employee of the General Partner, under any rule of law,
statute or constitution, or by the enforcement of any assessment or
penalty, or otherwise, nor shall any of such parties be personally liable
for any such amounts, obligations or claims, or liable for any deficiency
judgment based thereon or with respect thereto, it being
97
expressly
understood that the sole remedies hereunder or under any other document
with respect to the Securities against such parties with respect to such
amounts, obligations or claims shall be against the Issuer and that all
such liability of such parties is and is to be, by the acceptance hereof,
expressly waived and released as a condition of, and as consideration
for, the execution of this Indenture. It is expressly understood and
agreed, however, that nothing contained in this Section 1602 shall (a) in
any manner or way constitute or be deemed a release of the debt evidenced
by the Securities or (b) impair, in any manner, any rights, remedies or
recourse any Holder may have against the General Partner for fraud or
misappropriation of any insurance proceeds, condemnation proceeds, rents,
profits or issues in respect of the Issuer in violation of the terms of
this Indenture.
* * * * *
This Indenture may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
98
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
SIMON-DEBARTOLO GROUP, L.P.
By:
SD Property Group, Inc., as General Partner
By:
Name:
Title:
Attest:
Name:
Title:
[CHEMICAL BANK],
as Trustee
By:
Name:
Title:
Attest:
Name:
Title:
99
STATE OF ___________ )
) SS:
COUNTY OF __________ )
On the _____ day of ____________ 1996, before me personally came
____________________, to me known, who, being by me duly sworn, did
depose and say that he/she is ________________ of SD Property
Group, Inc., the managing general partner of Simon-DeBartolo Group, L.P.,
one of the parties described in and which executed the foregoing
instrument, and that he/she signed his/her name thereto by authority of
the Board of Directors.
[Notarial Seal]
Notary Public
COMMISSION EXPIRES
100
STATE OF ____________ )
) SS:
COUNTY OF ____________ )
On the _____ day of ____________ 1996, before me personally came
____________________, to me known, who, being by me duly sworn, did
depose and say that he/she is ________________ of [Chemical Bank], one of
the parties described in and which executed the foregoing instrument, and
that he/she signed his/her name thereto by authority of the Board of
Directors.
[Notarial Seal]
Notary Public
COMMISSION EXPIRES
101
EXHIBIT A
FORMS OF CERTIFICATION
EXHIBIT A-1
FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED
TO RECEIVE BEARER SECURITY OR TO OBTAIN INTEREST
PAYABLE PRIOR TO THE EXCHANGE DATE
CERTIFICATE
[Insert title or sufficient description of Securities to be delivered]
This is to certify that, as of the date hereof, and except as set
forth below, the above-captioned Securities held by you for our account
(i) are owned by person(s) that are not citizens or residents of the
United States, domestic partnerships, domestic corporations or any estate
or trust the income of which is subject to United States federal income
taxation regardless of its source ("United States person(s)"), (ii) are
owned by United States person(s) that are (a) foreign branches of United
States financial institutions (financial institutions, as defined in
United States Treasury Regulations Section 1.165-12(c)(1)(v) are herein
referred to as "financial institutions") purchasing for their own account
or for resale, or (b) United States person(s) who acquired the Securities
through foreign branches of United States financial institutions and who
hold the Securities through such United States financial institutions on
the date hereof (and in either case (a) or (b), each such United States
financial institution hereby agrees, on its own behalf or through its
agent, that you may advise Simon-DeBartolo Group, L.P. or its agent that
such financial institution will comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the United States Internal Revenue
Code of 1986, as amended, and the regulations thereunder), or (iii) are
owned by United States or foreign financial institution(s) for purposes
of resale during the restricted period (as defined in United States
Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and, in addition,
if the owner is a United States or foreign financial institution
described in clause (iii) above (whether or not also described in
clause (i) or (ii)), this is to further certify that such financial
institution has not acquired the Securities for purposes of resale
directly or indirectly to a
A-1-1
United States person or to a person within the United States or its
possessions.
As used herein, "United States" means the United States of America
(including the States thereof and the District of Columbia); and its
"possessions" include Puerto Rico, the U.S. Virgin Islands, Guam,
American Samoa, Wake Island and the Northern Mariana Islands.
We undertake to advise you promptly by tested telex on or prior to
the date on which you intend to submit your certification relating to the
above-captioned Securities held by you for our account in accordance with
your Operating Procedures if any applicable statement herein is not
correct on such date, and in the absence of any such notification it may
be assumed that this certification applies as of such date.
This certificate excepts and does not relate to U.S.
$_______________ of such interest in the above-captioned Securities in
respect of which we are not able to certify and as to which we understand
an exchange for an interest in a Permanent Global Security or an exchange
for and delivery of definitive Securities (or, if relevant, collection of
any interest) cannot be made until we do so certify.
We understand that this certificate may be required in connection
with certain tax legislation in the United States. If administrative or
legal proceedings are commenced or threatened in connection with which
this certificate is or would be relevant, we irrevocably authorize you to
produce this certificate or a copy hereof to any interested party in such
proceedings.
Dated: __________________, 19__
[To be dated no earlier than the 15th day prior
to (i) the Exchange Date or (ii) the relevant
Interest Payment Date occurring prior to the
Exchange Date, as applicable]
[Name of Person Making Certification]
(Authorized Signatory)
Name:
Title:
A-1-2
EXHIBIT A-2
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR
AND CEDEL S.A. IN CONNECTION WITH THE EXCHANGE OF
A PORTION OF A TEMPORARY GLOBAL SECURITY OR TO
OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE
CERTIFICATE
[Insert title or sufficient description of Securities to be delivered]
This is to certify that, based solely on written certifications that
we have received in writing, by tested telex or by electronic
transmission from each of the persons appearing in our records as persons
entitled to a portion of the principal amount set forth below (our
"Member Organizations") substantially in the form attached hereto, as of
the date hereof, [U.S.$] _______________ principal amount of the above-
captioned Securities (i) is owned by person(s) that are not citizens or
residents of the United States, domestic partnerships, domestic
corporations or any estate or trust the income of which is subject to
United States Federal income taxation regardless of its source ("United
States person(s)"), (ii) is owned by United States person(s) that are
(a) foreign branches of United States financial institutions (financial
institutions, as defined in U.S. Treasury Regulations
Section 1.165-12(c)(1)(v) are herein referred to as "financial
institutions") purchasing for their own account or for resale, or
(b) United States person(s) who acquired the Securities through foreign
branches of United States financial institutions and who hold the
Securities through such United States financial institutions on the date
hereof (and in either case (a) or (b), each such United States financial
institution has agreed, on its own behalf or through its agent, that we
may advise Simon-DeBartolo Group, L.P. or its agent that such financial
institution will comply with the requirements of Section 165(j)(3)(A),
(B) or (C) of the United States Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) is owned by United
States or foreign financial institution(s) for purposes of resale during
the restricted period (as defined in United States Treasury Regulations
Section 1.163-5(c)(2)(i)(D)(7)), and, to the further effect, that
financial institutions described in clause (iii) above (whether or not
also described in clause (i) or (ii)) have certified that they have not
acquired the Securities for purposes of resale directly or indirectly to
a United
A-2-1
States person or to a person within the United States or its
possessions.
As used herein, "United States" means the United States of America
(including the States thereof and the District of Columbia); and its
"possessions" include Puerto Rico, the U.S. Virgin Islands, Guam,
American Samoa, Wake Island and the Northern Mariana Islands.
We further certify that (i) we are not making available herewith for
exchange (or, if relevant, collection of any interest) any portion of the
temporary global Security representing the above-captioned Securities
excepted in the above-referenced certificates of Member Organizations and
(ii) as of the date hereof we have not received any notification from any
of our Member Organizations to the effect that the statements made by
such Member Organizations with respect to any portion of the part
submitted herewith for exchange (or, if relevant, collection of any
interest) are no longer true and cannot be relied upon as of the date
hereof.
We understand that this certification is required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to
produce this certificate or a copy hereof to any interested party in such
proceedings.
Dated: _____________ 19__
[To be dated no earlier than the Exchange Date
or the relevant Interest Payment Date occurring
prior to the Exchange Date, as applicable]
[Morgan Guaranty Trust Company of New York,
Brussels Office],
as Operator of the Euroclear System [Cedel
S.A.]
By:
A-2-2
TABLE OF CONTENTS
ARTICLE AND SECTION NUMBER PAGE
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions.............................. 1
SECTION 102. Compliance Certificates and Opinions..... 10
SECTION 103. Form of Documents Delivered to Trustee... 11
SECTION 104. Acts of Holders.......................... 12
SECTION 105. Notices, etc., to Trustee and Issuer..... 14
SECTION 106. Notice to Holders; Waiver................ 14
SECTION 107. Effect of Headings and Table of Contents. 15
SECTION 108. Successors and Assigns................... 15
SECTION 109. Separability Clause...................... 15
SECTION 110. Benefits of Indenture.................... 15
SECTION 111. Governing Law............................ 15
SECTION 112. Legal Holidays........................... 16
ARTICLE TWO
SECURITIES FORMS
SECTION 201. Forms of Securities...................... 16
SECTION 202. Form of Trustee's Certificate of
Authentication........................... 17
SECTION 203. Securities Issuable in Global Form....... 17
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series..... 18
SECTION 302. Denominations............................ 22
SECTION 303. Execution, Authentication, Delivery and
Dating................................... 23
SECTION 304. Temporary Securities..................... 26
SECTION 305. Registration, Registration of
Transfer and Exchange.................... 29
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities........................ 32
SECTION 307. Payment of Interest; Interest
Rights Preserved......................... 34
i
SECTION 308. Persons Deemed Owners.................... 36
SECTION 309. Cancellation............................. 37
SECTION 310. Computation of Interest.................. 38
ii
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.. 38
SECTION 402. Application of Trust Funds............... 39
SECTION 403. Reinstatement............................ 40
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default........................ 40
SECTION 502. Acceleration of Maturity;
Rescission and Annulment................. 42
SECTION 503. Collection of Indebtedness
and Suits for Enforcement by Trustee.... 43
SECTION 504. Trustee May File Proofs of Claim......... 44
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities or Coupons...... 45
SECTION 506. Application of Money Collected........... 45
SECTION 507. Limitation on Suits...................... 46
SECTION 508. Unconditional Right of Holders
to Receive Principal, Premium, if
any, Interest and Additional
Amounts........................................... 47
SECTION 509. Restoration of Rights and Remedies....... 47
SECTION 510. Rights and Remedies Cumulative........... 47
SECTION 511. Delay or Omission Not Waiver............. 47
SECTION 512. Control by Holders of Securities......... 48
SECTION 513. Waiver of Past Defaults.................. 48
SECTION 514. Waiver of Usury, Stay or Extension Laws.. 48
SECTION 515. Undertaking for Costs.................... 49
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults....................... 49
SECTION 602. Certain Rights of Trustee................ 49
SECTION 603. Not Responsible for Recitals
or Issuance of Securities............... 51
SECTION 604. May Hold Securities...................... 51
SECTION 605. Money Held in Trust...................... 52
SECTION 606. Compensation and Reimbursement........... 52
SECTION 607. Corporate Trustee Required;
Eligibility; Conflicting Interests....... 52
iii
SECTION 608. Resignation and Removal; Appointment
of Successor............................. 53
SECTION 609. Acceptance of Appointment by Successor... 54
SECTION 610. Merger, Conversion, Consolidation or
Succession to Business................... 56
SECTION 611. Appointment of Authenticating Agent...... 56
iv
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUER
SECTION 701. Disclosure of Names and Addresses
of Holders............................... 58
SECTION 702. Reports by Trustee....................... 58
SECTION 703. Reports by Issuer........................ 58
SECTION 704. Issuer to Furnish Trustee Names and
Addresses of Holders..................... 59
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION 801. Consolidations and Mergers of
Issuer and Sales, Leases and
Conveyances Permitted Subject
to Certain Conditions................... 59
SECTION 802. Rights and Duties of Successor
Corporation.............................. 60
SECTION 803. Officers' Certificate and Opinion
of Counsel............................... 60
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures
without Consent of Holders........... 60
SECTION 902. Supplemental Indentures with
Consent of Holders....................... 62
SECTION 903. Execution of Supplemental Indentures..... 63
SECTION 904. Effect of Supplemental Indentures........ 64
SECTION 905. Conformity with Trust Indenture Act...... 64
SECTION 906. Reference in Securities to
Supplemental Indentures.................. 64
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium,
if any, Interest and Additional
Amounts................................. 64
SECTION 1002. Maintenance of Office or Agency......... 65
SECTION 1003. Money for Securities Payments
to Be Held in Trust.................. 66
SECTION 1004. Make-Whole Amount....................... 68
v
SECTION 1005. [This Section Intentionally Omitted].... 68
SECTION 1006. Existence............................... 68
SECTION 1007. Maintenance of Properties............... 68
SECTION 1008. Insurance............................... 69
SECTION 1009. Payment of Taxes and Other Claims....... 69
SECTION 1010. Provision of Financial Information...... 69
SECTION 1011. Statement as to Compliance.............. 69
SECTION 1012. Additional Amounts...................... 70
SECTION 1013. Waiver of Certain Covenants............. 71
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article................ 71
SECTION 1102. Election to Redeem; Notice to Trustee... 71
SECTION 1103. Selection by Trustee of
Securities to Be Redeemed............. 72
SECTION 1104. Notice of Redemption.................... 72
SECTION 1105. Deposit of Redemption Price............. 74
SECTION 1106. Securities Payable on Redemption Date... 74
SECTION 1107. Securities Redeemed in Part............. 75
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article................ 75
SECTION 1202. Satisfaction of Sinking Fund
Payments with Securities............... 76
SECTION 1203. Redemption of Securities for
Sinking Fund............................ 76
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. Applicability of Article................ 77
SECTION 1302. Repayment of Securities................. 77
SECTION 1303. Exercise of Option...................... 77
SECTION 1304. When Securities Presented for
Repayment Become Due and Payable........ 78
SECTION 1305. Securities Repaid in Part............... 79
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
vi
SECTION 1401. Applicability of Article;
Issuer's Option to Effect
Defeasance or Covenant Defeasance....... 79
SECTION 1402. Defeasance and Discharge................ 80
SECTION 1403. Covenant Defeasance..................... 80
SECTION 1404. Conditions to Defeasance or
Covenant Defeasance..................... 81
SECTION 1405. Deposited Money and Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions.......... 83
vii
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. Purposes for Which Meetings May
Be Called............................... 84
SECTION 1502. Call, Notice and Place of Meetings...... 84
SECTION 1503. Persons Entitled to Vote at Meetings.... 85
SECTION 1504. Quorum; Action.......................... 85
SECTION 1505. Determination of Voting Rights;
Conduct and Adjournment of Meetings.... 86
SECTION 1506. Counting Votes and Recording
Action of Meetings...................... 87
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 1601. Securities in Foreign Currencies........ 88
SECTION 1602. Non-Recourse............................ 88
Exhibits
EXHIBIT A-1
EXHIBIT A-2
viii
PWRW&G DRAFT
10/14/96
October __, 1996
Simon-DeBartolo Group, L.P.
National City Center
115 West Washington Street, Suite 15 East
Indianapolis, IN 46204
Registration Statement on Form S-3
REGISTRATION NO. 333-11491
Ladies and Gentlemen:
In connection with the above-captioned Registration Statement
on Form S-3 (the "Registration Statement") filed by Simon-DeBartolo
Group, L.P. (the "Operating Partnership") with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations promulgated thereunder, we
have been requested to render our opinion as to the legality of the
securities being registered thereunder. The Registration Statement
relates to the registration under the Act of the Operating Partnership's
non-convertible investment grade debt securities, consisting of notes or
debentures denominated in
2
United States dollars or any other currency(the "Debt Securities"). The Debt
Securities are being registered for offering and sale from time to time
pursuant to Rule 415 under the Act. The aggregate public offering price of the
Debt Securities will not exceed $750,000,000 (or its equivalent (based on the
applicable exchange rate at the time of sale) if the Debt Securities are issued
with principal amounts denominated in one or more foreign currencies or
currency units as shall be designated by the Operating Partnership).
The Debt Securities are to be issued under an Indenture to be
entered into between the Operating Partnership and Chemical Bank, as
trustee (the "Trustee"), as may be supplemented from time to time
(together, the "Indenture").
In connection with this opinion, we have examined (i)
originals, photocopies or conformed copies of the Registration Statement
(including the exhibits and amendments thereto), (ii) the form of the
Indenture filed as an exhibit to the Registration Statement, and (iii)
records of certain of the corporate proceedings of the managing general
partner of the Operating Partnership relating, among other things, to the
proposed issuance and sale of the Debt Securities. In addition, we have
made such other examinations of law and fact as we considered necessary
in order to form a basis for the opinion hereinafter expressed. In
connection with such investigation, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as
originals, the conformity to originals of all documents submitted to us
as photocopies or conformed copies and the legal capacity of natural
persons executing such documents, none of which facts we have
independently verified. We
3
have relied as to matters of fact upon certificates of officers of the managing
general partner of the Operating Partnership.
In rendering the opinion set forth below, we have assumed that
(i) the Operating Partnership has been duly organized and is validly
existing in good standing under the laws of Delaware, (ii) the Operating
Partnership has the legal power and authority to enter into and perform
its obligations under the Indentures and the Debt Securities, (iii) the
execution, delivery and performance by the Operating Partnership of the
Indentures and the Debt Securities will not conflict with or violate the
charter or by-laws of the managing general partner of the Operating
Partnership, the laws of Delaware or the terms of any agreement or
instrument to which the Operating Partnership is subject, (iv) the
Indenture will have been duly authorized, executed and delivered by the
parties thereto, and (v) the Indenture, after it has been executed and
delivered, will represent a valid and binding obligation of the Trustee.
We have also assumed, with respect to the Debt Securities of a particular
series or issuance to be offered (the "Offered Securities"), that (i) the
terms of issue and sale of the Offered Securities shall have been duly
established in accordance with the appropriate Indenture, (ii) the
Offered Securities shall have been duly authorized, issued and delivered
by the Operating Partnership and duly authenticated by the Trustee, all
in accordance with the terms of appropriate Indenture, and against
payment by the purchasers thereof at the agreed consideration therefor
and (iii) the Offered Securities, when so issued, authenticated,
delivered and sold, will represent valid and binding obligations of the
Operating Partnership under the laws of Delaware.
4
Based on the foregoing, and subject to the limitations
hereinafter set forth, we are of the opinion that:
1. The Indenture, when duly authorized, executed and delivered
by the parties thereto, will represent a valid and binding obligation of
the Operating Partnership under the laws of the State of New York,
enforceable against the Operating Partnership in accordance with its
terms, except as such enforceability may be subject to (a) bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium
or similar laws affecting creditors' rights generally, (b) general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), (c) requirements that a
claim with respect to any Debt Securities denominated other than in United
States dollars (or a judgment denominated other than in United States
dollars in respect of such claim) be converted into United States dollars
at a rate of exchange prevailing on a date determined pursuant to
applicable law and (d) the enforceability of forum selection clauses in
the federal courts.
2. When issued, authenticated and delivered, the Offered
Securities will be legal, valid and binding obligations of the Operating
Partnership under the laws of the State of New York enforceable against
the Operating Partnership in accordance with their respective terms,
except as such enforceability may be subject to (a) bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium
or similar laws affecting creditors' rights generally, (b) general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), (c) requirements that a
claim with respect to any Offered Securities denominated other than in
United States dollars (or a judgment denominated other
5
than in United States dollars in respect of such claim) be converted into
United States dollars at a rate of exchange prevailing on a date determined
pursuant to applicable law and (d) the enforceability of forum selection
clauses in the federal courts.
We express no opinion as to the enforceability of any
provisions contained in the Indenture or the Offered Securities that
constitute waivers which are prohibited under the Uniform Commercial Code
of the State of New York prior to default.
Our opinions expressed above are limited to the laws of the
State of New York and the federal laws of the United States of America.
Our opinions are rendered only with respect to the laws, and the rules,
regulations and orders thereunder, that are currently in effect.
We hereby consent to the use of our name in the Registration
Statement and in the prospectus therein as the same appears in the
caption "Legal Matters" and to the use of this opinion as an exhibit to
the Registration Statement. In giving this consent, we do not thereby
admit that we come within the category of persons whose consent is
required by the Act or by the rules and regulations promulgated
thereunder.
Very truly yours,
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
Exhibit 12.1
Computation of Ratio of Earnings to Fixed Charges
(in thousands of dollars)
SIMON-DEBARTOLO
GROUP, L.P. SIMON PROPERTY GROUP, L.P.
(SDG, LP) (SPG, LP, the Predecessor of SDG, LP)
___________________________ ________________________________________________________________________
Pro Forma for For the For the
Pro Forma for the Year For the Six For the Six Year Year
the Six Month Ended Month Period Month Period Ended Ended For the period
Period Ended December Ended Ended December December December 20 to
June 30, 1996 31, 1995 June 30, 1996 June 30, 1995 31, 1995 31, 1994 December 31, 1993
Earnings:
Income (loss) before
extraordinary items $79,308 $169,932 $47,800 $45,735 $101,505 $60,308 $ 8,707
Add:
Minority interest in
income of majority owned
subsidiaries 1,384 4,005 1,175 1,335 2,681 3,759 58
Distributed income from
unconsolidated entities
joint ventures 8,992 25,593 2,662 3,089 6,214 5,795 --
Fixed charges 140,355 261,449 83,500 78,216 154,159 154,580 3,690
Less:
Income from unconsolidated
entities joint ventures (10,372) (14,005) (3,132) (2,409) (5,140) (1,034) (43
Interest capitalized (4,246) (3,129) (3,176) (1,343) (1,515) (1,586) --
Earnings $215,421 $443,845 $128,829 $124,623 $257,904 $221,822 $12,412
Fixed Charges:
Portion of rents
representative of the
interest factor 1,661 3,224 1,190 1,216 2,420 2,087 37
Interest on indebtedness
(including amortization of
debt expense) 134,448 255,096 79,134 75,657 150,224 150,907 3,653
Interest capitalized 4,246 3,129 3,176 1,343 1,515 1,586 --
Fixed Charges $140,355 $261,449 $ 83,500 $ 78,216 $154,159 $154,580 $ 3,690
Ratio of Earnings to Fixed
Charges 1.53 1.70 1.54 1.59 1.67 1.43 3.36
Coverage Deficit
SIMON PROPERTY GROUP
(The Predecessor of SPG, LP)
____________________________________________
For the period For the Year For the Year
January 1 to Ended Ended
December 19, December 31, December 31,
1993 1992 1991
Earnings:
Income (loss) before
extraordinary items $ 6,912 $(11,692) $(15,865)
Add:
Minority interest in
income of majority owned
subsidiaries 3,558 177 (684)
Distributed income from
unconsolidated entities
joint ventures 6,076 -- --
Fixed charges 161,856 183,961 163,504
Less:
Income from unconsolidated
entities joint ventures 1,091 -- --
Interest capitalized (86) (1,306) (2,170)
Earnings $179,407 $171,140 $144,785
Fixed Charges:
Portion of rents
representative of the
interest factor 1,491 1,693 1,536
Interest on indebtedness
(including amortization of
debt expense) 160,279 180,962 159,798
Interest capitalized 86 1,306 2,170
Fixed Charges $161,856 $183,961 $163,504
Ratio of Earnings to Fixed
Charges 1.11
Coverage Deficit $ (12,821) $ (18,719)
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated February
14, 1996 included in Simon Property Group, Inc.'s Form 10-K for the year
ended December 31, 1995, as amended on April 29, 1996, and our reports
dated February 14, 1996 included in Simon Property Group, L.P.'s Form 10-
K for the year ended December 31, 1995 and to all references to our Firm
included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
October 18, 1996
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3 No. 333-11491) of Simon-DeBartolo
Group, L.P. and to the incorporation by reference therein of our reports
dated February 14, 1996, except for Note 16, first paragraph, as to which
the date is March 1, 1996, with respect to the consolidated financial
statements and schedules of DeBartolo Realty Corporation included in its
Annual Report (Form 10-K) for the year ended December 31, 1995 which is
incorporated by reference in the Prospectus/Joint Proxy Statement dated
June 28, 1996 forming a part of the Simon DeBartolo Group, Inc.'s
Registration Statement on Form S-4 (No. 333-06933) and the consolidated
financial statements of DeBartolo Realty Partnership, L.P. included in
the Current Report on Form 8-K/A on August 28, 1996, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
New York, New York
October 15, 1996
Exhibit 99.1
Certain Information with Respect
to the Simon-DeBartolo Group, L.P.
DeBartolo Realty Partnership, L.P.
Interim and Annual Financial Information
Through June 30, 1996
TABLE OF CONTENTS
Page No.
Selected Financial Data
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Statements and Supplementary Data
SUMMARY HISTORICAL FINANCIAL DATA OF DRP
The following summary historical financial data of DRP and summary combined
historical financial data of the DRP Predecessor are derived from the
Consolidated Financial Statements of DRP and the combined financial statements
of the DRP Predecessor incorporated by reference into this Prospectus
Statement.
DRP
-------------------------------
(IN THOUSANDS, EXCEPT PER UNIT
AND PROPERTY DATA)
FOR THE SIX MONTHS ENDED
JUNE 30,
-------------------------------
1996 1995
---------- ----------
OPERATING DATA:
Total revenue.......................................................... $ 176,632 $ 160,452
Depreciation and amortization.......................................... 32,432 28,348
Operating income before interest....................................... 77,821 74,511
Interest expense....................................................... 60,759 61,338
Income before extraordinary items...................................... 14,668 21,565
Extraordinary items.................................................... 9,191 --
Net Income............................................................. 23,859 21,565
EARNINGS PER UNIT:
Income before extraordinary items...................................... $ 0.17 $ 0.26
Extraordinary items.................................................... 0.10 0.00
---------- ----------
Net income............................................................. $ 0.27 $ 0.26
========== ==========
Distributions per unit................................................. $ 0.63 $ 0.63
========== ==========
Weighted average units outstanding..................................... 88,367 82,942
BALANCE SHEET DATA:
Investment properties, net............................................. $1,335,582 $1,217,595
Total assets........................................................... 1,602,282 1,556,756
Mortgages and notes payable............................................ 1,479,515 1,412,205
Partners' deficit...................................................... $ (5,575) $ (2,052)
OTHER DATA:
Cash flow provided by (used in):
Operating activities................................................. $ 78,196 $ 56,896
Investing activities................................................. (23,833) (12,110)
Financing activities................................................. (47,728) (49,880)
DRP
-------------------------------
(IN THOUSANDS, EXCEPT PER UNIT
AND PROPERTY DATA)
FOR THE SIX MONTHS ENDED
JUNE 30,
-------------------------------
1996 1995
---------- ----------
Total EBITDA (4)....................................................... $ 157,164 $ 156,388
========== ==========
PROPERTY DATA:
OCCUPANCY AT END OF PERIOD:
Regional malls(5)...................................................... 83.8% 84.0%
Community shopping centers............................................. 88.8% 91.4%
Total tenant sales (millions)(6)....................................... $ 1,229 $ 1,213
NUMBER OF PORTFOLIO PROPERTIES AT END OF PERIOD:
Regional malls....................................................... 49 50
Specialty retail and mixed-use....................................... 1 1
Community shopping centers........................................... 11 11
---------- ----------
Total............................................................. 61 62
========== ==========
AVERAGE RENT PER SQUARE FOOT AT END OF PERIOD(7):
Regional malls(5)...................................................... $ 20.18 $ 18.80
Community shopping centers............................................. $ 7.44 $ 7.22
MALL GLA (IN THOUSANDS OF SQUARE FEET). .................... 15,102 15,300
SUMMARY HISTORICAL FINANCIAL DATA OF DRP (CONTINUED)
DRP DRP PREDECESSOR
--------------------------- ---------------------------------------------------
(IN THOUSANDS, EXCEPT PER UNIT AND PROPERTY DATA)
FOR THE FOR THE
FOR THE PERIOD FROM PERIOD FROM
YEAR ENDED APRIL 21 TO JANUARY 1 TO
DECEMBER 31, DECEMBER 31, APRIL 20, FOR THE YEAR ENDED DECEMBER 31,
------------ ------------ ------------ ------------------------------------
1995 1994 1994 1993 1992 1991
------------ ------------ ------------ ---------- ---------- ----------
OPERATING DATA:
Total revenue........................ $ 332,657 $ 228,943 $95,272 $ 308,955 $ 295,899 $ 281,835
Depreciation and amortization........ 58,603 39,578 16,616 54,227 54,751 48,939
Operating income before interest..... 155,556 104,672 43,008 135,200 118,204 122,293
Interest expense..................... 124,567 87,040 44,119 152,683 155,927 157,070
Income (loss) before extraordinary
items.............................. 46,343 27,668 3,905 (9,762) (25,448) (22,095)
Extraordinary items.................. (11,267) (8,932) -- -- -- --
---------- ---------- ------- ---------- ---------- ----------
Net income (loss).................... $ 35,076 $ 18,736 $ 3,905 $ (9,762) $ (25,448) $ (22,095)
========== ========== ======= ========== ========== ==========
EARNINGS PER UNIT:
Income before extraordinary items.... $ 0.53 $ 0.34 N/A N/A N/A N/A
Extraordinary items.................. (0.13) (0.11) N/A N/A N/A N/A
---------- ----------
Net income (loss).................... $ 0.40 $ 0.23 N/A N/A N/A N/A
========== ==========
Distributions per unit............... $ 1.26 $ 0.875 N/A N/A N/A N/A
Weighted average units outstanding... 85,722 82,540 N/A N/A N/A N/A
BALANCE SHEET DATA:
Investment properties, net........... $1,219,325 $1,217,838 N/A $1,228,453 $1,257,962 $1,215,663
Total assets......................... 1,531,994 1,572,970 N/A 1,645,080 1,683,717 1,674,802
Mortgages and notes payable(1)....... 1,348,573 1,409,827 N/A 1,628,711 1,612,748 1,569,798
Partners' equity and owners'
(deficit).......................... $ 44,815 $ 27,279 N/A $ (114,702) $ (79,524) $ (68,933)
OTHER DATA:
Cash flow provided by (used in):
Operating activities............... $ 108,900 N/A N/A N/A N/A N/A
Investing activities............... (47,542) N/A N/A N/A N/A N/A
Financing activities............... (74,406) N/A N/A N/A N/A N/A
Cash generated before debt
repayments and capital
expenditures(2).................... $ 128,200 N/A N/A N/A N/A N/A
(IN THOUSANDS, EXCEPT PER UNIT AND PROPERTY DATA)
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
EBITDA(3):
Wholly-owned and consolidated joint venture
portfolio properties........................ $ 214,369 $ 207,932 $ 189,427 $ 177,437 $ 171,232
Non-consolidated joint venture properties..... 95,563 92,796 85,325 81,277 75,491
---------- ---------- ---------- ---------- ----------
Total of portfolio properties................. $ 309,932 $ 300,728 $ 274,752 $ 258,714 $ 246,723
========== ========== ========== ========== ==========
EBITDA after minority interest................ $ 251,563 $ 240,740 $ 217,508 $ 201,902 $ 179,156
PROPERTY DATA:
OCCUPANCY AT END OF PERIOD:
Mall GLA leased at end of year.............. 84.4% 85.0% 86.2% 87.2% 88.7%
Mall store sales (in thousands)............. $2,813,254 $2,786,625 $2,805,182 $2,782,239 $2,682,069
NUMBER OF PROPERTIES AT END OF PERIOD:
Regional malls.............................. 51 51 51 51 51
Community shopping centers.................. 11 11 11 11 11
---------- ---------- ---------- ---------- ----------
Total.................................... 62 62 62 62 62
========== ========== ========== ========== ==========
AVERAGE BASE RENT PER SQUARE FOOT FOR
DEBARTOLO MALLS............................. $ 19.78 $ 19.39 $ 18.49 $ 17.54 $ 16.40
MALL GLA (IN THOUSANDS OF SQUARE FEET)........ 15,163 15,300 14,945 14,886 14,926
- - ---------------
DRP SUMMARY HISTORICAL FOOTNOTES
(1) DRP's pro rata share of mortgages and notes payable (including
nonconsolidated joint ventures) was $1,555,099 as of December 31, 1995.
(2) Industry analysts generally consider cash generated before debt repayments
and capital expenditures (also commonly referred to as funds from
operations) to be an appropriate measure of the performance of an equity
REIT. Cash generated before debt repayments and capital expenditures
represents net income (loss) (computed in accordance with generally accepted
accounting principles), excluding gains (losses) from debt restructuring and
sales of property (other than adjacent land located at DRP properties after
April 21, 1994), plus depreciation and amortization and other non-cash
items. DRP's management believes that cash generated before debt repayments
and capital expenditures is an important and widely used measure of the
operating performance of REITs which provides a relevant basis for
comparison among REITs. Cash generated before debt repayments and capital
expenditures is presented to assist investors in analyzing the performance
of DRP. DRP's method of calculating cash generated before debt repayments
and capital expenditures may be different from the methods used by other
REITs to calculate funds from operations. Cash generated before debt
repayments and capital expenditures: (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii)
should not be considered as an alternative to net income as a measure of
operating performance or to cash flows from operating, investing and
financing activities; and (iii) is not an alternative to cash flows as a
measure of liquidity. In March 1995, NAREIT modified its definition of cash
generated before debt repayments and capital expenditures. The modified
definition provides that amortization of deferred financing costs and
depreciation of non-rental real estate assets are no longer to be added back
to net income in arriving at cash generated before debt repayments and
capital expenditures. The modified definition has been adopted for the
period ended March 31, 1996 and included the add-back of certain formation
costs of $2,400 for such period as an unusual item. The cash
generated before debt repayments and capital expenditures for period ended
December 31, 1995 has been restated to $128,200 which includes the add-back
of certain formation costs of $12,700 for such period as an unusual item.
(3) Total EBITDA represents earnings before interest, taxes, depreciation and
amortization for all properties. EBITDA after minority interest represents
earnings before interest, taxes, depreciation and amortization for all
properties after distribution to the third-party joint venture partners.
EBITDA: (i) does not represent cash flow from operations as defined by
generally accepted accounting principles; (ii) should not be considered as
an alternative to net income as a measure of operating performance or to
cash flows from operating, investing and financing activities; and (iii) is
not an alternative to cash flows as a measure of liquidity. DRP's management
believes that in addition to cash flows and net income, EBITDA is a useful
financial performance measurement for assessing the operating performance of
an equity REIT because, together with net income and cash flows, EBITDA
provides investors with an additional basis to evaluate the ability of a
REIT to incur and service debt and to fund acquisitions and other capital
expenditures. To evaluate EBITDA and the trends it depicts, the components
of EBITDA, such as revenues and operating expenses, should be considered.
DRP's method of calculating EBITDA may be different from the methods used by
other REITs. DRC's weighted average share of the operating results for the
six months ended June 30, 1996 and 1995 was 61.9% and 58.8% and was 59.6%
in 1995. DRC's share of DRP was 61.9% and 58.8% at June 30, 1996 and 1995,
respectively, and was 61.8% and 58.8% at December 31, 1995 and 1994,
respectively.
Management Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion should be read in conjunction with the "Selected
Financial Information," and all of the Financial Statements and Notes thereto
appearing elsewhere in this exhibit.
General Background
The following discussion is based primarily on the Consolidated Financial
Statements of DeBartolo Realty Partnership, L.P. and the Combined Financial
Statements of the DeBartolo Retail Group (Predecessor).
The financial statements of DeBartolo Realty Partnership, L.P. for the 255
days from April 21, 1994 to December 31, 1994, are not indicative of the OP's
operating results and cash flows on an annual basis. Similarly, the results
presented in the financial statements of DeBartolo Retail Group (Predecessor)
include 110 days of 1994. Therefore, Management's Discussion and Analysis of
Operating Results and Cash Flows for 1994 will be presented on a combined
basis.
Comparison of Consolidated Operating Results for
the Year ended December 31, 1995 to the Year ended December 31, 1994
Revenues. Total revenues increased $8.5 million, or 2.6%, to $332.7
million for the year ended December 31, 1995 from $324.2 million for the year
ended December 31, 1994. The $2.2 million increase in minimum rents to $205.0
million in 1995 from $202.8 million in 1994 reflects continued improvements in
rental rates and the leasing of space, some of which space was previously
vacant to anchors and specialty anchors at three DeBartolo Properties. This
increase is net of a $1.7 million decrease in minimum rents for leases
terminated, in part, due to the OP's ongoing strategy to recapture
underproductive space.
Tenant recoveries increased $1.0 million, or 1.2%, to $82.1 million in
1995 from $81.1 million in 1994 reflecting the OP's strategy to improve
operating expense recovery margins. Other revenues increased $4.9 million, or
17.8%, to $32.5 million in 1995 from $27.6 million in 1994 due to (i) a $1.9
million increase in specialty leasing income, (ii) a $1.7 million increase in
interest income, (iii) a $1.0 million increase in promotional revenue which was
partially offset by the increase in advertising expenses as set forth in the
paragraph below, and (iv) a $0.5 million increase in lease cancellation income.
As the OP's leased area percentage increases significant growth in specialty
leasing income may be limited. Approximately $5.0 million in 1995 and $4.5
million in 1994 of other revenues is attributable to income received by the OP
from lessees' cancellation of leases. Historically lease cancellation income
has been lower than it has been in 1994 and 1995.
Shopping Center Expenses. Shopping center expenses increased $2.0
million, or 1.7%, to $118.3 million in 1995 from $116.3 million in 1994.
Property operating expenses increased $0.9 million, or 2.5%, primarily due to
increased utility and security costs. Repairs and maintenance expense
decreased $1.1 million, or 3.8%, predominantly due to a reduction in snow
removal costs. Advertising expenses increased $0.6 million due to increased
promotional efforts offset by the above-mentioned increase in promotional
revenues.
Interest Expense. Interest expense decreased $6.6 million, or 5.0%, to
$124.6 million in 1995 from $131.2 million in 1994, primarily resulting from
loan paydowns with the proceeds of the Company's two public stock offerings and
related transactions. Interest expense in 1995 includes (i) $11.1 million of
amortization relating to the refinancing of debt, (ii) $0.5 million of
amortization of deferred financing costs, (iii) $4.2 million relating to the
write-off of assigned interest rate protection agreements and (iv) $3.1 million
of amortization relating to interest rate protection agreements. Interest
expense in 1994 included (i) $11.4 million of amortization relating to the
refinancing of debt and (ii) $2.6 million of amortization relating to interest
rate protection agreements.
Joint Ventures. Net income of the nonconsolidated joint ventures
decreased $3.7 million to $13.7 million in 1995 from $17.4 million in 1994.
Minimum rents increased $2.6 million, resulting from (i) the opening of a new
department store during the fourth quarter of 1994 and (ii) the continued
improvement in rental rates for reletting Mall Store space. Percentage rents
decreased $0.2 million, from $6.2 million in 1994 to $6.0 million in 1995. The
decrease was due to (i) increases in base minimum rents on new leases which
affects percentage rents paid by such tenants and (ii) decreased sales of
certain tenants. Tenant recoveries increased $0.6 million due to an increase
in recoverable expenses. Other revenues increased $1.2 million, primarily due
to a $0.9 million increase in specialty leasing revenues and a $1.2 million
increase in advertising revenues offset by a $0.6 million decrease in lease
cancellation income.
Shopping center expenses increased $1.5 million, primarily resulting from
a $0.7 million increase in repairs and maintenance and a $1.0 million increase
in advertising expenses. Interest expense increased $4.6 million due to
increasing interest rates on variable rate debt and increased principal
outstanding relating to the financing of an Anchor addition. Depreciation and
amortization increased $0.8 million and gains on sale of assets decreased $1.0
million.
The OP's share of income from nonconsolidated joint ventures increased
$0.5 million to $8.9 million in 1995 from $8.4 million in 1994. This increase
is greater than the nonconsolidated joint ventures' change in net income
because the OP receives substantially all the economic benefit of three joint
ventures as a result of advances made to these joint ventures at the REIT
Formation.
Net Income. Net income increased by $12.4 million to $35.1 million in
1995 from $22.6 million in 1994 as a result of (I) the above-mentioned
fluctuations in revenues, shopping center expenses, interest expense and income
from unconsolidated joint ventures, (ii) a $3.8 million decrease in deferred
stock expense since deferred stock awards did not vest because the Company did
not achieve the targeted levels in 1995 as set forth in the Company's long-term
incentive deferred stock plan and (iii) the 1995 extraordinary charge resulting
from prepayment penalties of $3.4 million and the write-off of unamortized
deferred financing costs of $7.9 million relating to early retirement of
mortgage notes payable (the $8.9 million extraordinary charge in 1994 resulted
from prepayment penalties and the write-off of unamortized deferred financing
costs).
Depreciation and amortization increased $2.4 million, or 4.3%, resulting
from depreciation on capital projects completed during 1994 and 1995.
Investing Activities. Net cash used in investing activities totaled $47.5
million for the year ended December 31, 1995, principally comprised of
additions to investment properties of $51.3 million (see "Capital
Expenditures"), purchases of short-term investments of $9.7 million, and
advances to and investments in nonconsolidated joint ventures of $8.5 million.
These investments are offset by distributions from nonconsolidated joint
ventures of $19.4 million and proceeds from the sale of assets of $6.3 million.
Net cash used in investing activities for the year ended December 31, 1994
totaled $90.0 million, principally comprised of (i) $27.1 million of additions
to investment properties, (ii) $22.8 million to purchase two development sites
and partnership interests, and (iii) $53.8 million advanced to nonconsolidated
joint ventures to pay down property mortgage debt, offset by distributions from
nonconsolidated joint ventures of $12.9 million.
Financing Activities. Net cash used in financing activities totaled $74.4
million for the year ended December 31, 1995, primarily comprised of
distributions paid of $106.5 million and payments on mortgage and notes payable
of $178.1 million. These uses were funded through cash flow from operations of
$108.9 million, proceeds from incurrence of debt of $116.8 million, proceeds
from net offerings of common stock of $80.4 million and a decrease in
restricted cash of $21.8 million. Net cash provided by financing activities of
$29.5 million for the year ended December 31, 1994 was primarily from the
general partner's contribution of proceeds of the REIT Formation less (i)
paydowns of property mortgage debt and interest rate buydowns, (ii)
distributions to the DeBartolo Group's parent company and (iii) distributions
paid.
Comparison of Consolidated Operating Results for
the Year ended December 31, 1994 to the Year ended December 31, 1993
Revenues. Total revenues increased $15.2 million, or 4.9%, to
$324.2 million for the year ended December 31, 1994 from $309.0 million for the
year ended December 31, 1993. The increase is due primarily to an increase in
minimum rentals of $8.2 million, or 4.2%, resulting from continued improvements
in rental rates for reletting of Mall Store spaces and the leasing of a major
office tenant space which commenced July 1, 1993. Percentage rents decreased
$1.3 million, or 9.2%, primarily due to increases in base minimum rents which
offsets percentage rents from such tenants and decreased sales for certain
tenants.
Other revenues increased $9.3 million, or 50.8 %, to $27.6 million in
1994 from $18.3 million in 1993. This increase is primarily attributable to a
$3.3 million increase in lease cancellation payments which totaled $4.5 million
received during 1994 from underproductive tenants and an increase of $2.1
million in interest income earned as a result of increased cash resulting from
the general partners' contribution of proceeds from the REIT Formation and a
$1.7 million increase from specialty and temporary leasing which totaled $10.8
million in 1994.
Shopping Center Expenses. Total shopping center expenses decreased
$3.2 million, or 2.7%, to $116.3 million in 1994 from $119.5 million in 1993.
This decrease reflects the OP's continued efforts to contain operating expenses
at its properties. Management fees paid to the Property Manager decreased $1.6
million and the OP's provision for doubtful accounts decreased $1.3 million as
a result of the OP's focus on increasing the collectibility of accounts
receivable.
Interest Expense. Interest expense decreased $21.5 million, or 14.1%, to
$131.2 million in 1994 from $152.7 million in 1993. The decrease is the result
of mortgage loan paydowns and interest rate buydowns in connection with the
general partner's contribution of proceeds from the REIT Formation. Interest
expense in 1994 includes $11.4 million of amortization and $2.6 million of
amortization of interest rate protection agreements while in 1993 interest
expense included only $4.4 million of loan cost amortization.
Joint Ventures. Net income of the nonconsolidated joint ventures
increased $11.6 million to $17.4 million in 1994 from $5.8 million in 1993. The
increase is primarily due to (i) a $6.1 million increase in minimum rentals
resulting from continued improvements in rental rates for reletting of Mall
Store space, (ii) a $2.0 million increase in lease cancellation income from
underproductive tenants and (iii) a decrease in interest expense of
$5.6 million resulting from refinancings of permanent mortgages at lower
interest rates at two DeBartolo Malls and the result of mortgage loan paydowns
in connection with the use of proceeds resulting from the REIT Formation. The
OP's share of net income from nonconsolidated joint ventures increased $8.7
million to $8.4 million in 1994 from a $.3 million loss in 1993.
Net Income. Net income increased by $32.4 million to $22.6 million in
1994 from a loss of $9.8 million in 1993 as a result of (i) the above-mentioned
fluctuations in revenues, shopping center expenses, interest expense and income
from nonconsolidated joint ventures, (ii) a $4.1 million deferred stock
compensation expense relating to stock incentive plans, which stock will vest
pro rata through 1996 and (iii) extraordinary charges of $8.9 million resulting
from prepayment penalties and the write-off of unamortized deferred financing
costs related to the satisfaction of mortgage notes payable.
Investing Activities. Net cash used in investing activities increased
$79.5 million to $90.0 million in 1994 from $10.5 million in 1993 primarily
resulting from (i) $22.8 million to purchase two developmental land parcels and
purchases of partnership interests and (ii) $53.8 million advanced to joint
ventures to paydown mortgage debt.
Financing Activities. Net cash provided by financing activities increased
$54.8 million to $29.5 million in 1994 from funds used by financing activities
of $25.3 million in 1993. This increase reflects $543.9 million proceeds from
the public offering of common stock and $455.0 million of securitized debt
proceeds offset by (i) an increase in debt payments of $676.1 million, (ii)
$130.4 million of distributions to the DeBartolo Group, (iii) an increase of
$67.7 million for loan costs and interest rate buydowns, (iv) $46.4 million of
distributions paid, (v) an increase in restricted cash of $39.0 million and
(vi) $11.0 million from a decrease in payments on net affiliated receivables.
Portfolio Trends
The following sets forth the operating trends which have had a material effect
and which the OP believes will have a material effect on revenues in the
future.
Rental Rates
The rate of growth in rental rates of DeBartolo Properties exceeds the
rate of growth in Total Mall Store Sales (defined as sales reported by
retailers occupying Mall GLA) because as older leases expire, new leases are
negotiated at current rental rates which are generally higher than average
rates for expiring leases. Average minimum rents per square foot for DeBartolo
Malls increased by 20.6% to $19.78 for the year ended December 31, 1995 from
$16.40 for the year ended December 31, 1991.
The following table contains certain information relating to average minimum
rents at the DeBartolo Malls:
Historical Mall Store Minimum Rent
Average Initial Ending
Portfolio Minimum Minimum Minimum
Average Rent Rent Rent
Minimum of Leases of Leases of Leases
Rent of Executed Executed Expiring
Year Ended All During the During the During
December 31, Leases Year (1)(2) Year (1)(3) the Year
------------- -------- ---------- --------- --------
1995 $ 19.78 $ 26.60 $ 25.10 $ 20.46
1994 19.39 24.33 23.01 18.69
1993 18.49 24.31 23.06 17.08
1992 17.54 22.55 21.03 15.86
1991 16.40 23.09 21.65 14.53
____________________________
(1) Includes relet space only for leases executed and commenced during the
respective years.
(2) Average over the term of the lease, which reflects contractual rent
increases over the term of the leases.
(3) Total initial minimum rent per square foot, excluding leases with
specialty anchors, was $26.51 for 1995 and $25.01 for 1994. There was no
leasing activity with specialty anchors during 1991 through 1993.
Management believes that these positive trends in rental rates should
continue in 1996 due to, among other factors, expiring leases being replaced by
new leases with higher minimum rents, gradual leasing of additional unleased
space and the lease-up of recaptured underproductive space.
The revenues of the OP may be adversely affected by the inability to
collect rent due to bankruptcy or insolvency of tenants or otherwise. Two
department store companies operating six Anchors at the DeBartolo Properties
are operating under the protection of the United States Bankruptcy Code. At
December 31, 1995, leases (excluding rejected leases) of Anchor tenants open
and operating in bankruptcy comprise approximately 1% of Total GLA. Annual
rentals paid by these Anchor tenants comprised 2.5% of minimum rents paid by
Anchor tenants. At December 31, 1995, leases (excluding rejected leases) of
Mall Store tenants open and operating in bankruptcy comprise approximately 6.1%
of Mall GLA. Annual rentals paid by these Mall Store tenants comprised 5.6% of
minimum rents paid by Mall Store tenants. Substantially all of these tenants
are currently meeting their contractual obligations at the DeBartolo
Properties. At the time a tenant files for bankruptcy protection it is
difficult to determine to what extent these tenants will reject their leases or
seek other concessions as a condition to continued occupancy. The OP expects
certain of these tenants to reject their leases. Based on past experience, the
OP has been able to offset, over a reasonable period of time, the impact on
minimum rents caused by a tenant in bankruptcy.
1995 Leasing
During 1995, new leases commenced on 1,377,525 square feet of space in
DeBartolo Malls at an average initial rent of $22.27, a 1.8% increase over the
1,352,744 square feet of space covered by new leases that commenced during
1994. Included in the lease activity for 1995 were leases for 213,485 square
feet to four specialty anchors. Included in the 1995 lease commencements, are
leases to mall shop tenants on 955,666 square feet of previously leased space,
excluding specialty anchors. The average initial rent on this space was $26.51
per square foot representing a 20.2% increase over the average expiring rents
of $22.06 per square foot for this space. The $26.51 per square foot
represents a 6.0% increase over the $25.01 per square foot of initial rent for
leases commenced on previously leased space during 1994.
Mall Store Sales
From 1991 through 1995 reported Total Mall Store Sales of all DeBartolo
Malls, including Large Space Users (defined as theaters, drug stores, variety
stores, cafeterias and other large stores (e.g., health spas, hardware, tire,
furniture and specialty stores) ), increased 4.9% from $2.68 billion to
$2.81 billion. Total Mall Store Sales are an important factor contributing to
the level of revenues generated by the DeBartolo Malls because such sales
ultimately influence the total occupancy cost a tenant can pay. Total Mall
Store Sales measure a mall portfolio's ability to generate sales over its total
square footage and may be affected by occupancy. Total Mall Store Sales
increased 1.0% from $2.79 billion in 1994 to $2.81 billion in 1995.
Comparable Mall Store Sales
Comparable Mall Store Sales (defined as sales reported by Mall Store
tenants (excluding Larger Space Users) that occupied Mall GLA for two
consecutive years) are used to measure the ability of existing tenants to
increase their sales in the same leased area from year to year. Comparable
Mall Store Sales (excluding Large Space Users) increased between 1994 and 1995
primarily reflecting the introduction of more highly productive tenants into
the comparable store base and the closure of stores by weak retailers. The
increase is consistent with the OP's strategy of actively managing the tenant
mix to capitalize on current shopping trends.
The following table sets forth the changes in Comparable Mall Store Sales
from 1991:
1995 1994 1993 1992 1991
------ ------ ------ ------- ------
Comparable Mall Store
sales per square foot
for DeBartolo Malls $267 $260 $263 $260 $250
Percentage growth from
previous year 2.7% (1.2%) 1.2% 4.0% --
Cumulative growth
percentage from 1991 6.7% 4.0% 5.2% 4.0% --
Occupancy Costs
Another factor influencing the OP's ability to increase rents is occupancy
cost. Occupancy cost consists of minimum rent, percentage rent and
contributions to operating expenses paid by the tenants. The OP is able to
increase rents in part by containing its tenants' operating costs. Since 1991,
while the Comparable Mall Store Sales per square foot have grown 6.7%, the OP
has been able to increase minimum rents 18.5% while maintaining the tenants
occupancy costs at an acceptable level. For all DeBartolo Properties,
operating expenses recoverable from tenants increased only $1.6 million, or
1.1% to $145.0 million in 1995 from $143.4 million in 1994. Management
believes continuing efforts to increase Comparable Mall Store Sales while
controlling property operating expenses will continue the trend of increasing
rents at DeBartolo Malls.
The following table shows occupancy costs at DeBartolo Malls as a
percentage of Mall Store Sales.
DeBartolo Malls Historical Occupancy Cost
as a Percentage of Mall Store Sales (1)
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
Minimum rents 8.4% 8.3% 8.1% 7.8% 7.7%
Percentage rents 0.3 0.4 0.5 0.6 0.7
Recoverable expenses (2) 3.8 3.7 3.6 3.3 3.1
Total Occupancy Costs 12.5% 12.4% 12.2% 11.7% 11.5%
_________________
(1) Excludes Anchors.
(2) Includes common area maintenance costs, real estate taxes and
promotional expenses.
Leased Area
At December 31, 1995, 84.4% of the total Mall GLA at the DeBartolo Malls
was leased, as compared to 85.0% at December 31, 1994. This decline, in part,
reflects the current weak retailing environment that is putting pressure on
leasing of Mall Store space in the DeBartolo Malls. The OP is applying its
leasing strategies with the goal of increasing the productivity of space on a
tenant sales and minimum rent basis. The OP's selective recapture of
underproductive leased space has added to vacancy rates but may allow for more
profitable and productive leasing in the future. During 1995, 570,000 square
feet or 3.8% of Mall GLA, was recovered, of which 330,000 square feet was due
to bankruptcies, and the balance was a result of space recovered from variety
stores and lease cancellations. As a result, although overall leasing activity
remained strong during the year, a decline in tenant renewals combined with an
increase in the number of tenants that closed stores caused a decrease in Mall
GLA leased. At December 31, 1995, the OP had leases for 282,000 square feet of
currently vacant space, or 1.9% of Mall GLA, that has been negotiated and
presented to tenants for execution.
The following table sets forth the percentage of Mall GLA leased at the
DeBartolo Malls over the last five years.
Percentage of Mall
GLA Leased at the
December 31, DeBartolo Malls
1995 84.4%
1994 85.0
1993 86.2
1992 87.2
1991 88.7
Seasonal Nature of Regional Shopping Center Industry
The regional shopping center industry is seasonal in nature. Mall Store
sales and leased Mall GLA are highest in the fourth quarter due to the
Christmas selling season. Back-to-school and Easter events also result in
sales fluctuations.
Total Mall Store Sales and leased Mall GLA at the DeBartolo Malls on a
quarterly basis were as follows:
% of Mall Store Sales Leased Mall GLA
1995 1994 1995 1994
1st Quarter 21.0% 21.3% 84.0% 85.1%
2nd Quarter 22.2% 21.7% 84.0% 83.8%
3rd Quarter 22.9% 22.7% 83.3% 84.1%
4th Quarter 33.9% 34.3% 84.4% 85.0%
100.0% 100.0%
Minimum rental rates and tenant recoveries generally are not subject to
seasonal factors. However, the majority of new stores open in the second half
of the year in anticipation of the Christmas and back-to-school selling
seasons. Accordingly, occupancy levels and therefore revenues are lower in the
first two quarters and highest in the fourth quarter. The majority of store
closings occur in the first quarter after the more profitable holiday season.
LIQUIDITY AND CAPITAL RESOURCES
General
As of December 31, 1995, the OP's balance of cash and cash equivalents,
restricted cash and short term investments less amounts held for unitholder
distributions was $25 million, including its proportionate share of cash held
by unconsolidated joint ventures. In addition to its cash reserves, the OP has
unused borrowing capacity of approximately $225 million, which use is
restricted in some instances to certain properties. Capital available includes
contractual borrowing commitments, subject to customary lender approval rights,
of approximately $82.8 million for capital expenditures on properties securing
the respective mortgages.
Financings and Refinancings
During 1995, the OP completed various financing and refinancing activities
which unencumbered three properties.
DeBartolo Realty Corporation completed a public offering of 6,000,000
shares of common stock in August, 1995 generating net proceeds of approximately
$80.4 million. These proceeds were contributed to the operating partnership in
exchange for units and principally used to repay existing mortgage debt at two
properties. The OP also drew $50.0 million under its then existing revolving
credit facility to repay existing debt at one property in anticipation of a
redevelopment and expansion of this property. The OP also unencumbered two
additional properties with a lender by assigning the liability for these
mortgage notes to two other properties currently encumbered with mortgages due
to this lender.
In December, 1995 the OP expanded its revolving credit facility from $50
million to $120 million (availability increased to $94.5 million, $55 million
of which was immediately drawn) with a future expansion to $150 million
(increasing availability to $144.5 million) in the first quarter of 1996. This
facility is secured by three properties, two of which were unencumbered by the
above-mentioned transactions. This new 3-year facility carries an interest
rate of LIBOR plus 175 basis points, representing a 50 basis point reduction in
interest rates from the prior facility. The OP estimates its share of
borrowing capacity for four unencumbered properties is approximately
$88 million.
In May, 1995 the OP extended the maturity of the debt on one property for
18 months which also increased the note rate from 6.4% to 8.34% for this
period. Three loans totaling $44.1 million for one DeBartolo Property were
refinanced in September, 1995 for a total of $59.5 million ($46.5 million
currently outstanding), providing additional borrowing of $13.0 million to be
drawn upon over the next twelve months for the expansion and renovation of that
property. The new debt has an interest rate of 7.43% and matures in September,
2007. The weighted average interest rate on the maturing debt was 9.20%. A
loan in the amount of $55 million was restructured in December, 1995 at the
same principal amount, which extended the maturity by seven years and reduced
the interest rate from 8.88% to 7.42%.
Debt
The OP's pro rata share of debt is approximately $1.55 billion which
includes the OP's pro rata share of debt applicable to the nonconsolidated
joint ventures of $249.5 million. The OP's pro rata share of total floating
rate debt is $275.5 million and is subject to the below-mentioned interest rate
swaps and interest rate caps. Interest savings resulting from the rate caps
totaled $2.8 million in 1995.
During December 1995, the OP entered into an interest rate swap agreement
to pay LIBOR at (i) 4.75% on approximately $218 million of debt through April
1997 and (ii) 5.71% on $87.2 million of debt from May 1997 through April 2001.
As part of this arrangement, the OP assigned the following interest rate caps
(i) 4.75% through April 1996 and 5.25% from May 1996 through April 1997 on
approximately $131 million of debt and (ii) 4.75% through April 1996 on
$87.2 million of debt. The OP has an interest rate cap which limits interest
on $87.2 million of debt to no more than LIBOR of 8.44% for the period May 1996
through March 2001. The effect of this transaction is to extend the former
interest rate protection agreements beyond their expiration dates at interest
rates that are equal to or less than the prior agreement levels.
Loans maturing during 1996 total $151.1 million for three consolidated
properties and $25.9 million for two nonconsolidated joint ventures. The OP
expects to refinance $137.7 million relating to two of the consolidated
properties and has conveyed ownership of a third property to its lender
effective as of March 1, 1996, thereby fully satisfying the outstanding balance
of $13.4 million. The OP has extended or anticipates extending the maturity
dates relating to the mortgages of the two nonconsolidated joint ventures.
The interest coverage ratio based on the OP's share of EBITDA and interest
expense was 2.09:1 in 1995 and 2.02:1 in 1994.
Capital Resources
The OP's management anticipates that its cash generated from operating
performance will provide the necessary funds for its operating expenses,
interest expense on outstanding indebtedness, recurring capital expenditures
and distributions. The OP also believes that it has capital and access to
capital resources, including additional borrowings and issuances of debt,
sufficient to expand and develop its strategic plan for growth.
Capital Expenditures
Strategic Expansions and Renovations. Historically, expansions and major
renovations of DeBartolo Malls have been a substantial source of increased cash
flow. The OP focuses its expansion and renovation programs primarily where
additions, expansions or replacements of Anchors are planned and where market
rents on major lease rollovers can be further increased. The addition of food
courts, theaters and other traffic-generating tenants are frequently integrated
with these programs. The effect is to leverage renovation dollars by targeting
key opportunities to reinvigorate the merchandising, leasing and marketing of a
mall and its peripheral property. Related investments by Anchors in expanding
or renovating their stores provide additional leverage. The OP announced
during the quarter ending September 30, 1995 plans to invest approximately
$500 million over a five year period in strategic redevelopment programs at the
DeBartolo Properties ("Planned Capital Investment Strategy").
The following table sets forth the components of capital expenditures
showing both the total capital expenditures and the amount attributable to the
OP's interest in the DeBartolo Properties:
Total Portfolio Capital Expenditures
(In Millions)
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
New Developments $ 6.6 $ 21.7 $ 3.7 $ 12.4 $ 71.8
Renovations and Expansions 51.7 72.0 43.5 21.6 16.3
Tenant Allowances 9.4 11.3 4.9 7.3 5.3
------- ------- ------- ------- -------
Total $ 67.7 $ 105.0 $ 52.1 $ 41.3 $ 93.4
======= ======= ======= ======= =======
OP's Share of Total
(In Millions)
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
New Developments $ 6.6 $ 21.7 $ 3.7 $ 12.4 $ 65.7
Renovations and Expansions 41.5 24.1 23.7 12.7 15.0
Tenant Allowances 7.0 8.5 4.8 6.7 4.9
------- ------- ------- ------- -------
Total $ 55.1 $ 54.3 $ 32.2 $ 31.8 $ 85.6
======= ======= ======= ======= =======
The following summarizes the total portfolio capital expenditures for 1995
as shown on the statements of cash flows:
Total Per New Renovations
Statements Develop- and Tenant
of cash flow ments ExpansionsAllowances
Consolidated Properties $ 51.3 $ 6.6 $ 38.0 $ 6.7
Nonconsolidated Properties 9.7 -- 7.9 1.8
Property accounted for
under the cost method 6.7 -- 5.8 0.9
------ ----- ------ -----
Totals $ 67.7 $ 6.6 $ 51.7 $ 9.4
====== ===== ====== =====
Capital expenditures in 1995 for new developments primarily represent
costs to develop Indian River Mall and an adjacent community center in Vero
Beach, Florida.
The OP completed strategic renovations and expansions at ten properties in
1995. The aggregate costs of the projects completed was $36 million of which
the OP's share was approximately $30 million. The table below summarizes
strategic expansions and renovations completed during 1995. The OP's share of
capital expenditures relating to these projects totaled $27.7 million in 1995.
Owned/
Leased
Additional By
Property Activity Space Sq. Ft. Anchor
- --------------- ---------- ------------- ---------- -------------
Bay Park Square Expansion
Renovation/ Kohl's 20,000 Owned
Addition Elder-Beerman(1) 75,000 Leased
Addition Theatre 32,913 Ground Leased
Addition Food Court 7,000 --
Renovation Mall GLA -- --
Biltmore Square Addition Goody's 30,000 Leased
Cheltenham Square Addition ShopRite 65,701 Leased
Addition Home Depot 130,000 Ground Leased
Coral Square Renovation Mall GLA -- --
Eastern Hills Mall Addition Waccamaw 45,000 Leased
Glen Burnie Mall Addition Dick's
Sporting Goods 61,000 Leased
Expansion Toys "R" Us 7,000 Leased
Renovation Mall GLA -- --
Lima Mall Expansion Elder-Beerman(1) 26,351 Leased
Southern Park Mall Expansion/
Renovation Dillard's 52,000 Owned
Virginia Center
Commons Addition Sears 129,934 Owned
West Town Mall Addition Mall GLA 65,000 --
________________________________
(1)Tenant operating under bankruptcy protection.
The table below summarizes strategic expansions and renovations for which
construction or predevelopment was in process at December 31, 1995. In 1995,
the OP's share of capital expenditures relating to these projects was
approximately $14 million.
Owned/
Leased
Planned Additional By Anchor/
Property Activity Space Sq. Ft. Specialty Anchor
Aventura Mall Expansion JCPenney 60,000 Leased
Expansion Lord & Taylor 40,000 Ground Leased
Expansion Sears 22,000 Owned
Addition Theatre 85,000 Leased
Addition Bloomingdale's 252,000 Ground Leased
Addition Mall GLA 250,000 --
Addition Parking Deck -- --
Chautauqua Mall Addition JCPenney 55,000 Leased
Addition Office Max 24,000 Leased
Addition JoAnn Fabrics 11,000 Leased
Addition Food Court 4,000 --
Renovation Mall GLA -- --
Lafayette Square Expansion L.S. Ayres 11,000 Ground Leased
Addition Waccamaw 53,000 Leased
Renovation Mall GLA -- --
Addition Food Court 6,000 --
Randall Park Mall Addition Burlington Coat 164,000 Leased
Southern Park Mall Renovation Mall GLA -- --
Addition Food Court 7,000 --
Addition Mall GLA 10,000 --
Addition Theatre 38,000 Leased
Summit Mall Expansion Dillard's 107,000 Leased
Addition Food Court 8,000 --
Renovation Mall GLA -- --
University
Park Mall Expansion L.S. Ayres 33,000 Owned
Addition/
Renovation Mall GLA 33,000 --
Addition Food Court 8,000 --
West Town Mall Renovation Food Court -- --
Addition Theatre 75,000 Leased
Addition Parking Deck -- --
The OP, either on its own behalf or in conjunction with activities of
department stores, anticipates commencing within the next 12 months the
following projects:
Planned Additional Owned/
Property Activity Space Sq. Ft. Leased
Biltmore Square Expansion Theatre 18,000 Leased
Century III Mall Renovation Mall GLA -- --
Columbia Center Addition Theatre 33,000 Leased
Addition Barnes & Noble 25,000 Leased
The Florida Mall Addition Saks Fifth Avenue 100,000 Leased
Grove at
Lakeland Square Addition Sports Authority 44,000 Leased
Northfield Square Addition Theatre 30,000 Leased
Northgate Mall Addition Toys "R" Us 42,000 Leased
Richardson Square Renovation Mall GLA -- --
Addition Food Court 5,000 --
Addition Waccamaw 55,000 Leased
Addition Barnes & Noble 27,000 Leased
Terrace at The
Florida Mall Addition Waccamaw 51,000 Leased
Tenant Allowances. The OP's strategy to maximize performance of the
existing portfolio includes providing tenant allowances to modernize and
regenerate specialty store space and also to attract specific tenants aimed at
increasing customer traffic as well as increasing rents. The OP's share of
recurring tenant allowances paid during 1995 was $7.0 million as compared to
the $8.5 million spent in 1994.
Cash Generated Before Debt Repayments and Capital Expenditures
Management believes that cash generated before debt repayments and capital
expenditures (commonly referred to as funds from operations) provides an
important indicator of the financial performance of the OP. Cash generated
before debt repayments and capital expenditures is defined as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property (other than adjacent land located at
DeBartolo Properties after April 21, 1994), plus depreciation and amortization
and other non-cash items, and after adjustments for unconsolidated partnerships
and joint ventures. Accordingly, management expects that cash generated before
debt repayments and capital expenditures will be the most significant factor
considered in determining the amount of cash distributions.
The OP's management believes that cash generated before debt repayments and
capital expenditures is an important and widely used measure of the operating
performance which provides a relevant basis for comparison among real estate
companies. Cash generated before debt repayments and capital expenditures is
presented to assist in analyzing the performance of the OP. The OP's method of
calculating cash generated before debt repayments and capital expenditures may
be different from the methods used by other real estate companies to calculate
funds from operations. Cash generated before debt repayments and capital
expenditures: (i) does not represent cash flow from operations as defined by
generally accepted accounting principles; (ii) should not be considered as an
alternative to net income as a measure of operating performance or to cash
flows for operating, investing and financing activities; and (iii) is not an
alternative to cash flows as a measure of liquidity.
The following shows cash generated before debt repayments and capital
expenditures:
(Dollars in millions, except per unit data)
For the Year Ended December 31,
1995 Pro Forma 1994
--------------- -----------------
Net Income before extraordinary items $ 46.3 $ 40.6
Adjustments for non-cash items:
Depreciation and amortization(1) $ 90.8 $ 83.5
Straight-line rent accrual (2) (3.1) (4.8)
Deferred stock compensation
expense and other (0.6) 87.1 4.2 82.9
133.4 123.5
Other adjustments:
Gain on sale of operating property (3) (3.8) (3.3)
Cash generated before debt ------- -------
repayments and capital expenditures $ 129.6 $ 120.2
======= =======
(1)The adjustment for depreciation and amortization is comprised of the
following:
Year Ended December 31, 1995
Consolidated Nonconsolidated
Properties Properties Total
Depreciation of building and improve-
ments and amortization of deferred
leasing expenses $ 57.8 $ 23.7 $ 81.5
Amortization of formation costs 11.1 1.9 13.0
Write-off of assigned interest rate
protection agreements 4.2 -- 4.2
Depreciation of furniture, fixtures
and equipment 0.8 0.4 1.2
Amortization of interest rate
protection agreements 3.1 -- 3.1
Amortization of deferred loan costs 0.5 -- 0.5
------- ------- -------
$ 77.5 $ 26.0 $ 103.5
======= ======= =======
(2) Represents reduction for the straight-lining of minimum rents under GAAP.
(3)The 1995 adjustment represents gain on the sale of a partnership interest in
a mall development site acquired from the DeBartolo Group and simultaneously
sold to a third party. The 1994 adjustment represents gains prior to
April 21, 1994.
For 1995, cash generated before debt repayments and capital expenditures
rose 7.8% to $129.6 million from $120.2 million in 1994. On a per unit basis,
cash generated before debt repayments and capital expenditures rose 4.1% to
$1.51 from $1.45 in 1994. The lower percent increase on a per unit basis
reflects the greater number of units outstanding.
Economic Conditions
In the last four years, inflation has not had a significant impact on the
OP because there has been disinflation in apparel pricing which has slowed the
growth of tenant sales. In the event of higher inflation, however,
substantially all of the tenants' leases contain provisions designed to
mitigate the impact of inflation on the OP. Such provisions include clauses
enabling the OP to receive percentage rentals based on tenants' gross sales,
which generally increase as prices rise, and escalation clauses, which
generally increase rental rates during the terms of leases. In addition, many
of the leases are for terms of less than ten years which may enable the OP to
replace existing leases with new leases at higher base and/or percentage
rentals if rents of the existing leases are below the then-existing market
rate. Most of the leases require the tenants to pay their share of property
operating expenses, thereby reducing the OP's exposure to increases in costs
and property operating expenses resulting from inflation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION
AND RESULTS OF OPERATIONS THROUGH JUNE 30, 1996
The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with the accompanying
consolidated and combined financial statements and the notes thereto.
GENERAL BACKGROUND
The following discussion is based primarily on the consolidated financial
statements of the Operating Partnership for the six months ended June 30, 1996
and 1995.
As used in this quarterly report on Form 10-Q, the term "Mall Store" means
stores (other than Anchors) that are typically specialty retailers and lease
space in shopping centers. "Anchor" generally refers to a department store or
other large retail store in excess of 60,000 square feet. The term "Mall GLA"
refers to the total gross leasable area of Mall Stores only.
RESULTS OF OPERATIONS
During the first quarter of 1996, the Operating Partnership acquired
additional partnership interests of 33 1/3% and 25% in two of its then
nonconsolidated joint ventures. Effective March 31, 1996, the Operating
Partnership acquired an additional 10% partnership interest of a then
nonconsolidated joint venture, increasing the Operating Partnership ownership
percentage to 60%. As a result of these transactions, the Operating
Partnership is now accounting for these properties using the consolidated
method of accounting whereas in 1995 the Operating Partnership used the equity
method of accounting. Effective March 1, 1996, the Operating Partnership
transferred ownership of one property to its lender ("Property Transactions").
Comparison of Consolidated Six Months Ended June 30, 1996
to Six Months Ended June 30, 1995
Revenues: Total revenues increased $16.1 million or 10.0% to
$176.6 million in 1996 from $160.5 million in 1995. Of this increase,
$10.0 million is attributable to the Property Transactions. Minimum rents
increased $7.9 million or 7.4% in 1996 of which $6.1 million is the result of
the Property Transactions. The remaining increase of $1.8 million is due to a
$1.1 million increase in specialty leasing and a $0.7 million increase in
minimum rents reflecting continued improvements in rental rates for reletting
Mall Store space and rents from specialty anchors on space that was leased
subsequent to the second quarter of 1995. Minimum rents include specialty
leasing revenues of $5.2 million in 1996 and $3.8 million in 1995.
Tenant recoveries increased $5.6 million or 14.1% of which $2.7 million is
attributable to the Property Transactions. The remaining increase of
$2.9 million is attributable to increased recoverable expenses. Other revenues
increased $2.6 million primarily due to (i) $0.6 million settlement of
previously disputed phone commission income, (ii) a $0.7 million gain on sale
of peripheral land, (iii) $1.0 million increase in advertising revenues, and
(iv) $.3 million in other. Lease cancellation income was $1.9 million for 1996
and 1995.
Effective January 1, 1996, the Operating Partnership acquired the
management, leasing and certain other operating divisions of the Property
Manager. As a result, the Operating Partnership's other revenues include
$1.1 million of management revenues and net profits of leasing and other
activities relating to third party contracts and outside interests in joint
ventures.
Shopping Center Expenses: Shopping center expenses increased $8.8 million
or 15.3% in 1996 of which $3.4 million is attributable to the Property
Transactions. Property operating expenses and repairs and maintenance
increased $5.1 million in 1996 of which $1.7 million is attributable to the
Property Transactions. The remaining $3.4 million increase is due to a
$1.1 million increase in snow removal costs and a $1.8 million increase in
other shopping center operating expenses. Substantially all of this increase
has been recovered from tenants. The 1996 increase in real estate taxes of
$1.5 million or 9.1% in 1996 of which $0.9 million is attributable to the
Property Transactions. Advertising and promotion expenses increased
$1.0 million in 1996 of which $0.6 million is applicable to the Property
Transactions. The remaining $0.4 million increase is partially offset by a
$1.0 million increase in advertising contributions from tenants.
In 1996, management expenses totaling $4.1 million are substantially
comprised of salaries and other general and administrative expenses relating to
the management of the Operating Partnership's portfolio. In 1995, these
expenses were management fees charged to the 49 consolidated properties,
primarily by the Property Manager.
Interest Expense: Interest expense decreased $0.6 million or 0.1% in 1996
including a $1.8 million increase resulting from the Property Transactions.
The remaining $2.4 million decrease is caused by debt paydowns utilizing the
proceeds of the Company's 1995 follow-on public stock offering which were
contributed to the Operating Partnership in exchange for additional partnership
units and a reduction in amortization of interest rate protection agreements
resulting from a 1995 interest rate swap agreement.
Joint Ventures: Net income of the nonconsolidated joint ventures
increased $6.4 million to $12.9 million in 1996 from $6.5 million in 1995
primarily due to the change in accounting for three joint ventures from the
equity method to the consolidated method. Revenues of the nonconsolidated
joint ventures decreased $6.5 million to $68.2 million in 1996 from
$74.7 million in 1995 of which $10.0 million of the decrease was due to the
Property Transactions. The remaining $3.5 million increase is due to (i) a
$0.9 million increase in minimum rents, (ii) a $0.5 million increase in
specialty leasing revenues, (iii) a $0.7 million increase in revenues from
lessees' cancellation of leases, (iv) a $0.6 million increase in tenant
recoveries, and (v) a $1.5 million increase in land sales.
Shopping center expenses decreased $3.1 million to $24.6 million in 1996
of which $4.0 million is resulting from the Property Transactions. The
remaining $.9 million increase is due to (i) a $0.6 million increase in
property operating and repairs and maintenance expenses resulting from
increased snow removal and other shopping center operating expenses, and (ii) a
$0.3 million increase in advertising expenses.
The Operating Partnership's share of income from nonconsolidated joint
ventures increased $4.1 million primarily due to the impact of the Property
Transactions.
Net Income: Net income (loss) increased $2.3 million to $23.9 million for
1996 from $21.6 million for 1995 as the result of (i) the 1995 gain on sale of
assets represents a gain from the sale of a partnership interest in a mall
development site acquired from the DeBartolo Group and simultaneously sold to a
third party and (ii) extraordinary items recognized of $1.0 million in 1996
represents a gain of $9.2 million from the disposition of one shopping center
and the related extinguishment of debt offset by a one-time charge of $10.2
million for expenses relating to the Company's merger with SPG.
Investing Activities: Net cash used in investing activities of
$23.8 million, as shown in the consolidated statement of cash flows, for the
six months ended June 30, 1996 are primarily comprised of additions to
investment properties and tenant allowances of $39.9 million (see "capital
expenditures") and net contributions to nonconsolidated joint ventures of
$12.0 million. Net cash used in investing activities totaled $12.1 million for
the six months ended June 30, 1995, principally comprised of additions to
investment properties of $22.3 million. These investments were offset by (i)
net proceeds from the sale of a partnership interest in a mall site located in
Strongsville, Ohio totaling $3.8 million in the first quarter 1995 and (ii)
distributions received from nonconsolidated joint ventures of $11.1 million.
Financing Activities: Net cash used in financing activities for the six
months ended June 30, 1996 and 1995 totaled $47.7 and $49.9 million,
respectively, principally comprised of distributions to the Operating
Partnership's unitholders.
Comparison of Combined Three Months Ended June 30, 1996
to Three Months Ended June 30, 1995
Revenues: Total revenues increased $7.0 million or 8.6% to $88.2 million
in second quarter 1996 from $81.2 million in second quarter 1995. Of this
increase, $6.2 million is attributable to the Property Transactions. Minimum
rents increased $4.6 million or 8.6% in second quarter 1996 of which
$3.8 million is the result of the Property Transactions. The remaining
increase of $0.8 million is due to a $0.4 million increase in specialty leasing
and a $0.4 million increase in minimum rents reflecting continued improvements
in rental rates for reletting Mall Store space and rents from specialty anchors
on space that was leased subsequent to the second quarter of 1995.
Tenant recoveries increased $2.3 million or 11.6% of which $1.7 million is
attributable to the Property Transactions. The remaining increase of
$0.6 million is attributable to increased recoverable expenses. Other revenues
decreased $0.1 million primarily due to $0.8 million decrease in lease
cancellation income.
Effective January 1, 1996, the Operating Partnership acquired the
management, leasing and certain other operating divisions of the Property
Manager. As a result, the Operating Partnership's other revenues include
$1.1 million of management revenues and net profits of leasing and other
activities relating to third party contracts with outside interests in joint
ventures.
Shopping Center Expenses: Shopping center expenses increased
$3.9 million or 13.2% in second quarter 1996 of which $1.5 million is
attributable to the Property Transactions. Property operating expenses and
repairs and maintenance increased $1.8 million in second quarter 1996 of which
$0.9 million is attributable to the Property Transactions. Substantially all
of this increase has been recovered from tenants. Real estate taxes increased
$1.2 million in 1996 of which $0.7 million is attributable to Property
Transactions.
In 1996, management expenses totaling $2.0 million are substantially
comprised of salaries and other general and administrative expenses relating to
the management of the Operating Partnership's portfolio. In 1995, these
expenses were management fees charged to the 49 consolidated properties,
primarily by the Property Manager.
Interest Expense: Interest expense increased $0.8 million in second
quarter 1996 including a $1.0 million increase resulting from the Property
Transactions. The remaining $0.3 million decrease is caused by debt paydowns
utilizing the proceeds of the Company's 1995 follow-on public stock offering
which were contributed to the Operating Partnership in exchange for additional
partnership units and a reduction in amortization of interest rate protection
agreements resulting from a 1995 interest rate swap agreement.
Joint Ventures: Net income of the nonconsolidated joint ventures
increased $3.8 million to $7.4 million in second quarter 1996 from $3.5 million
in second quarter 1995 primarily due to the change in accounting for two joint
ventures from the equity method to the consolidated method. Revenues of the
nonconsolidated joint ventures decreased $4.6 million to $33.1 million in
second quarter 1996 from $37.7 million in second quarter 1995 of which
$6.1 million of the decrease was due to the Property Transactions. The
remaining increase is due to a $1.5 million increase in revenues from land
sales.
Shopping center expenses decreased $2.5 million to $11.3 million in 1996
of which $2.5 million is resulting from the Property Transactions.
The Operating Partnership's share of income from nonconsolidated joint
ventures increased $2.3 million primarily due to the impact of the Property
Transactions.
Net Income: Net income decreased $8.9 million to $.9 million for the
second quarter 1996 from $9.8 million for the second quarter 1995 as the result
of extraordinary items recognized in the second quarter of 1996 for a one-time
charge of $10.2 million for expenses relating to the Company's merger with
Simon Property Group.
LIQUIDITY AND CAPITAL RESOURCES
General. As of June 30, 1996, the Operating Partnership's total capital
availability was approximately $239 million. Of the $239 million,
approximately $28.3 million is reserved for distributions payable in July,
1996. The Operating Partnership's unused borrowing capacity was approximately
$206 million including $90 million of contractual borrowing commitments,
subject to customary lender approval rights, for capital expenditures on
properties securing the respective mortgages.
Financings and Refinancings. In April, 1996 the Operating Partnership
expanded its revolving credit facility to $150 million and total availability
increased to $140 million of which $62 million is outstanding at June 30, 1996.
This facility is secured by three properties and carries an interest rate of
LIBOR plus 175 basis points.
Effective March 29, 1996, the Operating Partnership finalized a joint
venture agreement with a financial institution and closed a $52 million
construction loan with a group of banks for the development of Indian River
Mall and a complementary power center. The Operating Partnership owns 50% of
this joint venture.
In June, 1996 the Operating Partnership obtained a $66 million mortgage,
of which $60 million is outstanding as of June 30, 1996, on one nonconsolidated
property at a rate of 6.78%. The Operating Partnership also refinanced an $18
million mortgage on a nonconsolidated property at a rate of 9.04%.
Debt. The Operating Partnership's pro rata share of debt is approximately
$1.606 billion which includes the Operating Partnership's pro rata share of
debt applicable to the nonconsolidated joint ventures of $216.3 million. The
Operating Partnership's pro rata share of total floating rate debt is
$282.7 million and is subject to the below-mentioned interest rate swaps and
interest rate caps.
The Operating Partnership has an interest rate swap agreement to pay LIBOR
at (i) 4.75% on approximately $218 million of debt through April 1997 and (ii)
5.71% on $87.2 million of debt from May 1997 through April 2001. The Operating
Partnership has an interest rate cap agreement which limits interest on
$87.2 million of debt to no more than LIBOR of 8.44% for the period May 1996
through March 2001.
Loans maturing during 1996 total $151.1 million for three consolidated
properties and $25.9 million for two nonconsolidated joint ventures. The
Operating Partnership expects to refinance $137.7 million relating to two of
the consolidated properties and has conveyed ownership of a third property to
its lender effective as of March 1, 1996, thereby fully satisfying the
outstanding balance of $13.4 million. The Operating Partnership has extended
or anticipates extending the maturity dates relating to the mortgages of the
two nonconsolidated joint ventures.
CAPITAL EXPENDITURES
The Operating Partnership continued to implement its $500 million
strategic redevelopment, renovation and remerchandising program which will
ultimately impact 34 of the Operating Partnership's 50 super-regional and
regional malls.
During the first six months of 1996, the Company invested $70.3 million
($52.4 million Operating Partnership's share) including $36.1 million for
consolidated properties in its development program. The Operating Partnership
is progressing on the construction of Indian River Mall incurring 1996 costs of
$16.9 million. Construction commenced on mall renovations and food court
additions at Chautauqua Mall and Lafayette Square. Expansions at Summit Mall
and University Park Mall are nearing completion with grand re-openings
scheduled for the fall of 1996. Burlington Coat Factory at Randall Park Mall
opened in April, 1996 and Waccamaw at Lafayette Square opened in June, 1996.
At The Florida Mall, work on the new Saks Fifth Avenue store is proceeding on
target for its fall 1996 opening.
Tenant allowances for consolidated properties paid during the six months
ended June 30, 1996 totaled $3.7 million compared to $2.1 million during the
same period in 1995.
PORTFOLIO LEASING AND SALES TRENDS
Rental Rates: During the six months ended June 30, 1996, new leases
commenced on 475,198 square feet of space in DeBartolo Malls at an average
initial rent of $23.01. Included in the 1996 lease commencements are leases to
mall shop tenants on 430,544 square feet of previously leased space at average
initial minimum rents of $22.92 per square foot which represents an 18.9%
increase over the average expiring rents of $19.28 per square foot for this
space.
Leased Area: Leased mall area decreased to 83.8% as of June 30, 1996,
from 84.0% at June 30, 1995. During the six months ended June 30, 1996,
320,000 square feet of underproductive space was recovered. Of that space,
235,000 square feet was due to bankruptcies, with the balance due to lease
cancellations. As a result, although the impact from bankruptcies continues,
the Operating Partnership was able to offset these losses with leasing activity
throughout the portfolio.
Mall Store Sales: Total Mall Store Sales are an important factor
contributing to the level of revenues generated by the DeBartolo Malls because
such sales ultimately influence the total occupancy cost a tenant can pay.
Total Mall Store Sales measure a mall portfolio's ability to generate sales
over its total square footage and may be affected by occupancy. Total Mall
Store sales of DeBartolo Malls, including Large Space Users (defined as
theaters, drug stores, variety stores, cafeterias and other large stores),
increased 1.3% to $1.229 billion for the six months ended June 30, 1996 from
$1.213 billion for the six months ended June 30, 1995. Mall Store sales
decreased 1.0% to $616.7 million for the second quarter 1996, compared to
$623.2 million in the second quarter 1995. Comparable Mall Store sales
increased 2.8% during the second quarter 1996 and increased 6.6% for the six
months ended June 30, 1996 versus the same period in 1995.
CASH GENERATED BEFORE DEBT PAYMENTS AND CAPITAL EXPENDITURES
Management believes that cash generated before debt repayments and capital
expenditures (commonly referred to as funds from operations) provides an
important indicator of the financial performance of the Operating Partnership.
Cash generated before debt repayments and capital expenditures is defined as
net income (loss) (computed in accordance with GAAP), excluding gains (or
losses) from debt restructuring and sales of property (other than adjacent land
located at DeBartolo Properties after April 21, 1994), plus depreciation of
real property and certain amortization and other non-cash items, and after
adjustments for unconsolidated partnerships and joint ventures. Accordingly,
management expects that cash generated before debt repayments and capital
expenditures will be the most significant factor considered in determining the
amount of cash distributions the Operating Partnership will make to
unitholders.
The following shows cash generated before debt repayments and capital
expenditures:
Three Months Six Months
Ended Ended
June 30, June 30,
1996 1995 1996 1995
------- ------- ------- -------
Income before extraordinary items $ 0.9 $ 9.8 $ 14.7 $ 21.5
Adjustments for non-cash items:
Depreciation, amortization
and other (2) 21.1 19.8 41.0 40.3
Other adjustments:
Gain on sale of assets (3) --- --- --- (3.8)
Merger expenses 10.2 --- 10.2 ---
------- ------- ------- -------
Cash generated before debt
repayments and capital
expenditures $ 32.2 $ 29.6 $ 65.9 $ 58.0
======== ======= ======== =======
(1) The calculation of cash generated before debt payments and capital
expenditures has been revised to adopt the National Association of Real
Estate Investment Trust's revised definition. The cash generated before debt
payments and capital expenditures for the six months ended June 30, 1995 has
been restated to $58.0 million from $58.7 million to conform with the 1996
calculation and presentation. Adjustments include (i) $0.3 million for
depreciation of furniture, fixtures and equipment, (ii) $0.3 million for
amortization of deferred loan costs and (iii) $1.6 million for the
amortization of interest rate protection agreements, and (iv) an adjustment
of $1.5 million to include straight-line rent accruals.
(2) The depreciation, amortization and other is comprised of the following:
Six Months Ended June 30, 1996
---------------------------------------
Consolidated Nonconsolidated
Properties Properties Total
----------- --------------- --------
Depreciation of building and
improvements and
amortization of deferred
leasing expenses $ 32.5 $ 10.4 $ 42.9
Amortization of formation
costs 4.8 0.1 4.9
Deferred stock expense
and other 0.4 --- 0.4
-------- ------- -------
$ 37.7 $ 10.5 $ 48.2
======== ======= =======
(3)The 1995 adjustment represents a gain on the sale of a partnership interest
in a mall development site acquired from the DeBartolo Group and
simultaneously sold to a third party.
DEBARTOLO REALTY PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands except unit data)
As of As of
June 30, December 31,
1996 1995
----------- -----------
Assets:
Investment properties (Note 4) $1,968,344 $1,793,663
Less accumulated depreciation 632,762 574,338
1,335,582 1,219,325
Cash and cash equivalents 32,486 25,851
Restricted cash (Note 3) 12,477 13,910
Short term investments 975 14,057
Accounts receivable, less allowance
for doubtful accounts of $9,031 and
$10,070 in 1996 and 1995 40,754 39,103
Investments in and advances to
nonconsolidated joint ventures
(Notes 4 and 5) 61,872 116,725
Minority interest in capital deficits
of consolidated joint ventures 34,456 25,496
Deferred charges and prepaid expenses 83,680 77,103
---------- ----------
$1,602,282 $1,531,570
========== ==========
Liabilities and Partners' Equity:
Liabilities:
Mortgages and notes payable (Note 4) $1,479,515 $1,348,573
Accounts payable and accrued expenses 51,779 38,810
Distributions payable 28,256 28,225
Deficits in nonconsolidated joint
ventures (Notes 4 and 5) 48,307 71,147
---------- ----------
1,607,857 1,486,755
---------- ----------
Commitments and contingencies -- --
Partners' Equity (Deficit):
Preferred Units, 10,000,000 units authorized,
none issued and outstanding -- --
General Partner, 55,496,757 and 55,329,162
units outstanding in 1996 and 1995 (3,449) 27,673
Limited Partners, 34,203,623 and
34,272,532 units in 1996 and 1995
outstanding, respectively (2,126) 17,142
---------- ----------
Total Partners' Equity (5,575) 44,815
---------- ----------
$1,602,282 $1,531,570
========== ==========
See accompanying notes
DEBARTOLO REALTY PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per unit data)
Six Months Ended June 30,
--------------------------
1996 1995
--------- ---------
Revenues:
Minimum rents $114,086 $106,191
Tenant recoveries 45,456 39,844
Percentage rents 5,635 5,632
Other 11,455 8,785
-------- --------
Total revenues 176,632 160,452
Expenses: -------- --------
Shopping Center Expenses:
Property operating 19,695 16,962
Repairs and maintenance 15,130 12,791
Real estate taxes 18,338 16,806
Advertising & promotion 3,778 2,761
Management expenses 4,143 2,797
Provision for doubtful accounts 1,502 1,493
Ground leases 1,450 1,207
Other 2,343 2,776
-------- --------
Total shopping center expenses 66,379 57,593
Deferred stock compensation expense 105 105
Interest expense 60,759 61,338
Depreciation and amortization 32,432 28,348
Merger expenses (Note 4) 10,200 --
-------- --------
169,875 147,384
Gain on sale of assets -- 3,779
Income from nonconsolidated
joint ventures (Notes 4 and 5) 8,236 4,182
Minority partners' interest in
consolidated joint ventures (325) 536
--------- --------
Income before extraordinary item 14,668 21,565
Extraordinary item (Note 4) 9,191 --
--------- --------
Net income $ 23,859 $ 21,565
========= ========
Net Income Available to
Unitholders Attributable to:
General Partner $ 14,762 $ 12,674
Limited Partners 9,097 8,891
--------- -----------
Net income available to unitholders $ 23,859 $ 21,565
========= ===========
EARNINGS PER UNIT (Note 6):
Income before extraordinary item $ 0.17 $ 0.26
Extraordinary item 0.10 ---
--------- -----------
Net income $ 0.27 $ 0.26
========= ===========
WEIGHTED AVERAGE UNITS
OUTSTANDING (000's) 89,822 83,150
========= ===========
See accompanying notes
DEBARTOLO REALTY PARTNERSHIP, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per unit data)
Three Months Ended June 30,
--------------------------
1996 1995
Revenues: --------- ---------
Minimum rents $ 57,532 $ 52,957
Tenant recoveries 22,416 20,090
Percentage rents 2,841 2,667
Other 5,417 5,509
--------- ---------
Total revenues 88,206 81,223
Expenses:
Shopping Center Expenses:
Property operating 9,841 8,383
Repairs and maintenance 6,958 6,614
Real estate taxes 9,555 8,323
Advertising & promotion 1,782 1,413
Management expenses 2,021 1,400
Provision for doubtful accounts 904 879
Ground leases 744 638
Other 1,470 1,739
---------- ---------
Total shopping center expenses 33,275 29,389
Deferred stock compensation expense 52 52
Interest expense 31,235 30,465
Depreciation and amortization 16,907 14,188
Merger expenses (Note 4) 10,200 --
---------- ---------
91,669 74,094
---------- ---------
Gain on sale of assets -- 18
Income from nonconsolidated joint
ventures (Notes 4 and 5) 4,755 2,427
Minority partners' interest in
consolidated joint ventures (390) 252
--------- --------
Net income $ 902 $ 9,826
========= ========
Net Income Available to Unitholders Attributable to:
General Partner $ 558 $ 5,777
Limited Partners 344 4,049
--------- ---------
Net income available to unitholders $ 902 $ 9,826
========= =========
EARNINGS PER UNIT (Note 6): $ 0.01 $ 0.12
========= =========
WEIGHTED AVERAGE UNITS 89,823 83,150
OUTSTANDING (000's) ========= =========
See accompanying notes
DEBARTOLO REALTY PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended June 30,
1996 1995
-------- --------
Cash Flow From Operating Activities:
Net income $ 23,859 $ 21,565
Adjustments to reconcile net income to net
cash provided by Operating Activities:
Amortization of formation costs 4,838 6,531
Amortization of interest rate protection
agreements and deferred loan costs 224 1,556
Gain on sale of assets -- (3,779)
Depreciation and amortization 32,432 28,348
Extraordinary item (9,191) --
Deferred stock compensation expense 105 105
Minority partners' interests in
consolidated joint ventures 325 (536)
Income from nonconsolidated
joint ventures (8,236) (4,182)
Decrease in restricted cash 1,433 7,746
Decrease (increase) in short term investments 13,082 (7,333)
Decrease in accounts receivable 1,214 2,805
(Decrease) increase in prepaid expenses
and other 1,317 (4,074)
Increase in accounts payable and
accrued expenses 16,794 8,144
-------- --------
Net Cash Provided By Operating Activities 78,196 56,896
-------- --------
Cash Flows From Investing Activities:
Additions to investment properties (36,146) (22,274)
Cash paid for tenant allowances (3,735) (2,144)
Purchase of partnership interests (5,375) --
Additions to deferred charges for lease
costs and other (3,640) (1,612)
Distributions from nonconsolidated
joint ventures 36,811 11,058
Advances to and investments in
nonconsolidated joint ventures (12,055) (888)
Net proceeds from sale of assets 307 3,750
-------- --------
Net Cash Used In Investing Activities (23,833) (12,110)
-------- --------
Cash Flows From Financing Activities:
Proceeds from issuance of debt 41,904 15,263
Scheduled principal payments on mortgages (3,301) (3,340)
Other payments on debt (30,248) (9,545)
Loan costs paid (294) (444)
Minority partner distributions (1,600) (127)
Distributions paid (56,480) (52,186)
Decrease in affiliate receivables 2,291 499
-------- --------
Net Cash Used in Financing Activities (47,728) (49,880)
-------- --------
Net (Decrease) Increase in Cash 6,635 (5,094)
Cash and Cash Equivalents:
Beginning of period 25,851 38,899
-------- --------
End of period $32,486 $ 33,805
======== ========
Supplemental Information:
Interest Paid $ 53,878 $ 50,254
======== ========
Supplemental schedule of non-cash
and financing activities:
Step-up in connection with acquisition of
additional interest in joint venture $ 7,296 $ --
======== ========
Historical cost basis of net investment
properties consolidated as a result of
acquisitions of additional interests
in joint ventures $121,245 $ --
======== ========
Mortgages on those properties consolidated
as a result of acquisitions of additional
interests in joint ventures $136,009 $ --
======== ========
Historical cost basis of net investment
property disposed $(4,040) $ --
======== ========
Mortgage extinguishment relating to
property disposition $(13,372) $ --
======== ========
Acquisition of certain businesses
of Property Manager $ 4,020 $ --
======== ========
See accompanying notes
DEBARTOLO REALTY PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Dollars in Thousands)
Note 1 - Organization and Ownership
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and in conjunction with the rules and regulations
of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting solely of normal
recurring matters) necessary for a fair presentation of the consolidated
financial statements for these interim periods have been included. The
results for the interim period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the full fiscal year.
These financial statements should be read in conjunction with the
DeBartolo Realty Partnership, L.P. December 31, 1995 audited
consolidated financial statements and notes thereto included herein.
DeBartolo Realty Partnership, L.P., a Delaware Limited Partnership (the
"Operating Partnership") and an affiliate, DeBartolo Capital
Partnership, a Delaware general partnership, are engaged in the
ownership, development, management, leasing, acquisition and expansion
of super-regional and regional malls and community shopping centers.
The Operating Partnership's sole general partner is DeBartolo Realty
Corporation (the "Company"), an Ohio corporation which operates as a self-
administered and self-managed real estate investment trust ("REIT"),
which at June 30, 1996 holds a 61.9% interest in the Operating
Partnership.
The Operating Partnership was formed to continue and expand the shopping
mall ownership, management and development business of The Edward J.
DeBartolo Corporation ("EJDC") in a portfolio which, as of June 30,
1996, consisted of 50 super-regional and regional malls (the "DeBartolo
Malls"), 11 community centers and land held for future development
(collectively, the "DeBartolo Properties"). As of June 30, 1996, EJDC
and certain affiliates (collectively, the "DeBartolo Group") and certain
current and former employees of EJDC, along with JCP Realty, Inc.
("JCP"), own the remaining 38.1% interest in the Operating Partnership.
In addition, the Operating Partnership owns 100% of the non-voting
preferred stock and a non-controlling common stock interest (5%) in
DeBartolo Properties Management, Inc. (the "Property Manager") which
provides certain architectural, design, construction and other services
to substantially all of the DeBartolo Properties, as well as, certain
other regional malls and community shopping centers owned by third
parties.
Note 2 - Basis of Presentation
The financial statements of the Operating Partnership are presented on a
consolidated basis. Properties which are controlled through majority
ownership have been consolidated and all significant intercompany
transactions and accounts have been eliminated. Properties where the
Operating Partnership owns less than a majority interest have been
accounted for under the equity method. One property, which is owned 2%
by the Operating Partnership, is accounted for under the cost method.
The Operating Partnership owns 5% of the voting common stock and all of
the nonvoting preferred stock of the Property Manager. The Operating
Partnership accounts for the investment in the Property Manager under
the equity method.
Note 3 - Restricted Cash
Cash is restricted primarily for renovations and redevelopment of the 17
DeBartolo Properties in connection with a securitized commercial pass-
through certificate issuance simultaneously with the IPO.
Note 4 - Mergers, Acquisitions and Dispositions
The parent company of the Operating Partnership entered into an
Agreement and Plan of Merger, dated as of March 26, 1996 (the
"Agreement"), among Simon Property Group, Inc., a Maryland corporation
("SPG"), its merger subsidiary and the Company, pursuant to which the
Company agreed to merge with the merger subsidiary. The Agreement
provides for the exchange of all outstanding Company common stock for
SPG common stock, $0.0001 par value (the "SPG Common Stock"), at an
exchange ratio of 0.68 shares of SPG Common Stock for each share of
Company common stock. The merger and other related transactions closed
on August 9, 1996. Shareholders of the Company received approximately 37.9
million shares of SPG common stock valued at $24.375 per share. During the
six-month period ended June 30, 1996, the Company incurred $10,200 of
underwriting, legal, accounting and other expenses associated with the merger.
These costs were charged to expense.
During January, 1996, the Property Manager acquired partnership
interests of 33 1/3% and 25% in two joint ventures, respectively, from
an unrelated joint venture partner. As a result, the Operating
Partnership effectively owns 65% and 74% of these joint ventures and
includes the financial position and results of operations and cash flows
of these joint ventures in its consolidated financial statements.
Effective March 31, 1996, the Operating Partnership acquired an
additional 10% partnership interest in Miami International Mall. As a
result, the Operating Partnership owns 60% of this joint venture and
includes the financial position and results of operations and cash flows
in its consolidated financial statements effective April 1, 1996.
The Operating Partnership transferred ownership of one property to its
lender, as of March 1, 1996, fully satisfying the property's mortgage
note payable. This property no longer met the Operating Partnership's
criteria for its ongoing strategic plan. The Operating Partnership has
recognized an extraordinary gain on this transaction of $9.2 million.
The Operating Partnership's share of this property's net income (loss)
for 1993, 1994 and 1995 was $9, ($760) and ($513), respectively. The
Operating Partnership's share of this property's cash generated before
debt payments and capital expenditures ("FFO") for 1993, 1994 and 1995
was $512, ($237) and $48, respectively.
Effective January 1, 1996, the Operating Partnership acquired the
management, leasing and certain other operating divisions of the
Property Manager. The operating results of these divisions are included
in the Operating Partnership's consolidated financial statements net of
eliminated intercompany transactions. The Property Manager continues to
provide architectural, engineering and construction services for the
Operating Partnership.
Note 5 - Investment in Nonconsolidated Joint Ventures
As a result of the above-discussed acquisitions, the combined Balance
Sheet of the nonconsolidated joint ventures includes the financial
position of nine joint ventures at June 30, 1996 and twelve joint
ventures at December 31, 1995. Three joint ventures, in which the
Operating Partnership acquired additional partnership interests during
the first quarter of 1996, are included in the Operating Partnership's
consolidated Balance Sheet at June 30, 1996 (see Note 4 above).
June 30, December 31,
---------- ----------
1996 1995
Balance Sheets
Investment properties (net) $ 505,288 $ 599,234
Other assets 42,471 43,094
---------- ----------
Total assets 547,759 642,328
---------- ----------
Mortgages and notes payable 508,341 584,495
Other liabilities 46,980 90,549
---------- ----------
Total liabilities 555,321 675,044
---------- ----------
Accumulated equity (deficit) (7,562) (32,716)
Less: Outside partners' equity (9,740) 180
Advances to nonconsolidated joint
ventures 30,867 78,474
---------- ----------
Net surplus in nonconsolidated
joint ventures $ 13,565 $ 45,578
========== ==========
Net surplus (deficits) in
nonconsolidated joint ventures is
presented in the accompanying
consolidated balance sheets as
follows:
Investments in nonconsolidated
joint ventures $ 31,005 $ 38,251
Advances to nonconsolidated
joint ventures 30,867 78,474
---------- ---------
Total investments in and advances to
nonconsolidated joint ventures 61,872 116,725
Deficits in nonconsolidated joint ventures (48,307) (71,147)
---------- ----------
$ 13,565 $ 45,578
========== ==========
The combined statements of operations for the nonconsolidated joint
ventures include the operating results of ten joint ventures for the
three month period ended March 31, 1996, nine joint ventures for the
three months ended June 30, 1996 and twelve joint ventures in 1995. The
operating results of two joint ventures, in which the Operating
Partnership acquired additional partnership interest in January 1996,
are included in the Operating Partnership's consolidated operating
statement. The operating results of one joint venture, in which the
Operating Partnership acquired additional partnership interest effective
March 31, 1996, are included in the Operating Partnership's consolidated
operating statement effective April 1, 1996.
Six Months Ended
June 30,
----------------------
1996 1995
---------- ---------
Statements of Operations
Revenues:
Minimum rents $ 41,183 $ 46,571
Tenant recoveries 19,549 21,971
Percentage rents 2,251 2,860
Other 5,238 3,294
---------- ---------
Total revenues 68,221 74,696
---------- ---------
Expenses:
Shopping Center Expenses:
Property operating 6,197 6,968
Repairs and maintenance 5,050 5,704
Real estate taxes 8,124 9,367
Advertising and promotion 1,833 2,019
Management fees to affiliate 2,329 2,477
Provision for doubtful accounts 554 467
Ground leases 60
Other 539 674
--------- ---------
24,626 27,736
Interest expense 20,150 28,604
Depreciation and amortization 10,559 11,814
--------- ---------
55,335 68,154
--------- ---------
Net income $ 12,886 $ 6,542
========= =========
DeBartolo Realty Partnership, L.P.'s share of:
Revenues less shopping center expenses $ 19,982 $ 20,275
Interest expense 7,333 9,866
Depreciation, amortization and other 4,413 6,227
--------- ---------
Net income $ 8,236 $ 4,182
========= ==========
Note 6 - Earnings Per Unit
Earnings per Unit is based on the weighted average number of units of
partnership interest ("units") outstanding for the six months ended June
30, 1996. Common stock awarded but not yet issued under the deferred
stock plan (42,400 shares) and the Company and the Operating
Partnership's long-term incentive plan (80,400 shares) have been
included in the computations of per unit data for the six months ended
June 30, 1996.
Note 7 - Distributions
The Operating Partnership paid a distribution of $0.315 per unit on
July 22, 1996 for the period of April 1, 1996 through June 28, 1996. On
August 9, 1996, the Operating Partnership paid a prorated distribution
of $0.1454 per unit for the period June 29, 1996 through August 9, 1996
(the closing date of the merger with SPG).
F-10
=============================================================================
REPORT OF INDEPENDENT AUDITORS
To the Partners of
DeBartolo Realty Partnership, L.P.
We have audited the accompanying consolidated balance sheets of DeBartolo
Realty Partnership, L.P. as of December 31, 1995 and 1994, and the
related consolidated statements of operations, partners' equity and
cash flows for the year ended December 31, 1995 and for the period April
21, 1994 (Commencement of Operations) to December 31, 1994, and the
combined statements of operations, accumulated deficit and cash flows of
DeBartolo Retail Group (Predecessor), as described in Note 2, for the
period January 1, 1994 to April 20, 1994 and the year ended December 31,
1993. These financial statements are the responsibility of DeBartolo
Realty Partnership, L.P.'s management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of DeBartolo Realty Partnership, L.P., at December 31, 1995 and 1994,
and the consolidated results of their operations and their cash flows
for the year ended December 31, 1995 and for the period April 21, 1994
to December 31, 1994, and the combined results of operations and cash
flows of DeBartolo Retail Group (Predecessor) for the period January 1,
1994 to April 20, 1994 and the year ended December 31, 1993, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 14, 1996, except for Note 16,
first paragraph, as to which the date is
March 1, 1996
DEBARTOLO REALTY PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except unit data)
As of December 31,
------------------------
1995 1994
---------- ----------
Assets:
Investment properties (Notes 4 and 8) $1,793,663 $1,737,592
Less accumulated depreciation 574,338 519,754
---------- ----------
1,219,325 1,217,838
Cash and cash equivalents 25,851 38,899
Restricted cash (Note 3) 13,910 35,751
Short term investments 14,057 4,339
Accounts receivable, less allowance
for doubtful accounts of $10,070 and
$9,462 in 1995 and 1994 39,103 40,083
Affiliate receivables (Note 11) 3,007 356
Investments in and advances to
nonconsolidated joint ventures (Note 5) 116,725 110,845
Minority interest in capital deficits
of consolidated joint ventures 25,920 27,249
Deferred charges and prepaid expenses (Note 7) 74,096 97,610
---------- ----------
$1,531,994 $1,572,970
========== ==========
Liabilities and Partners' Equity:
Liabilities:
Mortgages and notes payable (Note 8) $1,348,573 $1,409,827
Accounts payable and accrued expenses 38,810 39,325
Distributions payable 28,225 26,093
Deficits in nonconsolidated joint
ventures (Note 5) 71,147 69,842
Minority interest in consolidated
joint ventures 424 604
---------- ----------
1,487,179 1,545,691
========== ==========
Commitments and contingencies
(Notes 3, 8, 9, 10 and 15) --- ---
Partners' Equity (Note 12):
Preferred Units, 10,000,000 authorized,
none issued and outstanding --- ---
General Partner, 55,329,162 and 48,666,153
units outstanding, respectively 27,673 16,026
Limited Partners, 34,272,532 and
34,168,347 units outstanding, respectively 17,142 11,253
---------- ----------
Total Partners' Equity 44,815 27,279
---------- ----------
$1,531,994 $1,572,970
========== ==========
See accompanying notes
DEBARTOLO REALTY PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
DEBARTOLO RETAIL GROUP (PREDECESSOR)
COMBINED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit data)
DeBartolo Realty DeBartolo Retail
Partnership, L.P. Group
------------------------- -----------------------
1995 1994 1994 1993
----------- ----------- --------- -----------
January 1 April 21 January 1 January 1
through through through through
December 31 December 31 April 20 December 31
----------- ----------- --------- -----------
Revenues (Note 11):
Minimum rents $ 205,056 $ 140,909 $ 61,898 $ 194,643
Tenant recoveries 82,147 56,720 24,361 81,967
Percentage rents 12,924 9,122 3,653 14,060
Other 32,530 22,192 5,360 18,285
--------- --------- ---------- ---------
Total revenues 332,657 228,943 95,272 308,955
--------- --------- ---------- ---------
Expenses:
Shopping Center Expenses:
Property operating 34,707 23,575 10,272 33,966
Repairs and maintenance 28,060 20,469 8,710 29,602
Real estate taxes 33,223 23,371 9,807 33,015
Advertising and promotion 7,403 5,499 1,348 6,400
Management fees to
affiliate (Note 11) 5,674 3,274 2,246 7,167
Provision for doubtful accounts 2,671 910 1,535 3,747
Ground leases (Note 10) 2,413 1,499 754 2,232
Other 4,137 2,038 976 3,399
--------- --------- ---------- ---------
Total shopping center expenses 118,288 80,635 35,648 119,528
Deferred stock compensation
expense (Note 12) 210 4,058 --- ---
Interest expense 124,567 87,040 44,119 152,683
Depreciation and amortization 58,603 39,578 16,616 54,227
--------- --------- ---------- ---------
301,668 211,311 96,383 326,438
--------- --------- ---------- ---------
Gain on sale of assets (Note 13) 5,460 1,952 3,286 4,960
Income (loss) from nonconsolidated
joint ventures (Note 5) 8,865 7,554 842 (304)
Minority partners' interest in
consolidated joint ventures. 1,029 530 888 3,065
--------- --------- ---------- ---------
Income (loss) before
extraordinary items 46,343 27,668 3,905 (9,762)
Extraordinary item - loss on early
extinguishment of debt (Note 14) (11,267) (8,932) --- ---
--------- --------- ---------- ---------
Net income (loss) available
to Unitholders $ 35,076 $ 18,736 $ 3,905 $ (9,762)
========= ========= ========= =========
Net Income (loss) available to
Unitholders attributable to:
General Partner $ 20,911 $ 11,008 $ 3,905 $ (9,762)
Limited Partners 14,165 7,728 --- ---
--------- --------- ---------- ---------
$ 35,076 $ 18,736 $ 3,905 $ (9,762)
========= ========= ========= =========
EARNINGS PER UNIT:
Income before extraordinary items $ 0.53 $ 0.34
Extraordinary items (0.13) (0.11)
--------- ---------
$0.40 $0.23
========= =========
WEIGHTED AVERAGE UNITS
OUTSTANDING (000's) 85,722 82,540
========= =========
See accompanying notes
DeBartolo Realty Partnership
Consolidated Statements of Partnership Equity
And
DeBartolo Retail Group (Predecessor)
Combined Statements of Owners' Equity
(Dollars in Thousands, except for unit data)
Predecessor
Equity
DeBartolo Realty Limited Total (Deficit)
Corporation Partners
------------------------ --------------------- ----------------- ----------
Units Units Units
---------- ---------- ----------
Balance at January 31, 1993 $ (79,524)
Contributions 8,198
Distributions (33,614)
Net loss (9,762)
---------
Balance at December 31,1993 (114,702)
Contributions 8,818
Distributions (14,095)
Net income for the period
January 1, 1994 to
April 20, 1994 3,905
Affiliated receivables
not contributed to the
Operating Partnership (201,014)
Distribution of net
affiliated receivables
and payables (23,464)
Distributions to
predecessor's parent (130,400)
Minority partners'
interest exchanges
for Operating
Partnership (11,923)
Other cash and
non-cash
contributions
to equity 3,740
-----------
Accumulated Deficit
at commencement
of operations - $ - - $ - - $ - $ (479,135)
Contributions of
proceeds from
Initial Public
Offering, net of
transaction costs 41,336,900 545,670 - - 41,336,900 545,670 -
Exchange of debt
for partnership
interest 982,237 14,488 - - 982,237 14,488 -
Transfer of
predecessor
accumulated
deficit - (479,135) - - - (479,135) 479,135
Establishment of
in the Operating
Partnership - (33,422) 40,515,363 33,422 40,515,363 - -
Transfer of limited
partners' interest
to DeBartolo Realty
Corporation 6,347,016 - (6,347,016) - - - -
Distributions from
April 21, 1994 to
December 31, 1994 - (42,583) - (29,897) - (72,480) -
Net income from April
21, 1994 to
December 31, 1994 - 11,008 - 7,728 - 18,736 -
---------- --------- ---------- -------- ---------- -------- -----------
Balance at December
31, 1994 48,666,153 16,026 34,168,347 11,253 82,834,500 27,279 -
Contributions relating
to incentive plans 96,006 785 - 535 96,006 1,320 -
Contributions relating
second stock offering 6,000,000 49,417 - 30,953 6,000,000 80,370 -
Contributions relating
to purchase of
minority partners'
interest in five
properties - 5,514 671,188 3,921 671,188 9,435 -
Transfer of limited
partners' interest
DeBartolo Realty
Corporation 567,003 567 (567,003) (567) - - -
Distributions - (65,547) - (43,118) - (108,665) -
Net income - 20,911 - 14,165 - 35,076 -
---------- --------- ---------- -------- ---------- -------- -----------
Balance at December 31,1995 55,329,162 $ 27,673 34,272,532 $ 17,142 89,601,694 $ 44,815 $ -
========== ========= ========== ======== ========== ======== ===========
DEBARTOLO REALTY PARTNERSHIP, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
AND DEBARTOLO RETAIL GROUP (PREDECESSOR)
COMBINED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
DeBartolo Realty DeBartolo Retail
Partnership, L.P. Group
------------------------- -----------------------
1995 1994 1994 1993
----------- ----------- --------- -----------
January 1 April 21 January 1 January 1
through through through through
December 31 December 31 April 20 December 31
----------- ----------- --------- -----------
Cash Flow From Operating Activities:
Net income (loss) $ 35,076 $ 18,736 $ 3,905 $ (9,762)
Adjustments to reconcile net income
to net cash provided by
Operating Activities:
Amortization of formation and
loan costs included in
interest expense 11,616 10,528 1,354 4,390
Amortization and write-off of
interest rate protection agreements 7,307 2,112 -- --
Extraordinary loss on early
extinguishment of debt 11,267 8,932 -- --
Gain on sale of assets (5,460) (1,952) (3,286) (4,960)
Depreciation and amortization 58,603 39,578 16,616 54,227
Deferred stock compensation expense 210 4,058 -- --
Minority partners' interests in
consolidated joint ventures (1,029) (530) (888) (3,065)
(Income) loss from nonconsolidated
joint ventures (8,865) (7,554) (842) 304
Decrease (increase) in restricted cash -- 7,143 (2,829) (344)
Decrease (increase) in accounts
receivable 980 (642) 172 1,286
Decrease (increase) in prepaid
expenses and other (984) 5,219 (5,995) (429)
Increase (decrease) in accounts
payable and accrued expenses 179 (12,228) 7,938 (4,832)
Net Cash Provided By --------- --------- ---------- ---------
Operating Activities 108,900 73,400 16,145 36,815
Cash Flows From Investing Activities:
Additions to investment properties (51,339) (24,089) (3,018) (28,981)
Acquisition of development land -- (21,000) -- --
Purchase of properties and
partnership interests -- (1,818) -- --
Additions to deferred charges for
lease costs and other (3,625) (1,927) (501) (3,436)
Distributions from nonconsolidated
joint ventures 19,379 7,132 5,777 15,498
Advances to and investments in
nonconsolidated joint ventures (8,521) (53,585) (258) (1,784)
Net proceeds from sale of assets 6,282 3,035 4,547 8,206
Purchase of short term investments (9,718) (4,339) -- --
Net Cash Provided By (Used In) --------- --------- ---------- ---------
Investing Activities (47,542) (96,591) 6,547 10,497)
Cash Flows From Financing Activities:
Proceeds from issuance of debt 116,828 481,736 4,173 29,611
Partnership contributions 80,370 543,852 8,818 8,198
Scheduled principal payments on mortgages (6,647) (4,587) (3,657) (7,797)
Other payments on debt (171,436) (681,435) (626) (5,919)
Loan costs and interest rate buydowns (1,941) (70,822) (87) (3,205)
Distribution to predecessor parent -- (130,400) -- --
Prepayment penalties on early
extinguishment of mortgage
notes payable (3,390) (4,478) -- --
Partnership distributions (106,533) (46,387) (14,095) (20,936)
Minority partner distributions (847) (574) (144) (1,500)
(Increase) decrease in restricted cash 21,841 (39,000) -- --
Decrease (increase) in affiliate
receivables (net of affiliated payables) (2,651) 1,901 (14,672) (23,776)
Net Cash Provided By (Used In) --------- --------- ---------- ---------
Financing Activities (74,406) 49,806 (20,290) (25,324)
--------- --------- ---------- ---------
Net Increase (Decrease) In Cash (13,048) 26,615 2,402 994
Cash and Cash Equivalents:
Beginning of period 38,899 12,284 9,882 8,888
--------- --------- ---------- ---------
End of period $ 25,851 $ 38,899 $ 12,284 $ 9,882
========= ========= ========== =========
Supplemental Information:
Interest Paid $ 105,501 $ 81,306 $ 41,434 $ 147,646
========= ========= ========== =========
Supplemental Schedule of Non-Cash
and Financing Activities:
Distribution of affiliate
receivables and payables $ -- $ -- $ 23,464 $12,678
Exchange of debt for Operating
Partnership interest $ -- $14,488 $ -- $ --
Minority partners' interest exchanged
for Operating Partnership interest $ 9,435 $11,923 $ -- $ --
Affiliate receivables not contributed
to Operating Partnership $ -- $ -- $201,014 $ --
Distribution of affiliate payables to
minority partners $ -- $ -- $ -- $(1,264)
Limited Partners' interest exchanged
for General Partner Units $ 567 $ -- $ -- $ --
See accompanying notes
DEBARTOLO REALTY PARTNERSHIP, L.P. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AND
DEBARTOLO RETAIL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in Thousands)
Note 1 - Organization and Formation
DeBartolo Realty Partnership, L.P. (the "Operating Partnership" or "OP") was
formed as a Delaware limited partnership in 1993 in connection with DeBartolo
Realty Corporation's ( the "Company") initial public offering (the "IPO"). On
April 21, 1994, the Company raised $498 million in net proceeds through the
Company's IPO.
The proceeds of the IPO were used to acquire general partnership interests in
the OP, and indirectly, interest in DeBartolo Capital Partnership, a Delaware
general partnership ("FP"). The Company acquired a 47.8% general partner
interest in the OP in exchange for its contribution of these net proceeds to the
OP. The OP, and consequently the FP, were formed to continue and expand the
shopping mall ownership, management and development business of The Edward J.
DeBartolo Corporation ("EJDC") in a portfolio which, as of December 31, 1995,
consists of 51 super-regional and regional malls (the "DeBartolo Malls"), 11
community centers and land held for future development (collectively, the
"DeBartolo Properties"). As the sole general partner of the OP, the Company has
full, exclusive and complete responsibility and discretion in the management and
control of the OP. The OP was formed prior to the consummation of the Company's
IPO and is the successor entity to the DeBartolo Retail Group. During 1995,
certain property management and development activities are carried out for the
OP and FP through an affiliate, DeBartolo Properties Management, Inc. (the
"Property Manager").
Concurrently with the completion of the IPO, the FP completed a $455 million
principal amount securitized debt financing (the "Securitized Debt Financing").
Simultaneously with the IPO, EJDC and certain affiliates (collectively, the
"DeBartolo Group") and certain current and former employees of EJDC, along with
JCP Realty, Inc. ("JCP"), contributed to the OP interests in the DeBartolo
Properties (and certain other assets) for limited partnership interests in the
OP. Pursuant to an Exchange Rights Agreement, in April 1995 the Company filed a
registration statement for the issuance of 34,168,347 shares of common stock.
The Exchange Rights Agreement provides for the conversion of the limited partner
interests to shares of common stock. The Exchange Rights Agreement is subject
to certain restrictions relating to the initial exercise period, minimum value
of interest exchanged, and ownership limitations.
In connection with the IPO, the OP received options to acquire the interests of
the estate of Edward J. DeBartolo and other members of his family and affiliates
in four DeBartolo Malls and one community center. On July 1, 1995, the Company
exercised these options and acquired a 12.8% interest in Miami International
Mall, 10.1% interests in University Park Mall and University Center and 0.1%
interests in Coral Square and Lakeland Square. The exercise price of
approximately $9.4 million was payable in limited partnership interests in the
OP. As a result of these acquisitions, the Company's percentage ownership in
the OP decreased from 58.8% to 58.3%.
On August 1, 1995, the Company completed a public offering of 6,000,000 shares
of common stock at an offering price of $14 1/4 per share raising net proceeds
of approximately $80.4 million. The Company contributed the net proceeds to the
OP, which has used the net proceeds to retire mortgage debt (including any
related prepayment penalties). As a result of the contribution by the Company
to the OP of the net proceeds of the offering, the Company's percentage
ownership in the OP increased from 58.3% to 61.1%.
During August 1995, EJDC exchanged limited partnership interests in the OP to
retire certain EJDC corporate debt. The lender immediately exchanged the
limited partnership interests in the OP for common stock of the Company. As a
result of this transaction, the Company's percentage ownership in the OP
increased from 61.1% to 61.8%.
At December 31, 1995, ownership in the OP is as follows:
Percent
Total Units Owned
---------- -----
GENERAL PARTNER
DeBartolo Realty Corporation 55,329,162 61.8%
LIMITED PARTNERS
DeBartolo Group 32,714,135 36.5
JCP Realty, Inc. 1,016,156 1.1
DeBartolo Employees (current and former) 542,241 0.6
----------- -------
TOTAL 34,272,532 38.2
----------- -------
TOTAL UNITS 89,601,694 100%
=========== =======
Note 2 - Basis of Presentation
The financial statements of the OP are presented on a consolidated basis.
Properties which are controlled through majority ownership have been
consolidated and all significant intercompany transactions and accounts have
been eliminated. Properties where the OP owns less than a majority interest
have been accounted for under the equity method. One property, 2% of which is
owned by the OP, is accounted for under the cost method.
The OP owns 5% of the voting common stock and all of the nonvoting preferred
stock of the Property Manager. The OP's pro rata share is 95% of the Property
Manager's operating results. The OP accounted for its investment in the Property
Manager under the cost method through September 30, 1995. During 1995, in
accordance with Emerging Issues Task Force Issue No. 95-6, Accounting by a Real
Estate Investment Trust for an Investment in a Service Corporation, the OP
changed its method of accounting for its investment in the Property Manager to
the equity method. The OP has applied the new accounting method retroactively
to April 21, 1994, in accordance with Accounting Principles Board Opinion 20,
Accounting Changes. The change had no significant impact to previously issued
financial results for 1994 and 1995.
The accompanying combined financial statements of DeBartolo Retail Group
represent DeBartolo Properties previously owned by EJDC and certain of its
affiliates. The historical financial statements of DeBartolo Retail Group are
presented on a combined basis because EJDC and certain of its affiliates were
the subject of the business combination discussed above. The business
combination has been accounted for as a reorganization of entities under common
control, which is similar to the accounting used for a pooling of interests.
Note 3 - Summary of Significant Accounting Policies
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Investment Properties:
Investment properties are stated at cost less accumulated depreciation,
which in the opinion of management is not in excess of net realizable value.
Costs incurred for the acquisition, development, construction and improvement of
properties, including significant renovations, are capitalized. Interest costs
and real estate taxes incurred with respect to qualified expenditures relating
to the construction of assets are capitalized during the development period.
Depreciation and Amortization:
The cost of buildings, improvements and equipment are depreciated on the
straight-line method over estimated useful lives, as follows:
Buildings - 30 to 40 years
Improvements - shorter of lease term or useful life
Equipment - 3 to 10 years
Tenant allowances paid to tenants for construction are capitalized and
amortized over the terms of each specific lease. Maintenance and repairs are
charged to expense when incurred.
Deferred Charges:
Deferred charges consist principally of financing costs and leasing
commissions which are amortized over the terms of the respective agreements.
Capitalized Interest:
Interest is capitalized on projects during the construction period.
Interest capitalized was $1,614 in 1995; $686 from inception to December 31,
1994; $13 for the period January 1, 1994 to April 20, 1994, and $219 in 1993.
Cash and Cash Equivalents:
Highly liquid investments with maturities of three months or less are
considered cash equivalents.
Restricted Cash:
Cash is restricted primarily for renovations and redevelopment of certain
DeBartolo Properties in connection with the Securitized Debt Financing.
Fair Value of Financial Instruments:
The following methods and assumptions were used to estimate the fair value
of financial instruments:
* The fair value of cash and cash equivalents, restricted cash and
short-term investments approximate carrying value due to the short-
term nature of these instruments.
* The fair value of the OP's fixed rate mortgages and notes payable
is based on current rates available to the OP for debt of similar
terms. Fair value of variable rate debt is considered to be the
carrying amount.
* The fair value of the interest rate caps and interest rate swaps
are based on available market data.
Minority Interests:
Minority interests in consolidated joint ventures represent the amounts of
net assets of consolidated ventures attributable to the interests of outside
parties. Minority interests in capital deficits of joint ventures are carried
as assets to the extent considered recoverable.
Revenue Recognition:
Shopping center space is generally leased to specialty retail tenants under
short and intermediate term leases which are accounted for as operating leases.
Minimum rents are recognized on the straight-line method over the terms of
leases. Percentage rents are recognized on an accrual basis as earned. Real
estate tax and operating expense recoveries are recognized in the period the
applicable costs are incurred.
Ground Leases:
Certain properties, as lessees, lease land under operating leases. Rent
expense is recorded on the straight-line method over the term of these leases.
Income Taxes:
The allocable share of the taxable income or loss of the OP is includable
in the income tax returns of the partners; accordingly, income taxes are not
reflected in the consolidated financial statements.
Earnings Per Unit:
Earnings per unit is based on the weighted average number of units
outstanding for the year ending December 31, 1995 and for the period of April
21, 1994 through December 31, 1994. Units of common stock awarded during 1994
under a deferred stock plan (70,696 units) and units of common stock awarded
under a long-term incentive plan (245,200 units) have been considered
outstanding units. In April 1995, the OP issued 96,006 units of common stock
under both plans. Both plans are a part of the 1994 DeBartolo Realty
Corporation Stock Incentive Plan. For purposes of determining fully dilutive
earnings per unit, the remaining 2,427,100 units of common stock under the long-
term incentive deferred stock plan are anti-dilutive after adjusting earnings to
give effect to the increase in earnings necessary for the units of common stock
to be awarded under the plan.
Impact of Recently Issued Accounting Standards:
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The OP will adopt Statement 121 in
the first quarter of 1996 and, based on current circumstances, does not believe
the effect of adoption will be material. The OP continually analyzes its mall
properties based on investment related criteria and, as a result, the OP may
determine to dispose of certain properties. Current circumstances based on the
OP's intention to hold the properties for long-term appreciation, do not
indicate that any of the OP's properties are impaired. However, if a decision
is made to dispose of certain properties, it is reasonably possible that
significant write-downs may be required.
Reclassifications:
Certain prior year amounts have been reclassified to conform to the current
year presentation.
Note 4 - Investment Properties
Investment properties consist of shopping center properties, including
peripheral land and properties under development and an office tower adjacent to
one of the shopping centers. Investment properties are summarized as follows:
December 31,
---------------------------
1995 1994
---------- ----------
Land $ 193,365 $ 192,781
Shopping center buildings, improvements and
equipment 1,537,725 1,486,819
Office tower building, improvements and
equipment 40,522 40,225
Properties under construction/expansion/renovation 13,351 7,962
Peripheral land parcels 8,700 9,805
---------- ----------
1,793,663 1,737,592
Accumulated depreciation 574,338 519,754
---------- ----------
Total investment properties $1,219,325 $1,217,838
========== ==========
Peripheral land parcels primarily consist of undeveloped land parcels
adjacent to certain shopping centers.
Depreciation expense totaled $55,315 in 1995; $37,298 from April 21, 1994
to December 31, 1994; $15,792 for the period January 1, 1994 to April 20, 1994;
and $51,431 for 1993.
The DeBartolo Group has granted the OP options to purchase their interests
in two shopping center development sites at an agreed upon purchase price.
These options are subject to the rights and approvals of existing lenders, third
parties and governmental authorities. The OP has options and rights of first
refusal to purchase the DeBartolo Group's interest in two regional malls. The
option prices are fair market value at any time until December 31, 1998.
As of December 31, 1995, the OP had options to acquire the interests of
three outside partners in five DeBartolo Properties. These options are subject
to the rights of partners and lenders and to the satisfaction of certain
conditions. In January 1996, the Property Manager acquired the interests of one
outside partner in two properties, see Note 16.
Note 5 - Investments in Nonconsolidated Joint Ventures
The OP's investments in the joint ventures, which have been accounted for
under the equity method, are as follows:
OP'S PERCENTAGE
OWNERSHIP AS OF
VENTURE PROPERTY DECEMBER 31, 1995
- ------------------------------------ --------- -----------------
Aventura Mall Aventura Mall 33.3%
Jacksonville Avenues Limited Partnership The Avenues 25.0%
Biltmore Square Associates Biltmore Square 33.3%
Century III Associates Century III Mall 50.0%
Chesapeake-JCP Associates, Ltd. Chesapeake Square 50.0%
Coral-CS/LTD Associates Coral Square 50.0%
Florida Mall Associates The Florida Mall 50.0%
HD Lakeland Mall Joint Venture Lakeland Square 50.0%
West Dade County Associates Miami International 50.0%
Mall
Northfield Center Limited Partnership Northfield Square 31.6%
Palm Beach Mall (a tenancy in common) Palm Beach Mall 50.0%
Philadelphia Center Associates Great Northeast 50.0%
Plaza
These investments are recorded initially at cost and subsequently adjusted
for net equity in income (loss) and cash contributions and distributions. The
OP receives substantially all of the economic benefit of Biltmore Square,
Chesapeake Square and Northfield Square as the result of advances made to those
joint ventures. For one joint venture, the outside partner receives
substantially all of the economic benefit.
Summary financial information and summary of OP's investment in and share
of income (loss) from the above joint ventures follows:
December 31,
1995 1994
--------- ---------
Balance Sheets
Investment properties (net) $ 599,234 $ 604,506
Other assets 43,094 47,007
--------- ---------
Total assets 642,328 651,513
--------- ---------
Mortgages and notes payable 584,495 592,990
Other liabilities 90,549 85,182
--------- ---------
Total liabilities 675,044 678,172
--------- ---------
Accumulated deficit (32,716) (26,659)
Less: Outside partners' equity 180 3,753
Advances to nonconsolidated joint ventures 78,474 71,415
--------- ---------
Net surplus in nonconsolidated joint ventures $ 45,578 $ 41,003
========= =========
Net surplus (deficits) in nonconsolidated
joint ventures is presented in the accompanying
consolidated balance sheets as follows:
Investments in nonconsolidated joint ventures $ 38,251 $ 39,430
Advances to nonconsolidated joint ventures 78,474 71,415
--------- ---------
Total investments in and advances to
nonconsolidated joint ventures 116,725 110,845
Deficits in nonconsolidated joint ventures (71,147) (69,842)
--------- ---------
$ 45,578 $ 41,003
========= =========
Period From Period From
April 21, January 1,
1994 to 1994 to
December 31, December 31, April 20, December 31,
1995 1994 1994 1993
Statements of Operations -------- -------- -------- --------
Revenues:
Minimum rents $ 89,727 $ 60,978 $ 26,101 $ 80,971
Tenant recoveries 44,293 30,967 12,709 40,589
Percentage rents 6,058 4,833 1,406 7,932
Other 12,853 9,252 2,420 8,233
-------- -------- -------- --------
Total revenues 152,931 106,030 42,636 137,725
-------- -------- -------- --------
Expenses:
Shopping Center expenses 57,368 39,778 16,092 52,400
Interest expense 57,561 37,038 15,942 58,615
Depreciation and amortization 24,078 16,351 6,885 22,307
-------- -------- -------- --------
139,007 93,167 38,919 133,322
-------- -------- -------- --------
Gain (loss) on sale of assets 166 1,196 (1) 1,380
-------- -------- -------- --------
Income before extraordinary
item 14,090 14,059 3,716 5,783
Extraordinary item - loss on
early extinguishment of debt (425) (388) - -
-------- -------- -------- --------
Net income $ 13,665 $ 13,671 $ 3,716 $ 5,783
======== ======== ======== ========
DeBartolo Realty Partnership,
L.P.'s share of:
Revenues less shopping center
expenses $ 41,987 $ 28,706 $ 12,541 $ 40,302
Interest expense 20,035 12,902 8,206 29,801
Depreciation, amortization
and other 12,826 8,318 3,493 11,319
Gain on land sales 164 445 - 514
-------- -------- -------- --------
Income (loss) before
extraordinary item 9,290 7,931 842 (304)
Extraordinary item - loss on
early extinguishment of debt (425) (377) - -
-------- -------- -------- --------
Net income (loss) $ 8,865 $ 7,554 $ 842 $ (304)
======== ======== ======== ========
Note 6 - Property Manager
Summary financial information for the Property Manager is as follows:
December 31,
Balance Sheets 1995 1994
-------- --------
Cash and cash equivalents $ 2,018 $ 2,816
Accounts receivable, substantially
all due from related parties 13,516 10,531
Other assets 8,003 2,692
-------- --------
$ 23,537 $ 16,039
======== ========
Accounts payable and accrued liabilities $ 14,691 $ 11,421
Note payable to OP 4,018 --
Other long-term liabilities 4,082 3,977
-------- --------
Total Liabilities 22,791 15,398
Shareholders' equity 746 641
-------- --------
$ 23,537 $ 16,039
======== ========
OP's share of Shareholders' equity $ 709 $ 609
======== ========
Outside Shareholders' equity $ 37 $ 32
======== ========
Period From
Year Ended April 21, 1994
December 31, to December 31,
Statements of Operations 1995 1994
-------- --------
Revenues:
Construction and development $ 6,087 $ 4,541
Management and leasing 16,768 12,194
Other 3,223 1,507
-------- --------
Total revenues 26,078 18,242
-------- --------
Expenses:
Salaries and employee benefits 20,018 12,361
Other operating expenses 5,784 2,485
Other expenses 171 2,162
-------- --------
Total expenses 25,973 17,008
-------- --------
Net income 105 1,234
======== ========
OP's share of net income $ 100 $ 1,172
======== ========
Note 7 - Deferred Charges and Prepaid Expenses
Deferred charges and prepaid expenses are summarized as follows:
December 31,
1995 1994
-------- --------
Lease costs, net of accumulated amortization of
$15,566 and $14,541 in 1995 and 1994, respectively $ 17,402 $ 17,077
Securitized Debt Financing costs, net of accumulated
amortization of $2,992 and $1,226 in 1995
and 1994, respectively 9,374 11,135
Loan costs, net of accumulated amortization
of $11,382 and $11,910 in 1995 and 1994, respectively 8,743 11,189
Interest rate protection agreements, net of
accumulated amortization of $2,249
and $2,103 in 1995 and 1994, respectively 704 8,011
Interest rate buydowns,net of accumulated
amortization of $11,222 and $7,426 in 1995
and 1994, respectively 30,993 44,256
Investment in West Town Mall Joint Venture 2,699 2,405
Prepaid expenses and other 4,181 3,537
-------- --------
$ 74,096 $ 97,610
======== ========
Lease cost amortization totaled $3,288 in 1995; $2,280 from April 21, 1994 to
December 31, 1994; $824 for the period January 1, 1994 to April 20, 1994; and
$2,796 in 1993.
Amortization of loan costs, interest rate protection agreements and interest
rate buydowns totaled $14,729 in 1995; $12,640 from April 21, 1994 to
December 31, 1994; $1,354 for the period January 1, 1994 to April 20, 1994; and
$4,390 in 1993.
On December 27, 1995, the OP assigned certain interest protection agreements
to an unrelated third party and replaced such agreements with interest rate swap
agreements. Accordingly, interest rate protection agreements have been
written-off with a charge to interest expense. Fair value of the remaining
interest rate protection agreement and the interest rate swap was $704 and
$1,130, respectively, at December 31, 1995. Fair value of the interest rate
protection agreements at December 31, 1994 were $13,659.
Note 8 - Mortgages and Notes Payable
Mortgage debt, which is collateralized by substantially all investment
properties, is summarized as follows:
December 31,
1995 1994
---------- ----------
Commercial Mortgage pass-through certificates -
fixed interest rates ranging from 7.59% to 9.24%
(average of 8.13% at December 31, 1995), due
April, 2001 $ 367,244 $ 367,800
Commercial Mortgage pass-through certificates -
interest at LIBOR, subject to an interest rate
swap agreement, plus 56 basis points (5.31% at
December 31, 1995), due April, 2001 87,200 87,200
Revolving line of credit with interest at LIBOR
plus 175 basis points (7.5% at December 31, 1995)
due December 1998 55,000 --
Primarily first mortgages with fixed interest
rates ranging from 6.79% to 9.92% (average
of 7.9% at December 31, 1995), due at various
dates through 2012 692,162 804,362
First mortgages with variable interest rates
at LIBOR, subject to an interest rate swap
agreement, plus 100 basis points (5.75% at
December 31, 1995) due at various dates through 2002 74,864 78,362
Bond payable collateralized by a mortgage to
an affiliate of EJDC on one property at an
effective rate of 8.0% due September 1996 72,103 72,103
---------- ----------
Total Mortgages and Notes Payable $1,348,573 $1,409,827
========== ===========
During December 1995, the OP entered into an interest rate swap agreement to
pay LIBOR at (i) 4.75% on approximately $218 million of debt through April 1997
and (ii) 5.71% on $87.2 million of debt from May 1997 through April 2001. As
part of this arrangement, the OP assigned the following interest rate protection
agreements (i) 4.75% through April 1996 and 5.25% from May 1996 through April
1997 on approximately $131 million of debt and (ii) 4.75% through April 1996 on
$87.2 million of debt. The OP has an interest rate protection agreement which
limits interest on $87.2 million of debt to no more than LIBOR of 8.44% for the
period May 1996 through March 2001.
The OP's proportionate share of the mortgages and notes payable are as
follows as of December 31:
1995 1994
----------- -----------
DeBartolo Realty Partnership, L.P. $ 1,305,564 $ 1,363,042
Outside partners 43,009 46,785
----------- -----------
$ 1,348,573 $ 1,409,827
=========== ===========
Annual principal payments and maturities as of December 31, 1995 are as
follows:
Total OP's Share
----------- -----------
1996 $ 157,221 $ 157,139
1997 7,588 7,491
1998 63,253 63,149
1999 69,103 68,991
2000 8,661 8,540
Thereafter 1,042,747 1,000,254
----------- -----------
$ 1,348,573 $ 1,305,564
=========== ===========
During 1995, the OP paid off mortgages of $117,227 at three properties and
obtained the release of mortgage liens at two properties. Additionally, the OP
refinanced three loans at one property totaling $44,098 with a $59,500 mortgage
note payable (of which $46,528 is currently outstanding), providing additional
borrowing capacity of up to $13,000 to be drawn upon over the subsequent twelve
months for expansion and renovation of that property. The OP refinanced $9,518
of construction loans at three community centers with permanent financing
totaling $15,000.
In December 1995, the OP amended and expanded its revolving line of credit
from $50,000 to $120,000, subject to certain conditions being met. As of
December 31, 1995, total current availability under this working line is
$94,500, of which $55,000 is outstanding. The facility is secured by the
mortgages of two properties and a negative pledge of a third property and is
recourse to the OP. The OP anticipates the facility to be increased to $150,000
and the availability will be increased to $144,500 during the first quarter of
1996 once certain conditions are met including additional collateral of a
mortgage on the negative pledged property. Interest is provided at the lesser
of LIBOR plus 175 basis points or the Base Rate, as defined. The facility
matures in December 1998, however, the OP has a one-year extension option. The
facility requires the OP to maintain a minimum net worth as defined, limits the
OP's indebtedness and provides for other restrictive covenants.
The OP restructured a $54,906 mortgage note payable having an interest rate
of 8 7/8% maturing January, 1998. The new mortgage matures January, 2005 and
bears interest at 7.42% . In connection with this transaction, the OP made a
partial paydown of $5,491 on a mortgage note of a nonconsolidated joint venture.
Commercial mortgage pass-through certificate covenants require the OP to
fund into escrow reserves for renovations, repairs and maintenance and tenant
improvements and requires the FP to maintain Minimum Debt Service coverage
ratios (as defined) and provides for other restrictive covenants.
Annual reserve funding requirements are as follows:
1996 $ 7,600
1997 10,400
1998 6,933
1999 5,200
2000 5,200
Thereafter 1,734
---------
$ 37,067
=========
DeBartolo Realty Partnership, L.P. has guaranteed $29,946 of the mortgages
and notes payable relating to three consolidated properties and three
nonconsolidated joint ventures. An affiliate of EJDC continues to provide a
guarantee of 33 1/3% of the debt service obligation on a $100,000 floating rate
mortgage at one nonconsolidated joint venture. The OP has agreed to indemnify
the EJDC affiliate for any loss or costs incurred or associated with this
guaranty.
DeBartolo, Inc., parent of EJDC, and certain of its affiliates have
guaranteed $100,000 of the OP's mortgages and notes payable.
Fair Value of Debt Related Financial Instruments:
The estimated fair value of debt related financial instruments are as
follows:
December, 1995 December, 1994
----------------------- ----------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------- ---------- ---------- ----------
Securitized Debt Financing $ 454,444 $ 477,083 $ 455,000 $ 446,936
Fixed rate mortgages and
notes payable 764,265 796,231 876,465 805,553
Variable rate mortgages and
notes payable 74,864 74,864 78,362 78,362
Revolving loan 55,000 55,000 -- --
---------- ---------- ---------- ----------
$1,348,573 $1,403,178 $1,409,827 $1,330,851
========== ========== ========== ==========
The debt on the nonconsolidated joint ventures (see Note 5) was $584,495 at
December 31, 1995. The OP's pro rata share of that debt was $249,535 at
December 31, 1995. The OP's proportionate share of mortgage notes and other
notes payable on both its consolidated and nonconsolidated properties was
$1,555,099 at December 31, 1995.
Note 9 - Rentals Under Operating Leases
The properties receive rental income from the leasing of retail shopping
center space and an office tower under operating leases that expire at various
dates through 2026. Substantially all investment property is leased out under
operating leases. The minimum future rentals based on operating leases held are
as follows as of December 31, 1995
Leases
with Related
All Leases Parties (1)
----------- --------
1996 $ 181,438 $ 7,315
1997 165,984 6,975
1998 150,090 5,771
1999 130,068 5,419
2000 111,839 4,695
Thereafter 486,197 23,905
----------- --------
$ 1,225,616 $ 54,080
=========== ========
(1) Represents stores whose parent company also owns units of
the OP or stores whose chief executive officers are on the
Board of Directors of the Company.
Minimum future rentals do not include amounts which may be received under
the terms of certain leases based upon a percentage of the tenants' sales or as
reimbursement of shopping center expenses.
No single tenant or group of affiliated tenants collectively accounts for
more than 10% of the consolidated properties total revenues which include
minimum rents, tenant recoveries, percentage rents and other revenue. The
tenant base includes national and regional retail chains and local retailers and
consequently the consolidated properties credit risk is concentrated in the
retail industry. The DeBartolo Malls are located in 16 states, with 17 malls
located in Florida and 8 malls located in Ohio.
The revenues of the OP may be adversely affected by the inability to
collect rent due to bankruptcy or insolvency of tenants or otherwise. Two
department store companies operating six department stores or other large retail
stores in excess of 60,000 square feet ("Anchor") at the consolidated DeBartolo
Properties are operating under the protection of the United States Bankruptcy
Code. At December 31, 1995, leases (excluding rejected leases) of Anchor
tenants open and operating in bankruptcy comprise approximately 1% of total
gross leasable area ("GLA"). Annual rentals paid by these Anchor tenants
comprised 2.5% of minimum rents paid by Anchor tenants. At December 31, 1995,
leases (excluding rejected leases) of mall store tenants at consolidated
DeBartolo Properties open and operating in bankruptcy comprise approximately
6.4% of mall GLA. Annual rentals paid by these mall store tenants comprised
6.1% of minimum rents paid by mall store tenants. Substantially all of these
tenants are currently meeting their contractual obligations. At the time a
tenant files for bankruptcy protection it is difficult to determine to what
extent these tenants will reject their leases or seek other concessions as a
condition to continued occupancy. The OP expects certain of these tenants to
reject their leases. Based on past experience, the OP has been able to offset,
over a reasonable period of time, the impact on minimum rents caused by a tenant
in bankruptcy.
Note 10 - Ground Leases
Certain properties, as lessees, have ground leases expiring at various
dates through 2087. Following is a schedule of future minimum rental payments
required under these ground leases as of:
December 31,
1995
----------
1996 $ 2,267
1997 2,347
1998 2,347
1999 2,347
2000 2,347
Thereafter 225,607
----------
$ 237,262
==========
Note 11 - Transactions with Affiliates
Management and Other Fees: The Property Manager has contracted to provide
management, leasing, development and construction management services to the OP.
Amounts included in the consolidated financial statements related to agreements
with the Property Manager are as follows:
Period Period
From From
April 21, January 1,
1994 to 1994 to
December 31, April 20,
1995 1994 1994 1993
------- ------- ------- -------
Management fees $ 5,369 $ 3,044 $ 2,179 $ 7,167
Leasing fees 3,261 1,872 552 3,319
Development and construction 4,872 1,844 717 3,013
Other reimbursements 835 254 180 664
During 1995, the Property Manager earned development and construction
revenues of $893 from affiliates of a partner in the OP.
Insurance: The OP has first dollar commercial general liability coverage
and special cause of loss property insurance with a $5 deductible. Prior to
1995 the OP's insurance carrier reinsured certain coverages with an affiliate of
EJDC. Charges to the OP for the reinsured amounts totaled $3,462 from April 21,
1994 to December 31, 1994. Prior to April 21, 1994, the DeBartolo Retail Group
had first dollar commercial general liability insurance of which an affiliated
insurance company reinsured the first $250 per occurrence. Additionally, the
DeBartolo Retail Group had "All Risk" Property insurance. The insurance company
reinsured the first $95 per occurrence with an affiliate of EJDC. Charges for
the reinsured amounts totaled $1,374 for the period January 1, 1994 to April 20,
1994 and $4,355 for 1993.
Affiliate Leases: On November 6, 1995, Fun-N-Games, an affiliate of EJDC
which operated amusement centers in DeBartolo Properties, was sold to an
independent third party operator which continues to operate these stores. These
properties have recorded total revenues and operating expense reimbursements of
$1,771 from January 1, 1995 through November 6, 1995, $1,571 from April 21, 1994
to December 31, 1994, $776 for the period from January 1, 1994 to April 20, 1994
and $2,287 for 1993.
Affiliates of certain Anchor tenants and small shops in various properties
are partners in various properties or are partners in the OP. As of
December 31, 1995, these tenants own or lease space in 29 consolidated
properties. These properties recorded rental income and operating expense
reimbursements of $10,933 in 1995; $8,926 from April 21, 1994 to December 31,
1994; $3,314 for the period January 1,1994 to April 20, 1994; and $12,674 for
1993.
Affiliated Receivables (Payables): At December 31, 1995, the affiliated
receivable represents a $4,018 revolving loan receivable from the Property
Manager bearing interest at prime plus 200 basis points offset by amounts due to
the Property Manager for normal operating costs. Interest earned by the OP on
this revolver totaled $258 in 1995. At December 31, 1994, affiliated
receivables represent amounts due to the Property Manager for normal monthly
operating costs offset by dividends receivable from the Property Manager of
$809. At December 31, 1993, net affiliated receivables (which are primarily
non-interest bearing) are due from EJDC. Concurrent with the offering, these
affiliated receivables were distributed to EJDC. Interest expense includes
interest charged to properties by EJDC on net amounts due to EJDC totaling $760
for the period January 1, 1994 to April 20, 1994 and $2,754 in 1993.
The Property Manager leases office space from EJDC under an operating
lease. Rent charged under the lease totaled $1,092 in 1995 and $755 in 1994.
The Property Manager performs legal, tax and other services for EJDC under
a corporate service agreement. Fees for these services totaled $570 in 1995 and
$425 in 1994.
Note 12 - Stock Incentive Plan
The Company and the OP adopted the DeBartolo Realty Corporation 1994 Stock
Incentive Plan (the "Stock Incentive Plan") to provide incentives to attract and
retain officers, directors and key employees.
The Stock Incentive Plan provides for the grants of nonqualified and
incentive stock options to purchase a specified number of shares of Common Stock
("Options") or rights to future grants of Common Stock ("Deferred Stock").
Under the Stock Incentive Plan, 3,100,000 shares of Common Stock are available
for grant.
The Compensation Committee of the Company's Board of Directors has approved
the grant of approximately 2,743,000 shares in the form of Deferred Stock in
connection with a two-part, long-term incentive compensation program.
Deferred Stock Awards upon Completion of the Offering
Upon completion of the IPO, approximately 71,000 shares of Deferred Stock
were granted to certain employees of the Company and the Property Manager, and
will vest ratably over a five-year period. The vesting of this initial Deferred
Stock award is based only on service and will not depend on the Company's
financial performance.
Long-Term Incentive Deferred Stock Awards. The second and more significant
component of the Company and the OP's long-term compensation proposal is a
Deferred Stock grant for which vesting is tied to the attainment of annual and
cumulative targets for growth in the Company's funds from operations ("FFO") per
share (which is substantially equivalent to cash generated before debt
repayments and capital expenditures, including peripheral land sales) after
adjusting for a reserve (not to exceed a specified amount) set annually to cover
tenant allowances and the use of floating rate debt through 1998. This long-
term incentive Deferred Stock grant includes senior management and approximately
130 key employees of the Property Manager. Any Deferred Stock award earned upon
attainment of an annual and cumulative growth target will be distributed over
the three-year period subsequent to the period that the award was earned,
provided the employee remains in the employ of the Company or the Property
Manager. Deferred Stock awarded to employees over the three-year period will be
unrestricted.
The awards eligible to be earned in any given year will be earned only if
the annual and cumulative adjusted FFO per share growth target for such year is
reached. As defined, the adjusted FFO per share growth target from the current
adjusted FFO base was $1.54 in 1995 and increases 7% for each year ending
December 31, 1996 through 1998. The percentage of the total Deferred Stock
award eligible to be earned upon attainment of these targets is 10% for 1994,
15% for 1995, 20% for 1996, 25% for 1997 and 30% for 1998. The following table
provides the adjusted FFO target for award of the Common Stock reserved for
issuance under the Stock Incentive Plan.
Long-Term Incentive Deferred Stock Award Targets
Annual Cumulative
Year Ended Growth Growth Target FFO Per Share
December 31, Target From Plan Inception Growth Target
------------ ------- ------------------- -------------
1996 7.0% 16.8% $1.65
1997 7.0% 25.0% $1.77
1998 7.0% 33.7% $1.89
If the annual target is not met, the percentage of the award attributable
to that annual target may be earned in a subsequent year if the cumulative
growth target is met including the shortfall in the prior year(s). The
Compensation Committee of the Company's Board of Directors has the right to make
partial awards if targets are not met.
At December 31, 1995, approximately 2,672,300 shares of the total 3,100,000
shares of Common Stock reserved for issuance under the Stock Incentive Plan were
allocated among senior management and approximately 130 key employees in
connection with the long-term incentive award. The remaining shares have been
held for future allocations under the stock incentive plan to both current and
future employees. The Compensation Committee has discretion to waive the
additional three-year employment requirement upon certain terminations of
employment (e.g., retirement, death, disability or termination without cause).
The awards vest over a period of eight years, with the majority vesting in the
fourth through eighth years after the IPO.
The OP did not meet the FFO growth target in 1995; accordingly, the
financial statement reflects expense of $210 relating to the vested portion of
the 70,696 shares under the Deferred Stock plan. The OP achieved its 1994 FFO
target and accordingly expensed $3,848 relating to 245,200 shares awarded under
the long-term incentive deferred stock plan and $210 relating to the 1994 vested
portion of the Deferred Stock award.
Stock Option Plan:
The Company and the OP has a stock option plan in place covering each
Director of the Company who is not otherwise an employee of the Company or any
of its subsidiaries or affiliates. Each such Director, upon joining the
Company's Board of Directors, received an initial grant of Options to purchase
1,000 shares of Common Stock having an exercise price equal to 100% of the fair
market value of the Common Stock as of such date. Commencing on December 31,
1994, and on each December 31st thereafter, each Director also will
automatically receive an annual grant of options to purchase 500 shares of
Common Stock having an exercise price equal to 100% of the fair market value of
the Common Stock at the date of grant of such Option. The options can be
exercised any time during the ten years after grant.
Note 13 - Gain on Sale of Assets
During 1995, the OP has recognized a $3,750 gain from the sale of a
partnership interest in an undeveloped mall site located in Strongsville, Ohio,
which was acquired in 1994 from the DeBartolo Group through the exercise of an
option for $6,250 and immediately sold. The remaining gains primarily represent
the sale of land adjacent to three properties.
Note 14 - Extraordinary Item
The extraordinary charge in 1995 resulted from prepayment penalties of
$3,390 and the write-off of unamortized deferred financing costs of
$7,877 related to the early retirement of mortgage notes payable. The
extraordinary item in 1994 resulted from prepayment penalties and the write-off
of unamortized deferred financing costs related to the satisfaction of mortgage
notes payable in connection with the OP's reorganization.
Note 15 - Contingent Liabilities
Certain of the properties are subject to various legal proceedings and
claims arising in the ordinary course of business, some of which are covered by
insurance. Management of the properties believes the ultimate resolution of
these matters is not likely to have a material adverse effect on the
consolidated financial statements.
Substantially all of the properties have been subjected to Phase I
environmental audits. Such audits have not revealed nor is management aware of
any environmental liability that management believes would have a material
adverse impact on the OP's financial position or results of operations.
Management is unaware of any instances in which it would incur significant
environmental costs if any or all properties were sold, disposed of or
abandoned.
Note 16 - Subsequent Events
The OP transferred ownership of one property to its lender, as of March 1,
1996, fully satisfying the property's mortgage note payable. This property no
longer met the OP's criteria for its ongoing strategic plan. The OP will
recognize an extraordinary gain on this transaction of approximately $8.0
million in the first quarter of 1996.
On January 31, 1996, the Property Manager was assigned a 33 % partnership
interest in one of the nonconsolidated joint ventures and a 25% partnership
interest in another nonconsolidated joint venture from an unrelated joint
venture partner. As a result, the OP effectively owns 65% and 74% of these
joint ventures.
Note 16.1-Event (Unaudited) Subsequent to Date of Independent Auditor's Report
The Company entered into an Agreement and Plan of Merger, dated as of March
26, 1996 (the "Agreement"), among Simon Property Group, Inc., a Maryland
corporation ("SPG"), its merger subsidiary and the Company, pursuant to which
the Company agreed to merge with the merger subsidiary. The Agreement provides
for the exchange of all outstanding Company common stock for SPG common stock,
$0.0001 par value (the "SPG Common Stock"), at an exchange ratio of 0.68 shares
of SPG Common Stock for each share of Company common stock. The merger is
subject to the approval of shareholders of both SPG and the Company and other
conditions. The new entity will be renamed Simon DeBartolo Group, Inc.
Note 17 - Selected Quarterly Financial Data (Unaudited)
1995
DeBartolo Realty Partnership, L.P.
----------------------------------------------
January 1 April 1 July 1 October 1
To To To To
March 31 June 30 September 30 December 31
-------- -------- -------- --------
Operating Data:
Total revenues $ 79,229 $ 81,223 $ 84,099 $ 88,106
Income before
extraordinary items 11,739 9,826 13,343 11,435
Extraordinary items - - (5,629) (5,638)
-------- -------- -------- --------
Net income $ 11,739 $ 9,826 $ 7,714 $ 5,797
======== ======== ======== ========
Earning Per Unit Data:
Income before
extraordinary items $ 0.14 $ 0.12 $ 0.15 $ 0.12
Extraordinary items - - (0.07) (0.06)
-------- -------- -------- --------
Net income $ 0.14 $ 0.12 $ 0.08 $ 0.06
======== ======== ======= ========
Cash Dividends Per Unit $ 0.315 $ 0.315 $ 0.315 $ 0.315
======== ======== ======== ========
Weighted Average
Units Outstanding 83,150 83,150 84,567 89,150
======== ======== ======== ========
1994
DeBartolo Realty Partnership, L.P.
------------------------------------
April 21 July 1 October 1
To To To
June 30 September 30 December 31
Operating Data: -------- -------- --------
Total revenues $ 61,227 $ 80,412 $ 87,304
Income before extraordinary items 5,123 10,519 12,026
Extraordinary items (8,932) -- --
-------- -------- --------
Net income $ (3,809) $ 6,180 $ 12,026
======== ======== ========
Earning Per Unit Data:
Income before extraordinary items $ 0.06 $ 0.13 $ 0.15
Extraordinary items (0.11) -- --
-------- -------- --------
Net income (loss) $ (0.05) $ 0.13 $ 0.15
======== ======== ========
Cash Dividends Per Unit $ 0.245 $ 0.315 $ 0.315
Weighted Average Units Outstanding 81,590 82,906 82,908
Note 18 - Unaudited Pro Forma Financial Information
As a result of the IPO and the related transactions entered into in
connection with the formation of the Company and the OP, 1994 historical results
of operations and earnings per unit may not be indicative of future results of
operations and earnings per share. This unaudited Pro Forma Condensed
Consolidated Statement of Operations assumed that the Company qualifies as a
real estate investment trust for federal income tax purposes and also assumed
(i) completion of the asset contributions in the formation of the Company; (ii)
the completion of the IPO, including the exercise of the underwriters over-
allotment option and the Securitized Debt Financing; (iii) the completion of
debt exchange transactions with BJS Capital Partners, L.P. and MS Youngstown
General Partnership; (iv) the contribution by JCP Realty, Inc. and the EJDC
employees of their interests in certain DeBartolo Properties; and (v) the
completion of certain refinancings of mortgage indebtedness of the DeBartolo
Properties (collectively defined as the "REIT Formation") as of the beginning of
1994. In management's opinion, all necessary adjustments to reflect the effects
of these transactions have been made as of January 1, 1994.
The unaudited Pro Forma Condensed Statement of Operations is not
necessarily indicative of what actual results of operations of the OP would have
been assuming such transactions had been completed at January 1, 1994, nor does
it purport to represent the results of operations of future periods.
The following is the DeBartolo Realty Partnership, L.P. Pro Forma Condensed
Consolidated Statement of Operations for the twelve months ended December 31,
1994:
DeBARTOLO DeBARTOLO
REALTY REALTY
DeBARTOLO PARTNERSHIP, L.P. PARTNERSHIP, L.P.
RETAIL GROUP DeBARTOLO APRIL 21, 1994 FOR THE TWELVE
JANUARY 1, 1994 RETAIL GROUP TO MONTHS ENDED
TO PRO FORMA DECEMBER 31, DECEMBER 31,
APRIL 20, 1994 (A) ADJUSTMENTS 1994 1994
----------------- ------------ --------------- --------------
(Dollars in Thousands, Unaudited)
Revenues B $ 95,272 $ 1,125 $ 228,943 $ 325,340
Shopping center expenses C 35,648 500 80,635 116,783
Deferred stock compensation expense -- -- 4,058 4,058
Interest expense D 44,119 (7,316) 87,040 123,843
Depreciation and amortization 16,616 -- 39,578 56,194
--------- -------- --------- ---------
96,383 (6,816) 211,311 300,878
--------- --------- --------- ---------
Gain on sale of assets (primarily land) 3,286 -- 1,952 5,238
Income from nonconsolidated
joint ventures E 842 2,033 7,554 10,429
Minority partners' interest in
consolidated joint ventures F 888 (977) 530 441
--------- -------- --------- ---------
Income before extraordinary items 3,905 8,997 27,668 40,570
Extraordinary item - loss on early
extinguishment of debt -- -- (8,932) (8,932)
--------- ------- --------- ---------
Net income $ 3,905 $ 8,997 $ 18,736 $ 31,638
========= ======== ========= =========
Pro forma earnings per unit (based upon
pro forma weighted average units
outstanding)
Income before extraordinary items $ 0.49
Extraordinary loss on early extinguishment (0.11)
of debt ---------
Net Income $ 0.38
=========
(A)The pro forma adjustments reflect the historical combined operations of the
Predecessor to the OP (the "DeBartolo Retail Group") for the period from
January 1, 1994 through April 20, 1994.
(B)Represents pro forma impact of the Property Manager. The OP accounts for
its investment in the Property Manager on the equity basis of accounting.
Pro forma adjustments also include interest income on $60,000 of cash from
the REIT Formation from January 1, 1994 through April 20, 1994.
(C)The pro forma adjustment reflects the elimination of certain taxes associated
with the change of ownership structure from a corporation to a partnership.
The pro forma adjustments also reflect the Company's prorated share of
estimated annual cost of $2,000 associated with operating as a public
company.
(D)Reflects the reduction of interest expense associated with the reduction of
debt and restructuring resulting from the IPO and related transactions.
(E)The pro forma adjustment reflects the changes in ownership interest,
structure, and refinancing of debt in the nonconsolidated joint ventures
which are recorded on the equity method.
(F)Increase reflects the minority partners' share of the net effect of the REIT
Formation.
REPORT OF INDEPENDENT AUDITORS
To the Partners of
DeBartolo Realty Partnership, L.P.
We have audited the accompanying combined balance sheets of the Nonconsolidated
Joint Ventures of DeBartolo Realty Partnership, L.P. as of December 31, 1995 and
1994 and the related combined statements of operations, accumulated deficit and
cash flows for the year ended December 31, 1995 and for the period from
April 21, 1994 to December 31, 1994 and the combined statements of operations,
accumulated deficit and cash flows of the Uncombined Joint Ventures of
DeBartolo Retail Group as described in Note 1 for the period January 1, 1994 to
April 20, 1994 and for the year ended December 31, 1993. These financial
statements are the responsibility of DeBartolo Realty Partnership,
L.P.'s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a best basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Nonconsolidated Joint Ventures of DeBartolo Realty Partnership, L.P. at
December 31,1995 and 1994 and the combined results of their operations and
their cash flows for the year ended December 31, 1995 and for the period
April 21, 1994 to December 31, 1994, and the combined results of operations
and cash flows of the Uncombined Joint Ventures of DeBartolo Retail Group for
the period January 1, 1994 to April 20, 1994 and for the year ended
December 31, 1993, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 14, 1996
NONCONSOLIDATED JOINT VENTURES OF DEBARTOLO REALTY PARTNERSHIP, L.P.
AND
UNCOMBINED JOINT VENTURES OF DEBARTOLO RETAIL GROUP
COMBINED BALANCE SHEETS
(Dollars in Thousands)
December 31,
1995 1994
--------- ---------
Assets:
Investment properties (Notes 3 and 5) $ $ 784,211 $ 767,345
Less accumulated depreciation 184,977 162,839
--------- ---------
599,234 604,506
Cash and cash equivalents. 5,507 6,043
Restricted cash. 2,089 2,016
Accounts receivable, net of allowance
for doubtful accounts of $2,883 and
$2,718, in 1995 and 1994 17,506 18,321
Deferred charges and prepaid expenses (Note 4) 17,992 20,627
--------- ---------
$ 642,328 $ 651,513
========= =========
Liabilities and Accumulated Equity (Deficit):
Liabilities:
Mortgages and notes payable (Note 5) $ 584,495 $ 592,990
Accounts payable and accrued expenses 14,113 12,217
Affiliate payables (Note 8). 76,436 72,965
--------- ---------
675,044 678,172
--------- ---------
Commitments and contingencies
(Notes 5, 6, 7, and 9) - -
Accumulated deficit (32,716) (26,659)
--------- ---------
$ 642,328 $ 651,513
========= =========
Accumulated equity (deficit):
DeBartolo Realty Partnership, L.P. $ (32,896) $ (30,412)
Outside partners 180 3,753
--------- ---------
$ (32,716) $ (26,659)
========= =========
See accompanying notes
NONCONSOLIDATED JOINT VENTURES OF DEBARTOLO REALTY PARTNERSHIP, L.P.
AND
UNCOMBINED JOINT VENTURES OF DEBARTOLO RETAIL GROUP
COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
DeBartolo Realty Partnership, L.P. DeBartolo Retail Group
----------------------------------- -----------------------
April 21, January 1,
to to
December 31, April 20,
1995 1994 1994 1993
-------- -------- -------- --------
Revenues (Note 8):
Minimum rents $ 89,727 $ 60,978 $ 26,101 $ 80,971
Tenant recoveries 44,293 30,967 12,709 40,589
Percentage rents 6,058 4,833 1,406 7,932
Other 12,853 9,252 2,420 8,233
-------- -------- -------- --------
Total revenues 152,931 106,030 42,636 137,725
-------- -------- -------- --------
Expenses:
Shopping Center Expenses:
Property operating 14,381 10,178 4,247 13,289
Repairs and maintenance 12,065 7,888 3,437 11,563
Real estate taxes 18,630 13,052 5,185 16,898
Advertising and promotion 4,972 3,307 684 3,904
Management fees to
affiliate (Note 8) 4,984 3,377 1,545 4,731
Provision for doubtful accounts 997 276 496 1,078
Ground leases (Note 7) 130 88 37 125
Other 1,209 1,612 461 812
-------- -------- -------- --------
Total shopping center expenses 57,368 39,778 16,092 52,400
Interest expense 57,561 37,038 15,942 58,615
Depreciation and amortization 24,078 16,351 6,885 22,307
-------- -------- -------- --------
139,007 93,167 38,919 133,322
-------- -------- -------- --------
Gain( loss) on sale of assets 166 1,196 (1) 1,380
Income before extraordinary item 14,090 14,059 3,716 5,783
Extraordinary item (Note 10) (425) (388) -- --
-------- -------- -------- --------
Net income $ 13,665 $ 13,671 $ 13,716 $ 5,783
======== ======== ======== ========
See accompanying notes
NONCONSOLIDATED JOINT VENTURES OF DEBARTOLO REALTY PARTNERSHIP, L.P.
AND
UNCOMBINED JOINT VENTURES OF DEBARTOLO RETAIL GROUP
COMBINED STATEMENTS OF ACCUMULATED DEFICIT
(Dollars in Thousands)
Balance at December 31, 1992 $ 1,843
Contributions 6,258
Distributions (31,040)
Net income 5,783
----------
Balance at December 31, 1993 (17,156)
Contributions 4,398
Distributions (11,532)
Net income 3,716
----------
Balance at April 20, 1994 (20,574)
Contributions 1,279
Distributions (21,035)
Net income 13,671
----------
Balance at December 31, 1994 (26,659)
Contributions 9,097
Distributions (28,819)
Net income 13,665
----------
Balance at December 31, 1995 $ (32,716)
==========
See accompanying notes
NONCONSOLIDATED JOINT VENTURES OF DEBARTOLO REALTY PARTNERSHIP, L.P.
AND
UNCOMBINED JOINT VENTURES OF DEBARTOLO RETAIL GROUP
COMBINED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
DeBartolo Realty Partnership, L.P. DeBartolo Retail Group
-------------------------------- ----------------------
April 21, January 1,
to to
December 31, April 20,
1995 1994 1994 1993
-------- -------- -------- --------
Cash Flows From Operating Activities:
Net income $ 13,665 $ 13,671 $ 3,716 $ 5,783
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of financing costs included
in interest expense 1,941 1,184 367 877
(Gain) loss on sale of assets (166) (1,196) 1 (1,380)
Depreciation and amortization 24,078 16,351 6,885 22,307
Extraordinary items 425 388 - -
(Increase) decrease in restricted cash (73) 699 (1,548) (1,168)
(Increase) decrease in accounts receivable 815 (3,899) 767 (3,568)
Decrease (increase) in prepaid expenses
and other 39 2,007 (2,001) (175)
Increase (decrease) in accounts payable
and accrued expenses 1,012 (5,881) 6,322 3,405
Other -- 139 459 --
Net Cash Provided By Operating Activities 41,736 23,463 14,968 26,081
Cash Flows From Investing Activities:
Additions to investment properties (9,750) (24,524) (1,961) (9,270)
Additions to lease costs (1,268) (701) (156) (1,170)
Proceeds from sale of land 193 1,407 1 1,560
Net Cash Used In Investing Activities (10,825) (23,818) (2,116) (8,880)
Cash Flows From Financing Activities:
Proceeds from issuance of debt - 19,667 4,445 88,300
Scheduled principal payments on mortgages (3,004) (1,888) (871) (2,443)
Other payments on debt (5,491) (48,167) - (84,327)
Loan costs paid (126) (8,889) (320) (2,573)
Capital contributions 2,522 1,279 4,398 6,258
Partner distributions (28,819) (21,036) (11,532) (31,040)
(Increase) decrease in affiliate
receivables (net of affiliated payables) 3,471 56,962 (2,508) 9,987
Net Cash Used In Financing Activities (31,447) (2,072) (6,388) (15,838)
Net Increase (Decrease) In Cash and
Cash Equivalents (536) (2,427) 6,464 1,363
Cash and Cash Equivalents:
Beginning of year 6,043 8,470 2,006 643
End of year $ 5,507 $ 6,043 $ 8,470 $ 2,006
Supplemental Information:
Interest paid $ 56,125 $ 36,032 $ 15,319 $ 55,894
Supplemental Schedule of Non-Cash and
Financing Activities:
Step-up in basis associated with the
acquisition of partnership interests
in three properties $ 6,734 $ -- $ -- $ --
See accompanying notes
NONCONSOLIDATED JOINT VENTURES OF
DeBARTOLO REALTY PARTNERSHIP, L.P.
AND UNCOMBINED JOINT VENTURES OF DeBARTOLO RETAIL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in Thousands)
Note 1 - Basis of Presentation
DeBartolo Realty Partnership, L.P. (the "Operating Partnership" or "OP")
was formed as a Delaware limited partnership in 1993 in connection with
DeBartolo Realty Corporation's (the "Company") initial public offering (the
"IPO"). The OP owns 50% or less of twelve joint ventures and accounts for its
investment in these joint ventures under the equity method. Prior to April 21,
1994, each of these joint ventures were owned 50% or less by The Edward J.
DeBartolo Corporation ("EJDC") and certain affiliates.
The accompanying combined financial statements of the nonconsolidated
joint ventures of DeBartolo Realty Partnership, L.P. and uncombined joint
ventures of DeBartolo Retail Group consist of the assets, liabilities and
results of operations identified with the joint ventures which are owned 50% or
less by the OP.
The transaction relating to the acquisition of the investments in joint
ventures is accounted for as a reorganization of entities under common control
and accordingly the assets and liabilities of all combined joint ventures will
be carried forward at historical cost.
In conjunction with the IPO, the OP received options to acquire the
interests of the estate of Edward J. DeBartolo and other members of his family
and affiliates in three nonconsolidated joint ventures. On July 1, 1995, the
OP exercised these options and acquired a 12.8% interest in Miami International
Mall, and 0.1% interests in Coral Square and Lakeland Square. The purchase
price of approximately $6.7 million was payable in limited partnership
interests in the OP.
The joint ventures included in these combined financial statements and the
OP's and DeBartolo Retail Group's ownership interest in each are as follows:
OP'S
PERCENTAGE
OWNERSHIP
AT
DECEMBER 31,
VENTURE PROPERTY 1995
Aventura Mall Venture Aventura Mall 33.3%
Biltmore Square Associates Biltmore Square 33.3%
Century III Associates Century III Mall 50.0%
Chesapeake-JCP Associates, Ltd. Chesapeake Square 50.0%
Coral-CS/LTD Associates Coral Square 50.0%
Florida Mall Associates The Florida Mall 50.0%
HD Lakeland Mall Joint Venture Lakeland Square 50.0%
Jacksonville Avenues Limited Partnership The Avenues 25.0%
Northfield Center Limited Partnership Northfield Square 31.6%
Palm Beach Mall (A Tenancy in Common) Palm Beach Mall 50.0%
Philadelphia Center Associates Great Northeast Plaza 50.0%
West Dade County Associates Miami International Mall 50.0%
Note 2 - Summary of Significant Accounting Policies
Investment Properties:
Investment properties are stated at cost less accumulated depreciation,
which in the opinion of management is not in excess of net realizable value.
Costs incurred for the acquisition, development, construction and improvement
of properties, including significant renovations, are capitalized. Interest
costs and real estate taxes incurred with respect to qualified expenditures
relating to the construction of assets are capitalized during the development
period.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Depreciation and Amortization:
The cost of buildings, improvements and equipment are depreciated on the
straight-line method over estimated useful lives, as follows:
Buildings _ 30 to 40 years
Improvements _ shorter of lease term or useful life
Equipment _ 3 to 10 years
Tenant allowances paid to tenants for construction are capitalized and
amortized over the terms of each specific lease. Maintenance and repairs are
charged to expense when incurred.
Deferred Charges:
Deferred charges consist principally of financing costs and leasing
commissions which are amortized over the terms of the respective agreements.
Capitalized Interest:
Interest is capitalized on projects during the construction period.
Interest capitalized was $708 in 1995, $798 from April 21, 1994 to December 31,
1994, and $24 for the period January 1, 1994 to April 20, 1994. No interest
was capitalized during 1993.
Cash and Cash Equivalents:
Highly liquid investments with maturities of three months or less are
considered cash equivalents.
Restricted Cash:
Restricted cash is being restricted primarily for payment of expenditures
for improvements relating to a shopping center.
Fair Value of Financial Instruments:
The following methods and assumptions were used to estimate the fair value
of financial instruments:
The fair value of cash and cash equivalents and restricted
cash approximate the carrying value due to the short term nature of
these instruments.
The fair value of the fixed rate mortgages and notes
payable is based on current rates available to the OP for debt of
similar terms. Fair value of variable rate debt is considered to be
the carrying amount.
Revenue Recognition:
Shopping center space is generally leased to specialty retail tenants
under short and intermediate term leases which are accounted for as operating
leases. Minimum rents are recognized on the straight-line method over the
terms of leases. Percentage rents are recognized on an accrual basis as
earned. Real estate tax and operating expense recoveries are recognized in the
period the applicable costs are incurred.
Income Taxes:
The allocable share of the taxable income or loss of the joint ventures is
includable in the income tax returns of the partners; accordingly, income taxes
are not reflected in the combined financial statements.
Impact of Recently Issued Accounting Standards:
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The OP will adopt Statement 121 in
the first quarter of 1996 and, based on current circumstances, does not believe
the effect of adoption will be material.
Note 3 - Investment Properties
Investment properties consist of shopping center properties, including
peripheral land and properties under development. Investment properties are
summarized as follows:
DECEMBER 31,
1995 1994
--------- ---------
Land $ 80,670 $ 79,651
Shopping center buildings, improvements
and equipment 697,058 684,412
Properties under expansion/renovation 6,336 3,107
Peripheral land parcels 147 175
--------- ---------
784,211 767,345
Accumulated depreciation 184,977 162,839
--------- ---------
Total investment properties $ 599,234 $ 604,506
========= =========
Peripheral land parcels primarily consist of undeveloped land parcels
adjacent to certain shopping centers.
Depreciation expense totaled $22,283 in 1995; $14,982 from April 21, 1994 to
December 31, 1994; $6,395 for the period January 1, 1994 to April 20, 1994 and
$20,706 for 1993.
Note 4 - Deferred Charges and Prepaid Expenses
Deferred charges and prepaid expenses are summarized as follows:
DECEMBER 31,
1995 1994
-------- --------
Lease costs net of accumulated amortization
of $10,836 and $10,242 in 1995 and
1994, respectively $ 7,996 $ 8,343
Loan costs net of accumulated amortization of
$3,285 and $3,834 in 1995 and 1994,
respectively 3,319 3,887
Interest rate buydowns, net of accumulated
amortization of $2,068 and $904 in 1995
and 1994, respectively 6,101 7,811
Prepaid expenses and other 576 586
-------- --------
$ 17,992 $ 20,627
======== ========
Lease cost amortization totaled $1,795 in 1995; $1,369 from April 21, 1994
to December 31, 1994; $490 for the period January 1, 1994 to April 20, 1994;
and $1,601 in 1993.
Amortization of loan costs and interest rate buydowns totaled $1,941 in
1995; $1,184 from April 21, 1994 to December 31, 1994; $367 for the period
January 1, 1994 to April 20, 1994; and $877 in 1993.
Note 5 - Mortgages and Notes Payable
Mortgage debt, which is collateralized by substantially all investment
properties, is summarized as follows:
DECEMBER 31,
----------------------
1995 1994
--------- ---------
Primarily first mortgages with fixed interest rates
ranging from 6.0% to 9.52% (average of
7.6%) at December 31, 1995, due at various
dates through 2003 $ 401,595 $ 408,890
First mortgages with variable interest rates
(average of 7.03% at December 31, 1995)
due at various dates through 1998 107,900 109,100
Commercial paper secured by a first mortgage
due to an affiliate of EJDC on a property
under a 10 year credit facility through 1998
(effective rate including original issue discount
at December 31, 1995 of 7.11%) 75,000 75,000
--------- ---------
Total Mortgages and Notes Payable $ 584,495 $ 592,990
========= =========
The OP's proportionate share of the mortgages and notes payable are as
follows as of December 31:
DECEMBER 31,
----------------------
1995 1994
--------- ---------
DeBartolo Realty Partnership, L.P. $ 249,535 $ 246,365
Outside partners 334,960 346,625
--------- ---------
$ 584,495 $ 592,990
========= =========
Annual principal payments and maturities are as follows as of
December 31, 1995:
Total OP's Share
--------- ---------
1996 $ 28,873 $ 12,880
1997 6,214 2,445
1998 178,510 72,319
1999 3,795 1,608
2000 80,854 35,799
Thereafter 286,249 124,484
--------- ---------
$ 584,495 $ 249,535
========= =========
A lender on two properties is entitled to receive in addition to any
amounts due pursuant to the terms of the loan, 33 1/3% of net sales or
refinancing proceeds as defined upon sale or refinancing of the properties.
DeBartolo Realty Partnership, L.P. has guaranteed $21,726 of the mortgages
and notes payable relating to three nonconsolidated joint ventures. An
affiliate of EJDC continues to provide a guarantee of 33 1/3% of the debt
service obligation on a $100 million floating rate mortgage at one of the joint
ventures. The OP has agreed to indemnify the EJDC affiliate for any loss or
costs incurred or associated with this guaranty.
Fair Value of Debt Related Financial Instruments:
The estimated fair value of financial instruments are as follows:
December, 1995 December, 1994
-------------------- ---------------------
Carrying Fair Carrying Fair
Value Value Value Value
--------- --------- --------- ---------
Fixed rate mortgages and
notes payable $ 401,595 $ 415,563 $ 408,890 $ 366,041
Variable rate mortgages and
notes payable 182,900 182,900 184,100 184,100
--------- --------- --------- ---------
$ 584,495 $ 598,463 $ 592,990 $ 550,141
========= ========= ========= =========
Note 6 - Rentals Under Operating Leases
The properties receive rental income from the leasing of retail shopping
center space under operating leases that expire at various dates through 2020.
Substantially all investment property is leased out under operating leases.
The minimum future rentals based on operating leases held are as follows as of
December 31, 1995:
Leases
With Related
All Leases Parties (1)
-------- --------
1996 $ 83,243 $ 3,009
1997 77,076 2,989
1998 71,221 2,762
1999 64,362 2,762
2000 56,124 2,762
Thereafter 201,102 15,060
-------- --------
$ 553,128 $ 29,344
========= ========
(1) Represents stores whose parent company also owns units of the OP or
stores whose chief executive officer's are on the Board of Directors of the
Company.
Minimum future rentals do not include amounts which may be received under
the terms of certain leases based upon a percentage of the tenants' sales or as
reimbursement of shopping center expenses.
No single tenant or group of affiliated tenants collectively accounts for
more than 10% of the combined properties total revenues which include minimum
rents, tenant recoveries, percentage rents and other revenue. The tenant base
includes national and regional retail chains and local retailers and
consequently the combined properties credit risk is concentrated in the retail
industry.
The revenues of the joint ventures may be adversely affected by the inability
to collect rent due to bankruptcy or insolvency of tenants or otherwise. At
December 31, 1995, leases (excluding rejected leases) of mall store tenants of
the joint ventures open and operating in bankruptcy comprise approximately 5.1%
of mall gross leasable area ("GLA"). Annual rentals paid by these Mall Store
tenants comprised 5.0% of minimum rents paid by mall store tenants.
Substantially all of these tenants are currently meeting their contractual
obligations. At the time a tenant files for bankruptcy protection it is
difficult to determine to what extent these tenants will reject their leases or
seek other concessions as a condition to continued occupancy. The OP expects
certain of these tenants to reject their leases. Based on past experience, the
OP has been able to offset, over a reasonable period of time, the impact on
minimum rents caused by a tenant in bankruptcy.
Note 7 - Ground Leases
One joint venture, as lessee, has a ground lease expiring in 2012.
Following is a schedule of future minimum rental payments required under this
ground lease as of December 31, 1995:
1996 $ 120
1997 120
1998 120
1999 120
2000 120
Thereafter 1,380
-------
$ 1,980
=======
Note 8 - Transactions with Affiliates
Management and Other Fees: The Property Manager, an affiliate of the OP,
has contracted to provide management, leasing, development and construction
management services to the joint ventures. One joint venture is managed by a
partner in that joint venture who is unrelated to the OP. Amounts included in
the nonconsolidated financial statements related to agreements with the
Property Manager are as follows:
Period Period
From From
April 21, January 1,
1994 to 1994 to
December 31, December 31, April 20, December 31,
1995 1994 1994 1993
-------- ------- ------- -------
Management fees $ 4,075 $ 2,871 $ 1,353 $ 4,271
Leasing fees 986 550 156 1,117
Development and Construction 969 802 312 589
Other Reimbursements 119 163 55 302
Insurance: The joint ventures have first dollar commercial general
liability coverage and special cause of loss property insurance with a $5
deductible. Prior to 1995 the joint ventures' insurance carrier reinsured
certain coverages with an affiliate of EJDC. Charges to the joint ventures for
the reinsured amounts totaled $936 from April 21, 1994 to December 31, 1994.
Prior to April 21, 1994, the joint ventures had first dollar commercial general
liability insurance of which an affiliated insurance company reinsured the
first $250 per occurrence. Additionally, the joint ventures had "All Risk"
Property insurance. The insurance company reinsured the first $95 per
occurrence with an affiliate of EJDC. Charges for the reinsured amounts
totaled $371 for the period January 1, 1994 to April 20, 1994 and $1,074 for
1993.
Affiliate Leases: On November 6, 1995, Fun-N-Games, an affiliate of EJDC
which operated amusement centers in the joint venture properties, was sold to
an independent third party operator who continues to operate these stores. The
joint ventures recorded total revenues and operating expense reimbursements of
$559 through November 6, 1995; $504 from April 21, 1994 to December 31, 1994;
$254 for the period from January 1, 1994 to April 20, 1994 and $725 for 1993.
Affiliates of certain anchor tenants and small shops in various properties
are partners in those properties or are partners in the Operating Partnership.
As of December 31, 1995, these tenants own or lease space in 10 properties.
These properties recorded rental income and operating expense reimbursements of
$3,451 in 1995; $3,223 from April 21, 1994 to December 31, 1994; $1,443 for the
period January 1, 1994 to April 20, 1994 and $4,320 in 1993.
Affiliate Payables: At December 31, 1995, affiliate payables represent
amounts due to the Property Manager for normal monthly operating costs and
advances from DeBartolo Realty Partnership, L.P. Concurrent with the offering,
net affiliate payables, which were primarily non-interest bearing, were
distributed to EJDC. Interest expense including interest charged to properties
by affiliates of venturers totaled $6,689 in 1995; $7,681 from April 21, 1994
to December 31, 1994; $1,976 for the period from January 1, 1994 to April 20,
1994 and $6,098 in 1993.
Note 9 - Contingent Liabilities
Certain of the properties are subject to various legal proceedings and
claims arising in the ordinary course of business, some of which are covered by
insurance. Management of the properties believes the ultimate resolution of
these matters is not likely to have a material adverse effect on the combined
financial statements.
Substantially all of the properties have been subjected to Phase I
environmental audits. Such audits have not revealed nor is management aware of
any environmental liability that management believes would have a material
adverse impact on the OP's financial position or results of operations.
Management is unaware of any instances in which it would incur significant
environmental costs if any or all properties were sold, disposed of or
abandoned.
Note 10 - Extraordinary Item
The extraordinary charge in 1995 represents the write-off of unamortized
deferred financing costs of $425 relating to the partial paydown of mortgage
debt of one property. The extraordinary charge in 1994 resulted from
prepayment penalties and the write-off of unamortized deferred financing costs
related to the satisfaction of mortgage notes payable.
Note 11 - Subsequent Event
On January 31, 1996, the Property Manager was assigned a 33 % partnership
interest in one of the nonconsolidated joint ventures and a 25% partnership
interest in another nonconsolidated joint venture from an unrelated joint
venture partner.
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
DeBARTOLO REALTY PARTNERSHIP, L.P.
By: DeBARTOLO REALTY CORPORATION
General Partner
/s/ Edward J. DeBartolo, Jr.
Name: Edward J. DeBartolo, Jr.
Title: Chairman of the Board of Directors
Date: March 28, 1996
/s/ William T. Dillard, Sr.
Name: William T. Dillard, Sr.
Title: Director
Date: March 25, 1996
/s/ James R. Giuliano, III
Name: James R. Giuliano, III
Title: Senior Vice President, Chief Financial Officer and Director
Date: March 28, 1996
/s/ Rev. Theodore M. Hesburgh
Name: Rev. Theodore M. Hesburgh
Title: Director
Date: March 28, 1996
/s/ Anthony W. Liberati
Name: Anthony W. Liberati
Title: Director
Date: March 22, 1996
/s/ G. William Miller
Name: G. William Miller
Title: Director
Date: March 28, 1996
Name: Fredrick W. Petri
Title: Director
Date:
/s/ Richard S. Sokolov
Name: Richard S. Sokolov
Title: President, Chief Executive Officer and Director
Date: March 28, 1996
Name: Mark T. Gallogly
Title: Director
Date:
/s/ Philip J. Ward
Name: Philip J. Ward
Title: Director
Date: March 25, 1996
/s/ Marie Denise DeBartolo York
Name: Marie Denise DeBartolo York
Title: Director
Date: March 28, 1996
