UNITED STATES
                   SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C. 20549
                                FORM 10-K

  [x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
       EXCHANGE ACT OF 1934
       For the fiscal year ended December 31, 1997

                    Commission file number 333-11491

                       SIMON DeBARTOLO GROUP, L.P.
         (Exact name of registrant as specified in its charter)
                                    
                Delaware                             34-1755769
      (State or other jurisdiction                (I.R.S. Employer
    of incorporation or organization)           Identification No.)
                                                          
       115 West Washington Street                         
          Indianapolis, Indiana                        46204
(Address of principal executive offices)             (Zip Code)
                                    
   Registrant's telephone number, including area code: (317) 636-1600
                                    
    Securities registered pursuant to Section 12 (b) of the Act: None

    Securities registered pursuant to Section 12 (g) of the Act: None
- --------------------------------------------------------------------------
     

     
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.   YES [x]  NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.  N/A    

                   Documents Incorporated By Reference
     
Portions of Simon DeBartolo Group, Inc.'s Proxy Statement in connection
with its Annual Meeting of Shareholders are incorporated by reference in
Part III.
============================================================================
 1

                      SIMON DeBARTOLO GROUP, L.P.
                      Annual Report on Form 10-K
                           December 31, 1997
                                   
                           TABLE OF CONTENTS

Item No.                                                      Page No.

                                Part I

  1.Business                                                     3
  2.Properties                                                   9
  3.Legal Proceedings                                            32
  4.Submission of Matters to a Vote of Security Holders          32
  
                                Part II

  5.Market for the Registrant and Related Unitholder Matters     33
  6.Selected Financial Data                                      34
  7.Management's Discussion and Analysis of Financial
    Condition and Results of Operations                          35
  7A. Quantitative and Qualitative Disclosure About Market Risk  47
  8.Financial Statements and Supplementary Data                  47
  9.Changes in and Disagreements with Accountants on Accounting
   and Financial Disclosure                                      47
                               Part III

  10. Directors and Executive Officers of the Registrant         48
  11. Executive Compensation                                     48
  12. Security Ownership of Certain Beneficial Owners 
      and Management                                             48
  13. Certain Relationships and Related Transactions             48
  
                                Part IV

  14. Exhibits, Financial Statements, Schedules and Reports 
      on Form 8-K                                                49
  

                          SIGNATURES                             75

 2

                                PART I

Item 1. Business

     Background
     
     Simon DeBartolo Group, L.P. ("the Operating Partnership"or "SDG, LP"), a 
Delaware limited partnership, is a majority owned subsidiary of Simon DeBartolo 
Group, Inc. (the "Company"), a Maryland corporation, formerly known as Simon 
Property Group, Inc.  The Company is a self-administered and self-managed 
real estate investment trust ("REIT") under the Internal Revenue Code of 1986, 
as amended (the "Code").  The Operating Partnership 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 December 31, 1997, the Operating Partnership owns or holds
an interest in 202 income-producing properties, which consist of 120
regional malls, 72 community shopping centers, three specialty retail
centers, four mixed-use properties and three value-oriented super-
regional mall located in 33 states (the "Properties"). The Operating
Partnership also owns interests in one specialty retail center and two
community centers currently under construction and nine parcels of
land either in preconstruction development or held for future
development (collectively, the "Development Properties", and together
with the Properties, the "Portfolio Properties"). The Operating
Partnership also holds substantially all of the economic interest in
M.S. Management Associates, Inc. (the "Management Company"), while
substantially all of the voting stock is held by Melvin Simon, Herbert
Simon and David Simon. The Management Company manages Properties
generally not wholly-owned by the Operating Partnership and certain
other properties, and also engages in certain property development
activities. The Operating Partnership also holds substantially all of
the economic interest in, and the Management Company holds
substantially all of the voting stock of, DeBartolo Properties
Management, Inc. ("DPMI"), which provides architectural, design,
construction and other services to substantially all of the Portfolio
Properties, as well as certain other regional malls and community
shopping centers owned by third parties.

     The DRC Merger

     On August 9, 1996, the national shopping center business of
DeBartolo Realty Corporation ("DRC") was acquired for an aggregate
value of $3.0 billion (the "DRC Merger"). The acquired portfolio
consisted of 49 regional malls, 11 community centers and 1 mixed-use
Property. These Properties included 47,052,267 square feet of retail
space gross leasable area ("GLA") and 558,636 of office GLA. Pursuant
to the DRC Merger, the Company changed its name to Simon DeBartolo
Group, Inc. In addition, the Management Company purchased from The
Edward J. DeBartolo Corporation all of the voting stock of DPMI, for
$2.5 million in cash.

     For additional information concerning the DRC Merger, please see
Note 3 to the consolidated financial statements.

     The Partnership Merger

     On December 31, 1997, Simon Property Group, L.P., a Delaware
limited partnership ("SPG, LP"), merged (the "Partnership Merger")
into the Operating Partnership. Prior to the Partnership Merger, the
Operating Partnership and the Company held all of the partnership
interests of SPG, LP, which held interests in certain of the Portfolio
Properties. As a result of the Partnership Merger, the Operating
Partnership now directly or indirectly owns or holds interests in all
of the Portfolio Properties and directly holds substantially all of
the economic interest in the Management Company. Prior to the
DRC Merger, references to the Operating Partnership refer to
SPG, LP only.

     Definitive Merger Agreement

     The Company, Corporate Property Investors ("CPI") and Corporate
Realty Consultants, Inc. ("CRC") entered into an Agreement and Plan of
Merger, dated as of February 18, 1998 (the "Merger Agreement"),
pursuant to which a subsidiary of CPI shall be merged with and into
the Company (the "Merger"). Upon consummation of the Merger, CPI will
be renamed and holders of the Company's common stock will receive
shares of CPI common stock on a one-for-one basis and beneficial
interests in shares of CRC common stock. Based upon the capitalization
of the Company and CPI as of December 31, 1997, the Company's
stockholders would own in the aggregate approximately 67% of the
 3
outstanding shares of the new entity's common stock.  Even though the
Company's stockholders will receive shares of common stock of a new
entity, substantially all the members of the current Board of
Directors and senior management of the Company will be members of the
new Board of Directors and senior management of the new entity.  All
of the Company's policies, including investment and financing
policies, and practices are expected to continue as the new entity's
policies and practices.

     The Merger Agreement provides that prior to the Merger each
holder of CPI common stock will receive consideration of $179 per
share, consisting of a dividend of : (i) the Cash Amount (as defined
below); (ii) 1.0818 shares of CPI common stock; and (iii) 0.19 shares
of CPI 6.5% convertible preferred stock. The "Cash Amount" is equal to
$90.00 per share of CPI common stock, subject to adjustment as
follows: (i) if the Market Price (as defined below) for the Company's
common stock at the effective time of the Merger exceeds $38.67, then
the Cash Amount shall be reduces by an amount equal to such excess
multiplied by 2.0818 and (ii) if the Market Price for the Company's
common stock at the effective time of the Merger is less than $28.58,
then the Cash Amount shall be increased by an amount equal to such
deficiency multiplied by 2.0818. The "Market Price" shall be the
average of the closing prices per share for the Company's common stock
on the New York Stock Exchange for the 20 consecutive trading days
ending on the fifth trading day prior to the effective time of the
Merger.

     The transaction is expected to be consummated during the third
quarter of 1998 and is subject to the approval of the Company's
stockholders, as well as customary regulatory and other conditions.
The requisite number of CPI stockholders already have agreed to
approve the transaction. The foregoing description of the Merger
Agreement does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, which appears as
Exhibit 10.1 to the Company's Form 8-K dated February 19, 1998 and is
incorporated herein by reference.

     General
     
     As of December 31, 1997, the Operating Partnership owned or held
interests in a diversified portfolio of 202 income-producing
Properties, including 120 enclosed regional malls, 72 community
shopping centers, three specialty retail centers, four mixed-use
Properties and three value-oriented super-regional malls, located in
33 states. Regional malls, community centers and the remaining
portfolio comprised 82.8%, 8.3%, and 8.9%, respectively of total rent
revenues and tenant reimbursements in 1997. The value-oriented super-
regional malls are not included in consolidated rent revenues and
tenant reimbursements as they are each accounted for using the equity
method of accounting. The Properties contain an aggregate of
approximately 128.8 million square feet of GLA, of which 78.0 million
square feet is owned by the Operating Partnership ("Owned GLA").
Approximately 3,600 different retailers occupy more than 14,000 stores
in the Properties. Total estimated retail sales at the Properties
exceeded $25 billion in 1997.

     Operating Strategies
     
     The Operating Partnership's primary business objectives are to
increase cash generated from operations per unit of partnership interest in the
Operating Partnership ("Unit") 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;
     renewing existing leases at higher base rents per square foot;
     and continuing to sign leases that provide for percentage rents
     and/or regular or periodic fixed contractual increases in base
     rents.

    Management. Drawing upon the expertise gained through management
    of approximately 140 million square feet of GLA 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.
    
    Acquisitions. The Operating Partnership intends to selectively
    acquire individual properties and portfolios of properties that
    meet its investment criteria as opportunities arise. Management
    believes that consolidation will continue to occur within the
    shopping center industry, creating opportunities for the
    Operating Partnership to acquire additional portfolios of
    shopping centers and increase operating profit margins.
    Management also believes that its extensive experience in the
    shopping center business, access to capital markets, national
    operating scope, familiarity with real estate markets and
    advanced management systems will allow it to evaluate and execute
 4
    acquisitions competitively. Additionally, the Operating
    Partnership may be able to acquire properties on a tax-advantaged
    basis for the transferors.
    
    During 1997, the Operating Partnership, through the acquisition
    of The Retail Property Trust ("RPT"), and other related
    transactions, acquired a portfolio of ten wholly-owned Properties
    and one 50%-owned Property comprising approximately twelve
    million square feet of GLA in eight states. RPT is also a REIT.
    In addition, the Operating Partnership made several other single-
    Property ownership acquisitions in 1997. The Operating
    Partnership acquired a 50% ownership interest in Dadeland Mall
    and an additional 48% ownership interest in West Town Mall,
    increasing its ownership in that Property to 50%. In addition,
    the Operating Partnership acquired The Fashion Mall at Keystone
    at the Crossing, a 597,000 square-foot regional mall, along with
    an adjacent community center. Also acquired in 1997 was the
    remaining 30% ownership interest in Virginia Center Commons. On
    December 29, 1997, the Operating Partnership formed a joint
    venture partnership with The Macerich Company ("Macerich") to
    acquire a portfolio of twelve regional malls comprising
    approximately 10.7 million square feet of GLA. This transaction
    closed on February 27, 1998, with the Operating Partnership
    assuming leasing and management responsibilities for six of the
    regional malls and Macerich assuming leasing and management for
    the remaining properties.

    Development. The Operating Partnership's focus is to selectively
    develop new Properties in major metropolitan areas that exhibit
    strong population and economic growth. During 1997, the Operating
    Partnership opened one new regional mall, two value-oriented
    super-regional malls and one new community shopping center. On
    September 5, 1997, the Operating Partnership opened The Source, a
    730,000 square-foot regional mall in Westbury (Long Island), New
    York. On October 31, 1997 the Operating Partnership opened
    Grapevine Mills, a 1.2 million square-foot value-oriented super-
    regional mall in Grapevine (Dallas/Fort Worth), Texas, and on
    November 20, 1997, the Operating Partnership opened Arizona
    Mills, a 1.2 million square-foot value-oriented super-regional
    mall in Tempe, Arizona. In March 1997, the Operating Partnership
    opened Indian River Commons, a 260,000 square-foot community
    shopping center in Vero Beach, Florida, which is immediately
    adjacent to an existing regional mall Property.
     
    Development activities are ongoing at several other locations
    including the following projects, which have an aggregate
    construction cost of approximately $200 million:

     * The Shops at Sunset Place, a destination-oriented retail and
       entertainment project containing approximately 510,000 square feet of
       GLA is scheduled to open in October of 1998 in South Miami, Florida.
     * Muncie Plaza, a 196,000 square-foot community center project, is
       scheduled to open in April of 1998 in Muncie, Indiana, adjacent to
       Muncie Mall.
     * Lakeline Plaza, a 380,000 square-foot community center project,
       is scheduled to open in two phases in May and November of 1998 in
       Austin, Texas, adjacent to Lakeline Mall.
    
    The Operating Partnership also has direct or indirect interests
    in nine other parcels of land either in preconstruction
    development or being held for future development in eight states
    totaling approximately 677 acres. Management believes the
    Operating Partnership is well positioned to pursue future
    development opportunities as conditions warrant.
    
    The Operating Partnership is in the preconstruction development
    phase on one new value-oriented super-regional mall, a factory
    outlet center and one new community center project. Concord
    Mills, an approximately $200 million development, is scheduled to
    open in 1999. This 1.4 million square-foot value-oriented super-
    regional mall development project is 50%-owned by the Operating
    Partnership. Houston Premium Outlets is a 462,000 square-foot
    factory outlet project in Houston, Texas. This approximately $89
    million project, of which the Operating Partnership has a 50%
    ownership interest in, is scheduled to begin construction in 1998
    and open in 1999. The Shops at North East Mall, which is
    immediately adjacent to an existing regional mall in the
    Company's portfolio, is an approximately $55 million development.
    This 391,000 square-foot wholly-owned development project is
    scheduled to open in Hurst, Texas, in 1999.
    
    Strategic Expansions and Renovations. A key objective of the
    Operating Partnership is to increase the profitability and market
    share of the Properties through the completion of strategic
    renovations and expansions. In 1997, the Operating Partnership
 5
    completed construction and opened fourteen expansion and/or
    renovation projects: Alton Square in Alton, Illinois; Aventura
    Mall in Miami, Florida; Chautauqua Mall in Jamestown, New York;
    Columbia Center in Kennewick, Washington; The Forum Shops at
    Caesar's in Las Vegas, Nevada; Knoxville Center in Knoxville,
    Tennessee; La Plaza in McAllen, Texas; Muncie Mall in Muncie,
    Indiana; Northfield Square in Bradley, Illinois; Northgate Mall
    in Seattle, Washington; Orange Park Mall in Jacksonville,
    Florida; Paddock Mall in Ocala, Florida; Richmond Square in
    Richmond, Indiana; and Southern Park Mall in Youngstown, Ohio.
    
    The Operating Partnership has a number of renovation and/or
    expansion projects currently under construction, or in
    preconstruction development. The Operating Partnership expects to
    commence construction on many of these projects in the next 12 to
    24 months.
     
     Competition
     
     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) its management and
operational expertise, (iii) its extensive experience and relationship
with retailers and lenders, (iv) the size, quality and diversity of
its Properties and (v) through the mall marketing initiatives of Simon
Brand Ventures, which the Operating Partnership believes is the
world's largest and most sophisticated mall marketing initiative.
Management believes that the Properties are the largest, as measured
by GLA, of any publicly traded REIT, with more regional malls than any
other publicly traded REIT. For these reasons, management believes the
Operating Partnership to be the leader in the industry.
     
     All of the Portfolio Properties are located in developed areas.
With respect to certain of such properties, there are other properties
of the same type within the market area. The existence of competitive
properties could have a material effect on the Operating Partnership's
ability to lease space and on the level of rents the Operating
Partnership can obtain.

     There are numerous commercial developers, real estate companies
and other owners of real estate that compete with the Operating
Partnership in its trade areas. This results in competition for both
acquisition of prime sites (including land for development and
operating properties) and for tenants to occupy the space that the
Operating Partnership and its competitors develop and manage.

     Environmental Matters
     
     General Compliance. Management believes that the Portfolio
Properties are in compliance, in all material respects, with all
Federal, state and local environmental laws, ordinances and
regulations regarding hazardous or toxic substances (see Item 3. Legal
Proceedings). Substantially all of the Portfolio Properties have been
subjected to Phase I or similar environmental audits (which generally
involve only a review of records and visual inspection of the property
without soil sampling or ground water analysis) by independent
environmental consultants. The Phase I environmental audits are
intended to discover information regarding, and to evaluate the
environmental condition of, the surveyed properties and surrounding
properties. The environmental audits have not revealed, nor is
management aware of, any environmental liability that management
believes will have a material adverse effect on the Operating
Partnership. No assurance can be given that existing environmental
studies with respect to the Portfolio Properties reveal all potential
environmental liabilities; that any previous owner, occupant or tenant
of a Portfolio Property did not create any material environmental
condition not known to management; that the current environmental
condition of the Portfolio Properties will not be affected by tenants
and occupants, by the condition of nearby properties, or by unrelated
third parties; or that future uses or condition (including, without
limitation, changes in applicable environmental laws and regulations
or the interpretation thereof) will not result in imposition of
additional environmental liability.

     Asbestos-containing materials. Asbestos-containing materials are
present in most of the Properties, primarily in the form of vinyl
asbestos tile, mastics and roofing materials, which are generally in
good condition. Fireproofing and insulation containing asbestos is
also present in certain Properties in limited concentrations or in
limited areas. Management believes the presence of such asbestos-containing 
materials does not violate currently applicable laws. Asbestos-containing 
materials will be removed by the Operating Partnership in the ordinary course 
of any renovation, reconstruction and expansion, and in connection with
the retenanting of space.

     Underground Storage Tanks. Several of the Portfolio Properties
contain or at one time contained underground storage tanks used to
store waste oils or other petroleum products primarily related to the
 6
operation of auto service center establishments. All such tanks had
been removed or previously abandoned in place and filled with inert
materials in accordance with applicable environmental laws. Site
assessments have revealed seven Properties contain certain soil and/or
groundwater contamination associated with such tanks. Subsurface
investigations (Phase II assessments) and remediation work are either
ongoing or scheduled to be conducted at such Properties. The costs of
remediation with respect to such matters have not been and are not
expected to be material.

     Properties to be Developed or Acquired. Land being held for
shopping mall development or that may be acquired for development may
contain residues or debris associated with the use of the land by
prior owners or third parties. In certain instances, such residues or
debris could be or contain hazardous wastes or hazardous substances.
Prior to exercising any option to acquire any of the optioned
properties, the Operating Partnership will conduct environmental due
diligence consistent with past practice.

     Employees
     
     The Operating Partnership and its affiliates employ
approximately, 6,300 persons at various centers and offices throughout
the United States. Approximately 730 of such employees are located at
the Operating Partnership's headquarters in Indianapolis, Indiana, and
approximately 3,400 of all employees are part-time.

     Insurance
     
     The Operating Partnership has comprehensive liability, fire,
flood, extended coverage and rental loss insurance with respect to its
Properties. Management believes that such insurance provides adequate
coverage.

     Headquarters

     The Operating Partnership's executive offices are located at
National City Center, 115 West Washington Street, Indianapolis,
Indiana 46204, and its telephone number is (317) 636-1600.

 7
     Executive Officers of the Registrant

     The following table sets forth certain information with respect
to the executive officers of the Company, which is one of the general partners
of the Operating Partnership, as of December 31, 1997.

          Name           Age        Position
                                
   Melvin Simon (1)      71     Co-Chairman
   Herbert Simon (1)     63     Co-Chairman
   David Simon (1)       36     Chief Executive Officer
   Richard S. Sokolov    48     President and Chief Operating Officer
   Randolph L. Foxworthy 53     Executive Vice President - 
                                Corporate Development
   William J. Garvey     59     Executive Vice President -
                                Property Development
   James A. Napoli       51     Executive Vice President - Leasing
   John R. Neutzling     45     Executive Vice President -
                                Property Management
   James M. Barkley      46     General Counsel; Secretary
   Stephen E. Sterrett   42     Treasurer
   John Rulli            41     Senior Vice President - Human
                                Resources & Corporate Operations
   James R. Giuliano,    40     Senior Vice President
   III
                                
   (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 of the Company and SD Property Group, Inc.  The 
executive officers serve at the pleasure of the Board of Directors and have 
served in such capacities since the formation of the Company in 1993, with 
the exception of Mr. Sokolov and Mr. Giuliano who have held their offices 
since the DRC Merger. For biographical information of Melvin Simon, Herbert 
Simon, David Simon, and Richard Sokolov, see Item 10 of this report.

     Mr. Foxworthy is the Executive Vice President - Corporate
Development of the Company. Mr. Foxworthy joined Melvin Simon &
Associates, Inc. ("MSA") in 1980 and has been an Executive Vice
President in charge of Corporate Development of MSA since 1986 and has
held the same position with the Company since its formation in 1993.

     Mr. Garvey is the Executive Vice President - Property Development
of the Company. Mr. Garvey, who was Executive Vice President and
Director of Development at MSA, joined MSA in 1979 and held various
positions with MSA.

     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, which he joined in 1989.

     Mr. Neutzling is the Executive Vice President - Property
Management of the Company. Mr. Neutzling has also been an Executive
Vice President of MSA since 1992 overseeing all property and asset
management functions. He joined MSA in 1974 and has held various
positions with MSA.

     Mr. Barkley serves as the Company's General Counsel and
Secretary. Mr. Barkley holds the same position for MSA. He joined MSA
in 1978 as Assistant General Counsel for Development Activity.

     Mr. Sterrett serves as the Company's Treasurer. He joined MSA in
1989 and has held various positions with MSA.

     Mr. Rulli holds the position of Senior Vice President - Human
Resources and Corporate Operations. He joined MSA in 1988 and has held
various positions with MSA.

     Mr. Giuliano has served as Senior Vice President since the DRC
Merger. He joined DRC in 1993, where he served as Senior Vice
President and Chief Financial Officer up to the DRC Merger.

     The foregoing persons also hold the same offices with SD Property Group,
Inc., the managing general partner of the Operating Partnership.
 8

Item 2. Properties

     Portfolio Properties
     
     The Properties primarily consist of two types: regional malls and
community shopping centers. Regional malls contain two or more anchors
and a wide variety of smaller stores ("Mall" stores) located in
enclosed malls connecting the anchors. Additional stores
("Freestanding" stores) are usually located along the perimeter of the
parking area. The 120 regional malls in the Properties range in size
from approximately 200,000 to 1.6 million square feet of GLA, with 116
regional malls over 400,000 square feet. These regional malls contain
in the aggregate nearly 11,600 occupied stores, including 480 anchors
which are mostly national retailers. As of December 31, 1997, regional
malls (including specialty retail centers, and retail space in the
mixed-use Properties) represented 81.8% of total GLA, 76.5% of Owned
GLA and 81.5% of total annualized base rent of the Properties.

     Community shopping centers are generally unenclosed and smaller
than regional malls. Most of the 72 community shopping centers in the
Properties range in size from approximately 100,000 to 400,000 square
feet of GLA. Community shopping centers generally are of two types:
(i) traditional community centers, which focus primarily on value-
oriented and convenience goods and services, are usually anchored by a
supermarket, drugstore or discount retailer and are designed to
service a neighborhood area; and (ii) power centers, which are
designed to serve a larger trade area and contain at least two anchors
that are usually national retailers among the leaders in their markets
and occupy more than 70% of the GLA in the center. As of December 31,
1997, community shopping centers represented 13.5% of total GLA, 16.1%
of Owned GLA and 8.7% of the total annualized base rent of the
Properties.

     The Operating Partnership also has an interest in three specialty
retail centers, four mixed-use Properties and three value-oriented
super-regional malls. The specialty retail centers contain
approximately 760,000 square feet of GLA and do not have anchors;
instead, they feature retailers and entertainment facilities in a
distinctive shopping environment and location. The four mixed-use
Properties range in size from approximately 500,000 to 1,025,000
square feet of GLA. Two of these Properties are regional malls with
connected office buildings, and two are located in mixed-use
developments and contain primarily office space. The value-oriented
super-regional malls are each joint venture partnerships ranging in
size from approximately 1,160,000 to 1,330,000 square feet of GLA.
These include Arizona Mills, Grapevine Mills and Ontario Mills. These
Properties combine retail outlets, manufacturers, off-price stores and
other value-oriented tenants. As of December 31, 1997, value-oriented
super-regional malls represented 2.9% of total GLA, 4.6% of Owned GLA
and 5.6% of the total annualized base rent of the Properties.

     As of December 31, 1997, approximately 87.3% of the Mall and
Freestanding Owned GLA in regional malls, specialty retail centers and
the retail space in the mixed use Properties was leased, approximately
93.8% of the Owned GLA in the value-oriented super-regional malls was
leased, and approximately 91.3% of Owned GLA in the community shopping
centers was leased.

     Of the 202 Properties, 154 are owned 100% by the Operating
Partnership and the remainder are held as joint venture interests. The
Operating Partnership is the managing or co-managing general partner
of all but eight of the Properties held as joint venture interests.

 9

                            Additional Information

     The following table sets forth certain information, as of December
31, 1997, regarding the Properties:
The Operating Ownership Partnership's Interest (Expiration Percentage Year Built or Total Name/Location if Lease)(1) Interest(2) Acquired GLA Anchors/Specialty/Anchors REGIONAL MALLS 1. Alton Square Fee 100.0 Acquired 641,145 Famous Barr, JCPenney, Alton, IL 1993 Sears 2. Amigoland Mall Fee 100.0 Built 560,318 Beall's, Dillard's, JCPenney, Brownsville, TX 1974 Montgomery Ward 3. Anderson Mall Fee 100.0 Built 637,872 Gallant Belk, JCPenney, Anderson, SC 1972 Sears, Uptons 4. Aventura Mall(3) Fee 33.3 Built 1,459,397 AMC Theatre (4), Bloomingdales, Miami, FL 1983 Burdines (4), JCPenney, Lord & Taylor, Macy's, Sears 5. Avenues, The Fee 25.0 Built 1,113,651 Dillard's, Gayfers, Jacksonville, FL 1990 Sears, Parisian, JCPenney 6. Barton Creek Fee 100.0 Built 1,374,794 Dillard's (5), Foley's, Square 1981 JCPenney, Sears, Austin, TX Montgomery Ward 7. Battlefield Fee and Ground 100.0 Built 1,156,592 Dillard's, Famous Barr, Mall Lease (2056) 1970 Montgomery Ward, Sears, Springfield, MO JCPenney 8. Bay Park Square Fee 100.0 Built 641,929 Kohl's, Montgomery Ward, Green Bay, WI 1980 Shopko, Elder-Beerman 9. Bergen Mall Fee and Ground 100.0 Acquired 1,013,718 Value City, Stern's, Paramus, NJ Lease (6)(2061) 1987 Marshall's, Off 5th-Saks Fifth Avenue Outlet 10. Biltmore Square Fee (7) 66.7 Built 494,436 Belk, Dillard's, Proffitt's, Asheville, NC 1989 Goody's 11. Boynton Beach Mall Fee 100.0 Built 1,064,072 Burdines, Macy's, Sears, Boynton Beach, FL 1985 Dillard's (4) (5) JCPenney 12. Broadway Square Fee 100.0 Acquired 571,429 Dillard's, JCPenney, Sears Tyler, TX 1994 13. Brunswick Square Fee 100.0 Built 736,479 Brunswick Square Movies, East Brunswick, NJ 1973 Macy's, JCPenney 14. Castleton Square Fee 100.0 Built 1,352,729 LS Ayres, Lazarus, Montgomery Indianapolis, IN 1972 Ward (8), JCPenney, Sears 10 15. Century III Mall Fee 50.0 Built 1,287,251 Lazarus, Kaufmann's, JCPenney Pittsburgh, PA 1979 Sears, T.J. Maxx, Wickes Furniture 16. Charlottesville Ground Lease 50.0 Acquired 573,614 Belk, JCPenney, Sears Fashion Square (2076) 1997 Stone & Thomas Charlottesville, VA 17. Chautauqua Mall Fee 100.0 Built 428,285 The Bon Ton (4), Sears, Jamestown, NY 1971 JCPenney, Office Max 18. Cheltenham Square Fee 100.0 Built 624,790 Burlington Coat Factory, Philadelphia, PA 1981 Movies at Cheltenham, Home Depot, Value City, Seaman's Furniture, Shop Rite 19. Chesapeake Square Fee and Ground (7)75.0 Built 704,463 Dillard's, Belk, JCPenney, Sears, Chesapeake, VA Lease (2062) 1989 Montgomery Ward 20. Cielo Vista Mall Fee and Ground 100.0 Built 1,196,102 Dillard's (5), JCPenney, Montgomery El Paso, TX Lease (9)(2027) 1974 Ward, Sears 21. Circle Centre Property Lease 14.7 Built 793,234 Nordstrom, Parisian, Indianapolis, IN (2097) 1995 United Artists 22. College Mall Fee and Ground 100.0 Built 707,220 JCPenney, Lazarus, Bloomington, IN Lease (10)(2048) 1965 L.S. Ayres, Sears, Target 23. Columbia Center Fee 100.0 Acquired 772,894 Barnes & Noble, Kennewick, WA 1987 The Bon Marche, Lamonts, JCPenney, Sears 24. Coral Square Fee 50.0 Built 941,370 Burdines (5), Dillard's, Coral Springs, FL 1984 JCPenney, Sears 25. Cottonwood Mall Fee 100.0 Built 1,022,835 Dillard's, Foley's, Albuquerque, NM 1996 JCPenney, Mervyn's, Montgomery Ward United Artists 26. Crossroads Mall Fee 100.0 Acquired 871,356 Dillard's, Sears, Omaha, NE 1994 Younkers 27. Crystal River Mall Fee 100.0 Built 425,277 Belk, Kmart, Crystal River, FL 1990 JCPenney, Regal Cinema, Sears 28. Dadeland Mall Fee 50.0 Acquired 1,403,416 Burdine's, Burdine's Home Miami, FL 1997 Gallery, JCPenney, Limited Lord & Taylor, Saks Fifth Avenue 29. DeSoto Square Fee 100.0 Built 686,408 Burdines, JCPenney, Bradenton, FL 1973 Sears, Dillard's 11 30. Eastern Hills Mall Fee 100.0 Built 997,172 Sears, The Bon Ton, Buffalo, NY 1971 JCPenney, Kaufmann's, Burlington Coat Factory (4), Waccamaw (11) 31. Eastland Mall Fee 100.0 Built 702,496 Dillard's, General Cinema, Tulsa, OK 1986 JCPenney, Mervyn's, Service Merchandise 32. Edison Mall Fee 100.0 Acquired 987,103 Burdines (5), Dillard's, Fort Meyers, FL 1997 JCPenney, Sears 33. Fashion Mall at Ground Lease 100.0 Acquired 651,671 Jacobsons, Parisian Keystone at the (2067) 1997 Crossing, The Indianapolis, IN 34. Florida Mall, The Fee 50.0 Built 1,119,871 Burdines (4), Dillard's (5), Orlando, FL 1986 Gayfers, JCPenney, Saks Fifth Avenue, Sears 35. Forest Mall Fee 100.0 Built 484,131 JCPenney, Kohl's, Fond Du Lac, WI 1973 Younkers, Sears, Staples 36. Forest Village Fee 100.0 Built 417,344 JCPenney, Kmart Park Mall 1980 Forestville, MD 37. Fremont Mall Fee 100.0 Built 199,266 1/2 Price Store, JCPenney Fremont, NE 1966 38. Golden Ring Mall Fee 100.0 Built 719,625 Caldor, Hecht's, Baltimore, MD 1974 Montgomery Ward, United Artists 39. Great Lakes Mall Fee 100.0 Built 1,295,872 Dillard's (5), Great Lakes Cleveland, OH 1961 Mall Theatres, Kaufmann's, JCPenney, Sears 40. Greenwood Park Fee 100.0 Acquired 1,273,258 JCPenney, Lazarus, Mall 1979 L.S. Ayres, Sears, Greenwood, IN Montgomery Ward (8), Service Merchandise 41. Gulf View Square Fee 100.0 Built 809,913 Burdines, Dillard's, Port Richey, FL 1980 Montgomery Ward, JCPenney, Sears 42. Heritage Park Mall Fee 100.0 Built 634,178 Dillard's, Sears, Midwest City, OK 1978 Montgomery Ward, Service Merchandise 43. Hutchinson Mall Fee 100.0 Built 525,702 Cinema 8, Dillard's, Hutchinson, KS 1985 JCPenney, Sears, Wal-Mart (12), Service Merchandise 44. Independence Center Fee 100.0 Acquired 1,030,462 The Jones Store Co., Independence, MO 1994 Dillard's, Sears 12 45. Indian River Mall Fee 50.0 Built 749,613 AMC Theatre, Burdines, Sears, Vero Beach, FL 1996 JCPenney, Dillard's 46. Ingram Park Mall Fee 100.0 Built 1,133,183 Dillard's (5), Foley's, San Antonio, TX 1979 JCPenney, Sears, Beall's 47. Irving Mall Fee 100.0 Built 1,040,628 Barnes & Noble (4), Irving, TX 1971 Dillard's, Foley's, General Cinema (4) JCPenney, Mervyn's, Sears, 48. Jefferson Valley Fee 100.0 Built 589,601 Macy's, Sears, Mall 1983 Service Merchandise Yorktown Heights, NY 49. Knoxville Center Fee 100.0 Built 970,673 Dillard's, JCPenney, Knoxville, TN 1984 Proffitt's, Sears, Service Merchandise 50. La Plaza Fee and Ground 100.0 Built 987,645 Dillard's, JCPenney, Beall's, McAllen, TX Lease (6)(2040) 1976 Foley's, Sears, Service Merchandise, Joe Brand-Lady Brand 51. Lafayette Square Fee 100.0 Built 1,220,043 JCPenney, LS Ayres, Sears, Indianapolis, IN 1968 Lazarus, Waccamaw, Montgomery Ward (11) 52. Laguna Hills Mall Fee 100.0 Acquired 812,581 JCPenney, Laguna Hills, CA 1997 Macy's, Sears 53. Lakeland Square Fee 50.0 Built 900,556 Belk, Burdines, Lakeland, FL 1988 Dillard's (5), JCPenney, Sears 54. Lakeline Mall Fee 50.0(14) Built 1,102,670 Dillard's, Foley's, Sears, N. Austin, TX 1995 JCPenney, Mervyn's, United Artists 55. Lima Mall Fee 100.0 Built 753,127 Elder-Beerman, Sears, Lima, OH 1965 Lazarus, JCPenney 56. Lincolnwood Town Fee 100.0 Built 441,085 Carson Pirie Scott, Center 1990 JCPenney Lincolnwood, IL 57. Longview Mall Fee 100.0 Built 617,025 Dillard's (5), JCPenney, Longview, TX 1978 Sears, Service Merchandise, Beall's 58. Machesney Park Mall Fee 100.0 Built 555,860 Kohl's, JCPenney, Rockford, IL 1979 Bergners, (13) 59. Markland Mall Ground Lease 100.0 Built 391,284 Lazarus, Sears, Kokomo, IN (2041) 1968 Target 60. McCain Mall Ground Lease 100.0 Built 776,516 Dillard's, JCPenney, N. Little Rock, AR (15)(2032) 1973 M.M. Cohn, Sears 61. Melbourne Square Fee 100.0 Built 734,323 Belk, Burdines, Melbourne, FL 1982 Dillard's (5), JCPenney 13 62. Memorial Mall Fee 100.0 Built 416,698 JCPenney, Kohl's, Sheboygan, WI 1969 Sears 63. Menlo Park Mall Fee 100.0 Acquired 1,296,127 Macy's, Nordstrom, Edison, New Jersey 1997 (16) Cineplex Odeon 64. Miami Fee 60.0 Built 972,296 Burdines (5), Sears, International Mall 1982 Dillard's, JCPenney Miami, FL 65. Midland Park Mall Fee 100.0 Built 618,924 Dillard's (5), JCPenney, Midland, TX 1980 Sears, Beall's 66. Miller Hill Mall Fee 100.0 Built 801,511 Glass Block, JCPenney, Duluth, MN 1973 Montgomery Ward, Sears 67. Mission Viejo Mall Fee 100.0 Built 817,167 Macy's, Mission Viejo, CA 1979 Robinsons - May (5), Nordstrom (4) 68. Mounds Mall Ground Lease 100.0 Built 407,233 Elder-Beerman, JCPenney, Anderson, IN (2033) 1965 Sears 69. Muncie Mall Fee 100.0 Built 658,672 JCPenney, L.S. Ayres, Muncie, IN 1970 Sears, Elder Beerman, (5) 70. North East Mall Fee 100.0 Built 1,142,147 Dillard's (5), JCPenney, Hurst, TX 1971 Montgomery Ward, Sears 71. North Towne Square Fee 100.0 Built 761,659 Lion, Montgomery Ward, (13) Toledo, OH 1980 72. Northfield Square Fee (7)31.6 Built 558,420 Cinemark Movies 10, Carson Bradley, IL 1990 Pirie Scott, JCPenney, Sears, Venture 73. Northgate Mall Fee 100.0 Acquired 1,123,787 The Bon Marche, Lamonts, Seattle, WA 1987 (17) Nordstrom, JCPenney 74. Northwoods Mall Fee 100.0 Acquired 667,937 Famous Barr, JCPenney, Peoria, IL 1983 Sears (4) 75. Oak Court Mall Fee 100.0 Acquired 847,964 Dillard's (5), Goldsmith's Memphis, TN 1997 (18) 76. Orange Park Mall Fee 100.0 Acquired 916,174 AMC 24 Theatre, Dillard's, Jacksonville, FL 1994 Gayfer's, JCPenney, Sears 77. Orland Square Fee 100.0 Acquired 1,224,962 Carson Pirie Scott, JCPenney, Orland Park, IL 1997 Marshall Field, Plitt Theatres, Sears 78. Paddock Mall Fee 100.0 Built 559,414 Belk, Burdines, Ocala, FL 1980 JCPenney, Sears 14 79. Palm Beach Mall Fee 50.0 Built 1,200,692 JCPenney, Sears, West Palm Beach, FL 1967 Lord & Taylor, Dillards, Burdines 80. Port Charlotte Ground Lease (7)80.0 Built 716,149 Burdines, Dillard's, Town Center (2064) 1989 Montgomery Ward, Port Charlotte, FL JCPenney, Regal Cinema (4), Sears 81. Prien Lake Mall Fee and Ground 100.0 Built 455,550 Dillards (4), JCPenney, Lake Charles, LA Lease (6)(2025) 1972 Montgomery Ward, Sears (4), The White House 82. Promenade, The Fee 100.0 Acquired 600,437 Macy's, Macy's Home, Woodland Hills, CA 1997 AMC Theatre 83. Raleigh Springs Fee and Ground 100.0 Built 907,976 Dillard's, Goldsmith's Mall Lease (6)(2018) 1979 JCPenney, Sears Memphis, TN 84. Randall Park Mall Fee 100.0 Built 1,572,080 Dillard's, Kaufmann's, Cleveland, OH 1976 LaSalle Interiors (5), JCPenney, Sears, Burlington Coat Factory 85. Richardson Square Fee 100.0 Built 723,365 Barnes & Noble, Dillard's, Dallas, TX 1977 Ross Dress for Less (4), Sears, Stein Mart (4), Montgomery Ward 86. Richmond Town Fee 100.0 Built 872,989 JCPenney, Kaufmann's (4), Square 1966 Sears, Sony Theatres Cleveland, OH 87. Richmond Square Fee 100.0 Built 393,388 Dillard's, JCPenney, Richmond, IN 1966 Sears, Office Max 88. River Oaks Center Fee 100.0 Acquired 1,341,165 Carson Pirie Scott, Calumet City, IL 1997 (19) Cineplex Odeon, JCPenney, Marshall Field, Sears 89. Rolling Oaks Mall Fee 49.9 Built 758,939 Dillard's, Foley's, North San Antonio, TX 1988 Sears 90. Ross Park Mall Fee (7)100.0 Built 1,274,883 Lazarus, JCPenney, Pittsburgh, PA 1986 Kaufmann's, Sears, Service Merchandise 91. St. Charles Towne Fee 100.0 Built 1,053,244 Cineplex Odeon, Hecht's, Center 1990 JCPenney, Kohl's, Sears, Waldorf, MD Montgomery Ward, 92. Seminole Towne Fee 45.0 Built 1,153,861 Burdines, Dillard's, Center 1995 JCPenney, Parisian, Sears Sanford, FL United Artists 93. Smith Haven Mall Fee 25.0 Acquired 1,341,959 Sterns, Macy's, Lake Grove, NY 1995 Sears, JCPenney 15 94. Source, The Fee 50.0 Built 732,820 ABC Home, Cheesecake Factory, Long Island, NY 1997 Circuit City, Fortunoff, Loehmann's, Nordstrom Rack, Off 5th- Saks Fifth Avenue, Old Navy, Rainforest Cafe, Virgin Megastore 95. South Hills Fee 100.0 Acquired 1,107,269 Carmike Cinemas, Kaufmann's, Village 1997 Lazarus, Sears Pittsburgh, PA 96. South Park Mall Fee 100.0 Built 857,337 Burlington Coat Factory, Shreveport, LA 1975 Dillard's, JCPenney, Montgomery Ward, Regal Cinema, Stage 97. Southtown Mall Fee 100.0 Built 858,202 Kohl's, JCPenney (11), Ft. Wayne, IN 1969 L.S. Ayres (11), Sears, Service Merchandise (11) 98. Southern Park Mall Fee 100.0 Built 1,210,446 Dillard's, Kaufmann's, Youngstown, OH 1970 JCPenney, Sears 99. Southgate Mall Fee 100.0 Acquired 321,336 Albertson's (12), Sears, Yuma, AZ 1988 Dillard's, JCPenney 100. Summit Mall Fee 100.0 Built 717,774 Kaufmann's, Dillard's (5) (4) Akron, OH 1965 101. Sunland Park Mall Fee 100.0 Built 920,882 General Cinemas, JCPenney, El Paso, TX 1988 Mervyn's, Sears, Dillard's, Montgomery Ward 102. Tacoma Mall Fee 100.0 Acquired 1,280,841 The Bon Marche, Sears, Tacoma, WA 1987 Nordstrom, JCPenney, Mervyn's, Plitt Theatres 103. Tippecanoe Mall Fee 100.0 Built 865,341 Kohl's, Lazarus, Sears, Lafayette, IN 1973 L.S. Ayres, JCPenney 104. Towne East Square Fee 100.0 Built 1,152,772 Dillard's, JCPenney, Wichita, KS 1975 Sears, Service Merchandise 105. Towne West Square Fee 100.0 Built 938,536 Dillard's, Sears, JCPenney, Wichita, KS 1980 Montgomery Ward, Service Merchandise 106. Treasure Coast Square Fee 100.0 Built 884,720 Burdines, Dillard's (5), Jenson Beach, FL 1987 Sears, JCPenney 107. Tyrone Square Fee 100.0 Built 1,091,641 Burdines, Dillard's, St. Petersburg, FL 1972 JCPenney, Sears 108. University Mall Ground Lease 100.0 Built 565,953 JCPenney, M.M. Cohn, Little Rock, AR (20)(2026) 1967 Montgomery Ward 16 109. University Mall Fee 100.0 Acquired 711,327 McRae's, JCPenney, Pensacola, FL 1994 Sears, United Artists 110. University Park Mall Fee 60.0 Built 941,094 LS Ayres, JCPenney, Sears, South Bend, IN 1979 Marshall Fields 111. Upper Valley Mall Fee 100.0 Built 751,062 Lazarus, JCPenney, Springfield, OH 1971 Sears, Elder-Beerman 112. Valle Vista Mall Fee 100.0 Built 647,603 Dillard's, Mervyn's, Harlingen, TX 1983 Sears, JCPenney, Marshalls, Beall's 113. Virginia Center Fee 100.0 Built 791,130 Belk, Dillard's, Hecht's, Commons 1991 JCPenney, Sears Richmond, VA 114. Washington Square Fee 100.0 Built 1,172,130 L.S. Ayres, Lazarus, Indianapolis, IN 1974 Montgomery Ward (11), JCPenney, Sears 115. West Ridge Mall Fee 100.0 Built 1,040,337 Dillard's, JCPenney, Topeka, KS (21) 1988 Jones, Sears, Montgomery Ward 116. West Town Mall Fee 50.0 Acquired 1,337,046 Dillard's, JCPenney, Knoxville, TN 1991 Parisian, Proffitt's, Regal Cinema (4), Sears 117. Westchester, The (3) Fee 50.0 Acquired 827,470 Neiman Marcus, Nordstrom (22) 1997 White Plains, NY 118. White Oaks Mall Fee 77.0 Built 904,127 Bergner's, Famous Barr, Springfield, IL 1977 Montgomery Ward, Sears 119. Windsor Park Mall Fee 100.0 Built 1,095,248 Dillard's (5), JCPenney, San Antonio, TX 1976 Mervyn's, Beall's, Montgomery Ward 120. Woodville Mall Fee 100.0 Built 794,005 Andersons, Sears, Toledo, OH 1969 Elder-Beerman, (13) 17 VALUE-ORIENTED REGIONAL MALLS 1. Arizona Mills(3) Fee 26.3 Built 1,157,159 Burlington Coat Factory, 1997 Harkins Theater, Mikasa, Oshman's Supersport, Off 5th- Saks Fifth Avenue Outlet, JCPenney Outlet, Mikasa, Rainforest Cafe, GameWorks, Hi Health, Linens `N Things 2. Grapevine Mills (3) Fee 37.5 Built 1,213,779 Books-A-Million, Grapevine (Dallas/Ft. 1997 Burlington Coat Factory, Worth), TX Off 5th- Saks, Fifth Avenue Outlet, JCPenney Outlet, Rainforest Cafe, Group USA, Bed, Bath & Beyond, AMC Theatres, GameWorks, American Wilderness (4) 3. Ontario Mills Fee 25.0 Built 1,326,284 (3) 1996 JCPenney Outlet, Ontario, CA Burlington Coat Factory, Marshall's, Sports Authority, Dave & Busters, Group USA, IWERKS, American Wilderness Experience, T.J.Maxx, Foozles, Totally for Kids, Bed, Bath & Beyond, Off Rodeo, Mikasa, Virgin, GameWorks, Off 5th-Saks Fifth Avenue Outlet SPECIALTY RETAIL CENTERS - ------------------------- 1. Forum Shops at Ground (23) Built 477,584 - Caesars, The Lease 1992 Las Vegas, NV (2050) 2. Tower Shops, Space 50.0 Built 59,810 - The Lease 1996 Las Vegas, NV (2051) 3. Trolley Square Fee and 90.0 Acquired 223,793 - Salt Lake City, Ground 1986 UT Lease (24) 18 MIXED-USE PROPERTIES - -------------------- 1. Fashion Centre Fee 21.0 Built 988,517 Lowe's Theatres, at Pentagon 1989 (25) Macy's, City, The Nordstrom Arlington, VA 2. New Orleans Fee and 100.0 Built 1,023,690 Macy's, Centre/CNG Ground 1988 (26) Lord & Taylor Tower Lease New Orleans, LA (2084) 3. O'Hare Fee 100.0 Built 496,058 - International 1988 (27) Center Rosemont, IL 4. Riverway Fee 100.0 Acquired 818,278 - Rosemont, IL 1991 (28) COMMUNITY SHOPPING CENTERS - -------------------------- 1. Arvada Plaza Fee 100.0% Built 96,831 King Soopers Arvada, CO 1966 2. Aurora Plaza Ground 100.0 Built 150,209 King Soopers, Aurora, CO Lease 1965 MacFrugel's (2058) Bargains, Super Saver Cinema 3. Bloomingdale Fee 100.0 Built 598,521 Builders Square, Court 1987 T.J. Maxx, Bloomingdale, Cineplex Odeon, IL Frank's Nursery, Marshalls, Office Max, Old Navy, Service Merchandise, Wal-Mart, (13) 4. Boardman Plaza Fee 100.0 Built 651,181 Burlington Coat Youngstown, OH 1951 Factory, Giant Eagle, Stein Mart, T.J. Maxx, Reyers Outlet Hills 5. Bridgeview Fee 100.0 Built 280,299 Omni, Venture Court 1988 Bridgeview, IL 6. Brightwood Fee 100.0 Built 41,893 Revco Drug, Plaza 1965 Safeway Indianapolis, IN 7. Buffalo Grove Fee 92.5 Built 134,131 Buffalo Grove Towne Center 1988 Theatres Buffalo Grove, IL 8. Celina Plaza Fee and 100.0 Built 32,622 General Cinema El Paso, TX Ground 1978 Lease (29) (2027) 19 9. Century Mall Fee 100.0 Acquired 415,245 Burlington Coat (30) 1982 Factory, Merrillville, Montgomery Ward IN 10. Charles Towne Fee 100.0 Built 130,399 Montgomery Ward, Square (31) 1976 Regal Cinema (4) Charleston, SC 11. Chesapeake Fee 100.0 Built 305,904 Movies 10, Phar Center 1989 Mor, Chesapeake, VA K-Mart, Service Merchandise 12. Cobblestone Fee and 35.0 Built 261,107 Dick's Sporting Court Ground 1993 Goods, Victor, NY Lease (10) Kmart, Office (2038) Max 13. Cohoes Commons Fee and 100.0 Built 262,959 Bryant & Rochester, NY Ground 1984 Stratton Lease (6) Business (2032) Institute, Cohoes, Xerox (32) 14. Countryside Fee and 100.0 Built 435,543 Best Buy, Plaza Ground 1977 Builders Square, Countryside, IL Lease (10) Frank's Nursery, (2058) Old Country Buffet, Venture, (13) 15. Crystal Court Fee 35.0 Built 284,816 Cub Foods, Crystal Lake, 1989 Wal-Mart, IL Service Merchandise, (13) 16. Eastgate Fee 100.0 Acquired 462,510 Builder's Consumer Mall 1981 Square, (30) Burlington Coat Indianapolis, Factory, Cub IN Foods, General Cinema 17. Eastland Plaza Fee 100.0 Built 188,229 Marshalls, Tulsa, OK 1986 Target, Toys "R" Us 18. Fairfax Court Ground 26.3 Built 249,305 Circuit City Fairfax, VA Lease 1992 Superstore, (2052) Montgomery Ward, Today's Man 19. Forest Plaza Fee 100.0 Built 422,689 Builders Square Rockford, IL 1985 (12), Kohl's, Marshalls, Factory Card Outlet, Office Max, T.J. Maxx 20. Fox River Plaza Fee 100.0 Built 324,956 Builders Square, Elgin, IL 1985 Venture, Service Merchandise, (13) (13) 21. Gaitway Plaza Fee 23.3 Built 229,909 Books-A-Million, Ocala, FL 1989 Montgomery Ward, Office Depot, T.J. Maxx 22. Glen Burnie Fee 100.0 Built 459,219 Montgomery Ward, Mall (30) 1963 Best Buy, Toys Glen Burnie, MD "R" Us, Dick's Clothing and Sporting Goods 23. Great Lakes Fee 100.0 Built 163,919 Best Buy, Plaza 1976 Circuit City, Cleveland, OH Home Place, Michael's 24. Great Northeast Fee 50.0 Acquired 298,242 Sears, Phar Mor Plaza 1989 Philadelphia, PA 20 25. Greenwood Plus Fee 100.0 Built 226,297 Best Buy, Cinema Greenwood, IN 1979 I-IV, Kohl's 26. Griffith Park Ground 100.0 Built 274,230 General Cinema, Plaza Lease 1979 Service Griffith, IN (2060) Merchandise, Venture 27. Grove at Fee 100.0 Built 215,591 Lakeland Square Lakeland 1988 10 Theatre, Square, The Sports Lakeland, FL Authority, Wal-Mart 28. Hammond Square Space 100.0 Built 87,705 Burlington Coat Sandy Springs, Lease 1974 Factory, GA (2011) Service Merchandise 29. Highland Lakes Fee 100.0 Built 477,324 Bed, Bath & Center 1991 Beyond, Orlando, FL Goodings, Marshalls, Ross Dress for Less, Movies 12, Service Merchandise, Office Max, Target 30. Indian River Fee 50.0 Built 263,507 HomePlace, Commons 1997 Lowe's, Vero Beach, FL Office Max Service Merchandise 31. Ingram Plaza Fee 100.0 Built 111,518 _ San Antonio, TX 1980 32. Keystone Ground 100.0 Acquired 29,140 _ Shoppes Lease 1997 Indianapolis, (2067) IN 33. Knoxville Fee 100.0 Built 180,463 Circuit City, Commons 1987 Office Max, (13) Knoxville, TN 34. Lake Plaza Fee 100.0 Built 218,208 Builders Square Waukegan, IL 1986 (11), Venture 35. Lake View Plaza Fee 100.0 Built 388,358 Best Buy (33), Orland Park, IL 1986 Dominick's, Ultra 3 (33), Factory Card Outlet, Linens-N-Things (33), Marshalls, Pet Care Plus (33), Service Merchandise, (13) 36. Lima Center Fee 100.0 Built 201,154 Regal Cinema, Lima, OH 1978 Hills, Service Merchandise 37. Lincoln Fee 100.0 Built 161,337 PetsMart, Crossing 1990 Wal-Mart O'Fallon, IL 38. Mainland Fee (7) Built 390,986 Sam's Club, Wal- Crossing 80.0 1991 Mart, Galveston, TX Hobby Lobby 39. Maplewood Fee 100.0 Built 130,780 Bag `N Save, Big Square 1970 Lots Omaha, NE 21 40. Markland Plaza Fee 100.0 Built 108,296 Service Kokomo, IN 1974 Merchandise, Spiece 41. Martinsville Space 100.0 Built 102,162 Food Lion, Plaza Lease 1967 Rose's Martinsville, (2036) VA 42. Marwood Plaza Fee 100.0 Built 105,785 Kroger, Revco Indianapolis, 1962 Drug IN 43. Matteson Plaza Fee 100.0 Built 275,455 Dominick's, Matteson, IL 1988 Michael's Arts & Crafts, Kmart, Service Merchandise 44. Memorial Plaza Fee 100.0 Built 129,202 Dunham's Sheboygan, WI 1966 Sporting Goods, Marcus Theatre, Office Max (13) 45. Mounds Mall Fee 100.0 Built 7,500 Kerasotes Cinema 1974 Theater Anderson, IN 46. New Castle Fee 100.0 Built 91,648 Goody's Plaza 1966 New Castle, IN 47. North Ridge Fee 100.0 Built 323,672 Plaza 1985 Hobby Lobby, The Joliet, IL TJX Companies(12), Service Merchandise 48. North Riverside Fee 100.0 Built 119,608 Dominick's Park Plaza 1977 North Riverside, IL 49. Northland Plaza Fee and 100.0 Built 205,775 Marshalls, Columbus, OH Ground 1988 Phar-Mor, Lease (6) Service (2085) Merchandise 50. Northwood Plaza Fee 100.0 Built 211,840 Kroger, Target, Fort Wayne, IN 1974 (13) 51. Park Plaza Fee and 100.0 Built 114,458 Wal-Mart (11) Hopkinsville, Ground 1968 KY Lease (6) (2039) 52. Plaza at Fee 35.0 Built 337,966 Toys "R" Us, Buckland 1993 Kids "R" Us, Hills, The Service Manchester, CT Merchandise, Comp USA, Linens-N-Thing', Filene's Basement, (13) 53. Regency Plaza Fee 100.0 Built 277,521 Sam's Wholesale, St. Charles, MO 1988 Wal-Mart 54. Ridgewood Court Fee 35.0 Built 240,843 Home Quarters, Jackson, MS 1993 T.J. Maxx, Service Merchandise, (13) 55. Royal Eagle Fee 35.0 Built 203,140 Kmart, Plaza 1989 Stein Mart Coral Springs, FL 22 56. Sherwood Fee 100.0 Acquired 187,000 _ Gardens (34) 1997 Salinas, CA 57. St. Charles Fee 100.0 Built 435,035 Ames, Hechinger, Towne Plaza 1987 Jo Ann Fabrics, Waldorf, MD CVS, T.J. Maxx, Service Merchandise, Shoppers Food Warehouse 58. Teal Plaza Fee and 100.0 Built 100,831 Circuit City Lafayette, IN Ground 1962 (4), Hobby- Lease Lobby, The Pep (2007) (6) Boys (4) 59. Terrace at The Fee 100.0 Built 332,980 J.J. Byrons Florida Mall 1989 (11), Marshalls, Orlando, FL Service Merchandise, Target, Waccamaw 60. Tippecanoe Fee 100.0 Built 94,739 Barnes & Noble Plaza 1974 Bookseller, Lafayette, IN Service Merchandise 61. University Fee 60.0 Built 150,548 Best Buy, Center 1980 Michaels, South Bend, IN Service Merchandise 62. Village Park Fee 35.0 Built 503,052 Frank's Nursery, Plaza 1990 Gaylan's, Westfield, IN Jo-Ann Fabrics, Kohl's, Marsh, Regal Cinemas, Wal-Mart 63. Wabash Village Ground 100.0 Built 124,748 Kmart West Lafayette, Lease 1970 IN (2063) 64. Washington Fee (7) Built 50,302 Kids "R" Us Plaza 85.0 1976 Indianapolis, IN 65. West Ridge Fee 100.0 Built 237,650 Magic Forest, Plaza 1988 Target, Topeka, KS TJ Maxx, Toys "R" Us 66. West Town Fee 23.3 Built 384,832 PetsMart, Corners 1989 Wal-Mart, Altamonte Service Springs, FL Merchandise, Sports Authority, (13) 67. Westland Park Fee 23.3 Built 163,154 Burlington Coat Plaza 1989 Factory, Orange Park, FL PetsMart, Sports Authority 68. White Oaks Fee 100.0 Built 389,063 Cub Foods, Kids Plaza 1986 "R" Us, Springfield, IL Kohl's, Office Max, T.J. Maxx, Toys "R" Us 69. Wichita Mall Ground 100.0 Built 379,461 Cinema III, (30) Lease 1969 Office Max, Wichita, KS (2022) Montgomery Ward 70. Willow Knolls Fee 35.0 Built 383,230 Kohl's, Court 1990 Phar-Mor, Peoria, IL Sam's Wholesale Club, Willow Knolls Theaters 14 71. Wood Plaza Ground 100.0 Built 94,993 Country General Fort Dodge, IA Lease 1968 (2045) 72. Yards Plaza, Fee 35.0 Built 273,097 Burlington Coat The 1990 Factory, Chicago, IL Omni Superstore, Montgomery Ward 23 PROPERTIES UNDER CONSTRUCTION - ----------------------------- 1. Lakeline Plaza Fee 50.0 (35) 381,000 Linens `N Austin, TX (14) Things, Office Max, Old Navy, Ross Dress for Less, T.J. Maxx, Party City, Toys "R" Us 2. Muncie Plaza Fee 100.0 (36) 195,500 Factory Card Muncie, IN Outlet, Kohl's, OfficeMax, Shoe Carnival, T.J. Maxx 3. Shops at Sunset Fee 75.0 (37) 500,000 Nike Town, AMC Place, The Theatres Virgin Miami, FL Megastore, Z Gallerie, IMAX Theatre, Barnes & Noble, Twin Palms
24 (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 of the Properties held as joint venture interests are subject to preferences on distributions in favor of other partners. (3) This property is managed by a third party. (4) Indicates anchor is currently under construction. (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) Retailer vacated subsequent to December 31, 1997 and the space was sold to Von Maur, which is scheduled to open in the fourth quarter of 1998. (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 anchor has closed, but the Operating Partnership still collects rents and/or fees under an agreement (12) Indicates this anchor is currently subleasing the space to other retailers. (13) Includes an anchor space currently vacant. (14) Effective January 30, 1998, the Operating Partnership acquired an additional 15% interest in Lakeline Mall and Lakeline Plaza. (15) Indicates ground lease covers all of the property except for parcels owned in fee by anchors. (16) Primarily retail space with approximately 54,884 square feet of office space. (17) Primarily retail space with approximately 69,876 square feet of office space. (18) Primarily retail space with approximately 126,190 square feet of office space. (19) Primarily retail space with approximately 70,991 square feet of office space. (20) Indicates one ground lease covers substantially all of the property and a second ground lease covers the remainder. (21) Includes outlots in which the Operating Partnership has an 85% interest and which represent less than 3% of the GLA and total annualized base rent for the property. (22) The Operating Partnership purchased the management contract on this property during 1998. (23) The Operating Partnership owns 60% of the original phase of this Property and 55% of phase II, which opened in August 1997. (24) 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, subject to specified exceptions. (25) Primarily retail space with approximately 167,150 square feet of office space. (26) Primarily retail space with 486,723 square feet of office space. (27) Primarily office space with approximately 12,800 square feet of retail space. (28) Primarily office space with approximately 24,300 square feet of retail space. (29) Indicates ground lease covers outparcel. (30) Effective December 31, 1997, Eastgate Consumer Mall, Glen Burnie Mall, Century Mall and Wichita Mall have been reclassified as community centers. These Properties are currently being operated and marketed to tenant operations which are typically included in community centers. (31) The Operating Partnership demolished the previously existing regional mall, Charles Towne Square, and is in the process of rebuilding this community center and a cinema on the land. (32) Lease was terminated subsequent to December 31, 1997. (33) Subleased from TJX Companies. (34) This Property was sold in 1998. (35) Phase I is scheduled to open during May 1998 and phase II is scheduled to open during November 1998. (36) This center is scheduled to open during April 1998, however the OfficeMax and T.J. Maxx opened in 1997. (37) Scheduled to open during October 1998. 25 Land Held for Development The Operating Partnership has direct or indirect ownership interests in nine parcels of land either in preconstruction development or being held for future development, containing an aggregate of approximately 677 acres located in eight states, and, through the Management Company, interest in a mortgage on a parcel of land held for development containing approximately 134 acres. Management believes that the Operating Partnership's significant base of commercially zoned land, together with the Operating Partnership's status as a fully integrated real estate firm, gives it a competitive advantage in future development activities over other commercial real estate development companies in its principal markets. The following table describes the acreage of the parcels of land either in preconstruction development or being held for future development in which the Operating Partnership has an ownership interest, as well as the ownership percentage of the Operating Partnership's interest in each parcel: Ownership Location Acreage Interest (1) Bowie, MD 93.74 100% Concord, NC 187.48 50% Duluth, MN 11.17 100% Hurst, TX 36.09 100% Lafayette, IN 22.87 100% Little Rock, AR 97.00 50% Mt. Juliet, TN 109.26 100% Sanford, FL 77.24 22.5% Miami, FL 41.71 60% -------- 676.56 ======== (1) The Operating Partnership has a direct ownership interest in each parcel except Duluth, MN and Mt. Juliet, TN. The Operating Partnership has the option to acquire those parcels from the Management Company. The Management Company has granted options to the Operating Partnership (for no additional consideration) to acquire for a period of ten years (expiring December 2003) the Management Company's interest in the two parcels of land held for development, indicated in footnote (1) to the above table, at a price equal to the actual cost incurred to acquire and carry such properties. The Management Company may not sell its interest in any parcel subject to option through December 1998 without the consent of the Operating Partnership, and thereafter, may only sell its interest subject to certain notice and first purchase rights of the Operating Partnership. The Management Company also holds indebtedness secured by 134 acres of land held for development, Lakeview at Gwinnett ("Lakeview") in Gwinnett County, Georgia, in which Melvin Simon, Herbert Simon and certain of their affiliates (the "Simons") hold a 64% partnership interest. In addition, the Management Company holds unsecured debt owed by the Simons as partners of this partnership. The Management Company has an option to acquire the Simons' partnership interests in Lakeview for nominal consideration in the event the requisite partner consents to such transfers are obtained. The Management Company is required to fund certain operating expenses and carrying costs of the partnership that are owed by the Simons as partners thereof. The Management Company has granted to the Operating Partnership the option to acquire (i) the Simons' partnership interests and the secured debt or (ii) the property, if the Management Company forecloses the secured indebtedness, for nominal consideration plus the amount of all advances and outstanding debt. 26 Joint Ventures At certain of the Properties held as joint-ventures, the Operating Partnership and its partners each have rights of first refusal, subject to certain conditions, to acquire additional ownership in the Property should the other partner decide to sell its ownership interest. In addition, certain of the Properties held as joint ventures contain "buy-sell" provisions, which gives the partners the right to trigger a purchase or sale of ownership interest amongst the partners. Mortgage Financing on Properties The following table sets forth certain information regarding the mortgages and other debt encumbering the Properties. All mortgage and property related debt is nonrecourse, although certain Unitholders have guaranteed a portion of the property related debt in the aggregate amount of $583.2 million. 27 MORTGAGE AND OTHER DEBT ON PORTFOLIO PROPERTIES (Dollars in thousands)
Annual Interest Face Amount Debt Maturity Property Name Rate at 12/31/97 Service Date - -------------------------------- -------- ----------- --------- -------- Consolidated Properties: - ------------------------ Secured Indebtness Anderson Mall (1) 6.57% $ 19,000 $ 1,248 (2) 9/15/02 Barton Creek Square 8.10% 62,868 5,867 12/30/99 Battlefield Mall 7.50% 49,730 4,765 6/1/03 Biltmore Square 7.15% 27,534 2,795 1/1/01 Bloomingdale Court (3) 8.75% 29,009 2,538 (2) 12/1/00 Chesapeake Center 8.44% 6,563 554 (2) 5/15/15 Chesapeake Square 7.28% 49,490 4,883 1/1/01 Cielo Vista Mall - 1 (4) 9.38% 55,615 5,828 5/1/07 Cielo Vista Mall - 2 8.13% 2,323 189 (2) 7/1/04 College Mall (5) 7.00% 42,936 3,563 7/1/04 Columbia Center 7.62% 42,867 3,789 3/15/02 Crossroads Mall 7.75% 41,440 3,212 (2) 7/31/02 Crystal River 7.72% (6) 16,000 1,235 (2) 1/1/01 Eastgate Consumer Mall 6.00% (7) (8) 22,929 1,376 (2) 12/31/98 Eastland Mall 7.22% (9) 30,000 2,166 (2) 3/1/98 Edison Mall 6.37% (10) (11) 41,000 2,611 (2) 3/19/98 Forest Mall (1) 6.57% 12,800 841 (2) 9/15/02 Forest Plaza (3) 8.75% 16,904 1,479 (2) 12/1/00 Forest Village Park Mall (1) 6.57% 20,600 1,353 (2) 9/15/02 Forum Phase I - Class A-1 7.13% 46,997 3,349 (2) 5/15/04 Forum Phase I - Class A-2 6.02% (12) (13) 44,385 2,671 (2) 5/15/04 Forum Phase II - Class A-1 7.13% 43,004 3,064 (2) 5/15/04 Forum Phase II - Class A-2 6.02% (12) (13) 40,614 2,444 (2) 5/15/04 Fox River Plaza (3) 8.75% 12,654 1,107 (2) 12/1/00 Golden Ring Mall (1) 6.57% 29,750 1,955 (2) 9/15/02 Great Lakes Mall - 1 6.74% 53,410 4,354 3/1/01 Great Lakes Mall - 2 7.07% 8,608 724 3/1/99 Greenwood Park Mall (5) 7.00% 35,960 2,984 7/1/04 Grove at Lakeland Square, The 8.44% 3,750 317 (2) 5/15/15 Gulf View Square 8.25% 38,157 3,652 10/1/06 Highland Lakes Center 7.22% (9) 14,377 1,038 (2) 3/1/02 Hutchinson Mall (1) 8.44% 11,523 973 (2) 10/1/02 Ingram Park Mall - 1 8.10% 48,580 4,533 12/1/99 Ingram Park Mall - 2 9.63% 7,000 674 (2) 11/1/99 Jefferson Valley Mall 6.27% (14) (15) 50,000 3,134 (2) 1/12/00 Keystone at the Crossing 7.85% 64,772 5,085 7/1/27 La Plaza Mall 8.25% 50,044 4,677 12/30/99 Lake View Plaza (3) 8.75% 22,169 1,940 (2) 12/1/00 Lima Mall - 1 7.12% 14,377 1,215 3/1/02 Lima Mall - 2 7.12% 4,789 405 3/1/02 Lincoln Crossing (3) 8.75% 997 87 (2) 12/1/00 Longview Mall (1) 6.57% 22,100 1,452 (2) 9/15/02 Mainland Crossing 7.22% (9) 2,226 161 (2) 3/31/02 Markland Mall (1) 6.57% 10,000 657 (2) 9/15/02 Matteson Plaza (3) 8.75% 11,159 976 (2) 12/1/00 McCain Mall (4) 9.38% 26,059 2,721 5/1/07 Melbourne Square 7.42% 39,841 3,374 2/1/05 Miami International Mall 6.91% 47,009 3,758 12/21/03 Midland Park Mall (1) 6.57% 22,500 1,478 (2) 9/15/02 North East Mall 10.00% 22,201 2,475 9/1/00 North Riverside Park Plaza - 1 9.38% 4,054 452 9/1/02 North Riverside Park Plaza - 2 10.00% 3,617 420 9/1/02 North Towne Square (1) 6.57% 23,500 1,544 (2) 9/15/02 Northgate Shopping Center 7.62% 80,046 7,075 3/15/02 Orland Square 7.74% (16) (17) 50,000 3,871 (2) 9/1/01 Paddock Mall 8.25% 30,347 2,905 10/1/06 Port Charlotte Town Center 7.28% 46,102 3,857 1/1/01 Randall Park Mall 9.25% 33,879 4,338 1/1/11 Regency Plaza (3) 8.75% 1,878 164 (2) 12/1/00 River Oaks Center 8.67% 32,500 2,818 (2) 6/1/02 Riverway - 1 6.38% (18) (8) 85,571 5,455 (2) 12/31/98 28 Riverway - 2 6.38% (18) (8) 45,880 2,925 (2) 12/31/98 Ross Park Mall 6.14% 60,000 3,684 (2) 8/15/98 Shops at Sunset Place, The 6.97% (19) 23,546 1,641 (2) 6/30/00 South Park Mall (1) 7.25% 24,748 1,794 (2) 6/15/03 St. Charles Towne Plaza (3) 8.75% 30,742 2,690 (2) 12/1/00 Sunland Park Mall (20) 8.63% 39,855 3,773 1/1/26 Tacoma Mall 7.62% 93,656 8,278 3/15/02 Terrace at Florida Mall, The 8.44% 4,688 396 (2) 5/15/15 Tippecanoe Mall (5) 8.45% 46,961 4,647 7/1/04 Towne East Square (5) 7.00% 56,767 4,711 7/1/04 Treasure Coast Square 7.42% 53,953 4,714 1/1/06 Trolley Square - 1 5.81% 19,000 1,104 (2) 7/23/00 (21) Trolley Square - 2 7.22% (9) 4,641 335 (2) 7/23/00 (21) Trolley Square - 3 7.22% (9) 3,500 253 (2) 7/23/00 (21) University Park Mall 7.43% 59,500 4,421 (2) 10/1/07 Valle Vista Mall (4) 9.38% 34,514 3,604 5/1/07 West Ridge Plaza (3) 8.75% 4,612 404 (2) 12/1/00 White Oaks Mall - 55%/50% 7.70% 16,500 1,271 (2) 3/1/98 White Oaks Plaza (3) 8.75% 12,345 1,080 (2) 12/1/00 Windsor Park Mall - 1 8.00% 5,948 544 6/1/00 Windsor Park Mall - 2 8.00% 8,863 811 5/1/12 Cross - Collateralized Mortgages (22) 7.27% 175,000 12,720 (2) 12/19/04 Cross - Collateralized Mortgages (22) 6.08% (23) (24) 50,000 3,042 (2) 12/19/04 ---------- Total Secured Indebtedness $ 2,705,333 Unsecured Indebtness Simon DeBartolo Group, L.P.: Unsecured Revolving Credit Facility (25) 6.56% 952,000 62,490 (2) 9/27/99 Unsecured Notes 6.88% 250,000 17,188 (26) 11/15/06 Putable Asset Trust Securities 6.75% 100,000 6,750 (26) 11/15/03 Medium Term Notes 7.13% 100,000 7,125 (26) 6/24/05 Medium Term Notes 7.13% 180,000 12,825 (26) 9/20/07 Unsecured Term Loan 6.47% (27) 70,000 4,528 (2) 9/25/98 Unsecured Term Loan 6.47% (28) 63,000 4,075 (2) 1/31/99 Unsecured Notes 6.75% 100,000 6,750 (26) 7/15/04 Unsecured Notes 7.00% 150,000 10,500 (26) 7/15/09 Unsecured Notes 6.88% 150,000 10,313 (26) 10/27/05 ----------- 2,115,000 Shopping Center Associates: Unsecured Notes 6.75% 150,000 10,125 (26) 1/15/04 Unsecured Notes 7.63% 110,000 8,388 (26) 5/15/05 ----------- 260,000 Total Unsecured Indebtedness $2,375,000 ----------- Total Indebtedness-Consolidated $5,080,333 (29) =========== 29 Joint Venture Properties (30): - ------------------------------ Arizona Mills 7.02% (31) (13) 121,991 8,562 (2) 2/1/02 Aventura Mall - 1 7.68% (32) 100,000 7,680 (2) 8/8/98 Aventura Mall - 2 9.75% (33) 5,500 1,678 8/8/98 Aventura Mall - 3 6.82% (34) 43,766 2,984 (2) 8/8/98 Avenues, The 8.36% 58,408 5,555 5/15/03 Century III Mall 6.78% 66,000 4,475 (2) 7/1/03 Circle Centre Mall 6.16% (35) (36) 60,000 3,695 (2) 1/31/04 Cobblestone Court 7.22% (37) 6,180 446 (2) 11/30/05 Coral Square 7.40% 53,300 3,944 (2) 12/1/00 Crystal Court 7.22% (37) 3,570 258 (2) 11/30/05 Dadeland Mall 6.42% (38) 140,000 8,986 (2) 12/10/99 Fairfax Court 7.22% (37) 10,320 745 (2) 11/30/05 Florida Mall, The 8.65% (39) 75,000 6,488 (2) 12/1/98 Gaitway Plaza 7.22% (37) 7,350 531 (2) 11/30/05 Grapevine Mills 7.07% (40) 112,096 7,924 (2) 4/25/01 Great Northeast Plaza 9.04% 17,812 1,744 6/1/06 Indian River Commons 7.58% 8,399 637 (41) 11/1/04 Indian River Mall 7.58% 46,602 3,532 (41) 11/1/04 Lakeland Square 7.26% 52,961 4,368 12/22/03 Lakeline Mall 7.65% 73,620 6,300 5/1/07 Lakeline Plaza - 1 6.09% (42) 14,000 853 (2) 6/6/02 Northfield Square 9.52% 24,330 2,575 4/1/00 Ontario Mills - 1 7.37% (7) (43) 50,000 3,685 (2) 5/7/02 Ontario Mills - 2 7.21% (7) (44) 20,000 1,442 (2) 5/7/02 Ontario Mills - 3 7.46% (19) (44) 50,000 3,730 (2) 5/7/02 Ontario Mills - 4 0.00% (45) 4,450 0 (2) 12/28/09 Palm Beach Mall 8.21% 51,360 5,072 12/15/02 Plaza at Buckland Hills, The 7.22% (37) 17,680 1,276 (2) 11/30/05 Ridgewood Court 7.22% (37) 7,980 576 (2) 11/30/05 Royal Eagle Plaza 7.22% (37) 7,920 572 (2) 11/30/05 Seminole Towne Center 6.88% 70,500 4,850 (2) 1/1/06 Smith Haven Mall 7.86% 115,000 9,039 (2) 6/1/06 Source, The 7.07% (40) 108,428 7,665 (2) 7/16/01 Tower Shops, The 7.72% (6) 15,755 1,216 (2) 3/13/99 Village Park Plaza 7.22% (37) 8,960 647 (2) 11/30/05 West Town Corners 7.22% (37) 10,330 746 (2) 11/30/05 West Town Mall 6.90% 76,000 5,244 (2) 5/1/08 Westchester, The 8.74% 153,234 14,478 9/1/05 Westland Park Plaza 7.22% (37) 4,950 357 (2) 11/30/05 Willow Knolls Court 7.22% (37) 6,490 469 (2) 11/30/05 Yards Plaza, The 7.22% (37) 8,270 597 (2) 11/30/05 ----------- Total Joint Venture Properties Indebtedness $1,888,512 (46) ===========
30 (1) Loans secured by these ten properties are cross-collateralized and cross-defaulted. The aggregate principal amount of the loans is $196,521, with an annual debt service of $13,295, and weighted average interest rate of 6.77%. The interest rate and maturity date of eight of these loans were reset in October 1997 and all ten require monthly payments of interest only. (2) Requires monthly payments of interest only. (3) These ten properties are cross-defaulted. (4) On January 31, 1997, the Operating Partnership closed on a restructure of these loans, which included repaying the Irving Mall loan, paying $21,000 to remove the contingent interest feature and paying down a total of $3,900 on two other Property loans with the same lender. (5) Loans secured by these four properties are cross-collateralized and cross-defaulted. The aggregate principal amount of the loans is $182,624, with an annual debt service of $15,905, and an interest rate of 7.0% except for Tippecanoe Mall, which bears interest at 8.45%. During the term of these loans, there is amortization of a portion of the principal amount. (6) LIBOR + 2.000%. (7) LIBOR + 1.000%. (8) LIBOR Capped at 5.000%. (9) LIBOR + 1.500%. (10) LIBOR + 0.650%. (11) LIBOR Capped at 8.350%. (12) LIBOR + 0.300%. (13) LIBOR Capped at 9.500%. On January 6, 1998, through an interest rate protection agreement, the interest rate was effectively fixed at an all-in-one fixed rate of 6.19% (14) LIBOR + 0.550%. (15) LIBOR Capped at 8.700%. (16) LIBOR + 0.500%. (17) LIBOR Swapped at 7.242%. (18) LIBOR + 1.375%. (19) LIBOR + 1.250%. (20) Lender also participates in a percentage of gross revenues above a specified base. (21) July 23, 2000 is the earliest date on which the lender may call the bonds. (22) On September 2, 1997, a refinancing was completed of $453 million of commercial mortgage pass through certificates and a $48 million mortgage loan, resulting in releases of mortgages encumbering 18 of the Properties. The refinancing was funded, in part, with the proceeds of this $225 million loan, which is secured by cross-collateralized mortgages encumbering seven of the Properties (Bay Park Square, Boardman Plaza, Cheltenham Square, De Soto Square, Upper Valley Mall, Washington Square and West Ridge Mall). (23) LIBOR + 0.365%. (24) Minimum LIBOR Cap at 12.553%. (25) $1,250,000 unsecured revolving credit facility. Currently, bears interest at LIBOR + 0.65% and provides for different pricing based upon the Operating Partnership's investment grade rating. As of 12/31/97 $284,300 was available, after outstanding borrowings and letters of credit. (26) Requires semi-annual payments of interest only. (27) LIBOR + 0.750%. In March of 1998, the interest rate was reduced to LIBOR + 0.65%. (28) LIBOR + 0.750%. In January 1998, through an interst rate protection agreement, the interest rate was effectively fixed at 6.14% through maturity. (29) Includes minority interest partners' share ($132,824) of total consolidated indebtedness. (30) As defined in the accompanying consolidated financial statments, Joint Venture Properties are those accounted for using the equity method of accounting. (31) LIBOR + 1.300%. (32) Bank of Tokyo CD Rate + 0.900%. (33) PRIME + 1.250%. (34) LIBOR + 1.100%. (35) LIBOR + 0.440%. (36) LIBOR Capped at 8.810%. (37) Rate is fixed at 7.22% through December 1998 and thereafter the rate is the greater of 7.22% or 2.0% over the then current yield of a six month treasury bill selected by the lender. (38) LIBOR + 0.700%. (39) Commercial Paper rate + 0.750%. (40) LIBOR + 1.350%. (41) Loans require monthly interest payments only until they begin amortizing November, 2000. (42) LIBOR + 0.375%. (43) LIBOR Swapped at 6.370%. (44) LIBOR Swapped at 6.210%. (45) Beginning January 2000, this note will bear interest at 6.00%. (46) Includes outside partners' share ($1,117,736) of indebtedness.
31 Item 3. Legal Proceedings Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. On October 16, 1996, a complaint was filed in the Court of Common Pleas of Mahoning County, Ohio, captioned Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. The named defendants are SD Property Group, Inc., a 99%-owned subsidiary of the Company, and DPMI, and the plaintiffs are 27 former employees of the defendants. In the complaint, the plaintiffs alleged that they were recipients of deferred stock grants under the DRC stock incentive plan (the "DRC Plan") and that these grants immediately vested under the DRC Plan's "change in control" provision as a result of the DRC Merger. Plaintiffs asserted that the defendants' refusal to issue them approximately 661,000 shares of DRC common stock, which is equivalent to approximately 450,000 shares of common stock of the Company computed at the 0.68 Exchange Ratio used in the DRC Merger, constituted a breach of contract and a breach of the implied covenant of good faith and fair dealing under Ohio law. Plaintiffs sought damages equal to such number of shares of DRC common stock, or cash in lieu thereof, equal to all deferred stock ever granted to them under the DRC Plan, dividends on such stock from the time of the grants, compensatory damages for breach of the implied covenant of good faith and fair dealing, and punitive damages. The complaint was served on the defendants on October 28, 1996. The plaintiffs and the Company each filed motions for summary judgment. On October 31, 1997, the Court entered a judgment in favor of the Company granting the Company's motion for summary judgment. The plaintiffs have appealed this judgment and the appeal is pending. While it is difficult for the Company to predict the ultimate outcome of this action, based on the information known to the Company to date, it is not expected that this action will have a material adverse effect on the Company or the Operating Partnership. Roel Vento et al v. Tom Taylor et al. A subsidiary of the Operating Partnership is a defendant in litigation entitled Roel Vento et al v. Tom Taylor et al, in the District Court of Cameron County, Texas, in which a judgment in the amount of $7.8 million has been entered against all defendants. This judgment includes approximately $6.5 million of punitive damages and is based upon a jury's findings on four separate theories of liability including fraud, intentional infliction of emotional distress, tortuous interference with contract and civil conspiracy arising out of the sale of a business operating under a temporary license agreement at Valle Vista Mall in Harlingen, Texas. The Operating Partnership is seeking to overturn the award and has appealed the verdict. The Operating Partnership's appeal is pending. Although the Operating Partnership is optimistic that it may be able to reverse or reduce the verdict, there can be no assurance thereof. Management, based upon the advice of counsel, believes that the ultimate outcome of this action will not have a material adverse effect on the Operating Partnership. Browning-Ferris Industries of Illinois, et al. v. Richard Ter Maat, et al. v. Craig J. Cain, et al., Case No. 92 C 20259. On April 4, 1994, a third-party action was filed by Richard Ter Maat and five other parties (collectively referred to as "Third-Party Plaintiffs") named as defendants in the above referenced litigation, which had begun in 1992, against Machesney Park Associates (a predecessor to the Operating Partnership) (the "Affiliate") and approximately 74 other parties (collectively referred to as "Third-Party Defendants"). That third-party action alleged generally that the Third-Party Defendants are liable under the Comprehensive Environmental response, Compensation and Liability Act of 1980, 42 U.S.C. section 9601 et seq., and under Illinois statutory and common law for certain response costs expended and to be expended by Third- Party Plaintiffs in connection with the claims asserted by Browning- Ferris Industries of Illinois and approximately 20 other parties (collectively referred to as "Plaintiffs") against the Third-Party Plaintiffs. In the original lawsuit, Plaintiffs sought reimbursement of response costs they allegedly incurred and will incur in response to the release or threat of release of hazardous substances from the M.I.G./Dewane Landfill located one mile east of the City of Belvidere, in Boone County, Illinois (the "Site"), and declaratory judgment on liability against Defendants for such response costs. To date, the Plaintiffs have alleged response costs in excess of $5.0 million in connection with the Site. In February 1996, the Affiliate settled this pending litigation by the payment of $40,000 to the original Plaintiffs. Pursuant to that settlement, the Operating Partnership agreed that it would take part in a nonbinding arbitration or mediation at sometime in the future to allocate expenses incurred in remediating the Site. No such arbitration or mediation has yet been instituted. In addition, the Operating Partnership has made a demand upon its insurer for indemnification with respect to the claims asserted against the Operating Partnership in this matter. Management, based upon the advice of counsel, believes that the ultimate outcome of this action will not have a material adverse effect on the Operating Partnership. The Operating Partnership currently is not subject to any other material litigation other than routine litigation and administrative proceedings arising in the ordinary course of business. On the basis of consultation with counsel, management believes that these items will not have a material adverse impact on the Operating Partnership's financial position or results of operations. Item 4. Submission of Matters to a Vote of Security Holders None. 32 PART II Item 5. Market for Registrant and Related Unitholder Matters There is no established public trading market for the Operating Partnership's Units or preferred units (all of which are owned by the Company). The following table sets forth for the periods indicated, the distributions declared on the Units: Declared Distribution 1996 1st Quarter 1996 $0.4925 2nd Quarter 1996 $0.4925 3rd Quarter 1996 $0.1515(1) 4th Quarter 1996 $0.4925 1997 1st Quarter 1997 $0.4925 2nd Quarter 1997 $0.5050 3rd Quarter 1997 $0.5050 4th Quarter 1997 $0.5050 (1) Represents a distribution declared in the third quarter of 1996 related to the DRC Merger, designated to align the time periods of distribution payments of the merged entities. The current annual distribution rate is $2.02 per Unit. Holders The number of holders of Units was 132 as of March 6, 1998. Unregistered Sales of Equity Securities The Operating Partnership did not issue any equity securities that were not required to be registered under the Securities Act of 1933, as amended (the "Act") during the fourth quarter of 1997, except as follows: On November 14, 1997, the Operating Partnership issued 841,114 Units in connection with the acquisition of the remaining ownership interest of SCA. (see Note 3 to the financial statements) The foregoing transaction was exempt from registration under the Act in reliance on Section 4(2). 33 Item 6. Selected Financial Data The following table sets forth selected consolidated financial data for the Operating Partnership and combined historical financial data of Simon Property Group (the "Predecessor" of SPG, LP). The financial statements of the Operating Partnership for the periods after the DRC Merger reflect the reverse acquisition of DeBartolo Realty Partnership, L.P. by the Company using the purchase method of accounting. The financial statements for all pre-merger comparative periods reflect the financial statements of SPG, LP the predecessor for accounting purposes to SDG, LP. All references herein to the Operating Partnership are to SDG, LP or SPG, LP as the case may be. The financial data should be read in conjunction with the financial statements and notes thereto and with Management's Discussion and Analysis of Financial Condition and Results of Operations. Other data management believes is important in understanding trends in the Operating Partnership's business is also included in the table. The Operating Partnership Predecessor -------------------------------------------------------- ----------- December 20 to January 1 to For the Year Ended December 3l, December 31, December 19, 1997(1) 1996(1) 1995(1) 1994 1993 1993 -------- -------- -------- -------- -------- -------- OPERATING DATA: (in thousands, except per Unit data) Total revenue $ 1,054,167 $ 747,704 $ 553,657 $ 473,676 $ 18,424 $ 405,869 Income before extraordinary items 203,133 134,663 101,505 60,308 8,707 6,912 Net income (loss) available to Unitholders $ 173,943 $ 118,448 $ 96,730 $ 42,328 $(21,774) $ 33,101 BASIC EARNINGS PER UNIT (2): Income before extraordinary items $ 1.08 $ 1.02 $ 1.08 $ 0.71 $ 0.11 N/A Extraordinary items -- (0.03) (0.04) (0.21) (0.39) N/A ----------- --------- ---------- --------- ------------- Net income (loss) $ 1.08 $ 0.99 $ 1.04 $ 0.50 $ (0.28) N/A =========== ========= ========== ========= ============ Weighted average Units outstanding 161,023 120,182 92,666 84,510 78,447 N/A DILUTED EARNINGS PER UNIT (2): Income before extraordinary items $ 1.08 $ 1.01 $ 1.08 $ 0.71 $ 0.11 N/A Extraordinary items -- (0.03) (0.04) (0.21) (0.39) N/A ----------- ---------- ---------- --------- ------------- Net income (loss) $ 1.08 $ 0.98 $ 1.04 $ 0.50 $ (0.28) N/A =========== ========== ========== ========= ============= Diluted weighted average Units outstanding 161,407 120,317 92,776 84,712 78,454 N/A Distributions per Unit (3) 2.01 1.63 1.97 1.90 -- N/A BALANCE SHEET DATA: Cash and cash equivalents 109,699 64,309 62,721 105,139 110,625 N/A Total assets 7,662,667 5,895,910 2,556,436 2,316,860 1,793,654 N/A Mortgages and other indebtedness 5,077,990 3,681,984 1,980,759 1,938,091 1,455,884 N/A Limited partners' interest (4) _ _ 908,764 909,306 843,373 N/A Partners' equity (deficit) $2,251,299 $ 1,945,174 $ (589,126) $ (807,613) $ (791,820) N/A OTHER DATA: Cash flow provided (used in): Operating activities $ 370,907 $ 236,464 $ 194,336 $ 128,023 N/A N/A Investing activities (1,243,804) (199,742) (222,679) (266,772) N/A N/A Financing activities 918,287 (35,134) (14,075) 133,263 N/A N/A Funds from Operations (FFO) (5) $ 415,128 $ 281,495 $ 197,909 $ 167,761 N/A N/A =========== ======== ========= =========
Notes (1) Note 3 to the accompanying financial statements describes the DRC Merger, which occurred on August 9, 1996, and the 1997, 1996, and 1995 real estate acquisitions and development. (2) Per Unit data is reflected only for the Operating Partnership, because the historical combined financial statements of the Predecessor are a combined presentation of partnerships and corporations. (3) Represents distributions declared per period. A distribution of $0.1515 per Unit was declared on August 9, 1996, in connection with the DRC Merger, designated to align the time periods of distributions of the merged companies. The current annual distribution rate is $2.02 per Unit. (4) See Note 11 for discussion regarding the accounting for Limited Partners' Interest. (5) Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations for a definition of Funds from Operations. 34 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the Selected Financial Data, and all of the financial statements and notes thereto included elsewhere herein. Certain statements made in this report may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Operating Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward - -looking statements. Such factors include, among others, the following: general economic and business conditions, which will, among other things, affect demand for retail space or retail goods, availability and creditworthiness of prospective tenants, lease rents and the terms and availability of financing; adverse changes in the real estate markets including, among other things, competition with other companies and technology; risks of real estate development and acquisition; governmental actions and initiatives; and environmental/safety requirements. Overview The financial results reported reflect the merger completed on August 9, 1996 (the "DRC Merger") of Simon Property Group, Inc. and DeBartolo Realty Corporation ("DRC"), in accordance with the purchase method of accounting, valued at $3.0 billion. The DRC Merger resulted in the addition of 49 regional malls, 11 community centers and 1 mixed-use property. These properties included 47,052,267 square feet of retail space gross leasable area ("GLA") and 558,636 of office GLA. Of these properties, 40 regional malls, 10 community centers and the mixed-use property are being accounted for using the consolidated method of accounting. The remaining properties are being accounted for using the equity method of accounting. On September 29, 1997, the Operating Partnership completed its cash tender offer for all of the outstanding shares of beneficial interests of The Retail Property Trust ("RPT"). RPT owned 98.8% of Shopping Center Associates ("SCA"), which owned or had interests in twelve regional malls and one community center, comprising approximately twelve million square feet of GLA in eight states. Following the completion of the tender offer, the SCA portfolio was restructured. The Operating Partnership exchanged its 50% interests in two SCA properties to a third party for similar interests in two other SCA properties, in which it had 50% interests, with the result that SCA now owns interests in a total of eleven properties. Effective November 30, 1997, the Operating Partnership also acquired the remaining 50% ownership interest in another of the SCA properties. In addition, an affiliate of the Operating Partnership acquired the remaining 1.2% interest in SCA. At the completion of these transactions, the Operating Partnership directly or indirectly now owns 100% of ten of the eleven SCA properties, and 50% of the remaining property. In addition, the Operating Partnership acquired ownership interests in or commenced operations of several other Properties throughout the comparative periods and, as a result, increased the number of Properties it accounts for using the consolidated method of accounting (the "Property Transactions"). The following is a listing of such transactions: On February 23, 1995, the Operating Partnership acquired an additional 50% interest in White Oaks Mall, increasing its ownership to 77%. On August 1, 1995, the Operating Partnership purchased the remaining 50% ownership in Crossroads Mall. On September 25, 1995, the Operating Partnership acquired the remaining 55% ownership in Knoxville Center. On April 11, 1996, the Operating Partnership acquired the remaining 50% economic ownership interest in Ross Park Mall. On July 31, 1996, the Operating Partnership opened the wholly-owned Cottonwood Mall in Albuquerque, New Mexico. On August 29, 1997, the Operating Partnership opened the 55%-owned, $89 million phase II expansion of The Forum Shops at Caesar's. (see "Liquidity and Capital Resources" for additional information regarding these transactions.) Results of Operations Year Ended December 31, 1997 vs. Year Ended December 31, 1996 Total revenue increased $306.5 million or 41.0% in 1997 as compared to 1996. This increase is primarily the result of the DRC Merger ($234.1 million), the RPT acquisition ($30.6 million) and the Property Transactions ($28.4 million). Excluding these transactions, total revenues increased $13.4 million, which includes a $15.4 million increase in minimum rent and a $7.1 million increase in tenant reimbursements, partially offset by a $7.5 million decrease in other income. The $15.4 million increase in minimum rents results from increased occupancy levels, the replacement of expiring tenant leases with renewal leases at higher minimum base rents, and a $4.4 million increase in rents from tenants operating under license agreements. The 35 $7.1 million increase in tenant reimbursements is partially offset by a net increase in recoverable expenses. The $7.5 million decrease in other income is primarily the result of decreases in lease settlement income ($3.0 million), interest income ($1.3 million) and gains from sales of peripheral properties ($1.7 million). Total operating expenses increased $160.9 million, or 38.7%, in 1997 as compared to 1996. This increase is primarily the result of the DRC Merger ($113.5 million), the RPT acquisition ($15.9 million), the Property Transactions ($17.3 million), and the increase in depreciation and amortization ($10.1 million), primarily due to an increase in depreciable real estate realized through renovation and expansion activities. Interest expense increased $85.6 million, or 42.4% in 1997 as compared to 1996. This increase is primarily as a result of the DRC Merger ($61.1 million), the RPT acquisition ($13.9 million) and the Property Transactions ($9.1 million). The $0.1 million gain from extraordinary items in 1997 is the net result of gains realized on the forgiveness of debt ($31.1 million) and the write-off of net unamortized debt premiums ($8.4 million), partially offset by the acquisition of the contingent interest feature on four loans ($21.0 million) and prepayment penalties and write-offs of mortgage costs associated with early extinguishments of debt ($18.4 million). The $3.5 million extraordinary loss in 1996 is the result of write-offs of mortgage costs associated with early extinguishments of debt. Income (loss) from unconsolidated entities increased from $9.5 million in 1996 to $19.2 million in 1997, resulting from an increase in the Operating Partnership's share of M.S. Management Associates Inc.'s (the "Management Company") income ($5.0 million) and an increase in its share of income from partnerships and joint ventures ($4.6 million). The increase in Management Company income is primarily the result of income realized through marketing initiatives ($2.0 million) and the Operating Partnership's share of the Management Company's gains on sales of peripheral property ($1.9 million). The increase in the Operating Partnership's share of income from partnerships and joint ventures is primarily the result of the DRC Merger ($4.9 million), the RPT acquisition ($3.2 million), and the nonconsolidated joint-venture Properties acquired or commencing operations during 1997 ($5.0 million), partially offset by the increase in the amortization of the excess of the Operating Partnership's investment over its share of the equity in the underlying net assets of unconsolidated joint- venture Properties ($8.8 million). Net income was $203.2 million in 1997, as compared to $131.1 million in 1996, reflecting an increase of $72.0 million, for the reasons discussed above, and was allocated to the Company based on the Company's preferred unit preference and ownership interest in the Operating Partnership during the period. Preferred unit requirement increased by $16.6 million to $29.2 million in 1997 as a result of the Company's issuance of $200 million of 8 3/4% Series B cumulative redeemable preferred stock on September 27, 1996 and $150 million of 7.89% Series C Cumulative Step-Up Premium RateSM Preferred Stock on July 9, 1997. The net proceeds from the preferred stock issuances were contributed to the Operating Partnership in exchange for preferred units of partnership interest ("Preferred Units") with terms substantially identical to the preferred stock issued by the Company. This increase was partially offset by a reduction in preferred distributions ($2.0 million) resulting from the conversion of the $100 million 8 1/8% Series A Preferred Units into 3,809,523 units of partnership interest of the Operating Partnership ("Units") on November 11, 1997. Year Ended December 31, 1996 vs. Year Ended December 31, 1995 Total revenue increased $194.0 million, or 35.0%, in 1996 as compared to 1995. Of this increase, $155.7 million and $37.7 million are attributable to the DRC Merger and the Property Transactions, respectively. The remaining increase includes net increases in minimum rent, lease settlements and miscellaneous income of $9.3 million, $1.8 million and $2.3 million, respectively, partially offset by a net decrease in tenant reimbursements of $11.8 million. The minimum rent increase results from increases of $1.50 and $0.36 in average base minimum rents per square foot for regional mall stores and community shopping centers, respectively. Regional mall store leases executed during 1996 were $4.86 per square foot greater than leases expiring; community shopping center leases were $2.02 greater. Total operating expenses increased $113.7 million, or 37.6%, in 1996 as compared to 1995. Of this increase, $85.1 million and $18.6 million are the result of the DRC Merger (including $7.2 million of integration costs) and the Property Transactions, respectively. The remaining $10.0 million increase is primarily the result of a net increase in depreciation and amortization ($8.9 million). Interest expense increased $52.0 million, or 34.6%, to $202.2 million for 1996 as compared to $150.2 million for 1995. Of this increase, $41.1 million and $15.4 million are attributable to the DRC Merger and the Property 36 Transactions, respectively. In addition, the Operating Partnership realized incremental interest expenses in 1996 related to borrowings used to acquire additional ownership interests in and/or make equity investments in unconsolidated joint venture properties of $4.9 million. Offsetting these increases were interest savings realized as a result of restructuring the Operating Partnership's credit facilities, from the proceeds of the Company's 6,000,000 share common stock offering on April 19, 1995, and from the proceeds of the Series A preferred stock offering and a portion ($34.4 million) of the proceeds of the Series B preferred stock offering, which were used to pay down debt (described under "Financing and Debt"). Income (loss) from unconsolidated entities increased from $1.4 million in 1995 to $9.5 million in 1996, primarily resulting from an increase in the Operating Partnership's share of the Management Company income ($9.2 million), partially offset by a decrease in its share of income from partnerships and joint ventures ($1.1 million). The increase in Management Company income is primarily the result of the DRC Merger ($4.4 million) and the Management Company's losses in 1995 related to the settlement of a mortgage receivable ($3.9 million) and the liquidation of a partnership investment ($1.0 million). Extraordinary items of $3.5 million in 1996 and $3.3 million in 1995 result from write-offs of mortgage costs associated with early extinguishments of debt. Net income increased from $98.2 million in 1995 to $131.1 million in 1996, an increase of $32.9 million, for the reasons discussed above, and was allocated to the Company based on the Company's ownership interest during the period. Preferred Unit requirement increased by $11.2 million in 1996 as a result of the Company's issuance of $100 million of 8 1/8% Series A convertible preferred stock on October 27, 1995, and $200 million of 8 3/4% Series B cumulative redeemable preferred stock on September 27, 1996, the proceeds of which were contributed to the Operating Partnership in exchange for Preferred Units with terms substantially identical to the preferred stock issued by the Company. Liquidity and Capital Resources As of December 31, 1997, the Operating Partnership's balance of unrestricted cash and cash equivalents was $109.7 million. In addition to its cash balance, the Operating Partnership has a $1.25 billion unsecured revolving credit facility (the "Credit Facility") which had $284.3 million available after outstanding borrowings and letters of credit at December 31, 1997. The Operating Partnership and the Company also have access to public equity and debt markets. The Operating Partnership has a debt shelf registration statement currently effective, under which $850 million in debt securities may be issued. The Company has an equity shelf registration statement currently effective, under which $950 million in equity securities may be issued. Management anticipates that cash generated from operating performance will provide the necessary funds on a short- and long-term basis for its operating expenses, interest expense on outstanding indebtedness, recurring capital expenditures, and distributions to Unitholders. Sources of capital for nonrecurring capital expenditures, such as major building renovations and expansions, as well as for scheduled principal payments, including balloon payments, on outstanding indebtedness are expected to be obtained from: (i) excess cash generated from operating performance; (ii) working capital reserves; (iii) additional debt financing; and (iv) additional equity raised in the public markets. Sensitivity Analysis. The Operating Partnership's future earnings, cash flows and fair values relating to financial instruments is primarily dependent upon prevalent market rates of interest, such as LIBOR. Based upon consolidated indebtedness and interest rates at December 31, 1997, a 1% increase in the market rates of interest would decrease future earnings and cash flows by approximately $14 million, and would decrease the fair value of debt by approximately $505 million. A 1% decrease in the market rates of interest would increase future earnings and cash flows by approximately $14 million, and would increase the fair value of debt by approximately $683 million. Financing and Debt At December 31, 1997, the Operating Partnership had consolidated debt of $5,078.0 million, of which $3,467.6 million is fixed-rate debt bearing interest at a weighted average rate of 7.4% and $1,610.4 million is variable-rate debt bearing interest at a weighted average rate of 6.4%. As of December 31, 1997, the Operating Partnership had interest rate protection agreements related to $430.4 million of consolidated variable-rate debt. In addition, interest rate protection agreements which effectively fix the interest rates on an additional $148 million of consolidated variable-rate debt were obtained in January of 1998. The Operating Partnership's hedging activity as a result of these interest rate protection agreements resulted in net interest savings of $1.6 million for the year ended December 31, 1997. This did not materially impact the Operating Partnership's weighted average borrowing rates. 37 Scheduled principal payments of consolidated mortgage indebtedness over the next five years is $2,638 million, with $2,442 million thereafter. The Operating Partnership's ratio of consolidated debt-to-market capitalization was 46.0% and 41.5% at December 31, 1997 and 1996, respectively. The following summarizes significant financing and refinancing transactions completed in 1997: Secured Indebtedness. On January 31, 1997, the Operating Partnership completed a refinancing transaction involving debt on four wholly-owned Properties. The transaction consisted of the payoff of one loan totaling $43.4 million, a restatement of the interest rate on the three remaining loans, the acquisition of the contingent interest feature on all four loans for $21.0 million, and $3.9 million of principal reductions on two additional loans. This transaction, which was funded using the Credit Facility, resulted in an extraordinary loss of $23.2 million, including the write-off of deferred mortgage costs of $2.2 million. On May 15, 1997, the Operating Partnership refinanced approximately $140 million in existing debt on The Forum Shops at Caesar's. The new debt consists of three classes of notes totaling $180 million, with $90 million bearing interest at 7.125% and the other $90 million bearing interest at LIBOR plus 0.30%, all of which will mature on May 15, 2004. Approximately $40 million of the borrowings were placed in escrow to pay for construction costs required in connection with the development of the expansion of this project, which opened on August 29, 1997. As of December 31, 1997, $8.6 million remains in escrow. On June 5, 1997, the Operating Partnership closed a $115 million construction loan for The Shops at Sunset Place. The loan initially bears interest at LIBOR plus 1.25% and matures on June 30, 2000, with two one-year extensions available. On September 2, 1997, the Operating Partnership completed a refinancing of $453 million of commercial mortgage pass through certificates and a $48 million mortgage loan, resulting in releases of mortgages encumbering 18 of the Properties. The Operating Partnership funded this refinancing with the proceeds of a $225 million secured loan and borrowings of $294 million under the Credit Facility, which were later reduced with the proceeds from the sale of $180 million of notes issued on September 10, 1997, as described below. Subsequently, on December 22, 1997, the Operating Partnership retired the $225 million secured loan with the net proceeds from a $225 million series of multiclass mortgage pass-through certificates. This new facility includes six classes of certificates cross- collaterallized by the same seven Properties as the original $225 million secured loan and matures on December 19, 2004. Five of the six classes covering $175 million bear fixed interest rates ranging from 6.716% to 8.233%, with the remaining $50 million class bearing interest at LIBOR plus 0.365%. On September 4, 1997, the Operating Partnership transferred ownership of one Property and paid $6.6 million to its lender, fully satisfying the property's mortgage note payable of $42 million. This property no longer met the Operating Partnership's criteria for its ongoing strategic plan. The Operating Partnership recognized a gain on this transaction of approximately $31.1 million in the third quarter of 1997. Credit Facility. During 1997, the Operating Partnership obtained several improvements to its Credit Facility. The Credit Facility agreement was amended to increase the borrowing limit to $1.25 billion and reduce the interest rate from LIBOR plus 0.90% to LIBOR plus 0.65%. In addition, the Credit Facility's competitive bid feature, which has further reduced interest costs, was increased from $150 million to $625 million. Medium Term Notes. On May 15, 1997, the Operating Partnership established a Medium-Term Note ("MTN") program. On June 24, 1997, the Operating Partnership completed the sale of $100 million of notes under the MTN program. The notes sold bear interest at 7.125% and have a stated maturity of June 24, 2005. The net proceeds of this sale were used primarily to pay down the Credit Facility. On September 10, 1997, the Operating Partnership issued an additional $180 million principal amount of notes under its MTN program, which mature on September 20, 2007 and bear interest at 7.125% per annum. The Operating Partnership used the net proceeds of this offering to pay down the borrowings made under the Credit Facility. Equity Financings. On July 9, 1997 the Company sold 3,000,000 shares of 7.89% Series C Cumulative Step-Up Premium RateSM Preferred Stock (the "Series C Preferred Shares") in a public offering at $50.00 per share. Beginning October 1, 2012, the rate increases to 9.89% per annum. The Company intends to redeem the Series C Preferred Shares prior to October 1, 2012. The Company contributed the net proceeds of this offering of approximately $146 million to the Operating Partnership in exchange for preferred units with terms identical to the Series C Preferred Shares. The Operating Partnership used the net proceeds for the purchase of additional ownership interest in West Town Mall, to pay down the Credit Facility and for general working capital purposes. 38 During 1997, the Company and the Operating Partnership issued 8,051,924 additional shares of common stock and 876,712 additional Units, respectively, in public and private offerings, at prices ranging from $30.09 to $33.25 per share/Unit, and generating net proceeds of approximately $286 million. The proceeds of such offerings were used primarily to acquire additional ownership interests in Properties and to repay existing indebtedness. Unsecured Notes. On July 17, 1997, the Operating Partnership completed a $250 million public offering, of two tranches of its seven-year and twelve-year non-convertible senior unsecured debt securities. The first tranche was for $100 million at 6 3/4% with a maturity of July 15, 2004. The second tranche was for $150 million at 7% with a maturity of July 15, 2009. The notes pay interest semi-annually, and contain covenants relating to minimum leverage, EBITDA and unencumbered EBITDA ratios. On October 15, 1997, the SEC declared effective the Operating Partnership's registration statement, which provides for the offering, from time to time, of up to $1 billion aggregate public offering price of nonconvertible investment grade unsecured debt securities of the Operating Partnership. The net proceeds of such offerings may be used to fund property acquisition or development activity, retire existing debt or for any other purpose deemed appropriate by the Operating Partnership. Subsequently, on October 22, 1997, the Operating Partnership completed the sale of $150 million of its eight-year non-convertible senior unsecured debt securities under this new $1 billion debt shelf registration. The notes bear interest at 6 7/8%, and mature on October 27, 2005. The notes pay interest semi-annually, and contain covenants relating to minimum leverage, EBITDA and unencumbered EBITDA ratios. The Operating Partnership used $114.8 million of the net proceeds of approximately $147 million, along with an escrow refund of approximately $4 million to retire existing mortgages on Miller Hill Mall, Muncie Mall, and Towne West Square, with the remaining proceeds going to reduce the amount outstanding on the Credit Facility. Other. During 1997, in connection with the RPT acquisition, the Operating Partnership assumed consolidated mortgages of $123.5 million, unsecured debt totaling $275.0 million and a pro-rata share of joint venture mortgage indebtedness of $76.8 million. Acquisitions and Investment Management continues to actively review and evaluate a number of individual property and portfolio acquisition opportunities. Management believes that funds on hand, amounts available under the Credit Facility, together with the ability to issue shares of common stock and/or Units, provide the means to finance certain acquisitions. No assurance can be given that the Operating Partnership will not be required to, or will not elect to, even if not required to, obtain funds from outside sources, including through the sale of debt or equity securities, to finance significant acquisitions, if any. On June 16, 1997, the Operating Partnership purchased 1,408,450 shares of common stock of Chelsea GCA Realty, Inc. ("Chelsea"), a publicly traded REIT, for approximately $50 million using borrowings from the Credit Facility. The shares purchased represent approximately 9.2% of Chelsea's outstanding common stock, and had a market value of $53.8 million at December 31, 1997. In connection with this transaction the Operating Partnership and Chelsea have formed a strategic alliance to develop and acquire manufacturer's outlet shopping centers with 500,000 square feet or more of GLA in the United States. On July 10, 1997, the Operating Partnership acquired an additional 48% interest in West Town Mall in Knoxville, Tennessee for $67.4 million and 35,598 Units valued at approximately $1.1 million. This transaction increased the Operating Partnership's ownership of West Town Mall to 50%. On August 8, 1997, a subsidiary of the Operating Partnership acquired a 50% interest in a trust that owns Dadeland Mall, a 1.4 million square-foot super-regional mall in Miami, Florida for approximately $128 million. A portion of the purchase price was paid in the form of 658,707 shares of the Company's common stock, valued at approximately $20 million. The remaining portion of the purchase price was financed using borrowings from the Credit Facility. As described previously, during 1997 the Operating Partnership completed the purchase of RPT and its subsidiary SCA, which owned or had interests in twelve regional malls and one community center, comprising approximately twelve million square feet of GLA in eight states. The Operating Partnership exchanged its 50% interests in two SCA properties to a third party for similar interests in two other SCA properties, in which it had 50% interests, with the result that SCA now owns interests in a total of eleven properties. Effective November 30, 1997, the Operating Partnership also acquired the remaining 50% ownership interest in another of the SCA properties. The Operating Partnership now owns 100% of ten of the eleven SCA 39 properties acquired, and a noncontrolling 50% interest in the remaining property. The total cost for the acquisition of RPT and related transactions is estimated at $1.3 billion, including shares of the Company's common stock valued at approximately $50 million, Units valued at approximately $25.3 million, the assumption of $398.5 million of consolidated indebtedness and the Operating Partnership's $76.8 million pro rata share of joint venture indebtedness. On December 29, 1997, the Operating Partnership formed a joint venture partnership with The Macerich Company ("Macerich") to acquire a portfolio of twelve regional malls comprising approximately 10.7 million square feet of GLA. This transaction closed on February 27, 1998 at a total purchase price of $974.5 million, including the assumption of $485.0 million of indebtedness. The Operating Partnership and Macerich were each responsible for one half of the purchase price, including indebtedness assumed and each assumed leasing and management responsibilities for six of the regional malls. The Operating Partnership funded its share of the cash due at closing with a new six-month $242.0 million unsecured loan which bears interest at 6.42%. The Operating Partnership owns 50% of this joint venture. On December 30, 1997, the Operating Partnership acquired The Fashion Mall at Keystone at the Crossing, a 651,671 square-foot regional mall, along with an adjacent 29,140 square-foot community center, in Indianapolis, Indiana for $124.5 million, including the assumption of a $64.8 million mortgage. These Properties are wholly-owned by the Operating Partnership. On December 31, 1997, the Operating Partnership acquired the remaining 30% ownership interest in Virginia Center Commons as well as the management contract on that Property for a total of $2.3 million. The Operating Partnership now owns 100% of this Property. On January 26, 1998, the Operating Partnership acquired Cordova Mall in Pensacola, Florida for $87.3 million, which included the assumption of a $28.9 million mortgage and 1,713,016 Units, valued at approximately $55.5 million. This 874,000 square-foot regional mall is wholly-owned by the Operating Partnership. See Note 3 to the consolidated financial statements for 1996 and 1995 acquisition activity. Development Activity Development activities are an ongoing part of the Operating Partnership's business. The Operating Partnership opened one new regional mall, two value-oriented super- regional malls and one new community shopping center during 1997. On September 5, 1997, the Operating Partnership opened The Source, a 730,000 square-foot regional mall in Westbury (Long Island), New York. On October 31, 1997 the Operating Partnership opened Grapevine Mills, a 1.2 million square feet value-oriented super-regional mall in Grapevine (Dallas/Fort Worth), Texas, and on November 20, 1997, the Operating Partnership opened Arizona Mills, a 1.2 million square-foot value-oriented super-regional mall in Tempe, Arizona. In March 1997, the Operating Partnership opened Indian River Commons, a 260,000 square-foot community shopping center in Vero Beach, Florida, which is immediately adjacent to an existing regional mall Property. The Operating Partnership has joint venture partners on each of these Properties and accounts for them using the equity method of accounting. Construction also continues on the following projects: * The Shops at Sunset Place, a destination-oriented retail and entertainment project containing approximately 510,000 square feet of GLA is scheduled to open in October of 1998 in South Miami, Florida. The Operating Partnership owns 75% of this $149 million project. Construction financing of $115 million closed on this property in June 1997. The loan initially bears interest at LIBOR plus 125 basis points and matures on June 30, 2000. * Muncie Plaza, a 196,000 square-foot community center project, is scheduled to open in April of 1998 in Muncie, Indiana, adjacent to Muncie Mall. This approximately $14 million project is wholly-owned by the Operating Partnership. * Lakeline Plaza, a 380,000 square-foot community center project, is scheduled to open in two phases in May and November of 1998 in Austin, Texas, adjacent to Lakeline Mall. On January 30, 1998, the Operating Partnership increased its ownership interest in this approximately $34 million project from 50% to 65%. 40 In addition, the Operating Partnership is in the preconstruction development phase on a new value-oriented super-regional mall, a factory outlet center and a new community center project. Concord Mills, an approximately $200 million development, is scheduled to open in 1999. This 1,400,000 square-foot value-oriented super-regional mall development project is 50%-owned by the Operating Partnership. Houston Premium Outlets is a 462,000 square- foot factory outlet project in Houston, Texas. This approximately $89 million project, of which the Operating Partnership has a 50% ownership interest in, is scheduled to begin construction in 1998 and open in 1999. The Shops at North East Mall, an approximately $55 million development, which is immediately adjacent to North East Mall, an existing regional mall in the Company's portfolio, is scheduled to open in Hurst, Texas, in 1999. This 391,000 square-foot development project is wholly-owned by the Operating Partnership. Strategic Expansions and Renovations A key objective of the Operating Partnership is to increase the profitability and market share of the Properties through the completion of strategic renovations and expansions. In 1997, the Operating Partnership completed construction and opened fourteen major expansion and/or renovation projects: Alton Square in Alton, Illinois; Aventura Mall in Miami, Florida; Chautauqua Mall in Jamestown, New York; Columbia Center in Kennewick, Washington; The Forum Shops at Caesar's in Las Vegas, Nevada; Knoxville Center in Knoxville, Tennessee; La Plaza in McAllen, Texas; Muncie Mall in Muncie, Indiana; Northfield Square in Bradley, Illinois; Northgate Mall in Seattle, Washington; Orange Park Mall in Jacksonville, Florida; Paddock Mall in Ocala, Florida; Richmond Square in Richmond, Indiana; and Southern Park Mall in Youngstown, Ohio. The Operating Partnership currently has four major expansion projects under construction, and is in the preconstruction development stage with two additional major expansion projects. The aggregate cost of the projects is approximately $208 million. * A 255,000 square-foot small shop expansion and the addition of a 24-screen AMC Theatre complex to Aventura Mall in Miami, Florida, are scheduled to open in March 1998. Lord & Taylor, Macy's, JCPenney and Sears are also expanding at this Property. In addition, the Operating Partnership added a Bloomingdales to this project in November of 1997. The Operating Partnership has a 33% ownership interest in this project. * A 180,000 square-foot small shop expansion of The Florida Mall in Orlando, Florida, as well as the addition of Burdines, is scheduled for completion in the winter of 1999. The Operating Partnership has a 50% ownership interest in this project. Dillard's, Gayfers, JCPenney and Sears are also expanding. * A 68,000 square-foot small shop expansion of Prien Lake Mall in Lake Charles, Louisiana, as well as the addition of Dillard's and Sears, is scheduled for completion in the winter of 1998. The Operating Partnership owns 100% of Prien Lake Mall. The Operating Partnership has a number of smaller renovation and/or expansion projects currently under construction aggregating approximately $105 million, of which the Operating Partnership's share is approximately $100 million. In addition, preconstruction development continues on a number of project expansions, renovations and anchor additions at additional properties. The Operating Partnership expects to commence construction on many of these projects in the next 12 to 24 months. It is anticipated that these projects will be financed principally with access to debt and equity markets, existing credit facilities and cash flow from operations. Capital Expenditures Capital expenditures, excluding acquisitions, were $330.9 million, $211.4 million and $102.9 million for the periods ended December 31, 1997, 1996 and 1995, respectively. 1997 1996 1995 ---- ---- ---- New Developments $ 79.9 $ 80.1 $ 29.7 Renovations and Expansions 196.6 86.3 38.9 Tenant Allowances--Retail 36.7 24.0 17.2 Tenant Allowances--Offices 1.2 6.1 4.3 Capital Expenditures Recoverable from Tenants 12.9 11.4 8.0 Other 3.6 3.5 4.8 ------- ------- ------- Total $ 330.9 $211.4 $102.9 ======== ======= ======= 41 Distributions The Operating Partnership declared distributions on its Units in 1997 aggregating $2.01 per Unit. On January 23, 1998, the Operating Partnership declared a distribution of $0.5050 per Unit payable on February 20, 1998, to Unitholders of record on February 6, 1998. The current annual distribution rate is $2.02 per Unit. For federal income tax purposes, 35% of the 1997 Unit distributions and 64% of the 1996 Unit distributions represented a return of capital. Future distributions will be determined based on actual results of operations and cash available for distribution. Investing and Financing Activities Cash used in investing activities for the year ended December 31, 1997 of $1,243.8 million is primarily the result of acquisitions of $980.4 million, $305.2 million of capital expenditures, advances to the Management Company of $18.4 million and other investing activities of $55.4 million, including $50.0 million for the purchase of Chelsea stock, partially offset by net distributions from unconsolidated entities of $97.7 million and cash received from the acquisition of RPT of $19.7 million. Cash paid for acquisitions includes $745.5 million for the RPT acquisition and related transactions, $108.0 million for Dadeland Mall, $66.3 million for West Town Mall and $60.6 million for the acquisition of The Fashion Mall at Keystone at the Crossing and Keystone Shoppes. Capital expenditures includes development costs of $62.6 million, including $31.0 million at The Shops at Sunset Place, $11.3 million at Muncie Plaza, $7.0 million at Cottonwood Mall and $11.2 million for the acquisition of the land ($9.2 million) and other development costs ($2.0 million) at The Shops at North East Mall. Also included in capital expenditures is renovation and expansion costs of approximately $191.6 million, including $34.7 million, $15.6 million, $15.1 million, $12.2 million, and $10.6 million for the phase II expansion of Forum Shops at Caesar's, Miami International Mall, Northgate Mall, Charles Towne Square and Knoxville Center, respectively, and tenant costs and other operational capital expenditures of approximately $51.0 million. Net distributions from unconsolidated entities is primarily due to reimbursements of $70.1 million and $38.8 million from Dadeland Mall and West Town Mall, respectively, as a result of mortgages obtained on those Properties during 1997. Cash received from financing activities for the year ended December 31, 1997 of $918.3 million includes contributions from the Company of the net proceeds from the sales its common stock and Series C preferred stock of $344.4 million and net borrowings of $945.5 million, partially offset by partnership distributions of $350.4 million and $21.0 million for the retirement of a contingent interest feature on four mortgage loans. Net borrowings were used primarily to fund the acquisition of RPT and the related transactions ($757.0 million), other acquisitions ($180.0 million) and development and investment activity. 42 Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") Management believes that there are several important factors that contribute to the ability of the Operating Partnership to increase rent and improve profitability of its shopping centers, including aggregate tenant sales volume, sales per square foot, occupancy levels and tenant costs. Each of these factors has a significant effect on EBITDA. Management believes that EBITDA is an effective measure of shopping center operating performance because: (i) it is industry practice to evaluate real estate properties based on operating income before interest, taxes, depreciation and amortization, which is generally equivalent to EBITDA; and (ii) EBITDA is unaffected by the debt and equity structure of the property owner. 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 the Operating Partnership's operating performance; (iii) is not indicative of cash flows from operating, investing and financing activities; and (iv) is not an alternative to cash flows as a measure of the Operating Partnership's liquidity. Total EBITDA for the Properties increased from $346.7 million in 1993 to $940.0 million in 1997, representing a compound annual growth rate of 28.3%. Of this growth, $336.8 million, or 56.8%, is a result of the DRC Merger and $34.5 million or 5.8% is a result of the RPT acquisition. The remaining growth in total EBITDA reflects the addition of GLA to the Portfolio Properties through property acquisitions, developments and expansions, increased rental rates, increased tenant sales, improved occupancy levels and effective control of operating costs. During this period, the operating profit margin increased from 58.6% to 64.4%. This improvement is also primarily attributable to aggressive leasing of new and existing space and effective control of operating costs. The following summarizes total EBITDA for the Portfolio Properties and the operating profit margin of such properties, which is equal to total EBITDA expressed as a percentage of total revenue: For the Year Ended December 31, 1997 1996 1995 1994 1993 -------- --------- -------- -------- -------- (in thousands) EBITDA of consolidated Properties $677,930 $467,292 $343,875 $290,243 $244,397 EBITDA of unconsolidated Properties 262,098 148,030 93,673 96,592 102,282 -------- --------- -------- -------- -------- Total EBITDA of Portfolio Properties (1) $940,028 $615,322 $437,548 $386,835 $346,679 ======== ======== ======== ======== ======== EBITDA after minority interest (2) $746,842 $497,215 $357,158 $307,372 $256,169 ======== ======== ======== ======== ======== Increase in total EBITDA from prior period 52.8% 40.6% 13.1% 11.6% 9.5% Increase in EBITDA after minority interest from prior period 50.2% 39.2% 16.2% 20.0% 12.4% Operating profit margin of the Portfolio Properties 64.4% 62.5% (3) 63.1% 61.9% 58.6% (1) On a pro forma basis, assuming the DRC Merger and the RPT acquisition and related transactions had occurred on January 1, 1996, EBITDA would be $1,019 million and $911 million in 1997 and 1996, respectively, representing an 11.8% growth. (2) EBITDA after minority interest represents earnings before interest, taxes, depreciation and amortization for all Properties after distribution to the third-party joint ventures' partners. (3) The 1996 operating profit margin, excluding the $7.2 million merger integration costs, is 63.2%. 43 Funds from Operations ("FFO") FFO, as defined by NAREIT, means the consolidated net income of the Operating Partnership and its subsidiaries without giving effect to real estate related 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 the Operating Partnership's ownership interest, of funds from operations 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. FFO: (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 the Operating Partnership's 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 the Operating Partnership's liquidity. In March 1995, NAREIT modified its definition of FFO. The modified definition provides that amortization of deferred financing costs and depreciation of nonrental real estate assets are no longer to be added back to net income in arriving at FFO. This modification was adopted by the Operating Partnership beginning in 1996. Additionally the FFO for prior periods has been restated to reflect the modification in order to make the amounts comparative. Under the previous definition, FFO for the year ended December 31, 1995 was $208.3 million. The following summarizes FFO of the Operating Partnership and reconciles income before extraordinary items to FFO for the periods presented: For the Year Ended December 31, 1997 1996 1995 ------- ------- ------- (in thousands) FFO of the Operating Partnership $415,128 $281,495 $197,909 ======== ======== ======== Increase in FFO from prior period 47.5% 42.2% 18.0% ======== ======== ======== Reconciliation: Income before extraordinary items $203,133 $134,663 $101,505 Plus: Depreciation and amortization from consolidated properties 200,084 135,226 92,274 The Operating Partnership's share of depreciation and amortization and extraordinary items from unconsolidated affiliates 46,760 20,159 6,466 Merger integration costs -- 7,236 -- The Operating Partnership's share of (gains) or losses on sales of real estate (20) (88) 2,054 Less: Minority interest portion of depreciation, and amortization and extraordinary items (5,581) (3,007) (2,900) Preferred Unit requirement (29,248) (12,694) (1,490) -------- -------- -------- FFO of the Operating Partnership $415,128 $281,495 $ 197,909 ======== ======== ======== Portfolio Data Operating statistics give effect to the DRC Merger and are based upon the business and properties of the Operating Partnership and DRC on a combined basis for all periods presented. The purpose of this presentation is to provide a more comparable set of statistics on the portfolio as a whole. The following statistics exclude Charles Towne Square, Richmond Town Square and Mission Viejo Mall, which are all undergoing extensive redevelopment. The value-oriented super-regional mall category consists of Arizona Mills, Grapevine Mills and Ontario Mills. Aggregate Tenant Sales Volume and Sales per Square Foot. From 1994 to 1997, total reported retail sales at mall and freestanding GLA owned by the Operating Partnership ("Owned GLA") in the regional malls and value-oriented super-regional malls, and all reporting tenants at community shopping centers increased 25.3% from $7,611 million to $9,539 million, a compound annual growth rate of 7.8%. Retail sales at Owned GLA affect revenue and profitability levels because they 44 determine the amount of minimum rent that can be charged, the percentage rent realized, and the recoverable expenses (common area maintenance, real estate taxes, etc.) the tenants can afford to pay. The following illustrates the total reported sales of tenants at Owned GLA: Annual Total Tenant Percentage Year Ended December 31, Sales (in millions) Increase 1997 $ 9,539 20.4% 1996 7,921 3.6 1995 7,649 0.5 1994 7,611 4.7 Regional mall sales per square foot increased 8.8% in 1997 to $315 as compared to $290 in 1996. In addition, sales per square foot of reporting tenants operating for at least two consecutive years ("Comparable Sales") increased from $298 to $318, or 6.7%, from 1996 to 1997. The Operating Partnership believes its strong sales growth in 1997 is the result of its aggressive retenanting efforts and the redevelopment of many of the Properties. Sales per square foot at the community shopping centers decreased in 1997 to $183 as compared to $187 in 1996. Sales statistics for value-oriented super-regional malls are not provided as this category is comprised of new malls with insufficient history to provide meaningful comparisons. Occupancy Levels. Occupancy levels for regional malls increased from 84.7% at December 31, 1996, to 87.3% at December 31, 1997. Occupancy levels for value-oriented super-regional malls was 93.8% at December 31, 1997. Occupancy levels for community shopping centers decreased slightly, from 91.6% at December 31, 1996, to 91.3% at December 31, 1997. Owned GLA has increased 10.7 million square feet from December 31, 1996, to December 31, 1997, primarily as a result of the RPT acquisition, the acquisitions of Dadeland Mall, The Fashion Center at Keystone at the Crossing, and Keystone Shoppes and the 1997 Property openings. Occupancy Levels Value-Oriented Community Regional Regional Shopping December 31, Malls Malls Centers 1997 87.3% 93.8% 91.3% 1996 84.7 N/A 91.6 1995 85.5 N/A 93.6 1994 85.6 N/A 93.9 Tenant Occupancy Costs. Tenant occupancy costs as a percentage of sales increased slightly from 11.4% in 1996 to 11.5% in 1997 in the regional mall portfolio, excluding the SCA Properties. A tenant's ability to pay rent is affected by the percentage of its sales represented by occupancy costs, which consist of rent and expense recoveries. As sales levels increase, if expenses subject to recovery are controlled, the tenant can pay higher rent. Management believes the Operating Partnership is one of the lowest-cost providers of retail space, which has permitted the rents in both regional malls and community shopping centers to increase without raising a tenant's total occupancy cost beyond its ability to pay. Management believes continuing efforts to increase sales while controlling property operating expenses will continue the trend of increasing rents at the Properties. Average Base Rents. Average base rents per square foot of mall and freestanding Owned GLA at regional malls increased 28.7%, from $18.37 in 1994 to $23.65 in 1997. Average base rents per square foot of Owned GLA at value-oriented super-regional malls was $16.20 in 1997. In community shopping centers, average base rents of Owned GLA increased 4.5%, from $7.12 in 1994 to $7.44 in 1997. 45 The following highlights this trend:
Average Base Rent per Square Foot Mall and Freestanding Stores at: Community % Value-Oriented % Shopping % Year Ended December 31, Regional Malls Change Regional Malls Change Centers Change 1997 $23.65 14.4% $16.20 N/A $7.44 (2.7%) 1996 20.68 7.8 N/A N/A 7.65 4.9 1995 19.18 4.4 N/A N/A 7.29 2.4 1994 18.37 3.8 N/A N/A 7.12 N/A
Inflation Inflation has remained relatively low during the past four years and has had a minimal impact on the operating performance of the Properties. Nonetheless, substantially all of the tenants' leases contain provisions designed to lessen the impact of inflation. Such provisions include clauses enabling the Operating Partnership to receive percentage rentals based on tenants' gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. In addition, many of the leases are for terms of less than ten years, which may enable the Operating Partnership 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. Substantially all of the leases, other than those for anchors, require the tenants to pay a proportionate share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing the Operating Partnership's exposure to increases in costs and operating expenses resulting from inflation. However, inflation may have a negative impact on some of the Operating Partnership's other operating items. Interest and general and administrative expenses may be adversely affected by inflation as these specified costs could increase at a rate higher than rents. Also, for tenant leases with stated rent increases, inflation may have a negative effect as the stated rent increases in these leases could be lower than the increase in inflation at any given time. Year 2000 Costs Management continues to assess the impact of the Year 2000 Issue on its reporting systems and operations. The Year 2000 Issue exists because many computer systems and applications abbreviate dates by eliminating the first two digits of the year, assuming that these two digits would always be "19". Unless corrected, this shortcut would cause problems when the century date occurs. On that date, some computer programs may misinterpret the date January 1, 2000 as January 1, 1900. This could cause systems to incorrectly process critical financial and operational information, or stop processing altogether. To help facilitate the Operating Partnership's continued growth, substantially all of the computer systems and applications in use in its home office in Indianapolis have been, or are in the process of being, upgraded and modified. The Operating Partnership is of the opinion that, in connection with those upgrades and modifications, it has addressed applicable Year 2000 Issues as they might affect the computer systems and applications located in its home office. The Operating Partnership continues to evaluate what effect, if any the Year 2000 Issue might have at its Portfolio Properties. The Operating Partnership anticipates that the process of reviewing this issue at the Portfolio Properties and the implementation of solutions to any Year 2000 Issue which it may discover will require the expenditure of sums which the Operating Partnership does not expect to be material. Management expects to have all systems appropriately modified before any significant processing malfunctions could occur and does not expect the Year 2000 Issue will materially impact the financial condition or operations of the Operating Partnership. Definitive Merger Agreement Effective February 18, 1998, the Company and Corporate Property Investors ("CPI") signed a definitive agreement to merge the two companies. The merger is expected to be completed in the third quarter of 1998 and is subject to approval by the shareholders of the Company as well as customary regulatory and other conditions. A majority of the CPI shareholders have already approved the transaction. Under the terms of the agreement, the shareholders of CPI will receive, in a reverse triangular merger, consideration valued at $179 for each share of CPI common stock held consisting of $90 in cash, $70 in the Company's common stock and $19 worth of 6.5% convertible preferred 46 stock. The common stock component of the consideration is based upon a fixed exchange ratio using the Company's February 18, 1998 closing price of $33 5/8 per share, and is subject to a 15% symmetrical collar based upon the price of the Company's common stock determined at closing. In the event the Company's common stock price at closing is outside the parameters of the collar, an adjustment will be made in the cash component of consideration. The total purchase price, including indebtedness which would be assumed, is estimated at $5.8 billion. Seasonality The shopping center industry is seasonal in nature, particularly in the fourth quarter during the holiday season, when tenant occupancy and retail sales are typically at their highest levels. In addition, shopping malls achieve most of their temporary tenant rents during the holiday season. As a result of the above, earnings are generally highest in the fourth quarter of each year. Item 7A. Qualitative and Quantitative Disclosure About Market Risk Reference is made to Item 7 of this Form 10-K under the caption "Liquidity and Capital Resources". Item 8. Financial Statements and Supplementary Data Reference is made to the Index to Financial Statements contained in Item 14. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 47 PART III Item 10. Directors and Executive Officers of the Registrant The general partners of the Operating Partnership are the Company and SD Property Group, Inc., a majority owned subsidiary of the Company. SD Property Group, Inc. is the managing general partner of the Operating Partnership. The directors and executive officers of the Company also hold the same offices with SD Property Group, Inc. The information required by this item is incorporated herein by reference to the Company's definitive Proxy Statement for its annual meeting of shareholders to be filed with the Commission pursuant to Regulation 14A and is included under the caption "EXECUTIVE OFFICERS OF THE REGISTRANT" in Part I hereof. Item 11. Executive Compensation The information required by this item is incorporated herein by reference to the Company's definitive Proxy Statement for its annual meeting of shareholders to be filed with the Commission pursuant to Regulation 14A. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by this item is incorporated herein by reference to the Company's definitive Proxy Statement for its annual meeting of shareholders to be filed with the Commission pursuant to Regulation 14A. Item 13. Certain Relationships and Related Transactions The information required by this item is incorporated herein by reference to the Company's definitive Proxy Statement for its annual meeting of shareholders to be filed with the Commission pursuant to Regulation 14A. 48 PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) (1) Financial Statements Page No. Report of Independent Public Accountants 50 Simon DeBartolo Group, L.P. Consolidated Balance Sheets 51 as of December 31, 1997 and 1996 Simon DeBartolo Group, L.P. Consolidated Statements of Operations for the years 52 ended December 31, 1997, 1996 and 1995 Simon DeBartolo Group, L.P. Consolidated Statements of Changes in Partners' 53 Equity for the years ended December 31, 1997, 1996 and 1995 Simon DeBartolo Group, L.P. Consolidated Statements of Cash Flows for the years 54 ended December 31, 1997, 1996 and 1995 Notes to Financial Statements 55 (2) Financial Statement Schedules Report of Independent Public Accountants 77 Schedule III _ Schedule of Real Estate and Accumulated Depreciation 78 Notes to Schedule III 82 (3) Exhibits The Exhibit Index attached hereto is hereby incorporated by reference to this Item. 83 (b) Reports on Form 8-K Two Forms 8-K were filed during the fourth quarter ended December 31, 1997. On October 14, 1997. Under Item 5 - Other Events, the Operating Partnership reported that it completed its cash tender offer to purchase all of the outstanding beneficial interests in The Retail Property Trust. In addition, under Item 7 - Financial Statements and Exhibits, the Operating Partnership included, as an exhibit, a press release which outlined additional information regarding the offer. On October 27, 1997. Under Item 5 - Other Events, the Operating Partnership reported the offering and sale of $150 million aggregate principal amount of its 6 7/8% Notes due October 27, 2005. In addition, under Item 7 - Financial Statements and Exhibits, the Operating Partnership made available, in the form of exhibits, certain documents relating to the issuance of these notes. 49 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Simon DeBartolo Group, Inc.: We have audited the accompanying consolidated balance sheets of SIMON DeBARTOLO GROUP, L.P. (a Delaware limited partnership) and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, partners' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Operating Partnership'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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Simon DeBartolo Group, L.P. and subsidiaries as of December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Indianapolis, Indiana February 17, 1998 50 Balance Sheets Simon DeBartolo Group, L.P. Consolidated (Dollars in thousands, except per unit amounts) December 31, December 31, 1997 1996 ------------- ------------- ASSETS: Investment properties, at cost $6,867,354 $5,301,021 Less _ accumulated depreciation 461,792 279,072 ------------- ------------- 6,405,562 5,021,949 Cash and cash equivalents 109,699 64,309 Restricted cash 8,553 6,110 Tenant receivables and accrued revenue, net 188,359 166,119 Notes and advances receivable from Management Company and affiliate 93,809 75,452 Investment in partnerships and joint ventures, at equity 612,140 394,409 Investment in Management Company and affiliates 3,192 0 Other investment 53,785 0 Deferred costs and other assets 164,413 138,492 Minority interest 23,155 29,070 ------------- ------------- Total assets $7,662,667 $5,895,910 ============= ============= LIABILITIES: Mortgages and other indebtedness $5,077,990 $3,681,984 Accounts payable and accrued expenses 245,121 170,203 Cash distributions and losses in partnerships and joint ventures, at equity 20,563 17,106 Investment in Management Company and affiliates 0 8,567 Other liabilities 67,694 72,876 ------------- ------------- Total liabilities 5,411,368 3,950,736 ------------- ------------- COMMITMENTS AND CONTINGENCIES (Note 14) PARTNERS' EQUITY: Preferred units, 11,000,000 and 12,000,000 units outstanding, respectively 339,061 292,912 General Partner, 109,643,001 and 96,880,415 units outstanding, respectively 1,231,031 1,017,333 Limited Partners, 61,850,762 and 60,974,050 units outstanding, respectively 694,437 640,283 Unamortized restricted stock award (13,230) (5,354) ------------- ------------- Total partners' equity 2,251,299 1,945,174 ------------- ------------- Total liabilities and partners' equity $7,662,667 $5,895,910 ============= =============
The accompanying notes are an integral part of these statements 51 Statements of Operations Simon DeBartolo Group, L.P. Consolidated (Dollars in thousands, except per unit amounts) For the Year Ended December 31, 1997 1996 1995 --------- --------- --------- REVENUE: Minimum rent $641,352 $438,089 $307,857 Overage rent 38,810 30,810 23,278 Tenant reimbursements 322,416 233,974 192,994 Other income 51,589 44,831 29,528 --------- --------- --------- Total revenue 1,054,167 747,704 553,657 --------- --------- --------- EXPENSES: Property operating 176,846 129,094 96,851 Depreciation and amortization 200,900 135,780 92,739 Real estate taxes 98,830 69,173 53,941 Repairs and maintenance 43,000 31,779 24,614 Advertising and promotion 32,891 24,756 18,888 Merger integration costs 0 7,236 0 Provision for credit losses 5,992 3,460 2,858 Other 18,678 14,914 12,630 --------- --------- --------- Total operating expenses 577,137 416,192 302,521 --------- --------- --------- OPERATING INCOME 477,030 331,512 251,136 INTEREST EXPENSE 287,823 202,182 150,224 --------- --------- --------- INCOME BEFORE MINORITY INTEREST 189,207 129,330 100,912 MINORITY INTEREST (5,270) (4,300) (2,681) GAINS ON SALES OF ASSETS, NET 20 88 1,871 --------- --------- --------- INCOME BEFORE UNCONSOLIDATED ENTITIES 183,957 125,118 100,102 INCOME FROM UNCONSOLIDATED ENTITIES 19,176 9,545 1,403 --------- --------- --------- INCOME BEFORE EXTRAORDINARY ITEMS 203,133 134,663 101,505 EXTRAORDINARY ITEMS 58 (3,521) (3,285) --------- --------- --------- NET INCOME 203,191 131,142 98,220 PREFERRED UNIT REQUIREMENT (29,248) (12,694) (1,490) --------- --------- --------- NET INCOME AVAILABLE TO UNITHOLDERS $173,943 $118,448 $96,730 ========= ========= ========= NET INCOME AVAILABLE TO UNITHOLDERS ATTRIBUTABLE TO: General Partner $107,989 $72,561 $57,781 Limited Partners 65,954 45,887 38,949 --------- --------- --------- $173,943 $118,448 $96,730 ========= ========= ========= BASIC EARNINGS PER UNIT: Income before extraordinary items $1.08 $1.02 $1.08 Extraordinary items 0.00 (0.03) (0.04) --------- --------- --------- Net income $1.08 $0.99 $1.04 ========= ========= ========= DILUTED EARNINGS PER UNIT: Income before extraordinary items $1.08 $1.01 $1.08 Extraordinary items 0.00 (0.03) (0.04) --------- --------- --------- Net income $1.08 $0.98 $1.04 ========= ========= ========= The accompanying notes are an integral part of these statements. 52 Statements of Partners' Equity Simon DeBartolo Group, L.P. Consolidated (Dollars in thousands)
Unamort- ized Limited Restricted Total Partners' Preferred General Limited Stock Partners' Equity Units Partner Partner Award Equity Interest --------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 1994 $0 ($807,613) $0 $0 ($807,613) $909,306 General Partner Contributions (9,470,977 units) 216,545 216,545 Preferred unit contributions, net of issuance costs (4,000,000 units) 99,923 99,923 Acquisition of Limited Partners' interest and other(333,462 and 334,522 units, respectively) 5,036 5,036 (301) Stock incentive program (143,311 units) 3,608 (3,605) 3 Amortization of stock incentive 918 918 Adjustment to allocate net equity of the Operating Partnership (94,035) (94,035) 94,035 Adjustment to reflect limited partners' equity interest at Redemption Value (Note 10) 42,848 42,848 (42,848) Net income 1,490 57,781 59,271 38,949 Distributions (1,490) (110,532) (112,022) (73,508) --------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 1995 99,923 (686,362) 0 (2,687) (589,126) 908,764 1996 Adjustment to reflect limited partners' interest at Historical Value (Note 10) 822,072 86,692 908,764 (908,764) --------- ---------- ---------- ---------- ---------- ---------- 99,923 135,710 86,692 (2,687) 319,638 0 General Partner Contributions (373,992 units) 10,518 10,518 Units issued in connection with Merger (37,877,965 and 23,219,012 units, respectively) 922,379 565,448 1,487,827 Other unit issuances (472,410 units) 275 275 Preferred units issued, net of issuance costs(8,000,000 units) 192,989 192,989 Stock incentive program (200,030 units) 4,751 (4,751) 0 Amortization of stock incentive 2,084 2,084 Adjustment to allocate net equity of the Operating Partnership (14,382) 14,382 0 Net income 12,694 72,561 45,887 131,142 Distributions (12,694) (114,142) (72,401) (199,237) Other (62) (62) --------- ---------- ---------- ---------- ---------- Balance at December 31, 1996 292,912 1,017,333 640,283 (5,354) 1,945,174 General Partner Contributions (6,311,273 units) 200,920 200,920 Units issued in connection with acquisitions (2,193,037 and 876,712, respectively) 70,000 26,408 96,408 Stock incentive program (448,753 units) 14,016 (13,262) 754 Amortization of stock incentive 5,386 5,386 Preferred units issued, net of issuance costs (3,000,000 units) 146,072 146,072 Conversion of 4,000,000 Series A Preferred units into 3,809,523 common units (99,923) 99,923 0 Adjustment to allocate net equity of the Operating Partnership (82,869) 82,869 0 Unrealized gain on marketable securities 2,420 1,365 3,785 Net income 29,248 107,989 65,954 203,191 Distributions (29,248) (198,701) (122,442) (350,391) --------- ---------- ---------- ---------- ---------- Balance at December 31, 1997 $339,061 $1,231,031 $694,437 ($13,230) $2,251,299 ========= ========== ========== ========== ========== The accompanying notes are an integral part of these statements.
53 Statements of Cash Flows Simon DeBartolo Group, L.P. Consolidated (Dollars in thousands) For the Year Ended December 31, 1997 1996 1995 ----------- ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 203,191 $ 131,142 $ 98,220 Adjustments to reconcile net income to net cash provided by operating activities_ Depreciation and amortization 208,539 143,582 101,262 Extraordinary items (58) 3,521 3,285 Gains on sales of assets, net (20) (88) (1,871) Straight-line rent (9,769) (3,502) (1,126) Minority interest 5,270 4,300 2,681 Equity in income of unconsolidated entities (19,176) (9,545) (1,403) Changes in assets and liabilities_ Tenant receivables and accrued revenue (23,284) (6,422) 5,502 Deferred costs and other assets (30,203) (12,756) (14,290) Accounts payable, accrued expenses and other liabilities 36,417 (13,768) 2,076 ------------ ------------ ---------- Net cash provided by operating activities 370,907 236,464 194,336 ------------ ------------ ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions (980,427) (56,069) (88,272) Capital expenditures (305,178) (195,833) (98,220) Cash from DRC Merger, acquisitions and consolidation of joint ventures, net 19,744 37,053 4,346 Change in restricted cash (2,443) 1,474 -- Proceeds from sale of assets 599 399 2,550 Investments in unconsolidated entities (47,204) (62,096) (22,180) Distributions from unconsolidated entities 144,862 36,786 6,214 Investments in and advances (to)/from Management Company (18,357) 38,544 (27,117) Other investing activities (55,400) -- -- ----------- ----------- ---------- Net cash used in investing activities (1,243,804) (199,742) (222,679) ------------ ------------ ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Partnership contributions 344,438 201,704 242,377 Partnership distributions (350,391) (257,403) (177,726) Minority interest distributions, net (219) (5,115) (3,680) Mortgage and other note proceeds, net of transaction costs 2,976,222 1,293,582 456,520 Mortgage and other note principal payments (2,030,763) (1,267,902) (531,566) Other refinancing transaction (21,000) -- -- ------------ ------------ ---------- Net cash provided by (used in) financing activities 918,287 (35,134) (14,075) ------------ ------------ ---------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 45,390 1,588 (42,418) CASH AND CASH EQUIVALENTS, beginning of period 64,309 62,721 105,139 ------------ ------------ ---------- CASH AND CASH EQUIVALENTS, end of period $ 109,699 $ 64,309 $ 62,721 ========== ========== ========== The accompanying notes are an integral part of these statements. 54 SIMON DeBARTOLO GROUP, L.P. NOTES TO FINANCIAL STATEMENTS (Dollars in thousands, except per share/unit amounts) 1. Organization Simon DeBartolo Group, L.P. ("the Operating Partnership") is a subsidiary partnership of Simon DeBartolo Group, Inc. ("the Company"). The Operating Partnership is engaged primarily in the ownership, operation, management, leasing, acquisition, expansion and development of real estate properties, primarily regional malls and community centers. The Company, formerly known as Simon Property Group, Inc., is a self-administered and self-managed real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). On August 9, 1996, the Company acquired the national shopping center business of DeBartolo Realty Corporation ("DRC"), The Edward J. DeBartolo Corporation and their affiliates as the result of the DRC Merger. (see Note 3) On December 31, 1997, Simon Property Group, L.P., a Delaware limited partnership ("SPG, LP"), merged (the "Partnership Merger") into the Operating Partnership. Prior to the Partnership Merger, the Operating Partnership and the Company held all of the partnership interests of SPG, LP, which held interests in certain of the Portfolio Properties (as defined below). As a result of the Partnership Merger, the Operating Partnership now directly or indirectly owns or holds interests in all of the Portfolio Properties and directly holds substantially all of the economic interest in the Management Company (described below). As of December 31, 1997, the Operating Partnership owns or holds an interest in 202 income-producing properties, which consist of 120 regional malls, 72 community shopping centers, three specialty retail centers, four mixed-use properties and three value-oriented super- regional malls in 33 states (the "Properties"). The Operating Partnership also owns interests in one specialty retail center and two community centers currently under construction and nine parcels of land held for future development (collectively, the "Development Properties", and together with the Properties, the "Portfolio Properties"). At December 31, 1997 and 1996, the Company's ownership interest in the Operating Partnership was 63.9% and 61.4%, respectively. The Operating Partnership also holds substantially all of the economic interest in M.S. Management Associates, Inc. (the "Management Company"). See Note 7 for a description of the activities of the Management Company. The Operating Partnership is subject to risks incidental to the ownership and operation of commercial real estate. These include, among others, the risks normally associated with changes in the general economic climate, trends in the retail industry, creditworthiness of tenants, competition for tenants, changes in tax laws, interest rate levels, the availability of financing, and potential liability under environmental and other laws. Like most retail properties, the Operating Partnership's regional malls and community shopping centers rely heavily upon anchor tenants. As of December 31, 1997, 248 of the approximately 715 anchor stores in the Properties were occupied by three retailers. An affiliate of one of these retailers is a limited partner in the Operating Partnership and the Chief Operating Officer of another of these retailers is a director of the Company. 2. Basis of Presentation The accompanying consolidated financial statements of the Operating Partnership include all accounts of all entities owned or controlled by the Operating Partnership. All significant intercompany amounts have been eliminated. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles, which requires management to make estimates and assumptions that affect the reported amounts of the Operating Partnership's assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported periods. Actual results could differ from these estimates. Properties which are wholly-owned ("Wholly-Owned Properties") or owned less than 100% and are controlled by the Operating Partnership ("Minority Interest Properties") are accounted for using the consolidated method of accounting. Control is demonstrated by the ability of the general partner to manage day-to-day operations, refinance debt and sell the assets of the partnership without the consent of the limited partner and the inability of the limited partner to replace the general partner. Investments in partnerships and joint ventures which represent noncontrolling 14.7% to 50.0% ownership interests ("Joint Venture Properties") and the investment in 55 the Management Company (see Note 7) are accounted for using the equity method of accounting. These investments are recorded initially at cost and subsequently adjusted for net equity in income (loss) and cash contributions and distributions. Net operating results of the Operating Partnership are allocated after preferred distributions (see Note 11), based on its partners' ownership interests. The Company's weighted average ownership interest in the Operating Partnership during 1997, 1996 and 1995 was 62.1%, 61.2% and 60.3%, respectively. At December 31, 1997 and 1996, the Company's ownership interest was 63.9% and 61.4%, respectively. The deficit minority interest balance in the accompanying Consolidated Balance Sheets represents outside partners' interests in the net equity of certain Properties. Deficit minority interests were recorded when a partnership agreement provided for the settlement of deficit capital accounts before distributing the proceeds from the sale of partnership assets and/or from the intent (legal or otherwise) and ability of the partner to fund additional capital contributions. 3. The DRC Merger and Real Estate Acquisitions and Developments The DRC Merger On August 9, 1996, the Company acquired the national shopping center business of DRC for an aggregate value of $3.0 billion (the "DRC Merger"). The acquired portfolio consisted of 49 regional malls, 11 community centers and 1 mixed-use Property. These Properties included 47,052,267 square feet of retail space gross leasable area ("GLA") and 558,636 of office GLA. Pursuant to the DRC Merger, the Company acquired all the outstanding common stock of DRC (55,712,529 shares), at an exchange ratio of 0.68 shares of the Company's common stock for each share of DRC common stock (the "Exchange Ratio"). A total of 37,873,965 shares of the Company's common stock was issued by the Company, to the DRC shareholders. DRC and the acquisition subsidiary merged. DRC became a 99.9% subsidiary of the Company and changed its name to SD Property Group, Inc. This portion of the transaction was valued at approximately $923,179, based upon the number of DRC shares of common stock acquired (55,712,529 shares), the Exchange Ratio and the last reported sales price of the Company's common stock on August 9, 1996 ($24.375). In connection therewith, the Company changed its name to Simon DeBartolo Group, Inc. In connection with the DRC Merger, the general and limited partners of SPG, LP contributed 49.5% (47,442,212 units of partnership interest) of the total outstanding units of partnership interest ("Units") in SPG, LP to the operating partnership of DRC, DeBartolo Realty Partnership, L.P. ("DRP, LP") in exchange for 47,442,212 Units of partnership interest in DRP, LP, whose name was changed to Simon DeBartolo Group, L.P. ("SDG, LP"). As used herein, the term Units does not include units of partnership interest entitled to preferential distribution of cash ("Preferred Units") (see Note 11). The Company retained a 50.5% partnership interest (48,400,641 Units) in SPG, LP but assigned its rights to receive distributions of profits on 49.5% (47,442,212 Units) of the outstanding Units of partnership interest in SPG, LP to SDG, LP. The limited partners of DRP, LP approved the contribution made by the partners of SPG, LP and simultaneously exchanged their 38.0% (34,203,623 Units) partnership interest in DRP, LP, adjusted for the Exchange Ratio, for a smaller partnership interest in SDG, LP. The exchange of the limited partners' 38.0% partnership interest in DRP, LP for Units of SDG, LP has been accounted for as an acquisition of minority interest by the Company and is valued based on the estimated fair value of the consideration issued (approximately $566,900). The Units of SDG, LP may under certain circumstances be exchangeable for common stock of the Company on a one-for-one basis. Therefore, the value of the acquisition of the DRP, LP limited partners' interest acquired was based upon the number of DRP, LP Units exchanged (34,203,623), the Exchange Ratio and the last reported sales price per share of the Company's common stock on August 9, 1996 ($24.375). The limited partners of SPG, LP received a 23.7% partnership interest in SDG, LP (37,282,628 Units) for the contribution of their 38.9% partnership interest in SPG, LP (37,282,628 Units) 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 DRC Merger, the Company became a general partner of SDG, LP with 36.9% (57,605,796 Units) of the outstanding partnership Units in SDG, LP and became the managing general partner of SPG, LP with 24.3% (37,873,965 Units in SPG, LP) of the outstanding partnership Units in SPG, LP. The Company remained the sole general partner of SPG, LP with 1% of the outstanding partnership Units (958,429 Units) and 49.5% interest in the capital of SPG, LP, and SDG, LP became a special limited partner in SPG, LP with 49.5% (47,442,212 Units) of the outstanding partnership Units in SPG, LP and an additional 49.5% interest in the profits of SPG, LP. SPG, LP did not acquire any interest in SDG, LP. Upon completion of the DRC Merger, the Company directly and indirectly owned a controlling 61.2% (95,479,761 Units) partnership interest in SDG, LP. 56 For financial reporting purposes, the completion of the DRC Merger resulted in a reverse acquisition by the Company, using the purchase method of accounting, directly or indirectly, of 100% of the net assets of DRP, LP for consideration valued at $1.5 billion, including related transaction costs. The purchase price was allocated to the fair value of the assets and liabilities. Final adjustments to the purchase price allocation were not completed until 1997, however no material changes were recorded in 1997. Although the Company was the accounting acquirer, SDG, LP (formerly DRP, LP) became the primary operating partnership through which the business of the Company is being conducted. As a result of the DRC Merger, the Company's initial operating partnership, SPG, LP, became a subsidiary of SDG, LP with 99% of the profits allocable to SDG, LP and 1% of the profits allocable to the Company. Cash flow allocable to the Company's 1% profit interest in SDG, LP was absorbed by public Company costs and related expenses incurred by the Company. However, because the Company was the accounting acquirer and, upon completion of the DRC Merger, acquired majority control of SDG, LP; SPG, LP is the predecessor to SDG, LP for financial reporting purposes. Accordingly, the financial statements of SDG, LP for the post-Merger periods reflect the reverse acquisition of DRP, LP by the Company and for all pre-Merger comparative periods, the financial statements of SDG, LP reflect the financial statements of SPG, LP as the predecessor to SDG, LP for financial reporting purposes. As described in Note 1, on December 31, 1997, SPG, LP merged into the Operating Partnership and as a result, the Operating Partnership now directly or indirectly owns or holds interests in all of the Portfolio Properties and directly holds substantially all of the economic interest in the Management Company. Acquisitions On January 26, 1998, the Operating Partnership acquired a regional mall in Pensacola, Florida for $87,283, which included Units valued at $55,523 and the assumption of $28,935 of mortgage indebtedness. On September 29, 1997, the Operating Partnership completed its cash tender offer for all of the outstanding shares of beneficial interests of The Retail Property Trust ("RPT"). RPT owned 98.8% of Shopping Center Associates ("SCA"), which owned or had interests in twelve regional malls and one community center, comprising approximately twelve million square feet of GLA in eight states. Following the completion of the tender offer, the SCA portfolio was restructured. The Operating Partnership exchanged its 50% interests in two SCA properties to a third party for similar interests in two other SCA properties, in which it had 50% interests, with the result that SCA now owns interests in a total of eleven properties. Effective November 30, 1997, the Operating Partnership also acquired the remaining 50% ownership interest in another of the SCA properties. In addition, an affiliate of the Operating Partnership acquired the remaining 1.2% interest in SCA. At the completion of these transactions, the Operating Partnership now owns 100% of ten of the eleven SCA properties, and a noncontrolling 50% ownership interest in the remaining property. The total cost for the acquisition of RPT and related transactions is estimated at $1,300,000, which includes shares of common stock of the Company valued at approximately $50,000, Units valued at approximately $25,300, the assumption of $398,500 of consolidated indebtedness and the Operating Partnership's pro rata share of joint venture indebtedness of $76,750. Final adjustments to the purchase price allocation were not completed at December 31, 1997. While no material changes to the allocation are anticipated, changes will be recorded in 1998. Also in 1997, the Operating Partnership acquired a 100% ownership interest in the Fashion Mall at Keystone at the Crossing, along with an adjacent community center, the remaining 30% ownership interest and management contract of Virginia Center Commons, a noncontrolling 50% ownership of Dadeland Mall and an additional noncontrolling 48% ownership interest of West Town Mall, increasing its total ownership interest to 50%. The Operating Partnership paid an aggregate purchase price of approximately $322,000 for these Properties, which included Units valued at $1,100, common stock of the Company valued at approximately $20,000 and the assumption of $64,772 of mortgage indebtedness, with the remainder paid in cash. In 1996, the Operating Partnership acquired the remaining 50% ownership interest in two regional malls at an aggregate purchase price of $113,100 plus 472,410 Units. During 1995, the Operating Partnership acquired the remaining ownership interest in two regional malls, an additional controlling 50% interest in a third mall and a controlling 75% ownership interest in a joint venture redevelopment project. The aggregate purchase price for the regional mall interests acquired included $18,500; 2,142,247 Units; and the assumption of $41,250 of mortgage indebtedness. The 75% interest in the redevelopment project was acquired for $11,406. 57 Developments During 1997, the Operating Partnership opened four new Joint Venture Properties at an aggregate cost of approximately $550,000 (of which the Operating Partnership's share was approximately $206,000): Indian River Commons, an approximately 260,000 square-foot community center, which is immediately adjacent to an existing regional mall Property, opened in March of 1997; The Source, an approximately 730,000 square-foot regional mall opened in September; Grapevine Mills, a 1.2 million square-foot value-oriented super-regional mall, opened in October; and Arizona Mills, a 1.2 million square-foot value- oriented super-regional mall, opened in November. During 1996, the Operating Partnership opened one new approximately $75,000 Wholly-Owned Property and three Joint Venture Properties at an aggregate cost of approximately $250,000 (of which the Operating Partnership's share was approximately $83,000): Cottonwood Mall, an approximately 750,000 square-foot wholly-owned regional mall opened in July; Ontario Mills, an approximately 1.3 million square-foot value oriented super-regional mall, opened in November; Indian River Mall, an approximately 750,000 square-foot regional mall, also opened in November; and The Tower Shops, an approximately 60,000 square-foot specialty retail center, opened in November as well. The Operating Partnership also opened three new Joint Venture Properties during 1995 at an aggregate cost of approximately $370,000 (of which the Operating Partnership's share was approximately $133,000): Circle Centre, an approximately 800,000 square-foot regional mall, opened in September; Seminole Towne Center, an approximately 1.1 million square-foot regional mall, also opened in September; and Lakeline Mall, an approximately 1.1 million square-foot regional mall, opened in October. Pro Forma The following unaudited pro forma summary financial information combines the consolidated results of operations of the Operating Partnership as if the DRC Merger and the RPT acquisition had occurred as of January 1, 1996, and were carried forward through December 31, 1997. Preparation of the pro forma summary information was based upon assumptions deemed appropriate by the Operating Partnership. The pro forma summary information is not necessarily indicative of the results which actually would have occurred if the DRC Merger and the RPT acquisition had been consummated at January 1, 1996, nor does it purport to represent the future financial position and results of operations for future periods. Year Ended December 31, ------------------------ 1997 1996 ----------- ----------- Revenue $ 1,172,082 $ 1,099,903 Net income available for Unitholders attributable to: General Partner 103,118 86,845 Limited Partners 63,006 54,690 ----------- ----------- Total $ 166,124 $ 141,535 =========== =========== Net income per Unit $ 1.02 $ 0.89 =========== =========== Net income per Unit - assuming dilution $ 1.02 $ 0.89 =========== =========== Weighted average number of Units outstanding 163,186,832 159,449,229 =========== =========== Weighted average number of Units outstanding - - assuming dilution 163,570,896 159,584,761 =========== =========== 4. Summary of Significant Accounting Policies Investment Properties Investment Properties are recorded at the lower of cost (predecessor cost for Properties acquired from Melvin Simon, Herbert Simon and certain of their affiliates (the "Simons")) or net realizable value. Net realizable value of investment Properties for financial reporting purposes is reviewed for impairment on a Property- by-Property basis whenever events or changes in circumstances indicate that the carrying amount of investment Properties may not be recoverable. Impairment of investment Properties is recognized when estimated undiscounted operating income is less than the carrying value of the Property. To the extent an impairment has occurred, the excess of carrying value of the Property over its estimated net realizable value will be charged to income. The Operating Partnership 58 adopted Statement of Financial Accounting Standards ("SFAS") No. 121 (Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of) on January 1, 1996. The adoption of this pronouncement had no impact on the accompanying consolidated financial statements. Investment Properties include costs of acquisitions, development and predevelopment, construction, tenant allowances and improvements, interest and real estate taxes incurred during construction, certain capitalized improvements and replacements, and certain allocated overhead. Depreciation on buildings and improvements is provided utilizing the straight-line method over an estimated original useful life, which is generally 35 years or the term of the applicable tenant's lease in the case of tenant inducements. Depreciation on tenant allowances and improvements is provided utilizing the straight- line method over the term of the related lease. Certain improvements and replacements are capitalized when they extend the useful life, increase capacity, or improve the efficiency of the asset. All other repair and maintenance items are expensed as incurred. Capitalized Interest Interest is capitalized on projects during periods of construction. Interest capitalized by the Operating Partnership during 1997, 1996 and 1995 was $11,589, $5,831 and $1,515, respectively. Deferred Costs Deferred costs consist primarily of financing fees incurred to obtain long-term financing, costs of interest rate protection agreements, and internal and external leasing commissions and related costs. Deferred financing costs, including interest rate protection agreements, are amortized on a straight-line basis over the terms of the respective loans or agreements. Deferred leasing costs are amortized on a straight-line basis over the terms of the related leases. Deferred costs consist of the following: December 31, 1997 1996 ------- ------- Deferred financing costs $ 72,348 $ 64,931 Leasing costs and other 121,060 97,380 ------- ------- 193,408 162,311 Less accumulated amortization 87,666 70,386 ------- -------- Deferred costs, net $ 105,742 $ 91,925 ========= ======== Interest expense in the accompanying Consolidated Statements of Operations includes amortization of deferred financing costs of $8,338, $8,434 and $8,523 for 1997, 1996 and 1995, respectively, and has been reduced by amortization of debt premiums and discounts of $699, $632 and $0 for 1997, 1996 and 1995, respectively. Revenue Recognition The Operating Partnership, as a lessor, has retained substantially all of the risks and benefits of ownership of the investment Properties and accounts for its leases as operating leases. Minimum rents are accrued on a straight-line basis over the terms of their respective leases. Overage rents are recognized when earned. Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as revenue in the period the applicable expenditures are incurred. 59 Allowance for Credit Losses A provision for credit losses is recorded based on management's judgment of tenant creditworthiness. The activity in the allowance for credit losses during 1997, 1996 and 1995 was as follows: Balance at Provision Accounts Balance Year Ended Beginning for Credit Written at End of of Year Losses Off Year ----------- ---------- -------- ---------- December 31, l997 $ 7,918 $ 5,992 $ (106) $ 13,804 =========== ========== ======== ========= December 31, l996 $ 5,485 $ 3,460 $(1,027) $ 7,918 =========== ========== ======== ========= December 31, l995 $ 4,169 $ 2,858 $(1,542) $ 5,485 ========== ======== ======== ========= Income Taxes As a partnership, the allocated share of income or loss for each year is included in the income tax returns of the partners, accordingly, no accounting for income taxes is required in the accompanying consolidated financial statements. State and local taxes are not material. Taxable income of the Operating Partnership for the year ended December 31, 1997, is estimated to be $160,000 and was $164,008 and $100,915 for the years ended 1996 and 1995, respectively. Reconciling differences between book income and tax income primarily result from timing differences consisting of (i) depreciation expense, (ii) prepaid rental income and (iii) straight-line rent. Furthermore, the Operating Partnership's share of income or loss from the affiliated Management Company is excluded from the tax return of the Operating Partnership. Per Unit Data The Operating Partnership adopted SFAS No. 128 (Earnings Per Share) in the current period. Basic earnings per Unit is based on the weighted average number of Units outstanding during the period. The weighted average number of Units used in the computation for 1997, 1996 and 1995 was 161,022,887; 120,181,895; and 92,666,469, respectively. In accordance with SFAS No. 128, diluted earnings per Unit is based on the weighted average number of Units outstanding combined with the incremental weighted average Units that would have been outstanding if all dilutive potential Units would have been converted into Units at the earliest date possible. The diluted weighted average number of Units used in the computation for 1997, 1996 and 1995 was 161,406,951; 120,317,426; and 92,776,083, respectively. Units may be exchanged for shares of common stock of the Company on a one-for-one basis in certain circumstances and therefore are not dilutive (see Note 11). The Preferred Units have not been considered in the computations of diluted earnings per Unit for any of the periods presented, as they did not have a dilutive effect. Accordingly, the increase in weighted average Units outstanding under the diluted method over the basic method in every period presented for the Operating Partnership is due entirely to the effect of outstanding options under both the Employee Plan and the Director Plan (see Note 12). There were no changes in earnings from basic earnings per Unit to diluted earnings per Unit for any of the periods presented. It is the Operating Partnership's policy to accrue distributions when they are declared. The Operating Partnership declared distributions in 1997 aggregating $2.01 per Unit. In 1996 accrued distributions totaled $1.63 per Unit, which included a $0.1515 distribution on August 9, 1996, in connection with the DRC Merger, designated to align the time periods of distribution payments of the merged companies. The current annual distribution rate is $2.02 per Unit. The following is a summary of distributions per Unit declared in 1997 and 1996, which represented a return of capital measured using generally accepted accounting principles: For the Year Ended December 31, ------------------------------- Distributions per Unit 1997 1996 -------------------------------- -------- -------- From book net income $ 1.08 $ 0.99 Representing return of capital 0.93 0.64 -------- -------- Total distributions $ 2.01 $ 1.63 ======== ======== 60 On a federal income tax basis, 35% of the 1997 distributions and 64% of the 1996 distributions represented return of capital. Statements of Cash Flows For purposes of the Statements of Cash Flows, all highly liquid investments purchased with an original maturity of 90 days or less are considered cash and cash equivalents. Cash equivalents are carried at cost, which approximates market value. Cash equivalents generally consist of commercial paper, bankers acceptances, Eurodollars, repurchase agreements and Dutch auction securities. Cash and cash equivalents do not include restricted cash of $8,553 and $6,110 as of December 31, 1997 and 1996, respectively. Cash is restricted at December 31, 1997 primarily to pay for construction costs for the phase II expansion of The Forum Shops at Caesar's, and in 1996 cash was restricted primarily for renovations, redevelopment and other activities of the 17 properties which collateralized the commercial pass-through certificates that were retired in 1997 (see Note 9). Cash paid for interest, net of any amounts capitalized, during 1997, 1996 and 1995 were $282,501; $197,796; and $142,345, respectively. Noncash Transactions Please refer to Notes 3 and 11 for a discussion of noncash transactions. Reclassifications Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. These reclassifications have no impact on net operating results previously reported. 5. Investment Properties Investment properties consist of the following: December 31, ----------------------- 1997 1996 ---------- ---------- Land $1,253,953 $1,003,221 Buildings and improvements 5,560,112 4,270,244 Total land, buildings and improvements 6,814,065 5,273,465 Furniture, fixtures and equipment 53,289 27,556 Investment properties at cost 6,867,354 5,301,021 Less_accumulated depreciation 461,792 279,072 Investment properties at cost, net $6,405,562 $5,021,949 Building and improvements includes $158,609 and $86,461 of construction in progress at December 31, 1997 and 1996, respectively. 6. Investment in Partnerships and Joint Ventures As of December 31, 1997 and 1996, the unamortized excess of the Operating Partnership's investment over its share of the equity in the underlying net assets of the partnerships and joint ventures ("Excess Investment") was approximately $364,119 and $232,927, respectively. This Excess Investment is being amortized generally over the life of the related Properties. Amortization included in income from unconsolidated entities for the years ended December 31, 1997 and 1996 was $13,878 and $5,127, respectively. Summary financial information of partnerships and joint ventures accounted for using the equity method and a summary of the Operating Partnership's investment in and share of income from such partnerships and joint ventures follows. 61 December 31, BALANCE SHEETS 1997 1996 ---------- ---------- Assets: Investment properties at cost, net $2,734,686 $1,887,555 Cash and cash equivalents 101,582 61,267 Tenant receivables 87,008 58,548 Other assets 71,873 69,365 ---------- ---------- Total assets $2,995,149 $2,076,735 ========== ========== Liabilities and Partners' Equity: Mortgages and other notes payable $1,888,512 $1,121,804 Accounts payable, accrued expenses and other liabilities 212,543 213,394 ---------- ---------- Total liabilities 2,101,055 1,335,198 Partners' equity 894,094 741,537 ---------- ---------- Total liabilities and partners' equity $2,995,149 $2,076,735 ========== ========== The Operating Partnership's Share of: Total assets $1,009,691 $ 602,084 ========== ========== Partners' equity $ 227,458 $ 144,376 Add: Excess Investment 364,119 232,927 ---------- ---------- Operating Partnership's net Investment in Joint Ventures $ 591,577 $ 377,303 ========== ========== For the Year Ended December 31, STATEMENTS OF OPERATIONS 1997 1996 1995 --------- -------- -------- Revenue: Minimum rent $256,100 $144,166 $ 83,905 Overage rent 10,510 7,872 2,754 Tenant reimbursements 120,380 73,492 39,500 Other income 19,364 11,178 13,980 --------- -------- -------- Total revenue 406,354 236,708 140,139 Operating Expenses: Operating expenses and other 144,256 88,678 46,466 Depreciation and amortization 85,423 50,328 26,409 --------- -------- -------- Total operating expenses 229,679 139,006 72,875 --------- -------- -------- Operating Income 176,675 97,702 67,264 Interest Expense 96,675 48,918 28,685 Extraordinary Items (1,925) (1,314) (2,687) --------- -------- -------- Net Income $ 78,075 $ 47,470 $ 35,892 ========= ======== ======== Third-Party Investors' Share of Net Income 55,507 38,283 30,752 --------- -------- -------- The Operating Partnership's Share of Net Income $ 22,568 $ 9,187 $ 5,140 Amortization of Excess Investment 13,878 5,127 -- --------- -------- -------- Income from Unconsolidated Entities $ 8,690 $ 4,060 $ 5,140 ========= ======== ======== The net income or net loss for each partnership and joint venture is allocated in accordance with the provisions of the applicable partnership or joint venture agreement. The allocation provisions in these agreements are not always consistent with the ownership interests held by each general or limited partner or joint venturer, primarily due to partner preferences. The Operating Partnership receives substantially all of the economic benefit of Biltmore Square, Chesapeake Square, Northfield Square and Port Charlotte Town Center, resulting from advances made to these joint ventures. 62 7. Investment in Management Company The Operating Partnership holds 80% of the outstanding common stock, 5% of the outstanding voting common stock, and all of the preferred stock of the Management Company. The remaining 20% of the outstanding common stock of the Management Company (representing 95% of the voting common stock) is owned directly by Melvin Simon, Herbert Simon and David Simon. The Management Company, including its consolidated subsidiaries, provides management, leasing, development, accounting, legal, marketing and management information systems services to one Wholly-Owned Property and 27 Minority Interest and Joint Venture Properties, Melvin Simon & Associates, Inc. ("MSA"), and certain other nonowned properties. Because the Operating Partnership exercises significant influence over the financial and operating policies of the Management Company, it is reflected in the accompanying statements using the equity method of accounting. In connection with the DRC Merger, the Management Company purchased 95% of the voting stock (665 shares of common stock) of DeBartolo Properties Management, Inc. ("DPMI"), a DRC management company, for $2,500 in cash. DPMI provides architectural, design, construction and other services primarily to the Properties. During 1996, DPMI formed a captive insurance company, which provided property damage and general liability insurance for certain Properties in 1997 and 1996. The Operating Partnership paid a total of $9,628 and $2,383 to this wholly-owned subsidiary of the Management Company for insurance coverage during 1997 and 1996, respectively. The Management Company accounts for both DPMI and the captive insurance company using the consolidated method of accounting. During 1995, the Management Company liquidated its interest in a partnership investment which held a 9.8-acre parcel of land, resulting in a loss of $958 to the Management Company. Further, an undeveloped two-acre parcel of land, for which the Management Company held a mortgage, was sold in December 1995, resulting in a loss of $3,949 for the Management Company. Management, development and leasing fees charged to the Operating Partnership relating to the Minority Interest Properties were $8,343, $6,916 and $5,353 for the years ended December 31, 1997, 1996 and 1995, respectively. Architectural, contracting and engineering fees charged to the Operating Partnership for 1997 and 1996 were $67,258 and $21,650, respectively. Fees for services provided by the Management Company to MSA were $3,073, $4,000 and $4,572 for the years ended December 31, 1997, 1996 and 1995, respectively. At December 31, 1997 and 1996, total notes receivable and advances due from the Management Company and consolidated affiliates were $93,809 and $75,452, respectively, which included $11,474 due from DPMI in 1997 and 1996. Unpaid interest income receivable from the Management Company at December 31, 1997 and 1996, was $485 and $0, respectively. All preferred dividends due from the Management Company were paid by December 31, 1997 and 1996. Summarized consolidated financial information of the Management Company and a summary of the Operating Partnership's investment in and share of income (loss) from the Management Company follows. December 31, BALANCE SHEET DATA: 1997 1996 --------- --------- Total assets $ 137,750 $ 110,263 Notes payable to the Operating Partnership at 11%, due 2008 66,859 63,978 Shareholders' equity (deficit) 482 (11,879) The Operating Partnership's Share of: Total assets $ 128,596 $ 96,316 ========= ========= Shareholders' equity (deficit) $ 3,088 $(13,567) ========= ========= 63 For the Year Ended December 31, OPERATING DATA: 1997 1996 1995 -------- ------- -------- Total revenue 85,542 78,665 43,118 Operating Income 13,766 9,073 1,986 -------- ------- -------- Net Income (Loss) Available for Common Shareholders $12,366 $ 7,673 $(4,321) ======== ======= ======== The Operating Partnership's Share of Net Income (Loss) after intercompany profit elimination $10,486 $ 5,485 $(3,737) ======== ======= ======== The Operating Partnership manages substantially all Wholly-Owned Properties and substantially all of the Minority Interest and Joint Venture Properties that were owned by DRC prior to the DRC Merger, and, accordingly, it reimburses the Administrative Services Partnership ("ASP"), a subsidiary of the Management Company, for costs incurred, including management, leasing, development, accounting, legal, marketing, and management information systems. Substantially all employees (other than direct field personnel) are employed by ASP which is owned 1% by the Operating Partnership and 99% by the Management Company. The Management Company records costs net of amounts reimbursed by the Operating Partnership. Common costs are allocated based on payroll and related costs. In management's opinion, allocations under the cost-sharing arrangement are reasonable. The Operating Partnership's share of allocated common costs was $35,341, $29,262 and $21,874 for 1997, 1996 and 1995, respectively. Amounts payable by the Operating Partnership under the cost- sharing arrangement and management contracts were $1,725 and $3,288 at December 31, 1997 and 1996, respectively, and are reflected in accounts payable and accrued expenses in the accompanying Consolidated Balance Sheets. 8. Other Investment On June 16, 1997, the Operating Partnership purchased 1,408,450 shares of common stock of Chelsea GCA Realty, Inc. ("Chelsea"), a publicly traded REIT, for $50,000 using borrowings from the Operating Partnership's Credit Facility (see below). The shares purchased represent approximately 9.2% of Chelsea's outstanding common stock. In addition, the Operating Partnership and Chelsea announced that they have formed a strategic alliance to develop and acquire manufacturer's outlet shopping centers with 500,000 square feet or more of GLA in the United States. In accordance with SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities", the Operating Partnership's shares of Chelsea stock are classified as `available-for- sale securities'. Accordingly, the investment is being reflected at its market value of $53,785, as of December 31, 1997, in the accompanying consolidated balance sheets in other investments. Management currently does not intend to sell these securities. The unrealized gain of $3,785 is reflected in partners' equity. 64 9. Indebtedness Mortgages and other notes payable consist of the following: December 31, 1997 1996 ----------- ---------- Fixed-Rate Debt --------------- Mortgages, net $2,006,552 $2,076,428 Unsecured public notes, net 905,547 249,161 Medium-term notes, net 279,229 -- Commercial mortgage pass-through certificates, net 175,000 377,650 6 3/4% Putable Asset Trust Securities, net 101,297 101,472 ----------- ---------- Total fixed-rate debt 3,467,625 2,804,711 Variable-Rate Debt ------------------ Mortgages, net 451,820 561,985 Credit facility 952,000 230,000 Unsecured term loans 133,000 -- Commercial mortgage pass-through certificates, net 50,000 85,288 Construction loan 23,545 -- --------- ------- Total variable-rate debt 1,610,365 877,273 --------- -------- Total mortgages and other notes payable $ 5,077,990 $3,681,984 =========== ========== Fixed-Rate Debt Mortgage Loans & Other Notes. The fixed-rate mortgage loans bear interest ranging from 5.81% to 10.00% (weighted average of 7.71% at December 31, 1997), require monthly payments of principal and/or interest and have various due dates through 2027 (average maturity of 6.5 years). Certain of the Properties are pledged as collateral to secure the related mortgage note. The fixed and variable mortgage notes are nonrecourse and certain ones have partial guarantees by affiliates of approximately $583,158. Certain of the Properties are cross-defaulted and cross-collateralized as part of a group of properties. Under certain of the cross-default provisions, a default under any mortgage included in the cross-defaulted package may constitute a default under all such mortgages and may lead to acceleration of the indebtedness due on each Property within the collateral package. Certain of the Properties are subject to financial performance covenants relating to debt-to-market capitalization, minimum earnings before interest, taxes, depreciation and amortization ("EBITDA") ratios and minimum equity values. Unsecured Notes. The Operating Partnership has consolidated nonconvertible investment-grade unsecured debt securities aggregating $905,547 (the "Notes") at December 31, 1997. The Notes pay interest semiannually, and bear interest rates ranging from 6.75% to 7.625% (weighted average of 6.95%), and have various due dates through 2009 (average maturity of 8.2 years). Certain of the Notes are guaranteed by the Operating Partnership and contain leverage ratios and minimum EBITDA and unencumbered EBITDA ratios. The Operating Partnership currently has $850,000 remaining available for issuance on its debt shelf registration statement. Medium-Term Notes. On May 15, 1997, the Operating Partnership established a Medium-Term Note ("MTN") program. On June 24, 1997, the Operating Partnership completed the sale of $100,000 of notes under the MTN program, which bear interest at 7.125% and have a stated maturity of June 24, 2005. On September 10, 1997, the Operating 65 Partnership issued an additional $180,000 principal amount of notes under its MTN program. These notes mature on September 20, 2007 and bear interest at 7.125% per annum. The net proceeds from each of these sales were used primarily to pay down the Credit Facility (defined below). Commercial Mortgage Pass-Through Certificates. Prior to September 2, 1997, DeBartolo Capital Partnership ("DCP"), a Delaware general partnership whose interest is owned 100% by affiliated entities, held commercial mortgage pass-through certificates in the face amount of approximately $453,000. This debt was secured by assets of 17 of the Wholly-Owned Properties. On September 2, 1997, the Operating Partnership refinanced these certificates along with a $48,000 mortgage loan, resulting in releases of mortgages encumbering 18 of the Properties. The Operating Partnership subsequently issued a series of six classes of commercial mortgage pass-through certificates cross- collaterallized by seven of such Properties, which matures on December 19, 2004. Five of the six classes totaling $175,000 bear fixed interest rates ranging from 6.716% to 8.233%, with the remaining $50,000 class bearing interest at LIBOR plus 0.365%. In addition, the Operating Partnership used the net proceeds from the sale of the $180,000 MTN's described above and net borrowings under the Credit Facility of approximately $114,000 to retire the original certificates and the $48,000 mortgage loan. 6 3/4% Putable Asset Trust Securities (PATS). The PATS, issued December 1996, pay interest semiannually at 6.75% and mature in 2003. These notes contain leverage ratios and minimum EBITDA and unencumbered EBITDA ratios. Variable-Rate Debt Mortgages and Other Notes. The variable-rate mortgage loans and other notes bear interest ranging from 6.00% to 7.74% (weighted average of 6.58% at December 31, 1997) and are due at various dates through 2004 (average maturity of 2.5 years). Certain of the Properties are subject to collateral, cross-default and cross- collateral agreements, participation agreements or other covenants relating to debt-to-market capitalization, minimum EBITDA ratios and minimum equity values. Credit Facility. The Operating Partnership has a $1,250,000 unsecured revolving credit facility (the "Credit Facility") which initially matures in September of 1999, with a one-year extension available at the option of the Operating Partnership. The Credit Facility bears interest at LIBOR plus 65 basis points. The maximum and average amounts outstanding during 1997 under the Credit Facility were $952,000 and $461,362, respectively. The Credit Facility is primarily used for funding acquisition, renovation and expansion and predevelopment opportunities. At December 31, 1997, the Credit Facility had an effective interest rate of 6.56%, with $284,300 available after outstanding borrowings and letters of credit. The Credit Facility contains financial covenants relating to a capitalization value, minimum EBITDA and unencumbered EBITDA ratios and minimum equity values. Unsecured Term Loans. The Operating Partnership has two unsecured term loans outstanding at December 31, 1997. On June 30, 1997, the Operating Partnership closed a $70,000 unsecured term loan which bears interest at LIBOR plus 0.75% and matures on September 29, 1998. On September 17, 1997, the Operating Partnership retired a $63,000 mortgage loan secured by Lincolnwood Towne Center with a second unsecured term loan, which bears interest at LIBOR plus 0.75% and matures on January 31, 1999. Debt Maturity and Other As of December 31, 1997, scheduled principal repayments on indebtedness were as follows: 1998 $ 390,835 1999 1,209,011 2000 291,740 2001 250,091 2002 496,321 Thereafter 2,442,335 ---------- Total principal maturities 5,080,333 Net unamortized debt premiums (2,343) ---------- Total mortgages and other notes payable $5,077,990 ========== 66 Debt premiums and discounts are being amortized over the terms of the related debt instruments. Certain mortgages and notes payable may be prepaid but are generally subject to a prepayment of a yield- maintenance premium. The unconsolidated partnerships and joint ventures have $1,888,512 and $1,121,804 of mortgages and other notes payable at December 31, 1997 and 1996, respectively. The Operating Partnership's share of this debt was $770,776 and $448,218 at December 31, 1997 and 1996, respectively. This debt becomes due in installments over various terms extending to December 28, 2009, with interest rates ranging from 6.09% to 9.75% (weighted average rate of 7.34% at December 31, 1997). The debt matures $228,626 in 1998; $20,490 in 1999; $222,076 in 2000; $228,475 in 2001; $310,681 in 2002; and $878,164 thereafter. The $58 net extraordinary gain in 1997 results from a $31,136 gain realized on the forgiveness of debt and an $8,409 gain from write- offs of net unamortized debt premiums, partially offset by the $21,000 acquisition of the contingent interest feature on four loans, and $18,487 of prepayment penalties and write-offs of mortgage costs associated with early extinguishments of debt. In addition, net extraordinary losses resulting from the early extinguishment or refinancing of debt of $3,521 and $3,285 were incurred for the years ended December 31, 1996 and 1995, respectively. Interest Rate Protection Agreements The Operating Partnership has entered into certain interest rate protection agreements, in the form of "cap" or "swap" arrangements, with respect to the majority of its variable-rate mortgages and other notes payable. Cap arrangements, which effectively limit the amount by which variable interest rates may rise, have been entered into for $380,379 principal amount of consolidated debt and cap LIBOR at rates ranging from 5.0% to 16.765% through the related debt's maturity. One swap arrangement, which effectively fixes the Operating Partnership's interest rates on the respective borrowings, has been entered into for $50,000 principal amount of consolidated debt, which matures September 2001. In addition, interest rate protection agreements which effectively fix the interest rates on an additional $148,000 of consolidated variable-rate debt were obtained in January of 1998. Costs of the caps ($7,580) are amortized over the life of the agreements. The unamortized balance of the cap arrangements was $2,006 as of December 31, 1997. The Operating Partnership's hedging activity as a result of interest swaps and caps resulted in net interest savings of $1,586, $2,165 and $3,528 for the years ended December 31, 1997, 1996 and 1995, respectively. This did not materially impact the Operating Partnership's weighted average borrowing rate. Fair Value of Financial Instruments The carrying value of variable-rate mortgages and other loans represents their fair values. The fair value of fixed-rate mortgages and other notes payable was approximately $3,900,000 and $3,000,000 at December 31, 1997 and 1996, respectively. The fair value of the interest rate protection agreements at December 31, 1997 and 1996, was ($692) and $5,616, respectively. At December 31, 1997 and 1996, the estimated discount rates were 6.66% and 7.25%, respectively. 10. Rentals under Operating Leases The Operating Partnership receives rental income from the leasing of retail and mixed-use space under operating leases. Future minimum rentals to be received under noncancelable operating leases for each of the next five years and thereafter, excluding tenant reimbursements of operating expenses and percentage rent based on tenant sales volume, as of December 31, 1997, are as follows: 1998 $ 623,652 1999 580,561 2000 521,398 2001 469,331 2002 420,169 Thereafter 1,768,777 ---------- $4,383,888 ========== Approximately 2.9% of future minimum rents to be received are attributable to leases with JCPenney Company, Inc., an affiliate of a limited partner in the Operating Partnership. 67 11. Partners' Equity As described in Note 3, in connection with the DRC Merger on August 9, 1996, the Operating Partnership issued 37,877,965 Units to its non-managing general partner, the Company, and 23,219,012 Units to limited partners. On September 19, 1997, the Company issued 4,500,000 shares of its common stock in a public offering. The Company contributed the net proceeds of approximately $146,800 to the Operating Partnership in exchange for an equal number of Units. The Operating Partnership used the net proceeds to retire a portion of the outstanding balance on the Credit Facility. On November 11, 1997, the Operating Partnership issued 3,809,523 Units upon the conversion of all of the outstanding 8.125% Series A Preferred Units. On September 27, 1996, the Company completed a $200,000 public offering of 8,000,000 shares of Series B cumulative redeemable preferred stock("Series B Preferred Stock"), generating net proceeds of approximately $193,000. Dividends on the Series B Preferred Stock are paid quarterly in arrears at 8.75% per annum. The Company may redeem the Series B Preferred Stock any time on or after September 29, 2006, at a redemption price of $25.00 per share, plus accrued and unpaid dividends. The redemption price (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital shares of the Company, which may include other series of preferred shares. The Company contributed the proceeds to the Operating Partnership in exchange for Preferred Units, the economic terms of which are substantially identical to the Series B Preferred Stock. The Operating Partnership pays a preferred distribution to the Company equal to the dividends paid on the Series B Preferred Stock. On July 9, 1997, the Company sold 3,000,000 shares of 7.89% Series C Cumulative Step-Up Premium RateSM Preferred Stock (the "Series C Preferred Stock") in a public offering at $50.00 per share. Beginning October 1, 2012, the rate increases to 9.89% per annum. The Company intends to redeem the Series C Preferred Stock prior to October 1, 2012. The Series C Preferred Stock is not redeemable prior to September 30, 2007. Beginning September 30, 2007, the Series C Preferred Stock may be redeemed at the option of the Company in whole or in part, at a redemption price of $50.00 per share, plus accrued and unpaid distributions, if any, thereon. The redemption price of the Series C Preferred Stock may only be paid from the sale proceeds of other capital stock of the Company, which may include other classes or series of preferred stock. Additionally, the Series C Preferred Stock has no stated maturity and is not subject to any mandatory redemption provisions, nor is it convertible into any other securities of the Company. The Company contributed the net proceeds of this offering of approximately $146,000 to the Operating Partnership in exchange for Preferred Units, the economic terms of which are substantially identical to the Series C Preferred Stock. The Operating Partnership used the proceeds to increase its ownership interest in West Town Mall (see Note 3), to pay down the Credit Facility and for general working capital purposes. The Operating Partnership pays a preferred distribution to the Company equal to the dividends paid on the Series C Preferred Stock. Exchange Rights The former limited partners in SPG, LP had the right at any time after December 1994 to exchange all or any portion of their units for shares of common stock of the Company on a one-for-one basis or cash, as selected by the Company's Board of Director. If the Company had selected to use cash, the Company would have caused SPG, LP to redeem the Units. The amount of cash to be paid if the exchange right was exercised and the cash option was selected would have been based on the trading price of the Company's common stock at that time. In the periods when the Operating Partnership did not control whether cash would be used to settle the limited partners' exchange rights, the limited partners' equity interest was excluded from partners' equity and was reflected in the consolidated balance sheet at redemption value. In connection with the DRC Merger, the Operating Partnership agreement was amended eliminating the exchange right provision. However, the limited partners in SPG, LP exchanged their interest for Units in the Operating Partnership. The Operating Partnership extended rights to its limited partners similar to the rights previously held by the limited partners of SPG, LP. However, on November 13, 1996, an agreement was reached between the Company and the Operating Partnership which restricts the Company's ability to cause the Operating Partnership to redeem for cash the limited partners' units without contributing cash to the Operating Partnership as partners' equity sufficient to effect the redemption. If sufficient cash is not contributed, the Company will be deemed to have elected to acquire the limited partners' units for shares of the Company's common stock. As a result of these 68 arrangements, the limited partners' equity interest in the Operating Partnership has been included as partners' equity at historical carrying value. Previous adjustments to exclude limited partners' equity interest from partners' equity have been reversed. The Operating Partnership has the right to issue Units and Preferred Units under certain circumstances. As of December 31, 1997, the Company has reserved 61,850,762 shares of common stock for issuance upon the exchange of Units. 12. Stock Option Plans The Company and the Operating Partnership adopted an Employee Stock Plan (the "Employee Plan"). The Company also adopted a Director Stock Option Plan (the "Director Plan" and, together with the Employee Plan, the "Stock Option Plans") for the purpose of attracting and retaining eligible officers, directors and employees. The Company has reserved for issuance 4,595,000 shares of common stock under the Employee Plan and 100,000 shares of common stock under the Director Plan. If stock options granted in connection with the Stock Option Plans are exercised at any time or from time to time, the partnership agreement requires the Company to sell to the Operating Partnership, at fair market value, shares of the Company's common stock sufficient to satisfy the exercised stock options. The Company also is obligated to purchase Units for cash in an amount equal to the fair market value of such shares. Employee Plan The Employee Plan is currently administered by the Company's Compensation Committee (the "Committee"). During the ten-year period following the adoption of the Employee Plan, the Committee may, subject to the terms of the Employee Plan and in certain instances subject to board approval, grant to key employees (including officers and directors who are employees) of the Operating Partnership or its "affiliates" (as defined in the Employee Plan) the following types of awards: stock options (including options with a reload feature), stock appreciation rights, performance units and shares of restricted or unrestricted common stock. Awards granted under the Employee Plan become exercisable over the period determined by the Committee. The exercise price of an option may not be less than the fair market value of the shares of the common stock on the date of grant. The options vest 40% on the first anniversary of the date of grant, an additional 30% on the second anniversary of the grant date and become fully vested three years after the grant date. The options expire ten years from the date of grant. Director Plan Directors of the Company who are not also employees of the Company or its "affiliates" (as defined in the Director Plan) participate in the Director Plan. Under the Director Plan, each eligible director is automatically granted options ("Director Options") to purchase 5,000 shares of common stock upon the director's initial election to the Board of Directors and 3,000 shares of common stock upon each reelection of the director to the Board of Directors. The exercise price of the options is equal to 100% of the fair market value of the Company's common stock on the date of grant. Director Options become exercisable on the first anniversary of the date of grant or at such earlier time as a "change in control" of the Company occurs and will remain exercisable through the tenth anniversary of the date of grant (the "Expiration Date"). Prior to their Expiration Dates, Director Options will terminate 30 days after the optionee ceases to be a member of the Board of Directors. SFAS No. 123, "Accounting for Stock-Based Compensation," requires entities to measure compensation costs related to awards of stock- based compensation using either the fair value method or the intrinsic value method. Under the fair value method, compensation expense is measured at the grant date based on the fair value of the award. Under the intrinsic value method, compensation expense is equal to the excess, if any, of the quoted market price of the stock at the grant date over the amount the employee must pay to acquire the stock. Entities electing to measure compensation costs using the intrinsic value method must make pro forma disclosures of net income and earnings per Unit as if the fair value method had been applied. The Operating Partnership has elected to account for stock-based compensation programs using the intrinsic value method consistent with existing accounting policies. The impact on pro forma net income and earnings per Unit as a result of applying the fair value method was not material. 69 Information relating to the Stock Option Plans from January 1, 1995 through December 31, 1997 is as follows: Director Plan Employee Plan Option Price Option Price Options per Share Options per Share ------- ------------ -------- ------------- Shares under option at December 31, 1994 40,000 $22.25 - 2,070,147 $22.25 - $ 27.00 $ 25.25 Granted 15,000 24.9375 -- N/A Exercised -- -- (6,876) 23.44 Forfeited -- -- (49,137) 23.60 (1) ------- ----------- -------- ----------- Shares under option at December 31, 1995 55,000 $22.25 - 27.00 2,014,134 $22.25 - 25.25 Granted 44,080 23.50 (1) -- N/A Exercised (5,000) 22.25 (367,151) 23.33 (1) Forfeited (9,000) 25.52 (1) (24,000) 24.21 (1) -------- ------------- --------- -------------- Shares under option at December 31, 1996 85,080 $15 - 27.38 1,622,983 $22.25 - 25.25 -------- -------------- --------- -------------- Granted 9,000 29.3125 -- N/A Exercised (8,000) 23.62 (1) (361,902) 23.29 (1) Forfeited -- N/A (13,484) 23.99 (1) -------- ------------- --------- -------------- Shares under option at December 31, 1997 86,080 $15 - 27.38 1,247,597 $22.25 - 25.25 ======== ============== ========= ============= Options exercisable at December 31, 1997 77,080 23.96 (1) 1,247,597 $22.90 (1) ======== ============== ========= ============== Shares available for grant at December 31, 1997 920 1,611,474 ======== ========= (1) Represents the weighted average price. Stock Incentive Programs Two stock incentive programs are currently in effect. In October 1994, under the Employee Plan of the Company and the Operating Partnership, the Company's Compensation Committee approved a five-year stock incentive program (the "Stock Incentive Program"), under which shares of restricted common stock of the Company were granted to certain employees at no cost to those employees. A percentage of each of these restricted stock grants can be earned and awarded each year if the Company attains certain growth targets measured in Funds From Operations, as those growth targets may be established by the Company's Compensation Committee from time to time. Any restricted stock earned and awarded vests in four installments of 25% each on January 1 of each year following the year in which the restricted stock is deemed earned and awarded. In 1994, and prior to the DRC Merger, DRC also established a five- year stock incentive program (the "DRC Plan") under which shares of restricted common stock were granted to certain DRC employees at no cost to those employees. The DRC Plan also provided that this restricted stock would be earned and awarded based upon DRC's attainment of certain economic goals established by the Compensation Committee of DRC's Board of Directors. At the time of the DRC Merger, the Company and the Operating Partnership agreed to assume the terms and conditions of the DRC Plan and the economic criteria upon which restricted stock under both the Stock Incentive Program and the DRC Plan would be deemed earned and awarded were aligned with one another. Further, other terms and conditions of the DRC Plan and Stock Incentive Program were modified so that beginning with calendar year 1996, the terms and conditions of these two programs are substantially the same. It should be noted that the terms and conditions concerning vesting of the restricted stock grant to the Company's President and Chief Operating Officer, a former DRC employee, are different from those established by the DRC Plan and are specifically set forth in the employment contract between the Company and such individual. 70 In March 1995, an aggregate of 1,000,000 shares of restricted stock was granted to 50 executives, subject to the performance standards, vesting requirements and other terms of the Stock Incentive Program. Prior to the DRC Merger, 2,108,000 shares of DRC common stock were deemed available for grant to certain designated employees of DRC, also subject to certain performance standards, vesting requirements and other terms of the DRC Plan. During 1997, 1996 and 1995, a total of 448,753; 200,030; and 144,196 shares of common stock of the Company, respectively, net of forfeitures, were deemed earned and awarded under the Stock Incentive Program and the DRC Plan. Approximately $5,386; $2,084; and $918 relating to these programs were amortized in 1997, 1996 and 1995, respectively. The cost of restricted stock grants, based upon the stock's fair market value at the time such stock is earned, awarded and issued, is charged to partners' equity and subsequently amortized against earnings of the Operating Partnership over the vesting period. 13. Employee Benefit Plan The Operating Partnership and affiliated entities maintain a tax- qualified retirement 401(k) savings plan. Under the plan, eligible employees can participate in a cash or deferred arrangement permitting them to defer up to a maximum of 12% of their compensation, subject to certain limitations. Participants' salary deferrals are matched at specified percentages, and the plan provides annual contributions of 3% of eligible employees' compensation. The Operating Partnership contributed $2,727; $2,350; and $1,716 to the plans in 1997, 1996 and 1995, respectively. Except for the 401(k) plan, the Operating Partnership offers no other postretirement or postemployment benefits to its employees. 14. Commitments and Contingencies Litigation Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. On October 16, 1996, a complaint was filed in the Court of Common Pleas of Mahoning County, Ohio, captioned Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. The named defendants are SD Property Group, Inc., a 99%-owned subsidiary of the Company, and DPMI, and the plaintiffs are 27 former employees of the defendants. In the complaint, the plaintiffs alleged that they were recipients of deferred stock grants under the DRC stock incentive plan (the "DRC Plan") and that these grants immediately vested under the DRC Plan's "change in control" provision as a result of the DRC Merger. Plaintiffs asserted that the defendants' refusal to issue them approximately 661,000 shares of DRC common stock, which is equivalent to approximately 450,000 shares of common stock of the Company computed at the 0.68 Exchange Ratio used in the DRC Merger, constituted a breach of contract and a breach of the implied covenant of good faith and fair dealing under Ohio law. Plaintiffs sought damages equal to such number of shares of DRC common stock, or cash in lieu thereof, equal to all deferred stock ever granted to them under the DRC Plan, dividends on such stock from the time of the grants, compensatory damages for breach of the implied covenant of good faith and fair dealing, and punitive damages. The complaint was served on the defendants on October 28, 1996. The plaintiffs and the Company each filed motions for summary judgment. On October 31, 1997, the Court entered a judgment in favor of the Company granting the Company's motion for summary judgment. The plaintiffs have appealed this judgment and the appeal is pending. While it is difficult for the Company to predict the ultimate outcome of this action, based on the information known to the Company to date, it is not expected that this action will have a material adverse effect on the Company or the Operating Partnership. Roel Vento et al v. Tom Taylor et al. A subsidiary of the Operating Partnership is a defendant in litigation entitled Roel Vento et al v. Tom Taylor et al, in the District Court of Cameron County, Texas, in which a judgment in the amount of $7,800 has been entered against all defendants. This judgment includes approximately $6,500 of punitive damages and is based upon a jury's findings on four separate theories of liability including fraud, intentional infliction of emotional distress, tortuous interference with contract and civil conspiracy arising out of the sale of a business operating under a temporary license agreement at Valle Vista Mall in Harlingen, Texas. The Operating Partnership is seeking to overturn the award and has appealed the verdict. The Operating Partnership's appeal is pending. Although the Operating Partnership is optimistic that it may be able to reverse or reduce the verdict, there can be no assurance thereof. Management, based upon the advice of counsel, believes that the ultimate outcome of this action will not have a material adverse effect on the Operating Partnership. The Operating Partnership currently is not subject to any other material litigation other than routine litigation and administrative proceedings arising in the ordinary course of business. On the basis of consultation with counsel, management believes that these items will not have a material adverse impact on the Operating Partnership's financial position or results of operations. 71 Lease Commitments As of December 31, 1997, a total of 31 of the Properties are subject to ground leases. The termination dates of these ground leases range from 1998 to 2087. These ground leases generally require payments by the Operating Partnership of a fixed annual rent, or a fixed annual rent plus a participating percentage over a base rate. Ground lease expense incurred by the Operating Partnership for the years ended December 31, 1997, 1996 and 1995, was $10,511, $8,506 and $6,700, respectively. Future minimum lease payments due under such ground leases for each of the next five years ending December 31 and thereafter are as follows: 1998 $ 7,208 1999 7,218 2000 7,280 2001 7,378 2002 7,658 Thereafter 492,270 --------- $ 529,012 ========= Environmental Matters 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 Operating Partnership'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. 72 15. Quarterly Financial Data (Unaudited) Summarized quarterly 1997 and 1996 data is as follows: First Second Third Fourth Quarter Quarter Quarter (1) Quarter Total ---------- ---------- ------------ ----------- ---------- 1997 - --------------------------- Total revenue $ 242,414 $245,055 $ 259,783 $310,222 $1,057,474 Operating income 111,706 114,455 117,572 133,297 477,030 Income before extraordinary items 43,062 48,413 54,286 57,372 203,133 Net income available to Unitholders 13,409 40,539 72,400 47,595 173,943 Net income before extraordinary items per Unit (2) 0.23 0.27 0.28 0.29 1.08 Net income per Unit (2) 0.08 0.26 0.45 0.28 1.08 Weighted Average Units Outstanding 157,946,908 158,494,224 159,795,424 167,760,629 161,022,887 Net income before extraordinary items per Unit - - assuming dilution (2) 0.23 0.27 0.28 0.29 1.08 Net income per Unit - assuming 0.45 dilution (2) $ 0.08 $ 0.26 0.28 $ 1.08 Weighted Average Units Outstanding - Assuming Dilution 158,343,827 158,337,889 160,180,477 168,146,728 161,406,951 1996 Total revenue $ 139,444 $ 143,761 $ 202,436 $ 262,063 $ 747,704 Operating income 61,073 63,051 82,715 124,673 331,512 Income before extraordinary 23,832 23,968 28,839 58,024 134,663 items Net income available to 21,536 21,937 24,085 50,890 118,448 Unitholders Net income before extraordinary items per Unit (2) 0.23 0.23 0.20 0.33 1.02 Net income per Unit (2) 0.23 0.23 0.18 0.32 0.99 Weighted Average Units Outstanding 95,664,804 95,842,853 131,056,267 157,632,609 120,181,895 Net income before extraordinary items per Unit - - assuming dilution (2) 0.23 0.23 0.20 0.33 1.01 Net income per Unit - assuming dilution (2) $ 0.23 $ 0.23 $ 0.18 $ 0.32 $ 0.98 Weighted Average Units Outstanding - Assuming Dilution 95,686,946 95,882,210 131,174,020 157,946,730 120,317,426
(1) The third quarter of 1997 reflects the amounts as amended in Form 10-Q/A. (2) Primarily due to the cyclical nature of earnings available to Unitholders and the issuance of additional Units during the periods, the sum of the quarterly earnings per Unit varies from the annual earnings per Unit. 73 16. Subsequent Events (Unaudited) Proposed CPI Merger Effective February 18, 1998, the Company and Corporate Property Investors ("CPI") signed a definitive agreement to merge the two companies. The merger is expected to be completed by the end of the third quarter of 1998 and is subject to approval by the shareholders of the Company as well as customary regulatory and other conditions. A majority of the CPI shareholders have already approved the transaction. Under the terms of the agreement, the shareholders of CPI will receive, in a reverse triangular merger, consideration valued at $179 for each share of CPI common stock held consisting of $90 in cash, $70 in the Company's common stock and $19 worth of 6.5% convertible preferred stock. The common stock component of the consideration is based upon a fixed exchange ratio using the Company's February 18, 1998 closing price of $33 5/8 per share, and is subject to a 15% symmetrical collar based upon the price of the Company's common stock determined at closing. In the event the Company's common stock price at closing is outside the parameters of the collar, an adjustment will be made in the cash component of consideration. The total purchase price, including indebtedness which would be assumed, is estimated at $5.8 billion. Macerich Partnership On February 27, 1998, the Operating Partnership, in a joint venture partnership with The Macerich Company ("Macerich"), acquired a portfolio of twelve regional malls comprising approximately 10.7 million square feet of GLA at a purchase price of $974,500, including the assumption of $485,000 of indebtedness. The Operating Partnership and Macerich, as 50/50 partners in the joint venture, were each responsible for one half of the purchase price, including indebtedness assumed and each assumed leasing and management responsibilities for six of the regional malls. 74 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SIMON DeBARTOLO GROUP, L.P. By: Simon DeBartolo Group, Inc. General Partner By /s/ David Simon David Simon Chief Executive Officer March 18, 1998 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. Signature Capacity Date /s/ David Simon Chief Executive Officer March 18, 1998 David Simon and Director (Principal Executive Officer) /s/ Herbert Simon Co-Chairman of the Board of March 18, 1998 Herbert Simon Directors /s/ Melvin Simon Co-Chairman of the Board of March 18, 1998 Melvin Simon Directors /s/ Richard Sokolov President, Chief Operating March 18, 1998 Richard Sokolov Officer and Director /s/ Edward J. DeBartolo, Jr. Director March 18, 1998 Edward J. DeBartolo, Jr. /s/ M. Denise DeBartolo York Director March 18, 1998 M. Denise DeBartolo York /s/ Birch Bayh Director March 18, 1998 Birch Bayh /s/ William T. Dillard, II Director March 18, 1998 William T. Dillard, II /s/ G. William Miller Director March 18, 1998 G. William Miller /s/ Fredrick W. Petri Director March 18, 1998 Fredrick W. Petri /s/ Terry S. Prindiville Sr. Director March 18, 1998 Terry S. Prindiville Sr. /s/ J. Albert Smith Director March 18, 1998 J. Albert Smith 75 /s/ Philip J. Ward Director March 18, 1998 Philip J. Ward /s/ John Dahl Senior Vice President March 18, 1998 John Dahl (Principal Accounting Officer) Principal Financial Officers: /s/ Stephen E. Sterrett Treasurer March 18, 1998 Stephen E. Sterrett /s/ James R. Giuliano III Senior Vice President March 18, 1998 James R. Giuliano III 76 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE To Simon DeBartolo Group, Inc.: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of SIMON DeBARTOLO GROUP, L.P. included in this Form 10-K, and have issued our report thereon dated February 17, 1998. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule, "Schedule III: Real Estate and Accumulated Depreciation", as of December 31, 1997, is the responsibility of the Operating Partnership's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. The schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Indianapolis, Indiana, February 17, 1998 77 SIMON DeBARTOLO GROUP, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1997 SCHEDULE III (Dollars in thousands)
Cost Capitalized Gross Amounts At Subsequent to Which Carried At Initial Cost Acquisition Close of Period -------------------- ---------------- ------------------- Buildings Build- Buildings Accum- and ings and and ulated Encum- Improv- Improv- Improv- Depre- Date of Name, Location brances Land ements Land ements Land ements Total ciation Construction REGIONAL MALLS - ------------------------- ---------- ---------- ---------- ------- -------- ---------- ---------- ---------- -------- ------------- Alton Square, Alton, IL $0 $154 $7,641 $0 $11,825 $154 $19,466 $19,620 $1,508 1993 (Note 3) Amigoland Mall, 0 1,045 4,518 0 986 1,045 5,504 6,549 1,426 1974 Brownsville, TX Anderson Mall, Anderson, SC 19,000 1,838 18,122 1,363 2,197 3,201 20,319 23,520 3,698 1972 Barton Creek Square, 62,868 4,413 20,699 771 18,893 5,184 39,592 44,776 6,659 1981 Austin, TX Battlefield Mall, 49,730 4,040 29,783 3,225 32,636 7,265 62,419 69,684 9,131 1976 Springfield, MO Bay Park Square, Green Bay, 24,848 6,997 25,623 0 193 6,997 25,816 32,813 1,051 1996 (Note 4) WI Bergen Mall, Paramus, NJ 0 11,020 92,541 0 4,569 11,020 97,110 108,130 3,471 1996 (Note 4) Biltmore Square, Asheville, 27,534 10,907 19,315 0 793 10,907 20,108 31,015 831 1996 (Note 4) NC Boynton Beach Mall, Boynton 0 33,758 67,710 0 1,789 33,758 69,499 103,257 2,805 1996 (Note 4) Beach, FL Broadway Square, Tyler, TX 0 11,470 32,450 0 1,586 11,470 34,036 45,506 3,133 1994 (Note 3) Brunswick Square, East 0 8,436 55,838 0 935 8,436 56,773 65,209 2,284 1996 (Note 4) Brunswick, NJ Castleton Square, 0 45,011 80,963 0 1,234 45,011 82,197 127,208 3,309 1996 (Note 4) Indianapolis, IN Charlottesville Fashion 0 0 55,115 0 0 0 55,115 55,115 393 1997 (Note 4) Square, Charlottesville, VA Chautauqua Mall, Jamestown, 0 3,258 9,641 0 10,106 3,258 19,747 23,005 474 1996 (Note 4) NY Cheltenham Square, 34,226 14,226 43,799 0 1,371 14,226 45,170 59,396 1,883 1996 (Note 4) Philadelphia, PA Chesapeake Square, 49,490 11,533 70,461 0 398 11,533 70,859 82,392 2,866 1996 (Note 4) Chesapeake, VA Cielo Vista Mall, El Paso, 57,938 1,307 18,512 608 13,461 1,915 31,973 33,888 7,087 1974 TX College Mall, Bloomington, 42,936 1,012 16,245 722 16,995 1,734 33,240 34,974 6,530 1965 IN Columbia Center, Kennewick, 42,867 27,170 58,185 0 4,522 27,170 62,707 89,877 2,416 1996 (Note 4) WA Cottonwood Mall, 0 14,010 69,173 0 983 14,010 70,156 84,166 5,507 1993 Albuquerque, NM Crossroads Mall, Omaha, NE 41,440 884 37,293 409 22,290 1,293 59,583 60,876 4,547 1994 (Note 3) Crystal River Mall, Crystal 16,000 11,679 14,252 0 2,376 11,679 16,628 28,307 574 1996 (Note 4) River, FL DeSoto Square, Bradenton, 38,880 9,531 52,716 0 2,658 9,531 55,374 64,905 2,235 1996 (Note 4) FL Eastern Hills Mall, 0 15,444 47,604 0 468 15,444 48,072 63,516 1,952 1996 (Note 4) Buffalo, NY Eastland Mall, Tulsa, OK 30,000 3,124 24,035 518 6,106 3,642 30,141 33,783 4,525 1986 Edison Mall, Fort Myers, FL 41,000 13,618 108,215 0 0 13,618 108,215 121,833 773 1997 (Note 4) Fashion Mall at Keystone at 64,772 0 112,952 0 0 0 112,952 112,952 0 1997 (Note 4) the Crossing, Indianapolis, IN Forest Mall, Fond Du Lac, 12,800 754 4,498 0 2,334 754 6,832 7,586 1,431 1973 WI Forest Village Park, 20,600 1,212 4,625 757 3,694 1,969 8,319 10,288 1,562 1980 Forestville, MD Fremont Mall, Fremont, NE 0 26 1,280 265 2,156 291 3,436 3,727 392 1983 Golden Ring Mall, 29,750 1,130 8,955 572 8,459 1,702 17,414 19,116 3,523 1974 (Note 3) Baltimore, MD Great Lakes Mall, 62,018 14,608 100,362 0 2,166 14,608 102,528 117,136 4,152 1996 (Note 4) Cleveland, OH Greenwood Park Mall, 35,960 2,606 23,500 5,275 52,357 7,881 75,857 83,738 11,534 1977 Greenwood, IN Gulf View Square, Port 38,157 13,689 39,997 0 401 13,689 40,398 54,087 1,633 1996 (Note 4) Richey, FL Heritage Park, Midwest 0 598 6,213 0 1,487 598 7,700 8,298 1,581 1978 City, OK Hutchinson Mall, Hutchison, 11,523 1,777 18,427 0 2,903 1,777 21,330 23,107 3,658 1985 KS Independence Center, 0 5,539 45,822 0 2,888 5,539 48,710 54,249 4,386 1994 (Note 3) Independence, MO Ingram Park Mall, San 55,580 820 17,182 169 13,083 989 30,265 31,254 5,832 1979 Antonio, TX Irving Mall, Irving, TX 0 6,736 17,479 2,539 12,858 9,275 30,337 39,612 7,248 1971 Jefferson Valley Mall, Yorktown Heights, NY 50,000 4,869 30,304 0 2,910 4,869 33,214 38,083 5,690 1983 Knoxville Center, 0 5,269 22,965 3,712 30,601 8,981 53,566 62,547 4,064 1984 Knoxville, TN La Plaza, McAllen, TX 50,044 2,194 9,828 0 2,763 2,194 12,591 14,785 2,157 1976 Lafayette Square, 0 25,546 43,294 0 4,503 25,546 47,797 73,343 1,813 1996 (Note 4) Indianapolis, IN Laguna Hills Mall, Laguna 0 28,074 56,436 0 0 28,074 56,436 84,510 401 1997 (Note 4) Hills, CA Lima Mall, Lima, OH 19,166 7,910 35,495 0 586 7,910 36,081 43,991 1,476 1996 (Note 4) 78 Lincolnwood Town Center, 0 11,197 63,490 28 138 11,225 63,628 74,853 8,583 1990 Lincolnwood, IL Longview Mall, Longview, TX 22,100 278 3,602 124 3,459 402 7,061 7,463 1,679 1978 Machesney Park Mall, 0 613 7,460 120 3,101 733 10,561 11,294 2,319 1979 Rockford, IL Markland Mall, Kokomo, IN 10,000 0 7,568 0 1,111 0 8,679 8,679 1,317 1983 Mc Cain Mall, N. Little 26,059 0 9,515 0 6,326 0 15,841 15,841 3,873 1973 Rock, AR Melbourne Square, 39,841 20,552 51,110 0 1,439 20,552 52,549 73,101 2,096 1996 (Note 4) Melbourne, FL Memorial Mall, Sheboygan, 0 175 4,881 0 784 175 5,665 5,840 1,025 1980 WI Menlo Park Mall, Edison, NJ 65,684 225,131 0 0 65,684 225,131 290,815 1,606 1997 (Note 4) Miami International Mall, 47,009 18,685 69,959 12,687 3,146 31,372 73,105 104,477 13,352 1996 (Note 4) Miami, FL Midland Park Mall, Midland, 22,500 704 9,613 0 4,646 704 14,259 14,963 2,818 1980 TX Miller Hill Mall, Duluth, 0 2,537 18,114 0 1,893 2,537 20,007 22,544 3,443 1973 MN Mission Viejo Mall, Mission 0 9,139 54,445 0 12,536 9,139 66,981 76,120 2,206 1996 (Note 4) Viejo, CA Mounds Mall, Anderson, IN 0 0 2,689 0 1,702 0 4,391 4,391 1,077 1964 Muncie Mall, Muncie, IN 0 210 5,964 49 18,913 259 24,877 25,136 2,152 1975 North East Mall, Hurst, TX 22,201 1,440 13,473 784 16,158 2,224 29,631 31,855 1,942 1996 (Note 4) North Towne Square, Toledo, 23,500 579 8,382 0 1,798 579 10,180 10,759 3,156 1980 OH Northgate Mall, Seattle, WA 80,046 89,991 57,873 0 15,802 89,991 73,675 163,666 2,471 1996 (Note 4) Northwoods Mall, Peoria, IL 0 1,202 12,779 1,449 19,429 2,651 32,208 34,859 6,078 1983 (Note 3) Oak Court Mall, Memphis, TN 15,673 57,392 0 0 15,673 57,392 73,065 410 1997 (Note 4) Orange Park Mall, 0 13,345 65,173 0 10,759 13,345 75,932 89,277 5,986 1994 (Note 3) Jacksonville, FL Orland Square, Orland Park, 50,000 36,770 131,054 0 0 36,770 131,054 167,824 545 1997 (Note 4) IL Paddock Mall, Ocala, FL 30,347 20,420 30,490 0 3,713 20,420 34,203 54,623 1,265 1996 (Note 4) Port Charlotte Town Center, Port Charlotte, FL 46,102 5,561 59,381 0 34 5,561 59,415 64,976 2,404 1996 (Note 4) Prien Lake Mall, Lake 0 1,926 2,829 731 11,386 2,657 14,215 16,872 1,187 1972 Charles, LA Promenade, Woodland Hills, 0 13,072 14,487 0 0 13,072 14,487 27,559 103 1997 (Note 4) CA Raleigh Springs Mall, 0 9,137 28,604 0 554 9,137 29,158 38,295 1,193 1996 (Note 4) Memphis, TN Randall Park Mall, 33,879 4,421 52,456 0 2,106 4,421 54,562 58,983 2,170 1996 (Note 4) Cleveland, OH Richardson Square, Dallas, 0 4,867 6,329 1,075 1,866 5,942 8,195 14,137 353 1996 (Note 4) TX Richmond Square, Richmond, 0 3,410 11,343 0 7,928 3,410 19,271 22,681 566 1996 (Note 4) IN Richmond Towne Square, 0 2,666 12,112 0 1,050 2,666 13,162 15,828 490 1996 (Note 4) Cleveland, OH River Oaks Center, Calumet 32,500 30,884 102,357 0 0 30,884 102,357 133,241 413 1997 (Note 4) City, IL Ross Park Mall, Pittsburgh, 60,000 14,557 50,995 9,617 46,014 24,174 97,009 121,183 6,089 1996 (Note 4) PA South Hills Village, 0 23,453 126,887 0 0 23,453 126,887 150,340 302 1997 (Note 4) Pittsburgh, PA South Park Mall, 24,748 855 13,691 74 2,531 929 16,222 17,151 3,615 1975 Shreveport, LA Southern Park Mall, 0 16,982 77,774 97 11,506 17,079 89,280 106,359 3,387 1996 (Note 4) Youngstown, OH Southgate Mall, Yuma, AZ 0 1,817 7,974 0 2,969 1,817 10,943 12,760 1,741 1988 (Note 3) Southtown Mall, Ft. Wayne, 0 2,059 13,288 0 974 2,059 14,262 16,321 6,244 1969 IN St Charles Towne Center 0 9,328 52,974 1,180 9,412 10,508 62,386 72,894 10,611 1990 Waldorf, MD Summit Mall, Akron, OH 0 25,037 45,036 0 9,551 25,037 54,587 79,624 2,133 1996 (Note 4) Sunland Park Mall, El Paso, 39,855 2,896 28,900 0 2,291 2,896 31,191 34,087 6,571 1988 TX Tacoma Mall, Tacoma, WA 93,656 39,504 125,826 0 2,441 39,504 128,267 167,771 5,177 1996 (Note 4) Tippecanoe Mall, Lafayette, 46,961 4,320 8,474 5,517 31,314 9,837 39,788 49,625 6,816 1973 IN Towne East Square, Wichita, 56,767 9,495 18,479 2,042 8,372 11,537 26,851 38,388 6,082 1975 KS Towne West Square, Wichita, 0 988 21,203 76 4,584 1,064 25,787 26,851 5,477 1980 KS Treasure Coast Square, 53,953 11,124 73,108 0 1,296 11,124 74,404 85,528 2,972 1996 (Note 4) Jenson Beach, FL Tyrone Square, St. 0 15,638 120,962 0 1,418 15,638 122,380 138,018 4,939 1996 (Note 4) Petersburg, FL University Mall, Little 0 123 17,411 0 714 123 18,125 18,248 3,815 1967 Rock, AR 79 University Mall, Pensacola, 0 4,741 26,657 0 1,700 4,741 28,357 33,098 2,610 1994 (Note 3) FL University Park Mall, South 59,500 15,105 61,466 0 6,539 15,105 68,005 83,110 14,721 1996 (Note 4) Bend, IN Upper Valley Mall, 30,940 8,422 38,745 0 439 8,422 39,184 47,606 1,607 1996 (Note 4) Springfield, OH Valle Vista Mall, 34,514 1,398 17,266 372 6,899 1,770 24,165 25,935 4,305 1983 Harlingen, TX Virginia Center Commons, 0 9,765 63,098 1,839 397 11,604 63,495 75,099 2,853 1996 (Note 4) Richmond, VA Washington Square, 33,541 20,146 41,248 0 546 20,146 41,794 61,940 1,703 1996 (Note 4) Indianapolis, IN West Ridge Mall, Topeka, KS 44,288 5,775 34,132 197 3,892 5,972 38,024 43,996 6,070 1988 White Oaks Mall, 16,500 3,024 35,692 1,153 13,579 4,177 49,271 53,448 5,088 1977 Springfield, IL Windsor Park Mall, San 14,811 1,194 16,940 130 3,285 1,324 20,225 21,549 4,189 1976 Antonio, TX Woodville Mall, Toledo, OH 0 1,830 4,454 0 339 1,830 4,793 6,623 221 1996 (Note 4) COMMUNITY SHOPPING CENTERS - ------------------------- Arvada Plaza, Arvada, CO 0 70 342 608 581 678 923 1,601 207 1966 Aurora Plaza, Aurora, CO 0 35 5,754 0 1,004 35 6,758 6,793 1,381 1966 Bloomingdale Court, 29,009 9,735 26,184 0 1,323 9,735 27,507 37,242 3,218 1987 Bloomingdale, IL Boardman Plaza, Youngstown, 18,277 8,189 26,355 0 1,479 8,189 27,834 36,023 1,087 1996 (Note 4) OH Bridgeview Court, 0 308 3,638 0 50 308 3,688 3,996 596 1988 Bridgeview, IL Brightwood Plaza, 0 65 128 0 256 65 384 449 93 1965 Indianapolis, IN Buffalo Grove Towne Center, Buffalo Grove, IL 0 2,044 6,602 0 270 2,044 6,872 8,916 468 1988 Celina Plaza, El Paso, TX 0 138 815 0 13 138 828 966 144 1977 Century Mall, Merrillville, 0 2,190 9,589 0 1,376 2,190 10,965 13,155 2,792 1992 (Note 3) IN Charles Towne Square, 0 446 1,768 500 8,655 946 10,423 11,369 0 1976 Charleston, SC Chesapeake Center, 6,563 5,500 12,279 0 23 5,500 12,302 17,802 498 1996 (Note 4) Chesapeake, VA Cohoes Commons, Rochester, 0 1,698 8,426 0 80 1,698 8,506 10,204 1,765 1984 NY Countryside Plaza, 0 1,243 8,507 0 548 1,243 9,055 10,298 1,856 1977 Countryside, IL Eastgate Consumer Mall, 22,929 425 4,722 187 2,868 612 7,590 8,202 2,935 1991 (Note 3) Indianapolis, IN Eastland Plaza, Tulsa, OK 0 908 3,709 0 11 908 3,720 4,628 506 1987 Forest Plaza, Rockford, IL 16,904 4,270 16,818 453 455 4,723 17,273 21,996 1,782 1985 Fox River Plaza, Elgin, IL 12,654 2,907 9,453 0 60 2,907 9,513 12,420 1,016 1985 Glen Burnie Mall, Glen 0 7,422 22,778 0 2,265 7,422 25,043 32,465 930 1996 (Note 4) Burnie, MD Great Lakes Plaza, 0 1,027 2,025 0 3,073 1,027 5,098 6,125 226 1996 (Note 4) Cleveland, OH Greenwood Plus, Greenwood, 0 1,350 1,792 0 4,221 1,350 6,013 7,363 766 1979 (Note 3) IN Griffith Park Plaza, 0 0 2,412 0 110 0 2,522 2,522 533 1979 Griffith, IN Grove at Lakeland Square, 3,750 5,237 6,016 0 892 5,237 6,908 12,145 305 1996 (Note 4) The, Lakeland, FL Hammond Square, Sandy 0 0 27 0 1 0 28 28 5 1974 Springs, GA Highland Lakes Center, 14,377 13,950 18,490 0 314 13,950 18,804 32,754 769 1996 (Note 4) Orlando, FL Ingram Plaza, San Antonio, 0 421 1,802 4 22 425 1,824 2,249 449 1980 TX Keystone Shoppes , 0 0 12,550 0 0 0 12,550 12,550 0 1997 (Note 4) Indianapolis, IN Knoxville Commons, 0 3,730 5,345 0 1,608 3,730 6,953 10,683 869 1990 Knoxville, TN Lake Plaza, Waukegan, IL 0 2,868 6,420 0 267 2,868 6,687 9,555 654 1986 Lake View Plaza, Orland 22,169 4,775 17,586 0 445 4,775 18,031 22,806 1,806 1986 Park, IL Lima Center Lima, OH 0 1,808 5,151 0 9 1,808 5,160 6,968 204 1996 (Note 4) Lincoln Crossing, O'Fallon, 997 1,079 2,692 0 268 1,079 2,960 4,039 408 1990 IL Mainland Crossing, 2,226 1,850 1,737 0 124 1,850 1,861 3,711 81 1996 (Note 4) Galveston, TX Maplewood Square, Omaha, NE 0 466 1,249 0 157 466 1,406 1,872 303 1987 Markland Plaza, Kokomo, IN 0 210 1,258 0 475 210 1,733 1,943 385 1975 Martinsville Plaza, 0 0 584 0 45 0 629 629 266 1980 Martinsville, VA Marwood Plaza, 0 52 3,597 0 107 52 3,704 3,756 558 1962 Indianapolis, IN Matteson Plaza, Matteson, 11,159 1,830 9,737 0 1,557 1,830 11,294 13,124 1,218 1988 IL 80 Memorial Plaza, Sheboygan, 0 250 436 0 871 250 1,307 1,557 230 1966 WI Mounds Mall Cinema, 0 88 158 0 1 88 159 247 40 1975 Anderson, IN New Castle Plaza, New 0 128 1,621 0 547 128 2,168 2,296 460 1966 Castle, IN North Ridge Plaza, Joliet, 0 2,831 7,699 0 374 2,831 8,073 10,904 898 1985 IL North Riverside Park Plaza, N. Riverside, IL 7,671 1,062 2,490 0 254 1,062 2,744 3,806 617 1977 Northland Plaza, Columbus, 0 4,490 8,893 0 360 4,490 9,253 13,743 897 1988 OH Northwood Plaza, Fort 0 304 2,922 0 362 304 3,284 3,588 670 1977 Wayne, IN Park Plaza, Hopkinsville, 0 300 1,572 0 24 300 1,596 1,896 299 1968 KY Regency Plaza, St. Charles, 1,878 616 4,963 0 150 616 5,113 5,729 478 1988 MO Sherwood Gardens, Salinas, 0 0 9,106 0 0 0 9,106 9,106 136 1997 (Note 4) CA St. Charles Towne Plaza, 30,742 8,780 18,993 0 117 8,780 19,110 27,890 2,067 1987 Waldorf, MD Teal Plaza, Lafayette, IN 0 99 878 0 2,712 99 3,590 3,689 148 1986 Terrace at The Florida 4,688 5,647 4,126 0 956 5,647 5,082 10,729 272 1996 (Note 4) Mall, Orlando, FL Tippecanoe Plaza, 0 265 440 305 4,728 570 5,168 5,738 579 1962 Lafayette, IN University Center, South 0 2,388 5,214 0 46 2,388 5,260 7,648 2,197 1996 (Note 4) Bend, IN Wabash Village, West 0 0 976 0 203 0 1,179 1,179 232 1976 Lafayette, IN Washington Plaza, 0 942 1,697 0 0 942 1,697 2,639 434 1996 (Note 4) Indianapolis, IN West Ridge Plaza, Topeka, 4,612 1,491 4,620 0 508 1,491 5,128 6,619 504 1988 KS White Oaks Plaza, 12,345 3,265 14,267 0 188 3,265 14,455 17,720 1,460 1986 Springfield, IL Wichita Mall, Wichita, KS 0 0 4,535 0 1,635 0 6,170 6,170 1,184 1981 Wood Plaza, Fort Dodge, IA 0 45 380 0 760 45 1,140 1,185 216 1967 SPECIALTY RETAIL CENTERS - ------------------------ The Forum Shops at Caesars, Las Vegas, NV 175,000 0 72,866 0 57,655 0 130,521 130,521 12,508 1992 Trolley Square, Salt Lake 27,141 4,899 27,539 263 3,661 5,162 31,200 36,362 4,353 1986 (Note 3) City, UT MIXED-USE PROPERTIES - ------------------------ New Orleans Centre/CNG Plaza, New Orleans, LA 0 3,679 41,231 0 725 3,679 41,956 45,635 1,670 1996 (Note 4) O Hare International Center, Rosemont, IL 0 125 60,287 1 8,796 126 69,083 69,209 14,771 1986 Riverway, Rosemont, IL 131,451 8,738 129,175 16 6,560 8,754 135,735 144,489 28,737 1988 DEVELOPMENT PROJECTS - ------------------------- Bowie Town Center, Bowie, 6,000 570 0 0 6,000 570 6,570 0 MD Indian River Peripheral, 826 57 0 0 826 57 883 0 1996 (Note 4) Vero Beach, FL Muncie Plaza, Muncie, IN 625 10,626 625 10,626 11,251 0 North East Plaza, Hurst, TX 8,988 2,198 0 0 8,988 2,198 11,186 0 The Shops at Sunset Place, Miami, FL 23,546 12,297 68,111 0 0 12,297 68,111 80,408 0 Victoria Ward, Honolulu, HI 0 0 1,400 0 0 0 1,400 1,400 0 Waterford Lakes, Orlando, 0 0 1,114 0 0 0 1,114 1,114 0 FL Other 0 0 314 0 0 0 314 314 ---------- ---------- ---------- ------- -------- ---------- ---------- ---------- -------- $2,705,333 $1,191,370 $4,802,609 $62,583 $757,503 $1,253,953 $5,560,112 $6,814,065 $448,353 ========== ========== ========== ======= ======== ========== ========== ========== ========
81 SIMON DeBARTOLO GROUP, L.P. NOTES TO SCHEDULE III AS OF DECEMBER 31, 1997 (Dollars in thousands) (1) Reconciliation of Real Estate Properties: The changes in real estate assets for the years ended December 31, 1997 and 1996 are as follows: 1997 1996 Balance, beginning of year $5,273,465 $2,143,925 Acquisitions 1,238,909 2,843,287 Improvements 312,558 224,605 Disposals (10,867) (19,579) Consolidation -- 81,227 ---------- ---------- Balance, close of year $6,814,065 $5,273,465 ========== ========== The aggregate net book value for federal income tax purposes as of December 31, 1997 was $4,745,605. (2) Reconciliation of Accumulated Depreciation: The changes in accumulated depreciation and amortization for the years ended December 31, 1997 and 1996 are as follows: 1997 1996 Balance, beginning of year $ 270,637 $ 147,341 Carryover of minority partners' interest in accumulated depreciation of DeBartolo Properties -- 13,505 Depreciation expense 183,357 120,565 Disposals (5,641) (10,774) --------- --------- Balance, close of year $ 448,353 $ 270,637 ========= ========= Depreciation of the Operating Partnership's investment in buildings and improvements reflected in the statements of operations is calculated over the estimated original lives of the assets as follows: Buildings and Improvements - typically 35 years Tenant Inducements - shorter of lease term or useful life (3) Initial cost represents net book value at December 20, 1993. (4) Not developed/constructed by the Operating Partnership or the Simons. The date of construction represents acquisition date. 82 INDEX TO EXHIBITS Exhibits Page 2.1 Agreement and Plan of Merger among SPG, Sub and DRC, dated as of March 26, 1996, as amended (included as Annex I to the Prospectus/Joint Proxy Statement filed as part of Form S-4 of Simon Property Group, Inc. (Registration No. 333-06933)) 2.2 Amendment and supplement to Offer to Purchase for Cash all Outstanding Beneficial Interests in The Retail Property Trust (incorporated by reference to Exhibit 99.1 of the Form 8-K filed by the Operating Partnership on September 12, 1997) 2.3 (d) Merger agreement between SDG, LP and SPG, LP 2.4 (d) Purchase and Sale Agreement between the The Equitable Life Assurance Society of the United States and SM Portfolio Partners 2.5 Agreement and Plan of Merger among the Company and Corporate Property Investors and Corporate Realty Consultants, Inc. (incorporated by reference to Exhibit 10.1 in the Form 8-K filed by the Company on February 24, 1998) 3.1 (c) Amended and Restated Charter 3.2 (c) Amended and Restated Bylaws, incorporated by reference to Annex VIII of the Company's Schedule 14A on May 8, 1996. 3.3 (c) Articles Supplementary with respect to the Series B Preferred Stock of the Company to the Amended and Restated Charter. 3.4 Articles Supplementary with respect to the Series C Preferred Stock of the Company to the Amended and Restated Charter. (incorporated by reference to Exhibit 4.1 of the Form 8-K filed by the Company on July 8, 1997) 3.5 (d) Articles Supplementary with respect to the conversion of the Series A Preferred Stock of the Company into Common Stock. 4.2 (a) Secured Promissory Note and Open-End Mortgage and Security Agreement from Simon Property Group, L.P. in favor of Principal Mutual Life Insurance Company (Pool 2). 4.3 (d) Second Amended and Restated Credit Agreement dated as of December 22, 1997 among the Operating Partnership and Morgan Guaranty Trust Company of New York, Union Bank of Switzerland and Chase Manhattan Bank as Lead Agents. 9.1 (a) Voting Trust Agreement, Voting Agreement and Proxy between MSA, on the one hand, and Melvin Simon, Herbert Simon and David Simon, on the other hand. 10.1 Fifth Amended and Restated Limited Partnership Agreement of Simon DeBartolo Group, L.P. (Incorporated by Reference to Exhibit 10.1.1 of the Company's Form S-4 (Registration No. 333- 06933)) 10.3 (a) Noncompetition Agreement dated as of December 1, 1993 between the Company and each of Melvin Simon and Herbert Simon. 10.4 (a) Noncompetition Agreement dated as of December 1, 1993 between the Company and David Simon. 10.5 (a) Restriction and Noncompetition Agreement dated as of December 1, 1993 among the Company and the Management Companies. 10.6 (a) Simon Property Group, L.P. Employee Stock Plan. 10.7 (a) Simon DeBartolo Group, Inc. Director Stock Option Plan. 10.8 (c) Restated Indemnity Agreement dated as of August 9, 1996 between the Company and its directors and officers. 10.9 (a) Option Agreement to acquire the Excluded Retail Properties. (Previously filed as Exhibit 10.10.) 10.10 (a) Option Agreement to acquire the Excluded PropertiesLand. (Previously filed as Exhibit 10.11.) 10.11 (a) Registration Rights Agreement dated as of December 1, 1993 between the Company, certain Limited Partners and certain other parties. (Previously filed as Exhibit 10.12.) 10.12 (a) Option Agreements dated as of December 1, 1993 between the Management Company and Simon Property Group, L.P. (Previously filed as Exhibit 10.20.) 83 10.13 (a) Option Agreement dated as of December 1, 1993 to acquire Development Land. (Previously filed as Exhibit 10.22.) 10.14 (a) Option Agreement dated December 1, 1993 between the Management Company and Simon Property Group, L.P. (Previously filed as Exhibit 10.25.) 10.15 (a) Option Agreement dated December 1, 1993 between Simon Enterprises, Inc. and Simon Property Group, L.P. (Previously filed as Exhibit 10.26.) 10.16 (a) Lock-Up Agreement dated December 20, 1993 between MSA and Simon Property Group, L.P. (Previously filed as Exhibit 10.27.) 10.17 (b) Operating Agreement of Summit Mall Company, L.L.C. dated February 23, 1995. 10.19 Partnership Agreement of DeBartolo Capital Partnership (the "Financing Partnership") (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(b).) 10.20 Amended and Restated Articles of Incorporation of DPMI (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(c).) 10.21 Amended and Restated Code of Regulations of DPMI (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(d).) 10.25 First Amendment to the Corporate Services Agreement between DRC and DPMI (Incorporated by reference to the 1995 DRC Form 10-K Exhibit 10.17.) 10.26 Service Agreement between EJDC and DPMI (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10.(f).) 10.27 Master Services Agreement between DRP, LP and DPMI (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(g).) 10.28 First Amendment to Master Services Agreement between DRP, LP and DPMI (Incorporated by reference to the 1995 DRC Form 10-K Exhibit 10.20.) 10.33 DRC 1994 Stock Incentive Plan (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(k).) 10.34 Purchase Option and Right of First Refusal Agreement between DRP, LP and Edward J. DeBartolo (for Northfield Square) (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(o).) 10.35 Indemnification Agreement between DRC and its directors and officers (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(u).) 10.36 Amendment to Indemnification Agreement between DRP, LP and the directors and officers of DPMI (Incorporated by reference to the 1995 DRC Form 10-K Exhibit 10.49.) 10.37 Indemnification Agreement between DRP, LP and the directors and officers of DPMI (Incorporated by reference to the 1995 DRC Form 10-K Exhibit 10.50.) 10.38 Indemnification Agreement between DPMI and its directors and officers (Incorporated by reference to the 1995 DRC Form 10-K Exhibit 10.51.) 10.43 Office Lease between DRP, LP and an affiliate of EJDC (Southwoods Executive Center) (Incorporated by reference to the 1995 DRC Form 10-K Exhibit 10.69.) 10.44 Sublease between DRP, LP and DPMI (Incorporated by reference to the 1995 DRC Form 10-K Exhibit 10.70.) 10.45 Purchase Option and Right of First Refusal 10.46 Purchase Option and Right of First Refusal Agreement between DRP, LP and EJDC (for SouthPark Center Development Site) (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(p)(2).) 10.47 Purchase Option and Right of First Refusal Agreement between DRP, LP and Washington Mall Associates (for Washington, Pennsylvania Site) (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(p)(3).) 10.48 Purchase Option and Right of First Offer Agreement between DRP, LP and Cutler Ridge Mall, Inc. (for Cutler Ridge Mall) (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(q)(1).) 10.49 Purchase Option and Right of First Offer Agreement between DRP, LP and Almonte, Inc. (for Red Bird Mall) (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(q)(2).) 84 10.50 Purchase Option and Right of First Refusal Agreement between DRP, LP and DeBartolo-Stow Associates (for University Town Center) (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(r).) 10.51 Acquisition Option Agreement between DRP, LP and Coral Square Associates (for Coral Square) (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(s)(1).) 10.52 Acquisition Option Agreement between DRP, LP and Lakeland Square Associates (for Lakeland Square) (Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(s)(2).) 10.53 (c) Amended and Restated Articles of Incorporation of SD Property Group, Inc. 10.54 (c) Amended and Restated Regulations of SD Property Group, Inc. 10.55 (c) Indemnity Agreement by and between the Company and its new Directors, dated as of August 9, 1996 10.56 (c) Contribution Agreement, dated as of June 25, 1996, by and among DRC and the former limited partners of SPG, LP., excluding JCP Realty, Inc. and Brandywine Realty, Inc. 10.57 (c) JCP Contribution Agreement, dated as of August 8, 1996, by and among DRC and JCP Realty, Inc., and Brandywine Realty, Inc. 10.58 (c) Subscription Agreement by and between Day Acquisition Corp., and the Purchaser (as defined in this Exhibit) 10.59 (c) Amendment to Service Agreement dated as of August 9, 1996, between EJDC and DPMI 10.60 (c) Registration Rights Agreement (the "Agreement"), dated as of August 9, 1996, by and among the "Simon Family Members" (As defined in the Agreement), SPG, Inc., JCP Realty, Inc., Brandywine Realty, Inc., and the Estate of Edward J. DeBartolo Sr., Edward J. DeBartolo, Jr., Marie Denise DeBartolo York, and the Trusts and other entities listed on Schedule 2 of the Agreement, and any of their respective successors-in-interest and permitted assigns. 10.61 (c) Fourth Amendment to Purchase Option Agreement, dated as of July 15, 1996, between JCP Realty, Inc., and DRP, LP. 10.62 (d) Partnership Agreement of SM Portfolio Limited Partnership 10.63 (d) Limited Partnership Agreement of SDG Macerich Properties, L.P. 10.64 (d) Agreement of Limited Partnership of Simon Capital Limited Partnership 21.1 List of Subsidiaries of the Company. 86 23.1 Consent of Arthur Andersen LLP. 87 99.1 Agreement dated November 13, 1996 between Simon DeBartolo Group, Inc. and Simon DeBartolo Group, L.P. (Incorporated by reference to Amendment No. 3 of Form S-3 filed by Simon DeBartolo Group, L.P. and Simon Property Group, L.P. on November 20, 1996 under Registration No. 333-11491) (a) Incorporated by reference to the exhibit with the same number (or as indicated) that was filed with the Company's Form 10-K for the fiscal year ended December 31, 1993. (b) Incorporated by reference to the exhibit numbered as indicated that was filed with the Company's Form 10-K for the fiscal year ended December 31, 1995. (c) Incorporated by reference to the exhibit numbered as indicated that was filed with the Company's Form 10-K for the fiscal year ended December 31, 1996. (d) Incorporated by reference to the exhibit numbered as indicated that was filed with the Company's Form 10-K for the fiscal year ended December 31, 1997. 85 ============================================================================ EXHIBIT 21.1 List of Subsidiaries of the Company List of Subsidiary Jurisdiction Charles Mall Company Limited Partnership Maryland DeBartolo Capital Partnership Delaware DeBartolo Properties, Inc. Delaware DeBartolo Properties II, Inc. Delaware DeBartolo Properties III, Inc. Delaware East Towne Mall Company Limited Partnership Tennessee Forestville Associates Maryland Forum Finance Corp Delaware Golden Ring Mall Company Limited Partnership Indiana Jefferson Valley Mall Limited Partnership Delaware Knoxville Developers Limited Partnership Indiana The Retail Property Trust Massachusetts Shopping Center Associates Delaware Simon Property Group (Delaware), Inc. Delaware Simon Property Group (Illinois), L.P. Illinois Simon Property Group (Texas), L.P. Texas SD Property Group, Inc. Ohio SDG Properties VII, Inc. Delaware SDG Dadeland Associates, Inc. Delaware SDG Dadeland Developers, Inc. Delaware SDG EQ Associates, Inc. Delaware SDG Orland, Inc. Delaware 86 ============================================================================ EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports, included in this Form 10-K, into Simon DeBartolo Group, Inc.'s (formerly Simon Property Group, Inc.) previously filed Registration Statement File Nos. 33-79884, 33-87764, 33-87766, 333-06933, 333-43235, 333-33627 and 333-43681. ARTHUR ANDERSEN LLP Indianapolis, Indiana, March 19, 1998 87
 

5 This schedule contains summary financial information extracted from SEC Form 10-K and is qualified in its entirety by reference to such financial statements. 1000 YEAR DEC-31-1997 DEC-31-1997 109,699 0 202,163 13,804 0 0 6,867,354 (461,792) 7,662,667 0 5,077,990 0 339,061 0 1,912,238 7,662,667 0 1,054,167 0 571,145 0 5,992 287,823 203,133 203,133 203,133 0 58 0 203,191 1.08 1.08 The Operating Partnership does not report using a classified balance sheet.