SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): September 4, 1997
TAUBMAN CENTERS, INC.
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN
(State or Other Jurisdiction of Incorporation)
1-11530 38-2033632
(Commission File Number) (I.R.S Employer Identification Number)
200 East Long Lake Road, Suite 300, P.O. Box 200, Bloomfield Hills, Michigan
(Address of principal executive offices) 48303-0200
(Zip Code)
(248) 258-6800
(Registrant's Telephone Number, Including Area Code)
None
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Matters.
On September 4, 1997, The Taubman Realty Group Limited Partnership (TRG)
completed the acquisition of Regency Square shopping center. Taubman Centers,
Inc. (the Company) is the managing general partner of TRG. The Center was
acquired from a subsidiary of The Prudential Insurance Company of America (the
Seller) for approximately $123.9 million in cash. The Seller is unaffiliated
with TRG and the Company and the transaction was negotiated at arm's length. In
negotiating the purchase price, TRG considered, among other factors, the
Center's historical and anticipated cash flows, the nature and terms of the
leases, the physical condition of the property, expansion possibilities, and
market conditions. TRG borrowed under its existing commercial paper facility and
an existing revolving credit facility with Union Bank of Switzerland (New York
Branch) to fund the purchase price.
Regency Square is an 823 thousand square foot regional shopping center located
in Richmond, Virginia. The Center is anchored by Hecht's, JCPenney, and Sears.
The Center opened in 1975 and was renovated in 1987.
Item 7. Financial Statements and Exhibits.
The following financial statements and pro forma information are being supplied
as supplementary information to this voluntary filing on Form 8-K.
a-b Financial Statements and Pro Forma Information.
Independent Auditors' Report.
Regency Square, Historical Summary of Revenues and Direct Operating
Expenses for the Year Ended December 31, 1996.
Taubman Centers, Inc., Pro Forma Condensed Statement of Operations,
Year Ended December 31, 1996, and the Six Months Ended June 30, 1997
(unaudited).
The Taubman Realty Group Limited Partnership, Pro Forma Condensed
Consolidated Balance Sheet, June 30, 1997 (unaudited).
The Taubman Realty Group Limited Partnership, Pro Forma Condensed
Consolidated Statement of Operations, Year Ended December 31, 1996
(unaudited).
The Taubman Realty Group Limited Partnership, Pro Forma Condensed
Consolidated Statement of Operations, Six Months Ended June 30, 1997
(unaudited).
The Taubman Realty Group Limited Partnership, Statement of Estimated
Taxable Operating Results of Regency Square and Estimated Cash to be
Made Available by Operations of Regency Square for a Twelve Month
Period Ended June 30, 1997 (unaudited).
2
- ------------------------------------------------------------------------------
Regency Square
Historical Summary of Revenues and Direct
Operating Expenses for
the Year Ended December 31, 1996, and
Independent Auditors' Report
3
INDEPENDENT AUDITORS' REPORT
Partners
The Taubman Realty Group Limited Partnership
Bloomfield Hills, Michigan
We have audited the accompanying Historical Summary of Revenues and Direct
Operating Expenses of Regency Square (the "Historical Summary"), for the year
ended December 31, 1996. This Historical Summary is the responsibility of
Regency Square's management. Our responsibility is to express an opinion on the
Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a Form 8-K of The Taubman Realty Group Limited Partnership) as
described in Note 1 to the Historical Summary and is not intended to be a
complete presentation of Regency Square's revenues and expenses.
In our opinion, such Historical Summary presents fairly, in all material
respects, the revenues and direct operating expenses described in Note 1 to the
Historical Summary of Regency Square for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Detroit, Michigan
July 31, 1997
4
REGENCY SQUARE
HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
REVENUES:
Minimum rents $ 6,883,568
Percentage rents 1,352,919
Recoveries from tenants 4,485,625
Other 496,983
-----------
$13,219,095
DIRECT OPERATING EXPENSES:
Recoverable from tenants $ 3,841,585
Other 326,559
-----------
$ 4,168,144
-----------
EXCESS OF REVENUES OVER DIRECT
OPERATING EXPENSES $ 9,050,951
===========
See notes to historical summary.
5
REGENCY SQUARE
NOTES TO HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING
EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1996
- ------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General - Regency Square is a regional shopping center located in Richmond,
Virginia, which was owned by a subsidiary of The Prudential Insurance Company
of America. Shopping center space is generally leased to specialty retail
tenants under short and intermediate term leases which are accounted for as
operating leases. Leases typically provide for guaranteed minimum rent,
percentage rent, and other charges to cover certain operating costs.
Basis of presentation - The accompanying historical summary of revenues and
direct operating expenses has been prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission for
inclusion in a current report on Form 8-K of The Taubman Realty Group Limited
Partnerhsip (TRG). The accompanying historical summary is not representative
of the actual operations of the shopping center for the period presented
since material expenses which may not be comparable to the proposed future
oeration of Regency Square by TRG have been excluded. Expenses excluded
consist of interest and depreciation and amortization.
Revenue recognition - Minimum rents are recognized on an accrual basis as
earned, which does not materially differ from a straight-line method.
Percentage rents are recognized on an accrual basis as earned. Expense
recoveries, which include an administrative fee, are recognized as revenue in
the period applicable costs are chargeable to tenants.
6
TAUBMAN CENTERS, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1996 and the Six Months
Ended June 30, 1997
(unaudited)
(in thousands, except share data)
This unaudited Pro Forma Condensed Statement of Operations is presented as if
(i) TRG's acquisition of the Regency Square shopping center, (ii) TRG's
acquisition of interests in Paseo Nuevo, Fairlane Town Center and La Cumbre
shopping centers and (iii) the Company's issuances of common stock used to
acquire additional interests in TRG, had occurred as of January 1, 1996. In
management's opinion, all adjustments necessary to reflect the effects of these
transactions have been made. This unaudited Pro Forma Condensed Statement of
Operations is not necessarily indicative of what actual results of operations
would have been had these transactions occurred on January 1, 1996, nor does it
purport to represent the results of operations for future periods.
Year Ended Six Months Ended
December 31, 1996 June 30, 1997
------------------------------------ ------------------------------------
Historical Adjustment(A) Pro Forma Historical Adjustment(B) Pro Forma
---------- ---------- --------- ---------- ---------- ---------
Income:
Equity in TRG's income
before extraordinary
items $21,368 $ 3,567 $24,935 $12,694 $ (496) $12,198
Interest and other 284 284 151 151
------- ------- ------- ------- ------- -------
$21,652 $ 3,567 $25,219 $12,845 $ (496) $12,349
------- ------- ------- ------- ------- -------
Operating expenses $ 922 $ 922 $ 506 $ 506
------- ------- ------- -------
Income before
extraordinary items $20,730 $ 3,567 $24,297 $12,339 $ (496) $11,843
======= ======= ======= ======= ======= =======
Earnings per common share:
Income before
extraordinary items $ .47 $ .01 $ .48 $ .24 $ (.01) $ .23
======= ======= ======= ====== ======= =======
Weighted average number
of common shares
outstanding 44,444,833 6,277,690 50,722,523 50,722,523 50,722,523
========== ========= ========== ========== ==========
(A) Adjustment is due to the impact of TRG's September 1997 acquisition of
Regency Square shopping center, TRG's 1996 acquisitions of interests in
Paseo Nuevo, Fairlane Town Center and La Cumbre shopping centers, and the
increase in the Company's ownership of TRG from 33.47% to 36.7% acquired
in connection with issuances in December 1996 of the Company's common
stock. See TRG's Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1996 included in this report.
(B) Adjustment is due to the impact of TRG's September 1997 acquisition of
Regency Square shopping center. See TRG's Pro Forma Condensed Consolidated
Statement of Operations for the six months ended June 30, 1997.
7
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1997
(unaudited)
(in thousands)
This unaudited Pro Forma Condensed Consolidated Balance Sheet is presented as
if TRG's acquisition of the Regency Square shopping center (Regency) had
occurred on June 30, 1997. In management's opinion, all adjustments necessary to
reflect the effect of this transaction have been made. This unaudited Pro Forma
Condensed Consolidated Balance Sheet is not necessarily indicative of what the
actual financial position would have been at June 30, 1997, nor does it purport
to represent the future financial position of TRG.
Adjustments
for
Acquisition Pro
Historical of Regency(A) Forma
---------- -------------- ----------
Assets:
Properties, net $ 932,218 $ 124,580 $1,056,798
Other assets 66,008 66,008
---------- --------- ----------
$ 998,226 $ 124,580 $1,122,806
========== ========= ==========
Liabilities:
Debt $1,050,507 $ 123,880 $1,174,387
Capital lease obligation 49,642 49,642
Accounts payable and
other liabilities 85,227 700 85,927
Distributions in excess of
net income of unconsolidated
Joint Ventures 123,097 123,097
---------- --------- ----------
$1,308,473 $ 124,580 $1,433,053
Accumulated deficiency in assets (310,247) (310,247)
---------- --------- ----------
$ 998,226 $ 124,580 $1,122,806
========== ========= ==========
Allocation of accumulated
deficiency in assets:
General Partners $ (240,274) $ (240,274)
Limited Partners (69,973) (69,973)
---------- ----------
$ (310,247) $ (310,247)
========== ==========
(A) Represents TRG's acquisition of Regency for approximately $123.9 million.
Transaction costs were approximately $0.7 million. The purchase price was
allocated primarily to land, buildings and site improvements. TRG borrowed
under its existing commercial paper facility and an existing revolving
credit facility to fund the acquisition.
8
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1996
(unaudited)
(in thousands, except unit data)
This unaudited Pro Forma Condensed Statement of Operations is presented as if
(i) TRG's acquisition of the Regency Square shopping center, (ii) TRG's
acquisition of interests in Paseo Nuevo, Fairlane Town Center and La Cumbre
shopping centers, and (iii) TRG's issuances of units of partnership interest and
use of the proceeds to pay down floating rate debt, had occurred as of January
1, 1996. In management's opinion, all adjustments necessary to reflect the
effects of these transactions have been made. This unaudited Pro Forma Condensed
Statement of Operations is not necessarily indicative of what actual results of
operations would have been had these transactions occurred on January 1, 1996,
nor does it purport to represent the results of operations for future periods.
Adjustments Adjustments
for for
Acquisition Pro Other Pro
Historical of Regency(A) Forma Transactions Forma
---------- ------------- ----- ------------ -----
Revenues $262,729 $ 13,219 $275,948 $ 22,833(B) $298,781
-------- -------- -------- -------- --------
Operating Costs:
Recoverable expenses $ 72,093 $ 3,842 $ 75,935 $ 7,661(B) $ 83,596
Other operating 26,518 327 26,845 3,281(B) 30,126
Management, leasing and
development services 4,212 4,212 4,212
General and administrative 21,803 21,803 21,803
Interest 70,454 8,141 78,595 (966)(B),(C) 77,629
Depreciation and
amortization 35,770 3,044 38,814 3,527(B) 42,341
-------- -------- -------- -------- --------
$230,850 $ 15,354 $246,204 $ 13,503 $259,707
-------- -------- -------- -------- --------
Income before equity in
income of unconsolidated
Joint Ventures and before
extraordinary items $ 31,879 $ (2,135) $ 29,744 $ 9,330 $ 39,074
Equity in income before
extraordinary items of
unconsolidated Joint
Ventures 52,215 52,215 (1,029)(B) 51,186
-------- -------- -------- -------- --------
Income before
extraordinary items $ 84,094 $ (2,135) $ 81,959 $ 8,301 $ 90,260
======== ======== ======== ======== ========
Allocation of income
before extraordinary items:
General Partners $ 65,913 $ 64,239 $ 69,901
Limited Partners 18,181 17,720 20,359
-------- -------- --------
$ 84,094 $ 81,959 $ 90,260
======== ======== ========
Earnings per Unit of
Partnership Interest:
Income before
extraordinary items $ 1,290 $ 1,259 $ 1,289
======== ======== ========
Weighted Average Number
of Units of Partnershsip
Interest Outstanding 65,109 65,109 4,890(B),(C) 69,999
======== ======== ======== ========
See the accompanying Notes and Significant Assumptions
9
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES AND SIGNIFICANT ASSUMPTIONS
Year Ended December 31, 1996
(A) Acquisition of Regency Square
- ---------------------------------
In September 1997, TRG acquired Regency Square shopping center for approximately
$123.9 million. Transaction costs were approximately $0.7 million. TRG borrowed
under its existing commercial paper facility and an existing revolving credit
facility to fund the acquisition (average rate of 6.4% in 1996). The purchase
price was allocated primarily to land and to buildings and site improvements,
which will be depreciated over 40 years and 15 years, respectively. Pro forma
revenues and expenses, other than interest and depreciation, represent the
historical amounts of Regency Square.
(B) Acquisition of Interests in Centers
- ---------------------------------------
In June 1996, TRG acquired the Paseo Nuevo shopping center, located in Santa
Barbara, California, for $37 million. TRG used unsecured debt (average rate of
7.4% in 1996) to fund the acquisition. The Center is owned subject to two
participating ground leases with remaining terms of approximately 70 years. TRG
also assumed a $2.0 million note receivable due from the lessor of one of the
ground leases. The note accrues interest at an annual rate of 10%. The purchase
price was allocated primarily to the buildings and site improvements, which are
being depreciated over 40 years and 15 years, respectively. Pro forma revenues
and expenses other than interest, depreciation and management fee expense are
based on unaudited information provided by the seller of the property.
In July 1996, TRG completed transactions that resulted in the acquisition of the
75% interest in Fairlane Town Center (Fairlane), previously held by a joint
venture partner. In connection with the transactions, TRG issued to the joint
venture partner 3,096 units of partnership interest, exchangeable for
approximately 6.1 million shares of Taubman Centers, Inc. (TCO) common stock,
which had a closing price of $10.75 per share on the day prior to the issuance
date. TCO is the managing general partner of TRG. TRG also assumed mortgage debt
of $26 million, representing the former joint venture partner's beneficial
interest in the $34.6 million mortgage encumbering the property. TRG used
unsecured debt (average rate of 7.4% in 1996) to fund the repayment of the 9.73%
mortgage and the prepayment penalty of approximately $1.2 million. The
acquisition, which resulted in TRG owning 100% of Fairlane, was accounted for at
fair value. Prior to the acquisition date, TRG's interest in Fairlane was
accounted for under the equity method. The purchase price was allocated
primarily to land and to buildings and site improvements, which are being
depreciated over 40 years and 15 years, respectively. Pro forma revenues and
expenses, other than interest and depreciation and amortization, represent the
historical amounts of Fairlane.
In December 1996, TRG acquired La Cumbre Plaza in Santa Barbara, California for
$22.25 million in cash. TRG used proceeds from an equity offering (Note C) to
fund the acquisition. The Center is subject to four ground leases (three of
which are participating). The leases expire in 2028. The purchase price was
allocated to buildings and site improvements, which are being depreciated over
40 years and 15 years, respectively. Pro forma revenues and expenses other than
interest, depreciation, and management fee are based on unaudited information
provided by the seller of the property.
10
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES AND SIGNIFICANT ASSUMPTIONS
Year Ended December 31, 1996 - (Continued)
(C) Issuances of Units of Partnership Interest
- ----------------------------------------------
In December 1996, TRG issued 3,048 units of partnership interest to TCO for the
$75 million proceeds from TCO's December 1996 equity offering of 5.97 million
shares of common stock. Also in December 1996, TCO exchanged 652 thousand shares
of common stock for 333 TRG units of partnership interest newly issued under
TRG's incentive option plan. TRG used the net proceeds totaling $82.3 million
from the issuance of units to pay down short term floating rate debt (average
rate of 7.0%) and to acquire La Cumbre Plaza.
11
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1997
(unaudited)
(in thousands, except unit data)
This unaudited Pro Forma Condensed Consolidated Statement of Operations is
presented as if TRG's acquisition of Regency Square shopping center had occurred
on January 1, 1996. In management's opinion, all adjustments necessary to
reflect the effect of this transaction have been made. This unaudited Pro Forma
Condensed Consolidated Statement of Operations is not necessarily indicative of
what actual results of operations would have been had these transactions been
completed as of January 1, 1996, nor does it purport to represent the results of
operations for future periods.
Adjustments
for
Acquisition Pro
Historical of Regency(A) Forma
---------- -------------- ----------
Revenues $145,242 $ 6,453 $151,695
-------- -------- --------
Operating Costs:
Recoverable expenses $ 39,291 $ 1,750 $ 41,041
Other operating 18,238 192 18,430
Management, leasing and
development services 1,928 1,928
General and administrative 12,070 12,070
Interest 34,614 3,981 38,595
Depreciation and amortization 20,334 1,880 22,214
-------- -------- --------
$126,475 $ 7,803 $134,278
-------- -------- --------
Income before equity in income
of unconsolidated Joint Ventures
and before extraordinary items $ 18,767 $ (1,350) $ 17,417
Equity in income before extra-
ordinary items of unconsolidated
Joint Ventures 26,987 26,987
-------- -------- --------
Income before extraordinary items $ 45,754 $ (1,350) $ 44,404
======== ======== ========
Allocation of income before
extraordinary items:
General Partners $ 35,434 $ 34,388
Limited Partners 10,320 10,016
-------- --------
$ 45,754 $ 44,404
======== ========
Earnings per Unit of Partnership
Interest:
Income before extraordinary
items $ 654 $ 634
======== ========
Weighted Average Number of
Units of Partnership Interests
Outstanding 69,999 69,999
======== ========
See the accompanying Notes and Significant Assumptions
12
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES AND SIGNIFICANT ASSUMPTIONS
Six Months Ended June 30, 1997
(A) Acquisition of Regency Square
- ---------------------------------
In September 1997, TRG acquired Regency Square shopping center for approximately
$123.9 million. Transaction costs were approximately $0.7 million. TRG borrowed
under its existing commercial paper facility and an existing revolving credit
facility to fund the acquisition (average rate of 6.4% for the six months ended
June 30, 1997). The purchase price was allocated primarily to land and to
buildings and site improvements, which will be depreciated over 40 years and 15
years, respectively. Pro forma revenues and expenses, other than interest and
depreciation, are based on unaudited information provided by the seller of the
property.
13
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
STATEMENT OF ESTIMATED TAXABLE OPERATING
RESULTS OF REGENCY SQUARE AND ESTIMATED CASH TO BE MADE
AVAILABLE BY OPERATIONS OF REGENCY SQUARE
For a twelve-month period ended June 30, 1997
(unaudited)
(in thousands)
Revenues $ 13,064
--------
Operating Costs:
Recoverable expenses $ 3,671
Other operating 356
Interest 8,113
Depreciation and amortization 3,993
--------
$ 16,133
--------
Estimated taxable operating loss $ (3,069)
Add back depreciation and amortization 3,993
--------
Estimated cash to be made available by operations $ 924
========
Note:
This statement of estimated taxable operating results and estimated cash to be
made available from operations is an estimate of operating results of Regency
Square for a period of twelve months and does not purport to reflect actual
results for any period.
14
c. Exhibits.
Exhibit Number Description
-------------- -----------
23 Consent of Deloitte & Touche LLP.
99 (a) Purchase and Sale Agreement By and
Between One Federal Street Joint
Venture and The Taubman Realty Group
Limited Partnership, dated July 16,
1997 (Purchase and Sale Agreement)
(without exhibits or schedules, which
will be supplementally provided to
the Securities and Exchange Commission
upon its request).
99 (b) First Amendment to Purchase and Sale
Agreement, dated August 15, 1997
(without exhibits or schedules, which
will be supplementally provided to the
Securities and Exchange Commission
upon its request).
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TAUBMAN CENTERS, INC.
Date: September 10, 1997 By: /s/ Lisa A. Payne
----------------------------
Lisa A. Payne
Executive Vice President and
Chief Financial Officer
16
EXHIBIT INDEX
-------------
Exhibit Number Description
-------------- -----------
23 Consent of Deloitte & Touche LLP.
99 (a) Purchase and Sale Agreement By and
Between One Federal Street Joint
Venture and The Taubman Realty Group
Limited Partnership, dated July 16,
1997 (Purchase and Sale Agreement)
(without exhibits or schedules, which
will be supplementally provided to
the Securities and Exchange Commission
upon its request).
99 (b) First Amendment to Purchase and Sale
Agreement, dated August 15, 1997
(without exhibits or schedules, which
will be supplementally provided to the
Securities and Exchange Commission
upon its request).
17