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): December 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
48303-0200
(Address of Principal Executive Office) (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 December 4, 1997, The Taubman Realty Group Limited Partnership (TRG)
completed the acquisition of The Falls shopping center. Taubman Centers, Inc.
(TCO) is the managing general partner of TRG. The Center was acquired from
Heitman Capital Management Corp. on behalf of The Falls Partners Limited L.P.
(the Seller) for $156 million in cash. The Seller is unaffiliated with TRG and
TCO 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 an existing revolving credit facility with Union Bank of
Switzerland (New York Branch) to fund the purchase price.
The Falls is an 824 thousand square foot regional shopping center located in
Dade County, Florida. The Center is anchored by Bloomingdale's and Macy's. The
Center was originally built in 1980 and was completely redeveloped and expanded
in 1996.
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.
The Falls, 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 Nine Months Ended September
30, 1997 (unaudited).
The Taubman Realty Group Limited Partnership, Pro Forma Condensed
Consolidated Balance Sheet, September 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, Nine Months Ended September
30, 1997 (unaudited).
c Exhibits
No. 23 - Consent of Deloitte & Touche LLP.
No. 99 - Agreement of Purchase and Sale By and Between The Falls
Limited L.P. and The Taubman Realty Group Limited Partnership, dated
December 4, 1997 (without exhibits or schedules, which will be
supplementally provided to the Securities and Exchange Commission
upon its request).
2
- --------------------------------------------------------------------------------
The Falls
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 The Falls (the "Historical Summary"), for the year ended
December 31, 1996. This Historical Summary is the responsibility of The Falls'
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 The Falls' 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 The Falls for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Detroit, Michigan
November 3, 1997
4
THE FALLS
HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
REVENUES:
Minimum rents $5,215,686
Percentage rents 527,485
Recoveries from tenants 2,546,689
Other 449,023
----------
$8,738,883
DIRECT OPERATING EXPENSES:
Recoverable from tenants $2,793,997
Other 803,185
----------
$3,597,182
----------
EXCESS OF REVENUES OVER DIRECT
OPERATING EXPENSES $5,141,701
==========
See notes to historical summary.
5
THE FALLS
NOTES TO HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING
EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General - The Falls is a regional shopping center located in Miami, Florida,
which was owned by The Falls Partners Limited L.P. (the Partnership). All
authority to conduct the business affairs of the Partnership (other than sale
or mortgaging of the property) was vested in Heitman Capital Management
Company. The Center, originally built in 1980, was completely redeveloped and
expanded in 1996. The expansion opened on October 5, 1996. 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
Partnership (TRG). The accompanying historical summary is not representative
of the actual operations of the shopping center for the period presented
since material revenues and expenses which may not be comparable to the
proposed future operation of The Falls by TRG have been excluded. Revenues
and expenses excluded consist of interest income, property management fees,
interest expense 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 Nine Months Ended September 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 Falls shopping center, (ii) TRG's acquisition of
interests in Regency Square, The Mall at Tuttle Crossing, Paseo Nuevo, Fairlane
Town Center and La Cumbre shopping centers, and (iii) TCO's issuances of common
and preferred 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 Nine Months Ended
December 31, 1996 September 30, 1997
----------------------------------- -----------------------------------
Historical Adjustments Pro Forma Historical Adjustments Pro Forma
---------- ----------- --------- ---------- ----------- ---------
Income:
Equity in TRG's income
before extraordinary
items:
Series A Preferred
Equity interest in TRG $16,600(A) $16,600 $12,450(A) $12,450
Equity in TRG's income
allocable to partnership
unit holders $21,368 522(A),(B) 21,890 $19,102 (3,220)(A),(C) 15,882
------- ------- ------- ------- ------- -------
$21,368 $17,122 $38,490 $19,102 $ 9,230 $28,332
Interest and other 284 284 229 229
------- ------ ------- ------- ------- -------
$21,652 $17,122 $38,774 $19,331 $ 9,230 $28,561
------- ------- ------- ------- ------- -------
Operating expenses $ 922 $ 922 $ 778 $ 778
------- ------- ------- -------
Income before
extraordinary items $20,730 $17,122 $37,852 $18,553 $ 9,230 $27,783
Preferred Dividends 16,600(A) 16,600 12,450(A) 12,450
------- ------- ------- ------
Income before
extraordinary items
available to common
shareowners $20,730 $ 522 $21,252 $18,553 $(3,220) $15,333
======= ======= ======= ======= ======= =======
Income before
extraordinary items
per common share $ .47 $ (.05) $ .42 $ .37 $ (.07) $ .30
======= ======= ======= ======= ======= =======
Weighted average
number of common
shares outstanding 44,444,833 6,277,690(A) 50,722,523 50,730,179 50,730,179
========== ========= ========== ========== ==========
See the accompanying Notes and Significant Assumptions
7
TAUBMAN CENTERS, INC.
NOTES AND SIGNIFICANT ASSUMPTIONS
Year Ended December 31, 1996 and the Nine Months Ended September 30, 1997
(A) In October 1997, TCO completed a $200 million public offering of eight
million shares of 8.30% Series A Cumulative Redeemable Preferred Stock
(Series A Preferred Stock). TCO used the proceeds to acquire a Series A
Preferred Equity interest in TRG. The preferred equity interest entitles
TCO to income and distributions (in the form of guaranteed payments) in
amounts equal to the dividends payable on TCO's Series A Preferred Stock.
In addition to the income from TCO's preferred equity interest in TRG, TCO
will continue to participate in the income allocable to TRG partnership
unit holders to the extent of TCO's ownership in TRG (36.7% at September
30, 1997), including adjustments arising from TCO's additional basis in
TRG's net assets. The costs of the offering were paid by TRG. TRG used the
net proceeds to pay down short term debt under TRG's existing revolving
credit and commercial paper facilities.
The pro forma adjustments to equity in TRG's income before extraordinary
items for 1996 include $16.6 million, representing the income from TCO's
Series A Preferred Equity investment in TRG, and $0.5 million, representing
TCO's share of income allocable to TRG unit holders (Note B). The pro forma
adjustments to equity in TRG's income before extraordinary items for the
nine months ended September 30, 1997 include $12.45 million, representing
the income from TCO's Series A Preferred Equity investment in TRG and
$(3.2) million, representing TCO's share of income allocable to TRG unit
holders (Note C). See TRG's Pro Forma Condensed Consolidated Statements of
Operations for the year ended December 31, 1996 and the nine months ended
September 30, 1997 included in this report.
(B) Adjustment is due to the impact of TRG's December 1997 acquisition of The
Falls shopping center; TRG's September 1997 acquisition of Regency Square
and December 1997 acquisition of interests in The Mall at Tuttle Crossing;
TRG's 1996 acquisitions of interests in Paseo Nuevo, Fairlane Town Center
and La Cumbre shopping centers; and the increase in TCO's ownership of TRG
from 33.47% to 36.7% acquired in connection with issuances in December 1996
of TCO's common stock. See TRG's Pro Forma Condensed Consolidated
Statements of Operations for the year ended December 31, 1996 included in
this report.
(C) Adjustment is due to the impact of TRG's December 1997 acquisition of The
Falls shopping center and September 1997 acquisition of Regency Square, and
TRG's December 1997 acquisition of interests in The Mall at Tuttle
Crossing. See TRG's Pro Forma Condensed Consolidated Statement of
Operations for the nine months ended September 30, 1997.
8
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1997
(unaudited)
(in thousands)
This unaudited Pro Forma Condensed Consolidated Balance Sheet is presented as
if (i) TRG's acquisition of The Falls shopping center (ii) TRG's use of the net
proceeds from the issuance of Series A Preferred Equity to pay down short term
debt, and (iii) TRG's acquisition of interests in The Mall at Tuttle Crossing
had occurred on September 30, 1997. In management's opinion, all adjustments
necessary to reflect the effects of these transactions 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 September
30, 1997, nor does it purport to represent the future financial position of TRG.
Adjustments Adjustments
for for
Acquisition Pro Other Pro
Historical of The Falls(A) Forma Transactions Forma
---------- --------------- ----- ------------ -----
Assets:
Properties, net $1,121,653 $156,700 $1,278,353 $ 20,948(B) $1,299,301
Other assets 67,359 67,359 67,359
---------- -------- ---------- --------- ----------
$1,189,012 $156,700 $1,345,712 $ 20,948 $1,366,660
========== ======== ========== ========= ==========
Liabilities:
Debt $1,190,983 $156,000 $1,346,983 $(116,732)(B),(C) $1,230,251
Capital lease obligation 55,320 55,320 (55,320)(B)
Accounts payable and
other liabilities 117,132 700 117,832 117,832
Distributions in excess of
net income of unconsolidated
Joint Ventures 144,571 144,571 144,571
---------- -------- ---------- --------- ----------
$1,508,006 $156,700 $1,664,706 $(172,052) $1,492,654
Series A Preferred Equity 193,000(C) 193,000
Accumulated deficiency
in assets (318,994) (318,994) (318,994)
---------- -------- ---------- --------- ----------
$1,189,012 $156,700 $1,345,712 $ 20,948 $1,366,660
========== ======== ========== ========= ==========
Allocation of accumulated
deficiency in assets:
General Partners $ (247,064) $ (247,064) $ (247,064)
Limited Partners (71,930) (71,930) (71,930)
---------- ---------- ----------
$ (318,994) $ (318,994) $ (318,994)
========== ========== ==========
See the accompanying Notes and Significant Assumptions
9
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES AND SIGNIFICANT ASSUMPTIONS
September 30, 1997
(A) Represents TRG's December 1997 acquisition of The Falls shopping center for
$156 million. Transaction costs were approximately $0.7 million. The
purchase price was allocated primarily to land, buildings and site
improvements. TRG borrowed under an existing revolving credit facility to
fund the acquisition.
(B) In December 1997, TRG acquired interests in The Mall at Tuttle Crossing
from Tuttle Crossing Holding Co., a subsidiary of The Limited, Inc. (The
Limited). TRG's ownership interest in The Mall at Tuttle Crossing was
subject to a long-term participating lease with The Limited for land and
leasehold improvements. TRG purchased The Limited's interests in the lease
for $76.3 million in cash and took fee simple title to the underlying land
and buildings. The lease had been accounted for as a capital lease with
capital lease assets and a capital lease obligation of $55.3 million at
September 30, 1997. TRG used an existing revolving credit facility to fund
the acquisition.
(C) In October 1997, TCO completed a $200 million public offering of eight
million shares of Series A Preferred Stock. TCO used the proceeds to
acquire a Series A Preferred Equity interest in TRG that entitles TCO to
distributions (in the form of guaranteed payments) in amounts equal to the
dividends payable on TCO's Series A Preferred Stock. The costs of the
offering were paid by TRG. TRG used the net proceeds to pay down short term
debt under TRG's existing revolving credit and commercial paper facilities.
10
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 Falls shopping center; (ii) TRG's acquisition of
interests in Regency Square, The Mall at Tuttle Crossing, Paseo Nuevo, Fairlane
Town Center and La Cumbre shopping centers; and (iii) TRG's use of the net
proceeds from issuances of units of partnership interest and Series A Preferred
Equity 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 The Falls(A) Forma Transactions Forma
---------- --------------- ----- ------------ -----
Revenues $262,729 $ 8,739 $271,468 $36,052(B) $307,520
-------- ------- -------- ------- --------
Operating Costs:
Recoverable expenses $ 72,093 $ 2,794 $ 74,887 $11,503(B) $ 86,390
Other operating 26,518 990 27,508 3,608(B) 31,116
Management, leasing and
development services 4,212 4,212 4,212
General and administrative 21,803 21,803 21,803
Interest 70,454 6,545 76,999 (5,496)(B),(C) 71,503
Depreciation and amortization 35,770 2,811 38,581 6,571(B) 45,152
-------- ------- -------- ------- --------
$230,850 $13,140 $243,990 $16,186 $260,176
-------- ------- -------- ------- --------
Income before equity in income
of unconsolidated Joint Ventures
and before extraordinary items $ 31,879 $(4,401) $ 27,478 $19,866 $ 47,344
Equity in income before extra-
ordinary items of unconsolidated
Joint Ventures 52,215 52,215 (1,029)(B) 51,186
-------- ------- -------- ------- --------
Income before
extraordinary items $ 84,094 $(4,401) $ 79,693 $18,837 $ 98,530
Preferred distributions (16,600)(C) (16,600)
-------- -------- -------- ------- --------
Income before extraordinary
items allocable to unit holders $ 84,094 $(4,401) $ 79,693 $ 2,237 $ 81,930
======== ======= ======== ======= ========
Allocation of income before
extraordinary items:
General Partners $ 65,913 $ 62,463 $ 63,455
Limited Partners 18,181 17,230 18,475
-------- -------- --------
$ 84,094 $ 79,693 $ 81,930
======== ======== ========
Income before extraordinary
items per Unit of Partnership
Interest $ .65 $ .62 $ .59
======== ======== ========
Weighted Average Number of
Units of Partnership Interest
Outstanding 128,931,584 128,931,584 9,330,263(C) 138,261,847
=========== =========== ========= ===========
See the accompanying Notes and Significant Assumptions
11
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES AND SIGNIFICANT ASSUMPTIONS
Year Ended December 31, 1996
(A) Acquisition of The Falls
In December 1997, TRG acquired The Falls shopping center for $156 million.
Transaction costs were approximately $0.7 million. TRG borrowed under an
existing revolving credit facility to fund the acquisition (average rate of 6.6%
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. TRG's estimated incremental costs of managing The Falls of $0.2
million are included in pro forma other operating expenses. The pro forma
adjustment to interest is net of $3.7 million of capitalized interest, assuming
interest costs incurred relating to assets under construction would have been
capitalized until the opening of the redeveloped and expanded Center. Similarly,
depreciation would not have been recognized on constructed assets until the
opening of the Center. Pro forma revenues and expenses, other than interest
expense, depreciation, and management expense, represent the historical amounts
of The Falls.
The Falls was completely redeveloped and expanded during 1996. Prior to the
opening of the expansion on October 5, 1996, the Center's average mall tenant
occupancy (based on the square footage of the expanded center) was approximately
46%. As a result, the historical revenues and expenses are not representative of
future operations.
(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 units of partnership interest, exchangeable for approximately
6.1 million shares of TCO common stock, which had a closing price of $10.75 per
share on the day prior to the issuance date. 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 primarily 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 expense are based
on unaudited information provided by the seller of the property.
12
In September 1997, TRG acquired Regency Square shopping center for approximately
$123.9 million. TRG borrowed under its existing commercial paper facility and an
existing revolving credit facility to fund the acquisition (average rate of 6.6%
in 1996). 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, represent the historical amounts of Regency Square.
In December 1997, TRG acquired interests in The Mall at Tuttle Crossing from The
Limited. TRG's ownership interest in The Mall at Tuttle Crossing was subject to
a long-term participating lease with The Limited for land and leasehold
improvements. TRG purchased The Limited's interest in the lease for $76.3
million in cash and took fee simple title to the underlying land and buildings.
TRG used an existing revolving credit facility to fund the acquisition. The
lease was previously accounted for as a capital lease with capital lease assets
and a capital lease obligation of $55.3 million at September 30, 1997. Prior to
the opening of the Center in July 1997, all interest expense would have been
capitalized.
(C) Issuances of Units of Partnership Interest and Series A Preferred Equity
In December 1996, TRG issued 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 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.
In October 1997, TCO completed a $200 million public offering of eight million
shares of Series A Preferred Stock. TCO used the proceeds to acquire a Series A
Preferred Equity interest in TRG that entitles TCO to distributions (in the form
of guaranteed payments) in amounts equal to the dividends payable on TCO's
Series A Preferred Stock. The costs of the offering were paid by TRG. TRG used
net proceeds of approximately $193 million to pay down short term debt under
TRG's existing revolving credit and commercial paper facilities (average rate of
6.6% for 1996).
13
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 1997
(unaudited)
(in thousands, except unit data)
This unaudited Pro Forma Condensed Consolidated Statement of Operations is
presented as if (i) TRG's acquisition of The Falls shopping center; (ii) TRG's
use of the net proceeds from the issuance of Series A Preferred Equity to pay
down short term debt; and (iii) TRG's acquisitions of interests in Regency
Center and The Mall at Tuttle Crossing had occurred on 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 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 Adjustments
for for
Acquisition Pro Other Pro
Historical of The Falls(A) Forma Transactions Forma
---------- --------------- ----- ------------ -----
Revenues $223,961 $11,378 $235,339 $ 9,540(B) $244,879
-------- ------- -------- -------- --------
Operating Costs:
Recoverable expenses $ 60,223 $ 3,594 $ 63,817 $ 2,438(B) $ 66,255
Other operating 26,218 911 27,129 308(B) 27,437
Management, leasing and
development services 3,553 3,553 3,553
General and administrative 18,657 18,657 18,657
Interest 54,002 7,620 61,622 (3,682)(B),(C),(D) 57,940
Depreciation and amortization 31,386 3,546 34,932 2,538(B) 37,470
-------- ------- -------- -------- --------
$194,039 $15,671 $209,710 $ 1,602 $211,312
-------- ------- -------- -------- --------
Income before equity in income
of unconsolidated Joint
Ventures $ 29,922 $(4,293) $ 25,629 $ 7,938 $ 33,567
Equity in income of
unconsolidated Joint Ventures 38,873 38,873 38,873
-------- ------- -------- -------- --------
Net income $ 68,795 $(4,293) $ 64,502 $ 7,938 $ 72,440
Preferred Distributions (12,450)(C) (12,450)
-------- ------- -------- -------- --------
Net Income available to
unit holders $ 68,795 $(4,293) $ 64,502 $ (4,512) $ 59,990
======== ======= ======== ======== ========
Allocation of net income:
General Partners $ 53,278 $ 49,953 $ 46,463
Limited Partners 15,517 14,549 13,527
-------- -------- --------
$ 68,795 $ 64,502 $ 59,990
======== ======== ========
Net income per unit of
Partnership Interest $ .50 $ .47 $ .43
======== ======== ========
Weighted Average Number of
Units of Partnership
Interest Outstanding 138,261,847 138,261,847 138,261,847
=========== =========== ===========
See the accompanying Notes and Significant Assumptions
14
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES AND SIGNIFICANT ASSUMPTIONS
Nine Months Ended September 30, 1997
(A) Acquisition of The Falls
In December 1997, TRG acquired The Falls shopping center for $156 million.
Transaction costs were approximately $0.7 million. TRG borrowed under an
existing revolving credit facility to fund the acquisition (average rate of 6.5%
for the nine months ended September 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. TRG's estimated
incremental costs of managing The Falls of $0.1 million are included in pro
forma other operating expenses. Pro forma revenues and expenses, other than
interest expense, depreciation and management expense are based on unaudited
information provided by the seller of the property.
The Falls was completely redeveloped and expanded during 1996. The expanded
Center's mall tenant occupancy was approximately 80% at the opening of the
expansion on October 5, 1996 and was approximately 84% for the nine months ended
September 30, 1997. Mall tenant occupancy as of the acquisition date was
approximately 90%. As a result, the historical revenues and expenses are not
representative of future operations.
(B) Acquisition of Regency Square
In September 1997, TRG acquired Regency Square shopping center for approximately
$123.9 million. TRG borrowed under its existing commercial paper facility and an
existing revolving credit facility to fund the acquisition (average rate of 6.5%
for the nine months ended September 30, 1997). 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, are based on unaudited
information provided by the seller of the property.
(C) Series A Preferred Equity
In October 1997, TCO completed a $200 million public offering of eight million
shares of Series A Preferred Stock. TCO used the proceeds to acquire a Series A
Preferred Equity interest in TRG that entitles TCO to distributions (in the form
of guaranteed payments) in amounts equal to the dividends payable on TCO's
Series A Preferred Stock. The costs of the offering were paid by TRG. TRG used
the net proceeds to pay down short term debt under TRG's existing revolving
credit and commercial paper facilities (average rate of 6.5% for the nine months
ended September 30, 1997).
(D) Acquisition of Interests in The Mall at Tuttle Crossing
In December 1997, TRG acquired interests in The Mall at Tuttle Crossing from The
Limited. TRG's ownership interest in The Mall at Tuttle Crossing was subject to
a long-term participating lease with The Limited for land and leasehold
improvements. TRG purchased The Limited's interest in the lease for $76.3
million in cash and took fee simple title to the underlying land and buildings.
TRG used an existing revolving credit facility to fund the acquisition (average
rate of 6.5% for the nine months ended September 30, 1997). The lease was
previously accounted for as a capital lease with capital lease assets and a
capital lease obligation of $55.3 million at September 30, 1997. Lease payments
of $0.6 million were recognized as interest expense subsequent to the opening of
the Center in July 1997. Prior to the opening all interest expense would have
been capitalized.
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: December 18, 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 Agreement of Purchase and Sale By
and Between The Falls Limited L.P.
and The Taubman Realty Group
Limited Partnership, dated December
4, 1997 (without exhibits or
schedules, which will be
supplementally provided to the
Securities and Exchange Commission
upon its request).
17