SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: June 30, 1999
Commission File No. 1-11530
Taubman Centers, Inc.
______________________________________________________
(Exact name of registrant as specified in its charter)
Michigan 38-2033632
______________________________ ________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 East Long Lake Road, Suite 300, P.O. Box 200, Bloomfield Hills,
____________________________________________________________________
Michigan 48303-0200
____________________________________________________________________
(Address of principal executive offices) (Zip Code)
(248) 258-6800
____________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
___ ___
As of August 9, 1999, there were outstanding 53,277,693 shares of the
Company's common stock, par value $0.01 per share.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following consolidated financial statements of Taubman Centers, Inc. (the
Company) are provided pursuant to the requirements of this item.
Consolidated Balance Sheet as of June 30, 1999 and December 31, 1998...........2
Consolidated Statement of Operations for the three months ended
June 30, 1999 and 1998....................................................3
Consolidated Statement of Operations for the six months ended
June 30, 1999 and 1998....................................................4
Consolidated Statement of Cash Flows for the six months ended
June 30, 1999 and 1998....................................................5
Notes to Consolidated Financial Statements.....................................6
-1-
TAUBMAN CENTERS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
June 30 December 31
------- -----------
1999 1998
------- -----------
Assets:
Properties, net $1,365,396 $1,308,642
Investment in Unconsolidated Joint Ventures 99,997 98,350
Cash and cash equivalents 15,706 19,045
Accounts and notes receivable, less allowance
for doubtful accounts of $1,192 and $333 in
1999 and 1998 27,137 20,595
Accounts receivable from related parties 4,352 7,092
Deferred charges and other assets 41,943 27,139
---------- ----------
$1,554,531 $1,480,863
========== ==========
Liabilities:
Mortgage notes payable $ 911,937 $ 243,352
Unsecured notes payable 20,415 531,946
Accounts payable and accrued liabilities 105,996 171,669
Dividends payable 12,787 12,719
---------- ----------
$1,051,135 $ 959,686
Commitments and Contingencies (Note 5)
Minority Interests (Note 1)
Shareowners' Equity:
Series A Cumulative Redeemable Preferred
Stock, $0.01 par value, 50,000,000
shares authorized, $200 million liquidation
preference, 8,000,000 shares issued and
outstanding at June 30, 1999 and December
31, 1998 $ 80 $ 80
Series B Non-Participating Convertible Preferred
Stock, $0.001 par and liquidation value,
40,000,000 shares authorized and 31,399,913
shares issued and outstanding at June 30, 1999
and December 31, 1998 31 28
Common Stock, $0.01 par value, 250,000,000 shares
authorized, 53,277,693 and 52,995,904 issued
and outstanding at June 30, 1999 and December
31, 1998 533 530
Additional paid-in capital 701,006 697,965
Dividends in excess of net income (198,254) (177,426)
---------- ----------
$ 503,396 $ 521,177
---------- ----------
$1,554,531 $1,480,863
========== ==========
See notes to consolidated financial statements.
-2-
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share data)
Three Months Ended June 30
--------------------------
1999 1998
---- ----
Income:
Minimum rents $ 35,285 $ 25,682
Percentage rents 1,793 845
Expense recoveries 21,392 14,768
Revenues from management, leasing and
development services 5,943 2,000
Other 5,193 2,737
Revenues - transferred centers (Note 1) 46,071
-------- --------
$ 69,606 $ 92,103
-------- --------
Operating Expenses:
Recoverable expenses $ 18,957 $ 13,260
Other operating 11,043 7,872
Management, leasing and development services 4,464 1,248
General and administrative 4,421 7,323
Expenses other than interest, depreciation and
amortization - transferred centers (Note 1) 15,353
Interest expense 13,823 21,949
Depreciation and amortization (including $7.6
million in 1998 relating to the transferred
centers) 12,889 15,530
-------- --------
$ 65,597 $ 82,535
-------- --------
Income before equity in net income of Unconsolidated
Joint Ventures, extraordinary items, and minority
interest $ 4,009 $ 9,568
Equity in net income of Unconsolidated Joint Ventures 10,111 10,946
-------- --------
Income before extraordinary items and minority interest $ 14,120 $ 20,514
Extraordinary items (Note 3) (301)
Minority interest:
Minority share of income (4,390) (11,468)
Distributions in excess of earnings (3,118)
-------- --------
Net income $ 6,311 $ 9,046
Series A preferred dividends (4,150) (4,150)
-------- --------
Net income available to common shareowners $ 2,161 $ 4,896
======== ========
Basic and diluted earnings per common share:
Income before extraordinary items $ .04 $ .09
======== ========
Net income $ .04 $ .09
======== ========
Cash dividends declared per common share $ .24 $ .235
======== ========
Weighted average number of common shares
outstanding 53,192,213 52,240,765
========== ==========
See notes to consolidated financial statements.
-3-
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share data)
Six Months Ended June 30
------------------------
1999 1998
---- ----
Income:
Minimum rents $ 68,299 $ 51,035
Percentage rents 2,778 1,800
Expense recoveries 38,977 28,413
Revenues from management, leasing and
development services 11,676 3,777
Other 8,307 6,177
Revenues - transferred centers (Note 1) 88,103
-------- --------
$130,037 $179,305
-------- --------
Operating Expenses:
Recoverable expenses $ 34,426 $ 25,491
Other operating 19,248 13,843
Management, leasing and development services 8,855 2,281
General and administrative 9,149 14,149
Expenses other than interest, depreciation and
amortization - transferred centers (Note 1) 29,453
Interest expense 24,688 44,586
Depreciation and amortization (including $14.8
million in 1998 relating to the transferred
centers) 25,092 30,577
-------- --------
$121,458 $160,380
-------- --------
Income before equity in income before extraordinary
item of Unconsolidated Joint Ventures,
extraordinary items, and minority interest $ 8,579 $ 18,925
Equity in income before extraordinary item of
Unconsolidated Joint Ventures 19,734 22,676
-------- --------
Income before extraordinary items and minority interest $ 28,313 $ 41,601
Extraordinary items (Notes 2 and 3) (301) (957)
Minority interest:
Minority share of income (8,927) (22,698)
Distributions in excess of earnings (6,088)
-------- --------
Net income $ 12,997 $ 17,946
Series A preferred dividends (8,300) (8,300)
-------- --------
Net income available to common shareowners $ 4,697 $ 9,646
======== ========
Basic earnings per common share:
Income before extraordinary items $ .09 $ .19
======== ========
Net income $ .09 $ .19
======== ========
Diluted earnings per common share:
Income before extraordinary items $ .09 $ .19
======== ========
Net income $ .09 $ .18
======== ========
Cash dividends declared per common share $ .48 $ .47
======== ========
Weighted average number of common shares outstanding 53,104,922 51,512,514
========== ==========
See notes to consolidated financial statements.
-4-
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Six Months Ended June 30
------------------------
1999 1998
---- ----
Cash Flows from Operating Activities:
Income before extraordinary items and minority
interest $ 28,313 $ 41,601
Adjustments to reconcile income before
extraordinary items and minority interest
to net cash provided by operating activities:
Depreciation and amortization 25,092 30,577
Provision for losses on accounts receivable 1,508 817
Amortization of deferred financing costs 2,726 1,422
Other 167 415
Gains on sales of land (850)
Increase (decrease) in cash attributable to
changes in assets and liabilities:
Receivables, deferred charges and other assets (8,670) (743)
Accounts payable and other liabilities (11,119) 4,799
--------- ---------
Net Cash Provided By Operating Activities $ 37,167 $ 78,888
--------- ---------
Cash Flows from Investing Activities:
Additions to properties $(119,684) $(116,349)
Proceeds from sales of land 692
Purchase of interest in Fashionmall.com, Inc.
(Note 7) (7,417)
Contributions to Unconsolidated Joint Ventures (8,812) (18,839)
Distributions from Unconsolidated Joint Ventures
in excess of income before extraordinary
item 2,865 47,636
--------- ----------
Net Cash Used In Investing Activities $(132,356) $ (87,552)
--------- ----------
Cash Flows from Financing Activities:
Debt proceeds $ 671,355 $ 178,594
Debt payments (514,301) (49,568)
Debt issuance costs (9,742)
Redemption of partnership units (77,698)
GMPT Exchange (9,737)
Distributions to minority interest (15,015) (38,937)
Issuance of stock 3,047 26,308
Cash dividends to common shareowners (25,457) (23,873)
Cash dividends to Series A preferred shareowners (8,300) (8,300)
--------- ----------
Net Cash Provided By Financing Activities $ 91,850 $ 6,526
--------- ----------
Net Decrease In Cash $ (3,339) $ (2,138)
Cash and Cash Equivalents at Beginning of Period 19,045 8,965
Effect of consolidating TRG in connection with the
GMPT Exchange (TRG's cash balance at Beginning
of Period) (Note 1) 3,250
--------- ----------
Cash and Cash Equivalents at End of Period $ 15,706 $ 10,077
========= ==========
Interest on mortgage notes and other loans paid during the six months ended
June 30, 1999 and 1998, net of amounts capitalized of $7,313 and $7,456, was
$21,737 and $41,918, respectively.
See notes to consolidated financial statements.
-5-
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six months ended June 30, 1999
Note 1 - Interim Financial Statements
Taubman Centers, Inc. (the Company or TCO), a real estate investment trust, or
REIT, is the managing general partner of The Taubman Realty Group Limited
Partnership (the Operating Partnership or TRG). The Operating Partnership is an
operating subsidiary that engages in the ownership, management, leasing,
acquisition, development, and expansion of regional retail shopping centers and
interests therein. The Operating Partnership's portfolio as of June 30, 1999
includes 17 urban and suburban shopping centers in seven states. Three
additional centers are under construction in Florida and Texas.
On September 30, 1998, the Company obtained a majority and controlling
interest in the Operating Partnership as a result of a transaction in which the
Operating Partnership transferred interests in 10 shopping centers, together
with $990 million of its debt, for all of the partnership units owned by two
General Motors pension trusts (GMPT), representing approximately 37% of the
Operating Partnership's equity (the GMPT Exchange).
The consolidated financial statements of the Company include all accounts of
the Company, the Operating Partnership and its consolidated subsidiaries; all
intercompany balances have been eliminated. Investments in entities not
unilaterally controlled by ownership or contractual obligation (Unconsolidated
Joint Ventures) are accounted for under the equity method.
The Company's ownership in the Operating Partnership at June 30, 1999
consisted of a 62.9% managing general partnership interest (53,277,693 of the
84,677,606 units of partnership interest outstanding), as well as a preferred
equity interest. Net income and distributions are allocable first to the
preferred equity interest, and the remaining amounts to the general and limited
partners in the Operating Partnership in accordance with their percentage
ownership. The Company's average ownership percentage in the Operating
Partnership for the three months ended June 30, 1999 and 1998 was 62.9% and
39.1%, respectively. The Company's average ownership percentage in the Operating
Partnership for the six months ended June 30, 1999 and 1998 was 62.8% and 38.7%,
respectively.
Because the net equity of the Operating Partnership is less than zero, the
ownership interest of the Operating Partnership's noncontrolling partners (the
Minority Interest) is presented as a zero balance in the balance sheet as of
June 30, 1999 and December 31, 1998, and subsequent to the GMPT Exchange, the
income allocated to the Minority Interest is equal to the Minority Interest's
share of distributions. The Operating Partnership's net equity is less than zero
because of accumulated distributions in excess of net income and not as a result
of operating losses. Distributions to partners are usually greater than net
income because net income includes non-cash charges for depreciation and
amortization.
The unaudited interim financial statements should be read in conjunction with
the audited financial statements and related notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998. In the opinion
of management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial statements for the interim
periods have been made. The results of interim periods are not necessarily
indicative of the results for a full year.
-6-
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2 - Investments in Unconsolidated Joint Ventures
Following are the Company's investments in various real estate
Unconsolidated Joint Ventures which own regional retail shopping centers. The
Operating Partnership is generally the managing general partner of these
Unconsolidated Joint Ventures. The Operating Partnership's interest in each
Unconsolidated Joint Venture is as follows:
Ownership
as of
Unconsolidated Joint Venture Shopping Center June 30, 1999
---------------------------- --------------- -------------
Arizona Mills, L.L.C. Arizona Mills 37%
Fairfax Company of Virginia L.L.C. Fair Oaks 50
Lakeside Mall Limited
Partnership Lakeside 50
Rich-Taubman Associates Stamford Town Center 50
Taubman-Cherry Creek
Limited Partnership Cherry Creek 50
Twelve Oaks Mall Limited
Partnership Twelve Oaks Mall 50
West Farms Associates Westfarms 79
Woodland Woodland 50
The Company's carrying value of its Investment in Unconsolidated Joint
Ventures differs from its share of the deficiency in assets reported in the
combined balance sheet of the Unconsolidated Joint Ventures due to (i) the
Company's cost of its investment in excess of the historical net book values of
the Unconsolidated Joint Ventures and (ii) intercompany profits on sales of
services that are capitalized by the Unconsolidated Joint Ventures. The Company
reduces its investment in Unconsolidated Joint Ventures to eliminate the
intercompany profits and amortizes such amounts over the useful lives of the
related assets. The Company's additional basis allocated to depreciable assets
is recognized on a straight-line basis over 40 years.
During the three months ended March 31, 1998, an Unconsolidated Joint Venture
incurred an extraordinary charge related to the extinguishment of debt,
primarily consisting of a prepayment premium.
Combined balance sheet and results of operations information are presented
below (in thousands) for all Unconsolidated Joint Ventures, followed by the
Operating Partnership's beneficial interest in the combined information.
Beneficial interest is calculated based on the Operating Partnership's ownership
interest in each of the Unconsolidated Joint Ventures. The accounts of Woodfield
Associates, formerly a 50% Unconsolidated Joint Venture transferred to GMPT
(Note 1), are included in these results for the three and six months ended June
30, 1998.
-7-
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
June 30 December 31
------- -----------
1999 1998
---- ----
Assets:
Properties, net $ 579,466 $ 572,149
Other assets 72,926 73,046
---------- --------
$ 652,392 $ 645,195
========== =========
Liabilities and partners' accumulated deficiency
in assets:
Debt $ 825,888 $ 825,927
Capital lease obligations 4,509 5,187
Other liabilities 37,753 47,622
TRG's accumulated deficiency in assets (94,666) (103,545)
Unconsolidated Joint Venture Partners'
accumulated deficiency in assets (121,092) (129,996)
---------- --------
$ 652,392 $ 645,195
========== =========
TRG's accumulated deficiency in assets (above) $ (94,666) $(103,545)
Elimination of intercompany profit (5,414) (4,846)
TCO's additional basis 200,077 206,741
---------- ---------
Investment in Unconsolidated Joint Ventures $ 99,997 $ 98,350
========== =========
Three Months Ended Six Months Ended
June 30 June 30
------------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
Revenues $ 62,358 $ 72,337 $122,652 $144,458
-------- -------- -------- --------
Recoverable and other
operating expenses $ 21,656 $ 26,279 $ 42,594 $ 51,247
Interest expense 15,155 18,224 30,447 35,357
Depreciation and amortization 7,669 8,215 14,930 16,660
-------- -------- -------- --------
Total operating costs $ 44,480 $ 52,718 $ 87,971 $103,264
-------- -------- -------- --------
Income before extraordinary
item $ 17,878 $ 19,619 $ 34,681 $ 41,194
Extraordinary item (1,913)
-------- -------- -------- --------
Net income $ 17,878 $ 19,619 $ 34,681 $ 39,281
======== ======== ======== ========
Net income allocable to TRG $ 9,957 $ 10,308 $ 19,497 $ 20,481
Extraordinary item allocable
to TRG 957
Realized intercompany profit 1,336 1,620 2,601 3,093
Depreciation of TCO's additional
basis (1,182) (982) (2,364) (1,855)
------- -------- -------- --------
Equity in income before
extraordinary item of
Unconsolidated Joint
Ventures $ 10,111 $ 10,946 $ 19,734 $ 22,676
======== ========= ======== ========
Beneficial interest in
Unconsolidated Joint
Ventures' operations:
Revenues less recoverable
and other operating
expenses $ 23,452 $ 25,814 $ 46,303 $ 51,866
Interest expense (8,189) (9,706) (16,432) (18,911)
Depreciation and
amortization (5,152) (5,162) (10,137) (10,279)
-------- --------- -------- --------
Income before
extraordinary item $ 10,111 $ 10,946 $ 19,734 $ 22,676
========= ========= ======== ========
-8-
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3 - Beneficial Interest in Debt and Interest Expense
During the three months ended June 30, 1999, the following debt transactions
occurred:
A ten-year financing of $270 million with an all-in rate of approximately
6.9% secured by The Mall at Short Hills was completed in April 1999. Also, a
ten-year financing of $80 million with an all-in rate of approximately 7.8% on
Biltmore Fashion Park was completed in June 1999. The Company used the net
proceeds from these financings to pay off the balance on its $340 million bridge
loan.
A three-year $170 million loan, secured by Great Lakes Crossing, was
finalized. The loan agreement provides for an option to extend the maturity date
one year. The loan bears interest at one month LIBOR plus 1.50%. Proceeds from
the loan were used to repay the balance of the existing construction facility.
Payment of principal and interest are guaranteed by the Operating Partnership.
The loan agreement provides for a reduction of the interest rate and the amount
guaranteed as certain center performance and valuation criteria are met. In
addition, the Company finalized an amendment to the MacArthur Center
construction facility. The total availability under the facility is $120 million
with interest at one month LIBOR plus 1.35%. The balance at June 30, 1999 was
$108.2 million.
In June 1999, the Operating Partnership's $200 million line of credit facility
was securitized, with interests in Fairlane, LaCumbre, Paseo Nuevo, and Regency
Square serving as collateral. The rate on the line was decreased to LIBOR plus
0.90%.
During the three months ended June 30, 1999, extraordinary charges to income
of $0.3 million were recognized in connection with the extinguishment of debt.
The Operating Partnership's beneficial interest in the debt, capital lease
obligations, capitalized interest, and interest expense of its consolidated
subsidiaries and its Unconsolidated Joint Ventures is summarized in the
following table. The Operating Partnership's beneficial interest excludes debt
and interest relating to the 30% minority interest in MacArthur Center, and
subsequent to the refinancing relating to Great Lakes Crossing, the 20% minority
interest in that center.
Unconsolidated Share
Joint of Unconsolidated Consolidated Beneficial
Ventures Joint Ventures Subsidiaries Interest
---------- --------------- ------------ ----------
Debt as of:
June 30, 1999 $ 825,888 $ 439,088 $ 932,352 $ 1,304,988
December 31, 1998 825,927 439,271 775,298 1,186,192
Capital lease obligations:
June 30, 1999 $ 4,509 $ 2,481 -- $ 2,481
December 31, 1998 5,187 2,858 -- 2,858
Capitalized interest:
Six months ended June 30, 1999 $ 713 $ 356 $ 7,313 $ 7,669
Six months ended June 30, 1998 1,130 558 7,456 7,345
Interest expense
(Net of capitalized interest):
Six months ended June 30, 1999 $ 30,447 $ 16,432 $ 24,688 $ 39,935
Six months ended June 30, 1998 35,357 18,911 44,586 63,497
-9-
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4 - Incentive Option Plan
The Operating Partnership may issue options for up to 7.7 million units of
partnership interest under its incentive option plan for employees of its
subsidiary partnership, The Taubman Company Limited Partnership (the Manager).
The per unit exercise price of an option is the fair market value of a unit on
the date of grant. Incentive options generally vest in one-third increments on
the third, fourth, and fifth anniversaries (and expire on the tenth anniversary)
of the grant date. Options for 281,789 units and 103,368 units were exercised
during the first six months of 1999 and 1998 at weighted average exercise prices
of $10.80 and $11.11, respectively. During the six months ended June 30, 1999,
the Operating Partnership granted options for 1.0 million units at $12.25 per
unit and canceled options for 87,568 units at a weighted average exercise price
of $12.95 per unit. As of June 30, 1999, there were vested options for 6.1
million units with a weighted exercise price of $11.24 per unit and outstanding
options (including unvested options) for a total of 7.4 million units with a
weighted average exercise price of $11.36 per unit.
Note 5 - Commitments and Contingencies
At the time of the Company's initial public offering (IPO) and acquisition of
its partnership interest in the Operating Partnership, the Company entered into
an agreement (the Cash Tender Agreement) with A. Alfred Taubman, who is the
Company's chairman and owns an interest in the Operating Partnership, whereby he
has the annual right to tender to the Company units of partnership interest in
the Operating Partnership (provided that the aggregate value is at least $50
million) and cause the Company to purchase the tendered interests at a purchase
price based on a market valuation of the Company on the trading date immediately
preceding the date of the tender. The Company will have the option to pay for
these interests from available cash, borrowed funds or from the proceeds of an
offering of the Company's common stock. Generally, the Company expects to
finance these purchases through the sale of new shares of its stock. The
tendering partner will bear all market risk if the market price at closing is
less than the purchase price and will bear the costs of sale. Any proceeds of
the offering in excess of the purchase price will be for the sole benefit of the
Company. At A. Alfred Taubman's election, his family and Robert C. Larson and
his family may participate in tenders.
Based on a market value at June 30, 1999 of $13.1875 per common share, the
aggregate value of interests in the Operating Partnership that may be tendered
under the Cash Tender Agreement was approximately $318.2 million. The purchase
of these interests at June 30, 1999 would have resulted in the Company owning an
additional 28% interest in the Operating Partnership.
The Company has made a continuing, irrevocable offer to all present holders
(other than certain excluded holders, including A. Alfred Taubman), assignees of
all present holders, those future holders of partnership interests in the
Operating Partnership as the Company may, in its sole discretion, agree to
include in the continuing offer, and all existing and future optionees under the
Operating Partnership's incentive option plan to exchange shares of common stock
for partnership interests in the Operating Partnership (the Continuing Offer).
Under the Continuing Offer agreement, one unit of partnership interest is
exchangeable for one share of the Company's common stock.
Shares of common stock that were acquired by GMPT and the AT&T Master Pension
Trust in connection with the IPO may be sold through a registered offering.
Pursuant to a registration rights agreement with the Company, the owners of each
of these shares have the annual right to cause the Company to register and
publicly sell their shares of common stock (provided that the shares have an
aggregate value of at least $50 million and subject to certain other
restrictions). All expenses of such a registration are to be borne by the
Company, other than the underwriting discounts or selling commissions, which
will be borne by the exercising party.
-10-
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6 - Earnings Per Share
Basic earnings per common share are calculated by dividing earnings available
to common shareowners by the average number of common shares outstanding during
each period. For diluted earnings per common share, the Company's ownership
interest in the Operating Partnership (and therefore earnings) are adjusted
assuming the exercise of all options for units of partnership interest under the
Operating Partnership's incentive option plan having exercise prices less than
the average market value of the units using the treasury stock method. Options
for 0.2 million units of partnership interest with a weighted average price of
$13.89 per unit were excluded from the computation of diluted earnings per
share, for each of the three months ended June 30, 1999 and 1998, because the
exercise prices were greater than the average market price for the period
calculated. Options for 0.3 million units of partnership interest with a
weighted average price of $13.74 per unit were excluded from the computation of
diluted earnings per share, for each of the six months ended June 30, 1999 and
1998, because the exercise prices were greater than the average market price for
the period calculated.
Three Months Six Months
Ended June 30 Ended June 30
----------------- ---------------
1999 1998 1999 1998
---- ---- ---- ----
(in thousands, except share data)
Income before extraordinary items allocable
to common shareowners (Numerator):
Net income available to common
shareowners $ 2,161 $ 4,896 $ 4,697 $ 9,646
Common shareowners' share of extraordinary
items 189 189 366
---------- ---------- ---------- ----------
Basic income before extraordinary items $ 2,350 $ 4,896 $ 4,886 $ 10,012
Effect of dilutive options (97) (67) (167) (120)
---------- ---------- ---------- ----------
Diluted income before extraordinary items $ 2,253 $ 4,829 $ 4,719 $ 9,892
========== ========== ========== ==========
Shares (Denominator) - basic and diluted 53,192,213 52,240,765 53,104,922 51,512,514
========== ========== ========== ==========
Income before extraordinary items
per common share - basic and diluted $ .04 $ .09 $ .09 $ .19
========== ========== ========== ==========
Note 7 - Investment in Fashionmall.com, Inc.
In June 1999, the Company made an investment in an e-commerce company that
markets and sells fashion apparel, footwear, and beauty products over the
Internet. The Company obtained 824,084 convertible preferred shares of
Fashionmall.com, Inc., a 9.9 percent interest in the company, for $7.4 million.
In connection with this investment, the Company received an option, exercisable
during a 60-day period commencing March 2000, to purchase an additional 924,898
shares of common stock at the initial public offering price of $13.00 per share.
The investment in Fashionmall.com, Inc. is accounted for under the cost method.
-11-
Note 8 - Subsequent Events
In July 1999, the Company entered into a partnership agreement with Swerdlow
Real Estate Group to jointly develop Dolphin Mall, a 1.4 million square foot
value regional center located in Miami, Florida. The agreement is subject to
completion of financing arrangements for construction of the project. The
Company expects that the necessary financing will be in place by the end of the
third quarter.
In August 1999, the 50% owned Unconsolidated Joint Venture that owns Cherry
Creek completed a $177 million, secured financing. The financing has an all-in
rate of 7.8% and matures in August 2006. The proceeds were used to repay the
existing $130 million mortgage and transaction costs. The remaining net proceeds
of approximately $45.2 million were distributed to the Operating Partnership,
which had contributed all of the funding for the 1998 expansion of Cherry Creek.
The Operating Partnership used the distribution to pay down its line of credit.
-12-
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
The following discussion should be read in conjunction with the accompanying
Financial Statements of Taubman Centers, Inc. and the Notes thereto.
General Background and Performance Measurement
The Company owns a managing general partner's interest in The Taubman Realty
Group Limited Partnership (the Operating Partnership), through which the Company
conducts all of its operations. The Operating Partnership owns, develops,
acquires and operates regional shopping centers nationally. The Consolidated
Businesses consist of shopping centers that are controlled by ownership or
contractual agreement, development projects for future regional shopping centers
and The Taubman Company Limited Partnership (the Manager). Shopping centers that
are not controlled and that are owned through joint ventures with third parties
(Unconsolidated Joint Ventures) are accounted for under the equity method.
The operations of the shopping centers are best understood by measuring their
performance as a whole, without regard to the Company's ownership interest.
Consequently, in addition to the discussion of the operations of the
Consolidated Businesses, the operations of the Unconsolidated Joint Ventures are
presented and discussed as a whole.
On September 30, 1998, the Operating Partnership exchanged interests in 10
shopping centers (nine Consolidated Businesses and one Unconsolidated Joint
Venture) and a share of the Operating Partnership's debt for all of the
partnership units owned by two General Motors pension trusts (GMPT) (the GMPT
Exchange). See Results of Operations -- GMPT Exchange and Related Transactions
below. Performance statistics presented below exclude these ten centers
(transferred centers). Because the Company's portfolio changed significantly as
a result of the GMPT Exchange, the results of operations of the transferred
centers have been separately classified within the Consolidated Businesses and
Unconsolidated Joint Ventures for purposes of analyzing and understanding the
historical results of the current portfolio.
Since the Company's interest in the Operating Partnership has been its sole
material asset throughout all periods presented, references in the following
discussion to "the Company" include the Operating Partnership, except where
intercompany transactions are discussed or as otherwise noted, even though the
Operating Partnership did not become a consolidated subsidiary until September
30, 1998.
Seasonality
The regional shopping center industry is seasonal in nature, with mall tenant
sales highest in the fourth quarter due to the Christmas season, and with
lesser, though still significant, sales fluctuations associated with the Easter
holiday and back-to-school events. While minimum rents and recoveries are
generally not subject to seasonal factors, most leases are scheduled to expire
in the first quarter, and the majority of new stores open in the second half of
the year in anticipation of the Christmas selling season. Accordingly, revenues
and occupancy levels are generally highest in the fourth quarter.
-13-
The following table summarizes certain quarterly operating data for 1998 and the
first and second quarters of 1999:
1st 2nd 3rd 4th 1st 2nd
Quarter Quarter Quarter Quarter Total Quarter Quarter
1998 1998 1998 1998 1998 1999 1999
--------------------------------------------------------------------------
(in thousands)
Mall tenant sales $467,698 $505,732 $507,098 $852,198 $2,332,726 $533,730 $598,956
Revenues 98,960 99,993 106,250 126,424 431,627 117,901 129,235
Occupancy:
Average (1) 88.7% 89.3% 89.5% 90.0% 89.4% 88.5% 88.1%
Ending 88.6% 89.3% 89.6% 90.2% 90.2% 87.5% 88.0%
Leased Space 91.7% 92.0% 92.4% 92.3% 92.3% 91.3% 91.7%
(1)Average occupancy for centers that were owned and open for all of 1998 and
1999 was 89.8% and 88.7% for the first quarter of 1999 and 1998, respectively
and 89.3% for both the second quarters of 1999 and 1998.
Because the seasonality of sales contrasts with the generally fixed nature of
minimum rents and recoveries, mall tenant occupancy costs (the sum of minimum
rents, percentage rents and expense recoveries) relative to sales are
considerably higher in the first three quarters than they are in the fourth
quarter. The following table summarizes occupancy costs, excluding utilities,
for mall tenants as a percentage of sales for 1998 and the first and second
quarters of 1999:
1st 2nd 3rd 4th 1st 2nd
Quarter Quarter Quarter Quarter Total Quarter Quarter
1998 1998 1998 1998 1998 1999 1999
-----------------------------------------------------------
Minimum rents 11.6% 10.9% 11.0% 7.2% 9.7% 11.8% 10.8%
Percentage rents 0.2 0.2 0.3 0.4 0.3 0.2 0.4
Expense recoveries 4.5 4.5 4.7 3.4 4.1 4.7 4.9
---- ---- ---- ---- ---- ---- ----
Mall tenant occupancy
costs 16.3% 15.6% 16.0% 11.0% 14.1% 16.7% 16.1%
==== ==== ==== ==== ==== ==== ====
Rental Rates
Average base rent per square foot for all mall tenants at the 10 centers
owned and open for at least five years was $43.55 for the twelve months ended
June 30, 1999, compared to $41.74 for the twelve months ended June 30, 1998. As
leases have expired in the shopping centers, the Company has generally been able
to rent the available space, either to the existing tenant or a new tenant, at
rental rates that are higher than those of the expired leases. In a period of
increasing sales, rents on new leases will tend to rise as tenants' expectations
of future growth become more optimistic. In periods of slower growth or
declining sales, rents on new leases will grow more slowly or will decline for
the opposite reason. However, center revenues nevertheless increase as older
leases roll over or are terminated early and replaced with new leases negotiated
at current rental rates that are usually higher than the average rates for
existing leases.
-14-
Results of Operations
The following represent significant debt and equity transactions, new center
openings and expansions which affect the operating results described under
Comparison of Three Months Ended June 30, 1999 to the Three Months Ended June
30, 1998 and Comparison of Six Months Ended June 30, 1999 to the Six Months
Ended June 30, 1998.
GMPT Exchange and Related Transactions
On September 30, 1998, the Operating Partnership exchanged interests in 10
shopping centers (nine wholly owned and one Unconsolidated Joint Venture),
together with $990 million of debt, for all of GMPT's partnership units
(approximately 50 million units with a fair value of $675 million), providing
the Company with a majority and controlling interest in the Operating
Partnership. The Operating Partnership continues to manage the centers exchanged
under management agreements with GMPT that expire December 31, 1999. The
management agreements are cancelable with 90 days notice. Certain costs of
providing services under these agreements, including administrative and certain
other fixed costs, would not necessarily be eliminated if the contracts were to
be canceled or not renewed. The actual reduction of costs would be affected by
whether all or a portion of the contracts were canceled or not renewed, timing
of the cancellation or non-renewal, and actual or anticipated changes in the
Operating Partnership's owned or managed portfolio.
In anticipation of the GMPT Exchange, the Operating Partnership used the $1.2
billion proceeds from two bridge loans bearing interest at one-month LIBOR plus
1.30% to extinguish $1.1 billion of debt, including substantially all of the
Operating Partnership's public unsecured debt, its outstanding commercial paper,
and borrowings on its existing line of credit. The remaining proceeds were used
primarily to pay prepayment premiums and transaction costs. GMPT's share of debt
received in the exchange included the $902 million balance on the first bridge
loan, $86 million representing 50% of the debt on the Joint Venture owned
shopping center, and $1.6 million of assessment bond obligations.
Concurrently with the GMPT Exchange, the Operating Partnership committed to a
restructuring of its operations. The Company expects to reduce its annual
general and administrative expense to approximately $19 million in 1999. This is
a forward looking statement, and certain significant factors could cause the
actual reductions in general and administrative expense to differ materially,
including but not limited to: 1) actual payroll reductions achieved; 2) actual
results of negotiations; 3) use of outside consultants; and 4) changes in the
Company's owned or managed portfolio.
Other Debt Transactions
In April 1999, a ten year financing of $270 million with an all-in rate of
approximately 6.9% secured by The Mall at Short Hills was completed. Also, in
June 1999, a ten year financing of $80 million with an all-in rate of
approximately 7.8% secured by Biltmore Fashion Park was completed. The net
proceeds of these financings were used to pay off the entire $340 million
balance on the bridge loan.
In April 1999, a three year $170 million loan secured by Great Lakes Crossing
was finalized, with proceeds used to repay the balance of the existing
construction facility. The loan bears interest at one month LIBOR plus 1.50%. In
addition, the Company finalized an amendment to the MacArthur Center
construction facility, with total availability under the facility being $120
million at an interest rate of one-month LIBOR plus 1.35%.
In June 1999, the Operating Partnership's $200 million line of credit facility
was securitized, with interests in Fairlane, LaCumbre, Paseo Nuevo, and Regency
Square serving as collateral. The rate on the line was decreased to LIBOR plus
0.90%.
-15-
Openings and Expansions
In March 1999, MacArthur Center, a 70% owned enclosed super-regional mall,
opened in Norfolk, Virginia. In November 1998, Great Lakes Crossing, an 80%
owned enclosed value super-regional mall, opened in Auburn Hills, Michigan. Both
Great Lakes Crossing and MacArthur Center are owned by joint ventures in which
the Operating Partnership has a controlling interest, and consequently the
results of these centers are consolidated in the Company's financial statements.
The Company is entitled to a preferred return on its equity contributions to
these centers. The contributed capital was used to fund construction costs. The
income effect of the cumulative preferred return net of the interest on the
Operating Partnership's associated borrowings was approximately $0.5 million and
$1.0 million for the three and six months ended June 30, 1999, respectively, and
is expected to total approximately $2 million in 1999. The net effect in 2000 of
any recurring preference is expected to be minimal. At Cherry Creek, a 132,000
square foot expansion opened in stages throughout the fall of 1998.
Presentation of Operating Results
In order to facilitate the analysis of the ongoing business for periods prior
to the GMPT Exchange, the following tables contain the combined operating
results of the Company and the Operating Partnership and also present separately
the revenues and expenses, other than interest, depreciation and amortization,
of the transferred centers. The following discussions include analysis of the
Consolidated Businesses and the Unconsolidated Joint Ventures, with the interest
of the noncontrolling partners of the Operating Partnership (the Minority
Interest) deducted to arrive at the results allocable to the Company's
shareowners. Because the Operating Partnership's net equity is less than zero,
for periods subsequent to the GMPT Exchange the income allocated to the Minority
Interest is equal to the Minority Interest's share of distributions. The
Operating Partnership's net equity is less than zero due to accumulated
distributions in excess of net income and not as a result of operating losses.
Distributions to partners are usually greater than net income because net income
includes non-cash charges for depreciation and amortization. The Company's
average ownership percentage of the Operating Partnership was 62.88% and 62.84%
for the three and six months ended June 30, 1999 and 39.08% and 38.69% for the
three and six months ended June 30, 1998.
-16-
Comparison of the Three Months Ended June 30, 1999 to the Three Months Ended
June 30, 1998
The following table sets forth operating results for the three months ended
June 30, 1999 and June 30, 1998, showing the results of the Consolidated
Businesses and Unconsolidated Joint Ventures:
Three Months Ended June 30, 1999 Three Months Ended June 30, 1998
------------------------------------------ -----------------------------------------------
UNCONSOLIDATED UNCONSOLIDATED
CONSOLIDATED JOINT CONSOLIDATED JOINT
BUSINESSES(1) VENTURES(2) TOTAL BUSINESSES(1) VENTURES(2) TOTAL
------------------------------------------ -----------------------------------------------
(in millions of dollars)
REVENUES:
Minimum rents 33.5 38.7 72.2 23.8 36.0 59.8
Percentage rents 1.6 1.2 2.8 0.7 0.7 1.5
Expense recoveries 20.7 20.8 41.5 14.0 19.0 33.0
Management, leasing and development 6.0 6.0 2.0 2.0
Other 5.1 1.6 6.7 2.7 1.0 3.7
Revenues - transferred centers 46.1 15.6 61.6
---- ---- ---- ---- ---- ----
Total revenues 66.9 62.3 129.2 89.3 72.3 161.6
OPERATING COSTS:
Recoverable expenses 17.9 16.9 34.8 12.3 15.5 27.7
Other operating 9.2 3.4 12.6 5.8 3.5 9.3
Management, leasing and development 4.5 4.5 1.2 1.2
Expenses other than interest,
Depreciation and amortization
- transferred centers 15.4 5.9 21.2
General and administrative 4.4 4.4 7.3 7.3
Interest expense 13.8 15.2 29.1 21.9 18.3 40.2
Depreciation and amortization 12.8 7.5 20.3 15.4 8.0 23.4
---- ---- ----- ---- ---- -----
Total operating costs 62.7 43.0 105.7 79.4 51.0 130.4
Net results of Memorial City (1) (0.2) (0.2) (0.3) (0.3)
---- ---- ---- ---- ---- ----
4.0 19.3 23.3 9.6 21.3 30.9
==== ==== ==== ====
Equity in net income of
Unconsolidated Joint Ventures 10.1 10.9
---- ----
Income before extraordinary
items and minority interest 14.1 20.5
Extraordinary items (0.3)
Minority interest (7.5) (11.5)
---- -----
Net income 6.3 9.0
Series A prefered dividends (4.2) (4.2)
---- -----
Net income available to common
shareowners 2.2 4.9
==== =====
SUPPLEMENTAL INFORMATION (3):
EBITDA contribution 29.7 23.5 53.1 47.2 25.8 73.0
Beneficial Interest Expense (12.8) (8.2) (20.9) (21.9) (9.7) (31.7)
Non-real estate depreciation (0.6) (0.6) (0.5) (0.5)
Series A preferred dividends (4.2) (4.2) (4.2) (4.2)
---- ---- ---- ---- ---- ----
Funds from Operations contribution 12.1 15.3 27.4 20.6 16.1 36.7
==== ==== ==== ==== ==== ====
(1) The results of operations of Memorial City are presented net in this
table. The Company expects that Memorial City's net operating income
will approximate the ground rent payable under the lease for the
immediate future.
(2) With the exception of the Supplemental Information, amounts represent
100% of the Unconsolidated Joint Ventures. Amounts are net of
intercompany profits.
(3) EBITDA represents earnings before interest and depreciation and
amortization. Funds from Operations is defined and discussed in
Liquidity and Capital Resources.
(4) Amounts in the table may not add due to rounding.
(5) Certain 1998 amounts have been reclassified to conform to 1999
classifications.
-17-
Consolidated Businesses
- -----------------------
Total revenues for the three months ended June 30, 1999 were $66.9 million,
a $23.7 million, or 54.9%, increase over the comparable period in 1998,
excluding revenues of the transferred centers. Minimum rents increased $9.7
million of which $8.6 million was caused by the opening of MacArthur Center and
Great Lakes Crossing. Minimum rents also increased due to tenant rollovers.
Percentage rent increased because of an increase in tenant sales. Expense
recoveries increased primarily due to the new centers. Revenues from management,
leasing, and development services increased primarily due to the management
agreements with GMPT. Other revenue increased primarily due to increases in
lease cancellation and garage revenues, and a gain on the sale of peripheral
land.
Total operating costs were $62.7 million, a $1.3 million, or 2.0% decrease
over the comparable period in 1998, excluding expenses other than depreciation,
amortization and interest of the transferred centers. Recoverable expenses
increased primarily due to Great Lakes Crossing and MacArthur Center. Other
operating expense increased because of the writeoff of pre-development costs
related to certain projects and the new centers. Costs of management, leasing
and development services increased primarily due to the management agreements
with GMPT. General and administrative expense decreased $2.9 million primarily
due to decreases in payroll costs, travel and professional fees. Interest
expense decreased primarily due to the assumption of debt by GMPT as part of the
GMPT Exchange, partially offset by an increase in debt used to finance Great
Lakes Crossing and MacArthur Center and a decrease in capitalized interest
related to these centers. Depreciation and amortization expense decreased due to
the exclusion of the transferred centers in 1999, offset by an increase due to
the new centers.
Unconsolidated Joint Ventures
- -----------------------------
Total revenues for the three months ended June 30, 1999 were $62.3 million, a
$5.6 million, or 9.9%, increase from the comparable period of 1998, excluding
revenues of the transferred center. Minimum rents increased due to the expansion
at Cherry Creek and to tenant rollovers. Expense recoveries also increased
because of the Cherry Creek expansion. Other revenue increased by $0.6 million
primarily due to an increase in lease cancellation revenue.
Total operating costs decreased by $8.0 million (of which $5.9 million
represented the expenses other than interest, depreciation, and amortization of
the transferred center), to $43.0 million for the three months ended June 30,
1999. Recoverable expenses increased primarily due to the Cherry Creek
expansion. Interest expense decreased due to the assumption of debt by GMPT as
part of the GMPT Exchange.
As a result of the foregoing, net income of the Unconsolidated Joint Ventures
decreased by $2.0 million, or 9.4%, to $19.3 million. The Company's equity in
net income of the Unconsolidated Joint Ventures was $10.1 million, a 7.3%
decrease from the comparable period in 1998.
Net Income
- ----------
As a result of the foregoing, the Company's income before extraordinary items
and minority interest decreased $6.4 million, or 31.2%, to $14.1 million for the
three months ended June 30, 1999. The Company recognized a $0.3 extraordinary
loss related to the extinguishment of debt. The minority interest in the
Company's results decreased to $7.5 million, from $11.5 million in 1998,
primarily reflecting the Company's increased ownership in the Operating
Partnership due to the GMPT Exchange. After payment of $4.2 million in Series A
preferred dividends, net income available to common shareowners for 1999 was
$2.2 million compared to $4.9 million in 1998.
-18-
Comparison of the Six Months Ended June 30, 1999 to the Six Months Ended June
30, 1998
The following table sets forth operating results for the six months ended June
30, 1999 and June 30, 1998, showing the results of the Consolidated Businesses
and Unconsolidated Joint Ventures:
Six Months Ended June 30, 1999 Six Months Ended June 30, 1998
--------------------------------------- ---------------------------------------
UNCONSOLIDATED UNCONSOLIDATED
CONSOLIDATED JOINT CONSOLIDATED JOINT
BUSINESSES(1) VENTURES(2) TOTAL BUSINESSES(1) VENTURES(2) TOTAL
--------------------------------------- ---------------------------------------
(in millions of dollars)
REVENUES:
Minimum rents 64.5 77.3 141.8 47.2 71.6 118.8
Percentage rents 2.6 1.8 4.3 1.6 1.4 3.0
Expense recoveries 37.5 40.3 77.8 27.0 36.7 63.7
Management, leasing and development 11.7 11.7 3.8 3.8
Other 8.1 3.3 11.4 5.9 3.8 9.7
Revenues - transferred centers 88.1 31.0 119.1
----- ----- ----- ----- ----- -----
Total revenues 124.5 122.6 247.1 173.6 144.4 318.1
OPERATING COSTS:
Recoverable expenses 32.3 33.1 65.4 23.5 30.2 53.8
Other operating 15.3 6.6 21.9 9.8 6.5 16.3
Management, leasing and development 8.9 8.9 2.3 2.3
Expenses other than interest,
Depreciation and amortization
- transferred centers 29.5 11.7 41.1
General and administrative 9.1 9.1 14.1 14.1
Interest expense 24.7 30.6 55.3 44.6 35.5 80.1
Depreciation and amortization 24.9 14.7 39.6 30.4 16.0 46.4
----- ---- ----- ----- ---- -----
Total operating costs 115.3 85.0 200.3 154.2 99.9 254.1
Net results of Memorial City (1) (0.6) (0.6) (0.5) (0.5)
----- ---- ----- ----- ---- -----
8.6 37.6 46.2 18.9 44.6 63.5
==== ===== ==== =====
Equity in income before extraordinary
item of Unconsolidated Joint Ventures 19.7 22.7
----- ----
Income before extraordinary items
and minority interest 28.3 41.6
Extraordinary items (0.3) (1.0)
Minority interest (15.0) (22.7)
----- -----
Net income 13.0 17.9
Series A preferred dividends (8.3) (8.3)
----- ----
Net income available to common
shareowners 4.7 9.6
===== ====
SUPPLEMENTAL INFORMATION (3):
EBITDA contribution 57.2 46.3 103.5 94.4 51.9 146.3
Beneficial Interest Expense (23.5) (16.4) (39.9) (44.6) (18.9) (63.5)
Non-real estate depreciation (1.2) (1.2) (1.0) (1.0)
Series A preferred dividends (8.3) (8.3) (8.3) (8.3)
----- ----- ----- ----- ----- -----
Funds from Operations contribution 24.1 29.9 54.0 40.5 33.0 73.4
===== ===== ===== ===== ===== =====
(1) The results of operations of Memorial City are presented net in this
table. The Company expects that Memorial City's net operating income
will approximate the ground rent payable under the lease for the
immediate future.
(2) With the exception of the Supplemental Information, amounts represent
100% of the Unconsolidated Joint Ventures. Amounts are net of
intercompany profits.
(3) EBITDA represents earnings before interest and depreciation and
amortization. Funds from Operations is defined and discussed in
Liquidity and Capital Resources.
(4) Amounts in the table may not add due to rounding.
(5) Certain 1998 amounts have been reclassified to conform to 1999
classifications.
-19-
Consolidated Businesses
- -----------------------
Total revenues for the six months ended June 30, 1999 were $124.5 million, a
$39.0 million, or 45.6%, increase over the comparable period in 1998, excluding
revenues of the transferred centers. Minimum rents increased $17.3 million of
which $14.5 million was caused by the opening of MacArthur Center and Great
Lakes Crossing. Minimum rents also increased due to tenant rollovers. Percentage
rent increased because of an increase in tenant sales. Expense recoveries
increased primarily due to the new centers. Revenues from management, leasing,
and development services increased primarily due to the management agreements
with GMPT. Other revenue increased primarily due to increases in lease
cancellation and garage revenues, and gains on sales of peripheral land.
Total operating costs were $115.3 million, a $9.4 million, or 7.5% decrease
over the comparable period in 1998, excluding expenses other than depreciation,
amortization and interest of the transferred centers. Recoverable expenses
increased primarily due to Great Lakes Crossing and MacArthur Center. Other
operating expense increased due to an increase in the charge to operations for
costs of unsuccessful and potentially unsuccessful pre-development activities,
the new centers, and bad debt expense. Costs of management, leasing and
development services increased primarily due to the management agreements with
GMPT. General and administrative expense decreased $5.0 million primarily due to
decreases in payroll, travel and professional costs. Interest expense decreased
primarily due to the assumption of debt by GMPT as part of the GMPT Exchange,
partially offset by an increase in debt used to finance Great Lakes Crossing and
MacArthur Center and a decrease in capitalized interest related to these
centers. Depreciation and amortization expenses decreased due to the exclusion
of the transferred centers in 1999, partially offset by an increase due to the
new centers.
Unconsolidated Joint Ventures
- -----------------------------
Total revenues for the six months ended June 30, 1999 were $122.6 million, a
$9.2 million, or 8.1%, increase from the comparable period of 1998, excluding
revenues of the transferred center. Minimum rents increased due to the expansion
at Cherry Creek and tenant rollovers. Expense recoveries also increased because
of the Cherry Creek expansion. Other revenue decreased by $0.5 million primarily
due to a decrease in gains on sales of peripheral land.
Total operating costs decreased by $14.9 million (of which $11.7 million
represented the expenses other than interest, depreciation, and amortization of
the transferred center), to $85.0 million for the six months ended June 30,
1999. Recoverable expenses increased primarily due to the Cherry Creek
expansion. Interest expense decreased due to the assumption of debt by GMPT as
part of the GMPT Exchange.
As a result of the foregoing, income before extraordinary item of the
Unconsolidated Joint Ventures decreased by $7.0 million, or 15.7%, to $37.6
million. The Company's equity in income before extraordinary item of the
Unconsolidated Joint Ventures was $19.7 million, a 13.2% decrease from the
comparable period in 1998.
Net Income
- ----------
As a result of the foregoing, the Company's income before extraordinary items
and minority interest decreased $13.3 million, or 32.0%, to $28.3 million for
the six months ended June 30, 1999. The Company recognized a $0.3 extraordinary
loss related to the extinguishment of debt. The minority interest in the
Company's results decreased to $15.0 million, from $22.7 million in 1998,
primarily reflecting the Company's increased ownership in the Operating
Partnership due to the GMPT Exchange. After payment of $8.3 million in Series A
preferred dividends, net income available to common shareowners for 1999 was
$4.7 million compared to $9.6 million in 1998.
-20-
Liquidity and Capital Resources
On September 30, 1998, the Company obtained a majority and controlling
interest in the Operating Partnership as a result of the GMPT Exchange (See
Results of Operations - GMPT Exchange and Related Transactions above). As of
that date the Company consolidated the accounts of the Operating Partnership in
the Company's financial statements. Prior to that date the Company accounted for
its investment in the Operating Partnership under the equity method. In the
following discussion, references to beneficial interest represent the Operating
Partnership's share of the results of its consolidated and unconsolidated
businesses. The Company does not have and has not had any parent company
indebtedness; all debt discussed represents obligations of the Operating
Partnership or its subsidiaries and joint ventures.
The Company believes that its net cash provided by operating activities,
distributions from its joint ventures, the unutilized portion of its credit
facilities, and its ability to access the capital markets, assures adequate
liquidity to conduct its operations in accordance with its dividend and
financing policies.
As of June 30, 1999, the Company had a consolidated cash balance of $15.7
million. Additionally, the Company has a secured $200 million line of credit.
The line had $135 million of borrowings as of June 30, 1999 and expires in
September 2001. The Company also has available an unsecured bank line of credit
of up to $40 million. The line had $18.2 million of borrowings as of June 30,
1999 and expires August 31, 1999. The Company is currently finalizing an
agreement to extend the maturity to August 2000.
In August 1999, the 50% owned Unconsolidated Joint Venture that owns Cherry
Creek completed a $177 million, secured financing. The financing has an all-in
rate of 7.8% and matures in August 2006. The proceeds were used to repay the
existing $130 million mortgage and transaction costs. The remaining net proceeds
of approximately $45.2 million were distributed to the Operating Partnership,
which had contributed the funding for the 1998 expansion of Cherry Creek. The
Operating Partnership used the distribution to pay down its line of credit,
resulting in availability of approximately $120 million under the lines of
credit.
Debt
In April 1999, a ten-year financing of $270 million with an all-in rate of
approximately 6.9% secured by The Mall at Short Hills was completed. Also, a
ten-year financing of $80 million with an all-in rate of approximately 7.8%
secured by Biltmore Fashion Park was completed in June 1999. The net proceeds
from these financings were used to pay off the $340 million bridge loan that was
established in September of 1998 to facilitate the GMPT transaction.
In April 1999, a three-year $170 million loan secured by Great Lakes Crossing
was finalized. The loan agreement provides for an option to extend the maturity
date one year. The loan bears interest at one month LIBOR plus 1.50%. Proceeds
from the loan were used to repay the balance of the existing construction
facility. Payment of principal and interest are guaranteed by the Operating
Partnership. The loan agreement provides for a reduction of the interest rate
and the amount guaranteed as certain center performance and valuation criteria
are met. In addition, the Company finalized an amendment to the MacArthur Center
construction facility. The total availability under the facility is $120 million
with interest at one month LIBOR plus 1.35%. The balance at June 30, 1999 was
$108.2 million.
In June 1999, the Operating Partnership's $200 million line of credit facility
was securitized, with interests in Fairlane, LaCumbre, Paseo Nuevo, and Regency
Square serving as collateral. The rate on the line was decreased to LIBOR plus
0.90%.
Proceeds from additional borrowings provided funding of $137.8 million for the
first six months of 1999 compared to $204.9 million of borrowings and equity
issuances in the comparable period of 1998 (including $77.7 million for the
redemption of 6.1 million units of partnership interest in January 1998).
Additionally, the proceeds were used to fund capital expenditures for the
Consolidated Businesses and contributions to Unconsolidated Joint Ventures for
construction costs.
-21-
At June 30, 1999, the Operating Partnership's debt and its beneficial
interest in the debt of its Consolidated and Unconsolidated Joint Ventures
totaled $1,305.0 million. As shown in the following table, $164.0 million of
this debt was floating rate debt that remained unhedged at June 30, 1999.
Interest rates shown do not include amortization of debt issuance costs and
interest rate hedging costs. These items are reported as interest expense in the
results of operations. In the aggregate, these costs added 0.38% to the
effective rate of interest on beneficial interest in debt at June 30, 1999.
Included in beneficial interest in debt is debt used to fund development and
expansion costs. Beneficial interest in assets on which interest is being
capitalized totaled $187.1 million as of June 30, 1999. Beneficial interest in
capitalized interest was $3.3 million and $7.7 million for the three and six
months ended June 30, 1999.
Beneficial Interest in Debt
------------------------------------------------
Amount Interest LIBOR Frequency LIBOR
(in millions Rate at Cap of Rate at
of dollars) 6/30/99 Rate Resets 6/30/99
------------- ------- ----- ------ -------
Total beneficial interest
in fixed rate debt $ 754.2 7.51%(1)
Floating rate debt hedged via
interest rate caps:
Through July 1999 65.0 5.68 7.00% Monthly 5.24 %
Through December 1999 200.0 6.15 (1) 7.00 Monthly 5.24
Through October 2001 25.0 5.44 8.55 Monthly 5.24
Through January 2002 53.4 6.36 (1) 9.50 Monthly 5.24
Through July 2002 43.4 6.32 6.50 Monthly 5.24
Other floating rate debt 164.0 6.15 (1)
-----
Total beneficial interest in
debt $1,305.0 6.91 (1)
========
(1)Denotes weighted average interest rate.
Certain loan agreements contain various restrictive covenants, including
limitations on net worth, minimum debt service and fixed charges coverage
ratios, a maximum payout ratio on distributions, and a minimum debt yield ratio,
the latter being the most restrictive. The Operating Partnership is in
compliance with all of such covenants.
Sensitivity Analysis
The Company has exposure to interest rate risk on its debt obligations and
interest rate instruments. Based on the Operating Partnership's beneficial
interest in debt and interest rates in effect at June 30, 1999, a one percent
increase or decrease in interest rates would decrease or increase annual
earnings and cash flows by approximately $4.8 million. Based on the Company's
consolidated debt and interest rates in effect at June 30, 1999, a one percent
increase or decrease in interest rates would decrease or increase the fair value
of debt by approximately $30 million.
Funds from Operations
A principal factor that the Company considers in determining dividends to
shareowners is Funds from Operations, which is defined as income before
extraordinary and unusual items, real estate depreciation and amortization, and
the allocation to the minority interest in the Operating Partnership, less
preferred dividends.
Funds from Operations does not represent cash flows from operations, as
defined by generally accepted accounting principles, and should not be
considered to be an alternative to net income as an indicator of operating
performance or to cash flows from operations as a measure of liquidity. However,
the National Association of Real Estate Investment Trusts suggests that Funds
from Operations is a useful supplemental measure of operating performance for
REITs.
-22-
Reconciliation of Net Income to Funds from Operations
Three Months Ended Three Months Ended
June 30, 1999 June 30, 1998
------------------ ------------------
(in millions of dollars)
Income before extraordinary items
and minority interest (1) 14.1 20.5
Depreciation and amortization (2) 12.9 15.5
Share of Unconsolidated Joint Ventures'
depreciation and amortization (3) 5.2 5.2
Other income/expenses, net 0.2
Non-real estate depreciation (0.6) (0.5)
Preferred dividends (4.2) (4.2)
---- ----
Funds from Operations 27.4 36.7
==== ====
Funds from Operations allocable to
the Company 17.2 14.2
==== ====
(1) Includes gains on peripheral land sales of $0.4 million for the three
months ended June 30, 1999. There were no land sales for the three months
ended June 30, 1998.
(2) Includes $0.5 million and $1.1 million of mall tenant allowance
amortization for the three months ended June 30, 1999 and June 30, 1998,
respectively.
(3) Includes $0.2 million and $0.9 million of mall tenant allowance
amortization for the three months ended June 30, 1999 and June 30, 1998,
respectively.
(4) Amounts in the tables may not add due to rounding.
Six Months Ended Six Months Ended
June 30, 1999 June 30, 1998
----------------- ----------------
(in millions of dollars)
Income before extraordinary items and
minority interest (1) 28.3 41.6
Depreciation and amortization (2) 25.1 30.6
Share of Unconsolidated Joint Ventures'
depreciation and amortization (3) 10.1 10.3
Other income/expenses, net 0.3
Non-real estate depreciation (1.2) (1.0)
Preferred dividends (8.3) (8.3)
---- ----
Funds from Operations 54.0 73.4
==== ====
Funds from Operations allocable to
the Company 33.9 28.1
==== ====
(1) Includes gains on peripheral land sales of $0.9 million and $0.4 million
for the six months ended June 30, 1999 and June 30, 1998, respectively.
(2) Includes $1.0 million and $2.2 million of mall tenant allowance
amortization for the six months ended June 30, 1999 and June 30, 1998,
respectively.
(3) Includes $0.5 million and $1.2 million of mall tenant allowance
amortization for the six months ended June 30, 1999 and June 30, 1998,
respectively.
(4) Amounts in the table may not add due to rounding.
Dividends
The Company pays regular quarterly dividends to its common and Series A
preferred shareowners. Dividends to its common shareowners are at the discretion
of the Board of Directors and depend on the cash available to the Company, its
financial condition, capital and other requirements, and such other factors as
the Board of Directors deems relevant. Preferred dividends accrue regardless of
whether earnings, cash availability, or contractual obligations were to prohibit
the current payment of dividends.
-23-
On June 3, 1999, the Company declared a quarterly dividend of $0.24 per common
share payable July 20, 1999 to shareowners of record on June 30, 1999. The Board
of Directors also declared a quarterly dividend of $0.51875 per share on the
Company's 8.3% Series A Preferred Stock for the quarterly dividend period ended
June 30, 1999, which was paid on June 30, 1999 to shareowners of record on June
15, 1999. The tax status of total 1999 common dividends declared and to be
declared, assuming continuation of a $0.24 per common share quarterly dividend,
is estimated to be approximately 50% return of capital, and approximately 50% of
ordinary income. The tax status of total 1999 dividends to be paid on Series A
Preferred Stock is estimated to be 100% ordinary income. These are
forward-looking statements and certain significant factors could cause the
actual results to differ materially, including: 1) the amount of dividends
declared; 2) changes in the Company's share of anticipated taxable income of the
Operating Partnership due to the actual results of the Operating Partnership; 3)
changes in the number of the Company's outstanding shares; 4) property
acquisitions or dispositions; 5) financing transactions, including refinancing
of existing debt; and 6) changes in the Internal Revenue Code or its
application.
The annual determination of the Company's common dividends is based on
anticipated Funds from Operations available after preferred dividends, as well
as financing considerations and other appropriate factors. Further, the Company
has decided that the growth in common dividends will be less than the growth in
Funds from Operations for the immediate future.
Any inability of the Operating Partnership or its Joint Ventures to obtain
financing as required to fund maturing debts, capital expenditures and changes
in working capital, including development activities and expansions, may require
the utilization of cash to satisfy such obligations, thereby possibly reducing
distributions to partners of the Operating Partnership and funds available to
the Company for the payment of dividends.
Capital Spending
Capital spending for routine maintenance of the shopping centers is generally
recovered from tenants. The following table summarizes planned capital spending,
which is not recovered from tenants and assuming no acquisitions during 1999:
1999
------------------------------------------------------------------
Beneficial Interest in
Unconsolidated Consolidated Businesses
Consolidated Joint and Unconsolidated
Businesses Ventures (1) Joint Ventures (1) (2)
------------------------------------------------------------------
(in millions of dollars)
Development, renovation, and
expansion 223.4 (3) 25.4 (4) 190.0
Mall tenant allowances 4.3 5.6 7.4
Pre-construction development and
other 21.5 4.0 23.5
----- ---- -----
Total 249.2 35.0 220.9
===== ==== =====
(1) Costs are net of intercompany profits.
(2) Includes the Operating Partnership's share of construction costs for MacArthur
Center (a 70% owned consolidated joint venture), The Mall at Wellington Green
(a 90% owned consolidated joint venture) and International Plaza (a 50.1%
owned consolidated joint venture).
(3) Includes costs related to MacArthur Center, The Shops at Willow Bend, The Mall
at Wellington Green, and International Plaza.
(4) Excludes costs related to Dolphin Mall.
MacArthur Center, a new center in Norfolk, Virginia, opened in March 1999. The
930,000 square foot center is anchored by Nordstrom and Dillard's. This center
is owned by a joint venture in which the Operating Partnership has a 70%
controlling interest and cost approximately $157 million.
-24-
International Plaza, a new 1.3 million square foot center under
construction in Tampa, Florida, will be anchored by Nordstrom, Lord & Taylor,
Dillard's and Neiman Marcus. This project is owned by a joint venture in which
the Operating Partnership has a controlling 50.1% interest. In 1999, the Company
held ground-breaking ceremonies for The Shops at Willow Bend, a new 1.5 million
square foot center in Plano, Texas. Anchors will be Neiman Marcus, Saks Fifth
Avenue, Lord & Taylor, Foley's and Dillard's. The Mall at Wellington Green, a
1.3 million square foot center under construction in West Palm Beach County,
Florida, will be anchored by Lord & Taylor, Burdine's, Dillard's and JCPenney.
The center will be owned by a joint venture in which the Operating Partnership
has a 90% controlling interest. All three of these centers are expected to open
in 2001.
In July 1999, the Company entered into a partnership agreement with Swerdlow
Real Estate Group to jointly develop Dolphin Mall, a 1.4 million square foot
value regional center located in Miami, Florida. The agreement is subject to
completion of financing arrangements for construction of the project. The
Company expects that the necessary financing will be in place by the end of the
third quarter.
The total cost of these four projects is anticipated to be approximately $1
billion. The Company's beneficial investment in the projects will be
approximately $650 million, as three of these projects are joint ventures. While
the Company intends to finance approximately 75 percent of each new center with
construction debt, the Company will have a greater responsibility for the
project equity (approximately $200 million). Approximately 50% of this amount
has been funded under the Company's lines of credit. Additional sources of
funding are additional borrowings under the Company's lines of credit, proceeds
from the refinancings of certain centers, contributions from a potential new
joint venture partner, or other equity offerings. With respect to the
construction loan financing, the Company expects that it will have three of the
projects committed by year-end.
New food courts are currently under construction at Lakeside and Fairlane
Town Center in the Detroit metropolitan area. Both are expected to open in the
fall of 1999. Additionally, a 30-screen theater will be added at Fairlane and is
anticipated to open in the spring of 2000. At Fair Oaks in the Washington, D.C.
area, Hecht's expansion will open in the fall of 1999, and a JCPenney expansion
and a newly constructed Macy's store will open in the fall of 2000. The
Operating Partnership's share of the cost of these projects is expected to be
approximately $35 million.
In 1996, the Operating Partnership entered into an agreement to lease
Memorial City Mall, a 1.4 million square foot shopping center located in
Houston, Texas. Memorial City is anchored by Sears, Foley's, Montgomery Ward and
Mervyn's. In November 1999, the Operating Partnership has the option to
terminate the lease by paying $2 million to the lessor. The Operating
Partnership is using this option period to evaluate the redevelopment
opportunities of the center. Under the terms of the lease, the Operating
Partnership has agreed to invest a minimum of $3 million during the three-year
option period. If the redevelopment proceeds, the Operating Partnership is
required to invest an additional $22 million in property expenditures not
recoverable from tenants during the first 10 years of the lease term.
The Operating Partnership and The Mills Corporation have formed an alliance to
develop value super-regional projects in major metropolitan markets. The
ten-year agreement calls for the two companies to jointly develop and own at
least seven of these centers, each representing approximately $200 million of
capital investment. A number of locations across the nation are targeted for
future initiatives.
The Operating Partnership anticipates that its share of costs for
development projects, excluding Dolphin Mall, scheduled to be completed in 2001
will be as much as $185 million in 2000. The Operating Partnership's estimates
of 1999 and 2000 capital spending include only projects approved by the
Company's Board of Directors and, consequently, estimates will change as new
projects are approved. Estimates regarding capital expenditures presented above
are forward-looking statements and certain significant factors could cause the
actual results to differ materially, including but not limited to: 1) actual
results of negotiations with anchors, tenants and contractors; 2) changes in the
scope and number of projects; 3) cost overruns; 4) timing of expenditures; 5)
financing considerations; and 6) actual time to complete projects.
-25-
Year 2000 Matters
The approach of the calendar year 2000 (Year 2000) presents issues for many
financial, information, and operational systems that may not properly recognize
the Year 2000. The Company is implementing a plan to address the risks posed by
the Year 2000 issue covering affected application and infrastructure systems.
Affected systems include both informational (such as accounting and payroll) and
operational (such as elevators, security and lighting). The Company's plan also
addresses the effect of Year 2000 on third parties with which it conducts
business, including tenants, vendors, contractors, creditors, and others. The
Company has completed the assessment, inventory, planning and testing phases of
its plan and has determined that the majority of the Company's internal systems
and all of its mission critical systems are Year 2000 compliant. The Company has
requested information and has obtained commitments from tenants, vendors,
suppliers and business partners and has developed contingency plans to minimize
the impact on the Company in the event they do not meet their Year 2000
commitments. The Company's contingency plans include arrangements to have
personnel available at its home office and each of the centers to respond to any
operational needs as the year changes.
The Company performed a full system test during the first quarter of 1999 and
continues to remediate any remaining minor operational issues encountered with
application and infrastructure systems through repair and/or replacement. The
estimated costs of addressing this issue are not expected to be material to 1999
operations. The Company will also continue monitoring the progress of material
third parties' responses to the Year 2000 issue. The Company believes that its
most likely exposure will be the failure of third parties in comprehensively
addressing the issue. For example, failure of utility companies to meet their
commitments might result in temporary business interruption at centers. The
Company is continuing to develop contingency plans in response to such exposure,
as appropriate. Failure of third parties with which the Company conducts
business to successfully respond to the Year 2000 issue may have a material
adverse effect on the Company.
Cash Tender Agreement
A. Alfred Taubman has the annual right to tender to the Company units of
partnership interest in the Operating Partnership (provided that the aggregate
value is at least $50 million) and cause the Company to purchase the tendered
interests at a purchase price based on a market valuation of the Company on the
trading date immediately preceding the date of the tender (the Cash Tender
Agreement). At A. Alfred Taubman's election, his family, and Robert C. Larson
and his family may participate in tenders. The Company will have the option to
pay for these interests from available cash, borrowed funds, or from the
proceeds of an offering of the Company's common stock. Generally, the Company
expects to finance these purchases through the sale of new shares of its stock.
The tendering partner will bear all market risk if the market price at closing
is less than the purchase price and will bear the costs of sale. Any proceeds of
the offering in excess of the purchase price will be for the sole benefit of the
Company.
Based on a market value at June 30, 1999 of $13.1875 per common share, the
aggregate value of interests in the Operating Partnership that may be tendered
under the Cash Tender Agreement was approximately $318.2 million. The purchase
of these interests at June 30, 1999 would have resulted in the Company owning an
additional 28% interest in the Operating Partnership.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
requires companies to record derivatives on the balance sheet as assets and
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivatives and whether it qualifies for hedge accounting. This statement is
not expected to have a material impact on the Company's consolidated financial
statements. This statement is effective for fiscal years beginning after June
15, 2000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is included in this report at Item 2
under the caption "Liquidity and Capital Resources - Sensitivity Analysis".
-26-
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On May 12, 1999, the Company held its annual meeting of
shareholders. The matters on which shareholders voted were: the
election of one director to serve a one year term, the election of
three directors to serve a three year term and the ratification of the
Board's selection of Deloitte & Touche LLP as the Company's
independent auditors for the year ended December 31, 1999. Robert C.
Larson, Lisa A. Payne, A. Alfred Taubman, and Robert S. Taubman were
re-elected at the meeting, and the five remaining incumbent directors
continued to hold office after the meeting. The shareholders ratified
the selection of the independent auditors. The results of the voting
are shown below:
ELECTION OF DIRECTORS
NOMINEES VOTES FOR VOTES WITHHELD
-------- --------- --------------
Robert C. Larson 70,341,993 31,661
Lisa A. Payne 70,245,414 128,240
A. Alfred Taubman 70,335,771 37,883
Robert S. Taubman 70,340,232 33,122
RATIFICATION OF AUDITORS
69,898,881 Votes were cast for ratification;
155,725 Votes were cast against ratification; and
319,048 Votes abstained (including broker non-votes).
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
4 (a)-- Loan Agreement dated as of March 29, 1999 among
Taubman Auburn Hills Associates Limited Partnership, as
Borrower, Fleet National Bank , as a Bank, PNC Bank,
National Association, as a Bank, the other Banks signatory
hereto, each as a Bank, and PNC Bank, National
Association, as Administrative Agent.
4 (b)-- Mortgage, Assignment of Leases and Rents and Security
Agreement from Taubman Auburn Hills Associates Limited
Partnership, a Delaware limited partnership ("Mortgagor")
to PNC Bank, National Association, as Administrative Agent
for the Banks, dated as of March 29, 1999.
-27-
4 (c)-- First Amendment to Construction Loan Agreement dated as
of April 23, 1999 among Taubman MacArthur Associates
Limited Partnership, a Delaware limited partnership, as
Borrower, Bayerische Hypo - Und Vereinsbank AG, a New
York Branch (successor in interest to Bayerische
Hypotheken - Und Weschel - Bank Aktiengesellschaft, New
York Branch), the New York branch of a German banking
corporation, as administrative agent.
4 (d)-- Mortgage, Security Agreement and Fixture Filing by Short
Hills Associates, as Mortgagor, to Metropolitan Life
Insurance Company, as Mortgagee, dated April 15, 1999.
4 (e)-- Assignment of Leases, Short Hills Associates (Assignor)
and Metropolitan Life Insurance Company (Assignee) dated
as of April 15, 1999.
4 (f)-- Secured Revolving Credit Agreement dated as of June 24,
1999 among The Taubman Realty Group Limited Partnership,
as Borrower, The Banks Signatory Hereto, each as a bank
and UBS AG, Stamford Branch, as Administrative Agent.
10 -- Consolidated Agreement: Notice of Retirement and Release
and Covenant Not to Compete, between Robert C. Larson and
The Taubman Company Limited Partnership.
12 -- Statement Re: Computation of Taubman Centers, Inc. Ratio
of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
27 -- Financial Data Schedule.
b) Current Reports on Form 8-K.
None
-28-
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: August 11, 1999 By: /s/ Lisa A. Payne
----------------------------
Lisa A. Payne
Executive Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number
-------
4 (a) -- Loan Agreement dated as of March 29, 1999 among Taubman
Auburn Hills Associates Limited Partnership, as Borrower,
Fleet National Association, as a Bank, PNC Bank,
National Association, as a Bank, the other Banks
signatory hereto, each as a Bank, and PNC Bank, National
Association, as Administrative Agent.
4 (b) -- Mortgage, Assignment of Leases and Rents and Security
Agreement from Taubman Auburn Hills Associates Limited
Partnership, a Delaware limited partnership ("Mortgagor")
to PNC Bank, National Association, as Administrative
Agent for the Banks, dated as of March 29, 1999.
4 (c) -- First Amendment to Construction Loan Agreement dated as
of April 23, 1999 among Taubman MacArthur Associates
Limited Partnership, a Delaware limited partnership, as
Borrower, Bayerische Hypo - Und Vereinsbank AG, a New
York Branch (successor in interest to Bayerische
Hypotheken - Und Weschel - Bank Aktiengesellschaft, New
York Branch), the New York branch of a German banking
corporation, as administrative agent.
4 (d) -- Mortgage, Security Agreement and Fixture Filing by Short
Hills Associates, as Mortgagor, to Metropolitan Life
Insurance Company, as Mortgagee, dated April 15, 1999.
4 (e) -- Assignment of Leases, Short Hills Associates (Assignor)
and Metropolitan Life Insurance Company (Assignee) dated
as of April 15, 1999.
4 (f) -- Secured Revolving Credit Agreement dated as of June 24,
1999 among The Taubman Realty Group Limited Partnership,
as Borrower, The Banks Signatory Hereto, each as a bank
and UBS AG, Stamford Branch, as Administrative Agent.
10 -- Consolidated Agreement: Notice of Retirement and Release
and Covenant Not to Compete, between Robert C. Larson and
The Taubman Company Limited Partnership.
12 -- Statement Re: Computation of Taubman Centers, Inc. Ratio
of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
27 -- Financial Data Schedule.