EXHIBIT 99.10
FINANCIAL STATEMENT OF THE RICHARD E. JACOBS GROUP COMBINED PROPERTIES.
INDEX TO FINANCIAL STATEMENT OF THE
RICHARD E. JACOBS GROUP COMBINED PROPERTIES
Page
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Independent Auditors' Report................................................ 2
Combined Statement of Certain Revenues and Certain Expenses for the
Nine Months Ended September 30, 2000 (unaudited) and the Year Ended
December 31, 1999......................................................... 3
Notes to Combined Statement of Certain Revenues and Certain Expenses........ 4
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INDEPENDENT AUDITORS' REPORT
To the Owners of The Richard E. Jacobs Group
Combined Properties
Cleveland, Ohio
We have audited the accompanying combined statement of certain revenues and
certain expenses of the Combined Properties (owned by The Richard E. Jacobs
Group and listed in Note 1 to the combined statement) for the year ended
December 31, 1999. These properties are under common ownership. This combined
statement is the responsibility of The Richard E. Jacobs Group's management. Our
responsibility is to express an opinion on the combined statement based on our
audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the combined
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the combined
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the combined statement. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying combined statement of certain revenues and certain
expenses was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission (for inclusion in the
filing of Form 8-K of CBL & Associates Properties, Inc. as a result of the
acquisition of the Combined Properties). Material amounts, described in Note 1
to the combined statement of certain revenues and certain expenses, that would
not be directly attributable to those resulting from future operations of the
acquired properties are excluded, and the combined statement is not intended to
be a complete presentation of the acquired properties' revenues and expenses.
In our opinion, such combined statement presents fairly, in all material
respects, the combined certain revenues and certain expenses described in Note 1
to the combined statement of certain revenues and certain expenses for the year
ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
Cleveland, Ohio
August 31, 2000
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THE COMBINED PROPERTIES OF THE RICHARD E. JACOBS GROUP
COMBINED STATEMENT OF CERTAIN REVENUES AND CERTAIN EXPENSES
NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND
YEAR ENDED DECEMBER 31, 1999
(Dollars in Thousands)
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Nine Months Ended
September 30, 2000 Year Ended
(unaudited) December 31, 1999
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CERTAIN REVENUES:
Minimum rents $100,975 $132,955
Tenant recoveries 43,793 59,025
Percentage rents 4,025 9,684
Other rents 1,440 1,794
Other income 1,030 1,006
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Total certain revenues 151,263 204,464
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CERTAIN EXPENSES:
Property operating expenses (Notes 3 and 5) 24,342 31,996
Maintenance and repairs 12,746 17,326
Real estate taxes 12,558 16,630
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Total certain expenses 49,646 65,952
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CERTAIN REVENUES IN EXCESS OF CERTAIN EXPENSES $101,617 $138,512
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See notes to combined statement of certain revenues and certain expenses.
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THE COMBINED PROPERTIES OF THE RICHARD E. JACOBS GROUP
NOTES TO COMBINED STATEMENT OF CERTAIN REVENUES AND CERTAIN EXPENSES
NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND YEAR ENDED DECEMBER 31,
1999
(Dollars in Thousands)
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1. ORGANIZATION AND BASIS OF PRESENTATION
Organization - The Richard E. Jacobs Group ("The Jacobs Group") is divesting its
interest in 21 enclosed regional malls (and two associated centers) in a sale to
CBL & Associates Properties, Inc. ("CBL"), a self-managed, self-administered,
fully-integrated real estate investment trust company.
Basis of Presentation - The accompanying combined statement of certain revenues
and certain expenses includes information related to the operations of the 21
malls (and two associated centers) which are the subject of the CBL purchase for
the nine months ended September 30, 2000 (unaudited) and the year ended December
31, 1999.
The accompanying combined statement of certain revenues and certain expenses was
prepared for the purpose of complying with Rule 3-14 of Regulation S-X of the
Securities and Exchange Commission. Accordingly, the combined statement is not
representative of the actual operations for the periods presented as certain
revenues and expenses, which may not be directly attributable to the revenues
and expenses expected to be incurred in the future operations of the acquired
properties, have been excluded. Revenues excluded consist of interest income and
realized gains and losses on marketable securities. Expenses excluded consist of
management, leasing, interest, income taxes, depreciation and amortization and
other costs not directly attributable to the future operations of the acquired
properties.
The properties included in the combined statement and The Jacobs Group's
ownership interest in each entity are as follows:
The Jacobs Group's %
Entity Property Ownership
- ------ -------- --------------------
Brookfield Square Joint Venture Brookfield Square Mall 100.00%
Cary Venture Limited Partnership Cary Towne Center 80.00
C.V. Investments CherryVale Mall 100.00
Charleston Joint Venture Citadel Mall 100.00
Columbia Joint Venture Columbia Mall 79.00
Eastgate Company Eastgate Mall and Crossings (a) 53.85
Madison Joint Venture East Towne Mall 65.00
West Towne Mall and Crossing (a) 65.00
JG Saginaw LLC Fashion Square Mall 100.00
Lexington Joint Venture Fayette Mall 100.00
JG Winston-Salem LLC Hanes Mall 100.00
Jefferson Mall Company Jefferson Mall 87.25
Kentucky Oaks Mall Company Kentucky Oaks Mall 40.00
Midland Venture Limited Partnership Midland Mall 40.00
North Charleston Joint Venture Northwoods Mall 100.00
Old Hickory Mall Venture Old Hickory Mall 100.00
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The Jacobs Group's %
Entity Property Ownership
- ------ -------- --------------------
Parkdale Mall Associates Parkdale Mall 100.00
JG Randolph LLC Randolph Mall 100.00
Racine Joint Venture Regency Mall 100.00
Towne Mall Towne Mall 100.00
Wausau Joint Venture Wausau Center 100.00
(a) Includes associated centers.
After giving effect to The Jacobs Group's ownership interest in the combined
properties, The Jacobs Group's share of Certain Revenues in Excess of Certain
Expenses is $87,096 for the nine months ended September 30, 2000 (unaudited) and
$118,259 for the year ended December 31, 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition - Minimum rents are recognized on a straight line basis over
the terms of the related leases. Percentage rents, which are based upon the
level of sales achieved by the lessee, are recognized when the contractual sales
levels are achieved. Recoveries from tenants for common area maintenance, real
estate taxes, insurance and other shopping center operating expenses are
recognized as revenues in the period the applicable costs are incurred.
Property Operating Expenses - Property operating expenses consist primarily of
common area maintenance, utilities, insurance, advertising and promotion and
other operating expenses.
Concentration of Credit Risk - The combined properties' tenant base includes
primarily national and regional retail chains and local retailers and,
consequently, the combined properties' credit risk is concentrated in the retail
industry.
Use of Estimates - The preparation of the combined statement of certain revenues
and certain expenses requires management to make estimates and assumptions that
affect the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Interim Period - The unaudited combined statement of certain revenues and
certain expenses for the nine months ended September 30, 2000 has been prepared
in accordance with accounting principles generally accepted in the United States
of America for interim financial information. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included and
all of such adjustments were of a normal recurring nature. Operating results for
the period from January 1, 2000 to September 30, 2000 are not necessarily
indicative of future Operating results.
3. TRANSACTIONS WITH AFFILIATES
Affiliated entities of The Jacobs Group provide accounting, legal,
architectural, engineering, tenant coordination and lease administration
services to 20 of the 21 combined properties as well as to the two associated
centers. Most services are based upon an hourly rate for the actual hours of
work performed by employees of the affiliates. Fees included in the combined
statement related to agreements with affiliates were $1,634 for the nine months
ended September 30, 2000 (unaudited) and $3,031 for the year ended December 31,
1999.
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4. RENTAL INCOME UNDER OPERATING LEASES
As of December 31, 1999, future minimum rental income due on noncancelable
operating leases that expire at various dates through 2029 was as follows:
2000......................... $112,011
2001......................... 101,627
2002......................... 89,636
2003......................... 78,774
2004......................... 63,523
2005 and thereafter.......... 234,013
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$679,584
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In addition, substantially all of the retail leases include provisions for
percentage rent based on sales volume and reimbursements for certain real estate
taxes and operating costs.
5. GROUND LEASE COMMITMENTS
Certain of the combined properties lease land under noncancelable leases which
expire at various dates through 2022, with options to renew for additional
periods. The leases are accounted for as operating leases. Each of these leases
requires a base rent and one provides for additional rent based on a percentage
of cash flow. For the nine months ended September 30, 2000 (unaudited), the base
rent and additional ground rent were $75 and $111, respectively. For the year
ended December 31, 1999, the base rent and additional ground rent were $103 and
$127, respectively.
The following is a schedule of future minimum rental payments under
noncancelable operating leases as of December 31, 1999:
2000.......................... $ 101
2001.......................... 100
2002.......................... 100
2003.......................... 100
2004.......................... 100
2005 and thereafter........... 1,442
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$1,943
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