UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER 000-01743

THE ROUSE COMPANY LP

(Exact name of registrant as specified in its charter)

Maryland		52-0735512
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

10275 Little Patuxent Parkway
Columbia, Maryland		21044-3456
(Address of principal executive offices)		(Zip Code)

(410) 992-6000
(Registrant’s telephone number,
including area code)

N / A
(Former name, former address and former fiscal year, if changed since last report)

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 (the “Exchange Act”) 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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE ROUSE COMPANY LP AND SUBSIDIARIES

A Subsidiary of General Growth Properties, Inc.

CONSOLIDATED BALANCE SHEETS

September 30, 2005 and December 31, 2004

(Unaudited, in thousands)

	September 30,			December 31,
	2005			2004
				(as adjusted, see Notes 1 and 2)
Assets:
Investment in real estate:
Land	$	1,324,302		$	1,311,721
Buildings and equipment	8,545,089			8,211,285
Less accumulated depreciation	(288,015		)	(36,083		)
Developments in progress	206,542			388,953
Net property and equipment	9,787,918			9,875,876
Investment in and loans to/from Unconsolidated Real Estate Affiliates	1,175,713			1,177,311
Investment land and land held for development and sale	1,651,123			1,638,013
Net investment in real estate	12,614,754			12,691,200
Advances to General Growth Properties, Inc.	1,556,176			650,876
Cash and cash equivalents	19,655			30,196
Accounts and notes receivable, net	82,938			49,648
Insurance recovery receivable	30,000			—
Deferred tax assets	2,366			2,476
Deferred expenses, net	51,743			1,220
Goodwill	259,055			356,796
Prepaid expenses and other assets	797,606			906,471
Total assets	$	15,414,293		$	14,688,883

Liabilities and Partners’ Capital:
Mortgage notes and other debt payable	$	6,536,345		$	5,744,317
Deferred tax liabilities	1,209,571			1,266,862
Accounts payable, accrued expenses and other liabilities	535,090			527,714
	8,281,006			$	7,538,893

Commitments and contingencies	—			—

Partners’ capital:
Partners’ capital	7,132,285			7,149,901
Accumulated other comprehensive income	1,002			89
Total partners’ capital	7,133,287			7,149,990
Total liabilities and partners’ capital	$	15,414,293		$	14,688,883

The accompanying notes are an integral part of these consolidated financial statements.

THE ROUSE COMPANY LP AND SUBSIDIARIES

A Subsidiary of General Growth Properties, Inc.

CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three and Nine Months Ended September 30, 2005 and 2004

(Unaudited, in thousands)

	Three months ended						Nine months ended
	September 30,						September 30,
	2005			2004			2005			2004
Revenues:
Minimum rents	$	165,086		$	146,764		$	473,410		$	427,181
Tenant recoveries	68,472			66,255			194,844			188,377
Overage rents	3,918			3,167			10,064			7,921
Land sales	79,112			53,704			254,863			258,894
Management and other fees	2,222			3,084			9,820			10,361
Other	6,204			9,898			35,402			30,986
Total revenues	325,014			282,872			978,403			923,720
Expenses:
Real estate taxes	20,117			19,432			59,812			56,510
Repairs and maintenance	19,815			17,262			63,383			53,858
Marketing	2,506			1,899			2,976			5,292
Other property operating costs	45,528			54,812			142,065			148,948
Land sales operations	60,353			30,009			208,548			155,443
Provision for doubtful accounts	1,449			2,408			5,754			7,058
Property management and other costs	10,005			18,492			24,124			39,425
Other provisions	—			45,269			—			50,315
Depreciation and amortization	89,857			47,176			252,733			143,521
Total expenses	249,630			236,759			759,395			660,370
Operating income	75,384			46,113			219,008			263,350

Interest income	1,928			1,963			5,057			6,052
Interest expense	(67,080		)	(60,403		)	(185,715		)	(179,920		)
Provision for income taxes	(14,452		)	(18,206		)	(33,745		)	(57,319		)
Income allocated to minority interests	(458		)	(925		)	(2,947		)	(2,718		)
Equity in income (loss) of unconsolidated affiliates	(2,184		)	6,500			6,824			15,135
Net gains on dispositions of interests in operating properties	—			166			—			14,054
Income (loss) from continuing operations	(6,862		)	(24,792		)	8,482			58,634
Income from discontinued operations, net of income taxes:
Income from operations	—			136			—			349
Gain on dispositions	—			466			—			45,180
	—			602			—			45,529
Net income (loss)	(6,862		)	(24,190		)	8,482			104,163
Other comprehensive income:
Net unrealized gains (losses) on available-for-sale securities	(81		)	144			9			570
Minimum pension liability adjustments	—			418			—			(1,219		)
Net unrealized gains derivatives designated as cash flow hedges	530			678			904			2,781
Comprehensive income (loss)	$	(6,413	)	$	(22,950	)	$	9,395		$	106,295

The accompanying notes are an integral part of these consolidated financial statements.

THE ROUSE COMPANY LP AND SUBSIDIARIES

A Subsidiary of General Growth Properties, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2005 and 2004

(Unaudited, in thousands)

	2005			2004
Cash flows from operating activities:
Net income	$	8,482		$	104,163
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts, including discontinued operations	5,754			7,058
Equity in income of unconsolidated affiliates	(6,824		)	(15,135		)
Operating distributions received from unconsolidated affiliates	6,824			15,135
Depreciation, including discontinued operations	252,427			128,953
Amortization, including discontinued operations	306			15,548
Impairment losses on operating properties, net of insurance recovery receivable	—			432
Net gains on dispositions of interests in operating properties, including discontinued operations	—			(59,235		)
Losses (gains) on extinguishment of debt	(267		)	3,312
Participation expense pursuant to Contingent Stock Agreement	75,555			47,776
Land development and acquisition expenditures	(96,056		)	(130,424		)
Cost of land sales	114,162			91,271
Debt assumed by purchasers of land	(5,293		)	(5,618		)
Deferred income taxes, including discontinued operations	26,865			44,758
Proceeds from sale of marketable securities	9,088			—
Net changes:
Accounts and notes receivable	(30,875		)	(28,839		)
Prepaid expenses and other assets	13,178			(19,187		)
Accounts payable, accrued expenses and other liabilities	(5,416		)	26,661
Other	(2,538		)	(3,942		)
Net cash provided by operating activities	365,372			222,687
Cash flows from investing activities:
Acquisition/development of real estate and improvements and additions to properties	(142,639		)	(426,789		)
Proceeds from dispositions of interest in properties	—			87,823
Increase in investments in unconsolidated affiliates	(9,672		)	(3,781		)
Distributions received from unconsolidated affiliates in excess of income	36,228			49,996
Increase in restricted cash	(2,480		)	(3,719		)
Collection of long-term notes receivable	14,657			—
Insurance recovery receivable	5,000			—
Other, net	(3,461		)	(832		)
Net cash used by investing activities	(102,367		)	(297,302		)

	2005			2004
Cash flows from financing activities:
Proceeds from issuance of mortgage notes and other debt payable	1,857,037			515,682
Principal payments on mortgage notes and other debt payable	(1,090,685		)	(513,428		)
Advances to General Growth Properties, Inc., net	(964,355		)	—
Capital distribution to General Growth Properties, Inc., net	(32,886		)	—
Repayments of TRC-obligated mandatorily redeemable preferred securities	—			(79,751		)
Purchases of common stock	—			(31,117		)
Proceeds from issuance of common stock	—			221,917
Proceeds from exercise of stock options	—			30,923
Dividends paid	—			(145,195		)
Deferred financing and other related costs	(16,458		)	(8,059		)
Distributions to minority interest partners of excess financing proceeds	(27,148		)	—
Other, net	949			(480		)
Net cash provided (used) by financing activities	(273,546		)	(9,508		)

Net change in cash and cash equivalents	(10,541		)	(84,123		)
Cash and cash equivalents at beginning of period	30,196			117,230
Cash and cash equivalents at end of period	$	19,655		$	33,107

Supplemental disclosure of cash flow information:
Interest paid	$	193,641		$	164,664
Interest capitalized	36,140			29,113
Income taxes paid	13,218			22,374

Non-cash investing and financing activities:
Debt assumed by purchasers of land	$	5,293		$	5,618
Purchase price adjustments related to Merger:
Land	—			—
Buildings and equipment	83,737			—
Developments in progress	(21,677		)	—
Investment in Unconsolidated Real Estate Affiliates	34,911			—
Mortgage notes and other debt payable	41,375			—
Partners’ capital adjustment	6,788			—
Relief of liability related to Contingent Stock Agreement :
Advances from GGP	59,055			—
Common stock issued	—			51,817
Capital lease obligations incurred	—			3,704
Lapses of restrictions on common stock awards and grants of common stock	—			4,287
Debt assumed by purchasers of operating properties	—			130,787
Debt and other liabilities assumed or issued in acquisition of assets	—			340,524

The accompanying notes are an integral part of these consolidated financial statements.

THE ROUSE COMPANY LP AND SUBSIDIARIES

A Subsidiary of General Growth Properties, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 ORGANIZATION

General

Readers of this Quarterly Report on Form 10-Q should refer to the Company’s (as defined below) audited consolidated financial statements for the year ended December 31, 2004 which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (Commission File No. 000-01743), as certain footnote disclosures which would substantially duplicate those contained in the 2004 annual audited financial statements have been omitted from this report. Capitalized terms used, but not defined, in this Quarterly Report have the same meanings as in the Company’s 2004 Annual Report on Form 10-K (the “10-K”).

The Rouse Company LP (“we,” “TRCLP,” “us,” or the “Company”) is the successor company (by Merger as described below) to The Rouse Company (“TRC”). TRCLP’s primary business is the development and management of retail centers, office buildings, mixed-use projects and other commercial properties across the United States. We are also the developer of large-scale, master planned community projects in and around Columbia, Maryland; Summerlin, Nevada; and Houston, Texas.

On August 19, 2004, TRC executed a definitive merger agreement, which was approved by TRC’s Board of Directors, with General Growth Properties, Inc. (“GGP”). On November 9, 2004, TRC’s shareholders approved the merger (the “Merger”). On November 12, 2004, the Merger was completed and TRC was merged with and into us. A subsidiary of GGP was then merged with and into us and through a series of transactions, we were converted to a limited partnership and a subsidiary of GGP. Our general partner (Rouse LLC) owns a 1% interest in us and is a wholly-owned subsidiary of GGP. Our remaining interests are owned by our limited partner, GGP Limited Partnership, which is owned approximately 82% by GGP.

Typically, the effects of a merger transaction are reflected on the date of the transaction in the financial statements of the acquired company by adjusting its basis of assets and liabilities to their fair values in order to reflect the purchase price paid in the acquisition. However, there are certain exceptions (related to the presence of public debt that is qualitatively or quantitatively significant) to this requirement that would allow a company to elect to not apply this general practice. Accordingly, we had elected to not reflect these purchase accounting adjustments in our consolidated financial statements that were originally prepared and filed with the Securities and Exchange Commission (“SEC”) for 2004.

However, in 2005, we are reflecting these adjustments in our consolidated financial statements and the consolidated balance sheet for December 31, 2004 has been adjusted. In this report and all subsequent reports for 2005, the adjustments will be reflected in our consolidated statements in 2004 from the date of the Merger. As a result, a single underlying set of information can be used for both ours and GGP’s consolidated financial statements (see Note 2).

Basis of Presentation

The accompanying consolidated financial statements include the accounts of The Rouse Company LP, our subsidiaries and joint ventures in which we have a controlling interest. We also consolidate the accounts of certain variable interest entities where we are the primary beneficiary. Income allocated to minority interests in these joint ventures includes the share of such properties’ operations (generally computed as the respective joint venture partner ownership percentage) applicable to such non-controlling venturers. All significant intercompany balances and transactions have been eliminated.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial position and results of operations and cash flows for the interim periods have been included. The results for the interim periods ended September 30, 2005 and 2004 are not necessarily indicative of the results to be obtained for the full fiscal year.

Properties

Real estate assets are stated at cost. For redevelopment of existing operating properties, the net carrying value of the existing property under redevelopment plus the cost for the construction and improvements incurred in connection with the redevelopment are capitalized to the extent the capitalized costs of the property do not exceed the estimated fair value of the redeveloped property when complete. Real estate taxes incurred during construction periods are capitalized and amortized on the same basis as the related assets. Interest costs are capitalized during periods of active construction for qualified expenditures based upon interest rates in place during the construction period until construction is substantially complete. Capitalized interest costs are amortized over lives which are consistent with the constructed assets.

Pre-development costs, which generally include legal and professional fees and other directly-related third-party costs, are capitalized as part of the property being developed. In the event a development is no longer deemed to be probable, the costs previously capitalized are written off as a component of operating expenses.

Construction allowances granted to tenants are capitalized and depreciated over the related lease term. Maintenance and repairs are charged to expense when incurred. Expenditures for significant betterments and improvements are capitalized.

Our real estate assets, including developments in progress, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. A real estate asset is considered to be impaired when the estimated future undiscounted operating cash flow is less than its carrying value. To the extent an impairment has occurred, the excess of the carrying value of the asset over its estimated fair value will be charged to operations.

Depreciation or amortization expense is computed using the straight-line method, generally based upon the following estimated useful lives:

		Years
Buildings and improvements		40-45
Equipment, tenant improvements and fixtures		5-10

Purchased intangibles are amortized using the straight-line method over the terms of the related leases or agreements.

Acquisitions of Operating Properties—Purchase Accounting due to the Merger

The Merger has been accounted for using the purchase method and, accordingly, our properties’ results of operations subsequent to the Merger reflect a new basis of accounting from the date of acquisition. Therefore, our operating results for the three and nine months ended September 30, 2005 reflect this new basis of our assets and liabilities. However, the 2004 results for the comparable periods continue to reflect the prior TRC historical carrying amounts. Estimates of future cash flows and other valuation techniques were used to allocate the purchase price to our properties between land, buildings and improvements, equipment and identifiable intangible assets and liabilities such as amounts related to in-place at-market tenant leases, acquired above- and below-market leases and tenant relationships. The initial valuations used are subject to change until such information is finalized, which is expected to be no later than 12 months from the Merger date (see Note 2). The following paragraphs provide greater detail regarding some of the valuation techniques used to allocate the purchase price to certain types of assets and liabilities.

The fair values of tangible assets have been determined on an “if-vacant” basis. The “if-vacant” fair value was allocated to land, where applicable, buildings, tenant improvements and equipment based on comparable sales and other relevant information that existed on the Merger date.

The estimated fair value of acquired in-place at-market tenant leases is the cost that would have been incurred to lease the property to the occupancy level of the property at the date of the Merger. Such estimate included the fair value of leasing commissions, legal costs and tenant coordination costs that would be incurred to lease the property to this occupancy level. Additionally, we evaluated the time period over which such occupancy level would be achieved and included an estimate of the net operating costs (primarily real estate taxes, insurance and utilities) incurred during the lease-up period, which generally ranges up to one year. Acquired in-place at-market tenant leases are amortized over the average lease term (approximately five years).

Above-market and below-market in-place tenant lease values were recorded based on the present value (using an interest rate which reflected the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and our estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The above- and below-market lease values are amortized as adjustments to minimum rent revenue over the remaining non-cancelable terms of the respective leases (approximately five years).

The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed (including identified intangible liabilities) has been recorded as goodwill. Goodwill is not amortized, but rather is tested for impairment at a level of reporting referred to as a reporting unit on an annual basis, or more frequently, if events or changes in circumstances indicate that the asset might be impaired. An impairment loss for an asset group is allocated to the long-lived assets of the group on a pro-rata basis using the relative carrying amounts of those assets, unless the fair value of specific components of the reporting group are determinable without undue cost and effort.

As discussed above, a portion of the aggregate purchase price relating to the Merger was allocated to intangible assets and liabilities. This allocation, the accumulated amortization since the Merger date and the net carrying value of each intangible asset and liability component is as follows (in thousands):

	Gross Asset			Accumulated			Net Carrying
	(Liability)			Amortization			Amount
September 30, 2005
In-place leases	$	581,932		$	(120,806	)	$	461,126
Below-market ground leases, net	349,116			(6,343		)	342,773
Below-market tenant leases	(146,096		)	27,614			(118,482		)
Above-market tenant leases	108,899			(22,971		)	85,928
Real estate tax stabilization agreement	94,168			(3,686		)	90,482

December 31, 2004
In-place leases	$	488,950		$	(13,034	)	$	475,916
Below-market ground leases, net	381,433			(1,059		)	380,374
Below-market tenant leases	(156,943		)	3,116			(153,827		)
Above-market tenant leases	141,701			(2,883		)	138,818
Real estate tax stabilization agreement	94,168			(654		)	93,514

Amortization of these intangible assets and liabilities and similar assets and liabilities from our Unconsolidated Real Estate Affiliates decreased net income by approximately $52 million for the three months ended September 30, 2005, $2.7 million for the three months ended September 30, 2004, $128 million for the nine months ended September 30, 2005 and $7.2 million for the nine months ended September 30, 2004.

Future amortization, including our share of such items from Unconsolidated Real Estate Affiliates, is estimated to decrease net income by approximately $42 million in the fourth quarter of 2005, $162 million in 2006, $148 million in 2007, $107 million in 2008, $58 million in 2009, and $467 million for years thereafter.

Investments in Unconsolidated Real Estate Affiliates

As of September 30, 2005 and December 31, 2004, we held ownership interests in various unconsolidated joint ventures, collectively, the “Unconsolidated Real Estate Affiliates” which own or develop shopping centers, residential and commercial land, and other retail and investment property. We account for investments in Unconsolidated Real Estate Affilates where we own a non-controlling joint interest using the equity method. Under the equity method, the carrying value of our investment is adjusted for our share of the equity in earnings of such Unconsolidated Real Estate Affiliates from the date of acquisition and reduced by distributions received. Generally, the operating agreements with respect to our Unconsolidated Real Estate Affiliates provide that assets, liabilities and funding obligations are shared in accordance with our ownership percentages. Therefore, we generally also share in the profit and losses, cash flows and other matters relating to our Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. Differences between the carrying value of our investment in the Unconsolidated Real Estate Affiliates and our share of the underlying equity of such Unconsolidated Real Estate Affiliates are generally amortized over lives ranging from five to forty-five years.

For those Unconsolidated Real Estate Affiliates where we own less than a 5% interest and have virtually no influence on the joint venture’s operating and financial policies, we account for our investments using the cost method.

Advances to General Growth Properties, Inc.

The amounts advanced to General Growth Properties, Inc. are non-interest bearing, unsecured and payable on demand.

Cash and Cash Equivalents

Highly-liquid investments with maturities at dates of purchase of three months or less are classified as cash equivalents.

Leases

Leases which transfer substantially all the risks and benefits of ownership to tenants are considered finance leases and the present values of the minimum lease payments and the estimated residual values of the leased properties, if any, are accounted for as receivables. Leases which transfer substantially all the risks and benefits of ownership to us are considered capital leases and the present values of the minimum lease payments are accounted for as assets and liabilities.

Deferred Expenses

Deferred expenses consist principally of financing fees and leasing costs and commissions. Deferred financing fees are amortized to interest expense using the effective interest method (or other methods which approximate the effective interest method) over the terms of the respective agreements. Deferred leasing costs and commissions are amortized using the straight-line method over the average life of the tenant leases. Deferred expenses in the accompanying consolidated balance sheets are shown at cost, net of accumulated amortization of $3.0 million as of September 30, 2005.

Revenue Recognition and Related Matters

Minimum rent revenues are recognized on a straight-line basis over the terms of the related leases. Minimum rent revenues also include amounts collected from tenants to allow the termination of their leases prior to their scheduled termination dates and accretion related to above- and below-market leases on properties acquired as provided by FASB Statements No. 141, “Business Combinations” (“SFAS 141”) and No. 142, “Goodwill and Intangible Assets” (“SFAS 142”). The impact of these items on minimum rent revenues were as follows (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2005		2004		2005		2004
Minimum rent averaging income	$	13,901	$	736	$	24,070	$	2,789
Lease termination fees	603		1,455		6,735		4,152
(Above-) and below-market tenant lease accretion, net	3,379		618		4,410		1,348

As of September 30, 2005, straight-line rents receivable, which represent the current net cumulative rents recognized prior to when billed and collectible as provided by the terms of the leases, of approximately $21.6 million are included in accounts and notes receivable, net in the accompanying consolidated balance sheet.

We provide an allowance for doubtful accounts against the portion of accounts receivable, including straight-line rents, which is estimated to be uncollectible. Such allowances are reviewed periodically based upon our recovery experience. We also evaluate the probability of collecting future rent which is recognized currently under a straight-line methodology. This analysis considers the long-term nature of our leases, as a certain portion of the straight-line rent currently recognizable will not be billed to the tenant until many years into the future. Our experience relative to unbilled deferred rent receivable is that a certain portion of the amounts straight-lined into revenue are never collected from (or billed to) the tenant due to early lease terminations. For that portion of the otherwise recognizable deferred rent that is not deemed to be probable of collection, no revenue is recognized. Accounts and notes receivable in the accompanying consolidated balance sheets are shown net of an allowance for doubtful accounts of $34.8 million and $30.5 million at September 30, 2005 and December 31, 2004, respectively.

Overage rents are recognized on an accrual basis once tenant sales revenues exceed contractual tenant lease thresholds. Revenues relating to variable recoveries from tenants are computed as a formula related to real estate taxes, insurance and other operating expenses and are generally recognized as revenues in the period the related costs are incurred. Fixed contributions from tenants related to these expenses are recognized when due.

Management and other fees primarily represent management and leasing fees, financing fees and fees for other ancillary services performed by taxable REIT subsidiaries (“TRS”) entities owned by TRCLP for the benefit of the Unconsolidated Real Estate Affiliates. Such fees are recognized as revenue as the services are rendered.

Revenues from land sales are recognized using the full accrual method provided that various criteria relating to the terms of the transactions and our subsequent involvement with the land sold are met. Revenues relating to transactions that do not meet the established criteria are deferred and recognized when the criteria are met or using the installment or cost recovery methods, as appropriate in the circumstances. For land sale transactions in which we are required to perform additional services and incur significant costs after title has passed, revenues and cost of sales are recognized on a percentage of completion basis.

Cost of land sales is determined as a specified percentage of land sales revenues recognized for each community development project. The cost ratios used are based on actual costs incurred and estimates of development costs and sales revenues to completion of each project. The ratios are reviewed regularly and revised for changes in sales and cost estimates or development plans. Significant changes in these estimates or development plans, whether due to changes in market conditions or other factors, could result in changes to the cost ratio used for a specific project. The increase in the basis of the land due to purchase price accounting adjustments has resulted in a significant increase in the cost ratios of our projects. The specific identification method is used to determine cost of sales for certain parcels of land, including acquired parcels we do not intend to develop or for which development is complete at the date of acquisition.

NOTE 2 ACQUISITIONS AND INTANGIBLES

Purchase Price Adjustments

As described in Note 1, the Merger occurred on November 12, 2004 and the carrying values of all our assets and liabilities were adjusted as of such date to reflect the GGP purchase price of approximately $14.2 billion (including assumed debt and other liabilities of $7.0 billion).

The following table summarizes the estimated fair values of our assets at the date of the Merger with GGP. These fair values were based, in part, on preliminary third-party market valuations. These fair values were based on currently available information and assumptions and estimates that we believed were reasonable at that time. We will continue to review and expect to adjust these fair values as additional information becomes available for a period of one year following the acquisition.

(In Thousands)	Estimated Merger Fair Value as initially allocated		Adjustments (1)			Estimated Merger Fair Value currently
Land	$	1,314,711	$	—		$	1,314,711
Buildings and equipment	8,206,370		83,737			8,290,107
Developments in progress	383,996		(21,677		)	362,319
Investment in and loans to Unconsolidated Real Estate Affiliates	1,236,299		34,911			1,271,210
Investment land and land held for development and sale	1,645,700		33,128			1,678,828
Cash and cash equivalents	29,077		—			29,077
Accounts and notes receivable	84,424		1,093			85,517
Goodwill	356,796		(97,741		)	259,055
Prepaid expenses and other assets:
Below-market ground leases	382,328		(33,212		)	349,116
Above-market tenant leases	141,048		(32,802		)	108,246
Other	404,047		2,790			406,837
	927,423		(63,224		)	864,199
	$	14,184,796	$	(29,773	)	$	14,155,023

(1) Adjustments are the result of revisions in estimated fair values, including a reduction in liabilities assumed of $34 million, and due to the settlement of additional transaction costs.

As discussed in Note 1, the following table reflects the impact of purchase accounting on the December 31, 2004 balance sheet by adding the purchase accounting adjustments as shown in the table above to the amounts originally reported to yield the December 31, 2004 as adjusted amounts (certain amounts originally reported have been reclassified to conform to the current year presentation):

(In Thousands)	December 31, 2004, as originally reported			Effect of applying purchase accounting			December 31, 2004 as adjusted
Assets:
Investment in real estate:
Land	$	641,688		$	670,033		$	1,311,721
Buildings and equipment	5,243,467			2,967,818			8,211,285
Less accumulated depreciation	(1,005,502		)	969,419			(36,083		)
Developments in progress	255,597			133,356			388,953
Net property and equipment	5,135,250			4,740,626			9,875,876
Investment in and loans to Unconsolidated Real Estate Affiliates	528,899			648,412			1,177,311
Investment land and land held for development and sale	512,450			1,125,563			1,638,013
Net investment in real estate	6,176,599			6,514,601			12,691,200
Advances to General Growth Properties, Inc.	650,876			—			650,876
Cash and cash equivalents	30,196			—			30,196
Accounts and notes receivable, net	49,648			—			49,648
Deferred tax assets	76,582			(74,106		)	2,476
Deferred expenses, net	170,970			(169,750		)	1,220
Goodwill	—			356,796			356,796
Prepaid expenses and other assets	469,344			437,127			906,471
Total assets	$	7,624,215		$	7,064,668		$	14,688,883

Liabilities and Partners’ Capital:
Mortgage notes and other debt payable	$	5,629,010		$	115,307		$	5,744,317
Deferred tax liabilities	94,526			1,172,336			1,266,862
Accounts payable, accrued expenses and other liabilities	687,725			(160,011		)	527,714
	6,411,261			1,127,632			7,538,893

Partners’ capital:
Partners’ capital	1,217,244			5,932,657			7,149,901
Accumulated other comprehensive income (loss):
Minimum pension liability adjustment	(312		)	312			—
Unrealized net gains (losses) on available-for-sale securities	(126		)	215			89
Unrealized net gains (losses) on derivatives designated as cash flow hedges	(3,852		)	3,852			—
Total partners’ capital	1,212,954			5,937,036			7,149,990
Total liabilities and partners’ capital	$	7,624,215		$	7,064,668		$	14,688,883

Other Acquisition and Development Activities

Other acquisition and development activities in 2004 and 2005 included the following:

• In March 2004, we acquired Providence Place, a regional retail center in Providence, Rhode Island for $581.6 million, including assumed debt of $306.9 million.

• In November 2004, we purchased Oxmoor Center, a regional retail center in Louisville, Kentucky for $130.0 million, including $66.5 million of assumed debt.

• We are an investor in a consolidated joint venture that is developing The Shops at La Cantera, a regional retail center in San Antonio, Texas. The project held its grand opening of its first phase on September 15, 2005.

NOTE 3 INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Generally, we share in the profits and losses, cash flows and other matters relating to our investments in Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. We manage most of the properties owned by these joint ventures. Some of the joint ventures have elected to be treated as REITs for income tax purposes.

The significant accounting policies used by the Unconsolidated Real Estate Affiliates are the same as ours.

Condensed Combined Financial Information of Unconsolidated Real Estate Affiliates

The following is condensed combined statements of operations information for our Unconsolidated Real Estate Affiliates for the three and nine months ended September 30, 2005 and 2004 (in thousands):

	Three months ended						Nine months ended
	September 30,						September 30,
	2005			2004			2005			2004
Condensed Combined Statements of Operations - Unconsolidated Real Estate Affiliates
Revenues:
Minimum rents	$	54,348		$	51,887		$	159,815		$	154,621
Tenant recoveries	24,141			24,102			73,585			69,785
Overage rents	1,657			1,449			3,302			2,899
Land sales	39,861			32,483			110,761			83,405
Other	18,179			34,446			76,470			104,539
Total revenues	138,186			144,367			423,933			415,249

Expenses:
Property operating expenses	46,644			59,329			159,835			177,725
Land sales operations	29,409			18,814			65,165			51,974
Depreciation and amortization	20,863			21,088			67,516			62,760
Total expenses	96,916			99,231			292,516			292,459

Operating income	41,270			45,136			131,417			122,790
Interest income	331			122			997			261
Interest expense	(24,317		)	(22,690		)	(71,129		)	(66,760		)
Net income	$	17,284		$	22,568		$	61,285		$	56,291

Equity in Income (Loss) of Unconsolidated Real Estate Affiliates
Net income of Unconsolidated Real Estate Affiliates	$	17,284		$	22,568		$	61,285		$	56,291
Joint venture partners’ share of income of Unconsolidated
Real Estate Affiliates	(8,054		)	(11,516		)	(30,799		)	(28,754		)
Amortization of capital or basis differences	(11,414		)	(4,552		)	(23,662		)	(12,402		)
Equity in income (loss) of Unconsolidated Real Estate Affiliates	$	(2,184	)	$	6,500		$	6,824		$	15,135

NOTE 4 MORTGAGE NOTES AND OTHER DEBT PAYABLE

Debt is summarized as follows (in thousands):

	September 30, 2005		December 31, 2004, as adjusted

Mortgages and bonds	$	4,782,573	$	3,949,453
Medium-term notes	2,000		45,500
3.625% Notes due March 2009	400,000		400,000
8% Notes due April 2009	200,000		200,000
7.2% Notes due September 2012	400,000		400,000
5.375% Notes due November 2013	450,000		450,000
Other loans	153,260		149,378
	6,387,833		5,594,331
Purchase accounting adjustments	148,512		149,986
Total	$	6,536,345	$	5,744,317

During the first quarter of 2005, we refinanced approximately $536 million of mortgage debt with $941 million of new mortgage loans on the related properties. In the second quarter of 2005, we issued new variable-rate mortgage debt totaling $375 million. During the third quarter of 2005, we refinanced approximately $312 million of mortgage debt with $442 million of new mortgage loans on the related properties. The proceeds from these financing activities were used to repay $38.7 million and $35.0 million of TRCLP debt in the first and second quarters of 2005, respectively, while the remaining proceeds were advanced or distributed to GGP.

In the second quarter of 2005, we entered into interest rate swap agreements related to the newly issued $375 million of variable-rate debt (see above). During the third quarter, $80 million of this variable rate debt was repaid when we refinanced the debt and the interest rate swap agreement related to this loan expired at that time. We have interest rate swap agreements in place on the remaining variable rate debt that effectively fixed the LIBOR rate on this debt through June 2006. Information related to the swap agreements as of September 30, 2005 is as follows (dollars in millions):

Total notional amount	$	295.0
Average fixed effective rate (pay rate)	5.4		%
Average variable interest rate of related debt (receive rate)	5.5		%
Fair value of swap asset	$	0.9

The agreements relating to various loans impose limitations on us. The most restrictive of these limit the levels and types of debt we and our affiliates may incur and require us and our affiliates to maintain specified minimum levels of debt service coverage and net worth. The agreements also impose restrictions on sale, lease and certain other transactions, subject to various exclusions and limitations. These restrictions have not and are not expected to limit our normal business activities as we expect to be able to access additional funds as necessary from GGP.

We estimated the fair value of our debt based on quoted market prices for publicly-traded debt and on the discounted estimated future cash payments to be made for such debt. The discount rates used approximate current lending rates for loans or groups of loans with similar maturities and credit quality, assume the debt is outstanding through maturity and consider the debt’s collateral. We have utilized market information as available or present value techniques to estimate the amounts required to be disclosed. Because such amounts are estimates, there can be no assurance that the disclosed value of any financial instrument could be realized by immediate settlement of the instrument. The carrying amount and estimated fair value of our debt are summarized as follows (in thousands):

	September 30, 2005				December 31, 2004
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value

Fixed-rate debt	$	6,200,663	$	6,437,311	$	4,981,396	$	5,047,009
Variable-rate debt	335,682		323,971		762,921		762,921
Total	$	6,536,345	$	6,761,282	$	5,744,317	$	5,809,930

NOTE 5 OTHER PROVISIONS

Other provisions for the three and nine months ended September 30, 2004 consisted of the following (in thousands):

	Three months ended September 30, 2004		Nine months ended September 30, 2004
Pension plan settlement losses	$	680	$	3,548
Interest and penalties for tax related matters	44,589		44,589
Loss on early extinguishment of The Rouse Company-obligated mandatority redeemable preferred securities	—		2,178
Total	$	45,269	$	50,315

We terminated our defined pension plan in 2004. The settlement losses incurred in 2004 related to lump-sum distributions made primarily to employees retiring as a result of organizational changes.

One of the conditions for closing the Merger was that we deliver to GGP an opinion of tax counsel acceptable to GGP with respect to our qualification as a REIT. In preparing for the Merger, we discovered that we may have had non-REIT earnings and profits that we did not distribute to our shareholders. These earnings and profits included non-REIT earnings and profits we would have succeeded to in 2001 if a tax election we made in 2001 with respect to one of our subsidiaries was determined to be invalid. Such earnings and profits also included earnings and profits which might be attributed to certain intercompany transactions. Based on advice from our outside legal counsel who assisted us with REIT tax matters and our internal analysis, we believed that paying additional distributions to our shareholders (which we refer to as extraordinary dividends) and making payments of additional tax, interest and penalties were the most expedient courses of action to take. On November 9, 2004, we entered into an agreement with the Internal Revenue Service (“IRS”) to settle these matters and treat the payment of extraordinary dividends as satisfying our distribution requirements. The amount of the extraordinary dividend paid was $238 million. Additionally, we paid approximately $23.2 million of interest and a penalty of approximately $22.4 million to the IRS under the terms of the closing agreement with the IRS. As a result of these payments, we were able to deliver to GGP an acceptable opinion of tax counsel with respect to our REIT status.

NOTE 6 COMMITMENTS AND CONTINGENCIES

In the normal course of business, from time to time, we are involved in legal actions relating to the ownership and operations of our properties. In management’s opinion, we are adequately reserved and therefore the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material adverse effect on our consolidated financial position, results of operations or liquidity.

We lease land or buildings at certain properties from third parties. The leases generally provide us with a right of first refusal in the event of a proposed sale of the property by the landlord. All of our ground leases are classified as operating leases. Accordingly, rental payments are expensed as incurred and have, to the extent applicable, been straight-lined over the term of the lease. Rental expense for the three months ended September 30, 2005 and 2004 was $3.2 million and $3.0 million, respectively. Rental expense for the nine months ended September 30, 2005 and 2004 was $10.2 million and $5.9 million, respectively. These amounts include participation rent related to these leases and applicable amortization of above- and below-market lease valuation amounts due to purchase accounting adjustments.

TRC acquired various assets, including Summerlin, a master-planned community in suburban Las Vegas, Nevada, in the acquisition of The Hughes Corporation (“Hughes”) in 1996. In connection with the acquisition of Hughes, TRC entered into a Contingent Stock Agreement (“CSA”) for the benefit of the former Hughes owners or their successors (“beneficiaries”). Under the terms of the CSA, shares of TRC common stock were issuable to the beneficiaries based on the appraised values of defined asset groups, including Summerlin, at specified termination dates through 2009 and/or cash flows from the development and/or sale of those assets prior to the termination dates.

On October 19, 2004, GGP delivered to the beneficiaries an executed assumption agreement whereby GGP agreed, for the benefit of the beneficiaries under the CSA, to perform the CSA as successor to TRC, in the same manner and to the same extent that TRC would be required to perform the CSA if no succession had taken place. Under the assumption agreement, GGP assumed TRC’s obligation under the CSA to deliver shares of GGP common stock (either newly issued or treasury shares) twice a year to beneficiaries under the CSA. The amount of shares is based upon a formula set forth under the CSA and upon GGP’s stock price. We account for the beneficiaries’ share of earnings from the assets as an operating expense. We account for any distributions to

the beneficiaries as of the termination dates related to assets we own as of the termination date as additional investments in the related assets (that is, contingent consideration). A total of 1,552,385 shares of GGP common stock has been delivered to the beneficiaries as of the date of this report, pursuant to the CSA.

Two of our operating retail properties in the United States Gulf Coast region (Oakwood Center in Gretna, Louisiana and Riverwalk, located near the convention center in downtown New Orleans) have been closed since August 29, 2005, when a hurricane struck the area. Although property damage in the New Orleans area was generally due to hurricane effects, the damage to Oakwood Center and Riverwalk, which prevents these properties from re-opening, was from arson and vandalism. Riverwalk is currently expected to partially re-open by Thanksgiving 2005 even though certain repair and refurbishment activities are anticipated to continue into 2006. While two anchor stores at Oakwood Center have announced plans to re-open in time for the 2005 holiday season and repair and re-opening plans are in process, no official re-opening date has been set for the remainder of the property. We have comprehensive insurance coverage for both property damage and business interruption. The recovery effort at the properties is expected to include replacing portions of the building, landscaping and furnishings. The net book value of the property damage is currently estimated to be at least $35 million; however, we are still assessing the damage estimates and the actual net book value write-off could vary from this estimate. Changes to these estimates will be recorded in the periods in which they are determined. As of September 30, 2005, we have recorded a net fixed asset write-off and a corresponding insurance claim recovery receivable for this net book value amount because we believe that it is probable that the insurance recovery, net of deductibles on a replacement cost basis, will exceed the net book value of the damaged portion of the assets. While we expect the insurance proceeds will be sufficient to cover most of the replacement cost of the restoration of the properties, certain deductibles and limitations are expected to apply. No determination has been made as to the total amount or timing of those insurance payments. As of September 30, 2005 and through November 8, 2005, $5 million in insurance proceeds related to the Oakwood property has been received, which has been offset against this insurance recovery receivable. As only a nominal amount of repairs have taken place as of September 30, 2005, substantially all of the remaining $30 million receivable recorded represents the recovery of the net book value of fixed assets written off. The cost recoveries have been recorded on the expense line item to which they relate, and therefore there is no significant impact to any line item or our overall results. However, included in property operating expenses for the three and nine months ended September 30, 2005 are approximately $1 million of costs which, when fully expended, are not expected to be recoverable from insurance proceeds due to insurance policy deductibles.

NOTE 7 DISCONTINUED OPERATIONS

In October 2004, we sold our interests in two office buildings in Hunt Valley, Maryland for $8.4 million.

In May 2004, we sold our interest in one office building in Hughes Center, a master-planned business park in Las Vegas, Nevada, as part of certain agreements reached in 2003 under which we acquired interests in entities developing The Woodlands, a master-planned community in the Houston, Texas metropolitan area, for cash of $7.0 million and the assumption by the buyer of $3.5 million of mortgage debt. We recorded a gain on this sale of $5.5 million. In January and February 2004, we sold interests in five office buildings and seven parcels subject to ground leases in Hughes Center as part of the same 2003 agreement, for cash of $64.3 million and the assumption by the buyer of $107.3 million of mortgage debt. We recorded aggregate gains on these sales in the first quarter of 2004 of approximately $35.3 million (net of deferred income taxes of $2.7 million).

In March 2004, we sold our interests in Westdale Mall, a retail center in Cedar Rapids, Iowa, for cash of $1.3 million and the assumption by the buyer of $20.0 million of mortgage debt. We recognized a gain of $0.8 million in 2004 relating to this sale.

The operating results of the properties included in discontinued operations are summarized as follows (in thousands):

	Three months ended September 30, 2004			Nine months ended September 30, 2004
Revenues	$	359		$	3,963
Operating expenses, exclusive of depreciation and amortization	(73		)	(1,563		)
Interest expense	(1		)	(738		)
Depreciation and amortization	—			(979		)
Other provisions and losses	(162		)	(432		)
Income tax benefit	13			98
Income from operations	136			349
Gains on dispositions of interests in operating properties, net	466			45,180
Discontinued operations	$	602		$	45,529

As all of the above-mentioned dispositions occurred in 2004 and, as no additional operating assets held as of September 30, 2005 have been designated as held for sale, no amounts have been categorized as discontinued operations in 2005.

NOTE 8 TAX MATTERS

Prior to the Merger, TRC was a REIT and generally was not subject to corporate level Federal income tax on taxable income we distributed currently to our stockholders, but were liable for Federal and state income taxes with respect to our TRS entities.

Subsequent to the Merger, we are an entity disregarded for Federal income tax purposes and we are not liable for Federal income taxes, except with respect to our TRS entities.

As a subsidiary of GGP (which operates as a REIT), we own and operate several TRS entities that are principally engaged in the development and sale of land for residential, commercial and other uses, primarily in and around Columbia, Maryland; Summerlin, Nevada and Houston, Texas. Certain of the TRS entities also operate and/or own several retail centers and office and other properties. Except with respect to such TRS entities, management does not believe that we will be liable for significant income taxes at the Federal level or in most of the states in which we operate in 2005 and future years. Current Federal income taxes of the TRS entities are likely to increase significantly in future years as we exhaust the net loss carryforwards of certain TRS entities and complete certain land development projects.

Due to the uncertainty of the realization of certain tax carryforwards, we established valuation allowances. The majority of the valuation allowances established relate to net operating loss carryforwards, which will more likely than not expire unused. The valuation allowances established totaled $26.6 million and $24.9 million at September 30, 2005 and December 31, 2004, respectively.

One of our taxable subsidiaries is subject to an ongoing Federal Income Tax examination. We do not believe that the outcome of this examination will have a material adverse effect on our consolidated results of operations, cash flows, or financial position.

In December 2004, the FASB issued FSP FAS 109-1 related to the application of SFAS No. 109, “Accounting for Income Taxes,” to the tax deduction on qualified production activities provided by the American Jobs Creation Act of 2004 (the “Jobs Creation Act”). FSP FAS 109-1 clarifies that this tax deduction provided for under the Jobs Creation Act should be accounted for as a special deduction in accordance with SFAS No. 9 and not as a tax rate reduction. We are currently evaluating the effect that this deduction will have in 2005 and subsequent years. It is not expected to have a material impact on our financial position or results of operations in 2005.

NOTE 9 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2005, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF 04-05, “Investor’s Accounting for an Investment in a Limited Partnership When the Investor Is the Sole General Partner and the Limited Partners Have Certain Rights” (EITF 04-05) which provides guidance on when a sole general partner should consolidate a limited partnership. A sole general partner in a limited partnership is presumed to control that limited partnership and therefore should include the limited partnership in its consolidated financial statements, regardless of the sole general partner’s ownership interest in the limited partnership. The control presumption may be overcome if the limited partners have the ability to remove the sole general partner or otherwise dissolve the limited partnership. Other substantive participating rights by the limited partners may also overcome the control presumption. If ratified by the FASB, this consensus would be effective after the date of the ratification for general partners of all newly formed limited partnerships and existing limited partnerships for which the partnership agreements are modified. For general partners in all other limited partnerships, this consensus would be effective no later than the beginning of the first reporting period in fiscal years beginning after December 15, 2005. We do not expect EITF 04-05 to have a significant impact on our consolidated financial statements.

In May 2005, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 154, “Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”). This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements. Among other changes, SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. SFAS 154 also provides that:

• A change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and

• Correction of errors in previously issued financial statements should be termed a “restatement.”

SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005.

On February 7, 2005, the SEC staff published certain views concerning the accounting by lessees for leasehold improvements, rent holidays, lessor funding of lessee expenditures and other tenant inducements. Although the application of these views to lessors was not specified by the SEC and a formal accounting standard modifying existing practice on these items has not been

issued or proposed, we have conducted a review of our accounting relative to such items. We believe that our leasing practices and agreements with a majority of our tenants provide that leasehold improvements that we fund represent fixed assets that we own and control. We also believe that leases with such arrangements are properly accounted for as commencing at the completion of construction of such assets. A smaller percentage of our tenant leases do not provide for landlord funding but rather provide for tenant funded construction and furnishing of the leased premises prior to the formal commencement of the lease. We have concluded that the recognition of straight-line rental revenue relating to these leases should commence when tenants take possession of the leased space.

On December 16, 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets – An Amendment of APB Opinion No. 29” (“SFAS 153”). The amendments made by SFAS 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have “commercial substance.” SFAS 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of SFAS 153 on June 15, 2005 did not have a material effect on our consolidated financial statements.

In October 2005, the FASB Issued Staff Position No. FAS 13-1 “Accounting for Rental Costs Incurred during a Construction Period”. This FSP requires that rental costs associated with ground or building operating leases incurred during a construction period be recognized as rental expense. However, FSP No. FAS 13-1 does not address lessees that account for the sale or rental of real estate projects under FASB Statement No. 67 “Accounting for Costs and Initial Rental Operations of Real Estate Projects”. As we generally own rather than lease property upon which we construct new real estate projects and our policy would be to capitalize rental costs associated with ground leases incurred during construction periods under Statement No. 67, FSP No. FAS 13-1 will not have a material effect on our results of operations when it becomes effective in 2006.

NOTE 10 SEGMENTS

We have two business segments which offer different products or services. Our segments are managed separately because each requires different operating strategies or management expertise. We do not distinguish or group our consolidated operations on a geographic basis. Further, all operations are within the United States and no customer or tenant comprises more than 2% of consolidated revenues. Our reportable segments are as follows:

• Retail and Other - - includes the operation, development and management of regional shopping centers, office and industrial properties, downtown specialty marketplaces, the retail and non-retail rental components of mixed-use projects and community retail centers.

• Master Planned Communities - - includes the development and sale of land, primarily in large-scale, long-term community development projects in and around Columbia, Maryland; Summerlin, Nevada; and Houston, Texas.

Prior to the Merger, management of TRC had elected to present five operating segments, including retail centers, office and other properties, community development, commercial development, and corporate. Consistent with management practices of GGP, we have changed our reportable segments and have recategorized the 2004 segment results to reflect the two reportable segments described above.

The operating measure used to assess operating results for the business segments is Real Estate Property Net Operating Income (“NOI”). Management believes that NOI provides useful information about a property’s operating performance.

The accounting policies of the segments are the same as those described in Note 1, except that we account for the Unconsolidated Real Estate Affiliates and certain other minority interest ventures using the proportionate share method rather than the equity method. Under the proportionate share method, our share of the revenues and expenses of the Unconsolidated Properties are combined with the revenues and expenses of the Consolidated Properties. Under the equity method, our share of the net revenues and expenses of the Unconsolidated Properties are reported as a single line item, “Equity in income of unconsolidated affiliates,” in our Consolidated Statements of Operations and Comprehensive Income. In addition, the 2005 operations listed below reflect the application of purchase accounting as described in Notes 1 and 2.

Operating results for the segments for the three months ended September 30, 2005 and 2004 are as follows (in thousands):

	Three Months Ended September 30,
	2005						2004
	Retail and Other		Master Planned Communities		Total		Retail and Other		Master Planned Communities		Total

Property revenues:
Minimum rents	$	192,592	$	—	$	192,592	$	170,732	$	—	$	170,732
Tenant recoveries	79,876		—		79,876		77,525		—		77,525
Overage rents	4,749		—		4,749		3,844		—		3,844
Land sales	—		100,443		100,443		—		70,772		70,772
Other	24,737		—		24,737		26,423		—		26,423
Total property revenues	301,954		100,443		402,397		278,524		70,772		349,296
Property operating expenses:
Real estate taxes	24,494		—		24,494		22,868		—		22,868
Repairs and maintenance	22,347		—		22,347		20,665		—		20,665
Marketing	2,517		—		2,517		2,134		—		2,134
Other property and operating costs	60,205		—		60,205		76,646		—		76,646
Land sales operations	—		78,975		78,975		—		43,666		43,666
Provisions for doubtful accounts	1,623		—		1,623		2,624		—		2,624
Total property operating expenses	111,186		78,975		190,161		124,937		43,666		168,603
Real estate property net operating income	$	190,768	$	21,468	$	212,236	$	153,587	$	27,106	$	180,693

Operating results for the segments for the nine months ended September 30, 2005 and 2004 are as follows (in thousands):

	Nine Months Ended September 30,
	2005						2004
	Retail and Other		Master Planned Communities		Total		Retail and Other		Master Planned Communities		Total

Property revenues:
Minimum rents	$	547,463	$	—	$	547,463	$	501,410	$	—	$	501,410
Tenant recoveries	229,487		—		229,487		220,998		—		220,998
Overage rents	11,646		—		11,646		9,307		—		9,307
Land sales	—		313,417		313,417		—		302,665		302,665
Other	83,266		—		83,266		83,982		—		83,982
Total property revenues	871,862		313,417		1,185,279		815,697		302,665		1,118,362
Property operating expenses:
Real estate taxes	72,523		—		72,523		67,077		—		67,077
Repairs and maintenance	71,887		—		71,887		64,229		—		64,229
Marketing	3,565		—		3,565		6,075		—		6,075
Other property and operating costs	194,629		—		194,629		215,017		—		215,017
Land sales operations	—		251,760		251,760		—		194,869		194,869
Provisions for doubtful accounts	6,326		—		6,326		7,650		—		7,650
Total property operating expenses	348,930		251,760		600,690		360,048		194,869		554,917
Real estate property net operating income	$	522,932	$	61,657	$	584,589	$	455,649	$	107,796	$	563,445

The following reconciles segment basis NOI to GAAP-basis operating income and income (loss) from continuing operations.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004

Real estate property net operating income segment basis	$	212,236		$	180,693		$	584,589		$	563,445
Less NOI of unconsolidated properties	(39,212		)	(26,456		)	(98,544		)	(74,361		)
Less NOI of discontinued operations	—			(271		)	—			(2,834		)
Management and other fees	2,222			3,084			9,820			10,361
Property management and other costs	(10,005		)	(18,492		)	(24,124		)	(39,425		)
Other provisions	—			(45,269		)	—			(50,315		)
Depreciation and amortization	(89,857		)	(47,176		)	(252,733		)	(143,521		)
Operating income	75,384			46,113			219,008			263,350
Interest income	1,928			1,963			5,057			6,052
Interest expense	(67,080		)	(60,403		)	(185,715		)	(179,920		)
Provision for income taxes	(14,452		)	(18,206		)	(33,745		)	(57,319		)
Income allocated to minority interests	(458		)	(925		)	(2,947		)	(2,718		)
Equity in income (loss) of unconsolidated affiliates	(2,184		)	6,500			6,824			15,135
Net gains (losses) on dispositions of interests in operating properties	—			166			—			14,054
Income (loss) from continuing operations	$	(6,862	)	$	(24,792	)	$	8,482		$	58,634

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

As of September 30, 2005, all of our equity securities were held directly by a GGP controlled subsidiary and GGP is a reporting company under the Securities and Exchange Act of 1934, as amended, which has filed all the material required to be filed pursuant to Section 13, 14, or 15(d) thereof, as applicable. Therefore, certain disclosures and analysis otherwise required by Item 2 have been omitted as not applicable or answered by reference to filings made by GGP.

All references to numbered Notes are to specific footnotes to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and which Notes are incorporated into the applicable response by reference. The following discussion should be read in conjunction with such Consolidated Financial Statements and related Notes. Capitalized terms used, but not defined, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) have the same meanings as in such Notes.

Forward-looking Information

We may make forward-looking statements in this Quarterly Report and in other reports that we file with the SEC and in other information that we release publicly or provide to investors. In addition, our senior management might make forward-looking statements orally to analysts, investors, the media and others.

Forward-looking statements include:

• Projections of our revenues, income, capital expenditures, leverage, capital structure or other financial items;

• Descriptions of plans or objectives of our management for future operations, including pending debt repayment or restructuring;

• Forecasts of our future economic performance; and

• Descriptions of assumptions underlying or relating to any of the foregoing.

In this Quarterly Report, for example, we make forward-looking statements discussing our expectations about:

• Future repayment of debt, including the ratio of variable to fixed-rate debt in our portfolio;

• Future interest rates; and

• Future development and redevelopment expenditures.

Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements often include words such as “anticipate”, “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” or similar expressions. Forward-looking statements should not be unduly relied upon. They describe our expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made and we disclaim any obligation to update them except as required by law.

Management’s Overview and Summary

We operate our business in two segments: the Retail and Other segment and the Master Planned Communities segment. Our primary business (our Retail and Other segment) is the ownership, management, leasing and development of retail and office rental properties. We also develop and sell land for residential, commercial and other uses primarily in master-planned communities (our Master Planned Community segment). Management believes the most significant operating factor affecting incremental revenues and cash flow is increased rents (either base rental revenue or overage rents) earned from tenants at our properties. These rental revenue increases are primarily achieved by re-leasing existing space at higher current rents, increasing occupancy which results in more space generating rent and increasing tenant sales which results in increased overage rents. In addition, management considers changes in interest rates to be the most significant external factor in determining trends in cash flow or income from continuing operations. Interest rates have risen in recent months and could continue to rise in future months, which could adversely impact our future cash flow and net income.

Our Retail and Other revenues are primarily received from tenants in the form of fixed minimum rents, overage rents and recoveries of operating expenses. Our Master Planned Communities revenues are primarily received from land sales for residential and commercial purposes.

The accounting policies of the segments are the same as those described in Note 1, except that we account for real estate ventures in which we have joint interest and control and certain other minority interest ventures using the proportionate share method rather than the equity method. This difference affects only the reported revenues and operating expenses of the segments and has

no effect on our reported net earnings. In addition, the 2005 operations listed below reflect the application of purchase accounting as described in Notes 1 and 2.

Our consolidated results of operations were impacted by the application of purchase accounting as a result of the Merger. For additional information regarding this purchase accounting, see Note 2. For a reconciliation of Real Estate Property Net Operating Income for our two operating segments to GAAP-basis operating income and income (loss) from continuing operations, see Note 10.

Our Master Planned Communities segment includes the development and sale of residential and commercial land, primarily in large-scale projects in and around Columbia, Maryland; Summerlin, Nevada; and Houston, Texas. We develop and sell finished and undeveloped land in such communities to builders and other developers for residential, commercial and other uses.

At September 30, 2005, the Company owned 30 operating retail centers, 96 operating office buildings and 5 mixed-use projects containing both retail and office components (the “Consolidated Retail Properties”) and interests in 13 retail properties and 5 office buildings through investments in Unconsolidated Real Estate Affiliates (the “Unconsolidated Retail Properties”). For the purposes of this report, the Consolidated Retail Properties and the Unconsolidated Retail Properties are collectively referred to as our “Operating Property Portfolio.” In addition, our Master Planned Communities segment includes our interest in Woodlands, a master-planned community in the Houston, Texas metropolitan area. This project is classified in our Unconsolidated Real Estate Affiliates. Reference is made to Notes 1 and 3 for a further discussion of our investments in Unconsolidated Real Estate Affiliates.

Seasonality

Although we have a year-long temporary leasing program, occupancies for short-term tenants and, therefore, rental income recognized, are higher during the second half of the year. In addition, the majority of our tenants have December or January lease years for purposes of calculating annual overage rent amounts. Accordingly, overage rent thresholds are most commonly achieved in the fourth quarter. As a result, occupancy levels and revenue production are generally highest in the fourth quarter of each year.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. For example, significant estimates and assumptions have been made with respect to useful lives of assets, capitalization of development and leasing costs, recoverable amounts of receivables and deferred taxes, initial valuations and related amortization periods of property, deferred costs and intangibles, particularly with respect to acquisitions, and cost ratios and completion percentages used for land sales. Actual results could differ from those estimates.

Critical Accounting Policies

Critical accounting policies are those that are both significant to the overall presentation of our financial condition and results of operations and require management to make difficult, complex or subjective judgments. Our critical accounting policies are those applicable to the following:

• Initial valuations and estimated useful lives or amortization periods for property and intangibles. When we acquire a property, we make an initial assessment of the initial valuation and composition of the assets acquired and liabilities assumed. These assessments consider fair values of the respective assets and liabilities and are primarily determined based on estimated future cash flows using appropriate discount and capitalization rates, but may also be based on independent appraisals or other market data. The estimated future cash flows that are used for this analysis reflect the historical operations of the property, known trends and changes expected in current market and economic conditions which would impact the property’s operations, and our plans for such property. These estimates are particularly important as they are used for the allocation of purchase price between depreciable and non-depreciable real estate and other identifiable intangibles including above, below and at-market leases. As a result, the impact of these estimates on our operations could be substantial.

• Cost of land sales is determined as a specified percentage of land sales revenues recognized for each community development project. The cost ratios used are based on actual costs incurred and estimates of development costs and sales revenues to completion of each project. The ratios are reviewed regularly and revised for changes in sales and cost estimates or development plans. Significant changes in these estimates or development plans, whether due to changes in market conditions or other factors, could result in changes to the cost ratio used for a specific project. The increase in the basis of the land due to purchase price accounting adjustments has resulted in a significant increase in the cost ratios of our projects. The specific identification method is used to determine cost of sales for certain parcels of land, including acquired parcels we do not intend to develop or for which development is complete at the date of acquisition.

• Events or changes in circumstances concerning a property may occur which could indicate that the carrying values or amortization periods of the assets and liabilities may require adjustment. The resulting recovery analysis also depends on an analysis of future cash flows to be generated from a property’s assets and liabilities. Changes in our overall plans (for example, the extent and nature of a proposed redevelopment of a property) and our views on current market and economic conditions may have a significant impact on the resulting estimated future cash flows of a property that are analyzed for these purposes.

• We make periodic assessments of the collectibility of receivables (including those resulting from the difference between rental revenue recognized and rents currently due from tenants) and the recoverability of deferred taxes based on a specific review of the risk of loss on specific accounts or amounts. The receivable analysis places particular emphasis on past-due accounts and considers the nature and age of the receivables, the payment history and financial condition of the payee, the basis for any disputes or negotiations with the payee and other information which may impact collectibility. For straight-line rents, the analysis considers the probability of collection of the unbilled deferred rent receivable given our experience regarding such amounts. For deferred taxes, an assessment of the recoverability of the current tax asset considers the current expiration periods of the prior net operating loss carryforwards and the estimated future taxable income of our taxable REIT subsidiaries (“TRS”). The resulting estimates of any allowance or reserve related to the recovery of these items is subject to revision as these factors change and is sensitive to the effects of economic and market conditions on such payees and our taxable REIT subsidiaries.

• We capitalize the costs of development and leasing activities of our properties. These costs are incurred both at the property location and at the regional and corporate office level. The amount of capitalization depends, in part, on the identification and justifiable allocation of certain activities to specific projects and leases. Differences in methodologies of cost identification and documentation, as well as differing assumptions as to the time incurred on projects, can yield significant differences in the amounts capitalized.

Purchase Accounting for the Merger

The following table summarizes the most-recently estimated fair values of our assets at the date of the Merger with GGP. These fair values were based, in part, on preliminary third-party market valuations. These fair values were based on currently available information and assumptions and estimates that we believe are reasonable at this time. We will continue to review and expect to adjust these fair values as additional information becomes available for a period of one year following the acquisition.

(In thousands)	As of September 30, 2005
Land	$	1,311,684
Buildings and Equipment	8,293,134
Developments in progress	362,319
Investment in and loans to/from Unconsolidated Real Estate Affiliates	1,271,210
Investment land and land held for development and sale	1,678,828
Cash and cash equivalents	29,077
Accounts and notes receivable	85,517
Goodwill	259,055
Prepaid expenses and other assets:
Below-market ground leases	349,116
Above-market tenant leases	108,246
Other	406,837
	864,199
	$	14,155,023

Results of Operations for the Three Months Ended September 30, 2005 and 2004

See Note 10 for a reconciliation of Real Estate Property Net Operating Income for our two operating segments to GAAP-basis Income from continuing operations.

Retail and Other Segment

Revenues and expenses for the three months ended September 30, 2005, compared to the same period in 2004 are summarized as follows (in thousands):

	For the Three Months Ended September 30,				$ Increase			% Increase
	2005		2004		(Decrease)			(Decrease)
Property revenues:
Minimum rents	$	192,592	$	170,732	$	21,860		12.8	%
Tenant recoveries	79,876		77,525		2,351			3.0
Overage rents	4,749		3,844		905			23.5
Other	24,737		26,423		(1,686		)	(6.4	)
Total property revenues	301,954		278,524		23,430			8.4
Property operating expenses:
Real estate taxes	24,494		22,868		1,626			7.1
Repairs and maintenance	22,347		20,665		1,682			8.1
Marketing	2,517		2,134		383			17.9
Other property operating costs	60,205		76,646		(16,441		)	(21.5	)
Provision for doubtful accounts	1,623		2,624		(1,001		)	(38.1	)
Total property operating expenses	111,186		124,937		(13,751		)	(11.0	)
Real estate property net operating income	$	190,768	$	153,587	37,181			24.2	%

The increase in minimum rents is related to above- and below-market tenant leases and straight line rent adjustments at comparable properties and was primarily attributable to effect of purchase price accounting adjustments.

Increase in tenant recoveries: Increases were primarily attributable to converting the provision relating to recoverable operating expenses from proportionate share recovery percentages to fixed recovery charges.

Other revenues: Increase is primarily attributable to higher rents on re-leased space and an increase in revenues from specialty retail activities such as our push cart and advertising programs.

Reductions in property operating expenses are primarily attributable to synergies recognized through the Merger.

Master Planned Communities Segment

Master planned community operations relate to the communities of Summerlin, Nevada; Columbia, Emerson and Stone Lake in Howard County, Maryland; Fairwood in Prince George’s County, Maryland; and The Woodlands in Houston, Texas. We have also acquired developable land in the Houston, Texas metropolitan area (which we call “Bridgelands”) and began significant development activities at the Bridgelands in 2004 and lot sales commenced in October 2005. We refer to the Maryland properties as our Columbia-based operations.

Revenues and operating income from land sales are affected by such factors as the availability to purchasers of construction and permanent mortgage financing at acceptable interest rates, consumer and business confidence, regional economic conditions in the Baltimore-Washington, Las Vegas and Houston metropolitan areas, levels of homebuilder inventory, availability of saleable land for particular uses and our decisions to sell, develop or retain land. We believe that land sales in 2005 and 2004 benefited from strong housing demand, historically low interest rates, availability of mortgage financing and growing consumer confidence. Should interest rates continue their recent increasing trend or consumer confidence decline, land sales may be adversely affected. Revenues for community development include land sales to developers and participations with builders in their sales of finished homes to homebuyers.

Operating results of master planned communities segment are summarized as follows (in millions):

	Three months ended
	September 30,
	2005		2004
Nevada-based Operations:
Revenues	$	64.1	$	38.6
Operating costs and expenses	49.8		24.3
NOI	$	14.3	$	14.3

Columbia-based Operations:
Revenues	$	15.7	$	15.1
Operating costs and expenses	11.0		5.8
NOI	$	4.7	$	9.3

Houston-based Operations:
Revenues	$	20.6	$	17.1
Operating costs and expenses	18.2		13.6
NOI	$	2.4	$	3.5

Total:
Revenues	$	100.4	$	70.8
Operating costs and expenses	79.0		43.7
NOI	$	21.4	$	27.1

Purchase price accounting adjustments had a significant effect on NOI of our Master Planned Communities segment. As we allocate the cost of the Merger to our assets based on their fair values, we have increased the basis in our community development land assets. This results in a significant increase in our cost of land sales in 2005 when compared to comparable periods in 2004. In addition, purchase price accounting adjustments have resulted in a decrease in builder price participation revenues in 2005 when compared to the comparable period in 2004 as receipts of builder price participation payments in 2005 related to lots sold prior to the Merger were, due to purchase accounting, recorded as reductions in the cost basis of our land assets.

Increase due to Nevada-based revenues was primarily attributable to increased residential sales partially offset by lower building price participation revenues as a result of purchase accounting adjustments.

The increases in operating costs and expenses from Nevada-based and Columbia-based operations were primarily attributable to higher cost of land sales due to purchase accounting adjustments. The increase in Nevada-based revenues also resulted in higher cost of land sales in that region.

We expect the sales revenues of the Master Planned Communities segment to remain strong in 2005, assuming continued favorable market conditions in the Las Vegas, Houston, Howard County and Prince George’s County regions. Land sale activity at our newest project, The Bridgelands in Houston, Texas, commenced in October 2005.

Other Significant Revenues and Expenses

	For the Three Months Ended
	September 30,					$ Increase			% Increase
(In thousands)	2005			2004		(Decrease)			(Decrease)
Management and other fees	$	2,222		$	3,084	$	(862	)	(28.0	)%
Property management and other costs	10,005			18,492		(8,487		)	(45.9	)
Other provisions	—			45,269		(45,269		)	(100.0	)
Depreciation and amortization	89,857			47,176		42,681			90.5
Interest expense	67,080			60,403		6,677			11.1
Provision for income taxes	14,452			18,206		(3,754		)	(20.6	)
Equity in income (loss) of unconsolidated affiliates	(2,184		)	6,500		(8,684		)	(133.6	)

Management and other fees: The amount represents fees that we receive for managing primarily unconsolidated properties in our Operating Property Portfolio. We do not manage properties in which we do not have an ownership interest.

Property management and other costs: The amount represents certain general and administrative costs that are not allocated to our business segments. These expenses declined $8.5 million for the three months ended September 30, 2005, compared to the same period in 2004. The decrease in the three month period is primarily attributable to synergies recognized through the Merger.

Other provisions: Other provisions decreased $45.3 million for the three months ended September 30, 2005, compared to the same period in 2004. The decreases are primarily related to the interest and penalties recognized in the third quarter of 2004 as discussed in Note 5.

Depreciation and amortization: Depreciation and amortization expense increased $42.7 million for the three months ended September 30, 2005, compared to the same period in 2004. The increase is primarily attributable to the increase in the property basis as a result of purchase accounting adjustments and to the property acquisitions in 2004.

Interest Expense: Interest expense increased $6.7 million for the three months ended September 30, 2005, compared to the same period in 2004. Through new mortgage financings and refinancing existing mortgages, we have increased our outstanding debt balance from $4.6 billion as of September 30, 2004 to $6.5 billion as of September 30, 2005. Increases in interest expense as a result of such financing activity were partially offset by the effect of purchase accounting adjustments to the carrying value of debt and increased capitalized interest.

Income taxes: Income tax expenses decreased $3.8 million for the three months ended September 30, 2005, compared to the same period in 2004. The decrease was primarily attributable to lower earnings in the TRS entities primarily due to a decrease in net operating income from our Master Planned Communities segment (see Master Planned Communities section above) and the increase in depreciation and amortization expense (discussed above) relating to assets within our TRS entities.

Equity in income (loss) of unconsolidated affiliates: The decrease in equity in income (loss) of unconsolidated real estate affiliates for the three months ended September 30, 2005 compared to the same period in 2004 is primarily attributable to an increase in depreciation expense as a result of an increase in the depreciable basis of our investments in the ventures due to purchase accounting adjustments.

Results of Operations for the Nine Months Ended September 30, 2005 and 2004

See Note 10 for a reconciliation of Real Estate Property Net Operating Income for our two operating segments to GAAP-basis Income from continuing operations.

Retail and Other Segment

Revenues and expenses for the nine months ended September 30, 2005, compared to the same period in 2004 are summarized as follows (in thousands):

	For the Nine Months Ended
	September 30,				$ Increase			% Increase
	2005		2004		(Decrease)			(Decrease)

Property revenues:
Minimum rents	$	547,463	$	501,410	$	46,053		9.2	%
Tenant recoveries	229,487		220,998		8,489			3.8
Overage rents	11,646		9,307		2,339			25.1
Other	83,266		83,982		(716		)	(0.9	)
Total property revenues	871,862		815,697		56,165			6.9
Property operating expenses:
Real estate taxes	72,523		67,077		5,446			8.1
Repairs and maintenance	71,887		64,229		7,658			11.9
Marketing	3,565		6,075		(2,510		)	(41.3	)
Other property operating costs	194,629		215,017		(20,388		)	(9.5	)
Provision for doubtful accounts	6,326		7,650		(1,324		)	(17.3	)
Total property operating expenses	348,930		360,048		(11,118		)	(3.1	)
Real estate property net operating income	$	522,932	$	455,649	$	67,283		14.8	%

Other revenues: Increase is primarily attributable to higher rents on re-leased space and an increase in revenues from specialty retail activities such as our push cart and advertising programs.

Reductions in property operating expenses were primarily attributable to synergies recognized through the Merger.

Master Planned Communities Segment

Operating results of master planned communities segment are summarized as follows (in millions):

	Nine months ended
	September 30,
	2005		2004
Nevada-based Operations:
Revenues	$	192.8	$	198.8
Operating costs and expenses	155.6		130.6
NOI	$	37.2	$	68.2

Columbia-based Operations:
Revenues	$	62.8	$	60.1
Operating costs and expenses	53.1		24.8
NOI	$	9.7	$	35.3

Houston-based Operations:
Revenues	$	57.8	$	43.7
Operating costs and expenses	43.1		39.4
NOI	$	14.7	$	4.3

Total:
Revenues	$	313.4	$	302.6
Operating costs and expenses	251.8		194.8
NOI	$	61.6	$	107.8

The increases in operating costs and expenses from Nevada-based and Columbia-based operations were primarily attributable to higher cost of land sales due to purchase accounting adjustments.

The increase in revenues from Houston-based operations was primarily attributable to increased residential and commercial land sales at The Woodlands. The increases in NOI were attributable to the effect of higher revenues, the sale of certain lots in 2004 with high cost basis, and lower general and administrative costs. Purchase price accounting adjustments did not significantly affect the Houston-based operations. The cost allocated to The Woodlands through the purchase price allocation approximated our pre-Merger carrying value since there was not a significant increase in value from our December 2003 acquisition of a 52.5% interest in the project to the date of the Merger with GGP.

We expect the sales revenue of the Master Planned Communities segment to remain strong in 2005, assuming continued favorable market conditions in the Las Vegas, Houston, Howard County and Prince George’s County regions. Land sale activity at our newest project, The Bridgelands in Houston, Texas, commenced in October 2005.

Other Significant Revenues and Expenses

	For the Nine Months Ended
	September 30,				$ Increase			% Increase
(In thousands)	2005		2004		(Decrease)			(Decrease)
Management and other fees	$	9,820	$	10,361	$	(541	)	(5.2	)%
Property management and other costs	24,124		39,425		(15,301		)	(38.8	)
Other provisions	—		50,315		(50,315		)	(100.0	)
Depreciation and amortization	252,733		143,521		109,212			76.1
Interest expense	185,715		179,920		5,795			3.2
Provision for income taxes	33,745		57,319		(23,574		)	(41.1	)
Equity in income of unconsolidated affiliates	6,824		15,135		(8,311		)	(54.9	)

Property management and other costs: The amount represents certain general and administrative costs that are not allocated to our business segments. These expenses decreased $15.3 million for the nine months ended September 30, 2005, compared to the same period in 2004. The decrease in the nine month period is primarily attributable to synergies recognized through the Merger.

Other provisions: Other provisions decreased $50.3 million for the nine months ended September 30, 2005, compared to the same period in 2004. The decrease is primarily related to the interest and penalties recognized in the third quarter of 2004 as discussed in Note 5.

Depreciation and amortization: Depreciation and amortization expense increased $109.2 million for the nine months ended September 30, 2005, compared to the same period in 2004. The increase is primarily attributable to the increase in the property basis as a result of purchase accounting adjustments and to the property acquisitions in 2004.

Interest Expense: Interest expense increased $5.8 million for the nine months ended September 30, 2005, compared to the same period in 2004. Through new mortgage financings and refinancing existing mortgages, we have increased our outstanding debt balance from $4.6 billion as of September 30, 2004 to $6.5 billion as of September 30, 2005. Increases in interest expense as a result of such financing activity were partially offset by the effect of purchase accounting adjustments to the carrying value of debt and increased capitalized interest.

Income taxes: Income tax expenses decreased $23.6 million for the nine months ended September 30, 2005, compared to the same period in 2004. The decrease was primarily attributable to lower earnings in the TRS entities primarily due to a decrease in net operating income from our Master Planned Communities segment (see Master Planned Communities section above) and the increase in depreciation and amortization expense (discussed above) relating to assets within our TRS entities.

Equity in income of unconsolidated affiliates: The decrease in equity in income of unconsolidated real estate affiliates for the nine months ended September 30, 2005 compared to the same period in 2004 is primarily attributable to an increase in depreciation expense as a result of an increase in the depreciable basis of our investments in the ventures due to purchase accounting adjustments, partially offset by increased NOI at the Woodlands due to increased land sales (see Master Planned Communities segment section above).

Liquidity and Capital Resources

We had cash and cash equivalents totaling $19.7 million at September 30, 2005 and $30.2 million at December 31, 2004. Our primary cash requirements are for operating expenses, debt service, development of new properties, expansions and improvements to existing properties and acquisitions. We believe that our liquidity and capital resources are sufficient to meet our current and future requirements. In addition, we may obtain advances from GGP to meet operating, investing and financing requirements.

Recently Issued Accounting Pronouncements and Developments

As described in Note 9, new accounting pronouncements have been issued which are effective for the current year. There has not been a significant impact on our financial statements due to the application of such new statements. There are no pronouncements or interpretations that have not yet been adopted that are expected to have a material effect on our consolidated financial statements.

PART I.	FINANCIAL INFORMATION		3

	Item 1.	Financial Statements (Unaudited)	3

		Consolidated Balance Sheets	3

		Consolidated Statements of Operations and Comprehensive Income (Loss)	4

		Consolidated Statements of Cash Flows	5

		Notes to Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31

	Item 4.	Controls and Procedures	31

PART II.	OTHER INFORMATION		32

	Item 1.	Legal Proceedings	32

	Item 2.	Unregistered Sales of Securities and Use of Proceeds	32

	Item 3.	Defaults Upon Senior Securities	32

	Item 4.	Submission of Matters to a Vote of Security Holders	32

	Item 5.	Other Information	32

	Item 6.	Exhibits	32

	SIGNATURE		33

	EXHIBIT INDEX		34

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

		The Rouse Company LP
		By: Rouse LLC, its general partner
				(Registrant)


Date:	November 14, 2005	by:	/s/: Bernard Freibaum
		Bernard Freibaum
		Executive Vice President and Chief Financial Officer
		(On behalf of the registrant and as Principal Accounting Officer)

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Date:	November 14, 2005
		/s/:John Bucksbaum
		John Bucksbaum
		Chief Executive Officer, Rouse LLC,
		general partner of The Rouse Company LP

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Basis of Presentation

Properties

Acquisitions of Operating Properties—Purchase Accounting due to the Merger

Investments in Unconsolidated Real Estate Affiliates

Advances to General Growth Properties, Inc.

Cash and Cash Equivalents

Leases

Deferred Expenses

Revenue Recognition and Related Matters

Income Taxes

Fair Value of Financial Instruments

Use of Estimates

Reclassifications

Condensed Combined Financial Information of Unconsolidated Real Estate Affiliates

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Information

Forward-looking statements include:

In this Quarterly Report, for example, we make forward-looking statements discussing our expectations about:

Management’s Overview and Summary

Seasonality

Use of Estimates

Critical Accounting Policies

Purchase Accounting for the Merger

Results of Operations for the Three Months Ended September 30, 2005 and 2004

Retail and Other Segment

Master Planned Communities Segment

Other Significant Revenues and Expenses

Results of Operations for the Nine Months Ended September 30, 2005 and 2004

Retail and Other Segment

Master Planned Communities Segment

Other Significant Revenues and Expenses

Liquidity and Capital Resources

Recently Issued Accounting Pronouncements and Developments

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Item 4. Controls and Procedures

PART II. OTHER INFORMATION

SIGNATURE

EXHIBIT INDEX

/s/: John Bucksbaum
John Bucksbaum
Chief Executive Officer, Rouse LLC
November 14, 2005

/s/: Bernard Freibaum
Bernard Freibaum
Chief Financial Officer, Rouse LLC
November 14, 2005