-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CPjGTLvfea/AwitDlIF85p5PrIM2n2h0NCo9RFQHP+7uCPZi3kYSN6D29MCurha1 ew0N/Uab90yOXbNZptBAkA== 0000950124-97-002860.txt : 19970515 0000950124-97-002860.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950124-97-002860 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL GROWTH PROPERTIES INC CENTRAL INDEX KEY: 0000895648 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 421283895 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11656 FILM NUMBER: 97603292 BUSINESS ADDRESS: STREET 1: 55 WEST MONROE ST STREET 2: STE 3100 CITY: CHICAGO STATE: IL ZIP: 60603 BUSINESS PHONE: 3125515000 MAIL ADDRESS: STREET 1: 55 WEST MONROE ST STREET 2: STE 3100 CITY: CHICAGO STATE: IL ZIP: 60603 10-Q 1 FORM 10-Q QUARTERLY REPORT, 3-31-97 1 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 March 31, 1997 Commission file number 1-11656 GENERAL GROWTH PROPERTIES, INC. ------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 42-1283895 - ------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 55 W. Monroe St., Chicago, IL 60603 ----------------------------------- (Address of principal executive offices, Zip Code) (312) 551-5000 -------------- (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 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------------------- ------------------- The number of shares of Common Stock, $.10 par value, outstanding on May 13, 1997 was 30,788,949. 1 of 21 2 GENERAL GROWTH PROPERTIES, INC. INDEX
PART I FINANCIAL INFORMATION PAGE NUMBER ------ Item 1: Financial Statements Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996 ......................... 3 Consolidated Statements of Operations for the three months ended March 31, 1997 and 1996.................. 4 Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996.................. 5 Notes to Consolidated Financial Statements.......................... 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 11 Company Portfolio Results and Funds from Operations................. 12 Reconciliation of Company Funds from Operations to Net Income....... 14 Breakdown of Company Portfolio Results and Funds from Operations for the three months ended March 31, 1997................ 15 Breakdown of Company Portfolio Results and Funds from Operations for the three months ended March 31, 1996................ 15 Other Portfolio Data for the three months ended March 31, 1997...... 16 Management's Discussion and Analysis of Homart Portfolio's Funds from Operations..................................................... 17 Reconciliation of Homart Portfolio Funds from Operations to Net Income.............................................................. 19 General Growth Management, Inc. Statement of Operations for the three months ended March 31, 1997................................... 20 Liquidity and Capital Resources of the Company...................... 21 PART II OTHER INFORMATION Item 2: Changes in Securities...................................... Item 6: Exhibits and Reports on Form 8-K........................... 21 SIGNATURE........................................................... 21
2 of 21 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS MARCH 31, 1997 AND DECEMBER 31, 1996 (Dollars in thousands, except for share amounts)
ASSETS MARCH 31, 1997 DECEMBER 31, (UNAUDITED) 1996 ----------- ------------ Investment in real estate: Land $180,263 $173,263 Buildings and equipment 1,416,729 1,337,366 Less accumulated depreciation (198,943) (188,744) Developments in progress 47,006 44,439 ----------- ----------- Net property and equipment 1,445,055 1,366,324 Investment in CenterMark 0 64,769 Investment in GGP/Homart 194,751 193,270 Investment in Quail Springs Mall 15,516 15,077 ----------- ----------- Net investment in real estate 1,655,322 1,639,440 Cash and cash equivalents 13,645 15,947 Tenant accounts receivable, net 28,418 25,384 Deferred expenses, net 30,841 30,078 Investment in and note receivable from General Growth Management, Inc. 48,483 37,737 Prepaid and other assets 5,665 9,131 ----------- ----------- $1,782,374 $1,757,717 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Mortgage notes payable $1,130,173 $1,168,522 Notes and contracts payable 955 971 Distributions payable 21,926 20,744 Accounts payable and accrued expenses 53,439 44,836 ----------- ----------- 1,206,493 1,235,073 ----------- ----------- Minority interest in Operating Partnership 211,143 192,377 ----------- ----------- Commitments and contingencies Stockholders' equity: Preferred stock, $100 par value; 5,000,000 shares authorized; none issued Common stock; $.10 par value; 70,000,000 shares authorized; 30,791,185 shares issued and outstanding (30,789,185 as of 12/31/96) 3,079 3,079 Additional paid-in capital 595,676 595,628 Retained earnings (deficit) (234,017) (268,440) ----------- ----------- Total stockholders' equity 364,738 330,267 ----------- ----------- $1,782,374 $1,757,717 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 3 of 21 4 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) (Dollars in thousands, except per share amounts)
Three Months Ended March 31, 1997 1996 Revenues: Minimum rents $39,175 $32,344 Tenant recoveries 21,622 16,138 Percentage rents 2,073 1,380 Other 1,593 1,064 Fee income 865 815 --------- --------- Total revenues 65,328 51,741 --------- --------- Expenses: Property operating 22,167 18,001 Management fees to affiliate 750 667 General and administrative 840 735 Depreciation and amortization 11,162 9,141 --------- --------- Total expenses 34,919 28,544 --------- --------- Operating income 30,409 23,197 Interest expense, net (15,439) (17,540) Equity in net income/(loss) of unconsolidated affiliates: CenterMark 0 2,011 Quail Springs Mall 327 0 GGP/Homart 1,824 1,691 General Growth Management, Inc. (273) 451 Net gain on sales 58,647 0 --------- --------- Income before extraordinary item and allocation to minority interest 75,495 9,810 Income allocated to minority interest (27,542) (2,814) --------- --------- Income before extraordinary item 47,953 6,996 Extraordinary item (a) (377) (2,291) --------- --------- Net income $47,576 $4,705 ========= ========= Earnings per share before extraordinary item $1.55 $ .26 Extraordinary item per share (.01) (.08) --------- --------- Net earnings per share $1.54 $ .18 ========= =========
(a) Charges related to early retirement of debt. The accompanying notes are an integral part of these consolidated financial statements. 4 of 21 5 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) (Dollars in thousands)
Three Months Ended March 31, 1997 1996 ------------- ----------- Cash flows from operating activities: Net income $47,576 $4,705 Adjustments to reconcile net income to net cash provided by operation activities: Minority interest 27,542 2,814 Net gain on sales (58,647) Extraordinary items - charges related to early retirement of debt 377 2,291 Equity in net income of unconsolidated affiliates (1,878) (4,153) Provision for doubtful accounts 632 1,016 Depreciation 10,200 8,175 Amortization 962 966 Net changes in: Tenant accounts receivable (3,666) 1,340 Prepaid and other assets 1,249 (3,937) Accounts payable and accrued expenses 1,516 (1,148) ----------- ----------- Net cash provided by operating activities 25,863 12,069 ----------- ----------- Cash flows from investing activities: Acquisition/development of real estate and improvements and additions to properties (88,154) (19,137) Increase in investments in unconsolidated real estate affiliates (5,734) (9) Change in notes receivable affilliates (9,641) 61 Proceeds from the sale of CenterMark Stock Distributions received from CenterMark Properties, Inc. 130,500 6,111 Distributions received from GGP/Homart, Inc. 6,077 764 Increase in deferred expenses (1,725) (5,330) ----------- ----------- Net cash from investing activities 31,323 (17,540) ----------- ----------- Cash flows from financing activities: Cash distributions paid to common stockholders (13,239) (11,727) Cash distributions paid to minority interest (7,505) (6,923) Payment of stock offering costs (3) Proceeds from issuance of mortgage and other notes payable 85,000 340,000 Principal payments on mortgage and other notes payable (123,364) (327,302) Retirement of common stock (net of sale proceeds) 0 (63) Prepayment penalty on early retirement of debt (377) ----------- ----------- Net cash from financing activities (59,488) (6,015) ----------- ----------- Net change in cash and cash equivalents (2,302) (11,486) Cash and cash equivalents at beginning of period 15,947 18,298 ----------- ----------- Cash and equivalents at end of period $13,645 $6,812 =========== =========== Supplemental disclosure of cash flow information: Interest paid $18,215 $15,531 Interest capitalized $1,329 $1,551
The accompanying notes are an integral part of these consolidated financial statements. 5 of 21 6 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands except per share amounts) NOTE 1 ORGANIZATION AND BASIS OF PRESENTATION ORGANIZATION General Growth Properties, Inc. (the "Company"), a Delaware corporation, was formed in 1986 to own and operate enclosed mall shopping centers. On April 15, 1993, the Company completed its initial public offering of 18,975,000 shares of common stock and a business combination involving entities under varying common ownership. Proceeds from the initial public offering were used to acquire a majority interest in GGP Limited Partnership (the "Operating Partnership") which was formed to succeed to substantially all of the interests in eighteen enclosed mall general partnerships (the "Property Partnerships") owned and controlled by the Company and its original stockholders, Martin and Matthew Bucksbaum, and trusts established for the benefit of the stockholders' families (the "Bucksbaums"). The proceeds were used to repay existing indebtedness and acquire three additional centers (the "IBM Centers"). In May of 1995, the Company completed a follow-on stock offering of 4,500,000 common shares. Net proceeds were used to reduce the outstanding balance of the Company's credit facility. OPERATING PARTNERSHIP The Operating Partnership commenced operations on April 15, 1993 and at March 31, 1997, owned a 99% general partnership interest in the eighteen Property Partnerships, two recently developed properties, Natick Mall and four properties acquired during 1996. In addition, the Operating Partnership owned 100% of the three IBM Centers, Park Mall and a 99.999% interest in Piedmont Mall and Market Place Mall (see Note 4). At March 31, 1997, the Operating Partnership also owned a 38.2% interest in GGP/Homart, Inc. (see Note 3), a 95% non-voting preferred interest in General Growth Management, Inc. (see Note 5) and a 50% interest in Quail Springs Mall. At March 31, 1997, the Company owned a 63% general partnership interest in the Operating Partnership. Various minority interests own the remaining 37% limited partnership interest. The minority interest in the Operating Partnership is held primarily by trusts for the benefit of families of the original stockholders which initially owned and controlled the Company and is represented by units of limited partnership interests ("Units"). The Units can be exchanged, with certain restrictions, for shares of the Company on a one-for-one basis. The Bucksbaum's Units can be exchanged for cash, at the Company's election, if the Bucksbaums own 25% or more of the outstanding common stock of the Company at the time of the exchange. The Unitholders also share equally with the stockholders on a per share basis in any distributions by the Operating Partnership. 6 of 21 7 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands except per share amounts) BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of the Company and the Operating Partnership consisting of the thirty-one centers (the "Original Centers") and the unconsolidated investments in CenterMark Properties, Inc. (through January 2, 1997), GGP/Homart, Inc., General Growth Management, Inc. ("GGMI") and Quail Springs Mall. The consolidated statements of operations for prior periods have been reclassified to conform with current classifications with no effect on results of operations. NOTE 2 CENTERMARK ACQUISITION AND DISPOSITION On February 11, 1994, the Company, jointly with two other unaffiliated parties, acquired 100% of the stock of CenterMark from The Prudential Insurance Company of America. The Company and Westfield U.S. Investments Pty. Limited each acquired 40% of the stock of CenterMark and several real estate investment funds sponsored by Goldman Sachs & Co. acquired the remaining 20%. The Company's portion of the cash purchase price for the CenterMark stock, including certain transaction costs, was approximately $182,000. CenterMark elected real estate investment trust status for income tax purposes. The CenterMark portfolio includes interests in several major regional shopping malls and power centers. The Company sold 25% of its interest in CenterMark on December 19, 1995, to Westfield U.S. Investments Pty. Limited for a price of $72,500. As a result of the sale, the Company's ownership was reduced to 30% of the outstanding CenterMark stock. Concurrently with the sale of the stock, the Company also granted Westfield U.S. Investments Pty. Limited an option to purchase the remainder of the Company's CenterMark stock ("Option Stock") for $217,500. On June 28, 1996, Westfield U.S. Investments, Pty. Limited exercised its option to acquire the remaining 30% of the outstanding CenterMark stock in two transactions. The first payment in the amount of $87,000 was received on July 1, 1996, and the second payment in the amount of $130,500 was received on January 2, 1997. Proceeds from the first payment were used to repay the remaining balance outstanding on the Company's interim loan facility that was utilized in connection with the acquisition of GGP/Homart (see Note 3). The proceeds received from the second payment were primarily used to repay existing indebtedness (see Note 6) and resulted in a gain of $66,626. NOTE 3 GGP/HOMART ACQUISITION On December 22, 1995, the Company jointly with four other investors acquired 100% of the stock of GGP/Homart, Inc. ("GGP/Homart") from Sears, Roebuck and Co. The other investors in GGP/Homart are the New York State Common Retirement Fund, the 7 of 21 8 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands except per share amounts) Equitable Life Insurance Company of Iowa, USG Annuity & Life Company and The Trustees of the University of Pennsylvania. The Company acquired 38.2% of GGP/Homart for approximately $179,000 including certain transaction costs. The stockholders of GGP/Homart agreed to contribute additional capital as required, through the end of 1997. As of March 31, 1997, the stockholders had contributed $60,000 of additional capital. GGP/Homart owns interests in twenty-six regional shopping malls and one property currently under development. GGP/Homart elected real estate investment trust status for income tax purposes. On October 2, 1996, GGP/Homart opened West Oaks Mall, a new development, located in Ocoee, (Orlando) Florida. GGP/Homart currently has one property under development, Brass Mill Center and Commons. Brass Mill Center is located in Waterbury, Connecticut, and is scheduled to open in the fall of 1997. The following is summarized financial information for GGP/Homart for the three months ended March 31, 1997 and 1996. GGP/HOMART, INC. CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED, DOLLARS IN THOUSANDS)
Three Months Ended March 31, 1997 1996 ---------- --------- Revenues Minimum rents $24,840 $21,209 Tenant recoveries 10,735 9,237 Percentage rents 634 357 Other 707 444 ---------- --------- Total revenues 36,916 31,247 Operating expenses (16,035) (14,354) Depreciation and amortization (6,506) (4,737) ---------- --------- Net operating income 14,375 12,156 Interest expense, net (10,828) (8,910) Equity in net income of unconsolidated real estate affiliates 1,338 1,180 Gain/(loss) on land sale (54) Income allocated to minority interest (56) ---------- --------- Net income $4,775 $4,426 ========== =========
8 of 21 9 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands except per share amounts) NOTE 4 PROPERTY ACQUISITIONS AND DEVELOPMENT ACQUISITIONS On March 31, 1997, the Company acquired a 100% interest in Market Place Mall for a cash purchase price of approximately $70,000. Market Place Mall is located in Champaign, Illinois. The acquisition was accounted for utilizing the purchase method and accordingly, it is included in the Operating Partnership's results of operations from the date of acquisition. DEVELOPMENTS During 1996, the Company acquired two new development sites located in Iowa City, Iowa, and Grand Rapids, Michigan. The Iowa City site is currently under development and is scheduled to open in the summer of 1998. NOTE 5 ACQUISITION OF GENERAL GROWTH MANAGEMENT, INC. On December 22, 1995, the Company formed GGP Management, Inc. to manage, lease, develop and operate enclosed malls. In August 1996, the Operating Partnership, acting through GGP Management, completed the acquisition of GGMI for approximately $51,500. The Operating Partnership issued approximately $11,600 (453,791 Units) of Operating Partnership Units and sold $39,900 of common stock (1,555,855 shares) to GGP Management in order to acquire GGMI. A loan from the Operating Partnership to GGP Management to purchase the Company's common stock bears interest and is reflected on the consolidated balance sheet. In connection with the acquisition, GGP Management was merged into GGMI at closing. GGMI manages, leases, and performs various other services for the Original Centers, GGP/Homart and other properties owned by unaffiliated parties. NOTE 6 MORTGAGE LOANS AND CREDIT FACILITIES On January 2, 1997, a portion of the proceeds from the sale of CenterMark were used to repay a $12,597 mortgage on Westwood Mall and to reduce the balance on the non recourse bridge loan facility from $250,000 to $180,000. On March 31, 1997, the Company borrowed $70,000 for the acquisition of Market Place Mall (see Note 4). In addition to the $250,000 non recourse bridge loan that is collateralized in part by mortgages on seven Original Centers, the Company obtained additional short term unsecured financing. As part of the additional financing, the Company agreed not to encumber four additional 9 of 21 10 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands except per share amounts) Original Centers. As of March 31, 1997 the entire $250,000 non recourse loan was outstanding and $15,000 of the additional unsecured loan was outstanding. NOTE 7 NET GAIN ON SALES The net gain on sales relates primarily to the gain on the sale of CenterMark (see Note 2) less additional costs related to prior acquisitions. NOTE 8 EXTRAORDINARY ITEMS The extraordinary items resulted from prepayment costs and unamortized deferred financing costs related to the early extinguishment of mortgage notes payable. NOTE 9 DISTRIBUTIONS PAYABLE On March 28, 1997, the Company declared a cash distribution of $.45 per share payable April 30, 1997, to stockholders of record on April 15, 1997, totaling $13,856. In addition, a distribution of $8,070 was paid to the limited partners of the Operating Partnership. On December 17, 1996, the Company declared a cash distribution of $.43 per share payable January 31, 1997, to stockholders of record on December 31, 1996, totaling $13,239. In addition, a distribution of $7,505 was paid to the limited partners of the Operating Partnership. NOTE 10 COMMITMENTS AND CONTINGENCIES In the normal course of business, from time to time, the Company is involved in legal actions relating to the ownership and operations of its properties. In management's opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a materially adverse effect on the consolidated financial position, results of operations or liquidity of the Company. The Company has entered into contingent agreements for the acquisition of properties. Each acquisition is subject to satisfactory completion of due diligence and, in the case of developments, completion and occupancy of the project. NOTE 11 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 128, "Earnings Per Share," revises the disclosure requirements and increases the comparability of EPS data on an international basis by simplifying the existing computational guidelines in APB Opinion No. 15. The pronouncement will require the Company to present both basic and diluted EPS for net income on the face of the income statement and is effective for the Company's fiscal year ending December 31, 1997. The Company believes it will not have a material impact on its financial statements. 10 of 21 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As of March 31, 1997, the Company owned 100% of thirty-one enclosed regional shopping centers (the "Original Centers") and 50% of Quail Springs Mall and, through the Operating Partnership, 38.2% of the stock of GGP/Homart, Inc and a 95% interest in GGMI (see Note 5). GGP/Homart owns interests in twenty-six shopping centers (the "Homart Centers") and one center under development. During 1996 the Company owned an interest in CenterMark Properties, Inc. (the "CenterMark Centers") (see Note 2). Revenues are primarily derived from fixed minimum rents, percentage rents and recoveries of operating expenses from tenants. Inasmuch as the Company's financial statements reflect the use of the equity method to account for its investments in CenterMark, GGP/Homart, GGMI and Quail Springs Mall, the discussion of results of operations below relates primarily to the revenues and expenses of the Original Centers. The Original Centers, the CenterMark Centers, the Homart Centers and GGMI are collectively known as the "Company Portfolio". A separate discussion of GGP/Homart's results of operations is presented below (see "Homart Portfolio Results and Funds From Operations" on page 17). RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 AND 1996 Total revenues for the first quarter of 1997 were $65.3 million, which represents an increase of $13.6 million or approximately 26.3% from $51.7 million in the first quarter of 1996. Approximately $9.6 million and $1.4 million of the increase is from acquisitions and new developments, respectively. Improved performance of comparable properties accounted for $2.6 million of the increase. Minimum rent for the first quarter of 1997 increased by $6.9 million or 21.4% from $32.3 million in 1996 to $39.2 million. The acquisition and development of properties generated $5.5 million and $.6 million of the $6.9 million increase in minimum rents, respectively. Expansion space, specialty leasing efforts and a combination of occupancy and rental changes at the comparable centers accounted for the remaining increase of $.8 million in minimum rents. Tenant charges increased by $5.5 million from $16.1 million to $21.6 million for the first quarter of 1997. Approximately $1.2 million of the increase is attributable to higher recoverable operating expenses at the comparable malls. The remaining $4.3 million increase was generated by properties which were recently acquired or developed. For the first quarter of 1997 overage rents increased by $.7 million or approximately 50% from $1.4 million in 1996. The performance of the comparable centers produced $.2 million of the increase and the acquisition and development of additional centers accounted for the remaining $.5 million. Other revenues increased by approximately $.5 million to $1.6 million for the first quarter of 1997 from $1.1 million in 1996. Fee income generated by the Company's asset management activities for the Homart Portfolio was slightly above the first quarter of 1996. Total expenses, including depreciation and amortization, increased by approximately $6.5 million, from $28.5 million in the first quarter of 1996 to $35.0 million in the first quarter of 1997. For the period ended March 31, 1997, property operating expenses increased by $4.2 million and depreciation and amortization also increased by $2.1 million over the same period in 1996. Property operating expense decreased by $.1 million at comparable properties 11 of 21 12 primarily due to a $.5 million reduction in bad debt expense. The remaining $4.3 million increase in operating costs was due to the acquisition and development of new properties. Approximately $.6 million of the $2.1 million increase in depreciation and amortization was generated at comparable centers. The remaining $1.5 million was from properties acquired or developed. Management fees to affiliates and general and administrative expenses together were approximately $.2 million higher than in 1996. Net interest expense for the first quarter of 1997 was $15.4 million, a decrease of approximately $2.1 million or 12% from the first quarter of 1996. Refinancing activities and the use of the CenterMark proceeds to repay debt generated a $4.7 million decrease in interest expense. The acquisition of new properties accounted for an increase of approximately $2.6 million of interest expense. Equity in net income of unconsolidated real estate affiliates in the first quarter of 1997 decreased by approximately $2.3 million to $1.9 million in 1997, from $4.2 million in the first quarter of 1996. Approximately $2.0 million of the decrease is attributable to the sale of the Company's interest in CenterMark. The Company's ownership interest in GGMI resulted in a decrease of $.7 million as determined in accordance with generally accepted accounting principles. Quail Springs Mall and GGP/Homart accounted for increases of $.3 million and $.1 million, respectively. The results of GGP/Homart's operations are also presented and discussed below (see "Homart Portfolio Results and Funds From Operations" on page 17). COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS In order to portray the sources of the Company's funds from operations in a more meaningful and useful manner, the Company Portfolio results and funds from operations depicted below reflect 100% of the revenues and expenses of the Original Centers and GGMI combined with the Company's share of CenterMark's and GGP/Homart's portfolio results. The Company Portfolio results are a line item pro rata consolidation of 100% of the revenues and expenses of the Original Centers and GGMI, with the Company's share of the comparable revenue and expenses of the wholly owned CenterMark Centers and Homart Centers and the Company's share of CenterMark's and GGP/Homart's various percentage interests of the revenues and expenses of the centers that are owned in part by unaffiliated joint venture partners. Interest expense and general and administrative costs that relate to the acquisition, management and oversight of the Company's ownership of CenterMark and GGP/Homart are charged entirely against the Company's direct operations. These expenses cannot be charged on CenterMark's and GGP/Homart's financial statements because the other shareholders in CenterMark and GGP/Homart are not affiliated with the Company. The Company's share of CenterMark's and GGP/Homart's funds from operations does not represent the net effective incremental contribution to the Company made by the CenterMark and Homart centers. Accordingly, management believes the following schedule of the relative share of Company Portfolio net operating income (funds from operations before interest expense) contributed by the Original Centers and the Homart Centers provides a better indication of the significance of each portfolio to the Company's overall funds from operations. The net operating income from the Company's Portfolio is essentially equivalent to earnings before interest, taxes, depreciation and amortization 12 of 21 13 (EBITDA). EBITDA from the Company's property management affiliate is included below with the Original Centers. THREE MONTHS ENDED % OF TOTAL NET OPERATING INCOME BY PORTFOLIO MARCH 31, 1997 --------------------------------------- -------------- ----------- Original Centers and GGMI $42,701 80.24% 38.2% of GGP/Homart (a) $10,517 19.76% ----------- -------- Company Portfolio Net Operating Income $53,218 100.00% =========== ======== (a) Reflects the Company's share of GGP/Homart's Net Operating Income, including GGP/Homart's share of Net Operating Income from joint ventures. (See Note 3) The Company Portfolio results and funds from operations reflected below for the three months ended March 31, 1997 and 1996 do not purport to project results for any future period. For 1996, the Company Portfolio results include the Company's share of the CenterMark Centers results. 13 of 21 14 COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) (In thousands, except for per share amounts)
Three Months Ended March 31, 1997 1996 Revenues Minimum rents (a) $ 50,951 $ 50,344 Tenant recoveries 27,616 25,171 Percentage rents 2,417 2,135 Other 1,918 1,581 Fees 14,967 5,210 ----------- ----------- Total revenues $ 97,869 $ 84,441 Operating expenses (b) (43,811) (34,780) General and administrative (840) (735) ----------- ----------- Net operating income 53,218 48,926 Interest expense, net (22,099) (25,191) ----------- ----------- Operating Partnership Funds From Operations $ 31,119 $ 23,735 Less: FFO allocable to Operating Partnership unitholders $ 11,410 $ 8,810 ----------- ----------- Company Funds From Operations $ 19,709 $ 14,925 =========== =========== FFO per share $ .64 $ .55 =========== ===========
Company Portfolio Reconciliation of Funds From Operations to Net Income (Dollars in thousands - Unaudited)
Three Months Ended March 31, 1997 1996 ------------ ----------- Operating Partnership Funds From Operations (from above) $ 31,119 $ 23,735 Depreciation and amortization of real estate costs (15,605) (15,405) Straight-line rent (not included in FFO, so it must be added in order to reconcile to GAAP net income) 1,355 1,458 Net gain on sales 58,626 - Allocations to Operating Partnership unitholders (27,542) (2,792) Extraordinary item (c) (377) (2,291) ------------ ----------- Net income $ 47,576 $ 4,705 ============ ===========
(a) Excluding straight-line rents for the three months ended March 31, 1997 and 1996 of $1,355 and $1,458, respectively. (b) Excluding depreciation and amortization of capitalized real estate costs other than financing fees/costs. (c) Charges related to early retirement of debt. 14 of 21 15 BREAKDOWN OF COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) (In thousands, except for per share amounts)
Original GGP/ Centers Homart GGMI Total Revenues Minimum rents (a) $38,775 $12,176 $50,951 Tenant recoveries 21,964 5,652 27,616 Percentage rents 2,111 306 2,417 Other 1,615 303 1,918 Fees 866 14,101 14,967 ---------- --------- --------- --------- Total revenues 65,331 18,437 14,101 97,869 Operating expenses (b) (23,469) (7,920) (12,422) (43,811) General and administrative (840) (840) ---------- --------- --------- --------- Net operating income 41,022 10,517 1,679 53,218 Interest expense, net (15,623) (5,246) (1,230) (22,099) ---------- --------- --------- --------- Operating Partnership Funds From Operations $25,399 $5,271 $449 $31,119 ========== ========= ========= ========= Funds From Operations per share/unit $0.64 =========
BREAKDOWN OF COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED) (In thousands, except for per share amounts)
Original GGP/ Centers Homart CenterMark GGMI Total Revenues Minimum rents (a) $31,410 $11,062 $7,872 $50,344 Tenant recoveries 16,138 5,420 3,613 25,171 Percentage rents 1,380 207 548 2,135 Other 1,064 245 272 1,581 Fees 815 4,395 5,210 ---------- -------- -------- --------- --------- Total revenues 50,807 16,934 12,305 4,395 84,441 Operating expenses (b) (18,974) (7,709) (4,131) (3,966) (34,780) General and administrative (735) (735) ---------- -------- -------- --------- --------- Net operating income 31,098 9,225 8,174 429 48,926 Interest expense, net (17,540) (4,736) (2,915) (25,191) ---------- -------- -------- --------- --------- Operating Partnership Funds From Operation $13,558 $4,489 $5,259 $429 $23,735 ========== ======== ======== ========= ========= Funds From Operations per share/unit $0.55 =========
(a) Excluding straight-line rent for the three months ended March 31, 1997 and 1996 of $1,355 and $1,458, respectively. (b) Excluding depreciation and amortization of capitalized real estate costs other than financing fees/costs. 15 of 21 16 OTHER COMPANY PORTFOLIO DATA AS OF AND/OR FOR THE THREE MONTHS ENDED MARCH 31, 1997 (In thousands, except for per square foot amounts - unaudited)
Original GGP/ Total or Centers(a) Homart(a) Average ---------- --------- -------- Occupancy of centers not under redevelopment 83.2% 83.8% 83.5% Tenant allowances $ 3,036 $ 2,031 $ 5,067 Annualized sales per sq. ft. $243 $291 $267 Average rent per sq. ft. for new/renewal leases $ 20.02 $ 31.24 $ 26.80 Average rent per sq. ft. for expiring leases $ 16.68 $ 24.94 $ 19.46 % change in total sales 1.3% 9.5% 5.0%
(a) Data is for 100% of the non-anchor GLA in each portfolio, including those centers that are owned in part by unaffiliated joint venture partners. COMPANY PORTFOLIO DEBT MATURITY AND CURRENT AVERAGE INTEREST RATE SUMMARY AS OF MARCH 31, 1997 (Dollars in Thousands - unaudited)
Company Original Centers GGP/Homart(a) Portfolio Debt ------------------------- -------------------------- ------------------------- Current Current Current Maturing Average Maturing Average Maturing Average Year Amount Rate Amount Rate Amount Rate - ------------------------ ----------- --------- ---------- ---------- ----------- --------- 1997 $276,441 6.82% - - $276,441 6.82% 1998 111,739 7.25% 34,380 6.93% 146,119 7.17% 1999 112,678 8.79% 123,736 7.48% 236,414 8.10% 2000 - - 24,250 7.33% 24,250 7.33% Subsequent 637,806 7.01% 153,624 7.46% 791,430 7.09% ---------- ---- -------- ---- ---------- ---- Totals $1,138,664 7.16% $335,990 7.40% $1,474,654 7.22% ========== ==== ======== ==== ========== ==== Floating Rate $376,739 6.90% $121,631 7.46% $498,370 7.04% Fixed Rate 761,925 7.29% 214,359 (b) 7.37% 976,284 7.31% ---------- ---- -------- ---- ---------- ---- Totals $1,138,664 7.16% $335,990 7.40% $1,474,654 7.22% ========== ==== ======== ==== ========== ====
(a) GGP/Homart debt reflects the Operating Partnership's share of its total portfolio debt. (b) Includes $34,381 of floating rate debt with a 9% cap on the all-in rate through maturity in December 1998. 16 of 21 17 HOMART PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS GGP/Homart owns 100% of 15 retail properties and has various percentage interests in 11 other retail properties. As required by generally accepted accounting principles, GGP/Homart uses the equity method to account for its investments in joint venture properties that are not eligible for consolidation. The Company Portfolio results and Funds From Operations reflected above include the Company's share of GGP/Homart's Funds From Operations. In order to portray the sources of GGP/Homart's Funds From Operations in a more meaningful and useful manner, the "Homart Portfolio" results presented below comprise 100% of the revenues and expenses of the wholly owned Homart Centers and GGP/Homart's various percentage interests of the revenues and expenses of Homart Centers that are owned in part by unaffiliated joint venture partners. The Company's share of GGP/Homart's Funds From Operations does not take into account interest expense paid on debt incurred to fund a majority of the $179 million initial cash purchase price and $23 million of subsequent investments, for 38.2% of GGP/Homart's stock. Also not charged against GGP/Homart's funds from operations are certain general and administrative costs incurred by the Company that are attributable to the management and oversight of its investment in GGP/Homart. Accordingly, the net effective incremental contribution to the Company's funds from operations generated by the Homart Centers is substantially less than the amounts reflected below. See the discussion above regarding the relative contributions to net operating income (similar to EBITDA) made by the Original Centers and the Homart Centers. Management believes that contributions to Company Portfolio net operating income is the best indication of the relative significance to the Company of the Original Centers and the Homart Centers. MANAGEMENT'S DISCUSSION AND ANAYLSIS OF THE HOMART PORTFOLIO'S FUNDS FROM OPERATIONS (Dollars in thousands) THREE MONTHS ENDED MARCH 31, 1997 AND 1996 Total revenue for the first quarter of 1997 increased $4.0 million or 8.9% to $48.3 million from $44.3 in 1996. Minimum rents accounted for $2.9 million of the $4.0 million increase in total revenues. Minimum rent increased 10.1% or $2.9 million to $48.2 million for the quarter ended March 31, 1997. The development of West Oaks and increased ownership in Vista Ridge accounted for approximately $2.1 million of the $2.9 million increase in minimum rents. The improved performance of comparable properties accounted for the remaining increase in minimum rent of $.8 million. Tenant recoveries increased 4.2% from $14.2 million in 1996 to $14.8 million in 1997. The $.6 million increase consists of a $1.0 million increase generated from the development and increased ownership of properties offset by a $.4 million decrease due to lower recoverable expenses. During the first quarter of 1997, percentage rents increased $.3 million to $.8 million. Other revenues increased $.2 million or 33.3% from $.6 million in 1996. Operating expenses were $20.7 million for the first quarter of 1997, up from $20.2 million in 1996, an increase of 2.5% or $.5 million. The development and acquisition of properties accounted for an increase of $1.7 million that was offset by $1.2 million of reduced operating costs at the comparable properties. 17 of 21 18 Net interest expense increased $1.3 million or 10.5% from $12.4 million in the first three months of 1996 to $13.7 million. Approximately $1.1 million of the increase is attributable to a new development. The remaining $.2 million was caused by the refinancing of floating rate loans to fixed rate loans at several properties. The aforementioned changes generated a $2.1 million or 18.0% increase in Funds From Operations from $11.7 million to $13.8 million. 18 of 21 19 HOMART PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) (In thousands, except for per share amounts)
Three Months Ended March 31, 1997 1996 Revenues Minimum rents (a) $ 31,867 $ 28,951 Tenant recoveries 14,792 14,185 Percentage rents 801 540 Other 793 641 -------------- ------------- Total revenues 48,253 44,317 Operating expenses (b) (20,727) (20,175) -------------- ------------- Net operating income 27,526 24,142 Interest expense, net (13,730) (12,393) -------------- ------------- GGP/Homart Funds From Operations $ 13,796 11,749 ============== ============= Operating Partnership's share (38.2%) of GGP/Homart FFO $ 5,271 $ 4,489 ============== =============
Homart Portfolio Reconciliation of Funds From Operations to Net Income (Dollars in thousands - Unaudited)
Three Months Ended March 31, 1997 1996 --------------- -------------- GGP/Homart Funds From Operations (from above) $ 13,796 $ 11,749 Less:Depreciation and amortization - real estate (9,561) (8,313) Add: Straight-line rent not included in FFO 594 990 Less:Loss on land sale (54) - -------------- -------------- GGP/Homart net income $ 4,775 $ 4,426 ============== ============== Operating Partnership's share of GGP/Homart net income (c) $ 1,824 $ 1,691 ============== ==============
(a) Excluding straight-line rents for the three months ended March 31, 1997 and 1996 of $595 and $990, respectively. (b) Excluding depreciation and amortization of capitalized real estate costs other than financing fees/costs. (c) GGP/Homart's net income is reflected as equity in net income of unconsolidated real estate affiliates on the Company's Consolidated Statements of Operations (see Page 4 above). 19 of 21 20 GENERAL GROWTH MANAGEMENT, INC. In December 1995, the Company formed GGP Management, Inc. to manage, lease, develop and operate enclosed regional malls. In August 1996 the Company acquired General Growth Mangement, Inc. ("GGMI") for approximately $51.5 million in common stock and operating partnership units. GGP Management was merged into GGMI as a result of the acquisition. As required by generally accepted accounting principles, the Company accounts for its ownership interest in GGMI using the equity method. The Company owns 95% of GGMI through non-voting preferred stock. The 5% minority interest is owned by five key employees who hold common stock with voting rights. Due to the currently unpaid and accrued preferences on the preferred stock, the Company effectively earned 100% of the income generated by GGMI. The operating results of GGMI are included in the Company Portfolio Results. GGMI manages, leases, and performs various other services for the Original Centers, the Homart Centers and other properties owned by unaffiliated parties. The following schedule reflects the revenues and expenses related to the operations of GGMI for the three months ended March 31, 1997 and 1996. GENERAL GROWTH MANAGEMENT, INC. STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED, IN THOUSANDS)
Three Months Ended March 31, 1997(a) 1996(b) ------------ ------------- Revenues Management, leasing and development services $ 14,101 $ 4,626 Expenses Operating expense (12,422) (4,175) ------------ ----------- Net operating income 1,679 451 Interest expense, net (on loan from the Company) (1,230) ------------ ----------- GGMI Funds From Operations $ 449 $ 451 ============ ===========
(a) For three months ended March 31, 1997, the combined revenues and expenses of GGMI and the former GGP Management, Inc. are reflected. (b) For the three months ended March 31, 1996, only GGP Management, Inc. revenues and expenses are included. 20 of 21 21 LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY The Company uses undistributed Funds From Operations as the principal source of funding for recurring capital expenditures such as tenant construction allowances and minor improvements made to individual properties that are not recoverable through common area maintenance charges to tenants. Funding alternatives for acquisitions, new development, expansions and major renovation programs at individual centers include construction loans, mini-permanent loans, long-term project financing, additional property level or Company level equity investments, unsecured Company level debt or secured loans collateralized by individual shopping centers. The following factors, among others, will affect funds from operations and, accordingly, influence the decisions of the Board of Directors regarding distributions: (i) scheduled increases in base rents of existing leases; (ii) changes in minimum base rents and/or percentage rents attributable to replacement of existing leases with new or renewal leases; (iii) changes in occupancy rates at existing centers and procurement of leases for newly developed centers; and (iv) the Company's share of Funds From Operations generated by GGMI, GGP/Homart and distributions therefrom, less oversight costs and debt service on additional loans that were incurred to finance a portion of the cash purchase price for GGP/Homart's stock. The Company anticipates that its Funds From Operations, and potential new debt or equity from future new financings or refinancings will provide adequate liquidity to conduct its operations, fund general and administrative expenses, fund operating costs and interest payments and allow distributions to the Company's stockholders in accordance with the requirements of the Internal Revenue Code of 1986, as amended, for continued qualification as a real estate investment trust and to avoid any Company level federal income or excise tax. PART II OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES (c) On February 27, 1997, 1,000 shares of the Corporation's common stock were issued to each of Beth Stewart and A. Lorne Weil, directors of the Company in a private placement under Section 4(2) of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. Ms. Stewart and Mr. Weil served on the Evaluation Committee of the Board of Directors in connection with the Company's acquisition of General Growth Management, Inc. during 1996 and received the shares of Common Stock as compensation for their service on the Committee. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - Not applicable (b) Reports on Form 8-K - Not applicable SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GENERAL GROWTH PROPERTIES, INC. Date: May 13, 1997 /s/: Bernard Freibaum ---------------------------------- Bernard Freibaum Executive Vice President and Chief Financial Officer 21 of 21 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 JAN-01-1997 MAR-31-1997 13,645 0 66,702 0 0 86,012 1,864,464 (198,943) 1,782,374 75,365 1,131,128 0 0 3,079 572,802 1,782,374 0 65,328 0 (34,287) 0 (632) (15,439) 16,848 0 16,848 58,647 (377) 0 47,576 1.54 1.54
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