10-K 1 d10k.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 OR [ ] 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 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) 110 N. Wacker Dr., Chicago, IL 60606 ------------------------------ ----- (Address of principal executive offices) (Zip Code) (312) 960-5000 -------------- (Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- Common Stock, $.10 par value New York Stock Exchange Depositary Shares, each representing New York Stock Exchange 1/40 of a share of 7.25% Preferred Income Equity Redeemable Stock, Series A Preferred Stock Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None 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 [ ] Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. As of March 14, 2001, the aggregate market value of the 50,134,462 shares of Common Stock held by non-affiliates of the registrant was $1,724,628,493, based upon the closing price on the New York Stock Exchange composite tape on such date. (For this computation, the registrant has excluded the market value of all shares of its Common Stock reported as beneficially owned by executive officers and directors of the registrant; such exclusion shall not be deemed to constitute an admission that any such person is an "affiliate" of the registrant). As of March 14, 2001, there were 52,374,034 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for the annual stockholders meeting to be held on May 8, 2001 are incorporated by reference into Part III. PART I All references to numbered Notes are to specific footnotes ITEM 1. to the Consolidated Financial Statements of the Company (as BUSINESS defined below) included in this Annual Report on Form 10-K and the descriptions included in such Notes are incorporated into the applicable Item response by reference. The following discussion should be read in conjunction with such Consolidated Financial Statements and related Notes. General General Growth Properties Inc. ("General Growth") was formed in 1986 by Martin Bucksbaum and Matthew Bucksbaum (the "Original Stockholders"). On April 15, 1993, an initial public offering of the common stock (the "Common Stock") of General Growth and certain related transactions were completed. Concurrently, General Growth (as general partner) and the Original Stockholders (as limited partners) formed GGP Limited Partnership (the "Operating Partnership"). General Growth has elected to be taxed as a real estate investment trust (a "REIT") for federal income tax purposes. As of December 31, 2000, General Growth either directly or through the Operating Partnership and subsidiaries (collectively, the "Company") owned 100% of fifty-three regional mall shopping centers (the "Wholly-Owned Centers"); 50% of the stock of GGP/Homart, Inc. ("GGP/Homart"), 50% of the membership interest of GGP/Homart II, L.L.C. ("GGP/Homart II"), 51% of the stock of GGP Ivanhoe, Inc. ("GGP Ivanhoe"), and 51% of the stock of GGP Ivanhoe III, Inc. ("GGP Ivanhoe III"), and 50% of each of two regional mall shopping centers, Quail Springs Mall and Town East Mall (collectively, the "Unconsolidated Real Estate Affiliates"). In addition, as of December 31, 2001 the Company owned a non-voting preferred stock interest in General Growth Management, Inc. ("GGMI"). The Unconsolidated Real Estate Affiliates and GGMI comprise the "Unconsolidated Affiliates". The 50% interest in the twenty-three centers owned by GGP/Homart, the 50% interest in the seven centers owned by GGP/Homart II, the 51% ownership interest in the two centers owned by GGP Ivanhoe, the 51% ownership interest in the eight centers owned by GGP Ivanhoe III, and the 50% ownership interest in both Quail Springs Mall and Town East Mall comprise the "Unconsolidated Centers". Together, the Wholly-Owned Centers and the Unconsolidated Centers comprise the "Company Portfolio" or the "Portfolio Centers". On December 31, 2000, General Growth owned an approximate 73% general partnership interest in the Operating Partnership, and various minority holders, including the Original Stockholders and subsequent contributors of properties to the Operating Partnership, owned the remaining 27% limited partnership interest. See Item 7 and the Consolidated Financial Statements and Notes included in Item 8 of this Annual Report on Form 10-K for certain financial and other information required by this Item 1. On December 22, 1995 the Company, jointly with four other investors, acquired 100% of the stock of GGP/Homart which owned substantially all of the regional mall assets and liabilities of Homart Development Co., an indirect wholly- owned subsidiary of Sears, Roebuck & Co. The Company acquired approximately 38.2% of GGP/Homart for approximately $178 million including certain transaction costs. All of the stockholders of GGP/Homart committed to contribute up to $80.0 million of additional capital and, as of December 31, 1997 this commitment had been fulfilled. During 1999, three of the original four other investors, in independent transactions and pursuant to their respective exchange rights, exchanged their interests in GGP/Homart for Common Stock of General Growth. As a result of these transactions, the Company currently owns a 50% interest in GGP/Homart, which has elected to be taxed as a REIT. 2 On December 22, 1995, GGP Management, Inc. ("GGP Management") was formed to manage, lease, develop and operate enclosed malls. The Operating Partnership owned 100% of the non-voting preferred stock ownership interest in GGP Management representing 95% of the equity interest. Key employees of the Company held the remaining 5% equity interest in the form of common stock entitled to all of the voting rights in GGP Management. In August of 1996, GGP Management acquired GGMI through arm's length negotiations for approximately $51.5 million (including borrowings from the Operating Partnership of approximately $39.9 million) which was accounted for as a purchase. GGP Management was then merged into GGMI with GGMI as the surviving entity. At December 31, 2000, the Operating Partnership owned all of the non-voting preferred stock ownership interest in GGMI representing 95% of the equity interest. Certain key current or former employees of the Company held the remaining 5% equity interest through ownership of 100% of the common stock, which was entitled to all voting rights in GGMI. The interest only loans from the Operating Partnership to GGMI bore interest at rates ranging from 8% to 14% per annum and were scheduled to mature in 2016. On January 1, 2001 the REIT provisions of the Tax Relief Extension Act of 1999 became effective. Among other things, the law permits a REIT to own up to 100% of the stock of a taxable REIT subsidiary (a "TRS"). A TRS, which must pay corporate income tax, can provide services to REIT tenants and others without disqualifying the rents that a REIT receives from its tenants. Accordingly, on January 1, 2001 the Company acquired for nominal consideration 100% of the common stock of GGMI and will elect to have GGMI treated as a TRS. In connection with the acquisition, the GGMI preferred stock owned by the Company was cancelled and approximately $40 million of the outstanding loans owed by GGMI to the Company were contributed to the capital of GGMI. The Company and GGMI concurrently terminated the management contracts for the Wholly-Owned Centers as the management activities will be performed directly by the Company. GGMI will continue to manage, lease, and perform various other services for the Unconsolidated Centers and other properties owned by unaffiliated third parties. On September 17, 1997, GGP Ivanhoe indirectly acquired The Oaks Mall in Gainesville, Florida and Westroads Mall in Omaha, Nebraska. The purchase price for the two properties was approximately $206 million of which $125 million was financed through property level indebtedness. The Company contributed approximately $43 million for its 51% ownership interest in GGP Ivanhoe. Ivanhoe, Inc. of Montreal, Canada ("Ivanhoe") owns the remaining 49% ownership interest in GGP Ivanhoe. GGP Ivanhoe has elected to be taxed as a REIT. Effective as of June 30, 1998, GGP Ivanhoe III acquired the U.S. Prime Property, Inc. ("USPPI") real estate portfolio through a merger of a wholly-owned subsidiary of GGP Ivanhoe III into USPPI. The common stock of GGP Ivanhoe III, which has elected to be taxed as a REIT, is owned 51% by the Company and 49% by Ivanhoe. The aggregate consideration paid pursuant to the merger agreement was approximately $625 million. The acquisition was financed with a $392 million interim loan, which was replaced in 1999, and capital contributions from the Company and the joint venture partner in proportion to their respective stock ownership. The properties acquired include Landmark Mall in Alexandria, Virginia; the Mayfair Mall and adjacent office buildings in Wauwatosa (Milwaukee), Wisconsin; the Meadows Mall in Las Vegas, Nevada; the Northgate Mall in Chattanooga, Tennessee; Oglethorpe Mall in Savannah, Georgia; and the Park City Center in Lancaster, 3 Pennsylvania. During 1999, GGP Ivanhoe III acquired Oak View Mall in Omaha, Nebraska and Eastridge Mall in San Jose, California. The aggregate purchase price for the two properties was approximately $160 million, financed by capital contributions of the partners, a new $83 million long-term mortgage loan and certain short-term financing. In November 1999, the Company formed GGP/Homart II, a new joint venture with the New York State Common Retirement Fund, the Company's venture partner in GGP/Homart. GGP/Homart II owns three regional malls contributed by the New York State Common Retirement Fund (Alderwood Mall in Lynnwood (Seattle), Washington; Carolina Place in Charlotte, North Carolina; and Montclair Plaza in Montclair (Los Angeles), California), and four regional malls (Altamonte Mall in Orlando, Florida; Natick Mall in Natick, Massachusetts; Northbrook Court in Northbrook, Illinois; Stonebriar Centre in Frisco (Dallas), Texas) contributed by the Company as more fully described in Note 3. During May 2000, the Operating Partnership formed GGPLP L.L.C., a Delaware limited liability company (the "LLC") by contributing its interest in a portfolio of 44 Wholly-Owned Centers to the LLC in exchange for all of the common units of membership interest in the LLC. On May 25, 2000, a total of 700,000 redeemable preferred units of membership interest in the LLC (the "RPUs") were issued to an institutional investor by the LLC, which yielded approximately $170.6 million in net proceeds to the Company. The net proceeds of the sale of the RPUs were used to repay a portion of the Company's unsecured debt. Business of the The Company is primarily engaged in the ownership, Company operation, management, leasing, acquisition, development, expansion and financing of regional mall shopping centers in the United States. Most of the shopping centers in the Company Portfolio are strategically located in major and middle markets where they have strong competitive positions. A detailed listing starting on page 14 of this report contains information on each regional mall shopping center in the Company Portfolio including location, year opened, square footage, anchors, and anchor vacancies. The Company Portfolio's geographic diversification should mitigate the effects of regional economic conditions and local factors. The Company makes all key strategic decisions for the Portfolio Centers. However, in connection with the Unconsolidated Centers, such strategic decisions are made jointly with the respective stockholders or joint venture partners. The Company is also the asset manager of the Portfolio Centers, executing the strategic decisions and overseeing the day-to-day activities performed directly by the Operating Partnership or, with respect to the Unconsolidated Centers, by GGMI. GGMI performs day-to-day property management functions including leasing, construction management, data processing, maintenance, accounting, marketing, promotion and security pursuant to the management agreements with the Unconsolidated Centers. As of December 31, 2000 GGMI was the property manager for forty of the Unconsolidated Centers. The remaining two centers, owned by GGP/Homart through joint ventures, are managed by certain joint venture partners of GGP/Homart. The majority of the income from the Portfolio Centers is derived from rents received through long term leases with retail tenants. The long-term leases require the tenants to pay base rent which is a fixed amount specified in the lease. The base rent is often subject to scheduled increases defined in the lease. Another component of income is overage rent. Overage rent is paid by a tenant generally if their sales exceed an agreed 4 upon minimum annual amount. Overage rent is calculated by multiplying the sales in excess of the minimum annual amount by a percentage defined in the lease. Long-term leases generally contain a provision for the lessor to recover certain expenses incurred in the day-to-day operations including common area maintenance and real estate taxes. The recovery is generally related to the tenant's pro-rata share of space in the property. The evolution of the shopping center business necessitates the implementation of new approaches to shopping center management and leasing. Management's strategies to increase shareholder value and cash flow include the integration of mass merchandise retailers with traditional department stores, specialty leasing, entertainment-oriented tenants, proactive property management and leasing, operating cost reductions including those resulting from economies of scale, strategic expansions and acquisitions, e-business initiatives and selective new shopping center developments. Management believes that these approaches should enable the Company to operate and grow successfully in today's value- oriented and technological environment. Following is a summary of recent acquisition, development and expansion and redevelopment activity. As used in this Annual Report on Form 10-K, the term "GLA" refers to gross leaseable retail space, including Anchors and mall tenant areas; the term "Mall GLA" refers to gross leaseable retail space, excluding Anchors; the term "Anchor" refers to a department store or other large retail store; the term "Mall Stores" refers to stores (other than Anchors) that are typically specialty retailers who lease space in shopping centers; and the term "Freestanding GLA" means gross leaseable area of freestanding retail stores in locations that are not attached to the primary complex of buildings that comprise a regional mall shopping center. Acquisitions The Company continues to seek to acquire properties that provide opportunities for enhanced profitability and appreciation in value and corresponding increases in shareholder value. In 2000, the Company acquired an 100% ownership interest in Crossroads Center, a regional mall in St. Cloud (Minneapolis), Minnesota for an aggregate investment by the Company of approximately $80 million. The Company's management feels that it has a competitive advantage with respect to the acquisition of regional mall shopping centers for the following reasons: . The funds necessary for a cash acquisition of a shopping center may be available to the Company from a combination of sources, including mortgage or unsecured financing or the issuance of public or private debt or equity. . The Company has the flexibility to pay for an acquisition with a combination of cash, Preferred or Common Stock or common units of limited partnership interest in the Operating Partnership (the "Units"). This creates the opportunity for a tax-advantaged transaction for the seller. . Management's expertise allows it to evaluate proposed acquisitions for their increased profit potential. Additional profit can originate from many sources including expansions, remodeling, re-merchandising, and more efficient management of the property. Development The Company intends to pursue development when warranted by the potential financial returns. GGP/Homart II completed and opened on schedule in August 2000 the Stonebriar Centre (described below), an enclosed shopping center in Frisco (Dallas), Texas. In addition, the Company is preparing to develop (with a joint venture 5 partner) an enclosed regional mall in Westlake (Dallas), Texas (described below) and is investigating certain other development sites, including Toledo, Ohio and West Des Moines, Iowa. However, there can be no assurance that development of these sites will proceed. Construction commenced on the Stonebriar Centre in Frisco, Texas in October 1998. Upon its completion in August 2000, this 1,600,000 square foot regional mall shopping center featured five department store anchors, a 24 screen AMC theater, approximately 350,000 square feet of Mall Stores and 150,000 square feet of big box and large format retailers. Plans still include a possible second phase expansion to include two additional department stores. During 1999, the Company formed a joint venture to develop an enclosed mall in Westlake (Dallas), Texas. As of December 31, 2000, the Company had invested approximately $14.5 million in the joint venture. The Company is currently obligated to fund pre-development costs (estimated to be approximately $1.5 million, most of which has been incurred) and actual development costs have not yet been finalized. The retail site, part of a planned community which is expected to contain a resort hotel, a golf course, luxury homes and corporate offices, is currently planned to contain up to 1.5 million square feet of tenant space including up to six anchor stores and a multi-screen theater. There can be no assurance that development of this site will proceed beyond the pre-development phase. Expansions and Renovations During 2000, 16 major projects were underway or completed. The expansion and renovation of a Portfolio Center often increases customer traffic, trade area penetration and typically improves the competitive position of the property. Four of the larger renovation and expansion projects under construction in 2000 are described below. The redevelopment of the Knollwood Mall, a 402,182 square foot center located in St. Louis Park (Minneapolis), Minnesota began in 1999. The project includes adding a 16- screen theater complex and completely remerchandising the center, which is expected to be completed in early 2001. Eden Prairie Mall, located in Eden Prairie, Minnesota, a suburb of Minneapolis, was previously a four-anchor center with approximately 325,000 square feet of Mall Stores. Phase I of the renovation commenced in early 1999 consisting of a new Von Maur anchor store and a new 500 car parking structure. Construction of Phase II of the project commenced in late 1999 and will consist of a mall renovation, a food court renovation, and the construction of a multi-screen theatre. Both phases are scheduled to be completed in 2001. Fallbrook Mall is a 1,024,737 square foot enclosed mall located in West Hills, (Los Angeles) California. The renovation of the mall commenced in 2000 and will consist of converting the mall to an outdoor, 1,100,000 square foot power center with an additional anchor store and additional big box retailers. Completion of the project is anticipated for fall 2002. Valley Hills Mall, a 619,921 square foot center located in Hickory, North Carolina is undergoing an extensive renovation which commenced in 2000. The mall will add a new Dillards store to the existing anchors, Belk, JC Penney and Sears. The project also includes a food court, approximately 30,000 square feet of new mall shop space and two new parking decks. Completion is planned for late 2001. 6 The Portfolio Centers All of the 95 Portfolio Centers are shopping centers with at least one major department store as an Anchor and a wide variety of smaller Mall Stores. Most of the Portfolio Centers have three or four Anchors and additional Freestanding Stores. Each Portfolio Center provides ample parking for shoppers. The Portfolio Centers: . Range in size between approximately 184,000 and 1,810,000 square feet of total GLA and between approximately 125,000 and 800,000 square feet of Mall and Freestanding GLA. The smallest Portfolio Center has approximately 20 stores, and the largest has over 265 stores; . Have approximately 396 Anchors, operating under approximately 68 trade names; and . Have approximately 9,500 Mall and Freestanding Stores. The average size of the 95 Portfolio Centers is approximately 910,000 square feet of GLA, including all Anchors, Mall Stores and Freestanding Stores. The average Mall and Freestanding GLA per Portfolio Center is approximately 360,000 square feet. As of December 31, 2000, the Wholly-Owned Centers contained approximately 43.2 million square feet of GLA consisting of Anchors (whether owned or leased), Mall Stores and Freestanding Stores. The Unconsolidated Centers contained approximately 43.0 million square feet of GLA. The Company's share of total revenues from the Portfolio Centers and GGMI increased to $1,112 million in 2000 from $907 million in 1999. No single Portfolio Center generated more than 9.6% of the Company's total 2000 pro rata revenues. In 2000, total Mall Store sales from the Portfolio Centers increased by approximately 7.4% in comparison to the total Mall Store sales in 1999. 7 The table below shows tenants, by trade name, with more than .75% of aggregate annualized effective rents as compared to consolidated effective rents on an annualized basis in the Wholly-Owned Centers at December 31, 2000. In addition, similar percentages existed in the Portfolio Centers as of December 31, 2000.
% of Total Tenant Name Annualized Rents ----------- ---------------- JCPenney 1.52% Sears 1.34% Express (/1/) 1.31% Victoria's Secret (/1/) 1.12% Gap 1.10% Lerner N.Y. 0.94% Footlocker 0.91% The Limited 0.89% Zales Jewelers 0.88% Old Navy 0.85% American Eagle Outfitters 0.83% Eddie Bauer 0.82% Payless 0.81% Kay Bee Toys 0.81% Champs Sports 0.78%
-------- (1) Under common ownership by The Limited, Inc. Mall and The Portfolio Centers have a total of approximately 9,500 Freestanding Mall and Freestanding Stores. The following table reflects Stores the tenant representation by category in the Portfolio Centers as of December 31, 2000.
% of Sq. Ft. in Portfolio Tenant Categories Centers (*) Types of Tenants/Products Sold ----------------- --------------- -------------------------------- Specialty 22% Photo studios, beauty and nail salons, pharmacy and sundries, variety stores, pet stores, newsstands, jewelry repair, shoe repair, tailor, video games, shops for home/bath/kitchen, rugs, fabric stores, beds/ waterbeds, luggage, perfume, tobacco, toys, arcades, cameras, sunglasses, books ------------------------------------------------------------- Women's Apparel 19% Women's apparel ------------------------------------------------------------- Apparel 18% Unisex apparel, children's apparel, lingerie, and formalwear ------------------------------------------------------------- Shoes 11% Shoes ------------------------------------------------------------- Food 8% Restaurant, food court ------------------------------------------------------------- Gifts 5% Cards, candles, engraving stores, other gift or novelty ------------------------------------------------------------- Music/Electronics 6% Music, electronics, computer and software, video rental ------------------------------------------------------------- Sporting Goods 3% Sports apparel, sports and exercise equipment ------------------------------------------------------------- Jewelry 4% Fine jewelry and costume jewelry ------------------------------------------------------------- Men's Apparel 2% Men's apparel ------------------------------------------------------------- Specialty Food 2% Candy, coffee, nuts, chocolate, health food/vitamins ------------------------------------------------------------- Total 100% -------------------------------- --
8 -------- (*) Excludes the two malls managed by joint venture partners of GGP/Homart (Arrowhead Towne Center and Superstition Springs). Specialty tenants include Mastercuts, One Hour Photo, California Nails, Kay-Bee Toys, Dollar Tree, Pottery Barn and many others. Typical tenants in the Women's Apparel category include The Limited, Casual Corner, Lane Bryant and Victoria's Secret. The Apparel category typically includes tenants such as The Gap, American Eagle, Old Navy and J.Crew. The Shoes category includes tenants such as Footlocker, Journeys and Payless Shoesource. The Food category includes restaurants such as Ruby Tuesday, Cheesecake Factory and Max and Erma's, fast food restaurants such as Arby's, and food court tenants such as Sbarro. Typical tenants in the Gifts Category include Disney, Things Remembered, Kirlin's Hallmark and Spencer Gifts. The Music/Electronics category includes tenants such as Camelot Music, Radio Shack, and Suncoast Pictures. Sporting Goods include tenants such as Champs, Big 5 Sports and Scheel's Sports. Jewelry tenants typically include Zales, Helzberg Diamonds and Kay Jewelers. The Men's Apparel category includes tenants such as The Men's Warehouse and Nicks for Men. Specialty Food tenants include General Nutrition Center, Mr. Bulky, and Barnie's Coffee and Tea Company. Competition The Portfolio Centers compete with numerous shopping alternatives in seeking to attract retailers to lease space as retailers themselves face increasing competition from discount shopping centers, outlet malls, discount shopping clubs, direct mail, internet sales and telemarketing. The nature and extent of competition varies from property to property within the Company Portfolio. Below is a description of the type of competition that three of the Portfolio Centers face from other retail locations within their trade area. These examples are representative of the competitive environment in which the Company operates. Valley Hills Mall is a 616,000 square foot, enclosed regional shopping center located in Hickory, North Carolina. The mall opened in 1978 and serves a six county trade area which includes over 307,000 people. Major manufacturing industries in the area include furniture, textiles and fiber optics. The mall currently has three Anchor tenants: Belk, JCPenney and Sears. The mall has 78 mall shops with national retailers such as FootAction, American Eagle and Abercrombie & Fitch. Valley Hills' primary regional mall competition is just outside of its trade area and consists of super- regional centers such as Eastridge Mall, Hanes Mall and Carolina Place Mall. The mall also faces competition from neighborhood strip and power shopping centers including Kohl's, Marshalls and Barnes and Noble which have opened within the last year and are located within a one-mile radius of the center. Northbrook Court is a two-story, 978,000 square foot regional mall located in Northbrook (Chicago), Illinois. The mall contains 128 mall shops, and three Anchor department stores. The mall is anchored by Lord & Taylor, Marshall Fields and Neiman-Marcus. The property includes a 14-screen General Cinema Theater and national retailers such as Abercrombie & Fitch, Ann Taylor, The Gap and J.Crew. Northbrook Court faces competition from two regional malls in its primary trade area. Old Orchard Shopping Center is a recently renovated open-air regional shopping mall located eight miles southeast of Northbrook Court. Old Orchard features five Anchor department stores and includes 1.8 million square feet of leaseable area. Hawthorn Center, a 1.06 million square foot regional mall located ten miles northwest of Northbrook Court, includes three Anchor department stores. The secondary competition for Northbrook Court consists of discount retailers, numerous strip 9 shopping centers located within a few miles of the center, and a super regional mall (Woodfield Mall), with 2.1 million square feet located fifteen miles southwest of Northbrook Court. Crossroads Center is a 782,000 million square foot, single- level, regional shopping center located in St. Cloud (Minneapolis), Minnesota, one of Minnesota's fastest growing metropolitan areas. Crossroads Center is anchored by Dayton's, Sears, JCPenney and Target and has 119 specialty mall shops. Crossroads Center opened in 1966 and renovations were made in 1999, including a new food court and carousel. The mall's trade area includes over 415,000 people and major employers include granite, printing and lens manufacturing companies as well as medical, retail and high technology firms. The Center's primary competition is from a free- standing Kohl's department store and a number of "big-box" retailers in the immediate area, including Circuit City, K- Mart, Wal-Mart, Sam's Club and Best Buy. Additional competitors are Kendi Mall and Ridgedale Center, both over 50 miles to the south of Crossroads Center. Environmental Under various federal, state and local laws and regulations, Matters an owner of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on such property. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The costs of remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner's ability to sell such real estate or to borrow using such real estate as collateral. In connection with its ownership and operation of the Portfolio Centers, General Growth, the Operating Partnership or the relevant property venture through which the property is owned, may be potentially liable for such costs. All of the Portfolio Centers have been subject to Phase I environmental assessments, which are intended to discover information regarding, and to evaluate the environmental condition of, the surveyed and surrounding properties. The Phase I assessments included a historical review, a public records review, a preliminary investigation of the site and surrounding properties, screening for the presence of asbestos, polychlorinated biphenyls ("PCBs") and underground storage tanks and the preparation and issuance of a written report, but do not include soil sampling or subsurface investigations. Where the Phase I assessment so recommended, a Phase II assessment was conducted to further investigate any issues raised by the Phase I assessment. In each case where Phase I and/or Phase II assessments resulted in specific recommendations for remedial actions, management has either taken or scheduled the recommended action. Neither the Phase I nor the Phase II assessments have revealed any environmental liability that the Company believes would have a material effect on the Company's business, assets or results of operations, nor is the Company aware of any such liability. Nevertheless, it is possible that these assessments do not reveal all environmental liabilities or that there are material environmental liabilities of which the Company is unaware. Moreover, no assurances can be given that (i) future laws, ordinances or regulations will not impose any material environmental liability or (ii) the current environmental condition of the Portfolio Centers will not be adversely affected by tenants and occupants of the Portfolio Centers, by the condition of properties in the vicinity of the Portfolio Centers (such as the presence of underground storage tanks) or by third parties unrelated to the Company. 10 Employees As of March 14, 2001, the Company and GGMI had 3,506 full- time employees. Certain employees at three of the Portfolio Centers are subject to collective bargaining agreements. The Company's management believes that their employee relations are satisfactory and there has not been a labor-related work stoppage at any of its Centers. Insurance The Company has comprehensive liability, fire, flood, earthquake, extended coverage and rental loss insurance with respect to the Portfolio Centers. The Company's management believes that all of the Portfolio Centers are adequately covered by insurance. Qualification General Growth currently qualifies as a real estate as a Real investment trust pursuant to the requirements contained in Estate Sections 856-858 of the Internal Revenue Code of 1986, as Investment amended (the "Code"). If, as General Growth contemplates, Trust and such qualification continues, General Growth will not be Taxability of taxed on its real estate investment trust taxable income. Distributions During 2000, General Growth distributed (or was deemed to have distributed) 100% of its taxable income to its preferred and common stockholders. Cash distributions in the amount of $2.06 per share of Common Stock were paid for 2000, of which $1.90 (92.2%) was ordinary income and $0.16 (7.8%) was a return of capital based on the taxable income of General Growth. ITEM 2. The Company's investment in real estate as of December 31, PROPERTIES 2000 consisted of its interests in the Portfolio Centers, developments in progress and certain other real estate. In most cases, the land underlying the Portfolio Centers is also owned by the Company; however, at a few of the centers, all or part of the underlying land is owned by a third party that leases the land pursuant to a ground lease. Leasing The Portfolio Centers average Mall Store rent per square foot from leases that expired in 2000 was $29.29. As a result of market rents being higher than the rents under many of the expiring leases, the average Mall Store rent per square foot on new and renewal leases during 2000 was $35.24, or $5.95 per square foot more than the average for expiring leases. The following schedule shows scheduled lease expirations over the next five years. 11 PORTFOLIO CENTERS FIVE YEAR LEASE EXPIRATION SCHEDULE
All Expirations Expirations @ Share (/1/) -------------------------------- ------------------------------- Base Rent Footage Rent/PSF Base Rent Footage Rent/PSF ------------ ---------- -------- ------------ --------- -------- Wholly Owned 2001 $ 17,325,771 759,767 $22.80 $ 17,325,771 759,767 $22.80 2002 27,792,429 1,202,392 23.11 27,792,429 1,202,392 23.11 2003 29,945,519 1,386,243 21.60 29,945,519 1,386,243 21.60 2004 24,772,976 1,055,919 23.46 24,772,976 1,055,919 23.46 2005 38,815,920 1,640,130 23.67 38,815,920 1,640,130 23.67 ------------ ---------- ------ ------------ --------- ------ Portfolio Total $138,652,615 6,044,451 $22.94 $138,652,615 6,044,451 $22.94 Unconsolidated (/2/) 2001 $ 19,410,277 929,961 $20.87 $ 10,038,593 476,976 $21.05 2002 28,088,561 964,298 29.13 14,492,194 501,162 28.92 2003 27,369,549 964,575 28.37 14,159,561 500,306 28.30 2004 36,568,270 1,283,863 28.48 18,460,733 653,794 28.24 2005 30,086,497 1,050,881 28.63 15,189,306 534,992 28.39 ------------ ---------- ------ ------------ --------- ------ Portfolio Total $141,523,154 5,193,578 $27.25 $ 72,340,387 2,667,230 $27.12 Grand Total $280,175,769 11,238,029 $24.93 $210,993,002 8,711,681 $24.22 ============ ========== ====== ============ ========= ======
-------- (1) Expirations at share reflect the Company's direct or indirect ownership interest in a joint venture. (2) Excludes the two malls managed by joint venture partners of GGP/Homart (Arrowhead Towne Center and Superstition Springs). 12 Company At December 31, 2000, the Company had direct or indirect Portfolio Debt ("pro rata") mortgage and other debt of approximately $4,540,036. The ratio of pro rata floating rate debt to total pro rata debt and preferred stock and preferred Operating Partnership Units was 40.0% at December 31, 2000. The following table reflects the maturity dates of the Company's pro rata debt and the related interest rates. COMPANY PORTFOLIO DEBT MATURITY AND CURRENT AVERAGE INTEREST RATE SUMMARY(a) AS OF DECEMBER 31, 2000 (Dollars in Thousands)
Unconsolidated Wholly-Owned Joint Venture Company Centers Properties (b) Portfolio Debt ------------------- ------------------- ------------------- Current Current Current Average Average Average Maturing Interest Maturing Interest Maturing Interest Year Amount Rate Amount Rate Amount Rate ---- ---------- -------- ---------- -------- ---------- -------- 2001.................... $ 392,000 7.66% $ 78,300 8.11% $ 470,300 7.74% 2002.................... 96,055 7.93% 178,909 7.12% 274,964 7.41% 2003.................... 265,000 8.20% 474,272 7.43% 739,272 7.71% 2004.................... 1,109,377 7.57% 200,989 7.66% 1,310,366 7.58% 2005.................... 25,614 7.99% 0 0.00% 25,614 7.99% Subsequent.............. $1,356,080 7.08% 363,440 7.38% 1,719,520 7.07% ---------- ----- ---------- ----- ---------- ----- Totals.................. $3,244,126 7.44% $1,295,910 7.45% $4,540,036 7.42% ========== ===== ========== ===== ========== ===== Floating................ $1,411,343 7.97% $ 608,978 7.71% $2,020,321 7.89% Fixed Rate.............. 1,832,783 7.01% 686,932 7.22% 2,519,715 7.07% ---------- ----- ---------- ----- ---------- ----- Totals.................. $3,244,126 7.44% $1,295,910 7.45% $4,540,036 7.42% ========== ===== ========== ===== ========== =====
-------- (a) Excludes principal amortization. (b) Unconsolidated properties debt reflects the Company's share of debt (based on its respective equity ownership interests in the Unconsolidated Joint Ventures) relating to the properties owned by the Unconsolidated Joint Ventures. 13 Property Data The following tables set forth certain information regarding the Wholly-Owned Centers and the Unconsolidated Centers as of December 31, 2000. The first table depicts the Wholly- Owned Centers and the second table depicts the Unconsolidated Centers. Wholly-Owned Centers
Total GLA/Mall and Freestanding Year Opened/ GLA Name of Center/ Remodeled or (Square Feet) Anchor Location (/1/) Expanded (/2/) Anchors Vacancies ------------------------- -------------- ---------------- -------------------------------------- --------- Ala Moana Center 1959/ 1,812,089/ JCPenney, Liberty House, None Honolulu, Hawaii 1966,1987, 800,624 Neiman Marcus, Sears 1989,1999 Apache Mall 1969/ 742,028/ Dayton's, JCPenney, None Rochester, Minnesota 1985,1992 232,762 Sears, Ward Baybrook Mall 1978/ 1,087,088/ Dillards, Mervyn's, Sears, Ward None Houston, Texas 1984,1985 343,565 Bayshore Mall 1987/ 613,464/ Gottschalks, JCPenney, Mervyn's, Sears None Eureka, California 1989 293,304 Bellis Fair Mall 1988/ 762,709/ The Bon Marche, JCPenney, Mervyn's, None Bellingham, Washington N/A 336,150 Sears, Target, Birchwood Mall 1990/ 786,425/ Hudson's, JCPenney, Sears, None Port Huron, Michigan 1991, 1997 287,291 Target, Younkers The Boulevard Mall 1968/ 1,184,772/ Dillard's, JCPenney, Macy's, Sears None Las Vegas, Nevada 1992 327,375 Capital Mall 1978/ 532,749/ Dillard's, JCPenney, Sears None Jefferson City, Missouri 1985,1992 234,294 Century Plaza 1975/ 743,609/ JCPenney, McRae's, Rich's, Sears None Birmingham, Alabama 1990,1994 235,213 Chapel Hills Mall 1982/ 1,172,585/ Dillard's, Foley's, JCPenney, KMart, None Colorado Springs, CO 1986,1997,1998 398,145 Mervyn's, Sears, Coastland Center 1977/ 927,014/ Burdines, Dillard's, JCPenney, Sears None Naples, Florida 1985,1996 336,624 Colony Square Mall 1981/ 546,318/ Elder-Beerman, JCPenney, Lazarus, None Zanesville, Ohio 1987 231,154 Sears Columbia Mall 1985/ 741,213/ Dillard's, JCPenney, Sears, Target None Columbia, Missouri 1987 314,269 Coral Ridge Mall 1998/ 997,363/ Dillard's, JCPenney, Scheel's, None Iowa City, Iowa N/A 291,750 Sears, Target, Younkers Crossroads Center 1966/ 783,934/ Dayton's, JCPenney, None St. Cloud, Minnesota 1995,1999 277,005 Sears, Target The Crossroads 1980/ 755,127/ Hudson's, JCPenney, Mervyn's, None Portage, Michigan 1982,1988,1998 252,167 Sears Cumberland Mall 1973/ 1,159,723/ JCPenney, Macy's, Rich's, Sears None Atlanta, Georgia 1989 325,608
14
Total GLA/Mall Year Opened/ and Freestanding Name of Center/ Remodeled GLA Anchor Location (/1/) or Expanded (Square Feet) (/2/) Anchors Vacancies ------------------------ -------------- ------------------- --------------------------------------------- --------- Eagle Ridge Mall 1996/ 624,073/ Dillard's, JCPenney, Sears None Lake Wales, Florida N/A 279,291 Eden Prairie Mall 1976/ 873,766/ Kohl's, Mervyn's, Sears, Target None Eden Prairie, Minnesota 1989,1994 337,958 Fallbrook Mall 1966/ 1,041,141/ Burlington Coat Factory, JCPenney, Kmart, None West Hills, (Los Angeles), 1985 386,182 Mervyn's, Target California Fox River Mall 1984/ 1,128,712/ Dayton's, JCPenney, Sears, None Appleton, Wisconsin 1991,1998 434,152 Target, Younkers Gateway Mall 1990/ 646,747/ The Emporium, Sears, Target None Springfield/Eugene, 1999 287,796 Oregon Grand Traverse Mall 1992/ 577,399/ Hudson's, JCPenney, Target None Traverse City, Michigan N/A 299,928 Greenwood Mall 1979/ 783,837/ Dillard's, Dillard's Home Store, Famous Barr, None Bowling Green, Kentucky 1987 265,710 JCPenney, Sears Knollwood Mall 1955/ 399,699/ Cub Foods, Kohl's None St. Louis Park, 1981 168,439 (Minneapolis), Minnesota Lakeview Square Mall 1983/ 610,432/ Hudson's, JCPenney, Sears None Battle Creek, Michigan 1998 235,756 Lansing Mall 1969/ 846,524/ Hudson's, JCPenney, Mervyn's, None Lansing, Michigan N/A 319,619 Younkers Lockport Mall 1971/ 345,686/ Ames, The Bon Ton, None Lockport, New York 1984 114,015 Rosa's Homestore Mall of the Bluffs 1986/ 667,106/ Dillard's, JCPenney, Sears, Target None Council Bluffs, Iowa 1988,1998 319,060 (Omaha, Nebraska) Mall St. Vincent 1977/ 548,370/ Dillard's, Sears None Shreveport, Louisiana 1991 200,370 Market Place Shopping Center 1975/ 1,105,076/ Bergner's, Famous Barr, JCPenney, One Champaign, Illinois 1987,1994,1999 276,538 Kohl's, Sears McCreless Mall 1962/ 477,114/ Beall's, Montgomery Ward None San Antonio, Texas 1997 268,231 Northridge Fashion Center 1971/ 1,512,712/ JCPenney, Macy's, Robinson-May, None Northridge, California 1995,1997 625,105 Sears Oakwood Mall 1986/ 790,596/ Dayton's, JCPenney, None Eau Claire, Wisconsin 1991,1997 319,900 Scheel's All Sports, Sears, Target
15
Total GLA/Mall and Freestanding Year Opened/ GLA Name of Center/ Remodeled (Square Anchor Location (/1/) or Expanded Feet) (/2/) Anchors Vacancies ------------------------ -------------- ---------------- ------------------------------------- --------- Park Place 1974/ 981,449/ Dillards, Macy's, Sears None Tucson, Arizona 1998 346,915 Piedmont Mall 1984/ 667,278/ Ames, Belk, Belk Men's, None Danville, Virginia 1995 189,160 JCPenney, Sears, Ames Pierre Bossier Mall 1982/ 610,345/ Dillard's, JCPenney, Sears, None Bossier City, Louisiana 1985,1992 263,453 Service Merchandise, Stage The Pines 1986/ 609,182/ Dillard's, JCPenney, None Pine Bluff, Arkansas 1990 265,396 Sears, Wal-Mart Regency Square Mall 1967/ 1,429,962/ Belk, Dillard's, JCPenney, None Jacksonville, Florida 1992,1998,1999 470,927 Sears, Wards Rio West Mall 1981/ 445,009/ Beall's, JCPenney, KMart None Gallup, New Mexico 1991,1998 170,130 River Falls Mall 1990/ 752,167/ Dillard's, Toys "R" Us, Wal-Mart, None Clarksville, Indiana N/A 277,836 (Louisville, Kentucky) River Hills Mall 1991/ 725,561/ Herberger's, JCPenney, None Mankato, Minnesota 1996 259,643 Sears ,Target Riverlands Shopping Center 1965/ 183,768/ Winn-Dixie None LaPlace, Louisiana 1984 183,768 (/3/) RiverTown Crossings 1999/ 1,248,624/ Galyan's, Hudson's, JCPenney, None Granville (Grand Rapids), N/A 499,999 Kohl's, Sears, Younkers, Michigan Sooner Fashion Square 1976/ 515,266/ Dillard's, JCPenney, None Norman, Oklahoma 1999 175,194 Sears, Stein Mart, Old Navy Clothing Company Southlake Mall 1976/ 1,015,835/ JCPenney, Macy's, Rich's, Sears None Morrow, Georgia 1995,1999 277,335 SouthShore Mall 1981/ 337,828/ JCPenney, KMart, Sears None Aberdeen, Washington N/A 148,501 Southwest Plaza 1983/ 1,236,551/ Dillards, Foley's, JCPenney, None Littleton, Colorado 1994,1995 430,732 Sears, Wards Spring Hill Mall 1980/ 1,100,033/ Carson Pirie Scott, JCPenney, Kohl's, None West Dundee, Illinois 1992,1996 394,129 Marshall Field's, Sears Valley Hills Mall 1978/ 616,427/ Belk, JCPenney, Sears None Hickory, North Carolina 1988,1990,1996 204,131 Valley Plaza Mall 1967/ 1,157,240/ Gottschalks, JCPenney, None Bakersfield, California 1988,1997,1998 338,317 Macy's, Robinson-May, Sears
16
Total GLA/Mall and Freestanding Name of Center/ Year Opened/ GLA Location Remodeled or (Square Feet) Anchor (/1/) Expanded (/2/) Anchors Vacancies ------------------ ------------ ---------------- ------------------------------------------- --------- West Valley Mall 1995/ 742,768/ Gottschalks, JCPenney, Ross Dress for Less, None Tracy, California 1997 273,740 Sears, Target Westwood Mall 1972/ 453,971/ Elder-Beerman, JCPenney, None Jackson, Michigan 1978,1993 131,886 Wards
-------- (1) In certain cases, where a Center's location is part of a larger metropolitan area, the metropolitan area is identified in parentheses. (2) Includes square footage added in redevelopment/expansion projects. (3) Winn-Dixie does not occupy its space but is currently paying rent under a lease which expires in October 2002. 17 UNCONSOLIDATED CENTERS
Ownership Total GLA/Mall Year Opened/ Interest % and Freestanding Name of Center/ Remodeled or of Operating GLA Anchor Location (/1/) Expanded Partnership Square Feet (/2/) Anchors Vacancies ------------------------ ------------ ------------ ----------------- ------------------------------ --------- Alderwood Mall 1979/ 50 1,042,642/ The Bon Marche, JCPenney, One Lynnwood (Seattle), 1995,1996 310,834 Nordstrom, Sears, Washington Altamonte Mall 1974/ 50 1,090,250/ Burdines, Dillard's, None Orlando, Florida 1989,1990 389,202 JCPenney, Sears Arrowhead Towne Center 1993/ 16.7 1,130,901/ Dillard's, JCPenney, Mervyn's, None Glendale, Arizona N/A 392,954 Robinson-May, Wards Bay City Mall 1991/ 50 517,141/ JCPenney, Sears, None Bay City, Michigan 1993 211,290 Target, Younkers Brass Mill Center/Commons 1997/ 50 1,265,877/ Boscov's, Filene's, JCPenney, One Waterbury, Connecticut N/A 326,385 Sears Carolina Place 1991/ 50 1,090,910/ Belk, Dillards, Hecht's, None Charlotte, North Carolina 1994 317,408 JCPenney, Sears Chula Vista Center 1962/ 50 885,616/ JCPenney, Macy's, None Chula Vista, California 1993,1994 302,666 Mervyn's, Sears Columbiana Centre 1990/ 50 871,494/ Belk, Dillards, None Columbia, South Carolina 1992 258,067 Parisian, Sears Deerbrook Mall 1984/ 50 1,202,386/ Dillard's, Foley's, JCPenney, None Humble (Houston), Texas 1996,1997 462,793 Mervyn's, Sears Eastridge Mall 1970/ 51 1,358,684/ JCPenney, Macy's, Sears One San Jose, California 1982,1995 431,142 Lakeland Square 1988/ 50 900,600/ Belk, Burdines, Dillard's, None Lakeland, Florida 1994 290,562 JCPenney, Sears Landmark Mall 1965/ 51 962,931/ Hecht's, Lord & Taylor, Sears One Alexandria, VA 1989,1991 343,455 Mayfair Mall 1958/ 51 1,045,492/ The Boston Store, None Wauwatosa, Wisconsin 1986,1994 546,182 Marshall Fields Meadows Mall 1978/ 51 947,657/ Dillard's, JCPenney, Macy's, None Las Vegas, Nevada 1987,1997 310,804 Sears Montclair Plaza 1968/ 50 1,358,369/ JCPenney, Macy's, None Montclair (Los Angeles) 1985 518,359 Nordstrom, Robinson-May, California Sears, Wards Moreno Valley Mall 1992/ 50 1,035,060/ Harris, JCPenney, None Moreno Valley, California N/A 429,526 Robinson-May, Sears Natick Mall 1966/ 50 1,154,191/ Filene's, Lord & Taylor, None Natick, Massachusetts 1994 427,529 Macy's, Sears
18
Total GLA/Mall Ownership and Freestanding Year Opened/ Interest % GLA Name of Center/ Remodeled of Operating Square Anchor Location (/1/) or Expanded Partnership Feet (/2/) Anchors Vacancies --------------------------- -------------- ------------ ---------------- -------------------------------- --------- Neshaminy Mall 1968/ 25 1,060,529/ Boscov's, Sears, One Bensalem, 1995,1998 423,738 Strawbridge and Clothiers Pennsylvania Newgate Mall 1981/ 50 688,921/ Dillard's, Mervyn's, None Ogden, Utah 1994,1998 275,757 Oshman's, Sears New Park Mall 1980/ 50 1,168,681/ JCPenney, Macy's, Mervyn's, None Newark, California 1993 389,628 Sears, Target Northbrook Court 1976/ 50 982,013/ Lord & Taylor, Marshall Fields, None Northbrook, Illinois 1995,1996 359,094 Neiman Marcus Northgate Mall 1972/ 51 816,894/ JCPenney, Proffitt's, Sears None Chattanooga, 1991 242,730 Tennessee North Point Mall 1993/ 50 1,367,587/ Dillard's, JCPenney, Lord & None Alpharetta (Atlanta), N/A 397,526 Taylor, Parisian, Rich's, Sears Georgia The Oaks Mall(/2/) 1978/ 51 907,647/ Belk, Burdines, Dillard's, None Gainesville, Florida N/A 337,646 JCPenney, Sears Oak View Mall 1991/ 51 867,615/ Dillard's, JCPenney, None Omaha, Nebraska 1995 249,690 Sears, Younkers Oglethorpe Mall 1969/ 51 957,220/ Belk, JCPenney, Rich's, Sears None Savannah, Georgia 1989,1990,1992 409,249 Park City Center 1970/ 51 1,397,459/ The Bon-Ton, Boscov's, JCPenney, None Lancaster, 1988,1997 488,962 Kohl's, Sears Pennsylvania The Parks at Arlington 1988/ 50 1,189,299/ Dillard's, Foley's, JCPenney, None Arlington, Texas N/A 358,354 Mervyn's, Sears Pavilions at Buckland Hills 1990/ 50 1,011,140/ Dick's Sporting Goods, Filene's, None Manchester, 1994 327,618 Filene's Home Store, JCPenney, Connecticut Lord & Taylor, Sears Pembroke Lakes Mall 1992/ 50 1,116,825/ Burdine's, Dillard's, None Pembroke Pines, N/A 335,836 JCPenney, Sears Florida Prince Kuhio Plaza 1985/ 50 504,387/ JCPenney, Liberty House, One Hilo, Hawaii 1994,1999 165,061 Sears Quail Springs 1980/ 50 1,127,030/ Dillard's, Foley's, None Oklahoma City, 1992,1998,1999 333,258 JCPenney, Sears Oklahoma Steeplegate Mall 1990/ 50 483,109/ JCPenney, Sears, None Concord, N/A 185,506 The Bon Ton New Hampshire Stonebriar Centre 2000/ 50 1,648,094/ Foley's, JCPenney, One Frisco (Dallas), Texas N/A 524,013 Macy's, Nordstrom, Sears Superstition Springs 1990/ 16.7 1,073,726/ Dillard's, JCPenney, Mervyn's, None East Mesa, Arizona 1994 367,032 Robinson-May, Sears Town East Mall 1971/ 50 1,256,888/ Dillard's, Foley's, JCPenney, None Mesquite, Texas 1986 425,482 Sears
19
Ownership Total GLA/Mall Year Opened/ Interest % and Freestanding Name of Center/ Remodeled or of Operating GLA Square Feet Anchor Location (/1/) Expanded Partnership (/2/) Anchors Vacancies ----------------------- ------------ ------------ ---------------- ----------------------------- --------- Tysons Galleria 1988/ 50 810,710/ Macy's, Neiman Marcus, None McLean, Virginia 1994,1997 298,777 Saks Fifth Avenue Vista Ridge Mall 1989/ 50 1,053,369/ Dillard's, Foley's, None Lewisville, Texas 1991 380,307 JCPenney, Sears Washington Park Mall 1984/ 50 351,469/ Dillard's, JCPenney, None Bartlesville, Oklahoma 1986 157,173 Sears West Oaks Mall 1996/ 50 1,071,183/ Dillard's, JCPenney, None Ocoee (Orlando), Florida 1998 365,854 Parisian, Sears Westroads Mall 1968/ 51 1,085,515/ JCPenney, The Jones Store, None Omaha, Nebraska 1995,1999 373,895 Von Maur, Younkers The Woodlands Mall 1994/ 25 1,177,816/ Dillard's, Foley's, JCPenney, None The Woodlands, 1998 351,301 Mervyn's, Sears (Houston), Texas
-------- (1) In certain cases where a Center's location is part of a larger metropolitan area, the metropolitan area is identified in parenthesis. (2) Includes square footage added in redevelopment/expansion projects. 20 Anchors Anchors have traditionally been a major factor in the public's image of an enclosed shopping center. Anchors are generally department stores whose merchandise appeals to a broad range of shoppers. Anchors either own their stores, the land under them and adjacent parking areas, or enter into long-term leases at rates that are generally lower than the rents charged to Mall Store tenants. Although the Portfolio Centers receive a smaller percentage of their operating income from Anchors than from Mall Stores, strong Anchors play an important part in maintaining customer traffic and making the Portfolio Centers desirable locations for Mall Store tenants. The following table indicates the parent company of each Anchor and sets forth the number of stores and square feet owned or leased by each Anchor at the Portfolio Centers as of December 31, 2000. GENERAL GROWTH PROPERTIES, INC. PORTFOLIO ANCHORS AS OF DECEMBER 31, 2000
Total Square Feet Name Stores (000's) ----------------------------------------------- ------ ----------- Sears 82 11,775 JCPenney 79 8,957 Dillard's Inc. Dillard's 41 6,487 Dillard's Home Store 1 22 --- ------ Sub-Total Dillard's Inc. 42 6,409 === ====== Target Corporation Target 16 1,758 Mervyn's 16 1,353 Marshall Fields 3 692 Dayton's 4 532 Hudson's 6 695 --- ------ Sub-Total Target Corporation 45 5,030 === ====== May Department Stores Company Foley's 11 1,623 Robinson's-May 6 985 Filene's 3 520 Filene's Home Store 1 36 Lord & Taylor 5 577 Strawbridge and Clothier 1 218 Hecht's 2 345 Famous Barr 2 272 The Jones Store 1 175 --- ------ Sub-Total May Department Stores Company 34 4,949 === ====== Federated Department Stores, Inc. Macy's 14 2,512 Rich's 5 937 Burdines 5 676 The Bon Marche 2 321 Lazarus 1 50 --- ------ Sub-Total Federated Department Stores, Inc. 27 4,496 === ======
21 GENERAL GROWTH PROPERTIES, INC. PORTFOLIO ANCHORS AS OF DECEMBER 31, 2000 (continued)
Total Square Feet Name Stores (000's) ---------------------------------------- ------ ----------- Saks Holdings Incorporated Younkers 8 982 Parisian 3 395 Carson Pirie Scott 1 138 Boston Store 1 211 Bergners 1 154 McRae's 1 124 Saks Fifth Avenue 1 120 Proffitt's 1 90 Herberger's 1 71 --- ----- Sub-Total Saks Holdings Incorporated 18 2,285 === ===== Montgomery Ward & Co. 7 907 Belk Belk 9 1,144 Belk Men's 1 34 --- ----- Sub-Total Belk 10 1,178 === ===== Kohl's 6 544 Neiman-Marcus 3 423 Boscov 4 552 Liberty House 2 377 KMart 3 301 The Bon Ton 3 312 Gottschalks 3 268 Nordstrom 3 388 Wal-Mart 2 196 Von Maur 1 179 Scheel's All Sports 2 155 Harris 1 150 Elder-Beerman 3 141 Cub Foods 1 130 Ames 2 176 Burlington Coat Factory 1 101 Galyans 1 100 Dick's Sporting Goods 1 80 Oshman's 1 64 Service Merchandise 1 59 Rosa's Home Store 1 57 Beall's 2 56 The Emporium 1 50 Toys "R" Us 1 47 Winn-Dixie 1 47 Stein Mart 1 39 Stage 1 35 Old Navy Clothing Company 1 34 Ross Dress for Less 1 28
22 Ground Leases The Company currently leases the land under Rio West Mall, a portion of the Fallbrook Mall land and a portion of the SouthShore and Bayshore parking areas. In addition, Prince Kuhio Plaza, one of the Homart Centers, and the office building owned and used by the Company as its headquarters are subject to long-term ground leases. The leases generally contain various purchase options in favor of the Company and typically provide for a right of first refusal in favor of the Company in the event of a proposed sale of the property by the landlord. For other information concerning the Portfolio Centers see "Item 1--Business--Business of the Company" and for additional information concerning the mortgage debt encumbering the Wholly-Owned Centers, see Note 5. As stated in Item 1 above, management of the Company believes that each of the properties in the Company Portfolio is adequately insured. ITEM 3. LEGAL The Company is not currently involved in any material PROCEEDINGS litigation nor, to the Company's knowledge, is any material litigation currently threatened against the Company, the properties or any of the Unconsolidated Joint Ventures other than routine litigation arising in the ordinary course of business, most of which is expected to be covered by liability insurance. For information about certain environmental matters, see "Item 1--Business--Environmental Matters." ITEM 4. SUBMISSIONNo matters were submitted to a vote of General Growth's OF MATTERS TO Astockholders during the fourth quarter of fiscal 2000. VOTE OF SECURITY HOLDERS PART II ITEM 5. MARKET The Common Stock is listed on the New York Stock Exchange FOR REGISTRANT'S ("NYSE") and trades under the symbol "GGP". As of March 14, COMMON EQUITY 2001, the 52,374,034 outstanding shares of Common Stock were AND RELATED held by approximately 1,388 stockholders of record. The STOCKHOLDER closing price per share of the Common Stock on the NYSE on MATTERS such date was $34.40 per share. Set forth below are the high and low sales prices per share of Common Stock as reported on the composite tape, and the distributions per share of Common Stock declared for each such period.
Price 2000 ------------- Quarter Declared Ended High Low Distribution ------- ------ ------ ------------ March 31 $30.56 $30.44 $.51 June 30 $32.60 $31.75 $.51 September 30 $33.06 $32.19 $.51 December 31 $36.50 $36.12 $.53
Price 1999 ------------- Quarter Declared Ended High Low Distribution ------- ------ ------ ------------ March 31 $38.44 $31.25 $.49 June 30 $38.63 $31.13 $.49 September 30 $35.63 $31.06 $.49 December 31 $31.69 $25.00 $.51
23
Price 1998 ------------- Quarter Declared Ended High Low Distribution ------- ------ ------ ------------ March 31 $38.00 $34.88 $.47 June 30 $38.63 $34.44 $.47 September 30 $38.69 $33.19 $.47 December 31 $37.94 $32.88 $.47
ITEM 6. SELECTED FINANCIAL DATA (Dollars in Thousands, except per Share Amounts) The following table sets forth selected financial data for the Company which is derived from and therefore should be read in conjunction with the audited Consolidated Financial Statements and the related Notes and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in this Annual Report.
2000 1999 1998 1997 1996 --------- ----------- ----------- --------- -------- OPERATING DATA Revenue $ 698,767 $ 612,342 $ 426,576 $ 291,147 $217,405 Operating Expenses 226,234 206,088 151,784 109,677 75,954 Depreciation and Amortization 126,689 112,874 75,227 48,509 39,809 Interest Expense, Net 205,623 169,502 109,840 70,252 66,439 Equity in Net Income of Unconsolidated Affiliates 50,063 19,689 11,067 19,344 17,589 Net gain on sales including CenterMark in 1997 & 1996 44 4,412 196 58,647 43,821 --------- ----------- ----------- --------- -------- Income Before Minority Interest 190,328 147,979 100,988 140,700 96,613 Minority Interest (52,380) (33,058) (29,794) (49,997) (34,580) --------- ----------- ----------- --------- -------- Income Before Extraordinary Items 137,948 114,921 71,194 90,703 62,033 Extraordinary Items -- (13,796) (4,749) (1,152) (2,291) --------- ----------- ----------- --------- -------- Net Income 137,948 101,125 66,445 89,551 59,742 --------- ----------- ----------- --------- -------- Convertible Preferred Stock Dividends (24,467) (24,467) (13,433) -- -- Net Income available to common stockholders $ 113,481 $ 76,658 $ 53,012 $ 89,551 $ 59,742 ========= =========== =========== ========= ======== Earnings Before Extraordinary Item Per Share--Basic 2.18 1.97 1.60 2.78 2.20 Earnings Before Extraordinary Item Per Share--Diluted 2.18 1.96 1.59 2.76 2.20 Net Earnings Per Share-- Basic 2.18 1.67 1.46 2.75 2.12 Net Earnings Per Share-- Diluted 2.18 1.66 1.46 2.73 2.12 Distributions Declared Per Share 2.06 1.98 1.88 1.80 1.72 CASH FLOW DATA Operating Activities $ 309,474 $ 222,134 $ 118,304 $ 101,149 $ 67,202 Investing Activities (379,285) (1,254,697) (1,513,147) (183,535) (29,285) Financing Activities 71,447 1,038,526 1,388,575 92,337 (40,268) FUNDS FROM OPERATIONS (/1/) Operating Partnership $ 330,299 $ 274,234 $ 192,274 $ 147,625 $114,721 Minority Interest (90,805) (82,631) (69,182) (52,890) (42,115) Funds From Operations-- Company 239,494 191,603 123,092 94,735 72,606
24 BALANCE SHEET DATA Investment in Real Estate Assets--Cost $5,439,466 $5,023,690 $4,063,097 $2,157,251 $1,828,184 Total Assets 5,284,104 4,954,895 4,027,474 2,097,719 1,757,717 Total Debt 3,244,126 3,119,534 2,648,776 1,275,785 1,168,522 Redeemable Preferred Units 175,000 -- -- -- -- Convertible Preferred Stock 337,500 337,500 337,500 -- -- Stockholders' Equity 938,418 927,758 585,707 498,505 330,267
-------- (1) Funds from Operations (as defined below) does not represent cash flow from operations as defined by Generally Accepted Accounting Principles ("GAAP") and is not necessarily indicative of cash available to fund all cash requirements. Funds From Funds from Operations is used by the real estate industry Operations and investment community as a primary measure of the performance of real estate companies. As revised in October 1999, the National Association of Real Estate Investment Trusts ("NAREIT") defines Funds from Operations as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from debt restructuring and sales of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. In calculating its Funds from Operations, the Company also excluded gains on land sales, if any, through 1999. The NAREIT definition of Funds from Operations does not exclude the aforementioned item. The Company's Funds from Operations may not be directly comparable to similarly titled measures reported by other real estate investment trusts. Funds from Operations does not represent cash flow from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it indicative of funds available to fund the Company's cash needs, including its ability to make cash distributions. RECONCILIATION OF NET INCOME DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO FUNDS FROM OPERATIONS:
2000 1999 1998 -------- -------- -------- Net Income available to common stockholders $113,481 $ 76,658 $ 53,012 Extraordinary item--charges related to early retirement of debt -- 13,796 4,749 Allocations to Operating Partnership unitholders 43,026 33,058 29,794 Net loss (gain) on sales 1,005 (4,412) (196) Depreciation and amortization 172,787 155,134 104,915 -------- -------- -------- Funds From Operations $330,299 $274,234 $192,274 ======== ======== ========
25 GENERAL GROWTH PROPERTIES, INC. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All references to numbered Notes are to specific footnotes to the Consolidated Financial Statements of the Company included in this Annual Report, which descriptions 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 of Financial Condition and Results of Operations have the same meanings as in such Notes. Forward-Looking Forward-looking statements contained in this Annual Report Information on Form 10-K may include certain forward-looking information statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including (without limitation) statements with respect to anticipated future operating and financial performance, growth and acquisition opportunities and other similar forecasts and statements of expectation. Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates" and "should" and variations of these words and similar expressions, are intended to identify these forward- looking statements. Forward-looking statements made by the Company and its management are based on estimates, projections, beliefs and assumptions of management at the time of such statements and are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information or otherwise. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by the Company and its management as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation) general industry and economic conditions, interest rate trends, cost of capital and capital requirements, availability of real estate properties, competition from other companies and venues for the sale/distribution of goods and services, changes in retail rental rates in the Company's markets, shifts in customer demands, tenant bankruptcies or store closures, changes in vacancy rates at the Company's properties, changes in operating expenses, including employee wages, benefits and training, governmental and public policy changes, changes in applicable laws, rules and regulations (including changes in tax laws), the ability to obtain suitable equity and/or debt financing, and the continued availability of financing in the amounts and on the terms necessary to support the Company's future business. Certain As of December 31, 2000, the Company owned 100% of the Information fifty-three Wholly-Owned Centers, 50% of the stock of About The GGP/Homart, 50% of the membership interest in GGP/Homart II, Company 51% of the stock of GGP Ivanhoe, 51% of the stock of GGP Portfolio Ivanhoe III, 50% of Quail Springs Mall and Town East Mall, (collectively, the "Company Portfolio") and a non-voting preferred stock ownership interest (representing 95% of the equity interest) in GGMI. On January 1, 2001, the Operating Partnership purchased the common stock of GGMI and the preferred stock of GGMI, which was 100% owned by the Company, was cancelled as discussed below. 26 GENERAL GROWTH PROPERTIES, INC. Reference is made to Notes 3 and 4 for a further discussion of such entities owned by the Company. As of December 31, 2000, GGP/Homart owned interests in twenty-three shopping centers, GGP/Homart II owned interests in seven shopping centers, GGP Ivanhoe owned interests in two shopping centers, and GGP Ivanhoe III owned interests in eight shopping centers. As used in this Annual Report, the term "GLA" refers to gross leaseable retail space, including Anchors and mall tenant areas; the term "Mall GLA" refers to gross leaseable retail space, excluding Anchors; the term "Anchor" refers to a department store or other large retail store; the term "Mall Stores" refers to stores (other than Anchors) that are typically specialty retailers who lease space in shopping centers; and the term "Freestanding GLA" means gross leaseable area of freestanding retail stores in locations that are not attached to the primary complex of buildings that comprise a regional mall shopping center. The Mall Store and Freestanding Store portions of the centers in the Company Portfolio which were not undergoing redevelopment on December 31, 1999, had an occupancy rate of approximately 90.1% as of such date. On December 31, 2000, the Mall Store and Freestanding Store portions of the centers in the Company Portfolio which were not undergoing redevelopment were approximately 91.0% occupied, representing an increase in occupancy percentage of 0.9% over 1999. Total annualized sales averaged $357 per square foot for the Company Portfolio for the year ended December 31, 2000, an increase of $16 per square foot over the comparable amount for 1999. For the year ended December 31, 2000, total Mall Store sales for the Company Portfolio increased by 7.4% over the same period in 1999. Comparable Mall Store sales are current sales of those certain tenants that were open during the previous measuring period compared to the sales of those same tenants for the previous measuring period. Therefore, Comparable Mall Store sales in the year ended December 31, 2000 are of those tenants that were also operating for the full year ended December 31, 1999. Comparable Mall Store sales in the year ended December 31, 2000 increased by 2.4% over the same period in 1999. The average Mall Store rent per square foot from leases that expired in the year ended December 31, 2000 was $29.29. The Company Portfolio benefited from increasing rents inasmuch as the average Mall Store rent per square foot on new and renewal leases executed during 2000 was $35.24, or $5.95 per square foot above the average for expiring leases. RESULTS OF OPERATIONS OF General: THE COMPANY Company revenues are primarily derived from fixed minimum rents, overage 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 GGP/Homart, GGP/Homart II, GGP Ivanhoe, GGP Ivanhoe III, GGMI, Quail Springs Mall and Town East Mall, the discussion of results of operations which follows relates primarily to the revenues and expenses of the Wholly-Owned Centers. In addition, during 1999, the Company opened Rivertown Crossings and purchased interests in the following Wholly-Owned Centers: The Crossroads, Ala Moana, and Baybrook. Also 27 GENERAL GROWTH PROPERTIES, INC. during 1999, the Company contributed its 100% interests in one development project, Stonebriar, as well as three operating properties, Northbrook Court, Natick, and Altamonte to GGP/Homart II, an unconsolidated entity. During April 2000, the Company purchased a 100% interest in Crossroads Center. For purposes of the following discussion of the results of operations, the net effect of acquisitions will include the effect of the Rivertown Crossings opening, the effect of the new acquisitions in 1999 and 2000 and the effect of the three operating properties contributed to GGP/Homart II. Comparison of Year Ended December 31, 2000 To Year Ended December 31, 1999 Total revenues for 2000 were $698.8 million, which represents an increase of $86.5 million or approximately 14.1% from $612.3 million in 1999. Approximately $46.5 million or 52.7% of the increase was from properties acquired or developed after July 30, 1999. Minimum rent during 2000 increased $52.5 million or 13.5% from $387.5 million in 1999 to $440 million. The acquisition and development of properties generated a $27.9 million increase in minimum rents. Expansion space, specialty leasing and a combination of occupancy, rental charges and allowance reserve adjustments at the comparable centers accounted for the remaining increase in minimum rents. Tenant recoveries increased by $32.9 million or 18.2% from $180.6 million to $213.5 million in 2000. The increase in tenant recoveries was generated by a combination of new acquisitions and increased recoverable operating costs at the comparable centers. Overage rents increased $1.6 million or 6.0% from $27.0 million in 1999 to $28.6 million in 2000 as a result of the acquisition of new properties and improved performance at the comparable centers. Fee income for 2000 increased $1.6 million or 29.6% from $5.4 million in 1999 to $7.0 million in 2000. The fee revenue was primarily generated by asset management services performed for GGP/Homart and GGP/Homart II. Total expenses, including depreciation and amortization, increased by approximately 10.6% or $33.9 million, from $319 million in 1999 to $352.9 million in 2000. The majority of the increase in total expenses was attributable to properties acquired and developed in 1999 and 2000. The increase in total expenses from the new properties consists primarily of approximately $3.6 million of real estate taxes, $9.9 million of property operating costs, and $6.0 million of depreciation and amortization. Interest expense increased by $32.1 million or 17.3% from $186 million in 1999 to $218.1 million in 2000, substantially all due to indebtedness incurred in connection with the acquisition of new properties in 1999 and 2000. The note receivable from GGMI generated $6.8 million of interest income in 2000, a decrease of $4.6 million from $11.4 million in 1999. Equity in net income of unconsolidated affiliates during 2000 increased by $30.3 million to $50.0 million from $19.7 million in 1999. GGP/Homart II accounted for an increase of approximately $19.0 million. The Company's ownership interest in GGMI resulted in an increase of $11.1 million.. Net income after extraordinary items increased by approximately $36.8 million in 2000 to $137.9 million, from $101.1 million in 1999. The increase resulted from a combination of the above items. 28 GENERAL GROWTH PROPERTIES, INC. Comparison of Year Ended December 31, 1999 To Year Ended December 31, 1998 Total revenues for 1999 were $612.3 million, which represents an increase of $185.7 million or approximately 43.5% from $426.6 million in 1998. Approximately $168.2 million of the increase was from properties acquired or developed after January 1, 1998. Minimum rent during 1999 increased $118.5 million or 44.1% from $269.0 million in 1998 to $387.5 million. $103.8 million of the increase in minimum rent resulted from the acquisition and development of properties after January 1, 1998. Tenant recoveries (amounts received from tenants related to property operating costs) increased by $49.7 million or 38.0% from $130.9 million to $180.6 million in 1999. The increase in tenant recoveries was generated by a combination of new acquisitions and increased recoverable operating costs at the comparable centers (properties owned for the entire time during current and prior periods). Overage rents and other income increased $16.8 million or 76.4% from $22.0 million in 1998 to $38.8 million in 1999 primarily due to the acquisition of new properties and improved performance at the comparable centers. Fee income increased slightly during 1999 as compared to the year ended December 31, 1998 primarily due to fee revenue generated by asset management services performed for the Unconsolidated Joint Ventures. Total expenses, including depreciation and amortization, increased by approximately 40.5% or $92 million, from $227.0 million in 1998 to $319 million in 1999. Approximately $86.5 million or 94.0% of the increase in total expenses related to properties acquired and developed since January 1, 1998. The remaining $5.5 million of the increase was primarily accounted for by increased operating costs, the majority of which were recoverable from tenants. The increase in total expenses consists of $12 million of real estate taxes, $2.3 million of management fees, $36.6 million of property operating costs, $2.0 million of provision for doubtful accounts, $1.3 million of general and administrative and $37.6 million of depreciation and amortization. Interest expense increased by $60.2 million or 47.8% from $125.8 million in 1998 to $186 million in 1999. Debt used to fund acquisitions generated a $53.9 million increase in interest expense in 1999 compared to 1998. This increase was partially offset by the use of a portion of the proceeds of the Company's public offering of Common Stock to repay existing indebtedness. The note receivable from GGMI generated $11.4 million of interest income in 1999, an increase of $0.7 million from $10.7 million in 1998. Net income after extraordinary items increased by approximately $34.7 million in 1999 to $101.1 million from $66.4 million in 1998. The increase resulted from a combination of the above items. Liquidity and As of December 31, 2000, the Company held approximately Capital $27.2 million of unrestricted cash and cash equivalents. The Resources of Company uses operating cash flow as the principal source of The Company internal funding for short-term liquidity and capital needs such as tenant construction allowances and minor improvements made to individual properties that are not recoverable through common area maintenance charges to tenants. External funding alternatives for longer-term liquidity needs such as acquisitions, new development, expansions and major renovation programs at individual centers include construction loans, mini-permanent loans, long-term project financing, joint venture 29 GENERAL GROWTH PROPERTIES, INC. financing with institutional partners, additional Operating Partnership level or Company level equity securities, unsecured Company level debt or secured loans collateralized by individual shopping centers. In addition, the Company has access to the public equity and debt markets through a currently effective shelf registration statement under which up to $329.2 million in equity or debt securities may be issued from time to time. The Company also has a revolving credit facility and term loans (with a collective balance of approximately $265 million at December 31, 2000) which mature on July 31, 2003 as discussed below. The Company currently anticipates that it will be able to increase, if necessary, the aggregate principal amounts available to be borrowed under such facilities from an aggregate of $390 million as of December 31, 2000 to $650 million. As of December 31, 2000, the Company had consolidated debt of approximately $3,244 million, of which $1,833 million is comprised of debt bearing interest at a fixed rate, with the remaining $1,411 million bearing interest at floating rates. Reference is made to Note 5 and Items 2 and 7A of the Company's Annual Report on Form 10-K for additional information regarding the Company's debt and the potential impact on the Company of interest rate fluctuations. The following summarizes certain significant investment and financing transactions currently planned or completed since December 31,1999: The Company had previously advanced approximately $31 million collateralized by a second mortgage on the Crossroads Center in St. Cloud (Minneapolis), Minnesota. In connection with the second mortgage (as modified in February 2000) the Company acquired the property in April 2000 as further described in Note 3. In January 2000, the Company obtained a new $200 million unsecured short-term bank loan. The Company's initial draw under this loan was $120 million which was used to fund ongoing redevelopment projects and repay an $83 million interim loan obtained in September 1999. This loan bore interest at LIBOR plus 150 basis points and the remaining available amounts were drawn by June 30, 2000. The loan was repaid on August 1, 2000 with the proceeds of a new revolving credit facility (the "Revolver") and the term loan (the "Term Loan") described below. In May 2000, the Company received approximately $170.6 million of net proceeds through the issuance of preferred units of membership interest in GGPLP L.L.C. as more fully described in Note 1. These units provide for annual 8.95% preferred distributions and have a liquidation preference of $175 million. The net proceeds were used primarily to reduce the Company's outstanding short-term floating rate debt. As of July 31, 2000, the Company completed the refinancing of its Credit Facility. The Company's outstanding draws under the Revolver, its new unsecured revolving credit facility, were approximately $35 million as of December 31, 2000. The Revolver has a maturity of July 31, 2003 and bears interest at a rate per annum equal to LIBOR plus 100 to 190 basis points depending on the Company's average leverage ratio. In addition, the Company obtained an unsecured Term Loan which had an outstanding balance of $230 million at December 31, 2000. The Term Loan has a maturity of July 31, 2003 and bears interest at a rate per annum equal to LIBOR plus 100 to 170 basis points depending on the Company's average leverage ratio. 30 GENERAL GROWTH PROPERTIES, INC. In December 2000, the Company obtained an additional $20 million mortgage loan collateralized by the Valley Hills Mall. The new mortgage loan is payable interest only until maturity at a rate of 7.91% per annum and matures in February 2004. In January 2001, GGMI borrowed $37.5 million under a new revolving line of credit obtained by GGMI and an affiliate, which is guaranteed by General Growth and the Operating Partnership. The interest rate per annum with respect to any borrowings varies from LIBOR plus 100 to 190 basis points depending on the Company's average leverage ratio and the revolving line of credit matures in July 2003. Approximately $392 million of the Company's debt is scheduled to mature in 2001. Although agreements to refinance all of such indebtedness have not yet been reached, the Company anticipates that all of its debt will be repaid on a timely basis. Other than as described above or in conjunction with possible future acquisitions, there are no current plans to incur additional debt, increase the amounts available under the Revolver or Term Loans or raise equity capital. If additional capital is required, the Company believes that it can increase the amounts available under the Revolver or Term Loans, obtain an interim bank loan, obtain additional mortgage financing on under- leveraged assets, enter into new joint venture partnership arrangements or raise additional debt or equity capital. However, there can be no assurance that the Company can obtain such financing on satisfactory terms. The Company will continue to monitor its capital structure, investigate potential investments or joint venture partnership arrangements and purchase additional properties if they can be acquired and financed on terms that the Company reasonably believes will enhance long-term stockholder value. When property operating cash flow has been increased, the Company anticipates the refinancing of portions of its long-term floating rate debt with pooled or property- specific non-recourse fixed-rate mortgage financing. Accordingly, the Company anticipates that up to approximately $1,000 million of collateralized floating rate debt may be replaced in 2001 with new floating rate or long- term fixed rate mortgage financing. Net cash provided by operating activities was $309.5 million in 2000, an increase of $87.4 million from $222.1 million in the same period in 1999. Net income before allocations to the minority interest increased $42.3 million, which was primarily due to earnings attributable to properties acquired in 2000 and 1999. Summary of Net cash used by investing activities was $379.3 million in Investing 2000 compared to $1,254.7 million of cash used in 1999. Cash Activities flow from investing activities was impacted by acquisitions, development and improvements to real estate properties, which utilized cash of approximately $286.7 million in 2000 and $1,248.4 million in 1999 due to fewer acquisitions of investment property in 2000 as compared to 1999. Net cash used by investing activities in 1999 was $1,254.7 million, compared to a use of $1,513.1 million in 1998. Cash flow from investing activities was affected by the timing of acquisitions, development and improvements to real estate properties, requiring a use of cash of approximately $1,248.4 million in 1999 compared to $1,360.1 million in 1998. 31 GENERAL GROWTH PROPERTIES, INC. Summary of Financing activities in 2000 provided $71.4 million of cash Financing compared to a $1,038.5 million source of cash flow in 1999. Activities The proceeds from the issuance of the preferred units of membership interest provided approximately $170.6 million of cash from financing activities in 2000. The majority of the cash flow from financing activities in 1999 were from the $1,736.1 million of proceeds of mortgage and other notes payable. Distributions to common stockholders and the minority interests in the Operating Partnership were $152.5 million in 2000 compared to $120.8 million in 1999. The increase in distributions is due to the increased distribution rate on the Common Stock and Operating Partnership Units during 2000 compared to 1999 as well as the issuance of the preferred units of membership interest as discussed above and in Note 1. Financing activities provided cash of $1,038.5 million in 1999, compared to $1,388.6 million in 1998. The Common Stock offering in July 1999 provided net proceeds of approximately $330.3 million which, as described in Note 1, was utilized to reduce outstanding indebtedness and to fund the acquisition of the Ala Moana Center. As also described in Note 1, General Growth completed a public offering of preferred stock in June 1998, the net proceeds of which (approximately $322.7 million) were used primarily to reduce acquisition-related financing and amounts drawn on the Company's Credit Facility. Such payments are reflected in the use of cash for financing activities for principal payments on mortgage notes and other debt in 1999 and 1998. An additional significant contribution of cash from financing activity is financing from mortgages and acquisition debt, which had a positive impact of $1,736 million in 1999 versus approximately $2,093 million in 1998. The additional financing was used to repay existing indebtedness and to fund the acquisitions and redevelopment of real estate as discussed above. The remaining uses of cash consisted primarily of increased distributions (including dividends paid to preferred stockholders in 1999 and 1998). General Growth has established a Dividend Reinvestment and Stock Purchase Plan ("DRSP") under which it has reserved for issuance up to 1,000,000 shares of Common Stock. The DRSP, in general, allows participants to make purchases of Common Stock from dividends received or additional cash investments. Although the purchase price of the Common Stock is determined by the current market price, the purchases are made without fees or commissions. General Growth can satisfy DRSP Common Stock purchase needs through the issuance of new shares of Common Stock or by repurchases of currently outstanding Common Stock. Any new issuances of Common Stock pursuant to the DRSP will not reduce amounts otherwise available under the Company's currently effective shelf- registration described above. REIT In order to remain qualified as a real estate investment Requirements trust for federal income tax purposes, the Company must distribute 100% of capital gains and at least 95% (90% in 2001 and subsequent years) of its ordinary taxable income to stockholders. The following factors, among others, will affect operating cash flow 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 operating cash flow 32 GENERAL GROWTH PROPERTIES, INC. generated by the Unconsolidated Joint Ventures, to the extent distributed to the Company, less oversight costs and debt service on additional loans that have been or will be incurred to finance Company acquisitions. The Company anticipates that its operating cash flow, and potential new debt or equity from future offerings, 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 preferred and common 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 and will elect to have GGMI treated as a TRS. On January 1, 2001 the REIT provisions of the Tax Relief Extension Act of 1999 became effective. Among other things, the law permits a REIT to own up to 100% of the stock of a TRS. A TRS, which must pay corporate income tax, can provide services to REIT tenants and others without disqualifying the rents that a REIT receives from its tenants. Accordingly, on January 1, 2001 the Company acquired for nominal consideration 100% of the common stock of GGMI and will elect to have GGMI treated as a TRS. In connection with the acquisition, the GGMI preferred stock owned by the Company was cancelled and approximately $40 million of the outstanding loans owed by GGMI to the Company were contributed to the capital of GGMI. The Company and GGMI concurrently terminated the management contracts for the Wholly-Owned Centers as the management activities will be performed directly by the Company. GGMI will continue to manage, lease, and perform various other services for the Unconsolidated Centers and other properties owned by unaffiliated third parties. Recently Issued As more fully described in Note 12, certain accounting Accounting pronouncements were issued in 2000, which became effective Pronouncements in 2000 or will become effective in 2001. The Company does not expect the application of such new pronouncements to have a significant impact on its annual reported results of operations. Economic Inflation has been relatively low and has not had a Conditions significant detrimental impact on the Company. Should inflation rates increase in the future, substantially all of the Company's tenant leases contain provisions designed to mitigate the negative impact of inflation. Such provisions include clauses enabling the Company to receive percentage rents based on tenants' gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. In addition, many of the leases are for terms of less than 10 years which may enable the Company to replace or renew expiring leases with new leases at higher base and/or percentage rents, if rents under the expiring leases are below the then-existing market rates. Finally, most of the existing leases require the tenants to pay their share of certain operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. Inflation also poses a potential threat to the Company due to the possibility of future increases in interest rates. Such increases would adversely impact the Company due to the amount of its outstanding floating rate debt. However, in recent years, the Company's ratio of interest expense to cash flow has continued to decrease. Therefore, 33 GENERAL GROWTH PROPERTIES, INC. the relative risk the Company bears due to interest expense exposure has been declining. In addition, the Company has limited its exposure to interest rate increases on a portion of its floating rate debt by arranging interest rate cap agreements as described below. Finally, the Company has a policy of replacing floating rate debt with fixed rate debt as market conditions allow. (See Note 5). The current retail sector is experiencing declining growth and certain portions of the retail economy is in decline. Such reversals or reductions in the retail market adversely impacts the Company as demand for leasable space is reduced and rents computed as a percentage of tenant sales declines. In addition, the number of local, regional and national retailers, including tenants of the Company, filed for bankruptcy protection during the last few years. Most of the bankrupt retailers reorganized their operations and/or sold stores to stronger operators. Although some leases were terminated pursuant to the lease cancellation rights afforded by the bankruptcy laws, the impact on Company earnings was negligible. Over the last three years, the provision for doubtful accounts has averaged only $3.0 million per year, which represents less than 1% of average total revenues of $579.2 million. The Company and its affiliates currently have interests in 95 operating shopping centers. The Portfolio Centers are diversified both geographically and by property type (both major and middle market properties) and this may mitigate the impact of a potential economic downturn at a particular property or in a particular region of the country. The shopping center business is seasonal in nature. Mall stores typically achieve higher sales levels during the fourth quarter because of the holiday selling season. Although the Company has a year-long temporary leasing program, a significant portion of the rents received from short-term tenants are collected during the months of November and December. Thus, occupancy levels and revenue production are generally highest in the fourth quarter of each year and lower during the first and second quarters of each year. The Internet and electronic retailing are growing at significant rates. Although the amount of retail sales conducted solely via the Internet is expected to rise in the future, the Company believes that traditional retailing and "e-tailing" will converge such that the regional mall will continue to be a vital part of the overall mix of shopping alternatives for the consumer. In order to enhance the value and competitiveness of its properties through technology, the Company has commenced construction of an integrated broadband distribution system that will provide tenants at its properties with a private wide-area network, as well as supporting applications and equipment (the "Broadband System"), that will link tenants and mall locations via the Internet. The Company anticipates that the Broadband System will be installed and operating at substantially all of its properties before the end of the second quarter of 2001 as more fully discussed in Note 3. 34 GENERAL GROWTH PROPERTIES, INC. ITEM 7A. The Company has not entered into any transactions using QUANTITATIVE derivative commodity instruments. The Company is subject to AND QUALITATIVE market risk associated with changes in interest rates. DISCLOSURES Although the current interest rate trend is downward, the ABOUT MARKET economy during most of 2000 was in a period of rising RISK interest rates. Interest rate exposure is principally limited to the $1,411 million of consolidated debt of the Company outstanding at December 31, 2000 that is priced at interest rates that float with the market. A 25 basis point movement in the interest rate on the floating rate debt would result in an approximate $3.5 million annualized increase or decrease in interest expense and a corresponding opposite effect on cash flows. Additionally, approximately $856 million of such floating rate consolidated debt is comprised of commercial mortgage-backed securities which are subject to interest rate cap agreements, the effect of which is to limit the interest rate the Company would be required to pay on such debt to no more than approximately 9% per annum. The remaining $1,833 million of consolidated debt is fixed rate debt. The Company has an ongoing program of refinancing its floating and fixed rate debt and believes that this program allows it to vary its ratio of fixed to floating rate debt and to stagger its debt maturities in order to respond to changing market rate conditions. Reference is made to Note 5 for additional debt information. ITEM Reference is made to the Index to Financial Statements and 8. FINANCIAL Financial Statement Schedules on page F-1 for the required STATEMENTS AND information. SUPPLEMENTARY DATA ITEM 9. CHANGES Not applicable. IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 35 GENERAL GROWTH PROPERTIES, INC. PART III ITEM 10. DIRECTORSThe information which appears under the captions "Election AND EXECUTIVEof Directors" and "Executive Officers" in the Company's OFFICERS OF THEproxy statement for its 2001 Annual Meeting of Stockholders COMPANYis incorporated by reference into this Item 10. ITEM 11. EXECUTIVEThe information which appears under the caption "Executive COMPENSATIONCompensation" in the Company's proxy statement for its 2001 Annual Meeting of Stockholders is incorporated by reference into this Item 11; provided, however, that the Report of the Compensation Committee of the Board of Directors on Executive Compensation shall not be incorporated by reference herein, in any of the Company's previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or in any of the Company's future filings. ITEM The information which appears under the captions "Certain 12. SECURITY Relationships and Related Party Transactions" and "Stock OWNERSHIP OF Ownership" in the Company's proxy statement for its 2001 CERTAIN Annual Meeting of Stockholders is incorporated by reference BENEFICIAL into this Item 12. OWNERS AND MANAGEMENT ITEM The information which appears under the caption 13. CERTAIN "Compensation Committee Interlocks and Insider RELATIONSHIPS Participation" and "Certain Relationships and Related Party AND RELATED Transactions" in the Company's proxy statement for its 2001 TRANSACTIONS Annual Meeting of Stockholders is incorporated by reference into this Item 13. PART IV ITEM (a) Financial Statements and Financial Statement Schedules. 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K The financial statements and schedules listed in the accompanying Index to Consolidated Financial Statements and Financial Statement Schedules are filed as part of this Annual Report on Form 10-K. (b) No reports on Form 8-K were filed by the Company during the last quarter of the period covered by this report. (c) Exhibits. See Exhibit Index on page S-1 36 GENERAL GROWTH PROPERTIES, INC. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. By: /s/ John Bucksbaum _______________________ John Bucksbaum, Chief Executive Officer March 14, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date /s/ Matthew Bucksbaum __________________________ Matthew Bucksbaum Chairman of the Board March 14, 2001 /s/ Robert Michaels __________________________ Robert Michaels President and Director March 14, 2001 /s/ Bernard Freibaum __________________________ Bernard Freibaum Executive Vice President, Chief Financial Officer and Principal Accounting Officer March 14, 2001 /s/ Anthony Downs __________________________ Anthony Downs Director March 14, 2001 /s/ Morris Mark __________________________ Morris Mark Director March 14, 2001 /s/ Beth Stewart __________________________ Beth Stewart Director March 14, 2001 /s/ Lorne Weil __________________________ A. Lorne Weil Director March 14, 2001
37 GENERAL GROWTH PROPERTIES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULE The following financial statements and financial statement schedule are included in Item 8 of this Annual Report on Form 10-K: General Growth Properties, Inc. Financial Statements Page(s) Report of Independent Accountants F-2 Consolidated Balance Sheets as of December 31, 2000 and 1999 F-3 Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2000, 1999 and 1998 F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000, 1999, and 1998 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999, and 1998 F-7 Notes to Consolidated Financial Statements F-8 to F-37 Financial Statement Schedule Report of Independent Accountants F-38 Schedule III - Real Estate and Accumulated Depreciation F-39
All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule or because the information required is included in the consolidated financial statements and related notes. F-1 Report of Independent Accountants To the Board of Directors and Stockholders General Growth Properties, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive income, of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of General Growth Properties, Inc. at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Chicago, Illinois PricewaterhouseCoopers LLP February 6, 2001 F-2 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999 (Dollars in thousands, except for per share amounts)
ASSETS December 31, ------ ---------------------- 2000 1999 ---------- ---------- Investment in real estate: Land $ 649,160 $ 640,276 Building and equipment 4,016,493 3,664,832 Less accumulated depreciation (488,130) (376,673) Developments in progress 25,547 21,443 ---------- ---------- Net property and equipment 4,203,070 3,949,878 Investments in Unconsolidated Real Estate Affiliates 748,266 666,074 Mortgage note receivable - 31,065 ---------- ---------- Net investment in Real Estate 4,951,336 4,647,017 Cash and cash equivalents 27,229 25,593 Tenant accounts receivable, net 96,157 84,123 Deferred expenses, net 105,534 93,536 Investment in and note receivable from General Growth Management, Inc. 66,079 65,307 Prepaid expenses and other assets 37,769 39,319 ---------- ---------- $5,284,104 $4,954,895 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Mortgage notes and other debt payable $3,244,126 $3,119,534 Distributions payable 47,509 42,695 Accounts payable and accrued expenses 186,393 170,868 ---------- ---------- 3,478,028 3,333,097 ---------- ---------- Minority interest Redeemable Preferred Units 175,000 Common Units 355,158 356,540 ---------- ---------- 530,158 356,540 ---------- ---------- Commitments and contingencies Preferred Stock: $100 par value; 5,000,000 shares authorized; 345,000 designated as PIERS (Note 1) which are convertible and carry a $1,000 liquidation value, 337,500 of which were issued and outstanding at December 31, 2000 and 1999 337,500 337,500 Stockholders' Equity: Common stock: $.10 par value; 210,000,000 shares authorized; 52,281,259 and 51,697,425 shares issued and outstanding as of December 31, 2000 and 1999, respectively 5,228 5,170 Additional paid-in capital 1,210,261 1,199,921 Retained earnings (deficit) (266,085) (272,199) Notes receivable-common stock purchases (9,449) (3,420) Accumulated equity in other comprehensive loss of unconsolidated affiliate (1,537) (1,714) ---------- ---------- Total stockholders' equity 938,418 927,758 ---------- ---------- $5,284,104 $4,954,895 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. F-3 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Dollars in thousands, except for per share amounts)
Years ended December 31, 2000 1999 1998 --------- --------- --------- Revenues: Minimum rents $439,981 $387,547 $268,976 Tenant recoveries 213,502 180,584 130,903 Overage rents 28,626 27,011 16,226 Other 9,641 11,795 5,796 Fee income 7,017 5,405 4,675 --------- --------- --------- Total revenues 698,767 612,342 426,576 --------- --------- --------- Expenses: Real estate taxes 49,447 45,572 33,548 Management fees to affiliate 4,439 6,612 4,288 Property operating 163,972 143,622 106,986 Provision for doubtful accounts 2,025 4,425 2,451 General and administrative 6,351 5,857 4,511 Depreciation and amortization 126,689 112,874 75,227 --------- --------- --------- Total expenses 352,923 318,962 227,011 --------- --------- --------- Operating income 345,844 293,380 199,565 Interest income 12,452 16,482 16,011 Interest expense (218,075) (185,984) (125,851) Equity in net income/(loss) of unconsolidated affiliates 50,063 19,689 11,067 Gains on sales 44 4,412 196 Income before extraordinary items and allocation to minority interests 190,328 147,979 100,988 Income allocated to minority interest, including $9,354 applicable to Redeemable Preferred Units in 2000 (52,380) (33,058) (29,794) --------- --------- --------- Income before extraordinary items 137,948 114,921 71,194 Extraordinary items - (13,796) (4,749) --------- --------- --------- Net income 137,948 101,125 66,445 --------- --------- --------- Convertible Preferred Stock Dividends (24,467) (24,467) (13,433) --------- --------- --------- Net income available to common stockholders $113,481 $76,658 $53,012 ========= ========= ========= Earnings before extraordinary items per share-basic $2.18 $1.97 $1.60 ========= ========= ========= Earnings before extraordinary items per share-diluted $2.18 $1.96 $1.59 ========= ========= ========= Earnings per share-basic $2.18 $1.67 $1.46 ========= ========= ========= Earnings per share-diluted $2.18 $1.66 $1.46 ========= ========= ========= Net income $137,948 $101,125 $ 66,445 Other Comprehensive income (loss): Equity in unrealized income/(loss) on available-for-sale securities of unconsolidated affiliate, net of minority interest 177 (1,714) - --------- --------- --------- Comprehensive income $138,125 $99,411 $ 66,445 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-4 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in Thousands, except for Per Share Amounts)
Common Stock Additional Retained Employee Total ------------------ Paid-in Earnings Treasury Stock Stockholders' Shares Amount Capital (Deficit) Stock Loans Equity ---------- ------ ---------- --------- -------- -------- ------------- Balance, December 31, 1997 35,634,977 $3,577 $738,630 $(239,139) $(4,563) $ -- $498,505 Net income 66,445 66,445 Cash distributions declared ($1.88 per share) (68,940) (68,940) Convertible Preferred Stock Dividends (13,433) (13,433) Cost of issuance of preferred stock (14,814) (14,814) Exercise of stock options, net of employee stock loans 166,000 14 2,526 (530) 1, 154 (3,164) -- Purchase treasury stock (32,350) (1,136) (1,136) Conversion of operating partnership units to common stock 3,232,345 309 47,932 (2,670) 4,545 50,116 Adjustment for minority interest in operating partnership 68,964 68,964
-------- continued on next page F-5 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in Thousands, except for Per Share Amounts) - continued -
Additional Retained Employee Total Common Stock Paid-in Earnings Treasury Stock Stockholders' Shares Amount Capital (Deficit) Stock Loans Equity ---------- ------ ---------- --------- -------- -------- ------------- Balance, December 31, 1998 39,000,972 $3,900 $ 843,238 $(258,267) $ - $(3,164) $585,707 ---------- ------ ---------- --------- --- ------- -------- Net income 101,125 101,125 Cash distributions declared ($1.98 per share) (90,590) (90,590) Convertible Preferred Stock Dividends (24,467) (24,467) Issuance of common stock, net of $1,929 of issuance costs 10,000,000 1,000 329,296 330,296 Exercise of stock options, net of employee stock loans 60,000 6 1,134 (380) 760 Reduction in employee stock loans Conversion of operating partnership units to common stock 124 124 Conversion of interests in GGP/Homart to Common Stock 2,603,291 261 90,252 90,513 Conversion of operating partnership units to common stock 33,162 3 519 522 Adjustment for minority interest in operating partnership (64,518) (64,518) ---------- ------ ---------- --------- --- ------- -------- Balance, December 31, 1999 51,697,425 5,170 1,199,921 (272,199) $ - (3,420) 929,472 ---------- ------ ---------- --------- --- ------- -------- Accumulated equity in other comprehensive loss of unconsolidated affiliate (1,714) -------- Adjusted Total $927,758 -------- Balance, December 31, 1999 51,697,425 5,170 1,199,921 (272,199) $ - (3,420) $929,472 ---------- ------ ---------- --------- --- ------- -------- Net income 137,948 137,948 Cash distributions declared ($2.06 per share) (107,367) (107,367) Convertible Preferred Stock Dividends (24,467) (24,467) RPU issuance costs (4,375) (4,375) Conversion of operating partnership units to common stock 212,050 21 5,490 5,511 Adjustment for minority interest in operating partnership (1,441) (1,441) Issuance of Common Stock, net of employee stock option loans 371,784 37 10,666 (6,029) 4,674 ---------- ------ ---------- --------- --- ------- -------- Balance, December 31, 2000 52,281,259 $5,228 $1,210,261 $(266,085) $ - $(9,449) $939,955 ========== ====== ========== ========= === ======= ======== Accumulated equity in other comprehensive loss of unconsolidated affiliate (1,537) -------- Adjusted Total $938,418 ========
The accompanying notes are an integral part of these consolidated financial statements. F-6 GENERAL GROWTH PROPERTIES,INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands, except for per share amounts)
Year ended December 31, ----------------------------------- 2000 1999 1998 --------- ----------- ----------- Cash flows from operating activities: Net Income $ 137,948 $ 101,125 $ 66,445 Adjustments to reconcile net income to net cash provided by operating activities: Minority interests 52,380 33,058 29,794 Extraordinary items - 10,454 - Equity in net income of unconsolidated affiliates (50,063) (19,689) (11,067) Provision for doubtful accounts 2,025 4,425 2,451 Distributions received from unconsolidated affiliates 37,523 29,825 21,672 Depreciation 111,457 105,046 68,494 Amortization 15,232 7,828 6,733 Gain on sales (44) (4,412) (196) Net Changes: Tenant accounts receivable (14,059) (26,856) (42,187) Prepaid expenses and other assets 1,550 (9,183) (6,557) Accounts payable and accrued expenses 15,525 (9,487) (17,278) --------- ----------- ----------- Net cash provided by (used in) operating activities 309,474 222,134 118,304 --------- ----------- ----------- Cash flows from investing activities: Acquisition/development of real estate and improvements and additions to properties (286,734) (1,248,371) (1,360,071) Increase in investments in unconsolidated affiliates (91,663) (55,361) (92,990) Increase in mortgage note receivable - (31,065) - Change in notes receivable from General Growth Management, Inc. (2,406) 6,671 (33,031) Reduction in employee stock loans - 124 - Distributions received from unconsolidated affiliates 23,889 89,734 6,485 Increase in deferred expenses (22,371) (16,429) (33,540) --------- ----------- ----------- Net cash provided by (used in) investing activities (379,285) (1,254,697) (1,513,147) --------- ----------- ----------- Cash flows from financing activities: Cash distributions paid to common stockholders (106,103) (82,439) (66,639) Cash distributions paid to Operating Partnership Unitholders (40,333) (38,434) (36,467) Cash distributions paid to holders of RPU's (6,091) - - Payments of dividends on PIERS (24,467) (24,467) (7,316) Proceeds of preferred stock, net of issuance costs - - 322,686 Proceeds from sale of common stock and options, net 4,674 331,056 - Proceeds from issuance of RPU's, net of issuance costs 170,625 - - Capital contributions from minority interest - - 119 Proceeds from issuance of mortgage / other notes payable 360,301 1,736,072 2,093,000 Principal payments on mortgage notes and other debt payable (282,301) (867,713) (913,229) Purchase of treasury stock - - (1,136) Increase in deferred expenses (4,858) (15,549) (2,443) --------- ----------- ----------- Net cash provided by (used in) financing activities 71,447 1,038,526 1,388,575 --------- ----------- ----------- Net change in cash and cash equivalents 1,636 5,963 (6,268) Cash and cash equivalents at beginning of year 25,593 19,630 25,898 --------- ----------- ----------- Cash and cash equivalents at end of period $ 27,229 $ 25,593 $ 19,630 ========= =========== =========== Supplemental disclosure of cash flow information: Interest paid $ 222,711 $ 197,178 $ 128,987 Interest capitalized 17,709 17,166 12,028 ========= =========== =========== Non-cash investing and financing activities: Debt assumed as consideration to seller for purchase of real estate $ - $ - $ 289,530 Treasury stock exchanged for Operating Partnership Units - - 1,875 Common stock issued in exchange for Operating Partnership Units 5,511 522 48,241 Common stock issued in exchange for GGP/Homart stock - 90,513 - Contribution of property, other assets and related debt, net to GGP/Homart II - 224,033 - Notes receivable issued for exercised stock options 7,149 380 3,164 Assumption and conversion of notes In conjunction with acquisition of property 77,657 - - Operating Partnership Units and common stock issued as consideration for purchase of real estate 215 - 163,514 Penalty on retirement of debt - 8,655 - Distributions payable 47,509 42,695 33,757
The accompanying notes are an integral part of these consolidated financial statements. F-7 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) NOTE 1 ORGANIZATION General General Growth Properties, Inc., a Delaware corporation ("General Growth"), was formed in 1986 to own and operate regional mall shopping centers. All references to the "Company" in these notes to Consolidated Financial Statements include General Growth and those entities owned or controlled by General Growth (including the Operating Partnership and the LLC as described below), unless the context indicates otherwise. On April 15, 1993, General Growth completed its initial public offering 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 regional mall general partnerships owned and controlled by the Company and its original stockholders. The Company conducts substantially all of its business through the Operating Partnership. Effective January 1, 2000, General Growth established a Dividend Reinvestment and Stock Purchase Plan ("DRSP"). General Growth has reserved for issuance up to 1,000,000 shares of Common Stock for issuance under the DRSP. The DRSP will, in general, allow participants in the plan to make purchases of Common Stock from dividends received or additional cash investments. Although the purchase price of the Common Stock will be determined by the current market price, the purchases will be made without fees or commissions. General Growth will satisfy DRSP Common Stock purchase needs through the issuance of new shares of Common Stock or by repurchases of currently outstanding Common Stock. As of December 31, 2000 an aggregate of 25,045 shares of Common Stock have been issued under the DRSP. During July 1999, General Growth completed a public offering of 10,000,000 shares of Common Stock (the "1999 Offering"). General Growth received net proceeds of approximately $330,296 of which a portion was used to reduce outstanding loans including certain indebtedness to affiliates of the underwriter of the 1999 Offering. In addition, a portion of the proceeds of the 1999 Offering were used to fund a portion of the purchase price of Ala Moana Center (Note 3). Redeemable Preferred Stock During June 1998, General Growth completed a public offering of 13,500,000 depositary shares (the "Depositary Shares"), each representing 1/40 of a share of 7.25% Preferred Income Equity Redeemable Stock, Series A, par value $100 per share ("PIERS"). General Growth received net proceeds of approximately $322,686 which were utilized to fund certain of the acquisitions described in Note 3 and for other working capital needs. The Depositary Shares are convertible at any time, at the option of the holder, into shares of Common Stock at the conversion price of $39.70 per share of Common Stock. In addition, the PIERS have a preference on liquidation of General Growth equal to $1,000 per PIERS (equivalent to $25.00 per Depositary Share), plus accrued and unpaid dividends, if any, to the liquidation date. The PIERS and the Depositary Shares are subject to mandatory redemption by General Growth on July 15, 2008 at a price of $1,000 per PIERS, plus accrued and unpaid dividends, if F-8 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) any, to the redemption date. Accordingly, the PIERS have been reflected in the accompanying financial statements at such liquidation or redemption value. Shareholder Rights Plan In November 1998, General Growth adopted a shareholder rights plan (the "Plan"), pursuant to which General Growth declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of Common Stock outstanding on December 10, 1998 to the shareholders of record on that date. Prior to becoming exercisable, the Rights trade together with the Common Stock. In general, the Rights will become exercisable if a person or group acquires or announces a tender or exchange offer for 15% or more of the Common Stock. Each Right will initially entitle the holder to purchase from General Growth one one-thousandth of a share of newly-created Series A Junior Participating Preferred Stock, par value $100 per share (the "Preferred Stock"), at an exercise price of $148 per one one-thousandth of a share, subject to adjustment. In the event that a person or group acquires 15% or more of the Common Stock, each Right will entitle the holder (other than the acquirer) to purchase shares of Common Stock (or, in certain circumstances, cash or other securities) having a market value of twice the exercise price of a Right at such time. Under certain circumstances, each Right will entitle the holder (other than the acquirer) to purchase common stock of the acquirer having a market value of twice the exercise price of a Right at such time. In addition, under certain circumstances, the Board of Directors of General Growth may exchange each Right (other than those held by the acquirer) for one share of Common Stock, subject to adjustment. The Rights expire on November 18, 2008, unless earlier redeemed by General Growth for $0.01 per Right or such expiration date is extended. Operating Partnership The Operating Partnership commenced operations on April 15, 1993 and as of December 31, 2000, it owned 100% of fifty- three regional shopping centers (the "Wholly-Owned Centers"); 50% of the stock of GGP/Homart, Inc. ("GGP/Homart"), 50% of the membership interest of GGP/Homart II, L.L.C. ("GGP/Homart II"), 51% of the stock of GGP Ivanhoe, Inc. ("GGP Ivanhoe"), 51% of the stock of GGP Ivanhoe III, Inc. ("GGP Ivanhoe III"), 50% of Quail Springs Mall and Town East Mall, (collectively, the "Unconsolidated Real Estate Affiliates"), and a 100% non- voting preferred stock interest representing 95% of the equity interest in General Growth Management, Inc. ("GGMI"). The Unconsolidated Real Estate Affiliates and GGMI comprise the "Unconsolidated Affiliates". As of such date, GGP/Homart owned interests in twenty-three shopping centers, GGP/Homart II owned interests in seven shopping centers GGP Ivanhoe owned 100% of two shopping centers, and GGP Ivanhoe III (through a wholly-owned subsidiary) owned 100% of eight shopping centers, collectively the "Unconsolidated Centers". Together, the Wholly-Owned Centers and the Unconsolidated Centers comprise the "Company Portfolio" or the "Portfolio Centers". During May 2000, the Operating Partnership formed GGPLP L.L.C., a Delaware limited liability company (the "LLC") by contributing its interest in a portfolio of 44 Wholly-Owned regional shopping centers to the LLC in exchange for all of the F-9 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) common units of membership interest in the LLC. On May 25, 2000, a total of 700,000 redeemable preferred units of membership interest in the LLC (the "RPUs") were issued to an institutional investor by the LLC, which yielded approximately $170,625 in net proceeds to the Company. The net proceeds of the sale of the RPUs were used to repay a portion of the Company's unsecured debt. Holders of the RPUs are entitled to receive cumulative preferential cash distributions per RPU (payable quarterly commencing July 15, 2000) at a per annum rate of 8.95% of the $250 liquidation preference thereof (or $5.59375 per quarter) prior to any distributions by the LLC to the Operating Partnership. Subject to certain limitations, the RPUs may be redeemed at the option of the LLC at any time on or after May 25, 2005 for cash equal to the liquidation preference amount plus accrued and unpaid distributions and may be exchanged at the option of the holders of the RPUs on or after May 25, 2010 for an equivalent amount of a newly created series of redeemable preferred stock of General Growth. Such preferred stock would provide for an equivalent 8.95% annual preferred distribution and would be redeemable at the option of General Growth for cash equal to the liquidation preference amount plus accrued and unpaid distributions. The RPUs have been reflected in the accompanying consolidated financial statements as a component of minority interest at the current total liquidation preference amount of $175,000. As of December 31, 2000, the Company owned an approximate 73% general partnership interest in the Operating Partnership (excluding its preferred units of partnership interest as discussed below). The remaining approximate 27% minority interest in the Operating Partnership is held by limited partners that include trusts for the benefit of the families of the original stockholders who initially owned and controlled the Company and subsequent contributors of properties to the Company. These minority interests are represented by common units of limited partnership interest in the Operating Partnership (the "Units"). The Units can be redeemed at the option of the holders for cash or, at General Growth's election with certain restrictions, for shares of Common Stock on a one-for-one basis. The holders of the Units also share equally with General Growth's common stockholders on a per share basis in any distributions by the Operating Partnership on the basis that one Unit is equivalent to one share of Common Stock. In connection with the issuance of the Depositary Shares and in order to enable General Growth to comply with its obligations in respect to the PIERS, the Operating Partnership Agreement was amended to provide for the issuance to General Growth of preferred units of limited partnership interest (the "Preferred Units") in the Operating Partnership which have rights, preferences and other privileges, including distribution, liquidation, conversion and redemption rights, that mirror those of the PIERS. Accordingly, the Operating Partnership is required to make all required distributions on the Preferred Units prior to any distribution of cash or assets to the holders of the Units. At December 31, 2000, 100% of the Preferred Units of the Operating Partnership (337,500) were owned by General Growth. F-10 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) Changes in outstanding Operating Partnership Units (excluding the Preferred Units) for the three years ending December 31, 2000, are as follows:
Units ----- December 31, 1997 18,763,955 Acquisition of Southwest Plaza 505,420 Acquisition of Altamonte Mall 3,683,143 Acquisition of Mall St. Vincent 111,181 Conversion to common stock (3,232,345) ---------- December 31, 1998 19,831,354 Conversion to common stock (33,162) ---------- December 31, 1999 19,798,192 ---------- Acquisition of outparcel at Greenwood Mall 7,563 Conversion to common stock (212,050) ---------- December 31, 2000 19,593,705 ==========
Business Segment Information The Financial Accounting Standards Board (the "FASB") issued Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("Statement 131") in June of 1997. Statement 131 requires disclosure of certain operating and financial data with respect to separate business activities within an enterprise. The sole business of General Growth and its consolidated affiliates is the owning and operation of shopping centers. General Growth evaluates operating results and allocates resources on a property-by-property basis. General Growth does not distinguish or group its consolidated operations on a geographic basis. Accordingly, General Growth has concluded it currently has a single reportable segment for Statement 131 purposes. Further, all operations are within the United States and no customer or tenant comprises more than 10% of consolidated revenues. F-11 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) NOTE 2 Principles of Consolidation SUMMARY OF The accompanying consolidated financial statements include SIGNIFICANT the accounts of the Company consisting of the fifty-three ACCOUNTING centers and the unconsolidated investments in GGP/Homart, POLICIES GGP/Homart II, GGP Ivanhoe, GGP Ivanhoe III, Quail Springs Mall, Town East Mall and GGMI. All significant intercompany balances and transactions have been eliminated. Revenue Recognition Minimum rent revenues are recognized on a straight-line basis over the term of the related leases. Overage rents are recognized on an accrual basis once tenant sales revenues exceed contractual tenant lease annual thresholds. Recoveries from tenants for taxes, insurance and other shopping center operating expenses are recognized as revenues in the period the applicable costs are incurred. (See also Note 12.) The Company provides an allowance for doubtful accounts against the portion of accounts receivable which is estimated to be uncollectible. Such allowances are reviewed periodically based upon the recovery experience of the Company. Accounts receivable in the accompanying consolidated balance sheets are shown net of an allowance for doubtful accounts of $7,665 and $7,600 as of December 31, 2000 and 1999, respectively. Cash And Cash Equivalents The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The cash and cash equivalents of the Company are held at two financial institutions. Deferred Expenses Deferred expenses consist principally of financing fees and leasing commissions, which are amortized over the terms of the respective agreements. Deferred expenses in the accompanying consolidated balance sheets are shown at cost, net of accumulated amortization of $52,240 and $38,004 as of December 31, 2000 and 1999, respectively. Fair Value of Financial Investments Statement No. 107, Disclosure about the Fair Value of Financial Instruments, ("SFAS No. 107"), issued by the Financial Accounting Standards Board ("FASB"), requires the disclosure of the fair value of the Company's financial instruments for which it is practicable to estimate that value, whether or not such instruments are recognized in the consolidated balance sheets. SFAS No. 107 does not apply to all balance sheet items and the Company has utilized market information as available or present value techniques to estimate the SFAS No. 107 values required to be disclosed. Since such values are estimates, there can be no assurance that the SFAS No. 107 value of any financial instrument could be realized by immediate settlement of the instrument. The Company considers the carrying value of its cash and cash equivalents to approximate the SFAS No. 107 value due to the short maturity of these investments. Based on borrowing rates available to the Company at the end of 2000 for mortgage loans with similar terms and maturities, the SFAS No. 107 value of the F-12 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) mortgage notes and other debts payable approximates carrying value at December 31, 2000 and 1999. In addition, the Company estimates that the SFAS No. 107 value of its interest rate cap agreements (Note 5) at December 31, 2000 is approximately $344. The Company has no other significant financial instruments. Acquisitions Acquisitions of properties are accounted for utilizing the purchase method and, accordingly, the results of operations are included in the Company's results of operations from the respective dates of acquisition. The Company has financed the acquisitions through the date of this report through a combination of secured and unsecured debt, issuance of Operating Partnership Units and the proceeds of the public offerings of Depositary Shares and Common Stock as described in Note 1. Properties Real estate assets are stated at cost. Interest and real estate taxes incurred during construction periods are capitalized and amortized on the same basis as the related assets. The real estate assets of the Company 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 income is less than its carrying value. To the extent an impairment has occurred, the excess of carrying value of the asset over its estimated fair value will be charged to income. Depreciation expense is computed using the straight-line method based upon the following estimated useful lives:
Years ----- Buildings and improvements......................... 40 Equipment and fixtures............................. 10
Construction allowances paid to tenants are capitalized and depreciated over the average lease term. Maintenance and repairs are charged to expense when incurred. Expenditures for significant betterments and improvements are capitalized. Investments In Unconsolidated Affiliates The Company accounts for its investments in unconsolidated affiliates using the equity method whereby the cost of an investment is adjusted for the Company's share of equity in net income or loss from the date of acquisition and reduced by distributions received. The Company generally shares in the profit and losses, cash flows and other matters relating to its unconsolidated affiliates in accordance with its respective ownership percentages. However, due to currently unpaid and accrued preferences on the GGMI preferred stock as described in Note 4, the Company was entitled to 100% of the earnings (loss) and cash flows generated by GGMI in 2000, 1999 and 1998. In addition, differences between the Company's carrying value of its investment in the unconsolidated affiliates and the Company's share of the underlying equity of such unconsolidated affiliates are amortized over the respective lives of the unconsolidated affiliates. F-13 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) Income Taxes General Growth elected to be taxed as a real estate investment trust under sections 856-860 of the Internal Revenue Code of 1986 (the "Code"), commencing with its taxable year beginning January 1, 1993. In order to qualify as a real estate investment trust, General Growth is required to distribute at least 95% (90% in 2001 and subsequent years) of its ordinary taxable income and 100% of capital gains to stockholders and to meet certain asset and income tests as well as certain other requirements. As a real estate investment trust, General Growth will generally not be liable for Federal income taxes, provided it satisfies the necessary requirements. Accordingly, the consolidated statements of operations do not reflect a provision for income taxes. State income taxes are not significant. One of the Company's affiliates, GGMI, is a taxable corporation and accordingly, state and Federal income taxes on its net taxable income are payable by GGMI. Earnings Per Share ("EPS") Basic per share amounts are based on the weighted average of common shares outstanding of 52,058,320 for 2000, 45,940,104 for 1999 and 36,190,367 for 1998. Diluted per share amounts are based on the total number of weighted average common shares and dilutive securities (stock options) outstanding of 52,096,331 for 2000, 46,030,559 for 1999, and 36,381,914 for 1998. The effect of the issuance of the PIERS is anti- dilutive with respect to the Company's calculation of diluted earnings per share for the year ended December 31, 2000, 1999 and 1998 and therefore has been excluded. However, certain options outstanding were not included in the computation of diluted earnings per share either because the exercise price of the options was higher than the average market price of the Common Stock for the applicable periods and therefore, the effect would be anti-dilutive or because the conditions which must be satisfied prior to the issuance of any such shares were not achieved during the applicable periods. The outstanding Units have been excluded from the diluted earnings per share calculation as there would be no effect on the EPS amounts since the minority interests' share of income would also be added back to net income. F-14 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) The following are the reconciliations of the numerators and denominators of the basic and diluted EPS:
Year ended December 31, ---------------------------- 2000 1999 1998 -------- -------- -------- Numerators: Income before extraordinary items $137,948 $114,921 $ 71,194 Dividends on PIERS (24,467) (24,467) (13,433) -------- -------- -------- Income available to common stockholders before extraordinary items - for basic and diluted EPS $113,481 90,454 $ 57,761 Extraordinary items - (13,796) (4,749) -------- -------- -------- Net income available to common stockholders - for basic and diluted EPS $113,481 $ 76,658 $ 53,012 ======== ======== ======== Denominators: Weighted average common shares outstanding (in thousands) - for basic EPS 52,058 45,940 36,190 Effect of dilutive securities - options 38 91 192 -------- -------- -------- Weighted average common shares outstanding (in thousands) - for diluted EPS 52,096 46,031 36,382 ======== ======== ========
Minority Interest Income before minority interest is allocated to the limited partners (the "Minority Interest") based on their ownership percentage of the Operating Partnership. The ownership percentage is determined by dividing the numbers of Operating Partnership Units held by the Minority Interest by the total Operating Partnership Units (excluding Preferred Units) outstanding. The issuance of additional shares of Common Stock or Operating Partnership Units changes the percentage ownership of both the Minority Interest and the Company. Since a Unit is generally redeemable for cash or Common Stock at the option of the Company, it may be deemed to be equivalent to a common share. Therefore, such transactions are treated as capital transactions and result in an allocation between stockholders' equity and Minority Interest in the accompanying balance sheets to account for the change in the ownership of the underlying equity in the Operating Partnership. Comprehensive Income Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" requires that the Company disclose comprehensive income in addition to net income. Comprehensive income is a more inclusive financial reporting methodology that encompasses net income and all other changes in equity except those resulting from investments by and distributions to equity holders. Included in comprehensive income but not net income is unrealized holding gains or losses on marketable securities classified as available-for-sale. Although General Growth and its F-15 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) consolidated affiliates do not have any available-for-sale securities, one of its unconsolidated affiliates received common stock of Simon Property Group, Inc. as part of a 1998 transaction. Unrealized holding gains or losses on such securities through December 31, 1998 were not significant and were not reflected. However, during 1999 the Company reduced its carrying amount for its investment in such unconsolidated affiliate by $2,436 and reflected $1,714 as other comprehensive loss, net of minority interest of $722, as its equity in such unconsolidated affiliate's cumulative unrealized holding loss on such securities. For the year ended December 31, 2000 there were holding gains on such securities of $177, net of minority interest of $67 which were recorded. Estimates The preparation of financial statements in conformity with generally accepted accounting principles 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. Actual results could differ from those estimates. Reclassifications The consolidated financial statements for prior periods have been reclassified to conform with current classifications with no effect on results of operations. NOTE 3 PROPERTY Wholly-Owned Properties ACQUISITIONS 2000 AND DEVELOPMENTS During September 1999, St. Cloud Funding, L.L.C., a wholly- owned subsidiary of the Operating Partnership ("St. Cloud Funding"), agreed to advance approximately $31,000 to an unaffiliated developer in the form of a second mortgage loan (bearing interest at 15% per annum) collateralized by such developer's ownership interest in Crossroads Center in St. Cloud (Minneapolis), Minnesota. Contemporaneously with the loan, St. Cloud Mall L.L.C., all of the interests of which are owned by the Company ("St. Cloud Mall"), was granted an option to acquire the property in 2002. The loan had a scheduled maturity of June 1, 2004 which was accelerated in February 2000 to April 28, 2000. In conjunction with the maturity date modification, a put option agreement was executed which would permit the borrower (after March 15, 2000) to require St. Cloud Mall to purchase the property. In addition, St. Cloud Mall's purchase option was advanced to April 2000. On March 15, 2000, the borrower notified St. Cloud Mall of the exercise of the put option. Pursuant to the put option agreement, on April 26, 2000, St. Cloud Mall purchased the property at a price equal to approximately $2,000 plus the then outstanding balances of the first mortgage (approximately $46,600) and St. Cloud Funding's second mortgage. 1999 On January 11, 1999, the Company acquired a 100% ownership interest in The Crossroads Mall in Kalamazoo, Michigan. The aggregate purchase price was approximately $68,000 (subject to pro-rations and certain adjustments), which was F-16 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) funded initially from a new $83,655 short-term floating rate interim loan. In May 1999, a new $45,000 ten-year non- recourse mortgage loan collateralized by the property was obtained. On July 30, 1999, the Company acquired a 100% ownership interest in the Ala Moana Center in Honolulu, Hawaii. The price paid to the seller was $810,000 (before closing adjustments, including a credit for the cost to complete an ongoing expansion project), and was funded with the proceeds of a short-term first mortgage loan of approximately $438,000 and approximately $294,000 in cash including a portion of the net proceeds from the 1999 Offering. The short-term floating rate loan was fully repaid on August 26,1999 with the proceeds of the issuance of commercial mortgage-backed securities. On October 28, 1999, the Company acquired Baybrook Mall in Houston, Texas. The aggregate consideration paid by the Company was approximately $133,000 (subject to pro-rations and certain adjustments), which was paid in cash (raised primarily through new long-term financing on other previously unsecured properties), and a new 10-year $95,000 non-recourse loan. 1998 On April 2, 1998, the Company acquired Southwest Plaza located in Denver, Colorado. On May 8, 1998, the Company completed the acquisition of Northbrook Court Shopping Center located in Northbrook (Chicago), Illinois. The aggregate purchase price for Southwest Plaza and Northbrook Court was approximately $261,000, including approximately $149,000 of assumed debt. The Company contributed Northbrook Court to GGP/Homart II in November 1999 as described in Note 4. On June 2, 1998, the Company acquired the U.S. retail property portfolio (the "MEPC Portfolio") of MEPC plc, a United Kingdom based real estate company ("MEPC"), through the purchase of the stock of the three U.S. subsidiaries of MEPC ("MEPC U.S. Subsidiaries") that directly or indirectly owned the MEPC Portfolio. The Company acquired the MEPC Portfolio for approximately $871,000 (less certain adjustments for tenant allowances, construction costs, MEPC U.S. Subsidiary liabilities and other items). The Company borrowed approximately $830,000 to finance the purchase price for the stock, which was paid in cash at closing as more fully described in Note 5. The MEPC Portfolio consists of eight enclosed mall shopping centers: Apache Mall in Rochester, Minnesota; The Boulevard Mall in Las Vegas, Nevada; Cumberland Mall in Atlanta, Georgia; McCreless Mall in San Antonio, Texas; Northridge Fashion Center in Northridge (Los Angeles), California; Regency Square Mall in Jacksonville, Florida; Riverlands Shopping Center in LaPlace, Louisiana and Valley Plaza Mall in Bakersfield, California. On July 21, 1998, the Company acquired Altamonte Mall in Altamonte Springs (Orlando), Florida. The aggregate consideration paid for Altamonte Mall was $169,000 (subject to prorations and certain adjustments), part of which was paid by the payoff of approximately $24,000 of indebtedness assumed at acquisition with cash F-17 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) borrowed under the Company's line of credit facility (the "Credit Facility") as described in Note 5, and the balance of which was paid by the issuance of 3,683,143 Units. The Company contributed Altamonte Mall to GGP/Homart II in November, 1999 as described in Note 4. On September 3, 1998, the Company acquired Pierre Bossier Mall in Bossier City (Shreveport), Louisiana. The aggregate consideration paid for Pierre Bossier Mall was approximately $52,700 (subject to prorations and certain adjustments) which was paid in the form of approximately $10,000 in cash (borrowed under the Company's Credit Facility), a new mortgage loan (obtained from an independent third party) of approximately $42,000 and the assumption of approximately $700 of existing debt. The Company had previously loaned the sellers approximately $50,000 in early 1999 and received an option to buy the property. In conjunction with the closing of the sale, the loan was fully repaid. On September 15, 1998, the Company acquired Spring Hill Mall in West Dundee (Chicago), Illinois. The aggregate consideration paid by the Company was approximately $124,000 (subject to prorations and certain adjustments) which was paid in the form of approximately $32,000 in cash (borrowed under the Company's Credit Facility) and a new ten year fixed rate $92,000 mortgage loan. On September 18, 1998, the Company acquired Coastland Center in Naples, Florida, for approximately $114,500 in cash (subject to prorations and certain adjustments). The aggregate consideration paid was borrowed under the Company's Credit Facility. On October 21, 1998, the Company acquired Mall St. Vincent in Shreveport, Louisiana. The aggregate consideration paid for Mall St. Vincent was $26,400 (subject to prorations and certain adjustments) which was paid by issuing 200,052 Units, of which 88,871 were immediately redeemed for cash (borrowed under the Company's Credit Facility) upon demand of the holders of such Units, and by assuming approximately $19,200 of mortgage debt. Developments During the three year period ending December 31, 2000, the Company was developing or had completed construction at the following three development sites: Coralville (Iowa City), Iowa; Grandville (Grand Rapids), Michigan and Frisco (Dallas), Texas. Coral Ridge Mall, located in Coralville (Iowa City), Iowa was completed and opened in July 1998. Construction of the Grandville (Grand Rapids) mall (RiverTown Crossings) commenced in December 1997, and opened in November 1999. Construction of Stonebriar Centre, currently owned by GGP/Homart II, located in Frisco (Dallas), Texas commenced in October of 1999 and opened in August of 2000. The Company has an ongoing program of renovations and expansions at its properties including significant projects currently under construction at the Park Mall in Tuscon, Arizona; Eden Prairie Mall in Eden Prairie (Minneapolis), Minnesota; and Knollwood Mall in St. Louis Park (Minneapolis), Minnesota. In addition, the Company has commenced construction of an integrated broadband distribution system that will F-18 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) provide tenants at its properties with a private wide-area network as well as supporting applications and equipment (the "Broadband System"). The Company has already incurred the majority of these network costs (financed or to be financed by fixed-rate intermediate term equipment financing) and anticipates having the majority of its regional shopping centers wired for such broadband connectivity by the end of the second quarter of 2001. During 1999, the Company formed a joint venture to develop a regional mall in Westlake (Dallas), Texas. As of December 31, 2000, the Company had invested approximately $14,460 in the joint venture. The Company is currently obligated to fund pre-development costs (estimated to be approximately $1,545, most of which has been incurred). Actual development costs are not resolved at this time. The retail site, part of a planned community which is expected to contain a resort hotel, a golf course, luxury homes and corporate offices, is currently planned to contain up to 1.6 million square feet of tenant space including up to six anchor stores and a multi-screen theater. There can be no assurance that development of this site will proceed beyond the pre- development phase. The Company also owns and is investigating certain other potential development sites, including sites in Toledo, Ohio and West Des Moines, Iowa but there can be no assurance that development of these sites will proceed. NOTE 4 GGP/Homart INVESTMENTS IN The Company owns 50% of GGP/Homart with the remaining UNCONSOLIDATED ownership interest held by the New York State Common AFFILIATES Retirement Fund, an institutional investor. GGP/Homart has elected to be taxed as a REIT. The Company's co-investor in GGP/Homart has an exchange right under the GGP/Homart Stockholders Agreement, which permits it to convert its ownership interest in GGP/Homart to shares of Common Stock of General Growth. If such exchange right is exercised, the Company may alternatively satisfy such exchange in cash. In early 1999, the Company received notice that an institutional investor (which then owned an approximate 4.7% interest in GGP/Homart) desired to exercise its exchange right. The Company satisfied the exercise of such exchange right (effective as of January 1, 1999) by issuing 1,052,182 shares of Common Stock, thereby increasing its ownership interest in GGP/Homart from approximately 38.2% in 1998 to approximately 42.9% for the first quarter of 1999. During the second quarter of 1999, two other co-investors (which then owned in the aggregate an approximate 7.1% interest in GGP/Homart) notified the Company that they desired to exercise their exchange rights. The Company satisfied the exercise of such exchange rights (effective as of April 1, 1999) by issuing an aggregate of 1,551,109 shares of Common Stock, thereby increasing its ownership interest in GGP/Homart to 50%. GGP/Homart II In November 1999, the Company, together with New York State Common Retirement Fund, the Company's co-investor in GGP/Homart, formed GGP/Homart II, a Delaware limited liability company which is owned equally. GGP/Homart II owns F-19 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) 100% interests in Stonebriar Centre in Frisco (Dallas), Texas, Altamonte Mall in Altamonte Springs (Orlando), Florida, Natick Mall in Natick (Boston), Massachusetts and Northbrook Court in Northbrook (Chicago), Illinois which were contributed by the Company; and 100% interests in Alderwood Mall in Lynnwood (Seattle), Washington; Carolina Place in Charlotte, North Carolina; and Montclair Plaza in Los Angeles, California which were contributed by the New York State Common Retirement Fund. Certain of the malls were contributed subject to existing financing in order to balance the net equity values of the malls contributed by each of the venture partners. According to the membership agreement between the venture partners, the Company and its joint venture partner share in the profits and losses, cash flows and other matters relating to GGP/Homart II in accordance with their respective ownership percentages. GGP Ivanhoe III On July 23, 1998, effective as of June 30, 1998, GGP Ivanhoe III acquired the U.S. Prime Property, Inc. ("USPPI") portfolio through a merger of a wholly-owned subsidiary of GGP Ivanhoe III into USPPI. The common stock of GGP Ivanhoe III is owned 51% by the Company and 49% by an affiliate of Ivanhoe Inc. of Montreal, Quebec, Canada ("Ivanhoe"). GGP Ivanhoe III has elected to be taxed as a REIT. The aggregate consideration paid pursuant to the merger agreement was approximately $625,000 (less certain adjustments, including a credit of approximately $64,000 for outstanding mortgage indebtedness and accrued interest thereon and other miscellaneous items). The acquisition was financed with a $392,000 acquisition loan bearing interest at LIBOR plus 90 basis points which became due July 1, 1999, (subsequently extended and repaid in September 1999 as described below) and capital contributions from the Company and the "joint venture partner" in proportion to their respective stock ownership. Pursuant to the GGP Ivanhoe III stockholders' agreement, the Company initially contributed approximately $91,290 to GGP Ivanhoe III (less certain interest and other credits). The Company's capital contributions were funded primarily with borrowing under the Company's Credit Facility. The properties acquired include: Landmark Mall in Alexandria, Virginia; Mayfair Mall and adjacent office buildings in Wauwatosa (Milwaukee), Wisconsin; Meadows Mall in Las Vegas, Nevada; Northgate Mall in Chattanooga, Tennessee; Oglethorpe Mall in Savannah, Georgia; and Park City Center in Lancaster, Pennsylvania. Effective as of September 28, 1999, GGP Ivanhoe III acquired, through its wholly-owned subsidiary, Oak View Mall in Omaha, Nebraska from an unrelated third party. In addition, on December 22, 1999, GGP Ivanhoe III acquired Eastridge Shopping Center in San Jose, California. The aggregate purchase price for the two properties was approximately $160,000. A portion of the purchase price was financed with an $83,000 ten-year mortgage loan, collateralized by the Oak View Mall which bears interest at 7.71% per annum (and requires monthly payments of principal and interest based upon a 30-year amortization schedule). The remainder of the purchase price was funded by capital contributions from the Company and Ivanhoe in proportion to their respective stock ownership in GGP Ivanhoe III and short-term loans of approximately $30,000 bearing interest at LIBOR (6.56% at December 31, 2000) plus 185 basis F-20 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) points and maturing in June 2001. The Company's capital contributions were funded primarily from proceeds from the Company's Credit Facility. On September 30, 1999, GGP Ivanhoe III repaid the $392,000 acquisition loan with its allocated portion of the proceeds of the issuance of commercial mortgage-backed securities as described in Note 5 and capital contributions of approximately $26,000 and $25,000 from each of the Company and Ivanhoe, respectively. In conjunction with the repayment, GGP Ivanhoe III expensed previously unamortized deferred financing costs, the Company's share of which (approximately $1,799) has been reflected as an extraordinary item for the year ended December 31, 1999. The joint venture partner in GGP Ivanhoe III is also the Company's joint venture partner in GGP Ivanhoe (described below). The Company and Ivanhoe share in the profits and losses, cash flows and other matters relating to GGP Ivanhoe III in accordance with their respective ownership percentages except that certain major operating and capital decisions (as defined in the stockholders' agreement) require the approval of both stockholders. Accordingly, the Company is accounting for GGP Ivanhoe III using the equity method. GGP Ivanhoe GGP Ivanhoe owns The Oaks Mall in Gainesville, Florida and Westroads Mall in Omaha, Nebraska. The Company contributed approximately $43,700 for its 51% ownership interest in GGP Ivanhoe and Ivanhoe owns the remaining 49% ownership interest. The terms of the stockholders' agreement are similar to those of GGP Ivanhoe III. Town East Mall / Quail Springs Mall The Company owns a 50% interest in Town East Mall, located in Mesquite, Texas and a 50% interest in Quail Springs Mall in Oklahoma City, Oklahoma. The Company shares in the profits and losses, cash flows and other matters relating to Town East Mall and Quail Springs Mall in accordance with its ownership percentage. GGMI At December 31, 2000, the Operating Partnership owned all of the non-voting preferred stock of GGMI representing 95% of the equity interest. Certain key current and former employees of the Company held the remaining 5% equity interest through ownership of 100% of the common stock of GGMI, which was entitled to all voting rights in GGMI. Accordingly, the Company utilized the equity method to account for its ownership interest in GGMI. As no preferred stock dividends had been paid by GGMI, the Company had been allocated 100% of the earnings (loss) and cash flows generated by GGMI since 1996. The Operating Partnership also had advanced funds to GGMI, at interest rates ranging from 8% to 14% per annum, which were scheduled to mature by 2016. The loans required payment of interest only until maturity. GGMI manages, leases, and performs various other services for the Portfolio Centers and other properties owned by unaffiliated third parties. F-21 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) On January 1, 2001 the Company acquired 100% of the common stock of GGMI. In connection with the acquisition, the GGMI preferred stock owned by the Company was cancelled and approximately $40,000 of the outstanding loans owed by GGMI to the Company were contributed to the capital of GGMI. In addition, the Company and GGMI concurrently terminated the management contracts for the Wholly-Owned Centers as the management activities will be performed directly by the Company. The operations of GGMI will be fully consolidated with the Company but GGMI will continue to manage, lease, and perform various other services for the Unconsolidated Centers and other properties owned by unaffiliated third parties. During 2001, the Company will elect for GGMI to be treated as a taxable REIT subsidiary (a "TRS") as permitted by the Tax Relief Extension Act of 1999. F-22 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) SUMMARIZED FINANCIAL INFORMATION OF INVESTMENTS IN UNCONSOLIDATED REAL ESTATE AFFILIATES Following is summarized financial information for the Company's Unconsolidated Real Estate Affiliates as of December 31, 2000 and 1999 and for the years ended December 31, 2000, 1999 and 1998. CONDENSED BALANCE SHEETS
December 31, 2000 All Other Real Estate GGP/Homart GGP/Homart II Affiliates ---------- ------------- ----------- Assets: Net investment in real estate $1,437,600 $1,240,709 $1,164,122 Investment in real estate joint ventures 49,563 - - Other assets 116,242 80,866 69,362 ---------- ---------- ---------- $1,603,405 $1,321,575 $1,233,484 ========== ========== ========== Liabilities and Owners' Equity: Mortgage and other notes payable $1,134,346 $ 621,924 $ 728,343 Accounts payable and accrued expenses 38,712 38,018 49,195 Owners' equity 430,347 661,633 $ 455,946 ---------- ---------- ---------- $1,603,405 $1,321,575 $1,233,484 ========== ========== ==========
December 31, 1999 All Other Real Estate GGP/Homart GGP/Homart II Affiliates ---------- ------------- ----------- Assets: Net investment in real estate $1,225,379 $1,178,202 $1,145,385 Investment in real estate joint ventures 110,540 - - Other assets 116,817 293,721 51,826 ---------- ---------- ---------- $1,452,736 $1,471,923 $1,197,211 ========== ========== ========== Liabilities and Owners' Equity: Mortgage and other notes payable $ 945,553 $ 641,850 $ 733,935 Accounts payable and accrued expense 37,941 41,886 36,733 Owners' equity 469,242 788,187 426,543 ---------- ---------- ---------- $1,452,736 $1,471,923 $1,197,211 ========== ========== ==========
CONDENSED STATEMENTS OF OPERATIONS
December 31, 2000 All Other Real Estate GGP/Homart GGP/Homart II Affiliates ---------- ------------- ----------- Revenues: Tenant rents $254,275 $146,730 $199,709 Operating expenses (1) 146,138 81,678 117,266 -------- -------- -------- Operating Income (loss) 108,137 65,052 82,443 Interest expense, net (2) (73,098) (34,914) (53,128) Equity in net income of unconsolidated real estate affiliates 4,333 - - Gain on property sales (1,811) - - Income allocated to minority interest (408) - - -------- -------- -------- Net Income (loss) $ 37,153 $ 30,138 $ 29,315 ======== ======== ========
F-23 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts)
December 31, 1999 All Other Real Estate GGP/Homart GGP/Homart II Affiliates ---------- ------------- ----------- Revenues: Tenant rents $224,599 $12,535 $163,445 Operating expenses (1) 129,465 6,590 $ 93,699 -------- ------- -------- Operating Income (loss) 95,134 5,945 69,746 Interest expense, net (2) (60,814) (1,758) (45,624) Equity in net income of unconsolidated real estate affiliates 5,504 - - Gain on property sales 816 - Extraordinary Item (3,528) Income allocated to minority interest (808) - - -------- ------- -------- Net Income (loss) $ 39,832 $ 4,187 $ 20,594 ======== ======= ======== December 31, 1998 All Other Real Estate GGP/Homart GGP/Homart II Affiliates ---------- ------------- ----------- Revenues: Tenant rents $184,783 $ - $103,803 Operating expenses (1) 107,717 - 54,530 -------- ------- -------- Operating Income (loss) 77,066 - 49,273 Interest expense, net (2) (47,799) (29,882) Equity in net income of unconsolidated real estate affiliates 5,011 - - Gain on property sales 13,182 - - Income allocated to minority interest (705) - - -------- ------- -------- Net Income (loss) $ 46,755 $ - $ 19,391 ======== ======= ========
Significant accounting policies used by the Unconsolidated Real Estate Affiliates are the same as those used by the Company. -------- (1) Includes depreciation and amortization. (2) Includes extraordinary items. F-24 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) NOTE 5 MORTGAGE Mortgage notes and other debts payable at December 31, 2000 NOTES AND OTHER and 1999 consisted of the following: DEBTS PAYABLE
December 31, 2000 1999 ---------- ---------- Fixed-Rate debt Mortgage and other notes payable $1,832,783 $1,724,854 Variable-Rate debt Mortgage notes payable 1,146,343 1,234,680 Credit Facility and bank loans 265,000 160,000 ---------- ---------- Total Variable-Rate debt 1,411,343 1,394,680 ---------- ---------- Total $3,244,126 $3,119,534 ========== ==========
FIXED RATE DEBT Mortgage Notes Payable The fixed-rate mortgage notes bear interest ranging from 6.41% to 10.00% per annum (weighted average of 7.01% per annum), require monthly payments of principal and/or interest and have various maturity dates through 2020 (weighted average remaining term of 5.0 years). Certain properties are pledged as collateral for the related mortgage notes. The mortgage notes payable as of December 31, 2000 are non-recourse to the Company (except to the extent of supplemental guarantees executed by the Company). Certain loans have cross-default provisions and are cross- collateralized as part of a group of properties. Under certain cross-default provisions, a default under any mortgage notes included in a cross-defaulted package may constitute a default under all such mortgage notes and may lead to acceleration of the indebtedness due on each property within the collateral package. In general, the cross-defaulted properties are under common ownership. However, GGP Ivanhoe debt collateralized by two GGP Ivanhoe centers totaling $125,000 is cross-defaulted and cross- collateralized with debt collateralized by eleven Wholly- Owned centers. GGP Ivanhoe III debt collateralized by five GGP Ivanhoe III centers totaling $341,019 is cross-defaulted and cross-collateralized with debt collateralized by four Wholly-Owned Centers. VARIABLE RATE DEBT Mortgage Notes Payable Variable mortgage notes payable at December 31, 2000 consist primarily of the approximate $110,000 outstanding on the construction loan collateralized by Rivertown Crossings as described below, approximately $130,000 of non-recourse financing collateralized by a pool of six Wholly-Owned properties and approximately $856,350 of collateralized mortgage-backed securities as described below. The loans bear interest at a rate per annum equal to LIBOR plus 90 to 250 basis points. Commercial Mortgage-Backed Securities In August 1999, the Company issued $500,000 of commercial mortgage-backed securities, collateralized by the Ala Moana Center (see Note 3), with a maturity date of September 10, 2004 assuming the exercise by the Company of no-cost extension F-25 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) options aggregating two years. The securities (the "Ala Moana CMBS") are comprised of notes which bear interest at rates per annum ranging from LIBOR plus 50 basis points to LIBOR plus 275 basis points (weighted average equal to LIBOR plus 95 basis points), calculated and payable monthly. In conjunction with the issuance of the Ala Moana CMBS, the Company arranged for an interest rate cap agreement, the effect of which will limit the maximum interest rate the Company will be required to pay on the securities to 9% per annum. Payments received pursuant to the interest rate cap agreement for the year ended December 31, 2000 were approximately $77, which were reflected as a reduction in net interest expense. Approximately $438,000 of the proceeds from the sale of the Ala Moana CMBS was used by the Company to repay the short-term mortgage loan obtained in July, 1999 to enable it to purchase the Ala Moana Center. The remainder was utilized by the Company for general working capital purposes including paydowns on the Company's Credit Facility. In September 1999, the Company issued $700,229 of commercial mortgage backed securities with a maturity date of October 10, 2004, assuming the exercise of no-cost extension options aggregating two years, cross-collateralized and cross- defaulted by a portfolio of nine regional malls and an office complex adjacent to one of the regional malls. The properties in the portfolio are Mayfair Mall and adjacent office buildings in Wauwatosa (Milwaukee), Wisconsin; Park City Center in Lancaster, Pennsylvania; Oglethorpe Mall in Savannah, Georgia; Landmark Mall in Alexandria, Virginia, all centers owned by GGP Ivanhoe III; and Northgate Mall in Chattanooga, Tennessee; The Boulevard Mall in Las Vegas, Nevada; Regency Square Mall in Jacksonville, Florida; Valley Plaza Shopping Center in Bakersfield, California; Northridge Fashion Center in Northridge (Los Angeles), California, all Wholly-Owned Centers. The securities (the "GGP-Ivanhoe CMBS") are comprised of notes which bear interest at rates per annum ranging from LIBOR plus 52 basis points to LIBOR plus 325 basis points (weighted average equal to LIBOR plus approximately 109 basis points), calculated and payable monthly. In conjunction with the issuance of the GGP-Ivanhoe CMBS, the Company arranged for an interest rate cap agreement, the effect of which will limit the maximum interest rate the Company will be required to pay on the securities to 9.03% per annum. Payments received pursuant to the interest rate cap agreement for the year ended December 31, 2000 were approximately $366, which were reflected as a reduction in net interest expense. Approximately $340,000 of the proceeds from the sale of the GGP-Ivanhoe CMBS repaid amounts collateralized by the GGP Ivanhoe III properties in the GGP-Ivanhoe CMBS Portfolio of properties and the remaining approximately $360,000 repaid amounts collateralized by Wholly-Owned properties in the GGP-Ivanhoe CMBS portfolio of properties. Credit Facility The Company's $200,000 unsecured revolving Credit Facility was originally scheduled to mature on July 31, 2000. On June 23, 2000, the Company prepaid all remaining outstanding principal amounts and terminated the Credit Facility. The Credit Facility bore interest at a floating rate per annum equal to LIBOR plus 80 to 120 basis points depending upon the Company's leverage ratio. The Credit Facility F-26 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) was subject to financial performance covenants including debt-to-market capitalization, minimum earnings before interest, taxes, depreciation and amortization ("EBITDA") ratios and minimum equity values. As of July 31, 2000 the Company obtained a new unsecured revolving credit facility (the "Revolver") in a maximum aggregate principal amount of $135,000 (increased to $160,000 in September 2000). At December 31, 2000 the outstanding balance of the Revolver was $35,000. The Revolver has a maturity of July 31, 2003 and bears interest at a floating rate per annum equal to LIBOR plus 100 to 190 basis points, depending on the Company's average leverage ratio. The Revolver is subject to financial performance covenants including debt to value and net worth ratios, EBITDA ratios and minimum equity values. Interim Financing In January 1999, the Company obtained an additional $30,000 unsecured bank loan, which bore interest at a floating market rate (average rate equal to 6.46% per annum). The Company had obtained in November 1998 a thirteen-month loan in the principal amount of $55,000 collateralized by a negative pledge (i.e., the promise not to encumber) of Coastland Center in Naples, Florida. These loans were repaid on May 21, 1999 with a ten-year 7.0% mortgage loan in the principal amount of $87,000 collateralized by Coastland Center. In January 1999, the Company obtained an additional $83,655 floating rate (7.27% at September 30, 1999) interim loan (originally scheduled to mature June 1, 1999) which was expected to be replaced or refinanced by the maturity date with new mortgage financing. During May, 1999, the Company obtained a new $45,000 mortgage loan collateralized by The Crossroads Mall in Kalamazoo, Michigan. The loan, which bears interest at 7.40% and matures on June 1, 2009, partially repaid the interim loan and the maturity of the remaining balance, approximately $38,655 at June 30, 1999, was extended and repaid in October 1999 with a portion of the proceeds of the six property two-year non-recourse mortgage pool financing described below. In April 1999, the Company obtained an additional $25,000 bank loan, partially secured by Park Mall in Tucson, Arizona. In October 1999, the loan was increased to $50,000. The loan matures November 15, 2002 as extended, bears interest at a rate per annum of LIBOR plus 175 basis points and is expected to be further extended and then replaced by maturity with a $90,000 construction loan facility to be collateralized by Park Mall which is currently undergoing extensive renovation, with the final phase of renovation expected to be completed in 2001. On July 30, 1999, the Company obtained a three month loan in the principal amount of $25,000, collateralized by a negative pledge (i.e., the promise not to encumber) of Eagle Ridge Mall in Lake Wales, Florida. The proceeds of the loan were distributed to the Operating Partnership to fund ongoing acquisition and development activity. The short-term loan bore interest at a rate per annum of LIBOR plus 175 basis points. This loan was refinanced in October 1999 with a portion of the proceeds of the six-property two-year non- recourse mortgage pool financing described below. F-27 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) In September 1999, the Company obtained an additional $95,000 unsecured floating rate (LIBOR plus 250 basis points) interim loan which was scheduled to mature July 31, 2000. The loan provided for periodic principal payments ($12,000 paid in 1999) to maturity and the majority of the proceeds of this loan were used to repay the remaining balance on the MEPC Acquisition Financing. This loan was repaid in January 2000 as described below. In October 1999, the Company obtained a $130,000 two-year loan collateralized by six properties, five regional malls (Knollwood Mall, Eagle Ridge Mall, West Valley Mall, South Shore Mall and Century Mall) and the Company's headquarters, the 110 N. Wacker Drive office building in Chicago, Illinois. This loan bears interest at LIBOR plus 185 basis points and matures on November 1, 2001. The Company intends to replace this loan on or before maturity with non-recourse long-term mortgage financing. In January 2000, the Company obtained a new $200,000 unsecured short-term bank loan. The Company's initial draw under this loan was $120,000 in January, 2000 and the remaining available amounts were fully drawn at June 30, 2000. Loan proceeds were used to fund ongoing redevelopment projects and repay the remaining balance of $83,000 on an interim loan obtained in September 1999. The bank loan bore interest at a rate per annum of LIBOR plus 150 basis points and was refinanced on August 1, 2000 with the Revolver and the Term Loan described below. As of July 31, 2000, the Company obtained an unsecured term loan (the "Term Loan") in a maximum principal amount of $100,000. The principal amount of the Term Loan was increased to $155,000 in September, 2000. Term Loan proceeds were used to fund ongoing redevelopment projects and repay a portion of the remaining balance of the bank loan described in the prior paragraph immediately above. During the fourth quarter of 2000, the principal amount of the Term Loan was further increased to $230,000. The additional $75,000 was used to pay down the Revolver as discussed above and for current redevelopment projects. The Term Loan has a maturity of July 31, 2003 and bears interest at a rate per annum of LIBOR plus 100 to 170 basis points depending on the Company's average leverage ratio. Construction Loan During April 1999 the Company received $30,000 representing the initial loan draw on an $110,000 construction loan facility. The facility is collateralized by and provided financing for the RiverTown Crossings Mall development (including outparcel development) in Grandville (Grand Rapids), Michigan. The construction loan provides for periodic funding as construction and leasing continue and currently bears interest at a rate per annum of LIBOR plus 150 basis points. As of July 17, 2000 additional loan draws of approximately $80,000 had been made and no further amounts are available under the construction loan facility. Interest is due monthly but during 1999 was added to the periodic loan draws. The loan matures on June 29, 2001 and the Company currently intends to refinance the loan at or prior to maturity with a non-recourse long-term mortgage loan. F-28 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) Letters of Credit As of December 31, 2000 and 1999, the Operating Partnership had outstanding letters of credit of $7,693 and $7,934, respectively, primarily in connection with special real estate assessments and insurance requirements. In addition, the Company has a letter of credit of approximately $11,200 related to the funding of the Ala Moana CMBS and pending construction projects at the Ala Moana Center. Principal amounts due under mortgage notes and other debts payable mature as follows:
Amount Year Maturing ---- ---------- 2001 $407,736 2002 111,254 2003 282,344 2004 1,112,189 2005 40,894 Subsequent 1,289,709 ---------- Total $3,244,126 ==========
Certain mortgage notes payable may be prepaid but are generally subject to a prepayment penalty of a yield- maintenance premium or a percentage of the loan balance. Land, buildings and equipment related to the mortgage notes payable with an aggregate cost of approximately $4,599,615 at December 31, 2000 have been pledged as collateral. In addition, loans totaling approximately $386,540 (collateralized by assets with a total carrying value of approximately $477,389) were supplementally guaranteed by the Company. Certain properties, including those within the portfolios collateralized by commercial mortgage backed securities, are subject to financial performance convenants, primarily EBITDA ratios. NOTE 6 The extraordinary items resulted from prepayment costs and EXTRAORDINARY unamortized deferred financing costs related to the early ITEMS extinguishment, primarily through refinancings, of mortgage notes payable. In 1999, the basic and diluted per share impact of the extraordinary items was $.30. The basic per share impact of the extraordinary items in 1998 was $.14, and the diluted per share impact was $.13. NOTE 7 RENTALS The Company receives rental income from the leasing of UNDER OPERATING retail shopping center space under operating leases. The LEASES minimum future rentals based on operating leases of Wholly- Owned Centers held as of December 31, 2000 are as follows:
Year Amount ---- -------- 2001 $367,233 2002 352,886 2003 325,220 2004 300,440 2005 262,294 Thereafter 982,599
F-29 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) Minimum future rentals do not include amounts which are payable by certain tenants based upon a percentage of their gross sales or as reimbursement of shopping center operating expenses. The tenant base includes national and regional retail chains and local retailers, and consequently, the Company's credit risk is concentrated in the retail industry. NOTE 8 GGMI TRANSACTIONS GGMI had previously been contracted to provide management, WITH AFFILIATES leasing, development and construction management services for the Wholly-Owned Centers. In addition, certain shopping center advertising and payroll costs of the properties were paid by GGMI and reimbursed by the Company. Total costs included in the consolidated financial statements related to agreements with GGMI are as follows:
Year Ended December 31, 2000 1999 1998 ------- ------- ------- Management and Leasing Fees $22,834 $21,201 $15,074 Cost Reimbursements 55,937 56,548 41,594 Development Costs 8,833 3,499 7,801
On January 1, 2001, in connection with the acquisition of the common stock of GGMI, the Company and GGMI agreed to concurrently terminate the management contracts with respect to the Wholly-Owned Centers. Effective January 1, 2001, the Wholly-Owned Centers will be self-managed under the same standards and procedures in effect prior to January 1, 2001. Notes Receivable-Officers In April, May and September, 1998 certain officers of the Company issued to the Company an aggregate of $3,164 of promissory notes in connection with their exercise of options to purchase an aggregate of 166,000 shares of the Company's Common Stock. During 1999, the Company received approximately $62 in payments, made advances of approximately $380 in conjunction with additional advances and Common Stock purchases by such officers and forgave approximately $64 in principal and accrued interest on such notes. During 2000, the Company has made aggregate advances of $7,149 in conjunction with the exercise of options to purchase an aggregate 270,000 shares of Common Stock by officers. In June 2000, a $1,120 loan was repaid by one of the officers. Also in 2000, the Company forgave approximately $150 of other notes receivable from an officer (previously reflected in prepaid expenses and other assets). In January 2001, the Company made an additional $1,120 advance to an officer in conjunction with the exercise of options to purchase 40,000 shares of Common Stock. The notes, which bear interest at a rate computed as a formula of a market rate, are collateralized by the shares of Common Stock issued upon exercise of such options, provide for quarterly payments of interest and are payable to the Company on demand. F-30 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) NOTE 9 EMPLOYEE Stock Incentive Plan BENEFIT AND The Company's Stock Incentive Plan provides incentives to STOCK PLANS attract and retain officers and key employees. An aggregate of 3,000,000 shares of Common Stock have been authorized for issuance under the plan. Options are granted by the Compensation Committee of the Board of Directors at an exercise price of not less than 100% of the fair market value of the Common Stock on the date of grant. The term of the option is fixed by the Compensation Committee, but no option is exercisable more than 10 years after the date of the grant. Options granted to officers and key employees are for 10-year terms and are generally exercisable in either 33 1/3% or 20% annual increments from the date of the grants. However, during 2000, 53,319 options were granted to certain employees under the Stock Incentive Plan (of which 5,000 were forfeited during 2000) with the same terms as the TSO's granted in 2000 (as described and defined below). Options granted to non-employee directors are exercisable in full commencing on the date of grant and expire on the tenth anniversary of the date of the grant. A summary of the status of the Company's Stock Incentive Plan as of December 31, 2000, 1999 and 1998 and changes during the year ended on those dates is presented below.
2000 1999 1998 ------------------- ------------------- ------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price --------- -------- --------- -------- --------- -------- Outstanding at beginning of year 827,500 $29.85 848,500 $28.99 785,000 $24.79 Granted 205,319 30.89 47,500 $32.42 229,500 $36.19 Exercised (276,500) 26.38 (60,000) $19.00 (166,000) $19.06 Forfeited (14,000) 33.97 (8,500) $34.78 -- -- --------- ------ --------- ------ --------- ------ Outstanding at end of year 742,319 31.36 827,500 $29.85 848,500 $28.99 ========= ========= ========= Exercisable at end of year 467,500 30.64 595,500 $28.76 414,500 $27.57 Options available for future grants 1,644,014 1,835,333 1,874,333 Weighted average per share fair value of options granted during the year $2.62 $2.84 $3.18
F-31 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) The following table summarizes information about stock options outstanding pursuant to the Stock Incentive Plan at December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE -------------------------------------------------------------------------------------------- Number Weighted Average Options Range Of Outstanding Remaining Weighted Average Exercisable Weighted Average Exercise Prices At 12/31/00 Contractual Life Exercise Price At 12/31/00 Exercise Price --------------- ----------- ---------------- ---------------- ----------- ---------------- $19.00 - $22.50 2,000 3.8 years $21.31 2,000 $21.31 $27.81 - $29.97 429,819 6.9 years $28.59 301,500 $27.99 $31.75 - $33.84 93,500 8.9 years $33.07 28,000 $32.76 $36.06 - $37.69 217,000 6.8 years $36.20 136,000 $36.21 ------- --------- ------ ------- ------ 742,319 7.1 years $31.36 467,500 $30.64 ======= ========= ====== ======= ======
1998 Incentive Plan General Growth also has an incentive stock plan entitled the 1998 Incentive Stock Plan (the "1998 Incentive Plan"). Under the 1998 Incentive Plan, stock incentive awards in the form of threshold-vesting stock options ("TSOs") are granted to employees. The exercise price of the TSOs to be granted to a participant will be the Fair Market Value ("FMV") of a share of Common Stock on the date the TSO is granted. The threshold price (the "Threshold Price") which must be achieved in order for the TSO to vest will be determined by multiplying the FMV on the date of grant by the Estimated Annual Growth Rate (currently set at 7% in the 1998 Incentive Plan) and compounding the product over a five year period. Shares of the Common Stock must achieve and sustain the Threshold Price for at least 20 consecutive trading days at any time over the five years following the date of grant in order for the TSO to vest. All TSOs granted will have a term of 10 years but must vest within 5 years of the grant date in order to avoid forfeiture. The aggregate number of shares of Common Stock which may be subject to TSOs issued pursuant to the 1998 Incentive Plan may not exceed 1,000,000, subject to certain customary adjustments to prevent dilution. TSOs to purchase 251,030 and 313,964 shares of Common Stock at an exercise price of $29.97 and $31.69 respectively, were granted in 2000 and 1999, respectively. The estimated fair value of the 2000 TSOs is $1.49 and the estimated fair value of the 1999 grants was $1.36. None of the TSOs granted in 2000 and 1999 have vested. In addition, 13,606 of the 251,030 shares granted in 2000 and 60,336 of the 313,964 shares granted in 1999 have been forfeited thru December 31, 2000. The fair value of each option grant for 2000, 1999 and 1998 for the Stock Incentive Plan and the 1998 Incentive Plan was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
2000 1999 1998 --------- --------- --------- Risk-free interest rate 6.19% 5.21% 5.48% Dividend yield 6.86% 7.22% 7.28% Expected life 5.2 years 4.6 years 4.2 years Expected volatility 18.2% 20.0% 19.4%
F-32 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) Employee Stock Purchase Plan During 1999, General Growth established the General Growth Properties, Inc. Employee Stock Purchase Plan (the "ESPP") to assist eligible employees in acquiring a stock ownership interest in the General Growth. A maximum of 500,000 shares of Common Stock is reserved for issuance under the ESPP. Under the ESPP, eligible employees make payroll deductions over a six-month purchase period at which time the amounts withheld are used to purchase shares of Common Stock at a purchase price equal to 85% of the lesser of the closing price of a share of Common Stock on the first trading day of the purchase period or the last trading day of the purchase period. The first purchase period under the ESAP ended December 31, 1999. On January 3, 2000, 26,205 shares of Common Stock were sold to ESPP participants at a price of $23.80 per share. The second purchase period under the ESPP ended June 30, 2000 at which time 41,534 shares of Common Stock were sold to ESPP participants at a price of $23.75 per share. The third purchase period ended on December 29, 2000 at which time 26,108 shares of Common Stock were sold to ESPP participants at a price of $27.09 per share. The fair value of the rights to purchase pursuant to the ESPP in 2000 was estimated to be $5.04 per share using the Black- Scholes option pricing model, with the following assumptions: a risk free rate of 5.95%, a dividend yield of 6.86% and expected volatility of 18.20%. Stock Option Pro Forma Data The Company had applied Accounting Principles Board Opinion 25 in accounting for the Stock Incentive Plan, the 1998 Incentive Plan and the Employee Stock Purchase Plan through June 30, 2000 as provided by Interpretation 44 as defined and further described in Note 12. Accordingly, no compensation costs have been recognized. Had compensation costs for the Company's plans been determined based on the fair value at the grant date for options granted in 2000, 1999 and 1998 in accordance with the method required by Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation", the Company's net income and net income per share would have been reduced to the pro forma amounts as follows:
Year Ended December 31, 2000 1999 1998 -------- ------- ------- Net Income As Reported $113,481 $76,658 $53,012 Pro Forma 113,081 $76,160 $52,709 Net earnings per share - basic As Reported $ 2.18 $ 1.67 $ 1.46 Pro Forma $ 2.17 $ 1.66 $ 1.46 Net earnings per share - diluted As Reported $ 2.18 $ 1.66 $ 1.46 Pro Forma $ 2.17 $ 1.65 $ 1.45
Management Savings Plan The Company sponsors the General Growth Management Savings and Employee Stock Ownership Plan (the "401(k) Plan") which permits all eligible employees to F-33 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) defer a portion of their compensation in accordance with the provisions of Section 401(k) of the Code. Under the 401(k) Plan, the Company may make, but is not obligated to make, contributions to match the contributions of the employees. For the years ending December 31, 2000, 1999 and 1998 the Company made matching contributions of approximately $3,554, $2,891 and $2,042 respectively. NOTE 10 DISTRIBUTIONS On December 15, 2000, the Company declared a cash PAYABLE distribution of $.53 per share that was paid on January 31, 2001, to stockholders of record (1,390 owners of record) on January 5, 2001, totaling $ 27,744. In addition, a distribution of $ 10,385 was paid to the limited partners of the Operating Partnership. Concurrently, the Company declared the fourth quarter 2000 preferred stock dividend, for the period from October 1, 2000 through December 31, 2000, in the amount of $0.4531 per share, payable to preferred stockholders of record on January 5, 2001 and paid on January 15, 2001. As described in Note 1, such preferred stock dividend was in the same amount as the Operating Partnership's distribution to the Company of the same date with respect to the Preferred Units held by the Company. On December 13, 1999, the Company declared a cash distribution of $.51 per share that was paid on January 31, 2000, to stockholders of record (1,121 owners of record) on January 6, 2000, totaling $26,481. In addition, a distribution of $10,097 was paid to the limited partners of the Operating Partnership. Concurrently, the Company declared the fourth quarter 1999 preferred stock dividend, for the period from October 1, 1999 through December 31, 1999, in the amount of $0.4531 per share, payable to preferred stockholders of record on January 6, 2000 and paid on January 14, 2000. The allocations of the common distributions declared and paid for income tax purposes are as follows:
Year Ended December 31, 2000 1999 1998 ------ ------ ------ Ordinary Income 92.2% 66.0% 98.0% Capital Gain --% 3.0% 2.0% Return of Capital 7.8% 31.0% --% ------ ------ ------ 100.0% 100.0% 100.0% ====== ====== ======
NOTE 11 In the normal course of business, from time to time, the COMMITMENTS AND Company is involved in legal actions relating to the CONTINGENCIES 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 material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. The Company leases land at certain properties from third parties. Rental expense including participation rent related to these leases was $460, $375 and $292 for the years ended December 31, 2000, 1999 and 1998, respectively. The leases generally provide for a right of first refusal in favor of the Company in the event of a proposed sale of the property by the landlord. F-34 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) From time to time 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 12 During December 1999, the Securities and Exchange Commission RECENTLY ISSUED (the "SEC") issued Staff Accounting Bulletin 101 "Revenue ACCOUNTING Recognition" ("SAB" 101"). SAB 101 provides, among other PRONOUNCEMENTS things, that rental income should be deferred in interim periods by the lessor if the triggering events that create contingent rent have not yet occurred. The Company is entitled to receive contingent rents because a majority of the tenant leases provide for additional rent computed as a percentage of tenant sales revenues above certain annual thresholds. The Company had previously accrued, on an interim basis, such overage rents based on the prorated annual overage rent estimated to be due from tenants. The Company has applied this revised accounting effective January 1, 2000. There was no material cumulative effect on the Company's financial position as of the date of adoption of this revised accounting and the only material effect of this pronouncement is to shift the Company's recognition, including amounts from the operations of the Unconsolidated Real Estate Affiliates, of major portions of overage rent from interim quarters to the third and fourth quarter of 2000 and each subsequent year. The Company's cash collections of overage rent has not been affected by this accounting recognition change. On June 1, 1999 the FASB issued Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("Statement 133"). FASB Statement No. 138 "Accounting for Derivative Instruments and Hedging Activities-An Amendment of FASB Statement No 133" was issued in June 2000. Statement 133, as amended, is effective for fiscal years beginning after June 15, 2000 as provided by FASB Statement No. 137 issued in July 1999. The Company's only hedging activity is the cash value hedge represented by its cap agreements relating to its commercial mortgage- backed securities (Note 5). The interest rate cap agreements place a limit on the effective rate of interest the Company will bear on such floating rate obligations. The Company has concluded that these cap agreements are highly effective in achieving its objective of eliminating its exposure to variability in cash flows relating to these floating rate obligations when LIBOR rates exceed the strike rates of the cap agreements. However, Statement 133 also requires that the Company fair value the cap agreements as of the end of each reporting period. Interest rates have declined since the caps were obtained. The Company will adopt Statement 133 January 1, 2001. In accordance with the transition provisions of Statement 133, the Company will record at January 1, 2001 a loss to earnings of $3,334 as a cumulative-effect type transition adjustment to recognize at fair value the time-value portion of all the interest rate cap agreements that were previously designated as part of a hedging relationship. Included in the $3,334 loss is $704 relating to interest rate cap agreements held by Unconsolidated Real Estate Affiliates. The Company will also record $112 to other comprehensive income at January 1, 2001 to reflect the then fair value of the intrinsic portion of the interest rate cap agreements. Subsequent changes in the fair value of these agreements will be reflected in current earnings and accumulated other comprehensive income. As the remaining time-value portion of the fair value of the F-35 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) cap agreements at January 1, 2001 is not significant, any further decreases in the fair value of the cap agreements which would be required to be reflected in current earnings are not expected to be material. In March 2000, the FASB issued Statement of Accounting Standards Interpretation 44, "Accounting for Certain Transactions Involving Stock Compensation" ("Interpretation 44"). Interpretation 44 is generally effective for new stock option grants beginning July 1, 2000. However, the interpretive definition of an employee apply to new awards granted after December 15, 1998. Further, the FASB determined that any modifications to current accounting as a result of this guidance are to be recorded prospectively, effective as of July 1, 2000. General Growth has previously granted stock options to its employees, directors and to employees of its then unconsolidated subsidiary, GGMI (which, as of January 1, 2001, became a consolidated subsidiary). Under the terms of the Interpretation, any awards to GGMI employees are considered awards to non- employees. The Company has applied the accounting mandated by Interpretation 44 as of July 1, 2000 and there was virtually no impact on the Company's consolidated financial position or consolidated results of operations. Due to the acquisition of the common stock of GGMI by the Operating Partnership on January 1, 2001, those individuals who are employed by GGMI will be considered employees of General Growth for the purposes of accounting for stock option grants for 2001 and subsequent years. F-36 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) NOTE 13 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Year Ended First Second Third Fourth December 31, 2000 Quarter Quarter Quarter Quarter ----------------- -------- -------- -------- -------- Total Revenues $162,483 $165,026 $173,286 $197,972 Income before minority interest 36,680 37,791 44,840 71,017 Income before extraordinary items 28,241 27,950 31,363 50,394 Net income applicable to common shares 22,124 21,833 25,246 44,277 Earnings before extraordinary item per share - basic (a) $ 0.43 $ 0.42 $ 0.48 $ 0.85 Earnings before extraordinary item per share - diluted (a) 0.43 0.42 0.48 0.85 Net earnings per share - basic (a) 0.43 0.42 0.48 0.85 Net earnings per share - diluted (a) 0.43 0.42 0.48 0.85 Distributions declared per share $ 0.51 $ 0.51 $ 0.51 $ 0.53 Weighted average shares outstanding (in thousands) - basic 51,918 51,965 52,095 52,268 Weighted average shares outstanding (in thousands) - diluted 51,936 52,011 52,134 52,314 Year Ended First Second Third Fourth December 31, 1999 Quarter Quarter Quarter Quarter ----------------- -------- -------- -------- -------- Total Revenues $134,260 $135,916 $156,027 $186,139 Income before minority interest 27,545 33,208 35,770 51,456 Income before extraordinary items 23,329 24,415 28,783 38,394 Net income applicable to common shares 8,519 18,298 17,573 32,267 Earnings before extraordinary item per share -basic (a) $ 0.43 $ 0.44 $ 0.45 $ 0.62 Earnings before extraordinary item per share -diluted (a) 0.43 0.44 0.45 0.62 Net earnings per share - basic (a) 0.21 0.44 0.35 0.62 Net earnings per share - diluted (a) 0.21 0.44 0.35 0.62 Distributions declared per share $ 0.49 $ 0.49 $ 0.49 $ 0.51 Weighted average shares outstanding (in thousands) - basic 40,055 41,638 50,149 51,694 Weighted average shares outstanding (in thousands) - diluted 40,252 41,776 50,214 51,695
-------- (a) Earnings per share for the four quarters do not add up to the annual earnings per share due to the issuance of additional stock during the year. F-37 GENERAL GROWTH PROPERTIES, INC. Report of Independent Accountants on Financial Statement Schedule To the Board of Directors and Stockholders General Growth Properties, Inc. Our audits of the consolidated financial statements referred to in our report dated February 6, 2001 of General Growth Properties, Inc. which report and consolidated financial statements are included in this Annual Report on Form 10K also included an audit of the financial statement schedule listed in the Index to Consolidated Financial Statements and Consolidated Financial Statement Schedule on page F-1 of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Chicago, Illinois PricewaterhouseCoopers LLP February 6, 2001 F-38 GENERAL GROWTH PROPERTIES, INC. Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2000
Col. A Col. B Col. C Col. D Col. E ------ ------ ------ ------ ------ Costs Capitalized Subsequent Gross Amounts at Which Initial Cost To Acquisition Carried at Close of Period --------------------------- ------------------------ ------------------------------------------ Buildings and Buildings Encumbrances Improvements Carrying And Description (e) Land (a) Improvements Costs (b) Land Improvements Total(c)(d) ---------------- ------------ ------------ -------------- ------------ ----------- ------------ -------------- -------------- Ala Moana Combined Honolulu, HI 500,000,000 336,229,260 473,770,740 14,481,654 5,231,765 336,229,497 493,484,159 829,713,656 Col. A Col. F Col. G Col. H Col. I ------ ------ ------ ------ ------ Life Upon Which Depreciation in Latest Income Accumulated Date of Date Statement is Description Depreciation Construction Acquired Computed -------------------- ------------ ------------ -------- --------------- Ala Moana Combined Honolulu, HI 20,335,247 1999 (f) Apache Mall Rochester, MN 56,218,828 8,110,292 72,992,628 3,300,140 0 8,110,292 76,292,768 84,403,060 Apache Mall Rochester, MN 4,725,015 1998 (f) Baybrook Mall Friendswood, TX 94,086,611 13,300,000 117,162,546 1,595,005 0 13,300,000 118,757,551 132,057,551 Baybrook Mall Friendswood, TX 3,492,751 1999 (f) Bayshore Mall, Eureka, CA 37,250,000 3,004,345 27,398,907 22,852,279 2,887,090 3,005,040 53,138,276 56,143,316 Bayshore Mall, Eureka, CA 17,623,707 1986-1987 (f) Bellis Fair Mall, Bellingham, WA 73,000,000 7,616,458 47,040,131 9,315,718 6,122,020 7,485,224 62,477,869 69,963,093 Bellis Fair Mall, Bellingham, WA 23,663,035 1987-1988 (f) Birchwood Mall, Port Huron, MI 43,953,445 1,768,935 34,574,635 11,693,673 1,980,603 3,045,616 48,248,911 51,294,527 Birchwood Mall, Port Huron, MI 15,553,162 1989-1990 (f) Boulevard Mall Las Vegas, NV 88,765,714 16,490,343 148,413,086 3,120,520 0 16,490,343 151,533,606 168,023,949 Boulevard Mall Las Vegas, NV 9,595,509 1998 (f) Capital Mall Jefferson City, MO 16,500,000 4,200,000 14,201,000 6,384,326 0 3,912,935 20,585,326 24,498,261 Capital Mall Jefferson City, MO 4,188,652 1993 (f) Century Mall Birmingham, AL 32,000,000 3,164,000 28,513,908 3,595,222 0 3,164,000 32,109,130 35,273,130 Century Mall Birmingham, AL 2,973,670 1997 (f) Chapel Hills Colorado Springs, CO 36,750,000 4,300,000 34,017,000 58,397,277 36,805 4,300,000 92,451,082 96,751,082 Chapel Hills Colorado Springs, CO 13,309,613 1993 (f) Coastland Center Naples, FL 85,650,692 11,450,000 103,050,200 3,037,525 0 11,450,000 106,087,725 117,537,725 Coastland Center Naples, FL 5,823,089 1998 (f) Colony Square Mall Zanesville, OH 25,600,000 1,000,000 24,500,000 12,573,545 0 1,243,184 37,073,545 38,316,729 Colony Square Mall Zanesville, OH 13,216,189 1986 (f) Columbia Mall Columbia, MO 56,100,000 5,383,208 19,663,231 10,300,343 1,368,803 5,383,208 31,332,377 36,715,585 Columbia Mall Columbia, MO 13,760,013 1984-1985 (f) Coral Ridge Mall Coralville, IA 80,028,435 3,363,602 64,217,772 8,311,150 4,420,355 3,363,602 76,949,277 80,312,879 Coral Ridge Mall Coralville, IA 6,021,935 1998-1999 (f) Crossroads (MI) Kalamazoo, MI 44,440,854 6,800,000 61,200,000 2,342,926 41,616 6,800,000 63,584,542 70,384,542 Crossroads (MI) Kalamazoo, MI 3,211,356 1999 (f) Crossroads Center St. Cloud, MN 46,055,322 10,851,689 72,002,847 1,368,576 82,242 10,929,119 73,453,665 84,382,784 Crossroads Center St. Cloud, MN 1,079,262 2000 (f)
F-39 GENERAL GROWTH PROPERTIES, INC.
Col. A Col. B Col. C Col. D Col. E ------ ------ ------ ------ ------ Costs Capitalized Subsequent Gross Amounts at Which Initial Cost To Acquisition Carried at Close of Period --------------------------- ------------------------ ------------------------------------------ Buildings and Buildings Encumbrances Improvements Carrying And Description (e) Land (a) Improvements Costs (b) Land Improvements Total(c)(d) ---------------- -------------- ------------ -------------- ------------ ----------- ------------ -------------- -------------- Cumberland Mall Atlanta, GA 98,837,813 15,198,568 136,787,110 2,529,067 31,518 15,198,568 139,347,695 154,546,263 Col. A Col. F Col. G Col. H Col. I ------ ------ ------ ------ ------ Life Upon Which Depreciation in Latest Income Accumulated Date of Date Statement is Description Depreciation Construction Acquired Computed ----------------- ------------ ------------ -------- --------------- Cumberland Mall Atlanta, GA 8,700,812 1998 (f) Development in Progress 0 17,936,214 7,610,519 0 17,936,214 7,610,519 25,546,733 Development in Progress 0 Eagle Ridge Mall Lake Wales, FL 27,000,000 7,619,865 49,560,538 5,240,518 5,678,662 7,621,768 60,479,718 68,101,486 Eagle Ridge Mall Lake Wales, FL 8,466,079 1995-1996 (f) Eden Prairie Mall Eden Prairie, MN 0 465,063 19,024,047 28,245,168 2,688,933 465,063 49,958,148 50,423,211 Eden Prairie Mall Eden Prairie, MN 2,554,040 1997 (f) Fallbrook Mall, West Hills, CA 46,900,000 6,117,338 10,076,520 57,565,167 2,696,787 6,127,138 70,338,474 76,465,612 Fallbrook Mall, West Hills, CA 25,953,530 1984 (f) Fox River Mall Appleton, WI 93,200,000 2,700,566 18,291,067 33,581,270 1,820,253 4,787,291 53,692,590 58,479,881 Fox River Mall Appleton, WI 18,789,481 1983-1984 (f) Gateway Mall, Springfield, OR 30,750,000 8,728,263 34,707,170 18,723,328 7,624,197 8,749,088 61,054,695 69,803,783 Gateway Mall, Springfield, OR 18,185,248 1989-1990 (f) GGPLP Corp. Chicago, IL 318,163,109 0 556,740 88,729,876 0 0 89,286,616 89,286,616 GGPLP Corp. Chicago, IL 86,991 (f) 110 Building Chicago, IL 20,000,000 0 29,035,310 2,912,160 0 0 31,947,470 31,947,470 110 Building Chicago, IL 2,649,962 1997 (f) Grand Traverse Mall, Grand Traverse, MI 51,500,000 3,529,966 20,775,772 20,755,982 3,643,793 3,533,745 45,175,547 48,709,292 Grand Traverse Mall, Grand Traverse, MI 13,956,597 1990-1991 (f) Greenwood Mall Bowling Green, KY 39,500,000 3,200,000 40,202,000 18,107,939 0 3,431,918 58,309,939 61,741,857 Greenwood Mall Bowling Green, KY 12,401,423 1993 (f) Knollwood Mall, St. Louis Park, MN 10,000,000 0 9,748,047 27,915,997 2,340,180 7,025,606 40,004,224 47,029,830 Knollwood Mall, St. Louis Park, MN 14,614,498 1978 (f) Lakeview Square Mall Battle Creek, MI 26,101,407 3,578,619 32,209,980 10,024,096 42,469 3,578,619 42,276,545 45,855,164 Lakeview Square Mall Battle Creek, MI 4,243,019 1996 (f) Lansing Mall Lansing, MI 41,865,612 6,977,798 62,800,179 7,345,721 49,923 6,977,798 70,195,823 77,173,621 Lansing Mall Lansing, MI 7,016,317 1996 (f) Lockport Mall, Lockport, NY 9,300,000 800,000 10,000,000 4,247,075 23,656 800,000 14,270,731 15,070,731 Lockport Mall, Lockport, NY 5,149,125 1986 (f)
F-40 GENERAL GROWTH PROPERTIES, INC.
Col. A Col. B Col. C Col. D ------ ------ ------ ------ Costs Capitalized Subsequent Initial Cost To Acquisition --------------------------- ------------------------ Buildings and Encumbrances Improvements Carrying Description (e) Land (a) Improvements Costs (b) ---------------- -------------- ------------ -------------- ------------ ----------- Mall of the Bluffs, Council Bluffs, IA 43,953,445 1,860,116 24,016,343 13,934,688 2,529,093 Col. A Col. E Col. F Col. G Col. H Col. I ------ ------ ------ ------ ------ ------ Gross Amounts at Which Carried at Close of Period -------------------------------------------- Life Upon Which Depreciation in Buildings Latest Income And Accumulated Date of Date Statement is Description Land Improvements Total(c)(d) Depreciation Construction Acquired Computed ------------------ ------------ --------------- --------------- ------------ ------------ -------- --------------- Mall of the Bluffs, Council Bluffs, IA 1,895,220 40,480,124 42,375,344 14,235,180 1985-1986 (f) Mall St. Vincent Shreveport, LA 18,786,337 2,640,000 23,760,000 2,658,318 0 Mall St. Vincent Shreveport, LA 2,640,000 26,418,318 29,058,318 1,593,404 1998 (f) Marketplace Champaign, IL 47,000,000 7,000,000 63,972,357 32,643,237 40,968 Marketplace Champaign, IL 7,000,000 96,656,562 103,656,562 6,975,888 1997 (f) McCreless Mall San Antonio, TX 0 1,000,000 9,000,002 424,937 0 McCreless Mall San Antonio, TX 1,000,000 9,424,939 10,424,939 633,803 1998 (f) MEPC Acquisition Financing 0 0 0 0 0 MEPC Acquisition Financing 0 (1,543,887) (1,543,887) 33,967 Northridge Fashion Center Northridge, CA 106,364,102 16,618,095 149,562,583 9,642,506 2,977,145 Northridge Fashion Center Northridge, CA 16,975,131 162,182,234 179,157,365 10,199,318 1998 (f) Oakwood Mall, Eau Claire, WI 58,604,593 3,266,669 18,281,160 18,503,779 1,711,573 Oakwood Mall, Eau Claire, WI 3,617,262 38,496,512 42,113,774 13,876,401 1985-1986 (f) Park Mall Tucson, AZ 50,000,000 4,996,024 44,993,177 64,141,572 4,287,996 Park Mall Tucson, AZ 4,715,836 113,422,745 118,138,581 6,946,607 1996 (f) Piedmont Mall, Danville, VA 16,750,000 2,000,000 38,000,000 3,602,722 20,787 Piedmont Mall, Danville, VA 2,000,000 41,623,509 43,623,509 5,789,233 1995 (f) Pierre Bossier Mall Bossier City, LA 40,948,801 5,280,707 47,558,468 2,845,909 0 Pierre Bossier Mall Bossier City, LA 5,283,970 50,404,377 55,688,347 2,871,538 1998 (f) The Pines, Pine Bluff, AR 26,750,000 1,488,928 17,627,258 9,891,252 1,365,091 The Pines, Pine Bluff, AR 1,247,414 28,883,601 30,131,015 10,513,288 1985-1986 (f) Regency Square Mall Jacksonville, FL 86,533,675 16,497,552 148,477,968 4,276,971 0 Regency Square Mall Jacksonville, FL 16,506,853 152,754,939 169,261,792 9,555,861 1998 (f) Rio West Mall, Gallup, NM 13,500,000 0 19,500,000 4,804,389 0 Rio West Mall, Gallup, NM 0 24,304,389 24,304,389 8,120,753 1986 (f) River Falls Mall, Clarksville, IN 28,000,000 3,177,688 54,610,421 7,299,882 5,281,892 River Falls Mall, Clarksville, IN 3,182,305 67,192,195 70,374,500 23,456,921 1989-1990 (f) River Hills Mall, Mankato, MN 51,200,000 3,713,529 29,013,757 17,407,275 2,603,416 River Hills Mall, Mankato, MN 4,707,314 49,024,448 53,731,762 14,459,371 1990-1991 (f) Riverlands Shopping Center LaPlace, LA 0 500,000 4,500,000 190,299 0 Riverlands Shopping Center LaPlace, LA 500,000 4,690,299 5,190,299 350,850 1998 (f)
F-41 GENERAL GROWTH PROPERTIES, INC.
Col. A Col. B Col. C Col. D Col. E ------ ------ ------ ------ ------ Costs Capitalized Subsequent Gross Amounts at Which Initial Cost To Acquisition Carried at Close of Period --------------------------- ------------------------- ------------------------------------------ Buildings and Buildings Encumbrances Improvements Carrying And Description (e) Land (a) Improvements Costs (b) Land Improvements Total(c)(d) ---------------- -------------- ------------ -------------- ------------ ----------- ------------ -------------- -------------- Rivertown Crossing Grandville, MI 109,999,997 10,972,923 97,141,738 25,876,171 12,889,406 7,246,462 135,907,315 143,153,777 Col. A Col. F Col. G Col. H Col. I ------ ------ ------ ------ ------ Life Upon Which Depreciation in Latest Income Accumulated Date of Date Statement is Description Depreciation Construction Acquired Computed ------------------ ------------ ------------ -------- --------------- Rivertown Crossing Grandville, MI 4,353,186 1998-1999 (f) Sooner Fashion Mall, Norman, OK 20,000,000 2,700,000 24,300,000 13,043,186 0 2,580,578 37,343,186 39,923,764 Sooner Fashion Mall, Norman, OK 3,174,793 1996 (f) Southlake Mall, Morrow, GA 51,300,000 6,700,000 60,406,902 9,272,591 0 6,700,000 69,679,493 76,379,493 Southlake Mall, Morrow, GA 5 ,621,045 1997 (f) SouthShore Mall, Aberdeen, WA 9,000,000 650,000 15,350,000 5,268,915 0 650,000 20,618,915 21,268,915 SouthShore Mall, Aberdeen, WA 7,332, 334 1986 (f) Southwest Plaza Littleton, CO 83,936,068 9,000,000 103,983,673 11,430,141 118,012 9,000,000 115,531,826 124,531,826 Southwest Plaza Littleton, CO 7,323,807 1998 (f) Spring Hill West Dundee, IL 89,726,859 12,400,000 111,643,525 3,780,912 0 12,400,000 115,424,437 127,824,437 Spring Hill West Dundee, IL 7,279,691 1998 (f) Valley Hills, Harrisonburg, VA 34,675,327 3,443,594 31,025,471 20,368,473 47,615 5,656,275 51,441,559 57,097,834 Valley Hills, Harrisonburg, VA 3,047,443 1997 (f) Valley Plaza Shopping Center Bakersfield, CA 74,679,067 12,685,151 114,166,356 (6,616,950) 0 12,685,151 107,549,406 120,234,557 Valley Plaza Shopping Center Bakersfield, CA 6,854,466 1998 (f) West Valley Mall, Tracy, CA 32,000,000 9,295,045 47,789,310 11,763,585 7,756,557 10,890,502 67,309,452 78,199,954 West Valley Mall, Tracy, CA 9,378,925 1995 (f) Westwood Mall Jackson, MI 20,900,000 2,658,208 23,923,869 3,450,367 0 3,571,208 27,374,236 30,945,444 -------------- ------------ -------------- ------------ ----------- ------------ -------------- -------------- Westwood Mall Jackson, MI 2,812,474 1996 (f) ------------ Grand Totals $3,244,126,113 $654,506,050 $3,163,403,012 $768,859,180 $90,441,221 $667,096,357 $4,024,103,672 $4,691,200,029 ============== ============ ============== ============ =========== ============ ============== ============== Grand Totals $488,129,874 ============
F-42 GENERAL GROWTH PROPERTIES, INC General Growth Properties, Inc. Notes to Schedule III (Dollars in Thousands) (a) See description of mortgage notes payable in Note 5 of Notes to Consolidated Financial Statements. (b) Initial cost for constructed malls is cost at end of first complete calendar year subsequent to opening. (c) Carrying costs consists of capitalized construction- period interest and taxes. (d) The aggregate cost of land, buildings and equipment for federal income tax purposes is approximately $3,467,614 Reconciliation of Real Estate
1998 1999 2000 ---- ---- ---- Balance at beginning of year $1,863,485 $3,676,796 $4,326,551 Additions: 1,813,311 1,238,874 364,649 Reductions: -- (589,119) -- ---------- ---------- ---------- Balance at close of year $3,676,796 $4,326,551 $4,691,200 ========== ========== ==========
Reconciliation of Accumulated Depreciation
1998 1999 2000 ---- ---- ---- Balance at beginning of year $233,295 $301,789 $376,673 Depreciation Expense 68,494 105,046 $111,457 Reductions: -- (30,162) -- -------- -------- -------- Balance at close of year $301,789 $376,673 $488,130 ======== ======== ========
(f) Depreciation is computed based upon the following estimated lives: Buildings, improvements and carrying costs 40 years Tenant allowances 10 - 40 years Equipment and fixtures 10 years
F-43 GENERAL GROWTH PROPERTIES, INC. EXHIBIT INDEX 2(a) Purchase and Sale Agreement dated as of May 3, 1999, among D/E Hawaii Joint Venture, GGP Limited Partnership and General Growth Properties, Inc. (17) 2(b) Agreement of Purchase and Sale, dated as of July 27, 1999, among Oak View Mall Corporation, a Delaware corporation, and Oak View Mall, L.L.C., a Delaware limited liability company. (18) 2(c) Agreement of Purchase and Sale, dated as of July 22, 1999 between General Growth Properties, Inc., a Delaware corporation (the "Company"), and RREEF USA Fund-III, a California group trust. (18) 2(d) Operating Agreement, dated November 10, 1999, between GGP Limited Partnership, a Delaware limited partnership, The Comptroller of the State of New York as Trustee of the Common Retirement Fund ("NYSCRF"), and GGP/Homart II L.L.C. a Delaware limited liability company ("GGP/ Homart II"). (19) 2(e) Contribution Agreement dated November 10, 1999, by and between GGP Limited Partnership, a Delaware limited partnership (the "Operating Partnership"), and GGP/Homart II (Altamonte Mall). (19) 2(f) Contribution Agreement dated November 10, 1999, by and between the Operating Partnership and GGP/Homart II (Northbrook Court). (19) 2(g) Contribution Agreement dated November 10, 1999, by and between the Operating Partnership and GGP/Homart II (Natick Trust). (19) 2(h) Contribution Agreement dated November 10, 1999, by and between the Operating Partnership and GGP/Homart II (Stonebriar Centre). (19) 2(i) Contribution Agreement dated November 10, 1999, by and between NYSCRF and GGP/Homart II (Carolina Place). (19) 2(j) Contribution Agreement dated November 10, 1999, by and between NYSCRF and GGP/Homart II (Alderwood Mall). (19) 2(k) Contribution Agreement dated November 10, 1999, by and between NYSCRF and GGP/Homart II (Montclair Plaza). (19) 2(l) Contribution Agreement, dated February 1, 2000, by and between General Growth Companies, Inc. and GGP Limited Partnership. (20) 2(m) Purchase and Sale Agreement dated as of March 15, 2000 by and between Crossroads Shopping Center Trust and St. Cloud Mall L.L.C. (21) 2(n) Purchase Agreement dated May 25, 2000 among General Growth Properties, Inc., GGP Limited Partnership, GGPLP L.L.C. and Goldman Sachs 2000 Exchange Place Fund, L.P. (23) 3(a) Amended and Restated Certificate of Incorporation of the Company. (2) 3(b) Amendment to Amended and Restated Certificate of Incorporation of the Company.(3) 3(c) Amendment to Amended and Restated Certificate of Incorporation of the Company filed on December 21, 1995.(6) S-1 GENERAL GROWTH PROPERTIES, INC. 3(d) Amendment to Amended and Restated Certificate of Incorporation of the Company filed on May 20, 1997.(10) 3(e) Amendment to Second Amendment and Restated Certificate of Incorporation of the Company filed on May 17, 1999.(17) 3(f) Bylaws of the Company.(3) 3(g) Amendment to Bylaws of the Company.(3) 4(a) Redemption Rights Agreement, dated July 13, 1995, by and among GGP Limited Partnership, General Growth Properties, Inc. and the persons listed on the signature pages thereof.(5) 4(b) Redemption Rights Agreement dated December 6, 1996, among GGP Limited Partnership, a Delaware corporation, Forbes/Cohen Properties, a Michigan general partnership, Lakeview Square Associates, a Michigan general partnership, and Jackson Properties, a Michigan general partnership.(1) 4(c) Redemption Rights Agreement, dated June 19, 1997, among GGP Limited Partnership, a Delaware limited partnership, General Growth Properties, Inc., a Delaware corporation, and CA Southlake Investors, Ltd., a Georgia limited partnership.(8) 4(d) Redemption Rights Agreement dated October 23, 1997, among GGPI, GGPLP and Peter Leibowits.(10) 4(e) Form of Indenture.(7) 4(f) Certificate of Designations, Preferences and Rights of 7.25% Preferred Equity Redeemable Stock, Series A.(14) 4(g) Amendment to Certificate of Designations, Preferences and Rights of 7.25% Preferred Income Equity Redeemable Stock, Series A of General Growth Properties, Inc. filed on May 17, 1999.(17) 4(h) Redemption Rights Agreement dated April 2, 1998, among GGP Limited Partnership, General Growth Properties, Inc. and Southwest Properties Venture. (11) 4(i) Indenture and Servicing Agreement dated as of November 25, 1997, among the Issuers named therein, LaSalle National Bank, as Trustee, and Midland Loan Services, L.P., as Servicer (the "Indenture Agreement"). (12) 4(j) Form of Note pursuant to the Indenture Agreement. (12) 4(k) Mortgage, Deed of Trust, Security Agreement, Assignment of Leases and Rents, Fixture Filing and Financing Statement, date and effective as of November 25, 1997, among the Issuers, the Trustee and the Deed Trustees named therein. (12) 4(l) Rights Agreement, dated November 18, 1998, between General Growth Properties, Inc. and Norwest Bank Minnesota, N.A., as Rights Agent (including the Form of Certificate of Designation of Series A Junior Participating Preferred Stock attached thereto as Exhibit A, the Form of Right Certificate attached Preferred Stock attached thereto as Exhibit C). (15) 4(m) Form of Common Stock Certificate. (16) 4(n) First Amendment to Rights Agreement, dated as of November 10, 1999, between the Company and Norwest Bank, Minnesota, N.A. (18) S-2 GENERAL GROWTH PROPERTIES, INC. 4(o) Letter Agreement concerning Rights Agreement, dated November 10, 1999, between the Operating Partnership and NYSCRF. (18) 4(p) Certificate of Designations, Preferences and Rights of 8.95% Cumulative Redeemable Preferred Stock, Series B. (22) 10(a) Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership. (13) 10(b) Rights Agreement between the Company and the Limited Partners of the Operating Partnership.(4) 10(c)* General Growth Properties, Inc. 1993 Stock Incentive Plan, as amended.(9) 10(d) Form of Amended and Restated Agreement of Partnership for each of the Property Partnerships.(2) 10(e) Form of Indemnification Agreement between the Operating Partnership, Martin Bucksbaum, Matthew Bucksbaum, Mall Investment L.P. and M. Bucksbaum Company. (2) 10(f) Form of Registration Rights Agreement between the Company and the Bucksbaums. (2) 10(g) Form of Registration Rights Agreement between the Company and certain trustees for the IBM Retirement Plan. (2) 10(h) Form of Incidental Registration Rights Agreement between the Company, Equitable, Frank Russell and Wells Fargo.(2) 10(i) Form of Letter Agreements restricting sale of certain shares of Common Stock.(2) 10(j)* Letter Agreement dated October 14, 1993, between the Company and Bernard Freibaum.(4) 10(k)* Form of Option Agreement between the Company and certain Executive Officers.(8) 10(l)* General Growth Properties, Inc. 1998 Incentive Stock Plan.(16) 10(m) Amended and Restated Operating Agreement of GGPLP L.L.C. dated as of May 25, 2000. (22) 10(n) Registration Rights Agreement dated May 25, 2000 between General Growth Properties, Inc. and Goldman Sachs 2000 Exchange Place Fund, L.P. (23) 10(o) Term Loan Agreement, dated as of July 31, 2000, among the Operating Partnership and GGPLP L.L.C. (collectively "Borrower"), Bankers Trust Company ("BT") and Lehman Commercial Paper Inc. ("Lehman"). 10(p) Promissory Note dated July 31, 2000 made by Borrower in favor of BT. 10(q) Promissory Note dated July 31, 2000 made by Borrower in favor of Lehman. 10(r) Joinder Agreement, dated as of September 1, 2000, between Bayerische Hypo-Und Vereinsbank AG, New York Branch ("Hypo") and Borrower. 10(s) Promissory Note dated September 1, 2000 made by Borrower in favor of Hypo. 10(t) Joinder Agreement, dated as of September 22, 2000, between Fleet National Bank ("Fleet") and Borrower. S-3 GENERAL GROWTH PROPERTIES, INC. 10(u) Promissory Note dated September 22, 2000 made by Borrower in favor of Fleet. 10(v) First Amendment to Term Loan Agreement, dated as of September 22, 2000, among Borrower and BT, Lehman, Hypo and Fleet. 10(w) Lender Addendum, dated as of October 20, 2000, between Lehman, Borrower and BT. 10(x) Replacement Note dated October 20, 2000 made by Borrower in favor of Lehman. 10(y) Joinder Agreement, dated as of December 28, 2000, between The Chase Manhattan Bank ("Chase"), Borrower, BT and Lehman. 10(z) Promissory Note dated December 28, 2000 made by Borrower in favor of Chase. 10(aa) Second Amendment to Term Loan Agreement, dated as of December 28, 2000, among Borrower and BT, Lehman, Fleet and Chase. 10(bb) Revolving Credit Agreement, dated as of July 31, 2000, among Borrower, Bank of America, N.A. ("BofA") Dresdner Bank, AG ("Dresdner"), and U.S. Bank National Association ("USB"). 10(cc) Promissory Note dated July 31, 2000 made by Borrower in favor of BofA. 10(dd) Promissory Note dated July 31, 2000 made by Borrower in favor of Dresdner. 10(ee) Promissory Note dated July 31, 2000 made by Borrower in favor of USB. 10(ff) Joinder to Revolving Credit Agreement, dated as of September 1, 2000, among Hypo, Borrower, BofA, Dresdner and USB. 10(gg) Promissory Note dated September 1, 2000 made by Borrower in favor of Hypo. 21 List of Subsidiaries of General Growth Properties, Inc. 23 Consent of PricewaterhouseCoopers LLP - Independent Accountants. (*) A compensatory plan or arrangement required to be filed. ------------------------------------------------------------------------------- (1) Previously filed as an exhibit to the Company's Current Report on Form 8-K dated January 3, 1996, incorporated herein by reference. (2) Previously filed as an exhibit to the Company's Registration Statement on Form S-11 (No. 33-56640), incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1994, incorporated herein by reference. (4) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1993, incorporated herein by reference. (5) Previously filed as an exhibit to the Company's Current Report on Form 8-K dated July 17, 1996, incorporated herein by reference. S-4 GENERAL GROWTH PROPERTIES, INC. (6) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1995, incorporated herein by reference. (7) Previously filed as an exhibit to the Company's Registration Statement on Form S-3 (No. 333-37247) dated October 6, 1997, incorporated herein by reference. (8) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1996, incorporated herein by reference. (9) Previously filed as an exhibit to the Company's Registration Statement on Form S-8 (No. 333-28449) dated June 3, 1997, incorporated herein by reference. (10) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, incorporated herein by reference. (11) Previously filed as an exhibit to the Company's current report on Form 8-K dated May 26, 1998, incorporated herein by reference. (12) Previously filed as an exhibit to the Company's current report on Form 8-K/A dated June 2, 1998, incorporated herein by reference. (13) Previously filed as an exhibit to the Company's current report on Form 10-Q dated May 14, 1998, as amended May 21, 1998, incorporated herein by reference. (14) Previously filed as an exhibit to the Company's current report on Form 8-K dated August 7, 1998, incorporated herein by reference. (15) Previously filed as an exhibit to the Company's current report on Form 8-K, dated November 18, 1998, incorporated herein by reference. (16) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1998, incorporated herein by reference. (17) Previously filed as an exhibit to the Company's Current Report on Form 8-K, dated July 12, 1999, incorporated herein by reference. (18) Previously filed as an exhibit to the Company's Current Report on Form 8-K, dated November 23, 1999, incorporated herein by reference. (19) Previously filed as an exhibit to the Company's Current Report on Form 8-K/A, dated January 11, 2000, incorporated herein by reference. (20) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1999, incorporated herein by reference. (21) Previously filed as an exhibit to the Company's Current Report on Form 8-K, dated May 9, 2000, incorporated herein by reference. (22) Previously filed as an exhibit to the Company's Current Report on Form 8-K, dated June 13, 2000, incorporated herein by reference. (23) Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q dated August 9, 2000, incorporated herein by reference. S-5