-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WS7vguUh8SlNa1kg7IVt92IHqo5xTEZvqeYYRmkuRTo+0/KuAJQnY7D5o8pP+Uxh dYddnvq2d5HYyJtwNAU5Ag== 0000950137-00-001003.txt : 20000316 0000950137-00-001003.hdr.sgml : 20000316 ACCESSION NUMBER: 0000950137-00-001003 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL GROWTH PROPERTIES INC CENTRAL INDEX KEY: 0000895648 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 421283895 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-11656 FILM NUMBER: 570148 BUSINESS ADDRESS: STREET 1: 110 N WACKER DRIVE STREET 2: STE 3100 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3129605000 MAIL ADDRESS: STREET 1: 110 N WACKER DRIVE STREET 2: STE 3100 CITY: CHICAGO STATE: IL ZIP: 60606 10-K405 1 FORM 10-K405 1 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, 1999 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 ------ ------ [X] 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, 2000, the aggregate market value of the 48,959,071 shares of Common Stock held by non-affiliates of the registrant was $1,395,333,523, 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 and certain other stockholders; such exclusion shall not be deemed to constitute an admission that any such person is an "affiliate" of the registrant). As of March 14, 2000, there were 51,927,576 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for the annual stockholders meeting to be held on May 9, 2000 are incorporated by reference into Part III. 2 PART I All references to numbered Notes are to specific ITEM 1. BUSINESS footnotes to the Consolidated Financial Statements of the Company (as 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. FORWARD LOOKING Forward looking statements contained in this Annual INFORMATION Report 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 General Growth Properties, Inc. ("General Growth"), its Operating Partnership (as defined below) and subsidiaries (collectively, 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 rent rates in the Company's markets, shifts in customer demands, tenant bankruptcies, 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. GENERAL General Growth Properties, Inc. 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"). As of December 31, 1999, the Company owned 100% of fifty-two regional mall shopping centers (the "Wholly-Owned Centers"); 50% of the stock of GGP/Homart, Inc. ("GGP/Homart"), 50% of the stock 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"), 50% of each of two regional mall shopping centers, Quail Springs Mall and Town East Mall, and a non-voting preferred stock interest in General Growth Management, Inc. ("GGMI") (collectively, the "Unconsolidated Joint Ventures"). 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, 2 OF 39 3 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, 1999, General Growth owned an approximate 72% general partnership interest in the Operating Partnership, and various minority holders, including the Original Stockholders and subsequent contributors of properties to the Company, owned the remaining 28% 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 in 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. 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% ownership interest therein 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, which was accounted for as a purchase, by completing the following steps: GGP Management borrowed approximately $39.9 million from the Operating Partnership, and used the loan proceeds to acquire 1,555,855 newly-issued shares of Common Stock from the Company. GGP Management then exchanged the 1,555,855 shares of Common Stock and 453,791 Operating Partnership Units (contributed by the Operating Partnership) for 100% of the outstanding shares in GGMI. GGP Management was then merged into GGMI with GGMI as the surviving entity. As a result of these transactions, the Operating Partnership owns all of the non-voting preferred stock ownership interest in GGMI representing 95% of the equity interest. Certain key employees of the Company hold the remaining 5% equity interest through ownership of 100% of the common stock, which is entitled to all voting rights in GGMI. GGMI cannot distribute funds until its available cash flow exceeds all accumulated preferred dividends owed to the preferred stockholder. As of December 31, 1999, no such distributions by GGMI have been made. Any dividends in excess of the preferred cumulative dividend are allocated 95% to the preferred stockholder and 5% to the common stockholders. The interest only loans from the Operating Partnership to GGMI bear interest at rates ranging from 8% to 14% per annum and mature in 2016. GGMI may make principal payments on the loans if it has sufficient cash flow. GGMI manages, leases, and performs various other services for the Portfolio Centers and other properties owned by unaffiliated parties. 3 OF 39 4 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. 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 (less certain adjustments, including a credit of approximately $64 million for outstanding mortgage indebtedness and accrued interest thereon as well as credits for tenant allowances, construction costs, commissions, due diligence items and certain miscellaneous items). 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, 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 three regional malls (Altamonte Mall in Orlando, Florida; Natick Mall in Natick, Massachusetts; Northbrook Court in Northbrook, Illinois) and one mall (Stonebriar Centre in Frisco (Dallas), Texas) currently under construction contributed by the Company as more fully described in Note 3. 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 15 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 4 of 39 5 asset manager of the Portfolio Centers, executing the strategic decisions and overseeing the day-to-day activities performed 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. As of December 31, 1999 GGMI was the property manager for all of the Wholly-Owned Centers and thirty-nine of the Unconsolidated Centers. The remaining three centers, owned by GGP/Homart through joint ventures, are managed by certain joint venture partners of GGP/Homart. During February 2000, the venture partner's 50% interest in Lakeland Square, one of the three centers not managed by GGMI, was purchased by GGP/Homart. As a result, GGMI took over management of this mall in February 2000. 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 percentage rent. Percentage rent is paid by the tenant if their sales exceed an agreed upon minimum annual amount. Percentage 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, 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 1999, the Company acquired 100% ownership interests in three regional malls and partial ownership interests in five additional regional malls for an aggregate investment by the Company of approximately $1,170 million. The following is a summary description of the acquisitions made by the Company since December 31, 1998. 5 of 39 6 On January 11, 1999, the Company acquired a 100% ownership interest in the Crossroads Mall in Kalamazoo, Michigan for a purchase price of approximately $68 million. The Company utilized a $45 million long-term mortgage loan and interim loan proceeds to finance this acquisition. On July 30, 1999, the Company acquired 100% of the Ala Moana Center in Honolulu, Hawaii, as more fully described in Note 3. The transaction was funded by a new $438 million short-term first mortgage loan and approximately $294 million in cash including a portion of the net proceeds of the 1999 Offering as further described in Note 1. The Company repaid the short-term mortgage loan in August 1999 through the issuance of $500 million of commercial mortgage-backed securities maturing September 2004 (assuming the exercise of extension options aggregating two years) as more fully described in Note 5. The Company may discuss with institutional investors the formation of a new joint venture to own the property. The terms of any joint venture and the Company's interest in any joint venture, have not been determined and the Company may not ultimately elect to form any such joint venture. On September 28, 1999 the Company, through GGP Ivanhoe III, acquired the Oak View Mall and on December 22, 1999 acquired the Eastridge Mall in San Jose, California. The aggregate purchase price for the two properties was approximately $160 million, financed by capital contributions from the partners, a new $83 million long-term mortgage loan and approximately $30 million of other short-term floating rate financing. In October 1999, the Company acquired a 100% interest in the Baybrook Mall in Houston, Texas. The aggregate purchase price was approximately $133 million, which was paid with a new 10 year $95 million mortgage on the property and proceeds of other new secured financing. In November 1999, the Company formed GGP/Homart II, a new joint venture with the New York State Common Retirement Fund, its venture partner in GGP/Homart. GGP/Homart II owns six operating regional malls and one regional mall currently under construction as more fully described in Note 4. 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 6 of 39 7 DEVELOPMENT The Company intends to pursue development when warranted by the potential financial returns. RiverTown Crossings in Grandville, Michigan was completed and opened in November 1999. GGP/Homart II is currently developing an enclosed shopping center in Frisco (Dallas), Texas and the Company is preparing to develop (with a joint venture partner) an enclosed regional mall in Westlake (Dallas), Texas as described below. RiverTown Crossings in Grandville, Michigan is an approximately 1,100,000 square foot regional mall including five anchor stores. The funding for the development of this project came from a construction loan, the Company's line of credit facility ("Credit Facility") and retained cash flow of the Company. RiverTown Crossings was 100% leased at its grand opening. The Company broke ground on the construction of the Stonebriar Centre in Frisco, Texas in October 1998. Upon its scheduled completion in August of 2000, this 1,600,000 square foot regional mall shopping center will initially feature five department store anchors, a 24 screen AMC theater, approximately 350,000 square feet of Mall Stores and up to 150,000 square feet of big box or large format retailers. Plans also include a possible second phase expansion to include two additional department stores. As of December 31, 1999, approximately $73 million of construction costs has been spent, primarily funded by the Company's Credit Facility and other joint venture and secured financing and retained cash flow. This mall was contributed to GGP/Homart II in 1999 as part of the joint venture formation transaction discussed above. During 1999, the Company formed a joint venture to develop an enclosed mall in Westlake (Dallas), Texas. As of December 31, 1999, the Company has invested approximately $12.8 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 remains to be 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 1.6 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. EXPANSIONS AND During 1999, 21 major projects were underway or RENOVATIONS 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 undertaken or completed in 1999 are described below. The redevelopment of an Anchor location at the Northridge Fashion Center, a 1,465,261 square foot center located in Northridge (Los Angeles), California was completed in the summer of 1999. The project included adding a 48,000 square foot theater complex and a new outdoor retail / entertainment area containing approximately 168,000 square feet of Mall Stores. 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 160,000 square foot building with a multi-screen theater, 4 restaurants and a Barnes and Noble bookstore. Construction of Phase II of the project recently commenced and will consist 7 of 39 8 of a Von Maur anchor store and a new 500 car parking structure. Both phases are scheduled to be completed in early 2001. Market Place Mall is an 821,117 square foot enclosed mall located in Champaign, Illinois and anchored by Bergner's, JCPenney and Sears. The renovation and expansion of the mall consisting of a new 150,000 square foot Famous-Barr department store, approximately 43,000 square feet of additional Mall Store space, a new food court, a new service center and other customer amenities was recently completed. Park Mall, an 965,371 square foot center located in Tucson, Arizona is undergoing a remodeling and expansion to 1,350,000 square feet. The mall has added a new Dillards store to the existing anchors, Macy's and Sears. The project also includes a food court, a multiplex theater and an outdoor plaza for fine dining, and is expected to be completed during 2001. THE PORTFOLIO CENTERS All of the 93 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 1,780,000 square feet of total GLA and between approximately 125,000 and 867,000 square feet of Mall and Freestanding GLA. The smallest Portfolio Center has approximately 20 stores, and the largest has over 265 stores; - Have approximately 380 Anchors, operating under approximately 60 trade names; and - Have approximately 9,500 Mall and Freestanding Stores. The average size of the 93 Portfolio Centers is approximately 890,000 square feet of GLA, including all Anchors, Mall Stores and Freestanding Stores. The average Mall and Freestanding GLA per Portfolio Center is approximately 385,000 square feet. As of December 31, 1999, the Wholly-Owned Centers contained approximately 41.9 million square feet of GLA consisting of Anchors (whether owned or leased), Mall Stores and Freestanding Stores. The Unconsolidated Centers contained approximately 41.3 million square feet of GLA. The Company's share of total revenues from the Portfolio Centers and GGMI increased to $907 million in 1999 from $627.9 million in 1998. No single Portfolio Center generated more than 7% of the Company's total 1999 pro rata revenues. In 1999, total Mall Store sales from the Portfolio Centers increased by approximately 10.1% in comparison to the total Mall Store sales in 1998. 8 of 39 9 The table below shows tenants, by trade name, with more than .75% of annualized effective rents as compared to consolidated effective rents on an annualized basis in the Wholly-Owned Centers at December 31, 1999. In addition, similar percentages existed in the Portfolio Centers as of December 31, 1999. % OF TOTAL TENANT NAME ANNUALIZED RENTS ----------- ---------------- JCPenney 1.69% Sears 1.43% Victoria's Secret (1) 1.18% Express (1) 1.18% Footlocker 1.17% Gap 1.01% Lane Bryant (1) 0.96% Payless 0.94% Lerner New York (1) 0.92% Kay-Bee Toys 0.92% Disney Store 0.86% Disc Jockey 0.82% The Limited (1) 0.79% (1) Under common ownership by The Limited, Inc. MALL AND The Portfolio Centers have a total of FREESTANDING STORES approximately 9,500 Mall and Freestanding Stores. The following table reflects the tenant representation by category in the Wholly-Owned Centers as of December 31, 1999. In addition, similar tenant representation by category existed in the Portfolio Centers as of December 31, 1999.
% OF SQ. FT. IN WHOLLY-OWNED TENANT CATEGORIES CENTERS TYPES OF TENANTS/PRODUCTS SOLD ----------------- ------- -------------------------------------------------- Specialty 21% 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 16% Unisex apparel, children's apparel, lingerie, and formalwear -------------------------------------------------------------------------------------- Shoes 12% Shoes -------------------------------------------------------------------------------------- Food 8% Restaurant, food court -------------------------------------------------------------------------------------- Gifts 7% Cards, candles, engraving stores, other gift or novelty -------------------------------------------------------------------------------------- Music/Electronics 6% Music, electronics, computer and software, video rental -------------------------------------------------------------------------------------- Sporting Goods 4% Sports apparel, sports and exercise equipment --------------------------------------------------------------------------------------
9 of 39 10 Jewelry 3% Fine jewelry and costume jewelry -------------------------------------------------------------------------------------- Men's Apparel 2% Men's apparel -------------------------------------------------------------------------------------- Specialty Food 2% Candy, coffee, nuts, chocolate, health food/vitamins -------------------------------------------------------------------------------------- Total 100%
Specialty tenants include Mastercuts, One Hour Photo, California Nails, Lechter's, 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, Eddie Bauer, American Eagle, Old Navy and J.Crew. The Shoes category includes tenants such as Footlocker and Payless Shoesource. The Food category includes restaurants such as Ruby Tuesday 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, Friedman's Jewelers 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 comparative environment in which the Company operates. Northridge Fashion Center is a 1.5 million square foot, two-story enclosed regional shopping center located in Northridge, California, 25 miles northwest of Los Angeles. The mall opened in 1971 and was extensively rebuilt and retrofitted after damage from the Northridge earthquake in 1994. Northridge serves a ten-mile radius trade area which includes over 1.1 million people. Major employees in the area include Walt Disney, Boeing and Hughes Electronics. The mall currently has four Anchor tenants: Robinson-May, JCPenney, Macy's, and Sears. The mall has over 180 mall shops with national retailers such as Old Navy, Borders Books and Zainy Brainy. Northridge's regional mall competition within its trade area consists of Topanga Plaza, a four Anchor mall built in 1964 located four miles southwest of the center and Sherman Oaks Fashion Center, a two Anchor enclosed mall built in 1963, 10 miles southeast of Northridge. The mall also faces competition from neighborhood strip shopping centers which are located within a few miles of the center. Northbrook Court is a two-story, 978,000 square foot regional mall located in Northbrook, 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 10 of 39 11 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 shopping centers located within a few miles of the center, and a super regional mall (Woodfield Mall), a 2.1 million square foot mall located fifteen miles southwest of Northbrook Court. Park City Center is a 1.5 million square foot, single-level, regional shopping center located in Lancaster, Pennsylvania, in Pennsylvania Dutch Country. Park City is anchored by Boscov's, The Bon Ton, Kohl's, Sears and JCPenney as well as over 165 specialty mall shops. Park City is the only enclosed regional shopping center in Lancaster, is the only enclosed mall within 25 miles and is the largest retail venue in the area. Park City opened in 1970 and renovations were made in 1988 and 1997, including a new food court and carousel. Park City's trade area includes over 277,000 people and major employers include Armstrong World Industries, RR Donnelly and the County of Lancaster. The Center's primary competition is from a number of smaller factory outlet/power centers. Examples of such centers include Red Rose Commons, built in 1998, located two miles northeast of Park City and which features a Circuit City, a Home Depot and a Linen's and Things. An additional competitor is Tanger Factory Outlet Center, located seven miles east of the mall and featuring Ann Taylor, J. Crew and Coach outlet stores. These centers typically target discount shoppers and do not offer a broad selection of merchandise or price points and therefore do not pose a significant competitive threat to Park City. ENVIRONMENTAL Under various federal, state and local laws and MATTERS and regulations, 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. 11 of 39 12 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. EMPLOYEES As of March 14, 2000, the Company and GGMI had 3,311 full-time employees. Certain employees at three of the Portfolio Centers are subject to collective bargaining agreement. 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 AS A General Growth currently qualifies as a real estate REAL ESTATE investment trust pursuant to the requirements INVESTMENT TRUST AND contained in Sections 856-858 of the Internal TAXABILITY OF Revenue Code of 1986, as amended (the "Code"). If, DISTRIBUTONS as General Growth contemplates, such qualification continues, General Growth will not be taxed on its real estate investment trust taxable income. During 1999, 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 $1.98 per share of Common Stock were paid in 1999, of which $1.31 (66.0%) was ordinary income, $0.06 (3.0%) was long-term capital gain from sales of property, and $0.61 (31%) was a return of capital based on the taxable income of General Growth. ITEM 2. The Company's investment in real estate as of PROPERTIES December 31, 1999 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 1999 was $26.04. 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 1999 was $33.78, or $7.74 per square foot more than the average for expiring leases. The following schedule shows lease expirations over the next five years. 12 of 39 13 PORTFOLIO CENTERS FIVE YEAR LEASE EXPIRATION SCHEDULE
ALL EXPIRATIONS EXPIRATIONS @ SHARE (1) ------------------------------------ ------------------------------------ BASE RENT FOOTAGE RENT/PSF BASE RENT FOOTAGE RENT/PSF ------------------------------------ ------------------------------------ WHOLLY OWNED 2000 $20,127,300.00 782,173.00 $25.73 $20,127,300.00 782,173.00 $25.73 2001 20,899,225.00 931,839.00 22.43 20,899,225.00 931,839.00 22.43 2002 27,211,128.00 1,281,682.00 21.23 27,211,128.00 1,281,682.00 21.23 2003 29,124,286.00 1,314,672.00 22.15 29,124,286.00 1,314,672.00 22.15 2001 24,077,853.00 1,036,164.00 23.24 24,077,853.00 1,036,164.00 23.24 --------------- ------------ ------ --------------- ------------ ------ PORTFOLIO TOTAL $121,439,792.00 5,346,530.00 $22.71 $121,439,792.00 5,346,530.00 $22.71 UNCONSOLIDATED (2) 2000 $21,282,042.00 650,044.00 $32.74 $10,548,325.00 321,699.00 $32.79 2001 19,320,350.00 659,709.00 29.29 9,480,249.00 325,664.00 29.11 2002 27,225,308.00 926,648.00 29.38 13,415,471.00 456,514.00 29.39 2003 25,895,624.00 970,500.00 26.68 12,709,996.00 476,496.00 26.67 2004 24,717,558.00 964,780.00 25.62 12,007,839.00 473,629.00 25.35 --------------- ------------ ------ --------------- ------------ ------ PORTFOLIO TOTAL $118,440,882.00 4,171,681.00 $28.39 $ 58,161,880.00 2,054,002.00 $28.32 --------------- ------------ ------ --------------- ------------ ------ GRAND TOTAL $239,880,674.00 9,518,211.00 $25.20 $179,601,672.00 7,400,532.00 $24.27 =============== ============ ====== =============== ============ ======
(1) Expirations at share reflect the Company's direct or indirect ownership interest in a joint venture. (2) Excludes the three malls managed by joint venture partners of GGP/Homart (Arrowhead Towne Center, Lakeland Square and Superstition Springs). 13 of 39 14 COMPANY PORTFOLIO At December 31, 1999, the Company had direct or indirect DEBT ("pro rata") mortgage debt of approximately $4,332,695. The ratio of pro rata floating rate debt to total pro rata debt and preferred stock was 41.4% at December 31, 1999. 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, 1999 (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(C) RATE AMOUNT RATE AMOUNT RATE ---- ------ -------- ------ -------- ------ ------ 2000 $ 318,000 7.74% $93,000 7.51% $ 411,000 7.69% 2001 369,862 7.52% 15,300 7.15% 385,162 7.50% 2002 -0- -0-% 124,228 6.72% 124,228 6.72% 2003 -0- -0-% 410,596 7.23% 410,596 7.23% 2004 1,064,973 7.38% 202,188 7.46% 1,267,161 7.39% Subsequent $1,366,699 7.14% 367,849 7.47% 1,734,548 7.21% ---------- ------ --------- ----- ---------- ------ Totals $3,119,534 7.33% $1,213,161 7.31% $4,332,695 7.32% ========== ====== ========== ===== ========== ====== Floating $1,394,680 7.67% $540,030 7.41% $1,934,710 7.60% Fixed Rate 1,724,854 7.05% 673,131 7.23% 2,397,985 7.10% ----------- ------ --------- ----- ----------- ------ Totals $3,119,534 7.33% $1,213,161 7.31% $4,332,695 7.32% ========== ====== ========== ===== ========== ======
(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. 14 of 39 15 PROPERTY DATA The following tables set forth certain information regarding the Wholly-Owned Centers and the Unconsolidated Centers as of December 31, 1999. The first table depicts the Wholly-Owned Centers and the second table depicts the Unconsolidated Centers.
WHOLLY-OWNED CENTERS -------------------- TOTAL GLA/MALL YEAR AND FREESTANDING NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR LOCATION (1) OR EXPANDED (SQUARE FEET) (2) ANCHORS VACANCIES - --------------------- ------------------ ----------------- ---------------------------------------- --------- Ala Moana Center 1959/ 1,779,099/ JCPenney, Liberty House, None Honolulu, Hawaii 1966, 1987, 1989, 1999 769,355 Neiman Marcus, Sears Apache Mall 1969/ 753,690/ Dayton's, JCPenney, Montgomery Ward, None Rochester, Minnesota 1985, 1992 257,424 Sears Baybrook Mall 1978/ 1,086,938/ Dillards, Mervyn's, Montgomery Ward, Sears None Houston, Texas 1984, 1985 343,415 Bayshore Mall 1987/ 613,707/ Gottschalks, JCPenney, Sears, Mervyn's None Eureka, California 1989 343,692 Bellis Fair Mall 1988/ 762,955/ JCPenney, Mervyn's, Sears, None Bellingham, Washington N/A 349,792 Target, The Bon Marche Birchwood Mall 1990/ 714,462/ Hudson's, JCPenney, Sears, None Port Huron, Michigan 1991, 1997 288,328 Target, Younkers The Boulevard Mall 1968/ 1,211,693/ Dillard's, JCPenney, Macy's, Sears None Las Vegas, Nevada 1992 423,657 Capital Mall 1978/ 528,829/ Dillard's, JCPenney, Sears None Jefferson City, Missouri 1985, 1992 305,384 Century Mall 1975/ 722,728/ JCPenney, McRae's, Rich's, Sears None Birmingham, Alabama 1990, 1994 234,252 Chapel Hills Mall 1982/ 1,173,027/ Dillard's, Foley's, JCPenney, KMart, None Colorado Springs, CO 1986, 1997, 1998 426,869 Mervyn's, Sears Coastland Center 1977/ 925,006/ Burdines, Dillard's, JCPenney, Sears None Naples, Florida 1985, 1996 334,616 Colony Square Mall 1981/ 547,516/ Elder-Beerman, JCPenney, Lazarus, None Zanesville, Ohio 1987 289,512 Sears Columbia Mall 1985/ 731,924/ Dillard's, JCPenney, Sears, Target None Columbia, Missouri 1987 316,480 Coral Ridge Mall 1998/ 998,294/ Dillard's, JCPenney, Scheel's, None Iowa City, Iowa N/A 361,256 Sears, Target, Younkers The Crossroads 1980/1982, 765,882/ Hudson's, JCPenney, Mervyn's, None Kalamazoo, Michigan 1988, 1998 262,922 Sears Cumberland Mall 1973/ 1,199,672/ JCPenney, Macy's, Rich's, Sears None Atlanta, Georgia N/A 365,557
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TOTAL GLA/MALL YEAR AND FREESTANDING NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR LOCATION (1) OR EXPANDED (SQUARE FEET) (2) ANCHORS VACANCIES - --------------------- ---------------- ----------------- ---------------------------------------- --------- Eagle Ridge Mall 1996/ 629,841/ Dillard's, JCPenney, Sears None Winter Haven, Florida N/A 317,589 Eden Prairie Mall 1976/ 861,380/ Kohl's, Mervyn's, Sears, Target None Eden Prairie, Minnesota 1989, 1994 325,572 Fallbrook Mall 1966/ 1,024,763/ Burlington Coat Factory, JCPenney, Kmart, None West Hills, (Los Angeles), 1985 472,749 Mervyn's, Target California Fox River Mall 1984/ 1,101,979/ Dayton's, JCPenney, Sears, None Appleton, Wisconsin 1991, 1998 537,065 Target, Younkers Gateway Mall 1990/ 631,543/ Sears, Target, The Emporium None Springfield/Eugene, Oregon N/A 348,278 Grand Traverse Mall 1992/ 577,785/ Hudson's, JCPenney, Target None Traverse City, Michigan N/A 312,436 Greenwood Mall 1979/ 753,397/ Dillard's, Famous-Barr, JCPenney, Sears, None Bowling Green, Kentucky 1987 352,774 Knollwood Mall 1955/ 500,074/ Cub Foods, Kohl's None St. Louis Park, 1981 289,474 (Minneapolis), Minnesota Lakeview Mall 1983/ 621,510/ Hudson's, JCPenney, Sears None Battle Creek, Michigan 1998 329,917 Lansing Mall 1969/ 830,845/ Hudson's, JCPenney, Mervyn's, None Lansing, Michigan N/A 387,443 Younkers Lockport Mall 1971/ 345,796/ Hills, Montgomery Ward, The Bon Ton None Lockport, New York 1984 125,399 Mall of the Bluffs 1986/ 669,050/ Dillard's, JCPenney, Sears, Target None Council Bluffs, Iowa 1988, 1998 355,176 (Omaha, Nebraska) Mall St. Vincent 1977/ 567,819/ Dillard's, Sears None Shreveport, Louisiana 1991 219,819 Market Place Mall 1975/ 1,067,973/ Bergner's, Famous-Barr, JCPenney, None Champaign, Illinois 1987, 1994, 1999 391,342 Kohl's, Sears McCreless Mall 1962/ 476,799/ Beall's, Montgomery Ward None San Antonio, Texas 1997 290,941 Northridge Fashion Center 1971/ 1,465,261/ JCPenney, Macy's, Robinson's-May, None Northridge, California 1995, 1997 658,343 Sears Oakwood Mall 1986/ 786,464/ Dayton's, JCPenney, None Eau Claire, Wisconsin 1991, 1997 321,388 Scheel's All Sports, Sears, Target
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TOTAL GLA/MALL YEAR AND FREESTANDING NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR LOCATION (1) OR EXPANDED (SQUARE FEET) (2) ANCHORS VACANCIES - --------------------- ------------------ ----------------- ---------------------------------------- --------- Park Mall 1974/ 965,371/ Dillards, Macy's, Sears None Tucson, Arizona 1998 345,371 Piedmont Mall 1984/ 661,606/ Belk, Hills, Belk Men's, None Danville, Virginia 1995 188,986 JCPenney, Sears Pierre Bossier Mall 1982/ 643,396/ Dillard's, JCPenney, Sears, None Bossier City, Louisiana 1985, 1992 261,492 Service Merchandise, Stage The Pines 1986/ 609,047/ Dillard's, JCPenney, None Pine Bluff, Arkansas 1990 269,338 Sears, Wal-Mart Regency Square Mall 1967/ 1,400,320/ Belk, Dillard's, JCPenney, None Jacksonville, Florida 1992, 1998, 1999 588,689 Montgomery Ward, Sears Rio West Mall 1981/ 445,270/ Beall's, JCPenney, KMart None Gallup, New Mexico 1991, 1998 264,137 River Falls Mall 1990/ 748,298/ Bacon's, Toys "R" Us, Wal-Mart None Clarksville, Indiana N/A 403,260 (Louisville, Kentucky) River Hills Mall 1991/ 646,284/ Herberger's, JCPenney, None Mankato, Minnesota 1996 284,235 Sears ,Target Riverlands Shopping Center 1965/ 183,808/ Winn-Dixie None LaPlace, Louisiana 1984 136,874 (3) RiverTown Crossings 1999/ 1,125,410/ Hudson's, JCPenney, Kohl's, Sears, None Grand Rapids, Michigan N/A 510,138 Younkers Sooner Fashion Square 1976/ 480,090/ Dillard's, JCPenney, Sears, None Norman, Oklahoma 1999 175,136 Stein Mart, Service Merchandise Southlake Mall 1976/ 1,026,030/ JCPenney, Macy's, Rich's, Sears None Morrow, Georgia 1995, 1999 287,530 SouthShore Mall 1981/ 337,807/ JCPenney, KMart, Sears None Aberdeen, Washington N/A 148,480 Southwest Plaza 1983/ 1,238,089/ Dillards, Foley's, JCPenney, None Littleton, Colorado 1994, 1995 600,912 Montgomery Ward, Sears Spring Hill Mall 1980/ 1,075,394/ Carson Pirie Scott, JCPenney, Kohl's, None West Dundee, Illinois 1992, 1996 393,814 Marshall Field's, Sears Valley Hills Mall 1978/ 619,921/ Belk, JCPenney, Sears None Hickory, North Carolina 1988, 1990, 1996 207,625 Valley Plaza Mall 1967/ 1,158,818/ Gottschalks, JCPenney, None Bakersfield, California 1988, 1997, 1998 432,129 Macy's, Robinson's-May, Sears
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TOTAL GLA/MALL YEAR AND FREESTANDING NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR LOCATION (1) OR EXPANDED (SQUARE FEET) (2) ANCHORS VACANCIES - --------------------- ---------------- ----------------- --------------------------------- --------- West Valley Mall 1995/ 687,400/ Gottschalks, JCPenney, Ross Dress None Tracy, California 1997 336,585 for Less, Sears, Target Westwood Mall 1972/ 453,167/ Elder-Beerman, JCPenney, None Jackson, Michigan 1978, 1993 135,073 Montgomery Ward
(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. 18 or 39 19
UNCONSOLIDATED CENTERS OWNERSHIP TOTAL GLA/MALL YEAR OPENED/ INTEREST % AND FREESTANDING NAME OF CENTER/ REMODELED OF OPERATING GLA ANCHOR LOCATION (1) OR EXPANDED PARTNERSHIP SQUARE FEET(2) ANCHORS VACANCIES - ------------------------- ------------- ------------- ----------------- --------------------- --------- Alderwood Mall 1979/ 50 1,046,967/ JCPenney, Lamonts, Nordstrom, None Lynnwood (Seattle), 1995, 1996 305,232 Sears, The Bon Marche Washington Altamonte Mall 1974/ 50 1,070,548/ Burdine's, Dillard's, None Orlando, Florida 1989 392,000 JCPenney, Sears Arrowhead Towne Center 1993/ 16.7 1,130,901/ Dillard's, JCPenney, Mervyn's, None Glendale, Arizona N/A 392,954 Montgomery Ward, Robinson's-May Bay City Mall 1991/ 50 527,273/ JCPenney, Sears, None Bay City, Michigan 1993 211,622 Target, Younkers Brass Mill Center/Commons 1997/ 50 1,043,522/ Filene's, JCPenney, One Waterbury, Connecticut N/A 598,884 Sears Carolina Place 1991/ 50 1,091,307/ Belk's, Dillards, Hecht's, None Charlotte, North Carolina 1994 317,805 JCPenney, Sears Chula Vista Center 1962/ 50 882,501/ JCPenney, Macy's, None Chula Vista, California 1993, 1994 328,401 Mervyn's, Sears Columbiana Centre 1990/ 50 817,847/ Belk, Dillards, None Columbia, South Carolina 1992 258,870 Parisian, Sears Deerbrook Mall 1984/ 50 1,196,155/ Dillard's, JCPenney, Foley's, None Humble (Houston), Texas 1996, 1997 456,562 Mervyn's, Sears Eastridge Mall 1970/ 51 1,380,683/ JCPenney, Macy's, Sears One San Jose, California 1982, 1995 523,202 Lakeland Square 1988/ 25 904,993/ Belk, Burdines, Dillard's, None Lakeland, Florida 1994 291,862 JCPenney, Mervyn's, Sears Landmark Mall 1965/ 51 969,508/ Hecht's, JCPenney, Sears None Alexandria, VA 1989, 1991 338,502 Mayfair Mall 1958/ 51 1,366,043/ Marshall Fields, None Wauwatosa, Wisconsin 1986, 1994 866,733 The Boston Store Meadows Mall 1978/ 51 947,507/ Dillard's, JCPenney, Macy's, None Las Vegas, Nevada 1987, 1997 310,654 Sears Montclair Plaza 1968/ 50 1,496,089/ JCPenney, Macy's, None Montclair (Los Angeles) 1985 511,617 Montgomery Ward, Nordstrom, California Robinson's-May, Sears Moreno Valley Mall 1992/ 50 1,035,508/ Harris, JCPenney, None Moreno Valley, California N/A 429,974 Robinson's-May, Sears Natick Mall 1966/ 50 1,154,701/ Filene's, Lord & Taylor, None Natick, Massachusetts 1994 428,039 Macy's, Sears
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OWNERSHIP TOTAL GLA/MALL YEAR OPENED/ INTEREST % AND FREESTANDING NAME OF CENTER/ REMODELED OF OPERATING GLA ANCHOR LOCATION (1) OR EXPANDED PARTNERSHIP SQUARE FEET(2) ANCHORS VACANCIES - ------------------------- ----------- ----------- -------------- --------------------- --------- Neshaminy Mall 1968/ 25 975,469/ Boscov's, Sears, One Bensalem, Pennsylvania 1995, 1998 371,874 Strawbridge Newgate Mall 1981/ 50 726,918/ Dillard's, Mervyn's, Ogden, Utah 1994, 1998 316,754 Oshman's, Sears None New Park Mall 1980/ 50 1,131,329/ JCPenney, Macy's, Mervyn's, None Newark, California 1993 387,865 Sears, Target Northbrook Court 1976/ 50 977,507/ Lord & Taylor, Marshall Fields, None Northbrook, Illinois 1995, 1996 441,230 Neiman Marcus Northgate Mall 1972/ 51 858,309/ JCPenney, Proffitt's, Sears None Chattanooga, Tennessee 1991 415,689 North Point Mall 1993/ 50 1,362,631/ Dillard's, JCPenney, Lord & None Alpharetta (Atlanta), Georgia N/A 396,344 Taylor, Parisian, Rich's, Sears Oaks Mall (2) 1978/ 51 907,628/ Belk, Burdines, Dillard's, None Gainesville, Florida N/A 349,761 JCPenney, Sears Oak View Mall 1991/ 51 869,242/ Dillard's, JCPenney, None Omaha, Nebraska N/A 264,982 Sears, Younkers Oglethorpe Mall 1969/ 51 970,843/ Belk, JCPenney, Rich's, Sears None Savannah, Georgia 1989, 1990, 1992 434,259 Park City Center 1970/ 51 1,397,994/ Boscov's, JCPenney, None Lancaster, Pennsylvania 1988, 1997 533,637 Kohl's, Sears, The Bon-Ton The Parks at Arlington 1988/ 50 1,191,471/ Dillard's, Foley's, JCPenney, None Arlington, Texas N/A 360,526 Mervyn's, Sears The Pavilions at Buckland Hills 1990/ N/A (3) 961,105/ Dick's Sporting Goods, Filene's, None Manchester, Connecticut 1994 327,583 Filene's Home Store, JCPenney, Lord & Taylor, Sears Pembroke Lakes Mall 1992/ 50 1,063,860/ Burdine's, Dillard's, Dillard's None Pembroke Pines, Florida N/A 352,585 (Men's & Home Furnishings), JCPenney, Sears Prince Kuhio Plaza 1985/ 50 517,264/ JCPenney, Liberty House, One Hilo, Hawaii 1994, 1999 281,144 Sears Quail Springs 1980/ 50 1,019,817/ Dillard's, Foley's, None Oklahoma City, Oklahoma 1992, 1998, 1999 331,964 JCPenney, Sears Steeplegate Mall 1990/ 50 447,649/ JCPenney, Sears, None Concord, New Hampshire N/A 191,237 The Bon Ton Superstition Springs 1990/ 16.7 1,073,726/ Dillard's, JCPenney, Mervyn's, None East Mesa, Arizona 1994 367,032 Robinson's-May, Sears Town East Mall 1971/ 50 1,242,873/ Dillard's, Foley's, JCPenney, None Mesquite, Texas 1986 433,487 Sears
21
OWNERSHIP TOTAL GLA/MALL YEAR OPENED/ INTEREST % AND FREESTANDING NAME OF CENTER/ REMODELED OF OPERATING GLA ANCHOR LOCATION (1) OR EXPANDED PARTNERSHIP SQUARE FEET(2) ANCHORS VACANCIES - ------------------------- ------------ ------------ --------------- --------------------- --------- Tysons Galleria 1988/ 50 808,473/ Macy's, Neiman Marcus, None McLean, Virginia 1994, 1997 296,540 Saks Fifth Avenue Vista Ridge Mall 1989/ 40 1,059,133/ Dillard's, Foley's, None Lewisville, Texas 1991 386,071 JCPenney, Sears Washington Park Mall 1984/ 50 351,483/ Dillard's, JCPenney, None Bartlesville, Oklahoma 1986 157,187 Sears West Oaks Mall 1996/ 50 1,075,960/ Dillard's, JCPenney, None Ocoee (Orlando), Florida N/A 432,478 Parisian, Sears Westroads Mall 1968/ 51 1,079,188/ JCPenney, The Jones Store, None Omaha, Nebraska 1995, 1999 382,778 Von Maur, Younkers The Woodlands Mall 1994/ 25 1,178,455/ Dillard's, Foley's, JCPenney, None The Woodlands, 1998 350,377 Mervyn's, Sears (Houston), Texas MALLS UNDER DEVELOPMENT Stonebriar Centre 2000/ 50 1,600,000/ (4) (4) Frisco (Dallas), Texas N/A 612,000
(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. (3) GGP/Homart's participation is subordinated to certain preferred returns to its Joint Venture Partners. (4) Upon completion, this mall will contain up to five major department stores, currently expected to be Foley's, JCPenney, Sears, Macy's, and Nordstrom. 21 of 39 22 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, 1999.
GENERAL GROWTH PROPERTIES, INC. PORTFOLIO ANCHORS AS OF DECEMBER 31, 1999 TOTAL SQUARE FEET NAME STORES (000'S) ---- ------ -------- Sears 82 11,568 JCPenney 77 9,030 Dillard's Inc. Dillard's 37 5,975 Dillard's Home Store 1 22 Dillard's Men's Store 2 213 Bacon's 1 187 ---- ------ Sub-Total Dillard's Inc. 41 6,397 ==== ====== Dayton Hudson Corporation Target 15 1,650 Mervyn's 17 1,409 Marshall Fields 3 693 Dayton's 3 432 Hudson's 6 692 ---- ------ Sub-Total Dayton Hudson Corporation 44 4,876 ==== ====== May Department Stores Company Foley's 10 1,423 Robinson's-May 6 946 Filene's 3 520 Filene's Home Store 1 36 Lord & Taylor 4 457 Strawbridge's 1 218 Hecht's 2 345 Famous-Barr 1 122 The Jones Store 1 153 ---- ------ Sub-Total May Department Stores Company 29 4,220 ==== ====== Federated Department Stores, Inc. Macy's 13 2,294 Rich's 5 937 Burdines 5 681 The Bon Marche 2 321 Lazarus 1 50 ---- ------ Sub-Total Federated Department Stores, Inc. 26 4,283 ==== ======
22 of 39 23 GENERAL GROWTH PROPERTIES, INC. PORTFOLIO ANCHORS AS OF DECEMBER 31, 1999 (continued)
TOTAL SQUARE FEET NAME STORES (000'S) ---- ------ ------- Saks Incorporated Younkers 8 983 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 Incorporated 18 2,286 ==== ===== Montgomery Ward & Co. 7 907 Belk Belk 8 1,105 Belk Men's 1 34 ---- ----- Sub-Total Belk 9 1,139 ==== ===== Kohl's 6 515 Neiman-Marcus 3 422 Boscov 2 413 Liberty House 2 377 KMart 4 356 The Bon Ton 3 312 Joslins 3 301 Gottschalks 3 268 Nordstrom 2 245 Wal-Mart 2 196 Bullock's 1 190 Von Maur 1 179 Hills Department Store 2 176 Scheel's All Sports 2 154 Harris 1 150 Elder-Beerman 2 141 Cub Foods 1 130 Costner-Knott 2 122 JLHudson 1 122 Burlington Coat Factory 1 101 Service Merchandise 2 93 Goody's 3 83 Ames 1 81 Dick's Sporting Goods 1 80 Biggs 1 78 Oshman's 1 64 Lamont's 1 60 Beall's 2 56 The Emporium 1 50 Toys "R" Us 1 47 Winn-Dixie 1 47 Stein Mart 1 39 Office Depot 1 35 Stage 1 35 Ross Dress for Less 1 28
23 of 39 24 GROUND LEASES The Company currently leases the land under Rio West Mall, a portion of the Northridge Fashion Center, 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 GGP 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 litigation PROCEEDINGS 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. No matters were submitted to General Growth's stockholders SUBMISSION OF during the fourth quarter of fiscal 1999. MATTERS TO A VOTE OF SECURITY HOLDERS PART II The Common Stock is listed on the New York Stock Exchange ITEM 5. ("NYSE") and trades under the symbol "GGP". As of March 14, 2000, MARKET FOR the 51,927,576 outstanding shares of Common Stock were held by REGISTRANT'S approximately 1,107 stockholders of record. The closing price COMMON EQUITY per share of the Common Stock on the NYSE on such date was AND RELATED $28.50 per share. STOCKHOLDER MATTERS 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 1999 ----- DECLARED QUARTER ENDING 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
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PRICE 1998 ----- DECLARED QUARTER ENDING 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
PRICE 1997 ----- DECLARED QUARTER ENDING HIGH LOW DISTRIBUTION -------------- ---- --- ------------ March 31 $32.13 $30.25 $.45 June 30 $33.75 $31.13 $.45 September 30 $37.00 $32.44 $.45 December 31 $38.25 $31.81 $.45
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.
1999 1998 1997 1996 1995 -------- -------- -------- -------- ------- OPERATING DATA Revenue $ 612,342 $ 426,576 $ 291,147 $217,405 $167,396 Operating Expenses 206,088 151,784 109,677 75,954 63,968 Depreciation and Amortization 112,874 75,227 48,509 39,809 30,855 Interest Expense, Net 169,502 109,840 70,252 66,439 46,334 Equity in Net Income of Unconsolidated Affiliates 19,689 11,067 19,344 17,589 9,274 Net gain on sales including CenterMark in 1997, 1996 & 1995 $ 4,412 $ 196 $ 58,647 $ 43,821 $ 33,397 --------- --------- --------- -------- -------- Income Before Minority Interest 147,979 100,988 140,700 96,613 68,910 Minority Interest (33,058) (29,794) (49,997) (34,580) (25,856) --------- --------- --------- -------- --------- Income Before Extraordinary Items 114,921 71,194 90,703 62,033 43,054 Extraordinary Items (13,796) (4,749) (1,152) (2,291) - --------- --------- --------- -------- ----------- Net Income 101,125 66,445 89,551 59,742 43,054 --------- --------- --------- -------- ------ Convertible Preferred Stock Dividends (24,467) (13,433) -- -- -- Net Income available to common stockholders $ 76,658 $ 53,012 $ 89,551 $ 59,742 $43,054 ========= ========= ========= ======== ======= Earnings Before Extraordinary Item Per Share - Basic 1.97 1.60 2.78 2.20 1.69 Earnings Before Extraordinary Item Per Share - Diluted 1.96 1.59 2.76 2.20 1.69 Net Earnings Per Share - Basic 1.67 1.46 2.75 2.12 1.69 Net Earnings Per Share - Diluted 1.66 1.46 2.73 2.12 1.69 Distributions Declared Per Share 1.98 1.88 1.80 1.72 1.66
25 of 39 26 CASH FLOW DATA Operating Activities $ 222,134 $ 118,304 $ 101,149 $ 67,202 $ 60,660 Investing Activities (1,254,697) (1,513,147) (183,535) (29,285) (469,204) Financing Activities 1,038,526 1,388,575 92,337 (40,268) 421,225 FUNDS FROM OPERATIONS (1) Operating Partnership $ 274,234 $ 192,274 $ 147,625 $ 114,721 $ 85,138 Minority Interest (82,631) (69,182) (52,890) (42,115) (32,409) Funds From Operations - Company 191,603 123,092 94,735 72,606 52,729 BALANCE SHEET DATA Investment in Real Estate Assets-Cost $ 5,023,690 $ 4,063,097 $2,157,251 $1,828,184 $1,547,621 Total Assets 4,954,895 4,027,474 2,097,719 1,757,717 1,455,982 Total Debt 3,119,534 2,648,776 1,275,785 1,168,522 1,027,932 Convertible Preferred Stock 337,500 337,500 -- -- -- Stockholders' Equity 927,758 585,707 498,505 330,267 229,383
(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. 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 excludes gains on land sales, if any. 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:
1999 1998 1997 -------- -------- -------- Net Income available to common stockholders $ 76,658 $ 53,012 $ 89,551 Extraordinary item - charges related to early retirement of debt 13,796 4,749 1,152 Allocations to Operating Partnership unitholders 33,058 29,794 49,997 Net gain on sales (4,412) (196) (63,813) Depreciation and amortization 155,134 104,915 70,738 --------- -------- -------- Funds From Operations $ 274,234 $192,274 $147,625 ========= ======== ========
26 of 39 27 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. CERTAIN INFORMATION ABOUT As of December 31, 1999, the Company owned 100% of THE COMPANY PORTFOLIO the fifty-two Wholly-Owned Centers, 50% of the stock of GGP/Homart, 50% of the stock of GGP/Homart II, 51% of the stock of GGP Ivanhoe, 51% of the stock of GGP 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. The Company is also in the process of constructing one additional center as discussed below. Reference is made to Notes 3 and 4 for a further discussion of such entities owned by the Company. As of December 31, 1999 GGP/Homart owned interests in twenty-three shopping centers, GGP/Homart II owned interests in seven shopping centers (including one currently under construction), 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, 1998, had an occupancy rate of approximately 88.6% as of such date. On December 31, 1999, the Mall Store and Freestanding Store portions of the centers in the Company Portfolio which were not undergoing redevelopment were approximately 90.1% occupied, representing an increase of 1.5% over 1998. Total annualized sales averaged $341 per square foot for the Company Portfolio for the year ended December 31, 1999. For the year ended December 31, 1999, total Mall Store sales for the Company Portfolio increased by 10.1% over the same period in 1998. 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, 1999 are of those tenants that were also operating in the year ended December 31, 1998. Comparable Mall Store sales in the year ended December 31, 1999 increased by 6.1% over the same period in 1998. The average Mall Store rent per square foot from leases that expired in the year ended December 31, 1999 was $26.04. The Company Portfolio benefited from increasing rents inasmuch as the average Mall Store rent per square foot on new and renewal leases 27 of 39 28 GENERAL GROWTH PROPERTIES, INC. executed during 1999 was $33.78, or $7.74 per square foot above the average for expiring leases. Revenues are primarily derived from fixed minimum rents, percentage rents and recoveries of operating expenses from tenants. Inasmuch as the Company's financial statements reflect the use of the equity method to account for its investments in 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. RESULTS OF COMPARISON OF YEAR ENDED 1999 TO YEAR ENDED OPERATIONS OF THE DECEMBER 31, 1998 Total revenues for 1999 were COMPANY $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). Percentage 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 $0.7million from $10.7 million in 1998. Equity in net income of unconsolidated affiliates during 1999 increased by $8.6 million to $19.7 million from $11.1 million in 1998. The Company's equity in the earnings of GGP/Homart increased approximately $1.1 million, primarily due to the increase in average property occupancy, an increase in the ownership interest of GGP/Homart in The Parks at Arlington and an increase in the Company's ownership interest in 28 of 39 29 GENERAL GROWTH PROPERTIES, INC. GGP/Homart in 1999 versus 1998. The Company's equity in the earnings of GGMI resulted in an increase of approximately $3.9 million, primarily due to reduced write-offs of terminated third-party management contracts. GGP Ivanhoe III accounted for an increase of approximately $1.2 million due primarily to the acquisition of USPPI in June 1998 as described more fully in Note 4. 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. COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997 Total revenues for 1998 were $426.6 million, which represents an increase of $135.5 million or approximately 46.5% from $291.1 million in 1997. Approximately $128.8 million or 95.1% of the increase was from properties acquired or developed after January 1, 1997. Minimum rent during 1998 increased $93.2 million or 53.0% from $175.8 million in 1997 to $269.0 million. The acquisition and development of properties after January 1, 1997 generated a $77.5 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 $33.6 million or 34.5% from $97.3 million to $130.9 million in 1998. The increase in tenant recoveries was generated by a combination of new acquisitions and increased recoverable operating costs at the comparable centers. Percentage rents and other income increased $8.4 million or 61.8% from $13.6 million in 1997 to $22.0 million in 1998 as a result of the acquisition of new properties and improved performance at the comparable centers. Fee income during 1998 was comparable to the year ended December 31, 1997. The fee revenue was primarily generated by asset management services performed for GGP/Homart. Total expenses, including depreciation and amortization, increased by approximately 43.5% or $68.8 million, from $158.2 million in 1997 to $227.0 million in 1998. Virtually all of the increase in total expenses was attributable to properties acquired and developed since January 1, 1997. The increase in total expenses from the new properties consists of $13.4 million of real estate taxes, $1.0 million of management fees, $32.3 million of property operating costs, $0.9 million of provision for doubtful accounts, and $21.1 million of depreciation and amortization. Net interest expense increased by $39.5 million or 56.2% from $70.3 million in 1997 to $109.8 million in 1998, substantially all due to indebtedness incurred in connection with the acquisition of new properties in 1997 and 1998. The note receivable from GGMI generated $10.7 million of interest income in 1998, an increase of $4.3 million from $6.4 million in 1997. The change was due to the increase in the outstanding balance of the note, the proceeds of which were primarily used to finance the cost of the Company's new corporate headquarters building in downtown Chicago. Equity in net income of unconsolidated affiliates during 1998 decreased by $8.2 million to $11.1 million from $19.3 million in 1997. GGP/Homart accounted for an increase of approximately $1.4 million and the remaining property joint ventures accounted for an aggregate increase of $6.8 million. The Company's ownership interest in GGMI resulted in a decrease of $16.4 million, caused primarily by increased write-offs of terminated third-party management contracts. 29 of 39 30 GENERAL GROWTH PROPERTIES, INC. Net income decreased by approximately $23.2 million in 1998 to $66.4 million, from $89.6 million in 1997. Net income in 1997 included a $58.6 million gain on the January 1997 sale of the remaining investment in CenterMark. 1997 net income without the CenterMark gain (net of minority interest) would have been $52.9 million and 1998 net income increased by $13.5 million compared to this amount, primarily as a result of net income from newly acquired properties and higher income on comparable centers. LIQUIDITY AND CAPITAL As of December 31, 1999, the Company held RESOURCES OF THE COMPANY approximately $25.6 million of unrestricted cash and cash equivalents. The Company uses operating cash flow as the principal source of 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 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. Currently, 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 $200 million unsecured credit facility (the "Credit Facility") which matures on July 31, 2000. As of December 31, 1999, $160 million of the Credit Facility was drawn. As of December 31, 1999, the Company had consolidated debt of approximately $3,120 million, of which $1,725 million is comprised of debt bearing interest at a fixed rate, with the remaining $1,395 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 financing and refinancing transactions completed since December 31,1998: In January 1999, the Company obtained a $30 million short-term unsecured bank loan which bore interest at a floating market rate. The bank loan was repaid on May 21,1999 in conjunction with the replacement of the $55 million negative pledge (i.e., the promise not to encumber) of Coastland Mall with a ten-year 7.0% mortgage loan in the principal amount of $87 million collateralized by the Coastland Mall. In January 1999, the Company obtained an additional $83.7 million floating rate interim loan (scheduled to mature June 1, 1999 but partially repaid in May, 1999 with the remainder subsequently extended to November 1999, and repaid as discussed below). On January 11, 1999, the Company acquired The Crossroads Mall in Kalamazoo, Michigan. The aggregate purchase price was approximately $68 million, which was funded from the Company's new short-term floating rate interim loan described above. In May 1999, the Company obtained a new $45 million mortgage loan collateralized by The Crossroads Mall to replace a portion of the $83.7 million of interim financing. The new mortgage loan bears interest at 7.40% and matures in June 2009. 30 of 39 31 GENERAL GROWTH PROPERTIES, INC. The Company is currently negotiating a $90 million construction loan facility to finance the renovation currently underway at Park Mall in Tucson, Arizona (the final phase of which is expected to be completed in 2001). In conjunction with such negotiations, the Company obtained in April 1999 a $25 million short-term bank loan, which was increased to $50 million in October 1999. The loan is currently scheduled to mature on March 31, 2000, and the Company expects to obtain an extension of the maturity date. The Company is seeking a floating rate construction loan, which is expected to be replaced at project completion with permanent long-term mortgage non-recourse financing (see Note 5). On April 29, 1999, the Company finalized the terms of a new $110 million construction loan facility that will be used to fund the remaining construction costs for RiverTown Crossings Mall (a recently completed project in Grandville (Grand Rapids), Michigan as more fully described in Note 2). Loan amounts drawn on the facility (approximately $88 million) bear interest at a rate per annum equal to LIBOR plus 175 basis points. The Company expects to refinance this loan facility by the scheduled maturity of June 29, 2001 with permanent long-term financing collateralized by the center (see Note 5). On July 1, 1999, the Company obtained approximately $57 million of permanent long term mortgage financing. The new mortgage loan, collateralized by the Apache Mall, bears interest at 7.0% and is scheduled to mature August 1, 2009. On July 1, 1999, the Company obtained an extension of the maturity date of approximately $833 million of indebtedness (comprised of acquisition financing of $441 million and $392 million for MEPC and USPPI, respectively) from its scheduled maturity date on July 1, 1999 to October 1, 1999. In September 1999 the Company issued approximately $700 million of commercial mortgage backed securities maturing October 2004 assuming the exercise of no-cost extension options aggregating two years (the GGP-Ivanhoe CMBS as more fully described in Note 5). The Company used the proceeds from the issuance of the GGP Ivanhoe CMBS to repay most of the $441 million of the MEPC Acquisition Financing and, with capital contributions from Ivanhoe, the $392 million interim loan collateralized by the USPPI portfolio. In September 1999, the Company also obtained a $95 million unsecured interim loan to provide among other things, the remaining amount to retire the MEPC Acquisition Financing. The unsecured interim loan, as more fully described in Note 5, required periodic principal payments ($12 million paid as of December 31, 1999) until its July, 2000 maturity and was fully repaid in January 2000 as described below. During July 1999, General Growth completed the 1999 Offering as more fully described in Note 1. General Growth received net proceeds of approximately $330.3 million from the sale of 10,000,000 shares of Common Stock which were ultimately used to pay a portion of the purchase price for the Ala Moana Center. On July 26, 1999, the Company obtained a ten-year loan in the principal amount of $100 million collateralized by a mortgage encumbering Cumberland Mall in Atlanta, Georgia. The loan proceeds were used to repay a portion of the MEPC Acquisition Financing which had been collateralized by a mortgage on the MEPC Portfolio (which includes Cumberland Mall). 31 of 39 32 GENERAL GROWTH PROPERTIES, INC. On July 30, 1999, the Company obtained a three month loan (with an additional three-month extension option) in the principal amount of $25 million collateralized by a negative pledge (i.e., the promise not to encumber) of Eagle Ridge Mall in Lake Wales, Florida. This loan was repaid in October 1999 with a portion of the proceeds of the $130 million two-year mortgage pool financing described below and in Note 5. The proceeds of the loan were distributed to the Operating Partnership to fund ongoing acquisition and development activity. During July 1999, the $100 million loan collateralized by Northbrook Court was extended from its scheduled maturity of August 1, 1999 to November 30, 1999. Due to the formation of Homart II as described below and in Note 4, this $100 million loan was repaid by GGP/Homart II on November 30, 1999 with the proceeds from new commercial mortgage-backed securities, collateralized by a portion of GGP/Homart II's portfolio of properties (including Northbrook Court). On July 30, 1999, the Company acquired 100% of the Ala Moana Center in Honolulu, Hawaii, as more fully described in Note 3. The transaction was funded by a new $438 million short-term first mortgage loan and approximately $294 million in cash including a portion of the net proceeds of the 1999 Offering as further described in Note 1. The Company repaid the short-term mortgage loan in August 1999 through the issuance of $500 million of commercial mortgage-backed securities maturing September 2004 (assuming the exercise of no-cost extension options aggregating two years) as more fully described in Note 5. The Company may discuss with institutional investors the formation of a new joint venture to own the property. The terms of any joint venture and the Company's interest in any joint venture, have not been determined and the Company may not ultimately elect to form any such joint venture. On September 28, 1999 GGP Ivanhoe III acquired the Oak View Mall in Omaha, Nebraska, and on December 22, 1999 it acquired the Eastridge Mall in San Jose, California. The aggregate purchase price for the two properties was approximately $160 million, financed by capital contributions from its partners, a new $83 million long-term mortgage loan and approximately $30 million of other short-term floating rate debt. Additionally, in September 1999, the Company agreed to advance approximately $31 million collateralized by a second mortgage on the Crossroads Center in St. Cloud (Minneapolis), Minnesota. In connection with the second mortgage, the Company may be required to or may elect to acquire the property in April 2000 as more further described in Note 3. In October 1999, the Company acquired the Baybrook Mall in Houston, Texas. The aggregate purchase price was approximately $133 million, which was paid with the proceeds of a ten year $95 million mortgage on the property and the proceeds of other new secured financing. In October 1999, the Company obtained a $130 million two-year term loan collateralized by six properties which is scheduled to mature in October 2001 as more fully described in Note 5. 32 of 39 33 GENERAL GROWTH PROPERTIES, INC. In November 1999, the Company formed GGP/Homart II, a new joint venture with the New York State Common Retirement Fund, its venture partner in GGP/Homart. GGP/Homart II owns three regional malls contributed by New York State Common Retirement Fund and three operating regional malls and one mall currently under construction contributed by the Company (Note 4). In January 2000, the Company obtained a new $200 million unsecured short-term bank loan. The initial funding of $120 million on this loan was used to fund ongoing redevelopment projects and repay the interim loan obtained in September 1999. This loan bears interest at LIBOR plus 150 basis points and matures concurrently with the July 2000 maturity of the Company's Credit Facility. The Company currently expects to jointly refinance these obligations when due with a new revolving credit facility and term loans. Approximately $318 million of the Company's debt is scheduled to mature in 2000. 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 or raise equity capital. If additional capital is required, the Company believes that it can 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 joint venture 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 will consider the refinancing of portions of its long-term floating rate debt to pooled or property-specific non-recourse fixed-rate mortgage financing. Net cash provided by operating activities was $222.1 million in 1999, an increase of $103.8 million from $118.3 million in the same period in 1998. Net income before allocations to the minority interest increased $48 million, which was primarily due to earnings attributable to properties acquired in 1999 and 1998. Another significant change in cash provided by operating activities was a $37.6 million net change in cash flows from operating activities in 1999 as compared to 1998 related to depreciation and amortization. SUMMARY OF INVESTING Net cash used by investing activities was $1,254.7 ACTIVITIES million in 1999 compared to $1,513.1 million of cash used in 1998. Cash flow from investing activities was impacted by acquisitions, development and improvements to real estate properties, which utilized cash of approximately $1,248.4 million in 1999 and $1,360.1 million in 1998. Net cash used by investing activities in 1998 was $1,513.1 million, compared to a use of $183.5 million in 1997. 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 $1,360.1 million in 1998 compared to $200.6 million in 1997. The proceeds from the sale of CenterMark provided funds of $130.5 million in 1997. 33 of 39 34 GENERAL GROWTH PROPERTIES, INC. SUMMARY OF FINANCING Financing activities provided cash of $1,038.5 ACTIVITIES 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, the Company 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 use of cash consisted primarily of increased distributions (including dividends paid to preferred stockholders in 1999 and 1998). Financing activities in 1998 provided $1,388.6 million of cash compared to a $92 million source of cash flow in 1997. Distributions to common stockholders and the minority interest in the Operating Partnership were $103.1 million in 1998 compared to $88.9 million in 1997. The increase in distributions is due to the increased distribution rate and additional shares of Common Stock and Operating Partnership Units outstanding during 1998 compared to 1997. Net proceeds from the issuance of common stock during 1997 provided $165.8 million of cash flow. Net borrowing activity provided $29.6 million of cash flow in 1998 compared to $37.7 million in 1997. The purchase of treasury stock used $5.7 million of cash flow during 1997. General Growth has, effective January 1, 2000, 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. 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 REQUIREMENTS In order to remain qualified as a real estate investment trust for federal income tax purposes, the Company must distribute 100% of capital gains and at least 95% 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 generated by GGMI and the Unconsolidated Joint Ventures, to the extent distributed to the Company, less oversight costs and debt service on additional loans that were incurred to finance Company acquisitions. The 34 of 39 35 GENERAL GROWTH PROPERTIES, INC. 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. RECENTLY ISSUED ACCOUNTING As more fully described in Note 12, certain PRONOUNCEMENTS accounting pronouncements were issued in 1999, which became effective in 1999 or will become effective in 2000. The Company does not expect the application of such new pronouncements to have a significant impact on its annual reported results of operations. YEAR 2000 DISCLOSURES The Year 2000 problem resulted from the use of a two digit year date instead of a four digit date in the programs that operate computers (information technology or "IT" systems) and other devices (i.e. "non-IT" systems such as elevators, utility monitoring systems and time clocks that use computer chips). Systems with a Year 2000 problem had programs that were written to assume that the first two digits for any date used in the program would always be "19". Unless corrected, this assumption could have resulted in problems when the century date occurred. On that date, these computer programs could have misinterpreted the date January 1, 2000, as January 1, 1900. This could have caused systems to incorrectly process critical financial and operational information, generate erroneous information or fail altogether. The Year 2000 issue was expected to affect almost all companies and organizations. THE COMPANY'S YEAR 2000 The Company recently upgraded its major information EXPERIENCE: systems, including its databases and primary accounting software, which were fully operational prior to December 31, 1999. These upgrades were performed primarily for the purpose of routine improvements to the Company's information systems and were initiated in advance of any concern for the Year 2000 issue. The Company also evaluated several other smaller non-IT systems (i.e. time keeping systems, elevators, etc.) to verify that they were Year 2000 compliant. The non-IT systems evaluation process resulted in upgrades or replacements purchased for certain non-IT systems found to be not Year 2000 compliant. The cost of the required upgrades was not significant. As of the date of this report, the Company's IT systems and non-IT systems have not encountered any significant Year 2000 operating problems. In addition, there were no significant third-party Year 2000 operating problems that had any impact on the Company's operations. Therefore, the Company does not expect to incur any significant additional costs relating the Year 2000 issue. ECONOMIC CONDITIONS Inflation has been relatively low and has not had a 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 35 of 39 36 GENERAL GROWTH PROPERTIES, INC. 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, the relative risk the Company bears due to interest expense exposure has been declining. In addition, the Company has a policy of replacing floating rate debt with fixed rate debt as market conditions allow. (See also Note 5). A 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 $3.3 million per year, which represents less than 1% of average total revenues of $443.4 million. The Company and its affiliates currently have interests in 93 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. In 1999 the Company launched a new website - Mallibu.com - and has engaged in a number of other e.business initiatives. 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. ITEM 7A. QUANTITATIVE AND The Company has not entered into any transactions QUALITATIVE DISCLOSURES using derivative commodity instruments. The Company ABOUT MARKET RISK is subject to market risk associated with changes in interest rates. The economy is currently in a period of rising interest rates. Interest rate exposure is principally limited to the $1,395 million of consolidated debt of the Company outstanding at December 31, 1999 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 $859 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 36 of 39 37 GENERAL GROWTH PROPERTIES, INC. required to pay on such debt to no more than approximately 9% per annum. The remaining $1,725 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 Item 2 above and Note 5 for additional debt information. ITEM 8. FINANCIAL Reference is made to the Index on page F-1 to STATEMENTS AND Financial Statements and Financial Statement SUPPLEMENTARY DATA Schedules for the required information. ITEM 9. CHANGES IN AND None. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE PART III ITEM 10. DIRECTORS AND The information which appears under the captions EXECUTIVE OFFICERS OF THE "Proposal No. 1 - Election of Directors" and COMPANY "Executive Officers" in the Company's definitive proxy statement for its 2000 Annual Meeting of Stockholders is incorporated by reference into this Item 10. ITEM 11. EXECUTIVE The information which appears under the caption COMPENSATION "Executive Compensation" in the Company's definitive proxy statement for its 2000 Annual Meeting of Stockholders is incorporated by reference into this Item 11; provided, however, that neither the Report of the Compensation Committee of the Board of Directors on Executive Compensation nor the Performance Graph set forth therein shall 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 12. SECURITY The information which appears under the captions OWNERSHIP OF CERTAIN "Certain Relationships and Related Transactions" BENEFICIAL OWNERS AND and "Common Stock Ownership of Management" in the Company's definitive proxy statement for its 2000 Annual Meeting of Stockholders is incorporated by MANAGEMENT reference into this Item 12. 37 of 39 38 GENERAL GROWTH PROPERTIES, INC. ITEM 13. CERTAIN The information which appears under the caption RELATIONSHIPS AND RELATED "Compensation Committee Interlocks and Insider TRANSACTIONS Participation" and "Certain Relationships and Related Transactions" in the Company's definitive proxy statement for its 2000 Annual Meeting of Stockholders is incorporated by reference into this Item 13. PART IV ITEM 14. EXHIBITS, (a) Financial Statements and Financial Statement FINANCIAL STATEMENTS, Schedules. SCHEDULES AND REPORTS ON The financial statements and schedules listed in the accompanying Index to FORM 8-K Consolidated Financial Statements and Financial Statement Schedules are filed as part of this Annual Report on Form 10-K. (b) The following reports on Form 8-K were filed by the Company during the last quarter of the period covered by this report. 1) Current Report on Form 8-K dated November 23, 1999, as amended by Form 8-K/A dated January 11, 2000, concerning the formation of GGP/Homart II. Financial statements relating to the formation of GGP/Homart II and other recent acquisitions of the Company were filed with this 8-K, as amended. (c) Exhibits. See Exhibit Index on page S-1 38 of 39 39 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, 2000
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, 2000 /s/ Robert Michaels - --------------------------------- Robert Michaels President and Director March 14, 2000 /s/ Bernard Freibaum - --------------------------------- Bernard Freibaum Executive Vice President, Chief Financial Officer and Principal Accounting Officer March 14, 2000 /s/ Anthony Downs - --------------------------------- Anthony Downs Director March 14, 2000 /s/ Morris Mark - --------------------------------- Morris Mark Director March 14, 2000 /s/ Beth Stewart - --------------------------------- Beth Stewart Director March 14, 2000 /s/ Lorne Weil - --------------------------------- A. Lorne Weil Director March 14, 2000
39 of 39 40 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, 1999 and 1998 F-3 Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 1999, 1998 and 1997. F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 F-8 Notes to Consolidated Financial Statements F-9 to F-31 Financial Statement Schedule Report of Independent Accountants F-32 Schedule III - Real Estate and Accumulated Depreciation F-33
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 41 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 consolidated financial position of General Growth Properties, Inc. as of December 31, 1999 and 1998 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. 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 in accordance with auditing standards generally accepted in the United States, 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 the significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion expressed above. Chicago, Illinois PricewaterhouseCoopers LLP February 8, 2000 F-2 42 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 AND 1998 (Dollars in thousands, except for per share amounts)
ASSETS DECEMBER 31, - ------ ----------------------------- 1999 1998 ---------- ---------- Investment in Real Estate: Land $ 640,276 $ 364,699 Buildings and equipment 3,664,832 3,222,237 Less accumulated depreciation (376,673) (301,789) Developments in progress 21,443 89,860 ---------- ---------- Net property and equipment 3,949,878 3,375,007 Investment in Unconsolidated Real Estate Affiliates 666,074 386,301 Mortgage note receivable 31,065 - ---------- ---------- Net Investment in Real Estate 4,647,017 3,761,308 Cash and cash equivalents 25,593 19,630 Tenant accounts receivable, net 84,123 74,585 Deferred expenses, net 93,536 71,593 Investment in and note receivable from General Growth Management, Inc. 65,307 84,716 Prepaid expenses and other assets 39,319 15,642 ========== =========== $4,954,895 $4,027,474 ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY Mortgage notes and other debts payable $3,119,534 $2,648,776 Distributions payable 42,695 33,757 Accounts payable and accrued expenses 170,868 122,303 ---------- ---------- 3,333,097 2,804,836 ---------- ---------- Minority interest in Operating Partnership 356,540 299,431 ---------- ---------- Commitments and contingencies - - Convertible 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, 1999 and 1998 337,500 337,500 ---------- ---------- Stockholders' Equity: Common stock: $0.10 par value; 210,000,000 shares authorized; 51,697,425 and 39,000,972 shares issued and outstanding at December 31, 1999 and 1998, respectively 5,170 3,900 Additional paid-in capital 1,199,921 843,238 Retained earnings (deficit) (272,199) (258,267) Notes receivable - common stock purchase (3,420) (3,164) Accumulated equity in other comprehensive loss of unconsolidated affiliate (1,714) - ---------- ---------- Total Stockholders' Equity 927,758 585,707 ---------- ---------- $4,954,895 $4,027,474 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. F-3 43 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Dollars in thousands, except for per share amounts)
YEARS ENDED DECEMBER 31, 1999 1998 1997 -------- -------- -------- Revenues: Minimum rents $387,547 $268,976 $175,830 Tenant recoveries 180,584 130,903 97,291 Percentage rents 27,011 16,226 7,976 Other 11,795 5,796 5,577 Fee Income 5,405 4,675 4,473 -------- -------- -------- Total Revenues 612,342 426,576 291,147 -------- -------- -------- Expenses: Real estate taxes 45,572 33,548 20,761 Management fee to affiliate 6,612 4,288 3,308 Property operating 143,622 106,986 79,175 Provision for doubtful accounts 4,425 2,451 3,025 General and administrative 5,857 4,511 3,408 Depreciation and amortization 112,874 75,227 48,509 -------- -------- -------- Total Expenses 318,962 227,011 158,186 -------- -------- -------- Operating Income 293,380 199,565 132,961 Interest income 16,482 16,011 8,523 Interest expense (185,984) (125,851) (78,775) Equity in net income (loss) of unconsolidated affiliates 19,689 11,067 19,344 Net gain on sales 4,412 196 58,647 -------- -------- -------- Income before extraordinary items & allocation to minority interest 147,979 100,988 140,700 Income allocated to minority interest (33,058) (29,794) (49,997) -------- -------- -------- Income before extraordinary items 114,921 71,194 90,703 Extraordinary Items (13,796) (4,749) (1,152) -------- -------- -------- Net Income 101,125 66,445 89,551 Convertible Preferred Stock Dividends (24,467) (13,433) - -------- -------- -------- Net income available to common stockholders $ 76,658 $ 53,012 $ 89,551 ======== ======== ======== Earnings before extraordinary item per share - basic $ 1.97 $ 1.60 $ 2.78 ======== ======== ======== Earnings before extraordinary item per share - diluted $ 1.96 $ 1.59 $ 2.76 ======== ======== ======== Net earnings per share - basic $ 1.67 $ 1.46 $ 2.75 ======== ======== ======== Net earnings per share - diluted $ 1.66 $ 1.46 $ 2.73 ======== ======== ======== Net Income $101,125 $ 66,445 $ 89,551 Other comprehensive income (loss): Equity in unrealized loss on available-for-sale securities of unconsolidated affiliate, net of minority interest (1,714) - - ======== ======== ======== Comprehensive income $ 99,411 $ 66,445 $ 89,551 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. F-4 44 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in Thousands, except for Per Share Amounts)
ADDITIONAL RETAINED EMPLOYEE TOTAL COMMON STOCK PAID-IN EARNINGS TREASURY STOCK STOCKHOLDERS' SHARES AMOUNT CAPITAL (DEFICIT) STOCK LOANS EQUITY ---------- ------- -------- --------- -------- ------- ------------- Balance, December 31, 1996 30,789,185 $ 3,079 $595,628 $(268,440) $ - $ - $330,267 89,551 89,551 Net income Cash distributions declared ($1.80 per share) (59,779) (59,779) Issuance of common stock, less $533 of issuance costs 4,927,680 493 165,270 165,763 Issuance of common stock for services 2,000 50 50 Exercise of stock options 44,500 147 (471) 1,185 861 Purchase treasury stock (171,213) (5,748) (5,748) Conversion of operating partnership units to common stock 42,825 5 776 781 Adjustment for minority interest in operating partnership (23,241) (23,241) ---------- ------- -------- --------- ------- ------- --------- 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) PIERS 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 45 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) PIERS 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 124 124 units to common stock 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) ---------- ------ ---------- --------- ----- ------- -------- Totals 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) -------- Balance, December 31, 1999 $927,758 ========
The accompanying notes are an integral part of these consolidated financial statements. F-6 46 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands, except for per share amounts)
YEARS ENDED DECEMBER 31, 1999 1998 1997 ---------- ---------- -------- Cash flows from operating activities: Net Income $ 101,125 $ 66,445 $ 89,551 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest 33,058 29,794 49,997 Net gain on sales (4,412) (196) (58,647) Extraordinary items 10,454 - 79 Equity in net income of unconsolidated affiliates (19,689) (11,067) (19,344) Provision for doubtful accounts 4,425 2,451 3,025 Distributions received from unconsolidated affiliates 29,825 21,672 16,506 Depreciation 105,046 68,494 44,551 Amortization 7,828 6,733 3,957 Net Changes: Tenant accounts receivable (26,856) (42,187) (12,490) Prepaid expenses and other assets (9,183) (6,557) 46 Accounts payable and accrued expenses (9,487) (17,278) (16,082) ---------- ---------- -------- Net cash provided by (used in) operating activities 222,134 118,304 101,149 ---------- ---------- -------- Cash flows from investing activities: Acquisition/development of real estate and additions to properties (1,248,371) (1,360,071) (200,564) Increase in investments in unconsolidated affiliates (55,361) (92,990) (86,233) Increase in mortgage note receivable (31,065) - - Change in notes receivable from General Growth Management, Inc. 6,671 (33,031) (24,045) Reduction in employee stock loans 124 - - Proceeds received from sale of CenterMark stock - - 130,500 Distributions received from unconsolidated affiliates 89,734 6,485 3,846 Increase in deferred expenses (16,429) (33,540) (7,039) ---------- ---------- -------- Net cash provided by (used in) investing activities (1,254,697) (1,513,147) (183,535) ---------- ---------- -------- Cash flows from financing activities: Cash distributions paid to common stockholders (82,439) (66,639) (56,989) Cash distributions paid to minority interest (38,434) (36,467) (31,884) Proceeds from exercised options 760 - 861 Proceeds of preferred stock issuance, net of issuance costs of $14,814 - 322,686 - Proceeds of common stock issuance, net of issuance costs of $1,929 in 1999 and $533 in 1997 330,296 - 165,763 Capital contribution from minority interest - 119 -
continued on next page F-7 47 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands, except for per share amounts) - continued -
YEARS ENDED DECEMBER 31, 1999 1998 1997 ---------- ---------- --------- Payment of dividends on PIERS $ (24,467) $ (7,316) $ - Proceeds from issuance of mortgage / other notes payable 1,736,072 2,093,000 832,525 Principal payments on mortgage notes and other debts payable (867,713) (913,229) (802,929) Purchase of treasury stock - (1,136) (5,748) Increase in deferred financing costs (15,549) (2,443) (9,262) ---------- ---------- --------- Net cash provided by (used in) financing activities 1,038,526 1,388,575 92,337 ---------- ---------- --------- Net change in cash and cash equivalents 5,963 (6,268) 9,951 Cash and cash equivalents at beginning of year 19,630 25,898 15,947 ========== ========== ========= Cash and cash equivalents at end of year $ 25,593 $ 19,630 $ 25,898 ========== ========== ========= Supplemental disclosure of cash flow information: Interest paid $ 197,178 $ 128,987 $ 79,787 Interest capitalized 17,166 12,028 4,753 ========== ========== ========= Non-cash investing and financing activities: Debt assumed as consideration to seller for purchase of real estate $ - $ 289,530 $185,298 Treasury stock exchanged for Operating Partnership Units - 1,875 - Common stock issued in exchange for Operating Partnership Units 522 48,241 781 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 380 3,164 - Operating Partnership Units and common stock issued as consideration for purchase of real estate - 163,514 30,408 Penalty on retirement of debt 8,655 - - Distributions payable 42,695 33,757 24,421
The accompanying notes are an integral part of these consolidated financial statements. F-8 48 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 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. 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 PIERS 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 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 F-9 49 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) 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 the 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, 1999, it owned 100% of fifty-two regional shopping centers (the "Wholly-Owned Centers"); 50% of the stock of GGP/Homart, Inc. ("GGP/Homart"), 50% of the stock of GGP/Homart II, L.L.C. ("GGP/Homart II"), 51% of GGP Ivanhoe, Inc. ("GGP Ivanhoe"), 51% of GGP Ivanhoe III, Inc. ("GGP Ivanhoe III"), 50% of Quail Springs Mall and Town East Mall, (collectively the "Unconsolidated Joint Ventures"), and a 100% non-voting preferred stock interest representing 95% of the equity interest in General Growth Management, Inc. ("GGMI"). As of such date, GGP/Homart owned interests in twenty-three shopping centers, GGP/Homart II owned interests in seven shopping centers (including one shopping center under construction), GGP Ivanhoe owned 100% of two shopping centers, and GGP Ivanhoe III (through a wholly owned subsidiary) owned 100% of eight shopping centers. As of December 31, 1999, the Company owned an approximate 72% general partnership interest in the Operating Partnership (excluding its preferred units of partnership interest as discussed below). The remaining approximate 28% 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 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, 1999, 100% of the Preferred Units of the Operating Partnership (337,500) were owned by General Growth. F-10 50 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, 1999, are as follows:
UNITS ----------- December 31, 1996 17,934,410 Acquisition of Southlake Mall 353,537 Acquisition of Valley Hills Mall 518,833 Conversion to common stock (42,825) ----------- 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 ===========
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 operations on a geographic basis. Accordingly, General Growth has concluded it 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. Therefore, no additional disclosure due to Statement 131 is currently required. F-11 51 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) NOTE 2 PRINCIPLES OF CONSOLIDATION SUMMARY OF SIGNIFICANT The accompanying consolidated financial statements ACCOUNTING include the accounts of the Company consisting of POLICIES the fifty-two centers and the unconsolidated investments in GGP/Homart, 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. Percentage rents are recognized on an accrual basis (see Note 12). Recoveries from tenants for taxes, insurance and other shopping center operating expenses are recognized as revenues in the period the applicable costs are incurred. 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 $7,600 and $7,737 as of December 31, 1999 and 1998, 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 $38,004 and $30,685 as of December 31, 1999 and 1998, 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 1999 for mortgage loans with similar terms and maturities, the SFAS No. 107 value of the mortgage notes and other debts payable approximates carrying value at December 31, 1999 and 1998. In addition, the Company estimates that the SFAS No. 107 value of its interest rate cap agreements (Note 5) at December 31, 1999 is approximately $7,259. The Company has no other significant financial instruments. F-12 52 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) 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 periodically reviewed for impairment. 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 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 1999, 1998 and 1997. 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. 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% 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. As a result, Federal income taxes related to the distribution in the form of dividends of substantially all of the net taxable income of General Growth as described above are payable by the stockholders of General Growth. 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 45,940,104 for 1999, 36,190,367 for 1998 and 32,622,665 for 1997. Diluted per share amounts are based on the total number of weighted average common F-13 53 shares and dilutive securities (stock options) outstanding of 46,030,559 for 1999, 36,381,914 for 1998 and 32,839,637 for 1997. 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, 1999 and 1998 and therefore has been excluded. Of the options outstanding, options to purchase 2,000 shares of Common Stock at $37.69 per share (granted in 1999) and 227,500 shares of Common Stock at $36.19 per share (granted in 1998) were not included in the computation of diluted earnings per share 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. 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. Options to purchase 313,964 shares of Common Stock pursuant to General Growth's 1998 Incentive Stock Plan were granted on March 25, 1999 but were not included in the computation of diluted EPS because the conditions which must be satisfied prior to the issuance of any such shares under the Plan were not achieved during the applicable period. The following are the reconciliations of the numerators and denominators of the basic and diluted EPS:
YEAR ENDED DECEMBER 31, 1999 1998 1997 Numerators: Income before extraordinary items $114,921 $ 71,194 $ 90,703 Dividends on PIERS (24,467) (13,433) -- Extraordinary items (13,796) (4,749) (1,152) -------- -------- -------- Net income available to common shareholders for basic and diluted EPS $ 76,658 $ 53,012 $ 89,551 -------- -------- -------- Denominators (in thousands): Weighted average common shares outstanding for basic EPS 45,940 36,190 32,623 Effect of dilutive securities - options 91 192 217 -------- -------- -------- Weighted average common shares outstanding for diluted EPS 46,031 36,382 32,840 ======== ======== ========
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. F-14 54 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) 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. 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. One item 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 consolidated affiliates do not have any available-for-sale securities, one of its unconsolidated affiliates received common stock of an unrelated publicly traded entity 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, the Company has 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, 1999. 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 AND 1999 DEVELOPMENTS 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 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 F-15 55 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) 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. 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 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. 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 F-16 56 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) 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. 1997 On March 31, 1997, the Company acquired Market Place Mall for a cash purchase price of approximately $70,000 (borrowed under the Company's Credit Facility). Market Place Mall is located in Champaign, Illinois. During the second quarter of 1997, the Company acquired three properties, Century Plaza, Southlake Mall and Eden Prairie Center. Century Plaza located in Birmingham, Alabama, was acquired on May 1, 1997, for $31,800 in cash. Southlake Mall, located in Atlanta, Georgia, was acquired on June 18, 1997, for a purchase price of $67,000 which consisted of $45,100 of mortgage debt assumption, $11,500 of Operating Partnership Units (353,537 units), and $10,400 in cash. The aggregate consideration paid for Eden Prairie Center located in Eden Prairie (Minneapolis), Minnesota was $19,900. It included the assumption of a $16,800 mortgage loan, the payment of $1,100 in cash and the assumption of $2,000 of short-term liabilities. The Company acquired Valley Hills Mall, located in Hickory, North Carolina, on October 23, 1997, for a purchase price of approximately $34,500. The purchase price consisted of approximately $18,900 of Operating Partnership Units (518,833 units) and the assumption of approximately $15,600 of mortgage debt. GENERAL The acquisitions were 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 (for pro forma effect, see Note 13). The Company financed the forgoing acquisitions 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. MORTGAGE NOTE RECEIVABLE 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 now permits 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. Any resulting purchase of the property would occur in April 2000 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. F-17 57 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) DEVELOPMENTS During the three year period ending December 31, 1999, the Company was developing or had completed construction at three development sites in the following locations: 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 as scheduled 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 with an anticipated completion date in August of 2000. During 1999, the Company formed a joint venture to develop a regional mall in Westlake (Dallas), Texas. As of December 31, 1999, the Company had invested approximately $12,816 in the joint venture. The Company is currently obligated to fund pre-development costs (estimated to be approximately $1,545, most of which remains to be 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, but active development of these sites has not yet commenced. NOTE 4 GGP/HOMART INVESTMENTS IN The Company currently owns 50% of GGP/Homart with UNCONSOLIDATED the remaining ownership interest held by the New AFFILIATES York State Common Retirement Fund, an institutional investor. 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 100% interests in Stonebriar Centre in Frisco (Dallas), Texas (currently under construction), Altamonte Mall in Altamonte Springs (Orlando), Florida, Natick Mall in Natick (Boston), Massachusetts and Northbrook Court in Northbrook (Chicago), Illinois which were F-18 58 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) 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. As major operating and capital decisions require the approval of both venture partners, the Company will account for GGP/Homart II using the equity method. 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, which has elected to be taxed as a REIT, is owned 51% by the Company and 49% by an affiliate of Ivanhoe Inc. of Montreal, Quebec, Canada ("Ivanhoe"). 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 (5.82% at December 31, 1999) plus 185 basis 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 F-19 59 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) 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 The Operating Partnership currently holds all of the non-voting preferred stock ownership interest in GGMI representing 95% of the equity interest. Certain key employees of the Company hold the remaining 5% equity interest through ownership of 100% of the common stock of GGMI, which is entitled to all voting rights in GGMI. Accordingly, the Company utilizes the equity method to account for its ownership interest in GGMI. GGMI cannot distribute funds to its common stockholders until its available cash flow exceeds all accumulated preferred dividends owed to the preferred stockholder. As of December 31, 1999, no preferred stock dividends have been paid by GGMI. Due to these currently unpaid and accrued preferences on the preferred stock, the Company has been allocated 100% of the earnings (loss) and cash flows generated by GGMI since 1996. Any dividends in excess of the preferred cumulative dividend are allocated 95% to the preferred stockholder and 5% to the common stockholders. The Operating Partnership also has advanced funds to GGMI at interest rates ranging from 8% to 14% per annum and which mature by 2016. The loans require payment of interest only until maturity, but GGMI may make principal payments on the loans if it has sufficient cash flow. GGMI manages, leases, and performs various other services for the Portfolio Centers and other properties owned by unaffiliated parties. F-20 60 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) SUMMARIZED FINANCIAL INFORMATION OF INVESTMENT IN UNCONSOLIDATED AFFILIATES Following is summarized financial information for the Company's unconsolidated affiliates as of December 31, 1999 and 1998 and for the years ended December 31, 1999, 1998 and 1997.
CONDENSED BALANCE SHEETS DECEMBER 31,1999 GGP/HOMART GGMI ALL OTHER JV'S ----------- ---------- -------------- Assets: Net investment in real estate $1,225,379 $15,622 $2,323,587 Investment in real estate joint ventures 110,540 0 0 Other assets 116,817 81,038 345,547 ---------- --------- ------------ $1,452,736 $96,660 $2,669,134 ========== ========= ============ Liabilities and Owners' Equity: Mortgage and other notes payable $945,553 $0 $1,375,785 Accounts payable and accrued expense 37,941 104,475 78,619 Owners' equity 469,242 (7,815) 1,214,730 ---------- --------- ------------ $1,452,736 $96,660 $2,669,134 ========== ========= ============ DECEMBER 31,1998 GGP/HOMART GGMI ALL OTHER JV'S ---------- --------- -------------- Assets: Net investment in real estate $1,102,907 $ 39,711 $972,024 Investment in real estate joint ventures 124,668 - - Other assets 123,739 80,901 66,531 ---------- --------- ------------ $1,351,314 $120,612 $1,038,555 ========== ========= ============ Liabilities and Owners' Equity: Mortgage and other notes payable $ 814,738 $ 1,500 $674,627 Accounts payable and accrued expenses 39,881 125,997 30,394 Owners' equity 496,695 (6,885) 333,534 ---------- --------- ------------ $1,351,314 $120,612 $1,038,555 ========== ========= ============
CONDENSED STATEMENTS OF OPERATIONS
DECEMBER 31,1999 GGP/HOMART GGMI ALL OTHER JV'S ---------- -------- -------------- Revenues: Tenant rents $224,559 $0 $175,980 Fees and other revenues 0 78,701 0 ----------- -------- ----------- Total Revenues 224,599 78,701 175,980 Operating expenses (1) 129,465 80,400 100,289 ----------- -------- ----------- Operating Income (loss) 95,134 (1,699) 75,691 Interest expense, net (2) (60,814) (11,040) (47,382) Equity in net income of unconsolidated real estate affiliates 5,504 0 0 Gain on property sales 816 5,922 0 Income allocated to minority interest (808) 0 (3,528) ----------- -------- ----------- Net Income (loss) $39,832 ($6,817) $24,781 =========== ======== ===========
F-21 61 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts)
DECEMBER 31,1998 GGP/HOMART GGMI ALL OTHER JV'S ----------- ------- -------------- Revenues: Tenant rents $ 184,783 $ - $103,803 Fees and other revenues - 63,771 - ----------- ------- ----------- Total Revenues 184,783 63,771 103,803 Operating expenses (1) 107,717 70,407 54,530 ----------- ------- ----------- Operating Income (loss) 77,066 (6,636) 49,273 Interest expense, net (2) (47,799) (9,999) (29,882) Equity in net income of unconsolidated real estate affiliates 5,011 - - Gain on property sales 13,182 - - Income allocated to minority (705) - - interest ----------- ------- ----------- Net Income (loss) $ 46,755 $(16,635) $ 19,391 =========== ======== =========== DECEMBER 31,1997 GGP/HOMART GGMI ALL OTHER JV'S ----------- -------- -------------- Revenues: Tenant rents $ 159,280 $ - $28,540 Fees and other revenues - 62,867 - --------- -------- ------- Total Revenues 159,280 62,867 28,540 Operating expenses (1) 92,498 57,166 15,724 --------- -------- ------- Operating Income (loss) 66,782 5,701 12,816 Interest expense, net (2) (42,980) (5,895) (6,787) Equity in net income of unconsolidated real estate affiliates 5,999 - - Gain on property sales 13,767 - - Income allocated to minority interest (372) - - --------- -------- ------- Net Income (loss) $ 43,196 $ (194) $ 6,029 ========= ======== =======
Significant accounting policies used by joint ventures are the same as those used by the Company. (1) Includes depreciation and amortization. (2) Includes extraordinary items. F-22 62 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, 1999 NOTES AND OTHER and 1998 consisted of the following: DEBTS PAYABLE
DECEMBER 31, 1999 1998 ------------ -------- Fixed-Rate debt Mortgage notes payable $1,724,854 $2,036,210 Variable-Rate debt Mortgage notes payable 1,234,680 412,566 Line of credit facility 160,000 200,000 ---------- --------- Total Variable-Rate debt 1,394,680 612,566 ---------- ---------- Total mortgage notes and $3,119,534 $2,648,776 other debts payable ========== ==========
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 7.05% per annum), require monthly payments of principal and/or interest and have various maturity dates through 2020 (weighted average remaining term of 5.8 years). Certain properties are pledged as collateral for the related mortgage note(s). The mortgage notes payable as of December 31, 1999 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 included in a cross-defaulted package may constitute a default under all such mortgages 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 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 four Wholly-Owned Centers. VARIABLE RATE DEBT MORTGAGE NOTES PAYABLE Variable mortgage notes payable at December 31, 1999 consist primarily of the approximate $87.8 outstanding on the construction loan collateralized by Rivertown Crossings as described below and approximately $858,800 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. The Company currently expects to retire or refinance such obligations when due. MEPC ACQUISITION FINANCING In June 1998 the Company obtained a loan of approximately $830,000 to acquire the MEPC portfolio as described in Note 3. The Company repaid approximately $217,000 of this loan on June 10, 1998 from the net proceeds of the public offering of the Depositary Shares as described in Note 1. The loan was collateralized by the MEPC Portfolio and the remaining balance was repaid in 1999 as described below. During most of 1998, the Company fixed the annual interest rate with respect to a portion of such loan at 6.7% per annum and the remainder bore interest at a rate per annum equal F-23 63 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) to LIBOR plus 90 basis points. During 1999 the entire loan balance bore interest at a rate per annum equal to LIBOR plus 115 basis points, which rate was adjusted monthly. During the first quarter of 1999, the Company reached agreements in principle with other lenders for full replacement financing and notified the current lender that the loan would be fully repaid and not rolled into a new long-term fixed rate financing, as was originally contemplated. Such notification obligated the Company to pay $8,655 to the lender as a loan prepayment fee which the Company paid using the proceeds of the interim loan described below. On July 1, 1999, the Company obtained approximately $57,000 of permanent long term mortgage financing to partially repay the amount scheduled to mature on that date and the maturity date of the remaining indebtedness was extended to October 1, 1999 as described below. The new $57,000 mortgage loan, collateralized by the Apache Mall, bears interest at 7.0% per annum and matures August 1, 2009. In addition, during July 1999, approximately $15,000 of the amount remaining due was repaid from a portion of the proceeds of the 1999 Offering and approximately $100,000 was repaid from a new mortgage loan collateralized by the Cumberland Mall. The Cumberland Mall ten-year loan bears interest at a rate of 7.85% per annum and provides for monthly payments of principal and interest until its maturity on July 31, 2009. The remaining MEPC Acquisition Financing, approximately $441,000, was repaid in September 1999 with the proceeds of the GGP-Ivanhoe CMBS financing and other interim financing described below. In conjunction with the repayment, the Company expensed previously unamortized deferred financing costs of approximately $3,280. 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 of no-cost extension 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. 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 Northridge Fashion Center in Northridge (Los Angeles), California; Mayfair Mall and adjacent office buildings in Wauwatosa (Milwaukee), Wisconsin; Park City Center in Lancaster, Pennsylvania; The Boulevard Mall in Las Vegas, Nevada; Regency Square Mall in Jacksonville, Florida; Valley Plaza Shopping Center in Bakersfield, California; Oglethorpe Mall in Savannah, Georgia; Landmark Mall in Alexandria, Virginia; and Northgate Mall in Chattanooga, Tennessee. The securities (the "GGP-Ivanhoe CMBS") are comprised of notes which bear interest at F-24 64 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) 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. The $392,000 interim loan collateralized by the USPPI portfolio described above was repaid with $341,019 of the proceeds from the sale of the GGP-Ivanhoe CMBS and capital contributions by the Company (from its Credit Facility) and from Ivanhoe in the ratio of their respective stock ownership percentages. The remaining proceeds from the sale of the GGP-Ivanhoe CMBS along with approximately $81,800 of the proceeds from the new $95,000 short term interim financing were used by the Company to repay the $441,000 remaining balance on the MEPC Acquisition Financing. CREDIT FACILITY The Company's $200,000 unsecured revolving credit facility bears interest at a rate per annum equal to LIBOR plus 80 to 120 basis points depending upon the Company's leverage ratio and matures on July 31, 2000. The Credit Facility is subject to financial performance covenants including debt-to-market capitalization, minimum earnings before interest, taxes, depreciation and amortization ("EBITDA") ratios and minimum equity values. On December 31, 1999, the Credit Facility had an outstanding balance of $160,000. 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. 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. 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 a $25,000 bank loan, collateralized by Park Mall in Tucson, Arizona. In October 1999, the loan was increased to $50,000 and the term was extended to March 30, 2000. The loan bears interest at a rate per annum equal to LIBOR plus 175 basis points and is expected to be replaced with a $90,000 construction loan facility that will finance a renovation and expansion of Park Mall. The renovation and expansion has already commenced with the entire project expected to be completed in 2001. F-25 65 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) 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. 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 initial funding of $120,000 under this loan was used to fund ongoing redevelopment projects and repay the interim loan obtained in September 1999. This loan bears interest at LIBOR plus 150 basis points and matures concurrently with the July 2000 maturity of the Company's Credit Facility. The Company currently expects to jointly refinance these obligations when due with a new revolving credit facility and term loans. CONSTRUCTION LOAN During April 1999 the Company obtained a $110,000 construction loan facility collateralized by the RiverTown Crossings Mall development in Grandville (Grand Rapids), Michigan. Concurrently with the closing, the Company made an initial loan draw of $30,000. As of December 31, 1999, additional loan draws of approximately $57,862 have been made. The construction loan provides for periodic funding as construction and leasing continues and bears interest at a rate per annum of LIBOR plus 175 basis points (150 basis points after achievement of certain debt service ratios). Interest is due monthly but may be added to the periodic loan draws. The loan matures on June 29, 2001 and the Company currently intends to refinance such loan at or prior to maturity with a non-recourse long-term mortgage loan. LETTERS OF CREDIT As of December 31, 1999 and 1998, the Operating Partnership had outstanding letters of credit of $7,934 and $9,956, respectively, primarily in connection with special real estate assessments and insurance requirements. In addition, the Company obtained a letter of credit of approximately $54,000 related to the funding of the Ala Moana CMBS and pending construction projects at the Ala Moana Center. F-26 66 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) Principal amounts due under mortgage notes and other debts payable mature as follows: YEAR AMOUNT MATURING ---- --------------- 2000 $ 329,321 2001 382,035 2002 13,094 2003 14,104 2004 1,068,030 Subsequent 1,312,950 ---------- Total $3,119,534 ========== 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 $4,264,000 at December 31, 1999 have been pledged as collateral. In addition, loans totaling approximately $367,117 (collateralized by assets with a total carrying value of approximately $415,845) 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 EXTRAORDINARY costs and unamortized deferred financing costs ITEMS related to the early 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. The basic and diluted per share impact of the extraordinary items was $.03 in 1997. NOTE 7 RENTALS The Company receives rental income from the leasing UNDER OPERATING of retail shopping center space under operating LEASES leases. The minimum future rentals based on operating leases held as of December 31, 1999 are as follows: YEAR AMOUNT ---- ------ 2000 $ 290,908 2001 281,037 2002 264,223 2003 239,773 2004 216,056 Thereafter 996,515 Minimum future rentals do not include amounts, which may be received from certain tenants based upon a percentage of their gross sales or as reimbursement of shopping center operating expenses. F-27 67 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) 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 WITH GGMI TRANSACTIONS GGMI has been contracted to provide management, AFFILIATES leasing, development and construction management services for the Wholly-Owned Centers. In addition, certain shopping center advertising and payroll costs of the properties are 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, 1999 1998 1997 ------ ------ ------ Management and Leasing Fees $21,201 $15,074 $ 8,285 Cost Reimbursements 56,548 41,594 28,099 Development Costs 3,499 7,801 2,015 NOTES RECEIVABLE 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 such officers' 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 stock purchases by such officers and forgave approximately $64 in principal and accrued interest on such notes. The notes, which bear interest at a rate (6.02% per annum at December 31, 1999) 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. 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. 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. F-28 68 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) A summary of the status of the Company's Stock Incentive Plan as of December 31, 1999, 1998 and 1997 and changes during the year ended on those dates is presented below.
1999 1998 1997 ---------------- ----------------- ----------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ------ ----- ------ ----- ------ ----- Outstanding at beginning of year 848,500 $28.99 785,000 $ 24.79 827,500 $24.48 Granted 47,500 $32.42 229,500 $ 36.19 2,000 $31.75 Exercised (60,000) $19.00 (166,000) $ 19.06 (44,500) $19.35 Forfeited (8,500) $34.78 -- -- -- -- ------- ------ ------- ------- ------- ------ Outstanding at end of year 827,500 $29.85 848,500 $ 28.99 785,000 $24.79 ======= ======= ======= Exercisable at end of year 595,500 $28.76 414,500 $ 27.57 379,000 $23.85 Options available for future grants 1,826,833 1,874,333 2,103,833 Weighted average per share fair value of options granted during $ 2.84 $ 3.18 $ 2.74 the year
The following table summarizes information about stock options outstanding pursuant to the Stock Incentive Plan at December 31, 1999:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------------------------- -------------------------- WEIGHTED AVERAGE NUMBER REMAINING WEIGHTED AVERAGE OPTIONS WEIGHTED AVERAGE RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE EXERCISE PRICES AT 12/31/99 LIFE PRICE AT 12/31/99 PRICE --------------- ----------- ---- ----- ----------- ----- $19.00 - $28.00 557,500 6.79 years $27.10 457,500 $26.90 $31.75 - $37.69 270,000 8.31 years $35.55 138,000 $34.93 ------- ------- 827,500 7.28 years $29.85 595,500 $28.76 ======= ========== ====== ======= ======
1998 INCENTIVE PLAN General Growth and its stockholders have also approved an incentive stock plan entitled the 1998 Incentive Stock Plan (the "1998 Incentive Plan"). Under the 1998 Incentive Plan, the Compensation Committee of the Board of Directors of General Growth is authorized to grant to employees, stock incentive awards in the form of threshold-vesting stock options ("TSOs"). 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 F-29 69 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) 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 purpose of the 1998 Incentive Plan is to give the Company an advantage in attracting, retaining and motivating employees and to provide the Company with the ability to provide competitive incentives which are directly linked to the profitability of the Company's business and increases in stockholder value. Grants under the 1998 Incentive Plan are intended to reinforce the attainment of annual performance goals while encouraging sustained profitable long-term growth. 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. The initial grant, TSOs to purchase 313,964 shares of Common Stock at an exercise price of $31.69 and with an estimated fair value of $1.36, under the 1998 Incentive Plan was made in 1999. None of the TSO's vested or were forfeited during 1999. The fair value of each option grant for 1999, 1998 and 1997 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: 1999 1998 1997 ------ ------ ------ Risk free interest rate 5.21% 5.48% 6.23% Dividend yield 7.22% 7.28% 7.77% Expected life 4.6 years 4.2 years 4.75 years Expected volatility 20.0% 19.4% 18.8% 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 ESSP, 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 ESSP 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 fair value of the rights to purchase pursuant to the ESPP was estimated to be $6.16 per share using the Black-Scholes option pricing model, a risk free rate of 4.88%, a dividend yield of 7.22% and expected volatility of 20.0%. F-30 70 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) STOCK OPTION PRO FORMA DATA The Company has applied Accounting Principles Board Opinion 25 in accounting for the Stock Incentive Plan, the 1998 Incentive Plan and the Employee Stock Purchase Plan. 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 1999, 1998 and 1997 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, 1999 1998 1997 ---- ---- ---- Net Income As Reported $76,658 $53,012 $89,551 Pro Forma $76,160 $52,709 $89,341 Net earnings per share - basic As Reported $ 1.67 $ 1.46 $ 2.75 Pro Forma $ 1.66 $ 1.46 $ 2.74 Net earnings per share - diluted As Reported $ 1.66 $ 1.46 $ 2.73 Pro Forma $ 1.65 $ 1.45 $ 2.72
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 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 year ending December 31, 1999, 1998 and 1997 the Company made matching contributions of approximately $2,891, $2,042 and $625, respectively. NOTE 10 On December 13, 1999, the Company declared a cash DISTRIBUTIONS distribution of $.51 per share that was paid on PAYABLE 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. 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 17, 1998, the Company declared a cash distribution of $.47 per share that was paid on January 29, 1999, to stockholders of record (1,106 owners of record) on January 6, 1999, totaling $18,330. In addition, a distribution of $9,309 was paid to the F-31 71 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) 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, 1998, in the amount of $0.4531 per share, payable to preferred stockholders of record on January 6, 1999 and paid on January 15, 1999. The allocations of the distributions declared and paid for income tax purposes are as follows:
YEAR ENDED DECEMBER 31, 1999 1998 1997 ---- ---- ---- Ordinary Income 66.0% 98.0% 29.8% Capital Gain 3.0% 2.0% 70.2% Return of Capital 31.0% --% --% ----- ----- ----- 100.0% 100.0% 100.0% ===== ===== =====
NOTE 11 In the normal course of business, from time to time, COMMITMENTS AND the Company is involved in legal actions relating to CONTINGENCIES the ownership and operations of its properties. In management's opinion, the liabilities, if any that may ultimately result from such legal actions are not expected to have a 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 $375, $292, and $595 for the years ended December 31, 1999, 1998, and 1997 respectively. The leases 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. 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 RECENTLY In May, 1998, the Emerging Issues Task Force ISSUED ("EITF") of the FASB issued a consensus opinion ACCOUNTING entitled "Accounting for Contingent Rent in Interim PRONOUNCEMENTS Financial Periods" ("EITF 98-9"). EITF 98-9 was effective as of May 21, 1998 and provided 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 (predominantly computed on a calendar year basis). The Company had previously accrued, on an interim basis, such percentage rents based on the prorated annual percentage rent estimated to be due from tenants. The Company, as provided by EITF 98-9, prospectively adopted this consensus and did not record additional percentage rent in the third and fourth quarters of 1998 above amounts recognized in the six months ended June 30, 1998 ($5,013) until such triggering events occurred. Accordingly, the Company recognized approximately $1,300 of percentage rent in the fourth quarter of 1998, which would otherwise have been recognized in previous periods. During the fourth quarter of 1998, EITF 98-9 was withdrawn and, pursuant to the guidance issued by the EITF, the Company, effective January 1, 1999, reverted back to the original policy of accruing percentage rents on an estimated basis. During December 1999, the Securities and Exchange Commission (the "SEC") issued Staff Accounting Bulletin 101 F-32 72 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) "Revenue Recognition". This pronouncement, as subsequently extended to all publicly traded companies by the EITF, among other things, effectively reinstated the provisions of EITF 98-9. The Company will apply this revised accounting effective January 1, 2000. The only material effect of this pronouncement will be to shift the Company's recognition, including amounts from the operations of the Unconsolidated Joint Ventures, of major portions of percentage rent from interim quarters to the fourth quarter of 2000 and subsequent years. The Company's cash collections of percentage rents will not be affected by this accounting recognition change. On June 1, 1999 the FASB issued Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities", effective for fiscal years beginning after June 15, 2000. 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. Therefore, the Company does not believe there will be a material effect of adoption on the Company's financial statements when the standard is effective. NOTE 13 PRO Due to the impact of the public offering of the in FORMA PIERS 1998 and of Common Stock in 1999 and the FINANCIAL acquisitions and other significant transactions INFORMATION during 1997, 1998 and 1999, historical results of (UNAUDITED) operations may not be indicative of future results of operations. The pro forma condensed consolidated statements of operations for the year ended December 31, 1999 include adjustments for the 1999 Offering, the acquisition of 100% of The Crossroads Mall, the Ala Moana Center and Baybrook Mall and a 51% interest in Oak View Mall and Eastridge Mall (through GGP Ivanhoe III) and the formation of GGP/Homart II and the exchange of certain interests in GGP/Homart for shares of Common Stock as if such transactions had occurred on January 1, 1999. The pro forma condensed consolidated statements of operations for the year ended December 31, 1998 include adjustments for the public offering of the PIERS in 1998 and Common Stock in 1999 and the acquisition of 100% of the three operating properties in 1999 and 51% of the two operating properties acquired by GGP Ivanhoe III, of the GGP/Homart and GGP/Homart II transactions, the acquisition of 100% of Southwest Plaza, Northbrook Court, Altamonte Mall, Pierre Bossier Mall, Spring Hill Mall, Coastland Mall, and Mall St. Vincent, the eight operating properties in the MEPC Portfolio, and a 51% interest in the six operating properties owned by GGP Ivanhoe III as if such transactions occurred on January 1, 1998. The pro forma condensed consolidated statements of operations for the year ended December 31, 1997 include adjustments for the public offering of the PIERS in 1998 and for the acquisition of 100% of the fifteen operating properties in 1998 and 51% of GGP Ivanhoe III and adjustments for the acquisitions of Market Place Shopping Center, Century Plaza, Southlake Mall, Eden Prairie, Valley Hills, a 51% interest in GGP Ivanhoe, and a 50% interest in Town East as if such transactions had occurred on January 1, 1997. The pro forma information is based upon the historical consolidated statements of operations excluding extraordinary items and non-recurring gains on sales, including the gain in 1997 on the sale of a portion of the CenterMark stock and does not purport to present what actual results would have been had the offerings, acquisitions, and related transactions, in fact, occurred at the previously mentioned dates, or to project results for any future period. F-33 73 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) PRO FORMA FINANCIAL INFORMATION
YEARS ENDED 1999 1998 1997 --------------- --------------- -------------- Total Revenues: $ 615,616 $ 561,106 $ 482,248 Expenses: Property operating 199,969 191,529 179,091 Management fees 8,348 8,146 5,014 Depreciation and amortization 116,356 102,906 87,009 --------------- --------------- -------------- Total expenses 324,673 302,581 271,114 --------------- --------------- -------------- Operating income 290,943 258,525 211,134 Interest expense, net (183,018) (179,510) (160,120) Equity in net income/(loss) of unconsolidated affiliates. 45,151 43,261 24,067 --------------- --------------- -------------- 153,076 122,276 75,081 Minority interest in operating partnership (37,342) (38,701) (20,981) --------------- --------------- -------------- Pro forma net income (a) 115,734 83,575 54,100 Pro forma preferred stock dividends (24,467) (24,467) (24,467) --------------- --------------- -------------- Pro forma net income available to common stockholders $ 91,267 $ 59,108 $29,633 =============== =============== ============== Pro forma earnings per share - basic (b) $1.77 $ 1.21 $0.91 Pro forma earnings per share - diluted (b) $1.76 $ 1.21 $0.90
(a) The pro forma adjustments include management fee and depreciation modifications and adjustments to give effect to the public offering and acquisitions activity described above. (b) Pro forma basic earnings per share are based upon weighted average common shares of 51,655,035 for 1999, 48,793,658 for 1998, and 32,622,665 for 1997. Pro forma diluted per share amounts are based on the weighted average common shares and the effect of dilutive securities (stock options) outstanding of 51,755,490 for 1999, 48,985,205 for 1998, and 32,839,637 for 1997. F-34 74 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for per share amounts) NOTE 14 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
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
YEAR ENDED FIRST SECOND THIRD FOURTH DECEMBER 31, 1998 QUARTER QUARTER QUARTER(B) QUARTER(B) ------------------ ------- ------- ---------- ------- Total Revenues $80,447 $88,618 $113,055 $144,456 Income before minority interest 12,882 27,133 25,395 35,578 Income before extraordinary items 8,455 18,141 18,040 26,558 Net income applicable to common shares 8,455 16,942 11,923 15,692 Earnings before extraordinary item per share-basic (a) $ 0.24 $ 0.47 $ 0.33 $ 0.56 Earnings before extraordinary item per share-diluted (a) 0.24 0.47 0.33 0.55 Net earnings per share-basic (a) 0.24 0.47 0.33 0.42 Net earnings per share-diluted (a) 0.24 0.47 0.33 0.42 Distributions declared per share $ 0.47 $ 0.47 $ 0.47 $ 0.47 Weighted average shares outstanding (in thousands) -basic 35,689 35,877 35,899 37,283 Weighted average shares outstanding (in thousands) - diluted 35,936 36,047 35,990 37,450
(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. (b) Application of EITF 98-9 resulted in the recognition of approximately $1,300 of percentage rental revenue in the fourth quarter of 1998, which would have otherwise been recognized in the third quarter. F-35 75 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders General Growth Properties, Inc. Our report on the consolidated financial statements of General Growth Properties, Inc. is included on page F-2 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in the Index to Consolidated Financial Statements on page F-1 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. Chicago, Illinois PricewaterhouseCoopers LLP February 8, 2000 F-36 76
GENERAL GROWTH PROPERTIES, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 1999 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 500,000,000 336,229,259 473,770,741 10,130,876 1,854,477 336,229,497 485,756,094 21,985,591 Apache Mall Rochester, MN 56,811,469 8,110,292 72,992,628 1,106,574 0 8,110,292 74,099,202 82,209,494 Baybrook Mall Friendswood, TX 94,932,407 13,300,000 117,162,546 329,842 0 13,300,000 117,492,388 130,792,388 Bayshore Mall, Eureka, CA 37,250,000 3,004,345 27,398,907 22,106,509 2,887,090 3,005,040 52,392,506 55,397,546 Bellis Fair Mall, Bellingham, WA 73,000,000 7,616,458 47,040,131 8,179,511 6,122,020 7,485,224 61,341,662 68,826,886 Birchwood Mall, Port Huron, MI 44,473,981 1,768,935 34,574,635 11,040,651 1,967,320 3,045,616 47,582,606 50,628,222 Boulevard Mall Las Vegas, NV 89,382,491 16,490,343 148,413,086 1,406,662 0 16,490,343 149,819,748 166,310,091 Capital Mall Jefferson City, MO 16,500,000 4,200,000 14,201,000 5,103,140 0 3,912,935 19,304,140 23,217,075 Century Mall Birmingham, AL 32,000,000 3,164,000 28,513,908 2,463,506 0 3,164,000 30,977,414 34,141,414 Chapel Hills Colorado Springs, CO 36,750,000 4,300,000 34,017,000 55,921,010 36,805 4,300,000 89,974,815 94,274,815 Coastland Center Naples, FL 86,565,832 11,450,000 103,050,200 2,025,747 0 11,450,000 105,075,947 116,525,947 Colony Square Mall Zanesville, OH 25,600,000 1,000,000 24,500,000 11,538,684 0 1,243,184 36,038,684 37,281,868 Columbia Mall Columbia, MO 56,100,000 5,383,208 19,663,231 9,695,536 1,368,803 5,383,208 30,727,570 36,110,778 Coral Ridge Mall Coralville, IA 81,008,135 3,363,602 64,217,772 7,520,577 4,420,355 3,363,602 76,158,704 79,522,306
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 6,609,079 1999 (f) Apache Mall Rochester, MN 2,813,256 1998 (f) Baybrook Mall Friendswood, TX 524,369 1999 (f) Bayshore Mall, Eureka, CA 16,068,894 1986-1987 (f) Bellis Fair Mall, Bellingham, WA 21,821,145 1987-1988 (f) Birchwood Mall, Port Huron, MI 13,695,579 1989-1990 (f) Boulevard Mall Las Vegas, NV 5,671,819 1998 (f) Capital Mall Jefferson City, MO 3,445,926 1993 (f) Century Mall Birmingham, AL 2,060,497 1997 (f) Chapel Hills Colorado Springs, CO 10,208,106 1993 (f) Coastland Center Naples, FL 3,114,536 1998 (f) Colony Square Mall Zanesville, OH 12,034,612 1986 (f) Columbia Mall Columbia, MO 12,595,199 1984-1985 (f) Coral Ridge Mall Coralville, IA 3,382,029 1998-1999 (f)
77
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) - -------------------- ------------ --------- ------------- ------------ --------- ---------- ------------ ----------- Crossroads (MI) Kalamazoo, MI 44,820,562 6,800,000 61,200,000 1,207,393 0 6,800,000 62,407,393 69,207,393 Cumberland Mall Atlanta, GA 99,720,600 15,198,568 136,787,110 688,747 0 15,198,568 137,475,857 152,674,425 Development in Progress 0 17,936,214 3,506,695 0 17,936,214 3,506,695 21,442,909 Eagle Ridge Mall Lake Wales, FL 27,000,000 7,619,865 49,560,538 4,140,109 5,678,662 7,621,768 59,379,309 67,001,077 Eden Prairie Mall Eden Prairie, MN 0 465,063 19,024,047 4,301,120 1,684,662 465,063 25,009,829 25,474,892 Fallbrook Mall, West Hills, CA 46,900,000 6,117,338 10,076,520 56,643,397 2,520,315 6,127,138 69,240,232 75,367,370 Fox River Mall Appleton, WI 93,200,000 2,700,566 18,291,067 31,931,033 1,820,253 2,700,566 52,042,353 54,742,919 Gateway Mall, Springfield, OR 30,750,000 8,728,263 34,707,170 16,751,749 7,520,779 8,749,088 58,979,698 67,728,786 GGPLP Corp. Chicago, IL 243,000,000 0 556,740 31,986 0 0 588,726 588,726 110 Building Chicago, IL 20,000,000 0 29,035,510 0 0 0 29,035,510 29,035,510 Grand Traverse Mall, Grand Traverse, MI 51,500,000 3,529,966 20,775,772 20,366,714 3,643,793 3,533,745 44,786,279 48,320,024 Greenwood Mall Bowling Green, KY 39,500,000 3,200,000 40,202,000 16,660,039 0 3,207,010 56,862,039 60,069,049 Knollwood Mall, St. Louis Park, MN 10,000,000 0 9,748,047 24,049,591 2,198,782 7,025,606 35,996,420 43,022,026 Lakeview Square Mall Battle Creek, MI 26,676,046 3,578,619 32,209,980 6,882,102 0 3,578,619 39,092,082 42,670,701 Lansing Mall Lansing, MI 43,021,422 6,977,798 62,800,179 3,862,950 0 6,977,798 66,663,129 73,640,927 Lockport Mall, Lockport, NY 9,300,000 800,000 10,000,000 4,221,701 23,656 800,000 14,245,357 15,045,357
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 - -------------------- ------------ ------------ -------- --------------- Crossroads (MI) Kalamazoo, MI 1,583,003 1999 (f) Cumberland Mall Atlanta, GA 5,203,134 1998 (f) Development in Progress 0 Eagle Ridge Mall Lake Wales, FL 6,559,418 1995-1996 (f) Eden Prairie Mall Eden Prairie, MN 1,352,772 1997 (f) Fallbrook Mall, West Hills, CA 23,883,518 1984 (f) Fox River Mall Appleton, WI 16,809,618 1983-1984 (f) Gateway Mall, Springfield, OR 16,319,197 1989-1990 (f) GGPLP Corp. Chicago, IL 86,867 110 Building Chicago, IL 1,361,462 Grand Traverse Mall, Grand Traverse, MI 12,037,271 1990-1991 (f) Greenwood Mall Bowling Green, KY 10,262,394 1993 (f) Knollwood Mall, St. Louis Park, MN 13,477,097 1978 (f) Lakeview Square Mall Battle Creek, MI 2,970,710 1996 (f) Lansing Mall Lansing, MI 5,181,088 1996 (f) Lockport Mall, Lockport, NY 4,681,404 1986 (f)
78 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) - -------------------- ------------ ---------- ------------ ------------ ---------- ---------- ------------ ----------- Mall of the Bluffs, Council Bluffs, IA 44,473,981 1,860,116 24,016,343 12,490,311 2,529,093 1,894,220 39,035,747 40,929,967 Mall St. Vincent Shreveport, LA 18,980,553 2,640,000 23,760,000 1,001,642 0 2,640,000 24,761,642 27,401,642 Marketplace Champaign, IL 47,000,000 7,000,000 63,972,357 23,340,190 1,215,376 7,000,000 88,527,923 95,527,923 McCreless Mall San Antonio, TX 0 1,000,000 9,000,002 239,606 0 1,000,000 9,239,608 10,239,608 MEPC Acquisition Financing 25,000,000 0 0 0 0 0 0 0 Northridge Fashion Center Northridge, CA 107,103,159 16,618,095 149,562,583 6,348,900 2,930,658 16,663,260 158,842,141 175,505,401 Oakwood Mall, Eau Claire, WI 59,298,641 3,266,669 18,281,160 13,942,471 1,711,573 3,266,669 33,935,204 37,201,873 Park Mall Tucson, AZ 50,000,000 4,996,024 44,993,177 34,408,136 3,197,994 4,715,836 82,599,307 87,315,143 Piedmont Mall, Danville, VA 16,855,000 2,000,000 38,000,000 2,890,655 20,787 2,000,000 40,911,442 42,911,442 Pierre Bossier Mall Bossier City, LA 41,452,426 5,280,707 47,558,468 2,050,544 0 5,283,970 49,609,012 54,892,982 The Pines, Pine Bluff, AR 26,750,000 1,488,928 17,627,258 8,514,357 1,365,091 1,247,414 27,506,706 28,754,120 Regency Square Mall Jacksonville, FL 87,134,943 16,497,552 148,477,968 2,310,647 0 16,506,853 150,788,615 167,295,468 Rio West Mall, Gallup, NM 13,500,000 0 19,500,000 4,567,420 0 0 24,067,420 24,067,420 River Falls Mall, Clarksville, IN 28,000,000 3,177,688 54,610,421 6,833,658 5,281,892 3,182,305 66,725,971 69,908,276 River Hills Mall, Mankato, MN 51,200,000 3,713,529 29,013,757 18,489,952 2,584,241 4,707,314 50,087,950 54,795,264 Riverlands Shopping Center LaPlace, LA 0 500,000 4,500,000 185,285 0 500,000 4,685,285 5,185,285 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 - ---------------------- ------------ ------------ -------- --------------- Mall of the Bluffs, Council Bluffs, IA 12,958,603 1985-1986 (f) Mall St. Vincent Shreveport, LA 849,516 1998 (f) Marketplace Champaign, IL 4,370,612 1997 (f) McCreless Mall San Antonio, TX 380,970 1998 (f) MEPC Acquisition Financing 0 Northridge Fashion Center Northridge, CA 6,150,945 1998 (f) Oakwood Mall, Eau Claire, WI 12,589,829 1985-1986 (f) Park Mall Tucson, AZ 4,300,398 1996 (f) Piedmont Mall, Danville, VA 4,608,710 1995 (f) Pierre Bossier Mall Bossier City, LA 1,509,172 1998 (f) The Pines, Pine Bluff, AR 9,633,578 1985-1986 (f) Regency Square Mall Jacksonville, FL 5,713,919 1998 (f) Rio West Mall, Gallup, NM 7,392,436 1986 (f) River Falls Mall, Clarksville, IN 20,837,281 1989-1990 (f) River Hills Mall, Mankato, MN 12,558,294 1990-1991 (f) Riverlands Shopping Center LaPlace, LA 206,394 1998 (f)
F-39 79 GENERAL GROWTH PROPERTIES, INC
Col. A Col. B Col. C Col. D ------ ------ ------ ------ Costs Capitalized Gross Amounts at Subsequent Which Carried at Initial Cost To Acquisition Close of Period ------------------------------- ------------------------------- ----------------- Buildings and Encumbrances Improvements Carrying Description (e) Land (a) Improvements Costs (b) Land - ---------------------- -------------- -------------- -------------- -------------- -------------- -------------- Rivertown Crossing Grandville, MI 87,861,668 10,972,923 97,141,738 0 12,132,835 10,972,923 Sooner Fashion Mall, Norman, OK 20,000,000 2,700,000 24,300,000 8,230,874 0 2,700,000 Southlake Mall, Morrow, GA 51,300,000 6,700,000 60,406,902 6,054,951 51,340 6,700,000 SouthShore Mall, Aberdeen, WA 9,000,000 650,000 15,350,000 4,886,262 0 650,000 Southwest Plaza Littleton , CO 84,961,720 9,000,000 103,983,673 7,078,809 0 9,000,000 Spring Hill West Dundee, IL 90,816,339 12,400,000 111,643,525 2,472,773 0 12,400,000 St Cloud Mall LLC St Cloud, Minnesota 0 0 0 0 0 2,812,169 Valley Hills, Harrisonburg, VA 14,984,664 3,443,594 31,025,471 2,697,016 0 5,613,508 Valley Plaza Shopping Center Bakersfield, CA 75,197,965 12,685,151 114,166,356 -7,462,342 0 12,685,151 West Valley Mall, Tracy, CA 32,000,000 9,295,045 47,789,310 9,107,910 7,686,293 9,295,045 Westwood Mall Jackson, MI 20,900,000 2,658,208 23,923,869 2,295,190 0 3,571,208 -------------- -------------- -------------- -------------- -------------- -------------- Grand Totals $3,119,534,004 $ 643,576,931 $3,070,601,498 $ 513,282,673 $ 84,454,945 $ 658,211,969 ============== ============== ============== ============== ============== ============== 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 Improvements Total(c)(d) Depreciation Construction Acquired Computed - ---------------------- -------------- -------------- -------------- ------------ -------- --------------- Rivertown Crossing Grandville, MI 109,274,573 120,247,496 282,091 1998-1999 (f) Sooner Fashion Mall, Norman, OK 32,530,874 35,230,874 2,211,541 1996 (f) Southlake Mall, Morrow, GA 66,513,193 73,213,193 3,718,949 1997 (f) SouthShore Mall, Aberdeen, WA 20,236,262 20,886,262 6,741,260 1986 (f) Southwest Plaza Littleton , CO 111,062,482 120,062,482 4,240,644 1998 (f) Spring Hill West Dundee, IL 114,116,298 126,516,298 4,295,498 1998 (f) St Cloud Mall LLC St Cloud, Minnesota 0 2,812,169 0 1999 (f) Valley Hills, Harrisonburg, VA 33,722,487 39,335,995 1,844,486 1997 (f) Valley Plaza Shopping Center Bakersfield, CA 106,704,014 119,389,165 4,120,658 1998 (f) West Valley Mall, Tracy, CA 64,583,513 73,878,558 7,295,145 1995 (f) Westwood Mall Jackson, MI 26,219,059 29,790,267 2,048,540 1996 (f) -------------- -------------- -------------- Grand Totals $3,668,339,116 $4,326,551,085 $ 376,673,468 ============== ============== ==============
F-40 80 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 $3,556,155.
RECONCILIATION OF REAL ESTATE ----------------------------- 1997 1998 1999 ---- ---- ---- Balance at beginning of year $1,555,068 $1,863,485 $3,676,796 Additions: 308,417 1,813,311 1,238,874 Reductions: -- -- (589,119) ---------- ---------- ---------- Balance at close of year $1,863,485 $3,676,796 $4,326,551 ========== ========== ========== RECONCILIATION OF ACCUMULATED DEPRECIATION ------------------------------------------ 1996 1998 1999 ---- ---- ---- Balance at beginning of year $188,744 $233,295 $301,789 Depreciation Expense 44,551 68,494 105,046 Reductions: -- -- (30,162) --------- -------- -------- Balance at close of year $233,295 $301,789 $376,673 ======== ======== ========
(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-41 81 GENERAL GROWTH PROPERTIES, INC. EXHIBIT INDEX 2(a) Amended and Restated Stock Purchase Agreement, dated as of October 16, 1995, by and among Sears, Roebuck and Co., Homart Development Co., Homart Newco One, Inc. and GGP/Homart, Inc.(1) 2(b) Amendment No. 1 to Amended and Restated Stock Purchase Agreement, dated as of December 22, 1995, by and among Sears, Roebuck and Co., Homart Development Co., Homart Newco One, Inc. and GGP/Homart, Inc.(1) 2(c) Real Estate Purchase Agreement, dated as of July 31, 1995, by and among Sears, Roebuck and Co., Homart Development Co. and GGP/Homart, Inc.(1) 2(d) Amendment No. 1 to Real Estate Purchase Agreement, dated as of October 16, 1995, by and among Sears, Roebuck and Co., Homart Development Co. and GGP/Homart, Inc.(1) 2(e) Amendment No. 2 to Real Estate Purchase Agreement, dated as of December 22, 1995, by and among Sears, Roebuck and Co., Homart Development Co. and GGP/Homart, Inc.(1) 2(f) Mall Purchase Agreement, dated as of December 22, 1995, by and among Sears, Roebuck and Co., Homart Development Co. and General Growth Properties-Natick Limited Partnership.(1) 2(g) Contribution Agreement dated December 6, 1996, between Forbes/Cohen Properties, a Michigan general partnership, and GGP Limited Partnership, a Delaware limited partnership.(2) 2(h) Contribution Agreement dated December 6, 1996, between Lakeview Square Associates, a Michigan general partnership, and GGP Limited Partnership, a Delaware limited partnership.(2) 2(i) Contribution Agreement dated December 6, 1996, between Jackson Properties, a Michigan general partnership, and GGP limited Partnership, a Delaware limited partnership.(2) 2(j) Sale and Contribution Agreement dated June 19, 1997, between CA Southlake Investors, Ltd., a Georgia limited partnership, and GGP Limited Partnership, a Delaware limited partnership.(10) 2(k) Contribution Agreement dated June 10, 1997, among Atlantic Freeholds II, a Nevada general partnership, Town East Mall, L.P., a Delaware limited partnership, and Town East Mall Partnership, a Texas general partnership.(10) 2(l) Purchase and Sale Agreement dated as of March 22, 1997, between Century Plaza Co., an Alabama general partnership, and Century Plaza L.L.C., a Delaware limited liability company. (10) 2(m) Real Estate Purchase Agreement dated March 12, 1997, between Champaign Venture, an Illinois general partnership, and Champaign Market Place L.L.C., a Delaware limited liability company. (10) 2(n) Stock Purchase Agreement dated as of April 17, 1998 and amended June 2, 1998, among MEPC PLC, MEPC North American Properties Limited, U.K.-American Holdings Limited and GGP Limited Partnership. (16) 2(o) Purchase and Sale Agreement dated May 8, 1998, among Grosvenor International Limited, P.I.C. Investments, Northbrook Court I L.L.C. and Northbrook Court II L.L.C. (17) 2(p) Merger Agreement dated May 14, 1998, among GGP Limited Partnership, GGP Acquisition L.L.C. and U.S. Prime Property, Inc. (17) S-1 82 GENERAL GROWTH PROPERTIES, INC. 2(q) Sale and Contribution Agreement dated April 2, 1998, between Southwest Properties Venture and GGP Limited Partnership. (18) 2(r). Contribution and Exchange Agreement dated as of July 10, 1998 (the "Contribution Agreement") among Nashland Associates, HRE Altamonte, Inc., Altamonte Springs Mall L.P., and GGP Limited Partnership. (21) 2(s). Purchase and Sale Agreement and Joint Escrow Instructions dated as of August 21, 1998 by and between Spring Hill Mall Partnership (seller) and Spring Hill Mall L.L.C., (purchaser). (22) 2(t). Purchase and Sale Agreement dated as of the 18th day of September, 1998 by and between Coastland Center Joint Venture (seller) and Coastland Center, L.P. (purchaser). (23) 2(u) Purchase and Sale Agreement dated as of May 3, 1999, among D/E Hawaii Joint Venture, GGP Limited Partnership and General Growth Properties, Inc. (27) 2(v) 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. (28) 2(w) 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. (28) 2(x) 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"). (28) 2(y) 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). (29) 2(z) Contribution Agreement dated November 10, 1999, by and between the Operating Partnership and GGP/Homart II (Northbrook Court). (29) 2(aa) Contribution Agreement dated November 10, 1999, by and between the Operating Partnership and GGP/Homart II (Natick Trust). (29) 2(bb) Contribution Agreement dated November 10, 1999, by and between the Operating Partnership and GGP/Homart II (Stonebriar Centre). (29) 2(cc) Contribution Agreement dated November 10, 1999, by and between NYSCRF and GGP/Homart II (Carolina Place). (29) 2(dd) Contribution Agreement dated November 10, 1999, by and between NYSCRF and GGP/Homart II (Alderwood Mall). (29) 2(ee) Contribution Agreement dated November 10, 1999, by and between NYSCRF and GGP/Homart II (Montclair Plaza). (29) 2(ff) Contribution Agreement, dated February 1, 2000, by and between General Growth Companies, Inc. and GGP Limited Partnership. 3(a) Amended and Restated Certificate of Incorporation of the Company. (3) 3(b) Amendment to Amended and Restated Certificate of Incorporation of the Company.(5) S-2 83 GENERAL GROWTH PROPERTIES, INC. 3(c) Amendment to Amended and Restated Certificate of Incorporation of the Company filed on December 21, 1995.(11) 3(d) Amendment to Amended and Restated Certificate of Incorporation of the Company filed on May 20, 1997.(15) 3(e) Amendment to Second Amendment and Restated Certificate of Incorporation of the Company filed on May 17, 1999. (27) 3(f) Bylaws of the Company.(5) 3(g) Amendment to Bylaws of the Company.(5) 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.(8) 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.(2) 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.(13) 4(d) Redemption Rights Agreement dated October 23, 1997, among GGPI, GGPLP and Peter Leibowits.(15) 4(e) Form of Indenture.(12) 4(f) Certificate of Designations, Preferences and Rights of 7.25% Preferred Equity Redeemable Stock, Series A. (20) 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. (27) 4(h) Redemption Rights Agreement dated April 2, 1998, among GGP Limited Partnership, General Growth Properties, Inc. and Southwest Properties Venture. (17) 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"). (18) 4(j) Form of Note pursuant to the Indenture Agreement. (18) 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. (18) 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). (24) 4(m) Form of Common Stock Certificate. (25) S-3 84 GENERAL GROWTH PROPERTIES, INC. 4(n) First Amendment to Rights Agreement, dated as of November 10,1999, between the Company and Norwest Bank, Minnesota, N.A. (28) 4(o) Letter Agreement concerning Rights Agreement, dated November 10, 1999, between the Operating Partnership and NYSCRF. (28) 10(a) Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership. (19) 10(b) Rights Agreement between the Company and the Limited Partners of the Operating Partnership.(6) 10(c) Real Estate Management Agreement dated July 1, 1996, between General Growth Management, Inc. and GGP Limited Partnership.(13) 10(d)* General Growth Properties, Inc. 1993 Stock Incentive Plan, as amended.(14) 10(e) Form of Amended and Restated Agreement of Partnership for each of the Property Partnerships.(3) 10(f) Sale-Purchase Agreement dated as of December 30, 1992, by and between Equitable and the Company.(3) 10(g) Form of Indemnification Agreement between the Operating Partnership, Martin Bucksbaum, Matthew Bucksbaum, Mall Investment L.P. and M. Bucksbaum Company. (3) 10(h) Form of Registration Rights Agreement between the Company and the Bucksbaums. (3) 10(i) Form of Registration Rights Agreement between the Company and certain trustees for the IBM Retirement Plan. (3) 10(j) Form of Incidental Registration Rights Agreement between the Company, Equitable, Frank Russell and Wells Fargo.(3) 10(k) Form of Letter Agreements restricting sale of certain shares of Common Stock.(3) 10(l)* Letter Agreement dated October 14, 1993, between the Company and Bernard Freibaum.(6) 10(m)* Form of Option Agreement between the Company and certain Executive Officers.(13) 10(n)* General Growth Properties, Inc. 1998 Incentive Stock Plan.(25) 23 Consent of PricewaterhouseCoopers LLP - Independent Accountants. 27 Financial Data Schedule. (*) 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 5, 1996, incorporated herein by reference. S-4 85 GENERAL GROWTH PROPERTIES, INC. (2) Previously filed as an exhibit to the Company's Current Report on Form 8-K dated January 3, 1996, incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Registration Statement on Form S-11 (No. 33-56640), incorporated herein by reference. (4) Previously filed as an exhibit to the Company's Current Report on Form 8-K dated July 16, 1996, incorporated herein by reference. (5) 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. (6) 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. (7) Previously filed as an exhibit to the Company's Current Report on Form 8-K dated February 25, 1994, incorporated herein by reference. (8) Previously filed as an exhibit to the Company's Current Report on Form 8-K dated July 17, 1996, incorporated herein by reference. (9) Previously filed as an exhibit to the Company's Registration Statement on Form S-3 (No. 33-23035), incorporated herein by reference. (10) Previously filed as an exhibit to the Company's Current Report on Form 8-K dated June 19, 1997, incorporated herein by reference. (11) 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. (12) 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. (13) 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. (14) 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. (15) 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. (16) Previously filed as an exhibit to the Company's current report on Form 8K dated June 17, 1998, incorporated herein by reference. (17) Previously filed as an exhibit to the Company's current report on Form 8K dated May 26, 1998, incorporated herein by reference. (18) Previously filed as an exhibit to the Company's current report on Form 8K/A dated June 2, 1998, incorporated herein by reference. (19) 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. S-5 86 GENERAL GROWTH PROPERTIES, INC. (20) Previously filed as an exhibit to the Company's current report on Form 8-K dated August 7, 1998, incorporated herein by reference. (21) Previously filed as an exhibit to the Company's current report on Form 8K dated August 5, 1998, incorporated herein by reference. (22) Previously filed as an exhibit to the Company's current report on Form 8-K dated September 30, 1998, incorporated herein by reference. (23) Previously filed as an exhibit to the Company's current report on Form 8-K dated October 5, 1998, incorporated herein by reference. (24) Previously filed as an exhibit to the Company's current report on Form 8-K, dated November 18, 1998, incorporated herein by reference. (25) 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. (26) Previously filed as an exhibit to the Company's Registration Statement on Form S-8 (No. 333-74461) dated March 12, 1999, incorporated herein by reference. (27) Previously filed as an exhibit to the Company's Current Report on Form 8-K, dated July 12, 1999, incorporated herein by reference. (28) Previously filed as an exhibit to the Company's Current Report on Form 8-K, dated November 23, 1999, incorporated herein by reference. (29) Previously filed as an exhibit to the Company's Current Report on Form 8-K/A, dated January 11, 2000, incorporated herein by reference. S-6 EX-2.(FF) 2 CONTRIBUTION AGREEMENT, DATED 2/1/00 1 EXHIBIT 2(ff) CONTRIBUTION AGREEMENT BETWEEN GENERAL GROWTH COMPANIES, INC. a Delaware corporation and GGP LIMITED PARTNERSHIP a Delaware limited partnership 2 CONTRIBUTION AGREEMENT THIS CONTRIBUTION AGREEMENT is dated as of the 1st day of February, 2000, by and between GENERAL GROWTH COMPANIES, INC., a Delaware corporation ("Contributor"), and GGP LIMITED PARTNERSHIP, a Delaware limited partnership ("the Partnership"). RECITALS WHEREAS, Contributor is the fee owner of approximately 3.94 acres of land located in Bowling Green, Kentucky, which land is more particularly described on Exhibit A attached hereto and made a part hereof (the "Land"); and WHEREAS, Contributor desires to contribute to the capital of Partnership such Land, and Partnership desires to accept such contribution to capital, upon the terms and subject to the conditions contained herein. WHEREAS, Partnership desires to acquire the Land for purposes of developing and operating a self-storage facility (the "Improvements"). WHEREAS, to facilitate Partnership's construction and development of the Improvements, Contributor and Partnership have entered into a License Agreement dated as of August 1, 1998 ("License Agreement") pursuant to which Contributor granted to Partnership the right to enter the land and construct the Improvements. NOW, THEREFORE, in consideration of the mutual covenants, conditions and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: ARTICLE I Definitions I.1 Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: "AFFILIATE" shall mean a Person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with the Person specified. "AGREEMENT" shall mean this Contribution Agreement, as amended or modified from time to time hereafter in accordance with the terms hereof. "CLOSING" shall have the meaning set forth in Section 4.1. "CLOSING DATE" shall have the meaning set forth in Section 4.1. "CLOSING DOCUMENTS" shall mean the Contributor Closing Documents and Partnership Closing 3 Documents, collectively. "CONTRIBUTOR CLOSING DOCUMENTS" shall have the meaning set forth in Section 4.2. "ENVIRONMENTAL LAWS" shall mean all federal, state and local statutes, ordinances, codes, rules, regulations, guidelines, orders and decrees regulating, relating to or imposing liability or standards concerning or in connection with Hazardous Materials, Underground Storage Tanks or the protection of human health or the environment, as any of the same may be amended from time to time, including but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et. seq., as amended by the Superfund Amendments and Reauthorization Act or any equivalent state or local laws or ordinances; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq., as amended by the Hazardous and Solid Waste Amendments of 1984, or any equivalent state or local laws or ordinances; the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), 7 U.S.C. Section 136 et. seq. or any equivalent state or local laws or ordinances; the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.); the Emergency Planning and Community Right-to-Know Act ("EPCRA"), 42 U.S.C. Section 11001 et. seq. or any equivalent state or local laws or ordinances; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. Section 2601 et. seq. or any equivalent state or local laws or ordinances; the Atomic Energy Act, 42 U.S.C. Section 2011 et. seq., or any equivalent state or local laws or ordinances; the Clean Water Act (the "Clean Water Act"), 33 U.S.C. Section 1251 et. seq. or any equivalent state or local laws or ordinances; the Clean Air Act (the "Clean Air Act"), 42 U.S.C. Section 7401 et seq. or any equivalent state or local laws or ordinances; the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq. or any equivalent state or local laws or ordinances. "GENERAL PARTNER" shall mean General Growth Properties, Inc., a Delaware corporation. "HAZARDOUS MATERIALS" shall mean any substance, material, waste, gas or particulate matter which (i) is now, or at any future time may be, regulated by the United States Government, the State of Kentucky, any other state with jurisdiction, or any local governmental authority, or (ii) the exposure to, or manufacture, possession, presence, use generation, storage, transportation, treatment, release, disposal, abatement, cleanup, removal, remediation or handling of is prohibited, controlled or regulated by any Environmental Law, or (iii) requires investigation or remediation under any Environmental Law or common law, or (iv) is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous, or (v) causes or threatens to cause a nuisance upon the Property or to adjacent properties or poses or threatens to pose a hazard to the health or safety of persons on or about the Property, or (vi) could or does cause Contributor or Buyer to be liable for trespass. Such term includes, without limitation, any material or substance which is (1) now or at any future time defined as a "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste" or any like or similar term under any applicable Environmental Law; (2) oil and petroleum products; (3) asbestos or asbestos-containing material as defined in the regulations of the Occupational Safety and Health Administration at 29 C.F.R. Section 1910.1001; (4) polychlorinated biphenyls; (5) radioactive material; (6) now or at any future time designated as a "toxic pollutant" or a "hazardous substance" pursuant to Sections 307 or 311 of the Clean Water Act; (7) 2 4 now or at any future time defined as a "hazardous waste" pursuant to Section 1004 of RCRA; (8) now or at any future time defined as a "hazardous substance" pursuant to Section 101 of CERCLA; (9) now or at any future time designated as a "hazardous chemical" substance or mixture pursuant to TSCA; (10) now or at any future time designated as an "extremely hazardous" substance under Section 302 of EPCRA; (11) now or at any future time designated as a "priority pollutant" or "hazardous air pollutant" pursuant to the Clean Air Act; (12) now or at any future time designated as a hazardous chemical under the Occupational Safety and Health Act; (13) radon gas or other radioactive source material, including special nuclear material, and byproduct materials regulated under the Atomic Energy Act, 42 U.S.C. Section 2011 et. seq.; (14) now or at any future time subject to regulation under FIFRA; (15) natural gas, natural gas liquids, liquefied natural gas, and synthetic gas usable for fuel; or (16) infectious wastes or materials and pathogenic bacteria or other pathogenic microbial agents. "PERSON" shall mean any individual, corporation, partnership, limited liability company, governmental unit or agency, trust, estate or other entity of any type. "PARTNERSHIP AGREEMENT" shall mean the second Amended and Restated Agreement of Limited Partnership of Partnership dated as of April 1, 1998, as amended. "PARTNERSHIP CLOSING DOCUMENTS" shall have the meaning set forth in Section 4.2. "PROPERTY" shall mean the Land, together with all of the estate, right, title and interest of Contributor therein, and in and to (a) any land lying in the beds of any streets, roads or avenues, open or proposed, public or private, in front of or adjoining the Property to the center lines thereof, and in and to any awards to be made in lieu thereof and in and to any unpaid awards for damage to the foregoing by reason of the change of grade of any such streets, roads or avenues; and (b) all easements, rights, licenses, privileges, rights-of-way, strips and gores, hereditaments and such other real property rights and interests appurtenant to the foregoing (including, without limitation, all rights of Contributor under any reciprocal easement agreement affecting the Property). The parties expressly agree that the term "Property" shall not include any improvements constructed on the Land by or on behalf of Partnership in accordance with the terms of the License Agreement. "SUBSTANTIAL TAKING" shall mean a Taking with respect to such portion of the Property as, when so taken would, in the reasonable opinion of Partnership, leave remaining a balance of the Property, which, due either to the area taken or the location of the part taken would not, under applicable zoning laws, building regulations and economic conditions then prevailing or otherwise, readily accommodate development of the Property as a storage facility. "TAKING" shall mean a taking of all or any portion of the Property in condemnation or by exercise of the power of eminent domain or by an agreement in lieu thereof. "TITLE POLICY" shall mean an ALTA Form Owner's Policy of Title Insurance issued by Reynolds, Johnston, Hinton, Thomas & Pepper LLP, as agent for Chicago Title Insurance Company ("Title Company"), dated the date and time of Closing and with policy coverage in an amount not less than the Contribution Price, insuring Partnership as owner of good, marketable and indefeasible fee title 3 5 to the Property, subject only to the matters described in Schedule B of that certain Commitment for Title Insurance Number 17190 dated as of January 13, 1999 prepared on behalf of Title Company, which title commitment Partnership acknowledges it has reviewed and approved as of the date hereof. "UNDERGROUND STORAGE TANKS" shall mean Underground Storage Tanks as defined in Section 9001 of RCRA and as used herein, such term shall also include (i) any farm or residential tank of 1,100 gallons or less capacity used for storing motor fuel for noncommercial purposes, (ii) any tank used for storing heating oil for consumption on the premises where stored, (iii) any septic tank and (iv) any pipes connected to any of the items described in clauses (i) through (iii). "UNIT PRICE" shall mean the average of the closing price per share of Common Stock, $0.10 par value of the General Partner for the twenty (20) trading days preceding the Closing Date. "UNITS" shall mean common units of limited partnership interest in Partnership. I.2 References. All references in this Agreement to particular sections or articles shall, unless expressly otherwise provided, or unless the context otherwise requires, be deemed to refer to the specific sections or articles in this Agreement, and any references to "Exhibit" shall, unless otherwise specified, refer to one of the exhibits annexed hereto and, by such reference, be made a part hereof. The words "herein", "hereof", "hereunder", "hereinafter", "hereinabove" and other words of similar import refer to this Agreement as a whole and not to any particular section, subsection or article hereof. ARTICLE II Contribution of Property II.1 Contribution. Upon the terms and subject to the conditions contained herein, at the Closing, Contributor shall contribute to the capital of Partnership, and Partnership shall accept from Contributor, all of Contributor's right, title and interest in and to the Property. II.2 Consideration. (a) In exchange for the contribution of the Property, at the Closing, Partnership shall (i) issue to Contributor the number of Units equal to the quotient of (A) $215,000 (the "Contribution Price") divided by (B) the Unit Price. (b) Notwithstanding anything contained herein to the contrary, fractional Units shall not be issued hereunder; instead, the number of Units to be issued hereunder shall be the number of Units issuable pursuant to the other provisions of this Agreement rounded up to the nearest whole Unit. II.3 Admission to Partnership; Conversion Rights; Etc. 4 6 (a) At the Closing, Partnership shall deliver to Contributor a certificate representing the Units to be issued pursuant hereto, and Contributor shall execute and deliver to Partnership a signature page to the Partnership Agreement. (b) At the Closing, Contributor shall execute and deliver, and Partnership shall cause the other parties thereto to execute and deliver, an Amendment to Rights Agreement (the "Rights Agreement Amendment") and an Amendment to Registration Rights Agreement (the "RRA Amendment") in the form of Exhibits B and C, respectively, pursuant to which the parties thereto agree that Contributor is entitled to the rights thereunder in respect of the Units. (c) Contributor acknowledges that, notwithstanding anything to the contrary contained in the Partnership Agreement, Contributor will be entitled to receive as a distribution only a pro rata portion of the Net Operating Cash Flow (as defined in the Partnership Agreement) which is distributed for the calendar quarter during which the Closing occurs based on the number of Units issued to it pursuant hereto relative to the total number of issued and outstanding Units and the number of days in such quarter from and following the Closing Date relative to the total number of days in such quarter (and Contributor will be entitled to receive no distributions for previous quarters). Contributor acknowledges that the distribution for a calendar quarter is made in the immediately succeeding calendar quarter. ARTICLE III Costs and Expenses III.1 Payment of Costs and Expenses. (a) Partnership shall pay the cost of recording any documents; (b) Contributor shall be solely responsible for the payment of any real property transfer taxes, gains taxes levied or imposed upon Contributor or the Property as a result of the transfer of the Land to Partnership, sales taxes levied or imposed upon Contributor or the Property as a result of the transfer of the Land to Partnership, documentary stamps and other taxes, fees or charges imposed in connection with the conveyance of the Land or any portion thereof; (c) Partnership and Contributor shall each pay their respective legal fees incurred in connection with the drafting and negotiation of this Agreement and the closing of the transactions contemplated hereunder; and (d) Contributor shall bear its proportionate share of the cost of the issuance of the Title Policy, such proportionate share being equal to the total cost of such issuance multiplied by a fraction, the numerator of which is the Contribution Price and the denominator of which is the total insurance coverage afforded under the Title Policy; provided, however, Partnership shall pay the cost of any extended coverage or other endorsements. The parties shall split equally the cost of any escrow 5 7 fees or other closing charges. ARTICLE IV Closing IV.1 Closing. The closing of the transactions contemplated hereby (the "CLOSING") shall take place at the offices of Neal, Gerber & Eisenberg, Two North LaSalle Street, Chicago, Illinois 60602, at 9:00 a.m. Central Time on February 1, 2000, or such other date and time as may be mutually acceptable to Contributor and Partnership (the "CLOSING DATE"). IV.2 Contributor Closing Documents. On or prior to the Closing Date, Contributor shall deliver, or cause to be delivered, to Partnership the following documents (collectively, the "CONTRIBUTOR CLOSING DOCUMENTS"), duly executed by Contributor and the other parties thereto (other than Partnership) and in form and substance reasonably acceptable to Partnership and to Contributor: (a) Special Warranty Deed in proper statutory form for recording, so as to convey the entire fee simple estate of Contributor in the Property to Partnership. (b) An affidavit of Contributor stating its U.S. taxpayer identification number and that it is a "United States person", as defined by Sections 1445(f)(3) and 7701(b) of the Code. (c) A written certificate executed on behalf of Contributor and addressed to Partnership to the effect that all of the representations and warranties of Contributor herein contained in Section 6.1 are true and correct in all material respects as of the Closing Date with the same force and effect as though remade and repeated in full on and as of the Closing Date or stating the specific respects, if any, in which any of the representations and warranties is untrue. (d) Any instruments, documents or certificates required to be executed by Contributor with respect to any state, county or local transfer taxes applicable to the conveyance of the Property pursuant to this Agreement. (e) The Rights Agreement Amendment. (f) The RRA Amendment. (g) The signature page referred to in Section 2.3(a). (h) The Title Policy. (i) Such other documents, instruments or agreements which Contributor may be required to deliver to Partnership pursuant to the other provisions of this Agreement or which 6 8 Partnership reasonably may deem necessary or desirable in order to consummate the transactions contemplated hereunder; provided, however, that any such document, instrument or agreement which Partnership reasonably deems necessary or desirable shall not impose upon Contributor any obligation or liability other than an obligation or liability expressly imposed upon Contributor pursuant to the terms of this Agreement or pursuant to the terms of the other Contributor Closing Documents specified in this Section 4.2. IV.3 Partnership Closing Documents. On or prior to the Closing Date, Partnership shall deliver to Contributor the following documents (herein referred to collectively as the "PARTNERSHIP CLOSING DOCUMENTS"), duly executed by Partnership and the other parties thereto (other than Contributor) and in form and substance reasonably acceptable to Contributor and to Partnership unless the form thereof is attached hereto: (a) A written certificate addressed to Contributor to the effect that all of the representations and warranties of Partnership contained in Section 6.2 are true and correct in all material respects on and as of the Closing Date with the same force and effect as though remade and repeated in full on and as of the Closing Date (except for actions taken in accordance with or as contemplated by this Agreement and except for matters approved in writing or consented to in writing by Contributor) or stating the specific respects, if any, in which any of the representations and warranties is untrue. (b) Any instruments, documents or certificates required to be executed by Partnership with respect to any state, county or local transfer taxes applicable to the conveyance of the Property pursuant to this Agreement. (c) The Rights Agreement Amendment. (d) The RRA Amendment. (e) The signature page referred to in Section 2.3(a). (f) Such other documents, instruments or agreements which Partnership may be required to deliver to Contributor pursuant to the other provisions of this Agreement or which Contributor reasonably may deem necessary or desirable to consummate the transactions contemplated hereunder; provided, however, that any such other document, instrument or agreement which Contributor reasonably deems necessary or desirable shall not impose upon Partnership any obligation or liability other than an obligation or liability expressly imposed upon Partnership pursuant to the terms of this Agreement or pursuant to the terms of the other Partnership Closing Documents specified in this Section 4.3. IV.4 Joint Deliveries. Contributor and Partnership shall jointly execute and deliver a Closing Statement with respect to the contribution of the Property. 7 9 ARTICLE V Prorations and Adjustments V.1 Prorations. Subject to the other provisions of this Article and the terms of the License Agreement, the items pertaining to the Property that are identified in this Article shall be prorated between the parties on a per diem basis (employing the actual number of calendar days in the period involved and a 365-day year) so that credits and charges with respect to such items for all days preceding the Closing Date shall be allocated to Contributor, and credits and charges with respect to such items for all days including and after the Closing Date shall be allocated to Partnership. Each payment received shall be attributed to the most recent period for which such a payment is due. The parties shall make final adjusting payments as provided in Section 5.4 hereof. All prorations not specifically agreed to herein shall be made in accordance with customary practice in the county in which the Property is located. This Article V shall survive the Closing. V.2 Items to be Prorated. Subject to the terms of the License Agreement, the following items shall be prorated between Partnership and Contributor as of 11:59 pm on the day immediately preceding the Closing Date: (a) real property taxes and assessments (or installments thereof) based on the most recent tax bills; (b) sewer taxes and rents, if any; (c) all other items customarily apportioned in connection with the sale of similar properties similarly located. V.3 Installment Payment of Assessments. In furtherance of Section 5.2, if any real property assessment affects the Property at the Closing and such real property assessment is payable in installments (whether at the election of Contributor or otherwise), the installment relating to, or payable over, the applicable calendar or fiscal year in which Closing occurs, shall be apportioned between Contributor and Partnership as of 11:59 p.m. Central Standard Time on the day immediately preceding the Closing Date, and the remaining installments shall be the obligation of Partnership. 8 10 V.4 Settlement of Adjustments. (a) Contributor and Partnership acknowledge that it may be difficult to calculate, as of the day immediately preceding the Closing Date, certain of the adjustments, apportionments and payments to be made pursuant to this Article V. Accordingly, Contributor and Partnership hereby agree that any adjustments, apportionments and payments otherwise required to be made as of the Closing Date may to the extent necessary or desirable be estimated by Partnership and Contributor based on the most recent available data, and, as soon as practicable and if necessary from time to time after the Closing Date, additional adjustments, apportionments and payments shall be made to adjust for any differences between the actual apportionment or adjustment and the amount thereof estimated as of the Closing Date. Any errors or omissions in computing apportionments at the Closing shall be corrected promptly after their discovery. (b) Net prorations and adjustments made pursuant to this Article V as of the Closing Date and determined as provided in subsection (a) above shall be settled in cash. From time to time after the Closing as further adjustments are made as herein provided, settlement thereon between Contributor and Partnership shall be made in cash. (c) Notwithstanding anything to the contrary contained herein, a final determination of the amounts owing under this Article V shall be made as of the date that is eighteen (18) months after the Closing Date, and the amounts determined as of such date to be owing settled in cash no later than ten (10) days thereafter. No further adjustments or payments shall be required to be made under this Article V thereafter. ARTICLE VI Representations and Warranties VI.1 Contributor's Representations and Warranties. Contributor represents and warrants to Partnership as follows: (a) Contributor is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware with full power and authority to execute, deliver and perform this Agreement. (b) The execution, delivery and performance of this Agreement by Contributor have been duly and validly authorized by all necessary action on the part of Contributor. This Agreement has been, and the Contributor Closing Documents will be, duly executed and delivered by Contributor. This Agreement constitutes, and when so executed and delivered the Contributor Closing Documents will constitute, the legal, valid and binding obligations of Contributor, enforceable against Contributor in accordance with their respective terms. (c) None of the execution, delivery or performance of this Agreement by 9 11 Contributor does or will, with or without the giving of notice, lapse of time or both, violate, conflict with, constitute a default, result in a loss of rights, acceleration of payments due or creation of any lien upon the Property or require the approval or waiver of or filing with any Person (including without limitation any governmental body, agency or instrumentality) under (i) the articles of incorporation and by-laws of Contributor, (ii) any agreement, instrument or other document to which Contributor is a party or by which it is bound or (iii) any judgment, decree, order, statute, injunction, rule, regulation or the like of a governmental unit applicable to Contributor. (d) Except for the License Agreement, there are no leases or other occupancy rights affecting the Property. (e) Neither Contributor, nor, to Contributor's knowledge, any other Person has caused or permitted any Hazardous Material to be maintained, disposed of, stored, released or generated on, under or at the Property or any part thereof. To Contributor's knowledge, Contributor is in compliance with, and has heretofore complied with, all Environmental Laws with respect to the Property and, to Contributor's knowledge, all other occupants of the Property are and have been in compliance with the Environmental Laws. Contributor has not received any notice from any governmental unit or other person that it or the Property is not in compliance with any Environmental Law or that it has any liability with respect thereto and there are no administrative, regulatory or judicial proceedings pending or, to the knowledge of Contributor, threatened with respect to the Property pursuant to, or alleging any violation of, or liability under any Environmental Law. Contributor has not installed any underground or above ground storage tanks on, under or about the Property and, to Contributor's knowledge, no such tanks are located on, under or about the Property. To Contributor's knowledge, there is no facility located on or at the Property that is subject to the reporting requirements of Section 312 of the Federal Emergency Planning and Community Right to Know Act of 1986 and the federal regulations promulgated thereunder (42 U.S.C. Section 11022). (f) There is no litigation, including any arbitration, investigation or other proceeding by or before any court, arbitrator or governmental or regulatory official, body or authority which is pending or, to Contributor's knowledge, threatened against Contributor relating to the Property, there are no unsatisfied arbitration awards or judicial orders against Contributor and, to Contributor's knowledge, there is no basis for any such arbitration, investigation or other proceeding. (g) No condemnation proceeding or other proceeding or action in the nature of eminent domain is pending with respect to all or any part of the Property, and, to Contributor's knowledge, no condemnation proceeding or other proceeding or action in the nature of eminent domain is threatened with respect to the Property. (h) Copies of current real estate tax bills with respect to the Property have been delivered or made available to Partnership. No portion of the Property comprises part of a tax parcel which includes property other than property comprising all or a portion of the Property. No application or proceeding is pending with respect to a reduction or an increase of such taxes. There are no tax refund proceedings relating to the Property which are currently pending. Contributor has no 10 12 knowledge of any special tax or assessment to be levied against the Property or any change in the tax assessment of the Property. (i) Contributor has not received notice that there is, and there does not now exist, any violation of any restriction, condition or agreement contained in any easement, restrictive covenant or any similar instrument or agreement affecting the Property or any portion thereof. (j) No approval, consent, waiver, filing, registration or qualification of or with any third party, including, but not limited to, any governmental bodies, agencies or instrumentalities is required to be made, obtained or given for the execution, delivery and performance of this Agreement or any of the Contributor Closing Documents by Contributor. (k) No broker, finder, investment banker or other person is entitled to any brokerage, finder's or other fee or commission in connection with the contribution of the Property based upon arrangements made by or on behalf of Contributor. (l) To Contributor's knowledge, there is no bulk sales notice required in connection with the transfer of the Property to Partnership. (m) Contributor is an "accredited investor" within the meaning of Regulation D under the Securities Act of 1933, as amended, and has knowledge and experience in financial and business matters such that it is capable of evaluating the merits and risks of receiving and owning the Units to be issued to Contributor pursuant hereto, and Contributor is able to bear the economic risk of such ownership. The Units to be acquired by Contributor pursuant to this Agreement are being acquired by Contributor for its own account, for investment purposes only and not with a view to, and with no present intention of, selling or distributing the same. VI.2 Partnership Representations and Warranties. Partnership represents and warrants to Contributor as follows: (a) Partnership is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware with full right, power and authority to execute, deliver and perform this Agreement. (b) The execution, delivery and performance by Partnership of this Agreement have been duly and validly authorized by all requisite action on the part of Partnership. This Agreement has been, and the Partnership Closing Documents will be, duly executed and delivered by Partnership. This Agreement constitutes, and when so executed and delivered the Partnership Closing Documents will constitute, the legal, valid and binding obligations of Partnership, enforceable against it in accordance with their terms. (c) None of the execution, delivery or performance of this Agreement or the Partnership Closing Documents by Partnership does or will, with or without the giving of notice, lapse 11 13 of time or both, violate, conflict with, constitute a default or result in a loss of rights under or require the approval or waiver of or filing with any Person (including without limitation any governmental body, agency or instrumentality) under (i) the organizational documents of Partnership, (ii) any material agreement, instrument or other document to which Partnership is a party or by which Partnership is bound, or (iii) any judgment, decree, order, statute, injunction, rule, regulation or the like of a governmental unit applicable to Partnership. (d) No broker, finder, investment banker or other person is entitled to any brokerage, finder's or other fee or commission in connection with the contribution of the Property based upon arrangements made by or on behalf of Partnership. (e) The Units issued to Contributor pursuant to this Agreement have been authorized for issuance by all necessary partnership action on the part of Partnership and have been duly and validly issued. ARTICLE VII Conditions to Closing VII.1 Conditions to Contributor's Obligations. Contributor's obligation to close is subject to satisfaction of each of the following conditions (any of which may be waived by Contributor in its sole discretion): (a) Compliance with Agreement. On the Closing Date, all of the covenants and agreements to be complied with or performed by Partnership under this Agreement on or before the Closing shall have been complied with or performed in all material respects. (b) Accuracy of Representations and Warranties. The representations and warranties made by Partnership in this Agreement shall be true and complete in all material respects on and as of the Closing Date. (c) No Other Termination. No termination of this Agreement by Contributor or Partnership shall have occurred pursuant to any other provision hereof. (d) No Litigation. At Closing, there is no litigation, including any arbitration, investigation or other proceeding, pending by or before any court, arbitrator or governmental or regulatory official, body or authority nor any decree, order or injunction issued by any such court, arbitrator or governmental or regulatory official, body or authority and remaining in effect which does or is likely to prevent or hinder the timely consummation of the Closing or materially and adversely affect the Property. (e) Title Policy. At Closing, Title Company shall issue the Title Policy to Partnership. 12 14 (f) Plat of Subdivision. At Closing (i) the City-County Planning Commission of Warren County, Kentucky, shall have approved a final subdivision plat ("Plat") pursuant to which the Land shall become a separate legal parcel which may be conveyed pursuant to the Deed, and (ii) such Plat shall be recorded in the land records of Warren County, Kentucky. VII.2 Conditions to Partnership's Obligations. Partnership's obligation to close is subject to satisfaction of each of the following conditions (any of which may be waived by Partnership in its sole discretion): (a) Compliance with Agreement. On the Closing Date, all of the covenants and agreements to be complied with or performed by Contributor under this Agreement on or before the Closing shall have been complied with or performed in all material respects. (b) Accuracy of Representation and Warranties. The representations and warranties made by Contributor in this Agreement shall be true and complete in all material respects on and as of the Closing Date. (c) No Other Termination. No termination of this Agreement by Partnership or Contributor shall have occurred pursuant to any other provision hereof. (d) No Litigation. At Closing, there is no litigation, including any arbitration, investigation or other proceeding, pending by or before any court, arbitrator or governmental or regulatory official, body or authority nor any decree, order or injunction issued by any such court, arbitrator or governmental or regulatory official, body or authority and remaining in effect which does or is likely to prevent or hinder the timely consummation of the Closing or materially adversely affect the Property. (e) Plat of Subdivision. At Closing, Plat shall be approved by the Planning Commission and recorded in the land records of Warren County, Kentucky. ARTICLE VIII Additional Covenants VIII.1 Conduct of Business Pending Closing. From the date hereof until the Closing, Contributor shall (i) not enter into any lease or contracts with respect to the Property, (ii) not sell, transfer, exchange, further encumber or grant interests (including easements) in the Property or any part thereof or engage in negotiations or discussions with, or otherwise solicit or assist, any third party relating to the acquisition by such third party of the Property, (iii) not otherwise take any action which could or would render inaccurate any of the representations or warranties made by Contributor in this Agreement, and (iv) otherwise operate the Property in the ordinary course consistent with current practice. 13 15 VIII.2 Publicity. In no event shall either Contributor or Partnership issue any press release or otherwise disclose any non-public information regarding this Agreement or the contribution of the Property unless the other party has consented thereto in writing (and Contributor and Partnership agree not unreasonably to withhold or delay such consent) and to the form and substance of any such statement or disclosure; provided, however, that nothing herein shall be deemed to limit or impair in any way any party's ability to disclose the details of or information concerning this Agreement, or the Property to such party's attorneys, accountants or other advisors or to the extent such party reasonably deems necessary or desirable pursuant to any court or governmental order or applicable securities laws or regulations or financial reporting requirements, and to assess the Property in connection with Partnership's due diligence examination. Further, either party may disclose any information regarding this Agreement to its direct or indirect constituent partners, members or shareholders, as the case may be (and to counsel for such constituent partners, members and shareholders) and as otherwise necessary to comply with the terms of this Agreement. Any disclosure by a party's advisors or direct or indirect constituent partners, members or shareholders shall be deemed a breach hereof by such party. If for any reason this Closing is not consummated, Partnership will promptly return to Contributor all originals and copies of documents, reports and financial and other information relating to the Property and to Contributor which Contributor has furnished to Partnership. The obligations of Contributor and Partnership under this Section 8.2 shall survive the termination hereof, however caused, but shall terminate at Closing. VIII.3 Further Assurances. Each of Contributor and Partnership agree, at any time and from time to time after the Closing, to execute, acknowledge where appropriate and deliver such further instruments and other documents (and to bear its own costs and expenses incidental thereto) and to take such other actions as the other of them may reasonably request in order to carry out the intent and purpose of this Agreement; provided, however, that neither Contributor nor Partnership shall be obligated pursuant to this Section 8.4 to incur any expense of a material nature and/or to incur any material obligations in addition to those set forth in this Agreement and/or its respective Closing Documents. ARTICLE IX Condemnation IX.1 Condemnation in General. (a) If prior to the Closing Date the Property shall be the subject of a Taking, Contributor shall promptly inform Partnership of same. (b) If prior to the Closing Date the Property shall be the subject of a Substantial Taking, Partnership may by written notice delivered to Contributor on or before the Closing Date, elect as its sole remedy on account thereof, either (i) to terminate this Agreement, and the rights of the 14 16 parties hereto, in which event this Agreement (other than any right or obligation that expressly survives the termination of this Agreement) shall terminate as of the date of delivery of such notice; or (ii) to continue this Agreement in effect, in which event Contributor (A) shall transfer and assign to Partnership, at the Closing, its full right, title and interest in and to any condemnation awards with respect thereto, and shall cooperate in all reasonable respects with Partnership, at Partnership's sole cost and expense, in connection with the collection thereof, to the extent not collected at the Closing, and (B) to the extent any condemnation awards shall have been received by Contributor prior to the Closing, remit to Partnership the full amount thereof so collected, less, in each such case, (i) reasonable costs of collection thereof, and (ii) amounts, if any, applied by Contributor prior to Closing to the preservation, repair or restoration of the Property. (c) If prior to the Closing Date, the Property, or any portion thereof, is the subject of a Taking (other than a Substantial Taking), this Agreement shall nevertheless remain in full force and effect with no abatement of the consideration to be delivered to Contributor on account thereof and Partnership shall nevertheless acquire the Property or remaining balance thereof pursuant to the provisions hereof. In such event, any condemnation awards shall be applied and paid in the same manner and subject to the same provisions set forth above as are applicable in a case of a Substantial Taking as to which Partnership has elected nevertheless to continue this Agreement in effect. IX.2 Adjustment of Claims and Condemnation Proceedings. If a Taking shall occur and otherwise participate in condemnations brought against Contributor, Contributor shall initiate all actions required to adjust, compromise and collect the awards payable by the condemning authority. Partnership shall have the right (but not the obligation) to participate with Contributor in the initiation of all such actions and, in any event, Contributor shall consult with, and keep Partnership advised of, Contributor's progress in connection therewith. Contributor shall not agree to any settlement of the awards payable in connection with any such Taking (or enter into any agreement in lieu of a Taking) without Partnership's approval, which approval shall not be unreasonably withheld or delayed. ARTICLE X Miscellaneous X.1 Survival. The representations and warranties of Contributor and of Partnership set forth herein and in the Closing Documents shall survive Closing for a period of twelve (12) months. X.2 Notices. Notices must be in writing and sent to the party to whom or to which such notice is being sent, by (a) certified or registered mail, postage prepaid and return receipt requested, (b) commercial overnight courier service, or (c) delivered by hand with receipt acknowledged in writing, as follows: 15 17 To Partnership: GGP Limited Partnership 110 North Wacker Drive Chicago, Illinois 60606 Attention: Bernard Freibaum To Contributor: General Growth Companies, Inc. 110 North Wacker Drive Chicago, Illinois 60606 Attention: Matthew Bucksbaum All notices (i) shall be deemed given when received or, if mailed as described above with appropriate postage, after 5 business days and (ii) may be given either by a party or by such party's attorneys. The cost of delivery shall be borne by the party delivering the notice. X.3 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute a single document when at least one counterpart has been executed and delivered by each party hereto. X.4 Amendments. Except as otherwise provided herein, this Agreement may not be changed, modified, supplemented or terminated, except by an instrument executed by the party hereto which is or will be affected by the terms of such change, modification, supplement or termination. X.5 Waiver. Each party shall have the right exercisable in its sole and absolute discretion, but under no circumstances shall be obligated, to waive or defer compliance by any other party with its obligations hereunder or to waive satisfaction of any conditions contained herein for its benefit. No waiver by any party of a breach of any covenant or a failure to satisfy any condition shall be deemed a waiver of any other or subsequent breach or failure to satisfy any other condition. All waivers of any term, breach or condition hereof must be in writing. X.6 Successors and Assigns. Subject to the provisions of Section 10.10, the terms, covenants, agreements, conditions, representations and warranties contained in this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. X.7 Third Party Beneficiaries. The provisions of this Agreement are made for the benefit of the parties hereto and their respective successors in interest and assigns and are not intended for, and may not be enforced by, any other person or entity. X.8 Partial Invalidity. If any term or provision of this Agreement or the application thereof 16 18 to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law. X.9 Governing Law. This Agreement has been made pursuant to and shall be governed by the laws of the State of Kentucky (without regard to conflicts of law rules). X.10 Assignment. This Agreement may not be assigned or delegated by any party without the written consent of the other except that Partnership may assign this Agreement to an Affiliate of Partnership, it being acknowledged and agreed by Partnership that no such assignment shall relieve Partnership of its obligations under this Agreement. X.11 Headings; Exhibits. The headings or captions of the various Articles and Sections of this Agreement have been inserted solely for purposes of convenience, are not part of this Agreement and shall not be deemed in any manner to modify, explain, expand or restrict any of the provisions of this Agreement. X.12 Gender and Number. Words of any gender shall include the other gender and the neuter. Whenever the singular is used, the same shall include the plural wherever appropriate, and whenever the plural is used, the same also shall include the singular where appropriate. X.13 Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes any prior written or oral understandings and/or agreement among them with respect thereto. X.14 Costs of Enforcement. In the event that any action is brought by any party or parties to this Agreement against any other party or parties to enforce rights under this Agreement, the prevailing party's or parties' costs in such action, including reasonable attorneys' fees, shall be paid by the other party or parties. Any amounts owing hereunder which are not paid when due shall bear interest at the per annum rate equal to the prime rate of Bank of America Illinois, N.A. (or any successor), as the same may change from time to time, plus four percent. X.15 Time of the Essence. Time is of the essence with regard to each provision of this Agreement. If the final date of any period provided for herein for the performance of an obligation or for the taking of any action falls on a Saturday, Sunday or banking holiday, then the time of that period shall be deemed extended to the next day which is not a Sunday, Saturday or banking holiday. Each and every day described herein shall be deemed to end at 5:00 p.m. Central Standard Time. 17 19 IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto on the day and year first above written. Contributor: Partnership: GENERAL GROWTH COMPANIES, INC. GGP LIMITED PARTNERSHIP, a Delaware corporation a Delaware limited partnership By: General Growth Properties, Inc., a Delaware corporation, its general partner By: By: Name: Name: Title: Title: 18 EX-23 3 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 333-11067, 333-15907, 333-17021, 333-23035, 333-37247, 333-37383, 333-41603, 333-58045, 333-68505, 333-76379, 333-76757, 333-82569, 333-84419, 333-88813, 333-88819 and 333-91621) and the Registration Statements on Form S-8 (File Nos. 33-79372, 333-07241, 333-11237, 333-28449, 333-74461 and 333-79737) of General Growth Properties, Inc. of our report dated February 8, 2000 relating to the consolidated financial statements, which appears in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 8, 2000 relating to the financial statement schedule, which appears in this Form 10-K. Chicago, Illinois PricewaterhouseCoopers LLP March 14, 2000 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S FINANCIAL STATEMENTS INCLUDED IN ITS REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH REPORT. 1,000 12-MOS DEC-31-1999 DEC-31-1999 25,593 0 84,123 0 0 0 5,088,997 376,673 4,954,895 0 3,119,534 337,500 0 5,170 1,284,298 4,954,895 612,342 612,342 0 314,537 0 4,425 169,502 114,921 0 114,921 0 13,796 0 101,125 2.01 2.00
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