-----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, FJa9DbOw3MxCcJs27wal5AOBYNUrRQ4/zsGyHGZQlWBj04ZZ7dP+xs7h3TLlprYJ uUJpFlJdA8JAK690zJfauw== /in/edgar/work/20000811/0000950137-00-003644/0000950137-00-003644.txt : 20000921 0000950137-00-003644.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950137-00-003644 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL GROWTH PROPERTIES INC CENTRAL INDEX KEY: 0000895648 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 421283895 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11656 FILM NUMBER: 695336 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-Q 1 e10-q.txt QUARTERLY REPORT 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 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) N / A (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- The number of shares of Common Stock, $.10 par value, outstanding on August 9, 2000 was 52,100,760. 2 GENERAL GROWTH PROPERTIES, INC. ------------------------------- INDEX ----- PAGE NUMBER ------ PART I FINANCIAL INFORMATION Item 1: Financial Statements Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999............... 3 Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2000 and 1999............................ 4 Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and 1999......... 5 Notes to Consolidated Financial Statements.............. 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations........... 21 Liquidity and Capital Resources of the Company.......... 24 Item 3: Quantitative and Qualitative Disclosures about Market Risk............................................. 27 PART II OTHER INFORMATION. Item 4: Submission of Matters to a Vote of Security Holders.................................. 28 Item 6: Exhibits and Reports on Form 8-K.................. 28 SIGNATURES................................................. 29 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS JUNE 30, 2000 AND DECEMBER 31, 1999 (UNAUDITED) (Dollars in thousands, except for per share amounts) ASSETS ------ JUNE 30, DECEMBER 31, 2000 1999 ----------- ----------- Investment in real estate: Land $ 650,216 $ 640,276 Buildings and equipment 3,836,573 3,664,832 Less accumulated depreciation (432,339) (376,673) Developments in progress 22,856 21,443 ----------- ----------- Net property and equipment 4,007,306 3,949,878 Investments in Unconsolidated Real Estate Affiliates 695,463 666,074 Mortgage note receivable - 31,065 ----------- ----------- Net investment in Real Estate 4,772,769 4,647,017 Cash and cash equivalents 40,263 25,593 Tenant accounts receivable, net 74,007 84,123 Deferred expenses, net 99,438 93,536 Investment in and note receivable from General Growth Management, Inc. 62,400 65,307 Prepaid expenses and other assets 31,204 39,319 ----------- ----------- $ 5,080,081 $ 4,954,895 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Mortgage notes and other debt payable $ 3,100,835 $ 3,119,534 Distributions payable 44,271 42,695 Accounts payable and accrued expenses 152,491 170,868 ----------- ----------- 3,297,597 3,333,097 ----------- ----------- Minority interests 527,340 356,540 ----------- ----------- Commitments and contingencies - - Preferred Stock: $100 par value; 5,000,000 shares authorized; 345,000 designated as PIERS (Note 1) which are convertible and carry a $1,000 liquidation value, 337,500 of which were issued and outstanding at June 30, 2000 and December 31, 1999 337,500 337,500 Stockholders' Equity: Common stock: $.10 par value; 210,000,000 shares authorized; 52,000,641 and 51,697,425 shares issued and outstanding as June 30, 2000 and December 31, 1999, respectively 5,200 5,170 Additional paid-in capital 1,204,085 1,199,921 Retained earnings (deficit) (281,267) (272,199) Notes receivable-common stock purchases (8,660) (3,420) Accumulated equity in other comprehensive loss of unconsolidated affiliate (1,714) (1,714) ----------- ----------- Total stockholders' equity 917,644 927,758 ----------- ----------- $ 5,080,081 $ 4,954,895 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. . 3 of 27 4 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED) (Dollars in thousands, except for per share amounts) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2000 1999 2000 1999 ---------- --------- ---------- ---------- Revenues: Minimum rents $ 105,276 $ 86,698 $ 207,278 $ 170,471 Tenant recoveries 53,256 40,764 105,651 82,896 Overage rents 3,116 5,326 5,786 9,187 Other 1,637 2,216 5,360 4,661 Fee income 1,741 912 3,434 2,961 ---------- --------- ---------- ---------- Total revenues 165,026 135,916 327,509 270,176 ---------- --------- ---------- ---------- Expenses: Real estate taxes 12,488 11,504 25,068 23,350 Management fees to affiliate 1,628 1,300 3,960 2,600 Property operating 36,868 31,624 77,301 62,763 Provision for doubtful accounts 56 1,161 178 2,198 General and administrative 1,593 1,596 3,022 3,097 Depreciation and amortization 32,355 25,753 61,758 50,768 ---------- --------- ---------- ---------- Total expenses 84,988 72,938 171,287 144,776 ---------- --------- ---------- ---------- Operating income 80,038 62,978 156,222 125,400 Interest expense, net (51,289) (37,270) (99,274) (76,357) Equity in net income(loss) of unconsolidated affiliates 8,998 4,523 17,479 8,733 Gain on sales 44 2,977 44 2,977 Income before extraordinary items and allocation to minority interests 37,791 33,208 74,471 60,753 Income allocated to minority interests (9,841) (8,793) (18,280) (13,009) ---------- --------- ---------- ---------- Income before extraordinary items 27,950 24,415 56,191 47,744 Extraordinary items - - - (8,693) ---------- --------- ---------- ---------- Net income 27,950 24,415 56,191 39,051 ---------- --------- ---------- ---------- Convertible Preferred Stock Dividends (6,177) (6,117) (12,234) (12,234) ---------- --------- ---------- ---------- Net income available to common stockholders $ 21,833 $ 18,298 $ 43,957 $ 26,817 ========== ========= ========== ========== Earnings before extraordinary items per share-basic $ 0.42 $ 0.44 $ 0.85 $ 0.87 ========== ========= ========== ========== Earnings before extraordinary items per share-diluted $ 0.42 $ 0.44 $ 0.85 $ 0.87 ========== ========= ========== ========== Earnings per share-basic $ 0.42 $ 0.44 $ 0.85 $ 0.66 ========== ========= ========== ========== Earnings per share-diluted $ 0.42 $ 0.44 $ 0.85 $ 0.65 ========== ========= ========== ========== Distributions declared per share $ 0.51 $ 0.49 $ 1.02 $ 0.98 ========== ========= ========== ========== Net income $ 27,950 $ 24,415 $ 56,191 $ 39,051 Other Comprehensive income (loss): Equity in unrealized income/(loss) on available-for-sale securities of unconsolidated affiliate, net of minority interest - - - - ========== ========= ========== ========== Comprehensive income $ 27,950 $ 24,415 $ 56,191 $ 39,051 ========== ========= ========== ========== The accompanying notes are an integral part of these consolidated financial statements 4 of 29 5 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED) (Dollars in thousands, except for per share amounts) SIX MONTHS ENDED JUNE 30, 2000 1999 ---------- ---------- Cash flows from operating activities: Net Income $ 56,191 $ 39,051 Adjustments to reconcile net income to net cash provided by operating activities: Minority interests 18,280 13,009 Extraordinary items - 8,693 Equity in net income of unconsolidated affiliates (17,479) (8,733) Provision for doubtful accounts 178 2,198 Distributions received from unconsolidated affiliates 16,205 14,148 Depreciation 55,666 48,272 Amortization 6,092 2,495 Gain on sales (44) (2,977) Net Changes: Tenant accounts receivable 9,938 (3,520) Prepaid expenses and other assets 8,115 (2,456) Accounts payable and accrued expenses (18,377) (1,283) ---------- ---------- Net cash provided by (used in) operating activities 134,765 108,897 ---------- ---------- Cash flows from investing activities: Acquisition/development of real estate and improvements and additions to properties (105,179) (165,487) Deposit on Ala Moana Center - (16,200) Increase in investments in unconsolidated affiliates (60,930) (381) Change in notes receivable from General Growth Management, Inc. 2,986 (14,643) Distributions received from unconsolidated affiliates 32,737 11,557 Increase in deferred expenses (11,827) (6,589) ---------- ---------- Net cash provided by (used in) investing activities (142,213) (191,743) ---------- ---------- Cash flows from financing activities: Cash distributions paid to common stockholders (52,964) (37,466) Cash distributions paid to Operating Partnership Unitholders (20,198) (19,021) Payment of dividends on PIERS (12,234) (12,234) Proceeds from exercised options 1,203 760 Proceeds from sale of common stock, net of issuance costs 1,145 (74) Proceeds from issuance of RPU's, net of issuance costs 170,625 - Proceeds from issuance of mortgage/other notes payable 209,606 292,000 Principal payments on mortgage notes and other debt payable (274,897) (141,134) Penalty on retirement of debt - (38) Increase in deferred expenses (168) (972) ---------- ---------- Net cash provided by (used in) financing activities 22,118 81,821 ---------- ---------- Net change in cash and cash equivalents 14,670 (1,025) Cash and cash equivalents at beginning of year 25,593 19,630 ---------- ---------- Cash and cash equivalents at end of period $ 40,263 $ 18,605 ========== ========== Supplemental disclosure of cash flow information Interest paid $ 113,670 $ 91,196 Interest capitalized 9,382 8,027 Non-cash investing and financing activities: Common stock issued in exchange for Operating Partnership Units 418 170 Common stock issued in exchange for GGP/Homart stock - 90,511 Operating Partnership Units issued as consideration for purchase of land 215 - Penalty on retirement of debt - 8,655 Notes receivable issued for exercised stock options 6,360 - Assumption and conversion of notes in conjunction with acquisition of property 77,657 - The accompanying notes are an integral part of these consolidated financial statements 5 of 29 6 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) NOTE 1 ORGANIZATION Readers of this quarterly report should refer to the Company's audited financial statements for the year ended December 31, 1999 which are included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (Commission File No. 1-11656) dated March 14, 2000, as certain footnote disclosures which would substantially duplicate those contained in such audited financial statements have been omitted from this report. Capitalized terms used but not defined in this quarterly report have the same meanings as in the Company's 1999 Annual Report on Form 10-K. GENERAL General Growth Properties, Inc., a Delaware corporation ("General Growth"), was formed in 1986 to own and operate regional mall shopping centers. All references to the "Company" in these Notes to Consolidated Financial Statements include General Growth and those entities owned or controlled by General Growth (including the Operating Partnership and the LLC as described below), unless the context indicates otherwise. Proceeds from General Growth's April 15, 1993 initial public offering of common stock (the "Common Stock") 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, which commenced operations on April 15, 1993. As of June 30, 2000, the Company owned 100% of fifty-three regional shopping centers (the "Wholly-Owned Centers"); 50% of the stock of GGP/Homart, Inc. ("GGP/Homart"), 50% of the membership interest in GGP/Homart II L.L.C. ("GGP/Homart II"), 51% of the stock of GGP Ivanhoe, Inc. ("GGP Ivanhoe"), 51% of the stock of GGP Ivanhoe III, Inc. ("GGP Ivanhoe III") and 50% of Quail Springs Mall and Town East Mall (collectively the "Unconsolidated Real Estate Affiliates"); and a 100% non-voting preferred stock interest representing 95% of the equity interest in General Growth Management, Inc. ("GGMI"). As of such date, GGP/Homart owned interests in twenty-three shopping centers (the "Homart 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 owned 100% of eight shopping centers. Together, the Wholly-Owned Centers and the centers owned by the Unconsolidated Real Estate Affiliates comprise the "Company Portfolio" or the "Portfolio Centers". 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"). The Depositary Shares are convertible at any time, at the option of the holder, into shares of Common Stock at the conversion price of $39.70 per share of Common Stock. 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. 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 6 of 29 7 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) 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 2). 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 General Growth. A maximum of 500,000 shares of Common Stock is reserved for issuance under the ESPP. Under the ESPP, eligible employees make payroll deductions over a six-month purchase period at which time the amounts withheld are used to purchase shares of Common Stock at a purchase price equal to 85% of the lesser of the closing price of a share of Common Stock on the first trading day of the purchase period or the last trading day of the purchase period. The first purchase period under the ESPP 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. On July 1, 2000 41,423 shares of Common Stock were sold to ESPP participants at a price of $23.75 per share. In addition, effective January 1, 2000, General Growth established a Dividend Reinvestment and Stock Purchase Plan ("DRSP"). General Growth has reserved for issuance up to 1,000,000 shares of Common Stock for issuance under the DRSP. The DRSP will, in general, allow participants in the Plan to make purchases of Common Stock from dividends received or additional cash investments. Although the purchase price of the Common Stock will be determined by the current market price, the purchases will be made without fees or commissions. General Growth will satisfy DRSP Common Stock purchase needs through the issuance of new shares of Common Stock or by repurchases of currently outstanding Common Stock. As of June 30, 2000, an aggregate of 10,765 shares of Common Stock have been issued under the DRSP. During May 2000, the Operating Partnership formed GGPLP L.L.C., a Delaware limited liability company ("the LLC") by contributing its interest in a portfolio of 44 Wholly-Owned regional shopping centers to the LLC in exchange for all of the common units of membership interest in the LLC. On May 25, 2000, a total of 700,000 redeemable preferred units of membership interest in the LLC (the "RPUs") were issued to an institutional investor by the LLC, which yielded approximately $170,625 in net proceeds to the Company. The net proceeds of the sale of the RPUs were used to repay a portion of the Company's unsecured debt. Holders of the RPUs are entitled to receive cumulative preferential cash distributions per RPU (included in distributions payable at June 30, 2000) at a per annum rate of 8.95% of the $250 liquidation preference thereof (or $5.59375 per quarter) prior to any distributions by the LLC to the Operating Partnership. Subject to certain limitations, the RPUs may be redeemed in cash by the LLC at any time on or after May 25, 2005 for the liquidation preference amount plus accrued and unpaid distributions and may be exchanged by the holders of the RPUs on or after May 25, 2010 for an equivalent amount of a newly created series of redeemable preferred stock of General Growth. Such preferred stock would provide for an equivalent 8.95% annual preferred distribution and would also be redeemable by the Company for cash equal to the liquidation preference amount plus accrued and unpaid distributions. The RPUs have been reflected in the accompanying consolidated financial statements as a component of minority interest at the current total liquidation preference amount of $175,000. As of June 30, 2000, General Growth 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 7 of 29 8 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) 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 addition, in order to enable General Growth to comply with its obligations in respect to the PIERS, General Growth owns preferred units of limited partnership interest in the Operating Partnership (the "Preferred Units") 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 June 30, 2000, 100% of the Preferred Units (337,500) were owned by General Growth. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of the Company and the Operating Partnership consisting of the fifty-three centers (including those owned by the LLC) 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 inter-company balances and transactions have been eliminated. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the financial position of the Company as of June 30, 2000 and the results of operations for the three and six months ended June 30, 2000 and 1999 and cash flows for the six months ended June 30, 2000 and 1999 have been included. Certain amounts in the 1999 consolidated financial statements have been reclassified to conform to the 2000 presentation. EARNINGS PER SHARE ("EPS") Basic per share amounts are based on the weighted average of common shares outstanding of 51,941,744 for 2000 and 40,861,764, for 1999. Diluted per share amounts are based on the total number of weighted average common shares and dilutive securities (stock options) outstanding of 51,974,500 for 2000 and 41,001,796 for 1999. 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 three and six months ended June 30, 2000 and 1999 and therefore has been excluded. 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 306,141 and 258,595 shares of Common Stock pursuant to General Growth's stock option plans which were granted on May 23, 2000 and March 25, 1999, respectively, have not been included in the computation of diluted EPS because the conditions which must be satisfied prior to the issuance of any such shares under such plans were not achieved during the applicable periods. 8 of 29 9 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) The following are the reconciliations of the numerators and denominators of the basic and diluted EPS. THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 2000 1999 2000 1999 ---------- --------- ---------- ---------- Numerators: Income before extraordinary items $ 27,950 $ 24,415 $ 56,191 $ 47,744 Dividends on PIERS (6,117) (6,117) (12,234) (12,234) ---------- --------- ---------- ---------- Income available to common shareholders before extraordinary items - for basic and diluted EPS 21,833 18,298 43,957 35,510 Extraordinary Items - - - (8,693) ---------- --------- ---------- ---------- Net income available to common shareholders - for basic and diluted EPS $ 21,833 $ 18,298 $ 43,957 $ 26,817 ========== ========= ========== ========== Denominators: Weighted average common shares outstanding (in thousands) - for basic EPS 51,965 41,638 51,942 40,862 Effect of dilutive securities - options 46 138 33 140 ---------- --------- ---------- ---------- Weighted average common shares outstanding (in thousands) - for diluted EPS 52,011 41,776 51,975 41,002 ========== ========= ========== ========== NOTES RECEIVABLE - OFFICERS In April, May and September, 1998 certain officers of the Company issued to the Company an aggregate of $3,164 of promissory notes in connection with their exercise of options to purchase an aggregate of 166,000 shares of the Company's Common Stock. During 1999, the Company received approximately $62 in payments, made advances of approximately $380 in conjunction with additional advances and Common Stock purchases by such officers and forgave approximately $64 in principal and accrued interest on such notes. During the first quarter of 2000, the Company made an advance of $5,240 in conjunction with an exercise of options to purchase 200,000 shares of Common Stock by one of such officers. During the second quarter of 2000, the Company made an advance of $1,120 to another officer of the Company in conjunction with an exercise of options to purchase 40,000 shares of Common Stock by such officer. The $1,120 advance was repaid in June 2000. Also in 2000, the Company forgave approximately $150 of other notes receivable from an officer (previously reflected in prepaid expenses and other assets). The notes, which bear interest at a rate computed as a formula of a market rate, are collateralized by the shares of Common Stock issued upon exercise of such options, provide for quarterly payments of interest and are payable to the Company on demand. REVENUE RECOGNITION Minimum rent revenues are recognized on a straight-line basis over the term of the related leases. Overage rents are recognized on an accrual basis (see Note 8). 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 (including amounts recognized as receivable due to the recognition of minimum rents on a straight-line basis as described above) which is estimated to be 9 of 29 10 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) uncollectible. Such allowances are reviewed periodically based upon the recovery experience of the Company. 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 material available-for-sale securities, one of its unconsolidated affiliates received common stock of Simon Property Group, Inc. as part of a 1998 transaction. Holding gains or losses on such securities through June 30, 1999 were not significant and were not reflected. However, at December 31, 1999 the Company reduced its carrying amount for its investment in such unconsolidated affiliate by $2,436 and reflected $1,714 as other comprehensive loss, net of minority interest of $722, as its equity in such unconsolidated affiliate's cumulative unrealized holding loss on such securities. For the three and six months ended June 30, 2000 there were nominal holding losses on such securities which have not been reflected. BUSINESS SEGMENT INFORMATION The Financial Accounting Standards Board (the "FASB") has issued Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("Statement 131"). 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 owning and operating shopping centers. General Growth evaluates operating results and allocates resources on a property-by-property basis and does not distinguish or group its consolidated operations on a geographic basis. Accordingly, General Growth has determined 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. NOTE 2 PROPERTY ACQUISITIONS AND DEVELOPMENTS WHOLLY-OWNED PROPERTIES 2000 On April 26, 2000, the Company acquired a 100% interest in Crossroads Center in St. Cloud (Minneapolis), Minnesota for a purchase price of approximately $80,000 as further described in Note 6. 1999 On January 11, 1999, the Company acquired a 100% ownership interest in The Crossroads Mall in Kalamazoo, Michigan. The aggregate purchase price was approximately $68,000 (subject to pro-rations and certain adjustments), which was 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. 10 of 29 11 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) 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 (Note 4). On October 28, 1999, the Company acquired Baybrook Mall in Houston, Texas. The aggregate consideration paid by the Company was approximately $133,000 (subject to pro-rations and certain adjustments), which was paid in cash (raised primarily through new long-term financing on other previously unsecured properties), and a new 10-year $95,000 non-recourse loan. The Company financed the forgoing acquisitions through a combination of secured and unsecured debt and the proceeds of the 1999 Offering as described in Note 1. All acquisitions completed through June 30, 2000 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. DEVELOPMENTS During 2000 and 1999, the Company was developing or had completed construction at two development sites: Grandville (Grand Rapids), Michigan and Frisco (Dallas), Texas. Construction of the RiverTown Crossings Mall, a Wholly-Owned Center located in Grandville (Grand Rapids), Michigan, commenced in December 1997, and opened in November 1999. Construction of Stonebriar Centre, owned by GGP/Homart II, located in Frisco (Dallas), Texas commenced in October of 1999 and opened as scheduled on August 4, 2000. During 1999, the Company formed a joint venture to develop a regional mall in Westlake (Dallas), Texas. As of June 30, 2000, the Company has invested approximately $13,567 in the joint venture. In addition, the Company is currently obligated to fund pre-development costs (estimated to be approximately $1,545, a major portion 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, including sites in Toledo, Ohio and West Des Moines, Iowa, but there can be no assurance that development of these sites will proceed. 11 of 29 12 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) NOTE 3 INVESTMENTS IN UNCONSOLIDATED AFFILIATES GGP/HOMART The Company currently owns 50% of GGP/Homart with the remaining ownership interest held by an institutional investor. At June 30, 2000, GGP/Homart owned interests in twenty-three regional shopping malls, six of which were owned jointly with venture partners. During 2000, GGP/Homart purchased its venture partner's interest in Lakeland Square (Lakeland, Florida). During 1999, GGP/Homart purchased its venture partner's interest in the Parks at Arlington (Arlington (Dallas), Texas). GGP/Homart has elected real estate investment trust status for income tax purposes. The Company shares in the profits and losses, cash flows and other matters relating to GGP/Homart in accordance with its ownership percentage. The 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. During 1999, the Company received notice that one of the institutional investors (holding 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 additional 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 ("NYSCRF"), the Company's co-investor in GGP/Homart, formed GGP/Homart II, a Delaware limited liability company which is owned equally by the Company and NYSCRF. 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 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 NYSCRF. 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 is accounting for GGP/Homart II using the equity method. GGP IVANHOE III In 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 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. In 1999, GGP Ivanhoe III acquired Oak View Mall in Omaha, Nebraska and Eastridge Shopping Mall in San Jose, California. 12 of 29 13 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) GGP Ivanhoe III, which has elected to be taxed as a REIT, is owned 51% by the Company and 49% by a joint venture partner. The joint venture partner in GGP Ivanhoe III is an affiliate of Ivanhoe Inc. of Montreal, Quebec, Canada ("Ivanhoe") and 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 stockholder's 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 current or former 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 June 30, 2000, 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 at 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. 13 of 29 14 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) SUMMARIZED INCOME STATEMENT INFORMATION OF UNCONSOLIDATED REAL ESTATE AFFILIATES The following is summarized income statement information of Unconsolidated Real Estate Affiliates of the Company for the three and six months ended June 30, 2000 and 1999. THREE MONTHS ENDED SIX MONTHS ENDED JUNE JUNE 2000 1999 2000 1999 ---------- --------- ---------- ---------- Revenues Tenant rents $ 137,351 $ 92,913 $ 270,364 $ 180,161 Fees and other revenues - - - - ---------- --------- ---------- ---------- Total Revenues 137,351 92,913 270,364 180,161 ---------- --------- ---------- ---------- Operating expenses 56,874 38,977 89,215 72,684 Depreciation and amortization 25,816 14,919 75,934 31,306 ---------- --------- ---------- ---------- Operating Income 54,661 39,017 105,215 76,171 Interest expense, net (34,201) (25,793) (68,036) (49,725) Equity in net income of unconsolidated real estate affiliates 1,469 1,447 2,701 2,996 Gain (loss) on property sales - (158) 183 653 Income allocated to minority interest (63) (202) (151) (341) ---------- --------- ---------- ---------- Net Income $ 21,866 $ 14,311 $ 39,912 $ 29,754 ========== ========= ========== ========== NOTE 4 MORTGAGE NOTES AND OTHER DEBTS PAYABLE Mortgage notes and other debts payable at June 30, 2000 and December 31, 1999 consisted of the following: JUNE 30, 2000 DECEMBER 31, 1999 Fixed-Rate debt Mortgage notes payable $ 1,765,758 $ 1,724,854 Variable-Rate debt Mortgage notes payable 1,135,077 1,234,680 Credit Facility and bank loan 200,000 160,000 ------------ ------------- Total Variable-Rate debt 1,335,077 1,394,680 ------------ ------------- Total $ 3,100,835 $ 3,119,534 ============ ============= 14 of 29 15 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) FIXED RATE DEBT MORTGAGE NOTES PAYABLE Mortgage notes payable consist primarily of fixed rate non-recourse notes collateralized by individual or groups of properties. 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. VARIABLE RATE DEBT MORTGAGE NOTES PAYABLE Variable mortgage notes payable consist primarily of the approximate $97,500 outstanding on the construction loan collateralized by Rivertown Crossings as described below, approximately $130,000 of non-recourse financing collateralized by a pool of six wholly-owned properties and approximately $858,800 of collateralized mortgage-backed securities, as described below. The remaining loans are generally short term in nature and bear interest at a rate per annum equal to LIBOR (6.1325% at June 30, 2000) plus 90 to 185 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 a portfolio of eight regional mall shopping centers (the "MEPC Portfolio"). 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. Shortly after the initial acquisition loan funding, the Company obtained from the lender an option to allow the extension of this loan at maturity at the lender's then current rates. During 1999 however, 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 at maturity. Such notification obligated the Company to pay $8,655 to the lender as a loan prepayment fee which has been reflected in extraordinary items for the six months ended June 30, 1999. The remaining MEPC Acquisition Financing was repaid in 1999 with other secured financing and approximately $441,000 of the proceeds of the GGP-Ivanhoe CMBS 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. 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 limits the maximum interest rate the Company will be required to pay on the securities to 9% per annum. Payments received pursuant to the interest rate cap agreement for the six months ended June 30, 2000 were approximately $6.6, which were reflected as a reduction in net interest expense. In September 1999, the Company issued $700,229 of commercial mortgage backed securities cross-collateralized and cross-defaulted by a portfolio of nine regional malls and an office complex adjacent to one of the regional malls. The securities (the "GGP-Ivanhoe CMBS") are comprised of notes which bear interest at rates per annum ranging from LIBOR plus 52 basis points to LIBOR 15 of 29 16 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) 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 limits the maximum interest rate the Company will be required to pay on the securities to 9.03% per annum. Payments received pursuant to the interest rate cap agreement for the six months ended June 30, 2000 were approximately $97, which were reflected as a reduction in net interest expense. The $392,000 interim loan collateralized by the USPPI portfolio 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 other interim financing proceeds 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 was originally scheduled to mature on July 31, 2000. On June 23, 2000, the Company prepaid all remaining outstanding principal amounts and terminated the Credit Facility. The Credit Facility bore interest at a floating rate per annum equal to LIBOR plus 80 to 120 basis points depending upon the Company's leverage ratio. The Credit Facility was subject to financial performance covenants including debt-to-market capitalization, minimum earnings before interest, taxes, depreciation and amortization ("EBITDA") ratios and minimum equity values. On July 31, 2000 the Company obtained a new unsecured revolving credit facility (the "Revolver") in a maximum aggregate principal amount of $135,000. The Company's initial draw under the Revolver was $130,000. The Revolver has a maturity of July 31, 2003 and bears interest at a floating rate per annum equal to LIBOR plus 100 to 190 basis points, depending on the Company's average leverage ratio. The Revolver is subject to financial performance covenants including debt to value and net worth ratios, EBITDA ratios and minimum equity values. INTERIM FINANCING In January 1999, the Company obtained an additional $30,000 unsecured bank loan, which bore interest at a floating market rate (average rate equal to 6.46% per annum). The Company had obtained in November 1998 a thirteen-month loan in the principal amount of $55,000 collateralized by a negative pledge (i.e., the promise not to encumber) of Coastland Center. 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 (7.49% at June 30, 1999) interim loan which was originally scheduled to mature June 1, 1999. During May 1999, the Company obtained a new $45,000 mortgage loan collateralized by The Crossroads Mall. The loan partially repaid the interim loan and the remaining balance, approximately $38,655, was extended and repaid in October 1999 with a portion of the proceeds of a six property $130,000 two-year non-recourse mortgage pool financing. In April 1999, the Company obtained an additional $25,000 bank loan, partially secured by Park Mall in Tucson, Arizona. In October 1999, the loan was increased to $50,000. The loan matures September 1, 2000, bears interest at a rate per annum of LIBOR plus 175 basis points and is expected to be replaced by maturity with a $90,000 construction loan facility to be secured by Park 16 of 29 17 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) Mall which is currently undergoing extensive renovation, with the final phase of renovation expected to be completed in 2001. In January 2000, the Company obtained a new $200,000 unsecured short-term bank loan. The Company's initial draw under this loan was $120,000 in January, 2000 and the remaining available amounts were fully drawn at June 30, 2000. Loan proceeds were used to fund ongoing redevelopment projects and repay the remaining balance of $83,000 on an interim loan obtained in September 1999. The bank loan bore interest at a rate per annum of LIBOR plus 150 basis points and was refinanced on August 1, 2000 with the Revolver and the term loan described below. On August 1, 2000, the Company obtained an unsecured bank term loan (the "Term Loan") of $100,000. Term Loan proceeds were used to fund ongoing redevelopment projects and repay a portion of the remaining balance of the bank loan described above. The Term Loan has a maturity of July 31, 2003 and bears interest at a rate per annum of LIBOR plus 100 to 170 basis points depending on the Company's average leverage ratio. CONSTRUCTION LOAN During April 1999 the Company received $30,000 representing the initial loan draw on an $110,000 construction loan facility. The facility is secured by and will provide financing for the RiverTown Crossings Mall development (including outparcel development) in Grandville (Grand Rapids), Michigan. The construction loan provides for periodic funding as construction and leasing continues which currently bear interest at a rate per annum of LIBOR plus 150 basis points. As of June 30, 2000 additional loan draws of approximately $67,500 had been made and the final $12,500 was drawn on the loan in July 2000. Interest is due monthly but during 1999 were added to the periodic loan draws. The loan matures on June 29, 2001 and the Company currently intends to refinance the loan at or prior to maturity with a non-recourse long-term mortgage loan. LETTERS OF CREDIT As of June 30, 2000 and December 31, 1999, the Operating Partnership had outstanding letters of credit of $7,934, primarily in connection with special real estate assessments and insurance requirements. In addition at June 30, 2000 the Company has a letter of credit of approximately $30,925 related to the funding of the Ala Moana CMBS and pending construction projects at the Ala Moana Center. NOTE 5 DISTRIBUTIONS PAYABLE The following is a chart of the previous common and preferred distributions for the Company paid in 1999 and 2000. As described in Note 1, General Growth's preferred stock dividends to its preferred stockholders were in the same amount as the Operating Partnership's distributions to General Growth on the same dates with respect to the Preferred Units held by General Growth. 17 of 29 18 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) COMMON DISTRIBUTIONS - ------------------------------------------------------------------------------- GENERAL OPERATING GROWTH PARTNERSHIP DECLARATION AMOUNT PER RECORD PAYMENT STOCKHOLDERS LIMITED PARTNERS DATE SHARE DATE DATE AMOUNT AMOUNT ---- ----- ---- ---- ------ ------ 06/14/00 $ 0.51 07/06/00 07/31/00 $ 26,541 $ 10,090 03/22/00 0.51 04/06/00 04/28/00 26,483 10,101 12/13/99 0.51 01/06/00 01/31/00 26,481 10,097 09/22/99 0.49 10/05/99 10/29/99 25,322 9,701 06/18/99 0.49 07/02/99 07/30/99 19,651 9,712 03/18/99 0.49 04/05/99 04/30/99 19,136 9,712 12/17/98 0.47 01/06/99 01/29/99 18,330 9,309 PREFERRED DISTRIBUTIONS ---------------------------------------------- RECORD PAYMENT AMOUNT PER DATE DATE SHARE ---- ---- ----- 07/06/00 07/14/00 $0.4531 04/06/00 04/14/00 0.4531 01/06/00 01/14/00 0.4531 10/05/99 10/15/99 0.4531 07/02/99 07/15/99 0.4531 04/05/99 04/15/99 0.4531 01/06/99 01/15/99 0.4531 NOTE 6 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 Operating Partnership and the Company ("St. Cloud Mall"), was granted an option to acquire the property in 2002. The loan had a scheduled maturity of June 1, 2004 which was accelerated in February 2000 to April 28, 2000. In conjunction with the maturity date modification, a put option agreement was executed which would permit the borrower (after March 15, 2000) to require St. Cloud Mall to purchase the property. In addition, St. Cloud Mall's purchase option was advanced to April 2000. On March 15, 2000 the borrower notified St. Cloud Mall of the exercise of the put option. Pursuant to the put option agreement, on April 26, 2000, St. Cloud Mall purchased the property at a price equal to approximately $2,000 plus the then outstanding balances of the first mortgage (approximately $46,600) and St. Cloud Funding's second mortgage. NOTE 7 COMMITMENTS AND CONTINGENCIES In the normal course of business, from time to time, the Company is involved in legal actions relating to the ownership and operations of its properties. In management's opinion, the liabilities if any, that 18 of 29 19 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) may ultimately result from such legal actions are not expected to have a materially adverse effect on the consolidated financial position, results of operations or liquidity of the Company. The Company periodically enters 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 of the project. NOTE 8 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In May, 1998, the Emerging Issues Task Force ("EITF") of the FASB issued a consensus opinion entitled "Accounting for Contingent Rent in Interim 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 overage rents based on the prorated annual overage rent estimated to be due from tenants. 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 "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 has applied this revised accounting effective January 1, 2000. The Company believes that there is no material cumulative effect on the Company's financial position as of the date of adoption of this revised accounting and that the only material effect of this pronouncement will be to shift the Company's recognition, including amounts from the operations of the Unconsolidated Real Estate Affiliates, of major portions of overage rent from interim quarters to the fourth quarter of 2000 and subsequent years. The Company's cash collections of overage rents will not be affected by this accounting recognition change. The Company estimates that it would have recognized approximately $16,050 of additional overage rent in the six months ended June 30, 2000 if this change in accounting recognition of overage rent had not been mandated. On June 1, 1998 the FASB issued Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities". The new standard is effective for fiscal years beginning after June 15, 2000 as provided by FASB Statement No. 137 issued in July, 1999. The Company does not currently have any investments in derivatives, and the Company's only hedging activity is the cash value hedge represented by its cap agreements relating to its commercial mortgage-backed securities (Note 4). 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. In March 2000 the FASB issued Statement of Accounting Standards Interpretation 44, Accounting for Certain Transactions Involving Stock Compensation ("Interpretation 44"). Interpretation 44 is generally effective for new stock option grants beginning July 1, 2000. However, requirements related to the definition of an employee apply to new awards granted after December 15, 1998. 19 of 29 20 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) Further, the FASB determined that any modifications to current accounting as a result of this guidance are to be recorded prospectively. General Growth has previously granted stock options to its employees, directors and to employees of its currently unconsolidated subsidiary, GGMI. Under the terms of the Interpretation, any awards to GGMI employees are considered awards to non-employees. Although the Company has not fully assessed the impact of Interpretation 44 on its consolidated financial statements, it currently believes that the adoption of Interpretation 44 will not have a material impact on the Company's consolidated financial position or consolidated results of operations. 20 of 29 21 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) ITEM 2. 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 quarterly report and which descriptions are hereby incorporated herein by reference. The following discussion should be read in conjunction with such Consolidated Financial Statements and related Notes. On June 30, 2000, the Company owned 100% of the fifty-three Wholly-Owned Centers, 50% of the stock of GGP/Homart, 50% of the membership interest in 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, and a non-voting preferred stock ownership interest (representing 95% of the equity interest) in GGMI. GGP/Homart owns interests in twenty-three shopping centers, GGP/Homart II owns interests in seven shopping centers (including one under construction), GGP Ivanhoe owns interests in two shopping centers, and GGP Ivanhoe III owns interests in eight shopping centers. The Mall Store and Free-standing Store portions of the centers in the Company Portfolio which were not undergoing redevelopment on June 30, 1999 had an occupancy of approximately 87.4% as of such date. On June 30, 2000, the Mall Store and Free-standing Store portions of the centers in the Company Portfolio which were not undergoing redevelopment were approximately 89.1% occupied as of such date, representing an increase in occupancy percentage of 1.7% over 1999. Total annualized sales averaged $350 per square foot for the Company Portfolio in the six months ended June 30, 2000. In the six months ended June 30, 2000, total mall store sales for the Company Portfolio increased by 8.1% over the same period in 1999. Comparable mall store sales are sales of those tenants that were open the previous 12 months. Therefore, comparable mall store sales in the six months ended June 30, 2000 are of those tenants that were operating in the six months ended June 30, 1999. Comparable mall store sales in the six months ended June 30, 2000 increased by 5.1% over the same period in 1999. The average Mall Store rent per square foot from leases that expired in the six months ended June 30, 2000 was $29.29. The Company Portfolio benefited from increasing rents inasmuch as the average Mall Store rent per square foot on new and renewal leases executed during this same period was $34.63, or $5.34 per square foot above the average for expiring leases. FORWARD-LOOKING INFORMATION Forward looking statements contained in this Quarterly Report on Form 10-Q may include certain forward-looking information statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including (without limitation) statements with respect to anticipated future operating and financial performance, growth and acquisition opportunities and other similar forecasts and statements of expectation. Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates" and "should" and variations of these words and similar expressions, are intended to identify these forward-looking statements. Forward-looking statements made by the Company and its management are based on estimates, projections, beliefs and assumptions of management at the time of such statements and are not guarantees of future performance. The Company disclaims any obligation to update or revise 21 of 29 22 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) any forward-looking statement based on the occurrence of future events, the receipt of new information or otherwise. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by the Company and its management as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation) general industry and economic conditions, interest rate trends, cost of capital and capital requirements, availability of real estate properties, competition from other companies and venues for the sale/distribution of goods and services, changes in retail rental rates in the Company's markets, shifts in customer demands, tenant bankruptcies or store closures, changes in vacancy rates at the Company's properties, changes in operating expenses, including employee wages, benefits and training, governmental and public policy changes, changes in applicable laws, rules and regulations (including changes in tax laws), the ability to obtain suitable equity and/or debt financing, and the continued availability of financing in the amounts and on the terms necessary to support the Company's future business. Company revenues are primarily derived from fixed minimum rents, overage rents and recoveries of operating expenses from tenants. Inasmuch as the Company's financial statements reflect the use of the equity method to account for its investments in GGP/Homart, GGP/Homart II, GGP Ivanhoe, GGP Ivanhoe III, Quail Springs Mall and Town East Mall and GGMI, the discussion of results of operations of the Company below relates primarily to the revenues and expenses of the Wholly-Owned Centers. RESULTS OF OPERATIONS OF THE COMPANY THREE MONTHS ENDED JUNE 30, 2000 AND 1999 During calendar 1999, the Company opened Rivertown Crossings and purchased interests in the following Wholly-Owned Centers: The Crossroads, Ala Moana, and Baybrook. In addition, the Company contributed its 100% interests in Stonebriar, Northbrook Court, Natick, and Altamonte to GGP/Homart II, an unconsolidated entity. During April 2000, the Company purchased an 100% interest in Crossroads Center. For purposes of the following discussion of the results of operations, the net effect of acquisitions will include the effect of the new mall opening, the effect of the new acquisitions in 1999 and 2000 and the effect of the three operating properties contributed to GGP/Homart II. Total revenues for the three months ended June 30, 2000 were $165.0 million, which represents an increase of $29.1 million or approximately 21.4% from $135.9 million in the three months ended June 30, 1999. The majority of the increase is from the net effect of acquisition of properties. Minimum rent for the three months ended June 30, 2000 increased by $18.6 million or 21.5% from $86.7 million in the comparable period in 1999 to $105.3 million. The net effect of acquisition of properties generated the majority of such increase in minimum rents. Expansion space, specialty leasing and occupancy increases at the comparable centers (properties owned for the entire time during the three months ended June 30, 1999 and 2000) accounted for the remaining increase in minimum rents. Tenant recoveries increased by $12.5 million or 30.6% from $40.8 million to $53.3 million for the three months ended June 30, 2000. The majority of the increase was generated by the net effect newly aquired properties. For the three months ended June 30, 2000, overage rents decreased to $3.1 million from $5.3 million in 1999. The decrease is primarily attributable to the change in accounting for overage rents effective January 1, 2000, as more fully described in Note 8. Total expenses, including depreciation and amortization, increased by approximately $12.1 million, from $72.9 million in the three months ended June 30, 1999 to $85.0 million in the three months 22 of 29 23 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) ended June 30, 2000. For the three months ended June 30, 2000, property operating expenses increased by $5.3 million or 16.8% from $31.6 million in 1999 to $36.9 million in the second quarter of 2000, substantially all of which is attributable to the net effect of new acquisitions. The remainder is due to increases at the comparable centers. Depreciation and amortization increased by $6.6 million or 25.6% over the same period in 1999. The majority of the increase in depreciation and amortization was generated by the net effect of newly acquired properties. Management fees to affiliates increased by approximately $0.3 million or 23.1% over the same period in 1999. Net interest expense for the three months ended June 30, 2000 was $51.3 million, an increase of $14.0 million or 37.5% from $37.3 million in the three months ended June 30, 1999. The net effect of acquisition of new properties was responsible for approximately $6.7 million of the increase. The remainder is due to increased debt and interest rates at the comparable centers. Equity in net income of unconsolidated affiliates in the three months ended June 30, 2000 increased by approximately $4.5 million to earnings of $9.0 million in 2000, from $4.5 million in the three months ended June 30, 1999. The Company's equity in the earnings of GGP/Homart decreased approximately $1.8 million, primarily due to an increase in debt and related interest expense. The formation of GGP/Homart II resulted in earnings of approximately $4.1 million for the three months ended June 30, 2000. The Company's equity in the earnings of GGMI resulted in an increase of approximately $1.9 million, primarily due to an increase of fee revenue. Gain on sale in the three months ended June 30, 1999, represents the gain on the sale of outparcel land to a major tenant at Park Mall. RESULTS OF OPERATIONS OF THE COMPANY SIX MONTHS ENDED JUNE 30, 2000 AND 1999 Total revenues for the six months ended June 30, 2000 were $327.5 million, which represents an increase of $57.3 million or approximately 21.2% from $270.2 million in the six months ended June 30, 1999. Substantially all of the increase is from the net effect of acquisition of properties. Minimum rent for the six months ended June 30, 2000 increased by $36.8 million or 21.6% from $170.5 million in the comparable period in 1999 to $207.3 million. The net effect of acquisition of properties generated the majority of such increase in minimum rents. Expansion space, specialty leasing and occupancy increases at the comparable centers (properties owned for the entire time during the six months ended June 30, 1999 and 2000) accounted for the remaining increase in minimum rents. Tenant recoveries increased by $22.8 million or 27.5% from $82.9 million to $105.7 million for the six months ended June 30, 2000. Substantially all of the increase was generated by the net effect of properties which were acquired. For the six months ended June 30, 2000, overage rents decreased to $ 5.8 million from $9.2 million in 1999. The net effect of acquisitions contributed an increase of approximately $1.6 million in overage rent. The decrease is primarily attributable to the change in accounting for overage rents in the six months ended June 30, 2000 as more fully described in Note 8. Total expenses, including depreciation and amortization, increased by approximately $26.5 million, from $144.8 million in the six months ended June 30, 1999 to $ 171.3 million in the six months ended June 30, 2000. For the six months ended June 30, 2000, property operating expenses increased by $14.5 million or 23.1% from $62.8 million in 1999 to $77.3 million in the first quarter of 2000, substantially all of which is attributable to the net effect of the new acquisitions. Depreciation and amortization increased by $11 million or 21.7% over the same period in 1999. Approximately $4.1 million of the increase in depreciation and amortization was generated at comparable centers. The 23 of 29 24 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) remaining $6.9 million was from the net effect of newly acquired properties. Management fees to affiliates was approximately $1.4 million or 53.8% higher than in the six months ended June 30, 1999. Net interest expense for the six months ended June 30, 2000 was $99.3 million, an increase of $22.9 million or 30.0% from $76.4 million in the six months ended June 30, 1999. Debt incurred in connection with the acquisition of new properties was responsible for substantially all of such increase. Equity in net income of unconsolidated affiliates in the six months ended June 30, 2000 increased by approximately $8.8 million to earnings of $17.5 million in 2000, from $8.7 million in the six months ended June 30, 1999. The Company's equity in the earnings of GGP/Homart decreased approximately $3.1 million, primarily due to the gain recognized by GGP/Homart on its May, 1999 sale of its interest in the Rolling Oaks Mall in San Antonio, Texas. This decrease is partially offset by an 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 GGP/Homart in 2000 versus 1999. The Company's equity in the earnings of GGMI resulted in an increase of approximately $5.5 million, primarily due to the write-off of terminated third-party management contracts in 1999. The formation of GGP/Homart II resulted in earnings of approximately $7.7 million for the six months ended June 30, 2000. Gain on sale in the six months ended June 30, 1999, represents the gain on the sale of outparcel land to a major tenant at Park Mall. LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY As of June 30, 2000, the Company held approximately $40.3 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 investments, unsecured Company level debt or secured loans collateralized by individual shopping centers. In addition, the Company has access to the public equity and debt markets through a currently effective shelf registration statement under which up to $329.2 million in equity or debt securities may be issued from time to time. The Company also has a revolving credit facility and term loans (Note 4) with an aggregate balance as of the date of this report of approximately $230 million, maturing on July 31, 2003, which the Company currently anticipates it will be able to increase up to $550 million as necessary. As of June 30, 2000, the Company had consolidated debt of approximately $3,101 million, of which $1,766 million is comprised of debt bearing interest at a fixed rate, with the remaining $1,335 24 of 29 25 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) million bearing interest at floating rates. Reference is made to Note 4 and Item 3 below for additional information regarding the Company's debt and the potential impact on the Company of interest rate fluctuations. The following summarizes certain significant investment and financing transactions currently planned or completed since December 31,1999: The Company had previously advanced approximately $31 million collateralized by a second mortgage on the Crossroads Center in St. Cloud (Minneapolis), Minnesota. In connection with the second mortgage (as modified in February 2000) the Company acquired the property in April 2000 as more further described in Note 6. In January 2000, the Company obtained a new $200 million unsecured short-term bank loan. The Company's initial draw under this loan was $120 million which was used to fund ongoing redevelopment projects and repay an $83 million interim loan obtained in September 1999. This loan bore interest at LIBOR plus 150 basis points and the remaining available amounts were drawn by June 30, 2000. The loan was repaid August 1, 2000 from the proceeds of a new revolving credit facility and the $100 million term loan described below. In May 2000, the Company obtained approximately $170.6 million of net proceeds through the issuance of preferred units of membership interest as more fully described in Note 1. These units provide for annual 8.95% preferred distributions and have a liquidation preference of $175 million. The net proceeds were used primarily to reduce the Company's outstanding short-term floating rate debt. On August 1, 2000, the Company completed the refinancing of its Credit Facility. The Company's initial draw under the Revolver was $130 million. The Revolver has a maturity of July 31, 2003 and bears interest at a rate per annum equal to LIBOR plus 100 to 190 basis points depending on the Company's average leverage ratio. In addition, the Company obtained an unsecured bank term loan of $100,000. The Term Loan has a maturity of July 31, 2003 and bears interest at a rate per annum of LIBOR plus 100 to 170 basis points depending on the Company's average leverage ratio. Approximately $50 million of the Company's debt is scheduled to mature in the remainder of 2000. Although final agreements to refinance all such loan amounts 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 increase the amounts available under the Revolver or term loans, obtain an interim bank loan, obtain additional mortgage financing on under-leveraged assets, enter into new joint venture partnership arrangements or raise additional debt or equity capital. However, there can be no assurance that the Company can obtain such financing on satisfactory terms. The Company will continue to monitor its capital structure, investigate potential 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 anticipates the refinancing of portions of its long-term floating rate debt with pooled or property-specific non-recourse fixed-rate mortgage financing. Net cash provided by operating activities was $134.8 million in the first six months of 2000, an increase of $25.9 million from $108.9 million in the same period in 1999. Net income before 25 of 29 26 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) extraordinary items and allocations to the minority interest increased $17.1 million, which was represented primarily by the earnings contributed by acquisitions completed in 1999 and 2000. Net cash used by investing activities was $142.2 million in the first six months of 2000 compared to $191.7 million of cash used in the first six months of 1999. Cash flow from investing activities was impacted by the lower volume of development and improvements to consolidated real estate properties in the first six months of 2000, as compared to the first six months in 1999 as the ownership (and resulting development activities) of Stonebriar Centre was transferred to GGP/Homart II in November, 1999. Financing activities contributed cash of $22.1 million in the first six months of 2000, compared to a source of cash of $81.8 million in 1999. A major contributing factor to the variance in the cash provided from financing activity is that financing from mortgages and other debt, net of repayments of principal on mortgage debt, had a negative impact of $65.3 million in the first six months of 2000 versus a positive impact of $150.9 million in the first six months of 1999. The additional financing in 1999 was used to fund the acquisitions, developments and redevelopment of real estate discussed above and in Note 2. 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, the Unconsolidated Real Estate Affiliates and distributions there from, less oversight costs and debt service on additional loans that have been or will be incurred. The Company anticipates that its operating cash flow, and potential new debt or equity from future offerings, new financings or refinancings will provide adequate liquidity to conduct its operations, fund general and administrative expenses, fund operating costs and interest payments and allow distributions to the Company's preferred and common stockholders in accordance with the requirements of the Internal Revenue Code of 1986, as amended, for continued qualification as a real estate investment trust and to avoid any Company level federal income or excise tax. In addition, the Tax Relief Extension Act of 1999 will be effective January 1, 2001. Two key provisions of this tax law change will impact future Company operations: the availability of a taxable REIT subsidiary which may be wholly owned directly by a REIT and a reduction in the required level of distributions by a REIT to 90% of ordinary taxable income. The Company is still evaluating the impact of these changes. A taxable REIT subsidiary, wholly owned by the REIT as permitted under new law commencing in 2001, will be able to retain a larger amount of operating cash flow for reinvestment purposes. 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. In one such initiative, the Company expects to have the majority of its regional shopping centers wired for broadband connectivity by December 31, 2000. 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. 26 of 29 27 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS As more fully described in Note 8, the FASB, EITF and the AICPA have issued certain statements, which are effective for the current or subsequent year. The Company does not expect a significant impact on its annual reported operations due to the application of such new statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has not entered into any transactions using derivative commodity instruments. The Company 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 $1,335 million of debt of the Company outstanding at June 30, 2000 that is priced at interest rates that float with the market. However, approximately $858 million of such floating rate consolidated debt is comprised of commercial mortgage-backed securities which are subject to interest rate cap agreements, the effect of which is to limit the interest rate the Company would be required to pay on such debt to no more than approximately 9% per annum. Therefore, a 25 basis point movement in the interest rate on the floating rate debt would result in an approximate $3.18 million annualized increase or decrease in interest expense and cash flows. The remaining 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 to respond to changing market rate conditions. Reference is made to Item 2 above and Note 4 for additional debt information. 27 of 29 28 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At its Annual Meeting of Stockholders held on May 9, 2000, the stockholders voted upon the re-election of Morris Mark and Robert Michaels as Directors, and the ratification of the appointment of PricewaterhouseCoopers LLP as Independent Auditors. A total of 51,927,576 shares were eligible to vote on each matter presented at the Annual Meeting, which were approved by the following votes of stockholders: NUMBER OF SHARES NUMBER OF SHARES MATTER FOR WITHHELD - ------------------------------------------------------------------------------- 1. (a) Re-elect Morris Mark 44,165,631 229,038 (b) Re-elect Robert Michaels 38,856,543 5,538,126 NUMBER OF SHARES NUMBER OF FOR SHARES AGAINST ABSTAIN - ------------------------------------------------------------------------------- 2. Appointment of PricewaterhouseCoopers LLP as Independent Auditors 44,081,533 38,347 274,789 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - See Exhibit Index (b), (c) Reports on Form 8-K and proforma information The following reports on Form 8-K have been filed by the Company during the quarter covered by this report: 1. Current Report on Form 8-K dated May 9, 2000 describing under Item 5. the acquisition of Crossroads Center in St. Paul, Minnesota. No financial statements were required to be filed with the report. 2. Current Report on Form 8-K dated June 13, 2000 describing under Item 5. the issuance of 700,000 cumulative redeemable preferred units of membership interest of GGPLP L.L.C., yielding net proceeds to the Company of approximately $170.6 million. No financial statements were required to be filed with the report. 28 of 29 29 GENERAL GROWTH PROPERTIES, INC (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GENERAL GROWTH PROPERTIES, INC. (Registrant) Date: August 9, 2000 by: /s/: Bernard Freibaum --------------------------------------- Bernard Freibaum Executive Vice President and Chief Financial Officer (Principal Accounting Officer) 29 of 29 30 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) 31 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) 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) 32 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. (30) 2(gg) Purchase and Sale Agreement dated as of March 15, 2000 by and between Crossroads Shopping Center Trust and St. Cloud Mall L.L.C. (31) 2(hh) Purchase Agreement dated May 25, 2000 among General Growth Properties, Inc., GGP Limited Partnership, GGPLP L.L.C. and Goldman Sachs 2000 Exchange Place Fund, L.P. 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) 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) Bylaws of the Company.(5) 3(f) Amendment to 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) 33 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) 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) 4(p) Certificate of Designations, Preferences and Rights of 8.95% Cumulative Redeemable Preferred Stock, Series B. (32) 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) 34 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, as amended. 10(o) Amended and Restated Operating Agreement of GGPLP L.L.C. dated as of May 25, 2000. (32) 10(p) Registration Rights Agreement dated May 25, 2000 between General Growth Properties, Inc. and Goldman Sachs 2000 Exchange Place Fund, L.P. 23 Consent of PricewaterhouseCoopers LLP - Independent Accountants. (30) 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. (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. 35 (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. (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 8-K 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. 36 (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. (30) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1999, incorporated herein by reference. (31) Previously filed as an exhibit to the Company's Current Report on Form 8-K, dated May 9, 2000, incorporated herein by reference. (32) Previously filed as an exhibit to the Company's Current Report on Form 8-K, dated June 13, 2000, incorporated herein by reference. EX-2.(HH) 2 ex2-hh.txt PURCHASE AGREEMENT 1 EXECUTION COPY EXHIBIT 2(hh) PURCHASE AGREEMENT May 25, 2000 Goldman Sachs 2000 Exchange Place Fund, L.P. c/o Goldman, Sachs & Co. One New York Plaza New York, New York 10004 Attention: Elizabeth C. Groves Re: 8.95% Series A Cumulative Redeemable Preferred Units of GGPLP L.L.C. (the "Units") Ladies & Gentlemen: This Agreement provides for the purchase by the Goldman Sachs 2000 Exchange Place Fund, L.P., a Delaware limited partnership ("Subscriber"), of $175,000,000 aggregate amount of Units issued by GGPLP L.L.C., a Delaware limited liability company (the "Company"). The managing member of the Company is GGP Limited Partnership, a Delaware limited partnership ("GGP"). The general partner of GGP is General Growth Properties, Inc., a Delaware corporation ("Parent"; Parent, GGP and the Company are referred to herein individually as a "GGP Company" and collectively as the "GGP Companies"). Prior to the date hereof, GGP and certain of its affiliates have caused various partnership and limited liability company interests to be contributed to the capital of the Company (the "Contribution"). (The partnerships and limited liability companies owned wholly or in part, directly or indirectly, by the Company hereafter are referred to as the "Company Subsidiaries"; the real properties owned by the Company or by any Company Subsidiary hereafter are referred to as the "Properties.") 1. Sale of Units a. The Company hereby agrees to sell to the Subscriber, and the Subscriber hereby agrees to purchase from the Company, seven hundred thousand (700,000) Units. The purchase price of each Unit is $250.00, for an aggregate purchase price of $175,000,000 in the aggregate (the "Purchase Price"), less fees payable to Goldman, Sachs & Co. pursuant to a placement agent agreement dated May 15, 2000, and is payable in cash at the Closing (as defined below). b. The sale and purchase of the Units (the "Closing") shall take place at the offices of Fried, Frank, Harris, Shriver & Jacobson, New York, New York on May 25, 2000 (the "Closing Date"). 2 c. On the Closing Date, Subscriber shall, if the conditions set forth in Section 2 are satisfied on or prior to the Closing Date, pay to the Company by wire transfer of immediately available funds the Purchase Price of the Units purchased by the Subscriber less the fees described above. 2. Conditions of Closing The Subscriber's obligation to purchase the Units on the Closing Date and the Company's obligation to sell the Units to the Subscriber are subject to the fulfillment to the satisfaction of the Subscriber and the Company on the Closing Date of the following conditions precedent (provided that no party shall be excused by the failure to perform any of its own obligations): a. Delivery to the Subscriber of fully executed copies of each of the Transaction Documents listed on Exhibit A (the "Transaction Documents"). b. Delivery to the Subscriber of an opinion from counsel to the Company, dated the Closing Date addressed to the Subscriber substantially in the form of Exhibit B. c. The representations and warranties set forth in Sections 3 and 4 shall be true and accurate as of the Closing Date. d. Prior to the Closing, the partnership and limited liability company interests and properties listed on Schedule 3j shall have been duly contributed to the Company. 3. Representations and Warranties of the GGP Companies Each of the Company, GGP and the Parent hereby represents and warrants to the Subscriber as follows as of the date hereof and as of the Closing Date: a. The Parent has made with the Securities and Exchange Commission ("SEC") all filings required to be made by it since January 1, 1998 (the "SEC Reports"). The Company is not required to file any reports with the SEC. The SEC Reports were prepared and filed in compliance with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the Securities Act of 1933, as amended (the "Securities Act"), as applicable, and the rules and regulations promulgated by the SEC thereunder, and did not, as of their respective dates, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. The financial statements and the interim financial statements of the Parent included in the SEC Reports were prepared in accordance with U.S. Generally Accepted Accounting Principles applied on a consistent basis ("GAAP") (except in the case of the interim financial statements for the absence of footnotes and as may be otherwise noted therein) and fairly presented the financial condition and results of operations of the Parent and its subsidiaries as at the dates thereof and for the periods then ended, subject, in the case of the interim financial statements, to normal year-end adjustments and any other adjustments described in the SEC Reports. b. There has been no material adverse change in the business, assets, condition (financial or otherwise) or prospects of the Parent since the most recently filed SEC Report. -2- 3 c. (i) The Company is a validly existing limited liability company formed under the laws of the State of Delaware. GGP is a validly existing limited partnership formed under the laws of the State of Delaware. The Parent is a validly existing corporation organized under the laws of the State of Delaware. Each of the Company Subsidiaries is listed on Schedule 3j and is a validly existing general partnership, limited partnership or limited liability company. (ii) The Parent, GGP and the Company have all requisite corporate, limited partnership, or limited liability company authority and power to execute and deliver the Transaction Documents and to consummate the transactions contemplated thereby. The execution and delivery of the Transaction Documents by the GGP Companies and the consummation by them of the transactions contemplated thereby have been duly and validly authorized by all requisite corporate, limited partnership or limited liability company action on the part of the Parent, GGP and the Company, and no other proceedings on the part of the Parent, GGP or the Company are necessary to authorize the Transaction Documents or to consummate the transactions contemplated thereby. As of the Closing the Transaction Documents will have been fully and validly executed and delivered by the Company, GGP and the Parent. As of the Closing the Transaction Documents will constitute legal, valid and binding obligations of the Company, GGP and the Parent, enforceable in accordance with their terms. d. Neither the Contribution nor the execution, delivery or performance of the Transaction Documents by any GGP Company will conflict with, result in a default, right to accelerate or loss of rights under, or result in the creation of any Encumbrance (as defined below) pursuant to, any provision of any organizational documents of such GGP Company or any franchise, mortgage, deed of trust, lease, license, agreement, understanding, law, rule or regulation or any order, judgment or decree to which any GGP Company or any Company Subsidiary is a party or by which it or its properties may be bound or affected that would have a material adverse effect on the business, assets, condition (financial or otherwise) or prospects of any GGP Company ("Material Adverse Effect"). e. There is no action, suit, litigation, hearing or administrative proceeding pending against any GGP Company or any of its properties or assets or, to the Company's Knowledge (as defined below), currently threatened in or before any court or before or by any federal, state, county or municipal department, commission or agency (i) against any GGP Company or any Company Subsidiary that questions the validity of the Contribution or any of the Transaction Documents or the issuance of the Units or the right of any GGP Company to enter into any Transaction Documents or to consummate the Contribution or the transactions contemplated thereby or that could reasonably be expected to interfere with the ability of any GGP Company to perform its obligations or could reasonably be expected to have a Material Adverse Effect or (ii) against any GGP Company (or any of the Company Subsidiaries) or all or any portion of its properties including but not limited to alleged building code or zoning violations which are not covered by insurance which, if adversely determined, could reasonably be expected to have a Material Adverse Effect. There are no material insolvency or bankruptcy proceedings, pending or contemplated to which any GGP Company (or any of the Company Subsidiaries) is a party. f. The Units when issued, sold and delivered by the Company, upon receipt of the Purchase Price and performance by Subscriber of its obligations hereunder, shall be duly and validly issued and outstanding, fully paid, and non-assessable and will be free of any liens, claims, security interests or encumbrances of third parties of any kind (collectively, "Encumbrances"). On or prior to the Closing Date, the 8.95% Series B Cumulative -3- 4 Redeemable Preferred Shares, $100 par value per share, of the Parent (the "Preferred Shares") issuable upon exchange of the Units shall have been duly and validly reserved for issuance in accordance with this Agreement and the Parent's Certificate or Incorporation and when issued in exchange for Units, shall be duly and validly issued and authorized, delivered, fully paid, and non-assessable and will be free of any Encumbrances. The shares of Common Stock, $.10 par value per share, of the Parent (the "Common Shares") issuable upon exchange of the Units, when issued in exchange for Units, shall be duly and validly issued and outstanding, fully paid, and non-assessable and will be free of any Encumbrances. g. The issuance, sale and delivery of the Units, the Preferred Shares and the Common Shares is not subject to any preemptive right of any person under applicable law or the LLC Agreement (as defined below), the Partnership Agreement of GGP or the Certificate of Incorporation or bylaws of the Parent, as applicable, or to any contractual right of first refusal or right in favor of any person. There are no agreements or understandings of the GGP Companies (other than the Certificate of Incorporation of Parent (including the Certificate of Designations) Parent concerning the Preferred Shares and the LLC Agreement) in effect restricting the voting rights, the distribution rights or any other rights of the holders of the Units or the Preferred Shares . h. A true and complete copy of the Company's Limited Liability Company Agreement (the "LLC Agreement") is set forth as Exhibit C. There are no interests in the Company authorized, issued or outstanding that rank senior to, or on a parity with, the Units with respect to liquidation, winding up, dividends or distributions. There are no equity interests in the Parent issued or outstanding nor have any such equity interests been created that rank senior to the Preferred Shares with respect to liquidation, winding up, dividends or distributions. There are no shares of Preferred Shares issuable upon exchange of partnership or limited liability company interests which are outstanding as of the date hereof. Except for the Units, no other securities are exchangeable, convertible or otherwise exercisable for Preferred Shares. i. The Parent will file a registration statement with the SEC relating to the issuance of the Preferred Shares that may be issued by the Parent to Subscriber upon exchange of the Units into such shares or the resale of all or a portion of the Preferred Shares, in accordance with the Registration Rights Agreement attached hereto as Exhibit D (the "Registration Agreement") which will be executed and delivered on the Closing Date. j. Attached hereto as Schedule 3j is a true, correct and complete list of the partnership and limited liability company interests owned directly or indirectly by the Company, and a list of properties owned by those partnerships and limited liability companies. A Company Subsidiary has good and marketable fee simple or leasehold title to each of the Properties, free and clear of any Encumbrances or other matters affecting title, except for mortgage liens securing the repayment of the mortgage loans disclosed on Schedule 3j and for Encumbrances which do not adversely affect the use of the Properties. All of the leases relating to the Properties are in full force and effect. Neither the Company nor any Company Subsidiary has delivered a notice of monetary default or material non-monetary default to any tenant which remains uncured as of the date hereof except with respect to defaults which individually or in the aggregate would not have a Material Adverse Effect, if uncured. -4- 5 k. All mortgages encumbering the Properties are in good standing unless noncompliance would not be material to the Company (or the Company Subsidiary which owns such Property) and all payments due thereunder as of the date hereof have been made. Neither the Company nor any of the Company Subsidiaries has received a notice of default or a written notice of any matter which, if uncured beyond any grace period set forth in such mortgage, would constitute a default thereunder unless such default would not have a Material Adverse Effect. All consents to the proposed transaction and the Contribution from each mortgagee required to give its consent, are listed on Schedule 3k and all such consents have been obtained. The GGP Companies have good relationships with each of the lenders with respect to the Listed Consents and such lenders have indicated a preliminary willingness to provide the Listed Consents without any adverse conditions or amendments to the loans. The information set forth on Schedule 3k is true and correct in all material respects as of the dates listed thereon. l. There are no material condemnation or eminent domain proceedings pending, or to the Company's Knowledge, threatened, against any of the Properties. m. Neither the Company nor any Company Subsidiary has received any notice, complaint or service alleging a violation in any material respect of the Americans with Disabilities Act at any of the Properties that has not been cured, whether such notice, complaint or service alleged a violation against the Company, any Company Subsidiary or any tenant of the Properties, which violation could reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Company Subsidiary has received any written notices from any insurance company or board of fire underwriters alleging any material uncured defects or material inadequacies in any of the Properties, which defects or inadequacies could reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Company Subsidiary has received any notice canceling, suspending or threatening to cancel or suspend any certificates of occupancy or permits regulating the use of the Properties, which cancellations or suspensions could reasonably be expected to have a Material Adverse Effect. n. To the Company's Knowledge, (i) there are no underground storage tanks on the Properties, (ii) there are no hazardous substances or wastes beyond the limits permitted by law on or under the Properties and no hazardous substances or wastes beyond the limits permitted by law have been generated, released, discharged or been disposed of from or on the Property, and (iii) there is no asbestos, PCB's or formaldehyde based insulation on or at any of the Properties beyond the limits permitted by law, in each case, the presence of which could reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Company Subsidiary has received notification of a release or discharge of any hazardous substance or hazardous waste pursuant to or any notice of any violation or non-compliance with any federal, state or local environmental law, regulation or ordinance as to any Property, which violations or non-compliance could reasonably be expected to have a Material Adverse Effect. As used herein the terms "hazardous substances" and "hazardous wastes" shall have the meanings set forth in CERCLA. o. Each insurance policy maintained by the GGP Companies or the Company Subsidiaries with respect to the Properties is in full force and effect and no GGP Company or Company Subsidiary has received any notice from any insurance company which issued any of the policies of any defects or inadequacies of such Properties which, if not corrected would -5- 6 result in the termination of such policies and could reasonably be expected to have a Material Adverse Effect. p. Immediately following the issuance of the Units, less than 17.5% of the value of the Company's gross assets (giving effect to the Subscriber's investment in the Company) will consist of "stock or securities" within the meaning of Section 351(e)(1) of the Internal Revenue Code of 1986, as amended (the "Code"). For this purpose, if the Company holds an interest in an unincorporated entity, the provisions of Treasury Regulationss.1.731-2(c)(3) apply to determine the extent to which such interest is treated as a "stock or security". The Company has no present plan to increase the value of its assets constituting "stock or securities" to a percentage equal to or greater than 17.5%. q. Interests in neither the Company nor GGP are traded on an "established securities market" as defined in Treas. Reg.ss. 1.7704-1(b). r. Assuming that Subscriber's representations and warranties in Sections 4a., 4b. and 4c. are true and correct, all membership interests or other economic interests in the Company and GGP were issued in transactions that were not required to be registered under the Securities Act of 1933, as amended (the "Securities Act") or would not have been required to be so registered if the interest had been offered and sold in the United States. s. Each of the GGP Companies expects that at least 90% of the Company's gross income will be qualifying income as defined in Section 7704(d) of the Code in the current tax year and each subsequent year. t. The Company and GGP are partnerships for U.S. federal income tax purposes, and have not been and are not presently publicly traded partnerships within the meaning of Section 7704(b) of the Code ("PTP"). Neither the Company nor GGP has reported or taken a position with the Internal Revenue Service or its members that the Company or GGP is a PTP. u. During the current tax years of the Company and GGP, the Company and GGP have not had at any time more than 100 members (including the Subscriber which, for the purposes hereof, is being counted as one partner) within the meaning of Treas. Reg.ss. 1.7704-1(h) on a combined basis. v. The Company has no present plan or intention to, and each of the GGP Companies has no present plan or intention to cause the Company to: (i) liquidate or sell substantially all of the Company's assets; or (ii) make distributions to members or redeem interests in the Company in such manner as would cause the exchange right contained in the LLC Agreement of the Company relating to an imminent and substantial risk that Subscriber's interest in the Company represents or would exceed the 19.95% Limit (as defined in the LLC Agreement) to be exercisable. w. Nothing has come to the attention of the Company to cause it to believe and the Company does not believe that (i) it will fail to have sufficient cash flow to satisfy the payment of the return on the Preferred Shares (and hence cause the exchange right contained in the LLC Agreement relating to the failure to pay return in six (6) prior quarterly distribution periods to be exercisable) or (ii) the Company's income will fall to a level that would cause the exchange right contained in the LLC Agreement relating to an imminent and substantial risk -6- 7 that the Subscriber's interest in the Company represents or would exceed the 19.95% Limit to be exercisable. x. The Net Asset FMV and the Gross Asset FMV of the Company currently constitute less than 65% of the Net Asset FMV and the Gross Asset FMV of GGP, respectively, and the Company has no present plan or intention to, and the GGP Companies have no present plan or intention of causing the Company to, cause the Net Asset FMV or the Gross Asset FMV of the Company to constitute 65% or more of the Net Asset FMV or the Gross Asset FMV of GGP. For purposes of this representation, the term "Net Asset FMV" means, with respect to the Company or GGP, the fair market value of the assets of the Company or GGP, as the case may be (including its pro rata share of the fair market value of assets of entities in which it directly or indirectly owns an interest), over the liabilities of the Company or GGP (including its pro rata share of liabilities of entities in which it directly or indirectly owns an interest). For purposes of this representation, the term "Gross Asset FMV" means, with respect to the Company or GGP, the fair market value of the assets of the Company or GGP, as the case may be (including its pro rata share of the fair market value of assets of entities in which it directly or indirectly owns an interest). In calculating the fair market value of shopping center property in which the Company or GGP directly or indirectly owns an interest, (a) the fair market value of each such property which is open and operating was calculated by dividing Net Operating Income (as defined in the LLC Agreement) for such property for 1999 (or, if such property was acquired or opened during 1999, the 2000 budgeted Net Operating Income for such property) by a capitalization rate of 8.25% and (b) the fair market value of each such property which is under construction equals the land acquisition and construction costs for such property. The Company believes that these methodologies for calculating the fair market value of shopping center properties are a reasonable method of determining the fair market value of such properties. y. The GGP Companies expressly permit Fried, Frank, Harris, Shriver & Jacobson, as counsel to Subscriber, to rely upon the representations and warranties set forth in this Section 3 for the purpose of rendering legal opinions to Subscriber and Goldman Sachs & Co. as if such representations and warranties were made by the GGP Companies directly to Fried, Frank, Harris, Shriver & Jacobson. 4. Representations & Warranties of Subscriber Subscriber hereby represents and warrants as of the date hereof and as of the Closing Date that: a. Subscriber is purchasing the Units solely for investment, solely for its own account and not with a view to or for the resale or distribution thereof except as permitted under the Registration Agreement or as otherwise permitted under the Securities Act. b. Subscriber understands that it may sell or otherwise transfer the Units or the Preferred Shares issuable upon exchange of the Units only if such transaction is duly registered under the Securities Act, or if Subscriber shall have received the favorable opinion of counsel to Subscriber, which opinion shall be reasonably satisfactory to counsel to the Company, to the effect that such sale or other transfer may be made in the absence of registration under the Securities Act, and registration or qualification in every applicable state. Subscriber realizes that the Units are not a liquid investment and that no market exists or will develop for the Units. -7- 8 c. Subscriber is an "accredited investor" as such term is defined in Rule 501 of Regulation D promulgated pursuant to the Securities Act, and shall be such on the date any Units are issued to Subscriber; Subscriber acknowledges that Subscriber is able to bear the economic risk of losing Subscriber's entire investment in the Units and understands that an investment in the Company involves substantial risks; Subscriber has the power and authority to enter into this Agreement, and the execution and delivery of, and performance under this Agreement, shall not conflict with any rule, regulation, judgment or agreement applicable to Subscriber. Subscriber has had the opportunity to discuss the Company's affairs with the Company's officers. d. Subscriber has all requisite partnership authority and power to execute and deliver the Transaction Documents and the transactions contemplated thereby. The execution and delivery of the Transaction Documents and the consummation of the transactions contemplated thereby have been duly and validly authorized by all requisite partnership action on the part of Subscriber and no other proceedings on the part of Subscriber are necessary to authorize the Transaction Documents or to consummate the transactions contemplated thereby. The Transaction Documents constitute valid and binding obligations of Subscriber enforceable in accordance with their terms. e. Subscriber is not a "party-in-interest" (as defined under Section 3(14) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or a `disqualified person" (as defined under Section 4975(e)(2) of the Internal Revenue Code of 1986, as amended (the "Code")) with respect to any "employee benefit plan," as defined under Section 3(3) of ERISA, or a "plan," as defined in Section 4975(e)(1) of the Code ("employee benefit plan" and "plan," as defined herein, shall be referred to collectively as "Plans"). The purchase of Units under this Agreement by Subscriber shall not cause the Company to be a Plan that is subject to Title I of ERISA or Section 4975 of the Code, nor will it cause the assets of the Company to constitute "plan assets" of one or more such Plans for purposes of title I of ERISA or Section 4975 of the Code. f. Subscriber shall promptly notify the Company should Subscriber reasonably anticipate becoming a party-in interest or disqualified person with respect to any Plan, and Subscriber will take such steps as may be necessary to prevent the assets of the Company to be considered assets of any such Plan. g. The execution and delivery of this Agreement and the purchase of Units hereunder will not involve any non-exempt prohibited transaction within the meaning of Section 406(b)(3) of ERISA or Section 4975(c)(1)(F) of the Code. 5. General Covenants of the Parties a. So long as the Units remain outstanding, without the affirmative vote of the Majority Holders (defined below), each GGP Company hereby covenants that it will not create, authorize or issue any Preferred Shares or securities exchangeable, convertible or otherwise exercisable for Preferred Shares, if as a result of such creation, authorization or issuance, holders of Units (upon exchange thereof into Preferred Shares) would not have the right to vote a majority of all Preferred Shares issued or issuable upon exchange, conversion or exercise of any security. -8- 9 b. So long as the Units remain outstanding, without the affirmative vote of the Majority Holders, each of the GGP Companies hereby covenant that it will not propose amendments or modifications to the terms of the Preferred Shares which would materially and adversely affect any right, preference, privilege or voting power of the Preferred Shares or the holders thereof. The term "Majority Holders" means the holders of at least 51% of the Units and Preferred Shares obtained upon exchange of the Units. 6. Tax Covenants a. From and after the Closing Date through December 31, 2000, the Company shall not issue, or enter into binding agreements to issue, any interests in the Company to the extent such issuance would cause the Company to have more than 100 members immediately after such issuance and the Company shall, through the end of the current tax year of the Company, take all actions reasonably available to it under the Company's LLC Agreement in effect on the date hereof to avoid treatment of the Company as a PTP. For purposes of this covenant, the number of members of the Company shall be determined in accordance with the method of determining the number of partners in Treasury Regulationsss. 1.7704-1(h). b. From and after May 25, 2000, the Company shall notify holders of the Units promptly in the event that any GGP Company takes the position that the Company is, or upon consummation of an identified event in the immediate future, will be a PTP. c. For each taxable year, the Company will promptly provide notice to the holders of its Units in the event that any GGP Company anticipates or has actual knowledge that less than 90% of the gross income of the Company for such taxable year will or likely will constitute qualifying income within the meaning of Section 7704(d) of the Code. Each of the GGP Companies covenant that 90% or more of the gross income of the Company for the current tax year will constitute qualifying income for this purpose. d. The Company and the Company Subsidiaries will not take any position inconsistent with the form of the transaction set forth in the Transaction Documents, including without limitation, any position that the Company is not a partnership for federal income tax purposes or that the Subscriber is not a partner of the Company for federal income tax purposes. e. Neither the Company nor any Company Subsidiaries will make an election under Treas. Reg. ss. 301.7701-3 to be classified as an association. 7. Miscellaneous a. The representations and warranties set forth herein shall survive the Closing. When used herein, the "Company's Knowledge" includes the knowledge of the Company, any other GGP Company and the Company Subsidiaries. b. This Agreement may not be changed or terminated except by written agreement of all parties. It shall be binding on the parties and on their permitted assigns. It sets forth all agreements of the parties (except as set forth in the Transaction Documents). c. This Agreement shall be governed by the laws of the State of New York without regard (to the fullest extent permitted by law) to conflicts of law principles thereof which might result in the application of the laws of any other jurisdiction. -9- 10 d. All notices, requests, service of process, consents, and other communications under this Agreement shall be in writing and shall be deemed to have been delivered (i) on the date personally delivered or (ii) one day after properly sent by recognized overnight courier, addressed to the respective parties at their address set forth in this Agreement or (iii) on the day transmitted by facsimile so long as a confirmation copy is simultaneously forwarded by recognized overnight courier, in each case addressed to the respective parties at their address set forth below. Either party hereto may designate a different address by providing written notice of such new address to the other party hereto as provided above. Any GGP Company: General Growth Properties, Inc. 110 W. Wacker Drive Chicago, Illinois 60606 Attention: John Bucksbaum With a copy to: Neal, Gerber & Eisenberg Two North LaSalle Street Chicago, Illinois 60602 Attention: Marshall E. Eisenberg Subscriber: Goldman Sachs 2000 Exchange Place Fund, L.P. c/o Goldman, Sachs & Co. One New York Plaza New York, New York 10004 Attention: Elizabeth C. Groves With a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, NY 10004 Attention: Lawrence Barshay f. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which shall constitute one and the same Agreement, and all signatures need not appear on any one counterpart. g. The headings and sections are inserted for convenience only. When used in this Agreement, "including" means "including without limitation." References to Sections and Exhibits refer to this Agreement unless expressly provided otherwise. -10- 11 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. GENERAL GROWTH PROPERTIES, INC. By: /s/: Ronald L.Gern --------------------------------------------- Name: Ronald L. Gern Title: Senior Vice President and General Counsel GGP LIMITED PARTNERSHIP By: General Growth Properties, Inc., its General Partner By: /s/: Ronald L. Gern --------------------------------------------- Name: Ronald L. Gern Title: Senior Vice President and General Counsel GGPLP L.L.C. By: GGP Limited Partnership, its Managing Member By: General Growth Properties, Inc., its General Partner By: /s/: Ronald L. Gern --------------------------------------------- Name: Ronald L. Gern Title: Senior Vice President and General Counsel [Signature Page to Purchase Agreement] -11- 12 AGREED & ACCEPTED: GOLDMAN SACHS 2000 EXCHANGE PLACE FUND, L.P. By: Goldman Sachs Management Partners, L.P. Its: General Partner By: Goldman Sachs Management, Inc. Its: General Partner By:/s/: Eric Lane ----------------------------------------- Name: Eric Lane Title: [Signature Page to Purchase Agreement] -12- EX-10.(P) 3 ex10-p.txt REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10(p) REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of May 25, 2000 by and between GENERAL GROWTH PROPERTIES, INC., a Delaware corporation (the "Company"), and GOLDMAN SACHS 2000 EXCHANGE PLACE FUND, L.P., a Delaware limited partnership (the "Holder"). WHEREAS, the Holder is receiving on the date hereof Preferred Units of limited liability company interest ("Units") in GGPLP L.L.C, a Delaware limited liability company (the "LLC"); WHEREAS, in connection therewith, the Company has agreed to grant to the Holder the Registration Rights (as defined in Section 1 hereof); NOW, THEREFORE, the parties hereto, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth, hereby agree as follows: SECTION 1. REGISTRATION RIGHTS If Holder receives REIT Preferred Shares (including depositary shares representing fractions of REIT Preferred Shares) or Common Shares (each as defined in the Amended and Restated Operating Agreement of the LLC dated as of the date hereof (as amended from time to time, the "Operating Agreement")) of the Company upon exchange of Units (the "Covered Shares") pursuant to the Operating Agreement, then, unless such Covered Shares are issued to the Holder pursuant to an Issuer Registration Statement as provided in Section 2 below, Holder shall be entitled to offer for sale pursuant to a shelf registration statement, the Covered Shares, subject to the terms and conditions set forth in Section 3 hereof (the "Registration Rights"). SECTION 2. ISSUER REGISTRATION STATEMENT Anything contained herein to the contrary notwithstanding, in the event that the Covered Shares are issued by the Company to Holder pursuant to an effective registration statement (an "Issuer Registration Statement") filed with the Securities and Exchange Commission (the "Commission"), the Company shall be deemed to have satisfied all of its registration obligations under this Agreement with respect to such Covered Shares. 2 SECTION 3. DEMAND REGISTRATION RIGHTS 3.1 (a) Registration Procedure. Unless such Covered Shares are issued pursuant to an Issuer Registration Statement as provided in Section 2 hereof, then subject to Sections 3.1(c) and 3.2 hereof, if the Holder desires to exercise Registration Rights with respect to the Covered Shares, the Holder shall deliver to the Company a written notice (a "Registration Notice") informing the Company of such exercise and specifying the number of shares to be offered by such Holder (such shares to be offered, and all additional REIT Preferred Shares and Common Shares obtainable upon exchange of Units which the Company elects to register in a registration hereunder, being referred to herein as the "Registrable Securities"). Such notice may be given at any time on or after the date a notice of exchange is delivered by the Holder to the LLC pursuant to the Operating Agreement, but must be given at least fifteen (15) Business Days prior to the date on which the Holder proposes to consummate the sale of Registrable Securities. As used in this Agreement, a "Business Day" is any Monday, Tuesday, Wednesday, Thursday or Friday other than a day on which banks and other financial institutions are authorized or required to be closed for business in the State of New York. Upon receipt of the Registration Notice, the Company, if it has not already caused the Registrable Securities to be included as part of an existing shelf registration statement (prior to the filing of which the Company shall have given ten (10) Business Days notice to the Holder) and related prospectus that the Company then has on file with the Commission (the "Shelf Registration Statement") (in which event the Company shall be deemed to have satisfied its registration obligation under this Section 3), will cause to be filed with the Commission as soon as reasonably practicable after receiving the Registration Notice a new registration statement and related prospectus that may include only the Covered Shares that are the subject of the Registration Notice or, at the election of the Company, all REIT Preferred Shares and Common Shares obtainable upon exchange of Units (in which event the Company shall be deemed to have satisfied its registration obligation under this Section 3 with respect to such shares and all such shares shall constitute Registrable Securities hereunder and any person receiving such shares upon exchange of Units shall thereupon be a Holder hereunder) (a "New Registration Statement") that complies as to form in all material respects with applicable Commission rules providing for the sale by the Holder of the Registrable Securities, and agrees (subject to Section 3.2 hereof) to use its reasonable best efforts to cause such New Registration Statement to be declared effective by the Commission as soon as practicable. (As used herein, "Registration Statement" and "Prospectus" refer to the Shelf Registration Statement and related prospectus (including any preliminary prospectus) or the New Registration Statement and related prospectus (including any preliminary prospectus), whichever is utilized by the Company to satisfy Holder's Registration Rights pursuant to this Section 3, including in each case any documents incorporated therein by reference.) The Holder agrees to provide in writing in a timely manner information regarding the proposed plan of distribution by the Holder of the Registrable Securities and such other information reasonably requested by the Company in connection with the preparation of and for inclusion in the Registration Statement. The Company agrees -2- 3 (subject to Section 3.2 hereof) to use its reasonable best efforts to keep the Registration Statement effective (including the preparation and filing of any amendments and supplements necessary for that purpose) until the earlier of (i) the date on which the sale of all of the Registrable Securities registered under the Registration Statement is consummated or (ii) the date on which all of the Registrable Securities are eligible for sale pursuant to Rule 144(k) (or any successor provision) or in a single transaction pursuant to Rule 144(e) (or any successor provision) under the Securities Act of 1933, as amended (the "Act"). The Company agrees to provide to Holder a reasonable number of copies of the final Prospectus and any amendments or supplements thereto. Notwithstanding the foregoing, the Company may at any time, in its sole discretion and prior to receiving any Registration Notice from the Holder, include all of Holder's Covered Shares or any portion thereof in any Shelf Registration Statement. In connection with any Registration Statement utilized by the Company to satisfy Holder's Registration Rights pursuant to this Section 3, Holder agrees that it will respond in writing within ten (10) Business Days to any request by the Company to provide or verify information regarding Holder or Holder's Registrable Securities as may be required to be included in such Registration Statement pursuant to the rules and regulations of the Commission. (b) Offers and Sales. All offers and sales by the Holder under the Registration Statement referred to in this Section 3 shall be completed within the period during which the Registration Statement is required to remain effective pursuant to Section 3.1(a) of this Section 3, and upon expiration of such period Holder will not offer or sell any Registrable Securities under the Registration Statement. If directed by the Company, the Holder will return all undistributed copies of the Prospectus in its possession upon the expiration of such period. (c) Limitations on Registration Rights. Each exercise by the Holder of a Registration Right shall be with respect to a minimum of the lesser of (i) an amount of Common Shares or depositary shares of REIT Preferred Shares having a sale price of at least $350,000 or (ii) the total number of Covered Shares held by the Holder at such time, in each case plus the number of Covered Shares that may be issued upon exchange of Units by Holder. The right of the Holder to deliver a Registration Notice commences upon the first date the Holder is permitted to exchange Units pursuant to the Operating Agreement. The right of the Holder to deliver a Registration Notice shall expire on the date on which all of the Covered Shares held by the Holder or issuable upon redemption of Units held by the Holder are eligible for sale pursuant to Rule 144(k) (or any successor provision) or in a single transaction pursuant to Rule 144(e) (or any successor provision) under the Act. The Registration Rights granted pursuant to this Section 3.1 may be exercised in connection with an underwritten public offering; provided, that the Company shall have the right to select the underwriter or underwriters in connection with such public offering, which shall be subject to the reasonable approval of the Holder. -3- 4 3.2 Suspension of Offering. Upon any notice by the Company, either before or after the Holder has delivered a Registration Notice, that a negotiation or consummation of a transaction by the Company or any of its subsidiaries is pending or an event has occurred, which negotiation, consummation or event would require additional disclosure by the Company in a Registration Statement of material information which the Company has a bona fide business purpose for keeping confidential and the nondisclosure of which in the Registration Statement might cause the Registration Statement to fail to comply with applicable disclosure requirements (a "Materiality Notice"), Holder agrees that (a) it will immediately discontinue offers and sales of the Registrable Securities under the Registration Statement, until Holder receives copies of a supplemented or amended Prospectus that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective or (b) that its rights to require the Company to take action with respect to the registration or sale of any Registrable Securities pursuant to the Registration Statement shall be suspended for the period described in the Materiality Notice; provided, that the Company may delay, suspend or withdraw the Registration Statement for such reason for no more than ninety (90) days after delivery of the Materiality Notice at any one time and only once in any 180 day period. If so directed by the Company, Holder will deliver to the Company all copies of the Prospectus covering the Registrable Securities current at the time of receipt of any Materiality Notice. 3.3 Qualification. The Company agrees to use its reasonable best efforts to register or qualify the Registrable Securities by the time the applicable Registration Statement is declared effective by the Commission under all applicable state securities or "blue sky" laws of such jurisdictions as Holder shall reasonably request in writing, to keep each such registration or qualification effective during the period such Registration Statement is required to be kept effective or during the period offers or sales are being made by Holder after delivery of a Registration Notice to the Company, whichever is shorter, and to do any and all other acts and things which may be reasonably necessary or advisable to enable Holder to consummate the disposition in each such jurisdiction of the Registrable Securities owned by Holder; provided, however, that the Company shall not be required to (x) qualify generally to do business in any jurisdiction or to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify but for this Section 3.3, (y) subject itself to taxation in any such jurisdiction or (z) submit to the general service of process in any such jurisdiction. 3.4 Actions by the Company. Whenever the Company is required to effect the registration of Covered Shares under the Act pursuant to Section 3.1 of this Agreement, subject to Section 3.2 hereof, the Company shall: (a) prepare and file with the Commission (as soon as reasonably practical after receiving the Registration Notice, and in any event within 60 days after receipt of such Registration Notice) the requisite Registration Statement to effect such registration, which Registration Statement shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all -4- 5 financial statements required by the Commission to be filed therewith, and the Company shall use its reasonable best efforts to cause such Registration Statement to become effective; provided, however, that before filing a Registration Statement or Prospectus or any amendments or supplements thereto, or comparable statements under securities or blue sky laws of any jurisdiction, the Company shall (i) provide Holder with an adequate and appropriate opportunity to provide written comments with respect to of such Registration Statement and each Prospectus included therein (and each amendment or supplement thereto or comparable statement) to be filed with the Commission and (ii) not file any such Registration Statement or Prospectus (or amendment or supplement thereto or comparable statement) with the Commission to which Holder's counsel or any underwriter shall have reasonably objected on the grounds that such filing does not comply in all material respects with the requirements of the Act or of the rules or regulations thereunder; (b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary (i) to keep such Registration Statement effective and (ii) to comply with the provisions of the Act with respect to the disposition of the Covered Shares covered by such Registration Statement, in each case until such time as all of such Covered Shares have been disposed of in accordance with the intended methods of disposition by the seller(s) thereof set forth in such Registration Statement; provided, that except with respect to any Shelf Registration, such period need not extend beyond six months after the effective date of the Registration Statement; and provided further, that with respect to any Shelf Registration, such period need not extend beyond the time period provided in Section 3.1(a), and which periods, in any event, shall terminate when all the Covered Shares covered by such Registration Statement have been sold (but not before the expiration of the time period referred to in Section 4(3) of the Act and Rule 174 thereunder, if applicable); (c) furnish, without charge, to the Holder and each underwriter, if any, of the exchange shares covered by such Registration Statement, such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits), and the Prospectus included in such Registration Statement (including each preliminary Prospectus), and other documents, as the Holder and such underwriter may reasonably request in order to facilitate the public sale or other disposition of the Covered Shares owned by the Holder; (d) prior to any public offering of Covered Shares, use its best efforts to register or qualify the Covered Shares covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as the Holder or the sole or lead managing underwriter, if any, may reasonably request to enable the Holder to consummate the disposition in such jurisdictions of the Covered Shares owned by the Holder and to continue such registration or qualification in effect in each such jurisdiction for as long as such Registration Statement remains in effect (including through new filings or amendments or renewals), and do any and all other acts and things which may be -5- 6 necessary or advisable to enable the Holder to consummate the disposition in such jurisdictions of the Covered Shares owned by it; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction; (e) promptly notify the Holder and the sole or lead managing underwriter, if any: (i) when the Registration Statement, any pre-effective amendment, the Prospectus or any prospectus supplement related thereto or post-effective amendment to the Registration Statement has been filed, and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any state securities or blue sky authority for amendments or supplements to the Registration Statement or the Prospectus related thereto or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation or threat of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Covered Shares for sale under the securities or blue sky laws of any jurisdiction or the initiation of any proceeding for such purpose, (v) of the existence of any fact of which the Company becomes aware or the happening of any event which results in (A) the Registration Statement containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statements therein not misleading or (B) the Prospectus included in such Registration Statement containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statements therein, in the light of the circumstances under which they were made, not misleading and (vi) of the Company's reasonable determination that a post-effective amendment to a Registration Statement would be appropriate or that there exist circumstances not yet disclosed to the public which make further sales under such Registration Statement inadvisable pending such disclosure and post-effective amendment; and, if the notification relates to an event described in any of the clauses (v) or (vi) of this Section 3.4(e), subject to Section 3.2, the Company shall promptly prepare a supplement or post-effective amendment to such Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that (1) such Registration Statement shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (2) as thereafter delivered to the purchasers of the Covered Shares being sold thereunder, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (and shall furnish to the Holder and each underwriter, if any, a reasonable number of copies of such Prospectus so supplemented or amended); and if the notification relates to an event described in clauses (ii) through (iv) of this Section 3.4(e), the Company shall use its reasonable best efforts to remedy such matters; -6- 7 (f) make reasonably available for inspection by the Holder, any sole or lead managing underwriter participating in any disposition pursuant to such Registration Statement, Holder's counsel and any attorney, accountant or other agent retained by any such seller or any underwriter material financial and other relevant information concerning the business and operations of the Company and the properties of the Company and any subsidiaries thereof as may be in existence at such time as shall be necessary, in the reasonable opinion of such Holder's and such underwriters' respective counsel, to enable them to conduct a reasonable investigation within the meaning of the Act, and cause the Company's and any subsidiaries' officers, directors and employees, and the independent public accountants of the Company, to supply such information as may be reasonably requested by any such parties in connection with such Registration Statement; (g) obtain an opinion from the Company's counsel and a "cold comfort" letter from the Company's independent public accountants who have certified the Company's financial statements included or incorporated by reference in such Registration Statement in customary form and covering such matters as are customarily covered by such opinions and "cold comfort" letters delivered to underwriters in underwritten public offerings, which opinion and letter shall be reasonably satisfactory to the sole or lead managing underwriter, if any, and to the Holder, and furnish to the Holder participating in the offering and to each underwriter, if any, a copy of such opinion and letter addressed to the underwriter; (h) in the case of an underwritten offering, make generally available to its security holders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c)), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158); (i) use its reasonable best efforts to cause all such Covered Shares to be listed (i) on the national securities exchange on which the Company's common shares are then listed or (ii) if common shares of the Company are not at the time listed on any national securities exchange (or if the listing of Covered Shares is not permitted under the rules of such national securities exchange on which the Company's common shares are then listed), on another national securities exchange; (j) furnish to the Holder and the sole or lead managing underwriter, if any, without charge, at least one manually signed copy of the Registration Statement and any post-effective amendments thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those deemed to be incorporated by reference); (k) if requested by the sole or lead managing underwriter or the Holder of Covered Shares, incorporate in a prospectus supplement or post-effective amendment such information concerning the Holder, the underwriters or the intended method of -7- 8 distribution as the sole or lead managing underwriter or the Holder reasonably requests to be included therein and as is appropriate in the reasonable judgment of the Company, including, without limitation, information with respect to the number of Covered Shares being sold to the underwriters, the purchase price being paid therefor by such underwriters and any other terms of the underwritten offering of the Covered Shares to be sold in such offering; and (l) use its reasonable best efforts to take all other steps necessary to expedite or facilitate the registration and disposition of the Covered Shares contemplated hereby, including obtaining necessary governmental approvals and effecting required filings; entering into customary agreements (including customary underwriting agreements, if the public offering is underwritten); cooperating with the Holder and any underwriters in connection with any filings required by the National Association of Securities Dealers, Inc. (the "NASD"); providing appropriate certificates not bearing restrictive legends representing the Covered Shares; and providing a CUSIP number and maintaining a transfer agent and registrar for the Covered Shares. 3.5 Indemnification by the Company. The Company agrees to indemnify and hold harmless the Holder and each person, if any, who controls the Holder within the meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as follows: (i) against any and all loss, liability, claim and damage whatsoever, as incurred, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which the Registrable Securities were registered under the Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto), including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim and damage whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and -8- 9 (iii) against any and all expenses reasonably incurred, as incurred (including reasonable fees and disbursements of counsel), in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that the indemnity provided pursuant to this Section 3.5 does not apply with respect to any loss, liability, claim, damage or expense to the extent arising out of (A) any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by the Holder expressly for use in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) or (B) the Holder's failure to deliver an amended or supplemental Prospectus provided to the Holder by the Company if such loss, liability, claim, damage or expense would not have arisen had such delivery occurred. 3.6 Indemnification by the Holder. The Holder (and each permitted assignee of the Holder, on a several basis) agrees to indemnify and hold harmless the Company, and each of its trustees/directors and officers (including each trustee/director and officer of the Company who signed a Registration Statement), and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which the Registrable Securities were registered under the Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto), including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim -9- 10 whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Holder; and (iii) against any and all expense whatsoever, as incurred (including reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that the indemnity provided pursuant to this Section 3.6 shall only apply with respect to any loss, liability, claim, damage or expense to the extent arising out of (A) any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by the Holder expressly for use in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) or (B) the Holder's failure to deliver an amended or supplemental Prospectus provided to the Holder by the Company if such loss, liability, claim, damage or expense would not have arisen had such delivery occurred. Notwithstanding the provisions of this Section 3.6, the Holder and any permitted assignee shall not be required to indemnify the Company, its officers, trustees/directors or control persons with respect to any amount in excess of the amount of the gross proceeds to the Holder or such permitted assignee, as the case may be, from sales of the Registrable Securities of the Holder under the Registration Statement. 3.7 Conduct of Indemnification Proceedings. An indemnified party hereunder shall give reasonably prompt notice to the indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify the indemnifying party (i) shall not relieve it from any liability which it may have under the indemnity agreement provided in Section 3.5 or 3.6 above, unless and to the extent it did not otherwise learn of such action and the lack of notice by the indemnified party results in the forfeiture by the indemnifying party of substantial rights and defenses, and (ii) shall not, in any event, relieve the indemnifying party from any obligations to the indemnified party other than the indemnification obligation provided under Section 3.5 or 3.6 above. If the indemnifying party so elects within a reasonable time after receipt of such notice, the indemnifying party may assume the defense of such action or proceeding at such indemnifying party's own expense with counsel chosen by the indemnifying party and approved by the indemnified party, which approval shall not be unreasonably withheld; provided, however, that the indemnifying party will not settle any such action or proceeding without the written consent of the indemnified party unless, as a condition to such settlement, the indemnifying party secures the unconditional release of the indemnified party; and provided further, that if the indemnified party reasonably determines that a conflict of interest exists where it is advisable for the indemnified party -10- 11 to be represented by separate counsel or that, upon advice of counsel, there may be legal defenses available to it which are different from or in addition to those available to the indemnifying party, then the indemnifying party shall not be entitled to assume such defense and the indemnified party shall be entitled to separate counsel at the indemnifying party's expense. If the indemnifying party is not entitled to assume the defense of such action or proceeding as a result of the second proviso to the preceding sentence, the indemnifying party's counsel shall be entitled to conduct the indemnifying party's defense and counsel for the indemnified party shall be entitled to conduct the defense of the indemnified party, it being understood that both such counsel will cooperate with each other to conduct the defense of such action or proceeding as efficiently as possible. If the indemnifying party is not so entitled to assume the defense of such action or does not assume such defense, after having received the notice referred to in the first sentence of this paragraph, the indemnifying party will pay the reasonable fees and expenses of counsel for the indemnified party. In such event, however, the indemnifying party will not be liable for any settlement effected without the written consent of the indemnifying party. If an indemnifying party is entitled to assume, and assumes, the defense of such action or proceeding in accordance with this paragraph, the indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified party incurred thereafter in connection with such action or proceeding. 3.8 Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Sections 3.5 and 3.6 above is for any reason held to be unenforceable by the indemnified party although applicable in accordance with its terms, the Company and the Holder shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company and the Holder, (i) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Holder on the other, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative fault of, but also the relative benefits to, the Company on the one hand and the Holder on the other, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits to the indemnifying party and indemnified party shall be determined by reference to, among other things, the gross proceeds received by the indemnifying party and indemnified party in connection with the offering to which such losses, claims, damages, liabilities or expenses relate. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, the indemnifying party or the indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. -11- 12 The parties hereto agree that it would not be just or equitable if contribution pursuant to this Section 3.8 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 3.8, the Holder shall not be required to contribute any amount in excess of the amount of the gross proceeds to the Holder from sales of the Registrable Securities of the Holder under the Registration Statement. Notwithstanding the foregoing, no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 3.8, each person, if any, who controls the Holder within the meaning of Section 15 of the Act shall have the same rights to contribution as the Holder, and each trustee/director of the Company, each officer of the Company who signed a Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Act shall have the same rights to contribution as the Company. SECTION 4. EXPENSES The Company shall pay all expenses incident to the performance by the Company of the Company's registration obligations under Sections 2 and 3, including (i) all stock exchange, Commission and state securities registration, listing and filing fees, (ii) all expenses incurred in connection with the preparation, printing and distributing of any Issuer Registration Statement or Registration Statement and Prospectus and (iii) fees and disbursements of counsel for the Company and of the independent public accountants of the Company. The Holder shall be responsible for the payment of any brokerage and sales commissions, fees and disbursements of the Holder's counsel, accountants and other advisors and any transfer taxes relating to the sale or disposition of the Registrable Securities by the Holder pursuant to Section 3 or otherwise. SECTION 5. RULE 144 COMPLIANCE The Company covenants that it will use its best efforts to timely file the reports required to be filed by the Company under the Act and the Exchange Act so as to enable the Holder to sell Registrable Securities pursuant to Rule 144 under the Act. In connection with any sale, transfer or other disposition by the Holder of any Registrable Securities pursuant to Rule 144 under the Act, the Company shall cooperate with the Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any Act legend, and enable certificates for such Registrable Securities to be for such number of shares and registered in such names as Holder may reasonably request at least ten (10) Business Days prior to any sale of Registrable Securities hereunder. -12- 13 SECTION 6. MISCELLANEOUS 6.1 Integration; Amendment. This Agreement constitutes the entire agreement among the parties hereto with respect to the matters set forth herein and supersedes and renders of no force and effect all prior oral or written agreements, commitments and understandings among the parties with respect to the matters set forth herein. Except as otherwise expressly provided in this Agreement, no amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed by the Company and the Holder. 6.2 Waivers. No waiver by a party hereto shall be effective unless made in a written instrument duly executed by the party against whom such waiver is sought to be enforced, and only to the extent set forth in such instrument. Neither the waiver by any of the parties hereto of a breach or a default under any of the provisions of this Agreement, nor the failure of any of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder. 6.3 Assignment; Successors and Assigns. This Agreement and the rights granted hereunder may not be assigned by the Holder without the written consent of the Company; provided, however, that the Holder may assign its rights and obligations hereunder, following at least ten (10) days prior written notice to the Company, (i) to the direct equity owners (e.g., partners or members) or beneficiaries in connection with the transfer of the Holder's Units to its equity owners or beneficiaries (provided such transfer is made in accordance with the Operating Agreement and in compliance with applicable federal and state securities laws) and (ii) to a permitted transferee in connection with a transfer of the Holder's Units in accordance with the terms of the Operating Agreement, if, in the case of (i) and (ii) above, such persons agree in writing to be bound by all of the provisions hereof. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of all of the parties hereto. 6.4 Burden and Benefit. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, personal and legal representatives, successors and, subject to Section 6.3 above, assigns. 6.5 Notices. All notices called for under this Agreement shall be in writing and shall be deemed to have been delivered (i) on the date personally delivered or (ii) one day after properly sent by recognized overnight courier, addressed to the respective parties at their address set forth in this Agreement or (iii) on the day transmitted by facsimile so long as a confirmation copy is simultaneously forwarded by recognized overnight courier, in each case addressed to the respective parties at their address set forth on Schedule A. Either party hereto may designate a different address by providing written notice of such new address to the other party hereto as provided above. -13- 14 6.6 Specific Performance. The parties hereto acknowledge that the obligations undertaken by them hereunder are unique and that there would be no adequate remedy at law if either party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to (i) compel specific performance of the obligations, covenants and agreements of the other party under this Agreement in accordance with the terms and conditions of this Agreement and (ii) obtain preliminary injunctive relief to secure specific performance and to prevent a breach or contemplated breach of this Agreement in any court of the United States or any State thereof having jurisdiction. 6.7 Governing Law. This Agreement shall be governed by the laws of the State of New York, without regard, to the fullest extent permitted by law, to the conflict of laws rules thereof which might result in the application of the laws of any other jurisdiction. 6.8 Headings. Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof. 6.9 Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or entity may require. 6.10 Execution in Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be required. It shall not be necessary that the signature of or on behalf of each party appears on each counterpart, but it shall be sufficient that the signature of or on behalf of each party appears on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in any proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of or on behalf of both of the parties. 6.11 Severability. If fulfillment of any provision of this Agreement, at the time such fulfillment shall be due, shall transcend the limit of validity prescribed by law, then the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held ineffective, as though not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. -14- 15 [Remainder of Page Intentionally Blank] -15- 16 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed on its behalf as of the date first herein above set forth. GENERAL GROWTH PROPERTIES, INC. By: /s/: Ronald L. Gern --------------------------------------- Name: Ronald L. Gern Title: Senior vice President and General Counsel GOLDMAN SACHS 2000 EXCHANGE PLACE FUND, L.P. By: Goldman Sachs Management Partners, L.P., as its general partner By: Goldman Sachs Management, Inc., as its general partner By: /s/: Eric Lane -------------------------------------- Name: Eric Lane Title: [Signature Page to Registration Rights Agreement] 17 SCHEDULE A General Growth Properties, Inc 110 W. Wacker Drive Chicago, Illinois 60606. Attention: John Bucksbaum With a copy to: Neal, Gerber & Eisenberg Two North LaSalle Street Chicago, Illinois 60602 Attention: Marshall E. Eisenberg Goldman Sachs 2000 Exchange Place Fund, L.P. c/o Goldman, Sachs & Co. 1 New York Plaza, 41st Floor New York, New York 10004 Attention: Elizabeth C. Groves With a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, NY 10004 Attention: Lawrence Barshay EX-27 4 ex27.txt FDS
5 This schedule contains summary financial information extracted from the registrant's financial statements included in its report on Form 10-Q for the six months ended June 30, 2000 and is qualified in its entirety by reference to such financial statements included in such report. 0000895648 GENERAL GROWTH PROPERTIES, INC. 1,000 6-MOS DEC-31-2000 JUN-30-2000 40,263 0 74,007 0 0 0 5,267,508 432,339 5,080,081 0 3,100,835 337,500 0 5,200 1,444,984 5,080,081 327,509 327,509 0 171,109 0 178 99,274 56,191 0 56,191 0 0 0 56,191 0.42 0.42
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