-----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, OGtpLl0owmBXVrbgmwei7GAz6h4nKn37ZfDMwlubJhOcKMuUpc+3eCfYT3P+MeSP SW2+Sk/12Uj6YqorpShBQg== 0000950137-98-001353.txt : 19980401 0000950137-98-001353.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950137-98-001353 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL GROWTH PROPERTIES INC CENTRAL INDEX KEY: 0000895648 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 421283895 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11656 FILM NUMBER: 98581578 BUSINESS ADDRESS: STREET 1: 55 WEST MONROE ST STREET 2: STE 3100 CITY: CHICAGO STATE: IL ZIP: 60603 BUSINESS PHONE: 3125515000 MAIL ADDRESS: STREET 1: 55 WEST MONROE ST STREET 2: STE 3100 CITY: CHICAGO STATE: IL ZIP: 60603 10-K 1 FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997. OR [GRAPHIC OMITTED] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [ ] FOR THE TRANSITION PERIOD FROM ______________________ TO _________________ COMMISSION FILE NUMBER 1-11656 GENERAL GROWTH PROPERTIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 42-1283895 ------------------------------- ------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 55 W. MONROE - SUITE 3100 CHICAGO, ILLINOIS 60603 ------------------------------------- -------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 551-5000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- COMMON STOCK, $.10 PAR VALUE NEW YORK STOCK EXCHANGE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such report(s)) and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- [ ] Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. As of March 26, 1998, the aggregate market value of the 32,207,536 shares of Common Stock held by non-affiliates of the registrant was $1,223,886,368, based upon the closing price on the New York Stock Exchange composite tape on such date. (For this computation, the registrant has excluded the market value of all shares of its Common Stock reported as beneficially owned by executive officers and directors of the registrant and certain other stockholders; such exclusion shall not be deemed to constitute an admission that any such person is an "affiliate" of the registrant.) As of March 26, 1998, there were 35,768,922 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for the annual stockholders meeting to be held on May 14, 1998 are incorporated by reference into Part III. 2 PART I ITEM 1. BUSINESS FORWARD LOOKING INFORMATION Forward looking statements contained in this Annual Report on Form 10-K may include certain forward-looking information statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including (without limitation) statements with respect to anticipated future operating and financial performance, growth and acquisition opportunities and other similar forecasts and statements of expectation. Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates" and "should" and variations of these words and similar expressions, are intended to identify these forward-looking statements. Forward-looking statements made by the Company, its Operating Partnership and Subsidiaries (the "Company") and its management are based on estimates, projections, beliefs and assumptions of management at the time of such statements and are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information or otherwise. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by the Company and its management as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation) general industry and economic conditions, interest rate trends, cost of capital and capital requirements, availability of real estate properties, competition from other companies and venues for the sale/distribution of goods and services, shifts in customer demands, tenant bankruptcies, changes in operating expenses, including employee wages, benefits and training, governmental and public policy changes and the continued availability of financing in the amounts and at the terms necessary to support the Company's future business. GENERAL General Growth Properties, Inc. was formed in 1986 by Martin Bucksbaum and Matthew Bucksbaum (the "Original Stockholders"). On April 15, 1993, an initial public offering (the "IPO") of the common stock (the "Common Stock") of General Growth Properties, Inc. and certain related transactions were completed. In connection with the IPO, General Growth Properties, Inc. and the Original Stockholders formed GGP Limited Partnership (the "Operating Partnership"). As a result of the IPO and related transactions, General Growth Properties, Inc. and the Operating Partnership (collectively the "Company") together owned 100% of twenty-one enclosed mall shopping centers. During May of 1995, the Company completed a follow-on stock offering of 4,500,000 shares of Common Stock. The Company issued 3,451,783 shares of Common Stock during 1996 in connection with various acquisitions. In the third quarter of 1997 the Company sold an additional 4,927,680 shares of Common Stock in two separate transactions. At December 31, 1997, the Company owned 100% of thirty-five enclosed regional shopping centers, 51% of the stock of GGP/Ivanhoe, Inc., 50% of each of two enclosed mall shopping centers, Quail Springs and Town East, 38.2% of the stock of GGP/Homart, Inc. ("GGP/Homart") and a non-voting preferred stock interest in General Growth Management, Inc. ("GGMI"). The thirty-five 100% owned regional shopping centers, the 51% ownership interest in GGP/Ivanhoe, Inc., and the 50% ownership in both Quail Springs and Town East comprise the "GGP Centers". On December 31, 1997, General Growth Properties, Inc. owned a 66% general partnership interest in the Operating Partnership, and various minority holders, primarily the Original Stockholders, owned the remaining 34% limited partnership interest. The Company is engaged in the ownership, operation, management, leasing, acquisition, development, expansion and financing of enclosed mall shopping centers. See the Consolidated Financial Statements and Notes thereto included in item 8 of this Annual Report on Form 10-K for certain financial information required by this Item 1. On February 11, 1994, the Company acquired 40% of the outstanding stock of CenterMark Properties, Inc. ("CenterMark") for approximately $182.0 million in cash. CenterMark owned interests in sixteen enclosed regional shopping centers, three power centers and other real estate, including fourteen free-standing department stores net leased to May Company and a 116-unit apartment project in LaJolla, California. On December 19, 1995, the Company sold a portion of its interest in CenterMark for $72.5 million and granted the buyer an option to purchase its remaining interest. The Company's remaining interest was sold in two transactions with $87.0 million received on July 1, 1996 and $130.5 million received on January 2, 1997. -2- 3 On December 22, 1995 the Company, jointly with four other investors, acquired 100% of the stock in GGP/Homart which owned substantially all of the regional mall assets and liabilities that were owned by Homart Development Co., an indirect wholly-owned subsidiary of Sears, Roebuck & Co. The Company acquired 38.2% of GGP/Homart for approximately $178 million including certain transaction costs. All of the stockholders of GGP/Homart committed to contribute up to $80.0 million of additional capital and as of December 31, 1997 this commitment had been fulfilled. At December 31, 1997 GGP/Homart owned interests in twenty-five shopping centers (the "Homart Centers"). Together, the GGP Centers and the Homart Centers comprise the Company portfolio ("the "Portfolio Centers"). On December 22, 1995, GGP Management, Inc. ("GGP Management") was formed to manage, lease, develop and operate enclosed malls. The Operating Partnership owned 100% of the non-voting preferred stock ownership interest in GGP Management representing 95% of the equity interest. Key employees of the Company held the remaining 5% ownership interest therein, in the form of common stock entitled to all of the voting rights in GGP Management. In August of 1996, GGP Management acquired GGMI through arm's length negotiations for approximately $51.5 million, which was accounted for as a purchase, by completing the following steps: GGP Management borrowed approximately $39.9 million from the Operating Partnership, and used the loan proceeds to acquire 1,555,855 newly-issued shares of Common Stock from the Company. GGP Management then exchanged the 1,555,855 shares of Common Stock and 453,791 Operating Partnership Units (contributed by the Operating Partnership) for 100% of the outstanding shares in GGMI. GGP Management was then merged into GGMI with GGMI as the surviving entity. The Operating Partnership currently holds all of the non-voting preferred stock ownership interest in GGMI representing 95% of the equity interest. Five key employees of the Company hold the remaining 5% equity interest through ownership of 100% of the common stock which is entitled to all voting rights in GGMI. GGMI cannot distribute funds until its available cash flow exceeds all accumulated preferred dividends owed to the preferred stockholder. Any dividends in excess of the preferred cumulative dividend are allocated 95% to the preferred stockholder and 5% to the common stockholders. The interest only loan from the Operating Partnership to GGMI bears interest at 14% and matures in 2016. GGMI may make principal payments on the loan if it has sufficient cash flow. GGMI manages, leases, and performs various other services for the GGP Centers, Homart Centers and other properties owned by unaffiliated parties. As used herein, the term "GLA" refers to gross retail space, including anchors and mall tenant areas; the term "Mall GLA" refers to gross retail space, excluding anchors; the term "Anchor" refers to a department store or other large retail store; the term "Mall Stores" refers to stores (other than anchors) that are typically specialty retailers who lease space in shopping centers; and the term "Freestanding GLA" means gross leasable area of freestanding retail stores or convenience stores located along the perimeter of a center's parking area. BUSINESS OF THE COMPANY The Company is engaged in the ownership, operation, management, leasing, acquisition, development, expansion and financing of enclosed mall shopping centers. Most of the GGP Centers are strategically located nationwide in middle markets where they have strong competitive positions. The GGP Centers' geographic diversification should mitigate the effects of regional economic conditions and local factors. The Homart Centers are primarily concentrated in areas not served by the GGP Centers. In addition most of the Homart Centers are located in major markets which further diversify the Portfolio Centers in terms of geographic region and market type of the Company's enclosed mall shopping centers. The Company is the asset manager of the GGP Centers, making all key strategic decisions. It retains final authority over all operating matters and supervises GGMI, the property manager of the GGP Centers. GGMI performs day-to-day property management functions including leasing, construction management, data processing, maintenance, accounting, marketing, promotion and security at the GGP Centers pursuant to the management agreements. The Company, along with its stockholders in GGP/Homart, makes all key strategic decisions for the Homart Centers. The Company is the asset manager of the Homart Centers, executing the strategic plans and overseeing the day-to-day activities performed by GGMI. As of December 31, 1997 GGMI was the property manager for twenty-one of the Homart Centers, and the joint venture partners managed the other four Homart Centers. -3- 4 The majority of the mall income is derived from rents received through long term leases with retail tenants. The long term leases require the tenant to pay base rent which is a fixed amount specified in the lease. The base rent is often subject to scheduled increases defined in the lease. Another component of income is percentage rent. Percentage rent is paid by the tenant if their sales exceed an agreed upon minimum annual amount. Percentage rent is calculated by multiplying the sales in excess of the minimum annual amount by a percentage defined in the lease agreement. Long term leases generally contain a provision for the mall to recover expenses incurred in the day-to-day operations including common area maintenance and real estate taxes. The recovery is calculated by multiplying the tenants pro-rata share of space by the total recoverable expense amounts. The evolution of the shopping center business necessitates the implementation of new approaches to shopping center management and leasing. Management's strategies to increase shareholder value and cash flow include the integration of mass merchandise retailers with traditional department stores, specialty leasing, entertainment-oriented tenants, proactive property management and leasing, strategic expansions and acquisitions, and selective new shopping center developments. These approaches should enable the Company to operate and grow successfully in today's value-oriented environment. Following is a summary of recent acquisition, development and expansion and redevelopment activity. ACQUISITIONS The Company continues to seek desirable properties for acquisition. In 1997, the Company acquired 100% ownership interests in five regional malls and partial ownership interests in three additional regional malls for an aggregate investment of approximately $387 million. The Company acquired a 100% ownership interest in Valley Hills Mall located in Hickory, North Carolina on October 23, 1997 for a purchase price of approximately $34.5 million. During the second quarter of 1997, the Company acquired 100% ownership of three other properties, Century Plaza Shopping Center, Southlake Mall and Eden Prairie Mall. Century Plaza Shopping Center located in Birmingham, Alabama was acquired on May 1, 1997 for $31.8 million. Southlake Mall, located in Atlanta, Georgia, was acquired on June 18, 1997, for a purchase price of $67.0 million. The aggregate consideration paid for Eden Prairie Mall, located in Minneapolis, Minnesota, was $19.9 million. On March 31, 1997, the Company acquired a 100% ownership interest in Market Place Mall, located in Champaign, Illinois, for a purchase price of approximately $70.0 million. On September 17, 1997, GGP/Ivanhoe, Inc. acquired both The Oaks Mall In Gainesville, Florida and Westroads Mall in Omaha, Nebraska. The Company owns 51% of the ownership interest in GGP/Ivanhoe for an investment of $107.5 million including its prorata share of the property level indebtedness. On June 11, 1997, the Company acquired a 50% interest in Town East Mall, located in Mesquite, Texas for $56.5 million including its pro rata share of the property level indebtedness. The Company's management believes that it has the following competitive advantages and reasons to acquire enclosed shopping malls: o The funds necessary for a cash acquisition of a shopping center can be obtained by the Company from a combination of sources, including mortgage or unsecured financing or the issuance of public debt or equity. o The Company has the flexibility to pay for an acquisition with a combination of cash, Common Stock or limited partnership units in the Operating Partnership. This creates the opportunity for tax-advantaged transactions for the seller. o Management's expertise allows it to evaluate proposed acquisitions for their increased profit potential. Additional profit can originate from many sources including expansions, remodeling, remerchandising, and more efficient management of the property. -4- 5 DEVELOPMENT The Company intends to pursue development when warranted by the potential financial returns. Brass Mill, a Homart development project, was completed and had a grand opening ceremony in September of 1997. The Company is currently developing an enclosed shopping center in Coralville (Iowa City), Iowa and completing predevelopment work on the site located in Grand Rapids, Michigan. Brass Mill includes Brass Mill Commons a 930,000 square foot enclosed mall and power center which includes approximately 330,000 square feet of Mall Store space and a 200,000 square foot power center in Waterbury, Connecticut. As of December 31, 1997 the mall had approximately 250,000 square feet of Mall Store space signed and an additional 30,000 square feet out for signature. Sears, JCPenney, Filenes and Hoyt's theater anchor the enclosed regional mall. The power center, Brass Mill Commons, is currently 100% leased. Brass Mill includes Chili's, Office Max, Kids R Us, Toys R Us, Barnes & Noble, Hometown Buffet, TGI Friday's and Shaw's Grocery Store. Coral Ridge Mall, a 1,200,000 square foot enclosed regional mall located in Coralville, Iowa is scheduled to open in July of 1998. The mall will include five department store anchors, several big box retailers, a theater, an ice arena, a children's museum and approximately 200,000 square feet of Mall Store space. The Mall Store space was 52% signed and 47% out for signature at the end of 1997. As of December 31, 1997 approximately $26 million has been spent of an estimated total cost of $70 million. The funding for the development of this project comes primarily from an unsecured credit facility. The development in Grand Rapids, Michigan will consist of approximately 1,100,000 square feet and is currently expected to open in late 1999. EXPANSIONS AND RENOVATIONS Most of the Portfolio Centers were designed to allow for expansion and growth through the addition of new Anchors or Mall and Freestanding Stores. Five GGP Centers and eight Homart Centers are in the process of an expansion, Anchor addition or renovation. The expansion and renovation of a Portfolio Center often increases customer traffic, trade area penetration and typically improves the competitive position of the property. Three of the larger renovation and expansion projects are the renovation and expansion of Chapel Hills Mall, the expansion of Fox River Mall and Neshaminy Mall, a Homart Center. Chapel Hills Mall, a 1,159,187 square foot center located in Colorado Springs, Colorado recently added a three level 203,000 square foot Dillards department store and adjoining parking deck. The new Dillards opened in March of 1997. Additional improvements will include the addition of an ice rink, a two-level Borders Book Store, a food court expansion, new skylights, new ceilings, hand rails, remodeled restrooms and flooring upgrades. The ice rink and renovation are expected to be completed during 1998. Fox River Mall, a 1,045,806 square foot center, located in Appleton, Wisconsin is completing the expansion of its food court. The 36,000 square foot project includes a 7,000 square foot restaurant/brew pub, eight new permanent food court locations and an additional 300 seats, bringing the total seating capacity to 850 seats. The modifications were substantially complete by the end of 1997. Neshaminy Mall is currently a 945,779 square foot enclosed mall anchored by Boscov, Sears, and Strawbridge & Clothier. Neshaminy Mall, located in Bensalem, Pennsylvania, a suburb of Philadelphia, is currently undergoing an expansion project consisting of a 24 screen AMC Theater and approximately 20,000 square feet of Mall Store space. The addition of the 24 screen theater will complement the existing entertainment oriented tenant mix and differentiate Neshaminy Mall from its competition. The theater and additional Mall Store space is projected to open in late 1998. -5- 6 THE PORTFOLIO CENTERS All of the sixty-four Portfolio Centers are enclosed mall shopping centers with at least two major department stores as Anchors and a wide variety of smaller Mall Stores. Most of the Portfolio Centers have three or four Anchors and additional Freestanding Stores which are located along the perimeter of the parking area. Each Portfolio Center provides ample surface parking for shoppers. The Portfolio Centers: o range in size between approximately 340,000 and 1,365,000 square feet of total GLA and between approximately 125,000 and 425,000 square feet of Mall and Freestanding GLA. The smallest Portfolio Center has approximately 40 stores, and the largest has over 200 stores; o have approximately 250 Anchors, operating under approximately 53 trade names; and o have approximately 9,600 Mall and Freestanding Stores. The average size of the sixty-four Portfolio Centers is approximately 800,000 square feet of GLA, including all Anchors, Mall Stores and Freestanding Stores. The average Mall and Freestanding GLA per Portfolio Center is approximately 310,000 square feet. As of December 31, 1997, the GGP Centers contain approximately 28.9 million square feet of GLA consisting of Anchors (whether owned or leased), Mall Stores and Freestanding Stores. The Homart Centers contain approximately 22.3 million square feet of GLA. The Company's share of total revenues from the Portfolio Centers and GGMI increased to $443.7 million in 1997 from $363.4 million in 1996. No single Portfolio Center generated more than 7% of the Company's total 1997 pro rata revenues. In 1997, total Mall Store sales at all of the Portfolio Centers increased by approximately 7.2%. -6- 7 MALL AND FREESTANDING STORES The Portfolio Centers have an aggregate of approximately 9,600 Mall and Freestanding Stores. The following table reflects the tenant representation by category in the GGP Centers as of December 31, 1997. Management believes that similar tenant representation by category existed in the Portfolio Centers as of December 31, 1997.
- ---------------------------------------------------------------------------------------------------------------------------- % Of Sq. Ft. in Tenant Categories GGP Centers Types of Tenants/Products Sold - ---------------------------------------------------------------------------------------------------------------------------- Women's Apparel 21% Women's apparel - ------------------------------------------------------------------------------------------------------------- Men's Apparel 2% Men's apparel - ------------------------------------------------------------------------------------------------------------- Apparel 10% Unisex apparel, children's apparel, lingerie, formalwear - ------------------------------------------------------------------------------------------------------------- Shoes 11% Shoes - ------------------------------------------------------------------------------------------------------------- Specialty Food 3% Candy, coffee, nuts, chocolate, health food/vitamins - ------------------------------------------------------------------------------------------------------------- Food 9% Restaurant, food court - ------------------------------------------------------------------------------------------------------------- Gifts 6% Cards, candles, engraving stores, other gift or novelty - ------------------------------------------------------------------------------------------------------------- Jewelry 3% Fine jewelry and costume jewelry - ------------------------------------------------------------------------------------------------------------- Music/Electronics 6% Music, electronics, computer and software, video rental - ------------------------------------------------------------------------------------------------------------- Sporting Goods 4% Sports apparel, sports and exercise equipment - ------------------------------------------------------------------------------------------------------------- Entertainment 4% Arcades and interactive entertainment - ------------------------------------------------------------------------------------------------------------- Specialty 21% Photo studios and development, beauty and nail salons, pharmacy and sundries, variety stores, pet stores, newsstands, jewelry repair, shoe repair, tailor, optical, video games, sporting goods, shops for home/bath/kitchen, rugs, fabric stores, beds/waterbeds, luggage, perfume, tobacco, toys, cameras, sunglasses, books - ------------------------------------------------------------------------------------------------------------- Total 100% - -------------------------------------------------------------------------------------------------------------
Typical tenants in Women's Apparel include the Limited, Casual Corner, Talbots and Lerner. Men's Apparel includes tenants such as J. Riggins and Nicks for Men. The Apparel category typically includes Gap, Eddie Bauer, American Eagle, Buckle and Gymboree. The Shoes category often includes tenants such as Kinney, Footlocker and Payless Shoesource. Specialty Food tenants often include General Nutrition Center, Mr. Bulky, and Barnie's Coffee and Tea Company. The Food category typically includes restaurants such as Garfield's, fast food restaurants such as Arby's, and food court tenants such as Sbarro. Typical tenants in the Gifts Category include Disney, Things Remembered, Kirlin's Hallmark and Spencer Gifts. Jewelry tenants typically include Friedman's Jewelers and Golden Chain Gang. The Music/Electronics category includes tenants such as Camelot Music, Radio Shack, Suncoast Pictures and Waldensoftware. Sporting Goods include tenants such as Champs, Pro Image and Scheel's Sports. Entertainment tenants typically include Pocket Change, Aladdin's Castle and Tilt. Specialty tenants include Mastercuts, One Hour Photo, California Nails, Lechter's, Kay-Bee Toys, Dollar Tree, Lemstone Books, Garden Botanika and many others. The table below shows mall shop tenants (excluding department stores) in the GGP Centers with more than 50,000 total square feet on December 31, 1997. Management believes that similar square footage percentages existed in the Portfolio Centers as of December 31, 1997. -7- 8
- ------------------------------------------------------------------------------------ Total Tenant Name Sq. Ft. % of Total - ------------------------------------------------------------------------------------ Lerner New York 200,988 1.8% Express 161,923 1.5% Limited 153,121 1.4% Lane Bryant 139,980 1.3% Victoria's Secret 127,154 1.2% Footlocker 102,528 0.9% Radio Shack 87,898 0.8% Gap 86,509 0.8% Waldenbooks 82,361 0.8% Famous Footwear 77,142 0.7% Champs Sports 75,805 0.7% B. Dalton Bookseller 70,666 0.6% Lenscrafters 57,598 0.5% Casual Corner 55,363 0.5%
COMPETITION The Portfolio Centers compete with numerous shopping alternatives in seeking to attract retailers to lease space as retailers themselves face increasing competition from discount shopping centers, outlet malls, discount shopping clubs, direct mail and telemarketing. Below are detailed descriptions of the type of competitor the Portfolio Centers face. Fox River Mall is an enclosed super regional mall located in Appleton, Wisconsin. It consists of the main building, an adjacent community center and nine outparcels totaling 1,045,806 square feet. The mall is anchored by Dayton's, Younkers, JCPenney, Sears and Target. The primary competition for Fox River consists of three centers. One of the centers, located 26 miles northeast, consists of 601,630 square feet and is anchored by Elder Beerman, Kohl's, Montgomery Ward and Shopko. This center offers merchandise with lower price points and more discount retailers than Fox River Mall. A 903,538 square foot center located 29 miles northeast is anchored by Boston Store, JCPenney and Younkers. This center lacks a fashion anchor similar to the Dayton's at Fox River and is not easily accessible in its downtown location. In addition, a 328,775 square foot community center located approximately three miles from Fox River is anchored by Kohl's and Shopko. This center primarily serves as a convenience shopping facility for residents on the north side of Appleton and offers little direct competition to Fox River. Bellis Fair Mall is a 768,527 square foot regional shopping center located on Interstate 5 in Bellingham, Washington, 90 miles north of Seattle and 25 miles south of the Canadian border. The Mall is anchored by JCPenney, Bon Marche, Sears, Target and Mervyns. The primary competition for Bellis Fair consists of discount retailers. While these discount retailers help draw Canadian shoppers they in turn attract shoppers to Bellis Fair due to its stronger, fashion oriented tenant mix. The discount retailers that compete with Bellis Fair include Ross Dress for Less, Home Base, Office Depot, Good Guys, Circuit City and Wal-Mart. Other competition includes a 110,000 square foot center located 15 miles north that also helps draw Canadian shoppers. Located approximately 25 miles south is a 525,000 square foot center anchored by Bon Marche, Sears and Emporium. This center lacks the desirable national tenant mix available at Bellis Fair. As a whole, these outlet centers have little impact on Bellis Fair's core market. Natick Mall is a 1,152,039 square foot regional mall located in Boston, Massachusetts. The mall is anchored by Filenes, Macy's, Lord & Taylor, Jordan Marsh and Sears. Natick Mall is situated in a highly competitive market of regional malls, yet the center's excellent location makes it the dominant retail facility in the trade area. The primary competition for Natick Mall consists of an upscale 444,000 square foot specialty retail center with an adjacent -8- 9 300,000 square foot center. The specialty center is anchored by Bloomingdales, Homestore and Filenes. The 300,000 square foot adjacent center is anchored by Henri Bendel. These centers offer unique upscale merchants with a much smaller number of tenants and a more limited fashion mix than is offered at Natick. A 1,250,000 square foot center located approximately 22 miles north is anchored by Sears, Lord & Taylor, Filenes and Macy's. A 1988 renovation to this center, which included the addition of a second level of mall shops, has secured its strong competitive position in the northwest suburban Boston community, yet its market demographics remain weaker than Natick's. A new 1,100,000 square foot center located approximately 20 miles west is anchored by Sears, JCPenney and Filenes. This center offers a more moderately priced tenant mix and is also located in a weaker demographic area than Natick's market area. In addition, a 1,370,000 square foot center is located 25 miles southeast and is anchored by Sears, Filenes, Lord & Taylor and Macy's. This center contains similar tenants to and the same anchors as Natick. Because of its good location and tenant mix, it poses the most direct competition to Natick Mall. In addition to competition from other centers which the Portfolio Centers also face direct competition from other companies, catalogues, direct mail, internet sales and telemarketers. ENVIRONMENTAL MATTERS Under various federal, state and local laws and regulations, an owner of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on such property. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The costs of remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner's ability to sell such real estate or to borrow using such real estate as collateral. In connection with its ownership and operation of the Portfolio Centers, the Company, the Operating Partnership or the relevant Property Partnership, may be potentially liable for such costs. All of the Portfolio Centers have been subject to Phase I environmental assessments, which are intended to discover information regarding, and to evaluate the environmental condition of, the surveyed and surrounding properties. The Phase I assessments included an historical review, a public records review, a preliminary investigation of the site and surrounding properties, screening for the presence of asbestos, polychlorinated biphenyls ("PCBs") and underground storage tanks and the preparation and issuance of a written report, but do not include soil sampling or subsurface investigations. Where the Phase I assessment so recommended, a Phase II assessment was conducted to further investigate any issues raised by the Phase I assessment. In each case where Phase I and/or Phase II assessments resulted in specific recommendations for remedial actions, management has either taken or scheduled the recommended action. Neither the Phase I nor the Phase II assessments have revealed any environmental liability that the Company believes would have a material effect on the Company's business, assets or results of operations, nor is the Company aware of any such liability. Nevertheless, it is possible that these assessments do not reveal all environmental liabilities or that there are material environmental liabilities of which the Company is unaware. Moreover, no assurances can be given that (i) future laws, ordinances or regulations will not impose any material environmental liability or (ii) the current environmental condition of the Portfolio Centers will not be affected by tenants and occupants of the Portfolio Centers, by the condition of properties in the vicinity of the Portfolio Centers (such as the presence of underground storage tanks) or by third parties unrelated to the Operating Partnership or the Company. EMPLOYEES As of March 25, 1998, the Company and GGMI had approximately 2,800 full-time employees. None of the employees are subject to a collective bargaining agreement and the Company has not experienced a labor-related work stoppage. INSURANCE The Company has comprehensive liability, fire, flood, extended coverage and rental loss insurance with respect to the Portfolio Centers. The Company's management believes that all of the Portfolio Centers described herein which are owned by the Company, in whole or in part, are adequately covered by insurance. -9- 10 QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST AND TAXABILITY OF DISTRIBUTIONS The Company currently qualifies as a real estate investment trust pursuant to the requirements contained under Sections 856-858 of the Internal Revenue Code of 1986, as amended (the "Code"). If, as the Company contemplates, such qualification continues, the Company will not be taxed on its real estate investment trust taxable income. During 1997, the Company distributed (or was deemed to have distributed) 100% of its taxable income to stockholders. Cash distributions in the amount of $1.78 per share were paid in 1997. Of that amount, $.53 (29.8%) was ordinary income, based on the taxable income of the Company and $1.25 (70.2%) was a long-term capital gain from the sale of a portion of the CenterMark stock. -10- 11 ITEM 2. PROPERTIES The Company's investment in real estate as of December 31, 1997 consisted of its interest in the Portfolio Centers, development in progress and certain other real estate. As described elsewhere herein, on December 22, 1995 the Company acquired 38.2% of GGP/Homart. GGP/Homart owns interests in the Homart Centers and certain other real estate assets. The Company completed the sale of its remaining interest in CenterMark on January 2, 1997. As a result of the sale, the Company no longer has an ownership interest in the real estate assets of CenterMark. In most cases, the land underlying the Portfolio Centers is owned in fee; however, at a few of the GGP Centers, all or part of the underlying land is owned by a third party that leases the land pursuant to a ground lease. The Company currently leases the land under Rio West Mall. It also leases a portion of the Fallbrook Mall land and a portion of the SouthShore and Bayshore parking areas. The leases contain various purchase options in favor of the Company and typically provide for a right of first refusal in favor of the Company in the event of a proposed sale of the property by the Landlord. In addition, Prince Kuhio Plaza, one of the Homart Centers, is located on land leased pursuant to a long-term ground lease. The Portfolio Centers weighted average Mall Store rent per square foot from leases that expired in 1997 was $20.81. As a result of market rents being higher than the rents under many of the expiring leases, the weighted average Mall Store rent per square foot on new and renewal leases during 1997 was $25.84, or $5.03 per square foot more than the above-indicated average for expiring leases. Below is a schedule of the lease expirations over the next five years. COMPANY PORTFOLIO FIVE YEAR LEASE EXPIRATION SCHEDULE
All Expirations Expirations @ Share(1) -------------------------------------------- ------------------------------------------------- Base Rent Sq. Ft. Rent/Sq. Ft. Base Rent Sq. Ft. Rent/Sq. Ft. - ---------------------------------------------------------------------------------------------------------------------------------- GGP Centers 1998 $ 12,275,741 624,190 $ 19.67 $ 11,261,988 577,833 $ 19.49 1999 13,318,630 632,270 21.06 12,296,333 593,946 20.70 2000 11,270,130 511,754 22.02 10,601,982 486,771 21.78 2001 14,637,060 679,505 21.54 13,589,964 635,040 21.40 2002 15,373,776 684,733 22.45 13,925,430 632,646 22.01 ------------ ---------- -------- ------------ ---------- --------- 66,875,337 3,132,452 21.35 61,675,697 2,926,236 21.08 ------------ ---------- -------- ------------ ---------- --------- Homart Centers 1998 10,578,959 349,311 30.29 2,565,123 80,851 31.73 1999 11,821,594 369,708 31.98 2,717,458 82,529 32.93 2000 16,028,705 491,221 32.63 3,833,424 124,176 30.87 2001 10,281,914 338,574 30.37 2,546,634 84,584 30.11 2002 13,032,440 422,241 30.86 3,871,919 120,671 32.09 ------------ ---------- -------- ------------ ---------- --------- 61,743,612 1,971,055 31.33 15,534,558 492,811 31.52 ------------ ---------- -------- ------------ ---------- --------- Portfolio Centers 1998 22,854,700 973,501 23.48 13,827,111 658,684 20.99 1999 25,140,224 1,001,978 25.09 15,013,791 676,475 22.19 2000 27,298,835 1,002,975 27.22 14,435,406 610,947 23.63 2001 24,918,974 1,018,079 24.48 16,136,598 719,624 22.42 2002 28,406,216 1,106,974 25.66 17,797,349 753,317 23.63 ------------ ---------- -------- ------------- ----------- --------- $128,618,949 5,103,507 $ 25.20 $ 77,210,255 3,419,047 $ 22.58 ============ ========== ======== ============ ========== =========
(1) Expirations at share reflect the Company's direct or indirect ownership interest in a joint venture. -11- 12 At December 31, 1997, the Company had direct or indirect ("pro rata") mortgage debt totaling $1,709,003. The Company decreased its ratio of consolidated pro rata floating rate debt to total pro rata debt from 34% at December 31, 1996 to less than 13% at December 31, 1997. In addition to the reduction in the percentage of floating rate debt, the consolidated pro rata weighted average interest rate was reduced to 7.14% as of December 31, 1997 compared to 7.25% in the prior year. The following table reflects the maturity dates of the Company's pro rata debt and the related interest rates. COMPANY PORTFOLIO DEBT MATURITY AND CURRENT AVERAGE INTEREST RATE SUMMARY(a) AS OF DECEMBER 31, 1997 (Dollars in Thousands, unaudited)
Company GGP Centers GGP/Homart(b) Portfolio Debt ------------------------- ------------------------- -------------------------- Current Current Current Maturing Average Maturing Average Maturing Average Year Amount Rate Amount Rate Amount Rate - ---------------------------- -------------- -------- ---------- --------- ------------ --------- 1998 $ 16,743 6.93% $ 43,264 7.03% $ 60,007 7.00% 1999 196,687 7.83% 89,513 7.02% 286,200 7.58% 2000 - - 50,470 6.96% 50,470 6.96% 2001 152,000 6.41% - - 152,000 6.41% Subsequent 1,007,721 7.10% 152,605 7.46% 1,160,326 7.15% -------------- -------- ---------- --------- ------------ --------- Totals $ 1,373,151 7.13% $ 335,852 7.21% $ 1,709,003 7.14% ============== ======== ========== ========= ============ ========= Floating Rate $ 86,000 6.65% $ 129,051 6.96% $ 215,051 6.84% Fixed Rate (c) 1,287,151 7.16% 206,801 7.37% 1,493,952 7.19% -------------- -------- ---------- --------- ------------ --------- Totals $ 1,373,151 7.13% $ 335,852 7.21% $ 1,709,003 7.14% ============== ======== ========== ========= ============ =========
(a) Excludes principal amortization. (b) GGP/Homart debt reflects the Company's share of its total portfolio debt. (c) Includes $44,728 of floating rate debt with a 9% cap on the all-in rate through maturity. The following tables set forth certain information regarding the GGP Centers and the Homart Centers as of December 31, 1997. The first table depicts the GGP Centers and the second table depicts the Homart Centers. -12- 13 GGP CENTERS -----------
TOTAL GLA/MALL YEAR AND FREESTANDING NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR LOCATION(1) OR EXPANDED (SQUARE FEET) ANCHORS VACANCIES ----------- ----------- ----------- ------- --------- Bayshore Mall 1987/ 615,481/ Gottschalks, JCPenney, Sears, Mervyn's, None Eureka, California 1989 345,466 Bellis Fair Mall 1988/ 768,527/ The Bon Marche, JCPenney, Sears, Target, None Bellingham, Washington N/A 349,606 Mervyn's Birchwood Mall 1990/ 716,449/ Younkers, JCPenney, Sears, Target, Hudson's None Port Huron, Michigan 1991, 1997 287,306 Capital Mall 1978/ 517,680/ Dillard's, JCPenney, Sears None Jefferson City, Missouri 1985, 1992 307,815 Century Mall 1975/ 726,109/ JCPenney, McRae's, Rich's, Sears None Birmingham, Alabama 1990, 1994 237,764 Chapel Hills Mall 1982/ 1,159,187/ Joslin's, Sears, Mervyn's, KMart, JCPenney, None Colorado Springs, 1986 420,010 Dillard's Colorado Colony Square Mall 1981/ 547,738/ Lazarus, Elder-Beerman, JCPenney, Sears None Zanesville, Ohio 1987 289,559 Columbia Mall 1985/ 733,368/ Dillard's, JCPenney, Sears, Target None Columbia, Missouri 1987 317,924 Eagle Ridge Mall 1996/ 735,909/ Dillard's, JCPenney, Sears None Winter Haven, Florida N/A 317,648 Eden Prairie Mall 1976/ 862,399/ Sears, Target, Kohl's, Mervyn's None Eden Prairie, Minnesota 1994 325,602 Fallbrook Mall 1966/ 992,856/ JCPenney, Target, Mervyn's, KMart, None West Hills, California 1985 452,251 Burlington Coat Factory (Los Angeles, California) Fox River Mall 1984/ 1,045,806/ Dayton's, Younkers, JCPenney, Sears, Target None Appleton, Wisconsin 1991 537,813 Gateway Mall 1990/ 643,864/ The Emporium, Sears, Target None Springfield/Eugene, 1990 357,964 Oregon Grand Traverse Mall 1992/ 577,733/ Hudson's, JCPenney, Target None Traverse City, Michigan N/A 312,756 Greenwood Mall 1979/ 746,617/ Castner Knott, JCPenney, Sears, Dillard's None Bowling Green, Kentucky 1987 367,682 Knollwood Mall 1955/ 511,445/ Montgomery Ward, Kohl's None St. Louis Park, 1981 301,309 Minnesota (Minneapolis, Minnesota) Lakeview Mall 1993/ 621,729/ Hudson's, JCPenney, Sears None Battle Creek, Michigan N/A 331,464 Lansing Mall 1969/ 833,108/ Hudson's, JCPenney, Mervyn's, Montgomery Ward None Lansing, Michigan N/A 390,980 Lockport Mall 1971/ 345,932/ Montgomery Ward, Hills, Bon Ton None Lockport, New York 1984 125,535 Mall of the Bluffs 1986/ 587,201/ Dillard's, JCPenney, Target None Council Bluffs, Iowa 1988 353,567 (Omaha, Nebraska) Market Place Mall 1975/ 821,117/ Sears, Bergner's, JCPenney None Champaign, Illinois N/A 357,966 Natick Mall 1966/ 1,152,039/ Sears, Filene's, Lord & Taylor, Macy's None Natick, Massachusetts 1994 428,039
-13- 14 GGP CENTERS -----------
TOTAL GLA/MALL YEAR AND FREESTANDING NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR LOCATION(1) OR EXPANDED (SQUARE FEET) ANCHORS VACANCIES ----------- ----------- ------------- ------- ---------- Oaks Mall (2) 1978/ 907,392/ Dillard's, Burdines, Sears, JCPenney, Belk None Gainesville, Florida N/A 349,725 Oakwood Mall 1986/ 786,326/ Dayton's, JCPenney, Target, Sears, Scheel's None Eau Claire, Wisconsin 1991 321,250 All Sports Park Mall 1974/ 848,325/ Sears, Dillards, Macy's None Tucson, Arizona N/A 339,325 Piedmont Mall 1984/ 652,195/ Belk, Hills, JCPenney, Sears, Belk Mens None Danville, Virginia 1995 187,045 The Pines 1986/ 607,543/ Dillard's, JCPenney, Sears, Wal-Mart None Pine Bluff, Arkansas 1990 268,034 Quail Springs Mall (2) 1980/ 1,111,935/ Dillard's, Foley's, JCPenney, Sears None Oklahoma City, Oklahoma 1992 329,183 Rio West Mall 1981/ 379,195/ Beall's, JCPenney, KMart None Gallup, New Mexico 1991 193,580 River Falls Mall 1990/ 744,532/ Bacons, Wal-Mart, Toys "R" Us None Clarksville, Indiana N/A 399,367 (Louisville, Kentucky) River Hills Mall 1991/ 637,262/ Herberger's, JCPenney, Target, Sears None Mankato, Minnesota 1996 285,213 Sooner Fashion Square 1976/ 431,536/ Dillard's, JCPenney, Sears None Norman, Oklahoma N/A 199,911 Southlake Mall 1976/ 1,023,428/ Sears, Rich's, JCPenney, Macy's None Morrow, Georgia N/A 285,328 SouthShore Mall 1981/ 339,815/ JCPenney, Sears, KMart None Aberdeen, Washington N/A 150,497 Town East Mall (2) 1971/ 1,270,363/ Sears, Foley's, JCPenney, Dillard's None Mesquite, Texas 1986 434,586 Valley Hills Mall 1978/ 618,126/ Belk, JCPenney, Sears None Hickory, North Carolina 1986 205,830 Westwood Mall 1972/ 465,154/ Elder-Beerman, JCPenney, Montgomery Ward None Jackson, Michigan 1993 147,124 Westroads Mall (2) 1968/ 1,074,046/ Von Maur, JCPenney, Younkers, Montgomery Ward None Omaha, Nebraska 1995 382,836 West Valley Mall 1995/ 665,483/ Gottschalks, JCPenney, Target, Sears None Tracy, California N/A 147,467 MALLS UNDER DEVELOPMENT Coral Ridge Mall 1998/ 1,200,000/ Dillard's, Younkers, Sears, JCPenney, Target None Iowa City, Iowa N/A 200,000
(1) In some cases, where a center's location is part of a larger metropolitan area, the metropolitan area is identified in parentheses. (2) The Company owns 50% of Quail Springs Mall and Town East Mall and 51% of Oaks Mall and Westroads Mall. -14- 15 HOMART CENTERS --------------
OWNERSHIP TOTAL GLA/MALL YEAR INTEREST % AND FREESTANDING NAME OF CENTER/ OPENED/REMODELED OF GLA ANCHOR LOCATION(1) OR EXPANDED GGP/HOMART (SQUARE FEET) (2) ANCHORS VACANCIES ------------ --------------- ----------- ------------------ ------- --------- Arrowhead Towne Center 1993/ 33.3 1,130,901/ Dillard's, JCPenney, Mervyn's, None Glendale, Arizona 1996 397,656 Montgomery Ward, Robinson's-May Bay City Mall 1991/ 100 527,273/ Sears, Target, JCPenney, None Bay City, Michigan 1993 211,595 Younkers Brass Mill Center/Commons 1997/ 100 1,128,255/ Sears, Filene's, One Waterbury, Connecticut N/A 528,608 JCPenney Chula Vista Center 1960/ 100 884,227/ Macy's, Sears, JCPenney, None Chula Vista, California 1994 302,364 Mervyn's Columbiana Centre 1990/ 100 811,047/ Sears, Parisian's, Dillard's, None Columbia, South Carolina 1992 251,130 J. B. White Deerbrook Mall 1984/ 100 1,195,527/ Sears, Mervyn's, Foley's, None Humble, Texas N/A 362,936 JCPenney, Dillard's (Houston, Texas) Lakeland Square 1988/ 50 903,660/ Sears, Belk-Lindsey, Dillard's, None Lakeland, Florida 1994 291,780 JCPenney, Burdines, Dillard's (Men's & Home Furnishings) Moreno Valley Mall 1992/ 100 1,035,508/ Sears, Robinson's-May, None Moreno Valley, California N/A 429,254 JCPenney, Harris' Neshaminy Mall 1968/ 50 945,779/ Sears, Strawbridge & Clothier, None Bensalem, Pennsylvania 1995 257,381 Boscov's Newgate Mall 1981/ 100 625,953/ Sears, Mervyn's, Dillard's None Ogden, Utah 1994 247,428 New Park Mall 1980/ 50 1,131,329/ Sears, Macy's, Mervyn's, None Newark, California 1993 388,005 JCPenney North Point Mall 1993/ 100 1,366,405/ Sears, JCPenney, Lord & Taylor, None Alpharetta, N/A 396,287 Rich's, Dillard's, Parisian Georgia (Atlanta, Georgia) The Parks at Arlington 1988/ N/A(3) 1,191,828/ Sears, Dillard's, Mervyn's, None Arlington, Texas N/A 359,912 Foley's, JCPenney The Pavilions at Buckland Hills 1990/ N/A(3) 963,419/ Sears, Filene's, JCPenney, Lord & Manchester, Connecticut 1994 327,284 Taylor, Filene's Home Store, None Dick's Sporting Goods Pembroke Lakes Mall 1992/ 100 1,063,955/ Sears, Burdine's, JCPenney, None Pembroke Pines, Florida N/A 337,235 Dillard's, Dillard's (Men's & Home Furnishings) Prince Kuhio Plaza 1985/ 100 504,217/ Sears, Liberty House, JCPenney None Hilo, Hawaii N/A 166,191 Rolling Oaks Mall 1988/ 50 758,584/ Sears, Dillard's, Foley's None San Antonio, Texas 1992 297,727 Sequoia Mall and Tower Plaza 1975/ 100 345,940/ Sears, Mervyn's, Ross Dress for None Visalia, California N/A 172,940 Less Steeplegate Mall 1990/ 100 447,180/ Sears, JCPenney, Steinbach One Concord, New Hampshire N/A 162,655 Superstition Springs Center 1990/ 33.3 1,073,726/ Sears, JCPenney, Dillard's, None East Mesa, Arizonia 1994 368,361 Mervyn's, Robinson's-May
-15- 16 HOMART CENTERS --------------
OWNERSHIP TOTAL GLA/MALL YEAR INTEREST % AND FREESTANDING NAME OF CENTER/ OPENED/REMODELED OF GLA ANCHOR LOCATION(1) OR EXPANDED GGP/HOMART (SQUARE FEET) (2) ANCHORS VACANCIES ------------ ------------ ----------- ------------------ ------- --------- Tysons Galleria 1988/ 100 809,225/ Macy's, Saks Fifth Avenue, None McLean, Virginia 1997 296,838 Neiman Marcus Vista Ridge Mall 1989/ 80 1,052,419/ Sears, Dillard's, Foley's, None Lewisville, Texas 1991 379,555 JCPenney Washington Park Mall 1984/ 100 351,483/ Sears, Dillard's, JCPenney None Bartlesville, Oklahoma 1986 157,190 West Oaks Mall 1996/ 100 1,042,723/ Dillard's, Sears, JCPenney, None Ocoee, Florida N/A 312,626 Gayfers (Orlando, Florida) The Woodlands Mall 1994/ 50 1,031,892/ Sears, Dillard's, Mervyn's, None The Woodlands, N/A 350,082 Foley's, JCPenney Texas (Houston, Texas)
(1) In cases where a Center's location is part of a larger metropolitan area, the metropolitan area is identified in parenthesis. (2) Includes square footage added in redevelopment/expansion projects. (3) GGP/Homart's participation is subordinated to certain preferred returns to its Joint Venture Partners. -16- 17 ANCHORS Anchors have traditionally been a major factor in the public's image of an enclosed shopping center. Anchors are generally department stores whose merchandise appeals to a broad range of shoppers. Anchors either own their stores, the land under them and adjacent parking areas, or enter into long-term leases at rates that are generally lower than the rents charged to Mall Store tenants. Although the Portfolio Centers receive a smaller percentage of their operating income from Anchors than from Mall Stores, strong Anchors play an important part in maintaining customer traffic and making the Portfolio Centers desirable locations for Mall Store tenants. The following table indicates the parent company of each Anchor and sets forth the number of stores and square feet owned or leased by each Anchor at the GGP Centers and the Homart Centers as of December 31, 1997. -17- 18 GENERAL GROWTH PROPERTIES, INC. PORTFOLIO ANCHORS AS OF DECEMBER 31, 1997
Total Square Feet Name Stores (000's) - ------------------------------------------------------------ ------------ ---------------- Sears 52 6,716 JCPenney 50 5,087 Dayton Hudson Dayton's 2 269 Hudson's 4 405 Mervyn's 15 1,228 Target 14 1,530 ------------ ---------------- Sub-Total Dayton Hudson 35 3,432 ------------ ---------------- Dillard's 28 4,206 May Department Stores Company Filene's 3 523 Filene's Home Store 1 36 Foley's 7 1,258 Lord & Taylor 3 335 Robinson's-May 3 497 ------------ ---------------- Sub-Total May Department Stores Company 17 2,649 ------------ ---------------- Proffitt's Younkers 4 426 Herberger's 1 71 Parisian 2 182 ------------ ---------------- Sub-Total Proffitt's 7 679 ------------ ---------------- Federated Department Stores Burdines 3 387 Lazarus 1 50 Macy's 6 1,134 Rich's 3 524 The Bon Marche 1 100 ------------ ---------------- Sub-Total Federated Department Stores 14 2,195 ------------ ---------------- Montgomery Ward & Co. Montgomery Ward 6 770 ------------ ---------------- Sub-Total Montgomery Ward & Co. 6 770 ------------ ---------------- Harcourt General Neiman-Marcus 1 132 Mercantile Stores Bacons 1 187 Castner Knott 1 101 Gayfer's 1 213 Joslin's 1 171 JB White 1 181 ------------ ---------------- Sub-Total Mercantile Stores 5 853 ------------ ---------------- Kohl's 2 178 Mc Rae's 1 124 Burlington Coat Factory 1 101 KMart 4 357 Wal-Mart 2 197 Elder-Beerman 2 142 Emporium 1 50 Gottschalks 2 174 Hills Department Store 2 175 Ross Dress For Less 1 40 Beall's 1 31 Belk 2 286 Belk-Lindsey 2 182 Boscov 1 185 Bergners 1 154 Dick's Sporting Goods 1 80 Harris 1 150 Liberty House 1 50 Saks Fifth Avenue 1 120 Scheel's All Sports 1 50 Steinbach's 1 55 Strawbridge & Clothier 1 218 The Bon Ton 1 82 Toys "R" Us 1 47 Von Maur 1 179 Woolworth 1 50
-18- 19 For other information concerning the GGP Centers and the Homart Centers see "Item 1 - Business - Business of the Company" and for additional information concerning the mortgage debt encumbering the GGP Centers see Note 8 to the Consolidated Financial Statements appearing in Item 8 of this Annual Report on Form 10-K. ITEM 3. LEGAL PROCEEDINGS The Company is not currently involved in any material litigation nor, to the Company's knowledge, is any material litigation currently threatened against the Company, the properties or GGP/Homart other than routine litigation arising in the ordinary course of business, most of which is expected to be covered by liability insurance. For information about certain environmental matters, see "Item 1 - Business - Environmental Matters." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to the Company's stockholders during the fourth quarter of fiscal 1997. -19- 20 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock is listed on the New York Stock Exchange ("NYSE") and trades under the symbol "GGP". As of March 26, 1998, the 35,768,922 outstanding shares of Common Stock were held by approximately 1,129 stockholders of record. The closing price per share of Common Stock on the NYSE on such date was $38.00 per share. Set forth below are the high and low sales prices per share of Common Stock as reported on the composite tape, and the distributions per share of Common Stock declared for each such period.
==================================== =================================== ================= 1997 Price Declared Quarter Ending High Low Distribution ------------------------------------ ----------------- ----------------- ----------------- March 31, 1997 $32.13 $30.25 $.45 ------------------------------------ ----------------- ----------------- ----------------- June 30, 1997 $33.75 $31.13 $.45 ------------------------------------ ----------------- ----------------- ----------------- September 30, 1997 $37.00 $32.44 $.45 ------------------------------------ ----------------- ----------------- ----------------- December 31, 1997 $38.25 $31.81 $.45 ==================================== ================= ================= ================= ==================================== =================================== ================= 1996 Price Declared Quarter Ending High Low Distribution ------------------------------------ ----------------- ----------------- ----------------- March 31, 1996 $24.00 $20.63 $.43 ------------------------------------ ----------------- ----------------- ----------------- June 30, 1996 $24.63 $20.63 $.43 ------------------------------------ ----------------- ----------------- ----------------- September 30, 1996 $26.00 $23.50 $.43 ------------------------------------ ----------------- ----------------- ----------------- December 31, 1996 $32.75 $23.88 $.43 ==================================== ================= ================= ================= ==================================== =================================== ================= 1995 Price Declared Quarter Ending High Low Distribution ------------------------------------ ----------------- ----------------- ----------------- March 31, 1995 $22.63 $20.38 $.41 ------------------------------------ ----------------- ----------------- ----------------- June 30, 1995 $21.75 $19.38 $.41 ------------------------------------ ----------------- ----------------- ----------------- September 30, 1995 $20.63 $19.00 $.41 ------------------------------------ ----------------- ----------------- ----------------- December 31, 1995 $21.63 $18.50 $.43 ==================================== ================= ================= =================
-20- 21 Set forth below is certain information about sales made by the Operating Partnership of securities during the fourth quarter of 1997, which sales were not registered under the Securities Act of 1933, as amended. The sales were all made in connection with the acquisition of the malls and interests therein indicated below, were effected in reliance upon the exemption contained in Section 4 (2) of the Securities Act of 1933, as amended and/or Regulation D promulgated thereunder, and were not underwritten offerings.
=================== ================= ===================== ======================= ===================== ======================= Offering Price or Date Issuer Security Amount Purchaser Consideration =================== ================= ===================== ======================= ===================== ======================= 10/23/97 Operating Operating 518,833 Peter D. Leibowits Valley Hills Mall Partnership (1) Partnership Units =================== ================= ===================== ======================= ===================== ======================= 12/31/97 GGP Common Stock 7,873 John Bucksbaum 7,873 Operating Partnership Units =================== ================= ===================== ======================= ===================== ======================= 12/31/97 GGP Common Stock 7,873 Ann Bucksbaum 7,873 Operating Partnership Units =================== ================= ===================== ======================= ===================== =======================
(1) Holders of the units sold by the Operating Partnership have the right, on or after October 24, 1999, to require that the Operating Partnership redeem such units for cash; provided, however, that General Growth Properties, Inc. may assume the Operating Partnership's obligations and redeem the units for cash or shares of Common Stock on a one-for-one basis. -21- 22 ITEM 6. SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The following table sets forth selected financial data for the Company and should be read in conjunction with the Consolidated Financial Statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in this Annual Report.
==================================================================================================================================== 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING DATA - ------------------------------------------------------------------------------------------------------------------------------------ Revenue $ 291,147 $ 217,405 $ 167,396 $ 152,583 $ 142,210 - ----------------------------------------------------------------------------------------------------------------------------------- Operating Expenses 109,677 75,954 63,968 63,118 55,073 - ----------------------------------------------------------------------------------------------------------------------------------- Depreciation and Amortization 48,509 39,809 30,855 28,190 25,377 - ----------------------------------------------------------------------------------------------------------------------------------- Interest Expense, Net 70,252 66,439 46,334 42,995 37,495 - ----------------------------------------------------------------------------------------------------------------------------------- Equity in Net Income of Unconsolidated Affiliates 19,344 17,589 9,274 6,096 - - ----------------------------------------------------------------------------------------------------------------------------------- Net gain on the sale of a portion of CenterMark 58,647 43,821 33,397 - - - ----------------------------------------------------------------------------------------------------------------------------------- Income Before Minority Interest 140,700 96,613 68,910 24,376 24,265 - ----------------------------------------------------------------------------------------------------------------------------------- Minority Interest (49,997) (34,580) (25,856) (9,518) (9,823) - ----------------------------------------------------------------------------------------------------------------------------------- Income Before Extraordinary Item 90,703 62,033 43,054 14,858 14,442 - ----------------------------------------------------------------------------------------------------------------------------------- Extraordinary Item (1,152) (2,291) - (693) (1,832) - ----------------------------------------------------------------------------------------------------------------------------------- Net Income 89,551 59,742 43,054 14,165 12,610 - ----------------------------------------------------------------------------------------------------------------------------------- Earnings Before Extraordinary Item Per Share - Basic 2.78 2.20 1.69 .65 .63 - ----------------------------------------------------------------------------------------------------------------------------------- Earnings Before Extraordinary Item Per Share - Diluted 2.76 2.20 1.69 .65 .63 - ----------------------------------------------------------------------------------------------------------------------------------- Net Earnings Per Share - Basic 2.75 2.12 1.69 .62 .55 - ----------------------------------------------------------------------------------------------------------------------------------- Net Earnings Per Share - Diluted 2.73 2.12 1.69 .62 .55 - ----------------------------------------------------------------------------------------------------------------------------------- Distributions Declared Per Share 1.80 1.72 1.66 1.58 1.05 - ----------------------------------------------------------------------------------------------------------------------------------- CASH FLOW DATA - ----------------------------------------------------------------------------------------------------------------------------------- Operating Activities $ 85,716 $ 67,202 $ 60,660 $ 48,936 $ 53,077 - ----------------------------------------------------------------------------------------------------------------------------------- Investing Activities (167,029) (29,285) (469,204) (145,253) (111,408) - ----------------------------------------------------------------------------------------------------------------------------------- Financing Activities 91,264 (40,268) 421,225 96,380 52,587 - ----------------------------------------------------------------------------------------------------------------------------------- FUNDS FROM OPERATIONS (Unaudited) - ----------------------------------------------------------------------------------------------------------------------------------- Funds From Operations (1) Operating Partnership $ 143,010 $ 108,526 $ 81,214 $ 69,610 $ 47,810 - ----------------------------------------------------------------------------------------------------------------------------------- Minority Interest (51,238) (39,841) (30,915) (27,927) (19,189) - ----------------------------------------------------------------------------------------------------------------------------------- Funds From Operations Company 91,772 68,685 50,299 41,683 28,621 - ----------------------------------------------------------------------------------------------------------------------------------- Funds From Operations per share 2.81 2.44 1.97 1.83 1.58 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE SHEET DATA - ----------------------------------------------------------------------------------------------------------------------------------- Investment in Real Estate Assets - Cost $ 2,157,251 $ 1,828,184 $1,547,621 $ 996,125 $ 786,008 - ----------------------------------------------------------------------------------------------------------------------------------- Total Assets 2,097,719 1,757,717 1,455,982 906,533 789,455 - ----------------------------------------------------------------------------------------------------------------------------------- Total Debt 1,275,785 1,168,522 1,027,932 607,561 453,437 - ----------------------------------------------------------------------------------------------------------------------------------- Stockholders' Equity 498,505 330,267 229,383 154,426 173,013 - ------------------------------------------------------------------------------------------------------------------------------------
(1)Represents income before minority interest excluding straight line rent plus real estate depreciation and amortization and adjusted for equity in net income of unconsolidated affiliates (including related depreciation and amortization). Funds From Operations does not represent cash flow from operations as defined by Generally Accepted Accounting Principles (GAAP) and is not necessarily indicative of cash available to fund all cash requirements. -22- 23 FUNDS FROM OPERATIONS Funds from Operations is used by the real estate industry and investment community as a primary measure of the performance of real estate companies. The National Association of Real Estate Investment Trusts ("NAREIT") defines Funds from Operations as net income (loss) (computed in accordance with generally accepted accounting principles ("GAAP")), excluding gains (or losses) from debt restructuring and sales of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. In calculating its Funds from Operations, the Company also excludes non-cash straight line rent and gains on land sales, if any. The NAREIT definition of Funds from Operations does not exclude the aforementioned items. The Company's Funds from Operations may not be directly comparable to similarly titled measures reported by other real estate investment trusts. Funds from Operations does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it indicative of funds available to fund the Company's cash needs, including its ability to make cash distributions. RECONCILIATION OF NET INCOME DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO FFO: - --------------------------------------------------------------------------------
1997 1996 1995 --------- ---------- -------- Net Income $ 89,551 $ 59,742 $ 43,054 Extraordinary item - charges related to early retirement of debt 1,152 2,291 Allocations to Operating Partnership Unitholders 49,997 34,580 25,856 Net gain on sales (63,813) (43,975) (33,397) Straight line rents (4,615) (6,195) (2,997) Depreciation and amortization 70,738 62,083 48,698 --------- --------- --------- Funds From Operations $ 143,010 $ 108,526 $ 81,214 ========= ========= =========
-23- 24 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Consolidated Financial Statements and the Notes thereto appearing later in this Annual Report. CERTAIN INFORMATION ABOUT THE PORTFOLIO CENTERS As of December 31, 1997 the Company owned 100% of thirty-five enclosed regional shopping centers, 51% of the stock of GGP/Ivanhoe, Inc., 50% of each of two enclosed shopping centers, Quail Springs and Town East, 38.2% of the stock of GGP/Homart, Inc. and a non-voting preferred stock interest in GGMI. GGP/Homart owns interests in twenty-five shopping centers, (the "Homart Centers"). GGP/Ivanhoe owns interests in two shopping centers, The Oaks and Westroads. During 1996 the Company owned an interest in CenterMark Properties, Inc. (the "CenterMark Centers"). Revenues are primarily derived from fixed minimum rents, percentage rents and recoveries of operating expenses from tenants. Inasmuch as the Company's financial statements reflect the use of the equity method to account for its investments in CenterMark, GGP/Homart, the Property Joint Ventures ("GGP/Ivanhoe, Quail Springs and Town East") and GGMI, the discussion of results of operations below relates primarily to the revenues and expenses of thirty-five 100% owned centers. On December 31, 1997, the Portfolio Centers (all centers in which the Company holds a direct or indirect ownership interest) were approximately 85.1% leased. The occupancy of the Portfolio Centers which are not currently undergoing redevelopment on December 31, 1997, was approximately 85.7%. Comparable mall store sales are sales of those tenants that were open the previous 12 months. Therefore comparable mall store sales in 1997 are of those tenants that were operating the entire year of 1996 and 1997. Comparable mall store sales averaged $276 per square foot at the Portfolio Centers in 1997. In 1997, total mall store sales at the Portfolio Centers increased by 7.2% over 1996, and comparable mall store sales increased by 3.2% over 1996. The average mall store rent per square foot from leases that expired in 1997 was $20.81. The Portfolio Centers benefited from increasing rents inasmuch as the weighted average mall store rent per square foot on new and renewal leases executed during 1997 was $25.84, or $5.03 per square foot above the average for expiring leases. RESULTS OF OPERATIONS COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996 Total revenues for 1997 were $291.1 million, which represents an increase of $73.7 million or approximately 33.9% from $217.4 million in 1996. Approximately $55.8 million of the increase was from properties acquired or developed after January 1, 1996. Minimum rent during 1997 increased $35.3 million or 25.1% from $140.5 million in 1996 to $175.8 million. The $35.3 million increase in minimum rent was primarily caused by the acquisition and development of properties after January 1, 1996. Tenant recoveries increased by $34.3 million or 54.4% from $63.0 million to $97.3 million in 1997. The increase in tenant recoveries was generated by a combination of new acquisitions and increased recoverable operating costs at the comparable (properties owned for the entire time during current and prior periods) centers. Percentage rents and other income increased $4.3 million or 46.2% from $9.3 million in 1996 to $13.6 million in 1997. The acquisition of new properties and improved performance at the comparable centers accounted for the increase in percentage rents and other income. Fee income during 1997 was essentially flat compared to the year ended December 31, 1996. The fee revenue was primarily generated by asset management services performed for GGP/Homart. Total expenses, including depreciation and amortization increased by approximately 36.6% or $42.4 million, from $115.8 million in 1996 to $158.2 million in 1997. Approximately $28.5 million or 67.2% of the increase in total expenses was from properties acquired and developed since January 1, 1996. The increase in total expenses consists of $4.4 million of real estate taxes, $0.6 million of management fees, $27.7 million of property operating costs, $0.6 million of provision for doubtful accounts, $0.4 million of general and administrative and $8.7 million of depreciation and amortization. The remaining $13.9 million of the increase was primarily accounted for by increased recoverable operating costs. -24- 25 Net interest expense increased by $3.9 million or 5.8% from $66.4 million in 1996 to $70.3 million in 1997. Acquisitions generated an $18.5 million increase in 1997 compared to 1996. This increase was partially offset with the use of the stock offering proceeds and CenterMark sale proceeds to repay existing indebtedness. The note receivable from GGMI generated $6.4 million of interest income in 1997, an increase of $3.6 million from $2.8 million in 1996. Equity in net income of unconsolidated affiliates during 1997 increased by $1.7 million to $19.3 million from $17.6 million in 1996. A $9.4 million decrease is attributable to the sale of the Company's interest in CenterMark. GGP/Homart and the Property Joint Ventures accounted for increases of approximately $7.1 million and $2.9 million, respectively. The Company's ownership interest in GGMI resulted in an increase of $1.1 million. In addition the Company had a net gain of $58.6 million on the sale of its remaining interest in CenterMark on January 2, 1997. As of that date, the Company no longer held an ownership interest in CenterMark. Net income increased by approximately $29.8 million in 1997 to $89.5 million, from $59.7 million in 1996. The increase resulted from a larger gain on the sale of CenterMark in the amount of $9.9 million (net of minority interest share) and a combination of the aforementioned items. COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995 Total 1996 revenues increased by $50.0 million or 29.9% to $217.4 million from $167.4 million in 1995. Of the $50.0 million increase, $44.4 million was generated from increased minimum rents, tenant recoveries, percentage rents and other income. A majority of the increases came from new developments that were placed in service during 1995 and five properties that were acquired in 1996. The remaining $5.6 million was generated by increased straight line rents of $1.9 million and fee revenue of $3.7 million. Total 1996 operating expenses, including depreciation and amortization, increased by $21.0 million or 22.1% to $115.8 million in 1996 compared to $94.8 million in 1995. The $20.9 million increase consists of $3.0 million of real estate taxes and management fees, $8.9 million of depreciation expense, $1.7 million increase in provision for doubtful accounts and $7.3 million of property operating and general and administrative expenses from all properties, including five properties acquired during the fourth quarter of 1996. Net interest expense increased by $20.1 million or 43.4% to $66.4 million in 1996 compared to $46.3 million in 1995. The acquisitions and development of new properties, net of interest cost savings as a result of the use of the CenterMark sale proceeds to repay debt accounted for a $27.7 million increase. Additional interest cost savings due to lower interest rates reduced net interest expense by $4.3 million. Interest income increased by $3.3 million of which $2.8 million was interest income from General Growth Management, Inc. Equity in net income of unconsolidated affiliates increased by $8.3 million, from $9.3 million in 1995 to $17.6 million in 1996, or an 89% increase. Approximately $8.7 million of the increase is attributable to the Company's 38.2% interest in GGP/Homart's net income. The increase of $0.8 million in CenterMark's net income was due to changing from the equity method to the cost method as a result of the Company's reduced control in mid 1996. The Company's investment in Quail Springs Mall accounted for a $0.1 million increase and GGMI accounted for a decrease of approximately $1.3 million. In addition, the Company had a net gain of $43.8 million on the sale of a portion of its interest in CenterMark on July 1, 1996. As of that date, the Company's interest in CenterMark was reduced to 14%. Net income increased by $16.6 million in 1996 to $59.7 million from $43.1 million in 1995. The increase resulted from a larger gain on CenterMark in the amount of $6.6 million (net of minority interest share) and a combination of the aforementioned items. LIQUIDITY AND CAPITAL RESOURCES The Company uses operating cash flow as the principal source of funding for recurring capital expenditures such as tenant construction allowances and minor improvements made to individual properties that are not recoverable through common area maintenance charges to tenants. Funding alternatives for acquisitions, new development, expansions and major renovation programs at individual centers include construction loans, mini-permanent loans, long-term project financing, additional property level or Company level equity investments, -25- 26 unsecured Company level debt or secured loans collateralized by individual shopping centers. As of December 31, 1997 the Company held $25.9 million of unrestricted cash and cash equivalents. In addition to the cash balance, a $200 million unsecured credit facility had a balance of $86 million leaving $114 million available for future borrowings. The Company also has access to the public equity market through various shelf registrations. On January 31, 1996, the Company closed on a $340 million permanent nonrecourse loan on nine properties. Existing loans on the properties totaling $290 million were repaid and the $50 million of excess loan proceeds were used to reduce an interim loan. On June 28, 1996, the buyer's option to purchase the Operating Partnership's remaining interest in CenterMark was exercised. The first payment of $87 million was received in July of 1996 and was used to retire an interim loan arranged as part of the GGP/Homart acquisition. On October 15, 1996, approximately $200 million of mortgage debt on seven wholly owned centers matured. These mortgages were replaced with a $250 million short term, floating rate loan which bears interest at LIBOR plus 100 basis points. The excess proceeds were used to pay down a credit facility arranged by the Company during 1996. On January 2, 1997, the final portion of the proceeds from the sale of CenterMark totaling $130.5 million were used to repay a $12.6 million mortgage on Westwood Mall and to reduce the balance on a non-recourse bridge loan facility. In August of 1997 the Company completed a $200 million unsecured credit facility to be used for general corporate purposes including any potential future acquisitions or developments. On December 31, 1997, the credit facility had an outstanding balance of $86 million. During the third quarter of 1997 the Company sold approximately 4.9 million shares of common stock. The net proceeds from the transactions totaled $165.8 million and were primarily used to reduce the outstanding balance on two development loans and the unsecured credit facility. In addition to the $250 million non-recourse bridge loan that is collateralized in part by mortgages on seven wholly owned centers, the Company obtained additional short term unsecured financing. As part of the additional financing totaling $116.7 million, the Company agreed not to encumber four additional wholly owned centers. In September of 1997 the Company arranged a $125 million unsecured bridge loan, indirectly collateralized by The Oaks Mall and Westroads Mall owned by GGP/Ivanhoe. These unsecured bridge loans totaling $491.7 million were replaced with long term fixed rate permanent financing during November of 1997. During the third quarter of 1997, two property level loans totaling approximately $60.5 million with a weighted average interest rate of approximately 8.9% were repaid. In November of 1997 the Company completed the private placement of $560 million of collateralized mortgage-backed securities. The interest only notes include $250 million of 7 year notes and $310 million of 10 year notes. After reflecting the impact of amortizing all transaction costs, the weighted average effective annual interest rate will be approximately 6.95%. The notes are collateralized by mortgages on eleven wholly owned regional malls ($435 million) and two 51% owned regional malls ($125 million). At December 31, 1997, the stock market value of the common stock and partnership units outstanding (54,398,932 x $36.125 per share) was approximately $1,965 million. The consolidated pro rata debt of $1,709 million combined with the stock market value of the common stock and partnership units of $1,965 million equal a total market capitalization of approximately $3,674 million. The Company is comfortable with this level of debt and expects earnings before interest, taxes, depreciation and amortization ("EBITDA") to interest expense coverage to be at least 2.0 times, leaving a substantial cushion for unanticipated costs. There are no current plans to raise additional equity capital. However, if additional capital is required, the Company believes that it will be able to obtain an interim bank loan, obtain mortgage financing on unencumbered assets or raise additional equity capital. The Company will continue to constantly -26- 27 monitor its capital structure and plans to make new investments if they can be acquired and financed in a manner that will be likely to increase stockholder value. DEVELOPMENT The Company intends to pursue development when warranted by the potential financial returns. During 1996, the Company acquired 100% of a new development site located in Coralville (Iowa City), Iowa where the Company is developing an enclosed shopping center. The Company is currently performing predevelopment work at another development site located in Grand Rapids, Michigan. Coral Ridge Mall, a 1,200,000 square foot enclosed regional mall located in Coralville, Iowa is scheduled to open in July of 1998. The mall will include five department store anchors, several big box retailers, a theater, an ice arena, a children's museum and approximately 200,000 square feet of mall shop space. As of December 31, 1997 approximately $26 million has been spent of an estimated total cost of $70 million. The funding for the development of this project comes primarily from an unsecured credit facility. The development in Grand Rapids, Michigan will consist of approximately 1,100,000 square feet and is currently expected to open in late 1999. SUMMARY OF INVESTING ACTIVITIES Net cash used by investing activities in 1997 was $167.0 million, compared to a use of $29.3 million in 1996. Cash flow from investing activities was affected by the timing of acquisitions, development and improvements to real estate properties, requiring a use of cash of approximately $200.6 million in 1997 compared to $121.1 in 1996. Market Place Shopping Center and Century Plaza were acquired in 1997 for approximately $101.8 million . The sale of portions of the Company's interest in CenterMark provided cash flow of $130.5 million in 1997 and $87.0 million in 1996. Investments in GGP/Homart and the Property Joint Ventures used $86.2 million of cash flow in 1997 compared to $33.5 million in 1996. During 1996 distributions of $21.5 million were received from CenterMark. Distributions received from GGP/Homart in 1997 were $20.4 million compared to $13.8 million in 1996. The change in notes receivable from affiliates used $24.0 million of cash flow compared to the receipt of $12.6 million in 1996. Net cash used by investing activities in 1996 was $29.3 million, compared to a use of $469.2 million in 1995. Cash flow from investing activities was affected by the timing of acquisitions, development and improvements to real estate properties, requiring a use of cash of approximately $121.1 million in 1996 compared to $380.0 million in 1995. Natick Mall was acquired in 1995 for approximately $265.0 million. The sale of portions of CenterMark provided cash flow of $87.0 million in 1996 and $72.5 million in 1995. Investments in GGP/Homart and the Property Joint Ventures used $33.5 million of cash flow in 1996 compared to a use of $178.0 million in 1995. GGP/Homart was acquired during 1995. The collection of notes receivable from affiliates increased cash flow from investing activities by $12.6 million in 1996. SUMMARY OF FINANCING ACTIVITIES Financing activities in 1997 provided $91.3 million of cash compared to a $40.3 million use of cash flow in 1996. Distributions to common stockholders and the minority interest were $88.9 million in 1997 compared to $75.5 million in 1996. The increase is due to the increased distribution rate and additional shares and Operating Partnership Units outstanding during 1997 compared to 1996. Net proceeds from the issuance of common stock during 1997 provided $165.8 million of cash flow. Net borrowing activity provided $29.6 million of cash flow in 1997 compared to $37.7 million in 1996. The purchase of treasury stock used $5.7 million of cash flow during 1997. The payment of deferred financing costs used $9.3 million of cash flow in 1997 compared to $2.4 million in 1996. Financing activities in 1996 used $40.3 million of cash compared to a $421.2 million source of cash flow in 1995. The net change in cash flow from financing activities from 1995 to 1996 is made up of three main components. First, distributions decreased cash flow from 1995 to 1996 by $8.9 million due to the increased distribution rate and additional shares and Operating Partnership Units outstanding during 1996 compared to 1995. Net borrowing activity was a $37.7 million source in 1996 compared to a $400.7 million source of cash flow in 1995. The financing associated with the acquisitions of GGP/Homart and Natick Mall accounted for the -27- 28 majority of activity in 1995. The third main component is the net proceeds from the sale of common stock totaling $87.9 million in May of 1995 and none in 1996. REIT REQUIREMENTS In order to remain qualified as a real estate investment trust for federal income tax purposes, the Company must distribute 100% of capital gains and at least 95% of its ordinary taxable income to stockholders. The following factors, among others will 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 replacement leases; and (iii) changes in occupancy rates at existing Portfolio Centers and procurement of leases for newly developed Portfolio Centers. The Company anticipates that its cash from operations, together with existing loan facilities and additional borrowing capacity, will provide adequate liquidity to conduct its operations, fund administrative and operating costs and interest payments and allow distributions to the Company's stockholders in accordance with the Internal Revenue Code's requirements for qualification as a real estate investment trust and to avoid any Company or entity level federal income or excise tax. The distributions paid to Company stockholders in 1997 were approximately 29.8% taxable as ordinary income and approximately 70.2% taxable as long-term capital gain, due to the sale of a portion of the CenterMark stock. The Company currently plans to maintain its policy of increasing its distributions at a slower rate of growth than increases, if any, of funds from operations. Despite this general policy, the Company's Board of Directors will continue to evaluate the level of distributions on a quarterly basis and will typically consider increasing the quarterly distribution after the results of each year's operations have been reviewed. Given the critical importance of the holiday selling season, the Board of Directors plans to make its typical annual evaluation of a possible distribution increase during the first quarter of each year, after the results of the previous year's holiday selling season have been thoroughly analyzed. ECONOMIC CONDITIONS Inflation has been relatively low and has not had a significant detrimental impact on the Company. Should inflation rates increase in the future, substantially all of the tenants' leases contain provisions designed to mitigate the negative impact of inflation. Such provisions include clauses enabling the Company to receive percentage rents based on tenants' gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. In addition, many of the leases are for terms of less than 10 years which may enable the Company to replace or renew expiring leases with new leases at higher base and/or percentage rents, if rents of the existing leases are below the then-existing market rates. Finally, most of the leases require the tenants to pay their share of certain operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. A number of local, regional and national retailers filed for bankruptcy protection during the last few years. Most of the bankrupt retailers reorganized their operations and/or sold stores to stronger operators. Although some leases were terminated by virtue of the lease cancellation rights afforded by the bankruptcy laws, the impact on Company earnings was negligible. Over the last three years, the provision for doubtful accounts has averaged only $2.0 million per year, which represents less than 1% of average total revenues of $225 million. The difficult retail sales climate has probably contributed to the relatively flat average occupancy. The Company and its affiliates currently have an interest in 64 shopping centers. The Portfolio Centers have been diversified both geographically and by property type (both major and middle market properties) and this may mitigate the impact of a potential downturn at a particular property or in a particular region of the country. The shopping center business is still seasonal in nature. Mall stores typically achieve higher sales levels during the fourth quarter because of the holiday selling season. Although the Company has a year-long temporary leasing program, most of the rents received from short-term tenants are collected during the months of November and December. Thus, occupancy levels and revenue production are generally highest in the fourth quarter of each year and lower during the first and second quarters of each year. -28- 29 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June of 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income" and Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information." Statement No. 130 requires the reporting of comprehensive income which for the Company would be the same as net income currently reported. Statement No. 131 establishes standards for publicly-held business enterprises to report information about operating segments in annual financial statements and requires that these enterprises report selected information about operating segments in interim financial reports issued to stockholders. The Company will adopt the provisions under the new reporting and disclosure requirements promulgated in these statements beginning in its fiscal 1998 year. YEAR 2000 COMPLIANCE The Company has recently upgraded its major information systems including the database and accounting software which is Year 2000 compliant. The Company is in the process of evaluating several other smaller systems (time keeping systems, elevators, etc.) to verify that they are compliant. If these systems are not Year 2000 compliant, the appropriate upgrades will be purchased. The cost of any required upgrades are not anticipated to be significant. In addition, the Company is communicating with its customers, suppliers and service providers to determine whether they are actively involved in projects to ensure that their products and business systems will be Year 2000 compliant. The Company is not aware of any significant Year 2000 issues involving its customers, suppliers or service providers. -29- 30 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Refer to the Index on page F-1 to Financial Statements and Financial Statement Schedules for the required information. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY There is hereby incorporated by reference the information which appears under the captions "Election of Directors" and "Executive Officers" in the Company's definitive proxy statement for its 1998 Annual Meeting of Stockholders. ITEM 11. EXECUTIVE COMPENSATION There is hereby incorporated by reference the information which appears under the caption "Compensation of Executive Officers" in the Company's definitive proxy statement for its 1998 Annual Meeting of Stockholders; provided, however, that neither the Report of the Compensation Committee of the Board of Directors on Executive Compensation nor the Performance Graph set forth therein shall be incorporated by reference herein, in any of the Company's previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or in any of the Company's future filings. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT There is hereby incorporated by reference the information which appears under the captions "Common Stock Ownership of Certain Beneficial Owners" and "Common Stock Ownership of Management" in the Company's definitive proxy statement for its 1998 Annual Meeting of Stockholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There is hereby incorporated by reference the information which appears under the caption "Compensation Committee Interlocks and Insider Participation" in the Company's definitive proxy statement for its 1998 Annual Meeting of Stockholders. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements and Financial Statement Schedules. The financial statements and schedules listed in the accompanying Index to Consolidated Financial Statements and Financial Statement Schedules are filed as part of this Annual Report on Form 10-K. (b) Exhibits. See Exhibit Index on page S-1 -30- 31 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GENERAL GROWTH PROPERTIES, INC. By: /s/ Matthew Bucksbaum ------------------------------------- Matthew Bucksbaum, Chairman of the Board and Chief Executive Officer Date: March 30, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Robert Michaels President and Director March 30, 1998 - ------------------------------------ Robert Michaels /s/ John Bucksbaum Executive Vice President - March 30, 1998 - ------------------------------------ Director John Bucksbaum /s/ Bernard Freibaum Executive Vice President - March 30, 1998 - ------------------------------------ Chief Financial Officer and Bernard Freibaum Principal Accounting Officer /s/ Anthony Downs Director March 30, 1998 - ------------------------------------ Anthony Downs /s/ Morris Mark Director March 30, 1998 - ------------------------------------ Morris Mark /s/ Beth Stewart Director March 30, 1998 - ------------------------------------ Beth Stewart /s/ Lorne Weil Director March 30, 1998 - ------------------------------------ A. Lorne Weil
-31- 32 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULE The following financial statements and financial statement schedule are included in Item 8 of this Annual Report on Form 10-K: General Growth Properties, Inc.
Financial Statements Page(s) -------------------- ------- Report of Independent Accountants F-2 Consolidated Balance Sheets as of December 31, 1997 and 1996 F-3 Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995. F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 F-6 Notes to Consolidated Financial Statements F-7 to F-20 Financial Statement Schedule ---------------------------- Report of Independent Accountants F-21 Schedule III - Real Estate and Accumulated Depreciation F-22
All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule or because the information required is included in the consolidated financial statements and notes hereof. F-1 33 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders General Growth Properties, Inc. We have audited the accompanying consolidated balance sheets of General Growth Properties, Inc. as of December 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects,the consolidated financial position of General Growth Properties, Inc. as of December 31, 1997 and 1996 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Chicago, Illinois Coopers & Lybrand L.L.P. February 9, 1998 F-2 34 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands, except for Per Share Amounts)
DECEMBER 31, 1997 1996 --------------- -------------- ASSETS Investment in real estate: Land $ 194,131 $ 173,263 Buildings and equipment 1,601,351 1,337,366 Less accumulated depreciation (233,295) (188,744) Developments in progress 68,003 44,439 --------------- -------------- Net property and equipment 1,630,190 1,366,324 Investment in CenterMark 64,769 Investment in GGP/Homart 203,142 193,270 Investment in Property Joint Ventures 90,624 15,077 --------------- -------------- Net investment in real estate 1,923,956 1,639,440 Cash and cash equivalents 25,898 15,947 Tenant accounts receivable, net 34,849 25,384 Deferred expenses, net 42,343 30,078 Investment in and note receivable from General Growth Management, Inc. 61,588 37,737 Prepaid expenses and other assets 9,085 9,131 --------------- -------------- $ 2,097,719 $ 1,757,717 =============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Mortgage notes and other debt payable $ 1,275,785 $ 1,168,522 Distributions payable 24,421 20,744 Accounts payable and accrued expenses 36,540 45,807 --------------- -------------- 1,336,746 1,235,073 --------------- -------------- Minority interest in Operating Partnership 262,468 192,377 --------------- -------------- Commitments and contingencies Stockholders' equity: Preferred stock: $100 par value; 5,000,000 shares authorized; none issued Common stock: $.10 par value; 210,000,000 shares authorized in 1997 (70,000,000 in 1996) 35,769,454 shares issued in 1997 (30,789,185 in 1996) 35,634,977 shares outstanding in 1997 (30,789,185 in 1996) 3,577 3,079 Additional paid-in capital 738,630 595,628 Retained earnings (deficit) (239,139) (268,440) Treasury stock, at cost: 134,477 shares held as of December 31, 1997 (4,563) --------------- -------------- Total stockholders' equity 498,505 330,267 --------------- -------------- $ 2,097,719 $ 1,757,717 =============== ==============
The accompanying notes are an integral part of the consolidated financial statements. F-3 35 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands, except for Per Share Amounts)
YEAR ENDED DECEMBER 31, 1997 1996 1995 ------------ ----------- ----------- Revenues: Minimum rents $ 175,830 $ 140,468 $ 103,915 Tenant recoveries 97,291 63,040 54,072 Percentage rents 7,976 5,412 4,793 Other 5,577 3,925 3,811 Fee Income 4,473 4,560 805 ------------ ----------- ------------ Total revenues 291,147 217,405 167,396 ------------ ----------- ------------ Expenses: Real estate taxes 20,761 16,332 13,012 Management fees to affiliate 3,308 2,713 2,463 Property operating 79,175 51,466 45,075 Provision for doubtful accounts 3,025 2,421 607 General and administrative 3,408 3,022 2,811 Depreciation and amortization 48,509 39,809 30,855 ------------ ----------- ------------ Total expenses 158,186 115,763 94,823 ------------ ----------- ------------ Operating income 132,961 101,642 72,573 Interest expense (78,775) (70,272) (46,852) Interest income 8,523 3,833 518 Equity in net income (loss) of unconsolidated affiliates: CenterMark 9,397 8,628 GGP/Homart 16,505 9,355 646 Property Joint Ventures 3,033 110 General Growth Management, Inc. (194) (1,273) Net gain on sales 58,647 43,821 33,397 ------------ ----------- ------------ Income before allocation to minority interest and extraordinary item 140,700 96,613 68,910 Income allocated to minority interest (49,997) (34,580) (25,856) ------------ ----------- ------------ Income before extraordinary item 90,703 62,033 43,054 Extraordinary item (1,152) (2,291) ------------ ----------- ------------ Net income $ 89,551 $ 59,742 $ 43,054 ============ =========== ============ Earnings before extraordinary item per share - Basic $ 2.78 $ 2.20 $ 1.69 ============ =========== ============ Earnings before extraordinary item per share - Diluted $ 2.76 $ 2.20 $ 1.69 ============ =========== ============ Net earnings per share - Basic $ 2.75 $ 2.12 $ 1.69 ============ =========== ============ Net earnings per share - Diluted $ 2.73 $ 2.12 $ 1.69 ============ =========== ============
The accompanying notes are an integral part of the consolidated financial statements. F-4 36 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in Thousands, except for Per Share Amounts)
Additional Retained Total Common Stock Paid-in Earnings Treasury Stockholders' Shares Amount Capital (Deficit) Stock Equity ------------- --------- ----------- ------------ ---------- ------------- Balance, December 31, 1994 22,772,560 $ 2,277 $ 431,226 $ (279,077) $ - $ 154,426 Net income 43,054 43,054 Issuance of common stock, less $5,482 of offering costs 4,500,000 450 87,443 87,893 Cash distributions declared ($1.66 per share) (43,428) (43,428) Adjustment for minority interest in operating partnership (12,562) (12,562) ------------- --------- ----------- ------------ ---------- ------------- Balance, December 31, 1995 27,272,560 $ 2,727 $ 506,107 $ (279,451) $ - $ 229,383 Net income 59,742 59,742 Cash distributions declared ($1.72 per share) (48,731) (48,731) Acquisitions: General Growth Management, Inc. less $38 of issuance costs 1,555,855 156 39,675 39,831 Real estate investments 1,895,928 190 49,511 49,701 Exercise of stock options 66,667 7 1,381 1,388 Purchase and retirement of common stock (66,667) (7) (1,443) (1,450) Conversion of operating partnership units to common stock 64,842 6 1,315 1,321 Adjustment for minority interest in operating partnership (918) (918) ------------- --------- ----------- ------------ ---------- ------------- Balance, December 31, 1996 30,789,185 $ 3,079 $ 595,628 $ (268,440) $ - $ 330,267 Net income 89,551 89,551 Cash distributions declared ($1.80 per share) (59,779) (59,779) Issuance of common stock, less $533 of offering costs 4,927,680 493 165,270 165,763 Issuance of common stock for services 2,000 50 50 Exercise of stock options 44,500 147 (471) 1,185 861 Purchase treasury stock (171,213) (5,748) (5,748) Conversion of operating partnership units to common stock 42,825 5 776 781 Adjustment for minority interest in operating partnership (23,241) (23,241) ------------- --------- ----------- ------------ ---------- ------------- Balance, December 31, 1997 35,634,977 $ 3,577 $ 738,630 $ (239,139) $ (4,563) $ 498,505 ============= ========= =========== ============ ========== =============
The accompanying notes are an integral part of the consolidated financial statements. F-5 37 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
YEAR ENDED DECEMBER 31, 1997 1996 1995 ---------------- ---------------- ---------------- Cash flows from operating activities: Net income $ 89,551 $ 59,742 $ 43,054 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest 49,997 34,580 25,856 Net gain on sales (58,647) (43,821) (33,397) Extraordinary items 1,152 2,291 Equity in net income of unconsolidated affiliates (19,344) (17,589) (9,274) Provision for doubtful accounts 3,025 2,421 607 Depreciation 44,551 35,469 26,104 Amortization 3,957 4,340 4,751 Net changes in: Tenant accounts receivable (12,490) (12,974) (6,723) Prepaid and other assets 46 (5,744) (1,963) Accounts payable and accrued expenses (16,082) 8,487 11,645 ---------------- ---------------- ---------------- Net cash provided by operating activities 85,716 67,202 60,660 ---------------- ---------------- ---------------- Cash flows from investing activities: Acquisition/development of real estate and improvements and additions to properties (200,564) (121,138) (379,976) Change in investment and note receivable with GGMI (24,045) 12,532 Proceeds from the sale of CenterMark stock 130,500 87,000 72,500 Distributions received from CenterMark 21,531 23,462 Distributions received from GGP/Homart 20,352 13,791 Investment in Property Joint Ventures (72,514) (14,397) Investment in GGP/Homart (13,719) (19,058) (178,001) Increase in deferred expenses (7,039) (9,546) (7,189) ---------------- ---------------- ---------------- Net cash used in investing activities (167,029) (29,285) (469,204) ---------------- ---------------- ---------------- Cash flows from financing activities: Cash distributions paid to common stockholders (56,989) (47,604) (41,037) Cash distributions paid to minority interest (31,884) (27,861) (25,494) Gross proceeds from sale of common stock 166,296 93,375 Payment of stock issuance costs (533) (38) (5,482) Proceeds from issuance of mortgage and other notes payable 832,525 705,815 506,450 Principal payments on mortgage and other notes payable (802,929) (668,107) (105,728) Purchase of treasury stock (5,748) Proceeds from exercised options 861 1,388 Retirement of common stock (1,450) Increase in deferred financing costs (9,262) (2,411) (859) Prepayment penalty on early retirement of debt (1,073) ---------------- ---------------- ---------------- Net cash provided by financing activities 91,264 (40,268) 421,225 ---------------- ---------------- ---------------- Net change in cash and cash equivalents 9,951 (2,351) 12,681 Cash and cash equivalents at beginning of year 15,947 18,298 5,617 ---------------- ---------------- ---------------- Cash and cash equivalents at end of year $ 25,898 $ 15,947 $ 18,298 ================ ================ ================ Supplemental disclosure of cash flow information: Interest paid $ 79,787 $ 73,386 $ 51,310 Interest capitalized 4,753 5,947 5,409 Supplemental schedule of non-cash investing and financing activities: Acquisition of real estate and General Growth Management, Inc. (1996) 107,853 244,787 37,558 Operating partnership units and stock issued as consideration for: Additional real estate investments 30,408 89,438 17,908 Acquisition of General Growth Management, Inc. 51,497 Mortgage debt assumed as consideration for additional real estate investments 77,445 103,852 19,650
The accompanying notes are an integral part of the consolidated financial statements. F-6 38 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts) 1. ORGANIZATION AND BASIS OF PRESENTATION ORGANIZATION General Growth Properties, Inc., a Delaware corporation, was formed in 1986 to own and operate enclosed mall shopping centers. On April 15, 1993, the Company completed its initial public offering and a business combination involving entities under varying common ownership. Proceeds from the initial public offering were used to acquire a majority interest in GGP Limited Partnership (the "Operating Partnership") which was formed to succeed to substantially all of the interests in enclosed 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. OPERATING PARTNERSHIP The Operating Partnership commenced operations on April 15, 1993 and as of December 31, 1997, the Company together with the Operating Partnership owned 100% of thirty-five enclosed regional shopping centers, 51% of GGP/Ivanhoe, Inc. and 50% of both Quail Springs and Town East (the "Property Joint Ventures"), 38.2% of the stock of GGP/Homart, Inc. and a 95% non-voting preferred stock interest in General Growth Management, Inc. ("GGMI"). At December 31, 1997, the Company owned a 66% general partnership interest in the Operating Partnership. The minority interest in the Operating Partnership is held primarily by trusts for the benefit of families of the original stockholders which initially owned and controlled the Company and is represented by units of limited partnership interests ("Units"). The Units can be exchanged, with certain restrictions, for shares of the Company on a one-for-one basis. The original stockholders' Units can be exchanged for cash, at the Company's election, if 25% or more of the outstanding common stock of the Company is owned by the original stockholders at the time of the exchange. The Unitholders also share equally with the stockholders on a per share basis in any distributions by the Operating Partnership. Changes in Operating Partnership Units for the three years ending December 31, 1997, are as follows:
Units -------------- December 31, 1994 15,267,525 Acquisition of Piedmont Mall 832,936 -------------- December 31, 1995 16,100,461 Acquisition of General Growth Management, Inc. (issued to the original stockholders) 453,791 Acquisition of Lakeview Square, Lansing and Westwood Malls 1,445,000 Conversion to common stock (64,842) -------------- December 31, 1996 17,934,410 Acquisition of Southlake Mall 353,537 Acquisition of Valley Hills Mall 518,833 Conversion to common stock (42,825) -------------- December 31, 1997 18,763,955 ==============
F-7 39 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying financial statements of the Company have been prepared on a consolidated basis which include the accounts of the Company, its majority owned Operating Partnership and subsidiaries (hereinafter the "Company"). All significant intercompany balances and transactions have been eliminated. REVENUE RECOGNITION Minimum rent revenues are recognized on a straight-line basis over the term of the related leases. Percentage rents are recognized on an accrual basis. Recoveries from tenants for taxes, insurance and other shopping center operating expenses are recognized as revenues in the period the applicable costs are incurred. The Company provides an allowance for doubtful accounts against the portion of accounts receivable which is estimated to be uncollectible. Accounts receivable in the accompanying consolidated balance sheets are shown net of an allowance for doubtful accounts of $5,011 and $5,117 as of December 31, 1997 and 1996, respectively. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The carrying amount approximates fair value due to the short maturity of these investments. DEFERRED EXPENSES Deferred expenses consist principally of financing fees and leasing commissions which are amortized over the terms of the respective agreements. Deferred expenses in the accompanying consolidated balance sheets are shown net of accumulated amortization of $25,235 and $21,996 as of December 31, 1997 and 1996, respectively. PROPERTIES Real estate assets are stated at cost. Interest and real estate taxes incurred during construction periods are capitalized and amortized on the same basis as the related assets. The real estate assets of the Company are periodically reviewed for impairment. Based principally on a review of cash flows, management has determined that the fair value of its real estate assets exceeds their carrying value. Depreciation expense is computed using the straight-line method based upon the following estimated useful lives:
YEARS ----- Buildings and Improvements 40 Equipment and fixtures 10
Construction allowances paid to tenants are capitalized and depreciated over the average lease term. Maintenance and repairs are charged to expense when incurred. Expenditures for improvements are capitalized. F-8 40 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts) INVESTMENTS IN AFFILIATES The Company accounts for its investments in affiliates using the equity method whereby the cost of an investment is adjusted for the Company's share of equity in net income or loss from the date of acquisition and reduced by distributions received. Due to currently unpaid and accrued preferences as described in Note 7 on the preferred stock, the Operating Partnership was entitled to 100% of the earnings and cash flows generated by GGMI in 1997 and 1996. Subsequent to the July 1996 sale, the remaining investment in CenterMark was accounted for using the cost method whereby distributions received were included in income instead of its share of equity in net income or loss. INCOME TAXES The Company elected to be taxed as a real estate investment trust under sections 856-860 of the Internal Revenue Code of 1986, commencing with its taxable year beginning January 1, 1993. In order to qualify as a real estate investment trust, the Company is required to distribute at least 95% of its ordinary taxable income and 100% of capital gains to stockholders and to meet certain asset and income tests as well as certain other requirements. As a real estate investment trust, the Company will generally not be liable for Federal income taxes, provided it satisfies the necessary requirements. As a result, Federal income taxes on the net taxable income of the Company are payable by the stockholders of the Company. Accordingly, the consolidated statements of operations do not reflect a provision for income taxes. State income taxes are not significant. The Company's affiliate, GGMI, is a taxable corporation and accordingly, state and Federal income taxes on its net taxable income are payable by GGMI. EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which became effective for both interim and annual financial statement periods ending after December 15, 1997. As required by this statement, the Company adopted the new standards for computing and presenting earnings per share for 1997, and for all prior period earnings per share data presented. Basic per share amounts are based on the weighted average of common shares outstanding of 32,622,665 for 1997, 28,145,091 for 1996 and 25,509,546 for 1995. Diluted per share amounts are based on the weighted average common shares and the effect of dilutive securities (stock options) outstanding of 32,839,637 for 1997, 28,220,707 for 1996 and 25,521,875 for 1995. The outstanding Operating Partnership Units have been excluded from the diluted earnings per share calculation as there would be no effect on the amounts since the minority interests' share of income would also be added back to net income. MINORITY INTEREST Income before minority interest is allocated to the limited partners (the "Minority Interest") based on their ownership percentage of the Operating Partnership. The ownership percentage is determined by dividing the numbers of Operating Partnership Units held by the Minority Interest by the total Operating Partnership Units outstanding. The issuance of additional shares of common stock or Operating Partnership Units changes the percentage ownership of both the Minority Interest and the Company. Since a Unit is convertible into common stock and thus equivalent to a common share, such transactions are treated as capital transactions and result in an allocation between stockholders' equity and Minority Interest in the balance sheet to account for the change in the ownership of the underlying equity in the Operating Partnership. F-9 41 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts) ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS The consolidated statements of operations for prior periods have been reclassified to conform with current classifications with no effect on results of operations. 3. CENTERMARK ACQUISITION AND DISPOSITION On February 11, 1994, the Company and Subsidiaries acquired 40% of the outstanding stock of CenterMark which owns interests in several major regional shopping malls and power centers. The Company's portion of the cash purchase price for the CenterMark stock, including certain transaction costs, was approximately $182,000. CenterMark elected real estate investment trust status for income tax purposes. The Company sold 25% of its interest in CenterMark on December 19, 1995 for $72,500 which reduced the Company's ownership to 30% of the outstanding CenterMark stock. Concurrent with the sale of the stock, the Company also granted an option to purchase the remainder of the Company's CenterMark stock for $217,500. The Company's remaining interest was sold in two transactions with $87,000 received on July 1, 1996 and $130,500 received on January 2, 1997. 4. GGP/HOMART ACQUISITION On December 22, 1995, the Company, jointly with four other investors, acquired 100% of the stock of GGP/Homart, Inc. ("GGP/Homart") from Sears, Roebuck and Co. The Company acquired 38.2% of GGP/Homart for approximately $178,000 including certain transaction costs. All of the stockholders of GGP/Homart committed to contribute up to $80,000 of additional capital and as of December 31, 1997 this commitment had been fulfilled. The co-investors in GGP/Homart are allowed to exercise an exchange right according to the stockholders agreement. The exchange right is designed to allow a GGP/Homart stockholder to convert their ownership interest in GGP/Homart to a common stock ownership interest in General Growth Properties, Inc. GGP/Homart elected real estate investment trust status for income tax purposes. During the second quarter of 1997, GGP/Homart sold its ownership interest in Eden Prairie Mall to the Company (see Note 5). In September of 1997, GGP/Homart sold its ownership interest in Meriden Square to its joint venture partner and opened Brass Mill Center and Commons Mall, a new development, located in Waterbury, Connecticut. As of December 31, 1997 GGP/Homart owned interests in twenty-five regional shopping malls. F-10 42 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts) The following is summarized financial information for GGP/Homart.
December 31, Balance Sheet as of 1997 1996 - ------------------- ----------------- ----------------- Assets: Net investment in real estate $ 1,088,310 $ 1,007,008 Investment in real estate partnerships 154,109 179,228 Other assets 64,558 55,957 ----------------- ----------------- $ 1,306,977 $ 1,242,193 ================= ================= Liabilities and Stockholders' Equity: Mortgage and other notes payable $ 742,362 $ 689,773 Accounts payable and accrued expenses 54,806 83,547 Stockholders' equity 509,809 468,873 ----------------- ----------------- $ 1,306,977 $ 1,242,193 ================= ================= Period from Year ended December 31, December 22 through 1997 1996 December 31, 1995 ----------------- ----------------- -------------------- Summary of Operations - --------------------- Revenues $ 162,347 $ 145,689 $ 4,782 Operating costs (66,619) (62,002) (2,040) Depreciation and amortization (25,879) (20,824) (455) Interest expense (46,047) (40,575) (1,248) Equity in net income of real estate partnerships 5,999 2,434 314 Gain on sale of joint venture interest 13,767 Minority interest (372) (239) ----------------- ----------------- ----------------- Net income $ 43,196 $ 24,483 $ 1,353 ================= ================= =================
Significant accounting policies used by GGP/Homart are the same as those used by the Company. 5. PROPERTY ACQUISITIONS AND DEVELOPMENTS ACQUISITIONS - 1997 The Company acquired a 100% ownership interest in Valley Hills Mall located in Hickory, North Carolina on October 23, 1997 for a purchase price of approximately $34,500. The purchase price consisted of approximately $18,900 (518,833 units) of Operating Partnership Units and the assumption of approximately $15,600 mortgage debt. During the second quarter of 1997, the Company acquired 100% ownership of three other properties, Century Plaza Shopping Center, Southlake Mall and Eden Prairie Mall. Century Plaza Shopping Center located in Birmingham, Alabama was acquired on May 1, 1997 for $31,800 in cash. Southlake Mall was acquired on June 18, 1997, for a purchase price of $67,000. The purchase price consisted of $45,100 of mortgage debt assumption, $11,500 (353,537 units) of Operating Partnership Units, and $10,400 in cash. Southlake Mall is located in Atlanta, Georgia. The aggregate consideration paid for Eden Prairie Mall located in Minneapolis, Minnesota was $19,900. It included the assumption of a $16,800 mortgage, the payment of $1,100 in cash and the assumption of $2,000 of short-term liabilities. On March 31, 1997, the Company acquired a 100% ownership interest in Market Place Mall for a cash purchase price of approximately $70,000. Market Place Mall is located in Champaign, Illinois. F-11 43 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts) ACQUISITIONS - 1996 On October 4, 1996, Park Mall in Tucson, Arizona was acquired for one million shares of newly issued common stock and the payment of $23,995 in cash. Sooner Fashion Mall and 50% of Quail Springs Mall, in Norman and Oklahoma City, Oklahoma, respectively, were acquired on November 27, 1996, for 895,928 newly issued common shares, the assumption of $8,636 of mortgage debt and the payment of $16,695 in cash. On December 6, 1996, the Company acquired Lakeview Square, Lansing Mall and Westwood Mall, all located in south central Michigan for an aggregate purchase price of $132,148. The purchase price consisted of $92,411 of mortgage debt assumption, of which $4,436 was retired at closing, and the issuance of $39,737 (1,445,000 units) of Operating Partnership Units. ACQUISITIONS - 1995 Piedmont Mall was acquired on July 1, 1995, by assuming $19,650 of mortgage debt, issuing $17,908 (832,936 units) of Operating Partnership Units and the payment of approximately $1,700 in cash. Natick Mall was acquired on December 22, 1995, in conjunction with the GGP/Homart transaction, for an aggregate purchase price of approximately $265,000 consisting of $82,000 in cash and a mortgage loan for $183,000. The acquisitions were accounted for utilizing the purchase method and accordingly, the results of operations are included in the Company's results of operations from the dates of acquisition. DEVELOPMENTS During 1996, the Company acquired two new development sites located in Coralville (Iowa City), Iowa and Grand Rapids, Michigan. Coral Ridge Mall, located in Coralville, Iowa is currently under construction and is scheduled to open in July of 1998. The Grand Rapids project recently began site work and is scheduled to open in late 1999. 6. INVESTMENTS IN AFFILIATES On September 17, 1997, GGP/Ivanhoe, Inc. ("GGP/Ivanhoe") acquired both The Oaks Mall In Gainesville, Florida and Westroads Mall in Omaha, Nebraska. The purchase price for the two properties was approximately $206,000 of which $125,000 was financed through property level indebtedness. The Company owns 51% of the ownership interest in GGP/Ivanhoe for a net investment of $43,766. Ivanhoe, Inc. of Montreal, Quebec, Canada owns the remaining 49% ownership interest in GGP/Ivanhoe. On June 11, 1997, the Company acquired a 50% interest in Town East Mall, located in Mesquite, Texas for $56,500. The consideration included approximately $27,500 million in cash, the assumption of approximately $27,900 of mortgage indebtedness and the assumption of $1,100 in net current liabilities. 7. ACQUISITION OF GENERAL GROWTH MANAGEMENT, INC. On December 22, 1995, GGP Management, Inc. was formed to manage, lease, develop and operate enclosed malls. The Operating Partnership owned 100% of the non-voting preferred stock ownership interest in GGP Management, Inc. representing 95% of the equity interest. Key employees of the Company held the remaining 5% ownership interest therein, which interest was in the form of common stock which was entitled to all of the voting rights in GGP Management, Inc. In August 1996, GGP Management Inc., acquired General Growth Management, Inc. ("GGMI") through arm's length negotiations for approximately $51,500, which was accounted for as a purchase by completing the following steps: GGP Management, Inc. borrowed approximately $39,900 from the F-12 44 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts) Operating Partnership and used the loan proceeds to acquire 1,555,855 newly-issued common shares of the Company from the Company. GGP Management, Inc. then exchanged the 1,555,855 common shares and 453,791 Operating Partnership Units (contributed by the Operating Partnership) for 100% of the outstanding shares in GGMI. GGP Management, Inc. was then merged into GGMI with GGMI as the surviving entity. The Operating Partnership currently holds all of the non-voting preferred stock ownership interest in GGMI representing 95% of the equity interest. Five key employees of the Company hold the remaining 5% equity interest through ownership of 100% of the common stock which is entitled to all voting rights in GGMI. GGMI can not distribute funds until its available cash flow exceeds all accumulated preferred dividends owed to the preferred stockholder. Any dividends in excess of the preferred cumulative dividend are allocated 95% to the preferred stockholder and 5% to the common stockholders. The interest only loan from the Operating Partnership to GGMI bears interest at 14% and matures in 2016. GGMI may make principal payments on the loan if it has sufficient cash flow. GGMI manages, leases, and performs various other services for the Company owned shopping centers, GGP/Homart properties and other properties owned by unaffiliated parties. On June 16, 1997, GGMI acquired an office building in downtown Chicago, Illinois to be used as the Company's new corporate headquarters. The office building is in the process of being upgraded and retrofitted to create class A office space. GGMI and Company personnel are expected to initially occupy approximately half of the building commencing in the second quarter of 1998. The balance of the space will be leased to other tenants. 8. MORTGAGE NOTES AND OTHER DEBT PAYABLE Mortgage notes and other debt payable at December 31, 1997 and 1996, consisted of the following:
1997 1996 ---------------- ------------------ Fixed-Rate debt Mortgage notes payable $1,173,042 $ 766,783 Variable-Rate debt Mortgage notes payable 16,743 250,000 Credit facility 86,000 40,000 Construction loans 111,739 ---------------- ------------------ Total Variable-Rate debt 102,743 401,739 ================ ================== Total mortgage notes and other debt payable $1,275,785 $1,168,522 ================ ==================
FIXED-RATE DEBT MORTGAGE NOTES PAYABLE The fixed-rate mortgage notes bear interest ranging from 6.00% to 10.00% (weighted average of 7.11%), require monthly payments of principal and/or interest and have various maturity dates through 2020 (average remaining term of 7.8 years). Certain properties are pledged as collateral for the related mortgage note. The Mortgage notes payable as of December 31, 1997 are non-recourse to the Company. Certain properties are cross-defaulted and cross-collateralized as part of a group of properties. Under certain cross-default provisions, a default under any mortgage included in a cross-defaulted package may constitute a default under all such mortgages and may lead to acceleration of the indebtedness due on each property within the collateral package. GGP/Ivanhoe debt F-13 45 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts) totaling $125,000 is cross-defaulted and cross-collateralized with eleven wholly owned centers. Certain properties are subject to financial performance covenants, primarily minimum earnings before interest, taxes, depreciation and amortization ("EBITDA") ratios. VARIABLE-RATE DEBT MORTGAGE NOTES PAYABLE The mortgage note at December 31, 1997 is a non-recourse loan that bears interest at LIBOR plus 118 basis points and matures in December of 1998. This mortgage note is cross-collateralized with several GGP/Homart centers. CREDIT FACILITY The $200,000 unsecured revolving credit facility bears interest at LIBOR plus 80 to 120 basis points depending upon the Company's leverage ratio and matures on July 31, 1999 excluding a one year extension option. The credit facility is subject to financial performance covenants including debt-to-market capitalization, minimum earnings before interest, taxes, depreciation and amortization ("EBITDA") ratios and minimum equity values. CONSTRUCTION LOANS The construction loans were arranged in connection with the development of two regional malls. These recourse loans were repaid in 1997. Principal amounts due under mortgage notes and other debt payable mature as follows:
Year Amount Maturing ---- --------------- 1998 $ 19,946 1999 197,432 2000 2,260 2001 154,486 2002 185,718 Subsequent 715,943 ---------------- Total $ 1,275,785 ================
Certain mortgages notes payable may be prepaid but are generally subject to a prepayment penalty of a yield-maintenance premium or a percentage of the loan balance. Land, buildings and equipment related to the mortgages payable, with an aggregate cost of $1,524,740 at December 31, 1997 have been pledged as collateral. Based on borrowing rates available to the Company at the end of 1997 for mortgage loans with similar terms and maturities, the fair value of the mortgage notes and other debt payable approximates carrying value at December 31, 1997 and 1996. As of December 31, 1997 and 1996, the Operating Partnership had outstanding letters of credit of $7,717 and $6,200, respectively, in connection with special real estate assessments and liability insurance requirements. 9. RENTALS UNDER OPERATING LEASES The Company receives rental income from the leasing of retail shopping center space under operating leases. The minimum future rentals based on operating leases held as of December 31, 1997, are as follows: F-14 46 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts)
Year Amount ---- ------ 1998 $159,827 1999 152,580 2000 143,179 2001 129,562 2002 116,606 Thereafter 514,185
Minimum future rentals do not include amounts which may be received from certain tenants based upon a percentage of their gross sales or as reimbursement of shopping center operating expenses. No single tenant collectively accounts for more than 10% of the Company's total revenues. The tenant base includes national and regional retail chains and local retailers, and consequently the Company's credit risk is concentrated in the retail industry. 10. TRANSACTIONS WITH AFFILIATES GGMI has been contracted to provide management, leasing, development and construction management services for the owned properties. In addition, certain shopping center advertising and payroll costs of the properties are paid by GGMI and reimbursed by the Company. Total costs included in the consolidated financial statements related to agreements with GGMI are as follows:
Year Ended December 31, 1997 1996 1995 ----------------- ----------------- ---------------- Management and Leasing Fees $ 8,285 $ 7,956 $ 8,514 Cost Reimbursements 28,099 23,641 20,049 Development Costs 2,015 1,529 1,637
In December 1996, the Operating Partnership acquired a development site located in Grand Rapids, Michigan from a related partnership for $11,441. 11. STOCK INCENTIVE PLAN The Company's Stock Incentive Plan provides incentives to attract and retain officers and key employees. The Stock Incentive Plan originally consisted of 1,000,000 shares of common stock available for grant which was increased by 1,000,000 shares in both 1996 and 1997. As of December 31, 1997, the number of shares of common stock authorized for issuance under the plan were 3,000,000. Options are granted by the Compensation Committee of the Board of Directors at an exercise price of not less than 100% of the fair market value of the Common Stock on the date of grant. The term of the option is fixed by the Compensation Committee, but no option shall be exercisable more than 10 years after the date of the grant. Options granted to employee-officers are for 10-year terms and are exercisable in either 33 1/3% or 20% annual increments from the date of the grants. Options granted to non-employee directors are exercisable in full commencing on the date of grant and expire on the tenth anniversary of the date of the grant. F-15 47 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts) A summary of the status of the Company's stock options as of December 31, 1997, 1996 and 1995 and changes during the year ended on those dates is presented below.
1997 1996 1995 -------------------------- -------------------------- ------------------------ Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price -------------------------- -------------------------- ------------------------ Outstanding at beginning of year 827,500 $ 24.48 425,500 $ 19.50 173,500 $ 20.89 Granted 2,000 $ 31.75 502,000 $ 27.97 312,000 $ 19.02 Exercised (44,500) $ 19.35 (66,667) $ 20.81 Forfeited (33,333) $ 20.81 Cancelled (60,000) $ 21.03 -------------------------- -------------------------- ------------------------ Outstanding at end of year 785,000 $ 24.79 827,500 $ 24.48 425,500 $ 19.50 ========================== ========================== ======================== Exercisable at end of year 379,000 267,500 161,500 Options available for future grants 2,103,833 1,105,833 574,500 Weighted average per share fair value of options granted during the year $ 2.74 $ 2.28 $ 1.53
The fair value of each option grant for 1997, 1996 and 1995 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
1997 1996 1995 ------------ ----------- ----------- Risk free interest rate 6.23% 5.78% 5.68% Dividend yield 7.77% 7.75% 7.75% Expected life 4.75 years 4.00 years 4.00 years Expected volatility 18.8% 18.8% 18.8%
The following table summarizes information about stock options outstanding at December 31, 1997:
Options Outstanding Options Exercisable --------------------------------------------------- ----------------------------------- Weighted Average Weighted Weighted Number Remaining Average Options Average Range of Outstanding Contractual Exercise Exercisable Exercise Exercise Prices at 12/31/97 Life Price at 12/31/97 Price - ---------------------- --------------- --------------- ------------- ---------------- --------------- $19.00 - $31.75 785,000 8.5 years $24.79 379,000 $23.85
The Company has applied Accounting Principles Board Opinion 25 and selected interpretations in accounting for its plan. Accordingly, no compensation costs have been recognized. Had compensation costs for the Company's Plan been determined based on the fair value at the grant date for options granted in 1997, 1996 and 1995 in accordance with the method required by Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation", the Company's net income and net income per share would have been reduced to the pro forma amounts as follows: F-16 48 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts)
Year Ended December 31, 1997 1996 1995 ------------------- ------------------- --------------- Net Income As Reported $89,551 $59,742 $43,054 Pro Forma $89,341 $59,536 $42,991 Net earnings per share - basic As Reported $ 2.75 $ 2.12 $ 1.69 Pro Forma $ 2.74 $ 2.12 $ 1.69 Net earnings per share - diluted As Reported $ 2.73 $ 2.12 $ 1.69 Pro Forma $ 2.72 $ 2.11 $ 1.68
12. EXTRAORDINARY ITEMS The extraordinary items resulted from prepayment costs and unamortized deferred financing costs related to the early retirement of mortgage notes payable. The basic and diluted per share impact of the extraordinary items was $.03 in 1997 and $.08 in 1996. 13. DISTRIBUTIONS PAYABLE On December 16, 1997, the Company declared a cash distribution of $.45 per share payable January 30, 1998, to stockholders of record on December 30, 1997, totaling $16,029. In addition a distribution of $8,392 was paid to the limited partners of the Operating Partnership. On December 17, 1996, the Company declared a cash distribution of $.43 per share payable January 31, 1997, to stockholders of record on December 31, 1996, totaling $13,239. In addition a distribution of $7,505 was paid to the limited partners of the Operating Partnership. On December 15, 1995, the Company declared a cash distribution of $.43 per share payable January 31, 1996, to stockholders of record on December 29, 1995, totaling $11,727. In addition a distribution of $6,923 was paid to the limited partners of the Operating Partnership. The allocations of the distributions declared and paid for income tax purposes are as follows:
YEAR ENDED DECEMBER 31, 1997 1996 1995 -------------- --------------- ------------- Ordinary Income 29.8% 47.0% 51.6% Capital Gain 70.2 53.0 48.4 ============== =============== ============= 100.0% 100.0% 100.0% ============== =============== =============
14. COMMITMENTS AND CONTINGENCIES In the normal course of business, from time to time, the Company is involved in legal actions relating to the ownership and operations of its properties. In management's opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a materially adverse effect on the consolidated financial position, results of operations or liquidity of the Company. The Company leases land at a few properties from third parties. Rental expense including participation rent related to these leases was $595, $590 and $526 for the years ended December 31, 1997, 1996 and 1995, respectively. The leases provide for a right of first F-17 49 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts) refusal in favor of the Company in the event of a proposed sale of the property by the landlord. The Company has entered into several contingent agreements for the acquisition of properties. Each acquisition is subject to satisfactory completion of due diligence and, in the case of developments, completion and occupancy of the project. 15. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June of 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income" and Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information." Statement No. 130 requires the reporting of comprehensive income which for the Company would be the same as net income currently reported. Statement No. 131 establishes standards for publicly-held business enterprises to report information about operating segments in annual financial statements and requires that these enterprises report selected information about operating segments in interim financial reports issued to shareholders. The Company will adopt the provisions under the new reporting and disclosure requirements promulgated in these statements beginning in its fiscal 1998 year. 16. PRO FORMA FINANCIAL INFORMATION (UNAUDITED) Due to the impact of the acquisitions and dispositions during 1995, 1996 and 1997 historical results of operations may not be indicative of future results of operations. The pro forma condensed consolidated statements of operations for 1997 include adjustments for the acquisition of 100% of Market Place Shopping Center, Century Plaza and Southlake Mall and 50% of Town East as if they had occurred on January 1, 1997. The pro forma condensed consolidated statements of operations for 1996 include adjustments for the acquisition of 100% of the three operating properties in 1997, 50% of Town East, 100% of the five operating properties in 1996, 50% of Quail Springs Mall and the disposition of CenterMark Properties as if they had occurred on January 1, 1996. The pro forma condensed consolidated statements of operations for 1995 include adjustments for the acquisition of 100% of the five operating properties, 50% of Quail Springs Mall, GGP/Homart, the follow-on stock offering, Natick Mall and the disposition of a portion of the interest in CenterMark Properties as if they had occurred on January 1, 1995. The pro forma information is based upon the historical consolidated statements of operations and does not purport to present what actual results would have been had the offerings, acquisitions, sale and related transactions, in fact, occurred at the previously mentioned dates, or to project results for any future period. F-18 50 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts)
1997 1996 1995 ---- ---- ---- Total revenues $ 305,574 $ 280,939 $ 228,030 --------------- ---------------- -------------- Expenses: Property operating 112,187 96,512 76,188 Management fees 3,514 3,630 4,208 Depreciation and amortization 50,586 48,705 40,423 --------------- ---------------- -------------- Total expenses 166,287 148,847 120,819 --------------- ---------------- -------------- Operating income 139,287 132,092 107,211 Interest expense, net (78,711) (83,061) (74,168) Equity in net income/(loss) of unconsolidated affiliates CenterMark - - 8,023 GGP/Homart 16,506 9,355 9,075 Property Joint Ventures 3,423 2,758 927 General Growth Management, Inc. (194) (1,273) - --------------- ---------------- -------------- 80,311 59,871 51,068 Minority interest in operating partnership 29,361 23,005 19,202 --------------- ---------------- -------------- Pro forma net income (a) $ 50,950 $ 36,866 $ 31,866 =============== ================ ============== Pro forma earnings per share - basic (b) $ 1.56 $ 1.24 $ 1.09 =============== ================ ============== Pro forma earnings per share - diluted (b) $ 1.55 $ 1.24 $ 1.09 =============== ================ ==============
(a) The proforma adjustments include management fee and depreciation modifications and acquisition and disposition activity described in the above paragraph. The equity income from CenterMark reflects the reductions in ownership interest offset by the change from the equity method of accounting to the cost method 1995. Pro forma net income is before extraordinary item. (b) Basic earnings per share are based upon 32,622,665 for 1997, 29,717,353 for 1996 and 29,168,488 for 1995. Diluted per share amounts are based on the weighted average common shares and the effect of dilutive securities (stock options) outstanding of 32,839,637 for 1997, 29,792,969 for 1996 and 29,180,817 for 1995. F-19 51 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except Per Share Amounts) 17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Year Ended First Second Third Fourth December 31, 1997 Quarter Quarter Quarter Quarter Total - ------------------------------------------------------------------------------------------------------------------------------------ Total Revenues $ 65,328 $ 69,694 $ 74,199 $81,926 $ 291,147 Income before minority interest 75,495 17,823 24,440 22,942 140,700 Income before extraordinary item 47,953 11,127 15,982 15,641 90,703 Net income applicable to common shares 47,576 11,127 15,287 15,561 89,551 Earnings before extraordinary item per share - basic (a) 1.56 0.36 0.48 0.44 2.78 Earnings before extraordinary item per share - diluted (a) 1.55 0.36 0.48 0.44 2.76 Net earnings per share - basic (a) 1.55 0.36 0.46 0.44 2.75 Net earnings per share - diluted (a) 1.54 0.36 0.46 0.44 2.73 Distributions declared per share 0.45 0.45 0.45 0.45 1.80 Weighted average shares outstanding (in thousands) - basic 30,789 30,781 33,219 35,640 32,623 Weighted average shares outstanding (in thousands) - diluted 30,835 30,831 33,279 35,701 32,840
(a) Earnings per share for the four quarters do not add up to the annual earnings per share due to the issuance of additional stock and the gain on the sale of a portion of CenterMark stock in the first quarter.
Year Ended First Second Third Fourth December 31, 1996 Quarter Quarter Quarter Quarter Total - ------------------------------------------------------------------------------------------------------------------------------------ Total Revenues $ 51,741 $ 51,671 $ 51,569 $62,424 $ 217,405 Income before minority interest 9,810 11,607 58,275 16,921 96,613 Income before extraordinary item 6,996 7,275 36,667 11,095 62,033 Net income applicable to common shares 4,705 7,275 36,667 11,095 59,742 Earnings before extraordinary item per share - basic (a) 0.26 0.27 1.33 0.36 2.20 Earnings before extraordinary item per share - diluted (a) 0.26 0.27 1.33 0.36 2.20 Net earnings per share - basic (a) 0.18 0.27 1.33 0.36 2.12 Net earnings per share - diluted (a) 0.18 0.27 1.33 0.36 2.12 Distributions declared per share 0.43 0.43 0.43 0.43 1.72 Weighted average shares outstanding (in thousands) - basic 27,273 27,273 27,554 30,180 28,145 Weighted average shares outstanding (in thousands) - diluted 27,284 27,288 27,574 30,208 28,221
(a) Earnings per share for the four quarters do not add up to the annual earnings per share due to the issuance of additional stock and the gain on the sale of a portion of CenterMark stock in the third quarter. F-20 52 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders General Growth Properties, Inc. Our report on the consolidated financial statements of General Growth Properties, Inc. is included as page F-2 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in the Index to Consolidated Financial Statements on page F-1 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. Chicago, Illinois Coopers & Lybrand L.L.P. February 9, 1998 F-21 53 General Growth Properties, Inc. Schedule III - Real Estate and Accumulated Depreciation as of December 31, 1997
Col. A Col. B Col. C Col. D ------ ------ ------ ------ Costs Capitalized Subsequent Initial Cost To Acquisition ----------------------------- ---------------------------- Buildings and Encumbrances Improvements Carrying Description (e) Land (a) Improvements Costs (b) - ------------------- ------------- -------------- ------------- ------------- ----------- Bayshore Mall, Eureka, CA 37,250,000 3,004,345 27,398,907 19,903,001 2,887,090 Bellis Fair Mall, Bellingham, WA 73,000,000 7,616,458 47,040,131 6,117,887 6,122,020 Birchwood Mall, Port Huron, MI 39,122,228 1,768,935 34,574,635 6,831,866 1,967,320 Capital Mall Jefferson City, MO 16,500,000 4,200,000 14,201,000 3,155,283 0 Century Mall Birmingham, AL 0 3,164,000 28,513,908 369,014 0 Chapel Hills Colorado Springs, CO 36,750,000 4,300,000 34,017,000 32,776,554 36,805 Colony Square Mall Zanesville, OH 25,600,000 1,000,000 24,500,000 8,626,983 0 Columbia Mall Columbia, MO 56,100,000 5,383,208 19,663,231 7,732,810 1,368,803 Development in Progress 0 35,991,118 32,012,357 0 0 Eagle Ridge Mall Lake Wales, FL 0 7,619,865 49,560,538 146,702 5,678,662 Eden Prairie Mall Eden Prairie, MN 16,743,017 465,063 19,024,047 912,950 0 Fallbrook Mall, West Hills, CA 46,900,000 6,117,338 10,076,520 55,301,557 1,628,171 Fox River Mall Appleton, WI 93,200,000 2,700,566 18,291,067 26,938,650 1,820,253 Gateway Mall, Springfield, OR 30,750,000 8,728,263 34,707,170 8,082,899 7,520,779 GGPLP Corp Chicago, IL 86,000,000 89,115 0 0 Grand Traverse Mall, Grand Traverse, MI 51,500,000 3,529,966 20,775,772 18,649,321 3,643,793 Greenwood Mall Bowling Green, KY 39,500,000 3,200,000 40,202,000 11,626,083 0 Knollwood Mall, St. Louis Park, MN 0 0 9,748,047 22,343,715 1,767,267 Lakeview Square Mall Battle Creek, MI 27,077,893 3,578,619 32,209,980 954,294 0 Lansing Mall Lansing, MI 44,696,922 6,977,798 62,800,179 1,249,912 0 Lockport Mall, Col. A Col. E Col. F ------ ------ ------ Gross Amounts at Which Carried at Close of Period ------------------------------------------ Buildings and Accumulated Description Land Improvements Total(c)(d) Depreciation - ------------------- - ------------- ------------ ------------ --------------- Bayshore Mall, Eureka, CA 3,005,040 50,188,998 53,194,038 13,001,263 Bellis Fair Mall, Bellingham, WA 7,485,224 59,280,038 66,765,262 17,557,848 Birchwood Mall, Port Huron, MI 3,045,616 43,373,821 46,419,437 9,869,863 Capital Mall Jefferson City, MO 3,912,935 17,356,283 21,269,218 2,140,538 Century Mall Birmingham, AL 3,164,000 28,882,922 32,046,922 386,719 Chapel Hills Colorado Springs, CO 4,300,000 66,830,359 71,130,359 5,163,549 Colony Square Mall Zanesville, OH 1,243,184 33,126,983 34,370,167 9,867,946 Columbia Mall Columbia, MO 5,383,208 28,764,844 34,148,052 10,526,793 Development in Progress 35,991,118 32,012,357 68,003,475 0 Eagle Ridge Mall Lake Wales, FL 7,621,768 55,385,902 63,007,670 2,157,684 Eden Prairie Mall Eden Prairie, MN 465,063 19,936,997 20,402,060 249,235 Fallbrook Mall, West Hills, CA 6,127,138 67,006,248 73,133,386 19,700,687 Fox River Mall Appleton, WI 2,700,566 47,049,970 49,750,536 13,064,622 Gateway Mall, Springfield, OR 8,749,088 50,310,848 59,059,936 11,891,262 GGPLP Corp Chicago, IL 0 89,115 89,115 65,402 Grand Traverse Mall, Grand Traverse, MI 3,533,745 43,068,886 46,602,631 8,373,627 Greenwood Mall Bowling Green, KY 3,202,734 51,828,083 55,030,817 6,184,455 Knollwood Mall, St. Louis Park, MN 267,514 33,859,029 34,126,543 11,400,424 Lakeview Square Mall Battle Creek, MI 3,578,619 33,164,274 36,742,893 921,348 Lansing Mall Lansing, MI 6,977,798 64,050,091 71,027,889 1,746,874 Lockport Mall,
F-22 54
Col. A Col. B Col. C Col. D ------ ------ ------ ------ Costs Capitalized Subsequent Initial Cost To Acquisition ----------------------------- ---------------------------- Buildings and Encumbrances Improvements Carrying Description (e) Land (a) Improvements Costs (b) - ------------------- ------------- -------------- ------------- ------------- ----------- Lockport, NY 9,300,000 800,000 10,000,000 3,644,396 23,656 Mall of the Bluffs, Council Bluffs, IA 36,259,626 1,860,116 24,016,343 6,853,872 2,529,093 Marketplace Champaign, IL 47,000,000 7,000,000 63,972,357 391,634 0 Natick Mall Natick, MA 183,000,000 65,744,891 198,358,969 914,569 0 Oakwood Mall, Eau Claire, WI 35,305,425 3,266,669 18,281,160 12,344,975 1,711,573 Park Mall Tucson, AZ 0 4,996,024 44,993,177 1,003,287 10,274 Piedmont Mall, Danville, VA 17,040,000 2,000,000 38,000,000 1,501,724 20,787 The Pines, Pine Bluff, AR 26,750,000 1,488,928 17,627,258 6,425,989 1,365,091 Rio West Mall, Gallup, NM 13,500,000 0 19,500,000 3,086,211 0 River Falls Mall, Clarksville, IN 28,000,000 3,177,688 54,610,421 3,535,991 5,281,892 River Hills Mall, Mankato, MN 51,200,000 3,713,529 29,013,757 14,971,036 2,584,241 Sooner Fashion Mall, Norman, OK 20,000,000 2,700,000 24,300,000 412,524 0 Southlake Mall, Morrow, GA 51,300,000 6,700,000 60,406,902 123,261 0 SouthShore Mall, Aberdeen, WA 0 650,000 15,350,000 3,781,707 0 Valley Hills, Harrisonburg, VA 15,539,394 3,443,594 31,025,471 78,357 0 West Valley Mall, Tracy, CA 0 9,295,045 47,789,310 5,915,969 7,686,293 Westwood Mall Jackson, MI 20,900,000 2,658,208 23,923,869 429,573 0 ------------- -------------- ------------- ------------- ------------ Grand Totals 1,275,784,505 228,840,234 1,280,574,598 297,134,556 55,653,863 ============= ============== ============= ============= ============ Col. A Col. E Col. F ------ ------ ------ Gross Amounts at Which Carried at Close of Period ------------------------------------------ Buildings and Accumulated Description Land Improvements Total(c)(d) Depreciation - ------------------- ------------- ------------ ------------ --------------- Lockport, NY 800,000 13,668,052 14,468,052 3,744,323 Mall of the Bluffs, Council Bluffs, IA 1,866,012 33,399,308 35,265,320 11,037,669 Marketplace Champaign, IL 7,000,000 64,363,991 71,363,991 618,205 Natick Mall Natick, MA 65,751,628 199,273,538 265,025,166 10,114,580 Oakwood Mall, Eau Claire, WI 3,266,669 32,337,708 35,604,377 10,111,431 Park Mall Tucson, AZ 4,996,024 46,006,738 51,002,762 1,310,569 Piedmont Mall, Danville, VA 2,000,000 39,522,511 41,522,511 2,333,678 The Pines, Pine Bluff, AR 1,276,001 25,418,338 26,694,339 8,129,450 Rio West Mall, Gallup, NM 0 22,586,211 22,586,211 6,105,645 River Falls Mall, Clarksville, IN 3,182,305 63,428,304 66,610,609 15,841,145 River Hills Mall, Mankato, MN 3,782,109 46,569,034 50,351,143 8,894,889 Sooner Fashion Mall, Norman, OK 2,700,000 24,712,524 27,412,524 680,909 Southlake Mall, Morrow, GA 6,700,000 60,530,163 67,230,163 447,112 SouthShore Mall, Aberdeen, WA 650,000 19,131,707 19,781,707 5,582,610 Valley Hills, Harrisonburg, VA 3,443,594 31,103,828 34,547,422 99,184 West Valley Mall, Tracy, CA 9,295,045 61,391,572 70,686,617 3,299,980 Westwood Mall Jackson, MI 2,658,208 24,353,442 27,011,650 673,819 ------------ ------------- ------------- ------------- Grand Totals 230,121,953 1,633,363,017 1,863,484,970 233,295,337 ============ ============= ============= =============
F-23 55 General Growth Properties, Inc. Notes to Schedule III (Dollars in Thousands) (a) See description of mortgage notes payable in Note 7 of Notes to Consolidated Financial Statements. (b) Initial cost for constructed malls is cost at end of first complete calendar year subsequent to opening. (c) Carrying costs consists of capitalized construction-period interest and taxes. (d) The aggregate cost of land, buildings and equipment for federal income tax purposes is approximately $1.74 billion.
(e) Reconciliation of Real Estate ---------------------------------------------------------------------- 1995 1996 1997 -------------------- -------------------- ------------------------- Balance at beginning of year 823,108 1,248,892 1,555,068 Additions: 425,784 306,176 308,417 -------------------- -------------------- ------------------------- Balance at close of year 1,248,892 1,555,068 1,863,485 ==================== ==================== ========================= Reconciliation of Accumulated Depreciation ---------------------------------------------------------------------- 1995 1996 1997 -------------------- -------------------- ------------------------- Balance at beginning of year 127,152 153,275 188,744 Depreciation Expense 26,123 35,469 44,551 -------------------- -------------------- ------------------------- Balance at close of year 153,275 188,744 233,295 ==================== ==================== =========================
(f) Depreciation is computed based upon the following estimated lives: Buildings, improvements and carrying costs 40 years Tenant allowances 10 - 40 years Equipment and fixtures 10 years
F-24 56 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) S-1 57 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) 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. 3(e) Bylaws of the Company.(5) 3(f) 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, GGPL and Peter Leibowits. 4(e) Form of Indenture.(12) 10(a) Amended and Restated Agreement of Limited Partnership of the Operating Partnership.(6) 10(b) First Amendment to Amended and Restated Agreement of Limited Partnership.(5) 10(c) Second Amendment to Amended and Restated Agreement of Limited Partnership.(5) 10(d) Third Amendment to Amended and Restated Agreement of Limited Partnership.(9) S-2 58 10(e) Fourth Amendment to Amended and Restated Agreement of Limited Partnership.(9) 10(f) Fifth Amendment to Amended and Restated Agreement of Limited Partnership.(9) 10(g) Sixth Amendment to Amended and Restated Agreement of Limited Partnership.(9) 10(h) Seventh Amendment to Amended and Restated Agreement of Limited Partnership.(9) 10(i) Eighth Amendment to Amended and Restated Agreement of Limited Partnership.(9) 10(j) Ninth Amendment to Amended and Restated Agreement of Limited Partnership. 10(k) Tenth Amendment to Amended and Restated Agreement of Limited Partnership. 10(l) Eleventh Amendment to Amended and Restated Agreement of Limited Partnership. 10(m) Twelfth Amendment to Amended and Restated Agreement of Limited Partnership. 10(n) Thirteenth Amendment to Amended and Restated Agreement of Limited Partnership. 10(o) Fourteenth Amendment to Amended and Restated Agreement of Limited Partnership. 10(p) Rights Agreement between the Company and the Limited Partners of the Operating Partnership.(6) 10(q) Real Estate Management Agreement dated July 1, 1996, between General Growth Management, Inc. and GGP Limited Partnership.(13) 10(r)* General Growth Properties, Inc. 1993 Stock Incentive Plan, as amended.(14) 10(s) Form of Amended and Restated Agreement of Partnership for each of the Property Partnerships.(3) 10(t) Sale-Purchase Agreement dated as of December 30, 1992, by and between Equitable and the Company.(3) 10(u) Form of Indemnification Agreement between the Operating Partnership, Martin Bucksbaum, Matthew Bucksbaum, Mall Investment L.P. and M. Bucksbaum Company. (3) S-3 59 10(v) Form of Registration Rights Agreement between the Company and the Bucksbaums. (3) 10(w) Form of Registration Rights Agreement between the Company and certain trustees for the IBM Retirement Plan. (3) 10(aa) Form of Incidental Registration Rights Agreement between the Company, Equitable, Frank Russell and Wells Fargo.(3) 10(bb) Form of Letter Agreements restricting sale of certain shares of Common Stock.(3) 10(cc)* Letter Agreement dated October 14, 1993, between the Company and Bernard Freibaum.(6) 10(dd)* Form of Option Agreement between the Company and certain Executive Officers.(13) 21 List of Subsidiaries. 23 Consent of Coopers & Lybrand L.L.P. - Independent Accountants. 27 Financial Data Schedule *A compensatory plan or arrangement required to be filed. S-4 60 (1) Previously filed as an exhibit to the Company's Current Report on Form 8-K dated January 5, 1996. (2) Previously filed as an exhibit to the Company's Current Report on Form 8-K dated January 3, 1996. (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. (5) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1994. (6) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1993. (7) Previously filed as an exhibit to the Company's Current Report on Form 8-K dated February 25, 1994. (8) Previously filed as an exhibit to the Company's Current Report on Form 8-K dated July 17, 1996. (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. (11) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1995. (12) Previously filed as an exhibit to the Company's Registration Statement on Form S-3 (No. 333-37247) dated October 6, 1997. (13) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1996. (14) Previously filed as an exhibit to the Company's Registration Statement on Form S-9 (No. 333-28449) dated June 3, 1997. S-5 EX-3.(D) 2 AMENDMENT TO AMENDED & RESTATED CERTIFICATES 1 EXHIBIT 3(d) [LETTERHEAD OF STATE OF DELAWARE] CERTIFICATE OF AMENDMENT OF SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF GENERAL GROWTH PROPERTIES, INC. It is hereby certified that: 1. The name of the Corporation is General Growth Properties, Inc. (the "Corporation"). 2. The amendment to the Second Amended and Restated Certificate of Incorporation of the Corporation effected by this Amendment is as follows: By deleting Pargraph A of Article IV thereof as it now exists and inserting in lieu thereof a new Paragraph A of Article IV, reading in its entirety as follows: "ARTICLE IV A. Classes and Number of Shares. The total number of shares of all classes of capital stock that the Corporation shall have authority to issue is Two Hundred Fifteen Million (215,000,000) shares, consisting of (i) Five Million (5,000,000) shares of preferred stock, par value $100.00 per share (the "Preferred Stock") and (ii) Two Hundred Ten Million (210,000,000) shares of common stock, par value $0.10 per share (the "Common Stock")." 3. The aforesaid amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, General Growth Properties, Inc. has caused this Certificate of Amendment to be executed by its duly authorized Secretary this 19th day of May, 1997. GENERAL GROWTH PROPERTIES, INC., a Delaware corporation By /s/ Marshall E. Eisenberg -------------------------------- Marshall E. Eisenberg, Secretary EX-4.(D) 3 REDEMPTION RIGHTS AGREEMENT 1 EXHIBIT 4(d) REDEMPTION RIGHTS AGREEMENT Redemption Rights Agreement, dated October ___, 1997, among GGP Limited Partnership, a Delaware limited partnership (the "Partnership"), General Growth Properties, Inc., a Delaware corporation (the "General Partner"), and Peter D. Leibowits (collectively, "Contributing Partner"). R E C I T A L S WHEREAS, concurrently herewith, Contributing Partner is being admitted as a limited partner of the Partnership, the general partner of which is the General Partner; WHEREAS, shares of common stock, $.10 par value per share, of the General Partner (the "Common Stock") are listed on the New York Stock Exchange; and WHEREAS, the parties desire to set forth herein the terms and conditions upon which the Contributing Partner may cause the Partnership to redeem his limited partnership units in the Partnership. NOW, THEREFORE, the parties hereby agree as follows: I. Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below: "Acts" shall mean the Securities Act and the Exchange Act, collectively. "Affiliates" shall mean "affiliates" as defined pursuant to the Securities Act and the regulations promulgated thereunder. "Business Day" shall mean any day upon which commercial banks are open for business in Chicago, Illinois. "Cash Purchase Price" shall mean, with respect to any redeemed or purchased Units, an amount of cash equal to the value of the Share Purchase Price (computed as of the Computation Date and equal to the Current Per Share Market Price on such Computation Date multiplied by the number of Shares) that would be payable with respect to such Units assuming the Share Purchase Price were paid in full satisfaction of the Purchase Price of such Units. In the event that the Share Purchase Price includes securities other than Shares, then the value of such other securities shall be determined by the General Partner acting in good faith on the basis of the closing prices of securities if listed on a nationally recognized exchange and otherwise on the basis of such quotations and other 2 information as the General Partner considers, in its reasonable judgment, appropriate. "Certificate of Incorporation" shall mean the Certificate of Incorporation of the General Partner, as the same may be amended from time to time. "Code" shall mean the Internal Revenue Code of 1986, as amended, or any successor code. "Common Stock" shall have the meaning set forth in the recitals. "Computation Date" shall mean the date on which the applicable Notice is received by the Partnership or, if such date is not a Business Day, the first Business Day thereafter. "Conversion Factor" shall mean 100%, provided that such factor shall be adjusted in accordance with Section 6(a). "Contribution Agreement" shall mean that certain Contribution Agreement dated September 25, 1997, among the Partnership, the General Partner and Contributing Partner, as the same has been and may hereafter be amended from time to time, pursuant to which this Agreement is being executed. "Current Per Share Market Price" shall have the meaning set forth in the Partnership Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor statute. "Exchange Act Reporting Company" shall mean any corporation or other entity which is subject to the reporting requirements of the Exchange Act. "Expiration Date" shall mean the earlier of (a) April 16, 2023 and (b) the date upon which all Units have been redeemed or purchased in accordance with the terms hereof. "Liens" shall have the meaning set forth in the Contribution Agreement. "Major Transaction Event" shall mean, with respect to the General Partner, (a) a reclassification, capital reorganization or other similar change regarding or affecting outstanding Shares (other than a change addressed in Section 6(a)); (b) a 2 3 merger or consolidation of the General Partner with one or more other corporations or entities, other than a merger pursuant to which the General Partner is the surviving corporation and the outstanding Shares are not affected, (c) a sale, lease or exchange of all or substantially all of the General Partner's assets or (d) the liquidation, dissolution or winding up of the General Partner. "Notice" shall have the meaning set forth in Section 3.2. "Partnership Agreement" shall mean that certain Amended and Restated Agreement of Limited Partnership of the Partnership, dated July 27, 1993, as amended by that certain First Amendment thereto dated May 23, 1995, that certain Second Amendment thereto dated June 13, 1995, that certain Third Amendment thereto dated May 21, 1996, that certain Fourth Amendment thereto dated August 30, 1996, that certain Fifth Amendment thereto dated as of October 4, 1996, that certain Sixth Amendment thereto dated as of November 27, 1996, that certain Seventh Amendment thereto dated December 6, 1996, that certain Eighth Amendment thereto dated June 19, 1997, that certain Ninth Amendment thereto dated as of August 8, 1997, that certain Tenth Amendment thereto dated as of September 8, 1997, that certain Eleventh Amendment thereto dated as of September 11, 1997 and that certain Twelfth Amendment thereto dated October 15, 1997 and as the same may be further amended. "Person" shall mean any natural person, corporation, partnership, association, limited liability company, trust or other entity. "Purchase Price" shall mean the Cash Purchase Price or the Share Purchase Price, or a combination thereof. "Purchase Right" shall have the meaning set forth in Section 7.1. "Redemption Rights" shall have the meaning set forth in Section 2. "REIT" shall mean real estate investment trust as such term is defined under the Code. "REIT Requirements" shall have the meaning set forth in the Partnership Agreement, as the same may change from time to time. 3 4 "Registration Expenses" shall mean all expenses incident to the General Partner's performance of or compliance with the registration requirements set forth in this Agreement, including without limitation (a) the fees, disbursements and expenses of the General Partner's counsel and accountants in connection with the registration of Shares issuable upon the exercise of the Redemption Rights; (b) all expenses in connection with the preparation and printing of the registration statement or statements, any preliminary prospectus or final prospectus, any other offering document and amendments and supplements thereto; (c) the cost of printing or producing any blue sky or legal investment memoranda or other documents in connection with the offering, sale or delivery of such Shares; (d) all expenses in connection with the qualification of such Shares under state securities laws; (e) the fees and expenses incurred in connection with the listing of such Shares on each securities exchange on which securities of the same class are then listed and (f) all SEC, stock exchange and National Association of Securities Dealers, Inc. registration and filing fees. Notwithstanding the foregoing, Registration Expenses shall not include (and the General Partner will pay) any costs incurred by the Partnership or the General Partner in preparing any document that is incorporated by reference in a registration statement, or any professional fee or other expenses, that would have been incurred apart from the obligation of the General Partner hereunder to file a Registration Statement. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor statute. "Share Purchase Price" shall mean, with respect to the exercise of any Redemption Rights and subject to the provisions of Section 6(c), a number of Shares equal to the product of (a) the number of Units being redeemed or purchased multiplied by (b) the Conversion Factor; provided, however, that, in the event the General Partner, after the date of this Agreement, issues to all holders of Shares rights, options, warrants or convertible or exchangeable securities entitling the stockholders to subscribe for or purchase Shares (other than rights referred to in Section 6(b)) or any other securities or property, then the Share Purchase Price also shall include such rights, options, warrants or convertible or exchangeable securities that a holder of that number of Shares would have been entitled to receive. "Shares" shall mean shares of the Common Stock. 4 5 "Units" shall mean the limited partnership units in the Partnership issued to Contributing Partner pursuant to the Contribution Agreement. "Unitholder" shall mean the Person who at the time in question holds one or more Units in accordance with the Partnership Agreement, as the same may be amended from time to time. 2. Grant of Redemption Rights. (a) Upon the terms and subject to the conditions contained herein, the Partnership does hereby grant to Contributing Partner, and Contributing Partner does hereby accept, the right, but without obligation on the part of Contributing Partner, to require the Partnership to redeem from time to time part or all of the Units of Contributing Partner for the Cash Purchase Price ("Redemption Rights"). (b) Notwithstanding the provisions of Section 2(a), the General Partner may, in its sole and absolute discretion, assume the obligation of the Partnership with respect to and satisfy Contributing Partner's exercise of a Redemption Right by paying to Contributing Partner, at the General Partner's election (which may be exercised in the General Partner's sole discretion), either the Cash Purchase Price or the Share Purchase Price (or a combination thereof) with respect to the Units for which Contributing Partner exercised its Redemption Rights. If the General Partner assumes such obligations with respect to the exercise by Contributing Partner of a Redemption Right as to certain Units and makes the required payment within the required period of time, then the Partnership shall have no obligation to pay any amount to Contributing Partner with respect to the exercise of a Redemption Right for such Units, and any Units purchased shall be owned by the General Partner for all purposes. (c) If the General Partner shall assume the obligations of the Partnership with respect to and satisfy a Redemption Right, the Partnership, the Contributing Partner and the General Partner each shall treat the transaction between the General Partner and Contributing Partner as a sale of Contributing Partner's Units (or a portion thereof) to the General Partner for federal income tax purposes. (d) Upon the redemption or purchase of part or all of Contributing Partner's Units and the payment of the Purchase 5 6 Price with respect thereto, such Person shall be deemed withdrawn as a Partner in the Partnership to the extent of the Units redeemed or purchased and shall have no further rights or obligations under this Agreement with respect to such redeemed or purchased Units; provided, however, that Contributing Partner's rights under this Agreement with regard to any other Units will continue in full force and effect. (e) No fractional Shares shall be issued hereunder. In lieu of fractional Shares, the General Partner shall pay cash based on the Current Per Share Market Price on the relevant Computation Date. 3. Exercise of Redemption Rights. 3.1 Time for Exercise of Redemption Rights. Contributing Partner may exercise his Redemption Rights in whole or in part and at any time and from time to time on or after the second anniversary of the date hereof but prior to the Expiration Date; provided, however, that the Redemption Rights may not be exercised at any one time by Contributing Partner with respect to less than 1,000 Units (or all the Units then owned by Contributing Partner if Contributing Partner owns less than 1,000 Units) or in the event that such exercise of Redemption Rights (or the assignment of Units or delivery of either the Cash Purchase Price or the Share Purchase Price with respect thereto) violates the terms of the Partnership Agreement or applicable law. Once given, a Notice shall be irrevocable subject to the payment of the Purchase Price for the Units specified therein in accordance with the terms hereof. 3.2 Method of Exercise. The Redemption Rights shall be exercised by written notice (the "Notice") to the Partnership in the form of Exhibit A specifying the number of Units to be redeemed and the name or names (with address) in which any Shares issuable upon such exercise shall be registered if different than the Contributing Partner. 3.3 Closing. The closing of the redemption or purchase and sale pursuant to an exercise of the Redemption Rights shall occur within 30 days following the giving of the Notice. Contributing Partner shall execute such documents as the General Partner may reasonably require in connection with the closing of such redemption or purchase and sale. 3.4 Payment of Cash or Issuance of Shares. At the closing of the redemption or purchase and sale of Units pursuant to an 6 7 exercise of Redemption Rights, the Partnership shall deliver to Contributing Partner the Cash Purchase Price by check or, in the event that the General Partner has assumed the obligations of the Partnership with respect to such exercise of Redemption Rights, the General Partner shall deliver to the Partnership, at the election of the General Partner, which may be exercised in the General Partner's sole discretion, either (a) the Cash Purchase Price in immediately available funds or (b) certificates representing the Shares and any other securities constituting the Share Purchase Price, together with cash in lieu of the issuance of any fraction of a Share as provided in Section 2(e), or a combination thereof. 4. Matters Relating to Shares. 4.1 Registration. (a) The General Partner shall (i) prepare, file and use reasonable efforts to cause to become effective on or before the ninetieth day following the second anniversary of the date hereof a registration statement, which may be on Form S-3, under the Securities Act relating to the Shares to be issued upon exercise of the Redemption Rights assuming full satisfaction of the Redemption Rights by delivery of Shares and (ii) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act. (b) The General Partner shall pay all Registration Expenses incurred prior to the seventh anniversary of the date hereof with respect to filing and keeping effective the registration statement through such date, and the Unitholders shall reimburse the General Partner for Registration Expenses (or a pro rata portion of the Registration Expenses based on the number of Shares issuable to such Unitholders upon full exercise of the Redemption Rights of such Unitholders relative to the total number of Shares issuable pursuant to such registration statement) which are incurred after the seventh anniversary of the date hereof in respect of maintaining effective (but not the initial filing and causing to become effective of) such registration statement; provided, however, that Contributing Partner shall not be required to reimburse any costs (i) of preparing any documents filed with the SEC that are incorporated by reference in the Registration Statement or (ii) that become necessary because the General Partner is unable to use Form S-3 7 8 (or any equivalent short form that relies on incorporation by reference) for the reason that the General Partner has failed to comply on a timely basis with any requirement of the Acts or Form S-3. The reimbursement of such expenses by the Unitholders shall be paid upon demand. (c) If under the Securities Act or then current SEC policy the above-described registration of the Shares constituting the Share Purchase Price (assuming full satisfaction of the Redemption Rights by delivery of Shares) is not permitted for any reason or the public resale of such Shares may not be effected by Contributing Partner without the further registration under the Securities Act of such Shares for resale, the General Partner shall use reasonable efforts to register such Shares for resale, which may be accomplished by means of a shelf registration (and the General Partner shall not be required to register such Shares pursuant to Section 4.1(a)), and Contributing Partner and the General Partner shall enter into customary agreements with respect thereto which contain provisions similar to those contained in Section 4.1(a) and (b) (except that (i) such registration statement only shall be maintained until the Shares registered thereunder have been sold or are eligible for resale under Rule 144(k) promulgated under the Securities Act (without regard to the period that Units were held prior to the exchange of such Units for Shares pursuant to the Redemption Rights) and (ii) after the seventh anniversary of the date hereof, Contributing Partner shall pay the Registration Expenses therefor or a pro rata portion thereof based on the number of Shares of Contributing Partner which remain available for sale pursuant to such registration statement relative to the total number of Shares that remain available for sale pursuant to such registration statement) and other customary provisions, including without limitation customary indemnification provisions. (d) If a registration statement referred to in Section 4.1(a) or (c) is not effective on the later of the ninetieth day following the second anniversary of the date hereof and the closing pursuant to any exercise of Redemption Rights where Shares are otherwise issuable (unless, in either case, Contributing Partner has defaulted hereunder), the General Partner shall not have the right to deliver the Share Purchase Price in respect of such exercise of Redemption Rights, and the General Partner or the Partnership shall deliver the Cash Purchase Price on the date specified in Section 3.3 (but the General Partner shall not otherwise have any liability therefor); provided, however, that the General Partner may 8 9 deliver Shares if it previously filed a registration statement under Section 4.1(c) and such registration statement has not yet been declared effective solely by reason of the fact that the Shares are not yet outstanding. In the event that Shares are delivered to Contributing Partner pursuant to an exercise of Redemption Rights and the proviso contained in the immediately preceding sentence and the registration statement referred to in such sentence shall not have been declared effective on or before the tenth business day following delivery of such Shares, the General Partner shall, upon written notice from Contributing Partner to the General Partner, repurchase such Shares, and Contributing Partner shall sell such Shares to the General Partner, for a purchase price equal to the Cash Purchase Price relating to such exercise of Redemption Rights. Each of Contributing Partner and the General Partner shall execute such documents as may be reasonably requested by the other to effectuate such repurchase and sale. (e) Notwithstanding anything to the contrary contained herein, the General Partner shall have no obligation to keep any registration statement filed pursuant to this Section 4.1 effective after the Expiration Date or if the status of the General Partner (or its successor) as an Exchange Act Reporting Company is terminated or all of the Unitholders notify the General Partner in writing that the General Partner no longer need keep such registration statement effective. 4.2 Reservation of Shares. At all times while the Redemption Rights are outstanding, the General Partner shall reserve for issuance such number of Shares as may be necessary to enable the General Partner to issue Shares in full satisfaction of all Redemption Rights which are from time to time outstanding (assuming no limitations as to the ownership of such Shares under the Certificate of Incorporation which relate to compliance with the REIT Requirements and that the General Partner elected to pay the Share Purchase Price with respect to all such Redemption Rights). 4.3 Fully Paid and Non-Assessable. All Shares which may be issued upon exercise of the Redemption Rights shall be duly and validly issued and fully paid and non-assessable. 5. Transfer and Other Taxes. In the event that any state or local property transfer or other tax is payable as the result of or in connection with any exercise of the Redemption Rights by Contributing Partner, Contributor Partner shall pay such tax, and no Shares shall be issued pursuant hereto until such 9 10 Contributor Partner has paid to the General Partner or the Partnership, as the case may be, the amount of such tax or has provided evidence, in form reasonably satisfactory to the General Partner or the Partnership, as the case may be, as to the payment thereof. 6. Anti-Dilution and Adjustment Provisions. (a) The Conversion Factor shall be adjusted in the event that the General Partner (i) declares or pays a dividend on its outstanding Shares in Shares or makes a distribution to all holders of its outstanding Shares in Shares, (ii) subdivides its outstanding Shares, or (iii) combines its outstanding Shares into a smaller number of Shares. The Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time) and the denominator of which shall be the actual number of Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, subdivision or combination. Any adjustment to the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) If at any time the General Partner grants to its stockholders any right to subscribe pro rata for additional securities of the General Partner, whether Common Stock or other classifications, or for any other securities or interests that Contributing Partner would have been entitled to subscribe for if, immediately prior to such grant, Contributing Partner had exercised his Redemption Rights and received the Share Purchase Price in payment thereof, in lieu of any adjustment under any other subsection of this Section 6 or other provision of this Agreement, then the General Partner also shall grant to Contributing Partner the same subscription rights that Contributing Partner would be entitled to if Contributing Partner had exercised his Redemption Rights in full and received the Share Purchase Price in satisfaction thereof prior to such grant. (c) Upon the occurrence of a Major Transaction Event where at least one-half of the value (as determined in good faith by the General Partner) of the consideration received by the stockholders of the General Partner in connection with such 10 11 Major Transaction Event is in the form of securities in a successor entity, the General Partner shall cause effective provision to be made so that, upon exercise of the Redemption Rights and payment of the Purchase Price at any time following such Major Transaction Event by means of the Share Purchase Price, Unitholders shall have the right to acquire, in lieu of the Shares which otherwise would have been issued to Contributing Partner, the kind and amount of shares of stock and other securities and property (and the provisions contained in Section 4.1 shall apply anew to the extent that such securities are of a class of securities of the General Partner or its successor that are registered under the Exchange Act) and interests as would be issued or payable with respect to or in exchange for the number of Shares constituting the Share Purchase Price as if such Redemption Rights had been exercised and the General Partner had satisfied the Redemption Rights by delivery of the Share Purchase Price immediately before such Major Transaction Event. (d) In the event of any other Major Transaction Event, each Unitholder shall be entitled to exercise the Redemption Rights in full prior to the consummation of such Major Transaction Event, and, with respect to any Shares acquired upon exercise thereof, shall be entitled to all of the rights of the other holders of Shares with respect to any distribution by the General Partner (or the other party to such Major Transaction Event) in connection with such Major Transaction Event. If not exercised within forty-five days after written notice from the General Partner of such Major Transaction Event or such shorter period between the date of such notice and the effective date of such Major Transaction Event, the Redemption Rights shall terminate at the expiration of such period, but the Redemption Rights shall be revived if such Major Transaction Event is not consummated. (e) The Partnership shall give written notice of any Major Transaction Event promptly after such Major Transaction is announced to the public. (f) The provisions of this Section 6 shall apply to successive events that may occur from time to time but only shall apply to a particular event if it occurs prior to the exercise in full of the Redemption Rights or the liquidation of the Partnership. Nothing contained herein shall prevent or otherwise limit the liquidation of the Partnership pursuant to the Partnership Agreement, as amended from time to time. 11 12 (g) Whenever the Conversion Factor is adjusted as herein provided, the General Partner shall compute the adjusted Conversion Factor in accordance with this Section 6 and shall prepare a certificate signed by the chief financial officer of the General Partner setting forth the adjusted Conversion Factor and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed at the offices of the General Partner and mailed to the holders of the Redemption Rights within thirty days of any such adjustment. 7. Miscellaneous Provisions. 7.1 NoticesNotices. All notices or other communications given pursuant to this Agreement, including without limitation any Notice, shall be sent to the party to whom or to which such notice is being sent, by certified or registered mail, return receipt requested, commercial overnight delivery service, facsimile or delivered by hand with receipt acknowledged in writing and otherwise as set forth in this Section 8.1. All notices (a) shall be deemed given when received or, if mailed as described above, after 5 Business Days or, if sent by facsimile, upon receipt of confirmed answerback and (b) may be given either by a party or by such party's attorneys. For purposes of this Section 8.1, the addresses of the parties shall be, in the case of the Partnership and the General Partner, 55 West Monroe Street, Suite 3100, Chicago, Illinois 60603, facsimile number (312) 551-5475, Attention: Matthew Bucksbaum and Bernard Freibaum (with a copy to Neal, Gerber & Eisenberg, Two North LaSalle Street, Suite 2200, Chicago, Illinois 60602, Attn: Marshall E. Eisenberg), and, in the case of Contributing Partner, as set forth on the records of the Partnership. The address of any party may be changed by a notice in writing given in accordance with the provisions hereof. 7.2 Assignment. The rights of Contributing Partner hereunder (including the Redemption Rights) shall automatically devolve upon any Person to the extent that such Person holds Units, and becomes a substituted partner with respect to such Units, in accordance with the Partnership Agreement, as amended from time to time, and delivers to the Partnership a written instrument, in form reasonably satisfactory to the Partnership, pursuant to which such Person agrees to be bound by the terms hereof (but the rights of Contributing Partner hereunder are not otherwise assignable). Subject to the provisions of Section 6, the General Partner may assign this Agreement without the consent of Contributing Partner, provided that no such 12 13 assignment shall relieve the General Partner of its obligations under this Agreement. 7.3 Binding Effect. Except as otherwise set forth herein, this Agreement shall be binding upon, and inure to the benefit of, the parties and their successors and permitted assigns. 7.4 Governing Law. This Agreement shall be governed by the laws of the State of Delaware (without regard to its conflicts of law principles). 7.5 Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which shall constitute one document. 7.6 Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes any prior written or oral understandings and/or agreements among them with respect thereto. 7.7 Pronouns; Headings; Etc. As used herein, all pronouns shall include the masculine, feminine and neuter, and all terms shall include the singular and plural thereof wherever the context and facts require such construction. The headings herein are inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. Any references in this Agreement to a "Section" or "Exhibit" shall refer to a Section or Exhibit of this Agreement unless otherwise specified. 7.8 Survival. The representations, warranties and covenants contained herein or made pursuant hereto shall survive the execution and delivery of this Agreement and the issuance of Shares pursuant hereto. 7.9 Further Assurances. Each of the parties shall hereafter execute and deliver such other instruments and documents and do such further acts and things as may be required or useful to carry out the purposes of this Agreement. 7.10 No Right of Set-off. Each of the Partnership and the General Partner shall perform all of its obligations under this Agreement without asserting any right of setoff, counterclaim or similar justification for non-performance of its obligations under this Agreement on account of any claim that the 13 14 Partnership or the General Partner may have against Contributing Partner that does not arise under this Agreement. 14 15 IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. CONTRIBUTING PARTNER: - ----------------------------------- Peter D. Leibowits PARTNERSHIP: GGP LIMITED PARTNERSHIP, a Delaware limited partnership By: General Growth Properties, Inc. a Delaware corporation By: ------------------------------------ Its --------------------------------- GENERAL PARTNER: General Growth Properties, Inc. a Delaware corporation By: -------------------------------- Its --------------------------- 16 EXHIBIT A Notice of Redemption The undersigned hereby irrevocably (i) exercises its Redemption Rights as to ___________ units of limited partnership interest (the "Units") in GGP Limited Partnership (the "Partnership") in accordance with the terms of that certain Redemption Rights Agreement, dated _______________, 1997 (the "Agreement"), among the Partnership, General Growth Properties, Inc. (the "General Partner"), and the other parties thereto, (ii) transfers and surrenders such Units and all right, title and interest of the undersigned therein to the party, which shall be either the Partnership or the General Partner, that shall purchase or redeem such Units pursuant to the Agreement, and (iii) directs that the Cash Purchase Price or Share Purchase Price payable upon exercise of the Redemption Right be delivered to the address specified below and, if the Share Purchase Price is to be delivered, the Shares shall be registered or placed in the name(s) and at the address(es) specified below. The undersigned hereby represents, warrants, certifies and agrees (i) that the undersigned has unencumbered title to the Units, free and clear of all Liens, (ii) that the undersigned has the full right, power and authority to transfer and surrender the Units as provided herein and such transfer and surrender has been authorized by all necessary action, and (iii) that the undersigned has obtained the consent or approval of all persons or entities, if any, having the right to consent to or approve such transfer and surrender. 17 Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement. Dated: ____________________ Name: ________________________ _____________________________ (Signature of Limited Partner) _____________________________ (Street Address) _____________________________ City (State (Zip Code) Signature Guaranteed by ______________________________ If Shares are to be issued, issue to: Please insert social security or identifying number: EX-10.(J) 4 NINTH AMEND. TO AMENDED & RESTATED AGREEMENT 1 EXHIBIT 10(j) NINTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP Ninth Amendment to Amended and Restated Agreement of Limited Partnership (the "Amendment"), dated as of August 8, 1997, among the undersigned parties. R E C I T A L S: WHEREAS, a Delaware limited partnership known as GGP Limited Partnership exists pursuant to that certain Amended and Restated Agreement of Limited Partnership dated July 27, 1993, as amended by that certain First Amendment thereto dated May 23, 1995, that certain Second Amendment thereto dated July 13, 1995, that certain Third Amendment thereto dated as of May 21, 1996, that certain Fourth Amendment thereto dated as of August 30, 1996, that certain Fifth Amendment thereto dated as of October 4, 1996, that certain Sixth Amendment thereto dated as of November 27, 1996, that certain Seventh Amendment thereto dated as of December 6, 1996 and that certain Eighth Amendment thereto dated as of June 19, 1997 (the "Initial Partnership Agreement"); WHEREAS, as of the date hereof, General Growth Properties, Inc., a Delaware corporation and the general partner of the Partnership (the "General Partner"), sold 4,000,000 shares of its common stock, $.10 par value per share, in a public offering (the "Offering") and, in connection therewith, received gross proceeds of $135.6 million (the "Proceeds"); and WHEREAS, pursuant to the Initial Partnership Agreement, the General Partner has made, as of the date hereof, an additional contribution to the capital of the Partnership in the amount of the Proceeds; and WHEREAS, the parties hereto, being the general partner of the Partnership and a majority in interest of other partners of the Partnership, desire to amend the Initial Partnership Agreement to reflect the foregoing, the previous transfers of certain units of partnership interest, the previous redemption by the Partnership of 31,852 units of partnership interest in the Partnership held by the General Partner and certain other understandings as set forth herein. NOW, THEREFORE, the parties hereby agree as follows: 1. Capitalized terms used but not defined herein shall have the meanings set forth in the Initial Partnership Agreement, as amended hereby. 2. The issuance of 4,000,000 additional Units to the General Partner in consideration of the contribution of the Proceeds to the capital of the Partnership is hereby approved, and any and all notices relating thereto are hereby waived. The Partnership shall bear all expenses incurred by the Company in connection with the Offering. 2 3. Exhibit A of the Initial Partnership Agreement is hereby deleted and Exhibit A in the form attached to this Amendment is hereby inserted in lieu thereof. 4. Except as specifically set forth herein, the Initial Partnership Agreement shall remain in full force and effect. 5. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware (without regard to its conflicts of law principles). 6. This Amendment may be executed in counterparts, each of which shall be an original and all of which together shall constitute the same document. 7. This Amendment shall be binding upon, and inure to the benefit of, the parties and their respective successors and assigns. IN WITNESS WHEREOF, the parties have executed this Amendment on the date first written above. GENERAL PARTNER: GENERAL GROWTH PROPERTIES, INC., a Delaware corporation By: ----------------------------------- Its: ------------------------------- LIMITED PARTNERS: M.B. CAPITAL PARTNERS III, a South Dakota general partnership By: GENERAL TRUST COMPANY, not individually but solely as Trustee of Martin Investment Trust G, a partner By: ----------------------------- Its: ------------------------- 3 EXHIBIT A PARTNERS
Number of Percentage General Partner: Units Interest ---------------- ----- -------- General Growth Properties, Inc. 34,445,932.0000 65.3203 Limited Partners: ----------------- M.B. Capital Partners III 15,571,609.6062 29.5285 Stanley Richards Revocable Trust 149,706.3938 0.2839 Joe W. Lowrance 57,620.0000 0.1093 LWLDA Limited Partnership 45,223.0000 0.0858 Brent M. Milgrom 57,620.0000 0.1093 GDC/A&B Limited Partnership 45,223.0000 0.0858 Edward S. Brown 38,098.0000 0.0722 Edward S. Brown and Susan Garber, Husband and Wife, as Tenants by the Entirety 40,846.0000 0.0775 Lawrence A. Brown 17,647.0000 0.0335 Merrill H.J. Roth 29,024.0000 0.0550 The Roth Family 22,308.0000 0.0423 Limited Partnership Arthur B. Morgenstern 54,625.0000 0.1036 Joseph Straus, Jr. 78,017.0000 0.1479 HIA Limited Partnership 107,080.0000 0.2031 Morgenstern, Rounick-Weiner 63,422.0000 0.1203 Associates Marvin Rounick and Judy Rounick, Husband and Wife, as Tenants-by- the-Entirety 55,670.0000 0.1056
4 Joint Revocable Trust of Warren and Penny Weiner 18,557.0000 0.0352 Irrevocable Trust of Warren Weiner dated January 24, 1978 F/B/O Robyn Weiner 18,557.0000 0.0352 Irrevocable Trust of Warren Weiner dated January 24, 1978 F/B/O Kimberly Weiner 18,557.0000 0.0352 Forbes/Cohen Properties 801,842.0000 1.5205 Jackson Properties 346,795.0000 0.6576 Lakeview Square Properties 296,363.0000 0.5620 CA Southlake Investors, Ltd. 353,537.0000 0.6704 ------------ ------ Total Units: 52,733,879.0000 100.0000 =============== ========
2 EX-10.(K) 5 TENTH AMEND. TO AMENDED & RESTATED AGREEMENT 1 EXHIBIT 10(k) TENTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP Tenth Amendment to Amended and Restated Agreement of Limited Partnership (the "Amendment"), dated as of September 8, 1997, among the undersigned parties. R E C I T A L S: WHEREAS, a Delaware limited partnership known as GGP Limited Partnership exists pursuant to that certain Amended and Restated Agreement of Limited Partnership dated July 27, 1993, as amended by that certain First Amendment thereto dated May 23, 1995, that certain Second Amendment thereto dated July 13, 1995, that certain Third Amendment thereto dated as of May 21, 1996, that certain Fourth Amendment thereto dated as of August 30, 1996, that certain Fifth Amendment thereto dated as of October 4, 1996, that certain Sixth Amendment thereto dated as of November 27, 1996, that certain Seventh Amendment thereto dated as of December 6, 1996, that certain Eighth Amendment thereto dated as of June 19, 1997 and that certain Ninth Amendment thereto dated as of August 8, 1997 (the "Initial Partnership Agreement"); WHEREAS, on August 8, 1997, General Growth Properties, Inc., a Delaware corporation and the general partner of the Partnership (the "General Partner"), sold 4,000,000 shares of its common stock, $.10 par value per share, in a public offering (the "Offering") and, in connection therewith, granted the underwriter (the "Underwriter") an option to purchase up to 600,000 additional shares of common stock (the Overallotment Option"); WHEREAS, the Underwriter has exercised the Overallotment Option as to 350,000 shares of common stock (the "Shares") and, as of the date hereof, the Company has issued the Shares and received gross proceeds of $11,865,000 (the "Proceeds"); WHEREAS, pursuant to the Initial Partnership Agreement, the General Partner has made, as of the date hereof, an additional contribution to the capital of the Partnership in the amount of the Proceeds; and WHEREAS, the parties hereto, being the general partner of the Partnership and a majority in interest of other partners of the Partnership, desire to amend the Initial Partnership Agreement to reflect the foregoing and certain other understandings as set forth herein. NOW, THEREFORE, the parties hereby agree as follows: 1. Capitalized terms used but not defined herein shall have the meanings set forth in the Initial Partnership Agreement, as amended hereby. 2 2. The issuance of 350,000 additional Units to the General Partner in consideration of the contribution of the Proceeds to the capital of the Partnership is hereby approved, and any and all notices relating thereto are hereby waived. The Partnership shall bear all expenses incurred by the Company in connection with the issuance of the Shares. 3. Exhibit A of the Initial Partnership Agreement is hereby deleted and Exhibit A in the form attached to this Amendment is hereby inserted in lieu thereof. 4. Except as specifically set forth herein, the Initial Partnership Agreement shall remain in full force and effect. 5. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware (without regard to its conflicts of law principles). 6. This Amendment may be executed in counterparts, each of which shall be an original and all of which together shall constitute the same document. 7. This Amendment shall be binding upon, and inure to the benefit of, the parties and their respective successors and assigns. IN WITNESS WHEREOF, the parties have executed this Amendment on the date first written above. GENERAL PARTNER: GENERAL GROWTH PROPERTIES, INC., a Delaware corporation By: -------------------------------- Its: ---------------------------- LIMITED PARTNERS: M.B. CAPITAL PARTNERS III, a South Dakota general partnership By: GENERAL TRUST COMPANY, not individually but solely as Trustee of Martin Investment Trust G, a partner By:___________________________ Its:_______________________ 3 EXHIBIT A PARTNERS
Number of Percentage General Partner: Units Interest ---------------- ----- -------- General Growth 34,795,932.00 65.5490 Properties, Inc. Limited Partners: ----------------- M.B. Capital Partners III 15,571,609.6062 29.3340 Stanley Richards Revocable Trust 149,706.3938 .2820 Joe W. Lowrance 57,620.0000 .1085 LWLDA Limited Partnership 45,223.0000 .0852 Brent M. Milgrom 57,620.0000 .1085 GDC/A&B Limited Partnership 45,223.0000 .0852 Edward S. Brown 38,098.0000 .0718 Edward S. Brown and Susan Garber, Husband and Wife, as Tenants by the Entirety 40,846.0000 .0769 Lawrence A. Brown 17,647.0000 .0332 Merrill H.J. Roth 29,024.0000 .0547 The Roth Family 22,308.0000 .0420 Limited Partnership Arthur B. Morgenstern 54,625.0000 .1029 Joseph Straus, Jr. 78,017.0000 .1470 HIA Limited Partnership 107,080.0000 .2017 Morgenstern, Rounick-Weiner 63,422.0000 .1195 Associates Marvin Rounick and Judy Rounick, Husband and Wife, as Tenants-by- the-Entirety 55,670.0000 .1049
4 Joint Revocable Trust of Warren and Penny Weiner 18,557.0000 .0350 Irrevocable Trust of Warren Weiner dated January 24, 1978 F/B/O Robyn Weiner 18,557.0000 .0350 Irrevocable Trust of Warren Weiner dated January 24, 1978 F/B/O Kimberly Weiner 18,557.0000 .0350 Forbes/Cohen Properties 801,842.0000 1.5105 Jackson Properties 346,795.0000 .6533 Lakeview Square Properties 296,363.0000 .5583 CA Southlake Investors, Ltd. 353,537.0000 .6660 ------------ ----- Total Units: 53,083,879.0000 100.0000 =============== ========
2 EX-10.(L) 6 ELEVENTH AMEND. TO AMENDED & RESTATED AGREEMENT 1 EXHIBIT 10(l) ELEVENTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP Eleventh Amendment to Amended and Restated Agreement of Limited Partnership (the "Amendment"), dated as of September 11, 1997, among the undersigned parties. R E C I T A L S: WHEREAS, a Delaware limited partnership known as GGP Limited Partnership exists pursuant to that certain Amended and Restated Agreement of Limited Partnership dated July 27, 1993, as amended by that certain First Amendment thereto dated May 23, 1995, that certain Second Amendment thereto dated July 13, 1995, that certain Third Amendment thereto dated as of May 21, 1996, that certain Fourth Amendment thereto dated as of August 30, 1996, that certain Fifth Amendment thereto dated as of October 4, 1996, that certain Sixth Amendment thereto dated as of November 27, 1996, that certain Seventh Amendment thereto dated as of December 6, 1996, that certain Eighth Amendment thereto dated as of June 19, 1997, that certain Ninth Amendment thereto dated as of August 8, 1997 and that certain Tenth Amendment thereto dated as of September 8, 1997 (the "Initial Partnership Agreement"); WHEREAS, on the date hereof, General Growth Properties, Inc., a Delaware corporation and the general partner of the Partnership (the "General Partner"), sold 577,680 shares of its common stock, $.10 par value per share, to Smith Barney Inc. and received proceeds of $18,830,562.75 (the "Proceeds"); WHEREAS, pursuant to the Initial Partnership Agreement, the General Partner has made, as of the date hereof, an additional contribution to the capital of the Partnership in the amount of the Proceeds; and WHEREAS, the parties hereto, being the general partner of the Partnership and a majority in interest of other partners of the Partnership, desire to amend the Initial Partnership Agreement to reflect the foregoing and certain other understandings as set forth herein. NOW, THEREFORE, the parties hereby agree as follows: 1. Capitalized terms used but not defined herein shall have the meanings set forth in the Initial Partnership Agreement, as amended hereby. 2. The issuance of 577,680 additional Units to the General Partner in consideration of the contribution of the Proceeds to the capital of the Partnership is hereby approved, and any and all notices relating thereto are hereby waived. The Partnership shall bear all expenses incurred by the Company in connection with the issuance of the Shares. 2 3. Exhibit A of the Initial Partnership Agreement is hereby deleted and Exhibit A in the form attached to this Amendment is hereby inserted in lieu thereof. The parties hereby acknowledge that, for purposes of Sections 6.11 and 13.7 of the Initial Partnership Agreement, as amended hereby, the Bucksbaum Limited Partners include M.B. Capital Partners III and its successors and assigns. 4. Except as specifically set forth herein, the Initial Partnership Agreement shall remain in full force and effect. 5. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware (without regard to its conflicts of law principles). 6. This Amendment may be executed in counterparts, each of which shall be an original and all of which together shall constitute the same document. 7. This Amendment shall be binding upon, and inure to the benefit of, the parties and their respective successors and assigns. IN WITNESS WHEREOF, the parties have executed this Amendment on the date first written above. GENERAL PARTNER: GENERAL GROWTH PROPERTIES, INC., a Delaware corporation By: -------------------------------- Its: ---------------------------- LIMITED PARTNERS: M.B. CAPITAL PARTNERS III, a South Dakota general partnership By: GENERAL TRUST COMPANY, not individually but solely as Trustee of Martin Investment Trust G, a partner By:___________________________ Its:_______________________ 3 EXHIBIT A PARTNERS
Number of Percentage General Partner: Units Interest ---------------- ----- -------- General Growth 35,373,612.0000 65.9198 Properties, Inc. Limited Partners: ----------------- M.B. Capital Partners III 15,571,609.6062 29.0182 Stanley Richards Revocable Trust 149,706.3938 0.2790 Joe W. Lowrance 57,620.0000 0.1074 LWLDA Limited Partnership 45,223.0000 0.0843 Brent M. Milgrom 57,620.0000 0.1074 GDC/A&B Limited Partnership 45,223.0000 0.0843 Edward S. Brown 38,098.0000 0.0710 Edward S. Brown and Susan Garber, Husband and Wife, as Tenants by the Entirety 40,846.0000 0.0761 Lawrence A. Brown 17,647.0000 0.0329 Merrill H.J. Roth 29,024.0000 0.0541 The Roth Family 22,308.0000 0.0416 Limited Partnership Arthur B. Morgenstern 54,625.0000 0.1018 Joseph Straus, Jr. 78,017.0000 0.1454 HIA Limited Partnership 107,080.0000 0.1995 Morgenstern, Rounick-Weiner 63,422.0000 0.1182 Associates Marvin Rounick and Judy Rounick, Husband and Wife, as Tenants-by- the-Entirety 55,670.0000 0.1037
4 Joint Revocable Trust of Warren and Penny Weiner 18,557.0000 0.0346 Irrevocable Trust of Warren Weiner dated January 24, 1978 F/B/O Robyn Weiner 18,557.0000 0.0346 Irrevocable Trust of Warren Weiner dated January 24, 1978 F/B/O Kimberly Weiner 18,557.0000 0.0346 Forbes/Cohen Properties 801,842.0000 1.4943 Jackson Properties 346,795.0000 0.6463 Lakeview Square Properties 296,363.0000 0.5523 CA Southlake Investors, Ltd. 353,537.0000 0.6588 ------------ ------ Total Units: 53,661,559.0000 100.0000 =============== ==========
2 EX-10.(M) 7 TWELFTH AMEND. TO AMENDED & RESTATED AGREEMENT 1 EXHIBIT 10(m) TWELFTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP Twelfth Amendment to Amended and Restated Agreement of Limited Partnership (the "Amendment"), dated October __, 1997, among the undersigned parties. R E C I T A L S: WHEREAS, a Delaware limited partnership known as GGP Limited Partnership exists pursuant to that certain Amended and Restated Agreement of Limited Partnership dated July 27, 1993, as amended by that certain First Amendment thereto dated May 23, 1995, that certain Second Amendment thereto dated July 13, 1995, that certain Third Amendment thereto dated as of May 21, 1996, that certain Fourth Amendment thereto dated as of August 30, 1996, that certain Fifth Amendment thereto dated as of October 4, 1996, that certain Sixth Amendment thereto dated as of November 27, 1996, that certain Seventh Amendment thereto dated as of December 6, 1996, that certain Eighth Amendment thereto dated as of June 19, 1997, that certain Ninth Amendment thereto dated as of August 8, 1997, that certain Tenth Amendment thereto dated as of September 8, 1997 and that certain Eleventh Amendment thereto dated as of September 11, 1997 (the "Initial Partnership Agreement"); WHEREAS, in order to attract foreign investors to real estate investment trusts in which the Partnership desires to invest, the general partner of the Partnership deems it advisable to ensure that any such real estate investment trust is treated as a "domestically-controlled REIT" within the meaning of Section 897(h)(4)(B) of the Internal Revenue Code of 1986, as amended (the "Code"); and WHEREAS, in furtherance thereof, the parties hereto, being the general partner of the Partnership and a majority in interest of other partners of the Partnership, desire to amend the Initial Partnership Agreement to require that all partners of the Partnership provide prior written notice to the general partner of the Partnership of any sale, assignment or other transfer of any direct or indirect interest in the Partnership to a foreign person or a person that is directly or indirectly owned, in whole or in part, by a foreign person as determined in accordance with Section 897(h)(4) of the Code and the Treasury Department regulations promulgated thereunder (a "Foreign Owner"). NOW, THEREFORE, the parties hereby agree as follows: 1. Capitalized terms used but not defined herein shall have the meanings set forth in the Initial Partnership Agreement, as amended hereby. 2. Notwithstanding anything in the Initial Partnership Agreement to the contrary, no Partner may sell, assign or otherwise transfer its Units or other interest in the Partnership or any 2 portion thereof (or permit any interest in any Person that directly or through another Person owns Units or other interests in the Partnership to be transferred) to any Foreign Owner without providing written notice of the same to the General Partner, and any such written notice shall be received by the General Partner at least thirty days prior to any such sale, assignment or other transfer. Any such sale, assignment or other transfer of Units or other interests in the Partnership shall be null and void ab initio unless such notice shall have been given as required above. 3. Except as specifically set forth herein, the Initial Partnership Agreement shall remain in full force and effect. 4. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware (without regard to its conflicts of law principles). 5. This Amendment may be executed in counterparts, each of which shall be an original and all of which together shall constitute the same document. 6. This Amendment shall be binding upon, and inure to the benefit of, the parties and their respective successors and assigns. IN WITNESS WHEREOF, the parties have executed this Amendment on the date first written above. GENERAL PARTNER: GENERAL GROWTH PROPERTIES, INC., a Delaware corporation By: -------------------------------- Its: ------------------------- LIMITED PARTNERS: M.B. CAPITAL PARTNERS III, a South Dakota general partnership By: GENERAL TRUST COMPANY, not individually but solely as Trustee of Martin Investment Trust G, a partner By: --------------------------- Its: ----------------------- EX-10.(N) 8 THIRTEENTH AMEND. TO AMENDED & RESTATED AGREEMENT 1 EXHIBIT 10(n) THIRTEENTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP Thirteenth Amendment to Amended and Restated Agreement of Limited Partnership (the "Amendment"), dated October 23, 1997, among the undersigned parties. R E C I T A L S: WHEREAS, a Delaware limited partnership known as GGP Limited Partnership exists pursuant to that certain Amended and Restated Agreement of Limited Partnership dated July 27, 1993, as amended by that certain First Amendment thereto dated May 23, 1995, that certain Second Amendment thereto dated July 13, 1995, that certain Third Amendment thereto dated as of May 21, 1996, that certain Fourth Amendment thereto dated as of August 30, 1996, that certain Fifth Amendment thereto dated as of October 4, 1996, that certain Sixth Amendment thereto dated as of November 27, 1996, that certain Seventh Amendment thereto dated as of December 6, 1996, that certain Eighth Amendment dated June 19, 1997, that certain Ninth Amendment dated August 8, 1997 (the "Initial Partnership Agreement"), that certain Tenth Amendment dated as of September 8, 1997, that certain Eleventh Amendment dated as of September 11, 1997 and that certain Twelfth Amendment thereto dated October 15, 1997; WHEREAS, concurrently herewith, Peter D. Leibowits ("Contributor") is being admitted as an additional limited partner of the Partnership pursuant to that certain Contribution Agreement dated September 25, 1997, between the Partnership, General Growth Properties, Inc., a Delaware corporation and the general partner of the Partnership (the "General Partner"), and Contributor (the "Contribution Agreement"); and WHEREAS, the parties hereto, being the general partner of the Partnership, Contributor and a majority in interest of other partners of the Partnership, desire to amend the Initial Partnership Agreement to reflect the foregoing admission, a previous transfer of units of partnership interest, a previous redemption of 55,900 units of partnership interest held by the General Partner and certain other understandings as set forth herein. NOW, THEREFORE, the parties hereby agree as follows: 1. Capitalized terms used but not defined herein shall have the meanings set forth in the Initial Partnership Agreement, as amended hereby. 2. The issuance of Additional Units to Contributor upon the terms set forth in the Contribution Agreement is hereby approved and Contributor is hereby admitted as an Additional Partner. 2 3. Contributor hereby agrees to be bound by the Initial Partnership Agreement, as the same is amended hereby and as the same hereafter may be amended. 4. The last sentence of Section 13.7 of the Initial Partnership Agreement may not be amended to modify the approval rights of Contributor without the consent of Contributor. In addition, without the consent of Contributor, Section 2 hereof may not be amended. 5. Exhibit A of the Initial Partnership Agreement is hereby deleted and the Exhibit A attached to this Amendment is hereby inserted in lieu thereof. 6. Except as specifically set forth herein, the Initial Partnership Agreement shall remain in full force and effect. 7. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware (without regard to its conflicts of law principles). 8. This Amendment may be executed in counterparts, each of which shall be an original and all of which together shall constitute the same document. 9. This Amendment shall be binding upon, and inure to the benefit of, the parties and their respective successors and assigns. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 3 IN WITNESS WHEREOF, the parties have executed this Amendment on the date first written above. GENERAL PARTNER: GENERAL GROWTH PROPERTIES, INC., a Delaware corporation By: -------------------------------- Its: ---------------------------- LIMITED PARTNERS: M.B. CAPITAL PARTNERS III, a South Dakota general partnership By: GENERAL TRUST COMPANY, not individually but solely as Trustee of Martin Investment Trust G, a partner By:___________________________ Its:_______________________ ______________________________ Peter D. Leibowits 32 Lafayette Place Greenwich, Connecticut 06830 4 EXHIBIT A PARTNERS
Number of Percentage General Partner: Units Interest ---------------- ----- -------- General Growth Properties, Inc. 35,344,791.0000 Limited Partners: ----------------- M.B. Capital Partners III 15,571,609.6062 Stanley Richards Revocable Trust 149,706.3938 Joe W. Lowrance 57,620.0000 LWLDA Limited Partnership 45,223.0000 Brent M. Milgrom 57,620.0000 GDC/A&B Limited Partnership 45,223.0000 Edward S. Brown 38,098.0000 Edward S. Brown and Susan Garber, Husband and Wife, as Tenants by the Entirety 40,846.0000 Lawrence A. Brown 17,647.0000 Merrill H.J. Roth 29,024.0000 The Roth Family 22,308.0000 Limited Partnership Arthur B. Morgenstern 54,625.0000 Joseph Straus, Jr. 78,017.0000 HIA Limited Partnership 80,001.0000 Morgenstern, Rounick-Weiner 63,422.0000 Associates Marvin Rounick and Judy Rounick, Husband and Wife, as Tenants-by- the-Entirety 55,670.0000
5 Joint Revocable Trust of Warren and Penny Weiner 18,557.0000 Irrevocable Trust of Warren Weiner dated January 24, 1978 F/B/O Robyn Weiner 18,557.0000 Irrevocable Trust of Warren Weiner dated January 24, 1978 F/B/O Kimberly Weiner 18,557.0000 Forbes/Cohen Properties 801,842.0000 Jackson Properties 346,795.0000 Lakeview Square Properties 296,363.0000 CA Southlake Investors, Ltd. 353,537.0000 Peter D. Leibowits . . --------------- ---------- Total Units: . 100.0000% =============== ==========
2 EX-10.(O) 9 FOURTEENTH AMEND. TO AMENDED & RESTATED AGREEMENT 1 EXHIBIT 10(o) FOURTEENTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP Fourteenth Amendment to Amended and Restated Agreement of Limited Partnership (the "Amendment"), dated as of October 29, 1997, among the undersigned parties. R E C I T A L S: WHEREAS, a Delaware limited partnership known as GGP Limited Partnership exists pursuant to that certain Amended and Restated Agreement of Limited Partnership dated July 27, 1993, as amended by that certain First Amendment thereto dated May 23, 1995, that certain Second Amendment thereto dated July 13, 1995, that certain Third Amendment thereto dated as of May 21, 1996, that certain Fourth Amendment thereto dated as of August 30, 1996, that certain Fifth Amendment thereto dated as of October 4, 1996, that certain Sixth Amendment thereto dated as of November 27, 1996, that certain Seventh Amendment thereto dated as of December 6, 1996, that certain Eighth Amendment thereto dated as of June 19, 1997, that certain Ninth Amendment thereto dated as of August 8, 1997, that certain Tenth Amendment thereto dated as of September 8, 1997, that certain Eleventh Amendment thereto dated as of September 11, 1997, that certain Twelfth Amendment thereto dated October 15, 1997 and that certain Thirteenth Amendment thereto dated October 23, 1997 (the "Initial Partnership Agreement"); WHEREAS, concurrently herewith, General Growth Properties, Inc., a Delaware corporation and the general partner of the Partnership (the "General Partner"), is contributing to the capital of the Partnership the partnership and membership interests described on Schedule A, attached hereto and by this reference made a part hereof (collectively, the "Interests"); and WHEREAS, the parties hereto, being the General Partner and a majority in interest of other partners of the Partnership, desire to amend the Initial Partnership Agreement to issue additional units of partnership interest to the General Partner in consideration for the contribution of the Interests to the capital of the Partnership upon the terms set forth herein. NOW, THEREFORE, the parties hereby agree as follows: 1. Capitalized terms used but not defined herein shall have the meanings set forth in the Initial Partnership Agreement, as amended hereby. 2. The issuance of 94,500 additional Units to the General Partner in consideration of the contribution of the Interests to the capital of the Partnership is hereby approved, and any and all notices relating thereto are hereby waived. 2 3. Exhibit A of the Initial Partnership Agreement is hereby deleted and Exhibit A in the form attached to this Amendment is hereby inserted in lieu thereof. 4. Except as specifically set forth herein, the Initial Partnership Agreement shall remain in full force and effect. 5. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware (without regard to its conflicts of law principles). 6. This Amendment may be executed in counterparts, each of which shall be an original and all of which together shall constitute the same document. 7. This Amendment shall be binding upon, and inure to the benefit of, the parties and their respective successors and assigns. IN WITNESS WHEREOF, the parties have executed this Amendment on the date first written above. GENERAL PARTNER: - --------------- GENERAL GROWTH PROPERTIES, INC., a Delaware corporation By: ------------------------------- Its: --------------------------- LIMITED PARTNERS: - ---------------- M.B. CAPITAL PARTNERS III, a South Dakota general partnership By: GENERAL TRUST COMPANY, not individually but solely as Trustee of Martin Investment Trust G, a partner By:___________________________ Its:_______________________ 3 EXHIBIT A PARTNERS
General Partner: Number of Units Percentage Interest - ---------------- --------------- -------------------- General Growth Properties, Inc. 35,439,291.000 Limited Partners: - ----------------- 15,571,609.6062 M.B. Capital Partners III Stanley Richards Revocable Trust 149,706.3938 Joe W. Lowrance 57,620.0000 LWLDA Limited Partnership 45,223.0000 Brent M. Milgrom 57,620.0000 GDC/A&B Limited Partnership 45,223.0000 Edward S. Brown 38,098.0000 Edward S. Brown and Susan Garber, Husband and Wife, as Tenants by the Entirety 40,846.0000 Lawrence A. Brown 17,647.0000 Merrill H.J. Roth 29,024.0000 The Roth Family Limited Partnership 22,308.0000 Arthur B. Morgenstern 54,625.0000 Joseph Straus, Jr. 78,017.0000 HIA Limited Partnership 80,001.0000 Morgenstern, Rounick-Weiner Associates 63,422.0000 Marvin Rounick and Judy Rounick, Husband and Wife, as Tenants-by- the-Entirety 55,670.0000 Joint Revocable Trust of Warren and Penny Weiner 18,557.0000 Irrevocable Trust of Warren Weiner dated January 24, 1978 F/B/O Robyn Weiner 18,557.0000
4 Irrevocable Trust of 18,557.0000 Warren Weiner dated January 24, 1978 F/B/O Kimberly Weiner Forbes/Cohen Properties 801,842.0000 Jackson Properties 346,795.0000 Lakeview Square Properties 296,363.0000 CA Southlake Investors, Ltd. 353,537.0000 Peter D. Leibowits 518,833.0000 ------------ -------- Total Units: . 100.0000 ============ ========
5 SCHEDULE A INTERESTS .999% general partnership interest in Colony Square Partners, a Delaware general partnership .999% general partnership interest in Columbia Mall Partners, an Iowa general partnership .999% general partnership interest in Fallbrook Square Partners, a California general partnership .999% general partnership interest in Fox River Shopping Center Partners, an Iowa general partnership .999% general partnership interest in Lockport Partners, a Delaware general partnership .999% general partnership interest in Rio West Partners, a Delaware general partnership .999% general partnership interest in River Hills Mall Partners, a Delaware general partnership .999% limited partnership interest in Westwood Mall Limited Partnership, a Delaware limited partnership .999 units of membership interest in Sooner Fashion Mall L.L.C. 3 EX-21 10 LIST OF SUBSIDIARIES 1 EXHIBIT 21 ENTITY* STATE OF FORMATION BOSSIER FUNDING, INC. DELAWARE CENTURY PLAZA, INC. DELAWARE CHAMPAIGN MARKET PLACE, INC. DELAWARE EAGLE RIDGE MALL, INC. DELAWARE EDEN PRAIRIE MALL, INC. DELAWARE FALLBROOK SQUARE, INC. DELAWARE GENERAL GROWTH FINANCE SPE, INC. DELAWARE GGP IVANHOE, INC. DELAWARE GGP LIMITED PARTNERSHIP DELAWARE GGP-LAKEVIEW SQUARE, INC. DELAWARE GGP-LANSING MALL, INC. DELAWARE GGP-NATICK TRUST MASSACHUSETTS GGP-WESTWOOD MALL, INC. DELAWARE GRANDVILLE MALL, INC. DELAWARE OAKS MALL GAINESVILLE II, INC. DELAWARE OKLAHOMA MALL, INC. DELAWARE PIERRE BOSSIER MALL, INC. DELAWARE SOUTHLAKE MALL, INC. DELAWARE TOWN EAST MALL, INC. DELAWARE TRACY MALL, INC. DELAWARE VALLEY HILLS MALL, INC. DELAWARE WESTROADS MALL II, INC. DELAWARE * Does not include entities in which the Company has only a minority interest or in which the Company holds securities other than common stock. EX-23 11 CONSENT OF COOPERS & LYBRAND LLP 1 Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statement of General Growth Properties, Inc. on Forms S-3 (File Nos. 333-11067, 333-15907, 333-17021, 333-23035, 333-37247, 333-37383 and 333-41603) and the Registration Statement on Forms S-8 (File Nos. 33-79372, 333-07241, 333-11237 and 333-28449) of our reports dated February 9, 1998, on our audits of the consolidated financial statements and financial statement schedule of General Growth Properties, Inc. as of December 31, 1997 and 1996, and for the three years in the period ended December 31, 1997, which reports are included in this Annual Report on Form 10-K. Coopers & Lybrand L.L.P. Chicago, Illinois March 25, 1998 EX-27 12 FDS
5 0000895648 GENERAL GRWOTH PROPERTIES, INC. 1,000 YEAR JAN-01-1997 DEC-31-1997 25,898 0 87,602 0 0 47,638 2,169,876 (233,295) 2,097,719 60,211 1,276,535 0 0 3,577 757,396 2,097,719 0 291,147 0 106,652 0 3,025 70,252 82,053 0 82,053 58,647 (1,152) 0 139,548 2.78 2.76
-----END PRIVACY-ENHANCED MESSAGE-----