Exhibit 99.1
GGP - TRC, L.L.C., A SUBSIDIARY OF GENERAL GROWTH PROPERTIES, INC.
The following is unaudited consolidated financial information for our subsidiary, GGP —TRC, L.L.C, (“TRCLLC”), formerly known as The Rouse Company L.L.C., as of September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011.
TRCLLC (also, “we” or “us”) is a Delaware limited liability company, formed on November 9, 2010 through voluntary conversion of The Rouse Company Limited Partnership (“TRCLP”) into a limited liability company. TRCLLC is a subsidiary of General Growth Properties, Inc. (“GGP” or the “Company”), a Delaware corporation, which was organized in July 2010 and is a self-administered and self-managed real estate investment trust, referred to as a “REIT”.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of TRCLLC, its subsidiaries and joint ventures in which it has a controlling interest. For consolidated joint ventures, the noncontrolling partner’s share of the assets, liabilities and operations of the joint ventures (generally computed as the joint venture partner’s ownership percentage) is included in noncontrolling interests in consolidated real estate affiliates as a permanent element of capital. All significant intercompany balances and transactions have been eliminated.
Reclassifications
Certain prior period amounts in the consolidated financial statements have been reclassified to conform to the current period presentation as a result of discontinued operations. TRCLLC distributed various operating properties to GGP and sold its interest in an office portfolio during the nine months ended September 30, 2012. Amounts included on the Consolidated Statements of Operations and Comprehensive Loss for properties sold or distributed to GGP have been reclassified to discontinued operations for all periods presented.
Critical Accounting Policies
Critical accounting policies are those that are both significant to the overall presentation of TRCLLC’s financial condition and results of operations and require management to make difficult, complex or subjective judgments. Our critical accounting policies for the fiscal year ended December 31, 2011 have not changed during the nine months ended September 30, 2012.
MANAGEMENT’S DISCUSSION OF TRCLLC OPERATIONS AND LIQUIDITY
The following table summarizes minimum rents for the nine months ended September 30, 2012 and 2011.
| | Nine Months Ended September 30, | | | | | |
| | 2012 | | 2011 | | $ Change | | % Change | |
| | (Dollars in thousands) | | | | | |
Components of Minimum rents: | | | | | | | | | |
Base minimum rents | | $ | 205,865 | | $ | 197,376 | | $ | 8,489 | | 4.3 | % |
Lease termination income | | 517 | | 2,399 | | (1,882 | ) | (78.4 | ) |
Amortization of straight-line rent | | 9,090 | | 11,242 | | (2,152 | ) | (19.1 | ) |
Amortization of above- and below-market tenant leases, net | | (11,688 | ) | (8,983 | ) | (2,705 | ) | 30.1 | |
Total Minimum rents | | $ | 203,784 | | $ | 202,034 | | $ | 1,750 | | 0.9 | % |
Base minimum rents increased by $8.5 million primarily due to increased permanent occupancy and positive lease spreads.
Expenses decreased by $16.7 million primarily due to a $17.9 million decrease in depreciation and amortization and an $11.6 million decrease in property management and other costs partially offset by provision for impairment of $13.8 million recorded on two operating properties. These impairment charges were recorded as the estimated sales prices of these properties were less than the carrying values. No impairment charges were necessary during the nine months ended September 30, 2011.
Equity in income of Unconsolidated Real Estate Affiliates for the nine months ended September 30, 2012 increased by $17.4 million from 2011, primarily due to a decrease in amortization expense as a result of less tenant-specific intangibles as well as adjustments to intangibles across our Unconsolidated Real Estate Affiliate in the amount of $6.1 million and growth in property operations and gains from the purchase of additional interest in and sale of investment properties of $4.6 million at our Brazil joint venture. The remaining increase is due to improved operations at all of our joint ventures.
T-1
Cash position and liquidity at September 30, 2012
TRCLLC’s cash and cash equivalents decreased $297.4 million to $145.2 million as of September 30, 2012. The cash position of TRCLLC is largely determined at any point in time by the relative short-term demands for cash by TRCLLC and GGP.
TRCLLC has $1.30 billion of unsecured bonds of with maturity dates from 2013 through November 2015 and interest rates ranging from 5.38% to 6.75%. The bonds have covenants, including ratios of secured debt to gross assets and total debt to total gross assets. We are not aware of any instances of non-compliance with such covenants as of September 30, 2012. We repaid the $349.5 million of the bonds on September 17, 2012, when they matured. TRCLLC intends to redeem all of its 6.75% bonds due May 1, 2013 (approximately $600.0 million) on December 3, 2012, at the “Make-Whole Price,” as defined in the applicable indenture.
TRCLLC expects to remain current with respect to its debt obligations and be able to access additional funds as required from GGP.
T-2
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| | September 30, | | December 31, | |
| | 2012 | | 2011 | |
| | (Dollars in thousands) | |
Assets: | | | | | |
Investment in real estate: | | | | | |
Land | | $ | 532,809 | | $ | 901,274 | |
Buildings and equipment | | 3,132,239 | | 4,749,122 | |
Less accumulated depreciation | | (225,562 | ) | (251,137 | ) |
Construction in progress | | 22,379 | | 38,535 | |
Net property and equipment | | 3,461,865 | | 5,437,794 | |
Investment in and loans to/from Unconsolidated Real Estate Affiliates | | 1,246,628 | | 1,725,338 | |
Net investment in real estate | | 4,708,493 | | 7,163,132 | |
Cash and cash equivalents | | 145,156 | | 442,559 | |
Accounts and notes receivable, net | | 34,729 | | 45,894 | |
Deferred expenses, net | | 24,484 | | 39,057 | |
Prepaid expenses and other assets | | 258,800 | | 400,401 | |
Total assets | | $ | 5,171,662 | | $ | 8,091,043 | |
| | | | | |
Liabilities: | | | | | |
| | | | | |
Mortgages, notes and loans payable | | $ | 3,083,698 | | $ | 4,440,481 | |
Accounts payable and accrued expenses | | 236,629 | | 339,596 | |
Total liabilities | | 3,320,327 | | 4,780,077 | |
| | | | | |
Capital: | | | | | |
Members’ capital | | 4,265,618 | | 6,118,338 | |
Receivable from General Growth Properties, Inc. | | (2,336,329 | ) | (2,778,910 | ) |
Accumulated other comprehensive loss | | (83,672 | ) | (48,470 | ) |
Members’ capital attributable to General Growth Properties, Inc. | | 1,845,617 | | 3,290,958 | |
Noncontrolling interests in Consolidated Real Estate Affiliates | | 5,718 | | 20,008 | |
Total capital | | 1,851,335 | | 3,310,966 | |
Total liabilities and capital | | $ | 5,171,662 | | $ | 8,091,043 | |
T-3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
| | Nine Months Ended September 30, | |
| | 2012 | | 2011 | |
| | (Dollars in thousands) | |
Revenues: | | | | | |
Minimum rents | | $ | 203,784 | | $ | 202,034 | |
Tenant recoveries | | 101,034 | | 103,823 | |
Overage rents | | 5,041 | | 4,132 | |
Other | | 10,476 | | 8,075 | |
Total revenues | | 320,335 | | 318,064 | |
Expenses: | | | | | |
Real estate taxes | | 31,404 | | 30,767 | |
Property maintenance costs | | 11,114 | | 12,987 | |
Marketing | | 3,621 | | 3,394 | |
Other property operating costs | | 54,975 | | 55,223 | |
Provision for doubtful accounts | | 1,006 | | 840 | |
Property management and other costs | | 22,332 | | 33,911 | |
Provision for impairment | | 13,810 | | — | |
Depreciation and amortization | | 105,235 | | 123,088 | |
Total expenses | | 243,497 | | 260,210 | |
Operating income | | 76,838 | | 57,854 | |
| | | | | |
Interest income | | 508 | | 619 | |
Interest expense | | (140,092 | ) | (144,889 | ) |
Loss before income taxes, equity in income of Unconsolidated Real Estate Affiliates, discontinued operations and allocation to noncontrolling interests | | (62,746 | ) | (86,416 | ) |
Provision for income taxes | | (138 | ) | (311 | ) |
Equity in income of Unconsolidated Real Estate Affiliates | | 28,054 | | 10,697 | |
Loss from continuing operations | | (34,830 | ) | (76,030 | ) |
Discontinued operations | | 13,005 | | 17,051 | |
Net loss | | (21,825 | ) | (58,979 | ) |
Allocation to noncontrolling interests | | 382 | | 961 | |
Net loss attributable to General Growth Properties, Inc. | | $ | (21,443 | ) | $ | (58,018 | ) |
| | | | | |
Comprehensive loss: | | | | | |
Net loss | | $ | (21,825 | ) | $ | (58,979 | ) |
Other comprehensive loss: | | | | | |
Foreign currency translation | | (35,202 | ) | (42,981 | ) |
Other comprehensive loss | | (57,027 | ) | (101,960 | ) |
Comprehensive income allocated to noncontrolling interests | | 382 | | 961 | |
Comprehensive loss, net attributable to General Growth Properties, Inc. | | $ | (56,645 | ) | $ | (100,999 | ) |
T-4
CONSOLIDATED STATEMENTS OF CAPITAL
(UNAUDITED)
| | Members’
Capital | | Accumulated
other
comprehensive
loss | | Receivable from
General Growth
Properties, Inc. | | Noncontrolling
Interests in
Consolidated
Real Estate
Affiliates | | Total Capital | |
| | (Dollars in thousands) | |
| | | | | | | | | | | |
Balance at January 1, 2011 | | $ | 7,496,627 | | $ | — | | $ | (2,812,817 | ) | $ | 21,416 | | $ | 4,705,226 | |
| | | | | | | | | | | |
Net loss | | (58,018 | ) | — | | — | | (961 | ) | (58,979 | ) |
Other comprehensive loss | | — | | (42,981 | ) | — | | — | | (42,981 | ) |
Advances to General Growth Properties, Inc. | | — | | — | | (524,548 | ) | — | | (524,548 | ) |
Distributions to General Growth Properties, Inc. | | (449,877 | ) | — | | 59,855 | | — | | (390,022 | ) |
Distributions to noncontrolling interests in Consolidated Real Estate Affiliates | | — | | — | | — | | (145 | ) | (145 | ) |
Balance at September 30, 2011 | | $ | 6,988,732 | | $ | (42,981 | ) | $ | (3,277,510 | ) | $ | 20,310 | | $ | 3,688,551 | |
| | | | | | | | | | | |
Balance at January 1, 2012 | | $ | 6,118,338 | | $ | (48,470 | ) | $ | (2,778,910 | ) | $ | 20,008 | | $ | 3,310,966 | |
| | | | | | | | | | | |
Net loss | | (21,443 | ) | — | | — | | (382 | ) | (21,825 | ) |
Other comprehensive loss | | — | | (35,202 | ) | — | | — | | (35,202 | ) |
Advances from General Growth Properties, Inc. | | — | | — | | 90,729 | | — | | 90,729 | |
Distributions to General Growth Properties, Inc. | | (1,831,277 | ) | — | | 351,852 | | (13,901 | ) | (1,493,326 | ) |
Distributions to noncontrolling interests in Consolidated Real Estate Affiliates | | — | | — | | — | | (7 | ) | (7 | ) |
Balance at September 30, 2012 | | $ | 4,265,618 | | $ | (83,672 | ) | $ | (2,336,329 | ) | $ | 5,718 | | $ | 1,851,335 | |
T-5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | Nine Months Ended September 30, | |
| | 2012 | | 2011 | |
| | (Dollars in thousands) | |
Cash flows from operating activities: | | | | | |
Net loss | | $ | (21,825 | ) | $ | (58,979 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | |
Equity in income of Unconsolidated Real Estate Affiliates | | (28,054 | ) | (5,669 | ) |
Provision for (recovery of) doubtful accounts | | 1,005 | | (660 | ) |
Distributions received from Unconsolidated Real Estate Affiliates | | 15,704 | | 11,172 | |
Depreciation | | 127,226 | | 222,952 | |
Amortization | | 8,372 | | 10,029 | |
Provisions for impairment | | 13,810 | | — | |
Amortization of deferred financing costs | | — | | 55 | |
Accretion of debt market rate adjustments | | (19,322 | ) | (37,152 | ) |
Amortization of intangibles other than in-place leases | | 16,590 | | 26,294 | |
Straight-line rent amortization | | (11,928 | ) | (22,934 | ) |
Net (gain) loss on disposition | | (4,262 | ) | 1,496 | |
Decrease in restricted cash | | 10,223 | | 340 | |
Net changes: | | | | | |
Accounts and notes receivable | | 5,639 | | (142 | ) |
Prepaid expenses, deferred expenses and other assets | | (16,510 | ) | (4,181 | ) |
Accounts payable and accrued expenses | | (8,140 | ) | 38,515 | |
Net cash provided by operating activities | | 88,528 | | 181,136 | |
| | | | | |
Cash flows from investing activities: | | | | | |
Development of real estate and property additions/improvements | | (54,200 | ) | (75,370 | ) |
Proceeds from sales of investment properties | | 43,270 | | 131,859 | |
Distributions received from Unconsolidated Real Estate Affiliates in excess of income | | 23,291 | | 37,483 | |
Increase in investments in Unconsolidated Real Estate Affiliates | | (14,400 | ) | (18,503 | ) |
Decrease in restricted cash | | 2,580 | | 3,681 | |
Other, net | | 90 | | 82 | |
Net cash provided by investing activities | | 631 | | 79,232 | |
| | | | | |
Cash flows from financing activities: | | | | | |
Proceeds from issuance of mortgages, notes and loans payable | | 72,336 | | 141,738 | |
Principal payments on mortgages, notes and loans payable | | (541,440 | ) | (391,139 | ) |
Advances from (to) General Growth Properties, Inc. | | 82,561 | | (524,548 | ) |
Distributions to noncontrolling interests | | (7 | ) | (145 | ) |
Prepayment of financing fees | | (12 | ) | — | |
Deferred financing costs | | — | | (6,864 | ) |
Net cash used in financing activities | | (386,562 | ) | (780,958 | ) |
| | | | | |
Net change in cash and cash equivalents | | (297,403 | ) | (520,590 | ) |
Cash and cash equivalents at beginning of period | | 442,559 | | 903,630 | |
Cash and cash equivalents at end of period | | $ | 145,156 | | $ | 383,040 | |
T-6
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(UNAUDITED)
| | Nine Months Ended September 30, | |
| | 2012 | | 2011 | |
| | (Dollars in thousands) | |
Supplemental disclosure of cash flow information: | | | | | |
| | | | | |
Interest paid | | $ | 187,960 | | $ | 206,395 | |
Interest capitalized | | 192 | | 607 | |
Income taxes paid | | — | | 935 | |
Reorganization items paid | | — | | 3,089 | |
Non-Cash Transactions: | | | | | |
Change in accrued capital expenditures incurred in accounts payable and accrued expenses | | $ | (2,980 | ) | 1,053 | |
Non-Cash Distribution to GGPLP: | | | | | |
Assets | | $ | 2,420,198 | | — | |
Liabilities | | (935,086 | ) | — | |
| | | | | | | |
T-7
