GGP (GGP) 10-Q 2005 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2005

or

o 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 incorporation or organization)	(I.R.S. Employer Identification Number)
110 N. Wacker Dr., Chicago, IL	60606
(Address of principal executive offices)	(Zip Code)

(312) 960-5000
(Registrant’s telephone number, including area code)

N / A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES          þ                    NO          o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES          þ                    NO          o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES          o                    NO          þ

The number of shares of Common Stock, $.01 par value, outstanding on November 8, 2005 was 238,752,532.

GENERAL GROWTH PROPERTIES, INC.
INDEX

			PAGE
			NUMBER
Part I	FINANCIAL INFORMATION
	Item 1:	Financial Statements (Unaudited)
		Consolidated Balance Sheets		3
		Consolidated Statements of Operations and Comprehensive Income		4
		Consolidated Statements of Cash Flows		5
		Notes to Consolidated Financial Statements		6
	Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations		28
	Item 3:	Quantitative and Qualitative Disclosures about Market Risk		39
	Item 4:	Controls and Procedures		39
Part II	OTHER INFORMATION
	Item 1:	Legal Proceedings		40
	Item 2:	Unregistered Sales of Securities and Use of Proceeds		40
	Item 3:	Defaults Upon Senior Securities		40
	Item 4:	Submission of Matters to a Vote of Security Holders		40
	Item 5:	Other Information		40
	Item 6:	Exhibits		41
	SIGNATURE			42
	EXHIBIT INDEX			43
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	September 30, 2005			December 31, 2004
	(Dollars in thousands)
Assets
Investment in real estate:
Land	$	2,870,609		$	2,859,552
Buildings and equipment		18,798,274			18,251,258
Less accumulated depreciation		(1,955,301	)		(1,453,488	)
Developments in progress		410,814			559,969
Net property and equipment		20,124,396			20,217,291
Investment in and loans to/from Unconsolidated Real Estate Affiliates		1,826,148			1,945,541
Investment land and land held for development and sale		1,651,123			1,638,013
Net investment in real estate		23,601,667			23,800,845
Cash and cash equivalents		20,738			39,581
Accounts and notes receivable, net		271,708			242,425
Insurance recovery receivable		30,000			—
Deferred expenses, net		202,912			153,231
Prepaid expenses and other assets		1,180,162			1,482,543
Total assets	$	25,307,187		$	25,718,625
Liabilities and Stockholders’ Equity
Mortgage notes and other property debt payable	$	20,517,161		$	20,310,947
Deferred tax liabilities		1,209,571			1,414,565
Accounts payable and accrued expenses		992,393			895,520
Total liabilities		22,719,125			22,621,032
Minority interests:
Preferred		206,914			403,161
Common		430,802			551,282
Total minority interests		637,716			954,443
Commitments and contingencies		—			—
Preferred stock: $100 par value; 5,000,000 shares authorized; none issued and outstanding		—			—
Stockholders’ equity:
Common stock: $.01 par value; 875,000,000 shares authorized; 239,332,077 and 234,724,082 shares issued as of September 30, 2005 and December 31, 2004, respectively		2,393			2,347
Additional paid-in capital		2,457,521			2,378,237
Retained earnings (accumulated deficit)		(486,000	)		(227,511	)
Notes receivable-common stock purchase		(524	)		(5,178	)
Unearned compensation-restricted stock		(927	)		(1,060	)
Accumulated other comprehensive income (loss)		12,217			(3,685	)
Less common stock in treasury, 755,850 shares at September 30, 2005, at cost		(34,334	)		—
Total stockholders’ equity		1,950,346			2,143,150
Total liabilities and stockholders’ equity	$	25,307,187		$	25,718,625

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
	(In thousands, except for per share amounts)
Revenues:
Minimum rents	$	429,107		$	245,538		$	1,249,439		$	698,232
Tenant recoveries		183,069			111,570			543,432			319,264
Overage rents		13,185			9,386			36,497			23,168
Land sales		79,112			—			254,863			—
Management and other fees		22,409			18,400			65,224			57,263
Other		29,814			12,607			83,211			33,778
Total revenues		756,696			397,501			2,232,666			1,131,705
Expenses:
Real estate taxes		50,048			30,155			156,252			87,124
Repairs and maintenance		46,469			27,286			145,892			77,265
Marketing		13,350			12,370			36,180			33,325
Other property operating costs		99,399			51,072			294,669			141,048
Land sales operations		60,353			—			208,548			—
Provision for doubtful accounts		5,763			2,591			14,164			7,940
Property management and other costs		39,646			21,631			113,236			70,954
General and administrative		3,559			2,078			10,005			7,080
Depreciation and amortization		177,307			82,027			513,691			240,687
Total expenses		495,894			229,210			1,492,637			665,423
Operating income		260,802			168,291			740,029			466,282
Interest income		2,599			336			7,305			1,119
Interest expense		(270,970	)		(101,017	)		(761,022	)		(278,564	)
Benefit (provision) for income taxes		(14,980	)		350			(27,609	)		(40	)
Income (loss) allocated to minority interests		(3,479	)		(24,673	)		(25,121	)		(73,011	)
Equity in income (loss) of unconsolidated affiliates		19,194			19,686			75,301			55,770
Income (loss) from continuing operations		(6,834	)		62,973			8,883			171,556
Income from discontinued operations, net of minority interests		—			1,000			—			2,687
Net income (loss)	$	(6,834	)	$	63,973		$	8,883		$	174,243
Basic earnings (loss) per share:
Continuing operations	$	(0.03	)	$	0.29		$	0.04		$	0.79
Discontinued operations		—			—			—			0.01
Total basic earnings (loss) per share	$	(0.03	)	$	0.29		$	0.04		$	0.80
Diluted earnings (loss) per share:
Continuing operations	$	(0.03	)	$	0.29		$	0.04		$	0.78
Discontinued operations		—			—			—			0.01
Total diluted earnings (loss) per share	$	(0.03	)	$	0.29		$	0.04		$	0.79
Distributions declared per share	$	0.36		$	0.66		$	1.08		$	1.26
Comprehensive income, net:
Net income (loss)	$	(6,834	)	$	63,973		$	8,883		$	174,243
Other comprehensive income, net of minority interest:
Net unrealized gains (losses) on derivative financial instruments		3,863			(1,846	)		8,633			4,473
Minimum pension liability adjustment		—			(40	)		(181	)		(222	)
Foreign currency translation		3,836			344			7,274			344
Net unrealized gains (losses) on available-for-sale securities		(47	)		—			176			—
Comprehensive income, net	$	818		$	62,431		$	24,785		$	178,838

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine Months Ended September 30,
	2005			2004
	(In thousands)
Cash flows from operating activities:
Net Income	$	8,883		$	174,243
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interests, including discontinued operations		25,121			73,683
Equity in income of unconsolidated affiliates		(75,301	)		(55,770	)
Provision for doubtful accounts, including discontinued operations		14,164			7,955
Distributions received from unconsolidated affiliates		76,167			55,521
Depreciation, including discontinued operations		498,710			227,812
Amortization, including discontinued operations		20,839			22,481
Participation expense pursuant to Contingent Stock Agreement		75,555			—
Land development and acquisition expenditures		(99,256	)		—
Cost of land sales		114,162			—
Debt assumed by purchasers of land		(5,293	)		—
Deferred income taxes		20,849			—
Net changes:
Accounts and notes receivable		(40,080	)		(22,479	)
Prepaid expenses and other assets		(96,016	)		(2,957	)
Deferred expenses		(11,437	)		(30,444	)
Accounts payable and accrued expenses		38,969			74,509
Other, net		6,274			—
Net cash provided by operating activities		572,310			524,554
Cash flows from investing activities:
Acquisition/development of real estate and property additions/improvements		(396,478	)		(1,739,098	)
Increase in investments in unconsolidated affiliates		(102,827	)		(159,989	)
Increase in restricted cash		(15,154	)		(6,306	)
Distributions received from unconsolidated affiliates in excess of income		137,963			29,227
Loans to/from unconsolidated affiliates, net		126,500			(8,884	)
Other, net		14,621			887
Net cash used in investing activities		(235,375	)		(1,884,163	)
Cash flows from financing activities:
Cash distributions paid to common stockholders		(255,812	)		(196,125	)
Cash distributions paid to holders of Common Units		(58,858	)		(50,320	)
Cash distributions paid to holders of perpetual and convertible preferred units		(22,897	)		(28,500	)
Proceeds from issuance of common stock, including from common stock plans		111,721			16,306
Purchase of treasury stock		(99,580	)		—
Redemption of preferred minority interests		(183,000	)		(107,923	)
Proceeds from issuance of mortgage notes and other property debt payable		3,625,537			2,858,605
Principal payments on mortgage notes and other property debt payable		(3,444,999	)		(1,115,176	)
Other, net		(27,890	)		(6,972	)
Net cash provided by (used in) financing activities		(355,778	)		1,369,895
Net change in cash and cash equivalents		(18,843	)		10,286
Cash and cash equivalents at beginning of period		39,581			10,677
Cash and cash equivalents at end of period	$	20,738		$	20,963
Supplemental disclosure of cash flow information:
Interest paid	$	771,891		$	271,231
Interest capitalized		41,795			5,736
Income taxes paid		13,422			390
Non-cash investing and financing activities (Note 2):
Common stock issued in exchange for Operating Partnership Units	$	20,796		$	1,314
Common stock issued in exchange for convertible preferred units		13,368			8,976
Debt assumed in conjunction with acquisition of property		—			134,902
Common stock issued pursuant to Contingent Stock Agreement		59,055			—
Operating Partnership Units issued as consideration for purchase of real estate		—			25,132

The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1 ORGANIZATION

Readers of this Quarterly Report on Form 10-Q should refer to the Company’s (as defined below) audited financial statements for the year ended December 31, 2004 which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (Commission File No. 1-11656), as certain footnote disclosures which would substantially duplicate those contained in the 2004 annual audited financial statements have been omitted from this report. Capitalized terms used, but not defined, in this Quarterly Report have the same meanings as in the Company’s 2004 Annual Report on Form 10-K (the “10-K”).

General

General Growth Properties, Inc. (“General Growth”), a Delaware corporation, is a self-administered and self-managed real estate investment trust, referred to as a “REIT.” General Growth was organized in 1986 and through its subsidiaries and affiliates owns, operates, manages, leases, acquires, develops, expands and finances operating properties located primarily throughout the United States and develops and sells land for residential, commercial and other uses primarily in master planned communities. The operating properties consist of retail centers, office and industrial buildings and mixed-use and other properties. Land development and sales operations are predominantly related to large-scale, long-term community development projects in and around Columbia, Maryland; Summerlin, Nevada; and Houston, Texas. In these notes, the terms “we,” “us” and “our” refer to General Growth and its subsidiaries (the “Company”).

Substantially all of our business is conducted through GGP Limited Partnership (the “Operating Partnership” or “GGPLP”). As of September 30, 2005, General Growth, as sole general partner, owned approximately 81.7% of the Operating Partnership. Approximately 15.9% of the Operating Partnership is held by limited partners that indirectly include family members of the original stockholders of the Company and is represented by common units of limited partnership interest in the Operating Partnership (the “Common Units”). The remaining approximately 2.4% of the Operating Partnership is held by limited partners that include subsequent contributors of properties to the Operating Partnership. The Operating Partnership has preferred units of limited partnership interest (the “Preferred Units”) outstanding. Under certain circumstances, the Preferred Units are convertible into Common Units which are redeemable for shares of our common stock on a one-for-one basis.

In addition to holding ownership interests in various joint ventures, the Operating Partnership generally conducts its operations through the following subsidiaries:

• GGPLP L.L.C., a Delaware limited liability company (the “LLC”), has ownership interests in the majority of our properties (other than those acquired in The Rouse Company merger (the “TRC Merger,” Note 2)).

• The Rouse Company LP (“TRCLP”), successor to The Rouse Company, which includes both REIT and taxable REIT subsidiaries (“TRSs”), has ownership interests in Consolidated Properties and Unconsolidated Properties (each as defined below).

• General Growth Management, Inc. (“GGMI”), a TRS, manages, leases, and performs various other services for some of our Unconsolidated Real Estate Affiliates (as defined below) and approximately 30 properties owned by unaffiliated third parties.

In this report, we refer to our ownership interests in majority-owned or controlled properties as “Consolidated Properties,” to joint ventures in which we own a non-controlling interest as “Unconsolidated Real Estate Affiliates” and the properties owned by such joint ventures as the

6 of 43

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

“Unconsolidated Properties.” Our “Company Portfolio” includes both the Unconsolidated Properties and our Consolidated Properties.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of General Growth, our subsidiaries and joint ventures in which we have a controlling interest. We also consolidate the accounts of certain variable interest entities that were acquired in the TRC Merger (Note 2) and for which we are the primary beneficiary. Income allocated to minority interests in these joint ventures includes the share of such properties’ operations (generally computed as the respective joint venture partner ownership percentage) applicable to such non-controlling venturers. The equity of these non-controlling venturers has been included in minority interests-common.

Acquisitions (Note 2) are accounted for utilizing the purchase method of accounting and accordingly, the results of operations are included in our results of operations from the respective dates of acquisition. All significant intercompany balances and transactions have been eliminated.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial position and results of operations and cash flows for the interim periods have been included. The results for the interim periods ended September 30, 2005 are not necessarily indicative of the results to be obtained for the full fiscal year.

Minority Interests

Common

Changes in outstanding Common Units for the nine months ended September 30, 2005 were as follows:

December 31, 2004	55,532,263
Conversion of Preferred Units into Common Units	671,687
Redemptions for General Growth common stock	(2,764,209	)
September 30, 2005	53,439,741

Preferred

Components of minority interests—preferred at September 30, 2005 and December 31, 2004 were as follows:

											Carrying Amount
					Number
					of Units as of		Per Unit
	Coupon			Issuing	September 30,		Liquidation		Redeemable		September 30,		December 31,
Security Type	Rate			Entity	2005		Preference		by Issuer		2005		2004
											(In thousands)
Perpetual Preferred Units
Redeemable Preferred Units (“RPUs”)		8.95	%	LLC		240,000	$	250	April 2007		$	60,000	$	235,000	(1)
Cumulative Preferred Units (“CPUs”)		8.25	%	LLC		20,000		250		N/A		5,000		5,000
Price Development Company (“PDC”) Series C		8.75	%	PDC		—		25		N/A		—		8,000
												65,000		248,000

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

					Number
					of Units as of		Per Unit					Carrying Amount
	Coupon			Issuing	September 30,		Liquidation		Redeemable			September 30,		December 31,
Security Type	Rate			Entity	2005		Preference		by Issuer			2005		2004
Convertible Preferred Units
Series B-JP Realty		8.50	%	GGPLP		1,381,972		50		N/A		$	69,099	$	70,975
Series C-Glendale Galleria		7.00	%	GGPLP		413,676		50		N/A			20,685		32,176
Series D-Foothills Mall		6.50	%	GGPLP		532,750		50		N/A			26,637		26,637
Series E-Four Seasons Town Centre		7.00	%	GGPLP		502,658		50		N/A			25,132		25,132
													141,553		154,920
Other preferred stock of consolidated subsidiaries		N/A		Various		361		1,000		(2	)		361		241
Total minority interests-preferred												$	206,914	$	403,161

(1)	Includes $175 million which was redeemed in May 2005 as permitted under the terms of the applicable RPUs.
(2)	Redeemable on demand, under certain circumstances.

Earnings Per Share (“EPS”)

Information related to our EPS calculations is as follows:

	Three Months Ended September 30,
	2005						2004
	Basic			Diluted			Basic		Diluted
(In thousands)
Numerators:
Income (loss) from continuing operations	$	(6,834	)	$	(6,834	)	$	62,973	$	62,973
Discontinued operations, net of minority interests		—			—			1,000		1,000
Net income (loss)	$	(6,834	)	$	(6,834	)	$	63,973	$	63,973
Denominators:
Weighted average number of common shares outstanding — basic		238,218			238,218			218,605		218,605
Effect of dilutive securities — options		—			—			—		693
Weighted average number of common shares outstanding — diluted		238,218			238,218			218,605		219,298

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

	Nine Months Ended September 30,
	2005				2004
	Basic		Diluted		Basic		Diluted
(In thousands)
Numerators:
Income from continuing operations	$	8,883	$	8,883	$	171,556	$	171,556
Discontinued operations, net of minority interests		—		—		2,687		2,687
Net income	$	8,883	$	8,883	$	174,243	$	174,243
Denominators:
Weighted average number of common shares outstanding — basic		237,299		237,299		218,080		218,080
Effect of dilutive securities — options		—		779		—		679
Weighted average number of common shares outstanding — diluted		237,299		238,078		218,080		218,759

Diluted EPS excludes anti-dilutive options where the exercise price was higher than the average market price of our common stock and options for which conditions for issuance were not achieved. Such options totaled 1,809,000 for the three months ended September 30, 2004, 951,859 for the nine months ended September 30, 2005 and 1,538,000 for the nine months ended September 30, 2004. All outstanding options, (1,973,995), have been considered to be anti-dilutive for the three months ended September 30, 2005 as we reported a loss for the quarter. Outstanding Common Units have also been excluded from the diluted earnings per share calculation because there would be no effect on EPS as the minority interests’ share of earnings (loss) would also be added back to net income (loss).

The following chart summarizes distributions on our common stock and the Common Units in 2005 and 2004.

	Amount
	per				Common Stock		Common Units
Declaration Date	Share		Record Date	Payment Date	(In thousands)
October 6, 2005	$	0.41	October 18, 2005	October 31, 2005	$	97,854	$	21,910
July 5, 2005		0.36	July 15, 2005	July 29, 2005		85,703		19,325
April 4, 2005		0.36	April 15, 2005	April 29, 2005		85,603		19,325
January 7, 2005		0.36	January 17, 2005	January 31, 2005		84,506		19,992
August 20, 2004		0.36	October 15, 2004	October 29, 2004		78,727		19,992
July 2, 2004		0.30	July 15, 2004	July 30, 2004		65,575		16,662
April 5, 2004		0.30	April 15, 2004	April 30, 2004		65,357		16,704
January 5, 2004		0.30	January 15, 2004	January 30, 2004		65,193		16,714

Notes Receivable — Officers

Notes receivable — officers were as follows:

	September 30,		December 31,
(In thousands)	2005		2004
Income tax withholdings reported in Prepaid expenses and other assets	$	110	$	623
Reported as a reduction to Stockholders’ equity		524		5,178
	$	634	$	5,801

During 2005, two of our officers, in February and September, respectively, voluntarily repaid their notes in full. The notes had a combined balance of $5.1 million at December 31, 2004.

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Revenue Recognition and Related Matters

As of September 30, 2005, straight-line rents receivable, which represent the current net cumulative rents recognized prior to when billed and collectible as provided by the terms of the leases, of approximately $135.0 million are included in accounts and notes receivable, net in the accompanying consolidated balance sheet (Note 9).

Lease termination income was $1.8 million for the three months ended September 30, 2005, $1.7 million for the three months ended September 30, 2004, $11.1 million for the nine months ended September 30, 2005, and $7.0 million for the nine months ended September 30, 2004.

Management and other fees primarily represent management and leasing fees, financing fees and fees for other ancillary services which we perform for the benefit of the Unconsolidated Real Estate Affiliates and properties owned by third parties and are recognized as revenues when earned. We recognized fees for services performed for the Unconsolidated Properties of approximately $22.0 million for the three months ended September 30, 2005, $13.6 million for the three months ended September 30, 2004, $57.0 million for the nine months ended September 30, 2005 and $44.0 million for the nine months ended September 30, 2004.

Stock Plans

During the second quarter of 2002, we elected to prospectively adopt the fair value based employee stock-based compensation expense recognition provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). We had previously applied the intrinsic value based expense recognition provisions set forth in APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). The transition rules for adoption of SFAS 123 provide that prior grants of options, whether from our 1993 Stock Incentive Plan (now expired) or the 1998 Incentive Plan, are accounted for under APB 25. Had compensation costs for such prior grants of options been recorded under SFAS 123, our net income and earnings per share would have been nominally reduced but there would have been no effect on reported basic or diluted earnings per share.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. For example, significant estimates and assumptions have been made with respect to useful lives of assets, capitalization of development and leasing costs, recoverable amounts of receivables and deferred taxes, and initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions. Actual results could differ materially from those estimates.

Reclassifications

Certain amounts in the results for the nine months ended September 30, 2005 and 2004 have been reclassified to conform to the current quarter’s presentation.

10 of 43

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 2 ACQUISITIONS AND INTANGIBLES

The Rouse Company

We acquired The Rouse Company (“TRC”), a real estate development and management company, on November 12, 2004 (the “TRC Merger”) for a purchase price, including debt and other liabilities assumed, of approximately $14.2 billion. Immediately following the TRC Merger, TRC was, through a series of transactions, converted to a limited partnership (“TRCLP”) wholly-owned by the Operating Partnership and its subsidiaries. The results of TRCLP’s operations have been included in our consolidated financial statements since that date.

The following table summarizes the estimated fair values of the assets acquired at the date of acquisition, including adjustments made during the nine months ended September 30, 2005. These fair values were based, in part, on preliminary third-party market valuations. These fair values were based on currently available information and assumptions and estimates that we believe are reasonable at this time. We will continue to review and expect to adjust these fair values as additional information becomes available for a period of one year following the acquisition.

	November 12,		Non-Cash			September 30,
(In thousands)	2004		Adjustments			2005
Land	$	1,314,711	$	—		$	1,314,711
Buildings and equipment		8,206,370		83,737			8,290,107
Developments in progress		383,996		(21,677	)		362,319
Investment in and loans to Unconsolidated Real Estate Affiliates		1,236,299		34,911			1,271,210
Investment land and land held for development and sale		1,645,700		33,128			1,678,828
Cash and cash equivalents		29,077		—			29,077
Accounts and notes receivable		84,424		1,093			85,517
Prepaid expenses and other assets:
Below-market ground leases		382,328		(33,212	)		349,116
Above-market tenant leases		141,048		(32,802	)		108,246
Deferred tax assets		145,243		(142,675	)		2,568
Goodwill		356,796		(97,741	)		259,055
Other		401,527		2,742			404,269
Total purchase price	$	14,327,519	$	(172,496	)	$	14,155,023

During the nine months ended September 30, 2005, liabilities assumed were also reduced by $177 million as additional information became available.

Other Acquisitions

In 2005, we have made the following acquisitions, with a total investment of approximately $90 million.

	Acquisition
	Date
20% ownership interest in Zaratustra Mall (through Cencom, S.A. (Brazil))	August 3
50% ownership interest in Pinnacle Hills Promenade (through Rogers Retail L.L.C.)	September 30
50% interest in Circle T Power Center (through 170 Retail Associates, LTD)	October 31
50% interest in Whalers Village (through GGP/Teachers)	November 1

Also in 2004, we made the following acquisitions which have been reflected in our consolidated financial statements since the dates of the respective acquisitions:

	Acquisition
	Date
50% ownership interest in Burlington Town Center	January 7
Redlands Mall	January 16
The remaining 50% ownership interest in Town East Mall	March 1
Four Seasons Town Centre	March 5
Ownership interest in GSG de Cost Rica SRL	April 30
50% ownership interest in Riverchase Galleria	May 11

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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	Acquisition
	Date
Mall of Louisiana	May 12
Grand Canal Shoppes	May 17
50% ownership interest in GGP/NIG Brazil	July 30
Stonestown Galleria	August 13

In addition to the acquisitions discussed above, we have entered into a separate agreement (the “Phase II Agreement”), to acquire the multi-level retail space that is planned to be part of The Palazzo in Las Vegas, Nevada that will be connected to the existing Venetian and the Sands Expo and Convention Center facilities (the “Phase II Acquisition”) and the Grand Canal Shoppes listed above. The Palazzo is currently under construction and is expected to be completed in 2007. If completed as specified under the terms of the Phase II Agreement, we will purchase, payable upon grand opening, the Phase II Acquisition retail space at a price computed on a 6% capitalization rate on the projected net operating income of the Phase II retail space, as defined by the Phase II Agreement (“Phase II NOI”), up to $38 million and on a capitalization rate of 8% on Phase II NOI in excess of $38 million, all subject to a minimum purchase price of $250 million. Based on current construction plans and estimated rents, we believe the actual purchase price will be more than double the minimum purchase price. The Phase II Agreement is subject to the satisfaction of separate and customary closing conditions.

Accounting for Acquisitions and Intangibles

Acquisitions of properties are accounted for utilizing the purchase method and accordingly, the results of operations are included in our results of operations subsequent to the respective dates of acquisition. The purchase prices for all property acquisitions are subject to certain prorations and adjustments. Estimates of future cash flows and other valuation techniques are used to allocate the purchase price of acquired property between land, buildings and improvements, equipment and identifiable intangible assets and liabilities such as amounts related to in-place at-market tenant leases, acquired above and below-market leases and tenant relationships. Initial valuations are subject to change until such information is finalized no later than 12 months from the applicable acquisition dates.

The following table summarizes our intangible assets and liabilities:

	Gross Asset			Accumulated			Net Carrying
	(Liability)			Amortization			Amount
(In millions)
September 30, 2005
Tenant leases:
In-place value	$	687		$	144		$	543
Above-market		109			23			86
Below-market		(294	)		(96	)		(198	)
Ground leases:
Above-market		(17	)		—			(17	)
Below-market		366			7			359
Real estate tax stabilization agreement		94			4			90

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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	Gross Asset			Accumulated			Net Carrying
	(Liability)			Amortization			Amount
(In millions)
December 31, 2004
Tenant leases:
In-place value	$	595		$	29		$	566
Above-market		142			4			138
Below-market		(304	)		(52	)		(252	)
Ground leases:
Above-market		(17	)		—			(17	)
Below-market		398			1			397
Real estate tax stabilization agreement		94			1			93

Amortization of these intangible assets and liabilities, and similar assets and liabilities from our Unconsolidated Real Estate Affiliates, increased (decreased) net income by approximately $(58.6) million for the three months ended September 30, 2005, $6.1 million for the three months ended September 30, 2004 $(124.1) million for the nine months ended September 30, 2005 and $16.9 million for the nine months ended September 30, 2004.

Future amortization, including our share of such items from Unconsolidated Real Estate Affiliates, is estimated to decrease net income by approximately $150 million in 2005, $140 million in 2006, $130 million in 2007, $100 million in 2008 and $60 million in 2009.

NOTE 3 INVESTMENTS IN AND LOANS TO/FROM UNCONSOLIDATED REAL ESTATE AFFILIATES

The Unconsolidated Real Estate Affiliates constitute our investment in real estate joint ventures that own and/or develop shopping centers, residential and commercial land, and other retail and investment property. Generally, we share in the profits and losses, cash flows and other matters relating to our investments in Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. We manage most of the properties owned by these joint ventures. Some of the joint ventures have elected to be taxed as REITs. Since we have joint interest and control of the Unconsolidated Properties with our venture partners, we account for these joint ventures using the equity method. For those joint ventures where we own less than a 5% interest and have virtually no influence on the joint venture’s operating and financial policies, we account for our investments using the cost method.

In certain circumstances, we are obligated (or can elect) to fund debt in excess of our pro rata share of the debt of our Unconsolidated Real Estate Affiliates. Such Retained Debt totaled $184.4 million as of September 30, 2005 and $148.7 million as of December 31, 2004.

The significant accounting policies used by the Unconsolidated Real Estate Affiliates are the same as ours.

Condensed Combined Financial Information of Unconsolidated Real Estate Affiliates

The following is condensed combined income statement information for our Unconsolidated Real Estate Affiliates for the periods ended September 30, 2005 and 2004.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
(In thousands)
Condensed Combined Statements of Operations — Unconsolidated Real Estate Affiliates
Revenues:
Minimum rents	$	198,392		$	135,367		$	584,009		$	388,512
Tenant recoveries		88,877			60,035			265,165			181,364
Overage rents		4,037			2,759			9,793			6,479
Management and other fees		—			499			—			499
Land sales		39,861			—			110,761			—
Other		22,704			2,841			90,831			9,793
Total revenues		353,871			201,501			1,060,559			586,647
Expenses:
Real estate taxes		28,036			17,981			83,374			53,008
Repairs and maintenance		21,917			13,492			61,915			41,940
Marketing		5,517			6,121			20,052			18,908
Other property operating costs		46,953			23,226			176,084			76,782
Land sales operations		29,409			—			65,165			—
Provision for doubtful accounts		3,559			1,504			6,910			3,940
Property management and other costs		11,951			10,946			35,415			32,820
General and administrative		5,442			4,923			9,711			6,202
Depreciation and amortization		63,258			42,365			189,950			119,987
Total expenses		216,042			120,558			648,576			353,587
Operating income		137,829			80,943			411,983			233,060
Interest income		4,369			922			7,773			2,444
Interest expense		(80,638	)		(42,170	)		(221,834	)		(123,531	)
Equity in income of unconsolidated joint ventures		1,262			985			3,565			3,249
Net income	$	62,822		$	40,680		$	201,487		$	115,222
Equity In Income of Unconsolidated Real Estate Affiliates
Net income of Unconsolidated Real Estate Affiliates	$	62,822		$	40,680		$	201,487		$	115,222
Joint venture partners’ share of income of Unconsolidated Real Estate Affiliates		(31,426	)		(20,939	)		(102,702	)		(59,231	)
Amortization of capital or basis differences		(11,304	)		(55	)		(22,171	)		(204	)
Elimination of Unconsolidated Real Estate Affiliates loan interest		(898	)		—			(1,313	)		(17	)
Equity in income of Unconsolidated Real Estate Affiliates	$	19,194		$	19,686		$	75,301		$	55,770

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following is summarized financial information for certain individually significant Unconsolidated Real Estate Affiliates as of September 30, 2005 and December 31, 2004 and for the periods ended September 30, 2005 and 2004.

	GGP/Homart						GGP/Homart II
	September 30,			December 31,			September 30,			December 31,
	2005			2004			2005			2004
(In thousands)
Assets:
Land	$	146,777		$	146,777		$	190,787		$	190,707
Buildings and equipment		1,787,863			1,765,800			2,001,446			1,957,969
Less accumulated depreciation		(436,872	)		(389,682	)		(249,214	)		(205,637	)
Developments in progress		23,931			8,586			113,821			63,970
Investment in unconsolidated joint ventures		8,923			10,898			—			—
Net investment in real estate		1,530,622			1,542,379			2,056,840			2,007,009
Cash and cash equivalents		49,517			20,319			73,344			23,149
Accounts receivable, net		43,049			39,254			29,268			32,265
Deferred expenses, net		47,478			48,969			56,356			59,102
Prepaid expenses and other assets		19,676			56,482			107,548			36,236
Total assets	$	1,690,342		$	1,707,403		$	2,323,356		$	2,157,761
Liabilities and Owners’ Equity:
Mortgage notes and other property debt payable	$	1,586,492		$	1,469,938		$	1,672,928		$	1,331,301
Accounts payable and accrued expenses		59,783			63,560			76,504			81,574
Minority interest		—			—			117			117
Owners’ equity		44,067			173,905			573,807			744,769
Total liabilities and owners’ equity	$	1,690,342		$	1,707,403		$	2,323,356		$	2,157,761

As of September 30, 2005, we had notes payable to GGP/Homart of $50.0 million and to GGP/Homart II of $76.5 million. The notes bear interest at 5.25% and mature on July 31, 2007.

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

	GGP/Homart						GGP/Homart II
Three months ended September 30,	2005			2004			2005			2004
(In thousands)
Revenues:
Minimum rents	$	56,043		$	52,476		$	49,849		$	45,458
Tenant recoveries		23,349			21,833			23,980			22,119
Overage rents		973			1,211			972			868
Other		2,152			1,489			1,635			913
Total revenues		82,517			77,009			76,436			69,358
Expenses:
Real estate taxes		7,673			7,091			6,793			6,163
Repairs and maintenance		6,167			5,894			4,478			4,360
Marketing		2,171			2,474			2,016			2,187
Other property operating costs		8,800			10,187			5,908			4,924
Provision for doubtful accounts		391			324			2,297			557
Property management and other costs		5,051			4,669			4,310			3,777
General and administrative		162			182			433			4,673
Depreciation and amortization		17,265			17,190			15,822			14,586
Total expenses		47,680			48,011			42,057			41,227
Operating income		34,837			28,998			34,379			28,131
Interest income		1,331			455			2,417			367
Interest expense		(21,633	)		(20,347	)		(22,671	)		(13,827	)
Equity in income of unconsolidated joint ventures		1,262			985			—			—
Net income	$	15,797		$	10,091		$	14,125		$	14,671

	GGP/Homart						GGP/Homart II
Nine months ended September 30,	2005			2004			2005			2004
(In thousands)
Revenues:
Minimum rents	$	168,697		$	153,988			143,091		$	134,168
Tenant recoveries		70,623			68,489			69,558			65,044
Overage rents		2,642			2,379			2,566			2,304
Other		6,225			4,522			5,560			3,108
Total revenues		248,187			229,378			220,775			204,624
Expenses:
Real estate taxes		22,469			21,020			20,530			18,655
Repairs and maintenance		19,376			18,680			13,675			13,275
Marketing		7,095			7,270			6,883			7,041
Other property operating costs		26,380			31,785			20,187			25,009
Provision for doubtful accounts		1,016			1,215			3,374			1,265
Property management and other costs		15,125			13,915			12,680			11,712
General and administrative		410			704			1,438			5,002
Depreciation and amortization		51,247			49,909			45,998			42,435
Total expenses		143,118			144,498			124,765			124,394
Operating income		105,069			84,880			96,010			80,230
Interest income		2,499			1,086			3,569			1,118
Interest expense		(62,795	)		(60,456	)		(56,541	)		(40,635	)
Equity in income of unconsolidated joint ventures		3,565			3,249			—			—
Net income	$	48,338		$	28,759		$	43,038		$	40,713

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 4 MORTGAGE NOTES AND OTHER PROPERTY DEBT PAYABLE

Mortgage notes and other property debt payable reflected in the accompanying consolidated balance sheets at September 30, 2005 and December 31, 2004 consisted of the following:

	September 30,		December 31,
(In thousands)	2005		2004
Fixed-rate debt:
Commercial mortgage-backed securities	$	314,430	$	332,526
Other collateralized mortgage notes and other debt payable		11,904,013		9,036,659
Corporate and other unsecured term loans		1,636,986		1,750,882
Total fixed-rate debt		13,855,429		11,120,067
Variable-rate debt:
Commercial mortgage-backed securities		307,210		361,239
Other collateralized mortgage notes and other debt payable		884,448		2,189,059
Credit facilities		156,000		150,000
Corporate and other unsecured term loans		5,314,074		6,490,582
Total variable-rate debt		6,661,732		9,190,880
Total	$	20,517,161	$	20,310,947

Commercial Mortgage-Backed Securities

In December 2001, the Operating Partnership and certain Unconsolidated Real Estate Affiliates completed the placement of $2.55 billion of non-recourse commercial mortgage pass-through certificates (the “GGP MPTC”). The GGP MPTC was initially collateralized by 27 malls and one office building, including 19 malls then owned by certain Unconsolidated Real Estate Affiliates. At September 30, 2005, the GGP MPTC had a current outstanding principal balance of approximately $914.1 million (including $292.5 million by Unconsolidated Real Estate Affiliates) and was collateralized by nine malls, including five malls owned by Unconsolidated Real Estate Affiliates.

The GGP MPTC is comprised of both variable-rate and fixed-rate notes which require monthly payments of principal and interest. The certificates represent beneficial interests in three loan groups made by three initial sets of borrowers (the Operating Partnership, GGP/Homart and GGP/Homart II, and GGP Ivanhoe III). The original principal amount of the GGP MPTC was comprised of $1.235 billion attributed to the Operating Partnership, $900 million to GGP/Homart and GGP/Homart II and $415 million to GGP Ivanhoe III. The terms of the notes comprising the GGP MPTC are as follows:

			Weighted-Average
Initial Maturity	Interest Term	Interest Rate	Interest Rate
36 Months(1)	Variable	LIBOR(3) plus 60 to 235 basis points	LIBOR(3) plus 80 basis points
51 months(2)	Variable	LIBOR(3) plus 70 to 250 basis points	LIBOR(3) plus 90 basis points
5 years	Fixed	5.01 to 6.18%	5.39%

⁽¹⁾ With two no-cost 12-month extension options, one of which was exercised in 2004.

⁽²⁾ With two no-cost 18-month extension options, one of which was exercised in 2005.

⁽³⁾ 3.86% at September 30, 2005.

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The extension options with respect to the variable-rate notes are subject to obtaining extensions of the interest rate protection agreements which were required to be obtained in conjunction with the GGP MPTC.

Other Collateralized Mortgage Notes and Other Debt Payable

Other collateralized mortgage notes and other debt payable consist primarily of non-recourse notes collateralized by individual or groups of properties and equipment. Substantially all of the mortgage notes are non-recourse to us. Certain mortgage notes may be prepaid but are generally subject to a prepayment penalty equal to a yield-maintenance premium or a percentage of the loan balance. Certain loans have cross-default provisions and are cross-collateralized. Under certain cross-default provisions, a default under any mortgage note included in a cross-defaulted package may constitute a default under all such mortgage notes in the package and may lead to acceleration of the indebtedness due on each property within the collateral package. In general, the cross-defaulted properties are under common ownership. However, debt (totaling $138.6 million) collateralized by two Unconsolidated Properties is cross-defaulted and cross-collateralized with debt (totaling $868.8 million) collateralized by eleven Consolidated Properties.

As of September 30, 2005, the weighted-average interest rate on the fixed-rate collateralized mortgage notes and other debt payable was 5.42% (range of 3.13% to 10.15%). The weighted-average interest rate on variable-rate collateralized mortgage notes and other debt payable, excluding the impact of interest rate swaps, was 5.97% (range of LIBOR plus 75 to 213 basis points).

2004 Credit Facility

We entered into a credit agreement on November 12, 2004 to fund the TRC Merger consideration and, with other cash and financing sources, fund other costs of the merger. The terms of the notes comprising the 2004 Credit Facility are as follows:

			Outstanding at
	Initial		September 30,		December 31,
(In millions)	Capacity		2005		2004
Six-month bridge loan	$	1,145.0		—	$	749.9
Three-year term loan		3,650.0	$	3,236.4		3,650.0
Four-year term loan		2,000.0		1,985.0		2,000.0
Revolving credit facility		500.0		156.0		150.0
	$	7,295.0	$	5,377.4	$	6,549.9

Principal repayment of the three-year term loan begins in November 2005 ($500 million originally due November 12, 2005, but required payment has been reduced by principal pay downs to-date) with semi-annual payments in 2006, quarterly payments in 2007 and a final $1.8 billion payment in November 2007. Principal repayment of the four-year term loan began in January 2005 with quarterly payments scheduled through September 2008 and a final $1.9 billion payment in November 2008. The rate on the four-year term loan was reduced by 25 basis points in June 2005 and the rates on the revolver and three-year term loan were reduced by 50 basis points in September 2005. The 2004 Credit Facility currently bears interest at a weighted-average rate of LIBOR plus approximately 184 basis points.

We are generally required to apply the net proceeds of future mortgage financings and refinancings, sales of equity, and asset dispositions (including by casualty or condemnation) toward prepayment of the 2004 Credit Facility in accordance with various priorities set out in the facility. Exceptions to this requirement include the acquisition, construction or repair of assets useful in our business in an aggregate amount up

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

to $500 million annually and other items. The 2004 Credit Facility is secured by a pledge of the Operating Partnership’s ownership interest in TRCLP and in the LLC and also by a pledge of the interest in an operating account in which we will deposit any distributions the Operating Partnership receives from our interests in TRCLP.

During the term of the facility, we are subject to customary affirmative and negative covenants. Upon the occurrence of an event of default contained in the 2004 Credit Facility, the lenders under the facility will have the option of declaring immediately due and payable all amounts outstanding under the facility. The 2004 Credit Facility contains events of default including failure to maintain our status as a REIT under the Internal Revenue Code, failure to remain listed on the New York Stock Exchange and such customary events as nonpayment of principal, interest, fees or other amounts, breach of representations and warranties, breach of covenant, cross-default to other indebtedness and certain bankruptcy events.

Unsecured Term Loans

In conjunction with the TRC Merger, we assumed certain publicly-traded unsecured debt. At September 30, 2005 such debt totals $1.45 billion, bears interest at fixed rates ranging from 3.63% to 8.00% and matures at various dates from 2009 to 2013.

In conjunction with our acquisition of JP Realty in 2002, we assumed $100 million of ten-year senior unsecured notes which bear interest at a fixed rate of 7.29% and were issued by PDC in March 1998. The notes require semi-annual interest payments. Annual principal payments of $25 million as provided by the terms of the notes began in March 2005 and continue until the loan is fully repaid in March 2008.

Interest Rate Swaps

Concurrent with the issuance of the GGP MPTC certificates, we purchased interest rate protection agreements which were structured to limit our exposure to interest rate fluctuations. An equal amount of interest rate protection agreements were simultaneously sold to fully offset the effect of these agreements and to recoup a substantial portion of the cost of such agreements.

To achieve a more desirable balance between fixed and variable-rate debt, we have also entered into certain swap agreements as follows:

				2004 Credit
				Facility —
				Three-year Term			Property
	GGP MPTC			Loan			Specific
Total notional amount (in millions)	$	125.0		$	350.0		$	386.6
Average fixed effective rate (pay rate)		4.59	%		3.43	%		5.01	%
Variable interest rate of related debt (receive rate)	LIBOR + .92%			LIBOR + 1.75%			LIBOR + 1.67%

Such swap agreements have been designated as cash flow hedges and are intended to hedge our exposure to future interest rate changes on the related variable-rate debt.

Letters of Credit and Surety Bonds

We had outstanding letters of credit and surety bonds of $208 million as of September 30, 2005. The letters of credit and surety bonds were primarily issued in connection with insurance requirements, special real estate assessments and construction obligations.

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 5 OTHER ASSETS AND LIABILITIES

The following table summarizes the significant components of prepaid expenses and other assets as of September 30, 2005 and December 31, 2004.

	September 30,		December 31,
(In thousands)	2005		2004
Goodwill	$	259,055	$	356,796
Below-market ground leases		359,324		381,331
Deferred tax assets		11,377		145,243
Above-market tenant leases		85,928		137,263
Real estate tax stabilization agreement		90,482		94,168
Receivables-finance leases and bonds		120,199		76,572
Special Improvement District receivable		48,108		48,586
Other, prepaid expenses and marketable securities		210,689		242,584
	$	1,185,162	$	1,482,543

The following table summarizes the significant components of “Accounts Payable and Accrued Expenses” as of September 30, 2005 and December 31, 2004.

	September 30,		December 31,
(In thousands)	2005		2004
Below-market tenant leases	$	198,515	$	251,561
Accounts payable and accrued expenses		469,280		346,524
Deferred gains/income		30,785		73,100
Hughes participation payable		51,053		35,019
Other		242,760		189,316
	$	992,393	$	895,520

NOTE 6 COMMITMENTS AND CONTINGENCIES

In the normal course of business, from time to time, we are involved in legal actions relating to the ownership and operations of our properties. In management’s opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material adverse effect on our consolidated financial position, results of operations or liquidity.

We lease land or buildings at certain properties from third parties. Consolidated rental expense, including participation rent and excluding amortization of below-market ground leases, was $2.0 million for the three months ended September 30, 2005, $.6 million for the three months ended September 30, 2004, $6.0 million for the nine months ended September 30, 2005 and $2.0 million for the nine months ended September 30, 2004. The leases generally provide for a right of first refusal in our favor in the event of a proposed sale of the property by the landlord.

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

We periodically enter into contingent agreements for the acquisition of properties. Each acquisition is subject to satisfactory completion of due diligence and, in the case of property acquired under development, completion of the project .

TRC acquired various assets, including Summerlin, a master-planned community in suburban Las Vegas, Nevada, in the acquisition of The Hughes Corporation (“Hughes”) in 1996. In connection with the acquisition of Hughes, TRC entered into a Contingent Stock Agreement (“CSA”) for the benefit of the former Hughes owners or their successors (“beneficiaries”). Under the terms of the CSA, shares of TRC common stock are issuable to the beneficiaries based on the appraised values of defined asset groups, including Summerlin, at specified termination dates through 2009 and/or cash flows from the development and/or sale of those assets prior to the termination dates.

We assumed TRC’s obligation under the CSA to deliver shares of our common stock twice a year to beneficiaries under the CSA. The amount of shares is based upon a formula set forth in the CSA and upon our stock price. Such issuances could be dilutive to our existing stockholders if the delivery obligation is satisfied by the issuance of new shares rather than from treasury stock or shares purchased on the open market. We account for the beneficiaries’ share of earnings from the assets as an operating expense. We will account for any distributions to the beneficiaries in 2009, which could be significant, in connection with a valuation related to assets that we own as of such date as additional investments in the related assets (that is, contingent consideration). A total of 1,552,385 shares of our common stock were issued in the nine months ended September 30, 2005 pursuant to the CSA.

Two of our operating retail properties in the United States Gulf Coast region (Oakwood Center in Gretna, Louisiana and Riverwalk, located near the convention center in downtown New Orleans) have been closed since August 29, 2005, when a hurricane stuck the area. Although property damage in the New Orleans area was generally due to hurricane effects, the damage to Oakwood Center and Riverwalk, which prevents these properties from re-opening, was from arson and vandalism. Riverwalk is currently expected to partially re-open by Thanksgiving 2005 even though certain repair and refurbishment activities are anticipated to continue into 2006. While two anchor stores at Oakwood Center have announced plans to re-open in time for the 2005 holiday season and repair and re-opening plans are in process, no official re-opening date has been set for the remainder of the property. We have comprehensive insurance coverage for both property damage and business interruption. The recovery effort at the properties is expected to include replacing portions of the building, landscaping and furnishings. The net book value of the property damage is currently estimated to be at least $35 million; however, we are still assessing the damage estimates and the actual net book value write-off could vary from this estimate. Changes to these estimates will be recorded in the periods in which they are determined. As of September 30, 2005, we have recorded a net fixed asset write-off and a corresponding insurance claim recovery receivable for this net book value amount because we believe that it is probable that the insurance recovery, net of deductibles on a replacement cost basis, will exceed the net book value of the damaged portion of the assets. While we expect the insurance proceeds will be sufficient to cover most of the replacement cost of the restoration of the properties, certain deductibles and limitations are expected to apply. No determination has been made as to the total amount or timing of those insurance payments. As of September 30, 2005 and through November 8, 2005, $5 million in insurance proceeds related to the Oakwood property has been received, which has been offset against this insurance recovery receivable. As only a nominal amount of repairs have taken place as of September 30, 2005, substantially all of the remaining $30 million receivable recorded represents the recovery of the net book value of fixed assets written off. The cost recoveries have been recorded on the expense line item to which they relate, and therefore there is no significant impact to any line item or our overall results. However, included in property operating expenses for the three and nine months ended September 30, 2005 are approximately $1 million of costs which, when fully expended, are not expected to be recoverable from insurance proceeds due to insurance policy deductibles.

NOTE 7 DISCONTINUED OPERATIONS

In August 2004, our Board of Directors approved plans to dispose of certain of the commercial/business properties originally acquired in the JP Realty acquisition in July 2002. The sale closed on November 1, 2004 for $67.4 million and a gain of approximately $11.2 million was recognized.

Pursuant to SFAS 144, the operations of the industrial properties are classified as discontinued operations in the accompanying consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 8 TAX MATTERS

We elected to be taxed as a real estate investment trust (“REIT”) under sections 856-860 of the Internal Revenue Code, commencing with our taxable year beginning January 1, 1993. To qualify as a REIT, we must meet a number of organizational and operational requirements, including requirements to distribute at least 90% of our ordinary taxable income and to distribute to stockholders or pay tax on 100% of capital gains and to meet certain asset and income tests. It is management’s current intention to adhere to these requirements.

We also have subsidiaries which we have elected to be treated as TRS entities and which are, therefore, subject to Federal and state income taxes. Our primary TRSs include GGMI, entities which own our master planned community properties and other TRSs acquired in the TRC Merger. Current Federal income taxes payable by certain of these TRSs are likely to increase in future years as we utilize certain net loss carry forwards of such entities and as certain master planned community developments are completed. Such increases could be significant.

Deferred tax liabilities, net of deferred tax assets, were $1.2 billion at September 30, 2005 and $1.3 billion at December 31, 2004. Due to the uncertainty of the realization of certain net loss carryforwards, we established valuation allowances. The majority of the valuation allowances related to net operating loss carryforwards where there is uncertainty regarding their realizability and will more likely than not expire unused. However, in the three months ended March 31, 2005 we recognized a deferred income tax benefit primarily due to a reduction in certain GGMI tax asset valuation allowances.

One of our taxable subsidiaries is subject to an ongoing federal income tax examination. We do not believe that the outcome of this examination will have a material adverse effect on our consolidated financial position, results of operations or liquidity.

In December 2004, the FASB issued FSP FAS 109-1 related to the application of SFAS No. 109, “Accounting for Income Taxes,” to the tax deduction on qualified production activities provided by the American Jobs Creation Act of 2004 (the “Jobs Creation Act”). FSP FAS 109-1 clarifies that this tax deduction provided for under the Jobs Creation Act should be accounted for as a special deduction in accordance with SFAS No. 9 and not as a tax rate reduction. We are currently evaluating the effect that this deduction will have in 2005 and subsequent years. It is not expected to have a material impact on our financial position or results of operations in 2005.

NOTE 9 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2005, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF 04-05, “Investor’s Accounting for an Investment in a Limited Partnership When the Investor Is the Sole General Partner and the Limited Partners Have Certain Rights” (“EITF 04-05”) which provides guidance on when a sole general partner should consolidate a limited partnership. A sole general partner in a limited partnership is presumed to control that limited partnership and therefore should include the limited partnership in its consolidated financial statements, regardless of the sole general partner’s ownership interest in the limited partnership. The control presumption may be overcome if the limited partners have the ability to remove the sole general partner or otherwise dissolve the limited partnership. Other substantive participating rights by the limited partners may also overcome the control presumption. This consensus is effective for general partners of all newly formed limited partnerships and existing limited partnerships for which the partnership agreements are modified. For general partners in all other limited partnerships, this consensus would be effective no later than the beginning of the first reporting period in fiscal years beginning after December 15, 2005. We do not expect EITF 04-05 to have a significant impact on our financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In May 2005, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 154, “Accounting Changes and Error Corrections — A Replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”). This new standard replaces APB Opinion No. 20, “Accounting Changes,” and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements.” Among other changes, SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. SFAS 154 also provides that:

• A change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and

• Correction of errors in previously issued financial statements should be termed a “restatement.”

SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005.

On February 7, 2005, the SEC staff published certain views concerning the accounting by lessees for leasehold improvements, rent holidays, lessor funding of lessee expenditures and other tenant inducements. Although the application of these views to lessors was not specified by the SEC and a formal accounting standard modifying existing practice on these items has not been issued or proposed, we have conducted a review of our accounting relative to such items. We believe that our leasing practices and agreements with a majority of our tenants provide that leasehold improvements that we fund represent fixed assets that we own and control. We also believe that leases with such arrangements are properly accounted for as commencing at the completion of construction of such assets. A smaller percentage of our tenant leases do not provide for landlord funding but rather provide for tenant funded construction and furnishing of the leased premises prior to the formal commencement of the lease. We have concluded that the cumulative incremental straight-line rental revenue that would have been recognized on such leases if they had commenced on tenant possession of such space rather than the lease-specified commencement date to be approximately $10.1 million at December 31, 2004 which was recognized in the three months ended March 31, 2005. The recognition of straight-line rental revenue on this accelerated basis will have no effect on periodic or cumulative cash flows to be received pursuant to a tenant lease.

On December 16, 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets-An Amendment of APB Opinion No. 29” (“SFAS 153”). The amendments made by SFAS 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have “commercial substance.” SFAS 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of SFAS 153 on June 15, 2005 did not have a material effect on our consolidated financial statements.

On December 16, 2004, the FASB issued SFAS No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123R”). SFAS 123R replaces SFAS 123, which we adopted in the second quarter of 2002. SFAS 123R requires that compensation cost relating to share-based payment transactions be recognized in financial statements and measured based on the fair value of the equity or liability instruments used. SFAS 123R is effective as of the first interim or annual reporting period that begins after June 15, 2005. We do not believe that the adoption of SFAS 123R will have a material effect on our consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” (“SFAS 150”) which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability. The effective date of a portion of SFAS 150 has been indefinitely postponed by the FASB. We did not enter into new financial instruments subsequent to May 2003 which would fall within the scope of this statement. None of our transactions, arrangements or financial instruments, except for certain ventures acquired in the TRC Merger, have been identified that appear to meet the criteria for liability recognition in accordance with paragraphs 9 and 10 under SFAS 150 due to the indefinite life of the joint venture arrangements. Therefore, if the effectiveness of the measurement and classification provisions is no longer postponed, we would reclassify to liabilities approximately $15 million of minority interest with respect to such TRC Merger acquired ventures, but no amount for any of our other ventures.

In October 2005, the FASB Issued Staff Position No. FAS 13-1 “Accounting for Rental Costs Incurred during a Construction Period”. This FSP requires that rental costs associated with ground or building operating leases incurred during a construction period be recognized as rental expense. However, FSP No. FAS 13-1 does not address lessees that account for the sale or rental of real estate projects under FASB Statement No. 67 “Accounting for Costs and Initial Rental Operations of Real Estate Projects”. As we generally own rather than lease property upon which we construct new real estate ventures and our policy would be to capitalize rental costs associated with ground leases incurred during construction periods under Statement No. 67, FSP No. FAS 13-1 will not have a material effect on results of operations when it becomes effective in 2006.

NOTE 10 SEGMENTS

We have two business segments which offer different products and services. Our segments are managed separately because each requires different operating strategies or management expertise. We do not distinguish or group our consolidated operations on a geographic basis. Further, all material operations are within the United States and no customer or tenant comprises more than 10% of consolidated revenues. Our reportable segments are as follows:

• Retail and Other — includes the operation, development and management of regional shopping centers, office and industrial properties, downtown specialty marketplaces, the retail and non-retail rental components of mixed-use projects and community retail centers

• Master Planned Communities — includes the development and sale of land, primarily in large-scale, long-term community development projects in and around Columbia, Maryland; Summerlin, Nevada; and Houston, Texas

Prior to the TRC Merger, substantially all of our business involved ownership and operation of shopping centers. As we evaluated operating results and resource allocation on a property-by-property basis, we had concluded that we had a single reportable segment.

The operating measure used to assess operating results for the business segments is Real Estate Property Net Operating Income (“NOI”). Management believes that NOI provides useful information about a property’s operating performance.

The accounting policies of the segments are the same as those described in our 10-K, except that we account for unconsolidated real estate ventures using the proportionate share method rather than the equity method. Under the proportionate share method, our share of the revenues and expenses of the Unconsolidated Properties are combined with the revenues and expenses of the Consolidated Properties. Under the equity method, our share of the net revenues and expenses of the Unconsolidated Properties are reported as a single line item, “Equity in income of unconsolidated affiliates,” in our Consolidated Statements of Operations and Comprehensive Income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Operating results for the segments were as follows:

	Three Months Ended September 30, 2005
(In thousands)	Consolidated			Unconsolidated			Segment
Retail and Other	Properties			Properties			Basis
Property revenues:
Minimum rents	$	429,107		$	101,679		$	530,786
Tenant recoveries		183,069			44,861			227,930
Overage rents		13,185			2,031			15,216
Other		29,366			15,041			44,407
Total property revenues		654,727			163,612			818,339
Property operating expenses:
Real estate taxes		50,048			14,303			64,351
Repairs and maintenance		46,469			9,861			56,330
Marketing		13,350			2,932			16,282
Other property operating costs		99,399			25,903			125,302
Provision for doubtful accounts		5,763			1,816			7,579
Total property operating expenses		215,029			54,815			269,844
Retail and other net operating income		439,698			108,797			548,495
Master Planned Communities
Land sales		79,112			21,331			100,443
Land sales operations		(60,353	)		(18,622	)		(78,975	)
Master Planned Communities net operating income		18,759			2,709			21,468
Real estate property net operating income	$	458,457		$	111,506		$	569,963

	Three Months Ended September 30, 2004
(In thousands)	Consolidated		Unconsolidated		Segment
Retail and Other	Properties		Properties		Basis
Property revenues:
Minimum rents	$	245,538	$	68,316	$	313,854
Tenant recoveries		111,570		30,925		142,495
Overage rents		9,386		1,406		10,792
Other, including discontinued operations		13,544		1,561		15,105
Total property revenues		380,038		102,208		482,246
Property operating expenses:
Real estate taxes		30,155		9,182		39,337
Repairs and maintenance		27,286		7,023		34,309
Marketing		12,370		3,152		15,522
Other property operating costs		51,072		11,835		62,907
Provision for doubtful accounts		2,591		665		3,256
Total property operating expenses		123,474		31,857		155,331
Real estate property net operating income	$	256,564	$	70,351	$	326,915

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

	Nine Months Ended September 30, 2005
(In thousands)	Consolidated			Unconsolidated			Segment
Retail and Other	Properties			Properties			Basis
Property revenues:
Minimum rents	$	1,249,439		$	291,695		$	1,541,134
Tenant recoveries		543,432			133,452			676,884
Overage rents		36,497			4,898			41,395
Other		81,918			49,376			131,294
Total property revenues		1,911,286			479,421			2,390,707
Property operating expenses:
Real estate taxes		156,252			41,743			197,995
Repairs and maintenance		145,892			30,943			176,835
Marketing		36,180			10,148			46,328
Other property operating costs		294,669			89,091			383,760
Provision for doubtful accounts		14,164			3,541			17,705
Total property operating expenses		647,157			175,466			822,623
Retail and other net operating income		1,264,129			303,955			1,568,084
Master Planned Communities
Land sales		254,863			58,554			313,417
Land sales operations		(208,548	)		(43,212	)		(251,760	)
Master Planned Communities net operating income		46,315			15,342			61,657
Real estate property net operating income	$	1,310,444		$	319,297		$	1,629,741

	Nine Months Ended September 30, 2004
(In thousands)	Consolidated		Unconsolidated		Segment
Retail and Other	Properties		Properties		Basis
Property revenues:
Minimum rents	$	698,232	$	198,462	$	896,694
Tenant recoveries		319,264		93,476		412,740
Overage rents		23,168		3,426		26,594
Other, including discontinued operations		36,547		5,105		41,652
Total property revenues		1,077,211		300,469		1,377,680
Property operating expenses:
Real estate taxes		87,124		27,083		114,207
Repairs and maintenance		77,265		21,769		99,034
Marketing		33,325		9,732		43,057
Other property operating costs		141,048		39,538		180,586
Provision for doubtful accounts		7,940		1,920		9,860
Total property operating expenses		346,702		100,042		446,744
Real estate property net operating income	$	730,509	$	200,427	$	930,936

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following reconciles segment basis NOI to GAAP-basis operating income and income from continuing operations:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands)	2005			2004			2005			2004
Consolidated Properties real estate property net operating income	$	458,457		$	256,564		$	1,310,444		$	730,509
Management and other fees		22,409			18,400			65,224			57,263
Property management and other costs		(39,646	)		(21,631	)		(113,236	)		(70,954	)
General and administrative		(3,559	)		(2,078	)		(10,005	)		(7,080	)
Depreciation and amortization		(177,307	)		(82,027	)		(513,691	)		(240,687	)
Other (a)		448			(937	)		1,293			(2,769	)
Operating income		260,802			168,291			740,029			466,282
Interest income		2,599			336			7,305			1,119
Interest expense		(270,970	)		(101,017	)		(761,022	)		(278,564	)
(Provision) benefit for income taxes		(14,980	)		350			(27,609	)		(40	)
Income (loss) allocated to minority interests		(3,479	)		(24,673	)		(25,121	)		(73,011	)
Equity in income (loss) of unconsolidated affiliates		19,194			19,686			75,301			55,770
Income (loss) from continuing operations	$	(6,834	)	$	62,973		$	8,883		$	171,556

(a) Reflects minority interests in Consolidated Properties NOI.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All references to numbered Notes are to specific notes to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and which Notes are incorporated into the applicable response by reference. The following discussion should be read in conjunction with such Consolidated Financial Statements and related Notes. Capitalized terms used, but not defined, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) have the same meanings as in such Notes.

FORWARD-LOOKING INFORMATION

We may make forward-looking statements in this Quarterly Report and in other reports that we file with the SEC and in other information that we release publicly or provide to investors. In addition, our senior management might make forward-looking statements orally to analysts, investors, the media and others.

Forward-looking statements include:

• Projections of our revenues, income, earnings per share, Funds From Operations (“FFO”), capital expenditures, dividends, leverage, capital structure or other financial items;

• Descriptions of plans or objectives of our management for future operations, including pending acquisitions and development projects, and debt repayment or restructuring;

• Forecasts of our future economic performance; and

• Descriptions of assumptions underlying or relating to any of the foregoing.

In this Quarterly Report, for example, we make forward-looking statements discussing our expectations about:

• Future repayment of debt, including the ratio of variable to fixed-rate debt in our portfolio;

• Future interest rates; and

• Future development and redevelopment expenditures.

Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements often include words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “strive,” “should,” “will,” “would” or similar expressions. Forward-looking statements should not be unduly relied upon. They describe our current expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made and we disclaim any obligation to update them except as required by law.

There are several factors, many beyond our control, which could cause results to differ materially from our expectations. Some of these factors are described in Exhibit 99.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2005. These risks continue to be relevant to our performance and financial condition. Other factors, such as credit, market, operational, liquidity, interest rate and other risks, are described elsewhere in this Quarterly Report. Any factor described in this Quarterly Report could by itself, or together with one or more other factors, adversely affect our business, results of operations or financial condition. There are also other factors that we have not described in this Quarterly Report that could cause results to differ from our expectations.

MANAGEMENT’S OVERVIEW & SUMMARY

Our primary business is the ownership, management, leasing and development of retail and office rental property. As of September 30, 2005, we had ownership interest in and management responsibility for a portfolio of 210 regional shopping malls in 44 states. We strive to increase cash flow and real estate net

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operating income by acquiring, developing, renovating and managing retail rental property in major and middle markets throughout the United States.

We provide on-site management and other services to substantially all of our properties, including properties which we own through joint venture arrangements and which are unconsolidated for GAAP purposes. Our management operating philosophies and strategies are generally the same whether the properties are consolidated or unconsolidated. As a result, we believe that financial information and operating statistics with respect to all properties, both consolidated and unconsolidated, provide important insights into our operating results. Collectively, we refer to our Consolidated and Unconsolidated Properties as our “Company Portfolio” and the retail portion of the Company Portfolio as the “Retail Company Portfolio.”

Our business strategy includes selectively making strategic acquisitions, the expansion and renovation of existing properties and development of new property. We seek to enhance the yields of the acquired properties through subsequent proactive property management and leasing (including tenant remerchandising), operating cost reductions, physical expansions, redevelopments and capital reinvestment. Some of the actions that we take to increase productivity include changing the tenant mix, adding vendor carts or kiosks and full expansions or renovations of centers. Acquisitions have included single centers, privately held portfolios and public-to-public purchases such as the TRC Merger.

In 2005, we have made the following acquisitions, with a total investment of approximately $90 million.

	Acquisition
	Date
20% ownership interest in Zaratustra Mall (through Cencom, S.A. (Brazil))	August 3
50% ownership interest in Pinnacle Hills Promenade (through Rogers Retail L.L.C.)	September 30
50% interest in Circle T Power Center (through 170 Retail Associates, LTD)	October 31
50% interest in Whalers Village (through GGP/Teachers)	November 1

However, such acquisitions in 2005 have not significantly impacted 2005 operations. Acquisitions in 2004, as detailed in the following chart, were the most significant factor in overall increases from year to year in our cash flows and operating income.

		Gross
	Acquisition	Purchase
	Date	Price
		(In millions)
A 50% ownership interest in Burlington Town Center	January 7	$	10.25
Redlands Mall	January 16		14.25
The remaining 50% ownership interest in Town East Mall	March 1		44.5
Four Seasons Town Centre	March 5		161.0
A 33 1/3% ownership interest in GGP/Sambil Costa Rica	April 30		9.7
A 50% ownership interest in Riverchase Galleria	May 11		166.0
Mall of Louisiana	May 12		265.0
The Grand Canal Shoppes	May 17		766.0
A 50% ownership interest in GGP/NIG Brazil	July 30		7.0
Stonestown Galleria	August 13		312.0
The Rouse Company	November 12		14,155.0
		$	15,910.7

Acquisitions of properties are accounted for utilizing the purchase method and accordingly, the results of operations are included in our results of operations subsequent to the respective dates of acquisition.

The expansion and renovation of a property may also result in increased cash flows and operating income as a result of increased customer traffic, trade area penetration and improved competitive position of the property. As of September 30, 2005, we had 20 major approved redevelopment projects underway (each with budgeted projected expenditures, at our ownership share, in excess of $10 million). Total projected expenditures (including our share of the Unconsolidated Real Estate Affiliates) for the 20 redevelopment projects and the three new retail center development projects that we have under construction, as described below, were approximately $927.5 million as of September 30, 2005. Such development and re-development

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expenditures, together with expenditures for 12 other potential new retail or mixed-use developments are expected to result in approximately $400 to $500 million of expenditures per year for the years 2006 to 2008.

In addition to property redevelopment, we also develop retail centers from the ground-up. In September 2005, we opened the Shops at La Cantera in San Antonio, Texas. This open air center is anchored by Nieman’s, Nordstrom, Dillard’s and Foley’s. In August 2004, we completed the ground-up development of Jordan Creek Town Center in West Des Moines, Iowa. The center, costing approximately $175 million, is a 1.9 million square foot enclosed regional shopping mall with three anchor stores, a hotel and an amphitheater.

We also have three other new retail center development projects currently under construction, Lincolnshire Commons, in Lincolnshire (Chicago), Illinois; Otay Ranch Town Center in Chula Vista (San Diego), California; and Pinnacle Hills Promenade, in Rogers, Arkansas. These three projects are scheduled to open in 2006. We also have 12 other potential new retail or mixed-use developments that are projected to open in 2007 through 2009.

We believe that the most significant operating factor affecting incremental cash flow and net operating income is increased rents (either base rental revenue or overage rents) earned from tenants at our properties. These rental revenue increases are primarily achieved by:

• Renewing expiring leases and re-leasing existing space at rates higher than expiring or existing rates. The average annual new/renewal lease rate for our Consolidated Retail Properties for 2005 was $37.34 per square foot which was higher than the average annualized in place rent per square foot, as detailed in the table immediately below. Lease durations for in-line specialty stores typically average approximately ten years. As a result, many leases that are expiring now were signed in the early to mid 1990’s during a challenging retail environment.

• Increasing occupancy at the properties so that more space is generating rent. The occupancy percentage at properties which are not under redevelopment in our Retail Company Portfolio was 92.2 percent at September 30, 2005, compared to 90.8 percent at September 30, 2004.

• Increased tenant sales in which we participate through overage rents. For the nine months ended September 30, 2005, tenant sales per square foot in our Retail Company Portfolio increased almost 13 percent over 2004 to $425 per square foot primarily due to our focus on acquisitions of premier properties with high productivity, including TRCLP, as well as our focus on operating income growth through aggressive management, remerchandising and reinvestment.

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The following table summarizes additional operating statistics as of September 30, 2005.

	Consolidated			Unconsolidated			Company
	Retail			Retail			Retail
	Properties			Properties			Portfolio(b)
Operating Statistics(a)
Occupancy		91.8	%		93.1	%		92.2	%
Trailing 12 month total tenant sales per sq. ft. (c)	$	414		$	447		$	425
% change in total sales (c)		5.5	%		6.9	%		6.0	%
% change in comparable sales (c)		3.2			4.1			3.5
Mall and freestanding GLA excluding space under redevelopment (in sq. ft.)		41,884,108			18,699,111			60,543,219
Certain Financial Information
Average annualized in place rent per sq. ft.	$	32.62		$	35.96
Average rent per sq. ft. for new/renewal leases		37.34			40.11
Average rent per sq. ft. for leases expiring in 2005		29.63			32.31

(a)	Data is for 100% of the Mall GLA in each portfolio, including those properties that are owned in part by Unconsolidated Real Estate Affiliates. Data excludes properties currently being redeveloped and/or remerchandised and miscellaneous (non-mall) properties.
(b)	Weighted average amounts.
(c)	Due to tenant sales reporting timelines, data presented is as of August.

Our Master Planned Communities segment includes the development and sale of residential and commercial land, primarily in large-scale projects in and around Columbia, Maryland; Houston, Texas and Summerlin, Nevada. We develop land sell finished and undeveloped land in such communities to builders and other developers for residential, commercial and other uses. Our Master Planned Communities segment reported real estate property net operating income of $61.7 million during the nine months ended September 30, 2005. Land sale activity at our newest project, the Bridgelands in Houston, Texas, is expected to commence in late 2005 or early 2006.

During the first nine months of 2005, we obtained approximately $3.6 billion of consolidated debt through new financings and refinancings. Our share of debt issued by our Unconsolidated Real Estate Affiliates totaled approximately $600 million during the same period. Proceeds from the issuances were used, in part, to repay $2.5 billion of variable-rate debt. The new debt, substantially all of which is at fixed rates, bears interest at a weighted-average rate of approximately 5.06%.

Trends in Funds From Operations (“FFO”) as defined by The National Association of Real Estate Investment Trusts (“NAREIT”) have not been presented in this MD&A, as FFO, under current SEC reporting guidelines, can only be considered a supplemental measure of operating performance.

Two of our operating retail properties in the United States Gulf Coast region (Oakwood Center in Gretna, Louisiana and Riverwalk, located near the convention center in downtown New Orleans) have been closed since August 29, 2005, when a hurricane stuck the area. Although property damage in the New Orleans area was generally due to hurricane effects, the damage to Oakwood Center and Riverwalk, which prevents these properties from re-opening, was from arson and vandalism. Riverwalk is currently expected to partially re-open by Thanksgiving 2005 even though certain repair and refurbishment activities are anticipated to continue into 2006. While two anchor stores at Oakwood Center have announced plans to re-open in time for the 2005 holiday season and repair and re-opening plans are in process, no official re-opening date has been set for the remainder of the property. We have comprehensive insurance coverage for both property damage and business interruption. The recovery effort at the properties is expected to include replacing portions of the building, landscaping and furnishings. The net book value of the property damage is currently estimated to be at least $35 million; however, we are still assessing the damage estimates and the actual net book value write-off could vary from this estimate. Changes to these estimates will be recorded in the periods in which they are determined. As of September 30, 2005, we have recorded a net fixed asset write-off and a corresponding insurance claim recovery receivable for this net book value amount because we believe that it is probable that the insurance recovery, net of deductibles on a replacement cost basis, will exceed the net book value of the damaged portion of the assets. While we expect the insurance proceeds will be sufficient to cover most of the replacement cost of the restoration of the properties, certain deductibles and limitations are expected to apply. No determination has been made as to the total amount or timing of those insurance payments. As of September 30, 2005 and through November 8, 2005, $5 million in insurance proceeds related to the Oakwood property has been received, which has been offset against this insurance recovery receivable. As only a nominal amount of repairs have taken place as of September 30, 2005, substantially all of the remaining $30 million receivable recorded represents the recovery of the net book value of fixed assets written off. The cost recoveries have been recorded on the expense line item to which they relate, and therefore there is no significant impact to any line item or our overall results. However, included in property operating expenses for the three and nine months ended September 30, 2005 are approximately $1 million of costs which, when fully expended, are not expected to be recoverable from insurance proceeds due to insurance policy deductibles.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

See Note 10 for a reconciliation of Real Estate Property Net Operating Income for our two operating segments to GAAP-basis Income from continuing operations.

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Retail and Other Segment

	For the Three Months Ended
	September 30,
(In thousands)	2005		2004		$ Increase		% Increase
Property revenues:
Minimum rents	$	530,786	$	313,854	$	216,932		69.1	%
Tenant recoveries		227,930		142,495		85,435		60.0
Overage rents		15,216		10,792		4,424		41.0
Other		44,407		15,105		29,302		194.0
Total property revenues		818,339		482,246		336,093		69.7
Property operating expenses:
Real estate taxes		64,351		39,337		25,014		63.6
Repairs and maintenance		56,330		34,309		22,021		64.2
Marketing		16,282		15,522		760		4.9
Other property operating costs		125,302		62,907		62,395		99.2
Provision for doubtful accounts		7,579		3,256		4,323		132.8
Total property operating expenses		269,844		155,331		114,513		73.7
Real estate property net operating income	$	548,495	$	326,915	$	221,580		67.8	%

Minimum rents increased $195.9 million as a result of acquisitions and $21.0 million primarily as a result of Jordan Creek which opened in August 2004, Ala Moana which was recently redeveloped, and higher straight-line rents. Minimum rents also include the net effect of above and below-market lease rent accretion pursuant to SFAS 141 and 142 of $14.4 million in 2005 and $9.0 million in 2004.

Tenant recoveries increased $80.4 million as a result of acquisitions and $5.0 million due to higher recoverable expenses at various properties.

Overage rents and other property revenues increased primarily as a result of acquisitions.

Real estate taxes, repairs and maintenance, marketing, and other property operating costs increased primarily due to acquisitions. Excluding acquisitions, marketing and other property operating costs would have nominally decreased compared to 2004.

Real estate taxes, repairs and maintenance and other property operating expenses are generally recoverable from tenants and the increases in these expenses are generally consistent with the increase in tenant recovery revenues.

Provision for doubtful accounts increased in 2005 due to acquisitions and due to an allowance of approximately $1.6 million being made for an individual tenant bankruptcy.

Master Planned Communities

Land sale revenues totaled $100.4 million and land sales operations expenses totaled $79.0 million in 2005. The Master Planned Communities are comprised of residential and commercial land, primarily in large-scale projects, which were acquired in the TRC Merger.

Other Significant Revenues and Expenses

	For the Three Months Ended
	September 30,
(In thousands)	2005		2004			$ Increase			% Increase
Management and other fees	$	22,409	$	18,400		$	4,009			21.8	%
Property management and other costs		39,646		21,631			18,015			83.3
Depreciation and amortization		177,307		82,027			95,280			116.2
Interest expense		270,970		101,017			169,953			168.2
(Benefit) provision for income taxes		14,980		(350	)		15,330			4,380.0
Equity in income of unconsolidated affiliates		19,194		19,686			(492	)		(2.5	)

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Management and other fees for 2005 increased approximately $4.0 million compared to 2004, primarily as a result of acquisitions.

Property management and other costs as well as depreciation and amortization increased in 2005 as compared to 2004 primarily as a result of acquisitions. Because acquisitions are initially recorded at fair value, the depreciable basis and the corresponding depreciation expense for recent acquisitions are generally higher than for properties that we have owned for a longer period of time.

Interest expense increased $154.0 million in 2005 as compared to 2004 as a result of increased debt associated with acquisitions and $16.0 million as a result of higher debt levels associated with redevelopments, working capital requirements and higher average interest rates in comparison to the same period last year. The weighted average interest rate on our outstanding debt was 5.49% at September 30, 2005 compared to approximately 4.59% at September 30, 2004. See Item 3, Quantitative and Qualitative Disclosures About Market Risk for additional information regarding the potential impact of future interest rate increases.

The increase in the provision for income taxes for 2005 primarily relates to operations acquired in the TRC Merger, including the Master Planned Communities segment, which are conducted by various TRS entities.

Equity in income of unconsolidated affiliates increased in 2005 as compared to 2004 primarily due to the Riverchase and GGP/NIG Brazil joint venture acquisitions in 2004 and the operations of unconsolidated affiliates of TRCLP which were acquired in conjunction with the TRC Merger.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

Retail and Other Segment

	For the Nine Months Ended
	September 30,
(In thousands)	2005		2004		$ Increase		% Increase
Property revenues:
Minimum rents	$	1,541,134	$	896,694	$	644,440		71.9	%
Tenant recoveries		676,884		412,740		264,144		64.0
Overage rents		41,395		26,594		14,801		55.7
Other		131,294		41,652		89,642		215.2
Total property revenues		2,390,707		1,377,680		1,013,027		73.5
Property operating expenses:
Real estate taxes		197,995		114,207		83,788		73.4
Repairs and maintenance		176,835		99,034		77,801		78.6
Marketing		46,328		43,057		3,271		7.6
Other property operating costs		383,760		180,586		203,174		112.5
Provision for doubtful accounts		17,705		9,860		7,845		79.6
Total property operating expenses		822,623		446,744		375,879		84.1
Real estate property net operating income	$	1,568,084	$	930,936	$	637,148		68.4	%

Minimum rents increased $595.5 million as a result of acquisitions and $48.9 million primarily as a result of Jordan Creek which opened in August 2004 and higher straight line rents. Minimum rents include the net effect of above and below-market lease rent accretion pursuant to SFAS 141 and 142 of $37.9 million in 2005 and $24.7 million in 2004 and approximately $10.1 million in 2005 related to a change in the commencement period for certain previously recorded leases.

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Tenant recoveries increased $248.3 million as a result of acquisitions and $15.8 million due to higher recoverable expenses at various properties.

Overage rents and other property revenues increased primarily as a result of acquisitions.

Real estate taxes increased $76.0 million as a result of acquisitions and $7.8 million as a result of increased property tax expense at certain of our properties, including Jordan Creek which opened in August 2004.

Repairs and maintenance, marketing, and other property operating costs increased primarily due to acquisitions. Excluding acquisitions, marketing and other property operating costs would have decreased compared to 2004.

Provision for doubtful accounts increased in 2005 due to acquisitions and due to an allowance of approximately $1.6 million being made for an individual tenant bankruptcy.

Real estate taxes, repairs and maintenance and other property operating expenses are generally recoverable from tenants and the increases in these expenses are generally consistent with the increase in tenant recovery revenues.

Master Planned Communities

Land sale revenues totaled $313.4 million and land sales operations expenses totaled $251.8 million in 2005. The Mastered Planned Communities segment is comprised of residential and commercial land, primarily in large-scale projects, which was acquired in the TRC Merger.

Other Significant Revenues and Expenses

	For the Nine Months Ended
	September 30,
(In thousands)	2005		2004		$ Increase		% Increase
Management and other fees	$	65,224	$	57,263	$	7,961		13.9	%
Property management and other costs		113,236		70,954		42,282		59.6
Depreciation and amortization		513,691		240,687		273,004		113.4
Interest expense		761,022		278,564		482,458		173.2
Provision for income taxes		27,609		40		27,569		68,922.5
Equity in income of unconsolidated affiliates		75,301		55,770		19,531		35.0

The increase in management and other fees for 2005, as a result of acquisitions, was offset by the loss of fees resulting from our acquisition of the remaining 50% interest in Town East in March 2004. As the Town East venture is now wholly-owned and consolidated in our results of operations, GGMI no longer receives management or other fees from this property.

Property management and other costs and depreciation and amortization increased in 2005 as compared to 2004 primarily as a result of acquisitions. Because acquisitions are initially recorded at fair value, the depreciable basis and the corresponding depreciation expense for recent acquisitions are generally higher than for properties that we have owned for a longer period of time.

Interest expense increased $437.3 million in 2005 as compared to 2004 as a result of increased debt associated with acquisitions and $45.2 million as a result of higher debt levels primarily as a result of redevelopments, working capital requirements and higher average interest rates during the current year. The weighted average interest rate on our outstanding debt was 5.49% at September 30, 2005 compared to approximately 4.59% at September 30, 2004. Amortization of purchase accounting adjustments which increased the fair value of our debt acquired in the TRC Merger, decreased interest expense by approximately $37.8 million in the nine months ended September 30, 2005 and included approximately $5.3 million related to changes in prior period estimates. See Item 3, Quantitative and Qualitative

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Disclosures About Market Risk, for additional information regarding the potential impact of future interest rate increases.

The increase in the provision for income taxes for 2005 primarily relates to operations acquired in the TRC Merger, including the Master Planned Communities segment, which are conducted by various TRS entities.

Equity in income of unconsolidated affiliates increased in 2005 as compared to 2004 primarily due to the Riverchase and GGP/NIG Brazil joint venture acquisitions in 2004 and the operations of unconsolidated affiliates of TRCLP which were acquired in conjunction with the TRC Merger. A change in the commencement period in 2005 for the recognition of certain straight-line rents on previously recorded leases also contributed approximately $3.6 million of the increase over 2004.

Cash Flows from Operating Activities

Net cash provided by operating activities was $572 million for the nine months ended September 30, 2005 and $525 million for the comparable prior year period. Substantially all of the increase was attributable to acquisitions in 2004.

Cash Flows from Investing Activities

Net cash used in investing activities was $235 million for the nine months ended September 30, 2005 and $1.9 billion for the comparable prior year period. Substantially all of the decrease was attributable to acquisitions in 2004. As of September 30, 2005, there have been no significant acquisitions in 2005.

Cash used in development and redevelopment activities (including our pro rata share of our Unconsolidated Real Estate Affiliates) was approximately $401 million for the nine months ended September 30, 2005 and approximately $205 million for the comparable prior year period. As of September 30, 2005, we had 20 major approved redevelopment projects underway (each with budgeted projected expenditures, at our ownership share, in excess of $10 million). Total projected expenditures (including our share of the Unconsolidated Real Estate Affiliates) for the 20 redevelopment projects and the three new retail center development projects that are under construction were approximately $927.5 million as of September 30, 2005. Such development and re-development expenditures, together with expenditures for the 12 other potential new retail or mixed-use developments are expected to result in approximately $400 to $500 million of expenditures per year for the years 2006 to 2008.

Cash Flows from Financing Activities

Net cash used by financing activities was $356 million for the nine months ended September 30, 2005 and net cash provided by financing activities was $1.4 billion for the comparable prior year period.

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Our consolidated debt and our pro rata share of the debt of our Unconsolidated Real Estate Affiliates, after giving effect to interest rate swap agreements, were as follows:

	September 30,			December 31,
(In millions)	2005			2004
Consolidated:
Fixed-rate debt	$	14,717		$	11,860
Variable-rate debt:
2004 Credit Facility:
Six-month bridge loan		—			750
Three-year term loan		2,886			3,300
Four-year term loan		1,985			2,000
Revolving credit facility		156			150
Total 2004 Credit Facility		5,027			6,200
Other variable-rate debt		773			2,251
Total variable-rate debt		5,800			8,451
Total consolidated	$	20,517		$	20,311
Weighted-average interest rate		5.49	%		5.16	%
Unconsolidated Real Estate Affiliates:
Fixed-rate debt	$	2,555		$	2,112
Variable-rate debt		536			723
Total Unconsolidated Real Estate Affiliates	$	3,091		$	2,835
Weighted-average interest rate		5.42	%		5.16%

During the first nine months of 2005, we obtained approximately $3.6 billion of consolidated debt through new financings and refinancings. Our share of debt issued by our Unconsolidated Real Estate Affiliates totaled approximately $600 million during the same period. Proceeds from the issuances were used, in part, to repay $2.5 billion of variable-rate debt. The new debt, substantially all of which is at fixed rates, bears interest at a weighted-average rate of approximately 5.06%.

The rate on the four-year term loan was reduced by 25 basis points in the June 2005 and the rates on the revolver and three-year term loan were reduced by 50 basis points in September 2005. The 2004 Credit Facility currently bears interest at a weighted-average rate of LIBOR plus approximately 184 basis points.

We intend to continue to evaluate the percentage of variable-rate debt to total debt throughout 2005 and 2006 and to refinance the 2004 Credit Facility by the end of the third quarter of 2006. Funds required for any repayments are expected to come primarily from the following:

• Refinancing low loan-to-value mortgages on existing properties

• Placing mortgages on currently unencumbered properties

• Selective asset sales of office and industrial properties

Although agreements to refinance debt maturing in 2005 and 2006 have not yet been reached, we currently anticipate that all of our debt will be repaid or refinanced on a timely basis. We believe that we have sufficient sources of funds to meet our cash needs and that covenants in the 2004 Credit Facility will not impact our liquidity or our ability to operate our business. However, there can be no assurance that we can obtain such financing on satisfactory terms. We will continue to monitor our capital structure, investigate potential investments or joint venture partnership arrangements and purchase additional properties if they can be acquired and financed on terms that we reasonably believe will enhance long-term stockholder value.

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We have not guaranteed the debt of the Unconsolidated Real Estate Affiliates, however, certain Consolidated Properties are cross-collateralized with Unconsolidated Properties (Note 4) and we have retained or agreed to be responsible for a portion of certain debt of the Unconsolidated Real Estate Affiliates (Note 3).

During May 2005, we also redeemed $183 million of perpetual preferred units, which represented substantially all of the preferred units which we were currently able to redeem.

On August 3, 2005, we announced that our Board of Directors authorized, effective immediately, a $200 million per fiscal year common stock repurchase program, subject to a current $125 million annual limit in our 2004 Credit Facility. Stock repurchases under this program will be made through open market or privately negotiated transactions through 2009, unless the program is earlier terminated. We have no obligation to repurchase any shares of common stock under the program, and the timing, actual number and value of shares to be purchased will depend on our stock price, market conditions and other factors. The repurchase program is designed to give us the ability to acquire some or all of the shares of common stock to be issued upon the exercise of certain employee stock options (including those from the vesting of approximately 1 million TSO options in September 2005) and pursuant to the CSA through 2009. The program will give us the flexibility to reduce or eliminate the share, earnings per share and funds from operations per share dilution caused by the issuance of these shares, or to issue new shares. During the current quarter, we repurchased 2.2 million shares for $99.6 million under this program.

Contractual Obligations and Commitments

There has been no material changes in our contractual obligations and commitments in the nine months ended September 30, 2005. Committed real estate acquisition contracts at both September 30, 2005 and December 31, 2004 include $250 million related to the Palazzo (Note 2) and $30 million related to a commitment to purchase (through the GGP/Teachers joint venture) Whaler’s Village, a shopping center on the island of Maui, Hawaii, the purchase of which was completed on November 1, 2005.

REIT STATUS

In order to remain qualified as a real estate investment trust (“REIT”) for federal income tax purposes, we must distribute or pay tax on 100% of capital gains and at least 90% of our ordinary taxable income to stockholders. The following factors, among others, affect operating cash flow and, accordingly, influence the decisions, as regularly re-examined as appropriate, of the Board of Directors regarding distributions:

• Scheduled increases in base rents of existing leases

• Changes in minimum base rents and/or overage rents attributable to replacement of existing leases with new or renewal leases

• Changes in occupancy rates at existing properties and procurement of leases for newly developed properties

• Necessary capital improvement expenditures or debt repayments at existing properties

• Our share of distributions of operating cash flow generated by the Unconsolidated Real Estate Affiliates, less oversight costs and debt service on additional loans that have been or will be incurred

• Anticipated proceeds from sales in our Master Planned Communities segment.

We anticipate that our operating cash flow, and potential new debt or equity from future offerings, new financings or refinancings will provide adequate liquidity to conduct our operations, fund general and administrative expenses, and interest payments and allow distributions to our common stockholders in accordance with the REIT requirements of the Internal Revenue Code.

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SEASONALITY

Although we have a year-long temporary leasing program, occupancies for short-term tenants and, therefore, rental income recognized, are higher during the second half of the year. In addition, the majority of our tenants have December or January lease years for purposes of calculating annual overage rent amounts. Accordingly, overage rent thresholds are most commonly achieved in the fourth quarter. As a result, revenue production is generally highest in the fourth quarter of each year.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. For example, significant estimates and assumptions have been made with respect to useful lives of assets, capitalization of development and leasing costs, recoverable amounts of receivables and deferred taxes, initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions. Actual results could differ materially from those estimates.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are both significant to the overall presentation of our financial condition and results of operations and require management to make difficult, complex or subjective judgments. For example, significant estimates and assumptions have been made with respect to useful lives of assets, revenue recognition estimates in our Master Planned Communities segment, capitalization of development and leasing costs, recoverable amounts of receivables and deferred taxes and initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions. Our critical accounting policies, as discussed in our Annual Report on Form 10-K for the year ended December 31, 2004, have not changed during the nine months ended September 30, 2005.

ECONOMIC CONDITIONS

Changes in interest rates are the most significant economic condition which would impact our financial condition. Increases in interest rates, as have occurred in 2005, have and will continue to adversely impact us due to our outstanding variable-rate debt which has increased substantially due to the TRC Merger. We have limited our exposure to interest rate fluctuations related to a portion of our variable-rate debt by the use of interest rate cap and swap agreements. Subject to current market conditions, we have a policy of replacing variable-rate debt with fixed-rate debt. However, in an increasing interest rate environment (which generally follows improved market conditions), the fixed rates we can obtain with such replacement fixed-rate debt will also continue to increase.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

As described in Note 9, new accounting pronouncements have been issued which are effective for the current year. There has not been a significant impact on our financial statements due to the application of such new statements. There are no pronouncements or interpretations that have not yet been adopted that are expected to have a material effect on our consolidated financial statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to market risk associated with changes in interest rates both in terms of variable-rate debt and the cost of new fixed-rate debt upon maturity of existing debt and for acquisitions. At September 30, 2005, we had consolidated debt of $20.5 billion. Consolidated debt includes $6.7 billion of variable-rate debt of which approximately $861.6 million is subject to interest rate swap agreements, which fix the interest we are required to pay on such debt to approximately 4.32% per annum. Although the majority of the remaining variable-rate debt is subject to interest rate cap agreements pursuant to the loan agreements and financing terms, such interest rate caps generally limit our interest rate exposure only if LIBOR exceeds an annual rate significantly higher (generally above 8%) than current LIBOR rates (3.86%). A 25 basis point movement in the interest rate on the $5.8 billion of variable-rate debt which is not subject to interest rate swap agreements would result in an annualized increase or decrease in consolidated interest expense and operating cash flows of approximately $14.5 million.

We are also subject to interest rate exposure as a result of the variable-rate debt collateralized by the Unconsolidated Real Estate Affiliates for which similar interest rate swap agreements have not been obtained. Our share (based on our respective equity ownership interests in the Unconsolidated Real Estate Affiliates) of such remaining variable-rate debt was approximately $535.6 million at September 30, 2005. A similar 25 basis point annualized movement in the interest rate on the variable-rate debt of the Unconsolidated Real Estate Affiliates would result in an annualized increase or decrease in our equity in the income and operating cash flows from Unconsolidated Real Estate Affiliates of approximately $1.3 million.

We are further subject to interest rate risk with respect to our fixed-rate financing in that changes in interest rates will impact the fair value of our fixed-rate financing. To determine fair market value, the fixed-rate debt is discounted at a rate based on an estimate of current lending rates, assuming the debt is outstanding through maturity and considering the collateral. At September 30, 2005, the fair value of our debt is estimated to be approximately $330 million higher than the carrying value of $20.5 billion. If LIBOR were to increase by 25 basis points, the fair value of the debt would be approximately $190 million higher than the carrying value and the fair value of our swap agreements would increase by approximately $1.6 million.

We have an ongoing program of refinancing our consolidated and unconsolidated variable- and fixed-rate debt and believe that this program allows us to vary our ratio of fixed to variable-rate debt and to stagger our debt maturities to respond to changing market rate conditions. Reference is made to the above discussions of Liquidity and Capital Resources and Note 4 for additional debt information.

We have not entered into any transactions using derivative commodity instruments.

ITEM 4. CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been

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detected. Management is required to apply judgment in evaluating the cost-benefit relationship of possible controls and procedures.

There have been no changes in our internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently subject to litigation arising in the normal course of our business. In the opinion of management, none of these lawsuits or claims against us, either individually or in the aggregate, is likely to have a material adverse effect on our consolidated financial position, results of operations, or liquidity.

ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities (1)

							Approximate Dollar
					Total Number of Shares		Value of Shares that
	Total Number of				Purchased as Part of		May Yet be Purchased
	Shares		Average Price		Publicly Announced		Under the Plans or
Period	Purchased		Paid per Share		Plans or Programs		Programs
August 3-31 2005		1,248,500	$	44.59		1,248,500	$	144,332,383
September 1-30 2005		965,500		45.48		965,500		100,420,198
Total		2,214,000	$	44.98		2,214,000	$	100,420,198

⁽¹⁾On August 3, 2005, we announced that our Board of Directors authorized, effective immediately, a $200 million per fiscal year common stock repurchase program, subject to a current $125 million annual limit in our 2004 Credit Facility. Stock repurchases under this program will be made through open market or privately negotiated transactions through 2009, unless the program is earlier terminated. The repurchase program is designed to give us the ability to acquire some or all of the shares of common stock to be issued upon the exercise of certain employee stock options and pursuant to the CSA.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

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GENERAL GROWTH PROPERTIES, INC.

ITEM 6. EXHIBITS

10.1	Fourth Amendment, dated as of September 15, 2005 and effective on September 22, 2005 (the “Fourth Amendment”) to the Amended and Restated Credit Agreement, dated as of November 12, 2004, among General Growth Properties, Inc., GGP Limited Partnership and GGPLP L.L.C., as Borrowers, the Lenders parties thereto, Banc of America Securities LLC, Credit Suisse First Boston, Lehman Brothers Inc. and Wachovia Capital Markets, LLC, as joint advisors, joint arrangers and joint bookrunners, Bank of America, N.A. and Credit Suisse First Boston, as syndication agents, Eurohypo AG, New York Branch, as documentation agent, Lehman Commercial Paper Inc., as Tranche B administrative agent, and Wachovia Bank, National Association, as general administrative agent (previously filed as Exhibit 10.5 to the Current Report on Form 8-K dated September 22, 2005 which was filed with the SEC on September 26, 2005).
10.2	Summary of Non-Employee Director Compensation Program (previously filed as Exhibit 10.1 to the Current Report on Form 8-K dated July 26, 2005, which was filed with the SEC on July 28, 2005).
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GENERAL GROWTH PROPERTIES, INC.           (Registrant)
Date: November 9, 2005	By:	/s/:Bernard Freibaum
		Bernard Freibaum
		Executive Vice President and Chief Financial Officer (On behalf of the registrant and as Principal Accounting Officer)

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EXHIBIT INDEX

10.1	Fourth Amendment, dated as of September 15, 2005 and effective on September 22, 2005 (the “Fourth Amendment”) to the Amended and Restated Credit Agreement, dated as of November 12, 2004, among General Growth Properties, Inc., GGP Limited Partnership and GGPLP L.L.C., as Borrowers, the Lenders parties thereto, Banc of America Securities LLC, Credit Suisse First Boston, Lehman Brothers Inc. and Wachovia Capital Markets, LLC, as joint advisors, joint arrangers and joint bookrunners, Bank of America, N.A. and Credit Suisse First Boston, as syndication agents, Eurohypo AG, New York Branch, as documentation agent, Lehman Commercial Paper Inc., as Tranche B administrative agent, and Wachovia Bank, National Association, as general administrative agent (previously filed as Exhibit 10.5 to the Current Report on Form 8-K dated September 22, 2005 which was filed with the SEC on September 26, 2005).
10.2	Summary of Non-Employee Director Compensation Program (previously filed as Exhibit 10.1 to the Current Report on Form 8-K dated July 26, 2005, which was filed with the SEC on July 28, 2005).
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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