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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
| (Mark One) | ||
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the fiscal year ended December 31, 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 (Address of principal executive offices) | 60606 (Zip Code) | |
(312)960-5000
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of Each Class | Name of Each Exchange on Which Registered | |
| Common Stock, $.01 par value | New York Stock Exchange | |
| Preferred Stock Purchase Rights | New York Stock Exchange |
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES þ NO o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer þ Accelerated filer o Non-accelerated filer 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
On June 30, 2005, the last business day of the registrant’s most recently completed second quarter, the aggregate market value of the shares of common stock held by non-affiliates of the registrant was approximately $8.667 billion based upon the closing price of the common stock on the New York Stock Exchange composite tape on such date.
As of March 24, 2006, there were 241,005,634 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual stockholders meeting to be held on May 16, 2006 are incorporated by reference into Part III.
GENERAL GROWTH PROPERTIES, INC.
Annual Report on Form 10-K
December 31, 2005
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PART I
| Item 1. | Business |
All references to numbered Notes are to specific footnotes to the Consolidated Financial Statements of General Growth Properties, Inc. (“General Growth” or the “Company”) as included in this Annual Report on Form 10-K (“Annual Report”). The descriptions included in such Notes are incorporated into the applicable Item response by reference. The following discussion should be read in conjunction with such Consolidated Financial Statements and related Notes. The terms “we,” “us” and “our” may also be used to refer to General Growth and its subsidiaries. See also the Glossary at the end of Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for definitions of selected terms used in this Annual Report.
Overview
General Growth is a self-administered and self-managed real estate investment trust, referred to as a “REIT.” General Growth is a Delaware corporation and was organized in 1986.
Our business is focused in two main areas:
| • | Retail and Other. Through this segment of our business, we own, operate, manage, lease, acquire, develop, expand and finance rental properties. These properties, which are located primarily throughout the United States, include retail centers, office and industrial buildings and mixed-use and other properties. As of December 31, 2005, we had ownership interest in and/or management responsibility for a portfolio of over 200 regional shopping malls in 44 states. We also have ownership interest in certain joint ventures which own four retail properties (one under construction) in Brazil and one retail property under construction in Costa Rica. |
| • | Master Planned Communities. Through this segment of our business, we develop and sell land in and around Columbia, Maryland; Summerlin, Nevada; and Houston, Texas for residential, commercial and other uses primarily in master planned communities. As of December 31, 2005, these communities, including land previously sold or not saleable, total over 70,000 acres. |
Substantially all of our business is conducted through GGP Limited Partnership (the “Operating Partnership” or “GGPLP”). As of December 31, 2005, ownership of the Operating Partnership was as follows:
| 82% | General Growth, as sole general partner | |
| 16 | Limited partners that indirectly include family members of the original stockholders of the Company. Represented by common units of limited partnership interest (the “Common Units”) | |
| 2 | Limited partners that include subsequent contributors of properties to the Operating Partnership which are also represented by Common Units. | |
| 100% | ||
The Operating Partnership also 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 General Growth common stock on a one-for-one basis.
Many of our properties are owned entirely by us, or through entities in which we own a majority or controlling interest. As a result, these properties are consolidated under generally accepted accounting principles (“GAAP”), and we refer to them as the “Consolidated Properties.” Some properties are held through joint venture entities in which we own a non-controlling interest (“Unconsolidated Real Estate Affiliates”) and we
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refer to those properties as the “Unconsolidated Properties.” Collectively, we refer to the Consolidated Properties and Unconsolidated Properties as our “Company Portfolio.”
We make all key strategic decisions for our properties. However, in connection with the Unconsolidated Properties, such strategic decisions are made with the respective stockholders, members or joint venture partners of such properties. We are also the asset manager of most of the properties in the Company Portfolio, executing the strategic decisions and overseeing theday-to-day property management functions, including leasing, construction management, data processing, maintenance, accounting, marketing, promotional services and security oversight. With respect to jointly owned properties, we generally conduct the management activities through one of our taxable REIT subsidiaries (“TRS”). As of December 31, 2005, we managed the properties for 21 of our unconsolidated joint ventures and seven of our consolidated joint ventures. Our joint venture partners managed the properties for 12 of our unconsolidated joint ventures and four of our consolidated joint ventures.
General Development of Business
In recent years, acquisitions have been a key contributor to our growth. In 2004, for example, acquisitions totaled over $16 billion, largely due to the $14 billion acquisition of The Rouse Company in November (the “TRC Merger”). In 2005, however, acquisitions were minimal and our operational focus was on the following:
| • | Integrating and maximizing the operations of The Rouse Company LP (“TRCLP,” successor to The Rouse Company (“TRC”)) through proactive property management and leasing and through operating cost reductions. Specific actions to increase productivity of the TRCLP properties as well as our previously existing properties have included changing the tenant mix and adding vendor carts and kiosks. As the TRC Merger was primarily funded with new acquisition debt, an additional focus has been the management and refinancing of our current debt. |
| • | Development activities, includingground-up development and redevelopment and expansion of existing properties. For example, we substantially completed theground-up development of The Shops at LaCantera in San Antonio, Texas in September 2005, and the renovation of Eastridge Mall in San Jose, California in November 2005. The expansion and renovation of a property may result in increased cash flows and net income as a result of increased customer traffic, trade area penetration and improved competitive position of the property. |
| • | Growing our specialty leasing and alternative revenue business, which involves, among other things, the temporary leasing of carts, kiosks and available space to generate additional alternative rental revenue. |
Financial Information About Industry Segments
Information regarding our segments is incorporated herein by reference to Note 16.
Narrative Description of Business
Retail and Other Segment
Our Retail and Other segment consists of retail centers, office and industrial buildings and mixed-use and other properties.
Retail Portfolio
The Retail Portfolio is comprised primarily of regional shopping centers, but also includes festival market places, urban mixed-use centers and strip/ community centers. Most of our shopping centers are strategically located in major and middle markets where they have strong competitive positions. Most of these properties contain at least one major department store as an Anchor. We believe the Retail Portfolio’s geographic diversification should mitigate the effects of regional economic conditions and local factors.
A detailed listing of the principal properties in our Retail Portfolio is included in Item 2 of this Annual Report.
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The majority of the income from the properties in the Retail Portfolio is derived from rents received through long-term leases with retail tenants. These long-term leases generally require the tenants to pay base rent which is a fixed amount specified in the lease. The base rent is often subject to scheduled increases during the term of the lease. Another component of income is overage rent. Overage rent is paid by a tenant generally if its sales exceed an agreed upon minimum amount. Overage rent is calculated by multiplying the sales in excess of the minimum amount by a percentage defined in the lease, the majority of which is earned in the fourth quarter. In addition, our long-term leases generally contain provisions for us to bill to tenants amounts to recover certain expenses incurred in theday-to-day operations of the respective properties, including common area maintenance and real estate taxes. The recovery amount is generally related to the tenant’s pro-rata share of space in the property.
The following table reflects retail tenant representation by category for the Consolidated Properties as of December 31, 2005. In general, similar percentages existed for the Unconsolidated Properties.
| Category | % of Square Feet | Representative Tenants | ||||
| Specialty (includes personal services) | 22 | % | Regis, Lenscrafters, Dollar Tree, Petland | |||
| Family Apparel (includes unisex) | 14 | Gap, Old Navy, J Crew, Express, Anchor Blue, Banana Republic, Bachrach | ||||
| Women’s Apparel | 14 | Limited, Talbot’s, Chico’s, Lane Bryant, Ann Taylor, Coldwater Creek, Victoria’s Secret | ||||
| Teen Apparel | 9 | PacSun, Charlotte Russe, Forever 21, d.e.m.o., Hollister & Co., Aeropostale, Abercrombie & Fitch | ||||
| Shoes | 8 | FootLocker, Journeys, Champ’s, Finish Line, Payless Shoesource | ||||
| Restaurants | 7 | Ruby Tuesday, Applebee’s, Bennigan’s, Cheesecake Factory, Panera Bread, PF Chang’s China Bistro | ||||
| Home Entertainment and Electronics | 5 | RadioShack, Ritz Camera, FYE, Sam Goody, Apple Computer | ||||
| Home Furnishings | 4 | William-Sonoma, Select Comfort, Z Gallerie, Pottery Barn, Crate & Barrel | ||||
| Sporting Goods | 3 | Scheel’s All Sports, MC Sports, Dick’s Sporting Goods, Big 5 Sports | ||||
| Gifts (includes stationery, cards, gifts and novelty) | 3 | Papyrus, Hallmark, Yankee Candle, Things Remembered, Spencer Gifts | ||||
| Fast Food/ Food Court | 3 | Arby’s, Sbarro, McDonald’s, Auntie Anne’s, Chick-Fil-A, Subway, Sonic | ||||
| Jewelry | 3 | Zales Jewelers, Kay Jewelers, Piercing Pagoda, Helzberg Diamonds | ||||
| Children’s Merchandise | 2 | Gymboree, Club Libby Lu, Build-A-Bear, The Children’s Place, GapKids/BabyGap | ||||
| Personal Care | 2 | L’Occitane, Sephora, Trade Secret, Bath & Body Works | ||||
| Specialty Food (includes health, candy and coffee) | 1 | GNC, Vitamin World, Starbuck’s, Godiva Chocolatier, Harry & David | ||||
TOTAL | 100 | % | ||||
As of December 31, 2005, our largest tenant (based on common parent ownership) accounted for less than 4% of consolidated rents.
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| Other Office, Industrial andMixed-Use buildings |
The office and other properties are located primarily in the Baltimore/ Washington, D.C. and Las Vegas markets or are components of large-scale mixed-use properties (which include retail, parking and other uses) located in other urban markets. At December 31, 2005, in addition to office and other properties which are adjacent to our retail centers (included in our Retail portfolio), we owned and managed the following office and other properties:
| Consolidated | Location | Square Feet | ||||||
| Columbia Industrial (6 buildings) | Columbia, MD | 306,000 | ||||||
| Columbia Office (11 buildings) | Columbia, MD | 1,059,000 | ||||||
| Summerlin Commercial (28 buildings) | Summerlin, NV | 1,110,000 | ||||||
| Woodlands Office (2 buildings) | Houston, TX | 267,000 | ||||||
| Other Office Projects (6 buildings) | Various | 451,000 | ||||||
Unconsolidated | ||||||||
| Woodlands Office/ Industrial (5 buildings) | Houston, TX | 348,000 | ||||||
In December 2005, we sold seven office buildings totaling approximately 705,000 square feet located in the Hunt Valley Business Community in Hunt Valley, Maryland and 14 office buildings totaling approximately 402,000 square feet in the Rutherford Business Center, Woodlawn, Maryland. In December 2005, we also sold a 16 building, 952,000 square foot portfolio of industrial buildings comprised of 10 buildings totaling 582,000 square feet in the Hunt Valley Business Community and six buildings totaling 370,000 square feet in the Rutherford Business Center in suburban Baltimore. The portfolio also included three land parcels totaling more than 18 acres. The aggregate sale price of the two transactions was $181 million.
| Master Planned Communities Segment |
In conjunction with the TRC Merger, we acquired master planned communities. We develop and sell land in these communities to builders and other developers for residential, commercial and other uses. We may also develop some of this land for our own purposes. These master planned communities are as follows:
| • | Columbia is located in the Baltimore, Maryland/ Washington, D.C. corridor and encompasses approximately 18,000 acres. We own approximately 873 saleable acres of land in and around Columbia, including the adjacent communities of Emerson and Stone Lake. |
| • | Summerlin is located immediately north and west of Las Vegas and encompasses approximately 22,500 acres. We own approximately 6,400 saleable acres of land in Summerlin. Revenues from the sale of land at Summerlin are subject to the Contingent Stock Agreement as more fully described in Note 14. |
| • | Bridgelands is located in the western Houston, Texas metropolitan area and encompasses approximately 10,000 acres, approximately 7,300 acres of which is developable and saleable. TRC began development activities on Bridgelands in 2004 and we began selling portions of this land in 2006. |
| • | We also own a 52.5% economic interest in The Woodlands, a master planned community in the Houston, Texas metropolitan area which contains approximately 27,000 acres. Assets owned by The Woodlands include approximately 6,900 saleable acres of land, three golf course complexes, a resort conference center, a hotel, interests in seven office buildings and other assets. |
| • | Fairwood is located in Prince George’s County, Maryland. Fairwood contains over 1,000 acres of land. We own approximately 420 saleable acres of land at Fairwood. |
Other
| Competition |
The nature and extent of the competition we face varies from property to property within each segment of our business. In our Retail and Other segment, our direct competitors include other publicly-traded retail mall
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development and operating companies, retail real estate companies, commercial property developers and other owners of retail real estate that engage in similar businesses.
Within our Retail Portfolio, we compete to acquire land for new site development and to acquire existing retail properties. We believe that we have a competitive advantage with respect to acquisitions for the following reasons:
| • | Subject to certain limitations, the funds necessary for cash acquisitions are available to us from a combination of sources, including mortgage or unsecured financing or the issuance of public or private debt or equity. |
| • | We have the flexibility to pay for an acquisition with a combination of cash, General Growth equity securities or common or preferred units of limited partnership interest in the Operating Partnership. This last approach may create the opportunity for a tax-advantaged transaction for the seller. |
| • | Our expertise allows us to evaluate proposed acquisitions of existing retail properties for their increased profit potential through expansion, remodeling, re-merchandising and more efficient management of the property. |
We also compete for retail tenants. We believe the principal factors that retailers consider in making their leasing decision include:
| • | Consumer demographics |
| • | Quality, design and location of properties |
| • | Total number and geographic distribution of properties |
| • | Diversity of retailers and anchor tenants at shopping center locations |
| • | Management and operational expertise |
| • | Rental rates |
Based on these criteria, we believe that the size and scope of our property portfolio, as well as the overall quality and attractiveness of our individual properties, enable us to compete effectively for retail tenants in our local markets. Because our revenue potential is linked to the success of our retailers, we indirectly share exposure to the same competitive factors that our retail tenants experience in their respective markets when trying to attract individual shoppers. These dynamics include general competition from other regional shopping centers, including outlet malls and other discount shopping centers, as well as competition with discount shopping clubs, catalog companies, internet sales and telemarketing.
With respect to our office and other properties, we experience competition in the development and management of our properties similar to that of our Retail Portfolio. Prospective tenants generally consider quality and appearance, amenities, location relative to other commercial activity and price in determining the attractiveness of our properties. Based on the quality and location of our properties, which are generally in urban markets or are concentrated in the commercial centers of our master planned communities, we believe that our properties are viewed favorably among prospective tenants.
In our Master Planned Communities segment, we compete with other landholders and residential and commercial property developers in the development of properties within the Baltimore/ Washington, D.C., Las Vegas, and Houston markets. Significant factors affecting our competition in this business include:
| • | The size and scope of our master planned communities |
| • | The recreational and cultural amenities available within the communities |
| • | The commercial centers in the communities |
| • | The relationships of the developer with homebuilders |
| • | The proximity to major metropolitan areas |
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We believe our projects offer significant advantages when viewed against these criteria.
| Environmental Matters |
Under various federal, state and local laws and regulations, an owner of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on such real estate. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The costs of remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner’s ability to sell such real estate or to borrow using such real estate as collateral. In connection with our ownership and operation of our properties, we, or the relevant property venture through which the property is owned, may be potentially liable for such costs.
Substantially all of our properties have been subject to environmental assessments, which are intended to discover information regarding, and to evaluate the environmental condition of, the surveyed and surrounding properties.
The Phase I environmental assessments included a historical review, a public records review, a preliminary investigation of the site and surrounding properties, screening for the presence of asbestos, polychlorinated biphenyls (“PCBs”) and underground storage tanks and the preparation and issuance of a written report, but do not include soil sampling or subsurface investigations. A Phase II assessment, when necessary, was conducted to further investigate any issues raised by the Phase I assessment. In each case where Phase I and/or Phase II assessments resulted in specific recommendations for remedial actions required by law, management has either taken or scheduled the recommended action.
Neither the Phase I nor the Phase II assessments have revealed any environmental liability that we believe would have a material effect on our overall business, financial condition or results of operations. Nevertheless, it is possible that these assessments do not reveal all environmental liabilities or that there are material environmental liabilities of which we are unaware. Moreover, no assurances can be given that future laws, ordinances or regulations will not impose any material environmental liability or the current environmental condition of our properties will not be adversely affected by tenants and occupants of the properties, by the condition of properties in the vicinity of our properties (such as the presence on such properties of underground storage tanks) or by third parties unrelated to us.
Future development opportunities may require additional capital and other expenditures in order to comply with Federal, state and local statutes and regulations relating to the protection of the environment. It is impossible at this time to predict with any certainty the magnitude of any such expenditures or the long-range effect, if any, on our operations. Compliance with such laws has had no material adverse effect on our operating results or competitive position in the past.
Employees
As of March 1, 2006, we had approximately 4,700 employees.
Qualification as a Real Estate Investment Trust and Taxability of Distributions
General Growth currently qualifies as a real estate investment trust pursuant to the requirements contained in Sections 856-858 of the Internal Revenue Code of 1986, as amended (the “Code”). If, as we contemplate, such qualification continues, General Growth will not be taxed on its real estate investment trust taxable income. During 2005, General Growth distributed (or was deemed to have distributed) 100% of its taxable income to its preferred and common stockholders (Note 7).
Available Information
Our Internet website address iswww.generalgrowth.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are available and may be accessed free of charge through the Investment section of our Internet website under the Shareholder Info
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subsection, as soon as reasonably practicable after those documents are filed with, or furnished to, the SEC. Our Internet website and information contained therein or connected thereto are not intended to be incorporated into this Annual Report.
| Item 1A. | Risk Factors |
Risks Related to Real Estate Investments
| We invest primarily in regional mall shopping centers and other retail properties, which are subject to a number of significant risks which are beyond our control |
Real property investments are subject to varying degrees of risk that may affect the ability of our retail properties to generate sufficient revenues. A number of factors may decrease the income generated by a retail property, including:
| • | the regional and local economy, which may be negatively impacted by plant closings, industry slowdowns, adverse weather conditions, natural disasters and other factors; |
| • | local real estate conditions, such as an oversupply of, or a reduction in demand for, retail space or retail goods, and the availability and creditworthiness of current and prospective tenants; |
| • | perceptions by retailers or shoppers of the safety, convenience and attractiveness of the retail property; |
| • | the convenience and quality of competing retail properties and other retailing options such as the Internet; |
| • | changes in laws and regulations applicable to real property, including tax and zoning laws; and |
| • | changes in interest rate levels and the availability and cost of financing. |
If we are unable to generate sufficient revenue from our retail properties, including those held by joint ventures, we will be unable to meet operating and other expenses, including debt service, lease payments, capital expenditures and tenant improvements, and to make distributions from our joint ventures and then, in turn, to our stockholders.
| We depend on leasing space to tenants on economically favorable terms and collecting rent from these tenants, who may not be able to pay |
Our results of operations will depend on our ability to continue to lease space in our properties on economically favorable terms. If the sales of stores operating in our centers decline sufficiently, tenants might be unable to pay their existing minimum rents or expense recovery charges, since these rents and charges would represent a higher percentage of their sales. If our tenants’ sales decline, new tenants would be less likely to be willing to pay minimum rents as high as they would otherwise pay. In addition, as substantially all of our income is derived from rentals of real property, our income and cash available for distribution to our stockholders would be adversely affected if a significant number of tenants were unable to meet their obligations to us. During times of economic recession, these risks will increase.
| Bankruptcy or store closures of tenants may decrease our revenues and available cash |
A number of companies in the retail industry, including some of our tenants, have declared bankruptcy or voluntarily closed certain of their stores in recent years. The bankruptcy or closure of a major tenant, particularly an Anchor tenant, may have a material adverse effect on the retail properties affected and the income produced by these properties and may make it substantially more difficult to lease the remainder of the affected retail properties. Our leases generally do not contain provisions designed to ensure the creditworthiness of the tenant. As a result, the bankruptcy or closure of a major tenant could result in a lower level of revenues and cash available for distribution to our stockholders.
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| We may be negatively impacted by department store consolidations |
Department store consolidations, such as K-Mart’s acquisition of Sears and Federated’s acquisition of May Department Stores, are resulting in the closure of existing department stores and we may be unable to re-lease this area or to re-lease it on comparable or more favorable terms. Other tenants may be entitled to modify the terms of their existing leases, including those pertaining to rent payment, in the event of such closures. Additionally, department store closures could result in decreased customer traffic which could lead to decreased sales at other stores. Consolidations may also negatively affect current and future development and redevelopment projects.
| It may be difficult to buy and sell real estate quickly, and transfer restrictions apply to some of our properties |
Equity real estate investments are relatively illiquid, and this characteristic tends to limit our ability to vary our portfolio promptly in response to changes in economic or other conditions. In addition, significant expenditures associated with each equity investment, such as mortgage payments, real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investment. If income from a property declines while the related expenses do not decline, our income and cash available for distribution to our stockholders would be adversely affected. A significant portion of our properties are mortgaged to secure payment of indebtedness, and if we were unable to meet our mortgage payments, we could lose money as a result of foreclosure on the properties by the various mortgagees. In addition, if it becomes necessary or desirable for us to dispose of one or more of the mortgaged properties, we might not be able to obtain a release of the lien on the mortgaged property without payment of the associated debt. The foreclosure of a mortgage on a property or inability to sell a property could adversely affect the level of cash available for distribution to our stockholders. In certain transactions, if persons selling properties to us wish to defer the payment of taxes on the sales proceeds, we are likely to pay them in units of limited partnership interest in the Operating Partnership. In transactions of this kind, we may also agree, subject to certain exceptions, not to sell the acquired properties for significant periods of time.
Risks Related to our Business
| We develop and expand properties, and this activity is subject to various risks |
We intend to continue to pursue development and expansion activities as opportunities arise. In connection with any development or expansion, we will be subject to various risks, including the following:
| • | we may abandon development or expansion activities, which may result in additional cost recognition; |
| • | construction costs of a project may exceed original estimates or available financing, possibly making the project unfeasible or unprofitable; |
| • | we may not be able to obtain financing or to refinance construction loans, which generally have full recourse to us; |
| • | we may not be able to obtain zoning, occupancy or other required governmental permits and authorizations; |
| • | occupancy rates and rents at a completed project may not meet projections and, therefore, the project may not be profitable; and |
| • | we may need Anchor, mortgage lender and property partner approvals, if applicable, for expansion or redevelopment activities. |
If a development project is unsuccessful, our loss could exceed our investment in the project.
| If we are unable to manage our growth effectively, our financial condition and results of operations may be adversely affected |
We have experienced rapid growth in recent years, increasing our total consolidated assets from less than $2 billion at December 31, 1996 to over $25 billion at December 31, 2005. We may not be able to manage our
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growth effectively or to maintain a similar rate of growth in the future, and the failure to do so may have a material adverse effect on our financial condition and results of operations.
| We may incur costs to comply with environmental laws |
Under various federal, state or local laws, ordinances and regulations, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property, and may be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation andclean-up costs incurred by the parties in connection with the contamination. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of the hazardous or toxic substances. The presence of contamination or the failure to remediate contamination may adversely affect the owner’s ability to sell or lease real estate or to borrow using the real estate as collateral. Other federal, state and local laws, ordinances and regulations require abatement or removal of asbestos-containing materials in the event of demolition or certain renovations or remodeling and also govern emissions of and exposure to asbestos fibers in the air. Federal and state laws also regulate the operation and removal of underground storage tanks. In connection with the ownership, operation and management of our properties, we could be held liable for the costs of remedial action with respect to these regulated substances or tanks or related claims.
Each of our properties has been subjected to varying degrees of environmental assessment at various times. However, the identification of new areas of contamination, a change in the extent or known scope of contamination or changes in cleanup requirements could result in significant costs to us.
We are in a competitive business
There are numerous shopping facilities that compete with our properties in attracting retailers to lease space. In addition, retailers at our properties face continued competition from discount shopping centers, lifestyle centers, outlet malls, wholesale and discount shopping clubs, direct mail, telemarketing, television shopping networks and shopping via the Internet. Competition of this type could adversely affect our revenues and cash available for distribution to our stockholders.
We compete with other major real estate investors with significant capital for attractive investment opportunities. These competitors include other REITs, investment banking firms and private institutional investors. This competition has increased prices for commercial properties and may impair our ability to make suitable property acquisitions on favorable terms in the future.
We may not be able to obtain capital to make investments
We depend primarily on external financing to fund the growth of our business. This is because one of the requirements of the Internal Revenue Code of 1986, as amended, which we refer to as the “Code,” for a REIT generally is that it distribute 90% of its taxable income, excluding net capital gains, to its stockholders. Our access to debt or equity financing depends on banks’ willingness to lend to us and on conditions in the capital markets in general. We and other companies in the real estate industry have experienced less favorable terms for bank loans and capital markets financing from time to time. Although we believe, based on current market conditions, that we will be able to finance investments we wish to make in the foreseeable future, financing might not be available on acceptable terms or may be affected by the amount of debt we have outstanding as a result of the TRC Merger.
Some of our properties are subject to potential natural or other disasters
A number of our properties are located in areas which are subject to natural disasters. For example, two of our properties, located in the New Orleans area, suffered major damage in 2005. It is uncertain as to whether the New Orleans area will recover to its prior economic strength.
We carry comprehensive liability, fire, flood, earthquake, terrorism, extended coverage and rental loss insurance on all of our properties. We believe the policy specifications and insured limits of these policies are
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adequate and appropriate. There are, however, some types of losses, including lease and other contract claims, which generally are not insured. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. If this happens, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property.
If the Terrorism Risk Insurance Extension Act is not extended beyond 2007, we may incur higher insurance costs and greater difficulty in obtaining insurance which covers terrorist-related damages. Our tenants may also experience similar difficulties.
We are subject to risks that affect the general retail environment
Our concentration in the regional mall market means that we are subject to factors that affect the retail environment generally, including the level of consumer spending, the willingness of retailers to lease space in our shopping centers, department store consolidations and tenant bankruptcies. In addition, we are exposed to the risk that terrorist activities, or the threat of such activities, may discourage consumers from visiting our malls and impact consumer confidence.
| Inflation may adversely affect our financial condition and results of operations |
Should inflation increase in the future, we may experience any or all of the following:
| • | decreasing tenant sales as a result of decreased consumer spending which could result in lower overage rents; |
| • | difficulty in replacing or renewing expiring leases with new leases at higher base and/or overage rents; and |
| • | an inability to receive reimbursement from our tenants for their share of certain operating expenses, including common area maintenance, real estate taxes and insurance. |
Inflation also poses a potential threat to us due to the probability of future increases in interest rates. Such increases would adversely impact us due to our outstanding variable-rate debt as well as result in higher interest rates on new fixed-rate debt.
Risks Related to our Organizational and Financial Structure that Give Rise to Operational and Financial Risks
| As of December 31, 2005, we had material weaknesses in our internal control over financial reporting |
The reports for fiscal year 2005 included in this Annual Report include material weaknesses related to the Company’s failure to maintain effective policies and procedures relating to accounting for income taxes and failure to have sufficient personnel resources with appropriate technical accounting expertise to conduct a timely and accurate financial close. Although we have implemented and continue to implement remediation efforts, a material weakness indicates that there is more than a remote likelihood that a material misstatement of our financial statements will not be prevented or detected in a future period. In addition, we cannot assure you that we will not in the future identify further material weaknesses or significant deficiencies in our internal control over financial reporting that we have not discovered to date. We are taking steps to improve our internal control over financial reporting to comply with Section 404 of the Sarbanes-Oxley Act. The efforts we have taken and continue to take are subject to continued management review supported by confirmation and testing by management and by our internal auditors as well as audit committee oversight. However, if these remediation efforts are insufficient to address the identified material weaknesses, or if additional material weaknesses are discovered in the future, we may fail to meet our future reporting obligations on a timely basis and internal control deficiencies could cause investors to lose confidence in our reported financial information.
| Our substantial indebtedness could adversely affect our financial health and operating flexibility |
We have a substantial amount of indebtedness. As of December 31, 2005, we had an aggregate consolidated indebtedness outstanding of approximately $20.4 billion (Note 6). Approximately $6.9 billion of our aggregate
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indebtedness was unsecured, recourse indebtedness of the Operating Partnership and consolidated subsidiaries, while approximately $13.5 billion was secured by our properties. A majority of the secured indebtedness was non-recourse to us. This indebtedness does not include our proportionate share of indebtedness incurred by our Unconsolidated Properties. As a result of this substantial indebtedness, we are required to use a material portion of our cash flow to service principal and interest on our debt, which will limit the cash flow available for other desirable business opportunities, if present.
Our substantial indebtedness could have important consequences to us and the value of our common stock, including:
| • | limiting our ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of our growth strategy or other purposes; |
| • | limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service the debt; |
| • | increasing our vulnerability to general adverse economic and industry conditions, including increases in interest rates, particularly given our substantial indebtedness which bears interest at variable rates; |
| • | limiting our ability to capitalize on business opportunities, including the acquisition of additional properties, and to react to competitive pressures and adverse changes in government regulation; |
| • | limiting our ability or increasing the costs to refinance indebtedness; and |
| • | limiting our ability to enter into marketing and hedging transactions by reducing the number of counterparties with whom we can enter into such transactions as well as the volume of those transactions. |
| The terms of the 2006 Credit Facility (obtained in February 2006 (Note 6)) and certain other debt, contain covenants and events of default that may limit our flexibility and prevent us from taking certain actions or result in the acceleration of our obligations under such debt |
The terms of the 2006 Credit Facility, similar to the 2004 Credit Facility that was in effect at December 31, 2005, and certain other debt, require us to satisfy certain customary affirmative and negative covenants and to meet financial ratios and tests including ratios and tests based on leverage, interest coverage and net worth. The covenants under our debt affect, among other things, our ability to:
| • | incur indebtedness; |
| • | create liens on assets; |
| • | sell assets; |
| • | make capital expenditures; and |
| • | engage in mergers and acquisitions. |
Given the restrictions in our debt covenants on these and other activities, we may be restricted in our ability to pursue other acquisitions, may be significantly limited in our operating and financial flexibility and may be limited in our ability to respond to changes in our business or competitive activities.
A failure to comply with these covenants, including a failure to meet the financial tests or ratios, would likely result in an event of default under our debt and would allow the lenders to accelerate such debt under such facility. If our debt is accelerated, our assets may not be sufficient to repay such debt in full.
| We have a substantial amount of short-term indebtedness |
We have $2 billion of such indebtedness that must be refinanced this year. The failure to refinance this debt on favorable terms could have material consequences to us and our stockholders.
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| We share control of some of our properties with other investors and may have conflicts of interest with those investors |
While we generally make all operating decisions for the Unconsolidated Properties, we are required to make other decisions with the other investors who have interests in the relevant property or properties. For example, the approval of certain of the other investors is required with respect to operating budgets and refinancing, encumbering, expanding or selling any of these properties. We might not have the same interests as the other investors in relation to these transactions. Accordingly, we might not be able to favorably resolve any of these issues, or we might have to provide financial or other inducement to the other investors to obtain a favorable resolution.
In addition, various restrictive provisions and rights apply to sales or transfers of interests in our jointly owned properties. These may work to our disadvantage because, among other things, we might be required to make decisions about buying or selling interests in a property or properties at a time that is disadvantageous to us or we might be required to purchase the interests of our partners in our jointly owned properties.
| Bankruptcy of joint venture partners could impose delays and costs on us with respect to the jointly owned retail properties |
The bankruptcy of one of the other investors in any of our jointly owned shopping centers could materially and adversely affect the relevant property or properties. Under the bankruptcy laws, we would be precluded by the automatic stay from taking some actions affecting the estate of the other investor without prior approval of the bankruptcy court, which would, in most cases, entail prior notice to other parties and a hearing in the bankruptcy court. At a minimum, the requirement to obtain court approval may delay the actions we would or might want to take. If the relevant joint venture through which we have invested in a property has incurred recourse obligations, the discharge in bankruptcy of one of the other investors might result in our ultimate liability for a greater portion of those obligations than we would otherwise bear.
| Payments by our direct and indirect subsidiaries of dividends and distributions to us may be adversely affected by prior payments to these subsidiaries’ creditors and preferred security holders |
Substantially all of our assets are owned through our general partnership interest in the Operating Partnership, including TRCLP. The Operating Partnership holds substantially all of its properties and assets through subsidiaries, including subsidiary partnerships, limited liability companies and corporations that have elected to be taxed as REITs. The Operating Partnership therefore derives substantially all of its cash flow from cash distributions to it by its subsidiaries, and we, in turn, derive substantially all of our cash flow from cash distributions to us by the Operating Partnership. The creditors and preferred security holders, if any, of each of our direct and indirect subsidiaries are entitled to payment of that subsidiary’s obligations to them, when due and payable, before that subsidiary may make distributions to us. Thus, the Operating Partnership’s ability to make distributions to its partners, including us, depends on its subsidiaries’ ability first to satisfy their obligations to their creditors and preferred security holders, if any, and then to make distributions to the Operating Partnership. Similarly, our ability to pay dividends to holders of our common stock depends on the Operating Partnership’s ability first to satisfy its obligations to its creditors and preferred security holders,if any, and then to make distributions to us.
In addition, we will have the right to participate in any distribution of the assets of any of our direct or indirect subsidiaries upon the liquidation, reorganization or insolvency of the subsidiary only after the claims of the creditors, including trade creditors, and preferred security holders, if any, of the subsidiary are satisfied. Our common stockholders, in turn, will have the right to participate in any distribution of our assets upon the liquidation, reorganization or insolvency of us only after the claims of our creditors, including trade creditors, and preferred security holders, if any, are satisfied.
| We might fail to qualify or remain qualified as a REIT |
Although we believe that we will remain structured and will continue to operate so as to qualify as a REIT for federal income tax purposes, we might not continue to be so qualified. Qualification as a REIT for federal
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income tax purposes involves the application of highly technical and complex provisions of the Code for which there are only limited judicial or administrative interpretations. Therefore, the determination of various factual matters and circumstances not entirely within our control may impact our ability to qualify as a REIT. In addition, legislation, new regulations, administrative interpretations or court decisions might significantly change the tax laws with respect to the requirements for qualification as a REIT or the federal income tax consequences of qualification as a REIT.
If, with respect to any taxable year, we fail to maintain our qualification as a REIT, we would not be allowed to deduct distributions to stockholders in computing our taxable income and federal income tax. The corporate level income tax, including any applicable alternative minimum tax, would apply to our taxable income at regular corporate rates. As a result, the amount available for distribution to stockholders would be reduced for the year or years involved, and we would no longer be required to make distributions. In addition, unless we were entitled to relief under the relevant statutory provisions, we would be disqualified from treatment as a REIT for the five taxable years following the year during which qualification was lost. Notwithstanding that we currently intend to operate in a manner designed to allow us to qualify as a REIT, future economic, market, legal, tax or other considerations may cause us to determine that it is in our best interest and the best interest of our stockholders to revoke the REIT election.
| An ownership limit and certain anti-takeover defenses and applicable law may hinder any attempt to acquire us |
The Ownership Limit. Generally, for us to maintain our qualification as a REIT under the Code, not more than 50% in value of the outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of our taxable year. The Code defines “individuals” for purposes of the requirement described in the preceding sentence to include some types of entities. In general, under our current certificate of incorporation, no person other than Martin Bucksbaum (deceased), Matthew Bucksbaum (the Chairman of our board of directors), their families and related trusts and entities, including M.B. Capital Partners III, may own more than 7.5% of the value of our outstanding capital stock. However, our certificate of incorporation also permits our company to exempt a person from the 7.5% ownership limit upon the satisfaction of certain conditions which are described in our certificate of incorporation.
Selected Provisions of our Charter Documents. Our board of directors is divided into three classes of directors. Directors of each class are chosen for three-year staggered terms. Staggered terms of directors may reduce the possibility of a tender offer or an attempt to change control of our company, even though a tender offer or change in control might be in the best interest of our stockholders. Our charter authorizes the board of directors:
| • | to cause us to issue additional authorized but unissued shares of common stock or preferred stock; |
| • | to classify or reclassify, in one or more series, any unissued preferred stock; and |
| • | to set the preferences, rights and other terms of any classified or reclassified stock that we issue. |
Stockholder Rights Plan. We have a stockholder rights plan which will impact a potential acquirer unless the acquirer negotiates with our board of directors and the board of directors approves the transaction.
Selected Provisions of Delaware Law. We are a Delaware corporation, and Section 203 of the Delaware General Corporation Law applies to us. In general, Section 203 prevents an “interested stockholder,” as defined in the next sentence, from engaging in a “business combination,” as defined in the statute, with us for three years following the date that person becomes an interested stockholder unless:
| • | before that person became an interested stockholder, our board of directors approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination; |
| • | upon completion of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) stock held by directors who are also officers |
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| of the company and by employee stock plans that do not provide employees with the right to determine confidentially whether shares held under the plan will be tendered in a tender or exchange offer; or | |
| • | following the transaction in which that person became an interested stockholder, the business combination is approved by our board of directors and authorized at a meeting of stockholders by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock not owned by the interested stockholder. |
The statute defines “interested stockholder” to mean generally any person that is the owner of 15% or more of our outstanding voting stock or is an affiliate or associate of us and was the owner of 15% or more of our outstanding voting stock at any time within the three-year period immediately before the date of determination.
Each item discussed above may delay, deter or prevent a change in control of our company, even if a proposed transaction is at a premium over the then current market price for our common stock. Further, these provisions may apply in instances where some stockholders consider a transaction beneficial to them. As a result, our stock price may be negatively affected by these provisions.
| We are impacted by tax-related obligations to some of our partners |
We own properties through partnerships which have arrangements in place that protect the deferred tax situation of our existing third party limited partners. Violation of these arrangements could impose costs on us. As a result, we may be restricted with respect to decisions such as financing, encumbering, expanding or selling these properties.
Several of our joint venture partners are tax-exempt. As such, they are taxable to the extent of their share of unrelated business taxable income generated from these properties. As the managing partner in these joint ventures, we have obligations to avoid the creation of unrelated business taxable income at these properties. As a result, we may be restricted with respect to decisions such as financing and revenue generation with respect to these properties.
Risks Related to the TRC Merger
| We may not realize the full anticipated benefits of the TRC Merger |
Achieving the anticipated benefits of the TRC Merger will depend in part upon our ability to integrate the two companies’ businesses in an efficient and effective manner. We may continue to face difficulties integrating aspects of the combined company’s businesses that we have not historically focused on, such as the master planned community business. Any inability of management to integrate the operations of TRCLP successfully could cause us to not fully achieve the expected benefits of the TRC Merger.
| Limitations on the sale of the TRCLP assets may affect our cash flow |
We may be restricted in our ability to dispose of certain TRCLP assets until the ten-year period after TRC’s election of REIT status expires in 2008 due to the potential incurrence of substantial tax liabilities on such dispositions due to applicable REIT regulations.
| We have significant obligations under a Contingent Stock Agreement we assumed in the TRC Merger |
We have assumed the obligations of TRC under a Contingent Stock Agreement, which we refer to as the “CSA.” The assumption includes the obligation under the CSA to issue shares of common stock twice a year to the beneficiaries under the CSA and certain indemnification obligations. The number of shares is based upon our stock price and upon a formula set forth in the CSA. In addition, the CSA requires a valuation of certain assets that we own as of December 31, 2009, which could result in the issuance of a significant number of additional shares to the beneficiaries under the CSA. Such issuances could be dilutive to our existing stockholders if we are unable to repurchase a corresponding number of shares through our publicly announced stock repurchase program.
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Risks Related to our Common Stock
| Our common stock price may be volatile, and consequently investors may not be able to resell their common stock at or above their purchase price |
The price at which our common stock will trade may be volatile and may fluctuate due to factors such as:
| • | our historical and anticipated quarterly and annual operating results; |
| • | variations between our actual results and analyst and investor expectations or changes in financial estimates and recommendations by securities analysts; |
| • | the performance and prospects of our industry; |
| • | the depth and liquidity of the market for our common stock; |
| • | investor perception of us and the industry in which we operate; |
| • | domestic and international economic conditions; |
| • | the extent of institutional investor interest in us; |
| • | the reputation of REITs generally and the attractiveness of their equity securities in comparison to other equity securities, including securities issued by other real estate companies, and fixed income securities; |
| • | our financial condition and performance; and |
| • | general market conditions and trends. |
Fluctuations may be unrelated to or disproportionate to our financial performance. These fluctuations may result in a material decline in the trading price of our common stock.
| Future sales of our common stock may depress our stock price |
As of December 31, 2005, approximately 59.6 million shares of common stock were issuable upon exercise of conversion and/or redemption rights as to units of limited partnership interest in the Operating Partnership. Under our shelf registration statement, we may offer from time to time up to approximately $1.5 billion worth of common stock, preferred stock, depositary shares, debt securities, warrants, stock purchase contracts and/or purchase units. An additional 1.7 million shares of our common stock remain reserved for issuance under the CSA we assumed in connection with the TRC Merger. In addition, we have reserved a number of shares of common stock for issuance under our option and other benefit plans for employees and directors and in connection with certain other obligations, and these shares will be available for sale from time to time. Although we have publicly announced a stock repurchase program which may offset the dilution resulting from issuances pursuant to the CSA and our employee option plan, there is no certainty that we will be successful in acquiring a sufficient number of shares at an acceptable price to accomplish this goal. No prediction can be made as to the effect, if any, that these and other future sales of our common stock, or the availability of common stock for future sales, will have on the market price of the stock. Sales in the public market of substantial amounts of our common stock, or the perception that such sales could occur, could adversely affect prevailing market prices for our common stock.
| Increases in market interest rates may hurt the market price of our common stock |
We believe that investors consider the distribution rate on REIT stocks, expressed as a percentage of the price of the stocks, relative to market interest rates as an important factor in deciding whether to buy or sell the stocks. If market interest rates go up, prospective purchasers of REIT stocks may expect a higher distribution rate. Higher interest rates would not, however, result in more funds being available for us to distribute and, in fact, would likely increase our borrowing costs and might decrease our funds available for distribution. Thus, higher market interest rates could cause the market price of our common stock to decline.
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| Item 1B. | Unresolved Staff Comments |
None.
| Item 2. | Properties |
Our investment in real estate as of December 31, 2005, consisted of our interests in the properties in our Retail and Other and Master Planned Communities segments. In most cases, we also own the land underlying the retail properties. However, at certain of the properties, all or part of the underlying land is owned by a third party that leases the land to us pursuant to a long-term ground lease. The leases generally contain various purchase options and typically provide us with a right of first refusal in the event of a proposed sale of the property by the landlord. Information regarding encumbrances on these properties is included in Schedule III of this Annual Report.
The following tables set forth certain information regarding the Consolidated Properties and the Unconsolidated Properties in our Retail Portfolio as of December 31, 2005. These tables do not reflect subsequent activity in 2006 including purchases, sales or consolidations of Anchor stores such as our 2006 purchase of six Mervyn’s anchor locations. Anchors include all stores with Gross Leasable Area greater than 30,000 square feet.
Consolidated Retail Properties
| GLA | ||||||||||||||
| Mall and | Anchor | |||||||||||||
| Name of Center | Location(1) | Total | Freestanding | Anchors/Significant Tenants | Vacancies | |||||||||
| Ala Moana Center | Honolulu, HI | 1,748,761 | 801,973 | Barnes & Noble, Macy’s, Neiman Marcus, Old Navy, Sears, Shirokiya | — | |||||||||
| Alameda Plaza | Pocatello, ID | 190,341 | 190,341 | — | 2 | |||||||||
| Anaheim Crossing(2)(3) | Anaheim, CA | 92,170 | 92,170 | N/A | N/A | |||||||||
| Animas Valley Mall | Farmington, NM | 480,217 | 230,752 | Allen Theatres, Dillard’s, JCPenney, Ross Dress for Less, Sears | — | |||||||||
| Apache Mall(2) | Rochester, MN | 755,491 | 272,499 | Herberger’s, JCPenney, Marshall Field’s, Sears | — | |||||||||
| Arizona Center(2) | Phoenix, AZ | 168,429 | 82,426 | AMC Theatres | — | |||||||||
| Augusta Mall(2) | Augusta, GA | 1,066,486 | 317,263 | Dillard’s, JCPenney, Macy’s, Macy’s Home Store, Sears | — | |||||||||
| Austin Bluffs Plaza | Colorado Springs, CO | 108,902 | 108,902 | Longs Drugs | 1 | |||||||||
| Bailey Hills Village | Eugene, OR | 11,887 | 11,887 | N/A | N/A | |||||||||
| Baskin Robbins | Idaho Falls, ID | 1,814 | 1,814 | N/A | N/A | |||||||||
| Baybrook Mall | Friendswood (Houston), TX | 1,244,762 | 344,153 | Dillard’s, Foley’s, JCPenney, Mervyn’s, Sears | — | |||||||||
| Bayshore Mall(2) | Eureka, CA | 624,297 | 404,039 | Gottschalks, Mervyn’s, Sears | — | |||||||||
| Bayside Marketplace(2) | Miami, FL | 225,446 | 225,446 | N/A | N/A | |||||||||
| Beachwood Place | Beachwood, OH | 912,105 | 332,525 | Dillard’s, Nordstrom, Saks Fifth Avenue | — | |||||||||
| Bellis Fair | Bellingham (Seattle), WA | 774,579 | 355,649 | JCPenney, Macy’s, Mervyn’s, Sears, Target | — | |||||||||
| Birchwood Mall | Port Huron (Detroit), MI | 793,869 | 337,640 | GKC Theaters, JCPenney, Marshall Field’s, Sears, Target, Younkers | — | |||||||||
| Boise Plaza | Boise, ID | 114,404 | 114,404 | Albertson’s, Fred Meyer, Burlington Coat | — | |||||||||
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| GLA | ||||||||||||||
| Mall and | Anchor | |||||||||||||
| Name of Center | Location(1) | Total | Freestanding | Anchors/Significant Tenants | Vacancies | |||||||||
| Boise Towne Plaza(3) | Boise, ID | 116,677 | 116,677 | Circuit City, Linens ’N Things, Old Navy | — | |||||||||
| Boise Towne Square | Boise, ID | 1,143,302 | 474,522 | Dillard’s, JCPenney, Macy’s, Mervyn’s, Sears | — | |||||||||
| The Boulevard Mall | Las Vegas, NV | 1,178,595 | 390,559 | Dillard’s, JCPenney, Macy’s, Sears | — | |||||||||
| Burlington Town Center(3) | Burlington, VT | 311,092 | 164,339 | Filene’s | — | |||||||||
| Cache Valley Mall | Logan, UT | 322,578 | 176,746 | Dillard’s, Dillard’s Men’s & Home, JCPenney | — | |||||||||
| Cache Valley Marketplace | Logan, UT | 156,996 | 156,996 | Home Depot, Olive Garden, T.J. Maxx | — | |||||||||
| Canyon Point Village Center | Las Vegas, NV | 65,600 | 65,600 | N/A | N/A | |||||||||
| Capital Mall | Jefferson City, MO | 512,852 | 279,775 | Dillard’s, JCPenney, Sears | — | |||||||||
| Century Plaza | Birmingham, AL | 738,831 | 252,875 | JCPenney, McRae’s, Sears | 1 | |||||||||
| Chapel Hills Mall | Colorado Springs, CO | 1,174,371 | 428,932 | Dillard’s, Foley’s, JCPenney, Kmart, Mervyn’s, Sears | — | |||||||||
| Chico Mall | Chico, CA | 502,079 | 179,951 | Gottschalks, JCPenney, Sears | 1 | |||||||||
| Coastland Center | Naples, FL | 933,644 | 343,254 | Dillard’s, JCPenney, Macy’s, Sears | — | |||||||||
| Collin Creek | Plano, TX | 1,113,307 | 323,224 | Dillard’s, Foley’s, JCPenney, Mervyn’s, Sears | — | |||||||||
| Colony Square Mall | Zanesville, OH | 536,662 | 289,884 | Colony Square Cinema 10, Elder-Beerman, JCPenney, Sears | — | |||||||||
| Columbia Mall | Columbia, MO | 750,085 | 334,641 | Dillard’s, JCPenney, Sears, Target | — | |||||||||
| Coral Ridge Mall | Coralville (Iowa City), IA | 1,075,349 | 420,184 | Dillard’s, JCPenney, Scheel’s All Sports, Sears, Target, Younkers | — | |||||||||
| Coronado Center(2) | Albuquerque, NM | 1,152,708 | 378,379 | Barnes & Noble, Foley’s, JCPenney, Macy’s, Mervyn’s, Sears | — | |||||||||
| Cottonwood Mall | Salt Lake City, UT | 734,018 | 354,510 | JCPenney, Meier & Frank | — | |||||||||
| Cottonwood Square(2) | Salt Lake City, UT | 77,079 | 77,079 | — | 1 | |||||||||
| Country Hills Plaza | Ogden, UT | 140,097 | 140,097 | McKay-Dee Hospital Center, Smith’s Food King | — | |||||||||
| The Crossroads | Portage (Kalamazoo), MI | 769,339 | 266,379 | JCPenney, Marshall Field’s, Mervyn’s, Sears | — | |||||||||
| Crossroads Center | St. Cloud, MN | 897,330 | 291,650 | JCPenney, Marshall Field’s, Scheel’s All Sports, Sears, Target | — | |||||||||
| Cumberland Mall | Atlanta, GA | 816,964 | 316,389 | Macy’s, Sears | — | |||||||||
| Division Crossing | Portland, OR | 100,760 | 100,760 | Rite Aid, Safeway | — | |||||||||
| Eagle Ridge Mall | Lake Wales (Orlando), FL | 646,730 | 251,275 | Dillard’s, JCPenney, Recreation Station, Regal Cinemas, Sears | — | |||||||||
| Eastridge Mall | Casper, WY | 568,810 | 279,014 | JCPenney, Macy’s, Sears, Target | — | |||||||||
| Eden Prairie Center | Eden Prairie (Minneapolis), MN | 988,788 | 309,207 | AMC Theatres, Kohl’s, Sears, Target, Von Maur | — | |||||||||
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| GLA | ||||||||||||||
| Mall and | Anchor | |||||||||||||
| Name of Center | Location(1) | Total | Freestanding | Anchors/Significant Tenants | Vacancies | |||||||||
| Fallbrook Center | West Hills (Los Angeles), CA | 904,125 | 269,126 | DSW Shoe Warehouse, Home Depot, Kohl’s, Laemmle Theatres, Linens ’N Things, Mervyn’s, Ross Dress for Less, Sport Chalet, Target | — | |||||||||
| Faneuil Hall Marketplace(2) | Boston, MA | 203,313 | 203,313 | N/A | N/A | |||||||||
| Fashion Place(2) | Murray, UT | 876,472 | 310,499 | Dillard’s, Nordstrom, Sears | — | |||||||||
| Fashion Show | Las Vegas, NV | 1,896,194 | 536,303 | Bloomingdale’s Home, Dillard’s, Macy’s, Neiman Marcus, Nordstrom, Robinsons-May, Saks Fifth Avenue | 1 | |||||||||
| Foothills Mall | Fort Collins, CO | 802,431 | 462,334 | Foley’s, JCPenney, Mervyn’s, Sears | — | |||||||||
| Fort Union(2) | Midvale (Salt Lake City), UT | 32,968 | 32,968 | N/A | N/A | |||||||||
| Four Seasons Town Centre | Greensboro, NC | 1,141,375 | 499,359 | Belk, Dillard’s, JCPenney | — | |||||||||
| Fox River Mall | Appleton, WI | 1,219,006 | 530,369 | Cost Plus World Market, David’s Bridal, DSW Shoe Warehouse, Factory Card Outlet, JCPenney, Linens ’N-Things, Marshall Field’s, Scheel’s All Sports, Sears | ||||||||||
| Fremont Plaza(2) | Las Vegas, NV | 102,991 | 102,991 | Sav-On Drugs | 1 | |||||||||
| The Gallery at Harborplace(2) | Baltimore, MD | 130,158 | 130,158 | N/A | N/A | |||||||||
| Gateway Crossing Shopping Center | Bountiful (Salt Lake City), UT | 183,526 | 183,526 | All A Dollar, Barnes & Noble, T.J. Maxx | — | |||||||||
| Gateway Mall | Springfield, OR | 725,764 | 342,558 | 24 Hour Fitness, Movies 12, Ross Dress for Less, Sears, Target, Kohl’s | 1 | |||||||||
| Glenbrook Square | Fort Wayne, IN | 1,213,456 | 436,586 | JCPenney, L.S. Ayres, Sears | 1 | |||||||||
| Governor’s Square(2) | Tallahassee, FL | 1,023,031 | 331,426 | Dillard’s, JCPenney, Macy’s, Sears | — | |||||||||
| The Grand Canal Shoppes | Las Vegas, NV | 509,443 | 509,443 | N/A | N/A | |||||||||
| Grand Teton Mall | Idaho Falls, ID | 542,539 | 218,614 | Dillard’s, JCPenney, Macy’s, Sears | — | |||||||||
| Grand Teton Plaza | Idaho Falls, ID | 93,274 | 93,274 | Best Buy, Linens ’N Things, Petsmart, Ross Dress For Less | — | |||||||||
| Grand Traverse Mall | Traverse City, MI | 593,708 | 280,317 | GKC Theaters, JCPenney, Marshall Field’s, Target | — | |||||||||
| Greenwood Mall | Bowling Green, KY | 851,381 | 422,328 | Dillard’s, Famous Barr, JCPenney, Sears | — | |||||||||
| Halsey Crossing(2) | Gresham (Portland), OR | 99,438 | 99,438 | Safeway | — | |||||||||
| Harborplace(2) | Baltimore, MD | 143,928 | 143,928 | N/A | N/A | |||||||||
| Hulen Mall | Fort Worth, TX | 940,324 | 343,754 | Dillard’s, Foley’s, Sears | — | |||||||||
| Jordan Creek Town Center | West Des Moines, IA | 1,345,111 | 803,412 | Century Theatres, Dillard’s, Scheel’s All Sports, Younkers | — | |||||||||
| Knollwood Mall | St. Louis Park (Minneapolis), MN | 465,533 | 169,310 | Cub Foods, Kohl’s, T.J. Maxx | 1 | |||||||||
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| GLA | ||||||||||||||
| Mall and | Anchor | |||||||||||||
| Name of Center | Location(1) | Total | Freestanding | Anchors/Significant Tenants | Vacancies | |||||||||
| Lakeside Mall | Sterling Heights, MI | 1,505,619 | 483,021 | JCPenney, Lord & Taylor, Marshall Field’s, Marshall Field’s Mens & Home, Sears | — | |||||||||
| Lakeview Square | Battle Creek, MI | 545,654 | 254,061 | JCPenney, Marshall Field’s, Sears | — | |||||||||
| Landmark Mall(2) | Alexandria (Washington, D.C.), VA | 885,551 | 326,614 | Hecht’s, Lord & Taylor, Sears | — | |||||||||
| Lansing Mall(2) | Lansing, MI | 834,025 | 442,855 | JCPenney, Marshall Field’s, Mervyn’s, Younkers | — | |||||||||
| Lincolnshire Commons | Lincolnshire (Chicago), IL | 44,002 | 44,002 | N/A | N/A | |||||||||
| Lockport Mall | Lockport, NY | 336,070 | 122,989 | The Bon Ton | 2 | |||||||||
| Lynnhaven Mall | Virginia Beach, VA | 1,298,577 | 463,130 | AMC Theatres, Dick’s Sporting Goods, Dillard’s, Hecht’s, JCPenney, Steve & Barry’s University Sportswear | 1 | |||||||||
| The Maine Mall | South Portland, ME | 1,018,867 | 345,933 | Best Buy, Chuck E Cheese, Filene’s, Filene’s Home Store, JCPenney, Linens ’N Things, Macy’s, Sears, Sports Authority | — | |||||||||
| Mall at Sierra Vista | Sierra Vista, AZ | 342,262 | 110,992 | Cinemark, Dillard’s, Sears | — | |||||||||
| The Mall in Columbia | Columbia, MD | 1,392,967 | 592,799 | Hecht’s, JCPenney, Lord & Taylor, Nordstrom, Sears | — | |||||||||
| Mall of Louisiana | Baton Rouge, LA | 1,240,035 | 432,553 | Foley’s, JCPenney, McRae’s, Sears | — | |||||||||
| Mall of the Bluffs | Council Bluffs (Omaha, NE), IA | 701,418 | 375,196 | Dillard’s, Hy-Vee, JCPenney, Sears, Target | — | |||||||||
| Mall St. Matthews | Louisville, KY | 1,107,046 | 391,341 | Dillard’s, Dillard’s Men’s & Home, JCPenney | 1 | |||||||||
| Mall St. Vincent(2) | Shreveport, LA | 538,506 | 190,506 | Dillard’s, Sears | — | |||||||||
| Market Place Shopping Center | Champaign, IL | 1,045,487 | 509,741 | Bergner’s, Famous Barr, JCPenney, Sears | — | |||||||||
| Mayfair | Wauwatosa (Milwaukee), WI | 1,112,283 | 492,899 | AMC Theatres, Barnes & Noble, Boston Store, Marshall Field’s | — | |||||||||
| Meadows Mall | Las Vegas, NV | 956,479 | 319,626 | Dillard’s, JCPenney, Macy’s, Sears | — | |||||||||
| Metro Plaza | Baltimore, MD | 95,108 | 95,108 | N/A | N/A | |||||||||
| Mondawmin Mall | Baltimore, MD | 294,841 | 294,841 | N/A | N/A | |||||||||
| North Plains Mall | Clovis, NM | 303,613 | 109,532 | Beall’s, Dillard’s, JCPenney, Sears | — | |||||||||
| North Star Mall | San Antonio, TX | 1,257,095 | 430,270 | Dillard’s, Foley’s, Macy’s, Mervyn’s, Saks Fifth Avenue | — | |||||||||
| North Temple Shops | Salt Lake City, UT | 10,078 | 10,078 | N/A | N/A | |||||||||
| North Town Mall | Spokane, WA | 1,046,534 | 415,040 | Bumpers, Inc., JCPenney, Macy’s, Mervyn’s, Regal Cinemas, Sears | 1 | |||||||||
| Northgate Mall | Chattanooga, TN | 822,656 | 357,336 | JCPenney, Proffitt’s, Proffitt’s Home Store, Sears, T.J. Maxx | — | |||||||||
19
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| GLA | ||||||||||||||
| Mall and | Anchor | |||||||||||||
| Name of Center | Location(1) | Total | Freestanding | Anchors/Significant Tenants | Vacancies | |||||||||
| Northridge Fashion Center | Northridge (Los Angeles), CA | 1,440,151 | 564,708 | JCPenney, Macy’s, Pacific Theatres, Robinsons-May, Sears | — | |||||||||
| Oak View Mall | Omaha, NE | 865,829 | 261,569 | Dillard’s, JCPenney, Sears, Younkers | — | |||||||||
| Oakwood Center | Gretna, LA | 944,659 | 346,312 | Dillard’s, JCPenney, Mervyn’s, Sears | — | |||||||||
| Oakwood Mall | Eau Claire, WI | 821,518 | 336,442 | JCPenney, Marshall Field’s, Scheel’s All Sports, Sears, Younkers | — | |||||||||
| Oglethorpe Mall | Savannah, GA | 946,334 | 366,186 | Belk, JCPenney, Macy’s, Macy’s Junior Department, Sears, Stein Mart | — | |||||||||
| Orem Plaza Center Street | Orem, UT | 85,221 | 85,221 | Chuck E Cheese | — | |||||||||
| Orem Plaza State Street | Orem, UT | 27,557 | 27,557 | N/A | N/A | |||||||||
| Oviedo Marketplace | Oviedo, FL | 951,473 | 333,589 | Dillard’s, Macy’s, Regal Cinemas, Sears | — | |||||||||
| Owings Mills Mall | Owing Mills, MD | 1,083,447 | 436,410 | Hecht’s, JCPenney, Macy’s | 1 | |||||||||
| Oxmoor Center | Louisville, KY | 930,704 | 283,494 | Dick’s Sporting Goods, Macy’s, Sears, Von Maur | — | |||||||||
| Paramus Park | Paramus, NJ | 769,856 | 310,799 | Macy’s, Sears | — | |||||||||
| Park City Center | Lancaster (Philadelphia), PA | 1,375,762 | 512,573 | The Bon Ton, Boscov’s, JCPenney, Kohl’s, Sears | — | |||||||||
| Park Place | Tucson, AZ | 1,047,177 | 392,440 | Century Theatres, Dillard’s, Macy’s, Sears | — | |||||||||
| Peachtree Mall | Columbus, GA | 819,916 | 311,301 | Dillard’s, JCPenney, Macy’s, Parisian | — | |||||||||
| Pecanland Mall | Monroe, LA | 944,992 | 329,556 | Dillard’s, JCPenney, McRae’s, Mervyn’s, Sears | — | |||||||||
| Piedmont Mall | Danville, VA | 726,933 | 176,607 | Belk, Belk Men’s, Boscov’s, JCPenney, Sears | — | |||||||||
| Pierre Bossier Mall | Bossier City (Shreveport), LA | 607,688 | 214,390 | Dillard’s, JCPenney, Sears, Stage | 1 | |||||||||
| Pine Ridge Mall(2) | Pocatello, ID | 641,782 | 203,795 | Dillard’s, JCPenney, Macy’s, Sears, ShopKo | — | |||||||||
| The Pines | Pine Bluff, AR | 631,758 | 262,049 | Dillard’s, Holiday Inn Express, JCPenney, Sears | 1 | |||||||||
| Pioneer Place(2) | Portland, OR | 368,070 | 287,070 | Saks Fifth Avenue | — | |||||||||
| Plaza 800(2) | Sparks (Reno), NV | 176,431 | 176,431 | Albertson’s | 1 | |||||||||
| Plaza 9400(2) | Sandy (Salt Lake City), UT | 228,661 | 228,661 | Albertson’s, Deseret Industries | 1 | |||||||||
| Prince Kuhio Plaza(2) | Hilo, HI | 506,321 | 273,699 | Macy’s, Sears | 1 | |||||||||
| Providence Place(2) | Providence, RI | 1,275,818 | 638,229 | Filene’s, National Amusements Cinema 16, Nordstrom, JCPenney | — | |||||||||
| Provo Towne Centre(3) | Provo, UT | 801,014 | 230,945 | Cinemark, Dillard’s, JCPenney, Sears | — | |||||||||
| Red Cliffs Mall | St. George, UT | 385,610 | 108,553 | Dillard’s, JCPenney, Sears | 1 | |||||||||
| Red Cliffs Plaza | St George, UT | 57,304 | 57,304 | Gold’s Gym, Sears | — | |||||||||
| Redlands Mall | Redlands, CA | 173,997 | 78,938 | Gottschalks | — | |||||||||
20
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| GLA | ||||||||||||||
| Mall and | Anchor | |||||||||||||
| Name of Center | Location(1) | Total | Freestanding | Anchors/Significant Tenants | Vacancies | |||||||||
| Regency Square Mall | Jacksonville, FL | 1,445,681 | 529,175 | Belk, Champs Sports/World Foot Locker, Dillard’s, JCPenney, Sears | 1 | |||||||||
| Ridgedale Center | Minnetonka, MN | 1,021,910 | 319,530 | JCPenney, Marshall Field’s Men’s & Home, Marshall Field’s Women’s, Sears | — | |||||||||
| Rio West Mall(2)(3) | Gallup, NM | 514,856 | 333,723 | Beall’s, JCPenney | 1 | |||||||||
| River Falls Mall | Clarksville, IN | 729,945 | 198,179 | Bass Pro Shops Outdoor World, Toys R Us | 2 | |||||||||
| River Hills Mall | Mankato, MN | 696,888 | 256,694 | Herberger’s, JCPenney, Scheel’s All Sports, Sears, Target | — | |||||||||
| River Pointe Plaza | West Jordan (Salt Lake City), UT | 224,252 | 224,252 | Albertson’s, ShopKo | — | |||||||||
| Riverlands Shopping Center | LaPlace (New Orleans), LA | 184,093 | 184,093 | Burke’s Outlet, Citi Trends, Stage | 1 | |||||||||
| Riverside Plaza | Provo, UT | 175,417 | 175,417 | Big Lots, Macey’s, Rite Aid | — | |||||||||
| Rivertown Crossings | Grandville (Grand Rapids), MI | 1,270,942 | 421,884 | Dick’s Sporting Goods, JCPenney, Kohl’s, Marshall Field’s, Old Navy, Rivertown Cinemas, Sears, Younkers | — | |||||||||
| Riverwalk Marketplace(2) | New Orleans, LA | 186,415 | 186,415 | N/A | N/A | |||||||||
| Rogue Valley Mall | Medford (Portland), OR | 639,867 | 252,429 | JCPenney, Linens ’N Things, Meier & Frank, Meier & Frank Home Store, Mervyn’s | — | |||||||||
| Saint Louis Galleria | St. Louis, MO | 1,160,740 | 471,060 | Dillard’s, Famous Barr, Lord & Taylor | — | |||||||||
| Salem Center(2) | Salem, OR | 650,132 | 212,132 | JCPenney, Meier & Frank, Mervyn’s, Nordstrom | — | |||||||||
| The Shops at La Cantera(3) | San Antonio, TX | 1,010,977 | 381,977 | Dillard’s, Foley’s, Neiman Marcus, Nordstrom | — | |||||||||
| Sikes Senter | Wichita Falls, TX | 667,561 | 262,037 | Dillard’s, JCPenney, Sears, Sikes Ten Theatres | — | |||||||||
| Silver Lake Mall | Coeur d’ Alene, ID | 326,709 | 110,345 | JCPenney, Macy’s, Sears | 1 | |||||||||
| Sooner Mall | Norman, OK | 509,271 | 169,199 | Dillard’s, JCPenney, Old Navy, Sears, Stein Mart | — | |||||||||
| South Street Seaport(2) | New York, NY | 285,012 | 285,012 | N/A | N/A | |||||||||
| Southlake Mall | Morrow (Atlanta), GA | 1,015,515 | 275,263 | JCPenney, Macy’s, Sears | 1 | |||||||||
| Southland Center | Taylor, MI | 875,681 | 292,644 | JCPenney, Marshall Field’s, Mervyn’s | — | |||||||||
| Southland Mall | Hayward, CA | 1,259,938 | 519,674 | JCPenney, Macy’s, Mervyn’s, Sears | — | |||||||||
| Southshore Mall(2) | Aberdeen, WA | 291,644 | 157,869 | JCPenney, Sears | — | |||||||||
| Southwest Plaza | Littleton (Denver), CO | 1,313,065 | 675,888 | Dillard’s, Foley’s, JCPenney, Sears | — | |||||||||
| Spokane Valley Mall(3) | Spokane, WA | 737,854 | 318,770 | JCPenney, Macy’s, Regal ACT III, Sears | — | |||||||||
| Spokane Valley Plaza(3) | Spokane, WA | 132,048 | 132,048 | Linens ’N Things, Old Navy, Sportsman’s Warehouse, T.J. Maxx | — | |||||||||
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| GLA | ||||||||||||||
| Mall and | Anchor | |||||||||||||
| Name of Center | Location(1) | Total | Freestanding | Anchors/Significant Tenants | Vacancies | |||||||||
| Spring Hill Mall | West Dundee (Chicago), IL | 1,177,489 | 444,694 | Carson Pirie Scott, JCPenney, Kohl’s, Marshall Field’s, Sears, Steve & Barry’s University Sportswear | — | |||||||||
| Staten Island Mall | Staten Island, NY | 1,282,205 | 611,116 | Macy’s, Macy’s Home Store, Sears, JCPenney | — | |||||||||
| Stonestown | San Francisco, CA | 862,142 | 433,849 | Macy’s, Nordstrom | — | |||||||||
| The Streets at Southpoint | Durham, NC | 1,327,165 | 580,244 | Hecht’s, Hudson Belk, JCPenney, Nordstrom, Sears | — | |||||||||
| Three Rivers Mall | Kelso, WA | 430,111 | 236,878 | JCPenney, Macy’s, Sears | 1 | |||||||||
| Town East Mall | Mesquite (Dallas), TX | 1,218,261 | 408,875 | Dillard’s, Foley’s, JCPenney, Sears | — | |||||||||
| Tucson Mall(2) | Tucson, AZ | 1,302,740 | 444,476 | Dillard’s, JCPenney, Macy’s, Mervyn’s, Robinsons-May, Sears | — | |||||||||
| Twin Falls Crossing | Twin Falls, ID | 37,680 | 37,680 | Kalik Investors | — | |||||||||
| University Crossing | Orem, UT | 206,035 | 206,035 | Barnes & Noble, CompUSA, Fred Meyer — Burlington Coat, OfficeMax, Pier 1 Imports | — | |||||||||
| Valley Hills Mall | Hickory, NC | 906,183 | 294,667 | Belk, Dillard’s, JCPenney, Sears | — | |||||||||
| Valley Plaza Mall | Bakersfield, CA | 1,185,530 | 458,841 | Gottschalks, JCPenney, Macy’s, Robinsons-May, Sears | — | |||||||||
| Village of Cross Keys Retail | Baltimore, MD | 73,982 | 73,982 | N/A | N/A | |||||||||
| Visalia Mall | Visalia, CA | 440,978 | 183,978 | Gottschalks, JCPenney | — | |||||||||
| Ward Centers | Honolulu, HI | 712,170 | 595,089 | Borders Books & Music, Dave & Buster’s, Sports Authority | — | |||||||||
| West Valley Mall | Tracy (San Francisco), CA | 834,201 | 453,252 | Gottschalks, JCPenney, Movies 14, Sears, Target | — | |||||||||
| Westlake Center(2) | Seattle, WA | 104,631 | 104,631 | N/A | N/A | |||||||||
| Westwood Mall | Jackson, MI | 508,199 | 136,511 | Elder-Beerman, JCPenney, Wal-Mart | — | |||||||||
| White Marsh Mall | Baltimore, MD | 1,151,331 | 366,736 | Hecht’s, JCPenney, Macy’s, Sears | 1 | |||||||||
| White Mountain Mall | Rock Springs, WY | 329,713 | 175,253 | Flaming Gorge Harley Davidson, Herberger’s, JCPenney, State of Wyoming | — | |||||||||
| Willowbrook | Wayne, NJ | 1,523,691 | 495,691 | Bloomingdale’s, Lord & Taylor, Macy’s, Sears | — | |||||||||
| Woodbridge Center | Woodbridge, NJ | 1,634,126 | 549,091 | Dick’s Sporting Goods, Fortunoff, JCPenney, Lord & Taylor, Macy’s, Sears | — | |||||||||
| Woodlands Village | Flagstaff, AZ | 91,810 | 91,810 | — | — | |||||||||
| Yellowstone Square | Idaho Falls, ID | 222,017 | 222,017 | Yellowstone Warehouse | 1 | |||||||||
| 116,137,651 | 49,238,511 | |||||||||||||
22
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| (1) | In certain cases, where a center’s location is part of a larger metropolitan area, the metropolitan area is identified in parenthesis. |
| (2) | A portion of the property is subject to ground lease. |
| (3) | Owned in a joint venture with independent, non-controlling minority investors. |
Unconsolidated Retail Properties
| GLA | ||||||||||||||||||||||
| Ownership | Mall and | Anchor | ||||||||||||||||||||
| Name of Center | Location(1) | Interest | Total | Freestanding | Anchors/Significant Tenants | Vacancies | ||||||||||||||||
| Alderwood Mall | Lynnwood (Seattle), WA | 50 | % | 1,272,449 | 501,898 | JCPenney, Loews Cineplex, Macy’s, Nordstrom, Sears | — | |||||||||||||||
| Altamonte Mall | Altamonte Springs (Orlando), FL | 50 | 1,148,557 | 470,009 | Dillard’s, JCPenney, Macy’s, Sears | — | ||||||||||||||||
| Arrowhead Towne Center | Glendale, AZ | 16.7 | 1,129,857 | 345,320 | AMC Theatres, Dillard’s, JCPenney, Mervyn’s, Robinsons- May, Sears | — | ||||||||||||||||
| Bay City Mall | Bay City, MI | 50 | 525,251 | 209,600 | JCPenney, Sears, Target, Younkers | — | ||||||||||||||||
| Brass Mill Center and Commons | Waterbury, CT | 50 | 1,184,182 | 526,843 | Burlington Coat Factory, Filene’s, JCPenney, Regal Cinemas, Sears, Steve & Barry’s University Sportswear | — | ||||||||||||||||
| Bridgewater Commons | Bridgewater, NJ | 35 | 880,787 | 344,898 | AMC Theatres, Bloomingdale’s, Lord & Taylor, Macy’s | — | ||||||||||||||||
| Carolina Place | Pineville (Charlotte), NC | 50 | 1,102,008 | 328,506 | Belk, Dillard’s, Hecht’s, JCPenney, Sears | — | ||||||||||||||||
| Centerpointe Village Center | Summerlin, NV | 50 | 144,635 | 144,635 | Albertson’s, Sav-On Drug Store | — | ||||||||||||||||
| Christiana Mall | Newark, DE | 50 | 1,083,587 | 312,183 | JCPenney, Lord & Taylor, Macy’s, Strawbridge’s | — | ||||||||||||||||
| Chula Vista Center | Chula Vista (San Diego), CA | 50 | 876,354 | 288,217 | JCPenney, Macy’s, Mervyn’s, Sears, Ultrastar Theaters | — | ||||||||||||||||
| Clackamas Town Center | Portland, OR | 50 | 1,236,215 | 357,526 | Barnes & Noble, Century Theatres, JCPenney, Meier & Frank, Meier & Frank Home Store, Nordstrom, Sears | — | ||||||||||||||||
| Columbiana Centre | Columbia, SC | 50 | 824,127 | 265,150 | Belk, Dillard’s, Parisian, Sears | — | ||||||||||||||||
| Deerbrook Mall | Humble (Houston), TX | 50 | 1,206,160 | 365,608 | AMC Theatres, Dillard’s, Foley’s, JCPenney, Mervyn’s, Sears | — | ||||||||||||||||
| Eastridge Mall | San Jose, CA | 51 | 1,252,836 | 505,575 | AMC 15, JCPenney, Macy’s, Sears | — | ||||||||||||||||
| First Colony Mall | Sugar Land (Houston), TX | 50 | 1,017,355 | 398,307 | Dillard’s, Foley’s, JCPenney, Mervyn’s | — | ||||||||||||||||
| Florence Mall | Florence (Cincinnati, OH), KY | 50 | 930,171 | 377,764 | JCPenney, Macy’s, Macy’s Home Store, Sears | — | ||||||||||||||||
| Galleria At Tyler(2) | Riverside, CA | 50 | 1,060,163 | 438,455 | JCPenney, Macy’s, Nordstrom, Robinsons-May | — | ||||||||||||||||
| Glendale Galleria(2) | Glendale, CA | 50 | 1,319,348 | 514,348 | JCPenney, Macy’s, Mervyn’s, Nordstrom, Robinsons-May | — | ||||||||||||||||
| Highland Mall(2) | Austin, TX | 50 | 1,104,179 | 385,438 | Dillard’s, Dillard’s Men’s, Foley’s, JCPenney | — | ||||||||||||||||
| Kenwood Towne Centre(2) | Cincinnati, OH | 50 | 1,134,733 | 533,141 | Dillard’s, Macy’s, Parisian | — | ||||||||||||||||
| Lake Mead & Buffalo Partners Village Center | Summerlin, NV | 50 | 150,948 | 150,948 | Hollywood Video, Wells Fargo Bank | — | ||||||||||||||||
23
Table of Contents
| GLA | ||||||||||||||||||||||
| Ownership | Mall and | Anchor | ||||||||||||||||||||
| Name of Center | Location(1) | Interest | Total | Freestanding | Anchors/Significant Tenants | Vacancies | ||||||||||||||||
| Lakeland Square Mall | Lakeland (Orlando), FL | 50 | 898,502 | 288,464 | Dillard’s, Dillard’s Men’s & Home, JCPenney, Macy’s, Sears | 1 | ||||||||||||||||
| Mizner Park(2) | Boca Raton, FL | 50 | 236,599 | 125,777 | Mizner Park Cinema, Robb & Stucky | — | ||||||||||||||||
| Montclair Plaza | Montclair (San Bernadino), CA | 50 | 1,349,642 | 546,627 | Circuit City, Ethan Allen, JCPenney, Linens ’N Things, Macy’s, Nordstrom, Robinsons- May, Sears | — | ||||||||||||||||
| Moreno Valley Mall | Moreno Valley (Riverside), CA | 50 | 1,092,062 | 322,871 | Gottschalks, Harkins Theatre, JCPenney, Limited, Robinsons- May, Sears | — | ||||||||||||||||
| Natick Mall | Natick (Boston), MA | 50 | 1,154,026 | 427,364 | Filene’s, Lord & Taylor, Macy’s, Sears | — | ||||||||||||||||
| Neshaminy Mall | Bensalem, PA | 25 | 1,019,629 | 325,037 | AMC Theatres, Boscov’s, Sears, Strawbridge’s | — | ||||||||||||||||
| Newgate Mall | Ogden (Salt Lake City), UT | 50 | 725,947 | 253,813 | Dillard’s, Gart Sports, Mervyn’s, Sears, Tinsel Town | — | ||||||||||||||||
| NewPark Mall | Newark (San Francisco), CA | 50 | 1,138,354 | 394,890 | JCPenney, Macy’s, Mervyn’s, Sears, Target | — | ||||||||||||||||
| North Point Mall | Alpharetta (Atlanta), GA | 50 | 1,371,441 | 405,154 | Dillard’s, JCPenney, Macy’s, Parisian, Sears | 1 | ||||||||||||||||
| Northbrook Court | Northbrook (Chicago), IL | 50 | 1,011,221 | 395,302 | AMC Theatres, Lord & Taylor, Marshall Field’s, Neiman Marcus | — | ||||||||||||||||
| Oakbrook Center | Oakbrook (Chicago), IL | 50 | 2,119,809 | 834,829 | Bloomingdale’s Home, Crate & Barrel, Lord & Taylor, Marshall Field’s, Neiman Marcus, Nordstrom, Sears | — | ||||||||||||||||
| The Oaks Mall | Gainesville, FL | 51 | 906,392 | 348,525 | Belk, Dillard’s, JCPenney, Macy’s, Sears | — | ||||||||||||||||
| The Parks at Arlington | Arlington (Dallas), TX | 50 | 1,518,300 | 432,040 | AMC Theatres, Circuit City, Dick’s Sporting Goods, Dillard’s, Foley’s, JCPenney, Mervyn’s, Sears, Steve & Barry’s University Sportswear | — | ||||||||||||||||
| Park Meadows | Littleton, CO | 35 | 1,630,538 | 607,538 | Dillard’s, Foley’s, JCPenney, Nordstrom | 1 | ||||||||||||||||
| Pembroke Lakes Mall | Pembroke Pines (Fort Lauderdale), FL | 50 | 1,067,074 | 355,799 | Dillard’s, Dillard’s Men’s & Home, JCPenney, Macy’s, Sears | — | ||||||||||||||||
| Perimeter Mall | Atlanta, GA | 50 | 1,561,219 | 507,945 | Bloomingdale’s, Dillard’s, Macy’s, Nordstrom | — | ||||||||||||||||
| Quail Springs Mall | Oklahoma City, OK | 50 | 1,134,623 | 349,823 | AMC Theatres, Dillard’s, Foley’s, JCPenney, Sears | — | ||||||||||||||||
| Riverchase Galleria | Hoover (Birmingham), AL | 50 | 1,562,460 | 513,553 | Comp USA, JCPenney, Macy’s, Parisian, Proffitt’s, Sears | 1 | ||||||||||||||||
| The Shoppes at Buckland Hills | Manchester, CT | 50 | 978,117 | 429,944 | Filene’s, Filene’s Home & Men’s Store, JCPenney, Sears | 1 | ||||||||||||||||
| Shopping Center Iguatemi Bahia | Salvador, Bahia (Brazil) | 35 | 685,310 | 426,846 | Bompreco, C&A, Lojas Americanas, Cinema Multiplex, Playland, Riachuelo | — | ||||||||||||||||
| Shopping Center Taboao da Serra | Taboao da Serra, Sao Paulo (Brazil) | 35 | 418,660 | 188,172 | Beshi, C&A, Carrefour, Lojas Americanas, Riachuelo, Telha Norte | — | ||||||||||||||||
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Table of Contents
| GLA | ||||||||||||||||||||||
| Ownership | Mall and | Anchor | ||||||||||||||||||||
| Name of Center | Location(1) | Interest | Total | Freestanding | Anchors/Significant Tenants | Vacancies | ||||||||||||||||
| Silver City Galleria | Taunton (Boston), MA | 50 | 1,039,278 | 412,102 | Dick’s Sporting Goods, Filene’s, JCPenney, Sears, Silver City Cinemas, Steve & Barry’s University Sportswear | — | ||||||||||||||||
| Steeplegate Mall | Concord, NH | 50 | 481,041 | 224,694 | The Bon Ton, JCPenney, Sears | — | ||||||||||||||||
| Stonebriar Centre | Frisco (Dallas), TX | 50 | 1,652,556 | 527,523 | AMC Theatres, Barnes & Noble, Dave & Buster’s, Dick’s Sporting Goods, Foley’s, JCPenney, Macy’s, Nordstrom, Sears | — | ||||||||||||||||
| Superstition Springs Center(2) | East Mesa (Phoenix), AZ | 16.7 | 1,056,253 | 319,099 | Dillards, JCPenney, JCPenney Home Store, Mervyn’s, Robinsons-May, Sears | — | ||||||||||||||||
| Towson Town Center | Towson, MD | 35 | 939,255 | 520,126 | Hecht’s, Nordstrom, Nordstrom Rack | — | ||||||||||||||||
| Trails Village Partners | Summerlin, NV | 50 | 174,660 | 174,660 | Longs Drug Store, Vons Grocery Store | — | ||||||||||||||||
| Tysons Galleria | McLean (Washington, D.C.), VA | 50 | 821,744 | 309,811 | Macy’s, Neiman Marcus, Saks Fifth Avenue | — | ||||||||||||||||
| Via Parque | Rio de Janeiro, Rio de Janeiro (Brazil) | 50 | 564,032 | 241,271 | Kalunga, Leaders, Lojas Americanas, Marisa, Cine Via Parque, Claro Hall, Magic Games, C&C Casa e Construcao | — | ||||||||||||||||
| Village of Merrick Park(2) | Coral Gables, FL | 40 | 742,914 | 412,914 | Neiman Marcus, Nordstrom | — | ||||||||||||||||
| Vista Ridge Mall | Lewisville (Dallas), TX | 50 | 1,103,078 | 336,486 | Cinemark, Dillard’s, Foley’s, JCPenney, Movies 12, Sears | — | ||||||||||||||||
| Washington Park Mall | Bartlesville, OK | 50 | 357,346 | 163,050 | Dillard’s, JCPenney, Sears | — | ||||||||||||||||
| Water Tower Place | Chicago, IL | 52 | 712,798 | 285,755 | Lord & Taylor, Marshall Field’s | — | ||||||||||||||||
| West Oaks Mall | Ocoee (Orlando), FL | 50 | 1,168,566 | 371,816 | AMC Theatres, Dillard’s, JCPenney, McRae’s, Sears | 1 | ||||||||||||||||
| Westroads Mall | Omaha, NE | 51 | 1,138,923 | 314,863 | Dick’s Sporting Goods, JCPenney, Tilt, Von Maur, Younkers | 1 | ||||||||||||||||
| Whalers Village | Lahaina, HI | 50 | 105,715 | 105,715 | N/A | N/A | ||||||||||||||||
| Willowbrook Mall | Houston, TX | 50 | 1,511,885 | 405,301 | Dillard’s, Foley’s, JCPenney, Sears | 1 | ||||||||||||||||
| The Woodlands Mall | The Woodlands (Houston), TX | 50 | 1,332,854 | 487,625 | Dillard’s, Foley’s, Foley’s Children Store, JCPenney, Mervyn’s, Sears | — | ||||||||||||||||
| 59,066,725 | 21,857,493 | |||||||||||||||||||||
| (1) | In certain cases, where a center’s location is part of a larger metropolitan area, the metropolitan area is identified in parenthesis. |
| (2) | A portion of the property is subject to ground lease. |
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Leasing
The following schedule shows scheduled lease expirations in our Retail Portfolio over the next five years.
| Consolidated* | Unconsolidated* | |||||||||||||||||||||||
| Square | Rent per | Square | Rate per | |||||||||||||||||||||
| Base Rent | Footage | Square Foot | Base Rent | Footage | Square Foot | |||||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||||
| 2006 | $ | 103,983 | 3,448 | $ | 30.16 | $ | 29,594 | 881 | $ | 33.59 | ||||||||||||||
| 2007 | 99,456 | 3,241 | 30.69 | 24,988 | 722 | 34.61 | ||||||||||||||||||
| 2008 | 104,657 | 3,262 | 32.08 | 25,514 | 714 | 35.73 | ||||||||||||||||||
| 2009 | 112,595 | 2,958 | 38.06 | 23,908 | 560 | 42.69 | ||||||||||||||||||
| 2010 | 123,085 | 3,366 | 36.57 | 27,506 | 654 | 42.06 | ||||||||||||||||||
| Total | $ | 543,776 | 16,275 | $ | 33.41 | $ | 131,510 | 3,531 | $ | 37.24 | ||||||||||||||
| * | Excludes Anchors, community centers and tenants paying overage rent in lieu of base minimum rent. Unconsolidated amounts reflected at our ownership share. |
Combined occupancy for Consolidated Properties and Unconsolidated Properties as of December 31, 2005 was 92.5%.
Anchors
Anchors have traditionally been a major component of a regional shopping center. Anchors are frequently department stores whose merchandise appeals to a broad range of shoppers. Anchors generally either own their stores, the land under them and adjacent parking areas, or enter into long-term leases at rates that are generally lower than the rents charged to Mall Store tenants. The centers in the Retail Portfolio receive a smaller percentage of their operating income from Anchors than from Mall Stores. While the market share of many traditional department store Anchors has been declining, strong Anchors continue to play an important role in maintaining customer traffic and making the centers in the Retail Portfolio desirable locations for Mall Store tenants.
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The following table indicates the parent company of certain Anchors and sets forth the number of stores and square feet owned or leased by each Anchor in the Retail Portfolio as of December 31, 2005.
| Consolidated | Unconsolidated | Total | ||||||||||||||||||||||||
| Total | Square Feet | Total | Square Feet | Total | Square Feet | |||||||||||||||||||||
| Stores | (000’s) | Stores | (000’s) | Stores | (000’s) | |||||||||||||||||||||
Federated Department Stores, Inc.(1) | ||||||||||||||||||||||||||
| Bloomingdale’s | 1 | 260 | 2 | 373 | 3 | 633 | ||||||||||||||||||||
| Bloomingdale’s Home | 1 | 100 | 1 | 92 | 2 | 192 | ||||||||||||||||||||
| David’s Bridal | 1 | 10 | — | — | 1 | 10 | ||||||||||||||||||||
| Famous Barr | 3 | 534 | — | — | 3 | 534 | ||||||||||||||||||||
| Filene’s | 2 | 325 | 5 | 812 | 7 | 1,137 | ||||||||||||||||||||
| Filene’s Home & Men’s Store | — | — | 1 | 103 | 1 | 103 | ||||||||||||||||||||
| Filene’s Home Store | 1 | 41 | — | — | 1 | 41 | ||||||||||||||||||||
| Foley’s | 12 | 1,893 | 12 | 2,288 | 24 | 4,181 | ||||||||||||||||||||
| Foley’s Children’s Store | — | — | 1 | 17 | 1 | 17 | ||||||||||||||||||||
| Hecht’s | 7 | 1,173 | 2 | 341 | 9 | 1,514 | ||||||||||||||||||||
| L.S. Ayres | 1 | 242 | — | — | 1 | 242 | ||||||||||||||||||||
| Lord & Taylor | 6 | 758 | 6 | 799 | 12 | 1,557 | ||||||||||||||||||||
| Macy’s | 40 | 6,614 | 21 | 4,026 | 61 | 10,640 | ||||||||||||||||||||
| Macy’s Home Store | 2 | 202 | 1 | 112 | 3 | 314 | ||||||||||||||||||||
| Marshall Field’s | 14 | 2,135 | 5 | 945 | 19 | 3,080 | ||||||||||||||||||||
| Marshall Field’s Men’s & Home | 2 | 239 | — | — | 2 | 239 | ||||||||||||||||||||
| Marshall Field’s Women’s | 1 | 202 | — | — | 1 | 202 | ||||||||||||||||||||
| Meier & Frank | 3 | 502 | 1 | 199 | 4 | 701 | ||||||||||||||||||||
| Meier & Frank Home Store | 1 | 84 | 1 | 166 | 2 | 250 | ||||||||||||||||||||
| Robinsons-May | 4 | 650 | 4 | 676 | 8 | 1,326 | ||||||||||||||||||||
| Strawbridge’s | — | — | 2 | 426 | 2 | 426 | ||||||||||||||||||||
| Total Federated Department Stores, Inc. | 102 | 15,964 | 65 | 11,375 | 167 | 27,339 | ||||||||||||||||||||
Sears Holdings Corporation | ||||||||||||||||||||||||||
| Sears | 94 | 13,260 | 34 | 5,416 | 128 | 18,676 | ||||||||||||||||||||
| Kmart | 1 | 88 | — | — | 1 | 88 | ||||||||||||||||||||
| Total Sears Holdings Corporation | 95 | 13,348 | 34 | 5,416 | 129 | 18,764 | ||||||||||||||||||||
JCPenney Company, Inc. | ||||||||||||||||||||||||||
| JCPenney | 93 | 10,565 | 36 | 5,017 | 129 | 15,582 | ||||||||||||||||||||
| Total JCPenney Company, Inc. | 93 | 10,565 | 36 | 5,017 | 129 | 15,582 | ||||||||||||||||||||
Dillard’s Inc. | ||||||||||||||||||||||||||
| Dillard’s | 52 | 8,482 | 22 | 4,207 | 74 | 12,689 | ||||||||||||||||||||
| Dillard’s Men’s | — | — | 1 | 80 | 1 | 80 | ||||||||||||||||||||
| Dillard’s Men’s & Home | 2 | 257 | 2 | 157 | 4 | 414 | ||||||||||||||||||||
| Total Dillard’s Inc. | 54 | 8,739 | 25 | 4,444 | 79 | 13,183 | ||||||||||||||||||||
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| Consolidated | Unconsolidated | Total | ||||||||||||||||||||||||
| Total | Square Feet | Total | Square Feet | Total | Square Feet | |||||||||||||||||||||
| Stores | (000’s) | Stores | (000’s) | Stores | (000’s) | |||||||||||||||||||||
Saks Holdings, Inc. | ||||||||||||||||||||||||||
| Bergner’s | 1 | 154 | — | — | 1 | 154 | ||||||||||||||||||||
| Boston Store | 1 | 211 | — | — | 1 | 211 | ||||||||||||||||||||
| Carson Pirie Scott | 1 | 138 | — | — | 1 | 138 | ||||||||||||||||||||
| Herberger’s | 3 | 187 | — | — | 3 | 187 | ||||||||||||||||||||
| Parisian | 1 | 86 | 5 | 518 | 6 | 604 | ||||||||||||||||||||
| Saks Fifth Avenue | 7 | 478 | 1 | 120 | 8 | 598 | ||||||||||||||||||||
| Younkers | 8 | 940 | 2 | 244 | 10 | 1,184 | ||||||||||||||||||||
| Total Saks Holdings, Inc. | 22 | 2,194 | 8 | 882 | 30 | 3,076 | ||||||||||||||||||||
MDS Texas Realty I (d.b.a. Mervyn’s)(2) | 20 | 1,645 | 8 | 674 | 28 | 2,319 | ||||||||||||||||||||
Nordstrom, Inc. | ||||||||||||||||||||||||||
| Nordstrom | 8 | 1,255 | 12 | 2,046 | 20 | 3,301 | ||||||||||||||||||||
| Total Nordstrom, Inc. | 8 | 1,255 | 12 | 2,046 | 20 | 3,301 | ||||||||||||||||||||
Belk, Inc. | ||||||||||||||||||||||||||
| Belk | 5 | 848 | 3 | 454 | 8 | 1,302 | ||||||||||||||||||||
| Belk Men’s | 1 | 34 | — | — | 1 | 34 | ||||||||||||||||||||
| Hudson Belk | 1 | 180 | — | — | 1 | 180 | ||||||||||||||||||||
| McRae’s | 4 | 410 | 1 | 213 | 5 | 623 | ||||||||||||||||||||
| Proffitt’s | 1 | 90 | 1 | 230 | 2 | 320 | ||||||||||||||||||||
| Proffitt’s Home Store | 1 | 23 | — | — | 1 | 23 | ||||||||||||||||||||
| Total Belk, Inc. | 13 | 1,585 | 5 | 897 | 18 | 2,482 | ||||||||||||||||||||
Target Corporation | ||||||||||||||||||||||||||
| Target | 14 | 1,543 | 2 | 300 | 16 | 1,843 | ||||||||||||||||||||
| Total Target Corporation | 14 | 1,543 | 2 | 300 | 16 | 1,843 | ||||||||||||||||||||
Others | 107 | 7,255 | 46 | 3,558 | 153 | 10,814 | ||||||||||||||||||||
Grand Total | 528 | 64,093 | 241 | 34,609 | 769 | 98,703 | ||||||||||||||||||||
| (1) | In August 2005, Federated Department Stores, Inc. completed its merger with May Department Stores Company. In July and October, Federated announced planned store closings which included 15 of our Anchor stores. We may purchase some of these stores. |
| (2) | In 2006, we acquired six Mervyn’s anchor locations for an aggregate purchase price of approximately $76 million. |
Non-Retail Properties
See Item 1 “Narrative Description of Business” for information regarding our other properties (office, industrial andmixed-use buildings) and our Master Planned Communities segment.
| Item 3. | Legal Proceedings |
Neither the Company nor any of the Unconsolidated Real Estate Affiliates is currently involved in any material pending legal proceedings nor, to our knowledge, is any material legal proceeding currently threatened against the Company or any of the Unconsolidated Real Estate Affiliates.
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| Item 4. | Submission of Matters to a Vote of Security Holders |
No matters were submitted to a vote of General Growth’s stockholders during the fourth quarter of 2005.
PART II
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
General Growth’s common stock is listed on the New York Stock Exchange (“NYSE”) and trades under the symbol “GGP.” As of March 24, 2006, 241,005,634 outstanding shares of our common stock were held by 2,496 stockholders of record. The closing price per share of our common stock on the NYSE on March 24, 2006, was $49.64 per share.
On November 20, 2003, our stockholders approved a three-for-one stock split which was effective on the same date. All share and per share information is presented on a post-split basis.
Reference is made to Item 12 for information regarding shares of our common stock that may be issued under our equity compensation plans as of December 31, 2005.
The following table summarizes the quarterly high and low sales prices per share of our common stock as reported by the NYSE.
| Stock Price | ||||||||
| Quarter Ended | High | Low | ||||||
2005 | ||||||||
| December 31 | $ | 48.27 | $ | 39.60 | ||||
| September 30 | 47.48 | 40.82 | ||||||
| June 30 | 42.08 | 33.40 | ||||||
| March 31 | 37.75 | 31.38 | ||||||
2004 | ||||||||
| December 31 | $ | 36.90 | $ | 30.90 | ||||
| September 30 | 32.12 | 28.41 | ||||||
| June 30 | 35.30 | 24.31 | ||||||
| March 31 | 35.15 | 27.25 | ||||||
2003 | ||||||||
| December 31 | $ | 28.03 | $ | 23.91 | ||||
| September 30 | 24.03 | 20.77 | ||||||
| June 30 | 21.06 | 17.83 | ||||||
| March 31 | 18.40 | 15.90 | ||||||
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The following table summarizes quarterly distributions per share of our common stock.
| Declaration Date | Record Date | Payment Date | Amount | |||||||||
| January 6, 2006 | January 17, 2006 | January 31, 2006 | $ | .41 | ||||||||
| October 6, 2005 | October 18, 2005 | October 31, 2005 | .41 | |||||||||
| July 5, 2005 | July 15, 2005 | July 29, 2005 | .36 | |||||||||
| April 4, 2005 | April 15, 2005 | April 29, 2005 | .36 | |||||||||
| January 7, 2005 | January 17, 2005 | January 31, 2005 | .36 | |||||||||
| August 20, 2004 | October 15, 2004 | October 29, 2004 | .36 | |||||||||
| July 2, 2004 | July 15, 2004 | July 30, 2004 | .30 | |||||||||
| April 5, 2004 | April 15, 2004 | April 30, 2004 | .30 | |||||||||
| January 5, 2004 | January 15, 2004 | January 30, 2004 | .30 | |||||||||
| October 1, 2003 | October 15, 2003 | October 31, 2003 | .30 | |||||||||
| June 9, 2003 | July 7, 2003 | July 31, 2003 | .24 | |||||||||
| March 14, 2003 | April 3, 2003 | April 30, 2003 | .24 | |||||||||
On August 3, 2005, we announced that our Board of Directors authorized, effective immediately, a $200 million per fiscal year common stock repurchase program. Stock repurchases under this program are made through open market or privately negotiated transactions through 2009, unless the program is earlier terminated. The repurchase program gives 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. There were no repurchases under this program during the quarter ended December 31, 2005.
See Note 12 for information regarding exchanges of Common Units for common stock.
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| Item 6. Selected Financial Data |
The following table sets forth selected financial data which is derived from, and should be read in conjunction with, the Consolidated Financial Statements and the related Notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Annual Report.
Results for prior periods have been restated to reflect the reclassification of disposed properties in 2005 to discontinued operations (Note 4).
| 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||||||
Operating Data | |||||||||||||||||||||
| Revenues | $ | 3,073,416 | $ | 1,799,881 | $ | 1,262,791 | $ | 973,440 | $ | 799,365 | |||||||||||
| Depreciation and amortization | (672,914 | ) | (364,854 | ) | (230,195 | ) | (179,036 | ) | (144,863 | ) | |||||||||||
| Other operating expenses | (1,342,161 | ) | (693,735 | ) | (484,196 | ) | (366,806 | ) | (293,565 | ) | |||||||||||
| Interest expense, net | (1,020,825 | ) | (468,958 | ) | (276,235 | ) | (215,340 | ) | (220,402 | ) | |||||||||||
| Provision for income taxes | (50,646 | ) | (2,383 | ) | (98 | ) | (119 | ) | (160 | ) | |||||||||||
| Income allocated to minority interests | (43,989 | ) | (105,274 | ) | (110,984 | ) | (86,213 | ) | (40,288 | ) | |||||||||||
| Equity in income of unconsolidated affiliates | 120,986 | 88,191 | 94,480 | 80,825 | 60,195 | ||||||||||||||||
| Network discontinuance costs | — | — | — | — | (66,000 | ) | |||||||||||||||
| Income from continuing operations | 63,867 | 252,868 | 255,563 | 206,751 | 94,282 | ||||||||||||||||
| Income from discontinued operations, net | 11,686 | 14,984 | 7,848 | 2,507 | 1,362 | ||||||||||||||||
| Income before cumulative effect of accounting change | 75,553 | 267,852 | 263,411 | 209,258 | 95,644 | ||||||||||||||||
| Cumulative effect of accounting change | — | — | — | — | (3,334 | ) | |||||||||||||||
| Net income | 75,553 | 267,852 | 263,411 | 209,258 | 92,310 | ||||||||||||||||
| Convertible preferred stock dividends | — | — | (13,030 | ) | (24,467 | ) | (24,467 | ) | |||||||||||||
| Net income available to common stockholders | $ | 75,553 | $ | 267,852 | $ | 250,381 | $ | 184,791 | $ | 67,843 | |||||||||||
Basic earnings per share: | |||||||||||||||||||||
| Continuing operations | $ | 0.27 | $ | 1.15 | $ | 1.21 | $ | 0.98 | $ | 0.44 | |||||||||||
| Discontinued operations | 0.05 | 0.07 | 0.04 | 0.01 | 0.01 | ||||||||||||||||
| Cumulative effect of accounting change | — | — | — | — | (0.02 | ) | |||||||||||||||
| $ | 0.32 | $ | 1.22 | $ | 1.25 | $ | 0.99 | $ | 0.43 | ||||||||||||
Diluted earnings per share: | |||||||||||||||||||||
| Continuing operations | $ | 0.27 | $ | 1.15 | $ | 1.19 | $ | 0.97 | $ | 0.44 | |||||||||||
| Discontinued operations | 0.05 | 0.06 | 0.03 | 0.01 | 0.01 | ||||||||||||||||
| Cumulative effect of accounting change | — | — | — | — | (0.02 | ) | |||||||||||||||
| $ | 0.32 | $ | 1.21 | $ | 1.22 | $ | 0.98 | $ | 0.43 | ||||||||||||
Distributions declared per share | $ | 1.49 | $ | 1.26 | $ | 0.78 | $ | 0.92 | $ | 0.80 | |||||||||||
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| 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||||||
Balance Sheet Data | ||||||||||||||||||||
| Investment in real estate assets — cost | $ | 25,401,633 | $ | 25,254,333 | $ | 10,307,961 | $ | 7,724,515 | $ | 5,707,967 | ||||||||||
| Total assets | 25,307,019 | 25,718,625 | 9,582,897 | 7,280,822 | 5,646,807 | |||||||||||||||
| Total debt | 20,418,875 | 20,310,947 | 6,649,490 | 4,592,311 | 3,398,207 | |||||||||||||||
| Preferred minority interests | 205,944 | 403,161 | 495,211 | 468,201 | 175,000 | |||||||||||||||
| Common minority interests | 430,292 | 551,282 | 408,613 | 377,746 | 380,359 | |||||||||||||||
| Convertible preferred stock | — | — | — | 337,500 | 337,500 | |||||||||||||||
| Stockholders’ equity | 1,932,918 | 2,143,150 | 1,670,409 | 1,196,525 | 1,183,386 | |||||||||||||||
Cash Flow Data | ||||||||||||||||||||
| Operating activities | $ | 841,978 | $ | 719,376 | $ | 585,735 | $ | 460,495 | $ | 207,125 | ||||||||||
| Investing activities | (159,565 | ) | (9,021,509 | ) | (1,753,426 | ) | (949,411 | ) | (367,366 | ) | ||||||||||
| Financing activities | (619,203 | ) | 8,331,037 | 1,124,728 | 381,801 | 293,767 | ||||||||||||||
Funds From Operations(1) | ||||||||||||||||||||
| Operating Partnership | $ | 896,005 | $ | 766,164 | $ | 618,561 | $ | 485,304 | $ | 296,777 | ||||||||||
| Less: Allocation to Operating Partnership unitholders | (166,003 | ) | (154,347 | ) | (138,568 | ) | (116,170 | ) | (80,215 | ) | ||||||||||
| General Growth stockholders | $ | 730,002 | $ | 611,817 | $ | 479,993 | $ | 369,134 | $ | 216,562 | ||||||||||
| (1) | Funds From Operations (“FFO” as defined below) does not represent cash flow from operations as defined by Generally Accepted Accounting Principles (“GAAP”). |
Funds From Operations
Consistent with real estate industry and investment community practices, we use Funds From Operations (“FFO”) as a supplemental measure of our operating performance. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains or losses from cumulative effects of accounting changes, extraordinary items and sales of operating rental properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.
We consider FFO a useful supplemental measure for equity REITs and a complement to GAAP measures because it facilitates an understanding of the operating performance of our properties. FFO does not include real estate depreciation and amortization required by GAAP since these amounts are computed to allocate the cost of a property over its useful life. Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, we believe that FFO provides investors with a clearer view of our operating performance.
In order to provide a better understanding of the relationship between FFO and net income available to common stockholders, a reconciliation of FFO to net income available to common stockholders has been provided. FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to GAAP net income and is not necessarily indicative of cash available to fund all cash requirements.
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Reconciliation of FFO to Net Income Available to Common Stockholders
| 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||
| (In thousands) | |||||||||||||||||||||
| FFO: | |||||||||||||||||||||
| General Growth stockholders | $ | 730,002 | $ | 611,817 | $ | 479,993 | $ | 369,134 | $ | 216,562 | |||||||||||
| Operating Partnership unitholders | 166,003 | 154,347 | 138,568 | 116,170 | 80,215 | ||||||||||||||||
| Operating Partnership | 896,005 | 766,164 | 618,561 | 485,304 | 296,777 | ||||||||||||||||
| Depreciation and amortization of capitalized real estate costs | (799,337 | ) | (440,108 | ) | (299,711 | ) | (241,393 | ) | (200,123 | ) | |||||||||||
| FFO of discontinued operations | (13,548 | ) | (6,235 | ) | (6,299 | ) | (4,263 | ) | (2,215 | ) | |||||||||||
| Allocations to Operating Partnership unitholders | (19,253 | ) | (66,953 | ) | (56,988 | ) | (32,897 | ) | (157 | ) | |||||||||||
| Income from continuing operations | 63,867 | 252,868 | 255,563 | 206,751 | 94,282 | ||||||||||||||||
| Income from discontinued operations, net of minority interest | 11,686 | 14,984 | 7,848 | 2,507 | 1,362 | ||||||||||||||||
| Income before cumulative effect of accounting change and convertible preferred stock dividends | 75,553 | 267,852 | 263,411 | 209,258 | 95,644 | ||||||||||||||||
| Cumulative effect of accounting change | — | — | — | — | (3,334 | ) | |||||||||||||||
| Convertible preferred stock dividends | — | — | (13,030 | ) | (24,467 | ) | (24,467 | ) | |||||||||||||
| Net income available to common stockholders | $ | 75,553 | $ | 267,852 | $ | 250,381 | $ | 184,791 | $ | 67,843 | |||||||||||
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
All references to numbered Notes are to specific footnotes to our Consolidated Financial Statements included in this Annual Report and which descriptions are incorporated into the applicable response by reference. The following discussion should be read in conjunction with such Consolidated Financial Statements and related Notes. Capitalized terms used, but not defined, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) have the same meanings as in such Notes. See also the Glossary at the end of this Item 7 for definitions of selected terms used in this Annual Report.
Overview — Retail and Other Segment
Our primary business is acquiring, owning, managing, leasing and developing retail and office rental property. As of December 31, 2005, we had ownership interest in or management responsibility for a portfolio of over 200 regional shopping malls in 44 states. We provideon-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.”
Prior year acquisitions were the most significant factor affecting our cash flows and real estate net operating income in 2005, 2004 and 2003. Acquisitions have included single centers, privately held portfolios andpublic-to-public purchases such as the $14 billion TRC Merger in November 2004. Acquisitions in 2005, however, were not significant and consisted primarily of interests in joint ventures which are developing retail centers.
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We seek to increase cash flow and real estate net operating income of our retail and office rental properties through 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.
We believe that the most significant operating factor affecting incremental cash flow and real estate 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 $37.72 per square foot which was $4.43 per square foot higher than the average annualized in place rent per square foot, as detailed in the table immediately below. |
| • | 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 92.5 percent at December 31, 2005, compared to 92.1 percent at December 31, 2004. |
| • | Increased tenant sales in which we participate through overage rents. In 2005, tenant sales per square foot in our Retail Company Portfolio increased 6.4 percent over 2004 to $437 per square foot. |
The following table summarizes selected operating statistics as of December 31, 2005.
| Consolidated | Unconsolidated | Retail | ||||||||||
| Retail | Retail | Company | ||||||||||
| Properties | Properties | Portfolio | ||||||||||
Operating Statistics(a) | ||||||||||||
| Occupancy | 92.1 | % | 93.5 | % | 92.5 | % | ||||||
| Trailing 12 month total tenant sales per sq. ft.(b) | $ | 428 | $ | 455 | $ | 437 | ||||||
| % change in total sales(b) | 5.9 | % | 7.2 | % | 6.4 | % | ||||||
| % change in comparable sales(b) | 3.3 | 3.9 | 3.5 | |||||||||
| Mall and freestanding GLA excluding space under redevelopment (in sq. ft.) | 40,354,823 | 19,176,851 | 59,531,674 | |||||||||
Certain Financial Information | ||||||||||||
| Average annualized in place rent per sq. ft. | $ | 33.29 | $ | 36.25 | ||||||||
| Average rent per sq. ft. for new/renewal leases | 37.72 | 40.48 | ||||||||||
| Average rent per sq. ft. for leases expiring in 2005 | 29.63 | 32.31 | ||||||||||
| (a) | Excludes properties currently being redeveloped and/or remerchandised and miscellaneous (non-mall) properties. | |
| (b) | Due to tenant sales reporting timelines, data presented is as of November. |
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 December 31, 2005, we had 22 major approved redevelopment projects underway (each with budgeted projected expenditures, at our ownership share, in excess of $10 million).
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 Neiman Marcus, Nordstrom, Dillard’s and Foley’s. In August 2004, we completed theground-up development of Jordan Creek Town Center in West Des Moines, Iowa, a 1.9 million square foot enclosed regional shopping mall with four anchor stores, a hotel and an amphitheater.
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We have six retail center development projects currently under construction, all of which are scheduled to open in late 2006 or 2007:
| • | Lincolnshire Commons in Lincolnshire (Chicago), Illinois |
| • | Otay Ranch Town Center in Chula Vista (San Diego), California |
| • | Gateway Overlook in Benson, Maryland |
| • | Natick West in Natick, Massachusetts |
| • | The Shops at Fallen Timbers, Maumee (Toledo), Ohio |
| • | Pinnacle Hills Promenade in Rogers, Arkansas |
In addition, we have agreed to acquire the new retail development at The Palazzo in Las Vegas, Nevada, upon opening. This is currently expected in late 2007, at an estimated acquisition cost of $600 million. We also have 11 other potential new retail or mixed-use developments that are projected to open in 2006 through 2009.
Total projected expenditures (including our share of the Unconsolidated Real Estate Affiliates) for the 22 redevelopment projects and the six new retail center development projects were approximately $2.0 billion as of December 31, 2005. Such development and redevelopment expenditures, together with expenditures for the 11 other potential new retail or mixed-use developments are expected to result in approximately $450 to $800 million of expenditures per year for the years 2006 to 2009.
Overview — Master Planned Communities Segment
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 and 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 NOI of $95.7 million in 2005. Land sale activity at our newest project, the Bridgelands in Houston, Texas, began in 2006.
Overview — Other
We believe changes in interest rates are the most significant external factor affecting our cash flows and net income. As detailed in our discussion of economic conditions and market risk (Item 7A), interest rates have risen in recent months and could continue to rise in future months, which could adversely impact our future cash flow and net income.
During 2005, we obtained approximately $3.9 billion of consolidated debt through new financings and refinancings. Our share of debt issued by our Unconsolidated Real Estate Affiliates totaled approximately $840 million during the same period. Proceeds from the issuances were used, in part, to repay $2.7 billion of variable-rate debt.
Two of our operating retail properties (Oakwood Center in Gretna, Louisiana and Riverwalk, located near the convention center in downtown New Orleans) were closed in September 2005, when a hurricane struck the area. Although property damage in the New Orleans area was generally due to hurricane effects, the damage to Oakwood Center and Riverwalk was from arson and vandalism. Riverwalk partially re-opened on November 21, 2005 at a substantially reduced occupancy level. The Sears store at Oakwood Center is operating at a reduced level. Two other anchor stores at Oakwood Center are expected to re-open in 2006 and following repair and restoration, the remainder of the property is expected to open on or before Fall 2007. We have comprehensive insurance coverage for both property damage and business interruption. The restoration 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 approximately $53 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 December 31, 2005, we have recorded a net fixed asset write-off and a corresponding insurance claim recovery
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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 these amounts. While we expect the insurance proceeds will be sufficient to cover most of the replacement cost of the restoration of the properties and certain business interruption amounts, certain deductibles, limitations and exclusions are expected to apply with respect to both current and future matters. No determination has been made as to the total amount or timing of those insurance payments. As of December 31, 2005, $5 million in insurance proceeds related to the Oakwood property has been received, which has been offset against this insurance recovery receivable. In January 2006, we received an additional $5 million in insurance proceeds with respect to Oakwood and $2.5 million in insurance proceeds related to Riverwalk. As only a portion of the repairs have taken place as of December 31, 2005, substantially all of the remaining $63.4 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 in 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.
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, provision for income taxes, recoverable amounts of receivables, deferred taxes, initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions and cost ratios and completion percentages used for land sales. Actual results could differ 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. Our critical accounting policies are those applicable to the following:
Initial valuations and estimated useful lives or amortization periods for property and intangibles.When we acquire a property, we make an initial assessment of the initial valuation and composition of the assets acquired and liabilities assumed. These assessments consider fair values of the respective assets and liabilities and are primarily determined based on estimated future cash flows using appropriate discount and capitalization rates, but may also be based on independent appraisals or other market data. The estimated future cash flows that are used for this analysis reflect the historical operations of the property, known trends and changes expected in current market and economic conditions which would impact the property’s operations, and our plans for such property. These estimates are particularly important as they are used for the allocation of purchase price between depreciable and non-depreciable real estate and other identifiable intangibles including above, below and at-market leases. As a result, the impact of these estimates on our operations could be substantial.
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Significant differences in annual depreciation or amortization expense may result from the differing amortization periods related to such purchased assets and liabilities. For example, the TRC Merger increased land by $1.3 billion, buildings and equipment by $8.2 billion, investment land and land held for development and sale by $1.7 billion and other tenant-related intangibles and liabilities, net, by approximately $300 million. Buildings are depreciated over 40-45 years, equipment is depreciated over 5-15 years and purchased intangibles are amortized over the related remaining lease life which is, generally, 5 years. Land and investment land and land held for development and sale are not depreciated, however, the carrying value of such land will affect the gain/ loss recognized on the sale of such land. Therefore, the majority of the acquisition cost of $14 billion is reflected over time in increased depreciation and amortization charges.
Events or changes in circumstances concerning a property may occur which could indicate that the carrying values or amortization periods of the assets and liabilities may require adjustment. The resulting recovery analysis also depends on an analysis of future cash flows to be generated from a property’s assets and liabilities. Changes in our overall plans (for example, the extent and nature of a proposed redevelopment of a property) and our views on current market and economic conditions may have a significant impact on the resulting estimated future cash flows of a property that are analyzed for these purposes.
Recoverable amounts of receivables and deferred taxes.We make periodic assessments of the collectibility of receivables (including those resulting from the difference between rental revenue recognized and rents currently due from tenants) and the recoverability of deferred taxes based on a specific review of the risk of loss on specific accounts or amounts. The receivable analysis places particular emphasis on past-due accounts and considers the nature and age of the receivables, the payment history and financial condition of the payee, the basis for any disputes or negotiations with the payee and other information which may impact collectibility. For straight-line rents, the analysis considers the probability of collection of the unbilled deferred rent receivable given our experience regarding such amounts. For deferred taxes, an assessment of the recoverability of the current tax asset considers the current expiration periods of the prior net operating loss carryforwards and the estimated future taxable income of our taxable REIT subsidiaries. The resulting estimates of any allowance or reserve related to the recovery of these items is subject to revision as these factors change and is sensitive to the effects of economic and market conditions on such payees and our taxable REIT subsidiaries.
Capitalization of development and leasing costs.We capitalize the costs of development and leasing activities of our properties. These costs are incurred both at the property location and at the regional and corporate office level. The amount of capitalization depends, in part, on the identification and justifiable allocation of certain activities to specific projects and leases. Differences in methodologies of cost identification and documentation, as well as differing assumptions as to the time incurred on projects, can yield significant differences in the amounts capitalized and, as a result, the amount of depreciation recognized.
Revenue recognition and related matters.Minimum rent revenues are recognized on astraight-line basis over the terms of the related leases. Minimum rent revenues also include amounts collected from tenants to allow the termination of their leases prior to their scheduled termination dates and accretion related to above andbelow-market tenant leases on acquired properties.Straight-line rents receivable represents the current net cumulative rents recognized prior to when billed and collectible as provided by the terms of the leases. Overage rents are recognized on an accrual basis once tenant sales exceed contractual tenant lease thresholds. Recoveries from tenants are established in the leases or computed based upon a formula related to real estate taxes, insurance and other shopping center operating expenses and are generally recognized as revenues in the period the related costs are incurred. Revenues from land sales are recognized using the full accrual method provided that various criteria relating to the terms of the transactions and our subsequent involvement with the land sold are met. Revenues relating to transactions that do not meet the established criteria are deferred and recognized when the criteria are met or using the installment or cost recovery methods, as appropriate in the circumstances. For land sale transactions in which we are required to perform additional services and incur significant costs after title has passed, revenues and cost of sales are recognized on a percentage of completion basis.
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Cost of land sales is determined as a specified percentage of land sales revenues recognized for each community development project. The cost ratios used are based on actual costs incurred and estimates of development costs and sales revenues to completion of each project. The ratios are reviewed regularly and revised for changes in sales and cost estimates or development plans. Significant changes in these estimates or development plans, whether due to changes in market conditions or other factors, could result in changes to the cost ratio used for a specific project. The increase in the basis of the land due to purchase price accounting adjustments has resulted in a significant increase in the cost ratios of our projects. The specific identification method is used to determine cost of sales for certain parcels of land, including acquired parcels we do not intend to develop or for which development is complete at the date of acquisition.
Acquisitions
Acquisitions were as follows:
| Gross | ||||||||||||
| Purchase | New or | |||||||||||
| Acquisition Date | Price | Assumed Debt(1) | ||||||||||
| (In millions) | ||||||||||||
2005 | ||||||||||||
| 20% ownership interest in Shopping Leblon (under development) (through Cencom, S.A. (Brazil)) | August 3 | $ | 13.4 | — | ||||||||
| 50% ownership interest in Pinnacle Hills Promenade, a development in progress, (through Rogers Retail L.L.C.) | September 30 | 18.5 | — | |||||||||
| 50% interest in Circle T Power Center, a development in progress, (through 170 Retail Associates, LTD) | October 31 | 14.8 | — | |||||||||
| 50% interest in Whalers Village (through GGP/ Teachers) | November 1 | 85.0 | $ | 67.5 | ||||||||
| $ | 131.7 | $ | 67.5 | |||||||||
2004 | ||||||||||||
| 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 | $ | 134.4 | ||||||||
331/3% ownership interest in GGP/ Sambil Costa Rica | April 30 | 9.7 | (1) | — | ||||||||
| 50% ownership interest in Riverchase Galleria | May 11 | 166.0 | 100.0 | |||||||||
| Mall of Louisiana | May 12 | 265.0 | 185.0 | |||||||||
| The Grand Canal Shoppes | May 17 | 766.0 | 766.0 | |||||||||
| 50% ownership interest in GGP/ NIG Brazil | July 30 | 7.0 | (2) | — | ||||||||
| Stonestown Galleria | August 13 | 312.0 | 220.0 | |||||||||
| The Rouse Company | November 12 | 14,327.5 | (3) | 5,137.8 | ||||||||
| $ | 16,083.2 | $ | 6,543.2 | |||||||||
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| Gross | ||||||||||||
| Purchase | New or | |||||||||||
| Acquisition Date | Price | Assumed Debt(1) | ||||||||||
| (In millions) | ||||||||||||
2003 | ||||||||||||
| Peachtree Mall | April 30 | $ | 87.6 | $ | 53.0 | |||||||
| Saint Louis Galleria | June 11 | 235.0 | 176.0 | |||||||||
| Coronado Center | June 11 | 175.0 | 131.0 | |||||||||
| The remaining 49% ownership interest in GGP Ivanhoe III | July 1 | 459.0 | 268.0 | |||||||||
| Lynnhaven Mall | August 27 | 256.5 | 180.0 | |||||||||
| Sikes Senter | October 14 | 61.0 | 41.5 | |||||||||
| The Maine Mall | October 29 | 270.0 | 202.5 | |||||||||
| Glenbrook Square | October 31 | 219.0 | 164.3 | |||||||||
| Foothills Mall | December 5 | 100.5 | 45.7 | |||||||||
| Chico Mall | December 23 | 62.4 | 30.6 | |||||||||
| Rogue Valley Mall | December 23 | 57.5 | 28.0 | |||||||||
| $ | 1,983.5 | $ | 1,320.6 | |||||||||
| (1) | Additional funding, including for those acquisitions for which a specific and separate loan was not obtained, was paid from cash on hand or proceeds from borrowings under our credit facilities. |
| (2) | Total commitment of approximately $32.0 million, all of which has been funded at December 31, 2005. |
| (3) | Excludes approximately $130 million of purchase price adjustments which were recorded in 2005. |
Results of Operations
General:
Our revenues are primarily received from tenants in the form of fixed minimum rents, overage rents and recoveries of operating expenses. Our consolidated results of operations are also impacted by acquisitions. For additional information regarding our acquisitions, see the tables above and Note 3.
We provideon-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. As a result, we have presented the following discussion of our results of operations under the proportionate share 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. See Note 16 for additional information including reconciliations of our segment basis results to GAAP basis results.
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Retail and Other Segment
Acquisitions were the main reason for the increases in property revenues and expenses, on both a segment basis as detailed below and on a GAAP basis as reported in our Consolidated Statements of Income and Comprehensive Income:
| 2005 | 2004 | $ Increase | % Increase | ||||||||||||||
| (In thousands) | |||||||||||||||||
Property revenues: | |||||||||||||||||
| Minimum rents | $ | 2,064,127 | $ | 1,351,907 | $ | 712,220 | 52.7 | % | |||||||||
| Tenant recoveries | 936,029 | 607,811 | 328,218 | 54.0 | |||||||||||||
| Overage rents | 83,713 | 65,065 | 18,648 | 28.7 | |||||||||||||
| Other | 178,257 | 86,380 | 91,877 | 106.4 | |||||||||||||
| Total property revenues | 3,262,126 | 2,111,163 | 1,150,963 | 54.5 | |||||||||||||
Property operating expenses: | |||||||||||||||||
| Real estate taxes | 261,331 | 167,660 | 93,671 | 55.9 | |||||||||||||
| Repairs and maintenance | 238,605 | 156,401 | 82,204 | 52.6 | |||||||||||||
| Marketing | 78,227 | 61,571 | 16,656 | 27.1 | |||||||||||||
| Other property operating costs | 510,542 | 282,498 | 228,044 | 80.7 | |||||||||||||
| Provision for doubtful accounts | 18,725 | 13,141 | 5,584 | 42.5 | |||||||||||||
| Total property operating expenses | 1,107,430 | 681,271 | 426,159 | 62.6 | |||||||||||||
Real estate property net operating income | $ | 2,154,696 | $ | 1,429,892 | $ | 724,804 | 50.7 | % | |||||||||
Minimum rents increased $670 million as a result of acquisitions and $42 million largely as a result of Jordan Creek Town Center which opened in August 2004 and Ala Moana Center which was recently redeveloped. Minimum rents also include the net effect of above and below-market lease rent accretion pursuant to SFAS 141 and 142 of $41.8 million in 2005 and $34.5 million in 2004.
Tenant recoveries and overage rents increased primarily as a result of acquisitions.
Substantially all of the increases in real estate taxes, repairs and maintenance, marketing, other property operating costs and provision for doubtful accounts were attributable to acquisitions.
| 2004 | 2003 | $ Increase | % Increase | |||||||||||||||
| (In thousands) | ||||||||||||||||||
Property revenues: | ||||||||||||||||||
| Minimum rents | $ | 1,351,907 | $ | 1,061,772 | $ | 290,135 | 27.3 | % | ||||||||||
| Tenant recoveries | 607,811 | 472,471 | 135,340 | 28.6 | ||||||||||||||
| Overage rents | 65,065 | 43,552 | 21,513 | 49.4 | ||||||||||||||
| Other | 86,380 | 49,456 | 36,924 | 74.7 | ||||||||||||||
| Total property revenues | 2,111,163 | 1,627,251 | 483,912 | 29.7 | ||||||||||||||
Property operating expenses: | ||||||||||||||||||
| Real estate taxes | 167,660 | 128,332 | 39,328 | 30.6 | ||||||||||||||
| Repairs and maintenance | 156,401 | 115,149 | 41,252 | 35.8 | ||||||||||||||
| Marketing | 61,571 | 49,934 | 11,637 | 23.3 | ||||||||||||||
| Other property operating costs | 282,498 | 214,181 | 68,317 | 31.9 | ||||||||||||||
| Provision for doubtful accounts | 13,141 | 8,705 | 4,436 | 51.0 | ||||||||||||||
| Total property operating expenses | 681,271 | 516,301 | 164,970 | 32.0 | ||||||||||||||
Real estate property net operating income | $ | 1,429,892 | $ | 1,110,950 | $ | 318,942 | 28.7 | % | ||||||||||
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Minimum rents, tenant recoveries and other property revenues increased primarily as a result of acquisitions. Minimum rents also include the net effect of above and below-market lease rent accretion pursuant to SFAS 141 and 142 of $34.5 million in 2004 and $23.5 million in 2003.
Overage rents increased $17.0 million as a result of acquisitions and $4.5 million as a result of higher tenant sales, especially at Ala Moana Center.
Other property costs increased $78.9 million as a result of acquisitions and decreased $10.6 million as a result of lower operating costs at substantially all properties.
Real estate taxes, repairs and maintenance, marketing, and provision for doubtful accounts increased primarily due to acquisitions.
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 Segment
Land sale revenues totaled $468.3 million in 2005 and $105.8 million in 2004. Land sales operations expenses totaled $372.6 million in 2005 and $103.3 million in 2004. The Master Planned Communities are comprised of residential and commercial land, primarily in large-scale projects, which were acquired in the TRC Merger in November 2004. As a result, revenues and expenses in 2004 reflect operations for the six weeks following the acquisition only.
Certain Significant Consolidated Revenues and Expenses
| 2005 | 2004 | $ Increase | % Increase | |||||||||||||
| (In thousands) | ||||||||||||||||
| Tenant rents | $ | 2,494,851 | $ | 1,585,087 | $ | 909,764 | 57.4 | % | ||||||||
| Land sales | 385,205 | 68,643 | 316,562 | 461.2 | ||||||||||||
| Property operating expenses | 868,894 | 517,869 | 351,025 | 67.8 | ||||||||||||
| Land sales operations | 311,815 | 66,100 | 245,715 | 371.7 | ||||||||||||
| Management and other fees | 91,734 | 82,896 | 8,838 | 10.7 | ||||||||||||
| Property management and other costs | 148,399 | 100,267 | 48,132 | 48.0 | ||||||||||||
| Depreciation and amortization | 672,914 | 364,854 | 308,060 | 84.4 | ||||||||||||
| Interest expense | 1,031,241 | 472,185 | 559,056 | 118.4 | ||||||||||||
| Provision for income taxes | 50,646 | 2,383 | 48,263 | 2,025.3 | ||||||||||||
Substantially all of the increases in tenant rents (which includes minimum rents, tenant recoveries and overage rents), land sales, property operating expenses and land sales operations was attributable to acquisitions.
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 Mall in March 2004. As Town East Mall is now wholly-owned and consolidated in our results of operations, we no longer receive 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 $496.5 million in 2005 as compared to 2004 as a result of increased debt associated with acquisitions and $62.6 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. These increases were
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partially offset by lower debt extinguishment costs in 2005 as a result of deferred finance cost write-offs in 2004 resulting from TRC Merger funding. The weighted average interest rate on our outstanding debt was 5.64% at December 31, 2005 compared to approximately 5.16% at December 31, 2004. Amortization of purchase accounting adjustments, which increased the fair value of our debt acquired in the TRC Merger, decreased interest expense by approximately $51 million in 2005 and $1 million in 2004. See Liquidity and Capital Resources for information regarding 2006 financing activity and Item 7A, “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 taxable entities.
| $ Increase | % Increase | |||||||||||||||
| 2004 | 2003 | (Decrease) | (Decrease) | |||||||||||||
| (In thousands) | ||||||||||||||||
| Tenant rents | $ | 1,585,087 | $ | 1,142,385 | 442,702 | 38.8 | % | |||||||||
| Land sales | 68,643 | — | 68,643 | 100.0 | ||||||||||||
| Property operating expenses | 517,869 | 365,917 | 151,952 | 41.5 | ||||||||||||
| Land sales operations | 66,100 | — | 66,100 | 100.0 | ||||||||||||
| Management and other fees | 82,896 | 84,138 | (1,242 | ) | (1.5 | ) | ||||||||||
| Property management and other costs | 100,267 | 109,746 | (9,479 | ) | (8.6 | ) | ||||||||||
| Depreciation and amortization | 364,854 | 230,195 | 134,659 | 58.5 | ||||||||||||
| Interest expense | 472,185 | 278,543 | 193,642 | 69.5 | ||||||||||||
| Provision for income taxes | 2,383 | 98 | 2,285 | 2,331.6 | ||||||||||||
Substantially all of the increases in tenant rents (which includes minimum rents, tenant recoveries and overage rents), land sales, property operating expenses and land sales operations was attributable to acquisitions. The increase in property operating expenses attributable to acquisitions was partially offset by a $3.1 million decrease in operating costs at substantially all properties.
Management and other fees declined as a result of joint venture partnership interest acquisitions. We acquired the remaining 49% interest in GGP/ Ivanhoe III from our joint venture partner in July 2003 and the remaining 50% interest in Town East in March 2004. As these joint ventures are now consolidated in our results of operations, we no longer receive a management fee from these properties. These decreases were partially offset by increased development fees resulting from renovations at certain of our Unconsolidated Properties.
Property management and other costs decreased primarily as a result of lower costs in 2004 as the threshold-vesting stock options (“TSOs”) granted in 2002 vested in 2003 and there were no other previous groups of TSO grants that vested in 2004.
Depreciation and amortization increased $107.2 million as a result of acquisitions and $28.2 million as a result of additional depreciation on completed developments and other capitalized building and equipment costs.
Interest expense increased $173.8 million as a result of increased debt associated with acquisitions and $19.8 million as a result of higher debt levels primarily as a result of redevelopments and other working capital requirements. Interest expense also includes debt extinguishment costs of $15.9 million in 2004 and $2.5 million in 2003. This increase is primarily due to the write-off of unamortized deferred finance costs related to debt which was repaid in conjunction with the TRC Merger.
The increase in the provision for income taxes for 2004 primarily relates to operations acquired in the TRC Merger, including the Master Planned Communities segment, which are conducted by various taxable entities.
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Liquidity and Capital Resources
Our primary uses and sources of our consolidated cash are as follows:
| Uses | Sources | |
| Short-term liquidity and capital needs such as: | ||
| • Tenant construction allowances • Minor improvements made to individual properties that are not recoverable through common area maintenance charges to tenants • Dividend payments • Debt repayment requirements, including both principal and interest • Stock repurchases • Corporate and administrative expenses | • Operating cash flow, including the distributions of our share of cash flow produced by our Unconsolidated Real Estate Affiliates • Land sales from the Master Planned Communities segment • Borrowings under revolving credit facilities | |
| Longer-term liquidity needs such as: | ||
| • Acquisitions • New development, including our master planned communities • Major redevelopment, renovation or expansion programs at individual properties • Debt repayment requirements, including both principal and interest • Purchase of Anchor stores available as a result of consolidations, including the Federated/ May merger* • Income tax liabilities | • Secured loans collateralized by individual properties • Unsecured loans at either a venture or company level • Construction loans • Mini-permanent loans • Long-term project financing • Joint venture financing with institutional partners • Equity securities • Asset sales, including the sale of certain office and industrial property acquired in the TRC Merger |
| * | In August 2005, Federated Department Stores, Inc. completed its merger with May Department Stores Company. In July and October, Federated announced planned store closings which included 15 of our Anchor stores. We may purchase some of these stores. In addition, in 2006, we acquired six Mervyn’s anchor locations for an aggregate purchase price of approximately $76 million. |
Cash Flows from Operating Activities
Net cash provided by operating activities was $842.0 million in 2005, $719.4 million in 2004 and $585.7 million in 2003. Substantially all of the increases were attributable to acquisitions.
Cash Flows from Investing Activities
Net cash used in investing activities was $159.6 million in 2005, $9.0 billion in 2004 and $1.8 billion in 2003. Substantially all of the changes were attributable to acquisitions, including the TRC Merger in 2004.
As of December 31, 2005, we had 22 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 22 redevelopment projects and the six new retail center development projects that are under construction were approximately $2.0 billion as of December 31, 2005. Such development and redevelopment expenditures, together with expenditures for 11 other potential new retail or mixed-use developments, are expected to result in approximately $450 to $800 million of expenditures per year for the years 2006 to 2009.
Cash Flows from Financing Activities
Net cash (used in) provided by financing activities was ($619.2) million in 2005, $8.3 billion in 2004 and $1.1 billion in 2003.
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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:
| December 31, | ||||||||||||||
| 2005 | 2004 | 2003 | ||||||||||||
| (In millions) | ||||||||||||||
Consolidated: | ||||||||||||||
| Fixed-rate debt | $ | 14,789 | $ | 11,860 | $ | 4,552 | ||||||||
| Variable-rate debt: | ||||||||||||||
| 2004 Credit Facility: | ||||||||||||||
| Six-month bridge loan | — | 750 | — | |||||||||||
| Three-year term loan | 2,715 | 3,300 | — | |||||||||||
| Four-year term loan | 1,980 | 2,000 | — | |||||||||||
| Revolving credit facility | 180 | 150 | — | |||||||||||
| Total 2004 Credit Facility | 4,875 | 6,200 | — | |||||||||||
| Other variable-rate debt | 755 | 2,251 | 2,097 | |||||||||||
| Total variable-rate debt | 5,630 | 8,451 | 2,097 | |||||||||||
| Total consolidated | $ | 20,419 | $ | 20,311 | $ | 6,649 | ||||||||
| Weighted-average interest rate | 5.64 | % | 5.16 | % | 4.74 | % | ||||||||
Unconsolidated: | ||||||||||||||
| Fixed-rate debt | $ | 2,788 | $ | 2,112 | $ | 709 | ||||||||
| Variable-rate debt | 455 | 723 | 1,198 | |||||||||||
| Total Unconsolidated Real Estate Affiliates | $ | 3,243 | $ | 2,835 | $ | 1,907 | ||||||||
| Weighted-average interest rate | 5.56 | % | 5.16 | % | 4.53 | % | ||||||||
During 2005, we obtained approximately $3.9 billion of consolidated debt through new financings and refinancings. Our share of debt issued by our Unconsolidated Real Estate Affiliates totaled approximately $840 million during the same period. Proceeds from the issuances were used, in part, to repay $2.7 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 5.09%.
The rate on the four-year term loan was reduced by 25 basis points in June 2005 and the rates on the revolving credit facility and three-year term loan were reduced by 50 basis points in September 2005. The 2004 Credit Facility bore interest, until refinanced as discussed immediately below, at a weighted-average rate of LIBOR plus approximately 184 basis points.
In February 2006, we entered into several debt agreements. The proceeds of these transactions were used to reduce the amounts outstanding under the 2004 Credit Facility.
On February 24, 2006, we restated the 2004 Credit Facility and entered into a Second Amended and Restated Credit Agreement (the “2006 Credit Facility”). The 2006 Credit Facility provides for a $2.85 billion term loan (the “Term Loan”) and a $650 million revolving credit facility.
The 2006 Credit Facility has a four year term, with a one year extension option. The interest rate ranges from LIBOR plus 1.15% to LIBOR plus 1.5%, depending on our leverage ratio and assuming we maintain our election to have these loans designated as Eurodollar loans. The current interest rate is LIBOR plus 1.25%. Quarterly principal payments of $12.5 million on the Term Loan begin March 31, 2007, with the balance due at maturity.
Under the terms of the 2006 Credit Facility, we are subject to customary affirmative and negative covenants as we were under the 2004 Credit Facility. If a default occurs, the lenders will have the option of declaring all
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outstanding amounts immediately due and payable. These events of default include a failure to maintain our REIT status under the Internal Revenue Code, a 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.
Concurrently with the 2006 Credit Facility, we also entered into a $1.4 billion term loan (the “Short Term Loan”), TRCLP entered into a $500 million term loan (the “Bridge Loan”) and we issued $200 million of trust preferred securities through GGP Capital Trust I. All of these arrangements are subject to customary affirmative and negative covenants and events of default.
The interest rate on the Short Term Loan is the same as on the 2006 Credit Facility (currently LIBOR plus 1.25%). An $800 million principal payment is due under the Short Term Loan on August 14, 2006, with the balance due on December 31, 2006. We are required to apply the net proceeds of the refinancing of Ala Moana Center toward prepayment of the Short Term Loan.
The Bridge Loan bears interest at LIBOR plus 1.3% until May 24, 2006, and at LIBOR plus 1.55% thereafter, (assuming we maintain our election to have the loan designated as a Eurodollar loan) and is due August 24, 2006. We intend to repay the Bridge Loan with proceeds obtained from the sale of bonds issued by TRCLP.
As mentioned above, GGP Capital Trust I, a Delaware statutory trust (the “Trust”) and a wholly owned subsidiary of GGPLP, completed a private placement of $200 million of floating rate Preferred Securities. The Trust also issued $6.2 million of Common Securities to GGPLP. The Trust used the proceeds from the sale of the Preferred and Common Securities to purchase $206.2 million of floating rate Junior Subordinated Notes of GGPLP due 2036. The Preferred Securities require distributions equal to LIBOR plus 1.45%. Distributions are cumulative and accrue from the date of original issuance. The Preferred Securities mature on April 30, 2036, but may be redeemed beginning on April 30, 2011 if we exercise our right to redeem a like amount of the Junior Subordinated Notes. The Junior Subordinated Notes bear interest at LIBOR plus 1.45%.
Although agreements to refinance debt maturing in 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 2006 Credit Facility will not materially 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. We intend to continue to evaluate the percentage of variable-rate debt to total debt in 2006.
We have not generally guaranteed the debt of the Unconsolidated Real Estate Affiliates, however, certain Consolidated Properties are cross-collateralized with Unconsolidated Properties (Note 5) and we have retained or agreed to be responsible for a portion of certain debt of the Unconsolidated Real Estate Affiliates (Note 5).
During May 2005, we also redeemed $183 million of perpetual preferred units, which represented substantially all of the preferred units which we were able to redeem at that time.
Treasury Stock
On August 3, 2005, we announced that our Board of Directors authorized, effective immediately, a $200 million per fiscal year common stock repurchase program. Stock repurchases under this program are made through open market or privately negotiated transactions through 2009, unless the program is earlier terminated. The repurchase program gives 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. During 2005, we repurchased 2,214,000 shares for $99.6 million under this program.
Warrant Offering
On November 17, 2004, we sold 15.9 million shares of our common stock for $32.23 per share pursuant to a warrant offering.
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Contractual Cash Obligations and Commitments
The following table aggregates our contractual cash obligations and commitments subsequent to December 31, 2005:
| 2006 | 2007 | 2008 | 2009 | 2010 | Subsequent | Total | ||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
| Long-term debt-principal(1) | $ | 1,870,317 | $ | 2,378,676 | $ | 3,779,819 | $ | 5,072,581 | $ | 3,543,137 | $ | 3,627,430 | $ | 20,271,960 | ||||||||||||||
| Retained debt-principal | 50,928 | 88,365 | 2,367 | 2,524 | 120,019 | 38,516 | 302,719 | |||||||||||||||||||||
| Ground lease payments(1) | 8,248 | 8,372 | 8,395 | 8,419 | 8,428 | 352,535 | 394,397 | |||||||||||||||||||||
| Committed real estate acquisition contracts(2) | — | 250,000 | — | — | — | — | 250,000 | |||||||||||||||||||||
| Purchase obligations(3) | 68,725 | — | — | — | — | — | 68,725 | |||||||||||||||||||||
| Interest expense | 1,302,225 | 1,229,903 | 1,093,402 | 725,186 | 370,508 | 126,960 | 4,848,184 | |||||||||||||||||||||
| Other long-term liabilities(4) | — | — | — | — | — | — | — | |||||||||||||||||||||
| Total | $ | 3,300,443 | $ | 3,955,316 | $ | 4,883,983 | $ | 5,808,710 | $ | 4,042,092 | $ | 4,145,441 | $ | 26,135,985 | ||||||||||||||
| (1) | Excludes non-cash purchase accounting adjustments. |
| (2) | Reflects $250 million minimum purchase price of the Palazzo (Note 3). We currently expect the actual purchase price to be approximately $600 million. |
| (3) | Reflects accrued and incurred construction costs payable. Routine trade payables have been excluded. We expect development and redevelopment expenditures of $450 to $800 million per year for the years 2006 to 2009. |
| (4) | Other long-term liabilities related to ongoing real estate taxes have not been included in the table as such amounts depend upon future applicable real estate tax rates. Real estate tax expense was $206.2 million in 2005, $128.3 million in 2004 and $88.3 million in 2003. |
We anticipate that all of our debt will be repaid or refinanced on a timely basis. Other than as described above or in conjunction with possible future new developments or acquisitions, there are no current plans to incur additional debt, increase the amounts available under our credit facilities or raise equity capital.
We believe that we have adequate sources of funds if additional capital is required for any of the above listed obligations or for other purposes. However, there can be no assurance that we can obtain such financing on satisfactory terms.
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 were 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 2005 pursuant to the CSA. At December 31, 2005, 755,642 shares of common stock ($35.3 million) were issuable to the beneficiaries, representing their share of cash flows for the semi-annual period ended December 31, 2005.
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Off-Balance Sheet Financing Arrangements
We do not have any off-balance sheet financing arrangements.
REIT Requirements
In order to remain taxed as a real estate investment trust for federal income tax purposes, we must distribute or pay tax on 100% of our capital gains and at least 90% of our ordinary taxable income to stockholders. The following factors, among others, will affect operating cash flow and, accordingly, influence the decisions of the Board of Directors regarding distributions:
| • | 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 centers and procurement of leases for newly developed centers |
| • | 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 management 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 will provide adequate liquidity to conduct our operations, fund general and administrative expenses, fund operating costs and interest payments and allow distributions to our stockholders in accordance with the requirements of the Code.
Recently Issued Accounting Pronouncements and Developments
As described in Note 15, new accounting pronouncements have been issued which are effective for the current or subsequent year. We do not expect a significant impact on our financial statements due to the application of these new pronouncements.
Inflation
Inflation has been relatively low in recent years and has not had a significant detrimental impact on us. Should inflation rates increase in the future, substantially all of our tenant leases contain provisions designed to partially mitigate the negative impact of inflation. Such provisions include clauses enabling us to receive overage rents based on tenants’ gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. In addition, many of the leases expire each year which may enable us to replace or renew such expiring leases with new leases at higher base and/or overage rents, if rents under the expiring leases are below the then-existing market rates. Finally, many of the existing leases require the tenants to pay amounts related to all, or substantially all, of their share of certain operating expenses, including common area maintenance, real estate taxes and insurance, thereby partially reducing our exposure to increases in costs and operating expenses resulting from inflation. In general, these amounts either vary annually based on actual expenditures or are set on an initial share of costs with provisions for annual increases.
Inflation also poses a risk to us due to the probability of future increases in interest rates. Such increases would adversely impact us due to our outstanding variable-rate debt which increased substantially as a result of 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. Finally, 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.
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Forward-Looking Information
We may make forward-looking statements in this Annual Report and in other reports and proxy statements which we file with the SEC. 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, capital expenditures, dividends, capital structure or other financial items | |
| • | Descriptions of plans or objectives of our management for future operations, including pending acquisitions | |
| • | Forecasts of our future economic performance | |
| • | Descriptions of assumptions underlying or relating to any of the foregoing |
In this Annual 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 |
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,” “should,” “will,” “would” or similar expressions. Forward-looking statements should not be unduly relied upon. They give our expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made and we might not update them to reflect changes that occur after the date they are made.
There are several factors, many beyond our control, which could cause results to differ significantly from our expectations. Factors such as credit, market, operational, liquidity, interest rate and other risks, are described elsewhere in this Annual Report. Any factor described in this Annual 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 Annual Report that could cause results to differ from our expectations.
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GLOSSARY
Anchor: A department store or other large retail store with gross leaseable area greater than 30,000 square feet.
Code: The Internal Revenue Code of 1986, as amended.
Common Units: The common units of GGP Limited Partnership held by limited partners.
Company Portfolio: Includes both the Unconsolidated Properties and the Consolidated Properties.
Consolidated Properties: Properties in which we own either a majority or a controlling interest and, as a result, are consolidated under GAAP.
CSA: The Contingent Stock Agreement under which we assumed the obligations of TRC to issue shares of common stock twice a year to the beneficiaries thereunder.
Exchange Act: Securities Exchange Act of 1934, as amended.
Freestanding GLA: The gross leaseable area of freestanding retail stores in locations that are not attached to the primary complex of buildings that comprise a shopping center, measured in square feet.
Funds From Operations or FFO: A supplemental measure of operating performance defined by NAREIT as net income (loss) (computed in accordance with GAAP), excluding gains or losses from cumulative effects of accounting changes, extraordinary items and sales of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.
GAAP: Accounting principles generally accepted in the United States of America.
GGMI: General Growth Management, Inc., which manages, leases, and performs various services for some of our Unconsolidated Real Estate Affiliates and over 30 properties owned by unaffiliated third parties, all located in the United States.
GGPLP: GGP Limited Partnership, also referred to herein as the Operating Partnership, the partnership through which substantially all of our business is conducted.
Gross Leaseable Area or GLA: Gross leaseable retail space, including Anchors and all other leaseable areas, measured in square feet.
Mall GLA: Gross leaseable retail space, excluding both Anchors and Freestanding GLA, measured in square feet.
Mall Stores: Stores (other than Anchors) that are typically specialty retailers who lease space in the structure including, or attached to, the primary complex of buildings that comprise a shopping center.
MD&A: The Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Item 7 of this Annual Report on Form 10-K.
NAREIT: The National Association of Real Estate Investment Trusts.
NOI: Real estate property net operating income, the measure of property operating performance used by management.
Operating Partnership: GGP Limited Partnership, also referred to as GGPLP, the partnership through which substantially all of our business is conducted.
Overage rent: Rent paid by the tenant if its sales exceed an agreed upon minimum amount. The amount is calculated by multiplying the sales in excess of the minimum amount by a percentage defined in the applicable lease.
REIT: A real estate investment trust.
Retail Portfolio: The retail centers and mixed-use and other properties within our Retail and Other segment.
SEC: The United States Securities and Exchange Commission.
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Significant Tenants: Any tenant at a community/ strip center with gross leaseable area greater than 10,000 square feet.
Total GLA: The gross leaseable area of anchor stores plus Mall and Freestanding GLA.
Total Mall Stores Sales: The gross revenue from product sales to customers generated by the Mall Stores.
TRC Merger: The transaction in which we acquired The Rouse Company, a real estate development and management company, on November 12, 2004.
TRCLP: The Rouse Company LP.
TRS: An entity that has elected to be treated as taxable REIT subsidiary.
Unconsolidated Properties: Properties owned by Unconsolidated Real Estate Affiliates and which are unconsolidated under GAAP.
Unconsolidated Real Estate Affiliates: Joint venture entities in which we own a non-controlling interest.
| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
We have not entered into any transactions using derivative commodity instruments. We are subject to market risk associated with changes in interest rates both in terms of variable-rate debt and the price of new fixed-rate debt upon maturity of existing debt and for acquisitions. As of December 31, 2005, we had consolidated debt of $20.4 billion, including $6.5 billion of variable-rate debt of which approximately $883.1 million was subject to interest rate swap agreements, which fix the interest rate we are required to pay on such debt at approximately 5.46% 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 a rate per annum significantly higher (generally above 8% per annum) than current LIBOR rates (4.39% at December 31, 2005). A 25 basis point movement in the interest rate on the $5.6 billion of variable-rate debt which is not subject to interest rate swap agreements would result in an approximately $14.1 million annualized increase or decrease in consolidated interest expense and operating cash flows.
In addition, we are subject to interest rate exposure as a result of variable-rate debt collateralized by the Unconsolidated Properties 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 $455.6 million at December 31, 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 approximately $1.1 million annualized increase or decrease in our equity in the income and operating cash flows from Unconsolidated Real Estate Affiliates.
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 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 December 31, 2005, the fair value of our debt is estimated to be approximately $28.8 million lower than the carrying value of $20.4 billion. If LIBOR were to increase by 25 basis points, the fair value of our debt would be approximately $158.0 million lower than the carrying value and the fair value of our swap agreements would increase by approximately $1.6 million. For additional information concerning our debt, reference is made to Item 7, Liquidity and Capital Resources and Note 6.
| Item 8. | Financial Statements and Supplementary Data |
Reference is made to the Consolidated Financial Statements and Consolidated Financial Statement Schedule beginning on page F-1 for the required information.
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| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
| Item 9A. | Controls and Procedures |
Disclosure Controls and Procedures.As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)). Based on that evaluation, the CEO and the CFO have concluded that our disclosure controls and procedures are effective to ensure that information that we are required to disclose in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.
Internal Controls over Financing Reporting.There have been no changes in our internal controls during our most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting or in other factors that could significantly affect internal controls subsequent to the end of the period covered by this report.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and preparation of our financial statements for external reporting purposes in accordance with generally accepted accounting principles in the U.S.
As of December 31, 2005, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework utilizing the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Controls — Integrated Framework.” Based on this assessment management believes that, as of December 31, 2005, the Company did not maintain effective internal control over financial reporting because of the effect of material weaknesses in the Company’s system of internal controls. During the closing process for the year ended December 31, 2005, management determined that:
| • | the Company did not maintain effective controls at the Company’s subsidiary over the process of identifying, communicating, recording and tracking various items that create current and deferred income taxes; and |
| • | the Company had insufficient personnel resources with technical accounting expertise to enable it to conduct a timely and accurate financial close process. |
Subsequent to the period covered by this report, management of the Company reviewed and evaluated the design of the internal control process for accounting for income taxes and the staffing level with technical accounting expertise and is taking the following actions to remediate these reported material weaknesses in internal control over financial reporting by:
| • | Reviewing the documentation for the income tax closing process and documentation procedures to determine if changes are appropriate to more clearly set forth the quarterly and annual income tax closing process requirements; |
| • | Educating and training Company employees about accounting and reporting for income tax; |
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| • | Hiring employees to fill tax-related positions that were vacant at December 31, 2005; |
| • | Creating additional positions to review and coordinate the implementation and maintenance of internal controls over accounting for income tax; |
| • | Hiring additional accounting staff with requisite technical accounting expertise; |
| • | Adhering to the Company’s closing process, including monitoring controls and documentation procedures with the assistance and oversight of additional Company employees; |
The Company’s management has discussed these material weaknesses, initial corrective actions and both current and future plans with the Audit Committee, who concurred with management.
Deloitte & Touche LLP, the Company’s independent registered public accounting firm, audited management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 and, based on that audit, issued the report set forth herein.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
General Growth Properties, Inc.
Chicago, Illinois
We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that General Growth Properties, Inc. and subsidiaries (the “Company”) did not maintain effective internal control over financial reporting as of December 31, 2005, because of the effect of the material weaknesses identified in management’s assessment, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness on the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weaknesses have been identified and included in management’s assessment:
| As of December 31, 2005, the Company did not maintain effective controls at the Company’s The Rouse Company LP subsidiary over the process of identifying, communicating and tracking various items that create current and deferred income taxes. Specifically, the current portion of the tax provision was not accurately determined and the Company did not adequately review the differences between the income tax basis and financial reporting basis of assets and liabilities and reconcile the differences to recorded deferred income tax assets and liabilities. In addition, the tax department was not appropriately staffed to |
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| conduct a timely and accurate review of the tax provision. The consolidated financial statements were adjusted prior to the Company filing this Annual Report on Form 10-K to properly reflect several financial statement line items, including current and deferred taxes, as well as goodwill. | |
| As of December 31, 2005, the Company’s controls over the financial close process did not operate effectively. There are insufficient personnel resources with technical accounting expertise to conduct a timely and accurate financial close. The consolidated financial statements were corrected prior to the Company filing this Annual Report on Form 10-K. These error corrections affected various items within the consolidated statement of cash flows and a number of financial statement line items, including buildings and equipment, goodwill, investment in unconsolidated real estate affiliates, accounts payable and accrued expenses, equity in net income of unconsolidated affiliates and interest expense. |
These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the consolidated financial statements and consolidated financial statement schedule as of and for the year ended December 31, 2005, of the Company and this report does not affect our report on such consolidated financial statements and consolidated financial statement schedule.
In our opinion, management’s assessment that the Company did not maintain effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, because of the effect of the material weaknesses described above on the achievement of the objections of the control criteria, the Company has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and consolidated financial statement schedule as of and for the year ended December 31, 2005 of the Company and our reports dated March 31, 2006 expressed an unqualified opinion on those consolidated financial statements and consolidated financial statement schedule.
DELOITTE & TOUCHE LLP
Chicago, Illinois
March 31, 2006
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| Item 9B. | Other Information |
None.
PART III
| Item 10. | Directors and Executive Officers of the Registrant |
The information which appears under the captions “Election of Directors,” “Executive Officers,” “Governance of the Company — Committees of the Board of Directors — Audit Committee” and “— Nominating & Governance Committee” and “Stock Ownership — Section 16(a) Beneficial Ownership Reporting Compliance” in our proxy statement for our 2006 Annual Meeting of Stockholders is incorporated by reference into this Item 10.
We have a Code of Business Conduct and Ethics which applies to all of our employees, officers and directors, including our Chairman, Chief Executive Officer and Chief Financial Officer. The Code of Business Conduct and Ethics is available on the Corporate Governance page of our website atwww.generalgrowth.com and we will provide a copy of the Code of Business Conduct and Ethics without charge to any person who requests it in writing to: General Growth Properties, Inc., 110 N. Wacker Dr., Chicago, IL 60606, Attn: Director of Investor Relations. We will post on our website amendments to or waivers of our Code of Ethics for executive officers, in accordance with applicable laws and regulations.
Our Chief Executive Officer and Chief Financial Officer have signed certificates under Sections 302 and 906 of the Sarbanes-Oxley Act, which are filed as Exhibits 31.1 and 31.2 and 32.1 and 32.2, respectively, to this Annual Report. In addition, our Chief Executive Officer submitted his most recent annual certification to the NYSE pursuant to Section 303A 12(a) of the NYSE listing standards on May 25, 2005, in which he indicated that he was not aware of any violations of NYSE corporate governance listing standards.
| Item 11. | Executive Compensation |
The information which appears under the caption “Executive Compensation” in our proxy statement for our 2006 Annual Meeting of Stockholders is incorporated by reference into this Item 11; provided, however, that the Report of the Compensation Committee of the Board of Directors on Executive Compensation shall not be incorporated by reference herein, in any of our previous filings under the Securities Act of 1933, as amended, or the Exchange Act, or in any of our future filings.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The information which appears under the captions “Stock Ownership — Common Stock Ownership of Certain Beneficial Owners” and “— Equity Ownership of Management” in our proxy statement for our 2006 Annual Meeting of Stockholders is incorporated by reference into this Item 12.
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The following table sets forth certain information with respect to shares of our common stock that may be issued under our equity compensation plans as of December 31, 2005.
| (c) | ||||||||||||
| Number of Securities | ||||||||||||
| (a) | (b) | Remaining Available for | ||||||||||
| Number of Securities | Weighted-Average | Future Issuance Under | ||||||||||
| to be Issued upon | Exercise Price of | Equity Compensation | ||||||||||
| Exercise of | Outstanding | Plans (Excluding | ||||||||||
| Outstanding Options, | Options, Warrants | Securities Reflected in | ||||||||||
| Plan Category | Warrants and Rights | and Rights | Column (a)) | |||||||||
| Equity compensation plans approved by security holders(1) | 3,649,316 | $ | 30.42 | 12,207,735 | (2) | |||||||
| Equity compensation plans not approved by security holders(3) | N/A | N/A | 284,339 | |||||||||
| Total | 3,649,316 | $ | 30.42 | 12,492,074 | ||||||||
| (1) | Includes shares of common stock under the 1993 Stock Incentive Plan (which terminated on April 4, 2003), the 1998 Incentive Stock Plan and the 2003 Incentive Stock Plan. |
| (2) | Includes 6,645,500 shares of common stock available for issuance under the 2003 Incentive Stock Plan and 5,562,235 shares of common stock available for issuance under the 1998 Incentive Stock Plan. |
| (3) | Represents shares of common stock under our Employee Stock Purchase Plan, which was adopted by the Board of Directors in November 1998. Under the Employee Stock Purchase Plan, eligible employees make payroll deductions over a six-month period, at which time the amounts withheld are used to purchase shares of common stock at a purchase price equal to 85% of the lesser of the closing price of a share of common stock on the first or last trading day of the purchase period. Purchases of common stock under the Employee Stock Purchase Plan are made on the first business day of the next month after the close of the purchase period. Under New York Stock Exchange rules then in effect, stockholder approval was not required for the Employee Stock Purchase Plan because it is a broad-based plan available generally to all employees. |
| Item 13. | Certain Relationships and Related Transactions |
The information which appears under the caption “Certain Relationships and Related Party Transactions” in our proxy statement for our 2006 Annual Meeting of Stockholders is incorporated by reference into this Item 13.
| Item 14. | Principal Accounting Fees and Services |
The information which appears under the caption “Independent Public Accountants — Fees Billed by Independent Public Accountants and “Independent Public Accountants — Audit Committee Pre-Approval Policies and Procedures” in our proxy statement for our 2006 Annual Meeting of Stockholders is incorporated by reference into this Item 14.
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PART IV
| Item 15. | Exhibits and Financial Statement Schedules |
(a) Financial Statements and Financial Statement Schedules.
| The consolidated financial statements and schedule listed in the accompanying Index to Consolidated Financial Statements and Consolidated Financial Statement Schedule are filed as part of this Annual Report. |
(b) Exhibits.
| See Exhibit Index on page S-1. |
(c) Separate financial statements.
| Not applicable. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| General Growth Properties, Inc. |
| By: | /s/John Bucksbaum |
| John Bucksbaum | |
| Chief Executive Officer |
March 31, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||||
| /s/Matthew Bucksbaum Matthew Bucksbaum | Chairman of the Board | March 31, 2006 | ||||
| /s/John Bucksbaum John Bucksbaum | Director and Chief Executive Officer (Principal Executive Officer) | March 31, 2006 | ||||
| /s/Robert Michaels Robert Michaels | Director, President and Chief Operating Officer | March 31, 2006 | ||||
| /s/Bernard Freibaum Bernard Freibaum | Director, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | March 31, 2006 | ||||
| /s/Alan Cohen Alan Cohen | Director | March 31, 2006 | ||||
| /s/Anthony Downs Anthony Downs | Director | March 31, 2006 | ||||
| /s/Adam Metz Adam Metz | Director | March 31, 2006 | ||||
| /s/Thomas Nolan Thomas Nolan | Director | March 31, 2006 | ||||
| /s/John Riordan John Riordan | Director | March 31, 2006 | ||||
| /s/Beth Stewart Beth Stewart | Director | March 31, 2006 | ||||
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GENERAL GROWTH PROPERTIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements and consolidated financial statement schedule are included in Item 8 of this Annual Report on Form 10-K:
| Page | |||||
Consolidated Financial Statements | |||||
| F-2 | |||||
| F-3 | |||||
| F-4 | |||||
| F-5 | |||||
| F-6 | |||||
| F-7 | |||||
| F-8 | |||||
| F-9 | |||||
| F-10 | |||||
Consolidated Financial Statement Schedule | |||||
| F-55 | |||||
| F-56 | |||||
All other schedules are omitted since the required information is either not present in any amounts, is not present in amounts sufficient to require submission of the schedule or because the information required is included in the consolidated financial statements and related notes.
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
General Growth Properties, Inc.
Chicago, Illinois
We have audited the accompanying consolidated balance sheets of General Growth Properties, Inc. and subsidiaries (the “Company”) as of December 31, 2005 and 2004, and the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the consolidated financial statements of GGP/ Homart, Inc., GGP/ Homart II L.L.C., andGGP-TRS L.L.C., the Company’s investments in which are accounted for by use of the equity method. The Company’s equity of $70,175,000 and $126,855,000 in GGP/ Homart Inc.’s net assets as of December 31, 2005 and 2004, respectively, and of $31,425,000, $21,148,000 and $23,815,000 in GGP/ Homart Inc.’s net income for each of the three years in the respective period ended December 31, 2005 are included in the accompanying financial statements. The Company’s equity of $259,716,000 and $319,537,000 in GGP/ Homart II L.L.C.’s net assets as of December 31, 2005 and 2004, respectively, and of $33,849,000, $36,724,000 and $33,448,000 in GGP/ Homart II L.L.C.’s net income for each of the three years in the respective period ended December 31, 2005 are included in the accompanying financial statements. The Company’s equity of $3,764,000 inGGP-TRS L.L.C.’s net assets as of December 31, 2005, and of $19,308,000 inGGP-TRS L.L.C.’s net income for the year then ended are included in the accompanying financial statements. The financial statements of GGP/ Homart, Inc., GGP/ Homart II L.L.C., and GGP-TRS L.L.C. were audited by other auditors related to the periods listed above whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for such companies, is based solely on the reports of such other auditors.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of General Growth Properties, Inc. and subsidiaries at December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on the criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 31, 2006 expressed an unqualified opinion on management’s assessment on the effectiveness of the Company’s internal control over financial reporting and an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of material weaknesses.
Deloitte & Touche LLP
Chicago, Illinois
March 31, 2006
F-2
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Stockholders
GGP/ Homart, Inc.:
We have audited the consolidated balance sheets of GGP/ Homart, Inc. (a Delaware Corporation) and subsidiaries (the Company) as of December 31, 2005 and 2004, and the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2005 (not presented separately herein). These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of GGP/ Homart, Inc. and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
March 17, 2006
F-3
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To Members
GGP/ Homart II L.L.C.:
We have audited the consolidated balance sheets of GGP/ Homart II L.L.C. (a Delaware Limited Liability Company) and subsidiaries (the Company) as of December 31, 2005 and 2004, and the related consolidated statements of income and comprehensive income, changes in members’ capital, and cash flows for each of the years in the three-year period ended December 31, 2005 (not presented separately herein). These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of GGP/ Homart II L.L.C. and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
March 17, 2006
F-4
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Members GGP-TRS, L.L.C.:
We have audited the accompanying consolidated balance sheet of GGP – TRS L.L.C. (a Deleware limited liability company) and subsidiaries as of December 31, 2005, and the related consolidated statement of operations, changes in members’ capital, and cash flow for the then year ended (not presented separately herein). These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of GGP – TRS L.L.C. and subsidiaries as of December 31, 2005, and the result of their operations and their cash flow for the year then ended, in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
March 17, 2006
F-5
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GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
| December 31, | ||||||||||
| 2005 | 2004 | |||||||||
| (Dollars in thousands) | ||||||||||
| Assets | ||||||||||
| Investment in real estate: | ||||||||||
| Land | $ | 2,826,766 | $ | 2,859,552 | ||||||
| Buildings and equipment | 18,739,445 | 18,251,258 | ||||||||
| Less accumulated depreciation | (2,104,956 | ) | (1,453,488 | ) | ||||||
| Developments in progress | 366,262 | 559,969 | ||||||||
| Net property and equipment | 19,827,517 | 20,217,291 | ||||||||
| Investment in and loans to/from Unconsolidated Real Estate Affiliates | 1,818,097 | 1,945,541 | ||||||||
| Investment land and land held for development and sale | 1,651,063 | 1,638,013 | ||||||||
| Net investment in real estate | 23,296,677 | 23,800,845 | ||||||||
| Cash and cash equivalents | 102,791 | 39,581 | ||||||||
| Accounts and notes receivable, net | 293,351 | 242,425 | ||||||||
| Insurance recovery receivable | 63,382 | — | ||||||||
| Goodwill | 420,624 | 356,796 | ||||||||
| Deferred expenses, net | 209,825 | 153,231 | ||||||||
| Prepaid expenses and other assets | 920,369 | 1,125,747 | ||||||||
| Total assets | $ | 25,307,019 | $ | 25,718,625 | ||||||
| Liabilities and Stockholders’ Equity | ||||||||||
| Mortgage notes and other property debt payable | $ | 20,418,875 | $ | 20,310,947 | ||||||
| Deferred tax liabilities | 1,286,576 | 1,414,565 | ||||||||
| Accounts payable and accrued expenses | 1,032,414 | 895,520 | ||||||||
| Total liabilities | 22,737,865 | 22,621,032 | ||||||||
| Minority interests: | ||||||||||
| Preferred | 205,944 | 403,161 | ||||||||
| Common | 430,292 | 551,282 | ||||||||
| Total minority interests | 636,236 | 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, 239,865,045 and 234,724,082 shares issued as of December 31, 2005 and 2004, respectively | 2,399 | 2,347 | ||||||||
| Additional paid-in capital | 2,469,262 | 2,378,237 | ||||||||
| Retained earnings (accumulated deficit) | (518,555 | ) | (227,511 | ) | ||||||
| Notes receivable-common stock purchase | — | (5,178 | ) | |||||||
| Unearned compensation-restricted stock | (280 | ) | (1,060 | ) | ||||||
| Accumulated other comprehensive income (loss) | 10,454 | (3,685 | ) | |||||||
| Less common stock in treasury, 668,396 shares at December 31, 2005, at cost | (30,362 | ) | — | |||||||
| Total stockholders’ equity | 1,932,918 | 2,143,150 | ||||||||
| Total liabilities and stockholders’ equity | $ | 25,307,019 | $ | 25,718,625 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
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GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
| Years Ended December 31, | ||||||||||||||
| 2005 | 2004 | 2003 | ||||||||||||
| (Dollars in thousands, except for per | ||||||||||||||
| share amounts) | ||||||||||||||
| Revenues: | ||||||||||||||
| Minimum rents | $ | 1,670,387 | $ | 1,058,732 | $ | 775,320 | ||||||||
| Tenant recoveries | 754,836 | 472,250 | 332,137 | |||||||||||
| Overage rents | 69,628 | 54,105 | 34,928 | |||||||||||
| Land sales | 385,205 | 68,643 | — | |||||||||||
| Management and other fees | 91,734 | 82,896 | 84,138 | |||||||||||
| Other | 101,626 | 63,255 | 36,268 | |||||||||||
| Total revenues | 3,073,416 | 1,799,881 | 1,262,791 | |||||||||||
| Expenses: | ||||||||||||||
| Real estate taxes | 206,193 | 128,114 | 88,276 | |||||||||||
| Repairs and maintenance | 195,292 | 123,251 | 81,433 | |||||||||||
| Marketing | 63,522 | 48,220 | 35,797 | |||||||||||
| Other property operating costs | 390,019 | 207,909 | 153,370 | |||||||||||
| Land sales operations | 311,815 | 66,100 | — | |||||||||||
| Provision for doubtful accounts | 13,868 | 10,375 | 7,041 | |||||||||||
| Property management and other costs | 148,399 | 100,267 | 109,746 | |||||||||||
| General and administrative | 13,053 | 9,499 | 8,533 | |||||||||||
| Depreciation and amortization | 672,914 | 364,854 | 230,195 | |||||||||||
| Total expenses | 2,015,075 | 1,058,589 | 714,391 | |||||||||||
| Operating income | 1,058,341 | 741,292 | 548,400 | |||||||||||
| Interest income | 10,416 | 3,227 | 2,308 | |||||||||||
| Interest expense | (1,031,241 | ) | (472,185 | ) | (278,543 | ) | ||||||||
| Income before income taxes and allocations to minority interests and from unconsolidated affiliates | 37,516 | 272,334 | 272,165 | |||||||||||
| Provision for income taxes | (50,646 | ) | (2,383 | ) | (98 | ) | ||||||||
| Income allocated to minority interests | (43,989 | ) | (105,274 | ) | (110,984 | ) | ||||||||
| Equity in income of unconsolidated affiliates | 120,986 | 88,191 | 94,480 | |||||||||||
| Income from continuing operations | 63,867 | 252,868 | 255,563 | |||||||||||
| Discontinued operations, net of minority interests: | ||||||||||||||
| Income from operations | 6,568 | 3,813 | 4,128 | |||||||||||
| Gain on disposition | 5,118 | 11,171 | 3,720 | |||||||||||
| 11,686 | 14,984 | 7,848 | ||||||||||||
| Net income | $ | 75,553 | $ | 267,852 | $ | 263,411 | ||||||||
| Convertible preferred stock dividends | — | — | (13,030 | ) | ||||||||||
| Net income available to common stockholders | $ | 75,553 | $ | 267,852 | $ | 250,381 | ||||||||
Basic Earnings Per Share: | ||||||||||||||
| Continuing operations | $ | 0.27 | $ | 1.15 | $ | 1.21 | ||||||||
| Discontinued operations | 0.05 | 0.07 | 0.04 | |||||||||||
| Total basic earnings per share | $ | 0.32 | $ | 1.22 | $ | 1.25 | ||||||||
Diluted Earnings Per Share: | ||||||||||||||
| Continuing operations | $ | 0.27 | $ | 1.15 | $ | 1.19 | ||||||||
| Discontinued operations | 0.05 | 0.06 | 0.03 | |||||||||||
| Total diluted earnings per share | $ | 0.32 | $ | 1.21 | $ | 1.22 | ||||||||
Comprehensive Income, Net: | ||||||||||||||
| Net income | $ | 75,553 | $ | 267,852 | $ | 263,411 | ||||||||
| Other comprehensive income, net of minority interest: | ||||||||||||||
| Net unrealized gains on financial instruments | 9,554 | 10,992 | 12,542 | |||||||||||
| Minimum pension liability adjustment | (374 | ) | 102 | 308 | ||||||||||
| Foreign currency translation | 4,920 | 1,590 | — | |||||||||||
| Unrealized gains (losses) on available-for-sale securities | 39 | (94 | ) | — | ||||||||||
| Total other comprehensive income, net of minority interest | 14,139 | 12,590 | 12,850 | |||||||||||
| Comprehensive income, net | $ | 89,692 | $ | 280,442 | $ | 276,261 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
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GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| Notes | Accumulated | |||||||||||||||||||||||||||||||
| Retained | Receivable- | Unearned | Other | |||||||||||||||||||||||||||||
| Additional | Earnings | Common | Compensation | Comprehensive | Total | |||||||||||||||||||||||||||
| Common | Paid-In | (Accumulated | Stock | Restricted | Income | Treasury | Stockholders’ | |||||||||||||||||||||||||
| Stock | Capital | Deficit) | Purchase | Stock | (Loss) | Stock | Equity | |||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||
Balance, December 31, 2002 | $ | 1,872 | $ | 1,549,642 | $ | (315,844 | ) | $ | (7,772 | ) | $ | (2,248 | ) | $ | (29,125 | ) | $ | — | $ | 1,196,525 | ||||||||||||
| Net income | 263,411 | 263,411 | ||||||||||||||||||||||||||||||
| Cash distributions declared ($0.78 per share) | (155,049 | ) | (155,049 | ) | ||||||||||||||||||||||||||||
| Convertible Preferred Stock dividends | (13,030 | ) | (13,030 | ) | ||||||||||||||||||||||||||||
| PIERS redemption and conversion, net (25,503,543 common shares) | 255 | 337,837 | 338,092 | |||||||||||||||||||||||||||||
| Conversion of operating partnership units to common stock (2,956,491 common shares) | 30 | 22,134 | 22,164 | |||||||||||||||||||||||||||||
| Issuance of common stock, net of employee stock option loan/repayments (1,642,687 common shares) | 16 | 30,108 | 1,297 | 31,421 | ||||||||||||||||||||||||||||
| Restricted stock grant, net of compensation expense | 299 | 299 | ||||||||||||||||||||||||||||||
| Other comprehensive income | 12,850 | 12,850 | ||||||||||||||||||||||||||||||
| Adjustment for minority interest in operating partnership | (26,274 | ) | (26,274 | ) | ||||||||||||||||||||||||||||
Balance, December 31, 2003 | $ | 2,173 | $ | 1,913,447 | $ | (220,512 | ) | $ | (6,475 | ) | $ | (1,949 | ) | $ | (16,275 | ) | $ | — | $ | 1,670,409 | ||||||||||||
| Net income | 267,852 | 267,852 | ||||||||||||||||||||||||||||||
| Cash distributions declared ($1.26 per share) | (274,851 | ) | (274,851 | ) | ||||||||||||||||||||||||||||
| Conversion of operating partnership units to common stock (179,987 common shares) | 2 | 1,371 | 1,373 | |||||||||||||||||||||||||||||
| Conversion of convertible preferred units to common stock (456,463 common shares) | 4 | 9,297 | 9,301 | |||||||||||||||||||||||||||||
| Issuance of common stock, net of employee stock option loan/repayments (16,793,656 common shares) | 168 | 530,920 | 1,297 | 532,385 | ||||||||||||||||||||||||||||
| Restricted stock grant, net of compensation expense | 889 | 889 | ||||||||||||||||||||||||||||||
| Other comprehensive income | 12,590 | 12,590 | ||||||||||||||||||||||||||||||
| Adjustment for minority interest in operating partnership | (76,798 | ) | (76,798 | ) | ||||||||||||||||||||||||||||
Balance, December 31, 2004 | $ | 2,347 | $ | 2,378,237 | $ | (227,511 | ) | $ | (5,178 | ) | $ | (1,060 | ) | $ | (3,685 | ) | $ | — | 2,143,150 | |||||||||||||
| Net income | 75,553 | 75,553 | ||||||||||||||||||||||||||||||
| Cash distributions declared ($1.49 per share) | (353,665 | ) | (353,665 | ) | ||||||||||||||||||||||||||||
| Conversion of operating partnership units to common stock (2,470,368 common shares) | 25 | 23,907 | 23,932 | |||||||||||||||||||||||||||||
| Conversion of convertible preferred units to common stock (729,890 common shares) | 7 | 14,330 | 14,337 | |||||||||||||||||||||||||||||
| Issuance of common stock, net of employee stock option loan/repayments (1,322,720 common shares) (545,204 treasury shares) | 13 | 40,135 | (7,892 | ) | 5,178 | 24,522 | 61,956 | |||||||||||||||||||||||||
| Tax benefit from stock option exercises | 3,328 | 3,328 | ||||||||||||||||||||||||||||||
| Shares issued pursuant to CSA (551,985 common shares) (1,000,400 treasury shares) | 6 | 19,393 | (5,040 | ) | 44,696 | 59,055 | ||||||||||||||||||||||||||
| Restricted stock grant, net of compensation expense (66,000 common shares) | 1 | 2,336 | 780 | 3,117 | ||||||||||||||||||||||||||||
| Purchase of treasury stock (2,214,000 treasury shares) | (99,580 | ) | (99,580 | ) | ||||||||||||||||||||||||||||
| Other comprehensive income | 14,139 | 14,139 | ||||||||||||||||||||||||||||||
| Adjustment for minority interest in operating partnership | (12,404 | ) | (12,404 | ) | ||||||||||||||||||||||||||||
Balance, December 31, 2005 | $ | 2,399 | $ | 2,469,262 | $ | (518,555 | ) | $ | — | $ | (280 | ) | $ | 10,454 | $ | (30,362 | ) | $ | 1,932,918 | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years Ended December 31, | ||||||||||||||||
| 2005 | 2004 | 2003 | ||||||||||||||
| (In thousands) | ||||||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||
| Net income | $ | 75,553 | $ | 267,852 | $ | 263,411 | ||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
| Minority interests, including discontinued operations | 45,488 | 106,233 | 113,289 | |||||||||||||
| Equity in income of unconsolidated affiliates | (120,986 | ) | (88,191 | ) | (94,480 | ) | ||||||||||
| Provision for doubtful accounts, including discontinued operations | 13,876 | 10,393 | 7,009 | |||||||||||||
| Distributions received from unconsolidated affiliates | 119,602 | 87,906 | 91,613 | |||||||||||||
| Depreciation, including discontinued operations | 657,358 | 348,303 | 205,385 | |||||||||||||
| Amortization, including discontinued operations | 30,536 | 28,753 | 34,849 | |||||||||||||
| Amortization of debt market rate adjustment | (46,993 | ) | (1,026 | ) | (723 | ) | ||||||||||
| Gain on disposition | (5,118 | ) | (11,172 | ) | (4,831 | ) | ||||||||||
| Participation expense pursuant to Contingent Stock Agreement | 106,285 | 8,513 | — | |||||||||||||
| Land development and acquisitions expenditures | (140,823 | ) | (27,563 | ) | — | |||||||||||
| Cost of land sales | 181,301 | 51,659 | — | |||||||||||||
| Debt assumed by purchasers of land | (11,371 | ) | (318 | ) | — | |||||||||||
| Deferred income taxes | 28,596 | 1,993 | — | |||||||||||||
| Proceeds from the sale of marketable securities, including defined contribution plan assets | 27,740 | 7,954 | — | |||||||||||||
| Net changes: | ||||||||||||||||
| Accounts and notes receivable | (85,125 | ) | (21,177 | ) | (29,304 | ) | ||||||||||
| Prepaid expenses and other assets | (32,701 | ) | 21,463 | 16,269 | ||||||||||||
| Deferred expenses | (73,048 | ) | (43,485 | ) | (54,535 | ) | ||||||||||
| Accounts payable and accrued expenses | 61,909 | (44,614 | ) | 34,683 | ||||||||||||
| Other, net | 9,899 | 15,900 | 3,100 | |||||||||||||
| Net cash provided by operating activities | 841,978 | 719,376 | 585,735 | |||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||
| Acquisition/development of real estate and property additions/improvements | (497,977 | ) | (9,000,108 | ) | (1,732,358 | ) | ||||||||||
| Proceeds from sale of investment property | 143,543 | 65,268 | 14,978 | |||||||||||||
| Increase in investments in unconsolidated affiliates | (195,642 | ) | (211,247 | ) | (26,418 | ) | ||||||||||
| Increase in restricted cash | (22,950 | ) | (1,951 | ) | (7,971 | ) | ||||||||||
| Insurance recoveries | 5,000 | — | — | |||||||||||||
| Distributions received from unconsolidated affiliates in excess of income | 260,639 | 134,116 | 90,925 | |||||||||||||
| Loans (to) from unconsolidated affiliates, net | 126,500 | (8,884 | ) | (94,355 | ) | |||||||||||
| Other, net | 21,322 | 1,297 | 1,773 | |||||||||||||
| Net cash used in investing activities | (159,565 | ) | (9,021,509 | ) | (1,753,426 | ) | ||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||
| Cash distributions paid to common stockholders | (353,665 | ) | (274,851 | ) | (199,986 | ) | ||||||||||
| Cash distributions paid to holders of Common Units | (80,885 | ) | (70,412 | ) | (59,815 | ) | ||||||||||
| Cash distributions paid to holders of perpetual and convertible preferred units | (27,329 | ) | (37,152 | ) | (40,257 | ) | ||||||||||
| Payment of dividends on PIERS | — | — | (19,145 | ) | ||||||||||||
| Proceeds from issuance of common stock, including from common stock plans | 45,208 | 531,976 | 31,308 | |||||||||||||
| Purchase of treasury stock | (98,939 | ) | — | — | ||||||||||||
| Redemption of preferred minority interests | (183,000 | ) | (107,923 | ) | — | |||||||||||
| Proceeds from issuance of mortgage notes and other property debt payable | 3,907,254 | 12,733,339 | 3,140,750 | |||||||||||||
| Principal payments on mortgage notes and other property debt payable | (3,791,978 | ) | (4,430,532 | ) | (1,715,029 | ) | ||||||||||
| Other, net | (35,869 | ) | (13,408 | ) | (13,098 | ) | ||||||||||
| Net cash (used in) provided by financing activities | (619,203 | ) | 8,331,037 | 1,124,728 | ||||||||||||
| Net change in cash and cash equivalents | 63,210 | 28,904 | (42,963 | ) | ||||||||||||
| Cash and cash equivalents at beginning of period | 39,581 | 10,677 | 53,640 | |||||||||||||
| Cash and cash equivalents at end of period | $ | 102,791 | $ | 39,581 | $ | 10,677 | ||||||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||||||||||
| Interest paid | $ | 1,074,874 | $ | 424,380 | $ | 258,395 | ||||||||||
| Interest capitalized | 54,260 | 11,272 | 5,679 | |||||||||||||
| Income taxes paid | 8,170 | 390 | 98 | |||||||||||||
Non-Cash Investing and Financing Activities: | ||||||||||||||||
| Common stock issued in exchange for PIERS | $ | — | $ | — | $ | 337,483 | ||||||||||
| Common stock issued in exchange for Operating Partnership Units | 23,932 | 1,373 | 22,134 | |||||||||||||
| Common stock issued in exchange for convertible preferred units | 14,337 | 9,301 | — | |||||||||||||
| Assumption of debt in conjunction with acquisition of property | — | 134,902 | 552,174 | |||||||||||||
| Common stock issued pursuant to Contingent Stock Agreement | 59,055 | — | — | |||||||||||||
| Operating Partnership Units issued as consideration for purchase of real estate | — | 25,132 | 26,637 | |||||||||||||
| TRC Merger: | ||||||||||||||||
| Fair value of assets acquired | (134,166 | ) | 14,327,519 | — | ||||||||||||
| Cash paid | — | (7,150,844 | ) | — | ||||||||||||
| Liabilities assumed | (125,925 | ) | 7,176,675 | — | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Organization
| 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 December 31, 2005, ownership of the Operating Partnership was as follows:
| 82 | % | General Growth, as sole general partner | ||
| 16 | Limited partners that indirectly include family members of the original stockholders of the Company. Represented by common units of limited partnership interest (the “Common Units”) | |||
| 2 | Limited partners that include subsequent contributors of properties to the Operating Partnership which are also represented by Common Units. | |||
| 100 | % | |||
The Operating Partnership also 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 aone-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 3)). |
| • | The Rouse Company LP (“TRCLP”), successor to The Rouse Company (“TRC”), 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 “Unconsolidated Properties.” Our “Company Portfolio” includes both our Consolidated Properties and our Unconsolidated Properties.
| Shareholder Rights Plan |
We have a shareholder rights plan pursuant to which one preferred share purchase right (a “Right”) is attached to each currently outstanding or subsequently issued share of our common stock. Prior to becoming exercisable, the Rights trade together with our common stock. In general, the Rights will become exercisable
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
if a person or group acquires or announces a tender or exchange offer for 15% or more of our common stock. Each Right will initially entitle the holder to purchase from General Growth one-third of one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $100 per share (the “Preferred Stock”), at an exercise price of $148 per one one-thousandth of a share, subject to adjustment. If a person or group acquires 15% or more of our common stock, each Right will entitle the holder (other than the acquirer) to purchase shares of our common stock (or, in certain circumstances, cash or other securities) having a market value of twice the exercise price of a Right at such time. Under certain circumstances, each Right will entitle the holder (other than the acquirer) to purchase the common stock of the acquirer having a market value of twice the exercise price of a Right at such time. In addition, under certain circumstances, our Board of Directors may exchange each Right (other than those held by the acquirer) for one share of our common stock, subject to adjustment. If the Rights become exercisable, holders of common units of partnership interest in the Operating Partnership, other than General Growth, will receive the number of Rights they would have received if their units had been redeemed and the purchase price paid in our common stock. The Rights expire on November 18, 2008, unless earlier redeemed by our Board of Directors for one-third of $0.01 per Right or such expiration date is extended.
| Dividend Reinvestment and Stock Purchase Plan |
We have reserved up to 3.0 million shares of our common stock for issuance under the Dividend Reinvestment and Stock Purchase Plan (“DRSP”). In general, the DRSP allows participants to make purchases of our common stock from dividends received or additional cash investments. Although the purchase price of the common stock is determined by the current market price, the purchases are made without fees or commissions charged to the participant. We have and will continue to satisfy DRSP common stock purchase needs through the issuance of new shares of our common stock or by repurchases of currently outstanding common stock. As of December 31, 2005, an aggregate of 535,528 shares of our common stock have been issued under the DRSP.
| Note 2 | Summary of Significant Accounting Policies |
| Principles of Consolidation |
The accompanying consolidated financial statements include the accounts of General Growth, our subsidiaries and joint ventures in which we have a controlling interest. 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. All significant intercompany balances and transactions have been eliminated.
| Properties |
Real estate assets are stated at cost. Construction and improvement costs incurred in connection with the development of new properties or the redevelopment of existing properties are capitalized to the extent the total carrying value of the property does not exceed the estimated fair value of the completed property. Real estate taxes and interest costs incurred during construction periods are capitalized. Capitalized interest costs are based on qualified expenditures and interest rates in place during the construction period. Capitalized real estate taxes and interest costs are amortized over lives which are consistent with the constructed assets.
Pre-development costs, which generally include legal and professional fees and other directly-related third-party costs, are capitalized as part of the property being developed. In the event a development is no longer deemed to be probable, the costs previously capitalized are expensed.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Tenant improvements, either paid directly or in the form of construction allowances paid to tenants, are capitalized and depreciated over the average lease term. Maintenance and repairs are charged to expense when incurred. Expenditures for significant betterments and improvements are capitalized.
Our real estate assets, including developments in progress, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. A real estate asset is considered to be impaired when the estimated future undiscounted operating cash flow is less than its carrying value. To the extent an impairment has occurred, the excess of the carrying value of the asset over its estimated fair value will be expensed to operations.
Depreciation or amortization expense is computed using the straight-line method based upon the following estimated useful lives:
| Years | ||||
| Buildings and improvements | 40-45 | |||
| Equipment, tenant improvements and fixtures | 5-10 | |||
| Acquisitions of Operating Properties |
Acquisitions of properties are accounted for utilizing the purchase method and, accordingly, the results of operations of acquired properties are included in our results of operations from the respective dates of acquisition. 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 tenant and ground leases and tenant relationships. Initial valuations are subject to change until such information is finalized no later than 12 months from the acquisition date.
The fair values of tangible assets are determined on an “if vacant” basis. The “if-vacant” fair value is allocated to land, where applicable, buildings, tenant improvements and equipment based on comparable sales and other relevant information obtained in connection with the acquisition of the property.
The estimated fair value of acquired in-place at-market tenant leases are the costs we would have incurred to lease the property to the occupancy level of the property at the date of acquisition. Such estimate includes the fair value of leasing commissions, legal costs and tenant coordination costs that would be incurred to lease the property to this occupancy level. Additionally, we evaluate the time period over which such occupancy level would be achieved and include an estimate of the net operating costs (primarily real estate taxes, insurance and utilities) incurred during the lease-up period, which generally ranges up to one year. Acquired in-place at-market tenant leases are amortized over the average lease term.
Intangible assets and liabilities are also recorded for above-market and below-market in-place tenant and ground leases where we are either the lessor or the lessee. Above-market and below-market in-place tenant and ground lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be received or paid pursuant to the in-place leases and our estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the leases. Above and below-market lease values are amortized over the remaining non-cancelable terms of the respective leases (approximately five years for tenant leases and approximately 50 years for ground leases).
Due to existing contacts and relationships with tenants at our currently owned properties and at properties currently managed for others, no significant value has been ascribed to the tenant relationships at the acquired properties.
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Table of Contents
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. Goodwill is not amortized but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. An impairment loss for an asset group is allocated to the long-lived assets of the group on a pro-rata basis using the relative carrying amounts of those assets, unless the fair value of specific components of the reporting group are determinable without undue cost and effort.
| Investments in Unconsolidated Real Estate Affiliates |
We account for investments in joint ventures where we own a non-controlling joint interest using the equity method. Under the equity method, the cost of our investment is adjusted for our share of the equity in earnings of such Unconsolidated Real Estate Affiliates from the date of acquisition and reduced by distributions received. Generally, the operating agreements with respect to our Unconsolidated Real Estate Affiliates provide that assets, liabilities and funding obligations are shared in accordance with our ownership percentages. Therefore, we generally also share in the profit and losses, cash flows and other matters relating to our Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. Except for Retained Debt (as described in Note 5), differences between the carrying value of our investment in the Unconsolidated Real Estate Affiliates and our share of the underlying equity of such Unconsolidated Real Estate Affiliates are amortized over lives ranging from five to forty years.
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.
| Cash and Cash Equivalents and Investments in Marketable Securities |
Highly-liquid investments with maturities at dates of purchase of three months or less are classified as cash equivalents.
Investments in marketable securities with maturities at dates of purchase in excess of three months are carried at amortized cost as it is our intention to hold these investments until maturity. Most investments in marketable securities are held in an irrevocable trust for participants in our non-qualified defined contribution plans which were acquired with the TRC Merger, are classified as trading securities and are carried at market value with changes in values recognized in earnings. Other investments in marketable equity securities subject to significant restrictions on sale or transfer are classified as available-for-sale and are carried at market value with unrealized changes in values recognized in other comprehensive income.
| Leases |
Leases which transfer substantially all the risks and benefits of ownership to tenants are considered finance leases and the present values of the minimum lease payments and the estimated residual values of the leased properties, if any, are accounted for as receivables. Leases which transfer substantially all the risks and benefits of ownership to us are considered capital leases and the present values of the minimum lease payments are accounted for as assets and liabilities.
| Deferred Expenses |
Deferred expenses consist principally of financing fees and leasing costs and commissions. Deferred financing fees are amortized to interest expense using the interest method (or other methods which approximate the interest method) over the terms of the respective agreements. Deferred leasing costs and commissions are amortized using the straight-line method over the average life of the tenant leases. Deferred expenses in our Consolidated Balance Sheets are shown at cost, net of accumulated amortization of $147.5 million as of December 31, 2005 and $128.3 million as of December 31, 2004.
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Table of Contents
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Minority Interests — Common (Note 12) |
Income is allocated to the holders of the Common Units (the “OP Minority Interests”) based on their ownership percentage of the Operating Partnership. This ownership percentage, as well as the total net assets of the Operating Partnership, change when additional shares of our common stock or Common Units are issued. Such changes result in an allocation between stockholders’ equity and Minority Interests — Common in the Consolidated Balance Sheets. Due to the number of such capital transactions that occur each period, we have presented a single net effect of all such allocations for the period as the “Adjustment for Minority Interest in Operating Partnership” in our Consolidated Statements of Stockholders’ Equity (rather than separately allocating the minority interest for each individual capital transaction).
| Treasury Stock |
We account for repurchases of common stock using the cost method with common stock in treasury classified in the Consolidated Balance Sheets as a reduction of stockholders’ equity. Treasury stock is reissued at average cost.
| Revenue Recognition and Related Matters |
Minimum rent revenues are recognized on a straight-line basis over the terms of the related leases. Minimum rent revenues also include amounts collected from tenants to allow the termination of their leases prior to their scheduled termination dates and accretion related to above and below-market tenant leases on acquired properties as follows:
| 2005 | 2004 | 2003 | ||||||||||
| (In thousands) | ||||||||||||
| Lease termination fees | $ | 14,534 | $ | 7,942 | $ | 9,694 | ||||||
| Above and below-market tenant lease accretion | 34,692 | 27,591 | 16,551 | |||||||||
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 $123.5 million as of December 31, 2005 and $91.8 million as of December 31, 2004 are included in accounts and notes receivable, net in our Consolidated Balance Sheets.
We provide an allowance for doubtful accounts against the portion of accounts receivable, including straight-line rents, which is estimated to be uncollectible. Such allowances are reviewed periodically based upon our recovery experience. We also evaluate the probability of collecting future rent which is recognized currently under a straight-line methodology. This analysis considers the long-term nature of our leases, as a certain portion of the straight-line rent currently recognizable will not be billed to the tenant until many years into the future. Our experience relative to unbilled deferred rent receivable is that a certain portion of the amounts straight-lined into revenue are never collected from (or billed to) the tenant due to early lease terminations. For that portion of the otherwise recognizable deferred rent that is not deemed to be probable of collection, no revenue is recognized. Accounts receivable in our Consolidated Balance Sheets are shown net of an allowance for doubtful accounts of $54.6 million as of December 31, 2005 and $48.6 million as of December 31, 2004.
Overage rents are recognized on an accrual basis once tenant sales exceed contractual tenant lease thresholds. Recoveries from tenants are established in the leases or computed based upon a formula related to real estate taxes, insurance and other shopping center operating expenses and are generally recognized as revenues in the period the related costs are incurred.
Management and other fees primarily represent management and leasing fees, construction fees financing fees and fees for other ancillary services performed by GGMI and other subsidiaries (generally TRS entities owned
F-14
Table of Contents
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
by TRCLP) for the benefit of the Unconsolidated Real Estate Affiliates and for independent third-party investors. Such fees are recognized as revenue as the services are rendered.
Revenues from land sales are recognized using the full accrual method provided that various criteria relating to the terms of the transactions and our subsequent involvement with the land sold are met. Revenues relating to transactions that do not meet the established criteria are deferred and recognized when the criteria are met or using the installment or cost recovery methods, as appropriate in the circumstances. For land sale transactions in which we are required to perform additional services and incur significant costs after title has passed, revenues and cost of sales are recognized on a percentage of completion basis.
Cost of land sales is determined as a specified percentage of land sales revenues recognized for each community development project. The cost ratios used are based on actual costs incurred and estimates of development costs and sales revenues to completion of each project. The ratios are reviewed regularly and revised for changes in sales and cost estimates or development plans. Significant changes in these estimates or future development plans, whether due to changes in market conditions or other factors, could result in changes to the cost ratio used for a specific project. The specific identification method is used to determine cost of sales for certain parcels of land, including acquired parcels we do not intend to develop or for which development is complete at the date of acquisition.
| Income Taxes (Note 7) |
Deferred income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. A valuation allowance is provided if we believe it is more likely than not that all or some portion of the deferred tax asset will not be realized. An increase or decrease in the valuation allowance that results from a change in circumstances, and which causes a change in our judgment about the realizability of the related deferred tax asset, is included in the current tax provision.
| Earnings Per Share (“EPS”) |
Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted EPS is computed after adjusting the numerator and denominator of the basic EPS computation for the effects of all potentially dilutive common shares. The dilutive effects of convertible securities are computed using the “if-converted” method and the dilutive effects of options, warrants and their equivalents (including fixed awards and nonvested stock issued under stock-based compensation plans) are computed using the “treasury stock” method.
Dilutive 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 1,026,777 in 2005, 1,590,974 in 2004 and 21,000 in 2003. 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 income would also be added back to net income.
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Table of Contents
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Information related to our EPS calculations is summarized as follows:
| Years Ended December 31, | |||||||||||||||||||||||||
| 2005 | 2004 | 2003 | |||||||||||||||||||||||
| Basic | Diluted | Basic | Diluted | Basic | Diluted | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
| Numerators: | |||||||||||||||||||||||||
| Income from continuing operations | $ | 63,867 | $ | 63,867 | $ | 252,868 | $ | 252,868 | $ | 255,563 | $ | 255,563 | |||||||||||||
| Convertible preferred stock dividends | — | — | — | — | (13,030 | )* | — | ||||||||||||||||||
| Income from continuing operations available to common stockholders | 63,867 | 63,867 | 252,868 | 252,868 | 242,533 | 255,563 | |||||||||||||||||||
| Discontinued operations, net of minority interest | 11,686 | 11,686 | 14,984 | 14,984 | 7,848 | 7,848 | |||||||||||||||||||
| Net income available to common stockholders | $ | 75,553 | $ | 75,553 | $ | 267,852 | $ | 267,852 | $ | 250,381 | $ | 263,411 | |||||||||||||
| Denominators: | |||||||||||||||||||||||||
| Weighted average number of common shares outstanding — basic | 237,673 | 237,673 | 220,149 | 220,149 | 200,875 | 200,875 | |||||||||||||||||||
| Effect of dilutive securities — options (and PIERS in 2003*) | — | 796 | — | 680 | — | 14,204 | |||||||||||||||||||
| Weighted average number of common shares outstanding | 237,673 | 238,469 | 220,149 | 220,829 | 200,875 | 215,079 | |||||||||||||||||||
| * | For the year ended December 31, 2003, the effect of the issuance of the PIERS is dilutive and, therefore, no adjustment of net income is made as the PIERS dilution is reflected in the denominator of the diluted EPS calculation. |
Derivative Financial Instruments
We use derivative financial instruments to reduce risk associated with movements in interest rates. We may choose or be required by lenders to reduce cash flow and earnings volatility associated with interest rate risk exposure on variable-rate borrowings and/or forecasted fixed-rate borrowings by entering into interest rate swaps or interest rate caps. We do not use derivative financial instruments for speculative purposes.
Under interest rate cap agreements, we make initial premium payments to the counterparties in exchange for the right to receive payments from them if interest rates exceed specified levels during the agreement period. Under interest rate swap agreements, we and the counterparties agree to exchange the difference between fixed-rate and variable-rate interest amounts calculated by reference to specified notional principal amounts during the agreement period. Notional principal amounts are used to express the volume of these transactions, but the cash requirements and amounts subject to credit risk are substantially less.
Parties to interest rate exchange agreements are subject to market risk for changes in interest rates and risk of credit loss in the event of nonperformance by the counterparty. We do not require any collateral under these agreements, but deal only with highly-rated financial institution counterparties (which, in certain cases, are also the lenders on the related debt) and expect that all counterparties will meet their obligations.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Substantially all of our interest rate swap and other derivative financial instruments that we used in 2005, 2004 and 2003 qualified as cash flow hedges and hedged our exposure to forecasted interest payments on variable-rate LIBOR-based debt. Accordingly, the effective portion of the instruments’ gains or losses is reported as a component of other comprehensive income and reclassified into earnings when the related forecasted transactions affect earnings. If we discontinue a cash flow hedge because it is no longer probable that the original forecasted transaction will occur, the net gain or loss in accumulated other comprehensive income (loss) is immediately reclassified into earnings. If we discontinue a cash flow hedge because the variability of the probable forecasted transaction has been eliminated, the net gain or loss in accumulated other comprehensive income (loss) is reclassified to earnings.
We have not recognized any losses as a result of hedge discontinuance and the expense that we recognized related to changes in the time value of interest rate cap agreements and ineffective hedges was insignificant for 2005, 2004 and 2003.
Amounts receivable or payable under interest rate cap and swap agreements are accounted for as adjustments to interest expense on the related debt.
Fair Value of Financial Instruments
The fair values of our financial instruments approximate their carrying value in our financial statements except for debt. We estimated the fair value of our debt based on quoted market prices for publicly-traded debt and on the discounted estimated future cash payments to be made for other debt. The discount rates used approximate current lending rates for loans or groups of loans with similar maturities and credit quality, assume the debt is outstanding through maturity and consider the debt’s collateral (if applicable). We have utilized market information as available or present value techniques to estimate the amounts required to be disclosed. Since such amounts are estimates, there can be no assurance that the disclosed value of any financial instrument could be realized by immediate settlement of the instrument.
| 2005 | 2004 | |||||||||||||||
| Carrying | Estimated | Carrying | Estimated | |||||||||||||
| Amount | Fair Value | Amount | Fair Value | |||||||||||||
| (In millions) | ||||||||||||||||
| Fixed-rate debt | $ | 13,906 | $ | 13,960 | $ | 11,120 | $ | 11,368 | ||||||||
| Variable-rate debt | 6,513 | 6,430 | 9,191 | 9,187 | ||||||||||||
| $ | 20,419 | $ | 20,390 | $ | 20,311 | $ | 20,555 | |||||||||
| Stock Options (Note 10) |
During the second quarter of 2002, we elected to prospectively adopt the fair value based employee stock-based compensation expense recognition provisions of FASB Statement 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”). Under APB 25, compensation cost is recognized for awards of shares of common stock or stock options only if the quoted market price of the stock as of the grant date (or other measurement date, if later) is greater than the amount the grantee must pay to acquire the stock. Had compensation costs for options granted prior to second quarter of 2002 been determined in accordance with SFAS 123, our net income available to common stockholders would have been nominally reduced but there would have been no effect on reported basic or diluted earnings per share.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Foreign Currency Translation |
The functional currency for our joint venture in Brazil is its local currency. Assets and liabilities of this investment are translated at the rate of exchange in effect on the balance sheet date. Translation adjustments resulting from this process are accumulated in stockholders’ equity as a component of accumulated other comprehensive income (loss).
| 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, provision for income taxes, recoverable amounts of receivables, deferred taxes, initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to acquisitions, and cost ratios and completion percentages used for land sales. Actual results could differ from these and other estimates.
| Reclassifications |
Certain amounts in the 2004 and 2003 consolidated financial statements, including discontinued operations (Note 4), have been reclassified to conform to the current year presentation. In addition, in the Consolidated Statement of Cash Flows for the year ended December 31, 2005, certain expenditures relating to our master planned communities are presented as operating activities. Such changes were previously presented as investing activities. Additionally, proceeds from the sale of marketable securities designated as trading, have been presented as operating activities. Such proceeds were previously presented as investing activities. The accompanying Consolidated Statements of Cash Flows for the years ended December 31, 2004, have been restated for such land sales amounts, and proceeds from the sale of marketable securities designated as trading and certain other minor items consistent with the 2005 presentation. This restatement resulted in a $32.5 million decrease to operating cash flows and corresponding increases to investing and financing cash flows from the amounts previously reported in 2004.
| Note 3 | Acquisitions and Intangibles |
| The Rouse Company |
We acquired TRC, a real estate development and management company, on November 12, 2004 through the TRC Merger. 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 2005 based on additional information. The TRC merger was effected by
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the purchase of all of TRC’s outstanding stock at a cost of approximately $6.8 billion and the assumption of TRC liabilities (approximately $7.5 billion, including approximately $5.1 billion of existing TRC debt).
| Revisions/ | |||||||||||||
| Initial Estimate | Reclassifications | Final Valuation | |||||||||||
| November 12, 2004 | Non-Cash | November 12, 2005 | |||||||||||
| (In thousands) | |||||||||||||
| Land | $ | 1,314,711 | $ | (2,720 | ) | $ | 1,311,991 | ||||||
| Buildings and equipment | 8,206,370 | (24,808 | ) | 8,181,562 | |||||||||
| Developments in progress | 383,996 | (52,904 | ) | 331,092 | |||||||||
| Investment in and loans to Unconsolidated Real Estate Affiliates | 1,236,299 | 49,203 | 1,285,502 | ||||||||||
| Investment land and land held for development and sale | 1,645,700 | 54,079 | 1,699,779 | ||||||||||
| Cash and cash equivalents | 29,077 | — | 29,077 | ||||||||||
| Accounts and notes receivables | 84,424 | (2,470 | ) | 81,954 | |||||||||
| Prepaid expenses and other assets: | |||||||||||||
| Below-market ground leases | 382,328 | (23,804 | ) | 358,524 | |||||||||
| Above-market tenant leases | 141,048 | (32,830 | ) | 108,218 | |||||||||
| Deferred tax assets | 145,243 | (143,004 | ) | 2,239 | |||||||||
| Other | 401,527 | (18,736 | ) | 382,791 | |||||||||
| Goodwill | 356,796 | 63,828 | 420,624 | ||||||||||
| Total purchase price | $ | 14,327,519 | $ | (134,166 | ) | $ | 14,193,353 | ||||||
The estimated fair value of liabilities assumed were also reduced by approximately $126 million as additional information became available.
Other Acquisitions
In 2005, we made the following acquisitions, with a total purchase price of approximately $130 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% ownership interest in Circle T Power Center (through 170 Retail Associates, LTD) | October 31 | |||
| 50% ownership interest in Whalers Village (through GGP-TRS, L.L.C.) | November 1 | |||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Additional acquisitions in 2004 included the following:
| Gross | ||||||||
| Acquisition | Purchase | |||||||
| Date | Price | |||||||
| (In millions) | ||||||||
| 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 | ||||||
| 50% ownership interest in GSG de Costa Rica SRL | April 30 | 9.7 | ||||||
| 50% ownership interest in Riverchase Galleria | May 11 | 166.0 | ||||||
| Mall of Louisiana | May 12 | 265.0 | ||||||
| Grand Canal Shoppes | May 17 | 766.0 | ||||||
| 50% ownership interest in GGP/ NIG Brazil | July 30 | 7.0 | ||||||
| Stonestown Galleria | August 13 | 312.0 | ||||||
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, progress and estimated rents, we believe the actual purchase price will be approximately $600 million. The Phase II Agreement is subject to the satisfaction of customary closing conditions.
Accounting for Acquisitions and Intangibles
Acquisitions of properties are accounted for utilizing the purchase method and, accordingly, the results of operations of the acquired properties 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.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes our intangible assets and liabilities:
| Gross Asset | Accumulated | Net Carrying | |||||||||||
| (Liability) | Amortization | Amount | |||||||||||
| (In thousands) | |||||||||||||
December 31, 2005 | |||||||||||||
| Tenant leases: | |||||||||||||
| In-place value | $ | 664,444 | $ | 176,190 | $ | 488,254 | |||||||
| Above-market | 106,117 | 29,023 | 77,094 | ||||||||||
| Below-market | (293,967 | ) | (111,697 | ) | (182,270 | ) | |||||||
| Ground leases: | |||||||||||||
| Above-market | (16,968 | ) | (535 | ) | (16,433 | ) | |||||||
| Below-market | 358,524 | 8,736 | 349,788 | ||||||||||
| Real estate tax stabilization agreement | 91,879 | 4,691 | 87,188 | ||||||||||
December 31, 2004 | |||||||||||||
| Tenant leases: | |||||||||||||
| In-place value | $ | 595,162 | $ | 29,495 | $ | 565,667 | |||||||
| Above-market | 141,701 | 2,883 | 138,818 | ||||||||||
| Below-market | (303,427 | ) | (51,444 | ) | (251,983 | ) | |||||||
| Ground leases: | |||||||||||||
| Above-market | (17,077 | ) | (66 | ) | (17,011 | ) | |||||||
| Below-market | 398,510 | 1,125 | 397,385 | ||||||||||
| Real estate tax stabilization agreement | 94,168 | 654 | 93,514 | ||||||||||
Amortization of these intangible assets and liabilities, and similar assets and liabilities from our Unconsolidated Real Estate Affiliates, increased (decreased) net income by approximately $(157.5) million in 2005, $8.4 million in 2004 and $19.6 million in 2003.
Future amortization, including our share of such items from Unconsolidated Real Estate Affiliates, is estimated to decrease net income by approximately $190 million in 2006, $160 million in 2007, $110 million in 2008, $50 million in 2009, and $20 million in 2010.
| Note 4 | Discontinued Operations and Gains on Dispositions of Interests in Operating Properties |
On December 21, 2005, as approved in December 2005 by our Board of Directors, we sold 7 buildings totaling approximately 705,000 square feet located in the Hunt Valley Business Community in Hunt Valley, Maryland and 14 office buildings totaling approximately 402,000 square feet in the Rutherford Business Center, Woodlawn, Maryland. These 21 properties in Baltimore County were sold at an aggregate sale price of approximately $124.5 million, which was paid in cash at closing. We recognized approximately $4.9 million in gain, before minority interest, on the disposition of these office properties.
On December 23, 2005, as approved in December 2005 by our Board of Directors, we sold a sixteen building, 952,000 square foot portfolio of industrial buildings for approximately $57 million, which was paid in cash at closing. The portfolio is comprised of 10 buildings totaling 582,000 square feet in the Hunt Valley Business Community and six buildings totaling 370,000 square feet in the Rutherford Business Center in suburban Baltimore. The portfolio also includes three land parcels totaling more than 18 acres. We recognized gain of approximately $1.4 million, before minority interest, on the disposition of these industrial properties.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The carrying amounts for these properties as of December 31, 2004 were as follows:
| (In thousands) | ||||
| Land | $ | 57,132 | ||
| Buildings and equipment, net | 102,691 | |||
| Other assets | 4,459 | |||
| Mortgage notes payable | (21,963 | ) | ||
| Accounts payable and accrued expenses | (1,499 | ) | ||
| Net | $ | 140,820 | ||
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.
In March, 2003, our Board of Directors approved and we sold McCreless Mall in San Antonio, Texas for $15.0 million and a gain of approximately $4.0 million. McCreless Mall was purchased in 1998 as part of a portfolio of eight shopping centers.
Pursuant to SFAS No. 144, the operations of these properties (net of minority interests) have been reported as discontinued operations in the accompanying consolidated financial statements. Revenues and income before minority interests were as follows:
| Years Ended December 31, | ||||||||||||||
| 2005 | 2004 | 2003 | ||||||||||||
| (In thousands) | ||||||||||||||
Revenues: | ||||||||||||||
| Hunt Valley/ Rutherford | $ | 24,275 | $ | 2,813 | $ | — | ||||||||
| JP Realty commercial/business properties | — | 6,118 | 7,937 | |||||||||||
| McCreless | — | — | 859 | |||||||||||
| Total | $ | 24,275 | $ | 8,931 | $ | 8,796 | ||||||||
Net income: | ||||||||||||||
| Hunt Valley/Rutherford | $ | 8,067 | $ | 983 | $ | — | ||||||||
| JP Realty commercial/business properties | — | 3,801 | 5,030 | |||||||||||
| McCreless | — | — | 292 | |||||||||||
| Total | $ | 8,067 | $ | 4,784 | $ | 5,322 | ||||||||
| Note 5 | Unconsolidated Real Estate Affiliates |
The Unconsolidated Real Estate Affiliates constitute ournon-controlling 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.
In certain circumstances, we are obligated (or can elect) to fund debt (“Retained Debt”) in excess of our pro rata share of the debt of our Unconsolidated Real Estate Affiliates. In general, we elect to have retained debt in exchange for a reduced capital contribution by us when properties are acquired subject to existing financing.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We are obligated to fund all amounts related to Retained Debt, including any shortfalls in subsequent sales or refinancing proceeds to the extent of such Retained Debt. Such Retained Debt totaled $302.7 million as of December 31, 2005 and $148.7 million as of December 31, 2004, and has been reflected as a reduction in our investment in Unconsolidated Real Estate Affiliates.
The significant accounting policies used by the Unconsolidated Real Estate Affiliates are the same as ours.
New York State Common Retirement Fund (“NYSCRF”), our partner in GGP/ Homart, Inc. (“GGP/ Homart”), has an exchange right which permits it to convert its ownership interest in GGP/ Homart to shares of General Growth common stock. If this exchange right is exercised, we may alternatively satisfy it in cash.
During certain periods in 2006 or 2009, our partner in GGP Ivanhoe IV, Inc. has the right to require us to purchase all of its GGP Ivanhoe IV, Inc. common stock for a purchase price equal to the fair value of such stock. We can, at our election, satisfy this obligation in any combination of cash or General Growth common stock.
| Condensed Combined Financial Information of Unconsolidated Real Estate Affiliates |
Following is summarized financial information for our Unconsolidated Real Estate Affiliates as of December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004 and 2003.
| December 31, | |||||||||||
| 2005 | 2004 | ||||||||||
| (In thousands) | |||||||||||
| Condensed Combined Balance Sheets — Unconsolidated Real Estate Affiliates | |||||||||||
| Assets: | |||||||||||
| Land | $ | 919,532 | $ | 852,137 | |||||||
| Buildings and equipment | 7,658,896 | 7,398,555 | |||||||||
| Less accumulated depreciation | (1,304,226 | ) | (982,616 | ) | |||||||
| Developments in progress | 425,057 | 220,486 | |||||||||
| Net property and equipment | 7,699,259 | 7,488,562 | |||||||||
| Investment in unconsolidated joint ventures | 89,430 | 56,362 | |||||||||
| Investment land and land held for sale and development | 259,386 | 257,555 | |||||||||
| Net investment in real estate | 8,048,075 | 7,802,479 | |||||||||
| Cash and cash equivalents | 194,494 | 134,399 | |||||||||
| Accounts and notes receivable, net | 161,218 | 119,444 | |||||||||
| Deferred expenses, net | 148,561 | 175,447 | |||||||||
| Prepaid expenses and other assets | 259,480 | 261,463 | |||||||||
| Total assets | $ | 8,811,828 | $ | 8,493,232 | |||||||
| Liabilities and Owners’ Equity: | |||||||||||
| Mortgage notes and other property debt payable | $ | 6,325,118 | $ | 5,601,137 | |||||||
| Accounts payable and accrued expenses | 455,596 | 417,324 | |||||||||
| Owners’ equity | 2,031,114 | 2,474,771 | |||||||||
| Total liabilities and owners’ equity | $ | 8,811,828 | $ | 8,493,232 | |||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| December 31, | ||||||||
| 2005 | 2004 | |||||||
| (In thousands) | ||||||||
Investment In and Loans To/ From Unconsolidated Real Estate Affiliates | ||||||||
| Owners’ equity | $ | 2,031,114 | $ | 2,474,771 | ||||
| Less joint venture partners’ equity | (1,188,150 | ) | (1,258,133 | ) | ||||
| Capital or basis differences and loans | 975,133 | 728,903 | ||||||
| Investment in and loans to/from Unconsolidated Real Estate Affiliates | $ | 1,818,097 | $ | 1,945,541 | ||||
| Years Ended December 31, | ||||||||||||||
| 2005 | 2004 | 2003 | ||||||||||||
| (In thousands) | ||||||||||||||
Condensed Combined Statements of Operations — Unconsolidated Real Estate Affiliates | ||||||||||||||
| Revenues: | ||||||||||||||
| Minimum rents | $ | 792,708 | $ | 569,347 | $ | 559,060 | ||||||||
| Tenant recoveries | 364,645 | 264,907 | 272,537 | |||||||||||
| Overage rents | 28,592 | 21,421 | 15,593 | |||||||||||
| Land sales | 158,181 | 38,681 | — | |||||||||||
| Other | 126,503 | 35,082 | 15,414 | |||||||||||
| Total revenues | 1,470,629 | 929,438 | 862,604 | |||||||||||
| Expenses: | ||||||||||||||
| Real estate taxes | 112,010 | 77,513 | 78,449 | |||||||||||
| Repairs and maintenance | 87,449 | 59,051 | 64,864 | |||||||||||
| Marketing | 29,563 | 25,859 | 27,504 | |||||||||||
| Other property operating costs | 239,404 | 144,894 | 117,387 | |||||||||||
| Land sales operations | 89,560 | 18,101 | — | |||||||||||
| Provision for doubtful accounts | 10,071 | 5,389 | 3,197 | |||||||||||
| Property management and other costs | 59,423 | 47,042 | 48,807 | |||||||||||
| General and administrative | 3,267 | 7,759 | 2,099 | |||||||||||
| Depreciation and amortization | 254,542 | 170,530 | 157,776 | |||||||||||
| Total expenses | 885,289 | 556,138 | 500,083 | |||||||||||
| Operating income | 585,340 | 373,300 | 362,521 | |||||||||||
| Interest income | 14,430 | 3,779 | 5,757 | |||||||||||
| Interest expense | (303,447 | ) | (179,807 | ) | (174,862 | ) | ||||||||
| Equity in income of unconsolidated joint ventures | 5,384 | 4,337 | 3,933 | |||||||||||
| Net income | $ | 301,707 | $ | 201,609 | $ | 197,349 | ||||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Years Ended December 31, | ||||||||||||
| 2005 | 2004 | 2003 | ||||||||||
| (In thousands) | ||||||||||||
Equity In Income of Unconsolidated Real Estate Affiliates | ||||||||||||
| Net income of Unconsolidated Real Estate Affiliates | $ | 301,707 | $ | 201,609 | $ | 197,349 | ||||||
| Joint venture partners’ share of income of Unconsolidated Real Estate Affiliates | (157,152 | ) | (103,768 | ) | (98,226 | ) | ||||||
| Amortization of capital or basis differences | (22,998 | ) | (9,633 | ) | (3,263 | ) | ||||||
| Elimination of Unconsolidated Real Estate Affiliates loan interest | (571 | ) | (17 | ) | (1,380 | ) | ||||||
| Equity in income of Unconsolidated Real Estate Affiliates | $ | 120,986 | $ | 88,191 | $ | 94,480 | ||||||
Condensed Financial Information of Individually Significant Unconsolidated Real Estate Affiliates
The following is summarized financial information for certain individually significant Unconsolidated Real Estate Affiliates as of December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004 and 2003.
We own 50% of the common stock of GGP/ Homart Inc. (“GGP/ Homart”), a REIT. The remaining 50% interest in GGP/ Homart is owned by NYSCRF. GGP/Homart owns 23 retail properties. We own 50% of the membership interest of GGP/ Homart II L.L.C. (“GGP/ Homart II”), a limited liability company. The remaining 50% interest in GGP/ Homart II is owned by NYSCRF. GGP/Homart II owns 12 retail properties. In addition, we own 50% of the membership interest inGGP-TRS, L.L.C. (“GGP/ Teachers”), a limited liability company. The remaining 50% interest in GGP/ Teachers is owned by the Teachers’ Retirement System of the State of Illinois. GGP/ Teachers owns six retail properties. Our investment in such affiliates varies from a strict 50% ownership due to capital or basis differences on loans and related amortization.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| GGP/Homart | ||||||||||
| December 31, | December 31, | |||||||||
| 2005 | 2004 | |||||||||
| (In thousands) | ||||||||||
| Assets: | ||||||||||
| Land | $ | 146,527 | $ | 146,777 | ||||||
| Buildings and equipment | 1,796,336 | 1,765,800 | ||||||||
| Less accumulated depreciation | (452,809 | ) | (389,682 | ) | ||||||
| Developments in progress | 30,009 | 8,586 | ||||||||
| Investment in unconsolidated joint ventures | 8,788 | 10,898 | ||||||||
| Net investment in real estate | 1,528,851 | 1,542,379 | ||||||||
| Cash and cash equivalents | 65,612 | 20,319 | ||||||||
| Accounts receivable, net | 48,137 | 39,252 | ||||||||
| Deferred expenses, net | 46,709 | 48,970 | ||||||||
| Prepaid expenses and other assets | 18,333 | 56,482 | ||||||||
| Total assets | $ | 1,707,642 | $ | 1,707,402 | ||||||
| Liabilities and Stockholders’ Equity: | ||||||||||
| Mortgage notes and other property debt payable | $ | 1,579,717 | $ | 1,469,938 | ||||||
| Accounts payable and accrued expenses | 58,710 | 63,559 | ||||||||
| Stockholders’ equity | 69,215 | 173,905 | ||||||||
| Total liabilities and stockholders’ equity | $ | 1,707,642 | $ | 1,707,402 | ||||||
| GGP/Homart II | ||||||||||
| December 31, | December 31, | |||||||||
| 2005 | 2004 | |||||||||
| (In thousands) | ||||||||||
| Assets: | ||||||||||
| Land | $ | 190,787 | $ | 190,707 | ||||||
| Buildings and equipment | 2,014,151 | 1,957,969 | ||||||||
| Less accumulated depreciation | (264,434 | ) | (205,637 | ) | ||||||
| Developments in progress | 148,453 | 63,970 | ||||||||
| Net investment in real estate | 2,088,957 | 2,007,009 | ||||||||
| Cash and cash equivalents | 47,781 | 23,149 | ||||||||
| Accounts receivable, net | 32,644 | 32,265 | ||||||||
| Deferred expenses, net | 56,223 | 59,102 | ||||||||
| Prepaid expenses and other assets | 116,234 | 36,236 | ||||||||
| Total assets | $ | 2,341,839 | $ | 2,157,761 | ||||||
| Liabilities and Members’ Capital: | ||||||||||
| Mortgage notes and other property debt payable | $ | 1,666,979 | $ | 1,331,301 | ||||||
| Accounts payable and accrued expenses | 81,064 | 81,691 | ||||||||
| Members’ capital | 593,796 | 744,769 | ||||||||
| Total liabilities and members’ capital | $ | 2,341,839 | $ | 2,157,761 | ||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| GGP/Teachers | ||||||||||
| December 31, | December 31, | |||||||||
| 2005 | 2004 | |||||||||
| (In thousands) | ||||||||||
| Assets: | ||||||||||
| Land | $ | 176,761 | $ | 125,378 | ||||||
| Buildings and equipment | 879,828 | 703,700 | ||||||||
| Less accumulated depreciation | (64,795 | ) | (44,147 | ) | ||||||
| Developments in progress | 18,431 | 20,847 | ||||||||
| Net investment in real estate | 1,010,225 | 805,778 | ||||||||
| Cash and cash equivalents | 16,531 | 19,658 | ||||||||
| Accounts receivable, net | 9,725 | 7,990 | ||||||||
| Deferred expenses, net | 13,220 | 8,423 | ||||||||
| Prepaid expenses and other assets | 3,968 | 3,267 | ||||||||
| Total assets | $ | 1,053,669 | $ | 845,116 | ||||||
| Liabilities and Members’ Capital: | ||||||||||
| Mortgage notes and other property debt payable | $ | 786,025 | $ | 466,580 | ||||||
| Accounts payable and accrued expenses | 82,574 | 67,017 | ||||||||
| Members’ capital | 185,070 | 311,519 | ||||||||
| Total liabilities and members’ capital | $ | 1,053,669 | $ | 845,116 | ||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| GGP/Homart | ||||||||||||||
| 2005 | 2004 | 2003 | ||||||||||||
| Years ended December 31, | ||||||||||||||
| (In thousands) | ||||||||||||||
| Revenues: | ||||||||||||||
| Minimum rents | $ | 226,936 | $ | 214,448 | $ | 208,685 | ||||||||
| Tenant recoveries | 95,752 | 91,867 | 91,476 | |||||||||||
| Overage rents | 9,312 | 8,266 | 6,241 | |||||||||||
| Other | 10,660 | 7,469 | 6,388 | |||||||||||
| Total revenues | 342,660 | 322,050 | 312,790 | |||||||||||
| Expenses: | ||||||||||||||
| Real estate taxes | 29,745 | 27,845 | 26,852 | |||||||||||
| Repairs and maintenance | 26,748 | 25,890 | 25,482 | |||||||||||
| Marketing | 9,294 | 9,683 | 9,576 | |||||||||||
| Other property operating costs | 36,590 | 41,975 | 41,468 | |||||||||||
| Provision for doubtful accounts | 1,088 | 1,487 | 1,040 | |||||||||||
| Property management and other costs | 20,835 | 19,355 | 18,846 | |||||||||||
| General and administrative | 434 | 2,756 | 755 | |||||||||||
| Depreciation and amortization | 68,578 | 66,430 | 61,778 | |||||||||||
| Total expenses | 193,312 | 195,421 | 185,797 | |||||||||||
| Operating income | 149,348 | 126,629 | 126,993 | |||||||||||
| Interest income | 4,588 | 1,817 | 1,185 | |||||||||||
| Interest expense | (84,684 | ) | (81,120 | ) | (74,813 | ) | ||||||||
| Equity in income of unconsolidated joint ventures | 5,384 | 4,337 | 3,933 | |||||||||||
| Net income | $ | 74,636 | $ | 51,663 | $ | 57,298 | ||||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| GGP/Homart II | ||||||||||||||
| 2005 | 2004 | 2003 | ||||||||||||
| Years ended December 31, | ||||||||||||||
| (In thousands) | ||||||||||||||
| Revenues: | ||||||||||||||
| Minimum rents | $ | 194,938 | $ | 184,418 | $ | 177,752 | ||||||||
| Tenant recoveries | 92,862 | 90,958 | 85,194 | |||||||||||
| Overage rents | 6,432 | 5,530 | 5,552 | |||||||||||
| Other | 8,543 | 5,352 | 5,823 | |||||||||||
| Total revenues | 302,775 | 286,258 | 274,321 | |||||||||||
| Expenses: | ||||||||||||||
| Real estate taxes | 27,132 | 27,030 | 24,493 | |||||||||||
| Repairs and maintenance | 19,671 | 18,734 | 18,454 | |||||||||||
| Marketing | 8,726 | 9,504 | 9,271 | |||||||||||
| Other property operating costs | 29,518 | 34,268 | 34,496 | |||||||||||
| Provision for doubtful accounts | 3,125 | 1,591 | 1,733 | |||||||||||
| Property management and other costs | 17,468 | 16,176 | 15,892 | |||||||||||
| General and administrative | 1,913 | 4,282 | 577 | |||||||||||
| Depreciation and amortization | 61,923 | 56,394 | 53,243 | |||||||||||
| Total expenses | 169,476 | 167,979 | 158,159 | |||||||||||
| Operating income | 133,299 | 118,279 | 116,162 | |||||||||||
| Interest income | 7,358 | 1,492 | 4,188 | |||||||||||
| Interest expense | (77,285 | ) | (55,780 | ) | (60,491 | ) | ||||||||
| Net income | $ | 63,372 | $ | 63,991 | $ | 59,859 | ||||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| GGP/Teachers | ||||||||||||||
| 2005 | 2004 | 2003 | ||||||||||||
| Years ended December 31, | ||||||||||||||
| (In thousands) | ||||||||||||||
| Revenues: | ||||||||||||||
| Minimum rents | $ | 87,014 | $ | 83,464 | $ | 78,252 | ||||||||
| Tenant recoveries | 40,033 | 38,473 | 39,329 | |||||||||||
| Overage rents | 2,888 | 2,736 | 1,844 | |||||||||||
| Other | 2,378 | 1,831 | 1,132 | |||||||||||
| Total revenues | 132,313 | 126,504 | 120,557 | |||||||||||
| Expenses: | ||||||||||||||
| Real estate taxes | 11,130 | 10,868 | 11,756 | |||||||||||
| Repairs and maintenance | 7,405 | 7,472 | 8,321 | |||||||||||
| Marketing | 3,610 | 3,424 | 3,383 | |||||||||||
| Other property operating costs | 13,551 | 16,538 | 16,235 | |||||||||||
| Provision for doubtful accounts | 440 | 445 | 250 | |||||||||||
| Property management and other costs | 7,424 | 6,716 | 6,383 | |||||||||||
| General and administrative | 875 | 302 | 711 | |||||||||||
| Depreciation and amortization | 21,385 | 20,578 | 17,399 | |||||||||||
| Total expenses | 65,820 | 66,343 | 64,438 | |||||||||||
| Operating income | 66,493 | 60,161 | 56,119 | |||||||||||
| Interest income | 723 | 287 | 274 | |||||||||||
| Interest expense | (27,030 | ) | (15,499 | ) | (14,939 | ) | ||||||||
| Net income | $ | 40,186 | $ | 44,949 | $ | 41,454 | ||||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 6 Mortgage Notes and Other Property Debt Payable
Mortgage notes and other property debt payable are summarized as follows:
| December 31, | |||||||||
| 2005 | 2004 | ||||||||
| (In thousands) | |||||||||
| Fixed-rate debt: | |||||||||
| Commercial mortgage-backed securities | $ | 1,181,895 | $ | 1,201,291 | |||||
| Other collateralized mortgage notes and other property debt payable | 11,092,544 | 8,167,894 | |||||||
| Corporate and other unsecured term loans | 1,631,257 | 1,750,882 | |||||||
| Total fixed-rate debt | 13,905,696 | 11,120,067 | |||||||
| Variable-rate debt: | |||||||||
| Commercial mortgage-backed securities | 306,270 | 361,239 | |||||||
| Other collateralized mortgage notes and other property debt payable | 888,842 | 2,189,059 | |||||||
| Credit facilities | 180,500 | 150,000 | |||||||
| Corporate and other unsecured term loans | 5,137,567 | 6,490,582 | |||||||
| Total variable-rate debt | 6,513,179 | 9,190,880 | |||||||
| Total | $ | 20,418,875 | $ | 20,310,947 | |||||
As of December 31, 2005, approximately $20.1 billion of land, buildings and equipment and investment land and land held for development and sale (before accumulated depreciation) have been pledged as collateral for our mortgage notes and other debt payable. Certain properties, including those within the portfolios collateralized by commercial mortgage-backed securities, are subject to financial performance covenants, primarily debt service coverage ratios.
Our mortgage notes and other debt payable have various maturities through 2095. The weighted-average remaining term of our mortgage notes and other property debt payable was 4.2 years as of December 31, 2005.
Commercial Mortgage-Backed Securities
In December 2001, the Operating Partnership and certain Unconsolidated Real Estate Affiliates completed the placement of non-recourse commercial mortgage pass-through certificates (the “GGP MPTC”). The principal amount of the GGP MPTC is attributed to the Operating Partnership, GGP/Homart, GGP/Homart II and GGP Ivanhoe III. In addition, in November 1997 (refinanced in November 2004), the Operating Partnership and GGP Ivanhoe I completed the placement of non-recourse commercial mortgage backed securities (the “CMBS 13”).
The commercial mortgage-backed securities 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
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
under common ownership, however, certain unconsolidated debt is cross-defaulted and cross-collateralized by consolidated debt as follows:
| Outstanding Balance | Number of Collateralized Properties | |||||||||||||||||
| Consolidated | Unconsolidated | Consolidated | Unconsolidated | |||||||||||||||
| (Dollars in millions) | ||||||||||||||||||
| GGP MPTC | $ | 619.4 | $ | 291.4 | 4 | 5 | ||||||||||||
| CMBS 13 | 868.8 | 138.6 | 11 | 2 | ||||||||||||||
As of December 31, 2005, the weighted-average interest rate on the fixed-rate commercial mortgage-backed securities was 5.38% (range of 4.15% to 6.71%). The weighted-average interest rate on variable-rate commercial mortgage-backed securities, excluding the impact of interest rate swaps, was 5.29% (range of LIBOR (4.39% at December 31, 2005) plus 80 to 92 basis points).
Other Collateralized Mortgage Notes and Other Property Debt Payable
Collateralized mortgage notes and other property debt payable consist primarily of non-recourse notes collateralized by individual properties and equipment. Substantially all of the mortgage notes are non-recourse to us. Certain mortgage notes payable may be prepaid but are generally subject to a prepayment penalty equal to a yield-maintenance premium or a percentage of the loan balance.
The fixed-rate collateralized mortgage notes and other debt payable bear interest ranging, excluding the impact of interest rate swaps, from 3.13% to 11.27%. The variable-rate collateralized mortgage notes and other debt payable bear interest at LIBOR plus 75 to 213 basis points.
2004 Credit Facility
We entered into a credit agreement on November 12, 2004 to fund the cash portion of the TRC Merger consideration and, with other cash and financing sources, fund other costs of the merger transaction. The terms of the notes that comprised the 2004 Credit Facility are as follows:
| December 31, | ||||||||||||
| Initial | ||||||||||||
| Capacity | 2005 | 2004 | ||||||||||
| (In millions) | ||||||||||||
| Six-month bridge loan | $ | 1,145.0 | $ | — | $ | 749.9 | ||||||
| Three-year term loan | 3,650.0 | 3,064.9 | 3,650.0 | |||||||||
| Four-year term loan | 2,000.0 | 1,980.0 | 2,000.0 | |||||||||
| Revolving credit facility | 500.0 | 180.5 | 150.0 | |||||||||
| $ | 7,295.0 | $ | 5,225.4 | $ | 6,549.9 | |||||||
The rate on the four-year term loan was reduced by 25 basis points in June 2005 and the rates on the revolving credit facility and three-year term loan were reduced by 50 basis points in September 2005. The weighted-average interest rate on the 2004 Credit Facility, which was refinanced in February 2006 as described below, was LIBOR plus 184 basis points at December 31, 2005.
In February 2006, we entered into several debt agreements. The proceeds of these transactions were used to reduce the amounts outstanding under the 2004 Credit Facility.
On February 24, 2006, we restated the 2004 Credit Facility and entered into a Second Amended and Restated Credit Agreement (the “2006 Credit Facility”). The 2006 Credit Facility provides for a $2.85 billion term loan (the “Term Loan”) and a $650 million revolving credit facility.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The 2006 Credit Facility has a four year term, with a one year extension option. The interest rate ranges from LIBOR plus 1.15% to LIBOR plus 1.5%, depending on our leverage ratio and assuming we maintain our election to have these loans designated as Eurodollar loans. The current interest rate is LIBOR plus 1.25%. Quarterly principal payments of $12.5 million on the Term Loan begin March 31, 2007, with the balance due at maturity.
Under the terms of the 2006 Credit Facility, we are subject to customary affirmative and negative covenants as we were under the 2004 Credit Facility. If a default occurs, the lenders will have the option of declaring all outstanding amounts immediately due and payable. These events of default include a failure to maintain our REIT status under the Internal Revenue Code, a 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.
Concurrently with the 2006 Credit Facility, we also entered into a $1.4 billion term loan (the “Short Term Loan”), TRCLP entered into a $500 million term loan (the “Bridge Loan”) and we issued $200 million of trust preferred securities through GGP Capital Trust I. All of these arrangements are subject to customary affirmative and negative covenants and events of default.
The interest rate on the Short Term Loan is the same as on the 2006 Credit Facility (currently LIBOR plus 1.25%). An $800 million principal payment is due under the Short Term Loan on August 14, 2006, with the balance due on December 31, 2006. We are required to apply the net proceeds of the refinancing of Ala Moana Center toward prepayment of the Short Term Loan.
The Bridge Loan bears interest at LIBOR plus 1.3% until May 24, 2006, and at LIBOR plus 1.55% thereafter, (assuming we maintain our election to have the loan designated as a Eurodollar loan) and is due August 24, 2006. We intend to repay the Bridge Loan with proceeds obtained from the sale of bonds issued by TRCLP.
As mentioned above, GGP Capital Trust I, a Delaware statutory trust (the “Trust”) and a wholly owned subsidiary of GGPLP, completed a private placement of $200 million of floating rate Preferred Securities. The Trust also issued $6.2 million of Common Securities to GGPLP. The Trust used the proceeds from the sale of the Preferred and Common Securities to purchase $206.2 million of floating rate Junior Subordinated Notes of GGPLP due 2036. The Preferred Securities require distributions equal to LIBOR plus 1.45%. Distributions are cumulative and accrue from the date of original issuance. The Preferred Securities mature on April 30, 2036, but may be redeemed beginning on April 30, 2011 if we exercise our right to redeem a like amount of the Junior Subordinated Notes. The Junior Subordinated Notes bear interest at LIBOR plus 1.45%.
| Unsecured Term Loans |
In conjunction with the TRC Merger, we assumed certain publicly-traded unsecured debt. This debt totaled $1.5 billion at December 31, 2005 and $1.6 billion at December 31, 2004, 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 began in March 2005 and continue until the loan is fully repaid in March 2008.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Interest Rate Swaps |
To achieve a more desirable balance between fixed and variable-rate debt, we have also entered into certain swap agreements as follows:
| 2004 Credit | ||||||||||||
| GGP MPTC | Agreement | Property Specific | ||||||||||
| Total notional amount (in millions) | $ | 125.0 | $ | 350.0 | $ | 408.1 | ||||||
| Average fixed effective rate (pay rate) | 4.59 | % | 3.43 | % | 5.62 | % | ||||||
| Average variable interest rate of related debt (receive rate) | LIBOR + .92 | % | LIBOR + 1.75 | % | LIBOR + 1.60 | % | ||||||
Such swap agreements have been designated as cash flow hedges and are intended to hedge our exposure to future interest payments on the related variable-rate debt.
| Letters of Credit and Surety Bonds |
We had outstanding letters of credit and surety bonds of approximately $210 million as of December 31, 2005. These letters of credit and bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.
Note 7 Income Taxes
We elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code, commencing with our taxable year beginning January 1, 1993. To be taxed 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.
As a REIT, we will generally not be subject to corporate level Federal income tax on taxable income we distribute currently to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to Federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income or property, and to federal income and excise taxes on our undistributed taxable income. In addition, we are subject to rules which may impose corporate income tax on certain built-in gains recognized upon the disposition of assets owned by our subsidiaries where such subsidiaries (or other predecessors) had formerly been C corporations. These rules apply only where the disposition occurs within certain specified recognition periods. Specifically, in the case of the TRC assets, we may be subject to tax on built-in gain recognized upon the disposition prior to January 1, 2008 of assets owned by TRC on January 1, 1998, the effective date of TRC’s REIT election. At December 31, 2005, the total amount of built-in gains with respect to our assets is substantial. However, to the extent that any such properties are to be sold, we intend to utilize tax strategies such as dispositions through like-kind exchanges and the use of net operating loss carryforwards to limit or offset the amount of such gains and therefore the amount of tax paid.
We also have subsidiaries which we have elected to be treated as taxable real estate investment trust subsidiaries (a “TRS” or “TRS entities”) and which are, therefore, subject to federal and state income taxes. Our primary TRS entities include GGMI, entities which own our master planned community properties and other TRS entities acquired in the TRC Merger. Current federal income taxes of certain of these TRS entities are likely to increase in future years as we exhaust the net loss carry-forwards of these entities and as certain master planned community developments are completed. Such increases could be significant.
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Table of Contents
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The income tax provision (benefit) for the years ended December 31, 2005 and 2004 primarily related to the TRS entities acquired in the TRC Merger.
| 2005 | 2004 | |||||||
| (In thousands) | ||||||||
| Current | $ | 22,050 | $ | 390 | ||||
| Deferred | 28,596 | 1,993 | ||||||
| Total | $ | 50,646 | $ | 2,383 | ||||
Income tax expense computed by applying the federal corporate tax rate for the years ended December 31, 2005 and 2004 is reconciled to the provision for income taxes as follows:
| 2005 | 2004 | |||||||
| (In thousands) | ||||||||
| Tax at statutory rate on earnings from continuing operations before income taxes | $ | 40,080 | $ | 89,481 | ||||
| Decrease in valuation allowances, net | (5,114 | ) | (2,110 | ) | ||||
| State income taxes, net of federal income tax benefit | 343 | 115 | ||||||
| Tax at statutory rate on (earnings) loss not subject to federal income taxes and other permanent differences | 15,337 | (85,103 | ) | |||||
| Income tax expense | $ | 50,646 | $ | 2,383 | ||||
The income tax provision was insignificant in 2003.
As part of the TRC merger, we acquired a controlling interest in an entity whose assets included a deferred tax asset of approximately $140 million related to $464.5 million of temporary differences (primarily interest deduction carryforwards with no expiration date).
Realization of a deferred tax asset is dependent upon generating sufficient taxable income in future periods. Our net operating loss carryforwards are currently scheduled to expire in subsequent years through 2025. Some of the net operating loss carryforward amounts are subject to annual limitations under Section 382 of the Internal Revenue Code. This annual limitation under Section 382 is subject to modification if a taxpayer recognizes what are called “built-in gain items.” For 2004, the benefit of the entire amount of the net operating loss was recorded and a reserve was established to reflect the limitations caused by Section 382. For 2005, the presentation has changed, but the net amount has remained the same. For 2005, the benefit amount has been reduced to reflect the sum of the annual Section 382 limitations. The valuation amount has likewise been reduced, thereby maintaining the same net deferred tax benefit amount for the net operating loss carryforwards.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. Net deferred tax assets (liabilities) are summarized as follows:
| 2005 | 2004 | ||||||||
| (In thousands) | |||||||||
| Total deferred tax assets | $ | 12,457 | $ | 180,374 | |||||
| Valuation allowance | — | (29,998 | ) | ||||||
| Net deferred tax assets | 12,457 | 150,376 | |||||||
| Total deferred tax liabilities | (1,286,576 | ) | (1,414,565 | ) | |||||
| Net deferred tax assets (liabilities) | $ | (1,274,119 | ) | $ | (1,264,189 | ) | |||
Due to the uncertainty of the realization of certain tax carryforwards, we established valuation allowances. The majority of the valuation allowances related to net operating loss carryforwards where there was uncertainty regarding their realizability or limitations under Internal Revenue Code Section 382.
The tax effects of temporary differences and carryforwards included in the net deferred tax assets (liabilities) at December 31, 2005 and 2004 are summarized as follows:
| 2005 | 2004 | |||||||
| (In thousands) | ||||||||
| Property, primarily differences in depreciation and amortization, the tax basis of land assets and certain other costs | $ | (1,266,660 | ) | $ | (1,329,676 | ) | ||
| Deferred income | (236,167 | ) | (146,182 | ) | ||||
| Interest deduction carryforwards | 163,193 | 154,523 | ||||||
| Operating loss and tax credit carryforwards | 65,515 | 57,146 | ||||||
| Net deferred tax assets (liabilities) | $ | (1,274,119 | ) | $ | (1,264,189 | ) | ||
Several of our subsidiaries or partnerships in which we have an interest are currently under examination by the Internal Revenue Service. Although we believe our tax returns are correct, the final determination of tax audits and any related litigation could be different than that which was reported on the returns. In the opinion of management, we have made adequate tax provisions for years subject to examination.
Earnings and profits, which determine the taxability of dividends to stockholders, differ from net income reported for financial reporting purposes due to differences for federal income tax reporting purposes in, among other things, estimated useful lives, depreciable basis of properties and permanent and temporary differences on the inclusion of deductibility of elements of income and deductibility of expense for such purposes.
Distributions paid on our common and preferred stock and their tax status are presented in the following table. The tax status of General Growth distributions in 2005, 2004 and 2003 may not be indicative of future periods.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The portion of distributions shown below as unrecaptured Section 1250 capital gains are designated as capital gain distributions for tax purposes.
| 2005 | 2004 | 2003 | ||||||||||
Common shares | ||||||||||||
| Ordinary income | $ | 0.993 | $ | 1.260 | $ | 1.003 | ||||||
| Return of capital | 0.497 | — | — | |||||||||
| Unrecaptured Section 1250 capital gains | — | — | 0.017 | |||||||||
| Distributions per share | $ | 1.490 | $ | 1.260 | $ | 1.020 | ||||||
Preferred shares* | ||||||||||||
| Ordinary income | $ | — | $ | — | $ | 1.403 | ||||||
| Unrecaptured Section 1250 capital gains | — | — | 0.028 | |||||||||
| Distributions per share | $ | — | $ | — | $ | 1.431 | ||||||
*All outstanding preferred shares of General Growth were redeemed in 2003.
Note 8 Rentals Under Operating Leases
We receive rental income from the leasing of retail and other space under operating leases. The minimum future rentals based on operating leases of our Consolidated Properties held as of December 31, 2005 are as follows:
| Year | Amount | |||
| (In thousands) | ||||
| 2006 | $ | 1,308,641 | ||
| 2007 | 1,219,607 | |||
| 2008 | 1,096,938 | |||
| 2009 | 959,978 | |||
| 2010 | 804,762 | |||
| Subsequent | 2,817,353 | |||
Minimum future rentals exclude amounts which are payable by certain tenants based upon a percentage of their gross sales or as reimbursement of operating expenses and amortization of above and below-market tenant leases.
Such operating leases are with a variety of tenants, the majority of which are national and regional retail chains and local retailers, and consequently, our credit risk is concentrated in the retail industry.
| Note 9 | Transactions with Affiliates |
| Property Management and Other Fees |
GGMI and other TRS entities recognized fees from the Unconsolidated Real Estate Affiliates of $87.5 million in 2005, $61.8 million in 2004 and $63.0 million in 2003.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Notes Receivable — Officers |
Notes receivable — officers were fully repaid at December 31, 2005 and at December 31, 2004 were as follows:
| 2004 | ||||
| (In thousands) | ||||
| Income tax withholdings reported in Prepaid and Other Assets | $ | 623 | ||
| Reported as a reduction to Stockholders’ Equity | 5,178 | |||
| $ | 5,801 | |||
Between 1998 and April 30, 2002, some of our officers issued $25.0 million of promissory notes to us. The notes were issued in connection with the officers’ exercises of options to purchase 2,703,000 shares of our common stock. The notes bore interest at a rate equal to LIBOR plus 50 basis points, were full recourse to the officers, were collateralized by the shares of our common stock issued upon exercise of such options, provided for quarterly payments of interest and were payable to us on demand.
As of April 30, 2002, our Board of Directors terminated the availability of such loans to officers. In conjunction with this decision, the terms of the promissory notes, including approximately $2.8 million related to income tax withholding payments which we had made on behalf of the officers, were restructured. As of April 30, 2002, each officer repaid at least 60% of the principal and 100% of the interest due under such officer’s note and the remaining amounts, approximately $10.1 million, were represented by amended and restated promissory notes. These amended and restated, full recourse notes were payable in monthly installments of principal and interest (at a market rate which varied monthly computed at LIBOR plus 125 basis points) and were scheduled to be fully repaid in May 2009 (or within 90 days of the officer’s separation from the Company, if earlier). In 2005, voluntary repayments of $.6 million were received in December, $.5 million in September and $4.2 million in February and, therefore, all amounts have been repaid as of December 31, 2005.
| Other |
In May and June 2005, we purchased the interests in two airplanes from a company whose sole shareholder is one of our directors. The purchase was approved by our Board of Directors. The purchase price was $2.8 million and was based on an independent third party fair market valuation from Net Jets, Inc. As a result of the purchase, we will no longer incur or pay aircraft expenses to this company.
| Note 10 | Employee Benefit and Stock Plans |
| Incentive Stock Plans |
We grant stock options and restricted stock to attract and retain officers and key employees through the 2003 Incentive Stock Plan and, prior to April 2003, the 1993 Stock Incentive Plan. Stock options are granted by the Compensation Committee of the Board of Directors at an exercise price of not less than 100% of the fair market value of our common stock on the date of the grant. The terms of the options are fixed by the Compensation Committee. Options granted to officers and key employees under the 2003 Incentive Stock Plan are for5-year terms and under the 1993 Incentive Stock Plan are for10-year terms. Stock options are generally exercisable in either 331/3% or 20% annual increments beginning on the date of the grants. Options granted to non-employee directors are exercisable in full commencing on the date of grant and are scheduled to expire on the fifth anniversary of the date of the grant. The 2003 Incentive Stock Plan provides for the issuance of up to 9.0 million shares of our common stock.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A summary of the status of options granted under the 2003 and 1993 Stock Incentive Plans is presented below.
| 2005 | 2004 | 2003 | ||||||||||||||||||||||
| Weighted | Weighted | Weighted | ||||||||||||||||||||||
| Average | Average | Average | ||||||||||||||||||||||
| Exercise | Exercise | Exercise | ||||||||||||||||||||||
| Shares | Price | Shares | Price | Shares | Price | |||||||||||||||||||
| Outstanding at beginning of year | 1,875,687 | $ | 22.17 | 1,482,087 | $ | 14.86 | 1,590,309 | $ | 12.45 | |||||||||||||||
| Granted | 1,352,500 | 36.13 | 922,500 | 30.80 | 760,500 | 16.96 | ||||||||||||||||||
| Exercised | (610,213 | ) | 21.00 | (521,100 | ) | 16.83 | (845,922 | ) | 12.28 | |||||||||||||||
| Forfeited | (71,800 | ) | 32.90 | (7,800 | ) | 11.26 | (22,800 | ) | 11.76 | |||||||||||||||
| Outstanding at end of year | 2,546,174 | $ | 29.57 | 1,875,687 | $ | 22.17 | 1,482,087 | $ | 14.86 | |||||||||||||||
| Exercisable at end of year | 607,174 | $ | 25.85 | 369,687 | $ | 19.49 | 234,087 | $ | 13.67 | |||||||||||||||
| Shares available for future grants | 6,645,500 | 7,994,000 | 8,971,500 | |||||||||||||||||||||
| Weighted average per share fair value of options granted during the year | $ | 4.82 | $ | 2.97 | $ | 1.33 | ||||||||||||||||||
The following table summarizes information about stock options outstanding pursuant to the 2003 and 1993 Stock Incentive Plans as of December 31, 2005:
| Options Outstanding | Options Exercisable | |||||||||||||||||||
| Weighted | Weighted | Weighted | ||||||||||||||||||
| Number | Average Remaining | Average | Options | Average | ||||||||||||||||
| Range of Exercise Prices | Outstanding | Contractual Life | Exercise Price | Exercisable | Exercise Price | |||||||||||||||
| $9.45 - $14.18 | 139,900 | 5.1 years | $ | 13.03 | 109,900 | $ | 12.89 | |||||||||||||
| $14.18 - $18.90 | 517,111 | 6.9 years | 16.74 | 139,111 | 16.73 | |||||||||||||||
| $28.35 - $33.08 | 685,000 | 3.1 years | 30.94 | 184,000 | 30.94 | |||||||||||||||
| $33.08 - $37.80 | 1,121,663 | 3.9 years | 35.58 | 161,663 | 35.40 | |||||||||||||||
| $37.80 - $42.53 | 7,500 | 4.8 years | 40.55 | 7,500 | 40.55 | |||||||||||||||
| $42.53 - $47.26 | 75,000 | 4.8 years | 45.27 | 5,000 | 46.63 | |||||||||||||||
| Total | 2,546,174 | 4.8 years | $ | 29.57 | 607,174 | $ | 25.85 | |||||||||||||
| Threshold-Vesting Stock Options |
Under the 1998 Incentive Stock Plan (the “1998 Incentive Plan”), we may also grant stock incentive awards to employees in the form of threshold-vesting stock options (“TSOs”). The exercise price of the TSO is the Fair Market Value (“FMV”) of a share of our common stock on the date the TSO is granted. The threshold price (the “Threshold Price”) which must be achieved for the TSO to vest is determined by multiplying the FMV on the date of grant by the Estimated Annual Growth Rate (currently 7%) and compounding the product over a five-year period. Shares of our common stock must achieve and sustain the Threshold Price for at least 20 consecutive trading days at any time over the five years following the date of grant for the TSO to vest. TSOs granted in 2004 and thereafter must be exercised within 30 days of the vesting date. TSOs granted prior to 2004, all of which have vested, have a term of up to 10 years. As of December 31, 2005, 5,562,235 shares were available for future grants, subject to certain customary adjustments to prevent dilution.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following is a summary of the options under the 1998 Incentive Plan that have been awarded as of December 31, 2005:
| TSO Grant Year | |||||||||||||||||||||||||
| 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||
| Exercise price | $ | 35.41 | $ | 30.94 | $ | 16.77 | $ | 13.58 | $ | 11.58 | 9.99 | ||||||||||||||
| Threshold Vesting Stock Price | 49.66 | 43.39 | 23.52 | 19.04 | 16.23 | 14.01 | |||||||||||||||||||
| Vesting date | n/a | 9/07/2005 | 10/24/2003 | 6/03/2003 | 9/13/2002 | 3/22/2002 | |||||||||||||||||||
| Fair value of options on grant date | 3.77 | 1.59 | 1.31 | 1.13 | 0.74 | 0.50 | |||||||||||||||||||
| Shares: | |||||||||||||||||||||||||
| Original Grant | 1,000,000 | 1,031,480 | 900,000 | 779,025 | 989,988 | 753,090 | |||||||||||||||||||
| Forfeited | (55,723 | ) | (114,919 | ) | (62,727 | ) | (121,452 | ) | (152,178 | ) | (168,726 | ) | |||||||||||||
| Vested and exchanged for cash | — | — | (549,594 | ) | (495,693 | ) | (610,011 | ) | (438,288 | ) | |||||||||||||||
| Vested and exercised | — | (916,561 | ) | (215,502 | ) | (126,348 | ) | (181,419 | ) | (141,000 | ) | ||||||||||||||
| Outstanding | 944,277 | — | 72,177 | 35,532 | 46,380 | 5,076 | |||||||||||||||||||
The fair values of all stock options and of TSOs granted in 2003 were estimated on the date of grant using the Black-Scholes option pricing model. The fair values of TSOs granted in 2005 and 2004 were estimated using the binomial method. The following assumptions were used in determining these values:
| 2005 | 2004 | 2003 | ||||||||||
| Risk-free interest rate | 3.40 | % | 3.44 | % | 4.28 | % | ||||||
| Dividend yield | 4.00 | 6.09 | 6.21 | |||||||||
| Expected volatility | 21.61 | 20.10 | 16.95 | |||||||||
| Expected life | 5.0 years | 5.2 years | 9.9 years | |||||||||
Compensation expense related to incentive stock plans and TSOs totaled $11.1 million in 2005, $6.5 million in 2004 and $17.4 million in 2003.
Restricted Stock
Restricted stock grants to certain officers pursuant to the 2003 and 1993 Stock Incentive Plans were as follows:
| Number of | Vesting Period | |||||||
| Date | Shares | (In Years) | ||||||
| February 2005 | 66,000 | 1 | ||||||
| February 2004 | 55,000 | 1 | ||||||
| February 2003 | 60,000 | N/A | (1) | |||||
| February 2003 | 45,000 | 3 | ||||||
| September 2002 | 150,000 | 3 | ||||||
(1) Stock vested immediately
As this restricted stock represents an incentive for future periods, we are recognizing the related compensation expense ratably over the applicable vesting periods.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Employee Stock Purchase Plan
The General Growth Properties, Inc. Employee Stock Purchase Plan (the “ESPP”) was established to assist eligible employees in acquiring stock ownership interest in General Growth. Under the ESPP, eligible employees make payroll deductions over a six-month purchase period. At the end of the six-month purchase period, the amounts withheld are used to purchase shares of our common stock at a purchase price equal to 85% of the lesser of the closing price of a share of our common stock on the first or last trading day of the purchase period. A maximum of 1.5 million shares of our common stock are reserved for issuance under the ESPP. Since the inception of the ESPP, an aggregate of 1,215,661 shares of our common stock have been sold under the ESPP, including 65,395 shares for the purchase period ending December 31, 2005 which were purchased at a price of $35.54 per share.
| Management Savings Plan |
We sponsor the General Growth Management Savings and Employee Stock Ownership Plan (the “401(k) Plan”) which permits all eligible employees to defer a portion of their compensation in accordance with the provisions of Section 401(k) of the Internal Revenue Code. Subject to certain limitations (including an annual limit imposed by the Internal Revenue Code), each participant is allowed to make before-tax contributions up to 50% of gross earnings, as defined. We add to a participant’s account through a matching contribution up to 5% of the participant’s annual earnings contributed to the 401(k) Plan. We match 100% of the first 4% of earnings contributed by each participant and 50% of the next 2% of earnings contributed by each participant. We made matching contributions of approximately $7.5 million in 2005, $5.3 million in 2004, and $4.4 million in 2003.
| TRC Plan |
As a result of the TRC Merger, we assumed a retiree benefits plan that provides postretirement medical and life insurance benefits to former TRC employees who met minimum age and service requirements. We pay a portion of the cost of participants’ life insurance coverage and make contributions to the cost of participants’ medical coverage based on years of service, subject to a maximum annual contribution. Amounts related to this plan, which was terminated as of December 31, 2005, as to all unvested participants were not material as of or for the period ended December 31, 2005 and 2004.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Note 11 | Other Assets & Liabilities |
The following table summarizes the significant components of “Prepaid Expenses and Other Assets.”
| December 31, | ||||||||
| 2005 | 2004 | |||||||
| Below-market ground leases | $ | 349,788 | $ | 397,385 | ||||
| Deferred tax assets | 12,457 | 150,376 | ||||||
| Above-market tenant leases | 77,094 | 138,818 | ||||||
| Real estate tax stabilization agreement | 87,188 | 93,514 | ||||||
| Receivables, finance leases and bonds | 136,410 | 87,497 | ||||||
| Special Improvement District receivable | 66,206 | 48,586 | ||||||
| Security and escrow deposits | 87,126 | 24,490 | ||||||
| Funded defined contribution plan assets | 20,156 | 50,724 | ||||||
| Prepaid expenses | 29,884 | 19,486 | ||||||
| Other | 54,060 | 114,871 | ||||||
| $ | 920,369 | $ | 1,125,747 | |||||
The following table summarizes the significant components of “Accounts Payable and Accrued Expenses.”
| December 31, | ||||||||
| 2005 | 2004 | |||||||
| Below-market tenant leases | $ | 182,270 | $ | 251,983 | ||||
| Accounts payable deposits and accrued expenses | 594,876 | 376,826 | ||||||
| Deferred gains/income | 38,736 | 73,100 | ||||||
| Hughes participation payable | 61,783 | 35,019 | ||||||
| Pension and retirement benefit liabilities | — | 15,881 | ||||||
| Capital lease obligations | 19,206 | 22,487 | ||||||
| Insurance reserves | 31,852 | 18,046 | ||||||
| Other | 103,691 | 102,178 | ||||||
| $ | 1,032,414 | $ | 895,520 | |||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Note 12 | Minority Interests |
| Common |
Changes in outstanding Operating Partnership Common Units for the three years ended December 31, 2005 are as follows:
| December 31, 2002 | 58,668,741 | ||||
| Exchanges for General Growth common stock | (2,956,491 | ) | |||
| December 31, 2003 | 55,712,250 | ||||
| Exchanges for General Growth common stock | (179,987 | ) | |||
| December 31, 2004 | 55,532,263 | ||||
| Conversion of Preferred Units into Common Units | 729,890 | ||||
| Exchanges for General Growth common stock | (3,200,258 | ) | |||
| December 31, 2005 | 53,061,895 | ||||
Under certain circumstances, the Common Units can be redeemed at the option of the holders for cash or, at our election, for shares of General Growth common stock on a one-for-one basis. The holders of the Common Units also share equally with our common stockholders on a per share basis in any distributions by the Operating Partnership on the basis that one Common Unit is equivalent to one share of General Growth common stock.
Also included in minority interests-common is minority interest in consolidated joint ventures of approximately $13.6 million as of December 31, 2005 and $66.6 million as of December 31, 2004.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Preferred |
Components of minority interest — preferred as of December 31, 2005 and 2004 are as follows:
| Number | ||||||||||||||||||||||||
| of Units | ||||||||||||||||||||||||
| as of | Per Unit | Carrying Amount | ||||||||||||||||||||||
| Coupon | Issuing | December | Liquidation | |||||||||||||||||||||
| Security Type | Rate | Entity | 31, 2005 | Preference | 2005 | 2004 | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
Perpetual Preferred Units | ||||||||||||||||||||||||
| Redeemable Preferred Units (“RPUs”) | 8.95 | % | LLC | 240,000 | $ | 250 | $ | 60,000 | $ | 235,000 | (1) | |||||||||||||
| Cumulative Preferred Units (“CPUs”) | 8.25 | % | LLC | 20,000 | 250 | 5,000 | 5,000 | |||||||||||||||||
| Price Development Company (“PDC”) Series C | 8.75 | % | PDC | — | 25 | — | 8,000 | |||||||||||||||||
| 65,000 | 248,000 | |||||||||||||||||||||||
Convertible Preferred Units | ||||||||||||||||||||||||
| Series B—JP Realty | 8.50 | % | GGPLP | 1,362,571 | 50 | 68,129 | 70,975 | |||||||||||||||||
| Series C—Glendale Galleria | 7.00 | % | GGPLP | 413,676 | 50 | 20,685 | 32,176 | |||||||||||||||||
| Series D—Foothills Mall | 6.50 | % | GGPLP | 532,750 | 50 | 26,637 | 26,637 | |||||||||||||||||
| Series E—Four Seasons Town Centre | 7.00 | % | GGPLP | 502,658 | 50 | 25,132 | 25,132 | |||||||||||||||||
| 140,583 | 154,920 | |||||||||||||||||||||||
| Other preferred stock of consolidated subsidiaries | N/A | various | 361 | 1,000 | 361 | 241 | ||||||||||||||||||
| Total Minority Interest-Preferred | $ | 205,944 | $ | 403,161 | ||||||||||||||||||||
| (1) | Includes $175 million which was redeemed in May 2005 as permitted under the terms of the applicable RPUs. |
Holders of the RPUs and CPUs are entitled to receive cumulative preferential cash distributions prior to any distributions by the LLC to the Operating Partnership. Subject to certain limitations, the RPUs may be redeemed in cash by the LLC in April 2007 for the liquidation preference amount plus accrued and unpaid distributions and may be exchanged by the holders of the RPUs for an equivalent amount of redeemable preferred stock of General Growth. Such preferred stock provides for an equivalent 8.95% annual preferred distribution and is redeemable at our option for cash equal to the liquidation preference amount plus accrued and unpaid distributions.
The Convertible Preferred Units are convertible, with certain restrictions, at any time by the holder into Common Units of the Operating Partnership at the following rates:
| Number of Common | ||||
| Units for each | ||||
| Preferred Unit | ||||
| Series B — JP Realty | 3.000 | |||
| Series C — Glendale Galleria | 2.433 | |||
| Series D — Foothills Mall | 1.508 | |||
| Series E — Four Seasons Town Center | 1.298 | |||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 13 Accumulated Other Comprehensive Income (Loss)
Components of accumulated other comprehensive income (loss) as of December 31, 2005 and 2004 are as follows:
| 2005 | 2004 | |||||||
| (In thousands) | ||||||||
| Net unrealized gains (losses) on financial instruments | $ | 4,702 | $ | (4,852 | ) | |||
| Minimum pension liability adjustment | (703 | ) | (329 | ) | ||||
| Foreign currency translation | 6,510 | 1,590 | ||||||
| Unrealized losses on available-for-sale securities | (55 | ) | (94 | ) | ||||
| $ | 10,454 | $ | (3,685 | ) | ||||
Note 14 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. The leases generally provide us with a right of first refusal in the event of a proposed sale of the property by the landlord. All of our ground leases are classified as operating leases. Accordingly, rental payments are expensed as incurred and have, to the extent applicable, been straight-lined over the term of the lease. Rental expense, including participation rent and excluding amortization of above and below-market ground leases, was $10.5 million in 2005, $3.6 million in 2004 and $2.5 million in 2003.
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 General Growth common stock twice a year to beneficiaries under the CSA and certain indemnification obligations. 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 shares, new or treasury, rather than from 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 are likely to be significant, in connection with a valuation related to assets that we own as of such termination 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 2005 pursuant to the CSA. At December 31, 2005, 755,642 shares of common stock were issuable to the beneficiaries, representing their share of cash flows for the semi-annual period ending December 31, 2005.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Two of our operating retail properties (Oakwood Center in Gretna, Louisiana and Riverwalk, located near the convention center in downtown New Orleans) were closed in September 2005, when a hurricane struck the area. Although property damage in the New Orleans area was generally due to hurricane effects, the damage to Oakwood Center and Riverwalk was from arson and vandalism. Riverwalk partially re-opened on November 21, 2005 at a substantially reduced occupancy level. The Sears store at Oakwood Center is operating at a reduced level. Two other anchor stores at Oakwood Center are expected to re-open in 2006 and following repair and restoration, the remainder of the property is expected to open on or before Fall 2007. We have comprehensive insurance coverage for both property damage and business interruption. The restoration 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 approximately $53 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 December 31, 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 these amounts. While we expect the insurance proceeds will be sufficient to cover most of the replacement cost of the restoration of the properties and certain business interruption amounts, certain deductibles, limitations and exclusions are expected to apply with respect to both current and future matters. No determination has been made as to the total amount or timing of those insurance payments. As of December 31, 2005, $5 million in insurance proceeds related to the Oakwood property has been received, which has been offset against this insurance recovery receivable. In January 2006, we received an additional $5 million in insurance proceeds with respect to Oakwood and $2.5 million in insurance proceeds related to Riverwalk. As only a portion of the repairs have taken place as of December 31, 2005, substantially all of the remaining $63.4 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 in 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.
The following table summarizes the contractual maturities of our long-term and retained debt and commitments under ground leases as of December 31, 2005. Both long-term debt and ground leases include the related purchase accounting fair value adjustments:
| 2006 | 2007 | 2008 | 2009 | 2010 | Subsequent | Total | ||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
| Long-term debt-principal | $ | 1,905,410 | $ | 2,407,092 | $ | 3,798,168 | $ | 5,086,955 | $ | 3,555,162 | $ | 3,666,088 | $ | 20,418,875 | ||||||||||||||
| Retained debt-principal | 50,928 | 88,365 | 2,367 | 2,524 | 120,019 | 38,516 | 302,719 | |||||||||||||||||||||
| Ground lease payments | 15,327 | 15,451 | 15,474 | 15,497 | 15,506 | 650,523 | 727,778 | |||||||||||||||||||||
| Total | $ | 1,971,665 | $ | 2,510,908 | $ | 3,816,009 | $ | 5,104,976 | $ | 3,690,687 | $ | 4,355,127 | $ | 21,449,372 | ||||||||||||||
Note 15 Recently Issued Accounting Pronouncements
In October 2005, the FASB Issued Staff Position No. FAS 13-1, “Accounting for Rental Costs Incurred during a Construction Period” (“FSP 13-1”). 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 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 13-1 will not have a material effect on our results of operations when it becomes effective in 2006.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 is 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.
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”). 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.
In March 2005, the FASB issued FASB Interpretation No. 47 (“FIN 47”) “Accounting for Conditional Asset Retirement Obligations, an interpretation of SFAS No. 143” which clarifies that a liability for the performance of an asset retirement activity should be recorded if the obligation to perform such activity is unconditional, whether or not the timing or method of settlement may be conditional on a future event. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005, and therefore, is applicable to our December 31, 2005 consolidated financial statements. Under previous guidance, it was generally accepted that if the enterprise had no current plans or present obligation to perform such asset retirement activity, the liability could not reasonably be estimated and only a disclosure obligation, if material, was present. Although we may have an ultimate legal obligation to remediate any asbestos contained in any of our investment properties, either in the course of future remodeling, demolition or tenant construction, or as a transferred liability to a buyer, we do not believe that the current estimation of that liability, and the related asset and cumulative catch-up of any accretion or depreciation, is material to our consolidated financial statements. The time period for any of this work is indeterminate as we are not obligated to perform any amount of such work that is material to our consolidated financial statements in conjunction with any current renovation or construction project. Accordingly, amounts recorded relating to FIN 47 are not material to our consolidated financial statements.
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
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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, as provided by SEC regulation, is not required to be adopted until the first interim or annual reporting period that begins after December 15, 2005. Although we are still evaluating the provisions of SFAS 123R, we do not expect its adoption to have a material effect on our consolidated financial statements.
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.
Note 16 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 |
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| • | 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 Note 2, 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 Income and Comprehensive Income.
Segment operating results are as follows:
| Year Ended December 31, 2005 | |||||||||||||||
| Consolidated | Unconsolidated | Segment | |||||||||||||
| Properties | Properties | Basis | |||||||||||||
| (In thousands) | |||||||||||||||
Retail and Other | |||||||||||||||
| Property revenues: | |||||||||||||||
| Minimum rents | $ | 1,670,387 | $ | 393,740 | $ | 2,064,127 | |||||||||
| Tenant recoveries | 754,836 | 181,193 | 936,029 | ||||||||||||
| Overage rents | 69,628 | 14,085 | 83,713 | ||||||||||||
| Other, including net discontinued operations | 113,454 | 64,803 | 178,257 | ||||||||||||
| Total property revenues | 2,608,305 | 653,821 | 3,262,126 | ||||||||||||
| Property operating expenses: | |||||||||||||||
| Real estate taxes | 206,193 | 55,138 | 261,331 | ||||||||||||
| Repairs and maintenance | 195,292 | 43,313 | 238,605 | ||||||||||||
| Marketing | 63,522 | 14,705 | 78,227 | ||||||||||||
| Other property operating costs | 390,019 | 120,523 | 510,542 | ||||||||||||
| Provision for doubtful accounts | 13,868 | 4,857 | 18,725 | ||||||||||||
| Total property operating expenses | 868,894 | 238,536 | 1,107,430 | ||||||||||||
| Retail and other net operating income | 1,739,411 | 415,285 | 2,154,696 | ||||||||||||
Master Planned Communities | |||||||||||||||
| Land sales | 385,205 | 83,089 | 468,294 | ||||||||||||
| Land sales operations | (311,815 | ) | (60,826 | ) | (372,641 | ) | |||||||||
| Master Planned Communities net operating income | 73,390 | 22,263 | 95,653 | ||||||||||||
| Real estate property net operating income | $ | 1,812,801 | $ | 437,548 | $ | 2,250,349 | |||||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Year Ended December 31, 2004 | |||||||||||||||
| Consolidated | Unconsolidated | Segment | |||||||||||||
| Properties | Properties | Basis | |||||||||||||
| (In thousands) | |||||||||||||||
Retail and Other | |||||||||||||||
| Property revenues: | |||||||||||||||
| Minimum rents | $ | 1,058,732 | $ | 293,175 | $ | 1,351,907 | |||||||||
| Tenant recoveries | 472,250 | 135,561 | 607,811 | ||||||||||||
| Overage rents | 54,105 | 10,960 | 65,065 | ||||||||||||
| Other, including net discontinued operations | 67,686 | 18,694 | 86,380 | ||||||||||||
| Total property revenues | 1,652,773 | 458,390 | 2,111,163 | ||||||||||||
| Property operating expenses: | |||||||||||||||
| Real estate taxes | 128,114 | 39,546 | 167,660 | ||||||||||||
| Repairs and maintenance | 123,251 | 33,150 | 156,401 | ||||||||||||
| Marketing | 48,220 | 13,351 | 61,571 | ||||||||||||
| Other property operating costs | 207,909 | 74,589 | 282,498 | ||||||||||||
| Provision for doubtful accounts | 10,375 | 2,766 | 13,141 | ||||||||||||
| Total property operating expenses | 517,869 | 163,402 | 681,271 | ||||||||||||
| Retail and other net operating income | 1,134,904 | 294,988 | 1,429,892 | ||||||||||||
Master Planned Communities | |||||||||||||||
| Land sales | 68,643 | 37,170 | 105,813 | ||||||||||||
| Land sales operations | (66,100 | ) | (37,225 | ) | (103,325 | ) | |||||||||
| Master Planned Communities net operating income | 2,543 | (55 | ) | 2,488 | |||||||||||
| Real estate property net operating income | $ | 1,137,447 | $ | 294,933 | $ | 1,432,380 | |||||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Year Ended December 31, 2003 | ||||||||||||||
| Consolidated | Unconsolidated | Segment | ||||||||||||
| Properties | Properties | Basis | ||||||||||||
| (In thousands) | ||||||||||||||
Retail and Other | ||||||||||||||
| Property revenues: | ||||||||||||||
| Minimum rents | $ | 775,320 | $ | 286,452 | $ | 1,061,772 | ||||||||
| Tenant recoveries | 332,137 | 140,334 | 472,471 | |||||||||||
| Overage rents | 34,928 | 8,624 | 43,552 | |||||||||||
| Other, including net discontinued operations | 41,378 | 8,078 | 49,456 | |||||||||||
| Total property revenues | 1,183,763 | 443,488 | 1,627,251 | |||||||||||
| Property operating expenses: | ||||||||||||||
| Real estate taxes | 88,276 | 40,056 | 128,332 | |||||||||||
| Repairs and maintenance | 81,433 | 33,716 | 115,149 | |||||||||||
| Marketing | 35,797 | 14,137 | 49,934 | |||||||||||
| Other property operating costs | 153,370 | 60,811 | 214,181 | |||||||||||
| Provision for doubtful accounts | 7,041 | 1,664 | 8,705 | |||||||||||
| Total property operating expenses | 365,917 | 150,384 | 516,301 | |||||||||||
| Real estate property net operating income | $ | 817,846 | $ | 293,104 | $ | 1,110,950 | ||||||||
The following reconciles NOI to GAAP-basis operating income and income from continuing operations:
| 2005 | 2004 | 2003 | |||||||||||
| (In thousands) | |||||||||||||
| Real estate property net operating income | $ | 2,250,349 | $ | 1,432,380 | $ | 1,110,950 | |||||||
| Unconsolidated net operating income | (437,548 | ) | (294,933 | ) | (293,104 | ) | |||||||
| Consolidated Properties real estate property net operating income | 1,812,801 | 1,137,447 | 817,846 | ||||||||||
| Management and other fees | 91,734 | 82,896 | 84,138 | ||||||||||
| Property management and other costs | (148,399 | ) | (100,267 | ) | (109,746 | ) | |||||||
| General and administrative | (13,053 | ) | (9,499 | ) | (8,533 | ) | |||||||
| Depreciation and amortization | (672,914 | ) | (364,854 | ) | (230,195 | ) | |||||||
| Discontinued operations and minority interest in consolidated NOI | (11,828 | ) | (4,431 | ) | (5,110 | ) | |||||||
| Operating income | $ | 1,058,341 | $ | 741,292 | $ | 548,400 | |||||||
| Interest income | 10,416 | 3,227 | 2,308 | ||||||||||
| Interest expense | (1,031,241 | ) | (472,185 | ) | (278,543 | ) | |||||||
| Provision for income taxes | (50,646 | ) | (2,383 | ) | (98 | ) | |||||||
| Income allocated to minority interests | (43,989 | ) | (105,274 | ) | (110,984 | ) | |||||||
| Equity in income of unconsolidated affiliates | 120,986 | 88,191 | 94,480 | ||||||||||
| Income from continuing operations | $ | 63,867 | $ | 252,868 | $ | 255,563 | |||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following reconciles segment revenues to GAAP-basis consolidated revenues
| 2005 | 2004 | 2003 | ||||||||||
| (In thousands) | ||||||||||||
| Total property revenues | $ | 3,262,126 | $ | 2,111,163 | $ | 1,627,251 | ||||||
| Unconsolidated segment revenues | (653,821 | ) | (458,390 | ) | (443,488 | ) | ||||||
| Land sales | 385,205 | 68,643 | — | |||||||||
| Management and other fees | 91,734 | 82,896 | 84,138 | |||||||||
| Income from discontinued operations net of minority interest | (11,828 | ) | (4,431 | ) | (5,110 | ) | ||||||
| Total revenues | $ | 3,073,416 | $ | 1,799,881 | $ | 1,262,791 | ||||||
The assets by segment and the reconciliation of total segment assets to the total assets in the consolidated financial statements at December 31, 2005 and 2004 are summarized as follows:
| 2005 | 2004 | |||||||
| (In thousands) | ||||||||
| Retail and Other | $ | 25,523,426 | $ | 25,630,362 | ||||
| Master Planned Communities | 2,116,588 | 1,818,660 | ||||||
| Total segment assets | 27,640,014 | 27,449,022 | ||||||
| Unconsolidated Properties | (4,308,854 | ) | (3,918,661 | ) | ||||
| Corporate and other | 1,975,859 | 2,188,264 | ||||||
| Total assets | $ | 25,307,019 | $ | 25,718,625 | ||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 17 Quarterly Financial Information (Unaudited)
| 2005 | |||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||
| Quarter | Quarter | Quarter | Quarter | ||||||||||||||
| (In thousands except for share and per share amounts) | |||||||||||||||||
| Total revenues | $ | 707,168 | (b) | $ | 758,230 | (b) | $ | 745,842 | (b) | $ | 862,176 | ||||||
| Operating income | 233,716 | (b) | 222,473 | (b) | 279,777 | (b) | 322,375 | ||||||||||
| Income (loss) from continuing operations | 11,536 | (b) | 885 | (b) | (8,521 | )(b) | 59,967 | ||||||||||
| Income from discontinued operations | 1,529 | (b) | 1,767 | (b) | 1,687 | (b) | 6,703 | ||||||||||
| Net income (loss) available to common shareholders | 13,065 | 2,652 | (6,834 | ) | 66,670 | ||||||||||||
| Earnings (loss) from continuing operations: | |||||||||||||||||
| Basic(a) | 0.05 | (b) | — | (b) | (0.04 | )(b) | 0.25 | ||||||||||
| Diluted(a) | 0.05 | (b) | — | (b) | (0.04 | )(b) | 0.25 | ||||||||||
| Earnings from discontinued operations: | |||||||||||||||||
| Basic(a) | 0.01 | (b) | 0.01 | (b) | 0.01 | (b) | 0.03 | ||||||||||
| Diluted(a) | 0.01 | (b) | 0.01 | (b) | 0.01 | (b) | 0.03 | ||||||||||
| Earnings (loss) per share: | |||||||||||||||||
| Basic | 0.06 | 0.01 | (0.03 | ) | 0.28 | ||||||||||||
| Diluted | 0.06 | 0.01 | (0.03 | ) | 0.28 | ||||||||||||
| Distributions declared per share | 0.36 | 0.36 | 0.36 | 0.41 | |||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||
| Basic | 235,812 | 237,854 | 238,218 | 238,784 | |||||||||||||
| Diluted | 236,588 | 238,922 | 238,218 | 239,736 | |||||||||||||
| (a) | Earnings (loss) per share for the quarters do not add up to the annual earnings per share due to the issuance of additional common stock during the year. |
| (b) | Amounts reported herein differ from previously reported amounts as a result of reclassification of results of operations of sold properties to discontinued operations. Total revenues also reflect changes to conform to current period presentation. |
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| 2004 | |||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||
| Quarter | Quarter | Quarter | Quarter | ||||||||||||||
| (In thousands except for share and per share amounts) | |||||||||||||||||
| Total revenues | $ | 359,936 | (b) | $ | 374,526 | (b) | $ | 396,669 | (b) | $ | 668,750 | (b) | |||||
| Operating income | 152,522 | 145,469 | 168,291 | 275,010 | (b) | ||||||||||||
| Income from continuing operations | 58,336 | 50,247 | 62,973 | 81,312 | (b) | ||||||||||||
| Income from discontinued operations | 787 | 901 | 1,000 | 12,296 | (b) | ||||||||||||
| Net income available to common shareholders | 59,122 | 51,148 | 63,973 | 93,609 | (b) | ||||||||||||
| Earnings from continuing operations: | |||||||||||||||||
| Basic | 0.27 | 0.23 | 0.29 | 0.36 | (b) | ||||||||||||
| Diluted(a) | 0.27 | 0.22 | 0.29 | 0.36 | (b) | ||||||||||||
| Earnings from discontinued operations: | |||||||||||||||||
| Basic | — | 0.01 | — | 0.05 | (b) | ||||||||||||
| Diluted(a) | — | 0.01 | — | 0.05 | (b) | ||||||||||||
| Earnings per share: | |||||||||||||||||
| Basic(a) | 0.27 | 0.24 | 0.29 | 0.41 | |||||||||||||
| Diluted(a) | 0.27 | 0.23 | 0.29 | 0.41 | |||||||||||||
| Distributions declared per share | 0.30 | 0.30 | 0.66 | — | |||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||
| Basic | 217,553 | 218,075 | 218,605 | 226,312 | |||||||||||||
| Diluted | 218,479 | 218,882 | 219,298 | 227,200 | |||||||||||||
| (a) | Earnings (loss) per share for the quarters do not add up to the annual earnings per share due to the issuance of additional common stock during the year. |
| (b) | Amounts reported herein differ from previously reported amounts as a result of reclassification of results of operations of sold properties to discontinued operations. Total revenues also reflect changes to conform to current period presentation. |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
General Growth Properties, Inc.
Chicago, Illinois
We have audited the consolidated financial statements of General Growth Properties, Inc. and subsidiaries (the “Company”) as of December 31, 2005 and 2004, and for each of the three years in the period ended December 31, 2005, management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, and have issued our reports thereon dated March 31, 2006 (which report expresses an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of material weaknesses); such consolidated financial statements and reports are included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedule of the Company listed in the Index to Consolidated Financial Statements and Consolidated Financial Statement Schedule on page F-1 of this Form 10-K. This consolidated financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
Deloitte & Touche LLP
Chicago, Illinois
March 31, 2006
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Table of Contents
GENERAL GROWTH PROPERTIES, INC.
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2005
| Col. A | Col. B | Col. C | Col. D | Col. E | Col. F | Col. G | Col. H | Col. I | ||||||||||||||||||||||||||||||||||||||||||
| Costs Capitalized | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Subsequent to Acquisition | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Amounts at Which | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Initial Cost | Net Land, | Carried at Close of Period | Life Upon Which | |||||||||||||||||||||||||||||||||||||||||||||||
| Buildings and | Latest Income | |||||||||||||||||||||||||||||||||||||||||||||||||
| Buildings and | Equipment | Carrying | Buildings and | Accumulated | Date of | Date | Statement is | |||||||||||||||||||||||||||||||||||||||||||
| Name of Center | Location | Encumbrances(a) | Land | Equipment(b) | Improvements | Costs(c) | Land | Equipment | Total(d) | Depreciation(e) | Construction | Acquired | Computed | |||||||||||||||||||||||||||||||||||||
| Ala Moana Center | Honolulu, HI | $ | 547,606,276 | $ | 336,229,260 | $ | 473,770,740 | $ | 91,369,123 | $ | 8,508,742 | $ | 336,229,497 | $ | 573,648,368 | $ | 909,877,865 | $ | 108,697,433 | 1999 | (e | ) | ||||||||||||||||||||||||||||
| Alameda Plaza | Pocatello, ID | — | 740,000 | 2,060,000 | 3,854 | — | 740,040 | 2,063,814 | 2,803,854 | 179,381 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Anaheim Crossing | Anaheim, CA | — | — | 2,058,000 | (72,470 | ) | — | — | 1,985,530 | 1,985,530 | 174,188 | 2002 | (e | ) | ||||||||||||||||||||||||||||||||||||
| Animas Valley Mall | Farmington, NM | 26,286,347 | 10,783,000 | 30,165,000 | 5,499,666 | 28,481 | 6,464,479 | 40,011,668 | 46,476,146 | 3,750,310 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Apache Mall | Rochester, MN | 52,547,597 | 8,110,292 | 72,992,628 | 21,514,664 | 219,692 | 8,110,292 | 94,726,984 | 102,837,276 | 17,524,188 | 1998 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Arizona Center | Phoenix, AZ | 12,194,147 | — | 132,157,784 | 362,807 | — | — | 132,520,591 | 132,520,591 | 8,601,491 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Augusta Mall | Augusta, GA | 49,498,033 | — | 162,272,311 | 657,790 | — | — | 162,930,101 | 162,930,101 | 7,412,706 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Austin Bluffs Plaza | Colorado Springs, CO | 2,515,548 | 1,080,000 | 3,007,000 | 120,158 | — | 1,080,183 | 3,126,975 | 4,207,158 | 271,802 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Bailey Hills Village | Eugene, OR | — | 290,000 | 806,000 | 35,152 | — | 290,168 | 840,984 | 1,131,152 | 71,439 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Baybrook Mall | Friendswood, TX | 155,811,808 | 13,300,000 | 117,162,546 | 21,048,691 | 238,870 | 19,375,344 | 132,374,763 | 151,750,107 | 22,549,289 | 1999 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Bayshore Mall | Eureka, CA | 32,673,241 | 3,004,345 | 27,398,907 | 31,172,700 | 2,913,529 | 3,005,039 | 61,484,443 | 64,489,482 | 26,715,141 | 1986-1987 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Bayside Marketplace | Miami, FL | 68,638,674 | — | 155,340,061 | 24,811,873 | — | — | 180,151,934 | 180,151,934 | 10,104,303 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Beachwood Place | Cleveland, OH | 220,024,207 | 18,500,000 | 319,683,761 | 634,666 | — | 18,500,000 | 320,318,427 | 338,818,427 | 11,012,639 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Bellis Fair Mall | Bellingham, WA | 67,077,780 | 7,616,458 | 47,040,131 | 15,331,007 | 6,169,776 | 7,485,224 | 68,672,147 | 76,157,372 | 33,760,873 | 1987-1988 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Birchwood Mall | Port Huron, MI | 40,758,905 | 1,768,935 | 34,574,635 | 18,540,088 | 1,980,603 | 3,042,616 | 53,821,645 | 56,864,261 | 23,707,471 | 1989-1990 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Boise Plaza | Boise, ID | — | 465,000 | 1,293,000 | (309,382 | ) | — | 374,355 | 1,074,263 | 1,448,618 | 97,388 | 2002 | (e | ) | ||||||||||||||||||||||||||||||||||||
| Boise Towne Plaza | Boise, ID | 11,632,900 | 3,988,000 | 11,101,000 | 59,803 | — | 3,987,857 | 11,160,946 | 15,148,803 | 976,989 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Boise Towne Square | Boise, ID | 77,739,613 | 36,452,000 | 101,853,000 | 21,613,690 | — | 23,448,775 | 136,469,916 | 159,918,690 | 12,769,867 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Boulevard Mall | Las Vegas, NV | 115,187,007 | 16,490,343 | 148,413,086 | 6,807,416 | — | 15,355,557 | 156,355,289 | 171,710,846 | 30,685,532 | 1998 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Burlington Town Center | Burlington, VT | 31,500,000 | 1,637,035 | 32,797,783 | 1,451,144 | — | 1,637,035 | 34,248,927 | 35,885,962 | 6,682,649 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Cache Valley Mall | Logan, UT | — | 6,451,000 | 18,422,000 | 9,524,440 | 196,926 | 3,874,744 | 30,719,621 | 34,594,365 | 2,451,329 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Cache Valley Marketplace | Logan, UT | — | 1,500,000 | 1,583,000 | 3,672,671 | 42,847 | 3,139,246 | 3,659,273 | 6,798,519 | 205,614 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Capital Mall | Jefferson City, MO | 21,268,870 | 4,200,000 | 14,201,000 | 9,809,831 | — | 3,912,935 | 24,297,896 | 28,210,831 | 9,341,048 | 1993 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Century Mall | Birmingham, AL | — | 3,164,000 | 28,513,908 | 5,840,164 | — | 3,164,000 | 34,354,072 | 37,518,072 | 8,458,893 | 1997 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Chapel Hills Mall | Colorado Springs, CO | 121,725,238 | 4,300,000 | 34,017,000 | 62,766,467 | 36,805 | 4,300,000 | 96,820,272 | 101,120,272 | 29,803,676 | 1993 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Chico Mall | Chico, CA | 60,241,026 | 8,110,390 | 54,093,129 | 868,688 | — | 16,957,589 | 46,114,618 | 63,072,207 | 2,809,552 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Coastland Center | Naples, FL | 102,671,265 | 11,450,000 | 103,050,200 | 10,750,253 | — | 11,450,000 | 113,800,453 | 125,250,453 | 21,878,524 | 1998 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Collin Creek | Plano, TX | 76,323,136 | 26,250,000 | 122,990,879 | 1,263,702 | — | 26,250,000 | 124,254,580 | 150,504,580 | 8,151,227 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Colony Square Mall | Zanesville, OH | 41,083,300 | 1,000,000 | 24,500,000 | 18,006,575 | 25,000 | 1,243,184 | 42,288,390 | 43,531,575 | 20,780,178 | 1986 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Columbia Mall | Columbia, MO | 89,225,600 | 5,383,208 | 19,663,231 | 27,115,191 | 1,422,994 | 5,383,208 | 48,201,416 | 53,584,624 | 21,453,802 | 1984-1985 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Coral Ridge Mall | Coralville, IA | 104,631,227 | 3,363,602 | 64,217,772 | 13,448,543 | 4,575,166 | 3,412,857 | 82,192,225 | 85,605,082 | 20,670,399 | 1998-1999 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Coronado Center | Albuquerque, NM | 177,790,284 | 33,072,272 | 148,799,184 | 1,396,791 | — | 33,072,272 | 150,195,975 | 183,268,247 | 12,927,321 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Cottonwood Mall | Salt Lake City, UT | — | 12,616,000 | 35,697,000 | 1,957,070 | — | 7,613,427 | 42,656,642 | 50,270,070 | 3,963,329 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Cottonwood Square | Salt Lake City, UT | — | 1,558,000 | 4,339,000 | 85,129 | — | 1,558,221 | 4,423,908 | 5,982,129 | 381,914 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Country Hills Plaza | Ogden, UT | 5,102,778 | 3,620,000 | 9,080,000 | 454,460 | — | 3,620,000 | 9,534,460 | 13,154,460 | 810,357 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Crossroads | Portage, MI | 42,004,654 | 6,800,000 | 61,200,000 | 21,345,129 | 298,449 | 6,800,000 | 82,843,578 | 89,643,578 | 14,079,593 | 1999 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Crossroads Center | St. Cloud, MN | 117,770,375 | 10,812,523 | 72,202,847 | 35,175,709 | 1,758,651 | 13,206,441 | 106,743,289 | 119,949,731 | 12,877,270 | 2000 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Cumberland Mall | Atlanta, GA | 93,218,199 | 15,198,568 | 136,787,110 | 11,968,905 | 286,334 | 16,749,496 | 147,491,421 | 164,240,917 | 28,032,141 | 1998 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Division Crossing | Portland, OR | 5,797,108 | 1,773,000 | 4,935,000 | 249,993 | — | 1,772,915 | 5,185,078 | 6,957,993 | 446,425 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Eagle Ridge Mall | Lake Wales, FL | 49,895,997 | 7,619,865 | 49,560,538 | 11,652,741 | 5,719,079 | 7,619,865 | 66,932,358 | 74,552,223 | 20,405,217 | 1995-1996 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Eastridge Mall | Casper, WY | 41,320,674 | 9,902,000 | 27,596,000 | 5,443,446 | — | 6,092,453 | 36,848,993 | 42,941,446 | 3,454,066 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Eden Prairie Mall | Eden Prairie, MN | 84,798,741 | 465,063 | 19,024,047 | 115,895,501 | 9,506,545 | 492,585 | 144,398,570 | 144,891,155 | 22,842,532 | 1997 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Fallbrook Mall | West Hills, CA | 74,957,000 | 6,117,338 | 10,076,520 | 92,202,805 | 6,445,196 | 6,127,138 | 108,714,721 | 114,841,859 | 40,509,300 | 1984 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Faneuil Hall Marketplace | Boston, MA | — | — | 111,407,941 | 11,282,432 | — | — | 122,690,373 | 122,690,373 | 6,452,728 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Fashion Place | Murray, UT | 151,676,392 | — | 206,483,936 | 2,711,868 | — | — | 209,195,804 | 209,195,804 | 7,373,458 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Fashion Show | Las Vegas, NV | 373,266,363 | 523,650,100 | 602,288,273 | 17,433,528 | — | 523,650,100 | 619,721,801 | 1,143,371,901 | 30,278,938 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Foothills Mall | Fort Collins, CO | 44,188,376 | 10,052,653 | 90,495,739 | 6,078,508 | — | 9,263,802 | 97,363,098 | 106,626,900 | 6,213,078 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Fort Union | Midvale, UT | 3,026,223 | 141,000 | 3,701,000 | 22,828 | — | — | 3,864,828 | 3,864,828 | 343,041 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Four Seasons Town Centre | Greensboro, NC | 108,399,091 | 24,976,933 | 136,636,477 | 9,959,664 | — | 27,231,494 | 144,341,581 | 171,573,074 | 8,022,166 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Fox River Mall | Appleton, WI | 195,222,700 | 2,700,566 | 18,291,067 | 61,356,993 | 2,350,805 | 4,787,291 | 79,912,140 | 84,699,431 | 30,792,596 | 1983-1984 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Fremont Plaza | Las Vegas, NV | — | — | 3,956,000 | 255,373 | — | — | 4,211,373 | 4,211,373 | 349,802 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Gallery at Harborplace | Baltimore, MD | 107,653,394 | — | 174,410,487 | 1,037,616 | — | — | 175,448,104 | 175,448,104 | 7,173,157 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
F-56
Table of Contents
| GENERAL GROWTH PROPERTIES, INC. | ||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| DECEMBER 31, 2005 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Col. A | Col. B | Col. C | Col. D | Col. E | Col. F | Col. G | Col. H | Col. I | ||||||||||||||||||||||||||||||||||||||||||
| Costs Capitalized | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Subsequent to Acquisition | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Amounts at Which | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Initial Cost | Net Land, | Carried at Close of Period | Life Upon Which | |||||||||||||||||||||||||||||||||||||||||||||||
| Buildings and | Latest Income | |||||||||||||||||||||||||||||||||||||||||||||||||
| Buildings and | Equipment | Carrying | Buildings and | Accumulated | Date of | Date | Statement is | |||||||||||||||||||||||||||||||||||||||||||
| Name of Center | Location | Encumbrances(a) | Land | Equipment(b) | Improvements | Costs(c) | Land | Equipment | Total(d) | Depreciation(e) | Construction | Acquired | Computed | |||||||||||||||||||||||||||||||||||||
| Gateway Crossing Shopping Center | Bountiful, UT | 16,226,355 | 4,104,000 | 11,422,000 | 393,777 | — | 4,103,858 | 11,815,918 | 15,919,777 | 1,085,023 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Gateway Mall | Springfield, OR | 41,683,120 | 8,728,263 | 34,707,170 | 23,110,830 | 7,698,614 | 8,728,263 | 65,516,614 | 74,244,877 | 28,959,368 | 1989-1990 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Glenbrook Square | Fort Wayne, IN | 186,920,722 | 30,414,372 | 195,896,270 | 2,780,898 | — | 30,462,800 | 198,628,740 | 229,091,540 | 11,928,681 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Governor’s Square | Tallahassee, FL | 69,206,771 | — | 121,481,516 | 2,149,594 | — | — | 123,631,110 | 123,631,110 | 5,602,227 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Grand Canal Shoppes | Las Vegas, NV | 417,515,088 | — | 766,232,339 | 11,852,879 | — | — | 778,085,218 | 778,085,218 | 33,602,942 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Grand Teton Mall | Idaho Falls, ID | 28,163,980 | 13,104,000 | 36,813,000 | 19,716,520 | 149,495 | 9,322,131 | 60,460,884 | 69,783,015 | 4,508,002 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Grand Traverse Mall | Traverse City, MI | 89,796,495 | 3,529,966 | 20,775,772 | 25,231,342 | 3,643,793 | 3,533,746 | 49,647,128 | 53,180,873 | 22,576,476 | 1990-1991 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Greenwood Mall | Bowling Green, KY | 46,798,195 | 3,200,000 | 40,202,000 | 32,115,832 | 109,478 | 3,387,160 | 72,240,150 | 75,627,310 | 27,436,716 | 1993 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Halsey Crossing | Gresham, OR | 2,837,084 | — | 4,363,000 | 109,033 | — | — | 4,472,033 | 4,472,033 | 391,918 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Harborplace | Baltimore, MD | 31,221,300 | — | 54,308,359 | 395,065 | — | — | 54,703,423 | 54,703,423 | 3,569,367 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Hulen Mall | Fort Worth, TX | 119,310,165 | 8,910,000 | 153,893,780 | 361,189 | — | 8,910,000 | 154,254,969 | 163,164,969 | 6,097,816 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Jordan Creek Town Center | West Des Moines, IA | 196,938,756 | 18,141,510 | 166,142,669 | — | 5,974,300 | 18,141,510 | 172,116,969 | 190,258,479 | 9,592,537 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Knollwood Mall | St. Louis Park, MN | 41,911,510 | — | 9,748,047 | 43,380,965 | 3,965,615 | 7,025,606 | 50,069,021 | 57,094,627 | 20,728,542 | 1978 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Lakeside Mall | Sterling Heights, MI | 191,846,869 | 35,860,000 | 369,638,516 | 1,559,260 | — | 35,860,000 | 371,197,776 | 407,057,776 | 11,549,149 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Lakeview Square | Battle Creek, MI | 22,185,129 | 3,578,619 | 32,209,980 | 16,843,239 | 375,998 | 3,578,619 | 49,429,217 | 53,007,836 | 12,597,240 | 1996 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Landmark Mall | Alexandria, VA | 25,373,841 | 28,395,945 | 67,234,703 | (1,646,925 | ) | 1,087,044 | 28,395,945 | 66,674,821 | 95,070,766 | 13,969,535 | 2003 | (e | ) | ||||||||||||||||||||||||||||||||||||
| Lansing Mall | Lansing, MI | 67,320,015 | 6,977,798 | 62,800,179 | 45,141,358 | 768,954 | 11,496,394 | 104,191,896 | 115,688,290 | 23,138,756 | 1996 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Lincolnshire Commons | Lincolnshire, IL | — | — | — | 19,379,544 | — | 10,784,309 | 8,595,235 | 19,379,544 | 55,938 | 2005 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Lockport Mall | Lockport, NY | — | 800,000 | 10,000,000 | 4,272,423 | 53,912 | 800,000 | 14,326,335 | 15,126,335 | 7,381,548 | 1986 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Lynnhaven Mall | Virginia Beach, VA | 249,599,982 | 39,225,630 | 222,321,434 | 6,422,890 | 2,747 | 33,697,604 | 234,275,097 | 267,972,701 | 15,213,383 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Maine Mall | South Portland, ME | 228,366,913 | 41,373,998 | 238,457,053 | 2,272,302 | — | 41,102,158 | 241,001,195 | 282,103,353 | 13,466,762 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Mall at Sierra Vista | Sierra Vista, AZ | — | 4,550,000 | 18,658,000 | 1,431,119 | — | 3,651,670 | 20,987,450 | 24,639,119 | 2,023,693 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Mall in Columbia | Columbia, MD | 194,355,258 | 34,650,000 | 522,362,592 | 6,600,282 | — | 34,650,000 | 528,962,875 | 563,612,875 | 19,303,030 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Mall of Louisiana | Baton Rouge, LA | 185,000,000 | 24,590,822 | 246,452,070 | 5,337,444 | — | 24,590,822 | 251,789,514 | 276,380,336 | 11,016,309 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Mall of the Bluffs | Council Bluffs, IA | 40,758,905 | 1,860,116 | 24,016,343 | 21,410,525 | 2,585,988 | 1,895,220 | 47,977,752 | 49,872,972 | 22,044,635 | 1985-1986 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Mall St. Matthews | Louisville, KY | 153,328,236 | — | 176,582,596 | 3,113,734 | — | — | 179,696,331 | 179,696,331 | 7,888,235 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Mall St. Vincent | Shreveport, LA | 17,556,345 | 2,640,000 | 23,760,000 | 9,176,076 | 1,439 | 2,640,000 | 32,937,516 | 35,577,516 | 7,536,193 | 1998 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Market Place Shopping Center | Champaign, IL | 106,737,300 | 7,000,000 | 63,972,357 | 49,907,982 | 617,066 | 7,000,000 | 114,497,404 | 121,497,404 | 25,356,601 | 1997 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Mayfair | Wauwatosa, WI | 190,113,202 | 14,706,639 | 224,846,565 | 29,483,921 | 1,398,925 | 14,706,639 | 255,729,411 | 270,436,051 | 41,595,105 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Meadows Mall | Las Vegas, NV | 108,548,278 | 24,633,921 | 104,088,306 | 16,850,436 | 70,247 | 24,894,746 | 120,748,164 | 145,642,910 | 20,292,851 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Metro Plaza | Baltimore, MD | — | 1,050,000 | 10,340,484 | 195,399 | — | 1,050,000 | 10,535,883 | 11,585,883 | 1,008,483 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Mondawmin Mall | Baltimore, MD | 17,429,874 | 10,800,000 | 47,531,227 | 1,372,628 | — | 10,800,000 | 48,903,855 | 59,703,855 | 3,332,954 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| North Plains Mall | Clovis, NM | — | 4,676,000 | 13,033,000 | 2,771,226 | 2,347 | 2,722,314 | 17,760,259 | 20,482,573 | 1,629,889 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| North Star Mall | San Antonio, TX | 247,056,464 | 29,230,000 | 467,960,754 | 4,854,489 | — | 29,230,000 | 472,815,243 | 502,045,243 | 17,283,534 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| North Temple Shops | Salt Lake City, UT | — | 168,000 | 468,000 | 5,431 | — | 167,987 | 473,444 | 641,431 | 41,171 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| North Town Mall | Spokane, WA | 78,673,605 | 38,445,000 | 107,330,000 | 4,943,491 | — | 22,407,494 | 128,310,997 | 150,718,491 | 11,919,251 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Northgate Mall | Chattanooga, TN | 20,715,038 | 2,524,869 | 43,943,539 | 2,377,497 | 4,540 | 2,524,869 | 46,325,577 | 48,850,446 | 9,189,266 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Northridge Fashion Center | Northridge, CA | 133,039,062 | 16,618,095 | 149,562,583 | 31,020,669 | 3,540,766 | 16,866,397 | 183,875,717 | 200,742,113 | 36,047,190 | 1998 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Oak View Mall | Omaha, NE | 77,427,333 | 12,056,062 | 113,041,871 | 3,180,889 | — | 12,056,062 | 116,222,760 | 128,278,823 | 16,740,985 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Oakwood Center | Gretna, LA | — | 2,830,000 | 137,574,069 | (49,345,210 | ) | — | 2,830,000 | 88,228,859 | 91,058,859 | 7,383,399 | 2004 | (e | ) | ||||||||||||||||||||||||||||||||||||
| Oakwood Mall | Eau Claire, WI | 54,345,208 | 3,266,669 | 18,281,160 | 24,958,511 | 1,723,991 | 3,266,669 | 44,963,662 | 48,230,331 | 22,222,877 | 1985-1986 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Oglethorpe Mall | Savannah, GA | 149,134,768 | 16,036,395 | 92,977,582 | 5,802,825 | 177,709 | 16,036,395 | 98,958,116 | 114,994,511 | 17,593,691 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Orem Plaza Center Street | Orem, UT | 2,704,687 | 1,069,000 | 2,974,000 | 22,311 | — | 1,068,592 | 2,996,719 | 4,065,311 | 260,348 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Orem Plaza State Street | Orem, UT | 1,673,880 | 592,000 | 1,649,000 | 47,476 | — | 592,396 | 1,696,080 | 2,288,476 | 145,587 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Oviedo Marketplace | Orlando, FL | 54,572,965 | 24,016,700 | 23,958,404 | 545,012 | — | 24,016,700 | 24,503,416 | 48,520,116 | 3,206,138 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Owings Mills Mall | Owing Mills, MD | 41,970,049 | 26,986,250 | 173,896,354 | 13,372,343 | 109,008 | 26,735,000 | 187,628,955 | 214,363,955 | 11,209,785 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Oxmoor Center | Louisville, KY | 65,076,155 | — | 124,487,000 | 7,393,632 | — | — | 131,880,632 | 131,880,632 | 4,074,322 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Paramus Park | Paramus, NJ | 109,743,317 | 47,660,000 | 182,124,280 | 819,125 | — | 47,660,000 | 182,943,405 | 230,603,405 | 7,455,501 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Park City Center | Lancaster, PA | 158,046,874 | 8,465,148 | 177,191,205 | 9,379,326 | 19,681 | 8,465,148 | 186,590,213 | 195,055,361 | 32,811,166 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Park Place | Tucson, AZ | 186,316,855 | 4,996,024 | 44,993,177 | 97,826,284 | 13,523,774 | 4,715,836 | 156,623,424 | 161,339,260 | 28,903,088 | 1996 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Peachtree Mall | Columbus, GA | 94,358,571 | 22,051,603 | 67,678,571 | 3,812,549 | — | 22,051,603 | 71,491,120 | 93,542,723 | 6,326,978 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
F-57
Table of Contents
| GENERAL GROWTH PROPERTIES, INC. | ||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| DECEMBER 31, 2005 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Col. A | Col. B | Col. C | Col. D | Col. E | Col. F | Col. G | Col. H | Col. I | ||||||||||||||||||||||||||||||||||||||||||
| Costs Capitalized | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Subsequent to Acquisition | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Amounts at Which | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Initial Cost | Net Land, | Carried at Close of Period | Life Upon Which | |||||||||||||||||||||||||||||||||||||||||||||||
| Buildings and | Latest Income | |||||||||||||||||||||||||||||||||||||||||||||||||
| Buildings and | Equipment | Carrying | Buildings and | Accumulated | Date of | Date | Statement is | |||||||||||||||||||||||||||||||||||||||||||
| Name of Center | Location | Encumbrances(a) | Land | Equipment(b) | Improvements | Costs(c) | Land | Equipment | Total(d) | Depreciation(e) | Construction | Acquired | Computed | |||||||||||||||||||||||||||||||||||||
| Pecanland Mall | Monroe, LA | 63,395,960 | 7,190,000 | 64,710,000 | 14,465,965 | — | 10,101,102 | 76,264,863 | 86,365,965 | 7,888,333 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Piedmont Mall | Danville, VA | 25,704,859 | 2,000,000 | 38,000,000 | 10,145,999 | 186,190 | 2,000,000 | 48,332,189 | 50,332,189 | 13,596,687 | 1995 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Pierre Bossier Mall | Bossier City, LA | 37,874,365 | 4,363,832 | 35,352,736 | 9,452,004 | 2,260 | 4,367,095 | 44,803,737 | 49,170,832 | 9,635,972 | 1998 | (e | ) | |||||||||||||||||||||||||||||||||||||
| The Pines | Pine Bluff, AR | — | 1,488,928 | 17,627,258 | 15,495,891 | 1,365,091 | 1,247,414 | 34,729,754 | 35,977,167 | 16,537,315 | 1985-1986 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Pine Ridge Mall | Pocatello, ID | 27,859,405 | 8,375,000 | 23,337,000 | 5,787,850 | 26,316 | 4,905,207 | 32,620,959 | 37,526,167 | 2,696,306 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Pioneer Place | Portland, OR | 181,354,305 | — | 209,964,809 | 1,187,909 | — | — | 211,152,718 | 211,152,718 | 9,946,853 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Plaza 800 | Sparks, NV | — | 1,435,000 | 3,995,000 | 11,889 | — | — | 5,441,889 | 5,441,889 | 412,244 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Plaza 9400 | Sandy, UT | — | — | 9,114,000 | 181,084 | — | — | 9,295,084 | 9,295,084 | 815,533 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Prince Kuhio Plaza | Hilo, HI | 40,665,957 | — | 42,028,685 | 2,187,811 | 10,737 | 9,082 | 44,218,151 | 44,227,233 | 8,255,704 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Providence Place | Providence, RI | 437,228,921 | — | 502,808,680 | 1,545,621 | — | — | 504,354,301 | 504,354,301 | 20,595,215 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Provo Towne Centre | Provo, UT | 51,651,718 | 21,767,302 | 68,296,000 | (815,581 | ) | 72,352 | 13,485,901 | 75,834,172 | 89,320,073 | 7,267,812 | 2002 | (e | ) | ||||||||||||||||||||||||||||||||||||
| Red Cliffs Mall | St. George, UT | 26,478,762 | 7,019,000 | 19,644,000 | 8,253,485 | — | 5,116,379 | 29,800,106 | 34,916,485 | 2,814,483 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Red Cliffs Plaza | St. George, UT | — | — | 2,366,000 | 533,826 | — | — | 2,899,826 | 2,899,826 | 239,639 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Regency Square Mall | Jacksonville, FL | 101,188,176 | 16,497,552 | 148,477,968 | 18,197,746 | 118,881 | 17,884,037 | 165,408,111 | 183,292,148 | 31,070,977 | 1998 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Ridgedale Center | Minneapolis, MN | 188,202,904 | 10,710,000 | 272,607,123 | 2,294,390 | — | 10,710,000 | 274,901,513 | 285,611,513 | 10,290,165 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Rio West Mall | Gallup, NM | 22,844,000 | — | 19,500,000 | 6,686,714 | — | — | 26,186,714 | 26,186,714 | 12,514,815 | 1986 | (e | ) | |||||||||||||||||||||||||||||||||||||
| River Falls Mall | Clarksville, IN | — | 3,177,688 | 54,610,421 | 58,074,458 | 5,980,635 | 5,237,478 | 116,605,725 | 121,843,202 | 33,247,744 | 1989-1990 | (e | ) | |||||||||||||||||||||||||||||||||||||
| River Hills Mall | Mankato, MN | 83,017,800 | 3,713,529 | 29,013,757 | 23,084,360 | 2,678,428 | 4,707,482 | 53,782,593 | 58,490,074 | 23,191,607 | 1990-1991 | (e | ) | |||||||||||||||||||||||||||||||||||||
| River Pointe Plaza | West Jordan, UT | 4,189,427 | 1,302,000 | 3,623,000 | 183,043 | — | 1,301,531 | 3,806,512 | 5,108,043 | 327,917 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Riverlands Shopping Center | LaPlace, LA | — | 500,000 | 4,500,000 | 4,266,413 | 44,678 | 1,100,950 | 8,210,142 | 9,311,092 | 1,214,313 | 1998 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Riverside Plaza | Provo, UT | 5,995,704 | 2,475,000 | 6,890,000 | 1,833,570 | 6,877 | 2,475,227 | 8,730,220 | 11,205,447 | 745,442 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Rivertown Crossings | Grandville, MI | 123,966,076 | 10,972,923 | 97,141,738 | 32,560,125 | 13,280,645 | 7,226,462 | 146,728,970 | 153,955,431 | 29,643,506 | 1998-1999 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Riverwalk Marketplace | New Orleans, LA | 42,896,180 | — | 94,512,710 | 800,535 | — | — | 95,313,245 | 95,313,245 | 5,083,485 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Rogue Valley Mall | Medford, OR | 27,508,542 | 5,728,225 | 51,564,598 | 3,718,569 | 10,129 | 21,913,520 | 39,108,001 | 61,021,521 | 2,908,831 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Saint Louis Galleria | St. Louis, MO | 250,535,285 | 36,773,639 | 184,645,237 | 11,298,066 | 30,390 | 36,773,639 | 195,973,693 | 232,747,332 | 13,290,255 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Salem Center | Salem, OR | 27,225,164 | 11,885,000 | 33,253,000 | 2,013,173 | — | 6,966,434 | 40,184,739 | 47,151,173 | 3,767,126 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Shops at La Cantera | San Antonio, TX | 179,605,926 | 11,152,323 | 205,835,831 | 32,124,000 | 461,225 | 11,152,323 | 238,421,057 | 249,573,380 | 2,095,429 | 2005 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Sikes Senter | Wichita Falls, TX | 64,571,968 | 12,758,642 | 50,566,596 | 1,951,864 | — | 12,758,642 | 52,518,460 | 65,277,102 | 4,789,268 | 2003 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Silver Lake Mall | Coeur d’Alene, ID | — | 7,704,000 | 21,472,000 | 809,046 | — | 4,447,556 | 25,537,490 | 29,985,046 | 2,330,050 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Sooner Mall | Norman, OK | 59,205,800 | 2,700,000 | 24,300,000 | 18,018,192 | — | 2,580,578 | 42,437,614 | 45,018,192 | 10,612,860 | 1996 | (e | ) | |||||||||||||||||||||||||||||||||||||
| South Street Seaport | New York, NY | 54,850,000 | — | 10,871,602 | 1,286,789 | — | — | 12,158,391 | 12,158,391 | 3,731,372 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Southlake Mall | Morrow, GA | 105,996,100 | 6,700,000 | 60,406,902 | 13,074,709 | 192,535 | 6,700,000 | 73,674,146 | 80,374,146 | 17,220,115 | 1997 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Southland Center | Taylor, MI | 114,799,344 | 7,690,000 | 99,375,730 | 1,407,166 | — | 7,690,000 | 100,782,895 | 108,472,895 | 6,080,286 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Southland Mall | Hayward, CA | 87,227,876 | 8,904,277 | 80,142,961 | 7,804,986 | — | 14,120,774 | 82,731,450 | 96,852,224 | 7,230,262 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Southshore Mall | Aberdeen, WA | — | 650,000 | 15,350,000 | 5,606,694 | — | 650,000 | 20,956,694 | 21,606,694 | 10,993,637 | 1986 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Southwest Plaza | Littleton, CO | 77,674,866 | 9,000,000 | 103,983,673 | 28,463,084 | 973,804 | 9,000,000 | 133,420,561 | 142,420,561 | 26,366,210 | 1998 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Spokane Valley Mall | Spokane, WA | 40,231,327 | 19,297,000 | 54,970,000 | 3,855,101 | — | 11,455,446 | 66,666,655 | 78,122,101 | 6,202,512 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Spokane Valley Plaza | Spokane, WA | — | 3,558,000 | 10,150,000 | 2,653 | — | 3,557,601 | 10,153,052 | 13,710,653 | 880,709 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Spring Hill Mall | West Dundee, IL | 83,061,497 | 12,400,000 | 111,643,525 | 17,854,728 | 107,027 | 12,400,000 | 129,605,280 | 142,005,280 | 24,475,172 | 1998 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Staten Island Mall | Staten Island, NY | 173,482,164 | 222,710,000 | 318,042,341 | 22,763,949 | — | 222,710,000 | 340,806,289 | 563,516,289 | 14,655,196 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Stonestown | San Francisco, CA | 220,000,000 | 67,000,000 | 246,272,110 | 6,968,044 | — | 67,000,000 | 253,240,154 | 320,240,154 | 9,465,697 | 1998 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Streets at Southpoint | Durham, NC | 252,819,709 | 16,070,268 | 406,265,828 | 22,430,362 | — | 15,940,000 | 428,826,458 | 444,766,458 | 13,724,336 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Three Rivers Mall | Kelso, WA | 22,681,993 | 7,068,000 | 19,917,000 | 1,982,549 | — | 4,312,238 | 24,655,311 | 28,967,549 | 2,271,817 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Town East Mall | Mesquite, TX | 113,292,401 | 9,528,518 | 141,627,727 | 20,457,971 | 147,675 | 7,710,985 | 164,050,907 | 171,761,891 | 18,752,406 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Tucson Mall | Tucson, AZ | 125,329,659 | — | 181,424,484 | 21,422,131 | 405,608 | — | 203,252,222 | 203,252,222 | 21,757,512 | 2001 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Twin Falls Crossing | Twin Falls, ID | — | 275,000 | 767,000 | 373 | — | 275,499 | 766,874 | 1,042,373 | 66,708 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| University Crossing | Orem, UT | 12,114,394 | 3,420,000 | 9,526,000 | 557,580 | — | 3,419,812 | 10,083,768 | 13,503,580 | 874,160 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Valley Hills Mall | Hickory, NC | 60,372,674 | 3,443,594 | 31,025,471 | 41,591,496 | 1,699,275 | 5,656,275 | 72,103,562 | 77,759,836 | 15,519,428 | 1997 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Valley Plaza Mall | Bakersfield, CA | 102,402,961 | 12,685,151 | 114,166,356 | 16,691,647 | 234,101 | 12,685,151 | 131,092,105 | 143,777,256 | 23,729,222 | 1998 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Village of Cross Keys | Baltimore, MD | 860,998 | 18,070,000 | 57,284,799 | 1,594,290 | — | 18,070,000 | 58,879,089 | 76,949,089 | 3,204,181 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Visalia Mall | Visalia, CA | 46,090,053 | 16,466,000 | 47,699,000 | 9,858,504 | — | 11,052,128 | 62,971,376 | 74,023,504 | 5,798,715 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Ward Centers | Honolulu, HI | 153,991,076 | 164,006,531 | 89,320,759 | 21,313,186 | 155,398 | 165,590,722 | 109,205,151 | 274,795,874 | 13,355,656 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| West Valley Mall | Tracy, CA | 62,821,841 | 9,295,045 | 47,789,310 | 27,677,980 | 8,072,671 | 10,885,507 | 81,949,498 | 92,835,006 | 24,037,456 | 1995 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Westlake Center | Seattle, WA | 76,492,021 | — | 117,002,720 | 314,580 | — | — | 117,317,301 | 117,317,301 | 7,740,948 | 2004 | (e | ) *** | |||||||||||||||||||||||||||||||||||||
F-58
Table of Contents
| GENERAL GROWTH PROPERTIES, INC. | ||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| DECEMBER 31, 2005 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Col. A | Col. B | Col. C | Col. D | Col. E | Col. F | Col. G | Col. H | Col. I | ||||||||||||||||||||||||||||||||||||||||||
| Costs Capitalized | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Subsequent to Acquisition | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Amounts at Which | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Initial Cost | Net Land, | Carried at Close of Period | Life Upon Which | |||||||||||||||||||||||||||||||||||||||||||||||
| Buildings and | Latest Income | |||||||||||||||||||||||||||||||||||||||||||||||||
| Buildings and | Equipment | Carrying | Buildings and | Accumulated | Date of | Date | Statement is | |||||||||||||||||||||||||||||||||||||||||||
| Name of Center | Location | Encumbrances(a) | Land | Equipment(b) | Improvements | Costs(c) | Land | Equipment | Total(d) | Depreciation(e) | Construction | Acquired | Computed | |||||||||||||||||||||||||||||||||||||
| Westwood Mall | Jackson, MI | 37,110,400 | 2,658,208 | 23,923,869 | 6,704,728 | 546 | 3,571,208 | 29,716,144 | 33,287,352 | 7,759,777 | 1996 | (e | ) | |||||||||||||||||||||||||||||||||||||
| White Marsh Mall | Baltimore, MD | 76,255,823 | 24,760,000 | 239,687,702 | 4,806,094 | — | 24,760,000 | 244,493,796 | 269,253,796 | 10,203,429 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| White Mountain Mall | Rock Springs, WY | — | 2,335,000 | 6,520,000 | 5,900,360 | 4,495 | 1,362,805 | 13,397,050 | 14,759,855 | 1,377,249 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Willowbrook | Wayne, NJ | 181,285,437 | 56,819 | 444,762,007 | 34,274,307 | — | 28,809,987 | 450,283,146 | 479,093,133 | 16,792,134 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Woodbridge Center | Woodbridge, NJ | 221,336,704 | 27,032 | 420,703,497 | 52,309,222 | — | 50,737,355 | 422,302,396 | 473,039,751 | 16,852,804 | 2004 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Woodlands Village | Flagstaff, AZ | 7,660,126 | 2,689,000 | 7,484,000 | 24,123 | — | 2,688,652 | 7,508,472 | 10,197,123 | 651,726 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Yellowstone Square | Idaho Falls, ID | — | 1,057,000 | 2,943,000 | 52,705 | — | 1,057,200 | 2,995,505 | 4,052,705 | 259,188 | 2002 | (e | ) | |||||||||||||||||||||||||||||||||||||
| Other, including corporate and developments in progress | 7,337,204,380 | 265,082,941 | 490,726,930 | 96,045,413 | 4,331,915 | 232,032,167 | 624,155,031 | 856,187,199 | 86,327,802 | |||||||||||||||||||||||||||||||||||||||||
Total Retail and Other | 20,287,467,642 | 2,949,809,129 | 16,664,084,984 | 2,177,640,418 | 140,929,804 | 2,974,863,931 | 18,957,600,404 | 21,932,464,335 | 2,104,955,640 | |||||||||||||||||||||||||||||||||||||||||
Master Planned Communities (h) | Summerlin, NV | 60,533,143 | 990,179,000 | — | (33,568,499 | ) | — | 956,601,854 | 8,647 | 956,610,501 | — | 2004 | N/A | |||||||||||||||||||||||||||||||||||||
| Summerlin | Houston, TX | 48,519,429 | 257,222,000 | — | 46,842,220 | — | 304,064,220 | — | 304,064,220 | — | 2004 | N/A | ||||||||||||||||||||||||||||||||||||||
| The Bridgelands | Howard County, | — | 315,944,000 | — | (57,657,810 | ) | — | 258,286,190 | — | 258,286,190 | — | 2004 | N/A | |||||||||||||||||||||||||||||||||||||
| Columbia and Emerson | MD Prince George’s | — | 136,434,000 | — | (21,474,430 | ) | — | 114,959,570 | — | 114,959,570 | — | 2004 | N/A | |||||||||||||||||||||||||||||||||||||
| Fairwood | County, MD | 22,354,640 | — | — | 17,151,242 | — | 17,151,242 | — | 17,151,242 | — | 2004 | N/A | ||||||||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total Master Planned Communities | 131,407,211 $ | 20,418,874,853 | 1,699,779,000 $ | 4,649,588,129 | — $ | 16,664,084,984 | (48,707,277 | ) $2,128,933,141 | — $ | 140,929,804 | 1,651,063,076 $ | 4,625,927,007 | 8,647 $ | 18,957,609,051 | 1,651,071,723 $ | 23,583,536,058 | — $ | 2,104,955,640 | ||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
F-59
Table of Contents
GENERAL GROWTH PROPERTIES, INC.
NOTES TO SCHEDULE III
(Dollars in thousands)
| (a) | See description of mortgage notes and other debt payable in Note 6 of Notes to Consolidated Financial Statements. | |
| (b) | Initial cost for constructed malls is cost at end of first complete calendar year subsequent to opening. | |
| (c) | Carrying costs consist of capitalized construction-period interest and taxes. | |
| (d) | The aggregate cost of land, buildings and equipment for federal income tax purposes is approximately $15,704,085. |
Reconciliation of Real Estate
| 2005 | 2004 | 2003 | ||||||||||
| Balance at beginning of year | $ | 23,308,792 | $ | 9,677,348 | $ | 6,957,996 | ||||||
| Acquisitions | — | 11,235,608 | 2,474,222 | |||||||||
| Change in Investment land and land held for development and sale | 5,363 | 1,645,700 | — | |||||||||
| Additions | 496,362 | 804,556 | 257,372 | |||||||||
| Hurricane property damage provisions(f) | (53,022 | ) | — | — | ||||||||
| Dispositions | (173,959 | ) | (54,420 | ) | (12,242 | ) | ||||||
| Balance at end of year | $ | 23,583,536 | $ | 23,308,792 | $ | 9,677,348 | ||||||
Reconciliation of Accumulated Depreciation
| 2005 | 2004 | 2003 | ||||||||||
| Balance at beginning of year | $ | 1,453,488 | $ | 1,101,235 | $ | 798,431 | ||||||
| Depreciation expense | 652,109 | 354,560 | 205,780 | |||||||||
| Other(g) | (641 | ) | (2,307 | ) | 97,024 | |||||||
| Balance at end of year | $ | 2,104,956 | $ | 1,453,488 | $ | 1,101,235 | ||||||
| (e) | Depreciation is computed based upon the following estimated lives: |
| Years | ||||
| Buildings, improvements and carrying costs | 40-45 | |||
| Equipment, tenant improvements and fixtures | 5-10 | |||
| (f) | Carrying costs reduced for hurricane property damage (Note 14) | |
| (g) | Primarily dispositions in 2005 and 2004 and purchase of interest in GGP Ivanhoe III in 2003. | |
| (h) | Decrease in Costs Capitalized Subsequent to Acquisition is primarily attributable to land sales in these Master Planned Communities. |
F-60
Table of Contents
EXHIBIT INDEX
| 3 | .1 | Restated Certificate of Incorporation of General Growth Properties, Inc. filed with the Delaware Secretary of State on February 10, 2006 (filed herewith). | ||
| 3 | .2 | Bylaws of General Growth Properties, Inc., as amended (filed herewith). | ||
| 4 | .1 | Form of Common Stock Certificate (filed herewith). | ||
| 4 | .2 | Rights Agreement dated July 27, 1993, between General Growth Properties, Inc. and certain other parties named therein (filed herewith). | ||
| 4 | .3 | Amendment to Rights Agreement dated as of February 1, 2000, between General Growth Properties, Inc. and certain other parties named therein (previously filed as Exhibit 10.11 to the Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference). | ||
| 4 | .4 | Redemption Rights Agreement dated July 13, 1995, by and among GGP Limited Partnership (the “Operating Partnership”), General Growth Properties, Inc. and the persons listed on the signature pages thereof (filed herewith). | ||
| 4 | .5 | Redemption Rights Agreement dated December 6, 1996, among the Operating Partnership, Forbes/ Cohen Properties, Lakeview Square Associates, and Jackson Properties (filed herewith). | ||
| 4 | .6 | Redemption Rights Agreement dated June 19, 1997, among the Operating Partnership, General Growth Properties, Inc., and CA Southlake Investors, Ltd. (filed herewith). | ||
| 4 | .7 | Redemption Rights Agreement dated October 23, 1997, among General Growth Properties, Inc., the Operating Partnership and Peter Leibowits (filed herewith). | ||
| 4 | .8 | Redemption Rights Agreement dated April 2, 1998, among the Operating Partnership, General Growth Properties, Inc. and Southwest Properties Venture (filed herewith). | ||
| 4 | .9 | Redemption Rights Agreement dated July 21, 1998, among the Operating Partnership, General Growth Properties, Inc., Nashland Associates, and HRE Altamonte, Inc. (filed herewith). | ||
| 4 | .10 | Redemption Rights Agreement dated October 21, 1998, among the Operating Partnership, General Growth Properties, Inc. and the persons on the signature pages thereof (filed herewith). | ||
| 4 | .11 | Redemption Rights Agreement (PDC Common Units) dated July 10, 2002, by and among the Operating Partnership, General Growth Properties, Inc. and the persons listed on the signature pages thereof (previously filed as Exhibit 10.6 to the Current Report on Form 8-K dated July 10, 2002 which was filed with the SEC on July 24, 2002, incorporated herein by reference). | ||
| 4 | .12 | Redemption Rights Agreement (PDC Series B Preferred Units) dated July 10, 2002, by and among the Operating Partnership, General Growth Properties, Inc. and the persons listed on the signature pages thereof (previously filed as Exhibit 10.7 to the Current Report on Form 8-K dated July 10, 2002 which was filed with the SEC on July 24, 2002, incorporated herein by reference). | ||
| 4 | .13 | Redemption Rights Agreement (Series C Preferred Units) dated November 27, 2002, by and among the Operating Partnership, General Growth Properties, Inc. and JSG, LLC (previously filed as Exhibit 10(LLL) to the Annual Report on Form 10-K for the year ended December 31, 2002 which was filed with the SEC on March 14, 2003, incorporated herein by reference). | ||
| 4 | .14 | Redemption Rights Agreement (PDC Common Units) dated November 27, 2002, by and among the Operating Partnership, General Growth Properties, Inc. and JSG, LLC (previously filed as Exhibit 10(MMM) to the Annual Report on Form 10-K for the year ended December 31, 2002 which was filed with the SEC on March 14, 2003, incorporated herein by reference). | ||
| 4 | .15 | Redemption Rights Agreement dated December 11, 2003, by and among the Operating Partnership, General Growth Properties, Inc. and Everitt Enterprises, Inc. (previously filed as Exhibit 10.44 to the Annual Report on Form 10-K for the year ended December 31, 2003 which was filed with the SEC on March 12, 2004, incorporated herein by reference). | ||
| 4 | .16 | Form of Registration Rights Agreement dated April 15, 1993, between General Growth Properties, Inc., Martin Bucksbaum, Matthew Bucksbaum and the other parties named therein (filed herewith). | ||
| 4 | .17 | Amendment to Registration Rights Agreement dated February 1, 2000, among General Growth Properties, Inc. and certain other parties named therein (previously filed as Exhibit 10.16 to the Annual Report on Form 10-K for the year ended December 31, 2003 which was filed with the SEC on March 12, 2004, incorporated herein by reference). |
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| 4 | .18 | Registration Rights Agreement dated April 17, 2002, between General Growth Properties, Inc. and GSEP 2002 Realty Corp. (previously filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002 which was filed with the SEC on May 13, 2002, incorporated herein by reference). | ||
| 4 | .19 | Rights Agreement dated November 18, 1998, between General Growth Properties, Inc. and Norwest Bank Minnesota, N.A., as Rights Agent (including the Form of Certificate of Designation of Series A Junior Participating Preferred Stock attached thereto as Exhibit A, the Form of Right Certificate attached thereto as Exhibit B and the Summary of Rights to Purchase Preferred Shares attached thereto as Exhibit C) (filed herewith). | ||
| 4 | .20 | First Amendment to Rights Agreement dated as of November 10, 1999, between General Growth Properties, Inc. and Norwest Bank Minnesota, N.A. (filed herewith). | ||
| 4 | .21 | Second Amendment to Rights Agreement dated as of December 31, 2001, between General Growth Properties, Inc. and Mellon Investor Services, LLC, successor to Norwest Bank Minnesota, N.A. (previously filed as Exhibit 4.13 to the Registration Statement on Form S-3 (No. 333-82134) dated February 4, 2002 which was filed with the SEC on February 5, 2002, incorporated herein by reference). | ||
| 4 | .22 | Letter Agreement concerning Rights Agreement dated November 10, 1999, between the Operating Partnership and NYSCRF (filed herewith). | ||
| 4 | .23 | The Rouse Company and The First National Bank of Chicago (Trustee) Indenture dated as of February 24, 1995 (previously filed as Exhibit 4.23 to the Annual Report on Form 10-K for the year ended December 31, 2004 which was filed with the SEC on March 22, 2005, incorporated herein by reference). | ||
| 4 | .24 | Second Amended and Restated Credit Agreement dated as of February 24, 2006 among General Growth Properties, Inc., Operating Partnership and GGPLP L.L.C., as Borrowers; the several lenders from time to time parties thereto; Banc of America Securities LLC, Eurohypo AG, New York Branch (“Eurohypo”) and Wachovia Capital Markets, LLC, as Arrangers; Eurohypo, as Administrative Agent; Bank of America, N.A., and Wachovia Bank, National Association, as Syndication Agents; and Lehman Commercial Paper, Inc., as Documentation Agent (previously filed as Exhibit 4.1 to the Current Report on Form 8-K dated February 24, 2006 which was filed with the SEC on March 2, 2006, incorporated herein by reference). | ||
| 10 | .1 | Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership dated April 1, 1998 (the “LP Agreement”) (filed herewith). | ||
| 10 | .2 | First Amendment to the LP Agreement dated as of June 10, 1998 (previously filed as Exhibit 10(B) to the Annual Report on Form 10-K for the year ended December 31, 2002 which was filed with the SEC on March 14, 2003, incorporated herein by reference). | ||
| 10 | .3 | Second Amendment to the LP Agreement dated as of June 29, 1998 (previously filed as Exhibit 10(C) to the Annual Report on Form 10-K for the year ended December 31, 2002 which was filed with the SEC on March 14, 2003, incorporated herein by reference). | ||
| 10 | .4 | Third Amendment to the LP Agreement dated as of February 15, 2002 (previously filed as Exhibit 10.3 to the Current Report on Form 8-K dated July 10, 2002 which was filed with the SEC on July 24, 2002, incorporated herein by reference). | ||
| 10 | .5 | Amendment to the LP Agreement dated as of April 24, 2002 (previously filed as Exhibit 10.4 to the Current Report on Form 8-K dated July 10, 2002 which was filed with the SEC on July 24, 2002, incorporated herein by reference). | ||
| 10 | .6 | Fourth Amendment to the LP Agreement dated as of July 10, 2002 (previously filed as Exhibit 10.5 to the Current Report on Form 8-K dated July 10, 2002 which was filed with the SEC on July 24, 2002, incorporated herein by reference). | ||
| 10 | .7 | Amendment to the LP Agreement dated as of November 27, 2002 (previously filed as Exhibit 10(G) to the Annual Report on Form 10-K for the year ended December 31, 2002 which was filed with the SEC on March 14, 2003, incorporated herein by reference). | ||
| 10 | .8 | Sixth Amendment to the LP Agreement and Exhibit A to the Amendment dated as of November 20, 2003 (previously filed as Exhibit 10.8 to the Annual Report on Form 10-K for the year ended December 31, 2003 which was filed with the SEC on March 12, 2004, incorporated herein by reference). |
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| 10 | .9 | Amendment to the LP Agreement and Exhibit A to the Amendment dated as of December 11, 2003 (previously filed as an Exhibit 10.9 to the Annual Report on Form 10-K for the year ended December 31, 2003 which was filed with the SEC on March 12, 2004, incorporated herein by reference). | ||
| 10 | .10 | Amendment to the LP Agreement dated November 12, 2004 (previously filed as Exhibit 10.3 to the Current Report on Form 8-K/A dated November 12, 2004 which was filed with the SEC on November 18, 2004, incorporated herein by reference). | ||
| 10 | .11 | Second Amended and Restated Operating Agreement of GGPLP L.L.C. dated April 17, 2002 (the “LLC Agreement”) (previously filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002 which was filed with the SEC on May 13, 2002, incorporated herein by reference). | ||
| 10 | .12 | First Amendment to the LLC Agreement dated April 23, 2002 (previously filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002 which was filed with the SEC on May 13, 2002, incorporated herein by reference). | ||
| 10 | .13 | Second Amendment to the LLC Agreement dated May 13, 2002 (previously filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002 which was filed with the SEC on August 13, 2002, incorporated herein by reference). | ||
| 10 | .14 | Third Amendment to the LLC Agreement dated October 30, 2002 (previously filed as Exhibit 10(Y) to the Annual Report on Form 10-K for the year ended December 31, 2002 which was filed with the SEC on March 14, 2003, incorporated herein by reference). | ||
| 10 | .15 | Fourth Amendment to the LLC Agreement dated April 7, 2003 (previously filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 which was filed with the SEC on May 9, 2003, incorporated herein by reference). | ||
| 10 | .16 | Fifth Amendment to the LLC Agreement dated April 11, 2003 (previously filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 which was filed with the SEC on May 9, 2003, incorporated herein by reference). | ||
| 10 | .17 | Sixth Amendment to the LLC Agreement dated November 12, 2004 (previously filed as Exhibit 10.2 to the Current Report on Form 8-K/A dated November 12, 2004 which was filed with the SEC on November 18, 2004, incorporated herein by reference). | ||
| 10 | .18 | Stockholders Agreement dated December 20, 1995, among GGP/ Homart, Inc., Operating Partnership, The Comptroller of the State of New York, As Trustee of the Common Retirement Fund (“NYSCRF”), Equitable Life Insurance Company of Iowa, USG Annuity & Life Company, Trustees of the University of Pennsylvania and General Growth Properties (filed herewith). | ||
| 10 | .19 | First Amendment to Stockholders Agreement dated September 10, 1996 (filed herewith). | ||
| 10 | .20 | Operating Agreement dated November 10, 1999, between the Operating Partnership, NYSCRF, and GGP/Homart II L.L.C. (filed herewith). | ||
| 10 | .21 | Amendment to the Operating Agreement of GGP/Homart II L.L.C. dated November 22, 2002 (filed herewith). | ||
| 10 | .22 | Letter Amendment to the Operating Agreement of GGP/Homart II L.L.C. dated January 31, 2003 (filed herewith). | ||
| 10 | .23 | Second Amendment to the Operating Agreement of GGP/Homart II L.L.C. dated January 31, 2003 (filed herewith). | ||
| 10 | .24 | Amended and Restated Operating Agreement of GGP-TRS L.L.C. dated August 26, 2002, between the Operating Partnership, Teachers’ Retirement System of the State of Illinois and GGP-TRS L.L.C. (filed herewith). | ||
| 10 | .25 | First Amendment to Amended and Restated Operating Agreement of GGP-TRS L.L.C. dated December 19, 2002 (filed herewith). | ||
| 10 | .26 | Second Amendment to Amended and Restated Operating Agreement of GGP-TRS L.L.C. dated November 1, 2005 (filed herewith). | ||
| 10 | .27* | General Growth Properties, Inc. 1998 Incentive Stock Plan, as amended (previously filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 which was filed with the SEC on August 8, 2005, incorporated herein by reference). |
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| 10 | .28* | Form of Option Agreement pursuant to 1998 Incentive Stock Plan (previously filed as Exhibit 10.47 to the Annual Report on Form 10-K for the year ended December 31, 2004 which was filed with the SEC on March 22, 2005, incorporated herein by reference). | ||
| 10 | .29* | General Growth Properties, Inc. 2003 Incentive Stock Plan (previously filed as Exhibit 4.1 to the Registration Statement (333-105882) on Form S-8 dated June 5, 2003 which was filed with the SEC on June 6, 2003, incorporated herein by reference). | ||
| 10 | .30* | Form of Option Agreement pursuant to 2003 Incentive Stock Plan (previously filed as Exhibit 10.48 to the Annual Report on Form 10-K for the year ended December 31, 2004 which was filed with the SEC on March 22, 2005, incorporated herein by reference). | ||
| 10 | .31* | Form of Restricted Stock Agreement pursuant to 2003 Incentive Stock Plan (filed herewith). | ||
| 10 | .32* | 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, incorporated herein by reference). | ||
| 10 | .33 | Form of Contingent Stock Agreement, effective January 1, 1996, by The Rouse Company and in favor of and for the benefit of the Holders and the Representatives (as defined therein) (previously filed as Exhibit 99.1 to the Registration Statement on Form S-3/A (No. 333-120373) which was filed with the SEC on December 23, 2004, incorporated herein by reference). | ||
| 10 | .34 | Assumption Agreement dated October 19, 2004 by General Growth Properties, Inc. and The Rouse Company in favor of and for the benefit of the Holders and the Representatives (as defined therein) (previously filed as Exhibit 99.2 to the Registration Statement on Form S-3/A (No. 333-120373) which was filed with the SEC on December 23, 2004, incorporated herein by reference). | ||
| 10 | .35 | Agreement and Plan of Merger by and Among The Rouse Company, General Growth Properties, Inc. and Red Acquisition, LLC dated as of August 19, 2004 (previously filed as Exhibit 2.1 to our Current Report on Form 8-K/A dated August 20, 2004 which was filed with the SEC on August 24, 2004, incorporated herein by reference). | ||
| 21 | List of Subsidiaries (filed herewith). | |||
| 23 | .1 | Consent of Deloitte & Touche LLP (filed herewith). | ||
| 23 | .2 | Consent of KPMG LLP (filed herewith). | ||
| 31 | .1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). | ||
| 31 | .2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). | ||
| 32 | .1 | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). | ||
| 32 | .2 | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). |
| (*) | A compensatory plan or arrangement required to be filed. |
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the registrant has not filed debt instruments relating to long-term debt that is not registered and for which the total amount of securities authorized thereunder does not exceed 10% of total assets of the registrant and its subsidiaries on a consolidated basis as of December 31, 2005. The registrant agrees to furnish a copy of such agreements to the Commission upon request.
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