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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
Washington, D.C. 20549
Form 10-K/A
Amendment No. 1
| (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, 2007 | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from to | ||
Commission File Number 1-11656
GENERAL GROWTH PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 42-1283895 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| 110 N. Wacker Dr., Chicago, IL | 60606 | |
| (Address of principal executive offices) | (Zip Code) |
(312)960-5000
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
(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 ofRegulation 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 thisForm 10-K or any amendment to thisForm 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerþ | Accelerated filero | Non-accelerated filer o | Smaller reporting Company o | |||
| (Do not check if a smaller reporting company) | ||||||
Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). YES o NO þ
On June 29, 2007, 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 $11.385 billion based upon the closing price of the common stock on the New York Stock Exchange composite tape on such date.
As of February 22, 2008, there were 243,937,426 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 13, 2008 are incorporated by reference into Part III.
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The Registrant is filing the Amendment No. 1 to its Annual Report onForm 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission (“SEC”) on February 27, 2008 (the “Original10-K”) to amend Items 8 and 15 of the Original10-K. The amendment to Item 8 is to amend Note 5 — Unconsolidated Real Estate Affiliates of the Consolidated Financial Statements (“Note 5”), pagesF-21 throughF-31, to include additional information for certain unconsolidated real estate affiliates to supplement certain required disclosures as a result of an agreement with the SEC staff to provide such information in lieu of separate audited financial statements for such affiliates in accordance withS-XRule 3-09. This additional information includes the balance sheet and income statement for one additional unconsolidated real estate affiliate and condensed statement of cash flow information for each of the unconsolidated real estate affiliates disclosed in Note 5. Item 15 of the Original10-K is being amended to include the updated opinion of Deloitte & Touche LLP, new Exhibits 31.1, 31.2, 32.1 and 32.2, certifications of the Chief Executive Officer and Chief Financial Officer, new Exhibit 23.1, consent of Deloitte & Touche LLP and new Exhibit 23.2, consent of KPMG LLP. In accordance withRule 12b-15 under the Securities Exchange Act of 1934, as amended, this Amendment to the Original10-K sets forth the complete text of Items 8 and 15, as amended.
Except as described above, no other amendments are being made to the Original10-K. This amendment does not reflect events occurring after the February 27, 2008 filing of our Original10-K or modify or update the disclosure contained in the Original10-K in any way other than as required to reflect the items discussed above and reflected below.
PART II
| Item 8. | Financial Statements and Supplementary Data |
Reference is made to the Consolidated Financial Statements and Consolidated Financial Statement Schedule beginning onpage F-1 for the required information.
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 onpage S-1.
(c) Separate financial statements.
Not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
General Growth Properties, Inc.
| By: | /s/ Bernard Freibaum |
Bernard Freibaum
Executive Vice President and
Chief Financial Officer
Date: March 24, 2008
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 onForm 10-K:
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
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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 accompanying consolidated balance sheets of General Growth Properties, Inc. and subsidiaries (the “Company”) as of December 31, 2007 and 2006, 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, 2007. 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., and GGP-TRS L.L.C., the Company’s investments in which are accounted for by use of the equity method. The Company’s equity (deficit) of $(104,853,000) in GGP/Homart, Inc.’s net assets as of December 31, 2006, and of $30,204,000 and $31,425,000 in GGP/Homart, Inc.’s net income for each of the two years in the respective period ended December 31, 2006 are included in the accompanying financial statements. The Company’s equity of $281,518,000 and $81,926,000 in GGP/Homart II L.L.C.’s net assets as of December 31, 2007 and 2006, respectively, and of $17,163,000, $16,839,000, and $33,849,000 in GGP/Homart II L.L.C.’s net income for each of the three years in the respective period ended December 31, 2007 are included in the accompanying financial statements. The Company’s equity (deficit) of $(25,619,000) and $(30,170,000) in GGP-TRS L.L.C.’s net assets as of December 31, 2007 and 2006, respectively, and of $13,800,000, $15,004,000, and $19,308,000 in GGP-TRS L.L.C.’s net income for each of the three years in the respective period ended December 31, 2007 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 the 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, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 7 to the consolidated financial statements, on January 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2007, based on the criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2008 expressed an unqualified opinion on the Company’s internal control over financial reporting based on our audit.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 26, 2008
(March 24, 2008 as to Note 5, Condensed Financial Information of Individually Significant Unconsolidated Real Estate Affiliates as related to Woodlands Land Development cash flow information)
F-2
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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, 2006 and 2005, and the related consolidated statements of income and comprehensive income, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2006 (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, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Chicago, Illinois
February 27, 2007
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, 2007 and 2006, 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, 2007 (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, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Chicago, Illinois
February 22, 2008
F-4
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To Members
GGP — TRS, L.L.C.:
We have audited the consolidated balance sheets of GGP — TRS, L.L.C. (a Delaware Limited Liability Company) and subsidiaries (the Company) as of December 31, 2007 and 2006, 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, 2007 (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 — TRS, L.L.C. and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Chicago, Illinois
February 22, 2008
F-5
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GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
| December 31, | ||||||||
| 2007 | 2006 | |||||||
| (Dollars in thousands) | ||||||||
Assets | ||||||||
| Investment in real estate: | ||||||||
| Land | $ | 3,310,634 | $ | 2,952,477 | ||||
| Buildings and equipment | 22,653,814 | 19,379,386 | ||||||
| Less accumulated depreciation | (3,605,199 | ) | (2,766,871 | ) | ||||
| Developments in progress | 987,936 | 673,900 | ||||||
| Net property and equipment | 23,347,185 | 20,238,892 | ||||||
| Investment in and loans to/from Unconsolidated Real Estate Affiliates | 1,857,330 | 1,499,036 | ||||||
| Investment land and land held for development and sale | 1,639,372 | 1,655,838 | ||||||
| Net investment in real estate | 26,843,887 | 23,393,766 | ||||||
| Cash and cash equivalents | 99,534 | 97,139 | ||||||
| Accounts and notes receivable, net | 388,278 | 338,709 | ||||||
| Goodwill | 385,683 | 371,674 | ||||||
| Deferred expenses, net | 290,660 | 252,190 | ||||||
| Prepaid expenses and other assets | 806,277 | 787,967 | ||||||
| Total assets | $ | 28,814,319 | $ | 25,241,445 | ||||
Liabilities and Stockholders’ Equity | ||||||||
| Mortgages, notes and loans payable | $ | 24,282,139 | $ | 20,521,967 | ||||
| Investment in and loans to/from Unconsolidated Real Estate Affiliates | 53,964 | 172,421 | ||||||
| Deferred tax liabilities | 860,435 | 1,302,205 | ||||||
| Accounts payable and accrued expenses | 1,688,241 | 1,050,192 | ||||||
| Total liabilities | 26,884,779 | 23,046,785 | ||||||
| Minority interests: | ||||||||
| Preferred | 121,482 | 182,828 | ||||||
| Common | 351,362 | 347,753 | ||||||
| Total minority interests | 472,844 | 530,581 | ||||||
| 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, 245,704,746 and 242,357,416 shares issued as of December 31, 2007 and 2006, respectively | 2,457 | 2,424 | ||||||
| Additional paid-in capital | 2,601,296 | 2,533,898 | ||||||
| Retained earnings (accumulated deficit) | (1,087,080 | ) | (868,391 | ) | ||||
| Accumulated other comprehensive income | 35,658 | 9,582 | ||||||
| Less common stock in treasury, at cost, 1,806,650 and 290,787 shares as of December 31, 2007 and 2006, respectively | (95,635 | ) | (13,434 | ) | ||||
| Total stockholders’ equity | 1,456,696 | 1,664,079 | ||||||
| Total liabilities and stockholders’ equity | $ | 28,814,319 | $ | 25,241,445 | ||||
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, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (Dollars in thousands, except for per share amounts) | ||||||||||||
| Revenues: | ||||||||||||
| Minimum rents | $ | 1,933,674 | $ | 1,753,508 | $ | 1,670,387 | ||||||
| Tenant recoveries | 859,801 | 773,034 | 754,836 | |||||||||
| Overage rents | 89,016 | 75,945 | 69,628 | |||||||||
| Land sales | 145,649 | 423,183 | 385,205 | |||||||||
| Management and other fees | 106,584 | 115,798 | 91,022 | |||||||||
| Other | 127,077 | 114,815 | 101,626 | |||||||||
| Total revenues | 3,261,801 | 3,256,283 | 3,072,704 | |||||||||
| Expenses: | ||||||||||||
| Real estate taxes | 246,484 | 218,549 | 206,193 | |||||||||
| Repairs and maintenance | 216,536 | 199,078 | 195,292 | |||||||||
| Marketing | 54,664 | 48,626 | 63,522 | |||||||||
| Other property operating costs | 421,228 | 373,020 | 390,051 | |||||||||
| Land sales operations | 244,308 | 316,453 | 311,815 | |||||||||
| Provision for doubtful accounts | 5,426 | 22,078 | 13,868 | |||||||||
| Property management and other costs | 198,610 | 181,033 | 144,526 | |||||||||
| General and administrative | 37,005 | 18,800 | 15,539 | |||||||||
| Litigation provision | 89,225 | — | — | |||||||||
| Depreciation and amortization | 670,454 | 690,194 | 672,914 | |||||||||
| Total expenses | 2,183,940 | 2,067,831 | 2,013,720 | |||||||||
| Operating income | 1,077,861 | 1,188,452 | 1,058,984 | |||||||||
| Interest income | 8,641 | 11,585 | 10,416 | |||||||||
| Interest expense | (1,174,097 | ) | (1,117,437 | ) | (1,031,241 | ) | ||||||
| Income (loss) before income taxes, minority interest and equity in income of Unconsolidated Real Estate Affiliates | (87,595 | ) | 82,600 | 38,159 | ||||||||
| Benefit from (provision for) income taxes | 294,160 | (98,984 | ) | (51,289 | ) | |||||||
| Minority interest | (77,012 | ) | (37,761 | ) | (43,989 | ) | ||||||
| Equity in income of Unconsolidated Real Estate Affiliates | 158,401 | 114,241 | 120,986 | |||||||||
| Income from continuing operations | 287,954 | 60,096 | 63,867 | |||||||||
| Discontinued operations, net of minority interests: | ||||||||||||
| Income from operations | — | — | 6,568 | |||||||||
| Gain (loss) on dispositions | — | (823 | ) | 5,118 | ||||||||
| Income (loss) from discontinued operations | — | (823 | ) | 11,686 | ||||||||
| Net income | $ | 287,954 | $ | 59,273 | $ | 75,553 | ||||||
Basic Earnings Per Share | ||||||||||||
| Continuing operations | $ | 1.18 | $ | 0.25 | $ | 0.27 | ||||||
| Discontinued operations | — | — | 0.05 | |||||||||
| Total basic earnings per share | $ | 1.18 | $ | 0.25 | $ | 0.32 | ||||||
Diluted Earnings Per Share | ||||||||||||
| Continuing operations | $ | 1.18 | $ | 0.24 | $ | 0.27 | ||||||
| Discontinued operations | — | — | 0.05 | |||||||||
| Total diluted earnings per share | $ | 1.18 | $ | 0.24 | $ | 0.32 | ||||||
Comprehensive Income, Net: | ||||||||||||
| Net income | $ | 287,954 | $ | 59,273 | $ | 75,553 | ||||||
| Other comprehensive income, net of minority interest: | ||||||||||||
| Net unrealized gains (losses) on financial instruments | (2,295 | ) | (3,316 | ) | 9,554 | |||||||
| Accrued pension adjustment | 243 | (2 | ) | (374 | ) | |||||||
| Foreign currency translation | 28,131 | 2,728 | 4,920 | |||||||||
| Unrealized gains (losses) on available-for-sale securities | (3 | ) | (282 | ) | 39 | |||||||
| Total other comprehensive income (loss), net of minority interest | 26,076 | (872 | ) | 14,139 | ||||||||
| Comprehensive income, net | $ | 314,030 | $ | 58,401 | $ | 89,692 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
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GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| Notes | ||||||||||||||||||||||||||||
| Retained | Receivable- | Accumulated | ||||||||||||||||||||||||||
| Additional | Earnings | Common | Other | Total | ||||||||||||||||||||||||
| Common | Paid-In | (Accumulated | Stock | Comprehensive | Treasury | Stockholders’ | ||||||||||||||||||||||
| Stock | Capital | Deficit) | Purchase | Income (Loss) | Stock | Equity | ||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||
Balance, January 1, 2005 | $ | 2,347 | $ | 2,377,177 | $ | (227,511 | ) | $ | (5,178 | ) | $ | (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 | 3,116 | 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 | $ | 2,468,982 | $ | (518,555 | ) | $ | — | $ | 10,454 | $ | (30,362 | ) | 1,932,918 | |||||||||||||
| Net income | 59,273 | 59,273 | ||||||||||||||||||||||||||
| Cash distributions declared ($1.68 per share) | (403,831 | ) | (403,831 | ) | ||||||||||||||||||||||||
| Conversion of operating partnership units to common stock (808,173 common shares) | 8 | 5,784 | 5,792 | |||||||||||||||||||||||||
| Conversion of convertible preferred units to common stock (526,464 common shares) | 5 | 10,021 | 10,026 | |||||||||||||||||||||||||
| Issuance of common stock (971,238 common shares) (563,185 treasury shares) | 10 | 34,333 | (5,278 | ) | 26,018 | 55,083 | ||||||||||||||||||||||
| Tax benefit from stock option exercises | 267 | 267 | ||||||||||||||||||||||||||
| Shares issued pursuant to CSA (87,495 common shares) (1,727,524 treasury shares) | 1 | 4,895 | 76,835 | 81,731 | ||||||||||||||||||||||||
| Restricted stock grant, net of compensation expense (99,000 common shares) | 1 | 2,807 | 2,808 | |||||||||||||||||||||||||
| Purchase of treasury stock (1,913,100 treasury shares) | (85,925 | ) | (85,925 | ) | ||||||||||||||||||||||||
| Other comprehensive income | (872 | ) | (872 | ) | ||||||||||||||||||||||||
| Adjustment for minority interest in operating partnership | 6,809 | 6,809 | ||||||||||||||||||||||||||
Balance, December 31, 2006 | $ | 2,424 | $ | 2,533,898 | $ | (868,391 | ) | $ | — | $ | 9,582 | $ | (13,434 | ) | $ | 1,664,079 | ||||||||||||
Cumulative effect of adoption of FIN 48 | (54,128 | ) | (54,128 | ) | ||||||||||||||||||||||||
Adjusted balance, January 1, 2007 | $ | 2,424 | $ | 2,533,898 | $ | (922,519 | ) | $ | — | $ | 9,582 | $ | (13,434 | ) | $ | 1,609,951 | ||||||||||||
| Net income | 287,954 | 287,954 | ||||||||||||||||||||||||||
| Cash distributions declared ($1.85 per share) | (450,854 | ) | (450,854 | ) | ||||||||||||||||||||||||
| Conversion of operating partnership units to common stock (1,086,961 common shares) | 11 | 7,684 | 7,695 | |||||||||||||||||||||||||
| Conversion of convertible preferred units to common stock (29,269 common shares) | 488 | 488 | ||||||||||||||||||||||||||
| Issuance of common stock (1,582,968 common shares) (144,068 treasury shares) | 15 | 64,022 | (1,661 | ) | 6,657 | 69,033 | ||||||||||||||||||||||
| Tax benefit from stock option exercises | 3,531 | 3,531 | ||||||||||||||||||||||||||
| Shares issued pursuant to CSA (551,632 common shares) (146,969 treasury shares) | 6 | 29,875 | 6,790 | 36,671 | ||||||||||||||||||||||||
| Restricted stock grant, net of compensation expense (96,500 common shares) | 1 | 2,695 | 2,696 | |||||||||||||||||||||||||
| Purchase of treasury stock (1,806,900 treasury shares) | (95,648 | ) | (95,648 | ) | ||||||||||||||||||||||||
| Other comprehensive income | 26,076 | 26,076 | ||||||||||||||||||||||||||
| Adjustment for minority interest in operating partnership | (40,897 | ) | (40,897 | ) | ||||||||||||||||||||||||
Balance, December 31, 2007 | $ | 2,457 | $ | 2,601,296 | $ | (1,087,080 | ) | $ | — | $ | 35,658 | $ | (95,635 | ) | $ | 1,456,696 | ||||||||||||
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, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
Cash Flows from Operating Activities: | ||||||||||||
| Net income | $ | 287,954 | $ | 59,273 | $ | 75,553 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Minority interests | 77,012 | 37,761 | 45,488 | |||||||||
| Equity in income of Unconsolidated Real Estate Affiliates | (158,401 | ) | (114,241 | ) | (120,986 | ) | ||||||
| Provision for doubtful accounts | 5,426 | 22,078 | 13,876 | |||||||||
| Distributions received from Unconsolidated Real Estate Affiliates | 124,481 | 111,864 | 119,602 | |||||||||
| Depreciation | 635,873 | 663,523 | 657,358 | |||||||||
| Amortization | 34,581 | 26,671 | 21,037 | |||||||||
| Amortization of debt market rate adjustment and other non-cash interest expense | (11,073 | ) | (13,570 | ) | (32,672 | ) | ||||||
| Participation expense pursuant to Contingent Stock Agreement | 31,884 | 110,740 | 106,285 | |||||||||
| Land/residential development and acquisitions expenditures | (243,323 | ) | (200,367 | ) | (170,026 | ) | ||||||
| Cost of land sales | 48,794 | 175,184 | 181,301 | |||||||||
| Impairment of investment land and land held for development and sale | 127,600 | — | — | |||||||||
| Deferred income taxes including tax restructuring benefit | (368,136 | ) | 58,252 | 28,596 | ||||||||
| Straight-line rent amortization | (24,334 | ) | (34,176 | ) | (33,994 | ) | ||||||
| Amortization of intangibles other than in-place leases | (20,945 | ) | (41,668 | ) | (29,254 | ) | ||||||
| Net changes: | ||||||||||||
| Accounts and notes receivable | (21,868 | ) | (23,091 | ) | (51,131 | ) | ||||||
| Prepaid expenses and other assets | 53,819 | 28,165 | (69,379 | ) | ||||||||
| Deferred expenses | (37,878 | ) | (46,741 | ) | (73,048 | ) | ||||||
| Accounts payable and accrued expenses | 135,980 | (30,733 | ) | 122,208 | ||||||||
| Other, including insurance recoveries, net | 29,970 | 27,427 | 51,164 | |||||||||
| Net cash provided by operating activities | 707,416 | 816,351 | 841,978 | |||||||||
Cash Flows from Investing Activities: | ||||||||||||
| Acquisition/development of real estate and property additions/improvements | (1,495,334 | ) | (699,403 | ) | (497,977 | ) | ||||||
| Proceeds from sales of investment properties | 3,252 | 23,117 | 143,543 | |||||||||
| Increase in investments in Unconsolidated Real Estate Affiliates | (441,438 | ) | (285,747 | ) | (195,642 | ) | ||||||
| Distributions received from Unconsolidated Real Estate Affiliates in excess of income | 303,265 | 627,869 | 260,639 | |||||||||
| Loans (to) from Unconsolidated Real Estate Affiliates, net | (161,892 | ) | 67,821 | 126,500 | ||||||||
| (Increase) decrease in restricted cash | (11,590 | ) | 12,017 | (22,950 | ) | |||||||
| Other, including insurance recoveries, net | 22,805 | 43,926 | 31,690 | |||||||||
| Net cash used in investing activities | (1,780,932 | ) | (210,400 | ) | (154,197 | ) | ||||||
Cash Flows from Financing Activities: | ||||||||||||
| Proceeds from issuance of mortgages, notes and loans payable | 4,456,863 | 9,366,183 | 3,907,254 | |||||||||
| Principal payments on mortgages, notes and loans payable | (2,692,907 | ) | (9,383,378 | ) | (3,791,978 | ) | ||||||
| Deferred financing costs | (28,422 | ) | (38,916 | ) | (6,984 | ) | ||||||
| Cash distributions paid to common stockholders | (450,854 | ) | (403,831 | ) | (353,665 | ) | ||||||
| Cash distributions paid to holders of Common Units | (96,978 | ) | (88,992 | ) | (80,885 | ) | ||||||
| Cash distributions paid to holders of perpetual and convertible preferred units | (13,873 | ) | (17,546 | ) | (27,329 | ) | ||||||
| Proceeds from issuance of common stock, including from common stock plans | 60,625 | 49,267 | 45,208 | |||||||||
| Redemption of preferred minority interests | (60,000 | ) | — | (183,000 | ) | |||||||
| Purchase of treasury stock | (95,648 | ) | (85,925 | ) | (98,939 | ) | ||||||
| Other, net | (2,895 | ) | (8,465 | ) | (34,253 | ) | ||||||
| Net cash provided by (used in) financing activities | 1,075,911 | (611,603 | ) | (624,571 | ) | |||||||
| Net change in cash and cash equivalents | 2,395 | (5,652 | ) | 63,210 | ||||||||
| Cash and cash equivalents at beginning of period | 97,139 | 102,791 | 39,581 | |||||||||
| Cash and cash equivalents at end of period | $ | 99,534 | $ | 97,139 | $ | 102,791 | ||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||||||
| Interest paid | $ | 1,272,823 | $ | 1,170,929 | $ | 1,074,874 | ||||||
| Interest capitalized | 86,606 | 58,019 | 54,260 | |||||||||
| Taxes paid | 96,133 | 34,743 | 8,170 | |||||||||
Non-Cash Investing and Financing Activities: | ||||||||||||
| Common stock issued in exchange for Operating Partnership Units | $ | 7,695 | $ | 5,792 | $ | 23,932 | ||||||
| Common stock issued in exchange for convertible preferred units | 488 | 10,026 | 14,337 | |||||||||
| Common stock issued pursuant to Contingent Stock Agreement | 36,671 | 81,731 | 59,055 | |||||||||
| Acquisition of joint venture partner share of GGP/Homart Inc. in 2007, GGP Ivanhoe IV, Inc. in 2006, and disposition of certain properties in 2005, respectively: | ||||||||||||
| Total assets | 3,331,032 | 169,415 | (134,166 | ) | ||||||||
| Total liabilities | 2,381,942 | 169,415 | (125,925 | ) | ||||||||
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. (“GGP”), a Delaware corporation, is a self-administered and self-managed real estate investment trust, referred to as a “REIT.” GGP was organized in 1986 and through its subsidiaries and affiliates operates, develops, acquires and manages retail and other rental properties, primarily shopping centers, which are located primarily throughout the United States. GGP also holds assets through its international Unconsolidated Real Estate Affiliates in Brazil, Turkey and Costa Rica in which GGP has invested approximately $237.1 million at December 31, 2007. Additionally, GGP develops and sells land for residential, commercial and other uses primarily in large-scale, long-term master planned communities projects in and around Columbia, Maryland; Summerlin, Nevada; and Houston, Texas. In these notes, the terms “we,” “us” and “our” refer to GGP 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, 2007, ownership of the Operating Partnership was as follows:
| 82 | % | GGP, 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 GGP common stock on a one-for-one basis.
In addition to holding ownership interests in various joint ventures, the Operating Partnership generally conducts its operations through the following subsidiaries:
| • | GGPLP L.L.C., a Delaware limited liability company (the “LLC”), has ownership interests in the majority of our Consolidated Properties (as defined below) (other than those acquired in The Rouse Company merger (the “TRC Merger”). |
| • | 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 most of our Unconsolidated Real Estate Affiliates (as defined below) and approximately 30 properties owned by unaffiliated third parties. Effective July 1, 2006, GGMI also performs tenant related marketing and strategic partnership services at all of our Consolidated Properties. |
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 which will impact a potential acquirer unless the acquirer negotiates with our Board of Directors and the Board of Directors approves the transaction. Pursuant to this plan, one preferred share
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 if a person or group acquires or announces a tender or exchange offer for 15% or more of our common stock. Each Right entitles the holder to purchase from GGP 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 GGP, 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, but may be extended or redeemed earlier by our Board of Directors for one-third of $0.01 per Right.
| Note 2 | Summary of Significant Accounting Policies |
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of GGP, our subsidiaries and joint ventures in which we have a controlling interest. For consolidated joint ventures, the non-controlling partner’s share of operations (generally computed as the joint venture partner’s ownership percentage) is included in Minority Interest. 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.
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.
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 | |||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Impairment
Our real estate assets, including developments in progress and investment land and land held for development and sale, are reviewed for potential impairment indicators whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment indicators for our retail and other segment are assessed separately for each property and include, but are not limited to, significant decreases in real estate property net operating income and occupancy percentages. Impairment indicators for our master planned communities segment are assessed separately for each community and include, but are not limited to, significant decreases in sales pace or average selling prices, significant increases in expected land development and construction costs or cancellation rates, and projected losses on expected future land sales. Impairment indicators for developments in progress or other developments are assessed by project and include, but are not limited to, significant changes in projected completion dates, development costs and market factors.
If an indicator of potential impairment exists, the asset would be tested for recoverability by comparing its carrying value to the estimated future undiscounted operating cash flow. 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.
Based on the results of our evaluations, we recognized a non-cash impairment charge of $127.6 million in 2007 related to our Columbia and Fairwood properties in our master planned communities segment. The carrying value of the investment land and land held for development and sale that was impacted by this non-cash impairment charge totaled $1.64 billion at December 31, 2007 and $1.66 billion at December 31, 2006. This impairment charge is included in land sales operations in our Consolidated Statements of Income and Comprehensive Income.
There were no impairments present for our retail and other segment as of December 31, 2007.
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, debt liabilities assumed 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 thelease-up period, which generally ranges up to one year. Acquired in-place at-market tenant leases are amortized over periods that approximate the related lease terms.
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
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 (averaging 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.
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. Since each individual rental property or each operating property is an operating segment, which is each considered a reporting unit, we perform this test by comparing the fair value of each property with our book value of the property, including goodwill. If the implied fair value of goodwill is less than the book value of goodwill, then an impairment charge would be recorded. As of December 31, 2007 and 2006, we do not believe that any of our goodwill is impaired.
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.
When cumulative distributions, which are primarily from financing proceeds, exceed our investment in the joint venture, the investment is reported as a liability in our Consolidated Balance Sheets.
For those joint ventures where we own less than approximately 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
Highly-liquid investments with maturities at dates of purchase of three months or less are classified as cash equivalents.
Investments in Marketable Securities
Most investments in marketable securities are held in an irrevocable trust for participants in qualified defined contribution plans which were acquired with the TRC Merger, are classified as trading securities and are carried at fair value with changes in values recognized in earnings. 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. Other investments in marketable equity securities subject to significant restrictions on sale or transfer are classified as available-for-sale and are carried at fair value with unrealized changes in values recognized in other comprehensive income.
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
| Proceeds from sales of available-for-sale securities | $ | 3,720 | $ | 4,982 | $ | 27,740 | ||||||
| Gross realized gains on available-for-sale securities | 643 | 578 | 3,416 | |||||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 periods that approximate the related lease terms. Deferred expenses in our Consolidated Balance Sheets are shown at cost, net of accumulated amortization of $210.1 million as of December 31, 2007 and $151.0 million as of December 31, 2006.
Minority Interests — Common (Note 12)
Minority Interests — Common includes income allocated to holders of the Common Units (the “OP Minority Interests”) as well as to minority interest venture partners in consolidated joint ventures. Income is allocated to 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, changes 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. Termination income recognized for the years ended December 31, 2007, 2006 and 2005 was approximately $35.4 million, $31.2 million and $17.6 million, respectively. Accretion related to above and below-market tenant leases for the years ended December 31, 2007, 2006 and 2005 was approximately $31.0 million, $39.7 million and $34.7 million, respectively.
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 $201.9 million as of December 31, 2007 and $159.2 million as of December 31, 2006 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
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 recorded as straight-line rental revenue are never collected from (or billed to) tenants 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 $68.5 million as of December 31, 2007 and $56.9 million as of December 31, 2006.
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 for the benefit of the Unconsolidated Real Estate Affiliates and for properties owned by third parties. Such fees are recognized as revenue when earned.
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 ratios for land sales are 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 future 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 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. An increase or decrease in the deferred tax liability that results from a change in circumstances, and which causes a change in our judgment about expected future tax consequences of events, is included in the current tax provision. 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.
On January 1, 2007, we adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 prescribes a recognition threshold that a tax position is required to meet before recognition in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. Prior to adoption of FIN 48, we did not treat either interest or penalties related to tax uncertainties as part of income tax expense. With the adoption of FIN 48, we have chosen to change this accounting policy. As a result, we recognize
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
and report interest and penalties, if necessary, within our provision for income tax expense from January 1, 2007 forward.
In many of our Master Planned Communities, gains with respect to sales of land for commercial use, condominiums or apartments are reported for tax purposes on the percentage of completion method. Under the percentage of completion method, gain is recognized for tax purposes as costs are incurred in satisfaction of contractual obligations. In contrast, gains with respect to sales of land for single family residences are reported for tax purposes under the completed contract method. Under the completed contract method, gain is recognized for tax purposes when 95% of the costs of our contractual obligations are incurred.
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 requirements for vesting were not satisfied. Such options totaled 3,754,458 in 2007, 2,250,227 in 2006 and 1,026,777 in 2005. 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. Finally, the exchangeable senior notes that were issued in April 2007 (Note 6) are also excluded from EPS because the conditions for exchange were not satisfied as of December 31, 2007.
Information related to our EPS calculations is summarized as follows:
| Years Ended December 31, | ||||||||||||||||||||||||
| 2007 | 2006 | 2005 | ||||||||||||||||||||||
| Basic | Diluted | Basic | Diluted | Basic | Diluted | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Numerators: | ||||||||||||||||||||||||
| Income from continuing operations | $ | 287,954 | $ | 287,954 | $ | 60,096 | $ | 60,096 | $ | 63,867 | $ | 63,867 | ||||||||||||
| Discontinued operations, net of minority interests | — | — | (823 | ) | (823 | ) | 11,686 | 11,686 | ||||||||||||||||
| Net income available to common stockholders | $ | 287,954 | $ | 287,954 | $ | 59,273 | $ | 59,273 | $ | 75,553 | $ | 75,553 | ||||||||||||
| Denominators: | ||||||||||||||||||||||||
| Weighted average number of common shares outstanding — basic | 243,992 | 243,992 | 241,222 | 241,222 | 237,673 | 237,673 | ||||||||||||||||||
| Effect of dilutive securities — stock options | — | 546 | — | 832 | — | 796 | ||||||||||||||||||
| Weighted average number of common shares outstanding — diluted | 243,992 | 244,538 | 241,222 | 242,054 | 237,673 | 238,469 | ||||||||||||||||||
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
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
variable-rate borrowingsand/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.
All of our interest rate swap and other derivative financial instruments qualify as cash flow hedges and hedge 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, or if a hedge is deemed no longer effective, the net gain or loss in accumulated other comprehensive income (loss) is immediately reclassified into 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 were insignificant for 2007, 2006 and 2005.
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.
| 2007 | 2006 | |||||||||||||||
| Carrying | Estimated | Carrying | Estimated | |||||||||||||
| Amount | Fair Value | Amount | Fair Value | |||||||||||||
| (In millions) | ||||||||||||||||
| Fixed-rate debt | $ | 20,840 | $ | 20,596 | $ | 17,018 | $ | 16,854 | ||||||||
| Variable-rate debt | 3,442 | 3,361 | 3,504 | 3,518 | ||||||||||||
| $ | 24,282 | $ | 23,957 | $ | 20,522 | $ | 20,372 | |||||||||
Stock — Based Compensation Expense
On January 1, 2006, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share — Based Payment,” (“SFAS 123(R)”). SFAS 123(R) requires companies to estimate the fair value of share — based payment awards on the date of grant using an option — pricing model. The value of the portion of
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Consolidated Statements of Income and Comprehensive Income. SFAS 123(R) replaces SFAS No. 123, “Accounting for Stock — Based Compensation” (“SFAS 123”) which we adopted in the second quarter of 2002. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to SFAS 123(R). We have applied the provisions of SAB 107 in our adoption of SFAS 123(R).
We adopted SFAS 123(R) using the modified prospective transition method, which requires the application of the accounting standard as of January 1, 2006. Our Consolidated Financial Statements as of and for the years ended December 31, 2007 and 2006 reflect the impact of SFAS 123(R). In accordance with the modified prospective transition method, our Consolidated Financial Statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R). Because we had previously adopted SFAS 123, the impact of the adoption of SFAS 123(R) was not significant to our Consolidated Financial Statements. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Under SFAS 123, we did not estimate forfeitures for options issued pursuant to our Incentive Stock Plans. The cumulative effect of estimating forfeitures for these plans decreased compensation expense by approximately $128 thousand for the year ended December 31, 2007 and $150 thousand for the year ended December 31, 2006 and has been reflected in our Consolidated Statements of Income and Comprehensive Income.
Prior to the adoption of SFAS 123 in the second quarter of 2002, we accounted for stock — based awards using the intrinsic value method in accordance with APB 25 as allowed under SFAS 123. Under the intrinsic value method, compensation cost is recognized for common stock awards 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. Because the exercise price of stock options and the fair value of restricted stock grants equaled the fair market value of the underlying stock at the date of grant, no compensation expense related to grants issued under the 1993 Stock Incentive Plan was recognized. As a result of the cash settlement option available for threshold — vesting stock options (“TSOs”) issued prior to 2004, compensation expense equal to the change in the market price of our stock at the end of each reporting period continues to be recognized for all such unexercised TSOs.
On November 10, 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. 123(R)-3 “Transition Election Related to Accounting for Tax Effects of Share ��� Based Payment Awards.” The transition methods include procedures to establish the beginning balance of the additional paid — in capital pool (“APIC pool”) related to the tax effects of employee stock — based compensation, and to determine the subsequent impact on the APIC pool and Consolidated Statements of Cash Flows of the tax effects of employee stock — based compensation awards that are outstanding upon adoption of SFAS 123(R). We have adopted the transition guidance in SFAS 123(R) and not the alternative method described in this FASB staff position.
Foreign Currency Translation
The functional currencies for our international joint ventures are their local currencies. Assets, liabilities of these investments are translated at the rate of exchange in effect on the balance sheet date and operations are translated at the average exchange for the period. 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 and deferred taxes, initial valuations and
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 and Corrections
Certain amounts in the 2006 and 2005 Consolidated Financial Statements have been reclassified to conform to the current year presentation.
| Note 3 | Acquisitions and Intangibles |
GGP/Homart I Acquisition
On July 6, 2007, we acquired the fifty percent interest owned by New York State Common Retirement Fund (“NYSCRF”) in the GGP/Homart I portfolio (described below). This acquisition was the result of an election by NYSCRF to exercise its exchange right, in accordance with the GGP/Homart I Stockholders Agreement, with respect to its ownership in GGP/Homart I (“the Homart I acquisition”). The acquisition price for NYSCRF’s ownership interest was approximately $1.20 billion in cash (including deferred amounts) and the assumption of approximately $1.04 billion of existing mortgage debt (at fair value) representing NYSCRF’s share of the total mortgage debt of GGP/Homart I. The cash purchase price was primarily funded by a $750 million bank loan which, including amortization of the fees, bears interest at LIBOR plus 140 basis points and by an agreement to pay NYSCRF $254 million pursuant to a five year interest-only note. The note arose out of the January 2008 settlement of NYSCRF’s arbitration claims relating to, among other things, the method used to compute the total purchase price payable to NYSCRF for the exchange. The note is secured by our ownership interest in GGP/Homart II (another joint venture owned on a50/50 basis with NYSCRF) and bears interest at changing rates (initially, approximately 5.6% per annum) computed according to a formula based on mortgage loans to be obtained on, and secured by, three specified properties owned by GGP/Homart II. After setting aside certain monies relating to future development and expansion expenses for various GGP/Homart II properties, the note requires that we make principal payments to NYSCRF to the extent we receive distributions of any excess proceeds (as defined in the note) from GGP/Homart II attributable to such three mortgage loans.
As a result of this transaction, we own 100% of the GGP/Homart I portfolio and subsequently have consolidated the respective operations from the acquisition date. The properties in the GGP/Homart I portfolio include: Arrowhead Towne Center (a 33.3% unconsolidated interest), Bay City Mall, Brass Mill Center and Commons, Chula Vista Center, Columbiana Centre, Deerbrook Mall, Lakeland Square Mall, Moreno Valley Mall, Neshaminy Mall (a 50% unconsolidated interest), Newgate Mall, Newpark Mall, North Point Mall, The Parks at Arlington, Pembroke Lakes Mall, The Shoppes at Buckland Hills, Steeplegate Mall, Superstition Springs Center (a 33.3% unconsolidated interest), Tysons Galleria, Vista Ridge Mall, Washington Park Mall, West Oaks Mall, The Woodlands Mall and a parcel of land at East Mesa.
The aggregate purchase price was as follows:
| (In thousands) | ||||
| Cash paid | $ | 949,090 | ||
| Debt assumed | 1,055,057 | |||
| Acquisition and other costs, including deferred purchase price obligation | 254,677 | |||
| Total purchase price | $ | 2,258,824 | ||
The following table summarizes the allocation of the purchase price to the net assets acquired at the date of acquisition (see also Note 17 — Pro Forma Financial Information). These allocations were based on the relative fair values of the assets acquired and liabilities assumed. Because these fair values were based on currently available
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
information and assumptions and estimates that we believe are reasonable at this time, they are subject to reallocation as additional information, particularly with respect to liabilities assumed, becomes available.
| (In thousands) | ||||||||
Assets | ||||||||
| Land | 250,194 | |||||||
| Buildings and equipment | 1,660,372 | |||||||
| In-place lease value | 44,309 | |||||||
| Developments in progress | 8,477 | |||||||
| Investment in and loans to/from Unconsolidated Real Estate Affiliates | 137,973 | |||||||
| Cash | 11,240 | |||||||
| Tenant accounts receivable | 5,156 | |||||||
| Prepaid expenses and other assets: | ||||||||
| Above-market tenant leases | 43,782 | |||||||
| Other | 178,021 | |||||||
| Total Prepaid expenses and other assets | 221,803 | |||||||
| Total Assets | 2,339,524 | |||||||
Liabilities | ||||||||
| Current liabilities | 31,396 | |||||||
| Debt mark-to-market adjustments | (12,883 | ) | ||||||
| Below-market tenant leases | 62,188 | |||||||
| Total Liabilities | 80,701 | |||||||
Total Net Assets Acquired | $ | 2,258,824 | ||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Intangible Assets and Liabilities
The following table summarizes our intangible assets and liabilities:
| Accumulated | ||||||||||||
| Gross Asset | (Amortization)/ | |||||||||||
| (Liability) | Accretion | Net Carrying Amount | ||||||||||
| (In thousands) | ||||||||||||
As of December 31, 2007 | ||||||||||||
| Tenant leases: | ||||||||||||
| In-place value | $ | 679,329 | $ | (361,172 | ) | $ | 318,157 | |||||
| Above-market | 148,057 | (72,772 | ) | 75,285 | ||||||||
| Below-market | (324,088 | ) | 196,447 | (127,641 | ) | |||||||
| Ground leases: | ||||||||||||
| Above-market | (16,968 | ) | 1,479 | (15,489 | ) | |||||||
| Below-market | 293,435 | (19,590 | ) | 273,845 | ||||||||
| Real estate tax stabilization agreement | 91,879 | (12,425 | ) | 79,454 | ||||||||
As of December 31, 2006 | ||||||||||||
| Tenant leases: | ||||||||||||
| In-place value | $ | 667,492 | $ | (314,270 | ) | $ | 353,222 | |||||
| Above-market | 107,157 | (53,176 | ) | 53,981 | ||||||||
| Below-market | (294,052 | ) | 176,089 | (117,963 | ) | |||||||
| Ground leases: | ||||||||||||
| Above-market | (16,968 | ) | 1,007 | (15,961 | ) | |||||||
| Below-market | 293,435 | (12,919 | ) | 280,516 | ||||||||
| Real estate tax stabilization agreement | 91,879 | (8,501 | ) | 83,378 | ||||||||
Changes in gross asset (liability) balances in 2007 are the result of the Homart I acquisition, the acquisition of the minority interest in two consolidated joint ventures and our policy of writing off fully amortized intangible assets.
The gross asset balances of the in-place value of tenant leases are included in Buildings and equipment in our Consolidated Balance Sheets. The above-market and below-market tenant and ground leases as well as the real estate tax stabilization agreement intangible asset are included in Prepaid expenses and other assets and Accounts payable and accrued expenses as detailed in Note 11.
Amortization/accretion of these intangible assets and liabilities, and similar assets and liabilities from our Unconsolidated Real Estate Affiliates at our share, decreased our income (excluding the impact of minority interest and the provision for income taxes) by approximately $62.5 million in 2007, $118.2 million in 2006 and $157.5 million in 2005.
Future amortization, including our share of such items from Unconsolidated Real Estate Affiliates, is estimated to decrease income (excluding the impact of minority interest and the provision for income taxes) by approximately $65 million in 2008, $70 million in 2009, $60 million in 2010, $50 million in 2011, and $40 million in 2012.
| Note 4 | Discontinued Operations and Gains (Losses) on Dispositions of Interests in Operating Properties |
In December 2005, our Board of Directors approved two separate plans to dispose of certain office/industrial properties originally acquired in the TRCLP merger in 2004. The plans included 21 office properties which were sold at a total sale price of approximately $125 million and 16 industrial buildings which were sold at a total sale price of approximately $57 million. All of the properties were located in Hunt Valley and Woodlawn, Baltimore,
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Maryland. The sales closed in December 2005. As a result of the dispositions, we recognized a loss of approximately $1.3 million in 2006 and a gain of approximately $6.2 million in 2005, both before minority interest.
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 interest for these TRCLP office/industrial properties for the year ended December 31, 2005 was $24.3 million and $8.1 million, respectively.
| Note 5 | Unconsolidated Real Estate Affiliates |
The Unconsolidated Real Estate Affiliates include our non-controlling investments in real estate joint ventures. 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. We account for these joint ventures using the equity method because we have joint interest and control of these ventures with our venture partners and they have substantive participating rights in such ventures. For financial reporting purposes, each of these joint ventures is considered an individually significant Unconsolidated Real Estate Affiliate.
In certain circumstances, we have debt obligations in excess of our pro rata share of the debt of our Unconsolidated Real Estate Affiliates (“Retained Debt”). This Retained Debt represents distributed debt proceeds of the Unconsolidated Real Estate Affiliates in excess of our pro rata share of the non-recourse mortgage indebtedness of such Unconsolidated Real Estate Affiliates. The proceeds of the Retained Debt which are distributed to us are included as a reduction in our investment in Unconsolidated Real Estate Affiliates. In the event that the Unconsolidated Real Estate Affiliates do not generate sufficient cash flow to pay debt service, by agreement with our partners, our distributions may be reduced or we may be required to contribute funds in an amount equal to the debt service on Retained Debt. Such Retained Debt totaled $163.3 million as of December 31, 2007 and $170.1 million as of December 31, 2006, and has been reflected as a reduction in our investment in Unconsolidated Real Estate Affiliates. In other circumstances, the Company, in connection with the debt obligations of certain Unconsolidated Real Estate Affiliates, has agreed to provide supplemental guarantees or master-lease commitments to provide to the debt holders additional credit-enhancement or security. We currently do not expect to be required to perform pursuant to any of such supplemental credit-enhancement provisions for our Unconsolidated Real Estate Affiliates.
The significant accounting policies used by the Unconsolidated Real Estate Affiliates are the same as ours.
Condensed Combined Financial Information of Unconsolidated Real Estate Affiliates
Following is summarized financial information for our Unconsolidated Real Estate Affiliates as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005. Certain 2006 and 2005 amounts have been reclassified to conform to the 2007 presentation.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| December 31, | December 31, | |||||||
| 2007 | 2006 | |||||||
| (In thousands) | ||||||||
Condensed Combined Balance Sheets — Unconsolidated Real Estate Affiliates | ||||||||
| Assets: | ||||||||
| Land | $ | 917,244 | $ | 988,018 | ||||
| Buildings and equipment | 7,136,053 | 8,158,030 | ||||||
| Less accumulated depreciation | (1,361,649 | ) | (1,590,812 | ) | ||||
| Developments in progress | 645,156 | 551,464 | ||||||
| Net property and equipment | �� | 7,336,804 | 8,106,700 | |||||
| Investment in unconsolidated joint ventures | — | 45,863 | ||||||
| Investment land and land held for development and sale | 287,962 | 290,273 | ||||||
| Net investment in real estate | 7,624,766 | 8,442,836 | ||||||
| Cash and cash equivalents | 224,048 | 180,203 | ||||||
| Accounts and notes receivable, net | 133,747 | 165,049 | ||||||
| Deferred expenses, net | 166,201 | 155,051 | ||||||
| Prepaid expenses and other assets | 445,113 | 470,885 | ||||||
| Total assets | $ | 8,593,875 | $ | 9,414,024 | ||||
| Liabilities and Owners’ Equity: | ||||||||
| Mortgages, notes and loans payable | $ | 6,215,426 | $ | 7,752,889 | ||||
| Accounts payable and accrued expenses | 715,519 | 558,974 | ||||||
| Owners’ equity | 1,662,930 | 1,102,161 | ||||||
| Total liabilities and owners’ equity | $ | 8,593,875 | $ | 9,414,024 | ||||
Investment In and Loans To/From Unconsolidated Real Estate Affiliates, Net | ||||||||
| Owners’ equity | $ | 1,662,930 | $ | 1,102,161 | ||||
| Less joint venture partners’ equity | (853,459 | ) | (600,412 | ) | ||||
| Capital or basis differences and loans | 993,895 | 824,866 | ||||||
| Investment in and loans to/from Unconsolidated Real Estate Affiliates, net | $ | 1,803,366 | $ | 1,326,615 | ||||
Reconciliation — Investment In and Loans To/From Unconsolidated Real Estate Affiliates | ||||||||
| Asset — Investment in and loans to/from Unconsolidated Real Estate Affiliates | $ | 1,857,330 | $ | 1,499,036 | ||||
| Liability — Investment in and loans to/from Unconsolidated Real Estate Affiliates | (53,964 | ) | (172,421 | ) | ||||
| Investment in and loans to/from Unconsolidated Real Estate Affiliates, net | $ | 1,803,366 | $ | 1,326,615 | ||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Years Ended December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
Condensed Combined Statements of Income — Unconsolidated Real Estate Affiliates | ||||||||||||
| Revenues: | ||||||||||||
| Minimum rents | $ | 829,356 | $ | 864,368 | $ | 795,185 | ||||||
| Tenant recoveries | 358,941 | 378,413 | 365,325 | |||||||||
| Overage rents | 25,314 | 31,889 | 28,592 | |||||||||
| Land sales | 161,938 | 162,790 | 158,181 | |||||||||
| Management and other fees | 41,538 | 15,712 | — | |||||||||
| Other | 156,822 | 164,019 | 126,069 | |||||||||
| Total revenues | 1,573,909 | 1,617,191 | 1,473,352 | |||||||||
| Expenses: | ||||||||||||
| Real estate taxes | 104,523 | 119,426 | 112,225 | |||||||||
| Repairs and maintenance | 84,840 | 88,243 | 87,816 | |||||||||
| Marketing | 25,275 | 26,485 | 29,561 | |||||||||
| Other property operating costs | 293,568 | 311,267 | 239,194 | |||||||||
| Land sales operations | 91,539 | 103,519 | 89,561 | |||||||||
| Provision for doubtful accounts | 4,185 | 1,494 | 10,182 | |||||||||
| Property management and other costs | 94,268 | 77,290 | 59,548 | |||||||||
| General and administrative | 19,013 | 7,947 | 2,684 | |||||||||
| Litigation provision | 89,225 | — | — | |||||||||
| Depreciation and amortization | 259,015 | 269,327 | 257,153 | |||||||||
| Total expenses | 1,065,451 | 1,004,998 | 887,924 | |||||||||
| Operating income | 508,458 | 612,193 | 585,428 | |||||||||
| Interest income | 26,334 | 30,498 | 14,432 | |||||||||
| Interest expense | (355,917 | ) | (361,114 | ) | (304,368 | ) | ||||||
| Provision for income taxes | (9,263 | ) | (1,274 | ) | (1,157 | ) | ||||||
| Minority interest | (163 | ) | (588 | ) | — | |||||||
| Equity in income of unconsolidated joint ventures | 3,389 | 6,509 | 5,384 | |||||||||
| Income from continuing operations | 172,838 | 286,224 | 299,719 | |||||||||
| Discontinued operations, including gain on dispositions | 106,016 | 18,115 | 438 | |||||||||
| Net income | $ | 278,854 | $ | 304,339 | $ | 300,157 | ||||||
Equity In Income of Unconsolidated Real Estate Affiliates | ||||||||||||
| Net income | $ | 278,854 | $ | 304,339 | $ | 300,157 | ||||||
| Joint venture partners’ share of income | (187,672 | ) | (160,099 | ) | (157,756 | ) | ||||||
| Amortization of capital or basis differences | (19,019 | ) | (22,083 | ) | (20,844 | ) | ||||||
| Special allocation of litigation provision to GGPLP | 89,225 | — | — | |||||||||
| Elimination of Unconsolidated Real Estate Affiliates loan interest | (2,987 | ) | (7,916 | ) | (571 | ) | ||||||
| Equity in income Unconsolidated Real Estate Affiliates | $ | 158,401 | $ | 114,241 | $ | 120,986 | ||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005. Our investment in such affiliates varies from a strict ownership percentage due to capital or basis differences or loans and related amortization.
GGP/Homart II
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 11 retail properties and one office building. Certain 2006 and 2005 amounts have been reclassified to conform to the 2007 presentation.
| GGP/Homart II | ||||||||
| December 31, | December 31, | |||||||
| 2007 | 2006 | |||||||
| (In thousands) | ||||||||
| Assets: | ||||||||
| Land | $ | 248,094 | $ | 224,158 | ||||
| Buildings and equipment | 2,654,780 | 2,261,123 | ||||||
| Less accumulated depreciation | (400,078 | ) | (326,340 | ) | ||||
| Developments in progress | 108,078 | 286,396 | ||||||
| Net investment in real estate | 2,610,874 | 2,445,337 | ||||||
| Cash and cash equivalents | 30,851 | 6,289 | ||||||
| Accounts receivable, net | 40,319 | 35,506 | ||||||
| Deferred expenses, net | 76,297 | 58,712 | ||||||
| Prepaid expenses and other assets | 39,032 | 36,656 | ||||||
| Total assets | $ | 2,797,373 | $ | 2,582,500 | ||||
| Liabilities and Owners’ Equity: | ||||||||
| Mortgages, notes and loans payable | $ | 2,110,947 | $ | 2,284,763 | ||||
| Accounts payable and accrued expenses | 237,688 | 146,781 | ||||||
| Owners’ equity | 448,738 | 150,956 | ||||||
| Total liabilities and owners’ equity | $ | 2,797,373 | $ | 2,582,500 | ||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| GGP/Homart II | ||||||||||||
| Years Ended December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
| Revenues: | ||||||||||||
| Minimum rents | $ | 230,420 | $ | 205,835 | $ | 194,938 | ||||||
| Tenant recoveries | 103,265 | 94,298 | 92,862 | |||||||||
| Overage rents | 7,008 | 5,935 | 6,432 | |||||||||
| Other | 10,028 | 9,057 | 8,543 | |||||||||
| Total revenues | 350,721 | 315,125 | 302,775 | |||||||||
| Expenses: | ||||||||||||
| Real estate taxes | 29,615 | 29,883 | 27,132 | |||||||||
| Repairs and maintenance | 23,100 | 19,362 | 19,671 | |||||||||
| Marketing | 8,332 | 7,583 | 8,726 | |||||||||
| Other property operating costs | 41,099 | 37,776 | 29,490 | |||||||||
| Provision for (recovery of) doubtful accounts | 1,315 | (47 | ) | 3,125 | ||||||||
| Property management and other costs | 22,279 | 19,469 | 17,468 | |||||||||
| General and administrative | 11,777 | 7,137 | 2,005 | |||||||||
| Litigation provision | 89,225 | — | — | |||||||||
| Depreciation and amortization | 81,241 | 66,024 | 61,923 | |||||||||
| Total expenses | 307,983 | 187,187 | 169,540 | |||||||||
| Operating income | 42,738 | 127,938 | 133,235 | |||||||||
| Interest income | 7,871 | 8,840 | 7,358 | |||||||||
| Interest expense | (109,209 | ) | (91,240 | ) | (77,285 | ) | ||||||
| Income allocated to minority interests | (26 | ) | — | — | ||||||||
| (Provision for) benefit from income taxes | (2,202 | ) | (69 | ) | 64 | |||||||
| Net income (loss) | $ | (60,828 | ) | $ | 45,469 | $ | 63,372 | |||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| GGP/Homart II | ||||||||||||
| Years Ended December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||
| Net income (loss) | $ | (60,828 | ) | $ | 45,469 | $ | 63,372 | |||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | 81,241 | 66,024 | 61,923 | |||||||||
| Amortization of deferred financing costs | 460 | 1,014 | 3,172 | |||||||||
| Straight-line rent amortization | (4,929 | ) | (3,824 | ) | (3,244 | ) | ||||||
| Amortization of intangibles other than in-place leases | (2,306 | ) | (3,542 | ) | (3,542 | ) | ||||||
| Net changes: | ||||||||||||
| Accounts and notes receivable and other assets, net | 3,354 | (39 | ) | 5,203 | ||||||||
| Deferred expenses | (22,132 | ) | (5,773 | ) | (3,288 | ) | ||||||
| Accounts payable and accrued expenses | 111,954 | 2,527 | (7,884 | ) | ||||||||
| Other, net | (4,867 | ) | (2,829 | ) | 1,969 | |||||||
| Net cash provided by operating activities | 101,947 | 99,027 | 117,681 | |||||||||
| Cash Flows from Investing Activities: | ||||||||||||
| Acquisition/development of real estate and property additions/improvements | (267,899 | ) | (351,849 | ) | (123,261 | ) | ||||||
| Proceeds from sales of investment properties | 1,349 | — | — | |||||||||
| Net cash used in investing activities | (266,550 | ) | (351,849 | ) | (123,261 | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||||||
| Proceeds from issuance of mortgages, notes and loans payable | — | 810,000 | 703,000 | |||||||||
| Principal payments on mortgage notes, notes and loans payable | (24,316 | ) | (341,716 | ) | (336,334 | ) | ||||||
| Notes (receivable) payable from affiliate | (149,500 | ) | 224,500 | (114,393 | ) | |||||||
| Deferred financing costs | (17 | ) | (892 | ) | (518 | ) | ||||||
| Contributions (distributions) and receivables from members, net | 362,998 | (488,320 | ) | (215,454 | ) | |||||||
| Net cash provided by financing activities | 189,165 | 203,572 | 36,301 | |||||||||
| Net change in cash and cash equivalents | 24,562 | (49,250 | ) | 30,721 | ||||||||
| Cash and cash equivalents at the beginning of period | 6,289 | 55,539 | 24,818 | |||||||||
| Cash and cash equivalents at the end of period | $ | 30,851 | $ | 6,289 | $ | 55,539 | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||||||
| Interest paid, net of amounts capitalized | $ | 122,818 | $ | 99,034 | $ | 74,033 | ||||||
| Non-Cash Investing and Financing Activities: | ||||||||||||
| Accrued capital expenditures included in accounts payable and accrued expenses | $ | 67,497 | $ | 91,380 | $ | 32,391 | ||||||
| Write-off of fully amortized below-market leases, net | 2,306 | — | — | |||||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In February, 2004, Caruso Affiliated Holdings, LLC (“Caruso” or “plaintiff”) commenced a lawsuit involving GGP and GGP/Homart II (collectively, the “parties”) in the Los Angeles Superior Court (the “Court”) alleging violations of the California antitrust law and unfair competition laws and interference with prospective economic advantage. At trial, which commenced on October 1, 2007, the California antitrust law and unfair competition claims were dismissed. Trial proceeded with respect to the allegation that the parties had interfered with the plaintiff’s relationship with a then-prospective tenant for its lifestyle development which is adjacent to Glendale Galleria, a property located in Los Angeles owned by GGP/Homart II. Judgment of compensatory damages in the amount of approximately $74.2 million and punitive damages in the amount of $15 million were entered against the parties on December 21, 2007. Interest at the statutory rate of 10% will accrue from that date. The parties filed a motion for judgment notwithstanding the verdict and a motion for a new trial or remittitur which were denied by the Court on February 20, 2008. The parties will appeal the judgment and expect that they will post an appellate bond in approximately mid-to-late March for an amount equal to 150% of the judgment (excluding interest).
The judgment amount and the related interest have been recorded by GGP/Homart II. However, the GGP/Homart II Operating Agreement gives NYSCRF (the non-managing member of GGP/Homart II) rights to indemnification from the Company under certain circumstances. Although such rights could be asserted by NYSCRF, at this time we are not aware of any formal action taken by NYSCRF regarding these rights. However, the Company and NYSCRF have entered into a tolling agreement (essentially, a standstill agreement) relating to such rights. If the indemnity is applicable and enforceable, the Company may have the obligation to pay the damage award. In this event, management of the Company has determined that the Company would likely pay directly, or reimburse GGP/Homart II, for 100% of any payments and costs. Accordingly, the Company has reflected, as provision for litigation and in other general and administrative costs and interest expense, as applicable, 100% of the judgment and certain related costs, rather than reflect such 50% share of such costs in its equity in earnings of GGP/Homart II.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
GGP/Teachers
We own 50% of the membership interest in GGP- 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. Certain 2006 and 2005 amounts have been reclassified to conform to the 2007 presentation.
| GGP/Teachers | ||||||||
| December 31, | December 31, | |||||||
| 2007 | 2006 | |||||||
| (In thousands) | ||||||||
| Assets: | ||||||||
| Land | $ | 177,356 | $ | 176,761 | ||||
| Buildings and equipment | 1,039,444 | 908,786 | ||||||
| Less accumulated depreciation | (112,998 | ) | (89,323 | ) | ||||
| Developments in progress | 65,135 | 76,991 | ||||||
| Net investment in real estate | 1,168,937 | 1,073,215 | ||||||
| Cash and cash equivalents | 20,423 | 19,029 | ||||||
| Accounts receivable, net | 13,055 | 11,347 | ||||||
| Deferred expenses, net | 21,242 | 15,280 | ||||||
| Prepaid expenses and other assets | 11,138 | 13,980 | ||||||
| Total assets | $ | 1,234,795 | $ | 1,132,851 | ||||
| Liabilities and Owners’ Equity: | ||||||||
| Mortgages, notes and loans payable | $ | 1,029,788 | $ | 933,375 | ||||
| Accounts payable and accrued expenses | 92,993 | 88,188 | ||||||
| Owners’ equity | 112,014 | 111,288 | ||||||
| Total liabilities and owners’ equity | $ | 1,234,795 | $ | 1,132,851 | ||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| GGP/Teachers | ||||||||||||
| Years Ended December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
| Revenues: | ||||||||||||
| Minimum rents | $ | 111,810 | $ | 106,422 | $ | 87,014 | ||||||
| Tenant recoveries | 46,370 | 46,530 | 40,033 | |||||||||
| Overage rents | 4,732 | 6,003 | 2,888 | |||||||||
| Other | 3,737 | 2,753 | 2,378 | |||||||||
| Total revenues | 166,649 | 161,708 | 132,313 | |||||||||
| Expenses: | ||||||||||||
| Real estate taxes | 10,817 | 11,549 | 11,130 | |||||||||
| Repairs and maintenance | 9,073 | 8,298 | 7,405 | |||||||||
| Marketing | 3,992 | 3,909 | 3,610 | |||||||||
| Other property operating costs | 19,654 | 18,783 | 13,466 | |||||||||
| Provision for doubtful accounts | 455 | 132 | 440 | |||||||||
| Property management and other costs | 9,718 | 9,166 | 7,424 | |||||||||
| General and administrative | 239 | 297 | 213 | |||||||||
| Depreciation and amortization | 28,806 | 26,621 | 21,385 | |||||||||
| Total expenses | 82,754 | 78,755 | 65,073 | |||||||||
| Operating income | 83,895 | 82,953 | 67,240 | |||||||||
| Interest income | 702 | 914 | 723 | |||||||||
| Interest expense | (47,740 | ) | (44,262 | ) | (27,030 | ) | ||||||
| Provision for income taxes | (181 | ) | (485 | ) | (747 | ) | ||||||
| Net income | $ | 36,676 | $ | 39,120 | $ | 40,186 | ||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| GGP/Teachers | ||||||||||||
| Years Ended December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||
| Net income | $ | 36,676 | $ | 39,120 | $ | 40,186 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | 28,806 | 26,621 | 21,385 | |||||||||
| Amortization of deferred financing costs | 1,294 | 1,468 | 3,205 | |||||||||
| Straight-line rent amortization | (2,797 | ) | (1,368 | ) | (1,415 | ) | ||||||
| Amortization of intangibles other than in-place leases | (17,595 | ) | (17,777 | ) | (11,926 | ) | ||||||
| Net changes: | ||||||||||||
| Accounts and notes receivable and other assets, net | 3,119 | (10,509 | ) | (1,029 | ) | |||||||
| Deferred expenses | (6,668 | ) | (2,855 | ) | (5,962 | ) | ||||||
| Accounts payable and accrued expenses | 12,278 | (2,336 | ) | 3,169 | ||||||||
| Other, including gain on land exchange, net | 343 | 395 | 994 | |||||||||
| Net cash provided by operating activities | 55,456 | 32,759 | 48,607 | |||||||||
| Cash Flows from Investing Activities: | ||||||||||||
| Acquisition/development of real estate and property additions/improvements | (112,288 | ) | (64,590 | ) | (200,997 | ) | ||||||
| Net cash used in investing activities | (112,288 | ) | (64,590 | ) | (200,997 | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||||||
| Proceeds from issuance of mortgages, notes and loans payable | 200,000 | 250,000 | 598,000 | |||||||||
| Principal payments on mortgage notes, notes and loans payable | (103,587 | ) | (102,650 | ) | (278,556 | ) | ||||||
| Deferred financing costs | (2,234 | ) | (1,861 | ) | (2,683 | ) | ||||||
| Contributions (distributions) and receivables from members, net | (35,953 | ) | (112,908 | ) | (166,651 | ) | ||||||
| Net cash provided by financing activities | 58,226 | 32,581 | 150,110 | |||||||||
| Net change in cash and cash equivalents | 1,394 | 750 | (2,280 | ) | ||||||||
| Cash and cash equivalents at the beginning of period | 19,029 | 18,279 | 20,559 | |||||||||
| Cash and cash equivalents at the end of period | $ | 20,423 | $ | 19,029 | $ | 18,279 | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||||||
| Interest paid, net of amounts capitalized | $ | 51,818 | $ | 44,001 | $ | 23,245 | ||||||
| Non-Cash Investing and Financing Activities: | ||||||||||||
| Accrued capital expenditures included in accounts payable and accrued expenses | $ | 3,227 | $ | 79 | $ | 6 | ||||||
| Write-off of fully amortized below-market leases, net | 2,422 | — | — | |||||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Woodlands Land Development
We own 52.5% of the membership interest of The Woodlands Land Development Company, L.P. (“The Woodlands Partnership”), a limited liability partnership. The remaining 47.5% interest in The Woodlands Partnership is owned by Morgan Stanley Real Estate Fund II, L.P.
| The Woodlands Partnership | ||||||||
| December 31, | December 31, | |||||||
| 2007 | 2006 | |||||||
| (In thousands) | ||||||||
| Assets: | ||||||||
| Land | $ | 14,756 | $ | 13,828 | ||||
| Buildings and equipment | 48,201 | 91,485 | ||||||
| Less accumulated depreciation | (10,638 | ) | (19,271 | ) | ||||
| Developments in progress | 52,515 | 6,939 | ||||||
| Investment land and land held for development and sale | 287,962 | 290,273 | ||||||
| Net investment in real estate | 392,796 | 383,254 | ||||||
| Cash and cash equivalents | 27,359 | 15,219 | ||||||
| Deferred expenses, net | 2,044 | 2,782 | ||||||
| Prepaid expenses and other assets | 85,331 | 97,978 | ||||||
| Total assets | $ | 507,530 | $ | 499,233 | ||||
| Liabilities and Owners’ Equity: | ||||||||
| Mortgages, notes and loans payable | $ | 286,765 | $ | 321,724 | ||||
| Accounts payable and accrued expenses | 75,549 | 58,805 | ||||||
| Owners’ equity | 145,216 | 118,704 | ||||||
| Total liabilities and owners’ equity | $ | 507,530 | $ | 499,233 | ||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| The Woodlands Partnership | ||||||||||||
| Years Ended December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
| Revenues: | ||||||||||||
| Minimum rents | $ | 734 | $ | 1,834 | $ | (9 | ) | |||||
| Land sales | 161,938 | 161,540 | 157,581 | |||||||||
| Other | 34,750 | 34,244 | 31,947 | |||||||||
| Total revenues | 197,422 | 197,618 | 189,519 | |||||||||
| Expenses: | ||||||||||||
| Real estate taxes | 131 | 453 | — | |||||||||
| Repairs and maintenance | 257 | 311 | — | |||||||||
| Other property operating costs | 39,162 | 32,207 | 33,083 | |||||||||
| Land sales operations | 91,539 | 102,989 | 89,313 | |||||||||
| Depreciation and amortization | 3,504 | 5,218 | 4,659 | |||||||||
| Total expenses | 134,593 | 141,178 | 127,055 | |||||||||
| Operating income | 62,829 | 56,440 | 62,464 | |||||||||
| Interest income | 676 | 332 | 224 | |||||||||
| Interest expense | (9,025 | ) | (6,434 | ) | (5,873 | ) | ||||||
| Provision for income taxes | (1,918 | ) | — | — | ||||||||
| Income from continuing operations | 52,562 | 50,338 | 56,815 | |||||||||
| Discontinued operations, including gain on dispositions | 94,556 | 16,547 | — | |||||||||
| Net income | $ | 147,118 | $ | 66,885 | $ | 56,815 | ||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| The Woodlands Partnership | ||||||||||||
| Years Ended December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||
| Net income | $ | 147,118 | $ | 66,885 | $ | 56,815 | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||
| Depreciation and amortization | 3,504 | 5,218 | 4,659 | |||||||||
| Land development and acquisitions expenditures | (65,851 | ) | (103,120 | ) | (54,425 | ) | ||||||
| Cost of land sales | 68,162 | 71,773 | 60,413 | |||||||||
| Gain on dispositions | (94,556 | ) | (16,547 | ) | — | |||||||
| Net changes: | ||||||||||||
| Prepaid expenses and other assets | 12,647 | (9,052 | ) | (18,179 | ) | |||||||
| Deferred expenses | 738 | (2,782 | ) | — | ||||||||
| Accounts payable and accrued expenses | 16,745 | (25,470 | ) | (5,340 | ) | |||||||
| Net cash provided by (used in) operating activities | 88,507 | (13,095 | ) | 43,943 | ||||||||
| Cash Flows from Investing Activities: | ||||||||||||
| Acquisition/development of real estate and property additions/improvements | (67,624 | ) | (4,816 | ) | (19,222 | ) | ||||||
| Proceeds from dispositions | 146,822 | 43,335 | — | |||||||||
| Net cash provided by (used in) investing activities | 79,198 | 38,519 | (19,222 | ) | ||||||||
| Cash Flows from Financing Activities: | ||||||||||||
| Proceeds from issuance of mortgages, notes and loans payable | — | 39,688 | — | |||||||||
| Principal payments on mortgages, notes and loans payable | (34,959 | ) | — | (4,770 | ) | |||||||
| Contributions (distributions) and receivables from owners, net | (120,606 | ) | (49,893 | ) | (21,863 | ) | ||||||
| Net cash used in financing activities | (155,565 | ) | (10,205 | ) | (26,633 | ) | ||||||
| Net change in cash and cash equivalents | 12,140 | 15,219 | (1,912 | ) | ||||||||
| Cash and cash equivalents at the beginning of period | 15,219 | — | 1,912 | |||||||||
| Cash and cash equivalents at the end of period | $ | 27,359 | $ | 15,219 | $ | — | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||||||
| Interest paid, net of amounts capitalized | $ | 8,908 | $ | 6,673 | $ | 5,807 | ||||||
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Table of Contents
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Note 6 | Mortgages, Notes and Loans Payable |
Mortgages, notes and loans payable are summarized as follows:
| December 31, | December 31, | |||||||
| 2007 | 2006 | |||||||
| (In thousands) | ||||||||
| Fixed-rate debt: | ||||||||
| Commercial mortgage-backed securities | $ | — | $ | 868,765 | ||||
| Other collateralized mortgages, notes and loans payable | 16,943,760 | 13,762,381 | ||||||
| Corporate and other unsecured term loans | 3,895,922 | 2,386,334 | ||||||
| Total fixed-rate debt | 20,839,682 | 17,017,480 | ||||||
| Variable-rate debt: | ||||||||
| Other collateralized mortgages, notes and loans payable | 819,607 | 388,287 | ||||||
| Credit facilities | 429,150 | 60,000 | ||||||
| Corporate and other unsecured term loans | 2,193,700 | 3,056,200 | ||||||
| Total variable-rate debt | 3,442,457 | 3,504,487 | ||||||
| Total Mortgages, notes and loans payable | $ | 24,282,139 | $ | 20,521,967 | ||||
The weighted-average annual interest rate (including the effects of swaps and excluding the effects of deferred finance costs) on our mortgages, notes and loans payable was 5.55% at December 31, 2007 and 5.70% at December 31, 2006. Our mortgages, notes and loans payable have various maturities through 2095. The weighted-average remaining term of our mortgages, notes and loans payable was 4.05 years as of December 31, 2007.
As of December 31, 2007, approximately $22.61 billion of land, buildings and equipment and developments in progress (before accumulated depreciation) have been pledged as collateral for our mortgages, notes and loans payable. Substantially all of the mortgage notes are non-recourse to us. In addition, although certain mortgage loans contain guarantees or other credit enhancement or security provisions for the benefit of the note holder, we currently do not expect to be required to perform with respect to such provisions. 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. Certain properties, including those within the portfolios collateralized by commercial mortgage-backed securities, are subject to financial performance covenants, primarily debt service coverage ratios. We believe we are in compliance with all such covenants as of December 31, 2007.
Exchangeable Senior Notes
In April 2007, GGPLP completed the sale of $1.55 billion aggregate principal amount of 3.98% Exchangeable Senior Notes (the “Notes”) pursuant to Rule 144A under the Securities Act of 1933.
Interest on the Notes is payable semi-annually in arrears on April 15 and October 15 of each year, beginning October 15, 2007. The Notes will mature on April 15, 2027 unless previously redeemed by GGPLP, repurchased by GGPLP or exchanged in accordance with their terms prior to such date. Prior to April 15, 2012, we will not have the right to redeem the Notes, except to preserve our status as a REIT. On or after April 15, 2012, we may redeem for cash all or part of the Notes at any time, at 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to the redemption date. On each of April 15, 2012, April 15, 2017 and April 15, 2022, holders of the Notes may require us to repurchase the Notes, in whole or in part, for cash equal to 100% of the principal amount of Notes to be repurchased, plus accrued and unpaid interest.
The Notes are exchangeable for GGP common stock or a combination of cash and common stock, at our option, upon the satisfaction of certain conditions, including conditions relating to the market price of our common stock,
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Table of Contents
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the trading price of the Notes, the occurrence of certain corporate events and transactions, a call for redemption of the Notes and any failure by us to maintain a listing of our common stock on a national securities exchange. We currently intend to settle the principal amount of the Notes in cash and any premium in cash, shares of our common stock or a combination of both.
The initial exchange rate for each $1,000 principal amount of notes is approximately 11.27 shares of GGP common stock, representing an exchange price of approximately $88.72 per share and an exchange premium of 35%, which was based on the closing price of our common stock on April 10, 2007. The initial exchange rate is subject to adjustment under certain circumstances, including potential increases in the exchange rate resulting from increases in our dividends. We have registered, for the benefit of the holders of the Notes, the GGP common stock issuable upon the exchange of the Notes (approximately 17.5 million shares) and agree to maintain the effectiveness of such registration throughout the term of the Notes. In the event of a registration default, we will increase the applicable exchange rate by 3% (approximately 0.5 million shares) until we are no longer in default. As we believe that the likelihood of making such exchange rate adjustment is remote, no amounts reflecting a contingent liability have been accrued.
Proceeds from the offering, net of related fees, were approximately $1.52 billion and were used to repay $850 million of corporate unsecured debt, repay approximately $400 million on our revolving credit facility, redeem $60 million of perpetual preferred units and for other general corporate uses.
Commercial Mortgage-Backed Securities
In November 1997, the Operating Partnership and GGP Ivanhoe I completed the placement of fixed-rate non-recourse commercial mortgage backed securities (the “CMBS 13”). The commercial mortgage-backed securities had cross-default provisions and were cross-collateralized. In general, the cross-defaulted properties were under common ownership; however, $138.6 million of unconsolidated debt at two Unconsolidated Properties was cross-defaulted and cross-collateralized by $868.8 million of consolidated debt at eleven Consolidated Properties. The CMBS 13 was refinanced in November 2004 and replaced at its November 2007 maturity with new, property specific mortgage financing.
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 was attributed to the Operating Partnership, GGP/Homart I, GGP/Homart II, GGP Ivanhoe III and GGP Ivanhoe IV. The GGP MPTC was repaid in the third quarter of 2006.
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. The fixed-rate collateralized mortgage notes and other debt payable bear interest ranging from 3.17% to 10.15%. The variable-rate collateralized mortgage notes and other debt payable bear interest at LIBOR (5.02% at December 31, 2007) plus 100 basis points.
Corporate and Other Unsecured Term Loans
On July 6, 2007, we closed on a $750 million credit facility (Senior Bridge Facility) that was used to partially fund the Homart I acquisition. The facility is secured by several mall and office properties and matures on July 6, 2008. As of December 31, 2007, the balance on the Senior Bridge Facility was $722.2 million.
Under the terms of the Facility, we are subject to the same customary affirmative and negative covenants as the 2006 Credit Facility. The interest rate of the facility is LIBOR plus 1.25%.
On February 24, 2006, we amended the 2004 Credit Facility, which was entered into to fund the TRC Merger, by entering into a Second Amended and Restated Credit Agreement (the “2006 Credit Facility”). The 2006 Credit
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Table of Contents
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Facility provides for a $2.85 billion term loan (the “Term Loan”) and a $650 million revolving credit facility. As of December 31, 2007, $220.9 million is available to be drawn on the 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 interest rate, as of December 31, 2007, was LIBOR plus 1.25%. As of December 31, 2007 the weighted average interest rate on the remaining corporate unsecured fixed and variable rate debt and the revolving credit facility was 5.97%.
Under the terms of the 2006 Credit Facility, we are subject to customary affirmative and negative covenants. If a default occurs, the lenders will have the option of declaring all outstanding amounts immediately due and payable. 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. We believe we are in compliance with all such covenants as of December 31, 2007.
Concurrently with the 2006 Credit Facility transaction, we also entered into a $1.4 billion term loan (the “Short Term Loan”) and TRCLP entered into a $500 million term loan (the “Bridge Loan”). The Short Term Loan was repaid in August 2006 as part of various refinancing transactions including the GGP MPTC. The Bridge Loan was fully repaid in May 2006 with a portion of the proceeds obtained from the sale of $800 million of senior unsecured notes which were issued by TRCLP. These notes provide for semi-annual, interest-only payments at a rate of 6.75% and payment of the principal in full on May 1, 2013.
Also concurrently with the 2006 Credit Facility transaction, 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 trust preferred securities (“TRUPS”). The Trust also issued $6.2 million of Common Securities to GGPLP. The Trust used the proceeds from the sale of the TRUPS and Common Securities to purchase $206.2 million of floating rate Junior Subordinated Notes of GGPLP due 2036. The TRUPS require distributions equal to LIBOR plus 1.45%. Distributions are cumulative and accrue from the date of original issuance. The TRUPS mature on April 30, 2036, but may be redeemed beginning on April 30, 2011 if the Trust exercises its right to redeem a like amount of the Junior Subordinated Notes. The Junior Subordinated Notes bear interest at LIBOR plus 1.45%. Though the Trust is a wholly-owned subsidiary of GGPLP, we are not the primary beneficiary of the Trust and, accordingly, it is not consolidated for accounting purposes under FASB Interpretation No. 46 (as revised), “Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51” (“FIN 46R”). As a result, we have recorded the Junior Subordinated Notes as Mortgages, Notes and Loans Payable and our common equity interest in the Trust as Prepaid Expenses and Other Assets in our Consolidated Balance Sheets at December 31, 2007 and 2006.
Unsecured Term Loans
In conjunction with the TRC Merger, we assumed certain publicly-traded unsecured debt which included 8.78% and 8.44% Notes (repaid at maturity in March 2007), 3.625% Notes and 8% Notes due 2009, 7.2% Notes due 2012 and 5.375% Notes due 2013. Such debt totaled $1.45 billion at both December 31, 2007 and 2006, respectively. Under the terms of the Indenture dated as of February 24, 1995, as long as these notes are outstanding, TRCLP is required to file with the SEC the annual and quarterly reports and other documents which TRCLP would be required to file as if it was subject to Section 13(a) or 15(d) of the Exchange Act, regardless of whether TRCLP was subject to such requirements. TRCLP is no longer required to file reports or other documents with the SEC under Section 13(a) or 15(d). Accordingly, in lieu of such filing, certain financial and other information related to TRCLP has been included as Exhibit 99.1 to this Annual Report onForm 10-K. We believe that such TRCLP information is responsive to the terms of the Indenture and that any additional information needed or actions required can be supplied or addressed.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 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.
Interest Rate Swaps
To achieve a more desirable balance between fixed and variable-rate debt, we have also entered into the following certain swap agreements at December 31, 2007:
| Property | ||||
| Specific | ||||
| Total notional amount (in millions) | $ | 195.0 | ||
| Average fixed pay rate | 4.78 | % | ||
| Average variable receive rate | LIBOR | |||
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 $235.0 million as of December 31, 2007. 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 undersections 856-860 of the Internal Revenue Code, commencing with our taxable year beginning January 1, 1993. To qualify as a REIT, we must meet a number of organizational and operational requirements, including requirements to distribute at least 90% of our ordinary taxable income and to distribute to stockholders or pay tax on 100% of capital gains and to meet certain asset and income tests. It is management’s current intention to adhere to these requirements.
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, 2007, the total amount of built-in gains with respect to our assets is substantial. Effective January 1, 2008, with the exception of the built in gains associated with the Private REIT/TRS Restructuring described below, all TRC assets are no longer subject to the tax on built in gains. 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
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 carryforwards of these entities and as certain master planned community developments are completed. Such increases could be significant.
Effective March 31, 2007, through a series of transactions, a private REIT owned by GGPLP was contributed to TRCLP and one of our TRS entities became a qualified REIT subsidiary of that private REIT (“the Private REIT/TRS Restructuring”). This transaction resulted in approximately a $328.4 million decrease in our net deferred tax liabilities, an approximate $7.4 million increase in our current taxes payable and an approximate $321.0 million income tax benefit related to the properties now owned by that private REIT.
The (benefit from) provision for income taxes for the years ended December 31, 2007, 2006 and 2005 were as follows:
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
| Current | $ | 73,976 | $ | 40,732 | $ | 22,693 | ||||||
| Deferred | (368,136 | ) | 58,252 | 28,596 | ||||||||
| Total | $ | (294,160 | ) | $ | 98,984 | $ | 51,289 | |||||
Income tax expense computed by applying the Federal corporate tax rate for the years ended December 31, 2007, 2006 and 2005 is reconciled to the provision for income taxes as follows:
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
| Tax at statutory rate on earnings from continuing operations before income taxes | $ | (2,172 | ) | $ | 55,678 | $ | 40,723 | |||||
| Increase (decrease) in valuation allowances, net | 160 | 936 | (5,114 | ) | ||||||||
| State income taxes, net of Federal income tax benefit | 2,290 | 4,608 | 343 | |||||||||
| Tax at statutory rate on earnings (losses) not subject to Federal income taxes and other permanent differences | 22,308 | 37,762 | 15,337 | |||||||||
| Tax benefit from Private REIT/TRS Restructuring | (320,956 | ) | — | — | ||||||||
| FIN 48 tax expense, excluding interest | (2,763 | ) | ||||||||||
| FIN 48 interest, net of Federal income tax benefit | 6,973 | — | — | |||||||||
| (Benefit from) provision for income taxes | $ | (294,160 | ) | $ | 98,984 | $ | 51,289 | |||||
Realization of a deferred tax benefit is dependent upon generating sufficient taxable income in future periods. Our net operating loss carryforwards are currently scheduled to expire in subsequent years through 2026. 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 2005, the benefit amount has been reduced to reflect the sum of the annual Section 382 limitations, with no adjustment for the potential of built-in gain items. The valuation amount has likewise been reduced, thereby maintaining the same net deferred tax benefit amount for the net operating loss carryforwards. For 2007 and 2006, there has been no change from 2005 in the presentation of the net tax benefit.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The amounts and expiration dates of operating loss and tax credit carryforwards for tax purposes are as follows:
| Amount | Expiration Dates | |||||||
| (In thousands) | ||||||||
| Net operating loss carryforwards — Federal | $ | 41,472 | 2008 - 2026 | |||||
| Net operating loss carryforwards — State | 106,432 | 2008 - 2026 | ||||||
| Capital loss carryforwards | 9,232 | 2009 | ||||||
| Tax credit carryforwards — Federal AMT | 847 | n/a | ||||||
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:
| 2007 | 2006 | |||||||
| (In thousands) | ||||||||
| Total deferred tax assets | $ | 25,184 | $ | 16,006 | ||||
| Valuation allowance | (1,096 | ) | (936 | ) | ||||
| Net deferred tax assets | 24,088 | 15,070 | ||||||
| Total deferred tax liabilities | (860,435 | ) | (1,302,205 | ) | ||||
| Net deferred tax liabilities | $ | (836,347 | ) | $ | (1,287,135 | ) | ||
As part of the TRC merger, we acquired a controlling interest in an entity whose assets included a deferred tax asset of approximately $142 million related to $406 million of temporary differences (primarily interest deduction carryforwards with no expiration date).
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 is uncertainty regarding their realizability.
The tax effects of temporary differences and carryforwards included in the net deferred tax liabilities at December 31, 2007 and 2006 are summarized as follows:
| 2007 | 2006 | |||||||
| (In thousands) | ||||||||
| Property, primarily differences in depreciation and amortization, the tax basis of land assets and treatment of interest and certain other costs | $ | (796,142 | ) | $ | (1,165,960 | ) | ||
| Deferred income | (206,652 | ) | (291,634 | ) | ||||
| Interest deduction carryforwards | 142,103 | 142,177 | ||||||
| Operating loss and tax credit carryforwards | 24,345 | 28,282 | ||||||
| Net deferred tax liabilities | $ | (836,347 | ) | $ | (1,287,135 | ) | ||
Although we believe our tax returns are correct, the final determination of tax examinations 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. Generally, we are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ending December 31, 2004 through 2007 and are open to audit by state taxing authorities for years ending December 31, 2003 through 2007. Several of our taxable REIT subsidiaries are under examination by the Internal Revenue Service for the years 2001 through 2005. We are unable to determine when the remaining examinations will be resolved.
On January 1, 2007, we adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 prescribes a recognition threshold that a tax position is required to
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
meet before recognition in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues.
At January 1, 2007, we had total unrecognized tax benefits of approximately $135.1 million, excluding accrued interest, of which approximately $69 million would impact our effective tax rate. The future adoption of SFAS 141(R) (as defined and described in Note 15) may impact the amounts of total unrecognized tax benefits that would impact our effective tax rate. These unrecognized tax benefits increased our income tax liabilities by $82.1 million, increased goodwill by $28.0 million and cumulatively reduced retained earnings by $54.1 million. As of January 1, 2007, we had accrued interest of approximately $11.9 million related to these unrecognized tax benefits and no penalties. Prior to adoption of FIN 48, we did not treat either interest or penalties related to tax uncertainties as part of income tax expense. With the adoption of FIN 48, we have chosen to change this accounting policy. As a result, we will recognize and report interest and penalties, if necessary, within our provision for income tax expense from January 1, 2007 forward. We recognized potential interest expense related to the unrecognized tax benefits of $7.0 million for the year ended December 31, 2007. During the year ended December 31, 2007, we recognized previously unrecognized tax benefits, excluding accrued interest, of $20.0 million; of which $14.8 million decreased goodwill and $5.2 million reduced income tax expense. The recognition of the previously unrecognized tax benefits resulted in the reduction of interest expense accrued related to these amounts. At December 31, 2007, we had total unrecognized tax benefits of approximately $127.1 million, excluding interest, of which approximately $44.9 million would impact our effective tax rate.
| 2007 | ||||
| (In thousands) | ||||
| Unrecognized tax benefits, opening balance | $ | 135,062 | ||
| Gross increases — tax positions in prior period | 1,970 | |||
| Gross increases — tax positions in current period | 10,029 | |||
| Settlements | — | |||
| Lapse of statute of limitations | (19,952 | ) | ||
| Unrecognized tax benefits, ending balance | $ | 127,109 | ||
Based on our assessment of the expected outcome of existing examinations or examinations that may commence, or as a result of the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized tax benefits, excluding accrued interest, for tax positions taken regarding previously filed tax returns will materially change from those recorded at December 31, 2007. A material change in unrecognized tax benefits could have a material effect on our statements of income and comprehensive income. As of December 31, 2007, there is approximately $72.7 million of unrecognized tax benefits, excluding accrued interest, which due to the reasons above, could significantly increase or decrease during the next twelve months.
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 or deductibility of elements of income and deductibility of expense for such purposes.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Distributions paid on our common stock and their tax status, as sent to our shareholders, are presented in the following table. The tax status of GGP distributions in 2007, 2006 and 2005 may not be indicative of future periods.
| 2007 | 2006 | 2005 | ||||||||||
| Ordinary income | $ | 0.926 | $ | 0.542 | $ | 0.993 | ||||||
| Return of capital | — | 0.501 | 0.497 | |||||||||
| Qualified dividends | 0.501 | 0.432 | — | |||||||||
| Capital gain distributions | 0.423 | 0.205 | — | |||||||||
| Distributions per share | $ | 1.850 | $ | 1.680 | $ | 1.490 | ||||||
| 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, 2007 are as follows (in thousands):
Year | Amount | |||
| 2008 | $ | 1,642,365 | ||
| 2009 | 1,534,411 | |||
| 2010 | 1,369,628 | |||
| 2011 | 1,207,599 | |||
| 2012 | 1,033,005 | |||
| Subsequent | 3,752,229 | |||
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 |
Management and other fee revenues primarily represent management and leasing fees, development fees, financing fees and fees for other ancillary services performed for the benefit of certain of the Unconsolidated Real Estate Affiliates and for properties owned by third parties. Fees earned from the Unconsolidated Properties totaled approximately $83.4 million in 2007, $110.9 million in 2006 and $87.5 million in 2005. Such fees are recognized as revenue when earned.
| Note 10 | Stock-Based Compensation Plans |
Incentive Stock Plans
We grant qualified and non-qualified stock options and make restricted stock grants 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. Stock options generally vest 20% at the time of the grant and in 20% annual increments thereafter. Prior to May 2006, we granted options to non-employee directors that were exercisable in full commencing on the date of grant and scheduled to expire on the fifth anniversary of the date of the grant. Beginning in May 2006, non-employee directors received restricted stock grants, as further described below. The 2003 Incentive Stock Plan provides for the issuance of up to 9.0 million shares of our common stock, of which
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
approximately 5.0 million options and restricted shares have been granted as of December 31, 2007, subject to certain customary adjustments to prevent dilution.
The following tables summarize stock option activity for the 2003 Incentive Stock Plan as of and for the years ended December 31, 2007, 2006 and 2005.
| 2007 | 2006 | 2005 | ||||||||||||||||||||||
| Weighted | Weighted | Weighted | ||||||||||||||||||||||
| Average | Average | Average | ||||||||||||||||||||||
| Exercise | Exercise | Exercise | ||||||||||||||||||||||
| Shares | Price | Shares | Price | Shares | Price | |||||||||||||||||||
| Stock Options Outstanding at January 1 | 3,167,348 | $ | 38.41 | 2,546,174 | $ | 29.57 | 1,875,687 | $ | 22.17 | |||||||||||||||
| Granted | 1,205,000 | 65.81 | 1,370,000 | 49.78 | 1,352,500 | 36.13 | ||||||||||||||||||
| Exercised | (1,318,748 | ) | 33.81 | (573,226 | ) | 24.70 | (610,213 | ) | 21.00 | |||||||||||||||
| Exchanged for restricted stock | — | — | (30,000 | ) | 47.26 | — | — | |||||||||||||||||
| Forfeited | — | — | (145,000 | ) | 43.10 | (70,000 | ) | 33.49 | ||||||||||||||||
| Expired | (600 | ) | 9.99 | (600 | ) | 9.99 | (1,800 | ) | 9.99 | |||||||||||||||
| Stock Options Outstanding at December 31 | 3,053,000 | $ | 51.21 | 3,167,348 | $ | 38.41 | 2,546,174 | $ | 29.57 | |||||||||||||||
| Stock Options Outstanding | Stock Options Exercisable | |||||||||||||||||||||||
| Weighted | Weighted | |||||||||||||||||||||||
| Average | Weighted | Average | Weighted | |||||||||||||||||||||
| Remaining | Average | Remaining | Average | |||||||||||||||||||||
| Contractual | Exercise | Contractual | Exercise | |||||||||||||||||||||
Range of Exercise Prices | Shares | Term (in years) | Price | Shares | Term (in years) | Price | ||||||||||||||||||
In-the-money stock options | ||||||||||||||||||||||||
| $6.58 -$13.16 | 4,500 | 2.30 | $ | 9.99 | 4,500 | 2.30 | $ | 9.99 | ||||||||||||||||
| $13.16-$19.74 | 73,000 | 4.60 | 15.41 | 73,000 | 4.60 | 15.41 | ||||||||||||||||||
| $26.32-$32.91 | 197,000 | 1.10 | 30.94 | 145,000 | 1.10 | 30.94 | ||||||||||||||||||
| $32.91-$39.49 | 571,000 | 2.20 | 35.71 | 351,000 | 2.20 | 35.57 | ||||||||||||||||||
| $39.49-$46.07 | 50,000 | 2.80 | 44.59 | 20,000 | 2.80 | 44.59 | ||||||||||||||||||
| $46.07-$52.65 | 952,500 | 3.20 | 49.52 | 547,500 | 3.20 | 49.88 | ||||||||||||||||||
| $59.23-$65.81 | 1,205,000 | 4.20 | 65.81 | 201,000 | 4.20 | 65.81 | ||||||||||||||||||
| Total | 3,053,000 | 2.93 | $ | 51.21 | 1,342,000 | 2.93 | $ | 44.39 | ||||||||||||||||
| Intrinsic value (in thousands) | $ | — | $ | — | ||||||||||||||||||||
The intrinsic value of outstanding and exercisable stock options as of December 31, 2007 represents the excess of our closing stock price ($41.18) on that date over the exercise price multiplied by the applicable number of shares that may be acquired upon exercise of stock options, and is therefore not presented in the table above if the result is a negative value. The intrinsic value of exercised stock options represents the excess of our stock price at the time the option was exercised and the exercise price and was $39.3 million for options exercised during 2007, $13.9 million for options exercised during 2006, and $10.9 million for options exercised during 2005.
The weighted-average fair value of stock options as of the grant date was $11.07 for stock options granted during 2007, $7.61 for stock options granted during 2006, and $4.82 for stock options granted during 2005.
Stock options generally vest 20% at the time of the grant and in 20% annual increments thereafter. In February 2007, however, in lieu of awarding options similar in size to prior years to two of our senior executives, the Compensation Committee of our Board of Directors accelerated the vesting of options held by these executives so that all such options became immediately vested and exercisable. As a result, the vesting of 705,000 options was accelerated and
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
compensation expense of $4.1 million which would have been recognized in 2007 through 2010 was recognized in the first quarter of 2007.
Restricted Stock
We also make restricted stock grants to certain officers and, beginning in May 2006, to non-employee directors, pursuant to the 2003 Stock Incentive Plan. The vesting terms of these grants are specific to the individual grant. Generally, a portion of the shares vest immediately and the remainder vest in equal annual amounts over the next two to five years.
The following table summarizes restricted stock activity as of and for the years ended December 31, 2007, 2006, and 2005.
| 2007 | 2006 | 2005 | ||||||||||||||||||||||
| Weighted | Weighted | Weighted | ||||||||||||||||||||||
| Average | Average | Average | ||||||||||||||||||||||
| Grant Date | Grant Date | Grant Date | ||||||||||||||||||||||
| Shares | Fair Value | Shares | Fair Value | Shares | Fair Value | |||||||||||||||||||
| Nonvested restricted stock grants outstanding as of January 1 | 72,666 | $ | 47.62 | 15,000 | $ | 16.77 | 80,001 | $ | 16.71 | |||||||||||||||
| Granted | 96,500 | 65.29 | 99,000 | 47.91 | 66,000 | 35.41 | ||||||||||||||||||
| Vested | (32,668 | ) | 49.11 | (41,334 | ) | 37.13 | (131,001 | ) | 26.13 | |||||||||||||||
| Nonvested restricted stock grants outstanding as of December 31 | 136,498 | $ | 59.75 | 72,666 | $ | 47.62 | 15,000 | $ | 16.77 | |||||||||||||||
| Intrinsic value (in thousands) | $ | 5,621 | $ | 3,795 | $ | 705 | ||||||||||||||||||
The total fair value of restricted stock grants which vested during 2007 was $2.0 million, during 2006 was $2.0 million and during 2005 was $5.1 million.
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 Current Market Price (“CMP”) as defined in the 1998 Incentive Plan of our common stock on the date the TSO is granted. In order for the TSOs to vest, 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. Participating employees must remain employed until vesting occurs in order to exercise the options. The Threshold Price is currently determined by multiplying the CMP on the date of grant by the Estimated Annual Growth Rate (currently 7%) and compounding the product over a five-year period. 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. The 1998 Incentive Plan provides for the issuance of 11.0 million shares, of which 8,163,995 options have been granted as of December 31, 2007, subject to certain customary adjustments to prevent dilution.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes TSO activity as of December 31, 2007 by grant year.
| TSO Grant Year | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| Granted prior to January 1 | — | 1,400,000 | 1,000,000 | |||||||||
| Forfeited | — | (84,773 | ) | (118,332 | ) | |||||||
| Vested and Exercised | — | — | (723,920 | ) | ||||||||
| TSOs outstanding at January 1, 2007 | — | 1,315,227 | 157,748 | |||||||||
| Granted in 2007 | 1,400,000 | — | — | |||||||||
| Forfeited in 2007(1) | (86,110 | ) | (79,659 | ) | (1,334 | ) | ||||||
| Vested and Exercised in 2007 | — | — | (156,414 | ) | ||||||||
| TSOs outstanding at December 31, 2007(2) | 1,313,890 | 1,235,568 | — | |||||||||
| Intrinsic value (in thousands)(3) | $ | — | $ | — | $ | — | ||||||
| Intrinsic value — options exercised (in thousands) | — | — | 903 | |||||||||
| Fair value — options exercised (in thousands) | — | — | 596 | |||||||||
| Cash received — options exercised (in thousands) | — | — | 5,539 | |||||||||
| Exercise price(4) | $ | 65.81 | $ | 50.47 | $ | 35.41 | ||||||
| Threshold price | 92.30 | 70.79 | 49.66 | |||||||||
| Fair value of options on grant date | 9.54 | 6.51 | 3.81 | |||||||||
| Remaining contractual term (in years) | 4.1 | 3.1 | — | |||||||||
| (1) | No TSO expirations for years presented. | |
| (2) | TSOs outstanding at December 31, 2007 for the years 2004 and prior were 133,621. | |
| (3) | Intrinsic value is not presented if the result is a negative number. | |
| (4) | A weighted average exercise price is not applicable as there is only one grant date and issue per year. |
We have a $200 million per fiscal year common stock repurchase program which gives us the ability to acquire some or all of the shares of common stock to be issued upon the exercise of the TSOs.
Other Required Disclosures
The fair values of TSOs granted in 2007, 2006 and 2005 were estimated using the binomial method. The value of restricted stock grants is calculated as the average of the high and low stock prices on the date of the initial grant. The fair values of all other stock options were estimated on the date of grant using the Black-Scholes-Merton option pricing model. These fair values are affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. Expected volatilities are based on historical volatility of our stock price as well as that of our peer group, implied volatilities and various other factors. Historical data, such as the past performance of our common stock and the length of service by employees, was used to estimate expected life of the TSOs and our stock options and represents the period of time that options are expected to be outstanding. The weighted average estimated value of stock options and TSOs granted during 2007, 2006 and 2005 were based on the following assumptions:
| 2007 | 2006 | 2005 | ||||||||||
| Risk-free interest rate | 4.70 | % | 4.43 | % | 3.40 | % | ||||||
| Dividend yield | 4.00 | 4.00 | 4.00 | |||||||||
| Expected volatility | 24.72 | 22.94 | 21.61 | |||||||||
| Expected life (in years) | 5.0 | 2.5-3.5 | 5.0 | |||||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Compensation expense related to the Incentive Stock Plans, TSOs and restricted stock was $16.9 million in 2007, $14.0 million in 2006 and $11.1 million in 2005.
As of December 31, 2007, total compensation expense which had not yet been recognized related to nonvested options, TSOs and restricted stock grants was $29.2 million. Of this total, $9.7 million is expected to be recognized in 2008, $8.2 million in 2009, $7.0 million in 2010, $3.9 million in 2011 and $0.4 million in 2012. These amounts may be impacted by future grants, changes in forfeiture estimates or vesting terms, actual forfeiture rates which differ from estimated forfeituresand/or timing of TSO vesting.
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 GGP. Under the ESPP, eligible employees make payroll deductions over a six-month purchase period. At the end of each 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 a common stock on the first or last trading day of the purchase period. The ESPP is considered a compensatory plan pursuant to SFAS 123(R). A maximum of 3.0 million shares of our common stock are reserved for issuance under the ESPP. Since inception, an aggregate of approximately 1.6 million shares of our common stock have been purchased by eligible employees under the ESPP, including 79,213 shares for the purchase period ending December 31, 2007 which were purchased at a price of $35.00 per share. Compensation expense related to the ESPP was $2.0 million in 2007, $1.5 million in 2006, and $2.0 million in 2005.
Defined Contribution Plan
We sponsor the General Growth 401(k) Savings 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 recognized expense resulting from the matching contributions of $10.2 million in 2007, $9.3 million in 2006, and $7.5 million in 2005.
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 purchase our common stock from dividends received or additional cash investments. The stock is purchased at current market price, but no fees or commissions are charged to the participant. We expect to continue to satisfy DRSP common stock purchases by issuing new shares of our common stock or by repurchasing currently outstanding common stock. As of December 31, 2007, an aggregate of 651,590 shares of our common stock have been issued under the DRSP.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Note 11 | Other Assets and Liabilities |
The following table summarizes the significant components of “Prepaid expenses and other assets.”
| December 31, | December 31, | |||||||
| 2007 | 2006 | |||||||
| (In thousands) | ||||||||
| Below-market ground leases | $ | 273,845 | $ | 280,516 | ||||
| Receivables — finance leases and bonds | 114,979 | 111,694 | ||||||
| Security and escrow deposits | 83,638 | 76,834 | ||||||
| Real estate tax stabilization agreement | 79,454 | 83,378 | ||||||
| Above-market tenant leases | 75,285 | 53,981 | ||||||
| Special Improvement District receivable | 58,200 | 64,819 | ||||||
| Prepaid expenses | 52,820 | 37,528 | ||||||
| Deferred income tax | 24,088 | 15,070 | ||||||
| Funded defined contribution plan assets | 14,616 | 17,119 | ||||||
| Insurance recovery receivable | — | 14,952 | ||||||
| Other | 29,352 | 32,076 | ||||||
| Total Prepaid expenses and other assets | $ | 806,277 | $ | 787,967 | ||||
The following table summarizes the significant components of “Accounts payable and accrued expenses.”
| December 31, | December 31, | |||||||
| 2007 | 2006 | |||||||
| (In thousands) | ||||||||
| Accounts payable and accrued expenses | $ | 302,719 | $ | 200,936 | ||||
| Deferred purchase price obligation | 254,000 | — | ||||||
| Construction payables | 206,044 | 188,038 | ||||||
| Fin 48 liability | 146,201 | — | ||||||
| Below-market tenant leases | 127,641 | 117,963 | ||||||
| Accrued interest | 122,406 | 102,870 | ||||||
| Hughes participation payable | 86,008 | 90,793 | ||||||
| Accrued real estate taxes | 84,327 | 71,816 | ||||||
| Deferred gains/income | 79,479 | 56,414 | ||||||
| Accrued payroll and other employee liabilities | 71,191 | 58,372 | ||||||
| Tenant and other deposits | 28,212 | 32,887 | ||||||
| Insurance reserve | 19,407 | 12,800 | ||||||
| Above-market ground leases | 15,489 | 15,961 | ||||||
| Funded defined contribution plan liabilities | 14,616 | 17,119 | ||||||
| Capital lease obligations | 14,390 | 14,967 | ||||||
| FIN 47 liability | 14,321 | 11,493 | ||||||
| Other | 101,790 | 57,763 | ||||||
| Total Accounts payable and accrued expenses | $ | 1,688,241 | $ | 1,050,192 | ||||
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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, 2007 are as follows:
| January 31, 2005 | 55,532,263 | |||
| Conversion of Preferred Units into Common Units | 729,890 | |||
| Redemptions for GGP common stock | (3,200,258 | ) | ||
| December 31, 2005 | 53,061,895 | |||
| Conversion of Preferred Units into Common Units | 1,163,333 | |||
| Redemptions for GGP common stock | (1,334,637 | ) | ||
| December 31, 2006 | 52,890,591 | |||
| Conversion of Preferred Units into Common Units | 76,625 | |||
| Redemptions for GGP common stock | (1,116,230 | ) | ||
| December 31, 2007 | 51,850,986 | |||
Under certain circumstances, the Common Units can be redeemed at the option of the holders for cash or, at our election, for shares of GGP 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 GGP common stock.
Also included in minority interests-common is minority interest in consolidated joint ventures of approximately $2.5 million as of December 31, 2007 and $6.4 million as of December 31, 2006.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Preferred
Components of minority interest — preferred as of December 31, 2007 and 2006 are as follows:
| Number | ||||||||||||||||||||||||
| of Units | ||||||||||||||||||||||||
| as of | Per Unit | |||||||||||||||||||||||
| Coupon | Issuing | December 31, | Liquidation | Carrying Amount | ||||||||||||||||||||
Security Type | Rate | Entity | 2007 | Preference | 2007 | 2006 | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
Perpetual Preferred Units | ||||||||||||||||||||||||
| Redeemable Preferred Units (“RPUs”) | 8.95 | % | LLC | — | $ | 250 | $ | — | $ | 60,000 | ||||||||||||||
| Cumulative Preferred Units (“CPUs”) | 8.25 | % | LLC | 20,000 | 250 | 5,000 | 5,000 | |||||||||||||||||
| 5,000 | 65,000 | |||||||||||||||||||||||
Convertible Preferred Units | ||||||||||||||||||||||||
Series B-JP Realty | 8.50 | % | GGPLP | 1,284,715 | 50 | 64,237 | 64,724 | |||||||||||||||||
Series C-Glendale Galleria | 7.00 | % | GGPLP | — | 50 | — | 974 | |||||||||||||||||
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 | |||||||||||||||||
| 116,006 | 117,467 | |||||||||||||||||||||||
| Other preferred stock of | ||||||||||||||||||||||||
| consolidated subsidiaries | N/A | various | 476 | 1,000 | 476 | 361 | ||||||||||||||||||
| Total Minority Interest-Preferred | $ | 121,482 | $ | 182,828 | ||||||||||||||||||||
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. The RPUs were redeemed in cash by the LLC in April 2007 for the liquidation preference amount.
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 D — Foothills Mall | 1.508 | |||
| Series E — Four Seasons Town Centre | 1.298 | |||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Note 13 | Accumulated Other Comprehensive Income |
Components of accumulated other comprehensive income as of December 31, 2007 and 2006 are as follows:
| 2007 | 2006 | |||||||
| (In thousands) | ||||||||
| Net unrealized gains (losses) on financial instruments | $ | (909 | ) | $ | 1,386 | |||
| Accrued pension adjustment | (462 | ) | (705 | ) | ||||
| Foreign currency translation | 37,369 | 9,238 | ||||||
| Unrealized losses on available-for-sale securities | (340 | ) | (337 | ) | ||||
| $ | 35,658 | $ | 9,582 | |||||
| Note 14 | Commitments and Contingencies |
In the normal course of business, from time to time, we are involved in legal proceedings 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. 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 and straight-line rents, was $12.0 million in 2007, $10.3 million in 2006 and $10.5 million in 2005.
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. In conjunction with the acquisition of The Grand Canal Shoppes in 2004, we entered into an agreement (the “Phase II Agreement”) to acquire the multi-level retail space that is part of The Palazzo in Las Vegas, Nevada (the “Phase II Acquisition”) which is connected to the existing Venetian and the Sands Expo and Convention Center facilities and The Grand Canal Shoppes. The project opened on January 18, 2008. The Phase II Agreement provides for the payment of a purchase price amount 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. We have agreed to an initial purchase price of approximately $300 million and additional payments will be made during the 48 months after closing if Phase II NOI increases. Closing of the acquisition, although subject to customary closing conditions, is now expected to be in the first quarter of 2008.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the contractual maturities of our long-term commitments. Both long-term debt and ground leases include the related purchase accounting fair value adjustments:
| Subsequent / | ||||||||||||||||||||||||||||
| 2008 | 2009 | 2010 | 2011 | 2012 | Other (1) | Total | ||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
| Long-term debt-principal | $ | 2,643,190 | $ | 3,219,734 | $ | 3,956,797 | $ | 7,111,582 | $ | 3,744,743 | $ | 3,606,093 | $ | 24,282,139 | ||||||||||||||
| Retained debt-principal | 2,446 | 2,606 | 119,694 | 776 | 37,740 | — | 163,262 | |||||||||||||||||||||
| Ground lease payments | 15,895 | 15,907 | 15,805 | 15,333 | 15,137 | 596,964 | 675,041 | |||||||||||||||||||||
| FIN 48 obligations, including interest | 20,174 | — | — | — | — | 126,027 | 146,201 | |||||||||||||||||||||
| Total | $ | 2,681,705 | $ | 3,238,247 | $ | 4,092,296 | $ | 7,127,691 | $ | 3,797,620 | $ | 4,329,084 | $ | 25,266,643 | ||||||||||||||
| (1) | The remaining FIN 48 liability for which reasonable estimates about the timing of payments cannot be made is disclosed within the Subsequent/Other column. |
Contingent Stock Agreement
In conjunction with the TRC Merger, we assumed TRC’s obligations under a Contingent Stock Agreement (“CSA”). TRC entered into the CSA in 1996 when it acquired The Hughes Corporation (“Hughes”). This acquisition included various assets, including Summerlin (the “CSA Assets”), a development in our Master Planned Communities segment. We agreed that the TRC Merger would not have a prejudicial effect on the former Hughes owners or their successors (the “Beneficiaries”) with respect to their receipt of securities pursuant to the CSA. We further agreed to indemnify and hold harmless the Beneficiaries against losses arising out of any breach by us of these covenants.
Under the CSA, we are required to issue shares of our common stock semi-annually (February and August) to the Beneficiaries. The number of shares to be issued is based on cash flows from the developmentand/or sale of the CSA Assets and our stock price. We account for the Beneficiaries’ share of earnings from the CSA Assets as an operating expense. We delivered 698,601 shares of our common stock (including 146,969 treasury shares) to the Beneficiaries in 2007 and 1,815,019 (including 1,727,524 treasury shares) in 2006.
Under the CSA, we are also required to make a final stock distribution to the Beneficiaries in 2010, following a final valuation at the end of 2009. The amount of this distribution will be based on the appraised values of the CSA Assets at such time and is expected to be significant. We will account for this distribution as additional investments in the related assets (that is, contingent consideration).
Oakwood Center and Riverwalk Marketplace Damages
In September 2005, two of our operating retail properties, Oakwood Center, located in Gretna, Louisiana, and Riverwalk Marketplace, which is located near the convention center in downtown New Orleans, incurred hurricaneand/or vandalism damage. We have comprehensive insurance coverage for both property damage and business interruption and, therefore, recorded insurance recovery receivables for both of such coverages. However, in 2006, because of actual and potential disputes with our insurance carriers, we commenced litigation to preserve our rights regarding certain claims. Both properties have now reopened.
The net book value of the property damage at these properties had been estimated to be approximately $36 million. The Oakwood component of such estimate continues to be subject to review and revision as discussed below. During 2007, we reached a final settlement with our insurance carrier with respect to Riverwalk Marketplace in the
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
cumulative amount of approximately $17.5 million. Also during 2007, in connection with Oakwood Center, we reached final settlements with all of the insurance carriers for our first two layers of insurance coverage pursuant to which we have received a cumulative total to date of approximately $50 million. All of such insurance recovery proceeds from such carriers have been applied against the estimated property damage with the remainder recorded as recovery of operating costs and repairs, minimum rents and provision for doubtful accounts. As of December 31, 2007, although all recorded insurance recovery receivables have been collected, the litigation with respect to Oakwood Center remains pending and we continue to have discussions with our remaining insurance carriers at Oakwood Center regarding our unresolved and disputed claims with respect to deductibles, exclusions, additional business interruption coverage and the scope and cost of repair, cleaning, and replacement required at the property. While we believe that our claims are valid, there can be no assurance that any additional amounts will be collected.
| Note 15 | Recently Issued Accounting Pronouncements |
In August 2007, the FASB proposed FASB Staff Position No. APB14-a, “Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (including Partial Cash Settlements)”(FSP 14-a).FSP 14-a would require companies to separately account for the liability and equity components of the debt instruments in a manner that will reflect the nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. If the final FSP is issued, it would be retrospectively applied and effective for financial statements issued for fiscal years beginning after December 15, 2007. We are evaluating the impact ofFSP 14-a on our financial statements.
In June 2007, the FASB ratified EITF IssueNo. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards”(EITF 06-11).EITF 06-11 requires companies to recognize the income tax benefit realized from dividends or dividend equivalents that are charged to retained earnings and paid to employees for nonvested equity-classified employee share-based payment awards as an increase to additional paid-in capital.EITF 06-11 is effective for fiscal years beginning after December 15, 2007. We are evaluating the impact ofEITF 06-11 on our financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”) which provides companies with an option to report selected financial assets and liabilities at fair value. The standard’s objective is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. With certain limitations, early adoption is permitted. Although SFAS 159 is effective for the year ending December 31, 2008, as permitted, management has elected not to adopt SFAS 159 for its existing financial assets and liabilities on January 1, 2008.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”) which provides enhanced guidance for using fair value to measure assets and liabilities. SFAS 157 also requires expanded disclosure about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. However, on December 14, 2007, the FASB issued proposed Financial Staff PositionNo. SFAS 157-b (FSP 157-b) which would delay the effective date of SFAS 157 for all non financial assets and non financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. FSP 157-b partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008 for those items within its scope. We will adopt SFAS 157 except as it applies to those non financial assets and non financial liabilities as noted in FSP 157-b. In February 2008, the FASB issued two Staff Positions on SFAS 157: (1) FASB Staff PositionNo. FAS 157-1
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(FAS 157-1), “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement Under Statement 13,” and (2) FASB Staff PositionNo. FAS 157-2(FAS 157-2), “Effective Date of FASB Statement No. 157.”FAS 157-1 excludes FASB Statement No. 13,Accounting for Leases, as well as other accounting pronouncements that address fair value measurements on lease classification or measurement under Statement 13, from SFAS 157’s scope.FAS 157-2 partially defers Statement 157’s effective date. The partial adoption of SFAS 157 is not expected to have a material impact on our 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 SFAS 150 relating to measurement and classification provisions 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. Though we have certain limited life ventures that appear to meet the criteria for liability recognition, we do not believe that the adoption of the currently postponed provisions of SFAS 150, if required, will have a material impact on our financial statements.
In December 2007, the FASB issued SFAS No. 141 (R)Business Combinationsand SFAS No. 160Non-controlling Interests in Consolidated Financial Statements (“SFAS 141 (R)” and “SFAS 160”, respectively). SFAS 141 (R) will change how business acquisitions are accounted for and will impact the financial statements both on the acquisition date and in subsequent periods. SFAS 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. SFAS 141 (R) and SFAS 160 are effective for periods beginning on or after December 15, 2008. Early adoption is not permitted. We are currently evaluating the impact of these new statements on our financial statements.
| 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 retail and other rental property, primarily shopping centers |
| • | Master Planned Communities —includes the development and sale of land, primarily in large-scale, long-term community development projects in and around Columbia, Maryland; Summerlin, Nevada; and Houston, Texas |
The operating measure used to assess operating results for the business segments is Real Estate Property Net Operating Income (“NOI”) which represents the operating revenues of the properties less property operating expenses, exclusive of depreciation and amortization. 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 report 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 Real Estate Affiliates,” in our Consolidated Statements of Income and Comprehensive Income. This difference affects only the reported revenues and operating expenses of the segments and has no effect on our reported net earnings. In addition, other revenues include the NOI of discontinued operations and is reduced by the NOI attributable to our minority interest partners in consolidated joint ventures.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The total expenditures for additions to long-lived assets for the Master Planned Communities segment was $243.3 million for the year ended December 31, 2007, $200.4 million for the year ended December 31, 2006 and $170.0 million for the year ended December 31, 2005. Similarly, expenditures for long-lived assets for the Retail and Other segment was $1.50 billion for the year ended December 31, 2007, $699.4 million for the year ended December 31, 2006 and $498.0 million for the year ended December 31, 2005. Such amounts for the Master Planned Communities segment and the Retail and Other segment are included in the amounts listed as Land/Residential development and acquisitions expenditures and Acquisition/development of real estate and property additions/improvements, respectively, in the Consolidated Statements of Cash Flows.
The total amount of goodwill, as presented on the Consolidated Balance Sheets, is included in our Retail and Other segment. See Note 7 for more detail regarding the change in the value of goodwill within this segment.
Segment operating results are as follows:
| Year Ended December 31, 2007 | ||||||||||||
| Consolidated | Unconsolidated | Segment | ||||||||||
| Properties | Properties | Basis | ||||||||||
| (In thousands) | ||||||||||||
Retail and Other | ||||||||||||
| Property revenues: | ||||||||||||
| Minimum rents | $ | 1,933,674 | $ | 406,241 | $ | 2,339,915 | ||||||
| Tenant recoveries | 859,801 | 173,486 | 1,033,287 | |||||||||
| Overage rents | 89,016 | 12,213 | 101,229 | |||||||||
| Other, including minority interest | 115,910 | 82,884 | 198,794 | |||||||||
| Total property revenues | 2,998,401 | 674,824 | 3,673,225 | |||||||||
| Property operating expenses: | ||||||||||||
| Real estate taxes | 246,484 | 50,478 | 296,962 | |||||||||
| Repairs and maintenance | 216,536 | 40,559 | 257,095 | |||||||||
| Marketing | 54,664 | 12,233 | 66,897 | |||||||||
| Other property operating costs | 421,228 | 150,041 | 571,269 | |||||||||
| Provision for doubtful accounts | 5,426 | 1,978 | 7,404 | |||||||||
| Total property operating expenses | 944,338 | 255,289 | 1,199,627 | |||||||||
| Retail and other net operating income | 2,054,063 | 419,535 | 2,473,598 | |||||||||
Master Planned Communities | ||||||||||||
| Land sales | 145,649 | 85,017 | 230,666 | |||||||||
| Land sales operations | (116,708 | ) | (57,813 | ) | (174,521 | ) | ||||||
| Master Planned Communities net operating income before impairment charge | 28,941 | 27,204 | 56,145 | |||||||||
| Columbia and Fairwood Communities impairment charge | (127,600 | ) | — | (127,600 | ) | |||||||
| Master Planned Communities net operating income (loss) | (98,659 | ) | 27,204 | (71,455 | ) | |||||||
| Real estate property net operating income | $ | 1,955,404 | $ | 446,739 | $ | 2,402,143 | ||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| Year Ended December 31, 2006 | ||||||||||||
| Consolidated | Unconsolidated | Segment | ||||||||||
| Properties | Properties | Basis | ||||||||||
| (In thousands) | ||||||||||||
Retail and Other | ||||||||||||
| Property revenues: | ||||||||||||
| Minimum rents | $ | 1,753,508 | $ | 428,337 | $ | 2,181,845 | ||||||
| Tenant recoveries | 773,034 | 187,782 | 960,816 | |||||||||
| Overage rents | 75,945 | 15,966 | 91,911 | |||||||||
| Other, including minority interest | 99,779 | 88,552 | 188,331 | |||||||||
| Total property revenues | 2,702,266 | 720,637 | 3,422,903 | |||||||||
| Property operating expenses: | ||||||||||||
| Real estate taxes | 218,549 | 58,832 | 277,381 | |||||||||
| Repairs and maintenance | 199,078 | 43,768 | 242,846 | |||||||||
| Marketing | 48,626 | 13,184 | 61,810 | |||||||||
| Other property operating costs | 373,020 | 154,010 | 527,030 | |||||||||
| Provision for doubtful accounts | 22,078 | 793 | 22,871 | |||||||||
| Total property operating expenses | 861,351 | 270,587 | 1,131,938 | |||||||||
| Retail and other net operating income | 1,840,915 | 450,050 | 2,290,965 | |||||||||
Master Planned Communities | ||||||||||||
| Land sales | 423,183 | 85,561 | 508,744 | |||||||||
| Land sales operations | (316,453 | ) | (62,304 | ) | (378,757 | ) | ||||||
| Master Planned Communities net operating income | 106,730 | 23,257 | 129,987 | |||||||||
| Real estate property net operating income | $ | 1,947,645 | $ | 473,307 | $ | 2,420,952 | ||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| 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 minority interest and discontinued operations | 107,674 | 64,803 | 172,477 | |||||||||
| Total property revenues | 2,602,525 | 653,821 | 3,256,346 | |||||||||
| Property operating expenses: | ||||||||||||
| Real estate taxes | 206,193 | 55,138 | 261,331 | |||||||||
| Repairs and maintenance | 195,292 | 43,411 | 238,703 | |||||||||
| Marketing | 63,522 | 14,705 | 78,227 | |||||||||
| Other property operating costs | 390,051 | 120,381 | 510,432 | |||||||||
| Provision for doubtful accounts | 13,868 | 4,857 | 18,725 | |||||||||
| Total property operating expenses | 868,926 | 238,492 | 1,107,418 | |||||||||
| Retail and other net operating income | 1,733,599 | 415,329 | 2,148,928 | |||||||||
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 | $ | 1,806,989 | $ | 437,592 | $ | 2,244,581 | ||||||
F-56
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following reconciles NOI to GAAP-basis operating income and income from continuing operations:
| Years Ended December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
| Real estate property net operating income | $ | 2,402,143 | $ | 2,420,952 | $ | 2,244,581 | ||||||
| Unconsolidated Properties NOI | (446,739 | ) | (473,307 | ) | (437,592 | ) | ||||||
| Consolidated Properties NOI | 1,955,404 | 1,947,645 | 1,806,989 | |||||||||
| Management and other fees | 106,584 | 115,798 | 91,022 | |||||||||
| Property management and other costs | (198,610 | ) | (181,033 | ) | (144,526 | ) | ||||||
| General and administrative | (37,005 | ) | (18,800 | ) | (15,539 | ) | ||||||
| Litigation provision | (89,225 | ) | — | — | ||||||||
| Depreciation and amortization | (670,454 | ) | (690,194 | ) | (672,914 | ) | ||||||
| Discontinued operations and minority interest in consolidated NOI | 11,167 | 15,036 | (6,048 | ) | ||||||||
| Operating income | 1,077,861 | 1,188,452 | 1,058,984 | |||||||||
| Interest income | 8,641 | 11,585 | 10,416 | |||||||||
| Interest expense | (1,174,097 | ) | (1,117,437 | ) | (1,031,241 | ) | ||||||
| Benefit from (provision for) income taxes | 294,160 | (98,984 | ) | (51,289 | ) | |||||||
| Income allocated to minority interest | (77,012 | ) | (37,761 | ) | (43,989 | ) | ||||||
| Equity in income of unconsolidated affiliates | 158,401 | 114,241 | 120,986 | |||||||||
| Income from continuing operations | $ | 287,954 | $ | 60,096 | $ | 63,867 | ||||||
The following reconciles segment revenues to GAAP-basis consolidated revenues:
| Years Ended December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
| Segment basis total property revenues | $ | 3,673,225 | $ | 3,422,903 | $ | 3,256,346 | ||||||
| Unconsolidated segment revenues | (674,824 | ) | (720,637 | ) | (653,821 | ) | ||||||
| Land sales | 145,649 | 423,183 | 385,205 | |||||||||
| Management and other fees | 106,584 | 115,798 | 91,022 | |||||||||
| Real estate net operating income attributable to minority interests, net of discontinued operations | 11,167 | 15,036 | (6,048 | ) | ||||||||
| GAAP-basis consolidated total revenues | $ | 3,261,801 | $ | 3,256,283 | $ | 3,072,704 | ||||||
F-57
Table of Contents
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The assets by segment and the reconciliation of total segment assets to the total assets in the consolidated financial statements at December 31, 2007 and 2006 are summarized as follows:
| 2007 | 2006 | |||||||
| (In thousands) | ||||||||
| Retail and Other | $ | 28,790,732 | $ | 26,421,063 | ||||
| Master Planned Communities | 2,176,218 | 2,167,971 | ||||||
| Total segment assets | 30,966,950 | 28,589,034 | ||||||
| Unconsolidated Properties | (4,143,866 | ) | (4,753,634 | ) | ||||
| Corporate and other | 1,991,235 | 1,406,045 | ||||||
| Total assets | $ | 28,814,319 | $ | 25,241,445 | ||||
| Note 17 | Pro Forma Financial Information |
The following pro forma financial information has been presented as a result of the Homart I acquisition on July 6, 2007 (Note 3). The pro forma financial information is based upon the historical financial information of GGP, excluding discontinued operations, and the historical financial information of the GGP/Homart I portfolio as if the acquisition had occurred on the first day of each respective period presented.
The following pro forma financial information does not purport to present what actual results would have been had the Homart I acquisition, in fact, occurred on January 1, 2007 and on January 1, 2006, or to project our results of operations for future periods.
| Year Ended December 31, 2007 | Year Ended December 31, 2006 | |||||||||||||||||||||||
| Pro Forma | Pro Forma | |||||||||||||||||||||||
| As Reported | Adjustments | Pro Forma | As Reported | Adjustments | Pro Forma | |||||||||||||||||||
| (In thousands except for per share amounts) | ||||||||||||||||||||||||
| Total revenues | $ | 3,261,801 | $ | 172,799 | $ | 3,434,600 | $ | 3,256,283 | $ | 343,849 | $ | 3,600,132 | ||||||||||||
| Operating income | 1,077,861 | 79,116 | 1,156,977 | 1,188,452 | 162,322 | 1,350,774 | ||||||||||||||||||
| Equity in income of Unconsolidated Real Estate Affiliates | 158,401 | (7,691 | ) | 150,710 | 114,241 | (23,979 | ) | 90,262 | ||||||||||||||||
| Income from continuing operations | 287,954 | 2,752 | 290,706 | 60,096 | 10,069 | 70,165 | ||||||||||||||||||
| Per Share Data: | ||||||||||||||||||||||||
| Weighted average shares — basic | 243,992 | 243,992 | 241,222 | 241,222 | ||||||||||||||||||||
| Weighted average shares — dilutive | 244,538 | 244,538 | 242,054 | 242,054 | ||||||||||||||||||||
| Income from continuing operations per share — basic | $ | 1.18 | $ | 1.19 | $ | 0.25 | $ | 0.29 | ||||||||||||||||
| Income from continuing operations per share — diluted | $ | 1.18 | $ | 1.19 | $ | 0.24 | $ | 0.28 | ||||||||||||||||
Pro Forma Adjustments
The pro forma adjustments present the results of the GGP/Homart I portfolio as if the portfolio was consolidated as of January 1st and eliminates our share of GGP/Homart I from the Equity in unconsolidated real estate affiliates.
F-58
Table of Contents
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The adjustments eliminate the management fee income, net of income taxes, earned by GGMI for various management and leasing services provided to GGP/Homart I prior to the Homart I acquisition. The adjustments also eliminate the management fee expense incurred by the GGP/Homart I portfolio. The amortization of the straight-line rent receivable is restarted as of January 1st.
In addition, the adjustments reverse the depreciation expense incurred prior to acquisition by the GGP/Homart I portfolio and reflect 12 months of depreciation expense on the adjusted basis of assets. The adjustments reflect 12 months of amortization expense for the intangible assets, including in-place leases and above and below market leases, recorded during the Homart I acquisition. The adjustments also present an estimate of 12 months of interest expense related to the $750 million bank loan (Note 3) that was used to fund primarily all of the initial cash purchase price. Finally, the Homart I acquisition has no impact on Income (loss) from discontinued operations for the years ended December 31, 2007 and 2006.
| Note 18 | Quarterly Financial Information (Unaudited) |
| 2007 | ||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||
| Quarter | Quarter | Quarter | Quarter | |||||||||||||
| (In thousands except for per share amounts) | ||||||||||||||||
| Total revenues | $ | 728,788 | $ | 740,082 | $ | 864,258 | $ | 928,668 | ||||||||
| Operating income | 242,174 | 277,146 | 327,543 | 230,993 | ||||||||||||
| Income (loss) from continuing operations | 230,194 | 8,392 | (9,359 | ) | 58,726 | |||||||||||
| Net income (loss) | 230,194 | 8,392 | (9,359 | ) | 58,726 | |||||||||||
| Earnings (loss) per share from continuing operations:* | ||||||||||||||||
| Basic | 0.94 | 0.03 | (0.04 | ) | 0.24 | |||||||||||
| Diluted | 0.94 | 0.03 | (0.04 | ) | 0.24 | |||||||||||
| Earnings (loss) per share:* | ||||||||||||||||
| Basic | 0.94 | 0.03 | (0.04 | ) | 0.24 | |||||||||||
| Diluted | 0.94 | 0.03 | (0.04 | ) | 0.24 | |||||||||||
| Distributions declared per share | 0.45 | 0.45 | 0.45 | 0.50 | ||||||||||||
| Weighted-average shares outstanding: | ||||||||||||||||
| Basic | 243,653 | 244,960 | 243,775 | 243,867 | ||||||||||||
| Diluted | 244,406 | 245,627 | 243,775 | 244,258 | ||||||||||||
F-59
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| 2006 | ||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||
| Quarter | Quarter | Quarter | Quarter | |||||||||||||
| (In thousands except for per share amounts) | ||||||||||||||||
| Total revenues | $ | 828,619 | $ | 709,809 | $ | 746,031 | $ | 971,823 | ||||||||
| Operating income | 307,747 | 245,449 | 265,355 | 369,901 | ||||||||||||
| Income (loss) from continuing operations | 23,014 | (25,813 | ) | (8,161 | ) | 71,056 | ||||||||||
| Loss from discontinued operations | — | — | — | (823 | ) | |||||||||||
| Net income (loss) | 23,014 | (25,813 | ) | (8,161 | ) | 70,233 | ||||||||||
| Earnings (loss) per share from continuing operations: | ||||||||||||||||
| Basic | 0.10 | (0.11 | ) | (0.03 | ) | 0.29 | ||||||||||
| Diluted | 0.10 | (0.11 | ) | (0.03 | ) | 0.29 | ||||||||||
| Earnings (loss) per share: | ||||||||||||||||
| Basic | 0.10 | (0.11 | ) | (0.03 | ) | 0.29 | ||||||||||
| Diluted* | 0.10 | (0.11 | ) | (0.03 | ) | 0.29 | ||||||||||
| Distributions declared per share | 0.41 | 0.41 | 0.41 | 0.45 | ||||||||||||
| Weighted-average shares outstanding: | ||||||||||||||||
| Basic | 240,621 | 241,330 | 241,150 | 241,779 | ||||||||||||
| Diluted | 241,588 | 241,330 | 241,150 | 242,739 | ||||||||||||
| * | 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. |
F-60
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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, 2007 and 2006, and for each of the three years in the period ended December 31, 2007, and the Company’s internal control over financial reporting as of December 31, 2007, and have issued our reports thereon dated February 26, 2008 (which report on the consolidated financial statements expresses an unqualified opinion and includes an explanatory paragraph regarding the adoption of Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes), such consolidated financial statements and reports are included elsewhere in thisForm 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 onpage F-1 of thisForm 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.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 26, 2008
F-61
Table of Contents
GENERAL GROWTH PROPERTIES, INC.
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2007
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2007
| Costs Capitalized | Gross Amounts at Which | Life Upon Which | ||||||||||||||||||||||||||||||||||||||||||||||||
| Initial Cost (b) | Subsequent to Acquisition (c) | Carried at Close of Period (d) | Latest Income | |||||||||||||||||||||||||||||||||||||||||||||||
| Buildings and | Buildings and | Buildings and | Accumulated | Date of | Date | Statement is | ||||||||||||||||||||||||||||||||||||||||||||
Name of Center | Location | Encumbrances (a) | Land | Improvements | Land | Improvements | Land | Improvements | Total | Depreciation (e) | Construction | Acquired | Computed | |||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Retail and Other: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Ala Moana Center | Honolulu, HI | $ | 1,500,000 | $ | 336,229 | $ | 473,771 | $ | — | $ | 125,435 | $ | 336,229 | $ | 599,206 | $ | 935,435 | $ | 148,481 | 1999 | (e) | |||||||||||||||||||||||||||||
| Alameda Plaza | Pocatello, ID | — | 740 | 2,060 | — | 13 | 740 | 2,073 | 2,813 | 283 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Anaheim Crossing | Anaheim, CA | — | — | 1,986 | — | 29 | — | 2,015 | 2,015 | 274 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Animas Valley Mall | Farmington, NM | 24,746 | 6,464 | 35,902 | — | 8,168 | 6,464 | 44,070 | 50,534 | 6,283 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Apache Mall | Rochester, MN | 50,681 | 8,110 | 72,993 | — | 25,600 | 8,110 | 98,593 | 106,703 | 23,639 | 1998 | (e) | ||||||||||||||||||||||||||||||||||||||
| Arizona Center | Phoenix, AZ | 489 | 2,314 | 132,158 | — | (1,654 | ) | 2,314 | 130,504 | 132,818 | 18,023 | 2004 | (e) | |||||||||||||||||||||||||||||||||||||
| Augusta Mall | Augusta, GA | 175,000 | 787 | 162,272 | 1,217 | 52,082 | 2,004 | 214,354 | 216,358 | 18,980 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Austin Bluffs Plaza | Colorado Springs, CO | 2,383 | 1,080 | 3,007 | — | 225 | 1,080 | 3,232 | 4,312 | 440 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Bailey Hills Village | Eugene, OR | — | 290 | 806 | — | 36 | 290 | 842 | 1,132 | 114 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Baybrook Mall | Friendswood, TX | 150,868 | 13,300 | 117,163 | 6,853 | 27,555 | 20,153 | 144,718 | 164,871 | 30,523 | 1999 | (e) | ||||||||||||||||||||||||||||||||||||||
| Bayshore Mall | Eureka, CA | 31,720 | 3,005 | 27,399 | — | 36,835 | 3,005 | 64,234 | 67,239 | 30,440 | 1986-1987 | (e) | ||||||||||||||||||||||||||||||||||||||
| Bayside Marketplace | Miami, FL | 62,837 | — | 177,801 | — | 2,681 | — | 180,482 | 180,482 | 26,642 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Beachwood Place | Beachwood, OH | 244,746 | 18,500 | 319,684 | — | 33,273 | 18,500 | 352,957 | 371,457 | 30,835 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Bellis Fair | Bellingham, WA | 63,945 | 7,616 | 47,040 | (131 | ) | 14,759 | 7,485 | 61,799 | 69,284 | 29,260 | 1987-1988 | (e) | |||||||||||||||||||||||||||||||||||||
| Birchwood Mall | Port Huron, MI | 39,151 | 1,769 | 34,575 | 1,274 | 19,490 | 3,043 | 54,065 | 57,108 | 27,603 | 1989-1990 | (e) | ||||||||||||||||||||||||||||||||||||||
| Boise Plaza | Boise, ID | — | 374 | 1,042 | — | 112 | 374 | 1,154 | 1,528 | 152 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Boise Towne Plaza | Boise, ID | 11,219 | 3,988 | 11,101 | — | 146 | 3,988 | 11,247 | 15,235 | 1,545 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Boise Towne Square | Boise, ID | 74,464 | 23,449 | 131,001 | 1,019 | 29,122 | 24,468 | 160,123 | 184,591 | 21,703 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Burlington Town Center | Burlington, VT | 31,586 | 1,637 | 32,798 | 2,597 | 20,275 | 4,234 | 53,073 | 57,307 | 4,416 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Cache Valley Mall | Logan, UT | — | 3,875 | 22,047 | — | 9,011 | 3,875 | 31,058 | 34,933 | 4,228 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Cache Valley Marketplace | Logan, UT | — | 1,500 | 1,583 | 1,639 | 5,136 | 3,139 | 6,719 | 9,858 | 450 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Capital Mall | Jefferson City, MO | 20,710 | 4,200 | 14,201 | (287 | ) | 10,795 | 3,913 | 24,996 | 28,909 | 11,193 | 1993 | (e) | |||||||||||||||||||||||||||||||||||||
| Century Plaza | Birmingham, AL | — | 3,164 | 28,514 | — | 5,911 | 3,164 | 34,425 | 37,589 | 10,780 | 1997 | (e) | ||||||||||||||||||||||||||||||||||||||
| Chapel Hills Mall | Colorado Springs, CO | 118,203 | 4,300 | 34,017 | — | 71,251 | 4,300 | 105,268 | 109,568 | 34,441 | 1993 | (e) | ||||||||||||||||||||||||||||||||||||||
| Chico Mall | Chico, CA | 58,314 | 16,958 | 45,628 | — | 3,476 | 16,958 | 49,104 | 66,062 | 5,585 | 2003 | (e) | ||||||||||||||||||||||||||||||||||||||
| Coastland Center | Naples, FL | 99,060 | 11,450 | 103,050 | — | 49,605 | 11,450 | 152,655 | 164,105 | 29,932 | 1998 | (e) | ||||||||||||||||||||||||||||||||||||||
| Collin Creek | Plano, TX | 72,785 | 26,250 | 122,991 | — | (1,613 | ) | 26,250 | 121,378 | 147,628 | 11,594 | 2004 | (e) | |||||||||||||||||||||||||||||||||||||
| Colony Square Mall | Zanesville, OH | — | 1,000 | 24,500 | 597 | 24,927 | 1,597 | 49,427 | 51,024 | 24,166 | 1986 | (e) | ||||||||||||||||||||||||||||||||||||||
| Columbia Mall | Columbia, MO | 90,000 | 5,383 | 19,663 | — | 29,900 | 5,383 | 49,563 | 54,946 | 24,667 | 1984-1985 | (e) | ||||||||||||||||||||||||||||||||||||||
| Coral Ridge Mall | Coralville, IA | 100,658 | 3,364 | 64,218 | 49 | 21,961 | 3,413 | 86,179 | 89,592 | 26,916 | 1998-1999 | (e) | ||||||||||||||||||||||||||||||||||||||
| Coronado Center | Albuquerque, NM | 172,575 | 33,072 | 148,799 | — | 1,158 | 33,072 | 149,957 | 183,029 | 20,542 | 2003 | (e) | ||||||||||||||||||||||||||||||||||||||
| Cottonwood Mall | Salt Lake City, UT | — | 7,613 | 42,987 | — | (27,324 | ) | 7,613 | 15,663 | 23,276 | 2,012 | 2002 | (e) | |||||||||||||||||||||||||||||||||||||
| Cottonwood Square | Salt Lake City, UT | — | 1,558 | 4,339 | — | 218 | 1,558 | 4,557 | 6,115 | 612 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Country Hills Plaza | Ogden, UT | 13,759 | 3,620 | 9,080 | — | 887 | 3,620 | 9,967 | 13,587 | 1,304 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Crossroads Center | St. Cloud, MN | 86,433 | 10,813 | 72,203 | 2,393 | 40,050 | 13,206 | 112,253 | 125,459 | 19,347 | 2000 | (e) | ||||||||||||||||||||||||||||||||||||||
| Cumberland Mall | Atlanta, GA | 160,278 | 15,199 | 136,787 | 10,042 | 68,018 | 25,241 | 204,805 | 230,046 | 38,161 | 1998 | (e) | ||||||||||||||||||||||||||||||||||||||
| Division Crossing | Portland, OR | 5,492 | 1,773 | 4,935 | — | 421 | 1,773 | 5,356 | 7,129 | 726 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Eagle Ridge Mall | Lake Wales, FL | 48,555 | 7,620 | 49,561 | — | 18,555 | 7,620 | 68,116 | 75,736 | 23,818 | 1995-1996 | (e) | ||||||||||||||||||||||||||||||||||||||
| Eastridge Mall | Casper, WY | 40,069 | 6,171 | 34,384 | (79 | ) | 6,720 | 6,092 | 41,104 | 47,196 | 5,702 | 2002 | (e) | |||||||||||||||||||||||||||||||||||||
| Eastridge Mall | San Jose, CA | 170,000 | 36,724 | 178,018 | — | 15,100 | 36,724 | 193,118 | 229,842 | 17,477 | 2006 | (e) | ||||||||||||||||||||||||||||||||||||||
| Eden Prairie Center | Eden Prairie, MN | 81,908 | 465 | 19,024 | 28 | 122,215 | 493 | 141,239 | 141,732 | 37,576 | 1997 | (e) | ||||||||||||||||||||||||||||||||||||||
| Fallbrook Center | West Hills, CA | 85,000 | 6,117 | 10,077 | 10 | 101,730 | 6,127 | 111,807 | 117,934 | 45,329 | 1984 | (e) | ||||||||||||||||||||||||||||||||||||||
| Faneuil Hall Marketplace | Boston, MD | 95,928 | — | 122,098 | — | 689 | — | 122,787 | 122,787 | 15,586 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Fashion Place | Murray, UT | 147,510 | 21,604 | 206,484 | — | 7,800 | 21,604 | 214,284 | 235,888 | 20,329 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Fashion Show | Las Vegas, NV | 358,998 | 523,650 | 602,288 | — | 11,163 | 523,650 | 613,451 | 1,137,101 | 67,078 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Foothills Mall | Fort Collins, CO | 42,323 | 8,031 | 96,642 | 2,544 | 8,279 | 10,575 | 104,921 | 115,496 | 12,397 | 2003 | (e) | ||||||||||||||||||||||||||||||||||||||
| Fort Union | Midvale, UT | 2,867 | — | 3,842 | — | 24 | — | 3,866 | 3,866 | 539 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Four Seasons Town Centre | Greensboro, NC | 103,795 | 27,231 | 141,978 | — | 4,942 | 27,231 | 146,920 | 174,151 | 16,883 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Fox River Mall | Appleton, WI | 195,000 | 2,701 | 18,291 | 2,086 | 65,445 | 4,787 | 83,736 | 88,523 | 36,399 | 1983-1984 | (e) | ||||||||||||||||||||||||||||||||||||||
| Fremont Plaza | Las Vegas, NV | — | — | 3,956 | — | 320 | — | 4,276 | 4,276 | 559 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Gateway Crossing Shopping Center | Bountiful, UT | 15,649 | 4,104 | 11,422 | — | 996 | 4,104 | 12,418 | 16,522 | 1,737 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Gateway Mall | Springfield, OR | 40,588 | 8,728 | 34,707 | — | 38,249 | 8,728 | 72,956 | 81,684 | 31,297 | 1989-1990 | (e) | ||||||||||||||||||||||||||||||||||||||
| Gateway Overlook | Baltimore, MD | 55,000 | — | 31,679 | — | — | — | 31,679 | 31,679 | 285 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
F-62
Table of Contents
GENERAL GROWTH PROPERTIES, INC.
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
DECEMBER 31, 2007
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
DECEMBER 31, 2007
| Costs Capitalized | Gross Amounts at Which | Life Upon Which | ||||||||||||||||||||||||||||||||||||||||||||||||
| Initial Cost (b) | Subsequent to Acquisition (c) | Carried at Close of Period (d) | Latest Income | |||||||||||||||||||||||||||||||||||||||||||||||
| Buildings and | Buildings and | Buildings and | Accumulated | Date of | Date | Statement is | ||||||||||||||||||||||||||||||||||||||||||||
Name of Center | Location | Encumbrances (a) | Land | Improvements | Land | Improvements | Land | Improvements | Total | Depreciation(e) | Construction | Acquired | Computed | |||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Glenbrook Square | Fort Wayne, IN | 181,297 | 30,414 | 195,896 | 50 | 11,749 | 30,464 | 207,645 | 238,109 | 23,329 | 2003 | (e) | ||||||||||||||||||||||||||||||||||||||
| Governor’s Square | Tallahassee, FL | 63,172 | — | 121,482 | — | 4,794 | — | 126,276 | 126,276 | 14,999 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Grand Teton Mall | Idaho Falls, ID | 26,514 | 6,973 | 44,030 | — | 11,114 | 6,973 | 55,144 | 62,117 | 7,211 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Grand Teton Plaza | Idaho Falls, ID | — | 2,349 | 7,336 | — | 588 | 2,349 | 7,924 | 10,273 | 739 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Grand Traverse Mall | Traverse City, MI | 87,188 | 3,534 | 20,776 | — | 30,138 | 3,534 | 50,914 | 54,448 | 25,522 | 1990-1991 | (e) | ||||||||||||||||||||||||||||||||||||||
| Greenwood Mall | Bowling Green, KY | 45,569 | 3,200 | 40,202 | 187 | 35,916 | 3,387 | 76,118 | 79,505 | 29,966 | 1993 | (e) | ||||||||||||||||||||||||||||||||||||||
| Halsey Crossing | Gresham, OR | 2,688 | — | 4,363 | — | 114 | — | 4,477 | 4,477 | 627 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Harborplace | Baltimore, MD | 50,000 | — | 54,308 | — | 11,092 | — | 65,400 | 65,400 | 9,350 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Hulen Mall | Fort Worth, TX | 115,661 | 8,910 | 153,894 | — | 2,826 | 8,910 | 156,720 | 165,630 | 17,011 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Jordan Creek Town Center | West Des Moines, IA | 190,375 | 18,142 | 166,143 | — | 12,061 | 18,142 | 178,204 | 196,346 | 24,694 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Knollwood Mall | St. Louis Park, MN | 40,771 | — | 9,748 | 7,026 | 41,743 | 7,026 | 51,491 | 58,517 | 23,615 | 1978 | (e) | ||||||||||||||||||||||||||||||||||||||
| Lakeside Mall | Sterling Heights, MI | 185,116 | 35,860 | 369,639 | — | 4,887 | 35,860 | 374,526 | 410,386 | 37,247 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Lakeview Square | Battle Creek, MI | 42,094 | 3,579 | 32,210 | — | 19,291 | 3,579 | 51,501 | 55,080 | 16,024 | 1996 | (e) | ||||||||||||||||||||||||||||||||||||||
| Landmark Mall | Alexandria, VA | — | 28,396 | 67,235 | — | (150 | ) | 28,396 | 67,085 | 95,481 | 17,903 | 2003 | (e) | |||||||||||||||||||||||||||||||||||||
| Lansing Mall | Lansing, MI | 25,536 | 6,978 | 62,800 | 4,518 | 46,672 | 11,496 | 109,472 | 120,968 | 31,183 | 1996 | (e) | ||||||||||||||||||||||||||||||||||||||
| Lincolnshire Commons | Lincolnshire, IL | 28,000 | 10,784 | 9,441 | — | 18,646 | 10,784 | 28,087 | 38,871 | 1,514 | 2006 | (e) | ||||||||||||||||||||||||||||||||||||||
| Lockport Mall | Lockport, NY | — | 800 | 10,000 | — | 4,228 | 800 | 14,228 | 15,028 | 8,110 | 1986 | (e) | ||||||||||||||||||||||||||||||||||||||
| Lynnhaven Mall | Virginia Beach, VA | 242,284 | 33,698 | 229,433 | — | 4,574 | 33,698 | 234,007 | 267,705 | 28,975 | 2003 | (e) | ||||||||||||||||||||||||||||||||||||||
| Mall At Sierra Vista | Sierra Vista, AZ | — | 3,652 | 20,450 | — | 3,423 | 3,652 | 23,873 | 27,525 | 3,360 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Mall Of Louisiana | Baton Rouge, LA | 238,000 | 24,591 | 246,452 | — | 30,425 | 24,591 | 276,877 | 301,468 | 26,962 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Mall Of The Bluffs | Council Bluffs, IA | 39,151 | 1,860 | 24,016 | 35 | 24,942 | 1,895 | 48,958 | 50,853 | 25,228 | 1985-1986 | (e) | ||||||||||||||||||||||||||||||||||||||
| Mall St. Matthews | Louisville, KY | 148,207 | — | 176,583 | — | 7,974 | — | 184,557 | 184,557 | 21,640 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Mall St. Vincent | Shreveport, LA | 49,000 | 2,640 | 23,760 | — | 9,802 | 2,640 | 33,562 | 36,202 | 9,966 | 1998 | (e) | ||||||||||||||||||||||||||||||||||||||
| Market Place Shopping Center | Champaign, IL | 106,000 | 7,000 | 63,972 | — | 54,597 | 7,000 | 118,569 | 125,569 | 33,820 | 1997 | (e) | ||||||||||||||||||||||||||||||||||||||
| Mayfair Mall | Wauwatosa, WI | 181,314 | 14,707 | 224,847 | — | 35,713 | 14,707 | 260,560 | 275,267 | 57,034 | 2003 | (e) | ||||||||||||||||||||||||||||||||||||||
| Meadows Mall | Las Vegas, NV | 105,193 | 24,634 | 104,088 | (3,259 | ) | 17,589 | 21,375 | 121,677 | 143,052 | 27,012 | 2003 | (e) | |||||||||||||||||||||||||||||||||||||
| Metro Plaza | Baltimore, MD | — | 1,050 | 10,340 | 271 | 2,043 | 1,321 | 12,383 | 13,704 | 2,088 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Mondawmin Mall | Baltimore, MD | — | 10,800 | 47,531 | — | 1,265 | 10,800 | 48,796 | 59,596 | 8,497 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| North Plains Mall | Clovis, NM | — | 2,722 | 15,048 | — | 3,404 | 2,722 | 18,452 | 21,174 | 2,877 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| North Star Mall | San Antonio, TX | 238,619 | 29,230 | 467,961 | 3,791 | 34,678 | 33,021 | 502,639 | 535,660 | 46,222 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| North Temple Shops | Salt Lake City, UT | — | 168 | 468 | — | 6 | 168 | 474 | 642 | 65 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| North Town Mall | Spokane, WA | 74,443 | 22,407 | 125,033 | — | 6,331 | 22,407 | 131,364 | 153,771 | 19,155 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Northgate Mall | Chattanooga, TN | 45,812 | 2,525 | 43,944 | — | 8,371 | 2,525 | 52,315 | 54,840 | 13,108 | 2003 | (e) | ||||||||||||||||||||||||||||||||||||||
| Northridge Fashion Center | Northridge, CA | 129,315 | 16,618 | 149,563 | 248 | 38,187 | 16,866 | 187,750 | 204,616 | 47,535 | 1998 | (e) | ||||||||||||||||||||||||||||||||||||||
| Oak View Mall | Omaha, NE | 116,974 | 12,056 | 113,042 | — | 5,823 | 12,056 | 118,865 | 130,921 | 23,273 | 2003 | (e) | ||||||||||||||||||||||||||||||||||||||
| Oakwood Center | Gretna, LA | 95,000 | 2,830 | 137,574 | 1,532 | 17,488 | 4,362 | 155,062 | 159,424 | 18,393 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Oakwood Mall | Eau Claire, WI | 52,201 | 3,267 | 18,281 | — | 28,505 | 3,267 | 46,786 | 50,053 | 25,557 | 1985-1986 | (e) | ||||||||||||||||||||||||||||||||||||||
| Oglethorpe Mall | Savannah, GA | 144,628 | 16,036 | 92,978 | — | 7,971 | 16,036 | 100,949 | 116,985 | 23,868 | 2003 | (e) | ||||||||||||||||||||||||||||||||||||||
| Orem Plaza Center Street | Orem, UT | 2,562 | 1,069 | 2,974 | — | 2,383 | 1,069 | 5,357 | 6,426 | 483 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Orem Plaza State Street | Orem, UT | 1,586 | 592 | 1,649 | — | 157 | 592 | 1,806 | 2,398 | 233 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Oviedo Marketplace | Orlando, FL | 52,976 | 24,017 | 23,958 | (2,045 | ) | 762 | 21,972 | 24,720 | 46,692 | 8,988 | 2004 | (e) | |||||||||||||||||||||||||||||||||||||
| Owings Mills Mall | Owing Mills, MD | 101,951 | 27,534 | 173,005 | (6,208 | ) | 3,895 | 21,326 | 176,900 | 198,226 | 21,723 | 2004 | (e) | |||||||||||||||||||||||||||||||||||||
| Oxmoor Center | Louisville, KY | 62,287 | — | 131,434 | — | 6,261 | — | 137,695 | 137,695 | 11,332 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Paramus Park | Paramus, NJ | 106,461 | 47,660 | 182,124 | — | 6,466 | 47,660 | 188,590 | 236,250 | 19,230 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Park City Center | Lancaster, PA | 152,935 | 8,465 | 177,191 | (276 | ) | 35,644 | 8,189 | 212,835 | 221,024 | 43,860 | 2003 | (e) | |||||||||||||||||||||||||||||||||||||
| Park Place | Tucson, AZ | 180,593 | 4,996 | 44,993 | (280 | ) | 113,579 | 4,716 | 158,572 | 163,288 | 39,210 | 1996 | (e) | |||||||||||||||||||||||||||||||||||||
| Peachtree Mall | Columbus, GA | 91,593 | 22,052 | 67,679 | — | 5,641 | 22,052 | 73,320 | 95,372 | 10,891 | 2003 | (e) | ||||||||||||||||||||||||||||||||||||||
| Pecanland Mall | Monroe, LA | 60,156 | 10,101 | 68,329 | 297 | 14,145 | 10,398 | 82,474 | 92,872 | 12,832 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Piedmont Mall | Danville, VA | 34,492 | 2,000 | 38,000 | — | 10,461 | 2,000 | 48,461 | 50,461 | 16,177 | 1995 | (e) | ||||||||||||||||||||||||||||||||||||||
| Pierre Bossier Mall | Bossier City, LA | 36,335 | 4,367 | 35,353 | — | 10,674 | 4,367 | 46,027 | 50,394 | 12,210 | 1998 | (e) | ||||||||||||||||||||||||||||||||||||||
| Pine Ridge Mall | Pocatello, ID | 27,015 | 4,905 | 27,349 | — | 6,548 | 4,905 | 33,897 | 38,802 | 5,047 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Pioneer Place | Portland, OR | 169,552 | 10,805 | 209,965 | — | 967 | 10,805 | 210,932 | 221,737 | 21,505 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Plaza 800 | Sparks, NV | — | — | 5,430 | — | 31 | — | 5,461 | 5,461 | 680 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Plaza 9400 | Sandy, UT | — | — | 9,114 | — | 192 | — | 9,306 | 9,306 | 1,290 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Prince Kuhio Plaza | Hilo, HI | 38,957 | 9 | 42,710 | — | 1,959 | 9 | 44,669 | 44,678 | 10,149 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
F-63
Table of Contents
GENERAL GROWTH PROPERTIES, INC.
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
DECEMBER 31, 2007
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
DECEMBER 31, 2007
| Costs Capitalized | Gross Amounts at Which | Life Upon Which | ||||||||||||||||||||||||||||||||||||||||||||||||
| Initial Cost (b) | Subsequent to Acquisition (c) | Carried at Close of Period (d) | Latest Income | |||||||||||||||||||||||||||||||||||||||||||||||
| Buildings and | Buildings and | Buildings and | Accumulated | Date of | Date | Statement is | ||||||||||||||||||||||||||||||||||||||||||||
Name of Center | Location | Encumbrances (a) | Land | Improvements | Land | Improvements | Land | Improvements | Total | Depreciation(e) | Construction | Acquired | Computed | |||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Providence Place | Providence, RI | 422,801 | — | 502,809 | — | 6,617 | — | 509,426 | 509,426 | 57,537 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Provo Towne Centre | Provo, UT | 49,020 | 13,486 | 74,587 | — | 1,669 | 13,486 | 76,256 | 89,742 | 11,648 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Red Cliffs Mall | St. George, UT | 25,677 | 1,880 | 26,561 | — | 3,489 | 1,880 | 30,050 | 31,930 | 4,569 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Red Cliffs Plaza | St. George, UT | — | — | 2,366 | — | 370 | — | 2,736 | 2,736 | 373 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Regency Square Mall | Jacksonville, FL | 96,855 | 16,498 | 148,478 | 1,386 | 21,044 | 17,884 | 169,522 | 187,406 | 40,313 | 1998 | (e) | ||||||||||||||||||||||||||||||||||||||
| Ridgedale Center | Minnetonka, MN | 182,390 | 10,710 | 272,607 | — | 15,787 | 10,710 | 288,394 | 299,104 | 27,114 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Rio West Mall | Gallup, NM | — | — | 19,500 | — | 7,391 | — | 26,891 | 26,891 | 13,738 | 1986 | (e) | ||||||||||||||||||||||||||||||||||||||
| River Falls Mall | Clarksville, IN | — | 3,178 | 54,610 | 3,703 | 85,781 | 6,881 | 140,391 | 147,272 | 40,120 | 1989-1990 | (e) | ||||||||||||||||||||||||||||||||||||||
| River Hills Mall | Mankato, MN | 80,000 | 3,714 | 29,014 | 993 | 43,690 | 4,707 | 72,704 | 77,411 | 27,068 | 1990-1991 | (e) | ||||||||||||||||||||||||||||||||||||||
| River Pointe Plaza | West Jordan, UT | 3,969 | 1,302 | 3,623 | — | 510 | 1,302 | 4,133 | 5,435 | 531 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Riverlands Shopping Center | LaPlace, LA | — | 500 | 4,500 | 601 | 5,667 | 1,101 | 10,167 | 11,268 | 1,863 | 1998 | (e) | ||||||||||||||||||||||||||||||||||||||
| Riverside Plaza | Provo, UT | 5,680 | 2,475 | 6,890 | — | 2,132 | 2,475 | 9,022 | 11,497 | 1,293 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Rivertown Crossings | Grandville, MI | 120,508 | 10,973 | 97,142 | (3,747 | ) | 50,076 | 7,226 | 147,218 | 154,444 | 39,915 | 1998-1999 | (e) | |||||||||||||||||||||||||||||||||||||
| Riverwalk Marketplace | New Orleans, LA | — | — | 94,513 | — | (4,618 | ) | — | 89,895 | 89,895 | 6,826 | 2004 | (e) | |||||||||||||||||||||||||||||||||||||
| Rogue Valley Mall | Medford, OR | 26,847 | 21,913 | 36,392 | (95 | ) | 5,715 | 21,818 | 42,107 | 63,925 | 6,147 | 2003 | (e) | |||||||||||||||||||||||||||||||||||||
| Saint Louis Galleria | St. Louis, MO | 242,913 | 36,774 | 184,645 | (545 | ) | 23,855 | 36,229 | 208,500 | 244,729 | 24,810 | 2003 | (e) | |||||||||||||||||||||||||||||||||||||
| Salem Center | Salem, OR | 25,630 | 6,966 | 38,976 | — | 2,038 | 6,966 | 41,014 | 47,980 | 6,038 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Sikes Senter | Wichita Falls, TX | 62,723 | 12,759 | 50,567 | — | 3,460 | 12,759 | 54,027 | 66,786 | 9,259 | 2003 | (e) | ||||||||||||||||||||||||||||||||||||||
| Silver Lake Mall | Coeur d’Alene, ID | — | 4,448 | 24,801 | — | 1,520 | 4,448 | 26,321 | 30,769 | 3,754 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Sooner Mall | Norman, OK | 60,000 | 2,700 | 24,300 | (119 | ) | 20,496 | 2,581 | 44,796 | 47,377 | 13,698 | 1996 | (e) | |||||||||||||||||||||||||||||||||||||
| South Street Seaport | New York, NY | — | — | 10,872 | — | 1,329 | — | 12,201 | 12,201 | 8,099 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Southlake Mall | Morrow, GA | 100,000 | 6,700 | 60,407 | — | 14,294 | 6,700 | 74,701 | 81,401 | 21,469 | 1997 | (e) | ||||||||||||||||||||||||||||||||||||||
| Southland Center | Taylor, MI | 111,310 | 7,690 | 99,376 | — | (769 | ) | 7,690 | 98,607 | 106,297 | 7,087 | 2004 | (e) | |||||||||||||||||||||||||||||||||||||
| Southland Mall | Hayward, CA | 83,662 | 13,921 | 75,126 | 200 | 16,745 | 14,121 | 91,871 | 105,992 | 12,318 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Southshore Mall | Aberdeen, WA | — | 650 | 15,350 | — | 5,699 | 650 | 21,049 | 21,699 | 11,868 | 1986 | (e) | ||||||||||||||||||||||||||||||||||||||
| Southwest Plaza | Littleton, CO | 74,541 | 9,000 | 103,984 | 542 | 40,326 | 9,542 | 144,310 | 153,852 | 33,185 | 1998 | (e) | ||||||||||||||||||||||||||||||||||||||
| Spokane Valley Mall | Spokane, WA | 38,056 | 11,455 | 67,046 | — | 1,425 | 11,455 | 68,471 | 79,926 | 9,760 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Spokane Valley Plaza | Spokane, WA | — | 3,558 | 10,150 | — | 79 | 3,558 | 10,229 | 13,787 | 1,392 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Spring Hill Mall | West Dundee, IL | 79,717 | 12,400 | 111,644 | — | 20,019 | 12,400 | 131,663 | 144,063 | 32,038 | 1998 | (e) | ||||||||||||||||||||||||||||||||||||||
| Staten Island Mall | Staten Island, NY | 290,708 | 222,710 | 339,102 | — | 8,708 | 222,710 | 347,810 | 570,520 | 37,960 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Stonestown Galleria | San Francisco, CA | 273,000 | 67,000 | 246,272 | — | 8,481 | 67,000 | 254,753 | 321,753 | 22,513 | 1998 | (e) | ||||||||||||||||||||||||||||||||||||||
| The Boulevard Mall | Las Vegas, NV | 110,781 | 16,490 | 148,413 | (1,135 | ) | 14,181 | 15,355 | 162,594 | 177,949 | 39,005 | 1998 | (e) | |||||||||||||||||||||||||||||||||||||
| The Crossroads | Portage, MI | 40,741 | 6,800 | 61,200 | — | 23,280 | 6,800 | 84,480 | 91,280 | 18,632 | 1999 | (e) | ||||||||||||||||||||||||||||||||||||||
| The Gallery At Harborplace | Baltimore, MD | 102,978 | 17,912 | 174,410 | — | 2,417 | 17,912 | 176,827 | 194,739 | 15,079 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| The Grand Canal Shoppes | Las Vegas, NV | 403,708 | — | 766,232 | — | 14,768 | — | 781,000 | 781,000 | 74,223 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| The Maine Mall | South Portland, ME | 221,354 | 41,374 | 238,457 | (79 | ) | 9,875 | 41,295 | 248,332 | 289,627 | 26,291 | 2003 | (e) | |||||||||||||||||||||||||||||||||||||
| The Mall In Columbia | Columbia, MD | 400,000 | 34,650 | 522,363 | — | 17,981 | 34,650 | 540,344 | 574,994 | 53,018 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| The Pines | Pine Bluff, AR | — | 1,489 | 17,627 | (242 | ) | 17,374 | 1,247 | 35,001 | 36,248 | 19,206 | 1985-1986 | (e) | |||||||||||||||||||||||||||||||||||||
| The Shops At Fallen Timbers | Maumee, OH | — | 3,677 | 77,825 | — | — | 3,677 | 77,825 | 81,502 | 633 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| The Shops At La Cantera | San Antonio, TX | 174,543 | 10,966 | 205,222 | — | 8,283 | 10,966 | 213,505 | 224,471 | 15,370 | 2005 | (e) | ||||||||||||||||||||||||||||||||||||||
| The Streets At SouthPoint | Durham, NC | 245,707 | 16,070 | 406,266 | — | 7,386 | 16,070 | 413,652 | 429,722 | 38,011 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| The Village Of Cross Keys | Baltimore, MD | 376 | 18,070 | 57,285 | — | 73 | 18,070 | 57,358 | 75,428 | 4,064 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Three Rivers Mall | Kelso, WA | 21,995 | 4,312 | 23,019 | — | 2,587 | 4,312 | 25,606 | 29,918 | 3,685 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Town East Mall | Mesquite, TX | 108,538 | 7,711 | 149,258 | — | 18,028 | 7,711 | 167,286 | 174,997 | 28,681 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Tucson Mall | Tucson, AZ | 120,596 | — | 181,424 | — | 33,008 | — | 214,432 | 214,432 | 32,907 | 2001 | (e) | ||||||||||||||||||||||||||||||||||||||
| Twin Falls Crossing | Twin Falls, ID | — | 275 | 769 | — | — | 275 | 769 | 1,044 | 105 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| University Crossing | Orem, UT | 11,684 | 3,420 | 9,526 | — | 1,061 | 3,420 | 10,587 | 14,007 | 1,393 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Valley Hills Mall | Hickory, NC | 58,326 | 3,444 | 31,025 | 2,212 | 44,559 | 5,656 | 75,584 | 81,240 | 20,678 | 1997 | (e) | ||||||||||||||||||||||||||||||||||||||
| Valley Plaza Mall | Bakersfield, CA | 98,233 | 12,685 | 114,166 | — | 24,781 | 12,685 | 138,947 | 151,632 | 31,901 | 1998 | (e) | ||||||||||||||||||||||||||||||||||||||
| Visalia Mall | Visalia, CA | 43,461 | 11,052 | 58,172 | (14 | ) | 6,337 | 11,038 | 64,509 | 75,547 | 9,408 | 2002 | (e) | |||||||||||||||||||||||||||||||||||||
| Ward Centers | Honolulu, HI | 217,289 | 164,007 | 89,321 | 1,337 | 78,467 | 165,344 | 167,788 | 333,132 | 21,748 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| West Valley Mall | Tracy, CA | 59,078 | 9,295 | 47,789 | 1,591 | 34,979 | 10,886 | 82,768 | 93,654 | 27,557 | 1995 | (e) | ||||||||||||||||||||||||||||||||||||||
| Westlake Center | Seattle, WA | 76,409 | 12,971 | 117,003 | 4,669 | (2,912 | ) | 17,640 | 114,091 | 131,731 | 12,812 | 2004 | (e) | |||||||||||||||||||||||||||||||||||||
| Westwood Mall | Jackson, MI | — | 2,658 | 23,924 | 913 | 5,908 | 3,571 | 29,832 | 33,403 | 9,995 | 1996 | (e) | ||||||||||||||||||||||||||||||||||||||
| White Marsh Mall | Baltimore, MD | 187,000 | 24,760 | 239,688 | — | 13,205 | 24,760 | 252,893 | 277,653 | 26,766 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
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Table of Contents
GENERAL GROWTH PROPERTIES, INC.
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
DECEMBER 31, 2007
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
DECEMBER 31, 2007
| �� | Costs Capitalized | Gross Amounts at Which | Life Upon Which | |||||||||||||||||||||||||||||||||||||||||||||||
| Initial Cost (b) | Subsequent to Acquisition (c) | Carried at Close of Period (d) | Latest Income | |||||||||||||||||||||||||||||||||||||||||||||||
| Buildings and | Buildings and | Buildings and | Accumulated | Date of | Date | Statement is | ||||||||||||||||||||||||||||||||||||||||||||
Name of Center | Location | Encumbrances (a) | Land | Improvements | Land | Improvements | Land | Improvements | Total | Depreciation(e) | Construction | Acquired | Computed | |||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| White Mountain Mall | Rock Springs, WY | — | 1,363 | 7,611 | — | 7,729 | 1,363 | 15,340 | 16,703 | 2,563 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Willowbrook | Wayne, NJ | 172,346 | 28,810 | 444,762 | 30 | 10,670 | 28,840 | 455,432 | 484,272 | 44,348 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Woodbridge Center | Woodbridge, NJ | 213,521 | 50,737 | 420,703 | — | 5,987 | 50,737 | 426,690 | 477,427 | 45,742 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Woodlands Village | Flagstaff, AZ | 7,257 | 2,689 | 7,484 | — | 278 | 2,689 | 7,762 | 10,451 | 1,034 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Yellowstone Square | Idaho Falls, ID | — | 1,057 | 2,943 | — | 147 | 1,057 | 3,090 | 4,147 | 424 | 2002 | (e) | ||||||||||||||||||||||||||||||||||||||
| Total GGPI | 14,706,793 | 2,812,976 | 16,674,773 | 49,939 | 2,742,244 | 2,862,915 | 19,417,017 | 22,279,932 | 3,168,384 | |||||||||||||||||||||||||||||||||||||||||
| Bay City Mall | Bay City, MI | 24,696 | 1,274 | 35,779 | — | — | 1,274 | 35,779 | 37,053 | 11,488 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Brass Mill Center | Waterbury, CT | 105,730 | 12,687 | 131,634 | — | — | 12,687 | 131,634 | 144,321 | 38,575 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Brass Mill Commons | Waterbury, CT | 22,613 | 5,011 | 20,368 | — | — | 5,011 | 20,368 | 25,379 | 7,364 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Chula Vista Center | Chula Vista, CA | 60,182 | 6,387 | 63,526 | — | — | 6,387 | 63,526 | 69,913 | 18,344 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Columbiana Center | Columbia, SC | 66,099 | 5,838 | 81,298 | — | — | 5,838 | 81,298 | 87,136 | 25,157 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Deerbrook Mall | Humble, TX | 76,791 | 7,821 | 96,045 | — | — | 7,821 | 96,045 | 103,866 | 27,255 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Lakeland Square | Lakeland, FL | 56,285 | 8,983 | 75,761 | — | — | 8,983 | 75,761 | 84,744 | 19,468 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Moreno Valley Mall | Moreno Valley, CA | 88,000 | 3,291 | 64,105 | — | — | 3,291 | 64,105 | 67,396 | 16,461 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Newgate Mall | Ogden, UT | 42,064 | 1,061 | 22,910 | — | — | 1,061 | 22,910 | 23,971 | 6,690 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Newpark Mall | Newark, CA | 69,601 | 6,560 | 100,918 | — | — | 6,560 | 100,918 | 107,478 | 37,869 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| North Point Mall | Alpharetta, GA | 219,924 | 8,954 | 184,208 | — | — | 8,954 | 184,208 | 193,162 | 53,702 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Pembroke Mall | Pembroke Pines, FL | 133,549 | 16,939 | 121,507 | — | — | 16,939 | 121,507 | 138,446 | 36,139 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Steeplegate Mall | Concord, NH | 79,781 | 2,926 | 59,030 | — | — | 2,926 | 59,030 | 61,956 | 20,047 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| The Parks at Arlington | Arlington, TX | 140,002 | 13,251 | 218,103 | — | — | 13,251 | 218,103 | 231,354 | 53,409 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| The Shoppes at Buckland | Manchester, CT | 168,770 | 18,852 | 177,139 | — | — | 18,852 | 177,139 | 195,991 | 35,611 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| The Woodlands Mall | The Woodlands, TX | 240,000 | 12,785 | 174,794 | — | — | 12,785 | 174,794 | 187,579 | 48,734 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Tysons Galleria | McLean, VA | 255,000 | 3,222 | 88,240 | — | — | 3,222 | 88,240 | 91,462 | 30,586 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Vista Ridge Mall | Lewisville, TX | 82,348 | 6,964 | 122,142 | — | — | 6,964 | 122,142 | 129,106 | 60,815 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Washington Park Mall | Bartlesville, OK | 12,378 | 1,401 | 16,242 | — | — | 1,401 | 16,242 | 17,643 | 5,689 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| West Oaks Mall | Ocoee, FL | 71,501 | 13,534 | 70,909 | — | — | 13,534 | 70,909 | 84,443 | 25,899 | 2007 | (e) | ||||||||||||||||||||||||||||||||||||||
| Purchase accounting related adjustments | Chicago, IL | (11,413 | ) | 173,174 | 783,523 | — | — | 173,174 | 783,523 | 956,697 | (272,650 | ) | ||||||||||||||||||||||||||||||||||||||
| Total Homart I(f) | 2,003,901 | 330,915 | 2,708,181 | — | — | 330,915 | 2,708,181 | 3,039,096 | 306,652 | |||||||||||||||||||||||||||||||||||||||||
| Other, including corporate and developments in progress | 7,463,997 | 265,618 | 491,035 | 133,542 | 648,857 | 399,160 | 1,139,892 | 1,539,052 | 129,979 | |||||||||||||||||||||||||||||||||||||||||
Total Retail and Other | 24,174,691 | 3,409,509 | 19,873,989 | 183,481 | 3,391,101 | 3,592,990 | 23,265,090 | 26,858,080 | 3,605,015 | |||||||||||||||||||||||||||||||||||||||||
Master Planned Communities | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Bridgeland | Houston, TX | 32,030 | 257,222 | — | 113,000 | 1,001 | 370,222 | 1,001 | 371,223 | 149 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Columbia | Howard County, MD | — | 321,118 | — | (169,165 | ) | 150 | 151,953 | 150 | 152,103 | 22 | 2004 | (e) | |||||||||||||||||||||||||||||||||||||
| Fairwood | Prince George’s County, MD | — | 136,434 | — | (75,732 | ) | 27 | 60,702 | 27 | 60,729 | 3 | 2004 | (e) | |||||||||||||||||||||||||||||||||||||
| Summerlin | Summerlin, NV | 64,301 | 990,179 | — | 64,214 | 79 | 1,054,393 | 79 | 1,054,472 | 10 | 2004 | (e) | ||||||||||||||||||||||||||||||||||||||
| Other | 11,117 | — | — | 2,102 | 93,047 | 2,102 | 93,047 | 95,149 | — | |||||||||||||||||||||||||||||||||||||||||
Total Master Planned Communities | 107,448 | 1,704,953 | — | (65,581 | ) | 94,304 | 1,639,372 | 94,304 | 1,733,676 | 184 | ||||||||||||||||||||||||||||||||||||||||
Total | $ | 24,282,139 | $ | 5,114,462 | $ | 19,873,989 | $ | 117,900 | $ | 3,485,405 | $ | 5,232,362 | $ | 23,359,394 | $ | 28,591,756 | $ | 3,605,199 | ||||||||||||||||||||||||||||||||
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO SCHEDULE III
| (a) | See description of mortgages, 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) | For retail and other properties, costs capitalized subsequent to acquisitions is net of cost of disposals or other property write-downs. For Master Planned Communities, costs capitalized subsequent to acquisitions are net of land sales. | |
| (d) | The aggregate cost of land, buildings and improvements for federal income tax purposes is approximately $17.5 billion. | |
| (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) | Initial cost for individual properties acquired in the Homart I acquisition represents historical cost at December 31, 2007. As individual property values have not been finalized, purchase accounting related adjustments are presented in total. |
Reconciliation of Real Estate
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
| Balance at beginning of year | $ | 24,661,601 | $ | 23,583,536 | $ | 23,308,792 | ||||||
| Acquisitions | 3,152,350 | 234,624 | — | |||||||||
| Change in Master Planned Communities land | (16,466 | ) | 4,775 | 5,363 | ||||||||
| Additions | 866,353 | 855,529 | 496,362 | |||||||||
| Hurricane property damage provisions- Oakwood Center and Riverwalk (Note 14) | — | — | (53,022 | ) | ||||||||
| Dispositions and write-offs | (72,081 | ) | (16,863 | ) | (173,959 | ) | ||||||
| Balance at end of year | $ | 28,591,756 | $ | 24,661,601 | $ | 23,583,536 | ||||||
Reconciliation of Accumulated Depreciation
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
| Balance at beginning of year | $ | 2,766,871 | $ | 2,104,956 | $ | 1,453,488 | ||||||
| Depreciation expense | 635,872 | 663,524 | 652,109 | |||||||||
| Acquisitions | 274,537 | (g) | — | — | ||||||||
| Dispositions and write-offs | (72,081 | ) | (1,609 | ) | (641 | ) | ||||||
| Balance at end of year | $ | 3,605,199 | $ | 2,766,871 | $ | 2,104,956 | ||||||
| (g) | Accumulated depreciation of our original 50% interest in the properties acquired in the Homart I acquisition at July 6, 2007 (date of acquisition). Such properties were unconsolidated prior to the date of acquisition. |
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EXHIBIT INDEX
| 3 | .1 | Restated Certificate of Incorporation of General Growth Properties, Inc. filed with the Delaware Secretary of State on February 10, 2006 (previously filed as Exhibit 3.1 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 3 | .2 | Bylaws of General Growth Properties, Inc., as amended (previously filed as Exhibit 3(ii) to the Current Report onForm 8-K dated November 8, 2006 which was filed with the SEC on November 14, 2006). | ||
| 3 | .3 | Certificate of Designations, Preferences and Rights of Increasing Rate Cumulative Preferred Stock, Series I filed with the Delaware Secretary of State on February 26, 2007 (previously filed as Exhibit 3.3 to the Annual Report onForm 10-K for the year ended December 31, 2006, which was previously filed with the SEC on March 1, 2007). | ||
| 4 | .1 | Form of Common Stock Certificate (previously filed as Exhibit 4.1 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 4 | .2 | Rights Agreement dated July 27, 1993, between General Growth Properties, Inc. and certain other parties named therein (previously filed as Exhibit 4.2 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 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 onForm 10-K for the year ended December 31, 2003). | ||
| 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 (previously filed as Exhibit 4.4 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 4 | .5 | Redemption Rights Agreement dated December 6, 1996, among the Operating Partnership, Forbes/Cohen Properties, Lakeview Square Associates, and Jackson Properties (previously filed as Exhibit 4.5 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 4 | .6 | Redemption Rights Agreement dated June 19, 1997, among the Operating Partnership, General Growth Properties, Inc., and CA Southlake Investors, Ltd. (previously filed as Exhibit 4.6 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 4 | .7 | Redemption Rights Agreement dated October 23, 1997, among General Growth Properties, Inc., the Operating Partnership and Peter Leibowits (previously filed as Exhibit 4.7 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 4 | .8 | Redemption Rights Agreement dated April 2, 1998, among the Operating Partnership, General Growth Properties, Inc. and Southwest Properties Venture (previously filed as Exhibit 4.8 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 4 | .9 | Redemption Rights Agreement dated July 21, 1998, among the Operating Partnership, General Growth Properties, Inc., Nashland Associates, and HRE Altamonte, Inc. (previously filed as Exhibit 4.9 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 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 (previously filed as Exhibit 4.10 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 4 | .11 | Redemption Rights Agreement (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 4.11 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). | ||
| 4 | .12 | Redemption Rights Agreement (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 4.12 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). |
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| 4 | .13 | Redemption Rights Agreement (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 onForm 10-K for the year ended December 31, 2002 which was filed with the SEC on March 14, 2003). | ||
| 4 | .14 | 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 onForm 10-K for the year ended December 31, 2003 which was filed with the SEC on March 12, 2004). | ||
| 4 | .15 | Redemption Rights Agreement dated March 5, 2004, by and among the Operating Partnership, General Growth Properties, Inc. and Koury Corporation (previously filed as Exhibit 4.15 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). | ||
| 4 | .16 | Registration Rights Agreement dated April 15, 1993, between General Growth Properties, Inc., Martin Bucksbaum, Matthew Bucksbaum and the other parties named therein (previously filed as Exhibit 4.16 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). | ||
| 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 onForm 10-K for the year ended December 31, 2003 which was filed with the SEC on March 12, 2004). | ||
| 4 | .18 | Registration Rights Agreement dated April 17, 2002, between General Growth Properties, Inc. and GSEP 2002 Realty Corp (previously filed as Exhibit 4.18 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). | ||
| 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) (previously filed as Exhibit 4.19 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 4 | .20 | First Amendment to Rights Agreement dated as of November 10, 1999, between General Growth Properties, Inc. and Norwest Bank Minnesota, N.A. (previously filed as Exhibit 4.20 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 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 onForm S-3(No. 333-82134) dated February 4, 2002 which was filed with the SEC on February 5, 2002). | ||
| 4 | .22 | Letter Agreement concerning Rights Agreement dated November 10, 1999, between the Operating Partnership and NYSCRF (previously filed as Exhibit 4.22 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 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 onForm 10-K for the year ended December 31, 2004 which was filed with the SEC on March 22, 2005). | ||
| 4 | .24 | The Rouse Company LP, TRC Co-Issuer, Inc. and LaSalle Bank National Association (Trustee) Indenture dated May 5, 2006 (previously filed as Exhibit 4.24 to the Annual Report onForm 10-K for the year ended December 31, 2006, which was filed with the SEC on March 1, 2007). | ||
| 4 | .25 | 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 onForm 8-K dated February 24, 2006 which was filed with the SEC on March 2, 2006). |
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| 4 | .26 | Indenture, dated as of April 16, 2007, between the Operating Partnership and LaSalle Bank National Association (previously filed as Exhibit 4.1 to the Current Report onForm 8-K dated April 16, 2007, which was filed with the SEC on April 19, 2007). | ||
| 10 | .1 | Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership dated April 1, 1998 (the “LP Agreement”) (previously filed as Exhibit 10.1 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 10 | .2 | First Amendment to the LP Agreement dated as of June 10, 1998 (previously filed as Exhibit 10(B) to the Annual Report onForm 10-K for the year ended December 31, 2002 which was filed with the SEC on March 14, 2003). | ||
| 10 | .3 | Second Amendment to the LP Agreement dated as of June 29, 1998 (previously filed as Exhibit 10(C) to the Annual Report onForm 10-K for the year ended December 31, 2002 which was filed with the SEC on March 14, 2003). | ||
| 10 | .4 | Third Amendment to the LP Agreement dated as of February 15, 2002 (previously filed as Exhibit 10.4 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). | ||
| 10 | .5 | Amendment to the LP Agreement dated as of April 24, 2002 (previously filed as Exhibit 10.5 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). | ||
| 10 | .6 | Fourth Amendment to the LP Agreement dated as of July 10, 2002 (previously filed as Exhibit 10.6 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). | ||
| 10 | .7 | Amendment to the LP Agreement dated as of November 27, 2002 (previously filed as Exhibit 10(G) to the Annual Report onForm 10-K for the year ended December 31, 2002 which was filed with the SEC on March 14, 2003). | ||
| 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 onForm 10-K for the year ended December 31, 2003 which was filed with the SEC on March 12, 2004). | ||
| 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 onForm 10-K for the year ended December 31, 2003 which was filed with the SEC on March 12, 2004). | ||
| 10 | .10 | Amendment to the LP Agreement dated March 5, 2004 (previously filed as Exhibit 10.1 to the Quarterly Report onForm 10-Q for the quarterly period ended March 31, 2004 which was filed with the SEC on May 7, 2004). | ||
| 10 | .11 | Amendment to the LP Agreement dated November 12, 2004 (previously filed as Exhibit 10.3 to the Current Report onForm 8-K/A dated November 12, 2004 which was filed with the SEC on November 18, 2004). | ||
| 10 | .12 | Amendment to the LP Agreement dated September 30, 2006 (previously filed as Exhibit 10.12 to the Annual Report onForm 10-K for the year ended December 31, 2006, which was filed with the SEC on March 1, 2007). | ||
| 10 | .13 | Twelfth Amendment to the LP Agreement dated December 31, 2006 (previously filed as Exhibit 10.13 to the Annual Report onForm 10-K for the year ended December 31, 2006, which was filed with the SEC on March 1, 2007). | ||
| 10 | .14 | Second Amended and Restated Operating Agreement of GGPLP L.L.C. dated April 17, 2002 (the “LLC Agreement”) (previously filed as Exhibit 10.14 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). | ||
| 10 | .15 | First Amendment to the LLC Agreement dated April 23, 2002 (previously filed as Exhibit 10.15 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). | ||
| 10 | .16 | Second Amendment to the LLC Agreement dated May 13, 2002 (previously filed as Exhibit 10.16 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). |
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| 10 | .17 | Third Amendment to the LLC Agreement dated October 30, 2002 (previously filed as Exhibit 10(Y) to the Annual Report onForm 10-K for the year ended December 31, 2002 which was filed with the SEC on March 14, 2003). | ||
| 10 | .18 | Fourth Amendment to the LLC Agreement dated April 7, 2003 (previously filed as Exhibit 10.1 to the Quarterly Report onForm 10-Q for the quarterly period ended March 31, 2003 which was filed with the SEC on May 9, 2003). | ||
| 10 | .19 | Fifth Amendment to the LLC Agreement dated April 11, 2003 (previously filed as Exhibit 10.2 to the Quarterly Report onForm 10-Q for the quarterly period ended March 31, 2003 which was filed with the SEC on May 9, 2003). | ||
| 10 | .20 | Sixth Amendment to the LLC Agreement dated November 12, 2004 (previously filed as Exhibit 10.2 to the Current Report onForm 8-K/A dated November 12, 2004 which was filed with the SEC on November 18, 2004). | ||
| 10 | .21 | Operating Agreement dated November 10, 1999, between the Operating Partnership, NYSCRF, and GGP/Homart II L.L.C. (previously filed as Exhibit 10.20 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 10 | .22 | Amendment to the Operating Agreement of GGP/Homart II L.L.C. dated November 22, 2002 (previously filed as Exhibit 10.21 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 10 | .23 | Letter Amendment to the Operating Agreement of GGP/Homart II L.L.C. dated January 31, 2003 (previously filed as Exhibit 10.22 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 10 | .24 | Second Amendment to the Operating Agreement of GGP/Homart II L.L.C. dated January 31, 2003 (previously filed as Exhibit 10.23 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 10 | .25 | Third Amendment to the Operating Agreement of GGP/Homart II L.L.C. dated February 8, 2008 (previously filed as Exhibit 10.25 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). | ||
| 10 | .26 | 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. (previously filed as Exhibit 10.24 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 10 | .27 | First Amendment to Amended and Restated Operating Agreement of GGP-TRS L.L.C. dated December 19, 2002 (previously filed as Exhibit 10.25 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 10 | .28 | Second Amendment to Amended and Restated Operating Agreement of GGP-TRS L.L.C. dated November 1, 2005 (previously filed as Exhibit 10.26 to the Annual Report onForm 10-K for the year ended December 31, 2005 which was filed with the SEC on March 31, 2006). | ||
| 10 | .29* | Summary of Non-Employee Director Compensation Program (previously filed as Exhibit 10.29 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). | ||
| 10 | .30 | 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 10.30 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). | ||
| 10 | .31 | 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 onForm S-3/A(No. 333-120373) which was filed with the SEC on December 23, 2004). | ||
| 10 | .32 | Indemnity Agreement dated as of February 2006 by the Company and The Rouse Company, LP. (previously filed as Exhibit 10.1 to the Quarterly Report onForm 10-Q for the quarterly period ended March 31, 2006 which was filed with the SEC on May 10, 2006). |
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Table of Contents
| 10 | .33* | General Growth Properties, Inc. 1998 Incentive Stock Plan, as amended (previously filed as Exhibit 10.1 to the Quarterly Report onForm 10-Q for the quarterly period ended June 30, 2005 which was filed with the SEC on August 8, 2005). | ||
| 10 | .34* | Amendment dated November 8, 2006 and effective January 1, 2007 to General Growth Properties, Inc. 1998 Incentive Stock Plan (previously filed as Exhibit 10.1 to the Quarterly Report onForm 10-Q for the quarterly period ended September 30, 2006 which was filed with the SEC on November 8, 2006). | ||
| 10 | .35* | Form of Option Agreement pursuant to 1998 Incentive Stock Plan (previously filed as Exhibit 10.47 to the Annual Report onForm 10-K for the year ended December 31, 2004 which was filed with the SEC on March 22, 2005). | ||
| 10 | .36* | General Growth Properties, Inc. 2003 Incentive Stock Plan, as amended (previously filed as Exhibit 10.1 to the Quarterly Report onForm 10-Q for the quarterly period ended June 30, 2006 which was filed with the SEC on August 9, 2006). | ||
| 10 | .37* | Amendment dated November 8, 2006 and effective January 1, 2007 to General Growth Properties, Inc. 2003 Incentive Stock Plan (previously filed as Exhibit 10.2 to the Quarterly Report onForm 10-Q for the quarterly period ended September 30, 2006 which was filed with the SEC on November 8, 2006). | ||
| 10 | .38* | Form of Option Agreement pursuant to 2003 Incentive Stock Plan (previously filed as Exhibit 10.48 to the Annual Report onForm 10-K for the year ended December 31, 2004 which was filed with the SEC on March 22, 2005). | ||
| 10 | .39* | Form of Employee Restricted Stock Agreement pursuant to the 2003 Incentive Stock Plan (previously filed as Exhibit 10.2 to the Quarterly Report onForm 10-Q for the quarterly period ended June 30, 2006 which was filed with the SEC on August 9, 2006). | ||
| 10 | .40* | Form of Non-Employee Director Restricted Stock Agreement pursuant to the 2003 Incentive Stock Plan (previously filed as Exhibit 10.3 to the Quarterly Report onForm 10-Q for the quarterly period ended June 30, 2006 which was filed with the SEC on August 9, 2006). | ||
| 21 | List of Subsidiaries (previously filed as Exhibit 21 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). | |||
| 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). | ||
| 99 | .1 | Financial Statements of TRCLP, a wholly owned subsidiary of GGPLP (previously filed as Exhibit 99.1 to the Annual Report onForm 10-K for the year ended December 31, 2007 which was filed with the SEC on February 27, 2008). |
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