Exhibit 99.1
CONSOLIDATED FINANCIAL STATEMENTS OF THE ROUSE COMPANY LP, A SUBSIDIARY
OF GENERAL GROWTH PROPERTIES, INC.
OF GENERAL GROWTH PROPERTIES, INC.
The following is unaudited consolidated financial information for our subsidiary, The Rouse Company LP (“TRCLP”), as of March 31, 2008 and December 31, 2007 and for the three months ended March 31, 2008 and 2007.
Basis of Presentation
The accompanying Consolidated Financial Statements include the accounts of TRCLP, its subsidiaries and joint ventures in which it has 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.
In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. The results for the interim period ended March 31, 2008 are not necessarily indicative of the results to be obtained for the full fiscal year.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. 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 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.
Critical Accounting Policies
Critical accounting policies are those that are both significant to the overall presentation of TRCLP’s financial condition and results of operations and require management to make difficult, complex or subjective judgments. Our critical accounting policies for the fiscal year ended December 31, 2007 have not changed during 2008.
MANAGEMENT’S DISCUSSION OF TRCLP OPERATIONS AND LIQUIDITY
Overview
Effective March 31, 2007, through a series of transactions, a private REIT owned by GGPLP was contributed to TRCLP and a TRS became a qualified REIT subsidiary of that private REIT (“the Private REIT/TRS Restructuring”). This Private REIT/TRS Restructuring resulted in the recognition of an approximate $300 million income tax benefit in the three months ended March 31, 2007 related to the properties now owned by that private REIT.
Revenues
Tenant rents (which includes minimum rents, tenant recoveries, and overage rents) increased in the first quarter of 2008 primarily due to increased gross rents from tenants at various properties and a $2.2 million increase in lease termination income as compared to the first quarter of 2007. These increases in revenue were more than offset by a $14.7 million decrease in land sales revenues primarily due to decreased sales volumes at our Summerlin development.
CONSOLIDATED FINANCIAL STATEMENTS OF THE ROUSE COMPANY LP, A SUBSIDIARY
OF GENERAL GROWTH PROPERTIES, INC.
OF GENERAL GROWTH PROPERTIES, INC.
Operating expenses
Property operating costs decreased primarily as a result of a $2.6 million decrease in the provision for doubtful accounts as compared to the first quarter of 2007. Real estate taxes, repairs and maintenance and other property operating expenses are generally recoverable from tenants and the increases in these expenses are generally consistent with the increases in tenant recovery revenues. Land sales operations expense decreased by $10.2 million related to the decreased land sales volumes discussed above.
Net income
Interest expense increased primarily as a result of higher year over year average outstanding debt balances. The (provision for) benefit from income taxes for the first quarter of 2007 was directly impacted by the TRS restructuring mentioned above.
Cash position at March 31, 2008
TRCLP’s cash and cash equivalents increased $0.4 million to $24.1 million as of March 31, 2008 as compared to December 31, 2007. The cash position of TRCLP is largely determined at any point in time by the relative short-term demands for cash by TRCLP and GGP, TRCLP’s parent. TRCLP expects to remain current with respect to its debt obligations and be able to access additional funds as required from GGP.
THE ROUSE COMPANY LP AND SUBSIDIARIES
A SUBSIDIARY OF GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
A SUBSIDIARY OF GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Assets | ||||||||
Investment in real estate: | ||||||||
Land | $ | 1,559,321 | $ | 1,556,115 | ||||
Buildings and equipment | 11,069,881 | 11,040,398 | ||||||
Less accumulated depreciation | (1,400,487 | ) | (1,318,032 | ) | ||||
Developments in progress | 342,063 | 291,643 | ||||||
Net property and equipment | 11,570,778 | 11,570,124 | ||||||
Investment in and loans to/from Unconsolidated Real Estate Affiliates | 1,397,080 | 1,377,634 | ||||||
Investment land and land held for development and sale | 1,659,878 | 1,639,372 | ||||||
Net investment in real estate | 14,627,736 | 14,587,130 | ||||||
Cash and cash equivalents | 24,060 | 23,679 | ||||||
Accounts and notes receivable, net | 151,885 | 155,950 | ||||||
Goodwill | 385,683 | 385,683 | ||||||
Deferred expenses, net | 107,164 | 106,028 | ||||||
Prepaid expenses and other assets | 617,090 | 622,645 | ||||||
Total assets | $ | 15,913,618 | $ | 15,881,115 | ||||
Liabilities and Partners’ Capital | ||||||||
Mortgages, notes and loans payable | $ | 9,701,405 | $ | 9,455,727 | ||||
Investment in and loans to/from Unconsolidated Real Estate Affiliates | 25,954 | 25,632 | ||||||
Deferred tax liabilities | 860,331 | 854,000 | ||||||
Accounts payable and accrued expenses | 621,615 | 623,098 | ||||||
Total liabilities | 11,209,305 | 10,958,457 | ||||||
Minority interests | 7,306 | 3,983 | ||||||
Commitments and contingencies | — | — | ||||||
Partners’ capital: | ||||||||
Partners’ capital | 8,939,342 | 8,934,378 | ||||||
Accumulated other comprehensive loss | (418 | ) | (419 | ) | ||||
Total partners’ capital, before receivable from General Growth Properties, Inc. | 8,938,924 | 8,933,959 | ||||||
Receivable from General Growth Properties, Inc. | (4,241,917 | ) | (4,015,284 | ) | ||||
Total partners’ capital | 4,697,007 | 4,918,675 | ||||||
Total liabilities and partners’ capital | $ | 15,913,618 | $ | 15,881,115 | ||||
THE ROUSE COMPANY LP AND SUBSIDIARIES
A SUBSIDIARY OF GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
A SUBSIDIARY OF GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended | ||||||||
March 31, | ||||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Revenues: | ||||||||
Minimum rents | $ | 218,389 | $ | 211,735 | ||||
Tenant recoveries | 98,820 | 99,211 | ||||||
Overage rents | 5,652 | 7,144 | ||||||
Land sales | 9,066 | 23,793 | ||||||
Other | 15,704 | 12,142 | ||||||
Total revenues | 347,631 | 354,025 | ||||||
Expenses: | ||||||||
Real estate taxes | 27,939 | 27,008 | ||||||
Repairs and maintenance | 26,486 | 25,703 | ||||||
Marketing | 4,509 | 5,038 | ||||||
Other property operating costs | 54,223 | 55,379 | ||||||
Land sales operations | 9,921 | 20,144 | ||||||
Property management and other costs | 17,056 | 16,106 | ||||||
Provision for doubtful accounts | 1,291 | 3,867 | ||||||
Depreciation and amortization | 86,325 | 98,750 | ||||||
Total expenses | 227,750 | 251,995 | ||||||
Operating income | 119,881 | 102,030 | ||||||
Interest income | 682 | 1,180 | ||||||
Interest expense | (124,114 | ) | (108,329 | ) | ||||
Income before income taxes, minority interest and equity in income of Unconsolidated Real Estate Affiliates | (3,551 | ) | (5,119 | ) | ||||
(Provision for) benefit from income taxes | (6,180 | ) | 290,704 | |||||
Minority interest | (402 | ) | (379 | ) | ||||
Equity in income of Unconsolidated Real Estate Affiliates | 15,097 | 10,047 | ||||||
Net income | $ | 4,964 | $ | 295,253 | ||||
Comprehensive income, net: | ||||||||
Net income | $ | 4,964 | $ | 295,253 | ||||
Other comprehensive income: | ||||||||
Unrealized losses on available-for-sale securities | (7 | ) | (13 | ) | ||||
Net unrealized gains/(losses) on financial instruments | 8 | (116 | ) | |||||
Comprehensive income, net | $ | 4,965 | $ | 295,124 | ||||
THE ROUSE COMPANY LP AND SUBSIDIARIES
A SUBSIDIARY OF GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
A SUBSIDIARY OF GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended | ||||||||
March 31, | ||||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 4,964 | $ | 295,253 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 86,325 | 98,750 | ||||||
Minority interest | 402 | 379 | ||||||
Equity in income of Unconsolidated Real Estate Affiliates | (15,097 | ) | (10,047 | ) | ||||
Distributions received from Unconsolidated Real Estate Affiliates | 3,242 | 8,004 | ||||||
Participation expense pursuant to Contingent Stock Agreement | 91 | 4,528 | ||||||
Land development and acquisition expenditures | (31,740 | ) | (41,351 | ) | ||||
Cost of land sales | 1,082 | 7,887 | ||||||
Provision for doubtful accounts | 1,291 | 3,867 | ||||||
Tax restructuring benefit | — | (297,645 | ) | |||||
Straight-line rent amortization | (4,939 | ) | (5,177 | ) | ||||
Amortization of intangibles other than in-place leases | 642 | (540 | ) | |||||
Amortization of debt market rate adjustment and other non-cash interest expense | 556 | (9,100 | ) | |||||
Net changes: | ||||||||
Accounts and notes receivable | 7,304 | 30 | ||||||
Other assets | (10,892 | ) | 2,056 | |||||
Accounts payable and accrued expenses and deferred tax liabilities | 14,570 | (2,791 | ) | |||||
Other, net | (3,790 | ) | 518 | |||||
Net cash provided by operating activities | 54,011 | 54,621 | ||||||
Cash Flows from Investing Activities: | ||||||||
Acquisition/development of real estate and property additions/improvements | (76,148 | ) | (82,927 | ) | ||||
Proceeds from sale of investment properties | 17,166 | — | ||||||
Distributions received from Unconsolidated Real Estate Affiliates in excess of income | 3,999 | 5,039 | ||||||
Increase in investments in Unconsolidated Real Estate Affiliates | (11,268 | ) | (1,407 | ) | ||||
Decrease in restricted cash | 4,798 | 1,294 | ||||||
Other, net | 1,491 | 2,211 | ||||||
Net cash used in investing activities | (59,962 | ) | (75,790 | ) | ||||
THE ROUSE COMPANY LP AND SUBSIDIARIES
A SUBSIDIARY OF GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
A SUBSIDIARY OF GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended | ||||||||
March 31, | ||||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from issuance of mortgages, notes and loans payable | 650,000 | — | ||||||
Principal payments on mortgages, notes and loans payable | (399,846 | ) | (31,959 | ) | ||||
Advances to General Growth Properties, Inc. | (242,165 | ) | (76,902 | ) | ||||
Capital contribution from GGPLP | — | 100,000 | ||||||
Deferred financing costs | (4,578 | ) | — | |||||
Other, net | 2,921 | (1,078 | ) | |||||
Net cash provided by (used in) financing activities | 6,332 | (9,939 | ) | |||||
Net change in cash and cash equivalents | 381 | (31,108 | ) | |||||
Cash and cash equivalents at beginning of period | 23,679 | 65,416 | ||||||
Cash and cash equivalents at end of period | $ | 24,060 | $ | 34,308 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Interest paid | $ | 118,423 | $ | 116,186 | ||||
Interest capitalized | 9,248 | 11,194 | ||||||
Income taxes paid | 19,988 | 20,911 | ||||||
Non-Cash Transaction: | ||||||||
Change in accrued capital expenditures included in accounts payable and accrued expenses | 18,990 | (28,229 | ) |