SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2002
OR
[ ] 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.
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(Exact name of registrant as specified in its charter)
Delaware 42-1283895
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
110 N. Wacker Dr., Chicago, IL 60606
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(Address of principal executive offices) (Zip Code)
(312) 960-5000
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(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, $.10 par value New York Stock Exchange
Depositary Shares, each representing New York Stock Exchange
1/40 of a share of 7.25% Preferred Income
Equity Redeemable Stock, Series A
Preferred Stock Purchase Rights New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
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 X NO
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[X] Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
YES X NO
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On June 28, 2002, 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
$3.03 billion based upon the closing price of the Common Stock on the New
York Stock Exchange composite tape on such date.
As of March 13, 2003, there were 62,748,198 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual stockholders meeting to be held
on May 7, 2003 are incorporated by reference into Part III.
PART I All references to numbered Notes are to specific
ITEM 1. BUSINESS footnotes to the Consolidated Financial Statements
of the Company (as defined below) included in this
Annual Report on Form 10-K ("Annual Report") and
the descriptions included in such Notes are
incorporated into the applicable Item response by
reference. The following discussion should be read
in conjunction with such Consolidated Financial
Statements and related Notes.
GENERAL General Growth Properties Inc. ("General Growth")
was formed in 1986 by Martin Bucksbaum and Matthew
Bucksbaum (the "Original Stockholders"). On April
15, 1993, an initial public offering of the common
stock (the "Common Stock") of General Growth and
certain related transactions were completed.
Concurrently, General Growth (as general partner)
and the Original Stockholders (as limited partners)
formed GGP Limited Partnership (the "Operating
Partnership"). General Growth has elected to be
taxed as a real estate investment trust (a "REIT")
for federal income tax purposes. As of December 31,
2002, General Growth either directly or through the
Operating Partnership and subsidiaries
(collectively, the "Company") owned 100% of
fifty-seven regional mall shopping centers, 100% of
the Victoria Ward Assets (as defined in Note 3) and
100% of the JP Realty Assets (as defined in Note 3)
(collectively, the "Wholly-Owned Centers"); 100% of
the common stock of General Growth Management, Inc.
("GGMI"); 50% of the common stock of GGP/Homart,
Inc. ("GGP/Homart"), 50% of the membership
interests of GGP/Homart II, L.L.C. ("GGP/Homart
II"), 50% of the membership interests in GGP-TRS
L.L.C. ("GGP/Teachers"), 51% of the common stock of
GGP Ivanhoe, Inc. ("GGP Ivanhoe"), 51% of the
common stock of GGP Ivanhoe III, Inc. ("GGP Ivanhoe
III"), 50% of each of two regional mall shopping
centers, Quail Springs Mall and Town East Mall, and
a 50% general partnership interest in Westlake
Retail Associates, Ltd ("Circle T") (collectively,
the "Unconsolidated Real Estate Affiliates"). The
50% interest in the twenty-two centers owned by
GGP/Homart, the 50% interest in the ten centers
owned by GGP/Homart II, the 50% interest in the
five centers owned by GGP/Teachers, the 51%
ownership interest in the two centers owned by GGP
Ivanhoe, the 51% ownership interest in the eight
centers owned by GGP Ivanhoe III, the 50% ownership
interest in the center owned and being developed by
Circle T, and the 50% ownership interest in both
Quail Springs Mall and Town East Mall comprise the
"Unconsolidated Centers". Together, the
Wholly-Owned Centers and the Unconsolidated Centers
comprise the "Company Portfolio". However, as the
center being developed by Circle T is not yet
operational, it has been excluded from the
definition of, and the operational statistics for,
the Company Portfolio. On December 31, 2002,
General Growth owned an approximate 76% general
partnership interest in the Operating Partnership,
and various minority holders, including the
Original Stockholders and subsequent contributors
of properties to the Operating Partnership, owned
the remaining 24% limited partnership interest. See
Item 7 and the Consolidated Financial Statements
and Notes included in Item 8 of this Annual Report
on Form 10-K for certain financial and other
information required by this Item 1.
On December 22, 1995, the Company, jointly with
four other investors, acquired 100% of the common
stock of GGP/Homart which owned substantially all
of the regional mall assets and liabilities of
Homart Development Co., an indirect wholly-owned
subsidiary of Sears, Roebuck & Co. The Company
acquired approximately 38.2% of GGP/Homart for
approximately $178 million including certain
transaction costs. All of the stockholders of
GGP/Homart committed to contribute up to $80.0
million of additional capital and, as of December
31, 1997, this commitment had been fulfilled.
During 1999, three of the original four other
investors, in independent transactions and pursuant
to their respective exchange rights, exchanged
their interests in GGP/Homart for Common Stock of
General Growth. As a result of these transactions,
the Company currently owns a 50% interest in
GGP/Homart, which has
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elected to be taxed as a REIT.
On December 22, 1995, GGP Management, Inc. ("GGP
Management") was formed to manage, lease, develop
and operate enclosed malls. The Operating
Partnership owned 100% of the non-voting preferred
stock ownership interest in GGP Management
representing 95% of the equity interest. Key
employees of the Company held the remaining 5%
equity interest in the form of common stock
entitled to all of the voting rights in GGP
Management. In August of 1996, GGP Management
acquired GGMI for approximately $51.5 million with
GGP Management being merged into GGMI with GGMI as
the surviving entity. On January 1, 2001, the REIT
provisions of the Tax Relief Extension Act of 1999
became effective. Among other things, the law
permits a REIT to own up to 100% of the stock of a
taxable REIT subsidiary (a "TRS"). A TRS, which
must pay corporate income tax, can provide services
to REIT tenants and others without disqualifying
the rents that a REIT receives from its tenants.
Accordingly, on January 1, 2001 the Company
acquired for nominal consideration 100% of the
common stock of GGMI and has subsequently elected
to have GGMI treated as a TRS. In connection with
the acquisition, the GGMI preferred stock owned by
the Company was cancelled. The Company and GGMI
concurrently terminated the management contracts
for the Wholly-Owned Centers as the management
activities would thereafter be performed directly
by the Company. GGMI has continued to manage,
lease, and perform various other services for the
Unconsolidated Centers and other properties owned
by unaffiliated third parties.
On September 17, 1997, GGP Ivanhoe acquired The
Oaks Mall in Gainesville, Florida and Westroads
Mall in Omaha, Nebraska. The purchase price for the
two properties was approximately $206 million of
which $125 million was financed through property
level indebtedness. The Company contributed
approximately $43 million for its 51% ownership
interest in GGP Ivanhoe. Ivanhoe Cambridge Inc. of
Montreal, Canada ("Ivanhoe") owns the remaining 49%
ownership interest in GGP Ivanhoe. GGP Ivanhoe has
elected to be taxed as a REIT.
On June 30, 1998, GGP Ivanhoe III acquired the U.S.
Prime Property, Inc. real estate portfolio for an
aggregate consideration of approximately $625
million. The common stock of GGP Ivanhoe III, which
has elected to be taxed as a REIT, is owned 51% by
the Company and 49% by Ivanhoe. The properties
acquired were Landmark Mall in Alexandria,
Virginia; Mayfair Mall and adjacent office
buildings in Wauwatosa (Milwaukee), Wisconsin;
Meadows Mall in Las Vegas, Nevada; Northgate Mall
in Chattanooga, Tennessee; Oglethorpe Mall in
Savannah, Georgia; and Park City Center in
Lancaster, Pennsylvania. During 1999, GGP Ivanhoe
III acquired Oak View Mall in Omaha, Nebraska and
Eastridge Mall in San Jose, California for an
aggregate purchase price for both properties of
approximately $160 million, including a new $83
million long-term mortgage loan.
In November 1999, the Company formed GGP/Homart II,
a new joint venture with the New York State Common
Retirement Fund ("NYSCRF"), the Company's venture
partner in GGP/Homart. Upon formation, GGP/Homart
II owned three regional malls contributed by the
NYSCRF (Alderwood Mall in Lynnwood (Seattle),
Washington; Carolina Place in Charlotte, North
Carolina; and Montclair Plaza in Montclair (Los
Angeles), California), and four regional malls
(Altamonte Mall in Orlando, Florida; Natick Mall in
Natick, Massachusetts; Northbrook Court in
Northbrook, Illinois; Stonebriar Centre in Frisco
(Dallas), Texas) contributed by the Company. During
2001, GGP/Homart II acquired the Willowbrook Mall
in Houston, Texas for approximately $145 million,
approximately $102 million of which consisted of
new, non-recourse mortgage financing collateralized
by the property. During November 2002, GGP/Homart
II acquired Glendale Galleria, in Glendale, (Los
Angeles) California, for approximately $415 million
including approximately $170 million of
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first mortgage financing assumed at closing and
approximately $41 million of newly issued
preferred units of the Operating Partnership and
the remainder in cash (primarily from new
financing proceeds from new mortgage debt
collateralized by Glendale Galleria and other
GGP/Homart II properties). In addition, GGP/Homart
II acquired First Colony Mall in Sugar Land,
(Houston) Texas in December 2002 for approximately
$105 million, including approximately $67 million
in new, non-recourse first mortgage financing.
During May 2000, the Operating Partnership formed
GGPLP L.L.C., a Delaware limited liability company
(the "LLC"), by contributing its interest in a
portfolio of Wholly-Owned Centers to the LLC in
exchange for all of the common units of membership
interest in the LLC. On May 25, 2000, a total of
700,000 redeemable preferred units of membership
interest in the LLC (the "RPUs") were issued to an
institutional investor by the LLC, which yielded
approximately $170.6 million in net proceeds to the
Company. The net proceeds of the sale of the RPUs
were used to repay a portion of the Company's
unsecured debt. During 2002, the LLC issued
additional preferred units of membership interest
to various other investors as described in Note 1,
yielding approximately $63 million in cash
proceeds. At December 31, 2002, the LLC owned
interests in 47 Wholly-Owned Centers, the Victoria
Ward Assets and JP Realty Assets.
On August 26, 2002, the Company formed
GGP/Teachers, a new joint venture owned 50% by the
Company and 50% by Teachers' Retirement System of
the State of Illinois ("Illinois Teachers"). Upon
formation of GGP/Teachers, Clackamas Town Center in
Portland, Oregon, which was 100% owned by Illinois
Teachers, was contributed to GGP/Teachers. In
addition, concurrent with its formation,
GGP/Teachers acquired Galleria at Tyler in
Riverside, California, Kenwood Towne Centre in
Cincinnati, Ohio, and Silver City Galleria in
Taunton, Massachusetts, as described in Note 4. The
Company's share (approximately $112,000) of the
equity of GGP/Teachers was funded by a portion of
new unsecured loans. During December 2002,
GGP/Teachers acquired the Florence Mall in
Florence, Kentucky for approximately $97 million,
including approximately $60 million in new first
mortgage, non-recourse, financing obtained at
acquisition.
BUSINESS OF THE The Company is primarily engaged in the ownership,
COMPANY operation, management, leasing, acquisition,
development and expansion of regional mall and
community shopping centers in the United States.
Most of the shopping centers in the Company
Portfolio are strategically located in major and
middle markets where they have strong competitive
positions. A detailed listing starting on page 14
of this report contains information on each
significant property in the Company Portfolio
including location, year opened, square footage,
anchors/significant tenants, and anchor vacancies.
The Company Portfolio's geographic diversification
should mitigate the effects of regional economic
conditions and local factors.
The Company makes all key strategic decisions for
the properties in the Company Portfolio. However,
in connection with the Unconsolidated Centers and
Circle T, such strategic decisions are made jointly
with the respective stockholders or joint venture
partners. The Company is also the asset manager of
the properties in the Company Portfolio, executing
the strategic decisions and overseeing the
day-to-day activities performed directly by the
Operating Partnership or, with respect to the
Unconsolidated Centers, by GGMI. GGMI performs
day-to-day property management functions including
leasing, construction management, data processing,
maintenance, accounting, marketing, promotion and
security pursuant to the management agreements with
the Unconsolidated Centers. As of December 31,
2002, GGMI was the property manager for forty-seven
of the Unconsolidated Centers. The remaining two
centers, owned by GGP/Homart through joint
ventures, are managed
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by certain joint venture partners of GGP/Homart.
GGMI also performs and receives fees for similar
property management functions for forty-four
regional malls owned by unaffiliated third parties.
The majority of the income from the properties in
the Company Portfolio is derived from rents
received through long-term leases with retail
tenants. The long-term leases require the tenants
to pay base rent which is a fixed amount specified
in the lease. The base rent is often subject to
scheduled increases defined in the lease. Another
component of income is overage rent. Overage rent
is paid by a tenant generally if their sales exceed
an agreed upon minimum amount. Overage rent is
calculated by multiplying the sales in excess of
the minimum amount by a percentage defined in the
lease. Long-term leases generally contain a
provision for the lessor to recover certain
expenses incurred in the day-to-day operations
including common area maintenance and real estate
taxes. The recovery is generally related to the
tenant's pro-rata share of space in the property.
The shopping center business is continually
evolving with competitive pressures requiring the
ongoing re-evaluation of approaches to shopping
center management and leasing. Management's
strategies to increase shareholder value and cash
flow include the integration of mass merchandise
retailers with traditional department stores,
specialty leasing, entertainment-oriented tenants,
proactive property management and leasing,
operating cost reductions including those resulting
from economies of scale, strategic expansions and
acquisitions, and selective new shopping center
developments. Management believes that these
approaches should enable the Company to operate and
grow successfully in today's value-oriented and
technological environment. Following is a summary
of recent acquisition, development and expansion
and redevelopment activity.
As used in this Annual Report on Form 10-K, the
term "GLA" refers to gross leaseable retail space,
including Anchors and all other areas leased to
tenants; the term "Mall GLA" refers to gross
leaseable retail space, excluding Anchors; the term
"Anchor" refers to a department store or other
large retail store; the term "Mall Stores" refers
to stores (other than Anchors) that are typically
specialty retailers who lease space in the
structure including, or attached to, the primary
complex of buildings that comprise the shopping
center; the term "Freestanding GLA" means gross
leaseable area of freestanding retail stores in
locations that are not attached to the primary
complex of buildings that comprise a regional mall
or community shopping center; and the term "total
Mall Stores sales" means the gross revenue from
product sales to customers generated by the Mall
Stores.
ACQUISITIONS The Company continues to seek to selectively
acquire properties that provide opportunities for
enhanced profitability and appreciation in value
and corresponding increases in shareholder value.
In 2002, the Company acquired: a 100% ownership
interest in the stock of Victoria Ward, Limited, a
privately held real estate corporation whose assets
included 65 fee simple acres in Kakaako, Central
Honolulu, Hawaii, currently improved with, among
other uses, an entertainment, shopping and dining
district, for approximately $250 million; a 100%
ownership interest in JP Realty, Inc. ("JP
Realty"), a publicly held real estate investment
trust, and its operating partnership subsidiary,
Price Development Company, Limited Partnership
("PDC") which owned or had an interest in 51
properties, for approximately $1.1 billion; a 100%
ownership interest in Prince Kuhio Plaza, a
regional mall in Hilo, Hawaii formerly owned by
GGP/Homart, for approximately $39 million; a 100%
ownership interest in Pecanland Mall, a regional
mall in Monroe, Louisiana, for approximately $72
million; and a 100% ownership interest in
Southland Mall, a regional mall in the East Bay
area of San Francisco, California, for
approximately $89 million. The Company, through
GGP/Homart II, also acquired in 2002 a 100%
ownership interest
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in Glendale Galleria in Glendale (Los Angeles),
California for approximately $415 million and
First Colony Mall in Sugar Land (Houston), Texas
for approximately $105 million. Additionally, the
Company, through GGP/Homart, purchased the 50%
interest it did not own in the Woodlands Mall in
Houston, Texas for approximately $50 million. Also
in 2002, the Company formed GGP/Teachers, a new
joint venture owned 50% by the Company and 50% by
Teachers' Retirement System of the State of
Illinois. As of December 31, 2002, GGP/Teachers
owned Clackamas Town Center in Portland Oregon;
Galleria at Tyler in Riverside, California;
Kenwood Towne Centre in Cincinnati, Ohio; Silver
City Galleria in Taunton, Massachusetts; and
Florence Mall in Florence, Kentucky representing
an aggregate purchase or contributed value of
approximately $731 million.
The Company's management feels that it has a
competitive advantage with respect to the
acquisition of retail properties for the following
reasons:
o The funds necessary for a cash
acquisition of a shopping center
may be available to the Company
from a combination of sources,
including mortgage or unsecured
financing or the issuance of public
or private debt or equity.
o The Company has the flexibility to
pay for an acquisition with a
combination of cash, Preferred or
Common Stock or common or preferred
units of limited partnership
interest in the Operating
Partnership (the "Units"). This
creates the opportunity for a
tax-advantaged transaction for the
seller.
o Management's expertise allows it to
evaluate proposed acquisitions for
their increased profit potential.
Additional profit can originate
from many sources including
expansions, remodeling,
re-merchandising, and more
efficient management of the
property.
DEVELOPMENT The Company intends to pursue development when
warranted by the potential financial returns.
GGP/Homart II completed and opened in August 2000
the Stonebriar Centre, an enclosed shopping center
in Frisco (Dallas), Texas. Also as described below,
the Company has commenced construction of the
Jordan Creek Town Center in West Des Moines, Iowa
and, through Circle T, is preparing to develop
(with a joint venture partner) an enclosed regional
mall in Westlake (Dallas), Texas. In addition, the
Company is investigating certain other development
sites (representing a net investment of
approximately $20.2 million), including Toledo,
Ohio and South Sacramento, California. However,
there can be no assurance that development of these
sites will proceed.
During 1999, the Company formed the Circle T joint
venture to develop an enclosed mall in Westlake
(Dallas), Texas. As of December 31, 2002, the
Company had invested approximately $17.4 million in
the joint venture. The Company is currently
obligated to fund additional pre-development costs
of approximately $.7 million. The retail site, part
of a planned community which is expected to contain
a resort hotel, a golf course, luxury homes and
corporate offices, is currently planned to contain
up to 1.3 million square feet of tenant space
including up to six anchor stores, an ice rink and
a multi-screen theater. A mid-2005 opening is
currently scheduled.
Construction commenced on the Jordan Creek Town
Center in West Des Moines, Iowa in September 2002.
As of December 31, 2002, the Company had invested
approximately $30.4 million in the project. Upon
its projected completion in August 2004, this
approximately two million square foot enclosed
regional mall shopping center is planned to contain
up to three anchor stores, a hotel and an
amphitheater.
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EXPANSIONS AND As of December 31, 2002, 12 major redevelopment
RENOVATIONS projects were underway. The expansion and
renovation of a Portfolio Center often increases
customer traffic, trade area penetration and
typically improves the competitive position of the
property. Four of the larger renovation and
expansion projects under construction in 2002 are
described below.
The renovation of Alderwood Mall, a 1,039,264
square foot center located in Lynnwood (Seattle),
Washington, began in 2001. This two-phase project
includes the addition of 180,000 square feet of
Mall Stores, a theatre and a new relocated
Nordstrom's. The first phase of the project is
expected to be completed in the summer of 2003 with
Phase II to be completed in mid-2004.
Altamonte Mall, located in Altamonte Springs,
Florida, in the Orlando metro area, contains
approximately 1,099,000 square feet of GLA. The
renovation, consisting of the addition of an
18-screen AMC megaplex theatre, Center Court
remodeling, and food court improvements including
two new restaurants, commenced in early 2002.
Construction of the project is expected to be
completed in the summer or early fall of 2003.
The redevelopment of the Tucson Mall, a 1,304,968
square foot center located in Tucson, Arizona,
began in July 2002. The project includes an already
completed center court remodeling, as well as new
floor tiling, lighting, vertical transportation and
soft seating areas. Additional scheduled
improvements are a children's play area and a food
court renovation, with the entire project scheduled
to be completed in November 2003.
Fallbrook Mall is a 788,437 square foot enclosed
mall located in West Hills, (Los Angeles)
California. The renovation of the mall commenced in
2000 and will consist of merchandising and
converting the mall to an outdoor, 1,100,000 square
foot power center with the addition of Ross, DSW
Shoe Warehouse and Home Depot. Completion of the
project is anticipated for early summer of 2003.
THE COMPANY The Company Portfolio is comprised primarily of 153
retail properties (regional malls PORTFOLIO or
community centers) as detailed below. The Company
also has certain office space associated with the
Company's retail properties and approximately 1.4
million square feet of commercial/industrial space
at 6 former JP Realty properties (Note 3). Except
for two free-standing single tenant stores, the
remaining 151 retail properties are shopping
centers with a variety of smaller Mall Stores and
most of which contain at least one major department
store as an Anchor. Each property provides ample
parking for shoppers. Excluding the free-standing
stores mentioned above, the retail properties:
o Range in size between approximately
11,900 and 1,850,000 square feet of
total GLA and between approximately
11,900 and 836,000 square feet of
Mall and Freestanding GLA. The
smallest retail property has 5
stores, and the largest has over
320 stores;
o Have approximately 498 Anchors,
operating under approximately 68
trade names; and
o Have approximately 12,700 Mall and
Freestanding Stores.
The average size of the 151 retail properties is
approximately 757,300 square feet of GLA, including
all Anchors, Mall Stores and Freestanding Stores.
The average Mall and Freestanding GLA per Portfolio
Center is approximately 319,600 square feet.
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As of December 31, 2002, the Wholly-Owned Centers
contained approximately 62.6 million square feet of
GLA consisting of Anchors (whether owned or
leased), Mall Stores and Freestanding Stores. The
Unconsolidated Centers contained approximately 51.8
million square feet of GLA.
The Company's share of total revenues from the
properties in the Company Portfolio and GGMI
increased to $1.4 billion in 2002 from $1.2 billion
in 2001. No single retail property generated more
than 7.7% of the Company's total 2002 pro rata
revenues. In 2002, total Mall Store sales from the
properties in the Company Portfolio increased by
approximately 4.0% in comparison to the total Mall
Store sales in 2001.
The table below shows the top 25 tenants, by trade
name, ranked by percentage of aggregate annualized
effective rents as compared to consolidated
effective rents on an annualized basis in the
Wholly-Owned Centers at December 31, 2002. In
addition, similar percentages existed in the
Unconsolidated Centers as of December 31, 2002.
<Table>
<Caption>
% OF TOTAL
TENANT NAME ANNUALIZED RENTS
- ------------ ----------------
JCPenney 1.91%
Sears 1.59%
Old Navy (2) 1.45%
Foot Locker 1.26%
Cinemark 1.16%
Victoria's Secret (1) 1.03%
Express (1) 0.99%
The Gap (2) 0.96%
American Eagle Outfitters 0.96%
Zales Jewelers 0.84%
Abercrombie & Fitch 0.81%
Kaye Bee Toys 0.80%
Sam Goody 0.76%
Barnes & Noble 0.69%
Payless Shoe Source 0.68%
Lane Bryant 0.66%
Consolidated Amusement Theatres 0.65%
Lerner New York 0.63%
Kay Jewelers 0.63%
Finish Line 0.63%
Macy's 0.61%
GNC 0.59%
Radio Shack 0.59%
Banana Republic (2) 0.59%
The Buckle 0.58%
</Table>
(1) Under common ownership by The Limited, Inc.
(2) Under common ownership by Gap, Inc.
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MALL AND
FREESTANDING STORES The retail properties in the Company Portfolio have
a total of approximately 12,700 Mall and
Freestanding Stores. The following table reflects
the tenant representation by category in the retail
properties in the Company Portfolio as of
December 31, 2002.
<Table>
<Caption>
% OF SQ. FT. IN
THE RETAIL
TENANT CATEGORIES PROPERTIES TYPES OF TENANTS/PRODUCTS SOLD
----------------- --------------- --------------------------------------------------
Specialty 21% Photo studios, beauty and nail salons, pharmacy
and sundries, variety stores, pet stores,
newsstands, jewelry repair, shoe repair, tailor,
video games, shops for home/bath/kitchen, rugs,
fabric stores, beds/waterbeds, luggage, perfume,
tobacco, toys, arcades, cameras, sunglasses,
books
--------------------------------------------------------------------------------------
Women's Apparel 17% Women's apparel
--------------------------------------------------------------------------------------
Apparel 20% Unisex apparel, children's apparel, lingerie, and
formal wear
--------------------------------------------------------------------------------------
Shoes 11% Shoes
--------------------------------------------------------------------------------------
Food 8% Restaurant, food court, fast food
--------------------------------------------------------------------------------------
Gifts 6% Cards, candles, engraving stores, other gift or
novelty
--------------------------------------------------------------------------------------
Music/Electronics 6% Music, electronics, computer and software, video
rental
--------------------------------------------------------------------------------------
Sporting Goods 3% Sports apparel, sports and exercise equipment
--------------------------------------------------------------------------------------
Jewelry 4% Fine jewelry and costume jewelry
--------------------------------------------------------------------------------------
Men's Apparel 2% Men's apparel
--------------------------------------------------------------------------------------
Specialty Food 2% Candy, coffee, nuts, chocolate, health
food/vitamins
--------------------------------------------------------------------------------------
Total 100%
</Table>
Specialty tenants include Mastercuts, One Hour
Photo, California Nails, Kay-Bee Toys, Dollar Tree,
Pottery Barn and many others. Typical tenants in
the Women's Apparel category include The Limited,
Casual Corner, Lane Bryant and Victoria's Secret.
The Apparel category typically includes tenants
such as The Gap, American Eagle, Old Navy and
J.Crew. The Shoes category includes tenants such as
Footlocker, Journeys and Payless Shoesource. The
Food category includes restaurants such as Ruby
Tuesday, Cheesecake Factory, PF Chang's and Max and
Erma's, fast food restaurants such as Arby's, and
food court tenants such as Sbarro. Typical tenants
in the Gifts category include Things Remembered,
Kirlin's Hallmark and Spencer Gifts. The
Music/Electronics category includes tenants such as
Camelot Music, Radio Shack, and Suncoast Pictures.
Sporting Goods include tenants such as Champs, Big
5 Sports and Scheel's Sports. Jewelry tenants
typically include Zales Jewelers, Helzberg Diamonds
and Kay Jewelers. The Men's Apparel category
includes tenants such as The Men's Warehouse and
Nicks for Men. Specialty Food tenants include
General Nutrition Center, Mr. Bulky, and Barnie's
Coffee and Tea Company.
COMPETITION The retail properties in the Company Portfolio
compete with numerous shopping alternatives in
seeking to attract retailers to lease space as
retailers themselves face increasing competition
from discount shopping centers, outlet malls,
strip, power and lifestyle centers, discount
shopping clubs, direct mail, internet sales and
telemarketing.
9 of 47
The nature and extent of competition varies from
property to property within the Company Portfolio.
Below is a description of the type of competition
that three of the Portfolio Centers face from
other retail locations within their trade area.
These examples are representative of the
competitive environment in which the Company
operates.
Boise Towne Square is a 1,166,000 square foot,
enclosed regional shopping center which is
centrally located adjacent to the main thoroughfare
of Boise, Idaho. The mall was opened in October
1988 and is the dominant regional mall in its trade
area which includes the headquarters of five major
Fortune 500 corporations. The mall contains five
anchor department stores: Dillard's, JC Penney,
Mervyn's, Sears and The Bon Marche as well as 185
mall shops with national retailers such as
Abercrombie & Fitch, American Eagle Outfitters, B.
Dalton and Old Navy. Boise Towne Square's primary
competition consists of power, big box and discount
centers located in the immediate area which include
retail stores such as Barnes & Noble, Bath & Body
Works, Borders, Ross, Target and TJ Maxx.
The Parks at Arlington is a 1,520,000 square foot,
two-level enclosed regional mall located in
Arlington, Texas. The merchandise mix consists of
seven anchor stores and 190 mall shops. It was
built in 1988 and recently completed an extensive
expansion, which added a Galyans and a Great
Indoors to the existing anchors (Dillard's,
Foley's, Mervyn's, JC Penney and Sears). The
project also included a multiplex theatre and an
NHL-sized ice rink. The Parks at Arlington's trade
area is very large and densely populated with
household income levels above the national average
and with a wide range of ages, incomes and ethnic
backgrounds. The Parks at Arlington dominates
portions of the southwest Dallas market, the
southeast Fort Worth market and the Arlington
markets. The mall's principal competition is from
three enclosed regional malls (Six Flags Mall, a
1,022,000 square foot mall currently only anchored
by Foley's, located approximately 7 miles from The
Parks at Arlington; Fort Worth Town Center, a
1,023,000 square foot mall anchored by Dillard's,
Sears and Bealls, located approximately 12 miles
from The Parks at Arlington; Southwest Center Mall,
a 1,084,500 square foot mall anchored by Dillard's,
Foley's and Sears, located approximately 14 miles
from The Parks at Arlington).
Clackamas Towne Center is a 1,209,000 square foot,
two-level, regional shopping center strategically
located southeast of Portland, Oregon. Opened in
1981 and renovated in 1994, Clackamas Town Center
is anchored by JC Penney, Meier and Frank, Meier
and Frank Home Store, Nordstrom and Sears and has
185 Mall Shops. The mall's trade area includes over
1 million people. Clackamas Town Center's principal
competition is from the three enclosed regional
malls (the Washington Square Mall, a 1,350,000
square foot mall anchored by JC Penney, Meier &
Frank, Mervyn's, Nordstrom and Sears, located 30
miles from the center; Lloyd Center, a 1,400,000
square foot center anchored by Marshall's, Meier &
Frank, Nordstrom's and Sears, located 12 miles from
the center and Pioneer Place, a 347,000 square foot
center anchored by Saks Fifth Avenue and Tiffany &
Company, located in downtown Portland which is
approximately 20 miles from the center), all owned
by national-scope, mall-oriented real estate
investment trusts.
ENVIRONMENTAL Under various federal, state and local laws
MATTERS and regulations, an owner of real estate is liable
for the costs of removal or remediation of certain
hazardous or toxic substances on such property.
These laws often impose such liability without
regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or
toxic substances. The costs of remediation or
removal of such substances may be substantial, and
the presence of such substances, or the failure to
promptly remediate such substances, may adversely
affect the owner's ability to sell such real estate
or to borrow using such real estate as collateral.
In connection with its ownership and
10 of 47
operation of the Portfolio Centers, General Growth,
the Operating Partnership or the relevant property
venture through which the property is owned, may be
potentially liable for such costs.
All of the Portfolio Centers have been subject to
Phase I environmental assessments, which are
intended to discover information regarding, and to
evaluate the environmental condition of, the
surveyed and surrounding properties. The Phase I
assessments included a historical review, a public
records review, a preliminary investigation of the
site and surrounding properties, screening for the
presence of asbestos, polychlorinated biphenyls
("PCBs") and underground storage tanks and the
preparation and issuance of a written report, but
do not include soil sampling or subsurface
investigations. Where the Phase I assessment so
recommended, a Phase II assessment was conducted to
further investigate any issues raised by the Phase
I assessment. In each case where Phase I and/or
Phase II assessments resulted in specific
recommendations for remedial actions, management
has either taken or scheduled the recommended
action.
Neither the Phase I nor the Phase II assessments
have revealed any environmental liability that the
Company believes would have a material effect on
the Company's business, assets or results of
operations, nor is the Company aware of the
existence of any such liability. Nevertheless, it
is possible that these assessments do not reveal
all environmental liabilities or that there are
material environmental liabilities of which the
Company is unaware. Moreover, no assurances can be
given that (i) future laws, ordinances or
regulations will not impose any material
environmental liability or (ii) the current
environmental condition of the Portfolio Centers
will not be adversely affected by tenants and
occupants of the Portfolio Centers, by the
condition of properties in the vicinity of the
Portfolio Centers (such as the presence of
underground storage tanks) or by third parties
unrelated to the Company.
EMPLOYEES As of March 13, 2003, the Company had 3,810
full-time employees. Certain employees at three of
the Portfolio Centers are subject to collective
bargaining agreements. The Company's management
believes that its employee relations are
satisfactory and there has not been a labor-related
work stoppage at any of its Portfolio Centers.
INSURANCE The Company has comprehensive liability, fire,
flood, earthquake, terrorist, extended coverage and
rental loss insurance with respect to the Portfolio
Centers. The Company's management believes that all
of the Portfolio Centers are adequately covered by
insurance.
QUALIFICATION AS A General Growth currently qualifies as a real estate
REAL ESTATE investment trust pursuant to the requirements
INVESTMENT TRUST AND contained in Sections 856-858 of the Internal
TAXABILITY OF Revenue Code of 1986, as amended (the "Code"). If,
DISTRIBUTIONS as General Growth contemplates, such qualification
continues, General Growth will not be taxed on its
real estate investment trust taxable income.
During 2002, General Growth distributed (or was
deemed to have distributed) 100% of its taxable
income to its preferred and common stockholders.
Cash distributions in the amount of $2.67 per share
of Common Stock were paid in 2002, of which $2.13
(79.8%) was ordinary income, $0.01 (0.4%) was
Unrecaptured Section 1250 Gain and $0.53 (19.8%)
was a return of capital based on the taxable income
of General Growth.
AVAILABLE General Growth makes available free of charge
INFORMATION through its website at www.generalgrowth.com all
reports it electronically files with, or furnishes
to, the Securities and Exchange Commission (the
"SEC"), including its Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K, as well as any amendments to those
reports, as soon as reasonably practicable after
those
11 of 47
documents are filed with, or furnished to, the SEC.
These filings are also accessible on the SEC's
website at www.sec.gov.
ITEM 2. The Company's investment in real
PROPERTIES estate as of December 31, 2002 consisted of its
interests in the properties in the Company
Portfolio, developments in progress and certain
other real estate. In most cases, the land
underlying the retail properties in the Company
Portfolio is also owned by the Company; however, at
a few of the centers, all or part of the underlying
land is owned by a third party that leases the land
to the Company pursuant to a long-term ground
lease.
LEASING The retail properties in the Company Portfolio
average Mall Store rent per square foot from leases
that expired in 2002 was $29.90. As a result of
market rents being higher than the rents under many
of the expiring leases, the average Mall Store rent
per square foot on new and renewal leases during
2002 was $36.00, or $6.10 per square foot more than
the average for expiring leases. The following
schedule shows Mall Store scheduled lease
expirations over the next five years.
PORTFOLIO CENTERS
FIVE YEAR LEASE EXPIRATION SCHEDULE (1)
<Table>
<Caption>
ALL EXPIRATIONS EXPIRATIONS @ SHARE (2)
-------------------------------------------- -----------------------------------------
BASE RENT FOOTAGE RENT/PSF BASE RENT FOOTAGE RENT/PSF
--------------- ---------- --------- ------------- ---------- --------
WHOLLY-OWNED
2003 $ 33,986,243 1,693,616 $ 20.07 $ 33,986,243 1,693,616 $ 20.07
2004 38,549,091 1,685,679 22.87 38,549,091 1,685,679 22.87
2005 52,788,924 2,119,326 24.91 52,788,924 2,119,326 24.91
2006 47,139,398 1,830,597 25.75 47,139,398 1,830,597 25.75
2007 41,922,215 1,641,519 25.54 41,922,215 1,641,519 25.54
--------------- ---------- -------- ------------- ---------- -------
PORTFOLIO TOTAL $ 214,385,871 8,970,737 $ 23.90 $ 214,385,871 8,970,737 $ 23.90
UNCONSOLIDATED
2003 $ 44,081,696 1,408,908 $ 31.29 $ 19,912,355 644,441 $ 30.90
2004 41,151,224 1,299,907 31.66 20,045,758 636,237 31.51
2005 36,337,959 1,201,770 30.24 17,703,001 584,209 30.30
2006 42,694,795 1,443,370 29.58 20,522,298 690,178 29.73
2007 43,149,806 1,415,855 30.48 21,276,378 698,504 30.46
--------------- ---------- -------- ------------- ---------- -------
PORTFOLIO TOTAL $ 207,415,480 6,769,810 $ 30.64 $ 99,459,790 3,253,569 $ 30.57
GRAND TOTAL $ 421,801,351 15,740,547 $ 26.80 $ 313,845,661 12,224,306 $ 25.67
=============== ========== ======== ============= ========== =======
</Table>
(1) Excludes leases on Mall Stores over 40,000 square feet.
(2) Expirations at share reflect the Company's direct or indirect ownership
interest in a joint venture.
12 of 47
COMPANY PORTFOLIO At December 31, 2002, the Company had direct or
DEBT indirect ("pro rata") mortgage and other debt of
approximately $6,762.4 million (excluding a market
value purchase price adjustment of debt of
approximately $6.9 million related to the JP Realty
acquisition). The ratio of pro rata variable rate
debt to total pro rata debt and preferred stock
and preferred Operating Partnership Units was 32.2%
at December 31, 2002. The following table reflects
the maturity dates of the Company's pro rata debt
and the related interest rates, after the effect of
the current swap agreements of the Company as
described in Notes 5 and 13.
COMPANY PORTFOLIO DEBT
MATURITY AND CURRENT AVERAGE INTEREST RATE SUMMARY (a)
AS OF DECEMBER 31, 2002
(Dollars in Thousands)
<Table>
<Caption>
WHOLLY-OWNED UNCONSOLIDATED COMPANY
CENTERS CENTERS (b) PORTFOLIO DEBT
----------------------- ---------------------- ----------------------
CURRENT CURRENT CURRENT
AVERAGE AVERAGE AVERAGE
MATURING INTEREST MATURING INTEREST MATURING INTEREST
YEAR AMOUNT (a) RATE (c) AMOUNT (a) RATE (c) AMOUNT (a) RATE (c)
---------- ----------- -------- ----------- -------- ------------ --------
2003 $ 752,735 3.20% $ 201,131 5.73% $ 953,866 3.73%
2004 487,984 4.81% 87,971 4.96% 575,955 4.84%
2005 387,000 4.93% 122,413 5.70% 509,413 5.11%
2006 630,942 5.93% 406,898 4.60% 1,037,840 5.41%
2007 486,816 5.04% 663,365 3.36% 1,150,181 4.07%
Subsequent $ 1,839,933 6.43% 695,246 5.24% $ 2,535,179 6.09%
----------- ---- ------- ---- ------------ ----
Totals $ 4,585,410 5.39% $ 2,177,024 4.61% $ 6,762,434 5.14%
=========== ==== =========== ==== ============ ====
Variable Rate $ 1,402,820 3.04% $ 1,050,751 2.92% $ 2,453,571 2.99%
Fixed Rate 3,182,590 6.42% 1,126,273 6.18% 4,308,863 6.36%
----------- ---- ----------- ---- ----------- ----
Totals $ 4,585,410 5.39% $ 2,177,024 4.61% $ 6,762,434 5.14%
=========== ==== =========== ==== ============ ====
</Table>
(a) Excludes principal amortization.
(b) Unconsolidated properties debt reflects the Company's share of debt
(either retained (Note 4) or based on its respective equity ownership
interests in the Unconsolidated Real Estate Affiliates) relating to the
properties owned by the Unconsolidated Real Estate Affiliates.
(c) For variable rate loans, the interest rate reflected is the actual
annualized weighted average rate for the variable rate debt outstanding
during the year ended December 31, 2002.
13 of 47
PROPERTY DATA The following tables set forth certain
information regarding the Wholly-Owned
Centers and the Unconsolidated Centers as of
December 31, 2002. The first table depicts
the Wholly-Owned Centers and the second table
depicts the Unconsolidated Centers.
WHOLLY-OWNED CENTERS
<Table>
<Caption>
TOTAL GLA/MALL
YEAR AND FREESTANDING
NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR
LOCATION (1) OR EXPANDED (SQUARE FEET) (2) ANCHORS/SIGNIFICANT TENANTS VACANCIES (3)
- --------------------- ----------- ----------------- ---------------------------------------- -------------
Ala Moana Center 1959/ 1,847,908/ JCPenney (10), Macy's, None
Honolulu, Hawaii 1966,1987,1989,1999 836,443 Neiman Marcus, Sears
Alameda Plaza 1973/1978 190,341/ Albertsons N/A
Pocatello, Idaho 190,341
Anaheim Crossing (4) 1980 92,170/ Fullerton Toyota N/A
Anaheim, California 92,170
Animas Valley Mall 1982/2001 515,752/ Dillard's, JCPenney, Kaye Home None
Farmington, New Mexico 244,535 Furnishings, Ross Dress for Less, Sears
Apache Mall 1969/ 747,195/ Herberger's, JCPenney, None
Rochester, Minnesota 1985,1992,2002 264,203 Marshall Field's, Sears
Austin Bluffs Plaza 1985 114,524/ Albertsons, Longs Drugs N/A
Colorado Springs, Colorado 114,524
Bailey Hills Plaza 1988 11,887/ Safeway, ShopKo N/A
Eugene, Oregon 11,887
Baybrook Mall 1978/ 1,082,679/ Dillard's, Dillard's Men's and Home None
Friendswood (Houston), 1984,1985,1995 342,341 Store, Foley's, Mervyn's, Sears
Texas
Bayshore Mall 1987/ 615,318/ Gottschalks, Mervyn's, Sears One (5)
Eureka, California 1989 395,060
Bellis Fair 1988 772,395/ The Bon Marche, JCPenney, None
Bellingham (Seattle), 353,465 Mervyn's, Sears, Target,
Washington
Birchwood Mall 1990/ 780,541/ JCPenney, Marshall Field's, None
Port Huron (Detroit), 1991,1997 354,407 Sears, Target, Younkers
Michigan
Boise Plaza 1979/ 108,464/ Albertsons, Burlington Coat Factory N/A
Boise, Idaho 1984 108,464
Boise Towne Plaza (4) 1999 116,677/ Circuit City, Linens' n Things, N/A
Boise, Idaho 116,677 Old Navy
Boise Towne Square 1988 1,177,944/ The Bon Marche, Dillard's, None
Boise, Idaho 482,506 JCPenney, Mervyn's, Sears
The Boulevard Mall 1968/ 1,186,185/ Dillard's, JCPenney, Macy's, Sears None
Las Vegas, Nevada 1992 398,149
Cache Valley Mall 1976 305,965/ Dillard's, Dillard's Men's and Home None
Logan, Utah 160,133 Store, JCPenney
Cache Valley Marketplace 1976 157,713/ Home Depot N/A
Logan, Utah 157,713
Capital Mall 1978/ 530,964/ Dillard's, JCPenney, Sears None
Jefferson City, Missouri 1985,1992 301,279
</Table>
14 of 47
<Table>
<Caption>
TOTAL GLA/MALL
YEAR AND FREESTANDING
NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR
LOCATION (1) OR EXPANDED (SQUARE FEET) (2) ANCHORS/SIGNIFICANT TENANTS VACANCIES (3)
- --------------------- ----------- ----------------- ---------------------------------------- -------------
Century Plaza 1975/ 743,596/ JCPenney, McRae's, Rich's, Sears None
Birmingham, Alabama 1990,1994 255,120
Chapel Hills Mall 1982/ 1,174,070/ Dillard's, Foley's, JCPenney, Kmart, None
Colorado Springs, Colorado 1986,1997,1998 428,581 Mervyn's, Sears
Coastland Center 1977/ 924,139/ Burdines, Dillard's, JCPenney, Sears None
Naples, Florida 1985,1996 333,749
Colony Square Mall 1981/ 552,166/ Elder-Beerman, JCPenney, Sears One
Zanesville, Ohio 1985,1987 294,162
Columbia Mall 1985/ 744,676/ Dillard's, JCPenney, Sears, Target None
Columbia, Missouri 1986 329,232
Coral Ridge Mall 1998 1,046,629/ Dillard's, JCPenney, Scheel's All Sports, None
Coralville (Iowa City), 409,591 Sears, Target, Younkers
Iowa
Cottonwood Mall 1962/ 737,716/ JCPenney, Meier & Frank None
Salt Lake City, Utah 1984 358,208
Cottonwood Square 1984 77,079/ Albertsons N/A
Salt Lake City, Utah 77,079
Country Hill Plaza 1978 246,337/ Smith's Food & Drug N/A
Ogden (Salt Lake City), 246,337
Utah
Crossroads Center 1966/ 784,707/ JCPenney, Marshall Field's, None
St. Cloud, Minnesota 1995 282,378 Sears, Target
The Crossroads 1980/ 766,629/ JCPenney, Marshall Field's, Mervyn's, None
Portage (Kalamazoo), 1992 263,669 Sears
Michigan
Cumberland Mall 1973/ 1,171,495/ JCPenney, Macy's, Rich's, Sears None
Atlanta, Georgia 1989 337,380
Division Crossing 1990 93,390/ Rite Aid, Safeway N/A
Portland, Oregon 93,390
Eagle Ridge Mall 1996/ 625,125/ Dillard's, JCPenney, Sears None
Lake Wales (Orlando), 2000 313,873
Florida
Eastridge Mall 1982/ 571,842/ The Bon Marche, JCPenney, Sears, None
Casper, Wyoming 1997 282,046 Target
Eden Prairie Mall 1976/ 1,127,058/ Kohl's, Mervyn's, Sears, None
Eden Prairie (Minneapolis), 1989,1994,2001 394,851 Target, Von Maur
Minnesota
Fallbrook Mall 1966/ 1,010,427/ Home Depot, Kohl's, One (4)
West Hills (Los Angeles), 1985,2002,2003 445,615 Mervyn's, Target
California
Fort Union Plaza 1978/ 32,969/ Bucca Di Beppo N/A
Salt Lake City, Utah 1982-1987 32,969
Fox River Mall 1984/ 1,221,520/ JCPenney, Marshall Field's, Scheel's None
Appleton, Wisconsin 1985,1991,1997,2002,2003 532,883 All Sports, Sears, Target, Younkers
Fremont Village 1977 103,538/ Sav-On Drug, N/A
Las Vegas, Nevada 103,538 Smith's Food & Drug
</Table>
15 of 47
<Table>
<Caption>
TOTAL GLA/MALL
YEAR AND FREESTANDING
NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR
LOCATION (1) OR EXPANDED (SQUARE FEET) (2) ANCHORS/SIGNIFICANT TENANTS VACANCIES (3)
- --------------------- ----------- ----------------- ---------------------------------------- -------------
Gateway Crossing 1992 183,659/ Michaels', Ross, N/A
Bountiful, Utah 183,659 ShopKo, TJ Maxx
Gateway Mall 1990/ 724,885/ The Emporium (9), Sears, Target None
Springfield, Oregon 1999 441,620
Grand Teton Mall 1984 541,746/ The Bon Marche, Dillard's, JCPenney None
Idaho Falls, Idaho 271,821 Sears
Grand Traverse Mall 1992 577,632/ JCPenney, Marshall Field's, Target None
Traverse City, Michigan 312,283
Greenwood Mall 1979/ 829,239/ Dillard's, Famous Barr, None
Bowling Green, Kentucky 1987,1996,2002 400,186 JCPenney, Sears
Halsey Crossing 1990/ 96,038/ Safeway N/A
Gresham (Portland), 2000 96,038
Oregon
KIDK/Baskin Robbins 1980 1,814/ Baskin Robbins N/A
Idaho Falls, Idaho 1,814
Knollwood Mall 1955/ 403,802/ Cub Foods, Kohl's None
St. Louis Park, 1981,1999 193,202
(Minneapolis), Minnesota
Lakeview Square Mall 1983/ 607,095/ JCPenney, Marshall Field's, Sears None
Battle Creek, Michigan 1998,2001 315,502
Lansing Mall 1969/ 838,502/ JCPenney, Marshall Field's, Mervyn's, None
Lansing, Michigan 2001 447,332 Younkers
Lockport Mall 1975/ 336,075/ The Bon Ton, Rosa's Homestore One
Lockport, New York 1984 122,994
Mall of the Bluffs 1986/ 678,397/ Dillard's, JCPenney, Sears, Target None
Council Bluffs 1988,1998 352,523
(Omaha, Nebraska), Iowa
Mall St. Vincent 1976/ 545,687/ Dillard's, Sears None
Shreveport, Louisiana 1991 197,687
Mall at Sierra Vista 1999 338,875/ Dillard's, Sears None
Sierra Vista, Arizona 142,383
Market Place Shopping Center 1976/1984 1,105,843/ Bergners, Famous Barr, One
Champaign, Illinois 1987,1990,1994,1999 492,712 Sears
McCreless Mall (6) 1962/ 477,646/ Beall's One
San Antonio, Texas 1985,1997 291,788
North Plains Mall 1985/ 298,993/ Beall's, Dillard's, JCPenney, None
Clovis, New Mexico 1988 103,449 Sears
Northridge Fashion Center 1971/ 1,516,383/ JCPenney, Macy's, Robinsons-May, None
Northridge (Los Angeles), 1995,1997 691,940 Sears
California
North Temple Plaza 1970 10,085/ Albertsons, Rite Aid N/A
Salt Lake City, Utah 10,085
North Town Mall 1955/ 1,056,391/ The Bon Marche, The Emporium (9), None
Spokane, Washington 1961,1977,1984,1989, 503,140 JCPenney, Mervyn's, Sears
1992,1999-2000
</Table>
16 of 47
<Table>
<Caption>
TOTAL GLA/MALL
YEAR AND FREESTANDING
NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR
LOCATION (1) OR EXPANDED (SQUARE FEET) (2) ANCHORS/SIGNIFICANT TENANTS VACANCIES (3)
- --------------------- ----------- ----------------- --------------------------------------- -------------
Oakwood Mall 1986/ 823,004/ JCPenney, Marshall Field's, None
Eau Claire, Wisconsin 1991,1995,1997 337,928 Scheel's All Sports, Sears, Younkers
Orem Plaza-Center Street 1977/ 85,221/ Savers, Showbiz Pizza N/A
Orem, Utah 1989 85,221
Orem Plaza-State Street 1975 27,497/ Rite Aid, Staples N/A
Orem, Utah 27,497
Park Place 1974/ 1,037,013/ Dillard's, Macy's, Sears None
Tucson, Arizona 1998,2001 455,556
Pecanland Mall 1985 946,995/ Dillard's, JCPenney, None
Monroe, Louisiana 328,999 McRae's, Mervyn's, Sears
Piedmont Mall 1984/ 662,248/ Belk, Belk Men's, JCPenney, One
Danville, Virginia 1995 199,628 Sears
Pierre Bossier Mall 1982/ 612,580/ Dillard's, JCPenney, One
Bossier City (Shreveport), 1985,1993 230,676 Sears, Stage
Louisiana
Pine Ridge Mall 1981 610,305/ The Bon Marche, Dillard's, JCPenney None
Pocatello, Idaho 172,318 Sears, ShopKo
The Pines 1986/ 604,989/ Dillard's, JCPenney, None
Pine Bluff, Arkansas 1990 265,282 Sears, Wal-Mart
Plaza 800 1975 176,431/ Albertsons, ShopKo N/A
Reno, Nevada 176,431
Plaza 9400 1979 207,980/ Albertsons, Fred Meyer N/A
Sandy, Nevada 207,980
Prince Kuhio Plaza 1985/ 504,427/ JCPenney (5), Macy's, Sears One
Hilo, Hawaii 1994,1999 271,805
Provo Towne Center (7) 1998 801,597/ Dillard's, JCPenney, Sears None
Provo, Utah 309,878
Red Cliffs Mall 1990 385,476/ Dillard's, JCPenney, Sears One
St. George, Utah 108,419
Red Cliffs Plaza 1994 57,304/ America's Best Furniture N/A
St. George, Utah 57,304 Warehouse
Regency Square Mall 1968/ 1,455,865/ Belk, Dillard's, JCPenney, One
Jacksonville, Florida 1992,1998,2001 576,864 Sears
Rio West Mall 1981/ 445,076/ Beall's, JCPenney, Kmart None (8)
Gallup, New Mexico 1991,1998 263,943
River Falls Mall 1990 754,974/ Dillard's, Toys 'R' Us, Wal-Mart None
Clarksville, Indiana 409,936
River Hills Mall 1991/ 646,113/ Herberger's, JCPenney, None
Mankato, Minnesota 1996 284,064 Sears, Target
Riverlands Shopping Center 1965/ 187,718/ Big Lots N/A
LaPlace (New Orleans), 1984,1990 187,718
Louisiana
River Pointe Plaza 1988 224,147/ Albertsons, ShopKo N/A
West Jordan, Utah 224,147
</Table>
17 of 47
<Table>
<Caption>
TOTAL GLA/MALL
YEAR AND FREESTANDING
NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR
LOCATION (1) OR EXPANDED (SQUARE FEET) (2) ANCHORS/SIGNIFICANT TENANTS VACANCIES (3)
- --------------------- ----------- ----------------- --------------------------------------- -------------
Riverside Plaza 1977/ 174,655/ Big Lots, Macy's, Rite Aid N/A
Provo, Utah 1993 174,655
RiverTown Crossings 1999 1,256,814/ Galyans, JCPenney, Kohl's, None
Grandville (Grand Rapids), 529,843 Marshall Field's, Sears, Younkers
Michigan
Salem Center 1979/ 648,556/ JCPenney, Meier & Frank, Mervyn's, None
Salem, Oregon 1987,1995 210,556 Nordstrom
Silver Lake Mall 1989/ 333,755/ The Bon Ton, The Emporium (9), JCPenney, None
Coeur d'Alene, Idaho 1995 116,262 Sears
Sooner Mall 1976/ 508,585/ Dillard's, JCPenney, Old Navy, None
Norman, Oklahoma 1989,1999 168,513 Sears, Stein Mart
Southlake Mall 1976/ 1,017,347/ JCPenney, Macy's, Rich's, Sears None
Morrow (Atlanta), 1995,1999 278,847
Georgia
Southland Mall 1964/ 1,312,159/ JCPenney, Macy's, Mervyn's, Sears None
Hayward, California 1968,1972,1984 571,895
SouthShore Mall 1981 284,088/ JCPenney, Sears None
Aberdeen, Washington 150,313
Southwest Plaza 1983/ 1,285,095/ Dillard's, Foley's, JCPenney, Sears One
Littleton (Denver), 1994,1995,2001 647,918
Colorado
Spokane Valley Mall (7) 1997 739,140/ The Bon Marche, JCPenney, Sears None
Spokane, Washington 360,056
Spokane Valley Plaza 2001 132,048/ Linens 'n Things, Old Navy, N/A
Spokane, Washington 132,048 Sportsman's Warehouse
Spring Hill Mall 1980/ 1,108,992/ Carson Pirie Scott, JCPenney, Kohl's, None
West Dundee (Chicago), 1992,1997 376,196 Marshall Field's, Sears, Wickes Furniture
Illinois
Three Rivers Mall 1987 527,028/ The Bon Marche, The Emporium (9), None
Kelso, Washington 330,693 JCPenney, Sears
Tucson Mall 1982/ 1,304,899/ Dillard's, JCPenney, Macy's, None
Tucson, Arizona 1991,1993 446,635 Mervyn's, Robinsons-May, Sears
Twin Falls Crossing 1976 37,680/ Kalic Investors N/A
Twin Falls, Idaho 37,680
University Crossing 1971/ 199,136/ Barnes & Noble, Burlington Coat Factory, N/A
Orem, Utah 1975,1995 199,136 CompUSA, OfficeMax
Valley Hills Mall 1978/ 904,542/ Belk, Dillard's, JCPenney, Sears None
Hickory, North Carolina 1988,1990,1996 293,026
Valley Plaza Shopping Center 1967/ 1,162,335/ Gottschalks, JCPenney, None
Bakersfield, California 1988,1997,1998 435,646 Macy's, Robinsons-May, Sears
Victoria Ward 1972/1982,1988,1995, 695,473/ Borders Books, Consolidated Amusement N/A
Honolulu, Hawaii 1997,1999,2001 538,290 Theatres, Dave & Busters, Nordstrom Rack,
Office Depot, Ross Dress for Less,
Sports Authority
Visalia Mall 1964/ 439,833/ Gottschalks, JCPenney None
Visalia, California 1997 182,833
</Table>
18 of 47
<Table>
<Caption>
TOTAL GLA/MALL
YEAR AND FREESTANDING
NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR
LOCATION (1) OR EXPANDED (SQUARE FEET) (2) ANCHORS/SIGNIFICANT TENANTS VACANCIES (3)
- --------------------- ----------- ----------------- ------------------------------------------ -------------
West Valley Mall 1995/ 851,361/ Gottschalks, JCPenney, Ross Dress for Less, None
Tracy (San Francisco), 1997 490,886 Sears, Target
California
Westwood Mall 1972/ 454,984/ Elder-Beerman, JCPenney One
Jackson, Michigan 1978,1993 136,890
White Mountain Mall 1978 341,274/ Harley Davidson, Herberger's, JCPenney One
Rock Springs, Wyoming 174,766
Woodlands Village 1989 91,858/ Bashas', Wal-Mart N/A
Flagstaff, Arizona 91,858
Yellowstone Square 1973/ 222,075/ Albertsons N/A
Idaho Falls, Idaho 1977,1988 222,075
</Table>
(1) In certain cases, where a Center's location is part of a larger
metropolitan area, the metropolitan area is identified in parentheses.
(2) Includes square footage added in redevelopment/expansion projects.
(3) Anchor vacancy is not applicable for certain smaller strip mall,
community center or free-standing properties.
(4) Owned in a joint venture with independent, non-controlling minority
investors.
(5) Contract pending for replacement.
(6) Property subject to a contract for sale at January 21, 2003 and
scheduled to be sold by March 31, 2003.
(7) Owned in a joint venture with affiliate of one of the anchor stores
with a 25% minority ownership interest.
(8) One anchor has announced plans to close but is operating at the
property at December 31, 2002.
(9) Operating at December 31, 2002 but parent company has declared
bankruptcy.
(10) Operating at December 31, 2002 but scheduled for redevelopment into
Mall Stores in 2003 and 2004.
19 of 47
UNCONSOLIDATED CENTERS
<Table>
<Caption>
OWNERSHIP TOTAL GLA/MALL
YEAR OPENED/ INTEREST % AND FREESTANDING
NAME OF CENTER/ REMODELED OPERATING GLA ANCHOR
LOCATION (1) OR EXPANDED PARTNERSHIP SQUARE FEET(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES
- ------------------------- ----------- ----------- -------------- --------------------------- ---------
Alderwood Mall 1979/ 50 980,934/ The Bon Marche, JCPenney, None
Lynnwood (Seattle), 1995 308,646 Nordstrom, Sears
Washington
Altamonte Mall 1974/ 50 1,088,479/ Burdines, Dillard's, None
Altamonte Springs (Orlando), 1990,2002,2003 409,931 JCPenney, Sears
Florida
Arrowhead Towne Center 1993 16.7 1,131,276/ Dillard's, JCPenney,Mervyn's, None
Glendale, Arizona 393,329 Robinsons-May, Sears
Bay City Mall 1991/ 50 525,019/ JCPenney, Sears, None
Bay City, Michigan 1994,1997 209,368 Target, Younkers
Brass Mill Center and Commons 1997 50 1,181,596/ Filene's, JCPenney, One
Waterbury, Connecticut 598,958 Sears
Carolina Place 1991/ 50 1,099,981/ Belk, Dillard's, Hecht's, None
Pineville (Charlotte), 1994 326,479 JCPenney, Sears
North Carolina
Chula Vista Center 1962/ 50 885,739/ JCPenney, Macy's, None
Chula Vista (San Diego), 1988,1993,1994 324,479 Mervyn's, Sears
California
Clackamas Town Center 1981/ 50 1,184,448/ JCPenney, Meier & Frank, Meier None
Portland, Oregon 1993,1994 409,606 & Frank Home Store, Nordstrom,
Sears
Columbiana Centre 1990/ 50 831,515/ Belk, Dillard's, None
Columbia, South Carolina 1993 272,538 Parisian, Sears
Deerbrook Mall 1984/ 50 1,200,052/ Dillard's, Foley's, JCPenney, None
Humble (Houston), Texas 1996,1997 460,459 Mervyn's, Sears
Eastridge Mall 1970/ 51 1,358,744/ JCPenney, Macy's, Sears One (3)
San Jose, California 1982,1988,1995 501,263
First Colony Mall 1996 50 1,005,393/ Dillard's, Foley's, JCPenney, None
Sugar Land (Houston), Texas 386,345 Mervyn's
Florence Mall 1976/ 50 924,341/ JCPenney, Lazarus, Lazarus None
Florence 1994 371,934 Home Store, Sears
(Cincinnati, Ohio), Kentucky
Galleria at Tyler 1970/ 50 1,055,184/ JCPenney, Macy's, None
Riverside, California 1991,1996 441,724 Nordstrom, Robinsons-May
Glendale Galleria 1976/ 50 1,322,040/ JCPenney, Macy's, Mervyn's, None
Glendale, California 1983,1987 517,040 Nordstrom, Robinsons-May
Kenwood Towne Center 1959/1988 50 1,082,681/ Dillard's, Lazarus, Parisian None
Cincinnati, Ohio 481,089
Lakeland Square Mall 1988/ 50 901,214/ Belk, Burdines, Dillard's, None
Lakeland (Orlando), Florida 1990,1994 291,176 Dillard's Men's and Home Store,
JCPenney, Sears
Landmark Mall 1965/ 51 969,989/ Hecht's, Lord & Taylor, Sears One
Alexandria (Washington, D.C.), 1989,1990 359,052
Virginia
</Table>
20 of 47
<Table>
<Caption>
OWNERSHIP TOTAL GLA/MALL
YEAR OPENED/ INTEREST % AND FREESTANDING
NAME OF CENTER/ REMODELED OPERATING GLA ANCHOR
LOCATION (1) OR EXPANDED PARTNERSHIP SQUARE FEET(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES
- ------------------------- ----------- ----------- -------------- --------------------------- ---------
Mayfair 1958/ 51 1,060,273/ The Boston Store, None
Wauwatosa (Milwaukee), 1973,1986,1994, 2001 560,963 Marshall Field's
Wisconsin
Meadows Mall 1978/ 51 947,370/ Dillard's, JCPenney, Macy's, None
Las Vegas, Nevada 1987,1997 310,517 Sears
Montclair Plaza 1968/ 50 1,372,095/ JCPenney, Macy's, None
Montclair (San Bernadino), 1985 569,080 Nordstrom, Robinsons-May,
California Sears
Moreno Valley Mall 1992 50 1,035,273/ Gottschalks, JCPenney, None
Moreno Valley (Riverside), 429,739 Robinsons-May, Sears
California
Natick Mall 1966/ 50 1,155,711/ Filene's, Lord & Taylor, None
Natick (Boston), 1994 431,711 Macy's, Sears
Massachusetts
Neshaminy Mall 1968/ 25 1,043,011/ Boscov, Sears, None
Bensalem, Pennsylvania 1995,1998 439,416 Strawbridge and Clothiers
Newgate Mall 1981/ 50 686,060/ Dillard's, Gart Bros., Mervyn's, None
Ogden (Salt Lake City), 1994,1998 275,896 Sears
Utah
NewPark Mall 1980/ 50 1,137,559/ JCPenney, Macy's, Mervyn's, None
Newark (San Francisco), 1993 394,095 Sears, Target
California
Northbrook Court 1976/ 50 1,017,066/ Lord & Taylor, Marshall Field's, None
Northbrook (Chicago), 1995,1996 480,789 Neiman Marcus
Illinois
Northgate Mall 1972/ 51 824,430/ JCPenney, Proffitt's, Sears None
Chattanooga, Tennessee 1991,1997 381,810
North Point Mall 1993 50 1,365,903/ Dillard's, JCPenney, Lord & None
Alpharetta (Atlanta), Georgia 395,803 Taylor, Parisian, Rich's, Sears
The Oaks Mall 1978/ 51 906,009/ Belk, Burdines, Dillard's, None
Gainesville, Florida 1995 348,142 JCPenney, Sears
Oak View Mall 1991 51 866,595/ Dillard's, JCPenney, None
Omaha, Nebraska 262,335 Sears, Younkers
Oglethorpe Mall 1969/ 51 951,059/ Belk, JCPenney, Rich's, Sears None
Savannah, Georgia 1974,1982,1990,1992,2002 414,475
Park City Center 1970/ 51 1,368,029/ The Bon Ton, Boscov, JCPenney, None
Lancaster (Philadelphia), 1988,1997 504,840 Kohl's, Sears
Pennsylvania
The Parks at Arlington 1988/ 50 1,520,316/ Dillard's, Foley's, Galyans, None
Arlington (Dallas), Texas 1996,2002 472,371 The Great Indoors, JCPenney,
Mervyn's, Sears
Pavilions at Buckland Hills 1990/ 50 1,009,489/ Dick's Sporting Goods, Filene's, None
Manchester, Connecticut 1994 416,845 JCPenney, Lord & Taylor, Sears
Pembroke Lakes Mall 1992/ 50 1,106,467/ Burdines, Dillard's, None
Pembroke Pines 1997 395,192 Dillard's Men's and Home Store,
(Fort Lauderdale), Florida JCPenney, Sears
Quail Springs Mall 1980/ 50 1,130,633/ Dillard's, Foley's, None
Oklahoma City, Oklahoma 1992,1998,1999 442,780 JCPenney, Sears
</Table>
21 of 47
<Table>
<Caption>
OWNERSHIP TOTAL GLA/MALL
YEAR OPENED/ INTEREST % AND FREESTANDING
NAME OF CENTER/ REMODELED OPERATING GLA ANCHOR
LOCATION (1) OR EXPANDED PARTNERSHIP SQUARE FEET(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES
- ------------------------- ----------- ----------- -------------- --------------------------- ---------
Silver City Galleria 1992/ 50 1,015,314 Filene's, JCPenney, Sears Two
Taunton (Boston), 1999 433,628
Massachusetts
Steeplegate Mall 1990 50 488,450/ The Bon Ton, JCPenney, Sears None
Concord, New Hampshire 232,103
Stonebriar Centre 2000 50 1,652,840/ Foley's, Galyans, JCPenney, None
Frisco (Dallas), Texas 706,423 Macy's, Nordstrom, Sears
Superstition Springs 1990/ 16.7 1,084,607/ Dillard's, JCPenney, Mervyn's, None
East Mesa (Phoenix), 1994 377,913 Robinsons-May, Sears
Arizona
Town East Mall 1971/ 50 1,249,506/ Dillard's, Foley's, JCPenney, None
Mesquite (Dallas), 1986,1996,1998,2000 440,020 Sears
Texas
Tysons Galleria 1988/ 50 814,456/ Macy's, Neiman Marcus, None
McLean (Washington, D.C.), 1994,1997 302,523 Saks Fifth Avenue
Virginia
Vista Ridge Mall 1989/ 50 1,054,865/ Dillard's, Foley's, None
Lewisville (Dallas), Texas 1991 381,803 JCPenney, Sears
Washington Park Mall 1984/ 50 351,457/ Dillard's, JCPenney, None
Bartlesville, Oklahoma 1986 157,161 Sears
West Oaks Mall 1996/ 50 1,071,973/ Dillard's, JCPenney, None
Ocoee (Orlando), Florida 1998 428,491 Parisian, Sears
Westroads Mall 1968/ 51 1,119,719/ Galyans, JCPenney, The Jones None
Omaha, Nebraska 1990,1995,1999 354,419 Store, Von Maur, Younkers
Willowbrook Mall 1981/ 50 1,510,909/ Dillard's, Foley's, Foley's Home None
Houston, Texas 1992 404,325 Store, JCPenney, Lord & Taylor,
Sears
The Woodlands Mall 1994/ 50 1,177,713/ Dillard's, Foley's, JCPenney, None
The Woodlands 1998 349,645 Mervyn's, Sears
(Houston), Texas
</Table>
(1) In certain cases where a Center's location is part of a larger
metropolitan area, the metropolitan area is identified in parenthesis.
(2) Includes square footage added in redevelopment/expansion projects.
(3) Location scheduled for demolition and renovation.
ANCHORS Anchors have traditionally been a major factor in
the public's image of an enclosed shopping center.
Anchors are generally department stores whose
merchandise appeals to a broad range of shoppers.
Anchors either own their stores, the land under
them and adjacent parking areas, or enter into
long-term leases at rates that are generally lower
than the rents charged to Mall Store tenants.
Although the Portfolio Centers receive a smaller
percentage of their operating income from Anchors
than from Mall Stores, strong Anchors play an
important part in maintaining customer traffic and
making the Portfolio Centers desirable locations
for Mall Store tenants.
The following table indicates the parent company of
each Anchor and sets forth the number of stores and
square feet owned or leased by each Anchor at the
Portfolio Centers as of December 31, 2002.
22 of 47
GENERAL GROWTH PROPERTIES, INC.
PORTFOLIO ANCHORS
AS OF DECEMBER 31, 2002
<Table>
<Caption>
TOTAL SQUARE FEET
NAME STORES (000'S)
---- ------ -------
Sears
Sears 100 14,351
The Great Outdoors 1 133
--- ------
Sub-Total Sears 101 14,484
JCPenney 101 11,756
Dillard's Inc.
Dillard's 53 8,512
Dillard's Men's and Home Store 4 340
--- ------
Sub-Total Dillard's Inc. 57 8,852
=== ======
Target Corporation
Mervyn's 24 1,992
Target 16 1,792
Marshall Field's 13 1,917
--- ------
Sub-Total Target Corporation 53 5,701
=== ======
May Department Stores Company
Foley's 12 2,180
Robinsons-May 9 1,465
Lord & Taylor 6 701
Filene's 4 667
Meier & Frank 3 597
Hecht's 2 345
Famous Barr 2 272
Strawbridge and Clothiers 1 218
Meier & Frank Home Store 1 166
Foley's Home Store 1 156
The Jones Store 1 153
--- ------
Sub-Total May Department Stores Company 42 6,920
=== ======
Federated Department Stores, Inc.
Macy's 20 3,549
The Bon Marche 9 956
Rich's 5 937
Burdines 5 676
Lazarus 2 361
Lazarus Home Store 1 112
--- ------
Sub-Total Federated Department Stores, Inc. 42 6,591
=== ======
</Table>
23 of 47
GENERAL GROWTH PROPERTIES, INC.
PORTFOLIO ANCHORS
AS OF DECEMBER 31, 2002
(continued)
<Table>
<Caption>
TOTAL SQUARE FEET
NAME STORES (000'S)
---- ------ -------
Saks Holdings Incorporated
Younkers 9 1,030
Parisian 4 542
Herberger's 3 187
McRae's 2 250
Boston Store 1 211
Bergner's 1 154
Carson Pirie Scott 1 138
Saks Fifth Avenue 1 120
Proffitt's 1 90
----- ------
Sub-Total Saks Holdings Incorporated 23 2,722
===== ======
Belk
Belk 8 1,172
Belk Men's 1 34
----- ------
Sub-Total Belk 9 1,206
===== ======
Nordstrom 7 855
Kohl's 6 556
Gottschalks 5 568
The Bon Ton 4 356
Galyans 4 337
The Emporium 4 205
Neiman-Marcus 3 423
Scheel's All Sports 3 268
Beall's 3 81
Ross Dress for Less 3 81
Boscov 2 412
Kmart 2 171
Wal-Mart 2 196
Von Maur 2 329
Elder-Beerman 2 141
Cub Foods 1 130
Dick's Sporting Goods 1 80
Rosa's Home Store 1 50
Toys 'R' Us 1 48
Stein Mart 1 39
Stage 1 35
Old Navy 1 34
Home Depot 1 135
Shopko 1 112
Gart Bros. 1 64
Wicks Furniture 1 51
Kaye Home Furnishings 1 51
Harley Davidson 1 45
Dave & Buster's 1 44
Nordstrom Rack 1 31
Office Depot 1 31
Borders 1 30
----- ------
69 5,989
===== ======
</Table>
24 of 47
GROUND LEASES The Company currently leases the land under Rio
West Mall, Prince Kuhio Plaza, Tucson Mall and the
office building owned and used by the Company as
its headquarters, a portion of the land under
Lansing Mall, Mall St. Vincent and Ala Moana malls,
a portion of the land at certain retail centers
included in the JP Realty Assets, and a portion of
the land under the Apache, SouthShore and Bayshore
parking areas. In addition, a portion of the land
underlying Kenwood Towne Center, owned by
GGP/Teachers, is subject to a long-term ground
lease. The leases generally contain various
purchase options available to the Company and
typically provide for a right of first refusal in
favor of the Company in the event of a proposed
sale of the property by the landlord.
For other information concerning the properties in
the Company Portfolio see "Item 1 - Business -
Business of the Company" and for additional
information concerning the mortgage debt
encumbering the Wholly-Owned Centers, see Note 5.
As stated in Item 1 above, management of the
Company believes that each of the properties in the
Company Portfolio is adequately insured.
ITEM 3. LEGAL The Company is not currently involved in any
PROCEEDINGS material litigation nor, to the Company's
knowledge, is any material litigation currently
threatened against the Company, the properties or
any of the Unconsolidated Real Estate Affiliates.
For information about certain environmental
matters, see "Item 1 - Business - Environmental
Matters."
ITEM 4. SUBMISSION OF No matters were submitted to a vote of General
MATTERS TO A Growth's stockholders during the fourth quarter of
VOTE OF SECURITY fiscal 2002.
HOLDERS
25 of 47
PART II The Common Stock is listed on the New York Stock
ITEM 5. MARKET Exchange ("NYSE") and trades under the symbol
FOR REGISTRANT'S "GGP". As of March 13, 2003, the 62,748,198
COMMON EQUITY outstanding shares of Common Stock were held by
AND RELATED approximately 1,777 stockholders of record. The
STOCKHOLDER closing price per share of the Common Stock on the
MATTERS NYSE on such date was $52.63 per share.
Set forth below are the high and low sales prices
per share of Common Stock for each such period as
reported by the NYSE, and the distributions per
share of Common Stock declared for each such
period.
<Table>
<Caption>
PRICE
2002 ------------------- DECLARED
QUARTER ENDED HIGH LOW DISTRIBUTION
--------------------- -------- -------- ---------------
March 31 $ 44.74 $ 38.00 $ .65
June 30 $ 51.00 $ 44.18 $ .65
September 30 $ 51.80 $ 41.35 $ .72
December 31 $ 52.29 $ 45.15 $ .72
</Table>
<Table>
<Caption>
PRICE
2001 --------------------- DECLARED
QUARTER ENDED HIGH LOW DISTRIBUTION
--------------------- --------- -------- -------------
March 31 $ 38.38 $ 33.00 $ .53
June 30 $ 39.36 $ 33.75 $ .53
September 30 $ 39.51 $ 32.80 $ .65
December 31 $ 40.50 $ 34.35 $ .65
</Table>
<Table>
<Caption>
PRICE
2000 -------------------- DECLARED
QUARTER ENDED HIGH LOW DISTRIBUTION
--------------------- -------- -------- -------------
March 31 $ 30.56 $ 26.38 $ .51
June 30 $ 34.19 $ 29.63 $ .51
September 30 $ 34.50 $ 31.69 $ .51
December 31 $ 36.50 $ 28.69 $ .53
</Table>
26 of 47
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in Thousands, except per share amounts)
The following table sets forth selected financial data for the Company which is
derived from, and should be read in conjunction with, the audited Consolidated
Financial Statements and the related Notes and Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in this
Annual Report.
<Table>
<Caption>
2002 2001 2000 1999 1998
----------- ---------- ---------- ----------- -----------
OPERATING DATA
Revenue $ 980,466 $ 803,709 $ 698,767 $ 612,342 $ 426,576
Network discontinuance costs -- 66,000 -- -- --
Depreciation and amortization 180,028 145,352 119,663 108,272 75,227
Other operating expenses 369,731 295,843 226,234 206,088 151,784
Interest expense, net 215,246 209,622 212,649 174,104 109,840
Income allocated to
minority interests (87,003) (40,792) (52,380) (33,058) (29,794)
Equity in income of
unconsolidated affiliates 82,118 63,566 50,063 19,689 11,067
Net gain on sales 25 -- 44 4,412 196
----------- ---------- ---------- ----------- -----------
Income before extraordinary items and
cumulative effect of accounting change 210,601 109,666 137,948 114,921 71,194
Extraordinary items (1,343) (14,022) -- (13,796) (4,749)
Cumulative effect of accounting change -- (3,334) -- -- --
----------- ---------- ---------- ----------- -----------
Net income 209,258 92,310 137,948 101,125 66,445
----------- ---------- ---------- ----------- -----------
Convertible Preferred Stock Dividends (24,467) (24,467) (24,467) (24,467) (13,433)
Net income available
to common stockholders $ 184,791 $ 67,843 $ 113,481 $ 76,658 $ 53,012
=========== ========== ========== =========== ===========
Earnings before extraordinary items
and cumulative effect of accounting
change per share-Basic $ 2.99 $ 1.61 $ 2.18 $ 1.97 $ 1.60
Earnings before extraordinary items
and cumulative effect of accounting
change per share-Diluted 2.97 1.61 2.18 1.96 1.59
Earnings per share-Basic 2.97 1.28 2.18 1.67 1.46
Earnings per share-Diluted 2.95 1.28 2.18 1.66 1.46
Distributions Declared Per Share $ 2.74 $ 2.36 $ 2.06 $ 1.98 $ 1.88
CASH FLOW DATA
Operating Activities $ 508,363 $ 207,125 $ 287,103 $ 205,705 $84,764
Investing Activities (1,013,640) (367,366) (356,914) (1,238,268) (1,479,607)
Financing Activities 398,162 293,767 71,447 1,038,526 1,388,575
FUNDS FROM OPERATIONS (1)
Operating Partnership $ 479,971 $ 376,799 $ 330,299 $ 274,234 $192,274
Minority Interest (114,894) (101,844) (90,805) (82,631) (69,182)
Funds From Operations-Company 365,077 274,955 239,494 191,603 123,092
BALANCE SHEET DATA
Investment in Real Estate Assets-Cost $ 7,724,515 $5,707,967 $5,439,466 $ 5,023,690 $4,063,097
Total Assets 7,280,822 5,646,807 5,284,104 4,954,895 4,027,474
Total Debt 4,592,311 3,398,207 3,244,126 3,119,534 2,648,776
Preferred Units 468,201 175,000 175,000 -- --
Common Units 377,746 380,359 355,158 356,540 299,431
Convertible Preferred Stock 337,500 337,500 337,500 337,500 337,500
Stockholders' Equity $ 1,196,525 $1,183,386 $ 938,418 $ 927,758 $ 585,707
</Table>
(1) Funds from Operations (as defined below) does not represent cash flow
from operations as defined by Generally Accepted Accounting Principles
("GAAP") and is not necessarily indicative of cash available to fund
all cash requirements.
27 of 47
FUNDS FROM Funds from Operations is used by the real estate
OPERATIONS industry and investment community as a
supplemental measure of the performance of real
estate companies. As revised in October 1999, the
National Association of Real Estate Investment
Trusts ("NAREIT") defines Funds from Operations as
net income (loss) (computed in accordance with
GAAP), excluding gains (or losses) from debt
restructuring and sales of properties, plus real
estate related depreciation and amortization and
after adjustments for unconsolidated partnerships
and joint ventures. In calculating its Funds from
Operations, the Company also excluded $66,000 of
network discontinuance costs recognized in 2001
and approximately $6,705 of minimum rent
recognized in 2002 pursuant to SFAS No. 141 and
No. 142 (Note 13). The Company's Funds from
Operations may not be directly comparable to
similarly titled measures reported by other real
estate investment trusts. Funds from Operations
does not represent cash flow from operating
activities in accordance with GAAP and should not
be considered as an alternative to net income
(determined in accordance with GAAP) as an
indication of the Company's financial performance
or to cash flow from operating activities
(determined in accordance with GAAP) as a measure
of the Company's liquidity, nor is it indicative
of funds available to fund the Company's cash
needs, including its ability to make cash
distributions. In accordance with past practices
and consistent with current recommendations of
NAREIT, the Company has and will continue to
provide GAAP earnings and earnings per share
information in its periodic reports to investors
and the real estate investment community.
RECONCILIATION OF NET INCOME DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES TO FUNDS FROM OPERATIONS:
<Table>
<Caption>
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
Net Income available to common stockholders $ 184,791 $ 67,843 $ 113,481 $ 76,658 $ 53,012
Extraordinary items - charges related to early retirement 1,343 14,022 -- 13,796 4,749
of debt
Cumulative effect of accounting change -- 3,334 -- -- --
Allocations to Operating Partnership unitholders 58,154 25,128 43,026 33,058 29,794
Net (gain) loss on sales (25) -- 1,005 (4,412) (196)
Depreciation and amortization 242,413 200,472 172,787 155,134 104,915
Network discontinuance costs -- 66,000 -- -- --
SFAS #141 and #142 below-market lease rent accretion (6,705) -- -- -- --
---------- ---------- ---------- ---------- ----------
Funds from Operations - Operating Partnership 479,971 376,799 330,299 274,234 192,274
---------- ---------- ---------- ---------- ----------
Funds from Operations - Minority Interest (114,894) (101,844) (90,805) (82,631) (69,182)
---------- ---------- ---------- ---------- ----------
Funds from Operations - Company $ 365,077 $ 274,955 $ 239,494 $ 191,603 $ 123,092
========== ========== ========== ========== ==========
</Table>
28 of 47
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
All references to numbered Notes are to specific
footnotes to the Consolidated Financial Statements
of the Company included in this Annual Report and
which descriptions are incorporated into the
applicable response by reference. The following
discussion should be read in conjunction with such
Consolidated Financial Statements and related
Notes. Capitalized terms used, but not defined, in
this Management's Discussion and Analysis of
Financial Condition and Results of Operations have
the same meanings as in such Notes.
FORWARD-LOOKING Certain statements contained in this Annual Report
INFORMATION may include certain forward-looking information
statements, within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as
amended, including (without limitation) statements
with respect to anticipated future operating and
financial performance, growth and acquisition
opportunities and other similar forecasts and
statements of expectation. Words such as "expects",
"anticipates", "intends", "plans", "believes",
"seeks", "estimates" and "should" and variations of
these words and similar expressions, are intended
to identify these forward-looking statements.
Forward-looking statements made by the Company and
its management are based on estimates, projections,
beliefs and assumptions of management at the time
of such statements and are not guarantees of future
performance. The Company disclaims any obligation
to update or revise any forward-looking statement
based on the occurrence of future events, the
receipt of new information or otherwise.
Actual future performance, outcomes and results may
differ materially from those expressed in
forward-looking statements made by the Company and
its management as a result of a number of risks,
uncertainties and assumptions. Representative
examples of these factors include (without
limitation) general industry and economic
conditions, interest rate trends, cost of capital
and capital requirements, availability of real
estate properties, inability to consummate
acquisition opportunities, competition from other
companies and venues for the sale/distribution of
goods and services, changes in retail rental rates
in the Company's markets, shifts in customer
demands, tenant bankruptcies or store closures,
changes in vacancy rates at the Company's
properties, changes in operating expenses,
including employee wages, benefits and training,
governmental and public policy changes, changes in
applicable laws, rules and regulations (including
changes in tax laws), the ability to obtain
suitable equity and/or debt financing, and the
continued availability of financing in the amounts
and on the terms necessary to support the Company's
future business.
USE OF ESTIMATES The preparation of financial statements in
AND CRITICAL conformity with accounting principles generally
ACCOUNTING POLICIES 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. Critical accounting policies
are those that are both significant to the overall
presentation of the Company's financial condition
and results of operations and require management
to make difficult, complex or subjective
judgments. For example, significant estimates and
assumptions have been made with respect to useful
lives of assets, capitalization of development and
leasing costs, recoverable amounts of receivables
and deferred taxes and initial valuations and
related amortization periods of deferred costs and
intangibles, particularly with respect to property
acquisitions, as further discussed below. Actual
results could differ from those estimates for a
variety of reasons, certain of which are discussed
below. The Company's critical accounting policies
have not changed during 2002, except for the
election, during the second quarter of 2002, to
adopt the fair value based employee stock-based
compensation expense recognition provisions of
SFAS 123, as discussed in Note 9.
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INITIAL VALUATIONS AND ESTIMATED USEFUL LIVES OR
AMORTIZATION PERIODS FOR PROPERTY AND INTANGIBLES:
Upon acquisition of an investment property, the
Company makes an initial assessment of the initial
valuation and composition of the assets and
liabilities acquired. These assessments consider
fair values of the respective assets and
liabilities and are determined based on estimated
future cash flows using appropriate discount and
capitalization rates. The estimated future cash
flows that are used for this analysis reflect the
historical operations of the property, known trends
and changes expected in current market and economic
conditions which would impact the property's
operations, and the Company's plans for such
property. These estimates of cash flows were
particularly important in 2002 given the
application of SFAS 141 and 142 (Note 13) for the
allocation of purchase price between land,
buildings and improvements and other identifiable
intangibles. If events or changes in circumstances
concerning the property occur, this may indicate
that the carrying values or amortization periods of
the assets and liabilities may need to be adjusted.
The resulting recovery analysis also depends on an
analysis of future cash flows to be generated from
the property's assets and liabilities. Changes in
the Company's overall plans and its views on
current market and economic conditions may have a
significant impact on the resulting estimated
future cash flows of a property that are analyzed
for these purposes. As the resulting cash flows
are, under current accounting standards, the basis
for the carrying values of the assets and
liabilities and any subsequent impairment losses
recognized, the impact of these estimates on the
Company's operations could be substantial. For
example, the net consolidated carrying value of the
land, buildings and other assets, net of
identifiable intangible liabilities, at December
31, 2002 for acquisitions completed by the Company
in 2002 was approximately $1.6 billion.
RECOVERABLE AMOUNTS OF RECEIVABLES AND DEFERRED
TAXES: The Company makes periodic assessments of
the collectability of receivables and the
recoverability of deferred taxes based on a
specific review of the risk of loss on specific
accounts or amounts. This analysis places
particular emphasis on past-due accounts and
considers information such as, among other things,
the nature and age of the receivables, the payment
history and financial condition of the debtor and
the basis for any disputes or negotiations with the
debtor. The resulting estimate of any allowance or
reserve related to the recovery of these items is
subject to revision as these factors change and is
sensitive to the effects of economic and market
conditions on such debtors.
CAPITALIZATION OF DEVELOPMENT AND LEASING COSTS:
The Company has historically capitalized the costs
of development and leasing activities of its
properties. These costs are incurred both at the
property location and at the regional and corporate
office level. The amount of capitalization depends,
in part, on the identification of certain
activities to specific projects and lease
proposals. The amount of costs capitalized and the
recovery of such costs depends upon the ability to
make such specific identifications or justifiable
allocations. Differences in methodologies of cost
identifications and documentation, as well as
differing assumptions as to the time incurred on
different projects, can yield significant
differences in the amounts capitalized.
CERTAIN INFORMATION As of December 31, 2002, the Company owns 100% of
ABOUT THE COMPANY the Wholly-Owned Centers and GGMI, 50% of the
PORTFOLIO common stock of GGP/Homart, 50% of the membership
interests in GGP/Homart II, 50% of the membership
interests in GGP/Teachers, 51% of the common stock
of GGP Ivanhoe, 51% of the common stock of GGP
Ivanhoe III and 50% of Quail Springs Mall and Town
East Mall. Reference is made to Notes 3 and 4 for
a further discussion of such entities owned by
the Company.
As of December 31, 2002, GGP/Homart owns interests
in twenty-two shopping centers, GGP/Homart II owns
interests in ten shopping centers, GGP/Teachers
owns
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interests in five shopping centers, GGP
Ivanhoe owns interests in two shopping centers and
GGP Ivanhoe III owns interests in eight shopping
centers (collectively, with the Wholly-Owned
Centers, Quail Springs Mall and Town East Mall, the
"Company Portfolio").
As used in this Annual Report, the term "GLA"
refers to gross leaseable retail space, including
Anchors and mall tenant areas; the term "Mall GLA"
refers to gross leaseable retail space, excluding
Anchors; the term "Anchor" refers to a department
store or other large retail store; the term "Mall
Stores" refers to stores (other than Anchors) that
are typically specialty retailers who lease space
in the structure including, or attached to, the
primary complex of buildings that comprise a
shopping center; the term "Freestanding GLA" means
gross leaseable area of freestanding retail stores
in locations that are not attached to the primary
complex of buildings that comprise a shopping
center; and the term "total Mall Stores sales"
means the gross revenue from product sales to
customers generated by the Mall Stores.
The Mall Store and Freestanding Store portions of
the centers in the Company Portfolio which were not
undergoing significant redevelopment on December
31, 2002 had an occupancy rate of 91% as of such
date. This occupancy percentage remained constant
as compared to the December 31, 2001 occupancy
percentage of the Mall Store and Freestanding Store
portions of the centers in the Company Portfolio
which were not undergoing significant
redevelopment.
Total annualized Mall Store sales averaged $355 per
square foot for the Company Portfolio for the year
ended December 31, 2002, approximately equal to the
comparable amount for 2001. Comparable Mall Store
sales are retail sales of those tenants that were
open the previous 12 months. Therefore, comparable
Mall Store sales in the year ended December 31,
2002 are of those tenants that were also operating
in the year ended December 31, 2001. Comparable
Mall Store sales in the year ended December 31,
2002 decreased by 2.1% as compared to the same
period in 2001.
The Company Portfolio (excluding 2002 acquisitions)
average Mall Store rent per square foot from leases
that expired in the year ended December 31, 2002
was $29.90. The Company Portfolio benefited from
increasing rents inasmuch as the average Mall Store
rent per square foot on new and renewal leases
(excluding 2002 acquisitions) executed during this
same period was $36.00, or $6.10 per square foot
above the average for expiring leases.
RESULTS OF OPERATIONS GENERAL:
OF THE COMPANY Company revenues are primarily derived from
tenants in the form of fixed minimum rents,
overage rents and recoveries of operating
expenses. Inasmuch as the Company's consolidated
financial statements reflect the use of the equity
method to account for its investments in
GGP/Homart, GGP/Homart II, GGP/Teachers, GGP
Ivanhoe, GGP Ivanhoe III, Quail Springs Mall and
Town East Mall, the discussion of results of
operations of the Company below relates primarily
to the revenues and expenses of the Wholly-Owned
Centers and GGMI. In addition, the consolidated
results of operations of the Company were impacted
by the following acquisitions: in April 2000, the
Company purchased a 100% interest in Crossroads
Center; on January 1, 2001, the Operating
Partnership purchased the common stock of GGMI and
the preferred stock of GGMI, which was 100% owned
by the Operating Partnership, was cancelled; in
August 2001, the Company purchased a 100% interest
in Tucson Mall; in May 2002, the Victoria Ward
Assets were acquired; in July 2002, the JP Realty
Assets were acquired; in August 2002, Prince Kuhio
Plaza was acquired; in September 2002, Pecanland
Mall was acquired; and in December 2002, Southland
Mall was acquired. Such 2002 acquisitions
represented a net consolidated carrying
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value at December 31, 2002 of approximately $1.6
billion of net property and equipment, or
approximately 26% of the Company's consolidated
net property and equipment of approximately $6.2
billion. For purposes of the following discussion
of the results of operations, the net effect of
acquisitions will include the effect of the new
acquisitions in 2002, 2001 and 2000 and the
consolidation of GGMI's operations in 2001.
COMPARISON OF YEAR ENDED DECEMBER 31, 2002 TO YEAR
ENDED DECEMBER 31, 2001 Total revenues for 2002
were $980.5 million, which represents an increase
of $176.8 million or approximately 22.0% from
$803.7 million for the year ended December 31,
2001. New acquisitions accounted for approximately
$104.7 million of the increase in total revenues
with increases in tenant recoveries and fee income
as discussed below representing the majority of the
remaining increase. Minimum rent for the year ended
December 31, 2002 increased by $118.6 million or
25.3% from $468.6 million for the year ended
December 31, 2001 to $587.2 million for the year
ended December 31, 2002. The effect of acquisitions
comprised $74.9 million of such increase in minimum
rents (including approximately $4.6 million related
to SFAS 141 and 142 (Notes 2 and 13)), while the
remainder of such increase was due primarily to
base rents on expansion space and specialty leasing
increases at the comparable centers (properties
owned for the entire time during the year ended
December 31, 2002 and 2001). Tenant recoveries
increased by $34.4 million or 15.5% from $221.9
million in 2001 to $256.3 million in 2002. Of the
increase in tenant recoveries, approximately $24.6
million was attributable to new acquisitions and
the remainder was due to increased recoverable
operating costs at the comparable centers. Overage
rents increased $5.3 million or 23.2% from $22.8
million in 2001 to $28.1 million in 2002. The
increase in overage rents is substantially all due
to new acquisitions. Fees and other income
increased by $18.5 million or 20.5% from $90.4
million to $108.9 million for the year ended
December 31, 2002 primarily due to increases in
acquisition, financing, leasing and development
fees.
Total operating expenses, including depreciation
and amortization, increased by approximately $42.6
million or 8.4%, from $507.2 million for the year
ended December 31, 2001 to $549.8 million for the
year ended December 31, 2002. Excluding the effects
of the $66 million of Network discontinuance costs
which were incurred in 2001 but not in 2002, total
operating expenses increased approximately $108.6
million in 2002. Of the increase, $53.4 million was
due to the effect of acquisitions as discussed
below. Property operating expenses increased by
$60.7 million or 26.0% from $234.2 million for the
year ended December 31, 2001 to $294.9 million for
the year ended December 31, 2002, approximately
$26.0 million of which was attributable to the
effect of acquisitions. The remainder was due
primarily to approximately $27.5 million in
increases in net payroll and professional services
costs including approximately $11.8 million of
compensation expenses recognized due to the vesting
of certain of the Company's threshold vesting stock
options as described in Note 9.
Interest expense for the year ended December 31,
2002 was $218.9 million, an increase of $4.6
million or 2.1%, from $214.3 million for the year
ended December 31, 2001. This increase was
primarily due to loans incurred or assumed in
conjunction with new acquisitions, partially offset
by lower interest rates in 2002.
Equity in income of unconsolidated affiliates
increased by approximately $18.5 million or 29.1%
to earnings of $82.1 million for the year ended
December 31, 2002, from $63.6 million for the year
ended December 31, 2001. This increase was
partially a result of reduced net interest expense
for such affiliates in 2002 due to reduced interest
rates on their mortgage loans primarily resulting
from refinancings in 2001. In addition, the
Company's equity in the income of GGP Ivanhoe III
increased approximately $8.7 million, primarily
caused by increases in minimum rents, tenant
recoveries and specialty
32 of 47
leasing revenues at the properties. The Company's
equity in the income of GGP/Teachers resulted in
an increase in earnings of approximately $6.0
million for 2002.
Extraordinary items were approximately $1.3 million
in 2002, primarily due to the Company's $0.7
million equity interest in the extraordinary item
at Town East, an Unconsolidated Real Estate
Affiliate, related to a prepayment penalty incurred
in connection with the refinancing of mortgage debt
collateralized by Town East Mall.
COMPARISON OF YEAR ENDED DECEMBER 31, 2001 TO YEAR
ENDED DECEMBER 31, 2000 Total revenues for 2001
were $803.7 million, which represents an increase
of $104.9 million or approximately 15.0% from
$698.8 million in 2000. Approximately $12.8 million
or 12.2% of the increase was from properties
acquired or developed after January 1, 2000.
Minimum rent during 2001 increased $28.6 million or
6.5% from $440 million in 2000 to $468.6 million.
The acquisition and development of properties
generated a $7.6 million increase in minimum rents.
Expansion space, specialty leasing and a
combination of occupancy and rental charges at the
comparable centers accounted for the remaining
increase in minimum rents. Tenant recoveries
increased by $8.4 million or 3.9% from $213.5
million in 2000 to $221.9 million in 2001. The
increase in tenant recoveries was generated by a
combination of new acquisitions and increased
recoverable operating costs at the comparable
centers. Overage rents decreased $5.8 million or
20.3 % from $28.6 million in 2000 to $22.8 million
in 2001. The majority of the decline in overage
rents was due to the conversion of overage rent to
minimum rent on the releasing of tenant space and
due to general economic conditions as discussed
below. Fees for 2001 increased $ 70.3 million or
1004.3% from $7.0 million in 2000 to $77.3 million
in 2001. The increase was primarily generated by
the acquisition of GGMI as described above and in
Notes 1 and 4.
Total operating expenses, including depreciation
and amortization, increased by approximately 46.6%
or $161.3 million, from $345.9 million in 2000 to
$507.2 million in 2001. Part of the increase in
total operating expenses was attributable to the
$66 million provision for the discontinuance of the
Company's Network Services development activities
as more fully described in Note 11. The Company's
Network Services development activities was an
effort to create for retailers a suite of broadband
applications to support retail tenant operations,
on-line sales, and private wide area network
services to be delivered by the Broadband System as
discussed below. The Network Services development
activities were discontinued on June 29, 2001,
resulting in a charge to operations of $65 million
in the three months ended June 30, 2001, which
represented the Company's entire investment in the
Network Services development activities. The
Company incurred $1 million of net incremental
discontinuance costs in the three months ended
September 30, 2001 related primarily to payroll and
severance costs and expects that any net additional
costs related to the discontinuance of the Network
Services development activities will not be
significant. Depreciation expense increased by
approximately $25.7 million, primarily due to
increased depreciation on property additions
including Broadband System additions which have
shorter depreciable lives. An increase of $65.9
million was attributable to the consolidation of
GGMI as described above and in Notes 1 and 4. The
increase in total operating expenses from the new
acquisitions described above consists primarily of
approximately $1.2 million of real estate taxes,
$3.2 million of property operating costs, and $2.7
million of depreciation and amortization.
Interest income decreased approximately $7.8
million or 62.4% from $12.5 million in 2000 to $4.7
million in 2001. The note receivable from GGMI
generated $6.8 million of interest income in 2000,
whereas no such interest income was recognized in
2001 due to the consolidation of GGMI in 2001 as
discussed above. The corresponding interest expense
incurred by GGMI in 2000 was reflected as a
component of the
33 of 47
equity in the income (loss) of GGMI.
Interest expense decreased by $10.8 million or 4.8%
from $225.1 million in 2000 to $214.3 million in
2001. Declines in effective interest rates,
partially offset by the effect of acquisitions,
were the major source of such interest expense
decreases.
Equity in income (loss) of unconsolidated
affiliates during 2001 increased by $13.5 million
to $63.6 million from $50.1 million in 2000.
GGP/Homart II accounted for an increase of
approximately $4 million primarily due to declines
in interest rates in 2001 and the acquisition of
Willowbrook Mall in March 2001 by GGP/Homart II.
The Company's ownership interest in GGMI resulted
in a increase of $1.6 million due to the
consolidation of GGMI in 2001.
Extraordinary items were approximately $14.0
million in 2001, primarily due to the refinancing
of debt as a result of the GGP MPTC financing (Note
5) and the 2001 Offering (Note 1).
LIQUIDITY AND CAPITAL As of December 31, 2002, the Company held
RESOURCES OF THE approximately $54.1 million of unrestricted cash,
COMPANY cash equivalents and marketable securities. The
Company uses operating cash flow as the principal
source of internal funding for short-term
liquidity and capital needs such as tenant
construction allowances and minor improvements
made to individual properties that are not
recoverable through common area maintenance
charges to tenants. External funding alternatives
for longer-term liquidity needs such as
acquisitions, new development, expansions and
major renovation programs at individual centers
include construction loans, mini-permanent loans,
long-term project financing, joint venture
financing with institutional partners, additional
Operating Partnership level or Company level
equity investments and unsecured Company level
debt or secured loans collateralized by individual
shopping centers. In this regard, the Company
assumed, in conjunction with the acquisition of JP
Realty, a then outstanding $200 million unsecured
credit facility (the "PDC Credit Facility") with
an outstanding balance of approximately $120
million on acquisition. On September 20, 2002, the
Company made a prepayment of approximately $97
million on the PDC Credit Facility. The Company
borrowed an additional $110 million in the fourth
quarter of 2002. The balance on the PDC Credit
Facility was approximately $130 million at
December 31, 2002. The PDC Credit Facility is
scheduled to mature in July 2003 and bears
interest at the option of the Company at (i) the
higher of the federal funds rate plus 50 basis
points or the prime rate of Bank One, NA, or (ii)
LIBOR plus a spread of 85 to 145 basis points. The
LIBOR spread is determined by PDC's credit rating.
The PDC Credit Facility contains restrictive
covenants, including limitations on the amount of
outstanding secured and unsecured debt, and
requires PDC to maintain certain financial ratios.
As of December 31, 2002, the Company believes it
is in compliance with these and any other
restrictive covenants (Note 5) continued in its
various financing arrangements.
In addition, the Company considers its
Unconsolidated Real Estate Affiliates as potential
sources of short and long-term liquidity. In this
regard, the Company has net borrowings (in place of
distributions) at December 31, 2002 of
approximately $21 million and $82 million from
GGP/Homart and GGP/Homart II, respectively, which
bear interest at 5.5% per annum and of which
approximately $63 million is due March 30, 2003 and
approximately $39 million is due December 31, 2003.
Such loaned amounts are substantially all of the
GGP/Homart and GGP/Homart II net proceeds of the
GGP MPTC and other recent financings and are
expected to be repaid from future operating
distributions from GGP/Homart and GGP/Homart II
(Notes 4 and 5). To the extent that amounts remain
due in March 2003 after the application of
available operating distributions, the Company
expects to repay such amounts from other financing
proceeds as discussed below. Also, in order to
maintain its access to the public equity and debt
markets, the Company has a currently effective
shelf
34 of 47
registration statement under which up to $2
billion in equity or debt securities may be issued
from time to time. The Company also believes it
could obtain, if necessary, revolving credit
facilities similar to those which were fully
repaid in December 2001 with a portion of the
proceeds of the GGP MPTC financing.
As of December 31, 2002, the Company had
consolidated debt of approximately $4.6 billion, of
which approximately $3.2 billion is comprised of
debt bearing interest at fixed rates (after taking
into effect certain interest rate swap agreements
described below), with the remaining approximately
$1.4 billion bearing interest at variable rates. In
addition, the Company's pro rata share of the debt
of the Unconsolidated Real Estate Affiliates was
approximately $2.2 billion, of which approximately
$1.1 billion is comprised of debt bearing interest
at fixed rates (after taking into effect certain
interest rate swap agreements), with the remaining
approximately $1.1 billion bearing interest at
variable rates. Except in instances where certain
Wholly-Owned Centers are cross-collateralized with
the Unconsolidated Centers, or the Company has
retained a portion of the debt of a property when
contributed to an Unconsolidated Real Estate
Affiliate (Note 4), the Company has not otherwise
guaranteed the debt of the Unconsolidated Real
Estate Affiliates. Reference is made to Notes 5 and
12 and Items 2 and 7A of the Company's Annual
Report on Form 10-K for additional information
regarding the Company's debt and the potential
impact on the Company of interest rate
fluctuations.
The following summarizes certain significant
investment and financing transactions of the
Company currently planned or completed since
December 31, 2001:
During April 2002, the Company, through the LLC,
issued an additional 240,000 RPUs to an affiliate
of the institutional investor to whom the LLC had
issued 700,000 RPUs in May 2000 (see Note 1). The
issuance of these preferred units yielded
approximately $58 million in net proceeds to the
Company.
During May 2002, the Company, through the LLC,
issued 20,000 8.25% Cumulative Preferred Units to
an investor yielding $5 million in net proceeds to
the Company (see the description of the CPUs-Note
1).
On May 28, 2002, the Company acquired the stock of
Victoria Ward, Limited, a privately held real
estate corporation as described in Note 3. The
total Victoria Ward acquisition price was
approximately $250 million, including the
assumption of approximately $50 million of existing
short-term debt, substantially all of which was
repaid immediately following the closing. The $250
million total cash requirement was obtained
primarily from the sale of the Company's investment
in marketable securities and other available cash
and cash equivalents.
On July 1, 2002, the Company obtained a new
mortgage loan collateralized by the Crossroads
Center in St. Cloud, Minnesota, which was
previously unencumbered. The new $62 million
mortgage loan bears interest at LIBOR plus 120
basis points and matures, assuming the exercise of
one eighteen-month extension option, in July 2005.
On July 9, 2002, the Company obtained a new
mortgage loan collateralized by the Eden Prairie
Mall in Eden Prairie (Minneapolis), Minnesota. The
Eden Prairie Mall was previously subject to a
construction loan which was paid in December 2001
with a portion of the proceeds of the GGP MPTC
financing (Note 5). The new $55 million mortgage
loan bears interest at a rate per annum equal to
LIBOR plus 105 basis points, provides for monthly
payments of interest only and matures in July 2007,
assuming the exercise of all extension options.
On July 10, 2002, the Company acquired the JP
Realty Assets (Note 3) by merging JP Realty and PDC
with wholly-owned subsidiaries of the Company, with
PDC
35 of 47
surviving the merger and all of its subsidiaries
remaining in existence. The total acquisition
price was approximately $1.1 billion which
included the assumption of approximately $460
million in existing debt and approximately $116
million of existing preferred operating
partnership units. Pursuant to the terms of the
merger agreement, each outstanding share of JP
Realty common stock was converted into $26.10 in
cash. Holders of common units of limited
partnership interest in PDC received $26.10 per
unit in cash or, at the election of the holder,
.522 8.5% Series B Cumulative Preferred Units of
the Operating Partnership (convertible into common
units of limited partnership interest of the
Operating Partnership based on a conversion price
of $50 per unit). The cash acquisition price was
funded from a combination of the net proceeds from
the new Eden Prairie and Crossroads mortgage loans
described above, a $350 million acquisition loan
obtained from a group of commercial banks, and
available cash and cash equivalents. The
acquisition loan bears interest at the option of
the Company at (i) a rate per annum of LIBOR plus
150 basis points, or (ii) the higher of the
reference rate of Dresdner Bank, AG or the federal
funds rate plus 50 basis points, provides for
periodic principal payments (including from
certain refinancing proceeds) and matures in July
2003.
On August 5, 2002, the Operating Partnership
acquired Prince Kuhio Plaza in Hilo, Hawaii from
GGP/Homart for approximately $39 million. The
purchase price was comprised of the assumption of
approximately $24 million of GGP MPTC financing, a
note for $7.5 million and $7.5 million in cash. The
$7.5 million note, payable to GGP/Homart, was
distributed to the Operating Partnership in
conjunction with the distribution of the $7.5
million of cash proceeds to NYSCRF. The Operating
Partnership then cancelled the $7.5 million note.
On August 23, 2002, the Company obtained a new
mortgage loan collateralized by Eagle Ridge Mall in
Lake Wales, Florida; Century Plaza in Birmingham,
Alabama and Knollwood Mall in St. Louis Park
(Minneapolis), Minnesota. The new $76 million
mortgage loan bears interest at LIBOR plus 103
basis points and matures, assuming the exercise of
four, twelve-month extension options, in October
2007.
During August 2002, the Company, through Victoria
Ward, arranged for an aggregate of $150 million in
loans from two separate groups of banks. On August
23, 2002, the Company borrowed an initial $80
million and, on September 19, 2002, the Company
borrowed an additional $70 million. The two-year
loans provide for quarterly partial amortization of
principal, bear interest at the option of the
borrower at a rate per annum of (i) the greater of
the administrative agent's reference rate and the
federal funds rate plus 50 basis points or (ii)
LIBOR plus 100 basis points, and require the
remaining balance of approximately $130 million to
be paid at maturity (unless extended, under certain
conditions, for an additional six months with the
LIBOR spread to increase to 125 basis points).
On August 26, 2002, the Company formed
GGP/Teachers, a joint venture with Illinois
Teachers. Upon formation of GGP/Teachers, Clackamas
Town Center in Portland, Oregon, which was 100%
owned by Illinois Teachers, was contributed to the
new joint venture. In addition, concurrent with its
formation, GGP/Teachers acquired Galleria at Tyler
in Riverside, California, Kenwood Towne Centre in
Cincinnati, Ohio, and Silver City Galleria in
Taunton, Massachusetts, from an institutional
investor for an aggregate purchase price of
approximately $477 million. Two existing
non-recourse loans on Silver City Galleria,
aggregating a total of $75 million and bearing
interest at a rate per annum of 7.41%, were assumed
and three new non-recourse mortgage loans totaling
approximately $337 million were obtained. The new
loans bear interest at a weighted average rate per
annum of LIBOR plus 76 basis points. The Company's
share (approximately $112 million) of the equity of
GGP/Teachers was funded by a portion of new secured
and unsecured loans as described above. In
addition, the Company has approximately $19.5
million of
36 of 47
Retained Debt (Note 4) related to the debt
collateralized by the malls owned by GGP/Teachers
which remains a contingent obligation of the
Company.
On September 13, 2002, the Company acquired
Pecanland Mall, a 984,000 square foot enclosed
regional mall in Monroe, Louisiana, for
approximately $72 million. The acquisition was
funded by approximately $22 million of cash on hand
and the assumption of an existing $50 million loan
that bears interest at a rate per annum equal to
the sum of 3.0% plus the greater of (i) LIBOR or
(ii) 3.5%. The loan is scheduled to mature in
January 2005 (subject to a right to extend for one
additional year).
On December 4, 2002, the Company acquired Southland
Mall, a 1,450,000 square foot enclosed regional
mall in Hayward, California, for approximately $89
million. The acquisition was funded by
approximately $24 million cash on hand and a new
5-year (assuming all extension options are
exercised) $65 million mortgage loan that bears
interest at a rate per annum of LIBOR plus 75 basis
points.
Subsequent to year end, the Company refinanced the
mortgage loans collateralized by the Provo Mall and
the Spokane Mall with a new, long-term non-recourse
mortgage loan. The new $95 million loan bears
interest at a rate per annum of 4.42% and matures
in February 2008.
In March 2003, the Company reached a preliminary
agreement with a group of banks to establish a new
revolving credit facility and term loan. The total
amount to be financed is expected to be
approximately $700 million, have a term of three
years and provide for partial amortization of a
portion of the principal balance of the term loan
in the second and third years. The proceeds are
anticipated to be used to repay and consolidate
existing financing including amounts due on the PDC
Credit Facility, the Term Loan, the JP Realty
acquisition loan, and to certain Unconsolidated
Real Estate Affiliates.
In addition, certain Unconsolidated Real Estate
Affiliates completed significant investment and
financing transactions since December 31, 2001, as
summarized as follows:
On June 24, 2002, GGP/Homart II refinanced the
existing $178 million, 6% mortgage loan (with a
scheduled maturity of December 2002) collateralized
by Natick Mall. Both the refinanced loan and the
new loan represent Retained Debt of the Company
(Note 4), for which the Company remains
contingently responsible for the entire principal
balance. The new $168.4 million mortgage loan,
bearing interest at a rate per annum equal to LIBOR
plus 55 basis points, provides for monthly payments
of principal and interest and matures, assuming the
exercise of three, twelve-month extension options,
in January 2007.
On September 18, 2002, the Company, through Town
East Mall Partnership, refinanced the existing
$44.8 mortgage loan collateralized by the Town East
Mall. The new mortgage loan has a principal balance
of $87 million, provides for monthly payments of
principal and interest, bears interest at LIBOR
plus 58 basis points and matures, assuming the
exercise of two, twelve-month extension options, in
October 2007.
On November 27, 2002, the Company, through
GGP/Homart II, acquired all of the membership
interests in a limited liability company ("Glendale
LLC") that owns directly and indirectly Glendale
Galleria, an approximately 1,500,000 square foot
enclosed regional mall in Glendale (Los Angeles),
California (the "Glendale Property"). The purchase
price for the membership interests in Glendale LLC
was approximately $415 million less the outstanding
balance (approximately $170 million) of the
then-existing Glendale Property mortgage debt.
Approximately $41.1
37 of 47
million of the purchase price, which was paid to
one of the former holders of membership interests
in Glendale LLC, was paid by issuance of units of
a new series of preferred units of limited
partnership in the Operating Partnership, and the
remainder of the purchase price was paid in cash.
The cash portion of the purchase price and the
repayment of the then-existing mortgage debt
(which repayment occurred at closing) was funded
with the proceeds of (i) a new $235 million
mortgage loan collateralized by the Glendale
Property which bears interest at a rate per annum
of LIBOR plus 75 basis points and matures in
November 2007, assuming the exercise of all three
extension options, and (ii) a new $200 million
unsecured term loan obtained jointly and severally
by GGP/Homart and GGP/Homart II which bears
interest at the option of the borrower at a rate
per annum equal to (i) 25 basis points plus the
higher of the Deutsche Bank Trust Company of
America's prime rate or the federal funds rate
plus 50 basis points or (ii) LIBOR plus 125 basis
points, and matures in November 2003.
In November, 2002, the Company, through GGP/Homart,
obtained a $41 million mortgage loan collateralized
by the Parks at Arlington in Arlington (Dallas),
Texas. The loan bears interest at a rate per annum
of 5.59% and matures in September 2009.
On December 10, 2002, the Company, through
GGP/Homart II, refinanced the existing $135 million
mortgage loan collateralized by Stonebriar Centre
in Frisco (Dallas), Texas. The new mortgage loan
has a principal balance of $185 million, bears
interest at a rate per annum of 5.23% and matures
in December 2012.
On December 19, 2002, the Company, through
GGP/Teachers, acquired Florence Mall in Florence,
Kentucky for a purchase price of approximately $97
million. The acquisition was funded by additional
cash contributions to GGP/Teachers and a new $60
million two-year mortgage loan that bears interest
at a rate per annum of LIBOR plus 89 basis points
and matures in January 2008 (assuming the exercise
of both extension options). The Company's share of
the capital contributions to GGP/Teachers for this
acquisition was funded from cash on hand.
Also on December 19, 2002, the Company, through
GGP/Homart, acquired for a purchase price of
approximately $50 million the 50% interest that it
did not own in The Woodlands Mall in Houston, Texas
from the Woodlands Commercial Property Company, LP.
An additional $50 million mortgage loan bearing
interest at a rate per annum of LIBOR plus 250
basis points was placed at the property on December
31, 2002. This loan is scheduled to mature in
December 2006.
On December 30, 2002, the Company, through
GGP/Homart II, acquired First Colony Mall, an
enclosed regional mall in Sugar Land, Texas, for a
purchase price of approximately $105 million. The
acquisition was funded by cash on hand plus a new
$67 million mortgage loan bearing interest at a
rate per annum of LIBOR plus 80 basis points with a
scheduled maturity of January 2006.
Approximately $752.7 million of the Company's
consolidated debt is scheduled to mature in 2003
and approximately $488 million of consolidated debt
is scheduled to mature in 2004. In addition, the
Unconsolidated Real Estate Affiliates have certain
mortgage loans maturing in 2003 (the Company's
prorata portion of which is approximately $201.1
million). Although agreements to refinance all of
such indebtedness have not yet been reached, the
Company anticipates that all of its debt will be
repaid on a timely basis. Other than as described
above or in conjunction with possible future
acquisitions, there are no current plans to incur
additional debt, increase the amounts available
under the Term Loan or raise equity capital.
However, the Company currently expects to issue
Common Stock to convert its outstanding preferred
stock (PIERS - Note 1) when its option to do so
becomes exercisable on July 15, 2003. If additional
capital is required, the Company believes that it
can increase the
38 of 47
amounts available under the Term Loan, obtain new
revolving credit facilities, obtain an interim
bank loan, obtain additional mortgage financing on
under-leveraged or unencumbered assets, enter into
new joint venture partnership arrangements or
raise additional debt or equity capital. However,
there can be no assurance that the Company can
obtain such financing on satisfactory terms. The
Company will continue to monitor its capital
structure, investigate potential investments or
joint venture partnership arrangements and
purchase additional properties if they can be
acquired and financed on terms that the Company
reasonably believes will enhance long-term
stockholder value. When property operating cash
flow has been increased, the Company anticipates
the refinancing of portions of its long-term
floating rate debt with pooled or
property-specific, non-recourse fixed-rate
mortgage financing.
Net cash provided by operating activities was
$460.5 million in 2002, an increase of $253.4
million from $207.1 million in the same period in
2001. Income before gain on sales, extraordinary
items and cumulative effect of accounting change
increased $100.9 million, which was primarily due
to the effect of the $66 million provision for the
discontinuance of the Network Services in 2001 as
discussed in Note 11 and $69.5 million of 2002
earnings is attributable to properties acquired in
2002.
Net cash provided by operating activities was
$207.1 million in 2001, a decrease of $80 million
from $287.1 million in the same period in 2000.
Income before gain on sales, extraordinary items
and cumulative effect of accounting change
decreased $28.2 million in 2001, which was
primarily due to the $66 million provision for the
discontinuance of the Network Services development
activities in 2001 as described in Note 11.
The events of September 11th have had an impact on
the Company's insurance coverage. The Company had
coverage for terrorist acts in its policies that
expired in September 2002. The coverage was
excluded from its standard property policies at the
time of renewal. Accordingly, the Company obtained
a separate policy for terrorist acts. The Company's
premiums, including the cost of a separate
terrorist policy, increased by a factor of
approximately 30% to 40% for property coverage and
liability coverage. These increases will impact the
Company's annual common area maintenance rates paid
in the future by the Company's tenants as well as
the Company's net unrecoverable amounts.
The Company has over the past year experienced a
significant increase in the market price of its
Common Stock. Accordingly, certain options granted
under its incentive stock plans that vest based on
the market price of the Common Stock have vested.
Under current accounting standards, such vesting
caused the recognition of approximately $11.8
million of additional compensation expense in 2002,
as described above and in Note 1. In addition, the
Company has adopted SFAS 123 for grants of Common
Stock options awarded after January 1, 2002 as more
fully discussed in Note 9.
SUMMARY OF INVESTING Net cash used by investing activities in 2002 was
ACTIVITIES $965.8 million, compared to a use of $367.4
million in 2001. Cash flow from investing
activities was affected by the timing of
acquisitions, development and improvements to real
estate properties, requiring a use of cash of
approximately $1.0 billion in 2002 compared to
$338.2 million in 2001. In addition, approximately
$155.1 million of the use of cash in 2001 and a
corresponding source in 2002 for investing
activities was the purchase and subsequent sale of
the marketable securities discussed in Note 1.
Net cash used by investing activities in 2001 was
$367.4 million, compared to a use of $356.9 million
in 2000. Cash flow from investing activities was
affected by the timing of acquisitions, development
and improvements to real estate properties,
requiring a use of cash of approximately $338.2
million in 2001 compared to $286.7
39 of 47
million in 2000. In addition, approximately $155.1
million of the use of cash for investing
activities in 2001 was the purchase of the
marketable securities discussed in Note 1.
SUMMARY OF Financing activities provided net cash of $398.2
FINANCING ACTIVITIES million in 2002, compared to $293.8 million in
2001. A significant source of funds from financing
activities in 2002 was the Company's issuance of
additional preferred units in the Operating
Partnership yielding net proceeds of approximately
$63.3 million as described in Note 1. The 2001
Offering resulted in net proceeds of approximately
$348 million which, as described in Note 1, was
utilized to reduce outstanding indebtedness and
provide for additional working capital. An
additional significant contribution of cash from
financing activities was financing from mortgages
and acquisition debt, which had a positive impact
of $792.3 million in 2002 versus approximately
$2.1 billion in 2001. The majority of such
financing in 2001 was attributable to the GGP MPTC
financing described in Note 5. The additional
financing in 2002 was used to repay existing
indebtedness and to fund the acquisitions and
redevelopment of real estate as discussed above.
The remaining uses of cash consisted primarily of
increased distributions (including dividends paid
to preferred stockholders in 2002 and 2001).
Financing activities provided cash of $293.8
million in 2001, compared to $71.4 million in 2000.
The 2001 Offering resulted in net proceeds of
approximately $348 million which, as described in
Note 1, was utilized to reduce outstanding
indebtedness and provide for additional working
capital. An additional significant contribution of
cash from financing activities was financing from
mortgages and acquisition debt, which had a
positive impact of $2.1 billion in 2001 versus
approximately $360 million in 2000. The majority of
such financing was attributable to the GGP MPTC
financing described in Note 5. The additional
financing was used to repay existing indebtedness
and to fund the acquisitions and redevelopment of
real estate as discussed above. The remaining uses
of cash consisted primarily of increased
distributions (including dividends paid to
preferred stockholders in 2001 and 2000).
REIT REQUIREMENTS In order to remain qualified as a real estate
investment trust for federal income tax purposes,
General Growth must distribute or pay tax on 100%
of capital gains and at least 90% of its ordinary
taxable income to stockholders. The following
factors, among others, will affect operating cash
flow and, accordingly, influence the decisions of
the Board of Directors regarding distributions:
(i) scheduled increases in base rents of existing
leases; (ii) changes in minimum base rents and/or
overage rents attributable to replacement of
existing leases with new or renewal leases; (iii)
changes in occupancy rates at existing centers and
procurement of leases for newly developed centers;
(iv) necessary capital improvement expenditures or
debt repayments at existing properties; and (v)
General Growth's share of distributions of
operating cash flow generated by the
Unconsolidated Real Estate Affiliates, less
oversight costs and debt service on additional
loans that have been or will be incurred. General
Growth anticipates that its operating cash flow,
and potential new debt or equity from future
offerings, new financings or refinancings will
provide adequate liquidity to conduct its
operations, fund general and administrative
expenses, fund operating costs and interest
payments and allow distributions to General Growth
preferred and common stockholders in accordance
with the requirements of the Code.
On January 1, 2001, the REIT provisions of the Tax
Relief Extension Act of 1999 became effective.
Among other things, the law permits a REIT to own
up to 100% of the stock of a Taxable REIT
Subsidiary ("TRS"). A TRS, which must pay corporate
income tax, can provide services to REIT tenants
and others without disqualifying the rents that a
REIT receives from its tenants. Accordingly, on
January 1, 2001 the Operating Partnership acquired
for nominal cash consideration 100% of the common
stock of GGMI and elected in 2001 to have GGMI
treated as a TRS. The Operating Partnership and
GGMI concurrently terminated the management
contracts for the
40 of 47
Wholly-Owned Centers as the management activities
would thereafter be performed directly by the
Company. GGMI has continued to manage, lease, and
perform various other services for the
Unconsolidated Centers and other properties owned
by unaffiliated third parties. Although taxable
income is expected to be reported for 2002 and
subsequent years, GGMI is not expected to be
required to pay Federal income taxes in the near
term due to its significant net operating loss
carry-forwards primarily arising from 2001
operations.
RECENTLY ISSUED As described in Note 13, the FASB has issued
ACCOUNTING certain statements, which are effective for the
PRONOUNCEMENTS current or subsequent year. Although SFAS 141 and
AND DEVELOPMENTS SFAS 142 had been generally interpreted at
issuance by practitioners to not modify previous
accounting practices with respect to real estate
acquisitions, the implementation of the statements
has resulted in the recognition upon acquisition
of additional consolidated intangible assets
(acquired in-place lease origination costs) and
liabilities (acquired below-market leases)
relating to the Company's 2002 real estate
purchases of approximately $32.4 million and $52.5
million, respectively. The Company does not expect
a significant impact on its annual reported
operations due to the application of any of the
other new statements as discussed in Note 13.
ECONOMIC CONDITIONS Inflation has been relatively low and has not had
a significant detrimental impact on the Company.
Should inflation rates increase in the future,
substantially all of the Company's tenant leases
contain provisions designed to partially mitigate
the negative impact of inflation. Such provisions
include clauses enabling the Company to receive
percentage rents based on tenants' gross sales,
which generally increase as prices rise, and/or
escalation clauses, which generally increase
rental rates during the terms of the leases. In
addition, many of the leases expire each year
which may enable the Company to replace or renew
such expiring leases with new leases at higher
base and/or percentage rents, if rents under the
expiring leases are below the then-existing market
rates. Finally, many of the existing leases
require the tenants to pay all or substantially
all of their share of certain operating expenses,
including common area maintenance, real estate
taxes and insurance, thereby partially reducing
the Company's exposure to increases in costs and
operating expenses resulting from inflation.
Inflation also poses a potential threat to the
Company due to the possibility of future increases
in interest rates. Such increases would adversely
impact the Company due to the amount of its
outstanding floating rate debt. However, in recent
years, the Company's ratio of interest expense to
cash flow has continued to decrease. Therefore, the
relative risk the Company bears due to interest
expense exposure has been declining. In addition,
the Company has limited its exposure to interest
rate increases on a portion of its floating rate
debt by arranging interest rate cap and swap
agreements as described below. Finally, subject to
current market conditions, the Company has a policy
of replacing variable rate debt with fixed rate
debt. (See Note 5).
During 2001 and 2002, the retail sector was
experiencing declining growth due to layoffs,
eroding consumer confidence, falling stock prices,
the September 11, 2001 terrorist attacks and, most
recently, the threats of additional terrorism and
war. Although the 2002 holiday season was generally
stronger than economists' predictions, the retail
sector and the economy as a whole remains weak.
Such reversals or reductions in the retail market
adversely impacts the Company as demand for
leaseable space is reduced and rents computed as a
percentage of tenant sales declines. In addition, a
number of local, regional and national retailers,
including tenants of the Company, have voluntarily
closed their stores or filed for bankruptcy
protection during the last few years. Most of the
bankrupt retailers reorganized their operations
and/or sold stores to stronger operators. Although
some leases were terminated pursuant to the lease
cancellation rights afforded by the bankruptcy
laws, the impact on Company earnings was
negligible. Over the last three years, the
provision for doubtful accounts has averaged only
$3.1 million per year, which
41 of 47
represents less than 1% of average total revenues
of approximately $827.6 million. In addition, the
Company historically has generally been successful
in finding new uses or tenants for retail
locations that are vacated either as a result of
voluntary store closing or bankruptcy proceedings.
Therefore, the Company does not expect these store
closings or bankruptcy reorganizations to have a
material impact on its consolidated financial
results of operations.
The Company and its affiliates currently have
interests in 153 operating retail properties in the
United States. The Portfolio Centers are
diversified both geographically and by property
type (both major and middle market properties) and
this may mitigate the impact of a potential
economic downturn at a particular property or in a
particular region of the country.
The shopping center business is seasonal in nature.
Mall stores typically achieve higher sales levels
during the fourth quarter because of the holiday
selling season. Although the Company has a
year-long temporary leasing program, a significant
portion of the rents received from short-term
tenants are collected during the months of November
and December. Thus, occupancy levels and revenue
production are generally highest in the fourth
quarter of each year and lower during the first and
second quarters of each year.
ITEM 7A. The Company has not entered into any transactions
QUANTITATIVE AND using derivative commodity instruments. The
QUALITATIVE Company is subject to market risk associated with
DISCLOSURES changes in interest rates. Interest rate exposure
ABOUT MARKET is principally limited to the $2.1 billion of debt
RISK of the Company outstanding at December 31, 2002
that is priced at interest rates that vary with
the market. However, approximately $665.8 million
of such floating rate consolidated debt is
comprised of non-recourse commercial
mortgage-backed securities which are subject to
interest rate swap agreements, the effect of which
is to fix the interest rate the Company is
required to pay on such debt to approximately
4.84% per annum. Therefore, a 25 basis point
movement in the interest rate on the remaining
$1.4 billion of variable rate debt would result in
an approximately $3.5 million annualized increase
or decrease in consolidated interest expense and
cash flows. The remaining debt is fixed rate debt.
In addition, the Company is subject to interest
rate exposure as a result of the variable rate debt
collateralized by the Unconsolidated Real Estate
Affiliates for which similar interest rate swap
agreements have not been obtained. The Company's
share (based on the Company's respective equity
ownership interests in the Unconsolidated Real
Estate Affiliates) of such remaining variable rate
debt was approximately $1.1 billion at December 31,
2002. A similar 25 basis point annualized movement
in the interest rate on the variable rate debt of
the Unconsolidated Real Estate Affiliates would
result in an approximately $2.6 million annualized
increase or decrease in the Company's equity in the
income and cash flows from the Unconsolidated Real
Estate Affiliates. The Company is further subject
to interest rate risk with respect to its fixed
rate financing in that changes in interest rates
will impact the fair value of the Company's fixed
rate financing. The Company has an ongoing program
of refinancing its consolidated and unconsolidated
variable and fixed rate debt and believes that this
program allows it to vary its ratio of fixed to
variable rate debt and to stagger its debt
maturities to respond to changing market rate
conditions. Reference is made to the above
discussions of Liquidity and Capital Resources of
the Company and Note 5 for additional debt
information.
ITEM 8. FINANCIAL Reference is made to the Index to Consolidated
STATEMENTS AND Financial Statements and Consolidated Financial
SUPPLEMENTARY Statement Schedules on page F-1 for the required
DATA information.
42 of 47
ITEM 9. CHANGES IN On March 29, 2001, the Board of Directors of
AND General Growth, acting upon the recommendation of
DISAGREEMENTS the Audit Committee of the Board, approved the
WITH engagement of Deloitte & Touche LLP as its
ACCOUNTANTS ON independent accountants for the fiscal year ending
ACCOUNTING AND December 31, 2001 to replace the firm of
FINANCIAL PricewaterhouseCoopers LLP ("PwC"), who was
DISCLOSURE informed on March 29, 2001 that it would no longer
serve as the Company's independent accountants.
The reports of PwC on the Company's financial
statements for the years ended December 31, 2000
and 1999 contained no adverse opinion or a
disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or
accounting principle. In connection with its audits
for such fiscal years and the subsequent interim
period through March 29, 2001, there were no
disagreements with PwC on any matter of accounting
principles or practices, financial statement
disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction
of PwC, would have caused them to make reference
thereto in their reports on the financial
statements for such years. Also, during such fiscal
years and the subsequent interim period through
March 29, 2001, there were no reportable events (as
defined in Item 304(a)(1)(v) of Regulation S-K).
During fiscal years ended December 31, 2000 and
1999 and the subsequent interim period through
March 29, 2001, the Company did not consult with
Deloitte & Touche LLP regarding either (i) the
application of accounting principles to a specified
transaction, either completed or proposed; (ii) the
type of audit opinion that might be rendered on the
financial statements; or (iii) any matter that was
either the subject of a disagreement (as defined in
Item 304(a)(1)(iv) of Regulation S-K) or a
reportable event (as defined in Item 304(a)(1)(v)
of Regulation S-K).
The Company had reported this change in accountants
in a Current Report on Form 8-K, as amended, dated
March 29, 2001, and the Company provided PwC with a
copy of the disclosures of the Company in response
to Item 4 in such Form 8-K. PwC furnished the
Company a letter addressed to the Securities and
Exchange Commission stating that it agrees with
certain statements of the Company made in the Form
8-K. A copy of such letter was incorporated by
reference into Exhibit 16 of the Company's Report
on Form 10-K for December 31, 2001.
PART III
ITEM 10. The information which appears under the captions
DIRECTORS AND "Election of Directors", "Executive Officers" and
EXECUTIVE "Section 16(a) Beneficial Ownership Reporting
OFFICERS OF THE Compliance" in the Company's proxy statement for
COMPANY its 2003 Annual Meeting of Stockholders is
incorporated by reference into this Item 10.
ITEM 11. EXECUTIVE The information which appears under the caption
COMPENSATION "Executive Compensation" in the Company's proxy
statement for its 2003 Annual Meeting of
Stockholders is incorporated by reference into
this Item 11; provided, however, that the Report
of the Compensation Committee of the Board of
Directors on Executive Compensation shall not be
incorporated by reference herein, in any of the
Company's previous filings under the Securities
Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, or in any of the
Company's future filings.
43 of 47
ITEM 12. SECURITY The information which appears under the captions
OWNERSHIP OF "Stock Ownership" and "Equity Compensation Plan
CERTAIN BENEFICIAL Information" in the Company's proxy statement for
OWNERS AND its 2003 Annual Meeting of Stockholders is
MANAGEMENT incorporated by reference into this Item 12.
ITEM 13. CERTAIN The information which appears under the caption
RELATIONSHIPS "Certain Relationships and Related Party
AND RELATED Transactions" in the Company's proxy statement for
TRANSACTIONS its 2003 Annual Meeting of Stockholders is
incorporated by reference into this Item 13.
ITEM 14. CONTROLS Within the 90-day period prior to the filing of
AND PROCEDURES this report, the Company carried out an
evaluation, under the supervision and with the
participation of the Company's management,
including the Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO"), of the
effectiveness of the design and operation of the
Company's disclosure controls and procedures.
Based on that evaluation, the CEO and the CFO have
concluded that the Company's disclosure controls
and procedures are effective to ensure that
information required to be disclosed by the
Company in the reports it files under the
Securities and Exchange Act of 1934, as amended,
is recorded, processed, summarized and reported
within the time periods specified in the
Securities and Exchange Commission rules and
forms.
There have been no significant changes in the
Company's internal controls or in other factors
that could significantly affect internal controls
subsequent to the date of the evaluation referred
to above.
PART IV
ITEM 15. EXHIBITS, (a) Financial Statements and Financial Statement
FINANCIAL Schedules.
STATEMENTS,
SCHEDULES AND
REPORTS ON
FORM 8-K The consolidated financial statements and
schedules listed in the accompanying Index to
Consolidated Financial Statements and Financial
Statement Schedules are filed as part of this
Annual Report on Form 10-K.
(b) No reports on Form 8-K were filed by the
Company during the last quarter of the period
covered by this report.
(c) Exhibits.
See Exhibit Index on page S-1
44 of 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GENERAL GROWTH PROPERTIES, INC.
By: /s/ John Bucksbaum
- -------------------------------------
John Bucksbaum,
Chief Executive Officer March 13, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Matthew Bucksbaum
- ------------------------------------
Matthew Bucksbaum Chairman of the Board March 13, 2003
/s/ John Bucksbaum
- ------------------------------------
John Bucksbaum Chief Executive Officer
(Principal Executive Officer)
March 13, 2003
/s/ Robert Michaels
- ------------------------------------
Robert Michaels Director, President March 13, 2003
and Chief Operating Officer
/s/ Bernard Freibaum
- ------------------------------------
Bernard Freibaum Executive Vice President and Chief
Financial Officer (Principal Financial March 13, 2003
and Accounting Officer)
/s/ Anthony Downs
- ------------------------------------
Anthony Downs Director March 13, 2003
/s/ Morris Mark
- ------------------------------------
Morris Mark Director March 13, 2003
/s/ Beth Stewart
- ------------------------------------
Beth Stewart Director March 13, 2003
/s/ Alan Cohen
- ------------------------------------
Alan Cohen Director March 13, 2003
</Table>
45 of 47
CERTIFICATIONS
I, John Bucksbaum, certify that:
1. I have reviewed this annual report on Form 10-K of General Growth Properties,
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 13, 2003
/S/: John Bucksbaum
--------------------------------------
John Bucksbaum
Chief Executive Officer
46 of 47
I, Bernard Freibaum, certify that:
1. I have reviewed this annual report on Form 10-K of General Growth Properties,
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 13, 2003
/S/: Bernard Freibaum
---------------------------------
Bernard Freibaum
Executive Vice President and
Chief Financial Officer
47 of 47
GENERAL GROWTH PROPERTIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND CONSOLIDATED FINANCIAL STATEMENT
SCHEDULE
The following consolidated financial statements and consolidated financial
statement schedule are included in Item 8 of this Annual Report on Form 10-K:
<Table>
<Caption>
General Growth Properties, Inc.
Financial Statements Page(s)
Independent Auditors' Report F-2
Independent Auditors' Report F-3
Independent Auditors' Report F-4
Report of Independent Accountants F-5
Consolidated Balance Sheets as of December 31, 2002 and 2001 F-6
Consolidated Statements of Operations and Comprehensive Income
for the years ended December 31, 2002, 2001 and 2000 F-7
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2002, 2001 and 2000 F-8, F-9
Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000 F-10
Notes to Consolidated Financial Statements F-11 to F-47
Financial Statement Schedule
Independent Auditors' Report F-48
Independent Auditors' Report F-49
Schedule III - Real Estate and Accumulated Depreciation F-50
</Table>
All other schedules are omitted since the required information is not present or
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
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
General Growth Properties, Inc.
We have audited the accompanying consolidated balance sheets of General Growth
Properties, Inc. (the "Company") as of December 31, 2002 and 2001, and the
related consolidated statements of operations and comprehensive income,
stockholders' equity and cash flows for the years then ended. 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 did not audit the consolidated financial
statements of GGP/Homart, Inc. and GGP/Homart II L.L.C., the Company's
investments in which are accounted for by use of the equity method. The
Company's equity of $197,737,000 and $223,517,000 in GGP/Homart, Inc.'s net
assets as of December 31, 2002 and 2001, respectively, and $23,418,000 and
$21,822,000 in GGP/Homart, Inc.'s net income, respectively, for the years then
ended are included in the accompanying consolidated financial statements. The
Company's equity of $190,597,000 and $134,453,000 in GGP/Homart II L.L.C.'s net
assets as of December 31, 2002 and 2001, respectively, and $26,421,000 and
$23,995,000 in GGP/Homart II L.L.C.'s net income, respectively, for the years
then ended are included in the accompanying consolidated financial statements.
The consolidated financial statements of GGP/Homart, Inc. and GGP/Homart II
L.L.C. were audited by other auditors whose reports have been furnished to us,
and our opinion, insofar as it relates to the amounts included for such
companies, is based solely on the reports of such other auditors.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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
consolidated financial position of General Growth Properties, Inc. at December
31, 2002 and 2001, and the consolidated results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 13 to the consolidated financial statements, the Company
changed its method of accounting for derivative instruments and hedging
activities in 2001.
Deloitte & Touche LLP
Chicago, Illinois
February 3, 2003
F-2
INDEPENDENT AUDITORS' REPORT
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, 2002 and 2001,
and the related consolidated statements of income and comprehensive income,
stockholders' equity and cash flows for the years then ended (not presented
separately herein). These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 at December 31, 2002 and 2001, and the results of their operations
and their cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
As discussed in note 2, the Company changed its method of accounting for
intangible assets in 2002 and changed its method of accounting for derivative
instruments and hedging activities in 2001.
KPMG LLP
Chicago, Illinois
January 31, 2003
F-3
INDEPENDENT AUDITORS' REPORT
The 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, 2002 and 2001, and the related consolidated statements of income
and comprehensive income, members' capital and cash flows for the years then
ended (not presented separately herein). These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 at December 31, 2002 and 2001, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
As discussed in note 2, the Company changed its method of accounting for
intangible assets in 2002 and changed its method of accounting for derivative
instruments and hedging activities in 2001.
KPMG LLP
Chicago, Illinois
January 31, 2003
F-4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
General Growth Properties, Inc.
In our opinion, the consolidated statement of operations and comprehensive
income, of stockholders' equity and of cash flows for the year ended December
31, 2000 present fairly, in all material respects, the results of operations and
cash flows of General Growth Properties, Inc. for the year ended December 31,
2000 in conformity with accounting principles generally accepted in the United
States of America. 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 audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Chicago, Illinois
February 6, 2001
F-5
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
(Dollars in thousands, except for per share amounts)
ASSETS
<Table>
<Caption>
DECEMBER 31,
--------------------------
2002 2001
----------- -----------
Investment in real estate:
Land $ 1,128,990 $ 649,312
Buildings and equipment 5,738,514 4,383,358
Less accumulated depreciation (798,431) (625,544)
Developments in progress 90,492 57,436
----------- -----------
Net property and equipment 6,159,565 4,464,562
Investment in and loans from Unconsolidated Real Estate Affiliates 766,519 617,861
----------- -----------
Net investment in real estate 6,926,084 5,082,423
Cash and cash equivalents 53,640 160,755
Marketable securities 476 155,103
Tenant accounts receivable, net 126,587 93,043
Deferred expenses, net 108,694 96,656
Prepaid expenses and other assets 65,341 58,827
----------- -----------
$ 7,280,822 $ 5,646,807
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes and other debt payable $ 4,592,311 $ 3,398,207
Distributions payable 71,389 62,368
Network discontinuance reserve 4,123 5,161
Accounts payable and accrued expenses 233,027 104,826
----------- -----------
4,900,850 3,570,562
Minority interests:
Preferred Units 468,201 175,000
Common Units 377,746 380,359
----------- -----------
845,947 555,359
Commitments and contingencies -- --
Preferred stock: $100 par value; 5,000,000 shares authorized; 337,500 337,500
345,000 designated as PIERS (Note 1) which are convertible and carry a
$1,000 liquidation value, 337,500 of which were issued and outstanding at
December 31, 2002 and 2001
Stockholders' Equity:
Common stock: $.10 par value; 210,000,000 shares authorized;
62,397,085 and 61,923,932 shares issued and outstanding
as of December 31, 2002 and 2001, respectively 6,240 6,192
Additional paid-in capital 1,545,274 1,523,213
Retained earnings (accumulated deficit) (315,844) (328,349)
Notes receivable-common stock purchase (7,772) (19,890)
Unearned compensation - restricted stock (2,248) --
Accumulated other comprehensive income (loss) (29,125) 2,220
----------- -----------
Total stockholders' equity 1,196,525 1,183,386
----------- -----------
$ 7,280,822 $ 5,646,807
=========== ===========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Dollars in thousands, except for per share amounts)
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
2002 2001 2000
--------- --------- ---------
Revenues:
Minimum rents $ 587,245 $ 468,617 $ 439,981
Tenant recoveries 256,252 221,850 213,502
Overage rents 28,062 22,849 28,626
Fees* 88,627 77,344 7,017
Other 20,280 13,049 9,641
--------- --------- ---------
Total revenues 980,466 803,709 698,767
Expenses:
Real estate taxes 62,179 52,200 49,447
Property operating 294,938 234,235 168,411
Provision for doubtful accounts 3,894 3,402 2,025
General and administrative 8,720 6,006 6,351
Depreciation and amortization 180,028 145,352 119,663
Network discontinuance costs -- 66,000 --
--------- --------- ---------
Total operating expenses 549,759 507,195 345,897
--------- --------- ---------
Operating income 430,707 296,514 352,870
Interest income 3,689 4,655 12,452
Interest expense (218,935) (214,277) (225,101)
Income allocated to minority interests (87,003) (40,792) (52,380)
Equity in income of unconsolidated affiliates 82,118 63,566 50,063
--------- --------- ---------
Income before gain on sales, extraordinary items, and
cumulative effect of accounting change 210,576 109,666 137,904
Gain on sales 25 -- 44
--------- --------- ---------
Income before extraordinary items and cumulative effect
of accounting change 210,601 109,666 137,948
Extraordinary items (1,343) (14,022) --
Cumulative effect of accounting change -- (3,334) --
--------- --------- ---------
Net income 209,258 92,310 137,948
Convertible Preferred Stock Dividends (24,467) (24,467) (24,467)
--------- --------- ---------
Net income available to common stockholders $ 184,791 $ 67,843 $ 113,481
========= ========= =========
Earnings before extraordinary items and
cumulative effect of accounting change per share-basic $ 2.99 $ 1.61 $ 2.18
========= ========= =========
Earnings before extraordinary items and
cumulative effect of accounting change per share-diluted $ 2.97 $ 1.61 $ 2.18
========= ========= =========
Earnings per share-basic $ 2.97 $ 1.28 $ 2.18
========= ========= =========
Earnings per share-diluted $ 2.95 $ 1.28 $ 2.18
========= ========= =========
Net income $ 209,258 $ 92,310 $ 137,948
Other comprehensive income:
Net unrealized gains (losses) on financial instruments, net of minority interest (30,774) 2,389 --
Minimum pension liability adjustment (740) -- --
Equity in unrealized gains (losses) on available-for-sale 169 1,368 177
securities of unconsolidated affiliate, net of minority interest
--------- --------- ---------
Comprehensive income $ 177,913 $ 96,067 $ 138,125
========= ========= =========
</Table>
* Including $52,646, $45,079 and $6,967, respectively, from Unconsolidated Real
Estate Affiliates
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except for per share amounts)
<Table>
<Caption>
UNEARNED OTHER
COMPENSA- COMPRE- TOTAL
ADDITIONAL RETAINED EMPLOYEE TION HENSIVE STOCK-
COMMON STOCK PAID-IN EARNINGS STOCK RESTRICTED GAINS/ OLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) LOANS STOCK (LOSSES) EQUITY
----------- --------- ---------- ----------- ---------- --------- -------- ---------
Balance, December 31, 1999 51,697,425 $ 5,170 $1,199,921 $ (272,199) $ (3,420) $ (1,714) $ 927,758
Net income 137,948 137,948
Cash distributions declared
($2.06 per share) (107,367) (107,367)
Convertible Preferred Stock Dividends (24,467) (24,467)
RPU issuance costs (4,375) (4,375)
Conversion of operating partnership
units to common stock 212,050 21 5,490 5,511
Issuance of Common Stock, net
of employee stock option loans 371,784 37 10,666 (6,029) 4,674
Other comprehensive gains of
unconsolidated affiliate 177 177
Adjustment for minority interest
in operating partnership (1,441) (1,441)
---------- --------- ---------- ----------- ---------- --------- -------- ---------
Balance, December 31, 2000 52,281,259 5,228 1,210,261 (266,085) (9,449) -- (1,537) 938,418
---------- --------- ---------- ----------- ---------- --------- -------- ---------
Net income 92,310 92,310
Cash distributions declared
($2.36 per share) (130,107) (130,107)
Convertible Preferred Stock Dividends (24,467) (24,467)
Conversion of operating partnership
units to common stock 21,212 2 575 577
Issuance of Common Stock, net
of employee stock option loans 9,621,461 962 357,824 (10,441) 348,345
Other comprehensive gains 3,757 3,757
Adjustment for minority interest
in operating partnership (45,447) (45,447)
</Table>
- -----------------
continued on next page
F-8
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except for per share amounts)
<Table>
<Caption>
UNEARNED OTHER
COMPENSA- COMPRE- TOTAL
ADDITIONAL RETAINED EMPLOYEE TION HENSIVE STOCK-
COMMON STOCK PAID-IN EARNINGS STOCK RESTRICTED GAINS/ OLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) LOANS STOCK (LOSSES) EQUITY
----------- --------- ---------- ----------- ---------- --------- -------- ---------
Balance, December 31, 2001 61,923,932 $ 6,192 $1,523,213 $ (328,349) $ (19,890) $ -- $ 2,220 $1,183,386
----------- --------- ---------- ----------- ---------- --------- -------- ----------
Net income 209,258 209,258
Cash distributions declared
($2.74 per share) (170,614) (170,614)
Convertible Preferred Stock
Dividends (24,467) (24,467)
Conversion of operating partnership
units to common stock 16,246 2 634 636
Issuance of Common Stock, net
of employee stock option loans 456,907 46 19,312 12,118 31,476
Issuance costs, preferred units (1,672) (1,672)
Restricted stock grant, net of
recognized compensation
expense (2,248) (2,248)
Other comprehensive losses (31,345) (31,345)
Adjustment for minority interest
in operating partnership 2,115 2,115
----------- --------- ---------- ----------- ---------- --------- -------- ----------
Balance, December 31, 2002 62,397,085 $ 6,240 $1,545,274 $ (315,844) $ (7,772) $ (2,248) $(29,125) $1,196,525
=========== ========= ========== =========== ========== ========= ======== ==========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except for per share amounts)
<Table>
<Caption>
2002 2001 2000
----------- ----------- -----------
Cash flows from operating activities:
Net Income $ 209,258 $ 92,310 $ 137,948
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interests 87,003 40,792 52,380
Extraordinary items 1,343 14,022 --
Cumulative effect of accounting change -- 3,334 --
Equity in income of unconsolidated affiliates (82,118) (63,566) (50,063)
Provision for doubtful accounts 3,894 3,402 2,025
Distributions received from unconsolidated affiliates 80,177 59,403 37,523
Depreciation 172,887 128,682 111,457
Amortization 12,237 24,196 15,232
Gain on sales (25) -- (44)
Net changes:
Tenant accounts receivable (33,039) 15,810 (14,059)
Prepaid expenses and other assets (5,926) (821) 1,550
Increase in deferred expenses (21,321) (33,595) (22,371)
Network discontinuance reserve (1,038) 5,161 --
Accounts payable and accrued expenses 37,163 (82,005) 15,525
----------- ----------- -----------
Net cash provided by (used in) operating activities 460,495 207,125 287,103
----------- ----------- -----------
Cash flows from investing activities:
Acquisition/development of real estate and improvements
and additions to properties (1,006,368) (338,236) (286,734)
Network and Broadband System additions -- (47,037) --
Increase in investments in unconsolidated affiliates (165,581) (23,229) (91,663)
Change in notes receivable from General Growth Management, Inc. -- -- (2,406)
Distributions received from unconsolidated affiliates in excess of income 50,276 101,243 23,889
Loans from unconsolidated affiliates, net 1,274 94,996 --
Net (increase) decrease in holdings of investments in marketable securities 154,627 (155,103) --
----------- ----------- -----------
Net cash provided by (used in) investing activities (965,772) (367,366) (356,914)
----------- ----------- -----------
Cash flows from financing activities:
Cash distributions paid to common stockholders (165,942) (117,585) (106,103)
Cash distributions paid to holders of Common Units (52,334) (43,854) (40,333)
Cash distributions paid to holders of Preferred Units (25,014) (15,663) (6,091)
Payment of dividends on PIERS (24,467) (24,467) (24,467)
Proceeds from sale of common stock, net of issuance costs 29,228 348,346 4,674
Proceeds from issuance of RPUs and CPUs, net of issuance costs 63,326 -- 170,625
Proceeds from issuance of mortgage notes and other debt payable 792,344 2,137,667 360,301
Principal payments on mortgage notes and other debt payable (218,449) (1,983,586) (282,301)
Increase in deferred expenses (530) (7,091) (4,858)
----------- ----------- -----------
Net cash provided by (used in) financing activities 398,162 293,767 71,447
----------- ----------- -----------
Net change in cash and cash equivalents (107,115) 133,526 1,636
Cash and cash equivalents at beginning of period 160,755 27,229 25,593
----------- ----------- -----------
Cash and cash equivalents at end of period $ 53,640 $ 160,755 $ 27,229
=========== =========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 224,573 $ 211,319 $ 222,711
=========== =========== ===========
Interest capitalized $ 5,195 $ 16,272 $ 17,709
=========== =========== ===========
Non-cash investing and financing activities:
Common stock issued in exchange for Operating Partnership Units $ 636 $ 577 $ 5,511
Notes receivable issued for exercised stock options 4,243 10,441 7,149
Assumption and conversion of long-term debt, notes and other equity
securities in conjunction with acquisition of property 812,293 8,207 77,657
Operating Partnership Units and common stock issued as consideration
for purchase of real estate 41,131 -- 215
Distributions payable 71,389 62,368 47,509
Acquisition of GGMI -- 66,079 --
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
NOTE 1
ORGANIZATION GENERAL
General Growth Properties, Inc., a Delaware
corporation ("General Growth"), was formed in 1986
to own and operate regional mall shopping centers.
All references to the "Company" in these notes to
Consolidated Financial Statements include General
Growth and those entities owned or controlled by
General Growth (including the Operating Partnership
and the LLC as described below), unless the context
indicates otherwise. On April 15, 1993, General
Growth completed its initial public offering and a
business combination involving entities under
varying common ownership. Proceeds from the initial
public offering were used to acquire a majority
interest in GGP Limited Partnership (the "Operating
Partnership") which was formed to succeed to
substantially all of the interests in regional mall
general partnerships owned and controlled by the
Company and its original stockholders. The Company
conducts substantially all of its business through
the Operating Partnership.
During December 2001, General Growth completed a
public offering of 9,200,000 shares of Common Stock
(the "2001 Offering"). General Growth received net
proceeds of approximately $345,000 which was used
to reduce outstanding indebtedness and increase
working capital.
On January 1, 2001, the Operating Partnership
acquired for nominal cash consideration 100% of the
common stock of General Growth Management, Inc.
("GGMI"). In connection with the acquisition, the
GGMI preferred stock owned by the Operating
Partnership was cancelled and approximately $40,000
of the outstanding loans owed by GGMI to the
Operating Partnership were contributed to the
capital of GGMI. The operations of GGMI have been
fully consolidated with the Company as of and for
the years ended December 31, 2002 and 2001. This
transaction was accounted for as a purchase. In
addition, the Operating Partnership and GGMI
concurrently terminated the management contracts
for the Wholly-Owned Centers (as defined below) as
the management activities would thereafter be
performed directly by the Company. GGMI has
continued to manage, lease, and perform various
other services for the Unconsolidated Centers (as
defined below) and other properties owned by
unaffiliated third parties. During 2001, the
Company elected that GGMI be treated as a taxable
REIT subsidiary (a "TRS") as permitted under the
Tax Relief Extension Act of 1999.
General Growth has reserved for issuance up to
1,000,000 shares of Common Stock for issuance under
the Dividend Reinvestment and Stock Purchase Plan
("DRSP"). The DRSP allows, in general, participants
in the plan to make purchases of Common Stock from
dividends received or additional cash investments.
Although the purchase price of the Common Stock is
determined by the current market price, the
purchases will be made without fees or commissions.
General Growth has and will satisfy DRSP Common
Stock purchase needs through the issuance of new
shares of Common Stock or by repurchases of
currently outstanding Common Stock. As of December
31, 2002, an aggregate of 88,509 shares of Common
Stock have been issued under the DRSP.
F-11
PREFERRED STOCK
During June 1998, General Growth completed a public
offering of 13,500,000 depositary shares (the
"Depositary Shares"), each representing 1/40 of a
share of 7.25% Preferred Income Equity Redeemable
Stock, Series A, par value $100 per share
("PIERS"). The Depositary Shares are convertible at
any time, at the option of the holder, into shares
of Common Stock at the rate of .6297 shares of
Common Stock per Depositary Share. Although no
Depositary Shares had been converted at December
31, 2002, holders of approximately 1,600 Depositary
Shares elected to convert to Common Stock in
January 2003. On or after July 15, 2003, General
Growth has the option to convert the PIERS and the
Depositary Shares at the rate of .6297 shares of
Common Stock per Depositary Share if the closing
price of the Common Stock exceeds $45.65 per share
for 20 trading days within any period of 30
consecutive trading days. In addition, the PIERS
have a preference on liquidation of General Growth
equal to $1,000 per PIERS (equivalent to $25.00 per
Depositary Share), plus accrued and unpaid
dividends, if any, to the liquidation date. The
PIERS and the Depositary Shares are subject to
mandatory redemption by General Growth on July 15,
2008 at a price of $1,000 per PIERS, plus accrued
and unpaid dividends, if any, to the redemption
date. Accordingly, the PIERS have been reflected in
the accompanying consolidated financial statements
at such liquidation or redemption value.
During 2002, other classes of preferred stock of
General Growth were created to permit the future
conversion of certain equity interests assumed by
the Company in conjunction with the JP Realty
acquisition (Note 3) into General Growth equity
interests. As the conditions to allow such a
conversion have not yet occurred, such additional
classes of preferred stock have not been presented
in the accompanying consolidated balance sheet for
December 31, 2002.
SHAREHOLDER RIGHTS PLAN
General Growth has a shareholder rights plan
pursuant to which one preferred share purchase
right (a "Right") is attached to each currently
outstanding or subsequently issued share of Common
Stock. Prior to becoming exercisable, the Rights
trade together with the 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 the Common Stock. Each
Right will initially entitle the holder to purchase
from General Growth one one-thousandth of a share
of newly-created 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. In the event that a person or group
acquires 15% or more of the Common Stock, each
Right will entitle the holder (other than the
acquirer) to purchase shares of 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 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, the Board of
Directors of General Growth may exchange each Right
(other than those held by the acquirer) for one
share of Common Stock, subject to adjustment. If
the Rights become exercisable, holders of units of
partnership interest in the Operating Partnership,
other than General Growth, will receive the number
of Rights they would have received if their units
had been redeemed and the purchase price paid in
Common Stock. The Rights expire on November 18,
2008, unless earlier redeemed by the General Growth
Board of Directors for $0.01 per Right or such
expiration date is extended.
F-12
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
OPERATING PARTNERSHIP
The Operating Partnership commenced operations on
April 15, 1993 and as of December 31, 2002, it
owned directly or indirectly 100% of fifty-seven
regional shopping centers, 100% of the Victoria
Ward Assets (as defined in Note 3) and 100% of the
JP Realty Assets (as defined in Note 3)
(collectively, the "Wholly-Owned Centers"); 50% of
the common stock of GGP/Homart, Inc.
("GGP/Homart"), 50% of the membership interests in
GGP/Homart II, L.L.C. ("GGP/Homart II"), 50% of the
membership interests in GGP-TRS L.L.C.
("GGP/Teachers"), 51% of the common stock of GGP
Ivanhoe, Inc., ("GGP Ivanhoe"), 51% of the common
stock of GGP Ivanhoe III, Inc., ("GGP Ivanhoe
III"), 50% of Quail Springs Mall and Town East
Mall, and a 50% general partnership interest in
Westlake Retail Associates, Ltd. ("Circle T")
(collectively, the "Unconsolidated Real Estate
Affiliates"), and a 100% common stock interest in
GGMI. As of such date, GGP/Homart owned interests
in twenty-two shopping centers, GGP/Homart II owned
100% of ten shopping centers, GGP/Teachers owned
interests in five shopping centers, GGP Ivanhoe
owned 100% of two shopping centers, GGP Ivanhoe III
(through certain wholly-owned subsidiaries) owned
100% of eight shopping centers, and Circle T owned
100% of one shopping center (collectively, with
Quail Springs Mall and Town East Mall, the
"Unconsolidated Centers"). Together, the
Wholly-Owned Centers and the Unconsolidated Centers
comprise the "Company Portfolio" or the "Portfolio
Centers" except for the center owned and being
developed by Circle T which has been excluded from
the definition of, and the operating statistics
for, the Company Portfolio as it is not yet
operational.
During May 2000, the Operating Partnership formed
GGPLP L.L.C., a Delaware limited liability company
("the LLC"), by contributing its interest in a
portfolio of 44 Wholly-Owned Centers to the LLC in
exchange for all of the common units of membership
interest in the LLC. On May 25, 2000, a total of
700,000 redeemable preferred units of membership
interest in the LLC (the "2000 RPUs") were issued
to an institutional investor by the LLC, which
yielded approximately $170,625 in net proceeds to
the Company which were used primarily to repay
unsecured debt. During April 2002, an additional
240,000 RPUs were issued by the LLC to an affiliate
of the same institutional investor (the "2002
RPUs") yielding net proceeds of approximately
$58,365 which were used for various development and
acquisition needs. Holders of the 2000 RPUs and
2002 RPUs are entitled to receive cumulative
preferential cash distributions per RPU at a per
annum rate of 8.95% of the $250 liquidation
preference thereof (or $5.59375 per quarter) prior
to any distributions by the LLC to the Operating
Partnership. Subject to certain limitations, the
RPUs may be redeemed in cash by the LLC for the
liquidation preference amount plus accrued and
unpaid distributions and may be exchanged by the
holders of the RPUs for an equivalent amount of
redeemable preferred stock of General Growth. Such
preferred stock provides for an equivalent 8.95%
annual preferred distribution and is redeemable at
the option of General Growth for cash equal to the
liquidation preference amount plus accrued and
unpaid distributions. The redemption right may be
exercised at any time on or after May 25, 2005 with
respect to the 2000 RPUs and April 23, 2007 with
respect to the 2002 RPUs and the exchange right
generally may be exercised at any time on or after
May 25, 2010 with respect to the 2000 RPUs and
April 23, 2012 with respect to the 2002 RPUs. The
RPUs outstanding at December 31, 2002 and 2001 have
been reflected in the accompanying consolidated
financial statements as a component of minority
interest-Preferred Units at the then current total
liquidation preference amounts of $235,000 and
$175,000, respectively.
F-13
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
During May 2002, 20,000 8.25% cumulative preferred
units (the "CPUs") were issued by the LLC to an
independent third-party investor yielding $5,000.
The holders of these CPUs are entitled to receive
cumulative preferential cash distributions per CPU
at a per annum rate of 8.25% of the $250
liquidation preference thereof (or $5.15625 per
quarter), prior to any distributions by the LLC to
the Operating Partnership. In addition and subject
to certain conditions, the holders of the CPUs may,
on or after June 1, 2012, elect to exchange each
CPU for shares of Common Stock with a value as of
the exchange closing date equal to the $250 per
unit liquidation preference of such CPU plus any
accrued and unpaid distributions. However, after
receipt of such exchange election, General Growth
may elect to fulfill such an exchange election in
whole or in part in cash. The CPUs outstanding at
December 31, 2002 have been included in the
accompanying consolidated financial statements as a
component of minority interest-Preferred Units at
the then current total liquidation preference
amount of $5,000.
On July 10, 2002, in conjunction with the
acquisition of the JP Realty Assets (Note 2), the
Operating Partnership issued 1,426,393 8.5% Series
B Cumulative Preferred Units of limited partnership
interest in the Operating Partnership (the "Series
B Preferred Units"). The holders of these Series B
Preferred Units are entitled to receive cumulative
preferential cash distributions per Series B
Preferred Unit at a per annum rate of 8.50% of the
$50 per unit liquidation preference thereof (or
$1.0625 per unit per quarter), prior to any
distributions by the Operating Partnership to its
common unit holders. In addition and subject to
certain conditions, the holders of the Series B
Preferred Units may elect to exchange each Series B
Preferred Unit for common units of limited
partnership interest in the Operating Partnership
(which are convertible to Common Stock as discussed
below) with a value as of the exchange closing date
equal to the $50 per unit liquidation preference of
such Series B Preferred Units plus any accrued and
unpaid distributions. The Series B Preferred Units
outstanding at December 31, 2002 have been included
in the accompanying consolidated financial
statements as a component of minority
interest-Preferred Units at the then current total
liquidation preference amount of $71,320.
On November 27, 2002, in conjunction with
GGP/Homart II's acquisition of Glendale Galleria in
Glendale (Los Angeles), California, the Operating
Partnership issued 822,626 convertible preferred
Operating Partnership units (the "Series C
Preferred Units"). The Series C Preferred Units are
entitled to receive cumulative preferential cash
distributions per Series C Preferred Unit at a per
annum rate of 7% of the $50 per unit liquidation
preference thereof (or $0.8750 per unit per
quarter), prior to any distributions by the
Operating Partnership to its common unit holders.
The Series C preferred units are convertible into
approximately 667,000 common units of limited
partnership interest in the Operating Partnership,
based upon an initial conversion rate of .8109
common units per Series C Preferred Unit. The
Series C Preferred Units outstanding at December
31, 2002 have been included in the accompanying
consolidated financial statements as a component of
minority interest-Preferred Units at the then
current total liquidation preference amount of
$41,131.
F-14
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
As of December 31, 2002, the Company owned an
approximate 76% general partnership interest in the
Operating Partnership (excluding its preferred
units of partnership interest as discussed below).
The remaining approximate 24% minority interest in
the Operating Partnership is held by limited
partners that include trusts for the benefit of the
families of the original stockholders who initially
owned and controlled the Company and subsequent
contributors of properties to the Company. These
minority interests are represented by common units
of limited partnership interest in the Operating
Partnership (the "Units"). The Units can be
redeemed at the option of the holders for cash or,
at General Growth's election with certain
restrictions, for shares of Common Stock on a
one-for-one basis. The holders of the Units also
share equally with General Growth's common
stockholders on a per share basis in any
distributions by the Operating Partnership on the
basis that one Unit is equivalent to one share of
Common Stock.
In connection with the issuance of the Depositary
Shares and in order to enable General Growth to
comply with its obligations with respect to the
PIERS, the Operating Partnership Agreement was
amended to provide for the issuance to General
Growth of preferred units of limited partnership
interest (the "PIERS Preferred Units") in the
Operating Partnership which have rights,
preferences and other privileges, including
distribution, liquidation, conversion and
redemption rights, that mirror those of the PIERS.
Accordingly, the Operating Partnership is required
to make all required distributions on the PIERS
Preferred Units prior to any distribution of cash
or assets to the holders of the Units. At December
31, 2002, 100% of the PIERS Preferred Units of the
Operating Partnership (337,500) were owned by
General Growth.
Changes in outstanding Operating Partnership Units
(excluding the Preferred Units) for the three years
ended December 31, 2002, are as follows:
<Table>
<Caption>
UNITS
----------
December 31, 1999 19,798,192
Acquisition of outparcel
at Greenwood Mall 7,563
Conversion to common stock (212,050)
----------
December 31, 2000 19,593,705
Conversion to common stock (21,212)
----------
December 31, 2001 19,572,493
Conversion to common stock (16,246)
----------
December 31, 2002 19,556,247
==========
</Table>
BUSINESS SEGMENT INFORMATION
The Financial Accounting Standards Board (the
"FASB") issued Statement No. 131, "Disclosures
about Segments of an Enterprise and Related
Information" ("Statement 131"), in June of 1997.
Statement 131 requires disclosure of certain
operating and financial data with respect to
separate business activities within an enterprise.
The primary business of General Growth and its
consolidated affiliates is the owning and operation
of shopping centers. General Growth evaluates
operating results and allocates resources on a
property-by-property basis. General Growth does not
distinguish or group its consolidated operations on
a geographic basis. Accordingly, General Growth has
concluded it currently has a single reportable
segment for Statement 131 purposes. Further, all
material operations are within the United States
and no customer or tenant comprises more than 10%
of consolidated revenues.
F-15
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
NOTE 2 Principles of Consolidation
SUMMARY OF
SIGNIFICANT The accompanying consolidated financial statements
ACCOUNTING include the accounts of the Company consisting of
POLICIES the fifty-seven centers, the Victoria Ward Assets,
the JP Realty Assets and the unconsolidated
investments in GGP/Homart, GGP/Homart II,
GGP/Teachers, GGP Ivanhoe, GGP Ivanhoe III, Circle
T, Quail Springs Mall, and Town East Mall and,
until the acquisition of its common stock by the
Operating Partnership in January 2001 as discussed
above, GGMI. Included in the consolidated financial
statements are four joint ventures, acquired in the
JP Realty acquisition (Note 3), which are
partnerships with non-controlling independent joint
venture partners. Income allocated to minority
interests includes the share of such properties'
operations (computed as the respective joint
venture partner ownership percentage) applicable to
such non-controlling venture partners. All
significant intercompany balances and transactions
have been eliminated.
REVENUE RECOGNITION
Minimum rent revenues are recognized on a
straight-line basis over the terms of the related
leases. As of December 31, 2002, approximately
$62,294 has been recognized as straight-line rents
receivable (representing the current net cumulative
rents recognized prior to when billed and
collectible as provided by the terms of the
leases), all of which is included in tenant
accounts receivable, net in the accompanying
consolidated financial statements. Also included in
consolidated minimum rents in 2002 is approximately
$4,589 of accretion related to below-market leases
at properties acquired as provided by SFAS 141 and
142 as defined in Note 13. Overage rents are
recognized on an accrual basis once tenant sales
revenues exceed contractual tenant lease
thresholds. Recoveries from tenants computed as a
formula related to taxes, insurance and other
shopping center operating expenses are recognized
as revenues in the period the applicable costs are
incurred. Amounts collected from tenants to allow
the termination of their leases prior to their
scheduled termination dates, approximately $8,303,
$7,500 and $3,892 in 2002, 2001 and 2000,
respectively, have been included in minimum rents.
Fee income primarily represents GGMI management and
leasing fees in 2002 and 2001 due to the
consolidation of GGMI and, in 2000, financing fees
and other ancillary services performed by the
Company for the benefit of its Unconsolidated Real
Estate Affiliates. Management and leasing fees of
GGMI are recognized as services are rendered.
The Company provides an allowance for doubtful
accounts against the portion of accounts receivable
which is estimated to be uncollectible. Such
allowances are reviewed periodically based upon the
recovery experience of the Company. Accounts
receivable in the accompanying consolidated balance
sheets are shown net of an allowance for doubtful
accounts of $7,817 and $5,523 as of December 31,
2002 and 2001, respectively.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments
purchased with original maturities of three months
or less to be cash equivalents. The cash and cash
equivalents of the Company are held at two
financial institutions.
DEFERRED EXPENSES
Deferred expenses consist principally of financing
fees which are amortized over the terms of the
respective agreements and leasing commissions which
are amortized over the average life of the tenant
leases. Deferred expenses in the accompanying
consolidated balance sheets are shown at cost, net
of accumulated amortization of $73,546 and $61,282
as of December 31, 2002 and 2001, respectively.
F-16
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
FINANCIAL INSTRUMENTS
Statement No. 107, "Disclosure about the Fair Value
of Financial Instruments", ("SFAS No. 107"), issued
by the FASB, requires the disclosure of the fair
value of the Company's financial instruments for
which it is practicable to estimate that value.
SFAS No. 107 does not apply to all balance sheet
items and the Company has 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. The Company considers
the carrying value of its cash and cash equivalents
to approximate the fair value due to the short
maturity of these investments. Based on borrowing
rates available to the Company at the end of 2002
and 2001 for mortgage loans with similar terms and
maturities, the fair value of the mortgage notes
and other debts payable approximates $4,880,611 and
carrying value at December 31, 2002 and 2001,
respectively. In addition, the Company estimates
that the fair value of its interest rate cap and
swap agreements (Note 5) related to consolidated
debt at December 31, 2002 and 2001 is approximately
$(28,292) and $3,487, respectively.
The Company purchased approximately $155,100 of
marketable securities (bearing interest at a
weighted average variable annual rate of 2.9% at
December 31, 2001 and having a weighted average
maturity of approximately 3.63 years). Such
securities were classified as available-for-sale
securities and were recorded at cost which
approximated market value at December 31, 2001.
Such securities, which were subsequently sold in
May 2002 to finance certain acquisitions (Note 3),
represented a portion of the commercial mortgage
pass-through certificates issued in December 2001
as more fully described in Note 5. At December 31,
2002, the Company holds approximately $476 of
common stock of certain former tenants who had
settled their previous obligations by transferring
such common stock to the Company. These equity
securities have been reflected at their respective
market values and were sold in February 2003 at
prices approximating such assigned values. In
addition, the Company has certain derivative
financial instruments as described in Notes 5 and
13.
ACQUISITIONS
Acquisitions of properties are accounted for
utilizing the purchase method (as revised by SFAS
141 and SFAS 142 - Note 13) and, accordingly, the
results of operations are included in the Company's
results of operations from the respective dates of
acquisition. The Company has used estimates of
future cash flows and other valuation techniques to
allocate the purchase price of acquired property
between land, buildings and improvements, equipment
and other identifiable debit and credit intangibles
such as lease origination costs and acquired
below-market leases, respectively. The Company has
included at December 31, 2002 net unamortized lease
origination costs of approximately $28,434 in
buildings and improvements and the net deferred
credit related to acquired below-market leases of
approximately $47,867 in accounts payable and
accrued expenses. These identifiable debit and
credit intangibles are amortized over the terms of
the acquired leases. The Company has financed the
acquisitions through a combination of secured and
unsecured debt, issuance of Operating Partnership
Units and the proceeds of the public offerings of
Depositary Shares and Common Stock as described in
Note 1.
F-17
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
PROPERTIES
Real estate assets are stated at cost. Interest and
real estate taxes incurred during construction
periods are capitalized and amortized on the same
basis as the related assets. For redevelopment of
existing operating properties, the net book value
of the existing property under redevelopment plus
the cost for the construction and improvements
incurred in connection with the redevelopment are
capitalized to the extent the capitalized costs of
the property do not exceed the estimated fair value
of the redeveloped property when complete. The real
estate assets of the Company are reviewed for
impairment whenever events or changes in
circumstances indicate that the carrying value may
not be recoverable. A real estate asset is
considered to be impaired when the estimated future
undiscounted operating cash flow is less than its
carrying value. To the extent an impairment has
occurred, the excess of carrying value of the asset
over its estimated fair value will be charged to
operations. Depreciation expense is computed using
the straight-line method based upon the following
estimated useful lives:
<Table>
<Caption>
YEARS
-----
Buildings and improvements 40
Equipment and fixtures 10
</Table>
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.
INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The Company accounts for its investments in
unconsolidated affiliates using the equity method
whereby the cost of an investment is adjusted for
the Company's share of equity in net income or loss
from the date of acquisition and reduced by
distributions received. Generally, the operating
agreements with respect to these unconsolidated
affiliates (Note 4) provide that elements of
assets, liabilities and funding obligations are
shared in accordance with the Company's ownership
percentages (50% or 51% depending on the
affiliate). In addition, the Company generally
shares in the profit and losses, cash flows and
other matters relating to its unconsolidated
affiliates in accordance with its respective
ownership percentages. However, due to unpaid and
accrued preferences on the GGMI preferred stock as
described in Note 4, the Company was entitled to
100% of the earnings (loss) and cash flows
generated by GGMI in 2000. As of January 1, 2001,
GGMI has been consolidated due to the acquisition
of its common stock as discussed above. In
addition, the differences between the Company's
carrying value of its investment in the
unconsolidated affiliates and the Company's share
of the underlying equity of such unconsolidated
affiliates (approximately $126,054 and $130,752 at
December 31, 2002 and 2001, respectively) are
amortized over lives ranging from five to forty
years. Further, any advances to or loans (see Note
5) from the Unconsolidated Real Estate Affiliates
(loans equal approximately $102,053 and $94,996 at
December 31, 2002 and 2001, respectively) have been
included in the balance of the Company's
investments in Unconsolidated Affiliates.
F-18
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
INCOME TAXES
General Growth elected to be taxed as a real estate
investment ("REIT") trust under sections 856-860 of
the Internal Revenue Code of 1986 (the "Code"),
commencing with its taxable year beginning January
1, 1993. To qualify as a REIT, General Growth must
meet a number of organizational and operational
requirements, including requirements to distribute
at least 90% of its 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, General
Growth will generally not be subject to corporate
level Federal income tax on taxable income it
distributes currently to its stockholders. If
General Growth fails to qualify as a REIT in any
taxable year, it 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. Accordingly, the consolidated
statements of operations do not reflect a provision
for income taxes. Even if the Company qualifies for
taxation as a REIT, General Growth may be subject
to certain state and local taxes on its income or
property, and to Federal income and excise taxes on
its undistributed taxable income. However, such
state and local income and other taxes have not
been and are not expected to be significant.
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 timing differences on
the inclusion of deductability of elements of
income and expense for such purposes.
The allocations of the common distributions
declared and paid for income tax purposes are as
follows:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
2002 2001 2000
----- ------ ------
Ordinary Income 79.8% 76.0% 92.2%
Capital Gain 0.4% --% --%
Return of Capital 19.8% 24.0% 7.8%
----- ------ ------
100.0% 100.0% 100.0%
===== ====== ======
</Table>
One of the Company's subsidiaries, GGMI, is a
taxable corporation and accordingly, state and
Federal income taxes on its net taxable income are
payable by GGMI. GGMI has recognized a benefit
provided for income taxes in the amount of $2,696,
$0 and $1,002 for 2002, 2001 and 2000,
respectively. The net deferred tax asset
(liability), net of a valuation allowance of
$11,649 at December 31, 2002, was approximately
$5,133 which was primarily comprised of net
operating loss carryforwards which are currently
scheduled to expire in subsequent years through
2021. At December 31, 2002, the Company concluded
that it was more likely than not that this net
deferred tax asset will be realized in future
periods.
F-19
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
EARNINGS PER SHARE ("EPS")
Basic per share amounts are based on the weighted
average of common shares outstanding of 62,181,283
for 2002, 52,844,821 for 2001 and 52,058,320 for
2000. Diluted per share amounts are based on the
total number of weighted average common shares and
dilutive securities outstanding of 70,851,003 for
2002, 52,906,549 for 2001 and 52,096,331 for 2000.
The effect of the issuance of the PIERS is
anti-dilutive with respect to the Company's
calculation of diluted earnings per share for the
years ended December 31, 2001 and 2000 and
therefore has been excluded. In addition, 384,375,
737,693, and 1,115,516 options respectively,
outstanding for such years were not included in the
computation of diluted earnings per share either
because the exercise price of the options was
higher than the average market price of the Common
Stock for the applicable periods and therefore, the
effect would be anti-dilutive or because the
conditions which must be satisfied prior to the
issuance of any such shares were not achieved
during the applicable periods. The outstanding
Units have been excluded from the diluted earnings
per share calculation as there would be no effect
on the EPS amounts since the minority interests'
share of income would also be added back to net
income.
The following are the reconciliations of the
numerators and denominators of the basic and
diluted EPS:
<Table>
<Caption>
Years ended December 31,
2002 2001 2000
--------------------------- --------- ---------
Basic + Basic +
Basic Diluted Diluted Diluted
--------- --------- --------- ---------
Numerators:
Income before extraordinary items
and cumulative effect of accounting change $ 210,601 $ 210,601 $ 109,666 $ 137,948
Dividends on PIERS (24,467)(*) -- (24,467) (24,467)
--------- --------- --------- ---------
Income available to common stockholders before
extraordinary items and cumulative effect
of accounting change for basic and diluted EPS 186,134 210,601 85,199 113,481
Extraordinary items (1,343) (1,343) (14,022) --
Cumulative effect of accounting change -- -- (3,334) --
--------- --------- --------- ---------
Net income available to common
stockholders - for basic and diluted EPS $ 184,791 $ 209,258 $ 67,843 $ 113,481
========= ========= ========= =========
Denominators:
Weighted average common shares
outstanding (in thousands) - for basic EPS 62,181 62,181 52,845 52,058
=========
Effect of dilutive securities - options (and PIERS in 2002) 8,670 62 38
--------- --------- ---------
Weighted average common shares
outstanding (in thousands) - for diluted EPS 70,851 52,907 52,096
========= ========= =========
</Table>
(*) In 2002, the effect of the issuance of the PIERS is dilutive and,
therefore, no adjustment of net income is made as the PIERS
dilution is reflected in denominator of the diluted EPS calculation.
MCCRELESS MALL
On January 21, 2003, the Company entered into a
contract for the sale of McCreless Mall in San
Antonio, Texas. The contract provides for the sale
to occur no later than March 31, 2003 for aggregate
consideration of $15,000 (to be paid in cash at
closing). The sale, as subsequently approved by
General Growth's Board of Directors, is subject to
customary closing conditions and, therefore, there
can be no assurance that this transaction will be
completed on these or any other terms. The Company
has reclassified the McCreless Mall to
property-held-for-sale as of January 21, 2003 and
operations of the property will subsequently be
reported as discontinued operations until the sale
date.
F-20
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
MINORITY INTEREST
Income is allocated to the limited partners (the
"Minority Interest") based on their ownership
percentage of the Operating Partnership. The
ownership percentage is determined by dividing the
numbers of Operating Partnership Units held by the
Minority Interest by the total Operating
Partnership Units (excluding Preferred Units)
outstanding. The issuance of additional shares of
Common Stock or Operating Partnership Units changes
the percentage ownership of both the Minority
Interest and the Company. Since a Unit is generally
redeemable for cash or Common Stock at the option
of the Company, it may be deemed to be equivalent
to a common share. Therefore, such transactions are
treated as capital transactions and result in an
allocation between stockholders' equity and
Minority Interest-Common Units in the accompanying
consolidated balance sheets to account for the
change in the ownership of the underlying equity in
the Operating Partnership.
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income", requires
that the Company disclose comprehensive income in
addition to net income. Comprehensive income is a
more inclusive financial reporting methodology that
encompasses net income and all other changes in
equity except those resulting from investments by
and distributions to equity holders.
Included in comprehensive income but not net income
is unrealized holding gains or losses on marketable
securities classified as available-for-sale and
unrealized gains or losses on financial instruments
designated as cash flow hedges (Note 13). Also
included in comprehensive loss of 2002 is
approximately $740 representing the 2002 change in
the fair value of plan assets relating to a frozen
pension plan of Victoria Ward assumed by the
Company upon acquisition (Note 3). In addition, one
of the Company's unconsolidated affiliates received
common stock of a large publicly-traded real estate
company as part of a 1998 transaction. For the year
ended December 31, 2000, there were holding gains
on such securities of $177, net of minority
interest of $67, which were recorded. During 2001,
portions of the Company's holdings of the stock
were sold and the cumulative previously unrealized
losses for the stock sold were realized. For the
year ended December 31, 2002, there were no
unrealized losses as the remaining stock was sold
in March 2002 and the remaining cumulative
unrealized losses pertaining to such stock holdings
were realized.
USE OF ESTIMATES
The preparation of financial statements in
conformity with accounting principles generally
accepted in the United States of America requires
management to make estimates and assumptions. These
estimates and assumptions affect the reported
amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at
the date of the financial statements and the
reported amounts of revenues and expenses during
the reporting period. For example, significant
estimates and assumptions have been made with
respect to useful lives of assets, capitalization
of development and leasing costs, recoverable
amounts of receivables and deferred taxes, initial
valuations and related amortization periods of
deferred costs and intangibles, particularly with
respect to property acquisitions. Actual results
could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the 2001 and 2000 consolidated
financial statements have been reclassified to
conform to the current year presentation.
F-21
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
NOTE 3 WHOLLY-OWNED PROPERTIES
PROPERTY
ACQUISITIONS AND
DEVELOPMENTS
2002
On May 28, 2002, the Company acquired the stock of
Victoria Ward, Limited, a privately held real
estate corporation ("Victoria Ward"). The total
acquisition price was approximately $250,000,
including the assumption of approximately $50,000
of existing debt, substantially all of which was
repaid immediately following the closing. The
$250,000 total cash requirement was funded from the
proceeds of the sale of the Company's investment in
marketable securities (related to the GGP MPTC
financing (Note 5)) and from available cash and
cash equivalents. The principal Victoria Ward
assets include 65 fee simple acres in Kakaako,
central Honolulu, Hawaii, currently improved with,
among other uses, an entertainment, shopping and
dining district which includes Ward Entertainment
Center, Ward Warehouse, Ward Village and Village
Shops. In total, Victoria Ward currently has 17
properties subject to ground leases and 29 owned
buildings containing in the aggregate approximately
878,000 square feet of retail space, as well as
approximately 441,000 square feet of office,
commercial and industrial leaseable area
(collectively, the "Victoria Ward Assets").
On July 10, 2002, the Company acquired JP Realty,
Inc. ("JP Realty"), a publicly- held real estate
investment trust, and its operating partnership
subsidiary, Price Development Company, Limited
Partnership ("PDC"), by merging JP Realty and PDC
with wholly-owned subsidiaries of the Company, with
PDC surviving the merger and all of its
subsidiaries remaining in existence. The total
acquisition price was approximately $1,100,000
which included the assumption of approximately
$460,000 in existing debt and approximately
$116,000 of existing cumulative preferred operating
partnership units in PDC (510,000 Series A 8.75%
units redeemable in April 2004, 3,800,000 Series B
8.95% units redeemable in July 2004 and 320,000
Series C 8.75% units redeemable in May 2005) which
has been included in minority interest-Preferred
Units in the accompanying consolidated financial
statements. Each unit of each series of the
cumulative redeemable preferred units in PDC has a
liquidation value of $25 per unit and is
convertible at the option of the preferred unit
holder in 2009 (2010 for the Series C Units) into
0.025 shares of a newly created series of General
Growth preferred stock ($1,000 per share base
liquidation preference) with payment and
liquidation rights comparable to such preferred
unit. Pursuant to the terms of the merger
agreement, the outstanding shares of JP Realty
common stock were converted into $26.10 per share
of cash (approximately $431,470). Holders of common
units of limited partnership interest in PDC were
entitled to receive $26.10 per unit in cash or, at
the election of the holder, .522 8.5% Series B
Preferred Units (Note 1) per unit. Based upon the
elections of such holders, 1,426,393 Series B
Preferred Units were issued and the holders of the
remaining common units of limited partnership
interest of PDC received approximately $23,600 in
cash. JP Realty owned or had an interest in 51
properties, including 18 enclosed regional mall
centers (two of which were owned through
controlling general partnership interests), 26
anchored community centers (two of which were owned
through controlling general partnership interests),
one free-standing retail property and 6 mixed-use
commercial/business properties, containing an
aggregate of over 15,200,000 square feet of GLA in
10 western states (collectively, the "JP Realty
Assets"). The cash portion of the acquisition price
was funded from the net proceeds of certain new
mortgage loans, a new $350,000 acquisition loan
(Note 5), and available cash and cash equivalents.
F-22
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
On August 5, 2002, the Operating Partnership
acquired from GGP/Homart, the Prince Kuhio Plaza in
Hilo, Hawaii for approximately $39,000. Prince
Kuhio Plaza, which contains approximately 504,000
square feet of GLA, was acquired by the assumption
by the Operating Partnership of the allocated share
of the GGP MPTC financing (Note 5) pertaining to
Prince Kuhio Plaza (approximately $24,000) and the
payment to GGP/Homart of $7,500 in cash and $7,500
in the form of a promissory note. Immediately
following the acquisition, GGP/Homart issued a
dividend of $15,000 to its two co-investors, paid
in the form of $7,500 in cash to NYSCRF and the
$7,500 promissory note to the Operating
Partnership. Upon receipt of the promissory note as
a dividend, the Operating Partnership caused the
promissory note to GGP/Homart to be cancelled.
On August 26, 2002, concurrent with the formation
of GGP/Teachers (Note 4), the Company, through
GGP/Teachers, acquired Galleria at Tyler in
Riverside, California, Kenwood Towne Centre in
Cincinnati, Ohio and Silver City Galleria in
Taunton, Massachusetts from an institutional
investor for an aggregate purchase price of
approximately $477,000. Two existing non-recourse
loans on Silver City Galleria, aggregating a total
of $75,000 and bearing interest at a rate per annum
of 7.41%, were assumed and three new non-recourse
mortgage loans totaling approximately $337,000 were
obtained. The new loans bear interest at a weighted
average rate per annum of LIBOR (1.38% at December
31, 2002) plus 76 basis points.
On September 13, 2002, the Company acquired
Pecanland Mall, an enclosed regional mall in
Monroe, Louisiana, for approximately $72,000. The
acquisition was funded by approximately $22,000 of
cash on hand and the assumption of a $50,000
existing non-recourse loan that bears interest at a
rate per annum equal to the sum of 3.0% plus the
greater of (i) LIBOR or (ii) 3.5%. The loan is
scheduled to mature in January of 2005 (subject to
a right to extend for one additional year).
On December 4, 2002, the Company acquired Southland
Mall, an enclosed regional mall in Hayward,
California. The aggregate consideration paid was
approximately $89,000. The purchase was financed
with approximately $24,000 of cash on hand and a
new 5-year (assuming all options to extend are
exercised) $65,000 mortgage loan that bears
interest at LIBOR plus 75 basis points.
2001
During April 2001, GGP-Tucson Mall, L.L.C., a
wholly-owned subsidiary of the Operating
Partnership ("GGP-Tucson"), agreed to advance
$20,000 to an unaffiliated developer in the form of
a secured promissory note (bearing interest at 8%
per annum) collateralized by such developer's
ownership interest in Tucson Mall, a 1.3 million
square foot enclosed regional mall in Tucson,
Arizona. The promissory note was payable interest
only and was due on demand. GGP-Tucson had also
entered into an option agreement to purchase Tucson
Mall from such developer and its co-tenants in
title to the property. On August 15, 2001, the
promissory note was repaid in conjunction with
GGP-Tucson's completion of its acquisition of
Tucson Mall pursuant to the option agreement. The
aggregate consideration paid by GGP-Tucson for
Tucson Mall was approximately $180,000 (subject to
prorations and to certain adjustments and payments
to be made by GGP-Tucson). The consideration was
paid in the form of cash borrowed under the
Operating Partnership's revolving line of credit
and an approximately $150,000 short-term floating
rate acquisition loan which was scheduled to mature
in December 2001 but was refinanced in December
2001.
F-23
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
2000
On March 15, 2000, St. Cloud Mall L.L.C. acquired
the Crossroads Center in St. Cloud (Minneapolis),
Minnesota. St. Cloud L.L.C. had previously held a
$31,000 second mortgage on the property and,
pursuant to a purchase option, acquired the
property for a purchase price of approximately
$2,000 plus the assumption of the first mortgage on
the property (approximately $46,600) and the
balance of the second mortgage.
DEVELOPMENTS
The Company has an ongoing program of renovations
and expansions at its properties including
significant projects currently under construction
or recently completed at Alderwood Mall in Lynnwood
(Seattle), Washington; Altamonte Mall in Altamonte
Springs Florida; Tucson Mall in Tucson, Arizona;
and Fallbrook Mall in West Hills (Los Angeles),
California.
During 1999, the Company formed the Circle T joint
venture to develop a regional mall in Westlake
(Dallas), Texas as further described in Note 4
below. As of December 31, 2002, the Company had
invested approximately $17,368 in the joint
venture. The Company is currently obligated to fund
additional pre-development costs of approximately
$699. Actual development costs are not finalized or
committed but are anticipated to be funded from a
construction loan that is expected to be obtained.
The retail site, part of a planned community which
is expected to contain a resort hotel, a golf
course, luxury homes and corporate offices, is
currently planned to contain up to 1.3 million
square feet of tenant space with up to six anchor
stores, an ice rink and a multi-screen theater. The
construction project is currently anticipated to be
completed in 2005.
On September 23, 2002, the Company commenced
construction of the Jordan Creek Town Center on a
200 acre site in West Des Moines, Iowa. As of
December 31, 2002, the Company had invested
approximately $30,431 in the project, including
land costs. Actual development costs are estimated
to be approximately $199,000, which are anticipated
to be funded primarily from a construction loan
expected to be obtained and from current and
to-be-arranged unsecured revolving credit
facilities. At completion, currently scheduled for
August 2004, the regional mall is planned to
contain up to two million square feet of tenant
space with up to three anchor stores, a hotel and
an amphitheater.
The Company also owns and/or is investigating
certain other potential development sites
(representing a net investment of approximately
$20,156), including sites in Toledo, Ohio and South
Sacramento, California but there can be no
assurance that development of these sites will
proceed.
NOTE 4 GGP/HOMART
INVESTMENTS IN The Company owns 50% of the common stock
UNCONSOLIDATED of GGP/Homart with the remaining ownership interest
AFFILIATES held by the New York State Common Retirement Fund
("NYSCRF"). GGP/Homart has elected to be taxed as a
REIT. NYSCRF has an exchange right under the
GGP/Homart Stockholders Agreement, which permits it
to convert its ownership interest in GGP/Homart to
shares of Common Stock of General Growth. If such
exchange right is exercised, the Company may
alternatively satisfy such exchange in cash.
F-24
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
During 2002, as further described in Note 3,
GGP/Homart sold its interest in Prince Kuhio Plaza
to the Company for approximately $39,000. In
addition, GGP/Homart acquired on December 19, 2002,
for a purchase price of approximately $50,000, the
50% interest that it did not own in The Woodlands
Mall in Houston, Texas from The Woodlands
Commercial Property Company, LP. An additional
$50,000 mortgage loan bearing interest at a rate
per annum of LIBOR plus 250 basis points was placed
at the property on December 31, 2002 which is
scheduled to mature in December 2006.
GGP/HOMART II
In November 1999, the Company, together with
NYSCRF, the Company's co-investor in GGP/Homart,
formed GGP/Homart II, a Delaware limited liability
company which is owned equally by the Company and
NYSCRF. According to the membership agreement
between the venture partners, the Company and its
joint venture partner share in the profits and
losses, cash flows and other matters relating to
GGP/Homart II in accordance with their respective
ownership percentages.
At the time of its formation, GGP/Homart II owned
100% interests in Stonebriar Centre in Frisco
(Dallas), Texas, Altamonte Mall in Altamonte
Springs (Orlando), Florida, Natick Mall in Natick
(Boston), Massachusetts, and Northbrook Court in
Northbrook (Chicago), Illinois which were
contributed by the Company, and 100% interests in
Alderwood Mall in Lynnwood (Seattle), Washington,
Carolina Place in Charlotte, North Carolina, and
Montclair Plaza in Los Angeles, California which
were contributed by NYSCRF. Certain of these seven
malls were contributed subject to existing
financing ("Retained Debt") in order to balance the
net equity values of the malls contributed by each
of the venture partners. Such contribution
arrangements between the Company and NYSCRF have
the effect of the Company having an additional
contingent obligation to fund any shortfalls
GGP/Homart II may incur if the non-recourse debt
(approximately $167,000 at December 31, 2002)
related to Natick Mall is not funded by proceeds
from any subsequent sales or refinancing of Natick
Mall.
Subsequent to its formation, GGP/Homart II made
three additional acquisitions. Specifically, during
March 2001, GGP/Homart II acquired a 100% ownership
interest in Willowbrook Mall in Houston, Texas for
a purchase price of approximately $145,000.
GGP/Homart II financed the Willowbrook acquisition
with a new $102,000 10-year mortgage loan bearing
interest at 6.93% per annum and approximately
$43,000 in financing proceeds from a new mortgage
loan collateralized by the Stonebriar Center.
Glendale Galleria was acquired by GGP/Homart II on
November 27, 2002, for approximately $415,000. A
portion of the purchase price was paid by the
Operating Partnership's issuance of 822,626
convertible preferred Operating Partnership units
having a liquidation preference of approximately
$41,100 (Note 1). In addition, on December 30,
2002, GGP/Homart II acquired First Colony Mall, an
enclosed regional mall in Sugar Land, Texas for
approximately $105,000. The acquisition was funded
by cash on hand and a new $67,000 mortgage loan
bearing interest at a rate per annum of LIBOR plus
80 basis points with a scheduled maturity of
January 2006.
F-25
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
GGP/TEACHERS
On August 26, 2002, the Company formed
GGP/Teachers, a new joint venture owned 50% by the
Company and 50% by Teachers' Retirement System of
the State of Illinois ("Illinois Teachers"). Upon
formation of GGP/Teachers, Clackamas Town Center in
Portland, Oregon, which was 100% owned by Illinois
Teachers, was contributed to GGP/Teachers. In
addition, concurrent with its formation,
GGP/Teachers acquired Galleria at Tyler in
Riverside, California, Kenwood Towne Centre in
Cincinnati, Ohio, and Silver City Galleria in
Taunton, Massachusetts, as described in Note 3. The
Company's share (approximately $112,000) of the
equity of GGP/Teachers was funded by a portion of
new unsecured loans that total $150,000 (see Note
5) and bear interest at LIBOR plus 100 basis
points. According to the operating agreement
between the venture partners, the Company and
Illinois Teachers generally share in the profits
and losses, cash flows and other matters relating
to GGP/Teachers in accordance with their respective
50% ownership percentages. Also pursuant to the
operating agreement, and in exchange for a reduced
initial cash contribution by the Company,
approximately $19,488 of debt related to the
properties was deemed to be Retained Debt and
therefore, solely attributable to the Company. The
Company would be obligated to fund any shortfalls
of any subsequent sale or refinancing proceeds of
the properties against their respective loan
balances to the extent of such Retained Debt.
In addition, on December 19, 2002, Florence Mall in
Florence, Kentucky was acquired by GGP/Teachers for
a purchase price of approximately $97,000 including
a new, two-year $60,000 mortgage loan that bears
interest at a rate per annum of LIBOR plus 89 basis
points and matures in January 2008 (assuming an
exercise of both extension options).
GGP IVANHOE III
As of June 30, 1998, GGP Ivanhoe III acquired the
U.S. Prime Property, Inc. ("USPPI") portfolio
through a merger of a wholly-owned subsidiary of
GGP Ivanhoe III into USPPI. The common stock of GGP
Ivanhoe III is owned 51% by the Company and 49% by
an affiliate of Ivanhoe Cambridge Inc. of Montreal,
Quebec, Canada ("Ivanhoe"). GGP Ivanhoe III has
elected to be taxed as a REIT. The properties
acquired include: Landmark Mall in Alexandria,
Virginia; Mayfair Mall and adjacent office
buildings in Wauwatosa (Milwaukee), Wisconsin;
Meadows Mall in Las Vegas, Nevada; Northgate Mall
in Chattanooga, Tennessee; Oglethorpe Mall in
Savannah, Georgia; and Park City Center in
Lancaster, Pennsylvania. Effective as of September
28, 1999, GGP Ivanhoe III acquired Oak View Mall in
Omaha, Nebraska and on December 22, 1999, Eastridge
Shopping Center in San Jose, California.
In conjunction with the GGP MPTC financing as
defined and described in Note 5, GGP Ivanhoe III
entered into an interest rate swap agreement with
the Operating Partnership. The swap agreement
effectively converts approximately $90,790 of GGP
Ivanhoe III debt bearing interest at a weighted
average fixed rate of 5.33% per annum, which was
obtained in the GGP MPTC transaction, to variable
rate debt bearing interest at a weighted average
rate per annum of LIBOR plus 110 basis points. The
swap agreement qualifies as a cash flow hedge for
the Operating Partnership and a fair value hedge
for GGP Ivanhoe III.
F-26
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
The joint venture partner in GGP Ivanhoe III is
also the Company's joint venture partner in GGP
Ivanhoe (described below). The Company and Ivanhoe
share in the profits and losses, cash flows and
other matters relating to GGP Ivanhoe III in
accordance with their respective ownership
percentages except that certain major operating and
capital decisions (as defined in the stockholders'
agreement) require the approval of both
stockholders. The stockholder's agreement further
provides that any stockholder wishing to sell its
stock to a third party must offer the stock to the
other stockholder and, after the fifth anniversary
of the stockholder agreement (July 30, 2003), each
stockholder has the right to offer to sell its
stock to the other stockholder. Accordingly, the
Company is accounting for GGP Ivanhoe III using the
equity method.
GGP IVANHOE
GGP Ivanhoe owns The Oaks Mall in Gainesville,
Florida and Westroads Mall in Omaha, Nebraska. The
Company contributed approximately $43,700 for its
51% ownership interest in GGP Ivanhoe and Ivanhoe
owns the remaining 49% ownership interest. The
terms of the stockholders' agreement are similar to
those of GGP Ivanhoe III. As certain major
decisions concerning GGP Ivanhoe must be made
jointly by the Company and Ivanhoe, the Company is
accounting for GGP Ivanhoe using the equity method.
TOWN EAST MALL / QUAIL SPRINGS MALL
The Company owns a 50% interest in Town East Mall,
located in Mesquite, Texas and a 50% interest in
Quail Springs Mall in Oklahoma City, Oklahoma. The
Company shares in the profits and losses, cash
flows and other matters relating to Town East Mall
and Quail Springs Mall in accordance with its
ownership percentage.
CIRCLE T
At December 31, 2002, the Company, through a
wholly-owned subsidiary, owns a 50% general
partnership interest in Westlake Retail Associates,
Ltd. ("Circle T"). AIL Investment, LP, an affiliate
of Hillwood Development Company, ("Hillwood") is
the limited partner of Circle T. Circle T is
currently developing the Circle T Ranch Mall, a
regional mall in Dallas, Texas, scheduled for
completion in 2005. Development costs are expected
to be funded by a construction loan to be obtained
by the joint venture and capital contributions by
the joint venture partners. As of December 31,
2002, the Company has made contributions of
approximately $17,368 to the project for
pre-development costs and Hillwood has contributed
approximately $11,200, mostly in the form of land
costs and related predevelopments costs.
GGMI
At December 31, 2000, the Operating Partnership
owned all of the non-voting preferred stock of GGMI
representing 95% of the equity interest. Certain
key current and former employees of the Operating
Partnership held the remaining 5% equity interest
through ownership of 100% of the common stock of
GGMI, which was entitled to all voting rights in
GGMI. Accordingly, the Company utilized the equity
method to account for its ownership interest in
GGMI. As no preferred stock dividends had been paid
by GGMI, the Company had been allocated 100% of the
earnings (loss) and cash flows generated by GGMI
since 1996. The Operating Partnership also had
advanced funds to GGMI, at interest rates ranging
from 8% to 14% per annum, which were scheduled to
mature by 2016. The loans required payment of
interest only until maturity.
On January 1, 2001 the Operating Partnership
acquired 100% of the common stock of GGMI as
described in Note 1 and the operations of GGMI have
been fully consolidated with the Company as of and
for the year ended December 31, 2001 and December
31, 2002.
F-27
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
SUMMARIZED FINANCIAL INFORMATION OF INVESTMENTS IN UNCONSOLIDATED REAL ESTATE
AFFILIATES
Following is summarized financial information for the Company's Unconsolidated
Real Estate Affiliates as of December 31, 2002 and 2001 and for the years ended
December 31, 2002, 2001 and 2000.
<Table>
<Caption>
CONDENSED BALANCE SHEETS
DECEMBER 31, 2002
ALL OTHER
REAL ESTATE
GGP/HOMART GGP/HOMART II AFFILIATES
---------- ------------- -----------
Assets:
Net investment in real estate* $1,541,042 $1,950,308 $ 1,993,985
Investment in real estate joint ventures 12,520 -- --
Other assets 154,166 180,805 130,052
---------- ---------- -----------
$1,707,728 $2,131,113 $ 2,124,037
========== ========== ===========
Liabilities and Owners' Equity:
Mortgage and other notes payable $1,323,040 $1,469,137 $ 1,281,848
Accounts payable and accrued expenses 80,497 81,896 127,142
Owners' equity 304,191 580,080 715,047
---------- ---------- -----------
$1,707,728 $2,131,113 $ 2,124,037
========== ========== ===========
</Table>
<Table>
<Caption>
DECEMBER 31, 2001
ALL OTHER
REAL ESTATE
GGP/HOMART GGP/HOMART II AFFILIATES
---------- ------------- -----------
Assets:
Net investment in real estate* $1,428,163 $1,411,629 $ 1,207,265
Investment in real estate joint ventures 25,604 -- --
Other assets 117,198 93,904 65,699
---------- ---------- -----------
$1,570,965 $1,505,533 $ 1,272,964
========== ========== ===========
Liabilities and Owners' Equity:
Mortgage and other notes payable $1,186,616 $ 956,576 $ 768,553
Accounts payable and accrued expenses 43,216 47,591 47,565
Owners' equity 341,133 501,366 456,846
---------- ---------- -----------
$1,570,965 $1,505,533 $ 1,272,964
========== ========== ===========
</Table>
(*) At December 31, 2002 and 2001, the net investment in real estate includes
approximately $28,563 and $27,400, respectively, of assets of the Circle T joint
venture which are currently categorized as developments in progress.
F-28
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
<Table>
<Caption>
CONDENSED STATEMENTS OF OPERATIONS
DECEMBER 31, 2002
ALL OTHER
REAL ESTATE
GGP/HOMART GGP/HOMART II AFFILIATES
---------- ------------- -----------
Revenues:
Tenant rents $ 286,494 $ 210,171 $ 256,918
Operating expenses (*) 169,981 115,152 146,672
---------- ---------- -----------
Operating income 116,513 95,019 110,246
Interest expense, net (62,424) (38,583) (44,864)
Equity in net income of unconsolidated
real estate affiliates 4,938 -- --
Gain on property sales 921 9 --
---------- ---------- -----------
Net income $ 59,948 $ 56,445 $ 65,382
========== ========== ===========
</Table>
<Table>
<Caption>
DECEMBER 31, 2001
ALL OTHER
REAL ESTATE
GGP/HOMART GGP/HOMART II AFFILIATES
---------- ------------- -----------
Revenues:
Tenant rents $ 279,993 $ 189,280 $ 205,553
Operating expenses (*) 161,547 105,156 119,946
---------- ---------- -----------
Operating income 118,446 84,124 85,607
Interest expense, net (74,422) (44,938) (49,792)
Equity in net income of unconsolidated
real estate affiliates 3,375 -- --
Gain (loss) on property sales (1,074) 65 --
---------- ---------- -----------
Net income $ 46,325 $ 39,251 $ 35,815
========== ========== ===========
</Table>
<Table>
<Caption>
Revenues:
DECEMBER 31, 2000
ALL OTHER
REAL ESTATE
GGP/HOMART GGP/HOMART II AFFILIATES
---------- ------------- -----------
Revenues:
Tenant rents $ 253,348 $ 146,730 $ 199,709
Operating expenses (*) 143,862 80,339 117,266
---------- ---------- -----------
Operating income 109,486 66,391 82,443
Interest expense, net (74,447) (36,253) (53,128)
Equity in net income of unconsolidated
real estate affiliates 3,266 -- --
Gain (loss) on property sales (744) -- --
Income allocated to minority interest (408) -- --
---------- ---------- -----------
Net income $ 37,153 $ 30,138 $ 29,315
========== ========== ===========
</Table>
Significant accounting policies used by the
Unconsolidated Real Estate Affiliates are the same
as those used by the Company.
(*) Includes depreciation and amortization.
F-29
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
NOTE 5 MORTGAGE Mortgage notes and other debt payable have various
NOTES AND OTHER maturities through 2095 (weighted average scheduled
DEBT PAYABLE remaining term equal to 4.7 years at December 31,
2002) and consisted of the following:
<Table>
<Caption>
December 31, 2002 December 31, 2001
----------------- -----------------
Fixed-Rate debt:
Mortgage notes payable $ 2,523,701 $ 2,239,511
Variable-Rate debt:
Mortgage notes payable 1,472,310 951,696
Credit Facilities and bank loans 596,300 207,000
----------------- -----------------
Total Variable-Rate debt 2,068,610 1,158,696
----------------- -----------------
Total $ 4,592,311 $ 3,398,207
================= =================
</Table>
Land, buildings and equipment related to the
mortgage notes payable with an aggregate cost of
approximately $6,343,793 at December 31, 2002 have
been pledged as collateral. Certain properties,
including those within the portfolios
collateralized by commercial mortgage-backed
securities, are subject to financial performance
covenants, primarily debt service coverage ratios.
FIXED RATE DEBT
MORTGAGE NOTES AND OTHER DEBT PAYABLE
Mortgage notes and other debt payable consist
primarily of fixed rate non-recourse notes
collateralized by individual or groups of
properties or equipment. Also included in mortgage
notes and other debt payable are $100,000 of
ten-year senior unsecured notes, bearing interest
at a fixed rate of 7.29% per annum, which were
issued by PDC in March 1998 and were assumed by the
Company in conjunction with the acquisition of JP
Realty (Note 2). Interest payments on these notes
are due semi-annually on March 11 and September 11
of each year and principal payments of $25,000 are
due annually beginning March 2005. The fixed rate
notes bear interest ranging from 1.81% to 10.00%
per annum (weighted average of 6.42% per annum),
and require monthly payments of principal and/or
interest. Certain properties are pledged as
collateral for the related mortgage notes.
Substantially all of the mortgage notes payable as
of December 31, 2002 are non-recourse to the
Company. Certain mortgage notes payable may be
prepaid but are generally subject to a prepayment
penalty of a yield-maintenance premium or a
percentage of the loan balance. Certain loans have
cross-default provisions and are
cross-collateralized as part of a group of
properties. Under certain cross-default provisions,
a default under any mortgage notes included in a
cross-defaulted package may constitute a default
under all such mortgage notes and may lead to
acceleration of the indebtedness due on each
property within the collateral package. In general,
the cross-defaulted properties are under common
ownership. However, GGP Ivanhoe debt collateralized
by two GGP Ivanhoe centers (totaling $125,000) is
cross-defaulted and cross-collateralized with debt
collateralized by eleven Wholly-Owned centers.
F-30
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
VARIABLE RATE DEBT
MORTGAGE NOTES AND OTHER DEBT PAYABLE
Variable rate mortgage notes and other debt payable
at December 31, 2002 consist primarily of
approximately $852,691 of collateralized
mortgage-backed securities (approximately $665,790
of which are currently subject to fixed rate
interest swap agreements as described below and in
Note 13), the $275,000 outstanding on the loan
obtained in conjunction with the JP Realty
acquisition, the $172,500 outstanding on the
Company's Term Loan, the approximately $130,000 of
revolving credit of PDC, the approximately $91,000
of construction loans assumed in the JP Realty
acquisition, and the $150,000 in bank loans
obtained in September 2002, all as described below.
The remaining variable rate loans are individual
notes collateralized by individual properties and
equipment. The loans bear interest at a rate per
annum equal to LIBOR plus 60 to 250 basis points.
COMMERCIAL MORTGAGE-BACKED SECURITIES
In August 1999, the Company issued $500,000 of
commercial mortgage-backed securities (the "Ala
Moana CMBS") collateralized by the Ala Moana
Center. The securities were comprised of notes
which bore interest at rates per annum ranging from
LIBOR plus 50 basis points to LIBOR plus 275 basis
points (weighted average equal to LIBOR plus 95
basis points), calculated and payable monthly. The
notes were repaid in December 2001 with a portion
of the proceeds of the GGP MPTC financing described
below. In conjunction with the issuance of the Ala
Moana CMBS, the Company arranged for an interest
rate cap agreement, the effect of which was to
limit the maximum interest rate the Company would
be required to pay on the securities to 9% per
annum. Payments received pursuant to the interest
rate cap agreement for the year ended December 31,
2000 were approximately $77, which were reflected
as a reduction in net interest expense. No amounts
were received on the cap agreement in 2001.
Approximately $438,000 of the proceeds from the
sale of the Ala Moana CMBS was used by the Company
to repay the short-term mortgage loan obtained in
July 1999 to enable it to purchase the Ala Moana
Center. The remainder was utilized by the Company
for general working capital purposes including
repayments of outstanding indebtedness under the
Company's Credit Facility.
F-31
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
In September 1999, the Company issued $700,229 of
commercial mortgage-backed securities (the
"GGP-Ivanhoe CMBS") cross-collateralized and
cross-defaulted by a portfolio of nine regional
malls and an office complex adjacent to one of the
regional malls. The properties in the portfolio
were Mayfair Mall and adjacent office buildings in
Wauwatosa (Milwaukee), Wisconsin; Park City Center
in Lancaster, Pennsylvania; Oglethorpe Mall in
Savannah, Georgia; Landmark Mall in Alexandria,
Virginia, all centers owned by GGP Ivanhoe III; and
Northgate Mall in Chattanooga, Tennessee; The
Boulevard Mall in Las Vegas, Nevada; Regency Square
Mall in Jacksonville, Florida; Valley Plaza
Shopping Center in Bakersfield, California;
Northridge Fashion Center in Northridge (Los
Angeles), California, all Wholly-Owned Centers. The
GGP-Ivanhoe CMBS was comprised of notes which bore
interest at rates per annum ranging from LIBOR plus
52 basis points to LIBOR plus 325 basis points
(weighted average equal to LIBOR plus approximately
109 basis points), calculated and payable monthly.
The notes were repaid in December 2001 with a
portion of the proceeds of the GGP MPTC financing
described below. In conjunction with the issuance
of the GGP-Ivanhoe CMBS, the Company arranged for
an interest rate cap agreement, the effect of which
was to limit the maximum interest rate the Company
would be required to pay on the securities to 9.03%
per annum. Payments received pursuant to the
interest rate cap agreement for the year ended
December 31, 2000 were approximately $366, which
were reflected as a reduction in net interest
expense. No amounts were received on the cap
agreement in 2001. Approximately $340,000 of the
proceeds from the sale of the GGP-Ivanhoe CMBS
repaid amounts collateralized by the GGP Ivanhoe
III properties in the GGP-Ivanhoe CMBS Portfolio of
properties and the remaining approximately $360,000
repaid amounts collateralized by Wholly-Owned
properties in the GGP-Ivanhoe CMBS portfolio of
properties.
In early December 2001, the Operating Partnership
and certain Unconsolidated Real Estate Affiliates
completed the placement of $2,550,000 of
non-recourse commercial mortgage pass-through
certificates (the "GGP MPTC"). The GGP MPTC is
collateralized by 27 malls and one office building,
including 19 malls owned by certain Unconsolidated
Real Estate Affiliates. The GGP MPTC is comprised
of both variable rate and fixed rate notes which
require monthly payments of principal and interest.
The certificates represent beneficial interests in
three loan groups made by three sets of borrowers
(GGP/Homart-GGP/Homart II, Wholly-Owned and GGP
Ivanhoe III). The original principal amount of the
GGP MPTC was comprised of $1,235,000 attributed to
the Operating Partnership, $900,000 to GGP/Homart
and GGP/Homart II and $415,000 to GGP Ivanhoe III.
The three loan groups are comprised of variable
rate notes with a 36 month initial maturity (with
two no cost 12-month extension options), variable
rate notes with a 51 month initial maturity (with
two no cost 18-month extension options) and fixed
rate notes with a 5 year maturity. The 36 month
variable rate notes bear interest at rates per
annum ranging from LIBOR plus 60 to 235 basis
points (weighted average equal to 79 basis points),
the 51 month variable rate notes bear interest at
rates per annum ranging from LIBOR plus 70 to 250
basis points (weighted average equal to 103 basis
points) and the 5 year fixed rate notes bear
interest at rates per annum ranging from
approximately 5.01% to 6.18% (weighted average
equal to 5.38%). The extension options with respect
to the variable rate notes are subject to obtaining
extensions of the interest rate protection
agreements which were required to be obtained in
conjunction with the GGP MPTC. The GGP MPTC yielded
approximately $470,000 of net proceeds (including
amounts attributed to the Unconsolidated Real
Estate Affiliates) which were utilized for loan
repayments and temporary investments in cash
equivalents and marketable securities. On closing
of the GGP MPTC financing, approximately $94,996 of
such proceeds attributable to GGP/Homart and
GGP/Homart II were loaned to the Operating
Partnership. The loans, which were comprised of
approximately $16,596 by GGP/Homart and $78,400 by
GGP/Homart II, bear interest at a rate of 5.5% per
annum on the remaining outstanding balance and
mature on March 30, 2003.
F-32
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
Concurrent with the issuance of the certificates,
the Company purchased interest rate protection
agreements (structured to limit the Company's
exposure to interest rate fluctuations in a manner
similar to the interest rate cap agreements
purchased in connection with the Ala Moana and
GGP-Ivanhoe CMBS), and simultaneously an equal
amount of interest rate protection agreements were
sold to fully offset the effect of these agreements
and to recoup a substantial portion of the cost of
such agreements. Further, to achieve a more
desirable balance between fixed and variable rate
debt, the Company entered into $666,933 of swap
agreements. Approximately $575,000 of such swap
agreements are with independent financial services
firms and approximately $90,790 is with GGP Ivanhoe
III to provide Ivanhoe with only variable rate debt
(see Note 4). The notional amounts of such swap
agreements decline over time to an aggregate of
$25,000 at maturity of the 51 month variable rate
loans (assuming both 18 month extension options are
exercised). The swap agreements convert the related
variable rate debt to fixed rate debt currently
bearing interest at a weighted average rate of
4.85% per annum. Such swap agreements have been
designated as hedges of related variable rate debt
as described in Note 13.
CREDIT FACILITIES
The Company's $200,000 unsecured revolving Credit
Facility was originally scheduled to mature on July
31, 2000. On June 23, 2000 the Company prepaid all
remaining outstanding principal amounts and
terminated the Credit Facility. The Credit Facility
bore interest at a floating rate per annum equal to
LIBOR plus 80 to 120 basis points depending upon
the Company's leverage ratio. The Credit Facility
was subject to financial performance covenants
including debt-to-market capitalization, minimum
earnings before interest, taxes, depreciation and
amortization ("EBITDA") ratios and minimum equity
values.
As of July 31, 2000, the Company obtained a new
unsecured revolving credit facility (the
"Revolver") in a maximum aggregate principal amount
of $135,000 (cumulatively increased to $185,000
through December 2001). The outstanding balance of
the Revolver was fully repaid from a portion of the
proceeds of the GGP MPTC financing described above
and the Revolver was terminated. The Revolver bore
interest at a floating rate per annum equal to
LIBOR plus 100 to 190 basis points, depending on
the Company's average leverage ratio. The Revolver
was subject to financial performance covenants
including debt to value and net worth ratios,
EBITDA ratios and minimum equity values.
In January 2001, GGMI borrowed $37,500 under a new
revolving line of credit obtained by GGMI and an
affiliate, which was guaranteed by General Growth
and the Operating Partnership. This revolving line
of credit was scheduled to mature in July 2003 but
was fully repaid in December 2001 from a portion of
the proceeds of the GGP MPTC financing described
above and the line of credit was terminated. The
interest rate per annum with respect to any
borrowings varied from LIBOR plus 100 to 190 basis
points depending on the Company's average leverage
ratio.
In conjunction with the acquisition of JP Realty,
an existing $200,000 unsecured credit facility (the
"PDC Credit Facility") with a balance of
approximately $120,000 was assumed. The PDC Credit
Facility has a principal balance of $130,000 at
December 31, 2002, a scheduled maturity of July
2003 and bears interest at the option of the
Company at (i) the higher of the federal funds rate
plus 50 basis points or the prime rate of Bank One,
NA, or (ii) LIBOR plus a spread of 85 to 145 basis
points. The LIBOR spread is determined by PDC's
credit rating. The PDC Credit Facility, which is
expected to be repaid or extended in conjunction
with the new credit facility to be obtained as
discussed below, contains restrictive covenants,
including limitations on the amount of outstanding
secured and unsecured debt, and requires PDC to
maintain certain financial ratios.
F-33
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
In March 2003, the Company reached a preliminary
agreement with a group of banks to establish a new
revolving credit facility and term loan. The total
amount to be financed is expected to be
approximately $700,000, have a term of three years
and provide for partial amortization of a portion
of the principal balance of the term loan in the
second and third years. The proceeds are
anticipated to be used to repay and consolidate
existing financing including amounts due on the PDC
Credit Facility, the Term Loan, the JP Realty
acquisition loan, and to Unconsolidated Real Estate
Affiliates.
INTERIM FINANCING
In January 2000, the Company obtained a new
$200,000 unsecured short-term bank loan. The
Company's initial draw under this loan was $120,000
in January 2000 and the remaining available amounts
were fully drawn at June 30, 2000. The bank loan
bore interest at a rate per annum of LIBOR plus 150
basis points and was refinanced on August 1, 2000
with the Revolver and the Term Loan described
below.
As of July 31, 2000, the Company obtained an
unsecured term loan (the "Term Loan") in a maximum
principal amount of $100,000. As of September 30,
2001, the maximum principal amount of the Term Loan
was increased to $255,000 and, as of such date, all
amounts available under the Term Loan were fully
drawn. Term Loan proceeds were used to fund ongoing
redevelopment projects and repay a portion of the
remaining balance of the bank loan described in the
prior paragraph immediately above. During the
fourth quarter of 2001, approximately $48,000 of
the principal amount of the Term Loan was repaid
from a portion of the 2001 Offering. The Term Loan,
which is expected to be repaid or extended at or
prior to its scheduled maturity of July 31, 2003 by
the new credit facility discussed above, bears
interest at a rate per annum of LIBOR plus 100 to
170 basis points depending on the Company's average
leverage ratio.
In July 2002, in conjunction with the JP Realty
acquisition, the Company obtained a new $350,000
loan from a group of banks. The loan, with an
outstanding principal balance of $275,000 at
December 31, 2002, bears interest at a rate (as
elected by the borrower) per annum equal to LIBOR
plus 150 basis points and matures on July 9, 2003.
The loan, which is expected to be extended or
refinanced by the new credit facility discussed
above, provides for periodic partial amortization
of principal prior to the maturity of the loan
(aggregating not less than $60,000 paid prior to
the maturity date) and for additional prepayments
that may be required under certain circumstances
including the refinancing of certain indebtedness.
During August 2002, the Company, through Victoria
Ward, arranged for an aggregate of $150,000 in
loans from two separate groups of banks. On August
23, 2002, the Company borrowed an initial $80,000
and, on September 19, 2002, the Company borrowed an
additional $70,000. The two-year loans provide for
quarterly partial amortization of principal, bear
interest at a rate (as elected by the borrower) per
annum of LIBOR plus 100 basis points, and require
the remaining balance to be paid at maturity
(unless extended, under certain conditions, for an
additional six months).
F-34
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
CONSTRUCTION LOAN
During April 1999, the Company received $30,000
representing the initial loan draw on a $110,000
construction loan facility. The facility was
collateralized by and provided financing for the
RiverTown Crossings Mall development (including
outparcel development) in Grandville (Grand
Rapids), Michigan. The construction loan provided
for periodic funding as construction and leasing
continued and bore interest at a rate per annum of
LIBOR plus 150 basis points. As of July 17, 2000
additional loan draws of approximately $80,000 had
been made and no further amounts were available
under the construction loan facility. Interest was
due monthly. The loan had been scheduled to mature
on June 30, 2001 and was refinanced on June 28,
2001 with a non-recourse, long-term mortgage loan.
The new $130,000 non-recourse mortgage loan bears
interest at 7.53% per annum and matures on July 1,
2011.
In connection with the acquisition of JP Realty,
the Company assumed a $47,340 construction loan of
Spokane Mall Development Company Limited
Partnership, and a $50,000 construction loan of
Provo Mall Development Company, Ltd., for both of
which PDC is the general partner. The loans, which
bore interest at a rate per annum of LIBOR plus 150
basis points, were scheduled to mature in July 2003
but were replaced in February 2003 with a new
long-term non-recourse mortgage loan. The new loan,
allocated $53,000 to the Provo Mall and $42,000 to
the Spokane Mall, is collateralized by the two
malls, bears interest at a rate per annum of 4.42%
and matures in February 2008.
LETTERS OF CREDIT
As of December 31, 2002 and 2001, the Company had
outstanding letters of credit of $12,104 and
$13,200, respectively, primarily in connection with
special real estate assessments and insurance
requirements.
NOTE 6 The extraordinary items resulted from prepayment
EXTRAORDINARY penalties and unamortized deferred financing costs
ITEMS related to the early extinguishment, primarily
through refinancings, of mortgage notes payable. In
2002, the basic and diluted per share impact of the
extraordinary items was $0.02. The basic and the
diluted per share impact of the extraordinary items
in 2001 was $0.27.
NOTE 7 RENTALS The Company receives rental income from the leasing
UNDER OPERATING of retail shopping center space under operating
LEASES leases. The minimum future rentals based on
operating leases of Wholly-Owned Centers held as of
December 31, 2002 are as follows:
<Table>
<Caption>
YEAR AMOUNT
---- ----------
2003 $ 533,937
2004 500,033
2005 448,899
2006 392,742
2007 345,949
Subsequent 1,315,697
</Table>
Minimum future rentals do not include amounts which
are payable by certain tenants based upon a
percentage of their gross sales or as reimbursement
of shopping center operating expenses.
The tenant base includes national and regional
retail chains and local retailers, and
consequently, the Company's credit risk is
concentrated in the retail industry.
F-35
NOTE 8 GGMI
TRANSACTIONS In 2000, GGMI had been contracted to provide
WITH AFFILIATES management, leasing, development and construction
management services for the Wholly-Owned Centers.
In addition, certain shopping center advertising
and payroll costs of the properties were paid by
GGMI and reimbursed by the Company. Total costs
included in the consolidated financial statements
related to agreements between the Wholly-Owned
Centers and GGMI are as follows:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
2000
--------
Management and Leasing Fees $ 22,834
Cost Reimbursements 55,937
Development Costs 8,833
</Table>
On January 1, 2001, in connection with the
acquisition of the common stock of GGMI, the
Company and GGMI agreed to concurrently terminate
the management contracts with respect to the
Wholly-Owned Centers. Since January 1, 2001, the
Wholly-Owned Centers have been self-managed under
the same standards and procedures in effect prior
to January 1, 2001.
NOTES RECEIVABLE-OFFICERS
During 1998 certain officers of the Company issued
to the Company an aggregate of $3,164 of promissory
notes in connection with their exercise of options
to purchase an aggregate of 166,000 shares of the
Company's Common Stock. During 2000, the Company
made aggregate advances of $7,149 in conjunction
with the exercise of options to purchase an
aggregate 270,000 shares of Common Stock by
officers. In June 2000, a $1,120 loan was repaid by
one of the officers. Also in 2000, the Company
forgave approximately $150 of other notes
receivable from an officer (previously reflected in
prepaid expenses and other assets). During 2001,
the Company made additional advances to officers of
an aggregate of $10,441 in conjunction with the
exercise of options to purchase an aggregate of
330,000 shares of Common Stock. In early 2002,
additional advances of $4,243 were made to officers
in connection with the exercise of options to
acquire approximately 135,000 shares of Common
Stock.
As of April 30, 2002, the Company's Board of
Directors decided to terminate the availability of
loans to officers to exercise options on the Common
Stock. In conjunction with this decision, the
Company and the officers restructured the terms of
the promissory notes, including the approximately
$2,823 previously advanced in the form of income
tax withholding payments made by the Company on
behalf of such officers. Each of the officers
repaid no less than 60% of the principal and 100%
of the interest due under such officer's note as of
April 30, 2002 and the remaining amounts,
approximately $10,141 as of April 30, 2002, were
represented by amended and restated promissory
notes. These amended and restated, fully recourse
notes are payable in monthly installments of
principal and interest (at a market rate which
varies monthly computed at LIBOR plus 125 basis
points per annum) until fully repaid in May 2009
(or within 90 days of the officer's separation from
the Company, if earlier). In October 2002, a
voluntary prepayment of approximately $500 was
received from one of the officers. As of December
31, 2002, the current outstanding balance under the
promissory notes was $8,698, including
approximately $926 relating to income tax
withholding payments which have been reflected in
prepaid expenses and other assets.
F-36
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
NOTE 9 EMPLOYEE STOCK INCENTIVE PLAN
BENEFIT AND The Company's 1993 Stock Incentive Plan provides
STOCK PLANS incentives to attract and retain officers and
key employees. An aggregate of 3,000,000 shares
of Common Stock have been authorized for
issuance under the plan. 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 the Common
Stock on the date of grant. The term of the
option is fixed by the Compensation Committee,
but no option is exercisable more than 10 years
after the date of the grant. Options granted to
officers and key employees are for 10-year terms
and are generally exercisable in either 33 1/3%
or 20% annual increments from the date of the
grants. However, during 2000, 53,319 options
were granted to certain employees under the
Stock Incentive Plan (of which 5,000 were
forfeited during 2000) with the same terms as
the TSO's granted in 2000 (as described and
defined below). Options granted to non-employee
directors are exercisable in full commencing on
the date of grant and expire on the tenth
anniversary of the date of the grant.
In February 2003, the Company's Board of
Directors approved the adoption of the Company's
2003 Stock Incentive Plan, to replace the
existing Stock Incentive Plan which, by its
terms, expires in April 2003. The 2003 Stock
Incentive Plan, which is subject to shareholder
approval at the 2003 annual meeting, provides
for the issuance of up to 3,000,000 shares of
Common Stock.
F-37
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
A summary of the status of options granted under the Company's 1993 Stock
Incentive Plan as of December 31, 2002, 2001 and 2000 and changes during the
year ended on those dates is presented below.
<Table>
<Caption>
2002 2001 2000
------------------- ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- -------- -------- -------- --------
Outstanding at
beginning of year 543,219 $ 31.92 742,319 $ 31.36 827,500 $ 29.85
Granted 204,000 $ 47.52 213,000 $ 33.97 205,319 $ 30.89
Exercised (214,016) $ 33.38 (350,000) $ 31.60 (276,500) $ 26.38
Forfeited (3,100) $ 29.97 (62,100) $ 34.07 (14,000) $ 33.97
-------- -------- --------
Outstanding at end of year 530,103 $ 37.35 543,219 $ 31.92 742,319 $ 31.36
======== ======== ========
Exercisable at end of year 195,603 $ 32.80 217,500 $ 30.50 467,500 $ 30.64
Options available
for future grants 1,292,214 1,493,114 1,644,014
Weighted average per share
fair value of options
granted during the year $ 3.63 $ 3.06 $ 2.62
</Table>
The following table summarizes information about stock options outstanding
pursuant to the 1993 Stock Incentive Plan at December 31, 2002:
<Table>
<Caption>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------------------- -------------------------------
WEIGHTED AVERAGE
NUMBER REMAINING WEIGHTED AVERAGE OPTIONS WEIGHTED AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICES AT 12/31/02 LIFE PRICE AT 12/31/02 PRICE
- --------------- ----------- ---------------- ----------------- ----------- ----------------
$27.81 - $29.97 125,519 5.2 years $28.78 85,519 $28.22
$31.75 - $33.95 185,610 7.7 years $33.55 51,110 $32.81
$36.03 - $40.74 88,974 7.2 years $38.84 48,974 $37.29
$50.03 - $51.28 130,000 9.7 years $50.03 10,000 $50.03
-------- --------- ------ ------- ------
530,103 7.5 years $37.35 195,603 $32.80
======== ========= ====== ======= ======
</Table>
F-38
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
1998 INCENTIVE PLAN
General Growth also has an incentive stock plan
entitled the 1998 Incentive Stock Plan (the "1998
Incentive Plan"). Under the 1998 Incentive Plan,
stock incentive awards in the form of
threshold-vesting stock options ("TSOs") are granted
to employees. The exercise price of the TSOs to be
granted to a participant will be the Fair Market
Value ("FMV") of a share of Common Stock on the date
the TSO is granted. The threshold price (the
"Threshold Price") which must be achieved in order
for the TSO to vest will be determined by multiplying
the FMV on the date of grant by the Estimated Annual
Growth Rate (currently set at 7% in the 1998
Incentive Plan) and compounding the product over a
five-year period. Shares of the 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 in order for the
TSO to vest. All TSOs granted will have a term of 10
years but must vest within 5 years of the grant date
in order to avoid forfeiture. As of December 31,
2002, increases in the price of the Common Stock
since the respective grant dates has caused all TSOs
granted in 1999, 2000 and 2001 to become vested, as
detailed below. The aggregate number of shares of
Common Stock which may be subject to TSOs issued
pursuant to the 1998 Incentive Plan may not exceed
2,000,000, subject to certain customary adjustments
to prevent dilution.
The following is a summary of the options issued
under the 1998 Incentive Plan that have been awarded
as of December 31, 2002:
<Table>
<Caption>
2002 2001 2000 1999
--------- --------- --------- ---------
Exercise price $ 40.74 $ 34.73 $ 29.97 $ 31.69
Threshold Vesting
Stock Price $ 57.13 $ 48.70 $ 42.03 $ 44.44
Fair value of options on grant date $ 3.38 $ 2.21 $ 1.49 $ 1.36
Original Grant Shares 259,675 329,996 251,030 313,964
Forfeited at December 31, 2002 (25,300) (46,341) (56,242) (93,995)
Vested and exchanged for cash
at December 31, 2002 -- (174,461) (143,478) (144,636)
Vested and exercised at December 31, 2002 -- (32,867) (30,288) (37,750)
--------- --------- --------- ---------
1998 Incentive Plan TSOs outstanding
at December 31, 2002 234,375 76,327 21,022 37,583
--------- --------- --------- ---------
</Table>
The fair value of each option grant for 2002, 2001
and 2000 for the 1993 Stock Incentive Plan and the
1998 Incentive Plan was estimated on the date of
grant using the Black-Scholes option pricing model
with the following assumptions:
<Table>
<Caption>
2002 2001 2000
--------- --------- ---------
Risk-free interest rate 4.49% 4.79% 6.19%
Dividend yield 6.37% 6.46% 6.86%
Expected life 7.6 years 4.6 years 5.2 years
Expected volatility 19.57% 19.48% 18.2%
</Table>
F-39
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
EMPLOYEE STOCK PURCHASE PLAN
During 1999, General Growth established the General
Growth Properties, Inc. Employee Stock Purchase Plan
(the "ESPP") to assist eligible employees in
acquiring a stock ownership interest in General
Growth. A maximum of 500,000 shares of Common Stock
is reserved for issuance under the ESPP. Under the
ESPP, eligible employees make payroll deductions over
a six-month purchase period, at which time, the
amounts withheld are used to purchase shares of
Common Stock at a purchase price equal to 85% of the
lesser of the closing price of a share of Common
Stock on the first or last trading day of the
purchase period. Purchases of stock under the ESPP
are made on the first business day of the next month
after the close of the purchase period. As of January
6, 2003, an aggregate of 223,722 shares of Common
Stock have been sold under the ESPP, including 23,258
shares for the purchase period ending December 31,
2002 which were purchased on December 31, 2002 at a
price of $42.50 per share.
RESTRICTED STOCK
In September 2002, an officer was granted 50,000
shares of restricted Common Stock pursuant to the
stock incentive plan. As the restricted stock
represents an incentive for future periods, the
compensation expense of approximately $2,500 will be
recognized ratably over the vesting period of the
Common Stock (through September 2005).
STOCK OPTION PRO FORMA DATA
During the second quarter of 2002, the Company
elected to adopt the fair value based employee
stock-based compensation expense recognition
provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), prospectively. The
Company previously applied the intrinsic value based
expense recognition provisions set forth in APB
Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). SFAS 123 states that the
adoption of the fair value based method is a change
to a preferable method of accounting. In applying APB
25 in accounting for the Stock Incentive Plan, the
1998 Incentive Plan and the Employee Stock Purchase
Plan as provided by Interpretation 44 as defined and
further described in Note 13, no compensation costs
have been recognized in 2001 and 2000. Had
compensation costs for the Company's plans been
determined based on the fair value at the grant date
for options granted in 2001 and 2000 in accordance
with the method required by SFAS 123, the Company's
net income available to common stockholders and
earnings per share would have been reduced to the pro
forma amounts as follows:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
2002 2001 2000
----------- ----------- -----------
Net income available to common stockholders
As Reported $ 184,791 $ 67,843 $ 113,481
Add: stock-based compensation expense
recorded for options granted 88 -- --
Deduct: stock-based compensation expense
using SFAS 123 (427) (332) (400)
Pro Forma $ 184,452 $ 67,511 $ 113,081
=========== =========== ===========
Earnings per share - basic
As Reported $ 2.97 $ 1.28 $ 2.18
Pro Forma $ 2.97 $ 1.28 $ 2.17
Earnings per share - diluted
As Reported $ 2.95 $ 1.28 $ 2.18
Pro Forma $ 2.95 $ 1.28 $ 2.17
</Table>
F-40
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
MANAGEMENT SAVINGS PLAN
The Company sponsors the General Growth
Management Savings and Employee Stock
Ownership Plan (the "401(k) Plan") which
permits all eligible employees to defer a
portion of their compensation in accordance
with the provisions of Section 401(k) of the
Code. Under the 401(k) Plan, the Company may
make, but is not obligated to make,
contributions to match the contributions of
the employees. For the years ending December
31, 2002, 2001, and 2000, the Company has
elected to make matching contributions of
approximately $4,196, $3,851, and 3,554
respectively.
NOTE 10 On December 12, 2002, the Company declared a
DISTRIBUTIONS cash distribution of $0.72 per share that was
PAYABLE paid on January 31, 2003, to stockholders of
record (1,762 owners of record) on January 6,
2003, totaling $44,937. Also on January 31,
2003, a distribution of $14,080 was paid to the
limited partners of the Operating Partnership.
Also on December 12, 2002, the Company declared
the fourth quarter 2002 preferred stock
dividend, for the period from October 1, 2002
through December 31, 2002, in the amount of
$0.4531 per share, payable to preferred
stockholders of record on January 6, 2003 and
paid on January 15, 2003. As described in Note
1, such preferred stock dividend was in the
same amount as the Operating Partnership's
distribution to the Company of the same date
with respect to the PIERS Preferred Units held
by the Company.
On December 10, 2001, the Company declared a
cash distribution of $0.65 per share that was
paid on January 31, 2002, to stockholders of
record (1,481 owners of record) on January 14,
2002, totaling $40,266. Also on January 31,
2002, a distribution of $12,722 was paid to the
limited partners of the Operating Partnership.
Also on December 10, 2001, the Company declared
the fourth quarter 2001 preferred stock
dividend, for the period from October 1, 2001
through December 31, 2001, in the amount of
$0.4531 per share, payable to preferred
stockholders of record on January 4, 2002 and
paid on January 15, 2002. As described in Note
1, such preferred stock dividend was in the
same amount as the Operating Partnership's
distribution to the Company of the same date
with respect to the PIERS Preferred Units held
by the Company.
NOTE 11 During 2000 and 2001, the Company installed a
NETWORK broadband wiring and routing system that
DISCONTINUANCE provides tenants at the Company's properties
COSTS AND OTHER with the supporting equipment (the "Broadband
INTERNET System") to allow such tenants and mall
INITIATIVES locations to arrange high-speed cable access
to the Internet. Certain of the properties
acquired subsequent to July 1, 2001 do not
have such an installation.
Also during 2000 and 2001, the Company had also
been engaged in Network Services development
activities, an effort to create for retailers a
suite of broadband applications to support
retail tenant operations, on-line sales, and
private wide area network services to be
delivered by the Broadband System. As of
December 31, 2000, the Company had invested
approximately $66,000 in the Broadband System
and approximately $18,000 in Network Services
development activities, all of which was
reflected in buildings and equipment. The
Company discontinued its Network Services
development activities on June 29, 2001, as
retailer demand for such services had not
developed as anticipated.
F-41
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
The discontinuance of the Network Services
development activities resulted in a
non-recurring, pre-tax charge to second
quarter 2001 earnings of $65,000. The
$65,000 charge was comprised of an
approximate $11,800 reduction in the
carrying value of equipment that was
intended to allow tenants access to the
Network Services applications and
approximately $53,200 in the write-off of
capitalized Network development costs as
follows: approximately $17,400 in
obligations to various vendors including
amounts related to the termination of
contracts which provide no future benefit to
the Company, approximately $10,600 in
private wide area network equipment that was
deemed without value, approximately $25,200
in capitalized network development costs
including third-party consultants, internal
payroll, supplies and equipment for the
design, configuration and installation costs
of private wide area network equipment;
various costs related to the development of
Mallibu.com, a consumer Internet portal; and
related consumer-direct e-commerce
initiatives. In addition, the Company
recognized $1,000 of net incremental
discontinuance costs in the third quarter of
2001. This third quarter amount was
comprised of approximately $1,366 of
incremental discontinuance costs (primarily
payroll and severance costs) and
approximately $366 of reduction in the
Network discontinuance reserve. Such
reduction in the Network discontinuance
reserve was primarily due to the settlement
of obligations to Network Services vendors
and consultants at amounts lower than
originally contracted for. Minor reductions
have been made in the Network discontinuance
reserve in 2002 since settlement discussions
are continuing with other vendors and the
Company has and will continue to reduce the
Network discontinuance reserve as additional
settlements are agreed to (expected to be
finalized in the next 12 months). The
Company's investment in the Broadband
System, which is comprised primarily of mall
equipment and mall wiring, has been retained
by the Company. The Company has, after
accumulated depreciation of approximately
$19,783, a net carrying investment of
approximately $45,920 in the Broadband
System as of December 31, 2002. This net
investment has been reflected in buildings
and equipment and investment in
Unconsolidated Real Estate Affiliates in the
accompanying consolidated financial
statements.
NOTE 12 In the normal course of business, from time to
COMMITMENTS AND time, the Company is involved in legal actions
CONTINGENCIES relating to the ownership and operations of its
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 the
consolidated financial position, results of
operations or liquidity of the Company.
The Company leases land or buildings at certain
properties from third parties. Rental expense
including participation rent related to these
leases was $1,642, $664 and $460 for the years
ended December 31, 2002, 2001 and 2000,
respectively. The leases generally provide for
a right of first refusal in favor of the
Company in the event of a proposed sale of the
property by the landlord.
From time to time the Company has entered into
contingent agreements for the acquisition of
properties. Each acquisition is subject to
satisfactory completion of due diligence and,
in the case of developments, completion and
occupancy of the project.
F-42
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
The following table aggregates the Company's
expected contractual obligations and
commitments subsequent to December 31, 2002:
CONTRACTUAL OBLIGATIONS
<Table>
<Caption>
2003 2004 2005 2006 2007 SUBSEQUENT TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ----------
Long-term
debt $ 726,702 $ 453,459 $ 128,836 $ 973,455 $ 430,439 $1,879,420 $4,592,311
Retained
debt 3,277 3,592 7,308 4,251 168,220 -- 186,648
Ground
leases 2,445 2,469 2,455 2,417 2,384 89,383 101,553
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL $ 732,424 $ 459,520 $ 138,599 $ 980,123 $ 601,043 $1,968,803 $4,880,512
========== ========== ========== ========== ========== ========== ==========
</Table>
NOTE 13 RECENTLY ISSUED On June 1, 1998 the FASB issued Statement No.
ACCOUNTING 133, "Accounting for Derivative Instruments and
PRONOUNCEMENTS Hedging Activities" ("Statement 133").
Statement 133, as amended, was adopted by the
Company on January 1, 2001. The Company's only
hedging activities are the cash flow hedges
represented by its interest rate cap and swap
agreements relating to its commercial
mortgage-backed securities (Note 5). These
agreements either place a limit on the
effective rate of interest the Company will
bear on such variable rate obligations or fix
the effective interest rate on such obligations
to a certain rate. The Company has concluded
that these agreements are highly effective in
achieving its objective of eliminating its
exposure to variability in cash flows relating
to these variable rate obligations in any
interest rate environment for loans subject to
swap agreements and for loans with related cap
agreements, when LIBOR rates exceed the strike
rates of the agreements. However, Statement 133
also requires that the Company fair value the
interest rate cap and swap agreements as of the
end of each reporting period. Interest rates
have declined since these agreements were
obtained. In accordance with the transition
provisions of Statement 133, the Company
recorded at January 1, 2001 a loss to earnings
of $3,334 as a cumulative-effect type
transition adjustment to recognize at fair
value the time-value portion of all the
interest rate cap agreements that were
previously designated as part of a hedging
relationship. Included in the $3,334 loss is
$704 relating to interest rate cap agreements
held by Unconsolidated Real Estate Affiliates.
The Company also recorded $112 to other
comprehensive income at January 1, 2001 to
reflect the then fair value of the intrinsic
portion of the interest rate cap agreements.
Subsequent changes in the fair value of these
agreements will be reflected in current
earnings and accumulated other comprehensive
income. During 2002 and 2001, the Company
recorded approximately $(30,774) and $2,389,
respectively, of additional other comprehensive
income (loss) to reflect changes in the fair
value of its interest rate cap and swap
agreements.
In conjunction with the GGP MPTC financing
(Note 5), all of the debt hedged by the
Company's then existing interest rate cap
agreements was refinanced. As the related fair
values of the previous cap agreements were
nominal on the refinancing date, these cap
agreements were not terminated and any
subsequent changes in the fair value of these
cap agreements will be reflected in interest
expense. Further, certain caps were purchased
and sold in conjunction with GGP MPTC
financing. These purchased and sold caps do not
qualify for hedge accounting and changes in the
fair values of these agreements will also be
reflected in interest expense. Finally, certain
interest rate swap agreements were entered into
to partially fix the interest rates on a
portion of the GGP MPTC financing. These swap
agreements have been designated as cash flow
hedges on $666,933 of the Company's
consolidated variable rate debt (see also Note
5).
F-43
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
In July 2001, the FASB issued Statement No.
141, "Business Combinations", ("SFAS 141") and
Statement No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 141
requires the purchase method to be used for
business combinations initiated after June 30,
2001. SFAS 142 requires that goodwill no longer
be amortized to earnings, but instead reviewed
for impairment, upon adoption on January 1,
2002. The implementation of the statements has
resulted in the recognition upon acquisition of
additional consolidated intangible assets
(acquired in-place lease origination costs) and
liabilities (acquired below-market leases)
relating to the Company's 2002 real estate
purchases of approximately $32,385 and $52,466,
respectively. These intangible assets and
liabilities, and similar assets and liabilities
at the Unconsolidated Real Estate Affiliates,
are being amortized over the terms of the
acquired leases (weighted average life of
approximately 6.1 and 6.4 years, respectively)
which resulted in additional 2002 net income,
including the Company's share of such items
from its Unconsolidated Real Estate Affiliates,
of approximately $1,361.
In August 2001, the FASB issued Statement No.
143, "Accounting for Asset Retirement
Obligations" ("SFAS 143"). SFAS 143 addresses
the financial accounting and reporting for
asset retirement costs and related obligations
and was adopted by the Company on January 1,
2003. The Company does not believe the impact
of the adoption of SFAS 143 on its current or
future operations or financial results will be
significant.
In October 2001, the FASB issued Statement No.
144, "Accounting for the Impairment or Disposal
of Long-Lived Assets" ("SFAS 144"). SFAS 144
prescribes one accounting model for long-lived
assets (including discontinued operations) that
are to be held or disposed of by sale, as well
as addresses certain discontinued operations
issues. SFAS 144 was adopted by the Company on
January 1, 2002. Although the Company has
identified in January 2003 the McCreless Mall
in San Antonio, Texas as property held-for-sale
(Note 2), the Company does not generally hold
its properties for sale and has historically
not had significant operations that have been
accounted for as "discontinued operations".
Therefore, the Company does not anticipate that
SFAS 144 will have a significant impact on its
current or future operations or financial
results.
In February 2002, the FASB announced the
rescission of Statement No. 4, "Reporting Gains
and Losses from Extinguishment of Debt".
Generally, such rescission has the effect of
suspending the treatment of debt extinguishment
costs as extraordinary items. The rescission is
effective for the year ended December 31, 2003.
Accordingly, in the comparative statements
presented in 2003, the Company will reclassify
to other interest costs approximately $1,343
and $14,022 of debt extinguishment costs
recorded in 2002 and 2001, respectively, that
are classified under current accounting
standards as extraordinary items.
On November 25, 2002, the FASB published
Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness
of Others" ("FIN 45"). FIN 45 prescribes the
disclosures to be made by a guarantor in its
interim and annual financial statements about
obligations under certain guarantees it has
issued. FIN 45 also reaffirms that a guarantor
is required to recognize, at the inception of a
guarantee, a liability for the fair value of
the obligation undertaken in issuing the
guarantee. The initial recognition and initial
measurement provisions of FIN 45 are applicable
on a prospective basis to guarantees issued or
modified after December 31, 2002. The
disclosure requirements of FIN 45 are effective
for the Company's December 31, 2002
consolidated financial statements. As the
Company does not typically issue guarantees on
behalf of its unconsolidated affiliates or
other third-parties, the adoption of FIN 45 is
not expected to have a significant impact on
the Company's financial statements or
disclosures.
F-44
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
In January 2003, the FASB issued Interpretation
No. 46 ("FIN 46"), "Consolidation of Variable
Interest Entities" ("VIEs"), to improve
financial reporting of special purpose and
other entities. Certain VIEs that are
qualifying special purpose entities ("QSPEs")
will not be required to be consolidated under
the provisions of FIN 46. In addition, FIN 46
expands the disclosure requirements for the
beneficiary of a significant or a majority of
the variable interests to provide information
regarding the nature, purpose and financial
characteristics of the entities. The Company
has certain special purpose entities, primarily
created to facilitate the issuance of its
commercial mortgage-backed securities (Note 5).
Because these special purpose entities are
QSPEs, which are exempted from consolidation,
the Company does not believe these special
purpose entities will require consolidation in
its financial statements.
NOTE 14 PRO FORMA FINANCIAL Due to the impact of the acquisitions made or
INFORMATION (UNAUDITED) committed to during 2000, 2001 and 2002 as
described in Note 3, historical results of
operations may not be indicative of future
results of operations. The pro forma condensed
consolidated statements of operations for the
year ended December 31, 2002 include
adjustments for the acquisitions made during
2002 as described in Note 3 as if such
transactions had occurred on January 1, 2002.
The pro forma condensed consolidated statements
of operations for the year ended December 31,
2001 include adjustments for the acquisitions
made during 2002 as described in Note 3 plus
the acquisitions made in 2001 (the acquisition
of a 50% interest in Willowbrook Mall through
GGP/Homart II and the Company's acquisition of
100% of Tucson Mall), as if such transactions
had occurred on January 1, 2001. The pro forma
condensed consolidated statements of operations
for the year ended December 31, 2000 include
the 2002 and 2001 acquisitions described above
plus the 2000 acquisition of the Crossroads
Center, all as if such transactions had
occurred on January 1, 2000. The pro forma
information is based upon the historical
consolidated statements of operations excluding
extraordinary items, cumulative effect of
accounting change and gain on sale and does not
purport to present what actual results would
have been had the acquisitions, and related
transactions, in fact, occurred at the
previously mentioned dates, or to project
results for any future period.
F-45
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
PRO FORMA FINANCIAL INFORMATION
<Table>
<Caption>
Year Ended
December 31,
2002 2001 2000
----------- -------------- -----------
Total revenues $ 1,094,524 $ 1,023,799 $ 924,892
Expenses:
Real estate taxes 72,082 70,891 68,661
Other property operating 340,395 368,438 238,120
Depreciation and amortization 198,890 182,972 159,425
----------- -------------- -----------
Total Expenses 611,367 622,301 466,206
Operating Income 483,157 401,498 458,686
Interest expense, net (248,817) (300,329) (331,742)
Income allocated to minority interests (102,753) (58,352) (59,823)
Equity in income of unconsolidated affiliates 95,572 65,430 42,408
----------- -------------- -----------
Pro forma earnings before extraordinary items and cumulative
effect of accounting change (a) 227,159 108,247 109,529
Pro forma convertible preferred stock dividends (24,467) (24,467) (24,467)
----------- -------------- -----------
Pro forma earnings before extraordinary items and cumulative
effect of accounting change available to common stockholders (a) $ 202,692 $ 83,780 $ 85,062
=========== ============== ===========
Pro forma earnings per share - basic (b) $ 3.26 $ 1.59 $ 1.63
=========== ============== ===========
Pro forma earnings per share - diluted (b) $ 3.21 $ 1.58 $ 1.63
=========== ============== ===========
</Table>
(a) The pro forma adjustments include management fee and depreciation
modifications and adjustments to give effect to the acquisitions activity
described above and does not include extraordinary items or the 2001
cumulative effect of accounting change.
(b) Pro forma basic earnings per share are based upon weighted average common
shares of 62,181,283 for 2002, 52,844,821 for 2001 and 52,058,320 for 2000.
Pro forma diluted per share amounts are based on the weighted average
common shares and the effect of dilutive securities (stock options and, for
2002 only, PIERS) outstanding of 70,851,003 for 2002, 52,906,549 for 2001
and 52,096,331 for 2000.
F-46
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
NOTE 15 QUARTERLY
FINANCIAL INFORMATION
(UNAUDITED)
<Table>
<Caption>
YEAR ENDED FIRST SECOND THIRD FOURTH
DECEMBER 31, 2002 QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
Total revenues $ 204,139 $ 210,590 $ 258,361 $ 307,376
Operating income 85,285 89,218 116,482 139,722
Income before extraordinary items 37,567 40,813 51,054 81,167
Net income applicable to common shares 31,418 34,696 44,467 74,210
Earnings before extraordinary items
per share-basic (a) $ 0.51 $ 0.56 $ 0.72 $ 1.20
Earnings before extraordinary items
per share-diluted (a) 0.51 0.56 0.72 1.14
Earnings per share - basic (a) 0.51 0.56 0.71 1.19
Earnings per share - diluted (a) 0.51 0.56 0.71 1.13
Distributions declared per share $ 0.65 $ 0.65 $ 0.72 $ 0.72
Weighted average shares
outstanding (in thousands) - basic 61,979 62,137 62,244 62,361
Weighted average shares
outstanding (in thousands) - diluted 62,104 62,293 62,424 71,085
</Table>
<Table>
<Caption>
YEAR ENDED FIRST SECOND THIRD FOURTH
DECEMBER 31, 2002 QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
Total revenues $ 191,970 $ 189,542 $ 196,269 $ 225,928
Operating income 85,796 15,497 90,058 105,163
Income (loss) before extraordinary items and
cumulative effect of accounting change 30,071 (17,630) 35,609 61,616
Net income (loss) applicable to common
shares 20,620 (24,758) 29,239 42,742
Earnings (loss) before extraordinary items and
cumulative effect of accounting change
per share-basic(a) $ 0.46 $ (0.45) $ 0.56 $ 1.03
Earnings (loss) before extraordinary items
and cumulative effect of accounting change
per share-diluted (a) 0.46 (0.45) 0.56 1.03
Earnings (loss) per share - basic (a) 0.39 (0.47) 0.56 0.79
Earnings (loss) per share - diluted (a) 0.39 (0.47) 0.56 0.79
Distributions declared per share $ 0.53 $ 0.53 $ 0.65 $ 0.65
Weighted average shares
Outstanding (in thousands) - basic 52,365 52,413 52,596 53,990
Weighted average shares
Outstanding (in thousands) - diluted 52,444 52,508 52,662 54,067
</Table>
(a) Earnings (loss) per share for the four quarters do not add up to the
annual earnings per share due to the issuance of additional stock
during the year.
F-47
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULE
Board of Directors and Stockholders
General Growth Properties, Inc.
We have audited the consolidated financial statements of General Growth
Properties, Inc. (the "Company") as of December 31, 2002 and 2001, and for the
years then ended, and have issued our report thereon dated February 3, 2003
(which expresses an unqualified opinion and includes an explanatory paragraph
relating to the change in method of accounting for derivative instruments and
hedging activities in 2001 described in Note 13); such financial statements and
report are included elsewhere in this Form 10-K. Our audits also included the
Reconciliation of Real Estate and Reconciliation of Accumulated Depreciation for
the years ended December 31, 2002 and 2001 of the Company, listed in the Index
to Consolidated Financial Statements and Consolidated Financial Statement
Schedule on page F-1 of this Form 10-K. This 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 financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
Deloitte & Touche LLP
Chicago, Illinois
February 3, 2003
F-48
\
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of
General Growth Properties, Inc.
Our audit of the consolidated financial statements referred to in our report
dated February 6, 2001 appearing in this Annual Report on Form 10K of General
Growth Properties, Inc. also included an audit of the Reconciliation of Real
Estate and Reconciliation of Accumulated Depreciation for the year ended
December 31, 2000 listed in the Index to Consolidated Financial Statements and
Consolidated Financial Schedule of this Form 10-K. In our opinion, based on our
audit, the Reconciliation of Real Estate and Reconciliation of Accumulated
Depreciation for the year ended December 31, 2000 of this financial statement
schedule listed in the Index to Consolidated Financial Statements and
Consolidated Financial Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
PricewaterhouseCoopers LLP
Chicago, Illinois
February 6, 2001
F-49
GENERAL GROWTH PROPERTIES, INC.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2002
<Table>
<Caption>
Col. A Col. B Col. C Col. D
------ ------ ------ ------
Costs Capitalized
Subsequent
Initial Cost To Acquisition
--------------------------- -----------------------------
Buildings
and Buildings
Encumbrances Equipment and Carrying
Description (a) Land (b) Equipment Costs(c)
----------- ------------- ------------- ------------- ------------- -------------
Alameda Plaza
Pocatello, ID $ -- $ 740,000 $ 2,060,000 $ -- $ --
Ala Moana Center
Honolulu, HI 636,189,930 336,229,260 473,770,740 8,815,518 5,685,073
Anaheim Plaza
Anaheim, CA -- -- 2,058,000 -- --
Animas Valley Mall
Farmington, NM -- 10,783,000 30,165,000 2,249,089 --
Apache Mall
Rochester, MN 54,901,924 8,110,292 72,992,628 15,626,588 222,080
Austin Bluffs Plaza
Colorado Springs, CO -- 1,080,000 3,007,000 7,000 --
Bailey Hills Plaza
Eugene, OR -- 290,000 806,000 2,000 --
Baskin Robbins 17th St
Idaho Falls, ID -- 60,000 168,000 -- --
Baybrook Mall
Friendswood, TX 92,186,926 13,300,000 117,162,546 5,143,018 --
Bayshore Mall,
Eureka, CA 33,871,426 3,004,345 27,398,907 24,969,033 2,887,090
Bellis Fair Mall,
Bellingham, WA 70,996,112 7,616,458 47,040,131 10,845,328 6,122,020
Birchwood Mall,
Port Huron, MI 42,801,986 1,768,935 34,574,635 13,454,946 1,980,603
Boise Plaza
Boise, ID -- 465,000 1,293,000 -- --
Boise Towne Plaza
Boise, ID -- 3,988,000 11,101,000 -- --
Boise Towne Square
Boise, ID 81,979,000 36,452,000 101,853,000 15,057,339 --
Boulevard Mall
Las Vegas, NV 99,232,297 16,490,343 148,413,086 5,418,501 --
Cache Valley Mall
Logan, UT -- 6,451,000 18,422,000 427,094 --
Cache Valley Marketplace
Logan, UT -- 1,500,000 1,583,000 (1,378,503) --
Capital Mall
Jefferson City, MO 21,962,693 4,200,000 14,201,000 8,799,782 --
Century Mall
Birmingham, AL 30,800,000 3,164,000 28,513,908 5,667,433 --
<Caption>
Col. A Col. E Col. F Col. G Col. H
------ ------ ------ ------ ------
Gross Amounts at Which
Carried at Close of Period
-------------------------------------------
Buildings
and Accumulated Date of Date
Description Land Equipment Total(c)(d) Depreciation Construction Acquired
----------- ------------- ------------- ------------- ------------- ------------ --------
Alameda Plaza
Pocatello, ID $ 740,000 $ 2,060,000 $ 2,800,000 $ 24,000 2002
Ala Moana Center
Honolulu, HI 336,229,497 488,271,331 824,500,828 54,500,780 1999
Anaheim Plaza
Anaheim, CA -- 2,058,000 2,058,000 24,000 2002
Animas Valley Mall
Farmington, NM 10,814,235 32,414,089 43,228,324 573,693 2002
Apache Mall
Rochester, MN 8,110,292 88,841,296 96,951,588 8,978,249 1998
Austin Bluffs Plaza
Colorado Springs, CO 1,080,000 3,014,000 4,094,000 36,000 2002
Bailey Hills Plaza
Eugene, OR 290,000 808,000 1,098,000 10,000 2002
Baskin Robbins 17th St
Idaho Falls, ID 60,000 168,000 228,000 2,000 2002
Baybrook Mall
Friendswood, TX 13,300,000 122,305,564 135,605,564 10,193,532 1999
Bayshore Mall,
Eureka, CA 3,005,040 55,255,030 58,260,070 20,935,573 1986--1987
Bellis Fair Mall,
Bellingham, WA 7,485,224 64,007,479 71,492,703 27,380,980 1987--1988
Birchwood Mall,
Port Huron, MI 3,042,616 50,010,184 53,052,800 18,549,757 1989--1990
Boise Plaza
Boise, ID 465,000 1,293,000 1,758,000 15,000 2002
Boise Towne Plaza
Boise, ID 3,988,000 11,101,000 15,089,000 130,000 2002
Boise Towne Square
Boise, ID 37,825,249 116,910,339 154,735,588 1,745,344 2002
Boulevard Mall
Las Vegas, NV 15,908,632 153,831,587 169,740,219 18,135,268 1998
Cache Valley Mall
Logan, UT 6,444,263 18,849,094 25,293,357 379,660 2002
Cache Valley Marketplace
Logan, UT 1,500,000 204,497 1,704,497 -- 2002
Capital Mall
Jefferson City, MO 3,912,935 23,000,782 26,913,717 5,912,087 1993
Century Mall
Birmingham, AL 3,164,000 34,181,341 37,345,341 4,861,600 1997
<Caption>
Col. A Col. I
------ ------
Life Upon Which
Depreciation in
Latest Income
Statement is
Description Computed
----------- ----------------
Alameda Plaza
Pocatello, ID (e)
Ala Moana Center
Honolulu, HI (e)
Anaheim Plaza
Anaheim, CA (e)
Animas Valley Mall
Farmington, NM (e)
Apache Mall
Rochester, MN (e)
Austin Bluffs Plaza
Colorado Springs, CO (e)
Bailey Hills Plaza
Eugene, OR (e)
Baskin Robbins 17th St
Idaho Falls, ID (e)
Baybrook Mall
Friendswood, TX (e)
Bayshore Mall,
Eureka, CA (e)
Bellis Fair Mall,
Bellingham, WA (e)
Birchwood Mall,
Port Huron, MI (e)
Boise Plaza
Boise, ID (e)
Boise Towne Plaza
Boise, ID (e)
Boise Towne Square
Boise, ID (e)
Boulevard Mall
Las Vegas, NV (e)
Cache Valley Mall
Logan, UT (e)
Cache Valley Marketplace
Logan, UT (e)
Capital Mall
Jefferson City, MO (e)
Century Mall
Birmingham, AL (e)
</Table>
F-50
GENERAL GROWTH PROPERTIES, INC.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2002
<Table>
<Caption>
Col. A Col. B Col. C Col. D
------ ------ ------ ------
Costs Capitalized
Subsequent
Initial Cost To Acquisition
--------------------------- -----------------------------
Buildings
and Buildings
Encumbrances Equipment and Carrying
Description (a) Land (b) Equipment Costs(c)
----------- ------------- ------------- ------------- ------------- -------------
Chapel Hills
Colorado Springs, CO $ 35,669,194 $ 4,300,000 $ 34,017,000 $ 61,222,455 $ 36,805
Coastland Center
Naples, FL 83,617,161 11,450,000 103,050,200 4,640,750 --
Colony Square Mall
Zanesville, OH 25,600,000 1,000,000 24,500,000 16,557,741 --
Columbia Mall
Columbia, MO 56,100,000 5,383,208 19,663,231 15,777,379 1,368,803
Coral Ridge Mall
Coralville, IA 77,867,152 3,363,602 64,217,772 10,642,117 4,420,355
Cottonwood Mall
Salt Lake City, UT -- 12,616,000 35,697,000 1,791,813 --
Cottonwood Square
Salt Lake City, UT -- 1,558,000 4,339,000 2,000 --
Country Hills Plaza
Ogden, UT 5,583,000 3,620,000 9,080,000 3,000 --
The Crossroads
Kalamazoo, MI 43,588,822 6,800,000 61,200,000 17,541,835 233,356
Crossroads Center
St Cloud, MN 61,981,631 10,851,689 72,202,847 3,589,891 260,398
Cumberland Mall
Atlanta, GA 96,849,239 15,198,568 136,787,110 5,684,290 191,066
Development in Progress -- 30,637,677 58,081,977 32,410,010 --
Division Crossing
Portland, OR -- 1,773,000 4,935,000 691 --
Eagle Ridge Mall
Lake Wales, FL 26,800,000 7,619,865 49,560,538 7,522,171 5,678,662
Eastridge Mall
Casper, WY -- 9,902,000 27,596,000 2,971,131 --
Eden Prairie Mall
Eden Prairie, MN 55,000,000 465,063 19,024,047 108,593,102 9,248,013
Fallbrook Mall,
West Hills, CA 46,900,000 6,117,338 10,076,520 56,509,378 5,576,332
Fort Union Plaza
Salt Lake City, UT -- 141,000 3,701,000 18,000 --
Fox River Mall
Appleton, WI 93,200,000 2,700,566 18,291,067 43,213,253 2,351,519
Fremont Plaza
Las Vegas, NV -- -- 3,956,000 1,427 --
<Caption>
Col. A Col. E Col. F Col. G Col. H
------ ------ ------ ------ ------
Gross Amounts at Which
Carried at Close of Period
-------------------------------------------
Buildings
and Accumulated Date of Date
Description Land Equipment Total(c)(d) Depreciation Construction Acquired
----------- ------------- ------------- ------------- ------------- ------------ --------
Chapel Hills
Colorado Springs, CO $ 4,300,000 $ 95,276,260 $ 99,576,260 $ 20,041,560 1993
Coastland Center
Naples, FL 11,450,000 107,690,950 119,140,950 11,766,231 1998
Colony Square Mall
Zanesville, OH 1,243,184 41,057,741 42,300,925 15,940,429 1986
Columbia Mall
Columbia, MO 5,383,208 36,809,413 42,192,621 16,372,340 1984--1985
Coral Ridge Mall
Coralville, IA 3,406,770 79,280,244 82,687,014 11,510,359 1998--1999
Cottonwood Mall
Salt Lake City, UT 12,700,948 37,488,813 50,189,761 639,222 2002
Cottonwood Square
Salt Lake City, UT 1,558,000 4,341,000 5,899,000 51,000 2002
Country Hills Plaza
Ogden, UT 3,620,000 9,083,000 12,703,000 107,000 2002
The Crossroads
Kalamazoo, MI 6,800,000 78,975,191 85,775,191 7,461,561 1999
Crossroads Center
St Cloud, MN 11,090,292 76,053,136 87,143,428 5,364,829 2000
Cumberland Mall
Atlanta, GA 15,198,568 142,662,466 157,861,034 16,126,190 1998
Development in Progress 90,491,987 90,491,987 --
Division Crossing
Portland, OR 1,773,000 4,935,691 6,708,691 58,000 2002
Eagle Ridge Mall
Lake Wales, FL 7,619,865 62,761,371 70,381,236 12,487,644 1995--1996
Eastridge Mall
Casper, WY 10,058,481 30,567,131 40,625,612 608,265 2002
Eden Prairie Mall
Eden Prairie, MN 465,063 136,865,162 137,330,225 7,862,220 1997
Fallbrook Mall,
West Hills, CA 6,127,138 72,162,230 78,289,368 30,034,540 1984
Fort Union Plaza
Salt Lake City, UT 141,000 3,719,000 3,860,000 45,000 2002
Fox River Mall
Appleton, WI 4,787,291 63,855,839 68,643,130 22,675,534 1983--1984
Fremont Plaza
Las Vegas, NV -- 3,957,427 3,957,427 47,000 2002
<Caption>
Col. A Col. I
------ -------
Life Upon Which
Depreciation in
Latest Income
Statement is
Description Computed
----------- -----------------
Chapel Hills
Colorado Springs, CO (e)
Coastland Center
Naples, FL (e)
Colony Square Mall
Zanesville, OH (e)
Columbia Mall
Columbia, MO (e)
Coral Ridge Mall
Coralville, IA (e)
Cottonwood Mall
Salt Lake City, UT (e)
Cottonwood Square
Salt Lake City, UT (e)
Country Hills Plaza
Ogden, UT (e)
The Crossroads
Kalamazoo, MI (e)
Crossroads Center
St Cloud, MN (e)
Cumberland Mall
Atlanta, GA (e)
Development in Progress
Division Crossing
Portland, OR (e)
Eagle Ridge Mall
Lake Wales, FL (e)
Eastridge Mall
Casper, WY (e)
Eden Prairie Mall
Eden Prairie, MN (e)
Fallbrook Mall,
West Hills, CA (e)
Fort Union Plaza
Salt Lake City, UT (e)
Fox River Mall
Appleton, WI (e)
Fremont Plaza
Las Vegas, NV (e)
</Table>
F-51
GENERAL GROWTH PROPERTIES, INC.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2002
<Table>
<Caption>
Col. A Col. B Col. C Col. D
------ ------ ------ ------
Costs Capitalized
Subsequent
Initial Cost To Acquisition
--------------------------- -----------------------------
Buildings
and Buildings
Encumbrances Equipment and Carrying
Description (a) Land (b) Equipment Costs(c)
----------- ------------- ------------- ------------- ------------- -------------
Gateway Mall,
Springfield, OR $ 43,042,887 $ 8,728,263 $ 34,707,170 $ 22,296,890 $ 7,704,838
Gateway Crossing
Bountiful, UT -- 4,104,000 11,422,000 248,835 --
GGPLP Corp.
Chicago, IL 685,579,000 -- 556,740 65,635,471 --
110 Building
Chicago, IL 26,441,209 -- 29,035,310 2,206,558 --
Grand Teton Mall
Idaho Falls, ID -- 13,104,000 36,813,000 2,344,848 --
Grand Traverse Mall,
Grand Traverse, MI 49,985,400 3,529,966 20,775,772 23,057,862 3,643,793
Greenwood Mall
Bowling Green, KY 48,324,823 3,200,000 40,202,000 27,295,231 49,563
Halsey Crossing
Gresham, OR -- -- 4,363,000 4,000 --
Knollwood Mall,
St. Louis Park, MN 18,400,000 -- 9,748,047 29,770,284 3,221,522
Lakeview Square Mall
Battle Creek, MI 24,763,553 3,578,619 32,209,980 16,202,825 315,112
Lansing Mall
Lansing, MI 29,444,261 6,977,798 62,800,179 34,133,261 797,941
Lockport Mall,
Lockport, NY 9,300,000 800,000 10,000,000 4,341,427 23,656
Mall at Sierra Vista
Sierra Vista, AZ -- 4,550,000 18,658,000 885,791 --
Mall of the Bluffs,
Council Bluffs, IA 42,801,986 1,860,116 24,016,343 19,032,975 2,586,107
Mall St. Vincent
Shreveport, LA 18,345,186 2,640,000 23,760,000 5,168,733 --
Marketplace
Champaign, IL 47,000,000 7,000,000 63,972,357 38,598,047 604,080
McCreless Mall
San Antonio, TX -- 1,000,000 9,000,002 819,221 --
MEPC Acquisition
Financing -- -- (1,549,401) -- --
North Plains Mall
Clovis, NM -- 4,676,000 13,033,000 269,151 --
Northtown Mall
Spokane, WA 84,000,000 38,445,000 107,330,000 1,769,136 --
<Caption>
Col. A Col. E Col. F Col. G Col. H
------ ------ ------ ------ ------
Gross Amounts at Which
Carried at Close of Period
-------------------------------------------
Buildings
and Accumulated Date of Date
Description Land Equipment Total(c)(d) Depreciation Construction Acquired
----------- ------------- ------------- ------------- ------------- ------------ --------
F -- 51
Gateway Mall,
Springfield, OR $ 8,728,263 $ 64,708,898 $ 73,437,161 $ 21,702,955 1989--1990
Gateway Crossing
Bountiful, UT 4,104,000 11,670,835 15,774,835 147,000 2002
GGPLP Corp.
Chicago, IL -- 66,192,211 66,192,211 28,561,893
110 Building
Chicago, IL -- 31,241,868 31,241,868 3,908,266 1997
Grand Teton Mall
Idaho Falls, ID 13,166,099 39,157,848 52,323,947 666,788 2002
Grand Traverse Mall,
Grand Traverse, MI 3,533,745 47,477,427 51,011,172 17,648,043 1990--1991
Greenwood Mall
Bowling Green, KY 3,429,185 67,546,794 70,975,979 17,076,078 1993
Halsey Crossing
Gresham, OR -- 4,367,000 4,367,000 52,000 2002
Knollwood Mall,
St. Louis Park, MN 7,025,606 42,739,853 49,765,459 16,980,353 1978
Lakeview Square Mall
Battle Creek, MI 3,578,619 48,727,917 52,306,536 7,172,328 1996
Lansing Mall
Lansing, MI 11,496,394 97,731,381 109,227,775 11,668,662 1996
Lockport Mall,
Lockport, NY 800,000 14,365,083 15,165,083 6,088,182 1986
Mall at Sierra Vista
Sierra Vista, AZ 4,583,087 19,543,791 24,126,878 276,926 2002
Mall of the Bluffs,
Council Bluffs, IA 1,895,220 45,635,425 47,530,645 16,950,949 1985--1986
Mall St. Vincent
Shreveport, LA 2,640,000 28,928,733 31,568,733 3,587,658 1998
Marketplace
Champaign, IL 7,000,000 103,174,484 110,174,484 13,836,502 1997
McCreless Mall
San Antonio, TX 1,000,000 9,819,223 10,819,223 1,161,428 1998
MEPC Acquisition
Financing -- (1,549,401) (1,549,401) 37,157
North Plains Mall
Clovis, NM 4,605,260 13,302,151 17,907,411 250,104 2002
Northtown Mall
Spokane, WA 38,400,129 109,099,136 147,499,265 1,561,422 2002
<Caption>
Col. A Col. I
------ ------
Life Upon Which
Depreciation in
Latest Income
Statement is
Description Computed
----------- -----------------
Gateway Mall,
Springfield, OR (e)
Gateway Crossing
Bountiful, UT (e)
GGPLP Corp.
Chicago, IL (e)
110 Building
Chicago, IL (e)
Grand Teton Mall
Idaho Falls, ID (e)
Grand Traverse Mall,
Grand Traverse, MI (e)
Greenwood Mall
Bowling Green, KY (e)
Halsey Crossing
Gresham, OR (e)
Knollwood Mall,
St. Louis Park, MN (e)
Lakeview Square Mall
Battle Creek, MI (e)
Lansing Mall
Lansing, MI (e)
Lockport Mall,
Lockport, NY (e)
Mall at Sierra Vista
Sierra Vista, AZ (e)
Mall of the Bluffs,
Council Bluffs, IA (e)
Mall St. Vincent
Shreveport, LA (e)
Marketplace
Champaign, IL (e)
McCreless Mall
San Antonio, TX (e)
MEPC Acquisition
Financing (e)
North Plains Mall
Clovis, NM (e)
Northtown Mall
Spokane, WA (e)
</Table>
F-52
GENERAL GROWTH PROPERTIES, INC.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2002
<Table>
<Caption>
Col. A Col. B Col. C Col. D
------ ------ ------ ------
Costs Capitalized
Subsequent
Initial Cost To Acquisition
--------------------------- -----------------------------
Buildings
and Buildings
Encumbrances Equipment and Carrying
Description (a) Land (b) Equipment Costs(c)
----------- ------------- ------------- ------------- ------------- -------------
Northridge Fashion Center
Northridge, CA $ 137,925,906 $ 16,618,095 $ 149,562,583 $ 26,789,074 $ 3,540,766
North Temple Shops
Salt Lake City, UT -- 168,000 468,000 -- --
Oakwood Mall,
Eau Claire, WI 57,069,314 3,266,669 18,281,160 21,363,628 1,711,573
Orem Plaza Center Street
Orem, UT -- 1,069,000 2,974,000 4,000 --
Orem Plaza State Street
Orem, UT -- 592,000 1,649,000 -- --
Park Place
Tucson, AZ 99,543,369 4,996,024 44,993,177 94,964,230 13,571,940
Pecanland Mall
Monroe, LA 50,000,000 7,190,000 64,710,000 5,579,892 --
Piedmont Mall,
Danville, VA 29,863,011 2,000,000 38,000,000 5,339,859 20,787
Pierre Bossier Mall
Bossier City, LA 39,837,602 5,280,707 47,558,468 5,043,321 --
Pine Ridge Mall
Pocatello, ID -- 8,375,000 23,337,000 615,846 --
The Pines,
Pine Bluff, AR 25,963,291 1,488,928 17,627,258 10,896,132 1,365,091
Plaza 800
Sparks, NV -- 1,435,000 3,995,000 -- --
Plaza 9400
Sandy, UT -- -- 9,114,000 46,000 --
Prince Kuhio Plaza
Hilo, HI 23,920,724 -- 42,028,685 642,622 10,737
Provo Towne Centre
Provo, UT 46,489,000 21,332,000 68,296,000 (425,549) --
Red Cliffs Mall
St. George, UT -- 7,019,000 19,644,000 3,882,325 --
Red Cliffs Plaza
St. George, UT -- -- 2,366,000 -- --
Regency Square Mall
Jacksonville, FL 85,234,011 16,497,552 148,477,968 14,005,483 88,390
Rio West Mall,
Gallup, NM 13,500,000 -- 19,500,000 5,769,988 --
River Falls Mall,
Clarksville, IN -- 3,177,688 54,610,421 7,940,415 5,281,892
<Caption>
Col. A Col. E Col. F Col. G Col. H
------ ------ ------ ------ ------
Gross Amounts at Which
Carried at Close of Period
-------------------------------------------
Buildings
and Accumulated Date of Date
Description Land Equipment Total(c)(d) Depreciation Construction Acquired
----------- ------------- ------------- ------------- ------------- ------------ --------
Northridge Fashion Center
Northridge, CA $ 16,866,397 $ 179,892,423 $ 196,758,820 $ 19,459,549 1998
North Temple Shops
Salt Lake City, UT 168,000 468,000 636,000 6,000 2002
Oakwood Mall,
Eau Claire, WI 3,266,669 41,356,361 44,623,030 16,887,532 1985--1986
Orem Plaza Center Street
Orem, UT 1,069,000 2,978,000 4,047,000 35,000 2002
Orem Plaza State Street
Orem, UT 592,000 1,649,000 2,241,000 20,000 2002
Park Place
Tucson, AZ 4,715,836 153,529,347 158,245,183 14,997,028 1996
Pecanland Mall
Monroe, LA 7,553,555 70,289,892 77,843,447 684,319 2002
Piedmont Mall,
Danville, VA 2,000,000 43,360,646 45,360,646 8,308,386 1995
Pierre Bossier Mall
Bossier City, LA 5,283,970 52,601,789 57,885,759 5,997,179 1998
Pine Ridge Mall
Pocatello, ID 8,307,482 23,952,846 32,260,328 454,720 2002
The Pines,
Pine Bluff, AR 1,247,414 29,888,481 31,135,895 12,610,130 1985--1986
Plaza 800
Sparks, NV 1,435,000 3,995,000 5,430,000 47,000 2002
Plaza 9400
Sandy, UT -- 9,160,000 9,160,000 109,000 2002
Prince Kuhio Plaza
Hilo, HI 7,305 42,682,044 42,689,349 4,296,889 2002
Provo Towne Centre
Provo, UT 21,296,880 67,870,451 89,167,331 921,948 2002
Red Cliffs Mall
St. George, UT 10,339,670 23,526,325 33,865,995 374,425 2002
Red Cliffs Plaza
St. George, UT -- 2,366,000 2,366,000 28,000 2002
Regency Square Mall
Jacksonville, FL 16,456,452 162,571,841 179,028,293 17,681,978 1998
Rio West Mall,
Gallup, NM -- 25,269,988 25,269,988 9,498,631 1986
River Falls Mall,
Clarksville, IN 3,182,305 67,832,728 71,015,033 27,312,719 1989--1990
<Caption>
Col. A Col. I
------ ------
Life Upon Which
Depreciation in
Latest Income
Statement is
Description Computed
----------- -----------------
Northridge Fashion Center
Northridge, CA (e)
North Temple Shops
Salt Lake City, UT (e)
Oakwood Mall,
Eau Claire, WI (e)
Orem Plaza Center Street
Orem, UT (e)
Orem Plaza State Street
Orem, UT (e)
Park Place
Tucson, AZ (e)
Pecanland Mall
Monroe, LA (e)
Piedmont Mall,
Danville, VA (e)
Pierre Bossier Mall
Bossier City, LA (e)
Pine Ridge Mall
Pocatello, ID (e)
The Pines,
Pine Bluff, AR (e)
Plaza 800
Sparks, NV (e)
Plaza 9400
Sandy, UT (e)
Prince Kuhio Plaza
Hilo, HI (e)
Provo Towne Centre
Provo, UT (e)
Red Cliffs Mall
St. George, UT (e)
Red Cliffs Plaza
St. George, UT (e)
Regency Square Mall
Jacksonville, FL (e)
Rio West Mall,
Gallup, NM (e)
River Falls Mall,
Clarksville, IN (e)
</Table>
F-53
GENERAL GROWTH PROPERTIES, INC.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2002
<Table>
<Caption>
Col. A Col. B Col. C Col. D
------ ------ ------ ------
Costs Capitalized
Subsequent
Initial Cost To Acquisition
--------------------------- -----------------------------
Buildings
and Buildings
Encumbrances Equipment and Carrying
Description (a) Land (b) Equipment Costs(c)
----------- ------------- ------------- ------------- ------------- -------------
River Hills Mall,
Mankato, MN $ 51,200,000 $ 3,713,529 $ 29,013,757 $ 19,403,783 $ 2,674,311
Riverlands Shopping Center
LaPlace, LA -- 500,000 4,500,000 206,819 --
River Pointe Plaza
West Jordan, UT -- 1,302,000 3,623,000 -- --
Riverside Plaza
Provo, UT -- 2,475,000 6,890,000 1,000 --
Rivertown Crossing
Grandville, MI 128,276,097 10,972,923 97,141,738 32,150,079 13,346,435
Salem Center
Salem, OR 316,000 11,885,000 33,253,000 923,026 --
Silver Lake Mall
Coeur d'Alene, ID -- 7,704,000 21,472,000 171,852 --
Sooner Fashion Mall,
Norman, OK 20,000,000 2,700,000 24,300,000 15,941,626 --
Southlake Mall,
Morrow, GA 51,300,000 6,700,000 60,406,902 11,048,456 192,535
Southland Mall
Hayward, CA 65,000,000 8,904,277 80,142,961 3,392,353 --
SouthShore Mall,
Aberdeen, WA -- 650,000 15,350,000 3,382,243 --
Southwest Plaza
Littleton , CO 81,673,071 9,000,000 103,983,673 24,457,268 1,059,572
Spokane Valley Mall
Spokane, WA 47,340,000 19,297,000 54,970,000 3,144,482 --
Spokane Valley Mall Plaza
Spokane, WA -- 3,558,000 10,150,000 3,000 --
Spring Hill
West Dundee, IL 87,320,492 12,400,000 111,643,525 7,245,577 --
Three Rivers Mall
Kelso, WA -- 7,068,000 19,917,000 1,473,417 --
Twin Falls Crossing
Twin Falls, ID -- 275,000 767,000 -- --
Tucson Mall
Tucson, AZ 111,986,289 -- 181,424,484 2,725,643 --
University Crossing
Orem, UT -- 3,420,000 9,526,000 360,000 --
Valley Hills,
Hickory, NC 33,984,417 3,443,594 31,025,471 34,131,061 1,686,977
<Caption>
Col. A Col. E Col. F Col. G Col. H
------ ------ ------ ------ ------
Gross Amounts at Which
Carried at Close of Period
-------------------------------------------
Buildings
and Accumulated Date of Date
Description Land Equipment Total(c)(d) Depreciation Construction Acquired
----------- ------------- ------------- ------------- ------------- ------------ --------
River Hills Mall,
Mankato, MN $ 4,707,482 $ 51,091,851 $ 55,799,333 $ 17,938,735 1990--1991
Riverlands Shopping Center
LaPlace, LA 500,000 4,706,819 5,206,819 617,656 1998
River Pointe Plaza
West Jordan, UT 1,302,000 3,623,000 4,925,000 43,000 2002
Riverside Plaza
Provo, UT 2,475,000 6,891,000 9,366,000 81,000 2002
Rivertown Crossing
Grandville, MI 7,246,462 142,638,252 149,884,714 14,213,762 1998--1999
Salem Center
Salem, OR 11,879,172 34,176,026 46,055,198 533,878 2002
Silver Lake Mall
Coeur d'Alene, ID 7,612,118 21,643,852 29,255,970 397,625 2002
Sooner Fashion Mall,
Norman, OK 2,580,578 40,241,626 42,822,204 5,874,115 1996
Southlake Mall,
Morrow, GA 6,700,000 71,647,893 78,347,893 9,945,860 1997
Southland Mall
Hayward, CA 9,103,519 83,535,314 92,638,833 293,890 2002
SouthShore Mall,
Aberdeen, WA 650,000 18,732,243 19,382,243 8,483,808 1986
Southwest Plaza
Littleton , CO 9,000,000 129,500,513 138,500,513 14,706,704 1998
Spokane Valley Mall
Spokane, WA 19,563,621 58,114,482 77,678,103 834,341 2002
Spokane Valley Mall Plaza
Spokane, WA 3,558,000 10,153,000 13,711,000 116,000 2002
Spring Hill
West Dundee, IL 12,400,000 118,889,102 131,289,102 13,765,020 1998
Three Rivers Mall
Kelso, WA 6,986,572 21,390,417 28,376,989 367,223 2002
Twin Falls Crossing
Twin Falls, ID 275,000 767,000 1,042,000 9,000 2002
Tucson Mall
Tucson, AZ -- 184,150,127 184,150,127 6,347,043 2001
University Crossing
Orem, UT 3,420,000 9,886,000 13,306,000 112,000 2002
Valley Hills,
Hickory, NC 5,656,275 66,843,509 72,499,784 7,766,882 1997
<Caption>
Col. A Col. I
------ ------
Life Upon Which
Depreciation in
Latest Income
Statement is
Description Computed
----------- -----------------
River Hills Mall,
Mankato, MN (e)
Riverlands Shopping Center
LaPlace, LA (e)
River Pointe Plaza
West Jordan, UT (e)
Riverside Plaza
Provo, UT (e)
Rivertown Crossing
Grandville, MI (e)
Salem Center
Salem, OR (e)
Silver Lake Mall
Coeur d'Alene, ID (e)
Sooner Fashion Mall,
Norman, OK (e)
Southlake Mall,
Morrow, GA (e)
Southland Mall
Hayward, CA (e)
SouthShore Mall,
Aberdeen, WA (e)
Southwest Plaza
Littleton , CO (e)
Spokane Valley Mall
Spokane, WA (e)
Spokane Valley Mall Plaza
Spokane, WA (e)
Spring Hill
West Dundee, IL (e)
Three Rivers Mall
Kelso, WA (e)
Twin Falls Crossing
Twin Falls, ID (e)
Tucson Mall
Tucson, AZ (e)
University Crossing
Orem, UT (e)
Valley Hills,
Hickory, NC (e)
</Table>
F-54
GENERAL GROWTH PROPERTIES, INC.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2002
<Table>
<Caption>
Col. A Col. B Col. C Col. D
------ ------ ------ ------
Costs Capitalized
Subsequent
Initial Cost To Acquisition
--------------------------- -----------------------------
Buildings
and Buildings
Encumbrances Equipment and Carrying
Description (a) Land (b) Equipment Costs(c)
----------- ------------- ------------- ------------- ------------- -------------
Valley Plaza Shopping Center
Bakersfield, CA $ 80,878,988 $ 12,685,151 $ 114,166,356 $ 6,576,496 $ 229,955
Victoria Ward, LTD
Honolulu, HI 148,800,000 164,006,531 89,320,759 7,384,521 --
Visalia, Mall
Visalia, CA -- 16,466,000 47,699,000 5,180,758 --
West Valley Mall,
Tracy, CA 52,882,415 9,295,045 47,789,310 22,153,293 8,088,649
Westwood Mall
Jackson, MI 20,900,000 2,658,208 23,923,869 4,907,095 --
White Mountain Mall
Rock Springs, WY -- 2,335,000 6,520,000 204,631 --
Woodlands, Village
Flagstaff, AZ -- 2,689,000 7,484,000 -- --
Yellowstone Square
Idaho Falls, ID -- 1,057,000 2,943,000 -- --
First Security Place
Boise, ID -- -- 3,531,000 (3,531,000) --
Price Business Center--Commerce Park
West Valley City, UT -- 3,332,000 9,275,000 -- --
Price Business Center--Pioneer Square
Salt Lake City, UT -- 3,632,000 10,180,000 68,000 --
Price Business Center--South Main
Salt Lake City, UT -- 1,665,000 4,668,000 (1,000) --
Price Business Center--Timesquare
Salt Lake City, UT -- 4,101,000 11,441,000 1,262,000 --
Sears--Eastbay
Provo, UT -- 595,000 1,655,000 -- --
Miscellaneous Real Estate -- 1,742,000 1,586,000 (62,100) --
-------------- -------------- -------------- -------------- -------------
Grand Totals $4,592,310,795 $1,138,116,892 $4,506,288,914 $1,204,638,791 $ 118,078,397
============== ============== ============== ============== =============
<Caption>
Col. A Col. E Col. F Col. G Col. H
------ ------ ------ ------ ------
Gross Amounts at Which
Carried at Close of Period
-------------------------------------------
Buildings
and Accumulated Date of Date
Description Land Equipment Total(c)(d) Depreciation Construction Acquired
----------- ------------- ------------- ------------- ------------- ------------ --------
Valley Plaza Shopping Center
Bakersfield, CA $ 12,685,151 $ 120,972,807 $ 133,657,958 $ 12,682,612 1998
Victoria Ward, LTD
Honolulu, HI 163,429,824 96,705,280 260,135,104 2,516,330 2002
Visalia, Mall
Visalia, CA 16,867,400 52,879,758 69,747,158 768,191 2002
West Valley Mall,
Tracy, CA 10,885,507 78,031,252 88,916,759 13,868,957 1995
Westwood Mall
Jackson, MI 3,571,204 28,830,964 32,402,168 4,572,523 1996
White Mountain Mall
Rock Springs, WY 2,260,096 6,724,631 8,984,727 253,351 2002
Woodlands, Village
Flagstaff, AZ 2,689,000 7,484,000 10,173,000 89,000 2002
Yellowstone Square
Idaho Falls, ID 1,057,000 2,943,000 4,000,000 35,000 2002
First Security Place
Boise, ID -- -- -- -- 2002
Price Business Center--Commerce Park
West Valley City, UT 3,772,000 9,275,000 13,047,000 110,000 2002
Price Business Center--Pioneer Square
Salt Lake City, UT 3,632,000 10,248,000 13,880,000 121,000 2002
Price Business Center--South Main
Salt Lake City, UT 1,665,000 4,667,000 6,332,000 67,000 2002
Price Business Center--Timesquare
Salt Lake City, UT 3,661,000 12,703,000 16,364,000 188,000 2002
Sears--Eastbay
Provo, UT 595,000 1,655,000 2,250,000 20,000 2002
Miscellaneous Real Estate 1,743,000 1,523,900 3,266,900 40,000 2002
-------------- -------------- -------------- -------------
Grand Totals $1,128,990,314 $5,829,006,102 $6,957,996,416 $ 798,431,080
============== ============== ============== =============
<Caption>
Col. A Col. I
------ ------
Life Upon Which
Depreciation in
Latest Income
Statement is
Description Computed
----------- -----------------
Valley Plaza Shopping Center
Bakersfield, CA (e)
Victoria Ward, LTD
Honolulu, HI (e)
Visalia, Mall
Visalia, CA (e)
West Valley Mall,
Tracy, CA (e)
Westwood Mall
Jackson, MI (e)
White Mountain Mall
Rock Springs, WY (e)
Woodlands, Village
Flagstaff, AZ (e)
Yellowstone Square
Idaho Falls, ID (e)
First Security Place
Boise, ID (e)
Price Business Center--Commerce Park
West Valley City, UT (e)
Price Business Center--Pioneer Square
Salt Lake City, UT (e)
Price Business Center--South Main
Salt Lake City, UT (e)
Price Business Center--Timesquare
Salt Lake City, UT (e)
Sears--Eastbay
Provo, UT (e)
Miscellaneous Real Estate (e)
Grand Totals
</Table>
F-55
GENERAL GROWTH PROPERTIES, INC.
NOTES TO SCHEDULE III
(Dollars in Thousands)
(a) See description of mortgage notes payable in Note 5 of Notes to Consolidated
Financial Statements.
(b) Initial cost for constructed malls is cost at end of first complete calendar
year subsequent to opening.
(c) Carrying costs consist of capitalized construction-period interest and
taxes.
(d) The aggregate cost of land, buildings and equipment for federal income tax
purposes is approximately $5,953,095.
RECONCILIATION OF REAL ESTATE
<Table>
<Caption>
2000 2001 2002
---------- ---------- ----------
Balance at beginning of year $4,326,551 $4,676,740 $5,090,106
Additions 350,189 352,186 1,867,890
Other additions/(reductions) -- 61,180 --
---------- ---------- ----------
Balance at close of year $4,676,740 $5,090,106 $6,957,996
========== ========== ==========
</Table>
RECONCILIATION OF ACCUMULATED DEPRECIATION
<Table>
<Caption>
2000 2001 2002
-------- -------- --------
Balance at beginning of year $376,673 $488,130 $625,544
Depreciation expense 111,457 128,682 172,887
Other additions/(reductions) -- 8,732 --
-------- -------- --------
Balance at close of year $488,130 $625,544 $798,431
======== ======== ========
</Table>
(e) Depreciation is computed based upon the following estimated lives:
<Table>
Buildings, improvements and carrying costs 40 years
Tenant allowances 10-40 years
Equipment and fixtures 10 years
</Table>
F-56
GENERAL GROWTH PROPERTIES, INC.
EXHIBIT INDEX
2(a) Purchase and Sale Agreement dated as of May 3, 1999, among D/E
Hawaii Joint Venture, GGP Limited Partnership and General Growth Properties,
Inc. (17)
2(b) Agreement of Purchase and Sale, dated as of July 27, 1999, among
Oak View Mall Corporation, a Delaware corporation, and Oak View Mall, L.L.C., a
Delaware limited liability company. (18)
2(c) Agreement of Purchase and Sale, dated as of July 22, 1999 between
General Growth Properties, Inc., a Delaware corporation (the "Company"), and
RREEF USA Fund-III, a California group trust. (18)
2(d) Operating Agreement, dated November 10, 1999, between GGP Limited
Partnership, a Delaware limited partnership, The Comptroller of the State of New
York as Trustee of the Common Retirement Fund ("NYSCRF"), and GGP/Homart II
L.L.C. a Delaware limited liability company ("GGP/ Homart II"). (18)
2(e) Contribution Agreement dated November 10, 1999, by and between GGP
Limited Partnership, a Delaware limited partnership (the "Operating
Partnership"), and GGP/Homart II (Altamonte Mall). (19)
2(f) Contribution Agreement dated November 10, 1999, by and between the
Operating Partnership and GGP/Homart II (Northbrook Court). (19)
2(g) Contribution Agreement dated November 10, 1999, by and between the
Operating Partnership and GGP/Homart II (Natick Trust). (19)
2(h) Contribution Agreement dated November 10, 1999, by and between the
Operating Partnership and GGP/Homart II (Stonebriar Centre). (19)
2(i) Contribution Agreement dated November 10, 1999, by and between
NYSCRF and GGP/Homart II (Carolina Place). (19)
2(j) Contribution Agreement dated November 10, 1999, by and between
NYSCRF and GGP/Homart II (Alderwood Mall). (19)
2(k) Contribution Agreement dated November 10, 1999, by and between
NYSCRF and GGP/Homart II (Montclair Plaza). (19)
2(l) Contribution Agreement, dated February 1, 2000, by and between
General Growth Companies, Inc. and GGP Limited Partnership. (20)
2(m) Purchase and Sale Agreement dated as of March 15, 2000 by and
between Crossroads Shopping Center Trust and St. Cloud Mall L.L.C. (21)
2(n) Purchase Agreement dated May 25, 2000 among General Growth
Properties, Inc., GGP Limited Partnership, GGPLP L.L.C. and Goldman Sachs 2000
Exchange Place Fund, L.P. (23)
2(o) Purchase and Sale Agreement dated as of August 7, 2001 by and
between Oracle-Wetmore Co. and GGP-Tucson Mall, L.L.C. (27)
2(p) Purchase and Sale Agreement dated as of August 7, 2001 by and
between TMall-WN, L.L.C. and GGP-Tucson Mall, L.L.C. (27)
S-1
GENERAL GROWTH PROPERTIES, INC.
2(q) Purchase and Sale Agreement dated as of August 7, 2001 by and
between JCP Realty, Inc. and GGP-Tucson Mall, L.L.C. (27)
2(r) Purchase Agreement, dated April 17, 2002, among General Growth
Properties, Inc., GGP Limited Partnership, GGPLP L.L.C., the Goldman Sachs 2002
Exchange Place Fund, L.P. and GSEP 2002 Realty Corp. (30)
2(s) Purchase Agreement dated April 23, 2002, among General Growth
Properties, Inc., GGP Limited Partnership, GGPLP L.L.C., the Goldman Sachs 2002
Exchange Place Fund, L.P. and GSEP 2002 Realty Corp. (30)
3(a) Amended and Restated Certificate of Incorporation of the Company.
(2)
3(b) Amendment to Amended and Restated Certificate of Incorporation of
the Company. (3)
3(c) Amendment to Amended and Restated Certificate of Incorporation of
the Company filed on December 21, 1995. (6)
3(d) Amendment to Amended and Restated Certificate of Incorporation of
the Company filed on May 20, 1997. (10)
3(e) Amendment to Second Amendment and Restated Certificate of
Incorporation of the Company filed on May 17, 1999. (17)
3(f) Bylaws of the Company. (3)
3(g) Amendment to Bylaws of the Company. (3)
4(a) Redemption Rights Agreement, dated July 13, 1995, by and among GGP
Limited Partnership, General Growth Properties, Inc. and the persons listed on
the signature pages thereof. (5)
4(b) Redemption Rights Agreement dated December 6, 1996, among GGP
Limited Partnership, a Delaware corporation, Forbes/Cohen Properties, a Michigan
general partnership, Lakeview Square Associates, a Michigan general partnership,
and Jackson Properties, a Michigan general partnership. (1)
4(c) Redemption Rights Agreement, dated June 19, 1997, among GGP
Limited Partnership, a Delaware limited partnership, General Growth Properties,
Inc., a Delaware corporation, and CA Southlake Investors, Ltd., a Georgia
limited partnership. (8)
4(d) Redemption Rights Agreement dated October 23, 1997, among GGPI,
GGPLP and Peter Leibowits. (10)
4(e) Form of Indenture. (7)
4(f) Certificate of Designations, Preferences and Rights of 7.25%
Preferred Equity Redeemable Stock, Series A. (14)
4(g) Amendment to Certificate of Designations, Preferences and Rights
of 7.25% Preferred Income Equity Redeemable Stock, Series A of General Growth
Properties, Inc. filed on May 17, 1999. (17)
S-2
GENERAL GROWTH PROPERTIES, INC.
4(h) Certificate of Designations, Preferences and Rights of 8.95%
Cumulative Redeemable Preferred Stock, Series B. (22)
4(i) Certificate of Amendment and Restatement of Certificate of
Designations, Preferences and Rights creating 8.95% Cumulative Redeemable
Preferred Stock, Series B. (34)
4(j) Certificate of Designations, Preferences and Rights of 8.5%
Cumulative Convertible Preferred Stock, Series C. (34)
4(k) Certificate of Designations, Preferences and Rights of 8.5%
Cumulative Convertible Preferred Stock, Series D. (34)
4(l) Certificate of Designations, Preferences and Rights of 8.5%
Cumulative Convertible Preferred Stock, Series E. (34)
4(m) Certificate of Designations, Preferences and Rights of 8.5%
Cumulative Convertible Preferred Stock, Series F. (34)
4(n) Certificate of Designations Preferences and Rights creating 8.95%
Cumulative Redeemable Preferred Stock, Series G. (30)
4(o) Certificate of Designations Preferences and Rights creating 7.0%
Cumulative Redeemable Preferred Stock, Series H.
4(p) Redemption Rights Agreement dated April 2, 1998, among GGP Limited
Partnership, General Growth Properties, Inc. and Southwest Properties Venture.
(11)
4(q) Indenture and Servicing Agreement dated as of November 25, 1997,
among the Issuers named therein, LaSalle National Bank, as Trustee, and Midland
Loan Services, L.P., as Servicer (the "Indenture Agreement"). (12)
4(r) Form of Note pursuant to the Indenture Agreement. (12)
4(s) Mortgage, Deed of Trust, Security Agreement, Assignment of Leases
and Rents, Fixture Filing and Financing Statement, date and effective as of
November 25, 1997, among the Issuers, the Trustee and the Deed Trustees named
therein. (12)
4(t) 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 Preferred Stock attached thereto as Exhibit C). (15)
4(u) First Amendment to Rights Agreement, dated as of November 10,
1999, between the Company and Norwest Bank, Minnesota, N.A. (18)
4(v) Form of Common Stock Certificate. (16)
4(w) Letter Agreement concerning Rights Agreement, dated November 10,
1999, between the Operating Partnership and NYSCRF. (18)
10(a) Second Amended and Restated Agreement of Limited Partnership of
the Operating Partnership. (13)
10(b) First Amendment to Second Amended and Restated Agreement of
Limited Partnership of GGP Limited Partnership, dated as of June 10, 1998.
S-3
GENERAL GROWTH PROPERTIES, INC.
10(c) Second Amendment to Second Amended and Restated Agreement of
Limited Partnership of GGP Limited Partnership, dated as of June 29, 1998.
10(d) Third Amendment to Second Amended and Restated Agreement of
Limited Partnership of GGP Limited Partnership, dated as of February 15, 2002.
(34)
10(e) Amendment to Second Amended and Restated Agreement of Limited
Partnership of GGP Limited Partnership, dated as of April 24, 2002. (34)
10(f) Fourth Amendment to Second Amended and Restated Agreement of
Limited Partnership of GGP Limited Partnership, dated as of July 10, 2002. (34)
10(g) Amendment to Second Amended and Restated Agreement of Limited
Partnership of GGP Limited Partnership, dated as of November 27, 2002.
10(h) Rights Agreement between the Company and the Limited Partners of
the Operating Partnership. (4)
10(i) General Growth Properties, Inc. 1993 Stock Incentive Plan, as
amended. (9)
10(j) Amendment to 1993 Stock Incentive Plan, dated May 8, 2001, as
amended. (27)
10(k) Form of Amended and Restated Agreement of Partnership for each of
the Property Partnerships. (2)
10(l) Form of Indemnification Agreement between the Operating
Partnership, Martin Bucksbaum, Matthew Bucksbaum, Mall Investment L.P. and M.
Bucksbaum Company. (2)
10(m) Form of Registration Rights Agreement between the Company and the
Bucksbaums. (2)
10(n) Form of Registration Rights Agreement between the Company and
certain trustees for the IBM Retirement Plan. (2)
10(o) Form of Incidental Registration Rights Agreement between the
Company, Equitable, Frank Russell and Wells Fargo. (2)
10(p) Form of Letter Agreements restricting sale of certain shares of
Common Stock. (2)
10(q)* Letter Agreement dated October 14, 1993, between the Company and
Bernard Freibaum. (4)
10(r)* Form of Option Agreement between the Company and certain
Executive Officers. (8)
10(s)* General Growth Properties, Inc. 1998 Incentive Stock Plan. (16)
10(t) Amendment to 1998 Stock Incentive Plan, dated May 9, 2000. (28)
10(u) Amended and Restated Operating Agreement of GGPLP L.L.C. dated as
of May 25, 2000. (22)
10(v) Second Amended and Restated Operating Agreement of GGPLP L.L.C.,
dated April 17, 2002. (30)
10(w) First Amendment to the Second Amended and Restated Operating
Agreement of GGPLP L.L.C., dated April 23, 2002. (30)
S-4
GENERAL GROWTH PROPERTIES, INC.
10(x) Second Amendment to the Second Amended and Restated Operating
Agreement of GGPLP L.L.C. dated May 13, 2002. (31)
10(y) Third Amendment to the Second Amended and Restated Operating
Agreement of GGPLP L.L.C., dated October 30, 2002.
10(z) Registration Rights Agreement dated May 25, 2000 between General
Growth Properties, Inc. and Goldman Sachs 2000 Exchange Place Fund, L.P. (23)
10(aa) Term Loan Agreement, dated as of July 31, 2000, among the
Operating Partnership and GGPLP L.L.C. (collectively "Borrower"), Bankers Trust
Company ("BT") and Lehman Commercial Paper Inc. ("Lehman"). (24)
10(bb) Joinder Agreement, dated as of September 1, 2000, between
Bayerische Hypo-Und Vereinsbank AG, New York Branch ("Hypo") and Borrower. (24)
10(cc) Joinder Agreement, dated as of September 22, 2000, between Fleet
National Bank ("Fleet") and Borrower. (24)
10(dd) First Amendment to Term Loan Agreement, dated as of September
22, 2000, among Borrower and BT, Lehman, Hypo and Fleet. (24)
10(ee) Joinder Agreement, dated as of December 28, 2000, between The
Chase Manhattan Bank ("Chase"), Borrower, BT and Lehman. (24)
10(ff) Second Amendment to Term Loan Agreement, dated as of December
28, 2000, among Borrower and BT, Lehman, Fleet and Chase. (24)
10(gg) Third Amendment to Term Loan Agreement, dated as of June 11,
2001, executed by Borrower and BT, Lehman, Hypo, Fleet, Chase and Comerica Bank.
(29)
10(hh) Joinder Agreement, dated as of August 1, 2001 between
Commerzbank AG, New York and Grand Cayman Branches ("Commerzbank"), Borrower, BT
and Lehman. (28)
10(ii) Promissory Note dated July 31, 2000 made by Borrower in favor of
BT. (24)
10(jj) Promissory Note dated July 31, 2000 made by Borrower in favor of
Lehman. (24)
10(kk) Lender Addendum, dated as of October 20, 2000, between Lehman,
Borrower and BT. (24)
10(ll) Replacement Note dated October 20, 2000 made by Borrower in
favor of Lehman. (24)
10(mm) Promissory Note dated September 1, 2000 made by Borrower in
favor of Hypo. (24)
10(nn) Promissory Note dated September 22, 2000 made by Borrower in
favor of Fleet. (24)
10(oo) Promissory Note dated December 28, 2000 made by Borrower in
favor of Chase. (24)
10(pp) Promissory Note dated August 1, 2001 made by Borrower in favor
of Commerzbank. (28)
10(qq) Revolving Credit Agreement, dated as of July 31, 2000 among
Borrower, Bank of America, N.A. ("BofA") Dresdner Bank, AG ("Dresdner"). And
U.S. Bank National Association ("USB"). (24)
S-5
GENERAL GROWTH PROPERTIES, INC.
10(rr) Joinder to Revolving Credit Agreement, dated as of September 1,
2000, among Hypo, Borrower, BofA, Dresdner and USB. (24)
10(ss) First Amendment to Revolving Credit Agreement, dated as of June
7, 2001, executed by Borrower, BofA, Dresdner, USB and Hypo. (29)
10(tt) Joinder to Revolving Credit Agreement, dated as of August 10,
2001, executed by Commerzbank, as consented to by Borrower, BofA, Dresdner, USB
and Hypo. (29)
10(uu) Promissory Note dated July 31, 2000 made by Borrower in favor of
BofA. (24)
10(vv) Promissory Note dated July 31, 2000 made by Borrower in favor of
Dresdner. (24)
10(ww) Promissory Note dated July 31, 2000 made by Borrower in favor of
USB. (24)
10(xx) Promissory Note dated September 1, 2000 made by Borrower in
favor of Hypo. (24)
10(yy) Promissory Note dated August 16, 2001 made by Borrower in favor
of Commerzbank. (29)
10(zz) Revolving Credit Agreement, dated as of January 30, 2001, among
General Growth Management, Inc. and GGPLP L.L.C. (collectively, "Borrower"),
BofA, USB, and LaSalle Bank National Association ("LaSalle"). (26)
10(aaa) First Amendment to Revolving Credit Agreement, dated as of June
7, 2001, executed by Borrower, BofA, USB and LaSalle. (29)
10(bbb) Promissory Note dated January 30, 2001 made by Borrower in
favor of BofA. (26)
10(ccc) Promissory Note dated January 30, 2001 made by Borrower in
favor of USB. (26)
10(ddd) Promissory Note dated January 30, 2001 made by Borrower in
favor of LaSalle. (26)
10(eee) Registration Rights Agreement, dated April 17, 2002, between
General Growth Properties, Inc. and GSEP 2002 Realty Corp. (30)
10(fff) Term Credit Agreement, dated as of July 10, 2002, between GGPLP
L.L.C., Dresdner Bank AG, New York Branch and Bank of America, N.A. (32)
10(ggg) Agreement and Plan of Merger among General Growth Properties,
Inc., GGP Limited Partnership, GGP Acquisition, L.L.C., GGP Acquisition II,
L.L.C., JP Realty, Inc., and Price Development Company, Limited Partnership,
dated as of March 3, 2002. (33)
10(hhh) Voting Agreement, dated as of March 3, 2002. (33)
10(iii) Joinder to Voting Agreement, dated as of June 14, 2002. (34)
10(jjj) Redemption Rights Agreement (Common Units), dated July 10,
2002, by and among GGP Limited Partnership, General Growth Properties, Inc. and
the persons listed on the signature pages thereof. (34)
10(kkk) Redemption Rights Agreement (Series B Preferred Units), dated
July 10, 2002, by and among GGP Limited Partnership, General Growth Properties,
Inc. and the persons listed on the signature pages thereof. (34)
S-6
GENERAL GROWTH PROPERTIES, INC.
10(lll) Redemption Rights Agreement (Series C Preferred Units), dated
November 27, 2002, by and among GGP Limited Partnership, General Growth
Properties, Inc. and JSG, LLC.
10(mmm) Redemption Rights Agreement (Common Units), dated November 27,
2002, by and among GGP Limited Partnership, General Growth Properties, Inc. and
JSG, LLC.
16. Letter of Pricewaterhouse Coopers LLP dated April 11, 2001
regarding change in certifying accountant. (25)
21. List of Subsidiaries of General Growth Properties, Inc.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of KPMG LLP.
23.3 Consent of PricewaterhouseCoopers LLP - Independent Accountants.
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002-John Bucksbaum.
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002-Bernard Freibaum.
(*) A compensatory plan or arrangement required to be filed.
===============================================================================
(1) Previously filed as an exhibit to the Company's Current Report on
Form 8-K dated January 3, 1996, incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Registration
Statement on Form S-11 (No. 33-56640), incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, incorporated herein by
reference.
(4) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, incorporated herein by
reference.
(5) Previously filed as an exhibit to the Company's Current Report on
Form 8-K dated July 17, 1996, incorporated herein by reference.
(6) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Registration
Statement on Form S-3 (No. 333-37247) dated October 6, 1997, incorporated herein
by reference.
(8) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, incorporated herein by
reference.
(9) Previously filed as an exhibit to the Company's Registration
Statement on Form S-8 (No. 333-28449) dated June 3, 1997, incorporated herein by
reference.
(10) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, incorporated herein by
reference.
S-7
GENERAL GROWTH PROPERTIES, INC.
(11) Previously filed as an exhibit to the Company's current report on
Form 8-K dated May 26, 1998, incorporated herein by reference.
(12) Previously filed as an exhibit to the Company's current report on
Form 8-K/A dated June 2, 1998, incorporated herein by reference.
(13) Previously filed as an exhibit to the Company's current report on
Form 10-Q dated May 14, 1998, as amended May 21, 1998, incorporated herein by
reference.
(14) Previously filed as an exhibit to the Company's current report on
Form 8-K dated August 7, 1998, incorporated herein by reference.
(15) Previously filed as an exhibit to the Company's current report on
Form 8-K, dated November 18, 1998, incorporated herein by reference.
(16) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998, incorporated herein by
reference.
(17) Previously filed as an exhibit to the Company's Current Report on
Form 8-K, dated July 12, 1999, incorporated herein by reference.
(18) Previously filed as an exhibit to the Company's Current Report on
Form 8-K, dated November 23, 1999, incorporated herein by reference.
(19) Previously filed as an exhibit to the Company's Current Report on
Form 8-K/A, dated January 11, 2000, incorporated herein by reference.
(20) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1999, incorporated herein by
reference.
(21) Previously filed as an exhibit to the Company's Current Report on
Form 8-K, dated May 9, 2000, incorporated herein by reference.
(22) Previously filed as an exhibit to the Company's Current Report on
Form 8-K, dated June 13, 2000, incorporated herein by reference.
(23) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q dated August 9, 2000, incorporated herein by reference.
(24) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 2000, incorporated herein by
reference.
(25) Previously filed as an exhibit to the Company's Current Report on
Form 8-K, as amended, dated April 11, 2001, incorporated herein by reference.
(26) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q dated May 10, 2001, incorporated herein by reference.
(27) Previously filed as an exhibit to the Company's Current Report on
Form 8-K, dated August 30, 2001, incorporated herein by reference.
(28) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q dated August 13, 2001, incorporated herein by reference.
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GENERAL GROWTH PROPERTIES, INC.
(29) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q dated November 9, 2001, incorporated herein by reference.
(30) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q dated May 10, 2002, incorporated herein by reference.
(31) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q dated August 13, 2002, incorporated herein by reference.
(32) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q dated November 12, 2002, incorporated herein by reference.
(33) Previously filed as an exhibit to the Company's Current Report on
Form 8-K dated March 3, 2002, incorporated herein by reference.
(34) Previously filed as an exhibit to the Company's Current Report on
Form 8-K dated July 10, 2002, incorporated herein by reference.
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