- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K <Table> <Caption> (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, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO </Table> COMMISSION FILE NUMBER 1-11656 GENERAL GROWTH PROPERTIES, INC. (Exact name of registrant as specified in its charter) <Table> DELAWARE 42-1283895 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 110 N. WACKER DR., CHICAGO, IL 60606 (Address of principal executive offices) (Zip Code) </Table> (312)960-5000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: <Table> <Caption> TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- Common Stock, $.01 par value New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange </Table> 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2 of the Act). Yes [X] No [ ] On June 30, 2004, 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 $5.95 billion based upon the closing price of the common stock on the New York Stock Exchange composite tape on such date. As of March 4, 2005, there were 237,554,681 shares of the Registrant's common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for the annual stockholders meeting to be held on May 4, 2005 are incorporated by reference into Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS All references to numbered Notes are to specific footnotes to the Consolidated Financial Statements of General Growth Properties, Inc. ("General Growth" or the "Company") as included in this Annual Report on Form 10-K ("Annual Report"). The descriptions included in such Notes are incorporated into the applicable Item response by reference. The following discussion should be read in conjunction with such Consolidated Financial Statements and related Notes. The terms "we", "us" and "our" may also be used to refer to General Growth and its subsidiaries. GENERAL DEVELOPMENT OF BUSINESS General Growth, a Delaware corporation, is a self-administered and self-managed real estate investment trust, referred to as a "REIT." General Growth was organized in 1986 and through its subsidiaries and affiliates owns, operates, manages, leases, acquires, develops, expands and finances operating properties located primarily throughout the United States and develops and sells land for residential, commercial and other uses primarily in master-planned communities. The Retail and Other segment consists of retail centers, office and industrial buildings and mixed-use and other properties. - - The retail centers (the "Retail Portfolio") are primarily regional shopping centers in suburban market areas, but also include specialty marketplaces in certain downtown areas and community retail centers. - - The office and other properties (the "Office Portfolio") are located primarily in the Baltimore-Washington and Las Vegas markets or are components of large-scale mixed-use properties (which include retail, parking and other uses) located in other urban markets. The Community Development segment includes land development and sales operations which are predominantly related to large-scale, long-term community development projects in and around Columbia, Maryland; Summerlin, Nevada and Houston, Texas. Substantially all of our business is conducted through GGP Limited Partnership (the "Operating Partnership" or "GGPLP"). As of December 31, 2004, General Growth, as sole general partner, owned approximately 81% of the common units of partnership interest in the Operating Partnership. The other common units and the preferred units of limited partnership are held by limited partners that include trusts for the benefit of the families of our original stockholders and subsequent contributors of properties to the Operating Partnership. The common units that are held by limited partners are referred to as the "Common Units". In addition to holding ownership interests in various joint ventures, the Operating Partnership generally conducts its operations through the following subsidiaries: - - GGPLP L.L.C., a Delaware limited liability company (the "LLC"), has ownership interests in the majority of our properties (other than those acquired in The Rouse Company merger (the "TRC Merger", Note 3)). - - The Rouse Company LP ("TRCLP"), which includes both a REIT and taxable REIT subsidiaries ("TRS"), has ownership interests in Consolidated Properties and Unconsolidated Properties (as defined below). - - General Growth Management, Inc. ("GGMI"), a TRS, manages, leases, and performs various other services for some of our Unconsolidated Real Estate Affiliates (as defined below) and over 30 properties owned by unaffiliated third parties, all located in the United States. In this report, we refer to our ownership interests in majority owned or controlled properties as "Consolidated Properties" and to our ownership interests in joint ventures in which we own a non-controlling interest as "Unconsolidated Real Estate Affiliates" and the properties owned by such joint ventures as the "Unconsoli- 1 dated Properties." Our "Company Portfolio" includes both the Unconsolidated Properties and our Consolidated Properties. Our business strategy includes selectively making strategic acquisitions in order to enhance the yields of the acquired properties through subsequent proactive property management and leasing, operating cost reductions, physical expansions and renovations, redevelopments and capital reinvestment. Some of the actions that we take to increase productivity include changing the tenant mix and adding vendor carts or kiosks. Acquisitions have included single centers, privately held portfolios and public-to-public purchases such as The Rouse Company, ("TRC") in November 2004. During 2004, the purchase price of acquisitions totaled $16.1 billion including the $14.3 billion TRC Merger. We believe that we have a competitive advantage with respect to acquisitions for the following reasons: - - The funds necessary for the cash acquisition of a shopping center are available to us from a combination of sources, including mortgage or unsecured financing or the issuance of public or private debt or equity. - - We have the flexibility to pay for an acquisition with a combination of cash, General Growth equity securities, or, subject to certain provisions in our debt agreements, common or preferred units of limited partnership interest in the Operating Partnership. This creates the opportunity for a tax-advantaged transaction for the seller. - - Our expertise allows us to evaluate proposed acquisitions for their increased profit potential. Additional profit can originate from many sources including expansion, remodeling, re-merchandising, and more efficient management of the property. The expansion and renovation of a property also results in increased cash flows and net income as a result of increased customer traffic, trade area penetration and improved competitive position of the property. In addition to property redevelopment, we also develop retail centers from the ground-up. In August 2004, we completed the ground-up development of Jordan Creek Town Center in West Des Moines, Iowa. We make all key strategic decisions for our properties. However, in connection with the Unconsolidated Properties, such strategic decisions are made with the respective stockholders, members or joint venture partners. We are also the asset manager of most of the properties in the Company Portfolio, executing the strategic decisions and overseeing the day-to-day property management functions, including leasing, construction management, data processing, maintenance, accounting, marketing, promotional services and security oversight pursuant to management agreements with the Unconsolidated Properties. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS Information regarding our segments is incorporated herein by reference to Note 16 of the Notes to Consolidated Financial Statements included in this Annual Report. NARRATIVE DESCRIPTION OF BUSINESS RETAIL AND OTHER SEGMENT Retail Portfolio Most of the shopping centers in the Retail Portfolio are strategically located in major and middle markets where they have strong competitive positions. The Retail Portfolio's geographic diversification should mitigate the effects of regional economic conditions and local factors. The Retail Portfolio is comprised primarily of operating retail properties including regional malls and community centers. Most of these properties contain at least one major department store as an Anchor (as defined below). A detailed listing of the principal properties in our Retail Portfolio is included in Item 2 of this Annual Report. The majority of the income from the properties in the Retail Portfolio is derived from rents received through long-term leases with retail tenants. These long-term leases generally require the tenants to pay base rent which is a fixed amount specified in the lease. The base rent is often subject to scheduled increases during the 2 term of the lease. Another component of income is overage rent. Overage rent is paid by a tenant generally if its sales exceed an agreed upon minimum amount. Overage rent is calculated by multiplying the sales in excess of the minimum amount by a percentage defined in the lease. In addition, our long-term leases generally contain provisions for us to recover certain expenses incurred in the day-to-day operations of the respective properties including common area maintenance and real estate taxes. The recovery amount is generally related to the tenant's pro-rata share of space in the property. We use the following terms in this Annual Report: - - Anchor -- a department store or other large retail store with gross leaseable area greater than 30,000 square feet - - Freestanding GLA -- gross leaseable area of freestanding retail stores in locations that are not attached to the primary complex of buildings that comprise a shopping center - - GLA -- gross leaseable retail space, including Anchors and all other leaseable areas - - Mall GLA -- gross leaseable retail space, excluding both Anchors and Freestanding GLA - - Mall Stores -- stores (other than Anchors) that are typically specialty retailers who lease space in the structure including, or attached to, the primary complex of buildings that comprise a shopping center - - Total Mall Stores sales -- the gross revenue from product sales to customers generated by the Mall Stores. The following is selected operating data for the Consolidated and Unconsolidated Retail Properties within the Company Portfolio as of December 31, 2004: <Table> <Caption> CONSOLIDATED UNCONSOLIDATED PROPERTIES PROPERTIES ------------ -------------- Total GLA................................................. 115,206,093 57,965,724 Total Mall and Freestanding GLA........................... 46,972,163 21,224,910 Number of retail properties............................... 163 58 Average size of retail properties -- GLA.................. 706,786 999,409 Average size of retail properties -- Mall and Freestanding GLA..................................................... 288,173 365,947 Total GLA -- smallest property............................ 1,814 68,528 Total GLA -- largest property............................. 1,821,346 2,003,216 Mall and Freestanding GLA -- Smallest property............ 1,814 68,528 Mall and Freestanding GLA -- Largest property............. 774,847 813,450 Number of Mall and Freestanding Stores.................... 16,232 6,925 Number of Mall and Freestanding Stores in smallest property................................................ 2 32 Number of Mall and Freestanding Stores in largest property................................................ 399 166 Number of Anchors......................................... 519 228 Number of Anchor trade names.............................. 74 36 </Table> 3 The table below shows our ten largest tenants, by trade name, as of December 31, 2004 based on consolidated rents. In general, similar percentages existed in the Unconsolidated Properties as of December 31, 2004. <Table> <Caption> % OF CONSOLIDATED TENANT NAME RENTS - ----------- ----------------- The Gap..................................................... 2.79% Victoria's Secret........................................... 1.47 Express(1).................................................. 1.35 Abercrombie & Fitch......................................... 1.28 Foot Locker................................................. 1.17 American Eagle Outfitters................................... 1.15 The Limited(1).............................................. 1.15 JCPenney.................................................... 1.03 Sears....................................................... 0.85 Zales Jewelers.............................................. 0.79 </Table> - --------------- (1) Under common ownership by The Limited, Inc. 4 The following table reflects the tenant representation by category in the Retail Portfolio in the Consolidated Properties as of December 31, 2004. In general, similar percentages generally existed for the Unconsolidated Properties. <Table> <Caption> % OF SQUARE FEET IN THE CONSOLIDATED CATEGORY PROPERTIES TYPE OF PRODUCT OR SERVICE REPRESENTATIVE TENANTS - -------- ------------------- -------------------------- ---------------------- Specialty............... 22% Specialty Retail/Misc. & Mastercuts, One Hour Personal Services Photo, California Nails, Dollar Tree, Pottery Barn Apparel................. 21% Unisex/Family Apparel The Gap, American Eagle, Old Navy, J. Crew Women's Apparel......... 17% Women's Apparel The Limited, Casual Corner, Lane Bryant, Victoria's Secret Shoes................... 10% Shoe Stores Footlocker, Journey's, Payless Shoe Source Gifts................... 7% Card/Gift/Novelty Things Remembered, Kirlin's Hallmark, Spencer Gifts Restaurants............. 6% Restaurants Ruby Tuesday, Cheesecake Factory, PF Chang's, Max and Erma's, Panera Bread Fast Food/Food Court.... 4% Fast Food/Food Court Arby's, Sbarro, Manchu Wok Music/Electronics....... 4% Music/Electronics Camelot Music, Radio Shack, Suncoast Pictures, Sam Goody, F.Y.E. Jewelry................. 4% Jewelry Zales Jewelers, Helzberg Diamonds, Kay Jewelers Sporting Goods.......... 2% Sporting Goods Champ's, Big 5 Sports, Scheel's Sports Men's Apparel........... 2% Men's Apparel The Men's Wearhouse, Nick's for Men Specialty Food.......... 1% Specialty Food/Health General Nutrition Center, Barnie's Coffee and Tea Company TOTAL................... 100% </Table> 5 Office Portfolio At December 31, 2004, in addition to office and other properties which are adjacent to our retail centers, we owned and managed the following office and other properties: <Table> <Caption> CONSOLIDATED LOCATION SQUARE FEET - ------------ -------- ----------- Columbia Industrial (6 buildings)........................ Columbia, MD 306,000 Columbia Office (11 buildings)........................... Columbia, MD 1,059,000 Hunt Valley Business Center (19 buildings)............... Baltimore, MD 1,280,000 Rutherford Business Center (20 buildings)................ Baltimore, MD 783,000 Summerlin Commercial (28 buildings)...................... Summerlin, NV 1,110,000 Woodlands Office (2 buildings)........................... Houston, TX 267,000 Other Office Projects (6 buildings)...................... Various 451,000 UNCONSOLIDATED Woodlands Office/Industrial (5 buildings)................ Houston, TX 348,000 </Table> COMMUNITY DEVELOPMENT SEGMENT In conjunction with the TRC Merger, we acquired master-planned communities. We develop and sell land in these communities to builders and other developers for residential, commercial and other uses. We may also develop some of this land for our own purposes. These master-planned communities are as follows: - - Columbia is located in the Baltimore, Maryland/Washington, D.C. corridor and encompasses approximately 18,000 acres. We own approximately 716 saleable acres of land in and around Columbia, including the adjacent communities of Emerson and Stone Lake. - - Summerlin is located immediately north and west of Las Vegas and encompasses approximately 22,500 acres. We own approximately 6,900 saleable acres of land in Summerlin. We develop and sell land to builders and other developers for residential commercial and other uses. We may also develop some of this land for our own purposes. - - Bridgelands is located in the western Houston, Texas metropolitan area and encompasses approximately 10,000 acres. TRC began development activities on Bridgelands in 2004 and we expect to begin selling portions of this land in 2005. - - We also own certain office buildings and a 52.5% economic interest in The Woodlands, a master-planned community in the Houston, Texas metropolitan area. Assets owned by The Woodlands include approximately 7,600 saleable acres of land, three golf course complexes, a resort conference center, a hotel, interests in seven office buildings and other assets. - - Fairwood is located in Prince George's County, Maryland. Fairwood contains over 1,000 acres of unimproved land. TRC began sales at this community in 2004. OTHER COMPETITION In our Retail and Other segment, business is continually evolving and requires the ongoing re-evaluation of our approach to center management and leasing. Our strategies to increase stockholder value and cash flow include the integration of mass merchandise retailers with traditional department stores, specialty leasing, the inclusion of entertainment-oriented tenants, proactive property management and leasing (including revisions to the mix of tenants at a center), operating cost reductions including those resulting from economies of scale, strategic expansions, redevelopments, capital reinvestment and acquisitions, and selective new shopping center developments and concepts. Management believes that these approaches should enable us to operate and grow successfully in today's highly-competitive environment. 6 The nature and extent of competition varies from property to property. The properties in the Retail 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. Each of our office and other properties competes for tenants in the markets in which they operate. We believe that the office and other properties we own in our master-planned communities are attractive in relation to competing properties because they are concentrated in the commercial centers of these communities. We believe the office components of our major mixed-use properties are desirable to prospective tenants due to their quality and downtown locations. In our Community Development segment, we compete with other landholders in the Baltimore-Washington, Las Vegas and Houston markets. Significant factors affecting our competition in this business include: - - The size and scope of our master-planned communities - - The recreational and cultural amenities available within the communities - - The commercial centers in the communities - - The relationships of the developer with homebuilders We believe our community development projects offer significant advantages when viewed against these criteria. Environmental Matters Under various Federal, state and local laws and regulations, an owner of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on such real estate. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The costs of remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner's ability to sell such real estate or to borrow using such real estate as collateral. In connection with its ownership and operation of our properties, we, or the relevant property venture through which the property is owned, may be potentially liable for such costs. Substantially all of our properties have been subject to environmental assessments, which are intended to discover information regarding, and to evaluate the environmental condition of, the surveyed and surrounding properties. The Phase I environmental assessments included a historical review, a public records review, a preliminary investigation of the site and surrounding properties, screening for the presence of asbestos, polychlorinated biphenyls ("PCBs") and underground storage tanks and the preparation and issuance of a written report, but do not include soil sampling or subsurface investigations. A Phase II assessment, when necessary, was conducted to further investigate any issues raised by the Phase I assessment. In each case where Phase I and/or Phase II assessments resulted in specific recommendations for remedial actions required by law, management has either taken or scheduled the recommended action. Neither the Phase I nor the Phase II assessments have revealed any environmental liability that we believe would have a material effect on our overall business, assets or results of operations, nor are we 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 we are unaware. Moreover, no assurances can be given that future laws, ordinances or regulations will not impose any material environmental liability or the current environmental condition of our properties will not be adversely affected by tenants and occupants of the properties, by the condition of properties in the vicinity of our properties (such as the presence on such properties of underground storage tanks) or by third parties unrelated to us. In 2002, the President and Congress approved the Yucca Mountain site in Nevada for development of a repository site for highly radioactive materials. Yucca Mountain is located approximately 100 miles from Las Vegas. For the project to proceed, other approvals are necessary, including a license from the U.S. Nuclear Regulatory Commission or NRC. The Department of Energy's 2003 Strategic Plan, dated September 30, 7 2003, listed the licensing, construction and operation of the repository site at Yucca Mountain by 2010 as a major goal. In July 2004, the United States Court of Appeals for the D.C. Circuit rejected a number of challenges brought by the State of Nevada, local governmental units, environmental groups and trade associations with respect to the proposed Yucca Mountain repository and invalidated a portion of the EPA's and NRC's regulations governing the proposed repository. Future development opportunities may require additional capital and other expenditures in order to comply with Federal, state and local statutes and regulations relating to the protection of the environment. It is impossible at this time to predict with any certainty the magnitude of any such expenditures or the long-range effect, if any, on our operations. Compliance with such laws has had no material adverse effect on our operating results or competitive position in the past. Employees As of March 1, 2005, we had approximately 5,200 employees. Insurance We have comprehensive liability, fire, flood, earthquake, terrorist, extended coverage and rental loss insurance with respect to our properties. Our management believes that all of our properties are adequately covered by insurance. Qualification as a Real Estate Investment Trust and Taxability of Distributions General Growth currently qualifies as a real estate investment trust pursuant to the requirements contained in Sections 856-858 of the Internal Revenue Code of 1986, as amended (the "Code"). If, as General Growth contemplates, such qualification continues, General Growth will not be taxed on its real estate investment trust taxable income. During 2004, General Growth distributed (or was deemed to have distributed) 100% of its taxable income to its preferred and common stockholders as detailed in the following table: <Table> <Caption> 2004 2003 2002 ------ ------ ------ COMMON SHARES Ordinary income............................................ $1.260 $1.003 $0.710 Return of capital.......................................... -- -- 0.177 Unrecaptured Section 1250 capital gains.................... -- 0.017 0.003 ------ ------ ------ Distributions declared per common share.................... $1.260 $1.020 $0.890 ====== ====== ====== PREFERRED SHARES* Ordinary income............................................ $ -- $1.403 $1.802 Unrecaptured Section 1250 capital gains.................... -- 0.028 0.010 ------ ------ ------ Distributions declared per common share.................... $ -- $1.431 $1.812 ====== ====== ====== </Table> - --------------- * All outstanding preferred shares of General Growth were redeemed in 2003 (Note 1). Available Information We make available free of charge through our website at www.generalgrowth.com all reports electronically filed with, or furnished to, the Securities and Exchange Commission (the "SEC"), including our 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 filings, as soon as reasonably practicable after those documents are filed with, or furnished to, the SEC. These filings are also accessible on the SEC's website at www.sec.gov. We also make available free of charge through our website our Corporate Governance Guidelines, our Code of Business Conduct and Ethics (including any waivers of the code granted to our Chairman, Chief Executive Officer, 8 Chief Financial Officer or directors) and our charters of the Audit, Compensation and Nominating & Governance committees of our Board of Directors. All of these documents are also available without charge to any person who requests them in writing to: General Growth Properties, Inc. Attn: David Lozano Investor Relations Coordinator 110 North Wacker Drive Chicago, Illinois 60606 ITEM 2. PROPERTIES Our investment in real estate as of December 31, 2004, consisted of our interests in the properties in our Retail and Other and Community Development segments. In most cases, we also own the land underlying the retail properties, however, at certain of the properties, all or part of the underlying land is owned by a third party that leases the land to us pursuant to a long-term ground lease. The leases generally contain various purchase options available to us and typically provide for a right of first refusal in favor of us in the event of a proposed sale of the property by the landlord. Information regarding encumbrances on these properties is included in Schedule III of this Annual Report. The following tables set forth certain information regarding the Consolidated Properties and the Unconsolidated Properties in our Retail Portfolio as of December 31, 2004. Anchors include all stores with GLA greater than 30,000 square feet. To the extent a Retail Property does not have any Anchor space, significant tenants have been included in this list. CONSOLIDATED RETAIL PROPERTIES <Table> <Caption> YEAR OPENED/ TOTAL GLA/MALL AND YEAR REMODELED FREESTANDING GLA ANCHOR NAME OF CENTER/LOCATION(1) OR EXPANDED (SQUARE FEET)(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES(3) - -------------------------- ---------------------- ------------------ --------------------------- ------------ Ala Moana Center 1959/1966, 1987, 1989, 1,821,346/ 774,847 Macy's, Neiman Marcus, Old None Honolulu, Hawaii 1999, 2004 Navy, Sears, Shirokiya Alameda Plaza 1973/1978 190,341/ 46,395 Carmike Cinema, Key Bank, Two Pocatello, Idaho Wells Fargo Anaheim Crossing(4)(6) 1980 92,170/ 92,170 Fullerton Toyota N/A Anaheim, California Animas Valley Mall 1982/2001, 2003 500,284/ 231,067 Dillard's, JCPenney, Kaye None Farmington, New Mexico Home Furnishings, Ross Dress for Less, Sears Apache Mall(4) 1969/1985, 1992, 2002 751,761/ 268,769 Herberger's, JCPenney, None Rochester, Minnesota Marshall Field's, Sears Arizona Center(4) 1990 168,469/ 168,469 AMC Arizona Center 24 None Phoenix, Arizona Augusta Mall(4) 1978 1,066,418/ 317,195 Dillard's, JCPenney, None Augusta, Georgia Rich's-Macy's, Sears, Rich's Furniture Austin Bluffs Plaza 1985 114,524/ 42,981 Albertsons, Longs Drug None Colorado Springs, Colorado Store Bailey Hills Plaza 1988 11,887/ 11,887 Tommy's Paint Pot N/A Eugene, Oregon Baybrook Mall 1978/1984, 1985, 1995 1,295,179/ 340,035 Dillard's, Foley's, None Friendswood (Houston), Mervyn's, Sears Texas Bayshore Mall(4) 1987/1989 614,593/ 394,335 Gottschalks, Mervyn's, None Eureka, California Sears </Table> 9 <Table> <Caption> YEAR OPENED/ TOTAL GLA/MALL AND YEAR REMODELED FREESTANDING GLA ANCHOR NAME OF CENTER/LOCATION(1) OR EXPANDED (SQUARE FEET)(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES(3) - -------------------------- ---------------------- ------------------ --------------------------- ------------ Bayside Marketplace(4) 1987 223,821/ 223,821 The Disney Store, None Miami, Florida Victoria's Secret Beachwood Place 1978 912,941/ 348,594 Dillard's, Nordstrom, Saks None Cleveland, Ohio Fifth Avenue Bellis Fair 1988/2003 769,247/ 350,317 The Bon Marche, JCPenney, None Bellingham (Seattle), Mervyn's, Sears, Target Washington Birchwood Mall 1990/1991/1997 788,087/ 331,858 GKC Theaters, JCPenney, None Port Huron (Detroit), Marshall Field's, Sears, Michigan Target, Younkers Boise Plaza 1979/1984 114,404/ 0 Albertsons, Burlington Coat None Boise, Idaho Factory Boise Towne Plaza(6) 1999 116,677/ 25,143 Circuit City, Linens 'n None Boise, Idaho Things, Old Navy Boise Towne Square 1988 1,146,561/ 477,781 The Bon Marche, Dillard's, None Boise, Idaho JCPenney, Mervyn's, Sears The Boulevard Mall 1968/1992 1,184,895/ 396,859 Dillard's, JCPenney, None Las Vegas, Nevada Macy's, Sears Burlington Town Center 1976/1980, 1985, 2001 314,982/ 168,229 Filene's None Burlington, Vermont Cache Valley Mall 1976/2004 322,251/ 176,419 Dillard's, Dillard's Men's None Logan, Utah and Home Store, JCPenney Cache Valley Marketplace 1976 157,713/ 157,713 Home Depot N/A Logan, Utah Capital Mall 1978/1985, 1992 532,693/ 299,616 Dillard's, JCPenney, Sears None Jefferson City, Missouri Century Plaza 1975/1990, 1994 741,541/ 253,065 JCPenney, McRae's, Sears One Birmingham, Alabama Chapel Hills Mall 1982/1986, 1997, 1998 1,171,358/ 425,919 Dillard's, Foley's, None Colorado Springs, Colorado JCPenney, Kmart, Mervyn's, Sears Chico Mall 1988 502,488/ 180,360 Gottschalks, JCPenney, One Chico, California Sears Coastland Center 1977/1985, 1996 934,082/ 343,692 Burdines, Dillard's, None Naples, Florida JCPenney, Sears Collin Creek 1981 1,113,074/ 322,991 Dillard's, Foley's, None Plano, Texas JCPenney, Mervyn's Sears Colony Square Mall 1981/1985, 1987 549,362/ 291,358 Elder-Beerman, JCPenney, One Zanesville, Ohio Sears Columbia Mall 1985/1986, 2004 738,607/ 323,163 Dillard's, JCPenney, Sears, None Columbia, Missouri Target Coral Ridge Mall 1998 1,065,849/ 418,611 Dillard's, JCPenney, None Coralville (Iowa City), Scheel's All Sports, Sears, Iowa Target, Younkers Coronado Center(4) 1964/1975, 1976, 1984, 1,152,708/ 408,379 Foley's, JCPenney, Macy's, None Albuquerque, New Mexico 1992, 1995 Mervyn's, Sears Cottonwood Mall 1962/1984 737,446/ 357,938 JCPenney, Meier & Frank None Salt Lake City, Utah Cottonwood Square 1984 77,079/ 35,467 Software & More One Salt Lake City, Utah </Table> 10 <Table> <Caption> YEAR OPENED/ TOTAL GLA/MALL AND YEAR REMODELED FREESTANDING GLA ANCHOR NAME OF CENTER/LOCATION(1) OR EXPANDED (SQUARE FEET)(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES(3) - -------------------------- ---------------------- ------------------ --------------------------- ------------ Country Hill Plaza 1978 140,097/ 59,814 McKay-Dee Hospital Center, None Ogden (Salt Lake City), Smith's Food & Drug Utah Crossroads Center 1966/1995, 2004 897,605/ 291,925 JCPenney, Marshall Field's, None St. Cloud, Minnesota Scheel's All Sports, Sears, Target The Crossroads 1980/1992 773,570/ 270,610 JCPenney, Marshall Field's, None Portage (Kalamazoo), Mervyn's, Sears Michigan Cumberland Mall 1973/1989, 2004 1,155,999/ 321,884 JCPenney, Rich's, Sears One Atlanta, Georgia Division Crossing 1990 100,760/ 32,808 Rite Aid, Safeway None Portland, Oregon Eagle Ridge Mall 1996/2000 651,049/ 256,594 Dillard's, JCPenney, None Lake Wales (Orlando), Recreation Station, Regal Florida Cinemas, Sears Eastridge Mall 1982/1997 569,364/ 279,568 The Bon Marche, JCPenney, None Casper, Wyoming Sears, Target Eden Prairie Center 1976/1989, 1994, 2001 1,118,740/ 309,033 AMC Theatres, Kohl's, One Eden Prairie (Minneapolis), Sears, Target, Von Maur Minnesota Fallbrook Center 1966/1986, 2002, 2003 905,957/ 270,958 DSW Shoe Warehouse, Kohl's, None West Hills (Los Angeles), Laemmle Theatres, Linens 'n California Things, Mervyn's, Ross Dress for Less, Sport Chalet, Target Faneuil Hall Marketplace(4) 1976 197,946/ 197,946 Ann Taylor, Crate & Barrel None Boston, Massachusetts Fashion Place(4) 1972 876,164/ 310,191 Dillard's, Nordstrom, Sears None Salt Lake City, Utah Fashion Show 1981 1,764,562/ 530,766 Dillard's, Macy's, Neiman One Las Vegas, Nevada Marcus, Nordstrom, Robinsons-May, Saks Fifth Avenue, Bloomingdale's Home Foothills Mall 1973/1980, 1989 800,915/ 402,953 Foley's, JCPenney, None Fort Collins, Colorado Mervyn's, Sears Fort Union(4) 1978/1982-1987 32,968/ 32,968 Bucca Di Beppo N/A Salt Lake City, Utah Four Seasons Town Centre 1974/1988, 1999, 1,142,057/ 500,041 Belk, Dillard's, JCPenney None Greensboro, North Carolina 2001-2002 Fox River Mall 1984/1986, 1991, 1997, 1,218,468/ 435,451 Cost Plus World Market, None Appleton, Wisconsin 2002, 2003 David's Bridal, DSW Shoe Warehouse, Factory Card Outlet, JCPenney, Linens 'n Things, Marshall Field's, Scheel's All Sports, Sears Fremont Plaza(4) 1977 102,991/ 25,643 Sav-On Drug Store One Las Vegas, Nevada The Gallery at Harborplace(4) 1987 132,992/ 132,992 Brooks Brothers, Forever None Baltimore, Maryland 21, Gap </Table> 11 <Table> <Caption> YEAR OPENED/ TOTAL GLA/MALL AND YEAR REMODELED FREESTANDING GLA ANCHOR NAME OF CENTER/LOCATION(1) OR EXPANDED (SQUARE FEET)(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES(3) - -------------------------- ---------------------- ------------------ --------------------------- ------------ Gateway Crossing Shopping 1992 183,526/ 135,701 All A Dollar, Barnes & None Center Noble, TJ Maxx Bountiful (Salt Lake City), Utah Gateway Mall 1990/1999 725,738/ 342,532 24 Hour Fitness, Movies 12, One Springfield, Oregon Ross Dress for Less, Sears, Target Glenbrook Square 1966/1982, 1986 1,212,350/ 435,480 JCPenney, L.S. Ayres, None Fort Wayne, Indiana Marshall Field's, Sears Governor's Square(4) 1979 1,037,723/ 346,118 Burdines-Macy's, Dillard's, None Tallahassee, Florida JCPenney, Sears The Grand Canal Shoppes at 1999 516,090/ 516,090 Ann Taylor, Kenneth Cole None the Venetian Las Vegas, Nevada Grand Teton Mall 1984/2004 630,752/ 306,827 The Bon Marche, Dillard's, None Idaho Falls, Idaho JCPenney, Sears Grand Traverse Mall 1992 593,499/ 280,108 GKC Theaters, JCPenney, None Traverse City, Michigan Marshall Field's, Target Greenwood Mall 1979/1987, 1996, 2002 853,750/ 418,864 Dillard's, Dillard's None Bowling Green, Kentucky Women's World, Famous Barr, JCPenney, Sears Halsey Crossing(4) 1990/2000 99,438/ 46,674 Safeway None Gresham (Portland), Oregon Harborplace(4) 1980 141,320/ 141,320 Ann Taylor, J. Crew None Baltimore, Maryland Hulen Mall 1977 941,127/ 344,557 Dillard's, Foley's, Sears None Fort Worth, Texas Jordan Creek Town Center 2004 1,544,686/ 572,783 Bed Bath & Beyond, Best One West Des Moines, Iowa Buy, Century Theatres, DSW Shoe Warehouse, Dillard's, Scheel's All Sports, The Market, Younkers KIDK/Baskin Robbins 1980 1,814/ 1,814 Baskin Robbins N/A Idaho Falls, Idaho Knollwood Mall 1955/1981, 1999 464,321/ 168,098 Cub Foods, Kohl's, One St. Louis Park, TJ Maxx (Minneapolis), Minnesota Lakeside Mall 1976 1,458,432/ 508,132 JCPenney, Lord & Taylor, None Sterling Heights, Michigan Marshall Field's Men & Home, Marshall Field's Women, Sears Lakeview Square 1983/1998, 2001 546,044/ 254,451 JCPenney, Marshall Field's, None Battle Creek, Michigan Sears Landmark Mall(4) 1965/1989, 1990 889,951/ 331,014 Hecht's, Lord & Taylor, None Alexandria (Washington, Sears D.C.), Virginia Lansing Mall(4) 1969/2001 834,534/ 443,364 JCPenney, Marshall Field's, None Lansing, Michigan Mervyn's, Younkers Lockport Mall 1975/1984 336,070/ 122,989 The Bon Ton Two Lockport, New York </Table> 12 <Table> <Caption> YEAR OPENED/ TOTAL GLA/MALL AND YEAR REMODELED FREESTANDING GLA ANCHOR NAME OF CENTER/LOCATION(1) OR EXPANDED (SQUARE FEET)(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES(3) - -------------------------- ---------------------- ------------------ --------------------------- ------------ Lynnhaven Mall 1981/1991, 1996 1,296,252/ 460,805 AMC Theatres, Dick's None Virginia Beach, Virginia Sporting Goods, Dillard's, Hecht's, JCPenney, Lord & Taylor, Steve & Barry's University Sportswear The Maine Mall 1971/1982, 1986 1,047,188/ 364,254 Best Buy, Chuck E. Cheese, None Portland, Maine Filene's, Filene's Home Store, JCPenney, Linens 'n Things, Macy's, Sears, Sports Authority Mall of Louisiana 1997 1,240,067/ 432,585 Dillard's, Foley's, None Baton Rouge, Louisiana JCPenney, McRae's, Sears Mall of the Bluffs 1986/1988, 1998 687,393/ 312,927 Dillard's, Drug Town, None Council Bluffs (Omaha), Hy-Vee, JCPenney, Sears, Iowa Target Mall St. Matthews 1962 1,094,684/ 376,979 Dillard's Women's, One Louisville, Kentucky Dillard's Men's, Children's & Home, JCPenney Mall St. Vincent(4) 1976/1991 538,506/ 190,506 Dillard's, Sears None Shreveport, Louisiana Mall at Sierra Vista 1999 337,630/ 106,360 Cinemark Theatres, None Sierra Vista, Arizona Dillard's, Sears The Mall in Columbia 1971 1,384,260/ 584,092 AMC Columbia 14, Hecht's, None Columbia, Maryland JCPenney, LL. Bean, Lord & Taylor, Nordstrom, Sears Market Place Shopping 1976/1984, 1987, 1990, 1,036,646/ 500,900 Bergner's, Famous Barr, None Center 1994, 1999 JCPenney, Sears Champaign, Illinois Mayfair 1958/1973, 1986, 1994, 1,110,957/ 491,573 AMC Theatres, Barnes & None Wauwatosa (Milwaukee), 2001 Noble, Boston Store, Wisconsin Marshall Field's Meadows Mall 1978/1987, 1997, 2003 956,394/ 319,541 Dillard's, JCPenney, None Las Vegas, Nevada Macy's, Sears Metro Plaza 1956 135,031/ 135,031 Dollar Store, Social None Baltimore, Maryland Services Mondawmin Mall 1956 319,277/ 319,277 New York & Company, Stop None Baltimore, Maryland Shop and Save Northgate Mall 1972/1991, 1997 825,926/ 330,606 JCPenney, Proffitt's, None Chattanooga, Tennessee Proffitt's Home Store, Sears, T.J. Maxx Northridge Fashion Center 1971/1995, 1997 1,455,131/ 579,688 JCPenney, Macy's, Pacific None Northridge (Los Angeles), Theatres, Robinsons-May, California Sears North Plains Mall 1985/1988 296,293/ 102,212 Beall's, Dillard's, None Clovis, New Mexico JCPenney, Sears North Star 1960 1,259,073/ 466,246 Dillard's, Foley's, Macy's, None San Antonio, Texas Mervyn's, Saks Fifth Avenue North Temple Shops 1970 10,078/ 10,078 East Sea N/A Salt Lake City, Utah </Table> 13 <Table> <Caption> YEAR OPENED/ TOTAL GLA/MALL AND YEAR REMODELED FREESTANDING GLA ANCHOR NAME OF CENTER/LOCATION(1) OR EXPANDED (SQUARE FEET)(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES(3) - -------------------------- ---------------------- ------------------ --------------------------- ------------ NorthTown Mall 1955/1961, 1977, 1984, 1,046,534/ 415,040 The Bon Marche, Bumpers, One Spokane, Washington 1989, 1992, 1999-2000 Inc., JCPenney, Mervyn's, Regal Cinemas, Sears Oak View Mall 1991 868,272/ 264,012 Dillard's, JCPenney, Sears, None Omaha, Nebraska Younkers Oakwood Center 1966 952,220/ 353,873 Dillard's, JCPenney, None Gretna, Louisiana Mervyn's, Sears, Marshalls Oakwood Mall 1986/1991, 1995, 1997 822,088/ 337,012 JCPenney, Marshall Field's, None Eau Claire, Wisconsin Scheel's All Sports, Sears, Younkers Oglethorpe Mall 1969/1974, 1982, 1990, 949,166/ 375,463 Belk, JCPenney, Rich's, None Savannah, Georgia 1992, 2002 Sears, Stein Mart Orem Plaza-Center Street 1977/1989 82,317/ 48,656 Showbiz Pizza, Utah Office None Orem, Utah Supply Company Orem Plaza-State Street 1975 27,557/ 27,557 Label Tech, Tuesday Morning N/A Orem, Utah Oviedo Marketplace 1998 951,672/ 333,788 Burdines-Macy's, Dillard's, None Orlando, Florida Sears, Regal Cinemas 22 Owings Mills 1986 1,083,447/ 436,410 Hecht's, JCPenney, Macy's, None Baltimore, Maryland AMC Owings Mills 17, Sticks 'N' Stuff Oxmoor Center Mall 1971 930,045/ 282,979 Dick's Sporting Goods, None Louisville, Kentucky Lazarus, Sears, Von Maur Paramus Park 1974 770,227/ 311,170 Macy's, Sears, Fortunoff None Paramus, New Jersey Park City Center 1970/1988, 1997 1,367,923/ 504,734 The Bon Ton, Boscov's, None Lancaster (Philadelphia), JCPenney, Kohl's, Sears Pennsylvania Park Place 1974/1998, 2001, 2003 1,051,071/ 469,614 Dillard's, Macy's, Sears None Tucson, Arizona Peachtree Mall 1975/1985, 1993 818,441/ 309,826 Dillard's, JCPenney, None Columbus, Georgia Parisian, Rich's Pecanland Mall 1985 977,375/ 334,728 Dillard's, JCPenney, None Monroe, Louisiana McRae's, Mervyn's, Sears Piedmont Mall 1984/1995 725,328/ 175,002 Belk, Belk Men's, Boscov's, None Danville, Virginia JCPenney, Sears Pierre Bossier Mall 1982/1985, 1993 608,421/ 215,123 Dillard's, JCPenney, Sears, One Bossier City (Shreveport), Stage Louisiana Pine Ridge Mall(4) 1981 606,747/ 168,760 The Bon Marche, Dillard's, None Pocatello, Idaho JCPenney, Sears, ShopKo The Pines 1986/1990 602,637/ 262,930 Dillard's, JCPenney, Sears One Pine Bluff, Arkansas Pioneer Place(4) 1990 368,134/ 308,134 Saks Fifth Avenue None Portland, Oregon Plaza 800(4) 1975 176,431/ 27,806 Albertsons, ShopKo None Sparks (Reno), Nevada Plaza 9400(4) 1979 228,661/ 67,017 Albertsons, Deseret One Sandy (Salt Lake City), Industries Utah Prince Kuhio Plaza(4) 1985/1994, 1999 504,817/ 272,195 Macy's, Sears One Hilo, Hawaii Providence Place(4) 1999 1,271,439 748,439 Filene's, Lord & Taylor, None Providence, Rhode Island Nordstrom </Table> 14 <Table> <Caption> YEAR OPENED/ TOTAL GLA/MALL AND YEAR REMODELED FREESTANDING GLA ANCHOR NAME OF CENTER/LOCATION(1) OR EXPANDED (SQUARE FEET)(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES(3) - -------------------------- ---------------------- ------------------ --------------------------- ------------ Provo Towne Centre(7) 1998 801,014/ 230,945 Cinemark Theatres, None Provo, Utah Dillard's, JCPenney, Sears Red Cliffs Mall 1990 385,610/ 108,553 Dillard's, JCPenney, Sears One St. George, Utah Red Cliffs Plaza 1994 57,304/ 57,304 Gold's Gym N/A St. George, Utah Redlands Mall 1977 173,997/ 78,938 Gottschalks None Redlands, California Regency Square Mall 1968/1992, 1998, 2001 1,452,082/ 535,576 Belk, Champs Sports/World One Jacksonville, Florida Foot Locker, Dillard's, JCPenney, Sears Ridgedale Center 1974 1,034,542/ 332,162 JCPenney, Marshall Field's None Minneapolis, Minnesota Men & Home, Marshall Field's Women, Sears Rio West Mall(4)(5) 1981/1991, 1998 514,856/ 333,723 Beall's, JCPenney One Gallup, New Mexico River Falls Mall 1990 745,124/ 325,076 Dillard's, Dick's Sporting None(8) Clarksville, Indiana Goods, Toys 'R' Us River Hills Mall 1991/1996 644,630/ 282,581 Herberger's, JCPenney, None Mankato, Minnesota Sears, Target Riverlands Shopping Center 1965/1984, 1990, 2004 184,094/ 137,160 Burke's Outlet, Citi One LaPlace (New Orleans), Trends, Silver Cinema Louisiana River Pointe Plaza 1988 224,262/ 73,831 Albertsons, ShopKo None West Jordan (Salt Lake City), Utah Riverside Plaza 1977/1993 175,417/ 44,948 Big Lots, The Heritage None Provo, Utah Group, Macy's, Rite Aid RiverTown Crossings 1999 1,270,796/ 421,738 Dick's Sporting Goods, None Grandville (Grand Rapids), JCPenney, Kohl's, Marshall Michigan Field's, Old Navy, Rivertown Cinemas, Sears, Younkers Riverwalk(4) 1986 187,649/ 187,649 Abercrombie & Fitch, None New Orleans, Louisiana Victoria's Secret Rogue Valley Mall 1986/1991, 1996, 2002 633,107/ 276,123 JCPenney, Meier and Frank, None Medford (Portland), Oregon Meier and Frank Home Store, Mervyn's Saint Louis Galleria 1986/1991, 1995, 2002 1,166,133/ 476,453 Dillard's, Famous Barr, None St. Louis, Missouri Lord & Taylor Salem Center(4) 1979/1987, 1995 649,509/ 211,509 JCPenney, Meier & Frank, None Salem, Oregon Mervyn's, Nordstrom Sikes Senter 1974/1984, 2002 670,134/ 295,444 Dillard's, JCPenney, Sears None Wichita Falls, Texas Silver Lake Mall 1989/1995 327,939/ 110,446 The Bon Marche, JCPenney, One Coeur d'Alene, Idaho Sears Sooner Mall 1976/1989, 1999 505,201/ 165,129 Dillard's, JCPenney, Old None Norman, Oklahoma Navy, Sears, Stein Mart South Street Seaport(4) 1983 285,385/ 285,385 Ann Taylor, Brookstone None New York, New York Southlake Mall 1976/1995, 1999 1,014,158/ 273,906 JCPenney, Rich's, Sears One Morrow (Atlanta), Georgia Southland Center 1970 865,629/ 282,592 JCPenney, Marshall Field's, None Taylor, Michigan Mervyn's </Table> 15 <Table> <Caption> YEAR OPENED/ TOTAL GLA/MALL AND YEAR REMODELED FREESTANDING GLA ANCHOR NAME OF CENTER/LOCATION(1) OR EXPANDED (SQUARE FEET)(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES(3) - -------------------------- ---------------------- ------------------ --------------------------- ------------ Southland Mall 1964/1968, 1972, 1984 1,260,918/ 520,654 JCPenney, Macy's, Mervyn's, None Hayward, California Sears Southshore Mall(4) 1981 288,926/ 155,151 JCPenney, Sears None Aberdeen, Washington Southwest Plaza 1983/1994, 1995, 2001 1,290,802/ 653,625 Dillard's, Foley's, None Littleton (Denver), JCPenney, Sears Colorado Spokane Valley Mall(7) 1997 736,929/ 317,845 The Bon Marche, JCPenney, None Spokane, Washington Regal ACT III, Sears Spokane Valley Plaza 2001 132,048/ 6,000 Linens 'n Things, Old Navy, None Spokane, Washington Sportsman's Warehouse, T.J. Maxx Spring Hill Mall 1980/1992, 1997 1,179,728/ 446,932 Carson Pirie Scott, None West Dundee (Chicago), JCPenney, Kohl's, Marshall Illinois Field's, Sears, Wickes Furniture Staten Island Mall 1973 1,272,268/ 614,905 JCPenney, Macy's, Sears None Staten Island, New York Stonestown 1952/1987-1988 864,494/ 436,201 Macy's, Nordstrom None San Francisco, California The Streets at South Point 2002 1,327,396/ 580,475 Hecht's, JCPenney, None Durham, North Carolina Nordstrom, Sears, Belk Three Rivers Mall 1987 430,395/ 234,060 The Bon Marche, JCPenney, One Kelso, Washington Sears Town East Mall 1971/1986, 1996, 1998, 1,224,851/ 415,465 Dillard's, Foley's, None Mesquite (Dallas), Texas 2000 JCPenney, Sears Tucson Mall(4)(5) 1982/1991, 1993, 2003 1,302,186/ 443,922 Dillard's, JCPenney, None Tucson, Arizona Macy's, Mervyn's, Robinsons-May, Sears Twin Falls Crossing 1976 37,680/ 0 Kalic Investors None Twin Falls, Idaho University Crossing(4) 1971/1975, 1995 206,035/ 40,733 Barnes & Noble, Burlington None Orem, Utah Coat Factory, CompUSA, OfficeMax, Pier 1 Imports Valley Hills Mall 1978/1988, 1990, 1996 905,904/ 294,388 Belk, Dillard's, JCPenney, None Hickory, North Carolina Sears Valley Plaza Mall 1967/1988, 1997, 1998 1,183,769/ 457,080 Gottschalks, JCPenney, None Bakersfield, California Macy's, Robinsons-May, Sears Victoria Ward Centers(9) 1972/1982, 1988, 1995, 587,092/ 470,011 Borders Books, Consolidated None Honolulu, Hawaii 1997, 1999, 2001 Amusement Theatre, Dave & Busters, Sports Authority The Village of Cross Keys 1965 73,982/ 73,982 Elizabeth Arden Spa, None Baltimore, Maryland Talbots, William Sonoma Visalia Mall 1964/1997 439,828/ 182,828 Gottschalks, JCPenney None Visalia, California Westlake Center(4) 1988 104,631/ 104,631 Express Women's, None Seattle, Washington PF Chang's West Valley Mall 1995/1997 837,791/ 456,842 Gottschalks, JCPenney, None Tracy (San Francisco), Movies 14, Sears, Target California </Table> 16 <Table> <Caption> YEAR OPENED/ TOTAL GLA/MALL AND YEAR REMODELED FREESTANDING GLA ANCHOR NAME OF CENTER/LOCATION(1) OR EXPANDED (SQUARE FEET)(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES(3) - -------------------------- ---------------------- ------------------ --------------------------- ------------ Westwood Mall 1972/1978, 1993 508,243/ 136,542 Elder-Beerman, JCPenney, None Jackson, Michigan Wal-Mart White Marsh 1981 1,151,045/ 366,451 Hecht's (2), JCPenney, One Baltimore, Maryland Macy's, Sears White Mountain Mall 1978 329,629/ 175,169 Flaming Gorge Harley None Rock Springs, Wyoming Davidson, Herberger's, JCPenney, State of Wyoming Willowbrook 1969 1,522,614/ 494,614 Bloomingdale's, Lord & None Wayne, New Jersey Taylor, Macy's, Sears Woodlands Village 1989 91,858/ 91,858 Bashas N/A Flagstaff, Arizona Woodbridge Center 1971 1,634,643/ 549,608 Dick's Sporting Goods, None Woodbridge, New Jersey Fortunoff, JCPenney, Lord & Taylor, Macy's, Sears Yellowstone Square 1973/1977, 1988 266,855/ 100,122 Los Betos Mexican Food, Three Idaho Falls, Idaho Pizza Hut </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 in which tenants are not defined as anchors. (4) Property subject to a ground lease. (5) Owned in a joint venture with independent, non-controlling minority investors. (6) Owned in a joint venture with affiliate of one of the Anchor stores with a 25% minority ownership interest. (7) Owned by the Spokane Valley Mall joint venture described in (5) above. (8) Bass Pro lease was signed and the store is expected to open in early 2005. (9) Includes Ward Entertainment Center, Ward Warehouse, Ward Village and Village Shops. UNCONSOLIDATED RETAIL PROPERTIES <Table> <Caption> OWNERSHIP TOTAL GLA/MALL YEAR OPENED/ INTEREST % AND FREESTANDING YEAR REMODELED OR OF OPERATING GLA SQUARE ANCHOR NAME OF CENTER/ LOCATION(1) EXPANDED PARTNERSHIP FEET(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES(3) - --------------------------- --------------------- ------------ ---------------- --------------------------- ------------ Alderwood Mall 1979/1995, 2004 50% 1,183,753/ The Bon Marche, JCPenney, None Lynnwood (Seattle), 492,532 Nordstrom, Sears Washington Altamonte Mall 1974/1990, 2002, 50 1,169,593/ AMC, Burdines, Dillard's, None Altamonte Springs (Orlando), 2003, 2004 491,045 JCPenney, Sears Florida Arrowhead Towne Center 1993 16.7 1,129,264/ AMC Theatres, Dillard's, None Glendale, Arizona 344,727 JCPenney, Mervyn's, Robinsons-May, Sears Bay City Mall 1991/1994, 1997 50 525,248/ 209,597 JCPenney, Sears, Target, None Bay City, Michigan Younkers Brass Mill Center and Commons 1997 50 1,182,701/ Barnes & Noble, Brass Mill None Waterbury, Connecticut 346,061 Cinemas, Burlington Coat Factory, Filene's, JCPenney, Office Max, Sears Bridgewater Commons 1988 35 880,847/ 377,971 Bloomingdale's, Lord & None Bridgewater, New Jersey Taylor, Macy's </Table> 17 <Table> <Caption> OWNERSHIP TOTAL GLA/MALL YEAR OPENED/ INTEREST % AND FREESTANDING YEAR REMODELED OR OF OPERATING GLA SQUARE ANCHOR NAME OF CENTER/ LOCATION(1) EXPANDED PARTNERSHIP FEET(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES(3) - --------------------------- --------------------- ------------ ---------------- --------------------------- ------------ Carolina Place 1991/1994 50 1,136,627/ Belk, Dillard's, Hecht's, One Pineville (Charlotte), North 333,125 JCPenney, Sears Carolina Centerpointe Village Center 2001 50 144,635/ 144,635 Albertsons, Sav-On Drug N/A Summerlin, Nevada Store Christiana Mall 1978 50 1,083,586/ JCPenney, Lord & Taylor, None Newark, Delaware 312,182 Macy's, Strawbridge's Chula Vista Center 1962/1988, 1993, 50 876,695/ 288,558 JCPenney, Macy's, Mervyn's, None Chula Vista (San Diego), 1994, 2004 Sears, Ultrastar Theaters California Clackamas Town Center 1981/1993, 1994 50 1,181,189/ JCPenney, Meier & Frank, None Portland, Oregon 406,347 Meier & Frank Home Store, Nordstrom, Sears Columbiana Centre 1990/1993 50 825,084/ 266,107 Belk, Dillard's, Parisian, None Columbia, South Carolina Sears Deerbrook Mall 1984/1996, 1997 50 1,207,345/ AMC Theatres, Dillard's, None Humble (Houston), Texas 366,793 Foley's, JCPenney, Mervyn's, Sears Eastridge Mall 1970/1982, 1988, 1995 51 1,021,878/ AMC 15, JCPenney, Macy's, None(5) San Jose, California 274,617 Sears First Colony Mall 1996 50 1,010,672/ Dillard's, Foley's, None Sugar Land (Houston), Texas 391,624 JCPenney, Mervyn's Florence Mall 1976/1994 50 930,057/ JCPenney, Lazarus, Lazarus None Florence (Cincinnati, Ohio), 377,650 Home Store, Sears Kentucky Galleria at Tyler(4) 1970/1991, 1996 50 1,059,295/ JCPenney, Macy's, None Riverside, California 437,587 Nordstrom, Robinsons-May Glendale Galleria(4) 1976/1983, 1997 50 1,527,325/ JCPenney, Macy's, Mervyn's None Glendale, California 517,325 Nordstrom, Robinsons-May Highland Mall(4) 1971 50 1,100,289/ Dillard's, (2), Foley's, None Austin, Texas 381,548 JCPenney Kenwood Towne Centre(4) 1959/1988 50 1,140,612/ Dillard's Women's, None Cincinnati, Ohio 539,020 Dillard's Men's, Lazarus, Parisian Lakeland Square Mall 1988/1990, 1994 50 898,599/ 288,561 Belk, Burdines, Dillard's, None Lakeland (Orlando), Florida Dillard's Men's and Home Store, JCPenney, Sears Lake Mead & Buffalo Partners 1998 50 68,528/ 68,528 Hollywood Video, Wells None Village Center Fargo Bank Summerlin, Nevada Mizner Park(4) 2003 50 236,537/ 236,537 Robb & Stucky None Boca Raton, Florida Montclair Plaza 1968/1985 50 1,353,327/ Circuit City, Ethan Allen, None Montclair (San Bernadino), 443,441 JCPenney, Linens 'n Things, California Macy's, Nordstrom, Robinsons-May, Sears Moreno Valley Mall 1992 50 1,033,378/ Gottschalks, JCPenney, None Moreno Valley (Riverside), 341,187 Limited, Robinsons-May, California Sears Natick Mall 1966/1994 50 1,154,840/ Filene's, Lord & Taylor, None Natick (Boston), 428,178 Macy's, Sears Massachusetts Neshaminy Mall 1968/1995, 1998 25 1,014,198/ AMC Theatres, Boscov's, None Bensalem, Pennsylvania 319,606 Sears, Strawbridge & Clothiers Newgate Mall 1981/1994, 1998 50 688,427/ 216,293 Dillard's, Gart Sports, None Ogden (Salt Lake City), Utah Mervyn's, Sears, Tinsel Town </Table> 18 <Table> <Caption> OWNERSHIP TOTAL GLA/MALL YEAR OPENED/ INTEREST % AND FREESTANDING YEAR REMODELED OR OF OPERATING GLA SQUARE ANCHOR NAME OF CENTER/ LOCATION(1) EXPANDED PARTNERSHIP FEET(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES(3) - --------------------------- --------------------- ------------ ---------------- --------------------------- ------------ NewPark Mall 1980/1993 50 1,208,856/ JCPenney, Macy's, Mervyn's, None Newark (San Francisco), 465,392 Sears, Target California Northbrook Court 1976/1995, 1996 50 1,009,441/ AMC Theatres, Lord & None Northbrook (Chicago), 393,522 Taylor, Marshall Field's, Illinois Neiman Marcus North Point Mall 1993 50 1,376,903/ Dillard's, JCPenney, Lord & None Alpharetta (Atlanta), 410,616 Taylor, Parisian, Rich's, Georgia Sears Oakbrook Center 1962 50 2,003,216/ Bloomingdale's Home & None Oak Brook, Illinois 813,450 Furniture, Lord & Taylor, Marshall Field's, Neiman Marcus, Nordstrom, Sears The Oaks Mall 1978/1995 51 905,254/ 347,387 Belk, Dillard's, JCPenney, None Gainesville, Florida Macy's, Sears Park Meadows 1996 35 1,630,561/ Dick's Sporting Goods, One Littleton, Colorado 607,561 Dillard's, Foley's, JCPenney, Nordstrom The Parks at Arlington 1988/1996, 2002 50 1,519,022/ AMC Theatres, Dick's One Arlington (Dallas), Texas 396,044 Sporting Goods, Dillard's, Foley's, JCPenney, Mervyn's, Sears Pembroke Lakes Mall 1992/1997 50 1,066,986/ Burdines, Dillard's, None Pembroke Pines (Fort 355,711 Dillard's Men's and Home Lauderdale), Florida Store, JCPenney, Sears Perimeter Mall 1971 50 1,284,880 Bloomingdale's, Nordstrom, None Atlanta, Georgia 499,064 Rich's-Macy's Riverchase Galleria 1986/1996, 1998 50 1,578,984/ Comp USA, McRae's, None Hoover (Birmingham), Alabama 503,974 Parisian, Proffitt's, Rich's, Sears Quail Springs Mall 1980/1992, 1998, 1999 50 1,133,961/ AMC Theatres, Dillard's None Oklahoma City, Oklahoma 349,161 Foley's, JCPenney, Sears The Shoppes at Buckland Hills 1990/1994, 2003 50 1,048,549/ Dick's Sporting Goods, One Manchester, Connecticut 420,376 Filene's, Filene's Home & Mens Store, JCPenney, Sears Shopping Center Iguatemi 1975/1992 35 728,411/ 464,628 Bompreco, C&A, Lojas None Bahia Americanas, Multiplex, Salvador, Bahia Playland, Riachuelo, SAC Shopping Center Taboao da 2002 35 415,512/ 134,345 Beshi, C&A, Carrefour, None Serra Casas Bahia, CineTaboao, Taboao da Serra, Sao Paulo Riachuelo, Telha Norte Silver City Galleria 1992/1999 50 921,251/ 415,136 Filene's, JCPenney, Sears, None Taunton (Boston), Silver City Cinemas, Steve Massachusetts & Barry's University Sports Steeplegate Mall 1990 50 481,662/ 225,315 The Bon Ton, JCPenney, None Concord, New Hampshire Sears Stonebriar Centre 2000 50 1,652,277/ AMC Theatres, Barnes & None Frisco (Dallas), Texas 527,244 Noble, Dave & Busters, Dick's Sporting Goods, Foley's, JCPenney, Macy's, Nordstrom, Sears Superstition Springs 1990/1994 16.7 1,057,019/ Dillard's, JCPenney, None Center(4) 363,027 Mervyn's, Robinsons-May, East Mesa (Phoenix), Arizona Sears Towson Town Center 1959 35 965,287/ 515,158 Hecht's, Nordstrom, None Baltimore, Maryland Nordstrom Rack </Table> 19 <Table> <Caption> OWNERSHIP TOTAL GLA/MALL YEAR OPENED/ INTEREST % AND FREESTANDING YEAR REMODELED OR OF OPERATING GLA SQUARE ANCHOR NAME OF CENTER/ LOCATION(1) EXPANDED PARTNERSHIP FEET(2) ANCHORS/SIGNIFICANT TENANTS VACANCIES(3) - --------------------------- --------------------- ------------ ---------------- --------------------------- ------------ Trails Village Partners 1998 50 169,660/ 169,660 Longs Drug Store, Vons None Summerlin, Nevada Grocery Store Tysons Galleria 1988/1994, 1997 50 821,236/ 309,303 Macy's, Neiman Marcus, Saks None McLean (Washington, D.C.), Fifth Avenue Virginia The Village of Merrick 2002 40 737,304/ 737,304 Neiman Marcus, Nordstrom None Park(4) Coral Gables, Florida Vista Ridge Mall 1989/1991 50 1,046,233/ Dillard's, Foley's, None Lewisville (Dallas), Texas 376,023 JCPenney, Sears Washington Park Mall 1984/1986 50 352,125/ 157,829 Dillard's, JCPenney, Sears None Bartlesville, Oklahoma Water Tower Place 1976 52 712,761/ 285,718 Lord & Taylor, Marshall None Chicago, Illinois Field's West Oaks Mall 1996/1998 50 1,072,790/ AMC Theatres, Dillard's, None Ocoee (Orlando), Florida 372,034 JCPenney, McRae's, Sears Westroads Mall 1968/1990, 1995, 51 1,139,457/ Dick's Sporting Goods, One Omaha, Nebraska 1999, 2003 315,397 JCPenney, Tilt, Von Maur, Younkers Willowbrook Mall 1981/1992 50 1,512,923/ Dillard's, Foley's, One Houston, Texas 406,339 JCPenney, Sears The Woodlands Mall 1994/1998, 2004 50 1,333,632/ Dillard's, Foley's, Foley's None The Woodlands (Houston), 488,403 Children's Store, JCPenney, Texas Mervyn's, Sears </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) Anchor vacancy is not applicable for certain smaller strip mall, community center or free-standing properties in which tenants are not defined as Anchors. (4) Property subject to a ground lease. (5) AMC 15 is scheduled to open in August 2005. LEASING The following schedule shows Mall Store scheduled lease expirations in our Retail Portfolio over the next five years. <Table> <Caption> ALL EXPIRATIONS(1) --------------------------------------- SQUARE RENT PER BASE RENT FOOTAGE SQUARE FOOT ------------ ---------- ----------- Consolidated 2005......................................... $105,170,711 3,549,424 $29.63 2006......................................... 97,713,101 3,270,496 29.88 2007......................................... 103,936,259 3,333,710 31.18 2008......................................... 100,544,849 3,179,066 31.63 2009......................................... 118,280,807 3,128,659 37.81 ------------ ---------- ------ Total........................................ $525,645,727 16,461,355 $31.93 ============ ========== ====== </Table> 20 <Table> <Caption> ALL EXPIRATIONS(1) EXPIRATIONS AT SHARE(1)(2) --------------------------------------- -------------------------------------- SQUARE RENT PER SQUARE RENT PER BASE RENT FOOTAGE SQUARE FOOT BASE RENT FOOTAGE SQUARE FOOT ------------ ---------- ----------- ------------ --------- ----------- Unconsolidated 2005............... $ 48,051,582 1,487,008 $32.31 $ 22,303,429 690,071 $32.32 2006............... 61,971,587 1,781,544 34.79 29,975,328 826,518 36.27 2007............... 50,345,137 1,442,519 34.90 25,257,575 671,992 37.59 2008............... 53,175,929 1,556,995 34.15 24,665,122 722,060 34.16 2009............... 47,748,056 1,215,881 39.27 21,676,713 561,713 38.59 ------------ ---------- ------ ------------ --------- ------ Total.............. $261,292,291 7,483,947 $34.91 $123,878,167 3,472,354 $35.68 ------------ ---------- ------ ------------ --------- ------ Grand Total........ $786,938,018 23,945,302 $32.86 $123,878,167 3,472,354 $35.68 ============ ========== ====== ============ ========= ====== </Table> - --------------- (1) Excludes Anchors and tenants paying percentage rent in lieu of base minimum rent. (2) Expirations at share reflect our direct or indirect ownership interest in a joint venture. We believe that the presentation of this data for the Unconsolidated Real Estate Affiliates provides additional operational information that aids in the evaluation of our earnings from such Unconsolidated Real Estate Affiliates. Combined occupancy for Consolidated Properties and Unconsolidated Properties as of December 31, 2004 was 92.1%. ANCHORS Anchors have traditionally been a major component of a regional shopping center. Although certain of the properties in the Retail Portfolio have Anchors or significant tenants other than department stores, Anchors are frequently department stores whose merchandise appeals to a broad range of shoppers. Anchors generally either own their stores, the land under them and adjacent parking areas, or enter into long-term leases at rates that are generally lower than the rents charged to Mall Store tenants. The centers in the Retail Portfolio receive a smaller percentage of their operating income from Anchors than from Mall Stores. While the market share of traditional department store Anchors has been declining, strong Anchors continue to play an important role in maintaining customer traffic and making the centers in the Retail Portfolio desirable locations for Mall Store tenants. 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 in the Retail Portfolio as of December 31, 2004. <Table> <Caption> CONSOLIDATED UNCONSOLIDATED TOTAL -------------------- -------------------- -------------------- TOTAL SQUARE FEET TOTAL SQUARE FEET TOTAL SQUARE FEET STORES (000'S) STORES (000'S) STORES (000'S) ------ ----------- ------ ----------- ------ ----------- SEARS(1) Sears.............................. 94 13,251 34 5,417 128 18,668 Kmart.............................. 1 88 -- -- 1 88 --- ------ --- ------ --- ------ Total Sears..................... 95 13,339 34 5,417 129 18,756 --- ------ --- ------ --- ------ MAY DEPARTMENT STORES COMPANY(2) David's Bridal..................... 1 10 -- -- 1 10 Famous Barr........................ 3 534 -- -- 3 534 Filene's........................... 2 325 5 812 7 1,137 Filene's Home & Men's Store........ -- -- 1 103 1 103 Filene's Home Store................ 1 41 -- -- 1 41 Foley's............................ 12 1,893 11 2,123 23 4,016 Foley's Children's Store........... -- -- 1 17 1 17 </Table> 21 <Table> <Caption> CONSOLIDATED UNCONSOLIDATED TOTAL -------------------- -------------------- -------------------- TOTAL SQUARE FEET TOTAL SQUARE FEET TOTAL SQUARE FEET STORES (000'S) STORES (000'S) STORES (000'S) ------ ----------- ------ ----------- ------ ----------- Hecht's............................ 7 1,173 2 341 9 1,514 L.S. Ayres......................... 1 242 -- -- 1 242 Lord & Taylor...................... 8 962 7 914 15 1,876 Marshall Field's................... 18 2,698 3 948 21 3,646 Meier & Frank...................... 3 502 1 199 4 701 Meier & Frank Home Store........... 1 84 1 166 2 250 Robinsons-May...................... 4 650 4 676 8 1,326 Strawbridge's...................... -- -- 2 426 2 426 --- ------ --- ------ --- ------ Total May Department Stores Company....................... 61 9,114 38 6,725 99 15,839 --- ------ --- ------ --- ------ JC PENNEY............................ 92 10,562 37 5,222 129 15,784 DILLARD'S DEPARTMENT STORES Dillard's.......................... 54 8,917 21 3,820 75 12,737 Dillard's Men's and Home Store..... 1 37 2 157 3 194 Dillard's Woman's World............ 1 6 -- -- 1 6 --- ------ --- ------ --- ------ Total Dillard's Department Stores........................ 56 8,960 23 3,977 79 12,937 --- ------ --- ------ --- ------ FEDERATED DEPARTMENT STORES, INC.(2) Bloomingdale's..................... 1 260 2 373 3 633 Bloomingdale's Home................ 1 100 1 92 2 192 Burdines-Macy's.................... 3 492 3 435 6 927 Lazarus............................ 1 271 3 473 4 744 Macy's............................. 21 4,157 12 2,220 33 6,377 Rich's-Macy's...................... 5 923 3 790 8 1,713 Rich's-Macy's Furniture............ 1 152 -- -- 1 152 The Bon Marche..................... 9 764 1 221 10 985 --- ------ --- ------ --- ------ Total Federated Department Stores, Inc. ................. 42 7,119 25 4,604 67 11,723 --- ------ --- ------ --- ------ SAKS HOLDINGS, INC. Bergner's.......................... 1 154 -- -- 1 154 Boston Store....................... 1 211 -- -- 1 211 Carson Pirie Scott................. 1 138 -- -- 1 138 Herberger's........................ 3 187 -- -- 3 187 McRae's............................ 4 410 2 345 6 755 Parisian........................... 1 86 5 518 6 604 Proffitts Home Store............... 2 113 1 230 3 343 Saks Fifth Avenue.................. 4 407 1 120 5 527 Younkers........................... 8 940 2 244 10 1,184 --- ------ --- ------ --- ------ Total Saks Holdings, Inc. ...... 25 2,646 11 1,457 36 4,103 --- ------ --- ------ --- ------ MERVYN'S............................. 21 1,775 8 674 29 2,449 TARGET............................... 14 1,532 2 300 16 1,832 </Table> 22 <Table> <Caption> CONSOLIDATED UNCONSOLIDATED TOTAL -------------------- -------------------- -------------------- TOTAL SQUARE FEET TOTAL SQUARE FEET TOTAL SQUARE FEET STORES (000'S) STORES (000'S) STORES (000'S) ------ ----------- ------ ----------- ------ ----------- NORDSTROM Nordstrom.......................... 8 1,255 11 1,902 19 3,157 Nordstrom Rack..................... -- -- 1 31 1 31 --- ------ --- ------ --- ------ Total Nordstrom................. 8 1,255 12 1,933 20 3,188 --- ------ --- ------ --- ------ BELK Belk............................... 6 1,027 4 536 10 1,563 Belk Men's......................... 1 34 -- -- 1 34 --- ------ --- ------ --- ------ Total Belk...................... 7 1,061 4 536 11 1,597 --- ------ --- ------ --- ------ CINEMARK USA, INC. Cinemark........................... 2 113 -- -- 2 113 Movies 12.......................... 1 38 -- -- 1 38 Movies 14.......................... 1 49 -- -- 1 49 Rivertown Cinemas.................. 1 86 -- -- 1 86 Tinsel Town........................ -- -- 1 62 1 62 --- ------ --- ------ --- ------ Total Cinemark USA, Inc. ....... 5 286 1 62 6 348 --- ------ --- ------ --- ------ AMERICAN MULTI CINEMA AMC 15............................. -- -- 1 75 1 75 AMC Theaters....................... 3 241 7 594 10 835 --- ------ --- ------ --- ------ Total American Multi Cinema..... 3 241 8 669 11 910 --- ------ --- ------ --- ------ REGAL ENTERTAINMENT GROUP Regal Act III...................... 1 40 -- -- 1 40 Regal Cinemas...................... 3 186 -- -- 3 186 --- ------ --- ------ --- ------ Total Regal Entertainment Group......................... 4 226 -- -- 4 226 --- ------ --- ------ --- ------ STAGE STORES, INC. Beall's............................ 2 54 -- -- 2 54 Stage.............................. 1 35 -- -- 1 35 --- ------ --- ------ --- ------ Total Stage Stores, Inc. ....... 3 89 -- -- 3 89 --- ------ --- ------ --- ------ THE SPORTS AUTHORITY, INC. Gart Sports........................ -- -- 1 64 1 64 The Sports Authority............... 2 86 -- -- 2 86 --- ------ --- ------ --- ------ Total The Sports Authority, Inc. ......................... 2 86 1 64 3 150 --- ------ --- ------ --- ------ HY-VEE FOOD STORES, INC. Drug Town.......................... 1 12 -- -- 1 12 Hy-Vee............................. 1 36 -- -- 1 36 --- ------ --- ------ --- ------ Total Hy-Vee Food Stores, Inc. ......................... 2 48 -- -- 2 48 --- ------ --- ------ --- ------ </Table> 23 <Table> <Caption> CONSOLIDATED UNCONSOLIDATED TOTAL -------------------- -------------------- -------------------- TOTAL SQUARE FEET TOTAL SQUARE FEET TOTAL SQUARE FEET STORES (000'S) STORES (000'S) STORES (000'S) ------ ----------- ------ ----------- ------ ----------- HOYTS CINEMAS Brass Mill Cinemas................. -- -- 1 70 1 70 Silver City Cinemas................ -- -- 1 31 1 31 --- ------ --- ------ --- ------ Total Hoyts Cinemas............. -- -- 2 101 2 101 --- ------ --- ------ --- ------ Gottschalks.......................... 7 595 1 150 8 745 Kohl's............................... 6 567 -- -- 6 567 Scheels All Sports................... 5 472 -- -- 5 472 Boscov's............................. 2 399 1 185 3 584 Dick's Sporting Goods, Inc. ......... 5 367 4 323 9 690 Neiman-Marcus........................ 2 328 4 504 6 832 Von Maur, Inc. ...................... 2 306 1 179 3 485 The Bon Ton.......................... 2 224 1 88 3 312 Elder-Beerman........................ 3 141 -- -- 3 141 Linens 'n Things..................... 3 106 -- -- 3 106 GAP, Inc. ........................... 3 103 -- -- 3 103 Ross Stores, Inc. ................... 3 90 -- -- 3 90 The TJX Companies, Inc. ............. 2 85 -- -- 2 85 Stein Mart, Inc. .................... 2 76 -- -- 2 76 Value City Department Stores, Inc. .............................. 2 65 -- -- 2 65 George Kerasotes Corporation......... 2 60 -- -- 2 60 Steve & Barry's University Sportswear......................... 1 57 2 123 3 180 Dave & Busters, Inc. ................ 1 44 1 50 2 94 Barnes & Noble....................... 1 31 1 34 2 65 Others (single stores only).......... 25 1,609 6 357 31 1,966 --- ------ --- ------ --- ------ GRAND TOTAL.......................... 519 64,064 228 33,734 747 97,798 === ====== === ====== === ====== </Table> - --------------- (1) Kmart/Sears merger expected to close in March 2005. (2) May Department Stores Company and Federated Department Stores, Inc. announced a merger agreement in February 2005 with a closing expected in third quarter 2005. We have 19 properties with both a May and a Federated Anchor. NON-RETAIL PROPERTIES See Item 1 "Narrative Description of Business" for information regarding our Office Portfolio and our Community Development segment. ITEM 3. LEGAL PROCEEDINGS We are not currently involved in any material litigation nor, to our knowledge, is any material litigation currently threatened against us, the properties or any of the Unconsolidated Real Estate Affiliates. For information about certain environmental matters, see "Item 1 -- Business -- Environmental Matters." 24 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of General Growth's stockholders during the fourth quarter of 2004. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is listed on the New York Stock Exchange ("NYSE") and trades under the symbol "GGP". As of March 4, 2005, 237,554,681 outstanding shares of common stock were held by approximately 2,442 stockholders of record. The closing price per share of our common stock on the NYSE on March 4, 2005, was $35.68 per share. On November 20, 2003, our stockholders approved a three-for-one stock split which was effective December 5, 2003. All share and per share information is presented on a post-split basis. The following table summarizes the quarterly high and low sales prices per share of our common stock as reported by the NYSE. <Table> <Caption> STOCK PRICE --------------- QUARTER ENDED HIGH LOW - ------------- ------ ------ 2004 March 31.................................................... $35.15 $27.25 June 30..................................................... 35.30 24.31 September 30................................................ 32.12 28.41 December 31................................................. 36.90 30.90 2003 March 31.................................................... $18.40 $15.90 June 30..................................................... 21.06 17.83 September 30................................................ 24.03 20.77 December 31................................................. 28.03 23.91 2002 March 31.................................................... $14.91 $12.67 June 30..................................................... 17.00 14.73 September 30................................................ 17.27 13.78 December 31................................................. 17.43 15.05 </Table> 25 The following table summarizes quarterly distributions per share of our common stock. <Table> <Caption> DECLARATION DATE RECORD DATE PAYMENT DATE AMOUNT - ---------------- ----------- ------------ ------ January 7, 2005.......................... January 17, 2005 January 31, 2005 $.36 August 20, 2004.......................... October 15, 2004 October 29, 2004 .36 July 2, 2004............................. July 15, 2004 July 30, 2004 .30 April 5, 2004............................ April 15, 2004 April 30, 2004 .30 January 5, 2004.......................... January 15, 2004 January 30, 2004 .30 October 1, 2003.......................... October 15, 2003 October 31, 2003 .30 June 9, 2003............................. July 7, 2003 July 31, 2003 .24 March 14, 2003........................... April 3, 2003 April 30, 2003 .24 December 12, 2002........................ January 6, 2003 January 31, 2003 .24 September 17, 2002....................... October 4, 2002 October 31, 2002 .24 June 17, 2002............................ July 5, 2002 July 31, 2002 .22 March 21, 2002........................... April 15, 2002 April 30, 2002 .22 December 10, 2001........................ January 14, 2002 January 31, 2002 .22 </Table> ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial data which is derived from, and should be read in conjunction with, the Consolidated Financial Statements and the related Notes and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in this Annual Report. Results for 2003 and 2002 have been restated to reflect the reclassification of disposed properties to discontinued operations (Note 4). <Table> <Caption> 2004 2003 2002 2001 2000 ----------- ----------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) OPERATING DATA Revenue.............................. $ 1,802,845 $ 1,262,791 $ 973,440 $ 799,365 $ 693,847 Network discontinuance costs......... -- -- -- (66,000) -- Depreciation and amortization........ (365,622) (230,195) (179,036) (144,863) (119,337) Other operating expenses............. (694,948) (484,196) (366,806) (293,565) (224,255) Interest expense, net................ (468,958) (276,235) (215,340) (220,402) (212,640) Income allocated to minority interests.......................... (105,473) (110,984) (86,213) (40,288) (51,664) Income taxes......................... (2,383) (98) (119) (160) -- Equity in income of unconsolidated affiliates......................... 88,191 94,480 80,825 60,195 50,063 ----------- ----------- ---------- ---------- ---------- Income from continuing operations.... 253,652 255,563 206,751 94,282 136,014 Income from discontinued operations, net................................ 14,200 7,848 2,507 1,362 1,934 ----------- ----------- ---------- ---------- ---------- Income before cumulative effect of accounting change.................. 267,852 263,411 209,258 95,644 137,948 Cumulative effect of accounting change............................. -- -- -- (3,334) -- ----------- ----------- ---------- ---------- ---------- Net income........................... 267,852 263,411 209,258 92,310 137,948 Convertible preferred stock dividends.......................... -- (13,030) (24,467) (24,467) (24,467) ----------- ----------- ---------- ---------- ---------- Net income available to common stockholders....................... $ 267,852 $ 250,381 $ 184,791 $ 67,843 $ 113,481 =========== =========== ========== ========== ========== </Table> 26 <Table> <Caption> 2004 2003 2002 2001 2000 ----------- ----------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Basic earnings per share: Continuing operations.............. $ 1.16 $ 1.21 $ 0.98 $ 0.44 $ 0.72 Discontinued operations............ 0.06 0.04 0.01 0.01 0.01 Cumulative effect of accounting change.......................... -- -- -- (0.02) -- ----------- ----------- ---------- ---------- ---------- $ 1.22 $ 1.25 $ 0.99 $ 0.43 $ 0.73 =========== =========== ========== ========== ========== Diluted earnings per share: Continuing operations.............. $ 1.15 $ 1.19 $ 0.97 $ 0.44 $ 0.72 Discontinued operations............ 0.06 0.03 0.01 0.01 0.01 Cumulative effect of accounting change.......................... -- -- -- (0.02) -- ----------- ----------- ---------- ---------- ---------- $ 1.21 $ 1.22 $ 0.98 $ 0.43 $ 0.73 =========== =========== ========== ========== ========== Distributions declared per share..... $ 1.26 $ 0.78 $ 0.92 $ 0.80 $ 0.69 =========== =========== ========== ========== ========== BALANCE SHEET DATA Investment in real estate assets -- cost..................... $25,254,333 $10,307,961 $7,724,515 $5,707,967 $5,439,466 Total assets......................... 25,718,625 9,582,897 7,280,822 5,646,807 5,284,104 Total debt........................... 20,310,947 6,649,490 4,592,311 3,398,207 3,244,126 Preferred minority interests......... 403,161 495,211 468,201 175,000 175,000 Common minority interests............ 551,282 408,613 377,746 380,359 355,158 Convertible preferred stock.......... -- -- 337,500 337,500 337,500 Stockholders' equity................. 2,143,150 1,670,409 1,196,525 1,183,386 938,418 CASH FLOW DATA Operating activities................. $ 751,911 $ 578,487 $ 460,495 $ 207,125 $ 287,103 Investing activities................. (9,053,018) (1,745,455) (949,411) (367,366) (356,914) Financing activities................. 8,330,011 1,124,005 381,801 293,767 71,447 FUNDS FROM OPERATIONS(1) Operating Partnership................ $ 765,562 $ 618,561 $ 485,304 $ 296,777 $ 329,262 Less: Allocation to Operating Partnership unitholders............ (154,347) (138,568) (116,170) (80,215) (90,520) ----------- ----------- ---------- ---------- ---------- General Growth stockholders.......... $ 611,215 $ 479,993 $ 369,134 $ 216,562 $ 238,742 =========== =========== ========== ========== ========== </Table> - --------------- (1) Funds from Operations ("FFO" as defined below) does not represent cash flow from operations as defined by Generally Accepted Accounting Principles ("GAAP"), should not be considered as an alternative to GAAP net income and is not necessarily indicative of cash available to fund all cash requirements. See also "Reconciliation of FFO to Net Income Available to Common Stockholders". FUNDS FROM OPERATIONS Consistent with real estate industry and investment community practices, we use Funds From Operations ("FFO") as a supplemental measure of our operating performance. The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains or losses from cumulative effects of accounting changes, extraordinary items and sales of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. We consider FFO a useful supplemental measure for equity REITs and a complement to GAAP measures because it facilitates an understanding of the operating performance of our properties. FFO does not include 27 real estate depreciation and amortization required by GAAP since these amounts are computed to allocate the cost of a property over its useful life. Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, we believe that FFO provides investors with a clearer view of our operating performance. In order to provide a better understanding of the relationship between FFO and GAAP net income available to common stock-holders, a reconciliation of FFO to net income has been provided. FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to GAAP net income and is not necessarily indicative of cash available to fund all cash requirements. RECONCILIATION OF FFO TO NET INCOME AVAILABLE TO COMMON STOCKHOLDERS <Table> <Caption> 2004 2003 2002 2001 2000 --------- --------- --------- --------- --------- FFO: General Growth stockholders...... $ 611,215 $ 479,993 $ 369,134 $ 216,562 $ 238,742 Operating Partnership unitholders................... 154,347 138,568 116,170 80,215 90,520 --------- --------- --------- --------- --------- Operating Partnership............ 765,562 618,561 485,304 296,777 329,262 Depreciation and amortization of capitalized real estate costs.... (440,876) (299,711) (241,393) (200,123) (172,461) FFO of discontinued operations..... (4,484) (6,299) (4,263) (2,215) (2,932) Allocations to Operating Partnership unitholders.......... (66,550) (70,018) (57,364) (24,624) (42,322) Cumulative effect of accounting change........................... -- -- -- (3,334) -- --------- --------- --------- --------- --------- Income from continuing operations....................... 253,652 242,533 182,284 66,481 111,547 Income from discontinued operations, net of minority interest......................... 14,200 7,848 2,507 1,362 1,934 --------- --------- --------- --------- --------- Net income available to common stockholders..................... $ 267,852 $ 250,381 $ 184,791 $ 67,843 $ 113,481 ========= ========= ========= ========= ========= </Table> ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All references to numbered Notes are to specific footnotes to our Consolidated Financial Statements included in this Annual Report and which descriptions are incorporated into the applicable response by reference. The following discussion should be read in conjunction with such Consolidated Financial Statements and related Notes. Capitalized terms used, but not defined, in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") have the same meanings as in such Notes. OVERVIEW Our primary business is the ownership, management, leasing and development of retail and office rental property. We also develop and sell land for residential, commercial and other uses primarily in master-planned communities. We strive to increase cash flow and net income by acquiring, developing, renovating and managing retail rental property in major and middle markets throughout the United States. Our business strategy includes selectively making strategic acquisitions to enhance the yields of the acquired properties through subsequent proactive property management and leasing (including tenant remerchandising), operating cost reductions, physical expansions, redevelopments and capital reinvestment. Some of the actions that we take to increase productivity include changing the tenant mix, adding vendor carts or kiosks and even full expansions or renovations of centers. Acquisitions have included single centers, privately held portfolios and public-to-public purchases such as TRC for $14.3 billion in November 2004. During 2004, we acquired TRC, 100% interests in five retail properties, the remaining 50% interest in one retail property, a 50% interest in two retail properties, a 33 1/3% ownership interest in a property to be developed in Costa Rica and a 28 50% interest in a joint venture owning interests in two operating retail properties, a property management company and a property to be developed in Brazil, all for an aggregate consideration of approximately $16.1 billion. During 2003, we acquired 100% interests in 10 retail properties and additional ownership interests in seven retail properties, for total consideration of approximately $2.0 billion. The continued acquisition of property is the most significant factor in overall increases from year to year in our cash flow and net income. The expansion and renovation of a property also results in increased cash flows and net income as a result of increased customer traffic, trade area penetration and improved competitive position of the property. As of December 31, 2004, we had 21 major approved redevelopment projects underway (each with budgeted projected expenditures, at our ownership share, in excess of $10 million) for a total forecasted cost of approximately $1.0 billion (including our ownership share of Unconsolidated Properties). In addition to property redevelopment, we also develop retail centers from the ground-up. In August 2004, we completed the ground-up development of Jordan Creek Town Center in West Des Moines, Iowa. The center, costing approximately $175 million, is a 1.9 million square foot enclosed regional shopping mall with three anchor stores, a hotel and an amphitheater. We have 12 other potential new development projects that are projected to open in 2006, 2007 and 2008. Our Community Development segment includes the development and sale of residential and commercial land, primarily in large-scale projects in and around Columbia, Maryland; Houston, Texas and Summerlin, Nevada. We develop and sell finished and undeveloped land in such communities to builders and other developers for residential, commercial and other uses. We believe that the most significant operating factor affecting incremental cash flow and net income is increased rents (either base rental revenue or overage rents) earned from tenants at our properties. These rental revenue increases are primarily achieved by: - - Renewing expiring leases and re-leasing existing space at rates higher than expiring or existing rates. Average annual new/renewal lease rates at our consolidated properties for 2004 (excluding 2004 acquisitions) were $33.53 per square foot, $.82 per square foot higher than the average annualized in place rent per square foot and $7.84 per square foot higher than the average rent per square foot for leases which expired in 2004 (excluding 2004 acquisitions). Lease durations for in-line specialty stores typically average close to ten years. As a result, many leases that are expiring now were signed in the early to mid 1990's during a challenging retail environment. As a result, we expect lease spreads to continue to expand. - - Increasing occupancy at the properties so that more space is generating rent. Space leased at properties which are not under redevelopment was 92.1 percent at December 31, 2004, a 9 basis point increase over 91.2 percent at December 31, 2003. - - Increased tenant sales in which we participate through overage rents. Tenant sales per square foot at our Consolidated Properties increased 19 percent over 2003 to $402 per square foot primarily due to our focus on acquisitions of premier properties with high productivity, including TRCLP, as well as our focus on operating income growth through aggressive management, remerchandising and reinvestment. 29 The following table summarizes additional operating statistics for our Consolidated Properties as well as properties which are owned through joint venture arrangements and unconsolidated for GAAP purposes (the "Unconsolidated Properties"). We provide on-site management and other services to substantially all of the Unconsolidated Properties. Because the management operating philosophies and strategies are generally the same whether the properties are consolidated or unconsolidated, we believe that financial information and operating statistics with respect to all properties, both consolidated and unconsolidated, provide important insights into our operating results, including the relative size and significance of these elements of our overall operations. Collectively, we refer to our Consolidated and Unconsolidated Properties as our "Company Portfolio." <Table> <Caption> CONSOLIDATED UNCONSOLIDATED COMPANY PROPERTIES PROPERTIES PORTFOLIO(B) OPERATING STATISTICS(A) ------------ -------------- ------------- Space leased at centers not under redevelopment.............................. 92.1% 91.9% 92.1% Trailing 12 month total tenant sales per sq. ft.(c)..................................... $ 402 $ 427 $ 410 % change in total sales(c)................... 5.8% 6.7% 6.1% % change in comparable sales(c).............. 4.2% 4.3% 4.3% Mall and Freestanding GLA excluding space under redevelopment (in sq. ft.)........... 42,682,894 18,833,379 61,516,273 CERTAIN FINANCIAL INFORMATION Average annualized in place rent per sq. ft. ....................................... $ 32.71 $ 35.67 Average rent per sq. ft. for new/renewal leases (excludes 2004 acquisitions)........ $ 33.53 $ 36.45 Average rent per sq. ft. for leases expiring in 2004 (excludes 2004 acquisitions)....... $ 25.69 $ 32.35 </Table> - --------------- (a) Data is for 100% of the Mall GLA in each portfolio, including those properties that are owned in part by unconsolidated affiliates. Data excludes properties currently being redeveloped and/or remerchandised and miscellaneous (non-mall) properties. (b) Data presented in the column "Company Portfolio" are weighted average amounts. (c) Due to tenant sales reporting timelines, data presented is as of November 2004. We use the following terms in this Annual Report: - - Anchor -- a department store or other large retail store with gross leaseable area greater than 30,000 square feet - - Freestanding GLA -- gross leaseable area of freestanding retail stores in locations that are not attached to the primary complex of buildings that comprise a shopping center - - GLA -- gross leaseable retail space, including Anchors and all other leaseable areas - - Mall GLA -- gross leaseable retail space, excluding both Anchors and Freestanding GLA - - Mall Stores -- stores (other than Anchors) that are typically specialty retailers who lease space in the structure including, or attached to, the primary complex of buildings that comprise a shopping center - - Total Mall Stores sales -- the gross revenue from product sales to customers generated by the Mall Stores. We believe changes in interest rates are the most significant external factor affecting our cash flows and net income. As detailed in our discussion of economic conditions and market risk, interest rates have risen in recent months and could continue to rise in future months, which could adversely impact our future cash flow and net income. We have not included trends in Funds From Operations ("FFO") as defined by The National Association of Real Estate Investment Trusts ("NAREIT") in this MD&A, as FFO, under current SEC reporting guidelines, can only be considered a supplemental measure of our operating performance. 30 SEASONALITY Both our Retail and Other segment and our tenants' businesses are seasonal in nature. Our tenants' stores typically achieve higher sales levels during the fourth quarter because of the holiday selling season, and with lesser, though still significant, sales fluctuations associated with the Easter holiday and back-to-school events. Although we have 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. In addition, the majority of our tenants have December or January lease years for purposes of calculating annual overage rent amounts. Accordingly, overage rent thresholds are most commonly achieved in the fourth quarter. As a result, occupancy levels and revenue production are generally highest in the fourth quarter of each year. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. For example, significant estimates and assumptions have been made with respect to useful lives of assets, capitalization of development and leasing costs, recoverable amounts of receivables and deferred taxes, initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions. Actual results could differ from those estimates. CRITICAL ACCOUNTING POLICIES Critical accounting policies are those that are both significant to the overall presentation of our financial condition and results of operations and require management to make difficult, complex or subjective judgments. Our critical accounting policies are those applicable to the following: Initial Valuations and Estimated Useful Lives or Amortization Periods for Property and Intangibles. When we acquire a property, we make an initial assessment of the initial valuation and composition of the assets acquired and liabilities assumed. These assessments consider fair values of the respective assets and liabilities and are primarily determined based on estimated future cash flows using appropriate discount and capitalization rates, but may also be based on independent appraisals or other market data. The estimated future cash flows that are used for this analysis reflect the historical operations of the property, known trends and changes expected in current market and economic conditions which would impact the property's operations, and our plans for such property. These estimates are particularly important as they are used for the allocation of purchase price between depreciable and non-depreciable real estate and other identifiable intangibles including above, below and at-market leases. As a result, the impact of these estimates on our operations could be substantial. Significant differences in annual depreciation or amortization expense may result from the differing amortization periods related to such purchased assets and liabilities. For example, during 2004 we completed acquisitions which increased land by $1.5 billion, buildings and equipment by $9.8 billion and investment land and land held for development and sale by $1.6 billion. Buildings and equipment and other purchased intangible assets, net of identifiable purchased intangible liabilities, will be depreciated or amortized over estimated useful lives of five to forty-five years. Land and investment land and land held for development and sale are not depreciated, however, the carrying value of investment land and land held for development and sale will affect the gain/loss recognized on the sale of such land. Events or changes in circumstances concerning a property may occur which could indicate that the carrying values or amortization periods of the assets and liabilities may require adjustment. The resulting recovery analysis also depends on an analysis of future cash flows to be generated from a property's assets and liabilities. Changes in our overall plans (for example, the extent and nature of a proposed redevelopment of a property) and our views on current market and economic conditions may have a significant impact on the resulting estimated future cash flows of a property that are analyzed for these purposes. 31 Recoverable Amounts of Receivables and Deferred Taxes. We make periodic assessments of the collectibility of receivables (including those resulting from the difference between rental revenue recognized and rents currently due from tenants) and the recoverability of deferred taxes based on a specific review of the risk of loss on specific accounts or amounts. The receivable analysis places particular emphasis on past-due accounts and considers the nature and age of the receivables, the payment history and financial condition of the payee, the basis for any disputes or negotiations with the payee and other information which may impact collectibility. For straight-line rents, the analysis considers the probability of collection of the unbilled deferred rent receivable given our experience regarding such amounts. For deferred taxes, an assessment of the recoverability of the current tax asset considers the current expiration periods of the prior net operating loss carryforwards and the estimated future taxable income of our taxable REIT subsidiaries. The resulting estimates of any allowance or reserve related to the recovery of these items is subject to revision as these factors change and is sensitive to the effects of economic and market conditions on such payees and our taxable REIT subsidiaries. Capitalization of Development and Leasing Costs. We capitalize the costs of development and leasing activities of our properties. These costs are incurred both at the property location and at the regional and corporate office level. The amount of capitalization depends, in part, on the identification and justifiable allocation of certain activities to specific projects and leases. Differences in methodologies of cost identification and documentation, as well as differing assumptions as to the time incurred on projects, can yield significant differences in the amounts capitalized. ACQUISITIONS Acquisitions were as follows: <Table> <Caption> GROSS PURCHASE NEW OR ACQUISITION DATE PRICE ASSUMED DEBT(3) ---------------- --------- --------------- (IN MILLIONS) 2004 A 50% ownership interest in Burlington Town Center............................................ January 7 $ 10.25 -- Redlands Mall....................................... January 16 14.25 -- The remaining 50% ownership interest in Town East Mall.............................................. March 1 44.5 -- Four Seasons Town Centre............................ March 5 161.0 $ 134.4 A 33 1/3% ownership interest in GGP/Sambil Costa Rica.............................................. April 30 9.7(1) -- A 50% ownership interest in Riverchase Galleria..... May 11 166.0 100.0 Mall of Louisiana................................... May 12 265.0 185.0 The Grand Canal Shoppes............................. May 17 766.0 766.0 A 50% ownership interest in GGP/NIG Brazil.......... July 30 7.0(2) -- Stonestown Galleria................................. August 13 312.0 220.0 The Rouse Company................................... November 12 14,327.5 5,137.8 --------- -------- $16,083.2 $6,543.2 ========= ======== 2003 Peachtree Mall...................................... April 30 $ 87.6 $ 53.0 Saint Louis Galleria................................ June 11 235.0 176.0 Coronado Center..................................... June 11 175.0 131.0 The remaining 49% ownership interest in GGP Ivanhoe III............................................... July 1 459.0 268.0 Lynnhaven Mall...................................... August 27 256.5 180.0 Sikes Senter........................................ October 14 61.0 41.5 The Maine Mall...................................... October 29 270.0 202.5 Glenbrook Square.................................... October 31 219.0 164.3 </Table> 32 <Table> <Caption> GROSS PURCHASE NEW OR ACQUISITION DATE PRICE ASSUMED DEBT(3) ---------------- --------- --------------- (IN MILLIONS) Foothills Mall...................................... December 5 100.5 45.7 Chico Mall.......................................... December 23 62.4 30.6 Rogue Valley Mall................................... December 23 57.5 28.0 --------- -------- $ 1,983.5 $1,320.6 ========= ======== 2002 Victoria Ward, Limited.............................. May 28 $ 250.0 $ 50.0 JP Realty, Inc. .................................... July 10 1,100.0 460.0 Prince Kuhio........................................ August 5 39.0 24.0 GGP/Teachers........................................ August 26 477.0 412.0 Pecanland Mall...................................... September 13 72.0 50.0 Southland Mall...................................... December 4 89.0 65.0 --------- -------- $ 2,027.0 $1,061.0 ========= ======== </Table> - --------------- (1) Total commitment of $12.2 million (2) Total commitment of $32.0 million (3) Additional funding, including for those acquisitions for which a specific and separate loan was not obtained, was paid from cash on hand or proceeds from borrowings under our credit facilities. RESULTS OF OPERATIONS GENERAL Our revenues are primarily received from tenants in the form of fixed minimum rents, overage rents and recoveries of operating expenses. Our consolidated results of operations are also impacted by acquisitions. For additional information regarding our acquisitions, see the table above and Note 3. 33 Comparison of Year Ended December 31, 2004 to Year Ended December 31, 2003 Acquisitions were the main reason for the increases in the table below which compares major revenue and expense items for the years ended December 31, 2004 and 2003. <Table> <Caption> FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------- 2004 2003 $ CHANGE % CHANGE ---------- ---------- -------- -------- (DOLLARS IN THOUSANDS) Total revenues.......................... $1,802,845 $1,262,791 $540,054 42.8% Minimum rents......................... 1,060,963 775,320 285,643 36.8 Tenant recoveries..................... 473,428 332,137 141,291 42.5 Overage rents......................... 54,105 34,928 19,177 54.9 Land sales............................ 68,643 -- 68,643 100.0 Management and other fees............. 82,896 84,138 (1,242) (1.5) Total expenses.......................... 1,060,570 714,391 346,179 48.5 Real estate taxes..................... 128,320 88,276 40,044 45.4 Repairs and maintenance............... 123,984 81,433 42,551 52.3 Other property operating costs........ 207,655 153,370 54,285 35.4 Land sales operations................. 66,100 -- 66,100 100.0 Marketing............................. 48,220 35,797 12,423 34.7 Property management and other costs... 100,788 109,746 (8,958) (8.2) Depreciation and amortization......... 365,622 230,195 135,427 58.8 Interest expense........................ 472,185 278,543 193,642 69.5 Equity in income of unconsolidated affiliates............................ 88,191 94,480 (6,289) (6.7) </Table> Substantially all of the increase in total revenues was the result of acquisitions. Minimum rents and tenant recoveries increased primarily as a result of acquisitions. Minimum rents also include the effect of above and below-market lease rent accretion pursuant to SFAS 141 and 142 (Note 2) of $27.6 million in 2004 and $16.6 million in 2003. Overage rents increased $15.6 million as a result of acquisitions and $3.6 million as a result of higher tenant sales, especially at Ala Moana Center. The increase in land sales revenues and land sales operations expenses, both which are included in our Community Development segment, is the result of the TRC Merger. Management and other fees declined as a result of joint venture partnership interest acquisitions. We acquired the remaining 49% interest in GGP/Ivanhoe III from our joint venture partner in July 2003 and the remaining 50% interest in Town East in March 2004. As these joint ventures are now consolidated in our results of operations, GGMI no longer receives a management fee from these properties. These decreases were partially offset by increased development fees resulting from renovations at certain of our Unconsolidated Properties. Total expenses, including depreciation and amortization, increased primarily as a result of acquisitions. Real estate taxes increased $37.2 million as a result of acquisitions and $2.8 million as a result of increased property taxes at certain of our properties. Repairs and maintenance increased $39.5 million due to acquisitions and $3.1 million primarily due to miscellaneous increases across substantially all properties and to the opening of Jordan Creek Town Center in August 2004. Property operating costs increased $66.4 million as a result of acquisitions and decreased $12.1 million as a result of lower operating costs at substantially all properties. Real estate taxes, repairs and maintenance and other property operating expenses are generally recoverable from tenants and the increases in these expenses are generally consistent with the increase in tenant recovery revenues. Marketing expenses increased primarily due to acquisitions. Depreciation and amortization increased $107.2 million as a result of acquisitions and $28.2 million as a result of additional depreciation on completed developments and other capitalized building and equipment costs. 34 Property management and other costs decreased primarily as a result of lower costs in 2004 as the TSOs granted in 2002 vested in 2003 and there were no other previous groups of TSO grants that vested in 2004. Interest expense increased $173.8 million as a result of increased debt associated with acquisitions and $19.8 million as a result of higher debt levels primarily as a result of redevelopments and other working capital requirements. Interest expense also includes debt extinguishment costs of $15.9 million in 2004 and $2.5 million in 2003. This increase is primarily due to the write-off of unamortized deferred finance costs related to debt which was repaid in conjunction with the TRC Merger. Equity in income of unconsolidated affiliates decreased primarily due to acquisition of controlling interests in joint ventures. We acquired the remaining 49% interest in GGP/Ivanhoe III from our joint venture partner in July 2003 and the remaining 50% interest in Town East in March 2004. As a result, these joint ventures are now consolidated in our results of operations. These decreases were partially offset by increases resulting from the acquisition of interests in the Riverchase and GGP/NIG Brazil joint ventures in 2004. Comparison of Year Ended December 31, 2003 to Year Ended December 31, 2002 Acquisitions were the main reason for the increases in the table below which compares major revenue and expense items for the years ended December 31, 2003 and 2002. <Table> <Caption> FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------- 2003 2002 $ CHANGE % CHANGE ---------- -------- -------- -------- (DOLLARS IN THOUSANDS) Total revenues............................ $1,262,791 $973,440 $289,351 29.7% Minimum rents........................... 775,320 581,551 193,769 33.3 Tenant recoveries....................... 332,137 254,999 77,138 30.3 Overage rents........................... 34,928 28,044 6,884 24.5 Management and other fees............... 84,138 75,479 8,659 11.5 Total expenses............................ 714,391 545,842 168,549 30.9 Real estate taxes....................... 88,276 60,726 27,550 45.4 Repairs and maintenance................. 81,433 62,449 18,984 30.4 Other property operating costs.......... 153,370 107,726 45,644 42.4 Marketing............................... 35,797 28,681 7,116 24.8 Property management and other costs..... 109,746 94,676 15,070 15.9 Depreciation and amortization........... 230,195 179,036 51,159 28.6 Interest expense.......................... 278,543 219,029 59,514 27.2 Equity in income of unconsolidated affiliates.............................. 94,480 80,825 13,655 16.9 </Table> Acquisitions accounted for approximately $249.5 million of the $289.4 million increase in total revenues. Minimum rents increased $151.8 million as a result of acquisitions and $42.0 million due to additional rents from higher occupancies, higher base rents from lease renewals, as well as increased specialty leasing activities. Included in minimum rents is the effect of below-market lease rent accretion pursuant to SFAS 141 and 142 (Note 2) of $16.6 million in 2003 and $4.6 million in 2002. Tenant recoveries increased $70.5 million due to acquisitions and $6.6 million due to increased recoverable operating costs. Overage rents increased primarily as a result of acquisitions. The increase in management and other fees was primarily due to increases in acquisition, financing, leasing and development fees at GGMI, the components of which are discussed below. Acquisitions accounted for $117.9 million of the $168.5 million increase in total expenses, including depreciation and amortization. 35 Real estate taxes increased $21.6 million due to acquisitions and $6.0 million due to reassessments and increased real estate tax rates at the properties. The increase in repairs and maintenance was substantially due to acquisitions. Real estate taxes, repairs and maintenance and other property operating expenses are generally recoverable from tenants and the increases in these expenses are generally consistent with the increase in tenant recovery revenues. Other property operating costs increased $29.3 million as a result of acquisitions, $7.5 million due to increases in insurance costs and $5.5 million due to increases in net payroll costs including approximately $3.1 million in incremental compensation expenses recognized in 2003 over 2002 due to the vesting of certain of our TSOs as described in Note 10. The increase in management and other fees and property management and other costs was primarily due to increased fees and expenses related to late 2003 acquisition activity of the Unconsolidated Real Estate Affiliates. Third party management fees and expenses were generally comparable between the two years. Acquisitions accounted for $41.5 million of the $51.2 million increase in depreciation and amortization. The increase in interest expense, including amortization of deferred financing costs, due to the loans and financings related to acquisitions, was $48.6 million. Interest rates were generally stable during 2003 but certain reductions in interest expense were achieved through the refinancing of existing higher rate mortgage debt. The increase in equity in income of unconsolidated affiliates in 2003 was primarily due to an increase in our equity in the income of GGP/Teachers which resulted in an increase of approximately $14.2 million. This increase is due to a full year of operations being reflected in 2003 versus only four months in 2002 as GGP/ Teachers was formed in August 2002. In addition, our equity in the income of GGP/Homart II increased approximately $7.2 million, primarily as a result of the acquisition of Glendale Galleria and First Colony Mall during the fourth quarter of 2002. These increases were partially offset by the acquisition of the 49% ownership interest in GGP Ivanhoe III in July 2003 which caused the operations of GGP Ivanhoe III to be fully consolidated for the remaining six months of 2003. LIQUIDITY AND CAPITAL RESOURCES Our primary uses and sources of cash are as follows: <Table> <Caption> USES SOURCES ---- ------- Short-term liquidity and capital needs such as: - - Tenant construction allowances - Operating cash flow, including the - - Minor improvements made to individual distributions of our share of cash flow properties that are not recoverable through produced by our Unconsolidated Real Estate common area maintenance charges to tenants Affiliates - - Dividend payments - - Debt repayment requirements, including both principal and interest Longer-term liquidity needs such as: - - Acquisitions - Secured loans collateralized by individual - - New development properties - - Expansion - Unsecured loans at either a property or - - Major renovation programs at individual company level properties - Construction loans - - Debt repayment requirements, including both - Mini-permanent loans principal and interest - Long-term project financing - Joint venture financing with institutional partners - Equity securities - Asset sales, including land sales from the Community Development segment </Table> As of December 31, 2004, we had consolidated debt of approximately $20.3 billion, of which approximately $11.8 billion bears interest at fixed rates (after taking into effect certain interest rate swap agreements) and 36 approximately $8.5 billion bears interest at variable rates. In addition, our Unconsolidated Real Estate Affiliates have mortgage loans of which our allocable portion based on our respective ownership percentages is approximately $2.8 billion, including $2.1 billion which bears interest at fixed rates (after taking into effect certain interest rate swap agreements) and $0.7 billion which bears interest at variable rates. We intend to reduce the percentage of variable-rate debt to total debt throughout 2005 and 2006 until it returns to levels maintained before the TRC Merger. See also Item 7A of this Annual Report for additional information regarding the impact of interest rate fluctuations. Except in instances where certain Consolidated Properties are cross-collateralized with the Unconsolidated Properties or we have retained a portion of the debt of a property when it was contributed to an Unconsolidated Real Estate Affiliate, we have not otherwise guaranteed the debt of the Unconsolidated Real Estate Affiliates. Our net cash flows were as follows: <Table> <Caption> 2004 2003 2002 ----------- ----------- --------- (IN THOUSANDS) Net cash provided by operating activities...... $ 751,911 $ 578,487 $ 460,495 Net cash used in investing activities.......... (9,053,018) (1,745,455) (949,411) Net cash provided by financing activities...... 8,330,011 1,124,005 381,801 </Table> Substantially all of the changes were the result of acquisitions. TRC MERGER FINANCING Funding for the TRC Merger is summarized as follows: <Table> <Caption> (IN MILLIONS) SOURCES: 2004 Credit Facility........................................ $ 7,045.0 Warrants offering........................................... 512.7 Mortgage refinancings....................................... 2,040.1 --------- Total cash sources........................................ 9,597.8 Assumption of TRC debt...................................... 5,137.8 --------- Total sources............................................... $14,735.6 ========= USES: Purchase TRC common equity.................................. $ 6,763.0 Retire existing General Growth credit facilities............ 1,651.6 Retire existing TRC credit facilities....................... 687.8 Transaction and other costs................................. 495.4 --------- Total cash uses........................................... 9,597.8 Assumption of TRC debt...................................... 5,137.8 --------- Total uses.................................................. $14,735.6 ========= </Table> 37 2004 CREDIT FACILITY The significant terms of the notes comprising the 2004 Credit Facility are as follows: <Table> <Caption> INITIAL OUTSTANDING AT CAPACITY DECEMBER 31, 2004 -------- ----------------- (IN MILLIONS) Six-month bridge loan...................................... $1,145.0 $ 749.9 Three-year term loan....................................... 3,650.0 3,650.0 Four-year term loan........................................ 2,000.0 2,000.0 Revolving credit facility.................................. 500.0 150.0 -------- -------- $7,295.0 $6,549.9 ======== ======== </Table> We have the ability to extend the maturity of up to $600 million of the bridge loan for an additional six months. Principal repayment of the three-year $3.65 billion term loan begins in November 2005 with semi-annual payments in 2006, quarterly payments in 2007 and a final $1.775 billion payment in November 2007. Principal repayment of the four-year $2 billion term loan begins in March 2005 with quarterly payments through September 2008 and a final $1.925 billion payment in November 2008. The credit agreement bears interest at a weighted-average rate of LIBOR plus approximately 2.22 percent as of December 31, 2004. It is our current intention to repay the 2004 Credit Facility prior to maturity. Funds required for this repayment are expected to come from a variety of sources which may include any or all of the following: - - Increased cash flow from new and existing properties, including the Community Development segment - - Refinancing low loan-to-value mortgages on existing properties - - Placing mortgages on currently unencumbered properties, including the Community Development segment - - Selective asset sales of office properties - - Strategic joint ventures - - Equity issuances We are generally required to apply the net proceeds of future mortgage financings and refinancings, sales of equity, and asset dispositions (including by casualty or condemnation) toward prepayment of the credit agreement in accordance with various priorities set out in the credit agreement. Exceptions to this requirement include capital expenditures, $500 million annually per our written request to the lenders and other items. The credit agreement is secured by a pledge of the Operating Partnership's ownership interest in TRCLP and in GGPLP L.L.C and also by a pledge of the interest in an operating account in which we will deposit any distributions the Operating Partnership receives from our interests in the TRCLP companies. During the term of the facility, we are subject to customary affirmative and negative covenants including limitations on indebtedness, a fixed charge coverage ratio and debt to equity levels. We do not believe these covenants create material limitations on our liquidity or our ability to conduct our business. Upon the occurrence of an event of default contained in the credit agreement, the lenders under the facilities will have the option of declaring immediately due and payable all amounts outstanding under the agreement. The credit agreement contains events of default including failure to maintain our status as a REIT under the Internal Revenue Code, failure to remain listed on the New York Stock Exchange and such customary events as nonpayment of principal, interest, fees or other amounts, breach of representations and warranties, breach of covenant, cross-default to other indebtedness and certain bankruptcy events. WARRANT OFFERING On November 17, 2004, we sold 15.9 million shares of our common stock for $32.23 per share pursuant to a warrant offering. 38 CONTRACTUAL CASH OBLIGATIONS AND COMMITMENTS The following table aggregates our contractual cash obligations and commitments subsequent to December 31, 2004: <Table> <Caption> 2005 2006 2007 2008 2009 SUBSEQUENT TOTAL ---------- ---------- ---------- ---------- ---------- ---------- ----------- (IN THOUSANDS) Long-term debt-principal... $2,038,929 $2,084,985 $3,929,614 $4,521,833 $3,436,967 $4,157,050 $20,169,378(1) Retained debt-principal.... 132,942 61 15,734 -- -- -- 148,737 Ground lease payments...... 7,511 7,450 7,445 7,445 7,445 257,142 294,438(1) Committed real estate acquisition contracts.... -- 30,000 250,000 -- -- -- 280,000(2) Purchase obligations....... 38,004 -- -- -- -- -- 38,004(3) Other long-term liabilities.............. -- -- -- -- -- -- --(4) ---------- ---------- ---------- ---------- ---------- ---------- ----------- Total...................... $2,217,386 $2,122,496 $4,202,793 $4,529,278 $3,444,412 $4,414,192 $20,930,557 ========== ========== ========== ========== ========== ========== =========== </Table> - --------------- (1) Excludes non-cash purchase accounting adjustments. (2) Reflects $250 million related to the Palazzo (Note 3) and $30 million related to a commitment to purchase Whaler's Village, a shopping center on the island of Maui, Hawaii. We have also committed to invest $17.7 million in joint ventures in Costa Rica and Brazil. (3) Reflects accrued and incurred construction costs payable. Routine trade payables have been excluded. Other construction costs related to current redevelopment and development projects are currently expected to be approximately $774.6 million for consolidated properties and $297.4 for unconsolidated properties. (4) Other long-term liabilities related to interest expense on long-term debt or ongoing real estate taxes have not been included in the table as such amounts depend upon future amounts outstanding and future applicable real estate tax and interest rates. Interest expense was $472.2 million in 2004, $278.5 million in 2003 and $219.0 million in 2002. Real estate tax expense was $128.3 million in 2004, $88.3 million in 2003 and $60.7 million in 2002. We anticipate that all of our debt will be repaid or refinanced on or prior to maturity. Other than as described above or in conjunction with possible future new developments or acquisitions, there are no current plans to incur additional debt, increase the amounts available under our credit facilities or raise equity capital. We have established certain special purpose entities, primarily to facilitate financing arrangements. Such special purpose entities are either fully consolidated in the accompanying consolidated financial statements or are not owned or consolidated and we have no fixed or contingent obligations with respect to such unconsolidated entities. If additional capital is required for any of the above listed obligations or for other purposes, we believe that we can increase the amounts drawn or available under our credit facilities, 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 we can obtain such financing on satisfactory terms. We will continue to monitor our capital structure, investigate potential investments or joint venture partnership arrangements and purchase additional properties if they can be acquired and financed on terms that we reasonably believe will enhance long-term stockholder value. In addition, we anticipate that we will continue our current practice of initially financing acquisitions with variable-rate debt. When the acquired property operating cash flow has been increased, we anticipate refinancing portions of such variable-rate acquisition debt with pooled or property-specific, non-recourse fixed-rate mortgage financing. Such replacement financing, if based on increased property cash flow, should yield increased refinancing proceeds or other more favorable financing terms. TRC acquired Summerlin, a master-planned community in suburban Las Vegas, Nevada, in the acquisition of The Hughes Corporation ("Hughes") in 1996. In connection with the acquisition of Hughes, TRC entered 39 into a Contingent Stock Agreement ("CSA") for the benefit of the former Hughes owners or their successors ("beneficiaries"). Under terms of the CSA, shares of common stock are issuable to the beneficiaries based on the appraised values of defined asset groups, including Summerlin, at specified termination dates to 2009 and/or cash flows from the development and/or sale of those assets prior to the termination dates. Subsequent to the TRC Merger, shares of our common stock will be used to satisfy distribution requirements. We account for the beneficiaries' share of earnings from the assets as an operating expense. We account for any distributions to the beneficiaries as of the termination dates related to assets we own as of the termination date as additional investments in the related assets (that is, contingent consideration). We have filed a shelf registration statement and reserved 4 million shares of our common stock for issuance under the CSA. A total of 519,135 shares were issued in February 2005 pursuant to the CSA. REIT REQUIREMENTS In order to remain qualified as a real estate investment trust for federal income tax purposes, we must distribute or pay tax on 100% of our capital gains and at least 90% of our ordinary taxable income to stockholders. The following factors, among others, will affect operating cash flow and, accordingly, influence the decisions of the Board of Directors regarding distributions: - - Scheduled increases in base rents of existing leases - - Changes in minimum base rents and/or overage rents attributable to replacement of existing leases with new or renewal leases - - Changes in occupancy rates at existing properties and procurement of leases for newly developed properties - - Necessary capital improvement expenditures or debt repayments at existing properties - - Our share of distributions of operating cash flow generated by the Unconsolidated Real Estate Affiliates, less management costs and debt service on additional loans that have been or will be incurred. - - Anticipated proceeds from sales in our Community Development segment. We anticipate that our operating cash flow, and potential new debt or equity from future offerings, new financings or refinancings will provide adequate liquidity to conduct our operations, fund general and administrative expenses, fund operating costs and interest payments and allow distributions to our preferred and common stockholders in accordance with the requirements of the Code. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS As described in Note 14, new accounting pronouncements have been issued which are effective for the current or subsequent year. We do not expect a significant impact on our financial statements due to the application of these new statements. ECONOMIC CONDITIONS Inflation has been relatively low in recent years and has not had a significant detrimental impact on us. Should inflation rates increase in the future, substantially all of our tenant leases contain provisions designed to partially mitigate the negative impact of inflation. Such provisions include clauses enabling us to receive 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 us 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 amounts related to all or substantially all of their share of certain operating expenses, including common area maintenance, real estate taxes and insurance, thereby partially reducing our exposure to increases in costs and operating expenses resulting from inflation. Inflation also poses a risk to us due to the probability of future increases in interest rates. Such increases would adversely impact us due to our outstanding variable-rate debt which has increased substantially as a result of 40 the TRC Merger. We have limited our exposure to interest rate fluctuations related to a portion of our variable-rate debt by the use of interest rate cap and swap agreements. Finally, subject to current market conditions, we have a policy of replacing variable-rate debt with fixed-rate debt. However, in an increasing interest rate environment (which generally follows improved market conditions), the fixed rates we can obtain with such replacement fixed-rate debt will also continue to increase. According to the National Retail Federation, 2004 was the strongest holiday season since 1999. Despite these favorable trends, some economists remain cautious about prospects for continued improvements in retail markets and about future increases in interest rates. Growth in retail markets would lead to stronger demand for leaseable space, ability to increase rents to tenants with stronger sales performance and increased rents computed as a percentage of tenant sales. As of December 31, 2004 we had ownership interests in 179 regional malls primarily in the United States. Our properties are diversified both geographically and by property type (both major and middle market properties) and this may mitigate the impact of any economic decline at a particular property or in a particular region of the country. In addition, the diverse combination of our tenants is important because no single tenant (by trade name) comprises more than 2.79% of our annualized total rents. FORWARD-LOOKING INFORMATION We may make forward-looking statements in this Annual Report and in other reports and proxy statements which we file with the SEC. In addition, our senior management might make forward-looking statements orally to analysts, investors, the media and others. Forward-looking statements include: - - Projections of our revenues, income, earnings per share, Funds From Operations, capital expenditures, dividends, capital structure or other financial items; - - Descriptions of plans or objectives of our management for future operations, including pending acquisitions; - - Forecasts of our future economic performance; and - - Descriptions of assumptions underlying or relating to any of the foregoing. In this Annual Report, for example, we make forward-looking statements discussing our expectations about: - - Future repayment of debt, including the ratio of variable to fixed-rate debt in our portfolio - - Future interest rates - - Benefits of the TRC Merger Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements often include words such as "anticipate", "believe," "estimate," "expect," "intend," "plan," "project," "target," "can," "could," "may," "should," "will," "would" or similar expressions. Forward-looking statements should not be unduly relied upon. They give our expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made and we might not update them to reflect changes that occur after the date they are made. There are several factors, many beyond our control, which could cause results to differ significantly from our expectations. Some of these factors are described below. Other factors, such as credit, market, operational, liquidity, interest rate and other risks, are described elsewhere in this Annual Report. Any factor described in this Annual Report could by itself, or together with one or more other factors, adversely affect our business, results of operations or financial condition. There are also other factors that we have not described in this Annual Report that could cause results to differ from our expectations. 41 RISK FACTORS RISKS RELATED TO REAL ESTATE INVESTMENTS We invest primarily in regional mall shopping centers and other retail properties, which are subject to a number of significant risks which are beyond our control Real property investments are subject to varying degrees of risk that may affect the ability of our retail properties to generate sufficient revenues to meet operating and other expenses, including debt service, lease payments, capital expenditures and tenant improvements, and to make distributions to us and our stockholders. A number of factors may decrease the income generated by a retail property, including: - - the regional and local economy, which may be negatively impacted by plant closings, industry slowdowns, adverse weather conditions, natural disasters and other factors; - - local real estate conditions, such as an oversupply of, or a reduction in demand for, retail space or retail goods, and the availability and creditworthiness of current and prospective tenants; - - perceptions by retailers or shoppers of the safety, convenience and attractiveness of the retail property; and - - the convenience and quality of competing retail properties and other retailing options such as the Internet. Income from retail properties and retail property values are also affected by applicable laws and regulations, including tax and zoning laws, and by interest rate levels and the availability and cost of financing. We depend on leasing space to tenants on economically favorable terms and collecting rent from these tenants, who may not be able to pay Our results of operations will depend on our ability to continue to lease space in our properties on economically favorable terms. If the sales of stores operating in our centers decline sufficiently, tenants might be unable to pay their existing minimum rents or expense recovery charges, since these rents and charges would represent a higher percentage of their sales. If our tenants' sales decline, new tenants would be less likely to be willing to pay minimum rents as high as they would otherwise pay. In addition, as substantially all of our income is derived from rentals of real property, our income and cash available for distribution to our stockholders would be adversely affected if a significant number of lessees were unable to meet their obligations to us. During times of economic recession, these risks will increase. Bankruptcy or store closures of tenants may decrease our revenues and available cash A number of companies in the retail industry, including some of our tenants, have declared bankruptcy or voluntarily closed certain of their stores in recent years. The bankruptcy or closure of a major tenant, particularly an Anchor tenant, may have a material adverse effect on the retail properties affected and the income produced by these properties and may make it substantially more difficult to lease the remainder of the affected retail properties. Our leases generally do not contain provisions designed to ensure the creditworthiness of the tenant. As a result, the bankruptcy or closure of a major tenant could result in a lower level of cash available for distribution to our stockholders. We may be negatively impacted by department store consolidations Department store consolidations, such as K-Mart's pending acquisition of Sears and Federated's pending acquisition of May Department Stores, may result in the closure of existing department stores. With respect to existing department stores, we may be unable to re-lease this area or to re-lease it on comparable or more favorable terms. Additionally, department store closures could result in decreased customer traffic which could lead to decreased sales at other stores. Rents obtained from other tenants may also be adversely impacted. Consolidations may also negatively affect current and future development and redevelopment projects. 42 It may be difficult to buy and sell real estate quickly, and transfer restrictions apply to some of our mortgaged properties Equity real estate investments are relatively illiquid, and this characteristic tends to limit our ability to vary our portfolio promptly in response to changes in economic or other conditions. In addition, significant expenditures associated with each equity investment, such as mortgage payments, real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investment. If income from a property declines while the related expenses do not decline, our income and cash available for distribution to our stockholders would be adversely affected. A significant portion of our properties are mortgaged to secure payment of indebtedness, and if we were unable to meet our mortgage payments, we could lose money as a result of foreclosure on the properties by the various mortgagees. In addition, if it becomes necessary or desirable for us to dispose of one or more of the mortgaged properties, we might not be able to obtain a release of the lien on the mortgaged property without payment of the associated debt. The foreclosure of a mortgage on a property or inability to sell a property could adversely affect the level of cash available for distribution to our stockholders. If persons selling properties to us wish to defer the payment of taxes on the sales proceeds, we are likely to pay them in units of limited partnership interest in the Operating Partnership. In transactions of this kind, we may also agree, subject to certain exceptions, not to sell the acquired properties for significant periods of time. RISKS RELATED TO OUR BUSINESS We may acquire or develop new properties, and this activity is subject to various risks We intend to continue to pursue development and expansion activities as opportunities arise. In connection with any development or expansion, we will be subject to various risks, including the following: - - we may abandon development or expansion activities; - - construction costs of a project may exceed original estimates or available financing, possibly making the project unfeasible or unprofitable; - - we may not be able to obtain financing or to refinance construction loans, which generally have full recourse to us; - - we may not be able to obtain zoning, occupancy or other required governmental permits and authorizations; - - occupancy rates and rents at a completed project may not meet projections and, therefore, the project may not be profitable; and - - we may need Anchor, mortgage lender and property partner approvals, if applicable, for expansion activities. If a development project is unsuccessful, our loss could exceed our investment in the project. If we are unable to manage our growth effectively, our financial condition and results of operations may be adversely affected We have experienced rapid growth in recent years, increasing our total consolidated assets from approximately $1.8 billion at December 31, 1996 to approximately $25.7 billion at December 31, 2004. We may continue this rapid growth for the foreseeable future by acquiring or developing properties when we believe that market circumstances and investment opportunities are attractive. We may not, however, be able to manage our growth effectively or to maintain a similar rate of growth in the future, and the failure to do so may have a material adverse effect on our financial condition and results of operations. We may incur costs to comply with environmental laws Under various federal, state or local laws, ordinances and regulations, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property, and may be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred by the parties in connection with the contamination. These laws 43 often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of the hazardous or toxic substances. The presence of contamination or the failure to remediate contamination may adversely affect the owner's ability to sell or lease real estate or to borrow using the real estate as collateral. Other federal, state and local laws, ordinances and regulations require abatement or removal of asbestos-containing materials in the event of demolition or some renovations or remodeling and also govern emissions of and exposure to asbestos fibers in the air. Federal and state laws also regulate the operation and removal of underground storage tanks. In connection with the ownership, operation and management of our properties, we could be held liable for the costs of remedial action with respect to these regulated substances or tanks or related claims. Each of our properties has been subjected to varying degrees of environmental assessment at various times. However, the identification of new areas of contamination, a change in the extent or known scope of contamination or changes in cleanup requirements could result in significant costs to us. We are in a competitive business There are numerous shopping facilities that compete with our properties in attracting retailers to lease space. In addition, retailers at our properties face continued competition from discount shopping centers, lifestyle centers, outlet malls, wholesale and discount shopping clubs, direct mail, telemarketing, television shopping networks and shopping via the Internet. Competition of this type could adversely affect our revenues and cash available for distribution to stockholders. We compete with other major real estate investors with significant capital for attractive investment opportunities. These competitors include other REITs, investment banking firms and private institutional investors. This competition has increased prices for commercial properties and may impair our ability to make suitable property acquisitions on favorable terms in the future. We may not be able to obtain capital to make investments We depend primarily on external financing to fund the growth of our business. This is because one of the requirements of the Internal Revenue Code of 1986, as amended, which we refer to as the "Code," for a REIT generally is that it distributes 90% of its net taxable income, excluding net capital gains, to its stockholders. Our access to debt or equity financing depends on banks' willingness to lend to us and on conditions in the capital markets in general. We and other companies in the real estate industry have experienced less favorable terms for bank loans and capital markets financing from time to time. Although we believe, based on current market conditions, that we will be able to finance investments we wish to make in the foreseeable future, financing might not be available on acceptable terms or may be affected by the amount of debt we have outstanding as a result of the TRC Merger. Some of our potential losses may not be covered by insurance We carry comprehensive liability, fire, flood, earthquake, terrorism, extended coverage and rental loss insurance on all of our properties. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, some types of losses, including lease and other contract claims, that generally are not insured. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. If this happens, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. If the Terrorism Risk Insurance Act is not extended beyond 2005, we may incur higher insurance costs and greater difficulty in obtaining insurance which covers terrorist-related damages. Our tenants may also experience similar difficulties. 44 We are subject to risks that affect the general retail environment Our concentration in the regional mall market means that we are subject to factors that affect the retail environment generally, including the level of consumer spending, the willingness of retailers to lease space in our shopping centers and tenant bankruptcies. In addition, we are exposed to the risk that terrorist activities, or the threat of such activities, may discourage consumers from visiting our malls and impact consumer confidence. Inflation may adversely affect our financial condition and results of operations Should inflation rates increase in the future, we may experience any or all of the following: - - Tenant sales may decrease as a result of decreased consumer spending which could result in lower percentage rents - - We may be unable to replace or renew expiring leases with new leases at higher base and/or percentage rents - - We may be unable to receive reimbursement from our tenants for their share of certain operating expenses, including common area maintenance, real estate taxes and insurance. Inflation also poses a potential threat to us due to the probability of future increases in interest rates. Such increases would adversely impact us due to our outstanding variable-rate debt as well as result in higher interest rates on new fixed-rate debt. RISKS RELATING TO THE TRC MERGER We may be unable to integrate the operations of TRCLP successfully and may not realize the full anticipated benefits of the TRC Merger Achieving the anticipated benefits of the TRC Merger will depend in part upon our ability to integrate the two companies' businesses in an efficient and effective manner. Our attempt to integrate two companies that have previously operated independently may result in significant challenges, and we may be unable to accomplish the integration smoothly or successfully. In particular, the necessity of coordinating geographically dispersed organizations and addressing possible differences in corporate cultures and management philosophies may increase the difficulties of integration. The integration will continue to require the dedication of significant management resources, which may temporarily distract management's attention from the day-to-day operations of the businesses of the combined company. The process of integrating operations may cause further interruption of, or loss of momentum in, the activities of one or more of the combined company's businesses and the further loss of key personnel. Employee uncertainty and lack of focus during the integration process may also further disrupt the businesses of the combined company. In addition, we may face difficulties integrating aspects of the combined company's business that we have not historically focused on, such as the community development business. Any inability of management to integrate the operations of TRCLP successfully could have a material adverse effect on our business and financial condition. Limitations on the sale of the TRCLP assets may affect our cash flow We may be restricted in our ability to dispose of certain TRCLP assets until the ten-year period after TRC's election of REIT status expires in 2008 due to the potential incurrence of substantial tax liabilities on such dispositions due to applicable REIT regulations. Representatives of the holders of interests of a contingent stock agreement have asserted that the TRC merger is a prohibited transaction. In connection with the acquisition of The Hughes Corporation in 1996, TRC entered into a Contingent Stock Agreement ("CSA") under which TRC agreed to issue a formula-based number of additional shares of TRC common stock to holders of interests under the CSA for a period running through December 31, 2009. Under the CSA, TRC cannot enter into a "prohibited transaction" without consent of a majority of the interests 45 under the CSA. A "prohibited transaction" includes a merger that (1) would render TRC or a successor incapable of, or restricted from, delivering (on a timely basis) freely tradable and readily marketable securities comparable to TRC common stock or (2) could reasonably be expected to have a prejudicial effect on the holders of interests under the CSA with respect to their non-taxable receipt of securities pursuant to the CSA. On October 15, 2004, the representatives of the holders of interests under the CSA advised us that they believed that the merger constitutes a "prohibited transaction" because, among other reasons, it could reasonably be expected to have a prejudicial effect on the holders with respect to their non-taxable receipt of securities pursuant to the CSA. On October 19, 2004, we delivered to the representatives an executed assumption agreement whereby we agreed, for the benefit of the holders of interests under the CSA and the representatives, to perform the CSA as successor to TRC, in the same manner and to the same extent that TRC would be required to perform the CSA if no succession had taken place. Under the assumption agreement, we assumed TRC's obligation under the CSA to issue shares of common stock twice a year to holders of interests under the CSA and the representatives. The amount of shares is based upon a formula set forth under the CSA and upon our stock price. Such issuances could be dilutive to our existing stockholders. In addition, under the assumption agreement, we agreed that following the effective time of the TRC Merger there will not be a prejudicial effect on the holders of interests under the CSA and the representatives with respect to their non-taxable receipt of securities pursuant to the CSA as a result of the TRC Merger and that securities delivered pursuant to the CSA will be freely tradable and readily marketable. We further agreed to indemnify and hold harmless the holders against losses arising out of any breach by us of the foregoing covenants. We believe that all applicable requirements of the CSA have been satisfied in connection with the TRC Merger and that the TRC Merger does not constitute a "prohibited transaction". In order to minimize any uncertainty and any risk of delay in consummation of the merger, on October 19, 2004, we filed an action in Delaware Chancery Court against the representatives and the class of all holders of interests under the CSA seeking a declaratory judgment that the merger is not a "prohibited transaction". RISKS RELATED TO OUR ORGANIZATIONAL AND FINANCIAL STRUCTURE THAT GIVE RISE TO OPERATIONAL AND FINANCIAL RISKS, INCLUDING THOSE DESCRIBED BELOW We share control of some of our properties with other investors and may have conflicts of interest with those investors As of December 31, 2004, we owned partial interests in various retail and commercial properties (referred to in our Annual Report as the Unconsolidated Properties). We generally make all operating decisions for these properties, but we are required to make other decisions with the other investors who have interests in the relevant property or properties. For example, the consent of certain of the other relevant investors is required with respect to approving operating budgets, refinancing, encumbering, expanding or selling any of these properties. We might not have the same interests as the other investors in relation to these transactions. Accordingly, we might not be able to favorably resolve any of these issues, or we might have to provide financial or other inducement to the other investors to obtain a favorable resolution. In addition, various restrictive provisions and rights apply to sales or transfers of interests in our jointly owned properties. These may work to our disadvantage because, among other things, we might be required to make decisions about buying or selling interests in a property or properties at a time that is disadvantageous to us or we might be required to purchase the interests of our partners in our jointly owned properties. Bankruptcy of joint venture partners could impose delays and costs on us with respect to the jointly owned retail properties The bankruptcy of one of the other investors in any of our jointly owned shopping centers could materially and adversely affect the relevant property or properties. Under the bankruptcy laws, we would be precluded by the automatic stay from taking some actions affecting the estate of the other investor without prior approval of the bankruptcy court, which would, in most cases, entail prior notice to other parties and a hearing in the 46 bankruptcy court. At a minimum, the requirement to obtain court approval may delay the actions we would or might want to take. If the relevant joint venture through which we have invested in a property has incurred recourse obligations, the discharge in bankruptcy of one of the other investors might result in our ultimate liability for a greater portion of those obligations than we would otherwise bear. Payments by our direct and indirect subsidiaries of dividends and distributions to us may be adversely affected by prior payments to these subsidiaries' creditors and preferred security holders Substantially all of our assets are owned through our general partnership interest in the Operating Partnership, including TRCLP. The Operating Partnership holds substantially all of its properties and assets through subsidiaries, including subsidiary partnerships, limited liability companies and corporations that have elected to be taxed as REITs. The Operating Partnership therefore derives substantially all of its cash flow from cash distributions to it by its subsidiaries, and we, in turn, derive substantially all of our cash flow from cash distributions to us by the Operating Partnership. The creditors and preferred security holders, if any, of each of our direct and indirect subsidiaries are entitled to payment of that subsidiary's obligations to them, when due and payable, before that subsidiary may make distributions to us. Thus, the Operating Partnership's ability to make distributions to its partners, including us, depends on its subsidiaries' ability first to satisfy their obligations to their creditors and preferred security holders, if any, and then to make distributions to the Operating Partnership. Similarly, our ability to pay dividends to holders of our common stock depends on the Operating Partnership's ability first to satisfy its obligations to its creditors and preferred security holders, if any, and then to make distributions to us. In addition, we will have the right to participate in any distribution of the assets of any of our direct or indirect subsidiaries upon the liquidation, reorganization or insolvency of the subsidiary only after the claims of the creditors, including trade creditors, and preferred security holders, if any, of the subsidiary are satisfied. Our common stockholders, in turn, will have the right to participate in any distribution of our assets upon the liquidation, reorganization or insolvency of us only after the claims of our creditors, including trade creditors, and preferred security holders are satisfied. Our substantial indebtedness could adversely affect our financial health and operating flexibility We have a substantial amount of indebtedness. As of December 31, 2004, we had an aggregate consolidated indebtedness outstanding of approximately $11.9 billion, approximately $12.1 billion of which was secured by our properties. A majority of the secured indebtedness was non-recourse to us, while approximately $8.4 billion of our aggregate indebtedness was unsecured, recourse indebtedness of the Operating Partnership and consolidated subsidiaries. This indebtedness does not include our proportionate share of indebtedness incurred by our joint ventures. As a result of this substantial indebtedness, we are required to use a portion of our cash flow to service principal and interest on our debt, which will limit the free cash flow available for other desirable business opportunities. Our substantial indebtedness could have important consequences to us and the value of our common stock including: - - limiting our ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of our growth strategy or other purposes; - - limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service the debt; - - increasing our vulnerability to general adverse economic and industry conditions; - - limiting our ability to capitalize on business opportunities, including the acquisition of additional properties, and to react to competitive pressures and adverse changes in government regulation; - - placing us at a competitive disadvantage as compared to our competitors that have less leverage; - - limiting our ability or increasing the costs to refinance indebtedness; and 47 - - limiting our ability to enter into marketing and hedging transactions by reducing the number of counterparties with whom we can enter into such transactions as well as the volume of those transactions The terms of the 2004 credit facility obtained in conjunction with the trc merger contain covenants and events of default that may limit our flexibility and prevent us from taking certain actions or result in the acceleration of our obligations under the facility The terms of the 2004 Credit Facility require us to satisfy certain customary affirmative and negative covenants and to meet financial ratios and tests including ratios and tests based on leverage, interest coverage and net worth. The covenants under our 2004 Credit Facility affect, among other things, our ability to: - - incur indebtedness; - - create liens on assets; - - sell assets; and - - engage in mergers and acquisitions Given the restrictions in our debt covenants on such activities as making capital expenditures, incurring additional indebtedness and selling or disposing of assets, we may be restricted in our ability to pursue other acquisitions, may be significantly limited in our operating and financial flexibility and may be limited in our ability to respond to changes in our business or competitive activities. A failure to comply with these covenants, including a failure to meet the financial tests or ratios, would likely result in an event of default under the 2004 Credit Facility and would allow the lenders to accelerate our debt under the facility. If our debt is accelerated, our assets may not be sufficient to repay such debt in full. We might fail to qualify or remain qualified as a REIT Although we believe that we will remain structured and will continue to operate so as to qualify as a REIT for federal income tax purposes, we might not continue to be so qualified. Qualification as a REIT for federal income tax purposes involves the application of highly technical and complex provisions of the Code for which there are only limited judicial or administrative interpretations. Therefore, the determination of various factual matters and circumstances not entirely within our control may impact our ability to qualify as a REIT. In addition, legislation, new regulations, administrative interpretations or court decisions might significantly change the tax laws with respect to the requirements for qualification as a REIT or the federal income tax consequences of qualification as a REIT. If, with respect to any taxable year, we fail to maintain our qualification as a REIT, we would not be allowed to deduct distributions to stockholders in computing our taxable income and federal income tax. The corporate level income tax, including any applicable alternative minimum tax, would apply to our taxable income at regular corporate rates. As a result, the amount available for distribution to stockholders would be reduced for the year or years involved, and we would no longer be required to make distributions. In addition, unless we were entitled to relief under the relevant statutory provisions, we would be disqualified from treatment as a REIT for the taxable years following the year during which qualification was lost. Notwithstanding that we currently intend to operate in a manner designed to allow us to qualify as a REIT, future economic, market, legal, tax or other considerations may cause us to determine that it is in our best interest and the best interest of our stockholders to revoke the REIT election. An ownership limit and certain anti-takeover defenses and applicable law may hinder any attempt to acquire us The Ownership Limit. Generally, for us to maintain our qualification as a REIT under the Code, not more than 50% in value of the outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of our taxable year. The Code defines "individuals" for purposes of the requirement described in the preceding sentence to include some types of entities. Under our Second Amended and Restated Certificate of Incorporation, as amended, no person other than Martin 48 Bucksbaum (deceased), Matthew Bucksbaum (the Chairman of our Board of Directors), their families and related trusts and entities, including M.B. Capital Partners III, may own more than 7.5% of the value of our outstanding capital stock. These restrictions on transferability and ownership may delay, deter or prevent a change in control of our company or other transaction that might involve a premium price or otherwise be in the best interest of our stockholders. Selected Provisions of Our Charter Documents. Our board of directors is divided into three classes of directors. Directors of each class are chosen for three-year staggered terms. Staggered terms of directors may reduce the possibility of a tender offer or an attempt to change control of our company, even though a tender offer or change in control might be in the best interest of our stockholders. Our charter authorizes the board of directors: - - to cause us to issue additional authorized but unissued shares of common stock or preferred stock; - - to classify or reclassify, in one or more series, any unissued preferred stock; and - - to set the preferences, rights and other terms of any classified or reclassified stock that we issue. The board of directors could establish a series of preferred stock whose terms could delay, deter or prevent a change in control of us or other transaction that might involve a premium price or otherwise be in the best interest of our stockholders. Stockholder Rights Plan. We have a stockholder rights plan, which may delay, deter or prevent a change in control unless the acquirer negotiates with our board of directors and the board of directors approves the transaction. Our charter and bylaws contain other provisions that may delay, deter or prevent a change in control or other transaction that might involve a premium price or otherwise be in the best interest of our stockholders. Selected Provisions of Delaware Law. We are a Delaware corporation, and Section 203 of the Delaware General Corporation Law applies to us. In general, Section 203 prevents an "interested stockholder," as defined in the next sentence, from engaging in a "business combination," as defined in the statute, with us for three years following the date that person becomes an interested stockholder unless: - - before that person became an interested stockholder, our board of directors approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination; - - upon completion of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) stock held by directors who are also officers of the company and by employee stock plans that do not provide employees with the right to determine confidentially whether shares held under the plan will be tendered in a tender or exchange offer; or - - following the transaction in which that person became an interested stockholder, the business combination is approved by our board of directors and authorized at a meeting of stockholders by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock not owned by the interested stockholder. The statute defines "interested stockholder" to mean generally any person that is the owner of 15% or more of our outstanding voting stock or is an affiliate or associate of us and was the owner of 15% or more of our outstanding voting stock at any time within the three-year period immediately before the date of determination. The provisions of this statute may delay, deter or prevent a change in control of us or other transaction that might involve a premium price or otherwise be in the best interest of our stockholders. We have partners who have tax protection arrangements and other tax-related obligations to certain partners We own properties through partnerships which have arrangements in place that protect the deferred tax situation of our existing third party limited partners. Violation of these arrangements could impose costs on us. 49 As a result, we may be restricted with respect to decisions such as financing, encumbering, expanding or selling these properties. Several of our joint venture partners are tax-exempt. As such, they are taxable to the extent of their share of unrelated business taxable income generated from these properties. As the managing partner in these joint ventures, we have obligations to avoid the creation of unrelated business taxable income at these properties. Breach of these obligations could impose costs on us. As a result, we may be restricted with respect to decisions such as financing and revenue generation with respect to these properties. RISKS RELATING TO OUR COMMON STOCK Our common stock price may be volatile, and consequently investors may not be able to resell their common stock at or above their purchase price The price at which our common stock will trade may be volatile and may fluctuate due to factors such as: - - our historical and anticipated quarterly and annual operating results; - - variations between our actual results and analyst and investor expectations or changes in financial estimates and recommendations by securities analysts; - - the performance and prospects of our industry; - - the depth and liquidity of the market for our common stock; - - investor perception of us and the industry in which we operate; - - domestic and international economic conditions; - - the extent of institutional investor interest in us; - - the reputation of REITs generally and the attractiveness of their equity securities in comparison to other equity securities, including securities issued by other real estate companies, and fixed income securities; - - our financial condition and performance; and - - conditions and trends in general market conditions. Fluctuations may be unrelated to or disproportionate to our financial performance. These fluctuations may result in a material decline in the trading price of our common stock. Future sales of our common stock may depress our stock price No prediction can be made as to the effect, if any, that future sales of our common stock, or the availability of common stock for future sales, will have on the market price of the stock. Sales in the public market of substantial amounts of our common stock, or the perception that such sales could occur, could adversely affect prevailing market prices for our common stock. As of December 31, 2004, approximately 62.8 million shares of common stock were reserved for issuance upon exercise of conversion and/or redemption rights as to units of limited partnership interest in the operating partnership. Under our shelf registration statement, we may offer from time to time up to $2 billion worth of common stock, preferred stock, depositary shares, debt securities, warrants, stock purchase contracts and/or purchase units. Approximately $.5 billion was drawn against this shelf in connection with our November 2004 warrants offering. As a result of the CSA for issuance assumed with the TRC Merger, an additional 4 million shares of our common stock have been reserved. In addition, we have reserved a number of shares of common stock for issuance under our employee benefit plans and in connection with certain other obligations, and these shares will be available for sale from time to time. We have granted options to purchase additional common stock to some of our directors, executive officers and employees. We cannot predict the effect that future sales of common stock, or the perception that sales of common stock could occur, will have on the market prices of our equity securities. 50 Increases in market interest rates may hurt the market price of our common stock We believe that investors consider the distribution rate on REIT stocks, expressed as a percentage of the price of the stocks, relative to market interest rates as an important factor in deciding whether to buy or sell the stocks. If market interest rates go up, prospective purchasers of REIT stocks may expect a higher distribution rate. Higher interest rates would not, however, result in more funds being available for us to distribute and, in fact, would likely increase our borrowing costs and might decrease our funds available for distribution. Thus, higher market interest rates could cause the market price of our common stock to decline. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We have not entered into any transactions using derivative commodity instruments. We are subject to market risk associated with changes in interest rates both in terms of variable-rate debt and the price of new fixed-rate debt upon maturity of existing debt and for acquisitions. As of December 31, 2004, we had consolidated debt of $20.3 billion, including $9.2 billion of variable-rate debt of which approximately $740.4 million is subject to interest rate swap agreements, which fix the interest rate we are required to pay on such debt at approximately 3.9% per annum. Although the majority of the remaining variable-rate debt is subject to interest rate cap agreements pursuant to the loan agreements and financing terms, such interest rate caps generally limit our interest rate exposure only if LIBOR exceeds a rate per annum significantly higher (generally above 8% per annum) than current LIBOR rates (2.4% at December 31, 2004). A 25 basis point movement in the interest rate on the $8.5 billion of variable-rate debt which is not subject to interest rate swap agreements would result in an approximately $21 million annualized increase or decrease in consolidated interest expense and operating cash flows. In addition, we are subject to interest rate exposure as a result of variable-rate debt collateralized by the Unconsolidated Properties for which similar interest rate swap agreements have not been obtained. Our share (based on our respective equity ownership interests in the Unconsolidated Real Estate Affiliates) of such remaining variable-rate debt was approximately $722.9 million at December 31, 2004. 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 approximately $2 million annualized increase or decrease in our equity in the income and operating cash flows from Unconsolidated Real Estate Affiliates. We are further subject to interest rate risk with respect to our fixed-rate financing in that changes in interest rates will impact the fair value of our fixed-rate financing. To determine fair market value, the fixed-rate debt is discounted at a rate based on an estimate of current lending rates, assuming the debt is outstanding through maturity and considering the collateral. At December 31, 2004, the fair value of our debt is estimated to be approximately $235 million higher than the carrying value of $20.3 billion. If LIBOR were to increase by 25 basis points, the fair value of our debt would be approximately $147 million higher than the carrying value and the fair value of our swap agreements would increase by approximately $2 million. For additional information concerning our debt, reference is made to Item 7, Liquidity and Capital Resources and Note 6. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Reference is made to the Index to Consolidated Financial Statements and Consolidated Financial Statement Schedule on page F-1 for the required information. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities 51 Exchange Act of 1934, as amended, (the "Exchange Act")). Based on that evaluation, the CEO and the CFO have concluded that our disclosure controls and procedures are effective to ensure that information that we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. Internal Controls Over Financing Reporting. There have been no changes in our internal controls during our most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting or in other factors that could significantly affect internal controls subsequent to the end of the period covered by this report. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and preparation of our financial statements for external reporting purposes in accordance with generally accepted accounting principles in the U.S. As of December 31, 2004, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework utilizing the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in "Internal Control -- Integrated Framework." The scope of our assessment of the effectiveness of internal control over financial reporting includes all of our businesses except for TRCLP, a material business acquired on November 12, 2004. For the year ended December 31, 2004, our total revenues were $1.8 billion, of which TRCLP represented $205.9 million. Our total assets as of December 31, 2004, were $25.7 billion, of which TRCLP represented $14.8 billion. Based on this assessment, management believes that, as of December 31, 2004, our internal control over financial reporting is effective. Deloitte & Touche LLP, the Company's independent registered public accounting firm, audited management's assessment of the effectiveness of internal control over financial reporting as of December 31, 2004 and, based on that audit, issued the report set forth below. 52 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of General Growth Properties, Inc. Chicago, Illinois We have audited management's assessment, included within this December 31, 2004 Form 10-K of General Growth Properties, Inc. (the "Company") at Item 9A under the heading of "Management's Report on Internal Control Over Financial Reporting," that the Company maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control -- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in "Management's Report on Internal Control Over Financial Reporting," management excluded from their assessment the internal control over financial reporting at The Rouse Company, which was acquired on November 12, 2004 and whose financial statements reflect total assets and revenues constituting 57.7 and 5.7 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2004. Accordingly, our audit did not include the internal control over financial reporting at The Rouse Company. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness on internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness on internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions. A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness on the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the criteria established in Internal Control -- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the criteria established in 53 Internal Control -- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and consolidated financial statement schedule as of and for the year ended December 31, 2004 of the Company and our report dated March 21, 2005 expressed an unqualified opinion on those consolidated financial statements and consolidated financial statement schedule and included an explanatory paragraph relating to the change in method of accounting for debt extinguishment costs in 2003. DELOITTE & TOUCHE LLP Chicago, Illinois March 21, 2005 54 ITEM 9B. OTHER INFORMATION None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The information which appears under the captions "Election of Directors", "Executive Officers", "Governance of the Company -- Committees of the Board of Directors -- Audit Committee" and "-- Nominating & Governance Committee" and "Stock Ownership -- Section 16(a) Beneficial Ownership Reporting Compliance" in our proxy statement for our 2005 Annual Meeting of Stockholders is incorporated by reference into this Item 10. We have a Code of Business Conduct and Ethics which applies to all of our employees, officers and directors, including our Chairman, Chief Executive Officer and Chief Financial Officer. The Code of Business Conduct and Ethics is available on the Corporate Governance page of our website at www.generalgrowth.com and we will provide a copy of the Code of Business Conduct and Ethics without charge to any person who requests it by writing to the address indicated under Available Information. We will post on our website amendments to or waivers of our Code of Ethics for executive officers or directors, in accordance with applicable laws and regulations. Our Chief Executive Officer and Chief Financial Officer have signed certificates under Sections 302 and 906 of the Sarbanes-Oxley Act, which are filed as Exhibits 31.1 and 31.2 and 32.1 and 32.2, respectively, to this Form 10-K. In addition, our Chief Executive Officer submitted his most recent annual certification to the NYSE pursuant to Section 303A 12(a) of the NYSE listing standards on May 25, 2004, in which he indicated that he was not aware of any violations by us of NYSE corporate governance listing standards. ITEM 11. EXECUTIVE COMPENSATION The information which appears under the caption "Executive Compensation" in our proxy statement for our 2005 Annual Meeting of Stockholders is incorporated by reference into this Item 11; provided, however, that the Report of the Compensation Committee of the Board of Directors on Executive Compensation shall not be incorporated by reference herein, in any of our previous filings under the Securities Act of 1933, as amended, or the Exchange Act or in any of our future filings. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information which appears under the captions "Stock Ownership -- Common Stock Ownership of Certain Beneficial Owners" and "-- Equity Ownership of Management" in our proxy statement for our 2005 Annual Meeting of Stockholders is incorporated by reference into this Item 12. 55 The following table sets forth certain information with respect to shares of our common stock that may be issued under our equity compensation plans as of December 31, 2004. <Table> <Caption> (A) (C) NUMBER OF NUMBER OF SECURITIES SECURITIES (B) REMAINING AVAILABLE FOR TO BE ISSUED UPON WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION OUTSTANDING OUTSTANDING PLANS (EXCLUDING OPTIONS, WARRANTS OPTIONS, WARRANTS SECURITIES REFLECTED IN PLAN CATEGORY AND RIGHTS AND RIGHTS COLUMN (A)) - ------------- -------------------- -------------------- --------------------------- Equity compensation plans approved by security holders(1)................ 3,136,784 $22.17 9,430,305(2) Equity compensation plans not approved by security holders(3).... N/A N/A 461,710 --------- --------- Total................................ 3,136,784 9,892,015 ========= ========= </Table> - --------------- (1) Includes shares of common stock under the 1993 Stock Incentive Plan (which terminated on April 4, 2003), the 1998 Incentive Stock Plan and the 2003 Incentive Stock Plan. (2) Includes 7,994,000 shares of common stock available for issuance under the 2003 Incentive Stock Plan and 1,436,305 shares of common stock available for issuance under the 1998 Incentive Stock Plan. (3) Represents shares of common stock under our Employee Stock Purchase Plan, which was adopted by the Board of Directors in November 1998. Under the Employee Stock Purchase Plan, eligible employees make payroll deductions over a six-month period, at which time the amounts withheld are used to purchase shares of common stock at a purchase price equal to 85% of the lesser of the closing price of a share of common stock on the first or last trading day of the purchase period. Purchases of common stock under the Employee Stock Purchase Plan are made on the first business day of the next month after the close of the purchase period. Under New York Stock Exchange rules then in effect, stockholder approval was not required for the Employee Stock Purchase Plan because it is a broad-based plan available generally to all employees. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information which appears under the caption "Certain Relationships and Related Party Transactions" in our proxy statement for our 2005 Annual Meeting of Stockholders is incorporated by reference into this Item 13. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information which appears under the caption "Independent Auditors -- Fees Billed by Independent Auditors -- Audit Fees -- Audit-Related Fees", "-- Tax Fees", "-- All Other Fees" and "Independent Auditors -- Audit Committee Pre-Approval Policies and Procedures" in our proxy statement for our 2005 Annual Meeting of Stockholders is incorporated by reference into this Item 14. 56 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Financial Statements and Financial Statement Schedules. 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) Exhibits. See Exhibit Index on page S-1. (c) Separate financial statements. Not applicable. 57 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 21, 2005 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 Chairman of the Board March 21, 2005 - -------------------------------------- Matthew Bucksbaum /s/ JOHN BUCKSBAUM Chief Executive Officer March 21, 2005 - -------------------------------------- (Principal Executive Officer) John Bucksbaum /s/ ROBERT MICHAELS Director, President and March 21, 2005 - -------------------------------------- Chief Operating Officer Robert Michaels /s/ BERNARD FREIBAUM Director, Executive Vice President March 21, 2005 - -------------------------------------- and Chief Financial Officer Bernard Freibaum (Principal Financial and Accounting Officer) /s/ ANTHONY DOWNS Director March 21, 2005 - -------------------------------------- Anthony Downs /s/ BETH STEWART Director March 21, 2005 - -------------------------------------- Beth Stewart /s/ ALAN COHEN Director March 21, 2005 - -------------------------------------- Alan Cohen /s/ JOHN RIORDAN Director March 21, 2005 - -------------------------------------- John Riordan /s/ FRANK PTAK Director March 21, 2005 - -------------------------------------- Frank Ptak </Table> 58 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> PAGE(S) ------- FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm -- General Growth Properties, Inc. ............... F-2 Report of Independent Registered Public Accounting Firm -- GGP/Homart, Inc. .............................. F-3 Report of Independent Registered Public Accounting Firm -- GGP/Homart II L.L.C. .......................... F-4 Consolidated Balance Sheets as of December 31, 2004 and 2003................................................... F-5 Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2004, 2003, and 2002................................................... F-6 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2004, 2003 and 2002........... F-7 Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002....................... F-8 Notes to Consolidated Financial Statements................ F-9 FINANCIAL STATEMENT SCHEDULE Report of Independent Registered Public Accounting Firm... F-40 Schedule III -- Real Estate and Accumulated Depreciation........................................... F-41 </Table> All other schedules are omitted since the required information is either not present in any amounts, is not present in amounts sufficient to require submission of the schedule or because the information required is included in the consolidated financial statements and related notes. F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of General Growth Properties, Inc. Chicago, Illinois We have audited the accompanying consolidated balance sheets of General Growth Properties, Inc. (the "Company") as of December 31, 2004 and 2003, and the related consolidated statements of operations and comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2004. 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 $126,855,000 and $150,170,000 in GGP/Homart Inc.'s net assets as of December 31, 2004 and 2003, respectively, and $21,148,000, $23,815,000 and $23,418,000 in GGP/Homart Inc.'s net income, respectively, for each of the three years in the period ended December 31, 2004 are included in the accompanying consolidated financial statements. The Company's equity of $319,537,000 and $259,363,000 in GGP/ Homart II L.L.C.'s net assets as of December 31, 2004 and 2003, respectively, and $36,724,000, $33,448,000 and $26,421,000 in GGP/Homart II L.L.C.'s net income, respectively, for each of the three years in the period ended December 31, 2004 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of General Growth Properties, Inc. at December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 14 to the consolidated financial statements, the Company changed its method of accounting for debt extinguishment costs in 2003. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness on the Company's internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control -- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 21, 2005 expressed an unqualified opinion on management's assessment on the effectiveness of the Company's internal control over financial reporting and an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. DELOITTE & TOUCHE LLP Chicago, Illinois March 21, 2005 F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Stockholders GGP/Homart, Inc.: We have audited the consolidated balance sheets of GGP/Homart, Inc. (a Delaware Corporation) and subsidiaries (the Company) as of December 31, 2004 and 2003, and the related consolidated statements of income and comprehensive income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2004 (not presented separately herein). These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of GGP/Homart, Inc. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. KPMG LLP Chicago, Illinois March 1, 2005 F-3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To Members GGP/Homart II L.L.C.: We have audited the consolidated balance sheets of GGP/Homart II L.L.C. (a Delaware Limited Liability Company) and subsidiaries (the Company) as of December 31, 2004 and 2003, and the related consolidated statements of income and comprehensive income, changes in members' capital, and cash flows for each of the years in the three-year period ended December 31, 2004 (not presented separately herein). These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of GGP/Homart II L.L.C. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. KPMG LLP Chicago, Illinois March 1, 2005 F-4 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS <Table> <Caption> DECEMBER 31, ------------------------- 2004 2003 ----------- ----------- (DOLLARS IN THOUSANDS) ASSETS Investment in real estate: Land...................................................... $ 2,859,552 $ 1,384,662 Buildings and equipment................................... 18,251,258 8,124,165 Less accumulated depreciation............................. (1,453,488) (1,101,235) Developments in progress.................................. 559,969 168,521 ----------- ----------- Net property and equipment............................. 20,217,291 8,576,113 Investment in and loans to/from Unconsolidated Real Estate Affiliates............................................. 1,945,541 630,613 Investment land and land held for development and sale.... 1,638,013 -- ----------- ----------- Net investment in real estate.......................... 23,800,845 9,206,726 Cash and cash equivalents................................... 39,581 10,677 Tenant accounts receivable, net............................. 242,425 148,485 Deferred expenses, net...................................... 153,231 138,201 Prepaid expenses and other assets........................... 1,482,543 78,808 ----------- ----------- $25,718,625 $ 9,582,897 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Mortgage notes and other property debt payable.............. $20,310,947 $ 6,649,490 Deferred tax liability...................................... 1,414,565 -- Accounts payable and accrued expenses....................... 895,520 359,174 ----------- ----------- 22,621,032 7,008,664 ----------- ----------- Minority interests: Preferred................................................. 403,161 495,211 Common.................................................... 551,282 408,613 ----------- ----------- 954,443 903,824 ----------- ----------- Commitments and contingencies............................... -- -- Preferred Stock: $100 par value; 5,000,000 shares authorized; none issued and outstanding................... -- -- Stockholders' Equity: Common stock: $.01 par value; 875,000,000 shares authorized; 234,724,082 and 217,293,976 shares issued and outstanding as of December 31, 2004 and 2003, respectively........................................... 2,347 2,173 Additional paid-in capital................................ 2,378,237 1,913,447 Retained earnings (accumulated deficit)................... (227,511) (220,512) Notes receivable-common stock purchase.................... (5,178) (6,475) Unearned compensation-restricted stock.................... (1,060) (1,949) Accumulated other comprehensive loss...................... (3,685) (16,275) ----------- ----------- Total stockholders' equity............................. 2,143,150 1,670,409 ----------- ----------- $25,718,625 $ 9,582,897 =========== =========== </Table> The accompanying notes are an integral part of these consolidated financial statements. F-5 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME <Table> <Caption> YEARS ENDED DECEMBER 31, -------------------------------------- 2004 2003 2002 ----------- ----------- ---------- (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) Revenues: Minimum rents............................................. $1,060,963 $ 775,320 $ 581,551 Tenant recoveries......................................... 473,428 332,137 254,999 Overage rents............................................. 54,105 34,928 28,044 Land sales................................................ 68,643 -- -- Management and other fees................................. 82,896 84,138 75,479 Other..................................................... 62,810 36,268 33,367 ---------- ---------- --------- Total revenues.......................................... 1,802,845 1,262,791 973,440 ---------- ---------- --------- Expenses: Real estate taxes......................................... 128,320 88,276 60,726 Repairs and maintenance................................... 123,984 81,433 62,449 Marketing................................................. 48,220 35,797 28,681 Other property operating costs............................ 207,655 153,370 107,726 Land sales operations..................................... 66,100 -- -- Provision for doubtful accounts........................... 10,382 7,041 3,828 Property management and other costs....................... 100,788 109,746 94,676 General and administrative................................ 9,499 8,533 8,720 Depreciation and amortization............................. 365,622 230,195 179,036 ---------- ---------- --------- Total expenses.......................................... 1,060,570 714,391 545,842 ---------- ---------- --------- Operating income............................................ 742,275 548,400 427,598 Interest income............................................. 3,227 2,308 3,689 Interest expense............................................ (472,185) (278,543) (219,029) Income allocated to minority interests...................... (105,473) (110,984) (86,213) Income taxes................................................ (2,383) (98) (119) Equity in income of unconsolidated affiliates............... 88,191 94,480 80,825 ---------- ---------- --------- Income from continuing operations........................... 253,652 255,563 206,751 ---------- ---------- --------- Discontinued operations, net of minority interest: Income from operations.................................... 3,028 4,128 2,488 Gain on disposition....................................... 11,172 3,720 19 ---------- ---------- --------- 14,200 7,848 2,507 ---------- ---------- --------- Net income.................................................. $ 267,852 $ 263,411 $ 209,258 Convertible preferred stock dividends....................... -- (13,030) (24,467) ---------- ---------- --------- Net income available to common stockholders................. $ 267,852 $ 250,381 $ 184,791 ========== ========== ========= BASIC EARNINGS PER SHARE: Continuing operations..................................... $ 1.16 $ 1.21 $ 0.98 Discontinued operations................................... 0.06 0.04 0.01 ---------- ---------- --------- Total basic earnings per share.......................... $ 1.22 $ 1.25 $ 0.99 ========== ========== ========= DILUTED EARNINGS PER SHARE: Continuing operations..................................... $ 1.15 $ 1.19 $ 0.97 Discontinued operations................................... 0.06 0.03 0.01 ---------- ---------- --------- Total diluted earnings per share........................ $ 1.21 $ 1.22 $ 0.98 ========== ========== ========= COMPREHENSIVE INCOME, NET: Net income................................................ $ 267,852 $ 263,411 $ 209,258 Other comprehensive income, net of minority interest: Net unrealized gains (losses) on financial instruments........................................... 10,992 12,542 (30,774) Minimum pension liability adjustment.................... 102 308 (740) Foreign currency translation............................ 1,590 -- -- Equity in unrealized gains (losses) on available-for-sale securities......................... (94) -- 169 ---------- ---------- --------- Comprehensive income, net................................. $ 280,442 $ 276,261 $ 177,913 ========== ========== ========= </Table> The accompanying notes are an integral part of these consolidated financial statements. F-6 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY <Table> <Caption> NOTES RETAINED RECEIVABLE- COMMON STOCK ADDITIONAL EARNINGS COMMON -------------------- PAID-IN (ACCUMULATED STOCK SHARES AMOUNT CAPITAL DEFICIT) PURCHASE ----------- ------ ---------- ------------- ----------- (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) BALANCE, DECEMBER 31, 2001........ 185,771,796 $1,858 $1,527,547 $(328,349) $(19,890) Net income........................ 209,258 Cash distributions declared ($0.92 per share)...................... (170,614) Convertible Preferred Stock dividends....................... (24,467) Conversion of operating partnership units to common stock........................... 48,738 -- 636 Issuance of common stock, net of employee stock option loans..... 1,370,721 14 19,344 12,118 Issuance costs, preferred units... (1,672) Restricted stock grant, net of compensation expense............ Other comprehensive losses........ Adjustment for minority interest in operating partnership........ 2,115 ----------- ------ ---------- --------- -------- BALANCE, DECEMBER 31, 2002........ 187,191,255 $1,872 $1,549,642 $(315,844) $ (7,772) ----------- ------ ---------- --------- -------- Net income........................ 263,411 Cash distributions declared ($0.78 per share)...................... (155,049) Convertible Preferred Stock dividends....................... (13,030) PIERS redemption and conversion, net............................. 25,503,543 255 337,837 Conversion of operating partnership units to common stock........................... 2,956,491 30 22,134 Issuance of common stock, net of employee stock option loans/repayments................ 1,642,687 16 30,108 1,297 Restricted stock grant, net of compensation expense............ Other comprehensive gains......... Adjustment for minority interest in operating partnership........ (26,274) ----------- ------ ---------- --------- -------- BALANCE, DECEMBER 31, 2003........ 217,293,976 $2,173 $1,913,447 $(220,512) $ (6,475) ----------- ------ ---------- --------- -------- Net income........................ 267,852 Cash distributions declared ($1.26 per share)...................... (274,851) Conversion of operating partnership units to common stock........................... 179,987 2 1,371 Conversion of convertible preferred units to common stock........................... 456,463 4 9,297 Issuance of common stock, net of employee stock option loans/repayments................ 16,793,656 168 530,920 1,297 Restricted stock grant, net of compensation expense............ Other comprehensive gains......... Adjustment for minority interest in operating partnership........ (76,798) ----------- ------ ---------- --------- -------- BALANCE, DECEMBER 31, 2004........ 234,724,082 $2,347 $2,378,237 $(227,511) $ (5,178) =========== ====== ========== ========= ======== <Caption> UNEARNED ACCUMULATED COMPENSATION OTHER TOTAL RESTRICTED COMPREHENSIVE STOCKHOLDERS' STOCK LOSS EQUITY ------------ ------------- ------------- (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) BALANCE, DECEMBER 31, 2001........ $ -- $ 2,220 $1,183,386 Net income........................ 209,258 Cash distributions declared ($0.92 per share)...................... (170,614) Convertible Preferred Stock dividends....................... (24,467) Conversion of operating partnership units to common stock........................... 636 Issuance of common stock, net of employee stock option loans..... 31,476 Issuance costs, preferred units... (1,672) Restricted stock grant, net of compensation expense............ (2,248) (2,248) Other comprehensive losses........ (31,345) (31,345) Adjustment for minority interest in operating partnership........ 2,115 ------- -------- ---------- BALANCE, DECEMBER 31, 2002........ $(2,248) $(29,125) $1,196,525 ------- -------- ---------- Net income........................ 263,411 Cash distributions declared ($0.78 per share)...................... (155,049) Convertible Preferred Stock dividends....................... (13,030) PIERS redemption and conversion, net............................. 338,092 Conversion of operating partnership units to common stock........................... 22,164 Issuance of common stock, net of employee stock option loans/repayments................ 31,421 Restricted stock grant, net of compensation expense............ 299 299 Other comprehensive gains......... 12,850 12,850 Adjustment for minority interest in operating partnership........ (26,274) ------- -------- ---------- BALANCE, DECEMBER 31, 2003........ $(1,949) $(16,275) $1,670,409 ------- -------- ---------- Net income........................ 267,852 Cash distributions declared ($1.26 per share)...................... (274,851) Conversion of operating partnership units to common stock........................... 1,373 Conversion of convertible preferred units to common stock........................... 9,301 Issuance of common stock, net of employee stock option loans/repayments................ 532,385 Restricted stock grant, net of compensation expense............ 889 889 Other comprehensive gains......... 12,590 12,590 Adjustment for minority interest in operating partnership........ (76,798) ------- -------- ---------- BALANCE, DECEMBER 31, 2004........ $(1,060) $ (3,685) $2,143,150 ======= ======== ========== </Table> The accompanying notes are an integral part of these consolidated financial statements. F-7 GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS <Table> <Caption> YEARS ENDED DECEMBER 31, --------------------------------------- 2004 2003 2002 ----------- ----------- ----------- (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income................................................ $ 267,852 $ 263,411 $ 209,258 Adjustments to reconcile net income to net cash provided by operating activities: Minority interests, including discontinued operations.......................................... 106,233 113,289 87,003 Equity in income of unconsolidated affiliates......... (88,191) (94,480) (80,825) Provision for doubtful accounts, including discontinued operations............................. 10,393 7,009 3,859 Distributions received from unconsolidated affiliates.......................................... 87,906 91,613 80,177 Depreciation, including discontinued operations....... 348,303 205,385 172,593 Amortization, including discontinued operations....... 28,753 34,849 12,045 Gain on disposition................................... (11,172) (4,831) (25) Proceeds from sale of investment land and notes receivable from land sales.......................... 94,138 -- -- Net changes: Tenant accounts receivable.......................... (21,177) (29,304) (33,004) Prepaid expenses and other assets................... (9,434) 8,298 (5,926) Deferred expenses................................... (27,585) (51,435) (20,785) Accounts payable and accrued expenses............... (34,108) 34,683 36,125 ----------- ----------- ----------- Net cash provided by operating activities............. 751,911 578,487 460,495 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition/development of real estate and improvements and additions to properties............................. (9,044,868) (1,732,358) (1,006,368) Proceeds from sale of investment property................. 65,268 14,978 -- Increase in investments in unconsolidated affiliates...... (211,247) (26,418) (165,581) Distributions received from unconsolidated affiliates in excess of income........................................ 134,116 90,925 50,276 Proceeds from repayment of notes receivable for common stock purchases......................................... 1,297 1,297 16,361 Loan repayments from unconsolidated affiliates, net....... (8,884) (94,355) 1,274 Proceeds from sale of investments in marketable securities.............................................. 11,300 476 154,627 ----------- ----------- ----------- Net cash used in investing activities................... (9,053,018) (1,745,455) (949,411) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions paid to common stockholders............ (274,851) (199,986) (165,942) Cash distributions paid to holders of Common Units........ (70,412) (59,815) (52,334) Cash distributions paid to holders of perpetual and convertible preferred units............................. (37,152) (40,257) (25,014) Payment of dividends on PIERS............................. -- (19,145) (24,467) Proceeds from issuance of common stock.................... 512,663 -- -- Proceeds from issuance of common stock for employee stock plans................................................... 19,313 31,308 12,867 Redemption of preferred minority interests: PDC Series A Perpetual Preferred Units.................. (12,750) -- -- PDC Series B Perpetual Preferred Units.................. (95,000) -- -- Other preferred stock of consolidated subsidiaries...... (173) -- -- Proceeds from issuance of Preferred Units................. -- -- 63,326 Proceeds from issuance of mortgage notes and other debt payable................................................. 12,733,339 3,140,750 792,344 Principal payments on mortgage notes and other debt payable................................................. (4,431,558) (1,715,752) (218,449) Deferred financing costs.................................. (13,408) (13,098) (530) ----------- ----------- ----------- Net cash provided by financing activities............... 8,330,011 1,124,005 381,801 ----------- ----------- ----------- Net change in cash and cash equivalents..................... 28,904 (42,963) (107,115) Cash and cash equivalents at beginning of period............ 10,677 53,640 160,755 ----------- ----------- ----------- Cash and cash equivalents at end of period.................. $ 39,581 $ 10,677 $ 53,640 =========== =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid............................................. $ 424,380 $ 258,395 $ 224,573 Interest capitalized...................................... 11,272 5,679 5,195 NON-CASH INVESTING AND FINANCING ACTIVITIES: Common stock issued in exchange for PIERS................. $ -- $ 337,483 $ -- Common stock issued in exchange for Operating Partnership Units................................................... 1,373 22,134 636 Common stock issued in exchange for convertible preferred units................................................... 9,301 -- -- Assumption of debt in conjunction with acquisition of property................................................ 134,902 552,174 812,293 Notes receivable issued for exercised stock options....... -- -- 4,243 Operating Partnership Units issued as consideration for purchase of real estate................................. 25,132 26,637 41,131 TRC Merger: Fair value of assets acquired........................... 14,327,519 -- -- Cash paid............................................... (7,150,844) -- -- Liabilities assumed..................................... 7,176,675 -- -- </Table> The accompanying notes are an integral part of these consolidated financial statements. F-8 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 ORGANIZATION GENERAL General Growth Properties, Inc., a Delaware corporation ("General Growth"), is a self-administered and self-managed real estate investment trust, referred to as a "REIT." General Growth was organized in 1986 and through its subsidiaries and affiliates owns, operates, manages, leases, acquires, develops, expands and finances operating properties located primarily throughout the United States and develops and sells land for residential, commercial and other uses primarily in master-planned communities. The operating properties consist of retail centers, office and industrial buildings and mixed-use and other properties. The retail centers are primarily regional shopping centers in suburban market areas, but also include specialty marketplaces in certain downtown areas and community retail centers. The office and industrial properties are located primarily in the Baltimore-Washington and Las Vegas markets or are components of large-scale mixed-use properties (which include retail, parking and other uses) located in other urban markets. Land development and sales operations are predominantly related to large-scale, long-term community development projects in and around Columbia, Maryland; Summerlin, Nevada; and Houston, Texas. In these notes, the terms "we", "us" and "our" refer to General Growth and its subsidiaries (the "Company"). Substantially all of our business is conducted through GGP Limited Partnership (the "Operating Partnership" or "GGPLP"). As of December 31, 2004, General Growth owned an approximate 81% general partnership interest in the Operating Partnership. The remaining approximate 19% minority interest is held by limited partners that include trusts for the benefit of the families of the original stockholders of 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 "Common Units"). In addition to holding ownership interests in various joint ventures, the Operating Partnership generally conducts its operations through the following subsidiaries: - - GGPLP L.L.C., a Delaware limited liability company (the "LLC"), has ownership interests in the majority of our properties (other than those acquired in The Rouse Company merger (the "TRC Merger", Note 3)). - - The Rouse Company LP ("TRCLP"), which includes both a REIT and taxable REIT subsidiaries ("TRS"), has ownership interests in Consolidated Properties and Unconsolidated Properties (as defined below). - - General Growth Management, Inc. ("GGMI"), a TRS, manages, leases, and performs various other services for some of our Unconsolidated Real Estate Affiliates (as defined below) and over 30 properties owned by unaffiliated third parties, all located in the United States. In this report, we refer to our ownership interests in majority owned or controlled properties as "Consolidated Properties" and to our ownership interests in joint ventures in which we own a non-controlling interest as "Unconsolidated Real Estate Affiliates" and the properties owned by such joint ventures as the "Unconsolidated Properties." Our "Company Portfolio" includes both the Unconsolidated Properties and our Consolidated Properties. On November 17, 2004, we sold 15.9 million shares of our common stock for $32.23 per share pursuant to a warrant offering. The proceeds of this offering were used to partially fund the TRC Merger (Note 3). PREFERRED STOCK During June 1998, we issued 13,500,000 depositary shares, each representing 1/40th of a share of 7.25% Preferred Income Equity Redeemable Stock, Series A ("PIERS"), or a total of 337,500 PIERS. During May 2003, we called for redemption all of our outstanding depositary shares. The depositary shares (and the related F-9 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) PIERS) were convertible into our common stock at the rate of 1.8891 shares of common stock per depositary share. Through July 14, 2003, holders of 6,861,800 shares elected to convert their depositary shares and received a total of 12,963,357 shares of our common stock. We redeemed the remaining 6,638,200 depositary shares on July 15, 2003. As a result of this redemption, we issued an additional 12,540,186 shares of our common stock and paid approximately $17,000 in cash to redeem fractional shares of PIERS. We have also created other classes of preferred stock to permit the future potential conversion of certain equity interests, which we have issued in conjunction with acquisitions, into General Growth equity interests. For certain classes of such preferred stock, the conditions to allow such a conversion have not yet occurred. As of December 31, 2004 and 2003, 5.0 million shares of such preferred stock, with a par value of $100 per share, have been authorized, but none has been issued. SHAREHOLDER RIGHTS PLAN We have a shareholder rights plan pursuant to which one preferred share purchase right (a "Right") is attached to each currently outstanding or subsequently issued share of our common stock. Prior to becoming exercisable, the Rights trade together with our common stock. In general, the Rights will become exercisable if a person or group acquires or announces a tender or exchange offer for 15% or more of our common stock. Each Right will initially entitle the holder to purchase from General Growth one-third of one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $100 per share (the "Preferred Stock"), at an exercise price of $148 per one one-thousandth of a share, subject to adjustment. If a person or group acquires 15% or more of our common stock, each Right will entitle the holder (other than the acquirer) to purchase shares of our common stock (or, in certain circumstances, cash or other securities) having a market value of twice the exercise price of a Right at such time. Under certain circumstances, each Right will entitle the holder (other than the acquirer) to purchase the common stock of the acquirer having a market value of twice the exercise price of a Right at such time. In addition, under certain circumstances, our Board of Directors may exchange each Right (other than those held by the acquirer) for one share of our common stock, subject to adjustment. If the Rights become exercisable, holders of common units of partnership interest in the Operating Partnership, other than General Growth, will receive the number of Rights they would have received if their units had been redeemed and the purchase price paid in our common stock. The Rights expire on November 18, 2008, unless earlier redeemed by our Board of Directors for one-third of $0.01 per Right or such expiration date is extended. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN We have reserved up to 3.0 million shares of our common stock for issuance under the Dividend Reinvestment and Stock Purchase Plan ("DRSP"). In general, the DRSP allows participants in the plan to make purchases of our common stock from dividends received or additional cash investments. Although the purchase price of the common stock is determined by the current market price, the purchases will be made without fees or commissions. We have and will continue to satisfy DRSP common stock purchase needs through the issuance of new shares of our common stock or by repurchases of currently outstanding common stock. As of December 31, 2004, an aggregate of 464,952 shares of our common stock have been issued under the DRSP. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of General Growth, our subsidiaries and joint ventures in which we have a controlling interest. We also consolidate the accounts of certain variable interest entities that were acquired in the TRC Merger and are considered special purpose entities and where we are the primary beneficiary. Income allocated to minority interests in these joint ventures includes the share of such properties' operations (generally computed as the respective joint venture partner ownership F-10 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) percentage) applicable to such non-controlling venturers. All significant intercompany balances and transactions have been eliminated. PROPERTIES Real estate assets are stated at cost. For redevelopment of existing operating properties, the net carrying 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. Real estate taxes incurred during construction periods are capitalized and amortized on the same basis as the related assets. Interest costs are capitalized during periods of active construction for qualified expenditures based upon interest rates in place during the construction period until construction is substantially complete. Capitalized interest costs are amortized over lives which are consistent with the constructed assets. Pre-development costs, which generally include legal and professional fees and other third-party costs related directly to the acquisition of a property, are capitalized as part of the property being developed. In the event a development is no longer deemed to be probable, the costs previously capitalized are written off as a component of operating expenses. Construction allowances paid to tenants are capitalized and depreciated over the average lease term. Maintenance and repairs are charged to expense when incurred. Expenditures for significant betterments and improvements are capitalized. Our real estate assets, including developments in progress, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. A real estate asset is considered to be impaired when the estimated future undiscounted operating cash flow is less than its carrying value. To the extent an impairment has occurred, the excess of carrying value of the asset over its estimated fair value will be charged to operations. Depreciation or amortization expense is computed using the straight-line method based upon the following estimated useful lives: <Table> <Caption> YEARS ----- Buildings and improvements.................................. 40-45 Equipment, tenant improvements and fixtures................. 5-10 Purchased intangibles....................................... 5-15 </Table> ACQUISITIONS OF OPERATING PROPERTIES Acquisitions of properties are accounted for utilizing the purchase method and, accordingly, the results of operations of acquired properties are included in our results of operations from the respective dates of acquisition. Estimates of future cash flows and other valuation techniques are used to allocate the purchase price of acquired property between land, buildings and improvements, equipment and identifiable intangible assets and liabilities such as amounts related to in-place at-market leases, acquired above and below-market leases and tenant relationships. Initial valuations are subject to change until such information is finalized no later than 12 months from the acquisition date. The fair values of tangible assets are determined on an "if vacant" basis. The "if-vacant" fair value is allocated to land, where applicable, buildings, tenant improvements and equipment based on comparable sales and other relevant information obtained in connection with the acquisition of the property. The estimated fair value of acquired in-place at-market leases are the costs we would have incurred to lease the property to the occupancy level of the property at the date of acquisition. Such estimate includes the fair F-11 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) value of leasing commissions, legal costs and tenant coordination costs that would be incurred to lease the property to this occupancy level. Additionally, we evaluate the time period over which such occupancy level would be achieved and include an estimate of the net operating costs (primarily real estate taxes, insurance and utilities) incurred during the lease-up period, which generally ranges up to one year. Acquired in-place at-market leases are amortized over the average lease term. Above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and our estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above- and below-market lease values are amortized as adjustments to minimum rent revenue over the remaining non-cancelable terms of the respective leases (approximately five years). Purchase price allocations for properties acquired in 2004, 2003 and 2002 have resulted in acquired in-place leases of approximately $595.2 million ($565.7 million net of accumulated amortization) and acquired below-market leases (net of above-market leases) of approximately $162.4 million ($113.9 million net of accumulated amortization) as of December 31, 2004. Purchase price allocations for certain recent acquisitions may be subsequently revised as additional information becomes available. Amortization of these intangible assets and liabilities, and similar assets and liabilities from our Unconsolidated Real Estate Affiliates, resulted in additional net income, including our share of such items from Unconsolidated Real Estate Affiliates, of approximately $8.4 million in 2004, $19.6 million in 2003 and $1.9 million in 2002. Future amortization, including our share of such items from Unconsolidated Real Estate Affiliates, is estimated to decrease net income by approximately $90 million in 2005 and 2006, $97 million in 2007, $108 million in 2008 and $102 million in 2009. Due to existing contacts and relationships with tenants at our currently owned properties and at properties currently managed for others, no significant value has been ascribed to the tenant relationships at the properties acquired. The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. Goodwill is not amortized but is tested for impairment at a level of reporting referred to as a reporting unit on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. An impairment loss for an asset group is allocated to the long-lived assets of the group on a pro-rata basis using the relative carrying amounts of those assets, unless the fair value of specific components of the reporting group are determinable without undue cost and effort. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE AFFILIATES We account for investments in joint ventures where we own a non-controlling joint interest using the equity method. Under the equity method, the cost of our investment is adjusted for our share of the equity in earnings of such Unconsolidated Real Estate Affiliates from the date of acquisition and reduced by distributions received. Generally, the operating agreements with respect to our Unconsolidated Real Estate Affiliates provide that assets, liabilities and funding obligations are shared in accordance with our ownership percentages. Therefore, we generally also share in the profit and losses, cash flows and other matters relating to our Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. Except for Retained Debt (as described and defined in Note 5), differences between the carrying value of our investment in the Unconsolidated Real Estate Affiliates and our share of the underlying equity of such Unconsolidated Real Estate Affiliates are amortized over lives ranging from five to forty years. These differences totaled approximately $80.2 million as of December 31, 2004 and $49.0 million as of December 31, 2003. F-12 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) For those joint ventures where we own less than a 5% interest and have virtually no influence on the joint venture's operating and financial policies, we account for our investments using the cost method. CASH AND CASH EQUIVALENTS Highly-liquid investments with maturities at dates of purchase of three months or less are classified as cash equivalents. LEASES Leases which transfer substantially all the risks and benefits of ownership to tenants are considered finance leases and the present values of the minimum lease payments and the estimated residual values of the leased properties, if any, are accounted for as receivables. Leases which transfer substantially all the risks and benefits of ownership to us are considered capital leases and the present values of the minimum lease payments are accounted for as assets and liabilities. DEFERRED EXPENSES Deferred expenses consist principally of financing fees and leasing costs and commissions. Deferred financing fees are amortized to interest expense using the interest method (or other methods which approximate the interest method) over the terms of the respective agreements. Deferred leasing costs and commissions are amortized using the straight-line method over the average life of the tenant leases. Deferred expenses in the accompanying consolidated balance sheets are shown at cost, net of accumulated amortization of $128.3 million as of December 31, 2004 and $94.1 million as of December 31, 2003. MINORITY INTEREST -- COMMON (NOTE 11) Income is allocated to the holders of the Common Units (the "OP Minority Interests") based on their ownership percentage of the Operating Partnership. This ownership percentage, as well as the total net assets of the Operating Partnership, change when additional shares of our common stock or Operating Partnership Common Units are issued. Such changes result in an allocation between stockholders' equity and OP Minority Interests in the accompanying consolidated balance sheets. Due to the number of such capital transactions that occur each period, we have presented a single net effect of all such allocations for the period as the "Adjustment for Minority Interest in Operating Partnership" (rather than separately allocating the minority interest for each individual capital transaction). REVENUE RECOGNITION AND RELATED MATTERS Minimum rent revenues are recognized on a straight-line basis over the terms of the related leases (Note 14). Minimum rent revenues also include amounts collected from tenants to allow the termination of their leases prior to their scheduled termination dates and accretion related to above and below-market leases on properties acquired as provided by FASB Statements No. 141, "Business Combinations" ("SFAS 141") and No. 142, "Goodwill and Intangible Assets" ("SFAS 142") as follows: <Table> <Caption> 2004 2003 2002 ------- ------- ------ (IN THOUSANDS) Lease termination fees................................... $ 7,942 $ 9,694 $8,303 Above and below-market lease accretion................... 27,591 16,551 4,589 </Table> As of December 31, 2004, straight-line rents receivable, which represent the current net cumulative rents recognized prior to when billed and collectible as provided by the terms of the leases, of approximately $91.8 million are included in tenant accounts receivable, net in the accompanying consolidated balance sheet. F-13 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) We provide an allowance for doubtful accounts against the portion of accounts receivable, including straight-line rents, which is estimated to be uncollectible. Such allowances are reviewed periodically based upon our recovery experience. We also evaluate the probability of collecting future rent which is recognized currently under a straight-line methodology. This analysis considers the long-term nature of our leases, as a certain portion of the straight-line rent currently recognizable will not be billed to the tenant until many years into the future. Our experience relative to unbilled deferred rent receivable is that a certain portion of the amounts straight-lined into revenue are never collected from (or billed to) the tenant due to early lease terminations. For that portion of the otherwise recognizable deferred rent that is not deemed to be probable of collection, no revenue is recognized. Accounts receivable in the accompanying consolidated balance sheets are shown net of an allowance for doubtful accounts of $48.6 million as of December 31, 2004 and $12.9 million as of December 31, 2003. Overage rents are recognized on an accrual basis once tenant sales revenues exceed contractual tenant lease thresholds. Recoveries from tenants are computed as a formula related to real estate taxes, insurance and other shopping center operating expenses and are generally recognized as revenues in the period the related costs are incurred. Management and other fees primarily represent management and leasing fees, financing fees and fees for other ancillary services performed by GGMI and other subsidiaries (generally TRS entities owned by TRCLP) for the benefit of the Unconsolidated Real Estate Affiliates and for independent third-party investors. Such fees are recognized as revenue as the services are rendered. Revenues from land sales are recognized using the full accrual method provided that various criteria relating to the terms of the transactions and our subsequent involvement with the land sold are met. Revenues relating to transactions that do not meet the established criteria are deferred and recognized when the criteria are met or using the installment or cost recovery methods, as appropriate in the circumstances. For land sale transactions in which we are required to perform additional services and incur significant costs after title has passed, revenues and cost of sales are recognized on a percentage of completion basis. Cost of land sales is determined as a specified percentage of land sales revenues recognized for each community development project. The cost ratios used are based on actual costs incurred and estimates of development costs and sales revenues to completion of each project. The ratios are reviewed regularly and revised for changes in sales and cost estimates or development plans. Significant changes in these estimates or development plans, whether due to changes in market conditions or other factors, could result in changes to the cost ratio used for a specific project. The specific identification method is used to determine cost of sales for certain parcels of land, including acquired parcels we do not intend to develop or for which development is complete at the date of acquisition. INCOME TAXES (NOTE 7) Deferred income taxes are accounted for using the asset and liability method, which reflects the impact of the temporary differences between the amounts of assets and liabilities for financial reporting purposes and the bases of such assets and liabilities as measured for tax purposes. Deferred income taxes also reflect the impact of operating loss and tax credit carry forwards based on enacted tax rates expected to be in effect when such amounts are realized or settled. Deferred tax assets are reduced by a valuation allowance to the amount where realization is more likely than not assured after considering all available evidence, including tax planning strategies and other factors. EARNINGS PER SHARE ("EPS") Basic earnings per share ("EPS") is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted EPS is computed after adjusting the F-14 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) numerator and denominator of the basic EPS computation for the effects of all potentially dilutive common shares during the period. The dilutive effects of convertible securities are computed using the "if-converted" method and the dilutive effects of options, warrants and their equivalents (including fixed awards and nonvested stock issued under stock-based compensation plans) are computed using the "treasury stock" method. Dilutive EPS excludes options where the exercise price was higher than the average market price of our common stock and, therefore, the effect would be anti-dilutive and options for which the conditions which must be satisfied prior to the issuance of any such shares were not achieved. Such options totaled 1,590,974 in 2004, 21,000 in 2003 and 384,375 in 2002. Outstanding Common Units have also been excluded from the diluted earnings per share calculation because there would be no effect on EPS as the minority interests' share of income would also be added back to net income. Information related to our EPS calculations is summarized as follows: <Table> <Caption> YEARS ENDED DECEMBER 31, --------------------------------------------------------------- 2004 2003 2002 ------------------- ------------------- ------------------- BASIC DILUTED BASIC DILUTED BASIC DILUTED -------- -------- -------- -------- -------- -------- (IN THOUSANDS) Numerators: Income from continuing operations.................. $253,652 $253,652 $255,563 $255,563 $206,751 $206,751 Convertible preferred stock dividends................... -- -- (13,030)* -- (24,467)* -- -------- -------- -------- -------- -------- -------- Income from continuing operations available to common stockholders......... 253,652 253,652 242,533 255,563 182,284 206,751 Discontinued operations, net of minority interest........ 14,200 14,200 7,848 7,848 2,507 2,507 -------- -------- -------- -------- -------- -------- Net income available to common stockholders................ $267,852 $267,852 $250,381 $263,411 $184,791 $209,258 ======== ======== ======== ======== ======== ======== Denominators: Weighted average number of common shares outstanding -- basic....................... 220,149 220,149 200,875 200,875 186,544 186,544 Effect of dilutive securities -- options (and PIERS in 2003 and 2002*).... -- 680 -- 14,204 -- 26,009 -------- -------- -------- -------- -------- -------- Weighted average number of common shares outstanding... 220,149 220,829 200,875 215,079 186,544 212,553 ======== ======== ======== ======== ======== ======== </Table> - --------------- * For the twelve months ended December 31, 2003 and 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 the denominator of the diluted EPS calculation. DERIVATIVE FINANCIAL INSTRUMENTS We use derivative financial instruments to reduce risk associated with movements in interest rates. We may choose to reduce cash flow and earnings volatility associated with interest rate risk exposure on variable-rate borrowings and/or forecasted fixed-rate borrowings. In some instances, lenders may require us to do so. In F-15 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) order to limit interest rate risk on variable-rate borrowings, we may enter into interest rate swaps or interest rate caps to hedge specific risks. We do not use derivative financial instruments for speculative purposes. Under interest rate cap agreements, we make initial premium payments to the counterparties in exchange for the right to receive payments from them if interest rates exceed specified levels during the agreement period. Under interest rate swap agreements, we and the counterparties agree to exchange the difference between fixed-rate and variable-rate interest amounts calculated by reference to specified notional principal amounts during the agreement period. Notional principal amounts are used to express the volume of these transactions, but the cash requirements and amounts subject to credit risk are substantially less. Parties to interest rate exchange agreements are subject to market risk for changes in interest rates and risk of credit loss in the event of nonperformance by the counterparty. We do not require any collateral under these agreements but deal only with highly-rated financial institution counterparties (which, in certain cases, are also the lenders on the related debt) and expect that all counterparties will meet their obligations. Substantially all of the interest rate swap and other derivative financial instruments we used in 2004, 2003 and 2002 qualified as cash flow hedges and hedged our exposure to forecasted interest payments on variable-rate LIBOR-based debt. Accordingly, the effective portion of the instruments' gains or losses is reported as a component of other comprehensive income and reclassified into earnings when the related forecasted transactions affect earnings. If we discontinue a cash flow hedge because it is no longer probable that the original forecasted transaction will occur, the net gain or loss in accumulated other comprehensive income (loss) is immediately reclassified into earnings. If we discontinue a cash flow hedge because the variability of the probable forecasted transaction has been eliminated, the net gain or loss in accumulated other comprehensive income is reclassified to earnings over the term of the designated hedging relationship. We have not recognized any losses as a result of hedge discontinuance, and the expense that we recognized related to changes in the time value of interest rate cap agreements was insignificant for 2004, 2003 and 2002. Amounts receivable or payable under interest rate cap and swap agreements are accounted for as adjustments to interest expense on the related debt. FAIR VALUE OF FINANCIAL INSTRUMENTS FASB Statement No. 107, "Disclosure about the Fair Value of Financial Instruments" ("SFAS 107") requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value. SFAS 107 does not apply to all balance sheet items. Fair values of financial instruments approximate their carrying value in our financial statements except for debt. We estimated the fair value of our debt based on quoted market prices for publicly-traded debt and on the discounted estimated future cash payments to be made for other debt. The discount rates used approximate current lending rates for loans or groups of loans with similar maturities and credit quality, assume the debt is outstanding through maturity and consider the debt's collateral. We have utilized market information as available or present value techniques to estimate the amounts required to be disclosed. Since such amounts are estimates, there can be no assurance that the disclosed value of any financial instrument could be realized by immediate settlement of the instrument. <Table> <Caption> 2004 2003 --------------------- --------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE -------- ---------- -------- ---------- (IN MILLIONS) Fixed-rate debt............................... $11,120 $11,368 $4,052 $4,165 Variable-rate debt............................ 9,191 9,187 2,597 2,597 ------- ------- ------ ------ $20,311 $20,555 $6,649 $6,762 ======= ======= ====== ====== </Table> F-16 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) STOCK OPTIONS (NOTE 10) During the second quarter of 2002, we elected to prospectively adopt the fair value based employee stock-based compensation expense recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). We had previously applied the intrinsic value based expense recognition provisions set forth in APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Under APB 25, compensation cost is recognized for awards of shares of common stock or stock options only if the quoted market price of the stock as of the grant date (or other measurement date, if later) is greater than the amount the grantee must pay to acquire the stock. Had compensation costs for options granted in 2001 and prior years been determined in accordance with SFAS 123, our net income available to common stockholders would have been nominally reduced but there would have been no effect on reported basic or diluted earnings per share. FOREIGN CURRENCY TRANSLATION The functional currency for our joint venture in Brazil is its local currency. Assets and liabilities of this investment are translated at the rate of exchange in effect on the balance sheet date. Translation adjustments resulting from this process are accumulated in stockholders' equity as a component of accumulated other comprehensive income. 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 acquisitions, and cost ratios and completion percentages used for land sales. Actual results could differ from these and other estimates. RECLASSIFICATIONS Certain amounts in the 2003 and 2002 consolidated financial statements, including discontinued operations (Note 4), have been reclassified to conform to the current year presentation. NOTE 3 ACQUISITIONS THE ROUSE COMPANY We acquired The Rouse Company ("TRC"), a real estate development and management company, on November 12, 2004 (the "TRC Merger"). Immediately following the TRC Merger, TRC was, through a series of transactions, converted to a limited partnership ("TRCLP") wholly-owned by the Operating Partnership and its subsidiaries. The results of TRCLP's operations have been included in our consolidated financial statements since that date. We believe the TRCLP acquisition will further strengthen our retail property portfolio, further diversify our portfolio geographically and with our tenants, provide us with an entrance into new lines of business and result in improved productivity at the former TRCLP properties as well as create other merger synergies. F-17 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The aggregate purchase price was as follows: <Table> <Caption> (IN THOUSANDS) Purchase of outstanding Rouse shares: Shares purchased........................................ 103,718,038 Price per share......................................... $ 65.20526 $ 6,762,962 ------------ ----------- Liabilities assumed: Debt: TRCLP historical..................................... $ 5,023,444 Purchase price adjustments........................... 114,331 5,137,775 ------------ Below-market leases..................................... 154,651 Liabilities: TRCLP historical..................................... 826,679 Purchase price adjustments........................... 1,057,570 1,884,249 ------------ Merger costs: Employee related........................................ 260,612 Legal, investment advisory, accounting and other fees... 127,270 ----------- Total purchase price...................................... $14,327,519 =========== </Table> The following table summarizes the estimated fair values of the assets acquired at the date of acquisition. These fair values were based, in part, on preliminary third-party market valuations. Because these fair values were based on currently available information and assumptions and estimates that we believe are reasonable at this time, they are subject to reallocation as additional information becomes available. <Table> <Caption> (IN THOUSANDS) Land........................................................ $ 1,314,711 Building and equipment...................................... 8,206,370 Developments in progress.................................... 383,996 Investment in and loans to/from Unconsolidated Real Estate Affiliates................................................ 1,236,299 Investment land and land held for development and sale...... 1,645,700 Cash........................................................ 29,077 Tenant accounts receivable.................................. 84,424 Prepaid expenses and other assets: Below-market ground leases................................ 382,328 Above-market tenant leases................................ 141,048 Deferred tax assets....................................... 145,243 Goodwill.................................................. 356,796 Other..................................................... 401,527 ----------- 1,426,942 ----------- $14,327,519 =========== </Table> F-18 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OTHER ACQUISITIONS IN 2004 - - On January 7, 2004, we acquired a 50% membership interest in a limited liability company ("Burlington LLC") which owns Burlington Town Center, an enclosed mall in Burlington, Vermont for approximately $10.25 million. Approximately $9.0 million was funded in cash at closing with the remaining amounts to be funded in cash as necessary. In addition, at closing we made a $31.5 million mortgage loan to Burlington LLC to replace the existing mortgage financing which had been collateralized by the property. The new mortgage loan requires monthly payments of principal and interest, bears interest at an annual rate of 5.5% and is scheduled to mature in January 2009. We have an annual preferential return of 10% on our investment and an option to purchase the remaining 50% interest in Burlington LLC on or before January 2007 for approximately $10.25 million. - - On January 16, 2004, we acquired Redlands Mall, an enclosed mall in Redlands, California, which is currently under redevelopment, for approximately $14.25 million. The consideration was paid from cash on hand and proceeds from borrowings under our credit facilities. - - On March 1, 2004, we acquired the remaining 50% general partnership interest in Town East Mall in Mesquite, Texas from our unaffiliated joint venture partner for approximately $44.5 million, which was paid in cash from cash on hand and proceeds from borrowings under our credit facilities. - - On March 5, 2004, we acquired Four Seasons Town Centre, an enclosed mall in Greensboro, North Carolina, for approximately $161.0 million. The consideration was paid by the assumption of approximately $134.4 million in existing long-term non-recourse mortgage debt (bearing interest at an annual rate of approximately 5.6% and scheduled to mature in December 2013), approximately $25.1 million in 7% convertible preferred units of Operating Partnership interest (which are more fully described in Note 11) and the remaining amounts in cash, primarily from amounts borrowed under our credit facilities. Immediately following the closing, we prepaid approximately $22.4 million of the assumed debt using cash on hand. - - On April 30, 2004, we completed an agreement to form a joint venture to develop and subsequently own and manage a retail center in San Jose, Costa Rica. The venture, GSG de Costa Rica SRL ("GGP/Sambil Costa Rica"), is owned by a wholly-owned subsidiary of the Operating Partnership and two independent Latin American real estate investment and development firms. We have committed to invest approximately $12.2 million in GGP/Sambil Costa Rica, of which approximately $9.0 million was paid as of December 31, 2004. An additional $3.2 million, a portion of which will be drawn on a letter of credit provided by us, will be contributed as additional construction and development costs of the project are incurred. Our cash investments, the $16.0 million of capital contributions made by the Latin American co-venture partners and construction financing to be arranged, are expected to be sufficient to complete the project, an approximately 500,000 square foot retail center. The center is expected to open in 2007 or 2008. - - On May 11, 2004, we acquired a 50% interest in a joint venture (Hoover Mall Holding, L.L.C.) which owns, though a wholly-owned subsidiary, Riverchase Galleria, an enclosed regional mall in Birmingham, Alabama, for approximately $166.0 million. In conjunction with the purchase, the existing loan collateralized by the property was refinanced with a new, non-recourse mortgage loan of $200.0 million. The new loan bears interest at a rate of LIBOR plus 88 basis points, requires monthly payments of interest only and, assuming all no-cost extension options are exercised, is scheduled to mature in June 2009. In addition, we have fixed the interest rate to be paid on this loan (initially 3.26% per annum with steps up to 5.99% per annum in 2007) through the use of interest rate swaps. - - On May 12, 2004, we acquired the Mall of Louisiana, an enclosed regional mall in Baton Rouge, Louisiana. The purchase price of $265.0 million was paid with the proceeds of a new $185.0 million acquisition loan which, at December 31, 2004, bore interest at LIBOR plus 58 basis points. The interest rate will increase in future periods (to a potential maximum of LIBOR plus 134 basis points) depending upon certain factors F-19 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) and certain options regarding the loan rates and maturities elected by us. The loan, which requires monthly payments of interest only, will mature in July 2009 if all no-cost options to extend are exercised. - - On May 17, 2004, we acquired the Grand Canal Shoppes in Las Vegas, Nevada. The purchase price of approximately $766.0 million was funded by a new $427.0 million non-recourse mortgage loan and a new unsecured term loan. The new mortgage loan bears interest at an annual rate of 4.78%, provides for monthly payments of principal and interest and is scheduled to mature in May 2009. The new term loan, with an initial funding of $350.0 million, was repaid in conjunction with the financing of the TRC Merger. - - On July 30, 2004, we formed a joint venture to own, manage and develop retail properties in Brazil. We have committed to invest up to approximately $32.0 million for a 50% membership interest in the joint venture ("GGP/NIG Brazil") of which approximately $17.5 million was funded as of December 31, 2004. We will invest the remaining funds (upon the decision of both partners) to acquire additional interests in the properties currently owned or to acquire interests in other retail centers. The other 50% member in GGP/NIG Brazil contributed to the joint venture upon formation a 29% interest in an existing retail center in Salvador, Bahia, a 16.25% interest in an existing retail center in Sao Paulo, Sao Paulo and a 66.25% interest in an existing retail property management firm. In December 2004, GGP/NIG Brazil acquired a 50% interest in a retail center to be developed in Rio de Janeiro, using funds contributed by us. The property management firm currently manages the two centers partially owned by GGP/NIG Brazil and seven other existing retail centers in various urban areas of Brazil for the other member of GGP/NIG Brazil and other independent owners. - - On August 13, 2004, we acquired Stonestown Galleria, an enclosed regional mall in San Francisco, California. The purchase price was approximately $312.0 million and was paid through a combination of cash on hand, borrowings under our credit facilities and a $220.0 million variable-rate term loan collateralized by the property. The term loan bears interest at LIBOR plus 60 basis points, requires monthly interest-only payments and matures in August 2009 if all no-cost options to extend are exercised. We drew $27.2 million on the term loan in September 2004 and the remaining available amount of $192.8 million in October 2004. In addition to the acquisitions discussed above, we have entered into a separate agreement (the "Phase II Agreement"), to acquire the multi-level retail space that is planned to be part of The Palazzo in Las Vegas, Nevada (the working title of The Venetian's Phase II property), a new approximately 3,000 room hotel/casino that will be connected to the existing Venetian and the Sands Expo and Convention Center facilities (the "Phase II Acquisition") and the Grand Canal Shoppes described above. The Palazzo is currently under development and is expected to be completed in 2007. If completed as specified under the terms of the Phase II Agreement, we will purchase, payable upon grand opening, the Phase II Acquisition retail space at a price computed on a 6% capitalization rate on the projected net operating income of the Phase II retail space, as defined by the Phase II Agreement ("Phase II NOI"), up to $38.0 million and on a capitalization rate of 8% on Phase II NOI in excess of $38.0 million, all subject to a minimum purchase price of $250.0 million. Based on current preliminary plans and estimated rents, the actual purchase price would be more than double the minimum purchase price. The Phase II Agreement is subject to the satisfaction of separate and customary closing conditions. F-20 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2003 AND 2002 ACQUISITIONS <Table> <Caption> GROSS PURCHASE NEW OR ACQUISITION DATE PRICE ASSUMED DEBT(1) ---------------- -------- ---------------- (IN MILLIONS) 2003 Peachtree Mall.............................. April 30 $ 87.6 $ 53.0 Saint Louis Galleria........................ June 11 235.0 176.0 Coronado Center............................. June 11 175.0 131.0 The remaining 49% ownership interest in GGP Ivanhoe III............................... July 1 459.0 268.0 Lynnhaven Mall.............................. August 27 256.5 180.0 Sikes Senter................................ October 14 61.0 41.5 The Maine Mall.............................. October 29 270.0 202.5 Glenbrook Square............................ October 31 219.0 164.3 Foothills Mall.............................. December 5 100.5 45.7 Chico Mall.................................. December 23 62.4 30.6 Rogue Valley Mall........................... December 23 57.5 28.0 -------- -------- $1,983.5 $1,320.6 ======== ======== 2002 Victoria Ward, Limited...................... May 28 $ 250.0 $ 50.0 JP Realty, Inc. ............................ July 10 1,100.0 460.0 Prince Kuhio................................ August 5 39.0 24.0 50% ownership interest in GGP-TRS L.L.C. ("GGP/Teachers").......................... August 26 477.0 412.0 Pecanland Mall.............................. September 13 72.0 50.0 Southland Mall.............................. December 4 89.0 65.0 -------- -------- $2,027.0 $1,061.0 ======== ======== </Table> - --------------- (1) Additional funding, including for those acquisitions for which a specific and separate loan was not obtained, was paid from cash on hand or proceeds from borrowings under our credit facilities. The principal Victoria Ward, Limited 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. At acquisition in 2002, Victoria Ward owned 17 land parcels each of which was individually ground leased to tenants and 29 buildings containing approximately 878,000 square feet of retail space, as well as approximately 441,000 square feet of office, commercial and industrial leaseable area. Pursuant to the terms of the 2002 merger agreement with JP Realty, Inc. ("JP Realty"), a publicly-held real estate investment trust, and its operating partnership subsidiary, Price Development Company, Limited Partnership ("PDC"), the outstanding shares of JP Realty common stock were converted into $26.10 per share of cash (approximately $431.5 million). 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 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 F-21 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $23.6 million 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 six mixed-use commercial/business properties, containing an aggregate of over 15.2 million square feet of GLA in 10 western states. As further described in Note 4, during 2004 we sold certain of the commercial/business properties acquired in this acquisition. Concurrent with the formation of GGP/Teachers in 2002, we, 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. NOTE 4 DISCONTINUED OPERATIONS In August 2004, our Board of Directors approved plans to dispose of certain of the commercial/business properties originally acquired in the JP Realty acquisition in July 2002. The sale closed on November 1, 2004 for $67.4 million and a gain of approximately $11.2 million was recognized. The carrying amounts for these properties as of December 31, 2003 were as follows: <Table> <Caption> (IN THOUSANDS) Land........................................................ $13,246 Buildings and equipment, net................................ 38,062 Tenant accounts receivable, net............................. 1,337 Deferred expenses, net...................................... 27 Cash, prepaid and other assets.............................. 60 Accounts payable and accrued expenses....................... (110) ------- Net......................................................... $52,622 ======= </Table> On March 31, 2003, we sold McCreless Mall in San Antonio, Texas for aggregate consideration of $15.0 million (which was paid in cash at closing). We recorded a gain of approximately $4.0 million for financial reporting purposes on the sale of the mall. McCreless Mall was purchased in 1998 as part of a portfolio of eight shopping centers. Pursuant to SFAS No. 144, the operations of the JP Realty commercial/business properties and McCreless Mall (net of minority interest) have been reported as discontinued operations in the accompanying consolidated financial statements. Revenues and net income, before minority interests, were as follows: <Table> <Caption> YEARS ENDED DECEMBER 31, ------------------------ 2004 2003 2002 ------ ------ ------ (IN THOUSANDS) REVENUES: JP Realty commercial/business properties................. $6,118 $7,937 $3,236 McCreless................................................ -- 859 3,789 ------ ------ ------ Total................................................. $6,118 $8,796 $7,025 ====== ====== ====== NET INCOME: JP Realty commercial/business properties................. $3,801 $5,030 $1,911 McCreless................................................ -- 292 1,361 ------ ------ ------ Total................................................. $3,801 $5,322 $3,272 ====== ====== ====== </Table> F-22 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 5 INVESTMENTS IN UNCONSOLIDATED AFFILIATES As of December 31, 2004, we held ownership interests in various unconsolidated joint ventures, collectively, the "Unconsolidated Real Estate Affiliates." Generally, we share in the profits and losses, cash flows and other matters relating to our investments in Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. We manage most of the properties owned by these joint ventures. Some of the joint ventures have elected to be taxed as REITs. Certain of the properties were contributed to the joint venture subject to existing financing, as modified by certain replacement financing ("Retained Debt"), in order to balance the net equity values of the properties contributed by each of the venture partners. We are obligated to fund all amounts related to Retained Debt including any shortfalls of any subsequent sale or refinancing proceeds of the properties against their respective loan balances to the extent of such Retained Debt. Retained Debt totaled $148.7 million as of December 31, 2004 and $222.7 million as of December 31, 2003. New York State Common Retirement Fund ("NYSCRF"), our partner in GGP/Homart, Inc. ("GGP/ Homart"), has an exchange right which permits it to convert its ownership interest in GGP/Homart to shares of our common stock. If this exchange right is exercised, we may alternatively satisfy it in cash. During certain periods in 2006 or 2009, our partner in GGP Ivanhoe, IV, Inc. has the right to require us to purchase all of its GGP Ivanhoe IV, Inc. common stock for a purchase price equal to the fair value of such stock. We can satisfy this obligation in any combination of cash or our common stock. The significant accounting policies used by the Unconsolidated Real Estate Affiliates are the same as ours. F-23 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUMMARIZED FINANCIAL INFORMATION OF OUR INVESTMENTS IN UNCONSOLIDATED REAL ESTATE AFFILIATES Following is summarized financial information for our Unconsolidated Real Estate Affiliates as of December 31, 2004 and 2003 and for the years ended December 31, 2004, 2003 and 2002. <Table> <Caption> DECEMBER 31, ------------------------ 2004 2003 ----------- ---------- (IN THOUSANDS) COMBINED BALANCE SHEETS -- UNCONSOLIDATED REAL ESTATE AFFILIATES Assets: Land...................................................... $ 852,137 $ 532,036 Buildings and equipment................................... 7,398,555 4,698,202 Less accumulated depreciation............................. (982,616) (600,432) Developments in progress.................................. 220,486 100,197 ----------- ---------- Net property and equipment............................. 7,488,562 4,730,003 Investment in unconsolidated joint ventures............... 56,362 11,876 Investment land and land held for development and sale.... 257,555 -- ----------- ---------- Net investment in real estate.......................... 7,802,479 4,741,879 Cash and cash equivalents................................. 134,399 107,214 Tenant accounts receivable, net........................... 119,446 82,090 Deferred expenses, net.................................... 175,446 120,156 Prepaid expenses and other assets......................... 261,555 99,042 ----------- ---------- Total assets......................................... $ 8,493,325 $5,150,381 =========== ========== Liabilities and Owners' Equity: Mortgage notes and other property debt payable............ $ 5,601,137 $3,542,173 Accounts payable and accrued expenses..................... 416,426 232,120 Minority interest......................................... 991 117 Owners' equity............................................ 2,474,771 1,375,971 ----------- ---------- Total liabilities and owners' equity................. $ 8,493,325 $5,150,381 =========== ========== INVESTMENT IN AND LOANS TO/FROM UNCONSOLIDATED REAL ESTATE AFFILIATES Owners' equity............................................ $ 2,474,771 $1,375,971 Less joint venture partners' equity....................... (1,258,133) (794,402) Capital or basis differences and loans.................... 728,903 49,044 ----------- ---------- Investment in and loans to/from Unconsolidated Real Estate Affiliates............................................. $ 1,945,541 $ 630,613 =========== ========== </Table> F-24 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) <Table> <Caption> YEARS ENDED DECEMBER 31, --------------------------------- 2004 2003 2002 --------- --------- --------- (IN THOUSANDS) COMBINED STATEMENTS OF OPERATIONS -- UNCONSOLIDATED REAL ESTATE AFFILIATES Revenues: Minimum rents............................................. $ 569,287 $ 559,020 $ 484,539 Tenant recoveries......................................... 265,296 272,536 236,700 Overage rents............................................. 21,421 15,592 16,769 Land sales................................................ 38,681 -- -- Other..................................................... 35,636 15,123 13,001 --------- --------- --------- Total revenues......................................... 930,321 862,271 751,009 --------- --------- --------- Expenses: Real estate taxes......................................... 77,513 78,449 65,904 Repairs and maintenance................................... 59,051 64,865 56,340 Marketing................................................. 25,859 27,504 25,294 Other property operating costs............................ 145,655 117,053 98,767 Land sales operations..................................... 18,101 -- -- Provision for doubtful accounts........................... 5,389 3,197 3,433 Property management and other costs....................... 47,042 48,807 40,818 General and administrative................................ 7,427 2,099 536 Depreciation and amortization............................. 171,756 158,483 136,717 --------- --------- --------- Total expenses......................................... 557,793 500,457 427,809 --------- --------- --------- Operating income............................................ 372,528 361,814 323,200 Interest income............................................. 3,779 5,757 14,976 Interest expense............................................ (179,808) (174,862) (161,339) Equity in income of unconsolidated joint ventures........... 5,110 4,640 4,938 --------- --------- --------- Net income.................................................. $ 201,609 $ 197,349 $ 181,775 ========= ========= ========= EQUITY IN INCOME OF UNCONSOLIDATED AFFILIATES Total income of Unconsolidated Real Estate Affiliates....... $ 201,609 $ 197,349 $ 181,775 Joint venture partners' share of income of Unconsolidated Real Estate Affiliates.................................... (103,768) (98,226) (90,449) Amortization of capital or basis differences................ (9,633) (3,263) (4,717) Elimination of Unconsolidated Real Estate Affiliate loan interest.................................................. (17) (1,380) (5,784) --------- --------- --------- Equity in income of unconsolidated affiliates............... $ 88,191 $ 94,480 $ 80,825 ========= ========= ========= </Table> F-25 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUMMARIZED FINANCIAL INFORMATION OF INDIVIDUALLY SIGNIFICANT UNCONSOLIDATED REAL ESTATE AFFILIATES We own 50% of the membership interest of GGP/Homart II L.L.C. ("GGP/Homart II"), a limited liability company. The remaining 50% interest in GGP/Homart II is owned by NYSCRF. GGP Homart II owns 10 retail properties. <Table> <Caption> DECEMBER 31, ----------------------- 2004 2003 ---------- ---------- (IN THOUSANDS) Assets: Land...................................................... $ 190,707 $ 214,740 Buildings and equipment................................... 1,957,969 1,863,033 Less accumulated depreciation............................. (205,637) (151,663) Developments in progress.................................. 63,970 40,261 ---------- ---------- Net investment in real estate.......................... 2,007,009 1,966,371 Cash and cash equivalents................................. 23,149 5,999 Tenant accounts receivable, net........................... 32,265 28,241 Deferred expenses, net.................................... 59,102 59,658 Prepaid expenses and other assets......................... 36,236 39,662 ---------- ---------- Total assets........................................... $2,157,761 $2,099,931 ========== ========== Liabilities and Owners' Equity: Mortgage notes and other property debt payable............ $1,331,301 $1,317,607 Accounts payable and accrued expenses..................... 81,574 76,290 Minority interest......................................... 117 117 Owners' equity............................................ 744,769 705,917 ---------- ---------- Total liabilities and owners' equity................... $2,157,761 $2,099,931 ========== ========== </Table> F-26 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) <Table> <Caption> YEARS ENDED DECEMBER 31 ------------------------------ 2004 2003 2002 -------- -------- -------- Revenues: Minimum rents...................................... $184,402 $177,739 $136,405 Tenant recoveries.................................. 90,969 85,194 65,837 Overage rents...................................... 5,530 5,552 4,063 Other.............................................. 5,279 5,727 2,745 -------- -------- -------- Total revenues.................................. 286,180 274,212 209,050 Expenses: Real estate taxes.................................. 27,030 24,493 19,068 Repairs and maintenance............................ 18,734 18,455 13,506 Marketing.......................................... 9,504 9,271 6,901 Other property operating costs..................... 34,224 34,387 23,152 Provision for doubtful accounts.................... 1,591 1,733 578 Property management and other costs................ 16,176 15,892 11,357 General and administrative......................... 4,223 577 63 Depreciation and amortization...................... 56,420 53,243 39,397 -------- -------- -------- Total expenses.................................. 167,902 158,051 114,022 Operating income..................................... 118,278 116,161 95,028 Interest income...................................... 1,493 4,189 11,074 Interest expense..................................... (55,780) (60,491) (49,657) -------- -------- -------- Net Income........................................... $ 63,991 $ 59,859 $ 56,445 ======== ======== ======== </Table> NOTE 6 MORTGAGE NOTES AND OTHER PROPERTY DEBT PAYABLE Mortgage notes and other debt payable are summarized as follows: <Table> <Caption> DECEMBER 31, ------------------------ 2004 2003 ----------- ---------- (IN THOUSANDS) Fixed-rate debt: Commercial mortgage-backed securities..................... $ 332,526 $ 307,802 Other collateralized mortgage notes and other debt payable................................................ 9,036,659 3,645,163 Corporate and other unsecured term loans.................. 1,750,882 99,279 ----------- ---------- Total fixed-rate debt..................................... 11,120,067 4,052,244 ----------- ---------- Variable-rate debt: Commercial mortgage-backed securities..................... 361,239 495,746 Other collateralized mortgage notes and other debt payable................................................ 2,189,059 1,176,750 Credit facilities......................................... 150,000 789,000 Corporate and other unsecured term loans.................. 6,490,582 135,750 ----------- ---------- Total variable-rate debt.................................. 9,190,880 2,597,246 ----------- ---------- Total..................................................... $20,310,947 $6,649,490 =========== ========== </Table> F-27 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As of December 31, 2004, approximately $21.6 billion of land, buildings and equipment and investment land and land held for development and sale have been pledged as collateral for our collateralized mortgage notes and other debt payable. Certain properties, including those within the portfolios collateralized by commercial mortgage-backed securities, are subject to financial performance covenants, primarily debt service coverage ratios. Our mortgage notes and other debt payable have various maturities through 2095. The weighted-average remaining term of our mortgage notes and other debt payable was 4.5 years as of December 31, 2004. COMMERCIAL MORTGAGE-BACKED SECURITIES In early December 2001, the Operating Partnership and certain Unconsolidated Real Estate Affiliates completed the placement of $2.55 billion of non-recourse commercial mortgage pass-through certificates (the "GGP MPTC"). As of December 31, 2004, the GGP MPTC had an outstanding balance of approximately $1.1 billion (including $390.9 million by Unconsolidated Real Estate Affiliates) and was collateralized by 11 malls and one office building, including six malls owned by Unconsolidated Real Estate Affiliates. The GGP MPTC requires monthly payments of principal and interest. The certificates represent beneficial interests in three loan groups made by three sets of borrowers (the Operating Partnership and certain Unconsolidated Real Estate Affiliates). The terms of the notes comprising the GGP MPTC are as follows: <Table> <Caption> INITIAL MATURITY INTEREST TERM INTEREST RATE WEIGHTED-AVERAGE INTEREST RATE - ---------------- ------------- ------------- ------------------------------ 36 months(1)......... Variable LIBOR plus 60 to 235 basis points LIBOR plus 79 basis points 51 months(2)......... Variable LIBOR plus 70 to 250 basis points LIBOR plus 103 basis points 5 years.............. Fixed 5.01 to 6.18% 5.38% </Table> - --------------- (1) With two no-cost 12-month extension options, one of which was exercised in 2004. (2) With two no-cost 18-month extension options. The extension options are subject to obtaining extensions of the interest rate protection agreements which were required to be obtained in conjunction with the GGP MPTC. OTHER COLLATERALIZED MORTGAGE NOTES AND OTHER DEBT PAYABLE Collateralized mortgage notes and other debt payable consist primarily of non-recourse notes collateralized by individual or groups of properties and equipment. Substantially all of the mortgage notes are non-recourse to us. Certain mortgage notes payable may be prepaid but are generally subject to a prepayment penalty equal to a yield-maintenance premium or a percentage of the loan balance. Certain loans have cross-default provisions and are cross-collateralized. Under certain cross-default provisions, a default under any mortgage note included in a cross-defaulted package may constitute a default under all such mortgage notes in the package and may lead to acceleration of the indebtedness due on each property within the collateral package. In general, the cross-defaulted properties are under common ownership. However, fixed-rate debt collateralized by two joint venture properties (totaling $138.6 million) is cross-defaulted and cross-collateralized with debt (totaling $868.8 million) collateralized by 11 Consolidated Properties. The fixed-rate collateralized mortgage notes and other debt payable bear interest ranging from 3.11% to 10.15%. The variable-rate collateralized mortgage notes and other debt payable bear interest at LIBOR plus 58 to 213 basis points. F-28 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2004 CREDIT FACILITY We entered into a credit agreement on November 12, 2004 to fund the cash portion of the TRC Merger consideration and, with other cash and financing sources, fund other costs of the merger transaction. The terms of the notes comprising the 2004 Credit Facility are as follows: <Table> <Caption> INITIAL OUTSTANDING AT CAPACITY DECEMBER 31, 2004 -------- ----------------- (IN MILLIONS) Six-month bridge loan...................................... $1,145.0 $ 749.9 Three-year term loan....................................... 3,650.0 3,650.0 Four-year term loan........................................ 2,000.0 2,000.0 Revolving credit facility.................................. 500.0 150.0 -------- -------- $7,295.0 $6,549.9 ======== ======== </Table> We have the ability to extend the maturity of up to $600 million of the bridge loan for an additional six months. Principal repayment of the three-year $3.65 billion term loan begins in November 2005 with semi-annual payments in 2006, quarterly payments in 2007 and a final $1.775 billion payment in November 2007. Principal repayment of the four-year $2 billion term loan begins in March 2005 with quarterly payments through September 2008 and a final $1.925 billion payment in November 2008. The credit agreement currently bears interest at a weighted-average rate of LIBOR plus approximately 2.22 percent. We are generally required to apply the net proceeds of future mortgage financings and refinancings, sales of equity, and asset dispositions (including by casualty or condemnation) toward prepayment of the credit agreement in accordance with various priorities set out in the credit agreement. Exceptions to this requirement include capital expenditures, $500 million annually per our written request to the lenders and other items. The credit agreement is secured by a pledge of the Operating Partnership's ownership interest in TRCLP and in GGPLP L.L.C and also by a pledge of the interest in an operating account in which we will deposit any distributions the Operating Partnership receives from our interests in the TRCLP companies. During the term of the facility, we are subject to customary affirmative and negative covenants. Upon the occurrence of an event of default contained in the credit agreement, the lenders under the facilities will have the option of declaring immediately due and payable all amounts outstanding under the agreement. The credit agreement contains events of default including failure to maintain our status as a REIT under the Internal Revenue Code, failure to remain listed on the New York Stock Exchange and such customary events as nonpayment of principal, interest, fees or other amounts, breach of representations and warranties, breach of covenant, cross-default to other indebtedness and certain bankruptcy events. CREDIT FACILITIES In April 2003, we established the "2003 Credit Facility," a revolving credit facility and term loan with initial borrowing availability of approximately $779.0 million (which was subsequently increased to approximately $1.25 billion). The 2003 Credit Facility was repaid in November 2004, had a term of three years and provided for partial amortization of the principal balance of the term loan in the second and third years. UNSECURED TERM LOANS In conjunction with the TRC Merger, we assumed $1.6 billion of publicly-traded unsecured debt. Included in this total is $46.6 million of unsecured, medium-term notes which bear interest at fixed rates of 8.09% to 8.78% and mature at various dates from 2005 to 2007. The remaining $1.1 billion of publicly-traded unsecured debt bears interest at fixed rates ranging from 3.65% to 8.00% and matures at various dates from 2008 to 2013. F-29 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) During August 2002, we arranged for an aggregate of $150.0 million in loans from two separate groups of banks. We borrowed $80.0 million on this loan in August 2002 and $70.0 million in September 2002. These two-year loans were repaid in 2004, provided for quarterly partial amortization of principal, bore interest at LIBOR plus 100 basis points and required the remaining balance to be paid at maturity (unless extended, under certain circumstances, for an additional nine months). In conjunction with our acquisition of JP Realty in 2002, we assumed $100 million of ten-year senior unsecured notes which bear interest at a fixed rate of 7.29% and were issued by PDC in March 1998. The notes require semi-annual interest payments. Annual principal payments will begin in March 2005. INTEREST RATE SWAPS Concurrent with the issuance of the GGP MPTC certificates, we purchased interest rate protection agreements which were structured to limit our exposure to interest rate fluctuations. An equal amount of interest rate protection agreements were simultaneously sold to fully offset the effect of these agreements and to recoup a substantial portion of the cost of such agreements. To achieve a more desirable balance between fixed and variable-rate debt, we have also entered into certain swap agreements as follows: <Table> <Caption> 2004 CREDIT GGP MPTC AGREEMENT PROPERTY SPECIFIC ------------ ------------- ----------------- Total notional amount (in millions)........................ $ 375.0 $ 350.0 $ 15.4 Average fixed effective rate (pay rate)............................ 4.26% 3.43% 4.71% Average variable interest rate of related debt (receive rate)...... LIBOR + .92 LIBOR + 2.25 LIBOR + 2.13 </Table> Such swap agreements have been designated as cash flow hedges and are intended to hedge our exposure to future interest payments on the related variable-rate debt. LETTERS OF CREDIT AND SURETY BONDS We had outstanding letters of credit and surety bonds of approximately $194 million as of December 31, 2004, primarily in connection with insurance requirements, special real estate assessments and construction obligations. NOTE 7 INCOME TAXES We 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 our taxable year beginning January 1, 1993. To qualify as a REIT, we must meet a number of organizational and operational requirements, including requirements to distribute at least 90% of our ordinary taxable income and to distribute to stockholders or pay tax on 100% of capital gains and to meet certain asset and income tests. It is management's current intention to adhere to these requirements. As a REIT, we will generally not be subject to corporate level Federal income tax on taxable income we distribute currently to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to Federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income or property, and to Federal income and excise taxes on our undistributed taxable income. In addition, we are subject to rules which may impose corporate income tax on certain built-in gains recognized upon the disposition of assets owned by our subsidiaries where such subsidiaries (or other predecessors) had formerly been C corporations. These rules F-30 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) apply only where the disposition occurs within certain specified recognition periods. Specifically, in the case of the TRC assets, we may be subject to tax on built-in gain recognized upon the disposition prior to January 1, 2008 of assets owned by TRC on January 1, 1998, the effective date of TRC's REIT election. At December 31, 2004, the total amount of built-in gains with respect to our assets is substantial. However, we intend to utilize tax strategies such as dispositions through like-kind exchanges and the use of net operating loss carryforwards to limit or offset the amount of such gains and therefore the amount of tax paid. We also have subsidiaries which we have elected to be treated as taxable real estate investment trust subsidiaries ("TRSs") and which are, therefore, subject to Federal and state income taxes. Our primary TRSs include GGMI, entities which own our planned community properties and other TRSs acquired in the TRC Merger. Current Federal income taxes of certain of these TRSs are likely to increase in future years as we exhaust certain net loss carry forwards of such entities and as certain planned community developments are completed. Such increases could be significant. The income tax provision was insignificant in 2003 and 2002. The income tax provision (benefit) for the year ended December 31, 2004 primarily relates to the TRS operations acquired in the TRC Merger. Accordingly, the current year provision reflects the operations of the acquired TRSs for the period November 13, 2004 through December 31, 2004. <Table> <Caption> (IN THOUSANDS) Current..................................................... $ 390 Deferred.................................................... 1,993 ------ Total....................................................... $2,383 ====== </Table> Income tax expense for the year ended December 31, 2004 is reconciled to the amount computed by applying the Federal corporate tax rate as follows: <Table> <Caption> (IN THOUSANDS) Tax at statutory rate on earnings from continuing operations before income taxes....................................... $ 89,612 Increase (decrease) in valuation allowances, net............ (2,110) State income taxes, net of Federal income tax benefit....... 115 Tax at statutory rate on earnings not subject to Federal income taxes and other.................................... (85,234) -------- Income tax expense.......................................... $ 2,383 ======== </Table> SFAS No. 109 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The deferred tax assets and liabilities of the TRSs related primarily to differences in the book and tax bases of property and to operating loss and interest deduction carryforwards for federal income tax purposes. A valuation allowance for deferred tax assets is provided if we believe it is more likely than not that all or some portion of the deferred tax asset will not be realized. An increase or decrease in the valuation allowance that results from the change in circumstances, and which causes a change in our judgment about the realizability of the related deferred tax asset, would be included in the current tax provision. In connection with the TRC Merger, we allocated the purchase price to the various components of the acquisition based upon the relative value of each component in accordance with SFAS No. 141, "Business Combinations." With respect to income taxes, SFAS No. 109, paragraph 30 requires that a deferred tax liability or asset be recognized for differences between the assigned values and the tax bases of the assets and liabilities recognized in a purchase business combination. As part of the TRC Merger, we acquired a controlling financial interest in an entity whose assets include, among other things, approximately F-31 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $464.5 million of temporary differences (primarily interest deduction carryforwards with no set expiration). We have evaluated the nature of this tax attribute and believe that it is more likely than not that we will realize the benefit of these carryforwards that do not expire, and, accordingly, we have recorded an additional deferred tax asset of approximately $140 million related to this acquired tax attribute for a total deferred tax asset related to interest deduction carryforwards of approximately $154.5 million. In connection with purchase accounting and SFAS No. 141, we recorded a deferred tax liability of approximately $1.5 billion, which relates to the difference between the tax bases of the property owned by the TRSs acquired in the TRC Merger and the assigned values for financial reporting purposes. We also recorded a net deferred tax asset of $169 million, which relates to loss carryforwards and interest expense. Realization of deferred tax assets is dependent on generating sufficient taxable income in future periods. The net operating loss carryforwards are currently scheduled to expire in subsequent years through 2025. Some of the carryforward benefits are subject to annual limitation imposed under section 382 of the Code and the deferred tax asset is recorded based on the net operating loss remaining after considering the section 382 limitation. Except to the extent that valuation allowances have been established, we believe these limitations will not prevent the carryforward benefits from being realized. Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. Net deferred tax assets (liabilities) are summarized as follows: <Table> <Caption> 2004 2003 ----------- ------- (IN THOUSANDS) Total deferred tax assets................................... $ 180,374 $13,276 Valuation allowance......................................... (29,998) (8,143) ----------- ------- Net deferred tax assets..................................... 150,376 5,133 Total deferred tax liabilities.............................. (1,414,565) -- ----------- ------- Net deferred tax assets (liabilities)....................... $(1,264,189) $ 5,133 =========== ======= </Table> Due to the uncertainty of the realization of certain tax carryforwards, we established valuation allowances. The majority of the valuation allowances related to net operating loss carryforwards where there is uncertainty regarding their realizability and will more likely than not expire unused. The tax effects of temporary differences and carryforwards included in the net deferred tax assets (liabilities) at December 31, 2004 and 2003 are summarized as follows: <Table> <Caption> 2004 2003 ----------- ------ (IN THOUSANDS) Property, primarily differences in depreciation and amortization, the tax basis of land assets and treatment of interest and certain other costs....................... $(1,475,858) -- Interest deduction carryforwards............................ 154,523 -- Operating loss and tax credit carryforwards................. 57,146 $5,133 ----------- ------ Net deferred tax assets (liabilities)....................... $(1,264,189) $5,133 =========== ====== </Table> Several of our subsidiaries or partnerships in which we have an interest are currently under examination by the Internal Revenue Service. Although we believe our tax returns are correct, the final determination of tax audits and any related litigation could be different than that which was reported on the returns. In the opinion of management, we have made adequate tax provisions for years subject to examination. Earnings and profits, which determine the taxability of dividends to stockholders, differ from net income reported for financial reporting purposes due to differences for Federal income tax reporting purposes in, among other things, estimated useful lives, depreciable basis of properties and permanent and temporary F-32 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) differences on the inclusion of deductibility of elements of income and deductibility of expense for such purposes. Distributions paid on our common and preferred stock and their tax status are presented in the following table. The tax status of our distributions in 2004, 2003 and 2002 may not be indicative of future periods. The portion of distributions shown below as unrecaptured Section 1250 capital gains are designated as capital gain distributions for tax purposes. <Table> <Caption> 2004 2003 2002 ------ ------ ------ COMMON SHARES Ordinary income............................................ $1.260 $1.003 $0.710 Return of capital.......................................... -- -- 0.177 Unrecaptured Section 1250 capital gains.................... -- 0.017 0.003 ------ ------ ------ Distributions declared per common share.................... $1.260 $1.020 $0.890 ====== ====== ====== PREFERRED SHARES(*) Ordinary income............................................ $ -- $1.403 $1.802 Unrecaptured Section 1250 capital gains.................... -- 0.028 0.010 ------ ------ ------ Distributions declared per common share.................... $ -- $1.431 $1.812 ====== ====== ====== </Table> - --------------- (*) All outstanding preferred shares of General Growth were redeemed in 2003 (Note 1). NOTE 8 RENTALS UNDER OPERATING LEASES We receive rental income from the leasing of retail and other space under operating leases. The minimum future rentals based on operating leases of Consolidated Centers held as of December 31, 2004 are as follows: <Table> <Caption> YEAR AMOUNT - ---- -------------- (IN THOUSANDS) 2005........................................................ $1,225,101 2006........................................................ 1,109,692 2007........................................................ 997,971 2008........................................................ 870,755 2009........................................................ 741,005 Subsequent.................................................. 2,515,781 </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 operating expenses. Such operating leases are with a variety of tenants the majority of which are national and regional retail chains and local retailers, and consequently, our credit risk is concentrated in the retail industry. NOTE 9 TRANSACTIONS WITH AFFILIATES PROPERTY MANAGEMENT AND OTHER FEES GGMI and other property management affiliates recognized fees primarily from the Unconsolidated Real Estate Affiliates of $61.8 million in 2004, $63.0 million in 2003 and $52.6 million in 2002. F-33 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTES RECEIVABLE -- OFFICERS Notes receivable -- officers were as follows: <Table> <Caption> 2004 2003 ------ ------ (IN THOUSANDS) Income tax withholdings reported in Prepaid and Other Assets.................................................... $ 623 $ 775 Reported as a reduction to Stockholders' Equity............. 5,178 6,475 ------ ------ $5,801 $7,250 ====== ====== </Table> Between 1998 and April 30, 2002, some of our officers issued $25.0 million of promissory notes to us. The notes were issued in connection with the officers' exercises of options to purchase 2,703,000 shares of our common stock. The notes bore interest at a rate equal to LIBOR plus 50 basis points, were full recourse to the officers, were collateralized by the shares of our common stock issued upon exercise of such options, provided for quarterly payments of interest and were payable to us on demand. As of April 30, 2002, our Board of Directors terminated the availability of such loans to officers. In conjunction with this decision, the terms of the promissory notes, including approximately $2.8 million related to income tax withholding payments which we had made on behalf of the officers, were restructured. As of April 30, 2002, each officer repaid at least 60% of the principal and 100% of the interest due under such officer's note and the remaining amounts, approximately $10.1 million, were represented by amended and restated promissory notes. These amended and restated, 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) 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 $500,000 was received from one of the officers. NOTE 10 EMPLOYEE BENEFIT AND STOCK PLANS INCENTIVE STOCK PLANS We provide incentives to attract and retain officers and key employees through the 2003 Incentive Stock Plan and, prior to April 2003, the 1993 Stock Incentive Plan. In addition to certain grants of restricted stock as discussed below, options are granted by the Compensation Committee of the Board of Directors at an exercise price of not less than 100% of the fair market value of our common stock on the date of the grant. The terms of the options are fixed by the Compensation Committee. Options granted to officers and key employees under the 2003 Incentive Stock Plan are for 5-year terms and under the 1993 Incentive Stock Plan 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, 159,957 options were granted to certain employees under the 1993 Stock Incentive Plan with the same terms as the threshold-vesting stock options granted in 2000 under the 1998 Incentive Stock Plan (as described below). Options granted to non-employee directors are exercisable in full commencing on the date of grant and are scheduled to expire on the tenth anniversary of the date of the grant. The 2003 Incentive Stock Plan provides for the issuance of up to 9.0 million shares of our common stock. F-34 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A summary of the status of options granted under the 2003 and 1993 Stock Incentive Plans as of December 31, 2004, 2003 and 2002 and changes during the years ended on those dates is presented below. <Table> <Caption> 2004 2003 2002 --------------------- -------------------- -------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ---------- -------- --------- -------- --------- -------- Outstanding at beginning of year......................... 1,482,087 $14.86 1,590,309 $12.45 1,629,657 $10.64 Granted........................ 922,500 30.80 760,500 16.96 612,000 15.84 Exercised...................... (521,100) 16.83 (845,922) 12.28 (642,048) 11.13 Forfeited...................... (7,800) 11.26 (22,800) 11.76 (9,300) 9.99 ---------- ------ --------- ------ --------- ------ Outstanding at end of year..... 1,875,687 $22.17 1,482,087 $14.86 1,590,309 $12.45 ========== ====== ========= ====== ========= ====== Exercisable at end of year..... 369,687 $19.49 234,087 $13.67 586,809 $10.93 Options available for future grants....................... 7,994,000 8,971,500 3,876,642 Weighted average per share fair value of options granted during the year.............. $ 2.97 $ 1.33 $ 1.21 </Table> The following table summarizes information about stock options outstanding pursuant to the 2003 and 1993 Stock Incentive Plans as of December 31, 2004: <Table> <Caption> OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------------ ---------------------------- WEIGHTED WEIGHTED WEIGHTED NUMBER AVERAGE REMAINING AVERAGE OPTIONS AVERAGE RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE - ------------------------ ----------- ----------------- -------------- ----------- -------------- $7.08 - $10.62........ 11,457 4.3 years $ 9.99 11,457 $ 9.99 $10.62 - $14.16....... 334,230 6.2 years 12.17 148,230 12.33 $14.16 - $17.71....... 688,000 8.0 years 16.74 76,000 16.75 $21.25 - $24.79....... 12,000 8.6 years 21.96 12,000 21.96 $24.79 - $28.33....... 15,000 9.0 years 27.67 15,000 27.67 $28.33 - $31.87....... 815,000 4.1 years 30.94 107,000 30.94 --------- --------- ------ ------- ------ Total................. 1,875,687 6.0 years $22.17 369,687 $19.49 ========= ========= ====== ======= ====== </Table> 1998 INCENTIVE PLAN Under the 1998 Incentive Stock Plan (the "1998 Incentive Plan"), we may also grant stock incentive awards to employees in the form of threshold-vesting stock options ("TSOs"). The exercise price of the TSO is the Fair Market Value ("FMV") of a share of our common stock on the date the TSO is granted. The threshold price (the "Threshold Price"), which must be achieved for the TSO to vest is determined by multiplying the FMV on the date of grant by the Estimated Annual Growth Rate (currently 7%) and compounding the product over a five-year period. Shares of our common stock must achieve and sustain the Threshold Price for at least 20 consecutive trading days at any time over the five years following the date of grant for the TSO to vest. TSOs granted in 2004 and thereafter must vest within five years of the grant date in order to avoid forfeiture and must be exercised within 30 days of the vesting date. TSOs granted prior to 2004 have a term of up to 10 years but must vest within five years of the grant date in order to avoid forfeiture. The aggregate number of shares of our common stock which may be subject to TSOs may not exceed 6.0 million, subject to certain customary adjustments to prevent dilution. As of December 31, 2004, 1,436,305 shares were available for future grants. F-35 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As a result of increases in the price of our common stock, TSOs granted in 2002 and 2003 vested in 2003 and TSOs granted in 1999, 2000 and 2001 vested in 2002, as detailed below. The vesting of the TSOs resulted in the recognition of $3.0 million of compensation expense in 2004, $14.9 million in 2003 and $11.8 million in 2002. The following is a summary of the options under the 1998 Incentive Plan that have been awarded as of December 31, 2004: <Table> <Caption> TSO GRANT YEAR ---------------------------------------------------------------------- 2004 2003 2002 2001 2000 1999 ---------- --------- --------- --------- --------- --------- Exercise price....... $ 30.94 $ 16.77 $ 13.58 $ 11.58 $ 9.99 $ 10.56 Threshold Vesting Stock Price........ 43.39 23.52 19.04 16.23 14.01 14.81 Fair value of options on grant date...... 1.59 1.31 1.13 0.74 0.50 0.45 Shares: Original Grant....... 1,031,480 900,000 779,025 989,988 753,090 941,892 Forfeited............ (54,798) (58,734) (120,312) (147,225) (168,726) (281,985) Vested and exchanged for cash........... -- (549,594) (495,693) (610,011) (438,288) (460,623) Vested and exercised.......... -- (140,904) (107,124) (169,980) (141,000) (189,381) ---------- --------- --------- --------- --------- --------- Outstanding.......... 976,682 150,768 55,896 62,772 5,076 9,903 ========== ========= ========= ========= ========= ========= </Table> The fair value of each option granted pursuant to the 2003 and 1993 Stock Incentive Plans and TSOs granted pursuant to the 1998 Incentive Plan in 2003 and 2002 was estimated on the date of grant using the Black-Scholes option pricing model. In 2004, the fair value of TSO grants was estimated using the binomial method. The following assumptions were used in determining these values: <Table> <Caption> 2004 2003 2002 ------------ ------------ ------------ Risk-free interest rate.............................. 3.44% 4.28% 4.49% Dividend yield....................................... 6.09 6.21 6.37 Expected life........................................ 5.2 years 9.9 years 7.6 years Expected volatility.................................. 20.10% 16.95% 19.57% </Table> EMPLOYEE STOCK PURCHASE PLAN The General Growth Properties, Inc. Employee Stock Purchase Plan (the "ESPP") was established to assist eligible employees in acquiring a stock ownership interest in General Growth. Under the ESPP, eligible employees make payroll deductions over a six-month purchase period. At the end of the six-month purchase period, the amounts withheld are used to purchase shares of our common stock at a purchase price equal to 85% of the lesser of the closing price of a share of our common stock on the first or last trading day of the purchase period. A maximum of 1.5 million shares of our common stock are reserved for issuance under the ESPP. Since the inception of the ESPP, an aggregate of 1,038,290 shares of our common stock have been sold under the ESPP, including 65,176 shares for the purchase period ending December 31, 2004 which were purchased at a price of $25.18 per share. RESTRICTED STOCK Pursuant to the 2003 Stock Incentive Plan, in February 2004, certain officers were granted a total of 55,000 shares of restricted common stock. In addition, pursuant to the 1993 Stock Incentive Plan, certain F-36 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) officers were granted a total of 105,000 shares of restricted common stock in February 2003 and 150,000 shares in September 2002. The 2004 grant and 60,000 of the shares granted in 2003 have a one-year vesting period. The remaining 45,000 shares granted in 2003 and the 2002 grants vest over three years. As this restricted stock represents an incentive for future periods, we are recognizing the related compensation expense ratably over the applicable vesting periods. MANAGEMENT SAVINGS PLAN We sponsor the General Growth Management Savings and Employee Stock Ownership Plan (the "401(k) Plan") which permits all eligible employees to defer a portion of their compensation in accordance with the provisions of Section 401(k) of the Code. Under the 401(k) Plan, we make contributions to match the contributions of the participants. We match 100% of the first 4% of earnings contributed by plan participants and 50% of the next 2% of the participant's earnings contributions. We made matching contributions of approximately $5.3 million in 2004, $4.4 million in 2003 and $4.2 million in 2002. TRC PLAN As a result of the TRC Merger, we assumed a retiree benefits plan that provides postretirement medical and life insurance benefits to former TRC employees who met minimum age and service requirements. We pay a portion of the cost of participants' life insurance coverage and make contributions to the cost of participants' medical coverage based on years of service, subject to a maximum annual contribution. Amounts related to this plan, which has now been frozen, were not material as of or for the period ended December 31, 2004. NOTE 11 MINORITY INTEREST COMMON Changes in outstanding Operating Partnership Common Units for the three years ended December 31, 2004 are as follows: <Table> December 31, 2001........................................... 58,717,479 Exchanges for General Growth common stock................. (48,738) ---------- December 31, 2002........................................... 58,668,741 Exchanges for General Growth common stock................. (2,956,491) ---------- December 31, 2003........................................... 55,712,250 Exchanges for General Growth common stock................. (179,987) ---------- December 31, 2004........................................... 55,532,263 ========== </Table> Under certain circumstances, the Common Units can be redeemed at the option of the holders for cash or, at our election, for shares of our common stock on a one-for-one basis. The holders of the Common Units also share equally with our common stockholders on a per share basis in any distributions by the Operating Partnership on the basis that one Common Unit is equivalent to one share of our common stock. Also included in minority interest-common is minority interest in consolidated joint ventures of approximately $1.7 million as of December 31, 2004 and $1.9 million as of December 31, 2003. F-37 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) PREFERRED Components of minority interest -- preferred as of December 31, 2004 and 2003 are as follows: <Table> <Caption> PER UNIT CARRYING AMOUNT COUPON ISSUING NUMBER OF LIQUIDATION REDEEMABLE ------------------- SECURITY TYPE RATE ENTITY UNITS PREFERENCE BY ISSUER 2004 2003 - ------------- ------ ------- --------- ----------- ---------- -------- -------- PERPETUAL PREFERRED UNITS Redeemable Preferred Units ("RPUs")...... 8.95% LLC 940,000 $ 250 (1) $235,000 $235,000 Cumulative Preferred Units ("CPUs")...... 8.25% LLC 20,000 250 N/A 5,000 5,000 PDC Series A.......... 8.75% PDC 510,000 25 (2) -- 12,750 PDC Series B.......... 8.95% PDC 3,800,000 25 (3) -- 95,000 PDC Series C.......... 8.75% PDC 320,000 25 May 2005 8,000 8,000 -------- -------- 248,000 355,750 -------- -------- CONVERTIBLE PREFERRED UNITS Series B--JP Realty... 8.50% GGPLP 1,419,493 50 N/A 70,975 71,320 Series C--Glendale Galleria............ 7.00% GGPLP 643,504 50 N/A 32,176 41,131 Series D--Foothills Mall................ 6.50% GGPLP 532,750 50 N/A 26,637 26,637 Series E--Four Seasons Town Centre......... 7.00% GGPLP 502,658 50 N/A 25,132 -- -------- -------- 154,920 139,088 Other preferred stock of consolidated subsidiaries........ N/A various 241 1,000 (4) 241 373 -------- -------- Total Minority Interest- Preferred........... $403,161 $495,211 ======== ======== </Table> - --------------- (1) $175,000 redeemable by issuer in May 2005 and $60,000 in April 2007. (2) Redeemed in April 2004. (3) Redeemed in July 2004. (4) Redeemable on demand, under certain circumstances. Holders of the RPUs and CPUs are entitled to receive cumulative preferential cash distributions prior to any distributions by the LLC to the Operating Partnership. Subject to certain limitations, the RPUs may be redeemed in cash by the LLC for the liquidation preference amount plus accrued and unpaid distributions and may be exchanged by the holders of the RPUs for an equivalent amount of redeemable preferred stock of General Growth. Such preferred stock provides for an equivalent 8.95% annual preferred distribution and is redeemable at our option for cash equal to the liquidation preference amount plus accrued and unpaid distributions. The PDC Series C is convertible, at the option of the preferred holders in 2010, into 0.025 shares of a newly created series of General Growth preferred stock with an equivalent base liquidation preference and with payment and liquidation rights comparable to such preferred units. F-38 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Convertible Preferred Units are convertible, with certain restrictions, at any time by the holder into Common Units of the Operating Partnership at the following rates: <Table> <Caption> NUMBER OF COMMON UNITS FOR EACH PREFERRED UNIT ---------------- Series B -- JP Realty....................................... 3.000 Series C -- Glendale Galleria............................... 2.433 Series D -- Foothills Mall.................................. 1.508 Series E -- Four Seasons Town Center........................ 1.298 </Table> NOTE 12 ACCUMULATED OTHER COMPREHENSIVE INCOME Components of accumulated other comprehensive income as of December 31, 2004 and 2003 are as follows: <Table> <Caption> 2004 2003 ------- -------- (IN THOUSANDS) Net unrealized losses on financial instruments.............. $(4,852) $(15,844) Minimum pension liability adjustment........................ (329) (431) Foreign currency translation................................ 1,590 -- Equity in unrealized losses on available-for-sale securities................................................ (94) -- ------- -------- $(3,685) $(16,275) ======= ======== </Table> NOTE 13 COMMITMENTS AND CONTINGENCIES In the normal course of business, from time to time, we are involved in legal actions relating to the ownership and operations of our properties. In management's opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material adverse effect on our consolidated financial position, results of operations or liquidity. We lease land or buildings at certain properties from third parties. The leases generally provide us with a right of first refusal in the event of a proposed sale of the property by the landlord. All of our ground leases are classified as operating leases. Accordingly, rental payments are expensed as incurred and have, to the extent applicable, been straight-lined over the term of the lease. Rental expense, including participation rent related to these leases, was $3.6 million in 2004, $2.5 million in 2003 and $1.6 million in 2002. From time to time, we have 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. TRC acquired various assets, including Summerlin, a master-planned community in suburban Las Vegas, Nevada, in the acquisition of The Hughes Corporation ("Hughes") in 1996. In connection with the acquisition of Hughes, TRC entered into a Contingent Stock Agreement ("CSA") for the benefit of the former Hughes owners or their successors ("beneficiaries"). Under the terms of the CSA, shares of TRC common stock were issuable to the beneficiaries based on the appraised values of defined asset groups, including Summerlin, at specified termination dates through 2009 and/or cash flows from the development and/or sale of those assets prior to the termination dates. On October 19, 2004, we delivered to the representatives an executed assumption agreement whereby we agreed, for the benefit of the holders of interests under the CSA and the representatives, to perform the CSA as successor to TRC, in the same manner and to the same extent that TRC would be required to perform the CSA if no succession had taken place. Under the assumption agreement, we assumed TRC's obligation under F-39 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the CSA to issue shares of common stock twice a year to holders of interests under the CSA and the representatives. The amount of shares is based upon a formula set forth under the CSA and upon our stock price. Such issuances could be dilutive to our existing stockholders. In addition, under the assumption agreement, we agreed that following the effective time of the TRC Merger there will not be a prejudicial effect on the holders of interests under the CSA and the representatives with respect to their receipt of securities pursuant to the CSA as a result of the TRC Merger and that securities delivered pursuant to the CSA will be freely tradable and readily marketable. We further agreed to indemnify and hold harmless the holders against losses arising out of any breach by us of the foregoing covenants. We account for the beneficiaries' share of earnings from the assets as an operating expense. We account for any distributions to the beneficiaries as of the termination dates related to assets we own as of the termination date as additional investments in the related assets (that is, contingent consideration). A total of 519,135 shares of our common stock were issued in February 2005 pursuant to the CSA. The following table summarizes the contractual maturities of our long-term and retained debt and commitments under ground leases. Both long-term debt and ground leases include the related purchase accounting fair value adjustments: <Table> <Caption> 2005 2006 2007 2008 2009 SUBSEQUENT TOTAL ---------- ---------- ---------- ---------- ---------- ---------- ----------- (IN THOUSANDS) Long-term debt........... $2,054,095 $2,093,735 $3,942,278 $4,542,475 $3,463,625 $4,214,739 $20,310,947 Retained debt............ 132,942 61 15,734 -- -- -- 148,737 Ground leases............ 14,935 14,874 14,870 14,870 14,870 601,351 675,770 ---------- ---------- ---------- ---------- ---------- ---------- ----------- TOTAL.................... $2,201,972 $2,108,670 $3,972,882 $4,557,345 $3,478,495 $4,816,090 $21,135,454 ========== ========== ========== ========== ========== ========== =========== </Table> NOTE 14 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In January 2004, the FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities" ("VIEs"), to improve financial reporting of special purpose and other entities. We adopted FIN 46, as amended, as of December 31, 2003. 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. We have certain special purpose entities, primarily created to facilitate the issuance of our commercial mortgage-backed securities (Note 6) and other securitized debt or to facilitate the tax-increment financing of certain improvements at its properties. Because these special purpose entities are QSPEs, they are not required to be consolidated in our consolidated financial statements. As our Unconsolidated Real Estate Affiliates have operating agreements granting the independent third-party joint venturers substantive participating rights, the implementation of FIN 46 did not result in the consolidation of any previously unconsolidated affiliates. In May 2003, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity," ("SFAS 150") which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability. The effective date of a portion of the Statement has been indefinitely postponed by the FASB. We did not enter into new financial instruments subsequent to May 2003 which would fall within the scope of this statement. None of our transactions, arrangements or financial instruments has been identified that appear to meet the criteria for liability recognition in accordance with paragraphs 9 and 10 under SFAS 150 due to the indefinite life of the joint venture arrangements. Accordingly, even if the effectiveness of the measurement and classification provision of these paragraphs is no longer F-40 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) postponed, we do not expect that it will be required to reclassify the liquidation amounts of such minority interests to liabilities. On December 16, 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets -- An Amendment of APB Opinion No. 29". The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with at broader exception for exchanges of nonmonetary assets that do not have "commercial substance". SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. We do not believe the adoption of SFAS No. 153 on June 15, 2005 will have a material effect on our consolidated financial statements. On December 16, 2004, the FASB issued SFAS No. 123 (Revised 2004), "Share-Based Payment" ("SFAS No. 123R"). SFAS 123R replaces SFAS No. 123, which we adopted in the second quarter of 2002. SFAS 123R requires that the compensation cost relating to share-based payment transactions be recognized in financial statements and be measured based on the fair value of the equity or liability instruments used. SFAS No. 123R is effective as of the first interim or annual reporting period that begins after June 15, 2005. We do not believe that the adoption of SFAS No. 123R will have a material effect on our consolidated financial statements. On February 7, 2005, the SEC staff published certain views concerning the accounting by lessees for leasehold improvements, rent holidays, lessor funding of lessee expenditures and other tenant inducements. Although the application of these views to lessors was not specified by the SEC and a formal accounting standard modifying existing practice on these items has not been issued or proposed, we have conducted a review of our accounting relative to such items. We believe that our leasing practices and agreements with a majority of our tenants provide that leasehold improvements that we fund represent fixed assets that we own and control and that leases with such arrangements are properly accounted for as commencing at the completion of construction of such assets. A smaller percentage of our tenant leases do not provide for landlord funding but rather provide for tenant funded construction and furnishing of the leased premises prior to the formal commencement of the lease. We have concluded that the cumulative incremental straight-line rental revenue that would have been recognized on such leases if it had commenced with the turn-over of such space rather than the lease-specified commencement date to be immaterial to current and previous periods. The recognition of straight-line rental revenue on this accelerated basis is not expected to have a material effect on future periods and will have no effect on periodic or cumulative cash flows to be received pursuant to a tenant lease. 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 was effective for the year ended December 31, 2003. Accordingly, in the comparative statements presented in 2003, we reclassified to other interest costs approximately $1.3 million of debt extinguishment costs recorded in 2002 that had been classified under then current accounting standards as extraordinary items. NOTE 15 SEGMENTS We have the following reportable segments: - - Retail and Other -- includes the operation and management of regional shopping centers, office and industrial properties, downtown specialty marketplaces, the retail and non-retail rental components of mixed-use projects and community retail centers F-41 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) - - Community Development -- includes the development and sale of land, primarily in large-scale, long-term community development projects in and around Columbia, Maryland; Summerlin, Nevada; and Houston, Texas Our two business segments offer different products or services and are managed separately because each requires different operating strategies or management expertise. Prior to the TRC Merger, substantially all of our business involved ownership and operation of shopping centers. As we evaluated operating results and resource allocation on a property-by-property basis, we had concluded that we had a single reportable segment. We do not distinguish or group our consolidated operations on a geographic basis. Further, all material operations are within the United States and no customer or tenant comprises more than 10% of consolidated revenues. The operating measure used to assess operating results for the business segments is Real Estate Property Net Operating Income ("NOI"). Management believes that NOI provides useful information about a property's operating performance. The accounting policies of the segments are the same as those described in Note 1, except that we account for real estate ventures in which we have joint interest and control and certain other minority interest ventures using the proportionate share method rather than the equity method. This difference affects only the reported revenues and operating expenses of the segments and has no effect on our reported net earnings. F-42 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Operating results for the segments and reconciliations of real estate property net operating income to income from continuing operations in the consolidated financial statements are as follows: <Table> <Caption> YEARS ENDED DECEMBER 31, --------------------------------------------------------------- 2004 2003 2002 ------------------------------------- ---------- ---------- RETAIL COMMUNITY RETAIL RETAIL AND OTHER DEVELOPMENT TOTAL AND OTHER AND OTHER ---------- ----------- ---------- ---------- ---------- (IN THOUSANDS) Property revenues: Minimum rents....................... $1,354,138 $ -- $1,354,138 $1,061,772 $ 835,423 Tenant recoveries................... 608,989 -- 608,989 472,471 380,537 Overage rents....................... 65,065 -- 65,065 43,552 36,451 Land sales.......................... -- 105,813 105,813 -- -- Other............................... 84,184 -- 84,184 49,456 42,653 ---------- -------- ---------- ---------- ---------- Total property revenues.......... 2,112,376 105,813 2,218,189 1,627,251 1,295,064 ---------- -------- ---------- ---------- ---------- Property operating expenses: Real estate taxes................... 167,866 -- 167,866 128,332 95,062 Repairs and maintenance............. 157,134 -- 157,134 115,149 92,359 Marketing........................... 61,571 -- 61,571 49,934 41,961 Other property operating costs...... 282,244 -- 282,244 -- -- Land sales operations............... 125 103,200 103,325 214,181 161,241 Provision for doubtful accounts..... 13,148 -- 13,148 8,705 5,670 ---------- -------- ---------- ---------- ---------- Total property operating expenses....................... 682,690 103,200 785,288 516,301 396,293 ---------- -------- ---------- ---------- ---------- Real estate property net operating income.............................. $1,429,686 $ 2,613 $1,432,901 $1,110,950 $ 898,771 ========== ======== Real estate property net operating income of unconsolidated properties.................................................... (294,933) (293,104) (261,340) Management and other fees....................................... 82,896 84,138 75,479 Discontinued operations and other revenues...................... (2,680) (5,110) (2,880) Property management and other costs............................. (100,788) (109,746) (94,676) General and administrative...................................... (9,499) (8,533) (8,720) Depreciation and amortization................................... (365,622) (230,195) (179,036) ---------- ---------- ---------- Operating income................................................ 742,275 548,400 427,598 Interest income................................................. 3,227 2,308 3,689 Interest expense................................................ (472,185) (278,543) (219,029) Income allocated to minority interest........................... (105,473) (110,984) (86,213) Income taxes.................................................... (2,383) (98) (119) Equity in income of unconsolidated affiliates................... 88,191 94,480 80,825 ---------- ---------- ---------- Income from continuing operations............................... $ 253,652 $ 255,563 $ 206,751 ========== ========== ========== </Table> F-43 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The assets by segment and the reconciliation of total segment assets to the total assets in the consolidated financial statements at December 31, 2004, and 2003 are summarized as follows: <Table> <Caption> 2004 2003 ----------- ----------- (IN THOUSANDS) Retail and Other........................................... $25,630,362 $11,414,148 Community Development...................................... 1,818,660 -- ----------- ----------- 27,449,022 11,414,148 Unconsolidated Properties.................................. (3,918,661) (2,516,504) Corporate and Other........................................ 2,188,264 685,253 ----------- ----------- Total Assets............................................... $25,718,625 $ 9,582,897 =========== =========== </Table> NOTE 16 PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The following pro forma financial information has been presented as a result of acquisitions made during 2004 and 2003 (Note 3). The pro forma condensed consolidated statements of operations are based upon the historical financial information of General Growth, excluding discontinued operations, and the historical financial information of each of the acquisitions as if the acquisitions had occurred on the first day of the earliest period presented. F-44 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following pro forma financial information may not necessarily be indicative of what our actual results would have been if such transactions had been completed as of the dates assumed nor does it purport to represent our results of operations for future periods. Management believes that the TRC Merger will create potential cost savings and operating efficiencies, such as elimination of redundant administrative and property management costs. Additionally, we expect to continue to finance or refinance certain properties with secured debt which is expected to bear interest at rates lower than the interest rates assumed in determining the pro forma interest expense adjustments in this pro forma financial information. These potential cost and interest savings have not been reflected in the accompanying unaudited pro forma condensed consolidated statements of operations as we are currently unable to quantify them and there is no assurance that any anticipated savings will be realized. <Table> <Caption> YEARS ENDED DECEMBER 31, ----------------------------- 2004 2003 ------------- ------------- (UNAUDITED) (IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS) Revenues: Minimum rents............................................. $1,601,606 $1,520,928 Tenant charges............................................ 771,565 716,284 Land sales................................................ 297,636 243,411 Other..................................................... 212,577 208,948 ---------- ---------- Total revenues......................................... 2,883,384 2,689,571 ---------- ---------- Expenses: Real estate taxes......................................... 190,607 178,362 Other property operating.................................. 676,191 551,285 Land sales operations..................................... 96,141 56,387 Property management, general and administrative costs..... 149,756 171,449 Depreciation and amortization............................. 610,295 545,077 ---------- ---------- Total expenses......................................... 1,722,990 1,502,560 ---------- ---------- Operating income............................................ 1,160,394 1,187,011 Interest expense, net....................................... (987,422) (877,081) Income allocated to minority interests...................... (105,786) (114,291) Income taxes................................................ 15,502 (3,941) Equity in income of unconsolidated affiliates............... 56,022 63,557 ---------- ---------- Income from continuing operations........................... 138,710 255,255 Convertible preferred stock dividends....................... -- (13,030) ---------- ---------- Income from continuing operations available to common stockholders.............................................. $ 138,710 $ 242,225 ========== ========== Earnings from continuining operations per share: Basic..................................................... $ 0.59 $ 1.12 Diluted................................................... 0.59 1.11 Weighted-average common shares used in earnings per share calculation: Basic..................................................... 234,143 216,781 Diluted................................................... 234,823 230,985 </Table> F-45 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 17 QUARTERLY FINANCIAL INFORMATION (UNAUDITED) <Table> <Caption> 2004 ------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER(B) -------- -------- -------- ---------- (IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS) Total revenues............................. $359,829 $374,375 $397,501 $671,140 Operating income........................... 152,522 145,469 168,291 275,993 Income from continuing operations.......... 58,336 50,247 62,973 82,096 Income from discontinued operations........ 786 901 1,000 11,513 Net income available to common shareholders............................. 59,122 51,148 63,973 93,609 Earnings from continuing operations: Basic(a)................................. 0.27 0.23 0.29 0.36 Diluted(a)............................... 0.27 0.22 0.29 0.36 Earnings from discontinued operations: Basic.................................... -- 0.01 -- 0.05 Diluted.................................. -- 0.01 -- 0.05 Earnings per share: Basic(a)................................. 0.27 0.24 0.29 0.41 Diluted(a)............................... 0.27 0.23 0.29 0.41 Distributions declared per share........... 0.30 0.30 0.66 -- Weighted-average shares outstanding: Basic.................................... 217,553 218,075 218,605 226,312 Diluted.................................. 218,479 218,882 219,298 227,200 </Table> F-46 GENERAL GROWTH PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) <Table> <Caption> 2003 --------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER --------- --------- --------- --------- (IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS) Total revenues............................. $271,788 $282,766 $325,565 $382,672 Operating income........................... 108,408 115,451 142,741 181,800 Income from continuing operations.......... 47,199 49,969 60,055 98,340 Income from discontinued operations........ 4,389 1,034 1,378 1,047 Net income available to common shareholders............................. 45,511 44,050 61,433 99,387 Earnings from continuing operations: Basic(a)................................. 0.22 0.23 0.28 0.45 Diluted(a)............................... 0.22 0.23 0.28 0.45 Earnings from discontinued operations: Basic.................................... 0.02 -- 0.01 0.01 Diluted.................................. 0.02 -- -- 0.01 Earnings per share: Basic(a)................................. 0.24 0.23 0.29 0.46 Diluted(a)............................... 0.24 0.23 0.28 0.46 Distributions declared per share........... 0.24 0.24 -- 0.30 Weighted-average shares outstanding: Basic.................................... 187,785 188,623 210,889 215,785 Diluted.................................. 213,696 189,386 215,264 216,790 </Table> - --------------- (a) Earnings (loss) per share for the quarters do not add up to the annual earnings per share due to the issuance of additional stock during the year. (b) Includes results of operations of TRCLP subsequent to the November 12, 2004 TRC Merger. F-47 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of General Growth Properties, Inc. Chicago, Illinois We have audited the consolidated financial statements of General Growth Properties, Inc. (the "Company") as of December 31, 2004 and 2003, and for each of the three years in the period ended December 31, 2004, management's assessment of the effectiveness on the Company's internal control over financial reporting as of December 31, 2004, and the effectiveness on the Company's internal control over financial reporting as of December 31, 2004, and have issued our reports thereon dated March 21, 2005 (which report on the consolidated financial statements expresses an unqualified opinion and includes an explanatory paragraph relating to the change in accounting for debt extinguishment costs in 2003); such consolidated financial statements and reports are included elsewhere in this Form 10-K. Our audit also included the consolidated financial statement schedule of the Company listed in the Index to Consolidated Financial Statements and Consolidated Financial Statement Schedule on page F-1 of this Form 10-K. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audit. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. DELOITTE & TOUCHE LLP Chicago, Illinois March 21, 2005 F-48 GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2004 <Table> <Caption> COL. A COL. B COL. C COL. D - --------------------- --------------- -------------------------------- ----------------------------- COSTS CAPITALIZED SUBSEQUENT TO ACQUISITION ----------------------------- INITIAL COST NET LAND AND -------------------------------- BUILDINGS AND BUILDINGS AND EQUIPMENT CARRYING DESCRIPTION ENCUMBRANCES(A) LAND EQUIPMENT(B) IMPROVEMENTS COSTS(C) - ----------- --------------- -------------- --------------- -------------- ------------ Alameda Plaza Pocatello, ID...... $ -- $ 740,000 $ 2,060,000 $ 3,854 $ -- Ala Moana Center Honolulu, HI....... 557,260,648 336,229,260 473,770,740 18,479,206 5,520,385 Anaheim Property Anaheim, CA........ -- -- 2,058,000 (72,470) -- Animas Valley Mall Farmington, NM..... 27,015,824 10,783,000 30,165,000 5,235,054 21,325 Apache Mall Rochester, MN...... 53,387,740 8,110,292 72,992,628 19,386,141 219,692 Austin Bluffs Plaza Colorado Springs, CO................. 2,577,471 1,080,000 3,007,000 116,605 -- Bailey Hills Plaza Eugene, OR......... -- 290,000 806,000 35,152 -- KIDK/Baskin Robbins Idaho Falls, ID.... -- 60,000 168,000 814 -- Baybrook Mall Friendswood, TX.... 157,971,610 13,300,000 117,162,546 17,283,553 13,693 Bayshore Mall Eureka, CA................. 33,101,341 3,004,345 27,398,907 30,537,783 2,913,529 Bellis Fair Bellingham, WA..... 68,480,546 7,616,458 47,040,131 14,520,560 6,145,403 Birchwood Mall Port Huron, MI.......... 41,485,906 1,768,935 34,574,635 18,074,234 1,980,603 Boise Plaza Boise, ID.......... -- 465,000 1,293,000 (309,382) -- Boise Towne Plaza Boise, ID.......... 11,825,425 3,988,000 11,101,000 (627) -- Boise Towne Square Boise, ID.......... 79,240,031 36,452,000 101,853,000 20,194,389 -- The Boulevard Mall Las Vegas, NV...... 117,251,214 16,490,343 148,413,086 6,377,958 -- Burlington Town Center Burlington, VT................. -- 1,479,658 43,552,632 11,394 -- Cache Valley Mall Logan, UT.......... -- 6,451,000 18,422,000 9,685,268 196,926 Cache Valley Marketplace Logan, UT................. -- 1,500,000 1,583,000 3,645,459 42,847 <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(D) DEPRECIATION(E) CONSTRUCTION ACQUIRED - ----------- -------------- --------------- --------------- --------------- ------------ -------- Alameda Plaza Pocatello, ID...... $ 740,040 $ 2,063,814 $ 2,803,854 $ 127,786 2002 Ala Moana Center Honolulu, HI....... 336,229,497 497,770,094 833,999,591 89,458,940 1999 Anaheim Property Anaheim, CA........ -- 1,985,530 1,985,530 124,550 2002 Animas Valley Mall Farmington, NM..... 6,464,479 39,739,900 46,204,379 2,611,777 2002 Apache Mall Rochester, MN...... 8,110,292 92,598,461 100,708,753 14,602,088 1998 Austin Bluffs Plaza Colorado Springs, CO................. 1,080,183 3,123,422 4,203,605 190,755 2002 Bailey Hills Plaza Eugene, OR......... 290,168 840,984 1,131,152 50,414 2002 KIDK/Baskin Robbins Idaho Falls, ID.... 60,476 168,338 228,814 10,435 2002 Baybrook Mall Friendswood, TX.... 13,852,978 133,906,814 147,759,792 18,687,713 1999 Bayshore Mall Eureka, CA................. 3,005,039 60,849,525 63,854,564 24,795,601 1986-1987 Bellis Fair Bellingham, WA..... 7,485,224 67,837,328 75,322,552 31,795,548 1987-1988 Birchwood Mall Port Huron, MI.......... 3,042,616 53,355,791 56,398,407 21,944,059 1989-1990 Boise Plaza Boise, ID.......... 374,355 1,074,263 1,448,618 70,531 2002 Boise Towne Plaza Boise, ID.......... 3,987,857 11,100,516 15,088,373 694,923 2002 Boise Towne Square Boise, ID.......... 23,448,775 135,050,614 158,499,389 8,884,758 2002 The Boulevard Mall Las Vegas, NV...... 15,307,949 155,973,438 171,281,387 26,507,606 1998 Burlington Town Center Burlington, VT................. 1,637,035 43,406,649 45,043,684 1,158,425 2004 Cache Valley Mall Logan, UT.......... 3,874,744 30,880,450 34,755,194 1,540,127 2002 Cache Valley Marketplace Logan, UT................. 3,139,246 3,632,060 6,771,306 115,627 2002 </Table> F-49 <Table> <Caption> GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) COL. A COL. B COL. C COL. D - --------------------- --------------- -------------------------------- ----------------------------- COSTS CAPITALIZED SUBSEQUENT TO ACQUISITION ----------------------------- INITIAL COST NET LAND AND -------------------------------- BUILDINGS AND BUILDINGS AND EQUIPMENT CARRYING DESCRIPTION ENCUMBRANCES(A) LAND EQUIPMENT(B) IMPROVEMENTS COSTS(C) - ----------- --------------- -------------- --------------- -------------- ------------ Capital Mall Jefferson City, MO................. 21,518,791 4,200,000 14,201,000 9,384,049 -- Century Plaza Birmingham, AL..... 30,800,000 3,164,000 28,513,908 5,836,221 -- Chapel Hills Mall Colorado Springs, CO................. 34,324,274 4,300,000 34,017,000 61,938,764 36,805 Chico Mall Chico, CA.......... 30,600,000 8,110,390 54,093,129 714,372 -- Coastland Center Naples, FL......... 104,278,996 11,450,000 103,050,200 8,648,621 -- Colony Square Mall Zanesville, OH..... 41,083,300 1,000,000 24,500,000 17,788,169 -- Columbia Mall Columbia, MO....... 89,225,600 5,383,208 19,663,231 24,481,509 1,422,457 Coral Ridge Mall Coralville, IA..... 106,405,706 3,363,602 64,217,772 12,363,389 4,501,780 Coronado Center Albuquerque, NM.... 101,250,000 33,072,272 148,799,184 1,280,949 -- Cottonwood Mall Salt Lake City, UT................. -- 12,616,000 35,697,000 1,904,009 -- Cottonwood Square Salt Lake City, UT................. -- 1,558,000 4,339,000 22,916 -- Country Hill Plaza Portage, UT........ 5,276,057 3,620,000 9,080,000 321,695 -- The Crossroads Kalamazoo, MI...... 42,568,961 6,800,000 61,200,000 19,860,230 298,358 Crossroads Center St Cloud, MN....... 119,460,218 10,812,523 72,202,847 30,235,367 1,488,014 Cumberland Mall Atlanta, GA........ 94,524,385 15,198,568 136,787,110 11,106,737 188,458 Developments in Progress........... 60,327,000 173,536,919 256,022,000 130,410,365 -- Division Crossing Portland, OR....... 5,939,810 1,773,000 4,935,000 234,296 -- Eagle Ridge Mall Lake Wales, FL.......... 26,800,000 7,619,865 49,560,538 11,421,254 5,719,079 Eastridge Mall Casper, WY......... 41,900,000 9,902,000 27,596,000 5,396,347 -- Eden Prairie Center Eden Prairie, MN... 86,144,788 465,063 19,024,047 115,705,065 9,506,545 <Caption> GENERAL GROWTH PROPER GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) 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(D) DEPRECIATION(E) CONSTRUCTION ACQUIRED - ----------- -------------- --------------- --------------- --------------- ------------ -------- Capital Mall Jefferson City, MO................. 3,912,935 23,872,114 27,785,049 8,282,033 1993 Century Plaza Birmingham, AL..... 3,164,000 34,350,129 37,514,129 7,444,339 1997 Chapel Hills Mall Colorado Springs, CO................. 4,300,000 95,992,569 100,292,569 26,626,032 1993 Chico Mall Chico, CA.......... 16,957,589 45,960,302 62,917,891 1,402,577 2003 Coastland Center Naples, FL......... 11,450,000 111,698,821 123,148,821 18,136,148 1998 Colony Square Mall Zanesville, OH..... 1,243,184 42,044,985 43,288,169 19,251,327 1986 Columbia Mall Columbia, MO....... 5,383,208 45,567,197 50,950,405 19,694,237 1984-1985 Coral Ridge Mall Coralville, IA..... 3,412,857 81,033,686 84,446,543 17,634,442 1998-1999 Coronado Center Albuquerque, NM.... 33,072,272 150,080,133 183,152,405 7,988,270 2003 Cottonwood Mall Salt Lake City, UT................. 7,613,427 42,603,582 50,217,009 2,824,794 2002 Cottonwood Square Salt Lake City, UT................. 1,558,221 4,361,695 5,919,916 269,169 2002 Country Hill Plaza Portage, UT........ 3,620,000 9,401,695 13,021,695 568,847 2002 The Crossroads Kalamazoo, MI...... 6,800,000 81,358,588 88,158,588 11,799,875 1999 Crossroads Center St Cloud, MN....... 13,206,441 101,532,310 114,738,751 9,775,388 2000 Cumberland Mall Atlanta, GA........ 16,749,496 146,531,377 163,280,873 23,981,769 1998 Developments in Progress........... 45,243,769 514,725,515 559,969,284 -- Division Crossing Portland, OR....... 1,772,915 5,169,381 6,942,296 312,383 2002 Eagle Ridge Mall Lake Wales, FL.......... 7,619,865 66,700,871 74,320,736 17,632,459 1995-1996 Eastridge Mall Casper, WY......... 6,171,589 36,722,758 42,894,347 2,376,942 2002 Eden Prairie Center Eden Prairie, MN... 492,585 144,208,135 144,700,720 17,216,391 1997 </Table> F-50 <Table> <Caption> GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) COL. A COL. B COL. C COL. D - --------------------- --------------- -------------------------------- ----------------------------- COSTS CAPITALIZED SUBSEQUENT TO ACQUISITION ----------------------------- INITIAL COST NET LAND AND -------------------------------- BUILDINGS AND BUILDINGS AND EQUIPMENT CARRYING DESCRIPTION ENCUMBRANCES(A) LAND EQUIPMENT(B) IMPROVEMENTS COSTS(C) - ----------- --------------- -------------- --------------- -------------- ------------ Fallbrook Center West Hills, CA.......... 74,957,000 6,117,338 10,076,520 90,198,476 6,445,196 Foothills Mall Fort Collins, CO........ 44,996,631 10,052,653 90,495,739 5,949,442 -- Fort Union Midvale, UT................. 3,100,716 141,000 3,701,000 22,828 -- Four Seasons Town Center Greensboro, NC..... 110,512,930 24,976,933 136,636,477 8,308,196 -- Fox River Mall Appleton, WI....... 195,222,700 2,700,566 18,291,067 60,142,280 2,350,734 Fremont Plaza Las Vegas, NV...... -- -- 3,956,000 156,594 -- Gateway Crossing Shopping Center Bountiful, UT...... 16,494,902 4,104,000 11,422,000 286,518 -- Gateway Mall Springfield, OR.... 42,172,919 8,728,263 34,707,170 22,776,289 7,698,614 Glenbrook Square Fort Wayne, IN.......... 164,250,000 30,414,372 195,896,270 370,595 -- GGPLP Corp. Chicago, IL................. 6,702,815,060 -- 556,740 91,157,850 4,215,742 Corporate Headquarters Chicago, IL........ 23,160,764 -- 29,035,310 2,184,058 -- The Grand Canal Shoppes at the Venetian Las Vegas, NV...... 423,933,659 -- 766,232,339 10,551,199 -- Grand Teton Mall Idaho Falls, ID.... 28,945,548 13,104,000 36,813,000 14,214,911 103,094 Grand Traverse Mall Traverse City, MI................. 48,100,683 3,529,966 20,775,772 24,684,989 3,643,793 Greenwood Mall Bowling Green, KY................. 47,348,098 3,200,000 40,202,000 30,907,045 108,960 Halsey Crossing Gresham, OR........ 2,906,922 -- 4,363,000 109,033 -- Jordan Creek Town Center West Des Moines, IA................. 200,000,000 18,141,510 139,192,444 -- 4,962,935 <Caption> GENERAL GROWTH PROPER GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) 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(D) DEPRECIATION(E) CONSTRUCTION ACQUIRED - ----------- -------------- --------------- --------------- --------------- ------------ -------- Fallbrook Center West Hills, CA.......... 6,127,138 106,710,392 112,837,530 36,837,812 1984 Foothills Mall Fort Collins, CO........ 9,263,802 97,234,032 106,497,834 3,227,329 2003 Fort Union Midvale, UT................. -- 3,864,828 3,864,828 244,920 2002 Four Seasons Town Center Greensboro, NC..... 27,231,494 142,690,112 169,921,606 3,609,102 2004 Fox River Mall Appleton, WI....... 4,787,291 78,697,356 83,484,647 27,942,182 1983-1984 Fremont Plaza Las Vegas, NV...... -- 4,112,594 4,112,594 246,778 2002 Gateway Crossing Shopping Center Bountiful, UT...... 4,103,858 11,708,660 15,812,518 769,538 2002 Gateway Mall Springfield, OR.... 8,728,263 65,182,073 73,910,336 26,415,977 1989-1990 Glenbrook Square Fort Wayne, IN.......... 30,380,606 196,300,631 226,681,237 6,388,889 2003 GGPLP Corp. Chicago, IL................. -- 95,930,332 95,930,332 54,363,669 Corporate Headquarters Chicago, IL........ -- 31,219,368 31,219,368 5,468,986 1997 The Grand Canal Shoppes at the Venetian Las Vegas, NV...... -- 776,783,538 776,783,538 13,442,266 2004 Grand Teton Mall Idaho Falls, ID.... 9,322,131 54,912,874 64,235,005 3,016,930 2002 Grand Traverse Mall Traverse City, MI................. 3,533,746 49,100,774 52,634,520 21,013,228 1990-1991 Greenwood Mall Bowling Green, KY................. 3,387,160 71,030,845 74,418,005 23,890,194 1993 Halsey Crossing Gresham, OR........ -- 4,472,033 4,472,033 274,491 2002 Jordan Creek Town Center West Des Moines, IA................. 18,141,510 144,155,379 162,296,889 2,608,552 2004 </Table> F-51 <Table> <Caption> GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) COL. A COL. B COL. C COL. D - --------------------- --------------- -------------------------------- ----------------------------- COSTS CAPITALIZED SUBSEQUENT TO ACQUISITION ----------------------------- INITIAL COST NET LAND AND -------------------------------- BUILDINGS AND BUILDINGS AND EQUIPMENT CARRYING DESCRIPTION ENCUMBRANCES(A) LAND EQUIPMENT(B) IMPROVEMENTS COSTS(C) - ----------- --------------- -------------- --------------- -------------- ------------ Knollwood Mall St. Louis Park, MN..... 18,400,000 -- 9,748,047 36,750,600 3,891,475 Lakeview Square Battle Creek, MI... 23,131,857 3,578,619 32,209,980 16,641,406 375,998 Landmark Mall Alexandria, VA..... 26,315,360 28,395,945 67,234,703 (1,636,606) 1,087,044 Lansing Mall Lansing, MI........ 68,095,397 6,977,798 62,800,179 44,485,243 768,954 Lockport Mall Lockport, NY....... -- 800,000 10,000,000 4,272,423 23,656 Lynnhaven Mall Virginia Beach, VA................. 180,000,000 39,225,630 222,321,434 2,422,971 2,662 The Maine Mall Portland, MA....... 162,000,000 41,373,998 238,457,053 1,990,282 -- Mall of Louisiana Baton Rouge, LA.... 185,000,000 24,590,822 246,452,070 349,214 -- Mall at Sierra Vista Sierra Vista, AZ... -- 4,550,000 18,658,000 1,402,323 -- Mall of the Bluffs Council Bluffs, IA................. 41,485,906 1,860,116 24,016,343 20,847,345 2,585,988 Mall St. Vincent Shreveport, LA..... 17,839,575 2,640,000 23,760,000 8,108,712 1,392 Marketplace Shopping Center Champaign, IL...... 106,737,300 7,000,000 63,972,357 44,750,728 601,899 Mayfair Wauwatosa, WI...... 194,309,464 14,706,639 224,846,565 7,833,031 1,066,454 Meadows Mall Las Vegas, NV...... 110,091,727 24,633,921 104,088,306 15,404,623 69,253 MEPC Acquisition Financing.......... -- -- (1,549,401) 265,038 -- Northgate Mall Chattanooga, TN.... 21,483,687 2,524,869 43,943,539 1,630,088 2,226 Northridge Fashion Center Northridge, CA..... 134,786,902 16,618,095 149,562,583 28,881,783 3,540,766 North Plains Mall Clovis, NM......... -- 4,676,000 13,033,000 1,363,670 -- North Temple Shops Salt Lake City, UT................. -- 168,000 468,000 5,431 -- <Caption> GENERAL GROWTH PROPER GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) 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(D) DEPRECIATION(E) CONSTRUCTION ACQUIRED - ----------- -------------- --------------- --------------- --------------- ------------ -------- Knollwood Mall St. Louis Park, MN..... 7,025,606 43,364,516 50,390,122 19,346,894 1978 Lakeview Square Battle Creek, MI... 3,578,619 49,227,384 52,806,003 10,817,580 1996 Landmark Mall Alexandria, VA..... 28,395,945 66,685,141 95,081,086 11,494,529 2003 Lansing Mall Lansing, MI........ 11,496,394 103,535,780 115,032,174 19,294,599 1996 Lockport Mall Lockport, NY....... 800,000 14,296,079 15,096,079 6,989,654 1986 Lynnhaven Mall Virginia Beach, VA................. 33,697,604 230,275,093 263,972,697 8,476,144 2003 The Maine Mall Portland, MA....... 41,373,998 240,447,335 281,821,333 7,202,948 2003 Mall of Louisiana Baton Rouge, LA.... 24,590,822 246,801,284 271,392,106 4,402,659 2004 Mall at Sierra Vista Sierra Vista, AZ... 3,651,670 20,958,653 24,610,323 1,430,388 2002 Mall of the Bluffs Council Bluffs, IA................. 1,895,220 47,414,572 49,309,792 20,380,503 1985-1986 Mall St. Vincent Shreveport, LA..... 2,640,000 31,870,104 34,510,104 6,047,411 1998 Marketplace Shopping Center Champaign, IL...... 7,000,000 109,324,984 116,324,984 21,304,433 1997 Mayfair Wauwatosa, WI...... 14,706,639 233,746,050 248,452,689 33,823,316 2003 Meadows Mall Las Vegas, NV...... 24,894,746 119,301,357 144,196,103 16,853,209 2003 MEPC Acquisition Financing.......... -- (1,284,363) (1,284,363) 53,815 Northgate Mall Chattanooga, TN.... 2,524,869 45,575,853 48,100,722 7,647,575 2003 Northridge Fashion Center Northridge, CA..... 16,866,397 181,736,830 198,603,227 30,455,093 1998 North Plains Mall Clovis, NM......... 2,722,314 16,350,356 19,072,670 1,060,723 2002 North Temple Shops Salt Lake City, UT................. 167,987 473,444 641,431 29,334 2002 </Table> F-52 <Table> <Caption> GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) COL. A COL. B COL. C COL. D - --------------------- --------------- -------------------------------- ----------------------------- COSTS CAPITALIZED SUBSEQUENT TO ACQUISITION ----------------------------- INITIAL COST NET LAND AND -------------------------------- BUILDINGS AND BUILDINGS AND EQUIPMENT CARRYING DESCRIPTION ENCUMBRANCES(A) LAND EQUIPMENT(B) IMPROVEMENTS COSTS(C) - ----------- --------------- -------------- --------------- -------------- ------------ NorthTown Mall Spokane, WA........ 80,557,531 38,445,000 107,330,000 4,282,616 -- Oak View Mall Omaha, NE................. 78,519,494 12,056,062 113,041,871 2,547,429 -- Oakwood Mall Eau Claire, WI..... 55,314,543 3,266,669 18,281,160 23,174,460 1,723,991 Oglethorpe Mall Savannah, GA....... 39,386,760 16,036,395 92,977,582 4,263,526 177,709 Orem Plaza Center Street Orem, UT........... 2,771,265 1,069,000 2,974,000 22,311 -- Orem Plaza State Street Orem, UT........... 1,715,084 592,000 1,649,000 39,776 -- Park City Center Lancaster, PA...... 160,413,688 8,465,148 177,191,205 4,144,926 12,944 Park Place Tucson, AZ......... 188,962,627 4,996,024 44,993,177 96,385,331 13,523,774 Pecanland Mall Monroe, LA......... 64,913,732 7,190,000 64,710,000 10,658,506 -- Peachtree Mall Columbus, GA....... 53,000,000 22,051,603 67,678,571 2,552,142 -- Piedmont Mall Danville, VA....... 26,158,039 2,000,000 38,000,000 10,636,888 20,787 Pierre Bossier Mall Bossier City, LA... 38,571,826 5,280,707 47,558,468 7,937,364 2,186 Pine Ridge Mall Pocatello, ID...... 28,250,000 8,375,000 23,337,000 1,129,715 -- The Pines Pine Bluff, AR..... 24,984,335 1,488,928 17,627,258 13,954,108 1,365,091 Plaza 800 Sparks, NV......... -- 1,435,000 3,995,000 11,889 -- Plaza 9400 Sandy, UT.......... -- -- 9,114,000 188,936 -- Prince Kuhio Plaza Hilo, HI........... 41,476,942 -- 42,028,685 1,756,659 10,737 Provo Towne Centre Provo, UT.......... 52,881,491 21,767,302 68,296,000 (1,082,382) 59,165 Red Cliffs Mall St. George, UT......... 26,850,000 7,019,000 19,644,000 7,994,833 -- Red Cliffs Plaza St. George, UT......... -- -- 2,366,000 499,957 -- Regency Square Mall Jacksonville, FL... 103,239,181 16,497,552 148,477,968 17,410,602 118,881 <Caption> GENERAL GROWTH PROPER GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) 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(D) DEPRECIATION(E) CONSTRUCTION ACQUIRED - ----------- -------------- --------------- --------------- --------------- ------------ -------- NorthTown Mall Spokane, WA........ 22,407,494 127,650,122 150,057,616 8,421,535 2002 Oak View Mall Omaha, NE................. 12,056,062 115,589,300 127,645,362 13,454,576 2003 Oakwood Mall Eau Claire, WI..... 3,266,669 43,179,611 46,446,280 20,561,513 1985-1986 Oglethorpe Mall Savannah, GA....... 16,036,395 97,418,817 113,455,212 14,356,446 2003 Orem Plaza Center Street Orem, UT........... 1,068,592 2,996,719 4,065,311 185,287 2002 Orem Plaza State Street Orem, UT........... 592,396 1,688,380 2,280,776 103,297 2002 Park City Center Lancaster, PA...... 8,465,148 181,349,075 189,814,223 28,040,119 2003 Park Place Tucson, AZ......... 4,715,836 155,182,470 159,898,306 23,714,539 1996 Pecanland Mall Monroe, LA......... 10,101,102 72,457,404 82,558,506 5,312,951 2002 Peachtree Mall Columbus, GA....... 22,051,603 70,230,713 92,282,316 3,911,406 2003 Piedmont Mall Danville, VA....... 2,000,000 48,657,675 50,657,675 11,569,850 1995 Pierre Bossier Mall Bossier City, LA... 5,283,970 55,494,755 60,778,725 9,781,376 1998 Pine Ridge Mall Pocatello, ID...... 4,905,207 27,936,508 32,841,715 1,845,571 2002 The Pines Pine Bluff, AR..... 1,247,414 33,187,971 34,435,385 14,982,620 1985-1986 Plaza 800 Sparks, NV......... -- 5,441,889 5,441,889 274,347 2002 Plaza 9400 Sandy, UT.......... -- 9,302,936 9,302,936 578,437 2002 Prince Kuhio Plaza Hilo, HI........... 9,082 43,786,999 43,796,081 6,892,447 2002 Provo Towne Centre Provo, UT.......... 13,485,901 75,554,184 89,040,085 5,075,185 2002 Red Cliffs Mall St. George, UT......... 5,116,379 29,541,454 34,657,833 1,975,671 2002 Red Cliffs Plaza St. George, UT......... -- 2,865,957 2,865,957 146,657 2002 Regency Square Mall Jacksonville, FL... 17,884,037 164,620,966 182,505,003 26,614,044 1998 </Table> F-53 <Table> <Caption> GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) COL. A COL. B COL. C COL. D - --------------------- --------------- -------------------------------- ----------------------------- COSTS CAPITALIZED SUBSEQUENT TO ACQUISITION ----------------------------- INITIAL COST NET LAND AND -------------------------------- BUILDINGS AND BUILDINGS AND EQUIPMENT CARRYING DESCRIPTION ENCUMBRANCES(A) LAND EQUIPMENT(B) IMPROVEMENTS COSTS(C) - ----------- --------------- -------------- --------------- -------------- ------------ Rio West Mall Gallup, NM................. 22,844,000 -- 19,500,000 6,657,454 -- River Falls Mall Clarksville, IN.... -- 3,177,688 54,610,421 13,756,847 5,281,892 River Hills Mall Mankato, MN........ 83,017,800 3,713,529 29,013,757 22,295,189 2,674,311 Riverlands Shopping Center LaPlace, LA................. -- 500,000 4,500,000 3,425,594 43,842 River Pointe Plaza West Jordan, UT.... 4,292,554 1,302,000 3,623,000 115,029 -- Riverside Plaza Provo, UT.......... 6,143,294 2,475,000 6,890,000 1,390,317 6,877 RiverTown Crossings Grandville, MI..... 125,510,999 10,972,923 97,141,738 30,563,679 13,280,645 Rogue Valley Mall Medford, OR........ 27,801,951 5,728,225 51,564,598 1,325,905 -- Saint Louis Galleria St. Louis, MO...... 176,250,000 36,773,639 184,645,237 2,059,048 -- Salem Center Salem, OR................. 27,980,686 11,885,000 33,253,000 1,621,416 -- Sikes Senter Wichita Falls, TX.......... 41,500,000 12,758,642 50,566,596 701,179 -- Silver Lake Mall Coeur d'Alene, ID................. -- 7,704,000 21,472,000 204,357 -- Sooner Mall Norman, OK................. 59,205,800 2,700,000 24,300,000 17,430,011 -- Southlake Mall Morrow, GA......... 105,996,100 6,700,000 60,406,902 12,491,652 192,535 Southland Mall Hayward, CA........ 88,915,063 8,904,277 80,142,961 6,567,767 -- Southshore Mall Aberdeen, WA....... -- 650,000 15,350,000 5,589,170 -- Southwest Plaza Littleton, CO...... 79,095,272 9,000,000 103,983,673 27,125,015 973,804 Spokane Valley Mall Spokane, WA........ 41,248,340 19,297,000 54,970,000 3,803,452 -- Spokane Valley Plaza Spokane, WA........ -- 3,558,000 10,150,000 2,653 -- Spring Hill Mall West Dundee, IL......... 84,575,560 12,400,000 111,643,525 12,545,263 44,540 <Caption> GENERAL GROWTH PROPER GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) 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(D) DEPRECIATION(E) CONSTRUCTION ACQUIRED - ----------- -------------- --------------- --------------- --------------- ------------ -------- Rio West Mall Gallup, NM................. -- 26,157,454 26,157,454 11,542,937 1986 River Falls Mall Clarksville, IN.... 4,825,545 72,001,303 76,826,848 31,104,512 1989-1990 River Hills Mall Mankato, MN........ 4,707,482 52,989,304 57,696,786 21,519,153 1990-1991 Riverlands Shopping Center LaPlace, LA................. 1,100,950 7,368,486 8,469,436 952,338 1998 River Pointe Plaza West Jordan, UT.... 1,301,531 3,738,498 5,040,029 231,621 2002 Riverside Plaza Provo, UT.......... 2,475,227 8,286,967 10,762,194 476,005 2002 RiverTown Crossings Grandville, MI..... 7,246,462 144,712,523 151,958,985 24,407,601 1998-1999 Rogue Valley Mall Medford, OR........ 21,913,520 36,705,208 58,618,728 1,433,839 2003 Saint Louis Galleria St. Louis, MO...... 36,773,639 186,704,285 223,477,924 8,115,220 2003 Salem Center Salem, OR................. 6,966,434 39,792,982 46,759,416 2,644,513 2002 Sikes Senter Wichita Falls, TX.......... 12,758,642 51,267,775 64,026,417 2,602,107 2003 Silver Lake Mall Coeur d'Alene, ID................. 4,447,556 24,932,801 29,380,357 1,642,831 2002 Sooner Mall Norman, OK................. 2,580,578 41,849,433 44,430,011 9,035,091 1996 Southlake Mall Morrow, GA......... 6,700,000 73,091,089 79,791,089 14,890,277 1997 Southland Mall Hayward, CA........ 14,120,774 81,494,231 95,615,005 4,777,092 2002 Southshore Mall Aberdeen, WA....... 650,000 20,939,170 21,589,170 10,142,304 1986 Southwest Plaza Littleton, CO...... 9,000,000 132,082,492 141,082,492 23,146,758 1998 Spokane Valley Mall Spokane, WA........ 11,455,446 66,615,006 78,070,452 4,387,720 2002 Spokane Valley Plaza Spokane, WA........ 3,557,601 10,153,052 13,710,653 626,883 2002 Spring Hill Mall West Dundee, IL......... 12,400,000 124,233,328 136,633,328 20,748,904 1998 </Table> F-54 <Table> <Caption> GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) COL. A COL. B COL. C COL. D - --------------------- --------------- -------------------------------- ----------------------------- COSTS CAPITALIZED SUBSEQUENT TO ACQUISITION ----------------------------- INITIAL COST NET LAND AND -------------------------------- BUILDINGS AND BUILDINGS AND EQUIPMENT CARRYING DESCRIPTION ENCUMBRANCES(A) LAND EQUIPMENT(B) IMPROVEMENTS COSTS(C) - ----------- --------------- -------------- --------------- -------------- ------------ Stonestown San Francisco, CA...... 220,000,000 67,000,000 246,272,110 6,407,278 -- Three Rivers Mall Kelso, WA.......... 23,000,000 7,068,000 19,917,000 1,580,545 -- Town East Mall Mesquite (Dallas), TX................. 115,547,423 9,528,518 141,627,727 7,367,954 -- Twin Falls Crossing Twin Falls, ID..... -- 275,000 767,000 373 -- Tucson Mall Tucson, AZ......... 127,547,820 -- 181,424,484 20,771,036 405,608 University Crossing Orem, UT........... 12,314,888 3,420,000 9,526,000 443,397 -- Valley Hills Mall Hickory, NC........ 61,325,090 3,443,594 31,025,471 40,859,458 1,699,275 Valley Plaza Mall Bakersfield, CA.... 104,367,801 12,685,151 114,166,356 10,677,012 228,553 Victoria Ward Centers(g) Honolulu, HI....... 153,000,000 164,006,531 89,320,759 10,108,155 -- Visalia Mall Visalia, CA........ 47,330,972 16,466,000 47,699,000 9,570,164 -- West Valley Mall Tracy, CA.......... 64,598,455 9,295,045 47,789,310 27,090,024 8,072,671 Westwood Mall Jackson, MI........ 37,110,400 2,658,208 23,923,869 6,491,247 538 White Mountain Mall Rock Springs, WY... -- 2,335,000 6,520,000 4,887,882 4,495 Woodlands Village Flagstaff, AZ...... 7,848,688 2,689,000 7,484,000 32,124 -- Yellowstone Square Idaho Falls, ID.... -- 1,057,000 2,943,000 10,465 -- Miscellaneous Real Estate............. -- 1,306,800 1,586,000 (1,584,678) 108,462 THE ROUSE COMPANY OPERATING PROPERTIES(F): Fashion Show Las Vegas, NV...... 380,000,000 87,544,000 120,347,000 385,285,000 -- Providence Place Providence, RI..... 302,524,000 -- 463,568,000 -- -- <Caption> GENERAL GROWTH PROPER GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) 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(D) DEPRECIATION(E) CONSTRUCTION ACQUIRED - ----------- -------------- --------------- --------------- --------------- ------------ -------- Stonestown San Francisco, CA...... 67,000,000 252,679,388 319,679,388 2,957,666 2004 Three Rivers Mall Kelso, WA.......... 4,312,238 24,253,307 28,565,545 1,594,870 2002 Town East Mall Mesquite (Dallas), TX................. 7,710,985 150,813,214 158,524,199 14,496,422 Twin Falls Crossing Twin Falls, ID..... 275,499 766,874 1,042,373 47,536 2002 Tucson Mall Tucson, AZ......... -- 202,601,128 202,601,128 16,442,225 2001 University Crossing Orem, UT........... 3,419,812 9,969,585 13,389,397 619,486 2002 Valley Hills Mall Hickory, NC........ 5,656,275 71,371,523 77,027,798 12,697,580 1997 Valley Plaza Mall Bakersfield, CA.... 12,685,151 125,071,921 137,757,072 19,898,341 1998 Victoria Ward Centers(g) Honolulu, HI....... 165,504,492 97,930,953 263,435,445 10,085,887 2002 Visalia Mall Visalia, CA........ 11,052,128 62,683,036 73,735,164 4,079,691 2002 West Valley Mall Tracy, CA.......... 10,885,507 81,361,543 92,247,050 20,626,736 1995 Westwood Mall Jackson, MI........ 3,571,208 29,502,654 33,073,862 6,724,592 1996 White Mountain Mall Rock Springs, WY... 1,362,805 12,384,572 13,747,377 799,798 2002 Woodlands Village Flagstaff, AZ...... 2,688,652 7,516,472 10,205,124 464,082 2002 Yellowstone Square Idaho Falls, ID.... 1,057,200 2,953,265 4,010,465 183,250 2002 Miscellaneous Real Estate............. 1,306,800 109,784 1,416,584 242 2002 THE ROUSE COMPANY OPERATING PROPERTIES(F): Fashion Show Las Vegas, NV...... 87,544,000 505,632,000 593,176,000 64,336,000 1981 1996 Providence Place Providence, RI..... -- 463,568,000 463,568,000 6,225,000 1999 2004 </Table> F-55 <Table> <Caption> GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) COL. A COL. B COL. C COL. D - --------------------- --------------- -------------------------------- ----------------------------- COSTS CAPITALIZED SUBSEQUENT TO ACQUISITION ----------------------------- INITIAL COST NET LAND AND -------------------------------- BUILDINGS AND BUILDINGS AND EQUIPMENT CARRYING DESCRIPTION ENCUMBRANCES(A) LAND EQUIPMENT(B) IMPROVEMENTS COSTS(C) - ----------- --------------- -------------- --------------- -------------- ------------ Staten Island Mall Staten Island, NY................. 169,602,000 37,867,000 197,274,000 5,417,000 -- North Star San Antonio, TX........ 251,000,000 54,000,000 173,343,000 8,367,000 -- Lakeside Mall Sterling Heights, MI................. 195,000,000 51,300,000 175,161,000 4,793,000 -- The Mall in Columbia Columbia, MD....... 160,657,000 7,179,000 -- 203,347,000 -- Willowbrook Wayne, NJ.......... 172,288,000 56,819,000 114,629,000 15,702,000 -- Pioneer Place Portland, OR....... 127,058,000 2,813,000 -- 178,319,000 -- Woodbridge Center Woodbridge, NJ..... 225,000,000 27,032,000 -- 135,731,000 -- The Streets at South Point Durham, NC......... 134,592,000 18,266,000 143,474,000 658,000 -- Ridgedale Center Minneapolis, MN.... 105,000,000 20,216,000 129,171,000 2,563,000 -- Arizona Center Phoenix, AZ........ 29,345,000 96,000 -- 151,151,000 -- Paramus Park Paramus, NJ................. 98,349,000 13,476,000 -- 131,906,000 -- Fashion Place Salt Lake City, UT................. 65,229,000 19,379,000 119,715,000 4,062,000 -- Beachwood Place Cleveland, OH...... 108,633,000 10,673,000 -- 129,461,000 -- Owings Mills Baltimore, MD...... -- 25,170,000 -- 112,933,000 -- Oviedo Marketplace Orlando, FL........ 53,656,000 9,389,000 -- 122,350,000 -- Collin Creek Plano, TX.......... 72,972,000 26,419,000 102,037,000 1,994,000 -- Oxmoor Louisville, KY..... 66,364,000 -- 124,487,000 -- -- Westlake Center Seattle, WA........ 68,680,000 10,582,000 -- 105,553,000 -- The Gallery at Harborplace Baltimore, MD...... 89,256,000 6,648,000 -- 107,267,000 -- <Caption> GENERAL GROWTH PROPER GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) 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(D) DEPRECIATION(E) CONSTRUCTION ACQUIRED - ----------- -------------- --------------- --------------- --------------- ------------ -------- Staten Island Mall Staten Island, NY................. 37,867,000 202,691,000 240,558,000 10,102,000 1973 2003 North Star San Antonio, TX........ 54,000,000 181,710,000 235,710,000 19,267,000 1960 2002 Lakeside Mall Sterling Heights, MI................. 51,300,000 179,954,000 231,254,000 15,988,000 1976 2002 The Mall in Columbia Columbia, MD....... 7,179,000 203,347,000 210,526,000 47,509,000 1971 Willowbrook Wayne, NJ.......... 56,819,000 130,331,000 187,150,000 12,101,000 1969 2002 Pioneer Place Portland, OR....... 2,813,000 178,319,000 181,132,000 44,307,000 1990 Woodbridge Center Woodbridge, NJ..... 27,032,000 135,731,000 162,763,000 51,827,000 1971 The Streets at South Point Durham, NC......... 18,266,000 144,132,000 162,398,000 13,804,000 2002 2002 Ridgedale Center Minneapolis, MN.... 20,216,000 131,734,000 151,950,000 11,333,000 1974 2002 Arizona Center Phoenix, AZ........ 96,000 151,151,000 151,247,000 48,852,000 1990 Paramus Park Paramus, NJ................. 13,476,000 131,906,000 145,382,000 32,278,000 1974 Fashion Place Salt Lake City, UT................. 19,379,000 123,777,000 143,156,000 13,355,000 1972 1998 Beachwood Place Cleveland, OH...... 10,673,000 129,461,000 140,134,000 26,656,000 1978 Owings Mills Baltimore, MD...... 25,170,000 112,933,000 138,103,000 24,538,000 1986 Oviedo Marketplace Orlando, FL........ 9,389,000 122,350,000 131,739,000 14,986,000 1998 Collin Creek Plano, TX.......... 26,419,000 104,031,000 130,450,000 9,385,000 1981 2002 Oxmoor Louisville, KY..... -- 124,487,000 124,487,000 623,000 1971 2004 Westlake Center Seattle, WA........ 10,582,000 105,553,000 116,135,000 38,356,000 1988 The Gallery at Harborplace Baltimore, MD...... 6,648,000 107,267,000 113,915,000 38,541,000 1987 </Table> F-56 <Table> <Caption> GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) COL. A COL. B COL. C COL. D - --------------------- --------------- -------------------------------- ----------------------------- COSTS CAPITALIZED SUBSEQUENT TO ACQUISITION ----------------------------- INITIAL COST NET LAND AND -------------------------------- BUILDINGS AND BUILDINGS AND EQUIPMENT CARRYING DESCRIPTION ENCUMBRANCES(A) LAND EQUIPMENT(B) IMPROVEMENTS COSTS(C) - ----------- --------------- -------------- --------------- -------------- ------------ Bayside Marketplace Miami, FL.......... 67,744,000 -- -- 109,311,000 -- Mall St. Matthews Louisville, KY..... 155,896,000 -- -- 107,800,000 -- White Marsh Baltimore, MD...... 73,545,000 10,783,000 -- 92,371,000 -- Faneuil Hall Marketplace Boston, MA................. -- -- -- 100,956,000 -- Governor's Square Tallahassee, FL.... 64,336,000 -- -- 88,931,000 -- Oakwood Center Gretna, LA......... 49,615,000 15,938,000 -- 69,777,000 -- Augusta Mall Augusta, GA................. 50,006,000 4,697,000 -- 76,654,000 -- Riverwalk New Orleans, LA.... 12,399,000 -- -- 75,035,000 -- Hulen Mall Ft. Worth, TX................. 121,000,000 7,575,000 -- 67,426,000 -- Southland Center Taylor, MI......... 56,500,000 6,581,000 62,362,000 669,000 -- Harborplace Baltimore, MD...... 30,545,000 -- -- 63,447,000 -- South Street Seaport New York, NY....... 16,050,000 -- -- 46,100,000 -- Blue Cross & Blue Shield Building I Baltimore, MD...... 16,128,000 1,000,000 -- 44,139,000 -- Village of Cross Keys Baltimore, MD...... 12,782,000 925,000 -- 41,147,000 -- Mondawmin Mall Baltimore, MD...... 16,835,000 2,251,000 -- 25,964,000 -- Aon Building II Baltimore, MD...... 14,902,000 1,000,000 -- 26,072,000 -- Hunt Valley 75 Hunt Valley, MD......... 14,538,000 8,136,000 14,187,000 4,455,000 -- Seventy Columbia Corp Ctr Columbia, MD... 20,429,000 857,000 -- 24,504,000 -- Senate Plaza Camp Hill, PA........... 12,778,000 2,284,000 13,319,000 3,944,000 -- Woodlands Houston, TX................. 1,715,000 4,527,000 15,043,000 (938,000) -- <Caption> GENERAL GROWTH PROPER GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) 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(D) DEPRECIATION(E) CONSTRUCTION ACQUIRED - ----------- -------------- --------------- --------------- --------------- ------------ -------- Bayside Marketplace Miami, FL.......... -- 109,311,000 109,311,000 31,279,000 1987 Mall St. Matthews Louisville, KY..... -- 107,800,000 107,800,000 32,895,000 1962 White Marsh Baltimore, MD...... 10,783,000 92,371,000 103,154,000 30,394,000 1981 Faneuil Hall Marketplace Boston, MA................. -- 100,956,000 100,956,000 25,250,000 1976 Governor's Square Tallahassee, FL.... -- 88,931,000 88,931,000 27,534,000 1979 Oakwood Center Gretna, LA......... 15,938,000 69,777,000 85,715,000 22,706,000 1966 Augusta Mall Augusta, GA................. 4,697,000 76,654,000 81,351,000 12,583,000 1978 Riverwalk New Orleans, LA.... -- 75,035,000 75,035,000 21,319,000 1986 Hulen Mall Ft. Worth, TX................. 7,575,000 67,426,000 75,001,000 19,699,000 1977 Southland Center Taylor, MI......... 6,581,000 63,031,000 69,612,000 5,635,000 1970 2002 Harborplace Baltimore, MD...... -- 63,447,000 63,447,000 17,470,000 1980 South Street Seaport New York, NY....... -- 46,100,000 46,100,000 -- 1983 Blue Cross & Blue Shield Building I Baltimore, MD...... 1,000,000 44,139,000 45,139,000 16,504,000 1989 Village of Cross Keys Baltimore, MD...... 925,000 41,147,000 42,072,000 15,192,000 1965 Mondawmin Mall Baltimore, MD...... 2,251,000 25,964,000 28,215,000 12,935,000 1956 Aon Building II Baltimore, MD...... 1,000,000 26,072,000 27,072,000 11,150,000 1987 Hunt Valley 75 Hunt Valley, MD......... 8,136,000 18,642,000 26,778,000 3,865,000 1984 1998 Seventy Columbia Corp Ctr Columbia, MD... 857,000 24,504,000 25,361,000 8,611,000 1992 Senate Plaza Camp Hill, PA........... 2,284,000 17,263,000 19,547,000 7,278,000 1972 1998 Woodlands Houston, TX................. 4,527,000 14,105,000 18,632,000 589,000 1996 2003 </Table> F-57 <Table> <Caption> GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) COL. A COL. B COL. C COL. D - --------------------- --------------- -------------------------------- ----------------------------- COSTS CAPITALIZED SUBSEQUENT TO ACQUISITION ----------------------------- INITIAL COST NET LAND AND -------------------------------- BUILDINGS AND BUILDINGS AND EQUIPMENT CARRYING DESCRIPTION ENCUMBRANCES(A) LAND EQUIPMENT(B) IMPROVEMENTS COSTS(C) - ----------- --------------- -------------- --------------- -------------- ------------ Blue Cross & Blue Shield Building II Baltimore, MD...... 5,858,000 1,000,000 -- 16,196,000 -- Fifty Columbia Corp Ctr Columbia, MD....... 10,842,000 463,000 -- 15,740,000 -- Centerpointe Baltimore, MD...... 5,901,000 3,855,000 11,302,000 883,000 -- Aon Building I Baltimore, MD...... 7,656,000 650,000 -- 15,326,000 -- Forty Columbia Corp Ctr Columbia, MD....... 10,468,000 636,000 -- 15,147,000 -- Sixty Columbia Corp Ctr Columbia, MD....... 13,468,000 1,050,000 -- 14,594,000 -- Schilling Plaza North Baltimore, MD...... 5,225,000 4,470,000 8,059,000 2,305,000 -- Canyon Center Las Vegas, NV.......... 10,797,000 2,081,000 7,161,000 5,589,000 -- Schilling Plaza South Baltimore, MD...... -- 5,000,000 7,402,000 1,688,000 -- Canyon Center C&D Las Vegas, NV...... 92,000 1,722,000 -- 12,101,000 -- Thirty Columbia Corp Ctr Columbia, D.... 7,852,000 1,160,000 -- 12,172,000 -- Crossing Business Center Phase III Las Vegas, NV...... 7,318,000 2,842,000 1,416,000 8,216,000 -- American City Building Columbia, MD................. -- -- -- 12,288,000 -- Twenty Columbia Corp Ctr Columbia, MD... 3,512,000 927,000 -- 10,039,000 -- 10000 W. Charleston Arbors Summerlin, NV................. 23,254,000 695,000 -- 9,665,000 -- <Caption> GENERAL GROWTH PROPER GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) 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(D) DEPRECIATION(E) CONSTRUCTION ACQUIRED - ----------- -------------- --------------- --------------- --------------- ------------ -------- Blue Cross & Blue Shield Building II Baltimore, MD...... 1,000,000 16,196,000 17,196,000 5,714,000 1990 Fifty Columbia Corp Ctr Columbia, MD....... 463,000 15,740,000 16,203,000 6,696,000 1989 Centerpointe Baltimore, MD...... 3,855,000 12,185,000 16,040,000 2,447,000 1987 1998 Aon Building I Baltimore, MD...... 650,000 15,326,000 15,976,000 6,956,000 1988 Forty Columbia Corp Ctr Columbia, MD....... 636,000 15,147,000 15,783,000 7,085,000 1987 Sixty Columbia Corp Ctr Columbia, MD....... 1,050,000 14,594,000 15,644,000 2,256,000 1999 Schilling Plaza North Baltimore, MD...... 4,470,000 10,364,000 14,834,000 2,398,000 1980 1998 Canyon Center Las Vegas, NV.......... 2,081,000 12,750,000 14,831,000 3,538,000 1998 Schilling Plaza South Baltimore, MD...... 5,000,000 9,090,000 14,090,000 2,567,000 1987 1998 Canyon Center C&D Las Vegas, NV...... 1,722,000 12,101,000 13,823,000 3,217,000 1998 Thirty Columbia Corp Ctr Columbia, D.... 1,160,000 12,172,000 13,332,000 6,500,000 1986 Crossing Business Center Phase III Las Vegas, NV...... 2,842,000 9,632,000 12,474,000 2,630,000 1996 American City Building Columbia, MD................. -- 12,288,000 12,288,000 9,979,000 1969 Twenty Columbia Corp Ctr Columbia, MD... 927,000 10,039,000 10,966,000 5,857,000 1981 10000 W. Charleston Arbors Summerlin, NV................. 695,000 9,665,000 10,360,000 2,929,000 1999 </Table> F-58 <Table> <Caption> GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) COL. A COL. B COL. C COL. D - --------------------- --------------- -------------------------------- ----------------------------- COSTS CAPITALIZED SUBSEQUENT TO ACQUISITION ----------------------------- INITIAL COST NET LAND AND -------------------------------- BUILDINGS AND BUILDINGS AND EQUIPMENT CARRYING DESCRIPTION ENCUMBRANCES(A) LAND EQUIPMENT(B) IMPROVEMENTS COSTS(C) - ----------- --------------- -------------- --------------- -------------- ------------ 201 International Circle Baltimore, MD................. 3,420,000 5,464,000 3,763,000 906,000 -- Metro Plaza Baltimore, MD...... -- 205,000 -- 9,834,000 -- Crossing Business Center Phase I Las Vegas, NV...... 6,528,000 1,326,000 7,951,000 659,000 -- Riverspark/ Building 2 Columbia, MD....... 1,266,000 2,783,000 6,594,000 286,000 -- Ten Columbia Corp Ctr Columbia, D........ -- 733,000 -- 8,281,000 -- 10190 Covington Cross Las Vegas, NV...... 6,157,000 1,257,000 398,000 7,061,000 -- Riverspark Building B Columbia, MD....... -- 2,117,000 2,545,000 3,366,000 -- USA Group Las Vegas, NV................. 6,006,000 1,197,000 4,880,000 1,557,000 -- Miscellaneous Real Estate............. 98,798,000 48,633,000 90,692,000 64,665,000 Purchase accounting related adjustments........ 155,635,000 673,023,000 6,086,090,000 (3,121,262,000) --------------- -------------- --------------- -------------- ------------ TOTAL THE ROUSE COMPANY OPERATING PROPERTIES......... 4,073,001,000 1,314,711,000 8,206,370,000 1,925,000 -- --------------- -------------- --------------- -------------- ------------ THE ROUSE COMPANY INVESTMENT LAND AND LAND HELD FOR DEVELOPMENT AND SALE(F): Summerlin Summerlin, NV................. 18,147,000 74,029,000 -- 169,471,000 -- The Bridgelands Houston, TX........ 57,917,000 104,898,000 -- 13,117,000 -- Columbia and Emerson Howard County, MD.. -- 53,000,000 -- 39,595,000 -- <Caption> GENERAL GROWTH PROPER GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) 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(D) DEPRECIATION(E) CONSTRUCTION ACQUIRED - ----------- -------------- --------------- --------------- --------------- ------------ -------- 201 International Circle Baltimore, MD................. 5,464,000 4,669,000 10,133,000 1,324,000 1982 1998 Metro Plaza Baltimore, MD...... 205,000 9,834,000 10,039,000 5,911,000 1982 Crossing Business Center Phase I Las Vegas, NV...... 1,326,000 8,610,000 9,936,000 2,206,000 1994 1996 Riverspark/ Building 2 Columbia, MD....... 2,783,000 6,880,000 9,663,000 1,274,000 1987 1998 Ten Columbia Corp Ctr Columbia, D........ 733,000 8,281,000 9,014,000 4,826,000 1981 10190 Covington Cross Las Vegas, NV...... 1,257,000 7,459,000 8,716,000 1,735,000 1997 Riverspark Building B Columbia, MD....... 2,117,000 5,911,000 8,028,000 1,067,000 1985 1998 USA Group Las Vegas, NV................. 1,197,000 6,437,000 7,634,000 1,317,000 1998 Miscellaneous Real Estate............. 48,633,000 155,357,000 203,990,000 47,816,000 Purchase accounting related adjustments........ 670,033,000 2,967,818,000 3,637,851,000 (969,419,000) 2004 -------------- --------------- --------------- -------------- TOTAL THE ROUSE COMPANY OPERATING PROPERTIES......... 1,311,721,000 8,211,285,000 9,523,006,000 36,083,000 -------------- --------------- --------------- -------------- THE ROUSE COMPANY INVESTMENT LAND AND LAND HELD FOR DEVELOPMENT AND SALE(F): Summerlin Summerlin, NV................. 243,500,000 -- 243,500,000 -- 1996 The Bridgelands Houston, TX........ 118,015,000 -- 118,015,000 -- 2003 Columbia and Emerson Howard County, MD.. 92,595,000 -- 92,595,000 -- 1985 </Table> F-59 <Table> <Caption> GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) COL. A COL. B COL. C COL. D - --------------------- --------------- -------------------------------- ----------------------------- COSTS CAPITALIZED SUBSEQUENT TO ACQUISITION ----------------------------- INITIAL COST NET LAND AND -------------------------------- BUILDINGS AND BUILDINGS AND EQUIPMENT CARRYING DESCRIPTION ENCUMBRANCES(A) LAND EQUIPMENT(B) IMPROVEMENTS COSTS(C) - ----------- --------------- -------------- --------------- -------------- ------------ Fairwood Prince George's County, MD................. -- 58,266,000 -- -- -- Miscellaneous Real Estate............. -- -- -- 74,000 -- Purchase accounting related adjustments........ -- 1,355,507,000 -- (229,944,000) -- --------------- -------------- --------------- -------------- ------------ TOTAL INVESTMENT LAND AND LAND HELD FOR DEVELOPMENT AND SALE............... 76,064,000 1,645,700,000 -- (7,687,000) -- --------------- -------------- --------------- -------------- ------------ TOTAL NET PROPERTY AND EQUIPMENT AND INVESTMENT LAND AND LAND HELD FOR DEVELOPMENT AND SALE............... $18,776,021,843 $4,719,160,914 $16,708,656,316 $1,747,178,902 $133,796,047 =============== ============== =============== ============== ============ <Caption> GENERAL GROWTH PROPER GENERAL GROWTH PROPERTIES, INC. SCHEDULE III -- REAL SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED) 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(D) DEPRECIATION(E) CONSTRUCTION ACQUIRED - ----------- -------------- --------------- --------------- --------------- ------------ -------- Fairwood Prince George's County, MD................. 58,266,000 -- 58,266,000 -- 2004 Miscellaneous Real Estate............. 74,000 -- 74,000 -- Purchase accounting related adjustments........ 1,125,563,000 -- 1,125,563,000 2004 -------------- --------------- --------------- -------------- TOTAL INVESTMENT LAND AND LAND HELD FOR DEVELOPMENT AND SALE............... 1,638,013,000 -- 1,638,013,000 -- -------------- --------------- --------------- -------------- TOTAL NET PROPERTY AND EQUIPMENT AND INVESTMENT LAND AND LAND HELD FOR DEVELOPMENT AND SALE............... $4,542,808,561 $18,765,983,618 $23,308,792,179 $1,453,487,719 ============== =============== =============== ============== </Table> F-60 GENERAL GROWTH PROPERTIES, INC. NOTES TO SCHEDULE III (DOLLARS IN THOUSANDS) (a) See description of mortgage notes and other debt payable in Note 6 of Notes to Consolidated Financial Statements. (b) Initial cost for constructed malls is cost at end of first complete calendar year subsequent to opening. (c) Carrying costs consist of capitalized construction-period interest and taxes. (d) The aggregate cost of land, buildings and equipment for federal income tax purposes is approximately $16,570,519. RECONCILIATION OF REAL ESTATE <Table> <Caption> 2004 2003 2002 ----------- ---------- ---------- Balance at beginning of year.................... $ 9,677,348 $6,957,996 $5,090,106 Acquisitions.................................... 11,235,608 2,474,222 1,089,643 Investment land and land held for development and sale...................................... 1,645,700 -- -- Additions....................................... 804,556 257,372 778,247 Dispositions.................................... (54,420) (12,242) -- ----------- ---------- ---------- Balance at end of year.......................... $23,308,792 $9,677,348 $6,957,996 =========== ========== ========== </Table> RECONCILIATION OF ACCUMULATED DEPRECIATION <Table> <Caption> 2004 2003 2002 ---------- ---------- -------- Balance at beginning of year...................... $1,101,235 $ 798,431 $625,544 Depreciation expense.............................. 352,253 205,780 172,887 Other additions (primarily purchase of interest in GGP Ivanhoe III)................................ -- 97,024 -- ---------- ---------- -------- Balance at end of year............................ $1,453,488 $1,101,235 $798,431 ========== ========== ======== </Table> (e) Depreciation is computed based upon the following estimated lives: <Table> <Caption> YEARS ----- Buildings, improvements and carrying costs.................. 40-45 Equipment, tenant improvements and fixtures................. 5-10 Purchased intangibles....................................... 5-15 </Table> (f) Represents historical carrying values of properties acquired in the TRC Merger. As individual property values have not been finalized, purchase accounting related adjustments are presented in total. (g) Includes Ward Entertainment Center, Ward Warehouse, Ward Village and Village Shops. F-61 <Table> 2.1 Agreement and Plan of Merger by and Among The Rouse Company, General Growth Properties, Inc. and Red Acquisition, LLC dated as of August 19, 2004 (previously filed as Exhibit 2.1 to our Current Report on Form 8-K/A filed August 24, 2004, incorporated herein by reference). 3.1 Second Amended and Restated Certificate of Incorporation of General Growth Properties, Inc. filed with the Delaware Secretary of State on May 24, 1995 (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference). 3.2 Certificate of Correction filed to correct an error in the Second Amended and Restated Certificate of Incorporation of General Growth Properties, Inc. filed with the Delaware Secretary of State on December 21, 1995 (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 1995, incorporated herein by reference). 3.3 Certificate of Amendment of Second Amended and Restated Certificate of Incorporation of General Growth Properties, Inc. filed with the Delaware Secretary of State on May 20, 1997 (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 1997, incorporated herein by reference). 3.4 Second Certificate of Amendment of Second Amended and Restated Certificate of Incorporation of General Growth Properties, Inc. filed with the Delaware Secretary of State on May 17, 1999 (previously filed as an exhibit to our Current Report on Form 8-K, dated July 12, 1999, incorporated herein by reference). 3.5 Certificate of Amendment of Second Amended and Restated Certificate of Incorporation of General Growth Properties, Inc. filed with the Delaware Secretary of State on November 20, 2003 (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference). 3.6 Bylaws of General Growth Properties, Inc. (previously filed as an exhibit to our Current Report on Form 8-K filed on February 25, 1994, incorporated herein by reference). 3.7 Amendment to Article IV, Section 4.1 of the Bylaws (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 1994, incorporated herein by reference). 3.8 Amended and Restated Section 3.9 of the Bylaws of General Growth Properties, Inc. (as of February 5, 2003) (previously filed as an exhibit to our Quarterly Report on Form 10-Q dated May 9, 2003, incorporated herein by reference). 3.9 Purchase Agreement, dated April 17, 2002, among General Growth Properties, Inc., the Operating Partnership, GGPLP L.L.C., Goldman Sachs 2002 Exchange Place Fund, L.P. and GSEP 2002 Realty Corp. (previously filed as an exhibit to our Quarterly Report on Form 10-Q dated May 10, 2002, incorporated herein by reference). 3.10 Purchase Agreement dated April 23, 2002, among General Growth Properties, Inc., the Operating Partnership, GGPLP L.L.C., the Goldman Sachs 2002 Exchange Place Fund, L.P. and GSEP 2002 Realty Corp. (previously filed as an exhibit to our Quarterly Report on Form 10-Q dated May 10, 2002, incorporated herein by reference). 4.1 Redemption Rights Agreement, dated July 13, 1995, by and among the Operating Partnership, General Growth Properties, Inc. and the persons listed on the signature pages thereof (previously filed as an exhibit to our Current Report on Form 8-K dated July 17, 1996, incorporated herein by reference). 4.2 Redemption Rights Agreement dated December 6, 1996, among the Operating Partnership, Forbes/Cohen Properties, a Michigan general partnership, Lakeview Square Associates, a Michigan general partnership, and Jackson Properties, a Michigan general partnership (previously filed as an exhibit to our Current Report on Form 8-K dated January 3, 1997, incorporated herein by reference). 4.3 Redemption Rights Agreement, dated June 19, 1997, among the Operating Partnership, General Growth Properties, Inc., and CA Southlake Investors, Ltd., a Georgia limited partnership (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 1997, incorporated herein by reference). 4.4 Redemption Rights Agreement dated October 23, 1997, among General Growth Properties, Inc., the Operating Partnership and Peter Leibowits (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 1997, incorporated herein by reference). </Table> S-1 <Table> 4.5 Certificate of Designation of Series A Junior Participating Preferred Stock filed with the Delaware Secretary of State on November 18, 1998 (previously filed as an exhibit to our Current Report from on 8-K, dated November 18, 1998, incorporated herein by reference). 4.6 Certificate of Amendment and Restatement of Certificate of Designations, Preferences and Rights of 8.95% Cumulative Redeemable Preferred Stock, Series B filed with the Delaware Secretary of State on May 8, 2002 (previously filed as an exhibit to our Current Report on Form 8-K dated July 10, 2002, incorporated herein by reference). 4.7 Certificate of Designations, Preferences and Rights of 8.5% Cumulative Convertible Preferred Stock, Series C filed with the Delaware Secretary of State on July 10, 2002 (previously filed as an exhibit to our Current Report on Form 8-K dated July 10, 2002, incorporated herein by reference). 4.8 Certificate of Designations, Preferences and Rights of 8.75% Cumulative Redeemable Preferred Stock, Series D filed with the Delaware Secretary of State on July 10, 2002 (previously filed as an exhibit to our Current Report on Form 8-K dated July 10, 2002, incorporated herein by reference). 4.9 Certificate of Designations, Preferences and Rights of 8.95% Cumulative Redeemable Preferred Stock, Series E filed with the Delaware Secretary of State on July 10, 2002 (previously filed as an exhibit to our Current Report on Form 8-K dated July 10, 2002, incorporated herein by reference). 4.10 Certificate of Designations, Preferences and Rights of 8.75% Cumulative Redeemable Preferred Stock, Series F filed with the Delaware Secretary of State on July 10, 2002 (previously filed as an exhibit to our Current Report on Form 8-K dated July 10, 2002, incorporated herein by reference). 4.11 Certificate of Designations, Preferences and Rights of 8.95% Cumulative Redeemable Preferred Stock, Series G filed with the Delaware Secretary of State on April 17, 2002 (previously filed with the Delaware Secretary of State as an exhibit to our Quarterly Report on Form 10-Q dated May 10, 2002, incorporated herein by reference). 4.12 Certificate of Correction of Certificate of Designations, Preferences and Rights of 8.95% Cumulative Redeemable Preferred Stock Series G filed with the Delaware Secretary of State on April 29, 2002 (previously filed as an exhibit to our Current Report on Form 8-K dated July 24, 2002, incorporated herein by reference). 4.13 Certificate of Designations, Preferences and Rights of 7% Cumulative Convertible Preferred Stock, Series H filed with the Delaware Secretary of State on November 27, 2002 (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference). 4.14 Redemption Rights Agreement dated April 2, 1998, among the Operating Partnership, General Growth Properties, Inc. and Southwest Properties Venture (previously filed as an exhibit to our Current Report on Form 8-K dated May 26, 1998, incorporated herein by reference). 4.15 Rights Agreement, dated November 18, 1998, between General Growth Properties, Inc. and Norwest Bank Minnesota, N.A., as Rights Agent (including the Form of Certificate of Designation of Series A Junior Participating Preferred Stock attached thereto as Exhibit A, the Form of Right Certificate attached thereto as Exhibit B and the Summary of Rights to Purchase Preferred Shares attached thereto as Exhibit C) (previously filed as an exhibit to our current report on Form 8-K, dated November 18, 1998, incorporated herein by reference). 4.16 First Amendment to Rights Agreement, dated as of November 10, 1999, between General Growth Properties, Inc. and Norwest Bank Minnesota, N.A. (previously filed as an exhibit to our Current Report on Form 8-K, dated November 23, 1999, incorporated herein by reference). 4.17 Second Amendment to Rights Agreement, dated as of December 31, 2001, between General Growth Properties, Inc. and Mellon Investor Services, LLC, successor to Norwest Bank Minnesota, N.A. (previously filed as an exhibit to our Registration Statement on Form S-3 (No. 333-82134) dated February 5, 2002, incorporated herein by reference). 4.18 Form of Common Stock Certificate (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2004, incorporated herein by reference). 4.19 Letter Agreement concerning Rights Agreement, dated November 10, 1999, between the Operating Partnership and NYSCRF (previously filed as an exhibit to our Current Report on Form 8-K, dated November 23, 1999, incorporated herein by reference). </Table> S-2 <Table> 4.20 Redemption Rights Agreement, dated October 21, 1998, among the Operating Partnership, General Growth Properties, Inc. and the persons on the signature pages thereof (previously filed as an exhibit to our Current Report on Form 8-K dated November 13, 1998, incorporated herein by reference). 4.21 Redemption Rights Agreement, dated July 21, 1998, among the Operating Partnership, General Growth Properties, Inc., Nashland Associates, a Tennessee general partnership, and HRE Altamonte, Inc., a Delaware corporation (previously filed as an exhibit to our Current Report on Form 8-K/A dated October 2, 1998, incorporated herein by reference). 4.22 Redemption Rights Agreement, dated December 11, 2003, by and among the Operating Partnership, General Growth Properties, Inc. and Everitt Enterprises, Inc. (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference). 4.23 The Rouse Company and The First National Bank of Chicago (Trustee) Indenture dated as of February 24, 1995. 10.1 Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated April 1, 1998 (previously filed as an exhibit to our Quarterly Report on Form 10-Q dated May 14, 1998, as amended May 21, 1998, incorporated herein by reference). 10.2 First Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of June 10, 1998 (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference). 10.3 Second Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of June 29, 1998 (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference). 10.4 Third Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of February 15, 2002 (previously filed as an exhibit to our Current Report on Form 8-K dated July 10, 2002, incorporated herein by reference). 10.5 Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of April 24, 2002 (previously filed as an exhibit to our Current Report on Form 8-K dated July 10, 2002, incorporated herein by reference). 10.6 Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of July 10, 2002 (previously filed as an exhibit to our Current Report on Form 8-K dated July 10, 2002, incorporated herein by reference). 10.7 Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of November 27, 2002 (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference). 10.8 Sixth Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, and Exhibit A to the Amendment, dated as of November 20, 2003 (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference). 10.9 Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, and Exhibit A to the Amendment, dated as of December 11, 2003 (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference). 10.10 Amendment dated November 12, 2004 to the Second Amended and Restated Agreement of Limited Partnership of GGP Limited Partnership (previously filed as an exhibit to our Current Report on Form 8-K/A dated November 12, 2004, incorporated herein by reference). 10.11 Rights Agreement, dated July 27, 1993, between General Growth Properties, Inc. and certain other parties named therein (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 1993, incorporated herein by reference). 10.12 Amendment to Rights Agreement, dated as of February 1, 2000, between General Growth Properties, Inc. and certain other parties named therein (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 1994, incorporated herein by reference). </Table> S-3 <Table> 10.13 Form of Indemnification Agreement between the Operating Partnership, Martin Bucksbaum, Matthew Bucksbaum, Mall Investment L.P. and M. Bucksbaum Company (previously filed as an exhibit to our Registration Statement on Form S-11 (No. 33-56640), incorporated herein by reference). 10.14 Form of Registration Rights Agreement, dated April 15, 1993, between General Growth Properties, Inc., Martin Bucksbaum, Matthew Bucksbaum and the other parties named therein (previously filed as an exhibit to our Registration Statement on Form S-11 (No. 33-56640), incorporated herein by reference). 10.15 Amendment to Registration Rights Agreement, dated February 1, 2000, between General Growth Properties, Inc. and certain other parties named therein (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 1994, incorporated herein by reference). 10.16 Form of Registration Rights Agreement between General Growth Properties, Inc., Chase Manhattan Bank, as trustee for the IBM Retirement Plan and WFA Growth Realty Associates Limited Partnership (previously filed as an exhibit to our Registration Statement on Form S-11 (No. 33-56640), incorporated herein by reference). 10.17 Form of Incidental Registration Rights Agreement between General Growth Properties, Inc., the Equitable Life Assurance Society of the United States, Frank Russell Trust Company Commingled Employee Benefit Trust Real Estate Equity Fund and WFC Management Corporation (previously filed as an exhibit to our Registration Statement on Form S-11 (No. 33-56640), incorporated herein by reference). 10.18 Form of Letter Agreements restricting sale of certain shares of Common Stock (previously filed as an exhibit to our Registration Statement on Form S-11 (No. 33-56640), incorporated herein by reference). 10.19* Letter Agreement dated October 14, 1993, between General Growth Properties, Inc. and Bernard Freibaum (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 1993, incorporated herein by reference). 10.20* General Growth Properties, Inc. 1998 Incentive Stock Plan (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 1998, incorporated herein by reference). 10.21* Amendment to General Growth Properties, Inc. 1998 Incentive Stock Plan, dated May 9, 2000 (previously filed as an exhibit to our Quarterly Report on Form 10-Q dated August 13, 2001, incorporated herein by reference). 10.22* General Growth Properties, Inc. 2003 Incentive Stock Plan (previously filed as an exhibit to our Registration Statement (333-105882) on Form S-8 dated June 6, 2003, incorporated herein by reference). 10.23 Second Amended and Restated Operating Partnership Agreement of GGPLP L.L.C., dated April 17, 2002 (previously filed as an exhibit to our Quarterly Report on Form 10-Q dated May 10, 2002, incorporated herein by reference). 10.24 First Amendment to the Second Amended and Restated Operating Agreement of GGPLP L.L.C., dated April 23, 2002 (previously filed as an exhibit to our Quarterly Report on Form 10-Q dated May 10, 2002, incorporated herein by reference). 10.25 Second Amendment to the Second Amended and Restated Operating Agreement of GGPLP L.L.C., dated May 13, 2002 (previously filed as an exhibit to our Quarterly Report on Form 10-Q dated August 13, 2002, incorporated herein by reference). 10.26 Third Amendment to the Second Amended and Restated Operating Agreement of GGPLP L.L.C., dated October 30, 2002 (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference). 10.27 Fourth Amendment to the Second Amended and Restated Operating Agreement of GGPLP L.L.C., dated April 7, 2003 (previously filed as an exhibit to our Quarterly Report on Form 10-Q dated May 9, 2003, incorporated herein by reference). 10.28 Fifth Amendment to the Second Amended and Restated Operating Agreement of GGPLP L.L.C., dated April 11, 2003 (previously filed as an exhibit to our Quarterly Report on Form 10-Q dated May 9, 2003, incorporated herein by reference). </Table> S-4 <Table> 10.29 Sixth Amendment dated November 10, 2004 to the Second Amended and Restated Operating Agreement of GGPLP, L.L.C. (previously filed as an exhibit to our Current Report on Form 8-K/A, dated November 12, 2004, incorporated herein by reference). 10.30 Registration Rights Agreement dated May 25, 2000 between General Growth Properties, Inc. and Goldman Sachs 2000 Exchange Place Fund, L.P. (previously filed as an exhibit to our Quarterly Report on Form 10-Q dated August 9, 2000, incorporated herein by reference). 10.31 Registration Rights Agreement, dated April 17, 2002, between General Growth Properties, Inc. and GSEP 2002 Realty Corp. (previously filed as an exhibit to our Quarterly Report on Form 10-Q dated May 10, 2002, incorporated herein by reference). 10.32 Redemption Rights Agreement (PDC Common Units), dated July 10, 2002, by and among the Operating Partnership, General Growth Properties, Inc. and the persons listed on the signature pages thereof (previously filed as an exhibit to our Current Report on Form 8-K dated July 10, 2002, incorporated herein by reference). 10.33 Redemption Rights Agreement (PDC Series B Preferred Units), dated July 10, 2002, by and among the Operating Partnership, General Growth Properties, Inc. and the persons listed on the signature pages thereof (previously filed as an exhibit to our Current Report on Form 8-K dated July 10, 2002, incorporated herein by reference). 10.34 Redemption Rights Agreement (PDC Series C Preferred Units), dated November 27, 2002, by and among the Operating Partnership, General Growth Properties, Inc. and JSG, LLC (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference). 10.35 Redemption Rights Agreement (PDC Common Units), dated November 27, 2002, by and among the Operating Partnership, General Growth Properties, Inc. and JSG, LLC (previously filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference). 10.36 Operating Agreement, dated November 10, 1999, between the Operating 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") (previously filed as an exhibit to our Current Report on Form 8-K, dated November 23, 1999, incorporated herein by reference). 10.37 Contribution Agreement dated November 10, 1999, by and between the Operating Partnership and GGP/Homart II (Northbrook Court) (previously filed as an exhibit to our Current Report on Form 8-K/A, dated January 11, 2000, incorporated herein by reference). 10.38 Contribution Agreement dated November 10, 1999, by and between the Operating Partnership and GGP/Homart II (Altamonte Mall) (previously filed as an exhibit to our Current Report on Form 8-K/A, dated January 11, 2000, incorporated herein by reference). 10.39 Contribution Agreement dated November 10, 1999, by and between the Operating Partnership and GGP/Homart II (Natick Trust) (previously filed as an exhibit to our Current Report on Form 8-K/A, dated January 11, 2000, incorporated herein by reference). 10.40 Contribution Agreement dated November 10, 1999, by and between the Operating Partnership and GGP/Homart II (Stonebriar Centre) (previously filed as an exhibit to our Current Report on Form 8-K/A, dated January 11, 2000, incorporated herein by reference). 10.41 Contribution Agreement dated November 10, 1999, by and between NYSCRF and GGP/Homart II (Carolina Place) (previously filed as an exhibit to our Current Report on Form 8-K/A, dated January 11, 2000, incorporated herein by reference). 10.42 Contribution Agreement dated November 10, 1999, by and between NYSCRF and GGP/Homart II (Alderwood Mall) (previously filed as an exhibit to our Current Report on Form 8-K/A, dated January 11, 2000, incorporated herein by reference). 10.43 Contribution Agreement dated November 10, 1999, by and between NYSCRF and GGP/Homart II (Montclair Plaza) (previously filed as an exhibit to our Current Report on Form 8-K/A, dated January 11, 2000, incorporated herein by reference). </Table> S-5 <Table> 10.44 $7,295,000,000 Amended and Restated Credit Agreement among General Growth Properties, Inc., GGP Limited Partnership and GGPLP L.L.C, as Borrowers, the Several Lenders from Time to Time Parties hereto, Lehman Brothers Inc., Banc of America Securities LLC, Credit Suisse First Boston and Wachovia Capital Markets, LLC, as Arrangers, Bank of America, N.A. and Credit Suisse First Boston, as Syndication Agents, Eurohypo AG, New York Branch, as Documentation Agent, Lehman Commercial Paper Inc., as Tranche B Administrative Agent, and Wachovia Bank, National Association, as General Administrative Agent dated as of November 12, 2004 (previously filed as an exhibit to our Current Report on Form 8-K/A, dated November 12, 2004, incorporated herein by reference). 10.45 Form of Contingent Stock Agreement, effective January 1, 1996, by The Rouse Company and in favor of and for the benefit of the Holders and the Representatives (as defined therein) (previously filed as an exhibit to our Registration Statement on Form S-3/A (No. 333-120373), incorporated herein by reference). 10.46 Assumption Agreement dated October 19, 2004 by General Growth Properties, Inc. and The Rouse Company in favor of and for the benefit of the Holders and the Representatives (as defined therein). 10.47 Form of Option Agreement pursuant to 1998 Incentive Stock Plan. 10.48 Form of Option Agreement pursuant to 2003 Incentive Stock Plan. 21 List of our Subsidiaries. 23.1 Consent of Deloitte & Touche LLP. 23.2 Consent of KPMG LLP. 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. </Table> - --------------- (*) A compensatory plan or arrangement required to be filed. 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