<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission file number 1-11656
GENERAL GROWTH PROPERTIES, INC.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 42-1283895
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
55 W. Monroe St., Chicago, IL 60603
-----------------------------------
(Address of principal executive offices, Zip Code)
(312) 551-5000
--------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year, if changed since last
report)
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
---------- ----------
The number of shares of Common Stock, $.10 par value, outstanding on August 13,
1996 was 27,333,025.
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<PAGE> 2
GENERAL GROWTH PROPERTIES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
PART I FINANCIAL INFORMATION NUMBER
------
<S> <C>
Item 1: Financial Statements
Consolidated Balance Sheets
as of June 30, 1996 and December 31, 1995 ....................... 3
Consolidated Statements of Operations
for the three and six months ended June 30, 1996 and 1995 ....... 4
Consolidated Statements of Cash Flows
for the six months ended June 30, 1996 and 1995 ................. 5
Notes to Consolidated Financial Statements ...................... 6
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations .......... 11
Company Portfolio Results and Funds from Operations ............. 14
Reconciliation of Company Funds from Operations to Company Net
Income .......................................................... 14
Breakdown of Company Portfolio Results and Funds from
Operations for the three months ended June 30, 1996 ............. 15
Breakdown of Company Portfolio Results and Funds from
Operations for the six months ended June 30, 1996 ............... 15
Other Portfolio Data for the six months ended June 30, 1996 ..... 16
CenterMark Portfolio Results and Funds from Operations .......... 17
Management's Discussion and Analysis of CenterMark Funds from
Operations ...................................................... 17
Reconciliation of CenterMark Funds from Operations to CenterMark
Net Income ...................................................... 19
GGP/Homart Portfolio Results and Funds from Operations .......... 20
Reconciliation of GGP/Homart Funds from Operations to
GGP/Homart Net Income ........................................... 21
GGP Management, Inc. Statement of Operations for the three and
six months ended June 30, 1996 .................................. 22
Liquidity and Capital Resources of the Company .................. 23
PART II OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders .... 23
Item 6: Exhibits and Reports on Form 8-K ....................... 24
SIGNATURE ....................................................... 24
</TABLE>
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<PAGE> 3
PART I.FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(Dollars in thousands, except for share amounts)
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
1996 DECEMBER 31,
(UNAUDITED) 1995
----------- ------------
<S> <C> <C>
Investment in real estate:
Land $ 152,470 $ 144,517
Buildings and equipment 1,120,804 1,054,695
Less accumulated depreciation (169,721) (153,275)
Developments in progress - 49,680
---------- ----------
Net property and equipment 1,103,553 1,095,617
Investment in CenterMark 112,458 120,082
Investment in GGP/Homart 178,023 178,647
---------- ----------
Net investment in real estate 1,394,034 1,394,346
Cash and cash equivalents 5,106 18,298
Tenant accounts receivable, net 15,810 14,831
Deferred expenses, net 28,573 24,752
Prepaid and other assets 7,815 3,755
---------- ----------
$1,451,338 $1,455,982
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $1,047,340 $1,025,130
Notes and contracts payable 1,068 2,802
Dividends and distributions payable - 18,650
Accounts payable and accrued expenses 36,062 43,389
Accounts payable and accrued expenses -- affiliates 1,657 1,211
---------- ----------
1,086,127 1,091,182
---------- ----------
Minority interest in Operating Partnership 135,570 135,417
---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $100 par value; 5,000,000 shares authorized;
none issued
Common stock; $.10 par value; 70,000,000 shares authorized;
27,272,560 shares issued and outstanding 2,727 2,727
Additional paid-in capital 506,044 506,107
Retained earnings (deficit) (279,130) (279,451)
---------- ----------
Total stockholders' equity 229,641 229,383
---------- ----------
$1,451,338 $1,455,982
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE> 4
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Minimum rents $ 32,927 $ 24,475 $ 65,271 $ 48,744
Tenant recoveries 14,513 11,947 30,651 24,740
Percentage rents 1,389 1,120 2,769 2,331
Other 870 948 1,934 1,855
Fees 7,235 - 12,676 -
-------- -------- -------- --------
Total revenues 56,934 38,490 113,301 77,670
-------- -------- -------- --------
Expenses:
Property operating and management 20,767 12,103 42,943 26,007
Management fees to affiliate 658 733 1,325 1,434
Depreciation and amortization 9,259 7,348 18,400 14,630
General and administrative 758 718 1,493 1,415
-------- -------- -------- --------
Total expenses 31,442 20,902 64,161 43,486
-------- -------- -------- --------
Operating income 25,492 17,588 49,140 34,184
Interest expense, net (17,552) (11,675) (35,092) (23,597)
Equity in net income of unconsolidated
real estate affiliates
CenterMark 1,471 1,745 3,482 3,492
GGP/Homart 2,196 - 3,887 -
-------- -------- -------- --------
Income before extraordinary item and
allocation to minority interest 11,607 7,658 21,417 14,079
Income allocated to minority interest (4,332) (2,925) (7,146) (5,510)
-------- -------- -------- --------
Income before extraordinary item 7,275 4,733 14,271 8,569
Extraordinary item (a) - - (2,291) -
-------- -------- -------- --------
Net income $ 7,275 $ 4,733 $ 11,980 $ 8,569
======== ======== ======== ========
Earnings per share before extraordinary item $ .27 $ .19 $ .52 $ .36
Extraordinary item per share - - (.08) -
-------- -------- -------- --------
Net earnings per share $ .27 $ .19 $ .44 $ .36
======== ======== ======== ========
(a) Charges related to early retirement of debt.
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE> 5
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,980 $ 8,569
Adjustments to reconcile net income to net cash provided by operating activities:
Extraordinary items - charges related to early retirement of debt 2,291 -
Income allocated to minority interest 7,146 5,510
Equity in net income of unconsolidated real estate affiliates (7,369) (3,492)
Provision for doubtful accounts 1,542 (280)
Depreciation 16,444 12,554
Amortization 1,956 2,077
Net changes in:
Tenant accounts receivable (2,521) (1,147)
Prepaid and other assets (4,122) (544)
Accounts payable and accrued expenses (1,848) (1,384)
-------- --------
Net cash provided by operating activities 25,499 21,863
-------- --------
Cash flows from investing activities:
Acquisition of real estate and improvements and additions to properties (32,633) (46,517)
Increase in investments in unconsolidated real estate affiliates (121)
Change in notes receivable affiliates 61
Increase in deferred expenses (6,112) (3,262)
Dividends received from CenterMark Properties, Inc. 11,106 12,052
Dividends received from GGP/Homart, Inc. 4,633
-------- --------
Net cash used in investing activities (23,066) (37,727)
-------- --------
Cash flows from financing activities:
Cash dividends paid to common stockholders (23,455) (18,673)
Cash distributed to operating partnership unitholders (13,846) (12,520)
Proceeds from issuance of mortgage and other notes payable 367,212 33,500
Principal payments on mortgage and other notes payable (343,519) (77,011)
Retirement of common stock (net of sale proceeds) (62)
Increase in deferred financing costs (1,955)
-------- --------
Net cash provided by financing activities (15,625) (74,704)
-------- --------
Net change in cash and cash equivalents (13,192) (2,384)
Cash and cash equivalents at beginning of period 18,298 5,617
-------- --------
Cash and equivalents at end of period $ 5,106 $ 3,233
======== ========
Interest $ 38,172 $ 25,553
Interest capitalized $ 2,892 $ 1,657
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE> 6
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
NOTE 1 BASIS OF PRESENTATION
The financial statements include the consolidated accounts of General
Growth Properties, Inc. (the "Company"), and GGP Limited Partnership,
its majority-owned operating partnership, including 100% interests in
twenty-two enclosed mall property partnerships and three
directly-owned enclosed malls, known collectively as the "Original
Centers". In December 1995, the Company formed GGP Management, Inc.
("GGP Management") which primarily manages the GGP/Homart, Inc.
("GGP/Homart") properties. GGP Management is consolidated in the
Company's financial statements.
As required by generally accepted accounting principles ("GAAP"), the
Company accounts for its investments in CenterMark Properties, Inc.
("CenterMark") and GGP/Homart under the equity method. The Company
includes its share of CenterMark's and GGP/Homart's net income in its
statements of operations. The Company's investments in CenterMark and
GGP/Homart, as reported in its balance sheet, are increased by the
Company's proportionate share of net income and reduced by dividends
that are received.
The Company incurs significant interest expense attributable to its
investments in CenterMark and GGP/Homart. In addition, a significant
portion of the Company's general and administrative costs are
attributable to the management and oversight of its investments in
CenterMark and GGP/Homart. Accordingly, CenterMark's and GGP/Homart's
funds from operations do not represent CenterMark's and GGP/Homart's
net effective incremental contribution to the Company's funds from
operations. CenterMark's and GGP/Homart's funds from operations
exclude the aforementioned interest and general and administrative
costs that are accounted for as expenses of the Company.
The accompanying unaudited financial statements have been prepared by
the Company's management, in accordance with generally accepted
accounting principles for interim financial information and in
conjunction with the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normally recurring
matters) considered necessary for a fair presentation have been
included. The results of operations for the three and six month
periods ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the full year. These financial
statements should be read in conjunction with the Company's audited
financial statements and notes thereto included in the Company's
annual report on Form 10-K for the year ended December 31, 1995. The
balance sheet as of December 31, 1995 was derived from the Company's
audited financial statements.
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<PAGE> 7
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
NOTE 2 ORGANIZATION AND FORMATION OF THE COMPANY
On April 15, 1993, the Company completed an initial public offering of
18,975,000 shares of its common stock at $22 per share. Net proceeds
to the Company after underwriting discounts and other costs were
approximately $383,000.
The Company used substantially all of the net offering proceeds to
repay existing debt and purchase additional properties. The majority
of the funds remaining were used to pay for a portion of the
CenterMark acquisition (see Note 3).
On May 23, 1995, the Company completed a follow-on stock offering of
4,500,000 shares of its common stock at $20.75 per share. Net proceeds
to the Company after underwriting discounts and other costs were
approximately $87,893. Net proceeds were used to reduce the
outstanding balance of the Company's credit facility (see Note 5). On
December 22, 1995, the Company acquired a 38.2% interest in
GGP/Homart, Inc. (See Note 4.)
NOTE 3 CENTERMARK ACQUISITION
On February 11, 1994, the Company, jointly with two other unaffiliated
parties, acquired 100% of the stock of CenterMark from The Prudential
Insurance Company of America. Each of the Company and Westfield U.S.
Investments Pty. Limited acquired 40% of the stock of CenterMark and
several real estate investment funds sponsored by Goldman Sachs & Co.
acquired the remaining 20%. The Company's portion of the cash purchase
price for the CenterMark stock, including certain transaction costs,
was approximately $182,000. CenterMark elected real estate investment
trust status for income tax purposes. The CenterMark portfolio
includes interests in sixteen major regional shopping malls and three
power centers located in six states.
On December 19, 1995, the Company sold 25% of its interest in
CenterMark to Westfield U.S. Investments Pty. Limited for a purchase
price of $72,500. As a result of the sale, the Company's ownership was
reduced to 30% of the outstanding CenterMark stock. Concurrently with
the sale of the stock, the Company also granted Westfield U.S.
Investments Pty. Limited an option to purchase the remainder of the
Company's CenterMark stock ("Option Stock") for $217,500.
On June 28, 1996, Westfield U.S. Investments, Pty. Limited exercised
its option to acquire the remaining 30% of the outstanding CenterMark
stock. The Option Stock will be purchased in two installments. The
first installment in the amount of $87 million was paid on July 1,
1996, and the second installment in the amount of $130.5 million is
due in January 1997. Proceeds from the first installment were used to
repay the remaining balance outstanding on the Company's interim loan
facility that was utilized in connection with the acquisition of
GGP/Homart (See Note 4.)
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<PAGE> 8
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
CENTERMARK PROPERTIES, INC.
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Minimum rents $ 22,336 $20,997 $ 43,479 $ 37,251
Tenant recoveries 11,136 7,087 20,773 14,321
Percentage rents 220 99 1,717 744
Other 841 440 1,680 1,449
-------- ------- -------- --------
Total revenues 34,533 28,623 67,649 53,765
Operating expenses (13,228) (8,413) (24,410) (16,585)
Depreciation and amortization (8,836) (7,406) (17,464) (15,213)
-------- ------- -------- --------
Net operating income 12,469 12,804 25,775 21,967
Interest expense, net (7,454) (9,055) (14,680) (14,189)
Equity in net income of unconsolidated
real estate affiliates 110 614 957 953
Income allocated to minority interest (220) - (445) -
-------- ------- -------- --------
Net income $ 4,905 $ 4,363 $ 11,607 $ 8,731
======== ======= ======== ========
</TABLE>
As of July 1, 1996, the Company cannot exert influence over the operations of
CenterMark, so it will use the cost method of accounting until its remaining
CenterMark stock is purchased in January 1997.
NOTE 4 GGP/HOMART ACQUISITION
On December 22, 1995, the Company jointly with four other investors acquired
100% of the stock of GGP/Homart, Inc. ("GGP/Homart") from Sears, Roebuck and
Co. The other investors in GGP/Homart are the New York State Common Retirement
Fund, Equitable Life Insurance Company of Iowa, USG Annuity & Life Company and
The Trustees of the University of Pennsylvania. The Company acquired 38.2% of
GGP/Homart for approximately $179,000 including certain transaction costs. The
stockholders of GGP/Homart have agreed to contribute additional capital as
required through the end of 1997, up to $80,000. GGP/Homart owns interests in
twenty-five regional shopping malls and two properties currently under
development. GGP/Homart elected real estate investment trust status for income
tax purposes. The Company arranged a $125,000 interim loan facility in
conjunction with the acquisition of GGP/Homart. As of June 30, 1996, $75,000
remained outstanding on the interim loan facility. On July 1, 1996, the Company
retired the interim loan facility with the proceeds from the sale of
CenterMark. (See Note 3)
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<PAGE> 9
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
GGP/HOMART, INC.
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1996
-------- --------
<S> <C> <C>
Revenues
Minimum rents $ 21,901 $ 43,110
Tenant recoveries 9,546 18,783
Percentage rents 838 1,195
Other 1,139 1,583
-------- --------
Total revenues 33,424 64,671
Operating expenses (14,346) (28,700)
Depreciation and amortization (5,346) (10,083)
-------- --------
Net operating income 13,732 25,888
Interest expense, net (9,380) (18,290)
Equity in net income of unconsolidated
real estate affiliates 1,404 2,584
Income allocated to minority interest (7) (7)
-------- --------
Net income $ 5,749 $ 10,175
======== ========
</TABLE>
NOTE 5 CREDIT FACILITY
In January, 1994, the Company arranged a $208,500 credit facility
collateralized in part by six Original Centers, with an initial term
of two years and two one-year extension options. Approximately
$140,000 was borrowed as the initial draw on this facility to fund a
portion of the cash purchase price paid by the Company for its
interest in CenterMark (See Note 3). In May 1995, the outstanding
balance of the credit facility was reduced with the proceeds of the
Company's follow-on stock offering (See Note 2). The credit facility
was retired on January 31, 1996. (See Note 7).
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<PAGE> 10
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
NOTE 6 CONSTRUCTION LOAN FACILITY
In September, 1995, the Company closed a $120,000 construction loan
facility collateralized in part by two new developments in
Winterhaven, Florida and Tracy, California. It is a variable rate loan
with interest at the rate of 150 basis points over LIBOR. The loan
proceeds will be used to pay for construction and all other
development costs of both projects. The outstanding balance of the
construction loan facility was $107,524 on June 30, 1996.
NOTE 7 PERMANENT MORTGAGE FINANCING
On January 31, 1996 the Company closed a $340,000 multi-property
loan package with Principal Mutual Life Insurance Company. The
financing is nonrecourse and consists of cross collateralized first
mortgages on nine wholly owned Original Centers. To mitigate
refinancing risk the total debt was spread between five, ten and twenty
year maturities. All nine loans will be interest only for the first
five years. During the first five years, the weighted average interest
rate on the entire $340,000 loan package is 6.77%. The five year loans
can be extended for five additional years. Proceeds were used to repay
$340,000 of floating rate debt, approximately $290,000 of existing
loans on eight wholly owned malls and $50,000 of interim financing
which was used in connection with the acquisition of GGP/Homart. (See
Note 4).
NOTE 8 EXTRAORDINARY ITEM
The extraordinary item is the write-off of unamortized deferred
financing costs related to the early extinguishment of the Company's
credit facility and two other project loans.
NOTE 9 STOCK-BASED COMPENSATION
In 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123). Under the provisions of SFAS 123, companies can elect to account
for stock-based compensation plans using a fair-value-based method or
continue measuring compensation expense for those plans using the
intrinsic value based method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees". SFAS 123
requires that companies electing to continue using the intrinsic value
based method must make pro-forma disclosures of net income and earnings
per share as if the fair-value-based method of accounting had been
applied.
The company has elected to continue to account for stock-based
compensation using the intrinsic value method. As such, SFAS 123 did
not have an impact on the Company's first quarter results of operations
or financial position. The pro-forma information required by SFAS 123
will be included in the footnotes to the Company's 1996 year end
consolidated financial statements.
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<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is primarily engaged in the ownership, acquisition, development and
operation of enclosed regional shopping centers. It currently has interests in
sixty-six regional malls and three power centers located in 18 states. In
addition, two new enclosed regional malls located in Ocoee, Florida and
Waterbury, Connecticut are currently under development. The Company will own
38.2% of the two new shopping centers and they are expected to have grand
openings in late 1996 and 1997, respectively. Revenues are primarily derived
from fixed minimum rents, percentage rents and recoveries of operating expenses
from tenants. Inasmuch as the Company's financial statements reflect the use of
the equity method to account for its investments in CenterMark and GGP/Homart,
the discussion of results of operations below relates primarily to the revenues
and expenses of the Original Centers. The Original Centers, the CenterMark
Centers and the GGP/Homart Centers are collectively known as the "Company
Portfolio". A separate discussion of CenterMark's and GGP/Homart's results of
operations is presented below (see "CenterMark Portfolio Results and Funds from
Operations" on page 17 and "GGP/Homart Portfolio Results and Funds from
Operations" on page 20).
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Total revenues for the second quarter of 1996 were $56.9 million, which
represents an increase of $18.4 million or approximately 47.8% from $38.5
million in the second quarter of 1995. Approximately $8.4 million of the
increase is from properties that were acquired after June 30, 1995. Fee
revenue in 1996 accounted for $7.2 million of the increase. Minimum rent
for the second quarter of 1996 increased by $8.5 million or 34.5% from
$24.4 million in 1995 to $32.9 million in 1996. The acquisition of
properties after June 30, 1995, generated $6.2 million of the $8.5 million
increase in minimum rents. Expansions, new developments, specialty leasing
increases and a combination of occupancy and rental changes at the other
centers accounted for the remaining $2.3 million increase in minimum
rents. Tenant recoveries increased by $2.6 million from $11.9 million to
$14.5 million for the second quarter of 1996, primarily due to the
acquisition and development of new properties. For the second quarter of
1996 overage rents increased by $.3 million or approximately 24% to $1.4
million from $1.1 million in 1995. Most of the increase was from the
acquisition of additional centers. Other revenues decreased by
approximately $.1 million to $.9 million in the second quarter of 1996.
Fee revenue of $7.2 million was generated by GGP Management's development,
management, and leasing efforts and the Company's asset management and
financing activities for the GGP/Homart Portfolio.
Total expenses, including depreciation and amortization, increased by
approximately $10.5 million or 50.4%, from $20.9 million in the second
quarter of 1995 to $31.4 million in the second quarter of 1996. For the
period ended June 30, 1996, property operating and management expenses
increased by $8.6 million and depreciation and amortization increased by
$1.9 million over the same period in 1995. The increase in property
operating and management expenses, depreciation and amortization is
virtually all attributable to the acquisition and development of new
properties and the management expenses incurred to perform services for
GGP/Homart.
11 of 24
<PAGE> 12
Net interest expense for the second quarter of 1996 was $17.6 million,
an increase of approximately $5.9 million, or 50.3% above the second
quarter of 1995. The acquisition and development of new properties was
responsible for approximately a $6.5 million increase. There were also $.6
million of interest savings due to lower interest rates, which together
with the aforementioned $6.5 million increase produced the net $5.9
million increase in net interest expense.
Equity in net income of unconsolidated real estate affiliates in the
second quarter of 1996 increased by approximately $2.0 million or 110% to
$3.7 million in 1996, from $1.7 million in the second quarter of 1995.
Approximately $2.2 million of the increase is attributable to the
Company's 38.2% interest in GGP/Homart's net income determined in
accordance with generally accepted accounting principles. The remaining
$.2 million decrease is from the Company's reduced ownership interest in
CenterMark. The results of CenterMark's and GGP/Homart's operations are
also presented and discussed below (see "CenterMark Portfolio Results and
Funds from Operations" on Page 17 and "GGP/Homart Portfolio Results and
Funds from Operations" on page 20).
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Total revenues for the first half of 1996 were $113.3 million, which
represents an increase of $35.6 million or approximately 45.9% from $77.7
million in the first half of 1995. Approximately $21 million of the
increase is from properties that were acquired after June 30, 1995. Fee
revenue accounted for $12.7 million of the increase. Minimum rent for the
first six months of 1996 increased by $16.6 million or 33.9% from $48.7
million in 1995 to $65.3 million. The acquisition of properties after June
30, 1995, generated $12.3 million of the $16.6 million increase.
Expansions, new developments, specialty leasing increases and a
combination of occupancy and rental changes at the other centers accounted
for the remaining $4.3 million increase in minimum rents. Tenant
recoveries increased by $5.9 million or 23.9% from $24.7 million to $30.6
million for the first half of 1996, primarily due to the acquisition of
new properties. For the first six months of 1996 overage rents increased
by $.4 million or approximately 18.8% from $2.3 million in 1995. Most of
the increase was from the acquisition of additional centers. Other
revenues increased by approximately $.1 million or 4.3% to $1.9 million
for the first half of 1996. Fee revenue of $12.7 million was generated by
GGP Management's development, management, and leasing efforts and the
Company's asset management and financing activities for the GGP/Homart
Portfolio.
Total expenses, including depreciation and amortization, increased by
approximately $20.7 million or 47.6%, from $43.5 million in 1995 to $64.2
million in the first six months of 1996. For the period ended June 30,
1996, property operating and management expenses increased by $16.9
million and depreciation and amortization increased by $3.8 million over
the same period in 1995. The increase in property operating and management
expenses, depreciation and amortization is virtually all attributable to
the acquisition and development of new properties and the management
expenses incurred to perform services for GGP/Homart.
Net interest expense for the first half of 1996 was $35.1 million, an
increase of approximately $11.5 million or 48.7% up from $23.6 million
during the same period in 1995. The acquisition and development of new
properties was responsible for a $12.5 million increase. Interest savings,
due to lower interest rates reduced net interest expense by $1.0 million,
for a net increase of $11.5 million.
12 of 24
<PAGE> 13
Equity in net income of unconsolidated real estate affiliates increased
by approximately $3.9 million or 111% to $7.4 million for the first six
months of 1996, from $3.5 million in the first six months of 1995.
Approximately $3.9 million of the increase is attributable to the
Company's 38.2% interest in GGP/Homart's net income determined in
accordance with generally accepted accounting principles. The decrease in
CenterMark's net income was due to the reduced ownership percentage. (See
Note 3) The results of CenterMark's and GGP/Homart's operations are also
presented and discussed below (see "CenterMark Portfolio Results and Funds
from Operations" on Page 17 and "GGP/Homart Portfolio Results and Funds
from Operations" on page 20).
COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
In order to portray the sources of the Company's funds from operations in a
more meaningful and useful manner, the Company Portfolio results and funds from
operations depicted below reflect 100% of the revenues and expenses of the
Original Centers and 95% of GGP Management combined with the Company's share of
CenterMark's and GGP/Homart's portfolio results. The Company Portfolio results
are a line item pro rata consolidation of 100% of the revenues and expenses of
the Original Centers and 95% of GGP Management, with the Company's share of the
comparable revenue and expenses of the wholly owned CenterMark Centers and
GGP/Homart Centers and the Company's share of CenterMark's and GGP/Homart's
various percentage interests of the revenues and expenses of the centers that
are owned in part by unaffiliated joint venture partners. Interest expense and
general and administrative costs that relate to the acquisition, management and
oversight of the Company's ownership of CenterMark and GGP/Homart are charged
entirely against the Company's direct operations. These expenses cannot be
charged on CenterMark's and GGP/Homart's books because the other shareholders
in CenterMark and GGP/Homart are not affiliated with the Company.
The Company's share of CenterMark's and GGP/Homart's funds from operations does
not represent the net effective incremental contribution to the Company made by
the CenterMark and GGP/Homart centers. Accordingly, management believes the
following schedule of the relative share of Company Portfolio net operating
income (funds from operations before interest expense) contributed by each of
the Original Centers, the CenterMark Centers and the GGP/Homart Centers
provides a better indication of the significance of each portfolio to the
Company's overall funds from operations. The net operating income from the
Company's Portfolio is essentially equivalent to earnings before interest,
taxes, depreciation and amortization (EBITDA). Operating results of the
Company's property management subsidiary are consolidated with property
operations in the Company's Consolidated Statements of Operations and are
included below with the Original Centers.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED % OF ENDED % OF
NET OPERATING INCOME BY PORTFOLIO JUNE 30, 1996 TOTAL JUNE 30, ENDED TOTAL
--------------------------------- ------------- ------- -------------- ------
<S> <C> <C> <C> <C>
Original Centers $33,511 65.76% $65,038 65.11%
30% of CenterMark 7,720 15.15% 15,894 15.91%
38.2% of GGP/Homart 9,726 19.09% 18,951 18.97%
------- ------ ------- ------
Company Portfolio Net Operating Income $50,957 100.00% $99,883 100.00%
======= ====== ======= ======
</TABLE>
The Company Portfolio results and funds from operations reflected below for the
three and six months ended June 30, 1996 and 1995 do not purport to project
results for any future period.
13 of 24
<PAGE> 14
COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue
Minimum rents (a) $ 51,076 $ 33,934 $101,420 $ 67,376
Tenant recoveries 23,672 15,925 48,843 32,721
Percentage rents 1,839 1,237 3,974 2,783
Other 1,133 1,195 2,707 2,535
Fees 7,504 - 12,721
-------- -------- -------- --------
Total revenues $ 85,224 $ 52,291 $169,665 $105,415
Operating expenses (b) (33,509) (17,898) (68,289) (37,929)
General and administrative (758) - (1,493) -
-------- -------- -------- --------
Net operating income 50,957 34,393 99,883 67,486
Interest expense, net (25,283) (15,493) (50,474) (31,202)
-------- -------- -------- --------
Operating Partnership funds from operations $ 25,674 $ 18,900 $ 49,409 $ 36,284
Less: FFO allocable to Operating
Partnership unitholders $ 9,531 $ 7,222 $ 18,341 $ 14,201
-------- -------- -------- --------
Company funds from operations $ 16,143 $ 11,678 $ 31,068 $ 22,083
======== ======== ======== ========
FFO per share $ .59 $ .47 $ 1.14 $ 0.93
======== ======== ======== ========
</TABLE>
COMPANY PORTFOLIO
RECONCILIATION OF FUNDS FROM OPERATIONS TO NET INCOME
(Dollars in thousands - Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating Partnership funds from operations (from above) $ 25,674 $ 18,900 $ 49,409 $ 36,284
Depreciation and amortization of real estate costs (15,681) (11,985) (31,086) (23,710)
Straight-line rent (not included in FFO, so it must be
added in order to reconcile to GAAP net income) 1,561 743 3,019 1,505
Allocations to Operating Partnership unitholders (4,279) (2,925) (7,071) (5,510)
Extraordinary item (c) - - (2,291) -
-------- -------- -------- --------
Net income $ 7,275 $ 4,733 $ 11,980 $ 8,569
======== ======== ======== ========
</TABLE>
(a) Excluding straight-line rents for the three and six months
ended June 30, 1996 and 1995, of $1,561 and $3,019 and $743
and $1,505, respectively.
(b) Excluding depreciation and amortization of capitalized real
estate costs other than financing fees/costs.
(c) Charges related to early retirement of debt.
14 of 24
<PAGE> 15
BREAKDOWN OF COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Original GGP/ GGP
Centers Homart CenterMark Management Total
-------- ------ ---------- ---------- -----
<S> <C> <C> <C> <C> <C>
Revenues
Minimum rents (a) $ 31,985 $10,937 $ 8,154 $ 51,076
Tenant recoveries 14,514 5,223 3,935 23,672
Percentage rents 1,389 383 67 1,839
Other 870 518 (255) 1,133
Fees 1,973 532 4,999 7,504
-------- ------- ------- ------- --------
Total revenues 50,731 17,061 12,433 4,999 85,224
Operating expenses (b) (17,444) (7,335) (4,713) (4,017) (33,509)
General and administrative (758) (758)
-------- ------- ------- ------- --------
Net operating income 32,529 9,726 7,720 982 50,957
Interest expense, net (17,552) (4,757) (2,974) (25,283)
-------- ------- ------- ------- --------
Operating Partnership funds $ 14,977 $ 4,969 $ 4,746 $ 982 $ 25,674
from operations ======== ======= ======= ======= ========
Funds from operations per $ 0.59
share/unit ========
</TABLE>
BREAKDOWN OF COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Original GGP/ GGP
Centers Homart CenterMark Management Total
-------- ------ ---------- ---------- -----
<S> <C> <C> <C> <C> <C>
Revenues
Minimum rents (a) $ 63,395 $ 21,999 $16,026 $101,420
Tenant recoveries 30,652 10,643 7,548 48,843
Percentage rents 2,769 590 615 3,974
Other 1,934 763 10 2,707
Fees 2,788 539 9,394 12,721
-------- -------- ------- ------- --------
Total revenues 101,538 33,995 24,738 9,394 169,665
Operating expenses (b) (36,418) (15,044) (8,844) (7,983) (68,289)
General and administrative (1,493) (1,493)
-------- -------- ------- ------- --------
Net operating income 63,627 18,951 15,894 1,411 99,883
Interest expense, net (35,092) (9,493) (5,889) (50,474)
-------- -------- ------- ------- --------
Operating Partnership funds from $ 28,535 $ 9,458 $10,005 $ 1,411 $ 49,409
operations ======== ======== ======= ======= ========
Funds from operations per $ 1.14
share/unit ========
</TABLE>
(a) Excluding straight-line rent of $1,561 and $3,019 for the three months
ended June 30, 1996.
(b) Excluding depreciation and amortization of capitalized real estate costs
other than financing fees/costs.
15 of 24
<PAGE> 16
OTHER COMPANY PORTFOLIO DATA
AS OF AND/OR FOR THE SIX MONTHS ENDED JUNE 30, 1996
(In thousands, except for per square foot amounts)
<TABLE>
<CAPTION>
Original GGP/ Total or
Centers Homart CenterMark Average
-------- ------ ---------- --------
<S> <C> <C> <C> <C>
Occupancy of centers not
under redevelopment 85.0% 82.6% 89.2% 85.1%
Tenant allowances $5,088 $5,248 $ 661 $10,997
Annualized sales per sq. ft. $ 246 $ 234 $ 265 $ 250
Average rent per sq. ft.
of new/renewal leases $20.47 $24.68 $26.80 $ 24.08
Average rent per sq. ft.
of expiring leases $18.70 $21.61 $16.15 $ 18.79
% change in total sales 6.9% 5.3% 6.9% 6.3%
</TABLE>
(a) Data is for 100% of the non-anchor GLA in each portfolio, including those
centers that are owned in joint ventures with others.
TOTAL PORTFOLIO DEBT MATURITY SUMMARY (a)
AS OF JUNE 30, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Original Centers GGP/Homart CenterMark Total Portfolio Debt
---------------- ------------------- ----------------- ------------------------
Average Average Average Average
Amount Rate Amount Rate Amount Rate Amount Rate
------ ------- ------ ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $ 271,474 8.13% $ 80,601 7.74% $ 463 9.28% $352,538 8.05%
1997 - - - - - - -
1998 107,524 6.85% 34,380 6.92% - - 141,904 6.86%
1999 112,461 8.75% 100,343 7.40% 59,100 6.29% 271,904 7.72%
2000 - - 11,460 7.15% 11,160 8.30% 22,620 7.72%
Subsequent 555,881 6.64% 87,914 7.89% 98,015 7.46% 741,810 6.90%
---------- ----- -------- ----- -------- ----- ---------- -----
Totals $1,047,340 7.27% $314,698 7.47% $168,738 7.11% $1,530,776 7.30%
========== ===== ======== ===== ======== ===== ========== =====
Floating Rate $ 182,524 7.11% $139,159 7.17% $ 19,578 7.34% $ 341,261 7.15%
Fixed Rate 864,816 7.31% 175,539(b) 7.71% 149,160 7.08% 1,189,515 7.34%
---------- ----- -------- ----- -------- ----- ---------- -----
Totals $1,047,340 7.27% $314,698 7.47% $168,738 7.11% $1,530,776 7.30%
========== ===== ======== ===== ======== ===== ========== =====
</TABLE>
(a) GGP/Homart and CenterMark debt reflects the Operating Partnership's their
total portfolio debt.
(b) Includes $34,381 of floating rate debt with a 9% cap on the all-in rate
through maturity in December 1998.
16 of 24
<PAGE> 17
CENTERMARK PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
CenterMark owns 100% of 11 retail properties and has various percentage
interests in 8 other retail properties. It also owns 14 department stores that
are net leased to the May Company and a 116-unit apartment project. As required
by generally accepted accounting principles, CenterMark uses the equity method
to account for investments in joint venture properties that are not eligible for
consolidation. The Company Portfolio results and funds from operations reflected
above include the Company's share of CenterMark's funds from operations. In
order to portray the sources of CenterMark's funds from operations in a more
meaningful and useful manner, the CenterMark Portfolio results presented below
comprise 100% of the revenues and expenses of the wholly owned CenterMark
Centers and CenterMark's various percentage interests of the revenues and
expenses of CenterMark Centers that are owned in part by unaffiliated joint
venture partners.
In December 1995, the Company sold 25% of its interest in CenterMark to
Westfield U.S. Investments Pty. Limited. As a result of the sale, the Company's
ownership was reduced to 30% of the then outstanding CenterMark'stock.
Concurrently with the sale of the stock, the Company also granted Westfield
U.S. Investments Pty. Limited an option to purchase the remainder of the
Company's CenterMark'stock ("Option Stock") for $217,500. On June 28, 1996,
Westfield U.S. Investments, Pty. Limited exercised its option to acquire the
remaining 30% of the outstanding CenterMark'stock. The Option Stock will be
purchased in two installments. The first installment was purchased on July 1,
1996, and the final installment is due in January 1997.
The Company's share of CenterMark funds from operations does not take into
account interest expense paid on debt that was incurred to fund a majority of
the original $182 million cash purchase price for CenterMark's stock. Also not
charged against CenterMark's funds from operations are certain general and
administrative costs incurred by the Company that are attributable to the
management and oversight of its investment in CenterMark. Accordingly, the net
effective incremental contribution to the Company's funds from operations
generated by the CenterMark Centers is substantially less than the amounts
reflected below. See the discussion above regarding the relative contributions
to net operating income (similar to EBITDA) made by each of the Original
Centers, the CenterMark Centers and the GGP/Homart Centers. Management believes
that contributions to Company Portfolio net operating income is the best
indication of the relative significance to the Company of each of the Original
Centers, the CenterMark Centers and the GGP/Homart Centers.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CENTERMARK'S FUNDS FROM OPERATIONS
(Dollars in thousands)
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
CenterMark's funds from operations during the second quarter of 1996
increased by $.4 million or 2.6% from $15.4 million in 1995 to $15.8
million. Minimum rents increased by $2.1 million or 8.6% from $25.0 million in
the second quarter of 1995 to $27.1 million. Rental increases and
increased leasing activity, including the addition of an AMC Theater at
Mission Valley accounted for $1.9 million of the increase in minimum rents.
The specialty leasing program generated the remaining $.2 million of the
increase in minimum rents for the second quarter of 1996. Tenant recoveries
increased from $9.9 million in the second quarter of 1995 to $13.1 million
for the second quarter of 1996, due to
17 of 24
<PAGE> 18
higher recoverable operating costs. Percentage rents and other revenues
increased by $.2 million to $1.1 million for the quarter ended June 30, 1996.
Operating expenses increased by $4.8 million or 44% from $10.9 million to $15.7
million. The increase is primarily attributable to higher recoverable operating
expenses. Net interest expense increased by $.4 million or 4.2% from $9.5
million in 1995 to $9.9 million for the second quarter of 1996. Interest
expense increased due to additional borrowings on CenterMark's line of credit to
fund expansion and redevelopment projects.
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Total revenues for the first half of 1996 increased by $10.3 million or 14.3% to
$82.5 million. Minimum rents increased by $4.0 million or 8.2% from $49.4
million in the first half of 1995. Rental increases coupled with increased
leasing activity, including the addition of an AMC Theater at Mission Valley
accounted for $3.4 million of the increase in minimum rents. The specialty
leasing program generated the remaining $.6 million of the increase in minimum
rents for the six months ended June 30, 1996. Tenant recoveries increased from
$20.0 million in the first half of 1995 to $25.2 million for the comparable
period in 1996, due to higher recoverable operating costs. Percentage rents and
other revenues increased by $1.1 million to $3.9 million for the quarter ended
June 30, 1996. Operating expenses increased by $6.8 million from $22.7 million
to $29.5 million. Net interest expense increased by 3.3% or $.6 million from
$19.0 million in 1995 to $19.6 million for the first half of 1996. Interest
expense increased due to additional borrowings on CenterMark's line of credit to
fund expansion and redevelopment projects. The increase in operating expense is
primarily due to higher recoverable operating costs. For the six months ended
June 30, 1996, CenterMark's funds from operations increased 9.5% or $2.9
million, from $30.4 million in 1995 to approximately $33.3 million.
18 of 24
<PAGE> 19
CENTERMARK PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Revenues
Minimum rents (a) $ 27,180 $ 25,035 $ 53,419 $ 49,360
Tenant recoveries 13,113 9,945 25,158 19,953
Percentage rents 222 292 2,051 1,130
Other 926 618 1,831 1,700
-------- -------- -------- --------
Total revenues $ 41,441 $ 35,890 $ 82,459 72,143
Operating expenses (b) (15,708) (10,903) (29,479) (22,685)
-------- -------- -------- --------
Net operating income 25,733 24,987 52,980 49,458
Interest expense, net (9,913) (9,543) (19,630) (19,010)
-------- -------- -------- --------
CenterMark funds from operations $ 15,820 $ 15,444 $ 33,350 $ 30,448
======== ======== ======== ========
Operating Partnership's share of CenterMark FFO (c) $ 4,746 $ 6,178 $ 10,005 $ 12,179
======== ======== ======== ========
FFO per share/unit $ .11 $ $ .15 $ .23 $ .31
======== ======== ======== ========
</TABLE>
CenterMark Portfolio
Reconciliation of Funds from Operations to Net Income
(Dollars in thousands - Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
CenterMark funds from operations (from above) $ 15,820 $ 15,444 $ 33,350 $ 30,448
Less: Depreciation and amortization - real estate (11,299) (11,551) (22,613) (22,700)
Add: Straight-line rent not included in FFO 384 470 870 983
-------- -------- -------- --------
CenterMark net income $ 4,905 $ 4,363 $ 11,607 $ 8,731
======== ======== ======== ========
Operating Partnership's share of CenterMark
net income (d) $ 1,471 $ 1,745 $ 3,482 $ 3,492
======== ======== ======== ========
</TABLE>
(a) Excluding straight-line rents for the three and six months ended
June 30, 1996 and 1995, of $384 and $870 and $470 and $983, respectively.
(b) Excluding depreciation and amortization of capitalized real estate
costs other than financing fees/costs.
(c) During the six months ended June 30, 1996 and 1995, the Company owned
30% and 40% of CenterMark, respectively.
(d) CenterMark net income is reflected as equity in net income of
unconsolidated real estate affiliates on the Company's Consolidated
Statements of Operations (see Page 4 above) (c).
19 of 24
<PAGE> 20
GGP/HOMART PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
GGP/Homart owns 100% of 14 retail properties and has various percentage
interests in 11 other retail properties. As required by generally accepted
accounting principles, GGP/Homart uses the equity method to account for its
investments in joint venture properties that are not eligible for
consolidation. The Company Portfolio results and funds from operations
reflected above include the Company's share of GGP/Homart's funds from
operations. In order to portray the sources of GGP/Homart's funds from
operations in a more meaningful and useful manner, the "GGP/Homart Portfolio"
results presented below comprise 100% of the revenues and expenses of the
wholly owned GGP/Homart Centers and GGP/Homart's various percentage interests
of the revenues and expenses of GGP/Homart centers that are owned in part by
unaffiliated joint venture partners.
The Company's share of GGP/Homart's funds from operations does not take
into account interest expense paid on debt that was incurred to fund a majority
of the $179 million initial cash purchase price for 38.2% of GGP/Homart's
stock. Also not charged against GGP/Homart's funds from operations are certain
general and administrative costs incurred by the Company that are attributable
to the management and oversight of its investment in GGP/Homart. Accordingly,
the net effective incremental contribution to the Company's funds from
operations generated by the GGP/Homart Centers is substantially less than the
amounts reflected below. See the discussion above regarding the relative
contributions to net operating income (similar to EBITDA) made by each of the
Original Centers, the CenterMark Centers and the GGP/Homart Centers.
Management believes that contributions to Company Portfolio net operating
income is the best indication of the relative significance to the Company of
each of the Original Centers, the CenterMark Centers and the GGP/Homart
Centers.
The GGP/Homart Centers are located primarily in major metropolitan
areas, including suburbs of San Diego and San Francisco, California; Phoenix,
Arizona; Houston and Dallas - Fort Worth, Texas; Philadelphia, Pennsylvania;
Miami/Ft. Lauderdale, Florida; and Washington, D.C. The GGP/Homart Centers
contain approximately 20.8 million square feet of total GLA and approximately
7.5 million square feet of Mall Stores. There are 105 Anchors and more than
2,400 Mall Stores in the GGP/Homart Centers. On April 30, 1996, GGP/Homart
acquired an additional 31% ownership interest in Vista Ridge, increasing
GGP/Homart's ownership interest to 80%. Due to the acquisition of the
additional interest in Vista Ridge, GGP/Homart now consolidates Vista Ridge
into its GAAP basis financial statements. Vista Ridge is located in
Lewisville, Texas and has approximately one million square feet of total GLA
including Sears, Dillard's, Foley's and JC Penney as anchors.
20 of 24
<PAGE> 21
GGP/HOMART PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1996
------------------ ----------------
<S> <C> <C>
Revenues
Minimum rents (a) $ 28,624 $ 57,575
Tenant recoveries 13,668 27,853
Percentage rents 1,003 1,543
Other 1,357 1,998
-------- --------
Total revenues 44,652 88,969
Operating expenses (b) (19,199) (39,374)
-------- --------
Net operating income 25,453 49,595
Interest expense, net (12,450) (24,843)
-------- --------
GGP/Homart funds from operations $ 13,003 24,752
======== ========
Operating Partnership's share (38.2%) of GGP/Homart FFO $ 4,969 $ 9,458
======== ========
FFO per share/unit $ .11 $ 0.22
======== ========
</TABLE>
GGP/HOMART PORTFOLIO
RECONCILIATION OF FUNDS FROM OPERATIONS TO NET INCOME
(Dollars in thousands - Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1996
------------------ ----------------
<S> <C> <C>
GGP/Homart funds from operations (from above) $ 13,003 $ 24,752
Less: Depreciation and amortization - real estate (8,574) (16,887)
Add: Straight-line rent not included in FFO 1,320 2,310
-------- --------
GGP/Homart net income $ 5,749 $ 10,175
======== ========
Operating Partnership's share of GGP/Homart net income (c) $ 2,197 $ 3,888
======== ========
</TABLE>
(a) Excluding straight-line rents for the three and six months ended
June 30, 1996 of $1,320 and $2,310, respectively.
(b) Excluding depreciation and amortization of capitalized real estate
costs other than financing fees/costs.
(c) GGP/Homart's net income is reflected as equity in net income of
unconsolidated real estate affiliates on Company's Consolidated
Statements of Operations (see Page 4 above).
21 of 24
<PAGE> 22
GGP MANAGEMENT, INC.
In December 1995, the Company formed GGP Management, Inc. to manage, lease,
develop and operate enclosed regional malls. The Company consolidates GGP
Management, Inc. in its financial statements. The Company owns 95% of the
economic interest through non-voting preferred stock. The 5% minority interest
is held by five key employees who hold common stock with voting rights. The
operating results of GGP Management, Inc. are included in the Company
Portfolio Results. Currently, GGP Management Inc.'s primary function is to
manage, lease, develop and operate the GGP/Homart Centers. The following
schedule reflects the revenues and expenses related to the operations of GGP
Management, Inc. for the three and six months ended June 30, 1996.
GGP MANAGEMENT, INC.
STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, 1996 June 30, 1996
-------------- --------------
<S> <C> <C>
Revenues
Management, leasing and development services $ 5,262 $ 9,888
Expenses
Operating expense (4,228) (8,403)
------- -------
Net operating income $ 1,034 $ 1,485
======= =======
GGP Management, Inc. Funds from Operations $ 1,034 $ 1,485
======= =======
Operating Partnership's share (95%) of GGP Management's FFO $ 982 $ 1,411
======= =======
FFO per share/unit $ 0.02 $ 0.03
======= =======
</TABLE>
22 of 24
<PAGE> 23
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
The Company uses undistributed funds from operations as the principal
source of funding for recurring capital expenditures such as tenant
construction allowances and minor improvements made to individual
properties that are not recoverable through common area maintenance
charges to tenants. Funding alternatives for new development,
expansions and major renovation programs at individual centers include
construction loans, mini-permanent loans, long-term project financing,
additional property level or Company level equity investments, unsecured
Company level debt or secured loans collateralized by individual
shopping centers.
The following factors, among others, will affect funds from operations
and, accordingly, influence the decisions of the Board of Directors
regarding distributions: (i) scheduled increases in base rents of
existing leases; (ii) changes in minimum base rents and/or percentage
rents attributable to replacement of existing leases with new or renewal
leases; (iii) changes in occupancy rates at existing centers and
procurement of leases for newly developed centers; and (iv) the
Company's share of funds from operations generated by CenterMark and
GGP/Homart and dividend distributions therefrom, less oversight costs
and debt service on additional loans that were incurred to finance a
portion of the cash purchase price for CenterMark's and GGP/Homart's
stock. The Company anticipates that its funds from operations, and
potential new debt or equity from future new financings or refinancings
will provide adequate liquidity to conduct its operations, fund general
and administrative expenses, operating costs and interest payments and
allow distributions to the Company's stockholders in accordance with the
requirements of the Internal Revenue Code of 1986, as amended, for
continued qualification as a real estate investment trust and to avoid
any Company level federal income or excise tax.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At its Annual Meeting of Stockholders held on May 21, 1996, the REIT
presented to stockholders the re-election of Matthew Bucksbaum and Beth Stewart
as Directors, the approval of an amendment to the REIT's 1993 Stock Incentive
Plan to increase the number of shares available for issuance thereunder to
2,000,000 and the reappointment of Coopers & Lybrand L.L.P. as Independent
Auditors. A total of 27,272,560 shares were eligible to vote on each matter
presented at the Annual Meeting, all of which were approved by the following
votes of stockholders:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
MATTER FOR AGAINST ABSTAIN
------ --- --------- -------
<S> <C> <C> <C>
1. (a)Re-elect Matthew Bucksbaum 24,468,789 432,677 -
(b)Re-elect Beth Stewart 24,467,770 433,696 -
2. Amendment to 1993 Stock
Incentive Plan 21,468,010 3,348,916 84,540
3. Reappoint Coopers & Lybrand
L.L.P. as Independent Auditors 24,821,403 54,808 25,255
</TABLE>
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<PAGE> 24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Not applicable
(b) Reports on Form 8-K - Not applicable
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL GROWTH PROPERTIES, INC.
Date: August 13, 1996
/s/ Bernard Freibaum
------------------------------------------
Bernard Freibaum Executive
Vice President and Chief Financial Officer
24 of 24
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000895648
<NAME> GENERAL GROWTH PROPERTIES INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-31-1996
<PERIOD-END> JUN-30-1995
<CASH> 5,106
<SECURITIES> 0
<RECEIVABLES> 15,810
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,731
<PP&E> 1,621,059
<DEPRECIATION> 169,721
<TOTAL-ASSETS> 1,451,338
<CURRENT-LIABILITIES> 37,719
<BONDS> 1,048,408
0
0
<COMMON> 2,727
<OTHER-SE> 362,484
<TOTAL-LIABILITY-AND-EQUITY> 1,451,338
<SALES> 56,934
<TOTAL-REVENUES> 56,934
<CGS> 0
<TOTAL-COSTS> 30,917
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 527
<INTEREST-EXPENSE> 17,552
<INCOME-PRETAX> 7,275
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,275
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,275
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
