<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 March 31, 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 May 14,
1996 was 27,272,560.
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<PAGE> 2
GENERAL GROWTH PROPERTIES, INC.
INDEX
<TABLE>
<S> <C> <C>
PART I FINANCIAL INFORMATION PAGE
----
NUMBER
------
Item 1: Financial Statements
Consolidated Balance Sheets
as of March 31, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations
for the three months ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows
for the three months ended March 31, 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 . . . . . . . . . . . . . . . . 12
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 March 31, 1996 . . . . . . . . . . . . . . . . 15
CenterMark Portfolio Results and Funds from Operations . . . . . . . . . . . . . . . 16
Management's Discussion and Analysis of CenterMark Funds from Operations . . . . . . 16
Reconciliation of CenterMark Funds from Operations to CenterMark Net Income . . . . . 17
GGP/Homart Portfolio Results and Funds from Operations . . . . . . . . . . . . . . . 18
Reconciliation of GGP/Homart Funds from Operations to GGP/Homart Net Income . . . . . 19
GGP Management, Inc. Statement of Operations for the three
months ended March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Liquidity and Capital Resources of the Company . . . . . . . . . . . . . . . . . . . 21
PART II OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 21
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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<PAGE> 3
PART I.FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(Dollars in thousands, except for share amounts)
<TABLE>
<CAPTION>
ASSETS
MARCH 31,
1996 DECEMBER 31,
(UNAUDITED) 1995
-------------- -------------
<S> <C> <C>
Investment in real estate:
Land $ 152,137 $ 144,517
Buildings and equipment 1,107,611 1,054,695
Less accumulated depreciation (161,449) (153,275)
Developments in progress -- 49,680
-------------- -------------
Net property and equipment 1,098,299 1,095,617
Investment in CenterMark 115,981 120,082
Investment in GGP/Homart 179,583 178,647
-------------- -------------
Net investment in real estate 1,393,863 1,394,346
Cash and cash equivalents 6,812 18,298
Tenant accounts receivable, net 15,909 14,831
Deferred expenses, net 26,824 24,752
Prepaid and other assets 7,664 3,755
-------------- -------------
$1,451,072 $1,455,982
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $1,037,767 $1,025,130
Notes and contracts payable 2,864 2,802
Dividends and distributions payable -- 18,650
Accounts payable and accrued expenses 34,605 43,389
Accounts payable and accrued expenses -- affiliates 3,580 1,211
-------------- -------------
1,078,816 1,091,182
-------------- -------------
Minority interest in Operating Partnership 138,185 135,417
-------------- -------------
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 506,045 506,107
Retained earnings (deficit) (274,701) (279,451)
-------------- -------------
Total stockholders' equity 234,071 229,383
-------------- -------------
$1,451,072 $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 MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---------- ----------
<S> <C> <C>
Revenues:
Minimum rents $ 32,344 $ 24,269
Tenant recoveries 16,138 12,793
Percentage rents 1,380 1,211
Other 1,064 907
Fees 5,441 --
---------- ----------
Total revenues 56,367 39,180
---------- ----------
Expenses:
Property operating and management 22,176 13,904
Management fees to affiliate 667 701
Depreciation and amortization 9,141 7,282
General and administrative 735 697
---------- ----------
Total expenses 32,719 22,584
---------- ----------
Operating income 23,648 16,596
Interest expense, net (17,540) (11,922)
Equity in net income of unconsolidated
real estate affiliates
CenterMark 2,011 1,747
GGP/Homart 1,691 --
---------- ----------
Income before extraordinary item and
allocation to minority interest 9,810 6,421
Income allocated to minority interest (2,814) (2,585)
---------- ----------
Income before extraordinary item 6,996 3,836
Extraordinary item (a) (2,291) --
---------- ----------
Net income $4,705 $3,836
========== ==========
Earnings per share before extraordinary item $ .26 $ .17
Extraordinary item per share (.08) --
---------- ----------
Net earnings per share $ .18 $ .17
========== ==========
</TABLE>
(a) Charges related to early retirement of debt.
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 MARCH 31, 1996 AND 1995
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,705 $ 3,836
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 2,814 2,585
Equity in net income of unconsolidated real estate affiliates (3,702) (1,747)
Provision for doubtful accounts 1,016 216
Depreciation 8,175 6,285
Amortization 966 997
Net changes in:
Tenant accounts receivable (2,094) 80
Prepaid and other assets (3,937) (1,459)
Accounts payable and accrued expenses 1,835 (1,663)
-------- -------
Net cash provided by operating activities 12,069 9,130
-------- -------
Cash flows from investing activities:
Acquisition of real estate and improvements and additions to properties (19,137) (14,770)
Increase in investments in unconsolidated real estate affiliates (9) --
Change in notes receivable affiliates 61 --
Increase in deferred expenses (5,330) (1,185)
Dividends received from CenterMark Properties, Inc. 6,111 6,650
Dividends received from GGP/Homart, Inc. 764
-------- -------
Net cash used in investing activities (17,540) (9,305)
-------- -------
Cash flows from financing activities:
Cash dividends paid to common stockholders (11,727) (9,337)
Cash distributed to operating partnership unitholders (6,923) (6,259)
Proceeds from issuance of mortgage and other notes payable 340,000 18,500
Principal payments on mortgage and other notes payable (327,302) (939)
Retirement of common stock (net of sale proceeds) (63)
-------- -------
Net cash provided by financing activities (6,015) 1,965
-------- -------
Net change in cash and cash equivalents (11,486) 1,790
Cash and cash equivalents at beginning of period 18,298 5,617
-------- -------
Cash and equivalents at end of period $ 6,812 $ 7,407
======= =======
Interest paid $15,531 $12,476
Interest capitalized $ 1,551 $ 694
</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 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 month period ended March 31, 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. The option is exercisable at any time prior to September
30, 1996. If the option is exercised, the closing of the sale of
up to one-half of the Option Stock is scheduled to occur on or
before December 31, 1996, and the closing of the sale of the
remainder of the Option Stock should occur between January 2, 1997
and January 31, 1997.
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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 MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
------------ ------------
<S> <C> <C>
Revenues
Minimum rents $ 21,143 $16,254
Tenant recoveries 9,637 7,234
Percentage rents 1,497 645
Other 839 1,009
-------- -------
Total revenues 33,116 25,142
Operating expenses (11,182) (8,172)
Depreciation and amortization (8,628) (7,807)
-------- -------
Net operating income 13,306 9,163
Interest expense, net (7,226) (5,134)
Equity in net income of unconsolidated
real estate affiliates 847 339
Income allocated to minority interest (225) --
-------- -------
Net income $ 6,702 $ 4,368
======== =======
</TABLE>
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
March 31, 1996, $75,000 remained outstanding on the interim loan
facility.
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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 MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996
-------------
<S> <C>
Revenues
Minimum rents $21,209
Tenant recoveries 9,237
Percentage rents 357
Other 444
-------------
Total revenues 31,247
Operating expenses (14,354)
Depreciation and amortization (4,737)
-------------
Net operating income 12,156
Interest expense, net (8,910)
Equity in net income of unconsolidated
real estate affiliates 1,180
-------------
Net income $4,426
=============
</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 $94,807 on March 31, 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 unamoritized 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 16 and "GGP/Homart Portfolio Results and Funds from
Operations" on page 18).
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Total revenues for the first quarter of 1996 were $56.4 million, which
represents an increase of $17.2 million or approximately 43.9% from
$39.2 million in the first quarter of 1995. Approximately $8.8
million and $1.4 million of the increase is from acquisitions and new
developments, respectively. Fee revenue and improved performance of
comparable properties accounted for $5.4 million and $1.6 million of
the increase, respectively. Minimum rent for the first quarter of
1996 increased by $8.1 million or 33.3% from $24.3 million in 1995 to
$32.3 million. The acquisition and development of properties
generated $6.1 million and $1.2 million of the $8.1 million increase
in minimum rents, respectively. Expansion strategies, specialty
leasing efforts and a combination of occupancy and rental changes at
the comparable centers accounted for $.4 million, $.3 million and $.1
million of the remaining increase in minimum rents, respectively.
Tenant charges increased by $3.3 million from $12.8 million to $16.1
million for the first quarter of 1996. Approximately $.5 million of
the increase is attributable to higher operating expenses at the
comparable malls. The remaining $2.8 million increase was generated
by properties which were recently acquired or developed. For the
first quarter of 1996 overage rents increased by $.2 million or
approximately 14% from $1.2 million in 1995. The performance of the
comparable centers produced $.1 million of the increase and the
acquisition and development of additional centers accounted for the
remaining $.1 million. Other revenues increased by approximately $.2
million to $1.1 million for the first quarter of 1996 from $.9 million
in 1995, primarily due to the acquisition and development of new
properties. Fee revenue of $5.4 million was generated by GGP
Management's development, management, and leasing activities for the
GGP/Homart Portfolio.
Total expenses, including depreciation and amortization, increased by
approximately $7.1 million, from $22.6 million in the first quarter of
1995 to $32.7 million in the first quarter of 1996. For the period
ended March 31, 1996, property operating and management expenses
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<PAGE> 12
increased by $8.3 million and depreciation and amortization also
increased by $1.8 million over the same period in 1995. Operating
expense increased by $1.1 million at comparable properties primarily
due to higher operating costs. The remaining $7.6 million increase
in operating and management costs was due to the acquisition and
development of new properties and property management costs.
Approximately $.2 million of the $1.8 million increase in depreciation
and amortization was generated at comparable centers. The remaining
$1.6 million was from properties acquired or new developments.
Management fees to affiliates and general and administrative expenses
were essentially flat.
Net interest expense for the first quarter of 1996 was $17.5 million,
an increase of approximately $5.6 million from the first quarter of
1995. The acquisition and development of new properties resulted in
approximately $3.2 million and $.4 million of the increase,
respectively. The net effect of interest savings, due to lower fixed
interest rates of $.5 million and additional interest expense due to
new borrowings of $2.4 million accounted for the remaining $1.9
million of the $5.6 million increase in net interest expense.
Equity in net income of unconsolidated real estate affiliates in the
first quarter of 1996 increased by approximately $2.0 million to $3.7
million in 1996, from $1.7 million in the first quarter of 1995.
Approximately $1.7 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 $.3 million increase is from the Company's 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 16 and
"GGP/Homart Portfolio Results and Funds from Operations" on page 18).
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
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<PAGE> 13
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
ENDED %
NET OPERATING INCOME BY PORTFOLIO MARCH 31, 1996 OF TOTAL
------------------------------------------------ -------------------- ------------
<S> <C> <C>
Original Centers $31,527 64.44%
30% of CenterMark 8,174 16.71%
38.2% of GGP/Homart 9,225 18.85%
-------------------- ------------
Company Portfolio Net Operating Income $48,926 100.00%
==================== ============
</TABLE>
The Company Portfolio results and funds from operations reflected below for the
three months ended March 31, 1996 and 1995 do not purport to project results
for any future period.
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<PAGE> 14
COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
----------- -----------
<S> <C> <C>
Revenues
Minimum rents (a) $ 50,344 $33,442
Tenant recoveries 25,171 16,796
Percentage rents 2,135 1,546
Other 1,581 1,340
Fees 5,210
-------- -------
Total revenues $ 84,441 $53,124
Operating expenses (b) (34,780) (19,334)
General and administrative (735) (697)
-------- -------
Net operating income 48,926 33,093
Interest expense, net (25,191) (15,709)
-------- -------
Company funds from operations $ 23,735 $17,384
======== =======
Less: FFO allocable to operating
partnership unitholders $ 8,810 $6,979
======== =======
Company funds from operations $ 14,925 $10,405
======== =======
FFO per share $ 0.55 $ 0.46
======== =======
</TABLE>
Reconciliation of Funds from Operations to Net Income
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-------- ---------
<S> <C> <C>
Company funds from operations (from above) $ 23,735 $ 17,384
Depreciation and amortization of real estate costs (15,405) (11,725)
Straight-line rent 1,458 762
Allocations to operating partnership unitholders (2,792) (2,585)
Extraordinary item (c) (2,291) -
-------- --------
Net income $ 4,705 $ 3,836
======== ========
</TABLE>
(a) Excluding straight-line rent of $1,458 and $762 for the three months
ended March 31, 1996 and 1995, 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 21
<PAGE> 15
BREAKDOWN OF COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 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) $ 31,410 $11,062 $ 7,872 $ -- $ 50,344
Tenant recoveries 16,138 5,420 3,613 -- 25,171
Percentage rents 1,380 207 548 -- 2,135
Other 1,064 245 272 -- 1,581
Fees 815 -- -- 4,395 5,210
-------- ------- ------- ------- --------
Total revenues 50,807 16,934 12,305 4,395 84,441
Operating expenses (b) (18,974) (7,709) (4,131) (3,966) (34,780)
General and administrative (735) -- -- -- (735)
-------- ------- ------- ------- --------
Net operating income 31,098 9,225 8,174 429 48,926
Interest expense, net (17,540) (4,736) (2,915) -- (25,191)
-------- ------- ------- ------- --------
Funds from operations $ 13,558 $ 4,489 $ 5,259 $ 429 $ 23,735
======== ======= ======= ======= ========
Funds from operations per share $ 0.55
========
</TABLE>
(a) Excluding straight-line rent of $1,458 for the three months ended March 31,
1996.
(b) Excluding depreciation and amortization of capitalized real
estate costs other than financing fees/costs.
OTHER COMPANY PORTFOLIO DATA
AS OF AND/OR FOR THE THREE MONTHS ENDED MARCH 31, 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 84.2% 83.2% 89.6% 85.2%
Tenant allowances $ 2,697 $ 2,280 $ 319 $ 5,296
Annualized sales per sq. ft. $ 240 $ 233 $ 272 $ 250
Average rent per sq. ft.
of new/renewal leases $ 22.77 $ 26.20 $ 25.44 $ 24.88
Average rent per sq. ft.
of expiring leases $ 18.70 $ 21.61 $ 16.15 $ 18.79
% change in total sales +8.4% +9.7% +8.4% +8.9%
</TABLE>
15 of 21
<PAGE> 16
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.
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 relative contributions to Company Portfolio net operating income
is the best indication of the 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 MARCH 31, 1996 AND 1995
CenterMark's funds from operations during the first quarter of 1996
increased by $2.5 million or 16.8 % from $15.0 million in 1995 to
$17.5 million. Minimum rents increased by $1.9 million or 7.8% from
$24.3 million in the first quarter of 1995. Rental increases coupled
with increased leasing activity, including the addition of an AMC
Theater at Mission Valley accounted for $1.5 million of the increase
in minimum rents. The specialty leasing program generated the
remaining $.4 million of the increase in minimum rents for the first
quarter of 1996. Tenant recoveries increased from $10.0 million in
the first quarter of 1995 to $12.0 million for the first quarter of
1996, due to higher recoverable operating costs. Percentage rents and
other revenues increased by $.8 million to $2.7 million for the
quarter ended March 31, 1996. Operating expenses increased by $2.0
million from $11.8 million to $13.8 million. Approximately $1.1
million of the increase is attributable to higher operating costs, and
$.6 million of the increase resulted from a timing difference in
owners expenses. Net interest expense increased by 2.7% or $.2 million
from $9.5 million in 1995 to $9.7 million for the first quarter of
1996. Interest expense increased due to additional borrowings on
CenterMark's line of credit.
16 of 21
<PAGE> 17
CENTERMARK PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-------- ---------
<S> <C> <C>
Revenues
Minimum rents (a) $ 26,239 $ 24,325
Tenant recoveries 12,045 10,008
Percentage rents 1,829 838
Other 905 1,082
-------- ---------
Total revenues $ 41,018 $ 36,253
Operating expenses (b) (13,770) (11,782)
-------- ---------
Net operating income 27,248 24,471
Interest expense, net (9,718) (9,467)
-------- ---------
CenterMark funds from operations $ 17,530 $ 15,004
======== =========
Company's share of CenterMark FFO (c) $ 5,259 $ 6,002
======== =========
FFO per share $ .12 $ .16
======== =========
</TABLE>
CENTERMARK PORTFOLIO
RECONCILIATION OF FUNDS FROM OPERATIONS TO NET INCOME
(Dollars in thousands - Unaudited)
<TABLE>
<CAPTION>
Three Months End
March 31,
1996 1995
-------- --------
<S> <C> <C>
CenterMark funds from operations (from above) $ 17,530 $ 15,004
Less:Depreciation and amortization - real estate (11,314) (11,148)
Add: Straight-line rent not included in FFO 486 512
-------- --------
CenterMark net income (determined in accordance with generally
accepted accounting principles) $ 6,702 $ 4,368
======== ========
Company's share of CenterMark net income (determined in accordance with
generally accepted accounting principles) that 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) $ 2,011 $ 1,747
======== ========
</TABLE>
(a) Excluding straight-line rents of $486 and $512 for the three months ended
March 31, 1996 and 1995, respectively.
(b) Excluding depreciation and amortization of capitalized real estate costs
other than financing fees/costs.
(c) During the three months ended March 31, 1996 and 1995, the Company owned
30% and 40% of CenterMark, respectively.
17 of 21
<PAGE> 18
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 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 relative contributions to Company Portfolio net operating income
is the best indication of the 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.
18 of 21
<PAGE> 19
GGP/HOMART PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996
------------
<S> <C>
Revenues
Minimum rents (a) $ 28,951
Tenant recoveries 14,185
Percentage rents 540
Other 641
--------
Total revenues $ 44,317
Operating expenses (b) (20,175)
--------
Net operating income 24,142
Interest expense, net (12,393)
--------
GGP/Homart funds from operations $ 11,749
========
Company's share (38.2%) of GGP/Homart FFO $ 4,489
========
FFO per share $ .10
========
</TABLE>
GGP/Homart Portfolio
Reconciliation of Funds from Operations to Net Income
(Dollars in thousands - Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended
March 31, 1996
--------------
<S> <C>
GGP/Homart funds from operations (from above) $11,749
Less:Depreciation and amortization - real estate (8,313)
Add: Straight-line rent not included in FFO 990
-------
GGP/Homart net income (determined in accordance with generally
accepted accounting principles) $ 4,426
=======
Company's share of GGP/Homart net income (determined in accordance with
generally accepted accounting principles) that is reflected as equity in
net income of unconsolidated real estate affiliates on the Company's
Consolidated Statements of Operations (see Page 4 above) $ 1,691
=======
</TABLE>
(a) Excluding straight-line rents of $990 for the three months ended March 31,
1996.
(b) Excluding depreciation and amortization of capitalized real estate costs
other than financing fees/costs.
19 of 21
<PAGE> 20
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 months ended March 31,
1996. Revenues for services provided to shopping centers that are 100%
owned Original Centers and are consolidated into the Company's Financial
Statements, have been eliminated as inter-company transactions.
GGP MANAGEMENT, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<S> <C>
Revenues
Management, leasing and development services $ 4,626
Expenses
Operating expense 4,175
----------
Net operating income $ 451
==========
GGP Management Funds from Operations $ 451
==========
Company's share (95%) of GGP Management's FFO $ 429
==========
FFO per share $ 0.01
==========
</TABLE>
20 of 21
<PAGE> 21
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 qualification as a real estate
investment trust and to avoid any Company level federal income or
excise tax.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits - Not applicable
(B) Reports on Form 8-K
On January 5, 1996, the Company filed a Current Report on Form 8-K and
on March 5, 1996, the company filed a Current Report on Form 8-K/A to
disclose information about the acquisition of Homart Development Co.
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: MAY 14, 1996
/S/ BERNARD FREIBAUM
-----------------------------------
BERNARD FREIBAUM
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
21 of 21
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000895648
<NAME> GENERAL GROWTH PROPERTIES INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 6,812
<SECURITIES> 0
<RECEIVABLES> 15,909
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,385
<PP&E> 1,553,312
<DEPRECIATION> 161,449
<TOTAL-ASSETS> 1,451,072
<CURRENT-LIABILITIES> 38,185
<BONDS> 1,040,631
<COMMON> 2,727
0
0
<OTHER-SE> 369,529
<TOTAL-LIABILITY-AND-EQUITY> 1,451,072
<SALES> 56,367
<TOTAL-REVENUES> 56,367
<CGS> 0
<TOTAL-COSTS> 31,703
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,016
<INTEREST-EXPENSE> 17,540
<INCOME-PRETAX> 6,996
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,996
<DISCONTINUED> 0
<EXTRAORDINARY> 2,291
<CHANGES> 0
<NET-INCOME> 4,705
<EPS-PRIMARY> $.18
<EPS-DILUTED> $.18
</TABLE>
