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Registration No. 33-90556
Rule 424(b)(3)
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 20, 1995
832,936 SHARES
GENERAL GROWTH PROPERTIES, INC.
COMMON STOCK
(PAR VALUE $.10 PER SHARE)
___________________
This Prospectus Supplement relates to the possible issuance by General
Growth Properties, Inc. (the "Company") of up to 832,936 shares (the
"Redemption Shares") of common stock, par value $.10 per share (the "Common
Stock"), of the Company if and to the extent that the holders of up to 832,936
limited partnership units (the "Units") in GGP Limited Partnership (the
"Operating Partnership"), of which the Company is the sole general partner,
tender such Units for redemption. The Company currently holds a 62.6% interest
in the Operating Partnership. Such Units were issued in connection with the
July 1995 transaction pursuant to which the owners of the real and personal
property comprising the Piedmont Mall in Danville, Virginia contributed such
property to the Operating Partnership in exchange for Units, cash and the
Operating Partnership's assumption of certain liabilities of such contributors
(the "Piedmont Transaction"). In connection with the Piedmont Transaction, the
Company, the Operating Partnership and such contributors entered into the
Redemption Rights Agreement, dated July 13, 1995 (the "Redemption Rights
Agreement"), which sets forth the terms and conditions under which the Units
received by the contributors may be redeemed for cash, or, at the election of
the Company, in its sole and absolute discretion, Redemption Shares. The
Company has registered the Redemption Shares, as required under the terms of
the Redemption Rights Agreement, to provide the holders of the Redemption
Shares with freely tradeable securities, but the registration of such shares
does not necessarily mean that any of such shares will be issued by the Company
or offered or sold by the holders thereof.
The Company will not receive any cash proceeds from the issuance of
the Redemption Shares to holders of Units tendered for redemption, but has
agreed to bear certain expenses of registration of the Redemption Shares. The
Company will, however, acquire Units in the Operating Partnership in exchange
for Redemption Shares that the Company may issue to holders of Units pursuant
to this Prospectus Supplement. With each such acquisition, the Company's
interest in the Operating Partnership will increase.
The Company's Common Stock is listed on the New York Stock Exchange
(the "NYSE") under the symbol "GGP". The last reported sale price of the
shares of Common Stock on the NYSE on July 10, 1996 was $25 3/8 per share.
The Redemption Shares are subject to certain restrictions on ownership
designed to preserve the Company's status as a real estate investment trust
("REIT") for Federal income tax purposes. See "Description of Common Stock" in
the accompanying Prospectus.
SEE "REDEMPTION OF UNITS--TAX CONSEQUENCES OF REDEMPTION" AND
"--POTENTIAL CHANGE IN INVESTMENT UPON REDEMPTION OF UNITS" BEGINNING ON
PAGE 5 OF THIS PROSPECTUS SUPPLEMENT FOR A DISCUSSION OF CERTAIN
POTENTIALLY MATERIAL CONSEQUENCES ASSOCIATED WITH A REDEMPTION OF UNITS.
___________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
___________________
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
___________________
The date of this Prospectus Supplement is July 12, 1996.
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RECENT DEVELOPMENTS
The Company has announced its intent to acquire General Growth
Management, Inc., the largest manager of third-party owned shopping malls in
the United States. The acquisition will involve an exchange of Common Stock
and Units with an aggregate value of $51.5 million. The transaction is subject
to various conditions, including the execution of a definitive acquisition
agreement and the approval of the transaction by the stockholders of General
Growth Management, Inc.
On July 1, 1996, the Operating Partnership sold 40% of its remaining
interest (constituting a 12% interest) in CenterMark Properties, Inc., the Los
Angeles-based shopping center owner and operator ("CenterMark"), to CenterMark
for $87,000,000 in cash. The purchase occurred pursuant to the exercise of an
option which was previously granted to another CenterMark stockholder and
assigned to CenterMark. Under the terms of such option and subject to the
satisfaction of certain conditions, the Operating Partnership also will sell to
CenterMark the remainder of its CenterMark interest on January 2, 1997 for
$130,500,000 in cash.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of
the Redemption Shares to holders of Units tendered for redemption (but the
Company will acquire Units from such holders and thereby increase its interest
in the Operating Partnership).
DESCRIPTION OF UNITS
The following summary is qualified in its entirety by reference to the
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership (the "Amended and Restated Agreement"), as amended as of the date
hereof (as so amended, the "Partnership Agreement"), and the Rights Agreement
(as hereinafter defined). The Amended and Restated Agreement and the Rights
Agreement have been filed as Exhibits to the Company's Annual Report on Form
10-K for the year ended December 31, 1993, the amendments to the Amended and
Restated Agreement have been filed as Exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995, and the foregoing are
incorporated herein by reference.
MANAGEMENT AND OPERATIONS
The Operating Partnership is a Delaware limited partnership which is,
pursuant to the Partnership Agreement, required to be operated in a manner that
will enable the Company to continue to satisfy the requirements for being
classified as a REIT and to avoid any Federal income tax liability. The
Partnership Agreement provides that the net operating cash revenues of the
Operating Partnership, as well as net sales and refinancing proceeds, will be
distributed from time to time as determined by the Company, in its capacity as
the sole general partner of the Operating Partnership (but not less frequently
than quarterly), pro rata in accordance with the partners' percentage
interests.
Generally, pursuant to the Partnership Agreement, the Company, as the
sole general partner of the Operating Partnership, has exclusive and complete
responsibility and discretion in the management and control of the Operating
Partnership and the holders of Units (the "Limited Partners") have no authority
to transact business for, or participate in the management activities or
decisions of, the Operating Partnership. However, certain decisions, including
those to amend the Partnership Agreement (other than in connection with the
admission of additional Limited Partners) or terminate the Partnership
Agreement, to make a general assignment for the benefit of creditors, to take
title to any property other than in the name of the Operating Partnership or a
subsidiary partnership, to institute any proceeding for bankruptcy or to be
dissolved would require the consent of a majority in interest of the Limited
Partners. In addition, without the written consent of a Limited Partner, the
Partnership Agreement may not be amended to materially adversely affect such
Limited Partner's rights to
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distributions or allocations except in connection with the admission of
additional Limited Partners or unless such amendment affects the existing
Limited Partners who are Bucksbaums (as hereinafter defined) in the same manner
on a Unit-for-Unit basis.
TRANSFERABILITY OF INTERESTS
The Partnership Agreement provides that the Company may not
voluntarily withdraw from the Operating Partnership, or transfer or assign its
interest in the Operating Partnership, without the consent of a majority in
interest of the Limited Partners. Subject to the terms of a pledge agreement,
which prohibits the sale, assignment or other transfer of a limited number of
the Units received by Limited Partners who acquired their Units pursuant to the
Piedmont Transaction until July 13, 1996, such Limited Partners, may transfer
their interests in the Operating Partnership to a transferee, provided that
such transferee assumes all obligations of the transferor Limited Partner and
provided further that such transfer does not cause a termination of the
Operating Partnership for Federal income tax purposes, does not cause the
Company to cease to comply with requirements under the Internal Revenue Code of
1986, as amended (the "Code"), for qualification as a REIT and satisfies
certain other general requirements specified in the Partnership Agreement.
BUCKSBAUM RIGHTS
Pursuant to the terms of the Rights Agreement, dated as of July 27,
1993 (the "Rights Agreement"), Matthew Bucksbaum, the families of Martin
Bucksbaum and Matthew Bucksbaum and trusts for the benefit of certain members
of their families (collectively, the "Bucksbaums") currently hold certain
rights (the "Bucksbaum Rights") granted to them in connection with the
Company's initial public offering, which enable them to convert a portion of
their interest in the Operating Partnership into shares of Common Stock (the
"Exchange Component") and to sell the remainder of their partnership interest
to the Company (the "Sale Component"). The Exchange Component enables the
Bucksbaums to exchange their partnership interest in the Operating Partnership
for shares of Common Stock until they own up to 25% of the outstanding Common
Stock. The Sale Component enables the Bucksbaums to sell all or a portion of
their remaining interests in the Operating Partnership to the Company for cash
or Common Stock, or a combination thereof, at the Company's election. The Sale
Component can only be exercised if the Bucksbaums already own 25% or more of
the outstanding Common Stock.
The Bucksbaum Rights may be exercised by the Bucksbaums from time to
time (although only once during any calendar year), in whole or in part,
subject to the limitations that in any calendar year the Sale Component may be
exercised only with respect to one-fourth of the percentage interests in the
Partnership held by the Bucksbaums immediately after the Conversion Component
is fully exercised.
The Bucksbaum Rights expire on April 16, 2023 if not exercised
prior to that date.
CAPITAL CONTRIBUTIONS
The Partnership Agreement provides that if the Operating Partnership
requires additional funds at any time or from time to time in excess of funds
available to the Operating Partnership from borrowings or capital
contributions, the Company may borrow such funds from a financial institution
or other lender and lend such funds to the Operating Partnership on the same
terms and conditions as are applicable to the Company's borrowing of such
funds. As an alternative to borrowing funds required by the Operating
Partnership and after having used reasonable efforts to borrow such funds, the
Company may contribute the amount of such required funds as an additional
capital contribution to the Operating Partnership. If the Company so
contributes additional capital to the Operating Partnership, the Company's
partnership interest in the Operating Partnership will be increased on a
proportionate basis based upon the amount of such additional capital
contributions and the value of the Operating Partnership at the time of such
contributions. Conversely, the partnership interests of the Limited Partners
will be decreased on a proportionate basis in the event of additional capital
contributions by the Company.
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TAX MATTERS
Pursuant to the Partnership Agreement, the Company is the tax matters
partner of the Operating Partnership and, as such, has authority to make tax
elections under the Code on behalf of the Operating Partnership.
The net income or net loss of the Operating Partnership will generally
be allocated to the Company and the Limited Partners in accordance with their
percentage interests, subject to compliance with the provisions of Sections
704(b) and 704(c) of the Code and the regulations promulgated thereunder.
DUTIES AND CONFLICTS
The Partnership Agreement provides that all business activities of the
Company, including all activities pertaining to the acquisition and operation
of shopping center properties, must be conducted through the Operating
Partnership (excluding direct interests of up to 1% in subsidiary partnerships
of the Operating Partnership that are owned by the Company or subsidiaries
thereof). The Partnership Agreement prohibits the Company from borrowing for
the purpose of making a distribution to stockholders except if it arranges such
borrowing through the Operating Partnership.
Pursuant to the Partnership Agreement, the Bucksbaums cannot acquire
interests in shopping center properties or vacant land suitable for development
as a shopping center for a specified period of time. The Board of Directors of
the Company has approved an amendment to the Partnership Agreement which would
permit the Bucksbaums to own less than 5% of any publicly traded entity which
invests in retail malls, provided that neither Matthew Bucksbaum nor John
Bucksbaum is actively involved in the management of such entity by virtue of
any such investment.
TERM
The Operating Partnership will continue in full force and effect until
December 31, 2050, or until sooner dissolved upon the withdrawal, bankruptcy,
dissolution or termination of the Company (unless a majority in interest of the
Limited Partners elect to continue the Operating Partnership), the election of
the Company and a majority in interest of the Limited Partners, or the sale or
other disposition of all or substantially all the assets of the Operating
Partnership.
REDEMPTION OF UNITS
GENERAL
Each Limited Partner who is a party to the Redemption Rights Agreement
or a permitted assignee thereunder may, subject to certain limitations, require
that the Operating Partnership redeem such Limited Partner's Units, by
delivering a notice to the Operating Partnership, commencing July 13, 1996.
Such rights are described in the Redemption Rights Agreement which was executed
and delivered in connection with the Piedmont Transaction. The summary of the
terms of the Redemption Rights Agreement set forth below does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Redemption Rights Agreement. Subject to the rights of the Company described in
the next paragraph, upon redemption, such Limited Partner will receive, with
respect to each Unit tendered, cash in an amount equal to the market value of
one share of Common Stock of the Company (subject to certain anti-dilution
adjustments). The market value of the Common Stock for this purpose will be
equal to the average of the closing trading price of the Company's Common Stock
(or substitute information, if no such closing price is available) for the five
consecutive trading days ending on the date on which a redemption notice is
received by the Operating Partnership (or, if such date is not a business day,
the first business day thereafter).
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In lieu of the Operating Partnership redeeming Units, the Company, as
the sole general partner of the Operating Partnership, has the right, in its
sole and absolute discretion, to elect to assume directly and satisfy the
redemption right of a Limited Partner by paying to the redeeming Limited
Partner, with respect to each Unit tendered, either (a) the cash amount
described in the preceding paragraph or (b) one share of Common Stock of the
Company (subject to certain anti-dilution adjustments). The Company
anticipates that it generally will elect to assume directly and satisfy any
redemption right exercised by such a Limited Partner through the issuance of
shares of Common Stock (the Redemption Shares) pursuant to this Prospectus
Supplement, whereupon the Company will acquire the Units being redeemed and
will become the owner of such Units. However, there can be no assurance that
the Company will make such election in any particular case. With each exchange
of Units for shares of Common Stock or cash, the Company's ownership interest
in the Operating Partnership will increase. Such an acquisition by the Company
will be treated as a sale of such Units to the Company for Federal income tax
purposes. See "--Tax Consequences of Redemption" below. Upon redemption, such
Limited Partner's right to receive distributions with respect to the Units
redeemed will cease (but if such right is exchanged for Redemption Shares, the
Limited Partner will have rights as a stockholder of the Company from the time
of its acquisition of the Redemption Shares), and if all of its Units are
redeemed, such Limited Partner will have withdrawn as a partner of the
Operating Partnership and will no longer be a party to the Partnership
Agreement.
Each such Limited Partner must notify the Operating Partnership of
such Limited Partner's desire to require the Operating Partnership to redeem
Units by sending a notice in accordance with the terms of the Redemption Rights
Agreement. A Limited Partner must request the redemption of at least 1000
Units (or all of the Units held by such holder, if such Limited Partner owns
fewer than 1000 Units). The redemption will occur within 30 days following the
Operating Partnership's receipt of the notice and related documentation
required by the Redemption Rights Agreement, except that no redemption can
occur if the delivery of Redemption Shares would be prohibited under the
provisions of the Certificate of Incorporation of the Company, as amended,
designed to protect the Company's qualification as a REIT.
TAX CONSEQUENCES OF REDEMPTION
The following discussion summarizes certain Federal income tax
considerations that may be relevant to a Limited Partner who exercises such
Limited Partner's right to require the redemption of such Limited Partner's
Units in accordance with the terms of the Redemption Rights Agreement. (The
right of a Limited Partner to require the redemption of Units in accordance
with the terms of the Redemption Rights Agreement is referred to as the
"Redemption Right.") Because the specific tax consequences to a Limited Partner
exercising such Limited Partner's Redemption Right will depend upon the
specific circumstances of that Limited Partner, each Limited Partner
considering exercising the Redemption Right is strongly urged to consult such
Limited Partner's own tax advisor regarding the specific Federal, state, and
local tax consequences to such Limited Partner of the exercise of the
Redemption Right.
TAX TREATMENT OF REDEMPTION OF UNITS
THE EXERCISE BY A LIMITED PARTNER OF SUCH LIMITED PARTNER'S RIGHT TO
REQUIRE THE REDEMPTION OF SUCH LIMITED PARTNER'S UNITS PURSUANT TO THE
REDEMPTION RIGHTS AGREEMENT WILL BE TREATED FOR FEDERAL INCOME TAX PURPOSES AS
A SALE OF THE UNITS BY THE LIMITED PARTNER. SUCH A SALE WILL BE FULLY TAXABLE
TO THE REDEEMING LIMITED PARTNER. It is possible that the amount of gain
recognized (or even the tax liability resulting from such gain) could exceed
the amount of cash and the value of other property (i.e., Redemption Shares)
received upon such disposition. In addition, the ability of a Limited Partner
to sell a substantial number of Redemption Shares in order to raise cash to pay
tax liabilities associated with redemption of Units may be limited as a result
of fluctuations in the market price for the Common Stock, and the price the
Limited Partner receives for such shares may not equal the value of such
Limited Partner's Units at the time of redemption.
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If the Company assumes and performs the redemption obligation, the
Redemption Rights Agreement provides that the redemption will be treated by the
Company, the Operating Partnership and the redeeming Limited Partner as a sale
of Units by such Limited Partner to the Company at the time of such redemption.
In that event, such sale will be fully taxable to the redeeming Limited Partner
and such redeeming Limited Partner will be treated as realizing for tax
purposes an amount equal to the sum of the cash or the value of the Common
Stock received in the exchange plus the amount of Operating Partnership
nonrecourse liabilities allocable to the redeemed Units at the time of the
redemption. The determination of the amount of gain or loss is discussed more
fully below.
If the Company does not elect to assume the obligation to redeem a
Limited Partner's Units, the Operating Partnership will redeem such Units for
cash. If the Operating Partnership redeems Units for cash that the Company
contributes to the Operating Partnership to effect such redemption, the
redemption likely would be treated for tax purposes as a sale of such Units to
the Company in a fully taxable transaction, although the matter is not free
from doubt. In that event, the redeeming Limited Partner would be treated as
realizing an amount equal to the sum of the cash received in the exchange plus
the amount of Operating Partnership nonrecourse liabilities allocable to the
redeemed Units at the time of the redemption. The determination of the amount
of gain or loss in the event of sale treatment is discussed more fully below.
If, instead, the Operating Partnership chooses to redeem a Limited
Partner's Units for cash that is not contributed by the Company to effect the
redemption, the tax consequences would be the same as described in the previous
paragraph, except that if the Operating Partnership redeems less than all of a
Limited Partner's Units, the Limited Partner would not be permitted to
recognize any loss occurring on the transaction and would recognize taxable
gain only to the extent that the cash, plus the share of Operating Partnership
nonrecourse liabilities allocable to the redeemed Units, exceeded the Limited
Partner's adjusted basis in all of such Limited Partner's Units immediately
before the redemption.
TAX TREATMENT OF DISPOSITION OF UNITS BY LIMITED PARTNERS GENERALLY
If a Unit is redeemed in a manner that is treated as a sale of the
Unit, or a Limited Partner otherwise disposes of a Unit, the determination of
gain or loss from the sale or other disposition will be based on the difference
between the amount considered realized for tax purposes and the tax basis in
such Unit. See "Basis of Units" below. Upon the sale of a Unit, the "amount
realized" will be measured by the sum of the cash and fair market value of
other property (i.e., Redemption Shares) received plus the portion of the
Operating Partnership's nonrecourse liabilities allocable to the Unit sold. To
the extent that the amount of cash or property received plus the allocable
share of the Operating Partnership's nonrecourse liabilities exceeds the
Limited Partner's basis for the Unit disposed of, such Limited Partner will
recognize gain. It is possible that the amount of gain recognized or even the
tax liability resulting from such gain could exceed the amount of cash and the
value of any other property (i.e., Redemption Shares) received upon such
disposition.
Except as described below, any gain recognized upon a sale or other
disposition of Units will be treated as gain attributable to the sale or
disposition of a capital asset. To the extent, however, that the amount
realized upon the sale of a Unit attributable to a Limited Partner's share of
"unrealized receivables" of the Operating Partnership (as defined in Section
751 of the Code) exceeds the basis attributable to those assets, such excess
will be treated as ordinary income. Unrealized receivables include, to the
extent not previously included in Operating Partnership income, any rights to
payment for services rendered or to be rendered. Unrealized receivables also
include amounts that would be subject to recapture as ordinary income if the
Operating Partnership had sold its assets at their fair market value at the
time of the transfer of a Unit.
BASIS OF UNITS
In general, a Limited Partner who was deemed at the time of the
Piedmont Transaction to have received its Units upon liquidation of a
partnership had an initial tax basis in its Units ("Initial Basis") equal to
its basis in its partnership interest at the time of such liquidation.
Similarly, in general, a Limited Partner who at the time
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of the Piedmont Transaction contributed a partnership interest in exchange for
its Units had an Initial Basis in the Units equal to its basis in the
contributed partnership interest. A Limited Partner's Initial Basis in its
Units generally is increased by (a) such Limited Partner's share of Operating
Partnership taxable income and (b) increases in its share of liabilities of the
Operating Partnership (including any increase in its share of liabilities
occurring in connection with the Piedmont Transaction). Generally, such
Limited Partner's basis in its Units is decreased (but not below zero) by (i)
its share of Operating Partnership distributions, (ii) decreases in its share
of liabilities of the Operating Partnership (including any decrease in its
share of liabilities occurring in connection with the Piedmont Transaction),
(iii) its share of losses of the Operating Partnership, and (iv) its share of
nondeductible expenditures of the Operating Partnership that are not chargeable
to capital.
POTENTIAL APPLICATION OF THE DISGUISED SALE REGULATIONS TO A REDEMPTION OF
UNITS
There is a possibility that a redemption of Units issued in the
Piedmont Transaction might cause the original transfer of property to the
Operating Partnership in exchange for Units in connection with the Piedmont
Transaction to be treated as a "disguised sale" of property. The Code and the
Treasury Regulations thereunder (the "Disguised Sale Regulations") generally
provide that, unless one of the prescribed exceptions is applicable, a
partner's contribution of property to a partnership and a simultaneous or
subsequent transfer of money or other consideration (including the assumption
of or taking subject to a liability) from the partnership to the partner will
be presumed to be a sale, in whole or in part, of such property by the partner
to the partnership. The Disguised Sale Regulations also provide, however, that
if two years have passed between the transfer of money or other consideration
and the contribution of property, the transactions will not be presumed to be a
sale unless the facts and circumstances clearly establish that the transfers
constitute a sale. There can be no assurance that the Internal Revenue Service
("IRS") might not seek to contend that the Disguised Sale Regulations apply
here. The IRS could contend that the Piedmont Transaction itself was taxable
as a disguised sale under the Disguised Sale Regulations. Any gain recognized
thereby may be eligible for installment sale reporting under Section 453 of the
Code, subject to certain limitations.
POTENTIAL CHANGE IN INVESTMENT UPON REDEMPTION OF UNITS
If a Limited Partner exercises the right to require the redemption of
such Limited Partner's Units pursuant to the Redemption Rights Agreement, such
Limited Partner may receive cash or Redemption Shares in exchange for such
Units. If a Limited Partner receives cash, the Limited Partner will no longer
have any interest in the Company and will not benefit from any subsequent
increases in the share price of the Common Stock and will not receive any
future distributions from the Company (unless the Limited Partner currently
owns or acquires in the future additional shares of Common Stock or Units). If
a Limited Partner receives Redemption Shares, the Limited Partner will become a
stockholder of the Company rather than a holder of Units in the Operating
Partnership. ALTHOUGH THE NATURE OF AN INVESTMENT IN SHARES OF COMMON STOCK IS
SUBSTANTIALLY EQUIVALENT ECONOMICALLY TO AN INVESTMENT IN UNITS IN THE
OPERATING PARTNERSHIP, THERE ARE SOME DIFFERENCES BETWEEN OWNERSHIP OF UNITS
AND OWNERSHIP OF COMMON STOCK RELATING TO, AMONG OTHER THINGS, FORM OF
ORGANIZATION, PERMITTED INVESTMENTS, POLICIES AND RESTRICTIONS, MANAGEMENT
STRUCTURE, COMPENSATION AND FEES, INVESTOR RIGHTS AND FEDERAL INCOME TAXATION,
SOME OF WHICH MAY BE MATERIAL TO INVESTORS.
REGISTRATION OF SHARES
The Company has registered the Redemption Shares under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to its registration
obligations under the Redemption Rights Agreement. Under the Redemption Rights
Agreement, the Company is required to prepare and file with the Securities and
Exchange Commission such amendments and supplements to the registration
statement pursuant to which the Redemption Shares are registered under the
Securities Act, and the prospectus used in connection therewith, as may be
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necessary to keep such registration statement effective and to comply with the
provisions of the Securities Act. See "Plan of Distribution."
Pursuant to the Redemption Rights Agreement, the Company has agreed to
pay all expenses of effecting the above- described registration of the
Redemption Shares under the Securities Act prior to July 13, 2001. The Limited
Partners who are parties to the Redemption Rights Agreement have agreed
severally, in proportion to the number of Units held by them at such time in
relation to the total number of shares of Common Stock covered by such a
registration statement, to reimburse the Company for registration expenses
which are incurred thereafter.
If the Company does not maintain the above-described registration
statement in accordance with the terms of the Redemption Rights Agreement, the
Company shall have no right to deliver shares of Common Stock (i.e., Redemption
Shares) in consideration for tendered Units during the time when such
registration statement is not so effective.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
TO HOLDERS OF COMMON STOCK
This section is a summary of certain Federal income tax matters of
general application pertaining to REITs and their stockholders under the Code.
The discussion is based on current law and does not purport to deal with all
aspects of Federal income taxation that may be relevant to investors subject to
special treatment under Federal income tax laws, such as investors subject to
the Employee Retirement Income Security Act of 1974, as amended, other tax
exempt investors, dealers in securities or foreign persons. The provisions of
the Code pertaining to REITs are highly technical and complex and sometimes
involve mixed questions of fact and law. In addition, this section does not
discuss foreign, state or local taxation. Prospective investors should
consult, and must depend on, their own tax advisors regarding the Federal,
state, local, foreign and other tax consequences of holding and disposing of
the Redemption Shares.
In the opinion of Neal, Gerber & Eisenberg, tax counsel to the
Company, the Company has been organized and operated in a manner that has
enabled it to qualify as a REIT under Sections 856 through 859 of the Code, and
its proposed method of operation will enable it to continue to so qualify. No
assurance can be given, however, that the Company will so qualify or continue
to so qualify. The Company's ability to qualify as a REIT under the
requirements of the Code and the regulations promulgated thereunder is
dependent upon actual operating results.
To qualify as a REIT under the Code for a taxable year, the Company
must meet certain organizational and operational requirements, which generally
require it to be a passive investor in operating real estate and to avoid
excessive concentration of ownership of its stock. First, its principal
activities must be real estate related. Generally, at least 75% of the value
of the total assets of the Company at the end of each calendar quarter must
consist of real estate assets, cash or governmental securities. The Company
may not own more than 10% of the outstanding voting securities of any
corporation; shares of qualified REITs and of certain wholly owned subsidiaries
are exempt from this prohibition. Additionally, gross income from the sale or
other disposition of stock and securities held for less than one year, the sale
or other disposition of real property held for less than four years and from
certain other sources must constitute less than 30% of the gross income for
each taxable year of a REIT. For each taxable year, at least 75% of a REIT's
gross income must be derived from specified real estate sources and 95% must be
derived from such real estate sources plus certain other permitted sources.
Real estate income for purposes of these requirements includes gains from the
sale of real property not held primarily for sale to customers in the ordinary
course of business, dividends on REIT shares, interest on loans secured by
mortgages on real property, certain rents from real property and income from
foreclosure property. For rents to qualify, they may not be based on the
income or profits of any person, except that they may be based on a percentage
or percentages of gross income or receipts, and, subject to certain limited
exceptions, the REIT may not manage the property or furnish services to
residents except through an independent contractor which is paid an
arms'-length fee and from which the REIT derives no income.
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For the Company to remain qualified as a REIT, no more than 50% in
value of the outstanding capital stock of the Company (the "Capital Stock")
including in some circumstances stock into which outstanding securities might
be converted, may be owned actually or constructively by five or fewer
individuals (as defined in the Code to include certain entities) at any time
during the last half of the Company's taxable year. Accordingly, the
Certificate of Incorporation of the Company, as amended, contains provisions
restricting the acquisition of shares of Capital Stock. See "Description of
Common Stock -- Restrictions on Transfer" in the accompanying Prospectus.
So long as the Company qualifies for taxation as a REIT and
distributes at least 95% of the sum of (a) its REIT taxable income (as computed
without regard to net capital gains or the dividends-paid deduction) and (b)
its net income (after tax) from foreclosure property for its taxable year to
its stockholders annually, the Company itself will not be subject to Federal
income tax on that portion of such income distributed to stockholders. The
Company will be taxed at regular corporate rates on all income not distributed
to stockholders. The Company's policy is to distribute at least 95% of the sum
of its REIT taxable income and net income from foreclosure property. REITs may
also incur taxes for certain other activities or to the extent distributions do
not satisfy certain other requirements.
In the case of a REIT which is a partner in a partnership, such as the
Company, Treasury Regulations provide that the REIT will be deemed to own its
proportionate share of the assets of the partnership and will be deemed to earn
the income of the partnership attributable to such share. In addition, for
purposes of satisfying the asset and income tests described above, the
character of the gross income and assets in the hands of the partnership
remains the same when allocated to the REIT. Accordingly, the Company's
proportionate share of the assets, liabilities and items of income of the
Operating Partnership will be treated as assets, liabilities, and items of
income of the Company for purposes of qualifying as a REIT.
Failure of the Company to qualify during any taxable year as a REIT
could, unless certain relief provisions were available, have a material adverse
effect upon investors. If disqualified for taxation as a REIT for a taxable
year, the Company would also be disqualified for taxation as a REIT for the
next four taxable years, unless the failure was due to reasonable cause rather
than willful neglect and certain other conditions are met. The Company would
be subject to Federal income tax at corporate rates on all of its taxable
income and would not be able to deduct the dividends paid, which could result
in a discontinuation of or substantial reduction in dividends to stockholders.
Dividends would also be subject to the regular tax rules applicable to
dividends received by stockholders of corporations. Should the failure to
qualify be determined to have occurred retroactively in an earlier tax year of
the Company, the imposition of a substantial Federal income tax liability on
the Company attributable to such nonqualifying tax years may adversely affect
the Company's ability to pay dividends. In the event that the Company fails to
meet certain income tests of the tax law, it may, generally, nonetheless retain
its qualification as a REIT if it pays a 100% tax on the amount by which it
failed to meet the income tests so long as its failure was due to reasonable
cause and not willful neglect. Any such taxes would adversely affect the
Company's ability to pay dividends.
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS
As long as the Company qualifies as a REIT, distributions made to its
taxable domestic stockholders out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will be taxable to such
stockholders as ordinary income. Corporate stockholders will not be entitled
to the dividends-received deduction with respect to distributions by the
Company. Distributions that are designated as capital gain dividends will be
taxable to stockholders as long-term capital gains (to the extent they do not
exceed the Company's actual net capital gain for the taxable year) without
regard to the period for which the stockholder has held its stock. However,
corporate stockholders may be required to treat up to 20% of certain capital
gain dividends as ordinary income. Distributions by the Company in excess of
its current and accumulated earnings and profits will not be taxable to a
stockholder to the extent that such distributions do not exceed the adjusted
basis of the stockholder's shares, but rather, will be a nontaxable reduction
in a stockholder's adjusted basis in such shares to the extent thereof and
thereafter will be taxed as capital gain.
S-9
<PAGE> 10
Any dividend declared by the Company in October, November or December
of any year payable to a stockholder of record on a specified date in any such
month will be treated as both paid by the Company and received by the
stockholder on December 31, of such year, provided that the dividend is
actually paid by the Company during January of the following calendar year.
Stockholders may not include in their individual income tax returns
any net operating losses or capital losses of the Company. Instead, such
losses would be carried over by the Company for potential offset against its
future income (subject to certain limitations). Taxable distributions from the
Company and gain from the disposition of the Capital Stock will not be treated
as passive activity income and, therefore, stockholders generally will not be
able to apply any "passive activity losses" (such as losses from certain types
of limited partnerships in which the stockholder is a limited partner) against
such income. In addition, taxable distributions from the Company and gain from
the disposition of Capital Stock generally will be treated as investment income
for purposes of the investment interest limitations. The Company will notify
the stockholders after the close of the Company's taxable year as to the
portions of the distributions attributable to that year that constitute
ordinary income, return of capital, and capital gain. In general, any gain or
loss realized upon a taxable disposition of the Capital Stock by a stockholder
who is not a dealer in securities will be treated as long-term capital gain or
loss if the Capital Stock has been held for more than one year and otherwise as
short-term capital gain or loss. However, any loss upon a sale or exchange of
Capital Stock by a stockholder who has held such stock for six months or less
(after applying certain holding period rules) will be treated as a long-term
capital loss to the extent of distributions from the Company required to be
treated by such stockholder as long-term capital gain. All or a portion of any
loss realized upon a taxable disposition of the Capital Stock may be disallowed
if other shares of the Capital Stock are purchased within 30 days before or
after the disposition.
BACKUP WITHHOLDING
The Company will report to its domestic stockholders and to the IRS
the amount of dividends paid during each calendar year, and the amount of tax
withheld, if any. Under the backup withholding rules, a stockholder may be
subject to backup withholding at the rate of 31% with respect to dividends paid
unless such holder: (a) is a corporation or comes within certain other exempt
categories and when required demonstrates this fact, or (b) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. A stockholder that does not provide the Company with a
correct taxpayer identification number may also be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be creditable against
the stockholder's income tax liability. In addition, the Company may be
required to withhold a portion of capital gain distributions to any
stockholders that fail to certify their non-foreign status to the Company. See
- --"Taxation of Foreign Stockholders."
TAXATION OF PENSION TRUSTS
One of the requirements for the Company to qualify as a REIT for
Federal income tax purposes is that, during the last half of each taxable year,
not more than 50% in value of the Company's Capital Stock can be owned by five
or fewer individuals (as defined in the Code to include certain entities). For
purposes of the "five or fewer" test described above, beneficiaries of a
domestic pension trust that owns shares in the Company generally will be
treated as owning such shares in proportion to their actuarial interests in the
trust. In addition, amounts distributed by the Company to a tax-exempt pension
trust generally do not constitute "unrelated business taxable income" ("UBTI")
to such trust unless the trust owns more than ten percent of the Capital Stock,
in which case a portion of such amounts distributed may be treated as UBTI.
TAXATION OF FOREIGN STOCKHOLDERS
The rules governing United States Federal income taxation of
nonresident alien individuals, foreign corporations, foreign partnerships and
other foreign stockholders (collectively, "Non-U.S. Stockholders") are complex
and no attempt will be made herein to provide more than a summary of such
rules. Prospective Non-U.S. Stockholders should consult with their own tax
advisors to determine the impact of Federal, state and local
S-10
<PAGE> 11
income tax laws with regard to an investment in the Capital Stock, including
any reporting requirements. It is currently anticipated that the Company will
qualify as a "domestically controlled REIT" (i.e., a REIT in which at all times
during a specified testing period less than 50% of the value of the stock is
owned directly or indirectly by Non- U.S. Stockholders) and therefore gain from
the sale of Capital Stock by a Non-U.S. Stockholder will not be subject to
United States taxation unless such gain is treated as "effectively connected"
with the Non-U.S. Stockholder's United States trade or business.
Distributions that are not attributable to gain from the sale or
exchange by the Company of United States real property interests (and are not
designated as capital gain dividends) will be treated as dividends taxed as
ordinary income to the extent that they are made out of current or accumulated
earnings and profits of the Company. Such distributions generally will be
subject to a United States withholding tax equal to 30% of the gross amount of
the distribution, subject to reduction or elimination under an applicable tax
treaty. However, if dividends from the investment in the shares are treated as
"effectively connected" with the Non-U.S. Stockholder's conduct of a United
States trade or business, such dividends will be subject to regular U.S. income
taxation (foreign corporations may also be subject to the 30% branch profits
tax). The Company expects to withhold United States income tax at the rate of
30% on the amount of any such dividends made to a Non-U.S. Stockholder unless:
(1) a lower treaty rate applies and the Non- U.S. Stockholder files certain
information evidencing its entitlement to such lower treaty rate, or (2) the
Non-U.S. Stockholder files an IRS Form 4224 with the Company claiming that the
distribution is "effectively connected income". Distributions which exceed
current and accumulated earnings and profits of the Company will not be taxable
to the extent that they do not exceed the adjusted basis of a stockholder's
shares, but rather will reduce (but not below zero) the adjusted basis of such
shares. To the extent that such distributions exceed the adjusted basis of a
Non-U.S. Stockholder's shares, they generally will give rise to United States
tax liability if the Non-U.S. Stockholder would otherwise be subject to tax on
gain from the sale or disposition of his shares in the Company, as described
above. If it cannot be determined at the time a distribution is made whether
or not such distribution will be in excess of current and accumulated earnings
and profits, the distributions will be subject to withholding at the same rate
as dividends. However, amounts thus withheld are refundable if it is
subsequently determined that such distribution was, in fact, in excess of
current and accumulated earnings and profits of the Company.
Distributions by the Company to a Non-U.S. Stockholder that are
attributable to gain from sales or exchanges by the Company of a United States
real property interest are subject to income and withholding tax under the
provisions of the Foreign Investment in Real Property Tax Act of 1980, as
amended ("FIRPTA"). Under FIRPTA, those distributions, if any, which are
treated as gain recognized from the sale of a United States real property
interest, are taxed as income "effectively connected" with a United States
business. Non-U.S. Stockholders would thus be taxed at the normal capital gain
rates applicable to U.S. stockholders (subject to the applicable alternative
minimum tax and a special alternative minimum tax for nonresident alien
individuals). Also, distributions subject to FIRPTA may be subject to a 30%
branch profits tax in the hands of a foreign corporate stockholder not entitled
to treaty exemption. The Company will withhold 35% of any distribution to a
Non-U.S. Stockholder that could be designated by the Company as a capital gain
dividend. This amount is creditable against the Non-U.S. Stockholder's FIRPTA
tax liability. A refund may be available if the amount exceeds the Non-U.S.
Stockholder's FIRPTA tax liability.
PLAN OF DISTRIBUTION
This Prospectus Supplement relates to the possible issuance by the
Company of the Redemption Shares if, and to the extent that, holders of Units
acquired pursuant to the Piedmont Transaction tender such Units for redemption
in accordance with the terms of the Redemption Rights Agreement and the
Company, in its sole and absolute discretion, elects to issue Redemption Shares
in consideration for such Units. The Company has registered the Redemption
Shares for sale to provide the holders thereof with freely tradeable
securities, but registration of such shares does not necessarily mean that any
of such shares will be issued by the Company or offered or sold by the holders
thereof.
S-11
<PAGE> 12
The Company will not receive any cash proceeds from the issuance of
the Redemption Shares to holders of Units tendered for redemption (but the
Company will acquire Units from such holders).
The Company may from time to time issue up to 832,936 Redemption
Shares upon the acquisition of the Units tendered for redemption in accordance
with the Redemption Rights Agreement. The Company will acquire one Unit
(subject to certain anti-dilution adjustments) in exchange for each Redemption
Share that the Company may issue to holders of Units pursuant to this
Prospectus Supplement. Consequently, with each redemption by the Company, the
Company's interest in the Operating Partnership will increase.
The Redemption Shares will be listed on the NYSE, subject to official
notice of issuance.
S-12
<PAGE> 13
===================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN
ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
SUCH INFORMATION.
____________________________
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
----
Recent Developments . . . . . . . . . . . . . S-2
Use of Proceeds . . . . . . . . . . . . . . . S-2
Description of Units . . . . . . . . . . . . S-2
Redemption of Units . . . . . . . . . . . . . S-4
Certain Federal Income Tax Considerations
to Holders of Common Stock . . . . . . . . S-8
Plan of Distribution . . . . . . . . . . . . S-11
PROSPECTUS
Available Information . . . . . . . . . . . . 2
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . 3
Consolidated Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends . . 3
Capital Stock . . . . . . . . . . . . . . . . 4
Description of Common Stock . . . . . . . . . 4
Description of Preferred Stock . . . . . . . 7
Description of Depositary Shares . . . . . . 10
Description of Common Stock Warrants . . . . 12
Plan of Distribution . . . . . . . . . . . . 13
Validity of Securities . . . . . . . . . . . 14
Experts . . . . . . . . . . . . . . . . . . . 14
===================================================
832,936 SHARES
GENERAL GROWTH PROPERTIES, INC.
COMMON STOCK
(PAR VALUE $.10 PER SHARE)
--------------
PROSPECTUS SUPPLEMENT
--------------
JULY 12, 1996
===================================================
