<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
---------------------- ---------------------
COMMISSION FILE NUMBER 1-11656
GENERAL GROWTH PROPERTIES, INC.
(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 NO.)
55 W. MONROE - SUITE 3100
CHICAGO, ILLINOIS 60603
- --------------------------------------- -------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 551-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
---------------------------- -----------------------------------------
COMMON STOCK, $.10 PAR VALUE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such report(s)) and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
----- -----
/ / Indicate by a check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
As of March 25, 1997, the aggregate market value of the 27,798,947 shares of
Common Stock held by non-affiliates of the registrant was $854,817,620 based
upon the closing price on the New York Stock Exchange composite tape on such
date. (For this computation, the registrant has excluded the market value of
all shares of its Common Stock reported as beneficially owned by executive
officers and directors of the registrant and certain other stockholders; such
exclusion shall not be deemed to constitute an admission that any such person
is an "affiliate" of the registrant.) As of March 25, 1997, there were
30,789,185 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual stockholders meeting to be
held on May 15, 1997 are incorporated by reference into Part III.
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
General Growth Properties, Inc. (the "Company") was formed in 1986 by
Martin Bucksbaum and Matthew Bucksbaum. On April 15, 1993, an initial public
offering (the "IPO") of the common stock (the "Common Stock") of the Company
and certain related transactions were completed. During May 1995, the Company
completed a follow-on stock offering of 4,500,000 shares of Common Stock. In
connection with the IPO, the Company and Messrs. Bucksbaum, members of their
family and trusts for the benefit of them and their families (collectively, the
"Bucksbaums") formed GGP Limited Partnership (the "Operating Partnership"). As
a result of the IPO and related transactions, the Company and the Operating
Partnership owned 1% and 99%, respectively, of eighteen property partnerships,
each of which owned an enclosed mall shopping center. The Operating
Partnership also owned 100% of three additional shopping centers. At December
31, 1996, the Company and the Operating Partnership owned 1% and 99%,
respectively, of twenty-five property partnerships, and the Operating
Partnership owned 100% of five additional shopping centers and a 50% interest
in Quail Springs Mall (the thirty-one centers are the "Original Centers").
Currently, the Company owns a 63% general partnership interest in the Operating
Partnership, and various minority interests, primarily the Bucksbaums, own the
remaining 37% limited partnership interest. The Company, as general partner of
the Operating Partnership, is engaged in the ownership, operation, management,
leasing, acquisition, development, expansion and financing of enclosed mall
shopping centers. See the Consolidated Financial Statements and Notes thereto
included in Item 8 of this Annual Report on Form 10-K for certain financial
information required by this Item 1.
On February 11, 1994, the Company, through the Operating Partnership,
acquired 40% of the outstanding stock of CenterMark Properties, Inc.
("CenterMark"). CenterMark owned interests in sixteen enclosed regional
shopping centers and three power centers (collectively, the "CenterMark
Centers") and other real estate, including fourteen free-standing department
stores net leased to May Company and a 116-unit apartment project in LaJolla,
California. On December 19, 1995, the Company sold 25% of its 40% interest in
CenterMark for $72.5 million and granted the buyer an option to purchase its
remaining interest. On June 28, 1996, the option was exercised by the buyer to
purchase the remaining interest in two transactions. See "Recent Developments -
CenterMark Acquisition and Disposition" below.
On December 22, 1995 the Company, through the Operating Partnership's
ownership of stock in GGP/Homart, Inc. ("GGP/Homart") acquired a 38.2% interest
in substantially all of the regional mall assets and liabilities that were
owned by Homart Development Co., an indirect wholly-owned subsidiary of Sears,
Roebuck & Co. GGP/Homart currently owns interests in twenty-six shopping
centers (the "Homart Centers") and one property under development. Together,
the Original Centers, the CenterMark Centers and the Homart Centers comprise
the Operating Partnership portfolio ("the "Portfolio Centers").
During 1996, the Operating Partnership, acting through GGP Management,
Inc., acquired General Growth Management, Inc. ("GGMI"). GGMI is an affiliate
of the Company and is currently the largest third party owned regional mall
management company in the United States. See "Acquisition of GGMI" below.
RECENT DEVELOPMENTS
CENTERMARK ACQUISITION AND DISPOSITION
On February 11, 1994, the Company, through the Operating Partnership,
together with Westfield U.S. Investments Pty. Limited ("Westfield") and five
real estate investment funds sponsored by Goldman Sachs & Co. acquired all of
the outstanding stock of CenterMark (the "CenterMark Stock") for approximately
$1 billion (including both assumption of existing and new mortgage indebtedness
aggregating approximately $542 million). On December 19, 1995, the Company
sold 25% of its 40% interest in CenterMark to Westfield for $72.5 million, and
also granted Westfield an option which was exercisable on or before September
30, 1996, to purchase its remaining CenterMark stock for $217.5 million. On
June 28, 1996, Westfield exercised its option to acquire the remaining 30% of
the outstanding CenterMark Stock. The first payment of $87 million was
received on July 1, 1996, and the second payment of $130.5 million was received
on January 2, 1997. The aggregate financial statement gain from the sale
transactions approximated $143 million.
-2-
<PAGE> 3
HOMART REGIONAL MALL PORTFOLIO ACQUISITION
On December 22, 1995, the Company through the Operating Partnership,
jointly with four other investors formed GGP/Homart to acquire Homart
Development Company from Sears, Roebuck & Co. The Company acquired 38.2% of
the stock of GGP/Homart for approximately $179 million including certain
transaction costs. The Company also committed to invest up to an additional
$30.6 million to fund new projects as well as certain redevelopment costs. As
of December 31, 1996, the Company had contributed $17.2 million of the
additional equity. On January 21, 1997, an additional $5.7 million of capital
was contributed to GGP/Homart by the Company. GGP/Homart holds interests in
twenty-six regional shopping malls and one property currently under development
in Waterbury, Connecticut. On October 2, 1996, GGP/Homart opened West Oaks
Mall, a new development, located in Ocoee, (Orlando) Florida. The Company
obtained a $125 million interim loan to facilitate the acquisition of its
interest in GGP/Homart. On January 31, 1996, the interim loan was reduced to
$75 million with $50 million of excess proceeds from a $340 million
refinancing. The remaining $75 million was repaid in July, 1996, with the
proceeds from the sale of the Company's interest in CenterMark.
PROPERTY ACQUISITIONS AND DEVELOPMENTS
ACQUISITIONS
During the fourth quarter of 1996, the Company acquired 100% ownership in
five properties, Park Mall, Sooner Fashion Mall, Lakeview Square, Lansing Mall
and Westwood Mall, and a 50% interest in Quail Springs Mall. Park Mall in
Tucson, Arizona was acquired on October 4, 1996, for 1,000,000 shares of newly
issued common stock and $24 million in cash. Sooner Fashion Mall and 50% of
Quail Springs Mall, in Norman and Oklahoma City, Oklahoma, respectively, were
acquired on November 27, 1996, for 895,928 newly issued common shares, the
assumption of $8.6 million of mortgage debt and the payment of $16.7 million in
cash. On December 6, 1996, the Company acquired Lakeview Square, Lansing Mall
and Westwood Mall, all located in south central Michigan, for an aggregate
purchase price of $132.2 million which consisted of $92.4 million of mortgage
debt assumption ($4.4 million of which was retired at closing) and 1,445,000
newly issued Operating Partnership Units.
DEVELOPMENTS
During 1996, the Company acquired two new development sites located in
Iowa City, Iowa and Grand Rapids, Michigan. The Iowa City site is currently
under development and is scheduled to open in July 1998. In February of 1996,
the Company opened Eagle Ridge Mall in Winterhaven, Florida, which had
previously been under development.
ACQUISITION OF GGMI
On December 22, 1995, the Company formed GGP Management, Inc. ("GGP
Management") to manage, lease, develop and operate enclosed malls. In August
1996, the Operating Partnership, acting through GGP Management, completed the
acquisition of General Growth Management, Inc. for approximately $51.5 million.
The Operating Partnership issued 453,791 Operating Partnership Units
(approximately $11.6 million) and sold 1,555,855 shares of common stock it
acquired from the Company (approximately $39.9 million) to GGP Management in
connection with the acquisition of GGMI. The Operating Partnership extended a
loan to GGP Management to purchase the Company's common stock. This loan bears
interest at a rate of 14% per annum and is reflected on the consolidated
balance sheet. In connection with the acquisition, GGP Management was merged
into GGMI at closing. GGMI currently manages, leases, and performs various
other services for the Original Centers, GGP/Homart and other properties owned
by unaffiliated parties.
THE SHOPPING CENTER BUSINESS
Success in the highly competitive real estate shopping center business
depends upon many factors, including general economic conditions, increases or
decreases in operating expenses and interest rates, changes in demographics,
and competitive pressures. The Portfolio Centers compete with numerous
shopping alternatives in seeking to attract retailers to lease space as
retailers themselves face increasing competition from discount shopping
centers, outlet malls, discount shopping clubs, direct mail and telemarketing.
Management believes that the shopping center business is evolving from having
primarily a development-orientation to one which has more of a
operations-oriention. This evolution necessitates the implementation of new
approaches to shopping center management and
-3-
<PAGE> 4
leasing. Management's strategies include the integration of mass merchandise
retailers with traditional department stores, specialty leasing,
entertainment-oriented tenants, proactive property management and leasing,
strategic expansions and acquisitions, and selective new shopping center
developments. These approaches should enable the Company to operate and grow
successfully in today's value-oriented environment. Most of the Original Centers
are strategically located nationwide in middle markets where they have strong
competitive positions. The Original Centers' geographic diversification should
mitigate the effects of regional economic conditions and local factors. The
CenterMark Centers and the Homart Centers are primarily concentrated in areas
not served by the Original Centers. In addition, most of the CenterMark Centers
and Homart Centers are located in major markets which further diversify the
Portfolio Centers in terms of geographic region and market type of the Company's
enclosed mall shopping centers.
As used herein, the term "GLA" refers to gross retail space, including
anchors and mall tenant areas; the term "Mall GLA" refers to gross retail
space, excluding anchors; the term "Anchor" refers to a department store or
other large retail store; the term "Mall Stores" refers to stores (other than
anchors) that are typically specialty retailers who lease space in shopping
centers; and the term "Freestanding GLA" means gross leasable area of
freestanding retail stores or convenience stores located along the perimeter of
a center's parking area.
BUSINESS OF THE COMPANY
The Portfolio Centers currently consist of the Original Centers, a
portfolio of thirty-one enclosed mall shopping centers in twenty states and the
twenty-six Homart Centers located in fifteen states and through January 2,
1997, the nineteen CenterMark centers located in eight states. Thirty-two of
the fifty-seven Original Centers and Homart Centers have been expanded,
renovated or developed since 1990 and several other centers are currently being
redeveloped and/or expanded. In addition, over $350 million was spent by the
former owners of the CenterMark Centers from 1989 to 1993 to modernize,
redevelop, expand and remerchandise many of the properties.
The Company is the asset manager of the Original Centers, making all key
strategic decisions. It retains final authority over all operating matters and
supervises GGMI, the property manager of the Original Centers. GGMI performs
day-to-day property management functions including leasing, construction
management, data processing, maintenance, accounting, marketing, promotion and
security at the Original Centers pursuant to the management agreement.
The Company, along with its stockholders in GGP/Homart, makes all key
strategic decisions for the Homart Centers. The Company is the asset manager
of the Homart Centers, executing the strategic plans and overseeing the
day-to-day activites performed by GGMI. GGMI is currently the property manager
for twenty-one of the Homart Centers, and the joint venture partners manage the
other five Homart Centers.
The goal for each Portfolio Center is to maximize the sales of their
retail tenants, thereby increasing both the potential to receive both
percentage rents from existing tenants and higher minimum rents from new
tenants. Management believes that sales will be maximized by maintaining a
quality relationship with retailers, generating high customer traffic and
incorporating new strategies such as the use of entertainment tenants,
theaters, ice rinks and museums.
Company management believes that per share growth in its "Funds from
Operations", which is defined as net income (loss) before non-cash expenses and
certain gains or losses on sales and investments, is the key factor in
enhancing stockholder value. It is management's objective to achieve growth in
Funds from Operations through development of new shopping centers, acquisition
of additional shopping centers, expansions, renovations, leasing vacant space,
and proactive management to increase cash flow in the exisiting Portfolio
Centers. Funds from Operations can also be affected by external factors, such
as inflation or increases in disposable consumer income.
CENTERMARK'S BUSINESS
CenterMark is engaged in owning, operating, managing, leasing, expanding
and redeveloping regional shopping centers and power centers and other related
properties. CenterMark currently owns interests in the nineteen CenterMark
Centers, fourteen separate department store properties net leased to The May
Company and certain other real estate investments.
The CenterMark Centers are located primarily in major metropolitan areas,
including suburbs of Los Angeles and San Diego, California; Hartford,
Connecticut; Portland, Oregon; St. Louis, Missouri; and Washington D.C. The
-4-
<PAGE> 5
CenterMark Centers contain approximately 15.8 million square feet of total GLA,
including approximately 60 Anchors operating under 17 trade names and more than
1,800 Mall Stores operating under approximately 960 trade names.
GGP/HOMART'S BUSINESS
GGP/Homart is primarily engaged in owning, operating, expanding and
redeveloping regional shopping centers. GGP/Homart currently owns interests in
twenty-six existing centers and one center under construction in Waterbury,
Connecticut.
The 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 Homart Centers contain
approximately 22.7 million square feet of total GLA and approximately 7.9
million square feet of Mall Stores. There are approximately 109 Anchors and
more than 2,500 Mall Stores in the Homart Centers.
As of December 31, 1996, GGP/Homart owned 100% of sixteen Homart Centers
and varying percentages of the other eleven Homart Centers.
THE PORTFOLIO CENTERS
Sixty-one of the seventy-five Portfolio Centers are enclosed mall shopping
centers with at least two major department stores as Anchors and a wide variety
of smaller Mall Stores. At most of the Portfolio Centers, additional
Freestanding Stores are located along the perimeter of the parking area. Each
Portfolio Center provides ample surface parking for shoppers. The Portfolio
Centers:
- range in size between approximately 340,000 and 1,373,000 square
feet of total GLA and between approximately 125,000 and 530,000
square feet of Mall and Freestanding GLA. The smallest Portfolio
Center has approximately 40 stores, and the largest has over 175
stores;
- have approximately 287 Anchors, operating under approximately 64
trade names; and
- have approximately 7,000 Mall and Freestanding Stores.
The average size of the 75 Portfolio Centers is approximately 795,000
square feet of GLA, including all Anchors, Mall Stores and Freestanding Stores.
The average Mall and Freestanding GLA per Portfolio Center is approximately
310,000 square feet.
As of December 31, 1996, the Original Centers contain approximately 20.9
million square feet of GLA consisting of Anchors (whether owned or leased),
Mall Stores and Freestanding Stores. The CenterMark Centers and the Homart
Centers contain GLA of approximately 15.8 million square feet and 22.7 million
square feet, respectively.
The Company's share of total revenues from the Portfolio Centers and GGMI
increased from $229.1 million in 1995 to $363.4 million in 1996. No single
Portfolio Center generated more than 8% of the Company's total 1996 pro rata
revenues. In 1996, total Mall Store sales at all of the Portfolio Centers
increased by approximately 4.7%. The Portfolio Centers weighted average Mall
Store rent per square foot from leases that expired in 1996 was $18.79. As a
result of market rents being higher than the rents under many of the expiring
leases, the weighted average Mall Store rent per square foot on new and renewal
leases during 1996 was $23.71, or $4.92 per square foot more than the
above-indicated average for expiring leases.
Total mortgage debt on the Original Centers including 50% of Quail
Springs' debt at December 31, 1996 was approximately $1,177.1 million. Of this
amount, $401.7 million was variable rate debt, and the remaining $775.4 million
was fixed rate debt. The weighted average interest rate on the Company's debt
was approximately 7.18% as of December 31, 1996. The Company's share of
mortgage debt on the Homart Centers (38.2% of the debt on centers owned
entirely by GGP/Homart and 38.2% of GGP/Homart's share of debt on joint venture
properties) was approximately $324.4 million at December 31, 1996. $110.4
million was variable rate debt, and $214.0 million was fixed rate debt. The
weighted average interest rate of the Company's share of debt attributable to
the Homart Centers was approximately 7.51% as of December 31, 1996. The
Company's pro rata share of total consolidated
-5-
<PAGE> 6
debt was $1,501.5 million as of December 31, 1996, and its weighted average
interest rate was approximately 7.25%.
In most cases, the land underlying the Portfolio Centers is owned in fee;
however, in five of the Original Centers, all or part of the underlying land is
owned by a third party that leases the land pursuant to a ground lease. The
Company leases the land under Knollwood Mall and Rio West Mall. It also leases
a portion of the Fallbrook Mall land and a portion of the SouthShore and
Bayshore parking areas. The leases contain various purchase options in favor
of the Company and typically provide for a right of first refusal in favor of
the Company in the event of a proposed sale of the property by the Landlord.
In addition, Prince Kuhio Plaza, one of the Homart Centers, is located on land
leased pursuant to a long-term ground lease.
ANCHORS
Anchors have traditionally been a major factor in the public's image of an
enclosed shopping center. Anchors are generally department stores whose
merchandise appeals to a broad range of shoppers. Anchors either own their
stores, the land under them and adjacent parking areas, or enter into long-term
leases at rates that are generally lower than the rents charged to Mall Store
tenants. Although the Portfolio Centers receive a smaller percentage of their
operating income from Anchors than from Mall Stores, strong Anchors play an
important part in maintaining customer traffic and making the Portfolio Centers
desirable locations for Mall Store tenants. Anchors accounted for approximately
6% of the Portfolio Centers' pro rata consolidated minimum rent during 1996.
The following table indicates the parent company of each Anchor and sets
forth the number of stores and square feet owned or leased by each Anchor at
the Original Centers and the Homart Centers as of December 31, 1996.
-6-
<PAGE> 7
GENERAL GROWTH PROPERTIES, INC.
PORTFOLIO ANCHORS(1)
As of December 31, 1996
<TABLE>
<CAPTION>
Total Square Feet
Name Stores (000's)
- ----------------------------------------------------------- ------ -----------
<S> <C> <C>
Sears 47 5,648
JCPenney 45 4,181
Dayton Hudson
Daytons 2 269
Hudsons 3 304
Mervyns 18 1,482
Target 14 1,455
----- -------
Sub-Total Dayton Hudson 37 3,510
----- -------
Dillards 24 3,580
May Department Stores Company
Filenes 4 682
Filenes Home Store 1 36
Foleys 6 1,064
Lord & Taylor 3 335
Robinsons-May 3 497
----- -------
Sub-Total May Department Stores Company 17 2,614
----- -------
Proffitt's
Younkers 4 355
Herbergers 1 71
Parisian 1 95
----- -------
Sub-Total Proffitt's 6 521
----- -------
Federated Department Stores
Burdines 2 283
Lazarus 1 50
Macys 6 1,030
Richs 1 240
The Bon Marche 1 100
----- -------
Sub-Total Federated Department Stores 11 1,703
----- -------
Montgomery Ward & Co.
Montgomery Ward 5 617
Lechmere 1 69
----- -------
Sub-Total Montgomery Ward & Co. 6 686
----- -------
Harcourt General
Neiman-Marcus 1 132
Mercantile Stores
Bacons 1 187
Castner Knott 1 101
Gayfer's 1 213
Joslins 1 171
JB White 1 181
----- -------
Sub-Total Mercantile Stores 5 853
----- -------
Kohls 2 177
TJ Maxx 2 76
Burlington Coat Factory 1 101
KMart 4 357
Wal-Mart 2 197
All About Sports 1 335
Elder-Beerman 2 142
Emporium 1 50
Gottschalks 1 173
Hills Department Store 2 175
Ross Dress For Less 3 96
Service Merchandise 1 34
Bealls 2 47
Belk 1 122
Belk-Lindsey 1 82
Belk Men's 1 34
Boscov 1 185
Dicks Sporting Goods 1 80
Harris 1 150
Jordan Marsh 1 210
Liberty House 1 50
Oshman's Sporting Goods 1 64
Saks Fifth Avenue 1 120
Scheels All Sports 1 50
Steinbachs 1 55
Strawbridge & Clothier 1 218
The Bon Ton 1 82
Toys R Us 1 47
Woolworth 1 50
</TABLE>
7
<PAGE> 8
MALL AND FREESTANDING STORES
The Portfolio Centers have an aggregate of approximately 7,000 Mall and
Freestanding Stores. As of December 31, 1996, national or regional chains
leased approximately 91% of the space occupied in the Portfolio Centers
consisting of Mall Stores and Freestanding Stores. Among the retailers with
the largest representation in Mall and Freestanding Stores are: The Limited,
Limited Express, Lerner, Lane Bryant, Victoria's Secret, Structure, Payless
Shoesource, Kay-Bee Toys, Wilson's Leather, Thom McAnn, Casual Corner,
LensCrafters, Kinney, Foot Locker, Northern Reflections, Champs.
The Portfolio Centers derived approximately 92% of their 1996 revenues
from Mall and Freestanding Stores, which comprise approximately 40% of the
Portfolio Centers' total GLA. No single retailer accounted for more than 8% of
leased Mall and Freestanding GLA or more than 8% of the 1996 annualized base
rent.
Current Mall and Freestanding Store leases have an average remaining term
of approximately seven years. Generally, they provide for tenants to pay rent
comprised of two elements: minimum and percentage rent. Minimum or base rent
is often subject to increases according to a schedule agreed upon at the time
of lease inception. In many cases, the base rent is adjusted for inflation by
increases tied to changes in the Consumer Price Index. Percentage rent is
additional rent based on a percentage of the tenants' sales over certain
stated levels. In some cases, tenants pay only a fixed minimum rent, and in a
few cases, tenants pay only percentage rents. Most leases for Mall Stores
contain provisions that allow the Portfolio Centers to recover their costs for
common area maintenance, property taxes and other expenditures related to
day-to-day operations. Some Anchors also contribute to the recovery of these
costs.
EXPANSIONS AND RENOVATIONS
Most of the Portfolio Centers were designed to allow for expansion and
growth through the addition of new Anchors or Mall and Freestanding Stores.
Six Original Centers and five Homart Centers are in the process of an
expansion, Anchor addition or renovation. The expansion and renovation of a
Portfolio Center often increases customer traffic, trade area penetration and
typically improves the competitive position of the property.
ACQUISITIONS
The Company continues to seek desirable properties for acquisition. In
1996, the Company also acquired interests in six other properties for
approximately $230 million. The Company's management believes that it,
together with the Operating Partnership, have the following competitive
advantages and reasons to acquire enclosed shopping malls:
- The funds necessary for a cash acquisition of a shopping center can be
obtained by the Company and the Operating Partnership from a combination
of sources, including mortgage or unsecured financing or the issuance of
public debt or equity.
- The Company and the Operating Partnership have the flexibility to pay
for an acquisition with a combination of cash, Common Stock or limited
partnership units in the Operating Partnership. This creates the
opportunity for tax-advantaged transactions for sellers.
- Management's expertise allows it to evaluate proposed acquisitions for
their increased profit potential. Additional profit can originate from
many sources including expansions, remodeling, remerchandising, and more
efficient management of the property.
8
<PAGE> 9
DEVELOPMENT
The Company, through the Operating Partnership, intends to pursue
development when warranted by the potential financial returns. During 1996,
the Company acquired 100% of two new development sites located in Iowa City,
Iowa and Grand Rapids, Michigan. The Company and its affiliates are currently
developing an enclosed shopping center in Waterbury, Connecticut and completing
predevelopment work on the site recently acquired in Iowa City, Iowa. Brass
Mill Mall, a 950,000 square foot enclosed regional mall and Brass Mill Commons,
a 200,000 square foot power center, located in Waterbury Connecticut are
scheduled to open in the fall of 1997. Coral Ridge Mall, a 1,000,000 square
foot enclosed regional mall located in Iowa City, Iowa, is scheduled to open in
the summer of 1998.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws and regulations, an owner of
real estate is liable for the costs of removal or remediation of certain
hazardous or toxic substances on such property. These laws often impose such
liability without regard to whether the owner knew of, or was responsible for,
the presence of such hazardous or toxic substances. The costs of remediation
or removal of such substances may be substantial, and the presence of such
substances, or the failure to promptly remediate such substances, may adversely
affect the owner's ability to sell such real estate or to borrow using such
real estate as collateral. In connection with its ownership and operation of
the Portfolio Centers, the Company, the Operating Partnership or the relevant
Property Partnership, may be potentially liable for such costs.
All of the Portfolio Centers have been subject to Phase I environmental
assessments, which are intended to discover information regarding, and to
evaluate the environmental condition of, the surveyed and surrounding
properties. The Phase I assessments included an historical review, a public
records review, a preliminary investigation of the site and surrounding
properties, screening for the presence of asbestos, polychlorinated biphenyls
("PCBs") and underground storage tanks and the preparation and issuance of a
written report, but do not include soil sampling or subsurface investigations.
Where the Phase I assessment so recommended, a Phase II assessment was
conducted to further investigate any issues raised by the Phase I assessment.
In each case where Phase I and/or Phase II assessments resulted in specific
recommendations for remedial actions, management has either taken or scheduled
the recommended action.
Neither the Phase I nor the Phase II assessments have revealed any
environmental liability that the Company believes would have a material effect
on the Company's business, assets or results of operations, nor is the Company
aware of any such liability. Nevertheless, it is possible that these
assessments do not reveal all environmental liabilities or that there are
material environmental liabilities of which the Company is unaware. Moreover,
no assurances can be given that (i) future laws, ordinances or regulations will
not impose any material environmental liability or (ii) the current
environmental condition of the Portfolio Centers will not be affected by
tenants and occupants of the Portfolio Centers, by the condition of properties
in the vicinity of the Portfolio Centers (such as the presence of underground
storage tanks) or by third parties unrelated to the Operating Partnership or
the Company.
EMPLOYEES
As of March 25, 1997, the Company and GGMI had approximately 3,000
full-time employees. None of the employees are subject to a collective
bargaining agreement and the Company has not experienced a labor-related work
stoppage.
QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST AND TAXABILITY OF
DISTRIBUTIONS
The Company currently qualifies as a real estate investment trust pursuant
to the requirements contained under Sections 856-858 of the Internal Revenue
Code of 1986, as amended (the "Code"). If, as the Company contemplates, such
qualification continues, the Company will not be taxed on its real estate
investment trust taxable income. During 1996, the Company distributed (or was
deemed to have distributed) 100% of its taxable income to stockholders. Cash
distributions in the amount of $1.72 per share were paid in 1996. Of that
amount, $.808 (47.0%) was ordinary income, based on the taxable income of the
Company and $.912 (53.0%) was a long-term capital gain from the sale of a
portion of the CenterMark stock.
9
<PAGE> 10
ITEM 2. PROPERTIES
The Company's investment in real estate as of December 31, 1996 consisted
of its interests in the Portfolio Centers, development in progress and certain
other real estate . As described elsewhere herein, as of December 22, 1995,
the Company acquired, through the Operating Partnership, 38.2% of GGP/Homart.
GGP/Homart owns interests in the Homart Centers and certain other real estate
assets. The Company completed the sale of its remaining interest in CenterMark
on January 2, 1997. As a result of the sale, the Company no longer has an
ownership interest in the CenterMark Centers.
The following tables set forth certain information regarding the Original
Centers and the Homart Centers as of December 31, 1996. The first table
depicts the Original Centers and the second table depicts the Homart Centers.
10
<PAGE> 11
ORIGINAL CENTERS
<TABLE>
<CAPTION>
TOTAL GLA/MALL
YEAR AND FREESTANDING
NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR
LOCATION(1) OR EXPANDED (SQUARE FEET) ANCHORS VACANCIES
- ---------------------------- ---------------- ---------------- ----------------------------------------------------- ---------
<S> <C> <C> <C> <C>
Bayshore Mall 1987/ 616,036/ Gottschalks, JCPenney, Sears, Mervyn's, Ross Dress
Eureka, California 1989 346,021 for Less None
Bellis Fair Mall 1988/ 764,124/
Bellingham, Washington N/A 350,961 The Bon Marche, JCPenney, Sears, Target, Mervyn's None
Birchwood Mall 1990/ 607,048/
Port Huron, Michigan 1991 280,994 Younkers, JCPenney, Sears, Target None
Capital Mall 1978/ 537,513/
Jefferson City, Missouri 1985 307,828 Dillard's, JCPenney, Sears None
Chapel Hills Mall 1982/ 957,251/
Colorado Springs, Colorado 1986 420,234 Joslin's, Sears, Mervyn's, KMart, JCPenney, Dillard's None
Colony Square Mall 1981/ 548,851/
Zanesville, Ohio 1987 290,847 Lazarus, Elder-Beerman, JCPenney, Sears None
Columbia Mall 1985/ 727,013/
Columbia, Missouri 1987 311,569 Dillard's, JCPenney, Sears, Target None
Eagle Ridge Mall 1996/ 615,357/
Winter Haven, Florida N/A 317,638 Dillard's, JCPenney, Sears None
Fallbrook Mall
West Hills, California 1966/ 1,017,869/ JCPenney, Target, Mervyn's, KMart, Burlington Coat
(Los Angeles, California) 1985 465,855 Factory None
Fox River Mall 1984/ 1,090,016/
Appleton, Wisconsin 1991 525,320 Dayton's, Younkers, JCPenney, Sears, Target None
Gateway Mall 1990/ 640,508/
Springfield/Eugene, Oregon 1990 357,243 The Emporium, Sears, Target None
Grand Traverse Mall 1992/ 578,277/
Traverse City, Michigan N/A 312,989 Hudson's, JCPenney, Target, TJ Maxx None
Greenwood Mall 1979/ 772,802/
Bowling Green, Kentucky 1987 393,749 Castner Knott, JCPenney, Sears, Dillard's None
Knollwood Mall
St. Louis Park, Minnesota 1955/ 511,496/
(Minneapolis, Minnesota) 1981 300,896 Montgomery Ward, Kohl's, TJ Maxx None
Lakeview Mall 1993/ 614,230/
Battle Creek, Michigan N/A 322,637 Hudson's, JCPenney, Sears None
Lansing Mall 1969/ 830,213/
Lansing, Michigan N/A 386,811 Hudson's, JCPenney, Mervyn's, Montgomery Ward None
Lockport Mall 1971/ 345,894/
Lockport, New York 1984 125,497 Montgomery Ward, Hills, Bon Ton None
Mall of the Bluffs
Council Bluffs, Iowa 1986/ 587,193/
(Omaha, Nebraska) 1988 353,559 Dillard's, JCPenney, Target None
Natick Mall 1966/ 1,138,252/
Natick, Massachusetts 1994 431,066 Sears, Filene's, Lord & Taylor, Macy's, Jordan Marsh None
Oakwood Mall 1986/ 753,400/ Dayton's, JCPenney, Target, Sears, Scheel's All
Eau Claire, Wisconsin 1991 288,324 Sports None
Park Mall 1974/ 857,274/
Tucson, Arizona N/A 338,961 Sears, Dillard's, Macy's None
Piedmont Mall 1984/ 659,866/
Danville, Virginia 1995 187,168 Belk, Hills, JCPenney, Sears, Belk Mens None
</TABLE>
11
<PAGE> 12
ORIGINAL CENTERS
<TABLE>
<CAPTION>
TOTAL GLA/MALL
YEAR AND FREESTANDING
NAME OF CENTER/ OPENED/REMODELED GLA ANCHOR
LOCATION(1) OR EXPANDED (SQUARE FEET) ANCHORS VACANCIES
- ---------------------------- ---------------- ---------------- ----------------------------------------------------- ---------
<S> <C> <C> <C> <C>
The Pines 1986/ 607,874/
Pine Bluff, Arkansas 1990 268,165 Dillard's, JCPenney, Sears, Wal-Mart None
Quail Springs Mall (2) 1980/ 1,016,395/
Oklahoma City, Oklahoma N/A 328,542 Dillard's, Foley's, JCPenney, Sears None
Rio West Mall 1981/ 366,121/
Gallup, New Mexico 1991 184,988 Beall's, JCPenney, KMart None
River Falls Mall
Clarksville, Indiana 1990/ 744,405/
(Louisville, Kentucky) N/A 399,367 Bacons, Wal-Mart, Toys "R" Us, All About Sports None
River Hills Mall 1991/ 647,235/
Mankato, Minnesota 1996 285,186 Herberger's, JCPenney, Target, Sears None
Sooner Fashion Square 1976/ 466,165/
Norman, Oklahoma N/A 199,933 Dillard's, JCPenney, Sears, Service Merchandise None
SouthShore Mall 1981/ 339,825/
Aberdeen, Washington N/A 150,498 JCPenney, Sears, KMart None
Westwood Mall 1972/ 465,218/
Jackson, Michigan N/A 147,124 Elder-Beerman, JCPenney, Montgomery Ward None
West Valley Mall 1995/ 557,715/
Tracy, California N/A 281,097 Gottschalks, JCPenney, Target, Ross Dress for Less None
MALLS UNDER DEVELOPMENT
- -----------------------
Coral Ridge Mall 1998/ 900,000/
Iowa City, Iowa N/A 300,000 Dillard's, Younkers, Sears, JCPenney, Target None
</TABLE>
(1) In some cases, where a center's location is part of a larger metropolitan
area, the metropolitan area is identified in parentheses.
(2) The Company owns 50% of Quail Springs Mall.
12
<PAGE> 13
HOMART CENTERS
<TABLE>
<CAPTION>
TOTAL GLA/MALL
YEAR OWNERSHIP AND FREESTANDING
NAME OF CENTER/ OPENED/REMODELED INTEREST % GLA ANCHOR
LOCATION(1) OR EXPANDED OF GGP/HOMART (SQUARE FEET) (2) ANCHORS VACANCIES
- ------------------------------- ---------------- ------------- ----------------- ------------------------------------ ---------
<S> <C> <C> <C> <C> <C>
Dillard's, JCPenney, Mervyn's,
Arrowhead Towne Center 1993/ 1,135,603/ Montgomery Ward,
Glendale, Arizona 1996 33.3 397,656 Robinson's-May None
Bay City Mall 1991/ 527,246/ Sears, Target, JCPenney,
Bay City, Michigan 1993 100 211,595 Younkers None
Chula Vista Center 1960/ 884,314/ Macy's, Sears, JCPenney,
Chula Vista, California 1994 100 302,364 Mervyn's None
Columbiana Centre 1990/ 789,018/ Sears, Parisian's, Dillard's,
Columbia, South Carolina 1992 100 251,130 J. B. White None
Deerbrook Mall
Humble, Texas 1984/ 1,199,864/ Sears, Mervyn's, Macy's,
(Houston, Texas) N/A 100 362,936 Foley's, JCPenney None
Eden Prairie Center 1976/ 863,399/ Sears, Target, Kohl's,
Eden Prairie, Minnesota 1994 100 325,973 Mervyn's None
(Minneapolis, Minnesota)
Lakeland Square 1988/ 904,910/ Sears, Mervyn's, Belk-Lindsey,
Lakeland, Florida 1994 50 291,780 Dillard's, JCPenney, Burdines None
Meriden Square 1971/ 725,265/ Sears, JCPenney, Filene's None
Meriden, Connecticut 1993 50 290,439
(Hartford, Connecticut)
Moreno Valley Mall 1992/ 1,034,788/ Sears, Robinson's-May,
Moreno Valley, California N/A 100 429,254 JCPenney, Harris' None
Neshaminy Mall 1968/ 945,779/ Sears, Strawbridge & Clothier,
Bensalem, Pennsylvania N/A 50 308,988 Boscov's, Woolworth None
Newgate Mall 1981/ 688,856/ Sears, Mervyn's, Dillard's,
Ogden, Utah 1994 100 275,692 Oshman's None
New Park Mall 1980/ 1,107,837/ Sears, Macy's, Mervyn's,
Newark, California 1993 50 388,005 JCPenney None
North Point Mall
Alpharetta, Georgia 1993/ 1,362,574/ Sears, JCPenney, Lord & Taylor,
(Atlanta, Georgia) N/A 100 396,287 Mervyn's, Rich's, Dillard's None
The Parks at Arlington 1988/ 1,190,857/ Sears, Dillard's, Mervyn's,
Arlington, Texas N/A N/A 359,912 Foley's, JCPenney None
The Pavilions at Buckland Hills 1990/ 963,120/ Sears, Filene's, JCPenney, Lord &
Manchester, Connecticut 1994 N/A 327,284 Taylor, Filene's Home Store, Dick's None
Sporting Goods
Pembroke Lakes Mall 1992/ 1,063,859/ Sears, Burdine's, JCPenney,
Pembroke Pines, Florida N/A 100 337,235 Mervyn's, Dillard's None
Prince Kuhio Plaza 1985/ 475,765/ Sears, Liberty House, Woolworth,
Hilo, Hawaii N/A 100 166,191 JCPenney None
Rolling Oaks Mall 1988/ 758,584/
San Antonio, Texas 1992 50 297,727 Sears, Dillard's, Foley's, Beall's None
Sequoia Mall and Tower Plaza 1975/ 345,940/
Visalia, California N/A 100 172,940 Sears, Mervyn's, Ross Dress for Less None
Steeplegate Mall 1990/ 446,598/
Concord, New Hampshire N/A 100 162,655 Sears, JCPenney, Steinbach One
Superstition Springs Center 1990/ 1,075,054/ Sears, JCPenney, Dillard's,
East Mesa, Arizonia 1994 33.3 368,361 Mervyn's, Robinson's-May None
Tysons Galleria 1988/ 808,771/ Macy's, Saks Fifth Avenue,
McLean, Virginia N/A 100 296,838 Neiman Marcus None
</TABLE>
13
<PAGE> 14
HOMART CENTERS
<TABLE>
<CAPTION>
TOTAL GLA/MALL
YEAR OWNERSHIP AND FREESTANDING
NAME OF CENTER/ OPENED/REMODELED INTEREST % GLA ANCHOR
LOCATION(1) OR EXPANDED OF GGP/HOMART (SQUARE FEET) (2) ANCHORS VACANCIES
- ------------------------------- ---------------- ------------- ----------------- ------------------------------------ ---------
<S> <C> <C> <C> <C> <C>
Vista Ridge Mall 1989/ 1,052,617/ Sears, Dillard's, Foley's,
Lewisville, Texas 1991 80 379,555 JCPenney None
Washington Park Mall 1984/ 351,486/
Bartlesville, Oklahoma 1986 100 157,190 Sears, Dillard's, JCPenney None
West Oaks Mall
Ocoee, Florida 1996/ 1,015,160/
(Orlando, Florida) N/A 100 312,626 Dillard's, Sears, JCPenney, Gayfers None
The Woodlands Mall
The Woodlands, Texas 1994/ 1,028,033/ Sears, Dillard's, Mervyn's,
(Houston, Texas) N/A 50 350,082 Foley's None
MALLS UNDER DEVELOPMENT
- -----------------------
Brass Mill Center/Commons 1997/ 1,185,199/ Sears, Filene's, Lechmere,
Waterbury, Connecticut N/A 100 528,608 JCPenney None
</TABLE>
(1) In cases where a Center's location is part of a larger metropolitan area,
the metropolitan area is identified in parenthesis.
(2) Includes square footage added in redevelopment/expansion projects.
(3) GGP/Homart's participation is subordinated to certain preferred returns to
its Joint Venture Partners.
For other information concerning the Original Centers and the Homart
Centers see "Item 1 - Business - Business of the Company" and "Item 1 -
Business - GGP/Homart's Business", and for information concerning the mortgage
debt encumbering the Original Centers see Note 7 to the Consolidated Financial
Statements appearing in Item 8 of this Annual Report on Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
The Company, the Operating Partnership and the Property Partnerships are
not currently involved in any material litigation nor, to the Company's
knowledge, is any material litigation currently threatened against the Company,
the Operating Partnership, the Property Partnerships or their properties,
CenterMark, or GGP/Homart other than routine litigation arising in the ordinary
course of business, most of which is expected to be covered by liability
insurance. For information about certain environmental matters, see "Item 1 -
Business - Environmental Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Company's stockholders during the fourth
quarter of fiscal 1996.
14
<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Common Stock is listed on the New York Stock Exchange ("NYSE") and
trades under the symbol "GGP". As of March 25, 1997, the 30,789,185
outstanding shares of Common Stock were held by approximately 965 stockholders
of record. The closing price per share of Common Stock on the NYSE on such
date was $30.75 per share.
Set forth below are the high and low sales prices per share of Common
Stock as reported on the composite tape, and the distributions per share of
Common Stock declared for each such period.
<TABLE>
<CAPTION>
Price
1996 ------------------ Declared
Quarter Ending High Low Distribution
- -------------------- ------------------ ------------
<S> <C> <C> <C>
March 31, 1996 $24.00 $20.63 $.43
June 30, 1996 $24.63 $20.63 $.43
September 30, 1996 $26.00 $23.50 $.43
December 31, 1996 $32.75 $23.88 $.43
<CAPTION>
Price
1995 ------------------ Declared
Quarter Ending High Low Distribution
- -------------------- ------------------ ------------
<S> <C> <C> <C>
March 31, 1995 $22.63 $20.38 $.41
June 30, 1995 $21.75 $19.38 $.41
September 30, 1995 $20.63 $19.00 $.41
December 31, 1995 $21.63 $18.50 $.43
<CAPTION>
Price
1994 ------------------ Declared
Quarter Ending High Low Distribution
- -------------------- ------------------ ------------
<S> <C> <C> <C>
March 31, 1994 $21.50 $19.63 $.39
June 30, 1994 $22.00 $19.25 $.39
September 30, 1994 $22.63 $19.50 $.39
December 31, 1994 $22.63 $19.25 $.41
</TABLE>
15
<PAGE> 16
Set forth below is certain information about sales made by the Company
and/or the Operating Partnership of securities during the fourth quarter of
1996, which sales were not registered under the Securities Act of 1933, as
amended. The sales were all made in connection with the acquisition of the
malls and interests therein indicated below, were effected in reliance upon the
exemption contained in Section 4 (2) of the Securities Act pf 1933, as amended
and/or Regulation D promulgated thereunder, and were not underwritten
offerings.
<TABLE>
<CAPTION>
Offering Price or
Date Issuer Security Amount Purchaser Consideration
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/04/96 Company Common Stock 1,000,000 K-GAM Limited Park Mall
Partnership
11/27/96 Company Common Stock 895,928 The Equitable Life Sooner Fashion Mall
Assurance Society and 50% of Quail
of the United Springs Mall
States
12/06/96 Operating Units 1,445,000 Forbes-Cohen Lakeview Square,
Partnership Properties, Lansing Mall and
Lakeview Square Westwood Mall
Associates and
Jackson Properties
</TABLE>
16
<PAGE> 17
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth selected financial data for the Company and
should be read in conjunction with the Consolidated Financial Statements and
notes thereto and Management's Discussion and Analysis of Financial Condition
and Results of Operations contained in this Annual Report.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Revenue $ 217,405 $ 167,396 $ 152,583 $ 142,210 $ 119,050
Operating Expenses 75,954 63,968 63,118 55,073 46,379
Depreciation and Amortization 39,809 30,855 28,190 25,377 22,074
Interest Expense, Net 66,439 46,334 42,995 37,495 47,249
Equity in Net Income (Loss) of
Unconsolidated Affiliates 17,589 9,274 6,096 - (620)
Gain on the sale of a portion of
CenterMark 43,821 33,397 - - -
Net Income (Loss)
Before Minority Interest 96,613 68,910 24,376 24,265 2,728
Minority Interests (1) (34,580) (25,856) (9,518) (9,823) (2,728)
Extraordinary Item (2,291) - (693) (1,832) -
Net Income 59,742 43,054 14,165 12,610 -
Earnings Per Share Before
Extraordinary Item 2.20 1.69 .65 .63 -
Net Earnings Per Share 2.12 1.69 .62 .55 -
Distributions Declared Per Share 1.72 1.66 1.58 1.05 -
FUNDS FROM OPERATIONS
(Unaudited)
Funds From Operations (2)
Operating Partnership $ 108,526 $ 81,214 $ 69,610 $ 47,810 $ 25,422
Minority Interest (39,841) (30,915) (27,927) (19,189) (25,422)
Funds From Operations
Company 68,685 50,299 41,683 28,621 -
Funds From Operations per share 2.44 1.97 1.83 1.58 N/A
BALANCE SHEET DATA
Investment in Real Estate Assets $1,639,440 $1,547,621 $ 996,125 $ 786,008 $ 668,979
Total Assets 1,757,717 1,455,982 906,533 789,455 629,500
Total Debt 1,169,493 1,027,932 607,561 453,437 728,310
Stockholders' Equity/(Deficit) 330,267 229,383 154,426 173,013 (116,237)
CASH FLOW DATA
Operating Activities $ 52,688 $ 60,660 $ 48,936 $ 53,077 $ 24,313
Investing Activities (14,771) (469,204) (145,253) (111,408) (38,358)
Financing Activities (40,268) 421,225 96,380 52,587 16,421
</TABLE>
(1) Current minority holders (primarily the Bucksbaums) who were previously the
sole stockholders of the Company.
(2) Represents net income (loss) before minority interest excluding straight
line rent plus real estate depreciation and amortization and adjusted for
equity in net income (loss) of unconsolidated affiliates (including related
depreciation and amortization). Funds From Operations does not represent
cash flow from operations as defined by Generally Accepted Accounting
Principles (GAAP) and is not necessarily indicative of cash available to
fund all cash requirements.
17
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and the notes thereto appearing later in this
Annual Report.
CERTAIN INFORMATION ABOUT THE PORTFOLIO CENTERS
As of December 31, 1996, the Company owned 100% of thirty enclosed
regional shopping centers and 50% of Quail Springs Mall (the "Original
Centers") and, through the Operating Partnership, owned 14% of the stock of
CenterMark Properties, Inc. and 38.2% of the stock of GGP/Homart, Inc.
CenterMark owns interests in nineteen shopping centers (the "CenterMark
Centers") and other properties. GGP/Homart owns interests in twenty-six
shopping centers (the "Homart Centers") and one center under development.
Together, the Original Centers, the CenterMark Centers and the Homart Centers
comprise the operating partnership portfolio (the "Portfolio Centers").
Virtually all of the Company's revenues are derived from fixed minimum rents,
percentage rents and recoveries of operating expenses from its tenants.
On December 31, 1996, the Portfolio Centers were approximately 85.4%
leased. Excluding certain shopping centers that are currently undergoing
redevelopment, the occupancy of the remaining centers on December 31, 1996, was
approximately 86.3%.
Comparable mall store sales averaged $260 per square foot at the Portfolio
Centers in 1996. In 1996, total mall store sales at the Portfolio Centers
increased by 4.7% over 1995, and comparable mall store sales increased by 2.2%
over 1995.
After appropriate weighting based upon the relative contributions to total
1996 portfolio net operating income made by each of the Original Centers, the
Homart Centers and the CenterMark Centers, the average Mall Store rent per
square foot from leases that expired in 1996 was $18.79. The Portfolio Centers
benefited from increasing rents inasmuch as the weighted average mall store
rent per square foot on new and renewal leases executed during 1996 was $23.71,
or $4.92 per square foot above the average for expiring leases.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
Total 1996 revenues increased by $50.0 million or 29.9% to $217.4 million
from $167.4 million in 1995. Of this increase, $44.4 million was generated from
increased minimum rents, tenant recoveries, percentage rents and other income.
A majority of the increases came from new developments that were placed in
service during 1995 and five properties that were acquired in 1996. The
remaining $5.6 million was generated by straight line rents of $1.9 million and
fee revenue of $3.7 million. The fee revenue was primarily generated by asset
management services performed for GGP/Homart.
Total 1996 operating expenses, including depreciation and amortization,
increased by $20.9 million or 22.1% to $115.8 million in 1996 compared to $94.8
million in 1995. This increase consists of $3.0 million of real estate taxes
and management fees, $8.9 million of depreciation expense, $1.7 million
increase in provision for doubtful accounts and $7.3 million of property
operating and general and administrative expenses from all properties,
including five properties acquired during the fourth quarter of 1996.
Net interest expense increased by $20.1 million or 43.4% to $66.4 million
in 1996 compared to $46.3 million in 1995. The acquisitions and development of
new properties, net of interest cost savings as a result of the use of the
CenterMark sale proceeds, accounted for a $27.7 million increase. Additional
interest cost savings due to lower interest rates reduced net interest expense
by $4.3 million. Interest income increased by $3.3 million of which $2.8
million was interest income from GGMI.
Equity in net income of unconsolidated affiliates increased by $8.3
million, from $9.3 million in 1995 to $17.6 million in 1996, or an 89%
increase. Approximately $8.7 million of the increase is attributable to the
Company's 38.2% interest in GGP/Homart's net income. The increase of $0.8
million in CenterMark's net income
18
<PAGE> 19
was due to changing from the equity method to the cost method of accounting as a
result of the Company's reduced ownership interest in CenterMark (see Note 3 of
notes to consolidated financial statements). The Company's investment in Quail
Springs Mall accounted for a $0.1 million increase and GGMI accounted for a
decrease of approximately $1.3 million. In addition, the Company had a gain of
$43.8 million on the sale of a portion of its interest in CenterMark on July 1,
1996. As of that date, the Company's interest in CenterMark was reduced to 14%.
Net income increased by $16.6 million in 1996 to $59.7 million from $43.1
million in 1995. The increase resulted from a larger gain on CenterMark in the
amount of $6.6 million (net of minority interest share) and a combination of
the aforementioned items.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
Total 1995 revenues increased by $14.8 million or 9.7% to $167.4 million
compared to $152.6 million in 1994. Of this increase, $8.9 million or 6.0%
came from increased revenues generated by twenty-one of the Original Centers
that were owned throughout the two-year period. Of this increase, $5.8 million
was generated by higher minimum rents, $2.3 million was derived from additional
costs recovered from tenants, and the remaining $0.8 million was from higher
percentage rents and other income. The remaining $5.9 million increase in
total revenues, or 3.7% came from new acquisitions, developments and other
sources for 1995. Of this increase from new sources, $5.1 million was
generated from minimum rents, tenant recoveries, percentage rents and other
income from Piedmont Mall, West Valley Mall and Natick Mall. The other $0.8
million of revenues from new sources were primarily gross fees received for
other asset management, property management and other services performed for
GGP/Homart, Inc.
Total 1995 operating expenses, including depreciation and amortization,
increased by $3.5 million or 3.8% to $94.8 million in 1995 compared to $91.3
million in 1994. Of this increase, $0.9 million or 1% was from higher expenses
for twenty-one of the Original Centers that were owned throughout the two-year
period. The $0.9 million net increase was from a combination of $0.7 million
of increased real estate taxes, $1.7 million of increased property operating
expenses and $2.1 million of higher depreciation expense, less a $1.9 million
reduction in management fees and a $1.7 million reduction in the provision for
doubtful accounts. The remaining $2.6 million increase in total expenses, or
2.8%, was from expenses on properties added in 1995 (Piedmont, West Valley and
Natick) and from incremental general and administrative expenses for providing
services. The $2.6 million increase consists of $0.3 million of real estate
taxes and management fees, $0.5 million of depreciation expense and $1.8
million of additional property operating and general and administrative
expenses.
Net interest expense for 1995 was $46.3 million, an increase of $3.3
million or 7.7% over 1994 net interest expense of $43.0 million. $1.4 million
or 3.2% of the increase was attributable to new borrowings for Piedmont, West
Valley and Natick Malls, which were not owned in 1994. The other $1.9 million
or 4.5% of increased interest expense was primarily from higher interest rates
on variable rate loans of approximately $1.5 million. The remaining $0.4
million of increased interest expense was from interest on new financing used
to acquire GGP/Homart near the end of 1995.
Equity in net income of unconsolidated affiliates increased by $3.2
million, from $6.1 million in 1994 to $9.3 million in 1995, or a 52% increase.
$2.5 million, or 41% of the increase was from higher earnings from CenterMark,
and the remaining $0.6 million, or 9% of the increase was the Company's 38.2%
share of net income from GGP/Homart which was purchased near the end of 1995.
In addition, the Company had a gain of $33.4 million on the sale of 25% of its
interest in CenterMark on December 19, 1995. As of that date, the Company's
interest in CenterMark was reduced to 30%.
Net income increased by $28.9 million in 1995, to $43.1 million from $14.2
million in 1994. The increase resulted from the gain of $20.7 million (net of
minority interest share) plus an $8.2 million net increase resulting from a
combination of the aforementioned items.
19
<PAGE> 20
COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
In order to portray the sources of the Company's Funds from Operations in
a more meaningful and useful manner, the Company Portfolio results and funds
from operations depicted below reflect 100% of the revenues and expenses of the
Original Centers and GGMI 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 GGMI, 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 stockholders 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 (basically Funds from Operations before interest expense)
contributed by each of the Original Centers, the CenterMark Centers and the
GGP/Homart Centers provides a better indication of the significance of each
portfolio to the Company's overall funds from operations. The net operating
income from the Company's Portfolio is essentially equivalent to earnings
before interest, taxes, depreciation and amortization (EBITDA). EBITDA from
the Company's property management affiliate is included below with the Original
Centers.
<TABLE>
<CAPTION>
THREE MONTHS FOR THE YEAR
ENDED ENDED % OF
NET OPERATING INCOME BY PORTFOLIO DECEMBER 31, 1996 % OF TOTAL DECEMBER 31, 1996 TOTAL
- -------------------------------------- ----------------- ---------- ----------------- ------
<S> <C> <C> <C> <C>
Original Centers and GGMI $39,699 70% $140,526 68%
CenterMark (a) 5,532 9% 25,977 12%
38.2% of GGP/Homart (b) 11,844 21% 40,798 20%
------- ---- -------- ----
Company Portfolio Net Operating Income $57,075 100% $207,301 100%
======= ==== ======== ====
</TABLE>
(a) Reflects the Company's share of CenterMark's Net Operating Income.
(b) Reflects the Company's share of GGP/Homart's Net Operating Income.
The Company Portfolio results and Funds from Operations reflected below
for the three and twelve months ended December 31, 1996 and 1995 do not
purport to project results for any future period.
20
<PAGE> 21
COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 1996 AND 1995
(In thousands, except for per share amounts - Unaudited)
<TABLE>
<CAPTION>
Three Months Ended For the Year Ended
December 31, December 31,
1996 1995 1996 1995
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Revenues
Minimum rents (a) $ 60,431 $ 42,285 $210,130 $144,520
Tenant recoveries 24,251 19,808 96,263 72,381
Percentage rents 2,298 1,294 7,786 5,745
Other 1,918 1,689 6,665 5,874
Fees 16,833 613 42,544 613
-------- -------- -------- --------
Total revenues $105,731 $ 65,689 $363,388 $229,133
Operating expenses (b) (47,928) (25,582) (153,065) (83,044)
General and administrative (728) (710) (3,022) (2,811)
-------- -------- -------- --------
Net operating income 57,075 39,397 207,301 143,278
Interest expense, net (25,117) (16,115) (98,775) (62,064)
-------- -------- -------- --------
Operating Partnership funds from operations $ 31,958 $ 23,282 $108,526 $ 81,214
Less: FFO allocable to Operating
Partnership unitholders $ 11,502 $ 8,617 $ 39,841 $ 30,915
-------- -------- -------- --------
Company funds from operations $ 20,456 $ 14,665 $ 68,685 $ 50,299
======== ======== ======== ========
FFO per share $ .68 $ .54 $ 2.44 $ 1.97
======== ======== ======== ========
</TABLE>
COMPANY PORTFOLIO
RECONCILIATION OF FUNDS FROM OPERATIONS TO NET INCOME
(Dollars in thousands - Unaudited)
<TABLE>
<CAPTION>
Three Months Ended For the Year Ended
December 31, December 31,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating Partnership funds from operations (from above) $ 31,958 $ 23,282 $108,526 $ 81,214
Depreciation and amortization of real estate costs (16,697) (12,526) (62,083) (48,698)
Straight-line rent (not included in FFO, so it is added
back in order to reconcile to GAAP net income) 1,633 645 6,195 2,997
Gain on sales 27 33,397 43,975 33,397
Allocations to Operating Partnership unitholders (5,826) (16,575) (34,580) (25,856)
Extraordinary item (c) - - (2,291) -
-------- -------- -------- --------
Net income $ 11,095 $ 28,223 $ 59,742 $ 43,054
======== ======== ======== ========
</TABLE>
(a) Excluding straight-line rents for the three and twelve months ended
December 31, 1996 and 1995, of $1,633 and $6,195 and $645 and $2,997,
respectively.
(b) Excluding depreciation and amortization of capitalized real estate costs
other than financing fees/costs.
(c) Charges related to early retirement of debt.
21
<PAGE> 22
BREAKDOWN OF COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
(In thousands, except for per share amounts - Unaudited)
<TABLE>
<CAPTION>
Original GGP/
Centers Homart CenterMark GGMI Total
--------- ------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues
Minimum rents (a) $ 40,865 $ 13,610 $ 5,956 $ - $ 60,431
Tenant recoveries 17,142 5,452 1,657 - 24,251
Percentage rents 1,518 525 255 - 2,298
Other 1,051 676 191 - 1,918
Fees 992 - - 15,841 16,833
-------- -------- ------- -------- --------
Total revenues 61,568 20,263 8,059 15,841 105,731
Operating expenses (b) (23,639) (8,419) (2,527) (13,343) (47,928)
General and administrative (728) - - - (728)
-------- -------- ------- -------- --------
Net operating income 37,201 11,844 5,532 2,498 57,075
Interest expense, net (16,362) (4,787) (2,485) (1,483) (25,117)
-------- -------- ------- -------- --------
Operating Partnership funds from operations $ 20,839 $ 7,057 $ 3,047 $ 1,015 $ 31,958
======== ======== ======= ======== ========
Funds from operations per share/unit $ 0.68
========
</TABLE>
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(In thousands, except for per share amounts - Unaudited)
<TABLE>
<CAPTION>
Original GGP/
Centers Homart CenterMark GGMI Total
--------- ------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues
Minimum rents (a) $136,476 $ 46,955 $ 26,699 $ - $ 210,130
Tenant recoveries 63,146 21,505 11,612 - 96,263
Percentage rents 5,409 1,448 929 - 7,786
Other 3,940 2,089 636 - 6,665
Fees 4,560 - - 37,984 42,544
-------- -------- -------- -------- ---------
Total revenues 213,531 71,997 39,876 37,984 363,388
Operating expenses (b) (75,741) (31,199) (13,899) (32,226) (153,065)
General and administrative (3,022) - - - (3,022)
-------- -------- -------- -------- ---------
Net operating income 134,768 40,798 25,977 5,758 207,301
Interest expense, net (66,499) (19,396) (10,057) (2,823) (98,775)
-------- -------- -------- -------- ---------
Operating Partnership funds from operations $ 68,269 $ 21,402 $ 15,920 $ 2,935 $ 108,526
======== ======== ======== ======== =========
Funds from operations per share/unit $ 2.44
========
</TABLE>
(a) Excluding straight-line rent of $1,633 and $6,195 for the three and twelve
months ended December 31, 1996.
(b) Excluding depreciation and amortization of capitalized real estate costs
other than financing fees/costs.
22
<PAGE> 23
OTHER COMPANY PORTFOLIO DATA
AS OF AND/OR FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(In thousands, except for per square foot amounts - Unaudited)
<TABLE>
<CAPTION>
Original GGP/ Total or
Centers Homart(a) CenterMark(a) Average
-------- --------- ------------- --------
<S> <C> <C> <C> <C>
Occupancy of centers not
under redevelopment 84.5% 86.1% 90.4% 86.3%
Tenant allowances $ 8,483 $ 5,676 $ 5,237 $ 19,396
Annualized sales per sq. ft. $ 237 $ 281 $ 270 $ 260
Average rent per sq. ft.
of new/renewal leases $ 20.14 $ 25.72 $ 27.93 $ 23.71
Average rent per sq. ft.
of expiring leases $ 18.70 $ 21.61 $ 16.15 $ 18.79
% change in total sales 3.3% 7.5% 3.6% 4.7%
(a) Data is for 100% of the non-anchor GLA in each portfolio, including those centers that are owned in joint ventures with others.
</TABLE>
TOTAL PORTFOLIO DEBT MATURITY AND CURRENT AVERAGE INTEREST RATE SUMMARY
AS OF DECEMBER 31, 1996
(Dollars in Thousands - Unaudited)
<TABLE>
<CAPTION>
Original Centers(a) GGP/Homart(b) Total Portfolio Debt
------------------- ------------------------ --------------------
Current Current Current
Maturing Average Maturing Average Maturing Average
Year Amount (c) Rate Amount (c) Rate Amount (c) Rate
- ---------------- ---------- ------- ---------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
1997 $ 301,441 6.71% $ - - $ 301,441 6.71%
1998 111,739 7.50% 34,380 7.18% 146,119 7.42%
1999 125,588 8.90% 125,077 7.70% 250,665 8.30%
2000 - - 11,460 7.15% 11,460 7.15%
2001 152,000 6.41% - - 152,000 6.41%
Subsequent 486,375 7.20% 153,447 7.46% 639,822 7.26%
---------- ------- ---------- ------- ---------- --------
Totals $1,177,143 7.18% $ 324,364 7.51% $1,501,507 7.25%
========== ======= ========== ======= ========== ========
Floating Rate(d) $ 401,739 6.88% $ 110,327 7.71% $ 512,066 7.06%
Fixed Rate 775,404 7.32% 214,037 (e) 7.41% 989,441 7.34%
---------- ------- ---------- ------- ---------- --------
Totals $1,177,143 7.18% $ 324,364 7.51% $1,501,507 7.25%
========== ======= ========== ======= ========== ========
(a) Includes the Company's 50% share ($8,620) of Quail Springs debt.
(b) GGP/Homart debt reflects the Operating Partnership's share of its total portfolio debt.
(c) Maturing amount reflects the December 31, 1996 balance as if it was due on the final maturity date.
(d) The interest rate used for floating rate debt is the rate as of December 31, 1996.
(e) Includes $34,381 of floating rate debt with a 9% cap on the all-in rate through maturity in December 1998.
</TABLE>
-23-
<PAGE> 24
COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS (FFO)
FOR THE YEARS ENDED DECEMBER 31, 1996,
1995 AND 1994
In order to portray the sources of the Operating Partnership's FFO in a more
meaningful and expansive manner, the Company portfolio results depicted below
reflect 100% of the revenues and expenses of the thirty properties which are
wholly-owned by the Operating Partnership combined with the operating results
of GGMI, 38.2% of GGP/Homart's portfolio results, the Company's share (see
Note 3) of CenterMark's portfolio results and 50% of Quail Springs Mall, all
from the respective dates of acquisition. In effect, the Company portfolio
results are a line item pro rata consolidation of 100% of the revenues and
expenses from its wholly-owned properties, GGMI, 38.2% of the comparable
revenues and expenses of the wholly-owned GGP/Homart properties, its share of
GGP/Homart's various percentage interests in the revenues and expenses of its
unconsolidated affiliates, the Company's share of the comparable revenues and
expenses of the wholly-owned CenterMark properties and the Company's share of
CenterMark's various percentage interests in the revenues and expenses of its
unconsolidated affiliates and 50% of the revenues and expenses of Quail
Springs Mall.
<TABLE>
<CAPTION>
PORTFOLIO RESULTS (A) AND FUNDS FROM OPERATIONS
- -----------------------------------------------
(Dollars in thousands, except Per Share Amounts -
Unaudited)
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenues
Minimum rents $ 210,130 $ 144,520 $ 134,426
Tenant recoveries 96,263 72,381 70,199
Percentage rents 7,786 5,745 5,917
Other 6,665 5,874 3,689
Fees 42,544 613
--------- --------- ---------
Total revenues 363,388 229,133 214,231
Operating expenses (b) (156,087) (85,855) (87,322)
--------- --------- ---------
Net operating income 207,301 143,278 126,909
Interest expense, net (98,775) (62,064) (57,299)
--------- --------- ---------
Funds from operations (c) $ 108,526 $ 81,214 $ 69,610
========= ========= =========
Funds from operations per share (c) (d) $ 2.44 $ 1.97 $ 1.83
========= ========= =========
<CAPTION>
RECONCILIATION OF FFO TO NET INCOME DETERMINED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES:
- -----------------------------------------
<S> <C> <C> <C>
Funds from operations (from above) $ 108,526 $ 81,214 $ 69,610
Depreciation and amortization (62,083) (48,698) (45,733)
Pro forma adjustments (a) 499
Straight line rents 6,195 2,997
Gain on sales 43,975 33,397
Allocations to Operating Partnership Unitholders (34,580) (25,856) (9,518)
Extraordinary item - charges related to early
retirement of debt (2,291) (693)
--------- --------- ----------
Net income $ 59,742 $ 43,054 $ 14,165
========= ========= ==========
Net income - per share (d) $ 2.12 $ 1.69 $ .62
========= ========= ==========
(a) Portfolio results for 1994 include adjustments to account for the acquisition of 40% of CenterMark as though it occurred
on January 1, 1994.
(b) All expenses other than depreciation and amortization of real estate assets.
(c) No income from straightlining rents or gains on outparcel sales is included in funds from operations.
(d) Assuming full conversion of the Operating Partnership units into shares of the Company's common stock for a total of
44,470,761, 41,209,291 and 38,040,085 weighted average shares outstanding for the years ended December 31, 1996, 1995
and 1994 respectively.
</TABLE>
-24-
<PAGE> 25
LIQUIDITY AND CAPITAL RESOURCES
The principal sources of funding for development, acquisitions, expansion,
and renovation programs at the Portfolio Centers have historically been funds
from operations, construction loans, intermediate and permanent debt financing
and proceeds from equity offerings.
On April 15, 1993, the Company completed its IPO, resulting in net cash
proceeds to the Company of approximately $383 million, most of which was used
to repay outstanding debt. In January 1994, the Operating Partnership
established a $208.5 million line of credit, and approximately $140 million of
it was used, in addition to $42 million of cash on hand, to acquire 40% of the
stock of CenterMark.
On May 23, 1995, the Company completed a follow-on stock offering of 4.5
million shares of its Common Stock at $20.75 per share. Net proceeds after
underwriting discounts and other costs were approximately $88 million. On July
1, 1995, the Operating Partnership issued an additional 832,936 units in
connection with the acquisition of Piedmont Mall. During 1996, 1,833,949
additional units were issued as consideration (net of conversions from
operating partnership units to common stock). The Bucksbaums received an
additional 453,791 units when the Company purchased GGMI. On December 6, 1996,
1,445,000 units were issued as a portion of the purchase price for Lakeview
Square, Lansing Mall and Westwood Mall (see Note 5 of notes to consolidated
financial statements). During 1996, 64,842 units that were issued during 1995
in connection with the acquisition of Piedmont Mall, were converted to a like
amount of shares of Common Stock.
The Company issued a total of 3,516,625 common shares during 1996. During
the year 64,842 units were converted to common shares and 1,555,855 and
1,895,928 common shares were issued in connection with the acquisition of GGMI
and ownership interests in two malls. After these transactions, there were
30,789,185 shares of common stock outstanding and 17,934,410 units outstanding
as of December 31, 1996. Assuming full conversion of the Operating Partnership
units into shares of the Company, there would be 48,723,595 shares of common
stock outstanding.
During 1995, the Company opened a $120 million construction loan facility
to complete the development of new malls in Tracy, California (West Valley
Mall) and Winter Haven, Florida (Eagle Ridge Mall). Approximately $111.7
million of this facility was drawn as of December 31, 1996. The remaining
available loan proceeds will be sufficient to fund the additional leasing costs
for both projects.
On December 19, 1995, the Operating Partnership sold 25% of its interest
in CenterMark for $72.5 million. Concurrently with the sale of stock, the
Operating Partnership granted the buyer an option to purchase its remaining
CenterMark stock for $217.5 million. On June 28, 1996, the buyer's option to
purchase the Operating Partnership's remaining interest in CenterMark was
exercised. The first payment of $87 million was received in July and was used
to retire the interim loan arranged as part of the GGP/Homart acquisition. The
second installment of $130.5 million was received on January 2, 1997, and was
used to pay down existing loans (see Note 7 of notes to consolidated financial
statements).
Effective on December 22, 1995, the Operating Partnership purchased a
38.2% interest in GGP/Homart and 100% of Natick Mall. The equity investment
made for both acquisitions was approximately $261 million. In addition, a $183
million 7 year loan with interest at 6% was obtained for Natick Mall. There
were three sources of funds for the $261 million of year-end investments,
namely a $125 million interim bank loan, a $63.5 million draw on the Company's
line of credit and the $72.5 million of proceeds from the sale of CenterMark
stock. On January 31, 1996, the interim loan was reduced to $75 million when
the Company closed on a $340 million permanent nonrecourse loan on nine
properties. Existing loans on the properties totaled $290 million, and the $50
million of excess loan proceeds were used to reduce the aforementioned interim
loan.
On October 15, 1996, approximately $200 million of mortgage debt on seven
of the Original Centers matured. These mortgages were replaced with a $250
million short term, floating rate loan at LIBOR plus 100 basis points. The
excess proceeds were used to pay down a credit facility arranged by the Company
during 1996.
-25-
<PAGE> 26
The GGP/Homart and Quail Springs Mall investments are accounted for on the
equity method. Accordingly, indebtedness on the books of those entities is not
reflected on the Company's balance sheet. The Operating Partnership's 38.2%
share of GGP/Homart's debt at December 31, 1996, was approximately $324 million
and its 50% share of Quail Springs Mall debt at December 31, 1996, was $8.6
million. Accordingly, together with its direct mortgage debt of $1,169
million, total "consolidated pro rata debt" at December 31, 1996, was
approximately $1,502 million. At December 31, 1996, the stock market value of
the common stock and partnership units outstanding (48,723,595 x $32.25 share)
was approximately $1,571 million.
The Company is comfortable with this level of debt given that a
substantial majority of the financing is (or is presently expected to be
converted to) long-term fixed rate debt. EBITDA to interest expense coverage
is expected to be at least 2.0 times, leaving a substantial cushion for
unanticipated costs. There are no current plans to raise additional equity
capital. However, if additional capital is required, the Company believes that
it will be able to obtain an interim bank loan, obtain mortgage financing on
unencumbered assets or raise additional equity capital. The Company will
continue to constantly monitor its capital structure and plans to make new
investments if they can be acquired and financed in a manner that is likely to
increase stockholder value.
In order to remain qualified as a real estate investment trust for federal
income tax purposes, the Company must distribute 100% of capital gains and at
least 95% of its taxable income to stockholders. 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 replacement leases; and (iii) changes in occupancy rates at existing
Portfolio Centers and procurement of leases for newly developed Portfolio
Centers. The Company anticipates that its funds from operations, together with
existing loan facilities and additional borrowing capacity, will provide
adequate liquidity to conduct its operations, fund administrative and operating
costs and interest payments and allow distributions to the Company's
stockholders in accordance with the Internal Revenue Code's requirements for
qualification as a real estate investment trust and to avoid any Company or
entity level federal income or excise tax.
During 1996, the Company distributed approximately 70% of its funds from
operations. Of the distributions paid to Company stockholders in 1996,
approximately 47.0% were taxable as ordinary income and approximately 53.0%
were taxable as long-term capital gain, due to the sale of a portion of the
CenterMark stock. The Company currently plans to maintain its policy of
increasing its distributions at a slower rate of growth than increases, if any,
in Funds from Operations. Despite this general policy, the Company's Board of
Directors will continue to evaluate the level of distributions on a quarterly
basis and will typically consider increasing the quarterly distribution after
the results of each year's operations have been reviewed. Given the critical
importance of the holiday selling season, the Board of Directors plans to make
its typical annual evaluation of a possible distribution increase on or about
the end of the first quarter of each year, after the results of the previous
year's holiday selling season have been thoroughly analyzed.
ECONOMIC CONDITIONS
Since April 1993, inflation has been relatively low and has not had a
significant detrimental impact on the Company. Should inflation rates increase
in the future, substantially all of the tenants' leases contain provisions
designed to mitigate the negative impact of inflation. Such provisions include
clauses enabling the Company to receive percentage rents based on tenants'
gross sales, which generally increase as prices rise, and/or escalation
clauses, which generally increase rental rates during the terms of the leases.
In addition, many of the leases are for terms of less than 10 years which may
enable the Company to replace or renew expiring leases with new leases at
higher base and/or percentage rents, if rents of the existing leases are below
the then-existing market rates. Finally, most of the leases require the
tenants to pay their share of certain operating expenses, including common area
maintenance, real estate taxes and insurance, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
A number of local, regional and national retailers filed for bankruptcy
protection during the last three years. During 1996, more stores closed due to
bankruptcy and/or poor performance than in the prior year. Most of the
bankrupt retailers reorganized their operations and/or sold stores to stronger
operators. Although some leases were terminated by virtue of the lease
cancellation rights afforded by the bankruptcy laws, the
-26-
<PAGE> 27
impact on Company earnings was negligible. Over the last three years, the
provision for doubtful accounts has averaged only $1.8 million per year, which
represents approximately 1% of average total revenues of $179 million. The
difficult retail sales climate has probably contributed to the relatively flat
average occupancy. The Company may be able to increase earnings if retail
sales improve, market rental rates rise and currently vacant space can be
leased.
At the end of 1996, the Company had approximately $1.5 billion of
consolidated pro rata debt (including the Company's share of GGP/Homart's
debt). The weighted average interest rate on the consolidated pro rata debt
was approximately 7.25% at year end, a 50 basis point reduction from the prior
year. During 1996, the Company decreased its ratio of floating rate debt to
total debt by approximately 10% to 34%. The Company continues to seek fixed
rate loans in an effort to capitalize on the relatively low current fixed
interest rate environment. Approximately $512 million of the total consolidated
pro rata debt at year end bears interest at various floating rates.
Construction financing accounts for $137 million of the $512 million of
floating rate debt. On January 2, 1997, the Company retired $110 million of
the floating rate debt with the proceeds from the CenterMark transaction (see
Note 3 of notes to consolidated financial statements). The Company is in the
process of arranging permanent fixed rate financing for approximately half of
the remaining floating rate debt.
On December 22, 1995, the Company acquired 38.2% of GGP/Homart which
currently has interests in twenty-six malls and one under development. The
Company currently has an interest in 75 shopping centers. The Company's
portfolio has been diversified both geographically and by property type (both
major and middle market properties) and this may mitigate the impact of a
potential downturn at a particular property or in a particular region of the
country.
The shopping center business is still seasonal in nature. Mall stores
typically achieve higher sales levels during the fourth quarter because of the
holiday selling season. Although the Company has a year-long temporary leasing
program, most of the rents received from short-term tenants are collected
during the months of November and December. Thus, occupancy levels and revenue
production are generally highest in the fourth quarter of each year and lower
during the first and second quarters of each year. Total sales reported by
retailers at the Company's properties increased by almost 3.4% in 1995 and 4.7%
in 1996, indicating that the centers are maintaining their respective share of
sales dollars in the finite retail market.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to the Index to Financial Statements and Financial Statement
Schedules for the required information.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
There is hereby incorporated by reference the information which appears
under the captions "Election of Directors" and "Executive Officers" in the
Company's definitive proxy statement for its 1997 Annual Meeting of
Stockholders.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information which appears
under the caption "Compensation of Executive Officers" in the Company's
definitive proxy statement for its 1997 Annual Meeting of Stockholders;
-27-
<PAGE> 28
provided, however, that neither the Report of the Compensation Committee of the
Board of Directors on Executive Compensation nor the Performance Graph set
forth therein shall be incorporated by reference herein, in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, or in any of the Company's future
filings.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information which appears
under the captions "Common Stock Ownership of Certain Beneficial Owners" and
"Common Stock Ownership of Management" in the Company's definitive proxy
statement for its 1997 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information which appears
under the caption "Compensation Committee Interlocks and Insider Participation"
in the Company's definitive proxy statement for its 1997 Annual Meeting of
Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules.
The financial statements and schedules listed in the accompanying Index to
Consolidated Financial Statements and Financial Statement Schedules are filed
as part of this Annual Report on Form 10-K.
(b) Exhibits.
See Exhibit Index on page S-1
-28-
<PAGE> 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
GENERAL GROWTH PROPERTIES, INC.
By: /s/ Matthew Bucksbaum
-------------------------------------
Matthew Bucksbaum, Chairman of the Board
and Chief Executive Officer
Date: March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Robert Michaels President and Director March 27, 1997
- --------------------------
Robert Michaels
/s/ John Bucksbaum Executive Vice President - March 27, 1997
- -------------------------- Director
John Bucksbaum
/s/ Bernard Freibaum Executive Vice President - March 27, 1997
- -------------------------- Chief Financial Officer and
Bernard Freibaum Principal Accounting Officer
/s/ Anthony Downs Director March 27, 1997
- --------------------------
Anthony Downs
/s/ Morris Mark Director March 27, 1997
- --------------------------
Morris Mark
/s/ Beth Stewart Director March 27, 1997
- --------------------------
Beth Stewart
/s/ Lorne Weil Director March 27, 1997
- ---------------------------
A. Lorne Weil
-29-
<PAGE> 30
INDEX TO CONSOLIDATED FINANCIAL STATEMENT
AND CONSOLIDATED FINANCIAL STATEMENT
SCHEDULE
The following financial statements and financial statement schedule are
included in Item 8 of this Annual Report on Form 10-K:
General Growth Properties, Inc.
<TABLE>
<CAPTION>
Financial Statements Page(s)
-------------------- -------
<S> <C>
Report of Independent Accountants F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995 F-3
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994. F-4
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 F-6
Notes to Consolidated Financial Statements F-7 to F-21
Financial Statement Schedule
----------------------------
Report of Independent Accountants F-22
Schedule III - Real Estate and Accumulated Depreciation F-23
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of
the schedule or because the information required is included in the
consolidated financial statements and notes hereof.
</TABLE>
F-1
<PAGE> 31
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
General Growth Properties, Inc.
We have audited the accompanying consolidated balance sheets of General Growth
Properties, Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects the consolidated financial position of General Growth
Properties, Inc. as of December 31, 1996 and 1995 and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Chicago, Illinois Coopers & Lybrand L.L.P.
February 11, 1997
F-2
<PAGE> 32
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, except for Per Share Amounts)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Investment in real estate:
Land $ 173,263 $ 144,517
Buildings and equipment 1,337,366 1,054,695
Less accumulated depreciation (188,744) (153,275)
Developments in progress 44,439 49,680
------------- ------------
Net property and equipment 1,366,324 1,095,617
Investment in Quail Springs Mall 15,077
Investment in CenterMark 64,769 120,082
Investment in GGP/Homart 193,270 178,647
------------- ------------
Net investment in real estate 1,639,440 1,394,346
Cash and cash equivalents 15,947 18,298
Tenant accounts receivable, net 25,384 14,831
Deferred expenses, net 30,078 24,752
Investment in and note receivable from
General Growth Management, Inc. 37,737
Prepaid and other assets 9,131 3,755
------------- ------------
$ 1,757,717 $ 1,455,982
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $ 1,168,522 $ 1,025,130
Notes and contracts payable 971 2,802
Distributions payable 20,744 18,650
Accounts payable and accrued expenses 44,747 43,389
Accounts payable and accrued expenses - affiliates 89 1,211
------------- ------------
1,235,073 1,091,182
------------- ------------
Minority interest in Operating Partnership 192,377 135,417
------------- ------------
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;
30,789,185 shares issued and outstanding
(27,272,560 as of December 31, 1995) 3,079 2,727
Additional paid-in capital 595,628 506,107
Retained earnings (deficit) (268,440) (279,451)
------------- ------------
Total stockholders' equity 330,267 229,383
------------- ------------
$ 1,757,717 $ 1,455,982
============= ============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-3
<PAGE> 33
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, except for Per Share Amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Minimum rents $ 140,468 $ 103,915 $ 94,931
Tenant recoveries 63,040 54,072 50,085
Percentage rents 5,412 4,793 4,266
Other 3,925 3,811 3,301
Fee Income 4,560 805
--------- --------- ---------
Total revenues 217,405 167,396 152,583
--------- --------- ---------
Expenses:
Real estate taxes 16,332 13,012 12,140
Management fees to affiliate 2,713 2,463 4,362
Property operating 51,466 45,075 41,605
Provision for doubtful accounts 2,421 607 2,266
General and administrative 3,022 2,811 2,745
Depreciation and amortization 39,809 30,855 28,190
--------- --------- ---------
Total expenses 115,763 94,823 91,308
--------- --------- ---------
Operating income 101,642 72,573 61,275
Interest expense (70,272) (46,852) (43,612)
Interest income 3,833 518 617
Equity in net income (loss) of unconsolidated affiliates:
Quail Springs Mall 110
CenterMark 9,397 8,628 6,096
GGP/Homart 9,355 646
General Growth Management, Inc. (1,273)
Gain on the sale of a portion of CenterMark stock 43,821 33,397
--------- --------- ---------
Income before allocation to minority
interest and extraordinary item 96,613 68,910 24,376
Income allocated to minority interest (34,580) (25,856) (9,518)
--------- --------- ---------
Income before extraordinary item 62,033 43,054 14,858
Extraordinary item (2,291) (693)
--------- --------- ---------
Net income $ 59,742 $ 43,054 $ 14,165
========= ========= =========
Earnings per share before extraordinary item $ 2.20 $ 1.69 $ .65
Extraordinary item (.08) (.03)
--------- --------- ---------
Net earnings per share $ 2.12 $ 1.69 $ .62
========= ========= =========
The accompanying notes are an integral part of the conolidated financial statements.
</TABLE>
F-4
<PAGE> 34
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands, except for Per Share Amounts)
<TABLE>
<CAPTION>
Additional Retained Total
Common Stock Paid-in Earnings Stockholders'
Shares Amount Capital (Deficit) Equity
---------- ------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 22,772,560 $ 2,277 $ 427,997 $ (257,261) $ 173,013
Net income 14,165 14,165
Capital contribution, net of minority
interest 3,229 3,229
Cash distributions declared
($1.58 per share) (35,981) (35,981)
---------- ------- --------- ----------- ------------
Balance, December 31, 1994 22,772,560 2,277 431,226 (279,077) 154,426
Net income 43,054 43,054
Issuance of common stock:
Follow-on offering, less $5,482
of offering costs 4,500,000 450 87,443 87,893
Cash distributions declared
($1.66 per share) (43,428) (43,428)
Adjustment for minority interest
in operating partnership (12,562) (12,562)
---------- ------- --------- ----------- ------------
Balance, December 31, 1995 27,272,560 $ 2,727 $ 506,107 $ (279,451) $ 229,383
Exercise of stock options 66,667 7 1,381 1,388
Purchase and retirement of common stock (66,667) (7) (1,443) (1,450)
Net income 59,742 59,742
Cash distributions declared
($1.72 per share) (48,731) (48,731)
Acquisitions:
General Growth Management, Inc.
less $38 of issuance costs 1,555,855 156 39,675 39,831
Real estate investments 1,895,928 190 49,511 49,701
Conversion of operating partnership
units to common stock 64,842 6 1,315 1,321
Adjustment for minority interest
in operating partnership (918) (918)
---------- ------- --------- ----------- ------------
Balance, December 31, 1996 30,789,185 $ 3,079 $ 595,628 $ (268,440) $ 330,267
========== ======= ========= =========== ============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-5
<PAGE> 35
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
------------ ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 59,742 $ 43,054 $ 14,165
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest 34,580 25,856 9,518
Gain on the sale of a portion of CenterMark stock (43,821) (33,397)
Extraordinary items 2,291 693
Equity in net income of unconsolidated affiliate (17,589) (9,274) (6,096)
Provision for doubtful accounts 2,421 607 2,266
Depreciation 35,469 26,104 24,324
Amortization 4,340 4,751 3,867
Net changes in:
Tenant accounts receivable (12,974) (6,723) (1,510)
Prepaid and other assets (20,258) (1,963) 9,282
Accounts payable and accrued expenses 8,487 11,645 (7,573)
------------ ---------- -----------
Net cash provided by operating activities 52,688 60,660 48,936
------------ ---------- -----------
Cash flows from investing activities:
Acquisition/development of real estate and improvements
and additions to properties (121,138) (379,976) (37,100)
Decrease in short-term investments 61,832
Collection of notes receivable from affiliates 12,649
Proceeds from the sale of a portion of CenterMark stock 87,000 72,500
Distributions received from CenterMark 21,531 23,462 14,600
Distributions received from GGP/Homart 13,791
Investment in CenterMark (181,521)
Investment in GGP/Homart (19,058) (178,001)
Increase in deferred expenses (9,546) (7,189) (3,064)
------------ ---------- -----------
Net cash used in investing activities (14,771) (469,204) (145,253)
------------ ---------- -----------
Cash flows from financing activities:
Cash distributions paid to common stockholders (47,604) (41,037) (35,070)
Cash distributions paid to minority interest (27,861) (25,494) (23,511)
Gross proceeds from sale of common stock 93,375
Payment of stock issuance costs (38) (5,482)
Proceeds from issuance of mortgage and other notes payable 705,815 506,450 190,000
Principal payments on mortgage and other notes payable (668,107) (105,728) (35,876)
Retirement of common stock (net of sale proceeds) (62)
Increase in deferred financing costs (2,411) (859) (3,895)
Prepayment penalty on early retirement of debt (693)
Capital contribution 5,425
------------ ---------- -----------
Net cash provided by financing activities (40,268) 421,225 96,380
------------ ---------- -----------
Net change in cash and cash equivalents (2,351) 12,681 63
Cash and cash equivalents at beginning of year 18,298 5,617 5,554
------------ ---------- -----------
Cash and cash equivalents at end of year $ 15,947 $ 18,298 $ 5,617
============ ========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 73,386 $ 51,310 $ 42,985
Interest capitalized 5,947 5,409 913
Supplemental schedule of non-cash investing and financing activities:
Acquisition of real estate and General Growth Management, Inc. (1996) 244,787 37,558
Operating partnership units and stock issued as consideration for
additional real estate investments 89,438 17,908
acquisition of General Growth Management, Inc. 51,497
Mortgage debt assumed as consideration for additional real
estate investments 103,852 19,650
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-6
<PAGE> 36
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
General Growth Properties, Inc. (the "Company"), a Delaware corporation,
was formed in 1986 to own and operate enclosed mall shopping centers. On
April 15, 1993, the Company completed its initial public offering of
18,975,000 shares of common stock and a business combination involving
entities under varying common ownership. Proceeds from the initial public
offering were used to acquire a majority interest in GGP Limited
Partnership (the "Operating Partnership") which was formed to succeed to
substantially all of the interests in eighteen enclosed mall general
partnerships (the "Property Partnerships") owned and controlled by the
Company and its original stockholders, Martin and Matthew Bucksbaum, and
trusts established for the benefit of the stockholders' families (the
"Bucksbaums"). The proceeds were used to repay existing indebtedness and
acquire three additional centers (the "IBM Centers").
In May of 1995, the Company completed a follow-on stock offering of
4,500,000 common shares. Net proceeds were used to reduce the outstanding
balance of the Company's credit facility.
OPERATING PARTNERSHIP
The Operating Partnership commenced operations on April 15, 1993 and at
December 31, 1996, owned a 99% general partnership interest in the
eighteen Property Partnerships, two recently developed properties, Natick
Mall and four properties acquired during 1996 (see Note 5). In addition,
the Operating Partnership owned the three IBM Centers, Piedmont Mall and
Park Mall (see Note 5). At December 31, 1996, the Operating Partnership
also owned a 14% interest in CenterMark Properties, Inc. (see Note 3), a
38.2% interest in GGP/Homart, Inc. (see Note 4), a 100% economic interest
in General Growth Management, Inc. (see Note 6) and a 50% interest in
Quail Springs Mall (see Note 5). At December 31, 1996, the Company owned
a 63% general partnership interest in the Operating Partnership and
various minority interests own the remaining 37% limited partnership
interest.
The minority interest in the Operating Partnership is held primarily by
trusts for the benefit of families of the original stockholders which
initially owned and controlled the Company and is represented by units of
limited partnership interests ("Units"). The Units can be exchanged, with
certain restrictions, for shares of the Company on a one-for-one basis.
The Bucksbaum's Units can be exchanged for cash, at the Company's
election, if the Bucksbaums own 25% or more of the outstanding common
stock of the Company at the time of the exchange. The Unitholders also
share equally with the stockholders on a per share basis in any
distributions by the Operating Partnership.
F-7
<PAGE> 37
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
Changes in Operating Partnership Units for the three years ending December 31,
1996, are as follows:
<TABLE>
<CAPTION>
Units
-----------
<S> <C>
December 31, 1993 15,267,525
-----------
December 31, 1994 15,267,525
Acquisition of Piedmont Mall 832,936
-----------
December 31, 1995 16,100,461
Acquisition of General Growth
Management, Inc. (issued to Bucksbaums) 453,791
Acquisition of Lakeview Square, Lansing and Westwood Malls 1,445,000
Conversion to common stock (64,842)
-----------
December 31, 1996 17,934,410
===========
</TABLE>
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
the Company and the Operating Partnership consisting of the twenty-five
Property Partnerships, five directly owned centers and the unconsolidated
investments in CenterMark Properties, Inc., GGP/Homart, Inc., General
Growth Management, Inc. and Quail Springs Mall.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Minimum rent revenues are recognized on an accrual basis over the terms of
the related leases which approximates a straight-line basis. Percentage
rents are recognized on an accrual basis. Recoveries from tenants for
taxes, insurance and other shopping center operating expenses are
recognized as revenues in the period the applicable costs are incurred.
The Company provides an allowance for doubtful accounts against the
portion of accounts receivable which is estimated to be uncollectible.
Accounts receivable in the accompanying consolidated balance sheets are
shown net of an allowance for doubtful accounts of $5,117 and $2,259 as of
December 31, 1996 and 1995, respectively.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements, the Company considers all
highly liquid investments purchased with original maturities of three
months or less to be cash equivalents. The carrying amount approximates
fair value due to the short maturity of these investments.
DEFERRED EXPENSES
Deferred expenses consist principally of financing fees and leasing
commissions which are amortized over the terms of the respective
agreements. Deferred expenses in the accompanying consolidated balance
sheets are shown net of accumulated amortization of $21,996 and $20,827 as
of December 31, 1996 and 1995, respectively.
F-8
<PAGE> 38
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
PROPERTIES
Real estate assets are stated at cost. Interest and real estate taxes
incurred during construction periods are capitalized and amortized on the
same basis as the related assets. Statement of Financial Accounting
Standards No. 121, "Accounting for the impairment of long-lived assets and
for long-lived assets to be disposed of" was issued in 1995 and requires
the real estate assets of the Company to be reviewed for impairment.
Based principally on a review of cash flows, management has determined
that the fair value of its real estate assets exceeds their carrying
value. Depreciation expense is computed using the straight-line method
based upon the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and Improvements 40
Equipment and fixtures 10
</TABLE>
Construction allowances paid to tenants are capitalized and depreciated
over the average lease term. Maintenance and repairs are charged to
expense when incurred. Expenditures for improvements are capitalized.
INVESTMENT IN AFFILIATES
The Company acquired a 40% interest in CenterMark Properties, Inc.
("CenterMark") in February 1994 and a 38.2% interest in GGP/Homart, Inc.
("GGP/Homart") in December 1995. In December 1995, and July 1996 the
Company sold 25% and 40%, respectively, of its 40% interest in CenterMark
resulting in a 14% interest at December 31, 1996. During 1996, the
Company acquired a 95% non-voting preferred stock interest in General
Growth Management, Inc. ("GGMI") and a 50% interest in Quail Springs Mall.
The Company accounts for its investment in affiliates using the equity
method whereby the cost of an investment is adjusted for the Company's
share of equity in net income or loss from the date of acquisition and
reduced by distributions received. Due to currently unpaid and accrued
preferences on the preferred stock, the Operating Partnership was entitled
to 100% of the earnings and cash flow generated by GGMI in 1996.
Subsequent to the July 1996 sale, the investment in CenterMark is
accounted for using the cost method whereby distributions received are
included in income instead of its share of equity in net income or loss.
INCOME TAXES
The Company elected to be taxed as a real estate investment trust under
sections 856-860 of the Internal Revenue Code of 1986, commencing with its
taxable year beginning January 1, 1993. In order to qualify as a real
estate investment trust, the Company is required to distribute at least
95% of its ordinary taxable income and 100% of capital gains to
stockholders and to meet certain asset and income tests as well as certain
other requirements. As a real estate investment trust, the Company will
generally not be liable for Federal income taxes, provided it satisfies
the necessary requirements. As a result, Federal income taxes on the net
income of the Company are payable personally by the stockholders of the
Company. Accordingly, the consolidated statements of operations do not
reflect a provision for income taxes. State income taxes are not
significant. The Property Partnerships were not liable for Federal income
taxes, as each partner recognized its proportionate share of the Property
Partnerships' income or loss in its tax return.
During 1996, the Operating Partnership acquired control of GGMI, a taxable
subchapter C Corporation. As a result, state and Federal income taxes on
its net taxable income are payable by GGMI.
F-9
<PAGE> 39
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
EARNINGS PER SHARE
Per share amounts are based on the weighted average of common and common
equivalent shares (stock options) outstanding of 28,145,091 for 1996,
25,521,875 for 1995 and 22,772,560 for 1994.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts
of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
MINORITY INTEREST
Income before minority interest is allocated to the limited partners (the
"Minority Interest") based on their ownership percentage of the Operating
Partnership. The ownership percentage is determined by dividing the
numbers of Operating Partnership Units held by the Minority Interest by
the total Operating Partnership Units outstanding. The issuance of
additional shares of common stock or Operating Partnership Units changes
the percentage ownership of both the Minority Interest and the Company.
Since a Unit is convertible into common stock and thus equivalent to a
common share, such transactions are treated as capital transactions and
result in an allocation between stockholders' equity and Minority Interest
in the balance sheet to account for the change in the ownership of the
underlying equity in the Operating Partnership.
3. CENTERMARK ACQUISITION AND DISPOSITION
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. The Company and Westfield U.S. Investments
Pty. Limited each 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
several major regional shopping malls and power centers.
The Company sold 25% of its interest in CenterMark on December 19, 1995,
to Westfield U.S. Investments Pty. Limited for a purchase price of
$72,500. As a result of the sale, the Company's ownership was reduced to
30% of the outstanding CenterMark stock. Concurrently with the sale of
the stock, the Company also granted Westfield U.S. Investments Pty.
Limited an option to purchase the remainder of the Company's CenterMark
stock ("Option Stock") for $217,500.
On June 28, 1996, Westfield U.S. Investments, Pty. Limited exercised
its option to acquire the remaining 30% of the outstanding CenterMark
stock in two transactions. The first payment in the amount of $87,000 was
received on July 1, 1996, and the second payment in the amount of $130,500
was received on January 2, 1997. Proceeds from the first payment were
used to repay the remaining balance outstanding on the Company's interim
loan facility that was utilized in connection with the acquisition of
GGP/Homart (see Note 4). The proceeds received from the second
payment were primarily used to repay existing indebtedness (see Note
7) in 1997 and will result in a gain of approximately $66,000.
F-10
<PAGE> 40
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
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, the 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
agreed to contribute up to $80,000 of additional capital as required,
through the end of 1997. As of December 31, 1996, the stockholders had
contributed $45,000 of additional capital. On January 21, 1997, an
additional $15,000 of capital was contributed by the stockholders.
GGP/Homart owns interests in twenty-six regional shopping malls and one
property currently under development. The Operating Partnership arranged
a $125,000 interim loan facility in conjunction with the acquisition of
GGP/Homart. On July 1, 1996, the interim loan facility was retired with
proceeds from the sale of a portion of the CenterMark stock (see Note 3).
GGP/Homart elected real estate investment trust status for income tax
purposes.
On October 2, 1996, GGP/Homart opened West Oaks Mall, a new development,
located in Ocoee, (Orlando) Florida. GGP/Homart currently has one
property under development, Brass Mill Center and Commons. Brass Mill
Center is located in Waterbury, Connecticut, and is scheduled to open in
the fall of 1997.
The following is summarized financial information for GGP/Homart since the
date of acquisition.
<TABLE>
<CAPTION>
DECEMBER 31, December 31,
Balance Sheet as of 1996 1995
- ------------------- ------------ ------------
<S> <C> <C>
Assets:
Net investment in real estate $ 1,007,008 $ 832,910
Investment in real estate partnerships 179,228 229,128
Other assets 55,957 45,689
------------ ------------
$ 1,242,193 $ 1,107,727
============ ============
Liabilities and Stockholders' Equity:
Mortgage and other notes payable $ 689,773 $ 546,505
Accounts payable and accrued expenses 83,547 111,869
Stockholders' equity 468,873 449,353
------------ ------------
$ 1,242,193 $ 1,107,727
============ ============
<CAPTION>
Period from
YEAR ENDED December 22 through
DECEMBER 31, 1996 December 31, 1995
----------------- -------------------
<S> <C> <C>
Summary of Operations
Revenues $ 145,689 $ 4,782
Operating costs (62,002) (2,040)
Depreciation and amortization (20,824) (455)
Interest expense (40,575) (1,248)
Equity in net income of real estate partnerships 2,434 314
Minority interest (239) -
----------------- ----------------
Net income $ 24,483 $ 1,353
================= ================
Significant accounting policies used by GGP/Homart are the same as those used by the Company.
</TABLE>
F-11
<PAGE> 41
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
5. PROPERTY ACQUISITIONS AND DEVELOPMENTS
ACQUISITIONS
During the fourth quarter of 1996, the Company acquired 100% ownership in
five properties, Park Mall, Sooner Fashion Mall, Lakeview Square, Lansing
Mall and Westwood Mall, and a 50% interest in Quail Springs Mall. On
October 4, 1996, Park Mall in Tucson, Arizona was acquired for one
million shares of newly issued common stock and the payment of $23,995 in
cash. Sooner Fashion Mall and 50% of Quail Springs Mall, in Norman and
Oklahoma City, Oklahoma, respectively, were acquired on November 27,
1996, for 895,928 newly issued common shares, the assumption of $8,636 of
mortgage debt and the payment of $16,695 in cash. On December 6, 1996,
the Company acquired Lakeview Square, Lansing Mall and Westwood Mall, all
located in south central Michigan for an aggregate purchase price of
$132,148. The purchase price consisted of $92,411 of mortgage debt
assumption, of which $4,436 was retired at closing, and 1,445,000 newly
issued Operating Partnership Units.
During 1995, the Operating Partnership acquired 100% ownership interests
in two enclosed regional malls, Piedmont Mall in Danville, Virginia and
Natick Mall in Natick, Massachusetts. Piedmont Mall was acquired on July
1, 1995, by assuming $19,650 of mortgage debt, issuing $17,908 (832,936
Units) of Operating Partnership Units and the payment of approximately
$1,700 in cash. Natick Mall was acquired on December 22, 1995, in
conjunction with the GGP/Homart transaction, for an aggregate purchase
price of approximately $265,000 consisting of $82,000 in cash and a
mortgage loan for $183,000.
The acquisitions were accounted for utilizing the purchase method and
accordingly, are included in the Operating Partnership's results of
operations from the dates of acquisition.
DEVELOPMENTS
During 1996, the Company acquired two new development sites located in
Iowa City, Iowa, and Grand Rapids, Michigan. The Iowa City site is
currently under development and is scheduled to open in the summer of
1998.
The Company had two properties under development during 1995, West Valley
Mall in Tracy, California and Eagle Ridge Mall in Winter Haven, Florida.
West Valley opened during the fourth quarter of 1995 and Eagle Ridge
opened in February of 1996. In September of 1995, the Company arranged a
$120,000 construction loan facility for both developments, collateralized
in part by mortgages on West Valley and Eagle Ridge.
6. ACQUISITION OF GENERAL GROWTH MANAGEMENT, INC.
On December 22, 1995, the Company formed GGP Management, Inc. to manage,
lease, develop and operate enclosed malls. In August 1996, the Operating
Partnership, acting through GGP Management, completed the acquisition of
GGMI for approximately $51,500. The Operating Partnership issued
approximately $11,600 (453,791 Units) of Operating Partnership Units and
sold $39,900 of common stock (1,555,855 shares) to GGP Management in
order to acquire GGMI. A loan from the Operating Partnership to GGP
Management to purchase the Company's common stock bears interest and is
reflected on the consolidated balance sheet. In connection with the
acquisition, GGP Management was merged into GGMI at closing. GGMI
manages, leases, and performs various other services for the Original
Centers, GGP/Homart and other properties owned by unaffiliated parties.
F-12
<PAGE> 42
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
7. MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1996 and 1995, consisted of the
following:
<TABLE>
<CAPTION>
Carrying Amount Of Notes
December 31, Period Estimated Final
Property Pledged ------------------------ Interest Payment Balloon Payment Maturity
as Collateral 1996 1995 Rate Terms at Maturity Date
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bellis Fair(a) $ 73,000 $ - 7.340% (b) $ 45,380 02/15/16
Birchwood 39,549 39,940 8.750% 323 (c) 38,323 09/01/99
Colony Square (l) 22,614
Columbia (l) 45,277
Eagle Ridge(d) 55,584 37,167 (e) (f) 55,584 09/30/98
Fallbrook (l) 41,429
Fox River (l) 58,088
Gateway (o) 41,676
Grandville 11,441 8.500% (f) 11,441 (g)
Knollwood 15,561 15,814 (h) 149 (c) 06/01/16
Lakeview Square 27,561 10.000% 268 (c) 23,430 06/15/06
Lansing 1,096 13.250% 19 (c) 841 07/01/99
Lansing 125 9.750% 3 (c) 01/01/02
Lansing 13,648 9.250% 146 (c) 8,240 09/01/04
Lansing 787 9.880% 9 (c) 10/01/10
Lansing 31,957 9.350% 281 (c) 06/15/20
Lockport (l) 6,990 6.500%
Mall of the Bluffs 36,655 37,018 8.750% 299 (c) 35,510 09/01/99
Natick 183,000 183,000 6.000% (i) 177,463 12/22/02
Oakwood 35,691 36,044 8.750% 291 (c) 34,584 09/01/99
Piedmont 14,075 14,075 8.000% (j) 11/15/17
Piedmont 3,040 3,115 8.000% (k) 11/15/13
Piedmont 2,224
Rio West (l) 13,470
River Falls (o) 40,000
SouthShore (l) 9,931
West Valley(d) 56,155 43,758 (e) (f) 56,155 09/30/98
Westwood 12,597 9.850% 102 (c) 11,930 11/01/99
Interim Loan Facility 125,000
Credit Facility 40,000 (e) (f) 40,000 02/01/97
Six properties 208,500
Seven properties(l) 250,000 (m) (f) 250,000 10/15/97
Three properties(n) 115,000 6.880% (b) 104,877 02/15/06
Five properties(o) 152,000 6.410% (f) 152,000 02/15/01
---------- ----------
$1,168,522 $1,025,130
========== ==========
</TABLE>
(a) Bellis Fair is cross collateralized with the properties in notes (n)
and (o).
(b) The loan requires payments of interest only through February 15, 2001.
After this date payments of principal and interest are required through
maturity.
(c) Amount represents the monthly payment of interest plus principal.
(d) Each of these two properties has a $60,000 construction loan.
(e) The interest rate is 150 basis points above LIBOR (LIBOR was 5.375% at
December 31, 1996).
(f) The loan requires monthly payments of interest only.
(g) Note is due and payable when a construction loan is arranged for the
project.
(h) This mortgage consists of two notes: one with an original principal
balance of $16,175 that bears interest at 9.75% and a second note with
an original principal balance of $1,500 that bears interest at 10.375%.
(i) The loan requires monthly payments of $915 of interest for the first
five years and payments of $1,179 of principal and interest for the
remaining two years.
(j) The bond requires monthly payments of $94 of interest through 11/30/16,
the principal amount will amortize over the last 12 months.
(k) The bond requires monthly payments of interest and principal that vary
from $13 to $32.
(l) Seven properties are cross collateralized for the non recourse
facility; Colony Square, Columbia, Fallbrook, Fox River, Lockport, Rio
West and SouthShore.
(m) The interest rate is 100 basis points above LIBOR (LIBOR was 5.375% at
December 31, 1996).
(n) The three properties are Chapel Hills, Grand Traverse and Pines Mall.
The loans are cross-collateralized with the properties in notes (a) and
(o).
(o) The five properties are Bayshore, Capital, Gateway, Greenwood and River
Falls Mall. The loans are cross- collateralized with the properties in
notes (a) and (n).
F-13
<PAGE> 43
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
Based on borrowing rates available to the Company at the end of 1996 for
mortgage loans with similar terms and maturities, the fair value of the
mortgage notes payable approximates carrying value at December 31, 1996
and 1995.
Principal amounts due under mortgage notes payable mature as follows:
<TABLE>
<CAPTION>
Year Amount Maturing
---- ---------------
<S> <C>
1997 $ 304,531
1998 115,138
1999 125,047
2000 2,391
2001 154,637
Subsequent 466,778
---------------
Total $1,168,522
===============
</TABLE>
Land, buildings and equipment related to such mortgages, with an
aggregate cost as of December 31, 1996, of approximately $1,527,754, have
been pledged as collateral for the above debt. Certain property
partnership assets are cross-collateralized or cross-defaulted pursuant
to certain mortgage notes.
CREDIT FACILITY
In January 1994, the Operating Partnership 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 Operating Partnership 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
Operating Partnership's follow-on stock offering. The facility was
retired on January 31, 1996 with the proceeds from a permanent mortgage
financing. In December 1995, the Operating Partnership arranged a
$125,000 interim loan facility to complete the GGP/Homart transaction.
The interim loan facility was retired during 1996 with a permanent
mortgage financing and proceeds of the CenterMark sale (see Note 3).
CONSTRUCTION LOAN FACILITY
In September 1995, the Operating Partnership closed a $120,000
construction loan facility collateralized in part by two new developments
in Winter Haven, Florida and Tracy, California. The loan proceeds will
be used to pay for construction and all other development costs of both
projects.
PERMANENT MORTGAGE FINANCING
On January 31, 1996, the Operating Partnership closed a $340,000
multi-property loan package with Principal Mutual Life Insurance Company.
The financing is non recourse and consists of cross collateralized first
mortgages on nine wholly owned Original Centers as described in notes
(a), (n) and (o) in the above table. The five year loans can be extended
for five additional years. Proceeds were used to repay $340,000 of
floating rate debt, consisting of approximately $290,000 of existing
loans related to the credit facility, Gateway and River Falls mortgages,
and $50,000 of interim financing which was used in connection with the
acquisition of GGP/Homart.
F-14
<PAGE> 44
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
UNSECURED LINE OF CREDIT
In August 1996, the Operating Partnership established a short-term
revolving line of credit of $40,000. The unsecured line of credit was
arranged for new developments, expansions, working capital and potential
acquisitions.
NON RECOURSE BRIDGE LOAN FACILITY
On October 15, 1996, the Operating Partnership arranged a $250,000 one
year bridge loan facility from Goldman Sachs Mortgage Company. The
proceeds from this loan were used to pay off approximately $197,000 of
maturing loans on seven wholly owned properties and to pay down the
Operating Partnership's unsecured line of credit. The Operating
Partnership is in the process of arranging a permanent loan to replace
the bridge loan prior to its maturity on October 15, 1997.
SUBSEQUENT FINANCING ACTIVITY
On January 2, 1997, the Operating Partnership received $130,500 of
proceeds from the sale of CenterMark (see Note 3). The proceeds were
used to payoff and/or reduce a $12,597 mortgage collateralized by
Westwood Mall, the unsecured line of credit balance of $40,000 and
$70,000 of the $250,000 non recourse bridge facility. The remaining
proceeds were used for working capital.
8. NOTES AND CONTRACTS PAYABLE
Notes and contracts payable as of December 31, 1996, consist of notes
totaling $971 payable in connection with certain real estate tax special
assessments. The special assessment notes require periodic payment of
interest at rates between 6% and 12.75% and mature at varying dates
between 1997 and 2004. The special assessment notes and land contract
represent insignificant amounts, and it is not practical to estimate the
fair value due to lack of market information.
As of December 31, 1996 and 1995, the Operating Partnership had
outstanding letters of credit of $6,200 and $6,247, respectively, in
connection with special assessments and liability insurance requirements.
F-15
<PAGE> 45
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
9. RENTALS UNDER OPERATING LEASES
The Company receives rental income from the leasing of retail shopping
center space under operating leases. The minimum future rentals based on
operating leases held as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
Year Amount
---- --------
<S> <C>
1997 $138,322
1998 132,169
1999 124,370
2000 116,715
2001 105,477
Thereafter 513,714
</TABLE>
Minimum future rentals do not include amounts which may be received from
certain tenants based upon a percentage of their gross sales or as
reimbursement of shopping center operating expenses.
No single tenant collectively accounts for more than 10% of the Company's
total revenues. The tenant base includes national and regional retail
chains and local retailers, and consequently the Company's credit risk is
concentrated in the retail industry.
10. TRANSACTIONS WITH AFFILIATE
GGMI has been contracted to provide management, leasing, development and
construction management services to the property partnerships. In
addition, certain shopping center advertising and payroll costs of the
property partnerships are paid by GGMI and reimbursed by the Company.
Total costs included in the consolidated financial statements related to
agreements with GGMI are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Management and Leasing Fees $ 7,956 $ 8,514 $ 7,015
Cost Reimbursements 23,641 20,049 18,763
Development Costs 1,529 1,637 1,204
</TABLE>
Interest paid and accrued to GG Development, including amounts
capitalized, was $1,169 for the year ended December 31, 1994. In
December 1996, the Operating Partnership acquired a development site
located in Grand Rapids, Michigan from GG Development for $11,441. GG
Development was liquidated subsequent to the acquisition.
11. GROUND LEASES
The Company leases the Knollwood Mall land, Rio West Mall land, a portion
of the Fallbrook Mall building and land and a portion of the SouthShore
and Bayshore parking areas from third parties. The leases generally
require fixed annual payments plus participation rentals. Rental expense
including participation rent related to these leases was $590, $526 and
$525 for the years ended December 31, 1996, 1995 and 1994, respectively.
The leases provide for a right of first refusal in favor of the Company
in the event of a proposed sale of the property by the landlord.
F-16
<PAGE> 46
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
12. STOCK INCENTIVE PLAN
The Company's Stock Incentive Plan provides incentives to attract and
retain officers and key employees. The Stock Incentive Plan originally
consisted of 1,000,000 shares of common stock available for grant. On
May 21, 1996, the number of shares under the plan were increased to
2,000,000. Options are granted by the Compensation Committee of the
Board of Directors at an exercise price of not less than 100% of the fair
market value of the Common Stock on the date of grant. The term of the
option is fixed by the Compensation Committee, but no option shall be
exercisable more than 10 years after the date of the grant. Options
granted to employee-officers are for 10-year terms and are exercisable in
either 33 1/3% or 20% annual increments from the date of the grants.
Options granted to non-employee directors are exercisable in full
commencing on the date of grant and expire on the tenth anniversary of
the date of the grant.
A summary of the status of the Company's stock options as of December 31,
1996, 1995 and 1994 and changes during the year ended on those dates is
presented below.
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------------------- ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 425,500 $ 19.50 173,500 $ 20.89 160,000 $ 21.58
Granted 502,000 $ 27.97 312,000 $ 19.02 163,500 $ 20.81
Exercised (66,667) $ 20.81
Forfeited (33,333) $ 20.81
Cancelled (60,000) $ 21.03 (150,000) $ 21.54
----------------------- ------------------- --------------------
Outstanding at end of year 827,500 $ 24.48 425,500 $ 19.50 $ 173,500 $ 20.89
======================= =================== ====================
Exercisable at end of year 267,500 161,500 55,500
Options available for future grants 1,105,833 574,500 826,500
Weighted average per share fair value
of options granted during the year $ 2.28 $ 1.53
</TABLE>
The fair value of each option grant for 1996 and 1995 was estimated on the
date of grant using the Black-Scholes option pricing model with the
following assumptions:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Risk free interest rate 5.78% 5.68%
Dividend yield 7.75% 7.75%
Expected life 4.0 years 4.0 years
Expected volatility 18.8% 18.8%
</TABLE>
F-17
<PAGE> 47
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------- -----------------------
Weighted
Average Weighted Weighted
Number Remaining Average Options Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/96 Life Price at 12/31/96 Price
- --------------- ----------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$19.00 - $28.00 827,500 9.3 years $24.48 267,500 $22.46
</TABLE>
The Company has applied Accounting Principles Board Opinion 25 and selected
interpretations in accounting for its plan. Accordingly, no compensation
costs have been recognized. Had compensation costs for the Company's Plan
been determined based on the fair value at the grant date for options
granted in 1996 and 1995 in accordance with the method required by Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the Company's net income and net income per share would have
been reduced to the pro forma amounts as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
------------ ------------
<S> <C> <C> <C>
Net Income As Reported $59,742 $43,054
Pro Forma $59,536 $42,991
Net Income per share As Reported $ 2.12 $ 1.69
Pro Forma $ 2.12 $ 1.69
</TABLE>
F-18
<PAGE> 48
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
13. EXTRAORDINARY ITEMS
The extraordinary items resulted from prepayment costs and unamortized
deferred financing costs related to the early extinguishment of mortgage
notes payable.
14. DISTRIBUTIONS PAYABLE
On December 17, 1996, the Company declared a cash distribution of $.43
per share payable January 31, 1997, to stockholders of record on December
31, 1996, totaling $13,239. In addition, a distribution of $7,505 will
be paid to the limited partners of the Operating Partnership.
On December 15, 1995, the Company declared a cash distribution of $.43
per share payable January 31, 1996, to stockholders of record on December
29, 1995, totaling $11,727. In addition, a distribution of $6,923 was
paid to the limited partners of the Operating Partnership.
On December 30, 1994, the Company declared a cash distribution of $.41
per share payable January 31, 1995, to stockholders of record on January
17, 1995, totaling $9,337. In addition, a distribution of $6,259 was
paid to the limited partners of the Operating Partnership.
The allocations of the distributions declared and paid for income tax
purposes are as follows:
<TABLE>
YEAR ENDED DECEMBER 31,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Ordinary Income 47.0% 51.6% 53.2%
Capital Gain 53.0 48.4 -
Return of Capital - - 46.8
------- ------- -------
100.0% 100.0% 100.0%
======= ======= =======
</TABLE>
15. COMMITMENTS AND CONTINGENCIES
In the normal course of business, from time to time, the Company is
involved in legal actions relating to the ownership and operations of its
properties. In management's opinion, the liabilities, if any, that may
ultimately result from such legal actions are not expected to have a
materially adverse effect on the consolidated financial position, results
of operations or liquidity of the Company.
The Company has entered into several contingent agreements for the
acquisition of properties. Each acquisition is subject to satisfactory
completion of due diligence and, in the case of developments, completion
and occupancy of the project.
F-19
<PAGE> 49
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except Per Share Amounts)
16. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Due to the impact of the acquisition of 100% of Lakeview Square Mall,
Lansing Mall, Westwood Mall, Park Mall, and Sooner Mall and 50% of Quail
Springs Mall, which occurred in the fourth quarter of 1996, the follow-on
stock offering in 1995, acquisitions of Natick Mall and 38.2% of
GGP/Homart in 1995, the acquisition of 40% of CenterMark in 1994 and the
sale of 25% and 40% of the Company's interest in CenterMark during 1995
and 1996, historical results of operations may not be indicative of
future results of operations. The pro forma condensed consolidated
statements of operations for 1996 include adjustments for the acquisition
of 100% of the five operating properties, 50% of Quail Springs Mall and
the disposition of 40% of the original 40% interest in CenterMark
Properties as if they had occurred on January 1, 1996. The pro forma
condensed consolidated statements of operations for 1995 include
adjustments for the acquisition of 100% of the five operating properties,
50% of Quail Springs Mall, GGP/Homart, the follow-on stock offering,
Natick Mall and the disposition of 65% of the original 40% interest in
CenterMark Properties as if they had occurred on January 1, 1995. The pro
forma condensed consolidated statements of operations for 1994 include
adjustments for the follow-on stock offering, the acquisitions of Natick
Mall, 38.2% of GGP/Homart and the sale of 25% of the Company's interest
in CenterMark as if these transactions had occurred on January 1, 1994.
The pro forma information is based upon the historical consolidated
statements of operations and does not purport to present what actual
results would have been had the offerings, acquisitions, sale and related
transactions, in fact, occurred at the previously mentioned dates, or to
project results for any future period.
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
Total revenues $ 242,633 $ 228,030 $ 159,646
---------- ---------- ---------
Expenses:
Property operating 80,700 76,188 61,088
Management fees 3,130 4,208 4,671
Depreciation and amortization 43,687 40,423 29,230
---------- ---------- ---------
Total expenses 127,517 120,819 94,989
---------- ---------- ---------
Operating income 115,116 107,211 64,657
Interest expense, net (72,997) (74,168) (49,496)
Equity in net income/(loss) of unconsolidated affiliates
Quail Springs Mall 998 927
CenterMark 10,350 8,023 4,573
GGP/Homart 9,355 9,075 7,924
General Growth Management, Inc. (1,273)
---------- ---------- ---------
61,549 51,068 27,658
Minority interest in operating partnership 22,952 19,202 9,929
---------- ---------- ---------
Pro forma net income (a) $ 38,597 $ 31,866 $ 17,729
========== ========== =========
Pro forma earnings per share (b) $ 1.30 $ 1.09 $ 0.65
========== ========== =========
</TABLE>
(a) The pro forma adjustments include management fee and depreciation
modifications and acquisition and disposition activity described in the
above paragraph. The equity income from CenterMark reflects the
reductions in ownership interest offset by the change from the equity
method of accounting to the cost method in 1996 and 1995. Pro forma net
income is before extraordinary item.
(b) Earnings per share are based upon 29,717,353, 29,168,488 and 27,272,560
pro forma average shares of common stock outstanding for the years ended
December 31, 1996, 1995 and 1994, respectively.
F-20
<PAGE> 50
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended First Second Third Fourth
December 31, 1996 Quarter Quarter Quarter Quarter Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Revenues $ 56,367 $ 56,934 $ 51,569 $ 52,535 $217,405
Income before minority interest 9,810 11,607 58,275 16,921 96,613
Net income applicable to common shares 4,705 7,275 36,667 11,095 59,742
Net earnings per share(a) 0.18 0.27 1.33 0.36 2.12
Distributions declared per share 0.43 0.43 0.43 0.43 1.72
Weighted average shares outstanding (in thousands) 27,273 27,273 27,554 30,180 28,221
</TABLE>
(a) Earnings per share for the four quarters do not add up to the annual
earnings per share due to the issuance of additional stock and the gain
on the sale of a portion of CenterMark stock in the third quarter.
<TABLE>
<CAPTION>
Year Ended First Second Third Fourth
December 31, 1995 Quarter Quarter Quarter Quarter Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Revenues $ 39,180 $ 38,490 $ 42,509 $ 47,217 $167,396
Income before minority interest 6,420 7,659 10,033 44,798 68,910
Net income applicable to common shares 3,836 4,733 6,262 28,223 43,054
Net earnings per share 0.17 0.19 0.23 1.03 1.69
Distributions declared per share(b) 0.41 0.41 0.41 0.43 1.66
Weighted average shares outstanding (in thousands) 22,773 24,701 27,273 27,273 25,522
</TABLE>
(b) Earnings per share for the four quarters do not add up to the annual
earnings per share due to the issuance of additional stock and the gain
on the sale of a portion of CenterMark stock in the fourth quarter.
F-21
<PAGE> 51
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
General Growth Properties, Inc.
Our report on the consolidated financial statements of General Growth
Properties, Inc. is included as page F-2 of this Form 10-K. In connection with
our audits of such financial statements, we have also audited the related
financial statement schedule listed in the Index to Consolidated Financial
Statements on page F-1 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the information required to
be included therein.
Chicago, Illinois Coopers & Lybrand L.L.P.
February 11, 1997
F-22
<PAGE> 52
General Growth Properties, Inc.
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 1996
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Costs Capitalized Gross Amounts at Which
Initial Cost Subsequent to Acquisition Carried at Close of Period
---------------------- ------------------------ ----------------------------------
Building and Carrying Building and
Description Encumbrances (a) Land Improvements (b) Improvements Costs (c) Land Improvements Total(d)(e)
- ---------------- ---------------- ------ --------------- ------------ ----------- ----- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bayshore Mall,
Eureka, CA $ 37,250 $3,004 $27,399 $19,478 $ 2,887 $3,005 $49,764 $52,769
Bellis Fair Mall,
Bellingham, WA 73,000 7,616 47,040 5,752 6,122 7,485 58,914 66,399
Birchwood Mall,
Port Huron, MI 39,549 1,769 34,575 4,621 1,967 3,043 41,163 44,206
Capital Mall
Jefferson City, MO 16,500 4,200 14,201 2,340 0 3,913 16,541 20,454
Chapel Hills
Colorado Springs, CO 36,750 4,300 34,017 10,159 37 4,300 44,213 48,513
Colony Square Mall
Zanesville, OH 27,000 1,000 24,500 8,112 0 1,243 32,612 33,855
Columbia Mall
Columbia, MO 56,000 5,383 19,663 6,263 1,369 5,383 27,295 32,678
Eagle Ridge Mall
Lake Wales, FL 55,584 7,620 49,561 0 4,626 7,620 54,187 61,807
Developments in Progress 11,441 41,051 3,388 0 0 41,051 3,388 44,439
Fallbrook Mall,
West Hills, CA 51,000 6,117 10,076 53,939 1,628 6,117 65,643 71,760
Fox River Mall
Appleton, WI 88,000 2,701 18,291 21,041 1,820 2,701 41,152 43,853
Gateway Mall,
Springfield, OR 30,750 8,728 34,707 4,910 7,521 8,728 47,138 55,866
General Growth Properties
Chicago, IL 40,000 0 1,035 (946) 0 0 89 89
Grand Traverse Mall,
Grand Traverse, MI 51,500 3,530 20,776 17,987 3,644 3,534 42,407 45,941
Greenwood Mall
Bowling Green, KY 39,500 3,200 40,202 9,595 0 3,200 49,797 52,997
Knollwood Mall,
St. Louis Park, MN 15,561 0 9,748 21,680 1,767 0 33,195 33,195
Lakeview Square Mall
Battle Creek, MI 27,561 3,579 32,210 0 0 3,579 32,210 35,789
<CAPTION>
Col. F Col. G Col. H Col. I
Accumulated Date of Date Life Upon Which
Description Depreciation Construction Acquired Depreciation is Computed
- --------------- ------------ ------------- ---------- ------------------------
<S> <C> <C> <C> <C>
Bayshore Mall, $11,374 1986-1987 (f)
Eureka, CA
Bellis Fair Mall, 15,369 1987-1988 (f)
Bellingham, WA
Birchwood Mall, 8,153 1989-1990 (f)
Port Huron, MI
Capital Mall 1,599 1993 (f)
Jefferson City, MO
Chapel Hills 3,619 1993 (f)
Colorado Springs, CO
Colony Square Mall 8,837 1986 (f)
Zanesville, OH
Columbia Mall 9,468 1984-1985 (f)
Columbia, MO
Eagle Ridge Mall 476 1995-1996 (f)
Lake Wales, FL
Developments in Progress 0 (f)
Fallbrook Mall, 17,615 1984 (f)
West Hills, CA
Fox River Mall 11,461 1983-1984 (f)
Appleton, WI
Gateway Mall, 10,066 1989-1990 (f)
Springfield, OR
General Growth Properties 58 (f)
Chicago, IL
Grand Traverse Mall, 6,639 1990-1991 (f)
Grand Traverse, MI
Greenwood Mall 4,426 1993 (f)
Bowling Green, KY
Knollwood Mall, 10,422 1978 (f)
St. Louis Park, MN
Lakeview Square Mall 137 1996 (f)
Battle Creek, MI
</TABLE>
F-23
<PAGE> 53
General Growth Properties, Inc.
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 1996
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Costs Capitalized Gross Amounts at Which
Initial Cost Subsequent to Acquisition Carried at Close of Period
---------------------- ------------------------ ----------------------------------
Building and Carrying Building and
Description Encumbrances (a) Land Improvements (b) Improvements Costs (c) Land Improvements Total(d)(e)
- ---------------- ---------------- ------ --------------- ------------ ----------- ----- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lansing Mall
Lansing, MI 47,613 6,978 62,800 0 0 6,978 62,800 69,778
Lockport Mall,
Lockport, NY 7,000 800 10,000 3,449 24 800 13,473 14,273
Mall of the Bluffs,
Council Bluffs, IA 36,655 1,860 24,016 6,101 2,529 2,084 32,646 34,730
Natick Mall
Natick, MA 183,000 65,745 198,359 345 0 65,745 198,704 264,449
Oakwood Mall,
Eau Claire, WI 35,691 3,267 18,281 11,426 1,712 3,267 31,419 34,686
Park Mall
Tucson, AZ 0 4,996 44,994 0 10 4,996 45,004 50,000
Piedmont Mall,
Danville, VA 17,115 2,000 38,000 530 21 2,000 38,551 40,551
The Pines,
Pine Bluff, AR 26,750 1,489 17,627 6,002 1,365 1,276 24,994 26,270
Rio West Mall,
Gallup, NM 9,000 0 19,500 2,852 0 0 22,352 22,352
River Falls Mall,
Clarksville, IN 28,000 3,178 54,610 3,439 5,282 3,182 63,331 66,513
River Hills Mall,
Mankato, MN 0 3,714 29,014 14,226 2,584 3,781 45,824 49,605
Sooner Fashion Mall
Norman, OK 0 2,700 24,300 0 0 2,700 24,300 27,000
SouthShore Mall, 12,000
Aberdeen, WA 650 15,350 3,621 0 650 18,971 19,621
West Valley Mall,
Tracy, CA 56,155 9,295 47,789 0 6,964 9,295 54,753 64,048
Westwood Mall
Jackson, MI 12,597 2,658 23,924 0 0 2,658 23,924 26,582
---------- -------- ---------- -------- ------- -------- ---------- ----------
Grand Totals $1,168,522 $213,128 $1,049,953 $236,922 $53,879 $214,314 $1,340,754 $1,555,068
========== ======== ========== ======== ======= ======== ========== ==========
<CAPTION>
Col. F Col. G Col. H Col. I
Accumulated Date of Date Life Upon Which
Description Depreciation Construction Acquired Depreciation is Computed
- --------------- ------------ ------------- ---------- ------------------------
<S> <C> <C> <C> <C>
Lansing Mall
Lansing, MI 264 1996 (f)
Lockport Mall,
Lockport, NY 3,317 1986 (f)
Mall of the Bluffs,
Council Bluffs, IA 10,016 1985-1986 (f)
Natick Mall
Natick, MA 5,124 1995 (f)
Oakwood Mall,
Eau Claire, WI 8,870 1985-1986 (f)
Park Mall
Tucson, AZ 141 1996 (f)
Piedmont Mall,
Danville, VA 1,281 1995 (f)
The Pines,
Pine Bluff, AR 7,355 1985-1986 (f)
Rio West Mall,
Gallup, NM 5,530 1986 (f)
River Falls Mall,
Clarksville, IN 13,396 1989-1990 (f)
River Hills Mall,
Mankato, MN 7,179 1990-1991 (f)
Sooner Fashion Mall
Norman, OK 60 1996 (f)
SouthShore Mall,
Aberdeen, WA 5,012 1986 (f)
West Valley Mall,
Tracy, CA 1,378 1995 (f)
Westwood Mall
Jackson, MI 102 1996 (f)
--------
Grand Totals $188,744
========
</TABLE>
F-24
<PAGE> 54
General Growth Properties, Inc.
Notes to Schedule III
(Dollars in Thousands)
(a) See description of mortgage notes payable in Note 7 of Notes to
Consolidated Financial Statements.
(b) Initial cost for constructed malls is cost at end of first complete
calendar year subsequent to opening.
(c) Carrying costs consists of capitalized construction-period interest and
taxes.
(d) The aggregate cost of land, buildings and equipment for federal income tax
purposes is approximately $1 billion.
<TABLE>
<CAPTION>
(e) Reconciliation of Real Estate
-------------------------------------------
1996 1995 1994
----------- ---------- -----------
<S> <C> <C> <C>
Balance at begining of year $ 1,248,892 $ 823,108 $ 786,008
Additions 306,176 425,784 37,100
----------- ---------- -----------
Balance at close of year $ 1,555,068 $1,248,892 $ 823,108
=========== ========== ===========
<CAPTION>
Reconciliation of Accumulated Depreciation
---------------------------------------------
1996 1995 1994
----------- ---------- -----------
<S> <C> <C> <C>
Balance at begining of year $ 153,275 $ 127,170 $ 102,846
Depreciation Expense 35,469 26,105 24,324
----------- ---------- ----------
Balance at close of year $ 188,744 $ 153,275 $ 127,170
=========== ========== ==========
</TABLE>
(f) Depreciation is computed based upon the following estimated lives:
Buildings, improvements and carrying costs 40 years
Tenant allowances 10-40 years
Equipment and fixtures 10 years
F-25
<PAGE> 55
EXHIBIT INDEX
2(a) Amended and Restated Stock Purchase Agreement, dated as of October
16, 1995, by and among Sears, Roebuck and Co., Homart Development Co., Homart
Newco One, Inc. and GGP/Homart, Inc.(1)
2(b) Amendment No. 1 to Amended and Restated Stock Purchase Agreement,
dated as of December 22, 1995, by and among Sears, Roebuck and Co., Homart
Development Co., Homart Newco One, Inc. and GGP/Homart, Inc.(1)
2(c) Real Estate Purchase Agreement, dated as of July 31, 1995, by and
among Sears, Roebuck and Co., Homart Development Co. and GGP/Homart, Inc.(1)
2(d) Amendment No. 1 to Real Estate Purchase Agreement, dated as of
October 16, 1995, by and among Sears, Roebuck and Co., Homart Development Co.
and GGP/Homart, Inc.(1)
2(e) Amendment No. 2 to Real Estate Purchase Agreement, dated as of
December 22, 1995, by and among Sears, Roebuck and Co., Homart Development Co.
and GGP/Homart, Inc. (1)
2(f) Mall Purchase Agreement, dated as of December 22, 1995, by and among
Sears, Roebuck and Co., Homart Development Co. and General Growth
Properties-Natick Limited Partnership.(1)
2(g) Contribution Agreement dated December 6, 1996, between Forbes/Cohen
Properties, a Michigan general partnership, and GGP Limited Partnership, a
Delaware limited partnership.(2)
2(h) Contribution Agreement dated December 6, 1996, between Lakeview
Square Associates, a Michigan general partnership, and GGP Limited Partnership,
a Delaware limited partnership.(2)
2(i) Contribution Agreement dated December 6, 1996, between Jackson
Properties, a Michigan general partnership, and GGP Limited Partnership, a
Delaware limited partnership.(2)
3(a) Amended and Restated Certificate of Incorporation of the Company.(3)
3(b) Amendment to Amended and Restated Certificate of Incorporation of the
Company.(5)
3(c) Certificate to Amended and Restated Certificate of Incorporation of
the Company filed on December 21, 1995.
3(d) Bylaws of the Company.(5)
3(e) Amendment to Bylaws of the Company.(5)
4(a) Redemption Rights Agreement, dated July 13, 1995, by and among GGP
Limited Partnership, General Growth Properties, Inc. and the persons listed on
the signature pages thereof.(8)
4(b) Redemption Rights Agreement dated December 6, 1996, among GGP Limited
Partnership, a Delaware corporation, Forbes/Cohen Properties, a Michigan
general partnership, Lakeview Square Associates, a Michigan general
partnership, and Jackson Properties, a Michigan general partnership.(2)
10(a) Amended and Restated Agreement of Limited Partnership of the
Operating Partnership.(6)
10(b) First Amendment to Amended and Restated Agreement of Limited
Partnership.(5)
10(c) Second Amendment to Amended and Restated Agreement of Limited
Partnership.(5)
10(d) Third Amendment to Amended and Restated Agreement of Limited
Partnership.(9)
10(e) Fourth Amendment to Amended and Restated Agreement of Limited
Partnership.(9)
10(f) Fifth Amendment to Amended and Restated Agreement of Limited
Partnership.(9)
S-1
<PAGE> 56
10(g) Sixth Amendment to Amended and Restated Agreement of Limited
Partnership.(9)
10(h) Seventh Amendment to Amended and Restated Agreement of Limited
Partnership.(9)
10(i) Eighth Amendment to Amended and Restated Agreement of Limited
Partnership.(9)
10(j) Rights Agreement between the Company and the Limited Partners of the
Operating Partnership.(6)
10(k) Agreement Concerning Indemnification between the Company, the
Operating Partnership and the Limited Partners of the Operating Partnership.(6)
10(l) Agreement of Limited Partnership of GG Development.(3)
10(m) Letter Agreement dated December 30, 1992, among the partners of GG
Development with respect to assignment of interests to the Operating
Partnership.(3)
10(n) Form of Management Agreement between the Property Manager and a
Property Partnership.(3)
10(o) Form of Management Agreement between the Property Manager and the
Operating Partnership.(3)
10(p) Real Estate Management Agreement dated July 1, 1996, between General
Growth Management, Inc. and GGP Limited Partnership.
10(q)* General Growth Properties, Inc. 1993 Stock Incentive Plan, as
amended.(5)
10(r) Forms of Cash Flow Support Agreements between the Operating
Partnership and the partners of GG Development.(3)
10(s) Form of Amended and Restated Agreement of Partnership for each of
the Property Partnerships.(3)
10(t) Sale-Purchase Agreement dated as of December 30, 1992, by and
between Equitable and the Company.(3)
10(u) Sale-Purchase Agreement dated as of December 30, 1992, by and
between GG Development and the Company.(3)
10(v) Form of Indemnification Agreement between the Company and its
directors and officers.(3)
10(w) Form of Indemnification Agreement between the Operating Partnership,
Martin Bucksbaum, Matthew Bucksbaum, Mall Investment L.P. and M. Bucksbaum
Company.(3)
10(x) Form of Registration Rights Agreement between the Company and the
Bucksbaums.(3)
10(y) Form of Registration Rights Agreement between the Company and
certain trustees for the IBM Retirement Plan.(3)
10(z) Form of Incidental Registration Rights Agreement between the
Company, Equitable, Frank Russell and Wells Fargo.(3)
10(aa) Form of Letter Agreements restricting sale of certain shares of
Common Stock.(3)
S-2
<PAGE> 57
10(bb) Stock Purchase Agreement, as amended, by and among The Prudential
Insurance Company of America, GGP Limited Partnership, Westfield U.S.
Investment, Pty. Limited and Whitehall Street Real Estate Limited Partnership
III dated as of December 13, 1993.(7)
10(cc)* Letter Agreement dated October 14, 1993, between the Company and
Bernard Freibaum.(6)
10(dd) Form of Stock Purchase Agreement by and among GGP Limited
Partnership, Westfield U.S. Investments Pty. Limited and Westfield Corporation,
Inc.(2)
10(ee) Form of GGP Option Agreement by and among GGP Limited Partnership,
Westfield U.S. Investments Pty. Limited and CenterMark Properties, Inc.(2)
10(ff) GGP Agreement, dated May 13, 1996, by and among GGP Limited
Partnership, Westfield U.S. Investments Pty. Limited and CenterMark Properties,
Inc.(4)
10(gg)* Form of Option Agreement between the Company and certain executive
officers.
21 List of Subsidiaries.
23 Consent of Coopers & Lybrand L.L.P. - Independent Accountants.
24 Powers of Attorney
27 Financial Data Schedule
*A compensatory plan or arrangement required to be filed.
(1) Previously filed as an exhibit to the Company's Current Report on Form
8-K dated January 5, 1996.
(2) Previously filed as an exhibit to the Company's Current Report on Form
8-K dated January 3, 1996.
(3) Previously filed as an exhibit to the Company's Registration Statement
on Form S-11 (No. 33-56640), incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's Current Report on Form
8-K dated July 16, 1996.
(5) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
(6) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1993.
(7) Previously filed as an exhibit to the Company's Current Report on Form
8-K dated February 25, 1994.
(8) Previously filed as an exhibit to the Company's Current Report on Form
8-K dated July 17, 1996.
(9) Previously filed as an exhibit to the Company's Registration Statement
on Form S-3 (No. 33-23035), incorporated herein by reference.
S-3
<PAGE> 1
EXHIBIT 3(C)
CERTIFICATE OF CORRECTION
FILED TO CORRECT A CERTAIN ERROR
IN THE SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF GENERAL GROWTH PROPERTIES, INC.
FILED IN THE OFFICE OF THE SECRETARY OF STATE OF DELAWARE
ON MAY 24, 1995
It is hereby certified that:
1. The name of the corporation (the "corporation") is General Growth
Properties, Inc.
2. The Second Amended and Restated Certificate of Incorporation of the
corporation, was filed by the Secretary of State of Delaware on May 24, 1995,
and is hereby corrected, as permitted by Section 103(f) of the General
Corporation Law of the State of Delaware.
3. Article IV D.(1) of said instrument, and more specifically, the
definition of the term "Ownership Limit" set forth therein, currently contains
an inaccuracy in that it establishes the initial Ownership Limit at 5%, rather
than 7.5%, of the value of the outstanding Equity Stock of the Corporation.
4. The definition of "Ownership Limit" set forth in Article IV D.(1) of
said instrument in its corrected form is as follows:
"Ownership Limit" shall initially mean 7.5% of the value of the
outstanding Equity Stock of the Corporation, and after any adjustment as
set forth in subparagraph D(11) of the Article IV, shall mean such
greater percentage (but not more than 9.8%) of the value of the
outstanding Equity Stock as so adjusted.
IN WITNESS WHEREOF, said General Growth Properties, Inc. has caused this
certificate to be signed by MATTHEW BUCKSBAUM, its Chairman and CEO this 21st
day of December, 1995.
GENERAL GROWTH PROPERTIES, INC.
By:
------------------------------
Its: Chairman and CEO
Attest:
- ------------------------------
Marshall E. Eisenberg,
Secretary
<PAGE> 1
EXHIBIT 10(p)
REAL ESTATE MANAGEMENT AGREEMENT
THIS AGREEMENT is made this 1st day of July, 1996, between GGP
Limited Partnership, a Delaware limited partnership, having an office at 55 West
Monroe, Chicago, Illinois, 60603, ("Owner"), and GENERAL GROWTH MANAGEMENT,
INC., a Delaware corporation, having a principal address at 55 West Monroe,
Chicago, Illinois, 60603 ("Agent").
WITNESSETH
In consideration of the Covenants herein contained and for other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT AND AUTHORITY OF AGENT
1.1 Owner owns the shopping centers (each individually referred to as the
"Premises"), identified on Exhibit A attached hereto and made a part hereof.
Owner hereby appoints Agent as the exclusive managing and leasing agent for the
Premises, and hereby authorizes Agent to exercise such powers with respect to
the Premises as is permitted herein, and as may be necessary for the performance
of Agent's obligations under Article II, and Agent accepts such appointment on
the terms and conditions hereinafter set forth for the term provided in Article
V. Agent shall have no right or authority, express or implied, to commit or
otherwise obligate Owner in any manner whatsoever except to the extent
specifically provided herein and agrees that it shall not hold itself out as
having authority to act on behalf of Owner in any manner which is beyond the
scope of the terms of this Agreement.
ARTICLE II
AGENT'S AGREEMENT
2.1 Agent, on behalf of Owner, shall implement, or cause to be implemented,
the decisions of Owner and shall conduct the ordinary and usual business affairs
of Owner as provided in this Agreement. Agent shall at all times conform to the
policies and programs established by Owner and the scope of Agent's authority
shall be limited to said policies. Agent shall act in a fiduciary capacity with
respect to the cash and cash equivalent assets of Owner which are within the
custody or control of Agent. Agent shall deal at arm's length with all parties
and serve Owner's interests at all times. All undertakings incurred by Agent on
behalf of Owner in accordance with this Agreement shall be at the cost and
expense of Owner unless otherwise provided for herein. Agent agrees to use
diligent efforts in the management and operation of the Premises. Agent shall
perform the following duties in connection with the management and operation of
the Premises:
<PAGE> 2
(a) Contract, for periods limited to Owner's possession of the Premises, but
not in excess of one (1) year, in the name of Owner, for gas, electricity,
water and such other services as are being currently furnished to the
Premises. Service contracts shall be written to include a provision
allowing termination by Owner upon 30 days' notice whenever possible. All
service contracts in effect at the date hereof for the Premises, including
the terms thereof (with cancellation right, if any), the services provided
thereunder and the charges called for thereby, should be detailed in the
annual budget package. No such contract, other than for water or utilities,
which involves an expenditure in excess of the amount set forth in
paragraph 3 of Exhibit A attached hereto shall hereinafter be entered into
by Agent without the prior approval of Owner.
(b) Select, employ, pay, supervise, direct and discharge all employees
necessary for the proper, safe and economic operation and maintenance of
the Premises, in number and at wages in accordance with industry practices
and the annual budget, carry Worker's Compensation Insurance (and, when
required by law, compulsory Non-Occupational Disability Insurance) covering
such employees, and use reasonable care in the selection and supervision of
such employees. Agent shall keep bi-weekly time sheets which shall be
available for inspection by Owner. Agent shall prepare or cause to be
prepared and timely filed and paid, all necessary returns, forms and #
payments in connection with unemployment insurance, medical and life
insurance policies, pensions, withholding and social security taxes and all
other taxes relating to said employees which are imposed by any federal,
state or municipal authority. Agent shall also provide usual management
services in connection with labor relations and shall prepare, maintain and
file all necessary reports with respect to the Fair Labor Standards Act and
all other required statements and reports pertaining to labor employed at
the Premises. Agent shall use diligent efforts to comply with all laws and
regulations and collective bargaining agreements, if any, affecting such
employment. Owner shall have the right to review and approve all collective
bargaining agreements which affect the Premises prior to their
implementation or acceptance by Agent. Agent shall be and shall continue
throughout the term of this Agreement to be an equal opportunity employer.
All persons employed in connection with the operation and maintenance of
the Premises shall be employees of Agent or employees of contractors
approved by Owner to provide contract services to the Premises.
(c) Keep the Premises in a safe, clean, rentable and sightly condition and
make and contract for all repairs, alterations, replacements, and
installations, do all decorating and landscaping, and purchase all supplies
necessary for the proper operation of the Premises or the fulfillment of
Owner's obligations under any lease, operating agreement or other agreement
or compliance with all governmental and insurance requirements, provided
that, except as provided in Section 2.4 hereof, Agent shall not make any
purchase or do any work, the cost of which shall exceed the approved budget
or the amount set forth in paragraph 3 of Exhibit A attached hereto,
without obtaining in each instance the prior approval of Owner, except in
circumstances which Agent shall deem to constitute an emergency requiring
immediate action for the protection of the Premises or of tenants or other
persons or to avoid the suspension of necessary services or in order to
cure any violation or other condition which would subject Owner or Agent to
any criminal penalty or any civil fine in excess of $5,000.00. Agent shall
notify Owner immediately of the necessity for, the nature of, and the cost
of, any such emergency repairs or any action to cure any such violation or
other condition. Agent shall arrange for and supervise, on behalf of Owner,
the performance of all
<PAGE> 3
alterations and other work to prepare or alter space in the Premises for
occupancy by tenants thereof. If Owner shall require, Agent shall submit a
list of contractors and subcontractors performing tenant work, repairs,
alterations or services at the Premises under Agent's direction.
It is understood that Agent shall not be required to undertake the making
or supervision of extensive reconstruction of the Premises or any part
thereof except after written agreement by the parties hereto as to any
additional fee to be paid for such services.
Owner shall receive the benefit of all discounts and rebates obtainable by
Agent in its operation of the Premises, except that Agent shall be
permitted to keep up to a five percent rebate for goods purchased for the
Premises through Agent's central purchasing department. When requested by
Owner, Agent agrees to obtain competitive bids for the performance of any
work at the Premises, to furnish copies of such bids to Owner and to accept
such bid as Owner may direct.
If Agent desires to contract for repair, construction or other service
described in this paragraph (c) (other than work done at the request of a
tenant and at the tenant's sole cost and expense, hereinafter referred to
as "Tenant Work") with a party with respect to which any partner or
shareholder of Agent holds a beneficial interest, or with any subsidiary,
affiliate or related corporation in which Agent shall have a financial
interest, such interest shall be disclosed to, and approved by, Owner
before such services are procured. The cost of any such services shall
likewise be at competitive rates, notwithstanding that tenants of the
Premises may be required to pay such costs. Agent, or the general
contractor working under the supervision of Agent, is authorized to make
and install Tenant Work, and Agent may collect from such tenant or such
general contractor, for its sole account, its charge for supervisory
overhead on all such Tenant Work. Agent shall hold Owner harmless from any
claims which may be advanced by any such tenant in connection with Tenant
Work performed by Agent or under Agent's supervision. Agent, however, shall
not require any tenant to use Agent, its subsidiary, affiliate or related
corporation or its general contractor to perform such Tenant Work.
(d) Handle promptly complaints and requests from tenants and parties to
reciprocal easement and/or operating agreements, notify Owner of any major
complaint made by any such tenant or party and notify owner promptly
(together with copies of supporting documentation) of: the receipt of any
notice of violation of any governmental requirements; any known orders or
requirements of insurers, insurance rating organizations, Board of Fire
Underwriters or similar bodies; any known defect in the Premises; any known
fire or other damage to the Premises, and, in the case of any serious fire
or other serious damage to the Premises, Agent also shall immediately
provide telephone notice thereof to Owner's General Insurance Of rice, so
that an insurance adjuster can view the damage before repairs are started.
and complete customary loss reports in connection with fire or other damage
to the Premises.
(e) Notify Owner's General Liability Insurance carrier and Owner promptly
of any personal injury or property damage known to Agent occurring to or
claimed by any tenant or third party on or with respect to the Premises and
promptly forward to the carrier, completed insurance forms, any summons,
subpoena, or other like legal document served upon Agent relating to actual
or
<PAGE> 4
alleged potential liability of Owner, Agent, or the Premises, with copies
to Owner of all such documents.
(f) Advise Owner of those exceptions in leases, operating agreements and
other agreements in which the tenants or parties to such agreements do not
agree to hold Owner harmless with respect to liability from any accidents.
(g) At the option of Owner, receive and collect rent and all other monies
payable to Owner by all tenants and licensees in the Premises and by all
other parties including department stores under ground leases and
reciprocal easement agreements and tenants under leases of free-standing
stores. In this connection, Agent shall calculate all amounts due to Owner
from such tenants, licensees and other parties, including annual or
periodic adjustments where applicable, and shall, when appropriate, submit
statements or invoices to such tenants, licensees and parties. Agent shall
deposit the same promptly in the banks periodically designated by Owner
(the "Bank") in accounts with title including a distinctive portion of
Agent's name and such designation as Owner may direct (the "Bank Account"),
which account shall be used exclusively for such funds. Owner's
representative will be a signatory on all bank accounts maintained by Agent
and such representative's signature shall be required on all checks in
excess of $100,000.00 and for withdrawals in excess of $2,000,000.00 in any
month. All amounts received by Agent for or on behalf of Owner shall be and
remain the property of Owner. Checks may be drawn on the above-mentioned
bank account only for purposes authorized under this Agreement. No funds of
Agent or others shall be commingled with funds in any such bank account.
Owner has the right to control the types of cash management accounts and
dictate the specifics of said accounts with respect to disbursement and
management of funds.
(h) Serve notice of default upon tenants of space in the Premises and other
parties which are in default in performing obligations under their leases,
reciprocal easement and/or other agreements, with copies sent
simultaneously to Owner, and attempt to cause such defaults to be cured.
Agent shall, subject to Owner's consent with respect to any tenant who
occupies more than 1,000 square feet, utilizing counsel theretofore
approved by Owner, institute all necessary legal action or proceedings for
the collection of rent or other income from the Premises or the ousting or
dispossessing of tenants or other persons therefrom and all other matters
requiring legal attention. Agent agrees to use its best efforts to collect
rent and other charges from tenants and other occupants of the Premises in
a timely manner, and to pursue Owner's legal remedies for nonpayment of
same. Agent shall not terminate tenant leases in the Premises without
Owner's consent. Owner reserves the right to designate or approve legal
counsel and to control litigation affecting or arising out of the operation
of the Premises, including without limitation the settlement of such
litigation.
(i) Bond Agent and all of Agent's employees who may handle or be
responsible for monies or property of Owner with a "comprehensive 3-D" or
"Commercial Blanket" bond, in an amount of $ 1,000,000.00.
(j) Notify Owner immediately of any known fire, accident or other casualty,
condemnation proceedings, rezoning or other governmental order, lawsuit or
threat thereof involving the
<PAGE> 5
Premises; and the receipt of any notice of violations relative to the
leasing, use, repair and maintenance of the Premises under governmental
laws, rules, regulations, ordinances or like provisions.
(k) If Owner so directs, make timely payment of real estate and personal
property taxes and assessments levied or assessed against the Premises or
personal property used in connection therewith and any other charge that
may become a lien against the Premises. Owner may direct that payment of
such taxes and assessments either be made to the taxing authority or to a
mortgage lender holding an escrow account for such items. Agent shall
participate in Owner's tax review program and check tax assessments and,
when so requested, Agent shall assist Owner in its efforts to reduce such
taxes.
Agent shall promptly furnish Owner with copies of all assessment notices
and receipt tax bills.
(l) Cooperate with Owner in attaining certain corporate objectives,
including, purchase and reporting of goods and services furnished or
supplied by minority groups.
(m) Promptly comply with all present and future laws, ordinances, orders,
rules, regulations and requirements of all Federal, state and local
governments, courts, departments, commissions, boards and offices, any
national or local Board of Fire Underwriters or Insurance Services offices
having jurisdiction, or any other body exercising functions similar to
those of any of the foregoing ("Legal Requirements") which may be
applicable to the Premises or any part thereof or to the leasing, use,
repair, operation and management thereof, but only to the extent that such
compliance is reasonably capable of being carried out by Agent and Agent
has available the necessary funds therefor from collections or advances by
Owner. Agent shall give prompt notice to Owner of any known violation or
the receipt of notice of alleged violation of such laws and Agent shall not
bear responsibility for failure of the Premises or the operation thereof to
comply with such laws unless Agent has committed gross negligence or
willful misconduct in the performance of Agent's obligations under this
Agreement or in the performance of any other duties owed to Owner or third
parties by Agent. If and when directed by Owner, Agent shall institute in
its name, or in the name of Owner, using counsel selected by Owner,
appropriate actions or proceedings to contest any such law, ordinance,
rule, regulation, order, determination or requirement.
(n) Promote the Premises and participate as Owner's representative in any
Merchant's Associations or Advertising and Promotional Organizations
(collectively, the "Promotional Organizations") established to promote the
Premises.
(o) Consent to and approve tenant alteration work and installations which
are performed by tenants of leased space in the Premises and are provided
for in the leases of such tenants. Agent is authorized to approve tenant
alteration work and installations not provided for in leases if (i) such
alteration work and installations are made solely at the expense of the
tenant, and (ii) such alteration work and installations do not affect the
structural or mechanical integrity of any building. Agent shall
periodically monitor the progress of any tenant alteration work and
installations that are visible to the public to confirm that the tenant
work is being done in a good and workmanlike manner, and in substantial
conformity with any plans and specifications approved by Owner or
<PAGE> 6
Agent. Agent shall notify Owner of any material deficiencies or material
variations from the approved plans and specifications of any tenant.
(p) Provide, upon Owner's request in accordance with the provisions of
Section 7 and Section 9 of Exhibit A, general contracting and construction
management services ("Development Services") and consultation to Owner for
the Premises, which shall include, without limitation, the management,
supervision and administration of, and provisions for services for the
improvement expansion (and in the event of damage or condemnation, the
reconstruction) of the Premises, including advice, expertise and support of
Agent provided and/or retained and/or coordinated by home office and
on-site personnel including, without limitation, executive personnel,
design and engineering personnel, clerical personnel, legal and accounting
personnel. Such personnel shall perform consultation and various functions
involved with Development Services including, without limitation, the
following: design, planning, architectural, engineering, acquisition and
negotiation, negotiations with department stores and other anchors for site
acquisition and operation in the Premises; permits and licenses; preopening
advertising and publicity; market research, site work; negotiations with
public authorities; attendance of, public hearings; project management and
all other activities necessary to accomplish the improvement, expansion or
reconstruction of the Premises. It is understood that Development Services
and consultation with Owner may or may not involve Agent's in-house
personnel; by mutual agreement of Agent and Owner, outside professionals or
other persons may be engaged to provide Development Services and
consultation with Owner, provided that Agent agrees to require any
contractor or subcontractor brought onto the Premises to have workers'
compensation and employers liability insurance in the necessary statutory
amounts and comprehensive general liability insurance for at least $
1,000,000.00.
(q) If Owner so directs, pay when due (i) all debt service and other
amounts due under any mortgages which encumber the Premises or any part
thereof, and (ii) all rent and other charges payable under any ground lease
of land included in the Premises under which Owner is the tenant and give
Owner notice of the making of each payment.
(r) Carry out and comply with, directly or through a third party, all
requirements on the part of Owner under all such mortgages and ground
leases, all leases of space in the Premises, all ground leases and
reciprocal easement agreements with department stores and all other
agreements affecting or relating to the Premises which are known or made
known to Agent, including, without limitation, the furnishing of all
services and utilities called for therein, but only to the extent that such
requirements are at the time reasonably capable of being carried out by
Agent and Agent has available the necessary funds therefor from collections
or advances by Owner, provided that Agent shall promptly notify Owner if
Agent cannot carry out such requirements or has insufficient funds
available to do so. Agent shall notify Owner promptly of any default under
any such mortgage, lease, ground lease, reciprocal easement or other
agreement on the part of Owner, the tenant or other party thereto of which
Agent becomes aware.
(s) Use its reasonable efforts to comply with and require compliance with
the requirements of leases of space in the Premises, ground leases,
reciprocal easement agreements and all other agreements affecting or
relating to the Premises which are known or made known to Agent on the
<PAGE> 7
part of tenants, department stores and other parties thereto and enforce
compliance with the rules and regulations, sign criteria and like standards
for the Premises adopted by Owner from time to time.
(t) Furnish Owner with an executed copy of each lease, lease renewal, lease
amendment, service contract and other agreement entered into on or after
the date of this Agreement in connection with the operation, management and
leasing of the Premises, and use reasonable efforts to secure from tenants
and parties to reciprocal easement agreements, and furnish to Owner, any
certificates of insurance and renewals thereof required to be furnished by
the terms of their leases or agreements. All such executed copies of leases
shall be maintained in Agent's office with additional lease copies together
with Insurance Certificates maintained at each of the shopping center
locations.
(u) Inspect the Premises periodically and submit reports of findings and
recommendations to Owner which shall include, without limitation,
recommendations as to required repairs, replacements or maintenance. Agent
shall keep and submit annual written reports of all material alterations
made to the Premises, no matter by whom effected.
(v) Erect barriers or chains for the purpose of blocking access to the
common areas of and buildings included in the Premises as local law may
require, or, as directed in writing by Owner, in order to avoid the
dedication of the same for public use and furnish appropriate evidence of
same to Owner. Agent shall give any advance notice of the erection of such
barriers or chains which may be required under reciprocal easement
agreements or ground leases with department stores.
(w) Use its reasonable efforts to obtain from tenants of the Premises and
department stores which are parties to reciprocal easement agreements or
ground leases waivers of their insurers' rights of subrogation in respect
to policies of fire and extended coverage and other property damage
insurance carried by them in favor of Owner, Agent and any department store
or tenant for which Owner is obligated to attempt to obtain such waivers
under a ground lease, reciprocal easement agreement or space lease.
(x) Assist Owner in preparing any statements required to be submitted by
Owner under the terms of mortgages, ground leases, reciprocal easement
agreements and leases.
(y) Perform its duties in renting, managing, operating and maintaining the
Premises applying prudent and reasonable business practices which are
consistent with those followed in respect of the Premises prior to the date
of this Agreement, using reasonable care and diligence in carrying out
properly and efficiently its responsibilities under this Agreement. Agent
shall maintain those portions of the common areas of the Premises which are
Owner's obligation to maintain in a clean, safe and attractive condition,
use reasonable efforts to enforce the provisions of applicable leases,
ground leases and reciprocal easement agreements so as to cause tenants and
department stores to maintain their premises and common areas, if any, in
similar condition, arrange for necessary security for the Premises and
their common areas and arrange for cleaning and snow removal for the
parking areas and roadways of the Premises. Agent shall recommend to Owner
from time to time such procedures with respect to the
<PAGE> 8
Premises as Agent may deem advisable for the more efficient and economic
management and operation thereof.
(z) If leasing guidelines or any Legal Requirement (as defined in paragraph
2.1 (m) hereof) now or hereafter in effect require that tenant security
deposits be maintained, a separate interest-bearing account for such
security deposits (the "Security Deposit Account") shall be opened by Agent
at a bank approved by Owner. The Security Deposit Account shall be
maintained in the name of Agent in accordance with the relevant lease or
Legal Requirement, as the case may be, and shall be used only for tenant
security deposits. The bank shall be informed that the funds in the
Security Deposit Account are held in trust for Owner. Agent shall have the
authority to remit to tenants any interest to which they are entitled on
their security deposit, in accordance with their leases, but Agent shall
obtain the written approval of Owner prior to the return of such deposits
or any other security (including letters of credit) to any tenant when the
amount, in any single instance, exceeds $250,000.00.
Owner recognizes and understands that Environmental Services (as
hereinafter defined) are not actions or services that Agent is required to
perform under this Agreement and Owner further recognizes and understands
that Agent is not a consultant or a contractor that performs Environmental
Services. Upon Owner's request, Agent agrees to obtain and coordinate for
and on behalf of Owner, such Environmental Services that Owner may request
or require. Owner shall reimburse Agent for its administrative costs in
connection with the coordination of such Environmental Services as provided
in Exhibit A, paragraph 11 of the Agreement. In addition, Owner shall
reimburse Agent for the costs of outside professionals retained to perform
Environmental Services. Environmental Services is defined to be those acts
or actions involving the presence, use, exposure, removal, restoration, or
introduction of Hazardous Materials (as hereinafter defined) and the
investigation of and compliance with any and all applicable rules, laws, or
regulations of local state or federal authorities which apply or regulate
Hazardous Materials. Hazardous Materials means any hazardous, radioactive,
or toxic substance, material or waste listed in the United States
Department of Transportation Hazardous Materials Table (49 CFR 172.101); or
by the Environmental Protection Agency as hazardous substances (40 CFR Part
302) and amendments thereto; or such substances, materials and waste which
are or become regulated under applicable local, state or federal law
including, without limitation, materials, wastes or substances which are
petroleum products, asbestos, polychlorinated biphenyls, or designated as
hazardous substances under Section 311 of the Clean Water Act, 33 U.S.C.
Section 1251 et seq. (33 U.S.C. Section 1321) or listed pursuant to Section
307 of the Clean Water Act (33 U.S.C. Section 1317); or defined as
hazardous waste under Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903); or
defined as hazardous substances under Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section
9601, et seq. (42 U.S.C. Section 9601).
2.2 Agent agrees to render monthly reports relating to the management and
operation of the Premises for the preceding calendar month on or before the
fifteenth (15th) day of each month in form satisfactory to Owner in accordance
with Exhibit B. Agent agrees that Owner shall have the right to require the
transfer to Owner at any time of any funds in the Bank Account considered by
Owner to be in excess of an amount reasonably required by Agent for disbursement
in connection with the Premises.
<PAGE> 9
Agent agrees to keep records with respect to the management and operation of the
Premises as prescribed by Owner, and to retain those records for periods
specified by Owner. Owner and any Partner in Owner shall have the right to
inspect such records and audit the reports required by this Section during
business hours for the life of this Agreement and thereafter during the period
such records are to be retained pursuant to this Section. In addition, Agent
agrees that such records may be examined from time to time during the period
aforesaid by any of the supervisory or regulatory authorities having
jurisdiction over Owner.
2.3 Agent shall ensure such control over accounting and financial
transactions as is reasonably required to protect Owner's assets from loss or
diminution due to gross negligence or willful misconduct on the part of Agent's
associates or employees. Losses caused by gross negligence or willful misconduct
shall be borne by Agent.
2.4 Agent shall establish and prepare, in the form authorized by Owner,
with such additional changes as may be reasonably requested by Owner, operating
and capital improvement budgets for the promotion, operation, repair and
maintenance of the Premises for each calendar year (Annual Budget). Preliminary
and final budgets will be due 120 and 75 days, respectively, prior to
commencement of the calendar year to which they relate. Such budgets shall be
prepared on both an accrual basis and a cash basis showing a month-by-month
projection of income and expenses and capital expenditures. At least 45 days
prior to the end of each year, Agent shall meet with Owner to review such
budgets for the subsequent year. Upon receiving Owner's approval Agent shall use
its best efforts to comply with such final budgets.
(a) Agent shall meet with Owner on a regular basis, not less frequently
than semi-annually and otherwise upon reasonable call by Owner, to review
the operations of the Premises, to review and, if appropriate, revise in
light of actual experience the operating and capital improvement budgets
theretofore approved by Owner and to consider other matters which Owner may
raise.
(b) Upon approval of the operating budget by Owner, and unless and until
revoked or revised by Owner, Agent shall have the right, without further
consent or approval by Owner to incur and pay the operating expenses set
forth in the approved operating budget, subject to paragraph 2.1(g) above.
(c) At the request of Owner from time to time Agent shall prepare and
submit to Owner (i) operating projections for the Premises for the ensuing
five (5) years, such projections to be made on a year-by-year basis and to
be based on Agent's best judgment as to the future, taking into
consideration known circumstances and circumstances Agent can reasonably
anticipate are likely to occur, and (ii) a schedule in reasonable detail of
capital improvements, repairs and replacements not provided for in the
current capital improvement budget which Agent reasonably anticipates will
be required or should be made in the foreseeable future, with Agent's
opinion as to the relative priority and cost of each thereof.
2.5 Agent shall also participate in Owner's property review programs to the
extent requested by Owner. Such review shall include assets, investment,
financial and strategy profiles in form satisfactory to Owner. Agent shall
respond, within 10 days, to Owner's management evaluation reports concerning
<PAGE> 10
actions to be taken by Agent to correct or modify its management standards for
the operations, leasing or financial services provided for the Premises. If
Owner shall request that Agent's home office or regional office personnel travel
to the Premises to participate in Owner's property review programs or for any
other reason (unless such reason is for normal supervision), the reasonable cost
of meals, travel and hotel accommodations expenses incurred by such home office
personnel in connection with such travel shall be reimbursed to Agent by Owner.
Agent shall, however, bear the full cost and expenses incurred by its home
office or regional office personnel in connection with their travel to the
Premises to the extent such travel is required by the Agent for the normal
supervision of the management and leasing of the Premises.
2.6 Agent agrees to use its best efforts to have all space within the
Premises rented to desirable tenants, satisfactory to Owner, considering the
nature of the Premises, and in connection therewith:
(a) To negotiate, as the exclusive agent of Owner, all leases and renewals
of leases, it being understood that all inquiries to Owner with respect to
leasing any portion of the Premises shall be referred to Agent. All leases
and renewals for lease terms in excess of ninety (90) days must be prepared
in accordance with Exhibit C by Agent in accordance with the annual
approved budget and be submitted to Owner's representative for execution by
Owner. Agent is authorized to negotiate and execute leases and license
agreements with lease terms or with durations of ninety (90) days or less
(temporary tenant leases). If Agent shall receive a prospective tenant
reference from a property other than the Premises which Agent or any
subsidiary or affiliate manages (other than a property managed by Agent for
Owner) Agent shall promptly declare its potential conflict of interest to
Owner, and Owner shall determine if negotiations with such prospective
tenant shall be undertaken by Agent, Owner or a third party approved by
Owner. References of prospective tenants, as well as their varying use
requirements, shall be investigated carefully by Agent. Agent also is
authorized to negotiate and execute on Owner's behalf lease amendments
which: (i) change a tenant's commencement date by sixty (60) days or less
(or for such longer period as is approved by Owner); (ii) change a tenant's
permitted use by allowing the sale of such additional items as are
reasonably related to the tenant's primary and principle use, provided
Agent has no reason to know of any lease at the center prohibiting such
use; (iii) change a tenant's marketing charge or promotional charge or
advertising obligation.
Owner acknowledges and understands that Agent manages properties for third
parties. Owner further acknowledges and understands that Agent routinely
and customarily negotiates tenant leases for multiple locations involving
two or more properties (one or more of which may be the Premises and one or
more of which may be properties owned by others). Agent conducts such
multiple location negotiations in good faith for the benefit and interests
of Owner and other property owners. Agent shall be entitled to assume that
such leasing practices are approved and acceptable to Owner, unless and
until Owner specifically disapproves the practice and so notifies Agent in
writing.
(b) With Owner's prior approval, to advertise the Premises or portions
thereof for rent, by means of periodicals, signs, plans, brochures and
other means appropriate to the Premises.
<PAGE> 11
(c) In no event shall Agent engage or utilize the services of an outside broker
in connection with any lease without Owner's prior written consent. In any
case in which Owner requests or gives such consent, Agent shall cause such
broker to enter into a written agreement with Owner, on terms reasonably
satisfactory to Owner, with respect to such broker's commission and Owner
shall be responsible for the payment of such commission if earned pursuant
to the terms of said agreement.
(d) Agent will, in each instance, negotiate for the inclusion in all leases
entered into by Owner a provision to the effect that recourse on such
obligation shall be had only against the shopping center to which such
obligation relates, and no recourse shall be sought against Owner or any
other person holding, directly or indirectly, a beneficial interest in the
shopping center.
2.7 Agent agrees, for itself and all persons retained or employed by Agent
in performing its services, to hold in confidence and not to use or disclose to
others any confidential or proprietary information of Owner heretofore or
hereafter disclosed to Agent ("Confidential Information"), including, but not
limited to, any data, information plans, programs, processes, costs, operations
or the names of any tenants which may come within the knowledge of Agent in the
performance of, or as a result of, its services, except if required by judicial
or administrative order, or if Owner specifically gives Agent written
authorization to disclose any of the foregoing to others or such disclosure as
is required in the direct performance of Agent's duties hereunder. If Agent is
required by a judicial or administrative order to disclose any Confidential
Information, Agent shall promptly notify Owner thereof, consult with Owner on
the advisability of taking steps to resist or narrow such request and cooperate
with Owner in any attempt it may make to obtain an order or other assurance that
confidential treatment will be accorded to the Confidential Information
disclosed.
2.8 If at any time there shall be insufficient funds available to Agent
from collections to pay any obligations of Owner required to be paid under this
Agreement, Agent shall promptly notify Owner and Agent shall not be obligated to
pay such obligations unless Owner furnishes Agent with funds therefor.
2.9 Center Advertising Agency ("Center"), an unincorporated division of
Agent, directs, under Agent's supervision, the promotional activities for the
Premises. Incident to such services, Center provides promotional directors for
the Premises, places the advertising for the Promotional Organizations and
contracts for income-producing promotional activities, Agent shall continue to
use Center for such activities. All income relating to Center's contracts for
promotional activities for the Premises shall belong to Owner. Owner
acknowledges that Center may retain the customary trade discounts or rebates
incident to its contracting for advertising for the Promotional Organizations,
the cost of which advertising is borne by the Promotional Organizations. Owner
acknowledges that Center's cost of providing promotional directors to the
Promotional Organizations is reimbursed to Center by the Promotional
Organizations at an annual rate equal to twenty percent (20%) of the applicable
Marketing Fund. Owner agrees that Center shall be entitled to receive the fee
set forth in Exhibit A attached hereto for its services incident to contracting
for income-producing promotional activities.
2.10 Agent assumes no responsibility under this Agreement other than to
render the services called for hereunder in good faith, and Owner shall make no
claim against Agent on account of any alleged errors of judgment made in good
faith in connection with the operation of the Premises. Agent shall not be
liable to Owner or others except by reason of acts constituting willful
misfeasance or gross
<PAGE> 12
negligence on the part of Agent, and Owner agrees to indemnify, defend and hold
harmless Agent and its shareholders, directors, officers and employees from and
against all claims, actions, causes of action, costs and expenses (including,
but not limited to reasonable attorneys' fees) directly or indirectly arising
from the claims of any third party, except only those claims where liability
arises from acts constituting willful misfeasance or gross negligence on the
part of Agent.
ARTICLE III
OWNER'S AGREEMENTS
3.1 Owner, at its option, may pay directly all taxes, special assessments,
ground rents, insurance premiums and mortgage payments. If Owner makes such
election, Agent shall advise Owner of the due dates of such taxes assessments,
insurance premiums and mortgage payments.
3.2 Owner shall self-insure or, at its option, carry insurance upon the
Premises and shall look solely to such insurance for indemnity against any loss
or damage to the Premises, and to the extent that policies shall be procured,
Owner shall obtain waivers of subrogations against the Agent under such policies
if available at no additional cost to Owner. Owner shall provide and maintain at
Owner's sole cost and expense public liability insurance, including bodily
injury, contractual liability (with respect to the indemnity set forth in
Section 3.3 hereof) and broad form property damage liability, in connection with
the ownership, use and occupancy of the Premises, in the amount of not less than
$100,000,000. Agent shall be named in the public liability policies as an
additional insured.
3.3 Owner agrees to indemnify and save harmless Agent and its shareholders,
directors, officers and employees from and against all claims, losses and
liabilities resulting from: (i) damage to property or injury to, or death of,
persons from any cause whatsoever when Agent is carrying out the provisions of
this Agreement or acting under the direction of Owner in or about the Premises;
(ii) claims for defamation and false arrest when Agent is carrying out the
provisions of this Agreement or acting under the direction of Owner, and (iii)
claims occasioned by or in connection with or arising out of acts or omissions,
other than criminal acts, of the Agent when Agent is carrying out the provisions
of this Agreement or acting under the direction of Owner (except in cases of
Agent's willful misconduct or gross negligence and to defend or cause to be
defended, at no expense to Agent or such persons, any claim, action or
proceeding brought against Agent or such persons or Agent and Owner, jointly or
severally, arising out of the foregoing, and to hold Agent and such persons
harmless from any judgment, loss or settlement on account thereof.
Notwithstanding the foregoing, Owner shall not be responsible for
indemnifying or defending Agent or such persons in respect of any matter, claim
or liability in respect of which Agent is obligated to indemnify Owner as
provided in the following sentence. Agent agrees to indemnify and save harmless
Owner from and against all claims, losses and liabilities resulting from injury
to, or death of, persons in or about the Premises or for defamation and false
arrest in each case caused in whole or in part by the willful misconduct or
gross negligence of Agent, and to defend, at no expense to Owner, any claim,
action or proceeding brought against Owner or Owner and Agent, jointly or
severally, arising out of the foregoing, and to hold Owner harmless from any
judgments, loss or settlement on account thereof.
<PAGE> 13
Notwithstanding the foregoing, Agent shall not be responsible for
indemnifying or defending Owner in respect of any matter, claim or liability
which is covered by any public liability insurance policies carried by Owner and
under which Agent is named as an additional insured. The indemnification
obligations of Owner and Agent under this Section 3.3 shall in each case be
conditioned upon (a) prompt notice from the other party after such party learns
of any claim or basis therefor which is covered by such indemnity, (b) such
party's not taking any steps which would bar Owner or Agent, as the case may be,
from obtaining recovery under applicable insurance policies or would prejudice
the defense of the claim in question, and (c) such party's taking of all
necessary steps which if not taken would result in Owner or Agent, as the case
may be, being barred from obtaining recovery under applicable insurance policies
or would prejudice the defense of the claim in question. The provisions of this
Section 3.3 shall survive the expiration or termination of this Agreement.
3.4 Owner shall provide such office space on the Premises as may be
necessary for Agent to properly perform its functions under this Agreement.
Agent shall not be required to pay for utilities, telephone service or rent for
the office area on the Premises occupied by Agent. Agent shall have the right to
use the fixtures, furniture, furnishings and equipment, if any, which are the
property of Owner in said office space. Owner shall also provide space on the
Premises for use as community rooms and information and service centers where
the use of such space is determined by Owner to be in the best interest of the
Premises. All income derived from the utilization and/or operation of such
community rooms and/or information or service centers shall belong to the Owner
and all expenses relating thereto shall be borne by Owner.
3.5 Except as otherwise provided in this Agreement, everything done by
Agent in the performance of its obligations under this Agreement and all
expenses incurred pursuant hereto shall be for and on behalf of Owner and for
its account. Except as otherwise provided herein, all debts and liabilities
incurred to third parties in the ordinary course of business of managing the
Premises as provided herein are and shall be obligations of Owner, and Agent
shall not be liable for any such obligations by reason of its management,
supervision or operation of the Premises for Owner.
ARTICLE IV
COMPENSATION
4.1 In addition to any other compensation provided to be paid to Agent
under this Agreement, Owner agrees to pay to Agent as compensation for its
management services hereunder, a fee at the rate specified in paragraph 5 of
Exhibit A attached hereto. Said fee shall be payable monthly in equal
installments of 1/12 each, on the 10th day of each calendar month, and shall be
based on a fixed annual fee of $100,000 for each Premises. Agent shall withdraw
said fee from the operating account for the Premises and shall account for same
as provided for in Section 2.2 hereof.
<PAGE> 14
4.2 The following expenses or costs incurred by or on behalf of Agent in
connection with the management and leasing of the Premises shall be the sole
cost and expense of Agent and shall not be reimbursable by Owner and Agent shall
indemnify Owner for such expenses and costs:
(a) cost of gross salary and wages, payroll taxes, insurance, worker's
compensation, pension benefits and any other benefits of Agent's personnel
except such cost pertaining to personnel employed by Agent in accordance
with Paragraph 2.1 (b) hereof;
(b) general accounting and reporting services, as such services are
considered to be within the reasonable scope of Agent's responsibility to
Owner;
(c) costs of forms, stationery, ledgers, supplies, equipment and other
"general overhead" items used in Agent's home office or regional offices;
(d) cost or pro rata cost of telephone and general office expenses incurred
in the Premises by Agent for the operation and management of properties not
owned by Owner;
(e) cost of all bonuses, incentive compensation, profit sharing, or any pay
advances by Agent to Agent's employees, except such costs pertaining to
employees employed by Agent in accordance with Paragraph 2.1 (b) hereof;
(f) cost attributable to losses arising from criminal acts, gross
negligence or fraud on the part of Agent or Agent's associates or
employees;
(g) cost of automobile purchase and/or rental, except if furnished or
approved by Owner;
(h) except as otherwise provided in Exhibit A attached hereto, expenses
incurred in connection with the leasing of the Premises, it is being
understood and agreed, however, that Agent shall be reimbursed for
advertising expenses incurred in connection with the leasing of the
Premises;
(i) cost of liability or other insurance carried by Agent; and
(j) cost of bonds purchased pursuant to Section 2.1(i) of this Agreement.
ARTICLE V
DURATION, TERMINATION, DEFAULT
5.1 This agreement shall become effective on the date hereof.
5.2 Subject to earlier termination as hereinafter provided, this Agreement
shall terminate on December 31, 1997. Thereafter, this Agreement shall
automatically be extended from month-to-month on the same terms and conditions
as herein contained unless either party notifies the other at least thirty (30)
days prior to the end of the term or any monthly extension thereof of its
intention to terminate this Agreement.
<PAGE> 15
5.3 Owner shall have the right to terminate this Agreement at any time upon
30 days written notice given to Agent, and upon the giving of such notice and
the expiration of such 30-day period, this Agreement and the term hereof shall
terminate without any obligation on the part of Owner to make any payments to
Agent hereunder except as hereinafter provided.
5.4 If at any time during the term of this Agreement any involuntary
petition in bankruptcy or similar proceeding shall be filed against Agent
seeking its reorganization, liquidation or appointment of a receiver, trustee or
liquidator for it or for all or substantially all of its assets, and such
petition shall not be dismissed within 90 days after the filing thereof, or if
Agent shall:
(a) apply for or consent in writing to the appointment of a receiver,
trustee or liquidator of all or substantially all of its assets;
(b) file a voluntary petition in bankruptcy or admit in writing its
inability to pay its debts as they become due;
(c) make a general assignment for the benefit of creditors;
(d) file a petition or an answer seeking reorganization or an arrangement
with creditors or take advantage of any insolvency law; or
(e) file an answer admitting the material allegations of a petition filed
against it in any bankruptcy, reorganization or insolvency proceedings;
then upon the occurrence of any such event, Owner, at its option, may
terminate this Agreement by written notice given to Agent, and upon the
giving of such notice this Agreement and the term hereof shall terminate
without any obligation on the part of Owner to make any payments to Agent
hereunder except as hereinafter provided.
5.5 Owner shall have the additional right to terminate this Agreement on at
least 10 days' written notice to Agent if (a) Agent, without Owner's prior
written consent, shall assign or attempt to assign its rights or obligations
under this Agreement or subcontract (except for normal service agreements or as
otherwise specified in this Agreement) any of the services to be performed by
Agent, (b) if the Premises shall be damaged or destroyed to the extent of 25% or
more by fire or other casualty and Owner elects not to restore or repair such
property or (c) there shall be a condemnation or deed in lieu thereof of 10% or
more of the Premises.
5.6 It shall be an Event of Default under this Agreement on the part of
Owner if Owner shall default in any material respect in performing any of its
obligations under this Agreement and such default shall not be cured within 30
days after written notice thereof is given by Agent to Owner (or, if the default
in question is curable but is of such nature that it cannot reasonably be
completely cured within such 30-day period, if Owner does not promptly after
receiving such notice commence to cure such default and thereafter proceed with
reasonable diligence to complete the curing thereof). If an Event of Default by
Owner shall occur, Agent shall have the right to terminate this Agreement by
written notice given to Owner, and upon the giving of such notice this Agreement
and the term hereof
<PAGE> 16
shall terminate and Owner shall remain obligated to make the payments to Agent
hereunder as provided in Section 5.9 hereof.
5.7 If at any time during the term of this Agreement any involuntary
petition in bankruptcy or similar proceeding shall be filed against Owner
seeking its reorganization, liquidation or appointment of a receiver, trustee or
liquidator for it or for all or substantially all of its assets, and such
petition shall not be dismissed within 90 days after the filing thereof, or if
Owner shall:
(a) apply for or consent in writing to the appointment of a receiver,
trustee or liquidator of all or substantially all of its assets;
(b) file a voluntary petition in bankruptcy or admit in writing its
inability to pay its debts as they become due;
(c) make a general assignment for the benefit of creditors;
(d) file a petition or an answer seeking reorganization or an arrangement
with creditors or take advantage of any insolvency law; or
(e) file an answer admitting the material allegations of a petition filed
against it in any bankruptcy, reorganization or insolvency proceedings;
then, upon the occurrence of any such event Agent, at its option, may
terminate this Agreement by written notice given to Owner, and upon the
giving of such notice this Agreement and the term hereof shall terminate
and Owner shall remain obligated to make the payments to Agent hereunder as
hereinafter provided.
5.8 Agent shall have the additional right to terminate this Agreement on at
least 90 days written notice to Owner if at any time Owner assigns this
Agreement and its rights and obligations hereunder. Notwithstanding the
foregoing, Owner shall have the right to subordinate this Agreement in
connection with any mortgage of the Premises and/or assign this Agreement in
connection with such mortgages. Agent agrees to execute such further
instruments as Owner or its mortgagee deems necessary to effectuate such
subordination provided that in the event Owner's mortgagee becomes entitled to
possession of the Premises and elects to retain Agent to manage the Premises,
then Agent shall be entitled to the compensation set forth in this Agreement
during all periods in which Agent is providing services to the Premises.
5.9 Upon any termination of this Agreement pursuant to the provisions of
this Article V, Owner shall remain obligated to pay to Agent fees and other
amounts due to Agent hereunder which accrued prior to the effective date of such
termination. Nothing contained in this Section 5.9 shall be deemed to waive,
affect or impair (a) Owner's rights to seek recourse against Agent for damages
or other relief in the event of the termination of this Agreement by Owner
pursuant to (i) Section 5.3, 5.4 or 5.5 hereof, and (b) Agent's right to seek
recourse against Owner for damages or other relief in the event of the
termination of this Agreement by Agent pursuant to Section 5.6 or 5.7 hereof.
5.10 Upon the expiration or earlier termination of this Agreement, Agent
shall forthwith surrender and deliver to Owner any space in the Premises
occupied by Agent and shall make delivery to Owner or
<PAGE> 17
to Owner's designee or agent, at Agent's home or regional offices or at
its offices at the Premises, of the following:
(a) a final accounting, reflecting the balance of income from and expenses
of the Premises as at the date of expiration or termination of this
Agreement;
(b) any funds of Owner or tenant security or advance rent deposits, or
both, held by agent with respect to the Premises; and
(c) all Confidential Information (in whatever medium stored) and all other
records, contracts, leases, ground leases, reciprocal easement agreements,
receipts for deposits, unpaid bills, lease summaries, canceled checks, bank
statements, paid bills and all other records, papers and documents and any
microfilm and/or computer disk of any of the foregoing which relate to the
Premises and the operation, maintenance, management and leasing thereof;
all such data, information and documents being at all times the property of
the Owner.
In addition, Agent shall furnish all such information and take all such
action as Owner shall reasonably require to effectuate an orderly and
systematic termination of Agent's duties and activities under this
Agreement.
5.11 This Agreement shall terminate at the election of the Owner as to any
of the properties set forth in Exhibit A upon thirty (30) days written notice to
the Agent if such properties are sold by the Owner to a non-affiliated third
party purchaser or automatically if such properties were acquired by the Owner
on foreclosure of a mortgage and are subsequently redeemed. In the event such
properties are sold by the Owner to a non-affiliated third party purchaser and
this agreement is not thereby terminated by the Owner, the Agent shall have the
right to terminate this Agreement as to such properties upon sixty (60) days
prior written notice which notice must be given within (90) days after the date
such sale is consummated. If such properties are sold, Agent will not be
entitled to any sales commission unless the Agent has been retained by the Owner
pursuant to a separate commission arrangement. This Agreement shall remain in
full force and effect as to all properties not terminated pursuant to this
Section 5.11.
5.12 The provisions of this Article V shall survive the expiration or
termination of this Agreement.
ARTICLE VI
ASSIGNMENT
6.1 Agent, except for a transfer to a "Permissible Transferee", shall not
assign its rights or obligations under this Agreement, either directly or by a
transfer of stock or voting control either voluntarily or by operation of law.
Any change other than to a "Permissible Transferee" shall constitute a breach of
this Agreement by Agent and Owner may terminate this Agreement in accordance
with Section 5.5. A "Permissible Transferee" shall mean any corporation,
partnership, trust or other entity,
<PAGE> 18
more than 50% of the outstanding stock of which, or more than 50% interest in
which, is owned or controlled by Owner or General Growth Properties, Inc. or
any combination thereof.
6.2 In the event of a sale or conveyance of the Premises, Owner shall have
the right to cancel or assign this Agreement and its rights and obligations
hereunder to any person or entity to whom or which Owner sells or conveys such
property; (unless Agent elects to terminate this Agreement as provided in
Section 5.8 hereof). Upon such assignment, Owner shall be relieved of its
obligations under this Agreement which accrue from and after the date of such
assignment, provided that the assignee shall assume the obligations of Owner
under this Agreement and shall agree to perform and be bound by all of the terms
and provisions hereof, effective from and after the date of such assignment and
an executed copy of such assumption agreement shall be delivered to Agent. Agent
shall not be entitled to a "termination fee" in connection with an assignment or
cancellation as set forth in this Section 6.2, but otherwise shall be entitled
to collect from Owner such fees and expenses as Agent has earned pursuant to
this Agreement prior to the date of such assignment or cancellation.
ARTICLE VII
MISCELLANEOUS
7.1 Owner's Representative ("Owners Representative") whose name and address
is set forth in paragraph 2 of Exhibit A attached hereto shall be the duly
authorized representative of Owner for the purpose of this Agreement. Any
statement, notice, recommendation, request, demand, consent or approval under
this Agreement shall be in writing and shall be deemed given by Owner when made
or given by Owner's Representative or any officer of Owner and delivered
personally to an officer of Agent or mailed, addressed to Agent, at his address
first above set forth . Either party may, by notice to the other, designate a
different address for the receipt of the aforementioned communications and Owner
may, by notice to Agent, from time to time, designate a different Owner's
Representative to act as such. All communications mailed by one party to
another shall be sent by first class mail, postage prepaid or Express Mail
Service or other commercial overnight delivery service, except that notices of
default shall be sent by registered or certified mail, return receipt requested,
postage prepaid, Express Mail Service or other commercial overnight delivery
service with receipt acknowledged in writing. Communications so mailed shall be
deemed given or served on the date mailed. Notwithstanding the foregoing, any
notices, requests, consents, approvals and other communications, other than
notices of default or approvals of annual budgets, and other communications,
approvals or agreements which are required by the express terms of other
provisions of this Agreement to be in writing, may be given by telegram,
telephonic communication or orally in person. Agent and Owner shall furnish to
the other the names and telephone numbers of one or more persons who can be
reached at any time during the term of this Agreement in the event of an
emergency.
7.2 Agent shall, at its own expense, qualify to do business and obtain and
maintain such licenses as may be required for the performance by Agent of its
services.
7.3 Each provision of this Agreement is intended to be severable. If any
term or provision hereof shall be determined by a court of competent
jurisdiction to be illegal or invalid for any reason
<PAGE> 19
whatsoever, such provision shall be severed from this Agreement and shall not
affect the validity of the remainder of this Agreement.
7.4 In the event either of the parties hereto shall institute any action or
proceeding against the other party relating to this Agreement, the unsuccessful
party in such action or proceeding shall reimburse the successful party for its
disbursements incurred in connection therewith and for its reasonable attorney's
fees as fixed by the court.
7.5 No consent or waiver, express or implied, by either party hereto or of
any breach or default by the other party in the performance by the other of its
obligations hereunder shall be valid unless in writing, and no such consent or
waiver shall be deemed or construed to be a consent or waiver to or of any other
breach or default in the performance by such other party of the same or any
other obligations of such party hereunder. Failure on the part of either party
to complain of any act or failure to act of the other party or to declare the
other party in default, irrespective of how long such failure continues, shall
not constitute a waiver by such party of its rights hereunder. The granting of
any consent or approval in any one instance by or on behalf of Owner shall not
be construed to waive or limit the need for such consent in any other or
subsequent instance.
7.6 The venue of any action or proceeding brought by either party against
the other arising out of this Agreement shall be in the state or federal courts
of the State of Illinois.
7.7 This Agreement may not be changed or modified except by an agreement in
writing executed by each of the parties hereto. This Agreement constitutes all
of the understandings and agreements between the parties in connection with the
agency herein created.
7.8 If this Agreement shall remain in effect after the date of expiration
hereof, unless the parties hereto otherwise agree in writing, this Agreement
shall continue in effect on the same terms and conditions as are applicable
during the original term, except that either party shall have the right to
terminate this Agreement without payment to the other (except for fees and other
amounts due to Agent hereunder which accrued prior to the effective date of such
termination) on 30 days' written notice.
7.9 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their permitted successors and assigns, but shall not inure
to the benefit of, or be enforceable by, any other person or entity.
7.10 Nothing contained in this Agreement shall be construed as making Owner
and Agent partners or joint ventures or as making either of such parties liable
for the debts or obligations of the other, except as in this Agreement is
expressly provided.
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
(Owner)
GGP LIMITED PARTNERSHIP
By: By: General Growth Properties, Inc.
its general partner
By:
----------------------------------------
John Bucksbaum, Executive Vice President
(Agent)
GENERAL GROWTH MANAGEMENT, INC.
a Delaware corporation
By:
----------------------------------------
Robert A. Michaels, President
<PAGE> 21
EXHIBIT A
1. Premises (1.1):
Selected Shopping Centers presently controlled by Owner, including:
BayShore Mall Bellis Fair Birchwood Mall
Capital Mall Chapel Hills Mall Colony Square
Columbia Mall Eagle Ridge Mall Fallbrook Square
Fox River Mall Gateway Mall Grand Traverse Mall
Greenwood Mall Knollwood Mall Lockport Mall
Mall of the Bluffs Oakwood Mall Piedmont Mall
Pines Mall Rio West Mall River Falls Mall
River Hills Mall SouthShore Mall West Valley Mall
Selected future Shopping Centers to be constructed or acquired by Owner, as of
the date of the opening or acquisition, including, but not limited to the
following:
Park Mall Sooner Fashion Mall Lansing Mall
Lakeview Mall Westwood Mall
2. Name and Address of Owner's Representative (7.1):
John Bucksbaum
55 West Monroe
Chicago, Illinois 60603
3. Limit of amount authorized for non-emergency purchases and repairs
(2.1(a) and (c)): $30,000.00
4. Name of Banks (2.1(g)):
Banks and accounts as assigned by Owner
5. Management Commissions (4.1):
Owner agrees to pay Agent as compensation for its management services hereunder
an amount equal to $100,000 per year for each individual shopping center
(Premises). Such management commission shall be payable monthly in equal
installments of 1/12 of the annual fee.
6. Legal and Tenant Coordination Expenses:
Management Commission is intended to fully compensate Agent for any costs
related to in-house legal or tenant coordination expenses and no additional
compensation is due for there or related services.
<PAGE> 22
7. Temporarv Tenant Leases:
Leasing Fees are intended to fully compensate Agent for services in connection
with Temporary Tenant leasing activities and no additional specific compensation
is due for these costs or activities.
8. Leasing Fees:
Owner agrees to pay Agent as compensation for its leasing activities, in
conjunction with both temporary and longer term tenants an amount equal to
$150,000 per year for each individual shopping center (Premises). Such
management commission shall be payable monthly in equal installments of 1/12 of
the annual fee. No additional compensation shall be paid by Owner to Agent for
services related to the sale of the acquisition of departments agreements, the
sale of real estate, the arrangement of lease settlements or any other lease
related activities, unless special fee arrangements are negotiated between the
parties in advance. Not withstanding, Owner shall be obligated to reimburse
Agent for third party brokerage costs, professional fees and similar out of
pocket third party costs in connection with leasing activities if such
compensation is approved in advance of incurring the cost.
9. Promotional Income Fee (2.9):
Owner shall pay directly to Center a fee equal to twenty percent (20%) of all
cash receipts received by Owner incident to promotional activities referred to
in Section 2.9. No other fee shall be paid to Center for services rendered. Not
withstanding this, Center is entitled, using arms length pricing, to sell
promotion products, place advertising services and engage in other advertising
and promotion activities provided payment is made from the promotion fund or
merchants association of the shopping centers and further providing the
purchasers expenditures are covered by their operating budgets and the purchases
are approved by the Owner.
10. Excluded Services:
Notwithstanding anything to the contrary contained herein, the parties
acknowledge that it is not within the contemplation of this Agreement or the fee
structure included herein that the Agent perform any services with respect to
the following: any "due diligence" or similar efforts relating to any financing,
refinancing or sale or disposition of the Premises; zoning of the Premises;
performing or supervising any extensive alteration or renovation to the
Premises; site acquisitions of additional ground for the expansion of the
Premises; reconstruction after casualty or condemnation; leasing, management, or
construction relating to any proposed or implemented expansion of the Premises
or work generally classified as "development" work in connection with the same;
renewals or renegotiation of leases or other agreements with department stores
if such involves substantial changes from existing documents (including, without
limitation, negotiation of new leases, renewal leases, operating covenants,
renovation provisions, expansion rights, and like matters); or replacement of
department store tenancies. If the Agent proposes to perform such work or if the
Owner requests the Agent to perform any of the foregoing, prior to undertaking
the performance thereof, the Agent shall submit to the Owner for its approval a
written proposal indicating the nature, extent and cost thereof, including the
Agent's fee and payment provisions thereof for so performing such work and upon
acceptance of such proposal the Owner shall pay the Agent in accordance
therewith.
11. Other Requested Services:
If Owner requests Agent to provide its own personnel for non-routine services
which Agent is not obligated elsewhere in this Agreement to perform, the
compensation for which is not provided for
<PAGE> 23
hereinabove, Owner shall pay Agent an amount equal to two and one-half (2 1/2)
times the actual base cost of Agent's departmental personnel, as computed by
Agent, for their time involved in performing such requested services, plus
reimbursement for any out-of-pocket costs incurred incident to furnishing such
requested services. Owner and Agent shall agree in advance as to the hourly
base cost to be applicable for the specific services to be provided. Such
amount or amounts shall be payable to Agent monthly within ten (10) days after
Owner's receipt of Agent's statement setting forth the amount payable to Agent.
<PAGE> 24
EXHIBIT B
Form of Monthly Report
Monthly Report Outline
1) Cover Page
2) Invoice Copies of Capital Expenditure Items
3) Aged Accounts Receivables and a summary of collection activities
4) Bank Reconciliation
5) Trial Balance
6) Income and Expense Statement (with comparison to budget)
7) Journal Entry Forms
8) Management Fee Schedule
9) Significant Operating Matters
10) Security Deposit Reports
11) Rent Rolls
12) Occupancy Reports
Quarterly Report Outline
1) Leasing Activity
2) Competition
3) Variance Analysis
4) Government Activities
5) Tenant Sales Overview
6) Construction Activity
7) Significant Revisions to Forecast
8) Collection Analysis
<PAGE> 25
EXHIBIT C
Leasing Guidelines
Agent shall use a form or forms of lease which have been prepared and submitted
to Owner for Owner's prior review and approval. Agent shall negotiate and make
modifications to such forms as directed by Owner, or as necessary or appropriate
with respect to the needs of the particular transactions, utilizing methods and
techniques consistent with prevailing practices employed in management and
leasing of shopping centers.
All essential financial and business terms and provisions of the lease,
including construction and improvements of the leasehold, shall be presented for
Owner's approval. Tenant-signed leases presented by Agent for Owner's review and
execution shall be consistent with such terms and conditions previously approved
by Owner, or with such deviations or modifications identified for Owner's
review. Execution of tenant-signed leases that are presented by Agent for
Owner's signature shall acknowledge Owner's approval of the lease, its form, its
terms and provisions.
No lease or other agreement shall be entered into, modified, canceled or
extended if the consent of any mortgagee or ground lessor is required unless
such consent has been obtained. Agent shall notify Owner when such consent is
required.
<PAGE> 1
GENERAL GROWTH PROPERTIES, INC. EXHIBIT 10(GG)
STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of the 2nd day of December,
1996, by and between GENERAL GROWTH PROPERTIES, INC., a Delaware corporation
(the "Company") and __________________ (the "Employee").
WHEREAS, the Company desires to reward the Employee for his recent efforts
on behalf of the Company by awarding him an incentive stock option to purchase
shares of common stock $.10 par value, of the Company (the "Common Stock")
pursuant to the General Growth Properties, Inc. 1993 Stock Incentive Plan, as
amended (the "Plan"); and
WHEREAS, the Employee wishes to acquire the right to purchase shares of
Common Stock granted hereby.
NOW, THEREFORE, for good and valuable consideration, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Grant of Option. In accordance with the terms and conditions of the
Plan which are hereby incorporated herein, the Company hereby grants to the
Employee an option (the "Option") to purchase _______ shares of Common Stock at
a purchase price of $28.00 per share, the Fair Market Value (as defined in the
Plan) per share on the date hereof. This Option is intended to qualify as an
Incentive Stock Option as defined in, and subject to, Section 422 of the Code.
2. Time for Exercise of Options.
(a) The Option is, as of the date of this Agreement (the "Grant
Date"), exercisable for 20% of the shares of Common Stock subject hereto
and shall become exercisable in increments of 20% of the shares of Common
Stock subject hereto at the end of each of the first four anniversaries
of the Grant Date.
(b) The Option must be exercised if at all on or before the tenth
anniversary of the Grant Date and only at such time as the Employee is
employed by the Company or as provided in Paragraph 3 hereof.
3. Termination of Employment.
(a) If the Employee's employment with the Company, an Affiliate or a
Subsidiary terminates by reason of death then, notwithstanding the
provisions of Section 2 of this Agreement, the Option may thereafter be
exercised, to the extent then exercisable, or on such accelerated basis as
the Committee may determine, for a period of one year from the date of
such death or until the expiration of the term of the Option, whichever
period is shorter.
(b) If the Employee's employment with the Company, an Affiliate
or a Subsidiary terminates by reason of Retirement then, notwithstanding
the provisions of Section 2 of this Agreement, the Option may thereafter
be exercised by the Employee, to the extent exercisable at the time of
such Retirement, or on such accelerated basis as the Committee may
determine, for a period of three years from the date of such termination
of employment or until the expiration of the term hereof, whichever period
is shorter; provided, however, that if the Employee dies within such three
year period, any unexercised portion of this Option shall, notwithstanding
the expiration of such three year period, continue to be exercisable to t
<PAGE> 2
the extent to which it was exercisable at the time of death for a period
of one year from the date of such death or until the expiration of the
term hereof, whichever period is shorter.
(c) If the Employee's employment with the Company, an Affiliate or a
Subsidiary terminates by reason of Disability then, notwithstanding the
provisions of Section 2 of this Agreement, the Option may thereafter be
exercised by the Employee, to the extent exercisable at the time of
termination, or on such accelerated basis as the Committee may determine,
for a period of three years from the date of such termination of
employment or until the expiration of the term hereof, whichever period
is shorter; provided, however, that if the Employee dies within such
three year period, any unexercised portion of the Option shall,
notwithstanding the expiration of such three year period, continue to be
exercisable to the extent to which it was exercisable at the time of
death for a period of one year from the date of such death or until the
expiration of the term hereof, whichever period is shorter.
(d) If there occurs a Termination of Employment for any reason other
than death, Disability, Retirement or Cause (as hereinafter defined) then,
notwithstanding the provisions of Section 2 of this Agreement, the Option
shall terminate, except that the Option, to the extent then exercisable,
or on such accelerated basis as the Committee may determine, may be
exercised for the lesser of one year from the date of such Termination of
Employment or the balance of the term of the Option; provided, however,
that if the Employee dies within such one year period, any unexercised
portion of the Option shall, notwithstanding the expiration of such one
year period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of one year from the date of
such death or until the expiration of the stated term of the Option,
whichever period is shorter.
(e) In the event the Employee's Termination of Employment is for
Cause, any unexercised portion of the Option shall expire immediately
upon the giving to the Employee of notice of such Termination of
Employment.
(f) Notwithstanding any language to the contrary set forth in
Section 5(i) of the Plan, for purposes of this Agreement, the term
"Cause" shall mean (i) the conviction of the Employee for committing a
felony under Federal law or the law of the state in which such action
occurred or (ii) the commission by the Employee of an act of fraud or
embezzlement.
4. Method of Exercise. The Option may be exercised by written notice (the
"Notice"), addressed and delivered to the Company specifying the number of
whole shares of Common Stock subject to the Option to be purchased. For
purposes of this Agreement, the reference in Section 5(c) of the Plan to the
percentage of the Common Stock issued pursuant to a public offering shall have
no force or effect. The Notice shall be accompanied by (i) cash, or (ii) that
number of shares of unrestricted Common Stock which have an aggregate Fair
Market Value (as of the date of exercise) equal to the aggregate exercise price
for all of the shares of Common Stock subject to such exercise, or (iii) a
request that the Company withhold from the number of shares of Common Stock
otherwise issuable upon exercise of the Option that number of shares having an
aggregate Fair Market Value on the date of exercise equal to the exercise price
for all of the shares of Common Stock subject to such exercise; or (iv) any
combination thereof. The Employee agrees, that no later than the date as of
which an amount first becomes includible in his gross income for Federal income
tax purposes with respect to the Option, the Employee shall pay to the Company,
or make arrangements satisfactory to the Company regarding the payment of, any
Federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Withholding obligations may be settled
with Common Stock, including Common Stock that is acquired upon exercise of the
Option. The obligations of the Company under this Agreement and the Plan shall
be conditional on such payment or arrangements, and the Company, its Affiliates
and Subsidiaries shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the Employee.
<PAGE> 3
5. Delivery of Stock Certificates. The Option shall be deemed to have
been exercised upon receipt by the Company of the Notice accompanied by the
exercise price (the "Exercise Date") and the Employee shall be treated as the
holder of record of the shares with respect to which the Option is exercised as
of the Exercise Date for all purposes.
6. Adjustment Provisions. If, during the term of this Agreement, there
shall be any merger, reorganization, consolidation, recapitalization, stock
dividend, stock split, extraordinary distribution with respect to the Common
Stock, or other change in corporate structure affecting the Common Stock, the
Committee shall make an appropriate and equitable substitution or adjustment in
the aggregate number, kind and option price of shares subject to this Option.
7. Non-Transferability. The Option is not transferable or assignable by
the Employee other than by will or by the laws of descent and distribution, or
pursuant to a qualified domestic relations order and is exercisable during the
lifetime of the Employee only by the Employee, his guardian or legal
representative or by an alternate payee pursuant to such qualified domestic
relations order.
8. Compliance with Law. By accepting the Option, the Employee agrees for
himself and his guardian or legal representative that no shares of Common Stock
shall be delivered pursuant to the Option until qualified for delivery under
applicable securities laws and regulations as determined by the Company or its
legal counsel.
9. Limitations. The Employee shall have no rights as a stockholder with
respect to shares as to which the Option shall not have been exercised and
payment made as herein provided and shall have no rights with respect to such
shares not expressly conferred by this Agreement. Nothing contained in this
Agreement shall be construed to be a contract of employment between the Company
and the Employee.
10. Construction.
(a) Successors. This Agreement and all the terms and provisions
hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective legal representatives, heirs and
successors, except as expressly herein otherwise provided.
(b) Entire Agreement; Modification. This Agreement contains the
entire understanding between the parties with respect to the matters
referred to herein. Subject to Section 8(i) of the Plan, this Agreement
may be amended by the Committee.
(c) Capitalized Terms; Headings; Pronouns; Governing Law.
Capitalized terms used and not otherwise defined herein are deemed to
have the same meanings as in the Plan. The descriptive headings of the
respective sections and subsections of this Agreement are inserted for
convenience of reference only and shall not be deemed to modify or
construe the provisions which follow them. Any use of any masculine
pronoun shall include the feminine and vice-versa and any use of a
singular, the plural and vice-versa, as the context and facts may
require. The construction and interpretation of this Agreement shall be
governed in all respects by the laws of the State of Delaware.
(d) Notices. All communications between the parties shall be in
writing and shall be deemed to have been duly given as of the date and
time of hand delivery or three days after mailing via certified or
registered mail, return receipt requested, proper postage prepaid to the
following or such other addresses of which the parties shall from time to
time notify one another.
<PAGE> 4
(1) If to the Company: General Growth Properties, Inc. 55 West Monroe -
Suite 3100
Chicago, Illinois 60603-5060
(2) If to the Employee:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
(e) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement or the
application thereof to any party or circumstance shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to
the minimal extent of such provision or the remaining provisions of this
Agreement or the application of such provision to other parties or
circumstances.
(f) Counterpart Execution. This Agreement may be executed in
counterparts, each of which shall constitute an
original and all of which, when taken together, shall constitute the
entire document.
IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Agreement on the date first above written.
GENERAL GROWTH PROPERTIES, INC.
By:
----------------------------
Title:
-----------------------
EMPLOYEE
-----------------------------
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
OF GENERAL GROWTH PROPERTIES, INC.
Corporation
General Growth Properties, Inc.
Century Plaza, Inc.
Champaign Market Place, Inc.
Eagle Ridge Mall, Inc.
Eden Prairie Mall, Inc.
General Growth CMP, Inc.
General Growth Properties-Natick, Inc.
GGP-Lakeview Square, Inc.
GGP-Lansing Mall, Inc.
GGP-Westwood Mall, Inc.
Grandville Mall, Inc.
Oklahoma Mall, Inc.
Tracy Mall, Inc.
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
General Growth Properties, Inc. on Forms S-3 (File Nos. 33-90556, 333-11067,
333-15907, 333-17021 and 333-23035) and on Forms S-8 (File Nos. 33-79372,
333-07241 and 333-11237) of our reports dated February 11, 1997 on our audits
of the consolidated financial statements and financial statement schedule of
General Growth Properties, Inc. as of December 31, 1996 and 1995, and for the
three years in the period ended December 31, 1996, which reports are included
in this Annual Report on Form 10-K.
Chicago, Illinois Coopers & Lybrand L.L.P.
March 25, 1997
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Matthew Bucksbaum, Robert Michaels, Bernard Freibaum and Marshall
Eisenberg and each of them his/her true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him/her and in his/her
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K to be filed by General Growth Properties, Inc. with the Securities and
Exchange Commission and any or all amendments thereto, and to file the same,
with all exhibits thereto, and any other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents fully power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof. This power
of attorney may be executed in one or more counterparts; each of which shall be
deemed to be an original.
IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand and seal
as of the 27th day of March, 1997.
/s/Matthew Bucksbaum /s/Beth Stewart
__________________________________ ________________________________
Matthew Bucksbaum, Chairman of the Beth Stewart, Director
Board and Chief Executive Officer
(Principal Executive Officer)
/s/Robert Michaels /s/Bernard Freibaum
__________________________________ ________________________________
Robert Michaels, President, Chief Bernard Freibaum, Executive Vice
Operating Officer and Director President and Chief Financial
Officer (Principal Financial
and Accounting Officer
/s/John Bucksbaum /s/A. Lorne Weil
__________________________________ ________________________________
John Bucksbaum, Executive Vice A. Lorne Weil, Director
President and Director
/s/Anthony Downs /s/Morris Mark
__________________________________ ________________________________
Anthony Downs, Director Morris Mark, Director
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000895648
<NAME> GENERAL GROWTH PROPERTIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 15,747
<SECURITIES> 0
<RECEIVABLES> 25,384
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 39,209
<PP&E> 1,865,921
<DEPRECIATION> (188,744)
<TOTAL-ASSETS> 1,757,717
<CURRENT-LIABILITIES> 65,580
<BONDS> 1,169,483
0
0
<COMMON> 3,079
<OTHER-SE> 519,565
<TOTAL-LIABILITY-AND-EQUITY> 1,757,717
<SALES> 0
<TOTAL-REVENUES> 217,405
<CGS> 0
<TOTAL-COSTS> (111,955)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (2,421)
<INTEREST-EXPENSE> (67,826)
<INCOME-PRETAX> 33,816
<INCOME-TAX> 0
<INCOME-CONTINUING> 17,589
<DISCONTINUED> 43,821
<EXTRAORDINARY> (36,871)
<CHANGES> 0
<NET-INCOME> 59,742
<EPS-PRIMARY> 2.12
<EPS-DILUTED> 2.12
</TABLE>
