<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission file number 1-11656
GENERAL GROWTH PROPERTIES, INC.
------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 42-1283895
- ------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
55 W. Monroe St., Chicago, IL 60603
-----------------------------------
(Address of principal executive offices, Zip Code)
(312) 551-5000
--------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------------------- -------------------
The number of shares of Common Stock, $.10 par value, outstanding on May 13,
1997 was 30,788,949.
1 of 21
<PAGE> 2
GENERAL GROWTH PROPERTIES, INC.
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
NUMBER
------
<S> <C> <C>
Item 1: Financial Statements
Consolidated Balance Sheets
as of March 31, 1997 and December 31, 1996 ......................... 3
Consolidated Statements of Operations
for the three months ended March 31, 1997 and 1996.................. 4
Consolidated Statements of Cash Flows
for the three months ended March 31, 1997 and 1996.................. 5
Notes to Consolidated Financial Statements.......................... 6
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 11
Company Portfolio Results and Funds from Operations................. 12
Reconciliation of Company Funds from Operations to Net Income....... 14
Breakdown of Company Portfolio Results and Funds from
Operations for the three months ended March 31, 1997................ 15
Breakdown of Company Portfolio Results and Funds from
Operations for the three months ended March 31, 1996................ 15
Other Portfolio Data for the three months ended March 31, 1997...... 16
Management's Discussion and Analysis of Homart Portfolio's Funds
from Operations..................................................... 17
Reconciliation of Homart Portfolio Funds from Operations to Net
Income.............................................................. 19
General Growth Management, Inc. Statement of Operations for the
three months ended March 31, 1997................................... 20
Liquidity and Capital Resources of the Company...................... 21
PART II OTHER INFORMATION
Item 2: Changes in Securities......................................
Item 6: Exhibits and Reports on Form 8-K........................... 21
SIGNATURE........................................................... 21
</TABLE>
2 of 21
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(Dollars in thousands, except for share amounts)
<TABLE>
<CAPTION>
ASSETS
MARCH 31,
1997 DECEMBER 31,
(UNAUDITED) 1996
----------- ------------
<S> <C> <C>
Investment in real estate:
Land $180,263 $173,263
Buildings and equipment 1,416,729 1,337,366
Less accumulated depreciation (198,943) (188,744)
Developments in progress 47,006 44,439
----------- -----------
Net property and equipment 1,445,055 1,366,324
Investment in CenterMark 0 64,769
Investment in GGP/Homart 194,751 193,270
Investment in Quail Springs Mall 15,516 15,077
----------- -----------
Net investment in real estate 1,655,322 1,639,440
Cash and cash equivalents 13,645 15,947
Tenant accounts receivable, net 28,418 25,384
Deferred expenses, net 30,841 30,078
Investment in and note receivable from General Growth
Management, Inc. 48,483 37,737
Prepaid and other assets 5,665 9,131
----------- -----------
$1,782,374 $1,757,717
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $1,130,173 $1,168,522
Notes and contracts payable 955 971
Distributions payable 21,926 20,744
Accounts payable and accrued expenses 53,439 44,836
----------- -----------
1,206,493 1,235,073
----------- -----------
Minority interest in Operating Partnership 211,143 192,377
----------- -----------
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;
30,791,185 shares issued and outstanding
(30,789,185 as of 12/31/96) 3,079 3,079
Additional paid-in capital 595,676 595,628
Retained earnings (deficit) (234,017) (268,440)
----------- -----------
Total stockholders' equity 364,738 330,267
----------- -----------
$1,782,374 $1,757,717
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3 of 21
<PAGE> 4
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Revenues:
Minimum rents $39,175 $32,344
Tenant recoveries 21,622 16,138
Percentage rents 2,073 1,380
Other 1,593 1,064
Fee income 865 815
--------- ---------
Total revenues 65,328 51,741
--------- ---------
Expenses:
Property operating 22,167 18,001
Management fees to affiliate 750 667
General and administrative 840 735
Depreciation and amortization 11,162 9,141
--------- ---------
Total expenses 34,919 28,544
--------- ---------
Operating income 30,409 23,197
Interest expense, net (15,439) (17,540)
Equity in net income/(loss) of unconsolidated
affiliates:
CenterMark 0 2,011
Quail Springs Mall 327 0
GGP/Homart 1,824 1,691
General Growth Management, Inc. (273) 451
Net gain on sales 58,647 0
--------- ---------
Income before extraordinary item and
allocation to minority interest 75,495 9,810
Income allocated to minority interest (27,542) (2,814)
--------- ---------
Income before extraordinary item 47,953 6,996
Extraordinary item (a) (377) (2,291)
--------- ---------
Net income $47,576 $4,705
========= =========
Earnings per share before extraordinary item $1.55 $ .26
Extraordinary item per share (.01) (.08)
--------- ---------
Net earnings per share $1.54 $ .18
========= =========
</TABLE>
(a) Charges related to early retirement of debt.
The accompanying notes are an integral part of these consolidated financial
statements.
4 of 21
<PAGE> 5
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $47,576 $4,705
Adjustments to reconcile net income to net cash provided by operation activities:
Minority interest 27,542 2,814
Net gain on sales (58,647)
Extraordinary items - charges related to early retirement of debt 377 2,291
Equity in net income of unconsolidated affiliates (1,878) (4,153)
Provision for doubtful accounts 632 1,016
Depreciation 10,200 8,175
Amortization 962 966
Net changes in:
Tenant accounts receivable (3,666) 1,340
Prepaid and other assets 1,249 (3,937)
Accounts payable and accrued expenses 1,516 (1,148)
----------- -----------
Net cash provided by operating activities 25,863 12,069
----------- -----------
Cash flows from investing activities:
Acquisition/development of real estate and improvements and additions to properties (88,154) (19,137)
Increase in investments in unconsolidated real estate affiliates (5,734) (9)
Change in notes receivable affilliates (9,641) 61
Proceeds from the sale of CenterMark Stock
Distributions received from CenterMark Properties, Inc. 130,500 6,111
Distributions received from GGP/Homart, Inc. 6,077 764
Increase in deferred expenses (1,725) (5,330)
----------- -----------
Net cash from investing activities 31,323 (17,540)
----------- -----------
Cash flows from financing activities:
Cash distributions paid to common stockholders (13,239) (11,727)
Cash distributions paid to minority interest (7,505) (6,923)
Payment of stock offering costs (3)
Proceeds from issuance of mortgage and other notes payable 85,000 340,000
Principal payments on mortgage and other notes payable (123,364) (327,302)
Retirement of common stock (net of sale proceeds) 0 (63)
Prepayment penalty on early retirement of debt (377)
----------- -----------
Net cash from financing activities (59,488) (6,015)
----------- -----------
Net change in cash and cash equivalents (2,302) (11,486)
Cash and cash equivalents at beginning of period 15,947 18,298
----------- -----------
Cash and equivalents at end of period $13,645 $6,812
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $18,215 $15,531
Interest capitalized $1,329 $1,551
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5 of 21
<PAGE> 6
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
NOTE 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
March 31, 1997, owned a 99% general partnership interest in the
eighteen Property Partnerships, two recently developed properties,
Natick Mall and four properties acquired during 1996. In addition, the
Operating Partnership owned 100% of the three IBM Centers, Park Mall
and a 99.999% interest in Piedmont Mall and Market Place Mall (see Note
4). At March 31, 1997, the Operating Partnership also owned a 38.2%
interest in GGP/Homart, Inc. (see Note 3), a 95% non-voting preferred
interest in General Growth Management, Inc. (see Note 5) and a 50%
interest in Quail Springs Mall. At March 31, 1997, the Company owned a
63% general partnership interest in the Operating Partnership. 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.
6 of 21
<PAGE> 7
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of the Company and the Operating Partnership consisting of the
thirty-one centers (the "Original Centers") and the unconsolidated
investments in CenterMark Properties, Inc. (through January 2, 1997),
GGP/Homart, Inc., General Growth Management, Inc. ("GGMI") and Quail
Springs Mall.
The consolidated statements of operations for prior periods have been
reclassified to conform with current classifications with no effect on
results of operations.
NOTE 2 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 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 3). The proceeds received from
the second payment were primarily used to repay existing indebtedness
(see Note 6) and resulted in a gain of $66,626.
NOTE 3 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
7 of 21
<PAGE> 8
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
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 additional capital as required, through the end of 1997. As
of March 31, 1997, the stockholders had contributed $60,000 of
additional capital. GGP/Homart owns interests in twenty-six regional
shopping malls and one property currently under development. 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 for
the three months ended March 31, 1997 and 1996.
GGP/HOMART, INC.
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
---------- ---------
<S> <C> <C>
Revenues
Minimum rents $24,840 $21,209
Tenant recoveries 10,735 9,237
Percentage rents 634 357
Other 707 444
---------- ---------
Total revenues 36,916 31,247
Operating expenses (16,035) (14,354)
Depreciation and amortization (6,506) (4,737)
---------- ---------
Net operating income 14,375 12,156
Interest expense, net (10,828) (8,910)
Equity in net income of unconsolidated
real estate affiliates 1,338 1,180
Gain/(loss) on land sale (54)
Income allocated to minority interest (56)
---------- ---------
Net income $4,775 $4,426
========== =========
</TABLE>
8 of 21
<PAGE> 9
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
NOTE 4 PROPERTY ACQUISITIONS AND DEVELOPMENT
ACQUISITIONS
On March 31, 1997, the Company acquired a 100% interest in Market Place
Mall for a cash purchase price of approximately $70,000. Market Place
Mall is located in Champaign, Illinois.
The acquisition was accounted for utilizing the purchase method and
accordingly, it is included in the Operating Partnership's results of
operations from the date 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.
NOTE 5 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.
NOTE 6 MORTGAGE LOANS AND CREDIT FACILITIES
On January 2, 1997, a portion of the proceeds from the sale of
CenterMark were used to repay a $12,597 mortgage on Westwood Mall and
to reduce the balance on the non recourse bridge loan facility from
$250,000 to $180,000.
On March 31, 1997, the Company borrowed $70,000 for the acquisition of
Market Place Mall (see Note 4).
In addition to the $250,000 non recourse bridge loan that is
collateralized in part by mortgages on seven Original Centers,
the Company obtained additional short term unsecured financing. As
part of the additional financing, the Company agreed not to encumber
four additional
9 of 21
<PAGE> 10
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
Original Centers. As of March 31, 1997 the entire $250,000 non
recourse loan was outstanding and $15,000 of the additional unsecured
loan was outstanding.
NOTE 7 NET GAIN ON SALES
The net gain on sales relates primarily to the gain on the sale of
CenterMark (see Note 2) less additional costs related to prior
acquisitions.
NOTE 8 EXTRAORDINARY ITEMS
The extraordinary items resulted from prepayment costs and unamortized
deferred financing costs related to the early extinguishment of
mortgage notes payable.
NOTE 9 DISTRIBUTIONS PAYABLE
On March 28, 1997, the Company declared a cash distribution of $.45 per
share payable April 30, 1997, to stockholders of record on April 15,
1997, totaling $13,856. In addition, a distribution of $8,070 was paid
to the limited partners of the Operating Partnership.
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 was paid to the limited partners of the Operating Partnership.
NOTE 10 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 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.
NOTE 11 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share," revises the disclosure requirements and increases the
comparability of EPS data on an international basis by
simplifying the existing computational guidelines in APB Opinion No.
15. The pronouncement will require the Company to present both basic
and diluted EPS for net income on the face of the income statement and
is effective for the Company's fiscal year ending December 31, 1997.
The Company believes it will not have a material impact on its
financial statements.
10 of 21
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
As of March 31, 1997, the Company owned 100% of thirty-one enclosed
regional shopping centers (the "Original Centers") and 50% of Quail
Springs Mall and, through the Operating Partnership, 38.2% of the stock
of GGP/Homart, Inc and a 95% interest in GGMI (see Note 5). GGP/Homart
owns interests in twenty-six shopping centers (the "Homart Centers") and
one center under development. During 1996 the Company owned an interest
in CenterMark Properties, Inc. (the "CenterMark Centers") (see Note 2).
Revenues are primarily derived from fixed minimum rents, percentage rents
and recoveries of operating expenses from tenants. Inasmuch as the
Company's financial statements reflect the use of the equity method to
account for its investments in CenterMark, GGP/Homart, GGMI and Quail
Springs Mall, the discussion of results of operations below relates
primarily to the revenues and expenses of the Original Centers. The
Original Centers, the CenterMark Centers, the Homart Centers and GGMI are
collectively known as the "Company Portfolio". A separate discussion of
GGP/Homart's results of operations is presented below (see "Homart
Portfolio Results and Funds From Operations" on page 17).
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Total revenues for the first quarter of 1997 were $65.3 million, which
represents an increase of $13.6 million or approximately 26.3% from $51.7
million in the first quarter of 1996. Approximately $9.6 million and
$1.4 million of the increase is from acquisitions and new developments,
respectively. Improved performance of comparable properties accounted
for $2.6 million of the increase. Minimum rent for the first quarter of
1997 increased by $6.9 million or 21.4% from $32.3 million in 1996 to
$39.2 million. The acquisition and development of properties generated
$5.5 million and $.6 million of the $6.9 million increase in minimum
rents, respectively. Expansion space, specialty leasing efforts and a
combination of occupancy and rental changes at the comparable centers
accounted for the remaining increase of $.8 million in minimum rents.
Tenant charges increased by $5.5 million from $16.1 million to $21.6
million for the first quarter of 1997. Approximately $1.2 million of the
increase is attributable to higher recoverable operating expenses at the
comparable malls. The remaining $4.3 million increase was generated by
properties which were recently acquired or developed. For the first
quarter of 1997 overage rents increased by $.7 million or approximately
50% from $1.4 million in 1996. The performance of the comparable centers
produced $.2 million of the increase and the acquisition and development
of additional centers accounted for the remaining $.5 million. Other
revenues increased by approximately $.5 million to $1.6 million for the
first quarter of 1997 from $1.1 million in 1996. Fee income generated by
the Company's asset management activities for the Homart Portfolio was
slightly above the first quarter of 1996.
Total expenses, including depreciation and amortization, increased by
approximately $6.5 million, from $28.5 million in the first quarter of
1996 to $35.0 million in the first quarter of 1997. For the period ended
March 31, 1997, property operating expenses increased by $4.2 million and
depreciation and amortization also increased by $2.1 million over the same
period in 1996. Property operating expense decreased by $.1 million at
comparable properties
11 of 21
<PAGE> 12
primarily due to a $.5 million reduction in bad debt expense. The
remaining $4.3 million increase in operating costs was due to the
acquisition and development of new properties. Approximately $.6 million
of the $2.1 million increase in depreciation and amortization was
generated at comparable centers. The remaining $1.5 million was from
properties acquired or developed. Management fees to affiliates and
general and administrative expenses together were approximately $.2
million higher than in 1996.
Net interest expense for the first quarter of 1997 was $15.4 million, a
decrease of approximately $2.1 million or 12% from the first quarter of
1996. Refinancing activities and the use of the CenterMark proceeds to
repay debt generated a $4.7 million decrease in interest expense. The
acquisition of new properties accounted for an increase of approximately
$2.6 million of interest expense.
Equity in net income of unconsolidated real estate affiliates in the
first quarter of 1997 decreased by approximately $2.3 million to $1.9
million in 1997, from $4.2 million in the first quarter of 1996.
Approximately $2.0 million of the decrease is attributable to the sale of
the Company's interest in CenterMark. The Company's ownership interest
in GGMI resulted in a decrease of $.7 million as determined in accordance
with generally accepted accounting principles. Quail Springs Mall and
GGP/Homart accounted for increases of $.3 million and $.1 million,
respectively. The results of GGP/Homart's operations are also presented
and discussed below (see "Homart Portfolio Results and Funds From
Operations" on page 17).
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 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 financial statements
because the other shareholders in CenterMark and GGP/Homart are not
affiliated with the Company.
The Company's share of CenterMark's and GGP/Homart's funds from
operations does not represent the net effective incremental contribution
to the Company made by the CenterMark and Homart centers. Accordingly,
management believes the following schedule of the relative share of
Company Portfolio net operating income (funds from operations before
interest expense) contributed by the Original Centers and the 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
12 of 21
<PAGE> 13
(EBITDA). EBITDA from the Company's property management affiliate is
included below with the Original Centers.
THREE MONTHS
ENDED % OF TOTAL
NET OPERATING INCOME BY PORTFOLIO MARCH 31, 1997
--------------------------------------- -------------- -----------
Original Centers and GGMI $42,701 80.24%
38.2% of GGP/Homart (a) $10,517 19.76%
----------- --------
Company Portfolio Net Operating Income $53,218 100.00%
=========== ========
(a) Reflects the Company's share of GGP/Homart's Net Operating Income, including
GGP/Homart's share of Net Operating Income from joint ventures. (See Note 3)
The Company Portfolio results and funds from operations reflected below for the
three months ended March 31, 1997 and 1996 do not purport to project
results for any future period. For 1996, the Company Portfolio results include
the Company's share of the CenterMark Centers results.
13 of 21
<PAGE> 14
COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Revenues
Minimum rents (a) $ 50,951 $ 50,344
Tenant recoveries 27,616 25,171
Percentage rents 2,417 2,135
Other 1,918 1,581
Fees 14,967 5,210
----------- -----------
Total revenues $ 97,869 $ 84,441
Operating expenses (b) (43,811) (34,780)
General and administrative (840) (735)
----------- -----------
Net operating income 53,218 48,926
Interest expense, net (22,099) (25,191)
----------- -----------
Operating Partnership Funds From Operations $ 31,119 $ 23,735
Less: FFO allocable to Operating
Partnership unitholders $ 11,410 $ 8,810
----------- -----------
Company Funds From Operations $ 19,709 $ 14,925
=========== ===========
FFO per share $ .64 $ .55
=========== ===========
</TABLE>
Company Portfolio
Reconciliation of Funds From Operations to Net Income
(Dollars in thousands - Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
------------ -----------
<S> <C> <C>
Operating Partnership Funds From Operations (from above) $ 31,119 $ 23,735
Depreciation and amortization of real estate costs (15,605) (15,405)
Straight-line rent (not included in FFO, so it must be
added in order to reconcile to GAAP net income) 1,355 1,458
Net gain on sales 58,626 -
Allocations to Operating Partnership unitholders (27,542) (2,792)
Extraordinary item (c) (377) (2,291)
------------ -----------
Net income $ 47,576 $ 4,705
============ ===========
</TABLE>
(a) Excluding straight-line rents for the three months ended March 31, 1997 and
1996 of $1,355 and $1,458, respectively.
(b) Excluding depreciation and amortization of capitalized real estate costs
other than financing fees/costs.
(c) Charges related to early retirement of debt.
14 of 21
<PAGE> 15
BREAKDOWN OF COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Original GGP/
Centers Homart GGMI Total
<S> <C> <C> <C> <C>
Revenues
Minimum rents (a) $38,775 $12,176 $50,951
Tenant recoveries 21,964 5,652 27,616
Percentage rents 2,111 306 2,417
Other 1,615 303 1,918
Fees 866 14,101 14,967
---------- --------- --------- ---------
Total revenues 65,331 18,437 14,101 97,869
Operating expenses (b) (23,469) (7,920) (12,422) (43,811)
General and administrative (840) (840)
---------- --------- --------- ---------
Net operating income 41,022 10,517 1,679 53,218
Interest expense, net (15,623) (5,246) (1,230) (22,099)
---------- --------- --------- ---------
Operating Partnership Funds From Operations $25,399 $5,271 $449 $31,119
========== ========= ========= =========
Funds From Operations per share/unit $0.64
=========
</TABLE>
BREAKDOWN OF COMPANY PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Original GGP/
Centers Homart CenterMark GGMI Total
<S> <C> <C> <C> <C> <C>
Revenues
Minimum rents (a) $31,410 $11,062 $7,872 $50,344
Tenant recoveries 16,138 5,420 3,613 25,171
Percentage rents 1,380 207 548 2,135
Other 1,064 245 272 1,581
Fees 815 4,395 5,210
---------- -------- -------- --------- ---------
Total revenues 50,807 16,934 12,305 4,395 84,441
Operating expenses (b) (18,974) (7,709) (4,131) (3,966) (34,780)
General and administrative (735) (735)
---------- -------- -------- --------- ---------
Net operating income 31,098 9,225 8,174 429 48,926
Interest expense, net (17,540) (4,736) (2,915) (25,191)
---------- -------- -------- --------- ---------
Operating Partnership Funds From Operation $13,558 $4,489 $5,259 $429 $23,735
========== ======== ======== ========= =========
Funds From Operations per share/unit $0.55
=========
</TABLE>
(a) Excluding straight-line rent for the three months ended March 31, 1997 and
1996 of $1,355 and $1,458, respectively.
(b) Excluding depreciation and amortization of capitalized real estate costs
other than financing fees/costs.
15 of 21
<PAGE> 16
OTHER COMPANY PORTFOLIO DATA
AS OF AND/OR FOR THE THREE MONTHS ENDED MARCH 31, 1997
(In thousands, except for per square foot amounts - unaudited)
<TABLE>
<CAPTION>
Original GGP/ Total or
Centers(a) Homart(a) Average
---------- --------- --------
<S> <C> <C> <C>
Occupancy of centers not
under redevelopment 83.2% 83.8% 83.5%
Tenant allowances $ 3,036 $ 2,031 $ 5,067
Annualized sales per sq. ft. $243 $291 $267
Average rent per sq. ft.
for new/renewal leases $ 20.02 $ 31.24 $ 26.80
Average rent per sq. ft.
for expiring leases $ 16.68 $ 24.94 $ 19.46
% change in total sales 1.3% 9.5% 5.0%
</TABLE>
(a) Data is for 100% of the non-anchor GLA in each portfolio, including those
centers that are owned in part by unaffiliated joint venture partners.
COMPANY PORTFOLIO DEBT
MATURITY AND CURRENT AVERAGE INTEREST RATE SUMMARY
AS OF MARCH 31, 1997
(Dollars in Thousands - unaudited)
<TABLE>
<CAPTION>
Company
Original Centers GGP/Homart(a) Portfolio Debt
------------------------- -------------------------- -------------------------
Current Current Current
Maturing Average Maturing Average Maturing Average
Year Amount Rate Amount Rate Amount Rate
- ------------------------ ----------- --------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
1997 $276,441 6.82% - - $276,441 6.82%
1998 111,739 7.25% 34,380 6.93% 146,119 7.17%
1999 112,678 8.79% 123,736 7.48% 236,414 8.10%
2000 - - 24,250 7.33% 24,250 7.33%
Subsequent 637,806 7.01% 153,624 7.46% 791,430 7.09%
---------- ---- -------- ---- ---------- ----
Totals $1,138,664 7.16% $335,990 7.40% $1,474,654 7.22%
========== ==== ======== ==== ========== ====
Floating Rate $376,739 6.90% $121,631 7.46% $498,370 7.04%
Fixed Rate 761,925 7.29% 214,359 (b) 7.37% 976,284 7.31%
---------- ---- -------- ---- ---------- ----
Totals $1,138,664 7.16% $335,990 7.40% $1,474,654 7.22%
========== ==== ======== ==== ========== ====
</TABLE>
(a) GGP/Homart debt reflects the Operating Partnership's share of its total
portfolio debt.
(b) Includes $34,381 of floating rate debt with a 9% cap on the all-in rate
through maturity in December 1998.
16 of 21
<PAGE> 17
HOMART PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
GGP/Homart owns 100% of 15 retail properties and has various percentage
interests in 11 other retail properties. As required by generally accepted
accounting principles, GGP/Homart uses the equity method to account for its
investments in joint venture properties that are not eligible for consolidation.
The Company Portfolio results and Funds From Operations reflected above include
the Company's share of GGP/Homart's Funds From Operations. In order to portray
the sources of GGP/Homart's Funds From Operations in a more meaningful and
useful manner, the "Homart Portfolio" results presented below comprise 100% of
the revenues and expenses of the wholly owned Homart Centers and GGP/Homart's
various percentage interests of the revenues and expenses of Homart Centers that
are owned in part by unaffiliated joint venture partners.
The Company's share of GGP/Homart's Funds From Operations does not take into
account interest expense paid on debt incurred to fund a majority of the $179
million initial cash purchase price and $23 million of subsequent investments,
for 38.2% of GGP/Homart's stock. Also not charged against GGP/Homart's funds
from operations are certain general and administrative costs incurred by the
Company that are attributable to the management and oversight of its
investment in GGP/Homart. Accordingly, the net effective incremental
contribution to the Company's funds from operations generated by the Homart
Centers is substantially less than the amounts reflected below. See the
discussion above regarding the relative contributions to net operating income
(similar to EBITDA) made by the Original Centers and the Homart Centers.
Management believes that contributions to Company Portfolio net operating income
is the best indication of the relative significance to the Company of the
Original Centers and the Homart Centers.
MANAGEMENT'S DISCUSSION AND ANAYLSIS OF THE HOMART PORTFOLIO'S FUNDS FROM
OPERATIONS (Dollars in thousands)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Total revenue for the first quarter of 1997 increased $4.0 million or 8.9% to
$48.3 million from $44.3 in 1996. Minimum rents accounted for $2.9 million
of the $4.0 million increase in total revenues. Minimum rent increased 10.1% or
$2.9 million to $48.2 million for the quarter ended March 31, 1997. The
development of West Oaks and increased ownership in Vista Ridge accounted for
approximately $2.1 million of the $2.9 million increase in minimum rents. The
improved performance of comparable properties accounted for the remaining
increase in minimum rent of $.8 million. Tenant recoveries increased 4.2% from
$14.2 million in 1996 to $14.8 million in 1997. The $.6 million increase
consists of a $1.0 million increase generated from the development and increased
ownership of properties offset by a $.4 million decrease due to lower
recoverable expenses. During the first quarter of 1997, percentage rents
increased $.3 million to $.8 million. Other revenues increased $.2 million or
33.3% from $.6 million in 1996.
Operating expenses were $20.7 million for the first quarter of 1997, up from
$20.2 million in 1996, an increase of 2.5% or $.5 million. The development and
acquisition of properties accounted for an increase of $1.7 million that was
offset by $1.2 million of reduced operating costs at the comparable properties.
17 of 21
<PAGE> 18
Net interest expense increased $1.3 million or 10.5% from $12.4 million in
the first three months of 1996 to $13.7 million. Approximately $1.1 million of
the increase is attributable to a new development. The remaining $.2 million
was caused by the refinancing of floating rate loans to fixed rate loans at
several properties.
The aforementioned changes generated a $2.1 million or 18.0% increase in
Funds From Operations from $11.7 million to $13.8 million.
18 of 21
<PAGE> 19
HOMART PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Revenues
Minimum rents (a) $ 31,867 $ 28,951
Tenant recoveries 14,792 14,185
Percentage rents 801 540
Other 793 641
-------------- -------------
Total revenues 48,253 44,317
Operating expenses (b) (20,727) (20,175)
-------------- -------------
Net operating income 27,526 24,142
Interest expense, net (13,730) (12,393)
-------------- -------------
GGP/Homart Funds From Operations $ 13,796 11,749
============== =============
Operating Partnership's share (38.2%) of GGP/Homart FFO $ 5,271 $ 4,489
============== =============
</TABLE>
Homart Portfolio
Reconciliation of Funds From Operations to Net Income
(Dollars in thousands - Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
--------------- --------------
<S> <C> <C>
GGP/Homart Funds From Operations (from above) $ 13,796 $ 11,749
Less:Depreciation and amortization - real estate (9,561) (8,313)
Add: Straight-line rent not included in FFO 594 990
Less:Loss on land sale (54) -
-------------- --------------
GGP/Homart net income $ 4,775 $ 4,426
============== ==============
Operating Partnership's share of GGP/Homart net income (c) $ 1,824 $ 1,691
============== ==============
</TABLE>
(a) Excluding straight-line rents for the three months ended March 31, 1997 and
1996 of $595 and $990, respectively.
(b) Excluding depreciation and amortization of capitalized real estate costs
other than financing fees/costs.
(c) GGP/Homart's net income is reflected as equity in net income of
unconsolidated real estate affiliates on the Company's Consolidated
Statements of Operations (see Page 4 above).
19 of 21
<PAGE> 20
GENERAL GROWTH MANAGEMENT, INC.
In December 1995, the Company formed GGP Management, Inc. to manage,
lease, develop and operate enclosed regional malls. In August 1996 the Company
acquired General Growth Mangement, Inc. ("GGMI") for approximately $51.5 million
in common stock and operating partnership units. GGP Management was merged into
GGMI as a result of the acquisition. As required by generally accepted
accounting principles, the Company accounts for its ownership interest in GGMI
using the equity method. The Company owns 95% of GGMI through non-voting
preferred stock. The 5% minority interest is owned by five key employees who
hold common stock with voting rights. Due to the currently unpaid and accrued
preferences on the preferred stock, the Company effectively earned 100% of the
income generated by GGMI. The operating results of GGMI are included in the
Company Portfolio Results. GGMI manages, leases, and performs various other
services for the Original Centers, the Homart Centers and other properties owned
by unaffiliated parties. The following schedule reflects the revenues and
expenses related to the operations of GGMI for the three months ended March 31,
1997 and 1996.
GENERAL GROWTH MANAGEMENT, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997(a) 1996(b)
------------ -------------
<S> <C> <C>
Revenues
Management, leasing and development services $ 14,101 $ 4,626
Expenses
Operating expense (12,422) (4,175)
------------ -----------
Net operating income 1,679 451
Interest expense, net (on loan from the Company) (1,230)
------------ -----------
GGMI Funds From Operations $ 449 $ 451
============ ===========
</TABLE>
(a) For three months ended March 31, 1997, the combined revenues and expenses
of GGMI and the former GGP Management, Inc. are reflected.
(b) For the three months ended March 31, 1996, only GGP Management, Inc.
revenues and expenses are included.
20 of 21
<PAGE> 21
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
The Company uses undistributed Funds From Operations as the principal source
of funding for recurring capital expenditures such as tenant construction
allowances and minor improvements made to individual properties that are not
recoverable through common area maintenance charges to tenants. Funding
alternatives for acquisitions, new development, expansions and major
renovation programs at individual centers include construction loans,
mini-permanent loans, long-term project financing, additional property level
or Company level equity investments, unsecured Company level debt or secured
loans collateralized by individual shopping centers.
The following factors, among others, will affect funds from operations and,
accordingly, influence the decisions of the Board of Directors regarding
distributions: (i) scheduled increases in base rents of existing leases; (ii)
changes in minimum base rents and/or percentage rents attributable to
replacement of existing leases with new or renewal leases; (iii) changes in
occupancy rates at existing centers and procurement of leases for newly
developed centers; and (iv) the Company's share of Funds From Operations
generated by GGMI, GGP/Homart and distributions therefrom, less oversight
costs and debt service on additional loans that were incurred to finance a
portion of the cash purchase price for GGP/Homart's stock. The Company
anticipates that its Funds From Operations, and potential new debt or equity
from future new financings or refinancings will provide adequate liquidity to
conduct its operations, fund general and administrative expenses, fund
operating costs and interest payments and allow distributions to the Company's
stockholders in accordance with the requirements of the Internal Revenue Code
of 1986, as amended, for continued qualification as a real estate investment
trust and to avoid any Company level federal income or excise tax.
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(c) On February 27, 1997, 1,000 shares of the Corporation's common stock were
issued to each of Beth Stewart and A. Lorne Weil, directors of the
Company in a private placement under Section 4(2) of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
Ms. Stewart and Mr. Weil served on the Evaluation Committee of the Board
of Directors in connection with the Company's acquisition of General
Growth Management, Inc. during 1996 and received the shares of Common
Stock as compensation for their service on the Committee.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Not applicable
(b) Reports on Form 8-K - Not applicable
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL GROWTH PROPERTIES, INC.
Date: May 13, 1997 /s/: Bernard Freibaum
----------------------------------
Bernard Freibaum
Executive Vice President and Chief Financial Officer
21 of 21
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 13,645
<SECURITIES> 0
<RECEIVABLES> 66,702
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 86,012
<PP&E> 1,864,464
<DEPRECIATION> (198,943)
<TOTAL-ASSETS> 1,782,374
<CURRENT-LIABILITIES> 75,365
<BONDS> 1,131,128
0
0
<COMMON> 3,079
<OTHER-SE> 572,802
<TOTAL-LIABILITY-AND-EQUITY> 1,782,374
<SALES> 0
<TOTAL-REVENUES> 65,328
<CGS> 0
<TOTAL-COSTS> (34,287)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (632)
<INTEREST-EXPENSE> (15,439)
<INCOME-PRETAX> 16,848
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,848
<DISCONTINUED> 58,647
<EXTRAORDINARY> (377)
<CHANGES> 0
<NET-INCOME> 47,576
<EPS-PRIMARY> 1.54
<EPS-DILUTED> 1.54
</TABLE>
