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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(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
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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
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(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.
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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 together with the Operating Partnership owned 100% of
thirty enclosed regional shopping centers (the "Original Centers") and 50% of
Quail Springs, 38.2% of the stock of GGP/Homart, Inc., 15.4% of the stock of
CenterMark Properties Inc., and a non-voting preferred stock interest in
General Growth Management, Inc. ("GGMI"). 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.
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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, GGP Management, Inc. was formed to manage, lease,
develop and operate enclosed malls. The Operating Partnership owned 100% of the
non-voting preferred stock ownership interest in GGP Management, Inc.
representing 95% of the equity interest. Key employees of the Company held the
remaining 5% ownership interest therein, which interest was in the form of
common stock which was entitled to all of the voting rights in GGP Management,
Inc. In August of 1996, GGP Management, Inc. acquired General Growth
Management, Inc. ("GGMI") through arm's length negotiations for approximately
$51,500, which was accounted for as a purchase, by completing the following
steps: GGP Management, Inc. borrowed approximately $39,900 from the Operating
Partnership, and used the loan proceeds to acquire 1,555,855 newly-issued common
shares of the Company from the Company. GGP Management, Inc. then exchanged the
1,555,855 common shares and 453,791 Operating Partnership Units (contributed by
the Operating Partnership) for 100% of the outstanding shares in GGMI. GGP
Management, Inc. was then merged into GGMI with GGMI as the surviving entity.
The Operating Partnership currently holds all of the non-voting preferred
stock ownership interest in GGMI representing 95% of the equity interest. Five
key employees of the Company hold the remaining 5% equity interest through
ownership of 100% of the common stock which is entitled to all voting rights in
GGMI. None of these individuals previously held any ownership interest in GGMI,
except for Robert Michaels. Mr. Michaels through an ESOP owned less than 1% of
the stock of GGMI immediately prior to its acquisition by GGP Management, Inc.
Immediately prior to and immediately following the merger of GGMI with GGP
Management, Inc., Mr. Michaels held none of the Company's outstanding Common
Stock. GGMI can not distribute funds until its available cash flow exceeds all
accumulated preferred dividends owed to the preferred stockholders. Any
dividends in excess of the preferred cumulative dividend are allocated 95% to
the preferred stockholders and 5% to the common stockholders. The interest only
loan from the Operating Partnership to GGMI bears interest at 14% and matures in
2016. GGMI may make principal payments on the loan if it has sufficient cash
flow. GGMI 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.
Below are detailed descriptions of the type of competitor the Portfolio Centers
face.
Fox River Mall is an enclosed super regional mall located in Appleton,
Wisconsin. It consists of the main building, an adjacent community center and
nine outparcels totalling 1,090,016 square feet. The mall is anchored by
Dayton's, Younkers, JCPenney, Sears and Target. The primary competition for Fox
River consists of three centers. One of the centers, located 26 miles
northeast, consists of 601,630 square feet and is anchored by Elder Beerman,
Kohl's, Montgomery Ward and Shopko. This center offers merchandise with lower
price points and more discount retailers than Fox River Mall. A 903,538 square
foot center located 29 miles northeast is anchored by Boston Store, JCPenney
and Younkers. This center lacks a fashion anchor similar to the Dayton's at Fox
River and is not easily accessible in its downtown location. In addition, a
328,775 square foot community center located approximately three miles from Fox
River is anchored by Kohl's and Shopko. This center primarily serves as a
convenience shopping facility for residents on the north side of Appleton and
offers little direct competition to Fox River.
Bellis Fair is a 764,124 square foot regional shopping center located on
Interstate 5 in Bellingham, Washington, 90 miles north of Seattle and 25 miles
south of the Canadian border. The Mall is anchored by JCPenney, Bon Marche,
Sears, Target and Mervyns. The primary competition for Bellis Fair consists of
discount retailers. While these discount retailers help draw Canadian shoppers
they in turn attract shoppers to Bellis Fair due to its stronger, fashion
oriented tenant mix. The discount retailers that compete with Bellis Fair
include Ross Dress for Less, Home Base, Office Depot, Good Guys, Circuit City
and Wal-Mart. Other competition includes a 110,000 square foot center located
15 miles north that also helps draw Canadian shoppers. Located approximately 25
miles south is a 525,000 square foot center anchored by Bon Marche, Sears and
Emporium. This center lacks the desirable national tenant mix available at
Bellis Fair. As a whole, these outlet centers have little impact on Bellis
Fair's core market.
Natick Mall is a 1,138,252 square foot regional mall located in Boston,
Massachusetts. The mall is anchored by Filene's, Macy's, Lord & Taylor, Jordan
Marsh and Sears. Natick Mall is situated in a highly competitive market of
regional malls, yet the center's excellent location makes it the dominant
retail facility in the trade area. The primary competition for Natick Mall
consists of an upscale 444,000 square foot specialty retail center with an
adjacent 300,000 square foot center. The specialty center is anchored by
Bloomingdales Homestore and Filenes. The 300,000 square foot adjacent center is
anchored by Henri Bendel. These centers offer unique upscale merchants with a
much smaller number of tenants and a more limited fashion mix than is offered at
Natick. A 1,250,000 square foot center located approximately 22 miles north is
anchored by Sears, Lord & Taylor, Filene's and Macy's. A 1988 renovation to
this center, which included the addition of a second level of mall shops, has
secured its strong competitive position in the northwest suburban Boston
community, yet its market demographics remain weaker than Natick's. A new
1,100,000 square foot center located approximately 20 miles west is anchored by
Sears, JCPenney and Filenes. This center offers a more moderately priced tenant
mix and is also located in a weaker demographic area than Natick's market area.
In addition, a 1,370,000 square foot center is located 25 miles southeast and
is anchored by Sears, Filene's, Lord Taylor and Macy's. This center contains
similar tenants to and the same anchors as Natick. Because of its good location
and tenant mix, it poses the most direct competition to Natick Mall.
In addition to competition from other centers which the Company's centers
face, other companies, catalogues, direct mail and telemarketers also pose
direct competition to the Company's Centers.
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
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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 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 (the "Portfolio
Centers").
The Portfolio Centers currently consist of thirty-one Original Centers,
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.
ORIGINAL CENTERS BUSINESS
The Original Centers consisted of thirty-one enclosed mall shopping
centers as of December 31, 1996. The Original Centers are located throughout
the United States with a concentration in the Midwest.
A detailed listing on page 11 includes the center, location, year opened,
square footage and anchors. On December 31, 1996, the Original Centers
contained approximately 21 million square feet of total GLA, and approximately
10 million square feet of mall stores. As of such date, there were
approximately 121 anchors and more than 2,300 mall stores.
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
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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
The Portfolio Centers consist of seventy five properties, including one
center that is partially owned by both GGP/Homart and CenterMark. 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
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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.
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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
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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) 1 50
</TABLE>
(1) Excludes the CenterMark Portfolio.
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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. The following table reflects
the tenant representation by category in the Original Centers as of December
31, 1996. Management believes that similar tenant representation by category
existed in the Portfolio Centers as of December 31, 1996.
<TABLE>
<CAPTION>
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% OF SQ. FT. IN
TENANT CATEGORIES ORIGINAL CENTERS TYPES OF TENANTS/PRODUCTS SOLD
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Women's Apparel 21% Women's apparel
- --------------------------------------------------------------------------------------------------------------------------------
Men's Apparel 2% Men's apparel
- --------------------------------------------------------------------------------------------------------------------------------
Apparel 13% Unisex apparel, children's apparel, lingerie, formalwear
- --------------------------------------------------------------------------------------------------------------------------------
Shoes 11% Shoes
- --------------------------------------------------------------------------------------------------------------------------------
Specialty Food 2% Candy, coffee, nuts, chocolate, health food/vitamins
- --------------------------------------------------------------------------------------------------------------------------------
Food 9% Restaurant, food court
- --------------------------------------------------------------------------------------------------------------------------------
Gifts 7% Cards, candles, engraving stores
other gift or novelty
- --------------------------------------------------------------------------------------------------------------------------------
Jewelry 3% Fine jewelry and costume jewelry
- --------------------------------------------------------------------------------------------------------------------------------
Music/Electronics 7% Music, electronics, computer and software, video rental
- --------------------------------------------------------------------------------------------------------------------------------
Specialty 24% Photo studios and development, beauty and nail salons,
pharmacy and sundries, variety stores, pet stores,
newsstands, jewelry repair, shoe repair, tailor, optical,
video games, sporting goods, shops for home/bath/kitchen,
rugs, fabric stores, beds/waterbeds, luggage, perfume,
tobacco, toys, cameras, sunglasses, books
- --------------------------------------------------------------------------------------------------------------------------------
Total 100%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Typical tenants in Women's Apparel include The Limited, Casual Corner,
Talbots and Lerner. Men's Apparel includes tenants such as J Riggings and Nicks
for Men. The Apparel category typically includes Gap, Eddie Bauer, American
Eagle, Buckle, Victoria's Secret and Gymboree. The Shoes category often
includes tenants such as Kinney, Footlocker and Payless Shoesource.
Specialty Food tenants often include General Nutrition Center, Mr. Bulky, and
Barnie's Coffee and Tea Company. The Food category typically includes
restaurants such as Garfield's, fast food restaurants such as Arby's, and food
court tenants such as Sbarro. Typical tenants in the Gifts Category include
Disney, Things Remembered, Kirlin's Hallmark, and Spencer. Jewelry tenants
typically include Friedman's Jewelers and Golden Chain Gang. The
Music/Electronics category includes tenants such as Camelot Music, Radio Shack,
Suncoast Pictures, and Waldensoftware. Specialty tenants include Mastercuts,
One Hour Photo, California Nails, Lechter's, Kay-Bee Toys, Dollar Tree,
Lemstone Books, Garden Botanika and many others. The table below shows the mall
shop tenants (excluding department stores) in the Original Centers with more
than 50,000 total square feet on December 31, 1996. Management believes that
similar square footage percentages existed in the Portfolio Centers as of
December 31, 1996.
<TABLE>
<CAPTION>
- --------------------------------------------------------------
TOTAL
TENANT NAME SQ. FT. % OF TOTAL
- --------------------------------------------------------------
<S> <C> <C>
LANE BRYANT 151,329 2.3%
VICTORIA'S SECRET 127,936 2.0%
PAYLESS SHOESOURCE/PAYLESS KID 117,550 1.8%
LERNER NEW YORK 101,905 1.6%
FOOT LOCKER 92,859 1.4%
MAURICES 90,567 1.4%
RADIO SHACK 87,499 1.3%
DEB 86,751 1.3%
DISC JOCKEY/REEL COLLECTIONS 86,128 1.3%
KAY-BEE TOYS STORES 84,205 1.3%
WALDENBOOKS/WALDENKIDS 82,374 1.3%
FAMOUS FOOTWEAR 81,777 1.2%
CHAMPS 69,905 1.1%
AMERICAN EAGLE OUTFITTERS 61,882 0.9%
BUCKLE, THE 60,465 0.9%
B DALTON BOOKSELLERS 60,385 0.9%
FOOTACTION/FOOTACTION FOR KIDS 56,823 0.9%
CASUAL CORNER 54,856 0.8%
LIMITED EXPRESS 54,212 0.8%
LENSCRAFTERS 52,501 0.8%
GENERAL NUTRITION CENTER 50,467 0.8%
- --------------------------------------------------------------
</TABLE>
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.
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.
Two of the larger renovation and expansion projects are the renovation and
expansion of Chapel Hills Mall and the expansion of Fox River Mall.
Chapel Hills, a 957,251 square foot center located in Colorado Springs,
Colorado, is currently undergoing the addition of a three level 203,000 square
foot Dillards department store and adjoining parking deck. The project is
scheduled to be completed and open in the first quarter of 1997. The Company
will begin a renovation that will include the addition of an Ice Rink, a
two-level Borders Book Store, a food court expansion, new skylights, new
ceilings, hand rails, remodeled restrooms and flooring upgrades. The ice rink
is slated to open in June 1998, and the renovation is expected to be completed
in late 1998.
Fox River, a 1,090,016 square foot center, located in Appleton, Wisconsin
is beginning preparation for an expansion of its food court. The 35,000 square
foot project will include a 7,300 square foot restaurant/brew pub, eight new
permanent food court locations and an additional 300 seats, bringing the total
seating capacity to 850 seats. The modifications should be substantially
complete by the end of 1997.
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. 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.
Brass Mill, a GGP/Homart project includes a 950,000 square foot enclosed
mall and a 200,000 square foot power center in Waterbury, Connecticut. The
mall currently has a total of 130,180 square feet signed or out for signature.
Sears, JCPenney, Lechmere and Filenes have executed leases in conjunction with
the development of the enclosed mall. The power center, Brass Mills Commons
has 109,000 square feet executed or out for signature including Barnes & Noble
and Kids 'R Us. As of December 31, 1996, $50 million has been incurred in the
construction of the mall and power center. The Grand Opening is scheduled for
September 17, 1997.
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 majority of the mall income is derived from rents received through
long term leases with retail tenants. The long term leases require the
tenant to pay base rent which is a fixed amount specified in the lease. The
base rent is often subject to scheduled increases defined in the lease.
Another component of the lease is percentage rent. Percentage rent is paid by
the tenant if their sales exceed an agreed upon minimum annual amount.
Percentage rent is calculated by multiplying the sales in excess of the
minimum annual amount by a percentage defined in the lease agreement. Long
term leases generally contain a provision for the mall to recover expenses
incurred in the day-to-day operations including common area maintenance and
real estate taxes. The recovery is calculated by multiplying the tenants
pro-rata share of space by the total recoverable expense amounts.
The Company's management believes that all of its Properties described
herein which are owned by the Company, in whole or in part, are adequately
covered by insurance.
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 of 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) 1,445,000 Forbes-Cohen Lakeview Square,
Partnership Properties, Lansing Mall and
Lakeview Square Westwood Mall
Associates and
Jackson Properties
</TABLE>
(1) Holders of the units sold by the Operating Partnership have the right, on
or after December 7, 1997, to require that the Operating Partnership redeem
such units for cash; provided, however, that the Company may assume the
Operating Partnership's obligations and redeem the units for cash or shares
of the Company's Common Stock on a one-for-one basis.
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
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 -
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
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 -
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)
</TABLE>
(1) Current minority holders (primarily the Bucksbaums) who were previously the
sole stockholders of the Company.
(2) Represents net income 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.
FUNDS FROM OPERATIONS
Funds from Operations is used by the real estate industry and investment
community as a primary measure of the performance of real estate companies.
The National Association of Real Estate Investment Trusts ("NAREIT")
defines Funds from Operations as net income (loss) (computed in accordance with
generally accepted accounting principles ("GAAP")), excluding gains (or losses)
from debt restructuring and sales of properties, plus real estate related
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. In calculating its Funds from Operations,
the Company also excludes non-cash straight line rent and gains on land sales,
if any. The NAREIT definition of Funds from Operations does not exclude the
aforementioned items. The Company's Funds from Operations may not be directly
comparable to similarly titled measures reported by other real estate
investment trusts. Funds from Operations does not represent cash generated
from operating activities in accordance with GAAP and should not be considered
as an alternative to net income (determined in accordance with GAAP) as an
indication of the Company's financial performance or to cash flow from
operating activities (determined in accordance with GAAP) as a measure ofthe
Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make cash distributions.
<TABLE>
<CAPTION>
RECONCILIATION OF NET INCOME DETERMINED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO FFO:
- ---------------------------------------------------------------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Net income $ 59,742 $ 43,054 $ 14,165
Extraordinary item - charges related to early
retirement of debt 2,291 693
Allocations to Operation Partnership Unitholders 34,580 25,856 9,518
Gain on sales (43,975) (33,397)
Straight line rents (6,195) (2,997)
Pro Forma adjustments (a) (499)
Depreciation and amortization 62,083 48,698 45,733
--------- -------- --------
Funds From Operations $ 108,526 $ 81,214 $ 69,610
========= ======== ========
</TABLE>
(a) 1994 includes pro forma adjustments to account for the acquisition of 40%
of CenterMark as though it occurred on January 1, 1994.
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<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.
FORWARD LOOKING INFORMATION
Forward looking statements contained in this Management's Discussion and
Analysis of Financial Condition and Results of Operations may include certain
forward-looking information statements, within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including (without limitation) statements
with respect to anticipated future operating and financial performance, growth
and acquisition opportunities and other similar forecasts and statements or
expectation. Words such as "expects", "anticipates", "intends", "plans",
"believes", "seeks", "estimates" and "should" and variations of these words and
similar expressions, are intended to identify these forward-looking
statements. Forward-looking statements made by the Company and its management
are based on estimates, projections, beliefs and assumptions of management at
the time of such statements and are not guarantees of future performance. The
Company disclaims any obligation to update or revise any forward-looking
statement based on the occurrence of future events, the receipt of new
information or otherwise.
Actual future performance, outcomes and results may differ materially from
those expressed in forward-looking statements made by the Company and its
management as a result of a number of risks, uncertainties and assumptions.
Representative examples of these factors include (without limitation) general
industry and economic conditions, interest rate trends, cost of capital and
capital requirements, availability of real estate properties, competition from
other companies and venues for the sale/distribution of goods and services,
shifts in customer demands, tenant bankruptcies, changes in operating
expenses, including employee wages, benefits and training, governmental and
public policy changes and the continued availability of financing in the
amounts and the terms necessary to support the Company's future business.
CERTAIN INFORMATION ABOUT THE PORTFOLIO CENTERS
At December 31, 1996, the Company together with the Operating Partnership
owned 100% of thirty enclosed regional shopping centers (the "Original
Centers") and 50% of Quail Springs, 38.2% of the stock of GGP/Homart, Inc.,
15.4% of the stock of Centermark Properties Inc., and a non-voting preferred
stock interest in General Growth Management, Inc. ("GGMI"). 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. 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.
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 Portfolio Centers which are not currently
undergoing redevelopment on December 31, 1996, was approximately 86.3%.
Comparable mall store sales are sales of those tenants that were open the
previous 12 months. Therefore comparable mall store sales in 1996 are of those
tenants that were operating the entire year of 1995. 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
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<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
15.4%.
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
LIQUIDITY AND CAPITAL RESOURCES
The Company uses operating cash flow 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.
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.
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<PAGE> 21
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.
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. 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.
Brass Mill, a GGP/Homart project includes a 950,000 square foot enclosed
mall and a 200,000 square foot power center in Waterbury, Connecticut. The
mall currently has a total of 130,180 square feet signed or out for signature.
Sears, JCPenney, Lechmere and Filenes have executed leases in conjunction with
the development of the enclosed mall. The power center, Brass Mills Commons
has 109,000 square feet executed or out for signature including Barnes & Noble
and Kids 'R Us. As of December 31, 1996, $50 million has been incurred in the
construction of the mall and power center. The Grand Opening is scheduled for
September 17, 1997.
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.
SUMMARY OF INVESTING ACTIVITIES
Net cash used by investing activities in 1996 was $14.8 million, compared
to a use of $469.2 million in 1995. Cash flow from investing activities was
effected by the timing of acquisitions, development and improvements to real
estate properties, requiring a use of cash of approximately $121.1 million in
1996 compared to $380.0 in 1995. Natick Mall was acquired in 1995 for
approximately $265.0 million. The sale of portions of CenterMark provided cash
flow of $87.0 million in 1996 and $72.5 million in 1995. Investments in
GGP/Homart used $19.1 million of cash flow in 1996 compared to a use of $178.0
million in 1995. GGP/Homart was acquired during 1995. Distributions received
from GGP/Homart in 1996 were $13.8 million. The collection of notes receivable
from affiliates increased cash flow from investing activities by $12.6 million
in 1996.
Net cash used by investing activities in 1995 was $469.2 million compared
to $145.3 million in 1994. Acquisitions, developments of real estate and
improvements and additions to property used $380.0 million of cash flow in 1995
compared to a use of $37.1 million in 1994. The acquisition of Natick Mall and
development activity at Eagle Ridge and West Valley accounted for the majority
of the increase in 1995 compared to 1994. The sale of short-term investments
created a $61.8 million increase in cash flow in 1994. Proceeds from the sale
of a portion of CenterMark increased cash flow $72.5 million in 1995.
Distributions from CenterMark were $23.5 million in 1995 compared to $14.6
million in 1994. Investments in unconsolidated affiliates used $178.0 million
of cash flow in 1995 in connection with the acquisition of GGP/Homart, compared
to a $181.5 million used in the CenterMark acquisition during 1994.
SUMMARY OF FINANCING ACTIVITIES
Financing activities in 1996 used $40.3 million of cash compared to a
$421.2 million source of cash flow in 1995. The net change in cash flow from
financing activities form 1995 to 1996 is made up of three main components.
First, distributions decreased cash flow from 1995 to 1996 by $8.9 million due
to the increased distribution rate and additional shares and Operating
Partnership Units outstanding during 1996 compared to 1995. Net borrowing
activity was a $37.7 million source in 1996 compared to a $400.7 million source
of cash flow in 1995. The financing associated with the acquisitions of
GGP/Homart and Natick Mall accounted for the majority of activity in 1995. The
third main component is the net proceeds from the sale of common stock totaling
$87.9 million in May of 1995 and none in 1996.
Financing activities in 1995 created a source of cash flow totaling $421.2
million compared to a $96.4 million source of cash flow in 1994. The net
change of $324.8 million is primarily due to three components. First,
distributions decreased cash flow $7.9 million more in 1995 compared to 1994.
This was primarily due to the issuance of additional shares in connection with
the follow-on stock offering in May of 1995 and the increased distribution
rate. Second, net borrowings increased cash flow $400.7 million in 1995
compared to an increase of $154.1 million in 1994. The increased borrowing
activity was primarily attributable to the financing activities related to the
acquisitions of GGP/Homart and Natick Mall. Third, the follow-on stock
offering in 1995 contributed an increase of $87.9 million in cash flow net of
stock issuance costs.
REIT REQUIREMENTS
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
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<PAGE> 22
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. The executive officers serve at the pleasure of the Board of
Directors. John Bucksbaum, Executive Vice President is the son of Matthew
Bucksbaum, Chairman and Chief Executive Officer.
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;
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<PAGE> 23
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
-23-
<PAGE> 24
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: January 15, 1998
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 January 15, 1998
- --------------------------
Robert Michaels
/s/ John Bucksbaum Executive Vice President - January 15, 1998
- -------------------------- Director
John Bucksbaum
/s/ Bernard Freibaum Executive Vice President - January 15, 1998
- -------------------------- Chief Financial Officer and
Bernard Freibaum Principal Accounting Officer
/s/ Anthony Downs Director January 15, 1998
- --------------------------
Anthony Downs
/s/ Morris Mark Director January 15, 1998
- --------------------------
Morris Mark
/s/ Beth Stewart Director January 15, 1998
- --------------------------
Beth Stewart
/s/ Lorne Weil Director January 15, 1998
- ---------------------------
A. Lorne Weil
-24-
<PAGE> 25
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>
<TABLE>
<S> <C>
Westfield America, Inc. formerly CenterMark Properties, Inc.
Consolidated Financial Statements
Report of Independent Auditors G-1
Report of Independent Auditors G-2
Consolidated Balance Sheets as of March 31, 1997
(unaudited) December 31, 1996 and 1995 G-3
Consolidated Statements of Income for the three months
ended March 31, 1997 and 1996 (unaudited) and for the
years ended December 31, 1996 and 1995, the period from
February 12, 1994 through December 31, 1994 and the period
from January 1, 1994 through February 11, 1994 G-4
Consolidated Statements of Changes in Shareholders' Equity
for the three months ended March 31, 1997 and 1996
(unaudited) and for the years ended December 31, 1996 and
1995, the period from February 12, 1994 through December 31,
1994 and the period from January 1, 1994 through February
11, 1994 G-5
Consolidated Statements of Cash Flows for the three months
ended March 31, 1997 and 1996 (unaudited) and for the years
ended December 31, 1996 and 1995, the period from February
12, 1994 through December 31, 1994 and the period from
January 1, 1994 through February 11, 1994 G-6
Notes to Consolidated Financial Statements G-8
Schedule III Real Estate Investment and Accumulated Depreciation G-26
</TABLE>
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.
F-1
<PAGE> 26
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> 27
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> 28
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> 29
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> 30
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> 31
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, the Company together with the Operating Partnership
owned 100% of thirty enclosed regional shopping centers (the "Original
Centers"), a 15.4% interest in CenterMark Properties, Inc. (see Note 3), a
38.2% interest in GGP/Homart, Inc. (see Note 4), a non-voting preferred
stock ownership 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> 32
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>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements of the Company have been prepared on
a consolidated basis which include the accounts of the Company, its
majority owned Operating Partnerships and its subsidiaries. All
significant intercompany balances and transactions have been eliminated.
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> 33
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 35%, respectively, of its 40% interest in CenterMark
resulting in a 15.4% interest at December 31, 1996 after giving effect to
a CenterMark private offering. During 1996, the Company acquired a
non-voting preferred stock interest in General Growth Management, Inc.
("GGMI") (See Note 6) 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 as
described in Note 6 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 a non-voting preferred
stock ownership interest in 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> 34
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> 35
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> 36
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, GGP Management, Inc. was formed to manage, lease,
develop and operate enclosed malls. The Operating Partnership owned
100% of the non-voting preferred stock ownership interest in GGP
Management, Inc. representing 95% of the equity interest. Key employees
of the Company held the remaining 5% ownership interest therein, which
interest was in the form of common stock which was entitled to all of the
voting rights in GGP Management, Inc. In August 1996, GGP Management,
Inc. acquired General Growth Management, Inc. ("GGMI") through arm's
length negotiations for approximately $51,500, which was accounted for as
a purchase by completing the following steps: GGP Management, Inc.
borrowed approximately $39,900 from the Operating Partnership, and used
the loan proceeds to acquire 1,555,855 newly-issued common shares of the
Company from the Company. GGP Management, Inc. then exchanged the
1,555,855 common shares and 453,791 Operating Partnership Units
(contributed by the Operating Partnership) for 100% of the outstanding
shares in GGMI. GGP Management, Inc. was then merged into GGMI with GGMI
as the surviving entity.
The Operating Partnership currently holds all of the non-voting preferred
stock ownership interest in GGMI representing 95% of the equity interest.
Five key employees of the Company hold the remaining 5% equity interest
through ownership of 100% of the common stock which is entitled to all
voting rights in GGMI. GGMI can not distribute funds until its
available cash flow exceeds all accumulated preferred dividends owed to
the preferred stockholders. Any dividends in excess of the preferred
cumulative dividend are allocated 95% to the preferred stockholders and 5%
to the common stockholders. The interest only loan from the Operating
Partnership to GGMI bears interest at 14% and matures in 2016. GGMI may
make principal payments on the loan if it has sufficient cash flow. GGMI
manages, leases, and performs various other services for the Original
Centers, GGP/Homart and other properties owned by unaffiliated parties.
F-12
<PAGE> 37
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> 38
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> 39
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> 40
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> 41
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> 42
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> 43
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> 44
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 35% 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 35% 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 60% 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> 45
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> 46
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> 47
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> 48
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> 49
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> 50
REPORT OF INDEPENDENT AUDITORS
--------------------
To the Board of Directors
of Westfield America, Inc.:
We have audited the accompanying consolidated balance sheet of
Westfield America, Inc. and Subsidiaries formerly CenterMark Properties, Inc.
(the "Company") as of December 31, 1996 and the related consolidated statement
of income, shareholders' equity and cash flows for the year then ended (our
audit also includes the financial statement schedule on page G-26). These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audit.
We conducted our audit 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 significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects the consolidated financial position of
Westfield America, Inc. and Subsidiaries as of December 31, 1996 and the
consolidated results of operations and cash flows for the year then ended in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth thereof.
Ernst & Young LLP
Los Angeles, California
February 28, 1997
G-1
<PAGE> 51
REPORT OF INDEPENDENT AUDITORS
--------------------
To the Board of Directors
of Westfield America, Inc.:
We have audited the accompanying consolidated balance sheet of
Westfield America, Inc. and Subsidiaries, formerly CenterMark Properties, Inc.
(the "Company"), as of December 31, 1995 and the related consolidated statements
of income, changes in shareholders' equity and cash flows for the year ended
December 31, 1995 and the periods from February 12, 1994 through December 31,
1994 and from January 1, 1994 through February 11, 1994. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects the consolidated financial position of
Westfield America, Inc. and Subsidiaries as of December 31, 1995 and the
consolidated results of its operations and its cash flows for the year ended
December 31, 1995 and the periods from February 12, 1994 through December 31,
1994 and from January 1, 1994 through February 11, 1994 in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Los Angeles, California
February 13, 1996, except for information as to
earnings per share, dividends per share and average shares outstanding, for
which the date is March 3, 1997.
G-2
<PAGE> 52
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
---------- --------------------------
1997 1996 1995
---------- ---------- --------
(UNAUDITED)
<S> <C> <C> <C>
INVESTMENT IN REAL ESTATE:
Land ....................................................................... $ 196,810 $ 196,810 $143,851
Buildings, improvements and equipment ...................................... 1,001,768 975,224 503,125
Less accumulated depreciation and amortization ............................. (121,533) (110,260) (52,657)
---------- ---------- --------
Net property and equipment .............................................. 1,077,045 1,061,774 594,319
Construction in progress ................................................... 33,135 49,821 5,447
Investments in unconsolidated real estate partnerships ..................... 103,422 106,488 135,484
Direct financing leases receivable ......................................... 91,860 92,351 94,234
---------- ---------- --------
Net investment in real estate ........................................... 1,305,462 1,310,434 829,484
CASH AND CASH EQUIVALENTS ..................................................... 2,647 6,729 --
RESTRICTED CASH ............................................................... -- -- 100
ACCOUNTS AND NOTES RECEIVABLE (net of allowance of $6,305, $6,441 and $4,187 in 21,768 19,716 9,661
1997, 1996 and 1995, respectively)
DEFERRED EXPENSES AND OTHER ASSETS, NET ....................................... 9,125 7,691 5,461
---------- ---------- --------
Total assets ............................................................ $1,339,002 $1,344,570 $844,706
========== ========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Notes payable .............................................................. $ 783,285 $ 770,625 $426,781
Accounts payable and accrued expenses ...................................... 29,681 33,380 23,903
Distribution payable ....................................................... 1,952 21,981 13,603
Minority interest .......................................................... -- 54 --
---------- ---------- --------
Total liabilities ....................................................... 814,918 826,040 464,287
---------- ---------- --------
COMMITMENTS AND CONTINGENCIES ................................................. -- -- --
SHAREHOLDERS' EQUITY (NOTE 9):
Common stock ............................................................... 529 529 453
Preferred stock ............................................................ 94,000 94,000 --
Additional paid-in capital ................................................. 424,001 424,001 379,966
Retained earnings .......................................................... 5,554 -- --
---------- ---------- --------
Total shareholders' equity .............................................. 524,084 518,530 380,419
---------- ---------- --------
Total liabilities and shareholders' equity .............................. $1,339,002 $1,344,570 $844,706
========== ========== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
G-3
<PAGE> 53
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
-------------------------
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
THREE MONTHS ENDED YEAR ENDED FEBRUARY 12, JANUARY 1,
----------------------- --------------------------- 1994 THROUGH 1994 THROUGH
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, FEBRUARY 11,
1997 1996 1996 1995 1994 1994
-------- -------- --------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Minimum rents ................ $ 30,742 $ 20,967 $ 106,393 $ 75,154 $ 58,750 $ 7,309
Tenant recoveries ............ 14,055 8,987 44,423 32,335 32,023 4,036
Percentage rents ............. 1,986 1,572 3,991 1,690 2,470 467
Service fee income
from unconsolidated
real estate
partnerships .............. 120 475 1,282 2,148 6,213 957
-------- -------- --------- --------- -------- --------
Total revenues ............ 46,903 32,001 156,089 111,327 99,456 12,769
-------- -------- --------- --------- -------- --------
EXPENSES:
Operating_recoverable ........ 13,771 8,916 44,487 31,184 29,477 4,326
Other operating .............. 992 721 4,513 3,061 -- --
Management fees .............. 928 728 3,495 1,828 -- --
Advisory fee (not
payable) .................. -- -- 2,600 -- -- --
General and
administrative ............ 236 153 808 776 7,129 2,543
Depreciation and
amortization .............. 11,539 8,027 38,033 28,864 24,897 3,605
-------- -------- --------- --------- -------- --------
Total expenses ............ 27,466 18,545 93,936 65,713 61,503 10,474
-------- -------- --------- --------- -------- --------
OPERATING INCOME ................ 19,437 13,456 62,153 45,614 37,953 2,295
INTEREST EXPENSE, NET ........... (12,860) (7,482) (40,233) (27,916) (24,156) (481)
OTHER INCOME:
Equity in income
(losses) of
unconsolidated real
estate partnerships ....... 1,293 733 3,063 3,359 (386) (2,151)
Interest and other
income .................... 312 230 776 789 1,830 340
-------- -------- --------- --------- -------- --------
INCOME BEFORE MINORITY
INTEREST ..................... 8,182 6,937 25,759 21,846 15,241 3
MINORITY INTEREST IN
EARNINGS OF
CONSOLIDATED REAL
ESTATE PARTNERSHIP ........... (218) (230) (1,063) -- -- --
-------- -------- --------- --------- -------- --------
NET INCOME ...................... $ 7,964 $ 6,707 $ 24,696 $ 21,846 $ 15,241 $ 3
======== ======== ========= ========= ======== ========
Net Income allocable to preferred
shares ....................... $ 1,998 $ 1 $ 4,264 $ 3 $ -- $ --
-------- -------- --------- --------- -------- --------
Net Income allocable to
common shares ................ 5,966 6,706 20,432 21,843 15,241 3
-------- -------- --------- --------- -------- --------
$ 7,964 $ 6,707 24,696 21,846 15,241 3
======== ======== ========= ========= ======== ========
Earnings per share .............. $ 0.11 $ 0.15 $ 0.42 $ 0.48 $ 0.34
DISTRIBUTIONS DECLARED
PER COMMON SHARE ............. $ 0.01 $ 0.06 $ 1.51 $ 1.68 $ 0.81
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES ............. 53,481 45,109 49,383 44,978 44,902
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
G-4
<PAGE> 54
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
-------------------------
<TABLE>
<CAPTION>
TOTAL
COMMON PREFERRED ADDITIONAL RETAINED SHAREHOLDERS'
STOCK STOCK PAID-IN CAPITAL EARNINGS EQUITY
------- ------- --------------- -------- ---------
<S> <C> <C> <C> <C> <C>
BALANCES, JANUARY 1, 1994 ........................ $ 5,200 $ -- $ 657,630 $ 7,137 $ 669,967
Net income for the period from January 1, 1994
through February 11, 1994 ..................... -- -- -- 3 3
Capital contributions from Prudential ............ -- -- 48,000 -- 48,000
Distributions paid to Prudential ................. -- -- (460,558) (7,140) (467,698)
Distribution of partnership interest to Prudential -- -- (4,888) -- (4,888)
Capital contributions from GWG ................... -- -- 32,030 -- 32,030
------- ------- --------- -------- ---------
BALANCES, FEBRUARY 12, 1994 ...................... 5,200 -- 272,214 -- 277,414
Adjustment to reflect cost allocated to GWG's
investment in CenterMark Properties, Inc. ..... (5,200) -- 179,826 -- 174,626
------- ------- --------- -------- ---------
BALANCES, FEBRUARY 12, 1994, as adjusted ......... -- -- 452,040 -- 452,040
Stock split, 8980.3983 shares to 1 ............... 451 -- (451) -- --
Net income for the period from February 12, 1994
through December 31, 1994 ..................... -- -- -- 15,241 15,241
Distributions on common stock .................... -- -- (21,258) (15,241) (36,499)
------- ------- --------- -------- ---------
BALANCES, DECEMBER 31, 1994 ...................... 451 -- 430,331 -- 430,782
Net income for the year ended December 31, 1995 .. -- -- -- 21,846 21,846
Issuance of common stock ......................... -- -- 3,170 -- 3,170
Issuance of preferred stock ...................... 2 -- 50 -- 52
Distributions on common stock .................... -- -- (53,585) (21,843) (75,428)
Distributions on preferred stock ................. -- -- -- (3) (3)
------- ------- --------- -------- ---------
BALANCES, DECEMBER 31, 1995 ...................... 453 -- 379,966 -- 380,419
Net income for the year ended December 31, 1996 .. -- -- -- 24,696 24,696
Issuance of common stock ......................... 212 -- 342,109 -- 342,321
Cost of issuance of stock ........................ -- -- (29,000) -- (29,000)
Repurchase of common stock ....................... (136) -- (217,864) -- (218,000)
Issuance of preferred stock ...................... -- 94,000 -- -- 94,000
Advisory fee (not payable) ....................... -- -- 2,600 -- 2,600
Distributions on common stock .................... -- -- (53,810) (20,432) (74,242)
Distributions on preferred stock ................. -- -- -- (4,264) (4,264)
------- ------- --------- -------- ---------
BALANCES, DECEMBER 31, 1996 ...................... 529 94,000 424,001 -- 518,530
Net income for the three months ended March 31,
1997 (unaudited) .............................. -- -- -- 7,964 7,964
Distributions on common stock (unaudited) ........ -- -- -- (412) (412)
Distributions on preferred stock (unaudited) ..... -- -- -- (1,998) (1,998)
------- ------- --------- -------- ---------
BALANCES, MARCH 31, 1997 (UNAUDITED) .......... $ 529 $94,000 $ 424,001 $ 5,554 $ 524,084
======= ======= ========= ======== =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
G-5
<PAGE> 55
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
------------------
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
THREE MONTHS ENDED FEBRUARY 12, JANUARY 1,
----------------------- YEAR ENDED 1994 THROUGH 1994 THROUGH
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, FEBRUARY 11,
1997 1996 1996 1995 1994 1994
--------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................. $ 7,964 $ 6,707 $ 24,696 $ 21,846 $ 15,241 $ 3
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation ......................... 11,273 7,828 37,130 28,296 24,405 3,421
Amortization ......................... 349 393 1,466 854 492 184
Equity in (income) losses of
unconsolidated real estate
partnership ........................ (1,293) (733) (3,063) (3,359) 386 2,151
Minority interest in earnings of
consolidated real
estate partnership ................. 218 230 1,063 -- -- --
Advisory fee (not payable) ........... -- -- 2,600 -- --
Changes in assets and liabilities:
Accounts receivable, net ............. (2,079) (2,162) (5,510) 2,525 41 (1,464)
Deferred expenses and other assets ... (1,375) (387) (580) (605) (795) (3,473)
Accounts payable and accrued
expenses ........................... (3,479) (62) (1,914) (6,567) (19,105) 11,804
Deferred income taxes ................ (8) (6) -- -- -- (7,332)
-------- -------- --------- -------- -------- ---------
Net cash flows provided by
operating activities ................. 11,570 11,808 55,888 42,990 20,665 5,294
-------- -------- --------- -------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .................... (10,266) (5,522) (44,084) (12,787) (26,782) (5,304)
Purchase of unconsolidated
partnership interest ................. -- -- -- (2,000) -- --
Purchase of WPI, net of cash acquired ... -- -- (62,794) -- -- --
Cash distributions received from
unconsolidated real
estate partnerships .................. 4,359 1,717 10,786 16,558 29,961 267
Cash and cash equivalents of
consolidated real
estate partnership ................... -- 2,389 2,389 -- -- --
Repayment of direct financing leases
receivable ........................... 491 459 1,883 1,786 1,360 --
Notes receivable advances ............... -- -- -- (268) (40) --
Notes receivable repayments ............. 27 24 107 186 815 119
Decrease (increase) in investments ...... -- -- -- 248 6,432 (709)
Decrease (increase) in restricted cash .. -- 100 100 1,318 15,612 (17,030)
Repayment of advances made to
unconsolidated real estate
partnerships ......................... -- -- -- 435 300 --
Capital contribution to unconsolidated
real estate partnerships ............. -- -- -- -- (4,102) (844)
-------- -------- --------- -------- -------- ---------
Net cash flows (used in) provided by
investing activities ................. $ (5,389) $ (833) $ (91,613) $ 5,476 $ 23,556 $ (23,501)
-------- -------- --------- -------- -------- ---------
</TABLE>
G-6
<PAGE> 56
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
------------------
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
THREE MONTHS ENDED FEBRUARY 12, FEBRUARY 12,
----------------------- YEAR ENDED 1994 THROUGH 1994 THROUGH
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, FEBRUARY 11,
1997 1996 1996 1995 1994 1994
--------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock .. $ -- $ -- $ 340,405 $ -- $ -- $ 32,030
Proceeds from issuance of preferred stock -- -- 94,000 52 -- --
Purchase stock from common stockholders . -- -- (218,000) -- -- --
Stock issuance costs .................... -- -- (29,000) -- -- --
Cash distributions paid to preferred
shareholders ......................... (2,241) (1) (2,070) (3) -- --
Cash distributions paid to common
stockholders ......................... (20,198) (17,595) (69,568) (61,825) (36,499) --
Shareholder recontribution of
distributions ........................ -- 1,759 3,426 3,170 -- --
Decrease in minority interest in
consolidated real estate
partnership .......................... (484) -- (316) -- -- --
Proceeds from notes payable ............. 22,755 23,381 114,172 16,700 -- 413,681
Principal payments on notes payable ..... (10,095) (17,054) (190,595) (20,816) (31,489) --
Capital contributions from Prudential ... -- -- -- -- -- 48,000
Cash distributions paid to Prudential ... -- -- -- -- -- (467,698)
-------- -------- --------- -------- -------- ---------
Net cash flows (used in) provided by
financing activities ................. (10,263) (9,510) 42,454 (62,722) (67,988) 26,013
-------- -------- --------- -------- -------- ---------
Net (decrease) increase in cash
and cash equivalents ................. (4,082) 1,465 6,729 (14,256) (23,767) 7,806
CASH AND CASH EQUIVALENTS, beginning
of period ............................... 6,729 -- -- 14,256 38,023 30,217
-------- -------- --------- -------- -------- ---------
CASH AND CASH EQUIVALENTS, end of period ... $ 2,647 $ 1,465 $ 6,729 $ -- $ 14,256 $ 38,023
======== ======== ========= ======== ======== =========
</TABLE>
Supplemental cash flow information provided in Note 10.
The accompanying notes are an intergral part of the
consolidated financial statements
G-7
<PAGE> 57
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
-------------------
1. ORGANIZATION AND CHANGE IN OWNERSHIP:
Westfield America, Inc. ("WEA" or the "Company"), formerly CenterMark
Properties, Inc., is primarily in the business of owning, operating, leasing,
developing, redeveloping and acquiring super regional and regional retail
shopping centers in major metropolitan areas in the United States. On February
11, 1994, 100% of the stock of WEA, formerly May Centers, Inc., and
subsidiaries, was acquired from the Prudential Insurance Company of America
("Prudential") through a stock purchase agreement ("Stock Purchase Agreement")
between Prudential and GGP Limited Partnership ("GGP"), Westfield U.S.
Investments Pty. Limited ("WUSI"), a wholly owned subsidiary of Westfield
Holdings Limited ("WHL"), and five real estate investment funds sponsored by
Goldman Sachs & Co. ("Goldman"). The purchasers are collectively referred to as
"GWG." The cash purchase price including transaction costs of $14,830 was
approximately $420,000. In conjunction with the closing GWG contributed $32,030
to WEA, a portion of which was used to pay off revolving credit borrowings.
Also, in conjunction with the acquisition, the Company entered into an
agreement with CenterMark Management Company ("CMC"), a 50/50 partnership
between General Growth CMP, L.P. and Westfield Services, Inc., a wholly owned
subsidiary of WHL, to manage the properties in WEA's portfolio. Commencing
January 1, 1995, CMC subcontracted such management rights to Westfield
Corporation, Inc. ("WCI"), a wholly owned subsidiary of WHL. In July 1996, WCI
purchased General Growth CMP L.P.'s partnership interest in CMC. In
consideration for providing these management services, CMC will be reimbursed
certain recoverable property operating costs and receive gross fees of 5% of
minimum and percentage rents.
As part of the Stock Purchase Agreement, the Company elected Real
Estate Investment Trust ("REIT") status for income tax purposes.
The above acquisition was accounted for as a purchase. Accordingly, the
cost of the acquisition was allocated to the assets acquired and liabilities
assumed based upon their respective fair values. The results of operations and
the financial position of the Company reflect the revaluation of the assets and
liabilities of CMP to equal GWG's cost at February 11, 1994.
In 1995, WUSI and WCI, both wholly owned subsidiaries of WHL acquired
25% of GGP's interest in the Company and concurrently acquired options to
purchase the remaining combined 50% interest in the Company held by GGP and
Goldman.
On July 1, 1996, the Company was recapitalized (the "Recapitalization")
whereby the Company's common stock split 8,980.3983 shares to one and the
Company sold additional shares of both common and preferred stock to U.S. and
foreign investors (see Note 9) for $434,405.
In conjunction with the Recapitalization, the Company acquired the
options to acquire GGP and Goldman's interest in the Company and agreed to
exercise such options at two separate closing dates. On the first closing date,
July 1, 1996, the Company used $218,000 of the Recapitalization proceeds to
repurchase 40% of GGP's interest and 90% of Goldman's interest in the Company.
On the second closing date, January 2, 1997, the Company purchased GGP's
remaining interest in the Company for $130,500 from proceeds received from the
sale of shares to an affiliate of WHL. The Recapitalization does not result in a
sufficient change in ownership to warrant purchase accounting.
On July 1, 1996, the Company used $62,794 of the Recapitalization
proceeds to acquire indirect ownership of three regional shopping centers,
Connecticut Post Mall, South Shore Mall and Trumbull
G-8
<PAGE> 58
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
-------------------
1. ORGANIZATION AND CHANGE IN OWNERSHIP: (CONTINUED)
Shopping Park (the "Acquired Properties") through the acquisition of
substantially all the outstanding stock of Westland Properties, Inc., a company
whose business consisted of operating the Acquired Properties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION:
The Company conducts its business through its divisions, wholly-owned
subsidiaries and affiliates. The consolidated financial statements include the
accounts of the Company and all subsidiaries over which the Company is able to
exercise significant control. The Company does not consider itself to be in
control when the other partners have important approval rights over major
actions. Investments as general and limited partner in non-controlled
partnerships are accounted for using the equity method. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The accompanying unaudited financial statements for the three month
periods ended March 31, 1997 and 1996 have been prepared in accordance with
generally accepted accounting principles. In the opinion of management, such
financial statements reflect all adjustments considered necessary for a fair
presentation of the results of the respective interim periods and all such
adjustments are of a normal, recurring nature.
INVESTMENT IN REAL ESTATE:
Buildings, improvements and equipment are stated at cost. Costs related
to the acquisition, development, construction and improvement of properties are
capitalized. Interest costs and real estate taxes incurred during construction
periods are capitalized and amortized on the same basis as the related assets.
Expenditures for repairs and maintenance are charged to expense when incurred.
Certain repair and maintenance costs are chargeable to the tenants as provided
in their leases. Such reimbursements are included in recoverable expenses in the
Consolidated Statements of Income. Depreciation of property is computed on the
straight-line method over the estimated useful lives of the property, which
generally range from 3 to 50 years.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which requires impairment of losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. In this case an impairment
loss is recognized to the extent that the carrying amount exceeds the fair value
of the assets. Statement 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. Such assets are reported at the lower of
their carrying amount or fair value, less cost to sell. The Company adopted
Statement 121 in 1996 and the adoption had no effect.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments with an original
maturity of three months or less at date of purchase to be cash equivalents.
G-9
<PAGE> 59
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
-------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
RESTRICTED CASH:
Restricted cash at December 31, 1995 represented remaining funds for
the completion of the Westland Center redevelopment.
REVENUE RECOGNITION:
Shopping center space is generally leased to specialty retail tenants
under leases which are accounted for as operating leases. Minimum rent revenues
are recognized on a straight-line basis over the respective lease term.
Percentage rents are recognized on an accrual basis as earned. Recoveries from
tenants are recognized as income in the period the applicable costs are accrued.
INTEREST RATE SWAP CONTRACTS
In the normal course of business the Company enters into interest rate
swap contracts to reduce its exposure to fluctuations in interest rates. Net
interest differentials to be paid or received related to these swap contracts
are accrued as incurred or earned. Any gain or loss from terminating swap
contract transactions will be deferred and recognized over the original swap
contract term as a yield adjustment to interest expense of the underlying debt.
There were no terminations of swap contracts during the year ended December 31,
1996. When the underlying debt matures or is extinguished any unamortized gain
or loss is recognized at that time.
ACCOUNTS AND NOTES RECEIVABLE:
Accounts and notes receivable include amounts billed to tenants,
deferred rent receivables arising from straight-lining of rents and accrued
recoveries from tenants. Management periodically evaluates the collectibility of
these receivables and adjusts the allowance for doubtful accounts to reflect the
amounts estimated to be uncollectible.
DEFERRED EXPENSES AND OTHER ASSETS:
Deferred expenses and other assets include costs associated with notes
payable, tenant leases and prepaid expenses. Costs associated with obtaining
notes payable are amortized on a straight-line basis over the term of the
related notes payable, which approximates the effective interest rate method.
Direct costs related to leasing activities are capitalized and amortized over
the initial term of the new lease.
LEASE TERMINATIONS:
Included in accounts payable and accrued expenses are lump sum payments
received from tenants to terminate their lease. Income received from tenants for
early lease termination is deferred and amortized over the term of the original
lease unless the space is re-leased to a new tenant, at which time the remaining
deferred income is recognized. The unamortized costs of improvements pertaining
to terminated leases are expensed in the period of termination unless the
improvements can be used by the replacement tenant.
G-10
<PAGE> 60
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
-------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
EARNINGS PER SHARE:
Net income and dividend declared per common share is calculated by
dividing net income applicable to common stock (net income less dividend
requirements of preferred stock) by the weighted average number of shares of
common stock and common stock equivalents outstanding. Common stock equivalents
are represented by a warrant to purchase common stock at $16.01 per share (Note
9). Net income and dividends per share for the period January 1, 1994 through
February 11, 1994 have not been presented as they are not meaningful given the
change in capital structure that occurred in conjunction with the February 11,
1994 acquisition.
INCOME TAXES:
In conjunction with the February 11, 1994 acquisition, the Company
elected REIT status for income tax purposes. As a REIT, the Company is required
to distribute at least 95% of its taxable income to shareholders and meet
certain asset and income tests as well as certain other requirements. As a REIT,
the Company will generally not be liable for federal and state income taxes,
provided it satisfies the necessary requirements.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
3. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE PARTNERSHIPS:
As of December 31, 1996, the Company is a general and managing partner
in five real estate partnerships, a limited partner in one real estate
partnership and both a general and limited partner in one real estate
partnership. As a result of the February 11, 1994 acquisition, the carrying
amount of investments in unconsolidated real estate partnerships was adjusted to
reflect the purchase accounting adjustments described in Note 1. This adjustment
is being amortized on a straight-line basis over the useful life of the
associated asset which ranges from 15 to 24 years. The Company's interest in
each partnership as of December 31, 1996 is as follows:
<TABLE>
<CAPTION>
PERCENT
PROPERTY LOCATION INTEREST
- -------- -------- --------
<S> <C> <C>
Annapolis Mall....................................................... Annapolis, MD 30.0%
Meriden Square....................................................... Meriden, CT 50.0
Plaza Camino Real.................................................... Carlsbad, CA 40.0
Topanga Plaza........................................................ Canoga Park, CA 42.0
Vancouver Mall....................................................... Vancouver, WA 50.0
West Valley.......................................................... Canoga Park, CA 42.5
North County Fair.................................................... Escondido, CA 45.0
</TABLE>
G-11
<PAGE> 61
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
-------------------
3. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE PARTNERSHIPS: (CONTINUED)
A summary of the condensed balance sheet and income statement
information for all unconsolidated real estate partnerships on a combined basis
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
CONDENSED BALANCE SHEET INFORMATION 1996 1995
- ----------------------------------- --------- ---------
<S> <C> <C>
Investment in real estate:
Land, building and improvements, at cost ............................... $ 487,571 $ 516,710
Less accumulated depreciation and amortization ......................... (167,020) (160,220)
Construction in progress ............................................... 1,115 6,984
--------- ---------
Net investment in real estate ............................................. 321,666 363,474
Notes payable to affiliate ................................................ (1,156) --
Other notes payable ....................................................... (226,619) (260,241)
Other assets and liabilities, net, and interest of other partners ......... (50,977) (56,811)
--------- ---------
Net equity investment in unconsolidated real estate partnerships .......... 42,914 46,422
Adjustments to reflect cost allocated to GWG's investment ................. 63,574 78,100
Cost in excess of basis in the Mission Valley partnership interest acquired -- 10,962
--------- ---------
Investments in unconsolidated real estate partnerships .............. $ 106,488 $ 135,484
========= =========
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
FEBRUARY 12, JANUARY 1,
YEAR ENDED YEAR ENDED 1994 THROUGH 1994 THROUGH
CONDENSED STATEMENTS OF DECEMBER 31, DECEMBER 31, DECEMBER 31, FEBRUARY 11,
INCOME (LOSS) INFORMATION 1996 1995 1994 1994
- ------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenue ............................. $ 85,767 $ 95,359 $ 74,661 $ 13,734
Costs and expenses:
Operating, general and administrative
expenses ............................ 27,975 32,549 30,537 9,156
Interest expense, net .................. 22,342 24,844 19,885 3,570
Depreciation and amortization .......... 21,263 22,525 20,081 3,766
-------- -------- -------- --------
Net income (loss) ...................... 14,187 15,441 4,158 (2,758)
Other partners' share of (income) loss .... (7,049) (7,177) (2,647) 1,627
Adjustments to reflect the amortization of
cost allocated to GWG's and Prudential's
investment in CMP ...................... (4,075) (4,905) (1,897) (1,020)
-------- -------- -------- --------
Equity in income (losses) of unconsolidated
real estate partnerships ............... $ 3,063 $ 3,359 $ (386) $ (2,151)
======== ======== ======== ========
</TABLE>
Significant accounting policies used by unconsolidated real estate partnerships
are similar to those used by the Company.
G-12
<PAGE> 62
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
------------------
3. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE PARTNERSHIPS: (CONTINUED)
On September 1, 1995, the Company increased its ownership interest in
Mission Valley Partnership from 50 percent to 75.8 percent.
On January 17, 1994, an earthquake occurred near Topanga Plaza. The
cost of the repairs was approximately $11,500 of which $865 remains to be spent
at December 31, 1996. The majority of this cost was recovered under the
Partnership's earthquake insurance policy after payment of the required
deductible of approximately $2,100. The Company's share of this deductible and
uninsured expenses along with the write off of certain leasehold improvements
was $1,512 and is included in equity in income (losses) of unconsolidated real
estate partnerships in 1994. In 1995, the Topanga Plaza Partnership received
insurance proceeds for business interruption caused by the 1994 earthquake. The
Company's share of these proceeds, previously unrecognized due to uncertainty,
was $1,358, and is included in equity in income (losses) of unconsolidated
partnerships in 1995. During 1996, the Topanga Plaza Partnership was reimbursed
by two of its major department store tenants for their pro-rata share of the
cost of repairs caused by the earthquake. The Company's share of these proceeds,
previously unrecognized due to uncertainty, is $216, and is included in equity
in income (losses) of unconsolidated partnerships in 1996.
In January 1994, the Company increased its ownership interest in Plaza
Camino Real from 5 percent to 40 percent and changed its management and leasing
fee agreements.
4. LEASES:
DIRECT FINANCING LEASES RECEIVABLE:
The Company owns certain properties that are leased to May Department
Stores Company ("May") under direct financing leases. The leases' initial terms
expire in September 2017, and may be renewed for up to 14 additional five year
terms. May has the option to purchase the property under these leases at fair
market value during the last 16 months of the initial term or any of the renewal
option terms.
As a result of the changes in ownership described in Note 1, the direct
financing leases receivable at February 11, 1994 were revalued based upon future
cash flows for these leases discounted at seven percent.
The direct financing leases receivable are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
-------- --------
<S> <C> <C>
Minimum lease payments receivable ... $177,030 $185,460
Less unearned revenue ............... (84,679) (91,226)
-------- --------
Direct financing leases receivable $ 92,351 $ 94,234
======== ========
</TABLE>
G-13
<PAGE> 63
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
------------------
4. LEASES: (CONTINUED)
The future minimum rentals to be received by the Company on the direct
financing leases as of December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997................................................. $ 8,430
1998................................................. 8,430
1999................................................. 8,430
2000................................................. 8,430
2001................................................. 8,430
Thereafter........................................... 134,880
--------
$177,030
========
</TABLE>
In connection with the redevelopment plan at Eastland Shopping Center,
the Company exercised its option to purchase May's leasehold interest in its
store at Eastland in 1994.
PROPERTY RENTAL:
Substantially all of the property owned by the Company is leased to
third-party tenants under operating leases as of December 31, 1996. Lease terms
vary between tenants and some leases include percentage rental payments based on
sales volume.
Future minimum rental revenues under noncancelable operating leases as
of December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997.................................................... $ 93,229
1998.................................................... 87,842
1999.................................................... 83,394
2000.................................................... 79,131
2001.................................................... 71,550
Thereafter.............................................. 235,405
--------
$650,551
========
</TABLE>
These amounts do not include percentage rentals that may be received
under certain leases on the basis of tenant sales in excess of stipulated
minimums.
5. ACCOUNTS AND NOTES RECEIVABLE:
At December 31, 1996 and December 31, 1995, accounts and notes
receivable include $367 and $429 of tenant notes receivable and $5,192 and
$5,281 of other notes receivable which primarily relate to property sales and
which bear interest at rates ranging from 7.0% to 8.5% and are due at various
dates ranging from 1997 to 2004.
G-14
<PAGE> 64
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
------------------
6. DEFERRED EXPENSES AND OTHER ASSETS:
Deferred expenses and other assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
------ ------
<S> <C> <C>
Lease costs, net of accumulated amortization of $2,100 and $560 in
1996 and 1995, respectively ................................... $4,354 $2,406
Loan costs, net of accumulated amortization of $881 and $286 in
1996 and 1995, respectively ................................... 1,668 1,520
Other assets ..................................................... 1,669 1,535
------ ------
$7,691 $5,461
====== ======
</TABLE>
7. NOTES PAYABLE AND LINES OF CREDIT:
A summary of notes payable is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
-------- --------
<S> <C> <C>
Collateralized nonrecourse notes to an insurance company, interest only payable
monthly, at 6.15% due in 1999 ................................................. $172,000 $172,000
Collateralized nonrecourse notes to an insurance company, interest only payable
monthly, at 6.51% due in 2001 ................................................. 167,000 167,000
Senior collateralized nonrecourse notes, interest only payable quarterly at 6.39%
until 1997, thereafter principal and interest payable quarterly, due in 2004 .. 20,576 20,576
Senior collateralized nonrecourse notes bearing interest at 7.33%, $1,620
principal and interest payable quarterly until 1997, interest only payable from
1997 until 2004, principal and interest payable thereafter, due in 2014 ....... 56,429 58,705
Unsecured line of credit/collateralized project loan from a bank with a maximum
commitment of $50,000, interest only at LIBOR + 1.5% ($1,500 is at 8.25%
and $3,500 is at 7.156% at December 31, 1996) payable monthly, due in 1998 .... 5,000 --
Collateralized recourse note to an insurance company, interest only payable
monthly at 8.09%, due in 1999 ................................................. 15,000 --
Collateralized recourse construction loan payable to a bank, interest only at
LIBOR + 1.5% ($1,000 is at 7.156% and $3,885 is at 7.094% at December 31,
1996) payable monthly, due in 1998 with an option to extend to 2001 ........... 4,885 --
Collateralized non-recourse note payable to an insurance company interest at an
effective rate of 7.07%, $1,182 principal and interest payable monthly, due in
2000 .......................................................................... 144,959
Collateralized non-recourse note payable to a bank, interest only at LIBOR +
1% (6.5% at December 31, 1996) payable quarterly, due in 2001 ................. 73,350 --
Collateralized non-recourse note payable to a bank, interest only at LIBOR +
1% (6.5% at December 31, 1996) payable quarterly, due in 2001 ................. 73,450 --
</TABLE>
G-15
<PAGE> 65
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
------------------
7. NOTES PAYABLE AND LINES OF CREDIT: (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
-------- --------
<S> <C> <C>
Collateralized non-recourse construction loan payable to a bank with a maximum
commitment of $48,000, interest only payable monthly at LIBOR + 1.75%
($2,050 at 7.44% and $13,853 at 7.32% December 31, 1996) with borrowings
totaling $22,073 fixed at 7.5% through maturity, due in 1997 with an option to
extend to 2000 ................................................................ 37,976 --
Line of credit with a total commitment of $30,000 collateralized by a shopping
center property. Interest only payable monthly at prime or a LIBOR based
rate. This line of credit was repaid in 1996 and replaced with a $50 million
line of credit from a bank as previously disclosed ............................ -- 1,000
Collateralized non-recourse note, interest only payable monthly at the lower of
prime + 1% or 12% (9.5% at December 31, 1995), repaid in 1996 ................. -- 1,500
Collateralized note, principal of $3,000 plus accrued interest at prime due
quarterly, repaid in 1996 ..................................................... -- 6,000
-------- --------
$770,625 $426,781
======== ========
</TABLE>
Interest costs capitalized for the years ended December 31, 1996 and
1995 were $1,503 and $52, respectively. There was no capitalized interest in
1994.
Senior collateralized non-recourse notes totaling $77,005 and $79,281
at December 31, 1996 and 1995, respectively, are collateralized by the related
direct financing leases receivable from The May Company.
The unsecured portion of the Company's line of credit, initially
totaling $50,000 is for general corporate purposes.
The annual maturities of notes payable as of December 31, 1996 are as
follows:
<TABLE>
<S> <C>
1997.......................................................... $ 6,539
1998.......................................................... 12,022
1999.......................................................... 194,542
2000.......................................................... 172,633
2001.......................................................... 321,842
Thereafter.................................................... 63,047
--------
$770,625
========
</TABLE>
Certain note payable agreements above provide restrictive covenants
relating to the maintenance of specified financial performance ratios such as
minimum net worth, debt service coverage ratio, loan to value, ownership
percentages and restrictions on future dividend payments. As of December 31,
1996, the Company was in compliance with these covenants.
G-16
<PAGE> 66
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
------------------
8. INTEREST RATE SWAP CONTRACTS:
At December 31, 1996, the Company had two swap agreements. Interest
rate swaps are contractual agreements between the Company and third parties to
exchange fixed and floating interest payments periodically without the exchange
of the underlying principal amounts (notional amounts). Notional amounts are
used to express the volume of interest rate swap contracts. In the unlikely
event that a counterparty fails to meet the terms of an interest rate swap
contact, the Company's exposure is limited to the interest rate differential on
the notional amount. The Company does not anticipate non-performance by any of
the counterparties. Under one of the swap agreements, which has a notional
amount of $125,000, the Company is credited interest at LIBOR and incurs
interest at a fixed rate of 5.75%. Under the second swap agreement, which has a
notional amount of $11,400, the Company incurs interest at LIBOR and is credited
interest at a fixed rate of 6.23%. Both swap agreements expire in 2000.
On November 27, 1996 and November 29, 1996, the Company completed
structured deferred interest rates swaps totaling $90 million notional amount,
where the Company will receive LIBOR and pay 6.125% for three years beginning
February 11, 1999. Additionally, the counterparty received an option to extend
the swaps for an additional two years exercisable on November 12, 1997.
The fair value and unrealized gain of the interest rate swap contracts
were approximately $1,360 at December 31, 1996.
9. CAPITAL STOCK:
In conjunction with the acquisition of WEA at February 11, 1994, the
Company authorized 269,411,949 shares of $0.01 par value common stock of which
44,901,991 shares were issued. During 1995, WEA issued an additional 212,836
shares of common stock in conjunction with the recontribution of 10% of the July
1995 and October 1995 distribution, respectively. Additionally during 1995, the
Company authorized 200 shares of 7% non-cumulative, non-participating,
non-voting preferred stock with a par value of $1.00 of which 105 shares were
issued. During the six months ended June 30, 1996, the Company issued an
additional 169,370 shares of common stock in conjunction with the recontribution
of 10% and 5% of the December 1995 and March 1996 distributions, respectively.
In July 1996, the Company's Articles of Incorporation were amended. The
total number of shares of all classes of stock that the Company is authorized to
issue is 435,012,800.
In conjunction with the Recapitalization in July 1996, the Company's
stock split 8,980.3983 shares to one. In addition, Westfield America Trust
("WAT"), a newly formed publicly traded Australian trust in which WHL has an
ownership interest, acquired 19,631,543 shares of Class B-1 common stock and a
warrant to purchase up to 6,246,096 shares of Class B-1 common stock at $16.01
per share, all of which was exercisable at December 31, 1996. The Company
received $314,304, 940,000 WAT Special Options and 2,498,440 WAT Ordinary
Options for the issuance of this stock and warrants issued by the Company. In
connection with the sale of common and preferred stock, WEA designated the
purchasers of such stock to be the recipients of WAT Ordinary and Special
Options, respectively.
The Company received additional proceeds totaling $26,101 from the sale
of 1,623,985 shares of Class B-2 common stock, 6,300 shares of Class B-3 common
stock and 2,498,440 WAT Ordinary Options. The Company also received $94,000 upon
the sale of 940,000 shares of Series A Preferred Stock and sale of 940,000 WAT
special options.
G-17
<PAGE> 67
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
------------------
9. CAPITAL STOCK: (CONTINUED)
The Company used a portion of the proceeds raised from the issuance of
common and preferred stock to repurchase 5,434,104 shares from GGP and 8,182,386
shares from Goldman for a total purchase price of $218,000. The cost associated
with the Recapitalization of the Company and issuance of new capital stock was
$29,000.
At December 31, 1996 and 1995, the total number of shares authorized,
issued and outstanding were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------------- ------------------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
SHARES SHARES SHARES SHARES ISSUED
AUTHORIZED OUTSTANDING AUTHORIZED AND OUTSTANDING
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
Class A common stock, $.01 par value .......................... 25,000,000 8,151,155 44,901,992 18,045,931
Class B common stock, $.01 par value .......................... -- -- 44,901,992 18,045,931
Class B-1 common stock, $.01 par value ........................ 100,000,000 31,342,970 -- --
Class B-2 common stock, $.01 par value ........................ 100,000,000 13,429,110 -- --
Class B-3 common stock, $.01 par value ........................ 6,300 6,300 -- --
Class C common stock, $.01 par value .......................... -- -- 44,901,992 9,022,965
Excess common stock, $.01 par value ........................... 200,006,300 -- 134,705,973 --
Non-voting senior preferred stock, $1.00 par value ............ 200 105 200 105
Preferred stock, $1.00 par value of which 940,000 shares shall 5,000,000 940,000 -- --
be designated Series A cumulative redeemable preferred stock
Excess preferred stock, $1.00 par value ....................... 5,000,000 -- -- --
----------- ---------- ----------- ----------
Total number of shares authorized, issued and outstanding 435,012,800 53,869,640 269,412,149 45,114,932
=========== ========== =========== ==========
</TABLE>
Shares authorized, issued and outstanding at December 31, 1995 were adjusted to
reflect the July 1996 stock split.
SENIOR PREFERRED SHARES:
The holders of non-voting senior preferred stock shall be entitled to
receive, when declared, cash dividends at an annual rate of $35 per share, and
no more, payable quarterly. No dividend shall be paid on any Preferred or Common
Shares unless the full dividend has been paid on the Senior Preferred Shares.
The Company has an option to redeem the Senior Preferred Shares anytime after
February 20, 1999 at a redemption price of $550 per share, which is equal to the
liquidation preference.
SERIES A PREFERRED SHARES:
The holders of Series A Preferred Shares shall be entitled to receive,
when declared, cumulative cash dividends equal to the greater of $8.50 per annum
or an amount currently equal to 6.2461 times the dollar amount declared on
common shares. Series A Preferred Shareholders are entitled to dividends before
dividends are distributed to common shareholders. The holders of Series A
Preferred Shares have no
G-18
<PAGE> 68
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
------------------
9. CAPITAL STOCK: (CONTINUED)
voting rights unless a dividend is not declared for four quarters, at which time
the holders of Series A Preferred Shares may elect a Director to be added to the
Board of Directors. The Company has an option to redeem the Series A Preferred
Shares anytime after July 1, 2003 at a redemption price of $100 per share, which
is equal to the liquidation preference. Simultaneously with the issuance of the
Series A Preferred Shares, the Series A Preferred Shareholder also acquired
940,000 Special Options to acquire units in WAT. Each special option permits the
holder to acquire 124.92 (or 117,428,609 WAT units in the aggregate) units in
WAT in consideration for $100 or one Series A Preferred Share. The Special
Options are exercisable at any time after July 1, 1998 and prior to July 1,
2011.
COMMON SHARES:
The holders of Class A, Class B-1, Class B-2 and Class B-3 Common
Shares vote together as a class on all matters other than election of directors
and termination of REIT status and are entitled to receive distributions
declared after payment of dividends on preferred shares. Simultaneously with the
Recapitalization, the Class B-2 Shareholders acquired 13,429,110 Ordinary
Options to acquire units in WAT. Each Ordinary Option permits the holder to
acquire 20 units in WAT in exchange for one Class B-2 Common Share. The Ordinary
Options are exercisable at any time after January 1, 1997. The Ordinary Options
expire upon the listing of the Company's Common Stock on the New York Stock
Exchange, the American Stock Exchange or the London Stock Exchange.
10. SUPPLEMENTAL CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
FEBRUARY 12, JANUARY 1,
1994 1994
YEAR ENDED YEAR ENDED THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, FEBRUARY 11,
1996 1995 1994 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH PAID DURING THE PERIOD FOR:
Interest (net of amount capitalized) $42,378 $27,444 $21,731 $307
======= ======= ======= ====
Income taxes ....................... $ 60 $ 73 $ 1,684 $ --
======= ======= ======= ====
</TABLE>
NON CASH INVESTING AND FINANCING INFORMATION:
Mission Valley Partnership was accounted for under the equity method in
1995 and has been consolidated in 1996. The condensed assets and liabilities of
the partnership were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Net investment in real estate .... $ 34,992 $ 24,612
Cash and Cash Equivalents ........ 2,824 2,389
Accounts and notes receivable .... 1,407 891
Deferred expenses and other assets 979 1,201
Notes payable .................... (37,976) (28,988)
Accounts payable ................. (2,172) (798)
-------- --------
Minority/other partners' interest $ 54 $ (693)
======== ========
</TABLE>
G-19
<PAGE> 69
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
------------------
10. SUPPLEMENTAL CASH FLOW INFORMATION: (CONTINUED)
The Mission Valley Partnerships condensed consolidated statements of
income were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
-------- --------
<S> <C> <C>
Total Revenue .................................... $ 13,198 $ 11,117
Total Expenses ................................... 8,179 7,102
-------- --------
Operating Income .............................. 5,019 4,015
Interest Expense ................................. (1,945) (2,226)
Other Income ..................................... 76 185
-------- --------
Income before minority/other partners' interest 3,150 1,974
Minority/other partners' interest in earnings .... (1,063) (1,277)
-------- --------
Net income .................................... $ 2,087 $ 697
======== ========
</TABLE>
During 1996, construction in process totaling $4,529 was placed into
service.
During 1995, the Company increased its ownership interest in the
Mission Valley Partnership from 50% to 75.8%. In consideration, the Company paid
$2,000 in cash and provided the partner selling its interest with a note for the
remaining purchase price totaling $9,000.
During 1995, the Company purchased a building previously owned by one
of the Company's major tenants. In consideration, the Company paid $528 in cash
and provided the seller with a note for the remaining purchase price totaling
$1,500.
Included in accounts payable and accrued liabilities at December 31,
1995 are cash overdrafts totaling $2,263.
The cost of GWG's acquisition of the Company on February 11, 1994 was
accounted for as a purchase. Accordingly, the cost of the acquisition was
allocated to the assets acquired and liabilities assumed based upon respective
fair values as follows:
<TABLE>
<S> <C>
Net property and equipment .............................................. $ (10,498)
Investments in unconsolidated real estate partnerships .................. (6,818)
Direct financing leases receivable ...................................... 13,484
Accounts and notes receivable ........................................... (2,465)
Deferred expenses and other assets ...................................... (7,715)
Accounts payable and accrued expenses ................................... (6,863)
Deferred income taxes ................................................... 195,501
---------
Adjustment to reflect cost allocated to GWG's investment in CenterMark
Properties, Inc. ................................................... $ 174,626
=========
</TABLE>
Shortly before GWG's acquisition of the Company on February 11, 1994,
the Company dividended its 50% interest in Ballston Common Mall to Prudential.
The assets and liabilities that were dividended consisted of the following:
<TABLE>
<S> <C>
Net investment in real estate ....................... $(3,037)
Investment in unconsolidated real estate partnerships (3,408)
Accounts payable and accrued expenses ............... 1,557
-------
Distribution of partnership interest to Prudential .. $(4,888)
=======
</TABLE>
G-20
<PAGE> 70
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
------------------
11. INCOME TAXES:
As discussed in Note 2, the Company elected REIT status for income tax
purposes effective February 12, 1994 and, accordingly, is exempt from federal
income tax subsequent to that date. For the year ended December 31, 1996 and
1995 and the period from February 12, 1994 through December 31, 1994,
distributions have exceeded taxable income resulting in a partial return of
capital. On a per share basis distributions represented by ordinary income and
return of capital were approximately as follows:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12,
YEAR ENDED 1994
DECEMBER 31, THROUGH
------------------ DECEMBER 31,
1996 1995 1994
----- ----- ------------
(UNAUDITED)
<S> <C> <C> <C>
Distributions per share representing ordinary income ....... $0.88 $0.61 $0.56
Distributions per share representing a return of capital.... 0.63 0.96 0.35
----- ----- -----
Total distributions per share based on income tax amounts... $1.51 $1.57 $0.91
===== ===== =====
</TABLE>
For periods prior to the REIT election, the income tax provision consisted of
the following:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1994 THROUGH
FEBRUARY 11,
1994
------------
<S> <C>
Current income taxes:
Federal .......................................... $ 6,968
State and local .................................. 1,847
-------
Total current income taxes .................... 8,815
-------
Deferred income taxes:
Federal .......................................... (5,752)
State and local .................................. (1,580)
-------
Total deferred income taxes ................... (7,332)
Tax benefit due to dividend of partnership investment (1,480)
-------
$ 3
=======
</TABLE>
In 1994, total current income taxes includes $6,965 in federal and
$1,551 in state income taxes relating to the Ballston Common Mall partnership
interest dividended to Prudential as discussed in Note 10.
Included in accounts payable and accrued liabilities is a deferred
income tax liability of $1,479 and $1,457 at December 31, 1996 and 1995,
respectively, relating to installment notes receivable for property sales prior
to February 12, 1994.
G-21
<PAGE> 71
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
------------------
12. RELATED PARTIES:
As discussed in Note 1, the Company acquired the Acquired Properties in
conjunction with the Company's Recapitalization. Accordingly, the cost of this
acquisition was allocated to the assets acquired and liabilities assumed based
upon their respective fair values as follows:
<TABLE>
<S> <C>
Net property and equipment................................... $ 459,707
Cash and cash equivalents.................................... 9,616
Accounts and notes receivable................................ 3,761
Deferred expenses and other assets........................... 1,915
Notes payable................................................ (388,609)
Accounts payable and accrued expenses........................ (13,980)
---------
Total purchase price......................................... $ 72,410
=========
</TABLE>
The operations of the Company include the Acquired Properties from the
date of purchase, July 1, 1996. If the Acquired Properties were acquired on
January 1, 1995, the Condensed Consolidated Statements of Income would have been
as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Total revenues ................... $ 183,352 $ 164,511
Total operating expenses ......... 67,096 58,812
Depreciation expense ............. 43,131 39,060
--------- ---------
Operating income .............. 73,125 66,639
Interest expense, net ............ (52,479) (52,306)
Other income ..................... 3,839 4,148
--------- ---------
Income before minority interest 24,485 18,481
Minority interest ................ (1,063) --
--------- ---------
Net income ....................... $ 23,422 $ 18,481
========= =========
Earnings per share ............... $ 0.39 $ 0.41
========= =========
Estimated taxable income ......... $ 39,372
=========
Estimated cash flow .............. $ 79,536
=========
</TABLE>
If all of the above estimated cash flows were assumed to have been
distributed, the unaudited distributions per share, based on the pro forma
common shares and Common Stock equivalents outstanding would have been $1.53 per
share which would have included an unaudited estimated return of capital of
$0.70 per share.
CenterMark Management Company, an entity wholly owned by WHL, entered
into an agreement with WEA to manage the properties in WEA's portfolio beginning
January 1, 1995. Property management fees totaling $3,495 and $1,828, net of
capitalized leasing fees of $1,667 and $1,219 were expensed by WEA
G-22
<PAGE> 72
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
------------------
12. RELATED PARTIES: (CONTINUED)
for the years ended December 31, 1996 and 1995 respectively. Included in
accounts payable and accrued expenses at December 31, 1996 and 1995, are
management fees payable to CMC totaling $711 and $0, respectively.
In addition to the management fees, CMC is reimbursed for corporate
overhead and mall related payroll costs. Reimbursements to CMC of recoverable
property operating costs for the years ended December 31, 1996 and 1995 totaled
$8,409 and $6,598, respectively.
The Company entered into a Master Development Framework Agreement with
WCI, a wholly owned subsidiary of WHL, whereby the Company granted WCI the
exclusive right to carry out expansion, redevelopment and related works on WEA
wholly owned shopping centers and to endeavor to have WCI be appointed by the
relevant partner to carry out similar activities for jointly owned real estate
partnerships. During 1996 and 1995, the Company reimbursed WCI $21,535 and
$4,373, respectively, for expansion, redevelopment and related work.
In conjunction with the Recapitalization on July 1, 1996, the Company
engaged Westfield U.S. Advisory L.P. ("Advisor"), a wholly owned subsidiary of
WHL, to provide information, advise and assist the Company and undertake certain
duties and responsibilities on behalf of, and subject to, supervision of the
Company. The advisor is entitled to an annual fee of .55% of the net fair market
value of the Company. No fee is payable for the period through December 31,
1997. The service fee that would have been paid for the six months ended
December 31, 1996, if applicable, was approximately $2.6 million.
In conjunction with the Recapitalization on July 1, 1996, the Company
obtained an option to acquire all of the outstanding common stock of Westland
Realty, Inc. ("WRI"). WRI, a wholly owned subsidiary of WHL, holds a 50%
indirect general partnership interest in Westland Garden State Plaza L.P., an
owner and operator of a super-regional shopping center located in Paramus, New
Jersey. The terms of the option allow WEA to purchase the WRI stock at a price
equal to 50% of the market value of Garden State Plaza net of any mortgage debt
provided that the Company exercises its option within 120 days of the valuation
date. The valuation will be performed upon completion of the expansion of Garden
State Plaza and stabilization of its rents.
13. FINANCIAL INSTRUMENTS:
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statements of
Financial Accounting Standards No. 107, Disclosures about Fair Value of
Financial Instruments. The estimated fair value amounts have been determined by
the Company, using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1996. Although management
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for
G-23
<PAGE> 73
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
------------------
13. FINANCIAL INSTRUMENTS: (CONTINUED)
purpose of these consolidated financial statements since that date, and current
estimates of fair value may differ significantly from the amounts presented
herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------
CARRYING ESTIMATED FAIR
AMOUNT VALUE
-------- --------------
<S> <C> <C>
Assets:
Direct financing leases receivable .. $ 92,351 $ 80,689
Accounts and notes receivable ....... 19,716 18,180
Liabilities:
Notes payable ....................... 770,625 718,914
Accounts payable and accrued expenses 33,380 33,380
Off-balance sheet financial instruments-
Letters of credit ................... 3,337 3,337
</TABLE>
RESTRICTED CASH, ACCOUNTS AND NOTES RECEIVABLE, AND ACCOUNTS PAYABLE AND
ACCRUED EXPENSES:
The carrying amounts of these items are a reasonable estimate of their
fair value, except for certain notes receivable which are discounted at current
rates for similar terms.
DIRECT FINANCING LEASES RECEIVABLE:
The fair value of these lease receivables are based upon the discounted
future cash flows at current market rates for leases with similar terms.
NOTES PAYABLE:
The fair value of notes payable are based upon current market rates for
loans with similar terms.
LETTERS OF CREDIT:
The fair value of letters of credit is based on fees currently charged
for similar agreements or on the estimated cost to terminate them or otherwise
settle the obligations with the counterparts at the reporting date.
14. COMMITMENTS AND CONTINGENCIES:
COMMITMENTS:
The Company is currently involved in several development projects and
had outstanding commitments with contractors totaling approximately $35,829 at
December 31, 1996.
The Redevelopment Agency of the City of West Covina (the "Agency")
issued $45,000 of special tax assessment municipal bonds ("Original Bonds") on
March 1, 1990, to finance land acquisition for expansion of the shopping center
and additional site improvements. During 1996, the agency refinanced the
Original Bonds by issuing certain serial and term bonds with a total face amount
of $51,220 ("New Bonds"), proceeds of which were used to redeem the Original
Bonds. Special taxes levied against the
G-24
<PAGE> 74
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
------------------
14. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
property, together with incremental property tax, incremental sales tax, and
park and ride revenues will be used to pay the principal and interest on the
bonds and the administrative expense of the Agency. Principal and interest
payments began in 1996 and continue to 2022 in graduating amounts ranging from
$2,030 to $5,289. WEA has the contingent obligation to satisfy any shortfall in
annual debt service requirements after tenant recoveries.
The Company is subject to the risks inherent in the ownership and
operation of commercial real estate. These include, among others, the risks
normally associated with changes in the general economic climate, trends in the
retail industry, including creditworthiness of tenants, competition for tenants,
changes in tax laws, interest rate levels, the availability of financing, and
potential liability under environmental and other laws.
Substantially all of the properties have been subjected to Phase I
environmental reviews. Such reviews have not revealed, nor is management aware
of, any probable or reasonably possible environmental costs that management
believes would be material to the consolidated financial statements.
LITIGATION:
During early 1994, the Company reached an agreement to settle certain
litigation for $950. WEA currently is neither subject to any other material
litigation nor, to management's knowledge, is any material litigation currently
threatened against WEA other than routine litigation and administrative
proceedings arising in the ordinary course of business. Based on consultation
with counsel, management believes that these items will not have a material
adverse impact on the Company's consolidated financial position or results of
operations.
15. SUBSEQUENT EVENTS:
The Company paid a distribution of $22,440 to its shareholders on
January 30, 1997.
On January 2, 1997, the Company sold 8,151 common shares to WAT. The
Company used proceeds totaling $130,500 to purchase the remaining common stock
held by GGP Limited Partnership.
G-25
<PAGE> 75
SCHEDULE III
WESTFIELD AMERICA, INC.
REAL ESTATE INVESTMENT AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS & ACCUMULATED DEPRECIABLE
PROPERTY LAND IMPROVEMENTS TOTAL DEPRECIATION ENCUMBRANCES DATE OF COMPLETION LIFE
- -------- -------- ------------ ---------- ------------ ------------ ------------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eagle Rock ..... $ 3,624 $ 12,646 $ 16,270 $ 2,446 -- 1973 3-31.5 yrs
Eastland ....... 16,609 3,375 19,984 627 $ 4,885 under constr./1957 3-30 yrs.
Enfield ........ 8,468 21,050 29,518 3,767 -- 1987/1971 3-31.5 yrs.
La Jolla ....... 2,558 2,458 5,016 218 -- 1981 15-31.5 yrs.
Mid Rivers ..... 10,816 47,732 58,548 7,947 53,205 1996/1987 3-22 yrs.
Mission Valley . 1,007 63,237 64,244 23,283 37,976 1997/1961 3-50 yrs.
Montgomery ..... 32,420 163,740 196,160 24,572 121,515 1991/1962 3-20 yrs.
Plaza Bonita ... 22,994 79,732 102,726 13,951 59,030 1981 3-39 yrs.
South County ... 13,259 34,832 48,091 6,514 28,735 1979/1963 3-39 yrs.
West County .... 6,506 22,632 29,138 4,215 16,750 1985/1969 3-22 yrs.
West Covina .... 18,922 82,326 101,248 10,910 60,615 1993/1975 3-22 yrs.
West Park ...... 2,633 23,583 26,216 4,482 14,150 1984/1981 3-50 yrs.
Westland ....... 5,162 13,101 18,263 2,053 -- 1994/1960 3-50 yrs.
Trumbull ....... 16,405 161,814 178,219 2,235 144,959 1992/1964 3-40 yrs.
South Shore .... 29,071 112,111 141,182 1,402 73,350 under constr./1963 3-40 yrs.
Connecticut Post 6,356 130,855 137,211 1,638 73,450 1991/1960 3-40 yrs.
-------- -------- ---------- -------- --------
$196,810 $975,224 $1,172,034 $110,260 $688,620
======== ======== ========== ======== ========
</TABLE>
G-26
<PAGE> 76
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> 77
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> 78
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(a) Consent of Coopers & Lybrand L.L.P. - Independent Accountants.
23(b) Consent of Ernst & Young 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 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
General Growth Properties, Inc. on Forms S-3 (File Nos. 333-11067, 333-15907,
333-17021, 333-23035, 333-37247, 333-37383 and 333-41603) and the Registration
Statement of Forms S-8 (File Nos. 33-79372, 333-07241, 333-11237 and 333-28449)
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, and of our report dated February 13, 1996,
except for information as to earnings per share, dividends per share and
average shares outstanding, for which the date is March 3, 1997 on our audits
of the consolidated financial statements of Westfield America, Inc. formerly
CenterMark Properties, Inc. as of December 31, 1995 and 1994 and for the year
ended December 31, 1995 and the period from February 12, 1994 through December
31, 1994 and from January 1, 1994 through February 11, 1994, which reports are
included in this Annual Report on Form 10-K/A.
Coopers & Lybrand L.L.P.
Chicago, Illinois
January 12, 1998
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement of
General Growth Properties, Inc. on Forms S-3 (File Nos. 333-11067, 333-15907,
333-17021, 333-23035, 333-37247,333-37383 and 333-41603) and the Registration
Statement on Forms S-8 (File Nos. 33-79372, 333-07241, 333-11237 and 333-28449)
of our report dated February 28, 1997, on our audit of the consolidated
financial statements and financial statement schedule of Westfield America,
Inc. and Subsidiaries formerly CenterMark Properties Inc. as of December 31,
1996 and for the year then ended, which report is included in this Annual
Report on Form 10-K/A.
Ernst & Young L.L.P.
Los Angeles, California
January 12, 1998
