<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission file number 1-11656
GENERAL GROWTH PROPERTIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 42-1283895
- ------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
55 W. Monroe St., Chicago, IL 60603
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(Address of principal executive offices, Zip Code)
(312) 551-5000
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(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
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The number of shares of Common Stock, $.10 par value, outstanding on May 13,
1997 was 30,788,949.
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GENERAL GROWTH PROPERTIES, INC.
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
NUMBER
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<S> <C> <C>
Item 1: Financial Statements
Consolidated Balance Sheets
as of March 31, 1997 and December 31, 1996 ......................... 3
Consolidated Statements of Operations
for the three months ended March 31, 1997 and 1996.................. 4
Consolidated Statements of Cash Flows
for the three months ended March 31, 1997 and 1996.................. 5
Notes to Consolidated Financial Statements.......................... 6
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 11
Liquidity and Capital Resources of the Company...................... 13
PART II OTHER INFORMATION
Item 2: Changes in Securities...................................... 13
Item 6: Exhibits and Reports on Form 8-K........................... 13
SIGNATURE........................................................... 13
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(Dollars in thousands, except for share amounts)
<TABLE>
<CAPTION>
ASSETS
MARCH 31,
1997 DECEMBER 31,
(UNAUDITED) 1996
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<S> <C> <C>
Investment in real estate:
Land $180,263 $173,263
Buildings and equipment 1,416,729 1,337,366
Less accumulated depreciation (198,943) (188,744)
Developments in progress 47,006 44,439
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Net property and equipment 1,445,055 1,366,324
Investment in CenterMark 0 64,769
Investment in GGP/Homart 194,751 193,270
Investment in Quail Springs Mall 15,516 15,077
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Net investment in real estate 1,655,322 1,639,440
Cash and cash equivalents 13,645 15,947
Tenant accounts receivable, net 28,418 25,384
Deferred expenses, net 30,841 30,078
Investment in and note receivable from General Growth
Management, Inc. 48,483 37,737
Prepaid and other assets 5,665 9,131
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$1,782,374 $1,757,717
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $1,130,173 $1,168,522
Notes and contracts payable 955 971
Distributions payable 21,926 20,744
Accounts payable and accrued expenses 53,439 44,836
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1,206,493 1,235,073
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Minority interest in Operating Partnership 211,143 192,377
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Commitments and contingencies
Stockholders' equity:
Preferred stock, $100 par value; 5,000,000 shares authorized;
none issued
Common stock; $.10 par value; 70,000,000 shares authorized;
30,791,185 shares issued and outstanding
(30,789,185 as of 12/31/96) 3,079 3,079
Additional paid-in capital 595,676 595,628
Retained earnings (deficit) (234,017) (268,440)
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Total stockholders' equity 364,738 330,267
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$1,782,374 $1,757,717
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Revenues:
Minimum rents $39,175 $32,344
Tenant recoveries 21,622 16,138
Percentage rents 2,073 1,380
Other 1,593 1,064
Fee income 865 815
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Total revenues 65,328 51,741
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Expenses:
Property operating 22,167 18,001
Management fees to affiliate 750 667
General and administrative 840 735
Depreciation and amortization 11,162 9,141
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Total expenses 34,919 28,544
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Operating income 30,409 23,197
Interest expense, net (15,439) (17,540)
Equity in net income/(loss) of unconsolidated
affiliates:
CenterMark 0 2,011
Quail Springs Mall 327 0
GGP/Homart 1,824 1,691
General Growth Management, Inc. (273) 451
Net gain on sales 58,647 0
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Income before extraordinary item and
allocation to minority interest 75,495 9,810
Income allocated to minority interest (27,542) (2,814)
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Income before extraordinary item 47,953 6,996
Extraordinary item (a) (377) (2,291)
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Net income $47,576 $4,705
========= =========
Earnings per share before extraordinary item $1.55 $ .26
Extraordinary item per share (.01) (.08)
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Net earnings per share $1.54 $ .18
========= =========
</TABLE>
(a) Charges related to early retirement of debt.
The accompanying notes are an integral part of these consolidated financial
statements.
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GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income $47,576 $4,705
Adjustments to reconcile net income to net cash provided by operation activities:
Minority interest 27,542 2,814
Net gain on sales (58,647)
Extraordinary items - charges related to early retirement of debt 377 2,291
Equity in net income of unconsolidated affiliates (1,878) (4,153)
Provision for doubtful accounts 632 1,016
Depreciation 10,200 8,175
Amortization 962 966
Net changes in:
Tenant accounts receivable (3,666) 1,340
Prepaid and other assets 1,249 (3,937)
Accounts payable and accrued expenses 1,516 (1,148)
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Net cash provided by operating activities 25,863 12,069
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Cash flows from investing activities:
Acquisition/development of real estate and improvements and additions to properties (88,154) (19,137)
Increase in investments in unconsolidated real estate affiliates (5,734) (9)
Change in notes receivable affilliates (9,641) 61
Proceeds from the sale of CenterMark Stock 130,500
Distributions received from CenterMark Properties, Inc. 6,111
Distributions received from GGP/Homart, Inc. 6,077 764
Increase in deferred expenses (1,725) (5,330)
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Net cash from investing activities 31,323 (17,540)
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Cash flows from financing activities:
Cash distributions paid to common stockholders (13,239) (11,727)
Cash distributions paid to minority interest (7,505) (6,923)
Payment of stock offering costs (3)
Proceeds from issuance of mortgage and other notes payable 85,000 340,000
Principal payments on mortgage and other notes payable (123,364) (327,302)
Retirement of common stock (net of sale proceeds) 0 (63)
Prepayment penalty on early retirement of debt (377)
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Net cash from financing activities (59,488) (6,015)
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Net change in cash and cash equivalents (2,302) (11,486)
Cash and cash equivalents at beginning of period 15,947 18,298
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Cash and equivalents at end of period $13,645 $6,812
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $18,215 $15,531
Interest capitalized $1,329 $1,551
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
NOTE 1 ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
General Growth Properties, Inc. (the "Company"), a Delaware
corporation, was formed in 1986 to own and operate enclosed mall
shopping centers. On April 15, 1993, the Company completed its initial
public offering of 18,975,000 shares of common stock and a business
combination involving entities under varying common ownership.
Proceeds from the initial public offering were used to acquire a
majority interest in GGP Limited Partnership (the "Operating
Partnership") which was formed to succeed to substantially all of the
interests in eighteen enclosed mall general partnerships (the "Property
Partnerships") owned and controlled by the Company and its original
stockholders, Martin and Matthew Bucksbaum, and trusts established for
the benefit of the stockholders' families (the "Bucksbaums"). The
proceeds were used to repay existing indebtedness and acquire three
additional centers (the "IBM Centers").
In May of 1995, the Company completed a follow-on stock offering of
4,500,000 common shares. Net proceeds were used to reduce the
outstanding balance of the Company's credit facility.
OPERATING PARTNERSHIP
The Operating Partnership commenced operations on April 15, 1993 and at
March 31, 1997, the Company together with the Operating Partnership
owned 100% of thirty-one enclosed regional shopping centers (the
"Original Centers"), a 38.2% interest in GGP/Homart, Inc. (see Note 3),
a non-voting preferred interest in General Growth Management, Inc.
(see Note 5) and a 50% interest in Quail Springs Mall. At March 31,
1997, the Company owned a 63% general partnership interest in the
Operating Partnership. Various minority interests own the remaining
37% limited partnership interest.
The minority interest in the Operating Partnership is held primarily by
trusts for the benefit of families of the original stockholders which
initially owned and controlled the Company and is represented by units
of limited partnership interests ("Units"). The Units can be exchanged,
with certain restrictions, for shares of the Company on a one-for-one
basis. The Bucksbaum's Units can be exchanged for cash, at the
Company's election, if the Bucksbaums own 25% or more of the
outstanding common stock of the Company at the time of the exchange.
The Unitholders also share equally with the stockholders on a per share
basis in any distributions by the Operating Partnership.
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
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.
The consolidated statements of operations for prior periods have been
reclassified to conform with current classifications with no effect on
results of operations.
NOTE 2 CENTERMARK ACQUISITION AND DISPOSITION
On February 11, 1994, the Company, jointly with two other unaffiliated
parties, acquired 100% of the stock of CenterMark from The Prudential
Insurance Company of America. The Company and Westfield U.S.
Investments Pty. Limited each acquired 40% of the stock of CenterMark
and several real estate investment funds sponsored by Goldman Sachs &
Co. acquired the remaining 20%. The Company's portion of the cash
purchase price for the CenterMark stock, including certain transaction
costs, was approximately $182,000. CenterMark elected real estate
investment trust status for income tax purposes. The CenterMark
portfolio includes interests in several major regional shopping malls
and power centers.
The Company sold 25% of its interest in CenterMark on December 19,
1995, to Westfield U.S. Investments Pty. Limited for a price of
$72,500. As a result of the sale, the Company's ownership was reduced
to 30% of the outstanding CenterMark stock. Concurrently with the
sale of the stock, the Company also granted Westfield U.S. Investments
Pty. Limited an option to purchase the remainder of the Company's
CenterMark stock ("Option Stock") for $217,500.
On June 28, 1996, Westfield U.S. Investments, Pty. Limited exercised
its option to acquire the remaining 30% of the outstanding CenterMark
stock in two transactions. The first payment in the amount of $87,000
was received on July 1, 1996, and the second payment in the amount of
$130,500 was received on January 2, 1997. Proceeds from the first
payment were used to repay the remaining balance outstanding on the
Company's interim loan facility that was utilized in connection with
the acquisition of GGP/Homart (see Note 3). The proceeds received from
the second payment were primarily used to repay existing indebtedness
(see Note 6) and resulted in a gain of $66,626.
NOTE 3 GGP/HOMART ACQUISITION
On December 22, 1995, the Company jointly with four other investors
acquired 100% of the stock of GGP/Homart, Inc. ("GGP/Homart") from
Sears, Roebuck and Co. The other investors in GGP/Homart are the New
York State Common Retirement Fund, the
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
Equitable Life Insurance Company of Iowa, USG Annuity & Life Company
and The Trustees of the University of Pennsylvania. The Company
acquired 38.2% of GGP/Homart for approximately $179,000 including
certain transaction costs. The stockholders of GGP/Homart agreed to
contribute additional capital as required, through the end of 1997. As
of March 31, 1997, the stockholders had contributed $60,000 of
additional capital. GGP/Homart owns interests in twenty-six regional
shopping malls and one property currently under development. GGP/Homart
elected real estate investment trust status for income tax purposes.
On October 2, 1996, GGP/Homart opened West Oaks Mall, a new
development, located in Ocoee, (Orlando) Florida. GGP/Homart currently
has one property under development, Brass Mill Center and Commons.
Brass Mill Center is located in Waterbury, Connecticut, and is
scheduled to open in the fall of 1997.
The following is summarized financial information for GGP/Homart for
the three months ended March 31, 1997 and 1996.
GGP/HOMART, INC.
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
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<S> <C> <C>
Revenues
Minimum rents $24,840 $21,209
Tenant recoveries 10,735 9,237
Percentage rents 634 357
Other 707 444
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Total revenues 36,916 31,247
Operating expenses (16,035) (14,354)
Depreciation and amortization (6,506) (4,737)
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Net operating income 14,375 12,156
Interest expense, net (10,828) (8,910)
Equity in net income of unconsolidated
real estate affiliates 1,338 1,180
Gain/(loss) on land sale (54)
Income allocated to minority interest (56)
---------- ---------
Net income $4,775 $4,426
========== =========
</TABLE>
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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
NOTE 4 PROPERTY ACQUISITIONS AND DEVELOPMENT
ACQUISITIONS
On March 31, 1997, the Company acquired a 100% interest in Market Place
Mall for a cash purchase price of approximately $70,000. Market Place
Mall is located in Champaign, Illinois.
The acquisition was accounted for utilizing the purchase method and
accordingly, it is included in the Operating Partnership's results of
operations from the date of acquisition.
DEVELOPMENTS
During 1996, the Company acquired two new development sites located in
Iowa City, Iowa, and Grand Rapids, Michigan. The Iowa City site is
currently under development and is scheduled to open in the summer of
1998.
NOTE 5 ACQUISITION OF GENERAL GROWTH MANAGEMENT, INC.
On December 22, 1995, 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.
NOTE 6 MORTGAGE LOANS AND CREDIT FACILITIES
On January 2, 1997, a portion of the proceeds from the sale of
CenterMark were used to repay a $12,597 mortgage on Westwood Mall and
to reduce the balance on the non recourse bridge loan facility from
$250,000 to $180,000.
On March 31, 1997, the Company borrowed $70,000 for the acquisition of
Market Place Mall (see Note 4).
In addition to the $250,000 non recourse bridge loan that is
collateralized in part by mortgages on seven Original Centers,
the Company obtained additional short term unsecured financing. As
part of the additional financing, the Company agreed not to encumber
four additional
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<PAGE> 10
GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
Original Centers. As of March 31, 1997 the entire $250,000 non
recourse loan was outstanding and $15,000 of the additional unsecured
loan was outstanding.
NOTE 7 NET GAIN ON SALES
The net gain on sales relates primarily to the gain on the sale of
CenterMark (see Note 2) less additional costs related to prior
acquisitions.
NOTE 8 EXTRAORDINARY ITEMS
The extraordinary items resulted from prepayment costs and unamortized
deferred financing costs related to the early extinguishment of
mortgage notes payable.
NOTE 9 DISTRIBUTIONS PAYABLE
On March 28, 1997, the Company declared a cash distribution of $.45 per
share payable April 30, 1997, to stockholders of record on April 15,
1997, totaling $13,856. In addition, a distribution of $8,070 was paid
to the limited partners of the Operating Partnership.
On December 17, 1996, the Company declared a cash distribution of $.43
per share payable January 31, 1997, to stockholders of record on
December 31, 1996, totaling $13,239. In addition, a distribution of
$7,505 was paid to the limited partners of the Operating Partnership.
NOTE 10 COMMITMENTS AND CONTINGENCIES
In the normal course of business, from time to time, the Company is
involved in legal actions relating to the ownership and operations of
its properties. In management's opinion, the liabilities, if any, that
may ultimately result from such legal actions are not expected to have
a materially adverse effect on the consolidated financial position,
results of operations or liquidity of the Company.
The Company has entered into contingent agreements for the acquisition
of properties. Each acquisition is subject to satisfactory completion
of due diligence and, in the case of developments, completion and
occupancy of the project.
NOTE 11 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share," revises the disclosure requirements and increases the
comparability of EPS data on an international basis by
simplifying the existing computational guidelines in APB Opinion No.
15. The pronouncement will require the Company to present both basic
and diluted EPS for net income on the face of the income statement and
is effective for the Company's fiscal year ending December 31, 1997.
The Company believes it will not have a material impact on its
financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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.
As of March 31, 1997, the Company together with the Operating Partnership
owned 100% of thirty-one enclosed regional shopping centers (the "Original
Centers") and 50% of Quail Springs Mall and, through the Operating
Partnership, 38.2% of the stock of GGP/Homart, Inc and a non-voting
preferred stock interest in GGMI (see Note 5). GGP/Homart owns interests
in twenty-six shopping centers (the "Homart Centers") and one center under
development. During 1996 the Company owned an interest in CenterMark
Properties, Inc. (the "CenterMark Centers") (see Note 2). Revenues are
primarily derived from fixed minimum rents, percentage rents and
recoveries of operating expenses from tenants. Inasmuch as the Company's
financial statements reflect the use of the equity method to account for
its investments in CenterMark, GGP/Homart, GGMI and Quail Springs Mall,
the discussion of results of operations below relates primarily to the
revenues and expenses of the Original Centers.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Total revenues for the first quarter of 1997 were $65.3 million, which
represents an increase of $13.6 million or approximately 26.3% from $51.7
million in the first quarter of 1996. Approximately $9.6 million and
$1.4 million of the increase is from acquisitions and new developments,
respectively. Improved performance of comparable properties accounted
for $2.6 million of the increase. Minimum rent for the first quarter of
1997 increased by $6.9 million or 21.4% from $32.3 million in 1996 to
$39.2 million. The acquisition and development of properties generated
$5.5 million and $.6 million of the $6.9 million increase in minimum
rents, respectively. Expansion space, specialty leasing efforts and a
combination of occupancy and rental changes at the comparable centers
accounted for the remaining increase of $.8 million in minimum rents.
Tenant charges increased by $5.5 million from $16.1 million to $21.6
million for the first quarter of 1997. Approximately $1.2 million of the
increase is attributable to higher recoverable operating expenses at the
comparable malls. The remaining $4.3 million increase was generated by
properties which were recently acquired or developed. For the first
quarter of 1997 overage rents increased by $.7 million or approximately
50% from $1.4 million in 1996. The performance of the comparable centers
produced $.2 million of the increase and the acquisition and development
of additional centers accounted for the remaining $.5 million. Other
revenues increased by approximately $.5 million to $1.6 million for the
first quarter of 1997 from $1.1 million in 1996. Fee income generated by
the Company's asset management activities for the Homart Portfolio was
slightly above the first quarter of 1996.
Total expenses, including depreciation and amortization, increased by
approximately $6.5 million, from $28.5 million in the first quarter of
1996 to $35.0 million in the first quarter of 1997. For the period ended
March 31, 1997, property operating expenses increased by $4.2 million and
depreciation and amortization also increased by $2.1 million over the same
period in 1996. Property operating expense decreased by $.1 million at
comparable properties
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<PAGE> 12
primarily due to a $.5 million reduction in bad debt expense. The
remaining $4.3 million increase in operating costs was due to the
acquisition and development of new properties. Approximately $.6 million
of the $2.1 million increase in depreciation and amortization was
generated at comparable centers. The remaining $1.5 million was from
properties acquired or developed. Management fees to affiliates and
general and administrative expenses together were approximately $.2
million higher than in 1996.
Net interest expense for the first quarter of 1997 was $15.4 million, a
decrease of approximately $2.1 million or 12% from the first quarter of
1996. Refinancing activities and the use of the CenterMark proceeds to
repay debt generated a $4.7 million decrease in interest expense. The
acquisition of new properties accounted for an increase of approximately
$2.6 million of interest expense.
Equity in net income of unconsolidated real estate affiliates in the
first quarter of 1997 decreased by approximately $2.3 million to $1.9
million in 1997, from $4.2 million in the first quarter of 1996.
Approximately $2.0 million of the decrease is attributable to the sale of
the Company's interest in CenterMark. The Company's ownership interest
in GGMI resulted in a decrease of $.7 million as determined in accordance
with generally accepted accounting principles. Quail Springs Mall and
GGP/Homart accounted for increases of $.3 million and $.1 million,
respectively.
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<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
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.
SUMMARY OF INVESTING ACTIVITIES FOR THE QUARTERS ENDED MARCH 31, 1997 AND 1996
Net cash provided by investing activities during the first quarter of 1997 was
$31.3 million, compared to a use of $17.5 million in 1996. Cash flow from
investing activities was effected by the timing of acquisitions, development
and improvements to real estate properties, requiring a use of cash during the
first three months of approximately $88.2 million in 1997 compared to $19.1 in
1996. Market Place Mall ws acquired in March of 1997 for approximately $70.0
million. The sale of portions of CenterMark provided cash flow of $130.5
million in the first quarter of 1997. Additional investments in GGP/Homart
used $5.7 million of cash flow in 1997. Distributions received from
unconsolidated affiliates totaled $6.1 million in 1997 and $6.9 million.
Advances on notes receivable from affiliates decreased cash flow from investing
activities by $9.6 million in 1997. Deferred expenses decreased cash flow $1.7
million in 1997 compared to $5.3 million in 1996.
SUMMARY OF FINANCING ACTIVITIES FOR THE QUARTERS ENDED MARCH 31, 1997 AND 1996
Financing activities in 1997 used $59.5 million of cash compared to $6.0
million in 1996. Distributions paid to common shareholders and the minority
interest decreased cash flow by $20.7 million in 1997 compared to $18.6 million
in 1996. The total distributions increased due to an increased distribution
rate and additional shares and Operating Partnership Units outstanding during
1997. Net borrowing activity was a $38.4 million use of cash flow in 1997
compared to a $12.7 million source of cash flow in 1996.
The following factors, among others, will affect operating cash flow and,
accordingly, influence the decisions of the Board of Directors regarding
distributions: (i) scheduled increases in base rents of existing leases; (ii)
changes in minimum base rents and/or percentage rents attributable to
replacement of existing leases with new or renewal leases; (iii) changes in
occupancy rates at existing centers and procurement of leases for newly
developed centers; and (iv) the Company's share of Funds From Operations
generated by GGMI, GGP/Homart and distributions therefrom, less oversight
costs and debt service on additional loans that were incurred to finance a
portion of the cash purchase price for GGP/Homart's stock. The Company
anticipates that its Funds From Operations, and potential new debt or equity
from future new financings or refinancings will provide adequate liquidity to
conduct its operations, fund general and administrative expenses, fund
operating costs and interest payments and allow distributions to the Company's
stockholders in accordance with the requirements of the Internal Revenue Code
of 1986, as amended, for continued qualification as a real estate investment
trust and to avoid any Company level federal income or excise tax.
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(c) On February 27, 1997, 1,000 shares of the Corporation's common stock were
issued to each of Beth Stewart and A. Lorne Weil, directors of the
Company in a private placement under Section 4(2) of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
Ms. Stewart and Mr. Weil served on the Evaluation Committee of the Board
of Directors in connection with the Company's acquisition of General
Growth Management, Inc. during 1996 and received the shares of Common
Stock as compensation for their service on the Committee.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Not applicable
(b) Reports on Form 8-K - Not applicable
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL GROWTH PROPERTIES, INC.
Date: January 15, 1998 /s/: Bernard Freibaum
----------------------------------
Bernard Freibaum
Executive Vice President and Chief Financial Officer
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