URBAN SHOPPING CENTERS INC, 10-Q, 1999-11-12

URBAN SHOPPING CENTERS INC
10-Q, 1999-11-12
REAL ESTATE INVESTMENT TRUSTS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarter
ended September 30, 1999 Commission file number 1-12278

URBAN SHOPPING CENTERS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

Maryland 36-3886885
- ------------------------ -------------------
(State of incorporation) (I.R.S. Employer
Identification No.)

900 North Michigan Avenue, Suite 1500, Chicago, Illinois 60611
- -------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (312) 915-2000

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]

The number of shares of Common Stock and Unit Voting Common Stock, $.01 par
value, outstanding on November 10, 1999 were 17,523,484 and 407,935,
respectively.

<PAGE>

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1. Financial Statements . . . . . . . . . . . . . . . . 3

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . 18

PART II OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 29

Item 7A. Quantitative and Qualitative Disclosures about
Market Risk. . . . . . . . . . . . . . . . . . . . . . 33

<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

URBAN SHOPPING CENTERS, INC.

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 1999 AND DECEMBER 31, 1998

(Unaudited)
($000's omitted, except share amounts)

ASSETS
------

SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -----------

Investment properties:
Land, including peripheral
land parcels . . . . . . . . . . . . . $ 209,304 $ 157,045
Buildings and improvements . . . . . . . 1,426,503 1,095,431
Equipment, furniture and fixtures. . . . 5,051 4,065
Construction in progress . . . . . . . . 59,342 101,188
------------ -----------
1,700,200 1,357,729
Accumulated depreciation . . . . . . . . (194,234) (163,845)
------------ -----------
Investment properties, net of
accumulated depreciation . . . . . . 1,505,966 1,193,884

Investment property held for sale. . . . . 12,568 --
Investments in unconsolidated
partnerships . . . . . . . . . . . . . . 129,264 135,052
Investment in the Management Company . . . 49,098 48,552
Cash, cash equivalents and
short-term investments . . . . . . . . . 20,781 422
Interest, rents and other receivables. . . 16,740 18,978
Deferred expenses and other assets . . . . 17,688 14,522
------------ -----------

$ 1,752,105 $ 1,411,410
============ ===========

<PAGE>

URBAN SHOPPING CENTERS, INC.

CONSOLIDATED BALANCE SHEETS - CONTINUED

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -----------

Liabilities:
Mortgage notes payable . . . . . . . . . $ 1,064,154 $ 765,501
Land sale-leaseback proceeds . . . . . . 75,000 75,000
Deferred lease accrual . . . . . . . . . 22,339 20,733
Accounts payable and other
liabilities. . . . . . . . . . . . . . 69,433 51,270
Investments in unconsolidated
partnerships . . . . . . . . . . . . . 44,387 42,893

Commitments and contingencies
----------- -----------
Total liabilities. . . . . . . . 1,275,313 955,397

Minority interest. . . . . . . . . . . . . 162,813 129,739

Stockholders' equity:
Preferred stock, $.01 par value,
authorized 5,000,000 shares,
issued and outstanding 3,772,915
shares in 1999 and 1998 (liquida-
tion preference of $125,000) . . . . . 38 38
Common stock, $.01 par value,
authorized 140,000,000 shares,
issued and outstanding 17,520,484
shares in 1999 and 17,380,193
shares in 1998 . . . . . . . . . . . . 176 174
Unit voting stock, $.01 par value,
authorized 5,000,000 shares,
issued and outstanding 407,935
shares in 1999 and 1998. . . . . . . . 4 4
Additional paid-in capital . . . . . . . 494,851 489,880
Retained earnings (deficit). . . . . . . (181,090) (163,822)
------------ -----------

Total stockholders' equity . . . 313,979 326,274
------------ -----------

$ 1,752,105 $ 1,411,410
============ ===========

See accompanying notes to consolidated financial statements.

<PAGE>

<TABLE>
URBAN SHOPPING CENTERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

(UNAUDITED)
($000's omitted, except share amounts)

<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Shopping center revenues:
Minimum rents. . . . . . . . . . . . . . . . . . . $ 38,148 $ 29,389 $ 104,155 $ 88,241
Percentage rents . . . . . . . . . . . . . . . . . 1,887 1,188 3,413 3,880
Recoveries from tenants. . . . . . . . . . . . . . 19,542 16,952 55,706 47,126
Other. . . . . . . . . . . . . . . . . . . . . . . 3,382 1,237 7,404 3,465
---------- ---------- ---------- ----------
62,959 48,766 170,678 142,712

Interest income. . . . . . . . . . . . . . . . . . . 208 109 585 943
---------- ---------- ---------- ----------

63,167 48,875 171,263 143,655
---------- ---------- ---------- ----------

Expenses:
Shopping center expenses . . . . . . . . . . . . . . 21,963 18,587 61,141 53,410
Mortgage and other interest. . . . . . . . . . . . . 17,180 10,930 43,414 32,396
Ground rent. . . . . . . . . . . . . . . . . . . . . 1,137 1,109 3,366 3,509
Depreciation and amortization. . . . . . . . . . . . 13,302 10,404 36,411 31,101
General and administrative . . . . . . . . . . . . . 1,557 1,212 4,478 3,630
Write-off of assets. . . . . . . . . . . . . . . . . 275 70 1,668 183
---------- ---------- ---------- ----------
55,414 42,312 150,478 124,229
---------- ---------- ---------- ----------

<PAGE>

URBAN SHOPPING CENTERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------

Operating income . . . . . . . . . . . . . . 7,753 6,563 20,785 19,426

Income from unconsolidated partnerships. . . . . . . . 3,257 2,736 8,666 7,416
Income (loss) from the Management Company. . . . . . . 7 466 315 (880)
----------- ----------- ---------- ----------

Income before other gains,
minority interest and
extraordinary items. . . . . . . . . . . . 11,017 9,765 29,766 25,962

Other gains. . . . . . . . . . . . . . . . . . . . . . 632 -- 632 479
Minority interest. . . . . . . . . . . . . . . . . . . (4,096) (3,082) (10,047) (8,303)
----------- ----------- ---------- ----------

Income before extraordinary
items. . . . . . . . . . . . . . . . . . . 7,553 6,683 20,351 18,138

Extraordinary items (net of taxes and
minority interest) . . . . . . . . . . . . . . . . . -- -- (1,618) --
----------- ----------- ---------- ----------

Net income . . . . . . . . . . . . . . . . . 7,553 6,683 18,733 18,138

Dividends on preferred stock . . . . . . . . . . . . . (2,113) (1,575) (6,339) (4,771)
----------- ----------- ---------- ----------
Income applicable to common and
unit voting common stock . . . . . . . . . $ 5,440 $ 5,108 $ 12,394 $ 13,367
=========== =========== ========== ==========

<PAGE>

URBAN SHOPPING CENTERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------

Basic income per common and unit
voting common share:
Before extraordinary items . . . . . . . . . . . . . $ .30 $ .29 $ .78 $ .75
Extraordinary items. . . . . . . . . . . . . . . . . -- -- (.09) --
---------- ---------- ---------- ----------
Net income . . . . . . . . . . . . . . . . . $ .30 $ .29 $ .69 $ .75
========== ========== ========== ==========

Diluted income per common and unit
voting common share:
Before extraordinary items . . . . . . . . . . . . . $ .30 $ .29 $ .77 $ .75
Extraordinary items. . . . . . . . . . . . . . . . . -- -- (.09) --
---------- ---------- ---------- ----------
Net income . . . . . . . . . . . . . . . . . $ .30 $ .29 $ .68 $ .75
========== ========== ========== ==========

Weighted-average common and
unit voting common stock outstanding . . . . . . . . 17,917,234 17,745,261 17,903,077 17,736,017
========== ========== ========== ==========

Dividends declared and paid per common
and unit voting common share. . . . . . . . . . . . . $ .560 $ .525 $ 1.680 $ 1.575
========== ========== ========== ==========

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
URBAN SHOPPING CENTERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

(UNAUDITED)
($000's omitted, except share amounts)

<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,733 $ 18,138
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . 36,411 31,101
Write-off of assets. . . . . . . . . . . . . . . . . . . . . 1,668 183
Provision for losses on accounts receivable. . . . . . . . . 700 1,138
Income from unconsolidated partnerships. . . . . . . . . . . (8,666) (7,416)
Loss (income) from the Management Company. . . . . . . . . . (315) 880
Minority interest. . . . . . . . . . . . . . . . . . . . . . 10,047 8,303
Deferred lease accrual . . . . . . . . . . . . . . . . . . . 1,606 1,606
Extraordinary items. . . . . . . . . . . . . . . . . . . . . 1,618 --
Other gains. . . . . . . . . . . . . . . . . . . . . . . . . (632) (479)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . (957) (1,050)
Other changes in assets and liabilities:
Interest, rents and other receivables. . . . . . . . . . . . 2,407 (713)
Deferred expenses and other assets . . . . . . . . . . . . . (2,237) (1,090)
Accounts payable and other liabilities . . . . . . . . . . . 17,571 6,894
----------- -----------
Net cash provided by operating activities. . . . . . . 77,954 57,495
----------- -----------
Cash flows from investing activities:
Additions to investment properties, net of change
in related payables. . . . . . . . . . . . . . . . . . . . . (75,035) (20,764)
Acquisition of investment properties and
development parcels. . . . . . . . . . . . . . . . . . . . . (122,927) --
Deferred acquisition costs . . . . . . . . . . . . . . . . . . (3,731) --
Proceeds from the sale of development parcels,
net of selling costs . . . . . . . . . . . . . . . . . . . . 824 490
Cash contributions to unconsolidated partnerships
and the Management Company . . . . . . . . . . . . . . . . . (5,493) (25,143)
Cash distributions from unconsolidated partnerships
and the Management Company . . . . . . . . . . . . . . . . . 19,572 22,881
Decrease (increase) in restricted cash . . . . . . . . . . . . 714 (2,425)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . -- (3)
---------- ----------
Net cash used in investing activities. . . . . . . . . (186,076) (24,964)
---------- ----------

<PAGE>

URBAN SHOPPING CENTERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1999 1998
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of debt, net of issuance costs. . . . . 477,067 86,506
Proceeds from issuance of Common Stock under
option plan and unit incentive plan. . . . . . . . . . . . . 3,432 1,960
Proceeds from the issuance of perpetual preferred
partnership units. . . . . . . . . . . . . . . . . . . . . . 38,997 --
Repayment of debt. . . . . . . . . . . . . . . . . . . . . . . (337,375) (74,157)
Cash distributions to common unitholders . . . . . . . . . . . (15,063) (13,830)
Cash distributions to preferred unitholders. . . . . . . . . . (2,575) (1,470)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . (36,002) (31,947)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . -- 57
---------- ----------
Net cash provided by (used in)
financing activities . . . . . . . . . . . . . . . . 128,481 (32,881)
---------- ----------
Net increase (decrease) in cash and cash equivalents . . . . . . 20,359 (350)
Cash and cash equivalents at beginning of period . . . . . . . . 294 1,143
----------- -----------
Cash and cash equivalents at end of period . . . . . . . . . . . $ 20,653 $ 793
=========== ===========

Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest,
net of amounts capitalized . . . . . . . . . . . . . . . . . $ 39,889 $ 31,538
=========== ===========

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

URBAN SHOPPING CENTERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 AND 1998

(UNAUDITED)
($000's omitted, except share amounts)

Readers of this quarterly report should refer to the Company's audited
financial statements for the year ended December 31, 1998, which are
incorporated by reference in the Company's 1998 annual report on Form 10-K,
as certain disclosures which would substantially duplicate those contained
in such audited financial statements have been omitted from this report.

(1) ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION

On May 27, 1999, in connection with the acquisition of Century City
Shopping Center & Marketplace, the Company issued $40,000 of Series C
Cumulative Redeemable Preferred Partnership Units (the "Preferred Units")
in Urban Shopping Centers, L.P. (the "Operating Partnership") at $50.00 per
unit. The Preferred Units are entitled to fully cumulative distributions
at a rate of 9.125% per annum. The Preferred Units, which may be called by
the Company at par on or after May 27, 2004 have no stated maturity or
mandatory redemption and are not convertible into any other securities of
the Operating Partnership. The holders of the Preferred Units may exchange
them at any time on or after May 27, 2009 for shares of a new series of
preferred stock of the Company with similar terms.

BASIS OF PRESENTATION

In the opinion of management, all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation of the
consolidated financial statements have been included. The results for the
interim periods ended September 30, 1999 and 1998 are not necessarily
indicative of the results to be obtained for the full fiscal year.

The accompanying consolidated financial statements include the
accounts of the Company, the Operating Partnership and all controlled
affiliates. The effect of all significant intercompany balances and
transactions have been eliminated in the consolidated presentation.

The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Company's interest in
Water Tower Joint Venture ("Water Tower Place"), Coral-CS/LTD Associates
("Coral Square Mall"), West Dade County Associates ("Miami International
Mall"), S. F. Shopping Centre Associates, L.P. ("San Francisco Shopping
Centre"), Copley Place Associates, LLC ("Copley Place"), Valencia Town
Center Associates, L.P. ("Valencia Town Center"), Woodland Hills Mall, LLC
("Woodland Hills Mall") and Urban Retail Properties Co. (the "Management
Company").

For the nine months ended September 30, 1999 and 1998, the common
units, convertible preferred units, convertible preferred stock, stock
options and incentive units are either antidilutive or do not have a
significant effect on the computation of earnings per share.

Development costs, including interest and real estate taxes incurred
in connection with construction or expansion of certain investment
properties, are capitalized as a cost of the investment property and
depreciated over the estimated useful life of the related asset. During
the nine months ended September 30, 1999 and 1998, the Company incurred
interest of $47,113 and $34,991, respectively, and capitalized interest of
$3,699 and $2,595, respectively.

<PAGE>

URBAN SHOPPING CENTERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)
($000's omitted, except share amounts)

(1) ORGANIZATION AND BASIS OF PRESENTATION (Continued)

Cash and cash equivalents (which aggregated $20,653 and $294 at
September 30, 1999 and December 31, 1998, respectively) include a treasury
money market fund which invests principally in U.S. Treasury notes and
bills ($20,610 and none at September 30, 1999 and December 31, 1998,
respectively). Other short-term investments (generally with original
maturities of one year or less) are generally held to maturity and
aggregated $128 at September 30, 1999 and December 31, 1998. Cash
equivalents and other short-term investments are held at cost which
approximates market.

On May 21, 1998, the Emerging Issues Task Force of the Financial
Accounting Standards Board reached a consensus on Issue 98-9 "Accounting
for Contingent Rent in Interim Financial Periods." The Task Force
determined that a lessor should defer recognition of contingent rental
income (i.e., percentage/excess rent) in interim periods until the
specified target (i.e., breakpoint) that triggers the contingent rental
income is achieved. The Company implemented the consensus as of May 21,
1998. This consensus affects timing of revenue recognition for interim
financial periods and it is not expected to have any significant effect on
the Company's net income for the full calendar year 1999.

ACCOUNTING FOR DERIVATIVES

The Company uses interest rate swap agreements and treasury locks as
part of its interest rate risk management strategy. These off-balance
sheet derivatives are classified as synthetic alterations. The criteria
that must be satisfied by synthetic alteration accounting are as follows:
(i) the liability to be converted has exposure to interest rate risk and
(ii) the derivative is designated and effective as a synthetic alteration
of the liability.

Accrual accounting is applied for these derivatives treated as
synthetic alterations, and income and expense are recorded as adjustments
of interest expense. Fees, if any, related to these off-balance sheet
investment products are amortized on the interest method over the life of
the derivative. If the balance of the liability falls below that of the
derivative, the excess portion of the derivative is marked to market and
the resulting gain or loss included in income, as applicable. If a
derivative is terminated independent of the underlying debt, the gain or
loss is deferred and amortized over the remaining life of the derivative.
If a treasury lock is terminated, the gain or loss is deferred and
amortized over the life of the new debt.

Derivatives that do not satisfy the criteria above would be carried at
market value with changes in market value to be recognized as current
income or expense.

(2) ACQUISITION

(a) Houston Galleria

On October 4, 1999, the Company, through a partnership owned two-
thirds by the Company and one-third by institutional funds advised by
Walton Street Capital, LLC, contracted to acquire the approximate 1.6
million square foot retail component of the Houston Galleria, a mixed use
development in Houston, Texas. The acquisition is expected to be completed

<PAGE>

URBAN SHOPPING CENTERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)
($000's omitted, except share amounts)

by the middle of November of this year. The project includes an ice
skating rink, food court, an adjacent strip shopping center of
approximately 104,000 square feet and an adjacent fourteen acre development
site. Current plans call for development of up to 750,000 square feet of
new retail space on the development site which includes up to two new
anchor department stores. The interest rate on $225,000 of six year, non-
recourse debt which will be used to finance a portion of the acquisition
had been fixed at an interest rate of 7.93%. In addition to the retail
component, the project is comprised of three office towers totaling 1.1
million square feet of space and two Westin hotels aggregating 891 rooms.
The office and hotel portions of Houston Galleria are to be acquired by
institutional funds advised by Walton Street Capital, LLC.

(b) Century City Shopping Center & Marketplace

On June 10, 1999, the Company acquired Century City Shopping Center &
Marketplace ("Century City") in Los Angeles, California. As consideration
for the shopping center and related assets, which the Company acquired
subject to existing nonrecourse indebtedness of $160,000, the Company paid
$108,000 in cash, net of prorations. In connection with the acquisition,
the Company issued $3,200 of partnership units in the Operating Partnership
and $40,000 of Series C Cumulative Redeemable Preferred Partnership Units
in the Operating Partnership. The existing nonrecourse indebtedness and
the issuance of partnership units have not been reflected in investing and
financing activities in the accompanying consolidated statement of cash
flows. Century City is a 770,000 square foot open-air regional mall
located in Los Angeles, California. It is currently anchored by
Bloomingdale's (222,000 square feet) and Macy's (135,000 square feet) and
features a 50,000 square foot AMC theater, a 37,000 square foot Gelson's
Market and more than 325,000 square feet of specialty shops and
restaurants.

(3) INVESTMENT PROPERTIES

At September 30, 1999, the Company has classified Service Merchandise
Plaza as an investment property held for sale. Service Merchandise Plaza
in Columbus, Ohio, is an approximate 193,000 square foot community center
anchored by Service Merchandise, Circuit City and Office Depot. The
Company is selling Service Merchandise Plaza at this time because it is a
non-core asset which is not integral to the Company's strategy of owning
and operating dominant high quality regional malls and adjacent retail
facilities. Revenues of $2,079 and $1,600, expenses of $1,049 and $792,
and net income of $1,030 and $808, for the nine months ended September 30,
1999 and 1998, respectively, related to Service Merchandise Plaza are
included in the accompanying consolidated statements of operations.

(4) SALE OF INVESTMENT PROPERTY

On July 12, 1999, the Company completed an outparcel of land sale at
Wolfchase Galleria for total proceeds, net of selling expenses, of
approximately $824 and recognized a gain of $632 for financial reporting
purposes.

On April 30, 1998, the Company completed an outparcel of land sale at
Wolfchase Galleria for total proceeds, net of selling expenses, of
approximately $490 and recognized a gain of $479 for financial reporting
purposes.

<PAGE>

URBAN SHOPPING CENTERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)
($000's omitted, except share amounts)

(5) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS

Summarized financial information for the unconsolidated partnerships
is presented below:
September 30, December 31,
1999 1998
------------- -------------
Assets:
Investment properties, net . . . . . . $ 843,606 $ 860,634
Other assets . . . . . . . . . . . . . 55,562 46,934
----------- -----------
899,168 907,568
Less liabilities:
Mortgage notes payable . . . . . . . . 643,398 645,904
Other liabilities. . . . . . . . . . . 40,663 30,045
----------- -----------
Total capital . . . . . . . . . . . 215,107 231,619

Less: Outside partners' capital. . . . . 130,230 139,460
----------- -----------
Total investments in
unconsolidated partnerships . . . $ 84,877 $ 92,159
=========== ===========

Total investments in unconsolidated
partnerships are presented in the
accompanying consolidated balance
sheets as follows:
Assets - Investments in
unconsolidated partnerships. . . . $ 129,264 $ 135,052
Liabilities - Investments in
unconsolidated partnerships. . . . 44,387 42,893
----------- -----------
$ 84,877 $ 92,159
=========== ===========

Nine Months Ended
September 30
---------------------------
1999 1998
----------- -----------
Revenues:
Shopping centers . . . . . . . . . . . $ 137,586 $ 120,156
Interest income. . . . . . . . . . . . 670 883
----------- ---------
138,256 121,039
----------- ---------
Expenses:
Shopping centers . . . . . . . . . . . 61,833 54,306
Mortgage and other interest and
ground rent. . . . . . . . . . . . . 35,242 32,481
Depreciation and amortization. . . . . 20,138 16,821
----------- ----------
117,213 103,608
----------- ----------
Income before other gains. . . . . . 21,043 17,431

Other gains. . . . . . . . . . . . . . . -- 729
----------- ----------
Net income . . . . . . . . . . . $ 21,043 $ 18,160
=========== ==========

<PAGE>

URBAN SHOPPING CENTERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)
($000's omitted, except share amounts)

(5) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS (Continued)

Nine Months Ended
September 30
---------------------------
1999 1998
----------- -----------
Company's share of:
Mortgage and other interest and
ground rent. . . . . . . . . . . . . $ 16,234 $ 14,353
Depreciation and amortization. . . . . 9,186 7,252
Other gains. . . . . . . . . . . . . . -- 292
Net income . . . . . . . . . . . . . . 8,666 7,416
=========== ==========

(6) INVESTMENT IN THE MANAGEMENT COMPANY

The Company's consolidated financial statements present its investment
in the Management Company under the equity method of accounting.

Summarized financial information for the Management Company is
presented below.

September 30, December 31,
1999 1998
------------- -------------
Assets:
Investments in land parcels. . . . . . $ 14,204 $ 15,171
Cash, cash equivalents and
short-term investments . . . . . . . 2,982 4,324
Receivables and deferred expenses. . . 22,196 17,332
----------- -----------
$ 39,382 $ 36,827
=========== ===========

Liabilities:
Notes payable. . . . . . . . . . . . . $ 20,000 $ 20,000
Accounts payable and
other liabilities. . . . . . . . . . 4,793 4,777
----------- -----------

24,793 24,777
Owners' equity . . . . . . . . . . . . . 14,589 12,050
----------- -----------
$ 39,382 $ 36,827
=========== ===========

<PAGE>

URBAN SHOPPING CENTERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)
($000's omitted, except share amounts)

(6) INVESTMENT IN THE MANAGEMENT COMPANY

Nine Months Ended
September 30
---------------------------
1999 1998
----------- -----------
Revenues:
Management, leasing and
development services . . . . . . . . $ 31,608 $ 29,206
Interest income. . . . . . . . . . . . 216 418
---------- ----------
31,823 29,624
---------- ----------
Expenses:
Management, leasing and
development services . . . . . . . . 29,089 25,926
Mortgage and other interest. . . . . . 1,028 3,806
Land parcels . . . . . . . . . . . . . 41 1,476
Depreciation and amortization. . . . . 1,129 1,090
---------- ----------
31,287 32,298
---------- ----------
Operating income (loss). . . . . . 537 (2,674)

Income tax benefit (expense) . . . . . . (140) 711
---------- ----------
Income (loss) before other
loss and extraordinary
items. . . . . . . . . . . . . . 397 (1,963)

Loss on sale of land . . . . . . . . . . (99) --
---------- ----------
Income (loss) before
extraordinary items. . . . . . . 298 (1,963)
---------- ----------
Extraordinary items (net of taxes) . . . (1,788) --
---------- ----------
Net loss . . . . . . . . . . . . . $ (1,490) $ (1,963)
========== ==========

(7) MORTGAGE NOTES PAYABLE

(a) MainPlace

On September 29, 1999, the Company refinanced the MainPlace $80,000 of
indebtedness with a $110,000 loan. Of the total $110,000, $80,000 bears
interest at fixed rate of 7.00% through the use of an interest rate swap
and $30,000 bears interest at LIBOR + 1.30% (7.23% at September 30, 1999).
The loan matures on September 29, 2000; however, it may be extended for two
one-year periods.

<PAGE>

URBAN SHOPPING CENTERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)
($000's omitted, except share amounts)

(7) MORTGAGE NOTES PAYABLE (Continued)

(b) Citrus Park Town Center

On June 29, 1999, the Company signed an agreement with a lender for
$100,000 of indebtedness secured by Citrus Park Town Center. The loan
bears interest at 6.89% and matures on June 30, 2009. In connection with
the funding on the new loan, the Company repaid the $72,600 then
outstanding balance on the construction loan at Citrus Park Town Center.
In addition, during the second quarter of 1999, the Company terminated its
position in an $80,000 ten year treasury lock for a net gain of $3,200,
which will be amortized as an offset to interest expense over ten years.

(8) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

During 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company defines
each of its regional malls and community centers as an individual operating
segment and has determined that all of the regional malls and community
centers exhibit substantially identical economic characteristics and meet
the other criteria specified by SFAS No. 131 which permits the malls to be
aggregated into one reportable segment. The Management Company is viewed
by management as a separate segment and does not meet the quantitative
measures required for separate disclosure.

The Company separately assesses and measures the operating results of
its regional malls based on net operating income ("NOI"). NOI is
calculated as shopping center revenues less shopping center expenses
adjusted for straight-line rent and non-real estate depreciation. NOI for
the Company's unconsolidated partnerships is measured at the Company's
ownership share.

The following table summarizes the revenues, NOI and assets for the
Company's reportable segment.

Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
REVENUES:

Shopping center revenues . . .$ 83,803 $ 66,160 $231,780 $194,333
Company's share of
unconsolidated
partnerships . . . . . . . . (20,844) (17,394) (61,102) (51,621)
Interest income. . . . . . . . 208 109 585 943
-------- -------- -------- --------

Consolidated revenue . . .$ 63,167 $ 48,875 $171,263 $143,655
======== ======== ======== ========

<PAGE>

URBAN SHOPPING CENTERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(UNAUDITED)
($000's omitted, except share amounts)

(8) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
(Continued)

Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
NOI:

Shopping center NOI. . . . . .$ 52,556 $ 39,685 $141,600 $116,424
Unconsolidated
shopping center NOI. . . . . (11,892) (9,867) (33,450) (28,469)
Interest income. . . . . . . . 208 109 585 943
Straight-line rent
adjustments. . . . . . . . . 183 260 956 1,051
Real estate depreciation
and amortization . . . . . . (12,707) (9,933) (34,716) (29,533)
Non-shopping center
expenses . . . . . . . . . . (20,595) (13,691) (54,190) (40,990)
Income from unconsolidated
partnerships and the
Management Company . . . . . 3,264 3,202 8,981 6,536
-------- -------- -------- --------
Consolidated
income before
other gains,
minority interest
and extraordinary
items. . . . . . . . . .$ 11,017 $ 9,765 $ 29,766 $ 25,962
======== ======== ======== ========

September 30, December 31,
1999 1998
------------- ------------
ASSETS:

Total shopping center assets . . . . . . . . $1,682,226 $1,362,436
Investment in the Management Company . . . . 49,098 48,552
Cash, cash equivalents and short-term
investments. . . . . . . . . . . . . . . . 20,781 422
---------- ----------
Consolidated assets. . . . . . . . . $1,752,105 $1,411,410
========== ==========

Information relative to the Company's expenditures for additions to
long-lived assets has been included in the investing activities reported in
the consolidated statements of cash flows.

(9) SUBSEQUENT EVENT

On October 1, 1999, the Company issued $85,000 of Series D Cumulative
Redeemable Preferred Partnership Units (the "Series D Preferred Units") in
the Operating Partnership at $25 per unit. The Series D Preferred Units
are entitled to distributions at a rate of 9.45% per annum. The Series D
Preferred Units, which may be called by the Company at par on or after
October 1, 2004, have no stated maturity or mandatory redemption and are
not convertible into any other securities of the Operating Partnership.

<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

FINANCIAL CONDITION. Net cash flows from operating activities
increased $20.5 million in the nine months ended September 30, 1999 from
the nine months ended September 30, 1998. This increase was primarily
attributable to an increase in rental operations discussed below.

Net cash flows used in investing activities increased $161.1 million
in the nine months ended September 30, 1999 from the nine months ended
September 30, 1998. This increase was primarily attributable to (i) the
acquisition of Century City Shopping Center & Marketplace ("Century City")
on June 10, 1999, (ii) the acquisition of land in Durham, North Carolina in
June 1999 for the development of The Streets at Southpoint, (iii) an
increase in additions to investment properties at Citrus Park Town Center
as a result of the consolidation of this entity in 1999, and (iv) the
continuing construction costs incurred at Galleria at Roseville in 1999.

Net cash flows from financing activities increased $161.4 million in
the nine months ended September 30, 1999 from the nine months ended
September 30, 1998. This increase was primarily attributable to an
increase in the proceeds from (i) the issuance of a $100.0 million
permanent loan at Citrus Park Town Center in June 1999, (ii) the issuance
of $40.0 million in perpetual preferred partnership units of the Operating
Partnership in May 1999, (iii) the issuance of $20.0 million of
indebtedness for the construction of The Plaza at Citrus Park in June 1999,
and (iv) the issuance of an additional $30.0 million of indebtedness at
MainPlace in September 1999; partially offset by the repayment of the
construction loan at Citrus Park Town Center in June 1999.

At September 30, 1999, the Company had cash, cash equivalents and
short-term investments of $20.8 million.

On September 2, 1999, the Company paid $12.1 million to common and
preferred shareholders as a dividend of $.56 per share representing its
second quarter 1999 dividend. On September 2, 1999, the Operating
Partnership paid $5.1 million to its limited partners as a distribution of
$.56 per unit representing its second quarter 1999 distribution. On
September 15, 1999, the Operating Partnership paid $1.1 million to its
preferred unit holders.

CAPITALIZATION. At September 30, 1999, the Company's debt (including
the Company's share of debt of unconsolidated partnerships and the
Management Company) totaled $1,356.9 million of which $1,264.0 million is
fixed rate debt and $92.9 million is floating rate debt. On September 29,
1999, the Company refinanced the MainPlace $80.0 million of indebtedness
with a $110.0 million loan. Of the total $110.0 million, $80.0 million
bears interest at a fixed rate of 7.00% through the use of an interest rate
swap and $30.0 million bears interest at LIBOR + 1.30% (7.23% at September
30, 1999). The loan matures on September 29, 2000; however, it may be
extended for two one-year periods. On June 29, 1999, the Company signed an
agreement with a lender for $100.0 million of indebtedness secured by
Citrus Park Town Center. The loan bears interest at a fixed rate of 6.89%
and matures on June 30, 2009. In connection with the funding on the new
loan, the Company repaid the $72.6 million then outstanding balance on the
construction loan at Citrus Park Town Center. In addition, during the
second quarter of 1999, the Company terminated its position in an $80.0
million, ten year treasury lock for a net gain of $3.2 million, which will
be amortized as an offset to interest expense over ten years. Also on June
29, 1999, the Company secured a loan with a lender with a commitment of
$30.0 million, to be used for the construction of The Plaza at Citrus Park.

As of September 30, 1999, $20.0 million was outstanding on this loan. The
loan matures on June 29, 2000; however it may be extended for two six-month

<PAGE>

periods at the Company's option. The loan bears interest at a floating
rate of LIBOR + 1.40% (6.78% at September 30, 1999). As of September 30,
1999, $20.0 million was outstanding on this loan. On June 10, 1999, the
Company acquired Century City. A portion of the acquisition was financed
by a nine year, $160.0 million non-recourse loan. The $160.0 million bears
interest at a blended fixed rate of 7.58%. On February 25, 1999, the
Company secured $75.0 million in financing for Penn Square Mall. This loan
bears interest at a fixed rate of 7.03% and matures on March 1, 2009. Also
on February 25, 1999, the Management Company obtained a $20.0 million bank
loan. This loan matures on February 25, 2004. On August 25, 1999, the
Company entered into an interest rate swap agreement for the Management
Company indebtedness thereby fixing the all-in rate at 7.01% through
February 25, 2000. On March 1, 1999, Penn Square Mall and the Management
Company prepaid their indebtedness of $31.0 million and $20.0 million,
respectively. The indebtedness had a scheduled maturity date of August 1,
2001. The Management Company incurred a penalty of approximately $2.0
million due to this prepayment of debt. On November 6, 1996, the Company
entered into an agreement with a lender for a one year $5.0 million
unsecured revolving line of credit, which on January 30, 1998, was amended
to increase the line to $7.5 million and extend the maturity to January 29,
1999. On January 29, 1999, this line was further amended to increase the
line to $10.0 million, extend the maturity to January 28, 2000 and change
the interest rate to the Reference Rate - 1.5625% (6.68% at September 30,
1999). As of September 30, 1999, $5.6 million was outstanding on this line
of credit. As of September 30, 1999, $47.3 million was outstanding on the
Company's $107.5 million secured, revolving line of credit. On January 11,
1999, Water Tower Joint Venture completed a one year extension of its
$170.0 million of indebtedness. This indebtedness is now scheduled to
mature on February 1, 2000. In addition, it may be further extended for
one additional year. On January 14, 1999, S.F. Shopping Centre Associates,
L.P. extended the loan maturity on its $53.5 million of indebtedness to
July 1, 2003. In addition, it may be further extended for two one-year
periods.

Although there can be no assurances, the Company believes that
operating cash flows will be sufficient to service all Company debt and
anticipates repayment or refinancing when such amounts are due in the
ordinary course of its business. At September 30, 1999, the Company's
ratio of Company debt to total market capitalization (which includes the
market value of issued and outstanding shares of capital stock of the
Company and of partnership interests in the Operating Partnership not held
by the Company, plus Company debt) was approximately 58%, as illustrated by
the table at the end of the liquidity and capital resources section. The
debt to total market capitalization ratio is based upon the market value of
the common stock and indebtedness of the Company and, accordingly, will
fluctuate with changes in the value of the common stock (and the issuance
of additional shares of common stock, or other forms of capital, if any,
and the amount of outstanding indebtedness).

The Company believes that its cash generated from property operations
will provide the necessary funds on a short-term and long-term basis for
its operating expenses, interest expenses on outstanding indebtedness and
recurring capital expenditures and all dividends to the shareholders
necessary to satisfy the REIT requirements. Sources of capital for future
acquisitions, development and non-recurring capital expenditures, such as
major building renovations and expansions, as well as for scheduled
principal payments, including balloon payments, on the outstanding
indebtedness are expected to be obtained from the following sources: (i)
excess funds available for distribution, (ii) working capital reserves,
(iii) additional Company or property financing, (iv) proceeds from the sale
of assets, including outparcels and (v) additional equity raised in the
public or private markets (including the issuance of additional units
and/or unit voting common stock). Accordingly, the Company expects that it
may incur additional indebtedness. In light of current economic
conditions, relative costs of debt and equity capital, market values of
properties, growth and acquisition opportunities and other factors, the
Company may consider an increase or decrease in its ratio of Company debt
to total market capitalization accordingly.

<PAGE>

CAPITAL INVESTMENTS. On June 10, 1999, the Company acquired Century
City. As consideration for the shopping center and related assets, which
the Company acquired subject to existing nonrecourse indebtedness of $160.0
million, the Company paid $108.0 million in cash, net of prorations. In
connection with the acquisition, the Company issued $3.2 million of
partnership units in the Operating Partnership and $40.0 million of
Series C Cumulative Redeemable Preferred Partnership Units in the Operating
Partnership. Century City is a 770,000 square foot open-air regional mall
located in Los Angeles, California. It is currently anchored by
Bloomingdale's (222,000 square feet) and Macy's (135,000 square feet) and
features a 50,000 square foot AMC theater, a 37,000 square foot Gelson's
Market and more than 325,000 square feet of specialty shops and
restaurants.

The Company's newest super-regional mall development, Citrus Park Town
Center in Tampa, Florida, opened 100% leased on March 3, 1999. The anchor
tenants are Burdines, Dillard's, JCPenney and Sears. Citrus Park Town
Center also contains more than 120 specialty shops and restaurants and an
approximate 90,000 square foot state-of-the-art movie theatre. In
addition, the first phase of The Plaza at Citrus Park, an approximate
350,000 square foot community center opposite the regional mall, opened
this fall. The second phase of the center is scheduled to open in spring
2000.

The Company's latest development project is the 1.1 million square
foot Galleria at Roseville near Sacramento, California. Galleria at
Roseville already has four committed anchor tenants with JCPenney, Macy's,
Nordstrom and Sears. Galleria at Roseville remains on schedule to open on
August 25, 2000.

The Company's next scheduled development project is The Streets at
Southpoint in Durham, North Carolina. The official groundbreaking for the
mall took place in September 1999. The two-level 1.1 million square foot
regional mall will feature Belk, Hecht's, JCPenney, Nordstrom and Sears as
anchors along with an entertainment component featuring an IMAX theater.
The Streets at Southpoint is currently scheduled to open in fall 2001.

At September 30, 1999, amounts spent on construction in progress and
land for development related to The Plaza at Citrus Park, Galleria at
Roseville and The Streets at Southpoint totaled $69.9 million.

At September 30, 1999, there are approximately twenty-three, nine and
twenty-three acres of outparcel land, respectively, at Brandon TownCenter,
Citrus Park Town Center and Wolfchase Galleria available for future sale or
development.

<PAGE>

<TABLE>

100% Pro Rata
Balance of Share of
($000's omitted, Annual Mortgage Mortgage
except share and Maturity Interest Notes Ownership Notes
per share amounts) Date Rate Payable Interest Payable
- ----------------------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Consolidated Entities:
Old Orchard Center Dec. 2009 6.98% $164,921 100.0% $ 164,921
Oakbrook Center Oct. 2004 6.14% 140,000 100.0% 140,000
MainPlace Sept. 2000(1) (1) 110,000 100.0% 110,000
Wolfchase Galleria June 2007 7.80% 78,422 100.0% 78,422
Fox Valley Center Nov. 2006 6.75% 85,528 100.0% 85,528
Hawthorn Center Nov. 2008 6.75% 77,864 100.0% 77,864
Penn Square Mall Mar. 2009 7.03% 74,687 100.0% 74,687
Citrus Park Town Center (2) June 2009 6.89% 99,832 100.0% 99,832
Century City Shopping Center June 2008 7.58% (3) 160,000 100.0% 160,000
Operating Partnership Apr. 2000(4) (4) 47,300 100.0% 47,300
Operating Partnership (5) June 2000 6.78% (5) 20,000 100.0% 20,000
Operating Partnership Jan. 2000 6.68% (6) 5,600 100.0% 5,600
- -------------------------------------------------------------------------------------------------------------
1,064,154 1,064,154
Unconsolidated Entities: (7)
Water Tower Place Feb. 2000(8) (8) 170,000 55.0% 93,500
Coral Square Mall Dec. 2000 7.40% 53,300 50.0% 26,650
Miami International Mall Dec. 2003 6.91% 46,065 40.0% 18,426
San Francisco Shopping Centre July 2003(9) 6.90% 53,531 50.0% 26,766
Copley Place Aug. 2007 7.44% 191,052 33.3% 63,684
Woodland Hills Mall Jan. 2009 7.00% 89,450 50.0% 44,725
Management Company Feb. 2004 7.01%(10) 20,000 95.0% 19,000
- -------------------------------------------------------------------------------------------------------------
623,398 292,751
- -------------------------------------------------------------------------------------------------------------
Company debt $ 1,356,905
- -------------------------------------------------------------------------------------------------------------
Convertible preferred units
(convertible into 1,018,182
common units) $ 28,000
Convertible preferred stock
(convertible into 3,772,915
shares of common stock) $ 125,000
Perpetual preferred units $ 40,000
- -------------------------------------------------------------------------------------------------------------

<PAGE>

(2) The Company terminated its position in an $80.0 million treasury lock for a net gain of $3.2 million,
which will be amortized as an offset to interest expense over ten years.

(3) As of August 5, 1999, the aggregate $160.0 million was fixed at a blended interest rate of 7.58%.

(4) This line of credit, subject to lenders' approval, may be extended for an additional one or two-year
period and is currently subject to a floating rate of LIBOR + 0.85% (6.36% at September 30, 1999).

(5) Represents outstandings under a loan for $30.0 million, for which the fundings will be used on the
construction of The Plaza at Citrus Park. This loan may be extended for two six-month periods and currently bears
interest at LIBOR + 1.40% (6.78% at September 30, 1999).

(6) This line of credit bears interest at the Reference Rate - 1.5625% (6.68% at September 30, 1999).

(7) Excludes Valencia Town Center as the Company is a limited partner and is currently not entitled to any
cash distributions until the outside partner has received a return on and of its contributions to the Partnership.

(8) During the first quarter of 1999, the Company extended this loan maturity to February 1, 2000. It may
be further extended for one additional year. Of this total $170.0 million, $160.0 million bears interest at LIBOR
+ 1.125% and $10.0 million bears interest at LIBOR + 1.500% (6.50% and 6.87%, respectively, at September 30,
1999).

(9) On January 14, 1999, the Company extended this loan maturity to July 1, 2003; however, it may be further
extended for two one-year periods.

(10) This loan currently bears interest at a fixed rate of 7.01% through an interest rate swap agreement
which matures February 25, 2000.
</TABLE>

<PAGE>

<TABLE>

REVIEW OF OPERATIONS

FUNDS FROM OPERATIONS. Funds from operations should not be considered as an alternative to net income or any
other GAAP measurement of performance, as an indicator of operating performance or as an alternative to cash flows
from operating, investing or financing activities as a measure of liquidity. The chart below shows the
calculation of diluted funds from operations:

<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income before minority interest
and extraordinary items. . . . . . . . . . . . . . . $ 11,649 $ 9,765 $ 30,398 $ 26,441
Plus depreciation and amortization . . . . . . . . . . 12,707 9,933 34,716 29,533
Plus Company's share of depreciation
and amortization from unconsolidated
partnerships and the Management
Company . . . . . . . . . . . . . . . . . . . . . . . 2,959 2,211 8,751 6,822
Plus incentive unit dividends. . . . . . . . . . . . . 139 109 417 327
Less perpetual preferred unit distributions. . . . . . (913) -- (1,258) --
---------- ---------- ---------- ----------

Diluted funds from operations. . . . . . . . . . . . . $ 26,541 $ 22,018 $ 73,024 $ 63,123
========== ========== ========== ==========

</TABLE>

<PAGE>

<TABLE>

FUNDS AVAILABLE FOR DISTRIBUTION. The chart below shows the calculation of diluted funds available for
distribution:

<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Diluted funds from operations. . . . . . . . . . . . . $ 26,541 $ 22,018 $ 73,024 $ 63,123
Plus non-cash effect of Oakbrook Center
straight-lined ground rent and
related interest . . . . . . . . . . . . . . . . . . 867 827 2,583 2,460
Plus (less) adjustment to reflect actual
cash received from the Management
Company. . . . . . . . . . . . . . . . . . . . . . . (106) (489) (528) 802
Plus write-off of assets (a) . . . . . . . . . . . . . 275 70 1,767 183
Less straight-line rent adjustments (b). . . . . . . . (290) (249) (1,459) (1,220)
Less other gains (a) . . . . . . . . . . . . . . . . . (533) -- (533) (771)
---------- ---------- ---------- ----------

Diluted funds available for distribution
excluding other gains. . . . . . . . . . . . . . . . $ 26,754 $ 22,177 $ 74,854 $ 64,577
========== ========== ========== ==========

<FN>

(a) Includes the Company's share of unconsolidated partnerships and the Management Company.

(b) Includes the Company's share of unconsolidated partnerships.

</TABLE>

<PAGE>

Weighted-average diluted shares and units outstanding, including the
dilutive effect of preferred units, preferred stock and outstanding stock
options and incentive units, were 32,162,429 and 30,920,809 for the three
months ended September 30, 1999 and 1998, respectively, and 32,105,570 and
30,926,793, respectively, for the nine months ended September 30, 1999 and
1998.

SALES. Aggregate sales volume at the Company's regional malls for
those mall shops and anchors that report sales (excluding Citrus Park Town
Center and including the December 1998 acquisition of Woodland Hills Mall
and the June 1999 acquisition of Century City as if they had been in the
portfolio for the entire period) increased 4.0% to $697.3 million in the
three months ended September 30, 1999 from $670.7 million in the three
months ended September 30, 1998. Mall tenant sales (excluding anchors and
movie theaters) (excluding Citrus Park Town Center and including the
December 1998 acquisition of Woodland Hills Mall and the June 1999
acquisition of Century City as if they had been in the portfolio for the
entire period) increased 4.3% to $519.0 million in the three months ended
September 30, 1999 from $497.4 million in the same period for 1998.
Comparable reported mall tenant sales increased 4.1% in the nine months
ended September 30, 1999 compared to the same period for 1998. Sales per
square foot for the rolling twelve months ended September 30, 1999 were
$397 compared to $380 for the twelve months ended September 30, 1998. All
sales per square foot figures exclude Citrus Park Town Center which opened
on March 3, 1999.

OCCUPANCY. The mall GLA was 91.4% occupied at September 30, 1999 as
compared to 93.3% at December 31, 1998 and 90.9% at September 30, 1998.
The mall GLA was 93.4% leased at September 30, 1999.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1998

Shopping center revenues increased $28.0 million to $170.7 million in
the nine months ended September 30, 1999 from $142.7 million in the nine
months ended September 30, 1998. This increase was primarily a result of
(i) the opening of Citrus Park Town Center on March 3, 1999, (ii) the
acquisition of Century City on June 10, 1999, and (iii) increases in
shopping center revenues at Oakbrook Center and Old Orchard Center.

Shopping center expenses, including depreciation and amortization,
increased $13.1 million to $97.6 million in the nine months ended
September 30, 1999 from $84.5 million in the same period for 1998. This
increase was primarily a result of (i) the opening of Citrus Park Town
Center on March 3, 1999 and (ii) the acquisition of Century City Shopping
Center on June 10, 1999.

Mortgage and other interest increased $11.0 million to $43.4 million
in the nine months ended September 30, 1999 from $32.4 million in the same
period for 1998. This increase was primarily the result of (i) fundings on
the loans at Citrus Park Town Center, (ii) debt incurred in connection with
the acquisition of Century City on June 10, 1999, and (iii) the new
mortgage obtained by the Company at Penn Square Mall.

Income from unconsolidated partnerships increased $1.3 million to $8.7
million in the nine months ended September 30, 1999 from $7.4 million in
the same period for 1998. This increase was primarily attributable to the
Company's acquisition of a 50% equity interest in Woodland Hills Mall on
December 21, 1998 and increases at Water Tower Place and San Francisco
Shopping Centre. The increase at Water Tower Place was primarily due to a
decrease in mortgage interest as a result of a decrease in the floating
interest rate. The increase at San Francisco Shopping Centre was due to
increased minimum rents as a result of the re-merchandising of tenants.

<PAGE>

Income from the Management Company increased $1.1 million to $.3
million from a $.8 million loss in the nine months ended September 30,
1998. This increase was primarily attributable to a decrease in mortgage
interest as a result of the restructuring of debt at the Management
Company.

Other gains of $.6 million for the nine months ended September 30,
1999 represents the gain on sale of an outparcel of land at Wolfchase
Galleria.

The extraordinary items (net of taxes and minority interest) of $1.6
million in 1999 resulted from the prepayment penalty and the write-off of
deferred expenses related to the repayment of debt at the Management
Company and the write-off of deferred expenses related to the repayment of
the construction loan at Citrus Park Town Center.

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1998

Shopping center revenues increased $14.2 million to $63.0 million in
the three months ended September 30, 1999 from $48.8 million in the three
months ended September 30, 1998. This increase was primarily a result of
(i) the opening of Citrus Park Town Center on March 3, 1999, (ii) the
acquisition of Century City on June 10, 1999 and (iii) increases in
shopping center revenues at Oakbrook Center.

Shopping center expenses, including depreciation and amortization,
increased $6.3 million to $35.3 million in the three months ended
September 30, 1999 from $29.0 million in the same period for 1998. This
increase was primarily a result of (i) the opening of Citrus Park Town
Center on March 3, 1999 and (ii) the acquisition of Century City on
June 10, 1999.

Mortgage and other interest increased $6.3 million to $17.2 million in
the three months ended September 30, 1999 from $10.9 million in the same
period for 1998. This increase was primarily the result of (i) funding on
the permanent mortgage at Citrus Park Town Center, (ii) debt incurred in
connection with the acquisition of Century City on June 10, 1999, and (iii)
the new mortgage obtained by the Company at Penn Square Mall.

Other gains of $.6 million for the three months ended September 30,
1999 represents the gain on sale of an outparcel of land at Wolfchase
Galleria.

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("Statement 133"), was
issued by the FASB in June 1998. Statement of Financial Accounting
Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133, an
Amendment of FASB Statement No. 133" ("Statement 137"), was issued in June
1999. Statement 137 defers the effective date of Statement 133 for one
year. Statement 133, as amended, is now effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000. The effective date of
this statement for the Company is January 1, 2001. Statement 133
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts. Under the standard,
entities will be required to carry all derivative instruments in the
balance sheet at fair value. The accounting for changes in the fair value
(i.e., gains or losses) of a derivative instrument depends on whether it
has been designated and qualifies as part of a hedging relationship and, if
so, on the reason for holding it. The Company uses interest rate swap
agreements and treasury locks as part of its interest rate risk management
strategy. These derivatives are used to hedge cash flow exposure and under

<PAGE>

Statement 133 the effective portion of the gain or loss on the derivative
instrument will be reported initially as a component of other comprehensive
income (outside earnings) and subsequently reclassified into earnings when
the hedged transaction affects earnings. Any amounts excluded from the
assessment of hedge effectiveness as well as the ineffective portion of the
gain or loss will be reported in earnings immediately.

The Company does not anticipate early adoption of Statement 133, as
amended; however, it is estimated that adoption of Statement 133, as
amended, will result in the Company recording a derivative instrument asset
of $3.4 million and transition adjustment income of $3.4 million in other
comprehensive income at January 1, 2001.

The Company expects that the adoption of Statement 133 will increase
the volatility of reported earnings and other comprehensive income. In
general, the amount of volatility will vary with the level of derivative
activities during any period.

YEAR 2000

The Company uses a significant number of information technology ("IT")
and non-IT computer systems in its operations. The IT systems include the
Company's corporate operating and accounting systems, central lease entry
and property management systems, desktop and communications systems and
other corporate systems. The non-IT systems include embedded
microprocessors that control building systems, such as lighting, security,
fire, elevators, heating, ventilating and air conditioning systems.

In 1997, the Company began to address the year 2000 problem (that is,
the fact that some systems may fail or produce inaccurate results using
dates in or around the year 2000). The Company has replaced all of its
mission-critical IT systems, including its central lease entry and property
management software, key communications and desktop software and the
related computer hardware. The Company believes, based on statements by
vendors and on its own testing, that all of the replacements for mission-
critical IT systems are year 2000 ready. The Company also is continuing to
replace other IT systems which are not mission critical with year 2000
ready systems to the extent that it is cost-effective to do so.

The Company's property management staff has conducted an inventory and
assessment of the non-IT systems at its properties and is seeking
confirmation from the relevant vendors that these non-IT systems are year
2000 ready. The Company has begun, and is continuing, to replace critical
non-IT systems that the Company believes may not be year 2000 ready. The
Company believes that its properties currently are substantially year 2000
ready and that systems which are not yet year 2000 ready will be ready
prior to year end. However, the Company does not have the technical
capacity to test all of the non-IT systems at all of its properties.

The Company relies on a variety of outside suppliers to provide
critical services to its properties. Of particular concern are the local
utility providers. Electric utilities, for example, use numerous embedded
systems in producing, measuring, controlling, and dispensing electricity.
Without electricity, almost none of the systems at any property will
function and the property may be unable to operate. The Company does not
control these outside suppliers and for some suppliers, such as the
utilities, there may be no feasible alternative supplier available. The
failure of a utility or other supplier could have a material adverse effect
on the operations of the affected property, and a widespread failure of
utilities or other suppliers could have a material adverse effect on the
Company.

<PAGE>

The Company has developed and will continue to refine contingency
plans to address the risk created by the year 2000 problem. These plans
generally include having property management personnel on-site at the
properties during the year change to handle year 2000 problems as they
arise by using the methods that the Company's property management staff
customarily uses to address failures of systems and suppliers. The
contingency plans also include procuring alternative suppliers, when
available, where the Company is able to conclude, on the basis of its
inventory and assessment, that an existing supplier will not be year 2000
ready.

The Company's historical costs for remediation have not been material
and the Company does not anticipate that its future costs of remediation
will be material. Although the cost of replacing the Company's IT mission-
critical systems was substantial, those replacements were made to improve
operational efficiency and were not accelerated due to the year 2000
problem. The Company has not delayed any material projects as a result of
the year 2000 problem.

The foregoing discussion is equally applicable to the Management
Company, except that at third party-owned properties managed by the
Management Company both the historical and any necessary future remediation
costs are the obligation of the property owner and the replacement of any
non-IT systems located upon such properties are at the discretion of the
property owner.

FORWARD LOOKING STATEMENTS

Certain statements set forth herein contain forward-looking
statements, including, without limitation, statements relating to the
timing and anticipated capital expenditures of the Company's development
programs and acquisitions. Although the Company believes that the
expectations reflected in such forward-looking statements are based on
reasonable assumptions, the actual results may differ materially from that
set forth in the forward-looking statements. Certain factors that might
cause such differences include general economic conditions, local real
estate conditions, construction delays due to the unavailability of
construction materials, weather conditions or other delays beyond the
control of the Company. Consequently, such forward-looking statements
should be regarded solely as reflections of the Company's current operating
and development and acquisition plans and estimates. These plans and
estimates are subject to revision from time to time as additional
information becomes available, and actual results may differ from those
indicated in the referenced statements.

<PAGE>

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

4.1 Stock Certificate is hereby incorporated by reference to
Exhibit 4.1 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993

4.2 Credit Agreement among Urban Shopping Centers, L.P., Union
Bank of Switzerland (New York Branch), Morgan Guaranty Trust Company of New
York and the several Lenders is hereby incorporated by reference to Exhibit
4.11 to the Registrant's Form 10-Q (File No. 1-12278) filed on November 9,
1995

4.3 Mortgage, Security Agreement, Assignment of Leases and Rents
and Fixture Filing dated as of February 10, 1997 made by LaSalle National
Trust, N.A. and Water Tower Joint Venture to and with Lehman Brothers
Holdings Inc. is hereby incorporated by reference to Exhibit 4.8 to the
Registrant's Form 10-Q (File No. 1-12278) filed on May 13, 1997

4.4 Promissory Note A dated as of February 10, 1997 by and
between Water Tower Joint Venture and Lehman Brothers Holdings Inc. is
hereby incorporated by reference to Exhibit 4.9 to the Registrant's Form
10-Q (File No. 1-12278) filed on May 13, 1997

4.5 Promissory Note B dated as of February 10, 1997 by and
between Water Tower Joint Venture and Lehman Brothers Holdings Inc. is
hereby incorporated by reference to Exhibit 4.10 to the Registrant's Form
10-Q (File No. 1-12278) filed on May 13, 1997

4.6 Mortgage, Security Agreement and Assignment of Rents dated as
of November 3, 1997 made by LaSalle National Bank and Oak Brook Urban
Venture, L.P. to and with USC Oakbrook, Inc., Goldman Sachs Mitsui Marine
Derivative Products, L.P. and Teachers' Retirement System of the State of
Illinois is hereby incorporated by reference to Exhibit 4.6 to the
Registrant's Form 10-K (File no. 1-12278) filed on March 31, 1998

4.7 Fifth Amendment to Loan Agreement dated December 11, 1997 by
and among The Prudential Insurance Company of America, Old Orchard Urban
Limited Partnership and American National Bank and Trust Company of Chicago
is hereby incorporated by reference to Exhibit 4.7 to the Registrant's Form
10-K (File No. 1-12278) filed on March 31, 1998

10.1 Second Amended and Restated Agreement of Limited Partnership
of Urban Shopping Centers, L.P. is hereby incorporated by reference to
Exhibit 10.1 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993

10.2 Corporate Services Agreement among the Registrant, Urban
Shopping Centers, L.P. and JMB Retail Properties Co. (now Urban Retail
Properties Co.) is hereby incorporated by reference to Exhibit 10.3 to the
Registrant's Form 10-Q (File No. 1-12278) filed on November 19, 1993

10.3 JMB Realty Corporation Employee Savings Plan is hereby
incorporated by reference to Exhibit 10.4 to the Registrant's Registration
Statement on Form S-11 (No. 33-64488)

<PAGE>

10.4 Retirement Plan for Employees of Amfac, Inc. and Subsidiaries
is hereby incorporated by reference to Exhibit 10.5 to the Registrant's
Registration Statement on Form S-11 (No. 33-64488)

10.5 Urban Shopping Centers 1993 Option Plan is hereby
incorporated by reference to Exhibit 10.6 to the Registrant's Form 10-Q
(File No. 1-12278) filed on November 19, 1993

10.6 Non-Competition Agreement between JMB Realty Corporation and
the Registrant is hereby incorporated by reference to Exhibit 10.7 to the
Registrant's Form 10-Q (File No. 1-12278) filed on November 19, 1993

10.7 Non-Competition Agreement between JMB Institutional Realty
Corporation and the Registrant is hereby incorporated by reference to
Exhibit 10.8 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993

10.8 Non-Competition Agreement between Neil G. Bluhm and the
Registrant is hereby incorporated by reference to Exhibit 10.9 to the
Registrant's Form 10-Q (File No. 1-12278) filed on November 19, 1993

10.9 Non-Competition Agreement between Judd D. Malkin and the
Registrant is hereby incorporated by reference to Exhibit 10.10 to the
Registrant's Form 10-Q (File No. 1-12278) filed on November 19, 1993

10.10 Omnibus Agreement among Urban Shopping Centers, L.P., JMB
Properties Company, JMB Retail Properties Co. (now Urban Retail Properties
Co.) and the Registrant is hereby incorporated by reference to Exhibit
10.12 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993

10.11 Indemnification Agreement between the Registrant and its
Directors and Officers is hereby incorporated by reference to Exhibit 10.13
to the Registrant's Form 10-Q (File No. 1-12278) filed on November 19, 1993

10.12 Registration Rights and Lock-Up Agreement between the
Registrant and certain Investors is hereby incorporated by reference to
Exhibit 10.14 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993

10.13 Stockholders Agreement between Center Partners, Ltd., Urban
Investment & Development Co., Urban-Water Tower Associates, JMB/Miami
Investors, L.P., Island Holidays, Ltd., Celtic Funding Corporation and the
Registrant is hereby incorporated by reference to Exhibit 10.15 to the
Registrant's Form 10-Q (File No. 1-12278) filed on November 19, 1993

10.14 Lease Agreement, dated December 31, 1990, by and between
Teachers' Retirement System of the State of Illinois and LaSalle National
Trust, N.A., as Trustee for Oakbrook Urban Venture, as amended by the First
Amendment to Lease Agreement and to Restated and Amended Memorandum of
Lease is hereby incorporated by reference to Exhibit 10.16 to the
Registrant's Registration Statement on Form S-11 (No. 33-64488)

10.15 Second Amendment to Lease Agreement by and between Teachers'
Retirement System of the State of Illinois and LaSalle National Trust,
N.A., as Trustee for Oakbrook Urban Venture, L.P. is hereby incorporated by
reference to Exhibit 10.17 to the Registrant's Form 10-Q (File No. 1-12278)
filed on November 19, 1993

<PAGE>

10.16 Net Ground Rental Lease Agreement with respect to Penn Square
Mall, as amended by Amendment of Net Ground Rental Lease and as further
amended by Second Amendment of Net Ground Rental Lease is hereby
incorporated by reference to Exhibit 10.18 to the Registrant's Registration
Statement on Form S-11 (No. 33-64488)

10.17 Ground Lease by and between The Newhall Land and Farming
Company and Valencia Town Center Associates is hereby incorporated by
reference to Exhibit 10.19 to the Registrant's Registration Statement on
Form S-11 (No. 33-64488)

10.18 Restated Employment Agreement between Matthew S. Dominski and
the Registrant is hereby incorporated by reference to Exhibit 10.19 to the
Registrant's Form 10-K (File No. 1-12278) filed on March 25, 1994

10.19 Third Amendment to Lease Agreement by and between Teachers'
Retirement System of the State of Illinois and LaSalle National Trust,
N.A., as Trustee for Oakbrook Urban Venture, L.P. is hereby incorporated by
reference to Exhibit 10.20 to the Registrant's Form 10-K (File No. 1-12278)
filed on March 25, 1994

10.20 First Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban Shopping Centers, L.P. is hereby incorporated
by reference to Exhibit 10.21 to the Registrant's Form 10-Q (File No. 1-
12278) filed on August 9, 1995

10.21 First and Second Amendments to Urban Shopping Centers 1993
Option Plan are hereby incorporated by reference to Exhibit 10.22 to the
Registrant's Form 10-Q (File No. 1-12278) filed on August 9, 1995

10.22 Urban Shopping Centers 1996 Incentive Unit Program is hereby
incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K
filed on November 25, 1996

10.23 Second Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban Shopping Centers, L.P. is hereby incorporated
by reference to Exhibit 10.23 to the Registrant's Form 10-K (File No. 1-
12278) filed on March 31, 1997

10.24 Agreement for Purchase and Sale of Partnership Interest by
and between ZML-00 Associates Limited Partnership, Urban Shopping Centers,
L.P., USC Old Orchard, Inc., and H. Rigel Barber, Gary A. Nickele and
Jeffery A. Gluskin, as owner trustees of the Old Orchard Trust, is hereby
incorporated by reference to Exhibit 10.24 to the Registrant's Form 10-K
(File No. 1-12278) filed on March 31, 1997

10.25 Amended and Restated Agreement of Limited Partnership of Old
Orchard Urban Limited Partnership by and between USC Old Orchard, Inc. and
Urban Shopping Centers, L.P. is hereby incorporated by reference to Exhibit
10.25 to the Registrant's Form 10-K (File No. 1-12278) filed on March 31,
1997

10.26 Third Amendment to Urban Shopping Centers 1993 Option Plan is
hereby incorporated by reference to Exhibit 10.26 to the Registrant's Form
10-Q (File No. 1-12278) filed on May 13, 1997

<PAGE>

10.27 Hawthorn, L.P. Agreement of Purchase and Sale of Partnership
Interest dated November 14, 1997 is hereby incorporated by reference to
Exhibit 10.1 to the Registrant's Form 8-K/A filed on December 22, 1997

10.28 Fox Valley Mall LLC Agreement of Purchase and Sale of
Membership Interest dated November 14, 1997 is hereby incorporated by
reference to Exhibit 10.2 to the Registrant's Form 8-K/A filed on December
22, 1997

10.29 Third Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban Shopping Centers, L.P. is hereby incorporated
by reference to Exhibit 10.7 to the Registrant's Form 8-K/A filed on
December 22, 1997

10.30 Urban Shopping Centers Deferred Cash Compensation Plan dated
August 1, 1998 is hereby incorporated by reference to Exhibit 10.30 to the
Registrant's Form 10-K (File No. 1-12278) filed on March 29, 1999

10.31 Fourth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban Shopping Centers, L.P. is hereby incorporated
by reference to Exhibit 10.31 to the Registrant's Form 10-K (File No. 1-
12278) filed on March 29, 1999

10.32 Contribution Agreement dated June 10, 1999 among KPLP,
Century City Mall, LLC, a Delaware limited liability company, Urban LP, and
Chicago Deferred Exchange Corporation is hereby incorporated by reference
to Exhibit 10.1 to the Registrant's Form 8-K filed on June 16, 1999

10.33 Agreement of Purchase and Sale dated June 10, 1999 between
RREEF and USC Century, Inc. is hereby incorporated by reference to Exhibit
10.2 to the Registrant's Form 8-K filed on June 16, 1999

10.34 Registration Rights Agreement dated June 10, 1999 among KPLP,
Urban and Urban LP is hereby incorporated by reference to Exhibit 10.3 to
the Registrant's Form 8-K filed on June 16, 1999

10.35 Fifth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban LP dated May 27, 1999 is hereby incorporated
by reference to Exhibit 10.4 to the Registrant's Form 8-K filed on June 16,
1999

10.36 Registration Rights Agreement dated May 27, 1999 between
Urban and the unit holder named therein is hereby incorporated by reference
to Exhibit 10.5 to the Registrant's Form 8-K filed on June 16, 1999

10.37 Sixth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban LP dated October 1, 1999 is hereby filed
herewith

27.1 Financial Data Schedule

--------------------

Although certain additional long-term debt instruments of the
Registrant have been excluded from Exhibit 4 above, pursuant to Rule
601(b)(4)(iii), the Registrant commits to provide copies of such agreements
to the Securities and Exchange Commission upon request.

(b) Form 8-K/A dated June 10, 1999 was filed during the third
quarter 1999.

<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to interest rate changes primarily as a result
of its indebtedness. The Company's interest rate risk management objective
is to limit the impact of interest rate changes on earnings and cash flows
and to lower its overall borrowing costs. To achieve its objective, the
Company may enter into derivative financial instruments such as interest
rate swaps, caps and treasury locks in order to mitigate its interest rate
risk on a related financial instrument. Because of the Company's
objectives discussed above, the Company limits its exposure to increases in
interest rates; however, the Company also does not benefit fully from
decreases in interest rates. Furthermore, as interest rates increase and
decrease, the implicit value of the derivative instrument rises and falls,
respectively. This rise and fall in the implicit value of an interest rate
swap agreement does not impact the fixed payment agreed to under the swap
agreement. The Company does not enter into derivative or interest rate
transactions for speculative purposes.

The Company manages its exposure to changes in floating interest rates
by limiting exposure to floating rate changes in any one year. The Company
manages liquidity risk by staggering the maturities of its indebtedness.
The Company increases its financial flexibility through the use of variable
rate debt and derivatives versus fixed rate debt. The Company manages its
exposure to counterparties by diversifying its exposure to counterparties
and entering into swap agreements and treasury locks only with certain
parties which have a specified credit rating.

The Company's interest rate risk is monitored using a variety of
techniques. Fixed rate debt matures and bears average interest rates as
follows: 2000 - $26,650 at 7.40%; 2003 - $18,426 at 6.91%; and thereafter
- - $849,663 at 7.12%. Variable rate debt matures and bears average interest
rates (based on the September 30, 1999 LIBOR rate) as follows: 2000 -
$276,400 at 6.55%; 2003 - $26,766 at 6.21%; and thereafter - $159,000 at
5.93%.

The Company utilizes principally variable-to-fixed interest rate swaps
to mitigate its interest rate risk on the above variable rate debt.
Notional amounts of outstanding interest rate swaps have the following
maturities and provide for the following average fixed payment rates to
hedge the indicated underlying variable rates: 2000 - $39,000 at 6.90% and
6.75%; 2002 - $63,500 at 6.75% and 7.37%; 2003 - $10,000 at 6.72% and
7.41%; and thereafter - $256,766 at 5.98% and 6.51%.

The above average balances include the Company's share of
unconsolidated partnership's debt and swaps. The fair value of fixed and
variable rate debt approximates its carrying value at September 30, 1999.
The fair value of interest rate swap agreements was $5,292 at September 30,
1999.

As the above information incorporates only those exposures that exist
as of September 30, 1999, it does not consider those exposure or positions,
which could arise after that date. Moreover, because firm commitments are
not presented, the information represented therein has limited predictive
value. As a result, the Company's ultimate realized gain or loss with
respect to interest rate fluctuations will depend on the exposures that
arise during the period, the Company's hedging strategies at the time and
interest rates.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

URBAN SHOPPING CENTERS, INC.

By: ADAM S. METZ
Executive Vice President, Chief
Financial Officer, Treasurer,
Director of Acquisitions and Chief
Accounting Officer
Date: November 12, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.

ADAM S. METZ
Executive Vice President, Chief
Financial Officer, Treasurer,
Director of Acquisitions and Chief
Accounting Officer
Date: November 12, 1999

<ARTICLE> 5

<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999

<CASH> 20,781
<SECURITIES> 0
<RECEIVABLES> 16,740
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,521
<PP&E> 1,700,200
<DEPRECIATION> 194,234
<TOTAL-ASSETS> 1,752,105
<CURRENT-LIABILITIES> 69,433
<BONDS> 1,064,154
<COMMON> 176
0
38
<OTHER-SE> 313,761
<TOTAL-LIABILITY-AND-EQUITY> 1,752,105
<SALES> 170,678
<TOTAL-REVENUES> 171,263
<CGS> 0
<TOTAL-COSTS> 61,141
<OTHER-EXPENSES> 45,923
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,414
<INCOME-PRETAX> 14,012
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,012
<DISCONTINUED> 0
<EXTRAORDINARY> 1,618
<CHANGES> 0
<NET-INCOME> 12,394
<EPS-BASIC> .69
<EPS-DILUTED> .68

</TABLE>

EXHIBIT 10.37
- -------------

SIXTH AMENDMENT
TO
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
URBAN SHOPPING CENTERS, L.P.

This Sixth Amendment (this "Amendment") to the Second Amended
and Restated Agreement of Limited Partnership, dated as of October 14, 1993
(as amended through the date hereof, the "Partnership Agreement"), of Urban
Shopping Centers, L.P., an Illinois limited partnership (the
"Partnership"), is made as of the 1st day of October, 1999 by Urban
Shopping Centers, Inc., a Maryland corporation, as general partner (the
"General Partner"), with the consent of the Persons whose names are set
forth on Exhibit A to the Partnership Agreement, as Limited Partners (the
"Limited Partners"), and the undersigned Limited Partner that is being
admitted to the Partnership on the date hereof.

WHEREAS, the Partnership is an Illinois limited partnership
existing under the Illinois Revised Uniform Limited Partnership Act (the
"Act") pursuant to the Partnership Agreement;

WHEREAS, the General Partner and the Limited Partners desire to
amend the Partnership Agreement to create a class of Series D Cumulative
Redeemable Preferred Units (the "Series D Preferred Units") and to set
forth the rights, powers, duties and preferences of the Series D Preferred
Units;

NOW THEREFORE, pursuant to the authority contained in Section
14.1.3 of the Partnership Agreement, the General Partner and the Limited
Partners hereby amend the Partnership Agreement as follows:

SECTION 1. DEFINED TERMS. Capitalized terms used in this Amendment
and not otherwise defined herein shall have the meaning assigned thereto in
the Partnership Agreement.

SECTION 2. AMENDMENTS. Effective as of the date hereof, the
Partnership Agreement is hereby amended as follows:

(a) Section 4.2 of the Partnership Agreement is amended by
adding the following new subsection 4.2.10 at the end thereof:

"4.2.10 Issuance of Series D Preferred Units.

4.2.10.1 Designation and Number. A series of Partnership
Units in the Partnership designated as the "9.45% Series D Cumulative
Redeemable Preferred Units" (the "Series D Preferred Units") is hereby
established. The number of Series D Preferred Units shall be 3,400,000.
The Series D Preferred Units shall be Limited Partnership Interests and
shall be a separate class thereof.

4.2.10.2 Rank. The Series D Preferred Units shall, with
respect to distributions and rights upon voluntary or involuntary
liquidation, winding-up or dissolution of the Partnership, rank senior to
all other classes or series of Partnership Interests now or hereafter
authorized, issued or outstanding, other than any class or series of
Partnership Interests now or hereafter authorized and issued and expressly
designated in accordance with the Partnership Agreement as ranking on a
parity with or senior to the Series D Preferred Units with respect to
distributions or rights upon voluntary or involuntary liquidation, winding-
up or dissolution of the Partnership, or both. Prior to the sale of all or

<PAGE>

substantially all of the Old Orchard shopping mall, the Preferred Units
shall rank (i) senior with respect to Available Cash which is derived from
or attributable to the Old Orchard shopping mall and (ii) junior with
respect to all other Available Cash, to the Series D Preferred Units and
all other Parity Preferred Units with respect to distributions. Unless the
Partnership shall have sold all or substantially all of the Old Orchard
shopping mall prior to an Event of Dissolution, the Preferred Units shall
rank (i) senior with respect to liquidation proceeds which are derived from
or attributable to the liquidation of the Old Orchard shopping mall and
(ii) junior with respect to all other liquidation proceeds from the
Partnership with respect to rights upon liquidation, winding-up or
dissolution of the Partnership. The Series D Preferred Units rank on a
parity, with respect to distributions and rights upon voluntary or
involuntary liquidation, winding-up or dissolution of the Partnership, with
the Series A Preferred Units, the Series B Preferred Units, the Series C
Preferred Units and, after the sale of all or substantially all of the Old
Orchard shopping mall (if such sale occurs prior to an Event of
Dissolution), the Preferred Units of the Partnership. As used in this
subsection 4.2.10, the following terms are defined as follows:

"Articles Supplementary" shall mean the Articles Supplementary
for the Series D Cumulative Redeemable Preferred Stock of the General
Partner.

"Contribution Agreement" shall mean the Contribution Agreement
between Partnership, General Partner, Belcrest Realty Corporation and
Belair Real Estate Corporation, dated as of the date hereof.

"Parity Preferred Units" shall be used to refer to any class or
series of Partnership Interests of the Partnership now or hereafter
authorized, issued or outstanding that are expressly designated by the
Partnership to rank on a parity with Series D Preferred Units with respect
to distributions or rights upon voluntary or involuntary liquidation,
winding-up or dissolution of the Partnership, or both, whether or not the
distribution rates, distribution payment dates or redemption or liquidation
prices per unit or conversion rights or exchange rights shall be different
from those of the Series D Preferred Units, and shall include, without
limitation, the Series A Preferred Units, the Series B Preferred Units and
the Series C Preferred Units and, after a sale of all or substantially all
of the Old Orchard shopping mall (if such sale occurs prior to an Event of
Dissolution), the Preferred Units of the Partnership.

"Priority Return" shall mean, with respect to the Series D
Preferred Units, an amount equal to 9.45% per annum, determined on the
basis of a 360 day year of twelve 30 day months (and for any period shorter
than a full quarterly period for which distributions are computed, the
amount of the distribution payable shall be computed based on the ratio of
the actual number of days elapsed in such period to 90 days), cumulative to
the extent not distributed for any given distribution period pursuant to
Section 5.1 of the Partnership Agreement, of the Stated Value of the
Series D Preferred Units, commencing on the date of issuance of such
Series D Preferred Units, and, with respect to the other Parity Preferred
Units, the amount set forth in the respective amendment of the Partnership
Agreement establishing the terms of such other Parity Preferred Units.

"PTP" shall mean a "publicly traded partnership" within the
meaning of Section 7704 of the Code.

"Senior Preferred Units" shall be used to refer to any class or
series of Partnership Interests of the Partnership hereafter authorized,
issued or outstanding that are expressly designated by the Partnership to
rank senior to Series D Preferred Units with respect to distributions and
rights upon voluntary or involuntary liquidation, winding-up or dissolution
of the Partnership, whether or not the distribution rates, distribution
payment dates or redemption or liquidation prices per unit or conversion
rights or exchange rights shall be different from those of the Series D
Preferred Units.

<PAGE>

"Stated Value" shall mean, with respect to the Series D
Preferred Units, an amount equal to the original Capital Contribution per
Series D Preferred Unit of $25.00, and, with respect to the other Parity
Preferred Units, the amounts set forth in the respective amendment of the
Partnership Agreement establishing the terms of such other Parity Preferred
Units.

4.2.10.3 Distributions.

(a) Payment of Distributions. Subject to the rights of holders of
Senior Preferred Units and Parity Preferred Units, if any, holders of
Series D Preferred Units shall be entitled to receive, when, as and if
authorized and declared by the Partnership acting through the General
Partner, out of Available Cash, cumulative preferential cash distributions
at the rate per annum of 9.45% of the Stated Value of the Series D
Preferred Units. Distributions shall be cumulative, shall accrue from the
original date of issuance and all distributions accrued to the scheduled
date of payment shall be payable in cash (i) quarterly (such quarterly
periods for purposes of payment and accrual will be the quarterly periods
ending on and including the dates specified in this sentence and not
calendar year quarters) in arrears, on March 15, June 15, September 15 and
December 15 of each year commencing on December 15, 1999 (with the first
such payment to include the amount accrued from the period commencing
October 1, 1999 and ending December 15, 1999) and, (ii) in the event of (A)
an exchange of Series D Preferred Units into Series D Cumulative Redeemable
Preferred Stock of the General Partner (the "Series D Preferred Stock"), or
(B) a redemption of Series D Preferred Units, on the exchange date or
redemption date, as applicable (each a "Preferred Unit Distribution Payment
Date"). The amount of the distribution payable for any period shall be
computed on the basis of a 360-day year of twelve 30-day months, and the
amount of the distribution payable on the initial Preferred Unit
Distribution Payment Date and for any period shorter than a full quarterly
period for which distributions are computed shall be computed based on the
ratio of the actual number of days elapsed in such quarterly period to 90
days. If any date on which distributions are to be made on the Series D
Preferred Units is not a Business Day, then payment of the distribution to
be made on such date shall be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on
such date. Distributions on the Series D Preferred Units shall be made to
the holders of record of the Series D Preferred Units on the relevant
record dates to be fixed by the Partnership acting through the General
Partner, which record dates shall be not more than 60 days prior to the
relevant Preferred Unit Distribution Payment Date (each, a "Preferred Unit
Partnership Record Date").

(b) Limitation on Distributions. No distribution on the Series D
Preferred Units shall be declared or paid or set apart for payment by the
Partnership at such time as the terms and provisions of any agreement of
the Partnership relating to its indebtedness (other than any agreement with
a holder of Partnership Interests or an Affiliate thereof), prohibit such
declaration, payment or setting apart for payment or provide that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration, payment or setting
apart for payment shall be restricted or prohibited by law. Nothing in
this Section 4.2.10.3(b) shall be deemed to modify or in any manner limit
the provisions of Sections 4.2.10.3(c) or 4.2.10.3(d).

<PAGE>

(c) Distributions Cumulative. Distributions on the Series D
Preferred Units shall accrue whether or not (i) the terms and provisions of
any agreement of the Partnership, including any agreement relating to its
indebtedness at any time prohibit the current payment of distributions,
(ii) the Partnership has earnings, (iii) there are funds legally available
for the payment of such distributions and (iv) such distributions are
authorized and declared. Accrued but unpaid distributions on the Series D
Preferred Units shall accumulate as of the Preferred Unit Distribution
Payment Date on which they first become payable. Distributions on account
of arrears for any past distribution periods may be declared and paid at
any time, without reference to a regular Preferred Unit Distribution
Payment Date to holders of record of the Series D Preferred Units on the
record date fixed by the Partnership acting through the General Partner
which date shall be not more than 45 days prior to the payment date.
Accumulated and unpaid distributions shall not bear interest.

(d) Priority as to Distributions. (i) So long as any Series D
Preferred Units are outstanding, no distribution of cash or other property
shall be authorized, declared, paid or set apart for payment on or with
respect to any class or series of Partnership Interests of the Partnership
ranking junior to the Series D Preferred Units with respect to
distributions, including, without limitation, the Class B Units
(collectively, "Junior Units"), nor shall any cash or other property be set
aside for or applied to the purchase, redemption or other acquisition for
consideration of any Series D Preferred Units, any Parity Preferred Units
with respect to distributions or any Junior Units (other than Junior Units
for purposes of an employee incentive or benefit plan of the Partnership,
the General Partner or any of their respective Subsidiaries), unless, in
each case, all distributions accumulated and payable on all Series D
Preferred Units and all classes and series of outstanding Parity Preferred
Units with respect to distributions have been paid in full or declared and
irrevocably deposited in trust for immediate payment. Without limiting
Section 4.2.10.6 hereof, the foregoing sentence shall not prohibit (A)
distributions payable solely in Junior Units or in options, warrants or
rights to subscribe or purchase Junior Units, (B) the conversion of Junior
Units or Parity Preferred Units into Junior Units, or (C) the redemption of
Partnership Interests pursuant to the Partnership Agreement to the extent
required to preserve the General Partner's status as a real estate
investment trust.

(ii) So long as distributions have not been paid in full (or a sum
sufficient for such full payment is not irrevocably deposited in trust for
immediate payment) upon the Series D Preferred Units, all distributions
authorized and declared on the Series D Preferred Units and all classes or
series of outstanding Parity Preferred Units with respect to distributions
shall be authorized and declared so that the amount of distributions
authorized and declared per Series D Preferred Unit and such other classes
or series of Parity Preferred Units shall in all cases bear to each other
the same ratio that accrued distributions per Series D Preferred Unit and
such other classes or series of Parity Preferred Units (which shall not
include any accumulation in respect of unpaid distributions for prior
distribution periods if such class or series of Parity Preferred Units does
not have cumulative distribution rights) bear to each other.

(e) No Further Rights. Holders of Series D Preferred Units shall
not be entitled to any distributions, whether payable in cash, units, other
property or otherwise, in excess of the full cumulative distributions
described herein.

<PAGE>

4.2.10.4 Liquidation Preference.

(a) Payment of Liquidating Distributions. Subject to the rights of
holders of Senior Preferred Units and Parity Preferred Units with respect
to rights upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Partnership, the holders of Series D Preferred Units
shall be entitled to receive out of the assets of the Partnership legally
available for distribution or the proceeds thereof, after payment or
provision for debts and other liabilities of the Partnership, but before
any payment or distributions of the assets shall be made to holders of
units that rank junior to the Series D Preferred Units with respect to
rights upon liquidation, dissolution or winding-up of the Partnership, an
amount equal to the sum of (i) a liquidation preference equal to their
positive Capital Account balances determined after taking into account all
Capital Account adjustments for the Partnership taxable year in which the
liquidation occurs (other than those made as a result of the liquidating
distribution set forth in this Section 4.2.10.4) and (ii) any accumulated
and unpaid Priority Return thereon, whether or not authorized or declared,
to the date of payment. If, upon such voluntary or involuntary
liquidation, dissolution or winding-up, there are insufficient assets to
permit full payment of liquidating distributions to the holders of Series D
Preferred Units and any Parity Preferred Units with respect to rights upon
liquidation, dissolution or winding-up of the Partnership, all payments of
liquidating distributions on the Series D Preferred Units and such Parity
Preferred Units shall be made so that the payments on the Series D
Preferred Units and such Parity Preferred Units shall in all cases bear to
each other the same ratio that the respective rights of the Series D
Preferred Units and such other Parity Preferred Units (which shall not
include any accumulation in respect of unpaid distributions for prior
distribution periods if such Parity Preferred Units do not have cumulative
distribution rights) upon liquidation, dissolution or winding-up of the
Partnership bear to each other.

(b) Notice. Written notice of any such voluntary or involuntary
liquidation, dissolution or winding-up of the Partnership, stating the
payment date or dates when, and the place or places where, the amounts
distributable in such circumstances shall be payable, shall be given by
first class mail, postage pre-paid, not less than 30 and not more than 60
days prior to the payment date stated therein, to each record holder of the
Series D Preferred Units at the respective addresses of such holders as the
same shall appear on the transfer records of the Partnership.

(c) No Further Rights. After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of
Series D Preferred Units shall have no right or claim to any of the
remaining assets of the Partnership.

(d) Consolidation, Merger or Certain Other Transactions. The
voluntary sale, conveyance, lease, exchange or transfer (for cash, shares
of stock, securities or other consideration) of all or substantially all of
the property or assets of the General Partner or the Partnership to, or the
consolidation or merger or other business combination of the General
Partner or the Partnership with or into, any corporation, trust,
partnership, limited liability company or other entity (or of any
corporation, trust, partnership, limited liability company or other entity
with or into the Partnership) or a statutory share exchange of the General
Partner shall not be deemed to constitute a liquidation, dissolution or
winding-up of the Partnership.

4.2.10.5 Optional Redemption.

(a) Right of Optional Redemption. Without limiting Section
4.2.10.8(a)(ii) or (iii), the Series D Preferred Units may not be redeemed
prior to the fifth anniversary of the issuance date. On or after such
date, the Partnership shall have the right to redeem the Series D Preferred

<PAGE>

Units, in whole or in part, at any time or from time to time, upon not less
than 30 nor more than 60 days' written notice, at a redemption price,
payable in cash, equal to the Capital Account balance of the holders of
Series D Preferred Units (the "Redemption Price"); provided, however, that
no redemption pursuant to this Section 4.2.10.5 will be permitted if the
Redemption Price does not equal or exceed the Stated Value per Series D
Preferred Unit and all accrued and unpaid distributions thereon to the
redemption date. If fewer than all of the outstanding Series D Preferred
Units are to be redeemed, the Series D Preferred Units to be redeemed shall
be selected pro rata (as nearly as practicable without creating fractional
units).

(b) Limitation on Redemption. The Partnership may not redeem fewer
than all of the outstanding Series D Preferred Units unless all accumulated
and unpaid distributions have been paid or declared and irrevocably
deposited in trust for immediate payment on all Series D Preferred Units
for all quarterly distribution periods terminating on or prior to the date
of redemption.

(c) Notice of Redemption. Notice of redemption will be mailed by
the Partnership, by certified mail, postage prepaid, not less than 30 nor
more than 60 days prior to the redemption date, addressed to the holders of
record of the Series D Preferred Units to be redeemed at their respective
addresses as they appear on the records of the Partnership. No failure to
give or defect in such notice shall affect the validity of the proceedings
for the redemption of any Series D Preferred Units except as to the holder
to whom such notice was defective or not given. In addition to any
information required by law, each such notice shall state: (i) the
redemption date, (ii) the Redemption Price, (iii) the aggregate number of
Series D Preferred Units to be redeemed and if fewer than all of the
outstanding Series D Preferred Units are to be redeemed, the number of
Series D Preferred Units to be redeemed held by such holder, which number
shall equal such holder's pro rata share (based on the percentage of the
total number of outstanding Series D Preferred Units held by such holder)
of the aggregate number of Series D Preferred Units to be redeemed and
(iv) the place or places where certificates representing such Series D
Preferred Units are to be surrendered for payment of the Redemption Price.

(d) Procedures for Redemption. If the Partnership gives a notice
of redemption in respect of Series D Preferred Units (which notice will be
irrevocable) then the Partnership's obligation to make available the
Redemption Price shall be deemed fulfilled if, on or before the redemption
date, the Partnership pays each holder of Series D Preferred Units in cash
directly or the Partnership deposits irrevocably in trust for the benefit
of the Series D Preferred Units being redeemed funds sufficient to pay the
applicable Redemption Price with irrevocable instructions and authority to
pay such Redemption Price to the holders of the Series D Preferred Units
upon surrender of the Series D Preferred Units by such holders at the place
designated in the notice of redemption. If the Series D Preferred Units
are evidenced by a certificate and if fewer than all Series D Preferred
Units evidenced by any certificate are being redeemed, a new certificate
shall be issued upon surrender of the certificate evidencing all Series D
Preferred Units, evidencing the unredeemed Series D Preferred Units without
cost to the holder thereof. On and after the redemption date, (i)
distributions shall cease to accumulate on the Series D Preferred Units or
portions thereof called for redemption, (ii) such units shall no longer be
deemed to be outstanding and (iii) all rights of the holders thereof as
holders of Series D Preferred Units shall cease (except the right to
receive the Redemption Price and any accumulated and unpaid distributions),
unless the Partnership defaults in the payment thereof. If any date fixed
for redemption of Series D Preferred Units is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such Business

<PAGE>

Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date fixed for redemption. If payment of the
Redemption Price is improperly withheld or not paid by the Partnership,
distributions on such Series D Preferred Units will continue to accumulate
from the original redemption date to the date of payment, in which case the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the applicable Redemption Price. No interest shall
accrue for the benefit of the holders of the Series D Preferred Units to be
redeemed on any cash set aside by the Partnership. Subject to applicable
escheat laws, any cash deposited in trust by the Partnership that is
unclaimed at the end of two years after the redemption date shall revert to
the general funds of the Partnership, after which reversion the holders of
the Series D Preferred Units so called for redemption shall look only to
the general funds of the Partnership for the payment of such cash.

4.2.10.6 Voting Rights. (a) General. Holders of the
Series D Preferred Units shall not have any voting rights or right to
consent to any matter requiring the consent or approval of the Limited
Partners, except as otherwise expressly set forth in the Partnership
Agreement and except as set forth below.

(b) Certain Voting Rights. So long as any Series D Preferred Units
remain outstanding, the Partnership shall not, without the affirmative vote
of the holders of at least two-thirds of the Series D Preferred Units
outstanding at the time (i) (A) authorize or create, or increase the
authorized or issued amount of, any class or series of Partnership
Interests ranking senior to the Series D Preferred Units with respect to
distributions or rights upon liquidation, dissolution or winding-up, or (B)
reclassify any Partnership Interests of the Partnership into any such
senior Partnership Interests, or (C) create, authorize or issue any
obligations or securities convertible into or evidencing the right to
purchase any such senior Partnership Interests, (ii) (A) authorize or
create, or increase the authorized or issued amount of, any Parity
Preferred Units, or (B) reclassify any Partnership Interest into any such
Parity Preferred Units or (C) create, authorize or issue any obligations or
securities convertible into or evidencing the right to purchase any such
Parity Preferred Units, or (iii) either (A) consolidate, merge into or
with, or convey, transfer or lease its assets substantially as an entirety
to, any corporation or other entity or (B) amend, alter or repeal the
provisions of the Partnership Agreement whether by merger, consolidation or
otherwise, in either case in a manner that would materially and adversely
affect the powers, rights, preferences, privileges or voting power of the
Series D Preferred Units or the holders thereof; provided, however, that
(I) with respect to the occurrence of a merger, consolidation or sale or
lease of all of the Partnership's assets as an entirety, so long as (a) the
Partnership is the surviving entity and the Series D Preferred Units remain
outstanding with the terms thereof unchanged, (b) the resulting, surviving
or transferee entity is a partnership, limited liability company or other
pass-through entity organized under the laws of any state and substitutes
for the Series D Preferred Units other preferred units having substantially
the same terms and same rights as the Series D Preferred Units, including
with respect to distributions, voting rights upon liquidation, dissolution
or winding-up or (c) such merger or consolidation occurs after October 1,
2004, then the occurrence of such event shall not be deemed to materially
and adversely affect the powers, rights, preferences, privileges or voting
power of the Series D Preferred Units and no vote of the Series D Preferred
Units shall be required in such case, but, in the case of any merger or
consolidation described in clause (iii)(B)(I)(c) above, unless either
subclause (a) or (b) of clause (iii)(B)(I) is satisfied with respect to
such merger or consolidation, or such merger or consolidation is otherwise
approved by a vote of the holders of at least two-thirds of the Series D
Preferred Units outstanding, the Series D Preferred Units shall be
exchangeable for authorized and previously unissued shares of Series D
Preferred Stock at the Exchange Price (as defined below) and otherwise in

<PAGE>

accordance with the provisions of Section 4.2.10.8; and (II) any increase
in the amount of Partnership Interests or the creation or issuance of any
other class or series of Partnership Interests, in each case ranking either
(y) junior to the Series D Preferred Units with respect to distributions
and rights upon liquidation, dissolution or winding-up, or (z) on a parity
with the Series D Preferred Units with respect to distributions or rights
upon liquidation, dissolution or winding-up to the extent such Parity
Preferred Units are not issued to the General Partner or an Affiliate
thereof (including, without limitation, JMB Realty Corporation and its
Affiliates) (provided that the Partnership may issue Parity Preferred Units
to (i) the General Partner to the extent the issuance of such interests was
to allow the General Partner to issue corresponding preferred stock
permitted to be issued without the consent of holders of Series D Preferred
Stock pursuant to the terms of the Articles Supplementary, or (ii) any
other Affiliate of the Partnership provided the same are issued upon terms
no less favorable to the Partnership than would be obtained in an arm's
length transaction with an unaffiliated party as determined by the Board of
Directors of the General Partner (including a majority of the independent
directors) in good faith) shall not be deemed to materially and adversely
affect such powers, rights, preferences, privileges or voting powers and no
vote of the holders of Series D Preferred Units shall be required in such
case. Notwithstanding the foregoing, no vote of the holders of the Series
D Preferred Units shall be required pursuant to this Section 4.2.10.6, if,
at or prior to the time such action is to take effect, the Partnership is
entitled to and provides for the redemption of the Series D Preferred Units
then outstanding at the Redemption Price set forth in Section 4.2.10.5 in
accordance with the redemption procedures set forth therein.

4.2.10.7 Transfer Restrictions.

(a) The Series D Preferred Units shall be subject to the provisions
of Article XI of the Partnership Agreement, provided, however, that (i) the
General Partner shall not unreasonably withhold its consent to the
admission of transferees of Series D Preferred Units as Substituted Limited
Partners provided that if such transfer occurs prior to the fifth
anniversary of the date hereof, each such transferee must comply with the
following (A) such transferee shall not cause the total number of persons
holding Series D Preferred Units (for the purposes of Treasury Regulation
Section 1.7704-1(h)) to exceed five and (B) such transferee shall be a
"qualified purchaser" within the meaning of Section 2(a)(51)(A) of the
Investment Company Act of 1940, as amended; and (ii) the last sentence of
Section 11.4.1 shall not be applicable to transfers of Series D Preferred
Units.

(b) Notwithstanding anything to the contrary herein or
otherwise in the Partnership Agreement, no transfers of Series D Preferred
Units shall be permitted unless the transferee shall (i) not be "closely
held" within the meaning of Section 856(a)(6) of the Code as then in effect
and (ii) covenant that for so long as such transferee shall hold Series D
Preferred Units, such transferee shall (A) not become "closely held" within
the meaning of Section 856(a)(6) of the Code as in effect at the time of
transfer and (B) notify the General Partner in the event such transferee
shall become "closely held" within the meaning of Section 856(a)(6) of the
Code.

4.2.10.8 Exchange Rights.

(a) Right to Exchange. (i) Series D Preferred Units shall be
exchangeable in whole or in part at any time on or after the tenth
anniversary of the date hereof, at the option of the holders thereof, for
authorized but previously unissued shares of Series D Preferred Stock at an
exchange rate of one share of Series D Preferred Stock for one Series D
Preferred Unit, subject to adjustment as described below (the "Exchange
Price"), provided that the Series D Preferred Units will become
exchangeable at any time, in whole or in part, at the option of the holders

<PAGE>

of Series D Preferred Units for Series D Preferred Stock if (A) at any time
full distributions shall not have been timely made on the applicable
Preferred Unit Distribution Payment Date on any Series D Preferred Unit
with respect to 6 prior quarterly distribution periods, whether or not
consecutive, provided, however, that a distribution in respect of Series D
Preferred Units shall be considered timely made if made within two Business
Days after the applicable Preferred Unit Distribution Payment Date if at
the time of such late payment there shall not be any prior quarterly
distribution periods in respect of which full distributions were made more
than two Business Days after the applicable Preferred Unit Distribution
Payment Date, or (B) upon receipt by a holder or holders of Series D
Preferred Units of (I) notice from the General Partner that the General
Partner or a Subsidiary of the General Partner has taken the position that
the Partnership is, or upon the occurrence of a defined event in the
immediate future will be, a PTP and (II) an opinion rendered by an outside
nationally recognized independent counsel familiar with such matters
addressed to a holder or holders of Series D Preferred Units, that the
Partnership is or likely is, or upon the occurrence of a defined event in
the immediate future will be or likely will be, a PTP. In addition, the
Series D Preferred Units may be exchanged for Series D Preferred Stock, in
whole or in part, at the option of any holder prior to the tenth
anniversary of the issuance date and after the third anniversary thereof if
such holder of a Series D Preferred Units shall deliver to the General
Partner either (A) a private letter ruling addressed to such holder of
Series D Preferred Units or (B) an opinion of independent counsel
reasonably acceptable to the General Partner based on the enactment of
temporary or final Treasury Regulations or the publication of a Revenue
Ruling, in either case to the effect that an exchange of the Series D
Preferred Units at such earlier time would not cause the Series D Preferred
Units to be considered "stock and securities" within the meaning of
Section 351(e) of the Code for purposes of determining whether the holder
of such Series D Preferred Units is an "investment company" under
Section 721(b) of the Code if an exchange is permitted at such earlier
date. Furthermore, the Series D Preferred Units may be exchanged in whole
but not in part by any holder thereof which is a real estate investment
trust within the meaning of Sections 856 through 859 of the Code for
Series D Preferred Stock (but only if the exchange in whole may be
accomplished consistently with the ownership limitations set forth under
Article Seventh of the Charter of the General Partner (taking into account
exceptions thereto)) if at any time, (i) the Partnership reasonably
determines that the assets and income of the Partnership for a taxable year
after 1999 would not satisfy the income and assets tests of Section 856 of
the Code for such taxable year if the Partnership were a real estate
investment trust within the meaning of the Code or (ii) any such holder of
Series D Preferred Units shall deliver to the Partnership and the General
Partner Entity an opinion of independent counsel reasonably acceptable to
the General Partner to the effect that, based on the assets and income of
the Partnership for a taxable year after 1999, the Partnership would not
satisfy the income and assets tests of Section 856 of the Code for such
taxable year if the Partnership were a real estate investment trust within
the meaning of the Code and that such failure would create a meaningful
risk that a holder of the Series D Preferred Units would fail to maintain
qualification as a real estate investment trust.

(ii) Notwithstanding anything to the contrary set forth in this
Amendment, if an Exchange Notice (as defined below) has been delivered to
the General Partner, then the General Partner may, at its sole option,
elect to redeem or cause the Partnership to redeem all or a portion of the
outstanding Series D Preferred Units for cash in an amount equal to the
Stated Value per Series D Preferred Unit and all accrued and unpaid
distributions thereon to the date of redemption. The General Partner may
exercise its option to redeem the Series D Preferred Units for cash
pursuant to this Section 4.2.10.8(a)(ii) by giving each holder of record of
Series D Preferred Units notice of its election to redeem for cash, within
five Business Days after receipt of the Exchange Notice, by registered
mail, postage paid, at the address of each holder set forth in the records

<PAGE>

of the Partnership stating (A) the redemption date, which shall be no later
than 60 days following the receipt of the Exchange Notice, (B) the
redemption price, (C) the place or places where the Series D Preferred
Units are to be surrendered for payment of the redemption price, and
(D) the aggregate number of Series D Preferred Units to be redeemed, and if
fewer than all of the outstanding Series D Preferred Units are to be
redeemed, the number of Series D Preferred Units to be redeemed held by
such holder, which number shall equal such holder's pro-rata share (based
on the percentage of the total number of outstanding Series D Preferred
Units held by such holder) of the aggregate number of Series D Preferred
Units being redeemed.

(iii) If an exchange of all or a portion of Series D Preferred Units
pursuant to Section 4.2.10.8(a)(i) would violate the Ownership Limit (as
defined in the Charter of the General Partner, as and to the extent that
such Ownership Limit has heretofore been waived by the General Partner's
Board of Directors), the General Partner shall give written notice thereof
to each holder of record of Series D Preferred Units, within five Business
Days following receipt of the Exchange Notice, by registered mail, postage
prepaid, at the address of each such holder set forth in the records of the
Partnership. In such event, provided such holder shall then be able to
make the representation that it is not "closely held" within the meaning of
Section 856(a)(6) of the Internal Revenue Code of 1986, each holder of
Series D Preferred Units shall be entitled to exchange, pursuant to the
provision of Section 4.2.10.8(b) a number of Series D Preferred Units which
would comply with such Ownership Limit (as the General Partner's Board of
Directors may, at its sole discretion, waive such Ownership Limit with
respect to such holder) and any Series D Preferred Units not so exchanged
(the "Excess Units") shall be redeemed by the Partnership for cash in an
amount equal to the Stated Value per Excess Unit, and all accrued and
unpaid distributions thereon, to the date of redemption. The written
notice of the General Partner shall state (A) the number of Excess Units
held by such holder, (B) the redemption price, (C) the redemption date
which date shall be no later than 60 days following the receipt of the
Exchange Notice, and (D) the place or places where such Excess Units are to
be surrendered for payment of the Redemption Price. If an exchange would
result in Excess Units, as a condition to such exchange, each holder of
such Excess Units agrees to provide representations and covenants
reasonably requested by the General Partner relating to (I) the widely held
nature of the interests in such holder, sufficient to assure the General
Partner that the holder's ownership of stock of the General Partner
(without regard to the limits described above) will not cause any
individual to own in excess of the Ownership Limit (taking into account any
waiver thereof); (II) to the extent such holder can so represent and
covenant without obtaining information from its owners, the holder's
ownership of tenants of the Partnership and its affiliates and (III) any
other information required by the Charter.

(iv) The redemption of Series D Preferred Units described in Section
4.2.10.8(a)(ii) and (iii) shall be subject to the provisions of Section
4.2.10.5(c); provided, however, that for purposes hereof the term
"Redemption Price" in Section 4.2.10.5(c)(ii) shall be read to mean the
Stated Value per Series D Preferred Unit being redeemed plus all accrued
and unpaid distributions to the redemption date.

(b) Procedure for Exchange. (i) Any exchange shall be exercised
pursuant to a notice of exchange (the "Exchange Notice") delivered to the
General Partner by the holder who is exercising such exchange right, by
certified mail postage prepaid. Upon request of the General Partner, such
holder delivering the Exchange Notice shall provide to the General Partner
in writing such information as the General Partner may reasonably request
to determine whether any portion of the exchange by the delivering holder
will result in the violation of the restrictions of Article 7 of the
Charter, including the Ownership Limit. The exchange of Series D Preferred

<PAGE>

Units, or a specified portion thereof, may be effected after the fifth
Business Day following receipt by the General Partner of the Exchange
Notice and such requested information by delivering certificates, if any,
representing such Series D Preferred Units to be exchanged together with,
if applicable, written notice of exchange and a proper assignment of such
Series D Preferred Units to the office of the General Partner maintained
for such purpose. Currently, such office is located at 900 North Michigan
Avenue, Suite 1500, Chicago, Illinois 60611. Each exchange will be deemed
to have been effected immediately prior to the close of business on the
date on which such Series D Preferred Units to be exchanged (together with
all required documentation) shall have been surrendered and notice shall
have been received by the General Partner as aforesaid and the Exchange
Price shall have been paid. Any shares of Series D Preferred Stock issued
pursuant to this Section 4.2.10.8 shall be delivered as shares which are
duly authorized, validly issued, fully paid and nonassessable, free of
pledge, lien, encumbrance or restriction other than those provided in the
Charter, the Bylaws of the General Partner, the Securities Act and relevant
state securities or blue sky laws.

(ii) In the event of an exchange of Series D Preferred Units for
shares of Series D Preferred Stock, an amount equal to the accrued and
unpaid distributions that are not paid pursuant to Section 4.2.10.3(a)
hereof, whether or not declared, to the date of exchange on any Series D
Preferred Units tendered for exchange shall (A) accrue and be payable by
the General Partner from and after the date of exchange on the shares of
the Series D Preferred Stock into which such Series D Preferred Units are
exchanged, and (B) continue to accrue on such Series D Preferred Units,
which shall remain outstanding following such exchange, with the General
Partner as the holder of such Series D Preferred Units. Notwithstanding
anything to the contrary set forth herein, in no event shall a holder of a
Series D Preferred Unit that was validly exchanged into Series D Preferred
Stock pursuant to this Section (other than the General Partner now holding
such Series D Preferred Unit), receive a distribution out of Available Cash
of the Partnership, with respect to any Series D Preferred Units so
exchanged.

(iii) Fractional shares of Series D Preferred Stock shall not be
issued upon exchange but, in lieu thereof, the General Partner shall pay a
cash adjustment based upon the fair market value of the Series D Preferred
Stock on the day prior to the exchange date as determined in good faith by
the Board of Directors of the General Partner.

(c) Adjustment of Exchange Price. (i) The Exchange Price is
subject to adjustment upon certain events, including, (A) subdivisions,
combinations and reclassification of the Series D Preferred Stock, and (B)
distributions to all holders of Series D Preferred Stock of evidences of
indebtedness of the General Partner or assets (including securities, but
excluding dividends and distributions paid in cash out of equity applicable
to Series D Preferred Stock).

(ii) In case the General Partner shall be a party to any transaction
(including, without limitation, a merger, consolidation, statutory share
exchange, tender offer for all or substantially all of the General
Partner's capital stock or sale of all or substantially all of the General
Partner's assets), in each case as a result of which the Series D Preferred
Stock will be converted into the right to receive shares of capital stock,
other securities or other property (including cash or any combination
thereof), each Series D Preferred Unit will thereafter be exchangeable into
the kind and amount of shares of capital stock and other securities and
property receivable (including cash or any combination thereof) upon the
consummation of such transaction by a holder of that number of shares of
Series D Preferred Stock or fraction thereof into which one Series D
Preferred Unit was exchangeable immediately prior to such transaction. The
General Partner may not become a party to any such transaction unless the
terms thereof are consistent with the foregoing.

<PAGE>

4.2.10.9 No Conversion Rights. The holders of the Series D
Preferred Units shall not have any rights to convert such units into any
other class or series of Partnership Interests in the Partnership or into
any other interest in the Partnership.

4.2.10.10 No Sinking Fund. No sinking fund shall be
established for the retirement or redemption of Series D Preferred Units."

(b) Clause (iii) of Section 5.1 is amended to read in its
entirety as follows:

"(iii) thereafter, other than with respect to any class of
Partnership Interest issued pursuant to Section 4.2.1 or 4.2.2 that are
entitled to a preference over Partnership Units on the distribution of
Available Cash, in accordance with their respective Percentage Interests on
such Partnership Record Date."

"6.1.1 Net Income. After giving effect to the special
allocations set forth in Sections 6.2 and 6.4 below, Net Income shall be
allocated (a) first, to the General Partner to the extent that, on a
cumulative basis, Net Losses previously allocated to the General Partner
pursuant to the last sentence of Section 6.1.2 exceed Net Income previously
allocated to the General Partner pursuant to this clause (a) of Section
6.1.1; (b) second, to each Parity Preferred Unit holder to the extent of,
and in proportion to, the cumulative amount of Net Losses, if any, that
have been previously allocated to such holder pursuant to Section 6.1.2 (d)
and not previously offset pursuant to this Section 6.1.1(b); (c) third, to
each Partner, other than Parity Preferred Unit holders, to the extent of,
and in proportion to, the cumulative amount of Net Losses, if any, that
have been previously allocated to such partner pursuant to Section 6.1.2(c)
and not previously offset pursuant to this Section 6.1.1(c); (d) fourth, to
the Parity Preferred Unit holders (and within and among such classes, in
the order of preferences designated therein and pro rata among any such
classes) until each such holder has been allocated a cumulative amount of
Net Income pursuant to this Section 6.1.1(d) equal to the sum of (i) its
applicable Priority Return for the period, and (ii) the aggregate amount of
Priority Returns for prior periods net of amounts previously allocated to
such holder pursuant to this Section 6.1.1(d) with respect to such prior
periods; and (e) thereafter Net Income shall be allocated to the Partners
(other than holders of Parity Preferred Units) in accordance with their
respective Percentage Interests."

"6.1.2 Net Losses. After giving effect to the special
allocations set forth in Sections 6.2 and 6.4 below, Net Losses shall be
allocated (a) first, to the Partners in accordance with their respective
Percentage Interests, to the extent that Net Income has been previously
allocated to them pursuant to Section 6.1.1(e); (b) second, to the Parity
Preferred Unit holders to the extent of, and proportion to, the cumulative
amount of Net Income that has been allocated to each such Parity Preferred
Unit holder pursuant to Section 6.1.1(d) (net of prior distributions to
such holders) and not previously offset pursuant to this Section 6.1.2(b);
(c) third, to Partners, other than Parity Preferred Unit holders, in
accordance with their respective Percentage Interests until the Capital
Account balance of each such partner shall equal zero; and (d) thereafter,
to the Parity Preferred Unit holders in proportion to the Capital Account
balances of each such holder, provided that Net Losses shall not be
allocated to any such holder pursuant to this Section 6.1.2 to the extent
that such allocation would cause such holder to have an Adjusted Capital
Account Deficit at the end of such taxable year (or increase any existing
Adjusted Capital Account Deficit). All Net Losses in excess of the
limitations set forth in this Section 6.1.2 shall be allocated to the
General Partner.

<PAGE>

To the extent permitted under Section 704 of the Code, solely
for purposes of allocating Net Income or Net Losses in any taxable year (or
a portion thereof) to the holders of Series D Preferred Units pursuant to
Sections 6.1.1 and 6.1.2 hereof, items of Net Income or Net Losses, as the
case may be, shall not include Depreciation with respect to properties that
are "ceiling limited" in respect of holders of Series D Preferred Units.
For purposes of the preceding sentence, Partnership property shall be
considered "ceiling limited" in respect of a holder of Series D Preferred
Units if Depreciation attributable to such Partnership property which would
otherwise be allocable to such holder, without regard to this paragraph,
exceeds depreciation determined for federal income tax purposes
attributable to such Partnership property which would otherwise be
allocable to such holder by more than 5%."

(ii) Sections 6.4.1 and 6.4.2 are amended as follows:

(A) In each instance of allocation of Net Income with respect
to the Old Orchard shopping mall in Section 6.4.1 to Partners other than
the holders of Preferred Units, all such Net Income shall first be
allocated in accordance with Section 6.1.1, and for purposes of applying
6.1.1 with respect to Net Income from the Old Orchard shopping mall, Parity
Preferred Units shall not include Preferred Units.

(B) In each instance of allocation of Losses with respect to
the Old Orchard shopping mall in Section 6.4.2 to Partners other than the
holders of the Preferred Units, all such Losses shall first be allocated in
accordance with Section 6.1.2, and for purposes of applying 6.1.2 with
respect to Losses from the Old Orchard shopping mall, Parity Preferred
Units shall not include Preferred Units.

(d) The Partnership Agreement is amended to provide that references
in the Partnership Agreement to "this Agreement" or "the Agreement"
(including indirect references such as "hereunder", "hereby", "herein" and
"hereof") shall be deemed to be references to the Partnership Agreement as
hereby amended.

SECTION 3. CONTINUING EFFECTIVENESS. As herein amended, the
Partnership Agreement shall remain in full force and effect and is hereby
ratified and confirmed in all respects.

SECTION 4. EXHIBIT A TO PARTNERSHIP AGREEMENT. In order to
duly reflect the issuance of the Series D Preferred Units provided for
herein, the Partnership Agreement is hereby further amended by deleting
Exhibit A thereto and inserting Exhibit A attached hereto in lieu therefor.

<PAGE>

IN WITNESS WHEREOF, the undersigned, the General Partner of the
Partnership, has executed this Amendment to the Partnership Agreement as of
the date written above.

URBAN SHOPPING CENTERS, INC.

By:
Name:
Title:

IN WITNESS WHEREOF, the undersigned, which are hereby being
admitted as Limited Partners of the Partnership, agree to be bound by all
of the terms and conditions of the Partnership Agreement as of the date
written above.

BELCREST REALTY CORPORATION

By:
Name:
Title:

BELAIR REAL ESTATE CORPORATION

By:
Name:
Title: