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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12
General Growth Properties, Inc.
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(Name of Registrant as Specified In Its Charter)
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SEC 1913 (02-02)
GENERAL GROWTH PROPERTIES, INC.
110 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 5, 2004
To our Stockholders:
We are notifying you that the Annual Meeting of Stockholders of General
Growth Properties, Inc. will be held on Wednesday, May 5, 2004 at 9:00 a.m.
local time at our principal executive offices located at 110 North Wacker Drive,
Chicago, Illinois 60606 for the following purposes:
1. To elect three directors, each for a term of three years;
2. To ratify the selection of Deloitte & Touche LLP as the Company's
independent auditors for the year ending December 31, 2004; and
3. To transact other business properly coming before the meeting.
Each of these matters is described in further detail in the enclosed proxy
statement. We have also enclosed a copy of our 2003 Annual Report. Only
stockholders of record at the close of business on March 17, 2004 are entitled
to vote at the meeting or any postponement or adjournment of the meeting. A
complete list of these stockholders will be available at our principal executive
offices prior to the meeting.
Please use this opportunity to take part in our affairs by voting your
shares. Whether or not you plan to attend the meeting, please complete the
enclosed proxy card and return it in the envelope provided as promptly as
possible, or follow the instructions on the proxy card for voting by telephone
or over the Internet. Your proxy can be withdrawn by you at any time before it
is voted.
By order of the Board of Directors,
/s/ Matthew Bucksbaum
Chairman of the Board
Chicago, Illinois
April 5, 2004
TABLE OF CONTENTS
PAGE
----
ABOUT THE MEETING........................................... 1
What is the purpose of the annual meeting?................ 1
What are the Board's voting recommendations?.............. 1
What happens if additional proposals are presented at the
meeting?............................................... 1
Who is entitled to vote?.................................. 1
What constitutes a quorum?................................ 2
How do I vote my shares at the annual meeting?............ 2
Can I change my vote after I return my proxy card or after
I vote by telephone or over the Internet?.............. 2
What vote is required to approve each matter that comes
before the meeting?.................................... 2
Who will bear the costs of soliciting votes for the
meeting?............................................... 2
PROPOSAL 1 -- ELECTION OF DIRECTORS......................... 3
GOVERNANCE OF THE COMPANY................................... 5
Committees of the Board of Directors...................... 5
Stockholder Communications with the Board................. 7
Meetings of Non-Management Directors...................... 7
Compensation of Directors................................. 7
Compensation Committee Interlocks and Insider
Participation.......................................... 8
REPORT OF THE AUDIT COMMITTEE............................... 9
STOCK OWNERSHIP............................................. 10
Common Stock Ownership of Certain Beneficial Owners....... 10
Equity Ownership of Management............................ 11
Section 16(a) Beneficial Ownership Reporting Compliance... 11
EXECUTIVE OFFICERS.......................................... 12
EXECUTIVE COMPENSATION...................................... 13
Summary of Cash and Certain Other Compensation............ 13
Option Grants............................................. 14
Option Exercises and Year-End Values...................... 14
Long Term Incentive Plan Awards........................... 15
Standard Employee Benefits................................ 15
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION.............................................. 16
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS........ 19
PERFORMANCE GRAPH........................................... 20
INDEPENDENT AUDITORS........................................ 21
Fees Billed by Independent Auditors....................... 21
Audit Committee's Pre-Approval Policies and Procedures.... 21
PROPOSAL 2 -- RATIFICATION OF SELECTION OF INDEPENDENT
AUDITORS.................................................. 22
STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING............... 22
GENERAL GROWTH PROPERTIES, INC.
110 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
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PROXY STATEMENT
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The Board of Directors of General Growth Properties, Inc. is asking for
your proxy for use at the annual meeting of our stockholders to be held on
Wednesday, May 5, 2004 at 9:00 a.m. local time at our principal executive
offices located at 110 North Wacker Drive, Chicago, Illinois, and at any
postponements or adjournments of the meeting. We are initially mailing this
proxy statement and the enclosed proxy to our stockholders on or about April 5,
2004. In this proxy statement, we refer to General Growth Properties, Inc. as
"General Growth," "we," "our" or the "Company."
Unless otherwise indicated, all share amounts in this proxy statement have
been adjusted to reflect the three-for-one split of the Company's common stock,
which became effective December 5, 2003.
ABOUT THE MEETING
What is the purpose of the annual meeting?
At our annual meeting, stockholders will act upon the matters outlined in
the accompanying notice of meeting, including:
- the election of three directors, each for a term of three years (see page
3); and
- ratification of the selection of Deloitte & Touche LLP as the Company's
independent auditors for the year ending December 31, 2004; (see page
22).
In addition, management will report on General Growth's performance during
fiscal 2003 and respond to questions from stockholders.
What are the Board's voting recommendations?
Unless you give other instructions on your proxy card, the individuals
named on the card as proxy holders will vote in accordance with the
recommendations of the Board of Directors. The Board of Directors recommends
that you vote your shares "FOR" the election of each of the nominees to the
Board and "FOR" the ratification of the auditors.
What happens if additional proposals are presented at the meeting?
Other than the matters described in this proxy statement, we do not expect
any additional matters to be presented for a vote at the annual meeting. If
other matters are presented and you vote by proxy, your proxy grants the
individuals named as proxy holders the discretion to vote your shares on any
additional matters properly presented for a vote at the meeting.
Who is entitled to vote?
Only stockholders of record at the close of business on the record date,
March 17, 2004, are entitled to receive notice of the annual meeting and to vote
the shares of common stock that they held on that date at the meeting, or any
postponement or adjournment of the meeting. Each outstanding share of common
stock entitles its holder to cast one vote on each matter to be voted on.
1
What constitutes a quorum?
If a majority of the shares outstanding on the record date are present at
the annual meeting, either in person or by proxy, we will have a quorum at the
meeting, permitting the conduct of business at the meeting. As of the record
date, we had 217,756,631 shares of common stock outstanding and entitled to
vote. Abstentions and broker "non-votes" are counted as present and entitled to
vote for purposes of determining whether a quorum exists. A broker "non-vote"
occurs when a broker, bank or other nominee holding shares for a beneficial
owner does not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received voting
instructions from the beneficial owner.
How do I vote my shares at the annual meeting?
If you are a "record" holder of our common stock (that is, if you hold your
stock in your own name in the Company's stock records maintained by our transfer
agent), you may complete and sign the proxy card and return it to the Company or
deliver it in person. In addition, you may vote by telephone or over the
Internet by following the instructions included with your proxy card. Please be
aware that if you vote over the Internet, you may incur costs such as telephone
and Internet access charges for which you will be responsible. The Internet and
telephone voting facilities for stockholders of record will close at 11:59 p.m.
Eastern Time on May 4, 2004.
If you hold shares of our common stock in "street name" (that is, through a
broker, bank or other nominee), you will need to obtain a proxy form from the
institution that holds your shares and follow the voting instructions on that
form.
Can I change my vote after I return my proxy card or after I vote by telephone
or over the Internet?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised at the annual meeting by delivering to
the Secretary of the Company a written notice of revocation or a properly signed
proxy bearing a later date, or by attending the annual meeting and voting in
person (although attendance at the meeting will not cause your previously
granted proxy to be revoked unless you specifically so request). To revoke a
proxy previously submitted by telephone or over the Internet, you may simply
vote again at a later date, using the same procedures, in which case the later
submitted vote will be recorded and the earlier vote revoked.
What vote is required to approve each matter that comes before the meeting?
The three nominees for director with the most affirmative votes cast at the
annual meeting, in person or by proxy, will be elected. Abstentions and broker
non-votes are not counted as votes cast for purposes of, and therefore will have
no impact as to, the election of directors.
Ratification of the selection of Deloitte & Touche LLP as the Company's
independent auditors requires the affirmative vote of a majority of the shares
represented at the meeting in person or by proxy and entitled to vote on this
proposal. Abstentions will be treated as being present and entitled to vote on
the matter and, therefore, will have the effect of votes against the proposal. A
broker non-vote is treated as not being entitled to vote on the matter and,
therefore, is not counted for purposes of determining whether the proposal has
been approved.
Who will bear the costs of soliciting votes for the meeting?
General Growth will bear the entire cost of the solicitation of proxies
from its stockholders. In addition to the mailing of these proxy materials, the
solicitation of proxies or votes may be made in person, by telephone or by
electronic communication by our directors, officers and employees, who will not
receive any additional compensation for such solicitation activities. We will
also reimburse brokerage houses and other custodians, nominees and fiduciaries
for their reasonable out-of-pocket expenses for forwarding proxy and
solicitation materials to our stockholders.
2
PROPOSAL 1 -- ELECTION OF DIRECTORS
Our Board of Directors is currently comprised of nine members. Our bylaws
divide the Board into three classes, as nearly equal in number as possible, with
each class of directors serving a three-year term. The term of office of the
classes of directors expires in rotation so that one class is elected at each
annual meeting for a full three-year term.
The Board of Directors, at the recommendation of the Nominating &
Governance Committee, has nominated John Bucksbaum, Alan Cohen and Anthony
Downs, each of whom currently serves as a member of the Board of Directors. Each
of Messrs. Bucksbaum, Cohen and Downs has been nominated for a term of office
commencing on the date of this year's annual meeting and ending on the date of
the annual meeting in 2007.
The Board of Directors urges you to vote "FOR" the election of John
Bucksbaum, Alan Cohen and Anthony Downs as directors of the Company for terms of
office ending in 2007. Proxies will be so voted unless the stockholders specify
otherwise in their proxies.
Each of the nominees has consented to serve as a member of the Board of
Directors if he is re-elected. If any nominee is unable to serve if elected, it
is intended that the proxies will be voted for the election of the other
nominees and may be voted for any substitute nominees. In no event will the
proxies be voted for a greater number of persons than the number of nominees
named.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION TO THE BOARD
OF EACH OF THE NOMINEES NAMED BELOW.
NOMINEES FOR ELECTION AT THIS MEETING FOR TERMS EXPIRING IN 2007:
John Bucksbaum, 47, has served as a director of the Company since 1992, and
has served as our Chief Executive Officer since July 1999. From December 1992
through June 1999, Mr. Bucksbaum served as Executive Vice President of the
Company. In addition, Mr. Bucksbaum has served and continues to serve as a
director and/or officer of various of our affiliates and wholly-owned
subsidiaries. Mr. Bucksbaum is a member of the board of trustees of the
International Council of Shopping Centers ("ICSC"), the National Real Estate
Roundtable, and the University of Chicago Hospitals, and is also a trustee of
the Urban Land Institute and the National Association of Real Estate Investment
Trusts ("NAREIT"). Mr. Bucksbaum is Director of the Zell/Lurie Real Estate
Center at the Wharton School of the University of Pennsylvania and is a member
of the executive committee of the Wharton School Advisory Board and the
University of California Real Estate Center. He is also a member of the national
board of World T.E.A.M Sports and the board of trustees of the United States Ski
& Snowboard Team Foundation and the USA Cycling Development Foundation and the
Board of Directors of USA Cycling. Mr. Bucksbaum is the son of Matthew
Bucksbaum, the Chairman of the Board of the Company.
Alan Cohen, 43, has served as a director of the Company since 2001. Since
October 2002, Mr. Cohen has served as Vice President, Marketing of Airespace,
Inc., a developer of wireless local area networks. From October 2001 through
September 2002, he served as Vice President, Marketing of Tahoe Networks, Inc.,
a company specializing in networking infrastructure and operations solutions.
From March 2000 to October 2001, Mr. Cohen served as Senior Director, Marketing,
Service Provider Line of Business of Cisco Systems, Inc., a provider of Internet
networking solutions. From June 1999 to March 2000, Mr. Cohen served as General
Manager, SP Solutions, in Cisco's Customer Advocacy division and from June 1998
to June 1999, as Cisco's Director of Internet Business Solutions. Prior to
joining Cisco, Mr. Cohen was employed by International Business Machines
Corporation, an information technology company, acting in the capacity of Chief
Marketing Executive for IBM's Global Telecommunications and Media business unit
from January 1997 to June 1998 and Managing Director of B2B Electronic Commerce
for IBM's Internet division from June 1995 to January 1997. Mr. Cohen serves on
the advisory boards of Vista Broadband Networks, Inc., an Internet service
provider, and CPlane, Inc., a company specializing in network control software
products.
Anthony Downs, 73, has served as a director of the Company since 1993.
Since 1977, Mr. Downs has been a Senior Fellow at The Brookings Institution, a
private, non-profit policy research center, and a self-
3
employed speaker and writer. Mr. Downs served as an executive consultant to
Salomon Brothers Inc. from 1986 to 1994 and to Aetna Realty Investors from 1977
to 1994. Mr. Downs is a life trustee of the Urban Institute and is a director of
the NAACP Legal and Education Defense Fund, Inc. He is currently a member of the
Urban Land Institute, the Counselors of Real Estate, the Anglo-American Real
Property Institute, the American Real Estate and Urban Economics Association,
the National Academy of Public Administration and the American Academy of Arts
and Sciences.
DIRECTORS WHOSE TERMS CONTINUE UNTIL 2005:
Matthew Bucksbaum, 78, has served as a director of the Company since 1986
and as Chairman of the Board since July 1995. Mr. Bucksbaum also served as our
Chief Executive Officer from July 1995 through June 1999, as President of the
Company from December 1992 through June 1995 and as our Secretary and Treasurer
from 1986 to December 1992. Mr. Bucksbaum has served as President of General
Growth Companies, Inc., of which he is the sole stockholder and director, since
1985. In addition, Mr. Bucksbaum has served and continues to serve as a director
and/or officer of various of our affiliates and wholly-owned subsidiaries. Mr.
Bucksbaum is an ex-officio trustee and former Chairman of ICSC and is a member
of the Urban Land Institute and NAREIT. Mr. Bucksbaum is also a life trustee and
immediate past Chairman of the Aspen Music Festival and School and is a trustee
of the Chicago Symphony Orchestra. Mr. Bucksbaum is the father of John
Bucksbaum, the Chief Executive Officer of the Company.
Bernard Freibaum, 51, has served as a director of the Company since August
2003 and as Executive Vice President and Chief Financial Officer of the Company
since October 1993. In addition, Mr. Freibaum has served and continues to serve
as a director and/or officer of various of our affiliates and wholly-owned
subsidiaries. From August 1992 and prior to joining the Company, Mr. Freibaum
was a consultant with Ernst & Young. From 1985 through 1992, Mr. Freibaum was
Chief Financial Officer and General Counsel of Stein & Company, a real estate
development and service company. From 1973 through 1985, Mr. Freibaum held
various positions with Ernst & Young, American Invsco Corp. and Coopers &
Lybrand L.L.P.
Beth Stewart, 47, has served as a director of the Company since 1993. Ms.
Stewart has served as Chief Executive Officer of Storetrax, Inc., a Web-based
company focused on the retail real estate sector, since August 2001 and as
Chairman of the Board of Storetrax since October 1999. Since December 1999, Ms.
Stewart has been President of Stewart Real Estate Capital, a real estate
consulting and investment firm. From December 1992 until August 2001, Ms.
Stewart was a private real estate consultant and investor. From 1986 to November
1992, she served as Vice President of Goldman, Sachs & Co. Ms. Stewart is a
director of Imperial Parking Corporation, a provider of parking services, Avatar
Holdings Inc., a Florida-based home builder, and CarMax, Inc., a new and used
car retailer.
DIRECTORS WHOSE TERMS CONTINUE UNTIL 2006:
Robert Michaels, 60, has served as a director of the Company and as our
President and Chief Operating Officer since 1995. In addition, Mr. Michaels has
served and continues to serve as a director and/or officer of various of our
affiliates and wholly-owned subsidiaries. Mr. Michaels is an ex-officio trustee
of ICSC and also serves on the board of directors of the Center for Urban Land
Economics Research at the School of Business of the University of
Wisconsin-Madison and on the board of trustees of the University of South Dakota
Foundation.
Frank S. Ptak, 60, has been a director of the Company since August 2003.
Since 1996, Mr. Ptak has been Vice Chairman of Illinois Tool Works, Inc., a
manufacturer of fasteners, components, assemblies and systems. Mr. Ptak serves
as a director of Snap-on Incorporated, a tool manufacturer.
John Riordan, 66, has served as a director of the Company since May 2003.
Since July 2003, Mr. Riordan has served as Interim Executive Director of the
ICSC Educational Foundation and he also currently serves as an ex-officio
trustee of the ICSC. From May 2001 through July 2003, Mr. Riordan was the Vice
Chairman of ICSC and from January 1986 through May 2001 he served as President
and Chief Executive Officer of ICSC.
4
GOVERNANCE OF THE COMPANY
Pursuant to the Delaware General Corporation Law and the Company's bylaws,
General Growth's business, property and affairs are managed by or under the
direction of the Board of Directors. Members of the Board are kept informed of
the Company's business through discussions with the Chairman, the Chief
Executive Officer and other key members of management, by reviewing materials
provided to them and by participating in meetings of the Board and its
committees.
During 2003, the Board of Directors held 9 meetings and took action by
written consent 12 times. Each of the incumbent directors attended at least 75%
of all meetings of the Board and those Board committees on which he or she
served during 2003. The Company encourages its Board members to attend annual
meetings of its stockholders and 6 out of the Company's then 7 directors
attended the Company's annual meeting of stockholders in 2003.
The Board has adopted Corporate Governance Guidelines which, among other
matters, describe the responsibilities and certain qualifications of the
directors of the Company. The Corporate Governance Guidelines are posted on our
website at www.generalgrowth.com in the "Investment" section under the
"Corporate Governance" heading. Based upon the Board's application of the
independence standards set forth in the Company's Corporate Governance
Guidelines, which incorporate the independence criteria mandated by New York
Stock Exchange listing standards, the Board has determined that each of Alan
Cohen, Anthony Downs, Frank S. Ptak, John Riordan and Beth Stewart is
independent.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has four standing committees: the Executive
Committee, the Audit Committee, the Compensation Committee and the Nominating &
Governance Committee. Each of the committees operates under a written charter,
with the exception of the Executive Committee whose duties are delegated to it
by the Board of Directors from time to time. Copies of these charters can be
obtained on our website at www.generalgrowth.com in the "Investment" section
under the "Corporate Governance" heading. The committees of the Board of
Directors and a general description of their respective duties follow:
EXECUTIVE COMMITTEE. The members of the Executive Committee are John
Bucksbaum, Matthew Bucksbaum, Robert Michaels and Beth Stewart. The Executive
Committee has such authority as may be delegated to it by the Board of Directors
from time to time and advises the Board with respect to such matters as the
Board may direct. The Executive Committee did not meet during 2003, nor did it
take any actions by written consent.
AUDIT COMMITTEE. The current members of the Audit Committee are Anthony
Downs, Frank Ptak (Chair) and Beth Stewart. The Board of Directors has
determined that all of the members of the Audit Committee meet the requirements
for independence and expertise, including financial literacy, under applicable
New York Stock Exchange listing standards and Securities and Exchange Commission
("SEC") rules. The Board of Directors has also determined that Mr. Ptak is an
"audit committee financial expert" under applicable SEC rules. One of the
Company's Audit Committee members, Ms. Stewart, serves on the audit committee of
three other public companies. Based on Ms. Stewart's past performance as a
member and Chair of the Audit Committee and upon other relevant matters, the
Board of Directors has determined that Ms. Stewart's simultaneous service on
three other public company audit committees does not impair her ability to
effectively serve on the Audit Committee.
The Audit Committee operates under a written charter that was amended and
restated by the Board of Directors in February 2003 upon the recommendation of
the Audit Committee. The Audit Committee held four meetings during 2003 and took
one action by written consent.
The functions of the Audit Committee include assisting the Board in
monitoring the integrity of the Company's financial statements, the independent
auditors' qualifications and independence, the performance of the Company's
internal audit function and independent auditors and the compliance by the
Company with legal and regulatory requirements. The Audit Committee has the sole
authority to appoint or replace the
5
independent auditors of the Company, who report directly to the Audit Committee.
The Audit Committee pre-approves all auditing services and permitted non-audit
services (including the fees and terms associated with such services) to be
provided by the independent auditors, subject to certain de minimis exceptions
for non-audit services which are approved by the Audit Committee prior to the
completion of the audit. The Audit Committee has the authority to retain
independent legal, accounting or other advisors and the Company is required to
provide appropriate funding for the compensation of any such advisors. The Audit
Committee is also responsible for preparing a report for inclusion in our proxy
statement stating, among other things, whether our audited financial statements
should be included in our Annual Report on Form 10-K. This report is set forth
on page 9 of this proxy statement.
COMPENSATION COMMITTEE. The members of the Compensation Committee are Alan
Cohen (Chair), John Riordan and Beth Stewart. Each of the members of the
Compensation Committee is independent under applicable New York Stock Exchange
listing standards. The Compensation Committee held two meetings during 2003 and
took one action by written consent.
The Compensation Committee has overall responsibility for approving and
evaluating the director and officer compensation plans, policies and programs of
the Company. The functions of the Compensation Committee include annually
reviewing and making recommendations to the Board with respect to incentive-
compensation plans and equity-based plans, annually reviewing and approving the
compensation of directors, determining the compensation for our Chief Executive
Officer, the other executive officers and certain accounting and internal audit
personnel of the Company and monitoring compliance with legal prohibitions on
loans to directors and executive officers of the Company. The Compensation
Committee has the sole authority to retain any compensation consultant to be
used to assist it in the evaluation of director or senior executive
compensation, including approval of the consultant's fees and other retention
terms. The Compensation Committee also has the authority to obtain advice and
assistance from internal or external legal, accounting or other advisors.
The Compensation Committee administers our Employee Stock Purchase Plan,
our Cash Value Added Incentive Compensation Plan (the "CVA Plan"), our 1998
Incentive Stock Plan (the "1998 Plan"), our 2003 Incentive Stock Plan (the "2003
Plan") and all other incentive-compensation or equity-based plans which we may
adopt from time to time. The Compensation Committee is also responsible for
preparing an annual report on executive compensation for inclusion in our proxy
statement. This report is set forth on page 16 of this proxy statement.
NOMINATING & GOVERNANCE COMMITTEE. The Nominating & Governance Committee,
whose current members are John Riordan (Chair), Anthony Downs and Frank Ptak,
was formed in February 2003. Prior to its formation, the Board of Directors as a
whole performed the functions of the Nominating & Governance Committee. Each of
the members of the Nominating & Governance Committee is independent under
applicable New York Stock Exchange listing standards. The Nominating &
Governance Committee held five meetings in 2003 and took no actions by written
consent.
The functions of the Nominating & Governance Committee include assisting
the Board by identifying individuals qualified to become Board members and
recommending to the Board the director nominees for the next annual meeting of
stockholders, recommending to the Board corporate governance guidelines
applicable to the Company, leading the Board in its annual review of the Board's
performance and recommending to the Board director nominees for each Board
committee. The Nominating & Governance Committee has sole authority to retain
any search firm to be used to identify director candidates, including approval
of the search firm's fees and other retention terms. The Nominating & Governance
Committee also has the authority to obtain advice and assistance from internal
or external legal, accounting or other advisors.
In identifying and recommending nominees for positions on the Board of
Directors, the Nominating & Governance Committee takes into account many
factors, including those set forth under "Director Qualifications" in the
Company's Corporate Governance Guidelines. Such factors include independence,
diversity, age, skills, experience in the context of the needs of the Board of
Directors and ability to devote adequate time to Board of Directors duties. The
Nominating & Governance Committee does not set specific minimum qualifications
that nominees must meet in order for the committee to recommend them to the
Board of
6
Directors, but rather believes that each nominee should be evaluated based on
his or her merits, taking into account the needs of the Company and the
composition of the Board of Directors. In identifying potential candidates for
Board membership, the Nominating & Governance Committee relies on suggestions
and recommendations from members of the Board, management, stockholders and
others. The Nominating & Governance Committee has not previously used outside
consultants to help identify potential candidates, but it may choose to do so in
the future. The committee assesses which candidates appear to best fit the needs
of the Board and the Company and those candidates who are so identified are
interviewed and evaluated by the Nominating & Governance Committee. Nominees
selected by the Nominating & Governance Committee are recommended to the full
Board of Directors by the committee. After the Board of Directors has approved a
nominee, the Chairman of the Board and the Chairman of the Nominating &
Governance Committee extend an invitation to the nominee to join the Company's
Board of Directors.
The Nominating & Governance Committee will consider candidates recommended
by stockholders if such recommendations are made in accordance with the terms of
the Company's bylaws, and those candidates will be evaluated in the same manner
as other candidates.
Under our bylaws, nominations for director may be made by a stockholder
entitled to vote at the annual meeting who delivers written notice, along with
the additional information and materials required by our bylaws, to our
Corporate Secretary at General Growth Properties, Inc., 110 North Wacker Drive,
Chicago, Illinois, 60606, not less than 60 days nor more than 90 days prior to
the first anniversary of the preceding year's annual meeting. For our annual
meeting in the year 2005, we must receive this notice on or after February 7,
2005, and on or before March 9, 2005. You may obtain a copy of our bylaws by
writing to our Corporate Secretary.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD
Stockholders can send communications to one or more members of the Board,
by writing to the Board or to specific directors at the following address:
General Growth Properties, Inc. Board of Directors, c/o Corporate Secretary,
General Growth Properties, Inc., 110 North Wacker Drive, Chicago, Illinois,
60606. Any such communication will be promptly distributed by the corporate
secretary to the individual director or directors named in the communication or
to all directors if the communication is addressed to the whole Board of
Directors.
MEETINGS OF NON-MANAGEMENT DIRECTORS
The non-management directors of the Board meet in executive sessions,
without any management directors in attendance, each time the Board convenes for
a regularly scheduled meeting. The non-management directors rotate as the
presiding director for each executive session. Stockholders or other interested
persons wishing to communicate with the non-management directors may contact
them at the following address: Non-Management Directors, c/o Corporate
Secretary, General Growth Properties, Inc., 110 North Wacker Drive, Chicago,
Illinois, 60606. Any such communications will be promptly distributed by the
corporate secretary to the individual director or directors named in the
communication or to all non-management directors if the communication is
addressed to all non-management directors.
COMPENSATION OF DIRECTORS
Directors who are our employees receive no fees for their services as
directors. Non-employee directors receive an annual fee of $25,000, except that
members of the Audit Committee other than its Chair receive an annual fee of
$27,500, the Chair of the Audit Committee receives an annual fee of $35,000 and
the Chair of the Compensation Committee receives an annual fee of $27,500.
Non-employee directors receive a meeting fee of $1,000 for each Board or
committee meeting attended and reimbursement of expenses incurred in attending
meetings.
Under the 2003 Plan, all non-employee directors are entitled to receive,
upon joining the Board of Directors, an option to purchase 7,500 shares of our
common stock having an exercise price equal to the fair market value of a share
of our common stock on the date of grant. In addition, under the 2003 Plan, each
non-
7
employee director automatically receives on the first business day in January of
every year, an option to purchase 7,500 shares of our common stock having an
exercise price equal to the fair market value of a share of our common stock on
the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee has any "interlocking"
relationships as defined by the Securities and Exchange Commission, in that none
of them serves on the board of directors or compensation committee of any other
company where an executive officer of that company is on the Board of Directors
or Compensation Committee of General Growth.
We are party to a contract with Storetrax, Inc., a web-based retail real
estate listing service, pursuant to which Storetrax lists certain information
about our mall properties on its website to allow brokers and retailers
interested in leasing space to search for and view retail space at our
properties. Beth Stewart, a member of the Compensation Committee, serves as
Chief Executive Officer and Chairman of the Board of Storetrax and owns an
approximate 40% equity interest in Storetrax. During fiscal 2003, we paid
Storetrax aggregate fees of approximately $68,000 under the contract, and during
fiscal 2004, we anticipate paying Storetrax approximately the same amount. The
contract was entered into on an arms'-length basis, upon terms we believe to be
no less favorable to us than those generally offered by Storetrax to other
companies in our industry.
8
REPORT OF THE AUDIT COMMITTEE
The members of the Audit Committee have been appointed by the Board of
Directors. The Audit Committee operates under a written charter that was amended
and restated by the Board of Directors in February 2003 upon the recommendation
of the Audit Committee. As mentioned above, a copy of this charter is posted on
the Company's website at www.generalgrowth.com.
The Audit Committee assists the Board in monitoring the integrity of the
Company's financial statements, the independent auditors' qualifications and
independence, the performance of the Company's internal audit function and
independent auditors and the compliance by the Company with legal and regulatory
requirements. Management is responsible for the Company's internal controls and
the financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's financial statements in
accordance with generally accepted auditing standards and issuing a report on
those financial statements. The Audit Committee monitors and oversees these
processes.
In this context, the Audit Committee has reviewed and discussed the audited
financial statements for fiscal 2003 with management. The Audit Committee has
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communications with Audit Committees),
as amended by Statements on Auditing Standards Nos. 89 and 90, which includes,
among other items, matters related to the conduct of the audit of the Company's
annual financial statements.
The Audit Committee has also received the written disclosures and the
letter from the independent auditors required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and has
discussed with the independent auditors the issue of their independence from the
Company and management. In addition, the Audit Committee has considered whether
the provision of non-audit services by the independent auditors in 2003 is
compatible with maintaining the auditors' independence and has concluded that it
is.
Based on its review of the audited financial statements and the various
discussions noted above, and discussions with the independent auditors, the
Audit Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003.
Respectfully submitted by the Audit
Committee,
Anthony Downs
Frank Ptak (Chair)
Beth Stewart
9
STOCK OWNERSHIP
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following sets forth, as of March 18, 2004, certain information
concerning each stockholder who is known by us to beneficially own 5% or more of
our outstanding common stock. The table is based upon reports on Schedules 13D
or 13G filed by the stockholders with the SEC. Unless otherwise noted, each
stockholder has sole voting and investment power for all shares shown.
NUMBER OF SHARES APPROXIMATE
NAME AND ADDRESS BENEFICIALLY OWNED PERCENT OF CLASS
---------------- ------------------ ----------------
General Trust Company, as trustee........................... 53,971,746(1) 20.6%
300 North Dakota Avenue
Suite 202
Sioux Falls, South Dakota 57104
Davis Selected Advisers, L.P. .............................. 13,973,087 6.4%(2)
2949 East Elvira Road
Suite 101
Tucson, Arizona 85706
-------------------------
(1) This amount includes 45,328,909 shares of common stock issuable, in certain
circumstances, upon conversion of limited partnership units in the Operating
Partnership, as described in "Certain Relationships and Related Party
Transactions." These units are owned by a partnership whose general partners
include various trusts for which General Trust Company serves as trustee.
The beneficiaries of the trusts are members of the Bucksbaum family which,
for purposes hereof, include the descendants of Martin, Matthew and Maurice
Bucksbaum, including John Bucksbaum, Chief Executive Officer and a director
of the Company.
(2) This amount has been calculated by the Company, based solely on the
information contained in the holder's Schedule 13G filed with the SEC on
February 11, 2004.
10
EQUITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of March 18, 2004, by (a) each of our directors
and nominees for election as directors, (b) each of our executive officers named
in the Summary Compensation Table below and (c) all of our directors and
executive officers as a group. Unless otherwise noted, each person named in the
table has sole voting and investment power for all shares shown.
DIRECTORS AND NUMBER OF SHARES APPROXIMATE
EXECUTIVE OFFICERS BENEFICIALLY OWNED PERCENT OF CLASS
------------------ ------------------- ----------------
Matthew Bucksbaum........................................ 3,531,278(1)(2) 1.6%
John Bucksbaum........................................... 602,022(1)(3)(4) *
Alan Cohen............................................... 21,000(4) *
Anthony Downs............................................ 41,904(5) *
Bernard Freibaum......................................... 4,289,655(4)(6) 2.0%
Robert Michaels.......................................... 894,196(4) *
Frank Ptak............................................... 15,000(4) *
John Riordan............................................. 4,069 *
Beth Stewart............................................. 18,768 *
Jean Schlemmer........................................... 148,268(4) *
Joel Bayer............................................... 689,952 *
All directors and executive officers as a group (12
persons)............................................... 10,329,867(7) 4.7%
-------------------------
* Represents less than 1% of our outstanding common stock.
(1) This amount does not include shares of common stock beneficially owned by
General Trust Company (see "Common Stock Ownership of Certain Beneficial
Owners," above).
(2) This amount includes 2,514,735 shares beneficially owned by Mr. Bucksbaum as
co-trustee of the Martin Bucksbaum Marital GST Trust. However, this amount
excludes 13,739 shares of common stock beneficially owned by Mr. Bucksbaum's
spouse and 721,932 shares of common stock beneficially owned by the Matthew
and Carolyn Bucksbaum Family Foundation, as to which Mr. Bucksbaum disclaims
beneficial ownership.
(3) This amount does not include 15,359 shares of common stock beneficially
owned by Mr. Bucksbaum's spouse, as to which Mr. Bucksbaum disclaims
beneficial ownership.
(4) This amount includes shares of our common stock that such person has the
right to acquire within 60 days after the date of this table pursuant to
stock options awarded under our long-term incentive plans. These amounts are
as follows: Mr. John Bucksbaum, 24,000 shares; Mr. Cohen, 21,000 shares; Mr.
Freibaum, 60,000 shares; Mr. Michaels, 45,000 shares; Mr. Ptak, 15,000
shares; and Ms. Schlemmer, 113,330 shares.
(5) This amount includes 33,000 shares beneficially owned by Mr. Downs as
trustee of a trust for the benefit of his spouse.
(6) This amount does not include an aggregate of 12,000 shares of common stock
beneficially owned by Mr. Freibaum's spouse, as to which Mr. Freibaum
disclaims beneficial ownership.
(7) This amount includes an aggregate of 289,334 shares of common stock that our
directors and executive officers have the right to acquire within 60 days
after the date of this table pursuant to stock options awarded under our
long-term incentive plans.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and holders of more than 10% of our common stock
to file with the SEC reports regarding their ownership and changes in ownership
of our common stock. Based solely on our review of the reports furnished to us,
we believe that all of our directors, executive officers and 10% stockholders
complied with all Section 16(a) filing requirements during fiscal 2003.
11
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
Matthew Bucksbaum....................... 78 Chairman of the Board
John Bucksbaum.......................... 47 Chief Executive Officer
Robert Michaels......................... 60 President and Chief Operating Officer
Bernard Freibaum........................ 51 Executive Vice President and Chief Financial Officer
Jean Schlemmer.......................... 57 Executive Vice President, Asset Management
Joel Bayer.............................. 40 Senior Vice President and Chief Investment Officer
Ronald L. Gern.......................... 45 Senior Vice President and Assistant Secretary
We refer you to "Election of Directors" above for biographical information
concerning Messrs. Matthew Bucksbaum, John Bucksbaum, Bernard Freibaum and
Robert Michaels. Biographical information concerning our other executive
officers is set forth below.
Jean Schlemmer has served as Executive Vice President, Asset Management of
the Company since April 2000. In addition, Ms. Schlemmer serves as an officer of
one of our wholly-owned subsidiaries. Ms. Schlemmer also served as our Senior
Vice President, Asset Management from September 1997 to April 2000, our Senior
Vice President of Leasing from 1995 to September 1997, and our Vice President of
Leasing from 1989 to 1995. Prior to such time, Ms. Schlemmer was the Vice
President of Leasing for The Center Companies from 1986 to 1989 and, from 1984
to 1986, was the President of her own real estate company.
Joel Bayer has served as Senior Vice President and Chief Investment Officer
of the Company since May 2001, Senior Vice President -- Acquisitions of the
Company from March 1998 to May 2001 and as Vice President of the Company from
September 1993 to March 1998. In addition, Mr. Bayer has served and continues to
serve as a director and/or officer of various of our affiliates and wholly-owned
subsidiaries. From July 1988 through August 1993, Mr. Bayer held various
positions with Equity Financial and Management Company.
Ronald L. Gern has served as Senior Vice President and Assistant Secretary
of the Company since December 1997. In addition, Mr. Gern has served and
continues to serve as a director and/or officer of various of our affiliates and
wholly-owned subsidiaries. From 1985 to November 1997, Mr. Gern was employed by
Kravco Company, a shopping center management and development company, acting in
the capacity of Vice President and General Counsel from 1990 to November 1997,
and Counsel from 1985 to 1990. From 1982 to 1985, Mr. Gern was associated with
the law firm of Wolf, Block, Schorr & Solis-Cohen. Mr. Gern is a member and
former Chairman of the ICSC Law Conference Program Committee and a member of the
American College of Real Estate Lawyers.
12
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table discloses compensation received by our Chairman of the
Board, our Chief Executive Officer and our four other most highly compensated
executive officers (together, the "named executive officers") in the three most
recent years.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-------------------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION -------------------------- --------------
-------------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK AWARDS UNDERLYING LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) COMPENSATION ($) ($) OPTIONS (#) PAYOUTS ($)(2)
--------------------------- ---- ---------- ------------ ---------------- ------------ ----------- --------------
Matthew Bucksbaum........... 2003 $225,000 -- -- -- -- --
Chairman of the Board 2002 $200,000 -- -- -- -- --
2001 $200,000 -- -- -- -- --
John Bucksbaum.............. 2003 $225,000 -- -- -- -- --
Chief Executive Officer 2002 $225,000 -- -- -- -- --
2001 $225,000 -- -- -- -- --
Robert Michaels............. 2003 $650,000 $268,270 -- -- 179,661 --
President and Chief 2002 $600,000 $264,645 -- -- 174,069 --
Operating Officer 2001 $550,000 $265,095 -- -- 258,708 $80,113
Bernard Freibaum............ 2003 $850,000 $350,814 -- $1,015,200(3) 339,549 --
Executive Vice President 2002 $800,000 $352,860 -- $2,490,000(4) 332,820 --
and Chief Financial
Officer 2001 $750,000 $361,494 -- -- 268,821 $80,113
Jean Schlemmer.............. 2003 $350,000 $136,938 -- -- 61,068 --
Executive Vice President, 2002 $325,000 $143,349 -- -- 59,223 --
Asset Management 2001 $325,000 $156,648 -- -- 93,540 $33,728
Joel Bayer.................. 2003 $400,000 $165,089 -- $ 761,400(5) 137,796 --
Senior Vice President and 2002 $360,000 $158,787 -- -- 15,753 --
Chief Investment Officer 2001 $360,000 $173,518 -- -- 21,573 $53,408
-------------------------
(1) These bonuses represent amounts earned under the CVA Plan for the year shown
and paid during the following year. For each of Mr. Michaels, Mr. Freibaum,
Ms. Schlemmer and Mr. Bayer, respectively, an additional amount of $80,113,
$80,113, $33,728 and $53,408 was earned during 2001 which represents half
the amount credited to the bonus bank for 1999, the other half of which was
earned in 2000. See footnote (2), below. The amounts credited to the "bonus
bank" are "at risk" in the sense that they will either be earned by such
persons over the following two years or forfeited, depending, primarily, on
the extent to which future annual financial performance goals under the CVA
Plan are achieved. See "Report of the Compensation Committee on Executive
Compensation" for a description of the CVA Plan.
(2) The long-term incentive plan ("LTIP") payouts reported in this column
represent amounts previously credited to an individual's bonus bank for 1999
(see footnote (1), above) that were paid in 2001.
(3) This amount represents the dollar value of stock awarded to Mr. Freibaum,
based upon the closing price per share of our common stock on the date of
grant. The value of the stock as of December 31, 2003 was $1,665,000. This
stock was granted on February 4, 2003, and vested 100% on date of grant.
(4) This amount represents the dollar value of restricted stock awarded to Mr.
Freibaum, based upon the closing price per share of our common stock on the
date of grant. The value of the restricted stock as of December 31, 2003 was
$4,162,500. This restricted stock was granted on September 16, 2002, and
vests in increments of one-third on each of the first through third
anniversaries of the date of grant. Dividends are paid on unvested shares.
(5) This amount represents the dollar value of restricted stock awarded to Mr.
Bayer, based upon the closing price per share of our common stock on the
date of grant. The value of the restricted stock as of December 31, 2003 was
$1,248,750. This restricted stock was granted on February 4, 2003, and vests
in increments of one-third on each of the first through third anniversaries
of the date of grant. Dividends are paid on unvested shares.
13
OPTION GRANTS
The following table provides information on grants of options under the
1993 Stock Incentive Plan (the "1993 Plan") to the named executive officers
during 2003. The 1993 Plan, by its terms, expired on April 4, 2003. For
information related to awards made under the 1998 Plan to the named executive
officers during 2003, see "Long Term Incentive Plan Awards," below.
OPTION GRANTS IN 2003
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR PER SHARE DATE VALUE(1)
---- ---------- ------------- ----------- ---------- ----------
Matthew Bucksbaum..................... -- -- -- -- --
John Bucksbaum........................ -- -- -- -- --
Robert Michaels....................... 150,000 20.5% $16.77 2/4/13 $198,500
Bernard Freibaum...................... 300,000 41.0% $16.77 2/4/13 $396,000
Jean Schlemmer........................ 45,000 6.1% $16.77 2/4/13 $ 59,400
Joel Bayer............................ 120,000 16.4% $16.77 2/4/13 $158,400
-------------------------
(1) This amount was estimated using the Black-Scholes Option Pricing Formula on
the basis of the following assumptions: expected volatility: 16.95%; risk
free rate of return: 4.28%; dividend yield: 6.21%; and expected time until
exercise: 9.9 years.
OPTION EXERCISES AND YEAR-END VALUES
The following table provides information on option exercises during 2003 by
each of the named executive officers and the value of each of such officer's
unexercised in-the-money options at December 31, 2003.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NO. OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END AT YEAR-END
ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------- ---------- ----------- ------------- ----------- -------------
Matthew Bucksbaum.... -- -- -- -- -- --
John Bucksbaum....... 321,000 $2,386,305 24,000 0 $ 408,480 $ 0
Robert Michaels...... 188,730 $1,236,039 0 300,000 $ 0 $3,793,350
Bernard Freibaum..... 297,369 $1,731,617 0 570,000 $ 0 $7,173,175
Jean Schlemmer....... 30,291 $ 238,582 69,330 93,000 $1,038,379 $1,270,965
Joel Bayer........... 189,327 $1,823,739 0 96,000 $ 0 $1,054,080
On December 31, 2003, the closing price per share of our common stock on
the New York Stock Exchange was $27.75.
14
LONG TERM INCENTIVE PLAN AWARDS
The following table provides information on awards under the 1998 Plan to
the named executive officers during 2003.
LONG TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
NO. OF SECURITIES PERFORMANCE OR
UNDERLYING OTHER PERIOD
OPTIONS UNTIL MATURATION
NAME GRANTED(1) OR PAYOUT(2)
---- ----------------- ----------------
Matthew Bucksbaum........................................... 0 --
John Bucksbaum.............................................. 0 --
Robert Michaels............................................. 29,661 --
Bernard Freibaum............................................ 39,549 --
Jean Schlemmer.............................................. 16,068 --
Joel Bayer.................................................. 17,796 --
-------------------------
(1) Awards granted during 2003 under the 1998 Plan are in the form of
threshold-vesting stock options ("TSOs"), which when vested, are exercisable
for shares of common stock. The exercise price of each of the TSOs shown in
this column is $16.77 per share, the fair market value of one share of
common stock on the date of grant.
(2) The TSOs vest, and become exercisable, if shares of common stock achieve and
sustain a threshold market price of $23.52 per share for at least 20
consecutive trading days at any time over the five years following the date
of grant (i.e., on or before February 4, 2007). These TSOs vested on October
24, 2003 and they will be exercisable until February 4, 2012, at which time
they will expire.
STANDARD EMPLOYEE BENEFITS
During 2003, we contributed toward the cost of health, life and disability
insurance for our employees as part of a standard employee benefit package. We
also provided employees the opportunity to contribute pre-tax salary (subject to
applicable limitations) to a company-sponsored 401(k) plan. With the exception
of Matthew Bucksbaum, each of the named executive officers chose to contribute a
portion of his or her salary to the 401(k) plan during 2003, and we made a
matching contribution of $10,000 pursuant to the terms of the 401(k) plan
applicable to all participants on behalf of each of Messrs. John Bucksbaum,
Michaels, Freibaum and Bayer and Ms. Schlemmer.
15
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
GENERAL. The Company's executive compensation program is administered by
the Compensation Committee of the Board of Directors, whose current members are
Alan Cohen (Chair), John Riordan and Beth Stewart. The Compensation Committee's
responsibilities include, among others, determining the level of compensation
paid to our Chief Executive Officer, approving the level of compensation paid to
our other executive officers and determining awards under, and administering,
our Employee Stock Purchase Plan, the CVA Plan, the 1998 Plan, the 2003 Plan and
all other incentive-compensation or equity-based plans which the Company may
adopt from time to time.
EXECUTIVE COMPENSATION POLICY. The Company's compensation policy for
executive officers consists of three key elements:
- a base salary,
- a performance-based annual bonus comprised of both cash and stock
options, and
- periodic grants of stock, stock options and restricted stock.
The Compensation Committee believes that this three-part approach best
serves the interests of the Company and its stockholders. It enables the Company
to recruit and retain highly-qualified individuals by providing them with a
compensation package which is competitive and has financial incentives which are
aligned with the Company's performance. Under this approach, compensation for
these officers involves a portion of pay that is "at risk" -- namely, the annual
cash and stock option bonus. The annual bonus is variable and is based on a
measure of Company performance known as "cash value added," as described below.
Annual stock option awards relate a significant portion of an employee's
long-term remuneration directly to stock price appreciation realized by all of
the Company's stockholders.
BASE SALARY. In establishing the base salary paid to each of our executive
officers for fiscal 2003, the Compensation Committee reviewed the compensation
paid by comparable REITs to their executive officers and determined it to be in
the best interests of the Company and our stockholders for our executive
officers, in all but a few cases, to be generally in the mid portion of the
range. The Compensation Committee also took into account such factors as a
subjective assessment of the nature of the position, the contribution and
experience of the executive officer, and the length of the executive officer's
service to the Company.
ANNUAL BONUS. Since its adoption in 1998, bonus awards for the Company's
executive officers have generally been determined in accordance with the CVA
Plan. The purpose of the CVA Plan is to provide additional incentive
compensation to participants by relating the financial reward of such
participants to the increase in the value of the Company realized by its
stockholders. To date, various members of management of the Company and certain
of its affiliates (excluding Matthew Bucksbaum and John Bucksbaum) have been
designated by the Compensation Committee as participants under the CVA Plan.
In general, "cash value added" or "CVA" is determined to be the excess of
net operating income over a capital charge that is intended to represent the
return expected by the providers of the Company's capital. The Compensation
Committee believes that increases in CVA represent a performance standard that
is closely coordinated with increases in stockholder value.
The CVA Plan is intended to provide a target incentive award generally
ranging from between 1% and 50% of salary for participants. Under the CVA Plan,
the annual bonus award for a participant for a particular year is generally
equal to base salary times target incentive award times performance factor
(although the Compensation Committee may retain the discretion to determine
whether a participant receives all or a portion of such award). The performance
factor is determined by reference to the amount of improvement or deterioration
in CVA measured against established targets based, in part, on prior
performance. The performance factor calculation will produce an amount in excess
of the target incentive award if actual CVA exceeds targeted CVA and will
produce an amount which is less than the target incentive award if actual CVA is
less than targeted CVA.
16
The CVA Plan provides the opportunity for enhanced bonuses, but also uses a
"bonus bank" feature to ensure that increases in CVA are sustained before
extraordinary bonus awards are paid out. Each year, two-thirds of any annual
bonus award in excess of 125% of the target incentive award is added to the
outstanding bonus bank balance. The bonus paid to a participant is equal to the
annual bonus award for the year, up to a maximum of 125% of the target incentive
award, plus one-third of the annual bonus award in excess of 125% of the target
incentive award. In addition, amounts added to the bonus bank in any year are
paid in equal installments over the following two years, unless that amount is
forfeited under the "at risk" rules of the CVA Plan. A bonus bank balance is
considered "at risk" in the sense that in any year the annual bonus award is
negative, the negative annual bonus award amount will be subtracted from the
outstanding bonus bank balance.
The 1998 Plan generally has been integrated with the CVA Plan. Under the
1998 Plan, the Compensation Committee is authorized to grant to employees of the
Company, its subsidiaries and affiliates (other than Matthew Bucksbaum and John
Bucksbaum) stock incentive awards in the form of threshold-vesting stock options
("TSOs"). In any particular year, the number of TSOs to be granted to a
participant under the 1998 Plan will be determined, generally, by multiplying a
participant's annual bonus award under the CVA Plan by a percentage specified by
the Compensation Committee and then dividing the resulting amount by 10% of the
fair market value of a share of common stock on the date the option is granted.
An option granted under the 1998 Plan generally vests after the fair market
value of a share of common stock has sustained a target price level for at least
20 consecutive trading days within the five-year period following the date of
grant of the option.
Compensation under the 1998 Plan is intended to reinforce the attainment of
annual performance goals while encouraging sustained profitable long-term
growth. We believe that the 1998 Plan accomplishes this by providing a portion
of annual compensation in options to purchase common stock, the vesting of which
is tied directly to a sustained increase in our economic value to our
stockholders. By doing so, the 1998 Plan aligns the interests of our management
employees with those of our stockholders.
OTHER AWARDS. Stock option awards under the 1993 Plan have historically
been, and under the 2003 Plan are expected to continue to be, an important
element of our compensation program and have generally been made to our
executive officers either as an inducement to join the Company or in recognition
of exceptional performance. Particular awards have generally been made without
specific reference to any aspect of the Company's performance at such time.
Rather, the Chief Executive Officer has recommended to the Compensation
Committee the size of a particular award based upon a subjective assessments of
factors such as job responsibilities undertaken and efforts expended on behalf
of the Company, contributions to the Company and leadership qualities. Options
granted to executive officers pursuant to the 1993 Plan had an exercise price
equal to the fair market value of the common stock on the date of grant, are for
10-year terms and generally vest in either 33 1/3% or 20% annual increments from
the date of grant, and options to be granted under the 2003 Plan are expected to
have similar terms.
From time to time, the Compensation Committee has granted awards of
restricted stock under the 1993 Plan to our executive officers in recognition,
primarily, of exceptional performance and as a means of rewarding, motivating
and retaining the leadership talent essential for the Company's success. The
terms of these restricted stock awards have varied from individual to
individual. The Company granted awards of an aggregate of 105,000 shares of
restricted stock under the 1993 Plan.
In May 2003, the stockholders of the Company approved the adoption of the
2003 Plan. The 2003 Plan replaces the 1993 Plan which, by its terms, expired on
April 4, 2003. The 2003 Plan provides for awards to be made in the form of stock
options and restricted stock. The Company did not grant any options under the
2003 Plan in fiscal year 2003.
COMPENSATION OF MATTHEW AND JOHN BUCKSBAUM. In establishing the
compensation to be paid to each of Matthew Bucksbaum and John Bucksbaum for
fiscal 2003, the Compensation Committee noted that their salaries were
originally established at subjective levels prior to the Company's initial
public offering in 1993 and, at the request of Matthew Bucksbaum and John
Bucksbaum, had only been moderately adjusted since such time. The Compensation
Committee also recognized the unique position occupied by each of Matthew
17
Bucksbaum and John Bucksbaum by virtue of the Bucksbaums' ownership of an
approximate 17.1% limited partnership interest in the Operating Partnership
(subject to dilution in certain circumstances) and their rights to increase
their ownership in the Company, primarily as trust beneficiaries, to up to 25%
of our outstanding common stock by converting a portion of the units
representing their limited partnership interest in the Operating Partnership
into shares of common stock. See "Stock Ownership -- Common Stock Ownership of
Certain Beneficial Owners," "Stock Ownership -- Equity Ownership of Management,"
and "Certain Relationships and Related Party Transactions." Accordingly, the
compensation paid to Matthew Bucksbaum and John Bucksbaum during 2003 was not
based upon, and had no specific relation to, the Company's performance during
such period. In addition, John Bucksbaum declined to accept a salary increase or
bonus payment from the Company during each of the last three years.
INTERNAL REVENUE CODE SECTION 162(M). As one of the factors in its review
of compensation matters, the Compensation Committee considers the anticipated
tax treatment to the Company and to our executives of various payments and
benefits. The deductibility of some types of compensation payments depends upon
the timing of an executive's vesting or exercise of previously granted rights.
Furthermore, interpretations of and changes in the tax laws and other factors
beyond the Compensation Committee's control also affect the deductibility of
compensation. For these and other reasons, the Committee will not necessarily
limit executive compensation to that deductible under Section 162(m) of the
Internal Revenue Code. The Compensation Committee will consider various
alternatives to preserving the deductibility of compensation payments and
benefits to the extent reasonably practicable and to the extent consistent with
its other compensation objectives.
Respectfully submitted by the
Compensation
Committee,
Alan Cohen (Chair)(1)
John Riordan(2)
Beth Stewart
-------------------------
(1) Chair effective February 12, 2004.
(2) Member effective February 12, 2004.
18
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company is the general partner of the Operating Partnership and is
currently the owner of an approximate 79.6% interest in the Operating
Partnership. Members of the Bucksbaum family currently own an approximate 17.1%
limited partnership interest in the Operating Partnership (subject to dilution
in certain circumstances) and hold certain rights to increase their ownership in
the Company, primarily as trust beneficiaries, by converting a portion of the
units representing their interests in the Operating Partnership into shares of
our common stock representing up to 25% of the outstanding common stock and,
subject to certain limitations, by selling their remaining interests in the
Operating Partnership, if any, to us for cash or common stock, or a combination
thereof, at our election.
Prior to April 30, 2002, we had made a loan program available to our
executive officers in order to facilitate their exercise of options to purchase
shares of our common stock. Pursuant to the loan program, each of Bernard
Freibaum, Robert Michaels and Joel Bayer had issued a promissory note to us
which, as of April 30, 2002, had an outstanding balance (including accrued
interest) of $17,421,687, in the case of Mr. Freibaum, $6,087,901, in the case
of Mr. Michaels, and $3,588,377, in the case of Mr. Bayer. As of April 30, 2002,
the Board of Directors, upon the recommendation of the Compensation Committee,
terminated the availability of the loan program on an on-going basis, and
restructured each executive officer's note by requiring the repayment in cash of
no less than 60% of the principal balance and 100% of the accrued interest due
on such note as of April 30, 2002. The remaining amount due on the officer's
note was represented by a new promissory note in the aggregate principal amount
of $6,930,000, in the case of Mr. Freibaum, $2,000,000, in the case of Mr.
Michaels, and $1,210,571, in the case of Mr. Bayer.
The largest aggregate amount of debt outstanding during the 2003 fiscal
year for Mr. Friebaum's note was $6,270,000, for Mr. Michaels' note was
$1,309,524 and for Mr. Bayer's note was $1,095,279. As of March 31, 2004, the
outstanding balance on Mr. Freibaum's note was $5,115,000; the outstanding
balance on Mr. Michaels' note was $976,191, and the outstanding balance on Mr.
Bayer's note was $893,517. These notes, which bear interest at a rate per annum
equal to LIBOR plus 125 basis points (2.35% at March 31, 2004), are full
recourse to the executive officers, provide for monthly payments of principal
and interest and mature in May 2009 or within 90 days of the officer's
separation from the Company.
General Growth Companies, Inc., a Delaware corporation whose sole
stockholder and director is Matthew Bucksbaum, owns an undivided interest in two
airplanes which were used during 2003 for business travel by certain of our
executive officers, employees and third parties on company business. Aircraft
expenses incurred and paid or payable by us to General Growth Companies, Inc. in
connection with such business travel during 2003 were $819,227.
We are party to a contract with Storetrax, Inc., a web-based retail real
estate listing service, whereby Storetrax lists certain information about our
mall properties on its website to allow brokers and retailers interested in
leasing space to search for and view retail space at our properties. Beth
Stewart, a director of General Growth, serves as Chief Executive Officer and
Chairman of the Board of Storetrax and owns an approximate 40% equity interest
in Storetrax. During fiscal 2003, we paid Storetrax aggregate fees of
approximately $68,000 under the contract, and during fiscal 2004, we anticipate
paying Storetrax approximately the same amount. The contract was entered into on
an arms'-length basis, upon terms we believe to be no less favorable to us than
those generally offered by Storetrax to other companies in our industry.
Because of the Internal Revenue Code's ownership requirements for REITs,
certain of our executive officers, certain trusts for the benefit of the
Bucksbaums and certain of our employees purchase, or in the case of employees,
receive as additional compensation, from time to time, a preferred stock
ownership interest in one or more private REITs in which the Company and/or the
Operating Partnership has an interest. While the aggregate value of all such
preferred stock ownership interests may exceed $60,000 at any time, no
individual's ownership interest in such preferred stock exceeds $60,000 at any
time.
19
PERFORMANCE GRAPH
The graph below compares the five-year cumulative total stockholder return
assuming the investment of $100 on January 1, 1999 (and the reinvestment of
dividends thereafter) in each of General Growth's common stock, the S&P 500
Stock Index, the NAREIT All Equity REIT Index, General Growth's present peer
group (the "2003 Peers") and the peer group reported in General Growth's prior
proxy statement (the "2002 Peers"). The 2002 Peers were comprised of General
Growth, CBL & Associates Properties, Inc., Crown American Realty Trust, The
Macerich Company, Taubman Centers, Inc., Simon Property Group, Inc., Glimcher
Realty Trust, The Mills Corporation and the Rouse Company. The 2003 Peers are
comprised of the same companies as the 2002 Peers, with the exception of Crown
American Realty Trust, which was replaced in the 2003 Peers by Pennsylvania Real
Estate Investment Trust. The comparisons in the graph below are not intended to
forecast the possible future performance of our common stock.
TOTAL RETURN PERFORMANCE
[PERFORMANCE GRAPH]
PERIOD ENDING
INDEX 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
General Growth Properties, Inc. 100.00 78.25 108.20 123.27 175.03 294.65
S&P 500 100.00 121.11 110.34 97.32 75.75 97.40
NAREIT All Equity REIT Index 100.00 95.38 120.53 137.32 142.57 195.51
General Growth Properties 2002 Peers 100.00 85.17 101.50 133.88 167.15 254.65
General Growth Properties 2003 Peers 100.00 85.13 101.93 134.49 167.78 255.68
20
INDEPENDENT AUDITORS
Set forth below is a description of the fees paid by the Company to
Deloitte & Touche LLP for the audit of the Company's consolidated financial
statements for the fiscal years ended December 31, 2003 and 2002 and fees billed
for other services rendered by Deloitte & Touche LLP for those periods.
Representatives of Deloitte & Touche LLP are expected to be present at the
annual meeting to respond to appropriate questions and to make a statement
should they so desire.
FEES BILLED BY INDEPENDENT AUDITORS
Total fees billed to the Company by Deloitte & Touche LLP for fiscal years
ended December 31, 2003 and 2002 aggregated $2,341,000 and $4,458,000,
respectively, and were comprised of the following:
AUDIT FEES. The aggregate fees billed for services rendered in connection
with the audit of the Company's annual financial statements, audits of certain
unconsolidated affiliates of the Company, reviews of the financial statements
included in the Company's Quarterly Reports on Form 10-Q and consents were
$894,000 for the fiscal year ended December 31, 2003 and $510,000 for the fiscal
year ended December 31, 2002.
AUDIT-RELATED FEES. The aggregate fees billed for audit-related services
for the fiscal years ended December 31, 2003 and 2002, were $239,000 and
$65,000, respectively. These fees related to audits in connection with
acquisitions, audits of the Company's retirement savings plan, stand-alone
audits required by certain lenders of the Company, operating expense audits
required by tenants of one of the Company's properties and Sarbanes-Oxley Act
Section 404 advisory services.
TAX FEES. The aggregate fees billed for tax services for the fiscal years
ended December 31, 2003 and 2002 were $508,000 and $425,000 respectively. These
fees related to tax compliance services, tax planning services and federal and
state tax consultation. Fees totaling $271,000 for cost segregation services
performed in 2002 have been reclassified for 2002 as "other fees" from their
prior classification as "tax fees" in order to conform with the presentation of
fees for similar services in 2003.
ALL OTHER FEES. The aggregate fees billed for all other services for the
fiscal years ended December 31, 2003 and 2002 were $700,000 and $3,458,000
respectively. These non-audit services related to completion of the financial
information systems design and implementation which was commenced in 2000, lease
review services and cost segregation studies on completed acquisitions. Services
relating to the financial information systems design and implementation were
completed by the second quarter of 2003.
AUDIT COMMITTEE'S PRE-APPROVAL POLICIES AND PROCEDURES
In February 2003, the Board of Directors, upon the recommendation of the
Audit Committee, adopted an amended and restated Audit Committee Charter which
requires the Audit Committee to pre-approve all auditing services and permitted
non-audit services (including the fees and terms associated with such services)
to be provided by the independent auditors, subject to certain de minimis
exceptions for non-audit services which are approved by the Audit Committee
prior to the completion of the audit. Pre-approval is typically provided at
regularly scheduled Audit Committee meetings, but the Audit Committee has
delegated to its Chair the authority to grant specific pre-approval between
meetings as necessary, provided the matter is then presented to the full Audit
Committee at the next scheduled meeting. The Audit Committee has granted
pre-approval for routine and recurring audit, non-audit and tax services, in
each case with fees less than $10,000, so long as the services are directly
related to the performance of specifically pre-approved services and that the
performance and cost of each such service is promptly reported to the Audit
Committee.
In pre-approving the services generating fees in 2003, the Audit Committee
has not relied on the de minimis exception to the SEC pre-approval requirements
applicable to audit-related, tax and all other permitted non-audit services.
21
PROPOSAL 2 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee has selected Deloitte & Touche LLP as the Company's
independent auditors to conduct the audit of the Company's financial statements
for the fiscal year ending December 31, 2004. Deloitte & Touche LLP, a
registered accounting firm, also served as the Company's independent auditors
for the fiscal years ended December 31, 2003 and 2002. We are submitting the
selection of independent auditors for shareholder ratification at the Annual
Meeting.
Although ratification by stockholders is not required by our organizational
documents or other applicable law, the Audit Committee has determined that a
policy of requesting ratification by stockholders of its selection of
independent auditors is a matter of good corporate practice. If stockholders do
not ratify the selection, the Audit Committee will reconsider whether or not to
retain Deloitte & Touche LLP, but may still retain them. Even if the selection
is ratified, the Audit Committee, in its discretion, may change the appointment
at any time during the year if it determines that such a change would be in the
best interest of the Company and its stockholders.
The Board of Directors recommends a vote "FOR" ratification of the
selection of Deloitte & Touche LLP as the Company's independent auditors for the
fiscal year ending December 31, 2004.
STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
Notice of any stockholder proposal that is intended to be included in our
proxy statement and form of proxy for next year's annual meeting must be
received by us at our principal executive offices no later than December 6,
2004. Such notice must be in writing and must comply with the other provisions
of Rule 14a-8 under the Securities Exchange Act of 1934. In addition, the
persons named in the proxy for the next annual meeting will have discretionary
authority to vote with respect to any matter that is brought by any stockholder
during the meeting and that is not described in the proxy statement for such
meeting if we receive notice before February 7, 2005 or after March 9, 2005 that
such matter would be raised at the meeting. Any notices regarding stockholder
proposals must be received by us at our principal executive offices at 110 North
Wacker Drive, Chicago, Illinois, 60606, Attention: Corporate Secretary.
22
GENERAL GROWTH PROPERTIES, INC. PROXY
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Matthew Bucksbaum, John Bucksbaum and Marshall E. Eisenberg, and each of them, are hereby constituted and appointed the lawful
attorneys and proxies of the undersigned, with full power of substitution, to vote and act as proxy with respect to all shares of
common stock, $.01 par value, of GENERAL GROWTH PROPERTIES, INC., standing in the name of the undersigned on the Company's books at
the close of business on March 17, 2004, at the Annual Meeting of Stockholders to be held at the Company's principal executive
offices, 110 North Wacker Drive, Chicago, Illinois, at 9:00 a.m., local time, on May 5, 2004, or at any postponement(s) or
adjournment(s) thereof, as follows:
The powers hereby granted may be exercised by any of said attorneys or proxies or their substitutes present and acting at the
above-described Annual Meeting of Stockholders or any postponement(s) or adjournment(s)) thereof, or, if only one be present and
acting, then by that one. The undersigned hereby revokes any and all proxies heretofore given by the undersigned to vote at said
meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2 AND IN THE DISCRETION OF THE PROXIES UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING.
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Address Change/Comments (Mark the corresponding box on the reverse side)
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YOU CAN NOW ACCESS YOUR GENERAL GROWTH PROPERTIES, INC. ACCOUNT ONLINE.
Access your General Growth Properties, Inc. stockholder account online via Investor ServiceDirect(R) (ISD).
Mellon Investor Services LLC, Transfer Agent for General Growth Properties, Inc. now makes it easy and convenient to get current
information on your shareholder account.
o View account status o view payment history for dividends
o View certificate history o Make address changes
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o Establish/change your PIN
VISIT US ON THE WEB At http://www.mellowinvestor.com
CALL 1-877-978-7778 BETWEEN 9AM-7PM
MONDAY-FRIDAY EASTERN TIME
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2: Please [ ]
Mark Here
for Address
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SEE REVERSE SIDE
FOR all nominees WITHHOLD AUTHORITY
listed to the to vote for all
left (except as nominees listed
marked to the contrary to the left FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS: [ ] [ ] 2. Ratification of the [ ] [ ] [ ]
selection of
NOMINEES: independent auditors.
01 John Bucksbaum
02 Alan Cohen 3. In their discretion, the proxies are authorized to vote
03 Anthony Downs upon such other business as may properly come before the
meeting or any postponement(s) or adjournment(s) thereof.
(Instruction: To withhold authority to vote for any CONSENTING TO RECEIVE ALL FUTURE ANNUAL MEETING MATERIALS AND
individual nominee, write that nominee's name on the SHAREHOLDER COMMUNICATIONS ELECTRONICALLY IS SIMPLE AND FAST!
space provided below.) Enroll today at www.melloninvestor.com/ISD for secure online
access to your proxy materials, statements, tax documents and
other important shareholder correspondence.
--------------------------------------------------------- Mark here if you plan to attend the meeting { ]
Signature____________________________ Signature ___________________________________________ Date____________________________________
(Please sign this proxy as your name appears on the Company's corporate records. Joint owners should each sign personally.
Trustees and others signing in a representative capacity should indicate the capacity in which they sign.)
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Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER
AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
------------------------------------ --------------------------------- -------------------------------
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Use the Internet to vote your proxy. Use any touch-tone telephone to and
Have your proxy card in hand when OR vote your proxy. Have your proxy OR return it in the
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