UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
the Securities Act of 1934
Date of Report (Date of Earliest Event Reported)
May 11, 2004
General Growth Properties, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-11656 42-1283895
-------- ------- ----------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
incorporation) Number)
110 N. Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
(312) 960-5000
--------------
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
ONLY THOSE ITEMS AMENDED ARE REPORTED HEREIN.
The registrant hereby amends its Current Report on Form 8-K signed May 24,
2004 as follows:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Listed below are the financial statements, pro forma financial information
and exhibits filed as a part of this report:
(a) Financial Statements of Businesses Acquired.
The statements of certain revenues and certain expenses of The Grand Canal
Shoppes and the statements of revenues and certain operating expenses of the
Mall of Louisiana as listed in the accompanying Index to Financial Statements
are filed as part of this Current Report on Form 8-K/A.
(b) Pro Forma Financial Information.
The pro forma financial information of General Growth Properties, Inc.
(the "Company") listed in the accompanying Index to Financial Statements and Pro
Forma Financial Information is filed as part of this Current Report on Form
8-K/A.
(c) Exhibits.
See the Exhibit Index attached hereto and incorporated herein by
reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL GROWTH PROPERTIES, INC.
By: /s/ Bernard Freibaum
--------------------------------------
Bernard Freibaum
Executive Vice President and
Chief Financial Officer
Date: August 2, 2004
EXHIBIT INDEX
EXHIBIT
NUMBER NAME
23.1 Consent of Deloitte & Touche LLP regarding The Grand Canal Shoppes.
23.2 Consent of KPMG LLP regarding the Mall of Louisiana.
INDEX TO FINANCIAL STATEMENTS AND
PRO FORMA FINANCIAL INFORMATION
The following historical financial statements and pro forma financial
information is presented in accordance with Rule 3-14 and Article 11,
respectively, of Regulation S-X of the United States Securities and Exchange
Commission. The historical financial statements have been audited only for
certain properties acquired and only for their respective most recent fiscal
year as the transactions relating to these property acquisitions (as described
in the registrant's Current Report on Form 8-K signed May 24, 2004, as amended
by this report on Form 8-K/A) did not involve a related party and the
registrant, after reasonable inquiry, is not aware of any material factors
related to the properties not otherwise disclosed that would cause the reported
historical financial information to not be necessarily indicative of future
operating results. In accordance with Rule 3-14 of Regulation S-X of the United
States Securities and Exchange Commission, certain unaudited financial
information for properties acquired during 2004 that are not individually
significant has also been presented. In addition, as the properties will be
directly or indirectly owned by entities that will elect or have elected to be
treated as real estate investment trusts (as specified under sections 856-860 of
the Internal Revenue Code of 1986) for Federal income tax purposes, a
presentation of estimated taxable operating results is not applicable.
THE GRAND CANAL SHOPPES
Independent Auditors' Report.................................................................... F-2
Statements of Certain Revenues and Certain Expenses for the Year Ended December 31, 2003
and for the Three Months Ended March 31, 2004 (unaudited)..................................... F-3
Notes to Statements of Certain Revenues and Certain Expenses.................................... F-4 to F-5
MALL OF LOUISIANA
Independent Auditors' Report.................................................................... F-6
Statements of Revenues and Certain Operating Expenses for the Year Ended December 31, 2003
and for the Three Months Ended March 31, 2004 (unaudited)..................................... F-7
Notes to Statements of Revenues and Certain Operating Expenses.................................. F-8 to F-9
GENERAL GROWTH PROPERTIES, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 2003....................................................................... F-10
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
Year Ended December 31, 2003.................................................................. F-11 to F-17
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Three
Months Ended March 31, 2004................................................................... F-18
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
Three Months Ended March 31, 2004............................................................. F-19 to F-23
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2004................... F-24
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 2004................................................................................ F-25 to F-26
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
General Growth Properties, Inc.:
We have audited the accompanying statement of certain revenues and certain
expenses of The Grand Canal Shoppes (the "Property") for the year ended December
31, 2003. This statement is the responsibility of General Growth Properties,
Inc.'s management. Our responsibility is to express an opinion on this statement
based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the statement.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of certain revenues and certain expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission (for inclusion in the filing of Form 8-K/A of General
Growth Properties, Inc. as a result of the acquisition of the Property).
Material amounts, described in Note 1 to the statement of certain revenues and
certain expenses that would not be directly attributable to those resulting from
future operations of the Property are excluded, and the statement is not
intended to be a complete presentation of the Property's revenues and expenses.
In our opinion, such statement presents fairly, in all material respects,
certain revenues and certain expenses of the Property for the year ended
December 31, 2003 in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
Chicago, Illinois
July 27, 2004
F-2
THE GRAND CANAL SHOPPES
STATEMENTS OF CERTAIN REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 2003
AND THREE MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
(DOLLARS IN THOUSANDS)
Year Ended Three Months ended
December 31, 2003 March 31, 2004
(unaudited)
----------------- ------------------
Certain revenues:
Minimum rents $ 21,416 $ 5,603
Tenant charges 20,316 6,051
Other - -
----------------- ------------------
Total certain revenues 41,732 11,654
Certain expenses:
Real estate taxes 1,174 295
Other property operating 17,661 4,575
Provision for doubtful accounts - -
----------------- ------------------
Total certain expenses 18,835 4,870
----------------- ------------------
Certain revenues in excess of certain expenses $ 22,897 $ 6,784
================= ==================
The accompanying notes are an integral part of these statements.
F-3
THE GRAND CANAL SHOPPES
NOTES TO STATEMENTS OF CERTAIN REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 2003
AND THREE MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
(DOLLARS IN THOUSANDS)
1. ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION AND PROPERTY ACQUIRED
On May 17, 2004, General Growth Properties, Inc. (the "Company") completed
the acquisition of the Grand Canal Shoppes (the "Property") located in Las
Vegas, Nevada. The purchase price of approximately $766,000 was funded with the
proceeds from a new $427,000 non-recourse mortgage loan and a new unsecured term
loan. The new mortgage loan bears interest at a rate per annum of 4.78%,
provides for monthly payments of principal and interest and is scheduled to
mature in May 2009. The new term loan, with an initial funding of $350,000 but
with a total available capacity of up to $800,000, currently bears interest at a
rate per annum of LIBOR plus 115 basis points on the current outstanding
principal balance, requires monthly payments of interest only, and is scheduled
to mature in May 2009. The interest rate on the term loan may vary in the future
depending upon the Company's future leverage ratios, changes in LIBOR rates and
the length of LIBOR contracts. However, with respect to the initial funding of
the term loan, the Company has fixed the interest rate to be paid through the
use of interest rate swaps to approximately 3.435%. The Property, which opened
in 1999, consists of substantially all the enclosed retail area within the
Venetian Casino and Resort complex and contains a total of approximately 536,000
square feet of leaseable area featuring restaurants such as Wolfgang Puck's
Postrio and Grand Lux Cafe and high-end retail offerings including Kenneth Cole,
Movado and Burberry. The occupancy of the Property as of March 31, 2004 was
approximately 100%.
(B) BASIS OF PRESENTATION
The accompanying statements of certain revenues and certain expenses have
been prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission and are not intended to be a complete
presentation of the actual operations of the Property for the periods presented.
In addition, certain items that may not be comparable to the future operations
of the Property have been excluded. Excluded items consist of certain revenues,
primarily rental income and associated expenses related to certain tenant spaces
or activities within the complex which were not purchased by the Company, and
certain expenses, primarily depreciation and amortization expense, interest
expense, management fees and advisory and other costs not directly related to
the future operations of the Property.
(C) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION - All leases are classified as operating leases. Rental
revenue is recognized on a straight-line basis over the term of the individual
leases. Overage rents, which are based upon the level of sales achieved by the
lessee, are recognized when the contractual sales levels are achieved.
Recoveries from tenants for common area maintenance, real estate taxes,
insurance and other shopping center operating expenses are recognized as
revenues in the period the applicable costs are incurred.
OTHER PROPERTY OPERATING EXPENSES - Other property operating expenses represent
the direct expenses of operating the Property and consist primarily of common
area maintenance, security, utilities, insurance, advertising and promotion,
general and administrative, and other operating expenses that are expected to
continue in the ongoing operation of the Property.
F-4
THE GRAND CANAL SHOPPES
NOTES TO STATEMENTS OF CERTAIN REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 2003
AND THREE MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
(DOLLARS IN THOUSANDS)
USE OF ESTIMATES - The preparation of the statements of certain revenues and
certain expenses in conformity with accounting principles generally accepted in
the United States of America requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
periods presented. Actual results could differ from these estimates.
2. RENTALS UNDER OPERATING LEASES
Principal operations consist of leasing building space to commercial
tenants under operating leases.
Overage rents are based upon a percentage of the tenant's gross sales in excess
of contractual tenant lease thresholds and amounted to approximately $7,051 for
the year ended December 31, 2003, and $2,554 (unaudited) for the three months
ended March 31, 2004 and are included in tenant charges.
At December 31, 2003, minimum future rental income on noncancelable operating
leases was as follows:
Year ending December 31:
2004......................................... $ 21,653
2005......................................... 20,804
2006......................................... 18,878
2007......................................... 18,415
2008......................................... 17,566
Thereafter................................... 20,312
Minimum future rental income does not include amounts which are payable by
certain tenants based upon a percentage of their gross sales or as reimbursement
of operating expenses.
3. UNAUDITED INTERIM STATEMENT
The statement of certain revenues and certain expenses for the three
months ended March 31, 2004 is unaudited. In the opinion of management, all
significant adjustments necessary for a fair presentation of the statement for
the interim period have been included. The certain revenues in excess of certain
expenses for the interim period are not necessarily indicative of the results to
be expected for a full year of operations of the Property.
F-5
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
General Growth Properties, Inc.:
We have audited the accompanying statement of revenues and certain operating
expenses of Mall of Louisiana (the Property) for the year ended December 31,
2003. This statement of revenues and certain operating expenses is the
responsibility of the Property's management. Our responsibility is to express an
opinion on this statement of revenues and certain operating expenses based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues and certain operating expenses was
prepared for the purpose of complying with Rule 3-14 of Regulation S-X of the
Securities and Exchange Commission and for inclusion in the Form 8-K/A of
General Growth Properties, Inc. as described in Note 1. The presentation is not
intended to be a complete presentation of the Property's revenues and expenses.
In our opinion, the statement of revenues and certain operating expenses
presents fairly, in all material respects, the revenues and certain operating
expenses described in Note 2 of Mall of Louisiana for the year ended December
31, 2003, in conformity with accounting principles generally accepted in the
United States of America.
/s/ KPMG LLP
New York, New York
July 13, 2004
F-6
MALL OF LOUISIANA
STATEMENTS OF REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2003
AND THE THREE MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
(DOLLARS IN THOUSANDS)
Year ended Three months ended
December 31, 2003 March 31, 2004
(unaudited)
----------------- ------------------
Revenues:
Rental income $ 11,286 $ 2,888
Reimbursement income 6,633 1,639
Other 1,877 268
----------------- ------------------
Total revenues 19,796 4,795
----------------- ------------------
Certain operating expenses:
Real estate taxes 648 162
Property operating expenses 5,220 1,230
Bad debts 251 103
Loss on retirement of property 834 7
Donation of land 340 -
----------------- ------------------
Total certain operating expenses 7,293 1,502
----------------- ------------------
Excess of revenues over certain operating expenses $ 12,503 $ 3,293
================= ==================
The accompanying notes are an integral part of these statements.
F-7
MALL OF LOUISIANA
NOTES TO STATEMENTS OF REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2003
AND THE THREE MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION
(A) ORGANIZATION AND PROPERTY ACQUIRED
The construction of the Mall of Louisiana (the Property) was started in
1996 and completed in October 1997, at which time the Property started
operations. The Property is an approximate 350,000 square foot regional shopping
center located in Baton Rouge, Louisiana and is leased to various retailers. At
December 31, 2003 and March 31, 2004, the Property was 94% and 91% occupied,
respectively.
In July of 2003, the Property donated land with a book value of $340 to
the East Baton Rouge Parish.
On May 12, 2004, General Growth Properties, Inc. (the Company) completed
the acquisition of a 100% interest in the Property. The purchase price of
$265,000 and the assets acquired were as described in the Company's report on
Form 8-K dated April 26, 2004.
(B) BASIS OF PRESENTATION
The accompanying statement of revenues and certain operating expenses has
been prepared for the purpose of complying with the provisions of Article 3-14
of Regulation S-X promulgated by the Securities and Exchange Commission (the
SEC), which requires certain information with respect to real estate operations
to be included with certain filings with the SEC. The statement includes the
historical revenues and certain operating expenses of the Property, exclusive of
interest income, depreciation and amortization, interest expense and management
fees, which may not be comparable to the corresponding amounts reflected in the
future operations of the Property.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) REVENUE RECOGNITION - Rental revenues are recognized as income when
earned and when they can be reasonably estimated. In accordance with Statement
of Financial Accounting Standards No. 13, Accounting for Leases, the Property
recognizes the effects of scheduled rent increases and rent abatements on a
straight-line basis over the term of the lease. This requires that rental income
be recognized in equal annual amounts over the term of the lease. Generally, the
leases require tenants to reimburse the Property for real estate taxes and
operating expenses applicable to their leased premises. These costs and
reimbursements have been included in operating expenses and revenues,
respectively. Revenues also include percentage rent that tenants are required to
pay in accordance with the terms of their leases, as these revenues are
recognized in income when earned and their amounts can be reasonably estimated.
(B) PROPERTY OPERATING EXPENSES - Property operating expenses represent the
direct expenses of operating the Property and consist primarily of common area
maintenance, security, utilities, insurance, advertising and promotion, general
and administrative, and other operating expenses that are expected to continue
in the ongoing operation of the Property.
(C) ESTIMATES - The preparation of the statements in conformity with accounting
principles generally accepted in the United States of America requires the
Property's management to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
F-8
MALL OF LOUISIANA
NOTES TO STATEMENTS OF REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2003
AND THE THREE MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
(DOLLARS IN THOUSANDS)
(D) LOSS ON RETIREMENT OF PROPERTY - During 2003 and 2004, certain tenants
vacated their space before their leases expired and the Property wrote-off the
unamortized portion of tenant improvements and deferred leasing commissions,
which amounted to $834 and $7 (unaudited), respectively.
3. RENTAL INCOME UNDER OPERATING LEASES
The following is a schedule of future annual minimum base rental income
under noncancelable operating leases in effect as of December 31, 2003:
AMOUNT
--------------------
Year ending December 31:
2004 $ 11,497
2005 11,718
2006 11,577
2007 11,643
2008 5,403
Thereafter 17,198
--------------------
$ 69,036
====================
The above table does not include option or renewal periods and also excludes
contingent rentals, which may be received on the basis of a percentage of
tenants' sales, and common area maintenance charges and real estate tax
reimbursements.
Percentage rentals (included in other income) are based upon a percentage of the
tenant's gross sales and amounted to approximately $747 for the year ended
December 31, 2003, and $1 (unaudited) for the three months ended March 31, 2004.
4. UNAUDITED INTERIM STATEMENT
The statement of revenues and certain operating expenses for the three
months ended March 31, 2004 is unaudited. In the opinion of management, all
significant adjustments necessary for a fair presentation of the statement of
revenues and certain operating expenses for the interim period have been
included. The results of operations for the interim period are not necessarily
indicative of the results to be expected for a full year of operations of the
Property.
F-9
GENERAL GROWTH PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED)
Previously 2003 2003
Historical Reported Acquisitions General Growth Historical
General Growth Historical 2003 Pro Forma Properties, Inc. Grand Canal
Properties, Inc. (1) Acquisitions (2) Adjustments Pro Forma Shoppes
-------------------- ---------------- ----------- ---------------- -----------
Revenues
Minimum rent $ 781,675 $ 108,927 $ 7,922 a $ 898,524 $ 21,416
Tenant charges 368,640 59,034 - 427,674 20,316
Other 120,413 5,852 (1,951) a 124,314 -
------------ --------- ---------- ---------- -----------
Total revenues 1,270,728 173,813 5,971 1,450,512 41,732
------------ --------- ---------- ---------- -----------
Expenses:
Real estate taxes 89,038 16,457 - 105,495 1,174
Other property operating 390,177 45,072 - 435,249 17,661
Provision for doubtful accounts 7,009 340 - 7,349 -
Depreciation and amortization 231,172 5,806 30,566 b 267,544 -
------------ --------- ---------- ---------- -----------
Total Expenses 717,396 67,675 30,566 815,637 18,835
------------ --------- ---------- ---------- -----------
Operating Income 553,332 106,138 (24,595) 634,875 22,897
Interest expense, net (276,235) - (42,150) c (318,385) -
Equity in unconsolidated affiliates:
GGP Ivanhoe III 9,085 - (9,085) d - -
GGP Ivanhoe IV 594 - 447 d 1,041 -
Town East 3,595 - - 3,595 -
GGP/NIG Brazil - - - - -
Riverchase - - - - -
Other joint ventures 81,206 - - 81,206 -
------------ --------- ---------- ---------- -----------
Income before minority interest 371,577 106,138 (75,383) 402,332 22,897
Allocations to minority interests (112,111) - (8,493) e (120,604) -
------------ --------- ---------- ---------- -----------
Income from continuing operations 259,466 106,138 (83,876) 281,728 22,897
Convertible preferred stock dividends (13,030) - - (13,030) -
------------ --------- ---------- ---------- -----------
Income from continuing operations
available to common stockholders $ 246,436 $ 106,138 $ (83,876) $ 268,698 $ 22,897
============ ========= ========== ========== ===========
Weighted average shares outstanding -
basic 200,874,795
Weighted average shares outstanding -
diluted 215,078,600
Income from continuing operations per
share - basic $ 1.23
Income from continuing operations per
share - diluted $ 1.20
2004 2004
Historical Historical Total Acquisitions Total
Mall of Other 2004 Historical Pro Forma Pro Forma
Lousiana Acquisitions Combined Adjustments Combined
-------- ------------ --------- ------------ ------------
Revenues
Minimum rent $ 11,286 $ 45,953 $ 78,655 $ 17,125 a $ 994,304
Tenant charges 6,633 28,048 54,997 746 a 483,417
Other 1,877 1,530 3,407 (2,169) a 125,552
-------- -------- --------- --------- -------------
Total revenues 19,796 75,531 137,059 15,702 1,603,273
-------- -------- --------- --------- -------------
Expenses:
Real estate taxes 648 7,278 9,100 - 114,595
Other property operating 6,394 21,811 45,866 - 481,115
Provision for doubtful accounts 251 386 637 - 7,986
Depreciation and amortization - 1,918 1,918 38,659 b 308,121
-------- -------- --------- --------- -------------
Total Expenses 7,293 31,393 57,521 38,659 911,817
-------- -------- --------- --------- -------------
Operating Income 12,503 44,138 79,538 (22,957) 691,456
Interest expense, net - - - (45,373) c (363,758)
Equity in unconsolidated affiliates:
GGP Ivanhoe III - - - - -
GGP Ivanhoe IV - - - - 1,041
Town East - - - (3,595) d -
GGP/NIG Brazil - 955 955 (1,037) d (82)
Riverchase - 8,125 8,125 (6,658) d 1,467
Other joint ventures - - - - 90,286
-------- -------- --------- --------- -------------
Income before minority interest 12,503 53,218 88,618 (79,620) 411,330
Allocations to minority interests - - - (3,775) e (124,379)
-------- -------- --------- --------- -------------
Income from continuing operations 12,503 53,218 88,618 (83,395) 286,951
Convertible preferred stock dividends - - - - (13,030)
-------- -------- --------- --------- -------------
Income from continuing operations
available to common stockholders $ 12,503 $ 53,218 $ 88,618 $ (83,395) $ 273,921
======== ======== ========= ========= =============
Weighted average shares outstanding -
basic 200,874,795
Weighted average shares outstanding -
diluted 215,078,600
Income from continuing operations per
share - basic $ 1.36
Income from continuing operations per
share - diluted $ 1.33
(1) Amounts are derived from the statements included in the Company's Form
10-K for the Year Ended December 31, 2003
(2) Amounts are derived from the pro forma statements included in the
footnotes to the Company's December 31, 2003 financial statements
except that Burlington Mall, acquired January 7, 2004, has been
reflected as a 2004 acquisition and as a consolidated joint venture and
certain amounts have been updated to reflect more current information.
The accompanying notes are an integral part of these statements.
For alphabetical references, please refer to Note 3-Pro Forma Adjustments.
F-10
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)
NOTE 1 PRO FORMA BASIS OF PRESENTATION
This unaudited pro forma condensed consolidated statement of operations of
General Growth Properties, Inc. (the "Company") is presented as if (i) the
acquisitions made in 2003 (Peachtree Mall, Saint Louis Galleria, Coronado
Center, the remaining 49% interest in GGP Ivanhoe III, Lynnhaven Mall, Sikes
Senter, the Maine Mall, Glenbrook Square, Foothills Mall and Shops, Chico Mall
and Rogue Valley Mall) and (ii) the acquisitions made in 2004 (Burlington Town
Center, Redlands Mall, the remaining 50% general partnership interest in Town
East Mall, Four Seasons Town Centre, the 50% interest in Riverchase Galleria,
Mall of Louisiana, The Grand Canal Shoppes and a United States enclosed mall
contracted for on July 30, 2004, and the 33 1/3% and the 50% ownership interests
in GGP/Sambil Costa Rica and GGP/NIG Brazil, respectively, (as defined below))
had all occurred on January 1, 2003. The total pro forma condensed consolidated
statement of operations reflects these transactions plus the effect of the joint
venture partnership agreement modifications with respect to the Town East Mall,
and the GGP/Ivanhoe III and GGP/Ivanhoe IV properties (as described below). In
management's opinion, all adjustments necessary to reflect these transactions
have been included. The pro forma condensed consolidated statement of operations
is based upon the historical financial information of the Company, excluding
discontinued operations, and the historical financial information of each of the
above-mentioned entities for the year ended December 31, 2003. The Company
conducts substantially all of its business through GGP Limited Partnership (the
"Operating Partnership") of which the Company owns an approximate 79.65%
interest. General Growth Management, Inc. ("GGMI") is 100% owned by the
Operating Partnership and manages, leases and performs various other services
for properties owned by unaffiliated third parties and the properties owned
jointly with unaffiliated partners. This unaudited pro forma condensed
consolidated statement of operations should be read in conjunction with the
Statements of Certain Revenues and Certain Expenses for the Grand Canal Shoppes
and the Statements of Revenues and Certain Operating Expenses of Mall of
Louisiana included elsewhere in this report and such pro forma financial
information may not necessarily be indicative of what actual results of the
Company would have been if such transactions had been completed as of January 1,
2003, nor does it purport to represent the results of operations for future
periods.
NOTE 2 ACQUISITIONS
2003 ACQUISITIONS
On April 30, 2003, the Company acquired Peachtree Mall, an enclosed
regional mall located in Columbus, Georgia. The purchase price was approximately
$87,600, which was paid at closing with an acquisition loan of approximately
$53,000 (bearing interest at a rate per annum of LIBOR plus 85 basis points and
maturing in April 2008, assuming all no-cost extension options are exercised)
and the balance from cash on hand and amounts borrowed under the Company's
credit facilities.
On June 11, 2003, the Company acquired Saint Louis Galleria, an enclosed
mall in St. Louis, Missouri. The aggregate consideration paid for Saint Louis
Galleria was approximately $235,000 (subject to certain prorations and
adjustments). The consideration was paid from cash on hand, proceeds from
refinancings of existing long-term debt, and an approximately $176,000
acquisition loan which bears interest at LIBOR plus 165 basis points. The loan
requires monthly payments of interest-only and is scheduled to mature in June
2008 assuming all no-cost extension options are exercised.
F-11
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)
On June 11, 2003, the Company acquired Coronado Center, an enclosed mall
in Albuquerque, New Mexico. The aggregate consideration paid for Coronado Center
was approximately $175,000 (subject to certain prorations and adjustments). The
consideration was paid in the form of cash borrowed under the Company's credit
facilities and an approximately $131,000 acquisition loan which initially bore
interest at LIBOR plus 85 basis points. In September 2003, $30,000 was repaid
under the acquisition loan and, pursuant to the original loan terms, the
interest rate spread on the loan was reset to LIBOR plus 91 basis points. The
loan requires monthly payments of interest-only and is scheduled to mature in
October 2008 assuming all no-cost extension options are exercised.
On July 1, 2003, the Company acquired the 49% ownership interest in GGP
Ivanhoe III, Inc. ("GGP Ivanhoe III") which was held by the Company's joint
venture partner (an affiliate of Ivanhoe Cambridge, Inc. of Montreal, Canada
("Ivanhoe")), thereby increasing the Company's ownership interest to a full
100%. The aggregate consideration for the 49% ownership interest in Ivanhoe III
was approximately $459,000 (subject to certain prorations and adjustments).
Approximately $268,000 of existing mortgage debt was assumed in connection with
this acquisition with the balance of the aggregate consideration, or
approximately $191,000, being funded from proceeds from the refinancing of
existing long-term debt and new mortgage loans on previously unencumbered
properties. Concurrently with this transaction, a new joint venture, GGP Ivanhoe
IV, Inc., ("GGP Ivanhoe IV") was created between the Company and Ivanhoe to own
Eastridge Mall, which previously had been owned by GGP Ivanhoe III. The
Company's ownership interest in GGP Ivanhoe IV is 51% and Ivanhoe's ownership
interest is 49%.
On August 27, 2003, the Company acquired Lynnhaven Mall, an enclosed mall
in Virginia Beach, Virginia for approximately $256,500. The consideration (after
certain prorations and adjustments) was paid in the form of cash borrowed under
an existing unsecured credit facility and a $180,000 interest-only acquisition
loan. The acquisition loan currently bears interest at a rate per annum of LIBOR
plus 125 basis points and is scheduled to mature in August 2008, assuming the
exercise of all no-cost extension options.
On October 14, 2003, the Company acquired Sikes Senter, an enclosed mall
located in Wichita Falls, Texas. The purchase price was approximately $61,000,
which was paid at closing with an acquisition loan of approximately $41,500
(bearing interest at a rate per annum of LIBOR plus 70 basis points and
scheduled to mature in November 2008, assuming all no-cost extension options are
exercised) and the balance from cash on hand and amounts borrowed under the
Company's credit facilities.
On October 29, 2003, the Company acquired The Maine Mall, an enclosed mall
in Portland, Maine. The purchase price paid for The Maine Mall was approximately
$270,000 (subject to certain prorations and adjustments). The consideration was
paid in the form of cash borrowed under the Company's credit facilities and an
approximately $202,500 acquisition loan. During March 2004, a $40,500 paydown
was made and the loan now bears interest at LIBOR plus 125 basis points. The
loan requires monthly payments of interest-only and matures in October 2008,
assuming exercise by the Company of all no-cost extension options.
F-12
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)
On October 31, 2003, the Company acquired Glenbrook Square, an enclosed
mall in Fort Wayne, Indiana. The purchase price paid for Glenbrook Square was
approximately $219,000 (subject to certain prorations and adjustments). The
consideration was paid from cash on hand, proceeds from refinancings of existing
long-term debt and by an approximately $164,250 acquisition loan which currently
bears interest at LIBOR plus 108 basis points. The loan requires monthly
payments of interest only and is scheduled to mature in April 2009 (assuming the
exercise by the Company of all no-cost extension options).
On December 5, 2003, the Company acquired Foothills Mall and Shops, four
adjacent shopping centers in Foothills, Colorado. The purchase price paid was
approximately $100,500 (subject to certain prorations and adjustments). The
consideration was paid from cash on hand, including borrowings under an existing
line of credit, approximately $45,750 in assumed debt and approximately $26,637
in new 6.5% convertible preferred units of Operating Partnership interests. The
assumed debt requires monthly payments of principal and interest, bears interest
at a weighted average rate per annum of approximately 6.6% and matures in
September 2008. The $26,637 of 6.5% preferred units are comprised of 532,750
preferred units which are convertible, with certain restrictions, at any time
by the holder to common units of the Operating Partnership (initially at the
rate of 1.508 common units for each preferred unit).
On December 23, 2003, the Company acquired Chico Mall, an enclosed mall in
Chico, California. The purchase price paid for Chico Mall was approximately
$62,390 (subject to certain prorations and adjustments). The consideration was
paid in the form of cash borrowed under an existing unsecured revolving credit
facility and the assumption of approximately $30,600 in existing long-term
mortgage indebtedness that currently bears interest at a rate per annum of 7.0%.
The loan requires monthly payments of principal and interest and is scheduled to
mature in March 2005.
On December 23, 2003, the Company acquired Rogue Valley Mall, an enclosed
mall in Medford, Oregon. The purchase price paid for Rogue Valley Mall was
approximately $57,495 (subject to certain prorations and adjustments). The
consideration was paid from cash on hand, proceeds from borrowings under an
existing unsecured revolving credit facility, and by the assumption of
approximately $28,000 in existing long-term mortgage indebtedness that currently
bears interest at a rate per annum of 7.85%. The loan requires monthly payments
of principal and interest and is scheduled to mature in January 2011.
2004 ACQUISITIONS
On January 7, 2004, the Company acquired a 50% membership interest in a
newly formed limited liability company ("Burlington LLC") which owns Burlington
Town Center, an enclosed mall in Burlington, Vermont. The aggregate
consideration for the 50% ownership interest in Burlington Town Center was
approximately $10,250 (subject to certain prorations and adjustments).
Approximately $9,000 was funded in cash by the Company at closing with the
remaining amounts to be funded in cash in 2004 as necessary. In addition, at
closing the Company made a $31,500 mortgage loan to Burlington LLC to replace
the existing mortgage financing which had been collateralized by the property.
The new mortgage loan requires monthly payments of principal and interest, bears
interest at a rate per annum of 5.5% and is scheduled to mature in January 2009.
The Company has an annual preferential return of 10% on its investment and has
an option to purchase the remaining 50% interest in Burlington LLC on or before
January 2007 for approximately $10,250. In addition, management and leasing
responsibilities for the property were assumed by GGMI effective on the closing
date. Finally, as the rights held by the unaffiliated venture partners are
primarily protective in nature, this investment has been fully consolidated by
the Company.
F-13
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)
On January 16, 2004, the Company acquired Redlands Mall, an enclosed mall
in Redlands, California. The purchase price paid for Redlands Mall (currently
under redevelopment) was approximately $14,250 (subject to certain prorations
and adjustments). The consideration was paid from cash on hand and proceeds
from borrowings under the Company's credit facilities.
On March 1, 2004 the Company acquired the remaining 50% general
partnership interest in Town East Mall in Mesquite, Texas from its unaffiliated
joint venture partner. The purchase price for the 50% ownership interest was
approximately $44,500, which was paid in cash from cash on hand and proceeds
from borrowings under the Company's credit facilities.
On March 5, 2004, the Company acquired Four Seasons Town Centre, an
enclosed mall in Greensboro, North Carolina. The purchase price paid was
approximately $161,000 (subject to certain prorations and adjustments). The
consideration was paid by the assumption of approximately $134,400 in existing
long-term non-recourse mortgage debt (bearing interest at a rate per annum of
approximately 5.6% and scheduled to mature in December 2013), approximately
$25,100 in 7% preferred units of Operating Partnership interest and the
remaining amounts in cash, primarily from amounts borrowed under the Company's
credit facilities. Immediately following the closing, the Company prepaid
approximately $22,400 of such assumed debt using cash on hand. The $25,100 of 7%
preferred units are comprised of 502,658 preferred units which are convertible,
with certain restrictions, at any time by the holder to common units of the
Operating Partnership (initially at a rate of approximately 1.298 common units
for each preferred unit).
On April 30, 2004 the Company completed an agreement to form a joint
venture to develop and subsequently own and manage a retail center in San Jose,
Costa Rica. The venture, GSG de Costa Rica SRL ("GGP/Sambil Costa Rica"), is
owned 33 1/3% by a wholly-owned subsidiary of the Operating Partnership and 33
1/3% each by two independent Latin American real estate investment and
development firms. The Company has committed to invest approximately $12,217 in
GGP/Sambil Costa Rica, of which approximately $9,700 has been paid and the
remaining amounts will be drawn on a letter of credit provided by the Company as
additional construction and development costs of the project are incurred. The
Company's cash investments, the $16,000 of capital contributions made by the
Latin American co-venture partners and construction financing to be arranged,
are expected to be sufficient to complete the project, an approximately 500,000
square foot retail center. The center is expected to open in 2007. Although the
Company has a preferred interest in GGP/Sambil Costa Rica with respect to
approximately $5,533 of its cash investment, due to the Company's shared rights
and duties with respect to this investment, the Company is accounting for this
investment by the equity method.
On May 11, 2004 the Company completed the acquisition of a 50% interest in
a joint venture (Hoover Mall Holding, L.L.C.) which owns, though a wholly-owned
subsidiary, Riverchase Galleria, an enclosed regional mall in Birmingham,
Alabama. The acquisition price for the 50% interest in the joint venture was
approximately $166,000. In conjunction with the purchase, the existing loan
collateralized by the property was refinanced with a new, non-recourse mortgage
loan of $200,000. The new loan bears interest at a rate of LIBOR plus 88 basis
points, requires monthly payments of interest only and, assuming all no-cost
F-14
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)
extension options are exercised, is scheduled to mature in June 2009. In
addition, the Company has fixed the interest rate to be paid on this loan
(initially 3.26% per annum with steps to 5.99% per annum in 2007) through the
use of interest rate swaps. GGMI will manage the property and one of the current
joint venture partners will retain a 50% interest in the property. Due to the
Company's shared rights and duties with respect to this investment, the Company
is accounting for this investment by the equity method.
On May 12, 2004, the Company completed the acquisition of a 100% interest
in Mall of Louisiana, an enclosed regional mall in Baton Rouge, Louisiana. The
purchase price of $265,000 was paid with the proceeds of a new $185,000
acquisition loan that currently bears interest at LIBOR plus 58 basis points.
The interest rate will increase in future periods (to a potential maximum of
LIBOR plus 134 basis points) depending upon certain options regarding the loan
rates and maturities elected by the Company. The loan, which requires monthly
payments of interest only, has four no-cost options to extend and, if all such
options are exercised, will mature in June 2009.
On May 17, 2004, the Company completed the acquisition of the Grand Canal
Shoppes in Las Vegas, Nevada. The purchase price of approximately $766,000 was
funded by a new $427,000 non-recourse mortgage loan and a new unsecured term
loan. The new mortgage loan bears interest at a rate per annum of 4.78%,
provides for monthly payments of principal and interest and is scheduled to
mature in May 2009. The new term loan, with an initial funding of $350,000 but
with a total available capacity of up to $800,000, currently bears interest at a
rate per annum of LIBOR plus 115 basis points on the current outstanding
principal balance, requires monthly payments of interest only, and is scheduled
to mature in May 2009. The interest rate on the term loan may vary in the future
depending upon the Company's future leverage ratios, changes in LIBOR rates and
the length of LIBOR contracts, and, with respect to the initial funding of the
term loan, the Company has fixed the interest rate to be paid through the use of
interest rate swaps to a rate of 3.435% per annum.
Pursuant to a separate agreement (the "Phase II Agreement"), the Company
also agreed to acquire the multi-level retail space that is planned to be part
of The Palazzo (the working title of The Venetian's Phase II property), a new
approximately 3,000 room hotel/casino that will be connected to the existing
Venetian and the Sands Expo and Convention Center facilities (the "Phase II
Acquisition"). The Palazzo is currently under development and is expected to be
completed by late 2006 or early 2007. If completed as specified under the terms
of the Phase II Agreement, the Company will purchase, payable upon grand
opening, the Phase II Acquisition retail space at a price computed on a 6%
capitalization rate on the net operating income of the Phase II retail space
("Phase II NOI"), as defined, up to $38,000 and on a capitalization rate of 8%
on Phase II NOI in excess of $38,000, all subject to a minimum purchase price of
$250,000. Based on current preliminary plans and estimated rents, the actual
purchase price would be more than double the minimum purchase price. The Phase
II Acquisition is expected to be funded by a combination of cash on hand,
available funds from credit facilities of the Company and from proceeds of new
and replacement long term loans to be obtained and collateralized by new and
currently-owned properties and unsecured term loans.
F-15
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)
On July 30, 2004, the Company finalized a contract to acquire an enclosed
regional mall. The purchase price is expected to be approximately $312,000
(subject to customary closing conditions and certain prorations and adjustments)
and the transaction is expected to close in mid-August 2004. The purchase price
is expected to be paid through a combination of cash on hand, borrowings on the
Company's credit facilities and approximately $220,000 in the form of a variable
rate loan collateralized by the property.
On July 30, 2004, the Company formed a joint venture to own, manage and
develop retail properties in Brazil. The Company has committed to invest up to
approximately $32,000 for a 50% membership interest in the joint venture
("GGP/NIG Brazil") of which approximately $7,000 was funded at closing. The
remaining funds will be invested by the Company (upon the decision of both
partners) to acquire additional interests in the properties currently owned or
to acquire interests in other retail centers. The other 50% member in GGP/NIG
Brazil contributed to the joint venture upon formation a 29% interest in an
existing retail center in Salvador, Bahia, a 16.25% interest in an existing
retail center in Sao Paulo, Sao Paulo and a 66.25% interest in an existing
retail property management firm. The property management firm currently manages
nine existing retail centers, the two centers partially owned by GGP/NIG Brazil
and seven other existing retail centers in various urban areas of Brazil for the
other member of GGP/NIG Brazil and other independent owners. Unless and until
the Company has fully funded its committed investment amount, the Company's
share of the venture's operations will be ratably reduced. Due to the Company's
shared rights and duties with respect to this investment, the Company expects to
account for this investment by the equity method.
NOTE 3 PRO FORMA ADJUSTMENTS
(a) Revenues
Minimum rents have been adjusted to represent the effect of the
amortization of acquired below-market leases of approximately $7,922 and $7,923,
respectively, for acquisitions in 2003 and 2004. In addition, certain tenant
spaces or activities that were acquired by the Company in the Grand Canal
Shoppes purchase were previously operated within the Venetian casino complex. In
conjunction with the Grand Canal Shoppes transaction, certain of these spaces or
activities became subject to new leasing arrangements. The effect of $7,660 such
new agreements has been reflected as an additional pro forma minimum rent
adjustment. However, the costs of such activities have never been separately
identified and have been considered to be included in the historical expense
amounts. With respect to Mall of Louisiana, percentage rents of approximately
$746 and specialty leasing income of approximately $670 has been reclassified
from other income to be consistent with the presentation of the other properties
acquired. Other adjustments to other income reflect primarily the reductions in
amounts charged to the properties owned by GGP/Ivanhoe III and Town East Mall
Partnership by General Growth Management, Inc. as a result of the termination of
the management agreements and the properties becoming wholly-owned by the
Company.
F-16
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)
(b) Depreciation and amortization
Depreciation and amortization is adjusted to include additional amounts
for the properties acquired 100% by the Company related to the periods from
January 1, 2003 to the dates of acquisition for the 2003 acquisitions and for
the entire year of 2003 for the acquisitions made in 2004.
(c) Interest expense, net
Interest expense adjustments reflect a combination of debt assumption and
increased borrowings. In connection with the 2004 acquisitions described above,
the Company assumed or obtained approximately $1,109,500 of debt bearing
interest at the weighted average rate of 3.39%. The pro forma interest expense
on such borrowings was calculated using the interest rates described above and
using the LIBOR rate for the year ended December 31, 2003 equal to approximately
1.12%. The Company also incurred approximately $696,514 of other unsecured
borrowings to fund the remaining portion of the 2004 acquisitions and the pro
forma interest expense was calculated using the interest cost on the Company's
incremental borrowing facilities (2.48%) and the rate (3.435%) on the term loan
as a result of the swaps obtained.
Since the interest rates on certain of the loans assumed or obtained in
conjunction with the acquisitions are based on a spread over LIBOR, the rates
will periodically change. If the interest rate on such variable rate loans
increase or decrease by 12.5 basis points, the annual interest expense will
increase or decrease by approximately $3,473 (Note that the LIBOR rate for
August 2, 2004 is approximately 1.51%).
(d) Equity in earnings of other joint ventures
GGP Ivanhoe III and Town East Mall Partnership
Reduces equity in earnings from these ventures to zero due to the purchase
of the remaining 49% share (for GGP/Ivanhoe III, Inc.) and remaining 50% share
(for Town East Mall Partnership) which causes the properties owned by these two
joint ventures to be fully consolidated.
GGP Ivanhoe IV, Hoover Mall Holding, L.L.C. and GGP/NIG Brazil
Reflects the equity in income of Eastridge Mall due to the transfer of its
ownership by GGP/Ivanhoe III, Inc. in July 2003, the equity in income of
Riverchase Galleria due to the acquisition of an interest in Hoover Mall
Holding, L.L.C. in May 2004 and the equity in the income of GGP/NIG Brazil due
to the acquisition of an interest in the venture in July 2004.
(e) Minority interest
The allocations to minority interest has been adjusted to reflect the
allocation of earnings to the minority interests.
F-17
GENERAL GROWTH PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED)
Historical Historical Historical
General Growth Grand Historical Other
Properties, Inc. (1) Canal Shoppes Mall of Lousiana Acquisitions
-------------------- ------------- ---------------- ------------
Revenues
Minimum rent $ 222,656 $ 5,603 $ 2,888 $ 8,473
Tenant charges 102,604 6,051 1,639 5,414
Other 36,325 - 268 125
------------ ------- ------- -------
Total revenues 361,585 11,654 4,795 14,012
------------ ------- ------- -------
Expenses:
Real estate taxes 28,313 295 162 1,775
Other property operating 103,812 4,575 1,237 3,729
Provision for doubtful accounts 2,797 - 103 209
Depreciation and amortization 73,167 - - 371
------------ ------- ------- -------
Total Expenses 208,089 4,870 1,502 6,084
------------ ------- ------- -------
Operating Income 153,496 6,784 3,293 7,928
Interest expense, net (86,667) - - -
Equity in unconsolidated affiliates:
Town East 430 - - -
GGP/NIG Brazil - 258
Riverchase - 2,130
Other joint ventures 17,500 -
------------ ------- ------- -------
Income before minority interest 84,759 6,784 3,293 10,316
Allocations to minority interests (25,636) - - -
------------ ------- ------- -------
Income from continuing operations $ 59,123 $ 6,784 $ 3,293 $10,316
============ ======= ======= =======
Weighted average shares outstanding - basic 217,553,027
Weighted average shares outstanding - diluted 218,478,755
Income from continuing operations per share - basic $ 0.27
Income from continuing operations per share - diluted $ 0.27
Total Total
Historical Pro Forma Pro Forma
Combined Adjustments Combined
-------- ----------- ------------
Revenues
Minimum rent $ 16,964 $ 3,977 a $ 243,597
Tenant charges 13,104 1 a 115,709
Other 393 (160)a 36,558
-------- --------- ------------
Total revenues 30,461 3,818 395,864
-------- --------- ------------
Expenses:
Real estate taxes 2,232 - 30,545
Other property operating 9,541 - 113,353
Bad Debt 312 - 3,109
Depreciation and amortization 371 8,963 b 82,501
-------- --------- ------------
Total Expenses 12,456 8,963 229,508
-------- --------- ------------
Operating Income 18,005 (5,145) 166,356
Interest expense, net - (12,194)c (98,861)
Equity in unconsolidated affiliates:
Town East - (430)d -
GGP/NIG Brazil 258 (261)d (3)
Riverchase 2,130 (1,636)d 494
Other joint ventures - - 17,500
-------- --------- ------------
Income before minority interest 20,393 (19,666) 85,486
Allocations to minority interests - (588)e (26,224)
-------- --------- ------------
Income from continuing operations $ 20,393 $ (20,254) $ 59,262
======== ========= ============
Weighted average shares outstanding - basic 217,553,027
Weighted average shares outstanding - diluted 218,478,755
Income from continuing operations per share - basic $ 0.27
Income from continuing operations per share - diluted $ 0.27
(1) Amounts are derived from the statements included in the Company's Form 10-Q
for the Three Months Ended March 31, 2004.
The accompanying notes are an integral part of these statements. For
alphabetical references, please refer to Note 3 -- Pro Forma Adjustments.
F-18
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)
NOTE 1 PRO FORMA BASIS OF PRESENTATION
This unaudited pro forma condensed consolidated statement of operations of
General Growth Properties, Inc. ("the Company") is presented as if the
acquisitions made in 2004 (as described below) had all occurred on January 1,
2004. The total pro forma condensed consolidated statement of operations
reflects these transactions and in management's opinion, all adjustments
necessary to reflect these transactions have been included. Such pro forma
condensed consolidated statement of operations is based upon the historical
information of the Company, excluding discontinued operations and the historical
information from January 1 to the dates immediately prior to their respective
acquisitions for Burlington Town Center, Redlands Mall, the remaining 50%
general partnership interest in Town East Mall and Four Seasons Town Centre and
for the three months ended March 31, 2004 for the properties acquired after
March 31, 2004 as described in Note 2 below. The Company conducts substantially
all of its business through GGP Limited Partnership (the "Operating
Partnership") of which the Company owns an approximate 79.65% interest. General
Growth Management, Inc. ("GGMI") is 100% owned by the Operating Partnership and
manages, leases and performs various other services for properties owned by
unaffiliated third parties and the properties owned jointly with unaffiliated
partners. This unaudited pro forma condensed consolidated statement of
operations should be read in conjunction with the Statements of Certain Revenues
and Certain Expenses for the Grand Canal Shoppes and the Statements of Revenues
and Certain Operating Expenses of Mall of Louisiana included elsewhere in this
report and such pro forma financial information may not necessarily be
indicative of what actual results of the Company would have been assuming such
transactions had been completed as of January 1, 2004 nor does it purport to
represent the results of operations for future periods.
NOTE 2 ACQUISITIONS
On January 7, 2004, the Company acquired a 50% membership interest in a
newly formed limited liability company ("Burlington LLC") which owns Burlington
Town Center, an enclosed mall in Burlington, Vermont. The aggregate
consideration for the 50% ownership interest in Burlington Town Center was
approximately $10,250 (subject to certain prorations and adjustments).
Approximately $9,000 was funded in cash by the Company at closing with the
remaining amounts to be funded in cash in 2004 when certain conditions related
to the property are satisfied. In addition, at closing the Company made a
$31,500 mortgage loan to Burlington LLC to replace the existing mortgage
financing which had been collateralized by the property. The new mortgage loan
requires monthly payments of principal and interest, bears interest at a rate
per annum of 5.5% and is scheduled to mature in January 2009. The Company has an
annual preferential return of 10% on its investment and has an option to
purchase the remaining 50% interest in Burlington LLC on or before January 2007
for approximately $10,250. In addition, management and leasing responsibilities
for the property were assumed by GGMI effective on the closing date. Finally, as
the rights held by the unaffiliated venture partners are primarily protective in
nature, this investment has been fully consolidated by the Company.
On January 16, 2004, the Company acquired Redlands Mall, an enclosed mall
in Redlands, California. The purchase price paid for Redlands Mall (currently
under redevelopment) was approximately $14,250 (subject to certain prorations
and adjustments). The consideration was paid from cash on hand and proceeds from
borrowings under the Company's credit facilities.
F-19
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)
On March 1, 2004 the Company acquired the remaining 50% general
partnership interest in Town East Mall in Mesquite, Texas from its unaffiliated
joint venture partner. The purchase price for the 50% ownership interest was
approximately $44,500, which was paid in cash from cash on hand and proceeds
from borrowings under the Company's credit facilities.
On March 5, 2004, the Company acquired Four Seasons Town Centre, an
enclosed mall in Greensboro, North Carolina. The purchase price paid was
approximately $161,000 (subject to certain prorations and adjustments). The
consideration was paid by the assumption of approximately $134,400 in existing
long-term non-recourse mortgage debt (bearing interest at a rate per annum of
approximately 5.6% and scheduled to mature in December 2013), approximately
$25,100 in 7% preferred units of Operating Partnership interest and the
remaining amounts in cash, primarily from amounts borrowed under the Company's
credit facilities. Immediately following the closing, the Company prepaid
approximately $22,400 of such assumed debt using cash on hand. The $25,100 of 7%
preferred units are comprised of 502,658 preferred units which are convertible,
with certain restrictions, at any time by the holder to common units of the
Operating Partnership (initially at a rate of approximately 1.298 common units
for each preferred unit).
On April 30, 2004 the Company completed an agreement to form a joint
venture to develop and subsequently own and manage a retail center in San Jose,
Costa Rica. The venture, GSG de Costa Rica SRL ("GGP/Sambil Costa Rica"), is
owned 33 1/3% by a wholly-owned subsidiary of the Operating Partnership and 33
1/3% each by two independent Latin American real estate investment and
development firms. The Company has committed to invest approximately $12,217 in
GGP/Sambil Costa Rica, of which approximately $9,700 has been paid and the
remaining amounts will be drawn on a letter of credit provided by the Company as
additional construction and development costs of the project are incurred. The
Company's cash investments, the $16,000 of capital contributions made by the
Latin American co-venture partners and construction financing to be arranged,
are expected to be sufficient to complete the project, an approximately 500,000
square foot retail center. The center is expected to open in 2007. Although the
Company has a preferred interest in GGP/Sambil Costa Rica with respect to
approximately $5,533 of its cash investment, due to the Company's shared rights
and duties with respect to this investment, the Company is accounting for this
investment by the equity method.
On May 11, 2004 the Company completed the acquisition of a 50% interest in
a joint venture (Hoover Mall Holding, L.L.C.) which owns, through a wholly-owned
subsidiary, Riverchase Galleria, an enclosed regional mall in Birmingham,
Alabama. The acquisition price for the 50% interest in the joint venture was
approximately $166,000. In conjunction with the purchase, the existing loan
collateralized by the property was refinanced with a new, non-recourse mortgage
loan of $200,000. The new loan bears interest at a rate of LIBOR plus 88 basis
points, requires monthly payments of interest only and, assuming all no-cost
extension options are exercised, is scheduled to mature in June 2009. In
addition, the Company has fixed the interest rate to be paid on this loan
(initially 3.26% per annum with steps to 5.99% per annum in 2007) through the
use of interest rate swaps. GGMI will manage the property and one of the current
joint venture partners will retain a 50% interest in the property. Due to the
Company's shared rights and duties with respect to this investment, the Company
is accounting for this investment by the equity method.
F-20
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)
On May 12, 2004, the Company completed the acquisition of a 100% interest
in Mall of Louisiana, an enclosed regional mall in Baton Rouge, Louisiana. The
purchase price of $265,000 was paid with the proceeds of a new $185,000
acquisition loan that currently bears interest at LIBOR plus 58 basis points.
The interest rate will increase in future periods (to a potential maximum of
LIBOR plus 134 basis points) depending upon certain options regarding the loan
rates and maturities elected by the Company. The loan, which requires monthly
payments of interest only, has four no-cost options to extend and, if all such
options are exercised, will mature in June 2009.
On May 17, 2004, the Company completed the acquisition of the Grand Canal
Shoppes in Las Vegas, Nevada. The purchase price of approximately $766,000 was
funded by a new $427,000 non-recourse mortgage loan and a new unsecured term
loan. The new mortgage loan bears interest at a rate per annum of 4.78%,
provides for monthly payments of principal and interest and is scheduled to
mature in May 2009. The new term loan, with an initial funding of $350,000 but
with a total available capacity of up to $800,000, currently bears interest at a
rate per annum of LIBOR plus 115 basis points on the current outstanding
principal balance, requires monthly payments of interest only, and is scheduled
to mature in May 2009. The interest rate on the term loan may vary in the future
depending upon the Company's future leverage ratios, changes in LIBOR rates and
the length of LIBOR contracts, and, with respect to the initial funding of the
term loan, the Company has fixed the interest rate to be paid through the use of
interest rate swaps to a rate of 3.435% per annum.
Pursuant to a separate agreement (the "Phase II Agreement"), the Company
also agreed to acquire the multi-level retail space that is planned to be part
of The Palazzo (the working title of The Venetian's Phase II property), a new
approximately 3,000 room hotel/casino that will be connected to the existing
Venetian and the Sands Expo and Convention Center facilities (the "Phase II
Acquisition"). The Palazzo is currently under development and is expected to be
completed by late 2006 or early 2007. If completed as specified under the terms
of the Phase II Agreement, the Company will purchase, payable upon grand
opening, the Phase II Acquisition retail space at a price computed on a 6%
capitalization rate on the net operating income of the Phase II retail space
("Phase II NOI"), as defined, up to $38,000 and on a capitalization rate of 8%
on Phase II NOI in excess of $38,000, all subject to a minimum purchase price of
$250,000. Based on current preliminary plans and estimated rents, the actual
purchase price would be more than double the minimum purchase price. The Phase
II Acquisition is expected to be funded by a combination of cash on hand,
available funds from credit facilities of the Company and from proceeds of new
and replacement long term loans to be obtained and collateralized by new and
currently-owned properties and unsecured term loans.
On July 30, 2004, the Company finalized a contract to acquire a United
States enclosed regional mall. The purchase price is expected to be
approximately $312,000 (subject to customary closing conditions and certain
prorations and adjustments) and the transaction is expected to close in
mid-August 2004. The purchase price is expected to be paid through a combination
of cash on hand, borrowings on the Company's credit facilities and approximately
$220,000 in the form of a variable rate loan collateralized by the property.
F-21
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)
On July 30, 2004, the Company formed a joint venture to own, manage and
develop retail properties in Brazil. The Company has committed to invest up to
approximately $32,000 for a 50% membership interest in the joint venture
("GGP/NIG Brazil") of which approximately $7,000 was funded at closing. The
remaining funds will be invested by the Company (upon the decision of both
partners) to acquire additional interests in the properties currently owned or
to acquire interests in other retail centers. The other 50% member in GGP/NIG
Brazil contributed to the joint venture upon formation a 29% interest in an
existing retail center in Salvador, Bahia, a 16.25% interest in an existing
retail center in Sao Paulo, Sao Paulo and a 66.25% interest in an existing
retail property management firm. The property management firm currently manages
nine existing retail centers, the two centers partially owned by GGP/NIG Brazil
and seven other existing retail centers in various urban areas of Brazil for the
other member of GGP/NIG Brazil and other independent owners. Unless and until
the Company has fully funded its committed investment amount, the Company's
share of the venture's operations will be ratably reduced. Due to the Company's
shared rights and duties with respect to this investment, the Company expects to
account for this investment by the equity method.
NOTE 3 PRO FORMA ADJUSTMENTS
(a) Revenues
Certain tenant spaces or activities that were acquired by the Company in
the Grand Canal Shoppes purchase were previously operated within the Venetian
casino complex. In conjunction with the Grand Canal Shoppes transaction, certain
of these spaces or activities became subject to new leasing arrangements. The
$1,915 effect of such new agreements has been reflected as an additional pro
forma minimum rent adjustment. However, the costs of such activities have never
been separately identified and have been considered to be included in the
historical expense amounts. With respect to Mall of Louisiana, percentage rents
of $1 and specialty leasing income of $130 have been reclassified from other
income to be consistent with the presentation of the other properties acquired.
Other adjustments to other income primarily represents the reduction in amounts
charged to the Town East Mall by GGMI as a result of the termination of the
management agreements and the property becoming wholly-owned by the Company. The
$1,714 effect of the amortization of acquired below-market leases for the
consolidated properties acquired in 2004 has been reflected as a pro forma
adjustment to minimum rents.
(b) Depreciation and amortization
Depreciation and amortization is adjusted to include additional amounts
related to the three months ended March 31, 2004 for the acquisitions made in
2004.
F-22
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)
(c) Interest expense, net
Interest expense increased due to a combination of debt assumption and
increased borrowings. In connection with the acquisitions described above, the
Company obtained or assumed an aggregate of $1,109,500 of mortgage debt bearing
interest at the weighted average rate of 3.39%. The pro forma interest expense
on such borrowings was calculated using the interest rates described above and
using the LIBOR rate for the three months ended March 31, 2004 equal to
approximately 1.09%. The Company also incurred approximately $696,514 of other
unsecured borrowings to fund the remaining portion of the acquisitions and the
pro forma interest expense was calculated using the interest cost on the
Company's incremental borrowing facilities (2.45%) and the rate (3.435%) on the
term loan as a result of the swaps obtained.
Since the interest rates on certain of the loans assumed or obtained in
conjunction with the acquisitions on based on a spread over LIBOR, the rates
will periodically change. If the interest rate on such variable rate loans
increase or decrease by 12.5 basis points, the three month interest expense will
increase or decrease by approximately $289 (Note that the LIBOR rate for August
2, 2004 is approximately 1.51%).
(d) Equity in earnings of other joint ventures
Town East Mall Partnership
Reduces equity in earnings from this venture to zero due to the purchase
of the remaining 50% share of the Town East Mall Partnership which causes the
property to be fully consolidated.
Hoover Mall Holding, L.L.C. and GGP/NIG Brazil
Reflects the equity in income of Riverchase Galleria due to the
acquisition of an interest in Hoover Mall Holding, L.L.C. in May 2004 and the
equity in income of GGP/NIG Brazil due to the acquisition of an interest in the
venture in July 2004.
(e) Minority interest
The allocations to minority interest has been adjusted to reflect the
allocation of earnings to the minority interests.
F-23
GENERAL GROWTH PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2004
(DOLLARS IN THOUSANDS)
(UNAUDITED)
HISTORICAL TOTAL
GENERAL GROWTH ACQUISITION COMBINED
ASSETS PROPERTIES, INC.(*) ADJUSTMENTS PRO FORMA
------ ------------------- --------------- ------------
Investment in real estate:
Land $ 1,465,242 $ 69,636(a),(c) $ 1,534,878
Building and equipment 8,449,246 1,296,883(a),(c) 9,746,129
------------ ------------ ------------
9,914,488 1,366,519 11,281,007
Less accumulated depreciation (1,189,466) - (1,189,466)
------------ ------------ ------------
8,725,022 1,366,519 10,091,541
Development in progress 192,814 - 192,814
------------ ------------ ------------
Net property and equipment 8,917,836 1,366,519 10,284,355
Investment in Unconsolidated Real Estate Affiliates 606,098 82,597 688,695
------------ ------------ ------------
Net investment in real estate 9,523,934 1,449,116 10,973,050
Cash 8,938 - 8,938
Tenant accounts receivable, net 152,573 - 152,573
Deferred expenses, net 144,890 4,138(c) 149,028
Prepaid and other assets 81,130 623(c) 81,753
------------ ------------ ------------
TOTAL ASSETS $ 9,911,465 $ 1,453,877 $ 11,365,342
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes and other debt payable $ 6,968,322 $ 1,429,392(b),(c) $ 8,397,714
Distributions payable 7,268 - 7,268
Accounts payable and accrued expenses 351,638 24,485(c) 376,123
------------ ------------ ------------
TOTAL LIABILITIES 7,327,228 1,453,877 8,781,105
Minority interest:
Preferred Units 507,593 - 507,593
Common Units 410,459 - 410,459
Stockholders' Equity 1,666,185 - 1,666,185
------------ ------------ ------------
Total $ 9,911,465 $ 1,453,877 $ 11,365,342
============ ============ ============
(*) Amounts are derived from the statements included in the Company's Report on
Form 10-Q for March 31, 2004.
The accompanying notes are integral part of these statements.
For alphabetical references, please refer to Note 2-Pro Forma Adjustments.
F-24
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2004
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 1 PRO FORMA BASIS OF PRESENTATION
This unaudited pro forma condensed consolidated balance sheet of General
Growth Properties, Inc. is presented as if the acquisitions subsequent to March
31, 2004 (a 50% interest in Riverchase Galleria, a 50% interest in GGP/NIG
Brazil, a 33 1/3% interest in GGP/Sambil Costa Rica and 100% of the Mall of
Louisiana and The Grand Canal Shoppes and 100% of a mall contracted on July 30,
2004 to be acquired), had all occurred on March 31, 2004. In management's
opinion, all adjustments necessary to reflect these transactions have been
included.
The cost of the acquired assets and acquired or assumed liabilities
described in this Current Report on Form 8-K/A have been allocated based on
their respective fair values. Upon acquisition of the three consolidated
properties described immediately above the aggregate fair value of the tangible
and intangible assets acquired was approximately $1,366,519 and the liabilities
incurred or assumed was approximately $1,369,832 including a net deferred credit
of approximately $23,037 related to acquired below-market leases (included in
accounts payable and accrued expenses). The purchase allocation adjustments made
in connection with the preparation of the unaudited pro forma condensed
consolidated financial statements are based on the information available at this
time. Subsequent adjustments and refinements to the allocations may be made as
additional information becomes available.
The amounts reflected as acquisition adjustments to the investment in
Unconsolidated Real Estate Affiliates represents the Company's equity
investments in Riverchase Galleria, GGP/NIG Brazil and GGP/Sambil Costa Rica
with such investments being funded by additional amounts borrowed under the
Company's credit facilities.
F-25
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2004
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 2 ACQUISITION ADJUSTMENTS
(a) Investment in Real Estate
Asset additions are as follows:
Mall of Louisiana................................................ $ 270,923
Grand Canal Shoppes.............................................. 775,172
Additional committed mall acquisition............................ 320,424
GGP/Sambil Costa Rica............................................ 9,700
GGP/NIG Brazil................................................... 6,897
Riverchase Galleria.............................................. 66,000
------------
$ 1,449,116
============
Allocated to:
Land............................................................ $ 69,636
Buildings, equipment and intangibles............................. 1,296,883
Investment in unconsolidated ventures............................ 82,597
------------
$ 1,449,116
============
(b) Mortgage Notes and other Debt Payable
Additional debt related to the acquisitions:
Mall of Louisiana new mortgage loan.............................. $ 185,000
Mall of Louisiana additional debt to fund acquisition............ 80,532
Grand Canal Shoppes acquisition loan............................. 427,000
Grand Canal Shoppes additional debt to fund acquisition.......... 341,713
Riverchase Galleria additional debt to fund acquisition of
joint venture interest.................................... 66,000
Additional committed mall acquisition loans..... ................ 312,550
GGP/NIG Brazil addition debt to fund acquisition of joint venture
interest.................................................. 6,897
GGP/Sambil Costa Rica additional debt to fund acquisition of joint
venture interest.......................................... 9,700
------------
$ 1,429,392
============
(c) Adjustments in other tangible and intangible assets and liabilities to
reflect the purchase price to such assets and liabilities, including
acquired below market leases, based on their respective fair values.
F-26