##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended March 31, 2005oro
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from  to
 Commission file number 1-11656 GENERAL GROWTH PROPERTIES, INC.  Delaware
    
    42-1283895(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)
 110 N. Wacker Dr., Chicago, IL 60606
(Address of principal executive offices, including Zip Code) (312) 960-5000
(Registrants telephone number, including area code) N / A
(Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES       þ       NO       o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). YES       þ       NO       o The number of shares of Common Stock, $.01 par value, outstanding on May 6, 2005
was 237,851,712.




---



##### 



GENERAL GROWTH PROPERTIES, INC. INDEX PAGENUMBERPart I
    
    FINANCIAL INFORMATIONItem 1: Financial Statements (Unaudited)Consolidated Balance Sheets
as of March 31, 2005 and December 31, 2004
    
    
    3Consolidated Statements of Operations and Comprehensive Income
for the three months ended March 31, 2005 and 2004
    
    
    4Consolidated Statements of Cash Flows
for the three months ended March 31, 2005 and 2004
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2: Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    26Liquidity and Capital Resources of the Company
    
    
    31Item 3: Quantitative and Qualitative Disclosures about Market Risk
    
    
    34Item 4: Controls and Procedures
    
    
    35Part II
    
    OTHER INFORMATIONItem 1: Legal Proceedings
    
    
    36Item 2: Unregistered Sales of Securities and Use of Proceeds
    
    
    36Item 3: Defaults Upon Senior Securities
    
    
    36Item 4: Submission of Mattes to a Vote of Security Holders
    
    
    36Item 5: Other Information
    
    
    36Item 6: Exhibits
    
    
    36SIGNATURE
    
    
    37




---



##### 



PART I. FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS GENERAL GROWTH PROPERTIES, INC. 
 CONSOLIDATED BALANCE SHEETS
 MARCH 31, 2005 AND DECEMBER 31, 2004
 (UNAUDITED)
 (Dollars in thousands, except for per share and per unit amounts)
 March 31, 2005
    
    
    December 31, 2004(In thousands)AssetsInvestment in real estate:Land
    
    $
    2,863,060
    
    
    $
    2,859,552Buildings and equipment
    
    
    18,318,991
    
    
    
    18,251,258Less accumulated depreciation
    
    
    (1,611,476
    )
    
    
    (1,453,488
    )Developments in progress
    
    
    575,129
    
    
    
    559,969Net property and equipment
    
    
    20,145,704
    
    
    
    20,217,291Investment in and loans to/from Unconsolidated Real Estate Affiliates
    
    
    1,978,021
    
    
    
    1,945,541Investment land and land held for development and sale
    
    
    1,664,299
    
    
    
    1,638,013Net investment in real estate
    
    
    23,788,024
    
    
    
    23,800,845Cash and cash equivalents
    
    
    49,135
    
    
    
    39,581Accounts receivable, net
    
    
    251,082
    
    
    
    242,425Deferred expenses, net
    
    
    157,433
    
    
    
    153,231Prepaid expenses and other assets
    
    
    1,504,340
    
    
    
    1,482,543Total assets
    
    $
    25,750,014
    
    
    $
    25,718,625Liabilities and Stockholders EquityMortgage notes and other debt payable
    
    $
    20,392,810
    
    
    $
    20,310,947Deferred tax liabilities
    
    
    1,414,565
    
    
    
    1,414,565Accounts payable and accrued expenses
    
    
    1,055,347
    
    
    
    895,520Total liabilities
    
    
    22,862,722
    
    
    
    22,621,032Minority interests:Preferred
    
    
    219,275
    
    
    
    403,161Common
    
    
    543,378
    
    
    
    551,282Total minority interests
    
    
    762,653
    
    
    
    954,443Commitments and contingencies
    
    
    
    
    
    
    Preferred stock: $100 par value; 5,000,000 shares authorized; none
issued and outstanding
    
    
    
    
    
    
    Stockholders equity:Common stock: $.01 par value; 875,000,000 shares authorized;
237,597,603 and 234,724,082 shares issued and outstanding
as of March 31, 2005 and December 31, 2004, respectively
    
    
    2,376
    
    
    
    2,347Additional paid-in capital
    
    
    2,422,471
    
    
    
    2,378,237Retained earnings (accumulated deficit)
    
    
    (298,951
    )
    
    
    (227,511
    )Notes receivable-common stock purchase
    
    
    (1,237
    )
    
    
    (5,178
    )Unearned compensation-restricted stock
    
    
    (2,601
    )
    
    
    (1,060
    )Accumulated other comprehensive income (loss)
    
    
    2,581
    
    
    
    (3,685
    )Total stockholders equity
    
    
    2,124,639
    
    
    
    2,143,150$
    25,750,014
    
    
    $
    25,718,625
 The accompanying notes are an integral part of these consolidated financial statements. 3 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC. 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 FOR THE THREE MONTHS ENDED
 MARCH 31, 2005 AND 2004
 (UNAUDITED)
 (Dollars in thousands, except for per share and per unit amounts)
 Three Months EndedMarch 31,2005
    
    
    2004(In thousands, except forper share amounts)Revenues:Minimum rents
    
    $
    410,484
    
    
    $
    221,694Tenant recoveries
    
    
    182,007
    
    
    
    102,222Overage rents
    
    
    13,586
    
    
    
    8,352Land sales
    
    
    61,406
    
    
    
    Management and other fees
    
    
    19,563
    
    
    
    18,701Other
    
    
    22,487
    
    
    
    8,857Total revenues
    
    
    709,533
    
    
    
    359,826Expenses:Real estate taxes
    
    
    53,504
    
    
    
    28,121Repairs and maintenance
    
    
    53,817
    
    
    
    24,659Marketing
    
    
    12,368
    
    
    
    10,440Other property operating costs
    
    
    89,763
    
    
    
    41,196Land sales operations
    
    
    54,105
    
    
    
    Provision for doubtful accounts
    
    
    4,254
    
    
    
    2,784Property management and other costs
    
    
    34,637
    
    
    
    25,012General and administrative
    
    
    2,811
    
    
    
    2,190Depreciation and amortization
    
    
    163,309
    
    
    
    72,904Total expenses
    
    
    468,568
    
    
    
    207,306Operating income
    
    
    240,965
    
    
    
    152,520Interest income
    
    
    2,217
    
    
    
    417Interest expense
    
    
    (245,028
    )
    
    
    (87,087
    )Benefit (provision) for income taxes
    
    
    1,307
    
    
    
    (7
    )Income allocated to minority interests
    
    
    (12,856
    )
    
    
    (25,438
    )Equity in income of unconsolidated affiliates
    
    
    26,460
    
    
    
    17,930Income from continuing operations
    
    
    13,065
    
    
    
    58,335Income from discontinued operations, net of minority interests
    
    
    
    
    
    
    788Net income
    
    $
    13,065
    
    
    $
    59,123Basic earnings per share:Continuing operations
    
    $
    0.06
    
    
    $
    0.27Discontinued operations
    
    
    
    
    
    
    Total basic earnings per share
    
    $
    0.06
    
    
    $
    0.27Diluted earnings per share:Continuing operations
    
    $
    0.06
    
    
    $
    0.27Discontinued operations
    
    
    
    
    
    
    Total diluted earnings per share
    
    $
    0.06
    
    
    $
    0.27Distributions declared per share
    
    $
    0.36
    
    
    $
    0.30Comprehensive income, net:Net income
    
    $
    13,065
    
    
    $
    59,123Other comprehensive income, net of minority interest:Net unrealized gains on financial instruments
    
    
    6,127
    
    
    
    326Minimum pension liability adjustment
    
    
    (107
    )
    
    
    (83
    )Foreign currency translation
    
    
    (44
    )
    
    
    Unrealized gains on available-for-sale securities
    
    
    290
    
    
    
    Comprehensive income, net
    
    $
    19,331
    
    
    $
    59,366
 The accompanying notes are an integral part of these consolidated financial statements. 4 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC. 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
 (UNAUDITED)
 (Dollars in thousands)
 Three Months EndedMarch 31,2005
    
    
    2004(In thousands)Cash flows from operating activities:Net Income
    
    $
    13,065
    
    
    $
    59,123Adjustments to reconcile net income to net cash
provided by operating activities:Minority interests, including discontinued operations
    
    
    12,856
    
    
    
    25,636Equity in income of unconsolidated affiliates
    
    
    (26,460
    )
    
    
    (17,930
    )Provision for doubtful accounts, including discontinued operations
    
    
    4,254
    
    
    
    2,797Distributions received from unconsolidated affiliates
    
    
    8,585
    
    
    
    18,144Depreciation, including discontinued operations
    
    
    158,544
    
    
    
    66,859Amortization, including discontinued operations
    
    
    6,757
    
    
    
    9,382Participation expense pursuant to Contingent Stock Agreement

    
    
    20,214
    
    
    
    Land development and acquisition expenditures, net of cost of land sales
    
    
    3,160
    
    
    
    Debt assumed by purchasers of land
    
    
    (1,118
    )
    
    
    Net changes:Accounts receivable
    
    
    (12,911
    )
    
    
    (6,885
    )Prepaid expenses and other assets
    
    
    (6,797
    )
    
    
    402Deferred expenses
    
    
    (9,435
    )
    
    
    (8,281
    )Accounts payable and accrued expenses
    
    
    (35,179
    )
    
    
    (15,763
    )Net cash provided by operating activities
    
    
    135,535
    
    
    
    133,484Cash flows from investing activities:Acquisition/development of real estate and improvements
and additions to properties
    
    
    (118,908
    )
    
    
    (157,821
    )Increase in investments in unconsolidated affiliates
    
    
    (8,717
    )
    
    
    (4,781
    )Distributions received from unconsolidated affiliates in excess of income
    
    
    13,345
    
    
    
    25,070Proceeds from repayment of notes receivable for common stock purchases
    
    
    3,941
    
    
    
    238Loan repayments from unconsolidated affiliates, net
    
    
    
    
    
    
    (8,884
    )Net cash used in investing activities
    
    
    (110,339
    )
    
    
    (146,178
    )Cash flows from financing activities:Cash distributions paid to common stockholders
    
    
    (84,505
    )
    
    
    (65,193
    )Cash distributions paid to holders of Common Units
    
    
    (20,085
    )
    
    
    (16,788
    )Cash distributions paid to holders of perpetual and convertible preferred units
    
    
    (8,544
    )
    
    
    (10,277
    )Proceeds from issuance of common stock, including from common stock plans
    
    
    27,729
    
    
    
    8,211Proceeds from issuance of mortgage notes and other debt payable
    
    
    1,238,147
    
    
    
    769,000Principal payments on mortgage notes and other debt payable
    
    
    (1,166,860
    )
    
    
    (672,071
    )Deferred financing costs
    
    
    (1,524
    )
    
    
    (1,927
    )Net cash provided by (used in) financing activities
    
    
    (15,642
    )
    
    
    10,955Net change in cash and cash equivalents
    
    
    9,554
    
    
    
    (1,739
    )Cash and cash equivalents at beginning of period
    
    
    39,581
    
    
    
    10,677Cash and cash equivalents at end of period
    
    $
    49,135
    
    
    $
    8,938Supplemental disclosure of cash flow information:Interest paid
    
    $
    265,378
    
    
    $
    87,529Interest capitalized
    
    
    14,954
    
    
    
    1,947Non-cash investing and financing activities:Common stock issued in exchange for Operating Partnership Units
    
    $
    18,661
    
    
    $
    257Common stock issued in exchange for convertible preferred units
    
    
    1,006
    
    
    
    Assumption of debt in conjunction with acquisition of property
    
    
    
    
    
    
    134,902Common stock issued pursuant to Contingent Stock Agreement
    
    
    18,098
    
    
    
    Operating Partnership Units issued as consideration for purchase
of real estate
    
    
    
    
    
    
    25,132Debt assumed by purchasers of land
    
    
    1,118
    
    
    
    
 The accompanying notes are an integral part of these consolidated financial statements. 5 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC. 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 NOTE 1 ORGANIZATION Readers of this quarterly report should refer to the Companys (as defined below) audited
financial statements for the year ended December 31, 2004 which are included in the Companys
Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (Commission File No.
1-11656), as certain footnote disclosures which would substantially duplicate those contained in
the 2004 annual audited financial statements have been omitted from this report. Capitalized terms
used, but not defined, in this quarterly report have the same meanings as in the Companys 2004
Annual Report on Form 10-K. General General Growth Properties, Inc., a Delaware corporation (General Growth), is a self-administered
and self-managed real estate investment trust, referred to as a REIT. General Growth was
organized in 1986 and through its subsidiaries and affiliates owns, operates, manages, leases,
acquires, develops, expands and finances operating properties located primarily throughout the
United States and develops and sells land for residential, commercial and other uses primarily in
master-planned communities. The operating properties consist of retail centers, office and
industrial buildings and mixed-use and other properties. Land development and sales operations are
predominantly related to large-scale, long-term community development projects in and around
Columbia, Maryland; Summerlin, Nevada; and Houston, Texas. In these notes, the terms we, us
and our refer to General Growth and its subsidiaries (the Company). Substantially all of our business is conducted through GGP Limited Partnership (the Operating
Partnership or GGPLP). As of March 31, 2005, General Growth owned an approximate 81% general
partnership interest in the Operating Partnership. The remaining approximate 19% minority interest
is held by limited partners that include trusts for the benefit of the families of the original
stockholders of the Company and subsequent contributors of properties to the Operating Partnership.
These minority interests are represented by common units of limited partnership interest in the
Operating Partnership (the Common Units). In addition, the Operating Partnership currently has
preferred units of limited partnership interest (the Preferred Units) outstanding. The Preferred
Units are, under certain circumstances, convertible into Common Units and they may be exchanged by
their holders, under certain circumstances, for shares of our common stock on a one-for-one basis
as described below in this Note 1. In addition to holding ownership interests in various joint ventures, the Operating Partnership
generally conducts its operations through the following subsidiaries:  
    GGPLP L.L.C., a Delaware limited liability company (the LLC),
has ownership interests in the majority of our properties (other
than those acquired in The Rouse Company merger (the TRC Merger,
Note 2)).  
    The Rouse Company LP (TRCLP), which includes both a REIT and
taxable REIT subsidiaries (TRSs), has ownership interests in
Consolidated Properties and Unconsolidated Properties (as defined
below).  
    General Growth Management, Inc. (GGMI), a TRS, manages, leases,
and performs various other services for some of our Unconsolidated
Real Estate Affiliates (as defined below) and 30 properties owned
by unaffiliated third parties. In this report, we refer to our ownership interests in majority owned or controlled properties as
Consolidated Properties, to our ownership interests in joint ventures in which we own a
non-controlling interest as Unconsolidated Real Estate Affiliates and the properties owned by
such joint ventures as the Unconsolidated Properties. Our Company Portfolio includes both the
Unconsolidated Properties and our Consolidated Properties. 6 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) Basis of Presentation The accompanying consolidated financial statements include the accounts of General Growth, our
subsidiaries and joint ventures in which we have a controlling interest. We also consolidate the
accounts of certain variable interest entities that were acquired in the TRC Merger (Note 2) and
are considered special purpose entities and where we are the primary beneficiary. Income allocated
to minority interests in these joint ventures includes the share of such properties operations
(generally computed as the respective joint venture partner ownership percentage) applicable to
such non-controlling venturers. Acquisitions (Note 2) are accounted for utilizing the purchase method of accounting and
accordingly, the results of operations are included in our results of operations from the
respective dates of acquisition. All significant intercompany balances and transactions have been
eliminated. In the opinion of management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the financial position and results of operations and cash
flows for the interim periods have been included. The results for the interim periods ended March
31, 2005 are not necessarily indicative of the results to be obtained for the full fiscal year. Preferred Stock Various classes of preferred stock of General Growth have been created to permit the future
potential conversion of certain equity interests assumed by us in conjunction with various
acquisitions, into General Growth equity interests. As no such preferred stock has been issued,
such additional classes of preferred stock have not been presented in the accompanying consolidated
balance sheets as of March 31, 2005 and December 31, 2004. Minority Interests Common Changes in outstanding Operating Partnership Common Units for the three months ended March 31, 2005
were as follows: UnitsDecember 31, 2004
    
    
    55,532,263Conversion of Preferred Units
    
    
    59,229Exchanges for General Growth common stock
    
    
    (1,911,051
    )March 31, 2005
    
    
    53,680,441
 7 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) Preferred Components of minority interestpreferred at March 31, 2005 and December 31, 2004. Carrying AmountPer Unit
    
    
    
    
    
    
    (in thousands)Coupon
    
    
    Issuing
    
    
    Number
    
    
    Liquidation
    
    
    Redeemable
    
    
    March 31,
    
    
    December 31,Security Type
    
    Rate
    
    
    Entity
    
    
    of Units
    
    
    Preference
    
    
    by Issuer
    
    
    2005
    
    
    2004Perpetual Preferred UnitsRedeemable Preferred Units
(RPUs)
    
    
    8.95
    %
    
    LLC
    
    
    940,000
    
    
    $
    250
    
    
    
    (1
    )
    
    $
    60,000
    
    
    $
    235,000Cumulative Preferred Units
(CPUs)
    
    
    8.25
    %
    
    LLC
    
    
    20,000
    
    
    
    250
    
    
    
    N/A
    
    
    
    5,000
    
    
    
    5,000Price Development Company
(PDC) Series C
    
    
    8.75
    %
    
    PDC
    
    
    320,000
    
    
    
    25
    
    
    
    (2
    )
    
    
    
    
    
    
    8,00065,000
    
    
    
    248,000Convertible Preferred UnitsSeries B-JP Realty
    
    
    8.50
    %
    
    GGPLP
    
    
    1,401,353
    
    
    
    50
    
    
    
    N/A
    
    
    
    70,068
    
    
    
    70,975Series C-Glendale Galleria
    
    
    7.00
    %
    
    GGPLP
    
    
    641,528
    
    
    
    50
    
    
    
    N/A
    
    
    
    32,077
    
    
    
    32,176Series D-Foothills Mall
    
    
    6.50
    %
    
    GGPLP
    
    
    532,750
    
    
    
    50
    
    
    
    N/A
    
    
    
    26,637
    
    
    
    26,637Series E-Four Seasons Town
Centre
    
    
    7.00
    %
    
    GGPLP
    
    
    502,658
    
    
    
    50
    
    
    
    N/A
    
    
    
    25,132
    
    
    
    25,132153,914
    
    
    
    154,920Other preferred stock of
consolidated subsidiaries
    
    
    N/A
    
    
    various
    
    
    361
    
    
    
    1,000
    
    
    
    (3
    )
    
    
    361
    
    
    
    241Total Minority Interest-Preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    219,275
    
    
    $
    403,161
   (1)
    
    $175,000 called for redemption on March 25, 2005 in May 2005 (included in accounts payable and
accrued expenses) and $60,000 redeemable by issuer in April 2007.(2)
    
    Called for redemption on March 31, 2005 in May 2005 (included in accounts payable and accrued
expenses).(3)
    
    Redeemable on demand, under certain circumstances. Earnings Per Share (EPS) Information related to our EPS calculations is summarized as follows: Three Months Ended March 31,2005
    
    
    2004Basic
    
    
    Diluted
    
    
    Basic
    
    
    Diluted(In thousands)Numerators:Income from continuing operations
    
    $
    13,065
    
    
    $
    13,065
    
    
    $
    58,335
    
    
    $
    58,335Discontinued operations, net of minority interests
    
    
    
    
    
    
    
    
    
    
    788
    
    
    
    788Net income
    
    $
    13,065
    
    
    $
    13,065
    
    
    $
    59,123
    
    
    $
    59,123Denominators:Weighted average number of common shares
outstanding - basic
    
    
    235,812
    
    
    
    235,812
    
    
    
    217,553
    
    
    
    217,553Effect of
dilutive securities - options
    
    
    
    
    
    
    776
    
    
    
    
    
    
    
    926Weighted average number of common shares
outstanding - diluted
    
    
    235,812
    
    
    
    236,588
    
    
    
    217,553
    
    
    
    218,479
 Dilutive EPS excludes options where the exercise price was higher than the average market
price of our common stock and, therefore, the effect would be anti-dilutive and options for which
the conditions which must be satisfied prior to the issuance 8 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) of any such shares were not achieved. Such options totaled 1,199,132 in 2005 and 1,008,651 in 2004.
Outstanding Common Units have also been excluded from the diluted earnings per share calculation
because there would be no effect on EPS as the minority interests share of income would also be
added back to net income. Notes Receivable  Officers Notes receivable  officers were as follows: (In thousands)
    
    March 31, 2005
    
    
    December 31, 2004Income tax withholdings reported in
Prepaid expenses and other assets
    
    $
    174
    
    
    $
    623Reported as a reduction to Stockholders equity
    
    
    1,237
    
    
    
    5,178$
    1,411
    
    
    $
    5,801
 During February 2005, one of the officers voluntarily repaid his note, which had an
outstanding balance of $4.2 million at December 31, 2004. Revenue Recognition and Related Matters As of March 31, 2005, straight-line rents receivable, which represent the current net cumulative
rents recognized prior to when billed and collectible as provided by the terms of the leases, of
approximately $101,609 are included in accounts receivable, net in the accompanying consolidated
balance sheet (see Note 8). Minimum rent revenues also include amounts collected from tenants to
allow the termination of their leases prior to their scheduled termination dates and accretion
related to above and below-market leases on properties acquired as provided by FASB Statements No.
141, Business Combinations (SFAS 141) and No. 142, Goodwill and Intangible Assets (SFAS
142) as follows: Three Months EndedMarch 31,(In Thousands)
    
    2005
    
    
    2004Lease termination fees
    
    $
    2,566
    
    
    $
    2,989Above and below-market lease accretion
    
    
    7,631
    
    
    
    5,557
 Management fees primarily represent management and leasing fees, financing fees and fees for
other ancillary services performed by us for the benefit of the Unconsolidated Real Estate
Affiliates and properties owned by third parties and are recognized as revenues when earned. Fees
recognized by us for services performed for the Unconsolidated Properties were approximately $17.4
million for the three months ended March 31, 2005 and approximately $14.4 million for the three
months ended March 31, 2004. Business Segment Information We have the following reportable segments:  
    Retail and Other - includes the operation and management of regional shopping centers,
office and industrial properties, downtown specialty marketplaces, the retail and
non-retail rental components of mixed-use projects and community retail centers
    Community Development - includes the development and sale of land, primarily in
large-scale, long-term community development projects in and around Columbia, Maryland;
Summerlin, Nevada; and Houston, Texas Our two business segments offer different products or services and are managed separately because
each requires different operating strategies or management expertise. Prior to the TRC Merger,
substantially all of our business 9 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) involved ownership and operation of shopping centers. As we evaluated operating results and
resource allocation on a property-by-property basis, we had concluded that we had a single
reportable segment. We do not distinguish or group our consolidated operations on a geographic
basis. Further, all material operations are within the United States and no customer or tenant
comprises more than 3% of consolidated revenues. The operating measure used to assess operating results for the business segments is Real Estate
Property Net Operating Income (NOI). Management believes that NOI provides useful information
about a propertys operating performance. The accounting policies of the segments are the same as those described in Note 1, except that we
account for real estate ventures in which we have joint interest and control and certain other
minority interest ventures using the proportionate share method rather than the equity method.
This difference affects only the reported revenues and operating expenses of the segments and has
no effect on our reported net earnings. Employee Benefit and Stock Plans Incentive Stock Plans General Growth has incentive stock plans designed to attract and retain officers and key employees.
Our incentive stock plans provide for stock and option grants to employees in the following forms:  
    Restricted and unrestricted stock grants
    Options that vest generally over a fixed period of time
    Threshold-vesting stock options (TSOs) The plans also provide for option grants to directors. The terms of the 2003 Incentive Stock Plan
provide for the issuance of up to 9,000,000 shares of Common Stock pursuant to the plan, of which
6,658,000 are currently available for future grants as of the date of this report. Pursuant to the
1998 Incentive Plan, at December 31, 2004, the aggregate number of shares of our common stock which
may be issued subject to TSOs granted was limited to 6,000,000, subject to certain customary
adjustments to prevent dilution. After receiving the approval of our shareholders at our 2005
annual meeting, we increased the number of shares authorized for issuance under the 1998 Incentive
Plan to 11,000,000. The following is a summary of the TSOs that have been awarded through March 31, 2005: TSO Grant Year2005
    
    
    2004
    
    
    1999-2003Exercise price
    
    $
    35.41
    
    
    $
    30.94
    
    
    $
    14.35
    *Threshold vesting stock price
    
    $
    49.66
    
    
    $
    43.39
    
    
    $
    20.13
    *Fair value of options on grant date
    
    $
    2.34
    
    
    $
    1.59
    
    
    $
    1.07
    *Shares:Original grant
    
    
    1,000,000
    
    
    
    1,031,480
    
    
    
    4,523,952Forfeited
    
    
    (13,591
    )
    
    
    (72,212
    )
    
    
    (827,928
    )Vested and exchanged for cash
    
    
    
    
    
    
    
    
    
    
    (2,647,509
    )Vested and exercised
    
    
    
    
    
    
    
    
    
    
    (770,685
    )Outstanding
    
    
    986,409
    
    
    
    959,268
    
    
    
    277,830
   *
    
    Weighted average amounts Increases in the price of the common stock subsequent to the respective grant dates have caused all
the TSOs granted in 2003 and prior years to become vested. The granting and vesting of the TSOs
and subsequent increases in the 10 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) price of our common stock resulted in the recognition of compensation expense of approximately
$125,000 and $2.4 million for the three months ended March 31, 2005 and 2004, respectively. During the second quarter of 2002, the Company elected to prospectively adopt the fair value based
employee stock-based compensation expense recognition provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123). The Company
had previously applied the intrinsic value based expense recognition provisions set forth in APB
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). SFAS 123 states that the
adoption of the fair value based method is a change to a preferable method of accounting. The
transition rules for adoption of SFAS 123 provide that prior grants of options, whether from the
Companys 1993 Stock Incentive Plan (now expired) or the 1998 Incentive Plan, are accounted for
under APB 25. Had compensation costs for such prior grants of options been recorded under SFAS
123, the Companys net income and earnings per share would have been nominally reduced but there
would have been no effect on reported basic or diluted earnings per share. Employee Stock Purchase Plan The General Growth Properties, Inc. Employee Stock Purchase Plan (the ESPP) was established to
assist eligible employees in acquiring a stock ownership interest in General Growth. Under the
ESPP, eligible employees make payroll deductions over a six-month purchase period. At the end of
the six-month purchase period, the amounts withheld are used to purchase shares of our common stock
at a purchase price equal to 85% of the lesser of the closing price of a share of our common stock
on the first or last trading day of the purchase period. A maximum of 1,500,000 shares of our
common stock are reserved for issuance under the ESPP. Since the inception of the ESPP, an
aggregate of 1,038,290 shares of our common stock have been sold under the ESPP, including 65,176
shares for the purchase period ending December 31, 2004 which were purchased at a price of $25.18
per share. Restricted Stock Pursuant to the 2003 Incentive Stock Plan, in February 2005 and 2004, certain officers were granted
a total of 66,000 and 55,000 shares, respectively, of restricted common stock. In addition,
pursuant to the 1993 Stock Incentive Plan, certain officers were granted a total of 105,000 shares
of restricted common stock in February 2003 and 150,000 shares in September 2002. The 2005 grant,
the 2004 grant and 60,000 of the shares granted in 2003 had a one-year restriction period. The remaining
45,000 shares granted in 2003 and the 2002 grants vest over three years. As this restricted stock
represents an incentive for future periods, we are recognizing the related compensation expense
ratably over the applicable vesting periods. Management Savings Plan The General Growth Management Savings and Employee Stock Ownership Plan (the 401(k) Plan) permits
all eligible employees to defer a portion of their compensation in accordance with the provisions
of Section 401(k) of the Internal Revenue Code of 1986, as amended (the Code). Under the 401(k)
Plan, contributions were made to match the contributions of the participants. We match 100% of the
first 4% of earnings contributed by plan participants and 50% of the next 2% of the participants
earnings contributions. Matching contributions were made of approximately $5.3 million in 2004 and
$4.4 million in 2003. TRC Plan As a result of the TRC Merger, we assumed a retiree benefits plan that provides postretirement
medical and life insurance benefits to former TRC employees who met minimum age and service
requirements. The retiree benefits plan requires payment of a portion of the cost of participants
life insurance coverage and contributions to the cost of participants medical coverage based on
years of service, subject to a maximum annual contribution. 11 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) Amounts related to this plan, which has now been frozen, were not material as of or for the period
ended December 31, 2004 or March 31, 2005. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions. These
estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. For example, significant estimates
and assumptions have been made with respect to useful lives of assets, capitalization of
development and leasing costs, recoverable amounts of receivables and deferred taxes, initial
valuations and related amortization periods of deferred costs and intangibles, particularly with
respect to property acquisitions. Actual results could differ from those estimates. Reclassifications Certain amounts in the 2004 consolidated financial statements, including discontinued operations
(Note 7), have been reclassified to conform to the current year presentation. NOTE 2 PROPERTY ACQUISITIONS, RENOVATIONS, EXPANSIONS AND DEVELOPMENTS The Rouse Company We acquired The Rouse Company (TRC), a real estate development and management company, on
November 12, 2004 (the TRC Merger) for a purchase price, including debt and other liabilities
assumed, of approximately $14.4 billion. Immediately following the TRC Merger, TRC was, through a
series of transactions, converted to a limited partnership (TRCLP) wholly-owned by the Operating
Partnership and its subsidiaries. The results of TRCLPs operations have been included in our
consolidated financial statements since that date. The following table summarizes the estimated fair values of the assets acquired at the date of
acquisition. These fair values were based, in part, on preliminary third-party market valuations.
Because these fair values were based on currently available information and assumptions and
estimates that we believe are reasonable at this time, they have been and will continue to be
subject to adjustment as additional information becomes available. (In Thousands)Land
    
    $
    1,314,711Buildings and equipment
    
    
    8,210,348Developments in progress
    
    
    362,808Investment in and loans to/from Unconsolidated Real Estate Affiliates
    
    
    1,262,106Investment land and land held for development and sale
    
    
    1,673,300Cash and cash equivalents
    
    
    29,077Accounts receivable
    
    
    84,424Prepaid expenses and other assets:Below-market ground leases
    
    
    381,433Above-market tenant leases
    
    
    141,048Deferred tax assets
    
    
    145,243Goodwill
    
    
    411,900Other
    
    
    391,271$
    14,407,669
 12 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) Also in 2004, we made the following acquisitions which have been reflected in our consolidated
financial statements since the dates of the respective acquisitions: AcquisitionDate50% ownership interest in Burlington Town Center
    
    January 7Redlands Mall
    
    January 16The remaining 50% ownership interest in Town East Mall
    
    March 1Four Seasons Town Centre
    
    March 5Ownership interest in GSG de Cost Rica SRL
(GGP/Sambil Costa Rica)
    
    April 3050% ownership interest in Hoover Mall Holding, L.L.C.
    
    May 11Mall of Louisiana
    
    May 12Grand Canal Shoppes
    
    May 1750% ownership interest in GGP/NIG Brazil
    
    July 30Stonestown Galleria
    
    August 13
 In addition to the acquisitions discussed above, we have entered into a separate agreement
(the Phase II Agreement), to acquire the multi-level retail space that is planned to be part of
The Palazzo in Las Vegas, Nevada that will be connected to the existing Venetian and the Sands Expo
and Convention Center facilities (the Phase II Acquisition) and the Grand Canal Shoppes described
above. The Palazzo is currently under development and is expected to be completed in 2007. If
completed as specified under the terms of the Phase II Agreement, we will purchase, payable upon
grand opening, the Phase II Acquisition retail space at a price computed on a 6% capitalization
rate on the projected net operating income of the Phase II retail space, as defined by the Phase II
Agreement (Phase II NOI), up to $38 million and on a capitalization rate of 8% on Phase II NOI in
excess of $38 million, all subject to a minimum purchase price of $250 million. Based on current
preliminary plans and estimated rents, the actual purchase price would be more than double the
minimum purchase price. The Phase II Agreement is subject to the satisfaction of separate and
customary closing conditions. Accounting for Acquisitions Acquisitions of properties are accounted for utilizing the purchase method and accordingly, the
results of operations are included in our results of operations subsequent to the respective dates
of acquisition. The purchase prices for all property acquisitions are subject to certain
prorations and adjustments. Estimates of future cash flows and other valuation techniques are used
to allocate the purchase price of acquired property between land, buildings and improvements,
equipment and identifiable intangible assets and liabilities such as amounts related to in-place
at-market leases, acquired above and below-market leases and tenant relationships. Initial
valuations are subject to change until such information is finalized no later than 12 months from
the applicable acquisition dates. As of March 31, 2005, acquired in-place leases totaled approximately $595.2 million ($539.0 million
net of accumulated amortization) and acquired below-market leases (net of above-market leases)
totaled approximately $164.1 million ($107.5 million net of accumulated amortization). These
amounts are estimates as purchase price allocations for certain recent acquisitions may be
subsequently revised as additional information becomes available. Amortization of these intangible
assets and liabilities, and similar assets and liabilities from our Unconsolidated Real Estate
Affiliates, resulted in additional net income of approximately $5.5 million for the three months ended
March 31, 2005 and $5.1 million for the three months ended March 31, 2004. 13 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) NOTE 3 INVESTMENTS IN AND LOANS FROM UNCONSOLIDATED REAL ESTATE AFFILIATES The Unconsolidated Real Estate Affiliates constitute our investment in real estate joint
ventures that own and/or develop shopping centers and other retail and investment property.
Generally, we share in the profits and losses, cash flows and other matters relating to our
investments in Unconsolidated Real Estate Affiliates in accordance with our respective ownership
percentages. We manage most of the properties owned by these joint ventures. Some of the joint
ventures have elected to be taxed as REITs. Since we have joint interest and control of the
Unconsolidated Properties with our venture partners, we account for these joint ventures using the
equity method. Certain of the properties were contributed to the joint venture subject to existing financing, as
modified by certain replacement financing (Retained Debt), in order to balance the net equity
values of the properties contributed by each of the venture partners. We are obligated to fund all
amounts related to Retained Debt including any shortfalls of any subsequent sale or refinancing
proceeds of the properties against their respective loan balances to the extent of such Retained
Debt. Retained Debt totaled $148.1 million as of March 31, 2005 and $148.7 million as of December
31, 2004. The significant accounting policies used by the Unconsolidated Real Estate Affiliates are the same
as ours. 14 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) Condensed Combined Financial Information of Unconsolidated Real Estate Affiliates The following is condensed combined financial information for the Companys Unconsolidated Real
Estate Affiliates as of March 31, 2005 and December 31, 2004 and for the periods ended March 31,
2005 and 2004. (In Thousands)
    
    March 31, 2005
    
    
    December 31, 2004Combined
Balance Sheets - Unconsolidated Real Estate AffiliatesAssets:Land
    
    $
    865,934
    
    
    $
    852,137Buildings and equipment
    
    
    7,389,226
    
    
    
    7,398,555Less accumulated depreciation
    
    
    (1,116,835
    )
    
    
    (982,616
    )Developments in progress
    
    
    240,646
    
    
    
    220,486Net property and equipment
    
    
    7,378,971
    
    
    
    7,488,562Investment in unconsolidated joint ventures
    
    
    50,655
    
    
    
    56,362Investment land and land held for development and sale
    
    
    266,701
    
    
    
    257,555Net investment in real estate
    
    
    7,696,327
    
    
    
    7,802,479Cash and cash equivalents
    
    
    152,436
    
    
    
    134,399Accounts receivable, net
    
    
    133,194
    
    
    
    119,446Deferred expenses, net
    
    
    167,928
    
    
    
    175,446Prepaid expenses and other assets
    
    
    186,826
    
    
    
    261,555Total assets
    
    $
    8,336,711
    
    
    $
    8,493,325Liabilities and Owners Equity:Mortgage notes and other debt payable
    
    $
    5,577,192
    
    
    $
    5,601,137Accounts payable and accrued expenses
    
    
    373,207
    
    
    
    417,300Minority interest
    
    
    117
    
    
    
    117Owners equity
    
    
    2,386,195
    
    
    
    2,474,771Total liabilities and owners equity
    
    $
    8,336,711
    
    
    $
    8,493,325Investment In And Loans To/From Unconsolidated Real Estate AffiliatesOwners equity
    
    $
    2,386,195
    
    
    $
    2,474,771Less joint venture partners equity
    
    
    (1,277,911
    )
    
    
    (1,258,133
    )Loans and other, net
    
    
    869,737
    
    
    
    728,903Investment in and loans to/from
Unconsolidated Real Estate Affiliates
    
    $
    1,978,021
    
    
    $
    1,945,541
 15 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) Three Months EndedMarch 31,(In Thousands)
    
    2005
    
    
    2004Combined
Statements of Operations - Unconsolidated Real Estate AffiliatesRevenues:Minimum rents
    
    $
    195,833
    
    
    $
    125,199Tenant recoveries
    
    
    86,895
    
    
    
    61,624Overage rents
    
    
    3,503
    
    
    
    2,397Land sales
    
    
    16,319
    
    
    
    Other
    
    
    29,964
    
    
    
    2,973Total revenues
    
    
    332,514
    
    
    
    192,193Expenses:Real estate taxes
    
    
    27,543
    
    
    
    17,957Repairs and maintenance
    
    
    22,799
    
    
    
    14,440Marketing
    
    
    7,253
    
    
    
    6,387Other property operating costs
    
    
    60,153
    
    
    
    25,962Land sales operations
    
    
    7,204
    
    
    
    Provision for doubtful accounts
    
    
    2,207
    
    
    
    1,382Property management and other costs
    
    
    11,643
    
    
    
    11,034General and administrative
    
    
    481
    
    
    
    285Depreciation and amortization
    
    
    59,018
    
    
    
    38,524Total expenses
    
    
    198,301
    
    
    
    115,971Operating income
    
    
    134,213
    
    
    
    76,222Interest income
    
    
    1,536
    
    
    
    847Interest expense
    
    
    (69,239
    )
    
    
    (40,980
    )Equity in income of unconsolidated joint ventures
    
    
    1,119
    
    
    
    1,139Net income
    
    $
    67,629
    
    
    $
    37,228Equity In Income of Unconsolidated AffiliatesTotal income of Unconsolidated Real Estate
Affiliates
    
    $
    67,629
    
    
    $
    37,228Joint venture partners share of income of
Unconsolidated Real Estate Affiliates
    
    
    (34,791
    )
    
    
    (18,608
    )Amortization of capital or basis differences
    
    
    (6,378
    )
    
    
    (673
    )Elimination of Unconsolidated Real Estate
Affiliate loan interest
    
    
    
    
    
    
    (17
    )Equity in income of unconsolidated affiliates
    
    $
    26,460
    
    
    $
    17,930
 In addition, the following is summarized financial information for certain individually significant
Unconsolidated Real Estate Affiliates as of March 31, 2005 and December 31, 2004 and for the three
months ended March 31, 2005 and 2004. 16 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) GGP/Homart
    
    
    GGP/Homart II
    
    
    GGP/TeachersMarch 31,
    
    
    December 31,
    
    
    March 31,
    
    
    December 31,
    
    
    March 31,
    
    
    December 31,(In Thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Assets:Land
    
    $
    146,777
    
    
    $
    146,777
    
    
    $
    190,707
    
    
    $
    190,707
    
    
    $
    125,378
    
    
    $
    125,378Buildings and equipment
    
    
    1,769,501
    
    
    
    1,765,800
    
    
    
    1,983,065
    
    
    
    1,957,969
    
    
    
    704,582
    
    
    
    703,700Less accumulated depreciation
    
    
    (405,283
    )
    
    
    (389,682
    )
    
    
    (219,993
    )
    
    
    (205,637
    )
    
    
    (49,131
    )
    
    
    (44,147
    )Developments in progress
    
    
    21,627
    
    
    
    8,586
    
    
    
    50,020
    
    
    
    63,970
    
    
    
    25,380
    
    
    
    20,847Investment in unconsolidated joint ventures
    
    
    10,178
    
    
    
    10,898
    
    
    
    
    
    
    
    
    
    
    
    29
    
    
    
    Net investment in real estate
    
    
    1,542,800
    
    
    
    1,542,379
    
    
    
    2,003,799
    
    
    
    2,007,009
    
    
    
    806,238
    
    
    
    805,778Cash and cash equivalents
    
    
    28,028
    
    
    
    20,319
    
    
    
    28,617
    
    
    
    23,149
    
    
    
    17,061
    
    
    
    19,658Accounts receivable, net
    
    
    43,872
    
    
    
    39,254
    
    
    
    32,442
    
    
    
    32,265
    
    
    
    7,995
    
    
    
    7,990Deferred expenses, net
    
    
    48,642
    
    
    
    48,969
    
    
    
    58,811
    
    
    
    59,102
    
    
    
    8,923
    
    
    
    8,423Prepaid expenses and other assets
    
    
    50,021
    
    
    
    56,482
    
    
    
    28,219
    
    
    
    36,236
    
    
    
    3,918
    
    
    
    3,359Total assets
    
    $
    1,713,363
    
    
    $
    1,707,403
    
    
    $
    2,151,888
    
    
    $
    2,157,761
    
    
    $
    844,135
    
    
    $
    845,208Liabilities and Owners Equity:Mortgage notes and other property payable
    
    $
    1,463,875
    
    
    $
    1,469,938
    
    
    $
    1,326,254
    
    
    $
    1,331,301
    
    
    $
    465,985
    
    
    $
    466,580Accounts payable and accrued expenses
    
    
    54,960
    
    
    
    63,560
    
    
    
    65,667
    
    
    
    81,574
    
    
    
    64,912
    
    
    
    67,109Minority interest
    
    
    
    
    
    
    
    
    
    
    117
    
    
    
    117
    
    
    
    
    
    
    
    Owners equity
    
    
    194,528
    
    
    
    173,905
    
    
    
    759,850
    
    
    
    744,769
    
    
    
    313,238
    
    
    
    311,519Total liabilities and owners equity
    
    $
    1,713,363
    
    
    $
    1,707,403
    
    
    $
    2,151,888
    
    
    $
    2,157,761
    
    
    $
    844,135
    
    
    $
    845,208
 GGP/Homart
    
    
    GGP/Homart II
    
    
    GGP/TeachersThree Months Ended
    
    
    Three Months Ended
    
    
    Three Months EndedMarch 31,
    
    
    March 31,
    
    
    March 31,(In Thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Minimum rents
    
    $
    59,595
    
    
    $
    50,129
    
    
    $
    45,948
    
    
    $
    43,706
    
    
    $
    20,851
    
    
    $
    19,831Tenant recoveries
    
    
    22,943
    
    
    
    23,649
    
    
    
    23,090
    
    
    
    21,785
    
    
    
    9,579
    
    
    
    9,379Overage rents
    
    
    1,097
    
    
    
    774
    
    
    
    1,035
    
    
    
    989
    
    
    
    65
    
    
    
    238Other
    
    
    1,982
    
    
    
    1,370
    
    
    
    1,344
    
    
    
    1,033
    
    
    
    470
    
    
    
    334Total revenues
    
    
    85,617
    
    
    
    75,922
    
    
    
    71,417
    
    
    
    67,513
    
    
    
    30,965
    
    
    
    29,782Expenses:Real estate taxes
    
    
    7,380
    
    
    
    7,199
    
    
    
    7,301
    
    
    
    6,339
    
    
    
    2,749
    
    
    
    2,543Repairs and maintenance
    
    
    7,135
    
    
    
    6,458
    
    
    
    4,683
    
    
    
    4,420
    
    
    
    1,817
    
    
    
    1,827Marketing
    
    
    2,450
    
    
    
    2,475
    
    
    
    2,377
    
    
    
    2,361
    
    
    
    856
    
    
    
    878Other property operating costs
    
    
    7,845
    
    
    
    10,117
    
    
    
    8,075
    
    
    
    8,364
    
    
    
    3,690
    
    
    
    3,948Provision for doubtful accounts
    
    
    330
    
    
    
    435
    
    
    
    611
    
    
    
    529
    
    
    
    61
    
    
    
    252Property management and other costs
    
    
    5,065
    
    
    
    4,597
    
    
    
    4,088
    
    
    
    3,973
    
    
    
    1,650
    
    
    
    1,574General and administrative
    
    
    99
    
    
    
    81
    
    
    
    184
    
    
    
    132
    
    
    
    184
    
    
    
    56Depreciation and amortization
    
    
    17,020
    
    
    
    16,210
    
    
    
    15,024
    
    
    
    14,076
    
    
    
    5,147
    
    
    
    4,884Total expenses
    
    
    47,324
    
    
    
    47,572
    
    
    
    42,343
    
    
    
    40,194
    
    
    
    16,154
    
    
    
    15,962Operating income
    
    
    38,293
    
    
    
    28,350
    
    
    
    29,074
    
    
    
    27,319
    
    
    
    14,811
    
    
    
    13,820Interest income
    
    
    498
    
    
    
    361
    
    
    
    478
    
    
    
    406
    
    
    
    136
    
    
    
    58Interest expense
    
    
    (20,329
    )
    
    
    (20,431
    )
    
    
    (16,313
    )
    
    
    (13,371
    )
    
    
    (4,793
    )
    
    
    (3,614
    )Equity in income of unconsolidated joint ventures
    
    
    1,119
    
    
    
    1,139
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    19,581
    
    
    $
    9,419
    
    
    $
    13,239
    
    
    $
    14,354
    
    
    $
    10,154
    
    
    $
    10,264
 17 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) NOTE 4 MORTGAGE NOTES AND OTHER DEBT PAYABLE Mortgage notes and other debt payable reflected in the accompanying consolidated balance
sheets at March 31, 2005 and December 31, 2004 consisted of the following: (In Thousands)
    
    March 31, 2005
    
    
    December 31, 2004Fixed-rate debt:Commercial mortgage-backed securities
    
    $
    331,191
    
    
    $
    332,526Other collateralized mortgage notes and other debt payable
    
    
    9,968,952
    
    
    
    9,036,659Corporate and other unsecured term loans
    
    
    1,687,849
    
    
    
    1,750,882Total fixed-rate debt
    
    
    11,987,992
    
    
    
    11,120,067Variable-rate debt:Commercial mortgage-backed securities
    
    
    360,123
    
    
    
    361,239Other collateralized mortgage notes and other debt payable
    
    
    1,668,543
    
    
    
    2,189,059Credit facilities
    
    
    223,000
    
    
    
    150,000Corporate and other unsecured term loans
    
    
    6,153,152
    
    
    
    6,490,582Total variable-rate debt
    
    
    8,404,818
    
    
    
    9,190,880Total
    
    $
    20,392,810
    
    
    $
    20,310,947
 Commercial Mortgage-Backed Securities In early December 2001, the Operating Partnership and certain Unconsolidated Real Estate Affiliates
completed the placement of $2.55 billion of non-recourse commercial mortgage pass-through
certificates (the GGP MPTC). The GGP MPTC was initially collateralized by 27 malls and one
office building, including 19 malls then owned by certain Unconsolidated Real Estate Affiliates.
At March 31, 2005, the GGP MPTC has a current outstanding balance of approximately $1.1 billion
(including $389.5 million by Unconsolidated Real Estate Affiliates) and was collateralized by
eleven malls and one office building, including six malls owned by Unconsolidated Real Estate
Affiliates. The GGP MPTC is comprised of both variable rate and fixed rate notes which require monthly payments
of principal and interest. The certificates represent beneficial interests in three loan groups
made by three sets of borrowers (the Operating Partnership, GGP/Homart and GGP/Homart II, and GGP
Ivanhoe III). The original principal amount of the GGP MPTC was comprised of $1.235 billion
attributed to the Operating Partnership, $900 million to GGP/Homart and GGP/Homart II and $415
million to GGP Ivanhoe III. The terms of the notes comprising the GGP MPTC are as follows: Weighted-AverageInitial Maturity
    
    Interest Term
    
    Interest Rate
    
    Interest Rate36 months (1)
    
    Variable
    
    LIBOR
(3) plus
60 to 235 basis
points
    
    LIBOR (3) plus 79 basis points51 months (2)
    
    Variable
    
    LIBOR
(3) plus
70 to 250 basis
points
    
    LIBOR (3) plus 103 basis points5 years
    
    Fixed
    
    5.01 to 6.18%
    
    
    5.38
    %
   (1)
    
    With two no-cost 12-month extension options, one of which was exercised in 2004.(2)
    
    With two no-cost 18-month extension options.(3)
    
    2.87% at March 31, 2005. The extension options with respect to the variable rate notes are subject to obtaining extensions
of the interest rate protection agreements which were required to be obtained in conjunction with
the GGP MPTC. 18 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) Other Collateralized Mortgage Notes and Other Debt Payable Other collateralized mortgage notes and other debt payable consist primarily of non-recourse notes
collateralized by individual or groups of properties and equipment. Substantially all of the
mortgage notes are non-recourse to us. Certain mortgage notes payable may be prepaid but are
generally subject to a prepayment penalty equal to a yield-maintenance premium or a percentage of
the loan balance. Certain loans have cross-default provisions and are cross-collateralized. Under
certain cross-default provisions, a default under any mortgage note included in a cross-defaulted
package may constitute a default under all such mortgage notes in the package and may lead to
acceleration of the indebtedness due on each property within the collateral package. In general,
the cross-defaulted properties are under common ownership. However, fixed-rate debt (totaling
$138.6 million) collateralized by two Unconsolidated Properties is cross-defaulted and
cross-collateralized with debt (totaling $868.8 million) collateralized by eleven Consolidated
Properties. The fixed-rate collateralized mortgage notes and other debt payable bear interest ranging from
3.13% to 11.20%. The variable-rate collateralized mortgage notes and other debt payable bear
interest at LIBOR plus 60 to 213 basis points. Credit Facilities 2004 Credit Facility We entered into a credit agreement on November 12, 2004 to fund the cash portion of the TRC Merger
consideration and, with other cash and financing sources, fund other costs of the merger. The terms
of the notes comprising the 2004 Credit Facility are as follows: Outstanding at(In Millions)
    
    Initial Capacity
    
    
    March 31, 2005
    
    
    December 31, 2004Six-month bridge loan
    
    $
    1,145.0
    
    
    $
    433.2
    
    
    $
    749.9Three-year term loan
    
    
    3,650.0
    
    
    
    3,634.2
    
    
    
    3,650.0Four-year term loan
    
    
    2,000.0
    
    
    
    1,995.0
    
    
    
    2,000.0Revolving credit facility
    
    
    500.0
    
    
    
    223.0
    
    
    
    150.0$
    7,295.0
    
    
    $
    6,285.4
    
    
    $
    6,549.9
 The Company expects to repay the bridge loan in its entirety by May 12, 2005. Accordingly, the
available six-month, $600 million extension option of the loan will not be utilized. Principal
repayment of the three-year $3.6 billion term loan begins in November 2005 with semi-annual
payments in 2006, quarterly payments in 2007 and a final $1.8 billion payment in November 2007.
Principal repayment of the four-year $2 billion term loan began in January 2005 with quarterly
payments scheduled through September 2008 and a final $1.9 billion payment in November 2008. The
Company has proposed to holders of this four-year term loan to reduce the current interest rate of
LIBOR plus 2.25% by 50 basis points and pay a 10-basis-point consent fee for the reduction. There
can be no assurance that this proposal will be accepted by the holders on these or any other terms.
The credit facility currently bears interest at a weighted-average rate of LIBOR plus
approximately 223 basis points. We are generally required to apply the net proceeds of future mortgage financings and refinancings,
sales of equity, and asset dispositions (including by casualty or condemnation) toward prepayment
of the credit facility in accordance with various priorities set out in the credit facility.
Exceptions to this requirement include capital expenditures, $500 million annually per our written
request to the lenders and other items. The credit facility is secured by a pledge of the
Operating Partnerships ownership interest in TRCLP and in GGPLP L.L.C and also by a pledge of the
interest in an operating account in which we will deposit any distributions the Operating
Partnership receives from our interests in TRCLP. 19 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) During the term of the facility, we are subject to customary affirmative and negative covenants.
Upon the occurrence of an event of default contained in the credit facility, the lenders under the
facilities will have the option of declaring immediately due and payable all amounts outstanding
under the agreement. The credit facility contains events of default including failure to maintain
our status as a REIT under the Internal Revenue Code, failure to remain listed on the New York
Stock Exchange and such customary events as nonpayment of principal, interest, fees or other
amounts, breach of representations and warranties, breach of covenant, cross-default to other
indebtedness and certain bankruptcy events. 2003 Credit Facility In April 2003, we established the 2003 Credit Facility, a revolving credit facility and term loan
with initial borrowing availability of approximately $779.0 million (which was subsequently
increased to approximately $1.25 billion). The 2003 Credit Facility was repaid in November 2004,
in conjunction with financing of the TRC Merger. Unsecured Term Loans In conjunction with the TRC Merger, we assumed $1.6 billion of publicly-traded unsecured debt.
Included in this total is $46.6 million of unsecured, medium-term notes which bear interest at
fixed rates of 8.09% to 8.78% and mature at various dates from 2005 to 2007. The remaining $1.1
billion of publicly-traded unsecured debt bears interest at fixed rates ranging from 3.65% to 8.00%
and matures at various dates from 2008 to 2013. During August 2002, we arranged for an aggregate of $150.0 million in loans from two separate
groups of banks. We borrowed $80.0 million on this loan in August 2002 and $70.0 million in
September 2002. These two-year loans were repaid in 2004. In conjunction with our acquisition of JP Realty in 2002, we assumed $100 million of ten-year
senior unsecured notes which bear interest at a fixed rate of 7.29% and were issued by PDC in March
1998. The notes require semi-annual interest payments. Annual principal payments of $25 million
as provided by the terms of the notes began in March 2005 and continue until the loan is fully
repaid in March 2008. Interest Rate Swaps Concurrent with the issuance of the GGP MPTC certificates, we purchased interest rate protection
agreements which were structured to limit our exposure to interest rate fluctuations. An equal
amount of interest rate protection agreements were simultaneously sold to fully offset the effect
of these agreements and to recoup a substantial portion of the cost of such agreements. To achieve a more desirable balance between fixed and variable-rate debt, we have also entered into
certain swap agreements as follows: GGP
    
    
    2004 Credit
    
    
    PropertyMPTC
    
    
    Agreement
    
    
    SpecificTotal notional amount (in millions)
    
    $
    125.0
    
    
    $
    350.0
    
    
    $
    14.1Average fixed effective rate (pay rate)
    
    
    4.59
    %
    
    
    3.43
    %
    
    
    6.84
    %Average variable interest rate of
related debt (receive rate)
    
    LIBOR + .92
    
    LIBOR + 2.25
    
    LIBOR + 2.13
 Such swap agreements have been designated as cash flow hedges and are intended to hedge our
exposure to future interest rate changes on the related variable-rate debt. 20 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) Letters of Credit and Surety Bonds We had outstanding letters of credit and surety bonds as of March 31, 2005 and December 31, 2004 of
approximately $131.9 million and $194 million, respectively, primarily in connection with insurance
requirements, special real estate assessments and construction obligations. NOTE 5 COMMON DISTRIBUTIONS The following chart summarizes our common distributions paid in 2005 and 2004. OperatingGeneral
    
    
    PartnershipGrowth
    
    
    LimitedAmount per
    
    
    
    
    
    
    
    
    
    
    Stockholders
    
    
    PartnersDeclaration Date
    
    Share
    
    
    Record Date
    
    
    Payment Date
    
    
    Amount
    
    
    AmountApril 4, 2005
    
    $
    0.36
    
    
    April 15, 2005
    
    April 29, 2005
    
    $
    85,603
    
    
    $
    19,325January 7, 2005
    
    
    0.36
    
    
    January 17, 2005
    
    January 31, 2005
    
    
    84,506
    
    
    
    19,992August 20, 2004
    
    
    0.36
    
    
    October 15, 2004
    
    October 29, 2004
    
    
    78,727
    
    
    
    19,992July 2, 2004
    
    
    0.30
    
    
    July 15, 2004
    
    July 30, 2004
    
    
    65,575
    
    
    
    16,662April 5, 2004
    
    
    0.30
    
    
    April 15, 2004
    
    April 30, 2004
    
    
    65,357
    
    
    
    16,704January 5, 2004
    
    
    0.30
    
    
    January 15, 2004
    
    January 30, 2004
    
    
    65,193
    
    
    
    16,714
 NOTE 6 COMMITMENTS AND CONTINGENCIES In the normal course of business, from time to time, we are involved in legal actions relating
to the ownership and operations of our properties. In managements opinion, the liabilities if
any, that may ultimately result from such legal actions are not expected to have a material adverse
effect on our consolidated financial position, results of operations or liquidity. We lease land or buildings at certain properties from third parties. Consolidated rental expense
including participation rent related to these leases was $4.2 million for the three months ended
March 31, 2005 and $0.7 million for the three months ended March 31, 2004. The leases generally
provide for a right of first refusal in favor of us in the event of a proposed sale of the property
by the landlord. We periodically enter into contingent agreements for the acquisition of properties. Each
acquisition is subject to satisfactory completion of due diligence and, in the case of property
acquired under development, completion of the project . TRC acquired various assets, including Summerlin, a master-planned community in suburban Las
Vegas, Nevada, in the acquisition of The Hughes Corporation (Hughes) in 1996. In connection with
the acquisition of Hughes, TRC entered into a Contingent Stock Agreement (CSA) for the benefit of
the former Hughes owners or their successors (beneficiaries). Under the terms of the CSA, shares
of TRC common stock were issuable to the beneficiaries based on the appraised values of defined
asset groups, including Summerlin, at specified termination dates through 2009 and/or cash flows
from the development and/or sale of those assets prior to the termination dates. We assumed TRCs obligation under the CSA to issue shares of common stock twice a year to
beneficiaries under the CSA. The amount of shares is based upon a formula set forth under the CSA
and upon our stock price. Such issuances could be dilutive to our existing stockholders. In
addition, under the assumption agreement, we agreed that following the effective time of the TRC
Merger there would not be a prejudicial effect on the beneficiaries 21 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) under the CSA with respect to their receipt of securities pursuant to the CSA as a result of the
TRC Merger. We further agreed to indemnify and hold harmless the beneficiaries against losses
arising out of any breach by us of the foregoing covenants. We account for the beneficiaries share of earnings from the assets as an operating expense. We
will account for any distributions to the beneficiaries in 2009, in connection with a valuation
related to assets that we own as of such date as additional investments in the related assets (that
is, contingent consideration). A total of 519,164 shares of our common stock were issued in
February 2005 pursuant to the CSA. NOTE 7 DISCONTINUED OPERATIONS AND PROPERTIES HELD FOR SALE In August 2004, our Board of Directors approved plans to dispose of certain of the
commercial/business properties originally acquired in the JP Realty acquisition in July 2002. The
sale closed on November 1, 2004 for $67.4 million and a gain of approximately $11.2 million was
recognized. Pursuant to SFAS 144, the Company has reclassified the operations of the industrial properties to
discontinued operations in the accompanying consolidated financial statements as follows. Revenues
and income, before minority interests, were as follows: Three Months EndedMarch 31, 2004Industrial properties:Revenues
    
    $
    1,760Income
    
    $
    936
 NOTE 8 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In January 2004, the FASB issued Interpretation No. 46 (FIN 46), Consolidation of Variable
Interest Entities (VIEs), to improve financial reporting of special purpose and other entities.
We adopted FIN 46, as amended, as of December 31, 2003. Certain VIEs that are qualifying special
purpose entities (QSPEs) will not be required to be consolidated under the provisions of FIN 46.
In addition, FIN 46 expands the disclosure requirements for the beneficiary of a significant or a
majority of the variable interests to provide information regarding the nature, purpose and
financial characteristics of the entities. We have certain special purpose entities, primarily
created to facilitate the issuance of our commercial mortgage-backed securities (Note 4) and other
securitized debt or to facilitate the tax-increment financing of certain improvements at our
properties. Because these special purpose entities are QSPEs, they are not required to be
consolidated in our consolidated financial statements. As our Unconsolidated Real Estate
Affiliates have operating agreements granting the independent third-party joint venturers
substantive participating rights, the implementation of FIN 46 did not result in the consolidation
of any previously unconsolidated affiliates. In May 2003, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 150,
Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,
(SFAS 150) which establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It requires that an
issuer classify a financial instrument that is within its scope as a liability. The effective date
of a portion of the Statement has been indefinitely postponed by the FASB. We did not enter into
new financial instruments subsequent to May 2003 which would fall within the scope of this
statement. None of our transactions, arrangements or financial instruments has been identified that
appear to meet 22 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) the criteria for liability recognition in accordance with paragraphs 9 and 10 under SFAS 150 due to
the indefinite life of the joint venture arrangements. Accordingly, even if the effectiveness of
the measurement and classification provision of these paragraphs is no longer postponed, we do not
expect that it will be required to reclassify the liquidation amounts of such minority interests to
liabilities. On December 16, 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets-An Amendment
of APB Opinion No. 29. The amendments made by SFAS No. 153 are based on the principle that
exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged.
Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar
productive assets and replace it with at broader exception for exchanges of nonmonetary assets that
do not have commercial substance. SFAS No. 153 is effective for nonmonetary asset exchanges
occurring in fiscal periods beginning after June 15, 2005. We do not believe the adoption of SFAS
No. 153 on June 15, 2005 will have a material effect on our consolidated financial statements. On December 16, 2004, the FASB issued SFAS No. 123 (Revised 2004), Share-Based Payment (SFAS No.
123R). SFAS 123R replaces SFAS No. 123, which we adopted in the second quarter of 2002. SFAS
123R requires that the compensation cost relating to share-based payment transactions be recognized
in financial statements and be measured based on the fair value of the equity or liability
instruments used. SFAS No. 123R is effective as of the first interim or annual reporting period
that begins after June 15, 2005. We do not believe that the adoption of SFAS No. 123R will have a
material effect on our consolidated financial statements. On February 7, 2005, the SEC staff published certain views concerning the accounting by lessees for
leasehold improvements, rent holidays, lessor funding of lessee expenditures and other tenant
inducements. Although the application of these views to lessors was not specified by the SEC and a
formal accounting standard modifying existing practice on these items has not been issued or
proposed, we have conducted a review of our accounting relative to such items. We believe that our
leasing practices and agreements with a majority of our tenants provide that leasehold improvements
that we fund represent fixed assets that we own and control and that leases with such arrangements
are properly accounted for as commencing at the completion of construction of such assets. A
smaller percentage of our tenant leases do not provide for landlord funding but rather provide for
tenant funded construction and furnishing of the leased premises prior to the formal commencement
of the lease. We have concluded that the cumulative incremental straight-line rental revenue that
would have been recognized on such leases if they had commenced on tenant possession of such space
rather than the lease-specified commencement date to be approximately $10.1 million at December 31,
2004 which was recognized in the three months ended March 31, 2005. The recognition of
straight-line rental revenue on this accelerated basis will have no effect on periodic or
cumulative cash flows to be received pursuant to a tenant lease. NOTE 9 INCOME TAXES We elected to be taxed as a real estate investment (REIT) trust under sections 856-860 of
the Code, commencing with our taxable year beginning January 1, 1993. To qualify as a REIT, we
must meet a number of organizational and operational requirements, including requirements to
distribute at least 90% of our ordinary taxable income and to distribute to stockholders or pay tax
on 100% of capital gains and to meet certain asset and income tests. It is managements current
intention to adhere to these requirements. We also have subsidiaries which we have elected to be treated as taxable real estate investment
trust subsidiaries and which are, therefore, subject to Federal and state income taxes. Our
primary TRSs include GGMI, entities which own our planned community properties and other TRSs
acquired in the TRC Merger. Current Federal income taxes of certain of these TRSs are likely to
increase in future years as we exhaust certain net loss carry forwards of such entities and as
certain planned community developments are completed. Such increases could be significant. 23 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) The income tax provision was insignificant in 2004. The income tax provision (benefit) for the
three months ended March 31, 2005 is as follows: (In Thousands)Current
    
    $
    4,726Deferred
    
    
    (6,033
    )Total
    
    $
    (1,307
    )
 Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities.
Net deferred tax liabilities were $1.3 billion at March 31, 2005 and December
31, 2004, respectively. Due to the uncertainty of the realization of certain tax carryforwards, we established valuation
allowances. The majority of the valuation allowances related to net operating loss carryforwards
where there is uncertainty regarding their realizability and will more likely than not, expire
unused. However, the deferred income tax benefit recognized in 2005 is primarily due to a reduction in
certain GGMI tax asset valuation allowances due to an assessment of tax structuring opportunities
now available due to the TRC Merger. NOTE 10 SEGMENTS We have the following reportable segments:  
    Retail and Other  includes the operation and management of regional shopping centers,
office and industrial properties, downtown specialty marketplaces, the retail and
non-retail rental components of mixed-use projects and community retail centers
    Community Development  includes the development and sale of land, primarily in
large-scale, long-term community development projects in and around Columbia, Maryland;
Summerlin, Nevada; and Houston, Texas Our two business segments offer different products or services and are managed separately because
each requires different operating strategies or management expertise. Prior to the TRC Merger,
substantially all of our business involved ownership and operation of shopping centers. As we
evaluated operating results and resource allocation on a property-by-property basis, we had
concluded that we had a single reportable segment. We do not distinguish or group our consolidated
operations on a geographic basis. Further, all material operations are within the United States
and no customer or tenant comprises more than 10% of consolidated revenues. The operating measure used to assess operating results for the business segments is Real Estate
Property Net Operating Income (NOI). Management believes that NOI provides useful information
about a propertys operating performance. The accounting policies of the segments are the same as those described in Note 1, except that we
account for real estate ventures in which we have joint interest and control and certain other
minority interest ventures using the proportionate share method rather than the equity method.
This difference affects only the reported revenues and operating expenses of the segments and has
no effect on our reported net earnings. Operating results for the segments and reconciliations of real estate property net operating income
to income from continuing operations in the consolidated financial statements are as follows: 24 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED) Three Months Ended March 31,2005
    
    
    2004Retail
    
    
    Community
    
    
    
    
    
    
    Retail(In Thousands)
    
    and Other
    
    
    Development
    
    
    Total
    
    
    and OtherProperty revenues:Minimum rents
    
    $
    507,152
    
    
    $
    
    
    
    
    507,152
    
    
    $
    286,195Tenant recoveries
    
    
    225,731
    
    
    
    
    
    
    
    225,731
    
    
    
    133,952Overage rents
    
    
    15,313
    
    
    
    
    
    
    
    15,313
    
    
    
    9,489Land sales
    
    
    
    
    
    
    69,973
    
    
    
    69,973
    
    
    
    Other
    
    
    37,039
    
    
    
    1
    
    
    
    37,040
    
    
    
    11,201Total property revenues
    
    
    785,235
    
    
    
    69,974
    
    
    
    855,209
    
    
    
    440,837Property operating expenses:Real estate taxes
    
    
    67,182
    
    
    
    
    
    
    
    67,182
    
    
    
    37,297Repairs and maintenance
    
    
    64,741
    
    
    
    
    
    
    
    64,741
    
    
    
    32,134Marketing
    
    
    15,957
    
    
    
    
    
    
    
    15,957
    
    
    
    13,732Other property operating costs
    
    
    120,590
    
    
    
    1
    
    
    
    120,591
    
    
    
    54,620Land sales operations
    
    
    259
    
    
    
    59,504
    
    
    
    59,763
    
    
    
    Provision for doubtful accounts
    
    
    5,311
    
    
    
    
    
    
    
    5,311
    
    
    
    3,490Total property operating expenses
    
    
    274,040
    
    
    
    59,505
    
    
    
    333,545
    
    
    
    141,273Real estate property net operating income
    
    $
    511,195
    
    
    $
    10,469
    
    
    $
    521,664
    
    
    $
    299,564Real estate property net operating income
of unconsolidated properties
    
    
    
    
    
    
    
    
    
    
    (99,917
    )
    
    
    (64,810
    )Management and other fees
    
    
    
    
    
    
    
    
    
    
    19,563
    
    
    
    18,701Discontinued operations and other revenues
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    (829
    )Property management and other costs
    
    
    
    
    
    
    
    
    
    
    (34,637
    )
    
    
    (25,012
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    (2,811
    )
    
    
    (2,190
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    (163,309
    )
    
    
    (72,904
    )Operating income
    
    
    
    
    
    
    
    
    
    
    240,965
    
    
    
    152,520Interest income
    
    
    
    
    
    
    
    
    
    
    2,217
    
    
    
    417Interest expense
    
    
    
    
    
    
    
    
    
    
    (245,028
    )
    
    
    (87,087
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    1,307
    
    
    
    (7
    )Income allocated to minority interest
    
    
    
    
    
    
    
    
    
    
    (12,856
    )
    
    
    (25,438
    )Equity in income of unconsolidated affiliates
    
    
    
    
    
    
    
    
    
    
    26,460
    
    
    
    17,930Income from continuing operations
    
    
    
    
    
    
    
    
    
    $
    13,065
    
    
    $
    58,335
 25 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC. 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All references to numbered Notes are to specific notes to our Consolidated Financial
Statements included in this Quarterly Report and which Notes are incorporated into the applicable
response by reference. The following discussion should be read in conjunction with such
Consolidated Financial Statements and related Notes. Capitalized terms used, but not defined, in
this Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
have the same meanings as in such Notes. FORWARD-LOOKING INFORMATION We may make forward-looking statements in this Quarterly Report, in other reports and proxy
statements that we file with the SEC and in other information that we release publicly or provide
to investors. In addition, our senior management might make forward-looking statements orally to
analysts, investors, the media and others. Forward-looking statements include:  
    Projections of our revenues, income, earnings per share, Funds From Operations, capital
expenditures, dividends, leverage, capital structure or other financial items;  
    Descriptions of plans or objectives of our management for future operations, including
pending acquisitions and debt repayment or restructuring;  
    Forecasts of our future economic performance; and  
    Descriptions of assumptions underlying or relating to any of the foregoing.In this Quarterly Report, for example, we make forward-looking statements discussing our expectations about:  
    Future repayment of debt, including the ratio of variable to fixed-rate debt in our portfolio  

    Future interest rates  
    Benefits of the TRC Merger  
    Repayment of some of our debt Forward-looking statements discuss matters that are not historical facts. Because they discuss
future events or conditions, forward-looking statements often include words such as anticipate,
believe, estimate, expect, intend, plan, project, target, can, could, may,
should, will, would or similar expressions. Forward-looking statements should not be unduly
relied upon. They give our expectations about the future and are not guarantees. Forward-looking
statements speak only as of the date they are made and we disclaim any obligation to update them
except as required by law. There are several factors, many beyond our control, which could cause results to differ materially
from our expectations. Some of these factors are described in Exhibit 99.1 to this Quarterly
Report. Other factors, such as credit, market, operational, liquidity, interest rate and other
risks, are described elsewhere in this Quarterly Report. Any factor described in this Quarterly
Report could by itself, or together with one or more other factors, adversely affect our business,
results of operations or financial condition. There are also other factors that we have not
described in this Quarterly Report that could cause results to differ from our expectations. MANAGEMENTS OVERVIEW & SUMMARY Our primary business is the ownership, management, leasing and development of retail and office
rental property. We also develop and sell land for residential, commercial and other uses
primarily in master-planned communities. We strive to increase cash flow and net income by
acquiring, developing, renovating and managing retail rental property in major and middle markets
throughout the United States. Our business strategy includes selectively making strategic acquisitions to enhance the yields of
the acquired properties through subsequent proactive property management and leasing (including
tenant remerchandising), operating cost 26 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC. reductions, physical expansions, redevelopments and capital reinvestment. Some of the actions that
we take to increase productivity include changing the tenant mix, adding vendor carts or kiosks and
even full expansions or renovations of centers. Acquisitions have included single centers,
privately held portfolios and public-to-public purchases such as TRC for $14.3 billion in November
2004. Although we have not acquired any properties to date during 2005, during 2004, we acquired
TRC, 100% interests in five retail properties, the remaining 50% interest in one retail property, a
50% interest in two retail properties, a 33 1/3% ownership interest in a property to be developed
in Costa Rica and a 50% interest in a joint venture owning interests in two operating retail
properties, a property management company and a property to be developed in Brazil, all for an
aggregate consideration of approximately $16.1 billion. The continued acquisition of property is
the most significant factor in overall increases from year to year in our cash flows and net
income. The expansion and renovation of a property also results in increased cash flows and net income as a
result of increased customer traffic, trade area penetration and improved competitive position of
the property. As of March 31, 2005, we had 22 major approved redevelopment projects underway (each
with current incurred expenditures, at our ownership share) for a total cost of approximately
$627.5 million (including our ownership share of Unconsolidated Properties). In addition to property redevelopment, we also develop retail centers from the ground-up. In
August 2004, we completed the ground-up development of Jordan Creek Town Center in West Des Moines,
Iowa. The center, costing approximately $175 million, is a 1.9 million square foot enclosed
regional shopping mall with three anchor stores, a hotel and an amphitheater. We have two other
new development projects under construction and ten other potential new developments that are
projected to open in 2006 through 2008. Our Community Development segment includes the development and sale of residential and commercial
land, primarily in large-scale projects in and around Columbia, Maryland; Houston, Texas and
Summerlin, Nevada. We develop and sell finished and undeveloped land in such communities to
builders and other developers for residential, commercial and other uses. Land sale activity at
our newest project, the Bridgelands in Houston, Texas, is expected to commence in mid to late 2005. We believe that the most significant operating factor affecting incremental cash flow and net
income is increased rents (either base rental revenue or overage rents) earned from tenants at our
properties. These rental revenue increases are primarily achieved by:  Renewing expiring leases and re-leasing existing space at rates higher than expiring or
existing rates. Average annual new/renewal lease rates at our consolidated properties for
2005 were $33.23 per square foot, $.74 per square foot higher than the average annualized in
place rent per square foot and $3.60 per square foot higher than the average rent per square
foot for leases which expire in 2005. Lease durations for in-line specialty stores typically
average close to ten years. As a result, many leases that are expiring now were signed in the
early to mid 1990s during a challenging retail environment. 
Increasing occupancy and expanding rentable square footage at the properties so that more
space is generating rent. Space leased at properties which are not under redevelopment was
90.0 percent at March 31, 2005, comparable to the occupancy at March 31, 2004.  Increased tenant sales in which we participate through overage rents. Tenant sales per
square foot at our Consolidated Properties increased 17.3 percent over first quarter 2004 to
$407 per square foot primarily due to our focus on acquisitions of premier properties with
high productivity, including TRCLP, as well as our focus on operating income growth through
aggressive management, remerchandising and reinvestment. 27 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC. The following table summarizes additional operating statistics for our Consolidated Properties as
well as properties which are owned through joint venture arrangements and unconsolidated for GAAP
purposes (the Unconsolidated Properties). We provide on-site management and other services to
substantially all of the Unconsolidated Properties. Because the management operating philosophies
and strategies are generally the same whether the properties are consolidated or unconsolidated, we
believe that financial information and operating statistics with respect to all properties, both
consolidated and unconsolidated, provide important insights into our operating results, including
the relative size and significance of these elements of our overall operations. Collectively, we
refer to our Consolidated and Unconsolidated Properties as our Company Portfolio. COMPANY PORTFOLIO DATA As of and/or for the Three Months Ended March 31, 2005Consolidated Retail
    
    
    Unconsolidated
    
    
    RetailProperties
    
    
    Retail Properties
    
    
    Portfolio (b)OPERATING STATISTICS (a)Space leased at centers not
under redevelopment (as a %)
    
    
    89.8
    %
    
    
    90.4
    %
    
    
    90.0
    %Trailing 12 month total tenant sales per
sq. ft. (c)
    
    $
    407
    
    
    $
    434
    
    
    $
    416% change in total sales (c)
    
    
    3.7
    %
    
    
    5.0
    %
    
    
    4.2
    %% change in comparable sales (c)
    
    
    2.6
    %
    
    
    2.9
    %
    
    
    2.7
    %Mall and Freestanding GLA
excluding space under redevelopment (in
sq. ft.)
    
    
    42,493,200
    
    
    
    18,849,753
    
    
    
    61,342,953CERTAIN FINANCIAL INFORMATIONAverage annualized in place rent per sq.
ft.
    
    $
    32.49
    
    
    $
    35.47
    
    
    $
    33.30Average rent per sq. ft. for
new/renewal leases (excludes 2005
acquisitions)
    
    $
    33.23
    
    
    $
    37.35
    
    
    $
    34.91Average rent per sq. ft. for leases
expiring in 2005 (excludes 2005
acquisitions)
    
    $
    29.63
    
    
    $
    32.31
    
    
    $
    30.42
   (a)
    
    Data is for 100% of the Mall GLA in each portfolio, including those centers that are owned in part by unconsolidated affiliates. Data excludes properties currently being redeveloped and/or remerchandised and miscellaneous (non-mall) properties.(b)
    
    Data presented in the column Retail Portfolio are weighted average amounts.(c)
    
    Due to tenant sales reporting timelines, data presented is as of February 2005. SEASONALITY Both our Retail and Other segment and our tenants businesses are seasonal in nature. Our tenants
stores typically achieve higher sales levels during the fourth quarter because of the holiday
selling season, and with lesser, though still significant, sales fluctuations associated with the
Easter holiday and back-to-school events. Although we have a year-long temporary leasing program,
a significant portion of the rents received from short-term tenants are collected during the months
of November and December. In addition, the majority of our tenants have December or January lease
years for purposes of calculating annual overage rent amounts. Accordingly, overage rent
thresholds are most commonly achieved in the fourth quarter. As a result, occupancy levels and
revenue production are generally highest in the fourth quarter of each year. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions. These
estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates for a variety of reasons, certain of which are described below. 28 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC. CRITICAL ACCOUNTING POLICIES Critical accounting policies are those that are both significant to the overall presentation of the
Companys financial condition and results of operations and require management to make difficult,
complex or subjective judgments. For example, significant estimates and assumptions have been made
with respect to useful lives of assets, revenue recognition estimates for Community Development
Segment, capitalization of development and leasing costs, recoverable amounts of receivables and
deferred taxes and initial valuations and related amortization periods of deferred costs and
intangibles, particularly with respect to property acquisitions, as further discussed below. Our
critical accounting policies as discussed in our Annual Report on Form 10-K for the year ended
December 31, 2004 have not changed during the first quarter of 2005. ACQUISITIONS Another significant factor relating to overall increases in the Companys cash flow and net income
is the acquisition of additional properties as detailed in the following chart: AcquisitionDate2004A 50% ownership interest in Burlington Town Center
    
    January 7Redlands Mall
    
    January 16The remaining 50% ownership interest in Town East Mall
    
    March 1Four Seasons Town Centre
    
    March 5A 33 1/3% ownership interest in GGP/Sambil Costa Rica
    
    April 30A 50% ownership interest in Riverchase Galleria
    
    May 11Mall of Louisiana
    
    May 12The Grand Canal Shoppes
    
    May 17A 50% ownership interest in GGP/NIG Brazil
    
    July 30Stonestown Galleria
    
    August 13The Rouse Company
    
    November 12
 Although the Company has not made any acquisitions in 2005, readers of this MD&A should note
that, as described in the results of operations discussion below, the increases in cash flow and
elements of income in 2005 versus 2004 are primarily due to the acquisition of property and the
related financing of such acquisitions. RESULTS OF OPERATIONS Company revenues are primarily derived from tenants in the form of fixed minimum rents, overage
rents and recoveries of operating expenses. In addition, the consolidated results of operations of
the Company are impacted by acquisitions. Results of operations of the Company, as discussed
below, relate primarily to the revenues and expenses of the Consolidated Properties and our TRS
entities. Investments in Unconsolidated Real Estate Affiliates are accounted for using the equity
method of accounting. As a result, results of operations of Unconsolidated Real Estate Affiliates
are reported as Equity in income of unconsolidated affiliates. Additionally, the following
discussion of managements analysis of operations focuses on the consolidated financial statements
presented in this Quarterly Report. Trends in Funds from Operations (FFO) as defined by The
National Association of Real Estate Investment Trusts (NAREIT) have not been presented in this
management discussion and analysis of operations, as FFO, under current SEC reporting guidelines,
can only be considered a supplemental measure of Company operating performance. 29 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC. The following table compares major revenue and expense items for the three months ended March 31,
2005 and 2004: For The Three Months Ended March 31,(Dollars in Thousands)
    
    
    2005
    
    
    
    2004
    
    
    
    $ Change
    
    
    
    % ChangeTotal revenues
    
    
    $
    709,533
    
    
    
    $
    359,826
    
    
    
    $
    349,707
    
    
    
    
    97.2
    %Minimum rents
    
    
    
    410,484
    
    
    
    
    221,694
    
    
    
    
    188,790
    
    
    
    
    85.2Tenant recoveries
    
    
    
    182,007
    
    
    
    
    102,222
    
    
    
    
    79,785
    
    
    
    
    78.1Overage rents
    
    
    
    13,586
    
    
    
    
    8,352
    
    
    
    
    5,234
    
    
    
    
    62.7Land sales
    
    
    
    61,406
    
    
    
    
    
    
    
    
    
    61,406
    
    
    
    
    100.0Management and other fees
    
    
    
    19,563
    
    
    
    
    18,701
    
    
    
    
    862
    
    
    
    
    4.6Total expenses
    
    
    
    468,568
    
    
    
    
    207,306
    
    
    
    
    261,262
    
    
    
    
    126.0Real estate taxes
    
    
    
    53,504
    
    
    
    
    28,121
    
    
    
    
    25,383
    
    
    
    
    90.3Repairs and maintenance
    
    
    
    53,817
    
    
    
    
    24,659
    
    
    
    
    29,158
    
    
    
    
    118.2Other property operating costs
    
    
    
    89,763
    
    
    
    
    41,196
    
    
    
    
    48,567
    
    
    
    
    117.9Land sales operations
    
    
    
    54,105
    
    
    
    
    
    
    
    
    
    54,105
    
    
    
    
    100.0Marketing
    
    
    
    12,368
    
    
    
    
    10,440
    
    
    
    
    1,928
    
    
    
    
    18.5Property management and other costs
    
    
    
    34,637
    
    
    
    
    25,012
    
    
    
    
    9,625
    
    
    
    
    38.5Depreciation and amortization
    
    
    
    163,309
    
    
    
    
    72,904
    
    
    
    
    90,405
    
    
    
    
    124.0Interest expense
    
    
    
    245,028
    
    
    
    
    87,087
    
    
    
    
    157,941
    
    
    
    
    181.4Equity in income of unconsolidated affiliates
    
    
    
    26,460
    
    
    
    
    17,930
    
    
    
    
    8,530
    
    
    
    
    47.6
 Total revenues increased $331.1 million as a result of acquisitions and $18.6 million primarily as
a result of higher minimum rents and operating expense recoveries from tenants. Minimum rents increased primarily as a result of acquisitions. Minimum rents also include the net
effect of above and below-market lease rent accretion pursuant to SFAS 141 and 142 (Note 1) of $7.6
million in 2005 and $5.6 million in 2004 and approximately $10.1 million related to a change in the
commencement period for certain previously recorded leases. Tenant recoveries increased $75.8
million as a result of acquisitions and $4.0 million due to higher recoverable expenses at various
properties. Overage rents increased $4.9 million as a result of acquisitions and $0.4 million as a
result of higher tenant sales. Land sale revenues in 2005 are due to the Community Development segment, the properties of which
were acquired in the TRC Merger. Revenues in 2005 were comparable to those achieved by The Rouse
Company in 2004, excluding bulk sales. Management and other fees increased approximately $0.9 million compared to 2004. The acquisition
of TRC resulted in an increase of approximately $3.8 million in fees. This increase was
substantially offset by the Company acquiring the remaining 50% interest in Town East in March
2004. As the Town East venture is now consolidated in the results of operations of the Company,
GGMI no longer receives a management fee from this property. Total expenses increased $249.1 million as a result of acquisitions and $12.3 million as a result
of higher depreciation and property costs related to completed developments and renovations. Real estate taxes increased $22.8 million as a result of acquisitions and $2.6 million as a result
of increased property taxes at certain of our properties, including Jordan Creek which opened in
August 2004. Repairs and maintenance increased $27.9 million due to acquisitions and $1.2 million
primarily as a result of higher contracted expenses. Property operating costs increased $46.5
million as a result of acquisitions and $2.1 million as a result of higher energy costs. Real
estate taxes, repairs and maintenance and other property operating expenses are generally
recoverable from tenants and the increases in these expenses are generally consistent with the
increase in tenant recovery revenues. Property management and other costs increased primarily as a result of acquisitions subsequent to
March 31, 2004. 30 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC. Marketing expenses increased due to acquisitions. Depreciation and amortization increased $87.2
million as a result of acquisitions and $2.9 million as a result of additional depreciation on
completed developments and redevelopments and other capitalized building and equipment costs. Interest expense increased $147.8 million as a result of increased debt associated with
acquisitions and $10.1 million as a result of higher debt levels primarily as a result of
redevelopments, working capital requirements and higher average interest rates in comparison to the
same period last year. Equity in income of unconsolidated affiliates increased primarily due to the Riverchase and GGP/NIG
Brazil joint venture acquisitions in 2004 and the operations of unconsolidated affiliates of TRCLP
which were acquired in conjunction with the TRC Merger. 
 LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY Our primary uses and sources of cash are as follows: Uses
    
    SourcesShort-term liquidity and capital needs such as:
    
    Tenant construction allowances
    
    
    
    Operating cash flow, including
    
    Minor improvements made to individual
    
    
    
    the distributions of our share ofproperties that are not recoverable
    
    
    
    cash flow produced by ourthrough common area maintenance charges
    
    
    
    Unconsolidated Real Estate Affiliatesto tenants
    
    
    
    Land sales from the Community
    
    Dividend payments
    
    
    
    Development segment
    
    Debt repayment requirements, includingboth principal and interestLonger-term liquidity needs such as:
    
    Acquisitions
    
    
    
    Secured loans collateralized by
    
    New development
    
    
    
    individual properties
    
    Major renovation or expansion programs
    
    
    
    Unsecured loans at either aat individual properties
    
    
    
    venture or company level
    
    Debt repayment requirements, including
    
    
    
    Construction loansboth principal and interest
    
    
    
    Mini-permanent loans
    
    Long-term project financing
    
    Joint venture financing withinstitutional partners
    
    Equity securities
    
    Potential sale of certain officeand industrial property acquired inthe TRC Merger
 As of March 31, 2005, we had consolidated debt of approximately $20.4 billion, of which
approximately $12.5 billion bears interest at fixed rates (after taking into effect certain
interest rate swap agreements) and approximately $7.9 billion bears interest at variable rates. In
addition, our Unconsolidated Real Estate Affiliates have mortgage loans of which our allocable
portion based on our respective ownership percentages is approximately $2.8 billion, including $2.0
billion which bears interest at fixed rates (after taking into effect certain interest rate swap
agreements) and $0.8 billion which bears interest at variable rates. We intend to reduce the
percentage of variable-rate debt to total debt throughout 2005 and
2006. In such, regard, in the first quarter of 2005, we have obtained
approximately $1 billion of consolidated debt through such refinancing,
with the new debt bearing interest at a weighted average rate per annum of approximately 5.1% Except in instances where certain Consolidated Properties are cross-collateralized with the
Unconsolidated Properties or we have retained or agreed to be responsible for a portion of the debt
of a property when it was contributed to or acquired 31 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC. by an Unconsolidated Real Estate Affiliate, we have not otherwise guaranteed the debt of the
Unconsolidated Real Estate Affiliates. Our net cash flows for the quarter were as follows: (In Thousands)
    
    2005
    
    
    2004Net cash provided by operating activities
    
    $
    135,535
    
    
    $
    133,484Net cash used in investing activities
    
    
    (110,339
    )
    
    
    (146,178
    )Net cash provided by (used in) financing activities
    
    
    (15,642
    )
    
    
    10,955
 Substantially all of the changes were the result of acquisitions. 2004 Credit Facility The significant terms of the notes comprising the 2004 Credit Facility are as follows: Outstanding at(In Millions)
    
    Initial Capacity
    
    
    March 31, 2005Six-month bridge loan
    
    $
    1,145.0
    
    
    $
    433.2Three-year term loan
    
    
    3,650.0
    
    
    
    3,634.2Four-year term loan
    
    
    2,000.0
    
    
    
    1,995.0Revolving credit facility
    
    
    500.0
    
    
    
    223.0$
    7,295.0
    
    
    $
    6,285.4
 The Company expects to repay the bridge loan in its entirety by May 12, 2005. Accordingly,
the available six-month, $600 million extension option of the loan will not be utilized. Principal
repayment of the three-year $3.6 billion term loan begins in November 2005 with semi-annual
payments in 2006, quarterly payments in 2007 and a final $1.8 billion payment in November 2007.
Principal repayment of the four-year $2 billion term loan began in January 2005 with quarterly
payments scheduled through September 2008 and a final $1.9 billion payment in November 2008. The
Company has proposed to holders of this four-year term loan to reduce the current interest rate of
LIBOR plus 2.25% by 50 basis points and pay a 10-basis-point consent fee for the reduction. There
can be no assurance that this proposal will be accepted by the holders on these or any other terms.
The credit facility currently bears interest at a weighted-average rate of LIBOR plus
approximately 210 basis points. It is our current intention to repay the 2004 Credit Facility by the third quarter of 2006. Funds
required for this repayment are expected to come from a variety of sources which may include any or
all of the following:  
    Increased cash flow from new and existing properties, including the Community Development segment
    Refinancing low loan-to-value mortgages on existing properties
    Placing mortgages on currently unencumbered properties, including the Community Development segment
    Selective asset sales of office and industrial properties
    Strategic joint ventures
    Equity issuances We are generally required to apply the net proceeds of future mortgage financings and refinancings,
sales of equity, and asset dispositions (including by casualty or condemnation) toward prepayment
of the credit facility in accordance with various priorities set out in the credit facility.
Exceptions to this requirement include capital expenditures, $500 million annually per our written
request to the lenders and other items. The credit facility is secured by a pledge of the
Operating Partnerships ownership interest in TRCLP and in GGPLP L.L.C and also by a pledge of the
interest in an operating account in which we will deposit any distributions the Operating
Partnership receives from our interests in TRCLP. During the term of the facility, we are subject to customary affirmative and negative covenants
including limitations on indebtedness, a fixed charge coverage ratio and debt to equity levels.
We do not believe these covenants create material 32 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC. limitations on our liquidity or our ability to conduct our business, but may limit our ability to
finance additional acquisitions with debt. Upon the occurrence of an event of default contained in
the credit facility, the lenders under the facilities will have the option of declaring immediately
due and payable all amounts outstanding under the agreement. The credit facility contains events
of default including failure to maintain our status as a REIT under the Internal Revenue Code,
failure to remain listed on the New York Stock Exchange and such customary events as nonpayment of
principal, interest, fees or other amounts, breach of representations and warranties, breach of
covenant, cross-default to other indebtedness and certain bankruptcy events. Contractual Obligations and Commitments The following table aggregates the future maturities of the Companys contractual obligations and
commitments as of March 31, 2005: (In Thousands)
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Subsequent
    
    
    TotalLong-term debt-principal
    
    $
    1,229,545
    
    
    $
    2,147,559
    
    
    $
    3,868,605
    
    
    $
    4,548,855
    
    
    $
    3,522,363
    
    
    $
    5,075,883
    
    
    $
    20,392,810Retained debt-principal
    
    
    132,257
    
    
    
    61
    
    
    
    15,734
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,052
    (1)Ground lease payments
    
    
    8,164
    
    
    
    10,820
    
    
    
    10,816
    
    
    
    10,816
    
    
    
    10,816
    
    
    
    476,598
    
    
    
    528,030Committed real estate
acquisition contracts
    
    
    
    
    
    
    30,000
    
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    280,000
    (2)Purchase obligations
    
    
    139,962
    
    
    
    1,100
    
    
    
    920
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,982
    (3)Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0
    (4)Total
    
    $
    1,509,928
    
    
    $
    2,189,540
    
    
    $
    4,146,075
    
    
    $
    4,559,671
    
    
    $
    3,533,179
    
    
    $
    5,552,481
    
    
    $
    21,490,874
   (1)
    
    As separately detailed in Note 3.(2)
    
    Reflects $250 million related to the Palazzo (Note 2) and $30 million related to a
commitment to purchase Whalers Village, a shopping center on the island of Maui, Hawaii.
We have also committed to invest $17.4 million in joint ventures in Costa Rica and Brazil.(3)
    
    Reflects $141,982 accrued and incurred construction costs payable. Routine trade
payables have been excluded. Other construction costs related to current redevelopment and
development projects are currently expected to be approximately $676.5 million for
consolidated properties and $459.8 for unconsolidated properties.(4)
    
    Other long-term liabilities related to interest expense on long-term debt or ongoing
real estate taxes have not been included in the table as such amounts depend upon future
amounts outstanding and future applicable real estate tax and interest rates. Interest
expense was $245.0 million for the three months ended March 31, 2005 and $472.2 million for
fiscal 2004. Real estate tax expense was $53.5 million for the three months ended March 31,
2005 and $128.3 million for fiscal 2004. Although agreements to refinance debt maturing in 2005 and 2006 have not yet been reached, the
Company currently anticipates that all of its debt will be repaid or refinanced on a timely basis. If additional capital is required for any of the above listed obligations or
for other purposes, we believe that we can increase the amounts drawn or available under our credit facilities,
obtain new revolving credit facilities, obtain an interim bank loan, obtain additional mortgage financing on
under-leveraged or unencumbered assets, enter into new joint venture partnership arrangements or raise
additional debt or equity capital. However, there can be no assurance that we can obtain such financing
on satisfactory terms. We will continue to monitor our capital structure, investigate potential investments
or joint venture partnership arrangements and purchase additional properties if they can be acquired and financed
on terms that we reasonably believe will enhance long-term stockholder value. In addition, we anticipate that
we will continue our current practice of initially financing acquisitions with variable-rate debt. When the acquired
property operating cash flow has been increased, we anticipate refinancing portions of such variable-rate
acquisition debt with pooled or property-specific, non-recourse fixed-rate mortgage financing. Such
replacement financing, if based on increased property cash flow, should yield increased refinancing proceeds
or other more favorable financing terms. REIT Status In order to remain qualified as a real estate investment trust (REIT) for federal income tax
purposes, General Growth must distribute or pay tax on 100% of capital gains and at least 90% of
its ordinary taxable income to stockholders. The following factors, among others, will affect
operating cash flow and, accordingly, influence the decisions of the Board of Directors regarding
distributions:  
    Scheduled increases in base rents of existing leases
    Changes in minimum base rents and/or overage rents attributable to replacement of
existing leases with new or renewal leases
    Changes in occupancy rates at existing properties and procurement of leases for newly developed properties
    Necessary capital improvement expenditures or debt repayments at existing properties
    Our share of distributions of operating cash flow generated by the Unconsolidated Real
Estate Affiliates, less oversight costs and debt service on additional loans that have been
or will be incurred
    Anticipated proceeds from sales in our Community Development Segment. 33 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC.   We anticipate that our operating cash flow, and potential new debt or equity from future offerings,
new financings or refinancings will provide adequate liquidity to conduct our operations, fund
general and administrative expenses, fund operating costs and interest payments and allow
distributions to our preferred and common stockholders in accordance with the REIT requirements of
the Internal Revenue Code. ECONOMIC CONDITIONS Changes in interest rates are the most significant economic condition which would impact our
financial condition. Increases in interest rates, as have occurred in the first quarter of 2005,
have and will adversely impact us due to our outstanding variable rate debt which has increased
substantially due to the TRC Merger. We have limited our exposure to
interest rate fluctuations related to a portion of our variable-rate debt by the use of interest
rate cap and swap agreements. Subject to current market conditions, we have a policy of replacing
variable-rate debt with fixed-rate debt. However, in an increasing interest rate environment
(which generally follows improved market conditions), the fixed rates we can obtain with such
replacement fixed-rate debt will also continue to increase. According to the National Retail Federation, the 2004 holiday season was the strongest since 1999.
Despite these favorable trends, some economists remain cautious about prospects for continued
improvements in retail markets and future increases in interest rates. Growth in retail markets
would lead to stronger demand for leaseable space, ability to increase rents to tenants with
stronger sales performance and increased rents computed as a percentage of tenant sales. The Company and its affiliates currently have ownership interests in 163 consolidated and 58
unconsolidated operating regional malls and community centers, primarily in the United States.
These properties are diversified both geographically and by property type (both major and middle
market properties) and this may mitigate the impact of any economic decline at a particular
property or in a particular region of the country. In addition, the diverse combination of the
Companys tenants is important because no single tenant (by trade name) comprises more than 3% of
the Companys annualized total revenues. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS As described in Note 8,
new accounting pronouncements have been issued which are effective for the current
year. There has not been a significant impact on the Companys reported operations due to the
application of such new statements. There are no pronouncements or interpretations that have not
yet been adopted that are expected to have a material effect on the consolidated financial
statements. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK At March 31, 2005, we had consolidated debt of $20.4 billion, including $8.4 billion of
variable-rate debt of which approximately $489.1 million is subject to interest rate swap
agreements, which fix the interest we are required to pay on such debt to approximately 3.83% per
annum. Although the majority of the remaining variable-rate debt is subject to interest rate cap
agreements pursuant to the loan agreements and financing terms, such interest rate caps generally
limit the Companys interest rate exposure only if LIBOR exceeds a rate per annum significantly
higher (generally above 8% per annum) than current LIBOR rates. Therefore, a 25 basis point
movement in the interest rate on the remaining approximately $7.9 billion of variable-rate debt
would result in an approximately $20 million annualized increase or decrease in consolidated
interest expense and operating cash flows. In addition, the Company is subject to interest rate exposure as a result of the variable-rate debt
collateralized by the Unconsolidated Real Estate Affiliates for which interest rate swap agreements
have not been obtained. The Companys share (based on the Companys respective equity ownership
interests in the Unconsolidated Real Estate Affiliates) of such remaining variable-rate debt was
approximately $855.9 million at March 31, 2005. A similar 25 basis point annualized movement in
the interest rate on the variable-rate debt of the Unconsolidated Real Estate Affiliates would
result in approximately $2 million annualized increase or decrease in the Companys equity in the
income and operating cash flows from Unconsolidated Real Estate Affiliates. 34 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC. The Company is further subject to interest rate risk with respect to its fixed-rate financing in
that changes in interest rates will impact the fair value of the Companys fixed-rate financing.
To determine the fair market value, the fixed-rate debt is discounted at a rate based on an
estimate of current lending rates, assuming the debt is outstanding through maturity and
considering the debts collateral. At March 31, 2005, the fair value of our debt is estimated to be
$20.3 billion compared to the carrying value of $20.4 billion. If LIBOR were to increase by 25
basis points, the fair value of the debt would be approximately $181 million lower than the
carrying value and the fair value of our swap agreements would increase by approximately $1.8
million. The Company has an ongoing program of refinancing its consolidated and unconsolidated variable and
fixed rate debt and believes that this program allows it to vary its ratio of fixed to
variable-rate debt and to stagger its debt maturities to respond to changing market rate
conditions. Reference is made to the above discussions of Liquidity and Capital Resources of the
Company and Note 4 for additional debt information. The Company has not entered into any transactions using derivative commodity instruments. 
 ITEM 4. CONTROLS AND PROCEDURES Our management, with the participation of our Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures as of the end of the period
covered by this report have been designed and are functioning effectively to provide reasonable
assurance that the information required to be disclosed by us in reports filed under the Securities
Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods
specified in the SECs rules and forms. We believe that a controls system, no matter how well
designed and operated, cannot provide absolute assurance that the objectives of the controls system
are met, and no evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within a company have been detected. Management is required to apply
judgment in evaluating the cost-benefit relationship of possible controls and procedures. There have been no changes in our internal controls over financial reporting during our most recent
fiscal quarter that have materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting. 35 of 37




---



##### 



GENERAL GROWTH PROPERTIES, INC. 
 PART II. OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS We are currently subject to litigation arising in the normal course of its business. In the
opinion of management, none of these lawsuits or claims against us, either individually or in the
aggregate, is likely to have a material adverse effect on our business, results of operations, or
financial condition. In addition, we believe that we currently have adequate insurance in place to
cover any such significant litigation. 
 ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS None. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 
 ITEM 5. OTHER INFORMATION None. 
 ITEM 6. EXHIBITS 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. 99.1 Risk Factors 36 of 37




---



##### 



SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. GENERAL GROWTH PROPERTIES, INC.(Registrant)Date: May 9, 2005
    by:
    /s/: Bernard FreibaumBernard FreibaumExecutive Vice President and Chief Financial Officer
(Principal Accounting Officer) 37 of 37