GGP Ggp Inc. (delisted)

General Growth Properties, Inc. (the Company or GGP) (NYSE: GGP) today reported its operating results for the three months ending June 30, 2010.

Funds from operations was $93.6 million in the second quarter of 2010 compared to $58.2 million in the second quarter of 2009, an increase of approximately $35.4 million. Core FFO for the second quarter of 2010 was $102.9 million, or $0.32 per fully diluted share, compared to $124.6 million, or $0.39 per fully diluted share, for the second quarter of 2009. Earnings per share were a loss of $0.37 in the second quarter of 2010 compared to a loss of $0.51 in the second quarter of 2009.

“Our financial and operating performance during the second quarter demonstrated continued progress in meeting our strategic priorities,” said Adam Metz, chief executive officer of GGP. “GGP’s earnings were characterized by increased leasing activity, sales and traffic at properties compared to the same period last year. Our properties in the Northeast and Florida performed particularly well. Our leasing pipeline today is much stronger than it was a year ago. Our NOI for the quarter reflects in part the leasing environment from last year, when GGP faced its greatest challenges, but our leasing results have been considerably stronger since then, and I expect our NOI to reflect that improvement in future quarters.”

“During the second quarter, we signed 2.8 million square feet of in-line and outparcel tenant leasing deals. We actively manage our assets to attract the nation’s leading retailers, including Forever 21, which opened its largest store to date (126,000 square feet) at Fashion Show Mall in Las Vegas, and Microsoft, which opened a store in our Park Meadows Mall in Colorado and signed a lease for a new store in Oakbrook Center. In addition, Nordstrom remains on track to open at Christiana Mall in Delaware and at the St. Louis Galleria in 2011.”

During the quarter, tenant sales at comparable properties increased by 7.8%, which further builds on the 7.5% year-over-year growth in the first quarter of 2010. Mr. Metz continued, “Strong tenant sales demonstrate the success of our property strategy. Tenant sales lead to increased tenant demand, which results in higher occupancy and rental rates. Tenant sales at our properties have increased over the comparable 2009 month every month so far this year from their low point in December 2009. To that end, we remain focused on continuing to improve our properties’ shopping experience so that we create a long-term, sustainable franchise in our markets.

“As we have been improving our leasing and operating performance, we have been successfully managing our financial restructuring,” concluded Mr. Metz. “We are extremely pleased with our progress in the restructuring to date, and we look forward to continuing to work productively with all of our stakeholders to finish building the strong capital structure that will sustain GGP in the future. GGP will emerge from Chapter 11 with a strengthened financial foundation to enable us to execute on our clear strategy to build value for all stakeholders.”

Second Quarter 2010 and 2009 Comparable Retail and other Segment NOI

  Three Months Ended June 30, 2010 2009 (In thousands) Retail and other segment NOI $ 593,495 $ 612,875 Adjustments (22,026 ) (21,446 ) Comparable Retail and other segment NOI $ 571,469   $ 591,429   Decrease in Comparable Retail and other segment NOI (3.4 %)

A schedule showing adjustments and non-comparable income and expense items and their impact on 2010 and 2009 Net Operating Income (“NOI”) from our Retail and other segment is provided with this release. Concurrent with this release, the Company has also made available on its website its quarterly package of supplemental financial information, which provides additional operational result detail.

OPERATIONAL HIGHLIGHTS

GGP remains focused on three interrelated strategies to thrive in the future:

• Restructuring its balance sheet to create a solid foundation for future growth
• Realigning the Company’s property portfolio to focus on core strengths
• Reengineering operations to be more efficient and effective

Among GGP’s recent highlights with respect to these strategies are:

• On July 13, 2010, as amended August 2, 2010, GGP filed with the Bankruptcy Court its Amended Plan of Reorganization and Disclosure Statement (“the Plan”), continuing its progress toward expected emergence from bankruptcy in October 2010. Under the Plan, which is subject to Bankruptcy Court approval, GGP will emerge with a significantly improved balance sheet and substantially less debt than when the Company filed for bankruptcy protection, providing it with a strong financial foundation to execute its growth strategy going forward. GGP will satisfy debt and other claims in full, provide a substantial recovery for stockholders and implement a recapitalization with a minimum of $7.0 billion of new equity capital.
• GGP has successfully and consensually restructured all of approximately $15 billion of the project-level debt included in the bankruptcy, and has closed on all but $95 million of that debt. These plans provide for the payment of all allowed creditor claims in full and the extension of the secured mortgage loans so that GGP has a range of maturities of such filed debt, with no restructured loan maturing before January 1, 2014. Certain debt associated with non-filed joint venture properties matures prior to 2014.
• The Company has named four new executives to assume the roles of chief financial officer and department heads for asset management, leasing and marketing/communications. Drawn from experienced talent from both within and outside the organization, the Company believes these individuals strengthen the management team and will help the Company effectively execute its growth strategy.

SEGMENT RESULTS

Retail and Other Segment

• NOI in this segment decreased to $593.5 million for the second quarter of 2010 from the $612.9 million reported for the second quarter of 2009. Excluding the items detailed in the attached schedule of significant items that impact comparability, NOI for the second quarter of 2010 declined 3.4% year-over-year. Comparable NOI was primarily affected by reduced revenue and occupancy as a result of continuing weak economic conditions, which are triggering rental concessions, bankruptcy claim settlements and other reductions in rents and collections. See table below.

 

Comparable Property NOI Bridge

    Three Months Ended June 30,     2010 2009

Y-o-Y Change

(In thousands) Total Retail and other NOI $ 593,495 $ 612,875 (3.2 ) %   Adjustments: NOI from noncomparable properties (14,576 ) (10,201 ) Termination income (8,161 ) (11,077 ) Corporate and other 711 (168 )     Comparable Retail and other NOI $ 571,469   $ 591,429   (3.4 ) %

• Revenues from consolidated properties declined $20.8 million, or approximately 2.8%, for the second quarter of 2010 to $727.2 million, primarily due to declines in minimum rents and tenant recoveries as a result of declines in specialty leasing occupancy and sales volumes, the disruptive effect of the bankruptcy process and the continued weak economic conditions.
• Revenues from unconsolidated properties at the Company’s ownership share were $147.6 million for the second quarter of 2010, roughly comparable to the $149.8 million in the second quarter of 2009.
• Comparable tenant sales on a trailing 12 month basis increased 0.2% compared to the same period last year. However, on a quarterly basis, comparable tenant sales rose a healthy 7.8% year-over-year, with first quarter momentum continuing into second quarter. June 2010 comparable sales increased 9.2% year-over-year, with April and May showing increases of 7.2% and 6.8%, respectively.
• Retail leasing activity continued to increase during the second quarter of 2010, with retailers now willing, in general, to commit to longer lease terms than in the prior year. Total in-line and outparcel tenant leasing deals were signed covering 2.8 million square feet, an increase of 23% over the same period of last year. In addition to renewals, this total includes new deal square footage of approximately 433 thousand square feet. Given that tenant sales continue to increase, GGP believes that it is well positioned for future lease rate increases.
• Retail Center occupancy increased to 91.1% at June 30, 2010 from 91.0% at June 30, 2009.

Master Planned Communities Segment

GGP’s premier master planned community segment includes The Woodlands and Bridgeland, both in the Houston metropolitan area, Summerlin in Las Vegas and Columbia and Emerson in Maryland. This segment also includes the Nouvelle at Natick condominium project.

• During the quarter, GGP sold 27 units at its Nouvelle Natick condominium project and entered into agreements to sell an additional 15 units. As cumulative unit sales (128 units) exceed the threshold for revenue recognition under the percentage of completion method of accounting, previously deferred revenues of approximately $52.9 million were recognized in the second quarter of 2010.
• Land sale revenues for the second quarter of 2010 were $7.1 million for consolidated master planned communities and $13.3 million for unconsolidated communities, compared to $22.4 million and $13.4 million, respectively, for the second quarter of 2009. Decreases in land sale revenues for the consolidated master planned communities, particularly Columbia, reflect continued weak overall demand for individual lots. These decreases where partially offset by sales of lots in the Houston communities, which continued their first quarter 2010 improvements compared to 2009.
• NOI from the Master Planned Communities segment for the second quarter of 2010 was $0.9 million for consolidated properties and $4.6 million for the unconsolidated properties, continuing the first quarter 2010 results where margins from lot sales did not significantly exceed selling and community-specific general and administrative costs, which are largely fixed.

CORE FFO, FFO AND EPS HIGHLIGHTS

• Core FFO for the second quarter of 2010 was $102.9 million, or $0.32 per fully diluted share, compared to $124.6 million, or $0.39 per fully diluted share, for the second quarter of 2009. Core FFO excludes results from the Master Planned Communities segment and the (provision for) benefit from income taxes. FFO was $93.6 million in the second quarter of 2010 compared to $58.2 million in the second quarter of 2009, an increase of approximately $35.4 million. The primary driver for this quarterly increase was a decrease in aggregate provisions for impairment of $62.5 million compared to second quarter 2009. Partially offsetting this increase were $80.1 million, net, of reorganization items incurred in the second quarter of 2010 arising from the Company’s bankruptcy proceedings as detailed in the supplemental schedule of items that impact comparability. Similar items incurred in the second quarter of 2009 were $50.6 million (recorded either as reorganization items or as strategic initiative costs if such costs were incurred prior to GGP’s bankruptcy filing in April 2009).
• EPS were a loss of $0.37 in the second quarter of 2010 compared to a loss of $0.51 in the second quarter of 2009. A substantial majority of the improvement in EPS was due to the items listed in the attached supplemental comparative schedule of matters affecting NOI, Core FFO and FFO described above.

GGP INFORMATION/WEBSITE

The Company currently has ownership interest in more than 200 regional shopping malls in 43 states, as well as ownership in master planned community developments and commercial office buildings. The Company’s portfolio totals approximately 200 million square feet of retail space and includes over 24,000 retail stores nationwide. The Company’s common stock is currently traded on the New York Stock Exchange under the symbol GGP. For more information, please visit the Company website at http://www.ggp.com.

NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES AND DEFINITIONS

FUNDS FROM OPERATIONS AND CORE FFO

The Company, consistent with real estate industry and investment community preferences, uses FFO as a supplemental measure of operating performance for a Real Estate Investment Trust (REIT). The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income (loss) attributable to common stockholders (computed in accordance with Generally Accepted Accounting Principles (GAAP)), excluding gains (or losses) from cumulative effects of accounting changes, extraordinary items and sales of properties, plus real estate related depreciation and amortization and including adjustments for unconsolidated partnerships and joint ventures.

The Company considers FFO a supplemental measure for equity REITs and a complement to GAAP measures because it facilitates an understanding of the operating performance of the Company’s properties. FFO does not give effect to real estate depreciation and amortization since these amounts are computed to allocate the cost of a property over its useful life. Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, the Company believes that FFO provides investors with a clearer view of the Company’s operating performance. However, the Company believes that FFO is a less meaningful supplemental measure for the Master Planned Communities segment of its business. FFO does not facilitate an understanding of the operating performance of the Master Planned Communities segment of its business as its primary strategy in this segment is to develop and sell land in a manner that increases the value of the remaining land. In addition, the Master Planned Communities segment of the Company’s business is operated within taxable REIT subsidiaries and therefore its (provision for) benefit from income tax expense is largely attributable to this segment of the business. To isolate these parts of the Company from the Retail and Other segment, for which FFO is a relevant measure of operating performance, the Company also uses Core FFO as an operating measure. Core FFO is defined as FFO excluding the NOI from the Master Planned Communities segment and the (provision for) benefit from income taxes.

In order to provide a better understanding of the relationship between Core FFO, FFO and GAAP net income (loss), a reconciliation of Core FFO and FFO to GAAP net income (loss) attributable to common stockholders has been provided. Neither Core FFO nor FFO represent cash flow from operating activities in accordance with GAAP, neither should be considered as an alternative to GAAP net income (loss) attributable to common stockholders and neither is necessarily indicative of cash available to fund cash needs. In addition, the Company has presented FFO on a consolidated and unconsolidated basis (at the Company’s ownership share) as the Company believes that given the significance of the Company’s operations that are owned through investments accounted for on the equity method of accounting, the detail of the operations of the Company’s unconsolidated properties provides important insights into the income and FFO produced by such investments for the Company as a whole.

REAL ESTATE PROPERTY NET OPERATING INCOME (NOI) AND COMPARABLE NOI

The Company believes that NOI is a useful supplemental measure of the Company’s operating performance. The Company defines NOI as operating revenues (rental income, land and condominium sales, tenant recoveries and other income) less property and related expenses (real estate taxes, land and condominium sales operating costs, property maintenance costs, marketing and other property expenses). As with FFO described above, NOI has been reflected on a consolidated and unconsolidated basis (at the Company’s ownership share). Other REITs may use different methodologies for calculating NOI, and accordingly, the Company’s NOI may not be comparable to other REITs.

Because NOI excludes general and administrative expenses, interest expense, retail investment property impairment or other non-recoverable development costs, depreciation and amortization, gains and losses from property dispositions, allocations to non-controlling interests, reorganization items, strategic initiatives and extraordinary items, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact on operations from trends in occupancy rates, rental rates, land values (with respect to the Master Planned Communities) and operating costs. This measure thereby provides an operating perspective not immediately apparent from GAAP operating or net income (loss) attributable to common stockholders. The Company uses NOI to evaluate its operating performance on a property-by-property basis because NOI allows the Company to evaluate the impact that factors such as lease structure, lease rates and tenant base, which vary by property, have on the Company’s operating results, gross margins and investment returns.

In addition, management believes that NOI provides useful information to the investment community about the Company’s operating performance. However, due to the exclusions noted above, NOI should only be used as an alternative measure of the Company’s financial performance. For reference, and as an aid in understanding management’s computation of NOI, a reconciliation of NOI to consolidated operating income (loss) as computed in accordance with GAAP has been presented.

Comparable retail and other segment NOI excludes from both years the NOI of properties with significant physical or merchandising changes and those properties acquired or opened during the relevant comparative accounting periods.

PROPERTY INFORMATION

The Company has presented information on its consolidated and unconsolidated properties separately in the accompanying financial schedules. As a significant portion of the Company’s total operations are structured as joint venture arrangements which are unconsolidated, management of the Company believes that operating data with respect to all properties owned provides important insights into the income produced by such investments for the Company as a whole. In addition, the individual items of revenue and expense for the unconsolidated properties have been presented at the Company’s ownership share of such unconsolidated ventures. As substantially all of the management operating philosophies and strategies are the same regardless of ownership structure, an aggregate presentation of NOI and other operating statistics yields a more accurate representation of the relative size and significance of such elements of the Company’s overall operations.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements. Actual results may differ materially from the results suggested by these forward-looking statements, for a number of reasons, including, but not limited to, our ability to successfully complete our plan of reorganization and emerge from bankruptcy, our ability to refinance, extend, restructure or repay our near and intermediate term debt, our substantial level of indebtedness, our ability to raise capital through equity issuances, asset sales or the incurrence of new debt, retail and credit market conditions, impairments, our liquidity demands and retail and economic conditions,. Readers are referred to the documents filed by General Growth Properties, Inc. with the Securities and Exchange Commission, which further identify the important risk factors which could cause actual results to differ materially from the forward-looking statements in this release. The Company disclaims any obligation to update any forward-looking statements.

 

GENERAL GROWTH PROPERTIES, INC.

OVERVIEW

(In thousands, except per share amounts)

                    Three Months Ended Six Months Ended June 30, June 30, 2010 2009 2010 2009 Funds From Operations ("FFO")   Company stockholders $ 91,512 $ 56,863 $ 334,104 $ (105,038 ) Operating Partnership unit holders   2,095     1,322     7,667     (2,693 ) Operating Partnership $ 93,607   $ 58,185   $ 341,771   $ (107,731 )   Increase (decrease) in FFO over comparable prior year period   60.9   %   (73.8 ) %   417.2   %   (124.6 ) %   FFO per share: Company stockholders - basic $ 0.29 $ 0.18 $ 1.06 $ (0.34 ) Operating Partnership - basic 0.29 0.18 1.06 (0.34 ) Operating Partnership - diluted 0.29 0.18 1.05 (0.34 ) Increase (decrease) in diluted FFO per share over comparable prior year periods 61.1 % (73.9 ) % 408.8 % (123.9 ) %   Core Funds From Operations ("Core FFO") Core FFO $ 102,918 $ 124,552 $ 357,037 $ 1,664 Increase (decrease) in Core FFO over comparable prior year period (17.4 ) % (43.9 ) % 21,356.6 % (99.6 ) %   Core FFO per share - diluted 0.32 0.39 1.10 0.01 Increase (decrease) in diluted Core FFO per share over comparable prior year periods (17.9 ) % (44.3 ) % 10,900.0 % (99.3 ) %   Dividends Dividends paid per share (a) $ - $ - $ 0.19 $ - Payout ratio (% of diluted FFO paid out) - % - % 18.1 % - %   Real Estate Property Net Operating Income ("NOI") Retail and Other: Consolidated $ 491,919 $ 514,699 $ 977,659 $ 1,021,122

Unconsolidated

  101,576     98,176     202,113     197,670  

Total Retail and Other

  593,495     612,875     1,179,772     1,218,792   Master Planned Communities: Consolidated 900 (55,325 ) (4,197 ) (109,720 ) Unconsolidated   4,567     4,687     7,231     5,020   Total Master Planned Communities   5,467     (50,638 )   3,034     (104,700 ) Total Real estate property net operating income $ 598,962   $ 562,237   $ 1,182,806   $ 1,114,092       June 30, December 31,

Selected Balance Sheet Information

2010 2009 Cash and cash equivalents $ 548,265 $ 654,396   Investment in real estate: Net land, buildings and equipment $ 21,381,958 $ 21,684,661 Developments in progress 425,864 417,969 Net investment in and loans to/from Unconsolidated Real Estate Affiliates 1,951,246 1,941,024 Investment property and property held for development and sale   1,913,655     1,753,175   Net investment in real estate $ 25,672,723   $ 25,796,829     Total assets $ 27,837,383 $ 28,149,774   Mortgages, notes and loans payable not subject to compromise $ 16,809,002 $ 7,300,772 Mortgages, notes and loans payable subject to compromise (b) 7,856,257 17,767,253 Redeemable noncontrolling interests - Preferred 120,756 120,756 Redeemable noncontrolling interests - Common 97,851 86,077 Total equity   822,515     847,339   Total capitalization (at cost) $ 25,706,381   $ 26,122,197    

(a) Represents 2009 dividend declared in December 2009 that was paid in January 2010 ($6.0 million in cash and

4.9 million shares of common stock).

(b) Mortgages, notes and loans payable subject to compromise are for obligations of the Debtors which do not

have effective plans of reorganization as of June 30, 2010. The principal amounts of such mortgages,

notes and loans payable may change in the future depending on the outcome of their respective Chapter 11 cases.

 

GENERAL GROWTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

        Three Months Ended   Six Months Ended June 30, June 30, 2010   2009 2010   2009 Revenues: Minimum rents $ 484,459 $ 498,708 $ 977,217 $ 997,816 Tenant recoveries 215,587 224,691 429,838 457,710 Overage rents 7,447 5,782 17,793 15,806 Land and condominium sales 59,965 22,448 65,035 31,435 Management fees and other corporate revenues 15,902 18,860 33,988 40,719 Other   21,957     21,606     42,683     37,249   Total revenues   805,317     792,095     1,566,554     1,580,735   Expenses: Real estate taxes 71,062 68,959 143,157 140,518 Property maintenance costs 26,188 22,100 62,032 49,459 Marketing 6,250 6,906 13,331 14,482 Other property operating costs 128,201 126,479 255,272 258,178 Land and condominium sales operations 59,065 21,850 69,232 32,464 Provision for doubtful accounts 3,619 8,847 9,946 19,179 Property management and other costs 48,517 42,200 83,949 85,609 General and administrative 5,668 6,591 13,306 14,112 Strategic Initiatives - 25,713 - 64,013 Provisions for impairment 19,923 82,388 31,273 413,480 Depreciation and amortization   175,318     186,472     352,621     391,087   Total expenses   543,811     598,505     1,034,119     1,482,581   Operating income (loss) 261,506 193,590 532,435 98,154   Interest income 137 501 813 1,231 Interest expense   (301,726 )   (328,351 )   (637,004 )   (656,841 ) Loss before income taxes, noncontrolling interests, reorganization items, and equity in income of Unconsolidated Real Estate Affiliates (40,083 ) (134,260 ) (103,756 ) (557,456 ) Provision for income taxes (14,234 ) (15,742 ) (17,884 ) (4,228 ) Equity in income of Unconsolidated Real Estate Affiliates 16,901 16,339 50,652 23,877 Reorganization items   (80,111 )   (24,918 )   9,301     (24,918 ) Income (loss) from continuing operations (117,527 ) (158,581 ) (61,687 ) (562,725 ) Discontinued operations - loss on dispositions   -     -     -     (55 ) Net income (loss) (117,527 ) (158,581 ) (61,687 ) (562,780 ) Allocation to noncontrolling interests   1     179     (4,184 )   8,299   Net income (loss) attributable to common stockholders $ (117,526 ) $ (158,402 ) $ (65,871 ) $ (554,481 )   Basic and Diluted Earnings (Loss) Per Share: Continuing operations $ (0.37 ) $ (0.51 ) $ (0.21 ) $ (1.78 ) Discontinued operations   -     -     -     -   Total basic and diluted earnings (loss) per share $ (0.37 ) $ (0.51 ) $ (0.21 ) $ (1.78 )  

GENERAL GROWTH PROPERTIES, INC.

PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS ("FFO")

(In thousands)

        Three Months Ended June 30, 2010 Consolidated Unconsolidated Segment Retail and Other Properties Properties Basis Property revenues: Minimum rents $ 484,459 $ 97,466 $ 581,925 Tenant recoveries 215,587 37,500 253,087 Overage rents 7,447 951 8,398 Other, including noncontrolling interests   19,746     11,667     31,413   Total property revenues   727,239     147,584     874,823   Property operating expenses: Real estate taxes 71,062 12,078 83,140 Property maintenance costs 26,188 4,599 30,787 Marketing 6,250 1,107 7,357 Other property operating costs 128,201 27,509 155,710 Provision for doubtful accounts   3,619     715     4,334   Total property operating expenses   235,320     46,008     281,328   Retail and other net operating income   491,919     101,576     593,495     Master Planned Communities Land and condominium sales 59,965 13,337 73,302 Land and condominium sales operations   (59,065 )   (8,770 )   (67,835 ) Master Planned Communities net operating income 900 4,567 5,467

 

 

 

Real estate property net operating income 492,819 106,143 $ 598,962     Management fees and other corporate revenues 15,902 5,960 Property management and other costs (48,517 ) (9,661 ) General and administrative (5,668 ) 682 Provisions for impairment (19,923 ) (421 ) Depreciation on non-income producing assets, including headquarters building (2,451 ) - Interest income 137 2,506 Interest expense (301,726 ) (46,030 ) Provision for income taxes (14,234 ) (544 ) Preferred unit distributions (2,335 ) - Other FFO from noncontrolling interests 1,051 28 Reorganization items   (80,111 )   -   FFO 34,944 58,663 Equity in FFO of Unconsolidated Properties   58,663     (58,663 ) Operating Partnership FFO $ 93,607   $ -       Three Months Ended June 30, 2009 Consolidated Unconsolidated Segment Retail and Other Properties Properties Basis Property revenues: Minimum rents $ 498,708 $ 97,043 $ 595,751 Tenant recoveries 224,691 38,722 263,413 Overage rents 5,782 975 6,757 Other, including noncontrolling interests *   18,809     13,013     31,822   Total property revenues   747,990     149,753     897,743   Property operating expenses: Real estate taxes 68,959 12,263 81,222 Property maintenance costs * 22,100 4,165 26,265 Marketing 6,906 1,275 8,181 Other property operating costs * 126,479 32,068 158,547 Provision for doubtful accounts   8,847     1,806     10,653   Total property operating expenses   233,291     51,577     284,868   Retail and other net operating income   514,699     98,176     612,875     Master Planned Communities Land and condominium sales 22,448 13,419 35,867 Land and condominium sales operations   (21,850 )   (8,732 )   (30,582 ) Master Planned Communities net operating income 598 4,687 5,285   Provision for impairment   (55,923 )   -     (55,923 ) Master Planned Communities net operating (loss) income (55,325 ) 4,687 (50,638 )       Real estate property net operating income 459,374 102,863 $ 562,237     Management fees and other corporate revenues 18,861 4,396 Property management and other costs (42,200 ) (9,254 ) General and administrative (6,591 ) (2,482 ) Strategic initiatives (25,713 ) - Provisions for impairment (26,465 ) (1,761 ) Depreciation on non-income producing assets, including headquarters building (2,395 ) - Interest income 501 1,015 Interest expense (328,351 ) (41,991 ) (Provision for) benefit from income taxes (15,742 ) 13 Preferred unit distributions (2,336 ) - Other FFO from noncontrolling interests 1,330 31 Reorganization items   (24,918 )   -   FFO 5,355 52,830 Equity in FFO of Unconsolidated Properties   52,830     (52,830 ) Operating Partnership FFO $ 58,185   $ -    

* Approximately $2.9 million of fee revenue and $31.8 million of operating costs, primarily cleaning and janitorial costs, were reclassified to conform to the 2010 presentation.

  GENERAL GROWTH PROPERTIES, INC. PORTFOLIO RESULTS AND FUNDS FROM OPERATIONS ("FFO") (In thousands)         Six Months Ended June 30, 2010 Consolidated Unconsolidated Segment Retail and Other Properties Properties Basis Property revenues: Minimum rents $ 977,217 $ 197,345 $ 1,174,562 Tenant recoveries 429,838 76,771 506,609 Overage rents 17,793 2,190 19,983 Other, including noncontrolling interests   36,549     22,355     58,904   Total property revenues   1,461,397     298,661     1,760,058   Property operating expenses: Real estate taxes 143,157 24,663 167,820 Property maintenance costs 62,032 9,881 71,913 Marketing 13,331 2,628 15,959 Other property operating costs 255,272 57,231 312,503 Provision for doubtful accounts   9,946     2,145     12,091   Total property operating expenses   483,738     96,548     580,286   Retail and other net operating income   977,659     202,113     1,179,772     Master Planned Communities Land and condominium sales 65,035 25,972 91,007 Land and condominium sales operations   (69,232 )   (18,741 )   (87,973 ) Master Planned Communities net operating (loss) income (4,197 ) 7,231 3,034       Real estate property net operating income 973,462 209,344 $ 1,182,806     Management fees and other corporate revenues 33,988 9,850 Property management and other costs (83,949 ) (18,887 ) General and administrative (13,306 ) 260 Provisions for impairment (31,273 ) (421 ) Depreciation on non-income producing assets, including headquarters building (4,793 ) - Interest income 813 3,178 Interest expense (637,004 ) (88,215 ) Provision for income taxes (17,884 ) (416 ) Preferred unit distributions (4,671 ) - Other FFO from noncontrolling interests 2,337 57 Reorganization items   9,301     -   FFO 227,021 114,750 Equity in FFO of Unconsolidated Properties   114,750     (114,750 ) Operating Partnership FFO $ 341,771   $ -       Six Months Ended June 30, 2009 Consolidated Unconsolidated Segment Retail and Other Properties Properties Basis Property revenues: Minimum rents $ 997,816 $ 194,434 $ 1,192,250 Tenant recoveries 457,710 79,541 537,251 Overage rents 15,806 2,191 17,997 Other, including noncontrolling interests *   31,606     25,641     57,247   Total property revenues   1,502,938     301,807     1,804,745   Property operating expenses: Real estate taxes 140,518 24,844 165,362 Property maintenance costs * 49,459 8,999 58,458 Marketing 14,482 2,750 17,232 Other property operating costs * 258,178 64,490 322,668 Provision for doubtful accounts   19,179     3,054     22,233   Total property operating expenses   481,816     104,137     585,953   Retail and other net operating income   1,021,122     197,670     1,218,792     Master Planned Communities Land and condominium sales 31,435 18,520 49,955 Land and condominium sales operations   (32,464 )   (13,500 )   (45,964 ) Master Planned Communities net operating (loss) income (1,029 ) 5,020 3,991   Provision for impairment   (108,691 )   -     (108,691 ) Master Planned Communities net operating (loss) income (109,720 ) 5,020 (104,700 )       Real estate property net operating income 911,402 202,690 $ 1,114,092     Management fees and other corporate revenues 40,719 7,929 Property management and other costs (85,609 ) (18,300 ) General and administrative (14,112 ) (6,743 ) Strategic initiatives (64,013 ) - Provisions for impairment (304,789 ) (3,207 ) Depreciation on non-income producing assets, including headquarters building (4,877 ) - Interest income 1,231 1,932 Interest expense (656,841 ) (83,584 ) Provision for income taxes (4,228 ) (467 ) Preferred unit distributions (4,671 ) - Other FFO from noncontrolling interests 2,666 59 Reorganization items   (24,918 )   -   FFO (208,040 ) 100,309 Equity in FFO of Unconsolidated Properties   100,309     (100,309 ) Operating Partnership FFO $ (107,731 ) $ -    

* Approximately $5.6 million of fee revenue and $63.7 million of operating costs, primarily cleaning and janitorial costs, were reclassified to conform to the 2010 presentation.

 

GENERAL GROWTH PROPERTIES, INC.

SUPPLEMENTAL SCHEDULE OF SIGNIFICANT ITEMS THAT IMPACT COMPARABILITY (a)

(In thousands, except per share amounts)

            Three Months Ended Six Months Ended June 30, June 30, 2010 2009 2010 2009   Retail and other net operating income $ 593,495 $ 612,875 $ 1,179,772 $ 1,218,792   Retail and other net operating income adjustments: Net operating income from noncomparable properties (14,576 ) (10,201 ) (28,935 ) (17,623 ) Corporate and other 711 (168 ) (2,070 ) (1,607 ) Termination income   (8,161 )   (11,077 )   (20,832 )   (20,194 ) Total Retail and other net operating income adjustments   (22,026 )   (21,446 )   (51,837 )   (39,424 )         Comparable retail and other net operating income $ 571,469   $ 591,429   $ 1,127,935   $ 1,179,368       Core FFO $ 102,918 $ 124,552 $ 357,037 $ 1,664   Core FFO adjustments: Retail and other net operating income adjustments (22,026 ) (21,446 ) (51,837 ) (39,424 ) Provisions for impairment: Operating properties 19,716

-

30,773

121,422

Non-recoverable development and pre-development costs 628 8,865 921

57,824

Goodwill   -    

19,361

    -    

128,750

  Core FFO provisions for impairment 20,344 28,226 31,694 307,996   Reorganization items (b) Gains on liabilities subject to compromise - other (5,672 ) (2,379 ) (6,876 ) (2,379 ) Gains on liabilities subject to compromise - mortgage debt (35,938 ) - (319,009 ) - Restructuring costs 120,388 26,207 313,837 26,207 Interest income (80 ) (7 ) (90 ) (7 ) U.S. Trustee fees   1,413     1,097     2,837     1,097   Total reorganization items 80,111 24,918 (9,301 ) 24,918   Strategic initiatives (c) - 25,713 - 64,013   Termination of interest rate swaps - 34,813 - 34,813   Total Core FFO adjustments   78,429     92,224     (29,444 )   392,316   Comparable Core FFO $ 181,347   $ 216,776   $ 327,593   $ 393,980           Comparable Core FFO per share - diluted $ 0.56   $ 0.68   $ 1.01   $ 1.23       (a) Includes consolidated and unconsolidated properties.

(b)Reorganization items reflect bankruptcy-related activity, including gains on liabilities subject to compromise, interest income, U.S. Trustee fees, and other restructuring costs, incurred after filing for Chapter 11 protection on April 16, 2009.

(c) Strategic initiatives include fees and expenses incurred for various consultants and advisors that assisted in the development of strategic alternatives relating to our liquidity and financing situation prior to filing for Chapter 11 protection.

 

GENERAL GROWTH PROPERTIES, INC.

SUPPLEMENTAL DISCLOSURE OF CERTAIN NON-CASH REVENUES AND EXPENSES REFLECTED IN FFO

(In thousands)

          Three Months Ended Three Months Ended June 30, 2010 June 30, 2009 Consolidated Unconsolidated Consolidated Unconsolidated Properties Properties Properties Properties Minimum rents: Above- and below-market tenant leases, net $ 1,802 $ 81 $ 2,502 $ 1,214 Straight-line rent 8,571 2,674 10,058 2,747 Real estate taxes: Real estate tax stabilization agreement (981 ) - (981 ) - Other property operating costs: Non-cash ground rent expense (1,569 ) (248 ) (1,576 ) (481 ) Provisions for impairment (19,923 ) (421 ) (82,388 ) (1,761 ) Interest expense: Mark-to-market adjustments on debt 21,212 138 3,816 944 Amortization of deferred finance costs (7,495 ) (424 ) (5,843 ) (400 ) Amortization of discount on exchangeable notes (7,180 ) - (6,757 ) - Termination of interest rate swaps

(4,520

) - 10,061 - Debt extinguishment costs (157 ) - - - Non-cash reorganization items   (5,047 )   -     (31,176 )   -   Totals $

(15,287

) $ 1,800   $ (102,284 ) $ 2,263       Six Months Ended Six Months Ended June 30, 2010 June 30, 2009 Consolidated Unconsolidated Consolidated Unconsolidated Properties Properties Properties Properties Minimum rents: Above- and below-market tenant leases, net $ 3,085 $ 85 $ 3,356 $ 2,932 Straight-line rent 19,117 5,046 18,694 6,525 Real estate taxes: Real estate tax stabilization agreement (1,962 ) - (1,962 ) - Other property operating costs: Non-cash ground rent expense (3,133 ) (393 ) (3,163 ) (681 ) Provisions for impairment (31,273 ) (421 ) (413,480 ) (3,207 ) Interest expense: Mark-to-market adjustments on debt 8,822 214 6,063 1,331 Amortization of deferred finance costs (16,352 ) (837 ) (25,974 ) (825 ) Amortization of discount on exchangeable notes (14,290 ) - (13,450 ) - Termination of interest rate swaps

(9,040

) - 18,675 - Debt extinguishment costs (157 ) - - - Non-cash reorganization items   198,533     -     (31,176 )   -   Totals $

153,350

  $ 3,694   $ (442,417 ) $ 6,075    

SUPPLEMENTAL SCHEDULE OF MANAGEMENT AND ADMINISTRATIVE COSTS, NET

(In thousands)

          Three Months Ended Three Months Ended June 30, 2010 June 30, 2009 Consolidated Unconsolidated Consolidated Unconsolidated Properties Properties Properties Properties Management fees and other corporate revenues, net * $ 10,088 $ 5,960 $ 12,974 $ 4,396 Property management and other costs (48,517 ) (3,847 ) (42,200 ) (3,367 ) General and administrative   (5,668 )   682     (6,591 )   (2,482 ) Total management and administrative costs, net $ (44,097 ) $ 2,795   $ (35,817 ) $ (1,453 )     Six Months Ended Six Months Ended June 30, 2010 June 30, 2009 Consolidated Unconsolidated Consolidated Unconsolidated Properties Properties Properties Properties Management and other fees, net (a) $ 22,303 $ 9,850 $ 28,867 $ 7,929 Property management and other costs (83,949 ) (7,202 ) (85,609 ) (6,448 ) General and administrative   (13,306 )   260     (14,112 )   (6,743 ) Total management and administrative costs, net $ (74,952 ) $ 2,908   $ (70,854 ) $ (5,262 )   * Management and other fees are net of property management fee expense incurred by the unconsolidated properties, at our ownership share, which are reflected as a component of property management and other costs in unconsolidated properties. Such amounts are $5.8 million for the three months ended June 30, 2010, $5.9 million for the three months ended June 30, 2009, $11.7 million for the six months ended June 30, 2010, and $11.9 million for the six months ended June 30, 2009.  

GENERAL GROWTH PROPERTIES, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

(In thousands)

            Three Months Ended Six Months Ended June 30, June 30, 2010 2009 2010 2009

Reconciliation of Real Estate Property Net Operating

Income ("NOI") to GAAP Operating Income (Loss)

Real estate property net operating income: Segment basis $ 598,962 $ 562,237 $ 1,182,806 $ 1,114,092

Unconsolidated Properties

  (106,143 )   (102,863 )   (209,344 )   (202,690 ) Consolidated Properties 492,819 459,374 973,462 911,402 Management fees and other corporate revenues 15,902 18,861 33,988 40,719 Property management and other costs (48,517 ) (42,200 ) (83,949 ) (85,609 ) General and administrative (5,668 ) (6,591 ) (13,306 ) (14,112 )

Strategic Initiatives

- (25,713 ) - (64,013 ) Provisions for impairment (19,923 ) (26,465 ) (31,273 ) (304,789 ) Depreciation and amortization (175,318 ) (186,472 ) (352,621 ) (391,087 )

Noncontrolling interest in NOI of Consolidated Properties and other

  2,211     2,796     6,134     5,643   Operating income (loss) $ 261,506   $ 193,590   $ 532,435   $ 98,154      

Reconciliation of Core FFO to Funds From Operations ("FFO")

and to GAAP Net Income (Loss) Attributable to Common Stockholders

Core FFO $ 102,918 $ 124,552 $ 357,037 $ 1,664 Master Planned Communities net operating loss 5,467 (50,638 ) 3,034 (104,700 ) Provision for income taxes   (14,778 )   (15,729 )   (18,300 )   (4,695 ) Funds From Operations - Operating Partnership 93,607 58,185 341,771 (107,731 ) Depreciation and amortization of capitalized real estate costs (210,458 ) (220,584 ) (423,042 ) (462,679 ) Gains (losses) on sales of investment properties * (4,194 ) - 11,926 (55 ) Noncontrolling interests in depreciation of Consolidated Properties and other 819 893 1,962 1,768 Redeemable noncontrolling interests   2,700     3,104     1,512     14,216   Net income (loss) attributable to common stockholders $ (117,526 ) $ (158,402 ) $ (65,871 ) $ (554,481 )    

Reconciliation of Equity in NOI of Unconsolidated Properties

to GAAP Equity in Income of Unconsolidated Real Estate Affiliates

Equity in Unconsolidated Properties: NOI $ 106,143 $ 102,863 $ 209,344 $ 202,690 Net property management fees and costs (3,701 ) (4,858 ) (9,037 ) (10,371 ) Net interest expense (43,524 ) (40,976 ) (85,037 ) (81,652 ) General and administrative, provisions for impairment, income taxes and noncontrolling interest in FFO   (255 )   (4,199 )   (520 )   (10,358 ) FFO of unconsolidated properties 58,663 52,830 114,750 100,309 Depreciation and amortization of capitalized real estate costs (37,591 ) (36,507 ) (75,214 ) (76,469 ) Other, including gains on sales of investment properties *   (4,171 )   16     11,116     37   Equity in income of Unconsolidated Real Estate Affiliates $ 16,901   $ 16,339   $ 50,652   $ 23,877     Reconciliation of Weighted Average Shares Outstanding Basic:

Weighted average number of shares outstanding - FFO per share

324,628 319,601 323,837 319,596 Conversion of Operating Partnership units   (7,265 )   (7,264 )   (7,265 )   (7,990 ) Weighted average number of Company shares outstanding - GAAP EPS   317,363     312,337     316,572     311,606     Diluted: Weighted average number of shares outstanding - FFO per share 326,127 319,601 325,277 319,596 Conversion of Operating Partnership units (7,265 ) (7,264 ) (7,265 ) (7,990 ) Effect of dilutive securities - options   (1,499 )   -     (1,440 )   -   Weighted average number of Company shares outstanding - GAAP EPS   317,363     312,337     316,572     311,606  

 

* Included in such amounts for the six months ended June 30, 2010 is $9.3 million of gain, which, according to current GAAP guidance, is recognized due to our Brazilian joint venture issuing common stock with an issue price in excess of our carrying value per share of our investment in such venture.