Dailystocks.com - Ticker-based level links to all the information for the Stocks you own. Portal for Daytrading and Finance and Investing Web Sites
DailyStocks.com
What's New
Site Map
Help
FAQ
Log In
Home Quotes/Data/Chart Warren Buffett Fund Letters Ticker-based Links Education/Tips Insider Buying Index Quotes Forums Finance Site Directory
OTCBB Investors Daily Glossary News/Edtrl Company Overviews PowerRatings China Stocks Buy/Sell Indicators Company Profiles About Us
Nanotech List Videos Magic Formula Value Investing Daytrading/TA Analysis Activist Stocks Wi-fi List FOREX Quote ETF Quotes Commodities
Make DailyStocks Your Home Page AAII Ranked this System #1 Since 1998 Bookmark and Share


Welcome!
Welcome to the investing community at DailyStocks where we believe we have some of the most intelligent investors around. While we have had an online presence since 1997 as a portal, we are just beginning the forums section now. Our moderators are serious investors with MBA and CFAs with practical experience wwell-versed in fundamental, value, or technical investing. We look forward to your contribution to this community.

Recent Topics
Article by DailyStocks_admin    (12-18-13 11:41 PM)

Description

GENERAL GROWTH PROPERTIES, INC.10% Owner Investment Authority Abu Dhabi bought 2,568,934 shares on 12-09-2013 at $ 21.17

BUSINESS OVERVIEW

Our Company and Strategy

Our primary business is to be an owner and operator of best-in-class malls that provide an outstanding environment and experience for our communities, retailers, employees, consumers and shareholders. The majority of our properties are located in the United States; however, we also own interests in regional malls in Brazil.

We own entirely or with joint venture partners 144 regional malls (126 domestic and 18 in Brazil) comprising approximately 135 million square feet. The U.S. regional mall portfolio generated tenant sales of $545 per square foot during 2012; including 70 Class A malls generating average tenant sales of $635 per square foot and contributing approximately 68% of our share of Company net operating income.

Our company's internal growth is focused on three major areas:

(1)
increasing occupancy,

(2)
increasing rental revenues, and

(3)
investing in redevelopments within our existing portfolio.

Since December 31, 2011, not only has our occupancy risen, but more importantly the level of long-term, or "permanent" occupancy, has increased from 87.5% as of December 31, 2011 to 89.6% as of December 31, 2012. During this same period, we have seen an expansion of the spread, or variance, between the rent paid on expiring leases and the rent commencing under new leases, on a suite-to-suite basis. On a suite-to-suite basis, the leases commencing occupancy in 2012 exhibited initial rents that were 10.2% higher than the final rents paid on expiring leases. We identified $1.6 billion of redevelopment projects within our portfolio, over 80% of which is being invested into Class A malls. We anticipate generating stabilized returns in the high single to low double digits on these projects as they commence operations. The internal growth drivers within our existing portfolio are strongly complemented by the industry's expected lack of new supply of mall space over the next five years and the anticipated resilient demand for space from retailers, both domestic and international.

We believe our long-term strategy can provide our shareholders with a competitive risk-adjusted total return comprised of dividends and share price appreciation.

Our operational strategies include the following:


increase the permanent occupancy of our regional mall portfolio by converting temporary (or short-term) leases to permanent (or long-term) leases and leasing currently vacant space;


renew or replace expiring leases at rental rates greater than those on expiring leases;


opportunistically acquire whole or partial interests in high-quality regional malls and anchor pads;


continue executing on our existing redevelopment strategy and seek additional opportunities within our portfolio for redevelopment;


dispose of properties in our portfolio that do not fit within our long-term strategy, including certain of our office properties, strip centers and regional malls; and


lower borrowing costs by refinancing debt and reduce refinancing risk by laddering maturities.
Transactions

During 2012, we completed transactions achieving operational goals that promote our long-term strategy as summarized below (figures shown represent our proportionate share):


acquired 11 Sears anchor pads (including fee interests in five anchor pads and long-term leasehold interests in six anchor pads) for $270.0 million. This portfolio represents a significant opportunity to recapture valuable real estate within our portfolio and allows us to execute expansion and redevelopment opportunities, including re-tenanting the anchor space and adding new in-line GLA;


acquired fee or leasehold interest in seven anchor pads totaling 945 thousand square feet of GLA for $36.7 million, which allows us to recapture real estate in our portfolio and provides us with redevelopment opportunities;


acquired the remaining 49% interest in The Oaks and Westroads, previously owned through a joint venture, for $191.1 million which included the assumption of our incremental share of debt of $93.7 million;


acquired an additional interest in Aliansce Shopping Centers S.A. ("Aliansce") from certain affiliates of Pershing Square Capital Management, L.P. for $195.2 million. The additional 14.1% interest increased our total investment in our Brazilian Unconsolidated Real Estate Affiliate (Note 7 and Item 2);


decreased our borrowing costs by lowering the associated interest rate 110 basis points, lengthened our overall remaining term-to-maturity and generated net proceeds of $1.4 billion by refinancing $7.0 billion of debt;


repaid $949.6 million of unsecured corporate bonds and called for early redemption of an additional approximately $92 million of unsecured corporate bonds in early 2013;


completed the spin-off of a 30-property portfolio ("RPI Spin-Off"), disposing of non-core assets and decreasing our outstanding mortgage loans by $1.1 billion;


sold our interests in non-core assets including an office portfolio, three office properties, 11 strip centers/other retail, seven regional malls and an anchor box totaling approximately seven million square feet of GLA of for $524.5 million, which reduced our property level debt by $320.6 million. These sales generated net proceeds of $239.1 million that will be reinvested within our portfolio; and


increased our first quarter 2013 dividend 9% to $.12 per share from $.11 per share.
Segments

We operate in a single reportable segment, which includes the ownership, operation, management and selective re-development of our Consolidated Properties and Unconsolidated Properties, which are primarily regional malls. As of December 31, 2012, our segment was comprised of 126 regional malls in the United States and 18 malls in Brazil, eight strip centers totaling 1.6 million square feet, primarily in the Western region of the United States, as well as seven stand-alone office buildings totaling 0.9 million square feet, concentrated in Columbia, Maryland.

Each of our operating properties is deemed an individual operating segment for accounting principles generally accepted in the United States of America ("GAAP") since each property's financial operations are discrete and managed independently. Further, the Company's portfolio is primarily located in the United States and, for 2012, no individual property comprised over 10% of total revenues.

For the year ended December 31, 2012, our largest tenant, Limited Brands, (based on common parent ownership) accounted for approximately 3% of rents. Four tenants, in aggregate, Limited Brands, The Gap, Foot Locker, and Abercrombie & Fitch, comprised approximately 10% of rents for 2012.

Competition

We compete for tenants and visitors to our malls with other malls in close proximity, regardless of owner. In order to maintain and increase our mall's competitive position within its marketplace we do the following:


strategically arrange the physical location of the merchants within each mall to enforce a merchandising strategy that promotes cross-shopping and maximizes sales;


introduce new concepts to the mall which may include restaurants, theaters, new retailers;


implement marketing campaigns to attract people to the mall;


invest capital to maintain and improve the malls' aesthetic and infrastructure, including major redevelopments to further create the malls as a destination.

We believe the high-quality of our regional malls enables us to compete effectively for retailers and consumers.

Environmental Matters

Under various Federal, state and local laws and regulations, an owner of real estate may be liable for the costs of remediation of certain hazardous or toxic substances on such real estate. These laws may impose liability without regard to whether the owner knew of the presence of such hazardous or toxic substances. The costs of remediation may be substantial and may adversely affect the owner's ability to sell or borrow against such real estate as collateral. In connection with the ownership and operation of our properties, we, or the relevant joint venture through which the property is owned, may be liable for such costs.

Substantially all of our properties have been subject to a Phase I environmental site assessment, which is intended to evaluate the environmental condition of the subject property and its surroundings. Phase I environmental assessments typically include a historical review, a public records review, a site visit and interviews, but do not include sampling or subsurface investigations.

To date, the Phase I environmental site assessments have not revealed any environmental conditions that would have a material adverse effect on our overall business, financial condition or results of operations. However, it is possible that these assessments do not reveal all potential environmental liabilities or that conditions have changed since the assessment was prepared (typically, at the time the property was purchased or developed).

Other Policies

The following is a discussion of our investment policies, financing policies, conflict of interest policies and policies with respect to certain other activities. One or more of these policies may be amended or rescinded from time to time without a stockholder vote.

Investment Policies

Our primary business is to own and operate best-in-class malls that provide an outstanding environment and experience for our communities, retailers, employees, consumers and shareholders. The majority of our properties are located in the United States; however, we may also own interests in regional malls and property management activities outside the United States such as in Brazil. The Company elected to be treated as a REIT commencing with the taxable year beginning July 1, 2010, its date of incorporation. REIT limitations restrict us from making an investment that would cause our real estate assets to be less than 75% of our total assets. In addition, at least 75% of our gross income must be derived directly or indirectly from investments relating to real property or mortgages on real property, including "rents from real property," dividends from other REITs and, in certain circumstances, interest from certain types of temporary investments. At least 95% of our income must be derived from such real property investments, and from dividends, interest and gains from the sale or dispositions of stock or securities or from other combinations of the foregoing.

Subject to REIT limitations, we may invest in the securities of other issuers in connection with acquisitions of indirect interests in real estate. Such an investment would normally be in the form of a general or limited partnership or membership interests in special purpose partnerships and limited liability companies that own one or more properties. We may, in the future, acquire all or substantially all of the securities or assets of other REITs, management companies or similar entities where such investments would be consistent with our investment policies.

Financing Policies

We do not have a policy limiting the number or amount of mortgages that may be placed on any particular property. We generally seek to finance individual properties on a secured basis. However, mortgage financing instruments usually limit additional indebtedness on those properties. Typically, we invest in or form separate legal entities to assist us in obtaining permanent financing at attractive terms. Permanent financing may be structured as a mortgage loan on a single property, or on a group of properties, and generally requires us to provide a mortgage interest on the property in favor of an institutional third party or as a securitized financing. For securitized financings, we create separate legal entities to own the properties. These legal entities are structured so that they would not necessarily be consolidated in the event we became subject to a bankruptcy proceeding or liquidation. We decide upon the structure of the financing based upon the best terms available to us and whether the proposed financing is consistent with our other business objectives. For accounting purposes, we include the outstanding securitized debt of legal entities owning consolidated properties as part of our consolidated indebtedness.

We are party to a revolving credit facility and publically traded bonds that require us to satisfy certain affirmative and negative covenants and to meet financial ratios and tests, which may include ratios and tests based on leverage, interest coverage and net worth.

If our Board of Directors determines to seek additional capital, we may raise that capital through additional public equity or preferred equity offerings, public debt offerings, debt financing, retention of cash flows, by creating joint ventures with existing ownership interests in properties or a combination of these methods. Our ability to retain cash flows is limited by the requirement for REITs to pay tax on or distribute 100% of their capital gains income and distribute at least 90% of their taxable income. Our desire is to avoid entity level U.S. Federal income tax by distributing 100% of our capital gains and ordinary taxable income.

If our Board of Directors determines to raise additional equity capital, it may, without stockholder approval, issue additional shares of common stock or other capital stock. The Board of Directors may issue a number of shares up to the amount of our authorized capital in any manner and on such terms and for such consideration as it deems appropriate. Such securities may be senior to the outstanding classes of common stock. Such securities also may include additional classes of preferred stock, which may be convertible into common stock. The Plan Sponsors (as defined in Note 2) have preemptive rights to purchase our common stock as necessary to allow them to maintain their respective proportional ownership interest in GGP on a fully diluted basis. Any such offering could dilute a stockholder's investment in us.

We implemented our dividend reinvestment plan in which primarily all stockholders are entitled to participate. However, we may determine to pay dividends in a combination of cash and shares of common stock.

Conflict of Interest Policies

We maintain policies and have entered into agreements designed to reduce or eliminate potential conflicts of interest. We have adopted governance principles governing our affairs and the Board of Directors, as well as written charters for each of the standing committees of the Board of Directors. In addition, we have a Code of Business Conduct and Ethics, which applies to all of our officers, directors, and employees. At least a majority of the members of our Board of Directors must qualify as independent under the listing standards for NYSE companies. Any transaction between us and any director, officer or 5% stockholder must be approved pursuant to our Related Party Transaction Policy, including such transactions with Brookfield Investor, our largest stockholder. Refer to Note 10 for further discussion.

Policies With Respect To Certain Other Activities

We intend to make investments which are consistent with our qualification as a REIT, unless the Board of Directors determines that it is no longer in our best interests to qualify as a REIT. We have authority to offer shares of our common stock or other securities in exchange for property. We also have authority to repurchase or otherwise reacquire our shares or any other securities. We may issue shares of our common stock, or cash at our option, to holders of units of limited partnership interest in the Operating Partnership in future periods upon exercise of such holders' rights under the Operating Partnership agreement. Our policy prohibits us from making any loans to our directors or executive officers for any purpose. We may make loans to the joint ventures in which we participate.

CEO BACKGROUND

PROPOSAL 1—ELECTION OF DIRECTORS

The Board of Directors unanimously recommends a vote
FOR the nine Board of Directors' nominees (Item 1 on the Proxy Card).

Our Board of Directors is currently comprised of nine members. Each of the Company's directors serves for a one-year term and is subject to annual election by the stockholders. Accordingly, the stockholders will be asked to elect nine directors at the Annual Meeting. Each director will hold office until the Annual Meeting of Stockholders in 2014, and until a successor is duly elected and qualified, or until his or her earlier death, resignation or removal. The Board of Directors, based on the recommendation of the Nominating and Governance Committee, has nominated the persons set forth below for a term of office commencing on the date of this year's Annual Meeting and ending on the date of the Annual Meeting of Stockholders in 2014 and until their respective successors are duly elected and qualified, or until his or her earlier death, resignation or removal. Each of these persons currently serves as a member of the Board.

Director Nomination Process

The Nominating and Governance Committee annually selects candidates that it recommends to the Board of Directors to be nominees of the Board of Directors for election by the stockholders as directors. In addition, the Nominating and Governance Committee also selects candidates that it recommends to the Board of Directors for election as directors to fill vacancies. The Nominating and Governance Committee reviews with the Board, on an annual basis, the requisite experience, qualifications, attributes and skills of director nominees. The Nominating and Governance Committee considers many factors in identifying and recommending nominees for positions on the Board. This assessment includes independence, as well as consideration of factors such as integrity, objectivity, judgment, leadership, age, skills, experience and ability to devote adequate time to Board duties. Director nominees must possess appropriate qualifications and reflect a reasonable diversity of personal experience and background to promote our strategic objectives and to fulfill responsibilities as directors to our stockholders. In considering candidates, the Nominating and Governance Committee considers the background and qualifications of the directors as a group, and whether the candidates and existing directors together will provide an appropriate mix of experience, knowledge and attributes that will allow the Board to fulfill its responsibilities. The Nominating and Governance Committee and the Board do not have a formal diversity policy; however, in identifying nominees for director, the Nominating and Governance Committee considers a diversity of professional experiences, perspectives, education and backgrounds among the directors to ensure that a variety of perspectives are represented in Board discussions and deliberations concerning our business. The Nominating and Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. The Nominating and Governance Committee does not set specific minimum qualifications that candidates must meet in order for it to recommend them to the Board of Directors, but rather believes that each candidate should be evaluated based on his or her merits, taking into account the needs of the Company and the composition of the Board of Directors as a whole.

The Nominating and Governance Committee uses the same criteria to evaluate director candidates designated by Brookfield Investor pursuant to the Investment Agreements as it uses for all other candidates. See "Investment Agreements with Plan Sponsors" for a description of such designation rights.

In identifying potential candidates for Board membership, the Nominating and Governance Committee relies on suggestions and recommendations from members of the Board, management, stockholders and others. The Nominating and Governance Committee will consider candidates recommended by stockholders, and those candidates will be evaluated in the same manner as other candidates. The Nominating and Governance Committee assesses which candidates appear to best fit the needs of the Board and the Company and interviews and evaluates those candidates. Candidates selected by the Nominating and Governance Committee are recommended to the full Board of Directors. After the Board of Directors has approved a candidate (other than those designated pursuant to the Investment Agreements), the Board determines how to extend an invitation to join the Board.

Stockholders who wish to submit nominations for director for consideration by the Nominating and Governance Committee for election at the 2014 Annual Meeting of Stockholders may do so by delivering written notice, along with the additional information and materials required by our Bylaws, to our Corporate Secretary not later than 90 days nor earlier than 120 days prior to the first anniversary of this year's annual meeting. As specified in our Bylaws, different notice deadlines apply in the case of a special meeting, when the date of an annual meeting is more than 30 days before or more than 70 days after the first anniversary of the prior year's meeting, or when the first public announcement of the date of an annual meeting is less than 100 days prior to the date of such annual meeting. Accordingly, for the 2014 Annual Meeting of Stockholders, we must receive this notice on or after January 10, 2014 and on or before February 9, 2014. Such information must be addressed to our Corporate Secretary, c/o General Growth Properties, Inc., 110 North Wacker Drive, Chicago, Illinois 60606.

In the future, the Nominating and Governance Committee may choose to use outside consultants to help identify potential candidates and has sole authority to retain such outside consultants for this purpose.

Board of Directors and Nominees

The current members of our Board of Directors are set forth below, along with a description of their business experience, directorships during the past five years and qualifications, attributes and skills. Each of the members of our Board of Directors is standing for re-election as a nominee of the Board of Directors and has agreed to serve if elected.

Richard B. Clark
Director since November 2010
Age, 54

Mr. Clark has served as a director of GGP since November 2010. Mr. Clark is Senior Managing Partner and the CEO of the Brookfield Property Group, the real estate arm of Brookfield Asset Management Inc. ("Brookfield Asset Management") and Chairman of the Board of Directors of Brookfield Office Properties ("Brookfield Office Properties"). Mr. Clark joined Brookfield Asset Management in 1996, and is responsible for its real estate operations. Mr. Clark was formerly CEO of Brookfield Office Properties and, prior to that, was the President of its U.S. Commercial Operations. Mr. Clark has been employed with the Brookfield Property Group and its predecessors since 1984 in various executive roles. Mr. Clark holds a business degree from the Indiana University of Pennsylvania.


Key Attributes, Experience and Skills:
Mr. Clark's extensive experience in private equity, particularly in the real estate industry, allows him to make key contributions to our Board of Directors on investment and other strategy matters. Mr. Clark is a director designated by Brookfield Investor pursuant to the terms described under "Investment Agreements."

Mary Lou Fiala
Director since November 2010
Age, 61

Ms. Fiala has served as a director of GGP since November 2010. Ms. Fiala is the Co-Chairman of LOFT Unlimited, a personal financial and business consulting firm in Jacksonville, Florida. Ms. Fiala served as President and Chief Operating Officer of Regency Centers Corporation ("Regency"), a real estate investment trust (a "REIT") specializing in the ownership and operation of grocery anchored shopping centers, from January 1999 to December 2008. She was named Vice Chairman and Chief Operating Officer in January 2009, a position she served in until December 2009. In her role as Vice Chairman and Chief Operating Officer, Ms. Fiala was responsible for the operational management of Regency's retail centers nationwide. She is a current member of the Board of Directors of Regency and Build-A-Bear Workshop, Inc. Ms. Fiala also served as the 2008-2009 Chairman of the International Council of Shopping Centers. Ms. Fiala earned a bachelor's degree in science from Miami University.

Key Attributes, Experience and Skills:
Ms. Fiala has extensive operational experience in the retail industry, which brings the perspective of our tenants to our Board of Directors. Prior to working with Regency, Ms. Fiala served as Managing Director of Security Capital Global Strategic Group Incorporated, where she was responsible for the development of operating systems for the firm's retail-related initiatives. Previously, she also served as Senior Vice President and Director of Stores for Macy's East/Federated Department Stores, where she was responsible for 19 Macy's stores in five states, generating more than $1 billion in sales volume. Before her tenure at Macy's, Ms. Fiala was Senior Vice President of Henri Bendel and Senior Vice President and Regional Director of stores for Federated's Burdine's Division. Her prior leadership roles allow her to provide to our Board of Directors insight on management and operational initiatives.

J. Bruce Flatt
Director since November 2010
Chairman of the Board
Age, 47

Mr. Flatt has served as a director and Chairman of the Board of GGP since November 2010. Mr. Flatt has been Chief Executive Officer of Brookfield Asset Management since February 2002 after joining Brookfield in 1990. Mr. Flatt holds a business degree from the University of Manitoba.

Key Attributes, Experience and Skills:
Mr. Flatt has been instrumental in the global expansion of the asset management business of Brookfield Asset Management throughout the last twenty years. In this capacity, Mr. Flatt has served on over 15 public company boards, acted as chairman of a number, and been instrumental in the launch of a number of public companies across the global capital markets. Mr. Flatt's extensive experience in serving on the boards of public companies, including as chairman of the board, gives him valuable insight in the operations of public companies, and his long-time experience at Brookfield Asset Management, particularly in property operations, provides him with knowledge in financial investments and strategy in our industry that benefit our Board of Directors. Mr. Flatt is a Brookfield Investor director pursuant to the terms described under "Investment Agreements."

John K. Haley
Director since September 2009
Age, 62

Mr. Haley has served as a director of GGP since September 2009. Mr. Haley was a partner at Ernst & Young LLP in Transaction Advisory Services from 1998 until 2009 and led the Transaction Advisory Services practice in Boston, Massachusetts. Prior to that, he was an Audit Partner at Ernst & Young LLP from 1988 until 1997, where he served as audit partner on a variety of public and private companies. He is a current member of the Board of Directors of Body Central Corp. Mr. Haley holds a degree in accounting from Northeastern University and has completed executive programs at Harvard Business School, Northwestern University and Babson College.

Key Attributes, Experience and Skills:
Mr. Haley has financial expertise and significant experience in SEC registrations, restructurings, special investigations and forensic investigations. Mr. Haley has given expert testimony on financial and accounting matters, and has experience in the real estate and retail industries. Mr. Haley was a member of the American Society of Certified Public Accountants. Mr. Haley's extensive professional accounting and financial experience, including with respect to public company requirements and SEC registrations, allow him to provide key contributions to the Board of Directors on financial, accounting and corporate governance matters.

Cyrus Madon
Director since October 2010
Age, 47

Mr. Madon has served as a director of GGP since October 2010. Mr. Madon is the Senior Managing Partner of Brookfield Asset Management responsible for private equity and finance activities and has been a member of the Brookfield Asset Management team since 1998. Mr. Madon holds a business degree from Queen's University.

Key Attributes, Experience and Skills:
Mr. Madon's experience in restructuring, corporate finance and banking, particularly in the real estate industry, allow him to make valuable contributions to the Board of Directors on such matters. Mr. Madon has extensive experience in restructuring, corporate finance, and merchant banking across a broad range of industries, including real estate, real estate services and manufacturing. Mr. Madon is a Brookfield Investor director pursuant to the terms described under "Investment Agreements."

Sandeep Mathrani
Director since January 2011
Chief Executive Officer
Age, 50

Mr. Mathrani has served as a director of GGP since January 2011 when he also became the Company's Chief Executive Officer. Prior to joining the Company, Mr. Mathrani was the President of Retail for Vornado Realty Trust and was responsible for all of its U.S. Retail Real Estate and India Operations. Mr. Mathrani holds a Master of Engineering, Master of Management Science, and Bachelor of Engineering from Stevens Institute of Technology.

Key Attributes, Experience and Skills:
Vornado Realty Trust is one of the largest REITs in the country. The Retail division consists of over 200 owned and/or managed properties located in twenty-one states and Puerto Rico, totaling over 31 million square feet. A real estate industry veteran with over 20 years of experience, Mr. Mathrani joined Vornado in February 2002 after having spent eight years with Forest City Ratner, where he was Executive Vice President responsible for that company's retail development and related leasing in the New York City metropolitan area. Mr. Mathrani's leadership role with the Company as well as his prior leadership roles at real estate companies provide him with key experience in business and in the real estate industry and contribute to his ability to make strategic decisions with respect to our business. In addition, his in-depth knowledge of our business strategy and operations due to his role as our Chief Executive Officer enable him to provide valuable contributions and facilitate effective communication between management and the Board.

David J. Neithercut
Director since November 2010
Age, 57

Mr. Neithercut has served as a director of GGP since November 2010. Mr. Neithercut is the President and Chief Executive Officer and a member of the Board of Trustees of Equity Residential, a REIT focused on the acquisition, development and management of apartment properties in various U.S. markets. Mr. Neithercut has been the President of Equity Residential since May 2005 and became Chief Executive Officer and a trustee of Equity Residential in January 2006. Mr. Neithercut joined Equity Residential in 1995 as the company's Chief Financial Officer and served in that capacity until August 2004 when he was named Executive Vice President—Corporate Strategy. Prior to joining Equity Residential, Mr. Neithercut was Senior Vice President of Finance for Equity Group Investments, an affiliate of Equity Residential's predecessor company. Mr. Neithercut is a member of the Executive Committee of the National Multi Housing Council, a member of the Urban Land Institute and a member of the Executive Committee of the National Association of Real Estate Investment Trusts. Mr. Neithercut holds a bachelor's degree from St. Lawrence University and an M.B.A. from the Columbia University Graduate School of Business.

Key Attributes, Experience and Skills:
Mr. Neithercut's leadership experience in working with residential REITs, as well as his membership in industry committees, provides our Board with valuable insight and knowledge into REIT operations and strategy and the REIT industry in general.

Mark R. Patterson
Director since July 2011
Age, 52

Mr. Patterson has served as a director of GGP since July 2011. Mr. Patterson is the Chairman and Chief Executive Officer of Boomerang Systems, Inc., a manufacturer of automated robotic parking and storage systems. Until January 2009, Mr. Patterson was the Managing Director and Head of Real Estate Global Principal Investments of Merrill Lynch where he oversaw the principal investing activities of the firm. Mr. Patterson joined Merrill Lynch in April 2005, as the Global Head of Real Estate Investment Banking and in 2006 also became the Co-Head of Global Commercial Real Estate which encompassed real estate investment banking, principal investing and mortgage debt. Prior to joining Merrill Lynch, Mr. Patterson spent 16 years at Citigroup where he was the Global Head of Real Estate Investment Banking since 1996. Previously, Mr. Patterson was with Chemical Realty Trust in New York from 1987 to 1989 as an Associate in the Real Estate Investment Banking Group. He was an auditor of real estate companies in the Real Estate Division of Arthur Anderson and Co. in Houston, Texas from 1982 to 1985. Mr. Patterson holds a B.A. from the College of William and Mary and an M.B.A. from the Darden School of Business at the University of Virginia.

Key Attributes, Experience and Skills:
Mr. Patterson has been involved in a wide range of advisory assignments, initial public offerings and financings that have spanned virtually all property types. Many of these transactions are notable because they were some of the largest of their type or represented new financing trends in global real estate finance. Although based in the United States, Mr. Patterson has had extensive global experience overseeing both Merrill Lynch's and Citigroup's real estate activities worldwide. Mr. Patterson is also a Certified Public Accountant.

John G. Schreiber
Director since October 2010
Age, 66

Mr. Schreiber has served as a director of GGP since October 2010. Mr. Schreiber is the President of Centaur Capital Partners, Inc. and a Partner and Co-Founder of Blackstone Real Estate Advisors. Mr. Schreiber has overseen all of Blackstone's real estate investments since 1992. Previously, Mr. Schreiber served as Chairman and Chief Executive Officer of JMB Urban Development Co. and Executive Vice President of JMB Realty Corp. Mr. Schreiber is a past board member of Urban Shopping Centers, Inc., Host Hotels & Resorts, Inc., The Rouse Company and AMLI Residential Properties Trust and he currently serves on the board of JMB Realty Corp. and a number of mutual funds managed by T. Rowe Price Associates. Mr. Schreiber graduated from Loyola University of Chicago and received an M.B.A. from Harvard Business School.

Key Attributes, Experience and Skills:
Mr. Schreiber has extensive experience in overseeing financial investments in the real estate industry, and he has held leadership roles focused on shopping center development and strategy. His investment and operational experience contribute to our Board of Directors.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview—Introduction

Our primary business is to be an owner and operator of best-in-class malls that provide an outstanding environment and experience for our communities, retailers, employees, consumers and shareholders. The substantial majority of our properties are located in the United States; however, we also own interests in regional malls and property management activities through our Unconsolidated Real Estate Affiliates in Brazil. As of December 31, 2012, we are the owner, either entirely or with joint venture partners, of 144 regional malls (126 domestic and 18 in Brazil) comprising approximately 135 million square feet.

We provide management and other services to substantially all of our properties, including properties which we own through joint venture arrangements and which are unconsolidated for GAAP purposes. Our management operating philosophies and strategies are the same whether the properties are consolidated or unconsolidated.

Our operational strategies include the following:


increase the permanent occupancy of our regional mall portfolio by converting temporary (or short-term) leases to permanent (or long-term) leases and leasing currently vacant space;


renew or replace expiring leases at rental rates greater than those on expiring leases;


opportunistically acquire whole or partial interests in high-quality regional malls and anchor pads;


continue executing on our existing redevelopment strategy and seek additional opportunities within our portfolio for redevelopment;


dispose of properties in our portfolio that do not fit within our long-term strategy, including certain of our office properties, strip centers and regional malls; and


lower borrowing costs by refinancing debt and reduce refinancing risk by laddering maturities.

We seek to increase long-term Company NOI (as defined below) growth through proactive management and leasing of our regional malls. Our leasing strategy is to identify and provide the right stores that have appropriate merchandise mix for each of our regional malls. We believe that the most significant operating factor affecting incremental cash flow and NOI is increased 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;


increasing occupancy at the properties so that more space is generating rent; and


increased tenant sales in which we participate through overage rent.
Overview

Our Company NOI (as defined below) increased 5.1% from $2.0 billion in 2011 to $2.1 billion in 2012. Our Company FFO (as defined below) increased 13.7% from $874.4 million in 2011 to $993.9 million in 2012.

We completed transactions and achieved operational goals in order to promote our long-term strategy to enhance the quality of our overall portfolio as follows:


acquired 11 Sears anchor pads (including fee interests in five anchor pads and long-term leasehold interests in six anchor pads) for $270.0 million. This portfolio represents a significant opportunity to recapture valuable real estate within our portfolio and allows us to execute expansion and redevelopment opportunities, including re-tenanting the anchor space and adding new in-line GLA (Note 4);


acquired fee or leasehold interest in seven anchor pads totaling 945 thousand square feet of gross leasable area for $36.7 million, which allows us to recapture real estate in our portfolio and provides us with redevelopment opportunities;


acquired the remaining 49% interest in The Oaks and Westroads, previously owned through a joint venture, for $191.1 million which included the assumption of our incremental share of $93.7 million in additional debt (Note 4);


on October 9, 2012, we acquired an additional interest in Aliansce Shopping Centers S.A. from certain affiliates of Pershing Square Capital Management, L.P. for $195.2 million. The additional 14.1% interest increased our total investment in our Brazilian Unconsolidated Real Estate Affiliate (Note 7);


on January 12, 2012, we distributed our shares in RPI to complete the spin-off of a 30 property portfolio (Note 5). As a result, we decreased our outstanding mortgage loans by $1.1 billion;


sold our interests in non-core assets including an office portfolio, three office properties, 11 strip centers/other retail, seven regional malls and an anchor box totaling approximately seven million square feet of GLA for $524.5 million, which reduced our property level debt by $320.6 million. These sales generated net proceeds of $239.1 million that have been or will be reinvested in opportunities with higher returns;


increased our percentage leased to 96.1% as of December 31, 2012 from 95.7% as of December 31, 2011, of which permanent occupancy was 89.6% as of December 31, 2012; and


increased the weighted average in-place rents to $69.12 per square foot as of December 31, 2012 from $67.76 per square foot as of December 31, 2011.

As a result of our efforts, our portfolio now has tenant sales of $545 per square foot. We will continue to evaluate other opportunities to improve our portfolio.

Results of Operations

Year Ended December 31, 2012 and 2011

Base minimum rents increased by $51.8 million in 2012 primarily due to increased permanent occupancy from 87.5% as of December 31, 2011 to 89.6% as of December 31, 2012 and increasing in-place rents as presented in the operating metrics section above.

Tenant recoveries increased $4.5 million primarily due to higher recoveries from common area maintenance fees and real estate taxes.

Overage rents increased $8.7 million primarily due to increased tenant sales from $512 per square foot in 2011 to $545 per square foot in 2012.

Other revenues increased $1.4 million primarily due to parking, advertising and promotional revenues.

Management fees and other corporate revenues primarily represent the revenues earned from the management of our joint venture properties. Management fees and other corporate revenues increased $10.8 million primarily due to an increase in development and financing fees.

Property maintenance costs decreased $6.4 million due to a decrease in payroll costs and lower snow removal costs as a result of a mild winter, and were partially offset by higher costs for certain contracted services due to continued efforts to manage our expenses.

Other property operating costs decreased $8.0 million due to decreased payroll and decreased utility costs.

Property management and other costs represent regional and home office costs and includes items such as corporate payroll, rent for office space, supplies and professional fees, which represent corporate overhead costs not generated at the properties. Property management and other costs decreased $27.4 million primarily due to $13.9 million of payroll and $12.4 million severance costs incurred in 2011 that were reduced or did not occur in 2012. In addition, there was an increase in capitalized development overhead in 2012, which was partially offset by increased legal services and national marketing costs.

General and administrative costs represent the costs to run the public company and include costs for executives, audit fees, professional fees and administrative fees related to the public company. In 2012, general and administrative costs includes a net benefit of $5.3 million from a one-time litigation settlement and in 2011, includes the reversal of previously accrued bankruptcy costs and gains on settlements of $18.2 million both of which reduced general and administrative costs in 2011. Excluding these items, general and administrative costs decreased due to a $6.8 million decrease in professional fees.

Depreciation and amortization decreased $80.3 million primarily due to fully depreciated and written off tenant-specific in-place lease intangibles as tenants vacated prior to the end of their lease term in 2012 versus 2011 offset by increased building depreciation of $8.2 million as a result of accelerated depreciation associated with the demolition of a building.

Interest expense decreased $68.4 million primarily due to default interest incurred on the Homart Note and the 2006 Credit Facility totaling $55.9 million during 2011. Additionally we incurred less interest expense of $37.9 million related to our mortgage and notes payable due to lower average interest rates obtained as a result of our refinancing activity since 2011, as outlined in the Liquidity and Capital Resources section below. These decreases were partially offset by increases of amortization and write-offs of debt market rate adjustments of $22.6 million.

The Warrant liability adjustment represents the non-cash income or expense recognized as a result of the change in the fair value of the Warrant liability (Note 10). We incurred expense of $502.2 million for the year ended December 31, 2012 as the result of an increase in our stock price from December 31, 2011 which was partially offset by the effect of a decrease in implied volatility from 37% in 2011 to 33% in 2012. We recognized income of $55.0 million for the year ended December 31, 2011 as the result of a decrease in our stock price from December 31, 2010 and the decrease in implied volatility.

The gain from change in control of investment properties of $18.5 million represents the gain related to the acquisition of the remaining interest in The Oaks and Westroads (Note 4).

The loss on extinguishment of debt of $15.0 million represents the one-time make-whole payment related to the early payoff of certain of our corporate unsecured bonds (Note 8).

The equity in income (loss) of Unconsolidated Real Estate Affiliates increased $52.1 million primarily due to a decrease in amortization expense due to less tenant-specific intangibles and basis adjustments in our investment in Unconsolidated Real Estate Affiliates in the amount of $28.5 million, a decrease in interest expense of $6.8 million as a result of refinancing activity at our joint ventures, and growth in property operations.

The equity in income (loss) of Unconsolidated Real Estate Affiliates—gain on investment of $23.4 million represents the gain from the dilution of our investment in Aliansce as a result of its secondary equity offering (Note 7).

We recorded provisions for impairment of $118.6 million on nine of our operating properties during the year ended December 31, 2012 (Note 3 and 5). Of these impairment charges, $58.2 million are included in the provision for impairment in our Consolidated Statements of Operations and Comprehensive Loss. The remaining impairment charges are included, net of the gain on forgiveness of debt of $9.9 million in discontinued operations in our Consolidated Statements of Operations and Comprehensive Loss. Subsequent to December 31, 2012, one of the impaired properties that was previously transferred to a special servicer was sold, in a lender directed sale in full satisfaction of the related debt, for an amount less than the carrying value of the non-recourse debt of $91.2 million. As such, we expect to record a gain on forgiveness of debt of approximately $23 million in the first quarter of 2013.

Impairment charges for the year December 31, 2011 were $68.4 million, of which $0.9 million is included in the provision for impairment and $67.5 million are included in discontinued operations (Note 3 and 5) in our Consolidated Statements of Operations and Comprehensive Loss.

Discontinued operations for the year ended December 31, 2012, includes the net income (loss) on 21 properties that were sold during the current year, as well as, the 30 properties included in the RPI Spin-Off, and is offset by the gain on debt extinguishment related to one property that was sold in a lender directed sale for a sales price less than the carrying value of the debt of $50.8 million.

Year Ended December 31, 2011 and 2010

The base minimum rents have increased $40.7 million primarily due to increased permanent occupancy from 85.5% as of December 31, 2010 to 87.5% as of December 31, 2011 and increasing in-place rents. The changes in straight-line rent and above-and below-market tenant leases, net reflect the impact of the application of acquisition accounting in the fourth quarter of 2010. Lease termination income decreased due to fewer lease terminations.

Tenant recoveries remained flat for the year ended December 31, 2011 increasing only $0.7 million.

Overage rents increased $12.2 million for the year ended December 31, 2011 primarily due to increased tenant sales from $468 per square foot in 2010 to $512 per square foot in 2011.

Management fees and other corporate revenues decreased $2.1 million for the year ended December 31, 2011 due to a $1.4 million decrease in management fees resulting from the sale of our third-party management business in July 2010. In addition, development fees and specialty lease fees decreased $1.5 million for the year ended December 31, 2011 due to lower fees earned as a result of delays in projects at three properties owned by our Unconsolidated Real Estate Affiliates.

Other revenues increased $4.8 million primarily due to higher advertising and promotion revenue.

Real estate taxes increased $2.8 million for the year ended December 31, 2011 primarily due to the amortization of an intangible asset related to real estate taxes at one property, which was partially offset by a favorable real estate tax settlement that resulted in lower expense in 2010.

Marketing costs increased $1.6 million for the year ended December 31, 2011 primarily due to increased marketing efforts related to internal and external advertising, which was partially offset by a decrease in national advertising.

Other property operating costs increased $0.4 million for the year ended December 31, 2011 primarily due to an $8.6 million increase in utilities and a $2.1 million increase in outside professional services, which were partially offset by an $11.6 million decrease in payroll, benefits and incentive compensation.

The provision for doubtful accounts decreased $7.5 million for the year ended December 31, 2011 primarily due to improved collections of outstanding accounts receivable during 2011. In addition, the provision was higher in 2010 as the result of tenant bankruptcies and weaker economic conditions.

Property management and other costs increased $23.1 million for the year ended December 31, 2011 due to a $7.8 million increase in professional services primarily related to the RPI Spin-Off, a $12.4 million increase in severance as part of the realignment of the Company, a $12.1 million increase in incentive compensation and a $2.3 million increase in occupancy costs. These increases were partially offset by a $7.5 million decrease in benefits.

General and administrative expenses decreased by $15.7 million for the year ended December 31, 2011 primarily due to the reversal of previously accrued bankruptcy costs and gains on bankruptcy settlements of $23.8 million, which were offset by a $13.0 million increase in stock based compensation due to an increase in executive stock grants issued in 2011.

Provision for impairment included charges of $0.9 million related to one non-income producing asset for the year ended December 31, 2011 (Note 3). Based on the results of the Predecessor's evaluations for impairment, we recognized impairment charges related to operating properties and properties under development of $4.5 million for the period from January 1, 2010 through November 9, 2010 (Note 3).

Depreciation and amortization increased $259.6 million for the year ended December 31, 2011 primarily due to the impact of the application of the acquisition accounting in the fourth quarter of 2010.

Interest expense decreased $414.1 million for the year ended December 31, 2011 primarily as we refinanced 12 properties, resulting in a lower average debt balance and lower weighted average interest expense in 2011.

The Warrant liability adjustment was income of $55.0 million for the year ended December 31, 2011 due to the non-cash income recognized as a result of the change in the fair value of the Warrant liability (Note 10). The decrease in the fair value was primarily due to the decrease our stock price and the change in implied volatility from 38% in 2010 to 37% in 2011.

The provision for income taxes was $8.7 million for the year ended December 31, 2011 and the benefit for income taxes was $70.0 million for the year ended December 31, 2010. The change was primarily due to changes in liabilities pursuant to uncertain tax positions primarily related to HHC, which was spun off on the Effective Date.

The decrease in equity in (loss) income of Unconsolidated Real Estate Affiliates for the year ended December 31, 2011 of $18.5 million was primarily due to a $47.3 million decrease in amortization of intangible assets and liabilities, including above and below market lease amortization.

This is offset by $21.1 million related to the impairment of our investment in Turkey in 2010 and an increase in our share of income of the Unconsolidated Real Estate Affiliates.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Overview

Our primary business is to be an owner and operator of best-in-class retail properties that provide an outstanding environment and experience for our communities, retailers, employees, consumers and shareholders. Our properties are predominantly located in the United States. We provide management and other services to substantially all of our properties, including properties which we own through joint venture arrangements and which are unconsolidated for GAAP purposes. Our management operating philosophies and strategies are the same whether the properties are consolidated or unconsolidated.

As of September 30, 2013, we are the owner, either entirely or with joint venture partners, of 123 regional malls comprising approximately 127 million square feet of GLA. The regional mall portfolio generated tenant sales of $562 per square foot during the third quarter of 2013; including 73 Class A malls generating average tenant sales of $654 per square foot and contributing approximately 71% of our share of Company net operating income (‘‘NOI’’) (as defined below) for the three months and contributing approximately 70% of our share of Company NOI for the nine months ended September 30, 2013.

Our company’s growth is focused on three major areas:

1) increasing permanent occupancy;
2) increasing rental revenues by leasing at higher rents than those expiring; and
3) creating value from our redevelopment activities.

We have seen an expansion of the spread, or variance, between the rent paid on expiring leases and the rent commencing under new leases, on a suite-to-suite basis. On a suite-to-suite basis, the leases commencing occupancy in 2013 exhibited initial rents that were 12.2% higher than the final rents paid on expiring leases, on a gross basis. We have identified $2.0 billion of redevelopment projects within our portfolio, over 80% of which is being invested into Class A malls. We anticipate generating stabilized returns in the high single to low double digits on these projects as they commence operations. The internal growth drivers within our existing portfolio are strongly complemented by the industry’s lack of new supply of mall space over the next five years and the anticipated resilient demand for space from retailers, both domestic and international.

We believe our long-term strategy can provide our shareholders with a risk-adjusted total return comprised of dividends and share price appreciation.

Our key operational strategies include the following:


increase the permanent occupancy of our regional mall portfolio by converting temporary (or short-term) leases to permanent (or long-term) leases and leasing currently vacant space;

renew or replace expiring leases at rental rates greater than those on expiring leases;

opportunistically acquire whole or partial interests in high-quality retail properties;

continue executing on our existing redevelopment strategy and seek additional opportunities within our portfolio for redevelopment;

dispose of properties in our portfolio that do not fit within our long-term strategy, including certain of our office properties, strip centers and regional malls; and

control operating expenses by leveraging our scale to maximize operational synergies.

We seek to increase long-term Company NOI (as defined below) growth through proactive management and leasing of our regional malls. Our leasing strategy is to identify and provide the right stores that have appropriate merchandise mix for each of our regional malls. We believe that the most significant operating factor affecting incremental cash flow and NOI is increased 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;

increasing occupancy at the properties so that more space is generating rent; and

increased tenant sales in which we participate through overage rent.

Financial Overview

Our Company NOI (as defined below) increased 5.1% from $1.5 billion for the nine months ended September 30, 2012 to $1.6 billion for the nine months ended September 30, 2013. Our Company FFO (as defined below) increased 17.7% from $680.3 million for the nine months ended September 30, 2012 to $801.0 million for the nine months ended September 30, 2013.

See Non-GAAP Supplemental Financial Measures below for a discussion of Company NOI and Company FFO, along with a reconciliation to the comparable GAAP measures, Operating income and Net income (loss) attributable to General Growth Properties, Inc.

We completed transactions and achieved operational goals in order to promote our long-term strategy to enhance the quality of our overall portfolio as follows:


sold our investment in Aliansce (Note 6);


formed a joint venture that acquired a portfolio comprised of two properties in the Union Square area of San Francisco for total consideration of $40.3 million (Note 6);


acquired the 50% interest in Quail Springs Mall, previously held by our joint venture partner, for total consideration of $90.2 million (Note 3); and


sold our interests in three non-core assets totaling approximately 2 million square feet of GLA, which reduced our property level debt by $121.2 million (Note 4).

Results of Operations

Three Months Ended September 30, 2013 and 2012

Minimum rents were flat during the third quarter of 2013 compared to the third quarter of 2012.

Overage rent decreased by $3.5 million in part due to the change in ownership of The Grand Canal Shoppes and The Shoppes at the Palazzo, during the second quarter of 2013, which resulted in $1.8 million less in overage rent in the third quarter of 2013 compared to the third quarter of 2012.

Other revenue increased by $3.7 million due to the receipt of a $0.8 million tax settlement related to a previously-disposed property, a milestone payment of $0.9 million related to the sale of our third party management business in 2010, and a $0.8 million of gain on the sale of marketable securities.

Other property operating costs and Property management and other costs were both flat during the third quarter of 2013 compared to the third quarter of 2012 as a result of our operating expense management initiatives.

Depreciation and amortization expense decreased by $11.4 million. This decrease is primarily due to the change in ownership of The Grand Canal Shoppes and The Shoppes at the Palazzo during the second quarter of 2013, which resulted in $8.1 million less in depreciation and amortization expense. Further decrease is due to lower net amortization expense related to lease intangibles. These decreases are partially offset by the accelerated depreciation related to the change in the estimated useful lives at certain operating properties (Note 2).

Interest expense decreased by $21.7 million primarily due to the redemption of $1.3 billion of unsecured corporate bonds. The unsecured corporate bonds were redeemed subsequent to September 30, 2012 and prior to July 1, 2013.

Preferred Stock issued during the first quarter of 2013 resulted in $4.0 million in preferred dividends accrued during the third quarter of 2013. Refer to Note 10 for further discussion.

Equity in income of Unconsolidated Real Estate Affiliates decreased $8.1 million. This decrease was primarily due to a 2012 decrease in amortization expense related to our basis in our investment in Unconsolidated Real Estate Affiliates that increased 2012 Equity in income of Unconsolidated Real Estate Affiliates.

Nine months Ended September 30, 2013 and 2012

Minimum rents increased by $35.6 million primarily due to increased permanent occupancy from 92.4% as of September 30, 2012 to 94.8% as of September 30, 2013.

Tenant recoveries increased $15.3 million primarily due to higher real estate tax recoveries which were driven by increased Real estate tax expense and therefore recovery income. Additionally, we settled a multi-year real estate tax case with a municipality at one operating property, which resulted in a $5.1 million recovery.

Real estate taxes increased $14.9 million primarily due to an $11.1 million multi-year real estate tax settlement with a municipality at one operating property during the first quarter of 2013.

Other property operating costs and Property management and other costs were flat for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012 as a result of our operating expense management initiatives.

Depreciation and amortization expense decreased by $19.6 million primarily due to the change in ownership of The Grand Canal Shoppes and The Shoppes at the Palazzo during the second quarter of 2013, which resulted in $12.7 million less in depreciation and amortization expense . Further decrease is due to lower net amortization expense related to lease intangibles. These decreases are partially offset by accelerated depreciation associated with a change in the estimated useful lives at certain operating properties (Note 2).

Interest expense decreased by $27.2 million primarily due to the redemption of $1.3 billion of unsecured corporate bonds subsequent to September 30, 2012. The decrease is also due to capitalization of $6.6 million of interest costs related to development projects. This decrease is partially offset by a write-off of a market rate adjustment related to the refinancing of Ala Moana, which reduced interest expense during 2012.

The Warrant liability adjustment represents the non-cash income or expense recognized as a result of the change in the fair value of the Warrant liability. We incurred a net Warrant liability adjustment of $40.5 million during the first quarter of 2013. This adjustment reflects our purchase of the Warrants from Fairholme and Blackstone, as the amount paid exceeded the liability by approximately $55 million. This was partially offset by the revaluation of the remaining Brookfield Investor Warrants as of March 28, 2013. As of March 28, 2013, an amendment to the warrant agreement changed the classification of the Warrants owned by Brookfield from a liability to a component of permanent equity. As a result, the Warrants have not been revalued after March 28, 2013. Refer to Note 9 for a discussion of transactions related to the Warrants.

The Warrant liability adjustment of $413.1 million in the nine months ended September 30, 2012 as a result of an increase in our stock price within the quarter, which was partially offset by the effect of a decrease in the Warrants’ implied volatility.

The Gain from change in control of investment properties of $219.8 million in 2013 is due to a newly-formed joint venture that holds The Grand Canal Shoppes and The Shoppes at the Palazzo, and the purchase of the remaining interest in Quail Springs Mall, previously held in a joint venture (Note 3). The 2012 Gain from change in control of investment properties of $18.5 million relates to the purchase of our partner’s interest in two regional malls previously held in a joint venture.

The Loss on extinguishment of debt of $36.5 million in 2013 is the result of fees expensed for the early payoff of debt. $20.5 million of such fees were expensed as a result of the early redemption of the $608.7 million of 6.75% unsecured corporate bonds due November 9, 2015. In addition, we expensed $6.6 million in financing fees resulting from the refinancing of the $1.5 billion secured corporate loan, $3.5 million as a result of the early redemption of $91.8 million of 5.38% unsecured corporate bonds due November 26, 2013, and $5.9 million as a result of the early payoff of mortgage debt at one operating property (Note 7).

Preferred Stock issued during the first quarter of 2013 resulted in $10.1 million in preferred dividends accrued during the nine months ended September 30, 2013. Refer to Note 10 for further discussion.

Liquidity and Capital Resources

Our primary source of cash is from day-to-day ownership and management of our properties. We may also raise cash from refinancings, or borrowings under our revolving credit facility. Our primary uses of cash include payment of operating expenses, working capital, debt service, including principal and interest, reinvestment in or acquisition of properties, redevelopment of properties, tenant allowances and dividends.

Capital

Our capital plan is to obtain financial flexibility by managing our future maturities, cross collateralizations and corporate guarantees, and providing the necessary capital to fund growth. Our long term goal is to decrease our overall net debt to earnings before interest, taxes and depreciation and amortization, or EBITDA, and leverage ratios by improving operations, amortization of debt and refinancing debt at improved terms. We believe that we currently have sufficient liquidity to satisfy all of our commitments in the form of $603.5 million of consolidated unrestricted cash and $945.0 million of available credit under our credit facility as of September 30, 2013, as well as anticipated cash provided by operations.

Our key financing and capital raising objectives include the following:


refinance our maturing debt, and certain debt prepayable without penalty, managing future maturities and reducing amount of debt recourse to us; and


dispose of properties in our portfolio that do not fit within our long-term strategy.

We may also raise capital through public or private issuances of debt securities, preferred stock, common stock, common units of the Operating Partnership or other capital raising activities.

During the nine months ended September 30, 2013, we executed the following refinancing and capital transactions:


acquired 28,345,108 shares of our common stock for $566.9 million;


completed $4.6 billion of secured financings, including the $1.5 billion secured corporate loan, lowering the average interest rate, lengthening the term-to-maturity, and generating net proceeds of approximately $1.1 billion;


issued 10,000,000 shares of 6.375% Preferred Stock, generating proceeds of approximately $250 million before issuance costs; and


redeemed $700.5 million of unsecured corporate bonds with a weighted-average interest rate of 6.57%. The redeemed unsecured corporate bonds were scheduled to mature in 2013 and 2015.

As of September 30, 2013, we have $2.5 billion of debt pre-payable at par. We may pursue opportunities to refinance this debt at lower interest rates and longer terms.

As a result of our financing efforts in 2013, we have reduced the amount of debt due in the next three years from $5.3 billion to $1.3 billion, representing 7.4% of our total debt. The maximum amount due in any one of the next ten years is no more than $3.0 billion or approximately 17.3% of our total debt.

The following table illustrates the scheduled balloon payments at maturity for our proportionate share of total debt as of September 30, 2013. As noted above, the $206.2 million of Junior subordinated notes are due in 2041, but we may redeem them any time after April 30, 2011 (Note 7). As we do not expect to redeem the notes prior to maturity, they are included in the consolidated debt maturing subsequent to 2017.

Acquisitions and Joint Venture Activity

From time-to-time we may acquire high quality retail assets that are consistent with our strategy of owning and operating best-in-class properties within the retail landscape. Such assets provide long-term embedded growth or potential redevelopment opportunities.

During the nine months ended September 30, 2013, we executed the following acquisitions (at our proportionate share):

• acquired a 50% interest in a portfolio comprised of two properties in the Union Square area of San Francisco for $40.3 million and assumed debt of $41.3 million (Note 6);

• formed a joint venture with TIAACREF, generating proceeds to GGP of $411.5 million net of debt assumed of $312.1 million (Note 3); and

• acquired the 50% interest in Quail Springs Mall, previously held by our joint venture partner, for $55.5 million and assumed debt of $34.7 million (Note 3).

Default Interest Payment

Pursuant to the Plan, we agreed to pay to the holders of claims (the “2006 Lenders”) under a revolving and term loan facility the principal amount of their claims outstanding of approximately $2.6 billion plus post-petition interest at the contractual non-default rate. However, the 2006 Lenders asserted that they were entitled to receive interest at the contractual default rate. In July 2011, the Bankruptcy Court ruled in favor of the 2006 Lenders. On on March 13, 2013, we reached a settlement with the holders of claims (the “2006 Lenders”) under a revolving and term loan facility. In exchange for our dismissal of its appeal, and a payment by us of $97.4 million, the 2006 Lenders waived all claims to attorneys’ fees (Note 15).

Warrants and Brookfield Investor Ownership

On January 28, 2013, GGPLP acquired the 41,070,000 Warrants held by Fairholme and the 5,000,000 Warrants held by Blackstone for an aggregate purchase price of approximately $633 million. The Warrants were exercisable into approximately 27 million common shares of the Company at a weighted-average exercise price of $9.37 per share, assuming net share settlement.

As a result of the GGPLP/Fairholme/Blackston e transaction mentioned above, the Brookfield Investor is now the sole third party holder of the Company’s remaining outstanding Warrants, which are exercisable into approximately 43 million common shares of the Company at a weighted-average exercise price of $9.42 per share, assuming net share settlement.

The Warrants will continue to adjust for dividends paid by the Company. At maturity, we estimate that net share settlement ownership of the Brookfield Investor in us would be 42.0% after considering the transactions above. If the Brookfield Investor held the Warrants to maturity, assuming net share settlement and no other changes other than regular dividend adjustments, they would own approximately 42.6% of the Company. If the Brookfield Investor held the Warrants to maturity, assuming (a) the stock price increased $10 per share, (b) the Warrants were adjusted for the impact of regular dividends and (c) net share settlement, the Brookfield Investor’s potential ownership would increase to approximately 43.2% of the Company.

CONF CALL

Kevin Berry - Vice President of Investor Relations
Thank you, Mary. Good morning, everyone. Welcome to the General Growth Properties' third quarter of 2013 earnings conference call hosted by Sandeep Mathrani, Chief Executive Officer; and Michael Berman, Chief Financial Officer. Certain statements made during the call may be deemed forward-looking statements. And actual results may differ materially from those indicated due to a variety of risks, uncertainties and other factors. Please refer to our reports filed with the SEC for a more detailed discussion. Statements made during this call may include time-sensitive information accurate only as of today, October 29, 2013. We will discuss certain non-GAAP financial measures and have provided a reconciliation of each measure to its comparable GAAP measures. Reconciliations are included in our earnings release and supplemental information package was filed with the SEC and available on our website. It's my pleasure to turn the call over to Sandeep and Mike.

Sandeep Lakhmi Mathrani - Chief Executive Officer and Director
Thank you, Kevin. Good morning, everyone, and thank you for joining our conference call. I'll begin with an overview of our financial and operating results for the quarter, a discussion of our development initiatives throughout the portfolio and perspectives on the retail property sector. Michael will provide more detail on our results and guidance for the remainder of the year. Yesterday evening, we reported FFO per share of $0.29 for the third quarter, 26% higher than last year and above our guidance range. Same-store net operating income increased 6.8% driven primarily of higher permanent occupancy, in-place rents and managing operating expenses i.e. from the business. Overall, company NOI increased 5% after taking into account acquisition and disposition activity during the period. And EBITDA grew 4.4% quarter-over-quarter.

Year-to-date, FFO per share is 19% higher than last year. Same-store NOI is up 5.9%. Overall company NOI is up 5.1%. And EBITDA is up 4.5%. The financial performance to-date and outlook for the remainder of the year leads us to increase the quarterly dividend of $0.01 to $0.14 per share. The fourth quarter dividend is up 27% from last year's fourth quarter.

Turning to growth. We are very focused on the core sources of long-term growth for this company, increasing permanent occupancy, achieving positive rental spreads and creating value from our development initiatives. The growing permanent occupancy and reletting space at higher rents are the main sources of growth for next year as the portfolio reaches stabilized occupancy. Our reported occupancy of 94.6% at quarter-end includes permanent occupancy of 90.1%, which has increased over 2% from this time last year, when it was 88%. We're on track to approach 92% by year-end and over 93% by end of 2014. Through October, approximately 65% of the incremental leasing towards next year's permanent occupancy goal has been complete.

SHARE THIS PAGE:  Add to Delicious Delicious  Share    Bookmark and Share



 
Icon Legend Permissions Topic Options
You can comment on this topic
Print Topic

Email Topic

1103638 Views