Brookfield Property REIT Inc. - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - Brookfield Property REIT Inc.	ggp9302015ex-322.htm
EX-31.1 - EXHIBIT 31.1 - Brookfield Property REIT Inc.	ggp9302015ex-311.htm
EX-32.1 - EXHIBIT 32.1 - Brookfield Property REIT Inc.	ggp9302015ex-321.htm
EX-31.2 - EXHIBIT 31.2 - Brookfield Property REIT Inc.	ggp9302015ex-312.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2015

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from to

COMMISSION FILE NUMBER 1-34948

GENERAL GROWTH PROPERTIES, INC.

(Exact name of registrant as specified in its charter)



Delaware		27-2963337
(State or other jurisdiction of		(I.R.S. Employer
incorporating or organization)		Identification Number)



110 N. Wacker Dr., Chicago, IL		60606
(Address of principal executive offices)		(Zip Code)

(312) 960-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ýYes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ýYes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.



Large accelerated filer x		Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes ý No

Indicate by checkmark whether the Registrant has filed all documents and reports required to be filed by Sections 12,13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ýYes o No

The number of shares of Common Stock, $.01 par value, outstanding on November 2, 2015 was 882,494,813.

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

INDEX



			PAGE NUMBER

Part I	FINANCIAL INFORMATION

	Item 1: Consolidated Financial Statements (Unaudited)

		Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014	3

		Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2015 and 2014	4

		Consolidated Statements of Equity for the nine months ended September 30, 2015 and 2014	6

		Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014	8

		Notes to Consolidated Financial Statements (Unaudited)	10

		Note 1: Organization	10

		Note 2: Summary of Significant Accounting Policies	10

		Note 3: Acquisitions, Sales and Joint Venture Activity	15

		Note 4: Discontinued Operations and Gains on Dispositions of Operating Properties	17

		Note 5: Fair Value	17

		Note 6: Unconsolidated Real Estate Affiliates	19

		Note 7: Mortgages, Notes and Loans Payable	21

		Note 8: Income Taxes	23

		Note 9: Warrants	23

		Note 10: Equity and Redeemable Noncontrolling Interests	24

		Note 11: Earnings Per Share	27

		Note 12: Stock-Based Compensation Plans	29

		Note 13: Accounts and Notes Receivable, net	30

		Note 14: Prepaid Expenses and Other Assets	31

		Note 15: Accounts Payable and Accrued Expenses	31

		Note 16: Litigation	32

		Note 17: Commitments and Contingencies	32

		Note 18: Subsequent Events	33

	Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations		34

		Liquidity and Capital Resources	39

	Item 3: Quantitative and Qualitative Disclosures about Market Risk		49

	Item 4: Controls and Procedures		49

Part II	OTHER INFORMATION

	Item 1: Legal Proceedings		50

	Item 1A: Risk Factors		50

	Item 2: Unregistered Sales of Equity Securities and Use of Proceeds		50

	Item 3: Defaults Upon Senior Securities		50

	Item 4: Mine Safety Disclosures		50

	Item 5: Other Information		50

	Item 6: Exhibits		50

	SIGNATURE		52

	EXHIBIT INDEX		53

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



	September 30, 2015			December 31, 2014
	(Dollars in thousands, except share and per share amounts)
Assets:
Investment in real estate:
Land	$	3,638,774		$	4,244,607
Buildings and equipment	16,318,055			18,028,844
Less accumulated depreciation	(2,375,762		)	(2,280,845		)
Construction in progress	497,181			703,859
Net property and equipment	18,078,248			20,696,465
Investment in and loans to/from Unconsolidated Real Estate Affiliates	3,490,157			2,604,762
Net investment in real estate	21,568,405			23,301,227
Cash and cash equivalents	160,670			372,471
Accounts and notes receivable, net	881,564			663,768
Deferred expenses, net	169,673			184,491
Prepaid expenses and other assets	1,009,483			813,777
Total assets	$	23,789,795		$	25,335,734

Liabilities:
Mortgages, notes and loans payable	$	14,015,550		$	15,998,289
Investment in Unconsolidated Real Estate Affiliates	37,610			35,598
Accounts payable and accrued expenses	800,248			934,897
Dividend payable	166,115			154,694
Deferred tax liabilities	—			21,240
Junior subordinated notes	206,200			206,200
Total liabilities	15,225,723			17,350,918

Redeemable noncontrolling interests:
Preferred	154,566			164,031
Common	123,812			135,265
Total redeemable noncontrolling interests	278,378			299,296

Commitments and Contingencies	—			—

Equity:
Common stock:
11,000,000,000 shares authorized, $0.01 par value, 965,951,483 issued, 882,432,953 outstanding as of September 30, 2015, and 968,340,597 issued, 884,912,012 outstanding as of December 31, 2014	9,385			9,409
Preferred Stock:
500,000,000 shares authorized, $.01 par value, 10,000,000 shares issued and outstanding as of September 30, 2015 and December 31, 2014	242,042			242,042
Additional paid-in capital	11,362,222			11,351,625
Retained earnings (accumulated deficit)	(2,162,995		)	(2,822,740		)
Accumulated other comprehensive loss	(77,437		)	(51,753		)
Common stock in treasury, at cost, 56,059,335 shares as of September 30, 2015 and 55,969,390 shares as of December 31, 2014	(1,124,862		)	(1,122,664		)
Total stockholders’ equity	8,248,355			7,605,919
Noncontrolling interests in consolidated real estate affiliates	26,935			79,601
Noncontrolling interests related to long-term incentive plan common units	10,404			—
Total equity	8,285,694			7,685,520
Total liabilities, redeemable noncontrolling interests and equity	$	23,789,795		$	25,335,734

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(Dollars in thousands, except per share amounts)
Revenues:
Minimum rents	$	358,716		$	396,285		$	1,094,384		$	1,170,547
Tenant recoveries	172,515			186,066			518,040			552,596
Overage rents	6,455			9,277			18,755			24,486
Management fees and other corporate revenues	19,496			17,355			65,313			51,759
Other	28,142			18,775			62,956			63,149
Total revenues	585,324			627,758			1,759,448			1,862,537
Expenses:
Real estate taxes	57,942			57,430			170,425			172,686
Property maintenance costs	11,707			13,394			44,491			48,952
Marketing	4,273			4,624			12,849			15,926
Other property operating costs	79,265			84,581			227,874			251,646
Provision for doubtful accounts	1,622			355			6,199			5,211
Property management and other costs	38,685			34,428			121,847			119,391
General and administrative	12,627			12,778			37,395			52,609
Depreciation and amortization	154,228			182,237			483,026			528,928
Total expenses	360,349			389,827			1,104,106			1,195,349
Operating income	224,975			237,931			655,342			667,188

Interest and dividend income	13,232			8,536			34,896			19,801
Interest expense	(144,891		)	(174,109		)	(460,289		)	(528,273		)
Loss on foreign currency	(25,092		)	(15,972		)	(46,540		)	(7,017		)
Gain from changes in control of investment properties and other	13,399			—			622,412			—
Income before income taxes, equity in income of Unconsolidated Real Estate Affiliates, discontinued operations and allocation to noncontrolling interests	81,623			56,386			805,821			151,699
Benefit from (provision for) income taxes	17,996			4,800			29,082			(2,836		)
Equity in income of Unconsolidated Real Estate Affiliates	16,584			7,391			41,115			33,868
Unconsolidated Real Estate Affiliates - gain on investment	11,163			—			320,950			—
Income from continuing operations	127,366			68,577			1,196,968			182,731
Discontinued operations	—			8,822			—			203,649
Net income	127,366			77,399			1,196,968			386,380
Allocation to noncontrolling interests	(3,514		)	(2,791		)	(16,447		)	(10,008		)
Net income attributable to General Growth Properties, Inc.	123,852			74,608			1,180,521			376,372
Preferred Stock dividends	(3,984		)	(3,984		)	(11,952		)	(11,952		)
Net income attributable to common stockholders	$	119,868		$	70,624		$	1,168,569		$	364,420

Basic Earnings Per Share:
Continuing operations	$	0.14		$	0.07		$	1.32		$	0.18
Discontinued operations	—			0.01			—			0.23
Total basic earnings per share	$	0.14		$	0.08		$	1.32		$	0.41

Diluted Earnings Per Share:
Continuing operations	$	0.13		$	0.06		$	1.23		$	0.18
Discontinued operations	—			0.01			—			0.21
Total diluted earnings per share	$	0.13		$	0.07		$	1.23		$	0.39
Dividends declared per share	$	0.18		$	0.16		$	0.52		$	0.46

Table of Contents

GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Continued) (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(Dollars in thousands, except per share amounts)
Comprehensive Income, Net:
Net income	$	127,366		$	77,399		$	1,196,968		$	386,380
Other comprehensive loss
Net unrealized gains (losses) on financial instruments	16			6			16			(26		)
Foreign currency translation	(19,816		)	(12,270		)	(34,622		)	(5,124		)
Unrealized gains on available-for-sale securities	8,635			—			8,635			—
Other comprehensive loss	(11,165		)	(12,264		)	(25,971		)	(5,150		)
Comprehensive income	116,201			65,135			1,170,997			381,230
Comprehensive income allocated to noncontrolling interests	(3,434		)	(2,904		)	(16,160		)	(9,975		)
Comprehensive income attributable to General Growth Properties, Inc.	112,767			62,231			1,154,837			371,255
Preferred Stock dividends	(3,984		)	(3,984		)	(11,952		)	(11,952		)
Comprehensive income, net, attributable to common stockholders	$	108,783		$	58,247		$	1,142,885		$	359,303

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

	Common Stock		Preferred Stock		Additional Paid-In Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Common Stock in Treasury			Noncontrolling Interests in Consolidated Real Estate Affiliates and Long Term Incentive Plan Common Units			Total Equity
	(Dollars in thousands, except for share amounts)
Balance at January 1, 2014	$	9,395	$	242,042	$	11,372,443		$	(2,915,723	)	$	(38,173	)	$	(566,863	)	$	82,142		$	8,185,263

Net income								376,372									1,262			377,634
Distributions to noncontrolling interests in consolidated Real Estate Affiliates																	(3,454		)	(3,454		)
Restricted stock grants, net (24,744 common shares)	1				2,037															2,038
Employee stock purchase program (119,869 common shares)	1				2,497															2,498
Stock option grants, net of forfeitures (334,216 common shares)	3				22,574															22,577
Treasury stock purchases (27,624,282 common shares)														(555,801		)				(555,801		)
Cash dividends reinvested (DRIP) in stock (17,467 common shares)					384															384
Other comprehensive loss											(5,117		)							(5,117		)
Cash distributions declared ($0.46 per share)								(406,686		)										(406,686		)
Cash distributions on Preferred Stock								(11,952		)										(11,952		)
Fair value adjustment for noncontrolling interest in Operating Partnership					(27,751		)													(27,751		)

Balance at September 30, 2014	$	9,400	$	242,042	$	11,372,184		$	(2,957,989	)	$	(43,290	)	$	(1,122,664	)	$	79,950		$	7,579,633

Table of Contents

GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF EQUITY (Continued) (UNAUDITED)

	Common Stock			Preferred Stock		Additional Paid-In Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Common Stock in Treasury			Noncontrolling Interests in Consolidated Real Estate Affiliates and Long Term Incentive Plan Common Units			Total Equity
	(Dollars in thousands, except for share amounts)
Balance at January 1, 2015	$	9,409		$	242,042	$	11,351,625		$	(2,822,740	)	$	(51,753	)	$	(1,122,664	)	$	79,601		$	7,685,520

Net income									1,180,521									3,340			1,183,861
Distributions to noncontrolling interests in consolidated Real Estate Affiliates																		(53,888		)	(53,888		)
Long Term Incentive Plan Common Unit grants, net (1,655,576 LTIP Units)																		8,286			8,286
Restricted stock grants, net (223,244 common shares)	2			—		2,769															2,771
Employee stock purchase program (116,936 common shares)	1					2,764															2,765
Stock option grants, net of forfeitures (1,216,723 common shares)	13					33,938															33,951
Cancellation of common shares (3,963,675 common shares)	(40		)			(51,700		)	(48,859		)				100,599						—
Treasury stock purchase (4,053,620 common shares)															(102,797		)				(102,797		)
Cash dividends reinvested (DRIP) in stock (17,658 common shares)	—			—		487															487
Other comprehensive loss												(25,684		)							(25,684		)
Cash distributions declared ($0.52 per share)									(459,965		)										(459,965		)
Cash distributions on Preferred Stock									(11,952		)										(11,952		)
Fair value adjustment for noncontrolling interest in Operating Partnership						22,339															22,339

Balance at September 30, 2015	$	9,385		$	242,042	$	11,362,222		$	(2,162,995	)	$	(77,437	)	$	(1,124,862	)	$	37,339		$	8,285,694

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30,
	2015			2014
	(Dollars in thousands)
Cash Flows provided by Operating Activities:
Net income	$	1,196,968		$	386,380
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of Unconsolidated Real Estate Affiliates	(41,115		)	(33,868		)
Distributions received from Unconsolidated Real Estate Affiliates	47,763			28,041
Provision for doubtful accounts	6,199			5,328
Depreciation and amortization	483,026			536,938
Amortization/write-off of deferred finance costs	8,887			10,231
Accretion/write-off of debt market rate adjustments	13,305			13,040
Amortization of intangibles other than in-place leases	50,560			57,990
Straight-line rent amortization	(22,776		)	(37,530		)
Deferred income taxes	(36,244		)	(4,289		)
Litigation loss	—			17,854
Gain on dispositions, net	(13,635		)	(129,757		)
Unconsolidated Real Estate Affiliates - gain on investments	(320,950		)	—
Gain from changes in control of investment properties and other	(622,412		)	—
Gain on extinguishment of debt	—			(66,679		)
Loss on foreign currency	46,540			7,017
Net changes:
Accounts and notes receivable	(20,925		)	(1,365		)
Prepaid expenses and other assets	(11,287		)	(8,904		)
Deferred expenses	(29,503		)	(12,132		)
Restricted cash	1,185			(4,526		)
Accounts payable and accrued expenses	6,624			22,916
Other, net	24,782			19,713
Net cash provided by operating activities	766,992			806,398

Cash Flows used in Investing Activities:
Acquisition of real estate and property additions	(342,055		)	(407,067		)
Development of real estate and property improvements	(509,916		)	(453,718		)
Contributions to Unconsolidated Real Estate Affiliates	(134,552		)	(99,095		)
Proceeds from sales of investment properties	1,092,003			274,242
Distributions received from Unconsolidated Real Estate Affiliates in excess of income	120,981			364,966
Loans to joint venture partners	(271,219		)	(100,899		)
Acquisition of marketable securities	(33,300		)	—
Decrease in restricted cash	(27,238		)	3,727
Net cash used in investing activities	(105,296		)	(417,844		)

Cash Flows used in Financing Activities:
Proceeds from refinancing/issuance of mortgages, notes and loans payable	1,297,440			1,886,636
Principal payments on mortgages, notes and loans payable	(1,575,138		)	(1,595,058		)
Deferred finance costs	(2,138		)	(12,930		)
Treasury stock purchases	(100,599		)	(555,801		)
Distributions to noncontrolling interests in consolidated real estate affiliates	(53,888		)	(3,454		)
Cash distributions paid to common stockholders	(451,714		)	(392,699		)
Cash distributions paid to Preferred Stockholders	(11,952		)	(11,952		)
Cash redemptions paid to holders of common units	(1,471		)	—
Other, net	25,963			(991		)
Net cash used in financing activities	(873,497		)	(686,249		)

Net change in cash and cash equivalents	(211,801		)	(297,695		)
Cash and cash equivalents at beginning of period	372,471			577,271
Cash and cash equivalents at end of period	$	160,670		$	279,576

Table of Contents

GENERAL GROWTH PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (UNAUDITED)

	Nine Months Ended September 30,
	2015			2014
	(Dollars in thousands)

Supplemental Disclosure of Cash Flow Information:
Interest paid	$	456,196		$	518,773
Interest capitalized	10,270			12,718
Income taxes paid	9,323			8,486
Accrued capital expenditures included in accounts payable and accrued expenses	145,802			89,720
Non-Cash acquisition of Treasury Shares
Liabilities	(2,198		)	—
Equity	2,198			—
Non-Cash Sale of Property
Assets	—			21,426
Liabilities and equity	—			(21,426		)
Non-Cash Sale of Ala Moana (Refer to Note 3)

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

NOTE 1 ORGANIZATION

Readers of this Quarterly Report should refer to the Company’s (as defined below) audited consolidated financial statements for the year ended December 31, 2014 which are included in the Company’s Annual Report on Form 10-K (our “Annual Report”) for the fiscal year ended December 31, 2014 (Commission File No. 1-34948), as certain footnote disclosures which would substantially duplicate those contained in our Annual Report have been omitted from this Quarterly Report. In the opinion of management, all adjustments necessary for a fair presentation (which include only normal recurring adjustments) have been included in this Quarterly Report. Capitalized terms used, but not defined in this Quarterly Report, have the same meanings as in our Annual Report.

General

General Growth Properties, Inc. (“GGP” or the “Company”), a Delaware corporation, was organized in July 2010 and is a self-administered and self-managed real estate investment trust, referred to as a “REIT”. In these notes, the terms “we,” “us” and “our” refer to GGP and its subsidiaries.

GGP, through its subsidiaries and affiliates, is an owner and operator of retail properties. As of September 30, 2015, we are the owner, either entirely or with joint venture partners, of 131 retail properties.

Substantially all of our business is conducted through GGP Operating Partnership, LP (“GGPOP”), GGP Nimbus, LP (“GGPN”) and GGP Limited Partnership (“GGPLP”, and together with GGPN, the “Operating Partnerships"), subsidiaries of GGP. The Operating Partnerships own an interest in the properties that are part of the consolidated financial statements of GGP. As of September 30, 2015, GGP held approximately a 99% common equity ownership (without giving effect to the potential conversion of the Preferred Units and LTIP Units as defined below) of the Operating Partnerships, while the remaining 1% is held by limited partners and certain previous contributors of properties to the Operating Partnerships or their predecessors.

GGPOP is the general partner of, and owns a 1.5% equity interest in, each Operating Partnership. GGPOP has common units of limited partnership (“Common Units”), which are redeemable for cash or, at our option, shares of GGP common stock. It also has preferred units of limited partnership interest (“Preferred Units”), of which, certain Preferred Units can be converted into Common Units and then redeemed for cash or, at our option, shares of GGP common stock (Note 10). GGPOP has full value long term incentive plan units and appreciation only long term incentive plan units (collectively “LTIP Units”), which are redeemable for cash or, at our option, shares of GGP common stock (Note 12).

In addition to holding ownership interests in various joint ventures, the Operating Partnerships generally conduct their operations through General Growth Management, Inc. (“GGMI”), General Growth Services, Inc. (“GGSI”), and GGP REIT Services, LLC (“GGPRS”). GGMI and GGSI are taxable REIT subsidiaries (“TRS”s), which provide management, leasing, tenant coordination, business development, marketing, strategic partnership and other services for a majority of our Unconsolidated Real Estate Affiliates (defined below) and for substantially all of our Consolidated Properties, as defined below. GGSI also serves as a contractor to GGMI for these services. GGPRS generally provides financial, accounting, tax, legal, development, and other services to our Consolidated Properties.

We refer to our ownership interests in properties in which we own a majority or controlling interest and are consolidated under accounting principles generally accepted in the United States of America (“GAAP”) as the “Consolidated Properties.” We also own interests in certain properties through joint venture entities in which we own a noncontrolling interest (“Unconsolidated Real Estate Affiliates”) and we refer to those properties as the “Unconsolidated Properties.”

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of GGP, our subsidiaries and joint ventures in which we have a controlling interest. For consolidated joint ventures, the noncontrolling partner’s share of the assets, liabilities and operations of the joint ventures (generally computed as the joint venture partner’s ownership percentage) is included in

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

noncontrolling interests in consolidated real estate affiliates as permanent equity of the Company. Intercompany balances and transactions have been eliminated.

We operate in a single reportable segment which includes the operation, development and management of retail and other rental properties, primarily regional malls. Our portfolio is targeted to a range of market sizes and consumer tastes. Each of our operating properties is considered a separate operating segment, as each property earns revenues and incurs expenses, individual operating results are reviewed and discrete financial information is available. The Company's chief operating decision maker is comprised of a team of several members of executive management who use Company NOI in assessing segment operating performance. We do not distinguish or group our consolidated operations based on geography, size or type. Our operating properties have similar economic characteristics and provide similar products and services to our tenants.There are no individual operating segments that are greater than 10% of combined revenue, Company NOI, or combined assets. Company NOI excludes certain non-cash and non-comparable items such as straight-line rent and intangible asset and liability amortization, which are a result of our emergence, acquisition accounting and other capital contribution or restructuring events. Further, all material operations are within the United States and no customer or tenant comprises more than 10% of consolidated revenues. As a result, the Company’s operating properties are aggregated into a single reportable segment.

Reclassifications

Certain prior period amounts related to gains on extinguishment of debt that were previously presented as a distinct component of discontinued operations within the Consolidated Statements of Comprehensive Income have been collapsed within discontinued operations for all periods presented.

Properties

Real estate assets are stated at cost less any provisions for impairments. Expenditures for significant betterments and improvements are capitalized. Maintenance and repairs are charged to expense when incurred. Construction and improvement costs incurred in connection with the development of new properties or the redevelopment of existing properties are capitalized. Real estate taxes, interest costs, and internal costs associated with leasing and development overhead incurred during construction periods are capitalized. Capitalization is based on qualified expenditures and interest rates. Capitalized real estate taxes, interest costs, and internal costs associated with leasing and development overhead are amortized over lives which are consistent with the related assets.

Pre-development costs, which generally include legal and professional fees and other third-party costs directly related to the construction assets, are capitalized as part of the property being developed. In the event a development is no longer deemed to be probable of occurring, the capitalized costs are expensed (see also our impairment policies in this note below).

We periodically review the estimated useful lives of our properties, and may adjust them as necessary. The estimated useful lives of our properties range from 20 - 45 years.

Depreciation or amortization expense is computed using the straight-line method based upon the following estimated useful lives:



	Years
Buildings and improvements	10 - 45
Equipment and fixtures	3 - 20
Tenant improvements	Shorter of useful life or applicable lease term

Acquisitions of Operating Properties

Acquisitions of properties are accounted for utilizing the acquisition method of accounting and, accordingly, the results of operations of acquired properties have been included in the results of operations from the respective dates of acquisition. Estimates of future cash flows and other valuation techniques are used to allocate the purchase price of acquired property between land, buildings and improvements, equipment, assumed debt liabilities and identifiable intangible assets and liabilities such as amounts related to in-place tenant leases, acquired above and below-market tenant and ground leases, and tenant relationships.

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

Identifiable intangible assets and liabilities are calculated for above-market and below-market tenant and ground leases where we are either the lessor or the lessee. The difference between the contractual rental rates and our estimate of market rental rates is measured over a period equal to the remaining non-cancelable term of the leases, including significantly below-market renewal options for which exercise of the renewal option appears to be reasonably assured. The remaining term of leases with renewal options at terms significantly below market reflect the assumed exercise of such below-market renewal options and assume the amortization period would coincide with the extended lease term.

The gross asset balances of the in-place value of tenant leases are included in buildings and equipment in our Consolidated Balance Sheets.



	Gross Asset		Accumulated Amortization			Net Carrying Amount

As of September 30, 2015
Tenant leases:
In-place value	$	434,593	$	(271,572	)	$	163,021

As of December 31, 2014
Tenant leases:
In-place value	$	608,840	$	(362,531	)	$	246,309

The above-market tenant leases and below-market ground leases are included in prepaid expenses and other assets (Note 14). The below-market tenant leases, above-market ground leases and above-market headquarters office lease are included in accounts payable and accrued expenses (Note 15) in our Consolidated Balance Sheets.

Amortization/accretion of all intangibles, including the intangibles in Note 14 and Note 15, had the following effects on our Income from continuing operations:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Amortization/accretion effect on continuing operations	$	(33,336	)	$	(46,691	)	$	(111,224	)	$	(151,711	)

Future amortization/accretion of all intangibles, including the intangibles in Note 14 and Note 15, is estimated to decrease results from continuing operations as follows:



Year	Amount
2015 Remaining	$	26,349
2016	90,716
2017	67,885
2018	43,558
2019	25,860

Marketable Securities

Marketable securities are comprised of equity securities that are classified as available-for-sale. Available-for-sale securities are presented in prepaid expenses and other assets on our Consolidated Balance Sheets at fair value. Unrealized gains and losses resulting from the mark-to-market of these securities are included in other comprehensive income (loss). Realized gains and losses are recognized in earnings only upon the sale of the securities and are recorded based on the weighted average cost of such securities.

Revenue Recognition and Related Matters

Minimum rents are recognized on a straight-line basis over the terms of the related operating leases, including the effect of any free rent periods. Minimum rents also include lease termination income collected from tenants to allow for the tenant to vacate

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

their space prior to their scheduled termination dates, as well as, accretion related to above-market and below-market tenant leases on acquired properties and properties that were recorded at fair value at the Effective Date.

Overage rent is paid by a tenant when the tenant's sales exceed an agreed upon minimum amount and is recognized on an accrual basis once tenant sales exceed contractual tenant lease thresholds and is calculated by multiplying the sales in excess of the minimum amount by a percentage defined in the lease.

Tenant recoveries are established in the leases or computed based upon a formula related to real estate taxes, insurance and other property operating expenses and are generally recognized as revenues in the period the related costs are incurred.

Real estate sales are recognized whenever (1) a sale is consummated, (2) the buyer has demonstrated an adequate commitment to pay for the property, (3) the Company’s receivable is not subject to future subordination, and (4) the Company has transferred to the buyer the risks and rewards of ownership and does not have continuing involvement. Unless all conditions are met, recognition of all or a portion of the profit shall be postponed.

We provide an allowance for doubtful accounts against the portion of accounts receivable, including straight-line rents, which is estimated to be uncollectible. Such allowances are reviewed periodically based upon our recovery experience.

Management Fees and Other Corporate Revenues

Management fees and other corporate revenues primarily represent management and leasing fees, development fees, financing fees and fees for other ancillary services performed for the benefit of certain of the Unconsolidated Real Estate Affiliates. Management fees are reported at 100% of the revenue earned from the joint venture in management fees and other corporate revenues on our Consolidated Statements of Comprehensive Income. Our share of the management fee expense incurred by the Unconsolidated Real Estate Affiliates is reported within equity in income of Unconsolidated Real Estate Affiliates on our Consolidated Statements of Comprehensive Income and in property management and other costs in the Condensed Combined Statements of Income in Note 6. The following table summarizes the management fees from affiliates and our share of the management fee expense:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Management fees from affiliates	$	19,496		$	17,355		$	65,313		$	51,759
Management fee expense	(7,640		)	(6,555		)	(22,575		)	(19,805		)
Net management fees from affiliates	$	11,856		$	10,800		$	42,738		$	31,954

Impairment

Operating properties

We regularly review our consolidated properties for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment indicators are assessed separately for each property and include, but are not limited to, significant decreases in real estate property net operating income, significant decreases in occupancy percentage, debt maturities and management’s intent with respect to the properties and prevailing market conditions.

If an indicator of potential impairment exists, the property is tested for recoverability by comparing its carrying amount to the estimated future undiscounted cash flows. Although the carrying amount may exceed the estimated fair value of certain properties, a real estate asset is only considered to be impaired when its carrying amount cannot be recovered through estimated future undiscounted cash flows. To the extent an impairment provision is determined to be necessary, the excess of the carrying amount of the property over its estimated fair value is expensed to operations. In addition, the impairment provision is allocated proportionately to adjust the carrying amount of the asset group. The adjusted carrying amount, which represents the new cost basis of the property, is depreciated over the remaining useful life of the property.

Although we may market a property for sale, there can be no assurance that the transaction will occur until the sale is finalized. However, GAAP requires us to utilize the Company’s expected holding period of our properties when assessing recoverability. If

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

we cannot recover the carrying value of these properties within the planned holding period, we will estimate the fair values of the assets and record impairment charges for properties when the estimated fair value is less than their carrying value.

Impairment indicators for pre-development costs, which are typically costs incurred during the beginning stages of a potential development and construction in progress, are assessed by project and include, but are not limited to, significant changes in the Company’s plans with respect to the project, significant changes in projected completion dates, tenant demand, anticipated revenues or cash flows, development costs, market factors and sustainability of development projects.

Impairment charges are recorded in the Consolidated Statements of Comprehensive Income when the carrying value of a property is not recoverable and it exceeds the estimated fair value of the property, which can occur in accounting periods preceding disposition and/or in the period of disposition.

No provisions for impairment were recognized for the three and nine months ended September 30, 2015 and 2014.

Investment in Unconsolidated Real Estate Affiliates

A series of operating losses of an investee or other factors may indicate that an other-than-temporary decline in value of our investment in an Unconsolidated Real Estate Affiliate has occurred. The investment in each of the Unconsolidated Real Estate Affiliates is evaluated for valuation declines below the carrying amount. Accordingly, in addition to the property-specific impairment analysis that we perform for such joint ventures (as part of our operating property impairment process described above), we also considered whether there were other-than-temporary declines with respect to the carrying values of our Unconsolidated Real Estate Affiliates. During the three and nine months ended September 30, 2015, we recorded a $3.2 million impairment charge in equity in income from Unconsolidated Real Estate Affiliates on our Consolidated Statements of Comprehensive Income. This impairment charge relates to our investment in a single property venture where we concluded that our investment was other-than-temporarily impaired due to the Company receiving a purchase offer for its investment at a price less than the carrying value. No impairments related to our investments in Unconsolidated Real Estate Affiliates were recognized for the three and nine months ended September 30, 2014.

Fair Value Measurements (Note 5)

The accounting principles for fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:


•	Level 1 - defined as observable inputs such as quoted prices for identical assets or liabilities in active markets;


•	Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and


•	Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Note 5 includes a discussion of properties measured at fair value on a non-recurring basis using Level 2 and Level 3 inputs and the fair value of debt, which is estimated on a recurring basis using Level 2 and Level 3 inputs. Note 5 also includes a discussion of available-for-sale securities measured at fair value on a recurring basis using Level 1 inputs. Note 10 includes a discussion of certain redeemable noncontrolling interests that are measured at fair value using Level 1 inputs.

Recently Issued Accounting Pronouncements

Effective January 1, 2015 the definition of discontinued operations has been revised to limit what qualifies for this classification and presentation to disposals of components of a company that represent strategic shifts that have (or will have) a major effect on the company’s operations and financial results. Required expanded disclosures for disposals or disposal groups that qualify for discontinued operations are intended to provide users of financial statements with enhanced information about the assets, liabilities, revenues and expenses of such discontinued operations. In addition, in accordance with this pronouncement, companies are required to disclose the pretax profit or loss of an individually significant component that does not qualify for discontinued operations treatment. Pursuant to its terms, we have adopted this pronouncement effective January 1, 2015. This definition has been applied

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

prospectively and is anticipated to substantially reduce the number of transactions, going forward, that qualify for discontinued operations as compared to historical results. (See Note 4).

Effective January 1, 2016, the FASB issued an update that will require us to evaluate whether we should consolidate certain legal entities. Specifically, the amendments: (i) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIEs") or voting interest entities, (ii) eliminate the presumption that a general partner should consolidate a limited partnership, (iii) affect the consolidation analysis of reporting entities that are involved with VIEs, and (iv) provide a scope exception for certain entities. We are currently evaluating the impact of the adoption of this pronouncement on our consolidated financial statements.

Effective January 1, 2016, companies will be required to present debt issuance costs related to a recognized debt liability (excluding revolving credit facility) as a direct deduction from the carrying amount of that debt liability on the balance sheet. The recognition and measurement guidance for debt issuance costs will not be affected. The adoption of this pronouncement will result in the reclassification of unamortized capitalized loan fees from other assets to a direct reduction of the Company’s indebtedness on the consolidated balance sheets.

Effective January 1, 2018, companies will be required to apply a five-step model in accounting for revenue arising from contracts with customers. The core principle of the revenue model is that a company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Lease contracts will be excluded from this revenue recognition criteria; however, the sale of real estate will be required to follow the new model. Expanded quantitative and qualitative disclosures regarding revenue recognition will be required for contracts that are subject to this pronouncement. The new standard can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. The Company is evaluating the potential impact of this pronouncement on its consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. For example, estimates and assumptions have been made with respect to fair values of assets and liabilities for purposes of applying the acquisition method of accounting, the useful lives of assets, capitalization of development and leasing costs, provision for income taxes, recoverable amounts of receivables and deferred taxes, initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to acquisitions, impairment of long-lived assets, litigation related accruals and disclosures and fair value of debt. Actual results could differ from these and other estimates.

NOTE 3 ACQUISITIONS, SALES AND JOINT VENTURE ACTIVITY

On July 7, 2015, we purchased 1,125,760 shares of Seritage Growth Properties common stock at $29.58 per share for a total of $33.3 million as part of the spinoff of Sears Holdings Corporation. This investment is classified as an available-for-sale security with changes in fair value recognized in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. As of September 30, 2015, Seritage Growth Properties common stock traded at $37.25 per share resulting in unrealized gains of $8.6 million included in other comprehensive income (loss) in the Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2015.

On April 27, 2015, we sold the office portion of 200 Lafayette in New York, New York for a gross purchase price of approximately $124.5 million. This transaction resulted in a gain on sale of $11.9 million recognized in gain from changes in control of investment properties and other on our Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2015.

On April 17, 2015, we and our joint venture partners acquired the Crown Building located at 730 Fifth Avenue in New York, New York for a purchase price of $1.78 billion, which was funded with $1.25 billion of secured debt. We have an effective 50% interest in the retail portion of the property. GGP and Jeff Sutton will own, redevelop, lease and manage the retail portion of the property which is $1.30 billion of the purchase price. Vladislav Doronin’s Capital Group and Michael Shvo will own, redevelop, lease and manage the office tower which is $475.0 million of the purchase price. The office tower will be redeveloped into luxury residential

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

condominiums. Our share of the retail property purchase price is $650.0 million, and our share of the equity is $208.5 million. In connection with the acquisition, we provided $204.3 million in loans to our joint venture partners.

On April 1, 2015 we acquired a 50% interest in a joint venture to own 85 Fifth Avenue in New York, New York. The total purchase price was $86.0 million which was funded with $60.0 million of secured debt. GGP’s share of the equity is $14.0 million. In connection with the acquisition, we provided a $7.0 million loan to our joint venture partner.

On March 31, 2015, we acquired a 50% interest in a joint venture with Sears Holdings Corporation that owns anchor pads and in-place leases at 12 stores located at our properties for approximately $165.0 million. Subsequently, Sears Holdings Corporation sold its investment in the joint venture to Seritage Growth Properties. We recorded the investment in the joint venture for approximately $164.5 million ($165.0 million net of prorations and acquisition costs) to investment in and loans to/from Unconsolidated Real Estate Affiliates on our Consolidated Balance Sheet.

We account for the interests in the Crown, 85 Fifth, and Sears joint ventures under the equity method of accounting (Note 6) because we share control over major decisions with the joint venture partners which resulted in the partners obtaining substantive participating rights.

On February 27, 2015, we sold a 25% interest in Ala Moana Center in Honolulu, Hawaii for net proceeds of $907.0 million. We received $670.0 million at closing and will receive the remaining proceeds of $237.0 million in late 2016 upon completion of the redevelopment and expansion. Subsequently on April 10, 2015, we sold an additional 12.5% interest in Ala Moana Center for net proceeds of $453.5 million to another joint venture partner. We received $335.0 million at closing and will receive the remaining proceeds of $118.5 million in late 2016 upon completion of the redevelopment and expansion. As a result, our joint venture partners own a combined 37.5% economic interest in the joint venture.

Upon sale of the 25% interest in Ala Moana Center and in accordance with applicable accounting standards for real estate sales with future development required, we recognized a $584.4 million gain on change in control of investment properties and other as of the closing date calculated on the percentage of the basis (real estate asset carrying value of Ala Moana Center and development costs incurred to date) as compared to the total estimated costs expected to be incurred through completion of the development. During the nine months ended September 30, 2015, we recognized an additional $26.3 million gain on change of control of investment properties and other using the percentage of completion method for the construction completed from the closing date on February 27, 2015 through September 30, 2015. We will recognize an additional $38.0 million gain on change of control of investment properties and other through substantial completion of construction. In total, we recorded a gain from change in control of investment properties and other of $13.5 million and $610.7 million on our Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2015, respectively, as a result of this transaction.

Upon sale of the 12.5% interest in Ala Moana Center and in accordance with applicable accounting standards for real estate sales with future development required, we recognized a $295.9 million gain in Unconsolidated Real Estate Affiliates - gain on investment as of the closing date calculated on the percentage of the basis (real estate asset carrying value of Ala Moana Center and development costs incurred to date) as compared to the total estimated costs expected to be incurred through completion of the development. During the nine months ended September 30, 2015, we recognized an additional $9.5 million gain in Unconsolidated Real Estate Affiliates - gain on investment using the percentage of completion method for the construction completed from the closing date on April 10, 2015 through September 30, 2015. We will recognize an additional $19.0 million gain in Unconsolidated Real Estate Affiliates - gain on investment through substantial completion of construction. In total, we recorded a gain in Unconsolidated Real Estate Affiliates - gain on investment of $6.6 million and $304.4 million on our Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2015, respectively, as a result of this transaction.

We account for the 62.5% interest in the joint venture that owns Ala Moana Center under the equity method of accounting (Note 6) because we share control over major decisions with the joint venture partners which resulted in the partners obtaining substantive participating rights. Ala Moana Center was previously wholly owned by GGP and accounted for on a consolidated basis.

The table below summarizes the gain calculation ($ in millions) for the 25% and 12.5% interests sold:

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)



Gain on Sale of Interests in Ala Moana Center	25.0%			12.5%
Total proceeds (net of transaction costs of $6.8 million and $2.5 million, respectively)	$	900.2		$	451.0
Joint venture partner share of debt	462.5			231.3
Total consideration	1,362.7			682.3
Less: JV partner proportionate share of investment in Ala Moana Center and estimated development costs	(714.0		)	(357.9		)
Total gain from changes in control of investment properties and other	648.7			—
Total Unconsolidated Real Estate Affiliates - gain on investment	—			324.4
Gain attributable to JV partner proportionate share of investment in Ala Moana Center at closing	584.4			295.9
Gain attributable to post-sale development activities through September 30, 2015	26.3			9.5
Estimated future gain from changes in control of investment properties and other	38.0			—
Estimated future Unconsolidated Real Estate Affiliates - gain on investment	$	—		$	19.0

NOTE 4 DISCONTINUED OPERATIONS AND GAINS ON DISPOSITIONS OF OPERATING PROPERTIES

In the first quarter of 2015, the Company adopted Accounting Standards Update (ASU) No. 2014-08, "Reporting Discontinued operations and Disclosures of Disposals of Components of an Entity" issued by the Financial Accounting Standards Board. ASU No. 2014-08 changes the definition of a discontinued operation to include only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity's operations and financial results (e.g., a disposal of a major geographical area, a major line of business, a major equity method investment or other major parts of an entity). The Company’s adoption of ASU No. 2014-08 resulted in a change in how the Company would record operating results and gains on sales of real estate. Any future sales would not be reflected within discontinued operations in the Company’s Consolidated Statements of Comprehensive Income.

The Company did not have any dispositions during the nine months ended September 30, 2015 that qualified for discontinued operations presentation subsequent to its adoption of ASU No. 2014-08. The following table summarizes the operations of the properties included in discontinued operations for the three and nine months ended September 30, 2014.



	Three Months Ended September 30,			Nine Months Ended September 30,
	2014			2014

Retail and other revenue	$	5,519		$	24,004
Retail and other operating expenses	3,971			14,603
Operating income	1,548			9,401
Interest expense, net	(328		)	(2,188		)
Gains on dispositions	7,602			129,757
Net income from operations	8,822			136,970
Gain on debt extinguishment	—			66,679
Net income from discontinued operations	$	8,822		$	203,649

NOTE 5 FAIR VALUE

Nonrecurring Fair Value of Operating Properties

We estimate fair value relating to impairment assessments based upon discounted cash flow and direct capitalization models that include all projected cash inflows and outflows over a specific holding period, or the negotiated sales price, if applicable. Such projected cash flows are comprised of contractual rental revenues and forecasted rental revenues and expenses based upon market

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based on a reasonable range of current market rates for each property analyzed. Based upon these inputs, we determined that our valuations of properties using a discounted cash flow or a direct capitalization model were classified within Level 3 of the fair value hierarchy. For our properties for which the estimated fair value was based on negotiated sales prices, we determined that our valuation was classified within Level 2 of the fair value hierarchy.

Disclosure of Fair Value of Financial Instruments

The fair values of our financial instruments approximate their carrying amount in our consolidated financial statements except for debt. Management’s estimates of fair value are presented below for our debt as of September 30, 2015 and December 31, 2014.



	September 30, 2015				December 31, 2014
	Carrying Amount (1)		Estimated Fair Value		Carrying Amount (1)		Estimated Fair Value
Fixed-rate debt	$	11,770,104	$	12,343,645	$	13,606,936	$	14,211,247
Variable-rate debt	2,245,446		2,254,303		2,391,353		2,399,547
	$	14,015,550	$	14,597,948	$	15,998,289	$	16,610,794

(1) Includes market rate adjustments of $33.2 million and $19.9 million as of September 30, 2015 and December 31, 2014, respectively.

The fair value of our Junior Subordinated Notes approximates their carrying amount as of September 30, 2015 and December 31, 2014. We estimated the fair value of mortgages, notes and other loans payable using Level 2 and Level 3 inputs based on recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, current London Interbank Offered Rate (“LIBOR”), U.S. treasury obligation interest rates and on the discounted estimated future cash payments to be made on such debt. The discount rates estimated reflect our judgment as to what the approximate current lending rates for loans or groups of loans with similar maturities and assume that the debt is outstanding through maturity. We have utilized market information as available or present value techniques to estimate the amounts required to be disclosed. Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist in specific loans, it is unlikely that the estimated fair value of any such debt could be realized by immediate settlement of the obligation.

Recurring Fair Value of Marketable Securities

Marketable securities are measured at fair value on our Consolidated Balance Sheets using Level 1 inputs and included in Prepaid expenses and other assets. The fair values are shown below.



(Amounts in thousands)	September 30, 2015						December 31, 2014
	Fair Value		Cost Basis		Unrealized Gain		Fair Value		Cost Basis		Unrealized Gain
Marketable securities:
Seritage Growth Properties	$	41,935	$	33,300	$	8,635	$	—	$	—	$	—

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

NOTE 6 UNCONSOLIDATED REAL ESTATE AFFILIATES

The following is summarized financial information for all of our Unconsolidated Real Estate Affiliates.



	September 30, 2015			December 31, 2014
Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates (1)
Assets:
Land	$	1,748,898		$	1,152,485
Buildings and equipment	12,145,655			10,009,490
Less accumulated depreciation	(3,035,579		)	(2,591,347		)
Construction in progress	991,755			125,931
Net property and equipment	11,850,729			8,696,559
Investment in unconsolidated joint ventures	416,989			16,462
Net investment in real estate	12,267,718			8,713,021
Cash and cash equivalents	403,150			308,621
Accounts and notes receivable, net	234,159			203,511
Deferred expenses, net	335,671			281,835
Prepaid expenses and other assets	670,233			594,257
Total assets	$	13,910,931		$	10,101,245

Liabilities and Owners’ Equity:	\
Mortgages, notes and loans payable	$	9,795,210		$	7,945,828
Accounts payable, accrued expenses and other liabilities	691,263			418,995
Cumulative effect of foreign currency translation (“CFCT”)	(68,858		)	(35,238		)
Owners’ equity, excluding CFCT	3,493,316			1,771,660
Total liabilities and owners’ equity	$	13,910,931		$	10,101,245

Investment In and Loans To/From Unconsolidated Real Estate Affiliates, Net:
Owners’ equity	$	3,424,458		$	1,736,422
Less: joint venture partners’ equity	(1,785,634		)	(861,515		)
Plus: excess investment/basis differences	1,813,723			1,694,257
Investment in and loans to/from Unconsolidated Real Estate Affiliates, net	$	3,452,547		$	2,569,164

Reconciliation - Investment In and Loans To/From Unconsolidated Real Estate Affiliates:
Asset - Investment in and loans to/from Unconsolidated Real Estate Affiliates	$	3,490,157		$	2,604,762
Liability - Investment in Unconsolidated Real Estate Affiliates	(37,610		)	(35,598		)
Investment in and loans to/from Unconsolidated Real Estate Affiliates, net	$	3,452,547		$	2,569,164

(1) The Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates include Ala Moana Center as of September 30, 2015 as the property was contributed into a joint venture during the first quarter of 2015.

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Condensed Combined Statements of Income - Unconsolidated Real Estate Affiliates (1)
Revenues:
Minimum rents	$	264,333		$	204,661		$	742,168		$	601,778
Tenant recoveries	113,624			90,087			321,755			264,679
Overage rents	7,602			6,303			19,270			15,401
Other	11,006			7,910			36,061			26,985
Total revenues	396,565			308,961			1,119,254			908,843

Expenses:
Real estate taxes	33,080			27,468			93,754			82,060
Property maintenance costs	9,373			8,469			32,316			28,271
Marketing	4,477			2,873			12,518			9,663
Other property operating costs	53,961			45,532			152,290			128,250
Provision for doubtful accounts	172			1,119			4,436			2,162
Property management and other costs (2)	15,859			13,929			46,731			42,051
General and administrative	952			2,299			9,415			8,109
Depreciation and amortization	99,475			81,148			293,387			233,674
Total expenses	217,349			182,837			644,847			534,240
Operating income	179,216			126,124			474,407			374,603

Interest income	1,837			1,449			5,399			4,297
Interest expense	(100,766		)	(82,683		)	(294,132		)	(228,693		)
Provision for income taxes	(242		)	(341		)	(606		)	(619		)
Equity in loss of unconsolidated joint ventures	(13,252		)	—			(22,466		)	—
Income from continuing operations	66,793			44,549			162,602			149,588
Net income from disposed investment	—			485			—			1,263
Allocation to noncontrolling interests	(18		)	(14		)	(35		)	(31		)
Net income attributable to the ventures	$	66,775		$	45,020		$	162,567		$	150,820

Equity In Income of Unconsolidated Real Estate Affiliates:
Net income attributable to the ventures	$	66,775		$	45,020		$	162,567		$	150,820
Joint venture partners’ share of income	(31,676		)	(24,628		)	(78,240		)	(82,851		)
Amortization of capital or basis differences (3)	(18,515		)	(13,001		)	(43,212		)	(34,101		)
Equity in income of Unconsolidated Real Estate Affiliates	$	16,584		$	7,391		$	41,115		$	33,868

(1) The Condensed Combined Statements of Income - Unconsolidated Real Estate Affiliates include income from Ala Moana Center subsequent to the formation of the joint venture on February 27, 2015.

(2) Includes management fees charged to the unconsolidated joint ventures by GGMI and GGSI.

(3) Includes a $3.2 million impairment charge related to our investment in a single property venture (Note 2).

The Unconsolidated Real Estate Affiliates represents our investments in real estate joint ventures that are not consolidated. We hold interests in 26 domestic joint ventures, comprising 42 U.S. retail properties and one strip/other retail center, and one joint venture in Brazil. Generally, we share in the profits and losses, cash flows and other matters relating to our investments in Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. We manage most of the properties owned by these joint ventures. As we have joint control of these ventures with our venture partners, we account for these joint ventures under the equity method.

On March 7, 2014, we formed a joint venture, AMX Partners, LLC ("AMX"), with Kahikolu Partners, LLC (“MKB”) for the purpose of constructing a luxury residential condominium tower on a site located within the Ala Moana Shopping Center. In conjunction with the closing of AMX, GGP agreed to sell the air rights above the parking podium to AMX for $50 million. GGP received a $25 million payment in the third quarter of 2015 and will receive the remaining $25 million in the fourth quarter of 2015 once the reconstruction of the parking podium is completed and the space is ready for the condo building construction.

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

On January 29, 2015, we sold our interest in a joint venture that owns Trails Village, which resulted in our recognition of a gain of $12.0 million. The $12.0 million is recognized within Unconsolidated Real Estate Affiliates - gain on investment on our Consolidated Statements of Comprehensive Income.

On April 10, 2015, we sold a 12.5% interest in Ala Moana Center, which resulted in our recognition of a gain of $305.4 million (Note 3). The $305.4 million is recognized within Unconsolidated Real Estate Affiliates - gain on investment on our Consolidated Statements of Comprehensive Income.

On September 24, 2015, we sold our interest in a joint venture that owns Lake Mead & Buffalo, which resulted in our recognition of a gain of $3.1 million. The $3.1 million is recognized within Unconsolidated Real Estate Affiliates - gain on investment on our Consolidated Statements of Comprehensive Income.

To the extent that the Company contributes assets to a joint venture accounted for using the equity method, the Company’s investment in the joint venture is recorded at the Company’s cost basis in the assets that were contributed to the joint venture. The Company will recognize gains and losses on the contribution of its real estate to joint ventures, relating solely to the outside partner’s interest, to the extent the buyer is independent of the Company, the collection of the sales price is reasonably assured, and the Company will not be required to support the operations of the property or its related obligations to an extent greater than its proportionate interest.

Unconsolidated Mortgages, Notes and Loans Payable, and Retained Debt

Our proportionate share of the mortgages, notes and loans payable of the unconsolidated joint ventures was $5.0 billion as of September 30, 2015 and $3.9 billion as of December 31, 2014, including Retained Debt (as defined below). There can be no assurance that the Unconsolidated Properties will be able to refinance or restructure such debt on acceptable terms or otherwise, or that joint venture operations or contributions by us and/or our partners will be sufficient to repay such loans.

We have debt obligations in excess of our pro rata share of the debt for one of our Unconsolidated Real Estate Affiliates (“Retained Debt”). This Retained Debt represents distributed debt proceeds of the Unconsolidated Real Estate Affiliates in excess of our pro rata share of the non-recourse mortgage indebtedness. The proceeds of the Retained Debt which were distributed to us are included as a reduction in our investment in Unconsolidated Real Estate Affiliates. We had retained debt of $88.3 million at one property as of September 30, 2015, and $89.3 million as of December 31, 2014. We are obligated to contribute funds on an ongoing basis, as needed, to our Unconsolidated Real Estate Affiliates in amounts sufficient to pay debt service on such Retained Debt. If we do not contribute such funds, our distributions from such Unconsolidated Real Estate Affiliates, or our interest in, could be reduced to the extent of such deficiencies. As of September 30, 2015, we do not anticipate an inability to perform on our obligations with respect to Retained Debt.

NOTE 7 MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable and the weighted-average interest rates are summarized as follows:



	September 30, 2015 (1)		Weighted-Average Interest Rate (2)		December 31, 2014 (3)		Weighted-Average Interest Rate (2)

Fixed-rate debt:
Collateralized mortgages, notes and loans payable (4)	$	11,768,328	4.44	%	$	13,600,337	4.52	%
Corporate and other unsecured loans	1,776		4.41	%	6,599		4.41	%
Total fixed-rate debt	11,770,104		4.44	%	13,606,936		4.52	%
Variable-rate debt:
Collateralized mortgages, notes and loans payable (4)	1,995,446		2.02	%	2,291,353		2.00	%
Revolving credit facility	250,000		1.77	%	100,000		1.73	%
Total variable-rate debt	2,245,446		1.99	%	2,391,353		1.99	%

Total Mortgages, notes and loans payable	$	14,015,550	4.05	%	$	15,998,289	4.14	%

Junior subordinated notes	$	206,200	1.75	%	$	206,200	1.68	%

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

(1) Includes $33.2 million of market rate adjustments, net.

(2) Represents the weighted-average interest rates on our contractual principal balances.

(3) Includes $19.9 million of market rate adjustments, net.

(4) $99.5 million of the fixed-rate balance and $1.4 billion of the variable-rate balance is cross-collateralized.

Collateralized Mortgages, Notes and Loans Payable

As of September 30, 2015, $17.9 billion of land, buildings and equipment (before accumulated depreciation) and construction in progress have been pledged as collateral for our mortgages, notes and loans payable. Certain of these consolidated secured loans, representing $1.5 billion of debt, are cross-collateralized with other properties. Although a majority of the $13.8 billion of fixed and variable rate collateralized mortgages, notes and loans payable are non-recourse, $1.7 billion of such mortgages, notes and loans payable are recourse to the Company as guarantees on secured financings. In addition, certain mortgage loans contain other credit enhancement provisions which have been provided by GGP. Certain mortgages, notes and loans payable may be prepaid but are generally subject to a prepayment penalty equal to a yield-maintenance premium, defeasance or a percentage of the loan balance.

During the nine months ended September 30, 2015, we refinanced consolidated mortgage notes totaling $710.0 million at four properties and generated net proceeds of $240.9 million. The prior loans totaling $469.1 million had a weighted-average term-to-maturity of 1.3 years, and a weighted-average interest rate of 5.6%. The new loans have a weighted-average term-to-maturity of 11.0 years, and a weighted-average interest rate of 3.8%. In addition, we paid down $594.3 million of consolidated mortgage notes at five properties. The prior loans had a weighted-average term-to-maturity of 1.5 years, and a weighted-average interest rate of 5.3%.

Corporate and Other Unsecured Loans

We have certain unsecured debt obligations, the terms of which are described below:



	September 30, 2015 (2)		Weighted-Average Interest Rate		December 31, 2014 (2)		Weighted-Average Interest Rate
Unsecured debt:
HHC Note (1)	$	1,712	4.41	%	$	6,735	4.41	%
Revolving credit facility	250,000		1.77	%	100,000		1.73	%
Total unsecured debt	$	251,712	1.79	%	$	106,735	1.90	%

(1) Matures in December 2015.

(2) Excludes minimal market rate discounts that decrease the total amount that appears outstanding in our Consolidated Balance Sheets. The market rate discount amortizes as an addition to interest expense over the life of the loan.

Our revolving credit facility (the “Facility”) as amended on October 23, 2013, provides for revolving loans of up to $1.1 billion. The Facility has an uncommitted accordion feature for a total facility of up to $1.5 billion. The Facility is scheduled to mature in October 2018 and is unsecured. Borrowings under the Facility bear interest at a rate equal to LIBOR plus 132.5 to 195 basis points, which is determined by the Company’s leverage level. The Facility contains certain restrictive covenants which limit material changes in the nature of our business conducted, including but not limited to, mergers, dissolutions or liquidations, dispositions of assets, liens, incurrence of additional indebtedness, dividends, transactions with affiliates, prepayment of subordinated debt, negative pledges and changes in fiscal periods. In addition, we are required not to exceed a maximum net debt-to-value ratio, a maximum leverage ratio and a minimum net cash interest coverage ratio; we are not aware of any instances of non-compliance with such covenants as of September 30, 2015. As of September 30, 2015, $250.0 million was outstanding on the Facility.

Junior Subordinated Notes

GGP Capital Trust I, a Delaware statutory trust (the “Trust”) and a wholly-owned subsidiary of GGPN, completed a private placement of $200.0 million of trust preferred securities (“TRUPS”) in 2006. The Trust also issued $6.2 million of Common Securities to GGPOP. The Trust used the proceeds from the sale of the TRUPS and Common Securities to purchase $206.2 million

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

of floating rate Junior subordinated notes of GGPOP due 2036. Distributions on the TRUPS are equal to LIBOR plus 1.45%. Distributions are cumulative and accrue from the date of original issuance. The TRUPS mature on April 30, 2036, but may be redeemed beginning on April 30, 2011 if the Trust exercises its right to redeem a like amount of Junior subordinated notes. The Junior subordinated notes bear interest at LIBOR plus 1.45% and are fully recourse to the Company. Though the Trust currently is a wholly-owned subsidiary of GGPN, we are not the primary beneficiary of the Trust and, accordingly, it is not consolidated for accounting purposes. We have recorded the Junior subordinated notes as a liability and our common equity interest in the Trust as prepaid expenses and other assets in our Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014.

Letters of Credit and Surety Bonds

We had outstanding letters of credit and surety bonds of $75.7 million as of September 30, 2015 and $49.1 million as of December 31, 2014. These letters of credit and bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.

We are not aware of any instances of non-compliance with our financial covenants related to our mortgages, notes and loans payable as of September 30, 2015.

NOTE 8 INCOME TAXES

We have elected to be taxed as a REIT under the Internal Revenue Code. We intend to maintain REIT status. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of our taxable ordinary income. In addition, the Company is required to meet certain asset and income tests.

As a REIT, we will generally not be subject to corporate level Federal income tax on taxable income we distribute currently to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to Federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income or property, and to Federal income and excise taxes on our undistributed taxable income and capital gains. We are currently statutorily open to audit by the Internal Revenue Service for the years ended December 31, 2012 through 2014 and are statutorily open to audit by state taxing authorities for the years ended December 31, 2011 through 2014.

During the quarter ended September 30, 2015, all of the Company’s unrecognized tax benefits were recognized due to the expiration of the statute of limitations.

NOTE 9 WARRANTS

Brookfield owns 73,930,000 warrants (the “Warrants”) to purchase common stock of GGP with an initial weighted average exercise price of $10.70. Each Warrant was fully vested upon issuance, has a term of seven years and expires on November 9, 2017. Below is a summary of Warrants that were originally issued and are still outstanding.



Initial Warrant Holder	Number of Warrants	Initial Exercise Price
Brookfield - A	57,500,000	$	10.75
Brookfield - B	16,430,000	10.50
	73,930,000

The exercise prices of the Warrants are subject to adjustment for future dividends, stock dividends, distribution of assets, stock splits or reverse splits of our common stock or certain other events. In accordance with the agreement, these calculations adjust both the exercise price and the number of shares issuable for the originally issued 73,930,000 Warrants. During 2014 and 2015, the number of shares issuable upon exercise of the outstanding Warrants changed as follows:

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)



		Exercise Price
Record Date	Issuable Shares	Brookfield - A	Brookfield - B
April 15, 2014	85,668,428	9.28	9.06
July 15, 2014	86,215,500	9.22	9.01
October 15, 2014	86,806,928	9.16	8.94
December 15, 2014	87,353,999	9.10	8.89
April 15, 2015	87,856,714	9.05	8.84
July 15, 2015	88,433,357	8.99	8.78

Brookfield has the option for 57,500,000 Warrants to either full share settle (i.e. deliver cash for the exercise price of the Warrants in the amount of approximately $618 million in exchange for approximately 69 million shares of common stock) or net share settle. The remaining 16,430,000 Warrants owned or managed by Brookfield must be net share settled. As of September 30, 2015, the Warrants are exercisable into approximately 58 million common shares of the Company, at a weighted-average exercise price of approximately $8.94 per share. Due to their ownership of Warrants, Brookfield’s potential ownership of the Company may change as a result of payments of dividends and changes in our stock price.

NOTE 10 EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS

Allocation to Noncontrolling Interests

Noncontrolling interests consists of the redeemable interests related to GGPOP Common, Preferred and LTIP Units and the noncontrolling interest in our consolidated joint ventures. The following table reflects the activity included in the allocation to noncontrolling interests.



	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Distributions to preferred GGPOP units	$	(2,228	)	$	(2,232	)	$	(6,693	)	$	(6,697	)
Net income allocation to noncontrolling interests in GGPOP from continuing operations (common units)	(692		)	(412		)	(6,414		)	(2,049		)
Net income allocation to noncontrolling interests in GGPOP from continuing operations (LTIP units)	(325		)	—			(2,118		)	—
Net income allocated to noncontrolling interest in consolidated real estate affiliates	(269		)	(147		)	(1,222		)	(1,262		)
Allocation to noncontrolling interests	(3,514		)	(2,791		)	(16,447		)	(10,008		)
Other comprehensive (income) loss allocated to noncontrolling interests	80			(113		)	287			33
Comprehensive income allocated to noncontrolling interests	$	(3,434	)	$	(2,904	)	$	(16,160	)	$	(9,975	)

Redeemable Noncontrolling Interests

The noncontrolling interest related to the Common, Preferred, and LTIP Units of GGPOP are presented either as redeemable noncontrolling interests or as noncontrolling interests in our permanent equity on our Consolidated Balance Sheets. Classification as redeemable or permanent equity is considered on a tranche-by-tranche basis and is dependent on whether we could be required, under certain events outside of our control, to redeem the securities for cash by the holders of the securities. Those tranches for which we could be required to redeem the security for cash are included in redeemable equity. If we control the decision to redeem the securities for cash, the securities are classified as permanent equity.

The Common and Preferred Units of GGPOP are recorded at the greater of the carrying amount adjusted for the noncontrolling interest’s share of the allocation of income or loss (and its share of other comprehensive income or loss) and dividends or their redemption value (i.e. fair value) as of each measurement date. The excess of the fair value over the carrying amount from period

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

to period is recorded within additional paid-in capital in our Consolidated Balance Sheets. Allocation to noncontrolling interests is presented as an adjustment to net income to arrive at Net income (loss) attributable to General Growth Properties, Inc.

The common redeemable noncontrolling interests have been recorded at fair value for all periods presented. One tranche of preferred redeemable noncontrolling interests has been recorded at fair value, while the other tranches of preferred redeemable noncontrolling interests have been recorded at carrying value.

Generally, the holders of the Common Units share in any distributions by GGPOP with our common stockholders. However, the GGPOP operating partnership agreement permits distributions solely to GGP if such distributions were required to allow GGP to comply with the REIT distribution requirements or to avoid the imposition of excise tax. Under certain circumstances, the conversion rate for each Common Unit is required to be adjusted to give effect to stock distributions. If the holders had requested redemption of the Common and Preferred Units as of September 30, 2015, the aggregate amount of cash we would have paid would have been $123.8 million and $154.6 million, respectively.

GGPOP issued Preferred Units that are convertible into Common Units of GGPOP at the rates below (subject to adjustment). The holder may convert the Preferred Units into Common Units of GGPOP at any time, subject to certain restrictions. The Common Units are convertible into common stock at approximately a one-to-one ratio at the current stock price.



	Number of Common Units for each Preferred Unit	Number of Contractual Preferred Units Outstanding as of September 30, 2015	Converted Basis to Common Units Outstanding as of September 30, 2015	Conversion Price		Redemption Value (1)
Series B	3.00000	1,268,957	3,806,871	$	16.66670	$	102,796
Series D	1.50821	532,750	803,498	33.15188		26,637
Series E	1.29836	502,658	652,631	38.51000		25,133
						$	154,566

(1) The conversion price of Series B preferred units is lower than the GGP September 30, 2015 closing common stock price of $25.97; therefore, the September 30, 2015 common stock price of $25.97, and an additional conversion rate of 1.0397624 shares is used to calculate the Series B redemption value.

The following table reflects the activity of the redeemable noncontrolling interests for the nine months ended September 30, 2015, and 2014.



Balance at January 1, 2014	$	228,902
Net income	2,049
Distributions	(2,223		)
Other comprehensive loss	(33		)
Fair value adjustment for noncontrolling interests in Operating Partnership	30,920
Balance at September 30, 2014	$	259,615

Balance at January 1, 2015	$	299,296
Net income	6,414
Distributions	(3,235		)
Redemption of GGPOP units	(1,471		)
Other comprehensive loss	(287		)
Fair value adjustment for noncontrolling interests in Operating Partnership	(22,339		)
Balance at September 30, 2015	$	278,378

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

Common Stock Dividend

Our Board of Directors declared common stock dividends during 2015 and 2014 as follows:



Declaration Date	Record Date	Payment Date	Dividend Per Share
2015
November 2	December 15	January 4, 2016	$	0.19
September 1	October 15	October 30, 2015	0.18
May 21	July 15	July 31, 2015	0.17
February 19	April 15	April 30, 2015	0.17
2014
November 14	December 15	January 2, 2015	$	0.17
August 12	October 15	October 31, 2014	0.16
May 15	July 15	July 31, 2014	0.15
February 26	April 15	April 30, 2014	0.15

Our Dividend Reinvestment Plan (“DRIP”) provides eligible holders of GGP’s common stock with a convenient method of increasing their investment in the Company by reinvesting all or a portion of cash dividends in additional shares of common stock. Eligible stockholders who enroll in the DRIP on or before the fourth business day preceding the record date for a dividend payment will be able to have that dividend reinvested. As a result of the DRIP elections, 17,658 shares were issued during the nine months ended September 30, 2015 and 17,467 shares were issued during the nine months ended September 30, 2014.

Common Stock Purchase

In June 2015, we entered into transactions to purchase 650,000 shares of our common stock on multiple exchanges through the open market at a weighted average price of $26.00 per share. During the three months ended September 30, 2015 we entered into transactions to purchase an additional 3,403,620 shares of our common stock on multiple exchanges through the open market at a weighted average price of $25.24 per share. In total, we acquired 4,053,620 shares of our common stock for a total purchase price of $102.8 million plus commissions. With the exception of 89,945 shares purchased for $24.86 per share, these shares were retired in the three months ended September 30, 2015. The 89,945 shares were part of our treasury stock as of September 30, 2015. During October 2015 we retired the remaining 89,945 shares.

Preferred Stock

On February 13, 2013, we issued, in a public offering, 10,000,000 shares of 6.375% Series A Cumulative Perpetual Preferred Stock (the “Preferred Stock”) at a price of $25.00 per share, resulting in net proceeds of $242.0 million after issuance costs. The Preferred Stock is recorded net of issuance costs within equity on our Consolidated Balance Sheets, and accrues a quarterly dividend at an annual rate of 6.375%. The dividend is paid in arrears in preference to dividends on our common stock, and reduces net income available to common stockholders, and therefore, earnings per share.

The Preferred Stock does not have a stated maturity date but we may redeem the Preferred Stock after February 12, 2018, for $25.00 per share plus all accrued and unpaid dividends. We may redeem the Preferred Stock prior to February 12, 2018, in limited circumstances that preserve ownership limits and/or our status as a REIT, as well as during certain circumstances surrounding a change of control. Upon certain circumstances surrounding a change of control, holders of Preferred Stock may elect to convert each share of their Preferred Stock into a number of shares of GGP common stock equivalent to $25.00 plus accrued and unpaid dividends, but not to exceed a cap of 2.4679 common shares (subject to certain adjustments related to GGP common share splits, subdivisions, or combinations).

Our Board of Directors declared preferred stock dividends during 2015 and 2014 as follows:

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)



Declaration Date	Record Date	Payment Date	Dividend Per Share
2015
November 2	December 15	January 4, 2016	$	0.3984
September 1	September 15	October 1, 2015	0.3984
May 21	June 15	July 1, 2015	0.3984
February 19	March 16	April 1, 2015	0.3984
2014
November 14	December 15	January 2, 2015	$	0.3984
August 12	September 15	October 1, 2014	0.3984
May 15	June 16	July 1, 2014	0.3984
February 26	March 17	April 1, 2014	0.3984

Accumulated Other Comprehensive Loss

The following table reflects the activity of the components of accumulated other comprehensive loss for the nine months ended September 30, 2015, and 2014:



	Net unrealized gains (losses) on financial instruments			Foreign currency translation			Unrealized gains on available-for-sale securities		Total
Balance at January 1, 2014	$	124		$	(38,297	)	$	—	$	(38,173	)
Other comprehensive income (loss)	(26		)	(5,091		)	—		(5,117		)
Balance at September 30, 2014	$	98		$	(43,388	)	$	—	$	(43,290	)

Balance at January 1, 2015	$	70		$	(51,823	)	$	—	$	(51,753	)
Other comprehensive income (loss)	15			(34,271		)	8,572		(25,684		)
Balance at September 30, 2015	$	85		$	(86,094	)	$	8,572	$	(77,437	)

NOTE 11 EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted EPS is computed after adjusting the numerator and denominator of the basic EPS computation for the effects of all potentially dilutive common shares. The dilutive effect of the Warrants and the dilutive effect of options and their equivalents (including fixed awards and nonvested stock issued under stock-based compensation plans), are computed using the “treasury” method.

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

Information related to our EPS calculations is summarized as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Numerators - Basic and Diluted:
Income from continuing operations	$	127,366		$	68,577		$	1,196,968		$	182,731
Preferred Stock dividends	(3,984		)	(3,984		)	(11,952		)	(11,952		)
Allocation to noncontrolling interests	(3,514		)	(2,741		)	(16,447		)	(8,916		)
Income from continuing operations - attributable to common stockholders	119,868			61,852			1,168,569			161,863

Discontinued operations	—			8,822			—			203,649
Allocation to noncontrolling interests	—			(50		)	—			(1,092		)
Discontinued operations - net of noncontrolling interests	—			8,772			—			202,557

Net income	127,366			77,399			1,196,968			386,380
Preferred Stock dividends	(3,984		)	(3,984		)	(11,952		)	(11,952		)
Allocation to noncontrolling interests	(3,514		)	(2,791		)	(16,447		)	(10,008		)
Net income attributable to common stockholders	$	119,868		$	70,624		$	1,168,569		$	364,420

Denominators:
Weighted-average number of common shares outstanding - basic	884,640			883,898			885,437			887,927
Effect of dilutive securities	64,421			59,025			66,546			55,988
Weighted-average number of common shares outstanding - diluted	949,061			942,923			951,983			943,915

Anti-dilutive Securities:
Effect of Preferred Units	5,472			5,506			5,472			5,506
Effect of Common Units	4,770			4,834			4,788			4,834
Effect of LTIP Units	1,725			—			1,572			—
Weighted-average number of anti-dilutive securities	11,967			10,340			11,832			10,340

For the three and nine months ended September 30, 2015 and 2014, dilutive options and dilutive shares related to the Warrants are included in the denominator of EPS.

Outstanding Common Units and LTIP Units have been excluded from the diluted EPS calculation for all periods presented because including such units would also require that the share of GGPOP income attributable to such units be added back to net income therefore resulting in no effect on EPS. Outstanding Preferred Units have been excluded from the diluted EPS calculation for all periods presented because including the Preferred Units would also require that the Preferred Unit dividend be added back to the net income, resulting in them being anti-dilutive.

GGP owned 56,059,335 and 55,969,390 shares of treasury stock as of September 30, 2015 and September 30, 2014 respectively. These shares are presented as Common stock in treasury, at cost, on our Consolidated Balance Sheets. Accordingly, these shares have been excluded from the calculation of EPS.

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

NOTE 12 STOCK-BASED COMPENSATION PLANS

The General Growth Properties, Inc. 2010 Equity Plan (the ‘‘Equity Plan’’) reserved for issuance of 4% of outstanding shares on a fully diluted basis. The Equity Plan provides for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, other stock-based awards and performance-based compensation (collectively, the ‘‘Awards’’). Directors, officers and other employees of GGP’s and its subsidiaries and affiliates are eligible for the Awards. The Equity Plan is not subject to the Employee Retirement Income Security Act of 1974, as amended. No participant may be granted more than 4,000,000 shares, or the equivalent dollar value of such shares, in any year. Options granted under the Equity Plan will be designated as either nonqualified stock options or incentive stock options. An option granted as an incentive stock option will, to the extent it fails to qualify as an incentive stock option, be treated as a nonqualified option. The exercise price of an option may not be less than the fair value of a share of GGP’s common stock on the date of grant. The term of each option will be determined prior to the date of grant, but may not exceed 10 years.

On November 12, 2014, the Company’s Equity Plan was amended to allow for the grant of LTIP Units to certain officers, directors, and employees of the Company as an alternative to the Company’s stock options or restricted stock. LTIP Units are classes of partnership interests that under certain conditions, including vesting, are convertible by the holder into Common Units, which are redeemable by the holder for Common Shares on a one-to-one ratio (subject to adjustment for changes to GGP’s capital structure) or for the cash value of such shares at the option of the Company.

Compensation expense related to stock-based compensation plans for the three and nine months ended September 30, 2015, and 2014 is summarized in the following table in thousands:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Stock options - Property management and other costs	$	1,797	$	1,746	$	5,489	$	5,743
Stock options - General and administrative	2,734		3,626		8,274		11,896
Restricted stock - Property management and other costs	760		373		2,302		1,241
Restricted stock - General and administrative	153		279		464		834
LTIP Units - Property management and other costs	224		—		829		—
LTIP Units - General and administrative	2,512		—		7,490		—
Total	$	8,180	$	6,024	$	24,848	$	19,714

The following tables summarize stock option and LTIP Unit activity for the Equity Plan for GGP for the nine months ended September 30, 2015, and 2014:



	2015				2014
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Stock options Outstanding at January 1,	19,744,224		$	17.36	21,565,281		$	17.28
Granted	267,253		29.15		50,000		22.41
Exercised	(1,216,723	)	16.62		(334,216	)	14.74
Forfeited	(333,122	)	19.61		(316,243	)	19.00
Expired	(11,507	)	16.89		(10,840	)	14.33
Stock options Outstanding at September 30,	18,450,125		$	17.54	20,953,982		$	17.31

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)



	2015				2014
	Shares		Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
LTIP Units Outstanding at January 1,	—		$	—	—	$	—
Granted	1,758,396		29.33		—	—
Exercised	—		—		—	—
Forfeited	(19,166	)	29.15		—	—
Expired	—		—		—	—
LTIP Units Outstanding at September 30,	1,739,230		$	29.33	—	$	—

There was no significant restricted stock activity for the nine months ended September 30, 2015 and 2014.

NOTE 13 ACCOUNTS AND NOTES RECEIVABLE, NET

The following table summarizes the significant components of Accounts and notes receivable, net.



	September 30, 2015			December 31, 2014
Trade receivables	$	107,795		$	124,698
Notes receivable	551,496			320,881
Straight-line rent receivable	233,975			230,172
Other accounts receivable	3,434			3,638
Total accounts and notes receivable	896,700			679,389
Provision for doubtful accounts	(15,136		)	(15,621		)
Total accounts and notes receivable, net	$	881,564		$	663,768

On September 17, 2015, we entered into a promissory note with our joint venture partner, Ashkenazy Holding Co., LLC ("AHC"), in which we lent $40.4 million that bears interest at 6% per annum. The note is collateralized by AHC's equity in Miami Design District Associates, which is part of the AACMDD Group, LLC joint venture. We have an option through August 15, 2016 to purchase the collateral in exchange for cancellation of the note. If the option is exercised, all amounts previously paid by AHC must be repaid to AHC.

On June 30, 2015, we entered into a promissory note with our joint venture partner MKB, in which we would lend MKB up to $80 million for capital calls after an initial contribution of $80 million by MKB and until the joint venture secured construction financing. This loan bears interest at LIBOR plus 6% and is secured by MKB's partnership interest in AMX, which is constructing a luxury residential condominium tower on a site located within the Ala Moana Shopping Center. As of September 30, 2015, there was $19.6 million outstanding on this loan. Construction financing closed during the third quarter of 2015.

Notes receivable includes $204.3 million of notes receivables from our joint venture partners related to the acquisition of 730 Fifth Avenue in New York, New York (Note 3). The first note was issued for $104.3 million, bears interest at 8.0% compounded annually and matures on February 12, 2025. The second note was issued for $100.0 million to the joint venture partner acquiring the office portion of the property and bears interest at LIBOR plus 13.2% subject to terms and conditions in the loan agreement and matures on April 17, 2025.

Also included in notes receivable is $99.3 million and $45.4 million due from our joint venture partner related to the acquisition of the properties at 685 Fifth Avenue and 530 Fifth Avenue in New York, New York. The notes receivable bear interest at 7.5% and 9% respectively. Interest is compounded quarterly with accrued but unpaid interest increasing the loan balance. The notes are collateralized by our partner's ownership interest in the joint ventures. The loans mature on June 27, 2024 and June 18, 2024, respectively.

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

Included in notes receivable is a $89.6 million note receivable issued to Rique Empreendimentos e Participacoes Ltda. (“Rique”) in conjunction with our sale of Aliansce Shopping Centers, S.A. (“Aliansce”) to Rique and Canada Pension Plan Investment Board on September 30, 2013. The note receivable is denominated in Brazilian Reais, bears interest at an effective interest rate of approximately 14%, is collateralized by shares of common stock in Aliansce, and requires annual principal and interest payments over the term. On May 28, 2015, we agreed to extend the term of the note receivable issued to Rique by five years through September 30, 2023. This extension did not change the effective interest rate. We recognize the impact of changes in the exchange rate on the note receivable as gain or loss on foreign currency in our Consolidated Statements of Comprehensive Income.

NOTE 14 PREPAID EXPENSES AND OTHER ASSETS

The following table summarizes the significant components of Prepaid expenses and other assets.



	September 30, 2015							December 31, 2014
	Gross Asset		Accumulated Amortization			Balance		Gross Asset		Accumulated Amortization			Balance
Intangible assets:
Above-market tenant leases, net	$	669,439	$	(416,312	)	$	253,127	$	870,103	$	(498,016	)	$	372,087
Below-market ground leases, net	119,545		(10,238		)	109,307		119,866		(8,906		)	110,960
Real estate tax stabilization agreement, net	111,506		(30,880		)	80,626		111,506		(26,146		)	85,360
Total intangible assets	$	900,490	$	(457,430	)	$	443,060	$	1,101,475	$	(533,068	)	$	568,407

Remaining prepaid expenses and other assets:
Security and escrow deposits						83,468							93,676
Prepaid expenses						49,900							76,306
Other non-tenant receivables (1)						344,109							28,712
Deferred tax, net of valuation allowances						12,561							4,220
Marketable securities						41,935							—
Other						34,450							42,456
Total remaining prepaid expenses and other assets						566,423							245,370
Total prepaid expenses and other assets						$	1,009,483						$	813,777

(1) Includes receivable due from our joint venture partners due upon completion of the redevelopment at Ala Moana.

NOTE 15 ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The following table summarizes the significant components of Accounts payable and accrued expenses.

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)



	September 30, 2015							December 31, 2014
	Gross Liability		Accumulated Accretion			Balance		Gross Liability		Accumulated Accretion			Balance
Intangible liabilities:
Below-market tenant leases, net	384,456		(207,996		)	$	176,460	502,919		(259,390		)	$	243,529
Above-market headquarters office leases, net	15,268		(8,170		)	$	7,098	15,268		(6,867		)	$	8,401
Above-market ground leases, net	9,127		(1,798		)	$	7,329	9,127		(1,522		)	$	7,605
Total intangible liabilities	$	408,851	$	(217,964	)	$	190,887	$	527,314	$	(267,779	)	$	259,535

Remaining Accounts payable and accrued expenses:
Accrued interest						45,467							54,332
Accounts payable and accrued expenses						75,852							82,292
Accrued real estate taxes						99,023							85,910
Deferred gains/income						119,261							114,968
Accrued payroll and other employee liabilities						54,270							55,059
Construction payable						145,802							198,471
Tenant and other deposits						12,552							21,423
Insurance reserve liability						17,233							16,509
Capital lease obligations						11,553							12,066
Conditional asset retirement obligation liability						7,645							10,135
Uncertain tax position liability						—							6,663
Other						20,703							17,534
Total remaining Accounts payable and accrued expenses						609,361							675,362
Total Accounts payable and accrued expenses						$	800,248						$	934,897

NOTE 16 LITIGATION

In the normal course of business, from time to time, we are involved in legal proceedings relating to the ownership and operations of our properties. In management’s opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material effect on our consolidated financial position, results of operations or liquidity. Neither the Company nor any of the Unconsolidated Real Estate Affiliates is currently involved in any material pending legal proceedings nor, to our knowledge, is any material legal proceeding currently threatened against the Company or any of the Unconsolidated Real Estate Affiliates.

NOTE 17 COMMITMENTS AND CONTINGENCIES

We lease land or buildings at certain properties from third parties. The leases generally provide us with a right of first refusal in the event of a proposed sale of the property by the landlord. Rental payments are expensed as incurred and have been straight-lined over the term of the lease, to the extent applicable. The following is a summary of our contractual rental expense as presented in our Consolidated Statements of Comprehensive Income:

Table of Contents

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(Dollars in thousands)
Contractual rent expense, including participation rent	$	2,276	$	3,528	$	6,609	$	9,981
Contractual rent expense, including participation rent and excluding amortization of above and below-market ground leases and straight-line rent	1,687		2,371		4,829		6,513

NOTE 18 SUBSEQUENT EVENTS

On October 30, 2015, the Company amended its corporate credit facility. Among other things, the amendment reduces the drawn spread depending on the Company's leverage level and extends the maturity date to October 30, 2020.

Table of Contents

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All references to numbered Notes are to specific footnotes to our consolidated financial statements included in this Quarterly Report and whose descriptions are incorporated into the applicable response by reference. The following discussion should be read in conjunction with such consolidated financial statements and related Notes. Capitalized terms used, but not defined, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) have the same meanings as in such Notes.

Overview

Our primary business is owning and operating best-in-class retail properties that provide an outstanding environment and experience for our communities, retailers, employees, consumers and shareholders. We are an S&P 500 real estate company with a property portfolio comprised primarily of Class A malls (defined by sales per square foot) and urban retail properties. Our properties are generally the centers of retail, dining, and entertainment within their trade areas and, therefore, represent hubs of such activity predominantly located in the United States. As of September 30, 2015, we own, either entirely or with joint venture partners, 131 retail properties located throughout the United States comprising approximately 127 million square feet of gross leasable area ("GLA").

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.

We seek long-term growth in Company NOI and Company EBITDA (as defined below) through proactive management and leasing of our properties. We believe that the most significant operating factor affecting incremental cash flow, Company NOI and Company EBITDA growth is increased rents earned from tenants at our properties. This growth is primarily achieved by:


•	contractual fixed rental increases;


•	positive re-leasing spreads on a suite-to-suite basis;


•	income from redevelopment projects;


•	opportunistic acquisition of high quality retail properties; and


•	managing operating expenses.

As of September 30, 2015, the level of long-term, or “permanent” occupancy, was 91.3%. Since September 30, 2014, we have seen an increase in rents 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 2015 exhibited initial rents that were 9.70% higher than the final rents paid on expiring leases.

We may recycle capital by opportunistically investing in high quality retail properties. In addition, controlling operating expenses by leveraging our scale to maximize synergies is a critical component to Company NOI and Company EBITDA growth.

We have identified approximately $2.1 billion of income producing development and redevelopment projects within our portfolio, over 80% of which is being invested into Class A malls. We currently expect to achieve average returns of approximately 9-11% for all projects.

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

Financial Overview

Our Company NOI (as defined below) increased 4.4% from $1,584.0 million for the nine months ended September 30, 2014 to $1,653.5 million for the nine months ended September 30, 2015. Our Company FFO (as defined below) increased 7.8% from $898.2 million for the nine months ended September 30, 2014 to $968.6 million for the nine months ended September 30, 2015. Net income attributable to General Growth Properties, Inc. increased from $376.4 million for the nine months ended September 30, 2014 to $1,180.5 million for the nine months ended September 30, 2015.

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 attributable to General Growth Properties, Inc.

Table of Contents

Operating Metrics

The following table summarizes selected operating metrics for our portfolio.



	September 30, 2015 (1)			September 30, 2014 (1)			% Change
In-Place Rents per square foot (2)
Consolidated Properties	$	64.95		$	67.90		(4.34	)%
Unconsolidated Properties	89.14			80.30			11.01	%
Total	$	72.68		$	71.51		1.64	%

Percentage Leased
Consolidated Properties	96.1		%	96.6		%	(50) bps
Unconsolidated Properties	97.3		%	97.2		%	10 bps
Total	96.5		%	96.8		%	(30) bps

Tenant Sales Volume (All Less Anchors) (3)
Consolidated Properties	$	12,286		$	11,894		3.30	%
Unconsolidated Properties	8,421			8,148			3.35	%
Total	$	20,707		$	20,042		3.32	%

Tenant Sales per square foot (3)
Consolidated Properties	$	512		$	490		4.49	%
Unconsolidated Properties	769			752			2.26	%
Total	$	593		$	571		3.70	%



(1) Metrics exclude one asset that is being de-leased in preparation for redevelopment, assets acquired after January 1, 2014 and other assets.
(2) Rent is presented on a cash basis and consists of base minimum rent and common area costs.
(3) Tenant Sales (All Less Anchors) is presented as total sales volume in millions of dollars and Tenant Sales for tenants occupying less than 10,000 square feet is presented as sales per square foot in dollars on a trailing 12-month basis.

Lease Spread Metrics

The following table summarizes signed leases that are scheduled to commence in the respective period compared to expiring rent for the prior tenant in the same suite where the downtime between new and previous tenant was less than 24 months and the occupied space between the previous tenant and new tenant did not change by more than 10,000 square feet.



	# of Leases	SF	Term (in years)	Initial Rent PSF ¹		Expiring Rent PSF ²		Initial Rent Spread		% Change
Trailing 12 Commencements	1,694	4,924,232	6.6	$	63.30	$	57.68	$	5.62	9.7	%
2015 Commencements	1,586	4,701,589	6.4	$	63.99	$	58.48	$	5.51	9.4	%
2016 Commencements	240	871,253	6.4	$	80.70	$	67.54	$	13.15	19.5	%



(1) Represents initial annual rent over the lease consisting of base minimum rent and common area maintenance.
(2) Represents expiring rent at end of lease consisting of base minimum rent and common area maintenance.

Table of Contents

Results of Operations

Three months ended September 30, 2015 and 2014

The following table is a breakout of the components of minimum rents:



	Three Months Ended September 30,
	2015			2014			$ Change			% Change
	(Dollars in thousands)
Components of Minimum rents:
Base minimum rents	$	365,935		$	393,857		$	(27,922	)	(7.1	)%
Lease termination income	779			1,508			(729		)	(48.3	)
Straight-line rent	7,388			12,117			(4,729		)	(39.0	)
Above and below-market tenant leases, net	(15,386		)	(11,197		)	(4,189		)	37.4
Total Minimum rents	$	358,716		$	396,285		$	(37,569	)	(9.5	)%

Base minimum rents decreased $27.9 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $34.8 million less base minimum rents in the third quarter of 2015 compared to the third quarter of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates. The offsetting increase in base minimum rents is a result of an increase in occupancy and rent between September 30, 2014 and September 30, 2015.

Tenant recoveries decreased $13.6 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $18.5 million less in tenant recoveries in the third quarter of 2015 compared to the third quarter of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates. The offsetting increase in tenant recoveries is primarily due to higher real estate tax recoveries in the third quarter of 2015.

Overage rents decreased $2.8 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $2.7 million less in overage rents in the third quarter of 2015 compared to the third quarter of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates.

Management fees and other corporate revenues increased $2.1 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in an additional $1.5 million in management fees in the third quarter of 2015 compared to the third quarter of 2014. The remaining additional increase in management fees is primarily due to management fees earned on joint ventures acquired during 2015 (Note 3).

Other revenue increased $9.4 million primarily due to the sale of air rights at Ala Moana Center which resulted in a $12.5 million gain on sale for the three months ended September 30, 2015. This is offset by our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $2.8 million less in other revenue in the third quarter of 2015 compared to the third quarter of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates.

Property maintenance costs decreased $1.7 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $1.2 million less in property maintenance costs in the third quarter of 2015 compared to the third quarter of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates. The remaining additional decrease in property maintenance costs was a result of our operating expense management initiatives.

Other property operating costs decreased $5.3 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $5.9 million less in other property operating costs in the third quarter of 2015 compared to the third quarter of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates.

Depreciation and amortization expense decreased $28.0 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $16.4

Table of Contents

million less in depreciation and amortization expense in the third quarter of 2015 compared to the third quarter of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates. In addition, amortization of in-place lease values decreased by $14.0 million in the third quarter of 2015 compared to the third quarter of 2014.

Interest and dividend income increased $4.7 million primarily due to interest on notes receivable from our joint venture partners that were issued during 2015 (Note 13).

Interest expense decreased $29.2 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $14.8 million less in interest expense in the third quarter of 2015 compared to the third quarter of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates. In addition, there was a $9.2 million decrease due to mortgage notes that were paid down during the first quarter of 2015, and a corporate loan secured by fourteen properties decreased by $1.9 million due to a 2014 amendment that reduced the interest rate.

The loss on foreign currency is related to the impact of changes in the exchange rate on a note receivable denominated in Brazilian Reais, and received in conjunction with the sale of Aliansce in the third quarter of 2013 (Note 13).

The gain from changes in control of investment properties and other of $13.4 million in the third quarter of 2015 is primarily due to our sale of an interest in Ala Moana Center (Note 3).

Benefit from income taxes increased by $13.2 million primarily due to a $3.6 million adjustment for the impact of changes in the exchange rate on the note receivable denominated in Brazilian Reais, a $4.8 million reversal of liabilities in 2015 due to the expiration of the statute of limitations, and a $1.1 foreign tax credit for taxes paid in Brazil.

Equity in income of Unconsolidated Real Estate Affiliates increased $9.2 million primarily due to our sale of an interest in Ala Moana Center which caused the property to go from consolidated to unconsolidated.

Unconsolidated Real Estate Affiliates - gain on investment is primarily related to the sale of an additional 12.5% interest in Ala Moana Center during the second quarter of 2015 (Note 3) and the sale of our interest in a joint venture in the third quarter of 2015 (Note 6).

Nine months ended September 30, 2015 and 2014

The following table is a breakout of the components of minimum rents:



	Nine Months Ended September 30,
	2015			2014			$ Change			% Change
	(Dollars in thousands)
Components of Minimum rents:
Base minimum rents	$	1,105,654		$	1,175,180		$	(69,526	)	(5.9	)%
Lease termination income	11,226			8,700			2,526			29.0
Straight-line rent	22,779			36,792			(14,013		)	(38.1	)
Above and below-market tenant leases, net	(45,275		)	(50,125		)	4,850			(9.7	)
Total Minimum rents	$	1,094,384		$	1,170,547		$	(76,163	)	(6.5	)%

Base minimum rents decreased $69.5 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $83.5 million less base minimum rents in the first nine months of 2015 compared to the first nine months of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates. The offsetting increase in base minimum rents is a result of an increase in occupancy and rent between September 30, 2014 and September 30, 2015.

Tenant recoveries decreased $34.6 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $43.6 million less in tenant recoveries in the first nine months of 2015 compared to the first nine months of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates. The offsetting increase in tenant recoveries is primarily due to higher real estate tax recoveries in the first nine months of 2015.

Table of Contents

Overage rents decreased $5.7 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $5.9 million less in overage rents in the first nine months of 2015 compared to the first nine months of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates.

Management fees and other corporate revenues increased $13.6 million primarily due to $6.7 million in fees related to the residential condominium joint venture at Ala Moana, $3.5 million in management fees related to the new Ala Moana Center and Bayside Marketplace joint ventures, and $1.3 million in financing fees earned at the Crown Building located at 730 Fifth Avenue in the first nine months of 2015.

Other revenue decreased slightly primarily due to land condemnation revenues of $10.0 million received in the first quarter of 2014. In addition, our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014 resulted in $8.1 million less in other revenue in the first nine months of 2015 compared to the first nine months of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates. This is offset by the sale of air rights at Ala Moana Center which resulted in a $12.5 million gain on sale for the nine months ended September 30, 2015.

Property maintenance costs decreased $4.5 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $3.4 million less in property maintenance costs in the first nine months of 2015 compared to the first nine months of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates. The remaining additional decrease in property maintenance costs was a result of our operating expense management initiatives.

Marketing costs decreased $3.1 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $2.5 million less in marketing costs in the first nine months of 2015 compared to the first nine months of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates.

Other property operating costs decreased $23.8 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $20.3 million less in other property operating costs in the first nine months of 2015 compared to the first nine months of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates. The remaining additional decrease in property maintenance costs was a result of our operating expense management initiatives.

General and administrative expense decreased $15.2 million in the first nine months of 2015 compared to the first nine months of 2014 primarily due to the $17.9 million loss from the settlement of litigation in the second quarter of 2014.

Depreciation and amortization expense decreased $45.9 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $40.1 million less in depreciation and amortization expense in the first nine months of 2015 compared to the first nine months of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates.

Interest and dividend income increased $15.1 million primarily due to interest on notes receivable from our joint venture partners that were issued during 2015 (Note 13).

Interest expense decreased $68.0 million primarily due to our sale of an interest in Ala Moana Center during the first quarter of 2015 and our sale of an interest in Bayside Marketplace during the fourth quarter of 2014. This resulted in $30.9 million less in interest expense in the first nine months of 2015 compared to the first nine months of 2014 as the properties are now accounted for as Unconsolidated Real Estate Affiliates. In addition, there was a $14.2 million decrease due to mortgage notes on four properties that were refinanced in 2014 and 2015, a $8.4 million decrease due to mortgage notes that were paid down during the first quarter of 2015, and a corporate loan secured by fourteen properties decreased by $8.7 million due to a 2014 amendment that reduced the interest rate.

The gain from changes in control of investment properties and other of $622.4 million in 2015 is primarily due to our sale of an interest in Ala Moana Center. Also, the gain on the sale of the office portion of 200 Lafayette is included in the amount (Note 3).

Table of Contents

(Provision for) benefit from income taxes increased by $31.9 million primarily due a $18.4 million adjustment for the impact of changes in the exchange rate on the note receivable denominated in Brazilian Reais, a $6.0 million reversal of liabilities in 2015 due to the settlement of an audit and expiration of the statute of limitations, $3.0 million due to the transfer of a property, and a $1.3 million foreign tax credit for taxes paid in Brazil.

Equity in income of Unconsolidated Real Estate Affiliates increased $7.2 million primarily due to our sale of an interest in Ala Moana Center which caused the property to go from consolidated to unconsolidated.

Unconsolidated Real Estate Affiliates - gain on investment is primarily related to the sale of an additional 12.5% interest in Ala Moana Center during the second quarter of 2015 (Note 3) and our gain on the sale of our interest in two joint ventures in the first nine months of 2015 (Note 6).

Liquidity and Capital Resources

Our primary source of liquidity is from the ownership and management of our properties. We may generate cash from refinancings or borrowings under our revolving credit facility. Our primary uses of cash include payment of operating expenses, debt service, reinvestment in and redevelopment of properties, tenant allowances and dividends.

We anticipate maintaining financial flexibility by managing our future maturities, amortization of debt, and minimizing cross collateralizations and corporate guarantees. We believe that we currently have sufficient liquidity to satisfy all of our commitments in the form of $160.7 million of consolidated unrestricted cash and $800.0 million of available credit under our credit facility as of September 30, 2015, as well as anticipated cash provided by operations.

Our key financing objectives include:


•	to obtain property-secured debt with laddered maturities; and


•	to minimize the amount of debt that is cross-collateralized and/or recourse to us.

We may also raise capital through public or private issuances of debt securities, preferred stock, common stock, common units of the Operating Partnerships (as defined in Note 1) or other capital raising activities.

During the nine months ended September 30, 2015, we executed the following refinancing and capital transactions (at our proportionate share):


•	completed $800.0 million in secured financings, lowering the interest rate 210 basis points from 5.8% to 3.7%, lengthening the term-to-maturity from 1.2 years to 10.7 years, and generating net proceeds of $249.2 million; and


•	paid down $594.3 million of consolidated mortgage notes with a weighted-average term-to-maturity of 1.5 years, and a weighted-average interest rate of 5.3%.

As of September 30, 2015, we had $1.5 billion of debt pre-payable without penalty. We may pursue opportunities to refinance this debt at lower interest rates and longer maturities.

As a result of our financing efforts in 2015, we have reduced the amount of debt due in the next three years from $2.0 billion to $0.8 billion, representing 4.4% of our total debt at maturity. The maximum amount due in any one of the next ten years is no more than $2.8 billion or approximately 15% of our total debt at maturity.

As of September 30, 2015, our proportionate share of total debt aggregated $19.6 billion. Our total debt includes our consolidated debt of $14.0 billion and our share of Unconsolidated Real Estate Affiliates debt of $5.6 billion. Of our proportionate share of total debt, $2.1 billion is recourse to the Company or its subsidiaries (including the Facility) due to guarantees or other security provisions for the benefit of the note holder.

The following table illustrates the scheduled payments for our proportionate share of total debt as of September 30, 2015. The $206.2 million of Junior Subordinated Notes are due in 2036, 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 2019.

Table of Contents



	Consolidated(1)		Unconsolidated(1)
	(Dollars in thousands)
2015	$	35,418	$	5,287
2016	380,649		26,398
2017	536,918		198,949
2018	2,086,153		236,288
2019	1,030,444		1,180,602
Subsequent	9,955,833		3,916,903
	$	14,025,415	$	5,564,427

(1) Excludes $32.3 million of adjustments related to debt market rate adjustment.

We believe we will be able to extend the maturity date, repay or refinance the consolidated debt that is scheduled to mature in 2015. We also believe that the joint ventures will be able to refinance the debt of our Unconsolidated Real Estate Affiliates upon maturity; however, there can be no assurance that we will be able to refinance or restructure such debt on acceptable terms or otherwise, or that joint venture operations or contributions by us and/or our partners will be sufficient to repay such loans.

Acquisitions and Joint Venture Activity

From time-to-time we may acquire whole or partial interests in high-quality retail properties and may sell assets.

On February 27, 2015, we formed a partnership to own and operate Ala Moana Center located in Honolulu, Hawaii. Effective with the partnership formation, we closed on the sale of a 25% equity interest in Ala Moana Center to the joint venture partner. The transaction generated approximately $907.0 million of net proceeds, of which we received approximately $670.0 million of net proceeds at closing. The remaining net proceeds of approximately $237.0 million will be paid in late 2016 upon completion of the redevelopment and expansion.

On April 10, 2015, we closed on the sale of a 12.5% equity interest in Ala Moana Center to another joint venture partner. The transaction generated approximately $453.5 million of net proceeds, of which we received approximately $335 million of net proceeds at closing. The remaining net proceeds of approximately $118.5 million will be paid in late 2016 upon completion of the redevelopment and expansion.

We will account for the 62.5% interest in the joint venture that holds Ala Moana Center under the equity method of accounting because we share control over major decisions with the joint venture partners, which resulted from the partners obtaining substantive participating rights. Prior to the closing on February 27, 2015, Ala Moana Center was previously wholly owned by GGP and accounted for on a consolidated basis.

On March 31, 2015, we acquired a 50% interest in a joint venture with Sears Holdings Corporation that owns anchor pads and in-place leases at 12 stores located at our properties for approximately $165.0 million. We recorded the investment in the joint venture for approximately $164.5 million ($165.0 million net of prorations and acquisition costs) to investment in and loans to/from Unconsolidated Real Estate Affiliates on our Consolidated Balance Sheet as of March 31, 2015.

On April 1, 2015 we acquired a 50% interest in a joint venture to own 85 Fifth Avenue in New York, New York. The total purchase price was $86 million which was funded with $60 million of secured debt. GGP’s share of the equity is $14.0 million. In connection with the acquisition, we provided a $7.0 million loan to our joint venture partner.

On April 17, 2015, we and our joint venture partners acquired the Crown Building located at 730 Fifth Avenue in New York, New York for a gross purchase price of $1.8 billion, which was funded with $1.25 billion of secured debt. We have an effective 50% interest in the retail portion of the property. GGP and Jeff Sutton will own, redevelop, lease and manage the retail portion of the property which is $1.3 billion of the purchase price. Vladislav Doronin’s Capital Group and Michael Shvo will own, redevelop, lease and manage the office tower which is $475.0 million of the purchase price. The office tower will be redeveloped into luxury residential condominiums. Our share of the retail property is $650.0 million, and our share of the equity is $208.5 million. In connection with the acquisition, we provided $204.3 million in loans to our joint venture partners.

Table of Contents

of September 30, 2015, Seritage Growth Properties common stock traded at $37.25 per share resulting in unrealized gains of $8.6 million included in other comprehensive income (loss) in the Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2015 (Note 3).

Warrants and Brookfield Investor Ownership

Brookfield owns or manages on behalf of third parties all of the Company’s outstanding Warrants (Note 9) which are exercisable into approximately 58 million common shares (assuming net share settlement) of the Company at a weighted-average exercise price of $8.94 per share. The exercise price and common shares issuable under the Warrants adjusts for future dividends declared by the Company.

As of February 4, 2015, Brookfield’s potential ownership of the Company (assuming full share settlement of the Warrants) was 39.8%, which is stated in their Form 13D filed on the same date. If Brookfield held or managed this same ownership through the maturity date of the Warrants, assuming: (a) GGP’s common stock price increased $10 per share and (b) the Warrants were adjusted for the impact of regular dividends, we estimate that their ownership would be 39.0% under net share settlement, and 40.2% under full share settlement.

Redevelopments

We are currently redeveloping several consolidated and unconsolidated properties primarily to improve the productivity and value of the property, convert large-scale anchor boxes into smaller leasable areas and to create new in-line retail space and new restaurant venues.

We have identified approximately $2.1 billion of income producing redevelopment projects within our portfolio, over 80% of which is being invested into Class A malls. We plan to fund these redevelopments with available cash flow, construction financing, and proceeds from debt refinancings. We continue to evaluate a number of other redevelopment projects to further enhance the quality of our assets. We currently expect to achieve returns that average 9-11% for all projects (cash on cost, first year stabilized). Expected returns are based on the completion of current and future redevelopment projects, and the success of the leasing and asset management plans in place for each project. Expected returns are subject to a number of variables, risks, and uncertainties including those disclosed within Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014 (our "Annual Report"). We also refer the reader to our disclosure related to forward-looking statements, below. The following table illustrates our planned redevelopments:

Table of Contents



Property	Description	Ownership %	GGP’s Total Projected Share of Cost		GGP’s Investment to Date ¹		Expected Return on Investment ²	Expected Project Opening
Major Development Summary (in millions, at share unless otherwise noted)
Open

Various Malls		N/A	499.6		461.9		12%

	Total Open Projects		$	499.6	$	461.9	11%

Under Construction

Mayfair Mall ³ Wauwatosa, WI	Nordstrom	100%	72.3		52.4		6-8%	Q4 2015

Ridgedale Center ³ Minnetonka, MN	Nordstrom, Macy's Expansion, New Inline GLA and renovation	100%	106.2		96.5		8-9%	Q4 2015

Southwest Plaza Littleton, CO	Redevelopment	100%	72.6		57.2		9-10%	Q4 2015

Baybrook Mall Friendswood, TX	Expansion	53%	90.5		52.3		9-10%	Q4 2015

Ala Moana Center³ Honolulu, HI	Demolish existing Sears store and expand mall, adding anchor, box and inline tenants, reconfigure center court	62.5%	358.3		331.6		9-10%	Q1 2016

Other Projects Various Malls	Redevelopment projects at various malls	N/A	300.0		96.2		8-9%	Various

	Total Projects Under Construction		$	999.9	$	686.2	8-10%

Projects in Pipeline

Staten Island Mall Staten Island, NY	Expansion	100%	180.0		7.7		8-9%	TBD

New Mall Development Norwalk, CT	Ground up mall development	100%	285.0		40.7		8-10%	TBD

Ala Moana Center Honolulu, HI	Nordstrom box repositioning	62.5%	53.1		18.8		9-10%	TBD

Other Projects Various Malls	Redevelopment projects at various malls⁴	N/A	126.3		3.6		8-9%	TBD

	Total Projects in Pipeline		$	644.4	$	70.8	8-10%

	Total Development Summary		$	2,143.9	$	1,218.9	9-11%

(1) Projected costs and investments to date exclude capitalized interest and overhead.

(2) Return on investment represents first year stabilized cash-on-cash return, based upon budgeted assumptions. Actual costs may vary. Developments stabilize generally within 12-18 months of opening. Expected stabilization for Open projects is 2015, Under Construction 2017-2018 and Pipeline TBD.

(3) Project ROI includes income related to uplift on existing space.

Our investment in these projects for the three and nine months ended September 30, 2015 has increased from December 31, 2014, in conjunction with the applicable development plan and as projects near completion. The continued progression of the redevelopment projects at Ala Moana Center and Baybrook Mall resulted in increases to GGP’s investment to date.

Table of Contents

Capital Expenditures, Capitalized Interest and Overhead (at share)

The following table illustrates our capital expenditures, capitalized interest, and internal costs associated with leasing and development overhead, which primarily relate to ordinary capital projects at our operating properties. In addition, we incurred tenant allowances and capitalized leasing costs for our operating properties as outlined below. Capitalized interest is based upon qualified expenditures and interest rates; capitalized leasing and development costs are based upon time expended on these activities. These costs are amortized over lives which are consistent with the related asset.



	Nine Months Ended September 30,
	2015		2014
	(Dollars in thousands)
Capital expenditures	137,739		$	126,812
Tenant allowances	114,617		93,641
Capitalized interest and capitalized overhead	52,222		46,455
Total	$	304,578	$	266,908

The increase in Capital expenditures is primarily driven by refurbishment projects that improve the quality of our properties.

Common Stock Dividends

Our Board of Directors declared common stock dividends during 2015 and 2014 as follows:



Declaration Date	Record Date	Payment Date	Dividend Per Share
2015
November 2	December 15	January 4, 2016	$	0.19
September 1	October 15	October 30, 2015	0.18
May 21	July 15	July 31, 2015	0.17
February 19	April 15	April 30, 2015	0.17
2014
November 14	December 15	January 2, 2015	$	0.17
August 12	October 15	October 31, 2014	0.16
May 15	July 15	July 31, 2014	0.15
February 26	April 15	April 30, 2014	0.15

Preferred Stock Dividends

On February 13, 2013, we issued, under a public offering, 10,000,000 shares of 6.375% Series A Cumulative Stock at a price of $25.00 per share. Our Board of Directors declared preferred stock dividends during 2015 and 2014 as follows:



Declaration Date	Record Date	Payment Date	Dividend Per Share
2015
November 2	December 15	January 4, 2016	$	0.3984
September 1	September 15	October 1, 2015	0.3984
May 21	June 15	July 1, 2015	0.3984
February 19	March 16	April 1, 2015	0.3984
2014
November 14	December 15	January 2, 2015	$	0.3984
August 12	September 15	October 1, 2014	0.3984
May 15	June 16	July 1, 2014	0.3984
February 26	March 17	April 1, 2014	0.3984

Table of Contents

Summary of Cash Flows

Cash Flows from Operating Activities

Net cash provided by operating activities was $767.0 million for the nine months ended September 30, 2015 and $806.4 million for the nine months ended September 30, 2014. Significant changes in the components of net cash provided by operating activities include:


•	in 2015, a decrease in cash inflows from certain properties contributed to joint ventures; and


•	in 2014, a decrease in interest costs primarily as a result of the redemption of unsecured corporate bonds.

Cash Flows from Investing Activities

Net cash used in investing activities was $105.3 million for the nine months ended September 30, 2015 and $417.8 million for the nine months ended September 30, 2014. Significant components of net cash used in investing activities include:


•	in 2015, development of real estate and property improvements, ($509.9) million;


•	in 2015, proceeds from the sale of real estate, $1,092.0 million;


•	in 2015, acquisition of real estate, ($342.1) million; and


•	in 2014, development of real estate and property improvements, ($453.7) million.

Cash Flows from Financing Activities

Net cash used in financing activities was $873.5 million for the nine months ended September 30, 2015 and $686.2 million for the nine months ended September 30, 2014. Significant components of net cash used in financing activities include:


•	in 2015, proceeds from the refinancing or issuance of mortgages, notes, and loans payable, of $1,297.4 million net of principal payments of ($1,575.1) million;


•	in 2015, cash distributions paid to common stockholders of ($451.7) million;


•	in 2014, proceeds from the refinancing or issuance of mortgages, notes, and loans payable, net of principal payments of $291.5 million;


•	in 2014, the acquisition of 27.6 million shares of our common stock, ($555.8) million; and


•	in 2014, cash distributions paid to common stockholders of ($392.7) million.

Seasonality

Although we have a year-long temporary leasing program, occupancies for short-term tenants and, therefore, rental income recognized, are higher during fourth quarter of the year. In addition, the majority of our tenants have December or January lease years for purposes of calculating annual overage rent amounts. Accordingly, overage rent thresholds are most commonly achieved in the fourth quarter. As a result, revenue production is generally highest in the fourth quarter of each year.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is based on our consolidated interim financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the financial statements and disclosures. Some of these estimates and assumptions require application of difficult, subjective, and/or complex judgment about the effect of matters that are inherently uncertain and that may change in subsequent periods. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

A disclosure of our critical accounting policies which affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements is included in our Annual Report in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Refer also to the accounting policies discussed in Note 2.

Table of Contents

REIT Requirements

In order to remain qualified as a REIT for Federal income tax purposes, we must distribute at least 90% of our taxable ordinary income to stockholders. We are also subject to Federal income tax to the extent we distribute less than 100% of our REIT taxable income, including capital gains. See Note 8 to the consolidated financial statements for more detail on our ability to remain qualified as a REIT.

Recently Issued Accounting Pronouncements

Refer to Note 2 for a discussion of the revised definition of discontinued operations, the updated consolidation standard, and a recently-issued revenue recognition pronouncement. We have elected to adopt the revised definition of discontinued operations prospectively on January 1, 2015, pursuant to the pronouncement’s terms. The updated consolidation standard is effective for interim and annual reporting periods beginning after December 15, 2015. On July 9, 2015, the FASB voted for a one-year deferral of the effective date of the new revenue recognition standard. The new standard will become effective beginning with the first quarter 2018. We are currently evaluating the impact of the adoption of the updated consolidation standard and the recently-issued revenue recognition standard on our consolidated financial statements.

Non-GAAP Supplemental Financial Measures and Definitions

Net Operating Income (“NOI”) and Company NOI

The Company defines NOI as income from property operations after operating expenses have been deducted, but prior to deducting financing, administrative and income tax expenses. NOI excludes reductions in ownership as a result of sales or other transactions and has been reflected on a proportionate 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. The Company considers NOI a helpful supplemental measure of its operating performance because it is a direct measure of the actual results of our properties. Because NOI excludes reductions in ownership as a result of sales or other transactions, general and administrative expenses, interest expense, retail investment property impairment or non-recoverable development costs, depreciation and amortization, gains and losses from property dispositions, allocations to noncontrolling interests, provision for income taxes, discontinued operations, preferred stock dividends, 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 and operating costs.

The Company also considers Company NOI to be a helpful supplemental measure of its operating performance because it excludes from NOI certain non-cash and non-comparable items such as straight-line rent and intangible asset and liability amortization, which are a result of our emergence, acquisition accounting and other capital contribution or restructuring events. However, due to the exclusions noted, Company NOI should only be used as an alternative measure of the Company’s financial performance. We present Company NOI and Company FFO (as defined below); as we believe certain investors and other users of our financial information use these measures of the Company’s historical operating performance.

Earnings Before Interest Expense, Income Tax, Depreciation, and Amortization ("EBITDA") and Company EBITDA

The Company defines EBITDA as NOI less certain property management and administrative expenses, net of management fees and other operational items. EBITDA is a commonly used measure of performance in many industries, but may not be comparable to measures calculated by other companies. Management believes EBITDA provides useful information to investors regarding our results of operations because it helps us and our investors evaluate the ongoing operating performance of our properties after removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization). Management also believes the use of EBITDA facilitates comparisons between us and other equity REITs, retail property owners who are not REITs and other capital-intensive companies. Management uses EBITDA to evaluate property-level results and as one measure in determining the value of acquisitions and dispositions and, like FFO (discussed below), it is widely used by management in the annual budget process and for compensation programs.

The Company also considers Company EBITDA to be a helpful supplemental measure of its operating performance because it excludes from EBITDA certain non-cash and non-comparable items such as straight-line rent and intangible asset and liability amortization, which are a result of our emergence, acquisition accounting and other capital contribution or restructuring events. However, due to the exclusions noted, Company EBITDA should only be used as an alternative measure of the Company's financial performance.

Table of Contents

Funds From Operations (“FFO”) and Company FFO

The Company determines FFO based upon the definition set forth by National Association of Real Estate Investment Trusts (“NAREIT”). The Company determines FFO to be its share of consolidated net income (loss) computed in accordance with GAAP, excluding real estate related depreciation and amortization, excluding gains and losses from extraordinary items, excluding cumulative effects of accounting changes, excluding gains and losses from the sales of, or any impairment charges related to, previously depreciated operating properties, plus the allocable portion of FFO of unconsolidated joint ventures based upon the Company’s economic ownership interest, and all determined on a consistent basis in accordance with GAAP. As with the Company’s presentation of NOI, FFO has been reflected on a proportionate basis.

The Company considers FFO a helpful supplemental measure of the operating performance for equity REITs and a complement to GAAP measures because it is a recognized measure of performance by the real estate industry. FFO facilitates an understanding of the operating performance of the Company’s properties between periods because it 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.

As with the Company’s presentation of Company NOI, the Company also considers Company FFO to be a helpful supplemental measure of the operating performance for equity REITs because it excludes from FFO certain items that are non-cash and certain non-comparable items such as Company NOI adjustments, and FFO items such as mark-to-market adjustments on debt and gains on the extinguishment of debt, and interest expense on debt repaid or settled all which are a result of the Company’s acquisition accounting and other capital contribution or restructuring events.

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

The Company presents NOI and FFO as they are financial measures widely used in the REIT industry. In order to provide a better understanding of the relationship between the Company’s non-GAAP financial measures of NOI, Company NOI, FFO and Company FFO, reconciliations have been provided as follows: a reconciliation of GAAP operating income to NOI and Company NOI and a reconciliation of net income attributable to GGP to FFO and Company FFO. None of the Company’s non-GAAP financial measures represents cash flow from operating activities in accordance with GAAP, none should be considered as an alternative to GAAP net income (loss) attributable to GGP and none are necessarily indicative of cash available to fund cash needs. In addition, the Company has presented such financial measures 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.

Table of Contents

The following table reconciles Company NOI to GAAP Operating Income (dollars in thousands) for the three and nine months ended September 30, 2015 and 2014:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014

Company NOI	$	565,593		$	535,139		$	1,653,514		$	1,583,999
Adjustments for minimum rents, real estate taxes and other property operating costs	(9,240		)	(5,025		)	(35,291		)	(30,611		)
Proportionate NOI	556,353			530,114			1,618,223			1,553,388
Unconsolidated Properties	(150,855		)	(104,590		)	(412,650		)	(308,598		)
NOI of Sold Interests	245			19,847			12,540			57,987
Noncontrolling interest in NOI of Consolidated Properties	4,422			4,648			13,321			13,624
Consolidated Properties	410,165			450,019			1,231,434			1,316,401
Management fees and other corporate revenues	19,496			17,355			65,313			51,759
Property management and other costs	(38,685		)	(34,428		)	(121,847		)	(119,391		)
General and administrative	(12,627		)	(12,778		)	(37,395		)	(52,609		)
Depreciation and amortization	(154,228		)	(182,237		)	(483,026		)	(528,928		)
Gain (loss) on sales of investment properties	854			—			863			(44		)
Operating Income	$	224,975		$	237,931		$	655,342		$	667,188

Table of Contents

The following table reconciles Company EBITDA to GAAP Net income attributable to GGP for the three and nine months ended September 30, 2015 and 2014:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014

Company EBITDA	$	525,584		$	497,634		$	1,529,837		$	1,457,769
Adjustments for minimum rents, real estate taxes, other property operating costs, and general and administrative	(9,240		)	(5,025		)	(35,291		)	(48,465		)
Proportionate EBITDA	516,344			492,609			1,494,546			1,409,304
Unconsolidated Properties	(142,465		)	(96,702		)	(382,201		)	(284,034		)
EBITDA of sold interests	226			19,780			12,370			57,757
Noncontrolling interest in EBITDA of Consolidated Properties	4,244			4,481			12,790			13,133
Consolidated Properties	378,349			420,168			1,137,505			1,196,160
Depreciation and amortization	(154,228		)	(182,237		)	(483,026		)	(528,928		)
Interest income	13,232			8,536			34,896			19,801
Interest expense	(144,891		)	(174,109		)	(460,289		)	(528,273		)
Loss on foreign currency	(25,092		)	(15,972		)	(46,540		)	(7,017		)
Benefit from (provision for) income taxes	17,996			4,800			29,082			(2,836		)
Equity in income of Unconsolidated Real Estate Affiliates	16,584			7,391			41,115			33,868
Unconsolidated Real Estate Affiliates - gain on investment	11,163			—			320,950			—
Discontinued operations	—			8,822			—			203,649
Gain from changes in control of investment properties and other	13,399			—			622,412			—
Gain (loss) on sales of investment properties	854			—			863			(44		)
Allocation to noncontrolling interests	(3,514		)	(2,791		)	(16,447		)	(10,008		)
Net income attributable to GGP	$	123,852		$	74,608		$	1,180,521		$	376,372

Table of Contents

The following table reconciles Company FFO to GAAP net income attributable to GGP for the three and nine months ended September 30, 2015 and 2014:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014

Company FFO	$	340,747		$	308,250		$	968,639		$	898,228
Adjustments for minimum rents, property operating expenses, general and administrative, market rate adjustments, debt extinguishment, income taxes, and FFO from discontinued operations	(23,974		)	(15,019		)	(77,849		)	2,112
Proportionate FFO (1)	316,773			293,231			890,790			900,340
Depreciation and amortization of capitalized real estate costs	(220,039		)	(230,036		)	(660,604		)	(663,434		)
Gain from changes in control of investment properties and other	13,399			—			622,412			—
Preferred stock dividends	3,984			3,984			11,952			11,952
(Loss) gain on sales of investment properties	(2,359		)	7,605			(2,352		)	131,321
Unconsolidated Real Estate Affiliates - gain on investment	11,163			—			320,950			—
Noncontrolling interests in depreciation of Consolidated Properties	1,948			2,554			5,905			6,484
Redeemable noncontrolling interests	(1,017		)	(412		)	(8,532		)	(2,049		)
Depreciation and amortization of discontinued operations	—			(2,318		)	—			(8,242		)
Net income attributable to GGP	$	123,852		$	74,608		$	1,180,521		$	376,372

(1) FFO as defined by the NAREIT

Forward-Looking Statements

Certain statements made in this section or elsewhere in this report may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in any forward-looking statement are based on reasonable assumption, it can give no assurance that its expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and other factors. Such factors include, but are not limited to, the Company’s ability to refinance, extend, restructure or repay near and intermediate term debt, its indebtedness, its ability to raise capital through equity issuances, asset sales or the incurrence of new debt, retail and credit market conditions, impairments, its liquidity demands and economic conditions. The Company discusses these and other risks and uncertainties in its annual and quarterly periodic reports filed with the Securities and Exchange Commission. The Company may update that discussion in its periodic reports, but otherwise takes no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in the market risks described in our Annual Report.

ITEM 4 CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)).

Based on that evaluation, the CEO and the CFO have concluded that our disclosure controls and procedures are effective.

Table of Contents

Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

ITEM 1A RISK FACTORS

There are no material changes to the risk factors previously disclosed in our Annual Report.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information with respect to the stock repurchases made by GGP during the nine months ended September 30, 2015:



Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number or Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
June 2015	650,000	$	26.00	650,000	$	100,656,624
August 2015	1,535,252	$	25.71	1,535,252	$	561,178,739
September 2015	1,868,368	$	24.84	1,868,368	$	514,762,922
Total	4,053,620	$	25.36	4,053,620

(1) The Company's stock repurchase program, approved by our Board of Directors on August 8, 2011, authorizes the purchase of up to $250 million of the Company's common stock. On August 18, 2015, our Board of Directors approved an increase of $500 million to the Company's existing share repurchase program.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 OTHER INFORMATION

None

Table of Contents

ITEM 6 EXHIBITS



10.1			First Amendment dated July 1, 2015 to Fourth Amended and Restated Agreement of Limited Partnership of GGP Operating Partnership, LP (f/k/a GGP Limited Partnership) dated May 1, 2014.

31.1			Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101			The following financial information from General Growth Properties, Inc.’s. Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, has been filed with the SEC on November 5, 2015, formatted in XBRL (Extensible Business Reporting Language): (1) Consolidated Balance Sheets, (2) Consolidated Statements of Comprehensive Income, (3) Consolidated Statements of Equity, (4) Consolidated Statements of Cash Flows and (5) Notes to Consolidated Financial Statements.

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the registrant has not filed debt instruments relating to long-term debt that is not registered and for which the total amount of securities authorized thereunder does not exceed 10% of total assets of the registrant and its subsidiaries on a consolidated basis as of September 30, 2015. The registrant agrees to furnish a copy of such agreements to the SEC upon request.

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	GENERAL GROWTH PROPERTIES, INC.
	(Registrant)


Date: November 4, 2015	By:	/s/ Michael Berman
		Michael Berman
		Chief Financial Officer
		(on behalf of the Registrant)

EXHIBIT INDEX



		Incorporated by Reference Herein
Exhibit Number	Description	Form	Exhibit	Filing Date	File No.
10.1	First Amendment dated July 1, 2015 to Fourth Amended and Restated Agreement of Limited Partnership of GGP Operating Partnership, LP (f/k/a GGP Limited Partnership) dated May 1, 2014.	10-Q	10.1	8/6/2015	001-34948

10.2	Fourth Amended and Restated Credit Agreement dated October 30, 2015	8-K	10.1	11/2/2015	001-34948

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	The following financial information from General Growth Properties, Inc.’s. Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, has been filed with the SEC on November 4, 2015, formatted in XBRL (Extensible Business Reporting Language): (1) Consolidated Balance Sheets, (2) Consolidated Statements of Comprehensive Income, (3) Consolidated Statements of Equity, (4) Consolidated Statements of Cash Flows and (5) Notes to Consolidated Financial Statements.

Attached files

Stock widget

Investing forum

Brookfield Property REIT Inc. Reports