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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2011

or

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)

(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.    xYes    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).    xYes    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.

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

The number of shares of Common Stock, $.01 par value, outstanding on May 2, 2011 was 966,798,974

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GENERAL GROWTH PROPERTIES, INC.

INDEX

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GENERAL GROWTH PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

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

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GENERAL GROWTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

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

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GENERAL GROWTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

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

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GENERAL GROWTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

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

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GENERAL GROWTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(UNAUDITED)

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

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GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1         ORGANIZATION

Readers of this Quarterly Report should refer to the Company’s (as defined below) audited Consolidated Financial Statements for the year ended December 31, 2010 which are included in the Company’s Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended December 31, 2010 (Commission File No. 1-34948), as certain footnote disclosures which would substantially duplicate those contained in our Annual Report have been omitted from this 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”, the “Successor” or the “Company”), a Delaware corporation, formerly known as New GGP, Inc., was organized in July 2010 and is a self-administered and self-managed real estate investment trust, referred to as a “REIT”.  GGP is the successor registrant, by merger, on November 9, 2010 (the “Effective Date”) to GGP, Inc. (the “Predecessor”).  The Predecessor had filed for bankruptcy protection under Chapter 11 of Title 11 of the United States Code (“Chapter 11”) in the Southern District of New York (the “Bankruptcy Court”) on April 16, 2009 (the “Petition Date”) and emerged from bankruptcy, pursuant to a plan of reorganization (the “Plan”) on the Effective Date as described below.

GGP, through its subsidiaries and affiliates, operates, manages, develops and acquires retail and other rental properties, primarily regional malls, which are predominantly located throughout the United States. GGP also holds assets in Brazil through an investment in an Unconsolidated Real Estate Affiliate.  Additionally, prior to the Effective Date, the Predecessor had developed and sold land for residential, commercial and other uses primarily in large-scale, long-term master planned community projects in and around Columbia, Maryland; Summerlin, Nevada; and Houston, Texas, as well as one residential condominium project located in Natick (Boston), Massachusetts.

Substantially all of our business is conducted through GGP Limited Partnership (the “Operating Partnership” or “GGPLP”). As of March 31, 2011, GGP holds approximately a 99% common equity ownership (without giving effect to the potential conversion of the Preferred Units as defined below) of the Operating Partnership, while the remaining 1% is held by limited partners that indirectly include family members of the original stockholders of the Predecessor and certain previous contributors of properties to the Operating Partnership.  In these notes, the terms “we,” “us” and “our” refer to GGP and its subsidiaries or, in certain contexts, the Predecessor and its subsidiaries.

In this report, we refer to our ownership interests in properties in which we own a majority or controlling interest and, as a result, are consolidated under generally accepted accounting principles in the United States of America (“GAAP”) as the “Consolidated Properties.”  We also hold some properties through joint venture entities in which we own a non-controlling interest (“Unconsolidated Real Estate Affiliates”) and we refer to those properties as the “Unconsolidated Properties.”  Collectively, we refer to the Consolidated Properties and Unconsolidated Properties as our “Company Portfolio.”

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 noncontrolling interests in Consolidated Real Estate Affiliates as permanent equity of the Company. All significant intercompany balances and transactions have been eliminated.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. The results for the interim period ended March 31, 2011 are not necessarily indicative of the results to be obtained for the full fiscal year.

Reclassifications

Certain amounts in the 2010 consolidated financial statements have been reclassified to conform to the current period presentation.  Balance sheet amounts for properties to be disposed of, including the Special Consideration Properties (as defined below) have been reclassified to assets held for disposition and liabilities on assets held for disposition at December 31, 2010.  Income statement amounts for properties sold, transferred or to be disposed of, including the Special Consideration Properties, have been reclassified to discontinued operations for all periods presented.  However, two properties that were previously identified as Special Consideration Properties, Mall St. Vincent and Southland Center, have been reclassified as continuing operations (as discussed below) on the Consolidated Statements of Income and Comprehensive Income for all

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GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

periods presented.  In addition, certain income statement disclosures in the accompanying footnotes exclude amounts which have been reclassified to discontinued operations (Note 3).

Reorganization under Chapter 11 and the Plan

In April 2009, certain additional domestic subsidiaries (collectively with the subsidiaries filing on the Petition Date and the Predecessor, the “Debtors”) of the Predecessor also filed voluntary petitions for relief in the Bankruptcy Court (collectively, the “Chapter 11 Cases”).

On August 17, 2010, the Predecessor filed with the Bankruptcy Court its third amended and restated disclosure statement and the plan of reorganization, supplemented on September 30, 2010 and October 21, 2010 for the remaining Debtors in the Chapter 11 Cases. Prior to the Effective Date, approximately 262 Debtors had emerged from bankruptcy during 2010 and 2009.  On October 21, 2010, the Bankruptcy Court entered an order confirming the Plan.  Pursuant to the Plan, on the Effective Date, the Predecessor merged with a wholly-owned subsidiary of New GGP, Inc. and New GGP, Inc. was re-named General Growth Properties, Inc.  Also pursuant to the Plan, prepetition creditor claims were satisfied in full and equity holders received newly issued common stock in New GGP, Inc. and in The Howard Hughes Corporation, a newly formed real estate company (“HHC”).

The Plan was based on the agreements (collectively, as amended and restated, the “Investment Agreements”) with REP Investments LLC, an affiliate of Brookfield Asset Management Inc. (the “Brookfield Investor”), an affiliate of Fairholme Funds, Inc. (“Fairholme”) and an affiliate of Pershing Square Capital Management, L.P. (“Pershing Square” and together with the Brookfield Investor and Fairholme, the “Plan Sponsors”), pursuant to which the Predecessor would be divided into two companies, New GGP, Inc. and HHC and the Plan Sponsors would invest in the Company’s standalone emergence plan.  In addition, the Predecessor entered into an investment agreement with Teachers Retirement System of Texas (“Texas Teachers”).  The Plan Sponsors also entered into an agreement with affiliates of the Blackstone Group (“Blackstone”) whereby Blackstone subscribed for equity in New GGP and HHC.  Under the agreements, the Plan Sponsor and Blackstone agreed to purchase shares of GGP common stock at $10.00 per share and Teachers agreed to purchase shares of GGP common stock at $10.25 per share.

Pursuant to the Plan, each holder of a share of the Predecessor common stock received, on the Effective Date, a distribution of 0.098344 shares of common stock of HHC.  Following the distribution of the shares of HHC common stock, each existing share of the Predecessor common stock converted into and represented the right to receive one share of New GGP, Inc. common stock.  No fractional shares of HHC or New GGP, Inc. were issued (i.e., the number of shares issued to each record holder was “rounded down”).  Following these transactions, the Predecessor common stock ceased to exist.

The structure of the Plan Sponsors’ investments triggered the application of the acquisition method of accounting, as the Plan and the consummation of the Investment Agreements and the Texas Teachers investment agreement constituted a ‘‘transaction or event in which an acquirer obtains control of one or more businesses’’ or a ‘‘business combination’’ requiring such application. New GGP, Inc. was the acquirer that obtained control as it obtained all of the common stock of the Predecessor (a business for purposes of applying the acquisition method of accounting) in exchange for issuing its stock to the Predecessor common stockholders on a one-for-one basis (excluding fractional shares).  The acquisition method of accounting was applied at the Effective Date and, therefore, the Consolidated Balance Sheets at March 31, 2011 and December 31, 2010 and the Consolidated Statement of Income and Comprehensive Income, the Consolidated Statement of Equity and the Consolidated Statement of Cash Flows for the three months ended March 31, 2011 reflect the revaluation of the Predecessor’s assets and liabilities to Fair Value as of the Effective Date.

On the Effective Date, the Plan Sponsors, Blackstone and Texas Teachers owned a majority of the outstanding common stock of GGP. The Predecessor common stockholders held approximately 317 million shares of GGP

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GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

common stock; the Plan Sponsors, Blackstone and Texas Teachers collectively held approximately 644 million shares of GGP common stock on the Effective Date.

On November 15, 2010 (and November 23, 2010 with respect to the over allotment option), we sold an aggregate of approximately 154.9 million shares of GGP common stock in a registered public offering at $14.75 per share and repurchased an equal number of shares from Fairholme and Pershing as permitted under “clawback” rights in the Investment Agreements.  We also used a portion of the offering proceeds to repurchase approximately 24.4 million shares from Texas Teachers, also as permitted under its investment agreement.

Claims resolution process

As permitted under the bankruptcy process, the Debtors’ creditors filed proofs of claim with the Bankruptcy Court. Through the claims resolution process, the Company identified many claims which were disallowed by the Bankruptcy Court for various reasons, including claims were duplicative, amended or superseded by later filed claims, were without merit, or were otherwise overstated. Throughout the Chapter 11 proceedings, the Company resolved many claims through settlement or objections ordered by the Bankruptcy Court. The Company will continue to settle claims and file additional objections with the Bankruptcy Court.

Although as of the Effective Date all Debtors had emerged from bankruptcy, certain differences between liability amounts estimated by the Debtors and claims submitted by creditors had not yet been resolved and may be submitted to the Bankruptcy Court which will make a final determination of the allowable claim.  The various plans of reorganization of the Debtors provide that all allowed claims, that is, undisputed or Bankruptcy Court affirmed claims of creditors against the Debtors, are to be paid in full. Our aggregate liabilities include provisions for claims against Debtors that were timely submitted to the Bankruptcy Court and have been recorded, as appropriate, based upon accounting guidance for the recognition of contingent liabilities and on our evaluations of such claims. Accordingly, we currently believe that the aggregate amount of claims recorded by the Debtors will not vary materially from the amount of claims that will ultimately be allowed or resolved by the Bankruptcy Court.

We accrued an estimate of these claims based upon the best available evidence of amounts to be paid. However, the claims resolution process is uncertain and adjustments to claims estimates could result in adjustments to our financial statements in future periods.

Reorganization Items

Reorganization items are expense or income items that were incurred or realized by the Debtors as a result of the Chapter 11 Cases and are presented separately in the Consolidated Statements of Income and Comprehensive Income of the Predecessor.  Reorganization items include legal fees, professional fees and similar types of expenses, resulting from activities of the reorganization process, gains on liabilities subject to compromise directly related to the Chapter 11 Cases, and interest earned on cash accumulated by the Debtors as a result of the Chapter 11 Cases.  For the three months ended March 31, 2010 we recognized a net gain on reorganization items of $43.2 million which was primarily made up of $169.0 million of restructuring costs and a $213.4 million gain on settlements of liabilities subject to compromise. These amounts exclude reorganization items that are currently included within discontinued operations.

With respect to certain retained professionals, the terms of engagement and the timing of payment for services rendered were, and remain after the Effective Date, subject to approval by the Bankruptcy Court.  In addition, certain of these retained professionals had agreements that provided for success or completion fees that became payable upon the Effective Date.  As of March 31, 2011, we accrued $5.9 million and as of December 31, 2010 we accrued $7.1 million of success or completion fees in Accounts payable and accrued expenses on the Consolidated Balance Sheet.

In addition, a key employee incentive program (the “KEIP”) provided for payment to certain key employees upon successful emergence from bankruptcy.  The amount payable under the KEIP was calculated based upon a formula related to the recovery to creditors and equity holders on the Effective Date and on February 7, 2011, 90 days after the Effective Date.  Approximately $181.5 million was paid, in two installments, November 12, 2010 and February 25, 2011, under the KEIP, which we recognized from the date the KEIP was approved by the Bankruptcy Court to the Effective Date.  As of December 31, 2010, we accrued a liability of approximately

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GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

$115.5 million for the KEIP in Accounts payable and accrued expenses on the Consolidated Balance Sheet.  All KEIP amounts were fully paid as of March 31, 2011.

Special Consideration Properties

In 2010, we identified 13 properties (the “Special Consideration Properties”) as underperforming retail assets.  As of the Effective Date, we entered into deed in lieu agreements with respect to two of these properties, Eagle Ridge Mall and Oviedo Marketplace, pursuant to which we transferred the deeds to the properties to these respective lenders on November 1, 2010.  We subsequently notified the lenders to the remaining Special Consideration Properties of our intent to transfer the deed to these properties in full satisfaction of the related debt, in accordance with our rights in the loan modification agreements.  Accordingly, all the Special Consideration Properties were classified as held for disposition in our Consolidated Balance Sheet as of December 31, 2010.

During February 2011, an additional three Special Consideration Properties (Bay City, Lakeview and Moreno Valley) were transferred to the applicable lenders.  In addition, in March 2011 we revised our intent with respect to two of the Special Consideration Properties (Mall St. Vincent and Southland Center) and began negotiations to repay the debt and retain the title from the respective lenders.  These transactions closed on April 25, 2011.  Accordingly, we reclassified these two properties as held for use on our Consolidated Balance Sheet as of March 31, 2011 and as continuing operations in our Consolidated Statements of Income and Comprehensive Income for all periods presented as we no longer met the criteria for held for sale treatment.

With regard to the remaining Special Consideration Properties, we have agreed to continue to cooperate with the respective lenders to jointly market such properties for sale.  The dates of disposition for these properties, either by third-party sales or deed transfers to the lenders, are expected to occur before the end of 2011.   Therefore, as of March 31, 2011, the remaining six Special Consideration Properties remained as held for disposition on the Consolidated Balance Sheets.

Impairment

Operating properties

Accounting for the impairment or disposal of long-lived assets require that if impairment indicators exist and the undiscounted cash flows expected to be generated by an asset are less than its carrying amount, an impairment provision should be recorded to write down the carrying amount of such asset to its Fair Value (as defined below).  We review our consolidated assets for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Impairment indicators for our operating properties are assessed separately for each property and include, but are not limited to, significant decreases in real estate property net operating income and occupancy percentages.

Impairment indicators for pre-development costs, which are typically costs incurred during the beginning stages of a potential development, developments in progress, and land held for development and redevelopment 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, revenues or cash flows, development costs, market factors and sustainability of development projects.

If an indicator of potential impairment exists, the asset is tested for recoverability by comparing its carrying amount to the estimated future undiscounted cash flows.  The cash flow estimates used both for determining recoverability and estimating Fair Value (as described immediately below) are inherently judgmental and reflect current and projected trends in rental, occupancy and capitalization rates, and estimated holding periods for the applicable assets.  Fair Value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (“Fair Value”).  Although the estimated Fair Value of certain assets may be exceeded by the carrying amount, 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 asset over its estimated Fair Value is expensed to operations.  In addition, the impairment

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

provision is allocated proportionately to adjust the carrying amount of the asset.  The adjusted carrying amount, which represents the new cost basis of the asset, is depreciated over the remaining useful life of the asset.

The Predecessor recorded impairment charges related to operating properties and properties under development of $11.1 million for the three months ended March 31, 2010. No provisions for impairment were necessary for the three months ended March 31, 2011.

Investment in Unconsolidated Real Estate Affiliates

According to the guidance related to the equity method of accounting for investments, a series of operating losses of an investee or other factors may indicate that an other-than-temporary decrease in value of our investment in the Unconsolidated Real Estate Affiliates has occurred. The investment in each of the Unconsolidated Real Estate Affiliates is evaluated periodically and as deemed necessary for valuation declines that are other than temporary. Accordingly, in addition to the property-specific impairment analysis that we perform on the operating properties and developments in progress owned by such joint ventures (as part of our investment property impairment process described above), we also considered the ownership and distribution preferences and limitations and rights to sell and repurchase our ownership interests.  Based on our evaluations, no provisions for impairment were recorded for the three months ended March 31, 2011 and 2010 related to our investments in Unconsolidated Real Estate Affiliates.

Goodwill

The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed are recorded as goodwill.  The application of acquisition accounting on the Effective Date did not yield any goodwill for the Successor and all prior Predecessor goodwill amounts were eliminated.

General

Carrying values of our properties were reset to Fair Value on the Effective Date as provided by the acquisition method of accounting.  Additional impairment charges could be taken in the future if economic conditions change or if the plans regarding such assets change.  Therefore, we can provide no assurance that material impairment charges with respect to our assets, including operating properties, investments in Unconsolidated Real Estate Affiliates and developments in progress, will not occur in future periods.  Accordingly, we will continue to monitor circumstances and events in future periods to determine whether impairments are warranted.

Warrant Liability

Pursuant to the terms of the Investment Agreements, the Plan Sponsors were issued warrants (the “Warrants”) which included eight million warrants to purchase common stock of HHC at an exercise price of $50.00 per share and 120 million warrants to purchase common stock of New GGP, Inc. The Brookfield Investor and Blackstone received 57.5 million and 2.5 million, respectively, of our Warrants at an exercise price of $10.75 per share; Fairholme, Pershing Square and Blackstone received 41.07 million, 16.43 million and 2.5 million, respectively, of our Warrants at an exercise price of $10.50 per share.  The Warrants are fully vested and the exercise prices are subject to adjustment for future dividends, stock dividends, splits or reverse splits of our common stock or certain other events.  As a result of these investment provisions, on the record date of our 2010 common stock dividend (December 30, 2010), the number of shares issuable upon exercise of the outstanding Warrants was increased to 123,144,000 and the exercise prices were modified to $10.23 and $10.48, respectively.  Additionally, the number of shares issuable upon exercise of the outstanding Warrants will be increased on the record date (April 15, 2011) of our first quarter 2011 common stock dividend and again on the record date (July 15, 2011) of our second quarter 2011 common stock dividend.  Each Warrant has a term of seven years from the Effective Date.  The Brookfield Investor Warrants and the Blackstone Investors Warrants are immediately exercisable, while the Fairholme Warrants and the Pershing Square Warrants will be exercisable (for the initial 6.5 years) only upon 90 days prior notice.  No warrants were exercised during the three months ended March 31, 2011.

The Warrants are recorded as a liability on our Consolidated Balance Sheets as the holders of the Warrants could require GGP to settle such warrants in cash in the circumstance of a subsequent change of control (a circumstance that, as of the balance sheet date, we considered to be remote).  The Fair Value of the Warrants was estimated using the Black Scholes option pricing model using our stock price and level 3 inputs which were based primarily on our estimate of implied volatility derived from the market prices of publicly traded

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

options.  Subsequent to the Effective Date, changes in the Fair Value of the Warrants have been and will continue to be recognized in earnings.  Based on the uncertainty and variability of the assumptions used to Fair Value the Warrants, significant changes in earnings could be recognized in future periods.  The estimated Fair Value of the Warrants was $964.6 million as of March 31, 2011 and $1.04 billion as of December 31, 2010.

Noncontrolling Interests

The minority interests related to our common and preferred Operating Partnership units are presented as redeemable noncontrolling interests and will remain as temporary equity at a mezzanine level in our Consolidated Balance Sheets, presented 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 the Fair Value as of each measurement date.  The redeemable noncontrolling interests have been presented at Fair Value as of March 31, 2011 and December 31, 2010.  The excess of the Fair Value over the carrying amount from period 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 attributable to common stockholders.

The Plan provided that holders of the Common Units could elect to redeem, reinstate or convert their units. Four holders of the Common Units elected to redeem 226,684 Common Units in the aggregate on the Effective Date. All remaining Common Units were reinstated in the Operating Partnership on the Effective Date.

Generally, the holders of the Common Units share in any distributions by the Operating Partnership with our common stockholders.  However, the 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.  In such regard, the common stock dividend declared for 2010 modified the conversion rate to 1.0397624.  The aggregate amount of cash that would have been paid to the holders of the outstanding Common Units as of March 31, 2011 if such holders had requested redemption of the Common Units as of March 31, 2011, and all such Common Units were redeemed or purchased pursuant to the rights associated with such Common Units for cash, would have been $106.7 million.

The following table reflects the activity of the redeemable noncontrolling interests for the three months ended March 31, 2011 and 2010:

The Operating Partnership also issued Convertible Preferred Units, which were convertible, with certain restrictions, at any time by the holder into Common Units of the Operating Partnership at the following rates (subject to adjustment):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Fair Value Measurements

Fair Value measurements utilize 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.

The following table summarizes our assets and liabilities that are measured at Fair Value (both on a recurring and nonrecurring basis):

The following table summarizes the change in Fair Value of our Warrant Liability which is measured on a recurring basis:

Fair Value of Financial Instruments

The Fair Values of our financial instruments approximate their carrying amount in our financial statements except for debt. Management’s required estimates of Fair Value are presented below for our debt as of March 31, 2011 and December 31, 2010.

The Fair Value of the Junior Subordinated Notes approximates their carrying amount as of March 31, 2011 and December 31, 2010.

Derivative Financial Instruments

As of March 31, 2011 and December 31, 2010, we had no derivative financial instruments for our Consolidated Properties.  For the three months ended March 31, 2010, we recognized $4.5 million of additional interest

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

expense related to the amortization of accumulated other comprehensive (loss) income that resulted from the termination of interest rate swaps in 2009.

Revenue Recognition and Related Matters

Minimum rent revenues are recognized on a straight-line basis over the terms of the related leases.  Minimum rent revenues also include amounts collected from tenants to allow the termination of their leases prior to their scheduled termination dates and accretion related to above and below-market tenant leases on acquired properties.  Termination income was $3.9 million for the three months ended March 31, 2011 and $9.2 million for three months ended March 31, 2010.  Net amortization/(accretion) related to above and below-market tenant leases was $(27.6) million for the three months ended March 31, 2011 and $1.5 million for the three months ended March 31, 2010.

Percentage rent in lieu of fixed minimum rent totaled $13.4 million for the three months ended March 31, 2011 and $11.8 million for three months ended March 31, 2010.

Straight-line rent receivables, which represent the current net cumulative rents recognized prior to when billed and collectible as provided by the terms of the leases, of $42.5 million as of March 31, 2011 and $14.3 million as of December 31, 2010 are included in Accounts and notes receivable, net in our consolidated financial statements and are reduced for allowances and amounts doubtful of collection.

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 and  cost ratios.  Actual results could differ from these and other estimates.

Earnings Per Share

Information related to our earnings per share (“EPS”) calculations is summarized as follows: