UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2006

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

For the transition period from                      to                     

GENERAL GROWTH PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

Delaware		42-1283895
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

110 N. Wacker Dr., Chicago, IL 60606

(Address of principal executive offices, including Zip Code)

(312) 960-5000

(Registrant’s telephone number, including area code)

N / A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (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.

YES þ                      NO o

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

Large accelerated filer þ           Accelerated filer o          Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o                      NO þ

The number of shares of Common Stock, $.01 par value, outstanding on May 9, 2006 was 241,092,268.

 

 

GENERAL GROWTH PROPERTIES, INC.

INDEX

		PAGE
		NUMBER
Part I FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 2006 and December 31, 2005			3
Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2006 and 2005			4
Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and 2005			5
Notes to Consolidated Financial Statements			6
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Liquidity and Capital Resources			30
Item 3: Quantitative and Qualitative Disclosures about Market Risk			37
Item 4: Controls and Procedures			38
Part II OTHER INFORMATION
Item 1: Legal Proceedings			39
Item 2: Unregistered Sales of Securities and Use of Proceeds			39
Item 3: Defaults Upon Senior Securities			39
Item 4: Submission of Matters to a Vote of Security Holders			39
Item 5: Other Information			39
Item 6: Exhibits			39
SIGNATURE			41
Exhibit Index			42
Indemnity Agreement
Form of Restricted Stock Award
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GENERAL GROWTH PROPERTIES, INC.

		March 31,				December 31,
		2006				2005
		(Unaudited)
Assets
Investment in real estate:
Land		$	2,823,824			$	2,826,766
Buildings and equipment			18,797,590				18,739,445
Less accumulated depreciation			(2,262,698	)			(2,104,956	)
Developments in progress			406,734				366,262
Net property and equipment			19,765,450				19,827,517
Investment in and loans to/from Unconsolidated Real Estate Affiliates			1,785,286				1,818,097
Investment land and land held for development and sale			1,644,734				1,651,063
Net investment in real estate			23,195,470				23,296,677
Cash and cash equivalents			65,233				102,791
Accounts and notes receivable, net			278,569				293,351
Insurance recovery receivable			58,822				63,382
Goodwill			361,897				420,624
Deferred expenses, net			241,284				209,825
Prepaid expenses and other assets			961,429				920,369
Total assets		$	25,162,704			$	25,307,019
Liabilities and Stockholders’ Equity
Mortgage notes and other debt payable		$	20,448,048			$	20,418,875
Deferred tax liabilities			1,252,814				1,286,576
Accounts payable and accrued expenses			925,675				1,032,414
Total liabilities			22,626,537				22,737,865
Minority interests:
Preferred			202,110				205,944
Common			420,537				430,292
Total minority interests			622,647				636,236
Commitments and contingencies			—				—
Preferred stock: $100 par value; 5,000,000 shares authorized; none issued and outstanding			—				—
Stockholders’ equity:
Common stock: $.01 par value; 875,000,000 shares authorized; 241,015,206 and 239,865,045 shares issued and outstanding as of March 31, 2006 and December 31, 2005, respectively			2,410				2,399
Additional paid-in capital			2,492,481				2,469,262
Retained earnings (accumulated deficit)			(593,676	)			(518,555	)
Unearned compensation-restricted stock			(2,521	)			(280	)
Accumulated other comprehensive income			14,826				10,454
Less common stock in treasury, no shares at March 31, 2006 and 668,396 shares at December 31, 2005, at cost			—				(30,362	)
Total stockholders’ equity			1,913,520				1,932,918
Total liabilities and stockholders’ equity		$	25,162,704			$	25,307,019

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

GENERAL GROWTH PROPERTIES, INC.

		Three Months Ended
		March 31,
		2006				2005
Revenues:
Minimum rents		$	437,731			$	405,834
Tenant recoveries			185,442				185,057
Overage rents			14,227				13,607
Land sales			137,220				61,250
Management and other fees			28,713				18,356
Other			25,286				22,353
Total revenues			828,619				706,457
Expenses:
Real estate taxes			54,964				53,190
Repairs and maintenance			47,054				48,435
Marketing			12,030				13,952
Other property operating costs			86,833				92,937
Land sales operations			98,598				53,811
Provision for doubtful accounts			6,213				4,197
Property management and other costs			46,707				34,964
General and administrative			3,558				2,811
Depreciation and amortization			165,346				161,725
Total expenses			521,303				466,022
Operating income			307,316				240,435
Interest income			3,222				1,040
Interest expense			(278,794	)			(245,274	)
Income (loss) before income taxes and allocations to minority interests and from unconsolidated affiliates			31,744				(3,799	)
Benefit (provision) for income taxes			(25,974	)			1,307
Income allocated to minority interests			(11,224	)			(12,664	)
Equity in income of unconsolidated affiliates			28,468				26,691
Income from continuing operations			23,014				11,535
Income from discontinued operations, net of minority interests			—				1,530
Net income available to common stockholders		$	23,014			$	13,065
Basic Earnings Per Share:
Continuing operations		$	0.10			$	0.05
Discontinued operations			—				0.01
Total basic earnings per share		$	0.10			$	0.06
Diluted Earnings Per Share:
Continuing operations		$	0.10			$	0.05
Discontinued operations			—				0.01
Total diluted earnings per share		$	0.10			$	0.06
Dividends declared per share		$	0.41			$	0.36
Comprehensive Income, Net:
Net income		$	23,014			$	13,065
Other comprehensive income, net of minority interest:
Net unrealized gains on financial instruments			1,286				6,127
Minimum pension liability adjustment			(59	)			(107	)
Foreign currency translation			3,052				(44	)
Unrealized gains on available-for-sale securities			93				290
Total other comprehensive income, net of minority interest			4,372				6,266
Comprehensive income, net		$	27,386			$	19,331

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

GENERAL GROWTH PROPERTIES, INC.

		Three Months Ended
		March 31,
		2006				2005
Cash flows from operating activities:
Net Income		$	23,014			$	13,065
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interests, including discontinued operations			11,224				12,856
Equity in income of unconsolidated affiliates			(28,468	)			(26,460	)
Provision for doubtful accounts, including discontinued operations			6,213				4,254
Distributions received from unconsolidated affiliates			26,604				8,585
Depreciation, including discontinued operations			159,284				158,544
Amortization, including discontinued operations			8,769				6,757
Amortization of debt market rate adjustment			(7,939	)			(8,335	)
Participation expense pursuant to Contingent Stock Agreement			38,480				20,214
Land development and acquisition expenditures			(47,099	)			(25,347	)
Cost of land sales			53,428				28,507
Debt assumed by purchasers of land			(4,336	)			(1,118	)
Deferred income taxes			23,562				6,033
Proceeds from the sale of marketable securities, including defined contribution plan assets			3,107				4,574
Straight-line rent amortization			(12,530	)			(15,023	)
Above and below market lease amortization			(9,104	)			(7,726	)
Other intangible amortization			2,563				2,968
Net changes:
Accounts and notes receivable			17,006				2,112
Prepaid expenses and other assets			10,666				(18,137	)
Deferred expenses			(15,003	)			(9,435	)
Accounts payable and accrued expenses			(68,587	)			(33,486	)
Other, net			5,142				1,165
Net cash provided by operating activities			195,996				124,567
Cash flows from investing activities:
Acquisition/development of real estate and property additions/improvements			(176,538	)			(118,908	)
Proceeds from sale of investment property			6,208				—
Increase in investments in unconsolidated affiliates			(34,677	)			(8,717	)
Increase (decrease) in restricted cash			(5,208	)			3,798
Insurance recoveries			7,500				—
Distributions received from unconsolidated affiliates in excess of income			88,849				13,345
Loans to unconsolidated affiliates, net			(23,574	)			—
Other, net			4,855				7,113
Net cash used in investing activities			(132,585	)			(103,369	)
Cash flows from financing activities:
Cash distributions paid to common stockholders			(98,133	)			(84,505	)
Cash distributions paid to holders of Common Units			(21,760	)			(20,085	)
Cash distributions paid to holders of perpetual and convertible preferred units			(4,408	)			(8,544	)
Proceeds from issuance of common stock, including from common stock plans			9,158				27,729
Proceeds from issuance of mortgage notes and other property debt payable			5,821,200				1,238,147
Principal payments on mortgage notes and other property debt payable			(5,778,800	)			(1,163,255	)
Deferred finance costs			(30,057	)			(1,524	)
Other, net			1,831				393
Net cash used in financing activities			(100,969	)			(11,644	)
Net change in cash and cash equivalents			(37,558	)			9,554
Cash and cash equivalents at beginning of period			102,791				39,581
Cash and cash equivalents at end of period		$	65,233			$	49,135
Supplemental disclosure of cash flow information:
Interest paid		$	290,508			$	265,378
Interest capitalized			11,094				14,954
Taxes paid			4,315				3,898
Non-cash investing and financing activities:
Common stock issued in exchange for Operating Partnership Units		$	2,614			$	18,661
Common stock issued in exchange for convertible preferred units			3,833				1,006
Common stock issued pursuant to Contingent Stock Agreement			35,349				18,098

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

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, 2005 which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (Commission File No. 1-11656), as certain footnote disclosures which would substantially duplicate those contained in the 2005 annual audited consolidated financial statements have been omitted from this report. Capitalized terms used, but not defined, in this quarterly report have the same meanings as in the Company’s 2005 Annual Report on Form 10-K.

General

General Growth Properties, Inc. (“General Growth”), a Delaware corporation, is a self-administered and self-managed real estate investment trust, referred to as a “REIT.” General Growth was organized in 1986 and through its subsidiaries and affiliates owns, operates, manages, leases, acquires, develops, expands and finances operating properties located primarily throughout the United States and develops and sells land for residential, commercial and other uses primarily in master planned communities. The operating properties consist of retail centers, office and industrial buildings and mixed-use and other properties. Land development and sales operations are predominantly related to large-scale, long-term community development projects in and around Columbia, Maryland; Summerlin, Nevada; and Houston, Texas. In these notes, the terms “we,” “us” and “our” refer to General Growth and its subsidiaries (the “Company”).

Substantially all of our business is conducted through GGP Limited Partnership (the “Operating Partnership” or “GGPLP”). As of March 31, 2006, ownership of the Operating Partnership was as follows:

82	%		General Growth, as sole general partner
16			Limited partners that indirectly include family members of the original stockholders of the Company. Represented by common units of limited partnership interest (the “Common Units”)
2			Limited partners that include subsequent contributors of properties to the Operating Partnership which are also represented by Common Units.
100	%

The Operating Partnership also has preferred units of limited partnership interest (the “Preferred Units”) outstanding. Under certain circumstances, the Preferred Units are convertible into Common Units which are redeemable for shares of General Growth common stock on a one-for-one basis.

In addition to holding ownership interests in various joint ventures, the Operating Partnership generally conducts its operations through the following subsidiaries:

•		GGPLP L.L.C., a Delaware limited liability company (the “LLC”), has ownership interests in the majority of our properties (other than those acquired in The Rouse Company merger (the “TRC Merger,”).
•		The Rouse Company LP (“TRCLP”), successor to The Rouse Company (“TRC”), which includes both REIT and taxable REIT subsidiaries (“TRSs”), has ownership interests in Consolidated Properties and Unconsolidated Properties (each as defined below).

GENERAL GROWTH PROPERTIES, INC.

•

General Growth Management, Inc. (“GGMI”), a TRS, manages, leases, and performs various other services for some of our Unconsolidated Real Estate Affiliates (as defined below) and approximately 30 properties owned by unaffiliated third parties.

In this report, we refer to our ownership interests in majority-owned or controlled properties as “Consolidated Properties,” to joint ventures in which we own a non-controlling interest as “Unconsolidated Real Estate Affiliates” and the properties owned by such joint ventures as the “Unconsolidated Properties.” Our “Company Portfolio” includes both our Consolidated Properties and our Unconsolidated Properties.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of General Growth, our subsidiaries and joint ventures in which we have a controlling interest. Income allocated to minority interests in these joint ventures includes the share of such properties’ operations (generally computed as the respective joint venture partner ownership percentage) applicable to such non-controlling venturers. All significant intercompany balances and transactions have been eliminated.

In the opinion of management, all adjustments (consisting of normal recurring adjustments, unless otherwise noted) 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, 2006 are not necessarily indicative of the results to be obtained for the full fiscal year.

Accounting for Acquisitions

Acquisitions of properties are accounted for utilizing the purchase method and accordingly, the results of operations are included in our results of operations subsequent to the respective dates of acquisition. The purchase prices for all property acquisitions are subject to certain prorations and adjustments. Estimates of future cash flows and other valuation techniques are used to allocate the purchase price of acquired property between land, buildings and improvements, equipment and identifiable intangible assets and liabilities such as amounts related to in-place at-market leases, acquired above and below-market leases and tenant relationships. Initial valuations are subject to change until such information is finalized no later than the reporting period which contains the date 12 months from the applicable acquisition dates.

Earnings Per Share (“EPS”)

		Three Months Ended March 31,
		2006								2005
		Basic				Diluted				Basic				Diluted
		(In thousands)
Numerators:
Income from continuing operations		$	23,014			$	23,014			$	11,535			$	11,535
Discontinued operations, net of minority interests			—				—				1,530				1,530
Net income		$	23,014			$	23,014			$	13,065			$	13,065
Denominators:
Weighted average number of common shares outstanding — basic			240,621				240,621				235,812				235,812
Effect of dilutive securities — options			—				967				—				776
Weighted average number of common shares outstanding — diluted			240,621				241,588				235,812				236,588

GENERAL GROWTH PROPERTIES, INC.

Dilutive EPS excludes options where the exercise price was higher than the average market price of our common stock and, therefore, the effect would be anti-dilutive and options for which the conditions which must be satisfied prior to the issuance of any such shares were not achieved. Such excluded options totaled 3,213,651 for the three months ended March 31, 2006 and 1,199,132 for the three months ended March 31, 2005. Outstanding Common Units have also been excluded from the diluted earnings per share calculation because there would be no effect on EPS as the minority interests’ share of income would also be added back to net income.

Revenue Recognition and Related Matters

Straight-line rents receivable, which represent the current net cumulative rents recognized prior to when billed and collectible as provided by the terms of the leases, of approximately $137.3 million as of March 31, 2006 and $123.5 million as of December 31, 2005 are included in accounts receivable, net in the accompanying consolidated balance sheets. Minimum rent revenues also include amounts collected from tenants to allow the termination of their leases prior to their scheduled termination dates and accretion related to above and below-market leases on properties acquired as provided by FASB Statements No. 141, “Business Combinations” (“SFAS 141”) and No. 142, “Goodwill and Intangible Assets” (“SFAS 142”).

		Three Months Ended
		March 31,
(In thousands)		2006				2005
Termination income		$	17,240			$	2,527
Accretion of above and below-market leases			9,104				7,726

Management fees primarily represent management and leasing fees, financing fees and fees for other ancillary services performed by us for the benefit of certain of the Unconsolidated Real Estate Affiliates and for properties owned by third parties and are recognized as revenues when earned. We recognized fees for services performed for such Unconsolidated Properties of approximately $21.6 million for the three months ended March 31, 2006 and approximately $17.1 million for the three months ended March 31, 2005.

Employee Benefit and Stock Plans

Incentive Stock Plans

General Growth has incentive stock plans designed to attract and retain officers and key employees. Our incentive stock plans provide for stock and option grants to employees in the following forms:

	•		Restricted stock grants
	•		Threshold-vesting stock options (“TSOs”)
	•		Stock options (pursuant to the 2003 Incentive Stock Plan, “Executive Stock Options”)

During the quarter ended March 31, 2006, we issued 70,000 restricted stock grants to certain officers, 1,225,000 Executive Stock Options to officers and key employees and 45,000 Executive Stock Options to directors. The restricted stock grants vest over various periods of up to three years. Twenty percent of the Executive Stock Options granted to officers and key employees vested immediately and the remainder vest in 20% annual increments. The Executive Stock Options granted to directors vested immediately. All of the remaining Executive Stock Options granted in 2006 will expire by 2011.

GENERAL GROWTH PROPERTIES, INC.

The following is a summary of outstanding TSOs as of March 31, 2006:

		TSO Grant Year
		2006				2005				1999-2003
Exercise price		$	50.47			$	35.41			$	14.00	*
Threshold vesting stock price			70.79				49.66				19.63	*
Vesting date			N/A				N/A				2002-2003
Fair value of options on grant date			3.31				3.77				1.03	*
Shares:
Original grant			1,400,000				1,000,000				4,523,952
Forfeited			(38,060	)			(83,289	)			(845,826	)
Vested and exchanged for cash			—				—				(2,647,509	)
Vested and exercised			—				—				(862,770	)
Outstanding			1,361,940				916,711				167,847

Total compensation expense related to the restricted stock grants, Executive Stock Options and TSO’s totaled $5.0 million for the three months ended March 31, 2006 and $3.1 million for the three months ended March 31, 2005.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. For example, significant estimates and assumptions have been made with respect to useful lives of assets, capitalization of development and leasing costs, provisions 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 property acquisitions, and cost ratios and completion percentages used for land sales. Actual results could differ from those estimates.

Reclassifications and Corrections

Certain amounts in the 2005 consolidated financial statements, including discontinued operations (Note 6), have been reclassified to conform to the current year presentation. In addition, during the first quarter of 2006, we made a correction to the purchase price allocation of TRCLP that was recorded in our 2005 consolidated financial statements. Such correction reduced deferred tax liabilities by approximately $58.7 million with a corresponding reduction to goodwill and had no impact on earnings or cash flows for the year ended December 31, 2005 or the three months ended March 31, 2006. We believe that the effects of this correction are not material to our previously issued 2005 consolidated financial statements.

GENERAL GROWTH PROPERTIES, INC.

Retained Debt totaled $301.4 million as of March 31, 2006 and $302.7 million as of December 31, 2005, and has been reflected as a reduction of our Investment in Unconsolidated Real Estate Affiliates.

The significant accounting policies used by the Unconsolidated Real Estate Affiliates are the same as ours.

On April 6, 2006, we acquired our joint venture partner’s 49% interest in GGP Ivanhoe IV, Inc. which owns Eastridge Mall, for $115 million, which was paid with a note due in September 2006. As of April 6, 2006, Eastridge Mall will be consolidated for accounting purposes.

Condensed Combined Financial Information of Unconsolidated Real Estate Affiliates

The following is condensed combined financial information for our Unconsolidated Real Estate Affiliates as of March 31, 2006 and December 31, 2005 and for the three months ended March 31, 2006 and 2005.

						December 31,
(In thousands)		March 31, 2006				2005
Condensed Combined Balance Sheets — Unconsolidated Real Estate Affiliates
Assets:
Land		$	929,647			$	919,532
Buildings and equipment			7,760,735				7,658,896
Less accumulated depreciation			(1,366,120	)			(1,304,226	)
Developments in progress			499,307				425,057
Net property and equipment			7,823,569				7,699,259
Investment in unconsolidated joint ventures			74,621				89,430
Investment land and land held for sale and development			258,394				259,386
Net investment in real estate			8,156,584				8,048,075
Cash and cash equivalents			174,607				194,494
Accounts and notes receivable, net			139,023				161,218
Deferred expenses, net			147,266				148,561
Prepaid expenses and other assets			217,794				259,480
Total assets		$	8,835,274			$	8,811,828
Liabilities and Owners’ Equity:
Mortgage notes and other property debt payable		$	6,434,765			$	6,325,118
Accounts payable and accrued expenses			450,047				455,596
Owners’ equity			1,950,462				2,031,114
Total liabilities and owners’ equity		$	8,835,274			$	8,811,828
Investment In and Loans To/From Unconsolidated Real Estate Affiliates
Owners’ equity		$	1,950,462			$	2,031,114
Less joint venture partners’ equity			(1,126,461	)			(1,188,150	)
Capital or basis differences and loans			961,285				975,133
Investment in and loans to/from Unconsolidated Real Estate Affiliates		$	1,785,286			$	1,818,097

GENERAL GROWTH PROPERTIES, INC.

		Three Months Ended
		March 31,
(In thousands)		2006				2005
Condensed Combined Statements of Income — Unconsolidated Real Estate Affiliates
Revenues:
Minimum rents		$	210,979			$	192,445
Tenant recoveries			93,776				86,859
Overage rents			4,700				3,504
Land sales			35,331				16,319
Other			42,538				29,849
Total revenues			387,324				328,976
Expenses:
Real estate taxes			30,087				27,531
Repairs and maintenance			21,240				21,431
Marketing			7,121				6,826
Other property operating costs			73,675				57,864
Land sales operations			18,917				7,204
Provision for doubtful accounts			288				2,208
Property management and other costs			16,118				14,027
General and administrative			1,920				481
Depreciation and amortization			66,226				58,819
Total expenses			235,592				196,391
Operating income			151,732				132,585
Interest income			6,002				1,532
Interest expense			(80,821	)			(68,809	)
Equity in income of unconsolidated joint ventures			1,429				1,119
Net income		$	78,342			$	66,427
Equity In Income of Unconsolidated Real Estate Affiliates
Total income of Unconsolidated Real Estate Affiliates		$	78,342			$	66,427
Joint venture partners’ share of income of Unconsolidated Real Estate Affiliates			(41,075	)			(33,701	)
Amortization of capital or basis differences			(8,799	)			(6,035	)
Equity in income of Unconsolidated Real Estate Affiliates		$	28,468			$	26,691

In addition, the following is summarized financial information for certain individually significant Unconsolidated Real Estate Affiliates for the three months ended March 31, 2006 and 2005.

GENERAL GROWTH PROPERTIES, INC.

Three months ended March 31,		GGP/Homart
(In thousands)		2006				2005
Revenues:
Minimum rents		$	58,571			$	59,610
Tenant recoveries			24,566				22,943
Overage rents			1,736				1,097
Other			2,239				1,994
Total revenues			87,112				85,644
Expenses:
Real estate taxes			7,897				7,380
Repairs and maintenance			6,498				7,135
Marketing			2,272				2,450
Other property operating costs			10,456				7,872
Provision for doubtful accounts			(194	)			330
Property management and other costs			5,541				5,065
General and administrative			98				99
Depreciation and amortization			17,917				17,020
Total expenses			50,485				47,351
Operating income			36,627				38,293
Interest income			2,086				498
Interest expense			(21,648	)			(20,329	)
Equity in income of unconsolidated joint ventures			1,429				1,119
Net income		$	18,494			$	19,581

Three months ended March 31,		GGP/Homart II
(In thousands)		2006				2005
Revenues:
Minimum rents		$	52,535			$	45,957
Tenant recoveries			23,591				23,090
Overage rents			1,069				1,035
Other			2,003				1,341
Total revenues			79,198				71,423
Expenses:
Real estate taxes			7,448				7,301
Repairs and maintenance			4,482				4,727
Marketing			2,039				2,377
Other property operating costs			8,610				8,038
Provision for doubtful accounts			79				611
Property management and other costs			4,794				4,088
General and administrative			1,665				184
Depreciation and amortization			15,510				15,024
Total expenses			44,627				42,350
Operating income			34,571				29,073
Interest income			2,873				478
Interest expense			(20,112	)			(16,313	)
Net income		$	17,332			$	13,238

GENERAL GROWTH PROPERTIES, INC.

Three months ended March 31,		GGP/Teachers
(In thousands)		2006				2005
Revenues:
Minimum rents		$	25,651			$	20,860
Tenant recoveries			10,848				9,579
Overage rents			594				65
Other			518				470
Total revenues			37,611				30,974
Expenses:
Real estate taxes			2,914				2,749
Repairs and maintenance			1,893				1,817
Marketing			1,037				856
Other property operating costs			4,527				3,699
Provision for doubtful accounts			(108	)			61
Property management and other costs			2,190				1,650
General and administrative			150				184
Depreciation and amortization			7,460				5,147
Total expenses			20,063				16,163
Operating income			17,548				14,811
Interest income			184				136
Interest expense			(10,386	)			(4,793	)
Net income		$	7,346			$	10,154

NOTE 4 MORTGAGE NOTES AND OTHER PROPERTY DEBT PAYABLE

Mortgage notes and other property debt payable reflected in the accompanying consolidated balance sheets at March 31, 2006 and December 31, 2005 consisted of the following:

		March 31,				December 31,
(In thousands)		2006				2005
Fixed-rate debt:
Commercial mortgage-backed securities		$	1,180,497			$	1,181,895
Other collateralized mortgage notes and other debt payable			11,527,837				11,092,544
Corporate and other unsecured term loans			1,607,350				1,631,257
Total fixed-rate debt			14,315,684				13,905,696
Variable-rate debt:
Commercial mortgage-backed securities			305,219				306,270
Other collateralized mortgage notes and other debt payable			637,945				888,842
Credit facilities			141,000				180,500
Corporate and other unsecured term loans			5,048,200				5,137,567
Total variable-rate debt			6,132,364				6,513,179
Total		$	20,448,048			$	20,418,875

GENERAL GROWTH PROPERTIES, INC.

Commercial Mortgage-Backed Securities

In December 2001, the Operating Partnership and certain Unconsolidated Real Estate Affiliates completed the placement of non-recourse commercial mortgage pass-through certificates (the “GGP MPTC”). The principal amount of the GGP MPTC is attributed to the Operating Partnership, GGP/Homart, GGP/Homart II and GGP Ivanhoe III. In addition, in November 1997 (refinanced in November 2004), the Operating Partnership and GGP Ivanhoe I completed the placement of non-recourse commercial mortgage backed securities (the “CMBS 13”). The commercial mortgage-backed securities have cross-default provisions and are cross-collateralized. Under certain cross-default provisions, a default under any mortgage note included in a cross-defaulted package may constitute a default under all such mortgage notes in the package and may lead to acceleration of the indebtedness due on each property within the collateral package. In general, the cross-defaulted properties are under common ownership, however, certain unconsolidated debt is cross-defaulted and cross-collateralized by consolidated debt as follows:

		Outstanding Balance								Number of Collateralized Properties
		Consolidated				Unconsolidated				Consolidated				Unconsolidated
		(Dollars in millions)
GGP MPTC		$	616.9			$	290.3				4				5
CMBS 13			868.8				138.6				11				2

As of March 31, 2006, the weighted-average interest rate on the consolidated fixed-rate commercial mortgage-backed securities was 5.38% (range of 4.15% to 6.71%). The weighted-average interest rate on the consolidated variable-rate commercial mortgage-backed securities, excluding the impact of interest rate swaps, was 5.29% (range of LIBOR (4.83% at March 31, 2006) plus 80 to 92 basis points).

Other Collateralized Mortgage Notes and Other Property Debt Payable

Collateralized mortgage notes and other property debt payable consist primarily of non-recourse notes collateralized by individual properties and equipment. Substantially all of the mortgage notes are non-recourse to us. Certain mortgage notes payable may be prepaid but are generally subject to a prepayment penalty equal to a yield-maintenance premium or a percentage of the loan balance.

The fixed-rate collateralized mortgage notes and other debt payable bear interest ranging from 3.13% to 11.40%. The variable-rate collateralized mortgage notes and other debt payable bear interest at LIBOR plus 75 to 190 basis points.

Corporate and Other Unsecured Term Loans

In February 2006, we entered into several debt agreements. The proceeds of these transactions were used to reduce the approximately $5.3 billion outstanding under the 2004 Credit Facility, which was entered into to fund the cash portion of the TRC Merger consideration and, with other cash and financing sources, fund other costs of the merger transaction.

On February 24, 2006, we restated that 2004 Credit Facility and entered into a Second Amended and Restated Credit Agreement (the “2006 Credit Facility”). The 2006 Credit Facility provides for a $2.85 billion term loan (the “Term Loan”) and a $650 million revolving credit facility.

GENERAL GROWTH PROPERTIES, INC.

The 2006 Credit Facility has a four year term, with a one year extension option. The interest rate ranges from LIBOR plus 1.15% to LIBOR plus 1.5%, depending on our leverage ratio and assuming we maintain our election to have these loans designated as Eurodollar loans. The current interest rate is LIBOR plus 1.25%. Quarterly principal payments of $12.5 million on the Term Loan begin March 31, 2007, with the balance due at maturity.

Under the terms of the 2006 Credit Facility, we are subject to customary affirmative and negative covenants as we were under the 2004 Credit Facility. If a default occurs, the lenders will have the option of declaring all outstanding amounts immediately due and payable. Events of default include a failure to maintain our REIT status under the Internal Revenue Code, a failure to remain listed on the New York Stock Exchange and such customary events as nonpayment of principal, interest, fees or other amounts, breach of representations and warranties, breach of covenant, cross-default to other indebtedness and certain bankruptcy events.

Concurrently with the 2006 Credit Facility and as described below, we also entered into a $1.4 billion term loan (the “Short Term Loan”) and issued $200 million of trust preferred securities (the “TRUPS”) through GGP Capital Trust I and TRCLP entered into a $500 million term loan (the “Bridge Loan”). All of these arrangements are subject to customary affirmative and negative covenants and events of default.

The interest rate on the Short Term Loan is the same as on the 2006 Credit Facility (currently LIBOR plus 1.25%). An $800 million principal payment is due under the Short Term Loan on August 14, 2006, with the balance due on December 31, 2006. We are required to apply the net proceeds of the refinancing of Ala Moana Center, which is expected in the Fall of 2006, toward prepayment of the Short Term Loan.

The Bridge Loan bears interest at LIBOR plus 1.3% until May 24, 2006, and at LIBOR plus 1.55% thereafter and was scheduled to be due August 24, 2006. However, on May 5, 2006 we fully repaid the Bridge Loan with a portion of the proceeds obtained from the sale of bonds issued by TRCLP. A total of $800 million of senior unsecured notes were issued, providing for semi-annual payments (commencing November 1, 2006) of interest only at a rate per annum of 6.75% and payment of the principal in full on May 1, 2013.

As mentioned above, GGP Capital Trust I (the “Trust”), a Delaware statutory trust (the “Trust”), completed a private placement of $200 million of TRUPS. The Trust also issued $6.2 million of Common Securities to GGPLP. The Trust used the proceeds from the sale of the Preferred and Common Securities to purchase $206.2 million of floating rate Junior Subordinated Notes of GGPLP due 2036. The TRUPS require distributions equal to LIBOR plus 1.45%. Distributions are cumulative and accrue from the date original issuance. The Preferred Securities mature on April 30, 2036, but may be redeemed beginning on April 30, 2011 if we exercise our right to redeem a like amount of the Junior Subordinated Notes. The Junior Subordinated Notes bear interest at LIBOR plus 1.45%. Though the Trust is a wholly-owned subsidiary of GGPLP, we are not the primary beneficiary of the Trust and, accordingly, it is not consolidated for accounting purposes under FASB Interpretation No. 46, “Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51” (FIN 46R). As a result, we have recorded the Junior Subordinated Notes as “Mortgage Notes and Other Property Debt Payable” and our common equity interests in the Trust as “Prepaid and Other Assets” in our consolidated balance sheet as of March 31, 2006.

GENERAL GROWTH PROPERTIES, INC.

Unsecured Term Loans

In conjunction with the TRC Merger, we assumed certain publicly-traded unsecured debt. This fixed-rate debt, comprised of 8.78% and 8.44% Notes due 2007, 3.625% Notes and 8% Notes due 2009, 7.2% Notes due 2012 and 5.375% Notes due 2013, totaled $1.5 billion at both March 31, 2006 and December 31, 2005. Under the terms of the Indenture dated as of February 24, 1995, as long as these notes are outstanding, TRCLP is required to file with the SEC the annual and quarterly reports and other documents which TRCLP would be required to file if it was subject to Section 13(a) or 15(d) of the Exchange Act, regardless of whether TRCLP was subject to such requirements. TRCLP is no longer required to file reports or other documents with the SEC under Section 13(a) or 15(d). Accordingly, in lieu of such filing, certain financial and other information related to TRCLP has been included in a separate disclosure at the conclusion of our discussion of our operations and financial condition included in Item 2 of this Quarterly Report on Form 10-Q. We believe that such TRCLP information is responsive to the terms of the Indenture and that any additional information needed or actions required can be supplied or addressed.

In conjunction with our acquisition of JP Realty in 2002, we assumed $100 million of ten-year senior unsecured notes which bear interest at a fixed rate of 7.29% and were issued by PDC in March 1998. The notes require semi-annual interest payments. Annual principal payments of $25 million began in March 2005 and continue until the loan is fully repaid in March 2008.

Interest Rate Swaps

To achieve a more desirable balance between fixed and variable-rate debt, we have also entered into certain swap agreements as follows:

		GGP				2006 Credit				Property
		MPTC				Agreement				Specific
Total notional amount (in millions)		$	25.0			$	350.0			$	380.0
Average fixed effective rate (pay rate)			4.59	%			3.43	%			5.77	%
Average variable interest rate of related debt (receive rate)		LIBOR + .92%				LIBOR + 1.25%				LIBOR + 1.48%

Such swap agreements have been designated as cash flow hedges and are intended to hedge our exposure to future interest charges on the related variable-rate debt.

Letters of Credit and Surety Bonds

We had outstanding letters of credit and surety bonds of approximately $220 million as of March 31, 2006 and approximately $210 million as of December 31, 2005. These letters of credit and bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.

NOTE 5 COMMITMENTS AND CONTINGENCIES

In the normal course of business, from time to time, we are involved in legal actions relating to the ownership and operations of our properties. In management’s opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material adverse effect on our consolidated financial position, results of operations or liquidity.

We lease land or buildings at certain properties from third parties. Consolidated rental expense, including participation rent, and excluding amortization of above and below market ground leases, related to these leases was $2.5 million for the three months ended March 31, 2006 and $2.3 million for the three months ended March 31, 2005. The leases generally provide for a right of first refusal in favor of us in the event of a proposed sale of the property by the landlord.

We periodically enter into contingent agreements for the acquisition of properties. Each acquisition is subject to satisfactory completion of due diligence and, in the case of property acquired under development, completion of the project.

GENERAL GROWTH PROPERTIES, INC.

TRC acquired various assets, including Summerlin, a master-planned community in suburban Las Vegas, Nevada, in the acquisition of The Hughes Corporation (“Hughes”) in 1996. In connection with the acquisition of Hughes, TRC entered into a Contingent Stock Agreement (“CSA”) for the benefit of the former Hughes owners or their successors (“beneficiaries”). Under the terms of the CSA, shares of TRC common stock were issuable to the beneficiaries based on the appraised values of defined asset groups, including Summerlin, at specified termination dates through 2009 and/or cash flows from the development and/or sale of those assets prior to the termination dates.

We assumed TRC’s obligation under the CSA to issue shares of common stock twice a year to beneficiaries under the CSA. The amount of shares is based upon a formula set forth under the CSA and upon our stock price. Such issuances could be dilutive to our existing stockholders. In addition, under the assumption agreement, we agreed that following the effective time of the TRC Merger there would not be a prejudicial effect on the beneficiaries under the CSA with respect to their receipt of securities pursuant to the CSA as a result of the TRC Merger. We further agreed to indemnify and hold harmless the beneficiaries against losses arising out of any breach by us of the foregoing covenants.

We account for the beneficiaries’ share of earnings from the assets as an operating expense. We will account for any distributions to the beneficiaries in 2009, which are likely to be significant, in connection with a valuation related to assets that we own as of such date as additional investments in the related assets (that is, contingent consideration). A total of 755,828 shares (including 668,333 treasury shares) of our common stock were issued in February 2006 pursuant to the CSA.

Two of our operating retail properties (Oakwood Center in Gretna, Louisiana and Riverwalk Marketplace, located near the convention center in downtown New Orleans) continue to operate at reduced levels due to unrepaired damage and tenant vacancies which arose concurrently with hurricane damage in the New Orleans area in September 2005. We have comprehensive insurance coverage for both property damage and business interruption. The net book value of the property damage is currently estimated to be approximately $53 million; however, we are still assessing the damage estimates and the actual net book value write-off could vary from this estimate. Changes to these estimates will be recorded in the periods in which they are determined. During 2005, we recorded a net fixed asset write-off and a corresponding insurance claim recovery receivable for this net book value amount because we believe that it is probable that the insurance recovery, net of deductibles on a replacement cost basis, will exceed these amounts. While we expect the insurance proceeds will be sufficient to cover most of the replacement cost of the restoration of the properties and certain business interruption amounts, certain deductibles, limitations and exclusions are expected to apply with respect to both current and future matters. No determination has been made as to the total amount or timing of those insurance payments. As of March 31, 2006, an aggregate of $12.5 million in insurance proceeds related to the properties have been received, which has been offset against this insurance recovery receivable. In April 2006, we received an additional $5 million in insurance proceeds with respect to Oakwood. As only a portion of the repairs have taken place as of March 31, 2006, substantially all of the remaining $58.8 million receivable recorded represents the recovery of the net book value of fixed assets written off.

NOTE 6 DISCONTINUED OPERATIONS AND GAINS ON DISPOSITIONS OF INTERESTS IN OPERATING PROPERTIES

On December 21, 2005, as approved in December 2005 by our Board of Directors, we sold 7 buildings totaling approximately 705,000 square feet located in the Hunt Valley Business Community in Hunt Valley, Maryland and 14 office buildings totaling approximately 402,000 square feet in the Rutherford Business Center, Woodlawn, Maryland. These 21 properties in Baltimore County were sold at an

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