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General Growth Properties, Inc. Reports Results of Operations for First Quarter 2009

CHICAGO, May 06, 2009 (BUSINESS WIRE) -- General Growth Properties, Inc. (the Company) released today its first quarter 2009 operating results. For the first quarter of 2009, Core Funds From Operations (Core FFO) per fully diluted share were a loss of $0.38, Funds From Operations (FFO) per fully diluted share were a loss of $0.52 and Earnings per share - diluted (EPS) were a loss of $1.27. In the comparable 2008 period, Core FFO per fully diluted share were $0.74, FFO per fully diluted share were $0.73 and EPS were $0.01. The declines in Core FFO and FFO are primarily attributable to provisions for impairment, termination income and restructuring costs related to the development of alternatives to address our current liquidity and financing situations. A Supplemental Schedule of Significant FFO Items that Impact Comparability is provided with this release. In addition, the 2008 results have been restated to reflect the adoption of two accounting pronouncements as of January 1, 2009 that required retrospective application.

As previously reported, we filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). Although approximately 166 of our regional malls and certain other subsidiaries have also sought voluntary protection in related Chapter 11 filings, our property management subsidiary, certain of our wholly-owned subsidiaries, and our joint ventures, either consolidated or unconsolidated, have not sought such protection. The Bankruptcy Court has ruled to allow joint administration of these cases and has approved, on an interim basis, certain "first day" motions generally designed to permit continued normal operations and covering, among other things, employee obligations, critical service providers, tax matters, insurance matters, tenant obligations, cash management and cash collateral. These motions are subject to a final hearing before the Bankruptcy Court on May 8, 2009. The Company intends to pursue a plan of reorganization that extends mortgage maturities and reduces its corporate debt and overall leverage. We intend to work with our various lenders and other constituencies to emerge from bankruptcy as quickly as possible while executing on a plan of reorganization that preserves GGP's integrated, national business operations.

FINANCIAL AND OPERATIONAL HIGHLIGHTS

• Core FFO is defined as Funds From Operations excluding the Real Estate Property Net Operating Income (NOI) from the Master Planned Communities segment and the benefit from (provision for) income taxes. Core FFO for the first quarter of 2009 was a loss of $122.9 million or $0.38 per fully diluted share as compared to a positive $220.3 million or $0.74 per fully diluted share for the first quarter of 2008. The primary reason for the Core FFO decline is the approximately $279.8 million of Core FFO impairments recognized in the first quarter of 2009, as detailed in our Supplemental Schedule of Significant FFO Items that Impact Comparability included with this release. No significant impairments were recognized in the first quarter of 2008. In addition, approximately $38.3 million of restructuring costs were incurred in 2009 whereas no such restructuring costs were incurred in the first quarter of 2008. With respect to minimum rents, approximately $11.7 million more of termination income was recognized in 2008 than in 2009.
• FFO per fully diluted share was a loss of $0.52 in the first quarter of 2009. FFO for the quarter was a loss of $165.9 million as compared to $216.9 million in the first quarter of 2008. In addition to the items detailed in the Supplemental Schedule of Significant FFO Items that Impact Comparability, we experienced land sales declines in the Master Planned Community segment discussed below.
• EPS for the first quarter of 2009 were a loss of $1.27 per share versus earnings of $0.01 in the first quarter of 2008. Our first quarter 2009 EPS were significantly impacted by the FFO items discussed above as well as increased depreciation due to the scheduled acquisition of The Shoppes at The Palazzo in 2008.

SEGMENT RESULTS

Retail and Other Segment

• NOI for the first quarter of 2009 was $608.6 million, a decrease of approximately 4.1% from the $634.5 million reported in the first quarter of 2008. Minimum rents in the first quarter of 2009 declined approximately $2.7 million as compared to the same period of 2008 due to the 2008 sale of three office buildings and two office parks. Temporary tenant revenues, other revenues (including sponsorship, vending, parking and advertising) and overage rents declined in 2009 due to decreases in occupancy and the overall weakness of the retail economy. Weaknesses in certain of our tenants' businesses also led to an $8.6 million increase in our provision for doubtful accounts in 2009 as compared to 2008. In addition, other revenues declined in 2009 due to a loss on sale of outparcel land of $3.9 million whereas 2008 had outparcel sales gains of approximately $4.3 million.
• Revenues from consolidated properties were $ 757.6 million for the first quarter of 2009, a decline of 5.1% compared to $798.3 million for the same period in 2008. The majority of this decline is due to the items impacting FFO discussed above.
• Revenues from unconsolidated properties, at the Company's ownership share, increased to $152.1 million or 3.8% compared to $146.6 million in the first quarter of 2008. This increase was primarily due to the completion and commencement of operations at the Natick Collection in 2008.
• Total tenant sales declined 6.1% and comparable tenant sales declined 6.7% in 2009, both on a trailing 12 month basis, compared to the same period last year.
• Comparable NOI from consolidated properties in the first quarter of 2009 declined by 4.4% compared to the first quarter of 2008. Comparable NOI from unconsolidated properties at the Company's ownership share in the first quarter of 2009 increased by approximately 3.7% compared to the first quarter of 2008. In the aggregate, comparable segment NOI decreased 3.3% as compared to the first quarter of 2008.
• Retail Center occupancy decreased to 90.9% at March 31, 2009, compared to 92.5% at December 31, 2008 and 92.7% at March 31, 2008.
• Sales per square foot for first quarter 2009 (on a trailing twelve month basis) were $427 versus $438 for the fourth quarter 2008 and $460 in the first quarter of 2008.

Master Planned Communities Segment

• NOI in the first quarter of 2009for the Master Planned Communities segment was a loss of $54.4 million for consolidated properties and income of $0.3 million for unconsolidated properties as compared to a loss of $0.9 million and income of $7.7 million, respectively, in the first quarter of 2008. As detailed in the Supplemental Schedule of FFO Items that Impact Comparability, the NOI loss in the first quarter of 2009 is due primarily to the $52.8 million provision for impairment related to the agreement to sell substantially all of our remaining acreage at the Fairwood Community in a single bulk sale, a transaction which is expected to be completed in the third quarter of 2009. NOI remains negative for certain other communities as operating expenses cannot be completely eliminated despite the significant reduction in current sales revenues.
• Land sale revenues in the first quarter of 2009were approximately $9.0 million for consolidated properties and approximately $5.1 million for unconsolidated properties, compared to $9.1 million and $23.1 million, respectively, in the first quarter of 2008.

GGP INFORMATION/WEBSITE

The Company currently has ownership interest in, or management responsibility for, over 200 regional shopping malls in 44 states, as well as ownership in planned community developments and commercial office buildings. The Company's portfolio totals approximately 200 million square feet of retail space and includes over 24,000 retail stores nationwide. The Company's common stock is currently traded in the pink sheets using the symbol GGWPQ. For more information, please visit the Company website at http://www.ggp.com.

NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES AND DEFINITIONS

FUNDS FROM OPERATIONS AND CORE FFO

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

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

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

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

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

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

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

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

PROPERTY INFORMATION

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

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements. Actual results may differ materially from the results suggested by these forward-looking statements, for a number of reasons, including, but not limited to, the impact of our bankruptcy filing, our ability to refinance our near and intermediate term debt, our substantial level of indebtedness and interest rates, retail and credit market conditions, impairments, land sales in the Master Planned Communities segment, the cost and success of development and re-development projects and our ability to successfully manage our strategic and financial review and our liquidity demands. Readers are referred to the documents filed by General Growth Properties, Inc. with the Securities and Exchange Commission, which further identify the important risk factors which could cause actual results to differ materially from the forward-looking statements in this release. The Company disclaims any obligation to update any forward-looking statements.

SOURCE: General Growth Properties, Inc.

General Growth Properties, Inc.
Jim Graham
Senior Director of Public Affairs
(312) 960-2955

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