GENERAL GROWTH PROPERTIES INC - 10-Q Quarterly Report

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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 SEPTEMBER 30, 2004 OR

[ ] 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 1-11656

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 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 [X] NO [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

YES [X] NO [ ]

The number of shares of Common Stock, $.01 par value, outstanding on November 5,
2004 was 218,700,666.

GENERAL GROWTH PROPERTIES, INC.

INDEX

PAGE
NUMBER
------

PART I FINANCIAL INFORMATION

Item 1: Financial Statements

Consolidated Balance Sheets
as of September 30, 2004 and December 31, 2003....................................... 3

Consolidated Statements of Operations and Comprehensive Income
for the three and nine months ended September 30, 2004 and 2003...................... 4

Consolidated Statements of Cash Flows
for the nine months ended September 30, 2004 and 2003................................ 5

Notes to Consolidated Financial Statements........................................... 6

Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations........................................ 31

Liquidity and Capital Resources of the Company....................................... 37

Item 3: Quantitative and Qualitative Disclosures about Market Risk....................... 41

Item 4: Controls and Procedures.......................................................... 42

PART II OTHER INFORMATION

Item 6: Exhibits......................................................................... 43

SIGNATURE................................................................................. 44

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003
(Dollars in thousands, except for per share and per unit amounts)

SEPTEMBER 30, 2004 DECEMBER 31, 2003
------------------- ------------------
(unaudited)

ASSETS
Investment in real estate:
Land $ 1,535,836 $ 1,384,662
Buildings and equipment 9,920,089 8,121,270
Less accumulated depreciation (1,333,356) (1,100,840)
Developments in progress 171,540 168,521
------------------- ------------------
Net property and equipment 10,294,109 8,573,613
Investment in and loans to/from Unconsolidated Real Estate Affiliates 759,481 630,613
Properties held for sale 51,935 -
------------------- ------------------
Net investment in real estate 11,105,525 9,204,226
Cash and cash equivalents 20,963 10,677
Tenant accounts receivable, net 163,009 148,485
Deferred expenses, net 157,430 140,701
Prepaid expenses and other assets 90,739 78,808
------------------- ------------------
$ 11,537,666 $ 9,582,897
=================== ==================

LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes and other debt payable $ 8,614,821 $ 6,649,490
Distributions payable 106,137 6,828
Accounts payable and accrued expenses 425,653 352,346
------------------- ------------------
9,146,611 7,008,664
------------------- ------------------
Minority interests:
Preferred 403,486 495,211
Common 388,932 408,613
------------------- ------------------
792,418 903,824
------------------- ------------------

Commitments and contingencies - -

Preferred Stock: $100 par value; 5,000,000 shares authorized; none of
which were issued and outstanding at September 30, 2004 and
December 31, 2003 - -

Stockholders' Equity:
Common stock: $.01 par value; 875,000,000 shares authorized;
218,671,825 and 217,293,976 shares issued and outstanding
as of September 30, 2004 and December 31, 2003, respectively 2,187 2,173
Additional paid-in capital 1,936,595 1,913,447
Retained earnings (accumulated deficit) (321,121) (220,512)
Notes receivable-common stock purchase (5,588) (6,475)
Unearned compensation-restricted stock (1,756) (1,949)
Accumulated other comprehensive loss (11,680) (16,275)
------------------- ------------------
Total stockholders' equity 1,598,637 1,670,409
------------------- ------------------
$ 11,537,666 $ 9,582,897
=================== ==================

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

3 of 44

GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
2004 2003 2004 2003
--------- --------- ---------- ---------

Revenues:
Minimum rents $ 245,538 $ 203,420 $ 698,232 $ 543,394
Tenant recoveries 111,570 86,329 319,264 237,395
Overage rents 9,386 6,042 23,168 16,086
Management and other fees 18,400 21,071 57,263 61,672
Other 12,607 8,703 33,778 21,572
--------- --------- ---------- ---------
Total revenues 397,501 325,565 1,131,705 880,119
--------- --------- ---------- ---------
Expenses:
Real estate taxes 30,155 23,714 87,124 63,956
Repairs and maintenance 27,286 20,465 77,265 56,557
Marketing 12,370 9,533 33,325 25,294
Other property operating costs 51,072 39,672 141,048 109,118
Provision for doubtful accounts 2,591 2,145 7,940 5,689
Property management and other costs 21,281 24,272 70,994 81,420
General and administrative 2,078 1,675 7,080 6,479
Depreciation and amortization 82,027 61,349 240,687 165,103
--------- --------- ---------- ---------
Total expenses 228,860 182,825 665,463 513,616
--------- --------- ---------- ---------
Operating income 168,641 142,740 466,242 366,503

Interest income 336 611 1,119 1,667
Interest expense (101,017) (74,670) (278,564) (199,638)
Income allocated to minority interests (24,673) (27,197) (73,011) (73,289)
Equity in income of unconsolidated affiliates 19,686 18,571 55,770 61,980
--------- --------- ---------- ---------
Income from continuing operations 62,973 60,055 171,556 157,223
--------- --------- ---------- ---------
Discontinued operations, net of minority interest:
Income from operations 1,000 727 2,687 3,081
Gain on disposition - 651 - 3,720
--------- --------- ---------- ---------
1,000 1,378 2,687 6,801
--------- --------- ---------- ---------
Net income $ 63,973 $ 61,433 $ 174,243 $ 164,024
--------- --------- ---------- ---------

Convertible preferred stock dividends - - - (13,030)
--------- --------- ---------- ---------
Net income available to common stockholders $ 63,973 $ 61,433 $ 174,243 $ 150,994
========= ========= ========== =========

Basic earnings per share:
Continuing operations $ 0.29 $ 0.28 $ 0.79 $ 0.74
Discontinued operations - 0.01 0.01 0.03
--------- --------- ---------- ---------
Total basic earnings per share $ 0.29 $ 0.29 $ 0.80 $ 0.77
========= ========= ========== =========

Diluted earnings per share:
Continuing operations $ 0.29 $ 0.28 $ 0.78 $ 0.73
Discontinued operations - - 0.01 0.03
--------- --------- ---------- ---------
Total diluted earnings per share $ 0.29 $ 0.28 $ 0.79 $ 0.76
========= ========= ========== =========

Distributions declared per share $ 0.66 $ - $ 1.26 $ 0.48
========= ========= ========== =========

Net income $ 63,973 $ 61,433 $ 174,243 $ 164,024
Other comprehensive income, net of minority interest:
Net unrealized gains (losses) on financial instruments (1,846) 9,295 4,473 7,771
Minimum pension liability adjustment (40) (9) (222) (36)
Foreign currency translation 344 - 344 -
--------- --------- ---------- ---------
Comprehensive income, net $ 62,431 $ 70,719 $ 178,838 $ 171,759
========= ========= ========== =========

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

4 of 44

GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
(Dollars in thousands)

NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
2004 2003
----------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 174,243 $ 164,024
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interests, including income from discontinued operations 73,683 74,178
Equity in income of unconsolidated affiliates (55,770) (61,980)
Provision for doubtful accounts, including discontinued operations 7,955 5,718
Distributions received from unconsolidated affiliates 55,521 61,980
Depreciation, including discontinued operations 227,812 142,732
Amortization, including discontinued operations 22,481 29,672
Gain on disposition - (3,720)
Net changes:
Tenant accounts receivable (22,479) (12,015)
Prepaid expenses and other assets (9,263) (16,452)
Deferred expenses (30,444) (45,419)
Accounts payable and accrued expenses 74,509 (2,732)
----------- -----------
Net cash provided by operating activities 518,248 335,986
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition/development of real estate and improvements
and additions to properties (1,739,098) (958,890)
Proceeds from sale of investment property - 15,045
Increase in investments in unconsolidated affiliates (159,989) (20,718)
Distributions received from unconsolidated affiliates in excess of income 29,227 75,164
Proceeds from repayment of notes receivable for common stock purchases 887 887
Loan repayments from unconsolidated affiliates, net (8,884) (83,537)
Net proceeds from sale of investments in marketable securities - 476
----------- -----------
Net cash used in investing activities (1,877,857) (971,573)
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to common stockholders (196,125) (135,584)
Cash distributions paid to holders of common units (50,320) (42,264)
Cash distributions paid to holders of perpetual and convertible preferred units (28,500) (30,080)
Payment of dividends on PIERS - (19,145)
Proceeds from issuance of common stock for employee stock plans 16,306 25,176
Redemption of preferred minority interests:
PDC Series A Perpetual Preferred Units (12,750) -
PDC Series B Perpetual Preferred Units (95,000) -
Other preferred stock of consolidated subsidiaries (173) -
Proceeds from issuance of mortgage notes and other debt payable 2,858,605 2,567,500
Principal payments on mortgage notes and other debt payable (1,115,176) (1,632,642)
Deferred financing costs (6,972) (12,683)
----------- -----------
Net cash provided by financing activities 1,369,895 720,278
----------- -----------

Net change in cash and cash equivalents 10,286 84,691
Cash and cash equivalents at beginning of period 10,677 53,640
----------- -----------
Cash and cash equivalents at end of period $ 20,963 $ 138,331
=========== ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 271,231 $ 206,708
Interest capitalized 5,736 4,044

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued in exchange for PIERS $ - $ 337,483
Common stock issued in exchange for Operating Partnership Units 1,314 8,705
Common stock issued in exchange for convertible preferred units 8,976 -
Assumption of debt in conjunction with acquisition of property 134,902 447,754
Operating Partnership Units issued as consideration for purchase
of real estate 25,132 -

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

5 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

NOTE 1 ORGANIZATION

Readers of this quarterly report should refer to the Company's (as defined
below) audited financial statements for the year ended December 31, 2003 which
are included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2003 (Commission File No. 1-11656), as certain footnote
disclosures which would substantially duplicate those contained in the 2003
annual audited 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 2003 Annual Report on Form 10-K.

GENERAL

General Growth Properties, Inc., a Delaware corporation ("General Growth"), was
formed in 1986 to own and operate retail properties. All references to the
"Company" in these Notes to Consolidated Financial Statements include General
Growth and those entities owned or controlled by General Growth (including the
Operating Partnership and the LLC as described below), unless the context
indicates otherwise. The Company conducts substantially all of its business
through GGP Limited Partnership (the "Operating Partnership" or "GGPLP").
Effective December 5, 2003, the Company amended (as approved by a vote of the
holders of General Growth's common stock (the "Common Stock")) the Company's
charter to effectuate a three-for-one split of its Common Stock, increase the
number of authorized shares of Common Stock from 210 million to 875 million
shares and change the par value of its Common Stock from $.10 per share to $.01
per share. In addition, the Operating Partnership currently has common units of
limited partnership interest ("Units") and preferred units of limited
partnership interest (the "Preferred Units") outstanding. The Preferred Units
are, under certain circumstances, convertible into Units and they may be
exchanged by their holders, under certain circumstances, for shares of Common
Stock on a one-for-one basis as described below in this Note 1. These Units were
also split on a three-for-one basis so that they continue to be exchangeable on
a one-for-one basis into shares of Common Stock. In the accompanying
consolidated financial statements, unless otherwise noted, all previous
applicable share or per share disclosure amounts have been reflected on a
post-split basis.

As of September 30, 2004, the Company either directly or through the Operating
Partnership and subsidiaries owned a controlling interest in 127 operating
retail properties (regional malls and community centers), collectively, the
"Consolidated Properties" as well as 100% of General Growth Management, Inc.
("GGMI") and other mixed-use commercial business properties and potential
development sites. As of September 30, 2004, the Company also holds ownership
interests in various joint ventures, collectively, the "Unconsolidated Real
Estate Affiliates", as described in Note 3. For purposes of this report, the 46
retail properties owned by the Unconsolidated Real Estate Affiliates are
collectively referred to as the "Unconsolidated Properties" and, together with
the Consolidated Properties, comprise the "Company Portfolio".

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of the
Company and the Operating Partnership consisting of the Consolidated Properties,
GGMI and the Unconsolidated Real Estate Affiliates (Note 3). Included in the
consolidated financial statements are five joint ventures, which are jointly
owned with non-controlling independent joint venturers. 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.
Acquisitions (Note 2) are accounted for utilizing the purchase method of
accounting and accordingly, the results of operations are included in the
Company's results of operations from the respective dates of acquisition. All
significant intercompany balances and transactions have been eliminated.

6 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

In the opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the financial position and
results of operations and cash flows for the interim periods have been included.
The results for the interim periods ended September 30, 2004 are not necessarily
indicative of the results to be obtained for the full fiscal year.

PREFERRED AND COMMON STOCK

During May 2003, General Growth called for redemption on July 15, 2003 all of
its outstanding Depositary Shares, each representing 1/40 of a share of 7.25%
Preferred Income Equity Redeemable Stock, Series A ("PIERS"). The Depositary
Shares (and the related PIERS) were convertible into Common Stock at the rate of
1.8891 shares of Common Stock per Depositary Share. Through July 14, 2003,
holders of 6,861,800 shares elected to convert their Depositary Shares and
received a total of 12,963,357 shares of Common Stock. The Company redeemed the
remaining 6,638,200 Depositary Shares on July 15, 2003. As a result of this
redemption, an additional 12,540,186 shares of Common Stock were issued and
approximately $17 was paid in cash to redeem fractional shares of PIERS.

Other classes of preferred stock of General Growth have been created to permit
the future potential conversion of certain equity interests assumed by the
Company in conjunction with various acquisitions, into General Growth equity
interests. As no such preferred stock has been issued and, for certain classes
of such preferred stock, the conditions to allow such a conversion have not yet
occurred, such additional classes of preferred stock have not been presented in
the accompanying consolidated balance sheets as of September 30, 2004 and
December 31, 2003.

MINORITY INTEREST

As of September 30, 2004, General Growth owned an approximate 80% general
partnership interest in the Operating Partnership. The remaining approximate 20%
minority interest in the Operating Partnership is held by an entity that is
owned by trusts for the benefit of the families of the original stockholders of
the Company and by subsequent contributors of properties to the Company. These
minority interests are represented by the Units. The Units can be exchanged at
the option of the holders for cash or, at General Growth's election with certain
restrictions, for shares of Common Stock on a one-for-one basis. The holders of
the Units also share equally with General Growth's common stockholders in any
distributions by the Operating Partnership on the basis that one Unit is
equivalent to one share of Common Stock.

Changes in outstanding Operating Partnership Units (excluding the Preferred
Units) for the nine months ended September 30, 2004 and for the year ended
December 31, 2003, were as follows:

UNITS
----------

January 1, 2003 58,668,741
Exchanges for Common Stock (2,956,491)
----------

December 31, 2003 55,712,250
Conversion of Preferred Units into Common Units 436,963
Exchanges for Common Stock (609,111)
----------
September 30, 2004 55,540,102
==========

7 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

The following is a detailed listing of the components of minority
interest-preferred at September 30, 2004 and December 31, 2003.

Carrying Amount
Per Unit ------------------------
Coupon Issuing Number Liquidation Redeemable Sept. 30, Dec. 31,
Security Type Rate Entity of Units Preference by Issuer 2004 2003
------------- ---- ------ -------- ---------- --------- ---- ----

Perpetual Preferred Units
RPU 8.95% LLC 940,000 $250 (1) $ 235,000 $ 235,000
CPU 8.25% LLC 20,000 250 N/A 5,000 5,000
PDC Series A 8.75% PDC 510,000 25 (2) - 12,750
PDC Series B 8.95% PDC 3,800,000 25 (3) - 95,000
PDC Series C 8.75% PDC 320,000 25 May 2005 8,000 8,000
--------- ---------
248,000 355,750
--------- ---------
Convertible Preferred Units
Series B-JP Realty 8.50% GGPLP 1,425,993 50 N/A 71,300 71,320
Series C-Glendale Galleria 7.00% GGPLP 643,504 50 N/A 32,176 41,131
Series D-Foothills Mall
(Note 2) 6.50% GGPLP 532,750 50 N/A 26,637 26,637
Series E-Four Seasons Town
Centre (Note 2) 7.00% GGPLP 502,658 50 N/A 25,132 -
--------- ---------
155,245 139,088
--------- ---------
Other preferred stock of
consolidated subsidiaries N/A various 241 1,000 (4) 241 373
--------- ---------
Total Minority Interest-Preferred $ 403,486 $ 495,211
========= =========

(1) $175,000 redeemable by issuer in May 2005 and $60,000 in April 2007.

(2) Redeemed in April 2004.

(3) Redeemed in July 2004.

(4) Redeemable on demand, under certain circumstances.

EARNINGS PER SHARE ("EPS")

The following are the reconciliations of the numerators and denominators of
basic and diluted EPS.

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ------------------------------------
2004 2003 2004 2003 2003
-------- --------- -------- -------- ----------
BASIC & BASIC & BASIC &
DILUTIVE DILUTIVE DILUTIVE BASIC DILUTIVE
-------- --------- -------- -------- ----------

Numerators:
Income from continuing operations $ 62,973 $ 60,055 $171,556 $157,223 $ 157,223
Convertible preferred stock dividends - -* - (13,030) -*
-------- --------- -------- -------- ---------
Income from continuing operations available to
common stockholders 62,973 60,055 171,556 144,193 157,223
Discontinued operations, net of minority interest 1,000 1,378 2,687 6,801 6,801
-------- --------- -------- -------- ---------
Net income available to common stockholders $ 63,973 $ 61,433 $174,243 $150,994 $ 164,024
======== ========= ======== ======== =========

Denominators:
Weighted average number of common shares
outstanding (in thousands) - for basic EPS 218,605 210,889 218,080 195,850 195,850
Effect of dilutive securities - options (and PIERS in 2003*) 693 4,375 679 - 18,650
-------- --------- -------- -------- ---------
Weighted average number of common shares
outstanding (in thousands) - for diluted EPS 219,298 215,264 218,759 195,850 214,500
======== ========= ======== ======== =========

* For the three months ended September 30, 2003, although the effect of the
issuance of the PIERS is dilutive, the amount of the PIERS dividend is
zero so no adjustment of net income is made. For the nine months ended
September 30, 2003, the effect of the issuance of the PIERS is dilutive
and, therefore, no adjustment of net income is made as the PIERS dilution
is reflected in the denominator of the diluted EPS calculation.

8 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

Certain stock options outstanding were not included in the computation of
diluted earnings per share because the exercise price of the stock options was
higher than the average market price of the Common Stock for the applicable
periods and therefore, the effect would be anti-dilutive or because the
conditions which must be satisfied prior to the issuance of any such shares were
not achieved during the applicable periods. Such excluded options totaled
approximately 1,809,000 for the three months ended September 30, 2004, 1,538,000
for the nine months ended September 30, 2004 and 6,000 for the nine months ended
September 30, 2003. There were no excluded options for the three months ended
September 30, 2003. The outstanding Units and the share of income attributable
to such Units have also been excluded from the Company's calculation of diluted
earnings per share as inclusion of such items would have no net effect on the
reported EPS amounts.

NOTES RECEIVABLE - OFFICERS

During 1998, the Company made available to certain officers the ability to issue
promissory notes in connection with their exercise of options to purchase shares
of the Company's Common Stock. From April 9, 1998 to April 30, 2002 an aggregate
of $24,997 in advances were made to such officers in connection with their
exercise of options to purchase an aggregate of 2,703,000 shares of Common
Stock.

As of April 30, 2002, the Company's Board of Directors decided to terminate the
availability of loans to officers to exercise options on the Common Stock. In
conjunction with this decision, the Company and the officers restructured the
terms of the promissory notes, including the approximately $2,823 previously
advanced in the form of income tax withholding payments made by the Company on
behalf of such officers. The previous notes, which bore interest at a rate equal
to LIBOR plus 50 basis points, were full recourse to the officers, were
collateralized by the shares of Common Stock issued upon exercise of such
options, provided for quarterly payments of interest and were payable to the
Company on demand. Each of the officers repaid no less than 60% of the principal
and 100% of the interest due under such officer's note as of April 30, 2002 and
the remaining amounts, approximately $10,141 as of April 30, 2002, were
represented by amended and restated promissory notes. These amended and
restated, fully recourse notes are payable in monthly installments of principal
and interest (at a market rate which varies monthly computed at LIBOR (1.84% at
September 30, 2004) plus 125 basis points per annum) until fully repaid in May
2009 (or within 90 days of the officer's separation from the Company, if
earlier). As of September 30, 2004, the current outstanding balance under the
promissory notes was $6,260, of which approximately $672 relating to income tax
withholding payments has been reflected in prepaid expenses and other assets and
approximately $5,588 has been reflected as a reduction of Stockholders' Equity.
As of December 31, 2003, the outstanding balance under the promissory notes was
$7,250.

REVENUE RECOGNITION

Minimum rent revenues are recognized on a straight-line basis over the term of
the related leases. As of September 30, 2004, straight-line rents receivable
(representing the current net cumulative rents recognized prior to when billed
and collectible as provided by the terms of the leases) of approximately $87,045
are included in tenant accounts receivable, net in the accompanying consolidated
balance sheet. Accretion related to below-market leases at properties acquired
as provided by SFAS 141 and 142 is included in minimum rents and totaled $19,079
for the nine months ended September 30, 2004 and $12,315 for the nine months
ended September 30, 2003. In addition, amounts collected from tenants to allow
the termination of their leases prior to their scheduled termination dates have
been included in minimum rents and totaled $6,960 for the nine months ended
September 30, 2004 and $7,943 for the nine months ended September 30, 2003.
Recoveries from tenants are computed as a

9 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

formula related to real estate taxes, insurance and other shopping center
operating expenses and are generally recognized as revenues in the period the
related costs are incurred. Overage rents are recognized on an accrual basis
once tenant sales revenues exceed contractual tenant lease thresholds. The
Company provides an allowance for doubtful accounts against the portion of
accounts receivable, including straight-line rents, which is estimated to be
uncollectible. Such allowances are reviewed periodically based upon the recovery
experience of the Company. Management fees primarily represent GGMI management
and leasing fees, financing fees and fees for other ancillary services performed
by the Company for the benefit of its Unconsolidated Real Estate Affiliates and
properties owned by third parties and are recognized as revenues when earned.
Fees recognized by the Company for services performed for the Unconsolidated
Properties were $43,979 for the nine months ended September 30, 2004 and $55,091
for the nine months ended September 30, 2003.

BUSINESS SEGMENT INFORMATION

The primary business of General Growth and its consolidated affiliates is owning
and operating shopping centers. General Growth evaluates operating results and
allocates resources on a property-by-property basis and does not distinguish or
evaluate its consolidated operations on a geographic basis. Accordingly, General
Growth has determined it has a single reportable segment. Further, substantially
all operations are within the United States and no customer or tenant comprises
more than 10% of consolidated revenues.

STOCK INCENTIVE PLANS

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

- Restricted and unrestricted stock grants

- Options that vest generally over a fixed period of time (generally,
grants pursuant to the 2003 Incentive Stock Plan and, previously,
the 1993 Stock Incentive Plan)

- Threshold-vesting stock options ("TSOs") (generally, grants pursuant
to the Company's 1998 Incentive Plan)

The terms of the 2003 Incentive Stock Plan provide for the issuance of up to
9,000,000 shares of Common Stock pursuant to the plan. The exercise price of
TSOs to be granted to a participant pursuant to the Company's stock incentive
plans, will be the Fair Market Value ("FMV") of a share of Common Stock on the
date the TSO is granted. The threshold price (the "Threshold Price") which must
be achieved in order for the TSO to vest will be determined by multiplying the
FMV on the date of grant by the estimated annual growth rate (currently set at
7%) and compounding the product over a five-year period. Shares of the Common
Stock must achieve and sustain the Threshold Price for at least 20 consecutive
trading days at any time over the five years following the date of grant in
order for the TSO to vest. All TSOs granted prior to 2004 have a ten year term.
Any future TSOs granted must vest within five years of the grant date in order
to avoid forfeiture. The TSOs granted in 2004 provide that, upon vesting, they
must be exercised by the holder within 30 days after vesting. The aggregate
number of shares of Common Stock which may be subject to TSOs issued pursuant to
the 1998 Incentive Plan may not exceed 6,000,000, subject to certain customary
adjustments to prevent dilution.

10 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

The following is a summary of the TSOs that have been awarded through September
30, 2004:

TSO GRANT YEAR
--------------
2004 2003 2002 2001 2000 1999
---------- --------- --------- --------- --------- ---------

Exercise price $ 30.94 $ 16.77 $ 13.58 $ 11.58 $ 9.99 $ 10.56
Threshold Vesting Stock Price $ 43.39 $ 23.52 $ 19.04 $ 16.23 $ 14.01 $ 14.81
Fair value of options on grant date $ 1.59 $ 1.31 $ 1.13 $ 0.74 $ 0.50 $ 0.45
Shares:
Original Grant 1,031,480 900,000 779,025 989,988 913,047 941,892
Forfeited at September 30, 2004 (37,703) (58,356) (120,225) (147,225) (217,926) (281,985)
Vested and exchanged for cash
at September 30, 2004 - (549,594) (495,693) (610,011) (531,588) (460,623)
Vested and exercised at September 30, 2004 - (135,279) (105,810) (168,651) (147,000) (189,381)
---------- --------- --------- --------- --------- ---------
1998 Incentive Plan TSOs outstanding
at September 30, 2004 993,777 156,771 57,297 64,101 16,533 9,903
========== ========= ========= ========= ========= =========

Increases in the price of the Common Stock since the respective grant dates
caused the TSOs granted in 1999, 2000 and 2001 to become vested in 2002 and the
TSOs granted in 2002 and 2003 to become vested in 2003. The vesting of the TSOs
and subsequent increases in the Common Stock price resulted in the recognition
of compensation expense of approximately $3,703 for the nine months ended
September 30, 2004 and $14,908 for the year ended December 31, 2003.

During the second quarter of 2002, the Company elected to prospectively adopt
the fair value based employee stock-based compensation expense recognition
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"). The Company had previously applied
the intrinsic value based expense recognition provisions set forth in APB
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). SFAS 123
states that the adoption of the fair value based method is a change to a
preferable method of accounting. The transition rules for adoption of SFAS 123
provide that prior grants of options, whether from the Company's 1993 Stock
Incentive Plan (now expired) or the 1998 Incentive Plan, are accounted for under
APB 25. Had compensation costs for such prior grants of options been recorded
under SFAS 123, the Company's net income available to common stockholders and
earnings per share would have been nominally reduced but there would have been
no effect on reported basic or diluted earnings per share.

FOREIGN CURRENCY TRANSLATION

The functional currency for our joint venture in Brazil is its local currency.
Assets and liabilities of this investment are translated at the rate of exchange
in effect on the balance sheet date. Translation adjustments resulting from this
process are accumulated in stockholders' equity as a component of accumulated
other comprehensive income.

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, recoverable amounts of
receivables and deferred taxes, initial valuations and related

11 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

amortization periods of deferred costs and intangibles, particularly with
respect to property acquisitions. Actual results could differ from those
estimates.

RECLASSIFICATIONS

Certain amounts in the 2003 consolidated financial statements, including
discontinued operations (Note 7), have been reclassified to conform to the
current year presentation.

NOTE 2 PROPERTY ACQUISITIONS, RENOVATIONS, EXPANSIONS AND DEVELOPMENTS

2004 ACQUISITIONS

- On January 7, 2004, the Company acquired a 50% membership interest
in a newly formed limited liability company ("Burlington LLC") which
owns Burlington Town Center, an enclosed mall in Burlington,
Vermont. The aggregate consideration for the 50% ownership interest
in Burlington Town Center was approximately $10,250. Approximately
$9,000 was funded in cash by the Company at closing with the
remaining amounts to be funded in cash in 2004 as necessary. In
addition, at closing the Company made a $31,500 mortgage loan to
Burlington LLC to replace the existing mortgage financing which had
been collateralized by the property. The new mortgage loan requires
monthly payments of principal and interest, bears interest at a rate
per annum of 5.5% and is scheduled to mature in January 2009. The
Company has an annual preferential return of 10% on its investment
and has an option to purchase the remaining 50% interest in
Burlington LLC on or before January 2007 for approximately $10,250.

- On January 16, 2004, the Company acquired Redlands Mall, an enclosed
mall in Redlands, California. The purchase price paid for Redlands
Mall (currently under redevelopment) was approximately $14,250. The
consideration was paid from cash on hand and proceeds from
borrowings under the Company's credit facilities.

- On March 1, 2004, the Company acquired the remaining 50% general
partnership interest in Town East Mall in Mesquite, Texas from its
unaffiliated joint venture partner. The purchase price for the 50%
ownership interest was approximately $44,500, which was paid in cash
from cash on hand and proceeds from borrowings under the Company's
credit facilities.

- On March 5, 2004, the Company acquired Four Seasons Town Centre, an
enclosed mall in Greensboro, North Carolina. The purchase price paid
was approximately $161,000. The consideration was paid by the
assumption of approximately $134,400 in existing long-term
non-recourse mortgage debt (bearing interest at a rate per annum of
approximately 5.6% and scheduled to mature in December 2013),
approximately $25,132 in 7% convertible preferred units of Operating
Partnership interest and the remaining amounts in cash, primarily
from amounts borrowed under the Company's credit facilities.
Immediately following the closing, the Company prepaid approximately
$22,400 of such assumed debt using cash on hand. The $25,132 of 7%
preferred units are comprised of 502,658 preferred units which are
convertible, with certain restrictions, at any time by the holder
into common units of the Operating Partnership (initially at a rate
of approximately 1.298 common units for each preferred unit).

- On April 30, 2004, the Company completed an agreement to form a
joint venture to develop and subsequently own and manage a retail
center in San Jose, Costa Rica. The venture, GSG de Costa Rica SRL
("GGP/Sambil Costa Rica"), is owned by a wholly-owned subsidiary of
the

12 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

Operating Partnership and two independent Latin American real estate
investment and development firms. The Company has committed to
invest approximately $12,217 in GGP/Sambil Costa Rica, of which
approximately $9,000 was paid as of September 30, 2004. An
additional $3,200, a portion of which will be drawn on a letter of
credit provided by the Company, will be contributed as additional
construction and development costs of the project are incurred. The
Company's cash investments, the $16,000 of capital contributions
made by the Latin American co-venture partners and construction
financing to be arranged, are expected to be sufficient to complete
the project, an approximately 500,000 square foot retail center. The
center is expected to open in 2007.

- On May 11, 2004, the Company completed the acquisition of a 50%
interest in a joint venture (Hoover Mall Holding, L.L.C.) which
owns, though a wholly-owned subsidiary, Riverchase Galleria, an
enclosed regional mall in Birmingham, Alabama. The acquisition price
for the 50% interest in the joint venture was approximately
$166,000. In conjunction with the purchase, the existing loan
collateralized by the property was refinanced with a new,
non-recourse mortgage loan of $200,000. The new loan bears interest
at a rate of LIBOR plus 88 basis points, requires monthly payments
of interest only and, assuming all no-cost extension options are
exercised, is scheduled to mature in June 2009. In addition, the
Company has fixed the interest rate to be paid on this loan
(initially 3.26% per annum with steps up to 5.99% per annum in 2007)
through the use of interest rate swaps.

- On May 12, 2004, the Company completed the acquisition of the Mall
of Louisiana, an enclosed regional mall in Baton Rouge, Louisiana.
The purchase price of $265,000 was paid with the proceeds of a new
$185,000 acquisition loan which, at September 30, 2004, bore
interest at LIBOR plus 58 basis points. The interest rate will
increase in future periods (to a potential maximum of LIBOR plus 134
basis points) depending upon certain factors and certain options
regarding the loan rates and maturities elected by the Company. The
loan, which requires monthly payments of interest only, will mature
in July 2009 if all no-cost options to extend are exercised.

- On May 17, 2004, the Company completed the acquisition of the Grand
Canal Shoppes in Las Vegas, Nevada. The purchase price of
approximately $766,000 was funded by a new $427,000 non-recourse
mortgage loan and a new unsecured term loan. The new mortgage loan
bears interest at a rate per annum of 4.78%, provides for monthly
payments of principal and interest and is scheduled to mature in May
2009. The new term loan, with an initial funding of $350,000 but
with a total available capacity of up to $800,000, currently bears
interest at a rate per annum of LIBOR plus 115 basis points on the
current outstanding principal balance, requires monthly payments of
interest only, and is scheduled to mature in May 2009. The interest
rate on the term loan may vary in the future depending upon the
Company's future leverage ratios, changes in LIBOR rates and the
length of LIBOR contracts. The Company has fixed the interest rate
to be paid on $350,000 of the term loan through the use of interest
rate swaps to a rate of 3.435% per annum.

- On July 30, 2004, the Company formed a joint venture to own, manage
and develop retail properties in Brazil. The Company has committed
to invest up to approximately $32,000 for a 50% membership interest
in the joint venture ("GGP/NIG Brazil") of which approximately
$7,000 was funded as of September 30, 2004. An additional $900
was contributed on November 1, 2004. The remaining funds will be
invested by the Company (upon the decision of both partners) to
acquire additional interests in the properties currently owned or to
acquire interests in other retail centers. The other 50% member in
GGP/NIG Brazil contributed to the

13 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

joint venture upon formation a 29% interest in an existing retail
center in Salvador, Bahia, a 16.25% interest in an existing retail
center in Sao Paulo, Sao Paulo and a 66.25% interest in an existing
retail property management firm. The property management firm
currently manages the two centers partially owned by GGP/NIG Brazil
and seven other existing retail centers in various urban areas of
Brazil for the other member of GGP/NIG Brazil and other independent
owners.

- On August 13, 2004, the Company completed the acquisition of
Stonestown Galleria, an enclosed regional mall in San Francisco,
California. The purchase price was approximately $312,000 and was
paid through a combination of cash on hand, borrowings under the
Company's credit facilities and a $220,000 variable-rate term loan
collateralized by the property. The term loan bears interest at
LIBOR plus 60 basis points, requires monthly interest-only payments
and matures in August 2009 if all no-cost options to extend are
exercised. The Company drew $27,206 on the term loan in September
2004 and the remaining available amount of $192,794 in October 2004.

In addition to the acquisitions discussed above, the Company has entered into a
separate agreement (the "Phase II Agreement"), to acquire the multi-level retail
space that is planned to be part of The Palazzo in Las Vegas, Nevada (the
working title of The Venetian's Phase II property), a new approximately 3,000
room hotel/casino that will be connected to the existing Venetian and the Sands
Expo and Convention Center facilities (the "Phase II Acquisition") and the Grand
Canal Shoppes described above. The Palazzo is currently under development and is
expected to be completed in 2007. If completed as specified under the terms of
the Phase II Agreement, the Company will purchase, payable upon grand opening,
the Phase II Acquisition retail space at a price computed on a 6% capitalization
rate on the projected net operating income of the Phase II retail space, as
defined by the Phase II Agreement ("Phase II NOI"), up to $38,000 and on a
capitalization rate of 8% on Phase II NOI in excess of $38,000, all subject to a
minimum purchase price of $250,000. Based on current preliminary plans and
estimated rents, the actual purchase price would be more than double the minimum
purchase price. The Phase II Agreement is subject to the satisfaction of
separate and customary closing conditions.

2003 ACQUISITIONS

- On April 30, 2003, the Company acquired Peachtree Mall, an enclosed
regional mall located in Columbus, Georgia. The purchase price was
approximately $87,600, which was paid at closing with an acquisition
loan of approximately $53,000 (bearing interest at a rate per annum
of LIBOR plus 85 basis points and maturing in April 2008, assuming
all no-cost extension options are exercised) and the balance from
cash on hand and amounts borrowed under the Company's credit
facilities.

- On June 11, 2003, the Company acquired Saint Louis Galleria, an
enclosed mall in St. Louis, Missouri. The aggregate consideration
paid for Saint Louis Galleria was approximately $235,000. The
consideration was paid from cash on hand, proceeds from refinancings
of existing long-term debt, and an approximately $176,000
acquisition loan which bears interest at LIBOR plus 165 basis
points. The loan requires monthly payments of interest-only and is
scheduled to mature in June 2008 assuming all no-cost extension
options are exercised.

- On June 11, 2003, the Company acquired Coronado Center, an enclosed
mall in Albuquerque, New Mexico. The aggregate consideration paid
for Coronado Center was approximately $175,000. The consideration
was paid in the form of cash borrowed under the Company's

14 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

credit facilities and an approximately $131,000 acquisition loan
which initially bore interest at LIBOR plus 85 basis points. In
September 2003, $30,000 was repaid under the acquisition loan and,
pursuant to the original loan terms, the interest rate spread on the
loan was reset to LIBOR plus 91 basis points. The loan requires
monthly payments of interest-only and is scheduled to mature in
October 2008 assuming all no-cost extension options are exercised.

- On July 1, 2003, the Company acquired the 49% ownership interest in
GGP Ivanhoe III, Inc. ("GGP Ivanhoe III") which was held by the
Company's joint venture partner (an affiliate of Ivanhoe Cambridge,
Inc. of Montreal, Canada ("Ivanhoe")), thereby increasing the
Company's ownership interest to a full 100%. The aggregate
consideration for the 49% ownership interest in Ivanhoe III was
approximately $459,000. Approximately $268,000 of existing mortgage
debt was assumed in connection with this acquisition with the
balance of the aggregate consideration, or approximately $191,000,
being funded from proceeds from the refinancing of existing
long-term debt and new mortgage loans on previously unencumbered
properties. Concurrently with this transaction, a new joint venture,
GGP Ivanhoe IV, Inc., ("GGP Ivanhoe IV") was created between the
Company and Ivanhoe to own Eastridge Mall, which previously had been
owned by GGP Ivanhoe III. The Company's ownership interest in GGP
Ivanhoe IV is 51% and Ivanhoe's ownership interest is 49%.

- On August 27, 2003, the Company acquired Lynnhaven Mall, an enclosed
mall in Virginia Beach, Virginia for approximately $256,500. The
consideration was paid in the form of cash borrowed under an
existing unsecured credit facility and an $180,000 interest-only
acquisition loan. The acquisition loan currently bears interest at a
rate per annum of LIBOR plus 125 basis points and is scheduled to
mature in August 2008, assuming the exercise of all no-cost
extension options.

- On October 14, 2003, the Company acquired Sikes Senter, an enclosed
mall located in Wichita Falls, Texas. The purchase price was
approximately $61,000, which was paid at closing with an acquisition
loan of approximately $41,500 (bearing interest at a rate per annum
of LIBOR plus 70 basis points and scheduled to mature in November
2008, assuming all no-cost extension options are exercised) and the
balance from cash on hand and amounts borrowed under the Company's
credit facilities.

- On October 29, 2003, the Company acquired The Maine Mall, an
enclosed mall in Portland, Maine. The purchase price paid for The
Maine Mall was approximately $270,000. The consideration was paid in
the form of cash borrowed under the Company's credit facilities and
an approximately $202,500 acquisition loan. During March 2004, a
$40,500 paydown was made and the loan now bears interest at LIBOR
plus 125 basis points. The loan requires monthly payments of
interest-only and matures in October 2008, assuming exercise by the
Company of all no-cost extension options.

- On October 31, 2003, the Company acquired Glenbrook Square, an
enclosed mall in Fort Wayne, Indiana. The purchase price paid for
Glenbrook Square was approximately $219,000. The consideration was
paid from cash on hand, proceeds from refinancings of existing
long-term debt and by an approximately $164,250 acquisition loan
which currently bears interest at LIBOR plus 108 basis points. The
loan requires monthly payments of interest only and is scheduled to
mature in April 2009 (assuming the exercise by the Company of all
no-cost extension options).

15 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

- On December 5, 2003, the Company acquired Foothills Mall and Shops,
four adjacent shopping centers in Foothills, Colorado. The purchase
price paid was approximately $100,500. The consideration was paid
from cash on hand, including borrowings under an existing line of
credit, approximately $45,750 in assumed debt and approximately
$26,637 in new 6.5% convertible preferred units of Operating
Partnership interests. The assumed debt requires monthly payments of
principal and interest, bears interest at a weighted-average rate
per annum of approximately 6.6% and matures in September 2008. The
$26,637 of 6.5% preferred units are comprised of 532,750 preferred
units which are convertible, with certain restrictions, at any time
by the holder into common units of the Operating Partnership
(initially at the rate of 1.508 common units for each preferred
unit).

- On December 23, 2003, the Company acquired Chico Mall, an enclosed
mall in Chico, California. The purchase price paid for Chico Mall
was approximately $62,390. The consideration was paid in the form of
cash borrowed under an existing unsecured revolving credit facility
and the assumption of approximately $30,600 in existing long-term
mortgage indebtedness that currently bears interest at a rate per
annum of 7.0%. The loan requires monthly payments of principal and
interest and is scheduled to mature in March 2005.

- On December 23, 2003, the Company acquired Rogue Valley Mall, an
enclosed mall in Medford, Oregon. The purchase price paid for Rogue
Valley Mall was approximately $57,495. The consideration was paid
from cash on hand, proceeds from borrowings under an existing
unsecured revolving credit facility, and by the assumption of
approximately $28,000 in existing long-term mortgage indebtedness
that currently bears interest at a rate per annum of 7.85%. The loan
requires monthly payments of principal and interest and is scheduled
to mature in January 2011.

ACCOUNTING FOR ACQUISITIONS

All acquisitions completed through September 30, 2004 were accounted for
utilizing the purchase method of accounting and accordingly, the results of
operations are included in the Company's results of operations subsequent to the
respective dates of acquisition. The purchase prices for all property
acquisitions are subject to certain prorations and adjustments. The Company has
used estimates of future cash flows and other valuation techniques to allocate
the purchase price of acquired property between land, buildings and
improvements, tenant allowances, equipment and other identifiable debit and
credit intangibles such as amounts related to in-place leases and acquired
below-market leases. Due to existing contacts and relationships with tenants at
its currently owned properties and at properties currently managed for others,
no significant value has been ascribed to tenant relationships at the acquired
properties.

Above-market and below-market in-place lease intangibles are recorded based on
the present value (using an interest rate which reflects the risks associated
with the leases acquired) of the difference between the contractual amounts to
be paid pursuant to the in-place leases and the Company's estimate of fair
market lease rates for the corresponding in-place leases, measured over a period
equal to the remaining non-cancelable term of the lease. The capitalized above-
and below-market lease values are amortized as adjustments to minimum rent
revenues over the remaining non-cancelable terms of the respective leases
(approximately five years). Purchase price allocations for properties acquired
in 2002, 2003 and 2004 have resulted in intangible assets (acquired in-place
leases) of approximately $112,359 ($98,948 net of accumulated amortization) and
deferred credits (acquired below-market leases) of approximately $148,889
($108,669 net of accumulated amortization). Purchase price allocations for
certain recent acquisitions may be subsequently revised as additional

16 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

information becomes available. Amortization of these intangible assets and
liabilities, and similar assets and liabilities from the Company's
Unconsolidated Real Estate Affiliates, resulted in additional net income,
including the Company's share of such items from its Unconsolidated Real Estate
Affiliates, of approximately $16,889 for the nine months ended September 30,
2004 and $9,544 for the nine months ended September 30, 2003. Future
amortization, including the Company's share of such items from its
Unconsolidated Real Estate Affiliates, is estimated to increase net income by
approximately $25,000 in both 2005 and 2006, $17,000 in 2007 and $5,000 in 2008
and decrease net income by approximately $3,000 in 2009.

RENOVATIONS AND EXPANSIONS

The Company has an ongoing program of renovations and expansions at its
properties, which are currently under construction. As of September 30, 2004,
approximately 30 properties with total expenditures to date of approximately
$120,000 were being renovated and/or expanded. The Company also has plans to
renovate or expand several other properties, at which construction has not yet
commenced.

DEVELOPMENTS

In August 2004, the Company opened Jordan Creek Town Center in West Des Moines,
Iowa. This project is situated on a 200-acre site and currently contains 2.0
million square feet of tenant space and three anchor stores. As of September 30,
2004, the Company had invested approximately $160,000 in the project, including
land costs. Total development costs are expected to be approximately $200,000
and have been funded to date from operating cash flow and borrowings under
current unsecured revolving credit facilities. In connection with the opening,
approximately $105,000 was transferred from developments in progress to land and
buildings and equipment.

The Company is currently developing two properties with unconsolidated joint
ventures (Note 3).

- Circle T - This joint venture is developing a regional mall in
Westlake (Dallas), Texas. Total development costs are not finalized
or committed but are anticipated to be funded from a construction
loan that is expected to be obtained. The retail site, part of a
planned community which is expected to contain a resort hotel, a
golf course, luxury homes and corporate offices, is currently
planned to contain up to 1.3 million square feet of tenant space
including up to nine anchor stores, an ice rink and a multi-screen
theater. The construction project is currently anticipated to be
completed in 2007.

- GGP/Sambil Costa Rica - This joint venture is developing a retail
center in Costa Rica. The Company's approximately $12,217 committed
investment in GGP/Sambil Costa Rica, the $16,000 of capital
contributions made by the Latin American co-venture partners and
construction financing to be arranged, are expected to be sufficient
to complete the Costa Rican project, an approximately 500,000 square
foot retail center, which is expected to open in 2007.

The Company also owns and/or is investigating certain other potential
development sites (representing a net investment to date of approximately
$37,000), including sites in Toledo, Ohio; South Sacramento, California; Chula
Vista, California; Rogers, Arkansas and Charlotte, South Carolina but there can
be no assurance that development of these sites will proceed.

NOTE 3 INVESTMENTS IN AND LOANS FROM UNCONSOLIDATED REAL ESTATE AFFILIATES

The Unconsolidated Real Estate Affiliates constitute the Company's investment in
real estate joint ventures that own and/or develop shopping centers and other
retail and investment property. The

17 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

Company uses these joint ventures to limit its risk associated with individual
properties and to reduce its capital requirements. Since the Company has joint
interest and control of the properties with its venture partners, accounting
principles generally accepted in the United States of America require that the
Company account for these joint ventures using the equity method.

Unconsolidated Real Estate Affiliates include the following as of September 30,
2004:

VENTURE NUMBER OF COMPANY OWNERSHIP STRUCTURE AND
LEGAL NAME NAME RETAIL PROPERTIES PERCENTAGE
- -------------------------------- --------------------- ----------------- ------------------------------------

GGP/Homart, Inc. GGP/Homart 22 (a) 50% common stock
GGP/Homart II L.L.C. GGP/Homart II 10 50% LLC membership interest
GGP-TRS L.L.C. GGP/Teachers 5 50% LLC membership interest
GGP Ivanhoe, Inc. GGP Ivanhoe 2 51% common stock
GGP Ivanhoe IV, Inc. GGP Ivanhoe IV 1 51% common stock
Dayjay Associates Quail Springs 1 50% general partnership interest
Westlake Retail Associates, Ltd. Circle T 1 (b) 50% general partnership interest
Hoover Mall Holding L.L.C. Riverchase 1 50% LLC membership interest
GSG de Costa Rica SRL GGP/Sambil Costa Rica 1 (b) 33 1/3% LLC membership interest
Cayapas Empreendimentos GGP/NIG Brazil 2 50% LLC membership interest
Imobiliarios Ltda.
---
Total 46
===

(a) Including three retail properties owned jointly with venture partners.

(b) Not operational as currently under development.

GGP/HOMART

The Company holds 50% of the common stock of GGP/Homart with the remaining
ownership interest held by New York State Common Retirement Fund ("NYSCRF"), the
Company's co-investor in GGP/Homart II (described below). GGP/Homart has elected
to be taxed as a REIT for income tax purposes. The Company shares in the profits
and losses, cash flows and other matters relating to GGP/Homart in accordance
with its 50% ownership percentage. NYSCRF has an exchange right under the
GGP/Homart Stockholders' Agreement which permits it to convert its ownership
interest in GGP/Homart to shares of Common Stock of General Growth. If such
exchange right is exercised, the Company may alternatively satisfy such exchange
right in cash.

GGP/HOMART II

GGP/Homart II, is a Delaware limited liability company which is owned equally by
the Company and NYSCRF. Certain of the malls were contributed to the joint
venture subject to existing financing, as modified by certain replacement
financing ("Retained Debt"), in order to balance the net equity values of the
malls contributed by each of the venture partners. Such contribution
arrangements between the

18 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

Company and NYSCRF have the effect of the Company having an additional
contingent obligation to fund any shortfalls GGP/Homart II may incur if the
non-recourse debt (approximately $109,188 at September 30, 2004 with a current
maturity of January 2007 assuming all no-cost extension options are exercised)
related to Natick Mall is not funded by proceeds from any subsequent sales or
refinancing of Natick Mall. According to the membership agreement between the
venture partners, the Company and NYSCRF share in the profits and losses, cash
flows and other matters relating to GGP/Homart II in accordance with their
respective 50% ownership percentages.

GGP/TEACHERS

GGP/Teachers, is a limited liability company owned 50% by the Company and 50% by
Teachers' Retirement System of the State of Illinois ("Illinois Teachers").
According to the operating agreement between the venture partners, the Company
and Illinois Teachers generally share in the profits and losses, cash flows and
other matters relating to GGP/Teachers in accordance with their respective 50%
ownership percentages. Also pursuant to the operating agreement, and in exchange
for a reduced initial cash contribution by the Company, certain debt
(approximately $19,310 at September 30, 2004) related to the properties was
deemed to be Retained Debt and therefore, solely attributable to the Company.
The Company is obligated to fund shortfalls, if any, of any subsequent sale or
refinancing proceeds of the properties against their respective loan balances to
the extent of such Retained Debt.

GGP IVANHOE III

On July 1, 2003, as described in Note 2, the Company completed a transaction to
acquire the 49% ownership interest in GGP Ivanhoe III held by Ivanhoe, bringing
the Company's ownership to 100%. Concurrent with this transaction, ownership of
Eastridge Mall was transferred to GGP Ivanhoe IV, a newly-established joint
venture owned 51% by the Company and 49% by Ivanhoe. Accordingly, GGP Ivanhoe
III, which as of July 1, 2003 held a 100% ownership in seven enclosed regional
malls, was fully consolidated in the Company's consolidated financial statements
and GGP Ivanhoe IV, the owner of the Eastridge Mall, became an Unconsolidated
Real Estate Affiliate.

GGP IVANHOE IV

On July 1, 2003, concurrent with the Ivanhoe III transaction described above,
the ownership of the Eastridge Mall was transferred to a new joint venture, GGP
Ivanhoe IV. GGP Ivanhoe IV, which has elected to be taxed as a REIT, is owned
51% by the Company and 49% by Ivanhoe. The Company and Ivanhoe share in the
profits and losses, cash flows and other matters relating to GGP Ivanhoe IV in
accordance with their respective ownership percentages except that certain major
operating and capital decisions (as defined in the stockholders' agreement)
require the approval of both stockholders. Additionally, the stockholders'
agreement provides that during the 30-day period following June 30, 2006 or the
30-day period following June 30, 2009, Ivanhoe shall have the right to require
the Company to purchase all of the GGP Ivanhoe IV common stock held by Ivanhoe
for a purchase price equal to the value of such GGP Ivanhoe IV common stock. The
Company can satisfy this obligation in any combination of cash or Common Stock.
Also in exchange for a reduced cash portion of the total purchase price paid by
the Company in connection with the acquisition of Ivanhoe's interest in GGP
Ivanhoe III, certain debt related to the property (approximately $38,949 at
September 30, 2004) was deemed to be Retained Debt, and therefore, solely
attributable to the Company. Following the acquisition of Ivanhoe's interest in
GGP Ivanhoe III, the Company became obligated to fund all amounts related to
such Retained Debt including any shortfalls of any subsequent sale or
refinancing proceeds of the property against the respective loan balance to the
extent of such Retained Debt.

19 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

GGP IVANHOE

The Company owns a 51% common stock ownership interest in GGP Ivanhoe and
Ivanhoe owns the remaining 49% ownership interest. Other than the absence of a
right of Ivanhoe to require the Company to acquire the ownership interest of
Ivanhoe, the terms of the stockholders' agreement are similar to those of the
GGP Ivanhoe IV stockholders' agreement.

QUAIL SPRINGS / TOWN EAST

The Company owns a 50% general partnership interest in a joint venture which
owns Quail Springs Mall in Oklahoma City, Oklahoma and prior to March 1, 2004,
owned a 50% general partnership interest in a joint venture which owns Town East
Mall, located in Mesquite, Texas. On March 1, 2004 the Company acquired the
remaining 50% general partnership interest in Town East from its unaffiliated
joint venture partner for approximately $44,500, which was paid from cash on
hand and proceeds from borrowings under the Company's credit facilities. The
Company shared in the profits and losses, cash flows and other matters relating
to Town East until March 1, 2004 in accordance with its ownership percentage of
50%. The Company continues to share in the profits and losses, cash flows and
other matters relating to Quail Springs in accordance with its 50% ownership
percentage.

CIRCLE T

The Company, through a wholly-owned subsidiary, owns a 50% general partnership
interest in Westlake Retail Associates, Ltd. ("Circle T"). AIL Investment, L.P.,
an affiliate of Hillwood Development Company ("Hillwood"), is the limited
partner of Circle T. Circle T is currently developing the Circle T Ranch Mall, a
regional mall in Westlake (Dallas,) Texas, scheduled for completion in 2007 as
discussed in Note 2. Development costs are expected to be funded by a
construction loan to be obtained by the joint venture and capital contributions
by the joint venture partners. As of September 30, 2004, the Company's
investment in Circle T was approximately $19,000. The Company is currently
obligated to fund approximately $800 of additional specified pre-development
costs and Hillwood has contributed approximately $11,200, mostly in the form of
land costs and related pre-development costs. As certain major decisions
concerning Circle T must be made jointly by the Company and Hillwood, the
Company is accounting for Circle T using the equity method.

RIVERCHASE

Riverchase is a limited liability company owned 50% by the Company. The Company
acquired its ownership interest in May 2004 (Note 2). According to the operating
agreement, the venture partners generally share in the profits and losses, cash
flows and other matters relating to Riverchase in accordance with their
respective ownership percentages.

GGP/SAMBIL COSTA RICA

GGP/Sambil Costa Rica, which is a joint venture with a 33 1/3% common membership
interest held by the Company and 33 1/3% each by two independent Latin American
real estate investment and development firms, was formed in April 2004 (Note 2)
to develop and subsequently own and manage a retail center in San Jose, Costa
Rica. Although the Company has a preferred membership interest in GGP/Sambil
Costa Rica with respect to approximately $5,533 of its initial cash investment,
due to the Company's shared rights and duties with respect to this investment,
the Company is accounting for this investment by the equity method.

20 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

GGP/NIG BRAZIL

On July 30, 2004, the Company acquired a 50% membership interest in GGP/NIG
Brazil which was formed to own, manage and develop retail properties in Brazil.
The Company has committed to invest up to approximately $32,000 for its
membership interest in the joint venture of which approximately $7,000 was
funded through September 30, 2004. An additional $900 was contributed on
November 1, 2004. The remaining funds will be invested by the Company (upon the
decision of both partners) to acquire additional interests in the properties
currently owned or to acquire interests in other retail properties. The
Company's share of profits and losses is currently approximately 20% and will
increase to 50% as the Company increases its investment to $32,000.

CONDENSED COMBINED FINANCIAL INFORMATION OF UNCONSOLIDATED REAL ESTATE
AFFILIATES

The following is condensed financial information for the Company's
Unconsolidated Real Estate Affiliates as of September 30, 2004 and December 31,
2003 and for the three and nine month periods ended September 30, 2004 and 2003.

SEPTEMBER 30, DECEMBER 31,
2004 2003
------------ ------------

BALANCE SHEETS - UNCONSOLIDATED REAL ESTATE AFFILIATES
Assets:
Land $ 523,419 $ 532,036
Buildings and equipment 4,723,258 4,698,197
Less accumulated depreciation (690,728) (600,431)
Developments in progress 173,743 100,197
------------ ------------
Net property and equipment 4,729,692 4,729,999
Investment in unconsolidated joint ventures 42,523 11,876
------------ ------------
Net investment in real estate 4,772,215 4,741,875
Cash and cash equivalents 100,969 107,214
Tenant accounts receivable, net 78,016 82,091
Deferred expenses, net 120,987 120,159
Prepaid expenses and other assets 134,348 99,042
------------ ------------
Total assets $ 5,206,535 $ 5,150,381
============ ============

Liabilities and Owners' Equity:
Mortgage notes and other debt payable $ 3,491,545 $ 3,542,173
Accounts payable and accrued expenses 237,736 232,120
Minority interest 5,939 117
Owners' equity 1,471,315 1,375,971
------------ ------------
Total liabilities and owners' equity $ 5,206,535 $ 5,150,381
============ ============

COMPANY INVESTMENT IN AND LOANS TO/FROM UNCONSOLIDATED
REAL ESTATE AFFILIATES
Owners' equity $ 1,471,315 $ 1,375,971
Less joint venture partners' equity (786,977) (794,402)
Loans and other, net 75,143 49,044
------------ ------------
Company investment in and loans to/from
Unconsolidated Real Estate Affiliates $ 759,481 $ 630,613
============ ============

21 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
2004 2003 2004 2003
-------- -------- --------- ---------

STATEMENTS OF OPERATIONS - UNCONSOLIDATED REAL ESTATE AFFILIATES
Revenues:
Minimum rents $135,367 $125,341 $ 388,512 $ 415,415
Tenant recoveries 60,035 62,149 181,364 208,116
Overage rents 2,759 2,105 6,479 6,278
Management and other fees 499 - 499 -
Other 2,841 3,182 9,793 8,338

-------- -------- --------- ---------
Total revenues 201,501 192,777 586,647 638,147
-------- -------- --------- ---------
Expenses:
Real estate taxes 17,981 17,626 53,008 60,241
Repairs and maintenance 13,492 13,513 41,940 47,038
Marketing 6,121 6,381 18,908 21,156
Other property operating costs 23,226 26,794 76,782 88,038
Provision for doubtful accounts 1,504 1,449 3,940 2,750
Property management and other costs 10,946 11,215 32,820 35,979
General and administrative 4,923 78 6,202 1,351
Depreciation and amortization 42,365 38,212 119,987 125,005
-------- -------- --------- ---------
Total expenses 120,558 115,268 353,587 381,558
-------- -------- --------- ---------

Operating income 80,943 77,509 233,060 256,589
Interest income 922 1,023 2,444 4,729
Interest expense (42,170) (41,092) (123,531) (133,676)
Equity in income of unconsolidated joint ventures 985 1,096 3,249 2,827
-------- -------- --------- ---------
Net income $ 40,680 $ 38,536 $ 115,222 $ 130,469
======== ======== ========= =========
COMPANY EQUITY IN INCOME OF UNCONSOLIDATED AFFILIATES
Total income of Unconsolidated Real Estate Afiliates $ 40,680 $ 38,536 $ 115,222 $ 130,469
Joint venture partners' share of income of Unconsolidated Real
Estate Affiliates (20,939) (19,528) (59,231) (66,054)
Amortization of capital or basis differences (55) (296) (204) (1,343)
Elimination of Unconsolidated Real Estate Affiliate loan
interest - (141) (17) (1,092)
-------- -------- --------- ---------
Company equity in income of Unconsolidated Real Estate
Affiliates $ 19,686 $ 18,571 $ 55,770 $ 61,980
======== ======== ========= =========

22 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

NOTE 4 MORTGAGE NOTES AND OTHER DEBT PAYABLE

Mortgage notes and other debt payable reflected in the accompanying consolidated
balance sheets at September 30, 2004 and December 31, 2003 consisted of the
following:

SEPTEMBER 30, DECEMBER 31,
2004 2003
------------- ------------

Fixed-rate debt:
Commerical mortgage-backed securities $ 333,761 $ 307,802
Collateralized mortgage notes and other debt payable 4,884,586 3,744,442
------------ ------------
Total fixed-rate debt 5,218,347 4,052,244

Variable-rate debt:*
Commerical mortgage-backed securities 362,229 495,746
Collateralized mortgage notes and other debt payable 1,235,234 1,176,750
Credit facilities 1,179,011 789,000
Unsecured term loans 620,000 135,750
------------ ------------
Total variable-rate debt* 3,396,474 2,597,246
------------ ------------
Total $ 8,614,821 $ 6,649,490
============ ============

* The Company has entered into certain cash flow hedges as described below
related to approximately $725,000 of this variable-rate debt at September 30,
2004 and $500,000 at December 31, 2003. The effect of these arrangements has not
been reflected in the above segregation of variable versus fixed-rate debt.

COMMERCIAL MORTGAGE-BACKED SECURITIES

In early December 2001, the Operating Partnership and certain Unconsolidated
Real Estate Affiliates completed the placement of $2,550,000 of non-recourse
commercial mortgage pass-through certificates (the "GGP MPTC"). The GGP MPTC was
initially collateralized by 27 malls and one office building, including 19 malls
then owned by certain Unconsolidated Real Estate Affiliates. At September 30,
2004, the GGP MPTC has a current outstanding balance of approximately $1,200,000
(including $494,000 by Unconsolidated Real Estate Affiliates) and was
collateralized by 12 malls and one office building, including 7 malls owned by
Unconsolidated Real Estate Affiliates.

23 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

The GGP MPTC is comprised of both variable rate and fixed rate notes which
require monthly payments of principal and interest. The certificates represent
beneficial interests in three loan groups made by three sets of borrowers (the
Operating Partnership, GGP/Homart and GGP/Homart II, and GGP Ivanhoe III). The
original principal amount of the GGP MPTC was comprised of $1,235,000 attributed
to the Operating Partnership, $900,000 to GGP/Homart and GGP/Homart II and
$415,000 to GGP Ivanhoe III. The terms of the notes comprising the GGP MPTC are
as follows:

WEIGHTED-AVERAGE
INITIAL MATURITY INTEREST TERM INTEREST RATE INTEREST RATE
- ---------------- ------------- ------------- -------------

36 months (1) Variable LIBOR plus 60 to 235 basis points LIBOR plus 79 basis points
51 months (2) Variable LIBOR plus 70 to 250 basis points LIBOR plus 103 basis points
5 years Fixed 5.01 to 6.18% 5.38%

(1) With two no-cost 12-month extension options.

(2) With two no-cost 18-month extension options.

The extension options with respect to the variable rate notes are subject to
obtaining extensions of the interest rate protection agreements which were
required to be obtained in conjunction with the GGP MPTC.

COLLATERALIZED MORTGAGE NOTES AND OTHER DEBT PAYABLE

Collateralized mortgage notes and other debt payable consist primarily of
non-recourse notes collateralized by individual or groups of properties and
equipment. Substantially all of the mortgage notes at September 30, 2004 are
non-recourse to the Company. 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. Certain loans 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, fixed-rate GGP Ivanhoe debt collateralized by two GGP Ivanhoe
properties (totaling $125,000) is cross-defaulted and cross-collateralized with
debt (totaling $435,000) collateralized by eleven Consolidated Properties.

Also included in fixed-rate collateralized mortgage notes and other debt payable
are $100,000 of ten-year senior unsecured notes, bearing interest at a fixed
rate of 7.29% per annum, which were issued by PDC in March 1998 and were assumed
by the Company in conjunction with the acquisition of JP Realty in 2002.
Interest payments on these notes are due semi-annually on March 11 and September
11 of each year and principal payments of $25,000 are due annually beginning
March 2005.

The fixed-rate collateralized mortgage notes and other debt payable bear
interest ranging from 1.81% to 10.00% per annum. The variable-rate
collateralized mortgage notes and other debt payable bear interest at a rate per
annum equal to LIBOR plus 60 to 250 basis points.

24 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

CREDIT FACILITIES

In April 2003, the Company established the "2003 Credit Facility," a revolving
credit facility and term loan with initial borrowing availability of
approximately $779,000 (which was subsequently increased to approximately
$1,250,000). The 2003 Credit Facility has a term of three years and provides for
partial amortization of the principal balance of the term loan in the second and
third years. As of September 30, 2004, the weighted-average interest rate on the
2003 Credit Facility was 2.62%.

UNSECURED TERM LOANS

During the second quarter of 2004, the Company established a new term loan (the
"2004 Term Loan"). This loan has a total available capacity of up to $800,000,
currently bears interest on the current outstanding principal balance at a rate
per annum of LIBOR plus 115 basis points, requires monthly payments of interest
only, and is scheduled to mature in May 2009. The interest rate may vary in the
future depending upon the Company's future leverage ratios, changes in LIBOR
rates and the length of LIBOR contracts. The Company has fixed the interest rate
to be paid on $350,000 drawn on the 2004 Term Loan through the use of interest
rate swaps to a rate of 3.435% per annum. As of September 30, 2004, $620,000 had
been drawn on the 2004 Term Loan.

During August 2002, the Company, through Victoria Ward, arranged for an
aggregate of $150,000 in loans from two separate groups of banks. On August 23,
2002, the Company borrowed an initial $80,000 and, on September 19, 2002, the
Company borrowed an additional $70,000. As of September 30, 2004, all amounts
outstanding ($135,750 at December 31, 2003) have been repaid.

INTEREST RATE SWAPS

Concurrent with the issuance of the GGP MPTC certificates, the Company purchased
interest rate protection agreements (structured to limit the Company's exposure
to interest rate fluctuations), and simultaneously an equal amount of interest
rate protection agreements were sold to fully offset the effect of these
agreements and to recoup a substantial portion of the cost of such agreements.
Further, to achieve a more desirable balance between fixed and variable rate
debt, the Company initially entered into certain swap agreements (notional
amount equal to $666,933). Approximately $575,000 of such swap agreements were
with independent financial services firms. The notional amounts of such swap
agreements decline over time to an aggregate of $25,000 at maturity of the
51-month variable-rate loans (assuming both 18-month no-cost extension options
are exercised). As of September 30, 2004, $375,000 of swap agreements related to
the GGP MPTC were outstanding.

As of September 30, 2004, the Company has additional outstanding swap agreements
with a notional value of $350,000 on the 2004 Term Loan. The Company's swap
agreements fix the interest rate that it is required to pay on $725,000 of
variable rate debt to approximately 3.86% per annum. Such swap agreements have
been designated as cash flow hedges and are intended to hedge the Company's
exposure to future interest payments on the related variable-rate debt.

LETTERS OF CREDIT

The Company had outstanding letters of credit of approximately $11,503 as of
September 30, 2004 and $11,830 as of December 31, 2003, primarily in connection
with insurance requirements, special real estate assessments and construction
obligations. As of September 30, 2004, the Company also has an outstanding
letter of credit of approximately $2,855 in connection with future capital
contributions to GGP/Sambil Costa Rica primarily related to additional
construction and development costs.

25 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

NOTE 5 COMMON AND PREFERRED DISTRIBUTIONS

The following charts summarize common and preferred distributions for the
Company paid in 2004 and 2003.

COMMON DISTRIBUTIONS:

OPERATING
PARTNERSHIP
GENERAL GROWTH LIMITED
AMOUNT PER STOCKHOLDERS PARTNERS
DECLARATION DATE SHARE RECORD DATE PAYMENT DATE AMOUNT AMOUNT
---------------- ----- ----------- ------------ ------ ------

August 20, 200 4 $0.36 October 15, 2004 October 29, 2004 $ 78,727 $ 19,992
July 2, 2004 0.30 July 15, 2004 July 30, 2004 65,575 16,662
April 5, 2004 0.30 April 15, 2004 April 30, 2004 65,357 16,704
January 5, 2004 0.30 January 15, 2004 January 30, 2004 65,193 16,714
October 1, 2003 0.30 October 15, 2003 October 31, 2003 64,402 17,423
June 9, 2003 0.24 July 7, 2003 July 31, 2003 45,417 13,980
March 14, 2003 0.24 April 3, 2003 April 30, 2003 45,230 13,994
December 12, 2002 0.24 January 6, 2003 January 31, 2003 44,937 14,080

PREFERRED DISTRIBUTIONS:

RECORD DATE PAYMENT DATE AMOUNT PER SHARE
----------- ------------ ----------------

July 10, 2003 July 15, 2003 0.5252*
April 3, 2003 April 15, 2003 0.4531
January 6, 2003 January 15, 2003 0.4531

*Final distribution as described in Note 1.

NOTE 6 COMMITMENTS AND CONTINGENCIES

In the normal course of business, from time to time, the Company is involved in
legal actions relating to the ownership and operations of its 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 the
consolidated financial statements of the Company.

The Company leases land or buildings at certain properties from third parties.
Consolidated rental expense including participation rent related to these leases
was $2,041 for the nine months ended September 30, 2004 and $1,826 for the nine
months ended September 30, 2003. The leases generally provide for a right of
first refusal in favor of the Company in the event of a proposed sale of the
property by the landlord.

The Company periodically enters 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.

26 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

NOTE 7 DISCONTINUED OPERATIONS AND PROPERTIES HELD FOR SALE

In August 2004, the Company's Board of Directors approved plans to dispose of
the industrial properties originally acquired in the JP Realty acquisition in
July 2002. The sales closed on November 1, 2004 and a gain of approximately
$11,000 is expected to be recognized.

On March 31, 2003, the Company sold McCreless Mall in San Antonio, Texas for
aggregate consideration of approximately $15,000 (which was paid in cash at
closing). The Company recorded a gain of approximately $4,000 in conjunction
with the sale of the mall.

Pursuant to SFAS 144, the Company has reclassified the operations of the
industrial properties and McCreless Mall (net of minority interests) to
discontinued operations in the accompanying consolidated financial statements as
follows. Revenues and net income, before minority interests, were as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2004 2003 2004 2003
---- ---- ---- ----

Industrial properties:
Revenues $ 1,844 $ 1,798 $5,476 $5,820
Net income 1,246 937 3,357 3,745
McCreless Mall:
Revenues -- -- -- 859
Net income -- -- -- 292

NOTE 8 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In January 2004, the FASB issued a revised Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities" ("VIEs"), to improve financial
reporting of special purpose and other entities. The Company has adopted FIN 46
as of December 31, 2003. Certain VIEs that are qualifying special purpose
entities ("QSPEs") will not be required to be consolidated under the provisions
of FIN 46. In addition, FIN 46 expands the disclosure requirements for the
beneficiary of a significant or a majority of the variable interests to provide
information regarding the nature, purpose and financial characteristics of the
entities. The Company has certain special purpose entities, primarily created to
facilitate the issuance of its commercial mortgage-backed securities (Note 4)
and other securitized debt or to facilitate the tax-increment financing of
certain improvements at its properties. Because these special purpose entities
are QSPEs, which are exempted from consolidation, these special purpose entities
are not required to be consolidated in the Company's consolidated financial
statements. In addition, because the Company's Unconsolidated Real Estate
Affiliates constitute businesses (as defined in FIN 46) or have operating
agreements granting the independent third-party joint venturers substantive
participating rights, the implementation of FIN 46 did not result in the
consolidation of any previously unconsolidated affiliates.

In May 2003, the FASB issued Statement of Financial Accounting Standards No.
150, "Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity," which establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability. The effective date of a
portion of the Statement has been indefinitely postponed by the FASB. The
Company did not enter into new financial instruments subsequent to May 2003
which would

27 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

fall within the scope of this statement. No transactions, arrangements or
financial instruments of the Company have been identified that appear to meet
the criteria for liability recognition in accordance with paragraphs 9 and 10
under SFAS 150 due to the indefinite life of the Company's joint venture
arrangements. Accordingly, even if the effectiveness of the measurement and
classification provision of these paragraphs is no longer postponed, the Company
does not expect that it will be required to reclassify the liquidation amounts
of such minority interests to liabilities.

NOTE 9 PENDING ROUSE MERGER

On August 20, 2004, the Company announced that it had entered into an agreement
and plan of merger with The Rouse Company ("Rouse"). Under the terms of the
agreement, which has been approved by each company's board of directors,
stockholders of Rouse will receive a cash payment of $67.50 per share, without
interest, less the amount of a dividend adjustment (the "Extraordinary
Dividend"), as described below. The total consideration will be approximately
$12,600,000 consisting of $7,200,000 in cash plus the assumption of
approximately $5,400,000 of existing Rouse debt (including Rouse's share of debt
of unconsolidated affiliates).

The merger is subject to the approval of Rouse stockholders, customary closing
conditions and receipt of a tax opinion confirming Rouse's REIT status, as
further discussed below. The merger does not require the approval of General
Growth stockholders and is generally not conditioned upon receipt of financing
by the Company. The merger agreement provides for a termination fee and expense
reimbursement of up to an aggregate of $180,000, which is payable by Rouse to
the Company under certain circumstances.

The Rouse stockholders meeting to consider the approval of the merger is
currently scheduled for November 9, 2004. The merger will be completed as soon
as possible after the Rouse stockholders meeting and after all conditions to the
merger are satisfied or waived. It is currently expected that such completion
will occur on or about November 12, 2004.

The Company understands that in the course of preparing for the merger, Rouse
discovered issues relating to whether it satisfied certain tax law requirements
applicable to REITs. Rouse has filed a request with the Internal Revenue Service
for Rouse to take certain corrective actions that would result in Rouse having
satisfied these requirements, but there can be no assurance that the Internal
Revenue Service will in fact consent to this request. If the Internal Revenue
Service does not consent to Rouse's request, Rouse will likely not be able to
satisfy one of the conditions to the closing of the merger. In such event, there
may be other alternatives, which would also require the consent of the Internal
Revenue Service, that would enable Rouse to qualify as a REIT and enable Rouse
to satisfy such condition of the merger agreement.

The merger consideration will be reduced by the Extraordinary Dividend that
Rouse is expected to pay on or prior to the effective time of the merger as one
of the potential corrective actions to be performed by Rouse as described above.
Under the terms of the merger agreement, the Extraordinary Dividend will reduce
the merger consideration of $67.50 on a dollar-for-dollar basis up to $2.42 per
share, and any amount in excess of $2.42 per share will reduce the merger
consideration by 110% of this excess. Rouse currently estimates that the
Extraordinary Dividend will be approximately $2.30 per share. However, there can
be no assurance that the Internal Revenue Service will agree with this amount,
in which case the Extraordinary Dividend could be significantly larger
than Rouse's current estimate.

28 of 44

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

The Company intends to finance the costs of the merger with Rouse and to
refinance certain existing indebtedness of the Company with proceeds of a $9.75
billion senior credit facility from a syndicate of banks, financial institutions
and other entities. The Company anticipates the credit facility will include the
following:

- A six-month bridge loan of up to $3,600,000 (the "Bridge Loan"). The
Company expects to have an option to extend the maturity of up to
$600,000 of this Bridge Loan for an additional six months.

- A three-year $3,900,000 term loan ("Term Loan A")

- A four-year $2,000,000 term loan ("Term Loan B")

- A three-year $250,000 revolving credit facility (the "Rouse
Revolver")

In addition, the Company is conducting an offering of warrants to sell
newly-issued Common Stock. Each holder of shares of Common Stock and all holders
of common or convertible preferred units of limited partnership interest in the
Operating Partnership as of October 18, 2004, the record date, were allocated,
at no cost, 0.1 non-transferable warrants for each share or common unit
(assuming conversion of the preferred units into common units, in accordance
with the terms of the preferred units) owned at that time, for a total of
approximately 28.4 million warrants. Each whole warrant entitles the holder to
purchase one share of Common Stock for $32.23 per share. Each warrant holder
that exercises its basic subscription privilege in full also may subscribe for
additional shares at the same subscription price per share to the extent that
other holders do not exercise their warrants in full. If an insufficient number
of shares is available to satisfy fully the oversubscription privilege requests,
the available shares will be sold pro rata among warrant holders who exercised
their oversubscription privilege. M.B. Capital Partners III has committed to
back-stop the warrants offering to ensure that not less than $500,000 will be
raised in the warrants offering. M.B. Capital Partners III is a South Dakota
general partnership, the partners of which are trusts for the benefit of John
Bucksbaum (the current CEO of General Growth) and other members of the Bucksbaum
family (the founders of General Growth) and an entity wholly owned by a member
of the Bucksbaum family. M.B. Capital Partners III will comply with this
back-stop obligation by exercising its subscription privilege and by subscribing
for any Common Stock not subscribed for in the warrants offering to close any
gap between the amount subscribed for and $500,000. Assuming the warrant
offering is fully subscribed, total gross proceeds will be approximately
$915,000.

The period for the exercise of the subscription privilege granted by the
warrants is scheduled to expire on November 9, 2004 and the proceeds from the
warrant offering are expected to be received as soon as possible thereafter.
However, the Company has the option of extending the subscription period in the
event of a delay in the consummation of the merger or the Rouse stockholder
meeting to approve the merger. In addition, the Company has the right to cancel
the warrant offering at any time and for any reason, including but not limited
to an indefinite delay or termination of the Rouse merger agreement. Therefore,
although the Company anticipates that the warrant offering will be completed in
the fourth quarter of 2004 and, at a minimum, the $500,000 of proceeds from the
warrant offering or the M.B. Capital Partners III backstop agreement will be
received, there can be no assurance as to the timing or actual occurrence of
those events.

NOTE 10 PRO FORMA FINANCIAL INFORMATION

The following pro forma financial information has been presented as a result of
acquisitions made during 2003 and 2004 (Note 2) and the pending Rouse merger
(Note 9). The pro forma condensed consolidated statements of operations for the
nine months ended September 30, 2004 include adjustments for the acquisitions
made or committed to during 2004 as if such transactions had occurred on January
1, 2004. The pro forma condensed consolidated statements of operations for the
nine

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except for per share and per unit amounts)

months ended September 30, 2003 include adjustments for the acquisitions made or
committed to during 2004 and 2003, as if such transactions had occurred on
January 1, 2003. The pro forma information is based upon the historical
consolidated statements of operations excluding income from discontinued
operations and does not purport to present what actual results would have been
had the acquisitions, and related transactions, in fact, occurred at the
previously mentioned dates, or to project results for any future period.

PRO FORMA INFORMATION

NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
2004 2003
------------ ------------

Revenues:
Minimum rents $ 1,214,788 $ 1,164,116
Tenant charges 565,254 521,035
Other 405,493 369,632
------------ ------------
Total revenues 2,185,535 2,054,783
------------ ------------

Expenses:
Real estate taxes 146,449 133,378
Other property operating 711,754 655,672
Property management, general and administrative costs 104,498 135,434
Depreciation and amortization 470,840 422,779
------------ ------------
Total expenses 1,433,541 1,347,263
------------ ------------

Operating income 751,994 707,520

Interest expense, net (688,952) (665,571)
Income allocated to minority interests (42,428) (45,623)
Income taxes, primarily deferred (38,830) (12,289)
Equity in income of unconsolidated affiliates 71,916 73,036
------------ ------------

Income from continuing operations (a) 53,700 57,073
Convertible preferred stock dividends - (13,030)
------------ ------------
Income from continuing operations
available to common stockholders (a) $ 53,700 $ 44,043
============ ============

Earnings from continuining operations per share:
Basic $ 0.23 $ 0.21
Diluted 0.23 0.20

Weighted-average common shares
used in earnings per share calculation:
Basic 233,593 211,363
Diluted 234,272 216,554

(a) The pro forma adjustments include management fees, depreciation and
interest modifications and other adjustments to give effect to the
acquisitions activity described in Notes 2 and 9.

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GENERAL GROWTH PROPERTIES, INC.

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

All references to numbered Notes are to specific notes to the Consolidated
Financial Statements of the Company included in this Quarterly Report, and which
descriptions are incorporated into the applicable response by reference. The
following discussion should be read in conjunction with such Consolidated
Financial Statements and related Notes. Capitalized terms used, but not defined,
in this Management's Discussion and Analysis of Financial Condition and Results
of Operations ("MD&A") have the same meanings as in such Notes.

FORWARD-LOOKING INFORMATION

Certain statements contained in this Quarterly Report on Form 10-Q may include
certain forward-looking information statements, within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including (without limitation) statements with
respect to anticipated future operating and financial performance, growth and
acquisition opportunities and other similar forecasts and statements of
expectation. Words such as "expects", "anticipates", "intends", "plans", "will",
"believes", "seeks", "estimates", and "should" and variations of these words and
similar expressions, are intended to identify these forward-looking statements.
Forward-looking statements made by the Company and its management are based on
estimates, projections, beliefs and assumptions of management at the time of
such statements and are not guarantees of future performance.

Actual future performance, outcomes and results may differ materially from those
expressed in forward-looking statements made by the Company and its management
as a result of a number of risks, uncertainties and assumptions. Some of these
risks are described in Exhibit 99.1 to this Form 10-Q and are incorporated into
this Item 2 response by reference.

Readers are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date thereof. The Company undertakes no obligation to
publicly release any revisions to the forward-looking statements contained in
this release, or to update them to reflect events or circumstances occurring
after the date of this release, or to reflect the receipt of new information, or
to reflect the occurrence of unanticipated events or otherwise.

MANAGEMENT'S OVERVIEW & SUMMARY

The Company's primary business is the ownership, management, leasing and
development of retail rental property. Management of the Company believes the
most significant operating factor affecting incremental cash flow and net income
is increased rents (either base rental revenue or overage rents) earned from
tenants at the Company's properties. These rental revenue increases are
primarily achieved by re-leasing existing space at higher current rents,
increasing occupancy which results in more space generating rent and increasing
tenant sales which results in increased overage rents. Therefore, certain
operating statistics of the properties owned by the Company are presented to
indicate the trends of these factors. Readers of this MD&A should focus on
trends in such rental revenues as they are a more significant indicator of cash
flow and net income trends than tenant expense recoveries and net management
fees and expenses. In addition, management of the Company considers changes in
interest rates to be the most significant external factor in determining trends
in the Company's cash flow or income from continuing operations. As detailed in
our discussion of economic conditions and market risk, interest rates have
recently risen and may rise again in future months, which could adversely impact
the Company's future cash flow and net income.

Another significant factor relating to overall increases in the Company's cash
flow and net income is the acquisition of additional properties. During 2003,
the Company acquired 100% interests in 10 retail properties and additional
ownership interests in seven retail properties, for total consideration of
approximately $2.0

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GENERAL GROWTH PROPERTIES, INC.

billion. Through September 30, 2004, the Company acquired 100% interests in five
retail properties, the remaining 50% interest in one retail property, a 50%
interest in two retail properties, a 33 1/3% ownership interest in a property to
be developed in Costa Rica and a 50% interest in a joint venture owning
interests in two retail properties and a property management company in Brazil,
all for an aggregate consideration of approximately $1.8 billion. Readers of
this MD&A should note that, as described in the results of operations discussion
below, substantially all of the increases in cash flow and net income versus
prior years are due to the continued acquisition of property and the related
financing of such acquisitions.

Finally, the following discussion of management's analysis of operations focuses
on the consolidated financial statements presented in this Quarterly Report.
Trends in Funds from Operations ("FFO") as defined by The National Association
of Real Estate Investment Trusts ("NAREIT") have not been presented in this
management discussion and analysis of operations, as FFO, under current SEC
reporting guidelines, can only be considered a supplemental measure of Company
operating performance.

SEASONALITY

The business of our tenants and the Company's business are both seasonal in
nature. Our tenants' stores typically achieve higher sales levels during the
fourth quarter because of the holiday selling season, and with lesser, though
still significant, sales fluctuations associated with the Easter holiday and
back-to-school events. Although the Company has a year-long temporary leasing
program, a significant portion of the rents received from short-term tenants are
collected during the months of November and December. In addition, the majority
of our tenants have December or January lease years for purposes of calculating
annual overage rent amounts. Accordingly, overage rent thresholds are most
commonly achieved and recorded in the Company's fourth quarter. Thus, occupancy
levels and revenue production are generally higher in the later part of each
year as opposed to the early part of each year.

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. Actual results could differ
from those estimates for a variety of reasons, certain of which are described
below.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are both significant to the overall
presentation of the Company's financial condition and results of operations and
require management to make difficult, complex or subjective judgments. For
example, significant estimates and assumptions have been made with respect to
useful lives of assets, capitalization of development and leasing costs,
recoverable amounts of receivables and deferred taxes and initial valuations and
related amortization periods of deferred costs and intangibles, particularly
with respect to property acquisitions, as further discussed below. The Company's
critical accounting policies as discussed in its Annual Report on Form 10-K for
the year ended December 31, 2003 have not changed during 2004.

CERTAIN INFORMATION ABOUT THE COMPANY PORTFOLIO

At September 30, 2004, the Company owned 127 operating regional malls and
community centers (the "Consolidated Properties") and interests in 46 retail
properties through investments in Unconsolidated Real Estate Affiliates (the
"Unconsolidated Properties"). For the purposes of this report, the Consolidated
Properties and the Unconsolidated Properties are collectively referred to as the
"Company Portfolio". Reference is made

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GENERAL GROWTH PROPERTIES, INC.

to Notes 1 and 3 for a further discussion of such Consolidated Properties and
investments in Unconsolidated Real Estate Affiliates.

The Company has presented certain information on its Consolidated and
Unconsolidated Properties separately in charts and tables containing financial
data and operating statistics. As a significant portion of the Company's total
operations are structured as joint venture arrangements (which are generally
unconsolidated for GAAP purposes since the Company only has an approximate 50%
interest in such joint ventures,) management of the Company believes that
financial information and operating statistics with respect to all properties
owned provide important insights into the income produced by such investments
for the Company as a whole. Since GGMI, a wholly-owned subsidiary of the
Company, provides on-site management and other services to the Unconsolidated
Properties, the management operating philosophies and strategies are generally
the same whether the properties are consolidated or unconsolidated. As a result,
a presentation of certain financial information for Consolidated and
Unconsolidated Properties on a stand-alone basis as well as operating statistics
on a stand-alone and weighted-average basis depicts the relative size and
significance of these elements of the Company's overall operations.

COMPANY PORTFOLIO DATA

As of and/or for the Nine Months Ended September 30, 2004
---------------------------------------------------------
Consolidated Unconsolidated Company
Properties Properties Portfolio (b)
------------ -------------- --------------

OPERATING STATISTICS (a)
Space leased at properties not under redevelopment (as a %) 90.9% 90.7% 90.8%
Trailing 12 month total tenant sales per square foot (c) $ 367 $ 395 $ 377
% change in total sales (c) 6.4% 8.7% 7.2%
% change in comparable sales (c) 4.7% 4.9% 4.8%
Mall and freestanding gross leaseable area ("GLA")
excluding space under redevelopment (in square foot) 31,054,076 14,749,069 45,803,145

CERTAIN FINANCIAL INFORMATION
Average annualized in place rent per square foot $ 30.45 $ 33.85
Average rent per square foot for new/renewal leases (excludes
2004 acquisitions) $ 34.83 $ 36.69
Average rent per square foot for leases expiring in 2004
(excludes 2004 acquisitions) $ 25.69 $ 32.35

(a) Data is for 100% of the Mall GLA in each portfolio, including those
properties that are owned in part by unconsolidated affiliates. Data
excludes properties currently being redeveloped and/or remerchandised,
foreign properties and miscellaneous (non-mall) properties.

(b) Data includes weighted-average amounts.

(c) Due to tenant sales reporting timelines, data is as of August 31, 2004.

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GENERAL GROWTH PROPERTIES, INC.

ACQUISITIONS

During 2004 and 2003, the Company acquired the properties and joint venture
interests listed below. See Note 2 to the accompanying consolidated financial
statements for additional information.

GROSS
ACQUISITION PURCHASE NEW OR
(Dollars in millions) DATE PRICE ASSUMED DEBT (3)
- --------------------- ------------ --------- ----------------

2004
A 50% ownership interest in Burlington Town Center January 7 $ 10.25 --
Redlands Mall January 16 14.25 --
The remaining 50% ownership interest in Town East Mall March 1 44.5 --
Four Seasons Town Centre March 5 161.0 $ 134.4
A 33 1/3% ownership interest in GGP/Sambil Costa Rica April 30 9.7 (1) --
A 50% ownership interest in Riverchase Galleria May 11 166.0 100.0
Mall of Louisiana May 12 265.0 185.0
The Grand Canal Shoppes May 17 766.0 766.0
A 50% ownership interest in GGP/NIG Brazil July 30 7.0 (2) --
Stonestown Galleria August 13 312.0 220.0
--------- ----------
$ 1,755.7 $ 1,405.4
========= ==========
2003
Peachtree Mall April 30 $ 87.6 $ 53.0
Saint Louis Galleria June 11 235.0 176.0
Coronado Center June 11 175.0 131.0
The remaining 49% ownership interest in GGP Ivanhoe III July 1 459.0 268.0
Lynnhaven Mall August 27 256.5 180.0
Sikes Senter October 14 61.0 41.5
The Maine Mall October 29 270.0 202.5
Glenbrook Square October 31 219.0 164.3
Foothills Mall December 5 100.5 45.7
Chico Mall December 23 62.4 30.6
Rogue Valley Mall December 23 57.5 28.0
--------- ----------
$ 1,983.5 $ 1,320.6
========= ==========

(1) Total commitment of $12.2 million

(2) Total commitment of $32.0 million

(3) Additional funding, including for those acquisitions for which a specific
and separate loan was not obtained, was paid from cash on hand or proceeds
from borrowings under the Company credit facilities.

RESULTS OF OPERATIONS

Company revenues are primarily derived from tenants in the form of fixed minimum
rents, overage rents and recoveries of operating expenses. In addition, the
consolidated results of operations of the Company are impacted by acquisitions.
Results of operations of the Company, as discussed below, relate primarily to
the revenues and expenses of the Consolidated Properties and GGMI. Investments
in Unconsolidated Real Estate Affiliates are accounted for using the equity
method of accounting. As a result, results of operations of Unconsolidated Real
Estate Affiliates are reported as "Equity in income of unconsolidated
affiliates."

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GENERAL GROWTH PROPERTIES, INC.

The following table compares major revenue and expense items for the three
months ended September 30, 2004 and 2003:

THREE MONTHS ENDED SEPTEMBER 30,
- --------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 2004 2003 $ CHANGE % CHANGE
- ---------------------- ---- ---- -------- --------

Total Revenues $ 397,501 $325,565 $ 71,936 22%
Minimum rents 245,538 203,420 42,118 21%
Tenant recoveries 111,570 86,329 25,241 29%
Overage rents 9,386 6,042 3,344 55%
Management and other fees 18,400 21,071 (2,671) (13%)
Total Expenses 228,860 182,825 46,035 25%
Real estate taxes 30,155 23,714 6,441 27%
Repairs and maintenance 27,286 20,465 6,821 33%
Other property operating costs 51,072 39,672 11,400 29%
Marketing 12,370 9,533 2,837 30%
Property management and other costs 21,281 24,272 (2,991) (12%)
Depreciation and amortization 82,027 61,349 20,678 34%
Interest Expense 101,017 74,670 26,347 35%
Equity in income of unconsolidated affiliates 19,686 18,571 1,115 6%

Total revenues increased $66.9 million as a result of new acquisitions and $5.0
million primarily as a result of higher operating expense recoveries from
tenants.

Minimum rents increased primarily as a result of acquisitions. Minimum rents
also include the effect of below-market lease rent accretion pursuant to SFAS
141 and 142 (Note 1) of $7.0 million in 2004 and $5.7 million in 2003. Tenant
recoveries increased $20.6 million as a result of acquisitions and $4.6 million
due to higher recoverable expenses at various properties. Overage rents
increased $2.8 million as a result of acquisitions and $0.5 million as a result
of higher tenant sales.

Management and other fees decreased $2.7 million compared to 2003. The Company
acquired the remaining 50% interest in Town East in March 2004. As this joint
venture is now consolidated in the results of operations of the Company, GGMI no
longer receives a management fee from this property. This decrease was partially
offset by increased development fees resulting from renovations at certain of
the Unconsolidated Properties.

Total expenses increased $38.1 million as a result of acquisitions and $7.9
million as a result of higher depreciation and property costs.

Real estate taxes increased $5.0 million as a result of acquisitions and $1.4
million as a result of increased property taxes at certain of our properties
including Jordan Creek which opened in August 2004. Repairs and maintenance
increased $5.6 million due to acquisitions and $1.2 million primarily as a
result of higher contracted cleaning expenses. Property operating costs
increased $8.9 million as a result of acquisitions and $2.5 million as a result
of higher energy costs. Real estate taxes, repairs and maintenance and other
property operating expenses are generally recoverable from tenants and the
increases in these expenses are generally consistent with the increase in tenant
recovery revenues.

Property management and other costs decreased primarily as a result of lower
costs in 2004 as the TSOs granted in 2002 vested in 2003.

Marketing expenses increased primarily due to acquisitions. Depreciation and
amortization increased $16.1 million as a result of acquisitions and $4.6
million as a result of additional depreciation on completed developments and
redevelopments and other capitalized building and equipment costs.

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GENERAL GROWTH PROPERTIES, INC.

Interest expense increased $24.2 million as a result of increased debt
associated with acquisitions and $2.1 million as a result of higher debt levels
primarily as a result of redevelopments and other working capital requirements.

Equity in income of unconsolidated affiliates increased primarily due to the
Riverchase and GGP/NIG Brazil joint venture acquisitions in 2004.

The following table compares major revenue and expense items for the nine months
ended September 30, 2004 and 2003:

NINE MONTHS ENDED SEPTEMBER 30,
- ---------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 2004 2003 $ CHANGE % CHANGE
- ---------------------- ---- ---- -------- --------

Total Revenues $1,131,705 $880,119 $251,586 29%
Minimum rents 698,232 543,394 154,838 28%
Tenant recoveries 319,264 237,395 81,869 34%
Overage rents 23,168 16,086 7,082 44%
Management and other fees 57,263 61,672 (4,409) (7%)
Total Expenses 665,463 513,616 151,847 30%
Real estate taxes 87,124 63,956 23,168 36%
Repairs and maintenance 77,265 56,557 20,708 37%
Other property operating costs 141,048 109,118 31,930 29%
Marketing 33,325 25,294 8,031 32%
Property management and other costs 70,994 81,420 (10,426) (13%)
Depreciation and amortization 240,687 165,103 75,584 46%
Interest Expense 278,564 199,638 78,926 40%
Equity in income of unconsolidated affiliates 55,770 61,980 (6,210) (10%)

Substantially all of the increases in total revenues were a result of new
acquisitions.

Minimum rents and tenant recoveries increased primarily as a result of
acquisitions. Minimum rents also include the effect of below-market lease rent
accretion pursuant to SFAS 141 and 142 (Note 1) of $19.1 million in 2004 and
$12.3 million in 2003. Overage rents increased $5.7 million as a result of
acquisitions and $1.4 million as a result of higher tenant sales.

Management and other fees declined as a result of joint venture partnership
interest acquisitions. The Company acquired the remaining 49% interest in
GGP/Ivanhoe III from its joint venture partner in July 2003 and the remaining
50% interest in Town East in March 2004. As these joint ventures are now
consolidated in the results of operations of the Company, GGMI no longer
receives a management fee from these properties. These decreases were partially
offset by increased development fees resulting from renovations at certain of
the Unconsolidated Properties.

Total expenses, including depreciation and amortization, increased as a result
of acquisitions.

Real estate taxes increased $22.5 million as a result of acquisitions and $0.7
million as a result of increased property taxes at certain of our properties.
Repairs and maintenance increased $18.5 million due to acquisitions and $2.2
million primarily due to higher contracted cleaning expenses. Property operating
costs increased $33.9 million as a result of acquisitions and decreased $2.0
million as a result of lower operating costs at substantially all properties.
Real estate taxes, repairs and maintenance and other property operating expenses
are generally recoverable from tenants and the increases in these expenses are
generally consistent with the increase in tenant recovery revenues.

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GENERAL GROWTH PROPERTIES, INC.

Marketing expenses increased due to acquisitions. Depreciation and amortization
increased $54.3 million as a result of acquisitions and $21.3 million as a
result of additional depreciation on completed developments and other
capitalized building and equipment costs.

Property management and other costs decreased primarily as a result of lower
costs in 2004 as the TSOs granted in 2002 vested in 2003.

Interest expense increased $68.2 million as a result of increased debt
associated with acquisitions and $10.7 million as a result of higher debt levels
primarily as a result of redevelopments and other working capital requirements.

Equity in income of unconsolidated affiliates decreased primarily due to
acquisition of controlling interests in joint ventures. The Company acquired the
remaining 49% interest in GGP/Ivanhoe III from its joint venture partner in July
2003 and the remaining 50% interest in Town East in March 2004. As a result,
these joint ventures are now consolidated in the results of operations of the
Company. These decreases were partially offset by increases resulting from the
Riverchase and GGP/NIG Brazil joint venture acquisitions in 2004.

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

Net cash provided by operating activities was $518.2 million in the first nine
months of 2004, an increase of $182.2 million from $336.0 million in the same
period in 2003, primarily due to increased earnings (excluding depreciation and
amortization) as a result of properties acquired in 2004.

Net cash used in investing activities was $1.9 billion in the first nine months
of 2004 compared to $971.6 million in the first nine months of 2003. Net cash
provided by financing activities was $1.4 billion in the first nine months of
2004, compared to $720.3 million in the first nine months of 2003. Both changes
reflect the higher volume of acquisition and development activity for the
Consolidated Properties in the first nine months of 2004 as compared to the
first nine months in 2003. During the first nine months of 2004, the Company
acquired 100% interests in five retail properties, the remaining 50% interest in
one retail property, a 50% interest in two retail properties, a 33 1/3%
ownership interest in a property to be developed in Costa Rica and a 50%
interest in a joint venture owning interests in two retail properties and a
property management company in Brazil, all for an aggregate consideration of
approximately $1.8 billion. Consideration for the acquisitions included $1.3
billion of new debt, $134.4 million of assumed debt, $25.1 million of preferred
units in the Operating Partnership and $283.0 million from cash on hand or
proceeds from borrowings under the Company's credit facilities.

As of September 30, 2004, the Company held approximately $21.0 million of cash
and cash equivalents. The liquidity of the Company is derived primarily from its
leases that generate positive net cash flow from operations and distributions
from Unconsolidated Real Estate Affiliates. The Company uses operating cash flow
as the principal source of internal funding for short-term liquidity and capital
needs such as tenant construction allowances and minor improvements made to
individual properties that are not recoverable through common area maintenance
charges to tenants. External funding alternatives for longer-term capital needs
such as acquisitions, new development, expansions and major renovation programs
at individual properties include:

- Construction loans

- Mini-permanent loans

- Long-term project financing

- Joint venture financing with institutional partners

- Operating Partnership level or Company level equity investments

- Unsecured Company level debt

- Secured loans collateralized by individual or groups of properties

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GENERAL GROWTH PROPERTIES, INC.

To facilitate funding needs, the Company arranged the 2003 Credit Facility (Note
4) to replace a previously existing unsecured credit facility. This $1.25
billion credit facility has a term of three years and provides for partial
amortization of the principal balance of the term loan in the second and third
years. Borrowings under the 2003 Credit Facility totaled $1.2 billion at
September 30, 2004 and $789 million at December 31, 2003.

As of September 30, 2004, the Company believed it was in compliance with any
restrictive covenants contained in its various financing arrangements. Also, in
order to maintain its access to the public equity and debt markets, the Company
has a currently effective shelf registration statement under which up to $2
billion in equity or debt securities may be issued from time to time. It is
expected that up to $915 million will be drawn on this shelf registration
statement related to the Rouse acquisition-related warrants offering (Note 9).

As of September 30, 2004, the Company had consolidated debt of approximately
$8.6 billion. In addition, the Company's share (in general, calculated at the
Company's respective ownership interests) of the debt of the Unconsolidated Real
Estate Affiliates was approximately $1.9 billion. Except in instances where
certain Consolidated Properties are cross-collateralized with the Unconsolidated
Properties, or the Company has retained a portion of the debt of a property when
such property was contributed to an Unconsolidated Real Estate Affiliate (Note
3), the Company has not otherwise guaranteed the debt of the Unconsolidated Real
Estate Affiliates.

Reference is made to Note 4 and Item 3 of this Form 10-Q and Note 5 and Items 2
and 7A of the Company's Annual Report on Form 10-K for additional information
regarding the Company's debt and the potential impact on the Company of interest
rate fluctuations.

PENDING ROUSE MERGER

On August 20, 2004, the Company announced that it had entered into an agreement
and plan of merger with The Rouse Company ("Rouse"). Under the terms of the
agreement, which has been approved by each company's board of directors,
stockholders of Rouse will receive a cash payment of $67.50 per share, without
interest, less the amount of a dividend adjustment, as described below. The
total consideration will be approximately $12.6 billion consisting of $7.2
billion in cash plus the assumption of approximately $5.4 billion of existing
Rouse debt (including Rouse's share of debt of unconsolidated affiliates).

The merger is subject to the approval of Rouse stockholders, customary closing
conditions and the receipt of a tax opinion confirming Rouse's REIT status, as
further discussed below. The merger does not require the approval of General
Growth stockholders and is generally not conditioned upon receipt of financing
by the Company. The merger agreement provides for a termination fee and expense
reimbursement of up to an aggregate of $180 million, which is payable by Rouse
to the Company under certain circumstances.

The Rouse stockholders meeting to consider the approval of the merger is
currently scheduled for November 9, 2004. The merger will be completed as soon
as possible after the Rouse stockholders meeting and after all conditions to the
merger are satisfied or waived. It is currently expected that such completion
will occur on or about November 12, 2004.

The Company understands that in the course of preparing for the merger, Rouse
discovered issues relating to whether it satisfied certain tax law requirements
applicable to REITs. Rouse has filed a request with the Internal Revenue Service
for Rouse to take certain corrective actions that would result in Rouse having
satisfied these requirements, but there can be no assurance that the Internal
Revenue Service will in fact consent to this request. If the Internal Revenue
Service does not consent to Rouse's request, Rouse will likely not be able to
satisfy one of the conditions to the closing of the merger. In such event, there
may be other alternatives, which would also require the consent of the Internal
Revenue Service, that would enable Rouse to qualify as a REIT and enable Rouse
to satisfy such condition of the merger agreement.

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GENERAL GROWTH PROPERTIES, INC.

The merger consideration will be reduced by the Extraordinary Dividend that
Rouse is expected to pay on or prior to the effective time of the merger as one
of the potential corrective actions to be performed by Rouse as described above.
Under the terms of the merger agreement, the Extraordinary Dividend will reduce
the merger consideration of $67.50 on a dollar-for-dollar basis up to $2.42 per
share, and any amount in excess of $2.42 per share will reduce the merger
consideration by 110% of this excess. Rouse currently estimates that the
Extraordinary Dividend will be approximately $2.30 per share. However, there can
be no assurance that the Internal Revenue Service will agree with this amount,
in which case the Extraordinary Dividend could be significantly larger than
Rouse's current estimate.

The Company intends to finance the costs of the merger with Rouse with proceeds
of a $9.75 billion senior credit facility from a syndicate of banks, financial
institutions and other entities. The Company anticipates the credit facility
will include the following:

- The Bridge Loan, a six-month loan of up to $3.6 billion. The Company
expects to have an option to extend the maturity of up to $600
million of this Bridge Loan for an additional six months.

- Term Loan A, a three-year $3.9 billion term loan

- Term Loan B, a four-year $2.0 billion term loan

- The Rouse Revolver, a three-year $250 million revolving credit
facility

The Company expects to refinance the Bridge Loan with loans tied to various
properties in its portfolio. The proceeds from the Bridge Loan, Term Loan A and
Term Loan B are intended to be used to finance the Rouse merger and to pay
related fees and expenses and to refinance certain existing indebtedness of the
Company and Rouse, with any remaining portion to be used for the general
corporate purposes of the Company in the ordinary course of business. The
proceeds from the Rouse Revolver are intended to be used for general corporate
purposes of the Company in the ordinary course of business.

It is expected that the credit facility will bear interest quarterly in arrears,
or such other periodic basis as may be determined by the Company's election of
applicable interest rates. The Company anticipates that the components of the
credit facility will bear interest at LIBOR plus 200 to 275 basis points. At
closing and during the term of the credit facility the Company also will pay
various fees and expense reimbursements.

The Company anticipates that the term loan components of the credit facility
will be subject to scheduled principal amortization as follows:

- Term Loan A - repayment of $500 million on each of the first year
anniversary, the 18-month anniversary and the second-year
anniversary, and then $125 million at the end of each subsequent
calendar quarter.

- Term Loan B - repayment of an amount equal to 1% of the original
principal amount (expected to be $20 million) each year, payable in
equal quarterly installments.

With exceptions for capital expenditures and other items, the Company
anticipates that it will be required to apply the net proceeds of future
mortgage financings and refinancings, sales of equity, and asset dispositions
(including by casualty or condemnation) toward prepayment of the credit facility
in accordance with various priorities to be set out in the final credit facility
documents. Subject to any exceptions or limits contained in its existing
agreements, the Company anticipates that the credit facility will be secured by
a pledge of certain ownership interests held by the Operating Partnership.

In addition, the Company is conducting an offering of warrants to sell
newly-issued Common Stock. Each holder of shares of Common Stock and all holders
of common or convertible preferred units of limited partnership interest in the
Operating Partnership as of October 18, 2004, the record date, were allocated,
at no cost, 0.1 non-transferable warrants for each share or common unit
(assuming conversion of the preferred units into common units, in accordance
with the terms of the preferred units) owned at that time, for a total of
approximately 28.4 million warrants. Each whole warrant entitles the holder to
purchase one share of Common Stock for $32.23 per share. Each warrant holder
that exercises its basic subscription privilege in full

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GENERAL GROWTH PROPERTIES, INC.

also may subscribe for additional shares at the same subscription price per
share to the extent that other holders do not exercise their warrants in full.
If an insufficient number of shares is available to satisfy fully the
oversubscription privilege requests, the available shares will be sold pro rata
among warrant holders who exercised their oversubscription privilege. M.B.
Capital Partners III has committed to back-stop the warrants offering to ensure
that not less than $500 million will be raised in the warrants offering. M.B.
Capital Partners III is a South Dakota general partnership, the partners of
which are trusts for the benefit of John Bucksbaum (the current CEO of General
Growth) and other members of the Bucksbaum family (the founders of General
Growth) and an entity wholly owned by a member of the Bucksbaum family. M.B.
Capital Partners III will comply with this back-stop obligation by exercising
its subscription privilege and by subscribing for any Common Stock not
subscribed for in the warrants offering to close any gap between the amount
subscribed for and $500 million. Assuming the warrant offering is fully
subscribed, total gross proceeds will be approximately $915 million.

The period for the exercise of the subscription privilege granted by the
warrants is scheduled to expire on November 9, 2004 and the proceeds from the
warrant offering are expected to be received as soon as possible thereafter.
However, the Company has the option of extending the subscription period in the
event of a delay in the consummation of the merger or the Rouse stockholder
meeting to approve the merger. In addition, the Company has the right to cancel
the warrant offering at any time and for any reason, including but not limited
to an indefinite delay or termination of the Rouse merger agreement. Therefore,
although the Company anticipates that the warrant offering will be completed in
the fourth quarter of 2004 and, at a minimum, the $500,000 of proceeds from the
warrant offering or the M.B. Capital Partners III backstop agreement will be
received, there can be no assurance as to the timing or actual occurrence of
those events.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The following table aggregates the future maturities of the Company's
contractual obligations and commitments as of September 30, 2004:

(DOLLARS IN THOUSANDS) 2004 2005 2006 2007 2008 SUBSEQUENT TOTAL
---- ---- ---- ---- ---- ---------- -----

Long-term debt-principal $ 214,664 $ 331,797 $ 1,846,226 $ 454,293 $1,479,367 $ 4,288,474 $ 8,614,821
Retained debt-principal 761 6,586 29,914 119,077 199 10,910 167,447 (1)
Ground lease payments 634 2,520 2,450 2,445 2,445 89,082 99,576
Committed real estate
acquisition contracts
(Notes 2 and 9) 7,200,000 - - 250,000 - - 7,450,000 (2)
Purchase obligations 48,766 - - - - - 48,766 (3)
Other long-term liabilities - - - - - - - (4)
----------- --------- ----------- --------- ---------- ----------- -----------
Total $ 7,464,825 $ 340,903 $ 1,878,590 $ 825,815 $1,482,011 $ 4,388,466 $16,380,610
=========== ========= =========== ========= ========== =========== ===========

(1) As separately detailed in Note 3.

(2) Reflects $7.2 billion in expected cash funding related to the pending
Rouse acquisition (anticipated to be funded by the $9.75 billion senior
credit facility) and $250 million related to the Palazzo.

(3) Reflects accrued and incurred construction costs payable. Routine trade
payables have been excluded. Future construction costs related to current
redevelopment and development projects are currently expected to be
approximately $500 million for Consolidated Properties and approximately
$200 million for Unconsolidated Properties.

(4) Other long-term liabilities related to interest expense on long-term debt
or ongoing real estate taxes have not been included in the table as such
amounts depend upon future amounts outstanding and future applicable real
estate tax and interest rates. Interest expense was $278.5 million in 2003
and $219.0 million in 2002. Real estate tax expense was $89.0 million in
2003 and $61.1 million in 2002.

Not included in contractual obligations and commitments as of September 30, 2004
are additional committed investments in GGP/NIG Brazil of $25.0 million,
GGP/Sambil Costa Rica of $3.2 million and Circle T of $0.8 million.

Although agreements to refinance debt maturing in 2004 and 2005 have not yet
been reached, the Company currently anticipates that all of its debt will be
repaid or refinanced on a timely basis.

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GENERAL GROWTH PROPERTIES, INC.

REIT STATUS

In order to remain qualified as a real estate investment trust ("REIT") for
federal income tax purposes, General Growth must distribute or pay tax on 100%
of capital gains and at least 90% of its ordinary taxable income to
stockholders. The following factors, among others, will affect operating cash
flow and, accordingly, influence the decisions of the Board of Directors
regarding distributions:

- Scheduled increases in base rents of existing leases

- Changes in minimum base rents and/or overage rents attributable to
replacement of existing leases with new or renewal leases

- Changes in occupancy rates at existing properties and procurement of
leases for newly developed properties

- General Growth's share of distributions of operating cash flow
generated by the Unconsolidated Real Estate Affiliates, less
oversight costs and debt service on additional loans that have been
or will be incurred.

General Growth anticipates that its operating cash flow, and potential new debt
or equity from future offerings, new financings or refinancings will provide
adequate liquidity to conduct its operations, fund general and administrative
expenses, fund operating costs and interest payments and allow distributions to
General Growth preferred and common stockholders in accordance with the
requirements of the Internal Revenue Service.

ECONOMIC CONDITIONS

During 2003, the retail sector improved modestly and the 2003 holiday season was
the strongest since 1999. Throughout the first nine months of 2004, interest
rates, while increasing, have remained low, employment rates have risen and
shopper spending has increased. The Company currently estimates that sales
during the 2004 holiday season will increase 3 to 3.5% over 2003 sales and that
leasing will continue to be strong for the balance of 2004 and into 2005.
Despite these favorable trends, some economists remain cautious about prospects
for continued improvements in retail markets and about the likelihood of
interest rates continuing to remain at their current historic lows. Growth in
retail markets would lead to stronger demand for leaseable space, ability to
increase rents to tenants with stronger sales performance and increased rents
computed as a percentage of tenant sales.

The Company and its affiliates currently have ownership interests in 171
operating retail properties (regional malls and community centers). These
properties are diversified both geographically and by property type (both major
and middle market properties) and this may mitigate the impact of any economic
decline at a particular property or in a particular region of the country. In
addition, the diverse combination of the Company's tenants is important because
no single tenant (by trade name) comprises more than 10% of the Company's
annualized total revenues.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

As described in Note 8, the FASB, has issued certain statements which are
effective for the current year. There has not been a significant impact on the
Company's reported operations due to the application of such new statements.
There are no pronouncements or interpretations that have not yet been adopted
that are expected to have a material effect on the consolidated financial
statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has not entered into any transactions using derivative commodity
instruments. At September 30, 2004, $3.4 billion of the Company's consolidated
debt bears interest at rates that vary with the market. However, approximately
$725 million of such variable-rate consolidated debt is subject to interest rate
swap

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GENERAL GROWTH PROPERTIES, INC.

agreements, the effect of which is to fix the interest rate the Company is
required to pay on such debt to approximately 3.86% per annum. Although the
majority of the remaining variable-rate debt is subject to interest rate cap
agreements pursuant to the loan agreements and financing terms, such interest
rate caps generally limit the Company's interest rate exposure only if LIBOR
exceeds a rate per annum significantly higher (generally above 8% per annum)
than current LIBOR rates. Therefore, a 25 basis point movement in the interest
rate on the remaining approximately $2.7 billion of variable-rate debt would
result in an approximately $6.7 million annualized increase or decrease in
consolidated interest expense and operating cash flows.

In addition, the Company is subject to interest rate exposure as a result of the
variable-rate debt collateralized by the Unconsolidated Real Estate Affiliates
for which interest rate swap agreements have not been obtained. The Company's
share (based on the Company's respective equity ownership interests in the
Unconsolidated Real Estate Affiliates) of such remaining variable-rate debt was
approximately $522.2 million at September 30, 2004. A similar 25 basis point
annualized movement in the interest rate on the variable-rate debt of the
Unconsolidated Real Estate Affiliates would result in approximately $1.3 million
annualized increase or decrease in the Company's equity in the income and
operating cash flows from Unconsolidated Real Estate Affiliates.

The Company is further subject to interest rate risk with respect to its
fixed-rate financing in that changes in interest rates will impact the fair
value of the Company's fixed-rate financing. To determine the fair market value,
the fixed-rate debt is discounted at a rate based on an estimate of current
lending rates, assuming the debt is outstanding through maturity and considering
the debt's collateral. At September 30, 2004, the fair value of the fixed-rate
debt, including variable-rate debt converted to fixed-rate debt through interest
rate swaps is estimated to be $6.1 billion compared to the carrying value of
$5.9 billion. A 25 basis point increase in LIBOR would not have a material
impact on the fair value of our fixed-rate debt or swap agreements.

The Company has an ongoing program of refinancing its consolidated and
unconsolidated variable and fixed rate debt and believes that this program
allows it to vary its ratio of fixed to variable-rate debt and to stagger its
debt maturities to respond to changing market rate conditions. Reference is made
to the above discussions of Liquidity and Capital Resources of the Company and
Note 4 for additional debt information.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Chief Executive Officer ("CEO") and Chief Financial
Officer ("CFO"), of the effectiveness of the design and operation of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15(d)-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")).
Based on that evaluation, the CEO and the CFO have concluded that the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act, as amended, is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission
rules and forms.

There have been no significant changes in the Company's internal controls during
the Company's most recently completed fiscal quarter that have materially
affected or are reasonably likely to materially affect the Company's internal
control over financial reporting.

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GENERAL GROWTH PROPERTIES, INC.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS

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

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

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

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

99.1 Risk Factors

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SIGNATURE

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

GENERAL GROWTH PROPERTIES, INC.
(Registrant)

Date: November 9, 2004 by: /s/: Bernard Freibaum
---------------------------------------------
Bernard Freibaum
Executive Vice President and Chief
Financial Officer
(Principal Accounting Officer)

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