GENERAL GROWTH PROPERTIES INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

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, 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, $.10 par value, outstanding on August 8,
2003 was 71,476,968.

GENERAL GROWTH PROPERTIES, INC.

INDEX

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 AND DECEMBER 31, 2002
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)

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

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GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2003 AND 2002
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)

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

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GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)

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

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

NOTE 1 ORGANIZATION

Readers of this quarterly report should refer to the Company's audited financial
statements for the year ended December 31, 2002 which are included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002
(Commission File No. 1-11656), as certain footnote disclosures which would
substantially duplicate those contained in the 2002 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
2002 Annual Report on Form 10-K.

GENERAL

General Growth Properties, Inc., a Delaware corporation ("General Growth"), was
formed in 1986 to own and operate shopping centers. 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. Proceeds from General Growth's April 15, 1993 initial
public offering of common stock (the "Common Stock") were used to acquire a
majority interest in GGP Limited Partnership (the "Operating Partnership"),
which was formed to succeed to substantially all of the interests in regional
mall general partnerships owned and controlled by the Company and its original
stockholders. The Company conducts substantially all of its business through the
Operating Partnership, which commenced operations on April 15, 1993.

As of June 30, 2003, the Company either directly or through the Operating
Partnership and subsidiaries owned 100% of fifty-nine regional mall shopping
centers, 100% of the Victoria Ward Assets (as defined in Note 2) and 100% of the
JP Realty Assets (as defined in Note 2) (collectively, the "Wholly-Owned
Centers"); 100% of the common stock of General Growth Management, Inc. ("GGMI");
50% of the common stock of GGP/Homart, Inc. ("GGP/Homart"), 50% of the
membership interests of GGP/Homart II, L.L.C. ("GGP/Homart II"), 50% of the
membership interests in GGP-TRS L.L.C. ("GGP/Teachers"), 51% of the common stock
of GGP Ivanhoe, Inc. ("GGP Ivanhoe"), 51% of the common stock of GGP Ivanhoe
III, Inc. ("GGP Ivanhoe III"), 50% of each of two regional mall shopping
centers, Quail Springs Mall and Town East Mall, and a 50% general partnership
interest in Westlake Retail Associates, Ltd ("Circle T") (collectively, the
"Unconsolidated Real Estate Affiliates"). The 50% interest in the twenty-two
centers owned by GGP/Homart, the 50% interest in the ten centers owned by
GGP/Homart II, the 50% interest in the five centers owned by GGP/Teachers, the
51% ownership interest in the two centers owned by GGP Ivanhoe, the 51%
ownership interest in the eight centers owned by GGP Ivanhoe III, the 50%
ownership interest in the center owned and being developed by Circle T, and the
50% ownership interest in both Quail Springs Mall and Town East Mall comprise
the "Unconsolidated Centers". Together, the Wholly-Owned Centers and the
Unconsolidated Centers comprise the "Company Portfolio". However, as the center
being developed by Circle T is not yet operational, it has been excluded from
the definition of, and the operational statistics for, the Company Portfolio.

General Growth has reserved for issuance up to 1,000,000 shares of Common Stock
under the Dividend Reinvestment and Stock Purchase Plan ("DRSP"). The DRSP, in
general, allows participants in the plan to make purchases of Common Stock from
dividends received or additional cash investments. Although the purchase price
of the Common Stock is determined by the current market price, the purchases are
made without fees or commissions. General Growth has and will satisfy DRSP
Common Stock purchase needs through the issuance of new shares of Common Stock
or by repurchases of currently outstanding Common Stock. As of June 30, 2003, an
aggregate of 106,634 shares of Common Stock has been issued under the DRSP.

During May 2000, the Operating Partnership formed GGPLP L.L.C., a Delaware
limited liability company ("the LLC"), by contributing its interest in a
portfolio of 44 Wholly-Owned Centers to the LLC in exchange for all of the
common units of membership interest in the LLC. As of June 30, 2003, the LLC,
due to subsequent

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

acquisitions by the Company, owns 49 of the Wholly-Owned Centers. A total of
940,000 redeemable preferred units of membership interest in the LLC (the
"RPUs") have been issued by the LLC. Holders of the RPUs are entitled to receive
cumulative preferential cash distributions per RPU at a per annum rate of 8.95%
of the $250 liquidation preference thereof (or $5.59375 per quarter) prior to
any distributions by the LLC to the Operating Partnership. Subject to certain
limitations, the RPUs may be redeemed in cash by the LLC for the liquidation
preference amount plus accrued and unpaid distributions and may be exchanged by
the holders of the RPUs for an equivalent amount of redeemable preferred stock
of General Growth. Such preferred stock provides for an equivalent 8.95% annual
preferred distribution and is redeemable at the option of General Growth for
cash equal to the liquidation preference amount plus accrued and unpaid
distributions. The RPUs outstanding at June 30, 2003 and December 31, 2002 have
been reflected in the accompanying consolidated financial statements as a
component of minority interest at the current total liquidation preference
amount of $235,000.

In addition, 20,000 8.25% cumulative preferred units (the "CPUs") have been
issued by the LLC. The holders of these CPUs are entitled to receive cumulative
preferential cash distributions per CPU at a per annum rate of 8.25% of the $250
liquidation preference thereof (or $5.15625 per quarter), prior to any
distributions by the LLC to the Operating Partnership. The CPUs outstanding at
June 30, 2003 have been included in the accompanying consolidated financial
statements as a component of minority interest at the then current total
liquidation preference amount of $5,000.

As of June 30, 2003, General Growth owned an approximate 76% general partnership
interest in the Operating Partnership (excluding its preferred units of
partnership interest as discussed below). The remaining approximate 24% minority
interest in the Operating Partnership is held by limited partners that include
trusts for the benefit of the families of the original stockholders who
initially owned and controlled the Company and subsequent contributors of
properties to the Company. These minority interests are represented by common
units of limited partnership interest in the Operating Partnership (the
"Units"). The Units can be redeemed 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 on a per share basis in any distributions by the
Operating Partnership on the basis that one Unit is equivalent to one share of
Common Stock.

General Growth had issued 13,500,000 Depositary Shares, each representing 1/40
of a share of 7.25% Preferred Income Equity Redeemable Stock, Series A
("PIERS"), or a total of 337,500 PIERS. During May 2003, General Growth called
all of its outstanding PIERS and Depositary Shares for redemption on July 15,
2003. The Depositary Shares (and the related PIERS) were converted at the rate
of .6297 shares of Common Stock per Depositary Share and therefore, a total of
4,180,062 shares of Common Stock were issued on July 15, 2003 as a result of
this redemption. In order to enable General Growth to comply with its
obligations with respect to the PIERS, General Growth owned preferred units of
limited partnership interest in the Operating Partnership (the "Preferred
Units") which had rights, preferences and other privileges, including
distribution, liquidation, conversion and redemption rights, that mirrored those
of the PIERS. Accordingly, the Operating Partnership was required to make all
required distributions on the Preferred Units prior to any distribution of cash
or assets to the holders of the Units. The Depositary Shares had been
convertible at any time, at the option of the holder, into shares of Common
Stock at the rate of .6297 shares of Common Stock per Depositary Share. Although
no Depositary Shares had been converted at December 31, 2002, at June 30, 2003
holders of approximately 233,292 Depositary Shares had elected to convert to,
and such Depositary Shares were converted to, Common Stock. Holders of an
additional 6,628,508 Depositary Shares elected to convert to Common Stock
through July 14, 2003. A total of 4,320,833 shares of Common Stock were issued
as a result of such voluntary conversions. The PIERS and the Depositary Shares
had been subject to mandatory redemption by General Growth on July 15, 2008 at a
price of $1,000 per PIERS, plus accrued and unpaid dividends, if any, to the
redemption date. Accordingly, the PIERS were reflected in the accompanying
consolidated financial statements at such liquidation or redemption value. At
June 30, 2003, and December

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

31, 2002, 100% of the outstanding Preferred Units (331,668 and 337,500,
respectively), were owned by General Growth.

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of the
Company and the Operating Partnership consisting of the Wholly-Owned Centers
(including those owned by the LLC), GGMI and the unconsolidated investments in
GGP/Homart, GGP/Homart II, GGP/Teachers, GGP Ivanhoe, GGP Ivanhoe III, Circle T,
Quail Springs Mall and Town East Mall. Included in the consolidated financial
statements are four joint ventures, acquired in the JP Realty acquisition (Note
2), which are partnerships with non-controlling independent joint venture
partners. Income allocated to minority interests includes the share of such
properties' operations (computed as the respective joint venture partner
ownership percentage) applicable to such non-controlling venture partners. All
significant intercompany balances and transactions have been eliminated.

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 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, allocations of purchase price
to acquired assets and liabilities, recoverable amounts of receivables and
deferred taxes and amortization periods of deferred costs and intangibles.
Actual results could differ from those estimates.

In the opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary for a fair statement of the financial position of the
Company as of June 30, 2003 and the results of operations for the three and six
months ended June 30, 2003 and 2002 and cash flows for the six months ended June
30, 2003 and 2002 have been included. The results for the interim periods ended
June 30, 2003 and 2002 are not necessarily indicative of the results to be
obtained for the full fiscal year.

Certain amounts in the 2002 consolidated financial statements have been
reclassified to conform to the 2003 presentation.

EARNINGS PER SHARE ("EPS")

Basic per share amounts are based on the weighted average of common shares
outstanding of 62,735,352 for 2003 and 62,058,449 for 2002. Diluted per share
amounts are based on the total weighted average number of common shares and
dilutive securities (such as stock options) outstanding of 62,949,706 for 2003
and 62,192,722 for 2002. However, certain options outstanding were not included
in the computation of diluted earnings per share either 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. The
effect of the issuance of the PIERS is anti-dilutive with respect to the
Company's calculation of diluted earnings per share for the three and six months
ended June 30, 2003 and 2002 and therefore has been excluded. The outstanding
Units have also been excluded from the Company's calculation of diluted earnings
per share as there would be no net effect on the reported EPS amounts since the
minority interests' share of income would also be added back to net income.

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

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

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 29, 2002 an aggregate
of $26,956 in advances were made to such officers in connection with their
exercise of options to purchase an aggregate of 915,000 shares of Common Stock.

As of April 30, 2002, the Company's Board of Directors terminated 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. 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 (1.12% at
June 30, 2003) 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). In
October 2002, a voluntary prepayment of approximately $500 was received from one
of the officers. As of June 30, 2003, the current outstanding balance under the
promissory notes was $8,071, including approximately $861 relating to income tax
withholding payments which have been reflected in prepaid expenses and other
assets.

REVENUE RECOGNITION

Minimum rent revenues are recognized on a straight-line basis over the term of
the related leases. As of June 30, 2003, approximately $68,924 has been
recognized as 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), all of which is included in tenant accounts
receivable, net in the accompanying consolidated financial statements. Also
included in consolidated minimum rents for the six months ended June 30, 2003 is
approximately $6,656 of accretion related to the below-market leases at
properties acquired as provided by SFAS 141 and 142. 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. Such
termination income was approximately $5,561 and $3,924, respectively, for the
six months ended June 30, 2003 and 2002. Overage rents are recognized on an
accrual basis once tenant sales revenues exceed contractual tenant lease

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

thresholds. Recoveries from tenants computed as a formula related to taxes,
insurance and other shopping center operating expenses are recognized as
revenues in the period the applicable costs are incurred. The Company provides
an allowance for doubtful accounts against the portion of accounts receivable
which is estimated to be uncollectible. Such allowances are reviewed
periodically based upon the recovery experience of the Company. Fees recognized
by the Company in the six months ended June 30, 2003 and 2002 from its
Unconsolidated Real Estate Affiliates for services performed for the
Unconsolidated Centers were $36,944 and $29,091, respectively.

COMPREHENSIVE INCOME

Comprehensive income is a more inclusive financial reporting methodology that
encompasses net income and all other changes in equity except those resulting
from investments by and distributions to equity holders. Included in
comprehensive income but not net income are unrealized gains or losses on
marketable securities classified as available-for-sale and unrealized gains or
losses on financial instruments designated as cash flow hedges (Note 4). Also
included in comprehensive income for the six months ended June 30, 2003, is
approximately $27 representing the 2003 change in the fair value of plan assets
relating to a frozen pension plan of Victoria Ward assumed by the Company upon
acquisition (Note 2). In addition, one of the Company's unconsolidated
affiliates received common stock of a large, publicly traded real estate company
as part of a 1998 transaction. Cumulative net unrealized losses on such
securities through December 31, 2001 were $169, net of minority interest and
were reflected as accumulated equity in other comprehensive loss of
unconsolidated affiliate. During the three months ended March 31, 2002, all
holdings of such stock were sold and the remaining cumulative unrealized losses
pertaining to such stock holdings were realized.

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, all material
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 to attract and retain officers and key
employees. During 2003, the 1993 Stock Incentive Plan expired as provided by its
terms. Accordingly, the Company, as approved in May 2003 at the annual meeting
of its stockholders, established a new incentive stock plan (the "2003 Incentive
Stock Plan") to replace the 1993 Stock Incentive Plan. The terms of the 2003
Incentive Stock Plan are similar to those of the 1993 Stock Incentive Plan but
provide for the issuance of up to 3,000,000 shares of Common Stock pursuant to
the plan. These plans provide for stock and option grants to employees in the
form of 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 the 1993 Stock Incentive Plan) and in the form of
threshold-vesting stock options ("TSOs") (generally, grants pursuant to the 1998
Incentive Plan). The exercise price of the TSOs to be granted to a participant
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 will have a term of 10 years but must vest
within 5 years of the grant date in order to avoid forfeiture.

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

The following is a summary of the TSOs that have been awarded as of June 30,
2003:

On March 22, 2002, the TSOs that were granted in 2000 vested. On March 25, 2002
the Company extended a limited opportunity to employees with vested TSOs to
exchange such options directly for cash (computed as the net proceeds the
employee would have received had he or she exercised the options and then
immediately sold the resulting stock). In addition, on April 29, 2002, on
September 20, 2002 and on June 3, 2003, the TSOs granted in 1999, 2001 and 2002,
respectively, vested. Immediately following each vesting event additional
limited exchange opportunities to employees with previously vested TSOs were
extended. As a result of the vesting of the TSOs and the exchange opportunities,
the Company has recorded additional compensation expense of approximately $3,745
and $7,100, respectively, for the three and six months ended June 30, 2002 and
approximately $4,892 for the three and six months ended June 30, 2003.

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

During the second quarter of 2002, the Company elected to 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"), prospectively. 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 reduced to the proforma amounts as follows:

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

NOTE 2 PROPERTY ACQUISITIONS AND DEVELOPMENTS

On May 28, 2002, the Company acquired the stock of Victoria Ward, Limited, a
privately held real estate corporation ("Victoria Ward"). The total acquisition
price was approximately $250,000, including the assumption of approximately
$50,000 of existing debt, substantially all of which was repaid immediately
following the closing. The $250,000 total cash requirement was funded from the
proceeds of the sale of the Company's investment in marketable securities
(related to the GGP MPTC financing (Note 4)) and from available cash and cash
equivalents. The principal Victoria Ward assets include 65 fee simple acres in
Kakaako, central Honolulu, Hawaii, currently improved with, among other uses, an
entertainment, shopping and dining district which includes Ward Entertainment
Center, Ward Warehouse, Ward Village and Village Shops. In total, Victoria Ward
currently has 17 properties subject to ground leases and 29 owned buildings
containing in the aggregate approximately 878,000 square feet of retail space,
as well as approximately 441,000 square feet of office, commercial and
industrial leaseable area (collectively, the "Victoria Ward Assets"). In 2002
and subsequent years, Victoria Ward will be taxed as a REIT.

On July 10, 2002, the Company acquired JP Realty, Inc. ("JP Realty"), a
publicly-held real estate investment trust, and its operating partnership
subsidiary, Price Development Company, Limited Partnership ("PDC"), by merging
JP Realty and PDC with wholly-owned subsidiaries of the Company, with PDC
surviving the merger and all of its subsidiaries remaining in existence. The
total acquisition price was approximately $1,100,000 which included the
assumption of approximately $460,000 in existing debt and approximately $116,000
of existing cumulative preferred operating partnership units in PDC (510,000
Series A 8.75% units redeemable in April 2004, 3,800,000 Series B 8.95% units
redeemable in July 2004 and 320,000 Series C 8.75% units redeemable in May 2005)
which has been included in minority interest-Preferred Units in the accompanying
consolidated financial statements. Each unit of each series of the cumulative
redeemable preferred units in PDC has a liquidation value of $25 per unit and is
convertible at the option of the preferred unit holder in 2009 (2010 for the
Series C Units) into 0.025 shares of a newly created series of General Growth
preferred stock ($1,000 per share base liquidation preference) with payment and
liquidation rights comparable to such preferred unit. Pursuant to the terms of
the merger agreement, the outstanding shares of JP Realty common stock were
converted into $26.10 per share of cash (approximately $431,470). Holders of
common units of limited partnership interest in PDC were entitled to receive
$26.10 per unit in cash or, at the election of the holder, .522 8.5% Series B
Preferred Units (Note 1) per unit. Based upon the elections of such holders,
1,426,393 Series B Preferred Units were issued and the holders of the remaining
common units of limited partnership interest of PDC received approximately
$23,600 in cash. JP Realty owned or had an interest in 51 properties, including
18 enclosed regional mall centers (two of which were owned through controlling
general partnership interests), 26 anchored community centers (two of which were
owned through controlling general partnership interests), one free-standing
retail property and 6 mixed-use commercial/business properties, containing an
aggregate of over 15,200,000 square feet of GLA in 10 western states
(collectively, the "JP Realty Assets"). The cash portion of the acquisition
price was funded from the net proceeds of certain new mortgage loans, a new
$350,000 acquisition loan (Note 4), and available cash and cash equivalents.

On August 5, 2002, the Operating Partnership acquired from GGP/Homart, the
Prince Kuhio Plaza in Hilo, Hawaii for approximately $39,000. Prince Kuhio
Plaza, which contains approximately 504,000 square feet of GLA, was acquired by
the assumption by the Operating Partnership of the allocated share of the GGP
MPTC financing (Note 4) pertaining to Prince Kuhio Plaza (approximately $24,000)
and the payment to GGP/Homart of $7,500 in cash and $7,500 in the form of a
promissory note. Immediately following the acquisition, GGP/Homart issued a
dividend of $15,000 to its two co-investors, paid in the form of $7,500 in cash
to NYSCRF and the $7,500 promissory note to the Operating Partnership. Upon
receipt of the promissory note as a dividend, the Operating Partnership caused
the promissory note to GGP/Homart to be cancelled.

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

On August 26, 2002, concurrent with the formation of GGP/Teachers (Note 3), the
Company, through GGP/Teachers, acquired Galleria at Tyler in Riverside,
California, Kenwood Towne Centre in Cincinnati, Ohio and Silver City Galleria in
Taunton, Massachusetts from an institutional investor for an aggregate purchase
price of approximately $477,000. Two existing non-recourse loans on Silver City
Galleria, aggregating a total of $75,000 and bearing interest at a rate per
annum of 7.41%, were assumed and three new non-recourse mortgage loans totaling
approximately $337,000 were obtained. The new loans bear interest at a weighted
average rate per annum of LIBOR plus 76 basis points.

On September 13, 2002, the Company acquired Pecanland Mall, an enclosed regional
mall in Monroe, Louisiana, for approximately $72,000. The acquisition was funded
by approximately $22,000 of cash on hand and the assumption of a $50,000
existing non-recourse loan that bears interest at a rate per annum equal to the
sum of 3.0% plus the greater of (i) LIBOR or (ii) 3.5%. The loan is scheduled to
mature in January of 2005 (subject to a right to extend for one additional
year).

On December 4, 2002, the Company acquired Southland Mall, an enclosed regional
mall in Hayward, California. The aggregate consideration paid was approximately
$89,000. The purchase was financed with approximately $24,000 of cash on hand
and a new 5-year (assuming all options to extend are exercised) $65,000 mortgage
loan that bears interest at LIBOR plus 75 basis points.

On April 30, 2003, the Company acquired Peachtree Mall, an approximately 811,000
square foot 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 (Note 4).

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 (subject to certain prorations and adjustments). The
consideration was paid from cash on hand, including proceeds from refinancings
of existing long-term debt and an approximately $176,000 acquisition loan which
initially bears interest at LIBOR plus 105 basis points. After October 2003,
depending upon certain factors, the interest rate spread on the loan could vary
from 85 basis points to 165 basis points. The loan requires monthly payments of
interest only, is scheduled to mature in October 2005, and is subject to three
one-year, no-cost extension options.

On June 12, 2003, the Company acquired Coronado Center, an enclosed mall in
Albuquerque, New Mexico. The aggregate consideration paid for Coronado Center
was approximately $175,000 (subject to certain prorations and adjustments). The
consideration was paid in the form of cash borrowed under an existing unsecured
revolving credit facility and an approximately $131,000 acquisition loan which
initially bears interest at LIBOR plus 85 basis points. After October 2003,
depending upon certain factors, the interest rate spread on the loan could vary
from 90 basis points to 195 basis points. The loan requires monthly payments of
interest only, is scheduled to mature in October 2005, and is subject to three
one-year, no-cost extension options.

All acquisitions completed through June 30, 2003 were accounted for utilizing
the purchase method and accordingly, the results of operations are included in
the Company's results of operations from the respective dates of acquisition.
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, equipment and other identifiable debit and credit
intangibles such as lease origination costs and acquired below-market leases.
This allocation has resulted in the recognition upon acquisition of additional
consolidated intangible assets (acquired in-place lease origination costs) and
liabilities (acquired below-market leases) relating to the Company's 2003 real
estate purchases of approximately $6,107 and $15,388, respectively. These
intangible assets and liabilities, and similar assets and liabilities from the
Company's 2002 acquisitions including those by

14 of 40

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

the Unconsolidated Real Estate Affiliates, are being amortized over the terms of
the acquired leases which resulted in additional 2003 net income, including the
Company's share of such items from its Unconsolidated Real Estate Affiliates, of
approximately $3,100. Due to existing contacts and relationships with tenants at
its currently owned properties and at properties currently managed for others,
no value has been ascribed to the tenant relationships which exist at the
properties acquired in 2003.

On July 1, 2003, the Company, through the Operating Partnership, acquired the
49% ownership interest in 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%. Concurrently with this transaction, a new joint venture, GGP Ivanhoe IV,
Inc., ("GGP Ivanhoe IV") was created between the Operating Partnership and
Ivanhoe to own Eastridge Mall, which previously had been owned by GGP Ivanhoe
III. No gain or loss will be recognized on the transfer of Eastridge Mall by GGP
Ivanhoe III. The Company's ownership interest in GGP Ivanhoe IV is 51% and
Ivanhoe's ownership interest is 49%. The aggregate consideration for the 49%
ownership interest in Ivanhoe III was approximately $459,000 (subject to certain
prorations and adjustments). 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 using a
combination of proceeds from the refinancing of existing long-term debt and new
mortgage loans on previously unencumbered properties.

DEVELOPMENTS

The Company has an ongoing program of renovations and expansions at its
properties including significant projects currently under construction or
recently completed at Tucson Mall in Tucson, Arizona, Alderwood Mall in Lynnwood
(Seattle), Washington (owned by GGP/Homart) and Fallbrook Mall in West Hills
(Los Angeles), California.

During 1999, the Company formed the Circle T joint venture to develop a regional
mall in Westlake (Dallas), Texas as further described in Note 3 below. As of
June 30, 2003, the Company had invested approximately $18,044 in the joint
venture. The Company is currently obligated to fund additional pre-development
costs of approximately $658. 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 six anchor stores, an ice rink and a multi-screen theater.
The construction project is currently anticipated to be completed in 2005.

On September 23, 2002, the Company commenced construction of the Jordan Creek
Town Center on a 200 acre site in West Des Moines, Iowa. As of June 30, 2003,
the Company had invested approximately $36,734 in the project, including land
costs. Total development costs are estimated to be approximately $200,000 and
are anticipated to be funded from operating cash flow, current unsecured
revolving credit facilities and/or a future project loan. At completion,
currently scheduled for August 2004, the regional mall is planned to contain up
to two million square feet of tenant space with up to three anchor stores, a
hotel and an amphitheater.

The Company also owns and/or is investigating certain other potential
development sites (representing a net investment of approximately $21,163),
including sites in Toledo, Ohio and South Sacramento, California but there can
be no assurance that development of these sites will proceed.

15 of 40

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

NOTE 3 INVESTMENTS IN AND LOANS FROM UNCONSOLIDATED REAL ESTATE AFFILIATES

GGP/HOMART

The Company holds a 50% interest in 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). At June 30, 2003, GGP/Homart
owned interests in twenty-two regional shopping malls, three of which were owned
jointly with venture partners. During August 2002, as approved by NYSCRF,
GGP/Homart sold the Prince Kuhio Plaza to the Company (Note 2). 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, at its election, alternatively
satisfy such exchange in cash.

GGP/HOMART II

In November 1999, the Company, together with NYSCRF, formed GGP/Homart II, a
Delaware limited liability company which is owned equally by the Company and
NYSCRF. At June 30, 2003, GGP/Homart II owns ten regional shopping malls, one of
which was acquired in March 2001 and two of which were acquired in the fourth
quarter of 2002. The remaining seven properties were contributed to GGP/Homart
II by the Company or NYSCRF as part of their initial contributions. Certain of
these seven malls were contributed 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 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 $165,607 at June
30, 2003 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. In 2001, in connection with the
refinancing of Montclair Plaza, NYSCRF's only remaining Retained Debt
obligations were satisfied. 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.

On closing of the GGP MPTC financing (as defined and described in Note 4),
approximately $190,000 of the proceeds attributable to GGP/Homart and GGP/Homart
II were loaned, rather than distributed, approximately $95,000 to each of the
Operating Partnership and NYSCRF. The GGP/Homart loan to the Operating
Partnership of approximately $16,596 was repaid in October 2002. The $78,400
loan by GGP/Homart II to the Operating Partnership currently bears interest at a
rate per annum of LIBOR plus 135 basis points on the remaining outstanding
balance of approximately $11,387 and is now scheduled to mature on March 31,
2005. During May 2002, an additional $84,000 was loaned by GGP/Homart II to the
Operating Partnership and NYSCRF, in the ratio of their respective ownership
interests. The $42,000 of loans to the Operating Partnership were comprised of
$24,000 by GGP/Homart and $18,000 by GGP/Homart II. During April 2003, the
GGP/Homart loan was repaid. The GGP/Homart II loan currently bears interest at a
rate per annum of LIBOR plus 135 basis points on the remaining outstanding
balance of approximately $18,080 and matures on March 31, 2005. The Operating
Partnership anticipate repayment of these loans from future operating
distributions from GGP/Homart II.

GGP/TEACHERS

On August 26, 2002, the Company formed GGP/Teachers, a new joint venture owned
50% by the Company and 50% by Teachers' Retirement System of the State of
Illinois ("Illinois Teachers"). Upon formation of

16 of 40

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

GGP/Teachers, Clackamas Town Center in Portland, Oregon, which was 100% owned by
Illinois Teachers, was contributed to GGP/Teachers. In addition, concurrent with
its formation, GGP/Teachers acquired Galleria at Tyler in Riverside, California;
Kenwood Towne Centre in Cincinnati, Ohio; and Silver City Galleria in Taunton,
Massachusetts, as described in Note 2. The Company's share (approximately
$112,000) of the equity of GGP/Teachers was funded by a portion of new unsecured
loans that total $150,000 (see Note 4) and bear interest at LIBOR plus 100 basis
points. 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,
approximately $19,488 of debt related to the properties was deemed to be
Retained Debt and therefore, solely attributable to the Company. The Company
would be obligated to fund any shortfalls of any subsequent sale or refinancing
proceeds of the properties against their respective loan balances to the extent
of such Retained Debt.

In addition, on December 19, 2002, Florence Mall in Florence, Kentucky was
acquired by GGP/Teachers for a purchase price of approximately $97,000 including
a new $60,000 mortgage loan with an initial tem of two years, that bears
interest at a rate per annum of LIBOR plus 89 basis points and matures in
January 2008 (assuming the exercise of two no-cost extension options of eighteen
months each).

GGP IVANHOE III

At June 30, 2003, GGP Ivanhoe III owned 100% interests in eight regional
shopping malls. GGP Ivanhoe III, which had elected to be taxed as a REIT, was
owned 51% by the Company and 49% by Ivanhoe, which is also the Company's joint
venture partner in GGP Ivanhoe (described below). The Company and Ivanhoe shared
in the profits and losses, cash flows and other matters relating to GGP Ivanhoe
III in accordance with their respective ownership percentages except that
certain major operating and capital decisions (as defined in the stockholders'
agreement) required the approval of both stockholders. Accordingly, the Company
was accounting for GGP Ivanhoe III using the equity method.

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

GGP IVANHOE

GGP Ivanhoe owns The Oaks Mall in Gainesville, Florida and Westroads Mall in
Omaha, Nebraska. The Company owns a 51% ownership interest in GGP Ivanhoe and
Ivanhoe owns the remaining 49% ownership interest. The terms of the
stockholders' agreement are similar to those of the GGP Ivanhoe III
stockholders' agreement.

TOWN EAST MALL / QUAIL SPRINGS MALL

The Company owns a 50% interest in Town East Mall, located in Mesquite, Texas
and a 50% interest in Quail Springs Mall in Oklahoma City, Oklahoma. The Company
shares in the profits and losses, cash flows and other matters relating to Town
East Mall and Quail Springs Mall in accordance with its ownership percentage.

17 of 40

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

CIRCLE T

The Company, through a wholly-owned subsidiary, owns a 50% general partnership
interest in Westlake Retail Associates, Ltd. ("Circle T"). AIL Investment, LP,
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 Dallas, Texas, scheduled for completion in 2005. 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
June 30, 2003, the Company has made contributions of approximately $18,044 to
the project for pre-development costs and Hillwood has contributed approximately
$11,170, 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.

18 of 40

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

SUMMARIZED FINANCIAL INFORMATION OF UNCONSOLIDATED REAL ESTATE AFFILIATES

The following is summarized financial information for the Company's
Unconsolidated Real Estate Affiliates as of June 30, 2003 and December 31, 2002
and for the periods ended June 30, 2003 and 2002.

BALANCE SHEETS - UNCONSOLIDATED REAL ESTATE AFFILIATES

(*) At June 30, 2003 and December 31, 2002, amounts reflected as development in
progress includes approximately $29,214 and $28,563, respectively, of assets of
the Circle T joint venture.

19 of 40

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

STATEMENTS OF OPERATIONS - UNCONSOLIDATED REAL ESTATE AFFILIATES

NOTE 4 MORTGAGE NOTES AND OTHER DEBT PAYABLE

Mortgage notes and other debt payable reflected in the accompanying consolidated
balance sheets at June 30, 2003 and December 31, 2002 consisted of the
following:

* The Company has entered into certain cash flow hedges as described below
related to a portion of this variable rate debt. The effect of these
arrangements has not been reflected in the above segregation of variable versus
fixed-rate debt.

20 of 40

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

FIXED RATE DEBT
MORTGAGE NOTES AND OTHER DEBT PAYABLE

Mortgage notes and other debt payable consist primarily of fixed rate
non-recourse notes collateralized by individual or groups of properties or
equipment. Also included in 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 (Note 2). 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 notes bear interest ranging from 1.81% to 10.00% per annum
(weighted average of 6.42% per annum), and require monthly payments of principal
and/or interest. Certain properties are pledged as collateral for the related
mortgage notes. Substantially all of the mortgage notes at June 30, 2003 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 notes included in a cross-defaulted package may
constitute a default under all such mortgage notes 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, GGP
Ivanhoe debt collateralized by two GGP Ivanhoe centers (totaling $125,000) is
cross-defaulted and cross-collateralized with debt (totaling $435,000)
collateralized by eleven Wholly-Owned Centers.

VARIABLE RATE DEBT
MORTGAGE NOTES AND OTHER DEBT PAYABLE

Variable rate mortgage notes and other debt payable at June 30, 2003 consist
primarily of $480,526 of collateralized mortgage-backed securities, $618,500 of
mortgage notes secured by individual properties, and $768,500 of unsecured debt
of which $644,000 is outstanding under the Company's 2003 Credit Facility as
described below. Approximately $590,000 of the variable rate debt is currently
subject to fixed rate swap agreements as described below. The loans bear
interest at a rate per annum equal to LIBOR plus 60 to 250 basis points.

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"). At inception,
the GGP MPTC was collateralized by 27 malls and one office building, including
19 malls owned by certain Unconsolidated Real Estate Affiliates. During February
2003, GGP/Homart repaid approximately $65,000 and the West Oaks Mall was removed
from the collateralized group of properties. During June 2003, the Company also
repaid and removed an additional five properties from the collateralized group
of properties. Approximately $123,000 was repaid for Boulevard Mall,
approximately $55,000 was repaid for West Valley Mall, approximately $174,000
was repaid for Mayfair Mall, approximately $101,000 was repaid for Valley Plaza
Mall and approximately $89,000 was repaid for Regency Square Mall. All amounts
repaid include a previously negotiated pay-down premium (ranging from 5% to 25%
of the applicable allocated principal balance) to secure the release of the
property from the collateralized group of properties. 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 (GGP/Homart-GGP/Homart II,
Wholly-Owned 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 three loan
groups are comprised of variable rate notes with a 36 month initial maturity
(with two no cost 12 month no-cost extension options), variable rate notes with
a 51 month initial maturity (with two no cost 18 month no-cost extension
options) and fixed rate notes with a

21 of 40

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

five year maturity. The 36 month variable rate notes bear interest at rates per
annum ranging from LIBOR plus 60 to 235 basis points (weighted average equal to
79 basis points), the 51 month variable rate notes bear interest at rates per
annum ranging from LIBOR plus 70 to 250 basis points (weighted average equal to
103 basis points) and the five year fixed rate notes bear interest at rates per
annum ranging from approximately 5.01% to 6.18% (weighted average equal to
5.38%). The no-cost 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. The GGP
MPTC yielded approximately $470,000 of net proceeds (including amounts
attributed to the Unconsolidated Real Estate Affiliates) which were utilized for
other loan repayments and temporary investments in cash equivalents and
marketable securities. On closing of the GGP MPTC financing, approximately
$94,996 of such proceeds attributable to GGP/Homart and GGP/Homart II were
loaned to the Operating Partnership. The $16,596 loan by GGP/Homart was repaid
by the Operating Partnership in October 2002. The $78,400 loan by GGP/Homart II
currently bears interest at a rate per annum of LIBOR plus 135 basis points on
the remaining outstanding balance. Although the loan is currently scheduled to
mature on March 31, 2005 (Note 3), the Operating Partnership currently expects
to repay this loan in full by the end of 2004.

Concurrent with the issuance of the 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 $666,933 of swap agreements. Approximately
$575,000 of such swap agreements were with independent financial services firms
and approximately $91,933 was with GGP Ivanhoe III to provide Ivanhoe with only
variable rate debt. 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). The swap
agreements convert the related variable rate debt to fixed rate debt currently
bearing interest at a weighted average rate of 5.10% per annum. Such swap
agreements have been designated as hedges of related variable rate debt. As of
July 1, 2003, in conjunction with the acquisition of the remaining 49% of GGP
Ivanhoe III, the swap agreements between the Company and GGP Ivanhoe III were
cancelled (Note 2).

The Company's only hedging activities are the cash flow hedges represented by
its interest rate cap and swap agreements relating to its commercial
mortgage-backed securities as described above. These agreements either place a
limit on the effective rate of interest the Company will bear on such variable
rate obligations or fix the effective interest rate on such obligations to a
certain rate. The Company has concluded that these agreements are highly
effective in achieving its objective of reducing its exposure to variability in
cash flows relating to these variable rate obligations in any interest rate
environment for loans subject to swap agreements and for loans with related cap
agreements, when LIBOR rates exceed the strike rates of the agreements. However,
current accounting standards also require that the Company fair value the
interest rate cap and swap agreements as of the end of each reporting period. In
conjunction with the GGP MPTC financing, certain caps were purchased and sold.
These purchased and sold caps do not qualify for hedge accounting and changes in
the fair values of these agreements are reflected in interest expense. Finally,
certain interest rate swap agreements were entered into with the objective of
fixing the interest rates on the Company's variable rate financing. These swap
agreements have been designated as cash flow hedges on $590,269 of the Company's
consolidated variable rate debt. For the six months ended June 30, 2003, the
Company has recorded approximately $1,524 of other comprehensive loss due to
declines in the current fair value of such swap agreements.

22 of 40

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

CREDIT FACILITIES

In conjunction with the acquisition of JP Realty, an existing $200,000 unsecured
credit facility (the "PDC Credit Facility") with a balance of approximately
$120,000 was assumed. At December 31, 2002, approximately $130,000 was
outstanding on the PDC Credit Facility, all of which was repaid in 2003
primarily from the proceeds from a new credit facility obtained in April 2003
described below. The PDC Credit Facility had a scheduled maturity of July 2003
and bore interest at the option of the Company at (i) the higher of the federal
funds rate plus 50 basis points or the prime rate of Bank One, NA, or (ii) LIBOR
plus a spread of 85 to 145 basis points as determined by PDC's credit rating.

In April 2003, the Company reached an agreement with a group of banks to
establish a new revolving credit facility and term loan (the "2003 Credit
Facility") with initial borrowing availability of approximately $779,000 (which
may potentially be increased to approximately $1,000,000). At closing,
approximately $619,000 was borrowed under the 2003 Credit Facility, which 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. The proceeds were used
to repay and consolidate existing financing including amounts due on the PDC
Credit Facility (which was terminated upon repayment), the Term Loan and the JP
Realty acquisition loan. The amount outstanding on the 2003 Credit Facility at
June 30, 2003 was approximately $644,000. Amounts borrowed under the 2003 Credit
Facility bear interest at a rate per annum of LIBOR plus 100 to 175 basis points
depending upon the Company's leverage ratio. As of June 30, 2003, the applicable
weighted average interest rate on the 2003 Credit Facility was 2.37%.

INTERIM FINANCING

In July 2002, in conjunction with the JP Realty acquisition, the Company
obtained a new $350,000 loan from a group of banks. The loan was repaid in April
2003 with proceeds from the 2003 Credit Facility described above. The loan bore
interest at a rate per annum equal to LIBOR plus 150 basis points and was
scheduled to mature on July 9, 2003.

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. The two-year loans provide for quarterly
partial amortization of principal, bear interest at a rate per annum of LIBOR
plus 100 basis points, and require the remaining balance to be paid at maturity
(unless extended, under certain conditions, for an additional six months).

During June 2003, the Company obtained a new approximately $176,000 acquisition
loan for the purchase of Saint Louis Galleria as described in Note 2. The loan
initially bears interest at LIBOR plus 105 basis points. After October 2003,
depending upon certain factors, the interest rate spread on the loan could vary
from 85 basis points to 165 basis points. The loan requires monthly payments of
interest only, is scheduled to mature in October 2005, and is subject to three
one-year, no-cost extension options.

During June 2003, the Company obtained a new approximately $131,000 acquisition
loan for the purchase of Coronado Center as described in Note 2. The loan
initially bears interest at LIBOR plus 85 basis points. After October 2003,
depending upon certain factors, the interest rate spread on the loan could vary
from 90 basis points to 195 basis points. The loan requires monthly payments of
interest only, is scheduled to mature in October 2005, and is subject to three
one-year, no-cost extension options.

23 of 40

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

CONSTRUCTION LOAN

In connection with the acquisition of JP Realty, the Company assumed a $47,340
construction loan of Spokane Mall Development Company Limited Partnership, and a
$50,000 construction loan of Provo Mall Development Company, Ltd., in both of
which PDC is the general partner. The loans, which bore interest at a rate per
annum of LIBOR plus 150 basis points, were scheduled to mature in July 2003 but
were replaced in January 2003 with a new long-term non-recourse mortgage loan.
The new loan, allocated $53,000 to the Provo Mall and $42,000 to the Spokane
Mall, is collateralized by the two malls, bears interest at a rate per annum of
4.42% and matures in February 2008.

LETTERS OF CREDIT

As of June 30, 2003 and December 31, 2002, the Operating Partnership had
outstanding letters of credit of approximately $10,591 and $12,104,
respectively, primarily in connection with special real estate assessments and
insurance requirements.

NOTE 5 DISTRIBUTIONS PAYABLE

The following is a chart of the common and preferred distributions for the
Company paid in 2003 and 2002. As described in Note 1, General Growth's
preferred stock dividends to its preferred stockholders were in the same amount
as the Operating Partnership's distributions to General Growth on the same dates
with respect to the Preferred Units held by General Growth.

24 of 40

GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

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 position, results of operations or liquidity 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 $1,355 and $475 for the six months ended June 30, 2003 and 2002,
respectively. 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 developments, completion of the project.

NOTE 7 MCCRELESS MALL

On March 31, 2003, the Company sold McCreless Mall in San Antonio, Texas for
aggregate consideration of $15,000 (which was paid in cash at closing). The
Company recorded a gain of approximately $4,000 for financial reporting purposes
on the sale of the mall. McCreless Mall was purchased in 1998 as part of a
portfolio of eight shopping centers. Pursuant to SFAS 144, the Company has
reclassified the operations of McCreless Mall (approximately $859 in revenues
and $292 in net income in the six months ended June 30, 2003 and approximately
$1,973 in revenues and $758 in net income in the six months ended June 30, 2002,
respectively) to discontinued operations for the 2003 and 2002 consolidated
financial statements.

NOTE 8 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April 2002, the FASB issued Statement No. 145 "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections"
("SFAS 145"). Generally, SFAS 145 has the effect of suspending the treatment of
debt extinguishment costs as extraordinary items. SFAS 145 is effective for the
year ended December 31, 2003. Accordingly, in the comparative 2002 statements
presented in this report, the Company has reclassified to other interest costs
approximately $32 of debt extinguishment costs recorded in the three months
ended March 31, 2002 that had been classified under previous accounting
standards as extraordinary items.

In June 2002, the FASB issued Statement No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 requires that the costs
associated with exit or disposal activity be recognized and measured at fair
value when the liability is incurred. The provisions of SFAS 146 are effective
for exit or disposal activities initiated after December 31, 2002. As the
Company typically does not engage in significant disposal activities, it is not
expected that the implementation of SFAS 146 in 2003 will have a significant
impact on the Company's reported financial results.

On November 25, 2002, the FASB published Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 prescribes the
disclosures to be made by a guarantor in its interim and annual financial
statements about obligations under certain guarantees it has issued. FIN 45 also
reaffirms that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and initial measurement
provisions of FIN 45 are applicable on a prospective basis to guarantees issued
or modified after December 31, 2002. Except with respect to Retained Debt (Note
3) related to certain properties owned by Unconsolidated Real Estate Affiliates,
the Company does not typically

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GENERAL GROWTH PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND PER UNIT AMOUNTS)
(UNAUDITED)

issue guarantees on behalf of its unconsolidated affiliates or other third
parties. Therefore, the adoption of FIN 45 did not have a significant impact on
the Company's financial statements or disclosures.

In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities" which is intended to improve
financial reporting of special purpose and other entities. Certain variable
interest entities that are qualifying special purpose entities 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 and other securitized debt (Note 4).
Because these special purpose entities are qualifying special purpose entities,
which are exempted from consolidation, the Company does not believe these
special purpose entities will require consolidation in its financial statements
when FIN 46 is required to be adopted in the Company's third quarter 2003
interim financial statements.

On April 30, 2003 the FASB issued Statement No. 149 ("SFAS 149"), "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities". SFAS 149 amends
and clarifies accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities
under Statement 133. In particular, this Statement clarifies under what
circumstances a contract with an initial net investment meets the characteristic
of a derivative as discussed in Statement 133 and it clarifies when a derivative
contains a financing component that warrants special reporting in the statement
of cash flows. SFAS 149 is effective for contracts entered into or modified
after June 30, 2003 and for hedging relationships designated after June 30, 2003
and is to be applied prospectively. The Company does not believe that the
implementation of SFAS 149, when effective, will materially change the Company's
accounting for the kinds of derivatives that the Company has typically obtained
in the course of its regular financing activities.

On May 15, 2003 the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity"
("SFAS 150"). The issuance of SFAS 150 was intended to improve the accounting
for certain financial instruments that, under previous guidance, issuers could
account for as equity. SFAS 150 requires that those instruments be classified as
liabilities in statements of financial position and also requires disclosures
about alternative ways of settling the instruments and the capital structure of
entities, all of whose shares are mandatorily redeemable. SFAS 150 affects the
issuer's accounting for a number of freestanding financial instruments,
including mandatorily redeemable shares (such as the PIERS (Note 1)), which the
issuing company is obligated to buy back in exchange for cash or other assets.
Most of the guidance in Statement 150 is effective for all financial instruments
entered into or modified after May 31, 2003, and otherwise is effective for the
Company at the beginning of the third quarter of 2003. Although the PIERS were
fully redeemed on July 15, 2003, the Company expects that the implementation of
SFAS 150 will require that any disclosure or presentation of the PIERS in its
September 30, 2003 and all subsequent consolidated financial statements would be
as if the PIERS were debt rather than equity instruments.

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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 footnotes to the Consolidated
Financial Statements of the Company included in this quarterly report and which
descriptions are hereby incorporated herein 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 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", "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. The Company disclaims any obligation to update or revise any
forward-looking statement based on the occurrence of future events, the receipt
of new information or otherwise.

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. Representative
examples of these factors include (without limitation) general industry and
economic conditions, interest rate trends, cost of capital and capital
requirements, availability of real estate properties, inability to consummate
acquisition opportunities, competition from other companies and venues for the
sale/distribution of goods and services, changes in retail rental rates in the
Company's markets, shifts in customer demands, tenant bankruptcies or store
closures, changes in vacancy rates at the Company's properties, changes in
operating expenses, including employee wages, benefits and training,
governmental and public policy changes, changes in applicable laws, rules and
regulations (including changes in tax laws), the ability to obtain suitable
equity and/or debt financing, and the continued availability of financing in the
amounts and on the terms necessary to support the Company's future business.

USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES

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. 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, allocations of purchase price
to acquired assets and liabilities, 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. Actual results could differ from those
estimates for a variety of reasons, certain of which are discussed below. The
Company's critical accounting policies have not changed during 2003 or 2002.
However, the Company did elect, during the second quarter of 2002, to adopt the
fair value based employee stock-based compensation expense recognition
provisions of SFAS 123, as discussed in Note 1.

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GENERAL GROWTH PROPERTIES, INC.

INITIAL VALUATIONS AND ESTIMATED USEFUL LIVES OR AMORTIZATION PERIODS FOR
PROPERTY AND INTANGIBLES:

Upon acquisition of an investment property, the Company makes an initial
assessment of the initial valuation and composition of the assets and
liabilities acquired. These assessments consider fair values of the respective
assets and liabilities and are determined based on estimated future cash flows
using appropriate discount and capitalization rates. The estimated future cash
flows that are used for this analysis reflect the historical operations of the
property, known trends and changes expected in current market and economic
conditions which would impact the property's operations, and the Company's plans
for such property. These estimates of cash flows were particularly important
given the application of SFAS 141 and 142 (Note 1) for the allocation of
purchase price between land, buildings and improvements and other identifiable
intangibles. If events or changes in circumstances concerning the property
occur, this may indicate that the carrying values or amortization periods of the
assets and liabilities may need to be adjusted. The resulting recovery analysis
also depends on an analysis of future cash flows to be generated from the
property's assets and liabilities. Changes in the Company's overall plans and
its views on current market and economic conditions may have a significant
impact on the resulting estimated future cash flows of a property that are
analyzed for these purposes. As the resulting cash flows are, under current
accounting standards, the basis for the carrying values of the assets and
liabilities and any subsequent impairment losses recognized, the impact of these
estimates on the Company's operations could be substantial. For example, the net
consolidated carrying value of the land, buildings and other assets, net of
identifiable intangible liabilities, at June 30, 2003 for acquisitions completed
by the Company in 2003 was approximately $500 million.

RECOVERABLE AMOUNTS OF RECEIVABLES AND DEFERRED TAXES:

The Company makes periodic assessments of the collectability of receivables and
the recoverability of deferred taxes based on a specific review of the risk of
loss on specific accounts or amounts. This analysis places particular emphasis
on past-due accounts and considers information such as, among other things, the
nature and age of the receivables, the payment history and financial condition
of the debtor and the basis for any disputes or negotiations with the debtor.
The resulting estimate of any allowance or reserve related to the recovery of
these items is subject to revision as these factors change and is sensitive to
the effects of economic and market conditions on such debtors.

CAPITALIZATION OF DEVELOPMENT AND LEASING COSTS:

The Company has historically capitalized the costs of development and leasing
activities of its properties. These costs are incurred both at the property
location and at the regional and corporate office level. The amount of
capitalization depends, in part, on the identification of certain activities to
specific projects and lease proposals. The amount of costs capitalized and the
recovery of such costs depends upon the ability to make such specific
identifications or justifiable allocations. Differences in methodologies of cost
identifications and documentation, as well as differing assumptions as to the
time incurred on different projects, can yield significant differences in the
amounts capitalized.

CERTAIN INFORMATION ABOUT THE COMPANY PORTFOLIO

As of June 30, 2003, the Company owns 100% of the Wholly-Owned Centers, 50% of
the common stock of GGP/Homart, 50% of the membership interests in GGP/Homart
II, 50% of the membership interests in GGP/Teachers, 51% of the common stock of
GGP Ivanhoe, 51% of the common stock of GGP Ivanhoe III and 50% of Quail Springs
Mall and Town East Mall. As of June 30, 2003, GGP/Homart owned interests in
twenty-two shopping centers, GGP/Homart II owned interests in ten shopping
centers, GGP/Teachers owned interests in five shopping centers, GGP Ivanhoe
owned interests in two shopping centers, and GGP Ivanhoe III owned interests in
eight shopping centers (collectively, with the Wholly-Owned Centers, Quail
Springs Mall and Town

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GENERAL GROWTH PROPERTIES, INC.

East Mall, the "Company Portfolio"). The following data on the Company Portfolio
is for 100% of the non-anchor GLA of the centers, excluding centers currently
being redeveloped and/or remerchandised. On June 30, 2003, the Mall Store and
Freestanding Store portions of the centers in the Company Portfolio which were
not undergoing redevelopment were approximately 90.5% occupied as of such date,
representing a 1.3% increase in the occupancy percentage which existed on
June 30, 2002, but representing a decrease in occupancy percentage of 0.5% as
compared to December 31, 2002. Such minor occupancy declines are typical of the
usual retail cycle and the decline in 2003 is less than the first and second
quarter declines in 2002 as compared to December 31, 2001.

Total annualized Mall Store sales averaged $352 per square foot for the Company
Portfolio in the six months ended June 30, 2003. In the six months ended
June 30, 2003, total Mall Store sales for the Company Portfolio increased by
1.5 % over the same period in 2002. Comparable Mall Store sales are sales of
those tenants that were open the previous 12 months. Therefore, comparable Mall
Store sales in the six months ended June 30, 2003 are of those tenants that were
operating in the six months ended June 30, 2002. Comparable mall store sales in
the six months ended June 30, 2003 decreased by 1.0% as compared to the same
period in 2002.

The average Mall Store rent per square foot from leases that expired in the six
months ended June 30, 2003 was $26.70. The Company Portfolio benefited from
increasing rents inasmuch as the average Mall Store rent per square foot on new
and renewal leases executed during this same period was $36.20, or $9.50 per
square foot above the average for expiring leases.

Company revenues are primarily derived from tenants in the form of fixed minimum
rents, overage rents and recoveries of operating expenses. Inasmuch as the
Company's consolidated financial statements reflect the use of the equity method
to account for its investments in GGP/Homart, GGP/Homart II, GGP/Teachers, GGP
Ivanhoe, GGP Ivanhoe III, Quail Springs Mall and Town East Mall, the discussion
of results of operations of the Company below relates primarily to the revenues
and expenses of the Wholly-Owned Centers and GGMI. In addition, the Victoria
Ward Assets were acquired in May 2002, the JP Realty Assets were acquired in
July 2002, Prince Kuhio Plaza was acquired in August 2002, Pecanland Mall was
acquired in September 2002, Southland Mall was acquired in December 2002,
Peachtree Mall was acquired in April 2003 and Saint Louis Galleria and Coronado
Center were acquired in June 2003. The effect of the acquisitions on the results
of the Company's operations is included in the following discussions. McCreless
Mall, which was sold in March 2003, is included in discontinued operations for
the three and six months ended June 30, 2003 and 2002, and accordingly is
excluded from the following discussions.

RESULTS OF OPERATIONS OF THE COMPANY
THREE MONTHS ENDED JUNE 30, 2003 AND 2002

Total revenues for the three months ended June 30, 2003 were $284.7 million,
which represents an increase of $75.1 million or approximately 35.8% from $209.6
million in the three months ended June 30, 2002. The acquisitions in 2003 and
2002, as discussed above, were responsible for approximately $55.8 million of
the increase in total revenues with increases at the comparable centers
(properties owned for the entire time during the three months ended June 30,
2002 and 2003) as described as follows represented the majority of the remaining
increases. Minimum rent for the three months ended June 30, 2003 increased by
$49.4 million or 39.7% from $124.3 million in the comparable period in 2002 to
$173.7 million. The increase was primarily due to the 2003 and 2002 acquisitions
(including approximately $4.1 million related to the accretion of acquired
below-market leases (Note 1)), space expansions, higher rental rates on renewal
leases as discussed above, and additional specialty leasing. Tenant recoveries
increased $23.2 million from $57.4 million in 2002 to $80.6 million in 2003. Of
the total increase, $14.7 million is the result of 2003 and 2002 acquisitions.
The remaining increase is primarily due to increased tenant billings due to an
increase in recoverable expenses (as described below) during the three months
ended June 30, 2003 compared to the three months ended June 30, 2002.

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GENERAL GROWTH PROPERTIES, INC.

Total expenses, including depreciation and amortization, increased by
$47.1 million or 39.0%, from $120.8 million in the three months ended June 30,
2002 to $167.9 million in the three months ended June 30, 2003. For the three
months ended June 30, 2003, real estate taxes increased $6.9 million from
$13.6 million in the three months ended June 30, 2002 to $20.5 million in the
six months ended June 30, 2002. Of the total increase, $4.7 million was due to
the 2003 and 2002 acquisitions. Repairs and maintenance increased $4.7 million
or 33.8% from $13.9 million in the three months ended June 30, 2002 to
$18.6 million in the three months ended June 30, 2003. Substantially all of the
increase was due to 2003 and 2002 acquisitions. Marketing expenses increased
$1.7 million to $7.6 million, which was primarily due to the 2003 and 2002
acquisitions. For the three months ended June 30, 2003, other property operating
expenses increased by $13.0 million or 59.6% from $21.8 million in 2002 to
$34.8 million in the second quarter of 2003. Of the total increase, $6.8 million
was attributable to the net effect of 2003 and 2002 acquisitions. The remainder
of the increase was primarily as a result of increases in utilities expense and
insurance expense at the comparable centers. Depreciation and amortization
increased by $12.3 million or approximately 30.6% over the same period in 2002.
The majority of the increase in depreciation and amortization was generated by
the net effect of the acquisitions.

Interest expense for the three months ended June 30, 2003 was $64.2 million, an
increase of $15.5 million or 31.8%, from $48.7 million in the three months ended
June 30, 2002, with $7.3 million due to the 2003 and 2002 acquisitions. The
remaining increase was primarily due to increased debt at the comparable centers
in addition to the 2003 Credit Facility (Note 4), which the Company established
in April 2003 and debt extinguishment costs included in interest expense in 2003
of approximately $1.5 million.

Equity in income of unconsolidated affiliates in the three months ended June 30,
2003 increased by approximately $6.0 million to earnings of $21.1 million in
2003, from $15.1 million in the three months ended June 30, 2002, primarily due
to earnings of approximately $4.2 million from GGP/Teachers, an unconsolidated
affiliate formed in August 2002 (Note 3). In addition, the Company's equity in
the net income of GGP/Homart II increased approximately $1.3 million, primarily
as a result of to the acquisition of Glendale Galleria and First Colony Mall
during the fourth quarter of 2002.

RESULTS OF OPERATIONS OF THE COMPANY
SIX MONTHS ENDED JUNE 30, 2003 AND 2002

Total revenues for the six months ended June 30, 2003 were $558.6 million, which
represents an increase of $145.8 million or approximately 35.3% from $412.8
million in the six months ended June 30, 2002. Of the increase, $119.3 million
is from the net effect of the 2003 and 2002 acquisitions with increases at the
comparable centers (properties owned for the entire time during the six months
ended June 30, 2002 and 2003) as described as follows representing the majority
of the remaining increases. Minimum rent for the six months ended June 30, 2003
increased by $100.2 million or 41.2% from $243.2 million in the comparable
period in 2002 to $343.4 million in 2003. The net effect of the 2003 and 2002
acquisitions (including approximately $6.7 million related to the accretion of
acquired below-market leases (Note 1)) accounted for $87.8 million of the
increase in minimum rents. The remainder of such increase was primarily due to
higher base rental rates on new and renewal leases in addition to expansion
space, specialty leasing and occupancy increases at the comparable centers.
Tenant recoveries increased by $37.4 million or 32.7% from $114.3 million for
the six months ended June 30, 2002 to $151.7 million for the six months ended
June 30, 2003. Of the total increase in tenant recoveries, $28.4 million was the
result of the 2003 and 2002 acquisitions. The remaining increase is primarily
due to an increase in tenant billings due to an increase in recoverable expenses
as described below during the six months ended June 30, 2003 compared to the six
months ended June 30, 2002. For the six months ended June 30, 2003, overage
rents increased to $10.0 million in 2003 from $7.1 million in 2002, of which
$2.3 million was the result of the 2003 and 2002 acquisitions.

Total operating expenses, including depreciation and amortization, increased by
approximately $93.0 million or 38.9% from $239.0 million in the six months ended
June 30, 2002 to $332.0 million in the six months ended

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GENERAL GROWTH PROPERTIES, INC.

June 30, 2003. For the six months ended June 30, 2003, real estate taxes
increased $13.2 million from $27.4 million in the six months ended June 30, 2002
to $40.6 million in the six months ended June 30, 2002. Of the total increase,
$9.5 million was due to the 2003 and 2002 acquisitions. Repairs and maintenance
increased $9.0 million or 33.0% from $27.3 million in the six months ended
June 30, 2002 to $36.3 million in the six months ended June 30, 2003.
Substantially all of the increase was due to 2003 and 2002 acquisitions.
Marketing expenses increased $5 million to $15.8 million, which is primarily as
a result of the 2003 and 2002 acquisitions. For the six months ended June 30,
2003, other property operating expenses increased by $22.2 million or 46.8% from
$47.4 million in 2002 to $69.6 million in the six months ended June 30, 2003,
substantially all of which was attributable to the net effect of the 2003 and
2002 acquisitions. Depreciation and amortization increased by $25.9 million or
33.1% over the same period in 2002. Substantially all of the increase resulted
from the 2003 and 2002 acquisitions.

Interest expense for the six months ended June 30, 2003 was $125.0 million, an
increase of $28.1 million or 29.0% from $96.9 million in the six months ended
June 30, 2002. $13.8 million was the result of the 2003 and 2002 acquisitions.
The remaining increase was due to increased debt at the comparable centers in
addition to the 2003 Credit Facility (Note 4), which the Company established in
April 2003 and debt extinguishment costs included in interest expense in 2003 of
approximately $1.5 million.

Equity in income of unconsolidated affiliates in the six months ended June 30,
2003 increased by approximately $15.2 million to earnings of $43.4 million in
2003, from $28.2 million in the six months ended June 30, 2002. This overall
increase is primarily due to earnings of approximately $8.6 million from
GGP/Teachers, an unconsolidated affiliate formed in August 2002 (Note 3). In
addition, the Company's equity in the net income of GGP/Homart II increased
approximately $3.6 million, primarily as a result of the acquisition of Glendale
Galleria and First Colony Mall during the fourth quarter of 2002. The Company's
equity in the net income of GGP/Homart resulted in an increase in earnings of
approximately $1.4 million of the six months ended June 30, 2003 primarily due
to increases in the operations of comparable centers and the purchase in
December 2002 of the 50% interest that it did not own in The Woodlands Mall in
Houston, Texas.

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

As of June 30, 2003, the Company held approximately $20 million of unrestricted
cash and cash equivalents. 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 liquidity needs such as
acquisitions, new development, expansions and major renovation programs at
individual centers include construction loans, mini-permanent loans, long-term
project financing, joint venture financing with institutional partners,
additional Operating Partnership level or Company level equity investments and
unsecured Company level debt or secured loans collateralized by individual
shopping centers. In this regard, in March 2003 the Company arranged the 2003
Credit Facility (Note 4) to replace a previously existing unsecured credit
facility with a total available commitment of $200 million and with an
outstanding balance of approximately $110 million. The 2003 Credit Facility was
finalized in April 2003 with initial borrowing availability of approximately
$779 million (which may potentially be increased to approximately $1 billion).
At closing, approximately $619 million was borrowed under the 2003 Credit
Facility, which 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
June 30, 2003, the Company believes it is in compliance with any restrictive
covenants (Note 4) contained in its various financing arrangements.

In addition, the Company considers its Unconsolidated Real Estate Affiliates as
potential sources of short and long-term liquidity. In this regard, the Company
has net borrowings (in place of distributions) at June 30, 2003 of $29.5 million
from GGP/Homart II. The remaining $4.7 million on a loan from GGP/Homart was
repaid in April 2003. The $29.5 million currently borrowed from GGP/Homart II
bears interest at a rate per annum of LIBOR plus 135 basis points, and is due
March 31, 2005. Such remaining loaned amount represents a portion

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of the GGP/Homart II net proceeds of the GGP MPTC and other recent financings
and have been and are expected to be fully repaid from future operating
distributions from GGP/Homart II (Note 3). 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. Finally, in April 2003, the Company
obtained a revolving credit facility and term loan as described below.

As of June 30, 2003, the Company had consolidated debt of approximately $5
billion, of which approximately $3.6 billion is comprised of debt bearing
interest at fixed rates (after taking into effect certain interest rate swap
agreements described below), with the remaining approximately $1.4 billion
bearing interest at variable rates. In addition, the Company's pro rata share of
the debt of the Unconsolidated Real Estate Affiliates was approximately $2.1
billion, of which approximately $1.2 billion is comprised of debt bearing
interest at fixed rates (after taking into effect certain interest rate swap
agreements), with the remaining approximately $897.1 million bearing interest at
variable rates. Except in instances where certain Wholly-Owned Centers are
cross-collateralized with the Unconsolidated Centers, or the Company has
retained a portion of the debt of a property when 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 Notes 5 and 12 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.

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At June 30, 2003, the Company had direct or indirect ("pro rata") mortgage and
other debt of approximately $7.1 billion (excluding a market value purchase
price adjustment of debt of approximately $5.9 million related to the JP Realty
acquisition and reflecting a reduction in the debt of certain consolidated
former JP Realty ventures by approximately $24.3 million to reflect the minority
partners' share of such debt of such ventures). The following table reflects the
maturity dates of the Company's pro rata debt and the related interest rates,
after the effect of the current swap agreements of the Company as described in
Note 4.

COMPANY PORTFOLIO DEBT
MATURITY AND CURRENT AVERAGE INTEREST RATE SUMMARY (a)
AS OF JUNE 30, 2003

(Dollars in Thousands)

(a) Excludes principal amortization.
(b) Unconsolidated properties debt reflects the Company's share of
debt (either retained (Note 3) or based on its respective equity
ownership interests in the Unconsolidated Real Estate
Affiliates) relating to the properties owned by the
Unconsolidated Real Estate Affiliates.
(c) For variable rate loans, the interest rate reflected is the
actual annualized weighted average rate for the variable rate
debt outstanding during the six months ended June 30, 2003.

Reference is made to Note 4 and Item 3 below for additional information
regarding the Company's debt and the potential impact on the Company of interest
rate fluctuations.

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The following summarizes certain significant investment and financing
transactions of the Company currently planned or completed since December 31,
2002:

In January 2003, the Company refinanced the mortgage loans collateralized by the
Provo Towne Centre and the Spokane Valley Mall with a new, long-term
non-recourse mortgage loan. The new $95 million loan bears interest at a rate
per annum of 4.42% and matures in February 2008.

On March 31, 2003, the Company sold McCreless Mall in San Antonio, Texas for
aggregate consideration of $15 million (which was paid in cash at closing). The
Company recorded a gain of approximately $4 million for financial reporting
purposes on the sale of the mall. McCreless Mall was purchased in 1998 as part
of a portfolio of eight shopping centers.

In April 2003, the Company reached an agreement with a group of banks to
establish a new revolving credit facility and term loan (the "2003 Credit
Facility") with initial borrowing availability of approximately $779 million
(which may potentially be increased to approximately $1 billion). At closing,
approximately $619 million was borrowed under the 2003 Credit Facility, which
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. The proceeds were used
to repay and consolidate existing financing including amounts due on the PDC
Credit Facility, the Term Loan and the JP Realty acquisition loan. Amounts
borrowed under the 2003 Credit Facility bear interest at a rate per annum of
LIBOR plus 100 to 175 basis points depending upon the Company's leverage ratio.
The balance at June 30, 2003 on the revolving credit facility was $115 million
and the term loan was $529 million.

On April 30, 2003, the Company completed the acquisition of Peachtree Mall, an
811,000 square foot enclosed regional mall located in Columbus, Georgia. The
purchase price was approximately $87.6 million, which was paid at closing with a
five-year acquisition loan (assuming the exercise by the Company of all no-cost
extension options) of approximately $53 million (bearing interest at a rate per
annum of LIBOR plus 85 basis points), and the balance from cash on hand and
borrowings under the Company's credit facilities.

On June 11, 2003, the Company acquired Saint Louis Galleria, a two-level mall
containing approximately 1.2 million square feet of gross leaseable area, in St.
Louis, Missouri. The purchase price was approximately $235 million which was
funded by cash on hand, including proceeds from refinancings of existing
long-term financing and an approximately $176 million acquisition loan which
matures in October of 2005 and bears interest at a rate per annum of LIBOR plus
105 basis points (Note 2).

On June 12, 2003, the Company acquired Coronado Center, a two-level mall
containing approximately 1.2 million square feet of gross leaseable area, in
Albuquerque, New Mexico. The purchase price was approximately $175 million and
was funded by cash borrowed from the Company's revolving line of credit and by
an approximately $131 million acquisition loan which matures in October of 2005
and bears interest at a rate per annum of LIBOR plus 85 basis points (Note 2).

On June 13, 2003, the Company refinanced five malls, Boulevard Mall, West Valley
Mall, Mayfair Mall, Valley Plaza Mall and Regency Square Mall, which had all
been a part of the GGP MPTC financing (see Note 4). Boulevard Mall was
refinanced with a new non-recourse $120 million loan which matures in July of
2013 and bears interest at a rate per annum of 4.27375%. West Valley Mall was
refinanced with a new non-recourse $67 million loan which matures in April of
2010 and bears interest at a rate per annum of 3.43%. Mayfair Mall (owned by GGP
Ivanhoe III which was an Unconsolidated Real Estate Affiliate until the July 1,
2003 acquisition described below) was refinanced with a new non-recourse $200
million loan which matures in July of 2008 and bears interest at a rate per
annum of 3.108%. Valley Plaza was refinanced with a new non-recourse $107
million loan which matures in July of 2012 and bears interest at a rate per
annum of 3.90%. Regency Square Mall was refinanced with a new non-recourse $106
million loan which matures in July of 2010 and bears interest at a rate per
annum of 3.5940%.

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GENERAL GROWTH PROPERTIES, INC.

On July 1, 2003, the Company acquired the 49% ownership interest in GGP Ivanhoe
III which was held by Ivanhoe, the Company's joint venture partner, thereby
increasing the Company's ownership interest to a full 100%. Concurrently with
this transaction, a new joint venture, GGP Ivanhoe IV, was created between the
Operating Partnership and Ivanhoe to own Eastridge Mall, which previously had
been owned by GGP Ivanhoe III. No gain or loss will be recognized on this
transaction by GGP Ivanhoe III. The Company's ownership interest in GGP Ivanhoe
IV is 51% and Ivanhoe's ownership interest is 49%. The aggregate consideration
for the GGP Ivanhoe III acquisition was approximately $459 million.
Approximately $268 million of existing mortgage debt was assumed in connection
with the GGP Ivanhoe III acquisition. The balance of the aggregate
consideration, or approximately $191 million, was funded using a combination of
proceeds from the refinancing of existing long-term debt and new mortgage loans
on previously unencumbered properties as described immediately below.

On July 1, 2003, the Company obtained an aggregate of five new mortgage loans on
sixteen previously unencumbered properties. Visalia Mall was financed with a new
non-recourse $49 million loan which matures in January of 2010 and bears
interest at a rate per annum of 3.777%. Boise Towne Plaza was financed with a
new non-recourse $12.1 million loan which matures in July of 2010 and bears
interest at a rate per annum of 4.699%. A new non-recourse loan of approximately
$38.5 million, cross-collateralized by a group of nine retail properties (Austin
Bluffs Plaza, Division Crossing, Fort Union Plaza, Halsey Crossing, Orem
Plaza-Center Street, Orem Plaza-State Street, River Pointe Plaza, Riverside
Plaza and Woodlands Village), was obtained. This mortgage loan bears interest a
rate per annum of 4.396% and is scheduled to mature in April of 2009. Finally, a
new non-recourse loan of approximately $29.4 million, collateralized by the
Gateway Crossing and the University Crossing retail properties, was obtained
which matures in July of 2010 and bears interest at a rate per annum of 4.699%.
Finally, a new non-recourse loan of approximately $87 million, collateralized by
the Animas Valley, Grand Teton and Salem Center retail properties, was obtained
which matures in July of 2008 and bears interest at a rate per annum of 3.564%.

On July 31, 2003, the Company obtained a new long-term fixed rate non-recourse
mortgage loan collateralized by The Meadows Mall. The new $112 million loan,
bearing interest at a rate per annum of 5.45282%, matures in August 2013, and
replaced a previously existing $59.6 million mortgage loan.

In addition, certain Unconsolidated Real Estate Affiliates completed significant
investment and financing transactions since December 31, 2002, as summarized as
follows:

On February 14, 2003, GGP/Homart purchased from the holder the portion of the
GGP MPTC financing (approximately $65 million) attributable to the West Oaks
Mall, a property 100% owned by GGP/Homart. In March 2003, the Company, through
GGP/Homart, refinanced the Pembroke Lakes Mall $84 million mortgage with a new
long-term mortgage loan. The new $144 million loan is comprised of two notes,
both of which mature in April 2013 and for which the weighted average interest
rate per annum is 4.94%.

Also in March 2003, the Company, through GGP/Homart, made a $50 million
repayment on the GGP/Homart and GGP/Homart II term loans and repaid the $43.8
million mortgage secured by Columbiana Centre. A new $72 million mortgage loan,
collateralized by the Columbiana Centre, was obtained in April 2003. The new
loan, maturing in May 2008, provides for periodic amortization of principal and
interest and bears interest at a rate per annum of 4.13%.

In May 2003, the $19.2 million 7.65% mortgage loan (originally scheduled to
mature in September 2003) collateralized by Bay City Mall was repaid by
GGP/Homart. GGP/Homart currently plans to obtain replacement financing secured
by the property in late 2003 or early 2004.

Net cash provided by operating activities was $238.4 million in the first six
months of 2003, an increase of $63.8 million from $174.6 million in the same
period in 2002, primarily due to increased earnings in 2003 as a result of
properties acquired in 2002 and 2003 including unconsolidated affiliates as
discussed above.

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GENERAL GROWTH PROPERTIES, INC.

Net cash used by investing activities was $557.8 million in the first six months
of 2003 compared to $109.7 million of cash used in the first six months of 2002.
Cash flows from investing activities were impacted by the higher volume of
acquisition and development activity for the consolidated real estate properties
in the first six months of 2003 as compared to the first six months in 2002 as
further described in Note 2. This use of cash for investing activity in 2002 was
partially offset by the sale of the Company's $155 million of marketable
securities in May 2002.

Financing activities represented a source of cash of $285.8 million in the first
six months of 2003, compared to a use of cash of $146.4 million in 2002. A major
contributing factor to the variance in the cash provided from financing activity
is that financing from mortgages and other debt, net of repayments of principal
on mortgage debt, yielded an additional $428.7 million in the first six months
of 2003 versus a use of $90.8 million in the first six months of 2002.

In order to remain qualified as a real estate investment trust 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: (i) scheduled increases in base rents of existing leases; (ii)
changes in minimum base rents and/or overage rents attributable to replacement
of existing leases with new or renewal leases; (iii) changes in occupancy rates
at existing centers and procurement of leases for newly developed centers; and
(iv) 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.

In recent years, the retail sector has been experiencing declining growth due to
layoffs, eroding consumer confidence, falling stock prices, the war in Iraq, the
September 11, 2001 terrorist attacks and threats of additional terrorism.
Although the 2002 holiday season was generally stronger than economists'
predictions, the retail sector and the economy as a whole remains weak and no
significant improvements are expected for the balance of 2003. Such reversals or
reductions in the retail market adversely impact the Company as demand for
leaseable space is reduced and rents computed as a percentage of tenant sales
declines. In addition, a number of local, regional and national retailers,
including tenants of the Company, have voluntarily closed their stores or filed
for bankruptcy protection during the last few years. Most of the bankrupt
retailers reorganized their operations and/or sold stores to stronger operators.
Although some leases were terminated pursuant to the lease cancellation rights
afforded by the bankruptcy laws, the impact on Company earnings was negligible.
Over the last three years, the provision for doubtful accounts has averaged only
$3.1 million per year, which represents less than 1/2 of 1% of average total
revenues of approximately $827.6 million. In addition, the Company historically
has generally been successful in finding new uses or tenants for retail
locations that are vacated either as a result of voluntary store closing or
bankruptcy proceedings. Therefore, the Company does not expect these store
closings or bankruptcy reorganizations to have a material impact on its
consolidated financial condition or the results of its operations.

The events of September 11th also have had an impact on the Company's insurance
coverage. The Company had coverage for terrorist acts in its policies that
expired in September 2002. The coverage was excluded from its standard property
policies at the time of renewal. Accordingly, the Company obtained a separate
policy for terrorist acts. The Company's premiums, including the cost of a
separate terrorist policy, increased by 30% to 40% for property coverage and
liability coverage. These increases will impact the Company's annual common area
maintenance rates paid in the future by the Company's tenants as well as the
Company's net recoverable amounts. However, effective May 1, 2003, the Company
executed a mid-term cancellation of certain insurance policies and replaced them
with new policies which is anticipated to realize savings of approximately $2 to
$3 million over the annual premium period.

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GENERAL GROWTH PROPERTIES, INC.

The Company has over the past 18 months experienced a significant increase in
the market price of its Common Stock. Accordingly, certain options granted under
its incentive stock plans that vest based on the market price of the Common
Stock have vested. Such vesting caused the recognition of approximately $3.4
million of additional compensation expense in the first quarter 2002,
approximately $3.9 million in the second quarter 2002, approximately $4.4
million in the third quarter of 2002 and approximately $4.9 million in the
second quarter of 2003 as described above and in Note 1. In addition, the
Company has adopted SFAS 123 for future grants of Common Stock options as more
fully discussed in Note 1.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

As described in Note 8, the FASB, has issued certain statements, which are
effective for the current or subsequent year. The Company does not expect a
significant impact on its annual reported operations due to the application of
such new statements.

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GENERAL GROWTH PROPERTIES, INC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has not entered into any transactions using derivative commodity
instruments. The Company is subject to market risk associated with changes in
interest rates. Interest rate exposure is principally limited to the $2.0
billion of debt of the Company outstanding at June 30, 2003 that is priced at
interest rates that vary with the market. However, approximately $590.3 million
of such floating rate consolidated debt is subject to interest rate swap
agreements, the effect of which is to fix the interest rate the Company is
required to pay on such debt to approximately 5.10% per annum. Therefore, a 25
basis point movement in the interest rate on the remaining approximately $1.4
billion of variable rate debt would result in an approximately $3.5 million
annualized increase or decrease in consolidated interest expense and cash flows.
The remaining debt is fixed rate debt. 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 similar 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 variable rate debt was approximately $897.1 million at June
30, 2003. 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 an approximately $2.2 million annualized increase or decrease in the
Company's equity in the income and cash flows from the 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. 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 Item 2 above 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 conducted an
evaluation, under the supervision and with the participation of the Company's
Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities and Exchange Act of 1934 (the "Exchange Act")).
Based on this evaluation, the CEO and the CFO 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 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission rules and forms.

There has been no significant change in the Company's internal control over
financial reporting during the Company's most recently completed fiscal quarter
that has materially affected, or is 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the Company's Annual Meeting of Stockholders held on May 7, 2003, the
stockholders voted upon the election of Robert Michaels and John Riordan as
Directors of the Company, each for a term of three years, and the approval of
the 2003 Incentive Stock Plan which provides, among other things, for the
issuance of up to 3,000,000 shares of Common Stock pursuant to awards of stock
options and restricted stock. A total of 62,757,800 shares were eligible to vote
on each matter presented at the Annual Meeting and each matter was approved by
the following votes of stockholders:

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1 General Growth Properties, Inc. 2003 Incentive Stock Plan.

10.2 Revolving and Term Credit Agreement dated as of April 16,
2003, executed among GGP Limited Partnership, GGPLP L.L.C.,
Eurohypo AG, New York Branch and each of the Initial Lenders
named therein.

10.3 Guaranty dated as of April 16, 2003, executed by General
Growth Properties, Inc. and GGP Limited Partnership, jointly
and severally, as Guarantor.

31. Certifications Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.

32. Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b), (c) Reports on Form 8-K and proforma information.

The following report on Form 8-K has been filed by the Company during the
quarter covered by this report.

Current Report on Form 8-K dated April 28, 2003 furnishing to the SEC under Item
9 the press release describing the Company's results of operations for its first
quarter ended March 31, 2003.

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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: August 8, 2003 by: /s/: Bernard Freibaum
-----------------------------------
Bernard Freibaum
Executive Vice President and Chief
Financial Officer
(Principal Accounting Officer)

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