Brookfield Property REIT Inc. - FORM 10-Q - November 2, 2017

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý      Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2017
 
o         Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Transition Period from                    to                     
 
COMMISSION FILE NUMBER 1-34948

GGP INC.
(Exact name of registrant as specified in its charter)
Delaware
 
27-2963337
(State or other jurisdiction of incorporating or organization)
 
(I.R.S. Employer 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)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  
ý Yes      o  No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  
ý Yes      o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.
ý
Large accelerated filer
 o
Accelerated filer
o
Non-accelerated filer
(Do not check if a smaller reporting company)
 o
Smaller reporting company
 
 
o
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12,13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  
ý Yes      o No

The number of shares of Common Stock, $.01 par value, outstanding on October 31, 2017 was 945,976,981.
 


GGP INC.
INDEX
 
 
PAGE
NUMBER
 
 
 
Part I
FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2



GGP INC.

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
September 30,
2017
 
December 31,
2016
 
(Dollars in thousands, except share and per share amounts)
Assets:
 
 
 
Investment in real estate:
 

 
 

Land
$
3,320,747

 
$
3,066,019

Buildings and equipment
17,345,596

 
16,091,582

Less accumulated depreciation
(3,056,259
)
 
(2,737,286
)
Construction in progress
422,218

 
251,616

Net property and equipment
18,032,302

 
16,671,931

Investment in Unconsolidated Real Estate Affiliates
3,479,811

 
3,868,993

Net investment in real estate
21,512,113

 
20,540,924

Cash and cash equivalents
311,107

 
474,757

Accounts receivable, net
324,579

 
322,196

Notes receivable
415,499

 
678,496

Deferred expenses, net
267,478

 
209,852

Prepaid expenses and other assets
495,240

 
506,521

Total assets
$
23,326,016

 
$
22,732,746

Liabilities:
 

 
 
Mortgages, notes and loans payable
$
13,493,872

 
$
12,430,418

Investment in Unconsolidated Real Estate Affiliates
27,610

 
39,506

Accounts payable and accrued expenses
778,613

 
655,362

Dividend payable
199,315

 
433,961

Deferred tax liabilities
4,890

 
3,843

Junior subordinated notes
206,200

 
206,200

Total liabilities
14,710,500

 
13,769,290

Redeemable noncontrolling interests:
 

 
 

Preferred
52,256

 
144,060

Common
173,930

 
118,667

Total redeemable noncontrolling interests
226,186

 
262,727

Commitments and Contingencies
—

 
—

Equity:
 

 
 

Common stock:
 
 
 
11,000,000,000 shares authorized, $0.01 par value, 956,486,635 issued, 872,760,245 outstanding as of September 30, 2017, and 968,153,526 issued, 884,097,680 outstanding as of December 31, 2016
9,291

 
9,407

Preferred Stock:
 
 
 
500,000,000 shares authorized, $0.01 par value, 10,000,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016
242,042

 
242,042

Additional paid-in capital
11,312,277

 
11,417,597

Retained earnings (accumulated deficit)
(2,077,510
)
 
(1,824,866
)
Accumulated other comprehensive loss
(67,700
)
 
(70,456
)
Common stock in treasury, at cost, 56,267,195 shares as of September 30, 2017 and 56,596,651 shares as of December 31, 2016
(1,128,838
)
 
(1,137,960
)
Total stockholders' equity
8,289,562

 
8,635,764

Noncontrolling interests in consolidated real estate affiliates
54,110

 
33,583

Noncontrolling interests related to long-term incentive plan common units
45,658

 
31,382

Total equity
8,389,330

 
8,700,729

Total liabilities, redeemable noncontrolling interests and equity
$
23,326,016

 
$
22,732,746

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

3

GGP INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
(Dollars in thousands, except per share amounts)
Revenues:
 

 
 

 
 

 
 

Minimum rents
$
363,857

 
$
347,676

 
$
1,062,075

 
$
1,082,220

Tenant recoveries
160,755

 
162,031

 
485,737

 
504,242

Overage rents
4,582

 
6,505

 
13,799

 
19,024

Management fees and other corporate revenues
28,806

 
20,428

 
77,797

 
73,087

Other
20,357

 
17,853

 
61,079

 
57,539

Total revenues
578,357

 
554,493

 
1,700,487

 
1,736,112

Expenses:
 
 
 
 
 
 
 
Real estate taxes
61,516

 
58,239

 
178,053

 
173,651

Property maintenance costs
10,281

 
11,576

 
35,980

 
41,014

Marketing
1,744

 
2,244

 
5,185

 
7,036

Other property operating costs
75,848

 
73,479

 
214,742

 
215,474

Provision for doubtful accounts
2,152

 
574

 
8,769

 
5,685

(Recovery of) provision for loan loss
—

 
(6,659
)
 
—

 
29,410

Property management and other costs
35,195

 
37,760

 
115,334

 
106,787

General and administrative
12,037

 
13,237

 
42,582

 
41,313

Provision for impairment
—

 
28,276

 
—

 
73,039

Depreciation and amortization
161,278

 
182,350

 
505,875

 
499,269

Total expenses
360,051

 
401,076

 
1,106,520

 
1,192,678

Operating income
218,306

 
153,417

 
593,967

 
543,434

Interest and dividend income
15,948

 
14,114

 
51,336

 
43,507

Interest expense
(135,980
)
 
(141,296
)
 
(402,512
)
 
(437,338
)
Gain (loss) on foreign currency
3,889

 
(657
)
 
3,195

 
16,172

Gain on extinguishment of debt
—

 
—

 
55,112

 
—

Gain from changes in control of investment properties and other, net
95,165

 
620,309

 
79,325

 
733,416

Income before income taxes, equity in income of Unconsolidated Real Estate Affiliates and allocation to noncontrolling interests
197,328

 
645,887

 
380,423

 
899,191

Provision for income taxes
(6,993
)
 
(49
)
 
(15,347
)
 
(728
)
Equity in income of Unconsolidated Real Estate Affiliates
35,937

 
35,651

 
99,884

 
127,759

Unconsolidated Real Estate Affiliates - gain on investment, net
—

 
259

 
—

 
40,765

Net income
226,272

 
681,748

 
464,960

 
1,066,987

Allocation to noncontrolling interests
(3,492
)
 
(7,570
)
 
(9,157
)
 
(15,083
)
Net income attributable to GGP Inc.
222,780

 
674,178

 
455,803

 
1,051,904

Preferred Stock dividends
(3,984
)
 
(3,984
)
 
(11,952
)
 
(11,951
)
Net income attributable to common stockholders
$
218,796

 
$
670,194

 
$
443,851

 
$
1,039,953

Earnings Per Share:
 
 
 
 
 
 
 
Basic
$
0.25

 
$
0.76

 
$
0.50

 
$
1.18

Diluted
$
0.23

 
$
0.70

 
$
0.47

 
$
1.09

Dividends declared per share
$
0.22

 
$
0.20

 
$
0.66

 
$
0.58

 
 
 
 
 
 
 
 

4

GGP INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Continued)
(UNAUDITED)
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
(Dollars in thousands, except per share amounts)
Comprehensive Income, Net:
 

 
 

 
 

 
 

Net income
$
226,272

 
$
681,748

 
$
464,960

 
$
1,066,987

Other comprehensive income (loss)
 
 
 
 
 
 
 
Foreign currency translation
4,065

 
(994
)
 
2,602

 
14,640

Reclassification adjustment for realized gains on available-for-sale securities included in net income
—

 
—

 
—

 
(11,978
)
Net unrealized gains on other financial instruments
10

 
(16
)
 
21

 
4

Other comprehensive income (loss)
4,075

 
(1,010
)
 
2,623

 
2,666

Comprehensive income
230,347

 
680,738

 
467,583

 
1,069,653

Comprehensive income allocated to noncontrolling interests
(3,674
)
 
(7,563
)
 
(9,024
)
 
(15,079
)
Comprehensive income attributable to GGP Inc.
226,673

 
673,175

 
458,559

 
1,054,574

Preferred Stock dividends
(3,984
)
 
(3,984
)
 
(11,952
)
 
(11,951
)
Comprehensive income, net, attributable to common stockholders
$
222,689

 
$
669,191

 
$
446,607

 
$
1,042,623


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

5

GGP INC.

CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
 
Common
Stock
 
Preferred
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
(Accumulated
Deficit)
 
Accumulated 
Other
Comprehensive
Income (Loss)
 
Common
Stock in
Treasury
 
Noncontrolling
Interests in Consolidated Real Estate Affiliates and Long Term Incentive Plan Common Units
 
Total
Equity
 
(Dollars in thousands, except for per share and share amounts)
Balance at January 1, 2016
$
9,386

 
$
242,042

 
$
11,362,369

 
$
(2,141,549
)
 
$
(72,804
)
 
$
(1,129,401
)
 
$
38,251

 
$
8,308,294

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income


 


 


 
1,051,904

 


 


 
2,835

 
1,054,739

Distributions to noncontrolling interests in consolidated Real Estate Affiliates


 


 


 


 


 


 
(1,986
)
 
(1,986
)
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates
 
 
 
 
(18,416
)
 
 
 
 
 
 
 
(2,971
)
 
(21,387
)
Long Term Incentive Plan Common Unit grants, net (684,216 LTIP Units)
 
 
 
 
73

 
(950
)
 
 
 
 
 
11,651

 
10,774

Restricted stock grants, net (339,551 common shares)
3

 
—

 
2,429

 


 


 


 


 
2,432

Employee stock purchase program (107,476 common shares)
1

 


 
3,694

 


 


 


 


 
3,695

Stock options exercised (2,699,998 common shares)
27

 


 
51,599

 


 


 


 


 
51,626

Cancellation of repurchased common shares (270,869 common shares)
(2
)
 
 
 
(3,415
)
 
(3,356
)
 
 
 
6,773

 
 
 
—

Cash dividends reinvested (DRIP) in stock (20,759 common shares)
—

 
—

 
601

 
(213
)
 


 


 


 
388

Other comprehensive income


 


 


 


 
14,564

 


 


 
14,564

Amounts reclassified from accumulated other comprehensive income
 
 
 
 
 
 
 
 
(11,894
)
 
 
 
 
 
(11,894
)
Cash distributions declared ($0.58 per share)


 


 


 
(512,513
)
 


 


 


 
(512,513
)
Cash distributions on Preferred Stock


 


 


 
(11,951
)
 


 


 


 
(11,951
)
Fair value adjustment for noncontrolling interest in Operating Partnership


 


 
(2,377
)
 


 


 


 


 
(2,377
)
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at September 30, 2016
$
9,415

 
$
242,042

 
$
11,396,557

 
$
(1,618,628
)
 
$
(70,134
)
 
$
(1,122,628
)
 
$
47,780

 
$
8,884,404

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

6

GGP INC.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(UNAUDITED)
 
Common
Stock
 
Preferred
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
(Accumulated
Deficit)
 
Accumulated 
Other
Comprehensive
Income (Loss)
 
Common
Stock in
Treasury
 
Noncontrolling
Interests in Consolidated Real Estate Affiliates and Long Term Incentive Plan Common Units
 
Total
Equity
 
(Dollars in thousands, except for per share and share amounts)
Balance at January 1, 2017
$
9,407

 
$
242,042

 
$
11,417,597

 
$
(1,824,866
)
 
$
(70,456
)
 
$
(1,137,960
)
 
$
64,965

 
$
8,700,729

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative effect of accounting change
 
 
 
 
2,342

 
(3,000
)
 
 
 
 
 
658

 
—

Net income


 


 


 
455,803

 


 


 
2,171

 
457,974

Distributions to noncontrolling interests in consolidated Real Estate Affiliates


 


 


 


 


 


 
(4,472
)
 
(4,472
)
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates
 
 
 
 
 
 
 
 
 
 
 
 
8,638

 
8,638

Contributions received from noncontrolling interests in consolidated Real Estate Affiliates
 
 
 
 
—

 
 
 
 
 
 
 
15,258

 
15,258

Long Term Incentive Plan Common Unit grants, net (451,585 LTIP Units)


 
 
 
795

 
(744
)
 
 
 
 
 
12,550

 
12,601

Restricted stock grants, net (708,091 common shares)
7

 
—

 
6,792

 


 


 


 


 
6,799

Employee stock purchase program (127,619 common shares)
1

 


 
3,096

 


 


 


 


 
3,097

Stock options exercised (443,221 common shares)
4

 


 
17,212

 


 


 


 


 
17,216

Cancellation of repurchased common shares (12,980,447 common shares)
(128
)
 
 
 
(170,514
)
 
(112,464
)
 
 
 
283,106

 
 
 
—

Treasury stock purchase (12,650,991 common shares)
 
 
 
 
 
 
 
 
 
 
(273,984
)
 
 
 
(273,984
)
Cash dividends reinvested (DRIP) in stock (34,625 common shares)
—

 
—

 
834

 
(138
)
 


 


 


 
696

Other comprehensive income


 


 


 


 
2,756

 


 


 
2,756

Cash distributions declared ($0.66 per share)


 


 


 
(580,149
)
 


 


 


 
(580,149
)
Cash distributions on Preferred Stock


 


 


 
(11,952
)
 


 


 


 
(11,952
)
Fair value adjustment for noncontrolling interest in Operating Partnership


 


 
34,123

 
 
 


 


 


 
34,123

 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
Balance at September 30, 2017
$
9,291

 
$
242,042

 
$
11,312,277

 
$
(2,077,510
)
 
$
(67,700
)
 
$
(1,128,838
)
 
$
99,768

 
$
8,389,330


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


7

GGP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Nine Months Ended September 30,
 
2017
 
2016
 
(Dollars in thousands)
Cash Flows provided by Operating Activities:
 

 
 

Net income
$
464,960

 
$
1,066,987

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Equity in income of Unconsolidated Real Estate Affiliates
(99,884
)
 
(127,759
)
Distributions received from Unconsolidated Real Estate Affiliates
133,158

 
79,928

Provision for doubtful accounts
8,769

 
5,685

Depreciation and amortization
505,875

 
499,269

Amortization/write-off of deferred finance costs
9,011

 
8,880

Accretion/write-off of debt market rate adjustments
(3,256
)
 
(4,119
)
Amortization of intangibles other than in-place leases
24,874

 
36,450

Straight-line rent amortization
(3,260
)
 
(13,997
)
Deferred income taxes
9,290

 
(692
)
Cost of debt extinguishment
—

 
5,403

Gain on dispositions, net
(4,775
)
 
(27,266
)
Unconsolidated Real Estate Affiliates - gain on investment, net
—

 
(40,765
)
Gain from changes in control of investment properties and other, net
(79,325
)
 
(733,416
)
Provision for impairment
—

 
73,039

Gain on extinguishment of debt
(55,112
)
 
—

Provision for loan loss
—

 
29,410

Gain on foreign currency
(3,195
)
 
(16,172
)
Net changes:
 

 
 

Accounts and notes receivable, net
8,740

 
271

Prepaid expenses and other assets
(24,610
)
 
(9,504
)
Deferred expenses, net
(16,380
)
 
(36,117
)
Restricted cash
266

 
113

Accounts payable and accrued expenses
30,844

 
3,602

Other, net
32,327

 
24,347

Net cash provided by operating activities
938,317

 
823,577

Cash Flows (used in) provided by Investing Activities:
 

 
 

Acquisition of real estate and property additions
(291,046
)
 
(94,744
)
Development of real estate and property improvements
(451,078
)
 
(400,429
)
Loans to joint venture partners
(53,196
)
 
(52,970
)
Proceeds from repayment of loans to joint venture partners
47,076

 
7,578

Proceeds from sales of investment properties and Unconsolidated Real Estate Affiliates
42,028

 
1,300,703

Contributions to Unconsolidated Real Estate Affiliates
(71,076
)
 
(103,210
)
Distributions received from Unconsolidated Real Estate Affiliates in excess of income
81,763

 
60,891

Sale of marketable securities
—

 
46,408

Decrease in restricted cash
901

 
28,460

Other, net
—

 
662

Net cash (used in) provided by investing activities
(694,628
)

793,349

Cash Flows used in Financing Activities:
 

 
 

Proceeds from refinancing/issuance of mortgages, notes and loans payable
1,355,000

 
663,479

Principal payments on mortgages, notes and loans payable
(680,715
)
 
(1,466,675
)
Deferred finance costs
(3,133
)
 
(13,771
)
Treasury stock purchases
(267,788
)
 
—

Cash contributions from noncontrolling interests in consolidated real estate affiliates
15,258

 
—

Cash distributions to noncontrolling interests in consolidated real estate affiliates
(4,472
)
 
(23,075
)

8

GGP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(UNAUDITED)
 
Nine Months Ended September 30,
 
2017
 
2016
 
(Dollars in thousands)
Cash distributions paid to common stockholders
(812,871
)
 
(503,599
)
Cash distributions reinvested (DRIP) in common stock
834

 
601

Cash distributions paid to preferred stockholders
(11,952
)
 
(11,951
)
Cash distributions and redemptions paid to unit holders
(15,182
)
 
(3,173
)
Other, net
14,487

 
41,112

Net cash used in financing activities
(410,534
)
 
(1,317,052
)
Effect of foreign exchange rates on cash and cash equivalents
3,195

 
—

Net change in cash and cash equivalents
(163,650
)
 
299,874

Cash and cash equivalents at beginning of period
474,757

 
356,895

Cash and cash equivalents at end of period
$
311,107

 
$
656,769

Supplemental Disclosure of Cash Flow Information:
 

 
 

Interest paid
$
406,282

 
$
437,099

Interest capitalized
6,932

 
3,876

Income taxes paid
7,947

 
2,805

Accrued capital expenditures included in accounts payable and accrued expenses
126,306

 
88,515

Sale of Ala Moana (Refer to Note 3)
 
 
 
Acquisition of an additional interest in Miami Design District (Refer to Note 5)
 
 
 
Acquisition of 522 Fifth Avenue (Refer to Note 3)
 
 
 
Disposition of Lakeside (Refer to Note 3)
 
 
 
Issuance of note collateralized by Riverchase Galleria and Tysons Galleria anchor box (Refer to Note 13)
 
 
 
Acquisition and/or change of control at 218 West 57th Street, 530 Fifth Avenue and 685 Fifth Avenue (Refer to Note 3)
 
 
 

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


9
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)



NOTE 1        ORGANIZATION

Readers of this Quarterly Report should refer to the Company's (as defined below) audited consolidated financial statements for the year ended December 31, 2016 which are included in the Company's Annual Report on Form 10-K (our "Annual Report") for the fiscal year ended December 31, 2016 (Commission File No. 1-34948), as certain footnote disclosures which would substantially duplicate those contained in our Annual Report have been omitted from this Quarterly Report. In the opinion of management, all adjustments necessary for a fair presentation (which include only normal recurring adjustments) have been included in this Quarterly Report. Capitalized terms used, but not defined in this Quarterly Report, have the same meanings as in our Annual Report.
 
General
 
GGP Inc. ("GGP" or the "Company"), a Delaware corporation, was organized in July 2010 and is a self-administered and self-managed real estate investment trust, referred to as a "REIT". Effective January 27, 2017, the Company changed its name from General Growth Properties, Inc. to GGP Inc. In these notes, the terms "we," "us" and "our" refer to GGP and its subsidiaries.

GGP, through its subsidiaries and affiliates, is an owner and operator of retail properties. As of September 30, 2017, we are the owner, either entirely or with joint venture partners, of 126 retail properties.

Substantially all of our business is conducted through GGP Operating Partnership, LP ("GGPOP"), GGP Nimbus, LP ("GGPN") and GGP Limited Partnership ("GGPLP", and together with GGPN and GGPOP, the "Operating Partnerships"), subsidiaries of GGP. The Operating Partnerships own an interest in the properties that are part of the consolidated financial statements of GGP. As of September 30, 2017, GGP held approximately a 99% common equity ownership (without giving effect to the potential conversion of the Preferred Units and LTIP Units as defined below) of the Operating Partnerships, while the remaining 1% was held by limited partners and certain previous contributors of properties to the Operating Partnerships or their predecessors.

GGPOP is the general partner of, and owns a 1.5% equity interest in GGPN and GGPLP. GGPOP has common units of limited partnership ("Common Units"), which are redeemable for cash or, at our option, shares of GGP common stock. It also has preferred units of limited partnership interest ("Preferred Units"), of which, certain Preferred Units can be converted into Common Units and then redeemed for cash or, at our option, shares of GGP common stock (Note 9). GGPOP also has full value long term incentive plan units and appreciation only long term incentive plan units (collectively "LTIP Units"), which are redeemable for cash or, at our option, shares of GGP common stock (Note 11).

In addition to holding ownership interests in various joint ventures, the Operating Partnerships generally conduct their operations through General Growth Management, Inc. ("GGMI"), General Growth Services, Inc. ("GGSI") and GGPLP REIT Services, LLC ("GGPRS"). GGMI and GGSI are taxable REIT subsidiaries ("TRS"s), which provide management, leasing, tenant coordination, business development, marketing, strategic partnership and other services for a majority of our Unconsolidated Real Estate Affiliates (defined below) and for substantially all of our Consolidated Properties, as defined below. GGSI also serves as a contractor to GGMI for these services. GGPRS generally provides financial, accounting, tax, legal, development, and other services to our Consolidated Properties.

We refer to our ownership interests in properties in which we own a majority or controlling interest and are consolidated under accounting principles generally accepted in the United States of America ("GAAP") as the "Consolidated Properties." We also own interests in certain properties through joint venture entities in which we own a noncontrolling interest ("Unconsolidated Real Estate Affiliates") and we refer to those properties as the "Unconsolidated Properties".

NOTE 2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of GGP, our subsidiaries and joint ventures in which we have a controlling interest. For consolidated joint ventures, the noncontrolling partner's share of the assets, liabilities and operations of the joint ventures (generally computed as the joint venture partner's ownership percentage) is included in noncontrolling interests in consolidated real estate affiliates as permanent equity of the Company. Intercompany balances and

10
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


transactions have been eliminated. Noncontrolling interests are included on our Consolidated Balance Sheets related to the Common, Preferred, and LTIP Units of GGPOP and are presented either as redeemable noncontrolling interests or as noncontrolling interests in our permanent equity. Each of the Operating Partnerships are variable interest entities as the limited partners do not have substantive kick-out rights or substantive participating rights. However, as the Company holds a majority voting interest in the Operating Partnerships, it qualifies for the exemption from providing certain of the disclosure requirements associated with variable interest entities.

We operate in a single reportable segment, which includes the operation, development and management of retail and other rental properties. Our portfolio is targeted to a range of market sizes and consumer tastes. Each of our operating properties is considered a separate operating segment, as each property earns revenues and incurs expenses, individual operating results are reviewed and discrete financial information is available. The Company's chief operating decision maker is comprised of a team of several members of executive management who use Company NOI in assessing segment operating performance. We do not distinguish or group our consolidated operations based on geography, size or type for purposes of making property operating decisions. Our operating properties have similar economic characteristics and provide similar products and services to our tenants. There are no individual operating segments that are greater than 10% of combined revenue, Company NOI or combined assets. Company NOI excludes certain non-cash and non-comparable items such as straight-line rent and intangible asset and liability amortization, which are a result of our emergence, acquisition accounting and other capital contribution or restructuring events. Further, all material operations are within the United States and no customer or tenant comprises more than 10% of consolidated revenues. As a result, the Company's operating properties are aggregated into a single reportable segment.

Properties

Real estate assets are stated at cost less any provisions for impairments. Expenditures for significant betterments and improvements are capitalized. Maintenance and repairs are charged to expense when incurred. Construction and improvement costs incurred in connection with the development of new properties or the redevelopment of existing properties are capitalized. Real estate taxes, interest costs, and internal costs associated with leasing and development overhead incurred during construction periods are capitalized. Capitalization is based on qualified expenditures and interest rates. Capitalized real estate taxes, interest costs, and internal costs associated with leasing and development overhead are amortized over lives which are consistent with the related assets.

Pre-development costs, which generally include legal and professional fees and other third-party costs directly related to the construction assets, are capitalized as part of the property being developed. In the event a development is no longer deemed to be probable of occurring, the capitalized costs are expensed (see also our impairment policies in this note below).

We periodically review the estimated useful lives of our properties, and may adjust them as necessary. The estimated useful lives of our properties range from 10-45 years.

Depreciation or amortization expense is computed using the straight-line method based upon the following estimated useful lives:
 
Years
Buildings and improvements
10 - 45
Equipment and fixtures
3 - 20
Tenant improvements
Shorter of useful life or applicable lease term
 
Acquisitions of Operating Properties (Note 3)

Acquisitions of properties are accounted for utilizing the acquisition method of accounting and, accordingly, the results of operations of acquired properties have been included in the results of operations from the respective dates of acquisition. Estimates of future cash flows and other valuation techniques are used to allocate the purchase price of acquired property between land, buildings and improvements, equipment, assumed debt liabilities and identifiable intangible assets and liabilities such as amounts related to in-place tenant leases, acquired above and below-market tenant and ground leases, and tenant relationships.

Identifiable intangible assets and liabilities are calculated for above-market and below-market tenant and ground leases where we are either the lessor or the lessee. The difference between the contractual rental rates and our estimate of market rental rates is

11
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


measured over a period equal to the remaining non-cancelable term of the leases, including significantly below-market renewal options for which exercise of the renewal option appears to be reasonably assured. The remaining term of leases with renewal options at terms significantly below market reflect the assumed exercise of such below-market renewal options and assume the amortization period would coincide with the extended lease term.

The gross asset balances of the in-place value of tenant leases are included in buildings and equipment in our Consolidated Balance Sheets.
 
Gross Asset
 
Accumulated
Amortization
 
Net Carrying
Amount
 
 
 
 
 
 
As of September 30, 2017
 

 
 

 
 

Tenant leases:
 

 
 

 
 

In-place value
$
268,207

 
$
(178,885
)
 
$
89,322

 
 
 
 
 
 
As of December 31, 2016
 
 
 
 
 
Tenant leases:
 
 
 
 
 
In-place value
$
306,094

 
$
(214,111
)
 
$
91,983


The above-market tenant leases and below-market ground leases are included in prepaid expenses and other assets (Note 14); the below-market tenant leases, above-market ground leases and above-market headquarters office lease are included in accounts payable and accrued expenses (Note 15) in our Consolidated Balance Sheets.

Amortization/accretion of all intangibles, including the intangibles in Note 14 and Note 15, had the following effects on our income from continuing operations:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Amortization/accretion effect on continuing operations
$
(15,100
)
 
$
(23,014
)
 
$
(56,417
)
 
$
(72,118
)

Future amortization/accretion of all intangibles, including the intangibles in Note 14 and Note 15, is estimated to decrease results from continuing operations as follows:
Year
 
Amount
2017 Remaining
 
$
14,325

2018
 
45,801

2019
 
29,249

2020
 
20,458

2021
 
15,061


Marketable Securities

Marketable securities are comprised of equity securities that are classified as available-for-sale. Available-for-sale securities are presented in prepaid expenses and other assets on our Consolidated Balance Sheets at fair value. Unrealized gains and losses resulting from the mark-to-market of these securities are included in other comprehensive income. Realized gains and losses are recognized in earnings only upon the sale of the securities and are recorded based on the weighted average cost of such securities. During the nine months ended September 30, 2016, we recognized gains of $13.1 million in management fees and other corporate revenues on the Consolidated Statements of Comprehensive Income from the sale of Seritage Growth Properties stock.
Investments in Unconsolidated Real Estate Affiliates (Note 5)
We account for investments in joint ventures where we own a non-controlling joint interest using either the equity method or the cost method. If we have significant influence but not control over the investment, we utilize the equity method. If we have neither control nor significant influence, we utilize the cost method. Under the equity method, the cost of our investment is adjusted for

12
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


our share of the earnings of such Unconsolidated Real Estate Affiliates from the date of acquisition, increased by our contributions and reduced by distributions received. Under the cost method, the cost of our investment is not adjusted for our share of the earnings of such Unconsolidated Real Estate Affiliates from the date of acquisition and distributions are treated as earnings when received.
To determine the method of accounting for partially owned joint ventures, we evaluate the characteristics of associated entities and determine whether an entity is a variable interest entity ("VIE"). A limited partnership or other similar entity is considered a VIE unless a simple majority of limited partners (excluding limited partners that are under common control with the general partner) have substantive kick-out rights or participating rights. Accounting guidance amended the following: (i) modified the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIEs") or voting interest entities, (ii) eliminated the presumption that a general partner should consolidate a limited partnership, (iii) affected the consolidation analysis of reporting entities that are involved with VIEs, and (iv) provided a scope exception for certain entities. If an entity is determined to be a VIE, we determine which party is the primary beneficiary by analyzing whether we have both the power to direct the entity's significant economic activities and the obligation to absorb potentially significant losses or receive potentially significant benefits. Significant judgments and assumptions inherent in this analysis include the nature of the entity's operations, future cash flow projections, the entity's financing and capital structure, and contractual relationship and terms. The adoption of the consolidation guidance did not materially impact our consolidated financial statements.
Primary risks associated with our VIEs include the potential of funding the entities' debt obligations or making additional contributions to fund the entities' operations.
Generally, the operating agreements with respect to our Unconsolidated Real Estate Affiliates provide that assets, liabilities and funding obligations are shared in accordance with our ownership percentages. Therefore, we generally also share in the profit and losses, cash flows and other matters relating to our Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. Except for Retained Debt (as described in Note 5), differences between the carrying amount of our investment in the Unconsolidated Real Estate Affiliates and our share of the underlying equity of our Unconsolidated Real Estate Affiliates are typically amortized over lives ranging from 5 to 45 years. When cumulative distributions exceed our investment in the joint venture, the investment is reported as a liability in our consolidated financial statements. The liability is limited to our maximum potential obligation to fund contractual obligations, including recourse related to certain debt obligations.
Partially owned, non-variable interest joint ventures over which we have controlling financial interest are consolidated in our consolidated financial statements. In determining if we have a controlling financial interest, we consider factors such as ownership interest, authority to make decisions, kick-out rights and substantive participating rights. Partially owned joint ventures where we do not have a controlling financial interest, but have the ability to exercise significant influence, are accounted for using the equity method.
To the extent that we contribute assets to a joint venture accounted for using the equity method, our investment in the joint venture is recorded at our cost basis in the assets that were contributed to the joint venture. We will recognize gains and losses on the contribution of our real estate to joint ventures, relating solely to the outside partner's interest, to the extent the buyer is independent of the Company, the collection of the sales price is reasonably assured, and we will not be required to support the operations of the property or its related obligations to an extent greater than our proportionate interest.
The combined summarized financial information of unconsolidated joint ventures is disclosed in Note 5 to the Consolidated Financial Statements.
We continually analyze and assess reconsideration events, including changes in the factors mentioned above, to determine if the consolidation treatment remains appropriate. Decisions regarding consolidation of partially owned entities frequently require significant judgment by our management.
Revenue Recognition and Related Matters

Minimum rents are recognized on a straight-line basis over the terms of the related operating leases, including the effect of any free rent periods. Minimum rents also include lease termination income collected from tenants to allow for the tenant to vacate their space prior to their scheduled termination dates, as well as accretion related to above-market and below-market tenant leases on acquired properties and properties that were recorded at fair value at the emergence from bankruptcy.

13
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Overage rent is paid by a tenant when the tenant's sales exceed an agreed upon minimum amount and is recognized on an accrual basis once tenant sales exceed contractual tenant lease thresholds and is calculated by multiplying the sales in excess of the minimum amount by a percentage defined in the lease.
Tenant recoveries are established in the leases or computed based upon a formula related to real estate taxes, insurance and other property operating expenses and are generally recognized as revenues in the period the related costs are incurred.
Real estate sales are recognized whenever (1) a sale is consummated, (2) the buyer has demonstrated an adequate commitment to pay for the property, (3) our receivable is not subject to future subordination, and (4) we have transferred to the buyer the risks and rewards of ownership and do not have continuing involvement. Unless all conditions are met, recognition of all or a portion of the profit shall be postponed.
We provide an allowance for doubtful accounts against the portion of accounts receivable, net including straight-line rents, which is estimated to be uncollectible. Such allowances are reviewed periodically based upon our recovery experience.

Management Fees and Other Corporate Revenues

Management fees and other corporate revenues primarily represent management and leasing fees, development fees, financing fees and fees for other ancillary services performed for the benefit of certain of the Unconsolidated Real Estate Affiliates. Management fees are reported at 100% of the revenue earned from the joint venture in management fees and other corporate revenues on our Consolidated Statements of Comprehensive Income. Our share of the management fee expense incurred by the Unconsolidated Real Estate Affiliates is reported within equity in income of Unconsolidated Real Estate Affiliates on our Consolidated Statements of Comprehensive Income and in property management and other costs in the Condensed Combined Statements of Income in Note 5. The following table summarizes the management fees from affiliates and our share of the management fee expense:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Management fees from affiliates (1)
$
28,806

 
$
20,428

 
$
77,797

 
$
60,015

Management fee expense
(10,675
)
 
(8,250
)
 
(27,684
)
 
(23,964
)
Net management fees from affiliates
$
18,131

 
$
12,178

 
$
50,113

 
$
36,051

(1)
Excludes a $13.1 million gain recognized in management fees and other corporate revenues on the divestiture of our investment in Seritage Growth Properties during the nine months ended September 30, 2016.

Impairment

Operating properties
 
We regularly review our consolidated properties for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment indicators are assessed separately for each property and include, but are not limited to, significant decreases in real estate property net operating income, significant decreases in occupancy percentage, debt maturities, changes in management's intent with respect to the properties and prevailing market conditions.
 
If an indicator of potential impairment exists, the property is tested for recoverability by comparing its carrying amount to the estimated future undiscounted cash flows. Although the carrying amount may exceed the estimated fair value of certain properties, a real estate asset is only considered to be impaired when its carrying amount cannot be recovered through estimated future undiscounted cash flows. To the extent an impairment provision is determined to be necessary, the excess of the carrying amount of the property over its estimated fair value is expensed to operations. In addition, the impairment provision is allocated proportionately to adjust the carrying amount of the asset group. The adjusted carrying amount, which represents the new cost basis of the property, is depreciated over the remaining useful life of the property.

Although we may market a property for sale, there can be no assurance that the transaction will be complete until the sale is finalized. However, GAAP requires us to utilize the Company's expected holding period of our properties when assessing recoverability. If we cannot recover the carrying value of these properties within the planned holding period, we will estimate the fair values of the assets and record impairment charges for properties when the estimated fair value is less than their carrying value.

14
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)



Impairment indicators for pre-development costs, which are typically costs incurred during the beginning stages of a potential development and construction in progress, are assessed by project and include, but are not limited to, significant changes in the Company's plans with respect to the project, significant changes in projected completion dates, tenant demand, anticipated revenues or cash flows, development costs, market factors and sustainability of development projects.

Impairment charges are recorded in the Consolidated Statements of Comprehensive Income when the carrying value of a property is not recoverable and it exceeds the estimated fair value of the property, which can occur in accounting periods preceding disposition and/or in the period of disposition.

During the nine months ended September 30, 2016, we recorded a $73.0 million impairment charge (of which $28.3 million relates to the three months ended September 30, 2016) on our Consolidated Statements of Comprehensive Income related to three operating properties. During the nine months ended September 30, 2016, we received bona fide purchase offers for two properties which were less than their respective carrying values. The other property had non-recourse debt maturing during the nine months ended September 30, 2016 that exceeded the fair value of the operating property. This property was transferred to a special servicer during nine months ended September 30, 2016.

No provisions for impairment were recognized for the three and nine months ended September 30, 2017.

Changes in economic and operating conditions that occur subsequent to our review of recoverability of our properties could impact the assumptions used in that assessment and could result in future impairment if assumptions regarding those properties differ from actual results.

Investment in Unconsolidated Real Estate Affiliates

A series of operating losses of an investee or other factors may indicate that an other-than-temporary decline in value of our investment in an Unconsolidated Real Estate Affiliate has occurred. The investment in each of the Unconsolidated Real Estate Affiliates is evaluated for valuation declines below the carrying amount. Accordingly, in addition to the property-specific impairment analysis that we performed for such joint ventures (as part of our operating property impairment process described above), we also considered whether there were other-than-temporary declines with respect to the carrying values of our Unconsolidated Real Estate Affiliates. No impairments related to our investments in Unconsolidated Real Estate Affiliates were recognized for the three and nine months ended September 30, 2017 and 2016. Changes in economic and operating conditions that occur subsequent to our review of recoverability of our investments in Unconsolidated Real Estate Affiliates could impact the assumptions used in that assessment and could result in future impairment if assumptions regarding those investments differ from actual results.

Fair Value Measurements (Note 4)

The accounting principles for fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

•
Level 1 - defined as observable inputs such as quoted prices for identical assets or liabilities in active markets;
•
Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
•
Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Note 4 includes a discussion of properties measured at fair value on a non-recurring basis using Level 2 and Level 3 inputs and the fair value of debt, which is estimated on a recurring basis using Level 2 and Level 3 inputs. Note 9 includes a discussion of certain redeemable noncontrolling interests that are measured at fair value using Level 1 inputs.





15
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents. We are exposed to credit risk with respect to cash held at various financial institutions and access to our credit facility. Our credit risk exposure with regard to our cash and the $1.5 billion, including the uncommitted accordion feature, available under our credit facility is spread among a diversified group of investment grade financial institutions. We had $525.0 million outstanding and no outstanding balance under our credit facility as of September 30, 2017 and December 31, 2016, respectively.

Recently Issued Accounting Pronouncements
Effective January 1, 2018, companies will be required to apply a five-step model in accounting for revenue. The core principle of the revenue model is that a company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Lease contracts will be excluded from this revenue recognition criteria; however, the sale of real estate will be required to follow the new model. Expanded quantitative and qualitative disclosures regarding revenue recognition will be required for contracts that are subject to this pronouncement. The Company has completed a preliminary review of the potential impact of this pronouncement to determine specific areas that will be affected by the adoption of this standard. Once the new guidance setting forth principles for the recognition, measurement, presentation and disclosure of leases (discussed below) goes into effect, the new revenue standard may apply to executory costs and other components of revenue due under leases that are deemed to be non-lease components (such as common area maintenance and provision of utilities), even when the revenue for such activities is not separately stipulated in the lease. In that case, then revenue from these items previously recognized on a straight-line basis under current lease guidance would be recognized under the new revenue guidance as the related services are delivered. As a result, while the total revenue recognized over time would not differ under the new guidance, the recognition pattern would be different. The new standard can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. The company intends to adopt the modified retrospective approach for implementation.
In February 2016, the FASB issued Accounting Standards Update ("ASU") 2016-02 which will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Under ASU 2016-02, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Lessor accounting remains substantially similar to current GAAP. However, leasing costs that are currently eligible to be capitalized as initial direct costs are limited by ASU 2016-02. In addition, disclosures of leasing activities are to be expanded to include qualitative along with specific quantitative information. For public entities, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2016-02 mandates a modified retrospective transition method. The Company is evaluating the potential impact of this pronouncement on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-07 which eliminates the requirement for retrospective application of equity method accounting when an investment previously accounted for by another method initially qualifies for the equity method. This standard is effective for all entities for fiscal years beginning after December 15, 2016 with earlier application permitted. The adoption of this standard did not materially impact the Company's consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09 which simplifies the accounting for stock compensation related items such as income tax accounting, award classification, estimation of forfeitures, and cash flow presentation. The amendments in the ASU are effective for public business entities for annual periods beginning after December 15, 2016. The Company accounted for this compensation award adjustment by means of a cumulative-effect adjustment to equity as of January 1, 2017.
In June 2016, the FASB issued ASU 2016-13 which changes the model for the measurement of credit losses on financial instruments. Specifically, the amendments in the ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this ASU will be effective January 1, 2020 with early adoption permitted on January 1, 2019. The Company is evaluating the potential impact of this pronouncement on its consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15 which provides guidance on the statement of cash flows presentation of certain transactions where diversity in practice exists. The effective date will be the first quarter of fiscal year 2019, with early adoption permitted. The ASU will be adopted using a retrospective transition approach. The Company is evaluating the potential impact of this pronouncement on its Consolidated Statements of Cash Flows.

16
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


In November 2016, the FASB issued ASU 2016-18 which requires that a statement of cash flows explain the change during the reporting period in the total of cash and cash equivalents and restricted cash or restricted cash equivalents. This standard is effective for public entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is evaluating the potential impact of this pronouncement on its Consolidated Statements of Cash Flows.
In January 2017, the FASB issued ASU 2017-01 which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. Public entities should apply the amendments in this standard to annual periods beginning after December 15, 2017, including interim periods within those periods. The Company adopted this pronouncement early in the first fiscal quarter of 2017. The adoption of this standard resulted in less real estate acquisitions qualifying as businesses and, accordingly, acquisition costs for those acquisitions that are not businesses are capitalized rather than expensed.

In February 2017, the FASB issued ASU 2017-05 which clarifies the accounting for the derecognition of nonfinancial assets by eliminating the exception in current GAAP for transfers of investments in real estate entities (including equity method investments). The amendments in this update provide guidance on the accounting of partial sales of nonfinancial assets and contributions of nonfinancial assets to a joint venture or other noncontrolling investee. Once this guidance is adopted, an entity would use the guidance in the new revenue recognition standard (discussed above) to determine whether it is transferring multiple, distinct assets and would recognize a gain or loss for each distinct asset transferred. When an entity transfers nonfinancial assets included in a subsidiary and retains or receives an equity interest, it first determines whether it has retained a controlling financial interest in the subsidiary. If so, the entity does not derecognize the assets and accounts for the sale of noncontrolling interest in the subsidiary under the consolidation guidance covering decreases in ownership which would result in recognizing a gain or loss in equity. If an entity retains or receives a noncontrolling interest in the entity that owns the asset post-sale, that noncontrolling interest is considered noncash consideration and is included in the transaction price at its fair value. The retained noncontrolling interest is included at its fair value and results in an entity recognizing 100% of the gain on sale of the asset which differs from current applicable GAAP. Public entities should apply the amendments in this standard to annual periods beginning after December 15, 2017, including interim periods within those periods. Entities are required to adopt this standard in conjunction with the new revenue recognition standard which we will adopt on January 1, 2018. The adoption of this standard will result in higher gains on the sale of partial real estate interests due to recognizing 100% of the gain on sale of the partial interest and recording the retained noncontrolling interest at fair value.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. For example, estimates and assumptions have been made with respect to fair values of assets and liabilities for purposes of applying the acquisition method of accounting, the useful lives of assets, capitalization of development and leasing costs, provision for income taxes, recoverable amounts of receivables and deferred taxes, provision for loan loss, initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to acquisitions, impairment of long-lived assets, litigation related accruals and disclosures and fair value of debt. Actual results could differ from these and other estimates.

NOTE 3        ACQUISITIONS, SALES AND JOINT VENTURE ACTIVITY

On September 19, 2017, GGP entered into three transactions with affiliates of Thor Equities (“Thor”) related to three separate joint ventures between GGP and Thor. First, GGP acquired 49.9% of its partner's interest in 218 West 57th Street based on a gross property valuation of $104.0 million. After the acquisition, GGP owned a 99.9% interest in 218 West 57th Street, while Thor retained a 0.1% interest. A portion of the net proceeds from the acquisition were used by Thor to pay off their $12.3 million note receivable to GGP related to the property. Of the remaining net proceeds, $9.75 million was used to pay down a portion of their note receivable for 530 Fifth Avenue and $3.36 million was used to pay down a portion of their note receivable to GGP for 685 Fifth Avenue (Note 13).

17
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Second, GGP recapitalized the 530 Fifth Avenue joint venture based on a gross property valuation of $334 million, whereby (i) Thor’s common interest having a value of $48.1 million was converted to a preferred equity interest with a 7.0% cumulative return in 530 Fifth Avenue, which serves as collateral for Thor's still-outstanding note receivable, and (ii) GGP owned a 90.23% common equity interest in 530 Fifth Avenue, while Thor retained a 9.77% common equity interest. The preferred return payable to Thor must first go toward interest and principal due to GGP under Thor’s note receivable for 530 Fifth Avenue (Note 13).
Finally, GGP agreed to recapitalize the 685 Fifth Avenue joint venture based on a gross property valuation of $652.6 million, whereby upon closing (i) Thor’s common interest having a value of $150 million will be converted to a preferred equity interest with a 7.0% cumulative return in 685 Fifth Avenue, which serves as collateral for Thor's still-outstanding note receivable, and (ii) GGP will own a 97.03% common equity interest in 685 Fifth Avenue, while Thor will retain a 2.97% common equity interest. The preferred return payable to Thor must first go toward interest and principal due to GGP under Thor’s note receivable for 685 Fifth Avenue. The recapitalization will be effective on December 31, 2017, however, Thor executed a power of attorney on September 19, 2017 granting GGP sole authority with respect to the management of the joint venture and the property.
GGP had previously accounted for our interest in these three joint ventures using the equity method of accounting (Note 2). As a result of the transactions described above, we account for our interest in these three joint ventures using the consolidation method of accounting with our joint venture partner's share of equity included in noncontrolling interest (Note 2). In addition, the $48.1 million and $148.1 million notes receivable due from our joint venture partner at 530 Fifth Avenue and 685 Fifth Avenue, respectively, are presented on the balance sheet in noncontrolling interests in consolidated real estate affiliates. The notes receivable and our joint venture partners' share of equity effectively net within the noncontrolling interest.

The table below summarizes the gain from changes in control calculation ($ in millions):
Gain from changes in control for 218 West 57th Street, 530 Fifth Avenue and 685 Fifth Avenue
 
Net implied fair value of previous investment and consideration
$
250.0

Less: proportionate share of previous investments
198.1

Gain from changes in control of investment properties and other, net

$
51.9


The following table summaries the allocation of the purchase price to the net assets acquired at the date of acquisition. These allocations were based on the relative fair values of the assets acquired and liabilities assumed ($ in millions):

Allocation of Thor Equities Purchase Price
218 W. 57th Street
530 Fifth Avenue
685 Fifth Avenue
Investment in real estate, including intangible assets and liabilities
$
104.0

$
334.0

$
652.6

Fair value of debt (1)
(53.0
)
(221.0
)
(340.0
)
Net working capital (2)
0.1

14.3

1.7

Net assets acquired
$
51.1

$
127.3

$
314.3

(1)    530 Fifth Avenue includes $31.0 million of an intercompany loan between 530 Fifth Avenue and GGP.  218 W. 57th Street includes $53.0 million of an intercompany loan between 218 W. 57th Street and GGP.  Both loans eliminate in consolidation.
(2)    530 Fifth Avenue includes a $9.4 million escrow.

On July 12, 2017, we closed on the acquisition of the remaining 50% interest in 8 of the 12 anchor boxes included in the existing GS Portfolio Holdings LLC ("GSPH") joint venture with Seritage Growth Properties ("Seritage") for $190.1 million based on a total valuation of $380.2 million. We had previously owned a 50% interest in the joint venture and accounted for the joint venture using the equity method of accounting (Note 2), but as a result of the transaction we now account for this joint venture using the consolidation method of accounting. Of the total purchase price, $126.4 million was settled upon closing and Seritage retained certain special rights (governed by a Special Rights Agreement), which are callable by GGP for $63.7 million. Simultaneously, the 4 remaining anchor boxes in GSPH were distributed to a newly formed joint venture, GS Portfolio Holdings II, LLC ("GSPHII"), between GGP and Seritage in which the ownership interest remains at 50% for both joint venture partners. We account for GSPHII using the equity method of accounting (Note 2). In addition, GGPLP provided a loan to GSPHII for $127.4 million. This loan is collateralized by GSPHII's interest in the properties (Note 13). Finally, GGP acquired a 50% interest in 5 anchor boxes through a

18
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


newly formed joint venture, GS Portfolio Holdings 2017 ("GSPH2017"), for $57.5 million. We account for this joint venture using the equity method of accounting (Note 2).


The table below summarizes the gain from changes in control calculation ($ in millions):
Gain from a Change of Control in GSPH
 
Consideration paid to acquire our joint venture partner's interest
$
190.1

Less: proportionate share of previous investment
147.2

Gain from changes in control of investment properties and other, net

$
42.9


On June 30, 2017, we conveyed Lakeside Mall to the lender in full satisfaction of $144.5 million in outstanding debt. This transaction resulted in a $55.1 million gain on extinguishment of debt.

On June 9, 2017, we closed on the acquisition of our joint venture partner's 50% interest in Neshaminy Mall located in Bensalem, Pennsylvania for a gross purchase price of $65.0 million. Post acquisition, we own 100% of the mall. Prior to the acquisition of the remaining interest, the carrying value for our investment was $55.2 million. As a result of this acquisition, the implied fair value of our previous investment in Neshaminy Mall is $34.2 million, resulting in a loss of $21.0 million, recognized in loss from changes in control of investment properties and other for the nine months ended September 30, 2017.

On May 12, 2017, we closed on the sale of Red Cliffs Mall in St. George, Utah for $39.1 million. The transaction netted proceeds of approximately $36.3 million and resulted in a gain on sale of $5.6 million recognized in gain from changes in control of investment properties and other for the nine months ended September 30, 2017.

The acquisition of 605 N. Michigan Avenue on December 1, 2016 was recorded in 2016 using a preliminary estimate of the net assets acquired. Certain amounts were reclassified according to the subsequent purchase price allocation recorded during 2017.

On September 15, 2016, joint ventures we formed with Simon Property Group and Authentic Brands Group LLC acquired Aeropostale, Inc. ("Aeropostale") for $80.0 million in total cash which included cash for working capital requirements of the retail business. In connection with the transaction, our total investment was $20.4 million of cash contributed to the ventures for an effective ownership of approximately 26% in the two joint ventures. Aeropostale is a tenant at certain properties for which we receive rental income included in minimum rents on the Consolidated Statements of Comprehensive Income.

On August 1, 2016, we closed on the sale of Rogue Valley Mall located in Medford, Oregon for a sales price of $61.5 million. This transaction netted proceeds of approximately $6.4 million and resulted in a loss of $0.8 million recognized in gain from changes in control of investment properties and other for the three and nine months ended September 30, 2016.

On July 29, 2016, we reached an agreement on the sale of a 50% interest in Fashion Show located in Las Vegas, Nevada to TIAA-CREF Global Investments, LLC ("TIAACREF") for a sales price of $1.25 billion. We closed on the sale of the initial 49% and received proceeds of approximately $813.9 million on July 29, 2016, and we received the remaining $16.6 million for the closing of the final 1% interest on October 4, 2016. This transaction resulted in a gain on sale of $622.3 million recognized in gain from changes in control of investment properties and other for the three and nine months ended September 30, 2016.

The table below summarizes the gain calculation ($ in millions):
Cash received from joint venture partner
$
813.9

Less: Proportionate share of previous investment in Fashion Show
(191.6
)
Gain from change in control of investment property
$
622.3


On July 21, 2016, we closed on the sale of Newgate Mall located in Ogden, Utah for a sales price of $69.5 million. The transaction netted proceeds of approximately $8.4 million and resulted in a loss of $1.4 million recognized in gain from changes in control of investment properties and other for the three and nine months ended September 30, 2016.


19
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


On June 30, 2016, we closed on the sale of our 49.8% interest in One Stockton Partners, LLC in San Francisco, California to our joint venture partner for $49.8 million. In connection with the sale, $16.3 million in mortgage debt was assumed. This transaction netted proceeds of approximately $33.5 million and resulted in a gain of $22.7 million recognized in Unconsolidated Real Estate Affiliates - gain on investment on our Consolidated Statements of Operations and Comprehensive Income for the nine months ended September 30, 2016. In addition to the sale, the joint venture partner made an $8.0 million repayment of a note receivable.

On June 28, 2016, we closed on the sale of the office building and parking garage at Pioneer Place in Portland, Oregon for $121.8 million. This transaction netted proceeds of approximately $116.0 million and resulted in a gain on sale of $35.5 million recognized in gain from changes in control of investment properties and other for the nine months ended September 30, 2016.

On February 2, 2016, we closed on the acquisition of our joint venture partner's 25% interest in Spokane Valley Mall in Spokane, Washington for $37.5 million. This transaction resulted in a reduction of additional paid-in capital of $18.4 million due to the acquisition of our partner's noncontrolling interest.

On January 29, 2016, we closed on the sale of our 75% interest in Provo Towne Center in Provo, Utah to our joint venture partner for $37.5 million. Mortgage debt of $31.1 million was repaid upon closing. This transaction netted proceeds of approximately $2.8 million and resulted in a loss of $6.7 million recognized in gain from changes in control of investment properties and other for the nine months ended September 30, 2016.

On January 29, 2016, we closed on the sale of our 10% interest in 522 Fifth Avenue in New York City to our joint venture partner for $25.0 million, inclusive of the repayment of previously existing notes receivable from our joint venture partner. We received proceeds of $10.0 million upon closing and proceeds of $5.4 million on December 15, 2016. This transaction resulted in a gain on sale of $11.0 million recognized in Unconsolidated Real Estate Affiliates - gain on investment for the nine months ended September 30, 2016. On May 25, 2017, we received a 10% interest in 522 Fifth Avenue in full satisfaction of the remaining $9.0 million due.

On January 15, 2016, we closed on the sale of Eastridge Mall in San Jose, California for $225.0 million. This transaction netted proceeds of approximately $216.3 million and resulted in a gain on sale of $71.8 million recognized in gain from changes in control of investment properties and other for the nine months ended September 30, 2016.

On January 8, 2016, we closed on the sale of our 50% interest in Owings Mills Mall in Owings Mills, Maryland to our joint venture partner for $11.6 million. This transaction netted proceeds of approximately $11.6 million and resulted in a gain on sale of $0.6 million recognized in Unconsolidated Real Estate Affiliates - gain on investment for the nine months ended September 30, 2016.

On February 27, 2015, we sold a 25% interest in Ala Moana Center in Honolulu, Hawaii for net proceeds of $907.0 million. We received $670.0 million at closing and received the remaining proceeds of $237.0 million upon completion of the redevelopment and expansion in the fourth quarter of 2016. Subsequently on April 10, 2015, we sold an additional 12.5% interest in Ala Moana Center for net proceeds of $453.5 million to another joint venture partner. We received $335.0 million at closing and received the remaining proceeds of $118.5 million upon completion of the redevelopment and expansion in the fourth quarter of 2016. As a result, our joint venture partners own a combined 37.5% economic interest in the joint venture.

Upon sale of the 25% interest in Ala Moana Center and in accordance with applicable accounting standards for real estate sales with future development required, we recognized a $584.4 million gain on change in control of investment properties and other as of the closing date calculated on the percentage of the basis (real estate asset carrying value of Ala Moana Center and development costs incurred to date) as compared to the total estimated costs expected to be incurred through completion of the development. During the three months ended September 30, 2016, we recognized an additional $0.2 million gain on change of control of investment properties and other using the percentage of completion method for the construction completed from the closing date on February 27, 2015 through September 30, 2016. During the nine months ended September 30, 2016, we recognized an additional $12.7 million gain on change of control of investment properties and other using the percentage of completion method for the construction completed from the closing date on February 27, 2015 through September 30, 2016. The construction is complete and the full gain was recognized as of December 31, 2016.

Upon sale of the 12.5% interest in Ala Moana Center and in accordance with applicable accounting standards for real estate sales with future development required, we recognized a $295.9 million gain in Unconsolidated Real Estate Affiliates - gain on investment

20
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


as of the closing date calculated on the percentage of the basis (real estate asset carrying value of Ala Moana Center and development costs incurred to date) as compared to the total estimated costs expected to be incurred through completion of the development. During the three months ended September 30, 2016, we recognized an additional $0.3 million gain in Unconsolidated Real Estate Affiliates - gain on investment using the percentage of completion method for the construction completed from the closing date on April 10, 2015 through September 30, 2016. During the nine months ended September 30, 2016, we recognized an additional $6.5 million gain in Unconsolidated Real Estate Affiliates - gain on investment using the percentage of completion method for the construction completed from the closing date on April 10, 2015 through September 30, 2016. The construction is complete and the full gain was recognized as of December 31, 2016.
We account for the 62.5% interest in the joint venture that owns Ala Moana Center under the equity method of accounting (Note 5) because we share control over major decisions with the joint venture partners which resulted in the partners obtaining substantive participating rights. Prior to February 2015, Ala Moana Center was previously wholly owned by GGP and accounted for on a consolidated basis.
NOTE 4        FAIR VALUE
 
Nonrecurring Fair Value Measurements
 
We estimate fair value relating to changes in accounting methods for our assets and impairment assessments based upon discounted cash flow and direct capitalization models that include all projected cash inflows and outflows over a specific holding period, or the negotiated sales price, if applicable. Such projected cash flows are comprised of contractual rental revenues and forecasted rental revenues and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based on a reasonable range of current market rates for each property analyzed. Based upon these inputs, we determined that our valuations of properties using a discounted cash flow or a direct capitalization model were classified within Level 3 of the fair value hierarchy. For our properties for which the estimated fair value was based on negotiated sales prices, we determined that our valuation was classified within Level 2 of the fair value hierarchy.
 
Total Fair Value
Measurement
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
 
Provisions for Impairment
 
($ in thousands)
Nine Months Ended September 30, 2017
 
 
 
 
 
 
 
 
 
Investments in real estate (1)
$
1,090,600

 
$
—

 
$
—

 
$
1,090,600

 
$
—


Unobservable Quantitative Input
 
Range
Discount Rates
 
6.0% to 7.0%
Terminal capitalization rates
 
4.0% to 5.5%

Disclosure of Fair Value of Financial Instruments

The fair values of our financial instruments approximate their carrying amount in our consolidated financial statements except for debt. Management's estimates of fair value are presented below for our debt as of September 30, 2017 and December 31, 2016.
 
 
September 30, 2017
 
December 31, 2016
 
 
Carrying Amount (1)
 
Estimated Fair
Value
 
Carrying Amount (2)
 
Estimated Fair
Value
Fixed-rate debt
 
$
10,451,125

 
$
10,519,680

 
$
10,441,166

 
$
10,832,272

Variable-rate debt
 
3,042,747

 
2,955,915

 
1,989,252

 
1,990,458

 
 
$
13,493,872

 
$
13,475,595

 
$
12,430,418

 
$
12,822,730

 
(1) 
Includes net market rate adjustments of $24.6 million and deferred financing costs of $33.2 million, net.

21
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


(2)
Includes net market rate adjustments of $27.8 million and deferred financing costs of $40.1 million, net.

The fair value of our Junior Subordinated Notes approximates their carrying amount as of September 30, 2017 and December 31, 2016. We estimated the fair value of mortgages, notes and other loans payable using Level 2 and Level 3 inputs based on recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, current LIBOR, U.S. treasury obligation interest rates and on the discounted estimated future cash payments to be made on such debt. The discount rates estimated reflect our judgment as to what the approximate current lending rates for loans or groups of loans with similar maturities and assume that the debt is outstanding through maturity. We have utilized market information as available or present value techniques to estimate the amounts required to be disclosed. Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist in specific loans, it is unlikely that the estimated fair value of any such debt could be realized by immediate settlement of the obligation.


22
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 5        UNCONSOLIDATED REAL ESTATE AFFILIATES

Following is summarized financial information for all of our real estate related Unconsolidated Real Estate Affiliates accounted for using the equity method and a reconciliation to our total investment in Unconsolidated Real Estate Affiliates, inclusive of investments accounted for using the cost method (Note 2).
 
September 30, 2017
 
December 31, 2016
Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates (1)
 

 
 

Assets:
 

 
 

Land
$
2,872,752

 
$
2,664,736

Buildings and equipment
13,877,355

 
13,555,059

Less accumulated depreciation
(3,689,038
)
 
(3,538,776
)
Construction in progress
527,024

 
284,198

Net property and equipment
13,588,093

 
12,965,217

Investment in unconsolidated joint ventures
581,941

 
503,305

Net investment in real estate
14,170,034


13,468,522

Cash and cash equivalents
507,363

 
455,862

Accounts receivable, net
562,623

 
655,655

Notes receivable
11,969

 
8,912

Deferred expenses, net
341,098

 
321,095

Prepaid expenses and other assets
230,328

 
327,645

Total assets
$
15,823,415

 
$
15,237,691

Liabilities and Owners' Equity:
\

 
 

Mortgages, notes and loans payable
$
10,474,639

 
$
10,476,935

Accounts payable, accrued expenses and other liabilities
888,738

 
595,570

Cumulative effect of foreign currency translation ("CFCT")
(45,605
)
 
(50,851
)
Owners' equity, excluding CFCT
4,505,643

 
4,216,037

Total liabilities and owners' equity
$
15,823,415

 
$
15,237,691

Investment in Unconsolidated Real Estate Affiliates, Net:
 

 
 

Owners' equity
$
4,460,038

 
$
4,165,186

Less: joint venture partners' equity
(2,565,400
)
 
(2,095,166
)
Plus: excess investment/basis differences
1,604,437

 
1,590,821

Investment in Unconsolidated Real Estate Affiliates, net (equity method)
3,499,075

 
3,660,841

Investment in Unconsolidated Real Estate Affiliates, net (cost method)
—

 
180,000

Elimination of consolidated real estate investment interest through joint venture
(54,971
)
 
(27,500
)
Retail investment, net
8,097

 
16,146

Investment in Unconsolidated Real Estate Affiliates, net
$
3,452,201

 
$
3,829,487

Reconciliation - Investment in Unconsolidated Real Estate Affiliates:
 

 
 

Asset - Investment in Unconsolidated Real Estate Affiliates
$
3,479,811

 
$
3,868,993

Liability - Investment in Unconsolidated Real Estate Affiliates
(27,610
)
 
(39,506
)
Investment in Unconsolidated Real Estate Affiliates, net
$
3,452,201

 
$
3,829,487

 
(1)
The Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates include Miami Design District as of September 30, 2017. Refer to the discussion below regarding Miami Design District.

23
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Condensed Combined Statements of Income - Unconsolidated Real Estate Affiliates (1)
 
 

 
 

 
 
 
 
Revenues:
 
 

 
 

 
 
 
 
Minimum rents
 
$
295,294

 
$
278,396

 
$
880,767

 
$
800,167

Tenant recoveries
 
124,927

 
121,810

 
366,869

 
349,983

Overage rents
 
7,110

 
7,627

 
17,302

 
19,430

Condominium sales
 
97,573

 
91,788

 
277,962

 
445,434

Other
 
12,894

 
12,106

 
38,736

 
36,060

Total revenues
 
537,798

 
511,727

 
1,581,636

 
1,651,074

Expenses:
 
 

 
 

 
 
 
 
Real estate taxes
 
39,731

 
33,656

 
107,195

 
90,008

Property maintenance costs
 
9,437

 
9,767

 
30,501

 
30,116

Marketing
 
4,771

 
3,601

 
13,249

 
15,794

Other property operating costs
 
60,147

 
56,445

 
170,076

 
158,413

Condominium cost of sales
 
71,336

 
66,924

 
202,860

 
324,772

Provision for doubtful accounts
 
473

 
2,042

 
4,495

 
11,457

Property management and other costs (2)
 
23,102

 
17,477

 
61,472

 
50,946

General and administrative
 
292

 
482

 
1,355

 
1,777

Depreciation and amortization
 
128,800

 
126,408

 
378,531

 
347,267

Total expenses
 
338,089

 
316,802

 
969,734

 
1,030,550

Operating income
 
199,709

 
194,925

 
611,902

 
620,524

Interest income
 
2,987

 
2,692

 
8,530

 
6,792

Interest expense
 
(123,014
)
 
(109,863
)
 
(348,195
)
 
(313,777
)
Provision for income taxes
 
(364
)
 
(215
)
 
(911
)
 
(589
)
Equity in loss of unconsolidated joint ventures
 
(4,715
)
 
(3,616
)
 
(15,426
)
 
(37,869
)
Income from continuing operations
 
74,603

 
83,923

 
255,900

 
275,081

Allocation to noncontrolling interests
 
(25
)
 
(22
)
 
(69
)
 
(96
)
Net income attributable to the ventures
 
$
74,578

 
$
83,901

 
$
255,831

 
$
274,985

Equity In Income of Unconsolidated Real Estate Affiliates:
 
 

 
 

 
 
 
 
Net income attributable to the ventures
 
$
74,578

 
$
83,901

 
$
255,831

 
$
274,985

Joint venture partners' share of income
 
(30,050
)
 
(43,014
)
 
(116,372
)
 
(125,447
)
Elimination of (gain) loss from consolidated real estate investment with interest owned through joint venture
 
(77
)
 
—

 
1,363

 
—

Gain (loss) on retail investment
 
5,933

 
—

 
(4,853
)
 
—

Amortization of capital or basis differences
 
(14,447
)
 
(5,236
)
 
(36,085
)
 
(21,779
)
Equity in income of Unconsolidated Real Estate Affiliates
 
$
35,937

 
$
35,651

 
$
99,884

 
$
127,759

 
(1)
The Condensed Combined Statements of Income - Unconsolidated Real Estate Affiliates include income from Fashion Show subsequent to the formation of the joint venture on July 29, 2016 and Miami Design District subsequent to June 1, 2017.
(2)
Includes management fees charged to the unconsolidated joint ventures by GGMI and GGSI.

24
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


 
The Unconsolidated Real Estate Affiliates represent our investments in real estate joint ventures that are not consolidated. We hold interests in 22 domestic joint ventures, comprising 38 U.S. retail properties and one joint venture in Brazil. Generally, we share in the profits and losses, cash flows and other matters relating to our investments in Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. We manage most of the properties owned by these joint ventures.

On March 7, 2014, we formed a joint venture, AMX Partners, LLC ("AMX"), with Kahikolu Partners, LLC ("MKB") for the purpose of constructing a luxury residential condominium tower on a site located within the Ala Moana Shopping Center. AMX commenced recognizing revenues and cost of sales from the sale of condominiums using the percentage of completion method during 2016.

In accordance with GAAP, sales of condominiums have been recognized using the percentage of completion method. Under this method, revenue is recognized when (1) construction is beyond a preliminary stage, (2) buyers are unable to receive refunds of down-payments except in the event of non-delivery, (3) a substantial percentage of the condominiums are under firm contracts, (4) collection of the sales price is reasonably assured and (5) sales proceeds and costs can be reasonably estimated. The revenue from condominium sales is calculated based on the percentage of completion, as determined by the construction contract costs incurred to date in relation to the total estimated construction costs.

On March 24, 2016, Kenwood Towne Centre in Cincinnati, Ohio (property included in a joint venture of which we are 50% owner) acquired fee title to a portion of the property previously held under ground lease for a gross purchase price of $43.0 million.

On September 15, 2016, joint ventures we formed with Simon Property Group and Authentic Brands Group LLC acquired Aeropostale, which is presented as a retail investment above.
On June 1, 2017, we received an additional 7.3% of our joint venture partner's membership interests in Miami Design District in full satisfaction of two promissory notes for $57.6 million and $40.4 million, respectively, resulting in a total ownership of 22.3% (Note 13). We determined that we had significant influence over the investment subsequent to the acquisition of the additional interest, and therefore we changed our method of accounting for this joint venture from the cost method to the equity method (Note 2).
On July 12, 2017, we closed on the acquisition of the remaining 50% interest in 8 anchor boxes included in the GSPH joint venture with Seritage. We had previously owned a 50% interest in the joint venture and accounted for the joint venture using the equity method of accounting, but as a result of the transaction we now account for this joint venture using the consolidation method of accounting. Simultaneously, we distributed the 4 remaining anchor boxes in GSPH to a newly formed joint venture, GSPHII, between GGP and Seritage in which the ownership interest remains at 50% for both joint venture partners, and we continue to account for this joint venture using the equity method of accounting. Finally, we acquired a 50% interest in 5 anchor boxes through a newly formed joint venture, GSPH2017, which we account for using the equity method of accounting (Note 3).

On September 19, 2017, we entered into three transactions with affiliates of Thor related to joint ventures between GGP and Thor at 218 West 57th Street, 530 Fifth Avenue and 685 Fifth Avenue. Subsequent to the transactions, we changed our method of accounting for these three joint ventures from the equity method of accounting to the consolidation method of accounting with our joint venture partner's share of equity included in noncontrolling interest (Note 3).
Unconsolidated Mortgages, Notes and Loans Payable, and Retained Debt

Our proportionate share of the mortgages, notes and loans payable of the unconsolidated joint ventures was $5.1 billion as of September 30, 2017 and $5.4 billion as of December 31, 2016, including Retained Debt (as defined below). There can be no assurance that the Unconsolidated Properties will be able to refinance or restructure such debt on acceptable terms or otherwise, or that joint venture operations or contributions by us and/or our partners will be sufficient to repay such loans.

We have debt obligations in excess of our pro rata share of the debt for one of our Unconsolidated Real Estate Affiliates ("Retained Debt"). This Retained Debt represents distributed debt proceeds of the Unconsolidated Real Estate Affiliates in excess of our pro rata share of the non-recourse mortgage indebtedness. The proceeds of the Retained Debt which were distributed to us are included as a reduction in our investment in Unconsolidated Real Estate Affiliates. We had retained debt of $85.3 million at one property as of September 30, 2017, and $86.5 million as of December 31, 2016. We are obligated to contribute funds on an ongoing basis,

25
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


as needed, to our Unconsolidated Real Estate Affiliates in amounts sufficient to pay debt service on such Retained Debt. If we do not contribute such funds, our distributions from such Unconsolidated Real Estate Affiliates, or our interest in, could be reduced to the extent of such deficiencies. As of September 30, 2017, we do not anticipate an inability to perform on our obligations with respect to Retained Debt.

NOTE 6        MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable and the weighted-average interest rates are summarized as follows:
 
 
September 30, 2017 (1)
 
Weighted-Average
Interest Rate (2)
 
December 31, 2016 (3)
 
Weighted-Average
Interest Rate (2)
Fixed-rate debt:
 
 

 
 

 
 

 
 

Collateralized mortgages, notes and loans payable
 
$
10,451,125

 
4.41
%
 
$
10,441,166

 
4.44
%
Total fixed-rate debt
 
10,451,125

 
4.41
%
 
10,441,166

 
4.44
%
Variable-rate debt:
 
 

 
 

 
 

 
 

Collateralized mortgages, notes and loans payable (4)
 
2,524,744

 
3.23
%
 
1,997,978

 
2.45
%
Revolving credit facility (5)
 
518,003

 
2.56
%
 
(8,726
)
 
—

Total variable-rate debt
 
3,042,747

 
3.12
%
 
1,989,252

 
2.45
%
Total Mortgages, notes and loans payable
 
$
13,493,872

 
4.12
%
 
$
12,430,418

 
4.12
%
Junior subordinated notes
 
$
206,200

 
2.76
%
 
$
206,200

 
2.34
%
 
(1) 
Includes $24.6 million of market rate adjustments and $33.2 million of deferred financing costs, net.
(2) 
Represents the weighted-average interest rates on our contractual principal balances.
(3) 
Includes $27.8 million of market rate adjustments and $40.1 million of deferred financing costs, net.
(4) 
$1.4 billion of the variable-rate balance is cross-collateralized.
(5)
Includes deferred financing costs, which are shown as a reduction to the debt balance. See table below for the balance excluding deferred financing costs.
 
Collateralized Mortgages, Notes and Loans Payable

As of September 30, 2017, $17.9 billion of land, buildings and equipment (before accumulated depreciation) and construction in progress have been pledged as collateral for our mortgages, notes and loans payable. Certain of these consolidated secured loans, representing $1.4 billion of debt, are cross-collateralized. Although a majority of the $13.0 billion of fixed and variable rate collateralized mortgages, notes and loans payable are non-recourse, $825.5 million of such mortgages, notes and loans payable are recourse to the Company as guarantees on secured financings. In addition, certain mortgage loans contain other credit enhancement provisions which have been provided by GGP. Certain mortgages, notes and loans payable may be prepaid but are generally subject to a prepayment penalty equal to a yield-maintenance premium, defeasance or a percentage of the loan balance.

During the nine months ended September 30, 2017, we paid down a $73.4 million consolidated mortgage note at one property. The prior loan had a term-to-maturity of 0.2 years and an interest rate of 5.6%. The property subsequently replaced a property that was sold during the nine months ended September 30, 2017 as collateral in our $1.4 billion loan secured by cross-collateralized mortgages on 15 properties. In addition, we obtained a new consolidated mortgage note at one property for $325.0 million with an interest rate of 3.98%. Finally, as a result of the three transactions with Thor (Note 3), we now use the consolidation method of accounting for a $340.0 million consolidated mortgage note with an interest rate of LIBOR plus 2.75% and a $190.0 million consolidated mortgage note with an interest rate of LIBOR plus 3.25%. We manage our exposure to interest rate fluctuations related to this debt using interest rate cap agreements which allow us to replace variable-rate debt with fixed-rate debt. However, our efforts to manage risks associated with interest rate volatility may not be successful.

During the year ended December 31, 2016, we paid down $294.4 million of consolidated mortgage notes at two properties. The prior loans had a weighted-average term-to-maturity of 1.2 years and a weighted-average interest rate of 5.3%. In conjunction with the pay down of the loans, we paid $5.4 million in transaction costs.


26
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


On April 25, 2016, we amended our $1.4 billion loan secured by cross-collateralized mortgages on 15 properties. The interest rate remained consistent at LIBOR plus 1.75%, however, we were able to decrease the recourse from 100% to 50% and extend the term for three years. The loan now matures April 25, 2019, with two one year extension options.

Corporate and Other Unsecured Loans

We have certain unsecured debt obligations, the terms of which are described below:
 
 
September 30, 2017 (1)
 
Weighted-Average
Interest Rate
 
December 31, 2016 (2)
 
Weighted-Average
Interest Rate
Unsecured debt:
 
 

 
 

 
 

 
 

Revolving credit facility
 
$
525,000

 
2.56
%
 
$
—

 
—

Total unsecured debt
 
$
525,000

 
2.56
%
 
$
—

 
—

 
(1)
Excludes deferred financing costs of $7.0 million in 2017 that decrease the total amount that appears outstanding in our Consolidated Balance Sheets.
(2)
Excludes deferred financing costs of $8.7 million in 2016 that decrease the total amount that appears outstanding in our Consolidated Balance Sheets.

Our revolving credit facility (the "Facility") as amended on October 30, 2015, provides for revolving loans of up to $1.1 billion. The Facility has an uncommitted accordion feature for a total facility of up to $1.5 billion. The Facility is scheduled to mature in October 2020 and is unsecured. Borrowings under the Facility bear interest at a rate equal to LIBOR plus 130 to 190 basis points or at a base rate plus 30 to 90 basis points, which is determined by the Company's leverage level. The Facility contains certain restrictive covenants which limit material changes in the nature of our business conducted, including, but not limited to, mergers, dissolutions or liquidations, dispositions of assets, liens, incurrence of additional indebtedness, dividends, transactions with affiliates, prepayment of subordinated debt, negative pledges and changes in fiscal periods. In addition, we are required not to exceed a maximum net debt-to-value ratio, a maximum leverage ratio and a minimum net cash interest coverage ratio; we are not aware of any instances of non-compliance with such covenants as of September 30, 2017. As of September 30, 2017, $525.0 million was outstanding on the Facility.

Junior Subordinated Notes

GGP Capital Trust I, a Delaware statutory trust (the "Trust") and a wholly-owned subsidiary of GGPN, completed a private placement of $200.0 million of trust preferred securities ("TRUPS") in 2006. The Trust also issued $6.2 million of Common Securities to GGPOP. The Trust used the proceeds from the sale of the TRUPS and Common Securities to purchase $206.2 million of floating rate Junior subordinated notes of GGPOP due 2036. Distributions on the TRUPS are equal to LIBOR plus 1.45%. Distributions are cumulative and accrue from the date of original issuance. The TRUPS mature on April 30, 2036, but may be redeemed beginning on April 30, 2011 if the Trust exercises its right to redeem a like amount of Junior subordinated notes. The Junior subordinated notes bear interest at LIBOR plus 1.45% and are fully recourse to the Company. Though the Trust currently is a wholly-owned subsidiary of GGPN, we are not the primary beneficiary of the Trust and, accordingly, it is not consolidated for accounting purposes. We have recorded the Junior subordinated notes as a liability and our common equity interest in the Trust as prepaid expenses and other assets in our Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016.

Letters of Credit and Surety Bonds

We had outstanding letters of credit and surety bonds of $53.1 million as of September 30, 2017 and $57.8 million as of December 31, 2016. These letters of credit and bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.

We are not aware of any instances of non-compliance with our financial covenants related to our mortgages, notes and loans payable as of September 30, 2017.


27
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 7        INCOME TAXES

We have elected to be taxed as a REIT under the Internal Revenue Code. We intend to maintain REIT status. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of our taxable ordinary income. In addition, the Company is required to meet certain asset and income tests.

As a REIT, we will generally not be subject to corporate level Federal income tax on taxable income we distribute currently to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to Federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income or property, and to Federal income and excise taxes on our undistributed taxable income and capital gains. We are currently statutorily open to audit by the Internal Revenue Service for the years ended December 31, 2014 through 2016 and are statutorily open to audit by state taxing authorities for the years ended December 31, 2013 through 2016. We have one TRS that has extended the statute of limitations for the year ended December 31, 2013 until December 31, 2018 for purposes of reviewing a carryback claim.

We have no unrecognized tax benefits recorded pursuant to uncertain tax positions as of September 30, 2017.

NOTE 8        WARRANTS

Brookfield and certain parties who were previously members of a Brookfield investor consortium owned 73,930,000 warrants (the "Warrants") to purchase common stock of GGP with an initial weighted average exercise price of $10.70. Each Warrant was fully vested upon issuance, had a term of seven years and expires on November 9, 2017. Below is a summary of Warrants that were originally issued and are still outstanding as of September 30, 2017.

Initial Warrant Holder
 
 Number of Warrants
 
Initial Exercise Price
Brookfield - A
 
57,500,000

 
$
10.75

Brookfield - B
 
16,430,000

 
10.50

 
 
73,930,000

 
 

 
The exercise prices of the Warrants are subject to adjustment for future dividends, stock dividends, distribution of assets, stock splits or reverse splits of our common stock or certain other events. In accordance with the agreement, these calculations adjust both the exercise price and the number of shares issuable for the originally issued 73,930,000 Warrants. During 2016 and 2017, the number of shares issuable upon exercise of the outstanding Warrants changed as follows:

 
 
 
 
Exercise Price
Record Date
 
Issuable Shares
 
 Brookfield - A
 
Brookfield - B
April 15, 2016
 
90,288,964

 
$
8.80

 
$
8.60

July 15, 2016
 
90,865,607

 
8.75

 
8.54

October 14, 2016
 
91,553,142

 
8.68

 
8.48

December 15, 2016
 
92,344,178

 
8.61

 
8.41

December 27, 2016
 
93,268,285

 
8.52

 
8.32

April 13, 2017
 
94,170,214

 
8.44

 
8.24

July 13, 2017
 
95,057,357

 
8.36

 
8.17


As of September 30, 2017, the warrant holders had the option for 57,500,000 Warrants to either full share settle (i.e. deliver cash for the exercise price of the Warrants) or net share settle at the option of the holder. The remaining 16,430,000 Warrants owned or managed by Brookfield must be net share settled. 

On October 6, 2017, Brookfield exercised Warrants to purchase68,820,268 shares of our common stock, par value $0.01 per share (Note 18).


28
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 9        EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS

Allocation to Noncontrolling Interests

Noncontrolling interests consists of the redeemable interests related to GGPOP Common, Preferred, and LTIP Units and the noncontrolling interest in our consolidated joint ventures. The following table reflects the activity included in the allocation to noncontrolling interests.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Distributions to preferred GGPOP units
 
$
(874
)
 
$
(2,237
)
 
$
(3,889
)
 
$
(6,640
)
Net income allocation to noncontrolling interests in GGPOP from continuing operations (common units)
 
(1,846
)
 
(3,879
)
 
(3,097
)
 
(5,608
)
Net income allocation to noncontrolling interests in GGPOP from continuing operations (LTIP units)
 
(515
)
 
(1,172
)
 
(1,068
)
 
(2,325
)
Net income allocated to noncontrolling interest in consolidated real estate affiliates
 
(257
)
 
(282
)
 
(1,103
)
 
(510
)
Allocation to noncontrolling interests
 
(3,492
)
 
(7,570
)
 
(9,157
)
 
(15,083
)
Other comprehensive (income) loss allocated to noncontrolling interests
 
(182
)
 
7

 
133

 
4

Comprehensive income allocated to noncontrolling interests
 
$
(3,674
)
 
$
(7,563
)
 
$
(9,024
)
 
$
(15,079
)

Noncontrolling Interests

The noncontrolling interest related to the Common, Preferred, and LTIP Units of GGPOP are presented either as redeemable noncontrolling interests in mezzanine equity or as noncontrolling interests in our permanent equity on our Consolidated Balance Sheets. Classification as redeemable or permanent equity is considered on a tranche-by-tranche basis and is dependent on whether we could be required, under certain events outside of our control, to redeem the securities for cash by the holders of the securities. Those tranches for which we could be required to redeem the security for cash are included in redeemable equity. If we control the decision to redeem the securities for cash, the securities are classified as permanent equity.

The redeemable Common and Preferred Units of GGPOP are recorded at the greater of the carrying amount adjusted for the noncontrolling interest's share of the allocation of income or loss (and its share of other comprehensive income or loss) and dividends or their redemption value (i.e. fair value) as of each measurement date. The excess of the fair value over the carrying amount from period to period is recorded within additional paid-in capital in our Consolidated Balance Sheets. Allocation to noncontrolling interests is presented as an adjustment to net income to arrive at net income (loss) attributable to GGP Inc.

The common redeemable noncontrolling interests have been recorded at fair value for all periods presented. One tranche of preferred redeemable noncontrolling interests has been recorded at fair value, while the other tranches of preferred redeemable noncontrolling interests have been recorded at carrying value.

Generally, the holders of the Common Units share in any distributions by GGPOP with our common stockholders. However, the GGPOP operating partnership agreement permits distributions solely to GGP if such distributions were required to allow GGP to comply with the REIT distribution requirements or to avoid the imposition of excise tax. Under certain circumstances, the conversion rate for each Common Unit is required to be adjusted to give effect to stock distributions. If the holders had requested redemption of the Common and Preferred Units as of September 30, 2017, the aggregate amount of cash we would have paid would have been $173.9 million and $52.3 million, respectively.

GGPOP issued Preferred Units that are, or were, convertible into Common Units of GGPOP at the rates below (subject to adjustment). The holder may convert the Series D and Series E Preferred Units into Common Units of GGPOP at any time, subject to certain restrictions. The Common Units are convertible into common stock at approximately a one-to-one ratio at the current stock price.

29
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


 
 
Number of Common Units for each Preferred Unit
 
Number of Contractual Preferred Units Outstanding as of September 30, 2017
 
Converted Basis to Common Units Outstanding as of September 30, 2017
 
Conversion Price
 
Redemption Value (1)
Series B
 
3.00000

 
10

 
—

 
$
16.66670

 
$
486

Series D
 
1.50821

 
533

 
835

 
33.15188

 
26,637

Series E
 
1.29836

 
503

 
679

 
38.51000

 
25,133

 
 
 

 
 

 
 

 
 

 
$
52,256

 
(1)
As of July 10, 2017, the Series B preferred unit conversion option expired and now has a fixed cash liquidation value of $50 per unit.

The following table reflects the activity of the redeemable noncontrolling interests for the nine months ended September 30, 2017, and 2016.
Balance at January 1, 2016
$
287,627

Net income
5,608

Distributions
(3,078
)
Redemption of GGPOP units
(1,687
)
Other comprehensive loss
(4
)
Fair value adjustment for noncontrolling interests in Operating Partnership
2,377

Balance at September 30, 2016
$
290,843

 
 
Balance at January 1, 2017
$
262,727

Net income
3,097

Distributions
(4,731
)
Redemption of GGPOP units
(651
)
Other comprehensive loss
(133
)
Fair value adjustment for noncontrolling interests in Operating Partnership
(34,123
)
Balance at September 30, 2017
$
226,186


Common Stock Dividend

Our Board of Directors declared common stock dividends during 2017 and 2016 as follows:

Declaration Date
 
Record Date
 
Payment Date
 
Dividend Per Share
2017
 
 
 
 
 
 
October 31
 
December 15, 2017
 
January 5, 2018
 
$
0.22

August 2
 
October 13, 2017
 
October 31, 2017
 
0.22

May 1
 
July 13, 2017
 
July 28, 2017
 
0.22

January 30
 
April 13, 2017
 
April 28, 2017
 
0.22

2016
 
 
 
 
 
 
December 13
 
December 27, 2016
 
January 27, 2017
 
$
0.26

October 31
 
December 15, 2016
 
January 6, 2017
 
0.22

August 1
 
October 14, 2016
 
October 31, 2016
 
0.20

May 2
 
July 15, 2016
 
July 29, 2016
 
0.19

February 1
 
April 15, 2016
 
April 29, 2016
 
0.19



30
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Our Dividend Reinvestment Plan ("DRIP") provides eligible holders of GGP's common stock with a convenient method of increasing their investment in the Company by reinvesting all or a portion of cash dividends in additional shares of common stock. Eligible stockholders who enroll in the DRIP on or before the fourth business day preceding the record date for a dividend payment will be able to have that dividend reinvested. As a result of the DRIP elections, 34,625 shares were issued during the nine months ended September 30, 2017 and 20,759 shares were issued during the nine months ended September 30, 2016.

Preferred Stock

On February 13, 2013, we issued, in a public offering, 10,000,000 shares of 6.375% Series A Cumulative Perpetual Preferred Stock (the "Preferred Stock") at a price of $25.00 per share, resulting in net proceeds of $242.0 million after issuance costs. The Preferred Stock is recorded net of issuance costs within equity on our Consolidated Balance Sheets, and accrues a quarterly dividend at an annual rate of 6.375%. The dividend is paid in arrears in preference to dividends on our common stock, and reduces net income available to common stockholders, and therefore, earnings per share.

The Preferred Stock does not have a stated maturity date but we may redeem the Preferred Stock after February 13, 2018, for $25.00 per share plus all accrued and unpaid dividends. We may redeem the Preferred Stock prior to February 13, 2018, in limited circumstances that preserve ownership limits and/or our status as a REIT, as well as during certain circumstances surrounding a change of control. Upon certain circumstances surrounding a change of control, holders of Preferred Stock may elect to convert each share of their Preferred Stock into a number of shares of GGP common stock equivalent to $25.00 plus accrued and unpaid dividends, but not to exceed a cap of 2.4679 common shares (subject to certain adjustments related to GGP common share splits, subdivisions, or combinations).

Our Board of Directors declared preferred stock dividends during 2017 and 2016 as follows:
Declaration Date
 
Record Date
 
Payment Date
 
Dividend Per Share
2017
 
 
 
 
 
 
October 31
 
December 15, 2017
 
January 2, 2018
 
$
0.3984

August 2
 
September 15, 2017
 
October 2, 2017
 
0.3984

May 1
 
June 15, 2017
 
July 3, 2017
 
0.3984

January 30
 
March 15, 2017
 
April 3, 2017
 
0.3984

2016
 
 
 
 
 
 
October 31
 
December 15, 2016
 
January 3, 2017
 
$
0.3984

August 1
 
September 15, 2016
 
October 3, 2016
 
0.3984

May 2
 
June 15, 2016
 
July 1, 2016
 
0.3984

February 1
 
March 15, 2016
 
April 1, 2016
 
0.3984



















31
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


Accumulated Other Comprehensive Loss

The following table reflects the activity of the components of accumulated other comprehensive loss for the three months ended September 30, 2017, and 2016:
 
 
Foreign currency translation
 
Net unrealized gains (losses) on other financial instruments
 
Reclassification adjustment for realized gains on available-for-sale securities included in net income
 
Total
Balance at July 1, 2016
 
$
(69,251
)
 
$
120

 
$
—

 
$
(69,131
)
Other comprehensive income (loss)
 
(987
)
 
(16
)
 
—

 
(1,003
)
Balance at September 30, 2016
 
$
(70,238
)
 
$
104

 
$
—

 
$
(70,134
)
 
 
 
 
 
 
 
 
 
Balance at July 1, 2017
 
$
(71,708
)
 
$
115

 
$
—

 
$
(71,593
)
Other comprehensive income (loss)
 
3,884

 
9

 
—

 
3,893

Balance at September 30, 2017
 
$
(67,824
)
 
$
124

 
$
—

 
$
(67,700
)

The following table reflects the activity of the components of accumulated other comprehensive loss for the nine months ended September 30, 2017, and 2016:
 
 
Foreign currency translation
 
Net unrealized gains (losses) on other financial instruments
 
Reclassification adjustment for realized gains on available-for-sale securities included in net income
 
Total
Balance at January 1, 2016
 
$
(84,798
)
 
$
100

 
$
11,894

 
$
(72,804
)
Other comprehensive income (loss)
 
14,560

 
4

 
(11,894
)
 
2,670

Balance at September 30, 2016
 
$
(70,238
)
 
$
104

 
$
—

 
$
(70,134
)
 
 
 
 
 
 
 
 
 
Balance at January 1, 2017
 
$
(70,560
)
 
$
104

 
$
—

 
$
(70,456
)
Other comprehensive income (loss)
 
2,736

 
20

 
—

 
2,756

Balance at September 30, 2017
 
$
(67,824
)
 
$
124

 
$
—

 
$
(67,700
)

Realized gains from the sale of available-for-sale securities are included in management fees and other corporate revenues.


32
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 10    EARNINGS PER SHARE

Basic earnings per share ("EPS") is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted EPS is computed after adjusting the numerator and denominator of the basic EPS computation for the effects of all potentially dilutive common shares. The dilutive effect of the Warrants and the dilutive effect of options and their equivalents (including fixed awards and nonvested stock issued under stock-based compensation plans), are computed using the "treasury" method.

Information related to our EPS calculations is summarized as follows:

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Numerators - Basic and Diluted:
 
 

 
 

 
 
 
 
Net income
 
226,272

 
681,748

 
464,960

 
1,066,987

Preferred Stock dividends
 
(3,984
)
 
(3,984
)
 
(11,952
)
 
(11,951
)
Allocation to noncontrolling interests
 
(3,492
)
 
(7,570
)
 
(9,157
)
 
(15,083
)
Net income attributable to common stockholders
 
$
218,796

 
$
670,194

 
$
443,851

 
$
1,039,953

Denominators:
 
 

 
 

 
 
 
 
Weighted-average number of common shares outstanding - basic
 
878,663

 
885,092

 
881,786

 
883,720

Effect of dilutive securities
 
61,521

 
70,764

 
63,207

 
69,090

Weighted-average number of common shares outstanding - diluted
 
940,184

 
955,856

 
944,993

 
952,810

Anti-dilutive Securities:
 
 

 
 

 
 
 
 
Effect of Preferred Units
 
1,514

 
5,409

 
1,514

 
5,409

Effect of Common Units
 
8,374

 
4,768

 
5,991

 
4,768

Effect of LTIP Units
 
1,805

 
1,775

 
1,852

 
1,764

Weighted-average number of anti-dilutive securities
 
11,693

 
11,952

 
9,357

 
11,941

 
For the three and nine months ended September 30, 2017 and 2016, dilutive options and dilutive shares related to the Warrants are included in the denominator of diluted EPS.

Outstanding Common Units and LTIP Units have been excluded from the diluted earnings per share calculation because including such units would also require that the share of GGPOP income attributable to such units be added back to net income therefore resulting in no effect on EPS. Outstanding Preferred Units have been excluded from the diluted EPS calculation for all periods presented because including the Preferred Units would also require that the Preferred Units dividend be added back to the net income, resulting in anti-dilution. Subsequent to September 30, 2017, Brookfield exercised Warrants for 68,820,268 shares or common stock using both full and net share settlement. Approximately 49 million shares were already included in the diluted share count, thus the share count will increase by an incremental 20 million shares subsequent to quarter end (Note 18).

GGP owned 56,267,195 and 55,969,390 shares of treasury stock as of September 30, 2017 and 2016. These shares are presented as common stock in treasury, at cost, on our Consolidated Balance Sheets. Additionally, GGPN holds 27,459,195 shares of stock as a result of warrants purchased during the year ended December 31, 2013. These shares are presented as issued, but not outstanding on our Consolidated Balance Sheets. Accordingly, these shares have been excluded from the calculation of EPS.


33
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 11    STOCK-BASED COMPENSATION PLANS

The GGP Inc. 2010 Equity Plan (the "Equity Plan") reserved for issuance of 4% of outstanding shares on a fully diluted basis. The Equity Plan provides for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, other stock-based awards and performance-based compensation (collectively, the "Awards"). Directors, officers and other employees of GGP and its subsidiaries and affiliates are eligible for the Awards. The Equity Plan is not subject to the Employee Retirement Income Security Act of 1974, as amended. No participant may be granted more than 4,000,000 shares, or the equivalent dollar value of such shares, in any year. Options granted under the Equity Plan will be designated as either nonqualified stock options or incentive stock options. An option granted as an incentive stock option will, to the extent it fails to qualify as an incentive stock option, be treated as a nonqualified option. The exercise price of an option may not be less than the fair value of a share of GGP's common stock on the date of grant. The term of each option will be determined prior to the date of grant, but may not exceed 10 years.

On November 12, 2014, the Company's Equity Plan was amended to allow for the grant of LTIP Units to certain officers, directors, and employees of the Company as an alternative to the Company's stock options or restricted stock. LTIP Units are classes of partnership interests that under certain conditions, including vesting, are convertible by the holder into common units, which are redeemable by the holder for common shares on a one-to-one ratio (subject to adjustment for changes to GGP's capital structure) or for the cash value of such shares at the option of the Company.

On February 17, 2016, the Company's Equity Plan was amended to allow for the grant of restricted stock or LTIP Units to certain officers, directors, and employees of the Company that vest based on the achievement of certain established metrics that are based on the performance of the Company.

On January 1, 2017, the Company adopted ASU 2016-09, Compensation - Stock Compensation. This new guidance allowed us to make the election to account for share-based payment forfeitures when they occur versus estimating a forfeiture rate. This resulted in a cumulative effect of accounting change adjustment of $3.0 million to additional paid-in capital, noncontrolling interests related to LTIP Units and accumulated distributions in excess of earnings as of January 1, 2017.

Compensation expense related to stock-based compensation plans for the three and nine months ended September 30, 2017, and 2016 is summarized in the following table in thousands:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Stock options - Property management and other costs
$
811

 
$
1,479

 
$
2,766

 
$
4,632

Stock options - General and administrative
1,814

 
2,806

 
6,449

 
8,297

Restricted stock - Property management and other costs
1,366

 
772

 
4,424

 
2,080

Restricted stock - General and administrative
540

 
162

 
2,368

 
473

LTIP Units - Property management and other costs
397

 
379

 
1,189

 
967

LTIP Units - General and administrative
3,389

 
3,879

 
14,330

 
10,925

Total
$
8,317

 
$
9,477

 
$
31,526

 
$
27,374













34
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


The following tables summarize stock option, LTIP Unit and restricted stock activity for the Equity Plan for GGP for the nine months ended September 30, 2017, and 2016:
 
2017
 
2016
 
Shares
 
Weighted Average Exercise Price
 
Shares
 
Weighted Average Exercise Price (1)
Stock options Outstanding at January 1,
15,277,189

 
$
17.90

 
18,162,700

 
$
17.34

Granted
—

 
—

 
91,261

 
25.81

Exercised
(443,221
)
 
18.05

 
(2,699,998
)
 
14.20

Forfeited
(148,040
)
 
22.31

 
(224,247
)
 
19.80

Expired
(4,107
)
 
28.86

 
(15,608
)
 
17.73

Stock options Outstanding at September 30,
14,681,821

 
$
17.85

 
15,314,108

 
$
17.91

(1)
Changes to prior year weighted average exercise price is due to adjustment of the strike price for the special dividend issued in 2016.

 
2017
 
2016
 
Shares
 
Weighted Average Grant Date Fair Value
 
Shares
 
Weighted Average Grant Date Fair Value (1)
LTIP Units Outstanding at January 1,
4,345,912

 
$
27.27

 
1,724,747

 
$
29.32

Granted
553,526

 
25.38

 
2,640,963

 
25.89

Exercised
(92,880
)
 
29.15

 
—

 
—

Forfeited
(58,894
)
 
26.77

 
(38,862
)
 
28.98

Expired
—

 
—

 
—

 
—

LTIP Units Outstanding at September 30,
4,747,664

 
$
27.02

 
4,326,848

 
$
27.23

(1)
Changes to prior year weighted average exercise price is due to adjustment of the strike price for the special dividend issued in 2016.

 
2017
 
2016
 
Shares
 
Weighted Average Exercise Price
 
Shares
 
Weighted Average Exercise Price
Restricted stock Outstanding at January 1,
476,686

 
$
27.11

 
206,219

 
$
29.16

Granted
808,448

 
25.30

 
346,873

 
26.18

Vested
(170,137
)
 
26.78

 
(66,578
)
 
28.61

Canceled
(100,357
)
 
26.02

 
(7,322
)
 
27.62

Restricted stock Outstanding at September 30,
1,014,640

 
25.83

 
479,192

 
27.10



35
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 12    ACCOUNTS RECEIVABLE, NET

The following table summarizes the significant components of accounts receivable, net.
 
 
September 30, 2017
 
December 31, 2016
Trade receivables
 
$
102,908

 
$
107,107

Short-term tenant receivables
 
2,957

 
1,414

Straight-line rent receivable
 
235,216

 
227,859

Other accounts receivable
 
3,687

 
3,699

Total accounts receivable
 
344,768

 
340,079

Provision for doubtful accounts
 
(20,189
)
 
(17,883
)
Total accounts receivable, net
 
$
324,579

 
$
322,196


NOTE 13    NOTES RECEIVABLE

The following table summarizes the significant components of notes receivable.
 
 
September 30, 2017
 
December 31, 2016
Notes receivable
 
$
404,650

 
$
665,289

Accrued interest
 
10,849

 
13,207

Total notes receivable
 
415,499

 
678,496


As a result of the transactions described in Note 3, 530 Fifth Avenue and 685 Fifth Avenue are now accounted for under the consolidation method of accounting. Therefore, the $148.1 million and $48.1 million notes receivable due from our joint venture partner related to the properties at 685 Fifth Avenue and 530 Fifth Avenue, respectively, are presented on the balance sheet net of noncontrolling interests in consolidated real estate affiliates. Additionally, the $31.0 million mezzanine loan provided to the 530 Fifth Avenue joint venture and the $53.0 million mezzanine loan provided to the 218 W. 57th Street joint venture are now eliminated as part of the consolidation of the properties.

On July 12, 2017, we entered into a promissory note with our joint venture GS Portfolio Holding LLC, in which we lent GS Portfolio Holding LLC $127.4 million that bears interest at 6.6% per annum from July 12, 2017 to December 31, 2017, and 6.3% from January 1, 2018 to December 31, 2018. Interest payments occur a month in arrears, commencing on the first day of the second calendar month with a final payment on the maturity date. The note is collateralized by GS Portfolio Holdings LLC's interest in four anchor boxes (Note 3).

On May 23, 2017, we entered into a promissory note with our joint venture partner, Bayside Equities, LLC ("Bayside Equities"), a subsidiary of AHC, in which we lent Bayside Equities $19.1 million that bears interest at 12.2% per annum. The note is collateralized by Bayside Equities' economic interest in Riverchase Galleria and the Tysons Galleria anchor box.

On July 29, 2016, we settled a note receivable in the net amount of $78.9 million issued to Rique Empreendimentos e Participacoes Ltda. ("Rique") in exchange for approximately 18.3 million shares in Aliansce Shopping Centers, S.A. ("Aliansce"), resulting in an 11.3% ownership in Aliansce. On September 29, 2016, we sold the 18.3 million shares in Aliansce to the Canada Pension Plan Investment Board for a sales price of $84.9 million. The note receivable was issued in conjunction with our sale of Aliansce to Rique and Canada Pension Plan Investment Board on September 30, 2013. The note receivable was denominated in Brazilian Reais, bore interest at an effective interest rate of approximately 14%, was collateralized by shares of common stock in Aliansce, and required annual principal and interest payments over the term. During the nine months ended September 30, 2016, we determined, based on current information and events, that it was probable that we would be unable to collect all amounts due according to the contractual terms of the receivable. As the note receivable was a collateral dependent loan, we estimated the provision for loss based on the fair value of the market price of the Aliansce shares which served as the collateral for the loan. We recognized a $29.4 million loss on the note recorded in the provision for loan loss on the Consolidated Statements of Comprehensive Income based on the value of the collateral and included accrued interest of $7.5 million in the provision for loan loss. We recognized

36
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


the impact of changes in the exchange rate on the note receivable as gain or loss on foreign currency in our Consolidated Statements of Comprehensive Income.

On November 11, 2015, we entered into a promissory note with our joint venture partner, Ashkenazy Holding Co., LLC ("AHC"), in which we lent AHC $57.6 million that bears interest at 8% per annum. The note was collateralized by AHC's equity in Miami Design District Associates, which is part of the AACMDD Group, LLC joint venture ("AACMDD"). On November 18, 2016, the maturity date of the note was amended to November 15, 2019. On June 1, 2017, AHC conveyed the collateral of the note in full satisfaction of the receivable and $2.6 million in accrued interest.
On September 17, 2015, we entered into a promissory note with our joint venture partner, AHC, in which we lent AHC $40.4 million that bears interest at 6% per annum. The note was collateralized by AHC's equity in Miami Design District Associates, which is part of AACMDD. On November 18, 2016, the maturity date of the note was amended to September 17, 2019. On June 1, 2017, AHC conveyed the collateral of the note in full satisfaction of the receivable and $1.1 million in accrued interest.

The two AHC promissory notes discussed above were collectively collateralized by 7.3% of our joint venture partner's membership interests in Miami Design District.

On June 30, 2015, we entered into a promissory note with our joint venture partner MKB (defined in Note 5), in which we would lend MKB up to $80 million for capital calls after an initial contribution of $80 million by MKB and until the joint venture secured construction financing. This loan bears interest at LIBOR plus 6% and is secured by MKB's partnership interest in AMX, which is constructing a luxury residential condominium tower on a site located within the Ala Moana Shopping Center. On August 2, 2017 the outstanding note balance of $17.1 million was paid off. Construction financing closed during the third quarter of 2015.

Notes receivable includes $204.3 million of notes receivable from our joint venture partners related to the acquisition of 730 Fifth Avenue in New York, New York. The first note was issued for $104.3 million to our joint venture partner in the retail portion and bears interest at 8.0% compounded annually and matures on February 12, 2025. The second note was issued for $100.0 million to the joint venture partner acquiring the office portion of the property and bears interest at 9.0% subject to terms and conditions in the loan agreement and matures on April 17, 2025. As of September 30, 2017, there was $154.8 million and $80.0 million outstanding on these loans, respectively.


37
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 14    PREPAID EXPENSES AND OTHER ASSETS
 
The following table summarizes the significant components of prepaid expenses and other assets.
 
September 30, 2017
 
December 31, 2016
 
Gross Asset
 
Accumulated
Amortization
 
Balance
 
Gross Asset
 
Accumulated
Amortization
 
Balance
Intangible assets:
 

 
 

 
 

 
 

 
 

 
 

Above-market tenant leases, net
$
427,605

 
$
(317,067
)
 
$
110,538

 
$
512,802

 
$
(368,900
)
 
$
143,902

Below-market ground leases, net
118,994

 
(14,349
)
 
104,645

 
118,994

 
(12,788
)
 
106,206

Real estate tax stabilization agreement, net
111,506

 
(43,503
)
 
68,003

 
111,506

 
(38,769
)
 
72,737

Total intangible assets
$
658,105


$
(374,919
)
 
$
283,186

 
$
743,302


$
(420,457
)
 
$
322,845

Remaining prepaid expenses and other assets:
 

 
 

 
 

 
 

 
 

 
 

Security and escrow deposits
 

 
 

 
72,953

 
 
 
 
 
59,054

Prepaid expenses
 

 
 

 
52,564

 
 
 
 
 
46,709

Other non-tenant receivables
 

 
 

 
29,999

 
 
 
 
 
34,677

Deferred tax, net of valuation allowances
 

 
 

 
(1,300
)
 
 
 
 
 
6,943

Other
 

 
 

 
57,838

 
 
 
 
 
36,293

Total remaining prepaid expenses and other assets
 

 
 

 
212,054

 
 

 
 

 
183,676

Total prepaid expenses and other assets
 

 
 

 
$
495,240

 
 

 
 

 
$
506,521



38
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 15    ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The following table summarizes the significant components of accounts payable and accrued expenses.
 
 
September 30, 2017
 
December 31, 2016
 
Gross 
Liability
 
Accumulated
Accretion
 
Balance
 
Gross 
Liability
 
Accumulated
Accretion
 
Balance
Intangible liabilities:
 

 
 

 
 

 
 

 
 

 
 

Below-market tenant leases, net
251,789

 
(161,455
)
 
$
90,334

 
267,048

 
(172,210
)
 
$
94,838

Above-market headquarters office leases, net
4,342

 
(2,412
)
 
1,930

 
15,268

 
(10,346
)
 
4,922

Above-market ground leases, net
9,127

 
(2,533
)
 
6,594

 
9,127

 
(2,258
)
 
6,869

Total intangible liabilities
$
265,258


$
(166,400
)
 
$
98,858

 
$
291,443


$
(184,814
)
 
$
106,629

Remaining Accounts payable and accrued expenses:
 

 
 

 
 

 
 

 
 

 
 

Accrued interest
 

 
 

 
44,522

 
 

 
 

 
47,821

Accounts payable and accrued expenses
 

 
 

 
94,400

 
 

 
 

 
87,485

Accrued real estate taxes
 

 
 

 
107,981

 
 

 
 

 
87,313

Deferred gains/income
 

 
 

 
95,768

 
 

 
 

 
91,720

Accrued payroll and other employee liabilities
 

 
 

 
43,909

 
 

 
 

 
57,721

Construction payable
 

 
 

 
127,672

 
 

 
 

 
115,077

Tenant and other deposits
 

 
 

 
35,297

 
 

 
 

 
15,061

Insurance reserve liability
 

 
 

 
15,166

 
 

 
 

 
14,184

Capital lease obligations
 

 
 

 
5,386

 
 

 
 

 
5,386

Conditional asset retirement obligation liability
 

 
 

 
6,316

 
 

 
 

 
5,327

Other
 

 
 

 
103,338

 
 

 
 

 
21,638

Total remaining Accounts payable and accrued expenses
 

 
 

 
679,755

 
 

 
 

 
548,733

Total Accounts payable and accrued expenses
 

 
 

 
$
778,613

 
 

 
 

 
$
655,362


NOTE 16    LITIGATION

In the normal course of business, from time to time, we are involved in legal proceedings relating to the ownership and operations of our properties. In management's opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material effect on our consolidated financial position, results of operations or liquidity. Neither the Company nor any of the Unconsolidated Real Estate Affiliates is currently involved in any material pending legal proceedings nor, to our knowledge, is any material legal proceeding currently threatened against the Company or any of the Unconsolidated Real Estate Affiliates.


39
GGP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)


NOTE 17    COMMITMENTS AND CONTINGENCIES

We lease land or buildings at certain properties from third parties. The leases generally provide us with a right of first refusal in the event of a proposed sale of the property by the landlord. Rental payments are expensed as incurred and have been straight-lined over the term of the lease, to the extent applicable. The following is a summary of our contractual rental expense as presented in our Consolidated Statements of Comprehensive Income:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(Dollars in thousands)
Contractual rent expense, including participation rent
 
$
2,177

 
$
2,131

 
$
6,562

 
$
6,376

Contractual rent expense, including participation rent and excluding amortization of above and below-market ground leases and straight-line rent
 
1,605

 
1,551

 
4,846

 
4,637


NOTE 18    SUBSEQUENT EVENTS

On October 3, 2017, GGP acquired a 100% interest in 2 anchor boxes at Neshaminy Mall and Oakwood Center located in Bensalem, Pennsylvania and Gretna, Louisiana, respectively. Additionally, we terminated leases at 2 anchor boxes at Oxmoor Center and Crossroads Center located in Louisville, Kentucky and St. Cloud, Minnesota, respectively. The net consideration of the 2 acquired anchor boxes and 2 anchor box lease terminations was $20.5 million.

On October 6, 2017, Brookfield exercised Warrants to purchase 68,820,268 shares of our common stock, par value $0.01 per share. Warrants were exercised using the full physical settlement method resulting in the issuance of 55,296,573 shares of common stock for an aggregate of $462.4 million in cash and 13,523,695 shares of common stock were issued under net share settlement at a price of $21.21 per share.

On October 13, 2017, we refinanced a consolidated mortgage note at 530 Fifth Avenue. The new loan has a balance of $110.0 million, a term-to-maturity of 4.1 years and an interest rate of LIBOR plus 3.25%.

On October 25, 2017, Abu Dhabi Investment Authority exercised approximately 5.5 million warrants that were net share settled for approximately 4.3 million shares.


40

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

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

Overview

Our primary business is owning and operating best-in-class retail properties that provide an outstanding environment and experience for our communities, retailers, employees, consumers and shareholders. We are an S&P 500 real estate company with a property portfolio comprised primarily of Class A retail properties (defined primarily by sales per square foot) and urban retail properties. GGP Inc. defines best-in-class retail and modern luxury through curated merchandising and elegant culinary experiences set against the backdrop of refined ambiance across this distinguished collection of destinations. Our retail properties are the core centers of retail, dining and entertainment within their trade areas and, therefore, represent hubs of daily life. As of September 30, 2017, we own, either entirely or with joint venture partners, 126 retail properties located throughout the United States comprising approximately 123 million square feet of gross leasable area ("GLA").

We provide management and other services to substantially all of our properties, including properties which we own through joint venture arrangements and which are unconsolidated for GAAP purposes. Our management operating philosophies and strategies are the same whether the properties are consolidated or unconsolidated.

We seek to increase long-term Company NOI and Company EBITDA (as defined below) growth through proactive management and leasing of our properties. We also recycle capital through strategic dispositions in order to opportunistically invest in high quality retail properties, as well as control operating expenses. We believe that the following items are the most significant drivers affecting incremental cash flow and Company EBITDA growth:

•
contractual rent increases;
•
occupancy growth;
•
positive leasing spreads;
•
income from redevelopment projects; and
•
managing operating expenses.

As of September 30, 2017 the portfolio was 96.5% leased, compared to 96.7% leased at September 30, 2016. On a suite-to-suite basis, the leases commencing occupancy in the trailing 12 months exhibited initial rents that were 9.9% higher than the final rents paid on expiring leases. Our overall leasing activity is approximately twice the amount of GLA included in the suite-to-suite comparison due to leasing of anchor boxes that are not included in the suite-to-suite spreads.

We have identified approximately $1.5 billion of development and redevelopment projects within our portfolio, including re-development of anchor box spaces, over 80% of which is being invested into Class A retail properties. We currently expect to achieve stabilized returns of approximately 7-9% for all projects.

We believe our long-term strategy can provide our shareholders with a competitive risk-adjusted total return comprised of dividends and share price appreciation.

Financial Overview

Net income attributable to GGP Inc. decreased from $1,051.9 million for the nine months ended September 30, 2016 to $455.8 million for the nine months ended September 30, 2017 primarily due to 2016 gains related to the sale of interests in three properties. Our Company NOI (as defined below) remained flat of $1,699.6 million for the nine months ended September 30, 2016 compared to $1,714.9 million for the nine months ended September 30, 2017. Our Company FFO (as defined below) decreased 2.2% from $1,059.1 million for the nine months ended September 30, 2016 to $1,035.5 million for the nine months ended September 30, 2017 primarily due to decreased income recognition on condominiums.

See Non-GAAP Supplemental Financial Measures below for a discussion of Company NOI, Company EBITDA and Company FFO, along with a reconciliation to the comparable GAAP measures, Operating income and Net income attributable to GGP Inc.


41

Operating Metrics

The following table summarizes selected operating metrics for our portfolio.
 
 
September 30, 2017 (1)
 
September 30, 2016 (1)
In-Place Rents per square foot (2)
 
 

 
 

Consolidated Properties
 
$
65.63

 
$
65.17

Unconsolidated Properties
 
101.85

 
101.11

Total Retail Properties
 
$
78.02

 
$
77.41

 
 
 
 
 
Percentage Leased
 
 
 
 
Consolidated Properties
 
96.8
%
 
96.6
%
Unconsolidated Properties
 
95.9
%
 
96.9
%
Total Retail Properties
 
96.5
%
 
96.7
%
 
 
 
 
 
Tenant Sales Volume (All Less Anchors) (3)
 
 
 
 
Consolidated Properties
 
$
12,091

 
$
12,253

Unconsolidated Properties
 
9,068

 
8,805

Total Retail Properties
 
$
21,158

 
$
21,058

 
 
 
 
 
Tenant Sales per square foot (3)
 
 
 
 
Consolidated Properties
 
$
502

 
$
506

Unconsolidated Properties
 
765

 
740

Total Retail Properties
 
$
589

 
$
584

 
(1)
Metrics exclude properties acquired in the year ended December 31, 2016 and the nine months ended September 30, 2017 and certain other retail properties.
(2)
Rent is presented on a cash basis and consists of base minimum rent and common area costs.
(3)
Tenant Sales Volume (All Less Anchors) is presented as total sales volume in millions of dollars and Tenant Sales <10,000 square feet is presented as sales per square foot in dollars.

Lease Spread Metrics

The following table summarizes signed leases compared to expiring leases in the same suite, for leases where (1) the downtime between new and previous tenant was less than 24 months, (2) the occupied space between the previous tenant and new tenant did not change by more than 10,000 square feet and (3) the new lease is at least a year.
 
# of Leases
 
SF
 
Term
(in years)
 
Initial Rent PSF (1)
 
Expiring Rent PSF (2)
 
Initial Rent
Spread
 
% Change
Trailing 12 Month Commencements
1,579

 
4,743,623

 
6.6

 
$
62.87

 
$
57.21

 
$
5.66

 
9.9
%
 
(1)
Represents initial annual rent over the lease consisting of base minimum rent and common area maintenance.
(2)
Represents expiring rent at end of lease consisting of base minimum rent and common area maintenance.


42

Results of Operations
 
Three months ended September 30, 2017 and 2016
 
The following table is a breakout of the components of minimum rents:
 
Three Months Ended September 30,
 
 
 
 
 
2017
 
2016
 
$ Change
 
% Change
 
(Dollars in thousands)
 
 
 
 
Components of Minimum rents:
 

 
 

 
 

 
 

Base minimum rents
$
357,292

 
$
352,023

 
$
5,269

 
1.5
 %
Lease termination income
9,071

 
1,840

 
7,231

 
393.0

Straight-line rent
2,768

 
3,552

 
(784
)
 
(22.1
)
Above and below-market tenant leases, net
(5,274
)
 
(9,739
)
 
4,465

 
(45.8
)
Total Minimum rents
$
363,857

 
$
347,676

 
$
16,181

 
4.7
 %

Base minimum rents increased $5.3 million primarily due to the acquisition of the remaining 50% interest in Riverchase Galleria from our joint venture partner during the fourth quarter of 2016, resulting in a $5.1 million increase in base minimum rents during the three months ended September 30, 2017 compared to the three months ended September 30, 2016.

Lease termination income increased $7.2 million primarily due to lease terminations at multiple tenants spread across the portfolio during the three months ended September 30, 2017.

Management fees and other corporate revenues increased $8.4 million primarily due to property and asset management fees related to the new Seritage joint venture and lease fees at 530 Fifth Avenue during the third quarter of 2017 (Note 3).

Other revenue increased $2.5 million primarily due to the recognition of a $2.3 million gain on the sale of land at one operating property during the three months ended September 30, 2017.

Property maintenance costs decreased $1.3 million primarily due to operational efficiencies.

Other property operating costs increased $2.4 million primarily due to the acquisition of the remaining 50% interest in Riverchase Galleria from our joint venture partner during the fourth quarter of 2016, resulting in a $1.4 million increase in other property operating costs during the three months ended September 30, 2017 compared to the three months ended September 30, 2016.

Recovery of loan loss of $6.7 million relates to the settlement of the Rique note receivable during 2016 (Note 13).

Provision for impairment of $28.3 million is related to impairment charges recorded on one operating property during the three months ended September 30, 2016 (Note 2).
 
Depreciation and amortization decreased $21.1 million primarily due to the write-off of anchor buildings demolished at two operating properties during the three months ended September 30, 2016.

Interest and dividend income increased $1.8 million primarily due to an increase in interest income related to notes receivable due from joint venture partners (Note 13).

Interest expense decreased $5.3 million due to a mortgage note paid down at one of our operating properties during 2016, resulting in a $3.4 million decrease in interest expense (Note 6) and the conveyance of Lakeside Mall to the lender in full satisfaction of the debt, resulting in a $3.0 million decrease in interest expense. The decreases were partially offset by an outstanding revolver balance in the three months ended September 30, 2017 and an increase in the LIBOR rate over the prior year.

The loss on foreign currency during the three months ended September 30, 2016 is related to the impact of changes in the exchange rate on a note receivable denominated in Brazilian Reais and received in conjunction with the sale of Aliansce in the third quarter of 2013. The note receivable was settled during 2016 (Note 13). The gain on foreign currency during the three months ended September 30, 2017 is related to the impact of changes in the exchange rate on the proceeds from the settlement, which are held in Brazilian Reais.


43

The gain from changes in control of investment properties and other of $95.2 million during the three months ended September 30, 2017 relates to the transaction at 218 West 57th Street, 530 Fifth Avenue and 685 Fifth Avenue and the Seritage joint venture transactions. The gain from changes in control of investment properties and other of $620.3 million during the three months ended September 30, 2016 primarily relates to the sale of an interest in Fashion Show, the sale of our interests in two operating properties and additional development related to our sale of a 25% interest in Ala Moana Center in 2015 (Note 3).

Provision for income taxes increased $6.9 million primarily due to tax credits related to solar investments received during the three months ended September 30, 2016.

Unconsolidated Real Estate Affiliates - gain on investment during the three months ended September 30, 2016 relates to additional development related to the sale of an additional 12.5% interest in Ala Moana Center during the second quarter of 2015 (Note 3).

Nine months ended September 30, 2017 and 2016
 
The following table is a breakout of the components of minimum rents:
 
Nine Months Ended September 30,
 
 
 
 
 
2017
 
2016
 
$ Change
 
% Change
 
(Dollars in thousands)
 
 
 
 
Components of Minimum rents:
 

 
 

 
 

 
 

Base minimum rents
$
1,061,730

 
$
1,088,110

 
$
(26,380
)
 
(2.4
)%
Lease termination income
18,379

 
10,801

 
7,578

 
70.2

Straight-line rent
3,260

 
13,998

 
(10,738
)
 
(76.7
)
Above and below-market tenant leases, net
(21,294
)
 
(30,689
)
 
9,395

 
(30.6
)
Total Minimum rents
$
1,062,075

 
$
1,082,220

 
$
(20,145
)
 
(1.9
)%

Base minimum rents decreased $26.4 million primarily due to our sale of an interest in Fashion Show during the third quarter of 2016. This resulted in $45.0 million less base minimum rents during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 as the property is now accounted for as an Unconsolidated Real Estate Affiliate. In addition, the sale of two operating properties during the third quarter of 2016 resulted in $7.7 million less base minimum rents. The acquisition of the remaining 50% interest in Riverchase Galleria from our joint venture partner and the acquisition of 605 N. Michigan Avenue during the fourth quarter of 2016 resulted in an offsetting $19.5 million increase in base minimum rents.

Lease termination income increased $7.6 million primarily due to lease terminations at multiple tenants spread across the portfolio during the nine months ended September 30, 2017.

Tenant recoveries decreased $18.5 million primarily due to our sale of an interest in Fashion Show during the third quarter of 2016. This resulted in $18.5 million less tenant recoveries during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 as the property is now accounted for as an Unconsolidated Real Estate Affiliate. In addition, the sale of two operating properties during the third quarter of 2016 resulted in $3.0 million less tenant recoveries and reimbursable common area maintenance charges decreased by $11.6 million across the portfolio. The acquisition of the remaining 50% interest in Riverchase Galleria from our joint venture partner during the fourth quarter of 2016 resulted in an offsetting $7.9 million increase in tenant recoveries and reimbursable taxes increased by $7.8 million.

Management fees and other corporate revenues increased $4.7 million primarily due to $3.4 million in property management fees related to the joint venture formed with Fashion Show during the third quarter of 2016, $5.4 million in property and asset management fees related to the Seritage joint venture during the third quarter of 2017 (Note 3), a $4.3 million one-time profit participation payment received during the nine months ended September 30, 2017 related to our Aeropostale joint venture (Note 5) and $2.5 million in leasing fees at 530 Fifth Avenue. This is partially offset by the divestiture of our investment in Seritage Growth Properties stock during the nine months ended September 30, 2016, which resulted in a $13.1 million gain (Note 2).

Other revenue increased $3.5 million primarily due to the recognition of $4.6 million in gains on the sale of land at two operating properties during the nine months ended September 30, 2017 and a contract termination fee of $3.2 million received during the nine months ended September 30, 2017. The recognition of gains on the sale of air rights at Ala Moana Center resulted in an offsetting decrease in other revenue. During the nine months ended September 30, 2016, $13.1 million previously deferred gains were recognized, and during the nine months ended September 30, 2017, $7.0 million of previously deferred gains were recognized.

Property maintenance costs decreased $5.0 million primarily due to operational efficiencies.

44


Marketing costs decreased $1.9 million primarily due to a change in corporate strategy that resulted in a net reduction in spending.

Other property operating costs decreased $0.7 million primarily due to our sale of an interest in Fashion Show during the third quarter of 2016. This resulted in $5.9 million less other property operating costs during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 as the property is now accounted for as an Unconsolidated Real Estate Affiliate. The acquisition of the remaining 50% interest in Riverchase Galleria from our joint venture partner during the fourth quarter of 2016 resulted in an offsetting $3.9 million increase in other property operating costs.

Provision for loan loss of $29.4 million relates to the settlement of the Rique note receivable during 2016 (Note 13).

Property management and other costs increased $8.5 million primarily due to bonus savings in the prior year.

Provision for impairment of $73.0 million is related to impairment charges recorded on three operating properties during the nine months ended September 30, 2016 (Note 2).
 
Interest and dividend income increased $7.8 million primarily due to interest income received during the nine months ended September 30, 2017 on the proceeds of the settlement of the Rique note receivable in the third quarter of 2016. As it was determined during the first quarter of 2016 that it was probable that we would be unable to collect all amounts due according to the contractual terms of the receivable, interest income on the note receivable was not recognized subsequent to the first quarter of 2016 (Note 13).

Interest expense decreased $34.8 million primarily due to our sale of an interest in Fashion Show during the third quarter of 2016. This resulted in $20.1 million less interest expense during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 as the property is now accounted for as an Unconsolidated Real Estate Affiliate. In addition, we paid down mortgage notes at two operating properties during 2016, resulting in a $9.3 million decrease in interest expense (Note 6). We also sold two operating properties during 2016, resulting in a $2.7 million decrease in interest expense. The decreases were partially offset by an outstanding revolver balance in the three months ended September 30, 2017 and an increase in the LIBOR rate over the prior year.

The gain on foreign currency during the nine months ended September 30, 2016 is related to the impact of changes in the exchange rate on a note receivable denominated in Brazilian Reais and received in conjunction with the sale of Aliansce in the third quarter of 2013. The note receivable was settled during 2016 (Note 13). The gain on foreign currency during the nine months ended September 30, 2017 is related to the impact of changes in the exchange rate on the proceeds from the settlement, which are held in Brazilian Reais.

The gain from changes in control of investment properties and other of $79.3 million during the nine months ended September 30, 2017 relates to the transaction at 218 West 57th Street, 530 Fifth Avenue and 685 Fifth Avenue, the Seritage joint venture, the acquisition of the remaining interest in Neshaminy Mall and our sale of our interest in Red Cliffs Mall. The gain from changes in control of investment properties and other of $733.4 million during the nine months ended September 30, 2016 relates to the sale of an interest in Fashion Show, the sale of our interests in five operating properties, and additional development related to our sale of Ala Moana Center in 2015 (Note 3).

The gain on extinguishment of debt during the nine months ended September 30, 2017 relates to Lakeside Mall, which was conveyed to the lender in full satisfaction of the debt (Note 3).

Provision for income taxes increased $14.6 million primarily due to tax credits related to solar investments received during the nine months ended September 30, 2016 and the tax impact of the provision for loan loss related to the Rique note recorded during the nine months ended September 30, 2016 (Note 13).

Equity in income of Unconsolidated Real Estate Affiliates decreased by $27.9 million primarily due to decreased income recognition on condominiums during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 (Note 5), partially offset by our share of income in the Fashion Show joint venture formed during the third quarter of 2016.

Unconsolidated Real Estate Affiliates - gain on investment during the nine months ended September 30, 2016 is primarily related to the sale of our interests in three operating properties and additional development related to the sale of an additional 12.5% interest in Ala Moana Center during the second quarter of 2015 (Note 3).


45

Liquidity and Capital Resources
 
Our primary source of cash is from the ownership and management of our properties and strategic dispositions. We may generate cash from refinancings or borrowings under our revolving credit facility. Our primary uses of cash include payment of operating expenses, debt service, reinvestment in and redevelopment of properties, tenant allowances, dividends, share repurchases and acquisitions.
 
We anticipate maintaining financial flexibility by managing our future maturities, amortization of debt, and minimizing cross collateralizations and corporate guarantees. We believe that we currently have sufficient liquidity to satisfy all of our commitments in the form of $311.1 million of consolidated unrestricted cash and $525.0 million of available credit under our credit facility as of September 30, 2017, as well as anticipated cash provided by operations.
 
Our key financing objectives include:

•
to obtain property-secured debt with laddered maturities;
•
to strategically leverage unencumbered retail properties; and
•
to minimize the amount of debt that is cross-collateralized and/or recourse to us.

We may raise capital through public or private issuances of debt securities, preferred stock, common stock, common units of the Operating Partnerships (as defined in Note 1), share repurchases or other capital raising activities.

During the nine months ended September 30, 2017, we paid down a $73.4 million consolidated mortgage note at one property. The prior loan had a term-to-maturity of 0.2 years and an interest rate of 5.6%. The property subsequently replaced a property that was sold during the nine months ended September 30, 2017 as collateral in our $1.4 billion loan secured by cross-collateralized mortgages on 15 properties. In addition, we obtained a new consolidated mortgage note at one property for $325.0 million with an interest rate of 3.98%.

During the year ended December 31, 2016, we paid down $294.4 million of consolidated mortgage notes at two properties. The prior loans had a weighted-average term-to-maturity of 1.2 years and a weighted-average interest rate of 5.3%. In conjunction with the pay down of the loans, we paid $5.4 million in transaction costs.
 
As of September 30, 2017, we had $3.4 billion of debt pre-payable at our proportionate share without penalty. We may pursue opportunities to refinance this debt at lower interest rates and longer maturities.
 
As of September 30, 2017, our proportionate share of total debt aggregated $19.2 billion. Our total debt includes our consolidated debt of $13.7 billion and our share of Unconsolidated Real Estate Affiliates debt of $5.5 billion. Of our proportionate share of total debt, $1.7 billion is recourse to the Company or its subsidiaries (including the facility) due to guarantees or other security provisions for the benefit of the note holder.
 
The amount of debt due in the next three years represents 15.5% of our total debt at maturity. The maximum amount due in any one of the next ten years is no more than $3.2 billion at our proportionate share or approximately 17.9% of our total debt at maturity.

The following table illustrates the scheduled payments for our proportionate share of total debt as of September 30, 2017. The $206.2 million of Junior Subordinated Notes are due in 2036, but we may redeem them any time after April 30, 2011 (Note 6). As we do not expect to redeem the notes prior to maturity, they are included in the consolidated debt maturing subsequent to 2021.
 
Consolidated
 
Unconsolidated
 
(Dollars in thousands)
2017
$
—

 
$
—

2018
335,735

 
186,780

2019
1,668,276

 
1,019,345

2020
2,043,269

 
1,194,816

2021
2,644,349

 
322,240

Subsequent
7,008,443

 
2,823,996

Total
$
13,700,072

 
$
5,547,177

 
We believe we will be able to extend the maturity date, repay under our available line of credit or refinance the consolidated debt that is scheduled to mature in 2018. We also believe that the joint ventures will be able to refinance the debt of our Unconsolidated

46

Real Estate Affiliates upon maturity; however, there can be no assurance that we will be able to refinance or restructure such debt on acceptable terms or otherwise, or that joint venture operations or contributions by us and/or our partners will be sufficient to repay such loans.

Acquisitions and Joint Venture Activity

From time-to-time we may acquire whole or partial interests in high-quality retail properties or make strategic dispositions. Refer to Note 3 for more information.

Warrants and Brookfield Investor Ownership
 
Brookfield and certain parties who were previously members of a Brookfield investor consortium own or manage on behalf of third parties all of the Company's outstanding Warrants (Note 8) which are exercisable into approximately 57 million common shares of the Company at a weighted-average exercise price of $8.32 per share, assuming net share settlement at September 30, 2017. The strike price and common shares issuable under the Warrants adjust for dividends declared by the Company.

Subsequent to quarter end, on October 6, 2017, Brookfield exercised warrants to acquire an aggregate of 68,820,268 shares of the Company's Common Stock using both full share and net share settlement (Note 18).

Developments and Redevelopments
 
We are currently redeveloping several consolidated and unconsolidated properties primarily to improve the productivity and value of the property, convert large-scale anchor boxes into smaller leasable areas and to create new in-line retail space and new restaurant venues.

We have development and redevelopment activities totaling approximately $1.4 billion under construction and $156 million in the pipeline. We continue to evaluate a number of other redevelopment projects to further enhance the quality of our assets. Expected returns are based on the completion of current and future redevelopment projects, and the success of the leasing and asset management plans in place for each project. Expected returns are subject to a number of variables, risks, and uncertainties including those disclosed within Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016 (our "Annual Report"). We also refer the reader to our disclosure related to forward-looking statements, below. The following table illustrates our planned redevelopments:
Property
Description
 
GGP's Total Projected Share of Cost
 
GGP's Investment to Date (1)
 
Expected Return on Investment (2)
 
Stabilized Year
Major Development Summary (in millions, at share unless otherwise noted)
Under Construction
 
 

 
 

 
 
 
 
New Development
Norwalk, CT
Ground up development
 
525

 
113

 
8-9%
 
2020
Staten Island Mall
Staten Island, NY
Expansion
 
231

 
95

 
7-9%
 
2019
Other Projects
Redevelopment projects at various properties
 
606

 
440

 
6-8%
 
2017-2018
 
Total Projects Under Construction
 
$
1,362

 
$
648

 
 
 
 
Projects in Pipeline
 
 
 

 
 

 
 
 
 
Other Projects
Redevelopment projects at various properties
 
156

 
47

 
8-9%
 
TBD
 
Total Projects in Pipeline
 
$
156

 
$
47

 
 
 
 
 
(1)
Projected costs and investments to date exclude capitalized interest and overhead.
(2)
Return on investment represents first year stabilized cash-on-cash return, based upon budgeted assumptions. Actual costs may vary.

Our investment in these projects for the nine months ended September 30, 2017 has increased from December 31, 2016 in conjunction with the applicable development plan and as projects near completion. The continued progression of redevelopment projects resulted in increases to GGP's investment to date.


47

Capital Expenditures, Capitalized Interest and Overhead (at share)

The following table illustrates our capital expenditures, capitalized interest, and internal costs associated with leasing and development overhead, which primarily relate to ordinary capital projects at our operating properties. In addition, we incurred tenant allowances and capitalized leasing costs for our operating properties as outlined below. Capitalized interest is based upon qualified expenditures and interest rates; capitalized leasing and development costs are based upon time expended on these activities. These costs are amortized over lives which are consistent with the related asset.
 
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
 
(Dollars in thousands)
Operating capital expenditures (1)
 
$
119,295

 
$
120,485

Tenant allowances and capitalized leasing costs (2)
 
143,559

 
109,942

Capitalized interest and capitalized overhead
 
44,942

 
44,954

Total
 
$
307,796

 
$
275,381

(1)
Reflects only non-tenant operating capital expenditures.
(2)
Tenant allowances paid on 3.5 million square feet.

Common Stock Dividends

Our Board of Directors declared common stock dividends during 2017 and 2016 as follows:
Declaration Date
Record Date
Payment Date
Dividend Per Share
2017
 
 
 
October 31
December 15, 2017
January 5, 2018
$
0.22

August 2
October 13, 2017
October 31, 2017
0.22

May 1
July 13, 2017
July 28, 2017
0.22

January 30
April 13, 2017
April 28, 2017
0.22

2016
 
 
 
December 13
December 27, 2016
January 27, 2017
$
0.26

October 31
December 15, 2016
January 6, 2017
0.22

August 1
October 14, 2016
October 31, 2016
0.20

May 2
July 15, 2016
July 29, 2016
0.19

February 1
April 15, 2016
April 29, 2016
0.19


Preferred Stock Dividends

On February 13, 2013, we issued, under a public offering, 10,000,000 shares of 6.375% Series A Cumulative Stock at a price of $25.00 per share. Our Board of Directors declared preferred stock dividends during 2017 and 2016 as follows:
Declaration Date
Record Date
Payment Date
Dividend Per Share
2017
 
 
 
October 31
December 15, 2017
January 2, 2018
$
0.3984

August 2
September 15, 2017
October 2, 2017
0.3984

May 1
June 15, 2017
July 3, 2017
0.3984

January 30
March 15, 2017
April 3, 2017
0.3984

2016
 
 
 
October 31
December 15, 2016
January 3, 2017
$
0.3984

August 1
September 15, 2016
October 3, 2016
0.3984

May 2
June 15, 2016
July 1, 2016
0.3984

February 1
March 15, 2016
April 1, 2016
0.3984


48


Summary of Cash Flows

Cash Flows from Operating Activities

Net cash provided by operating activities was $938.3 million for the nine months ended September 30, 2017 and $823.6 million for the nine months ended September 30, 2016. Significant changes in the components of net cash provided by operating activities include:

•
in 2017, an increase in cash inflows from distributions received from unconsolidated real estate affiliates;
•
in 2017, a decrease in cash outflows for marketing and property maintenance & operating costs due to a continued effort to reduce operating expenses; and
•
in 2016, an increase in cash inflows from overage rent and tenant recoveries.
 
Cash Flows from Investing Activities

Net cash (used in) provided by investing activities was $(694.6) million for the nine months ended September 30, 2017 and $793.3 million for the nine months ended September 30, 2016. Significant components of net cash (used in) provided by investing activities include:
 
•
in 2017, development of real estate and property improvements, ($742.1) million;
•
in 2017, net proceeds from distributions received from unconsolidated real estate in excess of income, $81.7 million;
•
in 2016, proceeds from the sale of real estate, $1,300.7 million; net of development of real estate and property improvements, ($400.4) million; and
•
in 2016, proceeds from the sale of marketable securities, $46.4 million.

Cash Flows from Financing Activities

Net cash used in financing activities was $410.5 million for the nine months ended September 30, 2017 and $1,317.1 million for the nine months ended September 30, 2016. Significant components of net cash used in financing activities include:

•
in 2017, proceeds from the refinancing or issuance of mortgages, notes and loans payable, of $1,355.0 million; net of principal payments of ($680.7) million;
•
in 2017, cash distributions paid to common stockholders of ($812.9) million;
•
in 2017, repurchase of treasury stock of ($267.8) million;
•
in 2016, principal payments on mortgages, notes and loans payable of ($1,466.7) million; and
•
in 2016, cash distributions paid to common stockholders of ($503.6) million.

Seasonality

Although we have a year-long temporary leasing program, occupancies for short-term tenants and, therefore, rental income recognized, are higher during the fourth quarter of the year. In addition, the majority of our tenants have December or January lease years for purposes of calculating annual overage rent amounts. Accordingly, overage rent thresholds are most commonly achieved in the fourth quarter. As a result, revenue production is generally highest in the fourth quarter of each year.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is based on our consolidated interim financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the financial statements and disclosures. Some of these estimates and assumptions require application of difficult, subjective, and/or complex judgment about the effect of matters that are inherently uncertain and that may change in subsequent periods. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

A disclosure of our critical accounting policies which affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements is included in our Annual Report in Management's Discussion and Analysis of Financial Condition and Results of Operations.

49


Refer also to the accounting policies discussed in Note 2.

REIT Requirements

In order to remain qualified as a REIT for Federal income tax purposes, we must distribute at least 90% of our taxable ordinary income to stockholders. We are also subject to federal income tax to the extent we distribute less than 100% of our REIT taxable income, including capital gains. See Note 7 to the Consolidated Financial Statements for more detail on our ability to remain qualified as a REIT.

Recently Issued Accounting Pronouncements

Refer to Note 2 of the Consolidated Financial Statements for recently issued accounting pronouncements.

Non-GAAP Supplemental Financial Measures and Definitions

Proportionate or At Share Basis

The following non-GAAP supplemental financial measures are all presented on a proportionate basis. The proportionate financial information presents the consolidated and unconsolidated properties at the Company's ownership percentage or “at share”. This form of presentation offers insights into the financial performance and condition of the Company as a whole, given the significance of the Company's unconsolidated property operations that are owned through investments accounted for under GAAP using the equity method.

The proportionate financial information is not, and is not intended to be, a presentation in accordance with GAAP. The non-GAAP proportionate financial information reflects our proportionate economic ownership of each asset in our property portfolio that we do not wholly own. The amounts in the column labeled "Noncontrolling Interests" were derived on a property-by-property basis by including the share attributable to noncontrolling interests in each line item from each individual property. The Company does not have legal claim to the noncontrolling interest of assets, liabilities, revenue, and expenses. The amount of cash each noncontrolling interest receives is based on the specific provisions of each operating agreement and varies depending on certain factors including the amount of capital contributed by each investor and whether any investors are entitled to preferential distributions. The amounts in the column labeled "Unconsolidated Properties" were derived on a property-by-property basis by including our share of each line item from each individual entity. This provides visibility into our share of the operations of our joint ventures.

We do not control the unconsolidated joint ventures and the presentations of the assets and liabilities and revenues and expenses do not represent our legal claim to such items. The operating agreements of the unconsolidated joint ventures generally provide that partners may receive cash distributions (1) to the extent there is available cash from operations, (2) upon a capital event, such as a refinancing or sale or (3) upon liquidation of the venture. The amount of cash each partner receives is based upon specific provisions of each operating agreement and varies depending on factors including the amount of capital contributed by each partner and whether any contributions are entitled to priority distributions. Upon liquidation of the joint venture and after all liabilities, priority distributions and initial equity contributions have been repaid, the partners generally would be entitled to any residual cash remaining based on their respective legal ownership percentages.

We provide non-GAAP proportionate financial information because we believe it assists investors and analysts in estimating our economic interest in our unconsolidated joint ventures when read in conjunction with the Company's reported results under GAAP. Other companies in our industry may calculate their proportionate interest differently than we do, limiting the usefulness as a comparative measure. Because of these limitations, the non-GAAP proportionate financial information should not be considered in isolation or as a substitute for our financial statements as reported under GAAP.

Net Operating Income ("NOI") and Company NOI

The Company defines NOI as proportionate income from operations and after operating expenses have been deducted, but prior to deducting financing, property management, administrative and income tax expenses. NOI excludes management fees and other corporate revenue and reductions in ownership as a result of sales or other transactions. The Company considers NOI a helpful supplemental measure of its operating performance because it is a direct measure of the actual results of our properties. Because NOI excludes reductions in ownership as a result of sales or other transactions, management fees and other corporate revenue, general and administrative and property management expenses, interest expense, retail investment property impairment or non-recoverable development costs, depreciation and amortization, gains and losses from property dispositions, allocations to

50

noncontrolling interests, provision for income taxes, preferred stock dividends, and extraordinary items, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact on operations from trends in occupancy rates, rental rates and operating costs.
The Company also considers Company NOI to be a helpful supplemental measure of its operating performance because it excludes from NOI items such as straight-line rent, and amortization of intangibles resulting from acquisition accounting and other capital contribution or restructuring events. However, due to the exclusions noted, Company NOI should only be used as an alternative measure of the Company's financial performance.
We present Company NOI, Company EBITDA (as defined below) and Company FFO (as defined below); as we believe certain investors and other users of our financial information use these measures of the Company's historical operating performance.
Adjustments to NOI, EBITDA and FFO, including debt extinguishment costs, market rate adjustments on debt, straight-line rent, intangible asset and liability amortization, real estate tax stabilization, gains and losses on foreign currency and other items that are not a result of normal operations, assist management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at the properties or from other factors. In addition, the Company's leases include step rents that increase over the term of the lease to compensate the Company for anticipated increases in market rentals over time. The Company's leases do not include significant front loading or back loading of payments or significant rent-free periods. Therefore, we find it useful to evaluate rent on a contractual basis as it allows for comparison of existing rental rates to market rental rates. Management has historically made these adjustments in evaluating our performance, in our annual budget process and for our compensation programs.
Other REITs may use different methodologies for calculating NOI and Company NOI, and accordingly, the Company's Company NOI may not be comparable to other REITs. As a result of the elimination of corporate-level costs and expenses and depreciation and amortization, the Company NOI we present does not represent our total revenues, expenses, operating profit or net income and should not be used to evaluate our performance as a whole. Management compensates for these limitations by separately considering the impact of these excluded items, to the extent they are material, to operating decisions or assessments of our operating performance. Our consolidated GAAP statements of operations include such amounts, all of which should be considered by investors when evaluating our performance.

Earnings Before Interest Expense, Income Tax, Depreciation, and Amortization ("EBITDA") and Company EBITDA

The Company defines EBITDA as NOI less certain property management and administrative expenses, net of management fees and other corporate revenues. EBITDA is a commonly used measure of performance in many industries, but may not be comparable to measures calculated by other companies. Management believes EBITDA provides useful information to investors regarding our results of operations because it helps us and our investors evaluate the ongoing operating performance of our properties after removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization). Management also believes the use of EBITDA facilitates comparisons between us and other equity REITs, retail property owners who are not REITs and other capital-intensive companies. Management uses Company EBITDA to evaluate property-level results and as one measure in determining the value of acquisitions and dispositions and, like FFO (discussed below), it is widely used by management in the annual budget process and for compensation programs. Please see adjustments discussion above for the purpose and use of the adjustments included in Company EBITDA.
EBITDA and Company EBITDA, as presented, may not be comparable to similar measures calculated by other companies. This information should not be considered as an alternative to net income, operating profit, cash from operations or any other operating performance measure calculated in accordance with GAAP.

Funds From Operations ("FFO") and Company FFO

The Company determines FFO based upon the definition set forth by National Association of Real Estate Investment Trusts (“NAREIT”). The Company determines FFO to be its share of consolidated net income (loss) attributable to common shareholders and redeemable non-controlling common unit holders computed in accordance with GAAP, excluding real estate related depreciation and amortization, excluding gains and losses from extraordinary items, excluding cumulative effects of accounting changes, excluding gains and losses from the sales of, or any impairment charges related to, previously depreciated operating properties, plus the allocable portion of FFO of unconsolidated joint ventures based upon the Company's economic ownership interest, and all determined on a consistent basis in accordance with GAAP. As with the Company's presentation of NOI, FFO has been reflected on a proportionate basis.

The Company considers FFO a helpful supplemental measure of the operating performance for equity REITs and a complement to GAAP measures because it is a recognized measure of performance by the real estate industry. FFO facilitates an understanding of the operating performance of the Company's properties between periods because it does not give effect to real estate depreciation

51

and amortization since these amounts are computed to allocate the cost of a property over its useful life. Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, the Company believes that FFO provides investors with a clearer view of the Company's operating performance.

We calculate FFO in accordance with standards established by NAREIT, which may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO in accordance with NAREIT guidance. In addition, although FFO is a useful measure when comparing our results to other REITs, it may not be helpful to investors when comparing us to non-REITs. As with the presentation of Company NOI and Company EBITDA, we also consider Company FFO, which is not in accordance with NAREIT guidance and may not be comparable to measures calculated by other REITs, to be a helpful supplemental measure of our operating performance. Please see adjustments discussion above for the purpose and use of the adjustments included in Company FFO.

FFO and Company FFO do not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income determined in accordance with GAAP as a measure of operating performance, and is not an alternative to cash flows as a measure of liquidity or indicative of funds available to fund our cash needs. In addition, Company FFO per diluted share does not measure, and should not be used as a measure of, amounts that accrue directly to stockholders' benefit.

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

The Company presents NOI, EBITDA and FFO as they are financial measures widely used in the REIT industry. In order to provide a better understanding of the relationship between the Company's non-GAAP financial measures of NOI, Company NOI, EBITDA, Company EBITDA, FFO and Company FFO, reconciliations have been provided as follows: a reconciliation of GAAP operating income to NOI and Company NOI, a reconciliation of GAAP net income attributable to GGP to EBITDA and Company EBITDA, and a reconciliation of GAAP net income attributable to GGP to FFO and Company FFO. None of the Company's non-GAAP financial measures represents cash flow from operating activities in accordance with GAAP, none should be considered as an alternative to GAAP net income (loss) attributable to GGP and none are necessarily indicative of cash flow. In addition, the Company has presented such financial measures on a consolidated and unconsolidated basis (at the Company's proportionate share) as the Company believes that given the significance of the Company's operations that are owned through investments accounted for by the equity method of accounting, the detail of the operations of the Company's unconsolidated properties provides important insights into the income and FFO produced by such investments.





























52

The following table reconciles GAAP Operating Income to Company NOI (dollars in thousands) for the three and nine months ended September 30, 2017 and 2016:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Operating Income
$
218,306

 
$
153,417

 
$
593,967

 
$
543,434

Loss (gain) on sales of investment properties
172

 
1,016

 
(956
)
 
1,016

Depreciation and amortization
161,278

 
182,350

 
505,875

 
499,269

(Recovery of) provision for loan loss
—

 
(6,659
)
 
—

 
29,410

Provision for impairment
—

 
28,276

 
—

 
73,039

General and administrative
12,037

 
13,237

 
42,582

 
41,313

Property management and other costs
35,195

 
37,760

 
115,334

 
106,787

Management fees and other corporate revenues
(28,806
)
 
(20,428
)
 
(77,797
)
 
(73,087
)
Consolidated Properties
398,182

 
388,969

 
1,179,005

 
1,221,181

Noncontrolling interest in NOI of Consolidated Properties
(4,775
)
 
(3,734
)
 
(15,595
)
 
(11,080
)
NOI of sold interests
105

 
(11,195
)
 
(9,035
)
 
(61,853
)
Unconsolidated Properties
177,649

 
176,699

 
539,579

 
530,937

Proportionate NOI
571,161

 
550,739

 
1,693,954

 
1,679,185

Company adjustments:
 
 
 
 
 
 
 
Minimum rents
2,411

 
7,114

 
14,087

 
13,587

Real estate taxes
1,490

 
1,490

 
4,469

 
4,469

Property operating expenses
788

 
754

 
2,364

 
2,358

Company NOI
$
575,850

 
$
560,097

 
$
1,714,874

 
$
1,699,599




























53


The following table reconciles GAAP Net income attributable to GGP to Company EBITDA for the three and nine months ended September 30, 2017 and 2016:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Net Income Attributable to GGP
$
222,780

 
$
674,178

 
$
455,803

 
$
1,051,904

Allocation to noncontrolling interests
3,492

 
7,570

 
9,157

 
15,083

Loss (gain) on sales of investment properties
172

 
1,016

 
(956
)
 
1,016

Gain on extinguishment of debt
—

 
—

 
(55,112
)
 
—

Gains from changes in control of investment properties and other
(95,165
)
 
(620,309
)
 
(79,325
)
 
(733,416
)
Unconsolidated Real Estate Affiliates - gain on investment
—

 
(259
)
 
—

 
(40,765
)
Equity in income of Unconsolidated Real Estate Affiliates
(35,937
)
 
(35,651
)
 
(99,884
)
 
(127,759
)
(Recovery of) provision for loan loss
—

 
(6,659
)
 
—

 
29,410

Provision for impairment
—

 
28,276

 
—

 
73,039

Provision for income taxes
6,993

 
49

 
15,347

 
728

Gain (loss) on foreign currency
(3,889
)
 
657

 
(3,195
)
 
(16,172
)
Interest expense
135,980

 
141,296

 
402,512

 
437,338

Interest and dividend income
(15,948
)
 
(14,114
)
 
(51,336
)
 
(43,507
)
Depreciation and amortization
161,278

 
182,350

 
505,875

 
499,269

Consolidated Properties
379,756

 
358,400

 
1,098,886

 
1,146,168

Noncontrolling interest in EBITDA of Consolidated Properties
(4,595
)
 
(3,599
)
 
(14,990
)
 
(10,665
)
EBITDA of sold interests
105

 
(11,022
)
 
(8,871
)
 
(61,149
)
Unconsolidated Properties
166,347

 
167,912

 
508,753

 
504,458

Proportionate EBITDA
541,613

 
511,691

 
1,583,778

 
1,578,812

Company adjustments:
 
 
 
 
 
 
 
Minimum rents
2,411

 
7,114

 
14,087

 
13,587

Real estate taxes
1,490

 
1,490

 
4,469

 
4,469

Property operating expenses
788

 
754

 
2,364

 
2,358

Company EBITDA
$
546,302

 
$
521,049

 
$
1,604,698

 
$
1,599,226


54

The following table reconciles GAAP net income attributable to GGP to Company FFO for the three and nine months ended September 30, 2017 and 2016:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Net Income Attributable to GGP
$
222,780

 
$
674,178

 
$
455,803

 
$
1,051,904

Redeemable noncontrolling interests
2,361

 
5,051

 
4,165

 
7,934

Provision for impairment excluded from FFO
—

 
28,276

 
—

 
73,039

Noncontrolling interests in depreciation of Consolidated Properties
(2,029
)
 
(1,592
)
 
(6,812
)
 
(4,875
)
Unconsolidated Real Estate Affiliates - gain on investment
—

 
(259
)
 
—

 
(40,765
)
(Gain) loss on sales of investment properties
(1,394
)
 
1,017

 
(2,523
)
 
1,016

Preferred stock dividends
(3,984
)
 
(3,984
)
 
(11,952
)
 
(11,951
)
Gains from changes in control of investment properties and other
(95,165
)
 
(620,309
)
 
(79,325
)
 
(733,416
)
Depreciation and amortization of capitalized real estate costs - Consolidated Properties
157,038

 
178,105

 
492,886

 
487,803

Depreciation and amortization of capitalized real estate costs - Unconsolidated Properties
75,477

 
73,891

 
224,036

 
209,237

FFO (1)
355,084

 
334,374

 
1,076,278

 
1,039,926

Company adjustments:
 
 
 
 
 
 
 
Minimum rents
2,411

 
7,114

 
14,087

 
13,587

Real estate taxes
1,490

 
1,490

 
4,469

 
4,469

Property operating expenses
788

 
754

 
2,364

 
2,358

Investment income, net
(205
)
 
(205
)
 
(614
)
 
(614
)
Market rate adjustments
(1,122
)
 
(1,287
)
 
(3,454
)
 
(3,960
)
Write-off of mark-to-market adjustments on extinguished debt
—

 
(2,290
)
 
—

 
(2,290
)
(Recovery of) provision for loan loss
—

 
(6,659
)
 
—

 
21,891

(Gain) loss on foreign currency
(3,889
)
 
657

 
(3,195
)
 
(16,172
)
Benefit from (provision for) income taxes
—

 
2,093

 
—

 
(2,262
)
FFO from sold interests
—

 
195

 
(54,444
)
 
2,160

Company FFO
$
354,557

 
$
336,236

 
$
1,035,491

 
$
1,059,093

 
(1)
FFO as defined by the National Association of Real Estate Investment Trusts.


55

Forward-Looking Statements

Certain statements made in this section or elsewhere in this report may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in any forward-looking statement are based on reasonable assumption, it can give no assurance that its expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and other factors. Such factors include, but are not limited to, the Company's ability to refinance, extend, restructure or repay near and intermediate term debt, its indebtedness, its ability to raise capital through equity issuances, asset sales or the incurrence of new debt, retail and credit market conditions, impairments, its liquidity demands and economic conditions. The Company discusses these and other risks and uncertainties in its annual and quarterly periodic reports filed with the Securities and Exchange Commission. The Company may update that discussion in its periodic reports, but otherwise takes no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.


56


ITEM 3        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
There have been no significant changes in the market risks described in our Annual Report.

ITEM 4        CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended, (the "Exchange Act")).

Based on that evaluation, the CEO and the CFO have concluded that our disclosure controls and procedures are effective.

Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II    OTHER INFORMATION

ITEM 1        LEGAL PROCEEDINGS

In the normal course of business, from time to time, we are involved in legal proceedings relating to the ownership and operations of our properties. In management's opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material effect on our consolidated financial position, results of operations or liquidity. Neither the Company nor any of the Unconsolidated Real Estate Affiliates is currently involved in any material pending legal proceedings nor, to our knowledge, is any material legal proceeding currently threatened against the Company or any of the Unconsolidated Real Estate Affiliates.

ITEM 1A    RISK FACTORS

There are no material changes to the risk factors previously disclosed in our Annual Report.

ITEM 2        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities and Repurchase of Shares
The following table provides information with respect to the stock repurchases made by GGP during the nine months ended September 30, 2017:
Period
Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number or Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
March 2017
2,569,605

$
23.16

2,569,605

$
402,280,147

May 2017
796,371

$
21.90

796,371

$
384,840,711

August 2017
6,324,240

$
21.22

6,324,240

$
250,614,062

September 2017
2,960,775

$
21.12

2,960,775

$
188,072,423

Total
12,650,991

$
21.64

12,650,991

 

(1)
The Company's stock repurchase program, approved by our Board of Directors on August 8, 2011, authorizes the purchase of up to $250 million of the Company's common stock. On August 18, 2015, our Board of Directors approved an increase of $500 million to the Company's existing share repurchase program.


57

ITEM 3        DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4         MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5        OTHER INFORMATION

None.

ITEM 6     EXHIBITS
10.1

 
 
 
 
10.2

 
 
 
 
31.1

 
 
 
 
31.2

 
 
 
 
32.1

 
 
 
 
32.2

 
 
 
 
101

 
The following financial information from GGP Inc.'s. Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, has been filed with the SEC on November 2, 2017, formatted in XBRL (Extensible Business Reporting Language): (1) Consolidated Balance Sheets, (2) Consolidated Statements of Comprehensive Income, (3) Consolidated Statements of Equity, (4) Consolidated Statements of Cash Flows and (5) Notes to Consolidated Financial Statements.

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the registrant has not filed debt instruments relating to long-term debt that is not registered and for which the total amount of securities authorized thereunder does not exceed 10% of total assets of the registrant and its subsidiaries on a consolidated basis as of September 30, 2017. The registrant agrees to furnish a copy of such agreements to the SEC upon request.

58

EXHIBIT INDEX
 
 
 
 
 
Incorporated by Reference Herein
Exhibit Number
 
Description
 
Form
 
Exhibit
 
Filing Date
 
File No.
10.1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31.1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31.2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32.1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32.2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101
 
The following financial information from GGP Inc.'s. Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, has been filed with the SEC on November 2, 2017, formatted in XBRL (Extensible Business Reporting Language): (1) Consolidated Balance Sheets, (2) Consolidated Statements of Comprehensive Income, (3) Consolidated Statements of Equity, (4) Consolidated Statements of Cash Flows and (5) Notes to Consolidated Financial Statements.
 
 
 
 
 
 
 
 

59

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.

 
GGP INC.
 
(Registrant)
 
 
 
 
Date: November 2, 2017
By:
/s/ Michael Berman
 
 
Michael Berman
 
 
Chief Financial Officer
 
 
(on behalf of the Registrant)


60

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