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General Growth Properties Reports First Quarter 2010 Results of Operations

5/10/2010

Jim Graham
Senior Director
Public Affairs
(312) 960-2955

(Updated May 11, 2010)

CHICAGO—May 10, 2010- General Growth Properties, Inc. (the Company or GGP) today announced its operating results for the three months ending March 31, 2010.

“First quarter sales trends improved significantly from the same period last year,” said Adam Metz, chief executive officer of General Growth Properties. “The macroeconomic outlook is improving, and we are seeing signs of recovery and growth in a number of our markets. Even previously hard-hit markets like Florida are showing positive trends. Our retailer tenants are largely more profitable than a year ago, with higher margins, improved balance sheets and rising same-store-sales results. Improvement in comparable tenant sales accelerated over the course of the quarter, including a 10% year-over-year increase in March. In this improving environment, we continue to execute a business strategy designed both to strengthen operations within our portfolio of high-quality retail properties and to create long-term value for our stockholders. The combination of these improving conditions and our disciplined operating strategy has led to increased sales and leasing performance in the first quarter. Leasing activity grew 21% year-over-year, and our strong leasing pipeline is a very positive leading indicator for our business.

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“Our other operating metrics show progress as well,” said Mr. Metz. “Occupancy rates have stabilized and we are controlling expenses. Unfortunately, we will not see the full impact of this recovery and improved performance in our operating results for three or four more quarters, the time it takes for signed leases to be reflected in revenue flow.”

“The decrease in comparable NOI for the quarter, which was consistent with our expectations, reflects the temporary impact of our restructuring and the difficult market conditions of last year, when many of our newer leases were executed. Also, the majority of the negative NOI performance is concentrated in our malls with tenant sales below $350 per square foot. The NOI for malls with tenant sales above $350 per square foot remained essentially flat. We are optimistic that NOI will grow as the economic environment continues to improve and we complete our restructuring. The property-specific planning process we initiated in 2009 is helping us to more effectively execute our business strategy of focusing on the unique characteristics of the market served by each individual shopping center. In the first quarter, we continued to enhance the appeal of our properties to both shoppers and tenants while building a strong financial platform for the future. Also in the first quarter, our Brazilian joint venture Aliansce successfully completed its initial public offering, and our 31% ownership interest in the company provides us access to Brazil's exciting and growing market,” continued Mr. Metz.

First Quarter 2010 and 2009 Comparable Retail and other Segment NOI

	2010		2009
Retail and other segment NOI:	$586,277		$605,920
Adjustments:	(16,657	)	(18,470	)
Comparable retail and other Segment NOI:	$569,620		$587,450
Decrease in Comparable Retail and other segment NOI:	(3.0	%)

A schedule showing adjustments and non-comparable income and expense items and their impact on 2010 and 2009 operating results is provided with this release. Concurrent with this release, the Company has also made available on its website its quarterly package of supplemental financial information that provides additional detail on its operational results.

OPERATIONAL HIGHLIGHTS

GGP is focused on strengthening its assets and operational performance in order to maximize value over the long term. GGP invests in its properties to enhance their positions in the market and their appeal to shoppers and tenants and is committed to nurturing strong and long-lasting relationships with its retail partners.

Among the operational highlights of the first quarter of 2010 at the retail property level are:

Anchor Store Activity – The Company experienced particularly strong big box and department store activity in the first quarter, signing or commencing construction on eleven locations totaling nearly 1.2 million square feet filling previously empty anchor locations. This activity includes new Nordstrom’s at St. Louis Galleria (St. Louis, MO) and Christiana Mall (Newark, DE), a new Kohl’s at Coronado Center (Albuquerque, NM) and new Target stores at Christiana Mall (Newark, DE) and Valley Plaza Mall (Bakersfield, CA)

Ala Moana Center (Honolulu, HI) – Ala Moana Center remains the premier shopping destination in Hawaii, which was reinforced by two high-profile “firsts” in the first quarter of 2010. The first Diane von Furstenberg and the first Tory Burch stores in Hawaii were both approved in the quarter and are expected to open later this year.

The Mall in Columbia (Columbia, MD) – Following one of the most extensive community processes ever conducted, the County Council in Howard County, Md. approved a 30-year master plan for downtown Columbia. This long-term plan is expected to add 5,500 households, 4.3 million square feet of office space and 1.25 million square feet of retail space to this innovative project.

Park Meadows (Lone Tree, CO) – American Girl opened its eighth store in the nation at the Park Meadows property, a highly anticipated event that attracted approximately 1,800 shoppers by 9:00 AM. In addition, Microsoft closed on a lease for an 8,748 square-foot space with a projected opening date of June 1, a new first-to-market store for Park Meadows.

Water Tower Place (Chicago, IL) – In an innovative new agreement, Broadway in Chicago (BIC) leased 10,000 square feet of outparcel space in March 2010, with an opening planned in September. BIC is responsible for bringing some of Broadway’s hottest shows to Chicago, including Wicked, Mary Poppins, The Producers and Billy Elliott. Broadway in Chicago at Water Tower further solidifies Water Tower’s standing as the ultimate Michigan Avenue destination. In addition, Ed Debevic’s, a Chicago institution for both locals and tourists, will open in November on Water Tower’s mezzanine level.

In addition, in January 2010, Aliansce Shopping Centers S.A. (“Aliansce”) completed an initial public offering of Aliansce’s common shares on the Brazilian Stock Exchange, or BM&FBovespa. GGP did not sell any of its Aliansce shares in the offering and now has approximately a 31.4% ownership interest in Aliansce, which develops, owns and manages shopping centers in Brazil.

SEGMENT RESULTS

Retail and Other Segment

NOI in this segment decreased to $586.3 million for the first quarter of 2010 from the $605.9 million reported for the first quarter of 2009. Excluding the items detailed in the attached schedule of significant items that impact comparability, Comparable NOI for the first quarter of 2010 declined 3.0% year over year. NOI was primarily impacted by reduced revenue and occupancy as a result of the Company’s bankruptcy and the economic recession in 2009 when many of our newer leases were signed. See table below.

Comparable Property NOI Bridge

	2010		2009		Y-o-Y Change
Total Annual Retail and Other NOI	$586,277		$605,920		(3.2	%)

Adjustments:
NOI from non-comparable properties	(4,084	)	(7,998	)
Termination Income	(12,824	)	(9,267	)
Corporate and Other	251		(1,205	)

Comparable Retail and Other NOI	$569,620		$587,450		(3.0	%)

Revenues from consolidated properties declined $20.8 million, or approximately 2.8%, for the first quarter of 2010 to $734.2 million, primarily due to declines in minimum rents and tenant recoveries as a result of declines in occupancy rates and in specialty leasing occupancy and sales volumes. Operating expenses for consolidated properties decreased slightly overall, driven by continuing improvements in controllable expenses, partially offset by expenses in the first quarter related to unusual weather events and other one-time costs.

Revenues from unconsolidated properties at the Company’s ownership share were $151.1 million for the first quarter of 2010, roughly comparable to the $152.1 million in the first quarter of 2009, reflecting continued steady performance.

Comparable tenant sales, on a trailing 12 month basis, decreased 3.5% compared to the same period last year. However, on a quarterly basis, comparable tenant sales rose a healthy 7.5% year-over-year, with momentum picking up over the course of the quarter. January 2010 comparable sales increased 2.5% year-over-year, with February and March showing accelerating increases of 6.0% and 10.0%, respectively.

Retail leasing activity increased significantly in the first quarter of 2010, with total in-line and outparcel tenant leasing deals covering 1.36 million square feet signed, an increase of 21% over the same period of last year. Within total deals, the number of new lease deals grew 84%, representing new deal square footage of approximately 284 thousand square feet. Although rents remain below 2007 peak levels, they have stabilized. As sales continue their upward trend, the Company expects lease rates to reflect those increases over time.

Retail Center occupancy decreased to 90.5% at March 31, 2010 from 90.9% at March 31, 2009 as current occupancy is a sign of, in part, the 2009 economic recession and, accordingly, does not yet reflect the current year increased retail leasing activity described immediately above.

Master Planned Communities Segment

GGP’s premier master planned community segment includes The Woodlands and Bridgeland, both in the Houston metropolitan area, Summerlin in Las Vegas and Columbia and Emerson in Maryland.

Land sale revenues for the first quarter of 2010 were $5.1 million for consolidated properties and $12.6 million for unconsolidated properties, compared to $9.0 million and $5.1 million, respectively, for the first quarter of 2009. Decreases in land sale revenues for the consolidated communities, particularly Summerlin, reflect continued weak overall demand for individual lots. These decreases were partially offset by sales of lots in the Houston communities, which improved compared to 2009.

NOI from the Master Planned Communities segment for the first quarter of 2010 was a loss of $5.1 million for consolidated properties and earnings of $2.7 million for unconsolidated properties, compared to a loss of $54.4 million and earnings of $0.3 million, respectively, in the first quarter of 2009. The 2009 amount for the consolidated properties includes a provision for impairment of $52.8 million recorded at the Fairwood (Maryland) community to reflect an agreement to sell substantially all of the remaining acreage at the community in a single bulk transaction, which closed in the second quarter of 2009. Individual lot sales in 2010 for the consolidated communities did not exceed selling and community-specific general and administrative costs, which are largely fixed.

CORE FFO, FFO AND EPS HIGHLIGHTS

Core FFO for the first quarter of 2010 was $254.1 million, or $0.78 per fully diluted share, compared to a loss of $122.9 million, or $0.38 per fully diluted share, for the first quarter of 2009. FFO was $248.2 million in the first quarter of 2010 compared to a loss of $165.9 million in the first quarter of 2009, an increase of approximately $414.1 million. The primary drivers for this quarterly increase were (i) a decrease in aggregate provisions for impairment of $319.7 million, reflecting improving economic prospects since the downturn in 2009, and (ii) gains of approximately $283.1 million (included as a component of reorganization items) recorded in the first quarter of 2010 related to estimated fair value adjustments of the secured debt of the subsidiary debtors that emerged from bankruptcy in the quarter (as required under GAAP and solely for such accounting purposes). Partially offsetting these increases were $193.7 million, net, of other reorganization items incurred in the first quarter of 2010 arising from the Company’s bankruptcy proceedings, as detailed in the supplemental schedule of items that impact comparability. Similar costs incurred in the first quarter of 2009 were $38.3 million (recorded as strategic initiative costs because these costs were incurred prior to GGP’s petitions for bankruptcy protection in April 2009).

Given the uncertainties concerning GGP’s capital structure and the timing of the conclusion of its exit from bankruptcy, GGP will not provide FFO guidance for 2010 at this time.

EPS were $0.16 in the first quarter of 2010 compared to a loss $1.27 in the first quarter of 2009. Although a substantial majority of the increase in EPS was due to the items listed in the attached supplemental comparative schedule of the matters affecting NOI, Core FFO and FFO described above, first quarter 2010 EPS was also positively impacted by approximately $15.3 million of gain the Company was required to recognize under applicable accounting rules as a result of the dilution in ownership interest following the January 27, 2010 public offering of common stock by Aliansce, our unconsolidated affiliate in Brazil. GGP has excluded this gain from FFO. Any subsequent increases or decreases in the market value of Aliansce common stock are not, and will not be, reflected in GGP’s earnings as the Company will continue to account for its Aliansce ownership based on the equity method of accounting.

FINANCIAL RESTRUCTURING

In April 2009, GGP and certain of its subsidiaries filed for relief under Chapter 11 of the Bankruptcy Code. The Chapter 11 case created the protection necessary for GGP to execute a restructuring to extend mortgage maturities and reduce corporate debt. GGP has pursued a deliberate two-stage strategy to establish a sustainable, long-term capital structure for the Company. The first step was to restructure its property-level secured mortgage debt. The Company believes it has achieved substantial progress with respect to the first phase of its restructuring strategy. Through April 30, 2010, the Company has signed consensual plans of reorganization for $14.80 billion of secured mortgage debt and substantially all of the GGP subsidiaries associated with such debt have emerged from bankruptcy.

The Company is now in the midst of the second phase: exploring all potential alternatives for emergence from bankruptcy. As part of that process, GGP entered into agreements with an affiliate of Brookfield Asset Management Inc. (“Brookfield”), Pershing Square Capital Management (“Pershing”) and Fairholme Funds (“Fairholme”), to invest in a proposed recapitalization of GGP at a plan value of $15.00 per share with full recovery at par plus accrued interest to unsecured creditors. As a result of these agreements, the Company now has commitments for all financing necessary to emerge from Chapter 11. Consummation of the transactions contemplated by the agreements with Brookfield, Pershing and Fairholme are subject to higher and better offers pursuant to the bidding process approved by the Bankruptcy Court. There is no assurance that these transactions will be consummated. The Company is focused on continued progress in the Chapter 11 Cases and a comprehensive capital raise process, and is continuing to consider all alternatives to maximize value for all of the Company’s stakeholders.

GGP INFORMATION

The Company currently has ownership interest in, or management responsibility for, over 200 regional shopping malls in 43 states, as well as ownership in master planned community developments and commercial office buildings. The Company’s portfolio totals approximately 200 million square feet of retail space and includes over 24,000 retail stores nationwide. The Company’s common stock is currently traded on the New York Stock Exchange under the symbol GGP.

NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES AND DEFINITIONS

FUNDS FROM OPERATIONS AND CORE FFO

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

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

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

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

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

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

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

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

PROPERTY INFORMATION

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

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements. Actual results may differ materially from the results suggested by these forward-looking statements, for a number of reasons, including, but not limited to, the bankruptcy filings of the debtors not currently emerging from bankruptcy, our ability to refinance, extend, restructure or repay our near and intermediate term debt, our substantial level of indebtedness, our ability to implement a plan or plans of reorganization for the remaining debtors to emerge from bankruptcy, our ability to raise capital through equity issuances, asset sales or the incurrence of new debt, retail and credit market conditions, impairments, land sales in the Master Planned Communities segment, and our liquidity demands. Readers are referred to the documents filed by General Growth Properties, Inc. with the Securities and Exchange Commission, which further identify the important risk factors which could cause actual results to differ materially from the forward-looking statements in this release. The Company disclaims any obligation to update any forward-looking statements.

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