General Growth Properties and Its Predecessor Companies Have Been in the Shopping Center Business for Fifty 33
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X NE T... GENERAL 2003 Annual Report GROWTH PROPERTIES, INC. OUR VISION FOR THE N XT E 50 YEARS PEOPLE CREATING SPECIAL PLACES AND EXPERIENCES CONTENTS Financial Highlights Company Profile 1 Shareholder Letter 3 Portfolio 16 Financial Review 25 Directors & Officers 75 Corporate Information 76 COMPANY PROFILE General Growth Properties and its predecessor companies have been in the shopping center business for fifty 33 1 years. It is the second largest regional mall Real Estate Investment Trust (REIT) in the United States. General Growth 25 1 owns, develops, operates and/or manages shopping malls in 41 states and has ownership interests in, or management 122 responsibility for, 172 regional shopping malls totaling 150 million square feet of retail space. The total retail 114 space is inclusive of more than 16,000 retailers nationwide. General Growth provides investors with the opportunity to participate in the ownership of high-quality, income-producing real estate while maintaining liquidity. Our primary 97 95 93 89 objective is to provide increasing dividends and capital appreciation for our shareholders. 85 84 83 Creating shareholder value is a primary objective of the company. The Bucksbaum family, which founded General 71 Growth, is still engaged in the operation of the company’s day-to-day business activities. As owners of the largest stake in the company, General Growth management’s interests are aligned with those of each and every GGP shareholder. FINANCIAL HIGHLIGHTS dollars in thousands, except per share amounts 2 2 9 0 0 9 8 8 % Change 0 0 9 9 9 9 99 00 00 99 2001 2001 1 1 1 2 2 1 20 20 2003 2003 2003 vs. 2002 2003 2002 2001 2000 1999 SHOPPING CENTERS TOTAL SQUARE OWNED*† at year end FOOTAGE OWNED* in millions Consolidated Property Revenues 31.5% $ 1,185,693 $ 901,660 $ 803,709 $ 794,772 $ 691,044 *Information presented for Consolidated *Information presented for Consolidated Unconsolidated Revenues and Unconsolidated Centers. and Unconsolidated Centers (at Company Share) 12.5% $ 443,488 $ 394,223 $ 352,515 $ 316,888 $ 215,977 † Includes regional malls only. Funds from Operations (FFO) (Before Minority Interests) 27.5% $ 618,561 $ 485,304 $ 296,777 $ 329,262 $ 261,767 FFO Per Share (Fully Diluted)(1) 22.9% $ 2.31 $ 1.88 $ 1.32 $ 1.47 $ 1.28 Consolidated Real Estate Assets at Cost 33.4% $10,305,066 $ 7,724,515 $ 5,707,967 $ 5,439,466 $ 5,023,690 Stock and Partnership Units Outstanding at Year End $1.08 Shares of Common Stock(1) 217,293,976 187,191,255 185,771,796 156,843,777 155,092,275 $10,305 $10,258 Operating Partnership Units(1)(2) 55,712,250 58,668,741 58,717,479 58,781,115 59,394,576 $ .92 $9,061 Shares of Convertible Preferred Stock – 13,500,000 13,500,000 13,500,000 13,500,000 $ .80 $7,725 Shares of Common Stock $7,326 $7,243 $ .69 Full Conversion of Operating $ .66 $6,931 $ .63 Partnership Units and Convertible Preferred Stock(1) 273,006,226 271,362,846 269,992,125 241,127,742 239,989,701 $5,708 $5,439 $5,176 $5,024 MALL DATA dollars in millions $4,063 2001 2003 2002 2001 2000 1999 Mall Shop Tenant Sales(3) $ 10,258 $ 9,061 $ 7,326 $ 7,243 $ 6,931 Shopping Center Interests (4) 2 2 2 9 0 8 9 0 9 0 8 8 Owned at Year End 133 125 97 95 93 0 0 0 9 9 9 9 99 00 9 9 99 00 99 00 2001 2001 2001 1 1 2 1 1 1 2 1 2 20 20 20 2003 2003 2003 Mall Shop Square Footage CONSOLIDATED MALL SHOP SALES*† DIVIDEND GROWTH Leased at Year End(3) 91.3% 91.0% 91.0% 91.0% 90.1% REAL ESTATE dollars in millions PER SHARE* dollar/share declared ASSETS AT COST dollars in millions *Information presented for Consolidated *Reflects dividends declared for such fiscal years, and Unconsolidated Centers including the amount declared in January 2004 (1) Due to the three-for-one stock split effective December 5, 2003, all share and per share amounts have been reflected on a post-split basis. for December 2003 operations. † Excluding redevelopment properties. (2) Operating Partnership Units can be exchanged on a one-for-one basis into shares of the Company’s common stock. Due to the three-for-one stock split effective December 5, 2003, all per share amounts have (3) Excluding redevelopment properties. been reflected on a post-split basis. (4) Includes Consolidated and Unconsolidated regional malls only. GENERAL GROWTH PROPERTIES, INC. 2003 ANNUAL REPORT OPERATING PRINCIPLES GGP was founded on the following principles, which guide our daily business. We still strive to: 1. Maintain a clear focus on what we do best: create value and profit by acquiring, developing, renovating, and managing retail properties throughout the United States. 2. Make decisions with your money that we would make with our own. When we act, we are acting with our own money side by side with yours. We are partners with our shareholders. The management and approximately 4,000 employees of General Growth own approximately 30% of the company. 3. Avoid actions based solely on our current stock price or for short-term results. We are in a long-term business. Our goal is to maximize and increase shareholder value. TO OUR SHAREHOLDERS 4. Use conservative reporting methods that accurately and meaning- fully reflect the operating results of our company. These methods Fifty years ago Matthew and Martin Bucksbaum opened their first shopping center, are recommended by the National Association of Real Estate Town and Country, in Cedar Rapids, Iowa. They were ahead of the curve, as shopping Investment Trusts (NAREIT). centers in the ensuing 50 years have proven to be a smart, profitable investment and an important part of the world’s commercial, cultural and local community land- 5. Distribute a low percentage of Funds From Operations (FFO). scapes. We at General Growth Properties (GGP) are proud of our history over the Undistributed FFO represents our least expensive form of past 50 years, proud of our recent accomplishments and committed to remaining capital. Depreciation in real estate requires that we have the ahead of the curve for the NEXT 50 years. Our past and future success is based on funds available to reinvest to keep our properties interesting, ensuring that our people create special places and experiences for our Consumers, appealing, and attractive to customers. Owners, Retailers and Employees (C.O.R.E.). That means ensuring our people use good sense when making the right business decisions based upon tried and true fundamentals. 6. Keep sight of the reasons our community of shareholders and That means ensuring our people maintain our ethical compass in the right direction. business partners are invested in us: performance, security, and That means ensuring our people bring clarity and focus to our decision-making liquidity. We will be candid in our reporting to you. We will be process. That means ensuring our Company aggressively looks for opportunity. That honest in telling you what is good in our business and what the means ensuring we continually develop our employee talent. That means ensuring challenges are. In a business that counts on the successful handling we deliver consistent profitability. Good reputations and recurring profitability are of details, we will work hard to keep your confidence as we tend not made overnight. They are made by continuous learning over the past 50 years to the details at hand. and making the right choices, a practice we will continue for the NEXT 50 years. 2 3 GENERAL GROWTH PROPERTIES, INC. 2003 ANNUAL REPORT Our evolution has been built on continuously compounding every aspect of the shopping center business. GGP’s roots were in a single grocery store worth $35,000. That led to a single shopping center worth $1 million which in turn led to today’s enterprise value of approximately $17 billion. This is the power of compounding. Not only have we compounded the number of properties we own, but we simultaneously generated industry-leading, compounded returns for you, our shareholders. We compounded our management, leasing and marketing skills into the finest in our industry. We compounded our development expertise into an efficient and profitable operation. We compounded our financial skills into complex and innovative transactions. We compounded our talent and our knowledge to distinguish ourselves from our peers. These things combined produced Funds From Operations (FFO) per share compounded growth and total return appreciation of 16% and 20% respectively over the last 10 years as a public company. Every $1.00 invested in GGP at the initial public EX N T... 1954,Real estate visionaries Martin and Matthew Bucksbaum expand their family grocery operation with the creation of one of America’s earliest shopping centers—a spark offering (IPO) in April 1993, including reinvested dividends, has grown to over that helped redefine the retail landscape. $5.50 at the end of 2003. The power of compounding is a guiding principle at GGP. As entrepreneurial buyers and managers of real estate, we don’t just sit back and simply hope that our real estate appreciates. We manage our properties aggressively and thrived for 50 years in the real estate industry, an industry littered with many financial consistently improve them to be positioned to attract our C.O.R.E. constituencies. wrecks. We are proud to have created wealth for thousands of shareholders over the We make our properties appeal to leading retailers of the world so they will locate years.