UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

xQuarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2012

oTransition 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

GENERAL GROWTH PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	27-2963337
(State or other jurisdiction of	(I.R.S. Employer
incorporating or organization)	Identification Number)

110 N. Wacker Dr., Chicago, IL	60606
(Address of principal executive offices)	(Zip Code)

(312) 960-5000

(Registrant’s telephone number, including area code)

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. x 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). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

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

Indicate by checkmark 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. x Yes o No

The number of shares of Common Stock, $.01 par value, outstanding on November 1, 2012 was 938,881,500.

GENERAL GROWTH PROPERTIES, INC.

INDEX

			PAGE
			NUMBER
Part I	FINANCIAL INFORMATION
	Item 1:	Consolidated Financial Statements (Unaudited)
		Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011	3
		Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2012 and 2011	4
		Consolidated Statements of Equity for the nine months ended September  30, 2012 and 2011	5
		Consolidated Statements of Cash Flows for the nine months ended September  30, 2012 and 2011	6
	Notes to Consolidated Financial Statements (Unaudited)		8
		Note 1: Organization	8
		Note 2: Summary of Significant Accounting Policies	9
		Note 3: Acquisitions and Intangibles	13
		Note 4: Dispositions, Discontinued Operations and Gains (Losses) on Dispositions of Interests in Operating Properties	14
		Note 5: Unconsolidated Real Estate Affiliates	15
		Note 6: Mortgages, Notes and Loans Payable	17
		Note 7: Income Taxes	19
		Note 8: Warrant Liability	19
		Note 9: Equity and Redeemable Noncontrolling Interests	21
		Note 10: Earnings Per Share	23
		Note 11: Stock-Based Compensation Plans	24
		Note 12: Prepaid Expenses and Other Assets	25
		Note 13: Accounts Payable and Accrued Expenses	26
		Note 14: Litigation	26
		Note 15: Commitments and Contingencies	27
		Note 16: Subsequent Events	27
	Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
		Liquidity and Capital Resources	33
	Item 3:	Quantitative and Qualitative Disclosures about Market Risk	39
	Item 4:	Mine Safety Disclosures	40
	Item 5:	Controls and Procedures	40
Part II	OTHER INFORMATION
	Item 1:	Legal Proceedings	40
	Item 1A:	Risk Factors	41
	Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	41
	Item 3:	Defaults Upon Senior Securities	41
	Item 5:	Other Information	41
	Item 6:	Exhibits	41
	SIGNATURE		43
	EXHIBIT INDEX		44

2

GENERAL GROWTH PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30,			December 31,
	2012			2011
	(Dollars in thousands, except share amounts)
Assets:
Investment in real estate:
Land	$	4,303,329		$	4,623,944
Buildings and equipment	18,847,928			19,837,750
Less accumulated depreciation	(1,286,753		)	(974,185		)
Construction in progress	383,977			135,807
Net property and equipment	22,248,481			23,623,316
Investment in and loans to/from Unconsolidated Real Estate Affiliates	2,717,079			3,052,973
Net investment in real estate	24,965,560			26,676,289
Cash and cash equivalents	637,946			572,872
Accounts and notes receivable, net	243,503			218,749
Deferred expenses, net	176,377			170,012
Prepaid expenses and other assets	1,398,494			1,805,535
Assets held for disposition	—			74,694
Total assets	$	27,421,880		$	29,518,151
Liabilities:
Mortgages, notes and loans payable	$	16,074,015		$	17,143,014
Accounts payable and accrued expenses	1,271,364			1,445,738
Dividend payable	106,312			526,332
Deferred tax liabilities	22,520			29,220
Tax indemnification liability	303,750			303,750
Junior Subordinated Notes	206,200			206,200
Warrant liability	1,399,043			985,962
Liabilities held for disposition	—			74,795
Total liabilities	19,383,204			20,715,011
Redeemable noncontrolling interests:
Preferred	134,531			120,756
Common	132,020			103,039
Total redeemable noncontrolling interests	266,551			223,795
Commitments and Contingencies	—			—
Redeemable Preferred Stock: as of September 30, 2012 and December 31, 2011, $0.01 par value, 500,000 shares authorized, none issued and outstanding	—			—
Equity:
Common stock: as of September 30, 2012, $0.01 par value, 11,000,000,000 shares authorized and 938,619,521 shares issued and outstanding; as of December 31, 2011, $0.01 par value, 11,000,000,000 shares authorized and 935,307,487 shares issued and outstanding	9,387			9,353
Additional paid-in capital	10,417,657			10,405,318
Retained earnings (accumulated deficit)	(2,661,759		)	(1,883,569		)
Accumulated other comprehensive loss	(82,026		)	(47,773		)
Total stockholders’ equity	7,683,259			8,483,329
Noncontrolling interests in consolidated real estate affiliates	88,866			96,016
Total equity	7,772,125			8,579,345
Total liabilities and equity	$	27,421,880		$	29,518,151

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

3

GENERAL GROWTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(Dollars in thousands, except per share amounts)
Revenues:
Minimum rents	$	401,259		$	383,541		$	1,175,365		$	1,158,479
Tenant recoveries	184,869			189,942			542,784			547,157
Overage rents	12,835			12,823			34,230			29,291
Management fees and other corporate revenues	17,823			14,188			55,646			43,775
Other	16,387			16,488			49,802			47,357
Total revenues	633,173			616,982			1,857,827			1,826,059
Expenses:
Real estate taxes	59,258			56,530			174,797			173,898
Property maintenance costs	18,758			21,419			62,102			71,128
Marketing	8,085			7,639			22,497			19,937
Other property operating costs	101,890			107,631			286,170			290,629
Provision for doubtful accounts	1,370			1,078			3,097			2,295
Property management and other costs	38,903			45,455			119,350			137,517
General and administrative	10,045			15,441			31,675			18,067
Provision for impairment	98,288			—			98,288			—
Depreciation and amortization	208,833			226,360			612,188			675,536
Total expenses	545,430			481,553			1,410,164			1,389,007
Operating income	87,743			135,429			447,663			437,052
Interest income	766			680			2,307			1,912
Interest expense	(204,917		)	(218,932		)	(607,915		)	(672,936		)
Warrant liability adjustment	(123,381		)	337,781			(413,081		)	319,460
Gain from change in control of investment properties	—			—			18,547			—
Loss before income taxes, equity in income (loss) of Unconsolidated Real Estate Affiliates, discontinued operations and allocation to noncontrolling interests	(239,789		)	254,958			(552,479		)	85,488
Provision for income taxes	(2,449		)	(3,954		)	(5,553		)	(7,882		)
Equity in income (loss) of Unconsolidated Real Estate Affiliates	22,054			9,833			39,849			(2,534		)
Income (loss) from continuing operations	(220,184		)	260,837			(518,183		)	75,072
Discontinued operations	13,576			(4,276		)	10,982			(13,688		)
Net (loss) income	(206,608		)	256,561			(507,201		)	61,384
Allocation to noncontrolling interests	(1,279		)	(4,511		)	(6,236		)	(6,718		)
Net (loss) income attributable to common stockholders	$	(207,887	)	$	252,050		$	(513,437	)	$	54,666
Basic Earnings (Loss) Per Share:
Continuing operations	$	(0.24	)	$	0.27		$	(0.56	)	$	0.07
Discontinued operations	0.01			—			0.01			(0.01		)
Total basic earnings (loss) per share	$	(0.23	)	$	0.27		$	(0.55	)	$	0.06
Diluted Loss Per Share:
Continuing operations	$	(0.24	)	$	(0.08	)	$	(0.56	)	$	(0.26	)
Discontinued operations	0.01			—			0.01			(0.01		)
Total diluted loss per share	$	(0.23	)	$	(0.08	)	$	(0.55	)	$	(0.27	)
Dividends declared per share	$	0.11		$	0.10		$	0.31		$	0.30
Comprehensive Income (Loss), Net:
Net (loss) income	$	(206,608	)	$	256,561		$	(507,201	)	$	61,384
Other comprehensive loss:
Net unrealized losses on financial instruments	—			—			—			(1		)
Foreign currency translation	(842		)	(85,935		)	(35,202		)	(43,055		)
Unrealized gains (losses) on available-for-sale securities	606			(8		)	716			(3		)
Other comprehensive loss	(236		)	(85,943		)	(34,486		)	(43,059		)
Comprehensive (loss) income	(206,844		)	170,618			(541,687		)	18,325
Comprehensive loss allocated to noncontrolling interests	(1,284		)	(3,899		)	(6,003		)	(6,416		)
Comprehensive (loss) income, net attributable to common stockholders	$	(208,128	)	$	166,719		$	(547,690	)	$	11,909

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

4

GENERAL GROWTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

							Retained						Noncontrolling
				Additional			Earnings			Accumulated Other			Interests in
	Common			Paid-In			(Accumulated			Comprehensive			Consolidated Real			Total
	Stock			Capital			Deficit)			Income (Loss)			Estate Affiliates			Equity
	(Dollars in thousands, except per share amounts)
Balance at January 1, 2011	$	9,419		$	10,681,586		$	(612,075	)	$	172		$	102,647		$	10,181,749
Net income (loss)							54,666						(600		)	54,066
Distributions to noncontrolling interests in consolidated Real Estate Affiliates													(4,759		)	(4,759		)
Issuance of common stock - payment of dividend (22,256,121 common shares)	223			(244		)	21									—
Restricted stock grant, net of forfeitures and compensation expense ((282,320) common shares)	(3		)	8,593												8,590
Stock options exercised (97,987 common shares)	1			488												489
Purchase and cancellation of common shares ((34,906,069) common shares)	(349		)	(388,445		)	(154,221		)							(543,015		)
Cash dividends reinvested (DRIP) in stock (4,846,784 common shares)	48			80,660												80,708
Other comprehensive loss										(42,757		)				(42,757		)
Cash distributions declared ($0.30 per share)				(16		)	(283,297		)							(283,313		)
Cash redemptions for common units in excess of carrying value				(648		)										(648		)
Adjustment for noncontrolling interest in operating partnership				12,984												12,984
Balance at September 30, 2011	$	9,339		$	10,394,958		$	(994,906	)	$	(42,585	)	$	97,288		$	9,464,094
Balance at January 1, 2012	$	9,353		$	10,405,318		$	(1,883,569	)	$	(47,773	)	$	96,016		$	8,579,345
Net loss							(513,437		)				(115		)	(513,552		)
Distributions to noncontrolling interests in consolidated Real Estate Affiliates													(7,035		)	(7,035		)
Restricted stock grant, net of forfeitures and compensation expense ((48,125) common shares)				6,632												6,632
Employee stock purchase program (98,076 common shares)	1			1,604												1,605
Stock options exercised (396,064 common shares)	4			7,557												7,561
Cash dividends reinvested (DRIP) in stock (2,866,019 common shares)	29			43,810												43,839
Other comprehensive loss										(34,253		)				(34,253		)
Cash distributions declared ($0.31 per share)							(290,797		)							(290,797		)
Cash redemptions for common units in excess of carrying value				(409		)										(409		)
Adjustment for noncontrolling interest in operating partnership				(46,855		)										(46,855		)
Adjustment to dividend for RPI Spin-Off							26,044									26,044
Balance at September 30, 2012	$	9,387		$	10,417,657		$	(2,661,759	)	$	(82,026	)	$	88,866		$	7,772,125

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

5

GENERAL GROWTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
	2012			2011
	(In thousands)
Cash Flows from Operating Activities:
Net (loss) income	$	(507,201	)	$	61,384
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Equity in (income) loss of Unconsolidated Real Estate Affiliates	(39,849		)	2,534
Distributions received from Unconsolidated Real Estate Affiliates	30,021			21,996
Provision for doubtful accounts	3,264			4,733
Depreciation and amortization	621,388			755,152
Amortization/write-off of deferred finance costs	3,576			1,925
Accretion/write-off of debt market rate adjustments	(42,446		)	(57,056		)
Amortization of intangibles other than in-place leases	79,504			104,691
Straight-line rent amortization	(51,049		)	(78,272		)
Gain on dispositions	(13,037		)	(1,822		)
Gain from change in control of investment properties	(18,547		)	—
Gain on extinguishment of debt	(9,911		)	—
Provisions for impairment	118,588			—
Warrant liability adjustment	413,081			(319,460		)
Net changes:
Accounts and notes receivable	31,041			(4,628		)
Prepaid expenses and other assets	(1,104		)	34,115
Deferred expenses	(34,838		)	(14,936		)
Restricted cash	62,652			15,681
Accounts payable and accrued expenses	(48,870		)	(123,001		)
Other, net	10,994			(7,234		)
Net cash provided by operating activities	607,257			395,802
Cash Flows from Investing Activities:
Acquisition/development of real estate and property additions/improvements	(584,246		)	(180,506		)
Proceeds from sales of investment properties	194,269			446,765
Proceeds from sales of investment in Unconsolidated Real Estate Affiliates	—			74,906
Contributions to Unconsolidated Real Estate Affiliates	(62,139		)	(55,999		)
Distributions received from Unconsolidated Real Estate Affiliates in excess of income	289,366			49,147
Decrease (increase) in restricted cash	6,195			(87,822		)
Net cash (used in) provided by investing activities	(156,555		)	246,491
Cash Flows from Financing Activities:
Proceeds from refinance/issuance of mortgages, notes and loans payable	3,892,525			2,145,848
Principal payments on mortgages, notes and loans payable	(4,022,632		)	(2,600,840		)
Deferred finance costs	(27,254		)	(20,032		)
Cash distributions paid to common stockholders	(281,089		)	(225,830		)
Cash distributions reinvested (DRIP) in common stock	43,839			80,708
Cash distributions paid to holders of common units	(1,543		)	(6,802		)
Purchase and cancellation of common shares	—			(543,015		)
Other, net	10,526			(952		)
Net cash used in financing activities	(385,628		)	(1,170,915		)
Net change in cash and cash equivalents	65,074			(528,622		)
Cash and cash equivalents at beginning of period	572,872			1,021,311
Cash and cash equivalents at end of period	$	637,946		$	492,689

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

6

GENERAL GROWTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(UNAUDITED)

	Nine Months Ended September 30,
	2012			2011
	(In thousands)
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	631,844		$	719,903
Interest capitalized	780			1,704
Income taxes paid	2,598			8,222
Reorganization items paid	—			128,070
Third party property exchange	—			44,672
Non-Cash Transactions:
Change in accrued capital expenditures included in accounts payable and accrued expenses	$	1,170		$	(11,463	)
Debt payoffs via deeds in-lieu	—			161,524
Note receivable related to property sale	17,000			—
Rouse Properties, Inc. Dividend:
Adjustment to dividend for RPI Spin-off	(26,044		)	—
Non-Cash Distribution of RPI Spin-off:
Assets	1,554,486			—
Liabilities and equity	(1,554,486		)	—
Non-Cash Sale of Property to RPI:
Assets	63,672			—
Liabilities	(63,672		)	—
Non-Cash Acquisition of The Oaks and Westroads:
Assets	218,071			—
Liabilities and equity	(218,071		)	—
Decrease in assets and liabilities resulting from the contribution of a wholly owned mall into a newly formed unconsolidated joint venture
Assets	—			(336,744		)
Liabilities and equity	—			(238,126		)

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

7

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except 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, 2011 which are included in the Company’s annual report on Form 10-K (the “Annual Report”) for the fiscal year ended December 31, 2011, and as recast in the Form 8-K filed on June 27, 2012, (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.  Capitalized terms used, but not defined in this Quarterly Report, have the same meanings as in our Annual Report.

General

General Growth Properties, Inc. (“GGP”, the “Successor” 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”.  GGP is the successor registrant, by merger, on November 9, 2010 to GGP, Inc. (the “Predecessor”).  The Predecessor had filed for bankruptcy protection under Chapter 11 of Title 11 of the United States Code (“Chapter 11”) in the Southern District of New York on April 16, 2009 and emerged from bankruptcy, pursuant to a plan of reorganization (the “Plan”) on November 9, 2010.  In these notes, the terms “we,” “us” and “our” refer to GGP and its subsidiaries or, in certain contexts, the Predecessor and its subsidiaries.

GGP, through its subsidiaries and affiliates, operates, manages, develops and acquires retail and other rental properties, primarily regional malls, which are predominantly located throughout the United States. GGP also holds assets in Brazil through investments in Unconsolidated Real Estate Affiliates (as defined below).

Substantially all of our business is conducted through GGP Limited Partnership (the “Operating Partnership” or “GGPLP”).   GGPLP owns an interest in all retail and other rental properties that are part of the consolidated financial statements of GGP.  As of September 30, 2012, GGP holds approximately a 99% common equity ownership (without giving effect to the potential conversion of the Preferred Units as defined below) of the Operating Partnership, while the remaining 1% is held by limited partners that indirectly include family members of the original stockholders of the Predecessor and certain previous contributors of properties to the Operating Partnership.

The Operating Partnership also has preferred units of limited partnership interest (the “Preferred Units”) outstanding.  The terms of the Preferred Units provide that the Preferred Units are convertible into Common Units which then are redeemable for cash or, at our option, shares of GGP common stock (Note 9).

In addition to holding ownership interests in various joint ventures, the Operating Partnership generally conducts its operations through the following subsidiaries:

·GGP-TRC, LLC (“TRCLLC”), formerly known as The Rouse Company, LLC, which has ownership interests in certain Consolidated Properties and Unconsolidated Properties (each as defined below) and is the borrower of certain unsecured bonds (Note 6).

·General Growth Management, Inc. (“GGMI”), a taxable REIT subsidiary (a “TRS”), which manages, leases, and performs various services for some of our Unconsolidated Real Estate Affiliates (defined below).  GGMI also performs marketing and strategic partnership services at all of our Consolidated Properties.

In this Quarterly Report, we refer to our ownership interests in properties in which we own a majority or controlling interest and, as a result, are consolidated under accounting principles generally accepted in the United States of America (“GAAP”) as the “Consolidated Properties.”  We also hold some 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”.

8

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

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. All significant intercompany balances and transactions have been eliminated.

We operate in a single reportable segment referred to as our retail and other segment, which includes the operation, development and management of retail and other rental properties, primarily regional malls.  Our portfolio of regional malls represents a collection of retail properties that are 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.  We do not distinguish or group our consolidated operations based on geography, size or type. 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.

The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with GAAP and in conformity with the rules and regulations of the SEC applicable to interim financial information. As such, certain information and footnote disclosures normally included in complete annual financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. The results for the interim period ended September 30, 2012 are not necessarily indicative of the results to be obtained for the full fiscal year.

Reclassifications

Certain prior period amounts in the consolidated financial statements have been reclassified to conform to the current period presentation as amounts included on the Consolidated Statements of Operations and Comprehensive Income (Loss) for properties sold have been reclassified to discontinued operations for all periods presented.

In addition, three properties previously classified as held for sale were reclassified as held for use in the first quarter of 2012.  These properties are presented within continuing operations for all periods presented in the accompanying consolidated financial statements (Note 4).

In addition, prior period disclosures related to the Consolidated Statements of Operations and Comprehensive Income (Loss) in the accompanying footnotes have been adjusted for the impacts of discontinued operations.

Transactions with Affiliates

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 and are reported at 100% of the revenue earned from the joint venture in management fees and other corporate revenues on our Consolidated Statements of Operations and Comprehensive Income (Loss).  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 Operations and Comprehensive Income (Loss) 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:

9

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Management fees from affiliates	$	17,565		$	14,177		$	54,445		$	43,363
Management fee expense	(5,370		)	(5,441		)	(17,037		)	(16,171		)
Net management fees from affiliates	$	12,195		$	8,736		$	37,408		$	27,192

In connection with the spin-off of Rouse Properties, Inc. (“RPI Spin-Off”), we have entered into a Transition Services Agreement (“TSA”) with RPI.  In accordance with the TSA, we have agreed to provide legal and other services to RPI for established fees, which were not material for the three and nine months ended September 30, 2012.

Acquisitions of Operating Properties

Acquisitions of properties are accounted for utilizing the acquisition method of accounting and, accordingly, the results of operations of acquired properties were 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, debt liabilities assumed 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. No significant value had been ascribed to the tenant relationships (Note 3).

Impairment

Operating properties

Accounting for the impairment of long-lived assets requires that if impairment indicators exist and the undiscounted cash flows expected to be generated by an asset are less than its carrying amount, an impairment provision should be recorded to write down the carrying amount of such asset to its fair value.  We 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, management’s intent with respect to the properties and prevailing market conditions.

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.

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.  The cash flow estimates used both for determining recoverability and estimating fair value are inherently judgmental and reflect current and projected trends in rental, occupancy and capitalization rates, and estimated holding periods for the applicable properties.  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 reduce the recoverability periods for these assets.  If we cannot recover the carrying value of these properties within the planned hold period, we will estimate the fair values of the assets and record impairment charges for properties in which the estimated fair value is less than their carrying value.

10

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

We recorded impairment charges of $118.6 million on nine of our operating properties during the nine months ended September 30, 2012.  Of these impairment charges, $98.3 million related to seven of our operating properties and were recorded during the three months ended September 30, 2012.  These impairment charges are included in provision for impairment in our Consolidated Statements of Operations and Comprehensive Income (Loss).

During the three months ended September 30, 2012, three of the impairment charges related to regional malls that were transferred to the special servicer.  One of the properties was sold, in a lender directed sale in full satisfaction of the related debt, subsequent to September 30, 2012, for an amount less than the carrying value (Note 16).  Accordingly, we recorded an impairment charge of $11.1 million, resulting in a net book value of $15.2 million, which is less than the carrying value of the non-recourse debt of $64.9 million.  We expect to record a gain on extinguishment of debt of approximately $50 million in the fourth quarter of 2012.  We recorded impairment charges on the other two properties of $46.2 million, resulting in an aggregate net book value of $100.7 million, which is less than the aggregate carrying value of the non-recourse debt of $166.1 million.  These impairment charges were recorded because the estimated fair values of the properties, based on discounted cash flow analyses, were less than the carrying values of the properties.

The remaining four impairment charges recorded during the three months ended September 30, 2012, totaled $41.0 million and related to two regional malls and two small office buildings.  These impairment charges were recorded because the estimated sales prices of these properties were lower than their carrying values.  The estimated sales prices were based on negotiated sales prices finalized in the third quarter of 2012.

During the nine months ended September 30, 2012, we previously recorded two impairment charges that totaled $20.3 million and related to two regional malls as the sales prices of these properties were lower than their carrying values.  These properties were sold in the period in which the impairment was taken.  These impairment charges are included, net of the gain on forgiveness of debt of $9.9 million, in discontinued operations in our Consolidated Statements of Operations and Comprehensive Income (Loss).

Gains on disposition, including settlement of debt, are recorded in the Consolidated Statements of Operations and Comprehensive Income (Loss) in the period the property is disposed.  Impairment charges are recorded in the Consolidated Statements of Operations and Comprehensive Income (Loss) when the carrying value exceeds the estimated fair value of the property, which can occur in accounting periods preceding disposition and / or in the period of disposition.

No provisions for impairment were necessary for the three or nine months ended September 30, 2011.

Investment in Unconsolidated Real Estate Affiliates

According to the guidance related to the equity method of accounting for investments, a series of operating losses of an investee or other factors may indicate that an other-than-temporary decrease in value of our investment in the Unconsolidated Real Estate Affiliates has occurred. The investment in each of the Unconsolidated Real Estate Affiliates is evaluated periodically and as deemed necessary for valuation declines below the carrying amount. Accordingly, in addition to the property-specific impairment analysis that we perform for such joint ventures (as part of our operating property impairment process described above), we also considered whether there were other-than-temporary impairments with respect to the carrying values of our Unconsolidated Real Estate Affiliates.

We did not record any provisions for impairment related to our investments in Unconsolidated Real Estate Affiliates for the three and nine months ended September 30, 2012 and 2011.

General

Impairment charges could be taken in the future if economic conditions change or if the plans regarding our assets change.  Therefore, we can provide no assurance that material impairment charges with respect to our assets, including operating properties, construction in progress and investments in Unconsolidated Real Estate Affiliates,

11

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

will not occur in future periods.  Accordingly, we will continue to monitor circumstances and events in future periods to determine whether further impairments are warranted.

Fair Value Measurements

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.

The impairment section above includes a discussion of properties measured at fair value on a non recurring basis using Level 2 and Level 3 inputs.  Fair value of financial instruments below includes a discussion of the fair value of debt, which is estimated using Level 2 and Level 3 inputs.   Note 8 includes a discussion of the warrant liability which is estimated on a recurring basis using Level 3 inputs.

Fair Value of Operating Properties

The following table summarizes our assets that are measured at fair value on a nonrecurring basis as of September 30, 2012.

			Quoted Prices in
			Active Markets		Significant Other		Significant
	Total Fair Value		for Identical Assets		Observable Inputs		Unobservable Inputs
	Measurement		(Level 1)		(Level 2)		(Level 3)
Balance at September 30, 2012
Investments in real estate (1)	$	238,362	$	—	$	137,656	$	100,706

(1) Refer to the impairment section above for more information regarding impairment.

We estimate fair value relating to 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.

The following table summarizes provisions for impairment recorded in our Consolidated Statements of Operations and Comprehensive Income (Loss) as a result of changes in the fair value of our investments in real estate:

	Provisions for Impairment
	Three Months Ended September 30, 2012			Nine Months Ended September 30, 2012
Investments in real estate (1) (2)
Significant Other Observable Inputs (Level 2)	$	(52,048	)	$	(72,348	)
Significant Unobservable Inputs (Level 3)	(46,240		)	(46,240		)

(1) Refer to the impairment section above for more information regarding impairment.

(2) Certain of the properties impaired during the year have been subsequently sold.  As such, these impairment charges are included in discontinued operations in our Consolidated Statements of Operations and Comprehensive Income (Loss).

12

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

The following table sets forth quantitative information about the unobservable inputs of our Level 3 real estate, which are recorded at fair value as of September 30, 2012:

Unobservable Quantitative Input	Range
Discount rates	9.0% to 10.0%
Terminal capitalization rates	9.0% to 10.0%

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, 2012 and December 31, 2011.

	September 30, 2012				December 31, 2011
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Fixed-rate debt	$	14,246,457	$	15,338,267	$	14,795,370	$	14,978,908
Variable-rate debt	1,827,558		1,724,031		2,347,644		2,326,533
	$	16,074,015	$	17,062,298	$	17,143,014	$	17,305,441

The fair value of our Junior Subordinated Notes approximates their carrying amount as of September 30, 2012 and December 31, 2011.  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 London Interbank Offered Rate (“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 credit quality would be if credit markets were operating efficiently 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.

NOTE 3        ACQUISITIONS AND INTANGIBLES

Acquisitions

During the nine months ended September 30, 2012, we acquired five anchor boxes, excluding the Sears anchor pads discussed below, for an aggregate purchase price of $26.3 million.

In addition, on April 17, 2012, we acquired 11 Sears anchor pads (including fee interests in five anchor pads and long-term leasehold interests in six anchor pads) for the purpose of redevelopment or remerchandising.  Total consideration paid was $270.0 million. The purchase price of $212.0 million for the leasehold interests was recorded in construction in progress, as the buy-out costs were necessary costs related to redevelopment projects at these properties, and the purchase price of $58.0 million for the fee interests was recorded in land and building in our Consolidated Balance Sheets as of September 30, 2012.

Also, on April 5, 2012, we acquired the remaining 49% interest in the Oaks and Westroads, previously owned through a joint venture, for $191.1 million which included the assumption the remaining 49% of debt of $92.8 million and $98.3 million of cash.  The properties were previously recorded under the equity method of accounting and are now consolidated.  The acquisition resulted in a remeasurement of the net assets acquired to fair value.  We recorded a gain from the change in control, since the fair value of the net assets acquired was greater than our investment in the joint venture and the cash paid.  This gain is reported in our Consolidated Statements of Operations and Comprehensive Income (Loss).  The table below summarizes the gain calculation:

Total fair value of net assets acquired	$	200,271
Previous investment in the Oaks and Westroads	(83,415		)
Cash paid to acquire our joint venture partner’s interest	(98,309		)
Gain from change in control of investment properties	$	18,547

The following table summarizes 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.

Investment in real estate	$	402,197
Above-market lease intangibles	15,746
Below-market lease intangibles	(29,393		)
Fair value of mortgages, notes and loans payable	(197,927		)
Net working capital	9,648
Net assets acquired	$	200,271

13

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

Intangible Assets and Liabilities

The following table summarizes our intangible assets and liabilities:

	Gross Asset (Liability)			Accumulated (Amortization)/ Accretion			Net Carrying Amount
As of September 30, 2012
Tenant leases:
In-place value	$	1,005,505		$	(394,853	)	$	610,652
Above-market	1,244,135			(378,625		)	865,510
Below-market	(740,840		)	228,555			(512,285		)
Building leases:
Above-market	(15,268		)	2,969			(12,299		)
Ground leases:
Above-market	(9,756		)	711			(9,045		)
Below-market	196,824			(8,678		)	188,146
Real estate tax stabilization agreement	111,506			(11,945		)	99,561
As of December 31, 2011
Tenant leases:
In-place value	$	1,252,484		$	(391,605	)	$	860,879
Above-market	1,478,798			(315,044		)	1,163,754
Below-market	(819,056		)	184,254			(634,802		)
Building leases:
Above-market	(15,268		)	1,697			(13,571		)
Ground leases:
Above-market	(9,839		)	439			(9,400		)
Below-market	204,432			(6,202		)	198,230
Real estate tax stabilization agreement	111,506			(7,211		)	104,295

The gross asset balances of the in-place value of tenant leases are included in buildings and equipment in our Consolidated Balance Sheets.  The above-market tenant leases and below-market ground leases are included in prepaid expenses and other assets (Note 12); the below-market tenant leases, above-market ground leases and above-market building lease are included in accounts payable and accrued expenses (Note 13) in our Consolidated Balance Sheets.

Amortization/accretion of these intangibles had the following effects on our loss from continuing operations:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Amortization/accretion effect on continuing operations	$	(88,769	)	$	(125,541	)	$	(276,521	)	$	(362,723	)

Future amortization/accretion of these intangibles is estimated to decrease results from continuing operations by approximately $74.4 million for the remainder of 2012, $247.5 million in 2013, $199.9 million in 2014, $162.1 million in 2015 and $128.1 million in 2016.

NOTE 4        DISPOSITIONS, DISCONTINUED OPERATIONS AND GAINS (LOSSES) ON DISPOSITIONS OF INTERESTS IN OPERATING PROPERTIES

During the three months ended September 30, 2012, we sold our interests in one office portfolio, two regional malls, four strip centers and one office building for an aggregate sales price of $216.6 million.  We utilized the proceeds from these sales to paydown $89.8 million of debt associated with these properties resulting in net proceeds of $126.8 million and a gain of $13.2 million.  The office property was sold to HHC.  HHC assumed the remaining $19.2 million of the debt on the property as consideration for the sale.

14

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

On March 2, 2012, we sold our interest in one regional mall for $25.0 million.  We received $8.0 million in cash and entered into a secured note receivable with the buyer for $17.0 million.

On February 21, 2012, we sold Grand Traverse Mall to RPI.  Prior to the sale, the lender forgave $18.9 million of the secured indebtedness, which was partially offset by the write-off of debt market rate adjustments of $9.0 million.  The net gain on extinguishment of debt, of $9.9 million, is included in discontinued operations in our Consolidated Statements of Operations and Comprehensive Income (Loss).  RPI assumed the remaining $62.0 million of debt on the property as consideration for the sale.

On January 12, 2012, we completed the spin-off of RPI, a 30-mall portfolio totaling approximately 21 million square feet.  The RPI Spin-off was accomplished through a special dividend of the common stock of RPI to holders of GGP common stock as of December 30, 2011.  Subsequent to the spin-off, we retained a 1% interest in RPI.

All of our 2012 and 2011 dispositions are included in discontinued operations in our Consolidated Statements of Operations and Comprehensive Income (Loss) and are summarized in the table below.  In the first quarter of 2012, we revised our intent with respect to four properties previously classified as held for sale.  As we no longer met the criteria for held for sale treatment, we reclassified these four properties as held for use in our Consolidated Balance Sheet.  Three of these properties are presented within continuing operations and one property, which was subsequently sold, is presented within discontinued operations for all periods presented. These properties were measured at the lower of the carrying amount before the asset was classified as held for sale, adjusted for any depreciation and amortization expense that would have been recognized had the asset been continuously classified as held and used, and fair value at the date of decision not to sell.

The following table summarizes the operations of the properties included in discontinued operations.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(In thousands)
Retail and other revenue	$	4,858		$	82,258		$	38,620		$	260,156
Retail and other operating expenses	3,933			69,023			23,440			206,264
Provisions for impairment	—			—			10,393			51
Total expenses	3,933			69,023			33,833			206,315
Operating income	925			13,235			4,787			53,841
Interest expense, net	(561		)	(19,628		)	(6,819		)	(68,705		)
Net income (loss) from operations	364			(6,393		)	(2,032		)	(14,864		)
Provision for income taxes	—			(158		)	(23		)	(500		)
Allocation to noncontrolling interest	—			(93		)	—			(146		)
Gain on dispositions	13,212			2,368			13,037			1,822
Net income (loss) from discontinued operations	$	13,576		$	(4,276	)	$	10,982		$	(13,688	)

* Includes a net gain on debt extinguishment of $9.9 million during the nine months ended September 30, 2012.

NOTE 5        UNCONSOLIDATED REAL ESTATE AFFILIATES

The Unconsolidated Real Estate Affiliates represents our investments in real estate joint ventures that are not consolidated. 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.  As we have joint control of these ventures with our venture partners, we account for these joint ventures under the equity method.

In certain circumstances, we have debt obligations in excess of our pro rata share of the debt 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 of such Unconsolidated Real Estate Affiliates. The proceeds of the Retained Debt which are distributed to us are included as a reduction in our investment in Unconsolidated Real Estate Affiliates.  Such Retained Debt existed at one property and totaled $92.1 million as of September 30, 2012 and existed at two properties and totaled $130.6

15

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

million as of December 31, 2011.  We are obligated to contribute funds 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, 2012, we do not anticipate an inability to perform on our obligations with respect to such Retained Debt.

Indebtedness secured by our Unconsolidated Properties was $6.26 billion as of September 30, 2012 and $5.80 billion as of December 31, 2011 due to additional excess proceeds as a result of refinancings.  Our proportionate share of such debt was $2.94 billion as of September 30, 2012 and $2.78 billion as of December 31, 2011, including Retained Debt.  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.

Condensed Combined Financial Information of Unconsolidated Real Estate Affiliates

Following is summarized financial information for our Unconsolidated Real Estate Affiliates.

	September 30,			December 31,
	2012			2011
Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates
Assets:
Land	$	956,214		$	953,603
Buildings and equipment	7,608,675			7,906,346
Less accumulated depreciation	(2,027,208		)	(1,950,860		)
Construction in progress	152,659			99,352
Net property and equipment	6,690,340			7,008,441
Investments in unconsolidated joint ventures	1,104,360			758,372
Net investment in real estate	7,794,700			7,766,813
Cash and cash equivalents	267,468			387,549
Accounts and notes receivable, net	157,618			162,822
Deferred expenses, net	297,516			250,865
Prepaid expenses and other assets	163,110			143,021
Total assets	$	8,680,412		$	8,711,070
Liabilities and Owners’ Equity:
Mortgages, notes and loans payable	$	6,259,558		$	5,790,509
Accounts payable, accrued expenses and other liabilities	433,871			446,462
Owners’ equity	1,986,983			2,474,099
Total liabilities and owners’ equity	$	8,680,412		$	8,711,070
Investment In and Loans To/From Unconsolidated Real Estate Affiliates, Net:
Owners’ equity	$	1,986,983		$	2,474,099
Less joint venture partners’ equity	(1,142,358		)	(1,417,682		)
Capital or basis differences	1,872,454			1,996,556
Investment in and loans to/from
Unconsolidated Real Estate Affiliates, net	$	2,717,079		$	3,052,973

16

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Condensed Combined Statements of Income - Unconsolidated Real Estate Affiliates
Revenues:
Minimum rents	$	188,299		$	174,587		$	573,276		$	528,495
Tenant recoveries	74,767			72,571			225,059			219,604
Overage rents	5,788			4,766			16,743			12,024
Management and other fees	4,945			3,657			17,087			12,431
Other	7,659			26,381			40,046			40,831
Total revenues	281,458			281,962			872,211			813,385
Expenses:
Real estate taxes	23,927			21,885			71,858			67,728
Property maintenance costs	8,838			9,219			27,652			29,296
Marketing	4,080			4,214			10,894			10,628
Other property operating costs	42,232			43,524			120,561			122,234
Provision for doubtful accounts	943			2,573			1,711			6,422
Property management and other costs	11,388			11,411			36,113			33,956
General and administrative	5,447			5,007			25,544			19,271
Depreciation and amortization	65,189			64,973			203,976			196,227
Total expenses	162,044			162,806			498,309			485,762
Operating income	119,414			119,156			373,902			327,623
Interest income	2,400			5,005			8,114			15,339
Interest expense	(85,121		)	(90,858		)	(253,938		)	(265,770		)
Provision for income taxes	(221		)	(213		)	(672		)	(585		)
Equity in income of unconsolidated joint ventures	15,309			20,820			33,222			39,055
Income from continuing operations	51,781			53,910			160,628			115,662
Discontinued operations	398			(784		)	(543		)	111,399
Allocation to noncontrolling interests	(535		)	(459		)	(1,267		)	(3,435		)
Net income attributable to the ventures	$	51,644		$	52,667		$	158,818		$	223,626
Equity In Income (Loss) of Unconsolidated Real Estate Affiliates:
Net income attributable to the ventures	$	51,644		$	52,667		$	158,818		$	223,626
Joint venture partners’ share of income	(30,050		)	(32,352		)	(95,005		)	(123,495		)
Amortization of capital or basis differences	460			(10,482		)	(23,964		)	(102,665		)
Equity in income (loss) of Unconsolidated Real Estate Affiliates	$	22,054		$	9,833		$	39,849		$	(2,534	)

NOTE 6        MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable are summarized as follows:

	September 30,		December 31,
	2012		2011
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	12,909,868	$	13,091,080
Corporate and other unsecured term loans	1,336,589		1,704,290
Total fixed-rate debt	14,246,457		14,795,370
Variable-rate debt:
Collateralized mortgages, notes and loans payable	1,827,558		2,347,644
Total Mortgages, notes and loans payable	$	16,074,015	$	17,143,014
Variable-rate debt:
Junior Subordinated Notes	$	206,200	$	206,200

The weighted-average interest rate excluding the effects of deferred finance costs on our collateralized mortgages, notes and loans payable was 4.81% at September 30, 2012 and 5.13% at December 31, 2011.  The weighted average interest rate on the remaining corporate unsecured fixed and variable rate debt was 5.98% at September 30, 2012 and 6.18% at December 31, 2011.

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, 2012.  However, we have transferred three properties to the special servicer.  One of these properties was sold in a lender directed sale subsequent to September 30, 2012 (Note 16).

Collateralized Mortgages, Notes and Loans Payable

As of September 30, 2012, $21.58 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 secured loans, representing $2.13 billion of debt, are cross-collateralized with other properties.  Although a majority

17

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

of the $14.74 billion of fixed and variable rate collateralized mortgages, notes and loans payable are non-recourse, $1.56 billion 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 (primarily master leases for all or a portion of the property) 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.

On August 3, 2012, we closed on $763.5 million secured financings of five consolidated properties with a single lender.  The loans mature between January 2019 and September 2024 and bear interest at a weighted average rate of 5.80% per annum and replace loans at these properties in the same amount with an average interest rate of 7.5%.  Proceds from the financings were used to unencumber two properties.

On June 6, 2012, we closed on a new loan for The Grand Canal Shoppes and The Shoppes at The Palazzo in the amount of $625.0 million, which bears interest at 4.24% and matures in 2019.  The new loan replaces the existing loans at The Grand Canal Shoppes which was $368.1 million, bore interest at 4.78% and was scheduled to mature in 2014 and The Shoppes at The Palazzo, which was $239.0 million, bore interest at LIBOR plus 300 basis points and was scheduled to mature in 2017.  The new loan eliminates $238.7 million of recourse to the Company and resulted in $18.7 million in excess proceeds.

On April 2, 2012, we closed the $1.40 billion secured financing of Ala Moana Center.  The loan matures in April 2022 and bears interest at 4.23% per annum. The new loan replaces the previous loan at Ala Moana, which was $1.29 billion, bore interest at 5.59% and was scheduled to mature in 2018. The transaction resulted in $110.0 million in excess proceeds.

Corporate and Other Unsecured Loans

We have certain unsecured debt obligations, the terms of which are described below.

We have publicly-traded unsecured bonds of $1.30 billion outstanding as of September 30, 2012 and $1.65 billion outstanding as of December 31, 2011.  Such bonds have maturity dates from May 2013 through November 2015 and interest rates ranging from 5.38% to 6.75%.  The bonds have covenants, including ratios of secured debt to gross assets and total debt to total gross assets. We are not aware of any instances of non-compliance with such covenants as of September 30, 2012. We repaid the $349.5 million bond on September 17, 2012, when it matured, with available cash on hand.

In April 2012, we amended our revolving credit facility (the “Facility”) providing for revolving loans of up to $1.00 billion.  The Facility is scheduled to mature in April 2016 and is guaranteed by certain of our subsidiaries and secured by (i) first lien mortgages on certain properties, (ii) first-lien pledges of equity interests in certain of our subsidiaries and (iii) various additional collateral.  No amounts have been drawn on the Facility.  Borrowings under the Facility bear interest at a rate equal to LIBOR plus 2.25%.  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 to maintain 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, 2012.

We also have a note payable to HHC in the amount of $20.8 million, which bears interest at 4.41% per annum and matures in 2015.

The corporate and other unsecured loans exclude a net market rate premium of $15.2 million that increases the total amount that appears outstanding on the consolidated balance sheets.  The market rate premium amortizes as a reduction to interest expense over the life of the respective loan.

18

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

Junior Subordinated Notes

GGP Capital Trust I, a Delaware statutory trust (the “Trust”) and a wholly-owned subsidiary of GGPLP, 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 GGPLP.  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 GGPLP due 2041.  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, 2041, 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%. Though the Trust is a wholly-owned subsidiary of GGPLP, 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 mortgages, notes and loans payable and our common equity interest in the Trust as prepaid expenses and other assets in our Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011.

Letters of Credit and Surety Bonds

We had outstanding letters of credit and surety bonds of $19.6 million as of September 30, 2012 and $19.1 million as of December 31, 2011. These letters of credit and bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.

NOTE 7        INCOME TAXES

We have elected to be taxed as a REIT under sections 850-860 of 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 requirements to distribute at least 90% of our ordinary taxable income and to either distribute capital gains to stockholders, or pay corporate income tax on the undistributed capital gains. 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.  Generally, we are currently open to audit by the Internal Revenue Service for the years ending December 31, 2009 through 2011 and are open to audit by state taxing authorities for the years ending December 31, 2008 through 2011.

Based on our assessment of the expected outcome of examinations that are in process or may commence, or as a result of the expiration of the statute of limitations for specific jurisdictions, we do not expect that the related unrecognized tax benefits, excluding accrued interest, for tax positions taken regarding previously filed tax returns will materially change from those recorded at December 31, 2011 during the next twelve months.

NOTE 8        WARRANT LIABILITY

Pursuant to the terms of the Investment Agreements, the Plan Sponsors and Blackstone were issued 120,000,000 warrants (the “Warrants”) to purchase common stock of GGP.  Each GGP Warrant has a term of seven years and expires on November 9, 2017 and no warrants have been exercised to date.  The Brookfield Investor Warrants and the Blackstone (A and B) Investor Warrants are immediately exercisable, while the Fairholme Warrants and the Pershing Square Warrants will be exercisable (for the initial 6.5 years from the issuance) only upon 90 days prior notice.   However, upon such notice Fairholme and Pershing Square are not obligated to exercise at any point from the end of the 90 day notification period through maturity. Below is a summary of the Warrants initially received by the Plan Sponsors and Blackstone.

19

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

		Initial
Warrant Holder	Number of Warrants	Exercise Price
Brookfield Investor	57,500,000	$	10.75
Blackstone - B	2,500,000	10.75
Fairholme	41,070,000	10.50
Pershing Square	16,430,000	10.50
Blackstone - A	2,500,000	10.50
	120,000,000

The Warrants were fully vested upon issuance and the exercise prices 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 120,000,000 Warrants. As a result of these investment provisions, as of the record date of our common stock dividends, the number of shares issuable upon exercise of the outstanding Warrants was increased as follows:

	Exercise Price
Record Date	Issuable Shares	Brookfield Investor and Blackstone - B		Fairholme, Pershing Square and Blackstone - A
April 15, 2011	123,960,000	$	10.41	$	10.16
July 15, 2011	124,704,000	10.34		10.10
December 30, 2011	131,748,000	9.79		9.56
April 16, 2012	132,372,000	9.75		9.52
July 16, 2012	133,116,000	9.69		9.47

In addition to the adjustment for the common stock dividends, as a result of the RPI Spin-off, the exercise price of the Warrants was adjusted by $0.3943 for the Brookfield Investor and Blackstone-B Warrants and by $0.3852 for the Fairholme, Pershing Square and Blackstone-A Warrants, on the record date of December 30, 2011. As a result, the total number of issuable shares was 131,748,000.  During the three months ended September 30, 2012, as required per the terms of the Warrant Agreement, Fairholme gave notice of their intent to exercise their Warrants.  As noted above, the Warrants require a 90 day notification period prior to exercise. Fairholme is not required to exercise its Warrants as a result of the notice at any time after the 90 day period and prior to the maturity of the Warrants.

The estimated fair value of the Warrants was $1.40 billion as of September 30, 2012 and $986.0 million as of December 31, 2011 and is recorded as a liability as the holders of the Warrants may require GGP to settle such warrants in cash in the circumstance of a subsequent change of control.  Changes in the fair value of the Warrants are recognized in earnings.  The fair value of the Warrants was estimated using the Black Scholes option pricing model using our stock price, the Warrant term, and Level 3 inputs (Note 2).  An increase in GGP’s common stock price or in the expected volatility of the Warrants would increase the fair value; whereas, a decrease in GGP’s common stock price or an increase in the lack of marketability would decrease the fair value.  The discount for lack of marketability represents the costs associated with selling the warrants to another party.  The terms of the Warrants were not adjusted when determining the fair value as a result of the notice from Fairholme discussed above.  The following table summarizes the estimated fair value of the Warrants and significant observable and unobservable inputs used in the valuation as of September 30, 2012 and December 31, 2011:

20

GENERAL GROWTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

	September 30, 2012			December 31, 2011
Warrant liability	$	1,399,043		$	985,962
Observable Inputs
GGP stock price per share	$	19.48		$	15.02
Warrant term	5.11			5.86
Unobservable Inputs
Expected volatility	30		%	37		%
Range of values considered	(15% - 70		)%	(20% - 65		)%
Discount for lack of marketability	3		%	3		%
Range of values considered	(3% - 7		)%	(3% - 7		)%

The following table summarizes the change in fair value of the Warrant liability which is measured on a recurring basis using Level 3 inputs:

	2012		2011
Balance as of January 1,	$	985,962	$	1,041,004
Warrant liability adjustment	413,081		(319,460		)
Balance as of September 30,	$	1,399,043	$	721,544

NOTE 9        EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS

Allocation to Noncontrolling Interests

Noncontrolling interests consists of the redeemable interests related to our common and preferred Operating Partnership 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,
2012	2011	2012	2011