NOTE 8 WARRANTS

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 with an initial weighted average exercise price of $10.63. Each Warrant was originally recorded as a liability, as the holders of the Warrants could have required GGP to settle such Warrants in cash upon certain changes of control events. The Warrants were fully vested upon issuance. Each Warrant has a term of seven years and expires on November 9, 2017. Below is a summary of the Warrants initially received by the Plan Sponsors and Blackstone.

Warrant Holder	Number of Warrants	Initial Exercise Price
Brookfield Investor	57,500,000	$	10.75
Blackstone - B (2)	2,500,000	10.75
Fairholme (2)	41,070,000	10.50
Pershing Square (1)	16,430,000	10.50
Blackstone - A (2)	2,500,000	10.50
	120,000,000

(1) On December 31, 2012, the Pershing Square warrants were purchased by the Brookfield Investor.

(2) On January 28, 2013, the Fairholme and Blackstone A and B warrants were purchased by GGP.

The Brookfield Investor Warrants and the Blackstone (A and B) Warrants were immediately exercisable, while the Fairholme Warrants and the Pershing Square Warrants were exercisable (for the initial 6.5 years from the issuance) only upon 90 days prior notice, but there is no obligation to exercise at any point from the end of the 90 day notification period through maturity.

The exercise prices of the Warrants are subject to adjustment for future dividends, stock dividends, distribution of assets, stock splits or reverse splits of our common stock or certain other events. In accordance with the agreement, these calculations adjust both the exercise price and the number of shares issuable for the 120,000,000 Warrants that were initially issued to the Plan Sponsors. During 2012 and 2013, 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 (2)	Fairholme, Pershing Square and Blackstone - A (1) (2)
April 16, 2012	132,372,000	9.75	9.52
July 16, 2012	133,116,000	9.69	9.47
October 15, 2012	133,884,000	9.64	9.41
December 14, 2012	134,640,000	9.58	9.36

(1) On December 31, 2012, the Pershing Square warrants were purchased by the Brookfield Investor.

(2) On January 28, 2013, the Fairholme and Blackstone A and B warrants were purchased by GGP.

On December 31, 2012, the Brookfield Investor acquired all of the 16,430,000 Warrants held by Pershing Square for a purchase price of approximately $272 million. At the time of purchase, the Pershing Square Warrants were exercisable into approximately 10 million common shares of the Company at a weighted average exercise price of approximately $9.36 per share, assuming net share settlement (i.e. receive shares in common stock equivalent to the intrinsic value of the warrant at the time of exercise). In connection with the transaction, Brookfield Investor and Pershing Square are required to abide by certain undertakings outlined in their Warrant Purchase Agreement dated December 31, 2012, which was filed on the same date.

On January 28, 2013, GGPLP acquired the 41,070,000 Warrants held by Fairholme and the 5,000,000 Warrants held by Blackstone for an aggregate purchase price of approximately $633 million. At the time of purchase, the GGPLP Warrants were exercisable into approximately 27 million common shares of the Company at a weighted average exercise price of approximately $9.37 per share, assuming net share settlement. GGPLP funded the transaction using available cash resources, including its revolving credit facility. On March 26, 2013, GGPLP exercised their warrants and were issued approximately 27.5 million shares of GGP’s common stock, under net share settlement (See Note 10 for further discussion).

As a result of the transactions occurring on December 31, 2012, and January 28, 2013, the Brookfield Investor is now the sole third party owner of the Warrants. Brookfield Investor has the option for 57,500,000 Warrants to either full share settle (i.e. deliver cash for the exercise price of the Warrants in the amount of approximately $618 million in exchange for approximately 65,000,000 shares of common stock) or net share settle. The remaining 16,430,000 Warrants held by Brookfield Investor must be net share settled. As of March 31, 2013, Brookfield Investor’s Warrants are exercisable into approximately 43 million common shares of the Company, at a weighted-average exercise price of approximately $9.53 per share. Due to their ownership of the Warrants, Brookfield Investor’s potential ownership of the Company may change as a result of payments of dividends and changes in our stock price.

On March 28, 2013, we entered into an agreement with Brookfield Investor to amend the warrant agreement. The amendment to the warrant agreement replaced the right of warrant holders to receive cash from the Company under a change of control to the right to, instead, receive shares of the Company, changing the method of settlement. This amendment results in the classification of the Warrants as a component of permanent equity on our Consolidated Balance Sheets. Prior to the amendment, the Warrants were classified as a liability, due to the cash settlement feature, and marked to fair value, with changes in fair value recognized in earnings. As a result of the amendment, the fair value was determined as of March 28, 2013 with the change in fair value recognized in our Consolidated Statements of Operations and Comprehensive Income (Loss) and the determined fair value was reclassified to equity.

The estimated fair value of the Warrants was $895.5 million as of March 28, 2013 and $1.5 billion as of December 31, 2012. 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). As discussed above, the modification of the warrant agreement resulted in the classification of the warrants as equity as of March 28, 2013. From December 31, 2012 through March 28, 2013, changes in the fair value of the Warrants were recognized in earnings. 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 following table summarizes the change in fair value of the Warrants which is measured on a recurring basis using Level 3 inputs:

	Three Months Ended March 31,
	2013			2012
Balance as of January 1,	$	1,488,196		$	985,962
Warrant liability adjustment	40,546			143,112
Purchase of warrants by GGPLP	(633,229		)	—
Reclassification to equity	(895,513		)	—
Balance as of March 31,	$	—		$	1,129,074

The following table summarizes the estimated fair value of the Warrants and significant observable and unobservable inputs used in the valuation as of March 28, 2013 and December 31, 2012:

	March 28, 2013		December 31, 2012
Fair value of Warrants	$	895,513	$	1,488,196

Observable Inputs
GGP stock price per share	$	19.88	$	19.85
Warrant term	4.62		4.86

Unobservable Inputs
Expected volatility	30%		33%
Range of values considered	(15% - 65)%		(20% - 65)%

Discount for lack of marketability	3%		3%
Range of values considered	(3% - 7)%		(3% - 7)%