General Growth Properties (GGP) Posts In-Line Q4 FFO - Analyst Blog

Zacks Equity Research
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General Growth Properties Inc. (GGP) reported fourth-quarter 2014 funds from operations (“FFO”) per share of 38 cents, which came in line with the Zacks Consensus Estimate and climbed 5.1% from the year-ago quarter figure of 36 cents. Results were backed by a 2.4% increase in same store net operating income (“NOI”).

Total revenue during the reported quarter edged up 0.4% year over year to $673.0 million, but missed the Zacks Consensus Estimate of $684 million.

For full year 2014, FFO per share increased 13.7% to $1.32 per share from $1.16 in 2013. Total revenue for 2014 climbed 2% year over year to $2.5 billion.

Quarter in Details

At quarter end, same store lease percentage was 97.2%, reflecting an increase of 10 basis points (bps) from the prior-year end. Moreover, initial rental rates for executed leases that started in 2014 (on a suite-to-suite basis) increased 18.3% to $62.26 per square foot, as compared to the rental rates for expiring leases. During the fourth quarter, tenant sales (all less anchors) improved 5.4%, while tenant sales (<10,000 square feet) increased 4.8% per square foot.

The company's cash and cash equivalents as of Dec 31, 2014 were $372.5 million, down from $577.3 million as of Dec 31, 2013.

Portfolio Activity

General Growth Properties closed acquisition of 50% stake in 530 Fifth Avenue (property comprising around 58,000 square feet of retail space) in New York City for net equity share of $49 million.

On the other hand, the company sold 49% stake in Bayside Marketplace in Miami, FL, for net proceeds of $71.9 million. Moreover, it vended a strip center for net proceeds of $15.4 million.

Further, General Growth Properties inked a deal to acquire the Crown Building in New York City situated at 730 Fifth Avenue for around $1.775 billion ($888 million at share). Specifically, it will enjoy 50% stake through a JV and the deal is expected to close in the second quarter of 2015.

Finally, the company’s development and redevelopment activities totaled around $2.4 billion at share. Of the total property, $1.2 billion is under construction and $418 million has already been opened.

2015 Guidance

General Growth Properties expects its first-quarter 2015 FFO per share in the range of 31 to 33 cents with same store NOI growth of 4%. The Zacks Consensus Estimate of 32 cents falls within the guided range.

For full year 2015, the company expects FFO per share in the range of $1.40 to $1.46 with same store NOI growth of 4.5%. The Zacks Consensus Estimate of $1.45 per share also lies within this range.

Our Take

For General Growth Properties, a rise in initial rental rates and increase in same store NOI is encouraging. We expect this trend to continue going forward, given the improving market fundamentals. Moreover, we believe that the company’s portfolio repositioning efforts and initiatives to strengthen ties with its customers would help it to ride on the growth trajectory.

General Growth Properties has a Zacks Rank #3 (Hold). We presently look forward for the results of other retail REITs – Simon Property Group Inc. (SPG), Kimco Realty Corporation (KIM) and The Macerich Company (MAC) – which are scheduled to report in the upcoming days.


Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation and amortization and other non-cash expenses to net income.


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