General Growth Properties Q4 FFO Beats, Revenues Lag

General Growth Properties Inc.’s GGP fourth-quarter 2015 funds from operations (“FFO”) per share of 43 cents came in a penny ahead of the Zacks Consensus Estimate and were 5 cents higher than the year-ago quarter figure. The improvement was backed by a 6.7% rise in comparable net operating income (“NOI”).

However, total revenue during the quarter declined 4.2% year over year to nearly $644.6 million. The figure also missed the Zacks Consensus Estimate of $676 million.

For 2015, the company reported FFO per share of $1.44, which reflected 9% growth from the prior-year tally of $1.32. Yet, revenues fell 5.2% from a year ago to $2.4 billion.

Quarter in Details

Comparable NOI increased 6.7% from the prior-year quarter to $624 million. At quarter end, same-store leased percentage was 96.9%.

Moreover, initial rental rates for signed leases that started in the trailing 12 months (on a suite-to-suite basis) increased 10.8% to $64.92 per square foot, compared to the rental rate for expiring leases. On a trailing 12-month basis, tenant sales (all less anchors) improved 2.8% to $21.0 billion, while tenant sales (less than 10,000 square feet) grew 3% to $588 per square foot.

General Growth Properties’ development and redevelopment activities totaled around $2.3 billion at share. Of this, projects worth $0.4 billion are under construction, $0.6 billion are in the pipeline and around $1.3 billion are functional.

The company's cash and cash equivalents as of Dec 31, 2015 were $356.9 million, down from $372.5 million as of Dec 31, 2014.

Share Repurchase

During fourth-quarter 2015, General Growth Properties repurchased around 271,000 of its common shares at a weighted average price of $25.00 per share for a total of around $6.8 million. Notably, in the full year, the company bought back around 4.32 million of its common shares at a weighted average price of $25.34 per share, for a total consideration of about $109.5 million.

Quarterly Dividend

General Growth Properties announced a first-quarter common stock dividend of 19 cents per share, unchanged sequentially but up 12% year over year. This amount is payable on Apr 29, 2016 to stockholders of record as on Apr 15.

Guidance

General Growth Properties expects 2016 FFO per share in the range of $1.52 to $1.56. The Zacks Consensus Estimate of $1.57 lies above this range.

For the first quarter of 2016, the company expects FFO per share in the range of 34 to 36 cents. The Zacks Consensus Estimate of 35 cents lies within the range.

Our Take

General Growth Properties’ fourth-quarter 2015 FFO beat is encouraging. However, the lag in revenues is clearly a cause for concern. Although a solid tenant base, portfolio repositioning efforts and initiatives to strengthen ties with customers augur well, stiff competition and a hike in interest rate are the main headwinds for the company.

General Growth Properties has a Zacks Rank #3 (Hold). Investors interested in the retail REIT industry may consider stocks like Kimco Realty Corporation KIM, Regency Centers Corporation REG and Simon Property Group Inc. SPG. All these stocks carry a Zacks Rank #2 (Buy).

Note: FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.

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