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General Growth Properties Sees Rise in NOI: Is It a Hold? - Analyst Blog

We updated our research report on General Growth Properties Inc. GGP on May 13, 2015.

This Chicago, IL-based retail real estate investment trust (“REIT”) boasts a portfolio that is complemented by flagship urban retail properties which are much in demand by retailers. The company reported first-quarter 2015 funds from operations (“FFO”) per share of 32 cents, which were in line with the Zacks Consensus Estimate and a penny above the year-ago quarter figure. Results were backed by a 3.3% increase in comparable net operating income (“NOI”). The company also reported a rise in initial rental rates.

We expect this trend to continue going forward. We believe that amid improving market fundamentals, the company’s portfolio, consisting mainly of Class A regional malls, is well poised to generate decent cash flows, given its cluster of renowned tenants and efforts to support omni-channel retailing.

Yet, stiff competition limits any robust demand for the company’s properties; large construction pipeline increases its operational risks, while an anticipated hike in interest rates in the medium term would adversely impact its financing costs.

Over the past 7 days, the Zacks Consensus Estimate has remained unchanged at $1.43 for 2015 and $1.61 for 2016.

The stock currently carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Investors interested in the retail REIT industry may consider stocks like American Assets Trust, Inc. AAT, Excel Trust, Inc. EXL and EPR Properties EPR. All these stock carry a Zacks Rank #2 (Buy).

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

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
GENL GRWTH PPTY (GGP): Free Stock Analysis Report
 
EXCEL TRUST INC (EXL): Free Stock Analysis Report
 
AMER ASSETS TR (AAT): Free Stock Analysis Report
 
EPR PROPERTIES (EPR): Free Stock Analysis Report
 
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Zacks Investment Research

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