General Growth Properties' 4Q13 earnings: Is this the end for malls? (Part 1 of 4)
General Growth Properties is one of the largest mall REITs in the U.S.
General Growth Properties (GGP) is one of the biggest mall REITs in the United States. It’s a self-administered and self-managed REIT. GGP, through its subsidiaries and affiliates, operates, manages, and selectively redevelops properties that are predominantly located throughout the United States. The company’s portfolio comprises 123 regional malls—approximately 127 million square feet of gross leasable area. In addition to regional malls, as of September 30, 2013, GGP owns 11 strip mall or other retail centers, totaling 4.3 million square feet. These properties are primarily in the Western region of the United States. The company also owns seven stand-alone office buildings, totaling approximately 1 million square feet, concentrated in Columbia, Maryland.
General Growth’s place in the industry
General Growth Properties is the second-largest shopping center REIT in the U.S., with a market capitalization of $18.4 billion. The shopping center REIT sector is dominated by 3 big players. Simon Property Group (SPG) is by far the largest, and the other main player is Australian-operated Westfield. Other big shopping center REITs include Kimco Realty (KIM) and Realty Income Corp (O). Investors can also gain exposure to the REIT sector via the Vanguard REIT ETF (VNQ).
Competition from online retailers
The most vexing problem for shopping centers (particularly shopping malls) is competition from Internet retailers. Given the almost perfect price discovery online, malls have to find other ways to compete and draw traffic. Some have tried to enhance the shopping experience with large food courts and other services. While shopping malls will probably never go away entirely, online retailers remain a constant challenge for the shopping center REITs. Later on in this series, I’ll address General Growth Properties’ view of the landscape regarding online retailers—the company is surprisingly sanguine about this source of competition.
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