Real estate investment trust (REIT)
General Growth Properties, Inc
) declared the buyback of over 27.6 million common shares from
the hedge fund sponsor firm Pershing Square Capital Management,
L.P., thus marking the latter's exit. The repurchase price has
been settled at around $556 million or $20.12 per share.
Consequently, the company's common stock outstanding declined to
around 937 million shares. Notably, the earnings guidance for
2014 did not include the share repurchase activity. According to
the company, there would have been 2 cents positive impact of
this on pro forma funds from operations (FFO) per share had this
been occurred at the beginning of 2014. However, there
would have been a nominal effect on GAAP net income per share.
The deal was financed through General Growth Properties' existing
cash balance. Based on the company's guidance for 2014 of $2.25
billion net operating income and net debt of around $18.3 billion
at the end of fourth-quarter 2013, the implied capitalization for
the share repurchase is around 6%.
Previously, in Sep 2013, General Growth Properties bought back 25
million shares from Pershing Square Capital. With the latest move
the company offloaded the entire stake of Pershing Square
Battered by the financial crisis, General Growth Properties filed
for Chapter 11 bankruptcy protection, which is known to be one of
the biggest real estate bankruptcy cases in the U.S. In 2010,
Pershing Square Capital, being part of an investor group rescued
General Growth Properties from bankruptcy through an investment
of $60 million in shares. Since 2010, the company's shares have
On Feb 3, General Growth Properties reported fourth-quarter 2013
FFO per share of 36 cents, exceeding the Zacks Consensus Estimate
by a penny. Results befitted from revenue growth, rise in same
store net operating income (NOI) and increase in initial rental
We remain encouraged owing to its portfolio restructuring
activities and a significant development pipeline that bode well
for the company's long-term growth.
Currently, General Growth Properties carries a Zacks Rank #3
(Hold). Some better-ranked stocks in the REIT sector include
Federal Realty Investment Trust
Excel Trust, Inc.
). All these stocks holds a Zacks Rank #2 (Buy).
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