General Growth Properties, Inc. (GGP)

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General Growth Properties (GGP)

Q2 2013 Earnings Call

July 30, 2013 9:00 am ET


Kevin Berry - Vice President of Investor Relations

Sandeep Lakhmi Mathrani - Chief Executive Officer, Director and Chief Executive Officer of GGPLP

Michael B. Berman - Chief Financial Officer and Executive Vice President of Capital Markets


Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

Craig R. Schmidt - BofA Merrill Lynch, Research Division

Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division

Michael Bilerman - Citigroup Inc, Research Division

David Harris - Imperial Capital, LLC, Research Division

Quentin Velleley - Citigroup Inc, Research Division

Samit Parikh - ISI Group Inc., Research Division

Christy McElroy - UBS Investment Bank, Research Division

Vincent Chao - Deutsche Bank AG, Research Division

Joshua Patinkin

Richard C. Moore - RBC Capital Markets, LLC, Research Division

Cedrik Lachance - Green Street Advisors, Inc., Research Division

Michael W. Mueller - JP Morgan Chase & Co, Research Division

Ki Bin Kim - SunTrust Robinson Humphrey, Inc., Research Division

Benjamin Yang - Evercore Partners Inc., Research Division

Benjamin Yang - Keefe, Bruyette, & Woods, Inc., Research Division



Good day, ladies and gentlemen and welcome to the General Growth Properties Second Quarter 2013 Conference Call. [Operator Instructions] As a reminder, this conference could be recorded. I would like to introduce your host for today's conference, Mr. Kevin Berry. Mr. Berry, please go ahead.

Kevin Berry

Good morning, everyone. Welcome to General Growth Properties Second Quarter 2013 Earnings Conference Call, hosted by Sandeep Mathrani, Chief Executive Officer; and Michael Berman, Chief Financial Officer. Certain statements made during the call may be deemed forward-looking statements, and actual results may differ materially from those indicated due to a variety of risks, uncertainties and other factors. Please refer to our reports filed with the SEC for a more detailed discussion. Statements made during this call may include time-sensitive information only as of today, July 30, 2013. We will discuss certain non-GAAP financial measures, and then provided a reconciliation of each measure to comparable GAAP measure. Reconciliations are included in our earnings release and supplemental information package, both filed with the SEC and available on our website. It's my pleasure to turn the call over to Sandeep and Michael.

Sandeep Lakhmi Mathrani

Thank you, Kevin. Good morning, everyone. I'll begin with an overview of our financial and operating results, recent investment activities and plans, and then turn the call over to Michael. Yesterday evening, we reported FFO per share of $0.27 for the second quarter, $0.04 or about 18% above the second quarter 2012 and $0.02 above the midpoint of guidance. Total funds from operations increased 17% to $267 million. EBITDA reached $503 million, 5.2% above second quarter last year and same-store NOI increased 6.8%.

Year-to-date, FFO per share is $0.52, almost 15% higher than last year. EBITDA is up 5.5% and same store NOI is up 5.2%. Our financial performance to date and expectations for the balance of the year allow us to increase our full-year guidance to $1.13 to $1.15 per share from $1.11 to $1.15 per share, hence, at the midpoint, guidance has gone up by $0.01. This increase takes into account the partial sale of Grand Canal and the expected sale of our stake in Aliansce, which I'll discuss later. But for these 2 transactions, our guidance would have been $0.03 higher. Michael will discuss our revised guidance in more detail. We're increasing our quarterly common dividends from $0.12 to $0.13 per quarter, a direct result of our financial performance to date, and also our expectations for the near term.

Turning to operations. The U.S. mall portfolio was 95.9% leased at quarter end compared to 95.7% at this time last year on a same-store basis. Occupancy, which includes permanent and temp tenants ended the quarter at 93.6% compared to 92.4% on a same-store basis. Permanent occupancy ended the quarter at 88.8% compared to 86.8% on a same-store basis at the end of the second quarter last year. We forecast that portfolios turn of occupancy to be above 92% at year end and total occupancy to be 96% to 97% by year end. Leasing activity for 2013 is complete. As shown in our supplemental, we continue to realize healthy rental rates spread on a suite-to-suite basis, making the comparison on growth trends.

For this year, we have 3.9 million square feet signed at initial spreads of 11%. Including the deals that we have approved, but not yet signed, brings the total square footage for comparison purposes to 4.7 million square feet and the spread at 9.9%. As we are leasing into 2014, we reported to you the square footage signed to date. On a suite-to-suite basis, we signed 580,000 square feet, resulting in rent spreads of 8.9%. Including the deals we have already approved, but not signed yet, raised the total square footage to just over 1.1 million square feet and rent spread of 14%. As we expect to close this year over 92% permanent occupied, we are targeting 93% to 94% perm occupancy by the end of 2014. Through July of this year, about 60% of the incremental leasing towards this goal is complete. Year-to-date, we converted over 100 leases, comprising 270,000 square feet of a temp basis to a perm basis, more than doubling the rent of about 25,000 square foot to about 50,000 square foot. Our big-box leasing activity continues to be very active. Through June 30th, we executed 17 leases for 535,000 square feet and approved 21 leases for 625,000 square feet. Of that total, 400,000 square feet will take occupancy this year, followed by about 660,000 square feet next year and about 110,000 square feet in 2015, hence, this year, we would have done 20 -- 38 leases for about 1.1 million square feet. If I compare that to 2012, coincidentally, we executed 38 leases last year, covering 1.3 million square feet.

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