General Growth Properties, Inc. (GGP)

GGP 
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General Growth Properties, Inc. (GGP)

Institutional Investor and Analyst Conference Call

December 8, 2011 9:45 a.m. ET

Executives

Kevin Berry - Vice President of Investor Relations

Sandeep Mathrani - Chief Executive Officer

Shobi Khan - Chief Operating Officer

Alan Barocas - Senior Executive Vice President of Mall Leasing

Richard Pesin - Executive Vice President, Anchors, Development and Construction

Chuck Lhotka - Executive Vice President of Asset Management

Hugh Zwieg- Executive Vice President, Capital Markets

Steve Douglas - Chief Financial Officer

Presentation

Operator

Good morning, everyone. Welcome to GGP 2011 Investor and Analyst Conference. My name is Kevin Berry, the company’s Investor Relations Officer. This conference will contain forward-looking statements by General Growth Properties. Such forward-looking statements including expectations with respect to results, are based upon the current belief and expectations of GGPs management and are subject to risks and uncertainties and which results could differ from the forward-looking statements. Such risks are more fully disclosed in GGPs filings with the Securities and Exchange Commission and the information discussed during this conference should be considered in light of such risks.

This conference may include time sensitive information that may be accurate only as of today's date, December 8, 2011. During this conference we will discuss certain non-GAAP financial measures, reconciliations to these measures to the most directly comparable GAAP measures are included in appendix A. GGP does not assume any obligation to update the information contained in this conference. I would now like to turn and introduce Sandeep Mathrani, General Growth’s Chief Executive Officer.

Sandeep Mathrani

Good morning. Thanks, Kevin. It’s critical for the success of General Growth Properties for us to build new relationship and foster our old relationships. Thank you all for taking the time out of your schedule. I know most of you came in last night, so I do appreciate you staying away from your family for an evening. One year ago, I actually got this job and we went on a road show. At the time I didn’t know what I was getting myself into. And so I got a quick education on GGP.

On our road show we need a couple of ground rules. First, we would have an NOI of about $2.2 billion in 2011, we have achieved that. Second, we would have occupancy of about 93.5%, I think we have surpassed that. Third, our occupancy cost would be higher than the 13.5%, it’s peaked at 13.6%. However, if you base this upon 2010 sales, it’s closer to 14.5%. So I think we are doing well. It is just the beginning.

Unfortunately, there has been a lot of volatility in the stock market. Our stock, as all of you know, has not been immune to that. More so, the reason is not only the volatility in the market, but I think we should take some blame ourselves. It has been because of our lack of proper communication with you, the investors. We plan to do a better job through the weekend, go out and tell you our amazing story.

Our story is compelling. My first order of business in January was to establish a management team. A management team that’s experienced and credible. In January, we came up with that management team, and all the many years of experience are now contributing to the success of GGP. Before we go on, I would like to first acknowledge, Steve Douglas. Steve, thank you for an outstanding year for putting us on the right platform, giving us proper direction. Steve will be going back home to Toronto to be with his family and to Brookfield. I actually debate, I am not sure which one is family. Children and wife or Brookfield. Steve will give us highlights of 2011 and provide guidance for 2012, and I am sure most of you would sneak through that book or gone through the website, but let us play our slides.

We’re extremely pleased to have Michael Berman, join us as our new Chief Financial Officer. He will take his role on December 15. Mike’s real estate career spans 25 years. He is no stranger to most of you in this room. He has been CFO of a publicly traded REIT, Equity LifeStyle, for the last eight years. Welcome, Michael. Once again, each of the people that you would hear from today, are very talented. They’re experienced in the real estate field. I will briefly introduce each one of them and give you their key responsibility.

Shobi Khan. Shobi is Chief Operating Officer of General Growth Properties. Shobi’s key areas of responsibilities are; acquisitions, really more dispositions, our joint venture relationship, our Brazilian platform, human resources and information technology. I have known Shobi since 2006. When I was at Vornado, we had an attempt to buy equity offers. Alan Barocas, our Senior Executive Vice President of Mall Leasing. Alan is responsible for tenant relationships, leasing, strategy and research, business development and marketing. Alan and his team -- and by the way many members of his team and our senior executive team are in the audience today, most of whom are here his senior team have done an outstanding job. Outstanding job leasing 9 million square feet in 2011.

I have known Alan since 1993, when he was real estate rep at The Gap. So when he talks about The Gap later, he knows. Richard Pesin, is our Executive Vice President of Development. He is also the man in-charge of Anchor and big box leasing. Richard has been very focused, identifying compelling growth opportunities within the portfolio. He has identified over $1.6 billion of redevelopment/development opportunities within our portfolio as double-digit, first stabilized deal cash on cost, old fashioned, no fancy IRRs return. Rich and I have worked together from 1989 to 2002, at which point he took my role at Forest City.

I am pleased to introduce Chuck Lhotka, our new Executive Vice President of Asset Management. Chuck will talk about operations, expenses, and of course our venture into sustainability. Chuck has been with GGP for 40 years. He keeps reminding me it’s 39.6 years, as if that will make him a year younger. Hugh Zwieg, Hugh is our Executive Vice President of Finance. He is our capitals markets man. He has financed, refinanced over $4 billion this year. He has been fixated on laddering our maturities, but more importantly than that, he has spent his year rebuilding and strengthening the company's relationship with the lending community. Thank you, Hugh.

And finally, last but not least, is Marvin Levine. Marvin is our Chief Legal Officer. Marvin has a team of legal professionals who ensure that GGP conducts its business to the highest standards, mitigates risk and implements mitigating strategies. Being a lawyer he outmaneuvered me from a talking role, but he is here, a member of our senior management team. Our team is in place. We have a real company. They are focused, energized and committed. We are here to optimize shareholder value.

To diligently pursue our path, we needed to go see each and every one of our assets. The first day, Jan 17, I spent here in Chicago at GGP headquarters. The next day we started our tour to go see each and every asset, including all the non-core assets as I like to say, even the Baskin-Robbins in Utah, which was a JP priced, JP Realty acquisition. What resulted was a property level business plan for each asset. It focused where we should spend most of our time. Each one of the members who will speak today will go into more details into our plan. But for me, the most important part was to meet the people on the ground. To meet the mall manager, the meet the leasing agent. People who are responsible for the success of GGP, I thank them all.

Our strategic business plan focuses on four key areas. I’m glad someone else is clicking the slides, I forgot about them by the way. First, high quality malls. GGP has an extraordinary collection of real estate. We own malls, such as Ala Moana in Hawaii; Fashion Show in Vegas; Stonebriar in Texas; my favorite, Park Meadows in Colorado; Water Tower, which you're going to go visit in Chicago. I can keep going across the country as you can see, Bridgewater in New Jersey, Natick in Massachusetts.

We own 25 of the top 100 malls in the country. We also own 125 of the top 600 malls in the country. Our goal is to own the best malls in the United States. To accomplish that goal, Shobi and team has been able to sell over 12 million square feet of non-core GLA, non-core real estate this year. We are also seeking extraordinary acquisition. In September, we announced the acquisition of Plaza Frontenac with an institutional partner, Canada Pension Plan. For the deal to be cash neutral, we sold in minority interest in St. Louis Galleria. We now control the best two malls in the St. Louis market, both with sales of over $500 per square foot.

Leasing. I love to say, all we should be doing is lease, lease, lease. We have an unwavering focus on increasing occupancy, increasing occupancy cost, our spreads are getting stronger. You can see in 2007 and 2008 we were a leader, absolute leader. Our spreads were $9, $6. Unfortunately, in 2009, 2010 and deals done in 2011 in 2010 had negative spreads. As the new management team has come in 2011, the deals that commence in 2011, and those in 2012, have a positive spread of $4 or so, about 7%. 2013 and 2014, the rent expirations are on low to mid-50s. So we have substantial room to grow for years to come.

Our next focus. In 2011, we have been very focused on de-risking our balance sheet. As I said before, we have selectively and proactively refinanced $4 billion of our debt. Lowered interest expense, lengthened maturity. You will hear me say it at the end, but I will say it again because I can't say it often enough, 2012 will be focused on deleveraging our balance sheet. We are disciplined in our capital allocation. Until now we couldn’t allocate capital to minor portfolio. Of the $1.6 billion, we intend to spend $408 million or $285 million at share over the next three four months.

Rich will go into detail on that. Asset management, very important to us. People need an environment to shop in that’s pleasurable. We need to service two clients, our customers and our tenants. We do have real estate that separates us from our competition, separates us from our peer. However, that doesn’t mean we just sit on our lounge and not provide them an environment that they can enjoy shopping in. I would like now to introduce, Shobi, our Chief Operating Officer.

Shobi Khan

Good morning, everyone. It’s a pleasure begin here and I can definitely say it’s been an eventful and exciting year for general growth. As Sandeep mentioned, we have accomplished a lot this year and you are going to hear about all these accomplishments this morning. 2011 has been a year of transition for General Growth. We launched the IPO last November, and in just over 12 months have significantly repositioned this portfolio.

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