General Growth Properties, Inc. (GGP)

GGP 
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Industry: Consumer Services
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General Growth Properties, Inc (GGP)

Q4 2011 Earnings Call

February 09, 2012 9:00 AM ET

Executives

Michael Berman - Executive Vice President and Chief Financial Officer

Sandeep Mathrani – Chief Executive Officer

Kevin Berry – Vice President of Investor Relations

Analysts

Christy McElroy – UBS

Jay Habermann – Goldman Sachs

Samit Parikh – ISI Group

Alexander Goldfarb – Sandler O'Neill & Partners

Michael Bilerman – Citigroup

Richard Moore – RBC Capital Markets

Ben Yang – Keefe, Bruyette & Woods

Cedric Lachance – Green Street Advisors

Ki Bin Kim - Macquarie Research Equities

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the General Growth Properties Fourth Quarter 2011 Earnings Conference Call. At this time all participant lines are in a listen-only-mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder today’s conference is being recorded. I would now like to turn the conference over to Mr. Kevin Berry, Vice President of Investor Relations. Please go ahead.

Kevin Berry

Thank you. Good morning, and welcome to General Growth Properties’ fourth quarter 2011 earnings conference call. Please be aware that statements made during this call maybe deemed forward-looking statements and actual results may differ materially from those indicated by forward-looking statements due to a variety of risks, uncertainties and other factors. Please refer to our filings with the SEC for a detailed discussion.

Acknowledging the fact that this call maybe webcast for some time to come, we believe that it is important to note that our call includes time sensitive information that maybe accurate only as of today’s date February 9, 2012.

During today’s call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included within the earnings release and the supplemental information package included in the Form 8-K. This information is also available on our website in the investor’s section.

Participating in today’s call, will be Sandeep Mathrani, Chief Executive Officer, and Michael Berman, Chief Financial Officer.

I will now turn the call over to Sandeep.

Sandeep Mathrani

Thank you, Kevin. Good morning. Yesterday, we reported core FFO of $0.29 per diluted share for the quarter compared to $0.23 for the fourth quarter 2010, an increase of 26%. The results came in at the high end of our guidance for 2011 and above consensus by a $0.01 a share. The terms of core net operating income, our portfolio generated over $612 million during the quarter representing an increase of 7% for the same quarter last year.

And finally, core EBITDA increased 9.4% in the quarter to approximately $554 million. Michael will cover our results in more detail and discuss our views for 2012.

It has been just over a year since the new management team came to GGP. If there was one word to describe our activities in 2011, it would be active. We’ve assembled a very talented and dedicated senior management team comprised of the following individuals, some new to GGP and some veterans. Alan Barocas, Head of Mall Leasing, Cathie Hollowell, Human Resources, Shobi Khan, Chief Operating Officer, Marvin Levine, Chief Legal Officer, Chuck Lhotka, Head of Asset Management, Scott Morey, Head of Information Technology, Richard Pesin, Our R&D man, Jim Thurston, Chief Accounting Officer, Hugh Zwieg, Capital Market guru, and my newest partner Michael Berman, our Chief Financial Officer.

We had an excellent new year of leasing activity accomplishing for the eleventh million square feet, taking occupancy in 2011 and 2012. We made significant progress in de-risking the balance sheet, refinancing $3.6 billion of debt, $2.6 billion net share, lowering the interest rate by 77-basis points to just over 5% and lengthen the term to maturity of two years to ten.

We identified $1.6 billion of redevelopment and expansion opportunities within the portfolio. $408 million or $285 million net share of which we are moving forward on this year and next.

We reinforced our asset management activities with a clear focus on operational efficiencies, promoting sustainability initiatives and investing capital in refreshed projects.

Selectively, we pursued acquisitions such as Plaza Frontenac and Anchor [fads] at numerous malls including the Neiman Marcus at Fashion Show and Oakbrook.

And finally, we stored 11.5 million square feet at share of non-core assets. And successfully spun off 30 Class C malls, comprising of 9 million square feet of inline GLA into a new public company called Rouse Properties, resulting in a stock dividend of approximately $0.43 per share.

The combinations of these transactions not only strengthened our balance sheet, but helped to establish GGP as the owner of high quality regional malls with sales of over $500 per square foot.

Our portfolio of 136 regional malls accounts for 96% of our core net operating income in 2011. 78 of these malls are considered class A, and accounted for 75% of our net operating income in 2011. And has approximately $575 per square foot in sales.

Turning to our leasing activity. We have 5.6 million square feet expiring in 2012. To date, approximately 3.7 million square feet of leases has been executed and scheduled to take occupancy in 2012. On suite to suite basis, the average initial rent of $59 per square foot representing an increase over expiring rent of $3.73 or 6.8%. In addition to the 3.7 million taking occupancy, an additional 1.7 million square feet has been approved but not yet signed, which has added together, totals 5.4 million square feet. On a suite to suite basis, the average initial rent will be a blended $61per square foot representing an increase over expiring rent of $4.50 or 7.9%, a positive step.

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