General Growth Properties (GGP) Misses on Revenues in Q3

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General Growth Properties Inc.GGP reported weaker-than-expected revenues for third-quarter 2016. Its total revenues of $554.5 million not only fell short of the Zacks Consensus Estimate of $572.9 million, but also declined from the year-ago figure of around $585.3 million.

Nevertheless, the company's adjusted funds from operations ("FFO") per share of 35 cents came in line with the Zacks Consensus Estimate but narrowly missed the prior-year quarter figure of 36 cents.

Same store net operating income ("NOI") increased 3.8% from the prior-year period, while same store leased percentage was 96.7% at the end of the quarter.

Quarter in Details

Initial rental rates for signed leases which started in the trailing 12 months (on a suite-to-suite basis), increased 12.0%. Further, tenant sales (all less anchors) expanded 1.4% on a trailing 12-month basis.

General Growth Properties' development and redevelopment activities totaled around $1.0 billion. Of this, projects worth $0.6 billion are under construction and $0.4 billion are in the pipeline.

The company's cash and cash equivalents as of Sep 30, 2016 were $656.8 million, up from $356.9 million as of Dec 31, 2015.

Portfolio Activity

Notably, the company formed a joint venture with Simon Property Group and Authentic Brands Group LLC for acquisition of Aéropostale, Inc., with General Growth Properties' total investment being $20.4 million.

Moreover, during and subsequent to quarter end, the company acquired five anchor boxes from Macy's for around $48 million.

Dividend Raised

General Growth Properties announced a fourth-quarter common stock dividend of 22 cents per share, up 10% sequentially and 16% year over year. This amount is payable on Jan 6, 2017 to stockholders of record as on Dec 15, 2016.


For full-year 2016, General Growth Properties has guided adjusted FFO per share in the range of $1.52-$1.54. The Zacks Consensus Estimate of $1.53 lies within this range.

For fourth-quarter 2016, the company projects adjusted FFO per share in the range of 42-44 cents. The Zacks Consensus Estimate is currently pegged at 43 cents.

Our Take

General Growth's lower-than-expected revenue in the third quarter is disappointing. Nevertheless, amid downsizing and bankruptcies of retailers in recent years, this Aéropostale related move marks a noble way for mall landlords to retain the top-performing malls and avoid bulk store closures resulting from any liquidation move of Aeropostale.

Further, General Growth has a solid tenant base and its portfolio repositioning moves are expected to boost growth over the long term. Also, the company raised its quarterly dividend payout, which is encouraging. However, pressure on top-line growth, rise in online sales, stiff competition and any hike in interest rate remain concerns.

General Growth Properties has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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Investors interested in the retail REIT industry may consider stocks like Realty Income Corporation O , STORE Capital Corporation STOR and Washington Prime Group Inc. WPG . Each of these stocks carries a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All EPS numbers presented in this write up represent FFO per share.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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