GGP Reports First Quarter 2014 Results Same Store NOI Increases 5.7%; Company EBITDA Increases 4.1%

Company FFO per Share Increases 21.4%

CHICAGO, April 28, 2014 /PRNewswire/ -- General Growth Properties, Inc. (the "Company" or "GGP") (NYSE: GGP) today reported results for the three months ended March 31, 2014.

Financial Results

For the Three Months Ended March 31, 2014
Company Funds from Operations ("Company FFO") per share increased 21.4% to $0.31 per diluted share from $0.25 per diluted share in the prior year period. Company FFO increased 15.8% to $292 million from $253 million in the prior year period.

Company Earnings Before Interest, Taxes, Depreciation and Amortization ("Company EBITDA") increased 4.1% to $501 million from $481 million in the prior year period.

Comparable Net Operating Income ("Same Store NOI") increased 5.7% to $534 million from $505 million in the prior year period.

Net income attributable to GGP was $128 million, or $0.13 per diluted share, as compared to a net loss of $12 million, or $0.01 loss per diluted share, in the prior year period.  The increase is impacted primarily by lower depreciation expense and a gain on extinguishment of debt.

Operational Highlights for the Mall Portfolio

  • Tenant sales increased 1.2% to $565 per square foot on a trailing 12-month basis.
  • Same Store mall leased percentage was 96.2% at quarter end, an increase of 40 basis points from March 31, 2013.
  • Initial rental rates for executed leases commencing in 2014 on a suite-to-suite basis increased 10.8%, or $6.62 per square foot, to $67.75 per square foot when compared to the rental rate for expiring leases.

Financing Activities

Property-Level Debt
During the three months ended March 31, 2014, the Company obtained $685 million of property-level debt with a weighted-average interest rate of 4.37% and weighted-average term-to-maturity of 8.5 years. The prior loans had a weighted-average interest rate of 4.70% and a remaining term-to-maturity of 1.9 years. The transactions generated approximately $159 million of net proceeds.

Investment Activities

Development
The Company has development and redevelopment activities totaling approximately $2.2 billion of which projects totaling approximately $305 million have opened and $1.1 billion is under construction.

Common Share Repurchases
In February, the Company acquired 27.6 million of its common shares from affiliates of Pershing Square Capital Management, L.P. at $20.12 per share for total consideration of $556 million.  The Company used available liquidity to fund the repurchase transaction.

Guidance

Company FFO for the year ending December 31, 2014, is expected to be $1.30 to $1.32 per diluted share. Company FFO for the second quarter 2014 is expected to be $0.29 to $0.31 per diluted share.

The following table provides a reconciliation of the range of estimated diluted net income attributable to GGP per share to estimated FFO per diluted share and Company FFO per diluted share.


For the year ending

December 31, 2014

  For the three months ending
June 30, 2014


Low End

High End

Low End

High End






Company FFO per diluted share

$1.30

$1.32

$0.29

$0.31

Adjustments (1)

(0.04)

(0.04)

(0.01)

(0.01)

FFO

1.26

1.28

0.28

0.30

Depreciation, including share of joint ventures

(0.91)

(0.91)

(0.23)

(0.23)

Net income attributable to common stockholders

0.35

0.37

0.05

0.07

Preferred stock dividends

0.02

0.02

-

-

Net income attributable to GGP

$0.37

$0.39

$0.05

$0.07








(1)

Includes impact of straight-line rent, above/below market rent, ground rent amortization and debt market rate adjustments.

The guidance estimate reflects management's view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels, retail sales, variable expenses, interest rates and the earnings impact of the events referenced in this release and previously disclosed. The guidance also reflects management's view of capital market conditions. The estimates do not include possible future gains or losses or the impact on operating results from other possible future property acquisitions or dispositions or capital markets activity. Earnings per share estimates may be subject to fluctuations as a result of several factors, including any gains or losses associated with disposition activity. By definition, FFO and Company FFO do not include real estate-related depreciation and amortization, provisions for impairment, or gains or losses associated with property disposition activities. This guidance is a forward-looking statement and is subject to the risks and other factors described elsewhere in this release and in the Company's annual and quarterly periodic reports filed with the Securities and Exchange Commission.

Investor Conference Call

On Tuesday, April 29, 2014, the Company will host a conference call at 9:00 a.m. CDT (10:00 a.m. EDT). The conference call will be accessible by telephone and through the Internet. Interested parties can access the call by dialing 877.845.1018 (international 707.287.9345). A live webcast of the conference call will be available in listen-only mode in the Investors section at www.ggp.com. Interested parties should access the conference call or website 10 minutes prior to the beginning of the call in order to register.

For those unable to listen to the call live, a replay will be available for approximately two weeks after the conference call event. To access the replay, dial 855.859.2056 (international 404.537.3406) conference ID 15511925.

Supplemental Information

The Company has prepared a supplemental information report available on www.ggp.com in the Investors section. This information also has been furnished with the Securities and Exchange Commission as an exhibit on Form 8-K.

Forward-Looking Statements

Certain statements made in this press release may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in any forward-looking statement are based on reasonable assumption, it can give no assurance that its expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and other factors. Such factors include, but are not limited to, the Company's ability to refinance, extend, restructure or repay near and intermediate term debt, its indebtedness, its ability to raise capital through equity issuances, asset sales or the incurrence of new debt, retail and credit market conditions, impairments, its liquidity demands, and economic conditions. The Company discusses these and other risks and uncertainties in its annual and quarterly periodic reports filed with the Securities and Exchange Commission. The Company may update that discussion in its periodic reports, but otherwise takes no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.

Investors and others should note that we post our current Investor Presentation on the Investors page of our website at ggp.com.  From time to time, we update that Investor Presentation and when we do, it will be posted on the Investors page of our website at ggp.com.  It is possible that the updates could include information deemed to be material information.  Therefore, we encourage investors, the media and others interested in our company to review the information we post on the Investors page of our website at ggp.com from time to time.

General Growth Properties, Inc.

General Growth Properties, Inc. is an S&P 500 company focused exclusively on owning, managing, leasing, and redeveloping high-quality retail properties throughout the United States. GGP is headquartered in Chicago, Illinois, and publicly traded on the NYSE under the symbol GGP.

Investor Relations Contact:

Media Contact:

Kevin Berry

David Keating

VP Investor Relations

VP Corporate Communications

(312) 960-5529

(312) 960-6325

kevin.berry@ggp.com

david.keating@ggp.com    

Non-GAAP Supplemental Financial Measures and Definitions

Net Operating Income ("NOI") and Company NOI
The Company defines NOI as income from property operations after operating expenses have been deducted, but prior to deducting financing, administrative and income tax expenses.  NOI has been reflected on a proportionate basis (at the Company's ownership share).  Other REITs may use different methodologies for calculating NOI, and accordingly, the Company's NOI may not be comparable to other REITs.  The Company considers NOI a helpful supplemental measure of its operating performance because it is a direct measure of the actual results of the Company's properties.  Because NOI excludes general and administrative expenses, interest expense, retail investment property impairment or non-recoverable development costs, depreciation and amortization, gains and losses from property dispositions, allocations to noncontrolling interests, provision for income taxes, discontinued operations, preferred stock dividends, and extraordinary items, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact on operations from trends in occupancy rates, rental rates and operating costs. 

The Company also considers Company NOI to be a helpful supplemental measure of its operating performance because it excludes from NOI certain non-cash and non-comparable items such as straight-line rent and intangible asset and liability amortization, which are a result of the Company's acquisition accounting and other capital contribution or restructuring events. However, due to the exclusions noted, Company NOI should only be used as an alternative measure of the Company's financial performance.  The Company presents Company NOI and Company FFO (as defined below), as management of the Company believes certain investors and other users of the Company's financial information use them as measures of the Company's historical operating performance.

Funds From Operations ("FFO") and Company FFO
The Company determines FFO based upon the definition set forth by National Association of Real Estate Investment Trusts ("NAREIT").  The Company determines FFO to be its share of consolidated net income (loss) computed in accordance with GAAP, excluding real estate related depreciation and amortization, excluding gains and losses from extraordinary items, excluding cumulative effects of accounting changes, excluding gains and losses from the sales of, or any impairment charges related to, previously depreciated operating properties, plus the allocable portion of FFO of unconsolidated joint ventures based upon the Company's economic ownership interest, and all determined on a consistent basis in accordance with GAAP.  As with the Company's presentation of NOI, FFO has been reflected on a proportionate basis.

The Company considers FFO a helpful supplemental measure of the operating performance for equity REITs and a complement to GAAP measures because it is a recognized measure of performance by the real estate industry.  FFO facilitates an understanding of the operating performance of the Company's properties between periods because it does not give effect to real estate depreciation and amortization since these amounts are computed to allocate the cost of a property over its useful life.  Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, the Company believes that FFO provides investors with a clearer view of the Company's operating performance.

As with the Company's presentation of Company NOI, the Company also considers Company FFO to be a helpful supplemental measure of the operating performance for equity REITs because it excludes from FFO certain items that are non-cash and certain non-comparable items such as Company NOI adjustments, and FFO items such as mark-to-market adjustments on debt and gains on the extinguishment of debt, warrant liability adjustment, and interest expense on debt repaid or settled all which are a result of the Company's acquisition accounting and other capital contribution or restructuring events.

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
The Company presents NOI and FFO as they are financial measures widely used in the REIT industry.  In order to provide a better understanding of the relationship between the Company's non-GAAP financial measures of NOI, Company NOI, FFO and Company FFO, reconciliations have been provided as follows: a reconciliation of GAAP operating income to NOI and Company NOI and a reconciliation of net loss attributable to GGP to FFO and Company FFO.  None of the Company's non-GAAP financial measures represents cash flow from operating activities in accordance with GAAP, none should be considered as an alternative to GAAP net income (loss) attributable to GGP and none are necessarily indicative of cash available to fund cash needs.  In addition, the Company has presented such financial measures on a consolidated and unconsolidated basis (at the Company's ownership share) as the Company believes that given the significance of the Company's operations that are owned through investments accounted for on the equity method of accounting, the detail of the operations of the Company's unconsolidated properties provides important insights into the income and FFO produced by such investments for the Company as a whole.

 

 


FINANCIAL OVERVIEW

 

Consolidated Statements of Operations

(In thousands, except per share)




Three Months Ended



March 31, 2014


March 31, 2013






Revenues:





   Minimum rents


$           397,208


$           395,701

   Tenant recoveries


182,523


184,732

   Overage rents


9,829


11,349

   Management fees and other corporate revenues 


16,687


15,931

   Other


25,674


19,006

Total revenues


631,921


626,719

Expenses:





   Real estate taxes


57,771


67,579

   Property maintenance costs


22,042


23,020

   Marketing


5,815


6,516

   Other property operating costs


87,175


86,063

   Provision for doubtful accounts


2,229


1,765

   Property management and other costs


44,979


40,339

   General and administrative


11,599


10,933

   Depreciation and amortization


174,461


192,595

Total expenses


406,071


428,810

Operating income


225,850


197,909

Interest income


6,291


590

Interest expense


(179,441)


(191,829)

Gain on foreign currency


5,182


-

Warrant liability adjustment


-


(40,546)

Loss on extinguishment of debt


-


(9,319)

Income (loss) before income taxes, equity in income of Unconsolidated Real Estate Affiliates, discontinued operations, noncontrolling interests and preferred stock dividends


57,882


(43,195)

Provision for income taxes


(3,692)


(141)

Equity in income of Unconsolidated Real Estate Affiliates


7,157


13,194

Equity in income of Unconsolidated Real Estate Affiliates - gain on investment


-


3,448

Income (loss) from continuing operations


61,347


(26,694)

Discontinued operations:





Gain (loss) from discontinued operations, including gains (losses) on dispositions


3,861


(7,938)

Gain on extinguishment of debt


66,680


25,894

Discontinued operations, net


70,541


17,956

Net income (loss)


131,888


(8,738)

Allocation to noncontrolling interests


(3,852)


(2,788)

Net income (loss) attributable to GGP


128,036


(11,526)

Preferred stock dividends


(3,984)


(2,125)

Net income (loss) attributable to common stockholders


$           124,052


$           (13,651)

Basic Income (Loss) Per Share:





   Continuing operations


$                  0.06


$                (0.03)

   Discontinued operations


0.08


0.02

Total basic income (loss) per share


$                  0.14


$                (0.01)

Diluted Income (Loss) Per Share:





   Continuing operations


$                  0.06


$                (0.03)

   Discontinued operations


0.07


0.02

Total diluted income (loss) per share


$                  0.13


$                (0.01)

 

 

FINANCIAL OVERVIEW

 

Consolidated Balance Sheets

(In thousands)






March 31, 2014


December 31, 2013

Assets:





Investment in real estate:






Land


$        4,318,264


$                4,320,597


Buildings and equipment


18,245,002


18,270,748


Less accumulated depreciation


(1,967,452)


(1,884,861)


Construction in progress


424,032


406,930



Net property and equipment


21,019,846


21,113,414


Investment in and loans to/from Unconsolidated Real Estate Affiliates


2,402,793


2,407,698



Net investment in real estate


23,422,639


23,521,112

Cash and cash equivalents


403,129


577,271

Accounts and notes receivable, net


492,718


478,899

Deferred expenses, net


187,211


189,452

Prepaid expenses and other assets


942,819


995,569



Total assets


$     25,448,516


$              25,762,303

Liabilities:





Mortgages, notes and loans payable


$     16,001,058


$              15,672,437

Investment in Unconsolidated Real Estate Affiliates


17,892


17,405

Accounts payable and accrued expenses


893,257


989,367

Dividend payable 


139,497


134,476

Deferred tax liabilities


24,667


24,667

Tax indemnification liability


303,586


303,586

Junior Subordinated Notes


206,200


206,200



Total liabilities


17,586,157


17,348,138

 Redeemable noncontrolling interests:  






Preferred


139,584


131,881


Common 


106,351


97,021



Total redeemable noncontrolling interests


245,935


228,902

 Equity: 






Preferred stock


242,042


242,042


Stockholders' equity


7,292,709


7,861,079


Noncontrolling interests in consolidated real estate affiliates


81,673


82,142



Total equity


7,616,424


8,185,263



Total liabilities and equity


$     25,448,516


$              25,762,303

 

 


PROPORTIONATE FINANCIAL STATEMENTS

 

Company NOI, EBITDA and FFO

For the Three Months Ended March 31, 2014 and 2013

(In thousands)





Three Months Ended March 31, 2014


Three Months Ended March 31, 2013



Consolidated Properties

Noncontrolling Interests

Unconsolidated Properties

Proportionate

Adjustments

Company


Consolidated Properties

Noncontrolling Interests

Unconsolidated Properties

Proportionate

Adjustments

Company
















Property revenues:















Minimum rents


$        397,208

$              (3,571)

$              88,001

$          481,638

$         14,690

$  496,328


$        395,701

$              (3,407)

$              83,393

$          475,687

$            8,226

$  483,913

Tenant recoveries


182,523

(1,301)

42,478

223,700

-

223,700


184,732

(1,186)

36,821

220,367

-

220,367

Overage rents


9,829

(69)

2,254

12,014

-

12,014


11,349

(73)

2,331

13,607

-

13,607

Other revenue


25,674

(94)

3,208

28,788

-

28,788


19,006

(94)

3,169

22,081

-

22,081

 Total property revenues 


615,234

(5,035)

135,941

746,140

14,690

760,830


610,788

(4,760)

125,714

731,742

8,226

739,968

Property operating expenses:















Real estate taxes


57,771

(556)

13,559

70,774

(1,578)

69,196


67,579

(523)

12,553

79,609

(1,578)

78,031

Property maintenance costs


22,042

(101)

5,585

27,526

-

27,526


23,020

(87)

4,130

27,063

-

27,063

Marketing


5,815

(57)

1,750

7,508

-

7,508


6,516

(72)

1,508

7,952

-

7,952

Other property operating costs


87,175

(521)

20,498

107,152

(1,325)

105,827


86,063

(534)

17,450

102,979

(1,379)

101,600

Provision for doubtful accounts


2,229

1

440

2,670

-

2,670


1,765

(42)

700

2,423

-

2,423

Total property operating expenses  


175,032

(1,234)

41,832

215,630

(2,903)

212,727


184,943

(1,258)

36,341

220,026

(2,957)

217,069

NOI


$        440,202

$              (3,801)

$              94,109

$          530,510

$         17,593

$  548,103


$        425,845

$              (3,502)

$              89,373

$          511,716

$         11,183

$  522,899

Management fees and other corporate revenues


16,687

-

-

16,687

-

16,687


15,931

-

-

15,931

-

15,931

Property management and other costs


(44,979)

164

(7,012)

(51,827)

-

(51,827)


(40,339)

152

(6,069)

(46,256)

-

(46,256)

General and administrative


(11,599)

2

(203)

(11,800)

-

(11,800)


(10,933)

-

(239)

(11,172)

-

(11,172)

EBITDA


$        400,311

$              (3,635)

$              86,894

$          483,570

$         17,593

$  501,163


$        390,504

$              (3,350)

$              83,065

$          470,219

$         11,183

$  481,402

Depreciation on non-income producing assets


(2,726)

-

-

(2,726)

-

(2,726)


(3,094)

-

-

(3,094)

-

(3,094)

Interest income


6,291

-

546

6,837

-

6,837


590

-

94

684

-

684

Preferred unit distributions


(2,232)

-

-

(2,232)

-

(2,232)


(2,336)

-

-

(2,336)

-

(2,336)

Preferred stock dividends


(3,984)

-

-

(3,984)

-

(3,984)


(2,125)

-

-

(2,125)

-

(2,125)

Interest expense:















Default interest


-

-

-

-

-

-


(1,306)

-

-

(1,306)

1,306

-

Mark-to-market adjustments on debt


(1,520)

(96)

368

(1,248)

1,248

-


(2,650)

(91)

160

(2,581)

2,581

-

Write-off of mark-to-market adjustments on extinguished debt


(7,380)

-

-

(7,380)

7,380

-


7,205

-

-

7,205

(7,205)

-

Interest on existing debt


(170,541)

1,107

(35,520)

(204,954)

-

(204,954)


(195,078)

1,127

(32,078)

(226,029)

-

(226,029)

Gain on foreign currency


5,182

-

-

5,182

(5,182)

-


-

-

-

-

-

-

Warrant liability adjustment


-

-

-

-

-

-


(40,546)

-

-

(40,546)

40,546

-

Loss on extinguishment of debt


-

-

-

-

-

-


(9,319)

-

-

(9,319)

9,319

-

Provision for income taxes


(3,692)

18

(94)

(3,768)

2,050

(1,718)


(141)

17

(82)

(206)

-

(206)

FFO from discontinued operations


65,885

-

-

65,885

(65,852)

33


26,545

-

2,133

28,678

(24,440)

4,238



285,594

(2,606)

52,194

335,182

(42,763)

292,419


168,249

(2,297)

53,292

219,244

33,290

252,534

Equity in FFO of Unconsolidated Properties and Noncontrolling Interests

49,588

2,606

(52,194)

-

-

-


50,995

2,297

(53,292)

-

-

-

FFO


$        335,182

$                          -

$                         -

$          335,182

$       (42,763)

$  292,419


$        219,244

$                          -

$                         -

$          219,244

$         33,290

$  252,534
















Company FFO per diluted share







$         0.31







$         0.25

 

 

PROPORTIONATE FINANCIAL STATEMENTS


Reconciliation of Non-GAAP to GAAP Financial Measures
(In thousands)




Three Months Ended



March 31, 2014

March 31, 2013





Reconciliation of Company NOI to GAAP Operating Income




Company NOI


$          548,103

$          522,899


Adjustments for minimum rents, real estate taxes and other property operating costs


(17,593)

(11,183)


Proportionate NOI


530,510

511,716


Unconsolidated Properties


(94,109)

(89,373)


Consolidated Properties


436,401

422,343

Management fees and other corporate revenues


16,687

15,931

Property management and other costs


(44,979)

(40,339)

General and administrative


(11,599)

(10,933)

Depreciation and amortization


(174,461)

(192,595)

Noncontrolling interest in operating income of Consolidated Properties and other


3,801

3,502

Operating income


$          225,850

$          197,909





Reconciliation of Company EBITDA to GAAP Net Income (Loss) Attributable to GGP




Company EBITDA


$          501,163

$          481,402


Adjustments for minimum rents, real estate taxes and other property operating costs


(17,593)

(11,183)


Proportionate EBITDA


483,570

470,219


Unconsolidated Properties


(86,894)

(83,065)


Consolidated Properties


396,676

387,154

Depreciation and amortization


(174,461)

(192,595)

Noncontrolling interest in NOI of Consolidated Properties


3,801

3,502

Interest income


6,291

590

Interest expense


(179,441)

(191,829)

Gain on foreign currency


5,182

-

Warrant liability adjustment


-

(40,546)

Provision for income taxes


(3,692)

(141)

Equity in income of Unconsolidated Real Estate Affiliates


7,157

13,194

Equity in income of Unconsolidated Real Estate Affiliates - gain on investment


-

3,448

Discontinued operations


70,541

17,956

Loss on extinguishment of debt


-

(9,319)

Allocation to noncontrolling interests


(4,018)

(2,940)

Net income (loss) attributable to GGP


$          128,036

$          (11,526)





Reconciliation of Company FFO to GAAP Net Income (Loss) Attributable to GGP




Company FFO


$          292,419

$          252,534


Adjustments for minimum rents, property operating expenses, market rate adjustments, debt extinguishment, income taxes and FFO from discontinued operations 


42,763

(33,290)


Proportionate FFO


335,182

219,244

Depreciation and amortization of capitalized real estate costs


(218,392)

(231,198)

Preferred stock dividends


3,984

2,125

Gains on sales of investment properties 


6,299

3,124

Noncontrolling interests in depreciation of Consolidated Properties


1,662

1,769

Provision for impairment excluded from FFO of discontinued operations


-

(4,975)

Redeemable noncontrolling interests


(664)

80

Depreciation and amortization of discontinued operations


(35)

(1,695)

Net income (loss) attributable to GGP


$          128,036

$          (11,526)





Reconciliation of Equity in NOI of Unconsolidated Properties to GAAP Equity in Income of Unconsolidated Real Estate Affiliates




Equity in Unconsolidated Properties:





NOI


$            94,109

$            89,373


Net property management fees and costs


(7,012)

(6,069)


General and administrative and provisions for impairment


(203)

(239)


EBITDA


86,894

83,065


Net interest expense


(34,606)

(31,824)


Provision for income taxes


(94)

(82)


FFO of discontinued Unconsolidated Properties


-

2,133

FFO of Unconsolidated Properties


52,194

53,292

Depreciation and amortization of capitalized real estate costs


(46,658)

(40,103)

Other, including gain on sales of investment properties 


1,621

5

Equity in income of Unconsolidated Real Estate Affiliates


$              7,157

$            13,194

 

SOURCE General Growth Properties, Inc.



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