General Growth Properties, Inc. Reports Second Quarter 2011 Results

Aug 02, 2011, 07:00 ET from General Growth Properties

CHICAGO, Aug. 2, 2011 /PRNewswire/ -- General Growth Properties, Inc. (NYSE: GGP) (“GGP” or the “Company”) today reported financial and operating results for the quarter ended June 30, 2011.

The Company reported Core Funds From Operations of $199.6 million, or $0.20 per diluted share, for the second quarter of 2011, compared to $206.1 million, or $0.63 per diluted share, for the same period a year earlier. The change was primarily attributable to lower lease termination income during the current quarter and certain other adjustments in the current and prior year period, offset by lower interest expense.

Net loss attributable to common stockholders for the second quarter of 2011 was $203.0 million, or $0.22 per diluted share, compared to a net loss of $117.5 million, or $0.37 per diluted share, for the second quarter of 2010.  Contributing to this change was a $58.9 million charge recorded in the second quarter of 2011 related to the finalization of default interest on certain restructured loans.

Sandeep Mathrani, GGP’s chief executive officer commented, “As we conclude the mid-point of the year, I am pleased with the progress we have made towards strengthening the balance sheet, streamlining the portfolio, reinvigorating our leasing efforts and rightsizing the organization.”  Mr. Mathrani added, “Our recently announced plan to spin-off Rouse, a 30-mall portfolio, to GGP stockholders will enable us to efficiently achieve our strategic objective to focus on our core mall portfolio, which generates comparable tenant sales approaching $500 per square foot."

Operational Highlights

  • Comparable tenant sales increased 8.4% during the second quarter, to $465 per square foot, on a trailing 12 month basis.  
  • Regional mall percentage leased increased 90 basis points to 92.5% at June 30, 2011 compared to the prior year.
  • The average rental rate on leases signed during the six months ended June 30, 2011 was 9.1% higher than rents expiring during the same period.  The average rental rate on leases commencing during the six months ended June 30, 2011 was 2.0% higher than rents expiring during the same period.
  • Core NOI for the six months ended June 30, 2011, excluding lease termination income, increased 0.8% compared to the same period last year.  Core NOI excluding lease termination income and Rouse increased 1.3% for the same period.

Capital Markets Activity

  • During the quarter, completed the refinancing of 11 malls representing $2.2 billion of new fixed-rate mortgages ($2.1 billion at GGP’s share) at a weighted average interest rate of 5.31% and an average term of ten years.  The new loans generated proceeds in excess of in-place financing of approximately $579 million to GGP, extended the term to maturity by 6.0 years and lowered the average interest rate by 55 basis points.  GGP has closed on $2.5 billion of new financing since the beginning of 2011 and $3.3 billion since July 2010.
  • Repaid $245 million of corporate debt in advance of its contractual maturity, which had an interest rate of 5.95%.
  • Repaid nine property level mortgages totaling $255 million with a weighted average interest rate of 6.52%.
  • Bought back $487.9 million of GGP common stock at an average purchase price of $15.95 per share.
  • As of June 30, 2011, the Company had $1.3 billion of liquidity, comprised of unrestricted cash and undrawn capacity on the Company’s facility.

Acquisition and Disposition Activity

  • Closed on the sale of GGP’s 1/3 ownership interests in Arrowhead Towne Center and Superstition Springs Mall, both located in the Phoenix market, to Macerich in exchange for six big-box anchor locations and $75 million in net cash proceeds to GGP.
  • Closed on the sale of Gateway Crossing in Bountiful, Utah for $22.5 million.

Rouse Properties, Inc. Spin-Off

  • On August 1, 2011, the Company announced its Board of Directors has approved a plan to spin-off a 30-mall portfolio, totaling 21.1 million square feet, to holders of GGP common stock in the form of a taxable special dividend. The dividend is expected to be comprised of common stock in Rouse Properties, Inc. (“Rouse”), a recently formed company to which GGP plans to transfer the portfolio.  This distribution is expected to be made on a pro rata basis to holders of GGP common stock as of the dividend record date.  Rouse is expected to qualify as a Real Estate Investment Trust (“REIT”) and be listed on the New York Stock Exchange.

COMMON SHARE DIVIDEND

  • On July 29, 2011, the Board of Directors of the Company declared a quarterly common share dividend of $0.10 to shareholders of record at the close of business on October 14, 2011, payable on October 31, 2011.  

INVESTOR CONFERENCE CALL

The Company will host a conference call on Tuesday, August 2, 2011 at 1:00 p.m. Eastern time / 12:00 p.m. Central time to discuss second quarter earnings and other related matters that may be of interest to investors and analysts.  Scheduled speakers are Sandeep Mathrani, Chief Executive Officer and Steve Douglas, Chief Financial Officer.  

To access the conference call, please dial (877) 845-1018 (Domestic) or (707) 287-9345 (International).  A live audio webcast of the call will also be available in the Investor Relations section of the Company’s website at www.ggp.com.

SUPPLEMENTAL INFORMATION

A copy of General Growth’s quarterly Supplemental Information package is available in the Investor Relations section of the Company’s website at www.ggp.com.

NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES AND DEFINITIONS

REAL ESTATE PROPERTY NET OPERATING INCOME (NOI) AND CORE NOI

The Company believes NOI is a useful supplemental measure of the Company’s operating performance.  The Company defines NOI as operating revenues (rental income, tenant recoveries and other income) less property and related expenses (real estate taxes, property maintenance costs, marketing, other property expenses and provision for doubtful accounts).  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.  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 non-controlling interests, reorganization items, strategic initiatives, provision for income taxes, discontinued operations 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.  This measure provides an operating perspective not immediately apparent from GAAP operating or net income (loss) attributable to common stockholders. The Company uses NOI to evaluate its operating performance on a property-by-property basis because NOI allows the Company to evaluate the impact that factors such as lease structure, lease rates and tenant base, which vary by property, have on the Company’s operating results, gross margins and investment returns.

In addition, management believes NOI provides useful information to the investment community about the Company’s operating performance.  However, due to the exclusions noted above, NOI should only be used as an alternative measure of the Company’s financial performance.    

CORE NOI excludes the NOI impacts of non-cash and certain non-comparable items such as straight-line rent and intangible asset and liability amortization resulting from acquisition accounting.  We present Core NOI, and Core EBITDA and Core FFO as below, as we believe certain investors and other users of our financial information use them as measures of the Company’s historical operating performance.

EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) AND CORE EBITDA

EBITDA is defined as net income (loss) attributable to common stockholders, adjusted to exclude interest expense net of interest income, Permanent Warrant expense, income tax provision (benefit), discontinued operations, allocations to non-controlling interests, depreciation and amortization.  “Core EBITDA” comprises EBITDA as defined immediately above and excludes certain non-cash and certain non-recurring items such as our Core NOI adjustments described above, provisions for impairment, emergence reorganization items, strategic initiatives and certain management and administration costs.

FUNDS FROM OPERATIONS (“FFO”) AND CORE FFO

The Company, consistent with real estate industry and investment community preferences, uses FFO as a supplemental measure of operating performance for a Real Estate Investment Trust (REIT).  The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income (loss) attributable to common stockholders (computed in accordance with Generally Accepted Accounting Principles (GAAP)), excluding gains (or losses) from cumulative effects of accounting changes, extraordinary items and sales of properties, plus real estate related depreciation and amortization and including adjustments for unconsolidated partnerships and joint ventures.

The Company considers FFO a supplemental measure for equity REITs and a complement to GAAP measures because it facilitates an understanding of the operating performance of the Company’s properties.  FFO 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 our presentation of Core NOI and Core EBITDA, Core FFO excludes from FFO certain items that are non-cash and certain non-comparable items such as our Core NOI adjustments, Core EBITDA adjustments, and FFO items such as FFO from discontinued operations, Permanent Warrant expense, and interest expense on debt repaid or settled, all as a result of our emergence, acquisition accounting and other capital contribution or restructuring events.

RECONCILIATIONS OF NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

In order to provide a better understanding of the relationship between our non-GAAP Supplemental Financial measures of NOI, Core NOI, EBITDA, Core EBITDA, FFO and Core FFO, reconciliations have been provided as follows: a reconciliation of NOI and Core NOI to GAAP Operating Income (loss); a reconciliation of EBITDA and Core EBITDA to GAAP net income, a reconciliation of Core FFO and FFO to GAAP net income (loss) attributable to common stockholders has been provided.  None of our non-GAAP Supplemental 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 common stockholders 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.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements.  Actual results may differ materially from the results suggested by these forward-looking statements, for a number of reasons, including, but not limited to, our ability to refinance, extend, restructure or repay our remaining debt (including that of our Unconsolidated Real Estate Affiliates) with maturities in the short to intermediate term, our ability to raise capital through equity issuances, asset sales or the incurrence of new debt, retail and credit market conditions, impairments, our liquidity demands and retail and economic conditions. Readers are referred to the documents filed by General Growth Properties, Inc. with the Securities and Exchange Commission, which further identify the important risk factors that could cause actual results to differ materially from the forward-looking statements in this release.  The Company disclaims any obligation to update any forward-looking statements.

ABOUT GGP

GGP is one of the nation’s largest shopping center owners. GGP has ownership and management interest in 166 regional and super regional shopping malls in 43 states. The company portfolio totals 169 million square feet of space. A publicly-traded real estate investment trust (REIT), GGP is listed on the New York Stock Exchange under the symbol GGP.

Consolidated Statements of Income(1) (In thousands, except per share)

Three Months Ended

Six Months Ended

June 30, 2011

June 30, 2010

June 30, 2011

June 30, 2010

Revenues:

    Minimum rents

$       430,328

$       441,617

$       869,043

$       891,276

    Tenant recoveries

194,922

202,287

395,804

402,271

    Overage rents

6,464

6,602

18,268

15,969

    Management fees and other corporate revenues

14,235

16,016

29,588

33,988

    Other

17,290

18,302

34,324

36,695

Total revenues

663,239

684,824

1,347,027

1,380,199

Expenses:

    Real estate taxes

66,925

63,844

132,130

128,864

    Property maintenance costs

26,018

23,978

59,032

55,004

    Marketing

6,964

5,640

14,172

12,406

    Other property operating costs

111,191

109,067

219,358

220,661

    Provision for doubtful accounts

1,711

3,213

1,788

8,746

    Property management and other costs

44,785

49,239

92,537

83,705

    General and administrative (2)

2,411

5,210

3,157

13,320

    Provisions for impairment

-

-

-

11,057

    Depreciation and amortization

248,547

164,018

496,735

327,775

Total expenses

508,552

424,209

1,018,909

861,538

Operating income

154,687

260,615

328,118

518,661

Interest income

560

182

1,240

752

Interest expense

(253,158)

(323,652)

(491,292)

(651,311)

Warrant adjustment

(94,769)

-

(18,321)

-

Loss before income taxes, equity in (loss) income of Unconsolidated Real Estate Affiliates, reorganization items and noncontrolling interests

(192,680)

(62,855)

(180,255)

(131,898)

Provision for income taxes

(1,027)

(3,292)

(4,216)

(5,223)

Equity in (loss) income of Unconsolidated Real Estate Affiliates

(9,433)

13,221

(12,366)

45,480

Reorganization items

-

(69,845)

-

(26,988)

Loss from continuing operations

(203,140)

(122,771)

(196,837)

(118,629)

Discontinued operations

1,011

5,216

1,745

56,865

Net loss

(202,129)

(117,555)

(195,092)

(61,764)

Allocation to noncontrolling interests

(919)

28

(2,292)

(4,108)

Net loss attributable to common stockholders

$      (203,048)

$      (117,527)

$      (197,384)

$        (65,872)

Basic and Diluted (Loss) Earnings Per Share:

    Continuing operations

$            (0.22)

$            (0.39)

$            (0.21)

$            (0.39)

    Discontinued operations

-

0.02

-

0.18

Total basic and diluted (loss) earnings per share

$            (0.22)

$            (0.37)

$            (0.21)

$            (0.21)

(1)  Amounts presented in accordance with GAAP.

(2)  The three and six months ended June 30, 2011 includes bankruptcy related items, including previously accrued bankruptcy costs, other gains on settlements, legal fees and professional fees.

Consolidated Balance Sheets(1) (In thousands)

June 30, 2011

December 31, 2010

Assets:

Investment in real estate:

Land

$   4,683,115

$            4,722,674

Buildings and equipment

20,139,908

20,300,355

Less accumulated depreciation

(585,338)

(129,794)

Developments in progress

131,629

117,137

Net property and equipment

24,369,314

25,010,372

Investment in and loans to/from Unconsolidated Real Estate Affiliates

3,048,438

3,153,698

Net investment in real estate

27,417,752

28,164,070

Cash and cash equivalents

585,548

1,021,311

Accounts and notes receivable, net

156,456

114,099

Deferred expenses, net

171,124

175,669

Prepaid expenses and other assets

2,004,628

2,300,452

Assets held for disposition

436,361

591,778

Total Assets

$   30,771,869

$          32,367,379

Liabilities:

Mortgages, notes and loans payable

$   17,556,540

$          17,841,757

Deferred tax liabilities

24,587

36,463

Tax indemnification liability

303,750

303,750

Accounts payable and accrued expenses

1,650,832

1,931,970

Junior Subordinated Notes

206,200

206,200

Warrant liability

1,059,325

1,041,004

Liabilities held for disposition  

349,403

592,122

Total Liabilities

21,150,637

21,953,266

Redeemable noncontrolling interests:  

Preferred

120,756

120,756

Common  

114,999

111,608

Total Redeemable Noncontrolling Interests

235,755

232,364

Equity:

Total stockholders' equity

9,287,656

10,079,102

Noncontrolling interests in consolidated real estate affiliates

97,821

102,647

Total Equity

9,385,477

10,181,749

Total Liabilities and Equity

$   30,771,869

$          32,367,379

(1)   Presented in accordance with GAAP.

Reconciliation of Core NOI, Core EBITDA, and Core FFO, at share (In thousands, except per share)

Three Months Ended

Six Months Ended

June 30, 2011

June 30, 2010

June 30, 2011

June 30, 2010

NOI

$       516,164

$       552,364

$    1,060,634

$    1,099,111

Core NOI adjustments:

Straight-line rent (1)

(28,106)

(10,454)

(62,325)

(22,455)

Above- and below-market tenant leases, net (1)

37,827

(2,090)

70,726

(3,584)

Above- and below-market ground rent expense, net (1)

1,712

1,601

3,329

3,091

Total Core NOI adjustments

11,433

(10,943)

11,730

(22,948)

Core NOI

$       527,597

$       541,421

$    1,072,364

$    1,076,163

EBITDA

$       473,435

$       438,594

$       976,886

$       984,817

Core NOI adjustments

11,433

(10,943)

11,730

(22,948)

Above- and below-market building rent, net (1)

(424)

-

(848)

-

Provisions for impairment

-

-

-

11,057

Reorganization items (2)

-

69,845

-

26,988

Management and administrative costs, net

(9,960)

(2,534)

(19,499)

(3,726)

Total Core EBITDA adjustments

1,049

56,368

(8,617)

11,371

Core EBITDA

$       474,484

$       494,962

$       968,269

$    996,188

FFO

$         93,776

$       124,507

$       399,854

$       372,368

Core EBITDA adjustments

1,049

56,368

(8,617)

11,371

FFO from discontinued operations

(6,910)

(53,889)

(11,439)

(122,831)

Default interest

58,948

-

61,066

-

Interest expense relating to extinguished debt

3,322

66,528

6,968

133,208

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

(44,818)

-

(44,818)

-

Debt extinguishment expenses

1,591

-

1,600

-

Mark-to-market adjustments on debt

(3,246)

9,174

(7,438)

20,807

Warrant adjustment

94,769

-

18,321

-

Provision for income taxes

1,113

3,402

4,396

5,043

Total FFO adjustments

105,818

81,583

20,039

47,598

Core FFO

$       199,594

$       206,090

$       419,893

$       419,966

Core FFO per share - diluted

0.20

$             0.63

$             0.42

$             1.29

(1)

These items were impacted by the effects of acquisition accounting as of November 9, 2010. 

(2

Reorganization items reflect bankruptcy-related activity, including gains/losses on liabilities subject to compromise, interest income, U.S. Trustee fees, and other restructuring costs incurred during the Chapter 11 cases from April 16, 2009 to November 9, 2010. 

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

Three Months Ended

Six Months Ended

June 30, 2011

June 30, 2010

June 30, 2011

June 30, 2010

Reconciliation of NOI to GAAP Operating Income

NOI:

Pro Rata basis

$       516,164

$       552,364

$    1,060,634

$    1,099,111

Unconsolidated Properties

(83,106)

(91,465)

(175,743)

(184,604)

Consolidated Properties

433,058

460,899

884,891

914,507

Management fees and other corporate revenues

14,235

16,016

29,588

33,988

Property management and other costs

(44,785)

(49,239)

(92,537)

(83,705)

General and administrative

(2,411)

(5,210)

(3,157)

(13,320)

Provisions for impairment

-

-

-

(11,057)

Depreciation and amortization

(248,547)

(164,018)

(496,735)

(327,774)

Noncontrolling interest in NOI of Consolidated Properties

3,137

2,167

6,068

6,022

Operating income

$       154,687

$       260,615

$       328,118

$       518,661

Reconciliation of EBITDA to GAAP Net Loss Attributable to Common Stockholders

EBITDA:

Pro Rata basis

$       473,435

$       438,594

$       976,886

$       984,817

Unconsolidated Properties

(75,674)

(88,308)

(162,772)

(176,063)

Consolidated Properties

397,761

350,286

814,114

808,754

Preferred unit distributions

2,336

2,335

4,671

4,671

Depreciation and amortization

(248,547)

(164,018)

(496,735)

(327,774)

Noncontrolling interest in NOI of Consolidated Properties

3,137

2,167

6,068

6,022

Interest income

560

182

1,240

752

Interest expense

(253,158)

(323,652)

(491,292)

(651,311)

Warrant adjustment

(94,769)

-

(18,321)

-

Provision for income taxes

(1,027)

(3,292)

(4,216)

(5,223)

Equity in (loss) income of Unconsolidated Real Estate Affiliates

(9,433)

13,221

(12,366)

45,480

Discontinued operations

1,011

5,216

1,745

56,865

Allocation to noncontrolling interests

(919)

28

(2,292)

(4,108)

Net loss attributable to common stockholders

$      (203,048)

$      (117,527)

$      (197,384)

$        (65,872)

Reconciliation of FFO to GAAP Net Loss Attributable to Common Stockholders

FFO:

Pro Rata basis

$         93,776

$       124,507

$       399,854

$       372,368

Unconsolidated Properties

-

-

-

-

Consolidated Properties

93,776

124,507

399,854

372,368

Depreciation and amortization of capitalized real estate costs

(296,085)

(196,208)

(595,751)

(392,472)

Gain on sales of investment properties

(791)

(35,563)

2,625

(19,443)

Noncontrolling interests in depreciation of Consolidated Properties

1,627

819

4,014

1,962

Redeemable noncontrolling interests

1,464

2,700

1,424

1,512

Depreciation and amortization of discontinued operations

(3,039)

(13,782)

(9,550)

(29,799)

Net loss attributable to common stockholders

$      (203,048)

$      (117,527)

$      (197,384)

$        (65,872)

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

Equity in Unconsolidated Properties:

NOI

$         83,106

$         91,465

$       175,743

$       184,604

Net property management fees and costs

(3,799)

(3,361)

(8,120)

(8,383)

Net interest expense

(38,737)

(39,765)

(77,283)

(77,261)

General and administrative, provisions for impairment,

income taxes and noncontrolling interest in FFO

(3,697)

114

(4,987)

61

FFO of discontinued Unconsolidated Properties

2,249

41,282

1,814

46,753

FFO of Unconsolidated Properties

39,122

89,735

87,167

145,774

Depreciation and amortization of capitalized real estate costs

(48,477)

(37,271)

(102,750)

(74,828)

Other, including gain on sales of investment properties

(78)

(39,243)

3,217

(25,466)

Equity in (loss) income of Unconsolidated Real Estate Affiliates

$          (9,433)

$         13,221

$        (12,366)

$         45,480

SOURCE General Growth Properties



RELATED LINKS

http://www.ggp.com