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General Growth Properties (GGP) FFO Beats, Revenues Lag
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General Growth Properties Inc.’s second-quarter 2016 adjusted funds from operations (“FFO”) per share of 36 cents came in line with the Zacks Consensus Estimate and were up 3 cents from the prior-year quarter.
But, with the company reporting weaker-than-expected revenues for the quarter, shares of this retail real estate investment trust were down 3.45% in after-hours trading. In fact, total revenues of $574.6 million not only fell short of the Zacks Consensus Estimate of $585.6 million, but also declined from the year-ago number of around $580.0 million.
Nevertheless, same store net operating income (“NOI”) increased 4.0% from the prior-year period while same store leased percentage was 96.1% at quarter end.
Quarter in Detail
Initial rental rates for signed leases that started in the trailing 12 months (on a suite-to-suite basis) jumped 13.7%. Further, tenant sales (all less anchors) expanded 2.8% on a trailing 12-month basis.
General Growth Properties’ development and redevelopment activities totaled around $1.1 billion. Of this, projects worth $0.5 billion are under construction and $0.6 billion are in the pipeline.
The company's cash and cash equivalents as of Jun 30, 2016 were $226.3 million, down from $356.9 million as of Dec 31, 2015.
Portfolio Activity
Notably, General Growth Properties disposed its stake in an urban retail property and an office building and raked proceeds of around $150 million, resulting in around $58 million in gains during the quarter.
Following the quarter end, the company sold its 50% joint venture stake in a Class A mall for a gross valuation of about $2.5 billion and reaped $830 million in proceeds. Also, it disposed two Class B malls and got $15 million in proceeds.
Dividend Raised
General Growth Properties announced a third-quarter common stock dividend of 20 cents per share, up 5.3% sequentially and 11.1% year over year. This amount is payable on Oct 31, 2016 to stockholders of record as on Oct 14.
Guidance
General Growth Properties has revised its 2016 FFO guidance to reflect a 2 cents dilution impact from its transactions and a cent increase related to operations. As a result, the new FFO guidance is $1.51–$1.56. The Zacks Consensus Estimate of $1.56 lies within this range.
For third-quarter 2016, the company expects FFO per share in the range of 34–36 cents. The Zacks Consensus Estimate is currently pegged at 37 cents.
Our Take
The company’s lower-than-expected revenue in second quarter is disappointing. Though a solid tenant base and portfolio repositioning moves might lead to growth in the long term, the near-term earnings dilution from asset sales would be impossible to avoid.
General Growth Properties has a Zacks Rank #4 (Sell).
Investors interested in the retail REIT industry may consider stocks like The Macerich Company (MAC - Free Report) , Simon Property Group Inc. (SPG - Free Report) and STORE Capital Corporation . 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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General Growth Properties (GGP) FFO Beats, Revenues Lag
General Growth Properties Inc.’s second-quarter 2016 adjusted funds from operations (“FFO”) per share of 36 cents came in line with the Zacks Consensus Estimate and were up 3 cents from the prior-year quarter.
But, with the company reporting weaker-than-expected revenues for the quarter, shares of this retail real estate investment trust were down 3.45% in after-hours trading. In fact, total revenues of $574.6 million not only fell short of the Zacks Consensus Estimate of $585.6 million, but also declined from the year-ago number of around $580.0 million.
Nevertheless, same store net operating income (“NOI”) increased 4.0% from the prior-year period while same store leased percentage was 96.1% at quarter end.
Quarter in Detail
Initial rental rates for signed leases that started in the trailing 12 months (on a suite-to-suite basis) jumped 13.7%. Further, tenant sales (all less anchors) expanded 2.8% on a trailing 12-month basis.
General Growth Properties’ development and redevelopment activities totaled around $1.1 billion. Of this, projects worth $0.5 billion are under construction and $0.6 billion are in the pipeline.
The company's cash and cash equivalents as of Jun 30, 2016 were $226.3 million, down from $356.9 million as of Dec 31, 2015.
Portfolio Activity
Notably, General Growth Properties disposed its stake in an urban retail property and an office building and raked proceeds of around $150 million, resulting in around $58 million in gains during the quarter.
Following the quarter end, the company sold its 50% joint venture stake in a Class A mall for a gross valuation of about $2.5 billion and reaped $830 million in proceeds. Also, it disposed two Class B malls and got $15 million in proceeds.
Dividend Raised
General Growth Properties announced a third-quarter common stock dividend of 20 cents per share, up 5.3% sequentially and 11.1% year over year. This amount is payable on Oct 31, 2016 to stockholders of record as on Oct 14.
Guidance
General Growth Properties has revised its 2016 FFO guidance to reflect a 2 cents dilution impact from its transactions and a cent increase related to operations. As a result, the new FFO guidance is $1.51–$1.56. The Zacks Consensus Estimate of $1.56 lies within this range.
For third-quarter 2016, the company expects FFO per share in the range of 34–36 cents. The Zacks Consensus Estimate is currently pegged at 37 cents.
Our Take
The company’s lower-than-expected revenue in second quarter is disappointing. Though a solid tenant base and portfolio repositioning moves might lead to growth in the long term, the near-term earnings dilution from asset sales would be impossible to avoid.
General Growth Properties has a Zacks Rank #4 (Sell).
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Investors interested in the retail REIT industry may consider stocks like The Macerich Company (MAC - Free Report) , Simon Property Group Inc. (SPG - Free Report) and STORE Capital Corporation . 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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>