General Growth Properties Inc.’s GGP third-quarter 2015 funds from operations (“FFO”) per share of 36 cents came in a penny ahead of the Zacks Consensus Estimate and 3 cents above the year-ago quarter figure. Results were backed by a 5.1% increase in comparable net operating income (“NOI”). The company also announced a hike in its quarterly dividend rate.
However, total revenue during the quarter declined 6.8% year over year to nearly $585.3 million. The figure also missed the Zacks Consensus Estimate of $591 million.
Quarter in Details
Comparable NOI climbed 5.1% from the prior-year quarter to $560 million. At quarter-end, same-store lease percentage was 96.5%.
Moreover, initial rental rates for signed leases that started in the trailing 12 months (on a suite-to-suite basis) increased 9.7% to $63.30 per square foot, compared to the rental rate for expiring leases. On a trailing 12-month basis, tenant sales (all less anchors) improved 3.3% to $20.7 billion, while tenant sales (less than 10,000 square feet) increased 3.7% to $593 per square foot.
The company's cash and cash equivalents as of Sep 30, 2015 were $160.7 million, down from $372.5 million as of Dec 31, 2014.
Share Repurchase
During third-quarter 2015, General Growth Properties repurchased around 3.4 million of its common shares at a weighted average price of $25.24 per share for a total of around $86.0 million.
Quarterly Dividend
General Growth Properties also announced a raise in its quarterly dividend rate. The new fourth-quarter 2015 dividend of 19 cents represents 6% sequential and 12% year-over-year growth. It is payable on Jan 4, 2016 to stockholders of record as on Dec 15, 2015.
Guidance
General Growth Properties expects full-year 2015 FFO per share in the range of $1.42–$1.44. The Zacks Consensus Estimate of $1.43 lies within this range.
For the fourth quarter of 2015, the company expects FFO per share in the range of 41–43 cents. The Zacks Consensus Estimate of 42 cents lies within the range.
General Growth Properties has also provided the preliminary guidance for 2016, with FFO per share expected in the range of $1.51–$1.55.
Our Take
General Growth Properties’ FFO beat and dividend hike are encouraging. But the lag in revenues clearly remains a concern. Although improving market fundamentals, the company’s solid tenant base, portfolio repositioning efforts and initiatives to strengthen ties with customers augur well, the anticipated hike in interest rates in the medium term is expected to adversely impact financing costs.
General Growth Properties has a Zacks Rank #3 (Hold). Investors interested in the retail REIT industry may consider stocks Agree Realty Corp. ADC, Simon Property Group Inc. SPG and Taubman Centers, Inc. TCO. All these stocks have a Zacks Rank #2 (Buy).
Note: FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.
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