General Growth Properties Inc. GGP, which changed its name officially to GGP Inc. on Jan 27, came up with funds from operations (FFO) per share of 43 cents. This was in line with the Zacks Consensus Estimate as well as the prior-year quarter tally.
Total revenue in the quarter came in at $610.3 million and exceeded the Zacks Consensus Estimate of $607 million. However, the revenue figure was down 5.3% from a year ago.
Nevertheless, same store net operating income (“NOI”) increased 5.1% from the prior-year period, while same store leased percentage of 97.2% reflected a 50 basis points increase from the prior-quarter end.
For full-year 2016, GGP reported FFO per share of $1.53 that denoted more than a 6% increase from the year-ago figure of $1.44. Total revenue for the year came in at $2.35 billion and it was down 2.4% year over year.
Quarter in Details
Initial rental rates for signed leases, which started in 2016 (on a suite-to-suite basis), climbed 10.1 %. Further, tenant sales (all less anchors) inched up 0.9% on a trailing 12-month basis.
GGP’s development and redevelopment activities totaled around $1.3 billion. Of this, projects worth $0.6 billion are under construction and $0.7 billion are in the pipeline.
The company ended the quarter with cash and cash equivalents of $474.8 million, up from $356.9 million as of Dec 31, 2015.
Portfolio Activity
Notably, GGP acquired interests in five Macy’s Inc. M boxes. This included the boxes at Tysons Galleria and Stonestown Galleria. In addition, the company purchased its joint-venture partner’s interest in Riverchase Galleria in Hoover, AL. Further, the company acquired 605 N. Michigan Avenue in Chicago, IL.
Dividend Update
GGP announced a first-quarter common stock dividend of 22 cents per share, which reflects an increase of 16% year over year, but is flat sequentially. This amount is payable on Apr 28 to stockholders of record as on Apr 13.
Share Buyback
During the quarter, GGP acquired around 1.89 million of its common shares at a weighted average price of $24.47 per share. This resulted in total consideration of around $46 million.
Guidance
For full-year 2017, GGP has guided FFO per share in the range of $1.56–$1.61. The Zacks Consensus Estimate of $1.59 lies within this range.
For first-quarter 2017, the company projects FFO per share in the range of 35–37 cents. This is below the Zacks Consensus Estimate which is currently pegged at 38 cents.
Our Take
GGP’s in-line result in the fourth quarter instills our confidence on this stock. Moreover, the way this retail REIT has been addressing tenant bankruptcies and store closures looks encouraging. Moving ahead, amid an improving economy, the company’s portfolio of high quality retail properties is likely to generate decent cash flows, given its cluster of renowned tenants and efforts to support omni-channel retailing.
However, mall traffic is continuing to suffer with online purchases growing by leaps and bounds. While the company is taking steps to counter such moves, we believe that upfront expenses would limit its profitability improvement in the near term.
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.
General Growth Properties, Inc. Price, Consensus and EPS Surprise
General Growth Properties, Inc. Price, Consensus and EPS Surprise | General Growth Properties, Inc. Quote
We now look forward to the earnings releases of the other retail REITs like Kimco Realty Corporation KIM and Regency Centers Corporation REG, which are slated to report on Feb 2 and 8 respectively.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. 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.
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