General Growth Properties, Inc. Reports Second Quarter 2011 Results

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.

SOURCE General Growth Properties

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