General Growth Properties topped Wall Street estimates in third quarter

IMG_2921
General Growth Properties headquarters in Chicago’s West Loop .

By: Marika Bastrmajian

General Growth Properties, the owner and manager of high-quality retailing properties in the U.S., topped analyst’s expectations in its third quarter earnings Tuesday.

The company beat analyst’s expectation of 32 cents for company funds from operations by a penny.

The Chicago-based real estate investment trust reported that funds from operations per share increased 8.6 percent to $308 million, or 33 cents per diluted share, from $284 million or 29 cents per diluted shares in the year prior. FFO is a more precise metric for REITs that gives a measure of cash flow from operations after adjustments.

“Overall, [it was] just a solid quarter operationally,” said Ki Bin Kim, analyst at SunTrust, in a research note.

The company will continue to benefit from low interest rates, according to Kim.

Same store net operating income increased 5.4 percent to $548 million from $520 million in the prior year. Net operating income is income from property operations after operating expenses have been deducted.

“Within our same-store portfolio, we anticipate permanent revenue growth of approximately 4 percent, similar to our performance in the third quarter and year-to-date,” said Michael Berman, chief financial officer.

Initial rental rates for newly executed leases in 2014 increased 17.6 percent or $9.33 per square foot, to $62.44 per square foot when compared with rental rates for expiring leases.

“The portfolio was nearly 97 percent leased and 95 percent occupied at quarter-end,” said Sandeep Mathrani, chief executive officer.

General Growth Properties also made several acquisitions during the quarter, including a 12.5 percent interest in Miami Design District in Miami, Fla. The property is part of an 18-square city-block retail and entertainment development. The company acquired a 10 percent interest in 522 Fifth Avenue in New York City, which has about 26,500 square feet of retail space.

“Our external growth will come in the form of acquiring class A malls and flagship urban retail properties,” said Mathrani.

General Growth Properties also brought in net proceeds of $40.3 million after the sale of a strip center and medical office building.

Company shares closed at $25.04, up 15 cents from Monday’s close.