Press Releases

General Growth Properties, Inc. Announces Second Quarter 2009 Results of Operations

8/4/2009
Jim Graham
Senior Director
Public Affairs
(312) 960-2955

CHICAGO, Aug. 4, 2009 -- General Growth Properties, Inc. (the Company) released today its second quarter 2009 operating results. For the second quarter of 2009, Core Funds From Operations (Core FFO) per fully diluted share were $0.39, Funds From Operations (FFO) per fully diluted share were $0.18 and Earnings per share – diluted (EPS) were a loss of $0.51. In the comparable 2008 period, Core FFO per fully diluted share was $0.70, FFO per fully diluted share were $0.69 and EPS were $0.12. Core FFO and FFO declined for the second quarter of 2009 as compared to the second quarter of 2008 primarily as a result of provisions for impairment in 2009 and reorganization costs related to our bankruptcy filings (discussed immediately below) in April 2009. A Supplemental Schedule of Significant FFO Items that Impact Comparability is provided with this release. In addition, the second quarter and year to date 2008 results have been restated from the amounts originally reported in 2008 to reflect the adoption of two accounting pronouncements as of January 1, 2009 that required retrospective application.

As previously reported, the Company and certain of our wholly-owned subsidiaries (representing approximately 166 of our regional malls, collectively, the “Debtors”) have been operating since April 2009 as debtors-in-possession pursuant to the provisions of Chapter 11 of the U.S. Bankruptcy Code (“Chapter 11”). The Chapter 11 cases are being jointly administered in the Bankruptcy Court of the Southern District of New York (the “Bankruptcy Court”). However, our property management subsidiary, certain of our wholly-owned subsidiaries, and our joint ventures, either consolidated or unconsolidated, have not sought such Chapter 11 protection. Since the commencement of the Chapter 11 cases, the Debtors have continued their normal operations, as approved by Bankruptcy Court rulings, and have been developing a plan of reorganization that extends mortgage maturities, reduces overall leverage and that would allow the emergence from bankruptcy as quickly as possible while preserving the Company’s integrated, national business operations.

Click here to view financial tables.

FINANCIAL AND OPERATIONAL HIGHLIGHTS

  • Core FFO is defined as Funds From Operations excluding the Real Estate Property Net Operating Income (NOI) from the Master Planned Communities segment and the provision for income taxes. Core FFO for the second quarter of 2009 was $124.6 million or $0.39 per fully diluted share as compared to $222.1 million or $0.70 per fully diluted share for the second quarter of 2008. Core FFO declines for the second quarter of 2009 as compared to the second quarter of 2008 were primarily due to a $13.3 million reduction in NOI (due to occupancy declines and the overall weakness of the retail economy, both of which negatively influenced minimum and overage rents) and the approximately $33.7 million of reorganization costs and the approximately $27.9 million of additional restructuring costs (categorized as general and administrative costs) incurred in the second quarter of 2009 as compared to no such reorganization or restructuring costs incurred in the second quarter of 2008. In addition, while approximately $26.5 million of impairments were recognized in the second quarter of 2009 (related to goodwill ($19.4 million) and to proposed development projects that were terminated during the quarter ($7.1 million)), no significant impairments were recognized in the second quarter of 2008.

  • FFO per fully diluted share was $0.18 in the second quarter of 2009. FFO for the quarter was $58.2 million as compared to $221.7 million in the second quarter of 2008. In addition to the Core FFO variance items listed above, during the second quarter of 2009 an impairment provision of approximately $55.9 million was recorded at our Nouvelle at Natick condominium development. Reference is made to the attached Supplemental Schedule of Significant FFO Items that Impact Comparability for additional items impacting FFO comparability.

  • EPS for the second quarter of 2009 were a loss of $0.51 per share versus income of $0.12 in the second quarter of 2008. Our second quarter 2009 EPS were significantly impacted by the FFO items discussed above. In addition, there were no significant sales of retail and other assets in 2009 whereas in the second quarter of 2008 we sold (in two separate transactions) three office buildings (two located in Maryland and one located in Las Vegas) resulting in gains of approximately $30.8 million, net of approximately $6.2 million attributable to non-controlling interests, or approximately $0.12 per share.

    SEGMENT RESULTS

    Retail and Other Segment

  • NOI for the second quarter of 2009 was $615.8 million, a decrease of approximately 2.1% from the $629.1 million reported in the second quarter of 2008. Minimum rents (including temporary tenant revenues), overage rents and other revenues (including sponsorship, vending, parking and advertising) in the second quarter of 2009 declined as compared to the same period of 2008 due to the continued weakness in the economy and occupancy declines. In addition, we sold three office buildings in 2008, as discussed above, which also contributed to the decrease in NOI. Weaknesses in certain of our tenants’ businesses also led to a $3.9 million increase in our provision for doubtful accounts in the second quarter of 2009 as compared to the second quarter of 2008.

  • Revenues from consolidated properties were $750.9 million for the second quarter of 2009 as compared to $775.1 million for the same period in 2008, a decline of 3.1%. The majority of this decline is due to the items impacting FFO discussed above.

  • Revenues from unconsolidated properties, at the Company’s ownership share, decreased to $149.8 million or 2.6% compared to $153.8 million in the second quarter of 2008. This decrease was primarily due to declines in temporary tenant revenues and other income in the second quarter of 2009 as compared to the second quarter of 2008.

  • Total tenant sales declined 8.4% and comparable tenant sales declined 9.5% in 2009, both on a trailing 12 month basis, compared to the same period last year.

  • Comparable NOI from consolidated properties in the second quarter of 2009 declined by 2.7% compared to the second quarter of 2008. Comparable NOI from unconsolidated properties at the Company’s ownership share in the second quarter of 2009 declined 4.7% compared to the second quarter of 2008. In the aggregate, comparable segment NOI decreased 3.0% as compared to the second quarter of 2008.

  • Retail Center occupancy remained steady at 91.0% at June 30, 2009 as compared to 90.9% at March 31, 2009 but declined as compared to 93.2% at June 30, 2008.

  • Tenant sales per square foot for second quarter 2009 (on a trailing twelve month basis) were $417 versus $427 for the first quarter 2009 and $459 in the second quarter of 2008.

    Master Planned Communities Segment

  • NOI in the second quarter of 2009 for the Master Planned Communities segment was a loss of $55.3 million for consolidated properties and income of $4.7 million for unconsolidated properties as compared to income of $0.6 million for consolidated properties and of $6.6 million for unconsolidated properties, respectively, in the second quarter of 2008. As detailed in the Supplemental Schedule of FFO Items that Impact Comparability, the NOI loss in the second quarter of 2009 for consolidated properties is due primarily to the $55.9 million provision for impairment related to the Natick at Nouvelle condominium development. Although the single bulk sale of substantially all of our remaining residential acreage at the Fairwood Community was completed in the second quarter of 2009, this transaction did not significantly impact NOI for the quarter as the final sales price was not materially different from the estimated sale price utilized for the computation of the $52.8 million provision for impairment recorded in the first quarter of 2009. NOI remains negative for certain other communities as operating expenses cannot be completely eliminated despite the significant reduction in current sales revenues.

  • Land sale revenues in the second quarter of 2009 were approximately $22.4 million for consolidated properties (including approximately $15.0 million of sales revenue related to the bulk sale of substantially all of our remaining land at Fairwood) and approximately $13.4 million for unconsolidated properties, compared to $15.9 million for consolidated properties and $17.8 million for unconsolidated properties, in the second quarter of 2008 as current economic conditions continue to depress residential home building.

    GGP INFORMATION/WEBSITE
    The Company currently has ownership interest in, or management responsibility for, over 200 regional shopping malls in 44 states, as well as ownership in planned community developments and commercial office buildings. The Company’s portfolio totals approximately 200 million square feet of retail space and includes over 24,000 retail stores nationwide. The Company’s common stock is currently traded in the over-the-counter securities market operated by Pink OTC Markets Inc. using the symbol GGWPQ.

    NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES AND DEFINITIONS

    FUNDS FROM OPERATIONS 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 controlling interests (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. However, we believe that FFO is a less meaningful supplemental measure for the Master Planned Communities segment of our business. FFO does not facilitate an understanding of the operating performance of the Master Planned Communities segment of our business as our primary strategy in this segment is to develop and sell land in a manner that increases the value of the remaining land. In addition, the Master Planned Communities segment of our business is operated within taxable REIT subsidiaries and therefore our (provision for) benefit from income tax expense is largely attributable to this segment of the business. To isolate these parts of the Company from the Retail and Other segment, for which FFO is a relevant measure of operating performance, the Company also uses Core FFO as an operating measure. Core FFO is defined as FFO excluding the NOI from the Master Planned Communities segment and the (provision for) benefit from income taxes.

    In order to provide a better understanding of the relationship between Core FFO, FFO and GAAP net income (loss), a reconciliation of Core FFO and FFO to GAAP net income (loss) attributable to controlling interests has been provided. Neither Core FFO nor FFO represent cash flow from operating activities in accordance with GAAP, neither should be considered as an alternative to GAAP net income (loss) attributable to controlling interests and neither is necessarily indicative of cash available to fund cash needs. In addition, the Company has presented FFO 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.

    REAL ESTATE PROPERTY NET OPERATING INCOME (NOI) AND COMPARABLE NOI

    The Company believes that NOI is a useful supplemental measure of the Company’s operating performance. The Company defines NOI as operating revenues (rental income, land sales, tenant recoveries and other income) less property and related expenses (real estate taxes, land sales operating costs, repairs and maintenance, marketing and other property expenses). As with FFO described above, NOI has been reflected on a consolidated and unconsolidated 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 other non-recoverable development costs, depreciation and amortization, gains and losses from property dispositions, allocations to noncontrolling interests, reorganization items 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, land values (with respect to the Master Planned Communities) and operating costs. This measure thereby provides an operating perspective not immediately apparent from GAAP operating or net income attributable to controlling interests. 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 that 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. For reference, and as an aid in understanding management’s computation of NOI, a reconciliation of NOI to consolidated operating income as computed in accordance with GAAP has been presented.

    Comparable NOI excludes from both years the NOI of properties with significant physical or merchandising changes and those properties acquired or opened during the relevant comparative accounting periods.

    PROPERTY INFORMATION

    The Company has presented information on its consolidated and unconsolidated properties separately in the accompanying financial schedules. As a significant portion of the Company’s total operations are structured as joint venture arrangements which are unconsolidated, management of the Company believes that operating data with respect to all properties owned provides important insights into the income produced by such investments for the Company as a whole. In addition, the individual items of revenue and expense for the unconsolidated properties have been presented at the Company’s ownership share of such unconsolidated ventures. As substantially all of the management operating philosophies and strategies are the same regardless of ownership structure, an aggregate presentation of NOI and other operating statistics yields a more accurate representation of the relative size and significance of such elements of the Company’s overall operations.

    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, the Debtors bankruptcy filings, our ability to refinance, extend or repay our near and intermediate term debt, our substantial level of indebtedness and interest rates, retail and credit market conditions, impairments, land sales in the Master Planned Communities segment, the cost and success of development and re-development projects and our liquidity demands. 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 which 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.

    Click here to view financial tables.



    « Back to Press Releases

    		•