Press Releases

General Growth Properties, Inc. Releases Operational Results for Third Quarter 2009

11/5/2009
Jim Graham
Senior Director of Public Affairs
(312) 960-2955

Chicago, Illinois, November 5, 2009 -- General Growth Properties, Inc. (the Company) reported today its third quarter 2009 operating results. For the third quarter of 2009, Core Funds From Operations (Core FFO) per fully diluted share were $0.28, Funds From Operations (FFO) per fully diluted share were $0.31 and Earnings per share – diluted (EPS) were a loss of $0.38. In the comparable 2008 period, Core FFO per fully diluted share were $0.62, FFO per fully diluted share were $0.56 and EPS were a loss of $0.08. Core FFO and FFO declined for the third quarter of 2009 as compared to the third quarter of 2008 primarily as a result of the impact of the continued weak retail market on our operations and our ongoing costs associated with our April 2009 bankruptcy filings. A Supplemental Schedule of Significant FFO Items that Impact Comparability is provided with this release. Consistent with our previous releases for this year, the third 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.

Click here to view financial tables.

OPERATIONAL AND FINANCIAL HIGHLIGHTS
“Although comparable and total tenant sales on a trailing twelve month basis continue to be down, third quarter 2009 comparable tenant sales were only down 4.6% as compared to the third quarter 2008,“ stated Adam Metz, Chief Executive Officer of General Growth. “September 2009 comparable tenant sales actually increased 0.8% as compared to September 2008 comparable tenant sales. While we are hopeful these trends will continue, our outlook remains cautious for the upcoming Holiday season.” Elaborating on leasing spreads and Comparable NOI, Mr. Metz stressed, “We have significantly reduced tenant allowance expenditures on new leases signed such that the face rent amount is not reflective of the true value of our new leases when compared to those expiring. Further, although we have increased certain repairs and maintenance expenses in 2009 because the upkeep of our physical plant is critical to building and maintaining the long-term value of our properties, we have also negotiated reductions in certain janitorial and security contracts with no significant declines in service levels. Finally, a portion of our real estate tax increase in 2009 is a result of certain of such taxes no longer qualifying for capitalization due to decreased development spending.”

  • 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 benefit from (provision for) income taxes. Core FFO for the third quarter of 2009 were $88.9 million or $0.28 per fully diluted share as compared to $199.2 million or $0.62 per fully diluted share for the third quarter of 2008. During the third quarter of 2009 we recorded additional retail property, development project and goodwill impairments of $60.9 million, $0.19 per fully diluted share, which was in excess of similar provisions for impairment of $15.2 million, $0.05 per fully diluted share, recorded in the comparable 2008 period. In addition, $22.6 million, $0.07 per fully diluted share, of net reorganization items were reflected in the third quarter of 2009 as compared to no such reorganization items incurred in the third quarter of 2008. The remaining declines in Core FFO in 2009 are related to retail and other segment declines described below.

  • FFO per fully diluted share was $0.31 in the third quarter of 2009. FFO for the quarter were $100.2 million as compared to $178.9 million in the third quarter of 2008. In addition to the changes in Core FFO for 2009 as compared to 2008 listed above, during the third quarter of 2008 an impairment provision of $40.3 million, $0.13 per fully diluted share, 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 third quarter of 2009 were a loss of $0.38 per share versus a loss of $0.08 in the third quarter of 2008. Our third quarter 2009 EPS were significantly impacted by the Core FFO and FFO items discussed above. In addition, there were no significant sales of Retail and Other assets in 2009 whereas, in the third quarter of 2008, we sold (in two separate transactions) two office parks located in Maryland resulting in gains of approximately $18.0 million, which, after allocation of approximately $2.9 million attributable to non-controlling interests, increased EPS by $0.05 per share in 2008.

  • Chapter 11 Cases. The Company and certain of our wholly-owned subsidiaries (representing approximately 166 of our regional malls, collectively, the “Debtors”) continue to operate 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. The Debtors have been granted the exclusive right, until February 2010 and April 2010, respectively, to present and obtain acceptance of a plan of reorganization. As part of the plan of reorganization currently being developed, the Debtors are in negotiations with certain secured lenders to extend the maturities on their mortgage loans.

    SEGMENT RESULTS

    Retail and Other Segment

  • Revenues from consolidated properties were $736.4 million for the third quarter of 2009 as compared to $784.3 million for the same period in 2008, while revenues from unconsolidated properties, at the Company’s ownership share, decreased to $147.6 million for the third quarter of 2009 compared to $151.4 million in the third quarter of 2008. This represents revenue declines in the current quarter of 6.1% and 2.5%, respectively, as compared to the prior year period. Revenues for both consolidated and unconsolidated properties decreased primarily in the areas of minimum rents (including temporary tenant revenues), overage rents, and other revenues (including sponsorship, vending, parking and advertising) due to occupancy declines and reduced tenant sales volumes in the third quarter of 2009 as compared to the same period of 2008.

  • NOI for the third quarter of 2009 was $585.2 million, a decrease of approximately 6.0% from the $622.5 million reported in the third quarter of 2008. In addition to the revenue items discussed above, we sold two office parks in 2008 which also contributed to the decrease in NOI in 2009.

  • Total tenant sales declined 9.8% and comparable tenant sales declined 10.7% in 2009, both on a trailing 12 month basis, compared to the same period last year.

  • Comparable NOI from consolidated properties in the third quarter of 2009 declined by 6.3% compared to the third quarter of 2008. Comparable NOI from unconsolidated properties at the Company’s ownership share in the third quarter of 2009 declined 2.7% compared to the third quarter of 2008. In the aggregate, comparable retail and other NOI decreased 5.8% as compared to the third quarter of 2008. Such comparable NOI declines for the three months ended September 2009 versus the three months ended September 2008 are primarily the result of negative new leasing spreads and higher net real estate tax expense.

  • Retail Center occupancy increased slightly to 91.3% at September 30, 2009 as compared to 91.0% at June 30, 2009 but declined as compared to 92.7% at September 30, 2008. Although declines in the economy have yielded year-over-year occupancy reductions, quarter over quarter occupancy improvements in 2009 are primarily attributable to increases in shorter term tenant leasing.

  • Tenant sales per square foot for third quarter 2009 (on a trailing twelve month basis) were $409 as compared to $455 in the third quarter of 2008.

    Master Planned Communities Segment

  • NOI in the third quarter of 2009 for the Master Planned Communities segment was a loss of $2.2 million for consolidated properties and $0.8 million for unconsolidated properties as compared to a loss of $42.7 million for consolidated properties and income of $3.6 million for unconsolidated properties, respectively, in the third quarter of 2008. NOI remains negative for certain communities as operating expenses cannot be completely eliminated despite the significant reduction in current sales revenues. As detailed in the Supplemental Schedule of FFO Items that Impact Comparability, the NOI loss in the third quarter of 2008 for consolidated properties is due primarily to the $40.3 million provision for impairment related to the Nouvelle at Natick condominium development. Although an auction of certain of the remaining inventory of unsold condominiums was held at Nouvelle at Natick in early October 2009, the sales prices in the executed contracts obtained did not trigger any additional impairment provisions at September 30, 2009 beyond those recognized in previous periods.

  • Land sale revenues in the third quarter of 2009 were approximately $7.4 million for consolidated properties and approximately $7.8 million for unconsolidated properties, compared to $6.2 million for consolidated properties and $13.1 million for unconsolidated properties, in the third quarter of 2008.

    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 benefit from (provision for) 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 benefit from (provision for) 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.

    Click here to view financial tables.

    OPERATIONAL AND FINANCIAL HIGHLIGHTS
    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 bankruptcy filings of the Debtors, our ability to refinance, extend or repay our near and intermediate term debt, our substantial level of indebtedness, changes in 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.



    « Back to Press Releases

    		•