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General Growth Properties (GGP) FFO Tops Estimates in Q1

General Growth Properties Inc.’s GGP first-quarter 2016 funds from operations (“FFO”) per share of 40 cents came 5 cents ahead of the Zacks Consensus Estimate. FFO per share was also higher than the year-ago quarter figure of 32 cents.

The improvement was backed by a 5.2% rise in comparable net operating income (“NOI”).

Total revenue during the quarter increased 2.2% year over year to $607.0 million. The figure also surpassed the Zacks Consensus Estimate of $583 million.

Quarter in Details

Comparable NOI increased 5.2% from the prior-year quarter to $561 million. At quarter end, same-store leased percentage was 95.9%.

Moreover, initial rental rates for signed leases that started in the trailing 12 months (on a suite-to-suite basis) increased 13.0% to $66.37 per square foot compared with the rental rate for expiring leases. On a trailing 12-month basis, tenant sales (all less anchors) improved 2.1% to $20.3 billion.

General Growth Properties’ development and redevelopment activities totaled around $1 billion. Of this, projects worth $0.4 billion are under construction and $0.6 billion are in the pipeline.

The company's cash and cash equivalents as of Mar 31, 2016 were $193.1 million, down from $356.9 million as of Dec 31, 2015.

Quarterly Dividend

General Growth Properties announced a second-quarter common stock dividend of 19 cents per share, unchanged sequentially but up 12% year over year. This amount is payable on Jul 29, 2016 to stockholders of record as on Jul 15.

Guidance

General Growth Properties expects 2016 FFO per share in the range of $1.52 to $1.56. The Zacks Consensus Estimate of $1.55 lies within this range.

For the second quarter of 2016, the company expects FFO per share in the range of 34 cents to 36 cents. The Zacks Consensus Estimate is currently pegged at 36 cents.

Our Take

General Growth Properties’ first-quarter outperformance is encouraging. For the company, a solid tenant base, portfolio repositioning efforts and initiatives to strengthen ties with customers augur well. But stiff competition and anticipation of a hike in interest rate remain as headwinds.

General Growth Properties has a Zacks Rank #4 (Sell). Investors interested in the retail REIT industry may consider stocks like The Macerich Company MAC, Realty Income Corporation O and STORE Capital Corporation STOR. Each of these stocks carries a Zacks Rank #2 (Buy).

Note: FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.

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