GGP's Q4 FFO Beats Estimates, Revenues Miss, NOI Up Y/Y

Retail REIT GGP Inc. (NYSE:GGP) delivered fourth-quarter 2017 funds from operations (FFO) per share of 48 cents, beating the Zacks Consensus Estimate by a cent. The figure also came in higher than the prior-year quarter tally of 43 cents.

Results reflect 1.3% growth in same-store net operating income (NOI) from the prior-year period.

The company posted revenues of $627.4 million, which missed the Zacks Consensus Estimate of $651.7 million. However, the figure compared favorably with the year-ago tally of $610.3 million.

For full-year 2017, FFO per share came in at $1.57, up 2.6% from the prior-year number of $1.53. However, revenues edged down 0.8% from the prior-year period to $2.3 billion.

Quarter in Details

Same-store leased percentage was 96.7% at quarter end. Initial NOI weighted rental rates for signed leases that have commenced in the trailing 12 months (on a suite-to-suite basis) expanded 13.0%, when compared to the rental rate for expiring leases. Further, tenant sales (all less anchors) edged down 0.5% on a trailing 12-month basis, excluding apparel sales increased 1.9%. Moreover, holiday sales (November and December) inched up 0.5%, excluding apparel sales increased 3.4%.

GGP’s development and redevelopment activities totaled $1.5 billion. Of this, projects worth $1.4 billion are under construction and $0.1 billion in the pipeline.

The company ended the year 2017 with cash and cash equivalents of $164.6 million, down from $474.8 million as of Dec 31, 2016.

Guidance

The company did not provide its guidance for 2018. It noted that the board received an unsolicited proposal from Brookfield Property Partners late in 2017.

Dividend Update

GGP also announced a first-quarter common stock dividend of 22 cents per share. This dividend will be paid on Apr 30 to stockholders of record on Apr 13, 2018.

Our Take

GGP has a high-quality retail portfolio and a cluster of renowned tenants. In addition, the company has made concerted efforts to support omni-channel retailing, which is encouraging. However, mall traffic continues to suffer amid rapid shift in customers’ shopping preferences and patterns, with online purchases growing by leaps and bounds. These have made the retailers reconsider their footprint and eventually opt for store closures in recent times. This has emerged as a pressing concern for retail REIT like GGP, as the trend is curtailing demand for the retail real estate space considerably. Rate hike also add to its woes.

GGP has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock has lost 2.7% of its value in the past three months, outperforming the 7.8% loss incurred by the industry it belongs to.

We now look forward to the earnings releases of other retail REITs like Taubman Centers, Inc. (NYSE:TCO) , Regency Centers Corporation (NYSE:REG) and Federal Realty Investment Trust (NYSE:FRT) . Taubman Centers and Regency Centers are scheduled to release results on Feb 8, while Federal Realty is slated to report its numbers on Feb 13.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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