GGP FFO Down Big, But Fundamentals Look Ok

General Growth reported its earnings results. Due to costs attributable to provisions for impairment, termination income and restructuring costs related to the development of alternatives to address its liquidity and financing situations, FFO was down $0.52 per fully diluted share and its earnings were down $1.27 per share. Those are ugly numbers. However, as Seeking Alpha rightly points out, the real story here is in the company's NOI. The bankruptcy filing was sure to be a big drain on its results. But its property fundamentals remain solid. There is deterioration here, but it's modest and to be expected given the broader economic carnage. The results are in-line with what other mall have REITs reported.

NOI for the first quarter of 2009 was $608.6 million, a decrease of approximately 4.1% from the $634.5 million reported in the first quarter of 2008. Minimum rents in the first quarter of 2009 declined approximately $2.7 million as compared to the same period of 2008 due to the 2008 sale of three office buildings and two office parks. Temporary tenant revenues, other revenues (including sponsorship, vending, parking and advertising) and overage rents declined in 2009 due to decreases in occupancy and the overall weakness of the retail economy. Weaknesses in certain of our tenants' businesses also led to an $8.6 million increase in our provision for doubtful accounts in 2009 as compared to 2008.

In addition, other revenues declined in 2009 due to a loss on sale of outparcel land of $3.9 million whereas 2008 had outparcel sales gains of approximately $4.3 million.

* Revenues from consolidated properties were $ 757.6 million for the first quarter of 2009, a decline of 5.1% compared to $798.3 million for the same period in 2008. The majority of this decline is due to the items impacting FFO discussed above.

* Revenues from unconsolidated properties, at the Company's ownership share, increased to $152.1 million or 3.8% compared to $146.6 million in the first quarter of 2008. This increase was primarily due to the completion and commencement of operations at the Natick Collection in 2008.

* Total tenant sales declined 6.1% and comparable tenant sales declined 6.7% in 2009, both on a trailing 12 month basis, compared to the same period last year.

* Comparable NOI from consolidated properties in the first quarter of 2009 declined by 4.4% compared to the first quarter of 2008. Comparable NOI from unconsolidated properties at the Company's ownership share in the first quarter of 2009 increased by approximately 3.7% compared to the first quarter of 2008. In the aggregate, comparable segment NOI decreased 3.3% as compared to the first quarter of 2008.

* Retail Center occupancy decreased to 90.9% at March 31, 2009, compared to 92.5% at December 31, 2008 and 92.7% at March 31, 2008.

* Sales per square foot for first quarter 2009 (on a trailing twelve month basis) were $427 versus $438 for the fourth quarter 2008 and $460 in the first quarter of 2008.

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