General Growth Properties (GGP)

NetscribeREIT (22.29) Submitted: 2/23/07 4:40 AM : Start Price: $61.46 GGP Score: -43.36

General Growth Properties (GGP) is a self-administered and self-managed real estate investment trust (REIT). GGP owns, develops, operates, and manages around 200 shopping malls across 44 states, as well as Master Planned Communities in three states, including Summerlin in Nevada, The Woodlands and Bridgeland in Texas, and Columbia in Maryland.

The $10 billion U.S. shopping-center industry has showed solid performance in 2006; with lenders funded deals at record prices and retailers looked to expand. However, according to McGraw-Hill Construction, new construction (new starts and additions) of U.S. retail space slowed by 6% y-o-y for the first 10 months of 2006. This has spurred of demand for existing shopping malls. To take advantage of this trend the company has bought space vacated by J C Penney stores during late 2006.

The interest rate has been stabilized after 17 straight hikes in mid of 2006. This should enhance consumer-spending power. Moreover, factors like easing of inflationary pressure along with gaining momentum in job growth rate should push up the shopping activities, thereby boosting the demand for shopping mall. The company has been able to enhance its revenues by 2.9% to $728 million during the last quarter, owing to the increase in its retail center occupancy rate by 110 basis points to 93.6%; it has enhanced its average sales per square foot by 3.7% to $453.

The management believes that favorable shopping environment should drive their core funds from operations (FFO) for fiscal 2007, which is expected to be around $3.17-$3.23 per share, an increase of at least 7% when compared to fiscal 2006. Looking at all these aspects it seems that General Growth is poised to see an interesting year in 2007.

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