General Growth Properties (GGP) has an idea for an economic stimulus plan: Let's all hang out at the mall! GGP is the country's #2 mall operator, behind Simon Property Group. The self-managed and self-administered real estate investment trust (REIT) has a portfolio that includes 128 regional shopping malls (some 127 million sq. ft. of space) in major US markets. GGP owns, manages, leases, and redevelops its malls, which generate more than $570 per square foot in sales each year. Some of GGP's shopping locations include Ala Moana Center in Honolulu and Fashion Show in Las Vegas. GGP also has an interest in a mall in Brazil. Top tenants include L Brands, Abercrombie & Fitch, Foot Locker, and The Gap.
Chicago-based GGP owns or has an interest in (through joint venture partnerships) 128 regional malls in some 40 states, as well as another 13 strip/other retail properties. Essentially all of its holdings are located in the US, with the exception of a shopping center in Rio de Janeiro, Brazil in which GGP has a 35% interest.
Sales and Marketing
The company's largest tenant is Limited Brands, which made up roughly 4% of the company's rental income in 2014. Its second and third largest tenants include The Gap, and Foot Locker, respectively, which brought in a combined 5% of rental revenue.
GGP spent $23.46 billion on marketing costs in 2014, down from $26.23 million in 2013 and $33.07 million spent in 2012.
GGP has struggled to grow revenue in recent years. Revenue in 2014 inched upward by less than 1% to $2.54 billion, mostly thanks to higher minimum rents which were driven by shrinking vacancies and the acquisitions of an additional 50% of Quail Springs Mall and two operating properties. The company also collected management fee income, along with higher tenant recovery income that was driven by an increase in common area operating expense recoveries and real estate tax recoveries from tenants.
Despite modest revenue growth, the REIT enjoyed a second year of triple-digit profit growth, with net income in 2014 more than doubling to $665.85 million. A huge jump in non-recurring income from discontinued operations drove profit higher, mostly as the company sold interests in four major assets for a gain of $142.5 million. It also collected a net gain of $143.9 million when it sold a property with heavy debt obligations; the sale fully satisfied the property's debt and tax indemnification liabilities.
Operations provided $949.72 million, or 7% more cash than in 2013, mostly thanks to higher earnings.
GGP is looking for a sustained rebound in consumer spending to boost mall traffic, retail sales and, consequently, its own fortunes. The REIT is focused on building its portfolio of Class A regional malls. To this end, in mid-2013 it inked a deal with TIAA-CREF to own and operate Las Vegas's The Grand Canal Shoppes and The Shoppes at the Palazzo. The Grand Canal Shoppes generates more than $1,000 of sales per square foot.
The company also continues to strategically acquire properties, either on its own or through partnerships, to extend its geographic reach and grow its revenue-generating property portfolio. In 2015, GGP took a 75% stake in a partnership with AustralianSuper to own and operate the Ala Moana Center in Honolulu, Hawaii -- a shopping center that generates a whopping $1,350 in tenant sales per square foot. In 2014, GGP partnered in 50-50 joint-venture which spent $1.78 billion toward buying the Crown Building in New York City. Also that year, via a joint venture, it purchased interests in five retail properties located in New York City, Miami, Bellevue (Washington) for a total of $690.2 million. In 2012, GGP acquired about a dozen Sears stores for $270 million. The deal helped boost GGP's portfolio value and is in line with redevelopment and expansion plans.
GGP is also is selling non-core assets to raise capital and pay off debt. The company's strategy is to create value among its existing portfolio by redeveloping and expanding properties. Another element of GGP's growth strategy is improving its balance sheet. The economic environment of low interest rates allowed it to receive better mortgage terms on its properties.
GGP spun off about half of its mid-tier properties as it continued to restructure in 2012. It created Rouse Properties to own about 30 malls in noncore markets. The Rouse name is a nod to The Rouse Company, an upscale retail REIT acquired by GGP in 2004. The properties are regional malls with lower rents in locations such as Farmington, New Mexico; Springfield, Oregon; and Hayward, California.
The economic downturn, which impacted the commercial real estate industry, hurt GGP. After struggling to handle debt levels of more than $25 billion, GGP filed for Chapter 11 bankruptcy protection in 2009 and represented one of the largest bankruptcy cases of its kind. It emerged the following year. GGP was able to exit bankruptcy after it restructured some $15 billion in debt and received nearly $7 billion in new equity from several investors including Canadian firm Brookfield Asset Management and hedge fund Pershing Capital. The Teacher Retirement System of Texas and the Blackstone Group also invested in GGP.
GGP revamped itself in 2010 by splitting into two companies. GGP hung on to its portfolio of mall and retail space, while a new publicly traded company, The Howard Hughes Corporation, took over its portfolio of planned communities and other real estate assets with development potential over the long term. GGP paid the heirs of the late American entrepreneur Howard Hughes $230 million to settle a dispute over the Summerlin planned community in Las Vegas, and in return named the new spun off company after him. Executives from Brookfield Asset Management and Pershing Square Capital Management are in charge of The Howard Hughes Corporation.