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GGP's 2Q17 Results from an Investor’s Perspective

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GGP's 2Q17 Results from an Investor’s Perspective PART 1 OF 8

GGP’s 2Q17 Results from an Investor’s Perspective

2Q17 performance

GGP (GGP) reported funds from operations (or FFO) of $0.35 per share, which was in line with Wall Street estimates. Adjusted FFO remained flat year-over-year.

GGP&#8217;s 2Q17 Results from an Investor’s Perspective

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Its revenue fell 3.3% year-over-year to $555.8 million, surpassing Wall Street’s estimate of $542.6 million. The year-over-year rise in management fees, other corporate revenues, and other revenues was offset by a fall in minimum rents, tenant recoveries, and overage rents.

As more and more retailers are shutting their stores in order to maintain profits amid dwindling sales and declining traffic, malls are left with vacant space. In order to survive, mall owners have resorted to redevelopment and remodeling of these vacant spaces for other alternative uses such as restaurants and entertainment zones to attract traffic. There’s a shift in focus from apparel to non-apparel categories such as household goods, which are less reactive to the online craze.

As of the second quarter of 2017, GGP’s portfolio consisted of 15 hotels, office spaces spanning more than 6.0 million square feet in area, and 2,000 residential units.

Fiscal guidance

The solid results for the first six months of 2017 have made GGP optimistic about the rest of the year. GGP now expects to report FFO of $1.56–$1.60 per share. It expects NOI (net operating income) to rise 3.0%–4.0%.

Other commercial REITs such as Simon Property Group (SPG), Macerich (MAC), and Kimco Realty (KIM) reported FFOs of $2.47, $0.98, and $0.41, respectively, during 2Q17.

REIT ETFs also provide exposure to the sector. The above-mentioned REITs make up almost 13.0% of the iShares Cohen & Steers REIT (ICF). ICF’s broadly diversified portfolio may provide a cushion to investors from macro headwinds.

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