General Growth Properties (GGP) has devised a long-term strategy for increasing shareholder returns, which the company believes will provide its shareholders with competitive, risk-adjusted total returns made up of both dividends and share-price appreciation.
GGP’s planned initiatives aim to:
- selectively acquire high-quality retail properties
- create value from re-development projects (which includes converting large-scale anchor boxes into smaller, leasable areas and creating new in-line retail space and new restaurant venues)
- control operating expenses
- increase contractual fixed rents
- acquire assets with significant unrealized growth potential
- strategically locate tenants within each property to achieve a merchandising policy that promotes cross-shopping and maximizes sales
- introduce new concepts to the property, which may include restaurants, theaters, and first-to-market retailers
Enhancing competitive position
GGP believes that its operating strategy has produced positive results in recent years. The company expects its strategy to help increase profitability while maintaining a strong balance sheet and liquidity position in years to come. Controlling operating expenses by leveraging its scale and maximizing synergies becomes critical, the company believes, to its EBITDA (earnings before interest, taxes, depreciation, and amortization) growth. GGP expects its average annual EBITDA growth rate to be 4.6% over the next five years.
The company’s above strategy is also expected to help thwart competition from other major players like Simon Property Group (SPG), Macerich Company (MAC), Taubman Centers (TCO), and CBL & Associates Properties (CBL).
GGP makes up 2.93% of the holdings of the Schwab US REIT ETF (SCHH).
In the next part of this series, we’ll examine General Growth Properties’ key operating metrics, such as tenant lease expiry and tenant sales.