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Assessing General Growth Properties’ High FFO Growth in Q315

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Strong growth in FFO

FFO (funds from operations) is a measure used by REITs (real estate investment trusts) to define the cash generated from their operations. General Growth Properties’ (GGP) FFO per diluted share increased to $0.36 in 3Q15, compared to $0.33 in 3Q14, representing a growth of 9.1%.

The company’s strong growth in FFO in 3Q15 can be attributed to a healthy jump in rent charged to tenants. In addition, the higher leasing spreads also contributed to the rise in FFO in 3Q15, and the ability of the company to hike rents in its portfolio will be the main driver for future FFO growth.

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Same-store NOI up

General Growth Properties’ portfolio NOI (net operating income) increased by 5.7% to $565.6 million in 3Q15 over 3Q14. The comparable NOI (same-store NOI) increased by 5.1% to $560 million from $533 million in the same period one year previously. This increase in NOI was mainly attributed to a rise in rent charged to tenants and associated fees in addition to the company’s strict control over operating expenses.

NOI is used to measure the operating performance of a company’s properties. Same-store NOI metrics are used to determine the percentage of NOI from the company’s existing stores while what remains can be attributed to its new stores.

Peers and ETFs

Other companies in the retail REIT industry such as Taubman Centers (TCO), CBL & Associates Properties (CBL), and Pennsylvania Real Estate Investment Trust (PEI) released their 3Q15 earnings during the last week of October. General Growth Properties makes up 1.95% of the iShares US Real Estate ETF’s (IYR) portfolio.

Continue to the next part of this series for a discussion of General Growth Properties’ balance sheet activities in 3Q15.

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