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Why General Growth Properties’ Revenue Declined in 3Q15

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3Q15 revenue dip

General Growth Properties (GGP) total revenues for 3Q15 stood at $585.3 million, down by 7.4% over the same period one year previously. Minimum rent witnessed a YoY (year-over-year) decline of 10.4% in 3Q15 to $358.7 million. Tenant reimbursement, which is also a major source of income for the company, experienced a drop of 7.3% in 3Q15 to $172.5 million over 3Q14.

On the other hand, the company’s other income grew by 49.2% in 3Q15 to $28.1 million. The decline in General Growth Properties revenue in 3Q15 was primarily due to a sharp decline in minimum rent and tenant recoveries.

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Revenue contribution

Minimum rent contributed 61.3% to the total revenue of the company in 3Q15, compared to 63.3% in 3Q14, while tenant reimbursement shares-to-total revenue remained unchanged at 29.5%. On the other hand, the share of other income to the total revenues of the company increased from 3% in 3Q14 to 4.8% in 3Q15.

Earnings

Net income of the company rose by 69% to $120 million, or $0.13 per diluted share, as compared to $71 million, or $0.07 per diluted share during the same period one year previously. The rise in net income was mainly due to the positive impact of lower depreciation expenses, gains on investment properties, and gains on investment. The company’s gains on investment in 3Q5 were $11.2 million—compared to none in 3Q14.

Other players in the retail REIT industry—companies like Taubman Centers (TCO), CBL & Associates Properties (CBL), and Pennsylvania Real Estate Investment Trust (PEI)—released their 3Q15 earnings in the last week of October 2015. The iShares US Real Estate ETF (IYR) invests 1.95% of its portfolio in General Growth Properties.

In the next part of this series, we’ll discuss General Growth Properties’ operating metrics.

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