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How Higher Occupancy Rates Bode Well for General Growth Properties


Nov. 7 2015, Updated 2:07 p.m. ET

Occupancy rate

General Growth Properties’ (GGP) same-store occupancy increased from 95.1% in 3Q14 to 95.4% in 3Q15. Occupancy is the percentage of mall space and freestanding GLA (gross leasable area) leased as of the last day of the reporting period. As we’ll see, such a rise in occupancy level bodes well for a retail company because higher occupancy ensures higher rental income.

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Tenant sales per square foot

General Growth Properties (GGP) same-store mall tenant annual sales (for less than 10,000 square feet) per square foot increased by 3.7% for the year ending September 2015 to $593, compared to $571 for the same period one year previously.

Sales are based on reports by retailers leasing mall and freestanding stores for the trailing 12 months for tenants that have occupied such stores for a minimum of 12 months. GGP’s tenant sales (not including anchors) increased by 3.3% to $20.7 billion on a trailing 12-month basis.

Initial rent improvement

General Growth Properties’ initial rental rates for signed leases increased by 9.7%, or $5.62 per square foot, to $63.3 per square foot in 3Q15, compared to the rental rate for expiring leases. Initial rent per square foot is the average base minimum rent charge to all tenants each month. Initial rent is one of the most important indicators of an REIT’s (real estate investment trust) performance as a rise in minimum rent could lead to an improvement in the company’s top-line.

The iShares US Real Estate ETF (IYR) invests 1.95% of its portfolio in General Growth Properties. Peers like WP Glimcher (WPG), CBL & Associates Properties (CBL), and Taubman Centers (TCO) have weights of 0.26%, 0.1%, and 0.52%, respectively, in the same portfolio.

In the next article, we’ll discuss General Growth Properties’ funds from operations in 3Q15.


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