However, General Growth Properties plans to spend $525 million over the next two years on new developments, redevelopments and expansions of existing malls, with the larger projects all west of the Mississippi River, expected to come on line in the second half of 2004. The capital expenditures are expected to yield a 10% return or better, says CFO Bernard Freibaum.

"We hope retail sales will be more robust by then," Freibaum says during an earnings conference call Tuesday. "Most of these projects are substantially pre-leased or committed."

However, if the economy continues to sputter or slip back into recession, the projects also can be delayed, Freibaum adds.

General Growth Properties posted double-digit funds from operations growth last year for the ninth year in the last 10, with a 17.5% increase last year. Meanwhile, occupancy remained flat at 91% with sales at the mall also static at $355 per sf.

The trend for 2003 is expected to be a continued plateau for occupancy and sales, says president and COO Robert Michaels. "We continue to see retailers exercise a degree of caution as they look to 2003 and '04," he adds.

The consumer has less money to spend, notes CEO John Bucksbaum, with the only uptick late last year coming from 0% financing offered by auto dealers. "All is not bright with 2003 sales," he says. "I am concerned the economic environment will worsen before it gets better."

However, the tenant base remains strong, REIT officials say, with fewer store closings and financial difficulties reported last year compared to 2001.

"It's surprising to me to see the number of new concepts out there," Freibaum says.

Meanwhile, 2003 acquisitions may range anywhere from none to $1 billion, according to the company. "You don't know if you're going to acquire anything in a given year, but we do expect to see opportunities this year," Freibaum says. "But there's no way to say where, or how many."

Instant Insights /

General Growth Embarks on $525M Building Project

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