CHICAGO—Last week, General Growth Propertiesreleased its first quarter results and analysts seem pleased withthe Chicago-based real estate investment trust's performance andits overall outlook. The trust reported that its funds fromoperations per share increased 21.4% to $0.31 per dilutedshare from $0.25 per diluted share in last year's first quarter,and funds from operations increased 15.8% to $292million from $253 million in last year's first quarter. And itsEBITDA increased 4.1% to $501 million from $481million in last year's first quarter.

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Furthermore, net income for the trust, which has a portfolio of120 regional malls with about 125-million-square-feet, went upsharply compared to last year's first quarter, from a net loss of$12 million to a net income of $128 million. “The increase isimpacted primarily by lower depreciation expense and a gain onextinguishment of debt,” according to a company statement.

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“Tenant sales increased 1.2% to $565-per-square-foot on atrailing 12-month basis,” the statement continued, its leasedpercentage was 96.2%, an increase of 40 bps from March 31, 2013,and its initial rents for leases beginning this year increased10.8% to $67.75-per-square-foot when compared to the rents forexpiring leases.

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“General Growth turned in another very strong quarter in 1Q14despite continued softness in tenant sales,” according toRBC Capital Markets, which released a report onGGP last week. And “the outlook for the company remains healthyboth from an organic growth standpoint and from a deepeningdevelopment pipeline.” RBC estimates that GGP has about $2.2billion in active and potential projects. “Since most of theprojects are additions or other improvements to already productiveassets, there appears to be little risk in these projects.”

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Top GGP officials agree. Perhaps the trust's most significantactive project is the 650,000-square-foot Ewa WingExpansion at its Ala Moana Center inHonolulu. “We are close to 70% leased in the new wing,”Sandeep Mathrani, chief executive officer, saidlast week on a conference call to discuss the first quarter. InJune 2013, Sears closed its store at Ala Moana,which it had occupied since the iconic center opened in 1959. Butthe new wing will occupy the western portion of the mall onceoccupied by Sears, and include a 167,000-square-footBloomingdale's department store. GGP plans to openthe expansion in 2015. “It's had a positive impact on the existingmall,” Mathrani added.

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“We have raised our 2014 and 2015 FFO/shareestimates by $0.04 to $1.31 and $1.38 from $1.27 and $1.34previously,” the RBC analysts said. “We have also increased ourYE14 NAV/share estimate modestly to $22.95 from$22.93 at a 5.25% cap rate.”

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“We look for GGP to perform in line with the company's peersover the next 12 months,” RBC concluded. “The company has shed agood deal of weaker assets, and we expect improvements in theeconomy to translate into outsized growth for especially betterquality regional malls.”

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“The primary reason for the continued growth is consumerconfidence,” said Mathrani, which has improved significantly since2011, a trend he expects will continue.

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Brian J. Rogal

Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.