GGP's FFO Drops 8%

However, the retail business posted a comparable tenant sales increase of 2.5 percent, and the re-leasing and remerchandising of vacant stores, including Musicland and Retail Brand Alliance units, is going well. Mall sales per square foot for the quarter was $450, compared with $425 last year.

"The underlying business results are better than the numbers," says CEO John Bucksbaum. The future also bodes well for the company's regional malls as GGP explores adding other uses to them. Regional malls provide a unique opportunity to do so, Bucksbaum says.

"Adding alternative uses, and higher densification of our land will drive GGP for years to come," he says.

Holiday sales will be strong, predicts Robert Michaels, president and COO, and leasing activity is "robust" for 2007 and 2008. The company opened Pinnacle Hills Promenade in Rogers, AK; and Otay Ranch Town Center in Chula Vista, CA; in October. Opening in 2007 are The Shops at Fallen Timbers in Maumee, OH, The Shoppes at the Palazzo in Las Vegas, and the expansion of Natick (MA) Mall.

The company's international expansion is proceeding, Bucksbaum said, with a new project to open in Rio de Janeiro in December, and the company is "in the process of closing on additional interests in Brazil."

But some homebuilders have canceled short-term plans to build communities in GGP's Summerlin, Columbia and Fairwood communities, but master-planned communities are a long-term business, warned CFO Bernard Freibaum. Sales not made in 2006 could easily be made the next year.

"Our objective continues to be to manage the value of the land rather than generate a certain amount of sales," Freibaum said. "FFO is not a good indicator of value creation in the master planned business."