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CHICAGO-The strength of the retail sector during the recent economic downturn and jobless recovery is paying great dividends for General Growth Properties Inc. stockholders. Having announced earlier this month that it will increase its dividend by 25% subject to shareholder approval next month, the REIT backed up the proposal with a record 22.1% increase in third-quarter funds from operations.

Based on its most recent price of $75.22 per share, General Growth Properties’ dividend yield is 4.74%.

“REIT investors want to see dividend growth,” notes CFO Bernard Freibaum.

Net operating income is up 20% from the third quarter of 2002 to $275.7 million. Those results come even as General Growth’s tenants are seeing flat sales, increasing less than 1% to $354 per sf across the second-largest US retail REIT’s portfolio in the past year.

However, General Growth increased its occupancy rate two percentage points to 90.7%, continued to see increases in its specialty leasing program that capitalizes on malls’ common areas and substantial increases on new leases. The $33.62 per sf on new leases is up 26% over the $26.70 per sf rate of all expiring leases.

“Sales started to improve in August; and September, the third-most important retail month of the year, was very strong,” said president and COO Robert Michaels during Tuesday’s earnings conference call. “For ’04, the attitude of retailers is more positive than it was at the beginning of the year.”

Meanwhile, customer surveys reveal one surprising trend–renewed popularity of department stores, recently considered to be under-performers in most mall tenant rosters.

In addition to a dividend increase, General Growth Properties stockholders also will be asked next month to approve a 3-for-1 stock split.

“We’re constantly looking for ways to improve,” says CEO John Bucksbaum. “We’re improving as a company, and the key word here is company.”

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