General Growth
General Growth Properties Inc (NYSE:GGP) emerged from bankruptcy with a strong core portfolio of properties, included Ala Moana Center in Hawaii and the Shoppes at the Palazzo in Las Vegas. Since that time, the company’s financial condition has benefited from rising occupancy levels and retail sales of its tenants, with an average sales gain of 7% in 2012. Higher demand for mall retail space has also allowed General Growth to raise rents as older lease agreements come due.
In its latest fiscal year, General Growth Properties Inc (NYSE:GGP) reported a further improvement in its financial results, with increases in revenues and adjusted operating income of 2.7% and 13.7%, respectively, versus the prior year. The company’s higher profitability was chiefly the result of lower borrowing costs, as General Growth refinanced high cost debt that was negotiated during its bankruptcy proceedings. In addition, the company achieved a 10% increase in its lease rate, as it eliminated temporary leases in favor of higher-margin permanent leases.
Looking ahead, General Growth Properties Inc (NYSE:GGP) continues to redevelop its signature locations and repopulate its properties with growing retailers. In 2012, the company acquired eleven anchor pad locations from retailer Sears Holdings for $270 million, while selling other non-core assets that bought in $525 million. As the company brings down its debt load, General Growth Properties Inc (NYSE:GGP) should be able to further free up cash flow for reinvestment and improved shareholder dividends.
Howard Hughes
Originally part of the Rouse Properties Inc (NYSE:RSE) real estate business, Howard Hughes was spun off to General Growth Properties Inc (NYSE:GGP) shareholders in 2010. The company is primarily a developer of master planned communities around the country, including its signature Woodlands and Summerlin communities that are located in Houston and Las Vegas, respectively. The national housing bust led to a crash in Howard Hughes Corp (NYSE:HHC)’ home sales activity, although sales have sprung back recently, especially in its Houston market.
In FY2012, Howard Hughes Corp (NYSE:HHC) reported strong financial results, with increases in revenues and adjusted operating income of 36.6% and 77.4%, respectively, compared to the prior year. The company’s results were paced by higher volumes of home sales across the board, as well as double-digit price gains in its Houston and Las Vegas markets. In addition, Howard Hughes Corp (NYSE:HHC)’ profitability was enhanced by improved operating margins in its commercial real estate businesses that are incorporated into the communities, including office, retail, and resort properties.
Looking ahead, Howard Hughes Corp (NYSE:HHC) seems to be back on track with its development plans, including a new master planned community that is slated to be built next to its Ward Centers shopping complex in Hawaii. In addition, the company is planning commercial redevelopments at both its Summerlin community in Las Vegas and its South Street Seaport complex in New York City. While the company is heavily tied to a continuing rise in home sales, the Federal Reserve seems unwilling to change course in its bid to drive national home sales higher.
Rouse
Rouse Properties Inc (NYSE:RSE) regained its independence in January 2012, eight years after becoming part of the General Growth empire. Unfortunately, the company is only a shadow of its former self, as General Growth kept its best assets, including the Water Tower Place shopping center in Chicago. However, Rouse Properties Inc (NYSE:RSE) does still have a national footprint, operating 32 malls in secondary markets around the U.S.
In FY2012, Rouse Properties Inc (NYSE:RSE) posted generally weak results, with declines in revenues and adjusted operating income of 0.4% and 25.0%, respectively, versus the prior year. The company’s results were hurt by weak overall sales growth from its tenant base, as well as increased financing and operating costs from being a public company. Undaunted, Rouse has continued to build upon its national footprint, with recent acquisitions of malls in Michigan and Texas for roughly $160 million, which should improve its geographic diversification and future profitability.
General Growth Properties Inc (NYSE:GGP) enhanced shareholder value by completing the divestiture of its ill-fated Rouse acquisition from 2004. While Howard Hughes Corp (NYSE:HHC) and Rouse Properties Inc (NYSE:RSE) are interesting potential stories, General Growth is a leader in the retail real estate sector and is a must-own stock for long-term investors.
The article Tracking the Pieces of This Former Empire originally appeared on Fool.com and is written by Robert Hanley.
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