Brookfield Property REIT Inc. (BPR)

FORM 8-K | Current report
GGP Inc. (Form: 8-K, Received: 05/01/2017 07:02:08)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of
the Securities Act of 1934

Date of Report (Date of Earliest Event Reported)
May 1, 2017

GGP Inc.
(Exact name of registrant as specified in its charter)

Delaware
 
1-34948
 
27-2963337
(State or other
(Commission
(I.R.S. Employer
jurisdiction of
File Number)
Identification
incorporation)
 
Number)

110 N. Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)

(312) 960-5000
(Registrant’s telephone number, including area code)

N/A
(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]





ITEM 2.02      RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On May 1, 2017, GGP Inc. (“GGP”) issued a press release describing its results of operations for the three months ended March 31, 2017.  A copy of the press release is being furnished as Exhibit 99.1 to this report.  This information shall not be deemed “filed” for purposes of Section 18 of the Secur i ties Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

ITEM 7.01 REGULATION FD DISCLOSURE.

On May 1, 2017, GGP Inc. made available on its website the press release described in Item 2.02 above as well as certain supplemental financial information regarding its operations for the three months ended March 31, 2017. A copy of such supplemental financial information is being furnished as Exhibit 99.2 to this report. This information shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

ITEM 9.01      FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits

Exhibit No.      Description

99.1
Press release titled “GGP Reports First Quarter 2017 Results and Declares Second Quarter Dividend” dated May 1, 2017 (furnished herewith).

99.2
Certain GGP supplemental financial information regarding its operations for the three months ended March 31, 2017 (furnished herewith).































SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
GGP INC.
/s/ Michael Berman
Michael Berman
Chief Financial Officer
                                    

Date: May 1, 2017









































EXHIBIT INDEX
Exhibit Number
Name
99.1
Press release titled “GGP Reports First Quarter 2017 Results and Declares Second Quarter Dividend” dated May 1, 2017 (furnished herewith).
99.2
Certain GGP supplemental financial information regarding its operations for the three months ended March 31, 2017 (furnished herewith).




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GGP REPORTS FIRST QUARTER 2017 RESULTS
AND DECLARES SECOND QUARTER DIVIDEND



Chicago, Illinois, May 1, 2017 - GGP Inc. (the “Company” or “GGP”) (NYSE: GGP) today reported results for the three months ended March 31, 2017.
    
GAAP Operating Results
Net income attributable to GGP was $107 million, or $0.11 per diluted share, as compared to $192 million, or $0.20 per diluted share, in the prior year period.
Net income attributable to GGP decreased 44.1% from the prior year period primarily due to 2016 gains related to the sale of interests in four properties.
The Company declared a second quarter common stock dividend of $0.22 per share, an increase of 16% over the second quarter of 2016.

Company Operating Results
Company Same Store Net Operating Income (“Company Same Store NOI”) was $561 million as compared to $547 million in the prior year period, an increase of 2.5%.
Company Net Operating Income (“Company NOI”) as adjusted was $567 million as compared to $551 million in the prior year period, an increase of 2.9%. 1
Company earnings before interest, taxes, depreciation and amortization (“Company EBITDA”) as adjusted was $530 million as compared to $512 million in the prior year period, an increase of 3.7%. 1
Company Funds From Operations (“Company FFO”) was $346 million, or $0.36 per diluted share.
Same Store leased percentage was 95.9% at quarter end.
Initial NOI weighted rental rates for signed leases that have commenced in the trailing twelve months on a suite-to-suite basis increased 15.5% when compared to the rental rate for expiring leases.
Initial rental rates for signed leases that have commenced in the trailing twelve months on a suite-to-suite basis increased 10.5% when compared to the rental rate for expiring leases.
For the trailing twelve months, NOI weighted tenant sales per square foot (<10K sf) were $705 an increase of 1.8% over the prior year.
For the trailing twelve months, tenant sales per square foot (<10K sf) were $591 an increase of 0.6% over the prior year.
Tenant sales (all less anchors) increased 0.9% on a trailing 12-month basis.









1.
See Supplemental Information page 4 for items included as adjustments.


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Investment Activities
Development
The Company’s development and redevelopment activities total $1.3 billion, of which approximately $0.7 billion is under construction and $0.6 billion is in the pipeline.

Common Share Repurchase
During the quarter, the Company acquired approximately 2.57 million of its common shares at a weighted average price of $23.16 per share for total consideration of approximately $59.6 million.

Dividends
On May 1, 2017, the Company’s Board of Directors declared a second quarter common stock dividend of $0.22 per share payable on July 28, 2017, to stockholders of record on July 13, 2017. This represents an increase of $0.03 per share or 16% growth over the dividend declared for the second quarter of 2016.

The Board of Directors also declared a quarterly dividend on the 6.375% Series A Cumulative Redeemable Preferred Stock of $0.3984 per share payable on July 3, 2017, to stockholders of record on June 15, 2017.









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Guidance

 
For the year ending
For the three months ending
Earnings Guidance
December 31, 2017
June 30, 2017
 
 
 
Net income attributable to GGP
$0.59-$0.63

$0.10-$0.12

Preferred stock dividends
(0.02
)
(0.01
)
Net income attributable to common stockholders
$0.57-$0.61

$0.09-$0.11

Depreciation, including share of joint ventures
0.96

0.24

NAREIT FFO
$1.53-$1.57

$0.33-$0.35

Adjustments 1
0.03

0.01

Company FFO per diluted share
$1.56-$1.60

$0.34-$0.36



1.
Includes impact of straight-line rent, above/below market rent, gain/loss on foreign currency and the related provision for income taxes, and other items. For discussion on the purpose and use of these adjustments please see Non-GAAP Supplemental Financial Measures and Definitions.


The guidance estimate reflects management’s view of current and future market conditions, including assumptions with respect to Company Same Store NOI and Operating Income growth, rental rates, occupancy levels, retail sales, variable expenses, interest rates and the earnings impact of the events referenced in this release and previously disclosed. The guidance also reflects management’s view of capital market conditions. The estimates do not include future gains or losses, or the impact on operating results from future property acquisitions or dispositions or capital market activity. Earnings per share estimates may be subject to fluctuations as a result of several factors, including any gains or losses associated with disposition activity. By definition, FFO and Company FFO exclude real estate-related depreciation and amortization, provisions for impairment, or gains or losses associated with property disposition activities. This guidance is a forward-looking statement and is subject to the risks and other factors described elsewhere in this release and in the Company’s annual and quarterly periodic reports filed with the Securities and Exchange Commission.


Investor Conference Call
On Monday, May 1, 2017, the Company will host a conference call at 8:00 a.m. Central (9:00 a.m. Eastern). The conference call will be accessible by telephone and through the Internet. Interested parties can access the call by dialing 877.845.1018 (international 707.287.9345). A live webcast of the conference call will be available in listen-only mode in the Investors section at www.ggp.com. Interested parties should access the conference call or website 10 minutes prior to the beginning of the call in order to register. For those unable to listen to the call live, a replay will be available after the conference call event. To access the replay, dial 855.859.2056 (international 404.537.3406) conference ID 90188951.

Supplemental Information
The Company has prepared a supplemental information report available on www.ggp.com in the Investors section. This information also has been furnished with the Securities and Exchange Commission as an exhibit on Form 8-K.




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Forward-Looking Statements
Certain statements made in this press release may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in any forward-looking statement are based on reasonable assumptions, it can give no assurance that its expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and other factors. Such factors include, but are not limited to, the Company’s ability to refinance, extend, restructure or repay near and intermediate term debt, its indebtedness, its ability to raise capital through equity issuances, asset sales or the incurrence of new debt, retail and credit market conditions, impairments, its liquidity demands, and economic conditions. The Company discusses these and other risks and uncertainties in its annual and quarterly periodic reports filed with the Securities and Exchange Commission. The Company may update that discussion in its periodic reports, but otherwise takes no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.

Investors and others should note that we post our current Investor Presentation on the Investors page of our website at www.ggp.com. From time to time, we update that Investor Presentation and when we do, it will be posted on the Investors page of our website at ggp.com. It is possible that the updates could include information deemed to be material information. Therefore, we encourage investors, the media and others interested in our company to review the information we post on the Investors page of our website at www.investor.ggp.com from time to time.


GGP Inc.
GGP Inc. is an S&P 500 company focused exclusively on owning, managing, leasing and redeveloping high-quality retail properties throughout the United States. GGP is headquartered in Chicago, Illinois, and publicly traded on the NYSE under the symbol GGP.
Contact:                         
Kevin Berry                                
SVP Investor and Public Relations                            
(312) 960-5529                                
kevin.berry@ggp.com        


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Non-GAAP Supplemental Financial Measures and Definitions
Proportionate or At Share Basis
The following Non-GAAP supplemental financial measures are all presented on a proportionate basis. The proportionate financial information presents the consolidated and unconsolidated properties at the Company’s ownership percentage or “at share”. This form of presentation offers insights into the financial performance and condition of the Company as a whole, given the significance of the Company’s unconsolidated property operations that are owned through investments accounted for under GAAP using the equity method.

The proportionate financial information is not, and is not intended to be, a presentation in accordance with GAAP. The non-GAAP proportionate financial information reflects our proportionate economic ownership of each asset in our property portfolio that we do not wholly own. The amounts in the column labeled "Noncontrolling Interests" were derived on a property-by-property basis by including the share attributable to noncontrolling interests in each line item from each individual property. The Company does not have legal claim to the noncontrolling interest of assets, liabilities, revenue, and expenses. The amount of cash each noncontrolling interest receives is based on the specific provisions of each operating agreement and varies depending on certain factors including the amount of capital contributed by each investor and whether any investors are entitled to preferential distributions. The amounts in the column labeled "Unconsolidated Properties" were derived on a property-by-property basis by including our share of each line item from each individual entity. This provides visibility into our share of the operations of our joint ventures.

We do not control the unconsolidated joint ventures and the presentations of the assets and liabilities and revenues and expenses do not represent our legal claim to such items. The operating agreements of the unconsolidated joint ventures generally provide that partners may receive cash distributions (1) to the extent there is available cash from operations, (2) upon a capital event, such as a refinancing or sale or (3) upon liquidation of the venture. The amount of cash each partner receives is based upon specific provisions of each operating agreement and varies depending on factors including the amount of capital contributed by each partner and whether any contributions are entitled to priority distributions. Upon liquidation of the joint venture and after all liabilities, priority distributions and initial equity contributions have been repaid, the partners generally would be entitled to any residual cash remaining based on their respective legal ownership percentages.

We provide Non-GAAP proportionate financial information because we believe it assists investors and analysts in estimating our economic interest in our unconsolidated joint ventures when read in conjunction with the Company's reported results under GAAP. Other companies in our industry may calculate their proportionate interest differently than we do, limiting the usefulness as a comparative measure. Because of these limitations, the Non-GAAP proportionate financial information should not be considered in isolation or as a substitute for our financial statements as reported under GAAP.
Net Operating Income (“NOI”), Company NOI and Company Same Store NOI
The Company defines NOI as proportionate income from operations and after operating expenses have been deducted, but prior to deducting financing, property management, administrative and income tax expenses. NOI excludes management fees and other corporate revenue and reductions in ownership as a result of sales or other transactions. The Company considers NOI a helpful supplemental measure of its operating performance because it is a direct measure of the actual results of our properties. Because NOI excludes reductions in ownership as a result of sales or other transactions, management fees and other corporate revenue, general and administrative and property management expenses, interest expense, retail investment property impairment or non-recoverable development costs, depreciation and amortization, gains and losses from property dispositions, allocations to noncontrolling interests, provision for income taxes, preferred stock dividends, and extraordinary items, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact on operations from trends in occupancy rates, rental rates and operating costs.




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The Company also considers Company NOI to be a helpful supplemental measure of its operating performance because it excludes from NOI items such as straight-line rent, and amortization of intangibles resulting from acquisition accounting and other capital contribution or restructuring events. However, due to the exclusions noted, Company NOI should only be used as an alternative measure of the Company’s financial performance.
We present Company NOI, Company EBITDA and Company FFO (as defined below); as we believe certain investors and other users of our financial information use these measures of the Company’s historical operating performance.
Adjustments to NOI, EBITDA and FFO, including debt extinguishment costs, market rate adjustments on debt, straight-line rent, intangible asset and liability amortization, real estate tax stabilization, gains and losses on foreign currency and other items that are not a result of normal operations, assist management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at the properties or from other factors. In addition, the Company’s leases include step rents that increase over the term of the lease to compensate the Company for anticipated increases in market rentals over time. The Company’s leases do not include significant front loading or back loading of payments or significant rent-free periods. Therefore, we find it useful to evaluate rent on a contractual basis as it allows for comparison of existing rental rates to market rental rates. Management has historically made these adjustments in evaluating our performance, in our annual budget process and for our compensation programs.
The Company defines Company Same Store NOI as Company NOI excluding periodic effects of full or partial acquisitions of properties and certain redevelopments (for the list of properties included in Company Same Store NOI see the Property Schedule in our Supplemental Information). We do not include an acquired property in our Company Same Store NOI until the operating results for that property have been included in our consolidated results for one full calendar year. Properties that we sell are excluded from Company NOI and Company Same Store NOI for all periods once the transaction has closed.
The Company considers Company Same Store NOI a helpful supplemental measure of its operating performance because it assists management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at comparable properties or from other factors, such as the effect of acquisitions. For these reasons, we believe that Company Same Store NOI, when combined with GAAP operating income provides useful information to investors and management.
Other REITs may use different methodologies for calculating, NOI, Company NOI and Company Same Store NOI, and accordingly, the Company’s Company Same Store NOI may not be comparable to other REITs. As a result of the elimination of corporate-level costs and expenses and depreciation and amortization, the Company Same Store NOI we present does not represent our total revenues, expenses, operating profit or net income and should not be used to evaluate our performance as a whole. Management compensates for these limitations by separately considering the impact of these excluded items, to the extent they are material, to operating decisions or assessments of our operating performance. Our consolidated GAAP statements of operations include such amounts, all of which should be considered by investors when evaluating our performance.
Earnings Before Interest Expense, Income Tax, Depreciation, and Amortization ("EBITDA") and Company EBITDA
The Company defines EBITDA as NOI less certain property management and administrative expenses, net of management fees and other corporate revenues. EBITDA is a commonly used measure of performance in many industries, but may not be comparable to measures calculated by other companies. Management believes EBITDA provides useful information to investors regarding our results of operations because it helps us and our investors evaluate the ongoing operating performance of our properties after removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization). Management also believes the use of EBITDA facilitates comparisons between us and other equity REITs, retail property owners who are not REITs and other capital-intensive companies. Management uses Company EBITDA to evaluate property-level results and as one measure in determining the value of acquisitions and dispositions and, like FFO and Same Store NOI (discussed below), it is widely used by management in the annual budget process and for compensation programs. Please see adjustments discussion above for the purpose and use of the adjustments included in Company EBITDA.





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EBITDA and Company EBITDA, as presented, may not be comparable to similar measures calculated by other companies. This information should not be considered as an alternative to net income, operating profit, cash from operations or any other operating performance measure calculated in accordance with GAAP.
Funds From Operations (“FFO”) and Company FFO
The Company determines FFO based upon the definition set forth by National Association of Real Estate Investment Trusts (“NAREIT”). The Company determines FFO to be its share of consolidated net income (loss) attributable to common shareholders and redeemable non-controlling common unit holders computed in accordance with GAAP, excluding real estate related depreciation and amortization, excluding gains and losses from extraordinary items, excluding cumulative effects of accounting changes, excluding gains and losses from the sales of, or any impairment charges related to, previously depreciated operating properties, plus the allocable portion of FFO of unconsolidated joint ventures based upon the Company’s economic ownership interest, and all determined on a consistent basis in accordance with GAAP. As with the Company’s presentation of NOI, FFO has been reflected on a proportionate basis.
The Company considers FFO a helpful supplemental measure of the operating performance for equity REITs and a complement to GAAP measures because it is a recognized measure of performance by the real estate industry. FFO facilitates an understanding of the operating performance of the Company’s properties between periods because it does not give effect to real estate depreciation and amortization since these amounts are computed to allocate the cost of a property over its useful life. Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, the Company believes that FFO provides investors with a clearer view of the Company’s operating performance.
We calculate FFO in accordance with standards established by NAREIT, which may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO in accordance with NAREIT guidance. In addition, although FFO is a useful measure when comparing our results to other REITs, it may not be helpful to investors when comparing us to non-REITs. As with the presentation of Company NOI and Company EBITDA, we also consider Company FFO, which is not in accordance with NAREIT guidance and may not be comparable to measures calculated by other REITs, to be a helpful supplemental measure of our operating performance. Please see adjustments discussion above for the purpose and use of the adjustments included in Company FFO.
FFO and Company FFO do not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income determined in accordance with GAAP as a measure of operating performance, and is not an alternative to cash flows as a measure of liquidity or indicative of funds available to fund our cash needs. In addition, Company FFO per diluted share does not measure, and should not be used as a measure of, amounts that accrue directly to stockholders’ benefit.
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
The Company presents NOI, EBITDA and FFO as they are financial measures widely used in the REIT industry. In order to provide a better understanding of the relationship between the Company’s non-GAAP financial measures of NOI, Company NOI, EBITDA, Company EBITDA, FFO and Company FFO, reconciliations have been provided as follows: a reconciliation of GAAP operating income to Company NOI and Company Same Store NOI, a reconciliation of GAAP net income attributable to GGP to EBITDA and Company EBITDA, and a reconciliation of GAAP net income attributable to GGP to FFO and Company FFO. None of the Company’s non-GAAP financial measures represents cash flow from operating activities in accordance with GAAP, none should be considered as an alternative to GAAP net income (loss) attributable to GGP and none are necessarily indicative of cash flow. In addition, the Company has presented such financial measures on a consolidated and unconsolidated basis (at the Company’s proportionate share) as the Company believes that given the significance of the Company’s operations that are owned through investments accounted for by the equity method of accounting, the detail of the operations of the Company’s unconsolidated properties provides important insights into the income and FFO produced by such investments.







7

        
GAAP FINANCIAL STATEMENTS

                                                                       GGPTAGLINE140Y40.JPGClick to enlarge
                            

Consolidated Balance Sheets
(In thousands)
 
March 31, 2017
 
December 31, 2016
 
 
 
 
Assets:
 
 
 
Investment in real estate:
 
 
 
Land
$
3,057,183

 
$
3,066,019

Buildings and equipment
16,108,953

 
16,091,582

Less accumulated depreciation
(2,827,336
)
 
(2,737,286
)
Construction in progress
260,025

 
251,616

Net property and equipment
16,598,825

 
16,671,931

Investment in and loans to/from Unconsolidated Real Estate Affiliates
3,871,240

 
3,868,993

Net investment in real estate
20,470,065

 
20,540,924

Cash and cash equivalents
252,718

 
474,757

Accounts receivable, net
318,259

 
322,196

Notes receivable, net
691,791

 
678,496

Deferred expenses, net
248,624

 
209,852

Prepaid expenses and other assets
485,997

 
506,521

Total assets
$
22,467,454

 
$
22,732,746

Liabilities:
 
 
 
Mortgages, notes and loans payable
12,567,659

 
12,430,418

Investment in Unconsolidated Real Estate Affiliates
45,733

 
39,506

Accounts payable and accrued expenses
611,119

 
655,362

Dividend payable
202,007

 
433,961

Deferred tax liabilities
3,719

 
3,843

Junior Subordinated Notes
206,200

 
206,200

Total liabilities
13,636,437

 
13,769,290

Redeemable noncontrolling interests:
 
 
 
Preferred
137,410

 
144,060

Common
110,116

 
118,667

Total redeemable noncontrolling interests
247,526

 
262,727

Equity:
 
 
 
Preferred stock
242,042

 
242,042

Stockholders' equity
8,271,847

 
8,393,722

Noncontrolling interests in consolidated real estate affiliates
32,381

 
33,583

Noncontrolling interests related to Long-Term Incentive Plan Common Units
37,221

 
31,382

Total equity
8,583,491

 
8,700,729

Total liabilities, redeemable noncontrolling interests and equity
$
22,467,454

 
$
22,732,746

 
 
 
 



8

        
GAAP FINANCIAL STATEMENTS

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Consolidated Statements of Income
(In thousands, except per share)

 
Three Months Ended
 
March 31, 2017
 
March 31, 2016
Revenues:
 
 
 
Minimum rents
$
349,013

 
$
371,132

Tenant recoveries
163,055

 
172,448

Overage rents
5,937

 
8,145

Management fees and other corporate revenues
28,143

 
33,741

Other
20,184

 
21,566

Total revenues
566,332

 
607,032

Expenses:
 
 
 
Real estate taxes
57,494

 
58,103

Property maintenance costs
14,975

 
17,483

Marketing
2,145

 
2,054

Other property operating costs
69,303

 
70,394

Provision for doubtful accounts
3,451

 
3,401

Property management and other costs
41,114

 
30,745

Provision for loan loss

 
36,069

General and administrative
14,683

 
13,427

Provisions for impairment

 
40,705

Depreciation and amortization
170,298

 
160,671

Total expenses
373,463

 
433,052

Operating income
192,869

 
173,980

Interest and dividend income
17,936

 
16,058

Interest expense
(132,323
)
 
(147,677
)
Gain on foreign currency
3,183

 
8,936

Gain from changes in control of investment properties and other

 
74,555

Income before income taxes, equity in income of Unconsolidated Real Estate Affiliates and allocation to noncontrolling interests
81,665

 
125,852

Provision for income taxes
(4,510
)
 
(2,920
)
Equity in income of Unconsolidated Real Estate Affiliates
33,214

 
57,491

Unconsolidated Real Estate Affiliates - gain on investment

 
14,914

Net Income
110,369

 
195,337

Allocation to noncontrolling interests
(3,209
)
 
(3,557
)
Net income attributable to GGP
107,160

 
191,780

Preferred stock dividends
(3,984
)
 
(3,984
)
Net income attributable to common stockholders
$
103,176

 
$
187,796

 
 
 
 
Basic Earnings Per Share:
$
0.12

 
$
0.21

Diluted Earnings Per Share:
$
0.11

 
$
0.20

 
 
 
 

9

NON-GAAP PROPORTIONATE FINANCIAL INFORMATION

Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share)

GGPTAGLINE140Y38.JPGClick to enlarge

 
 
 
 
Three Months Ended
 
 
 
 
March 31, 2017
March 31, 2016
 
 
 
 
 
 
Reconciliation of GAAP Operating Income to Company Same Store NOI
 
 
 
Operating Income
 
$
192,869

$
173,980

Gain on sales of investment properties
 
(1,212
)

Depreciation and amortization
 
170,298

160,671

Provision for loan loss
 

36,069

Provision for impairment
 

40,705

General and administrative
 
14,683

13,427

Property management and other costs
 
41,114

30,745

Management fees and other corporate revenues
 
(28,143
)
(33,741
)
 
Consolidated Properties
 
389,609

421,856

 
Noncontrolling interest in NOI of Consolidated Properties
 
(5,720
)
(3,925
)
 
NOI of sold interests
 
113

(19,922
)
 
Unconsolidated Properties
 
186,094

187,611

 
Proportionate NOI
 
570,096

585,620

Company adjustments:
 
 
 
 
Minimum rents
 
8,337

3,338

 
Real estate taxes
 
1,490

1,490

 
Property operating expenses
 
999

1,013

Company NOI
 
580,922

591,461

Less Company Non-Same Store NOI
 
20,253

44,577

Company Same Store NOI
 
$
560,669

$
546,884

 
 
 
 
 
 
Reconciliation of GAAP Net Income Attributable to GGP to Company EBITDA
 
 
 
Net Income Attributable to GGP
 
$
107,160

$
191,780

Allocation to noncontrolling interests
 
3,209

3,557

Gain on sales of investment properties  
 
(1,212
)

Gains from changes in control of investment properties and other
 

(74,555
)
Unconsolidated Real Estate Affiliates - gain on investment
 

(14,914
)
Equity in income of Unconsolidated Real Estate Affiliates
 
(33,214
)
(57,491
)
Provision for loan loss
 

36,069

Provision for impairment
 

40,705

Provision for income taxes
 
4,510

2,920

Gain on foreign currency
 
(3,183
)
(8,936
)
Interest expense
 
132,323

147,677

Interest and dividend income
 
(17,936
)
(16,058
)
Depreciation and amortization
 
170,298

160,671

 
Consolidated Properties
 
361,955

411,425

 
Noncontrolling interest in EBITDA of Consolidated Properties
 
(5,493
)
(3,774
)
 
EBITDA of sold interests
 
108

(19,785
)
 
Unconsolidated Properties
 
176,622

178,852

 
Proportionate EBITDA
 
533,192

566,718

Company adjustments:
 
 
 
 
Minimum rents
 
8,337

3,338

 
Real estate taxes
 
1,490

1,490

 
Property operating expenses
 
999

1,013

Company EBITDA
 
$
544,018

$
572,559


10

NON-GAAP PROPORTIONATE FINANCIAL INFORMATION

Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share)

GGPTAGLINE140Y38.JPGClick to enlarge

 
 
 
 
Three Months Ended
 
 
 
 
March 31, 2017
March 31, 2016
 
 
 
 
 
 
Reconciliation of GAAP Net Income Attributable to GGP to Company FFO
 
 
 
Net Income Attributable to GGP
 
$
107,160

$
191,780

Redeemable noncontrolling interests
 
830

1,525

Provision for impairment excluded from FFO
 

40,705

Noncontrolling interests in depreciation of Consolidated Properties
 
(2,776
)
(2,115
)
Unconsolidated Real Estate Affiliates - gain on investment
 

(14,914
)
Gain on sales of investment properties
 
(1,212
)

Preferred stock dividends
 
(3,984
)
(3,984
)
Gains from changes in control of investment properties and other
 

(74,555
)
Depreciation and amortization of capitalized real estate costs - Consolidated Properties
 
165,979

157,561

Depreciation and amortization of capitalized real estate costs - Unconsolidated Properties
 
73,993

67,308

 
FFO
 
339,990

363,311

Company adjustments:
 
 
 
 
Minimum rents
 
8,337

3,338

 
Property operating expenses
 
1,490

1,490

 
Property management and other costs
 
999

1,013

 
Investment income, net
 
(205
)
(205
)
 
Market rate adjustments
 
(1,211
)
(294
)
 
Provision for loan loss
 

28,549

 
Gain on foreign currency
 
(3,183
)
(8,936
)
 
Provision for income taxes
 

(5,079
)
 
FFO from sold interests
 

(384
)
Company FFO
 
$
346,217

$
382,803

 
 
 
 
 
 
Reconciliation of Net Income Attributable to GGP per diluted share to Company FFO per diluted share
 
 
 
Net Income Attributable to GGP per diluted share
 
$
0.11

$
0.20

Preferred stock dividends
 


Net income attributable to common stockholders per diluted share
 
0.11

0.20

Redeemable noncontrolling interests
 


Provision for impairment excluded from FFO
 

0.04

Unconsolidated Real Estate Affiliates - gain on investment
 

(0.02
)
Gains from changes in control of investment properties and other
 

(0.08
)
Depreciation and amortization of capitalized real estate costs
 
0.25

0.24

 
FFO per diluted share
 
0.36

0.38

Company adjustments:
 
 
 
 
Straight-line rent
 
0.01


 
Loan loss provision
 

0.03

 
Gain on foreign currency
 
(0.01
)
(0.01
)
Company FFO per diluted share
 
$
0.36

$
0.40


11


















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SUPPLEMENTAL INFORMATION

FOR THE THREE MONTHS ENDED MARCH 31, 2017


BASIS OF PRESENTATION
GGPTAGLINE140Y37.JPGClick to enlarge


GENERAL INFORMATION
Unless the context indicates otherwise, references in the accompanying financial information (the "Supplemental") to the "Corporation" refer to GGP Inc. and references to "GGP" or the "Company" refer to the Corporation, its direct and indirect subsidiaries, and consolidated and unconsolidated entities. Additionally, where reference is made to "GAAP", this refers to accounting principles generally accepted in the United States of America.

NON-GAAP PROPORTIONATE FINANCIAL INFORMATION
The Company has presented information on its consolidated and unconsolidated properties ("Proportionate" or "at share") in certain schedules included within this Supplemental. This form of presentation offers insights into the financial performance and condition of the Company as a whole, given the significance of the Company's unconsolidated property operations that are owned through investments accounted for under the equity method.
                                                                                                                                                                                                                                                                               
The proportionate financial information is not, and is not intended to be, a presentation in accordance with GAAP. The proportionate financial information reflects our proportionate economic ownership of each asset in our property portfolio that we do not wholly own. The amounts in the column labeled "Noncontrolling Interests" were derived on a property-by-property basis by including the share attributable to noncontrolling interests in each line item from each individual property. The Company does not have legal claim to the noncontrolling interest of assets, liabilities, revenue, and expenses. The amount of cash each noncontrolling interest receives is based on the specific provisions of each operating agreement and varies depending on certain factors including the amount of capital contributed by each investor and whether any investors are entitled to preferential distributions. The amounts in the column labeled "Unconsolidated Properties" were derived on a property-by-property basis by including our share of each line item from each individual entity. This provides visibility into our share of the operations of our joint ventures.

We provide Non-GAAP proportionate financial information because we believe it assists investors and analysts in estimating our economic interest in our unconsolidated joint ventures when read in conjunction with the Company's reported results under GAAP. Other companies in our industry may calculate their proportionate interest differently than we do, limiting the usefulness as a comparative measure. Because of these limitations, this information should not be considered in isolation or as a substitute for our financial statements as reported under GAAP.

NON-GAAP MEASURES
For full discussion of the definitions, purpose and use of non-GAAP financial measures see “Non-GAAP Supplemental Financial Measures and Definitions” on pages ER5 to ER7.

This Supplemental makes reference to company same store net operating income (“Company Same Store NOI”), earnings before interest, taxes, depreciation and amortization ("EBITDA"), and funds from operations (“FFO”). Company Same Store NOI is defined as income from operations after operating expenses have been deducted, but prior to deducting financing, administrative and income tax expenses, excluding full or partial reductions in ownership as a result of sales or other transactions ("Sold Interests"), periodic effects of full or partial acquisitions of properties and certain redevelopments. EBITDA is defined as NOI (Company Same Store plus Company Non-Same Store NOI) less certain property management and administrative expenses, net of management fees and other operational items. FFO is defined as net income (loss) attributable to common stockholders in accordance with GAAP, excluding impairment write-downs on depreciable real estate, gains (or losses) from cumulative effects of accounting changes, extraordinary items and sales of properties, less preferred unit distributions and preferred stock dividends, plus real estate related depreciation and amortization including adjustments for unconsolidated entities. NOI, EBITDA and FFO are presented in the Supplemental on a Proportionate basis, which includes GGP’s share of consolidated and unconsolidated properties. As GGP conducts substantially all of its business through GGP Operating Partnership, LP, and through GGP Limited Partnership and GGP Nimbus, LP (collectively the “Operating Partnerships”, which are 99% owned by GGP) and since the limited common units of the Operating Partnerships are included in total diluted weighted average FFO per share amounts, all FFO amounts in this Supplemental reflect the FFO of the Operating Partnerships.

In order to present GGP's operations in a manner most relevant to its operations, Company NOI, Company EBITDA, and Company FFO have been presented to exclude certain revenues and expenses. Company Same Store NOI is presented to exclude the periodic effects of full or partial acquisitions of properties, reductions in ownership as a result of sales or other transactions, and certain redevelopments and other properties. Company NOI, EBITDA, FFO and derivations thereof, are not alternatives to GAAP operating income (loss) or net income (loss) attributable to common stockholders. For reference, as an aid in understanding management's computation of Company NOI, EBITDA, and FFO, a reconciliation of Company NOI to consolidated operating income, Company EBITDA, and Company FFO to net income (loss) in accordance with GAAP has been included in the "Reconciliation of GAAP to Non-GAAP Financial Measures" schedule.



TABLE OF CONTENTS
GGPTAGLINE140Y35.JPGClick to enlarge



 
Page
 
Page
 
 
 
 
Earnings Press Release
ER1-7

Portfolio Operating Metrics:
 
 
 
Key Operating Performance Indicators
15
GAAP Financial Statements:
 
Signed Leases All Less Anchors
16
GAAP Overview
1

Lease Expiration Schedule and Top Ten Tenants
17
Consolidated Balance Sheets
2

Property Schedule
18-24
Consolidated Statements of Income
3

 
 
 
 
Miscellaneous:
 
Non-GAAP Proportionate Financial Information:
 
Capital Information
25
Proportionate Overview
4

Change in Total Common and Equivalent Shares
26
Proportionate Assets, Liabilities, and Equity
5

Development Summary
27
Company NOI, EBITDA and FFO
6

Proportionate Capital Expenditures
28
Reconciliation of GAAP to Non-GAAP Financial Measures
7-9

Corporate Information
29
 
 
Glossary of Terms
30
Debt:
 
 
 
Summary, at Share
10

 
 
Detail, at Share
11-14

 
 


This presentation contains forward-looking statements. Actual results may differ materially from the results suggested by these forward-looking statements for a number of reasons. Readers are referred to the documents filed by GGP Inc. with the Securities and Exchange Commission, which further identify the important risk factors which could cause actual results to differ materially from the forward-looking statements in this Supplemental. The Company disclaims any obligation to update any forward-looking statements.


SELECT SCHEDULE DEFINITIONS
GGPTAGLINE140Y33.JPGClick to enlarge




Page
Schedule
Description
Non-GAAP Proportionate Financial Information:
 
4
Proportionate Overview
Summary of Company NOI, Same Store NOI, Company EBITDA and Company FFO on a proportionate basis.
5
Proportionate Assets, Liabilities and Equity
Provides the adjustments for noncontrolling interests and the Company's proportionate share of assets, liabilities and equity related to investments accounted for under the equity method to calculate the Company's proportionate share.
6
Company NOI, Company EBITDA and Company FFO
For the three months ended March 31, 2017 and 2016, provides the Company's proportionate share of revenues and expenses related to noncontrolling interests and investments accounted for under the equity method to calculate the Company's proportionate share. Company NOI, Company EBITDA and Company FFO include certain adjustments as defined on page 6.
Same Store Portfolio Operating Metrics:
 
15
Key Operating Performance Indicators
Certain retail properties operating measures presented on a comparable basis.


See Glossary of Terms for detailed descriptions.
18-24
Property Schedule
By Property, gross leasable area detail, including:
Anchor tenant listing
Ownership percentage
Gross leasable area by space type (mall, anchor, strip center, office)
Percentage leased


See Glossary of Terms for detailed descriptions.


GGPTAGLINE140Y32.JPGClick to enlarge

GGP REPORTS FIRST QUARTER 2017 RESULTS
AND DECLARES SECOND QUARTER DIVIDEND


Chicago, Illinois, May 1, 2017 - GGP Inc. (the “Company” or “GGP”) (NYSE: GGP) today reported results for the three months ended March 31, 2017.
    
GAAP Operating Results
Net income attributable to GGP was $107 million, or $0.11 per diluted share, as compared to $192 million, or $0.20 per diluted share, in the prior year period.
Net income attributable to GGP decreased 44.1% from the prior year period primarily due to 2016 gains related to the sale of interests in four properties.
The Company declared a second quarter common stock dividend of $0.22 per share, an increase of 16% over the second quarter of 2016.

Company Operating Results
Company Same Store Net Operating Income (“Company Same Store NOI”) was $561 million as compared to $547 million in the prior year period, an increase of 2.5%.
Company Net Operating Income (“Company NOI”) as adjusted was $567 million as compared to $551 million in the prior year period, an increase of 2.9%. 1
Company earnings before interest, taxes, depreciation and amortization (“Company EBITDA”) as adjusted was $530 million as compared to $512 million in the prior year period, an increase of 3.7%. 1
Company Funds From Operations (“Company FFO”) was $346 million, or $0.36 per diluted share.
Same Store leased percentage was 95.9% at quarter end.
Initial NOI weighted rental rates for signed leases that have commenced in the trailing twelve months on a suite-to-suite basis increased 15.5% when compared to the rental rate for expiring leases.
Initial rental rates for signed leases that have commenced in the trailing twelve months on a suite-to-suite basis increased 10.5% when compared to the rental rate for expiring leases.
For the trailing twelve months, NOI weighted tenant sales per square foot (<10K sf) were $705 an increase of 1.8% over the prior year.
For the trailing twelve months, tenant sales per square foot (<10K sf) were $591 an increase of 0.6% over the prior year.
Tenant sales (all less anchors) increased 0.9% on a trailing 12-month basis.









1.
See page 4 for items included as adjustments.

ER1


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Investment Activities
Development
The Company’s development and redevelopment activities total $1.3 billion, of which approximately $0.7 billion is under construction and $0.6 billion is in the pipeline.

Common Share Repurchase
During the quarter, the Company acquired approximately 2.57 million of its common shares at a weighted average price of $23.16 per share for total consideration of approximately $59.6 million.

Dividends
On May 1, 2017, the Company’s Board of Directors declared a second quarter common stock dividend of $0.22 per share payable on July 28, 2017, to stockholders of record on July 13, 2017. This represents an increase of $0.03 per share or 16% growth over the dividend declared for the second quarter of 2016.

The Board of Directors also declared a quarterly dividend on the 6.375% Series A Cumulative Redeemable Preferred Stock of $0.3984 per share payable on July 3, 2017, to stockholders of record on June 15, 2017.




















ER2


GGPTAGLINE140Y32.JPGClick to enlarge

Guidance
Earnings Guidance
For the year ending December 31, 2017
For the three months ending June 30, 2017
 
 
 
Net income attributable to GGP
$0.59 - $0.63

$0.10 - $0.12

Preferred stock dividends
(0.02
)
(0.01
)
Net income attributable to common stockholders
$0.57 - $0.61

$0.09 - $0.11

Depreciation, including share of JVs
0.96

0.24

NAREIT FFO
$1.53 - $1.57

$0.33 - $0.35

Adjustments 1
0.03

0.01

Company FFO per diluted share
$1.56 - $1.60

$0.34 - $0.36



1. Includes impact of straight-line rent, above/below market rent, gain/loss on foreign currency and the related provision for income taxes, and other items. For discussion on the purpose and use of these adjustments please see the Non-GAAP Supplemental Financial Measures and Definitions section on page ER7.

The guidance estimate reflects management’s view of current and future market conditions, including assumptions with respect to Company Same Store NOI and Operating Income growth, rental rates, occupancy levels, retail sales, variable expenses, interest rates and the earnings impact of the events referenced in this release and previously disclosed. The guidance also reflects management’s view of capital market conditions. The estimates do not include future gains or losses, or the impact on operating results from future property acquisitions or dispositions or capital market activity. Earnings per share estimates may be subject to fluctuations as a result of several factors, including any gains or losses associated with disposition activity. By definition, FFO and Company FFO exclude real estate-related depreciation and amortization, provisions for impairment, or gains or losses associated with property disposition activities. This guidance is a forward-looking statement and is subject to the risks and other factors described elsewhere in this release and in the Company’s annual and quarterly periodic reports filed with the Securities and Exchange Commission.


Investor Conference Call
On Monday, May 1, 2017, the Company will host a conference call at 8:00 a.m. Central (9:00 a.m. Eastern). The conference call will be accessible by telephone and through the Internet. Interested parties can access the call by dialing 877.845.1018 (international 707.287.9345). A live webcast of the conference call will be available in listen-only mode in the Investors section at www.ggp.com. Interested parties should access the conference call or website 10 minutes prior to the beginning of the call in order to register. For those unable to listen to the call live, a replay will be available after the conference call event. To access the replay, dial 855.859.2056 (international 404.537.3406) conference ID 90188951.


Supplemental Information
The Company has prepared a supplemental information report available on www.ggp.com in the Investors section. This information also has been furnished with the Securities and Exchange Commission as an exhibit on Form 8-K.





ER3


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Forward-Looking Statements
Certain statements made in this press release may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in any forward-looking statement are based on reasonable assumptions, it can give no assurance that its expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and other factors. Such factors include, but are not limited to, the Company’s ability to refinance, extend, restructure or repay near and intermediate term debt, its indebtedness, its ability to raise capital through equity issuances, asset sales or the incurrence of new debt, retail and credit market conditions, impairments, its liquidity demands, and economic conditions. The Company discusses these and other risks and uncertainties in its annual and quarterly periodic reports filed with the Securities and Exchange Commission. The Company may update that discussion in its periodic reports, but otherwise takes no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.

Investors and others should note that we post our current Investor Presentation on the Investors page of our website at www.ggp.com. From time to time, we update that Investor Presentation and when we do, it will be posted on the Investors page of our website at ggp.com. It is possible that the updates could include information deemed to be material information. Therefore, we encourage investors, the media and others interested in our company to review the information we post on the Investors page of our website at www.investor.ggp.com from time to time.

GGP Inc.
GGP Inc. is an S&P 500 company focused exclusively on owning, managing, leasing and redeveloping high-quality retail properties throughout the United States. GGP is headquartered in Chicago, Illinois, and publicly traded on the NYSE under the symbol GGP.

Contact:                         
Kevin Berry                                
SVP Investor and Public Relations                            
(312) 960-5529                                
kevin.berry@ggp.com    


















ER4



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Non-GAAP Supplemental Financial Measures and Definitions
Proportionate or At Share Basis
The following Non-GAAP supplemental financial measures are all presented on a proportionate basis. The proportionate financial information presents the consolidated and unconsolidated properties at the Company’s ownership percentage or “at share”. This form of presentation offers insights into the financial performance and condition of the Company as a whole, given the significance of the Company’s unconsolidated property operations that are owned through investments accounted for under GAAP using the equity method.
The proportionate financial information is not, and is not intended to be, a presentation in accordance with GAAP. The non-GAAP proportionate financial information reflects our proportionate economic ownership of each asset in our property portfolio that we do not wholly own. The amounts in the column labeled "Noncontrolling Interests" were derived on a property-by-property basis by including the share attributable to noncontrolling interests in each line item from each individual property. The Company does not have legal claim to the noncontrolling interest of assets, liabilities, revenue, and expenses. The amount of cash each noncontrolling interest receives is based on the specific provisions of each operating agreement and varies depending on certain factors including the amount of capital contributed by each investor and whether any investors are entitled to preferential distributions. The amounts in the column labeled "Unconsolidated Properties" were derived on a property-by-property basis by including our share of each line item from each individual entity. This provides visibility into our share of the operations of our joint ventures.
We do not control the unconsolidated joint ventures and the presentations of the assets and liabilities and revenues and expenses do not represent our legal claim to such items. The operating agreements of the unconsolidated joint ventures generally provide that partners may receive cash distributions (1) to the extent there is available cash from operations, (2) upon a capital event, such as a refinancing or sale or (3) upon liquidation of the venture. The amount of cash each partner receives is based upon specific provisions of each operating agreement and varies depending on factors including the amount of capital contributed by each partner and whether any contributions are entitled to priority distributions. Upon liquidation of the joint venture and after all liabilities, priority distributions and initial equity contributions have been repaid, the partners generally would be entitled to any residual cash remaining based on their respective legal ownership percentages.
We provide Non-GAAP proportionate financial information because we believe it assists investors and analysts in estimating our economic interest in our unconsolidated joint ventures when read in conjunction with the Company's reported results under GAAP. Other companies in our industry may calculate their proportionate interest differently than we do, limiting the usefulness as a comparative measure. Because of these limitations, the Non-GAAP proportionate financial information should not be considered in isolation or as a substitute for our financial statements as reported under GAAP.
Net Operating Income (“NOI”), Company NOI and Company Same Store NOI
The Company defines NOI as proportionate income from operations and after operating expenses have been deducted, but prior to deducting financing, property management, administrative and income tax expenses. NOI excludes management fees and other corporate revenue and reductions in ownership as a result of sales or other transactions. The Company considers NOI a helpful supplemental measure of its operating performance because it is a direct measure of the actual results of our properties. Because NOI excludes reductions in ownership as a result of sales or other transactions, management fees and other corporate revenue, general and administrative and property management expenses, interest expense, retail investment property impairment or non-recoverable development costs, depreciation and amortization, gains and losses from property dispositions, allocations to noncontrolling interests, provision for income taxes, preferred stock dividends, and extraordinary items, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact on operations from trends in occupancy rates, rental rates and operating costs.






ER5


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The Company also considers Company NOI to be a helpful supplemental measure of its operating performance because it excludes from NOI items such as straight-line rent, and amortization of intangibles resulting from acquisition accounting and other capital contribution or restructuring events. However, due to the exclusions noted, Company NOI should only be used as an alternative measure of the Company’s financial performance.
We present Company NOI, Company EBITDA and Company FFO (as defined below); as we believe certain investors and other users of our financial information use these measures of the Company’s historical operating performance.
Adjustments to NOI, EBITDA and FFO, including debt extinguishment costs, market rate adjustments on debt, straight-line rent, intangible asset and liability amortization, real estate tax stabilization, gains and losses on foreign currency and other items that are not a result of normal operations, assist management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at the properties or from other factors. In addition, the Company’s leases include step rents that increase over the term of the lease to compensate the Company for anticipated increases in market rentals over time. The Company’s leases do not include significant front loading or back loading of payments or significant rent-free periods. Therefore, we find it useful to evaluate rent on a contractual basis as it allows for comparison of existing rental rates to market rental rates. Management has historically made these adjustments in evaluating our performance, in our annual budget process and for our compensation programs.
The Company defines Company Same Store NOI as Company NOI excluding periodic effects of full or partial acquisitions of properties and certain redevelopments (for the list of properties included in Company Same Store NOI see the Property Schedule in our Supplemental Information). We do not include an acquired property in our Company Same Store NOI until the operating results for that property have been included in our consolidated results for one full calendar year. Properties that we sell are excluded from Company NOI and Company Same Store NOI for all periods once the transaction has closed.
The Company considers Company Same Store NOI a helpful supplemental measure of its operating performance because it assists management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at comparable properties or from other factors, such as the effect of acquisitions. For these reasons, we believe that Company Same Store NOI, when combined with GAAP operating income provides useful information to investors and management.
Other REITs may use different methodologies for calculating, NOI, Company NOI and Company Same Store NOI, and accordingly, the Company’s Company Same Store NOI may not be comparable to other REITs. As a result of the elimination of corporate-level costs and expenses and depreciation and amortization, the Company Same Store NOI we present does not represent our total revenues, expenses, operating profit or net income and should not be used to evaluate our performance as a whole. Management compensates for these limitations by separately considering the impact of these excluded items, to the extent they are material, to operating decisions or assessments of our operating performance. Our consolidated GAAP statements of operations include such amounts, all of which should be considered by investors when evaluating our performance.
Earnings Before Interest Expense, Income Tax, Depreciation, and Amortization ("EBITDA") and Company EBITDA
The Company defines EBITDA as NOI less certain property management and administrative expenses, net of management fees and other corporate revenues. EBITDA is a commonly used measure of performance in many industries, but may not be comparable to measures calculated by other companies. Management believes EBITDA provides useful information to investors regarding our results of operations because it helps us and our investors evaluate the ongoing operating performance of our properties after removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization). Management also believes the use of EBITDA facilitates comparisons between us and other equity REITs, retail property owners who are not REITs and other capital-intensive companies. Management uses Company EBITDA to evaluate property-level results and as one measure in determining the value of acquisitions and dispositions and, like FFO and Same Store NOI (discussed below), it is widely used by management in the annual budget process and for compensation programs. Please see adjustments discussion above for the purpose and use of the adjustments included in Company EBITDA.
EBITDA and Company EBITDA, as presented, may not be comparable to similar measures calculated by other companies. This information should not be considered as an alternative to net income, operating profit, cash from operations or any other operating performance measure calculated in accordance with GAAP.




ER6


GGPTAGLINE140Y32.JPGClick to enlarge

EBITDA and Company EBITDA, as presented, may not be comparable to similar measures calculated by other companies. This information should not be considered as an alternative to net income, operating profit, cash from operations or any other operating performance measure calculated in accordance with GAAP.
Funds From Operations (“FFO”) and Company FFO
The Company determines FFO based upon the definition set forth by National Association of Real Estate Investment Trusts (“NAREIT”). The Company determines FFO to be its share of consolidated net income (loss) attributable to common shareholders and redeemable non-controlling common unit holders computed in accordance with GAAP, excluding real estate related depreciation and amortization, excluding gains and losses from extraordinary items, excluding cumulative effects of accounting changes, excluding gains and losses from the sales of, or any impairment charges related to, previously depreciated operating properties, plus the allocable portion of FFO of unconsolidated joint ventures based upon the Company’s economic ownership interest, and all determined on a consistent basis in accordance with GAAP. As with the Company’s presentation of NOI, FFO has been reflected on a proportionate basis.
The Company considers FFO a helpful supplemental measure of the operating performance for equity REITs and a complement to GAAP measures because it is a recognized measure of performance by the real estate industry. FFO facilitates an understanding of the operating performance of the Company’s properties between periods because it does not give effect to real estate depreciation and amortization since these amounts are computed to allocate the cost of a property over its useful life. Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, the Company believes that FFO provides investors with a clearer view of the Company’s operating performance.
We calculate FFO in accordance with standards established by NAREIT, which may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO in accordance with NAREIT guidance. In addition, although FFO is a useful measure when comparing our results to other REITs, it may not be helpful to investors when comparing us to non-REITs. As with the presentation of Company NOI and Company EBITDA, we also consider Company FFO, which is not in accordance with NAREIT guidance and may not be comparable to measures calculated by other REITs, to be a helpful supplemental measure of our operating performance. Please see adjustments discussion above for the purpose and use of the adjustments included in Company FFO.
FFO and Company FFO do not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income determined in accordance with GAAP as a measure of operating performance, and is not an alternative to cash flows as a measure of liquidity or indicative of funds available to fund our cash needs. In addition, Company FFO per diluted share does not measure, and should not be used as a measure of, amounts that accrue directly to stockholders’ benefit.
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

The Company presents NOI, EBITDA and FFO as they are financial measures widely used in the REIT industry. In order to provide a better understanding of the relationship between the Company’s non-GAAP financial measures of NOI, Company NOI, EBITDA, Company EBITDA, FFO and Company FFO, reconciliations have been provided as follows: a reconciliation of GAAP operating income to Company NOI and Company Same Store NOI, a reconciliation of GAAP net income attributable to GGP to EBITDA and Company EBITDA, and a reconciliation of GAAP net income attributable to GGP to FFO and Company FFO. None of the Company’s non-GAAP financial measures represents cash flow from operating activities in accordance with GAAP, none should be considered as an alternative to GAAP net income (loss) attributable to GGP and none are necessarily indicative of cash flow. In addition, the Company has presented such financial measures on a consolidated and unconsolidated basis (at the Company’s proportionate share) as the Company believes that given the significance of the Company’s operations that are owned through investments accounted for by the equity method of accounting, the detail of the operations of the Company’s unconsolidated properties provides important insights into the income and FFO produced by such investments.





ER7
























GAAP Financial Statements



GAAP FINANCIAL OVERVIEW
(In thousands, except per share )
GGPTAGLINE140Y29.JPGClick to enlarge




 
 
Three Months Ended
 
 
March 31, 2017
March 31, 2016
Percentage Change
 
 
 
 
 
Operating income
 
$
192,869

$
173,980

10.9
 %
 
 
 
 
 
Net Income attributable to GGP
 
107,160

191,780

(44.1
)%
 
 
 
 
 
Net income attributable to common stockholders
 
103,176

187,796

(45.1
)%
Diluted earnings per share
 
$
0.11

$
0.20

(45.0
)%
 
 
 
 
 
Diluted weighted average number of shares outstanding
 
949,516

950,154

 

    


1


GAAP FINANCIAL STATEMENTS

Consolidated Balance Sheets
(In thousands)

GGPTAGLINE140Y28.JPGClick to enlarge

 
March 31, 2017
 
December 31, 2016
 
 
 
 
Assets:
 
 
 
Investment in real estate:
 
 
 
Land
$
3,057,183

 
$
3,066,019

Buildings and equipment
16,108,953

 
16,091,582

Less accumulated depreciation
(2,827,336
)
 
(2,737,286
)
Construction in progress
260,025

 
251,616

Net property and equipment
16,598,825

 
16,671,931

Investment in and loans to/from Unconsolidated Real Estate Affiliates
3,871,240

 
3,868,993

Net investment in real estate
20,470,065

 
20,540,924

Cash and cash equivalents
252,718

 
474,757

Accounts receivable, net
318,259

 
322,196

Notes receivable, net
691,791

 
678,496

Deferred expenses, net
248,624

 
209,852

Prepaid expenses and other assets
485,997

 
506,521

Total assets
$
22,467,454

 
$
22,732,746

Liabilities:
 
 
 
Mortgages, notes and loans payable
$
12,567,659

 
$
12,430,418

Investment in Unconsolidated Real Estate Affiliates
45,733

 
39,506

Accounts payable and accrued expenses
611,119

 
655,362

Dividend payable
202,007

 
433,961

Deferred tax liabilities
3,719

 
3,843

Junior Subordinated Notes
206,200

 
206,200

Total liabilities
13,636,437

 
13,769,290

Redeemable noncontrolling interests:
 
 
 
Preferred
137,410

 
144,060

Common
110,116

 
118,667

Total redeemable noncontrolling interests
247,526

 
262,727

Equity:
 
 
 
Preferred stock
242,042

 
242,042

Stockholders' equity
8,271,847

 
8,393,722

Noncontrolling interests in consolidated real estate affiliates
32,381

 
33,583

Noncontrolling interests related to long-term incentive plan common units
37,221

 
31,382

Total equity
8,583,491

 
8,700,729

Total liabilities, redeemable noncontrolling interests and equity
$
22,467,454

 
$
22,732,746



2

GAAP FINANCIAL STATEMENTS

Consolidated Statements of Income
(In thousands, except per share)
GGPTAGLINE140Y27.JPGClick to enlarge

 
Three Months Ended
 
March 31, 2017
 
March 31, 2016
Revenues:
 
 
 
Minimum rents
$
349,013

 
$
371,132

Tenant recoveries
163,055

 
172,448

Overage rents
5,937

 
8,145

Management fees and other corporate revenues
28,143

 
33,741

Other
20,184

 
21,566

Total revenues
566,332

 
607,032

Expenses:

 
 
Real estate taxes
57,494

 
58,103

Property maintenance costs
14,975

 
17,483

Marketing
2,145

 
2,054

Other property operating costs
69,303

 
70,394

Provision for doubtful accounts
3,451

 
3,401

Property management and other costs
41,114

 
30,745

Provision for loan loss

 
36,069

General and administrative
14,683

 
13,427

Provisions for impairment

 
40,705

Depreciation and amortization
170,298

 
160,671

Total expenses
373,463

 
433,052

Operating income
192,869

 
173,980

Interest and dividend income
17,936

 
16,058

Interest expense
(132,323
)
 
(147,677
)
Gain on foreign currency
3,183

 
8,936

Gain from changes in control of investment properties and other

 
74,555

Income before income taxes, equity in income of Unconsolidated Real Estate Affiliates and allocation to noncontrolling interests
81,665

 
125,852

Provision for income taxes
(4,510
)
 
(2,920
)
Equity in income of Unconsolidated Real Estate Affiliates
33,214

 
57,491

Unconsolidated Real Estate Affiliates - gain on investment

 
14,914

Net Income
110,369

 
195,337

Allocation to noncontrolling interests
(3,209
)
 
(3,557
)
Net income attributable to GGP
107,160

 
191,780

Preferred stock dividends
(3,984
)
 
(3,984
)
Net income attributable to common stockholders
$
103,176

 
$
187,796

 
 
 
 
Basic Earnings Per Share:
$
0.12

 
$
0.21

Diluted Earnings Per Share:
$
0.11

 
$
0.20


3








Non-GAAP Proportionate Financial Information


NON-GAAP PROPORTIONATE FINANCIAL OVERVIEW 1
(In thousands, except per share)

GGPTAGLINE140Y26.JPGClick to enlarge



 
 
Three Months Ended
 
 
March 31, 2017
March 31, 2016
Percentage Change
 
 
 
 
 
Company Same Store NOI  2
 
$
560,669

$
546,884

2.5
%
 
 
 
 
 
Company NOI  4
 
580,922

591,461

 
Adjustments 3
 
(13,629
)
(40,314
)
 
Company NOI - as adjusted
 
567,293

551,147

2.9
%
 
 
 
 
 
Company EBITDA  4
 
544,018

572,559

 
Adjustments 5
 
(13,629
)
(60,886
)
 
Company EBITDA - as adjusted
 
530,389

511,673

3.7
%
 
 
 
 
 
Company FFO  6
 
346,217

382,803

 
Company FFO per diluted share
 
$
0.36

$
0.40

 
 
 
 
 
 
FFO 7
 
339,990

363,311

 
FFO per diluted share
 
$
0.36

$
0.38

 
 
 
 
 
 
Diluted weighted average number of Company shares outstanding
 
956,158

956,664

 

1    For the Reconciliation of GAAP to Non-GAAP Financial Measures see pages 7-9.            
2    Includes lease termination fees of $11.0 million and $8.0 million for the three months ended March 31, 2017 and 2016.         
3    Adjustments include $13.6 million and $40.3 million condominium NOI in 2017 and 2016 respectively from Company NOI.
4    Company NOI and Company EBITDA exclude the periodic effects of Sold Interests. See Glossary of Terms on page 30.            
5    Adjustments include $13.6 million and $40.3 million condominium NOI in 2017 and 2016 respectively, $13 million gain on sales of Seritage stock in the prior year, and $7.5 million G&A savings in the prior year from Company EBITDA.
6    Company FFO includes the periodic effects of Sold Interests. See Glossary of Terms on page 30.
7    FFO is presented in accordance with the NAREIT definition of FFO.

4

NON-GAAP PROPORTIONATE FINANCIAL INFORMATION

Proportionate Assets, Liabilities and Equity 1
(In thousands)
GGPTAGLINE140Y24.JPGClick to enlarge


 
 
As of March 31, 2017
 
As of December 31, 2016
 
 
Noncontrolling
Interests 2
 
Unconsolidated Properties 2
 
Noncontrolling
Interests 2
 
Unconsolidated Properties 2
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Investment in real estate:
 
 
 
 
 
 
 
 
Land
 
$
(28,246
)
 
$
2,185,530

 
$
(36,830
)
 
$
2,181,417

Buildings and equipment
 
(201,786
)
 
8,185,557

 
(206,810
)
 
8,191,356

Less accumulated depreciation
 
27,271

 
(1,703,092
)
 
38,785

 
(1,648,775
)
Construction in progress
 
(219
)
 
192,280

 
(128
)
 
174,684

Net property and equipment
 
(202,980
)
 
8,860,275

 
(204,983
)
 
8,898,682

Investment in and loans to/from Unconsolidated Real Estate Affiliates
 

 
(3,691,240
)
 

 
(3,688,993
)
Net investment in real estate
 
(202,980
)
 
5,169,035

 
(204,983
)
 
5,209,689

Cash and cash equivalents
 
(6,060
)
 
244,674

 
(4,373
)
 
237,923

Accounts receivable, net
 
(3,856
)
 
473,903

 
(3,484
)
 
322,387

Notes receivable, net
 
(153
)
 
4,384

 
(109
)
 
4,400

Deferred expenses, net
 
(5,834
)
 
219,796

 
(2,866
)
 
192,759

Prepaid expenses and other assets
 
(10,110
)
 
234,040

 
(8,550
)
 
199,100

Total assets
 
$
(228,993
)
 
$
6,345,832

 
$
(224,365
)
 
$
6,166,258

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Mortgages, notes and loans payable
 
$
(181,599
)
 
$
5,900,015

 
$
(181,775
)
 
$
5,854,328

Investment in Unconsolidated Real Estate Affiliates
 

 
(45,733
)
 

 
(39,506
)
Accounts payable and accrued expenses
 
(15,013
)
 
491,223

 
(9,007
)
 
351,122

Dividend payable
 

 

 

 

Deferred tax liabilities
 

 
327

 

 
314

Junior Subordinated Notes
 

 

 

 

Total liabilities
 
(196,612
)
 
6,345,832

 
(190,782
)
 
6,166,258

 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests:
 
 
 
 
 
 
 
 
Preferred
 

 

 

 

Common
 

 

 

 

Total redeemable noncontrolling interests
 

 

 

 

 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
 
 
Preferred stock
 

 

 

 

Stockholders' equity
 

 

 

 

Noncontrolling interests in consolidated real estate affiliates
 
(32,381
)
 

 
(33,583
)
 

Noncontrolling interests related to Long-Term Incentive Plan Common Units
 

 

 

 

Total equity
 
(32,381
)
 

 
(33,583
)
 

Total liabilities, redeemable noncontrolling interests and equity
 
$
(228,993
)
 
$
6,345,832

 
$
(224,365
)
 
$
6,166,258

1 The Company's proportionate share of assets, liabilities and equity can be calculated using the consolidated information from page 2 combined with the columns above.
2 See Non-GAAP Supplemental Financial Measures and Definitions: Proportionate or At Share Basis on page ER5 for discussion on how this column is derived.

5

NON-GAAP PROPORTIONATE FINANCIAL INFORMATION

Company NOI, EBITDA and FFO 1
For the Three Months Ended March 31, 2017 and 2016
(In thousands)
GGPTAGLINE140Y21.JPGClick to enlarge


 
 
Three Months Ended March 31, 2017
 
Three Months Ended March 31, 2016
 
 
Noncontrolling Interests 2
Unconsolidated Properties 2
Sold Interests 3
Adjustments  4
 
Noncontrolling Interests 2
Unconsolidated Properties 2
Sold Interests 3
Adjustments 4
Property revenues:
 
 
 
 
 
 
 
 
 
 
Minimum rents  5
 
$
(5,076
)
$
157,267

$
1

$
8,337

 
$
(3,498
)
$
136,012

$
(17,127
)
$
3,338

Tenant recoveries
 
(2,066
)
62,212



 
(1,599
)
58,735

(6,065
)

Overage rents
 
(68
)
3,085



 
(99
)
3,793

(494
)

Other revenue
 
(202
)
6,349

(1
)

 
(199
)
5,982

(727
)

Condominium sales
 

48,493



 

141,419



Total property revenues
 
(7,412
)
277,406


8,337

 
(5,395
)
345,941

(24,413
)
3,338

Property operating expenses:
 
 
 
 
 
 
 
 
 
 
Real estate taxes
 
(751
)
18,253


(1,490
)
 
(780
)
15,729

(1,195
)
(1,490
)
Property maintenance costs
 
(91
)
5,734



 
(86
)
5,432

(481
)

Marketing
 
(18
)
2,369



 
(14
)
4,413

(20
)

Other property operating costs
 
(826
)
27,004

(3
)
(999
)
 
(583
)
25,592

(2,630
)
(1,013
)
Provision for doubtful accounts
 
(6
)
1,074

(110
)

 
(7
)
1,969

(165
)

Condominium cost of sales
 

36,878



 

105,195



Total property operating expenses
 
(1,692
)
91,312

(113
)
(2,489
)
 
(1,470
)
158,330

(4,491
)
(2,503
)
NOI
 
$
(5,720
)
$
186,094

$
113

$
10,826

 
$
(3,925
)
$
187,611

$
(19,922
)
$
5,841

Management fees and other corporate revenues
 

48



 




Property management and other costs  6
 
227

(9,320
)
(5
)

 
151

(8,665
)
22


General and administrative
 

(200
)


 

(94
)
115


EBITDA
 
$
(5,493
)
$
176,622

$
108

$
10,826

 
$
(3,774
)
$
178,852

$
(19,785
)
$
5,841

Depreciation on non-income producing assets  7
 




 




Investment income, net
 
363

(9,221
)

(205
)
 
386

706

(3
)
(205
)
Preferred unit distributions 8
 




 




Preferred stock dividends
 




 




Interest expense:
 
 
 
 
 
 
 
 
 
 
Mark-to-market adjustments on debt
 

90


(1,211
)
 

87


(294
)
Interest on existing debt
 
2,100

(60,158
)


 
1,439

(54,775
)
5,915


Gain on foreign currency
 



(3,183
)
 



(8,936
)
Provision for loan loss
 




 



28,549

(Provision for) benefits from income taxes
 
19

(139
)


 
16

(84
)

(5,079
)
FFO from sold interests  
 


(108
)

 


13,873

(384
)
FFO
 
$
(3,011
)
$
107,194

$

$
6,227

 
$
(1,933
)
$
124,786

$

$
19,492

 
 
 
 
 
 
 
 
 
 
 
1.
For the Reconciliation of GAAP to Non-GAAP Financial Measures see pages 7-9.
2.
See Non-GAAP Supplemental Financial Measures and Definitions: Proportionate or At Share Basis on page ER5 for discussion on how this column is derived.
3.
Sold interests include reclassification of operations related to full or partial reductions in ownership as a result of sales or other transactions.
4.
Adjustments primarily relate to: straight-line rent, above/below market lease amortization, amortization of real estate tax stabilization agreement, gain/loss on foreign currency, gain on debt extinguishment, and other items. For full discussion of the purpose and use of these adjustments see Non-GAAP Supplemental Financial Measures and Definitions in pages ER5 to ER7.
5.
Adjustments include amounts for straight-line rent of $1,376 and ($7,061) and above/below market lease amortization of $6,961 and $10,399 for the three months ended March 31, 2017 and 2016, respectively.
6.
Unconsolidated amounts include our share of management fees paid by these properties. Revenues associated with these fees are included in consolidated management fees and other corporate revenues.
7.
Consolidated amounts for depreciation on non-income producing assets are $4,319 and $3,110 for the three months ended March 31, 2017 and 2016, respectively.
8.
Consolidated amounts for preferred unit distributions are $2,131 and $2,201 for the three months ended March 31, 2017 and 2016, respectively.

6

NON-GAAP PROPORTIONATE FINANCIAL INFORMATION

Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share)

GGPTAGLINE140Y19.JPGClick to enlarge


 
 
 
 
Three Months Ended
 
 
 
 
March 31, 2017
March 31, 2016
 
 
 
 
 
 
Reconciliation of GAAP Operating Income to Company Same Store NOI
 
 
 
Operating Income
 
$
192,869

$
173,980

Gain on sales of investment properties 1
 
(1,212
)

Depreciation and amortization
 
170,298

160,671

Provision for loan loss 2
 

36,069

Provision for impairment
 

40,705

General and administrative
 
14,683

13,427

Property management and other costs
 
41,114

30,745

Management fees and other corporate revenues
 
(28,143
)
(33,741
)
 
Consolidated Properties
 
389,609

421,856

 
Noncontrolling interest in NOI of Consolidated Properties 6
 
(5,720
)
(3,925
)
 
NOI of sold interests 5, 6
 
113

(19,922
)
 
Unconsolidated Properties 6
 
186,094

187,611

 
Proportionate NOI
 
570,096

585,620

Company adjustments: 3
 
 
 
 
Minimum rents 4
 
8,337

3,338

 
Real estate taxes
 
1,490

1,490

 
Property operating expenses
 
999

1,013

Company NOI
 
580,922

591,461

Less Company Non-Same Store NOI
 
20,253

44,577

Company Same Store NOI
 
$
560,669

$
546,884

 
 
 
 
 
 
Reconciliation of GAAP Net Income Attributable to GGP to Company EBITDA
 
 
 
Net Income Attributable to GGP
 
$
107,160

$
191,780

Allocation to noncontrolling interests
 
3,209

3,557

Gain on sales of investment properties  1  
 
(1,212
)

Gains from changes in control of investment properties and other
 

(74,555
)
Unconsolidated Real Estate Affiliates - gain on investment
 

(14,914
)
Equity in income of Unconsolidated Real Estate Affiliates
 
(33,214
)
(57,491
)
Provision for loan loss 2
 

36,069

Provision for impairment
 

40,705

Provision for income taxes
 
4,510

2,920

Gain on foreign currency
 
(3,183
)
(8,936
)
Interest expense
 
132,323

147,677

Interest and dividend income
 
(17,936
)
(16,058
)
Depreciation and amortization
 
170,298

160,671

 
Consolidated Properties
 
361,955

411,425