Shopping mall owner General Growth Properties Inc., which is struggling to stave off bankruptcy and refinance billions in debt, on Monday reported lower-than-expected fourth-quarter funds from operations, as the weak economy crimped retail rents.
The real estate investment trust, which has a stake in more than 200 malls across 44 states, also declined to issue an outlook for 2009, citing the uncertainty of its refinancing efforts.
The Chicago-based company said its funds from operations totaled $222.2 million, or 70 cents per share, compared with year-ago FFO of $190.4 million, or 64 cents per share. But excluding one-time gains, core FFO slipped to 72 cents per share from 92 cents in the prior-year period.
That missed the average estimate of 85 cents per share expected by analysts polled by Thomson Reuters.
FFO, which adds such items as amortization and depreciation back to net income, is considered a key gauge of REIT strength because it gives a more accurate picture of cash performance.
Revenue dipped to $900.9 million from $928.7 million as the declining retail market hurt rents and diminished promotion and parking revenue, but did top analysts' $829.7 million forecast.
The real estate investment trust fell to a loss of $965,000 in the quarter from year-ago net income of $58.7 million. On a per-share basis, General Growth broke even — compared with the 24 cents per share it earned in the 2007 period. General Growth said lower costs for marketing, repairs and maintenance, supplies, contracted services, security, landscaping and personnel didn't fully offset revenue declines.
General Growth is having difficulty refinancing billions in debt it took on during an aggressive expansion effort that included the $7 billion acquisition of a competitor in 2004. For months, the company has been trying to get its lenders to rework the repayment terms on its massive debt load and warned last fall it might have to resort to seeking bankruptcy protection.
The company's problems haven't stopped there. During the quarter, its board removed its chief executive, president and chief financial officer after the company disclosed that former Chief Executive John Bucksbaum's family trust provided $90 million in personal loans to cover margin debt for the former chief financial officer and president.
On Friday, the company said it is in default on some of its loans, although it noted some of its lenders had agreed to hold off taking immediate action. The company said it received an extension on a mortgage loan for a shopping center in Gretna, La.
Still, General Growth cautioned there's no assurance that it will be able to negotiate forbearance agreements with all of its lenders. In its earnings report Monday, the company said the refinancing market "remains at a standstill."
The company said it is considering all strategic alternatives and continuing discussions with its lenders. In addition, General Growth said it has suspended its dividend, halted or slowed nearly all development and redevelopment projects, cut its work force by more than 20 percent and sold certain non-mall assets.
The REIT currently has about $1.18 billion of past due debt and about $4.09 billion worth of debt that could be called in, though it noted that lenders have not yet exercised any of their remedy rights on that debt.
The company also has an additional $1.44 billion worth of consolidated mortgage debt and about $595 million of unsecured bonds scheduled to mature during 2009 that remains to be refinanced, repaid or extended.
General Growth warned it may have to seek legal protection from creditors if it cannot rework the terms of its debt.
The stock, which traded last spring as high as $44.23, has lost nearly all of its value in the past year, closing Monday down 10 cents at 36 cents.
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