NEW YORK —- General Growth Properties, the second biggest U.S. real estate investment trust, reported Tuesday that second-quarter earnings fell compared with the year-ago period.
Higher occupancy and record mall revenue, with sales per square foot at $448, were offset by rising interest rates and lower-than-expected gains onland sales.
The company posted a net earnings loss of $25.8 million, or 11 cents per diluted share, versus a profit of $2.7 million, or 1 cent, a year ago.
“I am sorry for the earnings’ miss, but I am pleased with our strong operating performance,” John Bucksbaum, chief executive officer, told analysts during a conference call.
The drop in earnings can be attributed to several factors, including financing General Growth’s $12 billion acquisition of The Rouse Co. in a climate of rising interest rates. Land sales from the Rouse acquisition alsodeclined in the quarter compared with a year prior, generating less than $60 million, versus about $140 million in the second quarter of 2005.
Analysts seemed wary of the REIT’s tactics in integrating the assets of TheRouse Co., which among other things, brought a massive master-planning development business to the mall developer, but overall, were secure in General Growth’s overall financials.
“Despite the big miss from the somewhat unpredictable community developmentbusiness, the fundamentals of the mall business remain solid,” wrote Dennis Maloney, an analyst at Goldman Sachs.
The REIT’s executives agreed. “We are very disappointed in our first ever year-over-year decline in FFO(funds from operations) per share since going public,” said Bernie Freibaum, the company’s chief financial officer. “But we are confident that we continue to enhance the long-term value of our company.”
The strong operating platform and full development pipeline bodes well forfuture growth. The REIT has $1.1 billion slated for more than 60 redevelopment projects, and $1.3 billion earmarked for eight developments that are either underway or in planning. The company is also still growing its South American portfolio, Bucksbaum said, and will open a new retail property with its joint venture partner in Brazil at the end of this year.