Upload
others
View
0
Download
0
Embed Size (px)
Citation preview
2 0 1 3 A N N U A L R E P O R T
1
Our mission is to own and operate best-in-class retail properties that provide an outstanding environment and experience for our Communities, Retailers, Employees, Consumers and Shareholders.
2 3
FINANCIAL HIGHLIGHTS
Total property revenues
Total property operating expenses
Net operating income (NOI)
EBITDA
Funds From Operations (FFO)
Same store NOI
Total equity capitalization
Total capitalization
Common Stock Price at December 31
Cash dividends per share
$3,021,034
$832,423
$2,188,611
$2,015,379
$1,147,671
$2,111,519
$18,384,702
$37,049,610
$20.07
$0.51
$2,908,556
$824,257
$2,084,299
$1,932,008
$991,716
$1,992,893
$20,230,604
$40,228,494
$19.85
$0.42
2013 2012
Amounts represent GGP’s pro rata share. Net operating income, EBITDA and FFO are non-GAAP financial measures. Reconciliations to the most comparable GAAP measure are included in the Form 10-K, included herein. Amounts in thousands, except per share amounts.
5
Today, GGP is a pure-play owner of high-quality
regional malls in the U.S. This is the result of our strict
adherence to our mission to own and operate best-
in-class retail properties that provide an outstanding
environment and experience for our Communities,
Retailers, Employees, Consumers and Shareholders.
It is also the result of our employees’ commitment to
GGP’s five core values: High Performance, Attitude,
Do the Right Thing, Together and Own It. We believe
an organization can achieve and exceed its goals by
having a winning culture.
PORTFOLIO OVERVIEW
Since 2010, we have significantly pruned our portfolio
by selling or otherwise disposing of malls, office
properties, retail strip centers and non-U.S. investments
that do not fit within our asset focus. We constantly
review our portfolio to identify opportunities to recycle
capital from lower-growth into higher-growth assets.
Our efforts to decrease the size of our portfolio have,
in turn, increased the quality of our earnings. In 2013,
approximately 96% of our total net operating income
was generated from our shopping malls, compared
to 85% in 2010.
Our regional mall portfolio today consists of several
of the most valuable retail properties in the U.S. We
own 95 of the 463 highest quality shopping malls
DEAR SHAREHOLDER,
GLENDALE GALLERIA
A Smaller, High-Quality Portfolio(a)
U.S. Malls
Other properties
Creates Greater Earnings Quality(b)
U.S. Mall NOI - % of total NOI
169
72
85%
120
19
96%
2010 2013
a) Figures for 2010 are as of December 31, 2010. Figures for 2013 are as of December 31, 2013.b) Figures for 2010 are based on full year 2010 Company NOI. Figures for 2013 are based on full
year 2013 Company NOI.
6 7
in the U.S. (approximately 20%), which provides us
with a valuable large-scale retail property platform.
These 95 high-quality shopping malls account for
approximately 85% of our total net operating income.
Our mall portfolio contains flagship assets such as Ala
Moana Center in Hawaii, a retail destination for more
than 42 million shoppers a year; Glendale Galleria in
Los Angeles, where Apple opened one of its first retail
stores in 2001; Fashion Show in Las Vegas, the only
traditional mall on the Vegas Strip; and Water Tower
Place on Michigan Avenue in Chicago, one of the
country’s most successful vertical shopping malls.
FINANCIAL RESULTS
In 2013, GGP’s Funds from Operations per share
increased more than 18% to $1.16 per diluted share(1)
and was $50 million higher than our initial guidance
for the year. We reported a higher than expected level
of same store net operating income growth of 6.0%,
driven primarily by higher permanent occupancy,
positive suite-to-suite rent spreads and operational
efficiencies. Total earnings before interest, taxes,
depreciation and amortization increased 4.3%(1) and
funds from operations increased 15.7%(1) compared
to 2012. As a result of our earnings growth, we
increased our quarterly dividend three times, resulting
in a 27% total increase (from 11 cents paid in the first
quarter 2013 to 14 cents paid in the first quarter 2014).
We have refinanced 100 properties totaling $16.3
billion at share. In addition, we have used financing
proceeds to repay corporate unsecured bonds and
invest in the portfolio through development activities,
opportunistic acquisitions, and stock repurchases.
Today, the remaining average term to maturity of our
debt is the longest in our sector at more than seven
years, and our debt is comprised primarily of fixed rate,
property-secured loans.
Overall, total leverage is approximately 50% of the
total enterprise value. Our relatively long maturity
schedule is by design; it ensures that we will not face
an inordinate amount of debt in any given year. We
believe our general financing policy to obtain single
property mortgages at a fixed rate with no corporate
recourse has resulted in a strong balance sheet with
relatively low risk. Our net debt-to-EBITDA ratio has
decreased from 11 in early 2011 to less than 9. If
the ratio reflected the time value of our long debt
maturity schedule, our net debt-to-EBITDA ratio would
be less than 5(2).
Capping these financial accomplishments, in
December 2013, GGP was added to Standard &
Poor’s 500 Index. We are proud of this honor, which
recognizes our progress.
Our expectations for 2014 are based on the following:
· increasing permanent occupancy to 93%;
· same store NOI growth of 4% to 4.5%;
· approximately 4% EBITDA growth; and
· low double-digit FFO per share growth.
(1) Amounts represent GGP’s pro rata share. FFO and EBITDA are non-GAAP financial measures. Reconciliations to the most comparable GAAP measure are included in the attached Form 10-K filed with the SEC on February 21, 2014, our supplemental information report for the three and 12 months ended December 31, 2013, and our earnings press release dated February 3, 2014.
(2) This ratio is based on the net present value of debt as of December 31, 2013, of approximately $9.9 billion, calculated by applying an 8% discount rate to maturing debt and expected EBITDA for 2014 of approximately $2.1 billion.
a) Source: GGP Supplemental Information as of December 31, 2013. Total mall portfolio of 120 malls includes one mall currently undergoing redevelopment and is therefore excluded from metrics.
b) Comparative rolling twelve month sales for mall stores less than 10,000 square feet.
c) % based on full year 2013 NOI.
72%
13%
15%
100%
QUALITY GRADE
A
B+
B
$660
400
370
$564
SALES PSF(b)
% OF MALL NOI(c)
73
22
25
120
MALLS(a)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2026+
2025
$0.2
$0.5 $0.9
$1.7
$2.1
$1.0
$2.0
$3.0
$1.6
$1.9
$0.9 $1.0
$0.4
DEBT MATURITY LADDER ($ BILLIONS)
9
DEVELOPMENT
At the end of 2013 we had $2.1 billion of
developments: $285 million opened; $968 million
under construction; and $895 million in the
pipeline. These developments are expected to
generate 9% to 11% unlevered first-year stabilized
cash-on-cost returns.
The expansion and renovation of Ala Moana
Center in Honolulu, Hawaii, our flagship property, is
our largest development project. Bloomingdale’s
and Nordstrom will anchor 300,000 square feet of
new inline retail for a total of 650,000 square feet of
new retail space.
Glendale Galleria in Glendale, California, is one of
our largest completed projects to date. We took a
low-performing wing of the mall with a vacant anchor
store and transformed the entire center by, among
other improvements, adding a 110,000 square foot
flagship Bloomingdale’s that has a Gucci and a
Louis Vuitton store-within-a-store. We completed the
redevelopment on budget and on time, before the
2013 holiday shopping season, and will meet our
double-digit projected returns.
INDUSTRY PERSPECTIVES
Consumer confidence and low unemployment levels
are critical to the overall health of the U.S. economy,
the shopping mall industry, and the success of the
retailers within our centers. Educated consumers in
the U.S. (defined as those with bachelor’s degrees)
have a 3.7% unemployment rate, and their spending
patterns are less sensitive to macro-economic trends.
These educated consumers generally shop at high-
quality malls, as evidenced by the continued sales
growth within our portfolio.
The U.S. is experiencing real economic growth that
is creating opportunities throughout the country.
Overall consumer confidence has improved steadily
since mid-2011 as total employment has increased
and, today, it has returned to near pre-recession
levels. Coming out of the recession, consumers
generally spent more on non-durable goods, which
led to relatively high retail sales. In 2013, consumers
redirected spending to durable goods, such as
automobiles and home improvement items, which
resulted in moderate sales in other retail categories.
Within the GGP portfolio, total sales in 2013 were $564
per square foot, 22% higher than the last peak in
2007, and 39% higher than the low in 2009. Looking
forward, we expect total retail sales to grow in step
with the economy and retail sales at high-quality
retail properties to do slightly better.
As the shopping center industry evolves, existing
retailers are expanding their footprints and incubating
new concepts. An example is Pink from Victoria’s
Secret. Between 2007 and 2012, Victoria’s Secret
increased its selling square footage by 50% to an
average store size of more than 7,600 square feet.
It also incubated its Pink concept, transforming it
into a free-standing store. Foot Locker has grown to
incorporate House of Hoops. J Crew has Mercantile,
and Kate Spade unveiled Saturday.
Fast fashion continues to grow. H&M, Uniqlo and
Zara are increasing their store count. Abercrombie is
evolving its Hollister brand into a fast fashion retailer.
Lifestyle retailers Michael Kors and Kate Spade are
becoming leaders in their category because they
connect with their customer. Clothing designer
Vince, a recent IPO, is on a growth trajectory.
Restaurants and entertainment venues are
expanding: BJ’s Restaurant and Brewhouse plans to
open up to 19 new locations this year; Bar Louie plans
25 openings; Yard House is currently opening 50
locations and plans to reach 200 nationwide; Dave &
Buster’s plans to increase store count by 10% annually
until it doubles the current count to 150; and Seasons
52 and Perry’s Steakhouse have expansion plans. The
common theme among these companies – they all
desire to be in high-quality malls.
The shopping mall sector in the U.S. is a mature
industry, having grown significantly from its roots in
the early 1960s. The founders of GGP were significant
contributors to and visionaries in the development
of the industry. The industry has adapted to and
overcome perceived threats over time, whether
CONSUMER CONFIDENCE
57.1
81.6
60.0
70.0
80.0
90.0
100.0
2008 2009 2010 2011 2012 2013 FEB 2014
$50,000
$48,000
$46,000
$44,000
$42,000
$40,000
$38,000
2008 2009 2010 2011 2012
MSAsWITHGGPMALLS
U.S.MSAs
PER-CAPITA INCOME OF GGP MARKETS
GGP’s retail properties serve 84 U.S. Metropolitan Areas, which are comprised of residents with per-capita incomes that consistently outpace the U.S. average per-capita income. Source: Bureau of Economic Analysis 2008 – 2012 local area personal income data sets. www.bea.gov
Sources: University of Michigan, Thomson Reuters.
8
10 11
from catalog sales, home shopping networks or
power/lifestyle centers. The shopping mall format
has strived to remain a destination for shopping,
dining and entertainment.
E-commerce is the next frontier that will define the
mall as the base of omni-channel retailing. Omni-
channeling uses every point of distribution for selling.
As retailers integrate their online and brick-and-mortar
inventory, goods will be shipped from the warehouse
or the store, facilitating better inventory management
and enabling fewer mark-downs and higher margins.
While total e-commerce sales comprise 8.7% of total
retail sales, about half of online consumers have
used a “ship to store” option when shopping online.
Shoppers choose retailers with both an online and
brick-and-mortar presence because they value the
physical, sensory and social experience of shopping,
trying on clothes and seeing what others consider
in-fashion, the ability to pick-up merchandise at
the store, and the ease of returning merchandise
purchased online at the store.
Retailers with both an online and brick-and-mortar
presence enjoy more return visits per shopper than
retailers with a single retailing channel. Through
omni-channeling, successful retailers are able to
leverage their online stores and physical store network
to provide a powerful and efficient distribution source
that ultimately leads to higher sales.
Traditional online retailers with the desire to scale their
operations are opening brick-and-mortar locations.
Athleta, an online retailer acquired by the Gap, has
more than 65 stores in 27 states. Boston Proper, an
online retailer bought by Chico’s, is also opening
brick-and-mortar stores.
Innovation and ingenuity will take our properties
and retailers to the next level. We, along with our
peers Macerich, Simon and Westfield, launched
the Same Day Delivery initiative with crowdsourcing
company Deliv during the 2013 holiday season. Nine
Same Day Delivery locations delivered thousands of
packages to homes. We anticipate launching Same
Day Delivery at more GGP malls this year and in 2015.
To date, approximately 70 retailers have joined our
Same Day Delivery initiative.
The Same Day Delivery initiative has two distinct
advantages over the traditional, large online-only
retailers: instant gratification to customers through
same day delivery or in-store pick-up; and higher
margins and reduced overhead costs because
Same Store Delivery enables the shopping mall to
serve as a distribution site with exclusive product and
in-place labor.
Online retailing incubates new concepts; brick-and-
mortar drives sales. The retailers who marry the two
will thrive.
SUSTAINABILITY
Sustainability is integrated in our day-to-day
operations as we strive to improve our customers’
experience. As responsible stewards of your faith and
trust, we engage in sustainable practices that are
strategic and resource-focused, not because of a
perceived public relations value.
Our Sustainability goals are: minimize environmental
impact; increase energy efficiencies through the
installation of Energy Management Systems (EMS);
and conserve natural resources.
Our Sustainability goals are exemplified by the
actions of the management team at The Shops at La
Cantera in San Antonio, Texas—a state plagued by
drought that has mandated water restrictions. Using
their ingenuity, the management team identified
La Cantera’s HVAC system as a cost-effective water
source with zero environmental impact. The mall’s
HVAC units, used for heating and cooling, generate
one gallon of condensation every minute, which
provides enough water to fill the water features and
PARKMEADOWS
12 13
Sandeep MathraniChief Executive Officer
Sincerely,
WATER TOWERPLACE irrigate the landscape year-round, with 20% to spare.
Another example of sustainable practices is the
installation of energy-efficient lighting in the Providence
Place parking garage in Providence, Rhode Island.
The garage, which operates 24 hours a day, is used
by mall shoppers, hotel guests and business workers.
High-low capability LED lights were installed to minimize
energy consumption by switching from high mode to
low mode in response to occupancy.
Additionally, variable motion sensor LED lights
were installed in parking garages at five additional
properties, reducing annual estimated carbon
dioxide emissions by more than 3.8 million pounds
and energy consumption by 3.9 million annual
kilowatt hours (an estimated savings of $516,000
annually). By utilizing this technology, the garages
reduce consumption and provide a more inviting
environment for our customers.
Other Sustainability programs include the installation
of solar panels on top of the roofs of our New Jersey
malls and Ala Moana Center. The intent of the
solar panels is to supply power for a portion of the
common area demand of the center. The panels
have the capability of providing an aggregate
power of 5.129 megawatts, have amounted to a
power savings of more than $873,000, and provide
an average of 11% of the centers’ respective energy
needs. The Ala Moana system came online this year
and is expected to deliver 6% of the center’s energy
needs; the state of Hawaii’s energy costs are among
the highest in the nation.
We also have implemented a specialty recycling
program at our corporate office for hazardous items
such as batteries and light bulbs, and all of our
properties recycle items such as paper, cardboard
and plastic wrap—25,000 tons of materials are
recycled from our centers every year.
We continue exploring practices that not only lower
our carbon footprint, but also make our communities
better places to shop, live, work and play, all in an
effort to Do the Right Thing.
OUTLOOK
Momentum is powerful! It serves as fuel for a long
journey and propels us to meet challenges with
confidence. We have made great strides since
2010 in pruning our portfolio, leasing, redeveloping,
strengthening our balance sheet, and creating a
winning culture. We plan to continue on this path
and stay true to our core drivers of growth: increasing
permanent occupancy, achieving positive leasing
spreads, and generating returns on our development
activities. We believe our shopping malls will continue
to be in demand by retailers and consumers seeking
a safe and comfortable destination for shopping,
entertainment and dining.
On a personal note, it is bittersweet to share with you
that Chuck Lhotka is retiring after more than 42 years
at GGP. As head of asset management, Chuck’s
incredible contributions are found in just about every
great milestone GGP has achieved since 1972. His
sense of teamwork, positive attitude, moral compass
and ability to take responsibility make him the
embodiment of the GGP culture.
Grateful for your support and faith,
ALABAMA
Riverchase Galleria · Hoover
ARIZONA
Park Place · Tucson Tucson Mall · Tucson
ARKANSAS
Pinnacle Hills Promenade · Rogers
CALIFORNIA
Eastridge · San JoseGalleria at Tyler · RiversideGlendale Galleria · Glendale (Los Angeles)Northridge Fashion Center · Northridge (Los Angeles)Otay Ranch Town Center · Chula Vista (San Diego) Stonestown Galleria · San FranciscoValley Plaza · BakersfieldVisalia Mall · Visalia
COLORADO
Park Meadows · Lone Tree (Denver)Southwest Plaza · Littleton (Denver)
CONNECTICUT
Brass Mill Center · WaterburyThe Shoppes at Buckland Hills · Manchester (Hartford)
DELAWARE
Christiana Mall · Newark (Wilmington)
FLORIDA
Altamonte Mall · Altamonte Springs (Orlando)Bayside Marketplace · MiamiCoastland Center · NaplesGovernor’s Square · TallahasseeMizner Park · Boca RatonThe Oaks Mall · GainesvillePembroke Lakes Mall · Pembroke Pines (Fort Lauderdale)Village of Merrick Park · Coral Gables (Miami)
GEORGIA
Augusta Mall · AugustaCumberland Mall · AtlantaNorth Point Mall · Alpharetta (Atlanta)Oglethorpe Mall · SavannahPeachtree Mall · ColumbusPerimeter Mall · Atlanta The Shoppes at River Crossing · Macon
HAWAII
Ala Moana Center · Honolulu (Oahu)Prince Kuhio Plaza · Hilo (Big Island)Whalers Village · Lahaina (Maui)
IDAHO
Boise Towne Square · BoiseGrand Teton Mall · Idaho Falls
ILLINOIS
Market Place Shopping Center · ChampaignNorthbrook Court · Northbrook (Chicago)Oakbrook Center · Oak Brook (Chicago) Water Tower Place · Chicago
INDIANA
Glenbrook Square · Fort Wayne
IOWA
Coral Ridge Mall · Coralville (Iowa City)Jordan Creek Town Center · West Des Moines
KENTUCKY
Florence Mall · Florence (Cincinnati, OH)Greenwood Mall · Bowling GreenMall St. Matthews · LouisvilleOxmoor Center · Louisville
LOUISIANA
Mall of Louisiana · Baton RougeOakwood Center · Gretna (New Orleans)Pecanland Mall · Monroe
MAINE
The Maine Mall · South Portland
MARYLAND
The Gallery at Harborplace · Baltimore The Mall in Columbia · Columbia (Baltimore)Mondawmin Mall · BaltimoreTowson Town Center · Towson (Baltimore)White Marsh Mall · Baltimore
MASSACHUSETTS
Natick Mall · Natick (Boston)
MICHIGAN
The Crossroads · Portage (Kalamazoo)Lakeside Mall · Sterling Heights (Detroit)RiverTown Crossings · Grandville (Grand Rapids)
MINNESOTA
Apache Mall · RochesterCrossroads Center · St. CloudRidgedale Center · Minnetonka (Minneapolis)River Hills Mall · Mankato
MISSOURI
Columbia Mall · ColumbiaPlaza Frontenac · St. LouisSaint Louis Galleria · St. Louis
NEBRASKA
Oak View Mall · OmahaWestroads Mall · Omaha
NEVADA
Fashion Show · Las VegasThe Grand Canal Shoppes at The Venetian · Las VegasMeadows Mall · Las Vegas
NEW JERSEY
Bridgewater Commons · BridgewaterParamus Park · ParamusWillowbrook · WayneWoodbridge Center · Woodbridge
NEW MEXICO
Coronado Center · Albuquerque
NEW YORK
Staten Island Mall · Staten Island
NORTH CAROLINA
Carolina Place · Pineville (Charlotte)Four Seasons Town Centre · GreensboroThe Streets at Southpoint · Durham
OHIO
Beachwood Place · Beachwood (Cleveland)Kenwood Towne Centre · CincinnatiThe Shops at Fallen Timbers · Maumee (Toledo)
OKLAHOMA
Quail Springs Mall · Oklahoma CitySooner Mall · Norman (Oklahoma City)
OREGON
Clackamas Town Center · PortlandPioneer Place · PortlandRogue Valley Mall · Medford
PENNSYLVANIA
Neshaminy Mall · Bensalem (Philadelphia)Park City Center · Lancaster
RHODE ISLAND
Providence Place · Providence
SOUTH CAROLINA
Columbiana Centre · Columbia
TEXAS
Baybrook Mall · Friendswood (Houston)Deerbrook Mall · Humble (Houston)First Colony Mall · Sugar Land (Houston) Hulen Mall · Fort WorthNorth Star Mall · San AntonioThe Parks at Arlington · Arlington (DFW)The Shops at La Cantera · San AntonioStonebriar Centre · Frisco (DFW)Town East Mall · Mesquite (DFW)Willowbrook Mall · HoustonThe Woodlands Mall · The Woodlands (Houston)
UTAH
Fashion Place · Murray (Salt Lake City)Newgate Mall · Ogden (Salt Lake City)Provo Towne Centre · ProvoRed Cliffs Mall · St. George
VIRGINIA
Lynnhaven Mall · Virginia BeachTysons Galleria · McLean (Washington, D.C.)
WASHINGTON
Alderwood · Lynnwood (Seattle)Bellis Fair · BellinghamNorthTown Mall · SpokaneSpokane Valley Mall · SpokaneWestlake Center · Seattle
WISCONSIN
Fox River Mall · AppletonMayfair · Wauwatosa (Milwaukee)Oakwood Mall · Eau Claire
WYOMING
Eastridge Mall · Casper
PORTFOLIO
14 15
16 17
DIRECTORS AND EXECUTIVE OFFICERS
J. BRUCE FLATT Chairman
Senior Managing Partner and
Chief Executive Officer
of Brookfield Asset Management, Inc.
SANDEEP MATHRANI Chief Executive Officer
of General Growth Properties, Inc.
RICHARD B. CLARK
Chief Executive Officer
of Brookfield Property Partners L.P.
and Senior Managing Partner of
Brookfield Asset Management, Inc.
MARY LOU FIALA
Former President and
Chief Operating Officer
of Regency Centers and
Former Chairman of the International
Council of Shopping Centers
JOHN K. HALEY
Retired Partner of Ernst & Young LLP
DANIEL B. HURWITZ
Chief Executive Officer and Director
of DDR Corp.
BRIAN W. KINGSTON
Chief Investment Officer
of Brookfield Property Partners L.P.
and Senior Managing Partner of
Brookfield Asset Management, Inc.
DAVID J. NEITHERCUT Chief Executive Officer, President
and Trustee of Equity Residential
MARK R. PATTERSON
Chairman and Chief Executive Officer
of Boomerang Systems, Inc.
DIRECTORSSANDEEP MATHRANI Chief Executive Officer
MICHAEL B. BERMAN
Executive Vice President
and Chief Financial Officer
SHOBI KHAN
Executive Vice President
and Chief Operating Officer
ALAN J. BAROCAS
Senior Executive Vice President,
Mall Leasing
MARVIN J. LEVINE Executive Vice President
and Chief Legal Officer
RICHARD S. PESIN
Executive Vice President,
Anchors, Development and Construction
JAMES A. THURSTON
Senior Vice President and
Chief Accounting Officer
EXECUTIVE OFFICERSJOHN K. HALEY Chair DAVID J. NEITHERCUT MARK R. PATTERSON
AUDIT COMMITTEE
COMPENSATION COMMITTEEJ. BRUCE FLATT Chair MARY LOU FIALA JOHN K. HALEY DANIEL B. HURWITZ
NOMINATING AND GOVERNANCE COMMITTEEMARK R. PATTERSON Chair RICHARD B. CLARK MARY LOU FIALA
Core Values: High Performance, Attitude, Do the Right Thing, Together, Own It
18
CORPORATE OFFICE
General Growth Properties, Inc.110 N. Wacker Drive Chicago, IL 60606(312) 960-5000www.ggp.com
INVESTOR RELATIONS
Kevin Berry, Vice [email protected](312) 960-5529
REGISTRAR AND TRANSFER AGENT AND SHAREHOLDER SERVICES DEPARTMENT
American Stock Transfer & Trust Company, LLC 6201 15th Avenue Brooklyn, NY 11219 Phone: (866) 627-2643 TTY number: (866) 627-2643 Foreign Investor Line: (718) 921-8124 Email: [email protected]
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP Chicago, Illinois
CORPORATE INFORMATION