investor presentation march...
TRANSCRIPT
Investor Presentation
March 2016
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GGP Overview S&P 500 Real Estate Investment Trust(a)
NYSE Ticker GGP
Headquarters Chicago
Employees 1,700
Retail Properties 131
States 40
Total Retail GLA 123 million
Enterprise Value $44.0 billion
The Woodlands Mall, Houston, Texas
Natick Mall, Natick, MA
a) As of December 31, 2015.
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Own and operate Best-in-Class retail properties that provide an
outstanding environment and experience for our Communities, Retailers,
Employees, Consumers and Shareholders.
GGP Mission & Values
Operating Highlights(a)
Sales PSF <10K SF $588
Sales PSF <10K SF Growth 3.0%
Occupancy Cost 13.4%
Leased 96.9%
Lease Spreads(b) 10.8%
Ridgedale Center, Minnetonka, MN
Nordstrom Grand Opening – October 2015
Shops at Merrick Park, Coral Gables, FL H – Humility
A – Attitude
D – Do The Right Thing
T – Together
O – Own It
a) As of December 31, 2015
b) Lease spreads are suite-to-suite and represent 2015 commencements.
Shopping Centers
Country Shopping Center GLA
(SF in millions) Population (millions) GLA per Capita
U.S. 7,527 319 24
Canada 542 36 15
Australia 239 24 10
United Kingdom 318 64 5
France 264 64 4
Spain 142 46 3
Italy 171 60 3
Germany 195 80 2
China 2,691 1,368 2
Mexico 178 120 1
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1,094 malls in the U.S.; 464 are high-quality (B+ or better)
Source: ICSC
Scale & Quality
Urban Retail Properties
Regional Malls
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GGP owns 92 of the top 464 high-quality malls in the U.S.
Irreplaceable Retail Properties in the U.S. GGP is the 2nd largest retail
property REIT by market
capitalization and solely
focused on the U.S.
Portfolio comprises nearly 20%
of the high-quality malls in the
U.S.
National scale provides tenants
with access to retail, dining and
entertainment hubs in some of
the best trade areas in the U.S.
Retailers are constantly
evolving, using brick-and-
mortar and internet together to
maximize revenues
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Malls Sales and NOI Percentage by Rank
Top Retail Properties
2015 Sales
PSF(a)
% of Company
NOI(b)
Top 10 $804 23%
Top 30 $683 48%
Top 50 $702 66%
Top 100 $604 95%
Total Retail Properties $588 100%
78 Class A Retail Properties $682 76%
Evolution of Top 10 Tenants By Revenue
2000 2010 Today
J. C. Penney Gap L Brands
Sears L Brands Foot Locker
Express Abercrombie & Fitch Gap
Victoria's Secret Foot Locker Forever 21
Gap Golden Gate Abercrombie & Fitch
Lerner New York American Eagle Ascena Retail Group
Foot Locker Forever 21 Signet Jewelers
L Brands Macy's Genesco
Zale Luxottica Group Express
Old Navy Genesco Luxottica Group
a) Sales per square foot for trailing 12 months ended December 31, 2015 for comparable tenants occupying space less than 10,000 square feet.
b) For the year ended December 31, 2015.
GGP Outpaces U.S. Retail Growth Nearly
2-To-1 With “A” Centers Driving The Majority Of Growth
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GAFO Sales Growth; Total Market vs GGP 2010 to 2015; Excluding Department Stores
GGP Portfolio Productivity
Sales
Volume
Total United States (From U.S. Census) 13%
GGP Portfolio (Inline, Comp, <10k) 23%
Source: U.S. Census Nov. 2015 and GGP. GAFO stands for General Merchandise, Apparel and Accessories, Furniture and Other Sales.
Traffic Across The GGP Portfolio Is Steady,
With YoY Increases Across All Classes Of Assets
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Estimated Total Visits to GGP Centers
Year-Over-Year Traffic Growth
2012 2013 2014 2015
4% 3% - 2%
Tra
ffic
(in
millio
ns)
– B
ar
Gra
ph
Sa
les
Pe
r Sq
ua
re F
oo
t – L
ine
Gra
ph
Source: GGP.
Status Redevelopments
Total Projected
Share of Cost(b)
Open • Glendale Galleria $500
• Fashion Show
• The Woodlands
• Other
4Q 2015 Open • Ala Moana Center (Phase I) 780
• Ridgedale Center
• Baybrook Mall
• Southwest Plaza
• Other
Under Construction • Staten Island Mall 400
• Other
Pipeline • Norwalk (new mall) 640
• Ala Moana Center (Phase II)
• Other
Total $2,320
Development Activities Developments expected to stabilize 12 to 18 months after opening
80% of total cost is in Class A malls
Expected return on investment of 9-11%(a)
9 a) Represents first year stabilized cash-on-cost return, based upon budgeted assumptions. Actual costs may vary.
b) Represents GGP’s share of total projected costs. Amounts presented in millions.
Redevelopment of Department Store Boxes
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Since 2011, 79(a) of 83(b) vacant department stores have been redeveloped
for a total cost of $1.3 billion generating a 11% annual return
• 17 department stores - Nordstrom (3), Von Maur (3), Macy’s (2), Boscov’s (2), Dillard’s (2), Belk, Lord & Taylor, Bloomingdale’s, Carson’s and Bon Ton
• 10 entertainment venues - theaters (3), trampoline parks (2), Dave & Buster’s (3) and Round One (2)
• 11 sporting goods stores – Dick’s Sporting Goods / Field & Stream (5), Sports
Authority (4) and Scheels (2)
• 5 fast fashion retailers - Forever 21 (3) and H&M (2)
• 4 restaurants – Perry’s, Yard House, Old Town Pour House and Harry Caray’s
• 4 grocery stores - Sprouts, Fresh Market, Wegmans and Total Wine
• 3 fitness centers – 24 Hour Fitness, City Sports and Family Fitness
• 3 DSW
• 3 Container Stores
• 2 Pirch
• 185,000 square feet of inline space including, but not limited to, Apple, Nike, Lululemon, Tommy Bahama and Aritzia
• 17 other uses including, but not limited to, Nordstrom Rack, Crate& Barrel, Petco, Ulta and HH Gregg
a) The 79 stores comprise 5.9 million square feet.
b) The 83 stores comprise 6.1 million square feet.
Annual EBITDA Growth of 4% to 5%
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2% - 3%
1%
1.5%
0.5%
(1%)
Contractual Fixed
Increase in Rents +
Occupancy Growth
Positive Releasing
Spreads
Expense Growth
Developments
Acquisitions
Durable, Long-Term Cash Flow Growth
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High-quality malls continue to be in demand by retailers, restaurants and
entertainment venues
• Virtually no new supply of mall space since 2006 and negligible amount expected to deliver over next 10 years – primarily from expansions
• Nearly no long-term vacancy and laddered lease expirations form durable foundation for long-term revenue growth
Financial & Operational Highlights
2016
Guidance(a)
2015
Actual
2014
Reported
2013
Reported
2012
Reported Average
Same Store NOI 4% - 5% 4.8% 4.5% 6.0% 5.3% 5.0%
NOI 8% - 9% 5.0% 4.1% 5.0% 5.1% 5.4%
EBITDA 8% - 9% 5.4% 4.9% 4.3% 7.0% 5.9%
NOI Margin 78% 74.0% 73.6% 72.4% 71.1%
Sales PSF <10k SF $588 $570 $564 $545
Growth 3.0% 1.0% 3.6% 6.6%
Occupancy Cost 13.4% 13.4% 13.0% 13.2%
Lease Spreads(b) 10.8% 18.3% 12.3% 10.2%
Perm Occupancy 92.3% 93.0% 92.0% 89.6%
Total Occupancy 96.5% 96.7% 96.4% 94.9%
a) Figures represent mid-point of guidance that is current as of February 2, 2016, the date of GGP’s 4th quarter 2015 earnings call.
b) Lease spreads are suite-to-suite.
Cash Flow & Dividends
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2016
Guidance(a)
2015
Actual
2014
Reported
2013
Reported
2012
Reported CAGR
Company FFO per Diluted Share $1.52 - $1.56 $1.44 $1.32 $1.16 $0.98 11.7%
AFFO per Diluted Share $1.21 $1.09 $1.00 $0.88 $0.72 13.7%
Dividends $0.80 $0.71 $0.63 $0.51 $0.42 17.5%
AFFO Payout Ratio 66% 65% 63% 58% 58%
a) Figures represent mid-point of guidance that is current as of February 2, 2016, the date of GGP’s 4th quarter 2015 earnings call.
eCommerce
14 Source: Green Street Advisors report titled U.S. Mall Outlook dated January 26, 2016. Copied here with permission.
Demand Coming from Unlikely
Sources: Malls - the surviving ones -
have grown stronger over time
because of their ability to evolve
merchandising to match fluid
consumer needs. Today, non-
traditional tenants are opening
across the quality spectrum and are
an important source of demand. In
addition, several "online-only"
retailers are opening stores as they
are realizing the importance of
having a physical presence.
Restaurants
Entertainment
Sources of Mall
Demand
Services
Grocery
Online Retailers Opening Stores
But Consolidation from Mature Retailers: The
expansion of smaller, new entrants to malls will
be offset by mature retailers that will continue
to rationalize (i.e., downsize) their store counts
in the coming years. The proper balance
between online and brick & mortar continues
to evolve. One thing is certain: most retailers
want and need a presence in the mall. The
physical location helps further the brand and
retailers will likely see rent partially as a form of
advertising. However, sales generated by the
""fourth and fifth best malls"" in a given market
should be shifted online. A+
+
A
B B-
C
Current: 5
Retail
Locations
Identify
under-
performing
locations
Estimate
sales that
will move
online
Quantify risk
of less
market
presence
Result: 3 Retail
Locations
Anytown,
USA
Omni-Channel Generates Higher Sales
15 Source: ICSC
More Native-digital Retailers Are Finding
The Business Case For Brick-And-Mortar Deployment Increasingly Compelling
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“Clicks-to-Bricks” Retailing Concepts:
A Constant Evolution
Apple
Microsoft
Amazon
Athleta
Bonobos
Warby Parker
Baublebar
Boston Proper
Fabletics
Country Club Prep
J!NS Eyewear
Birchbox
Duluth Trading Co.
Refinery29
Veronica Virta
1701 Bespoke
Blue Nile
Dyson
Weddington Way
Shinola
Vosges Haut-
Chocolat
Try the World
Trunk Club
The Honest
Company
Essentia
Indochino
NastyGal
Rent the Runway
Frank & Oak
Chubbies
The Tie Bar
Consumers still desire a sensory, tactile
experience, particularly when shopping
for goods for which comfort is a
paramount point of consideration.
The conversion rate of browsers to buyers
is multiples higher in a physical store
environment versus a digital environment –
averaging around 20% (and as high as
60% depending on store type) compared
to less than 5% online – resulting in
significantly lower customer acquisition
costs and SG&A per unit.
Physical stores play an increasingly pivotal
role in fulfilling shoppers’ need for
discovery and instant gratification through
reserve-online/buy-online and pick-up in-
store models and/or distributed fulfillment
across the store network while reducing
retailers’ initial outlays for inventory,
reducing out-of-stock incidents, and
avoiding aggressive markdowns at the
end of seasonal cycles.
In the Press
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“We’ve been blown away by the economics of our stores.” – Dave
Gilboa, co-chief executive of Warby
Parker
“We’ve found that many customers want to engage with the merchandise before buying it. And there’s a level of
service and personalization that just isn’t possible on the desktop. A lot of people see Internet as next generation and brick-and-mortar as being traditional. The way we see it is as a physical space that we can leverage to communicate
our brand value” – Ethan Song, CEO of
Frank & Oak
“My company is an extension of me, so when I designed my stores I wanted
people to feel that they were in my home.” – Tory Burch
“I was reading all these reports that were down on retail brick and mortar, saying it’s all about
online… I think brick-and-mortar is an amazing opportunity to use our stores and our store staff as a vehicle to truly engage with the community in a way no other retailers are doing.” – Jim Brett,
President, West Elm
“Retail observers have been significantly overestimating our use of online and digital technology for shopping – we like shopping in stores.” – Nicole Flasch-Mihalko of LIM College,
which carried out a survey with the National Retail Federation that found “the shopping habits of 18- to 25-year-olds suggest that just over two thirds of them prefer to shop in stores for clothing and shoes.”
In the Press
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“It’s hard for brands to engage with their customers in a purely digital way.” – Simon Mottram,
CEO of Ralpha
“The heart of our business is online, but we
have a channel agnostic approach, which is where the world is moving to.” – Bec
Clarke, founder and chief executive of Astley Clarke
“It can be hard and expensive to get noticed online now. But if you spring up
offline – even for a short time – shoppers will love the interaction and share their experience of going there by tweeting or sharing an image online. You can create a storm.” – Ross Bailey, founder and chief
executive of Appear Here
“When you look at retailers who are striving in this environment, it’s the brands focused on
delivering a strong service experience. It is one of the ironies of our time that a digital medium, the Internet, is making the in-person shopping experience a more humane one.” – Andy Dunn,
founder and chief executive of Bonobos
Financial Flexibility
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Debt Overview(a) ($ in millions at GGP share)
Fixed Rate(b) $16,155
Variable Rate(b) 3,774
Total Debt $19,929
Remaining Term 6.1 Years
Total Debt / Enterprise Value 45%
Net Debt / EBITDA 8.5x
Interest Coverage 2.8x
Fixed Charge Coverage 2.3x
Debt Maturity Ladder(a) ($ in billions at GGP share)
$0.2 $0.6
$1.9 $2.0
$3.1
$1.7
$2.4
$1.9 $2.0
$1.7
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Financing philosophy
• Obtain property-secured debt; minimize corporate recourse and cross-collateralization
• Laddered maturities mitigate refinancing risk and earnings volatility
a) As of December 31, 2015. Net Debt / EBITDA based on Net Debt as of December 31, 2015 and guidance for 2016 EBITDA as issued on February 2,
2016. Interest Coverage and Fixed Charge Coverage are based on estimate for 2016. The Debt Maturity Ladder schedule assumes maturity
extension options are exercised and approved.
b) Fixed rate debt has a weighted average interest rate of 4.4% and variable rate debt has a weighted average interest rate of 2.4%.
Sustainability
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a) GRESB stands for Global Real Estate Sustainability Benchmark.
Committed to being an environmentally responsible
business
Concentrated on investments that increase
environmental performance in key areas such as:
• Solar power generation
• Heating and cooling
• Lighting
• Water usage
• Waste Management
Awarded the 2015 GreenStar and recognized as the
North American leader in the Retail – Large Cap
Sector by GRESB in 2014(a)
2016 Earnings Guidance
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Company FFO per Diluted Share $1.52 to $1.56
Adjustments (0.04)
NAREIT FFO per Diluted Share $1.48 to $1.52
Depreciation (0.94)
Net Income Attributable to Common Stockholders $0.54 to $0.58
Preferred Stock Dividends 0.02
Net Income Attributable to GGP $0.56 to $0.60
Key Growth Rate Assumptions:
Same Store NOI 4% to 5%
EBITDA Growth 8% to 9%
The guidance reflects management’s view of current and future market conditions, including assumptions with respect to Same Store NOI growth, rental rates, occupancy levels, retail
sales, variable expenses, interest rates and the earnings impact of the events referenced in the Company’s 4th quarter 2015 earnings press release and previously disclosed. The
guidance also reflects management’s view of capital market conditions. The estimates do not include possible future gains or losses, or the impact on operating results from other
possible future property acquisitions or dispositions or capital markets 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 do not include 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 in the Company’s 4th
quarter 2015 earnings press release and in the Company’s annual and quarterly periodic report filed with the Securities and Exchange Commission. Actual results for 2016 could vary
materially from the amounts presented if any of management’s assumptions are incorrect. Each amount shown represents the approximate midpoint of a range of possible outcomes
and reflects management’s best estimate of the most likely outcome. For a reconciliation of the non-GAAP measures shown to their respective GAAP measure please refer to GGP’s
4th quarter 2015 earnings release and Supplemental Information available at www.ggp.com and as furnished with the Securities and Exchange Commission.
Current as of February 2, 2016, the date of GGP’s 4th quarter 2015 earnings
conference call.
FORWARD-LOOKING STATEMENTS Certain statements made in this presentation 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 assumption, 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 the Company posts this Investor Presentation on the Investors page of its website at www.ggp.com. From time to time, the Company updates the Investor Presentation and when it does, it will be posted on the Investors section of its website at www.ggp.com. It is possible that the updates could include information deemed to be material information. Therefore, the Company encourages investors, the media and others interested in the Company to review the information posted on the Investors section of its website at www.ggp.com from time to time.
Michael Berman
Executive Vice President and
Chief Financial Officer
(312) 960-5044
Kevin Berry
Senior Vice President
Investor & Public Relations
(312) 960-5529
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Contact Information:
