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General Growth Properties Inc (GGP), Howard Hughes Corp (HHC), Rouse Properties Inc (RSE): Tracking the Pieces of This Former Empire

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General Growth Properties Inc (GGP)Over a fifty year period, the Bucksbaum family built General Growth Properties Inc (NYSE:GGP) from a tiny Iowa real estate developer into the #2 domestic mall empire. However, the company’s operating structure collapsed in 2008, mostly due to the weight of debt taken on during its blockbuster purchase of Rouse in 2004. Despite General Growth’s 2009 bankruptcy filing, it survived the process relatively intact, although it has spun off non-core units like Howard Hughes Corp (NYSE:HHC) and Rouse Properties Inc (NYSE:RSE). So, five years after the collapse, how are the pieces faring?

General Growth

General Growth Properties Inc (NYSE:GGP) emerged from bankruptcy with a strong core portfolio of properties, included Ala Moana Center in Hawaii and the Shoppes at the Palazzo in Las Vegas. Since that time, the company’s financial condition has benefited from rising occupancy levels and retail sales of its tenants, with an average sales gain of 7% in 2012. Higher demand for mall retail space has also allowed General Growth to raise rents as older lease agreements come due.

In its latest fiscal year, General Growth Properties Inc (NYSE:GGP) reported a further improvement in its financial results, with increases in revenues and adjusted operating income of 2.7% and 13.7%, respectively, versus the prior year. The company’s higher profitability was chiefly the result of lower borrowing costs, as General Growth refinanced high cost debt that was negotiated during its bankruptcy proceedings. In addition, the company achieved a 10% increase in its lease rate, as it eliminated temporary leases in favor of higher-margin permanent leases.

Looking ahead, General Growth Properties Inc (NYSE:GGP) continues to redevelop its signature locations and repopulate its properties with growing retailers. In 2012, the company acquired eleven anchor pad locations from retailer Sears Holdings for $270 million, while selling other non-core assets that bought in $525 million. As the company brings down its debt load, General Growth Properties Inc (NYSE:GGP) should be able to further free up cash flow for reinvestment and improved shareholder dividends.

Howard Hughes

Originally part of the Rouse Properties Inc (NYSE:RSE) real estate business, Howard Hughes was spun off to General Growth Properties Inc (NYSE:GGP) shareholders in 2010. The company is primarily a developer of master planned communities around the country, including its signature Woodlands and Summerlin communities that are located in Houston and Las Vegas, respectively. The national housing bust led to a crash in Howard Hughes Corp (NYSE:HHC)’ home sales activity, although sales have sprung back recently, especially in its Houston market.

In FY2012, Howard Hughes Corp (NYSE:HHC) reported strong financial results, with increases in revenues and adjusted operating income of 36.6% and 77.4%, respectively, compared to the prior year. The company’s results were paced by higher volumes of home sales across the board, as well as double-digit price gains in its Houston and Las Vegas markets. In addition, Howard Hughes Corp (NYSE:HHC)’ profitability was enhanced by improved operating margins in its commercial real estate businesses that are incorporated into the communities, including office, retail, and resort properties.

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