GGP Overview. S&P 500 Real Estate Investment Trust (a) NYSE Ticker. Employees 1,700 Retail Properties 131 States 40. Natick Mall, Natick, MA

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Dustin Dwayne Wood
6 years ago
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1 Investor Presentation February 2016

Total Retail GLA 123 million Enterprise Value $44.

2 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 Natick Mall, Natick, MA The Woodlands Mall, Houston, Texas a) As of December 31,

GGP Mission & Values Own and operate Best-in-Class retail properties that provide an outstanding environment and experience for our Communities,

Ridgedale Center, Minnetonka, MN Nordstrom Grand Opening October 2015 Operating Highlights (a) Sales PSF <10K SF $588 Sales PSF <10K SF Growth 3.

3 GGP Mission & Values Own and operate Best-in-Class retail properties that provide an outstanding environment and experience for our Communities, Retailers, Employees, Consumers and Shareholders. Ridgedale Center, Minnetonka, MN Nordstrom Grand Opening October 2015 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% H Humility Shops at Merrick Park, Coral Gables, FL 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. 3

4 Shopping Centers 1,094 malls in the U.S.; 464 are high-quality (B+ or better) Country Shopping Center GLA (SF in millions) Population (millions) GLA per Capita U.S. 7, Canada Australia United Kingdom France Spain Italy Germany China 2,691 1,368 2 Mexico Source: ICSC 4

5 Scale & Quality GGP owns 92 of the top 464 high-quality malls in the U.S. Regional Malls Urban Retail Properties 5

6 Irreplaceable Retail Properties in the U.S. GGP is the 2 nd 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-andmortar and internet together to maximize revenues Top Retail Properties Malls Sales and NOI Percentage by Rank 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 $ % 78 Class A Retail Properties $682 76% Evolution of Top 10 Tenants By Revenue 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,

7 GGP Outpaces U.S. Retail Growth Nearly 2-To-1 With A Centers Driving The Majority Of Growth 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 and GGP. GAFO stands for General Merchandise, Apparel and Accessories, Furniture and Other Sales. 7

Traffic (in millions) Bar Graph Sales Per Square Foot Line Graph

8 Traffic Across The GGP Portfolio Is Steady, With YoY Increases Across All Classes Of Assets Estimated Total Visits to GGP Centers Traffic (in millions) Bar Graph Sales Per Square Foot Line Graph Year-Over-Year Traffic Growth % 3% - 2% Source: GGP. 8

9 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) 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 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. 9

10 Redevelopment of Department Store Boxes 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. 10

11 Annual EBITDA Growth of 4% to 5% Contractual Fixed Increase in Rents + Occupancy Growth 2% - 3% Positive Releasing Spreads 1% Expense Growth (1%) Developments 1.5% Acquisitions 0.5% 11

12 Durable, Long-Term Cash Flow Growth 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 Guidance (a) 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. 12

13 Cash Flow & Dividends Guidance (a) Actual 2014 Reported 2013 Reported 2012 Reported CAGR Company FFO per Diluted Share $ $1.56 $1.44 $1.32 $1.16 $ % AFFO per Diluted Share $1.21 $1.09 $1.00 $0.88 $ % Dividends $0.80 $0.71 $0.63 $0.51 $ % 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. 13

ecommerce Demand Coming from Unlikely Sources: Malls -

because of their ability to evolve merchandising to

Today, nontraditional tenants are opening across the

In addition, several "online-only" retailers are

Sources of Mall Demand Restaurants Entertainment But

smaller, new entrants to malls will be offset by

e., downsize) their store counts in the coming years.

retailers will likely see rent partially as a form of

However, sales generated by the ""fourth and fifth

14 ecommerce 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, nontraditional 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. Grocery Online Retailers Opening Stores Services Sources of Mall Demand Restaurants Entertainment 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. Current: 5 Retail Locations Identify underperforming locations Estimate sales that will move online Quantify risk of less market presence Result: 3 Retail Locations B- Anytown, USA B A Source: Green Street Advisors report titled U.S. Mall Outlook dated January 26, Copied here with permission. A+ + C 14

15 Omni-Channel Generates Higher Sales Source: ICSC 15

16 More Native-digital Retailers Are Finding The Business Case For Brick-And-Mortar Deployment Increasingly Compelling 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 instore 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. 16

17 In the Press We ve been blown away by the economics of our stores. Dave Gilboa, co-chief executive of Warby Parker 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. 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 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 17

18 In the Press It s hard for brands to engage with their customers in a purely digital way. Simon Mottram, CEO of Ralpha 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 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 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 18

Financial Flexibility Financing philosophy Obtain property-secured debt; minimize corporate recourse and cross-collateralization Laddered maturities mitigate refinancing risk and earnings volatility

19 Financial Flexibility Financing philosophy Obtain property-secured debt; minimize corporate recourse and cross-collateralization Laddered maturities mitigate refinancing risk and earnings volatility Debt Overview (a) ($ in millions at GGP share) Debt Maturity Ladder (a) ($ in billions 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% $1.9 $2.0 $3.1 $1.7 $2.4 $1.9 $2.0 $1.7 Net Debt / EBITDA 8.5x Interest Coverage 2.8x Fixed Charge Coverage 2.3x $0.2 $ a) As of December 31, Net Debt / EBITDA based on Net Debt as of December 31, 2015 and guidance for 2016 EBITDA as issued on February 2, Interest Coverage and Fixed Charge Coverage are based on estimate for 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%. 19

20 Sustainability 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) a) GRESB stands for Global Real Estate Sustainability Benchmark. 20

21 2016 Earnings Guidance Current as of February 2, 2016, the date of GGP s 4th quarter 2015 earnings conference call. 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 and as furnished with the Securities and Exchange Commission. 21

22 Contact Information: Michael Berman Executive Vice President and Chief Financial Officer (312) Kevin Berry Vice President Investor Relations (312) 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 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 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 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. 22

S&P 500 Real Estate Company

Investor Presentation September 2015 S&P 500 Real Estate Company Core Values - Humility, Attitude, Do the Right Thing, Together and Own It. Assets Portfolio comprised of high-quality regional malls complemented