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UPDATE 2-General Growth 3rd quarter in line; raises outlook

Ilaina Jonas
Wednesday, 31 Oct 2012 | 9:55 PM ET

* Third-quarter FFO 23 cents matches Wall St view

* Tenant sales rise 8.2 pct

* Company raises full-year forecast

Oct 31 (Reuters) - General Growth Properties Inc, the No. 2 U.S. mall owner, said a key third-quarter earnings measure met Wall Street's forecast on higher occupancy, rent, and sales at its tenants' stores, and raised its forecast for the year.

Improving retail sales and consumer confidence have been good news for mall owners, including Simon Property Group Inc and Macerich Co, which have seen stronger sales at their tenants' stores in the third quarter. Stronger sales usually translate into higher rents.

General Growth on Wednesday posted third-quarter funds from operations of $231.3 million, or 23 cents per share, up from $212.6 million, or 22 cents a share, a year ago.

That result matched the 23 cents per share that analysts, on average, had forecast, according to Thomson Reuters I/B/E/S.

Funds from operations, a performance measure used by real estate investment trusts, removes the effect of depreciation on earnings.

Since emerging from bankruptcy at the end of 2010, General Growth has culled its portfolio of properties down to its most productive malls. It ended the third quarter with 145 malls, down from more than 200 properties in 2010.

William Ackman, head of hedge fund Pershing Square Capital Management, with a 10.2 percent stake in General Growth, has been urging the company to sell itself to Simon Property Group, the No. 1 U.S. mall owner.

But its biggest shareholder, Brookfield Asset Management, with a 42.2 percent stake, has said it is not interested in selling. Simon has said it is not inclined to be a buyer without Brookfield's support. General Growth's board had concurred.

``The results are good, and the board can point to it as continued progress that General Growth is a stand-alone entity,'' said Jeung Hyun, principal and portfolio manager of Adelante Capital Management.

For properties the company has owned at least a year, tenants' sales rose 8.2 percent to an annual $541 per square foot on a trailing 12-month basis. That compared with a 9.3 percent increase to $562 per square foot for Simon Property Group. Macerich said tenant sales rose 9.4 percent to an annual $511 per square foot.

General Growth's mall portfolio was 95.5 percent leased at the end of the quarter, up 1.3 percentage points from a year earlier. The average rent for new leases was 10.4 percent higher than for expiring leases.

Net operating income, a measure of performance at the property level of comparable malls, rose 4 percent in the third quarter.

Chicago-based General Growth raised its forecast for full-year funds from operations to 96 to 98 cents per share from a previously raised 95 to 97 cents per share. For the fourth quarter, it forecast FFO of 28 to 30 cents per share.

Analysts had forecast fourth-quarter FFO of 29 cents per share and full-year FFO of 97 cents.

General Growth shares closed 2.7 percent higher at $19.66 on Wednesday ahead of it posting results and were unchanged in after-hours trade.

The company is scheduled to hold a conference call with analysts on Thursday morning.

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