General Growth sinks on lower outlook, debt fears

WASHINGTON - The new managers of troubled mall owner General Growth Properties Inc. sought to reassure investors Wednesday that the company plans to sell off properties and cut costs in an effort to weather the rocky economic climate, weeks after the company ousted its top executives.

General Growth's shares have lost about 90 percent of their value over the past three months amid concerns about the real estate investment trust's ability to sell debt and turmoil in the Chicago-based company's executive ranks.

Its stock shed $2.24, or 50 percent, to $2.25 in trading Wednesday after the company reported disappointing third-quarter results, cut its year-end forecast and said it needs to refinance $900 million in debt by the start of next month.

"Unfortunately in real estate it isn't possible to turn things around immediately, so you're going to have to bear with us," Interim Chief Executive Adam Metz said on a conference call with analysts, where he detailed plans to "drastically" reduce spending on new developments and sell off assets.

"We realize that we need to generate billions of dollars" to reduce debt levels, he said. "Unfortunately these transactions take time."

Last month, the Chicago-based mall owner's board removed its CEO, president and chief financial officer after disclosing that the former CEO John Bucksbaum's family trust provided $90 million in personal loans to cover margin debt for the company's former chief financial officer and president.

Metz declined to answer an analyst's question about whether General Growth has received an offer for the entire company. He also said the company is searching for a permanent CFO, but not a new CEO or president.

General Growth's dismal results came as another shopping center operator, Kimco Realty Corp., lowered its full-year outlook to below Wall Street expectations amid growing problems at retail tenants.

General Growth has suspended its dividend and sold off $47 million in assets since June 30, but analysts are unsure whether the company's new management will be able to solve the company's problems.

The company's management also said Wednesday it doesn't envision restoring the dividend in the near term, but said its board will review the policy periodically.

"Actions taken by the new management team to reduce capital spending over the next few years, while necessary, may not be enough," wrote Christine McElroy, a Banc of America Securities analyst, who noted that the company has $600 million in debt coming due next March in addition to the $900 million in it needs to replace in the coming weeks.

RBC Capital Markets analyst Rich More predicted that General Growth "will be sold provided a buyer emerges with sufficient financing."

General Growth has an interest in more than 200 shopping malls in 44 states.

Early Wednesday, the company reported that funds from operations, the key financial measurement for REITs, fell 11 percent to $185.4 million, or 58 cents per share.

That was down from $208.4 million, or 71 cents per share, in the year-ago period.

Revenue fell 6 percent to $814.7 million from $864.2 million. On average, analysts polled by Thomson Reuters expected FFO of 76 cents per share on revenue of $865.5 million

FFO, which adds such items as amortization and depreciation back to net income, is considered a key gauge of REIT strength because it gives a more accurate picture of cash performance.

General Growth posted a loss of $15.4 million, or 6 cents per share, compared with a loss of $9.4 million, or 4 cents per share, in the year-ago period. Excluding results from businesses that have been, or are in the process of being sold, its losses from continuing operations totaled $30.5 million, or 11 cents per share.

The company lowered its estimates for "core" funds from operations, which excludes planned community developments, to a range of $2.85 to $2.95 per share. Previously, it had anticipated core FFO of $3.42 per share.

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