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Mall landlord GGP decides to 'stay the course,' not trim its portfolio; shares fall 6%

  • GGP said on Wednesday it will "stay the course" in retail, deciding against selling off some of its mall assets.
  • GGP CEO Sandeep Mathrani remains bullish on the REIT's path forward, adding that he sees a "light at the end of the tunnel."
  • Other retail REITs reporting earnings this week have also been upbeat about the sector and the opportunities ahead to fill vacancies.
Shoppers make their way around Water Tower Place shopping center in Chicago, Illinois.
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Shoppers make their way around Water Tower Place shopping center in Chicago, Illinois.

Mall landlord General Growth Properties announced on Wednesday that it has decided not to pursue the sales of some of its assets, sending shares of the stock tumbling.

This move surprised many who were expecting GGP to forge ahead with a plan that was set forth in May, when CEO Sandeep Mathrani said there was a wide gap between public and private markets' valuation of the company. Some parts of the business merited a value greater than GGP's stock price, he said at the time.

On Wednesday, though, in conjunction with reporting earnings, the real estate investment trust said it would "stay the course" in retail.

"We've ... determined that the inherent embedded value in [our] real estate is so high that you actually do the best for the shareholders [in staying the course]. ... This is not the right time [to sell]," Mathrani said on a call with analysts and investors.

"We did not see that it was appropriate to sell an asset with the highest growth just to print a value. ... We will continue to lease, lease, lease; redevelop our anchor boxes; intensify our assets and prune the lower-quality assets."

Shares of GGP were falling near 6 percent Wednesday afternoon. Notably, the stock has now fallen more than 30 percent over the past 12 months and is down about 13 percent in 2017.

A representative from GGP declined to comment further beyond what was mentioned on Wednesday's earnings conference call.

Despite taking a beating from Wall Street this year as the retail world faces increasing headwinds, Mathrani remains bullish on the REIT's path forward, adding that he sees a "light at the end of the tunnel."

Over the last five years, the composition of GGP's mall portfolio has evolved away from apparel, he said. "The non-traditional retail uses of entertainment, restaurants, car showrooms, fitness and grocery have increasingly become a large part of our business."

He went on to say GGP was filling vacated Sears boxes — something that's been top of mind for analysts and investors — with supermarkets, fitness centers, entertainment venues and other large-format stores.

"It's all about location, location, location. Our centers are within an hour's drive of 56 percent of the U.S. population."

By the end of the week, a slew of retail REITs will have reported earnings, and many executives thus far have been optimistic about the future of brick-and-mortar retail. Kimco Realty and Simon Property Group, for example, hit a similar note as GGP — each of them discussing ways the landlords are keeping properties occupied and finding ways to drive shoppers in.

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