UPDATE 2-U.S. mall owner General Growth's quarterly profit beats Street

Mon Jul 29, 2013 7:00pm EDT

* 2nd-qtr FFO 27 cents/shr vs Wall Street forecast of 25 cents

* Company raises lower end of its full-year forecast

* Plans to exit Brazilian shopping mall company

* Raises dividend by 1 cent per share

By Ilaina Jonas

NEW YORK, July 29 (Reuters) - General Growth Properties Inc said on Monday it had a 17 percent increase in a key measure of quarterly profit, beating Wall Street expectations, and said it had reached an agreement to sell its stake in a Brazilian shopping center company.

The No. 2 U.S. mall owner after Simon Property Group Inc , said it agreed to sell its stake in Brazilian shopping center owner Aliansce Shopping Centers SA to the Canada Pension Plan Investment Board and a Brazilian company, Rique Empreendimentos e Participacoes Ltda, for about $690 million. The deals are expected to close in the third quarter.

General Growth had a 40 percent stake in Aliansce at the end of last year, according to a filing with the U.S. Securities and Exchange Commission. General Growth did not provide details on the sale, but the Canadian pension plan said it had agreed to buy a 27.6 percent stake in Aliansce for $480 million.

Since emerging from bankruptcy at the end of 2010, General Growth has culled its portfolio of properties down to its most productive U.S. malls. It ended the second quarter with 123 U.S. malls, down from more than 200 properties in 2010. It has pared its portfolio to its best producing malls, lifting its average rent and sales per square foot.

During the quarter, General Growth sold a 49.9 interest in both the Grand Canal Shoppes and the Shoppes at the Palazzo in Las Vegas for net proceeds of $411.5 million and disposed of a strip center.

General Growth posted second-quarter funds from operations (FFO) of $267 million, or 27 cents per share, compared with $228 million, or 23 cents per share, a year ago.

Analysts on average expected FFO of 25 cents per share, according to Thomson Reuters I/B/E/S, and the company had forecast 24 cents to 26 cents per share.

FFO is a real estate investment trust performance measure that usually excludes gains or losses from property sales and removes the effect of depreciation on earnings.

The Chicago-based mall owner also raised its dividend for the third quarter by 1 cent to 13 cents a share, payable on Oct. 29 to stockholders of record on Oct 15.

Sales at stores open at least a year at its U.S. malls rose 5.1 percent to an annual $560 per square foot on a trailing 12-month basis. Higher sales raises demand for space at its properties and the company's ability to charge higher rent. Mall owners also get a portion of those sales.

Net operating income, which reflects how well the properties are being managed, rose 6.8 percent for its U.S. regional malls operating for more than a year.

General Growth's U.S. mall portfolio was 95.9 percent leased at the end of the quarter, up 1.6 percentage points from a year earlier. The average base rent for new leases in 2013 rose 11.1 percent over rents called for under expiring leases to $62.79 per square foot.

General Growth raised the lower end of its full-year FFO outlook to $1.13 to $1.15 per share from a prior forecast of $1.11 to $1.15 per share. Analysts have forecast $1.11 per share.

The company sees third-quarter FFO in the range of 26 cents to 28 cents per share, compared with Wall Street's view of 27 cents per share.

The company reported second-quarter results after the close of trading on Monday. Its shares closed down 1.9 percent, or 42 cents, at $21.21 on the New York Stock Exchange and rose slightly to $21.26 after hours.

General Growth is scheduled to hold a conference call with analysts on Tuesday morning.

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