Citi Favors General Growth Properties Defensive Strategy, Reaffirms Buy

Citi reiterated its Buy rating and $34 price target on General Growth Properties Inc GGP as it views the stock as attractive at a 16 percent NAV discount and 5.2 percent implied cap rate.

"GGP management remains focused on reducing the risk profile of the company in anticipation of a tougher road ahead – including approach to asset sales, balance sheet, and re/development – but with a pipeline of opportunities to continue to grow EBITDA 4-5% annually," analyst Michael Bilerman wrote in a note.

Bilerman favors the more defensive strategy of the GGP in the current environment and at this point in the cycle.

Citi hosted investor meetings with GGP management where the company noted a willingness to take back department store boxes amid the secular decline of this group. On the other hand, demand is strong among restaurants, fast fashion, cosmetics, and home furnishing.

The analyst noted that GGP sees a competitive advantage over strip centers in incentivizing more junior anchor and grocer tenants given up-front payouts and the new tenants can drive better traffic to the more profitable in-line space within the mall.

Bilerman said the company is "still on track for dispositions" while GGP expects to reach low-to-mid-7s D/EBITDA in 2017.

"GGP is unencumbering assets that should be easier to re-encumber later on if needed," the analyst added.time of writing, shares of GGP gained 0.87 percent to $29.65.