"We have a very good business that's going very, very strong," said General Growth Properties CEO John Bucksbaum, on the defensive during a conference call.

The second largest owner, manager and developer of regional shopping malls in the US announced a 10% increase in funds from operations in 2000 of $4.42 per share, and fourth-quarter FFO of $1.39 per share, up just 3.7% from the last three months of 1999.

Bucksbaum blamed "a tepid holiday sales season coupled with higher than expected short-term interest rates" for $6.3 million in lower fourth-quarter FFO.

"Despite collecting approximately $5 million less in percentage rent and paying approximately $1.3 million more in interest during the last quarter, I still believe that, depending upon the severity of the current downturn, we will deliver FFO per share between $4.86 and $5.00 in 2001," Bucksbaum said. "I am already encouraged by our preliminary January sales reports."

General Growth Properties already is in the process of negotiating renewal leases that include minimum rents rather than rents that include a percentage of a store's sales. Also, they are negotiating a refinance of nearly $1 billion in debt to fixed-rate financing by the end of 2001. However, analysts questioned why the REIT did not see the drop-off in percentage rents coming.

"The drop-off in sales occurred so suddenly in November and December that there was no way to anticipate the effect slower sales had on percentage rents," said Bucksbaum, adding a number of recent purchases did not provide the REIT with an adequate history. "We've been over bumps before. We'll get over them again."

Occupancy was up to 91%, said president and chief operating officer Robert A. Michaels, while renewals are averaging 20% increases over expiring leases at $35.24 per sf. Michaels added the REIT may have news by May on other occupants for 13 former Montgomery Wards stores vacated by the bankrupt retailer. "We view this as a short-term distraction and a long-term opportunity," Michaels said.

The REIT owns or manages 116 million sf of retail space in 146 shopping malls in 39 states. During the fourth quarter, it completed a 49,900-sf Richman Gordman's half-price store at Market Place Mall in Champaign, IL as well as a 29,000-sf expansion of a Kohl's department store there; redeveloped Valley Hills Mall in Hickory, NC and built a 16,000-sf Country Inn Hotel on an outparcel at Buckland Hills Mall in Manchester, CT.

General Growth also continues work on several projects, including a 1.325-million-sf redevelopment of Park Mall in Tucson, AZ; renovation of the 1.2-million-sf Southwest Plaza Mall in Littleton, CO; renovation of Mayfair Mall in Wauwatosa, WI where the second level will be expanded by 91,500 sf; and an 83,000-sf Best Buy addition on an outparcel at West Valley Mall in Tracy, CA.General Growth's local properties include three in the suburbs: the upscale Northbrook Court, Golf Mill Shopping Center in Niles, IL and Spring Hill Mall in West Dundee, IL.