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'Business as usual' at GGP as Brookfield Property merger talks continue

It is "business as usual" at the mall real estate investment trust GGP Inc. at the start of 2018, according to CEO Sandeep Mathrani, even as retail weakness lingers and closed-door discussions continue regarding the now three-month-old unsolicited takeover proposal from Brookfield Property Partners LP.

An analyst inquired on the company's 2017 year-end earnings call Feb. 7 how management is keeping morale up to drive performance with so much uncertainty lingering about the near-term future.

"I think [the employees] are pretty highly motivated to produce results and continue down the path we've had over the last seven years," Mathrani said.

The CEO rebuffed questions about the merger discussions several times. GGP reportedly rejected Brookfield's initial $14.8 billion takeover proposal, which Brookfield first disclosed in November 2017.

GGP did not provide 2018 funds from operations guidance with its 2017 year-end results, citing the ongoing negotiations. The company expects same-store net operating income growth in 2018 of between 2% and 3%, driven primarily by rent increases, occupancy and expense management, according to CFO Heath Fear.

Same-store net operating income growth for 2017, at 1.6%, was low relative to peers. Mathrani on the call attributed the low figure to higher-than-anticipated utility expense, "bad debt expense" from a tenant bankruptcy filing and the timing of certain lease commencements.