* FFO rises despite lower occupancy rates
* Says lenders not yet exercising remedy rights (Adds details on results, company challenges)
NEW YORK, Feb 23 (Reuters) - General Growth Properties Inc (GGP.N), the No. 2 U.S. mall owner that has warned it may have to file for Chapter 11 bankruptcy protection, said on Monday quarterly funds from operations rose despite lower occupancy rates.
General Growth, which is struggling to refinance billions of dollars in debt, said fourth-quarter funds from operations, or FFO, were $222 million, 70 cents per share, compared with $190.4 million, or 64 cents per share, in the year-earlier quarter.
Analysts, on average, had forecast FFO of 86 cents per share, according to Reuters Estimates. FFO is a performance measure of a real estate investment trust that strips out depreciation.
The company, which has an ownership position or manages over 200 regional shopping malls in 44 states, reported nil earnings per share, compared with 24 cents per share in the year-earlier period.
Retail center occupancy fell to 92.5 percent at year-end, from 93.8 percent at the end of 2007, and cost reductions failed to fully offset revenue declines.
Sales per square foot, on a trailing 12-month basis, decreased 4.2 percent, compared with the year-ago period.
Last week global real estate services firm Real Capital Analytics ranked General Growth as the No. 1 distressed real estate services company in the world. It is facing $27 billion of obligations, including $4.1 billion due on March 15.
The company on Monday said it has $1.18 billion of past due debt, but noted that its lenders had not yet exercised any of their remedy rights. In addition, the mall owner said it has $1.44 billion of consolidated mortgage debt and $595 million of unsecured bonds slated to mature later this year that remain to be refinanced, repaid or extended.
Given uncertainties about its ability to refinance loans and the impact of strategic alternatives, the company said it would not yet provide a core FFO forecast for 2009.
The company said it has suspended its dividend, and halted or slowed nearly all of its development and redevelopment projects.
The Chicago-based company that began as a family-owned grocery store in 1954 took on much of its debt as it grew by acquisition. Its biggest deal the 2004 acquisition of upscale mall owner The Rouse Co for $14.3 billion, including the assumption of $5.9 billion of debt.
But the credit crisis has dried up sources of large amounts of capital necessary to refinance loans coming due on many of its malls.
General Growth warned in November that it may have to file for Chapter 11 bankruptcy protection from its creditors. Since then it has been operating as if it were in bankruptcy, hiring bankruptcy attorneys and trolling for debtor-in-possession financing.
Shares of General Growth fell 10 cents, or 21.7 percent to 36 cents a share on Monday. Since September, the stock has lost 98.6 percent of its value. (Reporting by Ilaina Jonas; Additional reporting by Euan Rocha and Ransdell Pierson; Editing by Lincoln Feast)