Rouse's operating profits increased 50% in 1993

February 25, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

The Rouse Co. of Columbia said yesterday its operating profits rose 50 percent in 1993, thanks largely to refinancing of debt and better-than-average occupancy at the company's shopping malls.

Rouse said its earnings before depreciation and deferred taxes were $78.3 million, up from $52.3 million in 1992. In the fourth quarter, Rouse earned $25.2 million before depreciation and deferred taxes, up from $20.6 million in 1992's last three months.

Like many real estate investment-oriented companies, Rouse posted net losses for the year and for the quarter.

But industry analysts usually discount net losses because accounting rules force real estate owners to write down their assets over time, when most of the time real estate is actually gaining rather than losing value.

The noncash depreciation loss also doesn't inhibit the company's ability to pay dividends.

Analysts said Rouse's improving fortunes are due mostly to actions by the company's management, rather than an improving economy.

"I would say most of [the improvement] was them," said Catherine C. Creswell, who follows Rouse for Alex. Brown Inc. in Baltimore.

"The consumer has been very fickle."

She said the average sales growth of tenants in Rouse's 78 malls was up only modestly, reflecting consumer confidence that is stronger but still not overwhelming.

Rouse's big profit gains, Ms. Creswell said, came from improving average mall occupancy for the year, to about 93.5 percent, up from 92.5 percent in 1992. Occupancy at the end of the year topped 95 percent.

Rouse has 20 million square feet of retail space, said David Tripp, Rouse's director of investor relations. "One percent is 200,000 square feet, and that's a lot of increased rent," he said.

Ms. Creswell added that modest occupancy gains translate into big profit swings, because most costs at a mall are fixed, no matter how many tenants are in the complex.

Adding tenants means extra money but little extra cost, she said.

She said the 95 percent occupancy at Rouse malls is substantially better than major retail-oriented real estate investment trusts, such as Simon Property Group Inc. and Taubman Centers Inc., which have occupancy rates between 88 and 90 percent.

Mr. Tripp said Rouse also cut "a couple of million dollars, easily" by refinancing office and mixed-use projects to get lower interest rates. David Beeghly, an analyst with Scott & Stringfellow Investment Corp. in Richmond, Va., said the refinancings were key to strengthening struggling mixed-use projects in the western United States.

"This should show everyone that this wasn't a fluke, that this company survived" the real estate depression, Mr. Beeghly said.

The analysts said the results were in line with Wall Street expectations. Mr. Tripp said analysts expect Rouse's cash flow, after preferred stock dividends, to grow an additional 17 percent to 21 percent in 1994, depending on the estimate used.

The Rouse Co. ... ... ... ... Ticker ... ... ... ... ... Yesterday's

... ... ... ... ... ... .. .. Symbol ... ... ... ... ... Cls ... Chg.

... ... ... ... ... ... .. .. ROUS ... ... ... ... .. .. 18 ... unch.

Period ended

12/31/93 ... ... ... ... ... 4th qtr ... ... ... Year ago ... ... Chg.

Revenue ... .. .. .. ... ... $173,842 ... ... .. $164,992 ... ... +5.4%

Net Income .. .. ... ... ... $(515) .. .. ... .. $(1,255) ... ... --

Primary EPS .. .. .. ... ... $(0.08) ... ... ... $(0.03) .. .. .. --

... ... ... ... ... .. .. .. 12 mos. ... ... ... Year ago ... ... Chg.

Revenue ... ... ... .. .. .. $646,805 .. ... ... $597,105 ... ... + 8.3%

Net Income .. .. .. .. .. .. $(9,342) .. ... ... $(16,197) .. ... --

Primary EPS .. ... .. .. ... $(0.44) ... ... ... $(0.34) .. .. .. --

Figures in thousands (except per share data).

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