Improvement at malls lifts Rouse earnings 26%

August 16, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

Better results at shopping malls pushed The Rouse Co.'s key earnings measure up 26 percent during the second quarter.

Columbia-based Rouse said it earned $21.2 million during the quarter that ended June 30, excluding allowances for depreciation of its real estate assets and deferred taxes. The company earned $16.8 million by the same measure in the second quarter of 1993.

Real estate companies typically rely on cash flow, or earnings before depreciation and taxes, rather than the net income measure used by other companies, because accounting rules for net income distort real estate results by requiring companies to write down the value of their assets.

"They were very good, they really were," said Catherine C. Cresswell, who follows Rouse for Alex. Brown Inc. "Just looking at their retail center [earnings], they were up 17 percent, and that's not a small feat in this environment."

Barry Curtis, an associate analyst at Alex. Brown, said that for other mall developers "there has been growth, but it hasn't been double-digit growth."

Ms. Cresswell said the earnings before depreciation and taxes worked out to 37 cents a share, 3 cents higher than Alex. Brown's estimate. But a previously unannounced land sale accounted for the 3-cent difference. Rouse's stock closed unchanged at $19.75 yesterday.

Revenue for the quarter rose 6 percent, to $163.7 million, compared with the 1993 quarter.

The company's 78 retail centers, including 52 regional malls like Rouse's malls in Columbia, White Marsh and Owings Mills, and 16 urban marketplaces like Harborplace and The Gallery at Harborplace in Baltimore, made $3.4 million more during the second quarter than a year earlier.

"There is an uptick in the overall economic climate," Mr. Curtis said. "With the change in demographics, there's more discretionary income out there. . . . Department stores are doing well. That creates more traffic."

Rouse also cited strong re-leasing efforts, lower interest costs and the opening of new stores in its retail centers during the second quarter.

For the first half of the year, Rouse's cash flow rose 27 percent, to $41.4 million.

Rouse also said it spent $94 million during the first half of 1994 for property acquisitions, up from $32 million a year earlier. A Rouse spokesman said the money went to buy out a partner in a mall in Woodbridge, N.J., who had held a ground lease on the properties.

Development expenses also rose as the company continued pre-development work on malls in Florida and South Carolina, its first new centers since 1987.

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