Prime Retail income rises slightly Funds from operations up 2.3% in quarter

November 02, 1995|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Prime Retail Inc. reported only a slight increase in operational income in the third quarter, but rejected some analysts' views that the figures exemplify the retail factory outlet center industry's slide.

The Baltimore-based real estate investment trust reported funds from operations of $8.3 million in the quarter that ended Sept. 30, a 2.3 percent gain from a year ago. Revenues, however, jumped 41 percent, to $20 million.

Some Wall Street analysts have soured on the industry after Phillips-Van Heusen Corp.'s announcement last month that it would close 200 retail stores. Prime Retail predicts the moves by the company -- the largest factory outlet merchant -- will have little effect on its operations.

"We're seeing strong pre-leasing activity from large tenants in projects planned for 1996 and beyond, which equates to more consumer traffic," said Robert P. Mulreaney, Prime Retail's chief financial officer. "We think factory outlet centers are here to stay."

For the nine-month period, Prime Retail generated operational income of $24.2 million, a 12 percent gain from the comparable period a year ago. Revenues for the three quarters also rose by 41 percent, to $56.1 million.

Prime Retail's results for the quarter were boosted by the opening of Magnolia Bluff factory shops, a 238,000-square-foot center in Georgia, in late June.

The trust opened three new factory outlet centers between June and October, and has expansions under way on four projects.

In all, Prime Retail controls 17 centers in 14 states, containing 4.1 million square feet and valued at $437.2 million. As of Sept. 30, its portfolio was 95 percent leased with average base rents of $14.50 per square foot.

"They didn't have hyper growth like they had last year, but their properties are still returning over 10 percent, while the yield on other types of real estate is shrinking," said Robert Schwartzberg, a Friedman, Billings, Ramsey analyst. "We're looking for an outstanding fourth quarter."

He added that while Prime Retail's operational income figure for the quarter was not up significantly, it did represent rental income growth because much of its earnings a year ago were derived from one-time fees.

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