Rouse had strong 3rd quarter Earnings up 13.6% on 2% revenue drop

November 08, 1995|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Despite sluggish sales for many retailers, the Rouse Co. yesterday posted double-digit earnings gains in the third quarter, fueled largely by its portfolio of 76 regional shopping malls and continued cost cutting.

The Columbia-based real estate developer generated earnings before depreciation and deferred taxes of $29.2 million in the quarter ended Sept. 30, a 13.6 percent increase from the comparable period a year ago.

The boost in earnings came despite a 2 percent decline in revenues, to $169.2 million. Revenues are down because occupancy rates in Rouse's $4.7 billion portfolio have dropped slightly in the past year, even though that has been partially offset by mall expansions and rental increases.

"Even though 1995 has not been a strong year for retailers, the company's centers have continued to demonstrate their resilience, producing record levels of earnings each quarter," said Anthony W. Deering, Rouse's president and chief executive, in a statement. "The fourth quarter should put the cap on another year of record results for the company."

Roughly 80 percent of Rouse's annual revenue is derived from its retail projects. Because many leases are tied to merchant sales, rents fluctuate accordingly.

In the first nine months of 1995, Rouse recorded earnings before noncash charges of almost $77 million, a 14.6 percent gain from a year ago. But revenues were flat at $495.3 million.

"It was a solid quarter for them," said David Kostin, a Goldman Sachs & Co. analyst who tracks Rouse. "They kept expenses down, which they've been pretty vigilant about. I would expect revenues to bounce back next quarter, especially because of the seasonal nature of the fourth quarter."

Expenses fell by 7 percent and 5 percent in the quarter and nine-month periods, respectively, to $86.1 million and $259.3 million. Since the start of last year, Rouse has pared expenses by shaving more than 500 administrative, accounting and marketing field personnel.

"Like all of corporate America, we're reducing our head count," said David L. Tripp, a Rouse vice president and its director of investor relations.

Additionally, Rouse office and mixed-use properties have largely rebounded, producing earnings of $5.6 million in the first three quarters, exceeding the properties' results for all of 1994 by 29 percent, Mr. Deering noted.

On a Generally Accepted Accounting Principles basis, Rouse reported net income of $3.03 million for the quarter and a net loss of $3.4 million for the three quarters. As with most real estate companies, net income figures fail to take into account the special nature of development, and most analysts disregard them.

In addition to the earnings, Rouse announced plans to shift its common and preferred stock listing to the New York Stock Exchange effective Nov. 9, from Nasdaq, to both impress foreign investors and because its peer group is traded on the Big Board. The stock symbols will be RSE and RSE.PrA, respectively.

Rouse's common stock closed unchanged yesterday at $21.50 per share.

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