New openings bolster Prime Retail Operational income rises 13 percent

January 30, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Prime Retail Inc. reported yesterday that its operational income rose to $33.1 million in 1995, a 13 percent increase from a year ago, resulting primarily from the opening of new projects.

The Baltimore-based developer and owner of retail factory outlet centers also posted positive results in the fourth quarter ended Dec. 31, generating adjusted funds from operations to common shareholders of $8.9 million. That figure represents a 15.1 percent gain from the corresponding period a year ago.

"There have been very few believers in this company, but I think their fourth-quarter and year-end results will result in at least a few converts," said Jim Ulmer, an analyst with Aries Real Estate Securities, a Hunt Valley brokerage house.

"They're at the point where they needed to bring in a good performance to back up what they've said, and it appears with this that they've done it."

Money from operations -- defined as net income adjusted for noncash items plus cash distributions from joint ventures -- is viewed as a key measure of a real estate investment trust's financial health, because generally accepted accounting principle methods fail to take into account the real estate industry's specialized nature.

Prime Retail officials attributed at least a portion of the increases to the seven new or expanded projects that became operational in the second half of the year, centers that added 949,000 square feet of retail space to the company's portfolio.

In all, Prime Retail controls 17 factory outlet centers totaling 4.3 million square feet in 14 states. Those projects, which are 95 percent leased, were valued at $462.6 million Dec. 31.

Prime Retail's revenues jumped dramatically, by 37 percent, to $77.4 million for the year, and to $21.3 million for the three-month period, a 25 percent climb.

However, the real estate investment trust's liabilities -- such as mortgage debt, interest payments and expenses -- increased by an even greater percentage, up 40 percent to $326.6 million. Most notably, Prime Retail's interest coverage doubled in 1995, costing the company $16.3 million.

Prime Retail expects to counter the rising debt and interest costs with $255.5 million in new financing from Nomura Asset Capital Corp., a subsidiary of the giant Tokyo-based investment house.

Robert P. Mulreaney, Prime Retail's chief financial officer, said more than 90 percent of the new capital replaces floating-rate debt with a 10-year loan with fixed interest rates. Prime Retail expects to close on the transaction in July, a move that will generate proceeds of $52 million for future developments.

"Nineteen-ninety five was a very successful year for Prime Retail, and we are well-positioned to repeat this performance in 1996," Abraham Rosenthal, the company's chief executive, said in a prepared statement.

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