Rouse's rise in earnings levels off to modest 2.2% Its operating profits had risen 30% or more for 4 straight quarters


August 18, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

The Rouse Co. generated only slightly improved earnings of $46.4 million in the second quarter, despite solid gains from its shopping malls and office projects.

The Columbia real estate company's 2.2 percent increase in its funds from operations -- a standard measure of financial health used by real estate investment trusts -- comes after four consecutive quarters in which Rouse improved on its previous earnings by 30 percent or more.

Rouse officials attributed the earnings of 62 cents per share to a decrease in land sales in Columbia compared with sales in the second quarter of 1997, but it said the results were "on target."

Revenue in the quarter that ended June 30 were $222.6 million, 8 percent less than in the comparable period last year.

"Results for the second quarter and first half of 1998 were excellent and on target with the company's objectives for the full year," said Anthony W. Deering, Rouse's chairman and chief executive. "The company's retail centers are having an exceptional year. The office, mixed-use portfolio is likewise on track to produce record results."

"Earnings from land sales are well ahead of 1997 at this point New developments of both retail centers and office buildings are making rapid progress. We are excited and encouraged by the company's performance thus far."

For the first half of 1998, Rouse posted funds from operations of $103.9 million, or $1.38 per share, 26 percent more than in the same period last year. First-half revenue amounted to $494.7 million, 9.4 percent more than in the 1997 period.

At least part of the six-month increase stemmed from significant land sales in the first quarter.

Rouse's $34.6 million in land sales in the first half was 58 percent more than in the comparable period in 1997. By comparison, land sales were down 23 percent in the second quarter compared with sales in the same period of 1997. The company said second-quarter 1998 figures were down because of the tremendous volume in the previous quarter.

Despite the relatively small increase in earnings, Rouse had a few highlights in the second quarter, notably its retail centers, which posted gains of 11 percent in the quarter and in the first half, to $31.7 million and $60.9 million, respectively. Rouse generates the majority of its profit from malls and other retail centers.

"The retail earnings are interesting, because they are the backbone of their business," said David M. Fick, a Legg Mason vice president who analyzes Rouse. "But the biggest driver of their increases were cost savings, which they were able to translate to earnings. To the extent that they can keep costs down and rental income increasing, it will bode well for them long-term."

Rouse said occupancy in its retail projects as of June 30 was 92 percent and should inch up to 95 percent by year's end. Occupancy in its office and mixed-use projects was 95 percent at midyear.

Rouse's retail centers are expected to improve their performance after the REIT completes a deal to acquire seven malls -- including Towson Town Center -- for $1.1 billion. The acquisitions, announced in early April, are scheduled for completion by the fourth quarter this year.

Pub Date: 8/18/98

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