Rouse posts a record 3rd quarter REIT is predicting new mark for year

Commercial real estate

November 17, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Propelled by increases in its retail malls, Rouse Co. reported record third-quarter earnings of $50.2 million yesterday and predicted that its full 1998 results would also shatter the company's previous high mark.

The Columbia-based real estate investment trust's funds from operations -- a key gauge of a REIT's financial health -- of 66 cents per share amounted to a 4 percent increase over the comparable three-month period that ended Sept. 30, 1997. Revenue in the quarter declined 2 percent, to $227.2 million.

"Each of our three operating lines of business is on track for record-breaking performance in 1998," said Anthony W. Deering, Rouse's chairman and chief executive.

"Retail centers should show both the highest occupancy levels and the best comparable space tenant sales growth of any year this decade. Office, mixed-use and other properties are having an outstanding year. Demand for land continues to be strong," he said.

For the first nine months of 1998, Rouse posted funds from operations of $154.2 million, $2.03 per share, an 18 percent gain from the same period a year ago. Revenue for the three quarters rose 5.4 percent to $721.3 million.

In both the quarter and the nine months, the company's gains were led by its retail centers, which posted gains of 25 percent and 16 percent, respectively.

Rouse said the retail malls experienced higher occupancy levels -- 93.1 percent compared with 90.8 percent as of Sept. 30, 1997 -- and better operating margins, as well as higher rents, on re-leased space. Tenant sales, from which Rouse derives some rent, rose 4.4 percent between Sept. 30, 1997, and Sept. 30, 1998.

The company said the gains validate the "strategy of concentrating on dominant centers in major markets through new acquisition and disposition."

Rouse is likely to post further retail gains as well, as it begins to integrate six malls -- including Towson Town Center -- into its portfolio. The REIT, as of the end of October, has completed the purchase of five of the six centers from TrizecHahn Corp., a Toronto-based mall owner.

Rouse added that department store openings in Atlanta; White Marsh; Owings Mills; Orlando, Fla.; New Jersey; and Louisville, Ky., will also help future retail earnings.

In all, Rouse controls more than 200 retail, office, mixed-use and industrial properties valued at more than $4 billion.

"They're clearly having an excellent run this year," said David M. Fick, a Legg Mason Wood Walker Inc. vice president who tracks Rouse. "They're hitting on all cylinders, and their retail performance is the main story. With TrizecHahn under way, we expect that to continue. It shows their flight-to-quality strategy is working."

Rouse has been active on other fronts, too. Its office and mixed-use portfolio, which posted gains of 11 percent in the first nine months of the year, added five new buildings in Las Vegas. Land sales were up 15 percent for the first three quarters of the year.

In July, Rouse announced plans to invest $375 million to add 67 buildings totaling 4.6 million square feet. The purchase from Rouse-Teachers Properties Inc., a joint venture between the company and a New York pension fund, will also add 107 acres of commercial land.

Pub Date: 11/17/98

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