Prime Retail operational earnings up 22%

Company attributes increase to merger that doubled its size

Commercial real estate

May 06, 1999|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Prime Retail Inc. said yesterday that its operational earnings rose 22 percent in the first quarter of this year to 38 cents per share, an increase the company attributed to a June 1998 merger that doubled its size.

The Baltimore-based real estate investment trust's total funds from operations -- a key gauge of an REIT's financial health -- amounted to $27.7 million, a gain of 79 percent from the corresponding period in 1998.

The difference in the company's per share earnings and total funds from operations stems from the fact that Prime Retail has issued more than 31 million shares of its common stock since the first quarter of 1998. The new common stock was issued in association with its merger with the Horizon Group Inc., a Michigan outlet center mall owner.

After allocations to minority interests and preferred stock payouts, though, Prime Retail's funds from operations totaled $17.4 million, more than doubling the $8.5 million in the comparable 1998 quarter.

Prime Retail attributed much of the earnings surge to its nearly $1 billion merger with Horizon, which added 22 projects to its portfolio. In all, Prime Retail controls 50 projects nationwide, containing 14.4 million square feet.

"Our income gains largely reflect the Horizon acquisition," said Abraham Rosenthal, the company's chief executive. "The integration of Horizon has been well thought out by our team, and it's been a real source of pride, to double the company so smoothly."

Revenue in the quarter that ended March 31 more than doubled, to $78.6 million, while same-space sales in Prime Retail projects rose 1 percent.

"They had a very strong quarter," said David M. Fick, a Legg Mason Wood Walker Inc. principal who tracks Prime Retail. "They came in at a penny ahead of our estimates, and we had built in a lot of growth into our model already."

Prime Retail also announced a $63 million refinancing on its Niagara Falls, N.Y., outlet mall. Its new mortgage carries a fixed 7.60 percent interest rate and matures in 10 years. The refinancing netted $28 million for Prime Retail.

In all, Prime Retail is working to refinance $150 million worth of debt that is maturing this year. Fick predicts that if the refinancing effort is successful, Prime Retail's common stock price will increase significantly. The REIT's common shares closed yesterday at $9.125, up 50 cents per share.

"This is one of the great values in the stock market today for a REIT," Fick said. "I think investors skittish about the company now will think differently" if it can complete its refinancings, he said.

Pub Date: 5/06/99

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