Rouse's first quarter exceeds forecasts

Funds from operations jump to 76 a share as mall revenue rises

Real estate

May 11, 1999|By Jay Hancock | Jay Hancock,SUN STAFF

Propelled by a booming economy and higher rental income, the Rouse Co.'s key profit measure rose by 6.4 percent in the first quarter to $61.2 million, compared with the first quarter of 1998, the company said yesterday.

Funds from operations for the Columbia-based real estate concern came to 76 cents per share, well above the 68 cents expected by Wall Street analysts surveyed by First Call Corp.

"They had a very good quarter," said David Fick, who follows Rouse for Baltimore investment house Legg Mason Inc. "A big part of their results in terms of beating my estimate was interest savings.

"And land sales were again very strong. In every one of their business lines, they met or exceeded our expectations and the Street's expectations."

Funds from operations, a measure of corporate cash flow, is often considered the best measure of real estate profit because it factors out depreciation, which can distort results.

Perhaps Rouse's best-performing businesses for the three months that ended March 31 were its malls, which include The Mall in Columbia, Towson Town Center, Owings Mills Town Center and many others nationwide. Mall revenue, boosted by properties acquired from TrizecHahn Centers Inc. in late 1998, rose 17 percent to $146 million and funds from operations rose 20 percent to $35.2 million. Mall occupancies increased from 91.9 percent to 93.6 percent as strong consumer spending kept merchants healthy and rents current.

At Rouse's office complexes and mixed-use properties, revenue rose 13 percent to $62.8 million, and FFO profit increased 52 percent to $12.1 million.

Profit from land sales declined but still exceeded expectations, as strong housing markets continued in Rouse's community developments of Columbia and Summerlin, Nev. Total revenue fell to $269.7 million from $272.1 million in the first quarter of 1998.

"First-quarter results from the three operating lines of business were excellent, and prospects for the balance of the year are very encouraging," said Anthony Deering, Rouse's chairman and chief executive officer.

While Rouse's first quarter exceeded Fick's 70-cents-a-share estimate, he maintained his earnings projection of $2.94 a share for all of 1999. Rouse's stock rose 75 cents per share yesterday, closing at $26.25.

Rouse's per-share profit of 76 cents for the first quarter equaled its performance for the corresponding period last year. While total profit increased, per-share results were flat because the company had more stock outstanding in the first quarter than it did a year previously.

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