Rouse profit up nearly 12%

But 71 a share is 2 pennies short of consensus estimates

REITs

November 12, 1999|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

The Rouse Co. reported yesterday that third-quarter earnings jumped nearly 12 percent, to $56 million, on the strength of solid occupancy in its malls and continued gains in its office projects.

Although the Columbia-based real estate company said the 71 cents-per-share earnings were "in line with expectations and on track for an excellent 1999," the results fell short of consensus estimates by 2 cents per share. The earnings per share fell short largely because the real estate investment trust did not earn as much from land sales as analysts had expected.

"Overall, the company will produce very strong results for 1999, and the elements are in place for excellent growth in 2000," said Anthony W. Deering, Rouse's chairman and chief executive.

Rouse's revenue in the quarter rose 12 percent to $255 million.

While the company said its retail projects' funds from operations (FFO) -- a standard measure of REIT performance -- were flat at $36.5 million in the quarter ending Sept. 30, comparable same-space sales were up 6 percent from the corresponding period a year earlier.

The third-quarter retail FFO results were affected by a more than $1 million payment related to Rouse's termination as manager of the Fashion Island mall in California; construction costs at retail projects being renovated or ex-panded; and higher costs associated with projects opened last year.

Rouse noted, however, that FFO for comparable retail properties was up 10 percent, the result of the high average-occupancy rate of 95 percent that helped buoy its retail projects.

"Their retail projects did very very well," said David M. Fick, a principal at Legg Mason Wood Walker Inc. who analyzes Rouse. "It continues to prove the thesis that regional malls are performing well in the face of the onslaught of the Internet."

The company was also aided by strong results from its office and mixed-use projects, where the FFO was up 29 percent, to $10.6 million, in the third quarter. Rouse said the growth stemmed from its purchase of a portfolio of projects from Teachers Insurance & Annuity Association, new projects in Las Vegas and Columbia, and strong occupancy, which also stood at 95 percent at the end of the quarter.

For the first nine months of 1999, Rouse generated FFO of $172.9 million, a 12 percent gain. FFO per share totaled $2.17, up 7 percent. The REIT posted revenue of $774.5 million, up 7.5 percent vs. the corresponding period in 1998. Rouse's retail FFO was up 9 percent in the first three quarters of the year, to $106.3 million, while FFO from office and mixed-use projects rose 42 percent, to $35.3 million.

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