Rouse first quarter beats expectations

Columbia REIT credits retail sector and land sales

Commercial real estate

May 10, 2000|By Rona Kobell | Rona Kobell,SUN STAFF

The Rouse Co. said yesterday that its first-quarter earnings beat Wall Street's expectations, crediting robust land sales and a strong retail sector for the favorable returns.

The Columbia-based real estate investment trust reported overall funds from operations of $63 million, or 82 cents per share, up from $58.4 million, or 72 cents per share, from the first quarter of 1999.

Funds from operations measures earning performance for real estate companies. Analysts had estimated the company's funds from operations at between 77 cents and 79 cents a share.

"A 4-cent increase is a pretty dramatic surprise," said David M. Fick, an analyst with Legg Mason Wood Walker Inc. who predicted 78 cents a share for the quarter.

Fick said he was pleased with Rouse's performance, especially because the stocks of other REITs have been pummeled in the past year. Rouse's stock has rebounded since December, when it hit its 52-week low of $19.75 a share. Rouse shares lost 6.25 cents yesterday to close at $24.50.

Rouse divides its business into three areas: retail centers, office properties and community development. Funds from operations in the retail sector were $36.8 million, up from $35.8 million in the year-earlier quarter. Office properties saw a gain to $12.6 million, up from $11.2 million a year ago. Community development and land sales totaled $20.5 million, up from $18.9 million a year ago.

Rouse announced a slight dip in occupancy at its retail centers, to 93.2 percent in this quarter from 93.6 percent last year. The company attributed that to several expansion projects where construction has just been completed, including the Moorestown (N.J.) Mall near Philadelphia and Pioneer Place in Portland, Ore. Both projects were completed in March.

This month, Rouse finished its additions to Exton Square, a shopping center in Chester County, Pa. On May 22, it will begin a $250 million expansion and renovation of the Las Vegas Fashion Show, a retail center along The Strip.

Rouse said it will continue to sell several of its office and industrial properties in the Baltimore area to raise cash for its stock-buyback plan. The company announced plans in September to buy back $250 million of common stock. It also was interested in shedding its office properties to concentrate more on retail and community development, said Jeffrey Donahue, chief financial officer.

So far, Rouse has spent approximately $50 million to buy 2.2 million shares at less than $22 per share. It would have liked to purchase more, but has found over the past few weeks the Rouse shareholders want to hold on to it.

"It's a good sign ... it turns out to be very hard to purchase," Donahue said.

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