REIT's funds from operations dive

Prime Retail posts 47% drop in key performance gauge

April 03, 2001|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Outlet mall owner Prime Retail Inc. saw its funds from operations plunge 47 percent in the fourth quarter, hurt by lower mall occupancies, higher interest costs and retail tenants' bankruptcies and store closings, the Baltimore-based company said yesterday.

Funds from operations, a key measure of a real estate investment trust's performance, fell to $13.5 million, or 14 cents per diluted share, in the quarter that ended Dec. 31, compared with $25.6 million, or 37 cents per diluted share, in the fourth quarter of 1999, the company said. The 1999 fourth-quarter results exclude nonrecurring charges and other expenses totaling $22.5 million, or 42 cents per diluted share.

Revenue - mostly from base rents - dropped from $47.1 million in the fourth quarter of 1999 to $44 million in the last three months of 2000, Prime said.

Prime said its net loss widened in the fourth quarter to $111.4 million, or $2.69 per share, from a net loss of $55.7 million, or $1.42 per share, in the fourth quarter of 1999. The recent quarter's loss included a $64.5 million loss before the sale of real estate and extraordinary loss on early extinguishment of debt. Prime incurred a $42.6 million loss when it sold four outlet malls for $240 million in December as part of a turnaround plan.

Average sales per square foot at Prime's centers dipped 3 percent in the quarter, reflecting slower retail sales overall during the past holiday season, the company said.

For the year, Prime reported funds from operations of $60.5 million, or 70 cents per diluted share, excluding nonrecurring items, compared with $106.7 million, or $1.52 per diluted share, posted for 1999. Revenue in 2000 was $283.3 million, down from $305.9 million.

The company blamed the drops in funds from operations on decreases in average occupancy at its malls, from 93.8 percent to 92.8 percent in the quarter, and from 93.4 percent to 91.5 percent for the year, and on some of its tenants' bankruptcies and store closings.

The company's results were also hurt by a loss of net operating income, offset by decreased interest expense, after Prime sold a 70 percent joint venture interest in two of its outlet malls in 1999 and last year, as well as by higher interest costs, and higher administrative expenses due to reduced development.

Average sales per square foot at Prime's centers dipped 3 percent in the quarter, while same-store sales- sales per square foot at stores open and operated by the same merchant for at least a year - fell 5 percent, the company said.

Glenn Reschke, president and chief executive officer, blamed the drop on weakness in retail sales over the holiday selling season and harsh weather at many of the centers in November and December.

"Though such sales performance was disappointing, I'm encouraged by same-store sales for January, which were up to 4 percent, while same-space sales for the month were up 8 percent," Reschke said. Same-space sales are the average sales per square foot, excluding space open less than a year.

Prime Retail's stock rose 3 cents yesterday, closing at 42 cents per share. The shares have lost 94 percent of their value since the beginning of last year.

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