Malls acquired in May help Rouse's quarter

FFO rises $5.8 million

solid year is expected

July 30, 2002|By Meredith Cohn | Meredith Cohn,SUN STAFF

Bolstered by a set of newly acquired shopping malls, funds from operations at the Rouse Co. were up $5.8 million to $73.7 million in the quarter that ended June 30, the company reported yesterday.

Sale of stock to help pay for all or part of eight malls across the country, however, diluted the results on a per-share basis. FFO, a key gauge of performance for real estate investment trusts, was 78 cents a share, compared with the 90 cents a share that the Columbia-based REIT posted for the second quarter of 2001.

FFO in the first half of the year was $144.6 million, or $1.58 a share, compared with $140.5 million, or $1.86 a share, for the first six months of 2001. The results were in line with analysts' expectations.

Rouse, along with Westfield America Trust and Simon Property Group Inc., bought the portfolio of upscale malls and other assets owned by Rodamco North America NV in May. Rouse sold 16.7 million shares of stock and raised $456.9 million in part to pay for the deal.

The mall purchases, while considered expensive for the companies by analysts, fit into Rouse's strategy of owning only high-quality malls that dominate their area.

The malls pushed Rouse's net earnings for the second quarter to $98.1 million, or $1.04 per share, compared with $25.9 million, or 33 cents a share, in last year's second quarter.

Net operating income, or NOI, from retail centers was $105.2 million in the quarter, compared with $90.4 million in the 2001 quarter. The NOI was affected by the gain in Rodamco malls and the sale of Columbia village centers and Franklin Park in Toledo, Ohio.

Weak demand from office users and a decline in occupancy pushed NOI from office and other properties down to $30.7 million from $31.6 million in the second quarter of 2001.

In Rouse's third business segment, NOI from community development activity, largely from land sales in Columbia and Summerlin, Nev., was down to $15.6 million, compared with $19 million a year earlier. Company officials expect the larger percentage of land sales to occur in the second half of the year.

Additionally, two large developments are expected to open this year: The Village of Merrick Park in Coral Gables, Fla., a retail-residential-office project, is to open Sept. 27; and the first phase of an expansion of Fashion Show mall in Las Vegas is to open Nov. 1.

"Operating results were on track for the first six months of 2002, and development projects made excellent progress," said Anthony W. Deering, Rouse's chairman and chief executive.

"For the balance of the year, retail centers should continue to show good growth; office and other properties will probably be flat to down slightly; and community development operations should achieve record annual results," he said. "The dilution related to the Rodamco acquisition and its capitalization will turn to accretion, now that the properties have been successfully acquired and integrated into the company. This year, 2002, should be a very good one in a time of economic turmoil in the country, and expectations are for another year of solid growth in 2003."

Deering also told analysts in a conference call that he would be willing to sign off on the company's financial statements as a sign of his confidence amid reports of other companies' accounting scandals.

Rouse shares gained $1.59 to $31.20 on the New York Stock Exchange yesterday.

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