Rouse Co. fashions a record quarter

Land sales fuel results

paring of over 50 jobs will require a charge

October 29, 2002|By Meredith Cohn | Meredith Cohn,SUN STAFF

The Rouse Co. said yesterday that it sold enough land in the third quarter to push funds from operations to a record $96.8 million, although an effort to make the company more efficient is expected to result in the elimination of 50 or more jobs.

The Columbia-based real estate investment trust had said earlier in the month that financial results would exceed initial expectations for the quarter that ended Sept. 30, largely because a number of land sales closed in the third quarter instead of the fourth quarter.

Still, Rouse officials said they plan to take a $20 million to $25 million charge this year to pay for layoffs, retirements and an unspecified signing bonus for new Chief Financial Officer Thomas J. DeRosa.

Most of the expense will be taken in the fourth quarter, although $8.6 million was taken in this quarter.

The company said the reorganization is necessary because the company is not likely to continue developing malls at the same pace when most regions have enough.

Rouse employs about 600 people in Columbia and 3,700 people nationwide.

A company spokesman could not say how many of the staff reductions would come from layoffs but said most cuts would likely be made at the Columbia headquarters and in Summerlin, Nev., where a Rouse division oversees that community's development.

Rouse had already announced retirements of Chief Operating Officer Douglas A. McGregor and Chief Financial Officer Jeffrey H. Donahue and the merging of two divisions.

"The U.S. is going through a period of economic turmoil, but we have had an excellent quarter and year so far, especially under these circumstances," said Anthony W. Deering, chairman and chief executive.

"Office results will probably continue to be soft for some time, but our retail and community development operations have been consistently strong," Deering said.

"I'm confident that we will report record levels of funds from operations for both 2002 and 2003," he said.

Louis W. Taylor, an analyst who follows Rouse for Deutsche Bank, said the financial results were expected.

He also said the organizational changes were expected to come at some point as the company moves away from development.

The size of the one-time charge to pay for it was not expected, Taylor said.

"The size of the charge was a surprise and the scope of restructuring was broader than originally anticipated," he said. "But this is happening to a lot of real estate companies as their need for new development slows."

FFO was $96.8 million in the third quarter, or $1.03 a share, compared with $69.9 million, or 92 cents a share, in last year's corresponding period.

FFO is earnings before depreciation and amortization expenses, and is a measure of real estate investment trust performance.

Net earnings were $32.3 million, or 33 cents a share, in the third quarter.

Last year, net earnings were $29.2 million, or 37 cents a share, in the third quarter.

Net operating income for the retail centers was $123.1 million, compared with $94.4 million last year.

The company said much of the increase was due to recently purchased malls from the Rodamco North America NV portfolio.

But Rouse also said that occupancy levels were maintained and new rents on re-leased space generated growth.

In community development -- the land sales -- net operating income reached $26.5 million, up from the $16.5 million in 2001's third quarter.

The company primarily sells its property to other developers for houses and commercial buildings.

The stock rose $1.32 yesterday to close at $30.93.

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