Rouse Co. yesterday announced its earnings before noncash charges rose 23 percent in the first half of 1996 to $58.9 million, a performance that puts the company on track to generate a fourth consecutive year of record earnings.
Unlike in recent years, though, the Columbia-based real estate concern's earnings growth appears to be driven not by gains from retail centers but by managing expenses, diversification and its office projects.
"Our experience thus far in 1996 further convinces us of the wisdom of diversification of our operations and our assets into three business lines, across a broad geographic area," Rouse President and Chief Executive Officer Anthony W. Deering said in a prepared statement. "With strong performance from our office and land operations to offset the temporary slower growth from retail operations, we had expected 1996 to be a good year."
Rouse's primary vehicle for diversification came June 12, when it completed a $520 million acquisition of Hughes Corp. of Las Vegas. With Hughes, Rouse analysts expect the company to post 20 percent better earnings this year than last, which would produce roughly $130 million in earnings before depreciation and deferred taxes.
For the second quarter ended June 30, Rouse posted earnings -- before noncash charges -- of $29.7 million, a 20 percent increase from the comparable quarter last year. Revenues in the quarter totaled $179 million, a 9.4 percent boost from a year ago. For the six months, revenues rose 8 percent, to $352.2 million.
But Rouse has had to contend with sluggish retail center earnings in 1996 that grew just 1.4 percent in the quarter and 2.8 percent over the six months. Rouse attributed the figures to falling occupancy levels, as tenants such as Merry-Go-Round Enterprises Inc. exited Rouse malls because of bankruptcy liquidation. Deering added that the company is "beginning to sense improvement."
However, the retail center sluggishness was offset by a 72 percent jump in earnings from office projects in the quarter and a doubling of earnings for the six months. Land sales quadrupled in the quarter and rose by 131 percent in the first half.
"The big driver of their earnings increases lately has been cost control," said James Ulmer, a principal with Aires Real Estate Services, a Hunt Valley-based investment firm. "As a result, they've been able to generate stable earnings in the face of a dismal retail environment.
Pub Date: 8/15/96