Prime Retail Inc., the struggling Baltimore-based outlet mall operator, faced tenant bankruptcies, sagging sales and lower occupancies in the first quarter that pushed down earnings already hit by the sale of four of its centers.
Funds from operations, or FFO, the key measure for real estate investment trusts, dropped to $7.3 million, or 3 cents per diluted share, in the quarter that ended March 31, the company reported. That compared with $19 million, or 25 cents per diluted share, from the first quarter of last year.
Robert A. Brvenik, the company's chief financial officer, said the company is working to lease space abandoned by tenants. The task will be tougher for the next few quarters because of the economic downturn, he said.
"No doubt it's a challenge to cultivate new tenants, but we have an aggressive leasing staff pursuing that now," he said. Brvenik said the company will work to keep down costs and generate income. He said the company was current on all of its debt payments.
The company said the decrease in FFO in 2001 was a result of sale of four outlet centers, including the assumption of the purchaser's mortgage debt, which resulted in a decrease in net operating income of $6.8 million.
Other factors were higher interest expenses of $3.5 million, resulting from higher borrowing costs and reduced interest in development projects; the loss of $2 million in payments from tenants who were bankrupt or closed; reduced occupancy from 91 percent to 90.2 percent; and the sale of a 70 percent joint interest in Prime Outlets at Williamsburg.
Nonrecurring costs in the quarter included $13 million related to closing the company's e-commerce site; general and administrative expenses; and a loss of $1.1 million related to the company's Designer Connection retail outlet stores.
Total revenue was $58.12 million, compared with $72.84 million in the first quarter of 2000.
The company does not expect to pay distributions on its 10.5 percent Series A Senior Cumulative Preferred Stock, 8.5 percent Series B Cumulative Participating Convertible Preferred Stock, common stock or common units of limited partnership interest in Prime Retail LP during 2001.