Funds from operations up 10%, Rouse reports


The Rouse Co. reported yesterday that funds from operations grew 10 percent in the fourth quarter despite a tough economic environment, meeting analysts' expectations.

FFO, a key measure of performance for real estate investment trusts, was $70.8 million, or 93 cents a diluted share, in the three months that ended Dec. 31. That compares with FFO of $64.4 million, or 86 cents a diluted share, in the corresponding quarter of 2000.

For the year, FFO was $274.5 million, or $3.62 a diluted share. In 2000, FFO was $252.6 million, or $3.30 a diluted share.

"At the start of 2001 we were cautious about the country's economic environment and its impact on our businesses. Given the year's events, we had an outstanding 2001," said Anthony W. Deering, Rouse's chairman and chief executive officer.

Net income for the quarter was $24.3 million, or 30 cents a share, vs. $31.2 million, or 41 cents a share, in the year-earlier quarter. For the year, earnings were $110.7 million, or $1.40 a share, vs. $170.5 million, or $2.24 a share, in 2000.

The Columbia-based company had varying results in its three core businesses: land sales, office and other properties and retail.

Land sales from community development activities in Columbia and Summerlin, Nev., had a record year with net operating income of about $75 million, up 12.3 percent from $66.8 million in 2000, according to Rouse, reflecting its strategy to sell off land while prices are high.

For the fourth quarter, land sale income was $12.9 million, up from $11.5 million.

Net operating income from office and other properties was down for the year to $126.2 million from $137.7 million in 2000. Rouse attributes the decline to a transfer of 27 office buildings in Las Vegas to a joint venture late in 2000, shifting income away from the company.

For the fourth quarter, income fell to $31.5 million from $34.7 million a year ago.

On the retail front, net operating income increased by 2 percent to $358.2 million in the year from $350.1 million. But quarterly results, reflecting the retail slump after Sept. 11, dropped to $96.6 million from $97.9 million.

The results do not include a recent deal that will give Rouse eight high-end malls owned by Rodamco North America NV. That deal closes this year.

The numbers also don't include another recently announced deal to sell majority ownership of Rouse's Columbia-based community shopping centers. The company's strategy is to focus on major shopping malls that dominate their markets and on its two community developments.

That strategy helped Rouse in the last year, one analyst said.

"They had a quarter that showed their resilience in the face of a very tough economy. The consumer was simply not out shopping," said David Fick, a managing director and real estate analyst at Legg Mason Wood Walker Inc.

Fick said the quality of Rouse's mall portfolio - the company has shed many of its under-performing malls - helped it keep sales up. Comparable sales per square foot were $421.

Fick, which maintains a "buy" rating on Rouse stock, does have concerns about the 14.5 million shares Rouse sold to help pay its $1.45 billion share of the Rodamco deal. Fick said the sale would dilute outstanding Rouse shares.

He also remained concerned about Rouse's development pipeline because retailers are skittish about new projects in the current economic climate.

"It will be hard for Rouse to show the kinds of returns from new developments that they had initially projected," Fick said.

Rouse stock closed yesterday at $29, up 5 cents.

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