Prime Retail Inc., one of the nation's largest owners of outlet malls, said yesterday that its third-quarter funds from operations rose 25 percent as interest expenses dropped and fewer retail tenants declared bankruptcy or closed stores.
The Baltimore real estate investment trust, which has been struggling to pay off debt, reported funds from operations of $6.9 million for the quarter that ended Sept. 30, or 2 cents per diluted share, compared with $5.5 million, or flat per diluted share, for the third quarter of 2001. Funds from operations is considered the best measure of a REIT's performance.
Prime reported that its net loss applicable to common shareholders widened to $89.2 million, or $2.05 per common share, compared with a net loss of $78.9 million, or $1.81 per common share in the same period a year earlier.
The mall owner also said it has agreed to sell its newest outlet center, which it completed and opened in July 2000 in Barceloneta, Puerto Rico, for $36.5 million. The sale of the 176,000-square-foot shopping mall to an unspecified buyer is expected to close during the fourth quarter. Prime expects to continue managing and leasing the center.
Prime's funds from operations rose, in part, because interest costs have decreased as the company sold off shopping centers or partial ownership in shopping centers. It also paid down a $90 million mezzanine loan obtained in December 2000 to relieve debt and help cash flow, said Robert A. Brvenik, chief financial officer. The loan had a principal balance of $31.1 million as of Nov. 1.
The sale of the Puerto Rico outlet mall, which has a mortgage balance of $19.37 million, will enable Prime to meet new, stiffer terms on the mezzanine loan imposed by the lender this month in exchange for extending a Nov. 1 due date for loan payments.
Under the new terms, Prime has to pay the lenders - FRIT PRT Lending LLC, an affiliate of Fortress Investment Fund LLC and Greenwich Capital Financial Products LLC - at least $12 million by Dec. 31.
Shares of Prime Retail remained unchanged yesterday, closing at 8 cents per share.