The Rouse Co. reported a gain yesterday in funds from operations. But taking into account almost $52 million in one-time charges, the company lost money in the fourth quarter.
The charges stem from a corporate reorganization, which will spill over into this year, and declining values of shopping malls in New Jersey and Florida. The malls accounted for $39 million of the charges.
Analysts said the charges were appropriate and that the quarterly loss was not significant.
"We were impressed with the quarter," said David Fick, a managing director and Rouse analyst at Legg Mason Wood Walker Inc., who criticized last year the way the company accounted in its funds from operations for the charges from corporate restructuring.
Analysts and investors generally gauge the performance of real estate investment trusts by calculating funds from operations rather than earnings.
Funds from operations, which exclude one-time charges and other items such as depreciation and amortization, rose to $115.84 million, or $1.24 a diluted share, in the fourth quarter, compared with $73.32 million, or 96 cents a share, in the fourth quarter of 2001.
Using that measure, Rouse reported record earnings in 2002 of $357.25 million, or $3.86 per diluted share. In 2001, the company reported funds from operations of $283.75 million, or $3.74 per diluted share.
In terms of earnings, the company reported net loss of $5.3 million, or 10 cents per diluted share, for the fourth quarter, which ended Dec. 31., vs. income of $24.27 million, or $30 cents a diluted share, for the fourth quarter of 2001.
Net income for the year was $139.85 million, or $1.47 a diluted share. In 2001, net income was $110.71 million, or $1.40 per diluted share.
The company said it viewed the results as good, considering that the lagging economy had a negative impact on retail sales and office leasing.
"Given the environment, we're very pleased," said Thomas J. DeRosa, the company's vice chairman and chief financial officer.
He pointed to major events for the company last year. Rouse closed on its biggest acquisition ever, eight shopping malls from the Rodamco North America NV in May. It also opened the Village of Merrick Park mall in Coral Gables, Fla., and expanded Fashion Show Mall in Las Vegas.
Retail dominates Rouse's portfolio, but the company has two other primary businesses, offices and community development, which consists mostly of land sales in the planned communities of Columbia and Summerlin, Nev., outside Las Vegas.
"Being in diverse businesses paid off during 2002," said Anthony W. Deering, Rouse's chairman and chief executive. "We produced record results due to the strength of the retail center portfolio and the community development operations, even though our tenants' sales were soft and the office environment across the United States was very difficult."
Net operating income from the retail portfolio was $146.36 million in the fourth quarter and $469.64 million last year, compared with $101.18 million in the fourth quarter of 2001 and $375.65 million for that year. The increase resulted largely from the Rodamco acquisition.
Two malls whose poor performance resulted in the write-down were Echelon Mall in Voorhees, N.J., and Jacksonville Landing in Jacksonville, Fla. Both lost anchor department stores. As it has done in the past, Rouse will seek to sell the malls.
Deering and DeRosa predicted that retail sales in general will remain flat this year.
The company said it expects community development operations to continue to perform well. Net operating income in that segment was $23.45 million for the fourth quarter and $85.22 million for the year, compared with $12.92 million in the fourth quarter of 2001 and $74.99 million for that year.
On the office front, lease-termination fees helped boost net operating income for the quarter, but the total was down for the year.
Net operating income in that category was $33.39 million in the fourth quarter and $124.98 million in the year, compared with $31.98 million in the fourth quarter of 2001 and $127.94 million in that year.
Shares of Rouse stock closed yesterday at $32.20, up 38 cents.