The Rouse Co. capped a year of record stock prices with record financial results.
The Columbia development and management company's 2003 earnings report, released yesterday, showed a substantial increase in the key measure for a real estate investment trust.
Rouse produced $369.8 million last year in funds from operations, its best performance yet and a 52 percent jump from 2002. Funds from operations were $3.85 per share, compared with $2.63 a share the previous year.
Funds from operations in the fourth quarter were $101.8 million, $1.04 a share - double the results of the previous year, $50.9 million or 54 cents a share.
Rouse's stock price, hovering below its peak stock price of $50.20 set Feb. 11, closed at $49.20 yesterday, down 5 cents.
"Earnings were up substantially, our dividend was up substantially, our stock price was up substantially, so from any perspective it was a good year," said Anthony W. Deering, Rouse's chairman and chief executive officer.
Analysts expected to see funds from operations performance of $3.91 a share last year. Deering said the company beat that estimate but had to subtract 8 cents a share for a one-time "impairment" charge related to two industrial buildings Rouse intends to sell this year.
It's the type of charge that investors and analysts typically ignore, said Lee Schalop, a Banc of America Securities equity analyst.
"Their numbers look good," he said.
Arthur Oduma, an equity analyst with Chicago-based Morningstar Inc., called the report "pretty good - it was a lot more than what they had last year," he noted - and said he continues to hold a very positive view of the company.
"They've executed their strategy well," he said. "They have been moving more and more toward the upper-scale malls, and that has positive repercussions. The traffic to their malls is much higher than the average mall."
Net operating income from Rouse's retail centers was $508.9 million last year, up 8.3 percent from 2002. It fell 5.7 percent in the fourth quarter to $136.9 million, which the company attributed to the earlier sale of six retail operations in the Philadelphia area.
Rouse has been shedding its poorer performers and replacing them with fewer, but higher-end, regional retail centers in densely populated areas.
Last year, it bought a 50 percent interest in Christiana Mall, a large regional retail center in Newark, Del., and increased its ownership of Staten Island Mall to 100 percent.
Also last year, Rouse bought a 50 percent interest in Mizner Park, a mixed-use project in Boca Raton, Fla.; purchased 9,000 acres in a suburb of Houston; bought a majority interest in The Woodlands, a planned community outside Houston; and bought its Columbia headquarters after an embarrassing fight with its landlord when Rouse neglected to renew its lease on time.
"In 2003 we probably acquired over a billion dollars in new projects," Deering said.
Half of the purchase activity was in the fourth quarter.
Net earnings were $260.6 million last year, $2.73 per share, up from $139.9 million or $1.47 a share in 2002 - an 86 percent increase.
In the fourth quarter, net earnings were $57.9 million, 59 cents per share, compared to a net loss of $5.3 million or 10 cents a share the year before.
Rouse's office portfolio posted lackluster results, in line with a sector that has been weak nationally.
Net operating income from offices was down 2.2 percent to $122.2 million last year, and down 4.8 percent to $31.8 million in the fourth quarter.
But net operating income from master-planned communities jumped 44 percent last year thanks to land-price spikes in Columbia, the Prince George's County development of Fairwood, and Summerlin in Nevada. Rouse generated $123.9 million in net operating income in that category last year, up from $86.2 million in 2002, and $31.3 million in the fourth quarter compared with $23.5 million the year before.
Last month Rouse decided to increase its common stock cash dividend to 47 cents a share each quarter, up from a quarterly payment of 42 cents last year.
The company expects another weak year in the office sector, but strong income growth from retail and community development.