Rouse Properties Reports Second Quarter 2012 Results

Rouse Properties, Inc. (the “Company”) (“Rouse”, NYSE: RSE) a national owner of regional enclosed malls, today announced results for the three and six months ended June 30, 2012. The Company's results for the six months ended June 30, 2012 represent consolidated and combined results from January 1, 2012 through June 30, 2012.

“We are pleased with our accomplishments in the second quarter,” commented Andrew Silberfein, President and Chief Executive Officer of Rouse Properties. “The 551,000 square feet leased during the quarter contributed to a 90 basis point improvement in the portfolio's leased percentage from the first quarter 2012. We are in the beginning stages of significantly increasing our occupancy levels and sales per square foot as we implement our strategic initiatives and focused capital investments across our portfolio."

Operational Highlights Second Quarter 2012
  • Comparable tenant sales increased $14 per square foot, or 5.0%, on a trailing 12-month basis.
  • Leased percentage was 88.4% at quarter end, an increase of 90 basis points compared to March 31, 2012.
  • Total average rental rate for new and renewal leases executed increased 6.1% and initial rental rate for new and renewal leases executed increased 2.4% on a same suite rental basis.
  • Leased 551,146 square feet, more than double the volume of leasing activity in the same period of prior year.

Financial Results for the Three Months Ended June 30, 2012

Core Funds From Operations (“Core FFO”) was $14.4 million, or $0.29 per diluted share, as compared to $19.5 million, or $0.54 per diluted share in the prior year period. Core FFO per share using a normalized share count was $0.29 per share as compared to $0.30 in the prior quarter and $0.39 per share in the prior year period. The decrease over the prior year is primarily a result of the inclusion of actual costs associated with general and administrative costs whereas the 2011 results included an allocation from General Growth Properties, the Company's parent company prior to the spin off on January 12, 2012.

Core Net Operating Income (“Core NOI”) was $36.9 million as compared to $36.8 million in the prior quarter and $37.6 million in the prior year period.

Net loss was $(15.9) million, or $(0.32) per diluted share, as compared to a net loss of $(6.6) million, or $(0.18) per diluted share in the prior year period. Net loss per share based on a normalized share count was $(0.32) per share as compared $(0.13) per share in the prior year period. The increase in net loss was primarily the result of an increase in actual costs associated with general and administrative costs and other costs incurred during the second quarter 2012. In addition, interest expense increased as a result of additional debt on the portfolio compared to prior year, and the amortization of deferred financing costs.

Financing

During the quarter the Company reduced the outstanding Term Loan by approximately $110 million, resulting in a reduction in recourse debt by approximately 25%, by completing the following transactions:
  • Placed a new $48.5 million non-recourse first mortgage loan, secured by the Pierre Bossier Mall. The loan bears interest at a fixed rate of 4.94% and has a term of ten years. Net proceeds to Rouse after the term loan reduction and closing costs was approximately $9.9 million.
  • Closed on a new $78.8 million non-recourse first mortgage loan, secured by the Southland Center Mall. The loan bears interest at a fixed rate of 5.09% and has a term of ten years. Net proceeds to Rouse after the term loan reduction and closing costs was approximately $8.2 million.

Subsequent Events

Subsequent to the end of the second quarter, the Company acquired a 59,100 square foot anchor at Pierre Bossier Mall in Bossier City, Louisiana for $6.35 million, which is leased to Virginia College for a 15 year term.

In addition, the Company entered into a contract to purchase The Mall at Turtle Creek in Jonesboro, Arkansas for approximately $96.0 million, inclusive of the assumption of an existing $79.5 million mortgage. This 675,000 square foot market dominant mall is anchored by Dillard's, JCPenney and Target and is the only mall within a 75 mile radius. The acquisition is expected to occur later this year, pending completion of due diligence and performance of customary seller closing conditions.

Common Share Dividend

The Board of Directors declared a common stock dividend of $0.07 per share payable on October 29, 2012 to stockholders of record on October 15, 2012. It is the Company's objective to grow the dividend over time and the Board will continue to evaluate the dividend policy as the Company's repositioning plan takes effect.

2012 Guidance

As of the date of this release, the Company expects diluted net (loss) per share to be in the range of $(1.48) to $(1.37) for the year ending December 31, 2012, and expects diluted Core FFO per share to be in the range of $1.12 to $1.23 per normalized share for the year ending December 31, 2012. No additional property acquisitions, dispositions, or additional capital raises are included in the guidance, except those previously completed during the six months ended June 30, 2012.

A reconciliation of the range of estimated diluted net (loss) per share to estimated Core FFO per share for 2012 follows:
    For the year ended
December 31, 2012
Low     High
Expected net (loss) per share - basic and diluted (1) $ (1.48 )     $ (1.37 )
Adjust to normalized common shares (2) 0.10       0.10  
Expected net (loss) per share - normalized (1.38 ) (1.27 )
Add: Depreciation and amortization 1.41       1.41  
Expected Funds From Operations per share - normalized 0.03 0.14
Other core Funds From Operations adjustments (3) 1.09       1.09  
Core Funds From Operations - normalized $ 1.12       $ 1.23  
 

(1)
 

Assumes annualized weighted average common shares outstanding - basic and diluted of 46,146,895
 

(2)

Assumes all of the common shares were issued January 1, 2012. Calculated using 49,584,189 shares
 

(3)

Refer to the Supplemental Information package for additional details on the nature of the adjustments to reconcile to FFO and Core FFO. 2012 Guidance includes Straight-line rent and above / below market lease amortization of $17.5 million, Non recurring costs related to the spin-off from GGP and property acquisition costs of $7.6 million, Mark-to-market adjustments on debt of $10.5 million, Write-off of market rate debt adjustments of $9.0 million, Amortization of deferred financing costs of $7.2 million, Debt extinguishment costs of $1.8 million and Provision for income taxes of $0.5 million.
 

The outlook is a forward-looking statement and is subject to the risks and other factors described elsewhere in the release.

Supplemental Information

The Company released an informational supplemental packet, available at www.rouseproperties.com under the Investors section, with additional detail, including a description of non-GAAP financial measures and reconciliation to GAAP measures.

Investor Conference Webcast and Conference Call

The Company will host a webcast and conference call at 9:00 a.m. eastern time on August 14, 2012, to discuss second quarter 2012 results. The number to call is 877-407-3982 (domestic) and 1-201-493-6780 (international). The live webcast will be available at www.rouseproperties.com under the Investors section. A replay of the conference call will be available through August 30, 2012, by dialing 877-870-5176 (domestic) and 1-858-384-5517 (international) and entering the passcode 398472.

Forward Looking Statement

Certain matters within this press release are discussed using forward-looking language as specified in the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. These forward-looking statements may include statements related to the Company's ability to outperform the ongoing recovery of the Retail and REIT industry and the markets in which the Company's mall properties are located, the Company's ability to generate internal and external growth, the Company's ability to identify and complete the acquisition of properties in new markets, the Company's ability to complete redevelopment projects, the Company's ability to increase margins, including Net Operating Income and the Company's operating expectations for the full 2012 calendar year. For a description of factors that may cause the Company's actual results or performance to differ from its forward-looking statements, please review the information under the heading “Risk Factors” included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 and other documents filed by the Company with the Securities and Exchange Commission.

Non GAAP Financial Measures

The Company makes reference to net operating income (“NOI”) and funds from operations (“FFO”). NOI is defined as operating revenues (minimum rents, including lease termination fees, tenant recoveries, overage rents, and other income) less property and related expenses (real estate taxes, repairs and maintenance, marketing, other property operating costs, and provision for doubtful accounts). We use FFO, as defined by the National Association of Real Estate Investment Trusts, as a supplemental measure of our operating performance. FFO is defined as net income (loss) attributable to common stockholders in accordance with GAAP, excluding impairment write-downs on depreciable real estate, gains (or losses) from cumulative effects of accounting changes, extraordinary items and sales of properties, plus real estate related depreciation and amortization.

In order to present operations in a manner most relevant to its future operations, Core FFO and Core NOI have been presented to exclude certain non-cash and non-recurring revenue and expenses. A reconciliation of NOI to Core NOI and FFO to Core FFO has been included in the "Reconciliation of Core NOI and Core FFO" schedule attached to this release.

NOI, FFO and derivations thereof, are not alternatives to GAAP operating income (loss) or net income (loss) available to common stockholders. For reference, as an aid in understanding management's computation of NOI and FFO, a reconciliation of NOI to operating income and FFO to net income (loss) in accordance with GAAP has been included in the "Reconciliation of Non-GAAP to GAAP Financial Measures" schedule attached to this release.

About Rouse

Rouse is a publicly traded real estate investment trust headquartered in New York City and founded on a legacy of innovation and creativity. Among the country's largest publicly traded regional mall owners, the Company's geographically diverse portfolio spans the United States from coast to coast, and includes 31 malls in 19 states encompassing approximately 22 million square feet of space. For more information, visit www.rouseproperties.com.
       

Consolidated and Combined Statements of Operations and Comprehensive Loss
 
Three Months Ended Six Months Ended
June 30, 2012     June 30, 2011 June 30, 2012     June 30, 2011

(In thousands, except per share amounts)
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
Revenues:
Minimum rents $ 38,072 $ 36,554 $ 75,284 $ 74,956
Tenant recoveries 16,915 17,842 33,511 35,938
Overage rents 659 461 2,104 1,762
Other 1,303   1,398   2,458   2,698  
Total revenues 56,949   56,255   113,357   115,354  
Expenses:
Real estate taxes 5,575 6,089 11,565 12,114
Property maintenance costs 3,351 3,075 6,792 6,960
Marketing 660 808 1,121 1,574
Other property operating costs 14,992 13,555 29,391 27,591
Provision for doubtful accounts 451 302 714 512
General and administrative 5,240 3,197 10,384 5,726
Depreciation and amortization 16,773 19,518 35,047 38,486
Other 1,983   (606 ) 6,442   (78 )
Total expenses 49,025   45,938   101,456   92,885  
Operating income 7,924   10,317   11,901   22,469  
 
Interest income 8 7 9 8
Interest expense (23,699 ) (16,782 ) (53,688 ) (35,322 )
Loss before income taxes (15,767 ) (6,458 ) (41,778 ) (12,845 )
Provision for income taxes (173 ) (140 ) (239 ) (288 )
Net loss $ (15,940 ) $ (6,598 ) $ (42,017 ) $ (13,133 )
 
Net loss per share - Basic and Diluted (1) $ (0.32 ) $ (0.18 ) $ (0.98 ) $ (0.37 )
 
Dividends declared per share $ 0.07 $ $ 0.07 $
 
Comprehensive loss:
Net loss $ (15,940 ) $ (6,598 ) $ (42,017 ) $ (13,133 )
Other comprehensive gain (loss):
Net unrealized gain (loss) on financial instrument 65     (65 )  
Comprehensive loss $ (15,875 ) $ (6,598 ) $ (42,082 ) $ (13,133 )
 

(1)
 

Calculated using weighted average number of shares of 49,242,014 and 35,906,105 for the three months ended June 30, 2012 and 2011 and 43,013,900 and 35,906,105 for the six months ended June 30, 2012 and 2011, respectively.
       

Consolidated and Combined Balance Sheets
 
June 30, 2012

(In thousands)
(Unaudited) December 31, 2011
 
Assets:
Investment in real estate:
Land $ 315,779 $ 299,941
Buildings and equipment 1,212,035 1,162,541
Less accumulated depreciation (91,463 ) (72,620 )
Net investment in real estate 1,436,351 1,389,862
Cash and cash equivalents 163,299 204
Short term investment 29,989
Accounts receivable, net 20,216 17,561
Deferred expenses, net 40,396 35,549
Prepaid expenses and other assets 147,333   140,348  
Total assets $ 1,837,584   $ 1,583,524  
 
Liabilities:
Mortgages, notes and loans payable $ 1,185,995 $ 1,059,684
Accounts payable and accrued expenses 86,470   97,512  
Total liabilities 1,272,465   1,157,196  
 
Commitments and contingencies
 
Equity:
Common stock (1) 493
Class B common stock (2) 4
Additional paid-in capital 594,314
GGP Equity 426,328
Accumulated deficit (29,738 )
Accumulated other comprehensive loss (65 )  
Total stockholders' equity 565,008 426,328
Noncontrolling interest 111    
Total equity 565,119   426,328  
Total liabilities and equity $ 1,837,584   $ 1,583,524  
 

(1)
 

Common stock: $0.01 par value; 500,000,000 shares authorized, 49,225,133 and 0 shares issued and outstanding, respectively

(2)

Class B common stock: $0.01 par value; 1,000,000 shares authorized, 359,056 and 0 shares issued and outstanding, respectively.
 
       

Reconciliation of Core NOI and Core FFO - For The Three Month Period Ended
 
June 30, 2012 June 30, 2011

(In thousands)
(Unaudited) (Unaudited)
    Core     Core NOI /     Core     Core NOI /

GAAP (7)
Adjustments FFO

GAAP (7)
Adjustments FFO
 
Revenues:

Minimum rents (1)
$ 38,072 $ 4,917 $ 42,989 $ 36,554 $ 5,120 $ 41,674
Tenant recoveries 16,915 16,915 17,842 17,842
Overage rents 659 659 461 461
Other 1,303     1,303   1,398     1,398  
Total revenues 56,949   4,917   61,866   56,255   5,120   61,375  
Operating expenses:
Real estate taxes 5,575 5,575 6,089 6,089
Property maintenance costs 3,351 3,351 3,075 3,075
Marketing 660 660 808 808
Other property operating costs (2) 14,992 (31 ) 14,961 13,555 (31 ) 13,524
Provision for doubtful accounts 451     451   302     302  
Total operating expenses 25,029   (31 ) 24,998   23,829   (31 ) 23,798  
           
Net operating income 31,920   4,948   36,868   32,426   5,151   37,577  
 
General and administrative (3) 5,240 5,240 3,197 3,197
Other (4) 1,983   (1,983 )   (606 ) 606    
Subtotal 24,697   6,931   31,628   29,835   4,545   34,380  
 
Interest income 8 8 7 7
Interest expense
Mark-to-market adjustments on debt (2,661 ) 2,661 (1,871 ) 1,871
Write-off of market rate debt adjustments 1,603 (1,603 )
Amortization of deferred financing costs (2,020 ) 2,020
Write-off of deferred financing costs (1,780 ) 1,780
Debt extinguishment costs (1,582 ) 1,582
Interest on existing debt (17,238 ) (17,238 ) (14,932 ) (14,932 )
Provision for income taxes (173 ) 173     (140 ) 140    
Funds from operations $ 833 $ 13,565 $ 14,398 $ 12,920 $ 6,535 $ 19,455
Funds from operations per share - basic and diluted (5) $ 0.29 $ 0.54
Funds from operations per share - normalized (6)     $ 0.29       $ 0.39  
 

(1)
 

Core adjustments include amounts for straight-line rent of $(1,657) and $(1,683) and above / below market lease amortization of $6,574 and $6,803 for the three months ended June 30, 2012 and 2011.

(2)

Core adjustments include above / below market ground lease amortization of $31 for the three months ended June 30, 2012 and 2011.

(3)

General and administrative costs include $243 of non-cash stock compensation expense.

(4)

Core adjustments include non-recurring costs related to the spin-off from General Growth Properties and property acquisition costs

(5)

Calculated using weighted average number of shares of 49,242,014 and 35,906,105 for the three months ended June 30, 2012 and 2011.

(6)

Assumes all of the common shares were issued April 1, 2012. Calculated using 49,584,189 common shares.

(7)

Based on generally accepted accounting principles in the United States of America.
 
       

Reconciliation of Core NOI and Core FFO - For The Six Month Period Ended
 
June 30, 2012 June 30, 2011

(In thousands)
(Unaudited) (Unaudited)
    Core     Core NOI /     Core    

Core NOI /

GAAP (7)
Adjustments FFO

GAAP (7)
Adjustments

FFO
 
Revenues:
Minimum rents (1) $ 75,284 $ 9,853 $ 85,137 $ 74,956 $ 8,886 $ 83,842
Tenant recoveries 33,511 33,511 35,938 35,938
Overage rents 2,104 2,104 1,762 1,762
Other 2,458     2,458   2,698     2,698  
Total revenues 113,357   9,853   123,210   115,354   8,886   124,240  
Operating expenses:
Real estate taxes 11,565 11,565 12,114 12,114
Property maintenance costs 6,792 6,792 6,960 6,960
Marketing 1,121 1,121 1,574 1,574
Other property operating costs (2) 29,391 (62 ) 29,329 27,591 (62 ) 27,529
Provision for doubtful accounts 714     714   512     512  
Total operating expenses 49,583   (62 ) 49,521   48,751   (62 ) 48,689  
           
Net operating income 63,774   9,915   73,689   66,603   8,948   75,551  
 
General and administrative (3) 10,384 10,384 5,726 5,726
Other (4) 6,442   (6,442 )   (78 ) 78    
Subtotal 46,948   16,357   63,305   60,955   8,870   69,825  
 
Interest income 9 9 8 8
Interest expense
Mark-to-market adjustments on debt (5,385 ) 5,385 (3,670 ) 3,670
Write-off of market rate debt adjustments (8,957 ) 8,957 1,489 (1,489 )
Amortization of deferred financing costs (3,688 ) 3,688
Write-off of deferred financing costs (1,780 ) 1,780
Debt extinguishment costs (1,475 ) 1,475
Interest on existing debt (33,878 ) (33,878 ) (31,666 ) (31,666 )
Provision for income taxes (239 ) 239     (288 ) 288    
Funds from operations $ (6,970 ) $ 36,406 $ 29,436 $ 25,353 $ 12,814 $ 38,167
Funds from operations per share - basic and diluted (5) $ 0.68 $ 1.06
Funds from operations per share - normalized (6)     $ 0.59       $ 0.77  
 

(1)
 

Core adjustments include amounts for straight-line rent of $(3,156) and $(3,764) and above / below market lease amortization of $13,009 and $12,650 for the six months ended June 30, 2012 and 2011.

(2)

Core adjustments include above / below market ground lease amortization of $62 for the six months ended June 30, 2012 and 2011.

(3)

General and administrative costs include $1,015 of non-cash stock compensation expense and $352 of corporate allocation from GGP.

(4)

Core adjustments include non-recurring costs related to the spin-off from General Growth Properties and property acquisition costs

(5)

Calculated using weighted average number of shares of 43,013,900 and 35,906,105 for the six months ended June 30, 2012 and 2011.

(6)

Assumes all of the common shares were issued January 1, 2012. Calculated using 49,584,189 common shares.

(7)

Based on generally accepted accounting principles in the United States of America.
 
       

Reconciliation of Non-GAAP to GAAP Financial Measures
 
Three Months Ended Six Months Ended
June 30, 2012     June 30, 2011 June 30, 2012     June 30, 2011

(In thousands)
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
Reconciliation of NOI to GAAP Operating Income
NOI: $ 31,920 $ 32,426 $ 63,774 $ 66,603
General and administrative (5,240 ) (3,197 ) (10,384 ) (5,726 )
Other (1,983 ) 606 (6,442 ) 78
Depreciation and amortization (16,773 ) (19,518 ) (35,047 ) (38,486 )
Operating income $ 7,924   $ 10,317   $ 11,901   $ 22,469  
 
Reconciliation of FFO to GAAP Net Loss Attributable to Common Stockholders
FFO: $ 833 $ 12,920 $ (6,970 ) $ 25,353
Depreciation and amortization (16,773 ) (19,518 ) (35,047 ) (38,486 )
Net loss attributable to common stockholders $ (15,940 ) $ (6,598 ) $ (42,017 ) $ (13,133 )
 
Weighted average numbers of shares outstanding 49,242,014   35,906,105   43,013,900   35,906,105  
Per Share $ (0.32 ) $ (0.18 ) $ (0.98 ) $ (0.37 )
 
Weighted average numbers of shares outstanding (normalized) (1) 49,584,189   49,584,189   49,584,189   49,584,189  
Per Share (normalized) $ (0.32 ) $ (0.13 ) $ (0.85 ) $ (0.26 )
 

(1)
 

Assumes all of the common shares were issued on April 1 for the three months ended June 30, 2012 and 2011 and on January 1 for the six months ended June 30, 2012 and 2011. Calculated using 49,584,189 shares common shares.

Copyright Business Wire 2010

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