Rouse Properties Reports Fourth Quarter And Full Year 2012 Results

Rouse Properties, Inc. (the "Company" or "Rouse") (NYSE: RSE) a national owner of regional enclosed malls, today announced consolidated and combined results for the three months and year ended December 31, 2012.

"Our leasing momentum has continued to build throughout our first year as a stand alone company," commented Andrew Silberfein, President and Chief Executive Officer of Rouse Properties. “We completed 655,000 square feet of leasing in the quarter, bringing our 2012 total to over 2.1 million square feet. Our portfolio ended the year 90.0% leased, a 230 basis point increase over the prior year, with our permanent leasing percentage improving by 433 basis points. We continue to make meaningful progress across each of our strategic objectives: enhancing our malls through strategic and cosmetic improvements, improving our balance sheet, and executing on our targeted acquisition program in select markets throughout the country. The strength and quality of our team, national platform and financial flexibility will continue to allow us to unlock the value in our existing portfolio and grow our Company in the middle market mall sector."

Operational and Financial Highlights Fourth Quarter 2012
  • Exceeded the high end of the Core Funds From Operations ("Core FFO") guidance range by $0.03 per share for 2012; Core FFO as of year end was $1.26 per share compared to the guidance range of $1.16 to $1.23 per share.
  • Leased over 655,000 square feet in the quarter, an increase of 175% compared to the same period last year, bringing our 2012 total to 2.1 million square feet.
  • Leased percentage was 90.0% at quarter end, an increase of 70 basis points compared to the end of the prior quarter.
  • Permanent leasing increased 144 basis points compared to the end of the prior quarter.
  • Total average rental rate for new and renewal leases, on a same suite basis, increased 7.8% and the initial rental rate for new and renewal leases increased 3.5%.
  • Portfolio tenant sales increased to $296 per square foot; on a comparable trailing twelve month basis the same property tenant sales increased 2.6%.

Financial Results for the Three Months Ended December 31, 2012

Core FFO was $18.7 million, or $0.38 per diluted share, as compared to $25.2 million, or $0.70 per diluted share in the prior year period. Core FFO per share using a normalized share count was $0.38 per share as compared to $0.51 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 and increased interest expense. The 2011 results only included an allocation of general and administrative costs from General Growth Properties, the Company's parent company prior to the spin off on January 12, 2012 whereas 2012 results included actual costs incurred as a stand alone company. Interest expense increased as the Company had a lower average outstanding debt amount on the portfolio during 2011 than at the time of the spin-off and thereafter.

Core Net Operating Income (“Core NOI”) was $39.5 million as compared to $36.9 million in the prior quarter and $41.8 million in the prior year period.

Net loss was $(13.6) million, or $(0.28) per diluted share, as compared to a net loss of $(4.9) million, or $(0.14) per diluted share in the prior year period. Net loss per share based on a normalized share count was $(0.27) per share as compared $(0.10) per share in the prior year period. The increase in net loss was primarily the result of an increase in actual general and administrative costs, other expenses, interest expense, and the amortization of deferred financing costs.

Financing

In October, the Company placed a new $51.8 million non-recourse mortgage on Animas Valley Mall, located in Farmington, NM. The loan bears interest at a fixed rate of 4.41% and has a term of ten years. Approximately $37.1 million of the proceeds were used to reduce the Term Loan's outstanding balance to approximately $287.9 million. Net proceeds to the Company after related closing costs were approximately $14.3 million.

Acquisition

In December, the Company acquired The Mall at Turtle Creek and an adjacent shopping center, Turtle Creek Crossing (collectively "Turtle Creek"), located in Jonesboro, Arkansas. Turtle Creek was acquired for a total purchase price of approximately $96.3 million. As part of the acquisition, the Company assumed a $79.5 million, 6.54%, fixed rate mortgage due in June 2016. Turtle Creek totals approximately 731,000 square feet, and is anchored by Dillard's, JCPenney, and Target and generates mall shop sales of approximately $345 per square foot. With the nearest enclosed mall located over 75 miles away, this dominant regional mall is a shopping destination for Northeastern Arkansas, offering the most comprehensive retail selection with such key retailers as Victoria’s Secret, Buckle, Chico’s, American Eagle, Francesca’s, Aeropostale and Bath and Body Works.

Subsequent Event

In January 2013, the Company utilized available funds on deposit to pay down its Term Loan by $100.0 million. The Company simultaneously increased its available Revolver commitment from $50.0 million to $150.0 million, thereby maintaining its total level of liquidity. The outstanding balance of the Term Loan after this modification is $187.9 million, with $150.0 million of availability under the Revolver commitment which currently is fully undrawn.

In March 2013, the Company placed a new non-recourse mortgage loan on the Lakeland Square Mall, located in Lakeland, FL for $65.0 million. The loan bears interest at a fixed rate of 4.17% and has a term of ten years. This loan replaced a $50.3 million loan that had a fixed interest rate of 5.12% and was the only mortgage in the Company's portfolio that was due in 2013. Net proceeds to the Company after related closing costs and defeasance were approximately $13.4 million.

Common Share Dividend

On February 28, 2013 the Board of Directors declared a common stock dividend of $0.13 per share payable on April 29, 2013 to stockholders of record on April 15, 2013. The Company's objective is to continue to grow the dividend over time and the Board will continue to evaluate the dividend policy as the Company's repositioning and acquisition plans continue to take effect.

Annual Meeting

The Company's Annual Stockholders Meeting will take place on May 3, 2013 at 12:30 PM at 787 Third Ave., New York, New York.

2013 Guidance

Based on management's expectation as of the date of this release, the Company is providing initial guidance for 2013 Core FFO in the range of $1.49 to $1.55 per diluted share for the year ending December 31, 2013. Full year guidance assumes the following: same-property Core NOI growth of 1.75% to 2.5%, lease termination income of $0.1 million to $0.3 million, general and administrative expense of $20.4 million to $20.8 million, and net interest expense of $64.6 million to $65.5 million. The guidance presented does not include the effects of property acquisitions, dispositions, or capital transaction activity completed subsequent to December 31, 2012, except those previously announced and completed. The Company expects to update its annual guidance after each quarter's results.

A reconciliation of the range of estimated diluted net (loss) per share to estimated Core FFO per share for 2013 follows:

   
For the year ended
December 31, 2013
Low     High
Expected net (loss) per share (0.39)     (0.30)
Add: Depreciation and amortization 1.12       1.12
Expected Funds From Operations per share 0.73 0.82
Other Core Funds From Operations adjustments (2) 0.76       0.73
Core Funds From Operations (1)   $1.49         $1.55
   

(1)
 

Assumes annualized weighted average common shares outstanding - diluted of 49,979,455.

(2)

Refer to the Supplemental Information package for additional details on the nature of the adjustments to reconcile to FFO and Core FFO. 2013 Guidance includes:
 
  Low     High
Straight-line rent and above / below market lease amortization 18,146 17,746
Other expenses 1,000 500
Amortization of market rate adjustments 9,357 9,357
Amortization of deferred financing costs 7,673 7,423
Debt extinguishment costs 950 950
Income taxes 625 575
 

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 10:00 a.m. EASTERN STANDARD TIME on March 8, 2013, to discuss fourth quarter 2012 results. The number to call is 877-705-6003 (domestic) and 1-201-493-6725 (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 March 22, 2013, by dialing 877-870-5176 (domestic) and 1-858-384-5517 (international) and entering the passcode 408508.

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. 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 32 malls in 20 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 Year Ended

 
December 31, 2012     December 31, 2011 December 31,     December 31,

(In thousands, except per share amounts)
(Unaudited) (Unaudited) 2012 2011
 
Revenues:
Minimum rents $ 40,659 $ 40,008 $ 154,401 $ 153,431
Tenant recoveries 16,664 15,770 68,181 69,606
Overage rents 3,160 2,901 6,050 5,442
Other 1,671   2,229   5,342   6,337  
Total revenues 62,154   60,908   233,974   234,816  
Expenses:
Real estate taxes 5,903 5,522 23,447 23,465
Property maintenance costs 4,376 3,772 14,084 13,462
Marketing 1,937 1,622 3,787 4,061
Other property operating costs 15,724 14,342 61,110 57,650
Provision for doubtful accounts 505 (204 ) 1,919 601
General and administrative 4,926 2,601 20,652 11,330
Depreciation and amortization 19,244 19,305 71,090 78,216
Other 2,010   1,993   9,965   1,526  
Total expenses 54,625   48,953   206,054   190,311  
Operating income 7,529   11,955   27,920   44,505  
 
Interest income 492 22 755 36
Interest expense (21,490 ) (16,699 ) (96,889 ) (70,984 )
Loss before income taxes (13,469 ) (4,722 ) (68,214 ) (26,443 )
Provision for income taxes (117 ) (148 ) (445 ) (533 )
Net loss $ (13,586 ) $ (4,870 ) $ (68,659 ) $ (26,976 )
 
Net loss per share - Basic and Diluted (1) $ (0.28 ) $ (0.14 ) $ (1.49 ) $ (0.75 )
 
Dividends declared per share $ 0.07 $ $ 0.21 $
 
Comprehensive loss:
Net loss $ (13,586 ) $ (4,870 ) $ (68,659 ) $ (26,976 )
Other comprehensive gain (loss):
Net unrealized gain (loss) on financial instrument 32        
Comprehensive loss $ (13,554 ) $ (4,870 ) $ (68,659 ) $ (26,976 )
 

(1)
 

Calculated using weighted average number of shares of 49,258,249 and 35,906,105 for the three months ended December 31, 2012 and 2011 and 46,149,893 and 35,906,105 for the year ended December 31, 2012 and 2011, respectively.
 
       

Consolidated and Combined Balance Sheets
 

(In thousands)
December 31, 2012 December 31, 2011
 
Assets:
Investment in real estate:
Land $ 339,988 $ 299,941
Buildings and equipment 1,312,767 1,162,541
Less accumulated depreciation (116,336 ) (72,620 )

Net investment in real estate
1,536,419 1,389,862
Cash and cash equivalents 8,092 204
Restricted cash 44,559 13,323
Demand deposit from affiliate 150,163
Accounts receivable, net 25,976 17,561
Deferred expenses, net 40,406 35,549
Prepaid expenses and other assets 99,458   127,025  
Total assets $ 1,905,073   $ 1,583,524  
 
Liabilities:
Mortgages, notes and loans payable $ 1,283,491 $ 1,059,684
Accounts payable and accrued expenses 88,686   97,512  
Total liabilities 1,372,177   1,157,196  
 
Commitments and contingencies
 
Equity:
Common stock (1) 493
Class B common stock (2) 4
Additional paid-in capital 588,668
GGP equity 426,328
Accumulated deficit (56,380 )  
Total stockholders' equity 532,785 426,328
Non-controlling interest 111    
Total equity 532,896   426,328  
Total liabilities and equity $ 1,905,073   $ 1,583,524  
 

(1)
 

Common stock: $0.01 par value; 500,000,000 shares authorized, 49,246,087 and 0 shares issued as of December 31, 2012 and 2011 and 49,235,528 and 0 outstanding as of December 31, 2012 and 2011, 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
 
December 31, 2012 December 31, 2011

(In thousands)
(Unaudited) (Unaudited)
    Core    

Core NOI /
    Core     Core NOI /

GAAP (7)
Adjustments

FFO

GAAP (7)
Adjustments FFO
 
Revenues:
Minimum rents (1) $ 40,659 $ 5,754 $ 46,413 $ 40,008 $ 5,900 $ 45,908
Tenant recoveries 16,664 16,664 15,770 15,770
Overage rents 3,160 3,160 2,901 2,901
Other 1,671     1,671   2,229     2,229  
Total revenues 62,154   5,754   67,908   60,908   5,900   66,808  
Operating expenses:
Real estate taxes 5,903 5,903 5,522 5,522
Property maintenance costs 4,376 4,376 3,772 3,772
Marketing 1,937 1,937 1,622 1,622
Other property operating costs (2) 15,724 (31 ) 15,693 14,342 (31 ) 14,311
Provision for doubtful accounts 505     505   (204 )   (204 )
Total operating expenses 28,445   (31 ) 28,414   25,054   (31 ) 25,023  
           
Net operating income 33,709   5,785   39,494   35,854   5,931   41,785  
 
General and administrative (3) 4,926 4,926 2,601 2,601
Other (4) 2,010   (2,010 )   1,993   (1,993 )  
Subtotal 26,773   7,795   34,568   31,260   7,924   39,184  
 
Interest income 492 492 22 22
Interest expense
Mark-to-market adjustments on debt (2,584 ) 2,584 (2,722 ) 2,722
Amortization of deferred financing costs (1,909 ) 1,909
Write-off of deferred financing costs (615 ) 615
Interest on existing debt (16,382 ) (16,382 ) (13,977 ) (13,977 )
Provision for income taxes (117 ) 117     (148 ) 148    
Funds from operations $ 5,658 $ 13,020 $ 18,678 $ 14,435 $ 10,794 $ 25,229
Funds from operations per share - basic and diluted (5) $ 0.38 $ 0.70

Funds from operations per share - normalized and diluted (6)
    $ 0.38       $ 0.51  
 

(1)
 

Core adjustments include amounts for straight-line rent of $244 and $(718) and above / below market lease amortization of $5,510 and $6,618 for the three months ended December 31, 2012 and 2011.

(2)

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

(3)

General and administrative costs include $843 of non-cash stock compensation expense.

(4)

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

(5)

Calculated using weighted average number of shares of 49,258,249 and 35,906,105 for the three months ended December 31, 2012 and 2011.

(6)

Assumes 49,605,143 normalized common shares and 49,675,731 diluted common shares.

(7)

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

Reconciliation of Core NOI and Core FFO - For The Year Ended
 
December 31, 2012 December 31, 2011

(In thousands)
   
    Core     Core NOI     Core     Core NOI /

GAAP (7)
Adjustments / FFO

GAAP (7)
Adjustments FFO
 
Revenues:
Minimum rents (1) $ 154,401 $ 20,420 $ 174,821 $ 153,431 $ 19,163 $ 172,594
Tenant recoveries 68,181 68,181 69,606 69,606
Overage rents 6,050 6,050 5,442 5,442
Other 5,342     5,342   6,337     6,337  
Total revenues 233,974   20,420   254,394   234,816   19,163   253,979  
Operating expenses:
Real estate taxes 23,447 23,447 23,465 23,465
Property maintenance costs 14,084 14,084 13,462 13,462
Marketing 3,787 3,787 4,061 4,061
Other property operating costs (2) 61,110 (125 ) 60,985 57,650 (125 ) 57,525
Provision for doubtful accounts 1,919     1,919   601     601  
Total operating expenses 104,347   (125 ) 104,222   99,239   (125 ) 99,114  
           
Net operating income 129,627   20,545   150,172   135,577   19,288   154,865  
 
General and administrative (3) 20,652 20,652 11,330 11,330
Other (4) 9,965   (9,965 )   1,526   (1,526 )  
Subtotal 99,010   30,510   129,520   122,721   20,814   143,535  
 
Interest income 755 755 36 36
Interest expense
Mark-to-market adjustments on debt (10,503 ) 10,503 (11,323 ) 11,323
Write-off of market rate debt adjustments (8,957 ) 8,957 1,489 (1,489 )
Amortization of deferred financing costs (7,417 ) 7,417
Write-off of deferred financing costs (2,395 ) 2,395
Debt extinguishment costs (1,475 ) 1,475
Interest on existing debt (67,617 ) (67,617 ) (59,675 ) (59,675 )
Provision for income taxes (445 ) 445     (533 ) 533    
Funds from operations $ 2,431 $ 60,227 $ 62,658 $ 51,240 $ 32,656 $ 83,896
Funds from operations per share - basic and diluted (5) $ 1.36 $ 2.34
Funds from operations per share - normalized and diluted (6)     $ 1.26       $ 1.69  
 

(1)
 

Core adjustments include amounts for straight-line rent of $(3,608) and $(6,031) and above / below market lease amortization of $24,028 and $25,194 for the year ended December 31, 2012 and 2011.

(2)

Core adjustments include above / below market ground lease amortization of $125 for the year ended December 31, 2012 and 2011.

(3)

General and administrative costs include $2,494 of non-cash stock compensation expense and $352 of corporate allocation from GGP.

(4)

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

(5)

Calculated using weighted average number of shares of 46,149,893 and 35,906,105 for the year ended December 31, 2012 and 2011.

(6)

Assumes 49,605,143 normalized common shares and 49,675,731 diluted 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 Year Ended
December 31, 2012     December 31, 2011

 
   

 

(In thousands)
(Unaudited) (Unaudited)

December 31, 2012

December 31, 2011
 
Reconciliation of NOI to GAAP Operating Income
NOI: $ 33,709 $ 35,854 $ 129,627 $ 135,577
General and administrative (4,926 ) (2,601 ) (20,652 ) (11,330 )
Other (2,010 ) (1,993 ) (9,965 ) (1,526 )
Depreciation and amortization (19,244 ) (19,305 ) (71,090 ) (78,216 )
Operating income $ 7,529   $ 11,955   $ 27,920   $ 44,505  
 
Reconciliation of FFO to GAAP Net Loss Attributable to Common Stockholders
FFO: $ 5,658 $ 14,435 $ 2,431 $ 51,240
Depreciation and amortization (19,244 ) (19,305 ) (71,090 ) (78,216 )
Net loss attributable to common stockholders $ (13,586 ) $ (4,870 ) $ (68,659 ) $ (26,976 )
 
Weighted average numbers of shares outstanding 49,258,249   35,906,105   46,149,893   35,906,105  
Per Share $ (0.28 ) $ (0.14 ) $ (1.49 ) $ (0.75 )
 

Copyright Business Wire 2010

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