Rouse Properties, Inc. (the "Company" or "Rouse") (NYSE:RSE)
today announced consolidated results for the three months ended
March 31, 2016.
Operational and Financial Highlights First Quarter 2016
(1)
- Total initial rental rates for new and
renewal leases on a same suite basis rose 19.1% for the quarter
ended March 31, 2016.
- For the Operating Portfolio, tenant
sales were $357 per square foot on a trailing twelve month basis.
On a comparable basis, trailing twelve month Operating Portfolio
tenant sales increased 5.9%.
- Leased approximately 604,000 square
feet of inline space.
- For the Operating Portfolio, inline
leased percentage increased 50 basis points YoY to 91.8%, and
decreased 10 basis points sequentially.
- For the Operating Portfolio, inline
occupancy increased 20 basis points YoY to 89.3%, and decreased 130
basis points sequentially.
- Same Property Core NOI grew by 1.0% in
the first quarter compared to the same period in the prior
year.
- Same Property mall average in-place
rent for tenants less than 10,000 square feet increased by 5.8%,
year over year, to $42.20 from $39.89 per square foot.
(1) Operating Portfolio excludes properties undergoing
substantial redevelopment and special consideration assets.
Financial Results for the Three Months Ended March 31,
2016
Core FFO for three months ended March 31, 2016, was $0.44 per
diluted share, as compared to $0.40 per diluted share for the three
months ended March 31, 2015. Core FFO increased to $25.4 million
from $23.2 million for the three months ended March 31, 2016. Core
FFO per share increased 9.4% in 2016 was a result of higher Same
Property NOI and the impact of properties acquired in 2015.
Core NOI for three months ended March 31, 2016 increased to
$50.9 million from $47.5 million for the three months ended March
31, 2015. On a Same Property basis, excluding lease termination
income of approximately $0.2 million, Same Property Core NOI
increased to $36.5 million for the three months ended March 31,
2016, an increase of 1.0% as compared to the Same Property Core NOI
of $36.1 million for the prior year period.
Net loss allocable to common shareholders was $(11.8) million or
$(0.21) per basic and diluted share for the three months ended
March 31, 2016 compared to net income of $44.4 million, or $0.77
per basic and $0.76 per diluted share for the prior year period.
The change in net (loss) income was primarily due to a gain on
extinguishment of debt for Steeplegate Mall and the sale of the
Shoppes at Knollwood resulting in a gain of $55.3 million that
occurred during the three months ended March 31, 2015. The gain was
offset by $11.0 million of Other expense incurred in connection
with the potential merger with Brookfield during the three months
ended March 31, 2016.
Financial Activities
During the three months ended March 31, 2016 , the loan
associated with The Centre at Salisbury, located in Salisbury,
Maryland, was refinanced for $105.0 million. The initial funding of
$97.5 million was used in part to retire the outstanding mortgage
loan of $115.0 million which had a fixed interest rate of 5.79%.
The loan provides for subsequent funding of $7.5 million upon
achieving certain conditions. The loan bears interest at floating
rate of LIBOR (30 day) plus 260 basis points, matures in March 2019
and has a one year extension option.
Equity
During the three months ended March 31, 2016, the Company
settled the repurchase of 105,000 shares of its outstanding stock
for $1.6 million, at an average cost of $14.87. As of
March 31, 2016, the Company repurchased a total of
343,055 shares of its outstanding common stock for approximately
$5.1 million, at an average cost of $14.78 per share. As
of March 31, 2016, the Company had $44.9
million of remaining capacity to repurchase common stock under
the stock repurchase program.
Subsequent Events
On April 5, 2016, the loan for Vista Ridge Mall matured and was
not repaid. On April 19, 2016, the Company was notified by the
lender of the default related to the maturity. The Company is
working vigorously with the lender to convey the property in full
satisfaction of the debt.
Other
On February 25, 2016, the Company entered into a definitive
merger agreement (and other related agreements) to be acquired by
affiliates of Brookfield Asset Management for $18.25 per share in
an all-cash transaction, a portion of which may be paid out as a
special dividend. Under the terms of the merger agreement,
Brookfield will acquire all of the outstanding shares of the
Company’s common stock, other than those shares currently held by
Brookfield Property Partners L.P. and its affiliates, in a
transaction valued at approximately $2.8 billion, including the
Company’s indebtedness. The merger agreement prohibits the payment
of any further dividends by the Company, other than as necessary to
maintain the Company's REIT status and a closing dividend as part
of the $18.25 per share consideration payable in the
transaction.
In light of the pending acquisition, the Company will not hold
an investor webcast and conference call to discuss its first
quarter 2016 results.
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.
Forward-Looking Statements
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 and 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, 2015 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 (property operating expenses, real estate taxes,
repairs and maintenance, marketing, 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)
allocable 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, and real estate
related depreciation and amortization.
The Company also adjusts for the portion of consolidated net
income (loss) attributable to non-controlling interests of joint
ventures partners to reflect FFO allocable to the Company's common
shareholders.
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) allocable 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 Properties, Inc. (NYSE:RSE) is a publicly traded real
estate investment trust headquartered in New York City and was
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 36 malls and retail centers in 21
states encompassing approximately 24.9 million square feet. For
more information please visit: www.rouseproperties.com.
Consolidated Statements of Operations and
Comprehensive Income (Loss)
Three Months Ended
(In thousands,
except per share amounts)
March 31, 2016 (Unaudited) March 31, 2015
(Unaudited) Revenues: Minimum rents
$
56,265 $ 51,534 Tenant recoveries
20,843 19,949
Overage rents
1,744 1,590 Other
1,780 1,488
Total revenues
80,632 74,561
Expenses: Property operating costs
16,959 16,875 Real
estate taxes
7,032 7,474 Property maintenance costs
2,899 3,385 Marketing
421 389 Provision for doubtful
accounts
613 497 General and administrative
6,839
6,470 Provision for impairment
— 2,900 Depreciation and
amortization
26,348 25,986 Other
11,361 2,159
Total operating expenses
72,472 66,135
Operating income
8,160 8,426 Interest income
4
13 Interest expense
(17,953 ) (19,151 ) Gain on
extinguishment of debt
— 22,840 (Loss) income
before income taxes and gain on sale of real estate assets
(9,789 ) 12,128 Provision for income taxes
(158 ) (236 ) (Loss) income before gain on sale of
real estate assets
(9,947 ) 11,892 Gain on sale of
real estate assets
— 32,509 Net (loss) income
(9,947 ) 44,401 Net (income) loss attributable to
non-controlling interests
(135 ) 6 Net (loss)
income attributable to Rouse Properties Inc.
(10,082
) 44,407 Preferred distributions
(1,750 ) —
Net (loss) income allocable to common shareholders
$ (11,832 ) $ 44,407
Per common share
data: Net (loss) income per share allocable to common
shareholders Basic (1)
$ (0.21 ) $ 0.77
Diluted (2)
$ (0.21 ) $ 0.76
Dividends declared per share
$ — $ 0.18
Other comprehensive income (loss): Net (loss) income
$ (9,947 ) $ 44,401 Other comprehensive income
(loss): Net unrealized loss on financial instruments
(4,192
) (406 ) Comprehensive (loss) income
$ (14,139
) $ 43,995
(1) Calculated using weighted average number of shares of
57,643,017 and 57,603,340 for the three months ended March 31,
2016 and 2015, respectively.
(2) Calculated using weighted average number of shares of
57,643,017 and 58,287,256 for the three months ended March 31,
2016 and 2015, respectively.
Consolidated Balance Sheets
(In
thousands)
March 31, 2016 (Unaudited) December 31, 2015 (Unaudited)
Assets: Investment in real estate: Land
$
427,952 $ 428,157 Buildings and equipment
2,180,341
2,151,443 Less accumulated depreciation
(257,953 )
(239,091 ) Net investment in real estate
2,350,340 2,340,509
Cash and cash equivalents
6,516 5,420 Restricted cash
32,752 34,568 Accounts receivable, net
43,434 43,196
Deferred expenses, net (1)
45,975 44,859 Prepaid expenses
and other assets, net
44,540 49,034
Total
assets $ 2,523,557 $ 2,517,586
Liabilities: Mortgages, notes and loans payable, net
(1)
$ 1,735,926 $ 1,694,841 Accounts payable and
accrued expenses, net
127,992 147,288
Total
liabilities 1,863,918 1,842,129
Commitments and contingencies
— —
Mezzanine
Equity: 141,965 140,953 Non-controlling interest
in Operating Partnership
Equity: Preferred stock (2)
— — Common stock (3)
581 581 Additional paid-in
capital
643,203 643,828 Accumulated deficit
(131,264
) (121,182 ) Accumulated other comprehensive loss
(4,257 ) (65 ) Treasury stock (4)
(5,073
) (3,509 ) Total stockholders' equity
503,190 519,653
Non-controlling interest
14,484 14,851
Total equity 517,674 534,504
Total
liabilities, mezzanine equity and equity $
2,523,557 $ 2,517,586
(1) For the year ended December 31, 2015, deferred financing
costs of approximately $11.7 million were reclassified from
Deferred expenses, net to Mortgages, notes and loans payable, net
due to the adoption of ASU 2015-03: Simplifying the Presentation of
Debt Issuance Costs.
(2) Preferred stock: $0.01 par value; 50,000,000 shares
authorized, 0 issued and outstanding at March 31, 2016 and December
31, 2015
(3) Common stock: $0.01 par value; 500,000,000 shares
authorized, 58,287,506 issued and 57,882,048 outstanding at March
31, 2016 and 58,097,933 issued and 57,797,475 outstanding at
December 31, 2015
(4) Treasury stock, at cost, $0.01 par value, 343,055 shares at
March 31, 2016 and 238,055 shares at December 31, 2015
Reconciliation of Core NOI and Core FFO -
For the Three Month Period Ended
March 31, 2016 March 31, 2015
(In thousands,
except per share amounts)
(Unaudited) (Unaudited) Consolidated
Non-controlling Interest (1)
Rouse Total Core Adjustments
Core NOI / FFO Consolidated
Non-controlling Interest (1) Rouse
Total Core Adjustments
Core NOI / FFO Revenues: Minimum rents (2)
$ 56,265 $ (1,050 ) $
55,215 $ (759 ) $ 54,456
$ 51,534 $ (1,025 ) $ 50,509 $ 2,499 $ 53,008 Tenant recoveries
20,843 (325 ) 20,518 —
20,518 19,949 (327 ) 19,622 — 19,622 Overage rents
1,744 (67 ) 1,677 — 1,677
1,590 (49 ) 1,541 — 1,541 Other
1,780 (24
) 1,756 — 1,756
1,488 (9 ) 1,479 — 1,479
Total
revenues 80,632 (1,466 )
79,166 (759 ) 78,407
74,561 (1,410 ) 73,151 2,499 75,650
Operating expenses: Property operating costs (3)
16,959 (229 ) 16,730 (39
) 16,691 16,875 (277 ) 16,598 (39 ) 16,559 Real
estate taxes
7,032 (152 ) 6,880
— 6,880 7,474 (177 ) 7,297 — 7,297 Property
maintenance costs
2,899 (24 ) 2,875
— 2,875 3,385 (38 ) 3,347 — 3,347 Marketing
421 (7 ) 414 — 414 389 (1
) 388 — 388 Provision for doubtful accounts
613
(11 ) 602 — 602
497 30 527 — 527
Total
operating expenses 27,924 (423 )
27,501 (39 ) 27,462
28,620 (463 ) 28,157 (39 ) 28,118
Net operating income 52,708 (1,043
) 51,665 (720 ) 50,945
45,941 (947 ) 44,994 2,538 47,532
General and administrative (4)(5)
6,839
(1 ) 6,838 (3 ) 6,835
6,470 — 6,470 (5 ) 6,465 Other (6)
11,361 —
11,361 (11,361 ) —
2,159 — 2,159 (2,159 ) —
Subtotal 34,508 (1,042 )
33,466 10,644 44,110
37,312 (947 ) 36,365 4,702 41,067
Interest income
4 — 4 — 4
13 — 13 — 13 Interest expense Amortization and write-off of market
rate adjustments
239 — 239 (239
) — (50 ) — (50 ) 50 — Amortization and write-off of
deferred financing costs
(901 ) — (901
) — 901 — (899 ) — (899 ) 899 — Debt
extinguishment costs
— — — — — —
— — — — Interest on debt
(17,291 ) 335
(16,956 ) — (16,956 ) (18,202 )
357 (17,845 ) — (17,845 ) Provision for income taxes
(158
) 9 (149 ) 149 — (236 ) —
(236 ) 236 — Preferred distributions
(1,750 )
— (1,750 ) —
(1,750 ) — — — — —
Funds from operations $ 14,651 $
(698 ) $ 13,953 $ 11,455
$ 25,408 $ 17,938 $ (590 ) $ 17,348 $ 5,887 $ 23,235
Funds from operations per share - basic (7) $
0.44 $ 0.40
Funds from operations per share - diluted
(8) $ 0.44
$
0.40
(1) Represents our partner's share of operations from
consolidated properties.
(2) Core adjustments include the aggregate amounts for
straight-line rent of $(795) and $27, above / below market lease
amortization of $40 and $2,464 and tenant inducement amortization
of $(4) and $8 for the three months ended March 31, 2016 and
2015, respectively.
(3) Core adjustments include above / below market ground lease
amortization of $39 for each of the three months ended
March 31, 2016 and 2015.
(4) General and administrative costs include $804 and $865 of
non-cash stock compensation expense for the three months ended
March 31, 2016 and 2015, respectively.
(5) Core adjustments include amounts for the corporate and
regional office straight-line rent of $3 and $5 for the three
months ended March 31, 2016 and 2015, respectively.
(6) Core adjustments for the three months ended March 31, 2016,
primarily include $11.0 million of non-recurring costs related to
the potential merger with Brookfield. Core adjustments for the
three months ended March 31, 2015 primarily include costs related
to the transition from Brookfield's IT platform on to Rouse's IT
platform.
(7) Calculated using weighted average number of shares of common
stock of 57,643,017 and 57,603,340 for the three months ended
March 31, 2016 and 2015, respectively.
(8) Assumes 57,997,943 and 58,287,256 diluted shares of common
stock for the three months ended March 31, 2016 and 2015,
respectively.
Reconciliation of Non-GAAP to GAAP
Financial Measures
Three Months Ended
(In
thousands)
March 31, 2016 (unaudited)
March 31, 2015 (unaudited)
Reconciliation of NOI to GAAP Operating Income Rouse
NOI:
$ 51,665 $ 44,994 Non-controlling
interest
1,043 947 General and administrative
(6,839 ) (6,470 ) Other
(11,361
) (2,159 ) Depreciation and amortization
(26,348 ) (25,986 ) Provision for
impairment
— (2,900 ) Operating
income $ 8,160 $ 8,426
Reconciliation of FFO to GAAP Net (loss) income
allocable to common shareholders FFO:
$ 13,953
$ 17,348 Non-controlling interest - Depreciation and
amortization/Other
563 596 Depreciation and
amortization
(26,348 ) (25,986 )
Provision for impairment
— (2,900 ) Gain on
extinguishment of debt
— 22,840 Gain on sale of real
estate assets
— 32,509 Net (loss)
income allocable to common shareholders $ (11,832
) $ 44,407 Weighted average
number of shares outstanding - Basic
57,643,017
57,603,340 Weighted average number of shares
outstanding - Diluted
57,643,017 58,287,256
Per common share data: Net (loss)
income per share allocable to common shareholders Basic
$ (0.21 ) $ 0.77 Diluted
$ (0.21 ) $ 0.76
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Rouse Properties, Inc.Investor Relations,
212-608-5108IR@rouseproperties.com
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