By a News Reporter-Staff News Editor at Investment Weekly News -- Rouse Properties, Inc. (the "Company" or "Rouse") (NYSE:RSE) a national owner of regional enclosed malls, announced consolidated results for the three months ended June 30, 2014.
"We continued to make great progress through the second quarter of 2014, implementing our operational and capital investment programs across our entire platform, as well as continuing to grow and upgrade our portfolio with accretive acquisitions," stated Andrew Silberfein, President and Chief Executive Officer. "During the quarter, we leased 565,000 square feet, our ninth consecutive quarter with more than 525,000 square feet. This activity is improving the metrics of our portfolio, with our total portfolio leased percentage rising to 90.5%, our initial rent spreads up 7.7% over prior leases, and our tenant sales increasing to $309 per square foot."
Mr. Silberfein continued, "Our Same Property Core NOI growth which was up modestly for the quarter, after adjusting for settlement expenses related to legacy liability lawsuits, was in line with our expectations. As our signed but not yet open leases come on line, representing approximately $19.0 million of annual incremental revenue, we expect our same property NOI growth to significantly accelerate in the second half of 2014, following a pattern consistent with last year." Operational and Financial Highlights Second Quarter 2014 Total average rental rates for new and renewal leases, on a same suite basis, rose 12.4% and the initial rental rates for new and renewal leases increased 7.7%, on average, for leases executed during the quarter ended June 30, 2014.
Total portfolio average mall in-place rent for tenants less than 10,000 square feet increased 1.5%, year over year, to $39.17 from $38.61 per square foot.
Leased 565,000 square feet of in-line GLA in the quarter.
Inline leased percentage was 91.0% at quarter end, and 94.2% including anchors, for the portfolio excluding Knollwood, Gateway and Steeplegate malls. The total portfolio percentage leased increased 110 basis points compared to the same period last year.
Permanent leased percentage ended the quarter at 81.6%, a 220 basis point increase compared to the end of the same period last year.
Portfolio tenant sales increased by 4.0% to $309 per square foot on a trailing twelve month basis. Financial Results for the Three Months Ended June 30, 2014 Core FFO was $21.4 million, or $0.37 per diluted share, as compared to $17.2 million, or $0.34 per diluted share in the prior year period. The growth year over year was primarily the result of the impact of the properties that were acquired in 2013 and 2014.
Core NOI was $44.4 million as compared to $38.7 million in the prior year period. On a Same Property basis, excluding legacy litigation expenses of approximately $0.8 million, Core NOI, as adjusted, for the portfolio increased by 1.2% to $33.9 million from $33.5 million for the three months ended June 30, 2014 compared to June 30, 2013. Including these expenses, Same Property Core NOI was $33.1 million for the three months ended June 30, 2014 compared to $34.0 million for the three months ended June 30, 2013.
Net loss was $(8.2) million or $(0.14) per basic and diluted share, as compared to a net income of $4.1 million or $0.08 per basic and diluted share in the prior year period. The change in net loss was primarily due to the result of the gain on early extinguishment of debt of $14.0 million related to the Boulevard Mall for the three months ended June 30, 2013. Acquisition In May 2014, the Company completed the acquisition of Bel Air Mall, located in Mobile, Alabama, for a total purchase price of $131.9 million net of closing costs and adjustments. As part of the acquisition, the Company assumed an existing mortgage of $112.5 million which bears interest at a fixed rate of 5.30%, matures in December 2015, and amortizes over 30 years. Bel Air Mall totals approximately 1.3 million square feet and is anchored by Dillard's, Belk, Target, jcpenney and Sears. As the only enclosed regional mall within a 60 mile radius, it serves an expansive trade area of more than 570,000 people across southern Alabama, Mississippi and the Florida Panhandle, and features leading national retailers such as Victoria's Secret, Francesca's, Forever 21, Bath & Body Works, Journeys, Buckle, and Footlocker. Subsequent Events On July 1, 2014, the Company removed Chula Vista Center located in Chula Vista, CA from the 2013 Term Loan collateral pool and placed a new non-recourse mortgage loan on the asset for $70.0 million. The loan bears interest at a fixed rate of 4.18%, has a term of ten years, and amortizes over 30 years. Sikes Senter located in Wichita Falls, TX, had an outstanding mortgage loan of $54.6 million with a fixed interest rate of 5.20% which was repaid on July 1, 2014 from proceeds from the Chula Vista Center refinancing. Upon repayment Sikes Senter was added to the 2013 Term Loan collateral pool with no change to the outstanding 2013 Term Loan balance. These refinancings resulted in approximately $15.0 million of proceeds to the Company before transaction costs.
In July, 2014, the Company also reduced the spread on the non-recourse mortgage loan on NewPark Mall located in Newark, CA, from LIBOR plus 405 basis points to LIBOR plus 325 basis points.
On July 21, 2014, a receiver was appointed for the Steeplegate Mall mortgage loan and the Company along with the special servicer and the receiver are working on an orderly transfer of the deed to the Steeplegate Mall mortgage lender or successor lender should the loan be sold in the coming months. The loan matured on August 1, 2014 and was not repaid, as such the loan is currently in default. Common Stock Dividend On July 31, 2014, the Board of Directors declared a common stock dividend of $0.17 per share payable on October 31, 2014 to stockholders of record on October 15, 2014. 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. 2014 Guidance The Company is increasing its full year 2014 guidance range for Core FFO to $1.59 to $1.63 per diluted share, based on management's expectation as of the date of this release. Full year guidance assumes the following: Growth of 3.0% to 4.0% in Same Property Core NOI(1), as adjusted, excluding legacy litigation expenses, general and administrative expense of $24.6 million to $24.7 million, and net interest expense of $68.6 million to $68.8 million. The guidance presented does not include the effects of any additional property acquisitions, dispositions, or capital transaction activity completed subsequent to June 30, 2014, other than those items discussed herein.
Keywords for this news article include: Mortgage, Real Estate, Rouse Properties Inc, Investment and Finance.
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