Rouse Properties Reports Fourth Quarter and Full Year 2012 Results

Rouse Properties Reports Fourth Quarter and Full Year 2012 Results

- Exceeded Core 2012 FFO Guidance by $0.03 Per Share to $1.26 Per Share -

- Signed Over 655,000 Square Feet of Leases In Fourth Quarter, 2.1 Million in 2012-


- Leased Percentage Improved to 90.0%; Up 70 Basis Points From Prior Quarter-

- Completed the Acquisition of The Mall at Turtle Creek for $96.3 million -

- Quarterly Dividend Increase By More Than 85% to $0.13 Per Share -

NEW YORK--(BUSINESS WIRE)-- Rouse Properties, Inc. (the "Company" or "Rouse") (NYS: 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