10-K 1 FORM 10K -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the Fiscal Year Ended December 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) Commission File No 0-1743 THE ROUSE COMPANY (Exact name of registrant as specified in its charter) Maryland 52-0735512 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10275 Little Patuxent Parkway Columbia, Maryland 21044-3456 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (410) 992-6000 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- --------------------- NONE NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock (par value 1c per share) ------------------------------------- (Title of Class) Series A Convertible Preferred Stock (par value 1c per share) ------------------------------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x --- As of March 10, 1995, there were outstanding 47,797,546 shares of the registrant's common stock, par value 1c, which is the only class of common or voting stock of the registrant. As of that date, the aggregate market value of the shares of common stock held by non-affiliates of the registrant (based on the closing price as reported in The Wall Street Journal, Eastern Edition) was ---------------------------------------- approximately $926,077,454. Documents Incorporated by Reference The specified portions of the Annual Report to Shareholders for the fiscal year ended December 31, 1994 are incorporated by reference into Parts I, II and IV. Definitive Proxy Statement to be filed pursuant to Regulation 14A on or before April 7, 1995 is incorporated by reference into Part III. -------------------------------------------------------------------------------- PART I ------ Item 1. Business. Item 1(a). General Development of Business. The Rouse Company (the "Company") was incorporated as a business corporation under the laws of the State of Maryland in 1956. Its principal offices are located at The Rouse Company Building, Columbia, Maryland 21044. Its telephone number is (410) 992-6000. The Company, through its subsidiaries and affiliates, is engaged in (i) the ownership, management, acquisition and development of income-producing and other real estate in the United States, including retail centers, office buildings, mixed-use projects, community retail centers and two hotels, and the management of one retail center in Canada, and (ii) the development and sale of land to builders and other developers, primarily around Columbia, Maryland, for residential, commercial and industrial uses. Item 1(b). Financial Information About Industry Segments. Information required by Item 1(b) is incorporated herein by reference to note 11 of the notes to consolidated financial statements included in the 1994 Annual Report to Shareholders. As noted in Item 1(a), the Company is a real estate company engaged in most aspects of the real estate industry, including the management, acquisition and development of income-producing and other properties, both retail and commercial, community development and management, and land sales. These business segments are further described below. I-1 Item 1. Business, continued. Item 1(c). Narrative Description of Business. Operating Properties: -------------------- As set forth in Item 2, at December 31, 1994, the 67 regional retail centers owned, in whole or in part, or operated by subsidiaries or affiliates of the Company, aggregated 21,345,000 square feet of leasable space, including 982,000 square feet leased to department stores and 534,000 square feet of office space. The activities involved in operating and managing retail centers include: negotiating lease terms with present and prospective tenants, identifying and attracting desirable new tenants, conducting local market and consumer research, developing and implementing short- and long- term merchandising and leasing programs, assisting tenants in the presentation of their merchandise and the layout of their stores and storefronts, and maintaining the buildings and common areas. In conjunction with other partners or investors, the Company has a program of acquiring completed retail centers, with the Company having management responsibility and earning incentive fees including, in some instances, equity interests in the centers. The Company also has a program of providing management services for centers developed and owned by others under management agreements that also provide for incentive fees and, in some instances, equity interests in the centers. As of December 31, 1994, the Company managed 18 such centers, which are included in the figures in the preceding paragraph and aggregated 5,959,000 square feet of leasable space. In addition to Columbia Mall, which is included in the figures in the second preceding paragraph, The Howard Research And Development Corporation ("HRD", a wholly owned subsidiary of the Company) and its subsidiaries own and/or manage 17 office and industrial buildings and retail centers with 3,080,000 square feet of leasable office space, 8 village centers with 824,000 square feet of leasable retail space and other properties and additional commercial space, including the 289-room Columbia Inn in Columbia, Maryland. Other subsidiaries of the Company own, in whole or in part, and operate 11 office buildings with a total of 2,673,000 square feet of leasable space and the 148-room Cross Keys Inn located at The Village of Cross Keys in Baltimore, Maryland. The Company also has a 5% interest in Rouse-Teachers Properties, Inc., which owns 78 office/industrial buildings with 5,284,000 square feet of space and 454 acres of land. A wholly owned affiliate of the Company is responsible for the operation, management and development of all buildings and land owned by Rouse-Teachers Properties, Inc. I-2 Item 1. Business, continued. Development: ----------- The Company renovates and expands existing retail centers and develops suburban and downtown retail centers and mixed-use projects, primarily for ownership. In addition, the Company is capable of serving as the master developer for certain mixed-use projects, with the Company generally owning at least the retail component of such projects. The activities involved in the development, renovation and expansion of retail centers and mixed-use projects include: initial market and consumer research, evaluating and acquiring land sites, obtaining necessary public approvals, engaging architectural and engineering firms to design the project, estimating development costs, developing and testing pro forma operating statements, selecting a general contractor, arranging construction and permanent financing, identifying and obtaining department stores and other tenants, negotiating lease terms, negotiating partnership and joint venture agreements and promoting new, renovated or expanded retail centers and mixed-use projects. The Company also develops retail centers for others, with the Company earning incentive fees and, in some instances, equity interests in the centers. The Company and certain subsidiaries or affiliates are in the construction or development stage of announced projects, including two new regional retail centers and several expansions of existing centers. Land Sales: ---------- HRD is the developing entity of Columbia, Maryland, which is located in the Baltimore-Washington corridor. HRD owns approximately 1,953 saleable acres of land in and around Columbia, and, through its subsidiaries and affiliates, develops and sells this land to builders and other developers for residential, commercial and industrial uses. The Company, through its subsidiaries and affiliates, also is presently involved in community development and related land sales elsewhere in Maryland and is developing and selling a parcel of land in California. I-3 Item 1. Business, continued. Item 1(c). Narrative Description of Business, continued: In all aspects of the Company's business pertaining to the ownership, management, acquisition or development of income-producing and other real estate, the Company operates in highly competitive markets. With respect to the leasing and operation or management of developed properties, each project faces market competition from existing and future developments in its geographical market area. The Company competes with developers and other buyers with respect to the acquisition of development sites or centers and for financing opportunities in the money markets. The Company also faces competition in and around Columbia, Maryland with respect to the development and sale of land for residential, commercial and industrial uses. Neither the Company's business, taken as a whole, nor any of its industry segments, is seasonal in nature. Federal, state and local statutes and regulations relating to the protection of the environment have previously had no material effect on the Company's business. Future development opportunities of the Company may involve additional capital and other expenditures in order to comply with such statutes and regulations. It is impossible at this time to predict with any certainty the magnitude of any such expenditures or the long-range effect, if any, on the Company's operations. Compliance with such laws has had no material adverse effect on the earnings or competitive position of the Company in the past; the Company anticipates that they will have no material adverse effect on its future earnings or its competitive position in the industry. None of the Company's industry segments depends upon a single customer or a few customers, the loss of which would have a materially adverse effect on the segment. No customer accounts for 10 percent or more of the consolidated revenues of the Company. The Company and its subsidiaries had 4,695 full- and part-time employees at December 31, 1994. I-4 Item 2. Properties. The Company leases its headquarters building (approximately 127,000 square feet) in Columbia, Maryland for an initial term of 30 years which expires in 2003 with options for two 15-year renewal periods. The lease on the headquarters building is accounted for as a capital lease. Information respecting the Company's operating properties is incorporated herein by reference to the "Projects of The Rouse Company" table on pages 54 through 58 of the Annual Report to Shareholders for 1994 that is an Exhibit to this Form 10-K. The ownership of virtually all properties is subject to mortgage financing. The table of projects includes retail centers managed by the Company for a fee as identified in notes (c) and (d) to the table. Excluding such managed centers, certain of the remaining properties are subject to leases which provide an option to purchase (or repurchase) the property and/or to renew the leases for one or more renewal periods. The years of expiration indicated below assume all options to extend the terms of the leases are exercised. The properties subject to such leases in whole or in part are as follows:
Year of Nature of expiration Property interest of lease -------- -------- -------- Arizona Center Leasehold Various dates from 2017 to 2050 Augusta Mall Leasehold by joint venture 2068 Bayside Marketplace Leasehold by joint venture 2062 Columbia Mall, Inc. - American City Building Leasehold and fee 2000 Columbia Mall, Inc. - Columbia Cinema Leasehold and fee 2003 Columbia Mall, Inc. - Exhibit Building Leasehold and fee 2012 Columbia Mall, Inc. - Oakland Building Leasehold 2064 Echelon Mall Leasehold 2008 Faneuil Hall Marketplace Leasehold 2074 First National Bank Plaza Leasehold 2013
I-5 Item 2. Properties, continued.
Year of Nature of expiration Property interest of lease -------- -------- -------- Franklin Park Leasehold and fee by joint venture 2024 The Gallery at Market East Leasehold 2082 Governor's Square Leasehold by joint venture 2054 Greengate Mall Leasehold 2070 Harborplace Leasehold 2054 Harundale Mall Leasehold and fee owned jointly with others 2059 Highland Mall Leasehold and fee by joint venture 2070 The Jacksonville Landing Leasehold 2057 Mall St. Matthews Leasehold 2053 Midtown Square Leasehold 2055 Pioneer Place Leasehold 2076 Plymouth Meeting Leasehold and fee 2063 Riverwalk Leasehold by joint venture 2076 St. Louis Union Station Leasehold 2060 South Street Seaport Leasehold 2031 Tampa Bay Center Leasehold and fee 2047 Westlake Center Leasehold by joint venture 2043
I-6 Item 3. Legal Proceedings. On November 6, 1990, Robert P. Guastella Equities, Inc. ("Plaintiff"), a former tenant at the Riverwalk Shopping Center in New Orleans, Louisiana ("Riverwalk"), which is owned and operated by New Orleans Riverwalk Associates, an affiliate of the Company ("NORA"), filed suit in the Civil District Court of Orleans Parish, Louisiana against NORA, the Company, two Company affiliates - Rouse-New Orleans, Inc. and New Orleans Riverwalk Limited Partnership - and Connecticut General Life Insurance Company, which is a general partner of NORA (collectively, "Defendants"). Plaintiff alleges that Defendants breached Plaintiff's lease agreement with NORA for the operation of a restaurant at Riverwalk by (i) failing to prevent the leased premises from flooding, (ii) refusing to permit entertainment on the leased premises, (iii) interfering with the operation of air conditioning equipment on the leased premises and (iv) failing to provide adequate security. Plaintiff claims that as a result of these breaches it suffered losses and could not pay the rentals due under the lease agreement, as a result of which the lease and its tenancy were terminated by NORA. Plaintiff seeks damages of approximately $600,000 for these alleged breaches and $33,000,000 for alleged lost future profits which it claimed it would have earned had its lease not been terminated. All Defendants filed answers denying the claims of Plaintiff, asserting other defenses and raising a counterclaim. The case was tried before a jury and, on October 28, 1993, the jury returned a verdict against Defendants upon which judgment was entered by the trial court on January 7, 1994, in the total net amount of approximately $9,128,000 (which included a net award for lost future profits of approximately $8,640,000) plus interest from the date the suit was filed and attorneys' fees in an amount to be determined. On May 6, 1994, the trial court denied all post-trial motions of both Plaintiff and Defendants and entered an amended judgment in which it awarded Plaintiff $450,000 in attorneys' fees and awarded Defendants $25,000 in attorneys' fees. Defendants believe that the verdict and judgment as entered to date are contrary to the facts and applicable law. On May 23, 1994, Defendants appealed this judgment to the Louisiana Court of Appeals, Fourth District. Defendants intend to vigorously pursue their rights of appeal. Oral argument was held on March 8, 1995. For additional information about this suit, see Note 17 - Other Commitments and Contingencies to the Consolidated Financial Statements. I-7 Item 4. Submission of Matters to a Vote of Security Holders. None. I-8 Directors and Executive Officers. The executive officers of the Company as of March 31, 1995 are:
Date of Present office election or and position appointment with the to present Business or professional experience Executive Officer Age Company office during the past five years ----------------- --- ---------------- ----------- ----------------------------------- Bruce D. Alexander 51 Senior 11/16/78 Senior Vice-President and Director of New Business of the Vice-President 8/17/93 Company; formerly Senior Vice-President and Director of and Director of the Commercial Development Division of the Company New Business Anthony W. Deering 50 President and 2/25/93 President and Chief Executive Officer of the Company; Chief Executive 2/23/95 formerly President and Chief Operating Officer of Officer the Company; Executive Vice President - Finance and Administration and Chief Financial Officer of the Company; and Senior Vice-President and Chief Financial Officer of the Company Jeffrey H. Donahue 48 Senior 9/23/93 Senior Vice-President and Chief Financial Officer of the Vice-President, 9/23/93 Company and Director of the Finance Division; formerly Chief Financial 8/17/93 Vice-President and Treasurer of the Company Officer and Director of the Finance Division Duke S. Kassolis 43 Senior 9/23/93 Senior Vice-President and Director of Office and Mixed-Use Vice-President 8/17/93 Operations of the Company; formerly Vice-President and Director and Director of of Office and Commercial Properties of the Company Office and Mixed-Use Operations
I-9
Date of Present office election or and position appointment with the to present Business or professional experience Executive Officer Age Company office during the past five years ----------------- --- ---------------- ----------- ----------------------------------- Paul I. Latta, Jr. 51 Senior 9/23/93 Senior Vice-President and Director of Vice-President 8/17/93 Retail Operations of the Company; formerly and Director of Vice-President and Associate Division Director, Retail Operations Operating Properties Division of the Company Richard G. McCauley 54 Senior 1/22/75 Senior Vice-President, General Counsel Vice-President, 12/1/71 and Secretary of the Company General Counsel 4/24/75 and Secretary Douglas A. McGregor 52 Executive 8/17/93 Executive Vice-President for Development Vice-President and Operations of the Company; formerly for Development Executive Vice-President - Development and and Operations Director of the Office and Community Development Division of the Company; and Senior Vice-President and Director of the Office and Community Development Division of the Company Robert Minutoli 44 Senior 9/23/93 Senior Vice-President and Director of Vice-President 8/17/93 Acquisitions of the Company; formerly and Director of Vice-President for Development of the Company Acquisitions Robert D. Riedy 49 Senior 9/23/93 Senior Vice-President and Director of Retail Vice-President 8/17/93 Leasing of the Company; formerly Vice-President and Director of for Development of the Company Retail Leasing
I-10
Date of Present office election or and position appointment with the to present Business or professional experience Executive Officer Age Company office during the past five years ----------------- --- ---------------- ----------- ----------------------------------- Alton J. Scavo 48 Senior 9/23/93 Senior Vice-President and Director of the Vice-President, 8/17/93 Community Development Division of the Director of the Company and General Manager of Columbia; Community formerly Vice-President and Associate Director Development of the Community Development Division of Division and the Company General Manager of Columbia Jerome D. Smalley 45 Senior 9/23/93 Senior Vice-President and Director of Vice-President 8/17/93 the Commercial and Office Development and Director of Division of the Company; formerly the Commercial Vice-President for Development and Office Development Division Larry M. Wolf 59 Senior 11/16/78 Senior Vice-President and Director of Vice-President 8/17/93 Merchandising of the Company; formerly and Director of Senior Vice-President and Director of Merchandising Retail Leasing of the Company George L. Yungmann 52 Senior 9/23/93 Senior Vice-President and Controller Vice-President, 7/26/72 of the Company and Director of Controller and 7/26/72 the Controller's Division; formerly Director of the Vice-President, Controller and Director of Controller's the Controller's Division Division
The term of office of each officer is until election of a successor or otherwise at the pleasure of the Board of Directors. There is no arrangement or understanding between any of the above-listed officers and any other person pursuant to which any such officer was elected as an officer. None of the above-listed officers has any family relationship with any director or other executive officer. I-11 Part II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters. Information required by Item 5 is incorporated herein by reference to page 43 of the 1994 Annual Report to Shareholders. Item 6. Selected Financial Data. Information required by Item 6 is incorporated herein by reference to page 43 of the 1994 Annual Report to Shareholders. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Information required by Item 7 is incorporated herein by reference to pages 44 through 49 of the 1994 Annual Report to Shareholders. Item 8. Financial Statements and Supplementary Data. Financial Statements required by Item 8 are set forth in the Index to Financial Statements and Schedules on page IV-2. Supplementary data required by Item 8 are incorporated herein by reference to page 43 of the 1994 Annual Report to Shareholders. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. II-1 Part III The information required by Items 10, 11, 12 and 13 (except that information regarding executive officers called for by Item 10 that is contained in Part I) is incorporated herein by reference from the definitive proxy statement that the Company intends to file pursuant to Regulation 14A on or before April 7, 1995. III-1 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) 1 and 2. Financial Statements and Schedules: Reference is made to the Index to Financial Statements and Schedules on page IV-2. 3. Exhibits: Reference is made to the Exhibit Index. (b) Reports on Form 8-K: None. IV-1 THE ROUSE COMPANY AND SUBSIDIARIES Index to Financial Statements and Schedules Page ---- Independent Auditors' Report IV-3 Report of Independent Real Estate Consultants included on page 19 of the 1994 Annual Report to Shareholders incorporated herein by reference Financial Statements: The Rouse Company and Subsidiaries included on pages 20 through 42 of the 1994 Annual Report to Shareholders, incorporated herein by reference: Consolidated Cost Basis and Current Value Basis Balance Sheets at December 31, 1994 and 1993 Consolidated Cost Basis Statements of Operations for the Years Ended December 31, 1994, 1993 and 1992 Consolidated Cost Basis Statements of Shareholders' Equity for the Years Ended December 31, 1994, 1993 and 1992 Consolidated Cost Basis Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 Consolidated Current Value Basis Statements of Changes in Revaluation Equity for the Years Ended December 31, 1994, 1993 and 1992 Notes to Consolidated Financial Statements Schedules: The Rouse Company and Subsidiaries as of December 31, 1994 or for the years ended December 31, 1994, 1993 and 1992: Schedule II Valuation and Qualifying Accounts IV-4 Schedule III Real Estate and Accumulated Depreciation IV-5 All other schedules have been omitted as not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto. IV-2 INDEPENDENT AUDITORS' REPORT ---------------------------- The Board of Directors and Shareholders The Rouse Company: We have audited the consolidated cost basis financial statements and the related financial statement schedules of The Rouse Company and subsidiaries as listed in the accompanying index. We have also audited the supplemental consolidated current value basis financial statements listed in the index. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated cost basis financial statements referred to above present fairly, in all material respects, the financial position of The Rouse Company and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated cost basis financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As more fully described in note 1 to the consolidated financial statements, the supplemental consolidated current value basis financial statements referred to above have been prepared by management to present relevant financial information about The Rouse Company and its subsidiaries which is not provided by the cost basis financial statements and are not intended to be a presentation in conformity with generally accepted accounting principles. In addition, as more fully described in note 1, the supplemental consolidated current value basis financial statements do not purport to present the net realizable, liquidation or market value of the Company as a whole. Furthermore, amounts ultimately realized by the Company from the disposal of properties may vary from the current values presented. In our opinion, the supplemental consolidated current value basis financial statements referred to above present fairly, in all material respects, the information set forth therein on the basis of accounting described in note 1 to the consolidated financial statements. KPMG Peat Marwick LLP Baltimore, Maryland February 21, 1995 IV-3 Schedule II ----------- THE ROUSE COMPANY AND SUBSIDIARIES Valuation and Qualifying Accounts Years ended December 31, 1994, 1993 and 1992 ---
Additions ------------------------- Balance at Charged to Charged to Balance at beginning costs and other end of Descriptions of year expenses accounts Deductions year ------------ ---------- ---------- ---------- ---------- ---------- (in thousands) Year ended December 31, 1994: Allowance for doubtful receivables $24,036 $5,185 $ - $4,097 /(1)/ $25,124 ======= ====== ===== ====== ======= Pre-construction reserve $12,822 $3,400 $ - $2,113 /(2)/ $14,109 ======= ====== ===== ====== ======= Year ended December 31, 1993: Allowance for doubtful receivables $23,129 $4,741 $ - $3,834 /(1)/ $24,036 ======= ====== ===== ====== ======= Pre-construction reserve $11,127 $2,900 $ - $1,205 /(2)/ $12,822 ======= ====== ===== ====== ======= Year ended December 31, 1992: Allowance for doubtful receivables $18,514 $6,297 $ - $1,682 /(1)/ $23,129 ======= ====== ===== ====== ======= Pre-construction reserve $ 7,844 $3,050 $ 350 /(3)/ $ 117 /(2)/ $11,127 ======= ====== ===== ====== =======
Notes: (1) Balances written off as uncollectible. (2) Costs of unsuccessful projects written off. (3) Reclassification of pre-construction reserve related to a project in which the Company has an equity investment. IV-4 Schedule III ------------ THE ROUSE COMPANY AND SUBSIDIARIES Real Estate and Accumulated Depreciation (note 1) December 31, 1994
Cost capitalized Initial cost to subsequent to Gross amount at which carried Company acquisition at December 31, 1994 ------------------ -------------------- ----------------------------- Buildings Buildings and Encum- and Carrying Improve- brances improve- Improve- costs ments Description (note 4) Land ments ments (note 2) Land (note 3) Total ----------- -------- ---- --------- -------- --------- ---- --------- ----- Operating Properties: South Street Seaport Retail Center New York, NY $ 52,000 $ - $ - $ 141,192 $ - $ - $ 141,192 $ 141,192 Woodbridge Center Retail Center Woodbridge, NJ 137,055 - - 115,444 - 26,301 115,444 141,745 Other operating properties and related investments, each less than 5% of total 1,854,838 181,169 - 2,499,760 - 154,868 2,499,760 2,654,628 ----------- -------- -------- ----------- ------- -------- ----------- ----------- Total operating properties 2,043,893 181,169 - 2,756,396 - 181,169 2,756,396 2,937,565 ----------- -------- -------- ----------- ------- -------- ----------- ----------- Life on which Accumu- depre- lated ciation depre- Date of in latest ciation comple- income and tion of state- amorti- construc- Date ment is Description zation tion acquired computed ----------- ------- --------- -------- --------- Operating Properties: South Street Seaport Retail Center New York, NY $ 20,328 7/83 N/A Note 8 Woodbridge Center Retail Center Woodbridge, NJ 16,722 3/71 N/A Note 8 Other operating properties and related investments, each less than 5% of total 453,108 Various Various Note 8 --------- Total operating 490,158 properties ---------
(Continued) IV-5 Schedule III, continued ----------------------- THE ROUSE COMPANY AND SUBSIDIARIES Real Estate and Accumulated Depreciation (note 1) December 31, 1994
Cost capitalized Initial cost to subsequent to Gross amount at which carried Company acquisition at December 31, 1994 ------------------ -------------------- ----------------------------- Buildings Buildings and Encum- and Carrying Improve- brances improve- Improve- costs ments Description (note 4) Land ments ments (note 2) Land (note 3) Total ----------- -------- ---- --------- -------- --------- ---- --------- ----- Properties in Development: Construction and development in progress individually less than 5% of total 20,085 11,216 - 47,608 - 11,216 47,608 58,824 Pre-construction costs - - - 20,633 - - 20,663 20,663 Pre-construction reserve - - - (14,109) - - (14,109) (14,109) ---------- --------- --------- ---------- ------ -------- ---------- ---------- Total Properties in Development 20,085 11,216 - 54,132 - 11,216 54,132 65,348 ---------- --------- --------- ---------- ------ -------- ---------- ---------- Properties held for development and sale - 132,293 - 8,809 - 132,293 8,809 141,102 ---------- --------- --------- ---------- ------ -------- ---------- ---------- Total $2,063,978 $324,678 $ - $2,819,337 $ - $324,678 $2,819,337 $3,144,015 ========== ======== ========= ========== ====== ======== ========== ========== Life on which Accumu- depre- lated ciation depre- Date of in latest ciation comple- income and tion of state- amorti- construc- Date ment is Description zation tion acquired computed ----------- ------- --------- -------- --------- Properties in Development: Construction and development in progress individually less than 5% of total - N/A N/A N/A Pre-construction costs - N/A N/A N/A Pre-construction reserve - N/A N/A N/A -------- Total Properties in Development - -------- Properties held for development and sale - N/A Various N/A -------- Total $490,158 ========
(Continued) IV-6 Schedule III, continued ----------------------- THE ROUSE COMPANY AND SUBSIDIARIES Real Estate and Accumulated Depreciation (note 1) December 31, 1994 Notes: (1) Reference is made to notes 2, 3, 4, 5, 6, 10, 13 and 16 to the consolidated financial statements. Land was generally acquired one to three years before completion of construction. (2) The determination of these amounts is not practicable and, accordingly, they are included in improvements. (3) Buildings and improvements include deferred costs of $124,643,000 at December 31, 1994. (4) Encumbrances on office buildings are included in operating property encumbrances. (5) The changes in total cost of properties for the years ended December 31, 1994, 1993 and 1992 are as follows (in thousands):
1994 1993 1992 ----------- ----------- ----------- Balance at beginning of year $3,010,195 $2,827,379 $2,718,536 Additions, at cost 88,260 88,973 107,305 Cost of properties acquired 93,705 106,048 36,761 Additions to properties held for development and sale 16,270 21,388 19,793 Cost of land sales (15,804) (16,270) (12,953) Retirements, sales and other dispositions (30,050) (21,307) (40,382) Additions to pre-construction reserve (3,400) (2,900) (3,050) Receivables under finance leases, net (632) 8,061 44 Investments in unconsolidated real estate ventures, net (12,317) 4,255 1,325 Provision for loss on investment in an operating property (2,212) (5,432) - ---------- ---------- ---------- Balance at end of year $3,144,015 $3,010,195 $2,827,379 ========== ========== ==========
(Continued) IV-7 Schedule III, continued ----------------------- THE ROUSE COMPANY AND SUBSIDIARIES Real Estate and Accumulated Depreciation (note 1) December 31, 1994 Notes, continued: (6) The changes in accumulated depreciation and amortization for the years ended December 31, 1994, 1993 and 1992 are as follows (in thousands):
1994 1993 1992 --------- --------- --------- Balance at beginning of year $429,070 $375,903 $331,312 Depreciation and amortization charged to operations 74,186 70,200 68,163 Retirements, sales and other, net (13,098) (17,033) (23,572) -------- -------- -------- Balance at end of year $490,158 $429,070 $375,903 ======== ======== ========
(7) The aggregate cost of properties for Federal income tax purposes is approximately $2,895,656,000 at December 31, 1994. (8) Reference is made to note 2(c) to the consolidated financial statements for information related to depreciation. (9) The provision for loss on investment in an operating property in 1993 relates to a retail center and was recognized based on management's determination that the Company would not continue to support the project (which is financed by non-recourse loans) under the existing arrangements with lenders, public authorities and others involved and that it was unlikely that the Company would recover all of its investment in the project based on forecasts of future cash flows. (10) The provision for loss on investment in an operating property in 1994 relates to an industrial building which is subject to a contract for sale. IV-8 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Principal Executive Officer: /s/Anthony W. Deering ------------------------------------- Anthony W. Deering March 31, 1995 President and Chief Executive Officer Principal Financial Officer: /s/Jeffrey H. Donahue ------------------------------------- Jeffrey H. Donahue March 31, 1995 Senior Vice President and Chief Financial Officer Principal Accounting Officer: /s/George L. Yungmann ------------------------------------- George L. Yungmann March 31, 1995 Senior Vice President and Controller Board of Directors: David H. Benson, Jeremiah E. Casey, Anthony W. Deering, Rohit M. Desai, Mathias J. DeVito, Juanita T. James, Hanne M. Merriman, Thomas J. McHugh, Roger W. Schipke and Alexander B. Trowbridge. By: /s/Anthony W. Deering -------------------------------- Anthony W. Deering March 31, 1995 For Himself and as Attorney-in-fact IV-9 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS --------------------------------------------------- The Board of Directors The Rouse Company: We consent to the incorporation by reference in the Registration Statements of The Rouse Company on Form S-8 (Registration Nos. 2-68258, 2-83612, 33-56231, 33- 56233 and 33-56235) and Form S-3 (Registration Nos. 2-78898, 2-95596, 33-52458, 33-56646, 33-57347, 33-57584 and 33-57707) of our report dated February 21, 1995, relating to the consolidated financial statements and related schedules of The Rouse Company and subsidiaries as of December 31, 1994 and 1993 and for each of the years in the three-year period ended December 31, 1994, which report appears in the Annual Report on Form 10-K of The Rouse Company for the year ended December 31, 1994. KPMG PEAT MARWICK LLP Baltimore, Maryland March 31, 1995 IV-10 CONSENT OF INDEPENDENT REAL ESTATE CONSULTANTS ---------------------------------------------- The Board of Directors The Rouse Company: We consent to the incorporation by reference in the Registration Statements of The Rouse Company (the "Company") on Form S-8 (Registration Nos. 2-68258, 2-83612, 33-56231, 33-56233 and 33-56235) and Form S-3 (Registration Nos. 2-78898, 2-95596, 33-52458, 33-56646, 33-57347, 33-57584 and 33-57707) of our report dated February 21, 1995 on our concurrence with the Company's estimates of the total current value of its equity and other interests in certain real property owned and/or managed by the Company and its subsidiaries as of December 31, 1994 and 1993, which report appears in the 1994 Annual Report to Shareholders which is incorporated by reference in the Annual Report on Form 10-K of the Company for the year ended December 31, 1994. LANDAUER ASSOCIATES, INC. /s/ Deborah A. Jackson Deborah A. Jackson Senior Vice President Director of Retail Valuation New York, New York March 31, 1995 IV-11 Exhibit Index Exhibit No. ----------- 3 Articles of Incorporation and Bylaws 10 Material Contracts 11 Statement re computation of per share earnings 13 Annual report to security holders 21 Subsidiaries of the Registrant 24 Power of Attorney 27 Financial Data Schedule 99 Additional Exhibits: Form 11-K Annual Report of The Rouse Company Savings Plan for the year ended December 31, 1994 The Company agrees to furnish to the Commission upon request a copy of all constituent instruments defining the rights of holders of long-term debt of the Company and all its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed under which instruments the total amount of securities authorized does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. EX-3 2 EXHIBIT 3 Exhibit 3. Articles of Incorporation and Bylaws. The Amendments to the Articles of Incorporation of The Rouse Company adopted May 26, 1988 and the Amended and Restated Articles of Incorporation of The Rouse Company, dated May 27, 1988, are incorporated by reference from the Exhibits to the Company's Form 10-K Annual Report for the fiscal year ended December 31, 1988. The Articles of Amendment to the Amended and Restated Articles of Incorporation of The Rouse Company, which Articles of Amendment were effective January 10, 1991, are incorporated by reference from the Exhibits to the Company's Form 10-K Annual Report for the fiscal year ended December 31, 1990. The Articles Supplementary to the Charter of The Rouse Company, dated February 17, 1993, are incorporated by reference from the Exhibits to the Company's Form 10-K Annual Report for the fiscal year ended December 31, 1992. The Articles Supplementary to the Charter of The Rouse Company, dated September 26, 1994, are incorporated by reference from the Exhibits to the Company's Form S-3 Registration Statement (No. 33-57707). The Articles Supplementary to the Charter of The Rouse Company, dated December 27, 1994, are incorporated by reference from the Exhibits to the Company's Form S-3 Registration Statement (No. 33-57707). The Bylaws of The Rouse Company, as amended September 22, 1994, are incorporated by reference from the Exhibits to the Company's Form 10-Q Quarterly Report for the quarter ended September 30, 1994. All documents referred to above may be found in Commission file number 0-1743. EX-10 3 EXHIBIT 10 Exhibit 10. Material Contracts. The Company's 1985 Stock Option Plan and 1985 Stock Bonus Plan are incorporated by reference from the Company's definitive proxy statement filed pursuant to Regulation 14A on April 27, 1985, and the Amendment to The Rouse Company 1985 Stock Option Plan, effective as of May 12, 1994, is attached. The Rouse Company Deferred Compensation Plan for Outside Directors, dated as of January 1, 1986, is incorporated by reference from the Exhibits to the Company's Form 10-K Annual Report for the fiscal year ended December 31, 1985. The Company's 1990 Stock Option Plan and 1990 Stock Bonus Plan are incorporated by reference from the Company's definitive proxy statement filed pursuant to Regulation 14A on April 12, 1990, and the Amendment to The Rouse Company 1990 Stock Option Plan, effective as of May 12, 1994, is attached. The Company's 1994 Stock Incentive Plan is incorporated by reference from the Company's definitive proxy statement filed pursuant to Regulation 14A on April 5, 1994. The letter agreement, dated September 24, 1992, between the Company and Mathias J. DeVito, then Chairman of the Board and Chief Executive of the Company, is incorporated by reference from the Exhibits to the Company's Form S-3 Registration Statement (No. 33-56646). The Amended and Restated Supplemental Retirement Benefit Plan of The Rouse Company, dated January 1, 1985; Amendment Number 1 to the Amended and Restated Supplemental Retirement Benefit Plan of The Rouse Company, dated September 24, 1992; and The Rouse Company Division Incentive Programs are incorporated by reference from the Exhibits to the Company's Form 10-K Annual Report for the fiscal year ended December 31, 1992. The Retirement Agreement, dated November 30, 1994, between the Company and Mathias J. DeVito, then Chairman of the Board and Chief Executive Officer of the Company, is incorporated by reference from the Exhibits to the Company's Form S-3 Registration Statement (No. 33-57707). All documents referred to above may be found in Commission file number 0-1743. AMENDMENT TO THE ROUSE COMPANY 1985 STOCK OPTION PLAN Effective as of the approval of The Rouse Company 1994 Stock Incentive Plan by the shareholders of The Rouse Company on May 12, 1994, Article I(a) of The Rouse Company 1985 Stock Option Plan is amended by deleting "or in any other plan that entitled participants to acquire stock, stock options, or stock appreci-ation rights ("Rights") of the Company" from the fourth sentence of such Article I(a). IN WITNESS WHEREOF, this Amendment has been executed on behalf of The Rouse Company by its Senior Vice-President. ATTEST: THE ROUSE COMPANY /s/ David R. Schwiesow By: /s/ Richard G. McCauley ---------------------------- ----------------------------- David R. Schwiesow Richard G. McCauley Assistant Secretary Senior Vice-President AMENDMENT TO THE ROUSE COMPANY 1990 STOCK OPTION PLAN Effective as of the approval of The Rouse Company 1994 Stock Incentive Plan by the shareholders of The Rouse Company on May 12, 1994, Article I(a) of The Rouse Company 1990 Stock Option Plan is amended by deleting "or in any other plan that entitled participants to acquire stock, stock options or stock appreci-ation rights ("Rights") of the Company" from the fourth sentence of such Article I(a). IN WITNESS WHEREOF, this Amendment has been executed on behalf of The Rouse Company by its Senior Vice-President. ATTEST: THE ROUSE COMPANY /s/ David R. Schwiesow By: /s/ Richard G. McCauley ---------------------------- ----------------------------- David R. Schwiesow Richard G. McCauley Assistant Secretary Senior Vice-President EX-11 4 EXHIBIT 11 Exhibit 11 Exhibit 11. Statement re Computation of Per Share Earnings THE ROUSE COMPANY AND SUBSIDIARIES Computation of Fully Diluted Earnings (Loss) Per Share (Unaudited, in thousands except per share amounts)
Years ended December 31, ---------------------------- 1994 1993 1992 ------- ------- -------- Earnings (loss) before extraordinary losses $ 6,606 $(1,291) $(15,849) Add after tax interest expense applicable to convertible subordinated debentures 4,859 6,236 8,811 ------- ------- -------- Earnings (loss) before extraordinary losses, as adjusted 11,465 4,945 (7,038) Extraordinary losses, net of related income tax benefits (4,447) (8,051) (348) ------- ------- -------- Net earnings (loss), as adjusted $ 7,018 $(3,106) $ (7,386) ======= ======= ======== Shares: ------ Weighted average number of common shares outstanding 47,565 47,411 47,994 Assuming conversion of convertible Preferred stock 10,600 8,251 - Assuming conversion of convertible subordinated debentures 4,541 5,917 8,351 Assuming exercise of options and warrants reduced by the number of shares which could have been purchased with the proceeds from the exercise of such options 175 224 73 ------- ------- -------- Weighted average number of shares outstanding as adjusted 62,881 61,803 56,418 ======= ======= ======== Earnings (loss) per common share assuming full dilution: Earnings (loss) before extraordinary losses $ .18 $ .08 $ (.12) Extraordinary losses (.07) (.13) (.01) ------- ------- -------- Net earnings (loss) $ .11 $ (.05) $ (.13) ======= ======= ========
This calculation is submitted in accordance with Regulation S-K item 601 (b) (11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result. EX-13 5 EXHIBIT 13 Exhibit 13 Exhibit 13. Annual report to security holders The financial section of the annual report to security holders, which is incorporated by reference, is enclosed as Exhibit 13. This financial section includes all the information incorporated by reference in Parts I, II and IV of this Form 10-K Annual Report for the fiscal year ended December 31, 1994. Exhibit 13 REPORT OF INDEPENDENT REAL ESTATE CONSULTANTS -------------------------------------------------------------------------------- Landauer Associates, Inc. 666 Fifth Avenue New York, New York 10103 212-621-9500 KPMG Peat Marwick LLP and The Board of Directors and Shareholders The Rouse Company: We have reviewed estimates of the market value of equity and other interests in certain real property owned and/or managed by The Rouse Company (the Company) and its subsidiaries as of December 31, 1994 and 1993. The properties reviewed at December 31, 1994 include all the projects identified as "In Operation" on the "Projects of The Rouse Company" table on pages 54 through 58 of the Annual Report for 1994, properties held for development and sale, and certain parcels of land in development. The properties reviewed at December 31, 1993 were the same, except for the properties which were disposed of during 1994. The total values of its equity and other interests estimated by the Company were $2,338,624,000 and $2,227,151,000 as of December 31, 1994 and 1993, respectively. Based upon our review, we concur with the Company's estimates of the total value of the property interests appraised. In our opinion, the aggregate value estimated by the Company varies less than 10% from the aggregate value we would estimate in a full and complete appraisal of the same interests. A variation of less than 10% between appraisers implies substantial agreement as to the most probable market value of such property interests. The data used in our review were supplied to us in summary form by the Company. We have relied upon the Company's interpretation and summaries of leases, operating agreements, mortgages and partnership, joint venture and management agreements. We have had complete and unrestricted access to all underlying documents and have confirmed certain information by reference to such documents. We have found no discrepancies in the data and, to the best of our knowledge, believe all such data to be accurate and complete. The basic assumptions used by the Company and the individual value estimates prepared by the Company were, in our opinion, fair and reasonable. No assumption has been made with respect to a bulk sale of the entire holdings or groups of property interests. We have also physically inspected, within the past three years, substantially all of the properties which were reviewed. We certify that neither Landauer Associates, Inc. nor the undersigned have any present or prospective interest in the Company's properties, and we have no personal interest or bias with respect to the parties involved. To the best of our knowledge and belief, the facts upon which the analysis and conclusions were based are materially true and correct. No one, other than the undersigned assisted by members of our staff, performed the analyses and reached the conclusions resulting in the opinion expressed in this letter. Our fee for this assignment was not contingent on any action or event resulting from the analysis, opinions, or conclusions in, or the use of, this review. Our review has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice. Sincerely, Landauer Associates, Inc. /s/ James C. Kafes /s/ Deborah A. Jackson James C. Kafes, MAI, CRE Deborah A. Jackson Managing Director Senior Vice President Director of Retail Valuation February 21, 1995 1 The Rouse Company and Subsidiaries CONSOLIDATED COST BASIS AND CURRENT VALUE BASIS BALANCE SHEETS December 31, 1994 and 1993 (in thousands)
-------------------------------------------------------------------------------------------------------------------------- 1994 1993 ------------------------------- ------------------------------- Current Value Cost Current Value Cost Basis (note 1) Basis Basis (note 1) Basis -------------- ------------ -------------- ------------ Assets Property (notes 4, 5, 6, 10 and 16): Operating properties: Property and deferred costs of projects.................................... $4,232,913 $2,937,565 $4,070,962 $2,821,303 Less accumulated depreciation and amortization................................ 490,158 429,070 ---------- ---------- ---------- ---------- 4,232,913 2,447,407 4,070,962 2,392,233 Properties in development.......................... 70,866 65,348 59,836 57,065 Properties held for development and sale......................................... 162,446 141,102 154,911 131,827 ---------- ---------- ---------- ---------- Total property................................... 4,466,225 2,653,857 4,285,709 2,581,125 ---------- ---------- ---------- ---------- Prepaid expenses, deferred charges and other assets....................................... 112,987 104,254 117,042 107,972 Accounts and notes receivable (note 7)............... 78,202 78,202 77,926 77,926 Investments in marketable securities................. 30,149 30,149 34,403 34,403 Cash and cash equivalents............................ 49,398 49,398 73,556 73,556 ---------- ---------- ---------- ---------- Total.............................................. $4,736,961 $2,915,860 $4,588,636 $2,874,982 ========== ========== ========== ==========
The accompanying notes are an integral part of these statements. 2
-------------------------------------------------------------------------------------------------------------------------- 1994 1993 ------------------------------- ------------------------------- Current Value Cost Current Value Cost Basis (note 1) Basis Basis (note 1) Basis -------------- ------------ -------------- ------------ Liabilities Debt (note 10): Property debt not carrying a Parent Company guarantee of repayment........................... $1,998,445 $1,998,445 $1,886,257 $1,886,257 ---------- ---------- ---------- ---------- Parent Company debt and debt carrying a Parent Company guarantee of repayment: Property debt.................................... 223,731 223,731 273,540 273,540 Convertible subordinated debentures.............. 105,950 130,000 122,850 130,000 Other debt....................................... 116,500 120,700 131,668 120,700 ---------- ---------- ---------- ---------- 446,181 474,431 528,058 524,240 ---------- ---------- ---------- ---------- Total debt....................................... 2,444,626 2,472,876 2,414,315 2,410,497 ---------- ---------- ---------- ---------- Obligations under capital leases (note 16)........... 60,044 60,044 63,099 63,099 Accounts payable, accrued expenses and other liabilities.............................. 205,317 205,317 209,256 209,256 Deferred income taxes (note 12)...................... 412,729 82,597 376,360 78,979 Shareholders' equity (notes 14, 15 and 18) Series A Convertible Preferred stock with a liquidation preference of $225,252 in 1994 and $201,250 in 1993............................... 45 45 40 40 Common stock of 1c par value per share; 250,000,000 shares authorized; issued 47,571,046 shares in 1994 and 47,562,226 shares in 1993.......................... 476 476 476 476 Additional paid-in capital........................... 306,674 306,674 281,533 281,533 Accumulated deficit.................................. (212,169) (212,169) (168,898) (168,898) Revaluation equity................................... 1,519,219 -- 1,412,455 -- ---------- ---------- ---------- ---------- Total shareholders' equity......................... 1,614,245 95,026 1,525,606 113,151 ---------- ---------- ---------- ---------- Commitments and contingencies (notes 16 and 17) Total.............................................. $4,736,961 $2,915,860 $4,588,636 $2,874,982 ========== ========== ========== ==========
3 The Rouse Company and Subsidiaries CONSOLIDATED COST BASIS STATEMENTS OF OPERATIONS Years ended December 31, 1994, 1993 and 1992 (in thousands, except per share data) --------------------------------------------------------------------------------
1994 1993 1992 ------------ ------------ ------------ Revenues................................................................... $671,171 $646,805 $597,105 Operating expenses, exclusive of provision for bad debts, depreciation and amortization............................................ 356,958 352,217 331,365 Interest expense (note 10)................................................. 213,583 210,806 206,809 Provision for bad debts.................................................... 5,185 4,741 6,297 Depreciation and amortization (note 4)..................................... 74,186 70,200 68,163 Gain (loss) on dispositions of assets and other provisions, net (note 13).. (7,923) (5,769) (5,254) -------- -------- -------- Earnings (loss) before income taxes and extraordinary losses............. 13,336 3,072 (20,783) -------- -------- -------- Income tax benefit (provision) (note 12): Current--primarily state................................................. (735) (760) (352) Deferred--primarily Federal.............................................. (5,995) (3,603) 5,286 -------- -------- -------- (6,730) (4,363) 4,934 -------- -------- -------- Earnings (loss) before extraordinary losses.............................. 6,606 (1,291) (15,849) -------- -------- -------- Extraordinary losses, net of related income tax benefits (note 10)......... (4,447) (8,051) (348) -------- -------- -------- Net earnings (loss)...................................................... $ 2,159 $ (9,342) $(16,197) ======== ======== ======== Net loss applicable to common shareholders............................... $(10,922) $(20,723) $(16,197) ======== ======== ======== Loss per share of common stock after provision for dividends on Preferred stock (notes 14 and 18): Loss before extraordinary losses......................................... $ (.14) $ (.27) $ (.33) Extraordinary losses..................................................... (.09) (.17) (.01) -------- -------- -------- Total.................................................................... $ (.23) $ (.44) $ (.34) ======== ======== ========
The accompanying notes are an integral part of these statements. 4 The Rouse Company and Subsidiaries CONSOLIDATED COST BASIS STATEMENTS OF SHAREHOLDERS' EQUITY Years ended December 31, 1994, 1993 and 1992 (in thousands) --------------------------------------------------------------------------------
Series A Convertible Additional Preferred Common paid-in Accumulated stock stock capital deficit ----------- ------ ---------- ----------- Balance at December 31, 1991.................................. $ -- $482 $ 90,605 $ (73,759) Net loss...................................................... -- -- -- (16,197) Dividends on common stock -- $.60 per share................... -- -- -- (28,815) Proceeds from exercise of stock options, net.................. -- 1 578 -- Amortization of restricted common stock....................... -- -- 2,782 -- Repurchase of common stock (note 15).......................... -- (10) (11,990) -- Issuance of warrants to purchase common stock (note 15)....... -- -- 1,475 -- ---- ---- -------- -------- Balance at December 31, 1992.................................. -- 473 83,450 (118,771) Net loss...................................................... -- -- -- (9,342) Dividends on common stock -- $.62 per share................... -- -- -- (29,404) Proceeds from exercise of stock options, net.................. -- 3 446 -- Amortization of restricted common stock....................... -- -- 2,068 -- Issuance of Preferred stock (note 14)......................... 40 -- 195,569 -- Dividends on Preferred stock -- $2.83 per share............... -- -- -- (11,381) ---- ---- -------- --------- Balance at December 31, 1993.................................. 40 476 281,533 (168,898) Net earnings.................................................. -- -- -- 2,159 Dividends on common stock -- $.68 per share................... -- -- -- (32,349) Proceeds from exercise of stock options, net.................. -- -- 108 -- Amortization of restricted common stock....................... -- -- 2,225 -- Issuance of Preferred stock (note 14)......................... 5 -- 22,808 -- Dividends on Preferred stock -- $3.25 per share............... -- -- -- (13,081) ---- ---- -------- --------- Balance at December 31, 1994.................................. $ 45 $476 $306,674 $(212,169) ==== ==== ======== =========
The accompanying notes are an integral part of these statements. 5 The Rouse Company and Subsidiaries CONSOLIDATED COST BASIS STATEMENTS OF CASH FLOWS Years ended December 31, 1994, 1993 and 1992 (in thousands) --------------------------------------------------------------------------------
1994 1993 1992 ------------ ------------ ------------ Cash flows from operating activities Rents and other revenues received................................. $ 622,033 $ 600,594 $ 556,510 Proceeds from land sales.......................................... 37,482 33,830 29,670 Interest received................................................. 10,297 9,712 10,220 Land development expenditures..................................... (16,760) (20,407) (19,988) Operating expenditures: Operating properties............................................ (315,607) (309,130) (298,672) Land sales, development and corporate........................... (11,880) (9,034) (9,776) Interest paid: Operating properties............................................ (195,751) (184,278) (179,140) Land sales, development and corporate........................... (16,039) (20,138) (22,194) --------- --------- --------- Net cash provided by operating activities....................... 113,775 101,149 66,630 --------- --------- --------- Cash flows from investing activities Expenditures for properties in development and improvements to existing properties funded by debt.............................. (78,628) (87,243) (83,377) Expenditures for property acquisitions............................ (94,113) (34,967) (38,806) Expenditures for improvements to existing properties funded by cash provided by operating activities: Tenant leasing and remerchandising............................ (8,121) (7,374) (10,468) Building and equipment........................................ (5,155) (5,967) (13,508) Purchases of marketable securities................................ (70,189) (88,594) (21,421) Proceeds from redemptions or sales of marketable securities....... 74,443 72,400 28,217 Other............................................................. 3,212 (2,701) (5,473) --------- --------- --------- Net cash used in investing activities........................... (178,551) (154,446) (144,836) --------- --------- --------- Cash flows from financing activities Proceeds from issuance of property debt........................... 446,628 358,995 206,298 Repayments of property debt: Scheduled principal payments.................................... (46,750) (20,735) (17,907) Other payments.................................................. (304,977) (405,772) (73,494) Proceeds from issuance of other debt.............................. -- 120,329 16,033 Repayments of other debt.......................................... (8,968) (160,657) (3,912) Proceeds from issuance of Preferred stock......................... -- 195,609 -- Proceeds from exercise of stock options........................... 108 449 579 Dividends paid.................................................... (45,423) (41,150) (28,683) --------- --------- --------- Net cash provided by financing activities....................... 40,618 47,068 98,914 --------- --------- --------- Net increase (decrease) in cash and cash equivalents.............. (24,158) (6,229) 20,708 Cash and cash equivalents at beginning of year.................... 73,556 79,785 59,077 --------- --------- --------- Cash and cash equivalents at end of year.......................... $ 49,398 $ 73,556 $ 79,785 ========= ========= =========
The accompanying notes are an integral part of these statements. 6 -------------------------------------------------------------------------------
1994 1993 1992 ------------ ------------ ------------ Reconciliation of Net Earnings (Loss) to Net Cash Provided by Operating Activities Net earnings (loss)........................................................ $ 2,159 $ (9,342) $(16,197) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization............................................ 74,186 70,200 68,163 (Gain) loss of dispositions of assets and other provisions, net.......... 7,923 5,769 5,254 Extraordinary losses, net of related income tax benefits................. 4,447 8,051 348 Additions to pre-construction reserve.................................... 3,400 2,900 3,050 Provision for bad debts.................................................. 5,185 4,741 6,297 Decrease (increase) in: Accounts and notes receivable............................................ (5,209) (3,010) (7,273) Other assets............................................................. 7,382 (770) (6,414) Increase in accounts payable, accrued expenses and other liabilities...................................................... 5,754 21,437 14,105 Deferred income taxes (benefit).......................................... 5,995 3,603 (5,286) Other.................................................................... 2,553 (2,430) 4,583 -------- -------- -------- Net cash provided by operating activities.................................. $113,775 $101,149 $ 66,630 ======== ======== ======== -------------------------------------------------------------------------------------------------------------------------- 1994 1993 1992 ------------ ------------ ------------ Schedule of Non-Cash Investing and Financing Activities Series A Convertible Preferred stock issued in satisfaction of mortgage debt............................................ $ 23,000 $ -- $ -- Mortgage debt extinguished on disposition of an interest in a property............................................. 15,681 -- -- Capital lease obligations incurred......................................... 613 1,541 2,509 Value of non-cash consideration given in connection with acquisitions of interests in properties.................................. 1,129 13,416 -- Mortgage and other debt assumed in connection with acquisitions of interests in properties.................................. -- 71,995 -- Capital lease obligation terminated on disposition of an interest in a property............................................. -- -- 17,000 Debt issued in connection with purchase of common stock of the Company........................................................... -- -- 12,000 Reduction in a capital lease obligation due to a modification of terms.................................................... -- -- 4,139 ======== ======== ========
7 The Rouse Company and Subsidiaries CONSOLIDATED CURRENT VALUE BASIS STATEMENTS OF CHANGES IN REVALUATION EQUITY Years ended December 31, 1994, 1993 and 1992 (in thousands) --------------------------------------------------------------------------------
1994 1993 1992 ------------ ------------ ------------ Revaluation equity at beginning of year.................................. $1,412,455 $1,223,744 $1,256,742 Revaluation equity attributable to interests in operating properties sold or disposed............................................ 5,609 -- (4,929) ---------- ---------- ---------- 1,418,064 1,223,744 1,251,813 ---------- ---------- ---------- Change in value of interests in operating properties in operation during entire year........................................ 101,168 226,258 (57,990) Value of interests in operating properties opened or acquired............ -- 7,075 20,494 Change in value of land in development and properties held for development and sale, including effects of sales and transfers to operating properties...................................... 1,007 (10,761) (2,330) ---------- ---------- ---------- Change in value of interests in operating properties, land in development and properties held for development and sale............................................... 102,175 222,572 (39,826) Change in value of other property........................................ (337) (456) (348) Change in value attributable to debt, exclusive of operating property debt.......................................................... 32,068 (3,818) -- Change in present value of potential income taxes, net of cost basis deferred income taxes............................................ (32,751) (29,587) 12,105 ---------- ---------- ---------- 101,155 188,711 (28,069) ---------- ---------- ---------- Revaluation equity at end of year........................................ $1,519,219 $1,412,455 $1,223,744 ========== ========== ==========
The accompanying notes are an integral part of these statements. 8 The Rouse Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1994, 1993 and 1992 -------------------------------------------------------------------------------- (1) Current value basis financial statements (a) Current value reporting The Company's interests in operating properties, properties held for development and sale and certain other assets have appreciated in value and, accordingly, their aggregate current value substantially exceeds their aggregate cost basis net book value determined in conformity with generally accepted accounting principles. The current value basis financial statements present information about the current values to the Company of its assets and liabilities and the changes in such values. The current value basis financial statements are not intended to present the current liquidation values of assets or liabilities of the Company or its net assets taken as a whole. Management believes that the current value basis financial statements more realistically reflect the underlying financial strength of the Company. The current values of the Company's interests in operating properties, including interests in unconsolidated real estate ventures, represent management's estimates of the value of these assets primarily as investments. These values will generally be realized through future cash flows generated by the operation of these properties over their economic lives. The current values of properties held for development and sale represent management's estimates of the value of these assets under long-term development and sales programs. Shareholders' equity on a current value basis was $1,614,245,000 or $27.75 per share of common stock at December 31, 1994 and $1,525,606,000 or $26.75 per share of common stock at December 31, 1993. The per share calculations at December 31, 1994 and 1993 assume the conversion of the Preferred stock. The process for estimating the current values of the Company's assets and liabilities requires significant estimates and judgments by management. These estimates and judgments are made based on information and assumptions considered by management to be adequate and appropriate in the circumstances; however, they are not subject to precise quantification or verification and may change from time to time as economic and market factors, and management's evaluation of them, change. The current value basis financial statements have been and will continue to be an integral part of the Company's annual report to shareholders but, consistent with previous practice, current value information will not be presented as part of the Company's quarterly reports to shareholders. The extensive market research, financial analysis and testing of results required to produce reliable current value information make it impractical to report this information on an interim basis. (b) Bases of valuation Interests in operating properties--The current value of the Company's interests in operating properties is the Company's share, based on its underlying ownership interest, of each property's equity value (i.e., the present value of its forecasted net cash flow and residual value, if applicable, after deducting payments on the debt specifically related to the property) plus the outstanding balance of related debt. The current value of the Company's interests in unconsolidated real estate ventures is the present value of the Company's share of forecasted net cash flow, including incentive management fees, and residual value of the respective real estate ventures. The forecasts of net cash flow generally cover periods of eleven years, are based on an evaluation of the history and future of each property and are supported by market studies, analyses of tenant lease terms and projected sales performance and detailed estimates of revenues and operating expenses. The present values of forecasted net cash flows are determined using internal rates of return which vary by project and between years as investor yield requirements change. The resulting values recognize the considerable differences between properties in terms of quality, age, outlook and risk as well as the prevailing yield requirements of investors for income-producing properties. Properties in development--Properties in development are carried at the same amounts as in the cost basis financial statements except that certain parcels of land are carried at their estimated current values. Management believes that properties in development have values in excess of stated costs, but has followed a practice of not recognizing any value increment until these properties are completed and operating. 9 Properties held for development and sale--The current value of properties held for development and sale is based on the present value of forecasted net cash flows under development and sales programs. These programs set forth the proposed timing and cost of all improvements necessary to bring the properties to saleable condition, the pace and price of sales and the costs to administer the programs and sell the properties. Debt--Debt and obligations under capital leases specifically related to interests in operating properties are carried at the same amount as in the cost basis balance sheets since the value of the Company's equity interest in each property is based on net cash flow after payments on the debt or leases. The current values of publicly-traded debt not specifically related to interests in properties are determined using quoted market prices. The current values of other debt and obligations under capital leases are carried at the same amount as in the cost basis balance sheets since the difference between the stated and estimated market interest rates for such obligations is not material. Deferred income taxes--Because the current value basis financial statements presume that values will generally be realized over the long-term through operating cash flows and not through liquidation, the deferred income tax obligation on a current value basis represents an estimate of the present value of income tax payments which may be made based on projections of taxable income through 2047. The projections of taxable income reflect all allowable deductions permitted under the Internal Revenue Code. The discount rates used to compute the present value of income tax payments are based on the internal rates of return used to compute the current values of assets, adjusted to reflect the Company's assessment of the greater uncertainty with respect to the ultimate timing and amounts of income tax payments. Other assets and liabilities--Substantially all other assets and liabilities are carried in the current value basis balance sheets at the lower of cost or net realizable value--the same stated value as in the cost basis balance sheets. (c) Revaluation equity The aggregate difference between the current value basis and cost basis of the Company's assets and liabilities is reported as revaluation equity in the shareholders' equity section of the consolidated current value basis balance sheets. The components of revaluation equity at December 31, 1994 and 1993 are as follows (in thousands):
1994 1993 ---------- ---------- Value of interests in operating properties: Retail centers................................. $1,981,731 $1,908,831 Office, mixed-use and other.................... 202,450 175,556 Value of properties held for development and sale..................................... 143,919 132,387 Value of land in development................... 10,524 10,377 ---------- ---------- Total equity value............................. 2,338,624 2,227,151 Debt related to equity interests............... 2,142,510 2,088,787 ---------- ---------- Total asset value.............................. 4,481,134 4,315,938 Depreciated cost of interests in operating properties and costs of properties held for development and sale, land in development and certain other assets......... (2,668,766) (2,611,354) Present value of potential income taxes related to revaluation equity, net of cost basis deferred income taxes.................. (330,132) (297,381) Other, net..................................... 36,983 5,252 ---------- ---------- Total revaluation equity....................... $1,519,219 $1,412,455 ========== ==========
10 (2) Summary of significant accounting policies (a) Description of business The Company is engaged in the acquisition, development and management of a diversified portfolio of income-producing properties located across the United States and in land development and sales, primarily in Columbia, Maryland. The income-producing properties consist of retail centers, office buildings and mixed-use and other properties. The retail centers are primarily regional and urban shopping centers. Office properties are primarily suburban buildings or components of mixed-use properties which also include retail and other uses. (b) Basis of presentation The consolidated financial statements include the accounts of The Rouse Company, all subsidiaries and partnerships in which it has a majority interest and control and the Company's proportionate share of the assets, liabilities, revenues and expenses of unincorporated real estate ventures in which it has joint interest and control with other venturers. Investments in ventures which represent less than a 20% interest are accounted for using the equity or cost methods as appropriate in the circumstances. Significant intercompany balances and transactions are eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingencies at the date of the financial statements and revenues and expenses recognized during the reporting period. Actual results could differ from those estimates. (c) Property The Company capitalizes construction and development costs of projects and costs of developing land and other property for sale. Certain other costs associated with the financing, leasing and opening of projects are capitalized as deferred costs of projects and are amortized over the periods benefited by the expenditures. The pre-construction stage of project development includes efforts and related costs to secure land control and zoning and complete other initial tasks which are essential to the development of a project. These costs are transferred to construction and development in progress when the pre-construction tasks are completed. The Company provides for the costs of potentially unsuccessful pre- construction efforts by charges to operations. Depreciation is computed by the straight-line method. The annual rate of depreciation for most of the Company's retail centers is based on a 55 year composite life and a salvage value of approximately 10%, producing an effective annual rate of depreciation for new properties of 1.8% of depreciable cost. The other retail centers, all office buildings and other properties are generally depreciated using composite lives ranging primarily from 40 years to 50 years, producing effective annual rates of depreciation for such properties ranging from 2.5% to 2.0%. Maintenance and repair costs are expensed against operations as incurred, while costs of significant improvements, replacements and major renovations are capitalized. (d) Sales of property Gains from sales of operating properties and revenues from land sales are recognized using the full accrual method provided that various criteria relating to the terms of the transactions and any subsequent involvement by the Company with the properties sold are met. Gains or revenues relating to transactions which do not meet the established criteria are deferred and recognized when the criteria are met or using the installment or cost recovery methods, as appropriate in the circumstances. For land sale transactions under terms of which the Company is required to perform additional services and incur significant costs after title has passed, revenues and costs of sales are recognized proportionately on a percentage of completion basis. Cost of land sales is generally determined as a specified percentage of land sales recognized for each land development project. The cost percentages used are based on estimates of development costs and sales revenues to completion of each project and are revised periodically for changes in estimates or in development plans. The specific identification method is used to determine cost of sales of certain parcels of land. 11 (e) Accounting for leases Leases which transfer substantially all the risks and benefits of ownership to tenants are considered finance leases and the present values of the minimum lease payments and the estimated residual values of the leased properties, if any, are accounted for as receivables. Leases which transfer substantially all the risks and benefits of ownership to the Company are considered capital leases and the present values of the minimum lease payments are accounted for as property and debt. Direct costs of negotiating and consummating tenant leases are deferred and amortized over the terms of the related leases. In general, minimum rent revenues are recognized when due from tenants; however, the straight-line basis, which averages annual minimum rents over the terms of leases, is used to recognize estimated collectible minimum rent revenues under leases which provide for varying rents over their terms. (f) Income taxes Deferred income taxes are accounted for using the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences between the financial reporting bases of assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards based on enacted tax rates expected to be in effect when such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including tax planning strategies and other factors. The effects of changes in tax laws or rates on deferred tax assets and liabilities are recognized in the period that includes the enactment date. (g) Investments in marketable securities and cash and cash equivalents Effective January 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This change in accounting did not have a material effect on the financial position or results of operations of the Company. Investments with maturities at dates of purchase in excess of three months are classified as marketable securities and carried at amortized cost as it is the Company's intention to hold these investments until maturity. Short-term investments with maturities at dates of purchase of three months or less are classified as cash equivalents, except that any such investments purchased with the proceeds of loans which may be expended only for specified purposes are classified as investments in marketable securities. At December 31, 1994 and 1993, investments in marketable securities consist primarily of U.S. government and agency obligations with maturities of less than one year and include $2,001,000 and $4,422,000, respectively, which are held for restricted uses. (h) Interest rate exchange agreements The Company makes limited use of interest rate exchange agreements, including interest rate caps and swaps, primarily to manage interest rate risk associated with variable rate debt. Under interest rate cap agreements, the Company makes initial premium payments to the counterparties in exchange for the right to receive payments from them if interest rates on the related variable rate debt exceed specified levels during the agreement period. Premiums paid are amortized to interest expense over the terms of the agreements using the interest method and payments receivable from the counterparties are accrued as reductions of interest expense. Under interest rate swap agreements, the Company and the counterparties agree to exchange the difference between fixed rate and variable rate interest amounts calculated by reference to specified notional principal amounts during the agreement period. Notional principal amounts are used to express the volume of these transactions, but the cash requirements and amounts subject to credit risk are substantially less. Amounts receivable or payable under swap agreements are accounted for as adjustments to interest expense on the related debt. Parties to interest rate exchange agreements are subject to market risk for changes in interest rates and risk of credit loss in the event of nonperformance by the counterparty. The Company deals only with highly rated financial institution counterparties (which, in certain cases, are also the lenders on the related debt) and does not expect that any counterparties will fail to meet their obligations. 12 (3) Real estate ventures The Company has joint interest and control with other venturers in various operating properties which are accounted for using the proportionate share method. These projects are managed by the Company. The consolidated financial statements include the Company's proportionate share of its historical cost of these projects and depreciation based on the Company's depreciation policies which differ, in certain cases, from those of the joint ventures. The condensed, combined balance sheets of these ventures and the Company's proportionate share of their assets, liabilities and equity at December 31, 1994 and 1993 and the condensed, combined statements of earnings of these ventures and the Company's proportionate share of their revenues and expenses for 1994, 1993 and 1992 are summarized as follows (in thousands):
Combined Proportionate Share ------------------- --------------------- 1994 1993 1994 1993 -------- -------- -------- -------- Total assets, primarily property......... $389,987 $426,826 $179,868 $194,253 ======== ======== ======== ======== Liabilities, primarily long-term debt.... $325,309 $368,198 $153,238 $171,142 Venturers' equity........................ 64,678 58,628 26,630 23,111 -------- -------- -------- -------- Total liabilities and venturers' equity.. $389,987 $426,826 $179,868 $194,253 ======== ======== ======== ========
Combined Proportionate Share ---------------------------- ------------------------- 1994 1993 1992 1994 1993 1992 -------- -------- -------- ------- ------- ------- Revenues........................... $143,573 $144,564 $163,414 $65,650 $66,432 $76,233 Operating and interest expenses.... 83,492 87,290 112,858 38,592 40,689 53,098 Depreciation and amortization...... 13,281 12,396 13,983 3,680 3,833 4,925 -------- -------- -------- ------- ------- ------- Net earnings....................... $ 46,800 $ 44,878 $ 36,573 $23,378 $21,910 $18,210 ======== ======== ======== ======= ======= =======
The Company holds minority interests in certain real estate ventures which are accounted for using the equity or cost methods, as appropriate. These projects are managed by the Company and the agreements relating to them generally provide for preference returns to the Company when operating results or sale or refinancing proceeds exceed specified levels. The condensed, combined balance sheets of these ventures at December 31, 1994 and 1993 and their condensed combined statements of earnings for 1994, 1993 and 1992 are summarized as follows (in thousands):
1994 1993 ---------- ---------- Total assets, primarily property............... $1,200,252 $1,307,611 ========== ========== Liabilities, primarily long-term debt.......... $ 373,303 $ 468,352 Venturers' equity.............................. 826,949 839,259 ---------- ---------- Total liabilities and venturers' equity........ $1,200,252 $1,307,611 ========== ==========
1994 1993 1992 -------- -------- -------- Revenues............................ $200,728 $197,333 $193,111 Operating and interest expenses..... 133,470 142,740 141,184 Depreciation and amortization....... 37,701 36,768 34,897 Loss on disposition................. 25,722 -- -- -------- -------- -------- Net earnings........................ $ 3,835 $ 17,825 $ 17,030 ======== ======== ========
The Company's share of net earnings of these ventures was $1,856,000 in 1994, $723,000 in 1993 and $456,000 in 1992. 13 (4) Opertaing properties Property and deferred costs of projects at December 31, 1994 and 1993 are summarized as follows (in thousands):
1994 1993 ---------- ---------- Buildings and improvements....................... $2,457,926 $2,346,074 Land............................................. 181,169 155,580 Deferred costs................................... 124,643 122,762 Receivables under finance leases................. 81,408 82,040 Investments in unconsolidated real estate ventures....................................... 68,195 80,512 Furniture and equipment.......................... 24,224 34,335 ---------- ---------- Total.......................................... $2,937,565 $2,821,303 ========== ==========
Depreciation expense for 1994, 1993 and 1992 was $59,914,000, $55,508,000 and $51,834,000, respectively. Amortization expense for 1994, 1993 and 1992 was $14,272,000, $14,692,000 and $16,329,000, respectively. (5) Properties in development Properties in development include construction and development in progress and pre-construction costs, net. The construction and development in progress accounts include land and land improvements of $11,216,000 at December 31, 1994 and $12,521,000 at December 31, 1993. Changes in pre-construction costs, net, for 1994 and 1993 are summarized as follows (in thousands):
1994 1993 ------- ------- Balance at beginning of year, before pre-construction reserve............................ $18,473 $17,741 Costs incurred........................................ 10,337 12,024 Costs transferred to construction and development in progress......................................... (3,663) (6,603) Costs transferred to operating properties............. (2,401) (3,484) Costs of unsuccessful projects written off............ (2,113) (1,205) ------- ------- 20,633 18,473 Less pre-construction reserve......................... 14,109 12,822 ------- ------- Balance at end of year, net........................... $ 6,524 $ 5,651 ======= =======
(6) Properties held for development and sale Properties held for development and sale at December 31, 1994 and 1993 are summarized as follows (in thousands):
1994 1993 -------- -------- Land under development.............................. $ 84,872 $ 70,027 Other land.......................................... 42,794 50,390 Finished land....................................... 4,627 11,410 Industrial building subject to a contract for sale.. 8,809 -- -------- -------- Total............................................. $141,102 $131,827 ======== ========
14 (7) Accounts and notes receivable Accounts and notes receivable at December 31, 1994 and 1993 are summarized as follows (in thousands):
1994 1993 -------- -------- Accounts receivable, primarily accrued rents and income under tenant leases............................. $ 82,318 $ 80,126 Notes receivable, including secured notes of $9,488 in 1994 and $11,285 in 1993..................... 21,008 21,836 -------- -------- 103,326 101,962 Less allowance for doubtful receivables................ 25,124 24,036 -------- -------- Total.................................................. $ 78,202 $ 77,926 ======== ========
Accounts and notes receivable due after one year were $62,437,000 and $59,226,000 at December 31, 1994 and 1993, respectively. (8) Pension plans The Company has a defined benefit pension plan (the "funded plan") covering substantially all employees. The Company's policy is to fund, at a minimum, current service costs and amortization of unfunded accrued liabilities subject to the limits of the Internal Revenue Code. In addition, the Company has separate, non-qualified unfunded retirement plans (the "unfunded plans") covering directors and employees whose defined benefits exceed the limits of the funded plan. Benefits under the pension plans are based on the participants' years of service and compensation. The net pension cost for the Company's pension plans includes the following components (in thousands):
1994 1993 1992 ------- ------- ------- Service cost................................... $ 2,904 $ 2,191 $ 2,058 Interest cost on projected benefit obligations. 3,425 2,991 2,977 Actual return on funded plan assets............ (1,930) (1,790) (1,551) Other, net..................................... 927 897 (123) ------- ------- ------- Net pension cost............................... $ 5,326 $ 4,289 $ 3,361 ======= ======= =======
The funded status of the Company's pension plans at December 31, 1994 and 1993 is summarized as follows (in thousands):
1994 1993 ----------------------- ----------------------- Funded Unfunded Funded Unfunded Plan Plans Plan Plans -------- -------- -------- -------- Accumulated benefit obligations: Vested.................................. $ 24,059 $ 9,380 $ 26,667 $ 7,238 Nonvested............................... 3,040 338 3,783 290 -------- -------- -------- -------- Total................................... $ 27,099 $ 9,718 $ 30,450 $ 7,528 ======== ======== ======== ======== Projected benefit obligations............. $ 30,173 $10,746 $ 34,295 $ 7,685 Plan assets at fair value................. (27,465) -- (24,310) -- -------- -------- -------- -------- Excess of projected benefit obligations over plan assets............ 2,708 10,746 9,985 7,685 Unamortized prior service cost............ (2,359) (3,559) (3,241) (2,580) Unrecognized net gain (loss).............. (3,836) 391 (7,612) 969 Unrecognized net obligation at January 1, 1987, net of amortization.... (730) (945) (797) (1,080) Additional minimum liability.............. -- 3,085 7,805 2,534 -------- -------- -------- -------- Accrued (prepaid) pension cost included in accrued expenses..................... $ (4,217) $ 9,718 $ 6,140 $ 7,528 ======== ======== ======== ========
15 The projected benefit obligations for the plans were determined using discount rates of 8.875%, 7.5% and 8.25% in 1994, 1993 and 1992, respectively. The rate of compensation increases assumed was 4.5% for 1994, 1993 and 1992. The expected long-term rate of return on plan assets of the funded plan was 11% in 1994, 1993 and 1992. The assets of the funded plan consist primarily of pooled separate accounts with an insurance company and marketable securities. (9) Other Postretirement and Postemployment Benefits The Company has a retiree benefits plan that provides postretirement medical and life insurance benefits to full-time employees who meet minimum age and service requirements. The Company pays the full cost of participants' life insurance coverage and makes contributions based on years of service to the cost of participants' medical insurance coverage, subject to a maximum annual contribution. Prior to 1993, the Company accounted for postretirement benefit costs on the cash basis, and the cost of these benefits was not material in 1992. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which requires that postretirement benefit costs be recognized on the accrual basis as employees render the services required to be eligible for benefits. This change in accounting did not have a material effect on the financial position or results of operations of the Company, after considering recoveries of employee benefit costs under tenant leases. The postretirement benefit cost includes the following components (in thousands):
1994 1993 ------ ------ Service cost.................................... $ 741 $ 603 Interest cost on accumulated postretirement benefit obligation............................ 823 785 Amortization of transition obligation at January 1, 1993............................... 485 484 ------ ------ Net postretirement benefit cost............... $2,049 $1,872 ====== ======
The status of the Company's postretirement benefit plan at December 31, 1994 and 1993 is summarized as follows (in thousands):
1994 1993 ------- ------- Accumulated postretirement benefit obligation: Retirees...................................... $ 2,964 $ 3,130 Other fully eligible participants............. 1,637 2,016 Other active participants..................... 5,748 6,428 ------- ------- 10,349 11,574 Unrecognized net gain (loss).................... 1,028 (1,142) Unrecognized transition obligation.............. (8,719) (9,204) ------- ------- Accrued postretirement benefit cost included in accrued expenses.............................. $ 2,658 $ 1,228 ======= =======
The weighted average discount rates used to determine the accumulated postretirement benefit obligation were 8.875% and 7.5% at December 31, 1994 and 1993, respectively. The transition obligation at January 1, 1993 is being amortized to postretirement benefit cost over 20 years. Because the Company's contributions are fixed, health care cost trend rates do not affect the accumulated postretirement benefit obligation. Effective January 1, 1993, the Company also adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits." This change in accounting did not have a material effect on the financial position or results of operations of the Company, after considering recoveries of employee benefit costs under tenant leases. 16 (10) Debt In recognition of the various characteristics of real estate financing, debt is classified as follows: (a) "Property debt not carrying a Parent Company guarantee of repayment" which is subsidiary company debt having no express written obligation which would require the Company to repay the principal amount of such debt during the full term of the loan (nonrecourse loans); and (b) "Parent Company debt and debt carrying a Parent Company guarantee of repayment" which is debt of the Company and subsidiary company debt with an express written obligation of the Company to repay the principal amount of such debt during the full term of the loan (Company and recourse loans). With respect to property debt not carrying a Parent Company guarantee of repayment, the Company has in the past and may in the future, under some circumstances, support those subsidiary companies whose annual obligations, including debt service, exceed operating revenues. At December 31, 1994 and 1993, property debt not carrying a Parent Company guarantee of repayment includes $660,614,000 and $643,191,000, respectively, of mortgages and bonds relating to operating properties of subsidiary companies which are subject to agreements with lenders requiring the Company to provide support for operating and debt service costs, where necessary, for defined periods or until specified conditions relating to the operating results of the properties are met. Debt at December 31, 1994 and 1993 is summarized as follows (in thousands):
1994 1993 ---------- ---------- Mortgages and bonds................... $2,063,978 $1,923,791 Convertible subordinated debentures... 130,000 130,000 Other loans........................... 278,898 356,706 ---------- ---------- Total............................... $2,472,876 $2,410,497 ========== ==========
Mortgages and bonds are secured by deeds of trust or mortgages on real estate projects and general assignments of rents. This debt matures in installments through 2025 and, at December 31, 1994, bears interest at a weighted average effective interest rate of 8.74%, including lender participations. At December 31, 1994, approximately $691,682,000 of this debt is subject to payment of additional interest based on the operating results of the related properties in excess of stated levels. In addition, certain of such debt provides for payments to lenders of shares of the related properties' residual values, if any, upon sale or refinancing. The convertible subordinated debentures bear interest at 5.75% and mature in 2002. The debentures are convertible into one share of common stock for each $28.63 of par value. Other loans include $120,000,000 of 8.5% unsecured notes, issued in 1993 and due in 2003, various property acquisition and land loans, credit line advances and certain other borrowings. These loans include aggregate unsecured borrowings of $259,751,000 and $268,178,000 at December 31, 1994 and 1993, respectively, and at December 31, 1994, bear interest at a weighted average effective interest rate of 8.62%. The annual maturities of debt as of December 31, 1994 are summarized as follows (in thousands):
Company and Nonrecourse Recourse Loans Loans Total -------------- ------------ ---------- 1995..................... $ 28,851 $ 99,404 $ 128,255 1996..................... 39,941 45,398 85,339 1997..................... 19,764 118,888 138,652 1998..................... 16,414 63,385 79,799 1999..................... 26,046 115,460 141,506 Subsequent to 1999....... 343,415 1,555,910 1,899,325 -------- ---------- ---------- Total.................. $474,431 $1,998,445 $2,472,876 ======== ========== ==========
Approximately $56,337,000 of the debt maturing in 1995 relates to a retail center mortgage due in December. The Company expects to refinance this mortgage on a long-term basis at or prior to its scheduled maturity. 17 At December 31, 1994, the Company had entered into interest rate cap agreements which expire in December 1996 and April 1997. These agreements limit the average interest rate on $58,250,000 of mortgages to 8.19% through April 1995 and to 9.86% from May 1995 through April 1997 and limit the interest rate on advances up to $55,000,000 under a line of credit to 11.55% through December 1996. The interest rate swap agreements outstanding at December 31, 1994 were not material. Interest rate exchange agreements did not have a material effect on the weighted average effective interest rates on debt at December 31, 1994 and 1993 or interest expense for the years ended December 31, 1994, 1993 and 1992. Total interest costs were $220,971,000 in 1994, $219,705,000 in 1993 and $221,907,000 in 1992 of which $7,388,000, $8,899,000 and $15,098,000 were capitalized, respectively. During 1994, 1993, and 1992, the Company incurred extraordinary losses, related to extinguishments of debt prior to scheduled maturity or required partial early redemptions of debt, of $4,447,000, $8,051,000 and $348,000, respectively, net of related deferred income tax benefits of $2,377,000, $4,271,000 and $182,000, respectively. Proceeds from the Company's refinancings of the related properties, and in 1993, from the issuances of the 8.5% unsecured notes and Preferred stock were used to retire the debt extinguished and to fund the prepayment penalties, where applicable. In January 1995, the Company extinguished approximately $96,800,000 of property debt prior to its scheduled maturity. In connection with this transaction, the Company incurred an extraordinary loss of approximately $7,100,000, net of related deferred income tax benefits of $3,800,000. Proceeds from a loan of $96,800,000 obtained in January 1995 and available cash were used to retire the debt and fund the prepayment penalty. The loan is secured by the property, due in February 1996, and bears interest at a variable rate. The Company expects to refinance this loan on a long-term basis at or prior to its scheduled maturity. At December 31, 1994, the Company had available unused lines of credit totalling $159,720,000. In February 1995, the Company registered $150,000,000 of unsecured notes for issuance to the public from time to time through February 1997. The notes can be issued, subject to market conditions, for varying terms (nine months to 30 years) at fixed or floating rates based upon market indices at the time of issuance. The agreements relating to certain of the lines of credit, the 8.5% unsecured notes, the unsecured notes registered in February 1995, and certain other loans impose limitations on the Company. The most restrictive of these limit the Company's ability to incur certain types of additional debt if the Company does not maintain specified debt service coverage ratios. The agreements also impose restrictions on sale, lease and certain other transactions, subject to various exclusions and limitations. These restrictions have not limited the Company's normal business activities. In accordance with the Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," the estimated fair value of debt is determined based on quoted market prices for publicly-traded debt and on the discounted estimated future cash payments to be made for other debt. The discount rates used approximate current market rates for loans or groups of loans with similar maturities and credit quality. The estimated future payments include scheduled principal and interest payments, cash flows under interest rate exchange agreements, where applicable, and lenders' participations in operating results and residual values of the related properties, where applicable. The carrying amount and estimated fair value of the Company's debt at December 31, 1994 and 1993 are summarized as follows (in thousands):
1994 1993 ------------------------- ------------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value ---------- ---------- ---------- ---------- Fixed rate debt........ $2,152,270 $2,105,794 $2,110,163 $2,162,801 Variable rate debt..... 320,606 320,606 300,334 300,334 ---------- ---------- ---------- ---------- $2,472,876 $2,426,400 $2,410,497 $2,463,135 ========== ========== ========== ==========
Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement of the Company's debt obligations at fair value may not be possible and may not be a prudent management decision. 18 (11) Operating results and assets by line of business Operating results before gain (loss) on dispositions of assets and other provisions, net, income taxes and extraordinary losses are summarized by line of business as follows (in thousands):
1994 1993 1992 -------- -------- -------- Operating properties: Revenues............................... $633,047 $607,630 $565,117 Operating expenses, exclusive of provision for bad debts, depreciation and amortization....... 322,278 322,793 304,687 Interest expense....................... 196,690 189,805 184,943 Provision for bad debts................ 5,185 4,741 6,297 Depreciation and amortization.......... 74,186 70,200 68,163 -------- -------- -------- 34,708 20,091 1,027 -------- -------- -------- Land sales: Revenues............................... 35,232 35,313 29,137 Operating costs and expenses........... 19,877 19,387 16,330 Interest expense....................... 5,028 4,093 2,959 -------- -------- -------- 10,327 11,833 9,848 -------- -------- -------- Development: Operating costs and expenses........... 6,494 3,853 4,421 Interest expense....................... 495 495 495 -------- -------- -------- (6,989) (4,348) (4,916) -------- -------- -------- Corporate: Interest income........................ 2,892 3,862 2,851 Interest expense....................... 11,370 16,413 18,412 Other expenses......................... 8,309 6,184 5,927 -------- -------- -------- (16,787) (18,735) (21,488) -------- -------- -------- Operating income (loss).................. $ 21,259 $ 8,841 $(15,529) ======== ======== ========
The assets by line of business at December 31, 1994, 1993 and 1992 are as follows (in thousands):
1994 1993 1992 ---------- ---------- ---------- Operating properties.................. $2,617,045 $2,556,237 $2,396,900 Land sales............................ 136,986 140,673 140,227 Development........................... 68,863 63,656 96,570 Corporate............................. 92,966 114,416 92,584 ---------- ---------- ---------- Total............................... $2,915,860 $2,874,982 $2,726,281 ========== ========== ==========
19 (12) Income taxes Income tax expense (benefit) is reconciled to the amount computed by applying the Federal corporate tax rate as follows (in thousands):
1994 1993 1992 ------ ------ ------- Tax (benefit) at statutory rate on earnings (loss) before income taxes and extraordinary losses........................................ $4,668 $1,075 $(7,066) State income taxes, net of Federal income tax benefit............................ 2,062 1,398 1,374 Effect of increase in Federal tax rate.......... -- 1,890 -- Costs incurred in connection with a private placement of common stock of the Company....................................... -- -- 758 ------ ------ ------- Income tax expense (benefit).................... $6,730 $4,363 $(4,934) ====== ====== ======= Effective rate.................................. 50.5% 142.0% 23.7% ====== ====== =======
The net deferred tax obligations at December 31, 1994 and 1993 consist of total deferred tax assets of approximately $203,116,000 and $191,071,000, respectively, and total deferred tax liabilities of approximately $285,713,000 and $270,050,000, respectively. The tax effects of temporary differences between the financial reporting and income tax bases of assets and liabilities that are included in the net deferred tax obligations at December 31, 1994 and 1993 relate to the following (in thousands):
1994 1993 --------- --------- Property, primarily differences in depreciation and amortization and treatment of interest and certain other costs............................. $ 260,457 $ 245,642 Accounts and notes receivable, primarily differences in timing of recognition of rent revenues and doubtful receivables................... 5,070 4,243 Accrued expenses, primarily differences in timing of recognition of interest, compensation and pension expenses............................................ (58) (460) Effect of operating loss and tax credit carryforwards. (182,872) (170,446) --------- --------- Total............................................... $ 82,597 $ 78,979 ========= =========
The net operating losses carried forward from December 31, 1994 for Federal income tax purposes aggregate approximately $510,000,000. The loss carryforward will begin to expire in 1998. As indicated above, the deferred tax liabilities relate primarily to differences in depreciation and amortization of property and treatment of interest and certain other property-related costs for financial reporting and income tax purposes and the deferred tax assets relate primarily to the tax effects of operating loss carryforwards. The ultimate realization of these assets is dependent upon the generation of sufficient future taxable income to use the operating loss carryforwards before they expire. Based on the scheduled reversal of the deferred tax liabilities and projections of future taxable income over the operating loss carryforward period, management believes it is more likely than not that the Company will realize the benefits of the operating loss and tax credit carryforwards at December 31, 1994. 20 (13) Gain (loss) on dispositions of assets and other provisions, net Gain (loss) on dispositions of assets and other provisions, net, is summarized as follows (in thousands):
1994 1993 1992 ------- ------- ------- Dispositions of interests in properties........... $(5,284) $ -- $ -- Provisions for loss on investments in properties.. (2,212) (5,432) -- Costs incurred in connection with a private placement of common stock of the Company........ -- -- (2,231) Provision for loss on certain investments......... -- -- (4,156) Other, net........................................ (427) (337) 1,133 ------- ------- ------- Total........................................... $(7,923) $(5,769) $(5,254) ======= ======= =======
During 1994, the Company disposed of its interests in two retail centers, a hotel and an office building and incurred losses of $8,045,000. These losses were partially offset by a gain of $2,761,000 related to the disposition of an interest in a retail center the Company continues to manage. The provision for loss on investment in a property in 1994 relates to an industrial building which is subject to a contract for sale. The provision for loss on investment in a property in 1993 relates to a retail center property and was recognized based on management's determination that the Company would not continue to support the property (which is financed by nonrecourse loans) under the existing arrangements with lenders, public authorities and others involved and that it was unlikely that the Company would recover all of its investment in the property based on forecasts of future cash flows. The costs incurred in connection with a private placement of common stock of the Company in 1992 relate to the purchase by the Company and seven institutional investors of 9,500,000 shares of common stock previously owned by Trizec Investments Corporation as discussed in note 15. The provision for loss on certain investments in 1992 was recognized based on management's determination that declines in the market or fair values of an investment in an equity security and certain other investments were other than temporary. (14) Series A Convertible Preferred stock The Company has authorized issuance of 50,000,000 shares of Preferred stock of 1c par value per share of which 4,505,168 shares have been classified as Series A Convertible Preferred. At December 31, 1994 and 1993, 4,505,041 and 4,025,000 shares, respectively were issued. The Company issued 480,168 shares of the Series A Convertible Preferred stock valued at $23,000,000 in December 1994 in connection with a modification of terms of a debt agreement related to a retail center. The shares of Series A Convertible Preferred stock have a liquidation preference of $50 per share and earn dividends at an annual rate of 6.5% of the liquidation preference. At the option of the holders, each share of Preferred stock is convertible into shares of the Company's common stock at a conversion rate of approximately 2.35 shares of common stock for each share of Preferred stock, subject to adjustment in certain circumstances. In addition, beginning March 1, 1996, the shares of Preferred stock are redeemable for shares of common stock at the option of the Company, subject to certain conditions. (15) Common stock At December 31, 1994, shares of authorized and unissued common stock are reserved as follows: (a) 2,672,282 shares for issuance under the Company's stock option and stock bonus plans; (b) 4,540,692 shares for conversion of the convertible subordinated debentures; and (c) 10,600,096 shares for the conversion of the Preferred stock; and (d) 500,000 shares for exercise of the warrants issued to Trizec Investments Corporation discussed below. 21 The Company's stock option plans provide for the grant of options and stock appreciation rights to directors, officers and employees. A summary of changes in the outstanding stock options under the stock option plans is as follows:
1994 1993 1992 --------- --------- --------- Balance at beginning of year..... 1,709,302 1,438,542 1,288,152 Options granted.................. 566,000 350,000 285,000 Options exercised: $ 5.33 per share............... -- -- (91,410) $11.17 per share............... -- (41,340) (7,800) $11.83 per share............... (5,700) (2,400) (600) $15.33 per share............... (3,000) (9,500) (6,000) Options cancelled................ (38,500) (26,000) (28,800) --------- --------- --------- Balance at end of year........... 2,228,102 1,709,302 1,438,542 ========= ========= =========
The options outstanding at December 31, 1994 are exercisable, subject to, in some instances, certain vesting requirements, as follows: 111,000 shares at $27.00; 619,000 shares at $23.75; 22,500 shares at $21.33; 350,000 shares at $19.75; 327,500 shares at $19.00; 8,000 shares at $18.87; 230,500 shares at $18.00; 174,602 shares at $15.33; 285,000 shares at $14.75; and 100,000 shares at $13.50. Under the Company's stock bonus plans, shares of common stock may be awarded to certain officers and employees. Shares awarded under the plans may be subject to forfeiture restrictions which lapse at defined annual rates. In connection with the stock bonus plan awards, the Company may make loans to the recipients for the payment of related income taxes, which loans may be forgiven subject to the recipients' continued employment. The total loans outstanding at December 31, 1994 and 1993 were $2,620,000 and $2,256,000, respectively. The Company recognizes any forgiven loan installments, amortization of the fair value of the stock awarded and certain related costs as compensation costs over the terms of the awards. Such costs amounted to $1,663,000 in 1994, $2,415,000 in 1993 and $2,078,000 in 1992. In September 1992, seven investors acquired 8,500,000 shares of the Company's common stock in a private placement from Trizec Investments Corporation (Trizec). In addition, the Company acquired 1,000,000 shares of its common stock from Trizec for a note payable of $12,000,000, which was due and paid in 1993. Stock warrants allowing Trizec to purchase 500,000 shares of common stock at a price of $18 per share until September 1997 were issued by the Company to facilitate the transaction. The Company's share of the costs incurred in this transaction, including the value of the warrants issued, is included in gain (loss) on dispositions of assets and other provisions, net. (16) Leases The Company, as lessee, has entered into operating leases expiring at various dates through 2082. Rents under such leases aggregated $11,927,000 in 1994, $17,483,000 in 1993 and $16,397,000 in 1992, including contingent rents, based on the operating performance of the related properties, of $6,232,000, $10,006,000 and $8,106,000, respectively. In addition, real estate taxes, insurance and maintenance expenses are obligations of the Company. The minimum rent payments due under operating leases in effect at December 31, 1994 are summarized as follows (in thousands): 1995................................................................. $ 5,675 1996................................................................. 5,640 1997................................................................. 5,583 1998................................................................. 5,583 1999................................................................. 5,583 Subsequent to 1999................................................... 246,445 -------- Total.............................................................. $274,509 ========
22 Obligations under capital leases relate to leases of the Company's headquarters building and certain operating properties and equipment expiring at various dates through 2039. The property and other asset accounts include costs of $70,651,000 and $73,054,000 and accumulated depreciation of $21,249,000 and $20,010,000 at December 31, 1994 and 1993, respectively, related to these leases.The minimum rent payments due under capital leases and their present value at December 31, 1994 are summarized as follows (in thousands): 1995............................................................ $ 10,383 1996............................................................ 8,875 1997............................................................ 8,489 1998............................................................ 7,688 1999............................................................ 7,330 Subsequent to 1999.............................................. 201,771 --------- 244,536 Imputed interest at rates ranging from 5.59% to 13.00%.......... (184,492) --------- Obligations under capital leases, net........................... $ 60,044 =========
Space in the Company's operating properties is leased to approximately 6,400 tenants. In addition to minimum rents, the majority of the retail center leases provide for percentage rents when the tenants' sales volumes exceed stated amounts, and the majority of the retail center and office leases provide for other rents which reimburse the Company for certain of its operating expenses. Rents from tenants are summarized as follows (in thousands):
1994 1993 1992 -------- -------- -------- Minimum rents....................... $303,425 $289,422 $267,381 Percentage rents.................... 17,144 19,133 19,830 Other rents......................... 220,532 219,168 203,223 -------- -------- -------- Total............................. $541,101 $527,723 $490,434 ======== ======== ========
The minimum rents to be received from tenants under operating leases in effect at December 31, 1994 are summarized as follows (in thousands): 1995.............................................................. $ 282,022 1996.............................................................. 260,096 1997.............................................................. 234,565 1998.............................................................. 202,844 1999.............................................................. 170,221 Subsequent to 1999................................................ 581,777 ---------- Total........................................................... $1,731,525 ==========
Certain of the Company's tenant leases are accounted for as finance leases since the terms of the leases transfer substantially all of the risks and benefits of ownership to the tenants. Rents under such leases aggregated $8,511,000 in 1994, $6,601,000 in 1993 and $7,912,000 in 1992. The minimum rent payments to be received from tenants under finance leases in each of the next five years are approximately $8,900,000. The net investment in finance leases at December 31, 1994 and 1993 is summarized as follows (in thousands):
1994 1993 -------- --------- Total minimum rent payments to be received over lease terms.................................. $175,609 $ 184,120 Estimated residual values of leased properties...... 3,123 3,123 Unearned income..................................... (97,324) (105,203) -------- --------- Net investment in finance leases.................. $ 81,408 $ 82,040 ======== =========
23 (17) Other commitments and contingencies Commitments for the construction and development of properties in the ordinary course of business and other commitments not set forth elsewhere amount to approximately $13,000,000 at December 31, 1994. At December 31, 1994, subsidiaries of the Company have contingent liabilities of approximately $26,917,000 with respect to future minimum rents under long- term lease obligations of certain joint ventures and approximately $4,300,000 with respect to bank letters of credit issued to secure their obligations under certain agreements. In addition, the Company had contingent liabilities with respect to debt of certain joint ventures aggregating approximately $37,682,000. On November 6, 1990, Robert P. Guastella Equities, Inc. ("Plaintiff"), a former tenant at the Riverwalk Shopping Center in New Orleans, Louisiana ("Riverwalk"), which is owned and operated by New Orleans Riverwalk Associates, an affiliate of the Company ("NORA"), filed suit in the Civil District Court of Orleans Parish, Louisiana against NORA, the Company, two Company affiliates, and a partner of NORA (collectively, "Defendants"). Plaintiff alleges that Defendants breached Plaintiff's lease agreement with NORA for the operation of a restaurant at Riverwalk and that as a result of these breaches it suffered losses and could not pay the rentals due under the lease agreement, as a result of which the lease and its tenancy were terminated by NORA. Plaintiff sought damages of approximately $600,000 for these alleged breaches and $33,000,000 for alleged lost future profits which it claimed it would have earned had its lease not been terminated. The Defendants filed answers denying the claims of Plaintiff, asserting other defenses and raising a counterclaim. The case was tried before a jury and, on October 28, 1993, the jury returned a verdict against Defendants upon which judgment was entered by the trial court on January 7, 1994, in the total net amount of approximately $9,128,000 (which included a net award for lost future profits of approximately $8,640,000) plus interest from the date the suit was filed and attorneys' fees in an amount to be determined. On May 6, 1994, the trial court denied all post-trial motions of both Plaintiffs and Defendants and entered an amended judgment in which it awarded Plaintiff $450,000 in attorneys' fees and awarded Defendants $25,000 in attorneys' fees. Defendants believe that the verdict and judgment as entered to date are contrary to the facts and applicable law. On May 23, 1994, Defendants appealed this judgment to the Louisiana Court of Appeal, Fourth District. Defendants intend to vigorously pursue their rights of appeal. Oral argument is scheduled for March 8, 1995. A decision is expected in the second or third quarter of 1995. An estimate of the ultimate possible loss in the case cannot be made at this time, although a reasonably possible range of loss could be as high as the full amount of the damages awarded in the case, together with interest accrued and attorneys' fees awarded. The Company and certain of its subsidiaries are defendants in various other litigation matters arising in the ordinary course of business, some of which involve claims for damages that are substantial in amount. Some of these litigation matters are covered by insurance. In the opinion of management, adequate provisions (less than $1,500,000 in the aggregate) have been made for losses with respect to all litigation matters (including with respect to the above-described suit), where appropriate, and the ultimate resolution of all such litigation matters is not likely to have a material effect on the consolidated financial position of the Company. Due to the Company's modest and fluctuating net earnings (loss), it is not possible to predict whether the resolution of these matters is likely to have a material effect on the Company's consolidated net earnings (loss) and it is, therefore, possible that the resolution of these matters could have such a material effect in any future quarter or annual fiscal period. (18) Earnings (loss) per share of common stock Earnings (loss) per share of common stock is computed by dividing net earnings (loss), after deducting dividends on Preferred stock, by the weighted average number of shares of common stock outstanding during the year. The numbers of shares used in the computations were 47,565,000 for 1994, 47,411,000 for 1993 and 47,994,000 for 1992. Common stock equivalents have not been used in computing earnings (loss) per common share because their effects are not material or are anti-dilutive. 24 -------------------------------------------------------------------------------- Five Year Comparison of Selected Financial Data Year ended December 31 (in thousands, except per share data) --------------------------------------------------------------------------------
1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- Operating results: Revenues from continuing operations................. $ 671,171 $ 646,805 $ 597,105 $ 573,498 $ 529,570 Earnings (loss) from continuing operations.......... 6,606 (1,291) (15,849) 2,424 (1,165) Earnings (loss) from continuing operations per share of common stock............................. (.14) (.27) (.33) .05 (.07) Earnings before depreciation and deferred taxes from operations...................... 94,710 78,281 52,282 46,820 50,290 Cash flows from: Operating activities................................ 113,775 101,149 66,630 67,226 35,057 Investing activities................................ (178,551) (154,446) (144,836) (96,210) (248,532) Financing activities................................ 40,618 47,068 98,914 17,271 246,968 Total assets-cost basis............................... 2,915,860 2,874,982 2,726,281 2,637,452 2,614,877 Total assets-current value basis...................... 4,736,961 4,588,636 4,217,819 4,174,093 4,362,153 Debt, capital leases and Redeemable Preferred stock... 2,532,920 2,473,596 2,498,983 2,374,527 2,344,095 Shareholders' equity (deficit): Historical cost basis............................... 95,026 113,151 (34,848) 17,328 25,339 Current value basis................................. 1,614,245 1,525,606 1,188,896 1,274,070 1,470,088 Shareholders' equity (deficit) per share of common stock: Historical cost basis............................... 1.63 1.98 (.74) .36 .53 Current value basis................................. 27.75 26.75 25.50 26.60 30.10 Dividends per share of common stock................... .68 .62 .60 .60 .60 Dividends per share of convertible Preferred stock.... 3.25 2.83 -- -- -- Weighted average common shares outstanding............ 47,565 47,411 47,994 48,157 48,019 Market price per share of common stock at year end.... 19.25 17.75 18.00 18.25 14.50 Market price per share of convertible Preferred stock at year end......................... 48.50 53.75 -- -- --
Note--Historical cost basis shareholders' equity per share of common stock and current value basis shareholders' equity per share of common stock assume the conversion of the Series A Convertible Preferred stock. -------------------------------------------------------------------------------- Interim Financial Information (Unaudited) Interim consolidated results of operations are summarized as follows (in thousands, except per share data): --------------------------------------------------------------------------------
Quarter ended ------------------------------------------------------------------------------------ December September June March December September June March 31, 1994 30, 1994 30, 1994 31, 1994 31, 1993 30, 1993 30, 1993 31, 1993 -------- --------- -------- -------- -------- --------- -------- -------- Revenues........................... $172,325 $172,650 $163,662 $162,534 $173,842 $165,880 $154,341 $152,742 Operating income (loss)............ 9,922 7,314 1,853 2,170 7,053 2,118 975 (1,305) Earnings (loss) before extraordinary losses............... 4,161 4,146 549 (2,250) 740 (924) 436 (1,543) Net earnings (loss)................ 2,767 4,146 (2,030) (2,724) (515) (4,414) (1,912) (2,501) ======== ======== ======== ======== ======== ======== ======== ======== Earnings (loss) per common share: Earnings (loss) before extraordinary losses............... $ .02 $ .02 $ (.06) $ (.12) $ (.05) $ (.09) $ (.06) $ (.07) Extraordinary losses............... (.03) -- (.05) (.01) (.03) (.07) (.05) (.02) -------- -------- -------- -------- -------- -------- -------- -------- Total.............................. $ (.01) $ .02 $ (.11) $ (.13) $ (.08) $ (.16) $ (.11) $ (.09) ======== ======== ======== ======== ======== ======== ======== ========
Note--The net losses for the quarters ended December 31, 1994 and March 31, 1994 include provisions for losses on investments in operating properties of $1,644,000 ($.03 per share) and $5,023,000 ($.11 per share), respectively. The loss for the quarter ended March 31, 1994 was partially offset by a gain related to the disposition of an interest in a retail center the Company continues to manage of $1,908,000 ($.04 per share). The net loss for the quarter ended December 31, 1993 includes a provision for loss on investment in a retail center of $3,531,000 ($.07 per share). -------------------------------------------------------------------------------- Price of Common Stock and Dividends The Company's common stock is traded over the counter. The bid prices and dividends per share were as follows: --------------------------------------------------------------------------------
Quarter ended ------------------------------------------------------------------------------------ December September June March December September June March 31, 1994 30, 1994 30, 1994 31, 1994 31, 1993 30, 1993 30, 1993 31, 1993 -------- --------- -------- -------- -------- --------- -------- -------- High bid price..................... 19 1/2 20 20 19 21 20 1/2 18 3/4 19 Low bid price...................... 17 1/4 18 3/4 18 16 1/4 17 3/4 15 16 15 3/4 Dividends.......................... .17 .17 .17 .17 .17 .15 .15 .15
-------------------------------------------------------------------------------- Number of Holders of Common Stock The number of holders of record of the Company's common stock as of March 1, 1995 was 2,462. 25 The Rouse Company and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -------------------------------------------------------------------------------- General The Company's primary business is the acquisition, development and management of income-producing real estate projects. The Company operates a diversified portfolio of real estate properties located across the United States. In addition, the Company develops and sells land, primarily in Columbia, Maryland. Management believes that the Company's financial position is sound and that its liquidity and capital resources are adequate. As shown in the supplemental current value basis financial statements, current value shareholders' equity, which is an important indication of the Company's financial strength, was $1.61 billion at December 31, 1994, up from $1.53 billion at December 31, 1993. The Company has continued to achieve strong financial results in recent periods, despite the generally difficult market conditions in the real estate and retailing industries. Current value shareholders' equity per share increased 4% in 1994 and 5% 1993 after decreasing in each of the three preceding years. Earnings before depreciation and deferred taxes (EBDT), which is defined and discussed in more detail below, increased 21% in 1994 and 50% in 1993. These results have been made possible by several factors, including the continued strong performance of the Company's larger, major market retail centers and Columbia land sales operations, refinancing of a significant amount of project- related debt at lower interest rates, particularly in 1993 and the first half of 1994, and, to a lesser extent, dispositions or modifications of the terms of agreements relating to properties which were performing below expectations. Management believes that the Company's operating results should continue to improve in 1995, although the rate of growth in EBDT is likely to slow. For the longer term, management believes that the outlook for new development is better than it has been in many years, and the Company is aggressively pursuing a number of new regional shopping center development opportunities. The Company also intends to continue to focus development efforts on expansion opportunities at existing retail centers, projects in Columbia and special situations that do not involve significant risk. Finally, management is actively reviewing and evaluating the Company's portfolio of retail center properties to identify those that may not have characteristics and opportunities consistent with the Company's long-term objectives. While this process is still in progress and no decisions have been reached, it is possible that the Company will decide to sell selected properties, particularly smaller properties in smaller markets. Operating Results This discussion and analysis of operating results covers each of the Company's four business segments as management believes that a segment analysis provides the most effective means of understanding the Company's business. Note 11 to the consolidated financial statements and the elements of revenues and expenses set forth in the Five Year Summary of Earnings Before Depreciation and Deferred Taxes from Operations and Net Earnings (Loss) on page 50 should be referred to when reading this discussion. Operating Properties: The Company reports the results of its operating properties in two categories: retail centers ("retail" properties) and office, mixed-use and other properties ("office/mixed-use" properties). The Company's tenant leases provide the foundation for the performance of its retail and office/mixed-use properties. In addition to minimum rents, the majority of retail and office tenant leases provide for other rents which reimburse the Company for most of its operating expenses. Substantially all of the Company's retail leases also provide for additional rent based on tenant sales (percentage rent) in excess of stated levels. As leases expire, space is released, minimum rents are generally adjusted to market rates, expense reimbursement provisions are updated and new percentage rent levels are established for retail leases. Most of the Company's operating properties are financed with long term, fixed rate, nonrecourse debt and, therefore, are not directly affected by changes in interest rates. Although the interest rates on this debt do not fluctuate, certain loans provide for additional payments to the Company's lenders based on operating results and, in some instances, a share of a property's residual value upon sale or refinancing. Certain lenders' rights to participation in residual value expire upon maturity of the related loans. Revenues from retail properties increased $22,877,000 in 1994 and $35,118,000 in 1993. The increase in 1994 was attributable to expansions opened in 1994, a full year of operations of expansions opened and properties acquired in 1993 and increases in effective 26 rents due to re-leasing efforts. The increase was also due to higher occupancy levels at the Company's larger, major market retail centers and increased lease cancellation payments received as a result of tenant restructurings or downsizings. These increases were partially offset by the disposition of a retail center in the first quarter of 1994. A substantial portion of the increase in 1993 was attributable to changes in the composition of the Company's portfolio of retail properties during the year, including acquisitions of interests in retail centers in the first and second quarters and the openings of expansions in the first and third quarters, and to a full year of operations for properties opened or acquired during 1992. The increase in revenues also reflects higher average occupancy levels, increased rents from temporary and seasonal tenants, re-leasing of space at higher effective rents and improved recoveries of operating expenses from tenants at certain properties. Total operating and interest expenses for retail properties increased by $8,965,000 in 1994 and $19,959,000 in 1993, including increased depreciation and amortization of $2,662,000 and $1,508,000, respectively. The increase in 1994 was attributable to costs relating to expansions opened in 1994 and a full year of operations of expansions opened and properties acquired in 1993, higher occupancy levels at many of the Company's larger, major market retail centers and higher interest costs related to floating rate debt. These increases were partially mitigated by the effects of the disposition of a retail center in the first quarter of 1994 and to lower effective interest expense on fixed rate property debt due to debt repayments and refinancings at certain properties. The increase in 1993 was attributable primarily to the changes in the Company's portfolio of retail properties described above, partially offset by reductions in interest expense due to debt reductions, lower interest rates on floating rate debt and refinancings at certain properties. Revenues from office/mixed-use properties increased $2,540,000 in 1994 and $7,395,000 in 1993. Total operating and interest expenses for office/mixed-use properties increased $1,835,000 in 1994 and $3,490,000 in 1993, including increased depreciation and amortization of $1,324,000 and $529,000, respectively. The increase in revenues in 1994 was attributable primarily to higher occupancy levels at office and hotel properties and a full year of operations of properties opened in 1993, partially offset by lower recoveries of operating expenses at two office properties where the tenants began paying certain operating expenses directly in 1994. The increase in expenses in 1994 was due principally to a full year of operations of properties opened in 1993 and higher occupancy levels at office and hotel properties, partially offset by lower operating expenses at the two office properties referred to above. Also, lower interest expense at certain properties due to debt reductions, refinancings and the exercise, in the second quarter of 1994, of an option in a loan agreement to reduce the effective interest rate on that loan, partially mitigated the overall increase in interest and operating expenses in 1994. The increases in revenues and expenses in 1993 were due principally to operations of two industrial buildings in Columbia which opened in 1993 and an office building in Columbia opened in 1992. The increase in expenses in 1993 was partially offset by a reduction in interest expense due to debt reductions, lower interest rates on floating rate debt and the expiration of certain interest rate exchange agreements. Land Sales: The Company's land sales operations relate primarily to the city of Columbia. Generally, revenues and operating income from land sales are affected by such factors as the availability to purchasers of construction and permanent mortgage financing at acceptable interest rates, consumer and business confidence, availability of saleable land for particular uses and management's decisions to sell, develop or retain land. Land sales revenues were $35,232,000 in 1994, $35,313,000 in 1993 and $29,137,000 in 1992. The increase in revenues in 1993 was attributable primarily to higher sales of land for residential uses, and to a lesser extent, commercial land for retail and other uses. Land sales costs and expenses were $24,905,000 in 1994, $23,480,000 in 1993 and $19,289,000 in 1992. The increases in costs and expenses in 1994 and 1993 were attributable primarily to higher operating and interest expenses due to lower levels of land development activity on projects other than Columbia. The increase in 1993 was also due to increased cost of sales due to higher sales revenues. 27 Development: Development expenses were $6,989,000 in 1994, $4,348,000 in 1993 and $4,916,000 in 1992. These costs consist primarily of additions to the pre-construction reserve and new business costs. The pre-construction reserve is maintained to provide for costs of projects in the pre-construction phase of development, including retail center renovation and expansion opportunities, which may not go forward to completion. Additions to the pre-construction reserve were $3,400,000 in 1994, $2,900,000 in 1993 and $3,050,000 in 1992. New business costs relate primarily to the initial evaluation of acquisition and development opportunities. New business costs were $3,094,000 in 1994, $953,000 in 1993 and $1,371,000 in 1992. The increases in these costs in 1994 are due to the Company's more aggressive pursuit of new development and acquisition opportunities. Corporate: Corporate revenues consist of interest income earned on temporary investments, including investments of unused proceeds from refinancings of certain properties. Corporate interest expense relates primarily to interest on the convertible subordinated debentures, unused proceeds from refinancings of certain properties and a portion of the unsecured 8.5% notes, net of capitalized interest on corporate funds temporarily invested in projects under development. Corporate expenses also include general and administrative costs. Corporate interest income was $2,892,000 in 1994, $3,862,000 in 1993 and $2,851,000 in 1992. The decrease in 1994 was attributable primarily to lower average investment balances. The increase in 1993 was attributable to higher average investment balances as a result of proceeds from the offerings of the 8.5% unsecured notes and Preferred stock and refinancings of certain retail properties in 1992. The Company earned higher interest rates in 1994 and lower interest rates in 1993 on its investment balances which consisted primarily of short-term U. S. government and agency obligations in both years. Corporate interest costs were $13,934,000 in 1994, $18,571,000 in 1993 and $20,396,000 in 1992. Of such amounts, $2,564,000, $2,158,000 and $1,984,000 were capitalized in 1994, 1993 and 1992, respectively, on funds invested in development projects. The decreases in corporate interest costs in 1994 and 1993 are attributable primarily to the redemption of a $100,000,000 issue of convertible subordinated debentures in May 1993. The decrease in 1993 was partially offset by the issuance of the 8.5% unsecured notes. A portion of the proceeds of the 8.5% unsecured notes and proceeds from refinancings of certain retail properties completed in 1992 were used to refinance certain land and operating property debt and to finance improvements to a number of operating properties during 1994 and 1993. The interest costs on loan proceeds used for other segments are included in the operating results of those segments, reducing corporate interest costs. The higher level of interest capitalized in 1994, when compared to 1993 and 1992, reflects higher levels of corporate funds invested in development projects consistent with the Company's more aggressive pursuit of development opportunities in 1994. Gain (Loss) on Dispositions of Assets and Other Provisions, Net: The loss on dispositions of assets and other provisions, net, for 1994 consists primarily of losses totaling $8,045,000 incurred on dispositions of the Company's interests in two retail centers, a hotel and an office building and a provision for loss of $2,212,000 (recorded in the fourth quarter) on an investment in an industrial building which is subject to a contract for sale. These losses were partially offset by a gain of $2,761,000 related to the disposition of an interest in a retail center the Company continues to manage. The loss on dispositions of assets and other provisions, net, for 1993 consists primarily of a provision for loss on investment in a retail center recorded in the fourth quarter. This loss was recognized based on management's determination that the Company would not continue to support the property (which is financed by nonrecourse loans) under the existing arrangements with lenders, public authorities and others involved and that it was unlikely that the Company would recover all of its investment in the property based on forecasts of future cash flows. The loss on dispositions of assets and other provisions, net, for 1992 consists primarily of costs incurred in connection with a private placement with the Company and seven institutional investors of 9.5 million shares of common stock of the Company previously owned by Trizec Investments Corporation ($2,231,000) and provisions for losses on a marketable equity security and certain other investments based on management's determination that the declines in their fair values were other than temporary ($4,156,000). 28 Extraordinary Losses, Net of Related Income Tax Benefits: The extraordinary losses in 1994, 1993 and 1992 result from early extinguishments or required partial early redemptions of debt aggregating $6,824,000, $12,322,000 and $530,000, respectively, net of deferred income tax benefits of $2,377,000, $4,271,000 and $182,000, respectively. Net Earnings (Loss): The Company had net earnings of $2,159,000 in 1994 and net losses of $9,342,000 in 1993 and $16,197,000 in 1992. The Company's operating income (after depreciation and amortization) was $21,259,000 in 1994 and $8,841,000 in 1993 and its operating loss was $15,529,000 in 1992. The improvements in operating income in 1994 and 1993 were due primarily to the factors described above. Net earnings (loss) for each year was affected by unusual and/or nonrecurring items. The most significant of these are the items discussed above in gain (loss) on dispositions of assets and other provisions, net, and extraordinary losses, net of related income tax benefits. Earnings Before Depreciation and Deferred Taxes: The Company uses a supplemental performance measure along with net earnings (loss) to report its operating results. This measure, referred to as Earnings Before Depreciation and Deferred Taxes (EBDT), is not a measure of operating results or cash flows from operating activities as defined by generally accepted accounting principles. Additionally, EBDT is not necessarily indicative of cash available to fund cash needs and should not be considered as an alternative to cash flows as a measure of liquidity. However, the Company believes that EBDT provides relevant information about its operations and is necessary, along with net earnings (loss), for an understanding of its operating results. Depreciation and amortization are excluded from EBDT because, based on the Company's current value basis reporting, its operating properties are worth substantially more than their undepreciated historical cost. Deferred income taxes are excluded from EBDT because payments of income taxes have not been and are not anticipated in the near term to be, significant to the Company. Current Federal and state income taxes are included as reductions of EBDT. Gain (loss) on dispositions of assets and other provisions, net, and extraordinary losses, net of related income tax benefits, represent unusual and/or nonrecurring items and are therefore excluded from EBDT. EBDT is reconciled to net earnings (loss) in the Five Year Summary of Earnings Before Depreciation and Deferred Taxes from Operations and Net Earnings (Loss) on page 51. EBDT was $94,710,000 in 1994, $78,281,000 in 1993 and $52,282,000 in 1992. The significant changes in various revenue and expense elements comprising EBDT by segment are described above. The increases in EBDT in 1994 and 1993 were due primarily to improved results from the operating properties business segment, particularly retail properties. EBDT from retail properties was $103,978,000 in 1994, $87,248,000 in 1993 and $70,966,000 in 1992 and increased at rates of 19.2% and 22.9%, in 1994 and 1993, respectively. The increases in EBDT for 1994 and 1993 reflect the effects of re- leasing of space at higher effective rents, the operating results of recently expanded properties and debt reductions and refinancings at certain properties. The increase for 1993 also reflects slightly higher average occupancy levels and tenant sales. Average occupancy and tenant sales for the Company's portfolio of retail properties decreased slightly in 1994 when compared to 1993; however, occupancy and sales actually improved at many of the Company's larger, major market retail centers, most of which are wholly-owned or at least 50% owned, and sales of high-performing merchants (i.e. those paying percentage rents) increased by 3.4%. These factors had a disproportionate effect on EBDT and more than offset the effects of the overall decrease in occupancy and tenant sales. Office/mixed-use properties had EBDT of $4,273,000 in 1994 and $2,283,000 in 1993 and incurred a loss before depreciation and deferred taxes of $2,127,000 in 1992. The growth in EBDT in 1994 was attributable primarily to improved average occupancy levels at certain office and hotel properties, the operations of two industrial buildings in Columbia opened in 1993 and lower interest expense due to debt reductions, refinancings and the exercise, in the second quarter of 1994, of an option in a loan agreement to reduce the effective interest rate on that loan. The growth in EBDT in 1993 was attributable primarily to improved occupancy at several Columbia office properties and urban mixed-use projects and lower interest expense due to debt reductions, lower interest rates on floating rate debt and the expiration of certain interest rate exchange agreements. 29 Financial Condition, Liquidity and Capital Resources Management believes that the current values of the Company's assets and liabilities are the most realistic indicators of the Company's financial strength and future profitability. Current values of the Company's interests in operating properties, including interests in unconsolidated real estate ventures and properties held for development and sale, represent the present values of forecasted net operating cash flows from these properties--the Company's most significant assets. Since 1976, revaluation equity, the aggregate increment of current value over cost basis net book value of the Company's assets and liabilities, has increased at a compound annual rate of 15%. The majority of the Company's revaluation equity relates to prime regional shopping centers. Larger, major market retail centers continue to be a favored real estate investment and required investor yields in 1994 remained relatively unchanged from 1993. Revaluation equity increased $107 million or 7.6% to $1.52 billion at December 31, 1994. The increase was due primarily to higher levels of rents used in the forecasts of cash flows from retail properties and is consistent with the Company's leasing activities and operating results for 1994. Refinancings and other changes in financial arrangements at certain projects also increased forecasted cash flows from operating properties. In addition, the current value of publicly-traded debt not specifically related to interests in properties decreased. Cost basis shareholders' equity decreased to $95,026,000 at December 31, 1994 from $113,151,000 at December 31, 1993. The decrease was due primarily to the payment of regular quarterly dividends on the common and Preferred stocks, partially offset by the issuance of additional shares of Preferred stock. The Company had cash and cash equivalents and investments in marketable securities totalling $79,547,000 and $107,959,000 at December 31, 1994 and 1993, respectively, including $2,001,000 and $4,422,000, respectively, held for restricted uses. Net cash provided by operating activities was $113,775,000, $101,149,000 and $66,630,000 in 1994, 1993 and 1992, respectively. The changes in cash provided by operating activities were due primarily to the factors described in the discussion and analysis of operating results. In addition, the level of net cash provided by operating activities is affected by the timing of receipt of revenues (including land sales proceeds) and the payment of operating and interest expenses and land development costs. In 1994 and 1993, over 80% of the Company's debt was represented by mortgages and bonds collateralized by operating properties. Scheduled principal payments on property debt were $46,750,000, $20,735,000 and $17,907,000 in 1994, 1993 and 1992, respectively. The increase in 1994 was due primarily to the effects of refinancing certain office/mixed-use properties. The annual maturities of debt for the next five years include balloon payments of $83,748,000 in 1995, $33,585,000 in 1996, $87,507,000 in 1997, $38,682,000 in 1998 and $106,074,000 in 1999. The balloon payments for 1995 include $56,337,000 related to a retail center mortgage which is due in December. The Company expects to refinance the mortgage on a long term basis at or prior to its scheduled maturity. The Company is confident that it will be able to make the other balloon payments or arrange to refinance or extend their maturities at or prior to the scheduled repayment dates. In January 1995, the Company extinguished approximately $96,800,000 of fixed rate property debt prior to its scheduled maturity and incurred an extraordinary loss of approximately $7,100,000, net of related deferred income tax benefits. Proceeds from a variable rate loan of $96,800,000 obtained in January 1995 and due in February 1996 and available cash were used to retire the debt and fund the prepayment penalty. The Company is confident it will be able to refinance this loan on a long term basis at or prior to its scheduled maturity. The Company is continually evaluating sources of capital, and management believes there are reasonable and satisfactory sources available for all requirements without necessitating property sales. Cash expenditures for properties in development and improvements to existing properties funded by debt were $78,628,000, $87,243,000 and $83,377,000 in 1994, 1993 and 1992, respectively. A substantial portion of the costs of properties in development is financed with construction or similar loans. Typically, long term fixed rate debt financing is arranged concurrently with the construction financing prior to the commencement of construction. Management anticipates that acceptable methods of financing development projects with fixed rate, nonrecourse debt will continue to be available. Improvements to existing properties funded by debt consist primarily of costs of renovation and remerchandising programs and other capital improvement costs. The Company's share of these costs has been 30 financed primarily from proceeds of refinancings of the related properties or other properties, credit line borrowings and a portion of the proceeds of the 8.5% unsecured notes issued in January 1993. The interest costs on these financings are included in the operating results of the operating properties segment. Cash expenditures for acquisitions of interests in properties were $94,113,000 in 1994, $34,967,000 in 1993 and $38,806,000 in 1992. A substantial portion of these costs has been financed using nonrecourse debt. The acquisitions in 1994 consist primarily of the purchase of land underlying a retail center and the related equity interest of the former lessor. The acquisitions in 1993 and 1992 consist primarily of purchases of partners' interests in retail properties. The Company has available sources of capital in addition to those discussed above. The Company's equity interests in its operating properties and properties held for development and sale (principally Columbia land) and land in development represent a source of funds either through sales or refinancings. The aggregate equity value of these interests as of December 31, 1994 was approximately $2,339,000,000. The Company also has lines of credit available totalling $159,720,000 which can be used to fund property acquisition costs, finance other corporate needs, repay existing indebtedness or provide corporate liquidity, subject to approval by the lenders. In addition, in February 1995, the Company registered $150,000,000 of unsecured notes for issuance to the public from time to time through February 1997. The Company intends to use the proceeds from these notes to repay existing recourse indebtedness. The agreements relating to certain of the lines of credit, the 8.5% unsecured notes, the unsecured notes registered in February 1995 and certain other loans impose limitations on the Company. The most restrictive of these limit the Company's ability to incur certain types of additional debt if the Company does not maintain specified debt service coverage ratios. The agreements also impose restrictions on sale, lease and certain other transactions, subject to various exclusions and limitations. These restrictions have not limited the Company's normal business activities. New Accounting Standard Statement of Financial Accounting Standards No. 116, "Accounting for Contributions Received and Contributions Made" (SFAS No. 116), was issued by the Financial Accounting Standards Board in June 1993. SFAS No. 116 requires, among other things, that contributions made, including unconditional promises to give, be recognized as expenses at their fair value in the period made. The Company will adopt SFAS No. 116 effective January 1, 1995. Based on an analysis performed by the Company, the adoption of SFAS No. 116 will not have a material effect on the financial position or results of operations of the Company. Impact of Inflation The major portion of the Company's operating properties, its retail centers, is substantially protected from declines in the purchasing power of the dollar. Retail leases generally provide for minimum rents plus percentage rents based on sales over a minimum base. Generally, increases in tenant sales (whether due to increased unit sales or increased prices from demand or general inflation) will result in increased rental revenue to the Company. A substantial portion of the tenant leases (retail and office) also provide for other rents which reimburse the Company for certain of its operating expenses; consequently, increases in these costs do not have a significant impact on the Company's operations. The Company has a significant amount of debt which, in a period of inflation, will result in a holding gain since debt will be paid off with dollars having less purchasing power. 31 The Rouse Company and Subsidiaries FIVE YEAR SUMMARY OF EARNINGS BEFORE DEPRECIATION AND DEFERRED TAXES FROM OPERATIONS AND NET EARNINGS (LOSS) --------------------------------------------------------------------------------
Year ended December 31, ----------------------------------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (in thousands) Revenues: Operating properties: Retail centers: Minimum and percentage rents.............. $238,222 $227,140 $210,909 $208,560 $196,612 Other rents and other revenues............ 248,253 236,458 217,571 207,641 189,491 Office, mixed-use and other: Minimum and percentage rents.............. 82,347 81,415 76,302 71,629 56,176 Other rents and other revenues............ 64,225 62,617 60,335 59,379 60,406 -------- -------- -------- -------- -------- 633,047 607,630 565,117 547,209 502,685 Land sales.................................... 35,232 35,313 29,137 24,111 22,991 Development fees.............................. -- -- -- 375 -- Corporate interest income..................... 2,892 3,862 2,851 1,803 3,894 -------- -------- -------- -------- -------- 671,171 646,805 597,105 573,498 529,570 -------- -------- -------- -------- -------- Operating expenses, exclusive of depreciation and amortization: Operating properties: Retail centers.............................. 253,095 251,386 241,395 233,730 218,168 Office, mixed-use and other................. 74,368 76,148 69,589 69,129 60,944 -------- -------- -------- -------- -------- 327,463 327,534 310,984 302,859 279,112 Land sales.................................... 19,877 19,387 16,330 12,848 13,629 Development................................... 6,494 3,853 4,421 5,681 6,775 Corporate..................................... 8,309 6,184 5,927 6,567 6,667 -------- -------- -------- -------- -------- 362,143 356,958 337,662 327,955 306,183 -------- -------- -------- -------- -------- Interest expense: Operating properties: Retail centers.............................. 128,798 124,204 115,744 117,843 105,441 Office, mixed-use and other................. 67,892 65,601 69,199 63,474 51,581 -------- -------- -------- -------- -------- 196,690 189,805 184,943 181,317 157,022 Land sales.................................... 5,028 4,093 2,959 2,728 2,917 Development................................... 495 495 495 495 495 Corporate..................................... 11,370 16,413 18,412 13,755 10,088 -------- -------- -------- -------- -------- 213,583 210,806 206,809 198,295 170,522 -------- -------- -------- -------- -------- Preferred stock dividends (Note).............. -- -- -- -- 2,273 Current income taxes.......................... 735 760 352 428 302 -------- -------- -------- -------- -------- 576,461 568,524 544,823 526,678 479,280 -------- -------- -------- -------- -------- Earnings before depreciation and deferred taxes from operations....................... $ 94,710 $ 78,281 $ 52,282 $ 46,820 $ 50,290 ======== ======== ======== ======== ========
32 --------------------------------------------------------------------------------
Year ended December 31, ----------------------------------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (in thousands) Earnings before depreciation and deferred taxes from operations by segment: Operating properties: Retail centers.............................. $103,978 $ 87,248 $ 70,966 $ 64,097 $ 61,999 Office, mixed-use and other................. 4,273 2,283 (2,127) (1,591) 4,051 -------- -------- -------- -------- -------- 108,251 89,531 68,839 62,506 66,050 Land sales.................................... 10,330 11,833 9,847 8,634 6,644 Development................................... (6,989) (4,348) (4,916) (5,801) (7,270) Corporate (Note).............................. (16,882) (18,735) (21,488) (18,519) (15,134) -------- -------- -------- -------- -------- Earnings before depreciation and deferred taxes from operations............ $ 94,710 $ 78,281 $ 52,282 $ 46,820 $ 50,290 ======== ======== ======== ======== ======== Reconciliation to net earnings (loss): Earnings before depreciation and deferred taxes from operations....................... $ 94,710 $ 78,281 $ 52,282 $ 46,820 $ 50,290 Depreciation and amortization................. (74,186) (70,200) (68,163) (65,735) (55,360) Deferred income taxes applicable to operations (5,995) (3,603) 5,286 (2,393) (1,120) Preferred stock dividends (Note).............. -- -- -- -- 2,273 Gain (loss) on dispositions of assets and other provisions, net....................... (7,923) (5,769) (5,254) 23,732 2,752 Extraordinary losses, net of related income tax benefits................................ (4,447) (8,051) (348) (90) (651) Cumulative effect of change in accounting principle................................... -- -- -- 13,463 -- -------- -------- -------- -------- -------- Net earnings (loss)........................... $ 2,159 $ (9,342) $(16,197) $ 15,797 $ (1,816) ======== ======== ======== ======== ========
Note--Preferred stock dividends paid in 1990 are included as additional corporate expenses because the stock was subject to mandatory redemption requirements for cash. The Redeemable Preferred stock was repurchased in 1990. The convertible Preferred stock is redeemable only for shares of common stock and, accordingly, related dividends are not deducted from EBDT. 33 PROJECTS OF THE ROUSE COMPANY
---------------------------------------------------------------------------------------------------------------------------------- Date of Opening Retail Square Footage Retail Centers in Operation or Acquisition Department Stores Total Center Mall Only ---------------------------------------------------------------------------------------------------------------------------------- Almeda Mall, Houston, TX (a) 10/68 Foley's; JCPenney 802,000 294,000 ---------------------------------------------------------------------------------------------------------------------------------- The Shops at Arizona Center, Phoenix, AZ(a) 11/90 -- 151,000 151,000 ---------------------------------------------------------------------------------------------------------------------------------- Augusta Mall, Augusta, GA (b) 8/78 Rich's; R. H. Macy; JCPenney; Sears 902,000 313,000 ---------------------------------------------------------------------------------------------------------------------------------- Bayside Marketplace, Miami, FL (b) 4/87 -- 223,000 223,000 ---------------------------------------------------------------------------------------------------------------------------------- Beachwood Place, Cleveland, OH (b) 8/78 Saks Fifth Avenue; Dillard's 453,000 228,000 ---------------------------------------------------------------------------------------------------------------------------------- Burlington Center, Burlington, NJ (d) 8/82 Strawbridge & Clothier; Sears 567,000 246,000 ---------------------------------------------------------------------------------------------------------------------------------- Chapel Square, New Haven, CT (a) 4/83 -- 151,000 151,000 ---------------------------------------------------------------------------------------------------------------------------------- Cherry Hill, Cherry Hill, NJ (a) 10/61 Strawbridge & Clothier; R. H. Macy; JCPenney 1,285,000 544,000 ---------------------------------------------------------------------------------------------------------------------------------- The Citadel, Colorado Springs, CO (d) 8/80 Mervyn's; JCPenney; Foley's 917,000 460,000 ---------------------------------------------------------------------------------------------------------------------------------- College Square, Cedar Falls, IA (d) 8/80 Von Maur; Younkers; Wal-Mart 560,000 313,000 ---------------------------------------------------------------------------------------------------------------------------------- The Mall in Columbia, Columbia, MD (a) 8/71 Woodward & Lothrop; Hecht's; Sears 876,000 421,000 ---------------------------------------------------------------------------------------------------------------------------------- Eastfield Mall, Springfield, MA (a) 4/68 Sears; Filene's; JCPenney 674,000 217,000 ---------------------------------------------------------------------------------------------------------------------------------- Echelon Mall, Voorhees, NJ (a) 9/70 Strawbridge & Clothier; JCPenney; Boscov's 1,065,000 481,000 ---------------------------------------------------------------------------------------------------------------------------------- Exton Square, Exton, PA (a) 3/73 Strawbridge & Clothier 443,000 253,000 ---------------------------------------------------------------------------------------------------------------------------------- Faneuil Hall Marketplace, Boston, MA (a) 8/76 -- 215,000 215,000 ---------------------------------------------------------------------------------------------------------------------------------- Fashion Island, Newport Beach, CA(c) 8/90 The Broadway; I. Magnin; Robinson's--May; 1,215,000 593,000 Neiman Marcus ---------------------------------------------------------------------------------------------------------------------------------- Franklin Park, Toledo, OH (b) 7/71 Hudson's; JCPenney; Jacobson's; Lion 1,082,000 313,000 ---------------------------------------------------------------------------------------------------------------------------------- The Gallery at Harborplace, Baltimore, MD (a) 9/87 -- 139,000 139,000 ---------------------------------------------------------------------------------------------------------------------------------- The Gallery at Market East, Philadelphia, PA (a)(c) 8/77 Strawbridge & Clothier; JCPenney 1,320,000 360,000 ---------------------------------------------------------------------------------------------------------------------------------- Governor's Square, Tallahassee, FL (b) 8/79 Burdine's; Sears; JCPenney; Dillard's 1,031,000 340,000 ---------------------------------------------------------------------------------------------------------------------------------- The Grand Avenue, Milwaukee, WI (a) 8/82 Marshall Field; The Boston Store 842,000 242,000 ---------------------------------------------------------------------------------------------------------------------------------- Greengate Mall, Greensburg, PA (a) 8/65 Lazarus; Montgomery Ward 612,000 233,000 ---------------------------------------------------------------------------------------------------------------------------------- Harborplace, Baltimore, MD (a) 7/80 -- 136,000 136,000 ---------------------------------------------------------------------------------------------------------------------------------- Harundale Mall, Glen Burnie, MD (b) 10/58 Value City 309,000 232,000 ---------------------------------------------------------------------------------------------------------------------------------- Highland Mall, Austin, TX (b) 8/71 Dillard's; JCPenney; Foley's 1,099,000 367,000 ---------------------------------------------------------------------------------------------------------------------------------- Hulen Mall, Ft. Worth, TX (a) 8/77 Foley's; Montgomery Ward; Dillard's 924,000 327,000 ---------------------------------------------------------------------------------------------------------------------------------- The Jacksonville Landing, Jacksonville, FL (a) 6/87 -- 128,000 128,000 ---------------------------------------------------------------------------------------------------------------------------------- Mall St. Matthews, St. Matthews, KY (a) 3/62 JCPenney; Bacon's 645,000 255,000 ---------------------------------------------------------------------------------------------------------------------------------- Marshall Town Center, Marshalltown, IA (d) 8/80 JCPenney; Younkers; Menard's 340,000 153,000 ---------------------------------------------------------------------------------------------------------------------------------- Midtown Square, Charlotte, NC (a) 10/59 Burlington Coat Factory 235,000 190,000 ---------------------------------------------------------------------------------------------------------------------------------- Mondawmin (a)/Metro Plaza (b), Baltimore, MD 1/78; 12/82 -- 496,000 496,000 ---------------------------------------------------------------------------------------------------------------------------------- Muscatine Mall, Muscatine, IA (d) 8/80 JCPenney; Von Maur; Wal-Mart 347,000 186,000 ---------------------------------------------------------------------------------------------------------------------------------- The Shops at National Place, Washington, D.C. (a) 5/84 -- 125,000 125,000 ---------------------------------------------------------------------------------------------------------------------------------- North Grand, Ames, IA (d) 8/80 JCPenney; Sears; Younkers 350,000 157,000 ----------------------------------------------------------------------------------------------------------------------------------
34
---------------------------------------------------------------------------------------------------------------------------------- Date of Opening Retail Square Footage Retail Centers in Operation or Acquisition Department Stores Total Center Mall Only ---------------------------------------------------------------------------------------------------------------------------------- North Star, San Antonio, TX (b) 9/60 Dillard's; Foley's; Saks Fifth 1,288,000 487,000 Avenue; Marshall Field; Mervyn's ---------------------------------------------------------------------------------------------------------------------------------- Northwest Arkansas Mall, Fayetteville, AR (d) 8/80 JCPenney; Sears; Dillard's 554,000 242,000 ---------------------------------------------------------------------------------------------------------------------------------- Northwest Mall, Houston, TX (a) 10/68 Foley's; JCPenney 800,000 292,000 ---------------------------------------------------------------------------------------------------------------------------------- Oakwood Center, Gretna, LA (a) 10/82 Sears; Dillard's; Mervyn's; Maison Blanche 960,000 362,000 ---------------------------------------------------------------------------------------------------------------------------------- Outlet Square, Atlanta, GA (a) 7/83 Burlington Coat Factory; Marshalls 326,000 183,000 ---------------------------------------------------------------------------------------------------------------------------------- Owings Mills, Baltimore County, MD (a) 7/86 R. H. Macy; Hecht's; Saks Fifth Avenue 809,000 325,000 ---------------------------------------------------------------------------------------------------------------------------------- Paramus Park, Paramus, NJ (b) 3/74 Abraham & Straus; Sears 755,000 279,000 ---------------------------------------------------------------------------------------------------------------------------------- Perimeter Mall, Atlanta, GA (b) 8/71 Rich's; JCPenney; R. H. Macy 1,224,000 444,000 ---------------------------------------------------------------------------------------------------------------------------------- Pioneer Place, Portland, OR (a) 3/90 Saks Fifth Avenue 220,000 160,000 ---------------------------------------------------------------------------------------------------------------------------------- Plymouth Meeting, Montgomery County, PA (a) 2/66 Strawbridge & Clothier; Hess 784,000 442,000 ---------------------------------------------------------------------------------------------------------------------------------- Randhurst, Mt. Prospect, IL (d) 7/81 Carson, Pirie, Scott; JCPenney; 1,324,000 591,000 Montgomery Ward; Kohls ---------------------------------------------------------------------------------------------------------------------------------- Ridgedale Center, Minnetonka, MN (d) 1/89 Carson, Pirie, Scott; Dayton's; JCPenney; Sears 1,039,000 334,000 ---------------------------------------------------------------------------------------------------------------------------------- Riverwalk, New Orleans, LA (a) 8/86 -- 179,000 179,000 ---------------------------------------------------------------------------------------------------------------------------------- St. Louis Union Station, St. Louis, MO (a) 8/85 -- 172,000 172,000 ---------------------------------------------------------------------------------------------------------------------------------- Salem Centre, Salem, OR (d) 6/90 Meier & Frank; JCPenney; Mervyn's; Nordstrom 649,000 211,000 ---------------------------------------------------------------------------------------------------------------------------------- Salem Mall, Dayton, OH (a) 10/66 Lazarus; Sears; JCPenney 817,000 312,000 ---------------------------------------------------------------------------------------------------------------------------------- Santa Monica Place, Santa Monica, CA (b) 10/80 The Broadway; Robinson's--May 570,000 287,000 ---------------------------------------------------------------------------------------------------------------------------------- Sherway Gardens, Toronto, ONT (c) 12/78 Eaton's; The Bay 968,000 474,000 ---------------------------------------------------------------------------------------------------------------------------------- South DeKalb, Decatur, GA (a) 7/78 Rich's; JCPenney 691,000 329,000 ---------------------------------------------------------------------------------------------------------------------------------- Southland, Taylor, MI (d) 1/89 Hudson's; Mervyn's; JCPenney 903,000 320,000 ---------------------------------------------------------------------------------------------------------------------------------- South Street Seaport, New York, NY (a) 7/83 -- 257,000 257,000 ---------------------------------------------------------------------------------------------------------------------------------- Staten Island Mall, Staten Island, NY (d) 11/80 Sears; R. H. Macy; JCPenney 1,224,000 618,000 ---------------------------------------------------------------------------------------------------------------------------------- Mall St. Vincent, Shreveport, LA (c) 8/80 Sears; Dillard's 557,000 200,000 ---------------------------------------------------------------------------------------------------------------------------------- Talbottown, Easton, MD (a) 3/57 JCPenney 90,000 71,000 ---------------------------------------------------------------------------------------------------------------------------------- Tampa Bay Center, Tampa, FL (b) 8/76 Burdine's; Sears; Montgomery Ward 883,000 325,000 ---------------------------------------------------------------------------------------------------------------------------------- Town and Country Center, Miami, FL (c) 2/88 Sears; Marshalls; Mervyn's 645,000 467,000 ---------------------------------------------------------------------------------------------------------------------------------- Underground Atlanta, Atlanta, GA (c) 6/89 -- 219,000 219,000 ---------------------------------------------------------------------------------------------------------------------------------- Village of Cross Keys, Baltimore, MD (a) 9/65 -- 68,000 68,000 ---------------------------------------------------------------------------------------------------------------------------------- Westlake Center, Seattle, WA (b) 10/88 Nordstrom; Bon Marche 723,000 118,000 ---------------------------------------------------------------------------------------------------------------------------------- Westland Mall, West Burlington, IA (d) 8/80 JCPenney; Younkers 344,000 175,000 ---------------------------------------------------------------------------------------------------------------------------------- White Marsh, Baltimore County, MD (a) 8/81 R. H. Macy; JCPenney; Hecht's; 1,178,000 359,000 Sears; Woodward & Lothrop ---------------------------------------------------------------------------------------------------------------------------------- Willowbrook, Wayne, NJ (b) 9/69 R. H. Macy; Steinbach's; Stern's; Sears 1,499,000 485,000 ---------------------------------------------------------------------------------------------------------------------------------- Woodbridge Center, Woodbridge, NJ (a) 3/71 Abraham & Straus; JCPenney; 1,544,000 560,000 Stern's; Steinbach's; Fortunoff ---------------------------------------------------------------------------------------------------------------------------------- Total Retail Centers in Operation 44,922,000 19,829,000 ----------------------------------------------------------------------------------------------------------------------------------
35
---------------------------------------------------------------------------------------------------------------------------------- Retail Square Footage Retail Centers Under Construction or in Development Department Stores Total Center Mall Only ---------------------------------------------------------------------------------------------------------------------------------- Mall St. Matthews Expansion, St. Matthews, KY Dillard's 320,000 90,000 ---------------------------------------------------------------------------------------------------------------------------------- Beachwood Place Expansion, Cleveland, OH Nordstrom 250,000 50,000 ---------------------------------------------------------------------------------------------------------------------------------- Northwest Arkansas Mall Expansion, Fayetteville, AR JCPenney; Dillard's 310,000 70,000 ---------------------------------------------------------------------------------------------------------------------------------- The Citadel Expansion, Colorado Springs, CO Dillard's 180,000 -- ---------------------------------------------------------------------------------------------------------------------------------- Oakwood Center Expansion, Gretna, LA JCPenney 125,000 -- ---------------------------------------------------------------------------------------------------------------------------------- Burlington Center Expansion, Burlington, NJ JCPenney 102,000 -- ---------------------------------------------------------------------------------------------------------------------------------- Total Retail Centers Under Construction or 1,287,000 210,000 in Development ---------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------- Office Projects in Operation Location Square Feet ---------------------------------------------------------------------------------------------------------------------------------- 300 East Lombard (c) Baltimore, MD 233,000 ---------------------------------------------------------------------------------------------------------------------------------- Quadrangle at Cross Keys (a) Baltimore, MD 106,000 ---------------------------------------------------------------------------------------------------------------------------------- Village Square at Cross Keys (a) Baltimore, MD 79,000 ---------------------------------------------------------------------------------------------------------------------------------- Legg Mason Tower (a) Baltimore, MD 265,000 ---------------------------------------------------------------------------------------------------------------------------------- Schilling Center (a) Hunt Valley, MD 55,000 ---------------------------------------------------------------------------------------------------------------------------------- Alexander & Alexander Building (b) Owings Mills, MD 143,000 ---------------------------------------------------------------------------------------------------------------------------------- Alexander & Alexander Building II (b) Owings Mills, MD 198,000 ---------------------------------------------------------------------------------------------------------------------------------- Blue Cross & Blue Shield Building I (b) Owings Mills, MD 270,000 ---------------------------------------------------------------------------------------------------------------------------------- Blue Cross & Blue Shield Building II (b) Owings Mills, MD 117,000 ---------------------------------------------------------------------------------------------------------------------------------- One Arizona Center (a) Phoenix, AZ 322,000 ---------------------------------------------------------------------------------------------------------------------------------- Two Arizona Center (a) Phoenix, AZ 444,000 ---------------------------------------------------------------------------------------------------------------------------------- Chapel Square (a) New Haven, CT 136,000 ---------------------------------------------------------------------------------------------------------------------------------- First National Bank Plaza (a) Mt. Prospect, IL 66,000 ---------------------------------------------------------------------------------------------------------------------------------- Faneuil Hall Marketplace (a) Boston, MA 147,000 ---------------------------------------------------------------------------------------------------------------------------------- Pioneer Place (a) Portland, OR 284,000 ---------------------------------------------------------------------------------------------------------------------------------- Westlake Center (b) Seattle, WA 342,000 ---------------------------------------------------------------------------------------------------------------------------------- Total Office Projects in Operation 3,207,000 ---------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------- Hotel Projects in Operation Location Rooms ---------------------------------------------------------------------------------------------------------------------------------- Cross Keys Inn (a) Baltimore, MD 148 ---------------------------------------------------------------------------------------------------------------------------------- Stouffer Harborplace Hotel Baltimore, MD 622 ----------------------------------------------------------------------------------------------------------------------------------
36
---------------------------------------------------------------------------------------------------------------------------------- Columbia Properties in Operation Type of Project Square Feet ---------------------------------------------------------------------------------------------------------------------------------- The Mall in Columbia* (a) Retail 873,000 ---------------------------------------------------------------------------------------------------------------------------------- Gateway Plaza (a) Retail 24,000 ---------------------------------------------------------------------------------------------------------------------------------- Dobbin Center (b) Community Retail 219,000 ---------------------------------------------------------------------------------------------------------------------------------- Dorsey's Search Village Center (a) Community Retail 86,000 ---------------------------------------------------------------------------------------------------------------------------------- Harper's Choice Village Center (a) Community Retail 81,000 ---------------------------------------------------------------------------------------------------------------------------------- Hickory Ridge Village Center (a) Community Retail 97,000 ---------------------------------------------------------------------------------------------------------------------------------- King's Contrivance Village Center (a) Community Retail 107,000 ---------------------------------------------------------------------------------------------------------------------------------- Long Reach Village Center (a) Community Retail 77,000 ---------------------------------------------------------------------------------------------------------------------------------- Oakland Mills Village Center (a) Community Retail 62,000 ---------------------------------------------------------------------------------------------------------------------------------- Wilde Lake Village Center (a) Community Retail 95,000 ---------------------------------------------------------------------------------------------------------------------------------- 10 Corporate Center (a) Office 89,000 ---------------------------------------------------------------------------------------------------------------------------------- Amdahl Building (a) Office 105,000 ---------------------------------------------------------------------------------------------------------------------------------- American City Building (a) Office 111,000 ---------------------------------------------------------------------------------------------------------------------------------- Columbia Center Building (a) Office 44,000 ---------------------------------------------------------------------------------------------------------------------------------- Dorsey's Search Office Building (a) Office 20,000 ---------------------------------------------------------------------------------------------------------------------------------- Exhibit Building (a) Office 20,000 ---------------------------------------------------------------------------------------------------------------------------------- PaineWebber Building (a) Office 134,000 ---------------------------------------------------------------------------------------------------------------------------------- Parkside (a) Office 112,000 ---------------------------------------------------------------------------------------------------------------------------------- RWD Building (a) Office 137,000 ---------------------------------------------------------------------------------------------------------------------------------- Re/Max Building (a) Office 39,000 ---------------------------------------------------------------------------------------------------------------------------------- Reliance Building (a) Office 38,000 ---------------------------------------------------------------------------------------------------------------------------------- The Ryland Group Headquarters (a) Office 167,000 ---------------------------------------------------------------------------------------------------------------------------------- Oakland Building (a) R&D/Industrial 145,000 ---------------------------------------------------------------------------------------------------------------------------------- Gateway Commerce Center 1, 2 & 20 (a) Industrial 1,895,000 ---------------------------------------------------------------------------------------------------------------------------------- Columbia Inn (a) Hotel 289 rooms ---------------------------------------------------------------------------------------------------------------------------------- Total Columbia Properties in Operation 4,777,000 ---------------------------------------------------------------------------------------------------------------------------------- *Also listed in previous table of Retail Centers in Operation ----------------------------------------------------------------------------------------------------------------------------------
(a) Projects are wholly-owned by subsidiaries of the Company. (b) Projects are owned by joint ventures or partnerships and are managed by subsidiaries of the Company for a fee. The Company's ownership interest, through its subsidiaries, is at least 50% (except for North Star and Willowbrook in which the Company has 37 1/2% interests). (c) Projects are managed by subsidiaries of the Company for a fee plus a share of cash flow. (d) Projects are owned by partnerships or wholly-owned (Staten Island Mall, Randhurst and Burlington Center) by subsidiaries of the Company and are managed by subsidiaries of the Company for a fee plus a share of cash flow and a share of proceeds from sales or refinancings. The Company's ownership interest in the partnerships is determined based upon the results of operations. 37
------------------------------------------------------------------------------------------------------------------------------------ Office Projects Owned by Rouse-Teachers Properties, Inc. Location Square Feet ----------------------------------------------------------------------------------------------------------------------------------- Baltimore Freeport Centre Baltimore, MD 58,000 ----------------------------------------------------------------------------------------------------------------------------------- Triangle Business Center Baltimore, MD 75,000 ----------------------------------------------------------------------------------------------------------------------------------- Owen Brown I Columbia, MD 46,000 ----------------------------------------------------------------------------------------------------------------------------------- Sieling Tech Center Columbia, MD 76,000 ----------------------------------------------------------------------------------------------------------------------------------- RiversPark I & II Columbia, MD 306,000 ----------------------------------------------------------------------------------------------------------------------------------- Center Pointe Hunt Valley, MD 130,000 ----------------------------------------------------------------------------------------------------------------------------------- 201 International Circle Hunt Valley, MD 79,000 ----------------------------------------------------------------------------------------------------------------------------------- Loveton Center 9 Hunt Valley, MD 53,000 ----------------------------------------------------------------------------------------------------------------------------------- 11011 McCormick Road Hunt Valley, MD 57,000 ----------------------------------------------------------------------------------------------------------------------------------- Schilling Plaza North Hunt Valley, MD 96,000 ----------------------------------------------------------------------------------------------------------------------------------- Schilling Plaza South Hunt Valley, MD 108,000 ----------------------------------------------------------------------------------------------------------------------------------- One Hunt Valley Hunt Valley, MD 225,000 ----------------------------------------------------------------------------------------------------------------------------------- Inglewood Office Centres 1, 2 Prince George's County, MD 222,000 ----------------------------------------------------------------------------------------------------------------------------------- Inglewood Tech Centers I, II, III, IV & V Prince George's County, MD 316,000 ----------------------------------------------------------------------------------------------------------------------------------- Silver Spring Metro Plaza Silver Spring, MD 692,000 ----------------------------------------------------------------------------------------------------------------------------------- Ambassador Center Woodlawn, MD 83,000 ----------------------------------------------------------------------------------------------------------------------------------- 15 - 17 Governor's Court Woodlawn, MD 29,000 ----------------------------------------------------------------------------------------------------------------------------------- 21 Governor's Court Woodlawn, MD 56,000 ----------------------------------------------------------------------------------------------------------------------------------- Parkview Center Woodlawn, MD 58,000 ----------------------------------------------------------------------------------------------------------------------------------- Harbourside Tampa, FL 147,000 ----------------------------------------------------------------------------------------------------------------------------------- One & Two Prestige Place Tampa, FL 144,000 ----------------------------------------------------------------------------------------------------------------------------------- McCormick Centre I, II & III Tampa, FL 202,000 ----------------------------------------------------------------------------------------------------------------------------------- Gateway Centers I & II Raleigh, NC 116,000 ----------------------------------------------------------------------------------------------------------------------------------- Senate Plaza Camp Hill, PA 231,000 ----------------------------------------------------------------------------------------------------------------------------------- Total Office Projects Owned by 3,605,000 Rouse-Teachers Properties, Inc. ----------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------- Industrial Projects Owned by Rouse-Teachers Properties, Inc. Location Square Feet ----------------------------------------------------------------------------------------------------------------------------------- Pulaski Industrial Park Essex, MD 157,000 ----------------------------------------------------------------------------------------------------------------------------------- Hunt Valley Business Community Hunt Valley, MD 950,000 ----------------------------------------------------------------------------------------------------------------------------------- Rutherford Business Center Woodlawn, MD 572,000 ----------------------------------------------------------------------------------------------------------------------------------- Total Industrial Projects Owned 1,679,000 by Rouse-Teachers Properties, Inc. -----------------------------------------------------------------------------------------------------------------------------------
38 EX-21 6 EXHIBIT 21 Exhibit 21 Exhibit 21. Subsidiaries of the Registrant The Registrant had no parent at December 31, 1994. As of December 31, 1994, the Registrant owned 100% of the voting securities of the following domestic and foreign subsidiaries included in the consolidated financial statements: State of Subsidiary Incorporation ---------- ------------- Domestic subsidiaries: American City Corporation, The Maryland Baltimore Center, Inc. Maryland Charlottetown, Inc. Maryland Charlottetown North, Inc. Maryland Community Research and Development, Inc. Maryland Exton Square, Inc. Pennsylvania Four Owings Mills Corporate Center, Inc. Maryland Gallery Maintenance, Inc. (Note 1) Maryland Gallery II Trustee, Inc. Maryland Harbor Overlook Investments, Inc. Maryland Harborplace, Inc. Maryland Harborplace Management Corporation Maryland Harundale Mall, Inc. Maryland Hermes Incorporated Maryland Howard Research And Development Corporation, The (Note 2) Maryland Huntington Properties, Inc. (Note 3) Maryland It's Showtime of Maryland, Inc. Maryland Kalimba Marketplace, Inc. Maryland Louisville Shopping Center, Inc. Kentucky Mondawmin Corporation Maryland O. M. Guaranty, Inc. Maryland O. M. Land Development, Inc. Maryland O. M. Mall Corporation Maryland O. M. Management Company, Inc. Maryland One Owings Mills Corporate Center, Inc. Maryland Plymouth Meeting Mall, Inc. Pennsylvania PT Funding, Inc. Maryland Rouse-Brandywood, Inc. Maryland Rouse-Camden Warehouse, Inc. Maryland Rouse-Columbus, Inc. Maryland Rouse-Commerce, Inc. Maryland Rouse Company at Owings Mills, The Maryland Rouse Company Financial Services, Inc., The Maryland Rouse Company of Alabama, Inc., The Alabama Rouse Company of Alaska, Inc., The Maryland Rouse Company of Arkansas, Inc., The Maryland Rouse Company of California, Inc., The (Note 4) Maryland Rouse Company of Colorado, Inc., The (Note 5) Maryland Rouse Company of Connecticut, Inc., The (Note 6) Connecticut Rouse Company of Florida, Inc., The (Note 7) Florida 2. Rouse Company of Georgia, Inc., The (Note 8) Georgia Rouse Company of Idaho, Inc., The Maryland Rouse Company of Illinois, Inc., The Maryland Rouse Company of Iowa, Inc., The (Note 9) Maryland Rouse Company of Kentucky, Inc., The Maryland Rouse Company of Louisiana, The (Note 10) Maryland Rouse Company of Maine, Inc., The Maryland Rouse Company of Massachusetts, Inc., The (Note 11) Maryland Rouse Company of Michigan, Inc., The (Note 12) Maryland Rouse Company of Minnesota, Inc., The (Note 13) Maryland Rouse Company of Mississippi, Inc., The Maryland Rouse Company of Montana, Inc., The Maryland Rouse Company of New Hampshire, Inc., The Maryland Rouse Company of New Jersey, Inc., The (Note 14) New Jersey Rouse Company of New Mexico, Inc., The Maryland Rouse Company of New York, Inc., The (Note 15) New York Rouse Company of North Carolina, Inc., The (Note 16) Maryland Rouse Company of North Dakota, Inc., The Maryland Rouse Company of Ohio, Inc., The (Note 17) Ohio Rouse Company of Oklahoma, Inc., The Maryland Rouse Company of Oregon, Inc., The (Note 18) Maryland Rouse Company of Pennsylvania, Inc., The (Note 19) Pennsylvania Rouse Company of Rhode Island, Inc., The Maryland Rouse Company of South Carolina, Inc., The (Note 20) Maryland Rouse Company of South Dakota, Inc., The Maryland Rouse Company of Tennessee, Inc., The Maryland Rouse Company of Texas, Inc., The (Note 21) Texas Rouse Company of the District of Columbia, The Maryland Rouse Company of Utah, Inc., The Maryland Rouse Company of Vermont, Inc., The Maryland Rouse Company of Virginia, Inc., The (Note 22) Maryland Rouse Company of Washington, Inc., The (Note 23) Maryland Rouse Company of West Virginia, Inc., The Maryland Rouse Company of Wisconsin, Inc., The Maryland Rouse Company of Wyoming, Inc., The Maryland Rouse-Consulting, Inc. Maryland Rouse Credit Corporation Maryland Rouse Development Company of California, Inc., The Maryland Rouse Event Marketing, Inc. Maryland Rouse-Fairwood Development Corporation Maryland Rouse Fashion Island Management Company, Inc. Maryland Rouse Gallery II Management, Inc. Maryland Rouse Holding Company, The Maryland Rouse Holding Company of Arizona, Inc., The (Note 24) Maryland Rouse-Inglewood, Inc. Maryland Rouse Investing Company (Note 25) Maryland Rouse Management, Inc. Maryland Rouse Management Services Corporation Maryland 3. Rouse Management Services Corporation of Arkansas, Inc. Maryland Rouse Management Services Corporation of Louisiana, Inc. Maryland Rouse Metro Plaza, Inc. Maryland Rouse-Metro Shopping Center, Inc. Maryland Rouse-Milwaukee, Inc. Maryland Rouse-Milwaukee Garage Maintenance, Inc. Maryland Rouse Missouri Holding Company (Note 26) Maryland Rouse-Oakwood Shopping Center, Inc. Maryland Rouse-Oakwood Two, Inc. Maryland Rouse Office Management, Inc. Maryland Rouse Office Management of Pennsylvania, Inc. Maryland Rouse Philadelphia, Inc. Maryland Rouse Philadelphia Three, Inc. Maryland Rouse-Randhurst Shopping Center, Inc. Maryland Rouse-Santa Monica, Inc. Delaware Rouse Service Company, The Maryland Rouse SI Shopping Center, Inc. Maryland Rouse Tristate Venture, Inc. Texas Rouse Venture Capital, Inc. Maryland Rouse-Wates, Incorporated (Note 27) Delaware RREF Holding, Inc. (Note 28) Texas Salem Mall, Incorporated Maryland Saratoga Equipment Corporation, The Maryland Six Owings Mills Corporate Center, Inc. Maryland SMPL Management, Inc. Maryland Three Owings Mills Corporate Center, Inc. Maryland TRC Central, Inc. Maryland TRCD, Inc. (Note 29) Delaware TRC Holding Company of Washington, D.C.(Note 30) Maryland TRC Property Management, Inc. Maryland Two Owings Mills Corporate Center, Inc. Maryland Village of Cross Keys, Incorporated, The (Note 31) Maryland White Marsh Equities Corporation Maryland White Marsh Mall, Inc. Maryland Foreign subsidiaries: -------------------- Rouse Service (Canada) Limited Canada Sherway Mall Hotel Limited Canada Notes: ----- 1. Gallery Maintenance, Inc. owns all of the outstanding capital stock of Rouse Gallery Management, Inc., a Maryland corporation. 2. The Howard Research And Development Corporation owns all of the outstanding capital stock of the following Maryland corporations: 4. Columbia Development Corporation, The Columbia Gateway, Inc. Columbia Management, Inc. Dorsey's Search Village Center, Inc. ExecuCentre, Inc., The Fifty Columbia Corporate Center, Inc. Forty Columbia Corporate Center, Inc. Gateway Retail Center, Inc. GEAPE II, Inc. Hickory Ridge Village Center, Inc. HRD Parking, Inc. King's Contrivance Village Center, Inc. Lakefront North Parking, Inc. Oakland Ridge Commercial, Inc. Oakland Ridge Industrial Development Corporation Pointer's Run Buildings Group, Inc. Rouse-River Hill Village Center, Inc. The Columbia Development Corporation owns all of the outstanding capital stock of each of the following Maryland corporations: Columbia Mall, Inc. Dobbin Road Commercial, Inc. Guilford Industrial Center, Inc. Rouse Hotel Management, Inc. Columbia Mall, Inc. owns all of the outstanding capital stock of Seventy Columbia Corporate Center, Inc., a Maryland corporation. GEAPE II, Inc. owns all of the outstanding capital stock of GEAPE III, Inc., a Maryland corporation. 3. Huntington Properties, Inc. owns all of the outstanding capital stock of Huntington Realty Interests, Ltd., a Maryland corporation. Huntington Realty Interests, Ltd. owns all of the outstanding capital stock of the following Maryland corporations: HRIL, Inc. Huntington Capital Investors, Ltd. Regency-Huntington, Inc. 4. The Rouse Company of California, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: Rouse-Canyon Springs, Inc., a Maryland corporation Rouse-Irvine, Inc., a Maryland corporation Rouse-Oakland, Inc., a Maryland corporation 5. 5. The Rouse Company of Colorado, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: Rouse Management Services Corporation of Colorado, Inc. Rouse-Tabor Center, Inc. 6. The Rouse Company of Connecticut, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: Rouse Chapel Square, Inc. Rouse Chapel Square Finance, Inc. Rouse New Haven Parking Management, Inc. Rouse New Haven Shopping Center, Inc. 7. The Rouse Company of Florida, Inc. owns all of the outstanding capital stock of each of the following corporations: Bayside Entertainment Company, a Maryland corporation Governor's Square, Inc., a Florida corporation Howard Retail Investment Corporation, a Maryland corporation New River Center, Inc., a Florida corporation Rouse-Bayside, Inc., a Maryland corporation Rouse-Jacksonville, Inc., a Maryland corporation Rouse Kendall Management Corporation, a Maryland corporation Rouse-Marina, Inc., a Maryland corporation Rouse-Miami, Inc., a Maryland corporation Rouse Office Management of Florida, Inc., a Maryland corporation Rouse-Orlando, Inc., a Maryland corporation Rouse Retail Management - Bayside, Inc., a Maryland corporation Rouse-Tampa, Inc., a Florida corporation Rouse-West Dade, Inc., a Maryland corporation 8. The Rouse Company of Georgia, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: Augusta Mall, Inc. Outlet Square of Atlanta, Inc. Perimeter Center, Inc. Perimeter Mall, Inc. Perimeter Mall Management Corporation Rouse-Atlanta, Inc. Rouse Columbus Square, Inc. Rouse Columbus Square Management Corporation Rouse South DeKalb, Inc. South DeKalb Mall Management Corporation 6. 9. The Rouse Company of Iowa, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: Rouse Management Services Corporation of Iowa, Inc. Rouse Management Services Corporation Two of Iowa, Inc. 10. The Rouse Company of Louisiana owns all of the outstanding capital stock of each of the following Maryland corporations: Riverwalk Operating Company, Inc. Rouse-New Orleans, Inc. 11. The Rouse Company of Massachusetts, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: Eastfield Mall, Incorporated Faneuil Hall Marketplace, Inc. Marketplace Grasshopper, Inc. 12. The Rouse Company of Michigan, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: Rouse Southland, Inc. Rouse Southland Management Corporation Southland Security, Inc. Southland Shopping Center, Inc. 13. The Rouse Company of Minnesota, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: Ridgedale Shopping Center, Inc. Rouse-Maple Grove, Inc. Rouse Ridgedale, Inc. Rouse Ridgedale Management Corporation 14. The Rouse Company of New Jersey, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: Cherry Hill Center, Inc. Echelon Mall, Inc. Echelon Urban Center, Inc. Paramus Mall Management Company, Inc. Paramus Park, Inc. Rouse-Atlantic Gateway, Inc. Rouse-Burlington, Inc. Rouse-Echelon, Inc. The Willowbrook Corporation Willowbrook Management Corporation Woodbridge Center, Inc. 7. 15. The Rouse Company of New York, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: DM Shopping Center, Inc. Rouse-Seaport Retail Venture, Inc. Rouse SI Shopping Management, Inc. Seaport Marketplace, Inc. Seaport Marketplace Theatre, Inc. Seaport Theatre Management Corporation 16. The Rouse Company of North Carolina, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: Rouse-Charlotte, Inc. Rouse Office Management of North Carolina, Inc. 17. The Rouse Company of Ohio, Inc. owns all of the outstanding capital stock of each of the following corporations: Beachwood Place, Inc., a Maryland corporation Franklin Park Mall, Inc., a Maryland corporation Franklin Park Mall Management Corporation, a Maryland corporation Plaza Holding Corporation, an Ohio corporation 18. The Rouse Company of Oregon, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: Rouse Office Management of Oregon, Inc. Rouse-Portland, Inc. Rouse Salem Centre, Inc. Rouse Salem Centre Management Corporation 19. The Rouse Company of Pennsylvania, Inc. owns all of the outstanding capital stock of Whiteland I, Inc. and Whiteland II, Inc., both Maryland corporations. 20. The Rouse Company of South Carolina, Inc. owns all of the outstanding capital stock of Rouse-Spartanburg, Inc., a Maryland corporation. 21. The Rouse Company of Texas, Inc. owns all of the outstanding capital stock of each of the following corporations: Almeda Mall, Inc., a Maryland corporation AM Management Corporation, a Texas corporation AU Management Corporation, a Texas corporation Austin Mall, Inc., a Maryland corporation DK Management Corporation, a Texas corporation DK Shopping Center, Inc., a Texas corporation Greengate Mall, Inc., a Pennsylvania corporation NC Shopping Center, Inc., a Maryland corporation North Star Mall, Inc., a Texas corporation 8. Northwest Mall, Inc., a Maryland corporation NS Management Corporation, a Texas corporation NW Management Corporation, a Texas corporation Paramus Equities, Inc., a Texas corporation Rouse-Air Cargo, Inc., a Maryland corporation Rouse-Air Cargo (DFW), Inc., a Maryland corporation Rouse-Almeda, Inc., a Maryland corporation Rouse-Carillon Management Company, Inc., a Maryland corporation Rouse-Carillon Shopping Center, Inc., a Maryland corporation Rouse Central Park Shopping Center, Inc., a Maryland corporation Rouse Fort Worth, Inc., a Maryland corporation Rouse Holding Company of Texas, Inc., a Texas corporation Rouse Management Services Corporation of Texas, Inc., a Maryland corporation Rouse-Northwest, Inc., a Maryland corporation Rouse-Southlake, Inc., a Maryland corporation SDK Mall, Inc., a Texas corporation South DeKalb Mall, Inc., a Texas corporation 22. The Rouse Company of Virginia, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: Rouse Airport Retail, Inc. Rouse-Military Circle, Inc. Rouse-Richmond, Inc. Rouse-Military Circle, Inc. owns all of the outstanding capital stock of Rouse Hotel Management of Virginia, Inc., a Maryland corporation. 23. The Rouse Company of Washington, Inc. owns all of the outstanding capital stock of Rouse-Seattle, Inc., a Maryland corporation. 24. The Rouse Holding Company of Arizona, Inc. owns all of the outstanding capital stock of each of the following Maryland corporations: Rouse-Arizona Center, Inc. Rouse Office Management of Arizona, Inc. Rouse-Phoenix Development Corporation Rouse-Phoenix Parking, Inc. Rouse-Phoenix Parking Two, Inc. Rouse-Phoenix Two Corporate Center, Inc. 25. Rouse Investing Company owns all of the outstanding capital stock of each of the following corporations: Deerfield Homes, Inc., a Florida corporation 306 Corporation, a Texas corporation Wilmington Homes, Inc., a North Carolina corporation 9. Wilmington Homes, Inc. owns all of the outstanding capital stock of Echo Farms Golf and Country Club, Inc., a North Carolina corporation. 26. Rouse Missouri Holding Company owns all of the outstanding capital stock of each of the following Maryland corporations: The Rouse Company of Missouri, Inc. Rouse Missouri Management Corporation St. Louis Union Station Beergarten, Inc. The Rouse Company of Missouri, Inc. owns all of the outstanding capital stock of The Rouse Company of St. Louis, Inc., a Maryland Corporation. 27. Rouse-Wates, Incorporated (Rouse-Wates) and its consolidated subsidiaries are accounted for as a discontinued operation in the consolidated financial statements. Rouse-Wates owns all of the outstanding capital stock of each of the following corporations: Norbury Construction Company, a Delaware corporation Owen Brown B Development Company, a Maryland corporation 28. RREF Holding, Inc. owns all of the outstanding capital stock of RII Holding, Inc., a Texas corporation. 29. TRCD, Inc. owns all of the outstanding capital stock of the following Delaware corporations: Austin Mall Corporation Echelon Holding Company, Inc. The Franklin Park Corporation Mall St. Matthews Corporation North Star Mall Corporation One Franklin Park Corporation One Gallery Corporation One Willow Corporation Rouse Funding Corporation Rouse Funding Three, Inc. Rouse Funding Two, Inc. TRCDE, Inc. TRCDE Two, Inc. TRCDF, Inc. Two Franklin Park Corporation Two Gallery Corporation Two Willow Corporation Willowbrook Mall, Inc. The Franklin Park Corporation owns 50% of the outstanding capital stock of Franklin Park Finance, Inc., a Delaware corporation. Rodamco U.S.A., Inc. owns the remaining 50%. 10. One Gallery Corporation and Two Gallery Corporation each own 50% of the outstanding shares of Philadelphia Gallery II, a Pennsylvania business trust. Willowbrook Mall, Inc. owns 37.5% of the outstanding capital stock of Willowbroook Finance Corporation, a Delaware corporation. Rodamco U.S.A., Inc. owns the remaining 62.5%. 30. TRC Holding Company of Washington, D.C. owns all of the outstanding capital stock of Rouse-National Press Management, Inc., a Maryland corporation. 31. The Village of Cross Keys, Incorporated owns all of the outstanding capital stock of The Roost, Inc., a Maryland corporation. EX-24 7 EXHIBIT 24 Exhibit 24. Power of Attorney. The Power of Attorney, dated March 8, 1988, is incorporated by reference from the Exhibits to the Company's Form 10-K Annual Report for the fiscal year ended December 31, 1987, which may be found in Commission file number 0-1743. The Powers of Attorney, dated December 3, 1992 and March 16, 1993, respectively, are incorporated by reference from the Exhibits to the Company's Form 10-K Annual Report for the fiscal year ended December 31, 1992, which may be found in Commission file number 0-1743. EX-27 8 EXHIBIT 27
5 This financial data schedule is submitted in accordance with Regulation S-K item 601(c)(2). This schedule contains summary financial information extracted from the consolidated financial statements of the Rouse Company and subsidiaries included in Form 10-K for the annual period ended December 31, 1994 and is qualified in its entirety by reference to such financial statements. 1,000 YEAR DEC-31-1994 DEC-31-1994 $49,398 30,149 103,326 (25,124) 0 0 3,144,015 (490,158) 2,915,860 0 2,472,876 476 0 45 94,505 2,915,860 671,171 671,171 0 431,144 7,923 5,185 213,583 13,336 6,730 6,606 0 (4,447) 0 2,159 (.23) .11
EX-99 9 EXHIBIT 99 Exhibit 99 Exhibit 99. Additional Exhibits. Form 11-K Annual Report to The Rouse Company Savings Plan for the year ended December 31, 1994. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 1994 or [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ___________ to ____________ Commission File Number 0-1743 ---------- A. Full title of the plan and address of the plan: The Rouse Company Savings Plan c/o Personnel Division The Rouse Company Building 10275 Little Patuxent Parkway Columbia, Maryland 21044 B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive offices: The Rouse Company The Rouse Company Building 10275 Little Patuxent Parkway Columbia, Maryland 21044 REQUIRED INFORMATION Since The Rouse Company Savings Plan (the "Plan") is subject to the Employee Retirement Income Security Act of 1974, the Plan financial statements for the fiscal year ending December 31, 1994 will be filed on or before July 1, 1995. Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the Plan) have duly caused this annual report to be signed by the undersigned hereunto duly authorized. THE ROUSE COMPANY SAVINGS PLAN ------------------------------ Date: March 31, 1995 By /s/ William D. Boden -------------- -------------------------------- William D. Boden, Administrator and Date: March 31, 1995 By /s/ George L. Yungmann -------------- -------------------------------- George L. Yungmann, Trustee