<PAGE>
UNITED STATES
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, 1995
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
- ------------------- ---------------------
Common Stock (par value 1 cent per share) New York Stock Exchange
- -----------------------------------------
Series A Convertible Preferred Stock
- -------------------------------------
(par value 1 cent per share) New York Stock Exchange
- ----------------------------
9 1/4% Cumulative Quarterly Income Preferred
- --------------------------------------------
Securities New York Stock Exchange
- ----------
Securities registered pursuant to Section 12(g) of the Act:
NONE
----
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. __
As of February 20, 1996, there were outstanding 47,922,749 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 $906,134,036.
Documents Incorporated by Reference
The specified portions of the Annual Report to Shareholders for the fiscal year
ended December 31, 1995 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, 1996 is incorporated by reference into Part III.
<PAGE>
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.
RECENT DEVELOPMENTS. On February 27, 1996, the Company entered into certain
merger agreements whereby the Company agreed, subject to certain conditions,
to acquire The Hughes Corporation, a Delaware corporation ("THC"), its
affiliated partnership, Howard Hughes Properties, Limited Partnership
("HHPLP"), a Delaware limited partnership, and their subsidiaries and
affiliates. THC and HHPLP are primarily engaged in real estate management
and development. The assets of THC and its subsidiaries include four
large-scale, master-planned business parks (three in Las Vegas and one in
Los Angeles), a 75% partnership interest in a regional shopping center in
Las Vegas, a 22,500 acre master planned, new community in Las Vegas and
a number of other land parcels and commercial buildings in both Nevada
and Los Angeles.
The Company agreed to acquire all the capital stock of THC ("THC Common
Stock") through a merger of THC into a wholly owned subsidiary of the
Company (the "Merger"). The Company agreed to acquire the 48% of the
partnership interests of HHPLP which are not currently owned by THC through
a merger of another wholly owned subsidiary of the Company into HHPLP (the
"HHPLP Merger"). The purchase price includes debt presently encumbering the
assets of THC and its subsidiaries.
In the Merger, holders of THC Common Stock are to receive (i) shares of Rouse
Common Stock or, in the event that the number of shares of Rouse Common
Stock issuable in the Merger would otherwise exceed 19.9% of the currently
outstanding Rouse Common Stock, a combination of Rouse Common Stock and
cash, in each case having a value of $176.4 million, (ii) a note of up to
$15 million and (iii) contractual rights to receive additional shares of
Rouse Common Stock or, if the Company is
I-1
<PAGE>
Item 1. Business, continued.
unable for any reason to deliver shares of Rouse Common Stock, shares of a
new series of increasing rate Preferred Stock, par value $0.01 per share, of
the Company over a period of up to 15 years following the consummation of
the Merger based upon certain formulas relating to the cash flow and
appraised value of certain assets of THC and its subsidiaries. The number
of shares to be issued in the Merger will be determined by the average
closing price of the stock for the 30 trading days ending five days prior to
the closing date subject to maximum and minimum prices.
Pursuant to the HHPLP Merger, holders of partnership interests in HHPLP (other
than THC) will be entitled to receive an amount of cash equal to (i) the sum
of (x) $40 million plus (y) the aggregate amount of cash and cash
equivalents held by THC and its subsidiaries at December 31, 1995 minus (ii)
certain expenses, subject to certain adjustments.
The transactions are conditioned upon approval by the requisite vote of the
holders of THC Common Stock and certain other closing conditions and,
accordingly, there can be no assurance that the transactions will be
consummated. See Exhibit 99.2 for a description of the risks related to
these transactions. The transactions are expected to close in the second
quarter of 1996.
I-2
<PAGE>
Item 1. Business, continued.
Item 1(b). Financial Information About Industry Segments.
Information required by Item 1(b) is incorporated herein by
reference to note 13 of the notes to consolidated financial statements
included in the 1995 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-3
<PAGE>
Item 1. Business, continued.
Item 1(c). Narrative Description of Business.
Operating Properties:
--------------------
As set forth in Item 2, at December 31, 1995, the 66 regional
retail centers owned, in whole or in part, or operated by subsidiaries or
affiliates of the Company, aggregated 21,435,000 square feet of leasable
space, including 1,067,000 square feet leased to department stores and
402,000 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, 1995,
the Company managed 19 such centers, which are included in the figures in
the preceding paragraph and aggregated 6,097,000 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 3,081,000 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 2,685,000 square feet of
leasable space and the 146-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 76 office/industrial buildings
with 5,101,000
I-4
<PAGE>
Item 1. Business, continued.
Item 1(c). Narrative Description of Business, continued:
square feet of space and 308 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.
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 and certain subsidiaries or affiliates are in the
construction or development stage of announced projects, primarily
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 1,837
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 for sale a parcel of land in California.
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
I-5
<PAGE>
Item 1. Business, continued.
Item 1(c). Narrative Description of Business, continued:
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 operating results or competitive
position of the Company in the past; the Company anticipates that they will
have no material adverse effect on its future operating results 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 4,283 full- and part-
time employees at December 31, 1995.
I-6
<PAGE>
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 58
through 62 of Exhibit 13 to this Form 10-K. In addition to the properties
presented in the table, the Company owned Outlet Square in Atlanta, Georgia
and Talbottown in Easton, Maryland as of December 31, 1995. These properties
were sold in February, 1996. 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 2062
Echelon Mall Leasehold 2008
Faneuil Hall Marketplace Leasehold 2074
First National Bank Plaza Leasehold 2013
I-7
<PAGE>
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-8
<PAGE>
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 alleged 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 claimed
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. In addition, on September 3, 1992,
Plaintiff claimed $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 and asserted other defenses. NORA
also asserted a counterclaim against Plaintiff and its guarantors, Robert
Guastella and Charles Kovacs, for past due rentals and other charges in the
approximate amount of $300,000 plus interest and attorneys' fees as provided
for in the lease agreement. 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. The
trial court also entered an amended judgment in which it awarded Plaintiff
$450,000 in attorneys' fees and awarded Defendants $25,000 in attorneys' fees.
On May 23, 1994, Defendants appealed this judgment to the Louisiana Court of
Appeal, Fourth District. On November 16, 1995, the Louisiana Court of Appeal
in a 2 to 1 decision reduced the judgement by $240,000, but otherwise affirmed
the damage award to Plaintiff. Defendants subsequently filed a motion for
reconsideration with the Louisiana Court of Appeal, which was denied on
December 19, 1995, again in a 2 to 1 decision. On January 18, 1996,
Defendants filed a petition requesting the Louisiana Supreme Court to consider
a further appeal of this judgment. Plaintiff filed an opposition to this
petition on February 2, 1996, and Defendants submitted a reply brief on
February 21, 1996.
I-9
<PAGE>
The Company recorded in the fourth quarter of 1995 a pre-tax provision in the
amount of $12,321,000, representing the full amount of the modified award
(including attorneys' fees) plus interest, less pre-tax provisions previously
recorded totaling $1,150,000. The Company believes that the ultimate
disposition of this matter will not have a material adverse effect on the
Company's consolidated financial position.
I-10
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
None.
I-11
<PAGE>
Directors and Executive Officers.
The executive officers of the Company as of March 1, 1996 are:
<TABLE>
<CAPTION>
Present office and Date of election Business or professional
position with the or appointment to experience during the past five
Executive Officer Age Company present office years
- -------------------- --- ------------------------- ------------------ --------------------------------
<S> <C> <C> <C> <C>
Anthony W. Deering 51 President and 2/25/93 President and Chief Executive
Chief Executive Officer 2/23/95 Officer of the Company;
formerly President and Chief
Operating Officer of the
Company; and Executive Vice
President - Finance and
Administration and Chief
Financial Officer of the
Company
Jeffrey H. Donahue 49 Senior Vice-President, 9/23/93 Senior Vice-President and Chief
Chief Financial Officer 9/23/93 Financial Officer of the
and Director of the 8/17/93 Company and Director of the
Finance Division Finance Division; formerly
Vice-President and Treasurer of
the Company
Duke S. Kassolis 44 Senior Vice-President 9/23/93 Senior Vice-President and
and Director of Office 8/17/93 Director of Office and Mixed-
and Mixed-Use Operations Use Operations of the Company;
formerly Vice-President and
Director of Office and
Commercial Properties of the
Company
Paul I. Latta, Jr. 52 Senior Vice-President 9/23/93 Senior Vice-President and
and Director of Retail 8/17/93 Director of Retail Operations
Operations of the Company; formerly Vice-
President and Associate
Division Director, Operating
Properties Division of the
Company
</TABLE>
I-12
<PAGE>
Directors and Executive Officers, continued.
<TABLE>
<CAPTION>
Present office and Date of election Business or professional
position with the or appointment to experience during the past five
Executive Officer Age Company present office years
- -------------------- --- ------------------------- ------------------ --------------------------------
<S> <C> <C> <C> <C>
Douglas A. McGregor 53 Executive Vice-President 8/17/93 Executive Vice-President for
for Development and Development and Operations of
Operations the Company; formerly Executive
Vice-President - Development
and Director of the Office and
Community Development Division
of the Company
Robert Minutoli 45 Senior Vice-President 9/23/93 Senior Vice-President and
and Director of 8/17/93 Director of Acquisitions of the
Acquisitions Company; formerly Vice-
President for Development of
the Company
Robert D. Riedy 50 Senior Vice-President 9/23/93 Senior Vice-President and
and Director of Retail 8/17/93 Director of Retail Leasing of
Leasing the Company; formerly Vice-
President for Development of
the Company
Alton J. Scavo 49 Senior Vice-President, 9/23/93 Senior Vice-President and
Director of the 8/17/93 Director of the Community
Community Development Development Division of the
Division and General Company and General Manager of
Manager of Columbia Columbia; formerly Vice-
President and Associate
Director of the Community
Development Division of the
Company
Jerome D. Smalley 46 Senior Vice-President 9/23/93 Senior Vice-President and
and Director of the 8/17/93 Director of the Commercial and
Commercial and Office Office Development Division of
Development Division the Company; formerly Vice-
President for Development
of the Company
</TABLE>
I-13
<PAGE>
Directors and Executive Officers, continued.
<TABLE>
<CAPTION>
Present office and Date of election Business or professional
position with the or appointment to experience during the past five
Executive Officer Age Company present office years
- -------------------- --- ------------------------- ------------------ --------------------------------
<S> <C> <C> <C> <C>
George L. Yungmann 53 Senior Vice-President, 9/23/93 Senior Vice-President and
Controller and Director 7/26/72 Controller of the Company and
of the Controller's 7/26/72 Director of the Controller's
Division Division; formerly Vice-
President, Controller and
Director of the Controller's
Division
</TABLE>
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-14
<PAGE>
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 46 of Exhibit 13.
Item 6. Selected Financial Data.
Information required by Item 6 is incorporated herein by reference to
page 46 of Exhibit 13.
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 47 through 53 of Exhibit 13.
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 46 of Exhibit 13.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
II-1
<PAGE>
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, 1996.
III-1
<PAGE>
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:
A report on Form 8-K was filed on November 20, 1995, to report the decision
of the Louisiana Court of Appeals in the litigation matter described in Item
3 -- Legal Proceedings and the Company's decision to record an additional
provision for loss relating to the matter.
IV-1
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
Index to Financial Statements and Schedules
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report IV-3
Report of Independent Real Estate Consultants included on
page 21 of Exhibit 13 incorporated herein by reference
Financial Statements:
The Rouse Company and Subsidiaries included on pages 22
through 45 of Exhibit 13 incorporated herein by reference:
Consolidated Cost Basis and Current Value Basis Balance Sheets
at December 31, 1995 and 1994
Consolidated Cost Basis Statements of Operations for the Years
Ended December 31, 1995, 1994 and 1993
Consolidated Cost Basis Statements of Shareholders' Equity for
the Years Ended December 31, 1995, 1994 and 1993
Consolidated Cost Basis Statements of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993
Consolidated Current Value Basis Statements of Changes in
Revaluation Equity for the Years Ended December 31, 1995,
1994 and 1993
Notes to Consolidated Financial Statements
Schedules:
The Rouse Company and Subsidiaries as of December 31, 1995 or
for the years ended December 31, 1995, 1994 and 1993:
Schedule II Valuation and Qualifying Accounts IV-4
Schedule III Real Estate and Accumulated Depreciation IV-5
</TABLE>
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
<PAGE>
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, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, 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 22, 1996
IV-3
<PAGE>
Schedule II
-----------
THE ROUSE COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Additions
------------------------
Balance at Charged to Charged to Balance at
beginning costs and other end of
Descriptions of year expenses accounts Deductions year
------------ ---------- ---------- --------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Allowance for doubtful receivables $25,124 $ 3,318 $ - $3,974 /(1)/ $ 24,468
======= ====== ======= ====== =======
Valuation allowance - properties held
for sale $ - $15,589 $ - $ - $ 15,589
======= ======= ======= ====== ========
Pre-construction reserve $14,109 $ 3,800 $ - $2,530 /(2)/ $ 15,379
======= ======= ======= ====== ========
Year ended December 31, 1994:
Allowance for doubtful receivables $24,036 $ 5,185 $ - $4,097 /(1)/ $ 25,124
======= ======= ======= ====== ========
Valuation allowance - properties held
for sale $ - $ - $ - $ - $ -
======= ======= ======= ====== ========
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
======= ======= ======= ====== ========
Valuation allowance - properties held
for sale $ - $ - $ - $ - $ -
======= ======= ======= ====== ========
Pre-construction reserve $11,127 $ 2,900 $ - $1,205 /(2)/ $ 12,822
======= ======= ======= ====== ========
</TABLE>
Notes:
(1) Balances written off as uncollectible.
(2) Costs of unsuccessful projects written off.
IV-4
<PAGE>
Schedule III
------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1995
<TABLE>
<CAPTION>
Cost capitalized
Initial cost to subsequent to Gross amount at which carried
Company acquisition at December 31, 1995
--------------- -------------------- ---------------------------------
Buildings
Buildings and
Encum- and Carrying Improve-
brances Improve- Improve- costs ments
Description (note 4) Land ments ments (note 2) Land (note 3) Total
- ----------- ------- ------- -------- -------- -------- ---- -------- ------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Properties:
Woodbridge Center $135,701 $- $- $142,447 $- $26,301 $116,146 $142,447
Retail Center
Woodbridge, NJ
South Street Seaport 52,000 - - 140,480 - - 140,480 140,480
Retail Center
New York, NY
Arizona Center 120,847 97 - 137,058 - 97 137,058 137,155
Mixed-use project
Phoenix, AZ
Pioneer Place 97,875 - - 122,055 - - 122,055 122,055
Mixed-use project
Portland, OR
Westlake Center 95,351 10,582 - 101,658 - 10,582 101,658 112,240
Mixed-use project
Seattle, WA
The Gallery
at Harborplace 111,694 6,648 - 103,176 - 6,648 103,176 109,824
Mixed-use project
Baltimore, MD
Owings Mills 56,016 13,408 - 86,358 - 13,408 86,358 99,766
Retail Center
Baltimore, MD
Bayside Marketplace 84,375 - - 97,662 - - 97,662 97,662
Retail Center
Miami, FL
Mall St. Matthews 73,468 - - 91,599 - - 91,599 91,599
Retail Center
Louisville, KY
<CAPTION>
Life on
which
depreciation
Accumulated Date of in latest
depreciation completion income
and of Date statement is
amortization constrution acquired computed
------------ ----------- -------- ------------
(in thousands)
<S> <C> <C> <C> <C>
Operating Properties:
Woodbridge Center $19,099 3/71 N/A Note 8
Retail Center
Woodbridge, NJ
South Street Seaport 22,047 7/83 N/A Note 8
Retail Center
New York, NY
Arizona Center 18,889 11/90 N/A Note 8
Mixed-use project
Phoenix, AZ
Pioneer Place 17,752 3/90 N/A Note 8
Mixed-use project
Portland, OR
Westlake Center 19,716 10/88 N/A Note 8
Mixed-use project
Seattle, WA
The Gallery
at Harborplace 19,974 9/87 N/A Note 8
Mixed-use project
Baltimore, MD
Owings Mills 8,631 7/86 N/A Note 8
Retail Center
Baltimore, MD
Bayside Marketplace 14,496 4/87 N/A Note 8
Retail Center
Miami, FL
Mall St. Matthews 10,495 3/62 N/A Note 8
Retail Center
Louisville, KY
</TABLE>
(Continued)
IV-5
<PAGE>
Schedule III, continued
-----------------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1995
<TABLE>
<CAPTION>
Cost capitalized
Initial cost to subsequent to Gross amount at which carried
Company acquisition at December 31, 1995
--------------- -------------------- ---------------------------------
Buildings
Buildings and
Encum- and Carrying Improve-
brances Improve- Improve- costs ments
Description (note 4) Land ments ments (note 2) Land (note 3) Total
- ----------- ------- ------- -------- -------- -------- ---- -------- ------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paramus Park 70,353 13,475 - 69,290 - 13,475 69,290 82,765
Retail Center
Paramus, NJ
White Marsh 58,202 2,627 - 72,887 - 2,627 72,887 75,514
Retail Center
Baltimore, MD
Santa Monica Place - 5,088 - 68,207 - 5,088 68,207 73,295
Retail Center
Santa Monica, CA
Riverwalk 10,252 - - 72,211 - - 72,211 72,211
Retail Center
New Orleans, LA
Oakwood Center 55,000 14,750 - 56,888 - 14,750 56,888 71,638
Retail Center
Gretna, LA
Faneuil Hall
Marketplace 54,871 - - 71,476 - - 71,476 71,476
Retail Center
Boston, MA
Cherry Hill Mall 86,713 14,767 - 56,221 - 14,767 56,221 70,988
Retail Center
Cherry Hill, NJ
Hulen Mall 66,058 5,064 - 63,953 - 5,064 63,953 69,017
Retail Center
Ft. Worth, TX
St. Louis
Union Station - - - 67,093 - - 67,093 67,093
Retail Center
St. Louis, MO
<CAPTION>
Life on
which
depreciation
Accumulated Date of in latest
depreciation completion income
and of Date statement is
amortization constrution acquired computed
------------ ----------- -------- ------------
(in thousands)
<S> <C> <C> <C> <C>
Paramus Park 5,196 3/74 N/A Note 8
Retail Center
Paramus, NJ
White Marsh 10,649 8/81 N/A Note 8
Retail Center
Baltimore, MD
Santa Monica Place 7,973 10/80 N/A Note 8
Retail Center
Santa Monica, CA
Riverwalk 10,400 8/86 N/A Note 8
Retail Center
New Orleans, LA
Oakwood Center 6,117 10/82 N/A Note 8
Retail Center
Gretna, LA
Faneuil Hall
Marketplace 8,619 8/76 N/A Note 8
Retail Center
Boston, MA
Cherry Hill Mall 15,506 10/61 N/A Note 8
Retail Center
Cherry Hill, NJ
Hulen Mall 7,790 8/77 N/A Note 8
Retail Center
Ft. Worth, TX
St. Louis
Union Station 14,734 8/85 N/A Note 8
Retail Center
St. Louis, MO
</TABLE>
IV-6 (Continued)
<PAGE>
Schedule III, continued
-----------------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1995
<TABLE>
<CAPTION>
Cost capitalized
Initial cost to subsequent to Gross amount at which carried
Company acquisition at December 31, 1995
--------------- ---------------- -----------------------------
Buildings
Buildings and
Encum- and Carrying Improve-
brances Improve- Improve- costs ments
Description (note 4) Land ments ments (note 2) Land (note 3) Total
- ----------- ------- ---- -------- -------- -------- ---- -------- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Echelon Mall 62,000 6,160 - 53,910 - 6,160 53,910 60,070
Retail Center
Voorhees, NJ
The Mall in Columbia 47,414 4,788 - 46,663 - 4,788 46,663 51,451
Retail Center
Columbia, MD
Blue Cross &
Blue Shield Building I 38,295 1,000 - 44,580 - 1,000 44,580 45,580
Office Building
Baltimore, MD
Harborplace 32,891 - - 44,398 - - 44,398 44,398
Retail Center
Baltimore, MD
Village of Cross Keys - 1,083 - 40,189 - 1,083 40,189 41,272
Mixed-use Project
Baltimore, MD
Northwest Mall 23,426 6,649 - 27,320 - 6,649 27,320 33,969
Retail Center
Houston, TX
The Jacksonville Landing 15,211 - - 33,401 - - 33,401 33,401
Retail Center
Jacksonville, FL
Tampa Bay Center 48,000 920 - 30,579 - 920 30,579 31,499
Retail Center
Tampa, FL
Salem Mall 36,929 1,285 - 29,010 - 1,285 29,010 30,295
Retail Center
Dayton, OH
<CAPTION>
Life on
which
Accumu- depre-
lated ciation
depre- Date of in latest
ciation comple- income
and tion of state-
amorti- constr- Date ment is
zation uction acquired computed
------- ------ -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Echelon Mall 9,373 9/70 N/A Note 8
Retail Center
Voorhees, NJ
The Mall in Columbia 9,591 8/71 N/A Note 8
Retail Center
Columbia, MD
Blue Cross &
Blue Shield Building I 6,735 7/89 N/A Note 8
Office Building
Baltimore, MD
Harborplace 9,931 7/80 N/A Note 8
Retail Center
Baltimore, MD
Village of Cross Keys 14,305 9/65 N/A Note 8
Mixed-use Project
Baltimore, MD
Northwest Mall 5,458 10/68 N/A Note 8
Retail Center
Houston, TX
The Jacksonville Landing 8,455 6/87 N/A Note 8
Retail Center
Jacksonville, FL
Tampa Bay Center 8,719 8/76 N/A Note 8
Retail Center
Tampa, FL
Salem Mall 8,422 10/66 N/A Note 8
Retail Center
Dayton, OH
</TABLE>
IV-7 (Continued)
<PAGE>
Schedule III, continued
-----------------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1995
<TABLE>
<CAPTION>
Cost capitalized
Initial cost to subsequent to Gross amount at which carried
Company acquisition at December 31, 1995
--------------- ---------------- -----------------------------
Buildings
Buildings and
Encum- and Carrying Improve-
brances Improve- Improve- costs ments
Description (note 4) Land ments ments (note 2 Land (note 3) Total
- ----------- ------- ---- -------- -------- -------- ---- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Governors Square 28,115 - - 30,288 - - 30,288 30,288
Retail Center
Tallahassee, FL
Almeda Mall - 4,641 - 24,961 - 4,641 24,961 29,602
Retail Center
Houston, TX
Gateway Commerce Center #20 - 6,200 - 22,279 - 6,200 22,279 28,479
Industrial Building
Columbia, MD
North Star - 168 - 28,063 - 168 28,063 28,231
Retail Center
San Antonio, TX
Augusta Mall 21,314 1,601 - 26,117 - 1,601 26,117 27,718
Retail Center
Augusta, GA
Beachwood Place 41,228 3,276 - 23,982 - 3,276 23,982 27,258
Retail Center
Beachwood, OH
Plymouth Meeting 16,831 702 - 25,856 - 702 25,856 26,558
Retail Center
Plymouth Meeting, PA
Alexander & Alexander
Building I 22,469 1,000 - 25,021 - 1,000 25,021 26,021
Office Building
Baltimore, MD
Perimeter Mall 25,791 3,006 - 22,682 - 3,006 22,682 25,688
Retail Center
Atlanta, GA
<CAPTION>
Life on
which
Accumu- depre-
lated ciation
depre- Date of in latest
ciation comple- income
and tion of state-
amorti- constr- Date ment is
zation uction acquired computed
------- ------ -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Governors Square 3,926 8/79 N/A Note 8
Retail Center
Tallahassee, FL
Almeda Mall 6,132 10/68 N/A Note 8
Retail Center
Houston, TX
Gateway Commerce Center #20 3,350 N/A 8/93 Note 8
Industrial Building
Columbia, MD
North Star 6,761 9/60 N/A Note 8
Retail Center
San Antonio, TX
Augusta Mall 4,530 8/78 N/A Note 8
Retail Center
Augusta, GA
Beachwood Place 6,413 8/78 N/A Note 8
Retail Center
Beachwood, OH
Plymouth Meeting 10,672 2/66 N/A Note 8
Retail Center
Plymouth Meeting, PA
Alexander & Alexander
Building I 4,989 9/87 N/A Note 8
Office Building
Baltimore, MD
Perimeter Mall 5,574 8/71 N/A Note 8
Retail Center
Atlanta, GA
</TABLE>
IV-8 (Continued)
<PAGE>
Schedule III, continued
-----------------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1995
<TABLE>
<CAPTION>
Cost capitalized
Initial cost to subsequent to Gross amount at which carried
Company acquisition at December 31, 1995
--------------- ----------------- ------------------------------
Buildings
Buildings and
Encum- and Carrying Improve-
brances Improve- Improve- costs ments
Description (note 4) Land ments ments (note 2) Land (note 3) Total
- ----------- ------- ---- -------- -------- -------- ---- -------- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Exton Square 8,683 3,173 - 22,054 - 3,173 22,054 25,227
Retail Center
Exton, PA
Ryland Group Headquarters 21,000 856 - 24,280 - 856 24,280 25,136
Office Building
Columbia, MD
The Gallery at
Market East - - - 23,785 - - 23,785 23,785
Retail Center
Philadelphia, PA
South Dekalb 772 3,534 - 18,849 - 3,534 18,849 22,383
Retail Center
Decatur, GA
Willowbrook 33,750 853 - 20,818 - 853 20,818 21,671
Retail Center
Wayne, NJ
Franklin Park 24,500 653 - 20,652 - 653 20,652 21,305
Retail Center
Toledo, OH
The Grand Avenue 12,633 - - 20,447 - - 20,447 20,447
Retail Center
Milwaukee, WI
Columbia Inn 20,333 1,384 - 18,994 - 1,384 18,994 20,378
Hotel
Columbia, MD
Mondawmin 6,519 2,251 - 17,509 - 2,251 17,509 19,760
Retail Center
Baltimore, MD
RWD Building 11,544 2,596 - 16,038 - 2,596 16,038 18,634
Office Building
Columbia, MD
<CAPTION>
Life on
which
Accumu- depre-
lated ciation
depre- Date of in latest
ciation comple- income
and tion of state-
amorti- constr- Date ment is
zation uction acquired computed
------- ------ -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Exton Square 7,481 3/73 N/A Note 8
Retail Center
Exton, PA
Ryland Group Headquarters 2,877 6/92 N/A Note 8
Office Building
Columbia, MD
The Gallery at
Market East 6,193 8/77 N/A Note 8
Retail Center
Philadelphia, PA
South Dekalb 3,359 7/78 N/A Note 8
Retail Center
Decatur, GA
Willowbrook 7,100 9/69 N/A Note 8
Retail Center
Wayne, NJ
Franklin Park 4,059 7/71 N/A Note 8
Retail Center
Toledo, OH
The Grand Avenue 8,457 8/82 N/A Note 8
Retail Center
Milwaukee, WI
Columbia Inn 5,792 6/72 N/A Note 8
Hotel
Columbia, MD
Mondawmin 5,755 1/78 N/A Note 8
Retail Center
Baltimore, MD
RWD Building 5,017 7/86 N/A Note 8
Office Building
Columbia, MD
</TABLE>
IV-9 (Continued)
<PAGE>
Schedule III, continued
-----------------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1995
<TABLE>
<CAPTION>
Cost capitalized
Initial cost to subsequent to Gross amount at which carried
Company acquisition at December 31, 1995
--------------- ---------------- -----------------------------
Buildings
Buildings and
Encum- and Carrying Improve-
brances Improve- Improve- costs ments
Description (note 4) Land ments ments (note 2) Land (note 3) Total
- ----------- ------- ---- -------- -------- -------- ---- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Blue Cross &
Blue Shield Building II 14,000 1,000 - 16,616 - 1,000 16,616 17,616
Office Building
Baltimore, MD
Alexander &
Alexander Building II 12,989 650 - 16,711 - 650 16,711 17,361
Office Building
Baltimore, MD
Eastfield Mall 5,000 1,077 - 15,467 - 1,077 15,467 16,544
Retail Center
Springfield, MA
Highland Mall 7,157 12 - 16,525 - 12 16,525 16,537
Retail Center
Austin, TX
Parkside
Office Building 11,940 463 - 15,064 - 463 15,064 15,527
Columbia, MD
Midtown Square - - - 14,247 - - 14,247 14,247
Retail Center
Charlotte, NC
Gateway Commerce Center #2 - 1,947 - 10,360 - 1,947 10,360 12,307
Industrial Building
Columbia, MD
30 Corporate Center 12,917 1,160 - 10,461 - 1,160 10,461 11,621
Office Building
Columbia, MD
Amdahl Building 6,909 927 - 10,351 - 927 10,351 11,278
Office Building
Columbia, MD
<CAPTION>
Life on
which
Accumu- depre-
lated ciation
depre- Date of in latest
ciation comple- income
and tion of state-
amorti- constr- Date ment is
zation uction acquired computed
------- ------ -------- --------
(in thousands)
<C> <C> <C> <C>
Blue Cross &
Blue Shield Building II 2,141 8/90 N/A Note 8
Office Building
Baltimore, MD
Alexander &
Alexander Building II 4,728 11/88 N/A Note 8
Office Building
Baltimore, MD
Eastfield Mall 4,976 4/68 N/A Note 8
Retail Center
Springfield, MA
Highland Mall 4,806 8/71 N/A Note 8
Retail Center
Austin, TX
Parkside
Office Building 2,644 11/89 N/A Note 8
Columbia, MD
Midtown Square 9,312 10/59 N/A Note 8
Retail Center
Charlotte, NC
Gateway Commerce Center #2 1,407 N/A 8/93 Note 8
Industrial Building
Columbia, MD
30 Corporate Center 3,512 4/86 N/A Note 8
Office Building
Columbia, MD
Amdahl Building 3,691 6/81 N/A Note 8
Office Building
Columbia, MD
</TABLE>
IV-10 (Continued)
<PAGE>
Schedule III, continued
-----------------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1995
<TABLE>
<CAPTION>
Cost capitalized
Initial cost to subsequent to Gross amount at which carried
Company acquisition at December 31, 1995
--------------- ---------------- -----------------------------
Buildings
Buildings and
Encum- and Carrying Improve-
brances Improve- Improve- costs ments
Description (note 4) Land ments ments (note 2) Land (note 3) Total
- ----------- ------- ---- -------- -------- -------- ---- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hickory Ridge Village Center 9,583 907 - 10,174 - 907 10,174 11,081
Village Center
Columbia, MD
American City Building 3,282 - - 11,023 - - 11,023 11,023
Office Building
Columbia, MD
Dorsey's Search
Village Center 10,298 911 - 9,889 - 911 9,889 10,800
Village Center
Columbia, MD
10 Corporate Center 4,937 733 - 7,957 - 733 7,957 8,690
Office Building
Columbia, MD
<CAPTION>
Life on
which
Accumu- depre-
lated ciation
depre- Date of in latest
ciation comple- income
and tion of state-
amorti- constr- Date ment is
zation uction acquired computed
------- ------ -------- --------
(in thousands)
<C> <C> <C> <C>
Hickory Ridge Village Center 1,049 6/92 N/A Note 8
Village Center
Columbia, MD
American City Building 7,770 3/69 N/A Note 8
Office Building
Columbia, MD
Dorsey's Search 1,833 9/89 N/A Note 8
Village Center
Village Center
Columbia, MD
10 Corporate Center 3,157 9/81 N/A Note 8
Office Building
Columbia, MD
</TABLE>
IV-11 (Continued)
<PAGE>
Schedule III, continued
-----------------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1995
<TABLE>
<CAPTION>
Cost capitalized
Initial cost to subsequent to Gross amount at which carried
Company acquisition at December 31, 1995
-------------------- ---------------- -----------------------------
Buildings
Buildings and
Encum- and Carrying Improve-
brances Improve- Improve- costs ments
Description (note 4) Land ments ments (note 2) Land (note 3) Total
- ----------- -------- ---- -------- -------- -------- ---- -------- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
King's Contrivance
Village Center 7,665 1,072 - 7,348 - 1,072 7,348 8,420
Village Center
Columbia, MD
Metro Plaza 1,129 202 - 7,932 - 202 7,932 8,134
Retail Center
Baltimore, MD
Investments in
unconsolidated real
estate ventures 21,811 - 32,713 52,059 - - 84,772 84,772
Receivables under
finance leases - - - 81,632 - - 81,632 81,632
Other properties
and related investments
less than 5% of total 42,974 3,618 - 97,419 - 3,618 97,419 101,037
--------- ------- ------ --------- -------- ------- --------- ---------
Total Operating
Properties 2,001,015 158,964 32,713 2,814,679 - 185,265 2,821,091 3,006,356
--------- ------- ------ --------- -------- ------- --------- ---------
<CAPTION>
Life on
which
Accumu- depre-
lated ciation
depre- Date of in latest
ciation comple- income
and tion of statement
amorti- constr- Date is
zation uction acquired computed
-------- ------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C>
King's Contrivance
Village Center 2,167 6/86 N/A Note 8
Village Center
Columbia, MD
Metro Plaza 2,980 N/A 12/82 Note 8
Retail Center
Baltimore, MD
Investments in - Various Various Note 8
unconsolidated real
estate ventures
Receivables under
finance leases - Various Various Note 8
Other properties
and related investments
less than 5% of total 35,637 Various Various Note 8
-------
Total Operating 519,319
Properties -------
</TABLE>
IV-12 (Continued)
<PAGE>
Schedule III, continued
-----------------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1995
<TABLE>
<CAPTION>
Cost capitalized
Initial cost to subsequent to Gross amount at which carried
Company acquisition at December 31, 1995
---------------- ------------------ -----------------------------------
Buildings
Buildings and
Encum- and Carrying Improve-
brances Improve- Improve- costs ments
Description (note 4) Land ments ments (note 2) Land (note 3) Total
- ----------- -------- ---- -------- -------- --------- ---- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Properties in Development:
Arizona Center - - - 15,967 - - 15,967 15,967
Developed/developable land
under master lease
Phoenix, AZ
Beachwood Place Expansion - 1,149 - 9,326 - 1,149 9,326 10,475
Expansion of retail center
Beachwood, OH
White Marsh Expansion - 3,373 5,003 - - 3,373 5,003 8,376
Expansion of retail center
Baltimore, MD
Pre-construction costs -
Various projects - - - 21,463 - - 21,463 21,463
Pre-construction reserve - - - (15,379) - - (15,379) (15,379)
Other projects,
less than 5% of total 6,209 11,534 - 3,715 - 11,534 3,715 15,249
----- ------ ----- ------- ------- ------ ------- -------
Total Properties
in Development 6,209 16,056 5,003 35,092 - 16,056 40,095 56,151
----- ------ ----- ------- ------- ------ ------- -------
Properties held for
sale, less than 5%
of total - - - 22,602 - - 22,602 22,602
----- ------ ----- ------- ------- ------ ------- -------
<CAPTION>
Life on
which
Accumu- depre-
lated ciation
depre- Date of in latest
ciation comple- income
and tion of state-
amorti- constr- Date ment is
zation uction acquired computed
------- ------ -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Arizona Center N/A N/A N/A Note 8
Developed/developable land
under master lease
Phoenix, AZ
Beachwood Place Expansion - N/A N/A Note 8
Expansion of retail center
Beachwood, OH
White Marsh Expansion - N/A 8/95 Note 8
Expansion of retail center
Baltimore, MD
Pre-construction costs -
Various projects N/A N/A N/A N/A
Pre-construction reserve N/A N/A N/A N/A
Other projects,
less than 5% of total N/A N/A N/A N/A
Total Properties
in Development
Properties held for
sale, less than 5%
of total N/A Various Various N/A
</TABLE>
IV-13 (Continued)
<PAGE>
Schedule III, continued
-----------------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1995
<TABLE>
<CAPTION>
Cost capitalized
Initial cost to subsequent to Gross amount at which carried
Company acquisition at December 31, 1995
----------------- -------------------- -----------------------------
Buildings
Buildings and
Emcum- and Carrying Improve-
brances Improve- Improve- costs ments
Description (note 4) Land ments ments (note 2) Land (note 3) Total
- ----------- ---------- ------- -------- -------- -------- -------- ---------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Land held for development and sale:
Columbia 12,633 53,000 - 55,714 - 108,714 - 108,714
Land in various
stages
of development
Columbia, MD
Canyon Springs - 16,000 - 8,716 - 24,716 - 24,716
Land held for
development
Riverside County, CA
Other properties,
less than 5% of total - 738 - - - 738 - 738
------ ------ ------- ---------- -------- -------- ---------- ---------
Total land held for
development and
sale 12,633 69,738 - 64,430 - 134,168 - 134,168
------ ------ ------- ---------- -------- -------- ---------- ----------
Total Property $2,019,857 $271,059 $37,716 $2,910,502 $ - $335,489 $2,883,788 $3,219,277
========== ======== ======= ========== ======== ======== ========== ==========
<CAPTION>
Life on
which
Accumu- depre-
lated ciation
depre- Date of in latest
ciation comple- income
and tion of state-
amorti- constr- Date ment is
zation uction acquired computed
------- ------ -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Land held for development and sale:
Columbia N/A N/A 9/85 N/A s
Land in various
stages
of development
Columbia, MD
Canyon Springs N/A N/A 7/89 N/A
Land held for
development
Riverside County, CA
Other properties,
less than 5% of total N/A N/A Various N/A
--------
Total land held for N/A N/A Various N/A
development and sale --------
Total Property $519,319
========
</TABLE>
IV-14 (Continued)
<PAGE>
Schedule III, continued
-----------------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1995
Notes:
(1) Reference is made to notes 2, 3, 4, 5, 6, 7, 11, 15 and 18 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 $118,930,000 at
December 31, 1995.
(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,
1995, 1994 and 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year $3,144,015 $3,010,195 $2,827,379
Additions, at cost 73,155 88,260 88,973
Cost of properties acquired 78,605 93,705 106,048
Additions to land held for
development and sale 16,091 16,270 21,388
Cost of land sales (14,214) (15,804) (16,270)
Retirements, sales and other
dispositions (75,787) (30,049) (21,307)
Additions to pre-construction reserve (3,800) (3,400) (2,900)
Receivables under finance leases, net 224 (632) 8,061
Investments in unconsolidated real
estate ventures, net 16,577 (12,317) 4,255
Provision for loss on operating properties (15,589) (2,212) (5,432)
---------- ---------- ----------
Balance at end of year $3,219,277 $3,144,015 $3,010,195
========== ========== ==========
</TABLE>
In 1995 non-cash consideration in the form of purchase money loans was given in
acquisitions of properties and investments in unconsolidated real estate
ventures of $64,175,000 and $21,811,000, respectively.
IV-15
<PAGE>
Schedule III, continued
-----------------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1995
Notes, continued:
(6) The changes in accumulated depreciation and amortization for the years ended
December 31, 1995, 1994 and 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year $490,158 $429,070 $375,903
Depreciation and amortization
charged to operations 73,062 74,186 70,200
Retirements, sales and other, net (43,901) (13,098) (17,033)
-------- -------- --------
Balance at end of year $519,319 $490,158 $429,070
======== ======== ========
</TABLE>
(7) The aggregate cost of properties for Federal income tax purposes is
approximately $3,334,400,000 at December 31, 1995.
(8) Reference is made to note 2(c) to the consolidated financial statements for
information related to depreciation.
(9) Reference is made to note 15 to the consolidated financial statements for
information related to provisions for losses on real estate assets.
IV-16
<PAGE>
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.
The Rouse Company
By: /s/ Anthony W. Deering
-------------------------------------
Anthony W. Deering March 5, 1996
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Principal Executive Officer:
/s/ Anthony W. Deering
-------------------------------------
Anthony W. Deering March 5, 1996
President and Chief Executive Officer
Principal Financial Officer:
/s/ Jeffrey H. Donahue
-------------------------------------
Jeffrey H. Donahue March 5, 1996
Senior Vice President and
Chief Financial Officer
Principal Accounting Officer:
/s/ George L. Yungmann
-------------------------------------
George L. Yungmann March 5, 1996
Senior Vice President and Controller
IV-17
<PAGE>
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 5, 1996
For Himself and as
Attorney-in-fact for the
above-named persons
IV-18
<PAGE>
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, 33-57707 and 33-63279) of our report dated
February 22, 1996, relating to the consolidated financial statements and related
schedules of The Rouse Company and subsidiaries as of December 31, 1995 and 1994
and for each of the years in the three-year period ended December 31, 1995,
which report appears in the Annual Report on Form 10-K of The Rouse Company for
the year ended December 31, 1995.
KPMG PEAT MARWICK LLP
Baltimore, Maryland
March 5, 1996
IV-19
<PAGE>
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 33-5625) and Form S-3 (Registration
Nos. 2-78898, 2-95596, 33-52458, 33-56646, 33-57347, 33-57584, 33-57707 and
33-63279) of our report dated February 22, 1996 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, 1995 and 1994, which report appears in the
Annual Report on Form 10-K of the Company for the year ended December 31, 1995.
LANDAUER ASSOCIATES, INC.
Deborah A. Jackson
Senior Vice President
Director of Retail Valuation
New York, New York
March 5, 1996
IV-20
<PAGE>
Exhibit Index
Exhibit No.
- -----------
3 Articles of Incorporation and Bylaws
10 Material Contracts
11 Statement re computation of per share earnings
12.1 Ratio of earnings to fixed charges
12.2 Ratio of earnings to combined fixed charges and preferred
stock dividend requirements
13 Annual report to security holders
21 Subsidiaries of the Registrant
24 Power of Attorney
27 Financial Data Schedule
99 Additional Exhibits:
99.1 Form 11-K Annual Report of The Rouse Company
Savings Plan for the year ended December 31, 1995
99.2 Factors affecting future operating results
<PAGE>
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.
<PAGE>
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 incorporated by reference
from the Company's Form 10-K Annual Report for the fiscal year ended December
31, 1994.
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 incorporated by reference
from the Company's Form 10-K Annual Report for the fiscal year ended December
31, 1994.
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 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).
The Amended and Restated Supplemental Retirement Benefit Plan of The Rouse
Company, made as of January 1, 1985 and further amended and restated as of
September 24, 1992, March 4, 1994, and May 10, 1995, is attached.
All documents referred to above may be found in Commission file number 0-1743.
<PAGE>
AMENDED AND RESTATED
--------------------
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
------------------------------------
OF
--
THE ROUSE COMPANY
-----------------
THIS AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT BENEFIT PLAN (the "Plan")
is made as of the 1st day of January, 1985, and further amended and restated as
of the 24th day of September, 1992, the 4th day of March, 1994, and the 10th day
of May, 1995, by The Rouse Company (hereinafter referred to as the "Company").
Background Statement:
--------------------
The Company maintains a defined benefit plan for its employees known as the
Pension Plan and Trust Agreement of The Rouse Company (Amendment and Restatement
Effective January 1, 1989) (hereinafter referred to, including as amended from
time to time, as the "Pension Plan"). The Company also maintains a savings plan
for its employees known as The Rouse Company Savings Plan (Restated and with
Amendments Generally Effective January 1, 1987) (hereinafter referred to,
including as amended from time to time, as the "Savings Plan"). The Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Internal
Revenue Code of 1986, as amended (the "Code"), place certain limits on the
benefits that may be accrued and paid from the Pension Plan and on the maximum
annual additions that may be made to a Participant's accounts under the Savings
Plan. Certain of these limits were further restricted by the Retirement
Protection Act of 1994, as amended (the "RPA"). In addition, the Company wishes
to permit eligible employees to defer all or any portion of their incentive cash
bonus that the Board of Directors approves.
For these reasons, the Company desires to amend and restate this Plan (i)
to provide for the payment of benefits to those eligible employees whose pension
benefit under the Pension Plan or whose annual additions under the Savings Plan
could be affected by the limiting provisions of the Code or ERISA, including
those modified by the RPA, whether as presently existing or as subsequently
enacted, to the end that the total benefits available to such eligible employees
may be determined on the same basis as is applicable to all other employees of
the Company who are not subject to limitations on benefits paid under the
Pension Plan or on annual additions under the Savings Plan due to the
requirements of the Code and ERISA, including the RPA, and (ii) to permit
eligible employees to defer all or any portion of their incentive cash bonuses
that the Board of Directors approves.
<PAGE>
The Plan
--------
Accordingly, and pursuant to due authorization by the Board of Directors of
the Company, the Company further amends and restates this Plan.
SECTION 1
ELIGIBILITY
-----------
All employees of the Company who are determined by the Plan Administrator
to be in the special salary ranges shall be eligible to participate in this
Plan according to its terms. Each eligible employee is hereafter referred to as
a "Participant."
SECTION 2
AMOUNT OF BENEFIT RELATING TO THE PENSION PLAN
----------------------------------------------
A Participant who is vested and entitled to benefits under the Pension Plan
shall receive a benefit under this Section, credited to his or her Pension
Account, equal to the difference, if any, between (i) and (ii) where:
(i) is the benefit which would have been paid to such
Participant or, on his behalf, to his beneficiary(ies) under the Pension
Plan, if the provisions of the Pension Plan were administered without
regard to any special benefit limitations of the Pension Plan required by
any existing or subsequently enacted provision of the Code or ERISA; and
(ii) is the benefit which is payable to such Participant or, on
his behalf, to his beneficiary(ies) under the terms and conditions of the
Pension Plan, as amended from time to time.
The reference in clause (i) above to special benefit limitations
required by the Code or ERISA shall include, for example, the limitations which
are imposed by the Code as a result of the Retirement Protection Act of 1994, as
amended, on the maximum amount of benefits that can be paid to a Participant
under the Pension Plan when benefits are payable before the Participant's Social
Security Retirement Age, or when they are payable in a form other than a
straight life annuity, such as a lump sum.
-2-
<PAGE>
SECTION 3
AMOUNT OF BENEFIT RELATING TO THE SAVINGS PLAN
----------------------------------------------
(a) A Contribution Account shall be established for each
Participant. A Participant's Contribution Account shall be credited with the
difference, if any, between (i) and (ii) where:
(i) is the sum of Matching Contributions and Basic Contributions
that the Participant could elect to make under the Savings Plan if the
Savings Plan were administered without regard to any special annual
additions limitations provisions in the Savings Plan required by any
existing or subsequently enacted provision of the Code or ERISA; and
(ii) is the annual additions limitation under the Savings Plan
as required by any existing or subsequently enacted provision of the Code
or ERISA.
(b) Subject to such rules as the Plan Administrator shall establish,
a Participant may specify that his or her Contribution Account shall be treated
as if it were invested in any of the investment alternatives that are available
under The Rouse Company Savings Plan, as amended, and such Contribution Account
shall be credited with investment earnings, gains or losses accordingly.
SECTION 4
DEFERRAL OF INCENTIVE CASH BONUS
--------------------------------
(a) Each Participant shall be entitled to make an election as provided
in this Section 4 to defer the receipt of a percentage, or a stated dollar
amount, to be specified by the Participant, of any incentive cash bonus
otherwise payable by the Company to the Participant in the future.
(b) The Participant's deferral election shall be made subject to such
rules and in accordance with such terms and conditions as the Personnel
Committee of the Board of Directors of the Company or, if delegated by the
Personnel Committee, the Plan Administrator shall establish. Consistent with
such rules, terms and conditions, such election must be made prior to the time
the Participant earns the deferred amounts, and the Participant's election shall
specify the deferral period and the manner of payment of the deferred amounts.
Once made, the election shall be irrevocable and binding on both the Company and
the Participant; provided, however, that the Participant may, with the consent
of the Plan Administrator, (i) amend the deferral election to change the payment
method or postpone the scheduled payment date and (ii) make hardship
withdrawals. The Participant shall have the right to designate any beneficiary
or beneficiaries to receive payments upon the Participant's death.
-3-
<PAGE>
(c) A Deferred Bonus Account shall be established for each Participant
electing to defer his or her incentive cash bonus under this Section 4, which
Account shall be credited with such deferred bonuses. Subject to such rules,
terms and conditions as the Plan Administrator shall establish, a Participant
may specify that his or her Deferred Bonus Account shall be treated as if it
were invested in any of the investment alternatives that are available under The
Rouse Company Savings Plan, as amended, and such Deferred Bonus Account shall be
credited with investment earnings, gains or losses accordingly.
(d) The amount of each Participant's incentive cash bonus that the
Participant elects to defer under this Section 4 shall be deemed to be
compensation under the Company's Pension Plan, Savings Plan and welfare and
fringe benefit plans (including, but not limited to, its life insurance and
disability plans) only to the extent specifically provided in such plans. For
purposes of calculating the amount of a Participant's benefits under Section
2(i) or contributions under Section 3(a)(i), amounts deferred under this Section
4 shall be treated as compensation.
SECTION 5
PAYMENT OF BENEFITS
-------------------
(a) Benefit relating to Pension Plan - With respect to a Participant's
--------------------------------
benefit under Section 2 of this Plan, payment of benefits under this Plan shall
be made to, or at the direction of, the Participant in accordance with the
benefit payments provisions of the Pension Plan. In addition, the Participant
may select any form of benefit that is permitted under the Pension Plan. The
Participant may designate any beneficiary or beneficiaries to receive the
Participant's benefit upon his or her death, and if the participant is
predeceased by all beneficiaries, any death benefit shall be paid to his or her
estate.
(b) Benefit relating to Savings Plan - With respect to a Participant's
--------------------------------
benefit under Section 3 of this Plan, payment of benefits under this Plan shall
be made to, or at the direction of, the Participant in accordance with the
benefit payments provisions of the Savings Plan. In addition, the Participant
may select any form of benefit that is permitted under the Savings Plan, and the
Participant may designate any beneficiary or beneficiaries to receive the
Participant's benefit upon his or her death, and if the Participant is
predeceased by all beneficiaries, any death benefit shall be paid to his or her
estate.
(c) Benefit relating to Deferred Bonus - With respect to a
----------------------------------
Participant's incentive cash bonus that is deferred under Section 4 of this
Plan, payment of such deferred bonus shall be made to, or at the direction of,
the Participant in accordance
-4-
<PAGE>
with the payment provisions of Sections 4(b) and (c) of this Plan. The
Participant may designate any beneficiary or beneficiaries to receive the
Participant's deferred bonus upon his or her death, and if the participant is
predeceased by all beneficiaries, any death benefit shall be paid to his or her
estate.
(d) Additional Payment Provisions - In addition to the payment options
-----------------------------
provided in Sections 5(a)-(c) above, the Plan Administrator may, in his or her
sole discretion, establish additional or alternative provisions with respect to
the timing and form of payment of benefits under Sections 2 - 4 above (including
the payment of interest or other investment earnings, gains or losses on any
benefits that are paid in a form other than a lump sum upon the Participant's
termination), and under this Section 5 establish procedures for a Participant's
election. In such case, the additional or alternative provisions and the
election procedures shall be set forth in writing in the form of rules of
general application, signed by the Plan Administrator. Such rules shall be
attached as an exhibit to this Plan and shall be binding on all Participants.
The Plan Administrator may subsequently amend, modify or delete such provisions
or procedures in the same manner.
(e) Special Provision - Notwithstanding any other provision of this
-----------------
Plan, a Participant who has attained age 62 and who is or may be subject to
mandatory retirement policies under federal or state law may, anytime after
attaining age 62, request a distribution (actual or deferred, each of which is
referred to hereinafter as a "Distribution") of all or any portion of his or her
excess Pension Plan benefit specified in Section 2 or excess Savings Plan
benefit specified in Section 3 or both. The Company may, in its sole discretion
and with the prior approval of either the Board of Directors or the Personnel
Committee of the Board of Directors, approve or deny the request in whole or in
part and may specify the terms and conditions of any Distribution, including,
without limitation, the amount of the Distribution, the timing of the
Distribution, the form of payment of the Distribution and additional amounts, if
any, that will be credited to the Participant under this Plan (including
additional amounts with respect to any undistributed benefit of the Participant
under the Pension Plan or Savings Plan).
SECTION 6
FUNDING
-------
Benefits under this Plan shall be unsecured and payable solely in cash
from the general revenues and assets of the Company. This Plan shall be
administered as a non-funded Plan which is not intended to meet the
qualification requirements of Section 401 of the Code. In no event shall any
benefit payable under this Plan be made from the trust funds of the Pension Plan
-5-
<PAGE>
or the Savings Plan. Participants hereunder, to the extent that any benefits
become payable under the provisions of this Plan, shall be deemed to be general
creditors of the Company.
SECTION 7
OPERATION AND ADMINISTRATION
----------------------------
This Plan shall be operated under the direction of the Personnel
Committee of the Board of Directors of the Company and administered by the Plan
Administrator of the Pension Plan, whose decision on all matters involving the
interpretation and application of this Plan shall be final and binding.
SECTION 8
AMENDMENT AND DISCONTINUANCE
----------------------------
The Company shall continue this Plan for so long as the Pension Plan
or Savings Plan is in effect. The Plan may be amended, at any time and from
time to time, by the Board of Directors of the Company or the Personnel
Committee of the Board of Directors of the Company, except that the Personnel
Committee shall have no authority (i) to adopt any amendment to the Plan that
would increase the Company's imputed annual funding costs by more than five
percent (5%), or (ii) to terminate the Plan. However, no amendment of this Plan
(or termination coincident with termination of the Pension Plan and Savings
Plan) shall reduce any benefits vested or accrued by a Participant under this
Plan as of the date of such action. In the event of a discontinuance (or an
amendment which reduces a Participant's accrued benefit), the Company shall be
liable for the full amount of any benefit accrued as of a date immediately prior
to the effective date of such amendment or discontinuance, such benefit to be
determined by assuming that each affected Participant had terminated employment
as of such earlier date.
SECTION 9
VESTING
-------
Each Participant's interest in his accrued benefit under this Plan
shall be fully vested.
SECTION 10
NON-ALIENATION OF BENEFITS
--------------------------
None of the payments, benefits or rights of any Participant or
beneficiary shall be subject to any claim of any creditor, and, in particular,
to the fullest extent permitted by law, all such payments, benefits and rights
shall be free from attachment, garnishment, trustee's process or any other legal
or equitable process available to any creditor of such Participant or
beneficiary. No Participant or beneficiary shall have the right to alienate,
anticipate, commute, pledge, encumber or assign any of the benefits or payments
that he or she may expect
-6-
<PAGE>
to receive, contingently or otherwise, under this Plan, except the right to
designate a beneficiary or beneficiaries as provided above.
SECTION 11
NO CONTRACT OF EMPLOYMENT
-------------------------
(a) The Plan shall not be deemed to constitute a contract between the
Company and a Participant, or to be a consideration for, or a condition of,
employment of any Participant. Neither the establishment of this Plan, nor any
modification thereof, nor the creation of any fund or account, nor the payment
of any benefits shall be construed as giving any Participant the right to be
retained in the service of the Company, and all Participants shall remain
subject to discharge to the same extent as if this Plan had never been adopted.
(b) Notwithstanding any provision of Section 11(a), the terms and
conditions of any Distribution (without regard to whether it is an actual or
deferred distribution) under Section 5(e) shall constitute unconditional
contractual obligations of the Company that may not be modified except with the
written approval of both the Company, with the prior approval of either the
Board of Directors or the Personnel Committee of the Board of Directors, and the
Participant.
SECTION 12
HEIRS, ASSIGNS AND PERSONAL REPRESENTATIVES
-------------------------------------------
This Plan shall be binding upon the Company and any subsidiary or
affiliate of the Company that may, with the consent of the Board of Directors of
the Company, adopt this Plan. This Plan shall inure to the benefit of the heirs,
executors, administrators, successors and assigns of the parties, including each
Participant and beneficiary (subject to the right of a Participant to change
beneficiaries from time to time), present and future, all of whom are intended
to be and shall be third party beneficiaries hereunder.
SECTION 13
GENDER AND NUMBER
-----------------
Except where otherwise clearly indicated by context, the masculine
shall include the feminine and neuter, the singular shall include the plural,
and vice versa.
-7-
<PAGE>
SECTION 14
CONSTRUCTION
------------
This plan is intended to be an unfunded "Excess Benefit Plan," as
defined by section 3(36) of ERISA, as to that portion of the Plan that provides
benefits in excess of the limitations of section 415 of the Code, and an
unfunded plan that is maintained primarily for the purpose of providing deferred
compensation for a select group of management and highly compensated employees,
within the meaning of section 201(2), 301(a)(3), and 401(a)(1) of ERISA, as to
the remaining portion of the Plan. The Plan shall be administered and construed
accordingly.
SECTION 15
CONTROLLING LAW
---------------
This Plan shall be construed and enforced according to the laws of the
State of Maryland.
IN WITNESS WHEREOF, the Company has duly executed this Amended and
Restated Supplemental Retirement Benefit Plan as of May 10, 1995. The Plan
Administrator has joined herein for the purpose of indicating acceptance hereof.
ATTEST: THE ROUSE COMPANY
_____________________________ By:
-----------------------------
WITNESS: PLAN ADMINISTRATOR FOR THE
SUPPLEMENTAL RETIREMENT
BENEFIT PLAN OF THE ROUSE
COMPANY
_____________________________ By:
-----------------------------
-8-
<PAGE>
EXHIBIT 5(C)
DEFERRAL OF INCENTIVE CASH BONUS
Effective March 4, 1994, and pursuant to Section 4(b) of the Amended
and Restated Supplemental Retirement Benefit Plan of The Rouse Company, the
terms and conditions of a Participant's election to defer his or her incentive
cash bonus and the manner of payment of the deferred amounts shall be as
provided in Attachment 1.
_____________________________
William D. Boden
Plan Administrator
<PAGE>
Attachment 1
RESPONSE REQUIRED
BY DECEMBER 8, 1995
===================
TO:
FROM: William D. Boden
Re: Cash Bonus Deferral Program
---------------------------
In 1994, the company established a program as part of its Supplemental
Retirement Benefit Plan under which you may defer all or any portion of your
incentive cash bonus that the Board may approve annually. If you defer all or
part of your bonus, you benefit by avoiding current taxation on the bonus
(except that you must currently pay the Medicare portion of FICA, or 1.45%,
and the 1.45% will be treated as taxable income) and having the fulll amount
of the bonus (less the 1.45%) available for investment growth. IF YOU WISH
TO DEFER ANY PORTION OF YOUR BONUS THAT MAY BE GRANTED IN 1996, YOU MUST
COMPLETE AND RETURN THE ATTACHED INCENTIVE CASH BONUS DEFERRAL FORM TO ME
BY DECEMBER 8, 1995. NO DEFERRAL ELECTION THAT IS RECEIVED AFTER THAT DATE
WILL BE HONORED.
The basic terms of the bonus deferral program are as follows:
1. You may defer any dollar amount or percentage of your annual bonus.
2. The deferral decision must be made by completing and returning an
Incentive Cash Bonus Deferral Form prior to the end of the calendar year to
which the bonus relates. For administrative purposes, a decision to defer a
cash bonus that is granted in 1996 (if any) must be made by December 8, 1995.
3. You may invest your deferred bonus, on paper, in any of the
investments that are available under the Company's Savings Plan. Your
deferred bonus will be adjusted, up or down, to reflect the investment
performance of these hypothetical investment options. NOTE THAT YOUR ACCOUNT
IS UNFUNDED, YOU HAVE NO RIGHTS TO ANY SPECIFIC ASSETS OF THE COMPANY,
<PAGE>
Page
November 10, 1995
AND YOU ARE A GENERAL CREDITOR OF THE COMPANY WITH YOUR BENEFITS PAYABLE ONLY
FROM THE GENERAL ASSETS OF THE COMPANY.
4. While you are employed by the Company, you may reallocate your
investments once a month, with a minimum reallocation of 30% of your account
balance or $500, whichever is less. After you terminate employment, you may
reallocate your investments once a year on the anniversary of your
termination, subject to the same minimums. Reallocations will be effective
as of the first day of the following month.
5. With respect to each bonus deferral, you will specify a future date
on which distribution of the bonus, as adjusted for all related earnings or
losses, is to commence, either the first day of any future calendar quarter
or upon termination of employment, whichever occurs first. Once the election
is made, you may not begin to receive the bonus on an earlier or later date
except as provided in paragraphs 7, 8 and 9 below.
6. When you elect to defer your bonus, you also will elect the form of
payment when the bonus is distributed to you. You may choose to receive the
distribution in a lump sum or in up to 10 annual installment payments. While
you are employed by the Company, you may change the form of payment for a
scheduled distribution if you do so at least one year before the scheduled
date.
7. Disability receives special treatment. With respect to each bonus
deferral, you may elect whether to receive a distribution if you become
totally disabled and, if so, whether the distribution is to be in a lump sum
or in annual installments (up to 10). You are considered to be totally
disabled if you meet the standards under the Company's Long-Term Disability
Plan or any successor plan.
8. Your account balance will be distributed in a lump sum upon your
death.
9. With the consent of the Plan Administrator, you may receive a
distribution if a severe financial hardship occurs as a result of an
unanticipated emergency and no alternative funds are available. You may not
receive a loan against your account.
10. You may select anyone as your beneficiary, and you may name
alternate beneficiaries. If you die before all payments are made to you
under the Plan, your beneficiary(ies) will receive a lump sum payment of your
account balance.
<PAGE>
Page
November 10, 1995
If all of your named beneficiaries predecease you, your account balance will
be paid in a lump sum to your estate.
SEVERAL POINTS NEED TO BE EMPHASIZED. THE PLAN IS A NONQUALIFIED,
UNFUNDED PLAN, AND YOUR BENEFITS ARE PAYABLE ONLY FROM THE GENERAL ASSETS OF
THE COMPANY. THE TERMS OF THE PLAN ARE BASED ON CURRENT TAX LAWS. IF SUCH
LAWS CHANGE, THE TERMS OF THE PLAN MAY NEED TO BE CHANGED.
FEDERAL TAX LAWS PROVIDE THAT YOU MAY NOT ACCRUE BENEFITS UNDER THE
COMPANY'S QUALIFIED PENSION PLAN WITH RESPECT TO A DEFERRED BONUS. IF YOU
DECIDE TO DEFER A BONUS, YOU WILL, HOWEVER, ACCRUE PENSION BENEFITS RELATING
TO THE DEFERRED BONUS IN THE SAME AMOUNT UNDER THE EXCESS PENSION PLAN
PORTION OF THE COMPANY'S SUPPLEMENTAL RETIREMENT BENEFIT PLAN, WHICH IS A
NONQUALIFIED, UNFUNDED PLAN. IN SHORT, IF YOU DEFER A BONUS, YOUR COMBINED
PENSION BENEFIT UNDER THE QUALIFIED PENSION PLAN AND THE NONQUALIFIED EXCESS
PENSION PLAN WILL NOT CHANGE.
YOU SHOULD CONSULT WITH YOUR COUNSEL OR PERSONAL TAX ADVISER TO
DETERMINE THE FULL TAX CONSEQUENCES OF DEFERRING YOUR BONUS AND THE
ADVANTAGES AND DISADVANTAGES IN YOUR PERSONAL CIRCUMSTANCES. FINALLY,
NOTHING IN THIS PLAN SHOULD BE TAKEN TO IMPLY THAT ANY INDIVIDUAL HAS A RIGHT
TO RECEIVE A BONUS, OR ANY PARTICULAR AMOUNT.
Please give me a call if you have any questions about how the Plan
operates. REMEMBER, YOU MUST RETURN THE INCENTIVE CASH BONUS DEFERRAL FORM
TO ME BY DECEMBER 8, 1995 IF YOU WISH TO DEFER ANY BONUS THAT IS GRANTED TO
YOU IN 1996.
<PAGE>
THE ROUSE COMPANY
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
INCENTIVE CASH BONUS
DEFERRAL FORM
To:
From: William D. Boden
Plan Administrator
Under one portion of The Rouse Company Supplemental Retirement
Benefit Plan, you may defer any dollar amount or percentage of your annual
incentive cash bonus (if any), but only if this Deferral Form is signed and
returned to me by December 8. In addition, you must elect when and how you want
the deferred amounts, as adjusted for all related investments earnings or
losses, paid out to you. (For example, do you want your deferral to be paid to
you beginning when you terminate employment, or at some specific earlier date,
and do you want a lump sum or annual installments?) THIS ELECTION CANNOT BE
CHANGED, EXCEPT THAT WHILE YOU ARE EMPLOYED BY THE COMPANY, YOU MAY CHANGE THE
FORM OF PAYMENT FOR A SCHEDULED DISTRIBUTION IF YOU DO SO AT LEAST ONE YEAR
BEFORE THE SCHEDULED DATE. For example, if you defer your bonus until July 1,
1999, funds will be raised to you only at that time unless you terminate
---------------------------------------------
employment, become totally disabled ( and you previously elected a distribution
if you became totally disabled) or die before then. In addition, funds may be
released at the discretion of the Plan Administrator if a severe financial
hardship occurs as a result of an unanticipated emergency and no alternative
funds are available.
If you wish to defer any portion of any incentive cash bonus that may be
granted to you in 1996 for the year 1995, fill out this Deferral Form, sign
it at the bottom and return it to me. THIS FORM MUST BE RETURNED TO ME BY
DECEMBER 8, 1995 IF IT IS TO BE EFFECTIVE FOR ANY BONUS THAT MAY BE GRANTED
TO YOU IN 1996.
This Deferral Form is only applicable to the incentive cash bonus granted to
you in 1996. You will be provided with a new Deferral Form annually that
will permit you to defer your incentive cash bonus that is granted to you in
the following year (if any).
<PAGE>
Page 14
Incentive Cash Bonus Deferral Form
<PAGE>
Page 15
Incentive Cash Bonus Deferral Form
DEFERRAL ELECTIONS
1. SOURCE OF DEFERRED INCOME
I elect to defer the following percentage or dollar amount of any annual
incentive cash bonus that I am granted in 1996:
$_______________ or
________________%
I understand that the Medicare portion of FICA (currently 1.45%) will be
deducted from any deferral, and that the 1.45% will be treated as
taxable income.
2. DATE OF DEFERRED PAYMENT
I elect to receive payment of the above deferred amount (as adjusted for
all related investment earnings or losses) in the following manner
(check one and fill in any blanks):
___ A lump sum payment on the earlier to occur of my termination of
employment or the following specified date:
_______________________. The specified date must be the first day
of any calendar quarter (i.e., January 1, April 1, July 1 or
October 1).
___ Annual installment payments beginning on the earlier to occur of my
termination of employment or the following specified date:
_______________________, and continuing for a total of the
following number of years _______________ (insert any whole number
up to 10). The specified date must be the first day of any
calendar quarter (i.e., January 1, April 1, July 1 or October 1).
3. TOTAL DISABILITY
In the event of my total disability, I elect to receive payment of the
above deferred amount (as adjusted for all related investment earnings
or losses) in the following manner (check one):
___ A lump sum payment.
___ Annual installment payments beginning when my total disability is
established under the Company's Long-Term Disability Plan or any
successor plan and continuing for a total of the following number
of years _______ (insert any whole number up to 10).
___ Follow my payment election specified in paragraph 2 above.
If you do not select one of the above alternatives, your payment
election specified in paragraph 2 above relating to this deferred bonus
will be followed.
<PAGE>
Page 16
Incentive Cash Bonus Deferral Form
4. INVESTMENT ALLOCATION
You may invest your deferred bonus, on paper, in any of the investments
that are available under the Company's Savings Plan. As with the
Savings Plan, the minimum amount that may be allocated to any investment
is 10%. NOTE THAT THIS PLAN IS A NONQUALIFIED, UNFUNDED PLAN, AND
BENEFITS ARE PAYABLE ONLY FROM THE GENERAL ASSETS OF THE COMPANY. AS A
RESULT, YOUR ACCOUNT IS UNFUNDED, YOU HAVE NO RIGHTS TO ANY SPECIFIC
ASSETS OF THE COMPANY AND YOU ARE A GENERAL CREDITOR OF THE COMPANY.
YOUR DEFERRED BONUS AND ANY INVESTMENT EARNINGS OR LOSSES ARE CREDITED
TO YOUR ACCOUNT "ON PAPER" ONLY, UNTIL PAID. Please indicate how you
prefer to allocate your deferred bonus. Your deferred bonus will be
adjusted, up or down, to reflect the investment performance of these
hypothetical investment options. The Company reserves the right to
change the options offered on a prospective basis.
I direct that my deferred bonus be allocated among these investment
options as follows (total must equal 100%):
ALLOCATION INVESTMENT OPTION
___________% The Rouse Company Common Stock Fund
___________% The Rouse Company Preferred Stock Fund
___________% Long-Term Income Fund
___________% Ariel Growth Fund
___________% T. Rowe Price Prime Reserve (Money
Market) Fund
___________% T. Rowe Price Spectrum Income Fund
___________% T. Rowe Price Spectrum Growth Fund
___________% T. Rowe Price New Horizons Fund
___________% T. Rowe Price International Stock Fund
___________% T. Rowe Price Index Fund
___________% T. Rowe Price Small-Cap Value Fund
___________% T. Rowe Price New America Growth Fund
___________% T. Rowe Price Balanced Fund
100% TOTAL
While you are employed by the Company, you may reallocate your
investments once a month, with a minimum reallocation of 30% of
your account balance or $500, whichever is less. After you
terminate employment, you may reallocate your investments once a
year on the anniversary of your termination, subject to the same
minimums. Reallocations will be effective as of the first day of
the following
<PAGE>
Page 17
Incentive Cash Bonus Deferral Form
month. To reallocate your investments, give the Director of
Personnel (and not T. Rowe Price) a call.
5. BENEFICIARY DESIGNATION
You may select anyone as your beneficiary, and you may name alternate
beneficiaries. If you die before all payments relating to your deferred
bonus are made to you under the Plan, then your beneficiary(ies) will
receive a lump sum payment of your remaining deferred amounts, including
any adjustments to those amounts as a result of investment earnings or
losses. If all named beneficiaries predecease you, your remaining
deferred amounts will be paid to your estate.
Your beneficiary election remains in effect until you change it. To do
so, please call the Manager of Benefits in the Personnel Division to
request a Change Form.
PRIMARY BENEFICIARY(IES)
Name(s): __________________________________________________
____________________________________________________________
Relation(s) to Me: ________________________________________
Address(es): ______________________________________________
______________________________________________
SECONDARY BENEFICIARY(IES)
Name(s): __________________________________________________
____________________________________________________________
Relation(s) to Me: ________________________________________
Address(es): ______________________________________________
______________________________________________
SPECIFIC BENEFICIARY INSTRUCTIONS _________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
In witness whereof, I have executed this Deferral Form with the intent to be
legally bound by its terms.
Signed: __________________________________
Date: __________________________________
<PAGE>
EXHIBIT 5(d)
ADDITIONAL OPTIONS - FORM OF PAYMENT AND TIMING,
ELECTION PROCEDURES AND INVESTMENT ALTERNATIVES
Effective May 10, 1995, and pursuant to Section 5(d) of the Amended
and Restated Supplemental Retirement Benefit Plan of The Rouse Company (the
"Plan"), a Participant may elect to receive his or her benefits under Section
2-4 of the Plan pursuant to the following provisions:
1. Form of Payment - A Participant may elect to receive any
---------------
benefit under Sections 2-4 of the Plan:
A. In any form that is permitted under the Pension Plan or the
Savings Plan; or
B. In installments, payable no more frequently than quarterly,
over a period of up to 10 years.
2. Timing of Payment - A Participant may specify the date or
-----------------
dates on which payment of his or her benefits under Sections 2-4 of the Plan
is to occur, which may be any date on or after his or her termination date.
3. Additional Flexibility - A Participant who is entitled to
----------------------
benefits under more than one Section of Sections 2-4 of the Plan may elect a
different form of benefit payment with respect to each such Section and a
different date or dates on which payment of his or her benefits under each
such Section is to occur.
4. Election Procedures - A Participant's election(s) with respect
-------------------
to the form and timing of the benefit payments under Sections 2-4 of the Plan
shall be made in writing at least six months prior to his or her termination
date, except that the Plan Administrator may, in his or her sole discretion,
permit such elections to be made on less than six months' notice with respect
to:
A. Terminations that occur during the six-month period
beginning on May 10, 1995, the date on which the Personnel
Committee of the Board of Directors approved the amendments
to the Plan that are reflected in Section 5(d); and
B. Involuntary terminations.
5. Investment Alternatives - A Participant who elects to
-----------------------
receive payment of his or her benefits under Sections 2-4 of the Plan in any
form other than a lump sum
<PAGE>
payment upon termination may elect to have the deferred benefit treated as if it
were invested, on paper, in any of the investment alternatives that are
available under the Savings Plan and to be credited with investment earnings,
gains or losses accordingly. Investments may be reallocated (i) once a year on
or before the anniversary of the Participant's termination date, with the
reallocations to be effective on the first day of the month following the
anniversary of the Participant's termination date or (ii) with such greater
frequency as is permitted with respect to investments under the Savings Plan.
Other provisions relating to such investments (such as the minimum amount that
may be allocated to any investment) shall be the same as are provided with
respect to investments under the Savings Plan.
_____________________________
William D. Boden
Plan Administrator
<PAGE>
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)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Earnings (loss) before extraordinary losses $ 5,850 $ 6,606 $(1,291)
Add after tax interest expense applicable to
convertible subordinated debentures 4,859 4,859 6,236
------- ------- -------
Earnings before extraordinary losses,
as adjusted 10,709 11,465 4,945
Extraordinary losses, net of related income
tax benefits (8,631) (4,447) (8,051)
------- ------- -------
Net earnings (loss), as adjusted $ 2,078 $ 7,018 $(3,106)
======= ======= =======
Shares:
- ------
Weighted average number of common shares
outstanding 47,814 47,565 47,411
Assuming conversion of convertible
Preferred stock 10,600 10,600 8,251
Assuming conversion of convertible
subordinated debentures 4,541 4,541 5,917
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 247 175 224
------- ------- -------
Weighted average number of shares outstanding
as adjusted 63,202 62,881 61,803
======= ======= =======
Earnings (loss) per common share assuming full
dilution:
Earnings before extraordinary losses $ .17 $ .18 $ .08
Extraordinary losses (.14) (.07) (.13)
------- ------- -------
Net earnings (loss) $ .03 $ .11 $ (.05)
======= ======= =======
</TABLE>
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.
<PAGE>
EXHIBIT 12.1
The Rouse Company and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
1995 1994 1993 1992 1991
------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes, extraordinary loss
and cumulative effect of change in accounting principle $ 10,169 $ 13,336 $ 3,072 $ (20,783) $ 5,245
Fixed charges:
Interest costs 219,838 220,971 219,705 221,907 219,538
Capitalized interest (6,875) (7,388) (8,899) (15,098) (21,243)
Amortization of debt issuance costs 2,527 2,146 2,801 3,571 3,173
Distributions on Company-obligated mandatorily redeemable
preferred securities of a trust holding solely Parent Company
subordinated debt securities 1,204 -- -- -- --
Portion of rental expenses representative of
interest factor (1) 8,266 10,788 15,988 14,739 15,265
Support for debt service costs provided to affiliates
accounted for under the equity method -- -- 31 389 1,106
Adjustments to earnings (loss):
Minority interest in earnings of majority-owned subsidiaries
having fixed charges 2,026 2,234 1,909 1,747 2,118
Undistributed earnings of less than 50%-owned subsidiaries (189) (564) (68) (84) (540)
Previously capitalized interest amortized into earnings:
Depreciation of operating properties (2) 3,764 3,670 3,605 3,474 3,145
Cost of land sales (3) 1,421 1,580 1,627 1,295 928
-------- -------- -------- -------- --------
Earnings available for fixed charges $242,151 $246,773 $239,771 $211,157 $228,735
======== ======== ======== ======== ========
Fixed charges:
Interest costs $219,838 $220,971 $219,705 $221,907 $219,538
Amortization of debt expense 2,527 2,146 2,801 3,571 3,173
Distributions on Company-obligated mandatorily redeemable
preferred securities of a trust holding solely Parent Company
subordinated debt securities 1,204 -- -- -- --
Portion of rental expenses representative of
interest factor (1) 8,266 10,788 15,988 14,739 15,265
Support for debt service costs provided to affiliates
accounted for under the equity method -- -- 31 389 1,106
-------- -------- -------- -------- --------
Total fixed charges $231,835 $233,905 $238,525 $240,606 $239,082
======== ======== ======== ======== ========
Ratio of earnings to fixed charges (4) 1.04 1.06 1.01 -- --
======== ======== ======== ======== ========
</TABLE>
(1) Includes (a) 80% of minimum rentals, the portion of such rentals considered
to be a reasonable estimate of the interest factor and (b) 100% of
contingent rentals of $3,644,000, $6,232,000, $10,006,000, $8,106,000 and
$8,458,000 for the years ended December 31, 1995, 1994, 1993, 1992 and 1991
respectively.
(2) Represents an estimate of depreciation of capitalized interest costs based
on the Company's established depreciation policy and an analysis of
interest costs capitalized since 1971.
(3) Represents 10% of cost of land sales, the portion of such cost considered
to be a reasonable estimate of the interest factor.
(4) Total fixed charges exceeded the Company's earnings available for fixed
charges by $29,449,000 and $10,347,000 for the years ended December 31,
1992 and 1991, respectively.
<PAGE>
EXHIBIT 13
Exhibit 13. Annual report to security holders
The annual report to shareholders has not been completed as of this filing and
will be filed with the Securities and Exchange Commission in its entirety on or
before April 7, 1996.
The financial section of the annual report, which is incorporated by reference,
is final and 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, 1995.
<PAGE>
REPORT OF INDEPENDENT REAL ESTATE CONSULTANTS
Landauer Associates, Inc.
666 Fifth Avenue
New York, New York 10103
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, 1995 and 1994. The properties reviewed
at December 31, 1995 include all the projects identified as "In Operation" on
the "Projects of The Rouse Company" table on pages 58 through 62 of the Annual
Report for 1995, land held for development and sale, certain parcels of land in
development and certain other properties held for sale. The properties reviewed
at December 31, 1994 were the same, except for the properties which were aquired
or disposed of during 1995.
The total values of its equity and other interests estimated by the Company
were $2,444,218,000 and $2,338,624,000 at December 31, 1995 and 1994,
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.
James C. Kafes, MAI, CRE Deborah A. Jackson
Managing Director Senior Vice President
Director of Retail Valuation
February 22, 1996
21
<PAGE>
The Rouse Company and Subsidiaries
CONSOLIDATED COST BASIS AND
CURRENT VALUE BASIS BALANCE SHEETS
December 31, 1995 and 1994 (in thousands)
<TABLE>
<CAPTION>
1995 1994
---------------------------- --------------------------
Current Value Cost Current Value Cost
Basis (note 1) Basis Basis (note 1) Basis
-------------- ----- -------------- -----
<S> <C> <C> <C> <C>
Assets
Property (notes 4, 5, 6, 7, 11 and 18):
Operating properties:
Property and deferred
costs of projects......... $4,323,010 $3,006,356 $4,232,913 $2,937,565
Less accumulated depreciation and
amortization.............. 519,319 490,158
---------- ---------- --------- ----------
4,323,010 2,487,037 4,232,913 2,447,407
Properties in development.. 62,030 56,151 70,866 65,348
Properties held for sale... 22,602 22,602 8,809 8,809
Land held for development
and sale.................. 149,324 134,168 153,637 132,293
---------- ---------- --------- ----------
Total property............. 4,556,966 2,699,958 4,466,225 2,653,857
---------- ---------- --------- ----------
Prepaid expenses, deferred
charges and other assets... 160,854 151,068 159,956 151,223
Accounts and notes
receivable (note 8)....... 36,751 36,751 31,233 31,233
Investments in marketable
securities................ 2,910 2,910 30,149 30,149
Cash and cash equivalents.. 94,922 94,922 49,398 49,398
---------- ---------- ---------- ----------
Total...................... $4,852,403 $2,985,609 $4,736,961 $2,915,860
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
22
<PAGE>
<TABLE>
<CAPTION>
1995 1994
---------------------------- --------------------------
Current Value Cost Current Value Cost
Basis (note 1) Basis Basis (note 1) Basis
-------------- ----- -------------- -----
<S> <C> <C> <C> <C>
Liabilities
Debt (note 11):
Property debt not carrying
a Parent Company guarantee
of repayment.............. $1,990,041 $1,990,041 $1,998,445 $1,998,445
---------- ---------- ---------- ----------
Parent Company debt and
debt carrying a Parent
Company guarantee of
repayment:
Property debt.............. 138,488 138,488 223,731 223,731
Convertible subordinated
debentures................ 126,750 130,000 105,950 130,000
Other debt................. 231,884 221,000 116,500 120,700
---------- ---------- ---------- ----------
497,122 489,488 446,181 474,431
---------- ---------- ---------- ----------
Total debt................. 2,487,163 2,479,529 2,444,626 2,472,876
---------- ---------- ---------- ----------
Obligations under capital
leases (note 18).......... 58,786 58,786 60,044 60,044
Accounts payable, accrued
expenses and other
liabilities............... 185,561 185,561 205,317 205,317
Deferred income taxes
(note 14)................. 445,613 81,649 412,729 82,597
Company-obligated
mandatorily redeemable
preferred securities of a
trust holding solely
Parent Company
subordinated debt
securities
(note 12)................. 136,125 137,500 -- --
Shareholders' equity
(notes 16 and 17)
Series A Convertible
Preferred stock with a
liquidation preference
of $225,250 in 1995 and
$225,252 in 1994......... 45 45 45 45
Common stock of 1 cent par
value per share;
250,000,000 shares authorized;
issued 47,922,749 shares
in 1995 and 47,571,046 shares
in 1994................... 479 479 476 476
Additional paid-in capital. 309,943 309,943 306,674 306,674
Accumulated deficit........ (267,883) (267,883) (212,169) (212,169)
Revaluation equity......... 1,496,571 -- 1,519,219 --
---------- ---------- --------- ----------
Total shareholders' equity. 1,539,155 42,584 1,614,245 95,026
---------- ---------- --------- ----------
Commitments and contingencies
(notes 18, 19 and 20)
Total...................... $4,852,403 $2,985,609 $4,736,961 $2,915,860
========== ========== ========== ==========
</TABLE>
23
<PAGE>
The Rouse Company and Subsidiaries
CONSOLIDATED COST BASIS STATEMENTS OF OPERATIONS
Years ended December 31, 1995, 1994 and 1993
(in thousands, except per share data)
[CAPTION]
<TABLE>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues................... $ 672,821 $ 671,171 $ 646,805
Operating expenses,
exclusive of provision
for bad debts,
depreciation and
amortization............. 347,560 356,958 352,217
Interest expense (note 11). 212,963 213,583 210,806
Provision for bad debts.... 3,318 5,185 4,741
Depreciation and
amortization (note 4)..... 73,062 74,186 70,200
Gain (loss) on
dispositions of assets
and other provisions, net
(note 15)................. (25,749) (7,923) (5,769)
---------- ---------- ----------
Earnings before income
taxes and extraordinary
losses.................... 10,169 13,336 3,072
---------- ---------- ----------
Income taxes (note 14):
Current--primarily state... 620 735 760
Deferred--primarily Federal 3,699 5,995 3,603
---------- ---------- ----------
4,319 6,730 4,363
---------- ---------- ----------
Earnings (loss) before
extraordinary losses...... 5,850 6,606 (1,291)
Extraordinary losses, net
of related income tax
benefits (note 11)........ 8,631 4,447 8,051
---------- ---------- ----------
Net earnings (loss)........ $ (2,781) $ 2,159 $ (9,342)
========== ========== ==========
Net loss applicable to
common shareholders....... $ (17,422) $ (10,922) $ (20,723)
========== ========== ==========
Loss per share of common
stock after provision
for dividends on
Preferred stock (note 16):
Loss before extraordinary
losses.................... $(.18) $(.14) $(.27)
Extraordinary losses....... (.18) (.09) (.17)
---------- ---------- ----------
Total...................... $(.36) $(.23) $(.44)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
24
<PAGE>
The Rouse Company and Subsidiaries
CONSOLIDATED COST BASIS STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1995, 1994 and 1993 (in thousands)
<TABLE>
<CAPTION>
Series A
Convertible Additional
Preferred Common paid-in Accumulated
stock stock capital deficit
----------- ------ ---------- -----------
<S> <C> <C> <C> <C>
Balance at December 31,
1992...................... $ -- $ 473 $ 83,450 $ (118,771)
Net loss................... -- -- -- (9,342)
Dividends declared:
Common stock -- $ .62 per
share..................... -- -- -- (29,404)
Preferred stock -- $2.83
per share................. -- -- -- (11,381)
Proceeds from exercise of
stock options, net........ -- 3 446 --
Amortization of restricted
common stock.............. -- -- 2,068 --
Issuance of Preferred
stock (note 16)........... 40 -- 195,569 --
---------- ---------- ---------- ----------
Balance at December 31,
1993...................... 40 476 281,533 (168,898)
Net earnings............... -- -- -- 2,159
Dividends declared:
Common stock -- $ .68 per
share..................... -- -- -- (32,349)
Preferred stock -- $3.25
per share................. -- -- -- (13,081)
Proceeds from exercise of
stock options, net........ -- -- 108 --
Amortization of restricted
common stock.............. -- -- 2,225 --
Issuance of Preferred
stock (note 16)........... 5 -- 22,808 --
---------- ---------- ---------- ----------
Balance at December 31,
1994...................... 45 476 306,674 (212,169)
Net loss................... -- -- -- (2,781)
Dividends declared:
Common stock -- $ .80 per
share..................... -- -- -- (38,292)
Preferred stock -- $3.25
per share................. -- -- -- (14,641)
Proceeds from exercise of
stock options, net........ -- 3 2,139 --
Amortization of restricted
common stock.............. -- -- 1,130 --
---------- ---------- ---------- ----------
Balance at December 31,
1995...................... $ 45 $ 479 $ 309,943 $ (267,883)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
25
<PAGE>
The Rouse Company and Subsidiaries
CONSOLIDATED COST BASIS STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993 (in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating
activities
Rents and other revenues
received.................. $ 625,373 $ 622,033 $ 600,594
Proceeds from land sales... 33,233 37,482 33,830
Interest received.......... 10,323 10,297 9,712
Land development
expenditures.............. (16,874) (16,760) (20,407)
Operating expenditures:
Operating properties....... (308,425) (315,607) (309,130)
Land sales, development
and corporate............. (18,738) (11,880) (9,034)
Interest paid:
Operating properties....... (202,120) (195,751) (184,278)
Land sales, development
and corporate............. (15,771) (16,039) (20,138)
---------- ---------- ----------
Net cash provided by
operating activities...... 107,001 113,775 101,149
---------- ---------- ----------
Cash flows from investing
activities
Expenditures for
properties in development
and improvements to
existing properties
funded by debt........... (61,591) (78,628) (87,243)
Expenditures for property
acquisitions.............. (28,206) (94,113) (34,967)
Expenditures for
improvements to existing
properties funded by cash
provided by operating
activities:
Tenant leasing and
remerchandising........... (8,344) (8,121) (7,374)
Building and equipment..... (4,688) (5,155) (5,967)
Purchases of marketable
securities................ (5,411) (70,189) (88,594)
Proceeds from redemptions
or sales of marketable
securities................ 32,650 74,443 72,400
Other...................... 10,595 3,212 (2,701)
---------- ---------- ----------
Net cash used in investing
activities................ (64,995) (178,551) (154,446)
---------- ---------- ----------
Cash flows from financing
activities
Proceeds from issuance of
property debt............. 288,851 446,628 358,995
Repayments of property
debt:
Scheduled principal
payments.................. (36,446) (46,750) (20,735)
Other payments............. (413,438) (304,977) (405,772)
Proceeds from issuance of
other debt................ 124,831 -- 120,329
Repayments of other debt... (42,440) (8,968) (160,657)
Proceeds from the issuance
of Company-obligated
mandatorily redeemable
preferred securities..... 132,951 -- --
Proceeds from issuance of
Preferred stock........... -- -- 195,609
Proceeds from exercise of
stock options............. 2,142 108 449
Dividends paid............. (52,933) (45,423) (41,150)
---------- ---------- ----------
Net cash provided by
financing activities...... 3,518 40,618 47,068
---------- ---------- ----------
Net increase (decrease) in
cash and cash equivalents. 45,524 (24,158) (6,229)
Cash and cash equivalents
at beginning of year...... 49,398 73,556 79,785
---------- ---------- ----------
Cash and cash equivalents
at end of year............ $ 94,922 $ 49,398 $ 73,556
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE>
Reconciliation of Net Earnings (Loss) to Net Cash
Provided by Operating Activities
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net earnings (loss)........ $ (2,781) $ 2,159 $ (9,342)
Adjustments to reconcile
net earnings (loss) to
net cash provided
by operating activities:
Depreciation and
amortization.............. 73,062 74,186 70,200
(Gain) loss on
dispositions of assets
and other provisions, net. 25,749 7,923 5,769
Extraordinary losses, net
of related income tax
benefits.................. 8,631 4,447 8,051
Additions to
pre-construction reserve.. 3,800 3,400 2,900
Provision for bad debts.... 3,318 5,185 4,741
Decrease (increase) in:
Accounts and notes
receivable................ (3,836) (3,150) (407)
Other assets............... 1,357 5,323 (3,373)
Increase (decrease) in
accounts payable, accrued
expenses and other
liabilities............... (10,690) 5,754 21,437
Deferred income taxes...... 3,699 5,995 3,603
Other, net................. 4,692 2,553 (2,430)
---------- ---------- ----------
Net cash provided by
operating activities...... $ 107,001 $ 113,775 $ 101,149
========== ========== ==========
Schedule of Non-Cash Investing and Financing Activities
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Value of non-cash
consideration given in
acquisitions of interests
in properties............. $ 79,811 $ 1,129 $ 13,416
Mortgage and other debt
assumed in acquisitions
of interests in
properties................ 6,175 -- 71,995
Mortgage debt extinguished
on dispositions of
interests in
properties................ 20,779 15,681 --
Capital lease obligations
incurred.................. 1,837 613 1,541
Series A Convertible
Preferred stock issued
in satisfaction of
mortgage debt............. -- 23,000 --
========== ========== ==========
</TABLE>
27
<PAGE>
The Rouse Company and Subsidiaries
CONSOLIDATED CURRENT VALUE BASIS STATEMENTS OF CHANGES IN REVALUATION EQUITY
Years ended December 31, 1995, 1994 and 1993 (in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revaluation equity at
beginning of year......... $1,519,219 $1,412,455 $1,223,744
Revaluation equity
attributable to interests
in operating properties sold
or disposed.............. 3,082 5,609 --
---------- ---------- ----------
1,522,301 1,418,064 1,223,744
---------- ---------- ----------
Value of interests in
operating properties
opened or acquired........ 8,152 -- 7,075
Change in value of
interests in other
operating properties,
including properties
held for sale............. 39,233 101,168 226,258
Change in value of land in
development and land held
for development and sale,
including effects of sales
and transfers to operating
properties................ (5,827) 1,007 (10,761)
---------- ---------- ----------
Change in value of
interests in operating
properties,land in
development and land held
for development and sale. 41,558 102,175 222,572
Change in value of other
property.................. 1,053 (337) (456)
Change in value
attributable to debt,
exclusive of
operating property debt... (34,509) 32,068 (3,818)
Change in present value of
potential income taxes,
net of cost basis deferred income
taxes.................... (33,832) (32,751) (29,587)
---------- ---------- ----------
(25,730) 101,155 188,711
---------- ---------- ----------
Revaluation equity at end
of year................... $1,496,571 $1,519,219 $1,412,455
========== ========== ==========
The accompanying notes are an integral part of these statements.
</TABLE>
28
<PAGE>
The Rouse Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(1) Current value basis
financial statements
(a) Current value reporting
The Company's interests in operating properties, land 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 land 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 $1,539,155,000 or $26.30 per
share of common stock at December 31, 1995 and $1,614,245,000 or $27.75 per
share of common stock at December 31, 1994. The per share calculations 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 are an integral part of the
Company's annual report to shareholders but they are not 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 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 their historical cost, but
has followed a practice of not recognizing any value increment until these
properties are completed and operating.
29
<PAGE>
Properties held for sale--Properties held for sale are carried at their
estimated fair value less costs to sell. Fair values are based on contract
prices, negotiations with prospective purchasers or management's estimates of
future cash flows from operations and sale of the properties, where appropriate.
Land held for development and sale--The current value of land 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 are
prepared on the assumption 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 is the estimated 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, 1995 and 1994 are as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Value of interests in operating properties:
Retail centers................................................. $2,038,316 $1,981,731
Office, mixed-use and other.................................... 256,080 208,187
Value of land held for development and sale.................... 134,097 138,182
Value of land in development................................... 15,725 10,524
---------- ----------
Total equity value............................................. 2,444,218 2,338,624
Debt related to equity interests............................... 2,141,610 2,142,510
---------- ----------
Total asset value.............................................. 4,585,828 4,481,134
Depreciated cost of interests in operating properties and costs of
land held for development and sale, land in development and
certain other assets........................................... (2,728,820) (2,668,766)
Present value of potential income taxes related to revaluation
equity, net of cost basis deferred income taxes............... (363,964) (330,132)
Other, net..................................................... 3,527 36,983
---------- ----------
Total revaluation equity....................................... $1,496,571 $1,519,219
========== ==========
</TABLE>
30
<PAGE>
(2) Summary of significant accounting policies
(a) Description of business
The Company acquires, develops and/or manages income-producing properties
located throughout the United States and develops and sells land for
residential, commercial and other uses, primarily in Columbia, Maryland. The
income-producing properties consist of retail centers, office buildings and
mixed-use and other properties. The retail centers produce over 70% of the
Company's revenues and are primarily regional shopping centers in suburban
market areas. Retail centers also include specialty marketplaces in certain
downtown areas and several village centers in Columbia. The office, mixed-use
and other properties produce over 20% of the Company's revenues. The office
properties are primarily suburban buildings in the Columbia and Baltimore market
areas or components of large-scale mixed-use properties located in urban markets
which also include retail, parking and other uses. Land development and sales
operations produce about 5% of the Company's annual revenues and are
predominantly related to large-scale, long-term community developments.
(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 assets, liabilities, revenues
and expenses of unincorporated real estate ventures in which it has joint
interest and control with other venturers. Investments in other ventures 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.
Certain amounts for prior years have been reclassified to conform with the
presentation for 1995.
(c) Property
Properties to be developed or held and used in operations are carried at cost
reduced for impairment losses, where appropriate, based on estimated
undiscounted future cash flows. Properties held for sale are carried at cost
reduced for applicable valuation allowances. Acquisition, development and
construction costs of operating properties, properties in development and land
development projects are capitalized including, where applicable, salaries and
related costs, real estate taxes, interest and pre-construction costs. The pre-
construction stage of development of an operating property (or an expansion of
an existing property) includes efforts and related costs to secure land control
and zoning, evaluate feasibility and complete other initial tasks which are
essential to development. These costs are transferred to construction and
development in progress when the pre-construction tasks are completed. Provision
is made for potentially unsuccessful pre-construction efforts by charges to
operations. Costs of significant improvements, replacements and renovations at
operating properties are capitalized, while costs of maintenance and repairs are
expensed as incurred. Certain costs associated with financing and leasing of
operating properties are capitalized as deferred costs and amortized over the
periods benefited by the expenditures.
Depreciation of operating properties is computed using 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%.
Properties held for sale are carried at the lower of cost less accumulated
depreciation or estimated net realizable value. Operating properties are
classified as properties held for sale when marketing of the properties for sale
is authorized by management.
31
<PAGE>
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of." Statement No. 121
establishes new standards for measurement and recognition of impairment of long-
lived assets. The Statement will be effective with respect to the Company in
1996 and initial adoption is not expected to have a material effect on the
financial position or results of operations reported by the Company.
(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.
(e) 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, estimated collectible minimum rent revenues under leases which provide
for varying rents over their terms are averaged over the terms of the leases.
(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
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, 1995 and
1994, investments in marketable securities consist primarily of U.S. government
and agency obligations with maturities of less than one year and include
$2,910,000 and $2,001,000, respectively, which are held for restricted uses.
32
<PAGE>
(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.
(i) Other information about financial instruments
Fair values of financial instruments approximate their carrying value in the
financial statements except for debt and related interest rate exchange
agreements for which fair value information is provided in note 11.
(j) 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 47,814,000 for 1995, 47,565,000 for 1994
and 47,411,000 for 1993. Common stock equivalents have not been used in
computing earnings (loss) per common share because their effects are not
material or are anti-dilutive.
(k) Stock-Based Compensation
The Company uses the intrinsic value method to account for stock-based employee
compensation plans. Under this method, compensation cost is recognized for
awards of shares of common stock to employees only if the quoted market price of
the stock at the grant date (or other measurement date, if later) is greater
than the amount the employee must pay to acquire the stock. In October 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation." Statement No. 123
permits companies to adopt a new fair value based method to account for stock-
based employee compensation plans or to continue using the intrinsic value
method. If the intrinsic value method is used, information concerning the pro
forma effects on net earnings (loss) and earnings (loss) per share of common
stock of adopting the fair value based method is required to be presented in the
footnotes to the financial statements. The Statement also requires additional
footnote disclosures about stock-based employee compensation arrangements,
regardless of the method used to account for them. The Company intends to
continue using the intrinsic value method to account for its stock-based
employee compensation plans and will provide the pro forma and additional
disclosures about the plans in its 1996 financial statements, as required by
Statement No. 123.
(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.
33
<PAGE>
The condensed, combined balance sheets of these ventures and the Company's
proportionate share of their assets, liabilities and equity at December 31, 1995
and 1994 and the condensed, combined statements of earnings of these ventures
and the Company's proportionate share of their revenues and expenses for 1995,
1994 and 1993 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Combined Proportionate Share
-------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total assets, primarily property......... $339,121 $389,987 $151,195 $179,868
======== ======== ======== ========
Liabilities, primarily long-term debt.... $313,282 $325,309 $145,113 $153,238
Venturers' equity........................ 25,839 64,678 6,082 26,630
-------- -------- -------- --------
Total liabilities and venturers' equity. $339,121 $389,987 $151,195 $179,868
======== ======== ======== ========
<CAPTION>
Combined Proportionate Share
-------- -------------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues................................. $128,979 $143,573 $144,564 $ 58,085 $ 65,650 $ 66,432
Operating and interest expenses.......... 77,223 83,492 87,290 35,336 38,592 40,689
Depreciation and amortization............ 13,071 13,281 12,396 3,472 3,680 3,833
-------- -------- -------- -------- -------- --------
Net earnings............................ $ 38,685 $ 46,800 $ 44,878 $ 19,277 $ 23,378 $ 21,910
======== ======== ======== ======== ======== ========
</TABLE>
The Company holds minority interests in certain real estate ventures which are
accounted for using the equity or cost methods, as appropriate. Most of 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, 1995 and 1994 and
their condensed combined statements of earnings for 1995, 1994 and 1993 are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Total assets, primarily property.................................. 1,507,438 $1,200,252
========= ==========
Liabilities, primarily long-term debt............................. 481,528 $ 373,303
Venturers' equity................................................. 1,025,910 826,949
--------- ----------
Total liabilities and venturers' equity.......................... 1,507,438 $1,200,252
========= ==========
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues.......................................................... $209,100 $200,728 $ 197,333
Operating and interest expenses................................... 141,509 133,470 142,740
Depreciation and amortization..................................... 39,701 37,701 36,768
Loss on disposition............................................... -- 25,722 --
-------- -------- ---------
Net earnings..................................................... $ 27,890 $ 3,835 $ 17,825
======== ======== ==========
</TABLE>
The Company's share of net earnings of these ventures was
$3,712,000 in 1995, $1,856,000 in 1994 and $723,000 in 1993.
(4) Operating properties
Property and deferred costs of projects at December 31, 1995
and 1994 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Buildings and improvements........................................ $2,516,625 $2,457,926
Land.............................................................. 185,265 181,169
Deferred costs.................................................... 118,930 124,643
Investments in unconsolidated real estate ventures................ 84,772 68,195
Receivables under finance leases.................................. 81,632 81,408
Furniture and equipment........................................... 19,132 24,224
----------- ----------
Total............................................................ $3,006,356 $2,937,565
========== ==========
</TABLE>
34
<PAGE>
Depreciation expense for 1995, 1994 and 1993 was $59,247,000, $59,914,000 and
$55,508,000, respectively. Amortization expense for 1995, 1994 and 1993 was
$13,815,000, $14,272,000 and $14,692,000, 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 $16,056,000 at December 31, 1995
and $11,216,000 at December 31, 1994.
Changes in pre-construction costs, net, for 1995 and 1994 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Balance at beginning of year, before
pre-construction reserve............................. $20,633 $18,473
Costs incurred........................................ 12,451 10,337
Costs transferred to construction and development in
progress............................................. (7,405) (3,663)
Costs transferred to operating properties............. (1,686) (2,401)
Costs of unsuccessful projects written off............ (2,530) (2,113)
------- -------
21,463 20,633
Less pre-construction reserve......................... 15,379 14,109
------- -------
Balance at end of year, net.......................... $ 6,084 $ 6,524
======= =======
</TABLE>
(6) Properties held for sale
At December 31, 1995, operating properties held for sale include four retail
centers with an aggregate net carrying value of $15,493,000 and an industrial
building with a net carrying value of $7,109,000. Revenues and operating losses
relating to these properties for 1995 were $8,355,000 and $1,174,000,
respectively. All of the properties are expected to be sold in 1996.
(7) Land held for development and sale
Land held for development and sale at December 31, 1995 and 1994 is summarized
as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land under development................................ $ 87,196 $ 84,872
Undeveloped land...................................... 42,921 42,794
Finished land......................................... 4,051 4,627
-------- --------
Total................................................ $134,168 $132,293
======== ========
</TABLE>
(8) Accounts and notes receivable
Accounts and notes receivable at December 31, 1995 and 1994 are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Accounts receivable, primarily accrued rents and
income under tenant leases............................ $ 58,916 $ 53,674
Notes receivable from sales of properties............. 2,303 2,683
-------- --------
61,219 56,357
Less allowance for doubtful receivables............... 24,468 25,124
-------- --------
Total................................................ $ 36,751 $ 31,233
======== ========
</TABLE>
Accounts and notes receivable due after one year were $13,967,000 and
$15,469,000 at December 31, 1995 and 1994, respectively.
35
<PAGE>
Credit risk with respect to receivables from tenants is not highly
concentrated due to the large number of tenants and the geographic
diversification of the Company's operating properties. The Company performs in-
depth credit evaluations of prospective new tenants and requires security
deposits in certain circumstances. Tenants' compliance with the terms of their
leases is monitored closely, and the allowance for doubtful receivables is
established based on analyses of the risk of loss on specific tenant accounts,
historical trends and other relevant information. Notes receivable relate
primarily to sales of land and operating properties and are generally secured by
first liens on the related properties.
(9) 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 employees whose defined benefits exceed the limits of the funded plan
and directors. Benefits under the pension plans are based on the participants'
years of service and compensation.
The net pension cost includes the following components (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Service cost..................................................... $ 2,382 $ 2,904 $ 2,191
Interest cost on projected benefit obligations................... 3,309 3,425 2,991
Actual return on funded plan assets.............................. (5,422) (1,930) (1,790)
Other, net....................................................... 3,262 927 897
------- -------- -------
Net pension cost............................................... $ 3,531 $ 5,326 $ 4,289
======= ======== =======
The funded status of the pension plans at December 31, 1995 and
1994 is summarized as follows (in thousands):
1995 1994
------------------ --------------------
Funded Unfunded Funded Unfunded
Plan Plans Plan Plans
-------- ------ ------- -------
Accumulated benefit obligations:
Vested......................................................... $ 31,045 $ 4,658 $ 24,059 $ 9,380
Nonvested...................................................... 2,983 393 3,040 338
-------- ------- -------- -------
Total........................................................ $ 34,028 $ 5,051 $ 27,099 $ 9,718
======== ======= ======== =======
Projected benefit obligations.................................... $ 38,808 $ 6,801 $ 30,173 $10,746
Plan assets at fair value........................................ (34,084) -- (27,465) --
-------- ------- -------- -------
Excess of projected benefit
obligations over plan assets................................... 4,724 6,801 2,708 10,746
Unamortized prior service cost................................... (2,124) (3,067) (2,359) (3,559)
Unrecognized net gain (loss)..................................... (10,783) (1,077) (3,836) 391
Unrecognized net obligation at
January 1, 1987, net of amortization........................... (664) (810) (730) (945)
Additional minimum liability..................................... -- 3,204 -- 3,085
-------- ------- -------- -------
Accrued (prepaid) pension cost................................... $ (8,847) $ 5,051 $ (4,217) $ 9,718
======== ======= ======== =======
</TABLE>
The projected benefit obligations for the plans were determined using discount
rates of 7.25%, 8.875% and 7.5% in 1995, 1994 and 1993, respectively. The rate
of compensation increases assumed was 4.5% in 1995, 1994 and 1993. The expected
long-term rate of return on plan assets of the funded plan was 11% in 1995, 1994
and 1993. The assets of the funded plan consist primarily of pooled separate
accounts with an insurance company and marketable equity securities.
36
<PAGE>
(10) Other Postretirement 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.
The postretirement benefit cost includes the following components (in
thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Service cost........................................................ $ 607 $ 741
Interest cost on accumulated benefit obligation..................... 853 823
Amortization of transition obligation at January 1, 1993............ 484 485
Amortization of net gain............................................ (26) --
------- -------
Net postretirement benefit cost..................................... $ 1,918 $ 2,049
======= =======
The status of the postretirement benefit plan at December 31, 1995
and 1994 is summarized as follows (in thousands):
1995 1994
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................................ $ 3,195 $ 2,964
Other fully eligible participants................................... 1,720 1,637
Other active participants........................................... 8,186 5,748
------- -------
13,101 10,349
Unrecognized net gain (loss)........................................ (502) 1,028
Unrecognized transition obligation.................................. (8,235) (8,719)
------- -------
Accrued postretirement benefit cost................................. $ 4,364 $ 2,658
======= =======
</TABLE>
The weighted average discount rates used to determine the accumulated
postretirement benefit obligation were 7.25%, 8.875% and 7.5% in 1995, 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.
(11) 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, 1995 and
1994, property debt not carrying a Parent Company guarantee of repayment
includes $443,440,000 and $675,825,000, 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.
37
<PAGE>
Debt at December 31, 1995 and 1994 is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Mortgages and bonds.................. $1,997,998 $2,063,978
Convertible subordinated debentures.. 130,000 130,000
Medium-term notes.................... 100,300 --
Other loans.......................... 251,231 278,898
--------- ----------
Total............................... $2,479,529 $2,472,876
========== ==========
</TABLE>
Mortgages and bonds are secured by deeds of trust or mortgages on properties and
general assignments of rents. This debt matures in installments through 2025
and, at December 31, 1995, bears interest at a weighted average effective rate
of 8.70%, including lender participations. At December 31, 1995, approximately
$589,641,000 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 or at
maturity.
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.
The Company has registered $150,000,000 of unsecured, medium-term notes which
may be issued to the public from time to time through February 1997. The notes
may be issued, subject to market conditions, for varying terms (nine months to
30 years) and at fixed or variable interest rates based on market indices at the
time of issuance. The notes outstanding at December 31, 1995, mature at various
dates from 1996 to 2015, bear interest at a weighted average effective rate of
7.68% (including an average rate of 6.61% on $38,800,000 of variable rate notes)
and have a weighted average maturity of 6.5 years.
Other loans include $120,000,000 of 8.5% unsecured notes due in 2003, various
property acquisition and land loans and certain other borrowings. These loans
include aggregate unsecured borrowings of $229,372,000 and $259,751,000 at
December 31, 1995 and 1994, respectively, and at December 31, 1995, bear
interest at a weighted average effective rate of 8.61%.
The annual maturities of debt as of December 31, 1995 are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
Company and Nonrecourse Recourse
Recourse Loans Loans Total
-------------- ----------- ---------
<S> <C> <C> <C>
1996.................... $ 11,507 $ 98,922 $ 110,429
1997.................... 8,044 110,492 118,536
1998.................... 22,017 60,157 82,174
1999.................... 32,051 136,829 168,880
2000.................... 60,316 161,492 221,808
Subsequent to 2000...... 355,553 1,422,149 1,777,702
-------- ---------- ----------
Total.................. $489,488 $1,990,041 $2,479,529
======== ========== ==========
</TABLE>
Approximately $65,000,000 of nonrecourse debt maturing in 1996 relates to a
retail center mortgage due in August. The Company expects to refinance this
mortgage on a long-term basis at or prior to its scheduled maturity.
At December 31, 1995, 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 9.86% 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, 1995 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, 1995 and
1994 or interest expense for the years ended December 31, 1995, 1994 and 1993.
38
<PAGE>
Total interest costs were $219,838,000 in 1995, $220,971,000 in 1994 and
$219,705,000 in 1993 of which $6,875,000, $7,388,000 and $8,899,000 were
capitalized, respectively.
During 1995, 1994 and 1993, the Company incurred extraordinary losses, related
to extinguishments of debt prior to scheduled maturity or required partial early
redemptions of debt, of $13,278,000, $6,824,000 and $12,322,000, respectively,
less related deferred income tax benefits of $4,647,000, $2,377,000 and
$4,271,000, respectively. The sources of funds used to pay the debt and fund
the prepayment penalties, where applicable, included refinancings of properties
in each of the three years, issuance of the medium-term notes and the Company-
obligated mandatorily redeemable preferred securities in 1995 and issuance of
the 8.5% unsecured notes and Preferred stock in 1993.
At December 31, 1995, the Company had available unused lines of credit totaling
$158,920,000. The agreements relating to certain of the lines of credit, the
8.5% unsecured notes, the medium-term notes 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, 1995 and December 31, 1994 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---------------------- ---------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fixed rate debt..... $2,195,137 $2,249,968 $2,152,270 $2,105,794
Variable rate debt.. 284,392 284,392 320,606 320,606
---------- ---------- ---------- ----------
$2,479,529 $2,534,360 $2,472,876 $2,426,400
========== ========== ========== ==========
</TABLE>
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.
(12) Company-obligated mandatorily redeemable preferred securities
The redeemable preferred securities consist of 5,500,000 Cumulative Quarterly
Income Preferred Securities (preferred securities), with a liquidation amount of
$25 per security, which were issued in November 1995 by a statutory business
trust that is wholly-owned by the Company. The trust used the proceeds of the
preferred securities and other assets to purchase at par $141,753,000 of junior
subordinated debentures (debentures) of the Company due in November 2025, which
debentures are the sole assets of the trust.
Payments to be made by the trust on the preferred securities are dependent on
payments that the Company has undertaken to make, particularly the payments to
be made by the Company on the debentures. Compliance by the Company with these
undertakings, taken together, would have the effect of providing a full,
irrevocable and unconditional guarantee of the trust's obligations under the
preferred securities.
Distributions on the preferred securities are payable from interest payments
received on the debentures and are due quarterly at a rate of 9.25% of the
liquidation amount, subject to deferral for up to five years under certain
conditions. Distributions payable are included
39
<PAGE>
in operating expenses. Redemptions of the preferred securities are payable at
the liquidation amount from redemption payments received on the debentures. The
Company may redeem the debentures at par at any time after November 27, 2000,
but redemptions at or prior to maturity are payable only from the proceeds of
issuance of capital stock of the Company or of securities substantially
comparable in economic effect to the preferred securities.
(13) 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):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Operating properties:
Revenues............................................................ $ 636,646 $ 633,047 $ 607,630
Operating expenses, exclusive of provision
for bad debts, depreciation and
amortization....................................................... 313,525 322,278 322,793
Interest expense................................................... 197,249 196,690 189,805
Provision for bad debts............................................ 3,318 5,185 4,741
Depreciation and amortization...................................... 73,062 74,186 70,200
---------- ---------- ----------
49,492 34,708 20,091
---------- ---------- ----------
Land sales:
Revenues............................................................ 33,403 35,232 35,313
Operating costs and expenses........................................ 17,827 19,877 19,387
Interest expense.................................................... 5,071 5,028 4,093
---------- ---------- ----------
10,505 10,327 11,833
---------- ---------- ----------
Development:
Operating costs and expenses........................................ 7,288 6,494 3,853
Interest expense.................................................... 358 495 495
---------- ---------- ----------
(7,646) (6,989) (4,348)
---------- ---------- ----------
Corporate:
Interest income..................................................... 2,772 2,892 3,862
Interest expense.................................................... 10,285 11,370 16,413
Other expenses...................................................... 8,920 8,309 6,184
---------- ---------- ----------
(16,433) (16,787) (18,735)
---------- ---------- ----------
Operating income.................................................... $ 35,918 $ 21,259 $ 8,841
========== ========== ==========
The assets by line of business at December 31, 1995, 1994 and 1993
are as follows (in thousands):
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Operating properties................................................ $2,656,527 $2,617,045 $2,556,237
Land sales.......................................................... 141,275 136,986 140,673
Development......................................................... 63,732 68,863 63,656
Corporate........................................................... 124,075 92,966 114,416
---------- ---------- ----------
Total.............................................................. $2,985,609 $2,915,860 $2,874,982
========== ========== ==========
</TABLE>
40
<PAGE>
(14) Income taxes
Income tax expense is reconciled to the amount computed by applying the Federal
corporate tax rate as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Tax at statutory rate on earnings
before income taxes and extraordinary losses.................. $ 3,560 $ 4,668 $ 1,075
State income taxes, net of Federal income
tax benefit................................................... 759 2,062 1,398
Effect of increase in Federal tax rate.......................... -- -- 1,890
-------- -------- --------
Income tax expense.............................................. $ 4,319 $ 6,730 $ 4,363
======== ======== ========
Effective rate.................................................. 42.5% 50.5% 142.0%
======== ======== ========
The net deferred tax obligations at December 31, 1995 and 1994
consist of the following (in thousands):
<CAPTION>
1995 1994
---- -----
<S> <C> <C>
Total deferred tax liabilities.................................. $ 299,717 $ 285,713
Total deferred tax assets....................................... 218,068 203,116
--------- ---------
Net deferred tax obligations.................................. $ 81,649 $ 82,597
========= =========
</TABLE>
The tax effects of temporary differences and carryforwards that are included
in the net deferred tax obligations at December 31, 1995 and 1994 relate to the
following (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Property, primarily differences in depreciation
and amortization and treatment of interest
and certain other costs............................. $ 273,585 $ 260,457
Accounts and notes receivable, primarily
differences in timing of recognition of rent
revenues and doubtful receivables................... 5,684 5,070
Accrued expenses, primarily differences in timing of
recognition of interest, compensation and pension
expenses............................................ (4,925) (58)
Operating loss and tax credit carryforwards........... (192,695) (182,872)
--------- ---------
Total............................................... $ 81,649 $ 82,597
========= =========
</TABLE>
The net operating losses carried forward from December 31, 1995 for Federal
income tax purposes aggregate approximately $538,000,000.
As indicated above, the deferred tax assets relate primarily to operating loss
carryforwards for Federal income tax purposes. These loss carryforwards will
begin to expire in 1998, and the ultimate realization of these assets is
dependent upon the generation of sufficient future taxable income to use the
loss carryforwards before they expire. Based on the scheduled reversal of the
deferred tax liabilities (particularly those relating to depreciation of
property) and projections of future taxable income over the loss carryforward
period, management believes that it is more likely than not that the Company
will realize the benefits of the operating loss carryforwards at December 31,
1995. The amount of the deferred tax asset considered realizable could be
reduced, however, if estimates of future taxable income are reduced.
(15) 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):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Provision for a litigation judgment.. $(12,321) $ -- $ --
Net loss on operating properties..... (13,210) (7,496) (5,432)
Other, net........................... (218) (427) (337)
-------- -------- ---------
Total.............................. $(25,749) $ (7,923) $ (5,769)
======== ======== =========
</TABLE>
41
<PAGE>
The provision for a litigation judgment in 1995 relates to the matter
involving a former tenant at the Riverwalk Shopping Center discussed in note 19.
The net loss on operating properties in 1995 relates primarily to provisions
for losses recognized on retail centers the Company decided to sell
($15,589,000). These provisions were partially offset by a gain on disposition
of a retail center ($2,379,000).
The net loss on operating properties in 1994 relates primarily to losses
incurred on dispositions of interests in two retail centers, a hotel and an
office building ($8,045,000) and a provision for loss on an industrial building
($2,212,000). These losses were partially offset by a gain on disposition of an
interest in a retail center the Company continues to manage ($2,761,000).
The net loss on operating properties in 1993 relates to a provision for loss
recognized on a retail center. This loss was recognized based on management's
determination that the Company would not continue to support the property under
the arrangements with the lenders, public authorities and others involved and
that it was unlikely that the Company would fully recover its investment in the
property based on forecasts of future cash flows.
(16) 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, 1995 and 1994, 4,505,009 and 4,505,041
shares, respectively were issued. The Company sold 4,025,000 shares of the
Series A Convertible Preferred stock in a public offering in 1993 and issued
480,168 shares valued at $23,000,000 in 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.
(17) Common stock
At December 31, 1995, shares of authorized and unissued common stock are
reserved as follows: (a) 2,471,580 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; (c) 10,600,020 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.
Under the Company's stock option plans, options to purchase shares of common
stock and stock appreciation rights may be awarded to officers and employees.
Stock options are granted with an exercise price equal to the market price of
the common stock on the date of grant and typically vest over a three- to five-
year period, subject to certain conditions. The Company has not granted any
stock appreciation rights. A summary of changes in the outstanding stock
options under the stock option plans is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year.. 2,228,102 1,709,302 1,438,542
Options granted............... 200,500 566,000 350,000
Options exercised:
$11.17 per share............. -- -- (41,340)
$11.83 per share............. -- (5,700) (2,400)
$14.75 per share............. (2,600) -- --
$15.33 per share............. (174,602) (3,000) (9,500)
$18.00 per share............. (2,250) -- --
Options cancelled............. (21,750) (38,500) (26,000)
--------- --------- ---------
Balance at end of year....... 2,227,400 2,228,102 1,709,302
========= ========= =========
</TABLE>
42
<PAGE>
Options to purchase 1,229,000 shares are exercisable at December 31, 1995 at
prices ranging from $13.50 to $27.00 per share.
Under the Company's stock bonus plans, shares of common stock may be awarded to
officers and employees. Shares awarded under the plans are typically subject to
forfeiture restrictions which lapse at defined annual rates. In connection with
the stock bonus plan awards, the Company typically makes loans to the recipients
for the payment of related income taxes, which loans are forgiven in
installments subject to the recipients' continued employment. The total loans
outstanding at December 31, 1995 and 1994 were $3,829,000 and $2,620,000,
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
$2,763,000 in 1995, $1,663,000 in 1994 and $2,415,000 in 1993.
In 1992, seven investors acquired 8,500,000 shares of the Company's common stock
in a private placement from Trizec Investments Corporation (Trizec). 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.
(18) Leases
The Company, as lessee, has entered into operating leases expiring at various
dates through 2076. Rents under such leases aggregated $9,421,000 in 1995,
$11,927,000 in 1994 and $17,483,000 in 1993, including contingent rents, based
on the performance of the related properties, of $3,644,000, $6,232,000 and
$10,006,000, 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, 1995 are summarized as
follows (in thousands):
<TABLE>
<S> <C>
1996................................................... $ 5,775
1997................................................... 5,717
1998................................................... 5,653
1999................................................... 5,621
2000................................................... 5,621
Subsequent to 2000..................................... 242,039
--------
Total................................................. $270,426
========
</TABLE>
Obligations under capital leases relate to the Company's headquarters building
and certain operating properties and equipment. The property and other asset
accounts include costs of $66,207,000 and $70,651,000 and accumulated
depreciation of $19,130,000 and $21,249,000 at December 31, 1995 and 1994,
respectively, related to these leases. The minimum rent payments due under
capital leases and their present value at December 31, 1995 are summarized
as follows (in thousands):
<TABLE>
<S> <C>
1996.................................................... $ 9,289
1997.................................................... 8,904
1998.................................................... 8,255
1999.................................................... 7,806
2000.................................................... 7,554
Subsequent to 2000...................................... 194,825
---------
236,633
Imputed interest at rates ranging from 5.59% to 13.00%.. (177,847)
---------
Obligations under capital leases, net.................. $ 58,786
=========
</TABLE>
43
<PAGE>
Space in the Company's operating properties is leased to approximately 6,300
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):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Minimum rents..... $310,149 $303,425 $289,422
Percentage rents.. 15,362 17,144 19,133
Other rents....... 217,037 220,532 219,168
-------- -------- --------
Total............ $542,548 $541,101 $527,723
======== ======== ========
</TABLE>
The minimum rents to be received from tenants under operating leases in effect
at December 31, 1995 are summarized as follows (in thousands):
<TABLE>
<S> <C>
1996............................................ $ 288,219
1997............................................ 262,700
1998............................................ 232,995
1999............................................ 200,765
2000............................................ 173,551
Subsequent to 2000.............................. 532,880
----------
Total.......................................... $1,691,110
==========
</TABLE>
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 $8,780,000 in
1995, $8,511,000 in 1994 and $6,601,000 in 1993. The minimum rent payments to
be received from tenants under finance leases are approximately $8,900,000 in
each of the next five years. The net investment in finance leases at December
31, 1995 and 1994 is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Total minimum rent payments to be received
over lease terms............................... $167,050 $175,609
Estimated residual values of leased properties.. 3,123 3,123
Unearned income................................. (88,541) (97,324)
-------- --------
Net investment in finance leases............... $ 81,632 $ 81,408
======== ========
</TABLE>
(19) 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 $10,000,000 at December 31, 1995.
At December 31, 1995, subsidiaries of the Company had contingent liabilities of
approximately $25,138,000 with respect to future minimum rents under long-term
lease obligations of certain joint ventures and approximately $18,000,000 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 $37,454,000.
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
44
<PAGE>
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.
In addition, on September 3, 1992, Plaintiff claimed $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 and
asserting other defenses. NORA also asserted a counterclaim against Plaintiff
and its individual guarantors for past due rentals and other charges in the
approximate amount of $300,000 plus interest and attorneys' fees as provided for
in the lease agreement. 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 (including a net award for lost future profits of
approximately $8,640,000) plus interest and attorneys' fees. On May 6, 1994, the
trial court denied all post-trial motions of both Plaintiff and Defendants. The
trial court also entered an amended judgment in which it awarded the Plaintiff
$450,000 in attorneys' fees and awarded Defendants $25,000 in attorneys' fees.
On May 23, 1994, Defendants appealed this judgment to the Louisiana Court of
Appeal, Fourth Circuit. On November 16, 1995, the Louisiana Court of Appeal
reduced the judgment by $240,000, but otherwise affirmed the damage award to
Plaintiff. Defendants subsequently filed a motion for reconsideration with the
Louisiana Court of Appeal, which was denied on December 19, 1995. On January
18, 1996, Defendants filed a petition requesting the Louisiana Supreme Court to
consider a further appeal of this judgment.
The Company recorded in the fourth quarter of 1995 a pre-tax provision in the
amount of $12,321,000, representing the full amount of the modified award
(including attorneys' fees) plus interest, less pre-tax provisions previously
recorded totaling $1,150,000.
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 provision has been made for losses with respect to all litigation
matters, 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 fiscal
year.
(20) Possible acquisition of The Hughes Corporation and related matters
On February 22, 1996, the Company's Board of Directors approved the terms of
agreements to acquire all of the issued and outstanding shares of common stock
of The Hughes Corporation and the ownership interests of stockholders of The
Hughes Corporation in an affiliated partnership (together "Hughes"). The assets
of Hughes consist primarily of a regional shopping center and a large-scale,
master-planned community in Las Vegas, Nevada, four large-scale, master-planned
business parks and various other properties in Nevada and Southern California.
The total purchase cost is approximately $520,000,000 consisting primarily of
debt to be assumed or incurred in connection with the acquisition (including
$10,000,000 payable to the owners of Hughes) and shares of common stock of the
Company valued at $176,400,000. Additional shares of common stock of the
Company may be issued to the owners of Hughes subsequent to closing based on the
values of certain specified assets at various termination dates from 2001 to
2010 and the cash flows generated from development and/or sale of those assets
prior to the termination dates. The acquisition will be accounted for using the
purchase method and is expected to close in the second quarter of 1996. However,
the transactions are conditional upon approval by the requisite vote of the
holders of the common stock of The Hughes Corporation and certain other closing
conditions and, accordingly, there can be no assurance that the transactions
will be consummated.
45
<PAGE>
================================================================================
Five Year Comparison of Selected Financial Data
Year ended December 31 (in thousands, except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating results data:
Revenues from continuing
operations...................... $ 672,821 $ 671,171 $ 646,805 $ 597,105 $ 573,498
Earnings (loss) from continuing
operations...................... 5,850 6,606 (1,291) (15,849) 2,424
Earnings (loss) from continuing
operations applicable to
common shareholders per share of
common stock.................... (.18) (.14) (.27) (.33) .05
Balance sheet data:
Total assets-cost basis.......... 2,985,609 2,915,860 2,874,982 2,726,281 2,637,452
Total assets-current value basis. 4,852,403 4,736,961 4,588,636 4,217,819 4,174,093
Debt and capital leases.......... 2,538,315 2,532,920 2,473,596 2,498,983 2,374,527
Shareholders' equity (deficit):
Historical cost basis.......... 42,584 95,026 113,151 (34,848) 17,328
Current value basis............ 1,539,155 1,614,245 1,525,606 1,188,896 1,274,070
Shareholders' equity (deficit)
per share of common stock (note 1):
Historical cost basis........ .73 1.63 1.98 (.74) .36
Current value basis.......... 26.30 27.75 26.75 25.50 26.60
Other selected data:
Earnings before depreciation and
deferred taxes from operations
(EBDT) (note 2)................. 108,360 94,710 78,281 52,282 46,820
Net cash provided by (used in):
Operating activities........... 107,001 113,775 101,149 66,630 67,226
Investing activities........... (64,995) (178,551) (154,446) (144,836) (96,210)
Financing activities........... 3,518 40,618 47,068 98,914 17,271
Dividends per share of common
stock........................... .80 .68 .62 .60 .60
Dividends per share of
convertible Preferred stock..... 3.25 3.25 2.83 -- --
Market price per share of common
stock at year-end............... 20.13 19.25 17.75 18.00 18.25
Market price per share of
convertible Preferred stock at
year-end........................ 51.63 48.50 53.75 -- --
Weighted average common shares
outstanding..................... 47,814 47,565 47,411 47,994 48,157
</TABLE>
Note 1--Historical cost basis shareholders' equity (deficit) 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.
Note 2--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, including
the payment of dividends and should not be considered as an alternative
to cash flows as a measure of liquidity. See the "Earnings Before
Depreciation and Deferred Taxes" section of Management's Discussion and
Analysis of Financial Condition and Results of Operations on page 50 for
a full discussion of EBDT.
================================================================================
Interim Financial Information (Unaudited)
Interim consolidated results of operations are summarized as follows (in
thousands, except per share data):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter ended
------------------------------------------------------------------------------------
December September June March December September June March
31, 1995 30, 1995 30, 1995 31, 1995 31, 1994 30, 1994 30, 1994 31, 1994
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................................... $177,505 $169,165 $163,636 $162,515 $172,325 $172,650 $163,662 $162,534
Operating income............................ 13,385 11,380 6,499 4,654 9,922 7,314 1,853 2,170
Earnings (loss) before extraordinary losses. 1,911 3,169 1,403 (633) 4,451 4,146 576 (2,567)
Net earnings (loss)......................... 634 3,032 1,403 (7,850) 2,767 4,146 (2,030) (2,724)
======== ======== ======== ======== ======== ======== ======== ========
Earnings (loss) per common share:
Earnings (loss) before extraordinary losses. $ (.03) $ (.01) $ (.05) $ (.09) $ .02 $ .02 $ (.06) $ (.12)
Extraordinary losses........................ (.03) -- -- (.15) (.03) -- (.05) (.01)
-------- -------- -------- -------- -------- -------- -------- --------
Total...................................... $ (.06) $ (.01) $ (.05) $ (.24) $ (.01) $ .02 $ (.11) $ (.13)
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Note--Net earnings for the quarter ended December 31, 1995 includes a provision
for a litigation judgment of $8,009,000 ($.17 per share). Net earnings
(loss) for the first, second and third quarters of 1995 includes
provisions for losses on disposition of operating properties of $3,156,000
($.07 per share), $3,617,000 ($.08 per share) and $3,665,000 ($.08 per
share), respectively. The provision for loss in the second quarter was
partially offset by a gain on disposition of a retail center property of
$1,261,000 ($.03 per share). Net earnings (loss) for the quarters ended
December 31, 1994 and March 31, 1994 includes provisions for losses on
dispositions of operating properties of $1,644,000 ($.03 per share) and
$5,023,000 ($.11 per share), respectively. The provision for loss in the
quarter ended March 31, 1994 was partially offset by a gain on disposition
of an interest in a retail center the Company continues to manage of
$1,908,000 ($.04 per share.)
================================================================================
Price of Common Stock and Dividends
- --------------------------------------------------------------------------------
The Company's common stock began trading on the New York Stock Exchange in
November 1995. Prior to that time it was traded over the counter. The prices
and dividends per share were as follows:
<TABLE>
<CAPTION>
Quarter ended
------------------------------------------------------------------------------------
December September June March December September June March
31, 1995 30, 1995 30, 1995 31, 1995 31, 1994 30, 1994 30, 1994 31, 1994
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High bid or sales price. 22 22 5/8 20 11/16 19 7/8 19 1/2 20 20 19
Low bid or sales price... 18 5/8 19 1/2 17 18 17 1/4 18 3/4 18 16 1/4
Dividends................ .20 .20 .20 .20 .17 .17 .17 .17
</TABLE>
Number of Holders of Common Stock
The number of holders of record of the Company's common stock as of February 20,
1996 was 2,269.
46
<PAGE>
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 retail centers, office buildings and mixed-use and other properties
located throughout the United States. In addition, the Company develops and
sells land for residential, commercial and other uses, 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 $1.54
billion at December 31, 1995, slightly down from $1.61 billion at December 31,
1994.
The Company has continued to achieve strong financial results in recent periods,
despite the generally difficult environment for retail businesses. Earnings
before depreciation and deferred taxes (EBDT), which is defined and discussed in
detail below, increased 14% in 1995 and 21% in 1994, including increases of 12%
and 19%, respectively, in EBDT from retail centers. These results have been
made possible by several factors, including strong performances from the
Company's larger, major market retail centers, expansions of certain retail
centers and retail centers in which the Company has acquired ownership
interests, consistently good earnings from land sales and operating properties
in Columbia, refinancing of a significant amount of project-related debt at
lower interest rates and, to a lesser extent, dispositions or modifications of
the terms of agreements relating to properties which were incurring losses
before depreciation and deferred taxes.
Management believes that the outlook is for continued satisfactory growth in
EBDT from existing properties. Prospects for growth in EBDT from land sales and
office/mixed-use properties in 1996 are good given the solid or improving
conditions in the major markets in which the Company operates. EBDT from retail
centers is also expected to grow in 1996, although the rate of growth is
expected to slow given the continued difficult retailing environment. The
planned acquisition of The Hughes Corporation (Hughes) will allow the Company to
capitalize on its existing strengths in retail and office/mixed-use projects and
large-scale land development projects and to establish a significant presence in
the fast-growing Las Vegas market. The acquisition is scheduled to close in the
second quarter of 1996 and is expected to contribute significantly to the growth
in EBDT in 1996. For the longer term, the Company intends to focus its
development efforts on Columbia, the assets acquired in the purchase of Hughes,
opportunities to expand and/or revitalize existing retail centers and new
projects in growing markets which have not had excessive retail development. The
Company will also continue to selectively dispose of retail centers that do not
appear to have future prospects consistent with the Company's objectives,
particularly smaller centers in smaller markets. The objective is to refine and
continually upgrade the portfolio so that it is comprised of top tier properties
that will produce consistently strong increases in earnings and current values.
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 13 to
the consolidated financial statements and the information relating to revenues
and expenses in the Five Year Summary of Earnings Before Depreciation and
Deferred Taxes from Operations and Net Earnings (Loss) on page 54 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
re-leased, 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
47
<PAGE>
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
or at maturity.
Revenues from retail properties increased $5,205,000 in 1995 and $22,877,000 in
1994. The increase in 1995 was attributable to the operations of expansions
opened in August 1994 and March 1995, higher effective rents on re-leased space
and purchases of ownership interests in two retail centers. These increases
were partially offset by the effects of lower average occupancy (90.9% in 1995
compared to 92.3% in 1994), lower recoveries of operating expenses due to
expense reduction efforts and dispositions of interests in properties in the
first quarter of 1994 and second quarter of 1995. The increase in 1994 was
attributable to the operations of expansions opened in 1994, a full year of
operations of expansions opened and properties acquired in 1993 and higher
effective rents on re-leased space. 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.
Total operating and interest expenses for retail properties decreased $7,661,000
in 1995 and increased $8,965,000 in 1994. The decrease in 1995 was attributable
primarily to the effects of lower average occupancy levels, lower operating
expenses due to expense reduction efforts, lower bad debt expenses due to
recoveries of amounts previously reserved, the dispositions referred to above
and reductions in interest expense due to debt repayments and refinancings
completed in 1994 and early 1995 at certain properties. These decreases were
partially offset by increases in expenses associated with the operations and
financing of the properties opened or acquired referred to above. 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 interest expense on fixed rate
property debt due to debt repayments and refinancings at certain properties.
Revenues from office/mixed-use properties decreased $1,606,000 in 1995 and
increased $2,540,000 in 1994. The decrease in 1995 was attributable primarily
to dispositions of properties in the third quarter of 1994 and second quarter of
1995 and lower recoveries of operating expenses due to lower occupancy levels
and reduced operating expenses at certain projects. These decreases were
partially offset by increased revenues at certain hotel and office properties in
Columbia due to higher occupancy levels and increases in tenant lease
cancellation payments due to tenant restructurings and downsizings. 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.
Total operating and interest expenses for office/mixed-use properties decreased
$3,324,000 in 1995 and increased $1,835,000 in 1994. The decrease in 1995 was
attributable primarily to the dispositions of properties referred to above,
lower bad debt expense due to recoveries of amounts previously reserved and
lower operating expenses at certain projects. These decreases were partially
offset by expenses related to the openings of two industrial buildings in
Columbia in the second quarter of 1994 and higher interest expense on a mixed-
use project. Interest on this project's loan was lower in 1994 because the
Company exercised an option in the loan agreement to make a specified payment
and reduce the effective interest rate on the loan retroactive to the beginning
of its term. The payment was less than the interest previously accrued, and the
difference was recorded as a reduction to interest expense in 1994. The
increase in 1994 was due primarily 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 and refinancings and the exercise of the interest rate reduction
option referred to above mitigated the overall increase in interest and
operating expenses in 1994.
48
<PAGE>
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 $33,403,000 in 1995, $35,232,000 in 1994 and
$35,313,000 in 1993. The decrease in revenues in 1995 was due primarily to
lower sales of land for commercial/other uses in Columbia.
Land sales costs and expenses were $22,898,000 in 1995, $24,905,000 in 1994 and
$23,480,000 in 1993. The decrease in 1995 was attributable to lower cost of
sales due to the lower land sales revenues referred to above. The increase in
1994 was attributable primarily to higher operating and interest expenses due to
a lower level of land development activity on projects other than Columbia.
Development: Development expenses were $7,646,000 in 1995, $6,989,000 in 1994
and $4,348,000 in 1993. 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 $3,800,000 in 1995, $3,400,000 in 1994 and
$2,900,000 in 1993. New business costs relate primarily to the initial
evaluation of potential acquisition and development opportunities. These costs
were $3,488,000 in 1995, $3,094,000 in 1994 and $953,000 in 1993. The increases
in pre-construction reserve additions and new business costs in 1995 and 1994
were attributable to the Company's more active pursuit of potential 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 income was $2,772,000 in 1995,
$2,892,000 in 1994 and $3,862,000 in 1993. The decreases in 1995 and 1994 were
attributable primarily to lower average investment balances.
Corporate expenses consist of certain interest and operating expenses, as
discussed below, reduced by costs capitalized or allocated to other segments.
Interest is capitalized on corporate funds invested in projects under
development, and interest on the proceeds of corporate borrowings and
distributions on the proceeds of the Company-obligated mandatorily redeemable
preferred securities which are used for other segments are allocated to those
segments. Accordingly, corporate interest expense consists primarily of
interest on the convertible subordinated debentures, the unsecured 8.5% notes
and unused proceeds from refinancings of certain properties, net of interest
capitalized on development projects or allocated to other segments, and
corporate operating expenses consist primarily of general and administrative
costs and distributions on the redeemable preferred securities, net of
distributions allocated to other segments.
Corporate interest costs were $14,032,000 in 1995, $13,934,000 in 1994 and
$18,571,000 in 1993. Of such amounts, $3,747,000, $2,564,000, and $2,158,000,
were capitalized in 1995, 1994 and 1993, respectively, on funds invested in
development projects. The decrease in corporate interest costs in 1994 was
attributable primarily to redemption of a $100,000,000 issue of convertible
subordinated debentures in May 1993. The higher level of interest capitalized
in 1995 reflects the higher level of corporate funds invested in development
projects, consistent with the Company's more active pursuit of development
opportunities.
Gain (Loss) on Dispositions of Assets and Other Provisions, Net: The loss on
dispositions of assets and other provisions, net, for 1995 consisted primarily
of a provision for loss of $12,321,000 (recorded in the fourth quarter) on a
litigation judgment involving a former tenant as discussed in note 19 to the
consolidated financial statements and provisions for losses totaling $15,589,000
recognized on retail centers the Company decided to sell. These losses were
partially offset by a gain of $2,379,000 related to the disposition of a retail
center.
49
<PAGE>
The loss on dispositions of assets and other provisions, net, for 1994 consisted
primarily of losses totalling $8,045,000 incurred on dispositions of interests
in two retail centers, a hotel and an office building and a provision for loss
of $2,212,000 on an industrial building. These losses were partially offset by
a gain of $2,761,000 on 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,
consisted 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 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.
Extraordinary Losses, Net of Related Income Tax Benefits: The extraordinary
losses in 1995, 1994 and 1993 resulted from early extinguishments or required
partial early redemptions of debt and aggregated $13,278,000, $6,824,000 and
$12,322,000, respectively, less deferred income tax benefits of $4,647,000,
$2,377,000 and $4,271,000, respectively.
Net Earnings (Loss): The Company had a net loss of $2,781,000 in 1995, net
earnings of $2,159,000 in 1994 and a net loss of $9,342,000 in 1993. The
Company's operating income (after depreciation and amortization) was $35,918,000
in 1995, $21,259,000 in 1994 and $8,841,000 in 1993. The improvements in
operating income in 1995 and 1994 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, as shown in the
current value basis balance sheets, the Company's portfolio of operating
properties is worth substantially more than its undepreciated historical cost.
Deferred income taxes are excluded from EBDT because payments of income taxes
have not been significant and are not anticipated to become significant in the
near term. 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
55.
EBDT was $108,360,000 in 1995, $94,710,000 in 1994 and $78,281,000 in 1993. The
increases in EBDT in 1995 and 1994 were due primarily to improved results from
the operating properties business segment, particularly retail properties. The
significant changes in revenues and expenses comprising EBDT by segment are
described above.
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 land 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 14%. The majority of
revaluation equity relates to larger, major
50
<PAGE>
market retail centers which continue to be a favored real estate investment.
However, revaluation equity decreased $23 million or 1.5% to $1.50 billion at
December 31, 1995. The decrease was due primarily to increases in the current
value of deferred income taxes (e.g., the present value of estimated future tax
payments) and the current value of publicly-traded debt not specifically related
to interests in properties. Also, the rate of increase in the current values of
properties moderated significantly in 1995 compared to 1994 and 1993. While
investors' yield requirements for top tier retail centers did not change
significantly during the year, the yield requirements for certain other
properties increased. As a result, the modest increases in values of the
Company's larger, major market retail centers in 1995 were largely offset by
decreases in the values of certain other properties. In addition, the projected
growth in cash flows was reduced for many retail centers in 1995 as compared to
1994, primarily because of slower assumed growth in tenant sales as a result of
the continued difficult retail environment.
Cost basis shareholders' equity decreased to $42,584,000 at December 31, 1995
from $95,026,000 at December 31, 1994. The decrease was due primarily to the
payment of regular quarterly dividends on the common and Preferred stocks.
The Company had cash and cash equivalents and investments in marketable
securities totalling $97,832,000 and $79,547,000 at December 31, 1995 and 1994,
respectively, including $2,910,000 and $2,001,000, respectively, held for
restricted uses.
Net cash provided by operating activities was $107,001,000, $113,775,000 and
$101,149,000, in 1995, 1994 and 1993, respectively. The changes in cash
provided by operating activities were due primarily to the factors discussed
above in the 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 particular, net cash provided
by operating activities for 1995 was reduced due to payment of certain pension
obligations and other liabilities.
In 1995 and 1994, over 80% of the Company's debt consisted of mortgages and
bonds collateralized by operating properties. Scheduled principal payments on
property debt were $36,446,000, $46,750,000 and $20,735,000 in 1995, 1994 and
1993, respectively. The decrease in 1995 was due primarily to early repayments
of property debt, and 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 $75,742,000 in 1996,
$80,430,000 in 1997, $42,524,000 in 1998, $132,200,000 in 1999 and $184,330,000
in 2000. The balloon payments for 1996 include $65,000,000 related to a retail
center mortgage due in August. 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 their scheduled repayment
dates.
The Company has historically relied primarily on fixed rate, nonrecourse loans
from private institutional lenders to finance its operating properties and
expects that it will continue to do so in the future. In recent years, however,
the Company has made greater use of the public capital markets to meet its
capital resource needs. Since 1993, the Company has completed public debt and
equity offerings aggregating over $600,000,000 (including the unused portion of
the medium-term notes), the proceeds of which have been used primarily to repay
or refinance corporate and property debt and to provide liquidity and funds for
other corporate purposes. These transactions were completed on terms which
allowed the Company to reduce its overall cost of capital while restructuring
its debt maturities and increasing its financial flexibility. 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 $61,591,000, $78,628,000 and $87,243,000 in 1995,
1994 and 1993, 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
51
<PAGE>
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 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.
Cash expenditures for acquisitions of interests in properties were $28,206,000
in 1995, $94,113,000 in 1994 and $34,967,000 in 1993. These costs were financed
primarily by nonrecourse debt. The acquisitions in 1995 consisted of the
purchases of partnership interests in three retail centers, two of which were
financed in whole or in part by the sellers. The acquisitions in 1994 consisted
primarily of the purchase of land underlying a retail center and the related
equity interest of the former ground lessor. The acquisitions in 1993 consisted
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, land held
for development and sale 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, 1995 was approximately $2,444,000,000. The Company
also has lines of credit available totalling $158,920,000 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, the Company may issue additional medium-term notes of up to
$49,700,000 through February 1997.
The agreements relating to certain of the lines of credit, the 8.5% unsecured
notes, the medium-term notes 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 and
are not expected to do so in the foreseeable future.
Possible Acquisition of The Hughes Corporation
On February 22, 1996, the Company's Board of Directors approved the terms of
agreements to acquire all of the issued and outstanding shares of common stock
of The Hughes Corporation and the ownership interests of stockholders of The
Hughes Corporation in an affiliated partnership. Consummation of the
transactions is subject to certain closing conditions. For additional
information about this transaction, refer to note 20 to the consolidated
financial statements and Exhibit 99.2 of this Form 10-K.
New Accounting Standards
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of." Statement No. 121
establishes new standards for measurement and recognition of impairment of long-
lived assets. The Statement will be effective with respect to the Company in
1996 and initial adoption is not expected to have a material effect on the
financial position or results of operations reported by the Company.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Statement No. 123 permits companies to adopt a new fair value
based method to account for stock-based employee compensation plans or to
continue using the intrinsic value method. If the intrinsic value method is
used, information concerning the pro forma effects on net earnings (loss) and
earnings (loss) per share of common stock of adopting the fair value based
method is required to be presented in the footnotes to the financial statements.
The Statement also requires additional footnote disclosures about stock-based
employee compensation arrangements, regardless of the method used to account for
them. The Company intends to continue using the intrinsic value method to
account for its stock-based employee compensations plans and will provide the
pro forma and additional disclosures about the plans in its 1996 financial
statements, as required by Statement No. 123.
52
<PAGE>
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 operating results.
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.
Information Relating to Forward-looking Statements
This Form 10-K of the Company includes forward-looking statements which reflect
the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties, including those identified below which could cause actual results
to differ materially from historical results or those anticipated. The words
"believe," "expect," "anticipate" and similar expressions identify forward-
looking statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The following factors could cause actual results to differ materially from
historical results or those anticipated: (1) real estate investment risks;
(2) development risks; (3) illiquidity of real estate investments;
(4) dependence on rental income from real property; (5) effect of uninsured
loss; (6) lack of geographical diversification; (7) possible environmental
liabilities; (8) difficulties of compliance with the Americans with
Disabilities Act; (9) competition; (10) changes in the economic climate; and
(11) factors relating to the proposed Hughes acquisition. For a more detailed
discussion of these factors, see Exhibit 99.2 of the Company's Form 10-K for
the fiscal year ended December 31, 1995.
53
<PAGE>
The Rouse Company and Subsidiaries
FIVE YEAR SUMMARY OF EARNINGS BEFORE DEPRECIATION AND
DEFERRED TAXES FROM OPERATIONS AND NET EARNINGS (LOSS)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenues:
Operating properties:
Retail centers:
Minimum and percentage
rents..................... $245,192 $238,222 $227,140 $210,909 $208,560
Other rents and other
revenues.................. 246,488 248,253 236,458 217,571 207,641
Office, mixed-use and
other:
Minimum and percentage
rents..................... 80,319 82,347 81,415 76,302 71,629
Other rents and other
revenues.................. 64,647 64,225 62,617 60,335 59,379
-------- -------- -------- -------- --------
636,646 633,047 607,630 565,117 547,209
Land sales................. 33,403 35,232 35,313 29,137 24,111
Development fees........... -- -- -- -- 375
Corporate interest income.. 2,772 2,892 3,862 2,851 1,803
-------- -------- -------- -------- --------
672,821 671,171 646,805 597,105 573,498
-------- -------- -------- -------- --------
Operating expenses, exclusive of
depreciation and amortization:
Operating properties:
Retail centers............. 246,747 253,095 251,386 241,395 233,730
Office, mixed-use and other 70,096 74,368 76,148 69,589 69,129
-------- -------- -------- -------- --------
316,843 327,463 327,534 310,984 302,859
Land sales................. 17,827 19,877 19,387 16,330 12,848
Development................ 7,288 6,494 3,853 4,421 5,681
Corporate.................. 8,920 8,309 6,184 5,927 6,567
-------- -------- -------- -------- --------
350,878 362,143 356,958 337,662 327,955
-------- -------- -------- -------- --------
Interest expense:
Operating properties:
Retail centers............. 128,215 128,798 124,204 115,744 117,843
Office, mixed-use and other 69,034 67,892 65,601 69,199 63,474
-------- -------- -------- -------- --------
197,249 196,690 189,805 184,943 181,317
Land sales................. 5,071 5,028 4,093 2,959 2,728
Development................ 358 495 495 495 495
Corporate.................. 10,285 11,370 16,413 18,412 13,755
-------- -------- -------- -------- --------
212,963 213,583 210,806 206,809 198,295
-------- -------- -------- -------- --------
Current income
taxes--primarily state.... 620 735 760 352 428
-------- -------- -------- -------- --------
564,461 576,461 568,524 544,823 526,678
-------- -------- -------- -------- --------
Earnings before
depreciation and deferred
taxes from operations..... $108,360 $ 94,710 $ 78,281 $ 52,282 $ 46,820
======== ======== ======== ======== ========
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Earnings before depreciation and deferred
taxes from operations by
segment:
Operating properties:
Retail centers............. $116,135 $103,978 $ 87,248 $ 70,966 $ 64,097
Office, mixed-use and other 5,839 4,273 2,283 (2,127) (1,591)
-------- -------- -------- -------- -------
121,974 108,251 89,531 68,839 62,506
Land sales................. 10,502 10,330 11,833 9,847 8,634
Development................ (7,646) (6,989) (4,348) (4,916) (5,801)
Corporate.................. (16,470) (16,882) (18,735) (21,488) (18,519)
-------- -------- -------- -------- --------
Earnings before
depreciation and deferred
taxes from operations..... $108,360 $ 94,710 $ 78,281 $ 52,282 $ 46,820
======== ======== ======== ======== ========
Reconciliation to net
earnings (loss):
Earnings before
depreciation and deferred
taxes from operations..... $108,360 $ 94,710 $ 78,281 $ 52,282 $ 46,820
Depreciation and
amortization.............. (73,062) (74,186) (70,200) (68,163) (65,735)
Deferred income taxes
applicable to operations.. (3,699) (5,995) (3,603) 5,286 (2,393)
Gain (loss) on
dispositions of assets
and other provisions, net. (25,749) (7,923) (5,769) (5,254) 23,732
Extraordinary losses, net
of related income tax
benefits.................. (8,631) (4,447) (8,051) (348) (90)
Cumulative effect of
change in accounting
principle................. -- -- -- -- 13,463
-------- -------- -------- -------- --------
Net earnings (loss)........ $ (2,781) $ 2,159 $ (9,342) $(16,197) $ 15,797
======== ======== ======== ======== ========
</TABLE>
Note: 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, including the
payment of dividends and should not be considered as an alternative to
cash flows as a measure of liquidity. See the "Earnings Before
Depreciation and Deferred Taxes" section of Management's Discussion and
Analysis of Financial Condition and Results of Operations on page 50 for a
full discussion of EBDT.
55
<PAGE>
PROJECTS OF THE ROUSE
COMPANY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Retail Square Footage
Date of Opening Total Mall
Retail Centers in Operation or Acquisition Department Stores Center Only
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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, Beachwood, 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
Cherry Hill Mall, 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; Dillard's 1,128,000 460,000
College Square, Cedar Falls, IA (d) 8/80 Von Maur; Younkers; Wal-Mart 560,000 313,000
Collin Creek, Plano, TX (b) 9/95 Dillard's; Foley's; Sears; JCPenney; Mervyn's 1,123,000 333,000
The Mall in Columbia, Columbia, MD (a) 8/71 JCPenney; 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
Entertainment Center at Irvine Spectrum, Irvine, CA (c) 11/95 Edwards Theatre 218,000 108,000
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; Bullock's; Robinson's--May; 1,205,000 593,000
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; Clover 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, Louisville, KY (a) 3/62 JCPenney; Bacon's; Dillard's 1,092,000 353,000
Marshall Town Center, Marshalltown, IA (d) 8/80 JCPenney; Younkers; Menard's; Stage 340,000 141,000
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; Wal-Mart 347,000 178,000
The Shops at National Place, Washington, D.C. (a)(c) 5/84 -- 125,000 125,000
North Grand, Ames, IA (d) 8/80 JCPenney; Sears; Younkers 350,000 157,000
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Retail Square Footage
Date of Opening Total Mall
Retail Centers in Operation or Acquisition Department Stores Center Only
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North Star, San Antonio, TX (b) 9/60 Dillard's; Foley's; Saks Fifth Avenue; 1,288,000 487,000
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
Owings Mills, Baltimore, MD (a) 7/86 R.H. Macy; Hecht's 809,000 325,000
Paramus Park, Paramus, NJ (a) 3/74 R.H. Macy; 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, Plymouth Meeting, PA (a) 2/66 Strawbridge & Clothier 784,000 415,000
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 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 (a) 10/80 The Broadway; Robinson's-May 570,000 287,000
Sherway Gardens, Toronto, ONT (c) 12/78 Eaton's; The Bay 968,000 524,000
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
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, MD (a) 8/81 R.H. Macy; JCPenney; Hecht's; Sears 1,178,000 359,000
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 JCPenney; Stern's; Steinbach's; Fortunoff;
Sears 1,544,000 560,000
Total Retail Centers in Operation 46,344,000 19,966,000
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Retail Square Footage
Retail Centers Under Construction Total Mall
or in Development Department Stores Center Only
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Marketplace at Oviedo Crossing, Orlando, FL Dillard's; Gayfer's 700,000 400,000
Beachwood Place Expansion, Beachwood, OH Nordstrom 462,000 120,000
Northwest Arkansas Mall Expansion, Fayetteville, AR JCPenney; Dillard's 302,000 42,000
Oakwood Center Expansion, Gretna, LA JCPenney 125,000 --
Perimeter Mall Expansion, Atlanta, GA Nordstrom 225,000 --
Burlington Center Expansion, Burlington, NJ. JCPenney 102,000 --
Total Retail Centers Under Construction or
in Development 1,916,000 562,000
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Office Projects in Operation Location Square Feet
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
300 East Lombard (c) Baltimore, MD 233,000
Quadrangle at Cross Keys (a) Baltimore, MD 110,000
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 I (b) Baltimore, MD 143,000
Alexander & Alexander Building II (b) Baltimore, MD 198,000
Blue Cross & Blue Shield Building I (b) Baltimore, MD 270,000
Blue Cross & Blue Shield Building II (b) Baltimore, MD 117,000
One Arizona Center (a) Phoenix, AZ 330,000
Two Arizona Center (a) Phoenix, AZ 449,000
First National Bank Plaza (a) Mt. Prospect, IL 66,000
Faneuil Hall Marketplace (a) Boston, MA 147,000
Pioneer Place (a) Portland, OR 283,000
Westlake Center (b) Seattle, WA 342,000
Total Office Projects in Operation 3,087,000
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Hotel Projects in Operation Location Rooms
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cross Keys Inn (a) Baltimore, MD 146
Stouffer Harborplace Hotel Baltimore, MD 622
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Columbia Properties in Operation Type of Project Square Feet
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The Mall in Columbia* (a) Retail 876,000
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
30 Corporate Center (a) Office 134,000
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
Parkside (a) Office 113,000
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 4,781,000
</TABLE>
* Also listed in previous table of Retail Centers in Operation
(a) Projects are wholly-owned subsidiaries of the Company.
(b) Projects are owned by joint ventures or partnerships and are managed by
subsidiaries of the Company for a fee (except for Collin Creek which the
Company will begin managing in 1997). 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 and Collin Creek in
which the Company has a 30% interest).
(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.
61
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Office Projects Owned by Rouse-Teachers Properties, Inc. Location Square Feet
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 99,000
Schilling Plaza South Hunt Valley, MD 108,000
One Hunt Valley Hunt Valley, MD 215,000
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 690,000
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
Senate Plaza Camp Hill, PA 231,000
Total Office Projects Owned by
Rouse-Teachers Properties, Inc 3,422,000
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Projects Owned by Rouse-Teachers Properties, Inc Location Square Feet
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
by Rouse-Teachers Properties, Inc. 1,679,000
</TABLE>
62
<PAGE>
EXHIBIT 21
Exhibit 21. Subsidiaries of the Registrant
The Registrant had no parent at December 31, 1995.
As of December 31, 1995, 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
---------- -------------
Directly owned subsidiaries of the Company. All
shares are Common Stock unless otherwise noted.
American City Corporation, The Maryland
Baltimore Center, Inc. Maryland
Charlottetown, Inc. Maryland
Charlottetown North, Inc. Maryland
Community Research and Development, Inc. Maryland
Exton Shopping, 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. (Note 2) Maryland
Harborplace Management Corporation Maryland
Harundale Mall, Inc. Maryland
Hermes Incorporated Maryland
Howard Research And Development
Corporation, The (Note 3) Maryland
Huntington Properties, Inc. (Note 4) 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. (Note 5) Pennsylvania
Plymouth Meeting Food Court, Inc. Maryland
PT Funding, Inc. Maryland
Rouse-Brandywood, Inc. Maryland
Rouse-Camden Warehouse, Inc. Maryland
Rouse Capital (Note 6) Delaware
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
<PAGE>
Rouse Company of California, Inc., The (Note 7) Maryland
Rouse Company of Colorado, Inc., The (Note 8) Maryland
Rouse Company of Connecticut, Inc., The (Note 9) Connecticut
Rouse Company of Florida, Inc., The (Note 10) Florida
Rouse Company of Georgia, Inc., The (Note 11) Georgia
Rouse Company of Idaho, Inc., The Maryland
Rouse Company of Illinois, Inc., The Maryland
Rouse Company of Iowa, Inc., The (Note 12) Maryland
Rouse Company of Kentucky, Inc., The Maryland
Rouse Company of Louisiana, The (Note 13) Maryland
Rouse Company of Maine, Inc., The Maryland
Rouse Company of Massachusetts, Inc., The
(Note 14) Maryland
Rouse Company of Michigan, Inc., The (Note 15) Maryland
Rouse Company of Minnesota, Inc., The (Note 16) 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 17) New Jersey
Rouse Company of New Mexico, Inc., The Maryland
Rouse Company of New York, Inc., The (Note 18) New York
Rouse Company of North Carolina, Inc.,
The (Note 19) Maryland
Rouse Company of North Dakota, Inc., The Maryland
Rouse Company of Ohio, Inc., The (Note 20) Ohio
Rouse Company of Oklahoma, Inc., The Maryland
Rouse Company of Oregon, Inc., The (Note 21) Maryland
Rouse Company of Pennsylvania,
Inc., The (Note 22) Pennsylvania
Rouse Company of Rhode Island, Inc., The Maryland
Rouse Company of South Carolina,
Inc., The (Note 23) Maryland
Rouse Company of South Dakota, Inc., The Maryland
Rouse Company of Tennessee, Inc., The Maryland
Rouse Company of Texas, Inc., The (Note 24) 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 25) Maryland
Rouse Company of Washington, Inc., The (Note 26) 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-Hagerstown, Inc. Maryland
Rouse-Harford County, Inc. Maryland
Rouse Holding Company, The Maryland
Rouse Holding Company of Arizona, Inc., The
(Note 27) Maryland
Rouse-Inglewood, Inc. Maryland
Rouse Investing Company (Note 28) Maryland
<PAGE>
Rouse Management, Inc. Maryland
Rouse Management Services Corporation Maryland
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 29) 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 Common, Inc. Maryland
Rouse-Wates, Incorporated (Note 30) Delaware
RREF Holding, Inc. (Note 31) Texas
Salem Mall, Incorporated Maryland
Santa Monica Place, Inc. 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 32) Delaware
TRC Holding Company of Washington, D.C.(Note 33) Maryland
TRC Property Management, Inc. Maryland
Two Owings Mills Corporate Center, Inc. Maryland
Village of Cross Keys, Incorporated,
The (Note 34) Maryland
White Marsh Equities Corporation Maryland
White Marsh Mall, Inc. Maryland
Foreign subsidiaries:
- --------------------
Rouse Service (Canada) Limited Canada
<PAGE>
Notes:
- -----
1. Gallery Maintenance, Inc. owns all of the outstanding capital stock of
Rouse Gallery Management, Inc., a Maryland corporation.
2. Harborplace, Inc. owns all of the outstanding Series A Preferred Stock of
RFT One, Inc., a Delaware corporation.
3. The Howard Research And Development Corporation owns all of
the outstanding capital stock of the following Maryland corporations:
Columbia Development Corporation, The
Columbia Gateway, Inc.
Columbia Management, Inc.
Columbia Town Homes Investor, 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.
4. 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.
<PAGE>
5. Plymouth Meeting Mall, Inc. owns all of the outstanding common stock of
1150 Plymouth Associates, Inc., a Maryland corporation, and all of the
outstanding Series A Preferred Stock of RFT Five, Inc., a Delaware
corporation.
6. Rouse Capital is a statutory business trust formed under Delaware law.
All of the Common Securities of Rouse Capital are owned by the Company.
The Preferred Securities of Rouse Capital were sold in a public registered
offering in 1995.
7. The Rouse Company of California, Inc. owns all of the
outstanding capital stock of each of the following Maryland corporations:
Rouse-Canyon Springs, Inc.
Rouse-Irvine, Inc.
Rouse-Oakland, Inc.
Rouse-Palm Springs II, Inc.
Rouse-Sacramento, Inc.
8. 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.
9. 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.
10. The Rouse Company of Florida, Inc. owns all of the
outstanding common 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-Fort Myers, 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-Sunrise, Inc., a Maryland corporation
Rouse-Tampa, Inc., a Florida corporation
<PAGE>
Rouse-West Dade, Inc., a Maryland corporation
Rouse-Tampa, Inc. owns all of the outstanding Series A Preferred Stock of
RFT Four, Inc., a Delaware corporation.
11. 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
12. 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.
13. 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.
14. 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.
15. 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.
16. 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
<PAGE>
17. The Rouse Company of New Jersey, Inc. owns all of the out-
standing Series A Preferred Stock of Rouse Woodbridge Funding, Inc., a
Delaware corporation, and all of the outstanding common stock of each of
the following Maryland corporations:
Cherry Hill Center, Inc.
Echelon Mall, Inc.
Echelon Urban Center, Inc.
Paramus Equities II, 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.
Paramus Park, Inc. owns all of the outstanding Series A Preferred Stock of
RFT Two, Inc., a Delaware corporation.
18. 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
19. 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.
20. The Rouse Company of Ohio, Inc. owns all of the outstanding
common stock of each of the following corporations:
Beachwood Place, Inc., a Maryland corporation
Cuyahoga Development Corporation, a Maryland
corporation
Franklin Park Mall, Inc., a Maryland corporation (a)
Franklin Park Mall Management Corporation, a
Maryland corporation
Plaza Holding Corporation, an Ohio corporation
Beachwood Place, Inc. owns all of the outstanding Series A Preferred
Stock of RFT Three, Inc., a Delaware corporation.
Franklin Park Mall, Inc. owns all of the outstanding Series A Preferred
Stock of Rouse Funding Two, Inc., a Delaware corporation.
<PAGE>
21. 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
22. The Rouse Company of Pennsylvania, Inc. owns all of the
outstanding capital stock of Whiteland I, Inc. and Whiteland II, Inc., both
Maryland corporations.
23. The Rouse Company of South Carolina, Inc. owns all of the outstanding
capital stock of Rouse-Spartanburg, Inc., a Maryland corporation.
24. 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
Collin Creek, Inc., a Maryland corporation
Collin Creek Mall Management Company, 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
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
Rouse-Tarrant, Inc., a Maryland corporation
SDK Mall, Inc., a Texas corporation
South DeKalb Mall, Inc., a Texas corporation
25. The Rouse Company of Virginia, Inc. owns all of the out-
standing capital stock of each of the following Maryland
corporations:
<PAGE>
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.
26. The Rouse Company of Washington, Inc. owns all of the
outstanding capital stock of Rouse-Seattle, Inc., a Maryland corporation.
27. 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.
28. 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
Wilmington Homes, Inc. owns all of the outstanding capital stock of Echo
Farms Golf and Country Club, Inc., a North Carolina corporation.
29. 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.
30. Rouse-Wates, Incorporated 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
31. RREF Holding, Inc. owns all of the outstanding capital stock of RII
Holding, Inc., a Texas corporation.
<PAGE>
32. TRCD, Inc. owns all of the outstanding common stock of the following
Delaware corporations:
Austin Mall Corporation
Collin Creek Property, Inc.
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
RFT One, Inc.
RFT Two, Inc.
RFT Three, Inc.
RFT Four, Inc.
RFT Five, Inc.
Rouse Funding Corporation
Rouse Funding Three, Inc.
Rouse Funding Two, Inc.
Rouse-MTN, Inc.
Rouse Woodbridge Funding, 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%.
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%.
33. TRC Holding Company of Washington, D.C. owns all of the
outstanding capital stock of Rouse-National Press Management, Inc., a
Maryland corporation.
34. The Village of Cross Keys, Incorporated owns all of the
outstanding capital stock of The Roost, Inc., a Maryland corporation.
<PAGE>
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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 94,922
<SECURITIES> 2,910
<RECEIVABLES> 61,219
<ALLOWANCES> (24,468)
<INVENTORY> 0
<CURRENT-ASSETS> 143,114
<PP&E> 3,219,277
<DEPRECIATION> (519,319)
<TOTAL-ASSETS> 2,985,609
<CURRENT-LIABILITIES> 302,638
<BONDS> 2,479,529
479
0
<COMMON> 45
<OTHER-SE> 42,060
<TOTAL-LIABILITY-AND-EQUITY> 2,985,609
<SALES> 672,821
<TOTAL-REVENUES> 672,821
<CGS> 0
<TOTAL-COSTS> 420,622
<OTHER-EXPENSES> 25,749
<LOSS-PROVISION> 3,318
<INTEREST-EXPENSE> 212,963
<INCOME-PRETAX> 10,169
<INCOME-TAX> 4,319
<INCOME-CONTINUING> 5,850
<DISCONTINUED> 0
<EXTRAORDINARY> 8,631
<CHANGES> 0
<NET-INCOME> (2,781)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> .03
</TABLE>
<PAGE>
EXHIBIT 99
Exhibit 99. Additional Exhibits.
99.1 Form 11-K Annual Report to The Rouse Company Savings Plan for the
year ended December 31, 1995.
99.2 Factors affecting future operating results.
<PAGE>
UNITED STATES
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, 1995 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
<PAGE>
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 ended December 31, 1995 will be filed on or before July 1, 1996.
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 5, 1996 By /s/ William D. Boden
------------- --------------------------------
William D. Boden, Administrator
and
Date: March 5, 1996 By /s/ George L. Yungmann
------------- ----------------------------
George L. Yungmann, Trustee
<PAGE>
Exhibit 99.2
FACTORS AFFECTING FUTURE OPERATING RESULTS
This Form 10-K, the Company's Annual Report to Shareholders, any Form 10-Q
or any Form 8-K of the Company or any other written or oral statements made by
or on behalf of the Company includes forward-looking statements which reflect
the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties, including those discussed below that could cause actual results
to differ materially from historical results or those anticipated. The words
"believe," "expect," "anticipate" and similar expressions identify forward-
looking statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The following factors could cause actual results to differ materially from
historical results or those anticipated:
Real Estate Investment Risks. Real property investments are subject to
varying degrees of risk. Revenues and property values may be adversely affected
by the general economic climate, the local economic climate and local real
estate conditions, including (i) the perceptions of prospective tenants of the
attractiveness of the property; (ii) the ability to provide adequate management,
maintenance and insurance; (iii) the inability to collect rent due to bankruptcy
or insolvency of tenants or otherwise; and (iv) increased operating costs. Real
estate values may also be adversely affected by such factors as applicable laws,
including tax laws, interest rate levels and the availability of financing.
Development Risks. New project development is subject to a number of
risks, including risks of availability of financing, construction delays or cost
overruns that may increase project costs, risks that the properties will not
achieve anticipated occupancy levels or sustain anticipated lease levels, and
new project commencement risks such as receipt of zoning, occupancy and other
required governmental permits and authorizations and the incurrence of
development costs in connection with projects that are not pursued to
completion.
Illiquidity of Real Estate Investments. Real estate investments are
relatively illiquid and therefore may tend to limit the ability of the Company
to react promptly in response to changes in economic or other conditions.
Dependence on Rental Income from Real Property. The Company's cash flow
and results of operations would be adversely affected if a significant number of
tenants were unable to meet their obligations or if the Company were unable to
lease a significant amount of space in its income-producing properties on
economically favorable lease terms. In the event of a default by a tenant, the
Company may experience delays in enforcing its rights as lessor and may incur
substantial costs in protecting its investment. The bankruptcy or insolvency of
a major tenant may have an adverse effect on an income-producing property.
Effect of Uninsured Loss. The Company carries comprehensive liability,
fire, flood, extended coverage and rental loss insurance with respect to its
properties with insured limits and
<PAGE>
policy specifications that it believes are customary for similar properties.
There are, however, certain types of losses (generally of a catastrophic nature,
such as wars or earthquakes) which may be either uninsurable, or, in the
Company's judgment, not economically insurable. Should an uninsured loss occur,
the Company could lose both its invested capital in and anticipated profits from
the affected property.
Lack of Geographical Diversification. A significant portion of the
Company's properties is geographically concentrated. The Company's land sales,
for instance, relate primarily to land in and around Columbia, Maryland. These
sales are affected by the economic climate in Howard County, Maryland and the
Baltimore-Washington area, and by local real estate conditions and other
factors, including applicable zoning laws and the availability of financing for
residential development. Similarly, most of the office/industrial buildings
that the Company manages are located in the Baltimore-Washington corridor,
including Columbia, Maryland. Due to the geographic concentration of this
portfolio, the Company's operating results in managing these buildings depend
especially on the local economic climate and real estate conditions, including
the availability of comparable, competing office/industrial buildings.
Environmental Matters. Under various federal, state and local
environmental laws, ordinances and regulations, a current or previous owner or
operator of real property may become liable for the costs of the investigation,
removal and remediation of hazardous or toxic substances on, under, in or
migrating from such property. Such laws often impose liability without regard
to whether the owner or operator knew of, or was responsible for, the presence
of such hazardous or toxic substances. The presence of hazardous or toxic
substances, or the failure to remediate properly such substances when present,
may adversely affect the owner's ability to sell or rent such real property or
to borrow using such real property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic wastes may also be liable for the
costs of the investigation, removal and remediation of such wastes at the
disposal or treatment facility, regardless of whether such facility is owned or
operated by such person. Other federal, state and local laws, ordinances and
regulations require abatement or removal of certain asbestos-containing
materials in the event of demolition or certain renovations or remodeling,
impose certain worker protection and notification requirements and govern
emissions of and exposure to asbestos fibers in the air. Certain of the
Company's properties contain underground storage tanks which are subject to
strict laws and regulations designed to prevent leakage or other releases of
hazardous substances into the environment. In connection with its ownership,
operation and management of such properties, the Company could be held liable
for the environmental response costs associated with the release of such
regulated substances or related claims. In addition to clean up actions brought
by federal, state and local agencies, the presence of hazardous substances on a
property could result in personal injury or similar claims by private
plaintiffs. Such claims could result in costs or liabilities which could exceed
the value of such property. Notwithstanding the above, the Company has not been
notified by any private party or governmental authority of any non-compliance,
liability or other claim in connection with environmental conditions at any of
its properties that it believes will involve any material expenditure, nor is
the Company aware of any environmental condition with respect to any of its
properties that it believes will involve any material expenditure.
<PAGE>
Americans with Disabilities Act Compliance. Under the Americans with
Disabilities Act (the "ADA"), all public accommodations and commercial
facilities are required to meet certain federal requirements related to access
and use by disabled persons. These requirements became effective in 1992. The
Company has surveyed each of its properties and believes that it is in
substantial compliance with the ADA and that it will not be required to make
substantial capital expenditures to address the requirements of the ADA. In
addition, the Company has developed an ADA Compliance Plan and has budgeted for
and moved forward with the removal of those barriers to access that are readily
achievable. The Company believes that implementation of its ADA Compliance Plan
will not have a material adverse effect on its financial condition.
Competition. There are numerous other developers, managers and owners of
real estate that compete with the Company in seeking management and leasing
revenues, land for development, properties for acquisition and disposition and
tenants for properties.
Changes in Economic Climate. The Company's business and operating results
can be adversely affected by changes in the economic environment generally. For
example, an increase in interest rates will affect the interest payable on the
Company's outstanding floating rate debt and may result in increased interest
expense if debt is refinanced at higher interest rates. Moreover, in a
recessionary economy, credit conditions may be inflexible and consumer spending
conservative, which could adversely affect the Company's revenue from its retail
centers.
Hughes Acquisition. The consummation of the Merger and the HHPLP Merger
described in "Recent Developments" under Item 1 above is subject to the
satisfaction of many conditions, including, but not limited to obtaining
requisite THC stockholder approval of the transactions and the receipt of any
necessary regulatory and other consents from various federal and state
governmental authorities. There can be no assurance that all or any of the
conditions to the Merger and the HHPLP Merger will be satisfied, and
accordingly, there can be no assurance that such mergers will be consummated.
If these mergers are consummated, the Company will be assuming debt and
issuing, at the time of the mergers, a significant amount of Common Stock and
will be required under the terms of the mergers to issue additional shares of
Common Stock and/or other securities in the future based on certain formulas
relating to the cash flow and appraised value of certain assets of THC and its
subsidiaries. In addition, the Company's results of operations could be
adversely affected by the future operating performance of the real estate assets
acquired in the mergers. This future operating performance is subject to a
number of risks, including risks similar to those set forth above, risks
relating to the location of those real estate assets in Nevada and California
and other risks or potential risks.
<PAGE>
Exhibit 12.2
[CAPTION]
<TABLE>
The Rouse Company and Subsidiaries
Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividend Requirements
(dollars in thousands)
Year ended December 31,
-------------------------------------------------------------
1995 1994 1993 1992 1991
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes, extraordinary loss
and cumulative effect of change in accounting principle $ 10,169 $ 13,336 $ 3,072 $(20,783) $ 5,245
Fixed charges:
Interest costs 219,838 220,971 219,705 221,907 219,538
Capitalized interest (6,875) (7,388) (8,899) (15,098) (21,243)
Amortization of debt issuance costs 2,527 2,146 2,801 3,571 3,173
Distributions on Company-obligated mandatorily redeemable
preferred securities of a trust holding solely Parent Company
subordinated debt securities 1,204 - - - -
Portion of rental expense representative of
interest factor (1) 8,266 10,788 15,988 14,739 15,265
Support for debt service costs provided to affiliates
accounted for under the equity method - - 31 389 1,106
Adjustments to earnings (loss):
Minority interest in earnings of majority-owned subsidiaries
having fixed charges 2,026 2,234 1,909 1,747 2,118
Undistributed earnings of less than 50%-owned subsidiaries (189) (564) (68) (84) (540)
Previously capitalized interest amortized into earnings:
Depreciation of operating properties (2) 3,764 3,670 3,605 3,474 3,145
Cost of land sales (3) 1,421 1,580 1,627 1,295 928
Earnings available for fixed charges and --------- -------- -------- -------- --------
Preferred stock dividend requirements $242,151 $246,773 $239,771 $211,157 $228,735
========= ======== ======== ======== ========
Combined fixed charges and Preferred stock
dividend requirements:
Interest costs $219,838 $220,971 $219,705 $221,907 $219,538
Amortization of debt expense 2,527 2,146 2,801 3,571 3,173
Distributions on Company-obligated mandatorily redeemable
preferred securities of a trust holding solely Parent Company
subordinated debt securities 1,204 - - - -
Portion of rental expense representative of
interest factor (1) 8,266 10,788 15,988 14,739 15,265
Support for debt service costs provided to affiliates
accounted for under the equity method - - 31 389 1,106
Preferred stock dividend requirements (4) 24,402 21,802 18,968 - -
--------- -------- -------- -------- --------
Total fixed charges $256,237 $255,707 $257,493 $240,606 $239,082
========= ======== ======== ======== ========
Ratio of earnings to fixed combined charges
and Preferred stock dividend requirements (5) - - - - -
========= ======== ======== ======== ========
</TABLE>
(1) Includes (a) 80% of minimum rentals, the portion of such rentals considered
to be a reasonable estimate of the interest factor and (b) 100% of
contingent rentals of $3,644,000, $6,232,000, $10,006,000, $8,106,000 and
$8,458,000 for the years ended December 31, 1995, 1994, 1993, 1992, and
1991, respectively.
(2) Represents an estimate of depreciation of capitalized interest costs
based on the Company's established depreciation policy and an analysis of
interest costs capitalized since 1971.
(3) Represents 10% of cost of land sales, the portion of such cost considered
to be a reasonable estimate of the interest factor.
(4) Represents estimated pre-tax earnings required to cover Preferred stock
dividend requirements. All amounts are calculated based on actual Preferred
stock dividends and an estimated effective tax rate of 40%.
(5) Total combined fixed charges and Preferred stock dividend requirements
exceeded the Company's earnings available for combined fixed charges and
Preferred stock dividend requirements by $14,086,000, $8,934,000,
$17,722,000, $29,449,000 and $10,347,000 for the years ended December 31,
1995, 1994, 1993, 1992 and 1991, respectively.
